Transcripts - Week 1, 9-28-11

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Criminal Action No. 09-cr-00266-CMA UNITED STATES OF AMERICA, Plaintiff, v. 1. 2. 3. 4. 5. 6. DAVID A. BANKS; DEMETRIUS K. HARPER, a/k/a KEN HARPER; GARY L. WALKER; CLINTON A. STEWART, a/k/a C. ALFRED STEWART; DAVID A. ZIRPOLO; and KENDRICK BARNES,
Defendants. __________________________________________________________ REPORTER'S TRANSCRIPT (Jury Trial Day 3) __________________________________________________________ Proceedings before the HONORABLE CHRISTINE M. ARGUELLO, Judge, United States District Court, for the District of Colorado, commencing at 9:11 a.m. on the 28th day of September 2011, Alfred A. Arraj United States Courthouse, Denver, Colorado. A P P E A R A N C E S FOR THE PLAINTIFF: MATTHEW T. KIRSCH and SUNEETA HAZRA, U.S. Attorney's Office - Denver, 1225 17th St., Suite 700, Denver, CO 80202 FOR THE DEFENDANTS: Pro Se.
DARLENE M. MARTINEZ, RMR, CRR United States District Court For the District of Colorado
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I N D E X WITNESSES: PRICE ROE DIRECT EXAMINATION BY MR. KIRSCH CROSS-EXAMINATION BY MR. WALKER MATTHEW SHEPTOCK DIRECT EXAMINATION BY MS. HAZRA CROSS-EXAMINATION BY MR. BANKS JOHN ELY DIRECT EXAMINATION BY MR. KIRSCH CROSS-EXAMINATION BY MR. WALKER CROSS-EXAMINATION BY MR. BANKS DEAN HALE DIRECT EXAMINATION BY MS. HAZRA CROSS-EXAMINATION BY MR. WALKER REDIRECT EXAMINATION BY MS. HAZRA RECROSS-EXAMINATION BY MR. ZIRPOLO DONALD CROCKETT DIRECT EXAMINATION BY MR. KIRSCH CROSS-EXAMINATION BY MR. BANKS CROSS-EXAMINATION BY MR. WALKER KATHRYN LOSEY-MILLER DIRECT EXAMINATION BY MR. KIRSCH CROSS-EXAMINATION BY MR. BANKS CROSS-EXAMINATION BY MR. WALKER KATHERINE HOLMES DIRECT EXAMINATION BY MR. KIRSCH CROSS-EXAMINATION BY MR. BANKS REDIRECT EXAMINATION BY MR. KIRSCH MEL CASTLEBERRY DIRECT EXAMINATION BY MR. KIRSCH CROSS-EXAMINATION BY MR. BANKS CROSS-EXAMINATION BY MR. WALKER PAUL TRAN DIRECT EXAMINATION BY MR. KIRSCH CROSS-EXAMINATION BY MR. WALKER CROSS-EXAMINATION BY MR. BANKS REDIRECT EXAMINATION BY MR. KIRSCH E X H I B I T S
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NO. 1G 1F 1B 2.00 6.00 61.00 66.04 66.03 111.00 116.01 120.01 121.01 121.00 126.01 171.00 171.01 390.04 390.01 391.00 396.01 501.01 502.04 502.01 503.01 No. 62.00 110.01 110.02 110.03 110.04 112.00 122.00 172.00 392.00 392.01 No. D328 .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... ..........................................
ADMITTED 221 271 319 355 357 350 363 365 224 231 321 326 328 334 393 394 264 266 274 286 202 425 430 247
ADMISSIBLE .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... .......................................... 358 218 219 220 226 330 397 278 279 REFUSED 295
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 time. MR. BANKS:
SEPTEMBER 28, 2011 (Proceedings commence at 9:11 a.m.) (The following is had in open court, outside the hearing and presence of the jury.) THE COURT: MR. ZIRPOLO: THE COURT: in this case. Mr. Banks, please tell me what happened as to why you were not here on or before 9 o'clock today. MR. BANKS: traffic. Well, Your Honor, we were all caught in You may be seated. I apologize, Your Honor. All right. We are back on the record
There was a bad accident on University Boulevard We actually got into
that had traffic backed up.
Denver -- South Denver probably around 8 o'clock, 8:05, 8:10, somewhere in there. until close to University. We didn't really break free And the radio reported that
there was a bad accident at University that caused the continual back up. And there is still a lot of heavy
traffic getting into downtown Denver. THE COURT: Some of you seem to make it here on
Yeah, but myself and Mr. Walker, we He was at 6th Avenue caught in
were all in the same car.
traffic when I was at Lincoln and Broadway, so it just kind of varied.

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THE COURT:
What time did you leave Colorado
Springs this morning? MR. WALKER: THE COURT: leave at 7 o'clock. Just at 7:45. All right. I would advise that you
It is known to have traffic delays. I will not
You decided to commute from Colorado Springs. have this Court convene late again. MR. BANKS: THE COURT: Yes, Your Honor.
Do you understand?
And if you do, I am going to
sanction -- I will impose a fine for every minute you are late. I promised this jury yesterday that we would start I had to break that promise because you That kind of disrespect to
promptly at 9:00.
all didn't show up on time.
the Court -- I realize you think it is out of your control, but the fact of the matter is, there is traffic between Colorado Springs and Denver, and there are always accidents. If you are going to commute, you leave with enough time to get here at the time I said we are going to begin. Do I make myself clear? MR. BANKS: MR. WALKER: THE COURT: Yes. Yes. Anything further before we bring in the
MR. BANKS:
No, Your Honor.

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MR. KIRSCH: THE COURT: the jury.
No, Your Honor.
Thank you.
Ms. Barnes, would you please bring in
(The following is had in open court, in the hearing and presence of the jury.) THE COURT: All right. Well, it appears one of our So it is not getting off
jurors has not shown up, either. to a good start.
Will you let the jury know we cannot Can you call Ms. Ross
begin until they are all assembled.
to see if you can get ahold of this juror. COURTROOM DEPUTY: THE COURT: Yes, Your Honor. Court will be in recess.
All right.
(A break is taken from 9:15 a.m. to 9:25 a.m.) THE COURT: You may be seated.
Ms. Barnes, would you please bring in the jury. (The following is had in open court, in the hearing and presence of the jury.) THE COURT: You may be seated. Welcome back,
ladies and gentlemen of the jury.
I apologize, I should
have heeded the advice of my father when I made that promise to you yesterday. He said never promise anything So
that is totally not 100 percent within your control.
traffic being what it is in Denver, I apologize we were not able to get started directly at 9:00, but we are ready to proceed at this time, and welcome back.
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Mr. Kirsch, the Government may call its next witness. MR. KIRSCH: Thank you, Your Honor. The Government
would call Price Roe. COURTROOM DEPUTY: Your attention, please. PRICE ROE having been first duly sworn, testified as follows: COURTROOM DEPUTY: Please be seated.
Please state your name, and spell your first and last names for the record. THE WITNESS: Price Roe, P-R-I-C-E R-O-E. DIRECT EXAMINATION BY MR. KIRSCH: Q. A. Q. A. Q. A. Mr. Roe, where do you live? Washington, D.C. And do you work there as well, I take it? Yes, I do. What do you do for a living? I am a contractor with a consulting firm that
primarily focuses on the federal government. Q. At some point in your career, were you employed by
the Department of Justice? A. Q. A. Yes, I was. Approximately when was that? The spring of 2003 to the spring of 2006.
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Q.
What was your position with the Department of
Justice? A. I served as special assistant, just kind of like an
advisor to the Chief Information Officer at DOJ. Q. A. Q. What was that person's name? Van Hitch. And what sort of things did that office in which you
worked handle for the Department of Justice? A. Sure. About 10 percent of the Department's budget is
for information technology; so computers, servers, new programs to help the lawyers and agents do their job. So
the CIO is responsible for keeping the infrastructure -the IT infrastructure running and investing in new programs in support of the Department. Q. And I think you just used the term CIO. That is an
acronym? A. Q. An acronym for chief information officer. All right. And how -- did you have a responsibility
for any particular portion or subpart of that overall work of the chief information office? A. Sure. As special assistant, one of my jobs was --
the core of my job was the strategic planning initiative. So after 9/11, there was a lot of focus on the components -- the FBI components, like a division of the Department of Justice. It is a stand alone agency but
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part of the Department, in improving their information technology so they can perform their mission better. So I interfaced with those components in trying to understand what the requirements were, making sure the investments were going well, and speaking with outside companies about the Department's mission. Q. The outside companies that you would speak to, would
those be companies that -- what kind of companies were those? A. Sure. In the -- from the D.C. world of IT, there are One
two major -- I would divide it into two major groups. are called system integrators; Lockheed Martin, SRA or Boeing.
Companies that install major systems have lots of And then the other kind would be the actual So a company that has a software
consultants.
solutions providers.
package or a scanner or some kind of tool that a Boeing might use when they say, Department of Justice, do you want to improve the way that you process the prisoners getting booked at prisons? So we have the system, we use
these three tools from these three companies, and we put them together, and we will install the whole thing for you. Q. All right. I think you said that you interfaced with
those kinds of companies? A. Yes. So we must -- I mean, probably in a given

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month, we would receive unsolicited requests for meetings and product demonstrations, probably about two or three a week. You have to remember, this is right after 9/11, and
there was a tremendous push -- a lot of funding was flying into the federal agencies that had national security missions to get your IT better. Q. So you had two to three requests per meeting; four
meetings a week? A. It was about that. It ebbed and flowed, but
generally it was a lot. Q. And how many of those requests for meetings would be
granted? A. As many as possible. The way that we saw the
mission, and especially because there is a tendency to just go with the big guys, IBM always gets the meeting because they are the big guys. with the government. They get a lot of business
But we thought it was important to
give small businesses a chance, too, to learn what they are doing. Because all of the best solutions, from a technology standpoint, are not necessarily always going to be with just IBM. In this case, there are start-ups.
There are going to be places that are not -- outside of D.C. There is Silicon Valley. There is this area. There is Boston. There is
Austin.
So there is a lot of places
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that have technology companies that are looking to sell to the government. Q. Now, when you were working at the Department of
Justice, did you also become familiar with the procurement process that the Department of Justice uses? A. Q. I did. And was procurement something that was in the purview
of your office at the Department of Justice? A. Q. A. No. And let me qualify that a little bit.
All right. I would say to a degree, in a sense that you work
with the procurement office, so to understand the procurement requirements. Here is what we need. You need
to buy a thousand wands to make sure that people don't have weapons on them. Well, you tell that to the
procurement office, here is what you need, here is about how much we can spend, and then they say here are the rules for how you do the procurement. It is called -- the
federal act is called -- referred to in D.C. parlance as the FAR, which I believe stands for the Federal Acquisition Rule or Rules. Q. A. Q. Did your office actually handle the procurement? No. Your office provided information to a different
office that would do the procurement; is that right?

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A.
Yes.
Unless it is a de minimis amount of something,
like a hundred dollars at Home Depot to buy something, the FAR governs all procurement activities. be done by contracting officers. Q. A. All right. And those are a straight line, totally separate So you can't tell And that can only
reporting structure outside of us.
procurement -- even if you want to hire IBM, the contracting officer says, I may or may not choose to make the contract award to IBM. and this stuff takes months. Q. Were you -- in your position, were you familiar with We will have a competition,
major procurements that were being made by the Department of Justice while you were there, between 2003 and 2006? A. Yes, because several were front page news in the
Washington Post on a weekly basis. Q. Was -- during that time period, was the Department of
Justice doing any procurement for information sharing software for law enforcement? A. I'm sure they were, yes. I can't think of an
immediate -- like these buys were definitely during this time, because it was something that was going on at every level in the department. activity. There was a lot of procurement
But I can't name one that I was personally
involved in.
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Q.
All right.
Are you familiar with any rules that
relate to meetings with companies or providers that might relate to an active procurement process? A. Yes. And, again, I say this as a non-lawyer,
non-procurement, this is my -Q. I am talking about your understanding based on your
position there at DOJ. A. Sure. So before -- there is something called RFP, I don't know how common of an
request for proposal. acronym that is.
But before an RFP is officially
released, a request for proposal, which is done by the procurement side. OCI is the Office of the Chief Only the
Information Officer, doesn't release an RFP. contracting side can release an RFP.
Before that time, you can meet with any companies, any companies that are interested in -- they may have heard maybe there is going to be an RFP, maybe there is not. As soon as an RFP is released -- and by practice,
usually before it is released, just out of caution, agencies will shut down and not talk to anyone that could possibly be a bidder on that request for proposal. kind of like a quiet period. And, in fact, I believe it is governed by the FAR. You can't meet with anyone. If you do, that is showing an If you meet with one, So
unfair advantage to said company.
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you meet with all.
So what agencies do is they have an
industry day where they meet with everyone at once, answer questions in front of everybody, so there is no favoritism or special deals. And that is all influenced or directly
governed by the Federal Acquisition Rule. Q. All right. So am I -- is it -- while you were at
DOJ, then, if you knew that a request for a proposal had been issued, would you have met with a potential bidder on that request? A. No. That would have been -- that would have opened
up the Department to the protest process for showing undue favor to one of the bidders. Q. A. That was something you wanted to avoid? Massively. That would have been -- I would have been
in big trouble. Q. All right. Let me ask you to take a look, now,
please, at what I believe, Your Honor, is a stipulated exhibit. A. Q. A. It is Government Exhibit 501.01.
That is here before me? Yes. It should be in one of those folders there.
I found it. MR. KIRSCH: Your Honor, I would move to admit and
publish that exhibit. THE COURT: MR. KIRSCH: 501.01? Yes, Your Honor.
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THE COURT: MR. KIRSCH: MR. BANKS: Your Honor. THE COURT:
Is it stipulated? That is my understanding, Your Honor. One moment, Your Honor. No objection,
All right 501.01 will be admitted.
(Exhibit No. 501.01 is admitted.) MR. KIRSCH: Thank you, Your Honor. May we go
ahead and publish that? THE COURT: MR. KIRSCH: You may. Special Agent Smith, can I ask you to
begin -- Ms. Barnes, I don't think the jury has their screens activated. Can we begin with page 3 of that exhibit, please. And can you expand where it begins "Original message," down at the bottom, please. Q. (BY MR. KIRSCH) Mr. Roe, can you see that portion on
the screen there now? A. Q. Yes, sir. This e-mail, in the header information says it is to Can you explain who -- do you know Andy
Andy Anderson. Anderson? A. Q. A.
Yes, I know him well. Who is that? Andy was kind of the office manager. He is the guy
who has been at the DOJ, for Department of Justice, excuse

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me, for 25 years or so.
And often inquiries came to him,
because everyone -- if anyone is like, hey, I need to meet with someone in the CIS office, we'll send an e-mail to Andy, and he will figure out who to show it to. Q. Okay. The text of the e-mail appears to be addressed
to Mr. Hitch? A. Correct. So that would be like sending it to the
secretary or to the executive assistant or someone knowing that maybe you don't send it to CEO, you send it to the chief of staff or something like that. Q. The Mr. Hitch there, is that Vance Hitch, the person
that you said was your boss? A. Q. That is correct. Okay. And if we can go to the next page of that This e-mail appears to
briefly, please just expand that.
come from a Gary Walker at IRP Solutions Corporation; is that correct? A. Yes, it does. MR. KIRSCH: Okay. Now can we display page 2 of
that exhibit, please.
And can we start by expanding the Yes. Thank you.
bottom message at the bottom. Q. (BY MR. KIRSCH)
Now, is this a message from you,
Mr. Roe? A. Q. Yes. Okay. And so how is it that you came to respond to a
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message that had been directed to Mr. Anderson and/or Mr. Hitch? A. So, part of -- I don't recall exactly, but just
reading this would make me think Andy would have said to me verbally or sent me an e-mail saying, hey, I got this e-mail, can you handle this one? And I did this often,
which was I would, on behalf of the office, respond to companies interested and say, we would be happy to meet with you. Again, because we wanted to be as open to
companies as possible in giving them an opportunity to talk about what they are doing. MR. KIRSCH: If we could go back to page 3 just
briefly and extend the top, just the top part there. Q. (BY MR. KIRSCH) Is this -- the rest of the message
from you? A. Yes. That's -- yes. Okay. And now can we go back to page
MR. KIRSCH: 2, please.
And expand from the top down to the message we
looked at before. Q. (BY MR. KIRSCH) Can you sort of summarize what is
happening here on these messages that are on the screen, Mr. Roe? A. Sure. Let's see. Basically, yeah, so we will be in
town, and we want to show you -- we want to do a product demonstration where we talk about the solution we built.
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And my response at the top of the page, which I don't know, it is probably continued from a previous page. was like, yes. I
Andy actually controlled Van's schedule --
Mr. Hitch's schedule, and so I said yeah, we will certainly be happy to meet with you during this time. MR. KIRSCH: Okay. Then if we can display the And let's start from
first page of this message, please.
the message from Gary Walker there about a third of the way down and go down to the bottom, please. Q. (BY MR. KIRSCH) Now, the message on the bottom of
the screen, Mr. Roe, with the date of December 10, 2003, does that reflect that a meeting had occurred? A. Yes. I don't recall the meeting. Like I said, we
have lots of meetings.
But that makes total sense.
Writing the e-mail, that makes total sense to me that the e-mail occurred, otherwise I wouldn't have written. Q. Okay. MR. KIRSCH: Q. (BY MR. KIRSCH) Thank you, Special Agent Smith. If you -- I understand that you
don't have a specific memory of that meeting; is that right? A. Q. To the best of my ability, I can't. Okay. Did you have a routine practice with respect
to things that you would say to vendors at meetings like that?

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A. Q.
Yes. All right. And what is it -- what information would
you give to vendors during a meeting like that? A. If you recall, I made the distinction between kind of
the big players like an IBM or a General Dynamics and smaller companies. big guns, the VP. With big players, they usually had the I didn't need to say anything to them,
because they would be at the meeting, and they had been around for a long time. They didn't need me, relatively new to D.C., telling them how procurement and D.C. and meetings with -they didn't need my advice on anything. But with smaller
companies, especially those from outside of D.C., I would often -- I would give them two pieces of advice, which is, I would share my thoughts, which is please continue to pursue the Department and pursue your solution. And I
hope it goes well, because we need ideas from all parts of our country and all parts of the economy, not just big guys. We need small entrepreneurs to bring their ideas
into the federal government. The second part I would say, and, oh, by the way, you are going to have to be persistent, because it is incredibly painfully hard to get business with the government. The procurement rules are painful, and it And it is really hard for small
takes a really long time.
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businesses, because they often don't have a lot of money, and they can't hire the facilitators who set up meetings in D.C. and set up the D.C. lobby shop. And our system -- the federal government's system is designed to be open, and that is why these Federal Acquisition Rules are very clear about you can't show favoritism. But if you know how the process works and it So
is a business team process, it is easier to navigate. I would often just say, keep at it.
You know, our country
needs companies like yours to continue to pursue, and not just sell to commercial space. Q. Was it any part of your routine practice to suggest
that the Department of Justice would buy a product -- a particular product that a particular vendor was telling you about during the meeting? A. I would have no authority to do so. It was totally
outside of my scope. Q. A. And does that mean that you did not do that? That's correct. I might encourage them to pursue it,
but there is nothing -- it isn't my job. MR. KIRSCH: Honor? THE COURT: MR. KIRSCH: could.
Can I have one moment, please, Your
You may. Your Honor, one more question, if I
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Q.
(BY MR. KIRSCH)
Mr. Roe, do you have any reason to
think you would have varied from your standard practice at all when you had a meeting with the representatives from IRP? A. I have no reason to believe I did. MR. KIRSCH: Thank you, Mr. Roe. Those are all of
the questions I have, Your Honor. THE COURT: Okay. Mr. Walker?
CROSS-EXAMINATION BY MR. WALKER: Q. A. Q. Good morning, Mr. Roe. Good morning. You mentioned that it was your office's policy to try
to meet with as many companies, especially small companies, as possible? A. Yes. I particularly had a desire to do so because I
moved from Silicon Valley to D.C. after 9/11 to serve. Q. With the CIO, the Chief Information Officer, Van
Hitch, did you typically attend meetings and demonstrations for small companies? A. On occasion. So I don't know it was typical. But he And
tried to make himself available as often as possible.
I would advise him that there are some companies that are coming in, hopefully you can make a meeting. Q. Would there be any particular technology or
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capabilities being offered by a vendor that would cause you to suggest that he attend a meeting? A. Yes. Depending on the given year, if there was an
important piece of either legislation or a departmental need that was related to a certain type of functionality, such as, you know, a particular -- never a brand offered, but a type of functionality, like a search engine. need to have better search engines at DOJ, we get complaints it is hard to find stuff. So that might be said by someone in the newspaper, officials in the technology press, and then suddenly we get lots of e-mails from search engine companies saying, hey, we have got a great search engine, you should use our software at DOJ because I read that you have a problem. Q. Do you recall the functionality of the software We
applications that IRP Solutions demoed for you during the meeting? A. I did not recall until I read this e-mail, which was
that law enforcement -- something with law enforcement, either case management or analytical tools, data mining, something to that effect. Q. I know it has been many years, but do you recall if
that type of functionality would be something that you discussed and suggested that Mr. Hitch actually attend the meeting?
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A.
I am quite sure it would have been.
It was and
remains an important core part of the Department's technology. Q. A. Did Mr. Hitch attend the meeting? Again, unfortunately, I do not recall. But it makes
sense that he -- I think I referenced in the e-mail that he did, so I just don't remember. Q. And what, as best you can recall, was your office's
final disposition with IRP Solutions? A. se. I don't believe there was a final disposition, per If you could explain that question a little bit
better I can answer it. Q. Yes. So let me clarify a bit for you. In this
string of communications, being e-mail or telephone calls, following the meeting, do you remember your last advice to IRP Solutions or last instructions to IRP Solutions? A. I don't. But as I said before a moment ago, I
believe I would have likely said, if it was consistent with what I made a rule of saying, which was to encourage IRP Solutions to continue the good work. this e-mail it states, good luck. And, like I said, my position was generally one to be encouraging, because it is very discouraging trying to get business with the federal government, especially for small companies.
And I think in
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Q.
And would you consider reaching out to Mr. Van Hitch,
via a company that offered software technology, a logical step to enter into procurement -- early stages of potentially being considered for procurement by the DOJ? A. It is one of the steps that companies who are It is not a required step.
interested in selling takes.
The only required step is you bid when a request for proposal is released. MR. WALKER: THE COURT: MR. BANKS: THE COURT: MR. KIRSCH: THE COURT: released? MR. KIRSCH: THE COURT: THE WITNESS: THE COURT: Yes, please, Your Honor. Thank you very much, you are released. Do I leave these exhibits here? Yes, please. No further questions, Your Honor. Thank you. Anybody else?
No thanks, Your Honor. All right. Any redirect?
No, Your Honor, thank you. All right. May this witness be
Government may call its next witness. MS. HAZRA: Sheptock. Ms. Barnes can we have Exhibits 1G and 110.01 to 116.04? COURTROOM DEPUTY: Remain standing. Thank you, Your Honor. We call Matthew
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Your attention, please. MATTHEW SHEPTOCK having been first duly sworn, testified as follows: COURTROOM DEPUTY: Please be seated.
Please state your name, and spell your first and last names for the record. THE WITNESS: Matthew Sheptock, M-A-T-T-H-E-W.
Last name is Sheptock, S-H-E-P-T-O-C-K. DIRECT EXAMINATION BY MS. HAZRA: Q. A. Q. A. Q. A. Q. A. Q. Good morning, Mr. Sheptock. Good morning. Where are you currently employed? I'm currently employed at Tech Systems. How long have you been there? I have now been there for a little over 5 years. Where did you work previously? Previous to that I worked at Computer Horizons Corp. Do you recall approximately how long you worked at
Computer Horizons? A. Yes. It would have been straight out of school, so
close to about 12 to 13 years. Q. I would like to turn your attention to the time What was your position at
period of 2003 and 2004.
Computer Horizons at that time?

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A.
At that time I was VP of business-related operations
for the Western Region. Q. A. What kind of company is Computer Horizons? Computer Horizons Corp is a consulting firm that
focuses both on staffing, as well as project related work for Fortune 500 and 1000 companies. Q. A. When you say "staffing," what do you mean by that? Staffing, meaning if a company is in need of a
resource or somebody to come in to do IT related work, we would supply that resource to them. Q. Are you familiar with a company known as DKH
Enterprises? A. Q. A. I am. How did you first get into contact with DKH? First contact with DKH Enterprises was a phone call
from an individual by the name of Clinton Stewart. Q. A. Do you recall approximately when that phone call was? Approximately would have been probably close to 7
years ago. Q. A. Q. A. Q. call?

2004? Sounds correct. Is it possible it could have been a year earlier? It could have been. Did Mr. Stewart explain what he wanted in the phone
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A.
Yes, he did.
During that phone call, Mr. Stewart
said that they had a need for a payrolled individual to come on board for an out-sourced job that they were doing internally. Q. was? A. Yeah. At the time of the phone call, he explained Did Mr. Stewart explain what his position with DKH
himself as being one of the lead developers or the lead management within DKH Enterprises. Q. And I believe you just said that Mr. Stewart told you
that DKH wanted to have some individuals payrolled; is that correct? A. Q. A. That's correct, yes. What does that mean? What does "payroll" mean?
Payroll means when a company -- in the IT related
world, that is what I am in, when a company has an individual that they need to bring on board but don't have the resources or the money to support that individual at the time of them beginning work, so -Q. A. So what would Computer Horizons do in that case? Computer Horizons Corp would support the payroll for
that individual and, you know, get the individual to work for that company while, you know, billing is -- was made known to the company that they were working for. Q. So in this arrangement, Computer Horizons Corp would
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pay the employee directly; is that correct? A. Q. That is correct, yes. And how would Computer Horizons make money in the
payrolling arrangement? A. There would be a bill rate that is discussed between
us and the other company or the other firm, and it is always going to be a little bit higher. But because it is
a payrolled situation, we are only looking for a little bit of the, you know, overhead factor, which would cover our administration costs, our internal costs within the office, and things of that sort. Q. So I believe you said that Mr. Stewart called and Did he in that
said that he wanted individuals payrolled.
call -- and you may have already said this -- explain what approximately the employees would be doing? A. Not at that particular time. It was just more of a
formality call of would we be able to supply, you know, that resource to them to be able to payroll that individual. Q. Was it unusual for you to receive essentially a cold
call from a client? A. Oh, absolutely. In our business, it is known on a
daily basis that we prefer to receive calls from companies that, you know, are not as massive or not as revenue generated, to be able to payroll these individuals for
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them. Q. After receiving this initial call with Mr. Stewart,
did you have a follow-up call with another employee of DKH? A. I did. At that time, the follow-up call was with
Demetrius Harper, who was known as the president of DKH Enterprises. Q. And what was discussed in that phone call with
Mr. Harper? A. That phone call entailed basically going over the
paperwork, contractual obligations, and confirming the bill rates. Q. In that phone call, did you all discuss who the
employees would be that were payrolled? A. Yeah. At that time it was known to be the Department
of Transportation out of New York, which was a government-related job they were working on. Q. Okay. So let me back up. In that phone call, did
Mr. Harper explain to you what the employees would be working on? Is that what the New York Department of
Transportation reference is? A. Yes. He mentioned it was a government-related job at
that time, and that, you know, he had, you know, during the phone call with Mr. Stewart, it was known that they had a resource that they were looking at putting on board
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for this position, so. Q. So just to clarify, did Mr. Harper tell you -- give
you any information concerning the employees he wanted payrolled? A. No. That was pretty much coming from Mr. Stewart.
Mr. Stewart and I, you know, were working on that end of things. Mr. Harper was mostly in conversation in regards And, you know, his signature is what we
to the contract.
would require in order for us to proceed with the business. Q. At some point in time did you decide to enter into a
contract with DKH Enterprises? A. Q. We did, yes. And did you, was part of that contract, payroll any
individuals? A. At that time we payrolled, we decided to payroll one
individual by the name of David Banks. Q. Did you at some point in the course of your
relationship with DKH Enterprises payroll additional employees? A. We did. After about a couple weeks, we had spoken
again, and they had asked that we payroll a couple other individuals, one by the name of Robert Anderson, and a second one by the name of Samuel Thurman. Q. If you can please look at what is in -- there should
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be in folders in front of you.
I will have you first look
at what has been marked for identification purposes as Government's Exhibit 110.01. document? A. Yeah. This is the Master Consulting Agreement that Do you recognize this
is pretty much put in front of any business-related matters that we did within Computer Horizons Corp. Q. Does this memorialize the understanding that you had
between Computer Horizons Corp and DKH Enterprises? A. It does. MS. HAZRA: Your Honor, I would ask Government
Exhibit 110.01 be admissible. THE COURT: MR. BANKS: THE COURT: MR. BANKS: THE COURT: Admissible? No objection. No objection? No objection. 110.01 will be admissible.
(Exhibit No. 110.01 is found admissible.) Q. (BY MS. HAZRA) I would have you look what has been
marked for identification purposes as Government's Exhibit 110.02. A. Q. A. If you could -- do you recognize that document?
I do. What is this document? This document would be the task orders related to the
billing -- hourly billing rate that we agreed upon between

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DKH and Computer Horizons Corp. Q. And does this task order form concern a certain
employee? A. Yes, it is in reference to David Banks. MS. HAZRA: Your Honor, I would ask that Government
Exhibit 110.02 be made admissible. THE COURT: MR. BANKS: THE COURT: Any objection? No objection. 110.02 will be made admissible.
(Exhibit No. 110.02 is found admissible.) Q. (BY MS. HAZRA) If you can please look at what is
marked as identification purpose as Government's Exhibit 110.03 and 110.04. documents? A. Q. I do. Are they the same sort of task orders that you Do you recognize both of those
previously discussed in connection with 110.02 and Mr. Banks? A. Q. Yes, they are. And are these for the same -- other two employees you
just testified about? A. They are for both Robert Anderson and the other is
for Sam Thurman. MS. HAZRA: Your Honor, I would ask that Government
Exhibits 110.03 and 110.04 be made admissible.

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THE COURT: MR. BANKS: THE COURT: admissible.
Any objection? No objection. Exhibits 110.03 and 110.04 will be made
(Exhibit Nos. 110.03, 110.04 are found admissible.) (BY MS. HAZRA) Pursuant to this contract and the
work orders we have just discussed, did these three employees begin working for DKH Enterprises? A. Under the understanding that I had with both
Mr. Stewart, as well as Demetrius, yes, that was my understanding that they would start working for that job. Q. And how did Computer Horizons keep track of the hours
these individuals worked? A. Computer Horizons Corp had a semi- or a bi-monthly
time sheet that needed to be filled out and handed in, you know, on a bi-monthly basis for billing purposes. Q. Do you know whether or not Computer Horizons Corp
required any approval of the time sheet at the client company? A. Yeah. The approval would come from a signature from
the client, itself, or who we had the agreement with, as well as the signature internally within our office. Q. And how were these time sheets transmitted from DKH
Enterprises to Computer Horizons Corp? A. They could have been faxed up. Usually that is the
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case.
They were faxed in on both the 15th and last day of
the month. Q. I would like you to look at what has been marked for
identification purposes as Government's Exhibit 1G, which should be an envelope in front of you, as well. recognize Government's Exhibit 1G? A. Q. A. I do. What is 1G? 1G would be reference to the time sheet that Computer Do you
Horizons Corp used for any individual that was performing duties on a consulting basis with any of our clients. Q. Is 1G a time sheet in connection with a certain
employee? A. Yes. This time sheet references Mr. David Banks. Your Honor, I would ask that
MS. HAZRA:
Government's Exhibit 1G be admitted into evidence. THE COURT: MR. BANKS: THE COURT: evidence. (Exhibit No. 1G is admitted.) MS. HAZRA: Honor? THE COURT: MS. HAZRA: It may. Special Agent Smith, can you put that
Any objection? No objection, Your Honor. Exhibit 1G will be admitted into
May it be published to the jury, Your
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up?
Special Agent, if you could focus in on the time
period at the top, the top half. Q. (BY MS. HAZRA) Mr. Sheptock, does this time period It might be easier to see
cover a certain time period?
the paper copy in front of you. A. Yeah. The time period would cover when the agreement
came into play and when the individual was actually working on site. Q. It says on the top right-hand corner, there is a Are you able to see that?
period ending there. A. Q. A. Q. Yes.
Does that look like 9/15/03? Correct. Thank you. Yes, it does. If you could go to the whole screen. I
believe you just mentioned, sir, that -- whose time card is this, for who worked these hours? A. Q. This would, again, be Mr. David Banks' time card. There is a line there for client approval. MS. HAZRA: If you could maybe highlight that
Special Agent Smith. THE WITNESS: Yeah. That is signed by Mr. Clinton
Stewart, both signature wise, as well as printed. Q. (BY MS. HAZRA) And how many hours did Mr. David
Banks work for this time period? A. For this time period, it would have been a 2-week
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time frame. Q. How many hours total, which is reflected on
Government's Exhibit 1G? A. 123-and-a-half hours. MS. HAZRA: Maybe you can just highlight that
column Special Agent Smith. Q. (BY MS. HAZRA) Those are total hours worked in that
2-week time period? A. Within that 2-week time period, that is what was sent
in, yes. MS. HAZRA: Q. (BY MS. HAZRA) Thank you Special Agent Smith. If you could please now turn to Do you recognize the pages
Government's Exhibit 111.
contained in Government's Exhibit 111? A. Q. A. I do. What is Government's Exhibit 111? These would contain many time sheets for both
Mr. Robert Anderson, as well as David Banks, as well as Mr. Thurman. Q. And do these time sheets reflect the total time
period that these employees were payrolled with Computer Horizons Corporation at DKH Enterprises? A. here. MS. HAZRA: Your Honor, I would ask that
It would.
It would.
There are many time sheets
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Government's Exhibit 111 be admitted. THE COURT: MR. BANKS: THE COURT: Any objection? No objection. Exhibit 111 will be admitted.
(Exhibit No. 111.00 is admitted.) MS. HAZRA: of 111. Could you just publish the first page
Your Honor, may we publish to the jury? THE COURT: MS. HAZRA: You may. Special Agent Smith, if you could just
highlight the top part of the period ending, top right-hand corner. Q. (BY MS. HAZRA) Mr. Sheptock, so is this consistent
with your recollection of approximately when these individuals began working for you -- being payrolled at DKH? A. Yeah. Looking at the first page -- going back to the
last page of this stack here, yes, it does look like it is. Q. For a period ending August 15, 2003. If you would
look on the screen, sir, it might be easier. A. Yes, correct. MS. HAZRA: Then, Special Agent Smith, I don't know
if you can turn to the last page, which is page 83 of the exhibit. ending.
If you could just highlight the top period
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Q.
(BY MS. HAZRA)
It shows there the period ends on
March 31, 2004; is that correct? A. That is correct. MS. HAZRA: Q. (BY MS. HAZRA) Thank you Special Agent Smith. Based on these time cards, what did
Computer Horizons do to compensate the individuals that were payrolled? A. Computer Horizons Corp was in a position, due to the So
payrolling, to pay these individuals every two weeks.
that's what we performed, and that is what we did in this matter. Q. What did Computer Horizons Corp -- do they generate
any documents to then get paid back from DKH Enterprises? A. They do. There is an invoice that is sent out every
30 days, per the contractual agreement that is sent out. Q. Could you please look at what has been marked for Do
identification purposes as Government's Exhibit 112. you recognize Government's Exhibit 112? A. Q. A. I do. What is Government Exhibit 112?
Government Exhibit 112 would be in reference to the
invoices that are sent out on a monthly basis. Q. A. And these are invoices sent to whom? To DKH Enterprises, attention Clinton Stewart. MS. HAZRA: Your Honor, I would ask that
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Government's Exhibit 112 be made admissible. THE COURT: MR. BANKS: THE COURT: Any objection? No objection, Your Honor. Exhibit 112 is made admissible.
(Exhibit No. 112.00 is found admissible.) Q. (BY MS. HAZRA) I am sorry, Mr. Sheptock, I just want I apologize. You
to circle back to the time cards again.
have testified that David Banks was one of the individuals you payrolled; is that correct? A. Q. That is correct. Were you aware at that time that Mr. Banks was also
working for other staffing companies at the same time Computer Horizons Corp was payrolling him? A. Q. I was not, no. Had you been aware that Mr. Banks was working for, at
times, two other staffing companies, would that have affected your decision to continue payrolling him? MR. ZIRPOLO: THE COURT: MS. HAZRA: his decision. Your Honor, objection, foundation. Sustained. I am asking if it would have affected
I will rephrase, Your Honor. Yes. Would that information have affected
THE COURT: Q. (BY MS. HAZRA)
any decisions, had you known? A. It would. You know, we focus on our clients as being
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the number one priority for us.
And an individual that is
working more hours or continues on more than one job on a 40-hour week basis, is not what Computer Horizons stand for or what we do. Q. Had you been aware of that information, would you
have acted differently with respect to Mr. Banks? MR. ZIRPOLO: THE COURT: THE WITNESS: Q. A. (BY MS. HAZRA) Objection, speculation. Overruled. Yes, I would. What would you have done differently? Probably would
Probably questioning the assignment.
have gotten a little more involved with Mr. Harper in why there -- how can somebody have the time to work this many hours and continuously be a positive influence within the client base. Q. So --
Did DKH Enterprises pay Computer Horizons Corp on
these invoices we previously looked at? A. Q. No, they have not. When you didn't receive money, did you make -- what
steps, if any, did you take? A. Well, what we look at as a company, when I was with 90 days to I
Computer Horizons Corp, it is a 90-day cycle.
kind of give or take -- receive payment for invoices.
would get a report from our accounts receivable department letting us know that we haven't received a payment, and
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when that 90 days hits, that is when we really start, you know, seeking in and settling in to find out why we haven't been paid at that point. Q. A. So what did you do to find out? At that point I picked up the phone and got ahold of
Mr. Harper, and we started conversing on what the problem was here. Q. A. What did Mr. Harper say about his lack of payment? He said that the job that they were working on at the
time, which was government related, was not -- did not pay them yet, so they needed more time in order to pay the payments to us for that. Q. Did Mr. Harper provide any further details about the
government job in these conversations? A. Yeah. At that time he had mentioned that it was the And me,
Department of Transportation out of New York.
being familiar with the area, working in this area for the IT division for pretty much my lifetime, I know that the government can be a little bit slow with payment. Q. So based on Mr. Harper's statements, did you continue
to payroll Mr. Banks, Mr. Thurman, Mr. Anderson? A. Q. I did, yes. Did DKH Enterprises then pay you on the later
invoices? A. They did not, no.

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Q.
What actions did you take, then, when you still did
not receive payment? A. At that point in time, my legal counsel started
getting a little more involved internally within our office, and some letters were sent back and forth amongst us stating that payments would be received shortly hereafter. Q. Did you make any attempts to continue contacting
anyone at DKH Enterprises? A. At that time, there was probably maybe two or three
calls per week trying to find out when we would receive payment on these, so -Q. Were you able to speak with anyone in these phone
calls? A. There were times I could. But there were plenty of
voicemails, that's for sure. Q. At some point in time did you make a decision as to
whether to continue payrolling the three individuals with DKH Enterprises? A. Absolutely. At that point in time, you know, it
started to become a situation where we felt we were kind of going to be losing a lot of money here. So the
decision between both us, our legal counsel and the president of the company, was to, you know, decide to pull the resources from this assignment.
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Q. A. Q. A.
Who relayed that decision to the employees? I did. What was their reaction when you told them? There really wasn't a reaction, which was kind of a But at the time --
little unfamiliar to me. Q. A. Q. A.
Why was it unfamiliar to you? What is that? Why was it unfamiliar to you? I've worked with a lot of individuals, and the last
thing anybody wants to know or be informed of is losing their job. So especially being within the time frame that
they were working out there, being paid the money they were, but just to, you know, lose your job out of nowhere because the bills weren't being paid by the client, there was really no reaction. Q. A. Q. It was taken very easily.
By all of the three employees? By the three employees, correct. If you could please look at Government's Exhibit Do you
116.01, which is in the folder in front of you. recognize Government Exhibit 116.01? A. Q. A. I do. What is this?
This would be an e-mail from myself to Demetrius,
basically asking about funding or when payment was going to be received.

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Q.
Is there more than one e-mail reflected in this
exhibit? A. Yes, there are several on here. MS. HAZRA: Your Honor, I ask that Government My understanding is the
Exhibit 116.01 be admitted.
defense has stipulated to its admission. MR. BANKS: THE COURT: will be admitted. (Exhibit No. 116.01 is admitted.) MS. HAZRA: 116.01 to the jury? please. Q. (BY MS. HAZRA) This is an e-mail sent by you, Special Agent Smith, can you display If you could start with page 4, No objection, Your Honor. All right. Government Exhibit 116.01
Mr. Sheptock? A. Q. Correct, yes. And as you can see, the date reflected there is May
4, 2004? A. On the bottom of page 4? MS. HAZRA: Q. (BY MS. HAZRA) I apologize, Your Honor. You can see -- apologize, sir. Yes,
thank you.
Can you see there "To:
Demetrius Harper," and
it says 5/4/2004? A. Q. I do, yes. And what is the substance of this e-mail?
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A.
The substance of this e-mail is, again, wondering
where we are on payments and what is being done about this. MS. HAZRA: If you can please turn to page 3,
Special Agent Smith. Q. (BY MS. HAZRA) Are these more e-mails from you to
Mr. Harper? A. Q. That is correct, yes. And what is the subject matter of these e-mails,
again? A. Again, asking for when payment is going to be Also, mentioning the payment plan that we have
received.
in place, and the contract, as well. MS. HAZRA: If you could please turn now to page 2, And if you could highlight the top
Special Agent Smith. portion. Q. (BY MS. HAZRA)
And does that top portion of that
e-mail, does that reflect Mr. Harper's response to your inquiries as to when payment was coming? A. It does, yes. It doesn't say when we would receive
the payment, but it does say that, you know, he is expecting payment from the client he is working for, so -Q. And this e-mail references the New York Police Had Mr. Harper mentioned a different agency
Department.
to you in terms of a signed contract already?

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A.
Yes.
This was -- the police department was something
that came up, I think, later on down the road, so -MS. HAZRA: And then, last, if you could just turn
to the first page, Special Agent. Q. (BY MS. HAZRA) You talked earlier in testimony about
a payment plan.
Is that the e-mail that reflects what you
were referring to, sir? A. Q. That is correct, yes. How much money did Computer Horizons Corp lose to DKH
Enterprises? A. I could not give you an exact sum on that, but over
the time frame, it would have been close to a million dollars that was lost. MS. HAZRA: THE COURT: Q. (BY MS. HAZRA) Your Honor, may I have one moment? You may. Sir, you just testified you weren't
sure about the exact amount of loss; is that correct? A. Q. That is correct. Would the amount of money Computer Horizons Corp lost
be reflected in the invoices Computer Horizons Corp generated? A. If those invoices were added up, that would reflect
the exact amount of money we lost at that time, correct. MS. HAZRA: THE COURT: No further questions, Your Honor. All right. Thank you.
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Mr. Banks, you may proceed. CROSS-EXAMINATION BY MR. BANKS: Q. Mr. Sheptock, I would like to start with asking you a
couple of questions regarding -- we had two interviews -you had two interviews, one with the Special Agent of the IRS, and the other one with Robert Moen. Do you remember
the details of those interviews with those individuals? A. time. One was quite a long time ago. One was more present
I could probably remember more details on the But I do remember speaking to
present than the past. them, yes. Q. A. Q. was? MS. HAZRA:
You just remember the overall conversation? Conversation, yes, I do. Could you just explain what the overall conversation
Objection, Your Honor.
He is trying to
impeach the witness, but he hasn't laid any proper foundation. THE COURT: THE WITNESS: Overruled. The conversations were basically in
regards to DKH Enterprises and what happened during the time frames of the non-payment issues. Q. (BY MR. BANKS) Now, your memory is fairly stout with
regards to Mr. Harper's -- what Mr. Harper actually said

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to you.
But your memory, as far as specifics to what
happened during the -- during the interviews with the FBI, you only remember very broad types of things? A. No, sir. If you ask me general questions related to
those conversations, I am sure I can answer them for you. At the same time, in regards to why my memory is pretty good on the other side, is because there is a lot of documentation that is attached to it. Q. A. Q. Okay. Now, you mentioned a million dollars lost?
I mentioned around a million dollars lost, correct. Around a million dollars. From what we have, the
invoices total 382,000.
Is there some other -- is there
some other calculation or interest or something that takes it almost $600,000 higher? A. No. As I mentioned, I don't know the exact amount.
But if you added up the invoices, that would be the total amount. Q. Okay. You also mentioned that Mr. Harper told you
that he had a contract in place with the New York City Transit? A. Q. A. Department of Transportation. Department of Transportation? Yes. MR. BANKS: Your Honor.
One moment, Your Honor.
Thank you,
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Q.
(BY MR. BANKS)
Now, on the e-mail you just viewed, And is it
Mr. Harper mentioned the NYPD specifically.
your testimony that he is mentioning NYPD separately in that e-mail, but he told you previously it was the Department of Transportation, and that is clear in your mind from 7 years ago? A. Yes, sir, it is. At that time, when all of this was It was not an
going on, you know, some things are clear.
easy moment for me, especially when I had the president and the corporate office all over me for payment purposes on this. MR. BANKS: Your Honor, can I have Mr. Sheptock
review -- refresh his testimony with regard to his two investigations? THE COURT: No. You need to first establish that
he doesn't remember something, and then you could proceed. You don't have him just review. Q. (BY MR. BANKS) Mr. Sheptock, on June 19, 2007, 9:45
a.m., you were interviewed by Special Agent Sanchez of the Internal Revenue Service, Criminal Investigation. Do you
recall your statement as it reads here that Sheptock -MS. HAZRA: THE COURT: statement he gave. MR. BANKS: Say it again?
Objection, Your Honor. Sustained. Ask him if he recalls what
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THE COURT:
Ask him if he recalls what statement he
But you can't read the statement. MR. BANKS: I understand, Your Honor. I thought I
asked him that previously. Q. (BY MR. BANKS) Do you remember your exact statement
regarding what DKH was doing with regards to software and the statement he made regarding that? A. As I mentioned earlier, there is some things I can
recall on the earlier conversations and some that, you know, I cannot. THE COURT: recollection. So at this point you may refresh his
If you want to hand that to Ms. Barnes, she
will give it to him. The record will reflect that Ms. Barnes is handing him, I assume, the statements he made previously. THE COURT: (BY MR. BANKS) Yes, Your Honor. Mr. Sheptock, on page 1 -- I am
sorry, on page 2 of that document -- can you read for the Court? MS. HAZRA: THE COURT: the question. your question. Q. (BY MR. BANKS) Mr. Sheptock, can you read your Objection, Your Honor. Have him read it, then you can ask him
Read it to himself, then you can ask him
statement there, please, number seven.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q.
THE COURT: to that statement. Q. (BY MR. BANKS)
Now you may ask a question with respect
Mr. Sheptock, obviously this was in
-- with regard to that, you said that DKH was -MS. HAZRA: THE COURT: told the agent. MR. BANKS: THE COURT: (BY MR. BANKS) I apologize, Your Honor. That's all right. Mr. Sheptock, do you recall you Objection, Your Honor. Ask him if he recalls what it is he
telling the agent that -THE COURT: Do you recall what you told the agent?
Do you recall what you told the agent? Q. (BY MR. BANKS) Do you recall what you told the
agent? A. I do, reading off the paper now, yes. MR. BANKS: THE COURT: Now, Your Honor? If you want to get it out, it has to be
what he told the agent. Q. (BY MR. BANKS) What did you tell the agent,
Mr. Sheptock? A. That my understanding was that DKH was performing
software development for the Department of Transportation in New York. Q. Okay.

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A.
The contractual agreement was for net 30 days, which
is what we have in place for every client that is out there for us. And that the contract begin -- first
payment was actually due in 60 days from the time it began, because you're always 30 days in arrears. MR. BANKS: Your Honor, can I have -- can
Mr. Sheptock be provided with the FBI interview of 2009? THE COURT: foundation. Try to do the same thing. Lay the
If he doesn't remember, he can be provided. I thought I asked him that already,
MR. BANKS: Your Honor, too. THE COURT: sequence. Q. (BY MR. BANKS)
You may have, but let's try to go in
Mr. Sheptock, do you remember what
you told Special Agent Robert Moen of the FBI on 4/7/2009 regarding statements by Mr. Harper and dealings he had in New York City with the New York police enforcement organizations? A. That one would have been a little bit further back,
so word for word, no. Q. A. Actually, sir, this is the 2009 interview. The 2009. All right. Yeah, I believe it was the
same thing that I had mentioned on this one. MR. BANKS: THE COURT: Your Honor -Ms. Barnes, would you please hand that
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copy to the witness. Q. (BY MR. BANKS) If you could go to the section to
refresh your recollection -- go to paragraph one, two three -- paragraph three, please, and refresh your recollection. A. Q. Yes. Okay. Now, based on your statement, you said that
DKH, at least in the statement that is read here, that DKH already had a contract in place; is that correct? A. Yeah. That is what was told to me. There was a
contract in place, yes. Q. A. Q. It was told to you? From DKH Enterprises, correct, Mr. Harper. I didn't mean to interrupt you, Mr. Sheptock. Is there some reason you didn't mention that when your memory would have been clearer in 2007? A. The only thing I could say on that is it wasn't But the -- from
questioned or asked in the same manner.
what I am reading on both statements here, it is pretty much similar or the same, so -Q. I don't see it that way. Contract in place and
developing solutions are two different things; is that correct? A. I'm not understanding the question. Contract in
place and developing solutions?

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Q. A. Q. A. Q.
Let me read it for you now. Sure. "Harper told Shebcock that --" Sheptock Sheptock. I am sorry, I didn't mean to mispronounce
your name.
"Harper told Sheptock that DKH had a contract Harper told
already in place with the State of New York.
him that they were working with a New York Transit System or something similar," which is fine. Now, previous to that, on seven, it reads "Sheptock's understanding was that DKH was developing software for the government sector, he believed it to be the New York Department of Transportation." Now, the New York Department of Transportation and New York City stuff is consistent. But there is a
complete addition of a contract in place, which is two years later you remembered something that you really didn't provide two years ago; is that correct? MS. HAZRA: I object to the characterization and
the argument, Your Honor. THE COURT: MR. BANKS: Honor. It is argument. All right. Sustained.
I am going to move on, Your
I think I have established what I need to
establish there. Q. (BY MR. BANKS) Did Computer Horizons file a civil
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judgment? A. I believe they have, yes. I wasn't involved with the
legal aspect of it. that. Q.
Our legal counsel would have handled
Mr. Michael Crawford -- Caulfield, sorry. Okay. You also mentioned -- for clarification, now I
am going to ask you a little something about payrolling. A. Q. Sure. As far as the identity of the individuals, you had
mentioned that individuals working other contracts -- let me just ask you the question. In the payrolling arrangement, or during your experience in staffing, you have never seen an individual work personal contracts; is that correct or incorrect? A. Q. How do you define personal contracts? I mean multiple assignments. Have you ever had a
consultant or contractor in your life span work multiple assignments? A. In my life span, which has been my whole career
within the IT industry for consulting, I have never seen an individual that had worked two simultaneous contracts without informing us ahead of time. Q. Without informing you ahead of time. Now, do you
think it is impossible for -A. Let me add to that, without informing me ahead of
time, as well as -- you know, I rarely see individuals

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working over 40 hours a week, as well. Q. So you rarely see that. Is it beyond all realm of
the imagination that people work two jobs? A. Q. A. It definitely can be done. Okay. Are you asking me if I ever saw it? No, I rarely see Yes, I am sure it can.
it, so -Q. Okay. Now, you did mention, again, that you reached
out to Mr. Harper on a routine basis, and you were able to reach him most of the time. You did say you had to leave
some voicemails or whatever; is that correct? A. What I did say is there were several voicemails that But, yes, I reached out to
were left along the way.
Mr. Harper several times, yes. MR. BANKS: Thank you. THE COURT: MR. WALKER: THE COURT: MS. HAZRA: THE COURT: MS. HAZRA: THE COURT: Anybody else? No, Your Honor. Any redirect? No, Your Honor. May this witness be excused? Yes, Your Honor. Thank you very much. You are excused. No further questions, Your Honor.
How long will the next witness take? MR. KIRSCH: Your Honor, if I can confirm that we
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have the witness available, the witness I have in mind I expect would take about 15 minutes on direct. THE COURT: MR. KIRSCH: Honor. THE COURT: MR. KIRSCH: Ely. Ms. Barnes if we can have Government Exhibit 503.01 and 503.02 available. COURTROOM DEPUTY: Remain standing. You may. Your Honor, the Government calls John All right. Can I go back and confirm that, Your
Your attention, please. JOHN ELY having been first duly sworn, testified as follows: COURTROOM DEPUTY: Please be seated.
Please state your name, and spell your first and last names for the record. THE WITNESS: E-L-Y. DIRECT EXAMINATION BY MR. KIRSCH: Q. A. Mr. Ely, where do you work, sir? I work with the Federal Bureau of Prisons in John A. Ely. J-O-H-N. Last name is
Washington, D.C., our headquarters, and I'm in the Office of Security Technology.
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Q. A. Q.
What is your position there? I am a security specialist. And what does the Office of Security Technology do
for the Bureau of Prisons? A. We evaluate new technology, new products that people
are trying to introduce to the Bureau of Prisons. Q. A. Q. A. Q. How long have you held that position? I have been there since late 1996. And held that position continuously since that time? Yes, sir. Is the Bureau of Prisons a part of Department of
Justice? A. Q. Yes, sir. And your office, the Office of Security Technology,
does it have contracting authority for the Bureau of Prisons? A. Q. is? A. It is in our procurement division, administrative No, not at all. Where -- do you know where the contracting authority
division, which is where our procurement office is. Q. In the course of your work -- well, let me ask a I apologize.
different question first.
You said, I think, that you evaluate security systems and products?
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A.
Yes, sir.
And it can range from new handcuffs to Really anything that somebody or someone
x-ray machines.
wants to try to introduce, or something that somebody might see that they might think it has an application or something for the federal government, they typically try to run it through us. Q. All right. We are like a clearinghouse.
In the context of your work evaluating
those things, do you have meetings with vendors of those kinds of products? A. Yes, sir. They will often come and make
presentations to us, or we will try to arrange for the appropriate or applicable division, whether it is facilities or corrections or one of the other divisions, to have a presentation made for them. Q. All right. And when you say that that happens often,
can you give us a sense of the frequency with which you might have meetings or set up meetings like that with vendors? A. Well, we evaluate literally thousands of products,
and probably, I would say, maybe 20 percent of those involve the manufacturer or rep or vendor actually coming to our office and, perhaps, making a presentation to us, either on the computer or showing their product. MR. KIRSCH: Your Honor, at this time I would offer
what, again, I understand is a stipulated exhibit that is

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marked as Government Exhibit 503.01. THE COURT: with Mr. Roe. Ms. Barnes? MR. KIRSCH: THE COURT: MR. KIRSCH: THE COURT: admitted. (Exhibit No. 503.01 is admitted.) MR. KIRSCH: be activated. Your Honor, could I ask that the elmo This is 503.01, Your Honor. I may have mismarked mine. I believe Mr. Roe was 501.01. I marked the wrong one. 503.01 will be I thought that was already received
Our government computer system is not
working very well. THE COURT: the elmo. COURTROOM DEPUTY: Q. (BY MR. KIRSCH) Yes, Your Honor. Ms. Barnes, would you please activate
Mr. Ely, I have put the first page Are you able to see
of this exhibit on the screen now. that? first. A. Yes, sir, I can see it. MR. KIRSCH:
I am going to focus on the bottom of that exhibit
Your Honor, I don't believe the jurors
are able to see that. THE COURT: MR. KIRSCH: Go ahead and publish, Ms. Barnes. I am sorry, Your Honor, that is
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probably because I didn't ask to publish it. THE COURT: Q. Right.
I apologize.
(BY MR. KIRSCH)
Can you see that on the screen,
Mr. Ely? A. Q. A. Q. Yes. Is this an e-mail from you? Yes, it is. Okay. And then at the very bottom of the page here
with the arrows, where it says David Banks, is that an e-mail that you had received? A. Q. Yes, sir. And I am going to now flip to the second page of that Is this the remainder of that e-mail now on the
exhibit. screen? A. Q.
Yes, sir. Do you recall having a conversation with a David
Banks about the software that is mentioned here? A. I really -- I really don't recall the exact time or This does bring back some recollection
the information. to that.
I would only say that it probably took place,
being the position that we are in in our office. Q. OST. A. Q. There is a reference in the middle of the screen to Do you know what that is? Office of Security Technology. And what would the Office of Security Technology have
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had to do with a meeting about software? A. Really, that is one of the areas that we don't get So for something like that, we, ourselves, So that is one of the incidences
involved with.
do not evaluate that.
where we would try to arrange or be a go-between for some other division that would have responsibility for that area, just to try to be the person to set up a meeting so that they can meet with somebody who might be responsible for that. Q. now. Okay. I am going to show you page 1 of that exhibit
And this appears to suggest that there was a meeting
scheduled for November 3rd of 2003? A. Q. Yes, sir, it appears that way. And the people that are referenced there, are those
people that would have had something to do with the software? A. They actually run the programs that would use the
software for something like what IRP was trying to present. Q. All right. And do you recall whether or not you
attended that meeting? A. I don't recall. And thinking back, I really don't
think the meeting actually took place at the -- in Denver. Q. A. All right. If I can remember correctly, I don't think it took
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place there. actually. Q.
I recall it may have taken place in D.C.
All right.
During -- did you have at this time
period, did you have any sort of a standard practice, a routine practice about what, if anything, you would say to vendors about the contracting process? A. Normally, when they come in and they present a
product, typically we will always present a disclaimer saying that, you know, all we are doing is evaluating this. This is a first step of the process. You know,
we'll do everything we can to help you, to point you in the right direction. And especially when it comes to
buying something like that, we always say, you know, we are not -- all of us in that office are not contracting officers. We have no authority to commit specifically
this office or the BOP in general to purchasing any items. Q. Did you ever attend meetings with the folks mentioned
in that e-mail, Judd Clemens or Doug Wombacher? A. I don't remember or recall being in a meeting with I think --
Judd Clemens, who was in the Denver site.
again, we have met so many different companies. Q. I don't want to interrupt you, but I want to make I think perhaps it wasn't. I
sure my question was clear.
am asking generally, in the course of your career at BOP, did you participate in a meeting with Mr. Wombacher or
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with vendors? A. Oh, yes. Yes, on several occasions for other
products and presentations, yes. Q. Okay. And during the course of those meetings, did
you observe whether or not there was a routine practice with respect to the statements that you described were part of your practice? A. Yes, sir. In every division we met with, they are
quick to bring up the fact that they, too, are not contracting officers and have no authority to commit as such. Q. All right. During the course of any meetings or
discussions that you would have had with representatives of IRP, are you able to say whether or not you would have ever made any statements that would have suggested that the Bureau of Prisons was going to buy that software? A. No, sir. There is no way. I would have never said
anything like that. MR. KIRSCH: Thank you, Mr. Ely.
Those are my questions, Your Honor. THE COURT: MR. WALKER: THE COURT: Cross-examination? Yes, Your Honor. You may proceed, Mr. Walker. CROSS-EXAMINATION BY MR. WALKER:
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Q. A. Q.
Good morning, Mr. Ely. Good morning. Now, in your role in the Security Technology Office
within the BOP, you stated that vendors often came to your office to solicit their products to the Bureau of Prisons. And, in the course of doing that, if the vendor conducted a demonstration meeting and interest was expressed in the product by the Bureau of Prisons, would it be logical that this meeting is an early step in the procurement process? A. Not in the procurement process, but in the
development of an evaluation plan, or even maybe a pilot proposal or further steps to evaluate the technology. The procurement thing, that is a totally separate process. That comes after extensive pilot evaluation,
long-term trials, then introduction, even, to software folks and things like that. Then that whole package would
go over to the procurement side, and then the procurement side would have to take it from there. totally separate processes. Q. So is it fair to say this meeting and demonstration So they are a
with your department would be a prerequisite to entering into procurement? A. yes. Q. If it got that far, that would be the initial stage, Uh-huh. And would your office render a request for a meeting
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that encompassed a demonstration with the company who provided a product with which you had no interest? A. Yes. Actually, in order to give fairness to all
people that would like to present their products, even if we don't have interest at all, we'll still allow them the opportunity to come in, make their presentation. And, you
know, who knows, there might be some piece or part of that that might interest somebody. everybody with a product. Q. In the interest of being fair to all vendors in the So we try to be fair to
community, if they conducted that demonstration meeting and you determined that no one in the audience knew of a need for that type of technology within the Bureau of Prisons, what would your likely response be to that vendor? A. We would tell them that, you know -in some case we
wouldn't have an interest because it was outside our realm, which are things with software, things like that. So what we would tell that vendor is we will try to put you in contact with somebody who might have an interest. At that point, it is out of our hands. hands, and it moved into another realm. Q. Let me clarify. If the vendors's product fell within It is out of OST's
your area of interest, but you had no need or interest in their product, what would your likely response be to that
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vendor? A. Could you repeat that again? I am not sure I am
catching that. Q. Sure. If the company came to you with a product that
did lie within your area of responsibility -A. Q. Okay. -- and then during the meeting you determined that
you had no need or interest in their product, what would your likely response be to that? A. If it did lie in the interest, I personally would not It would involve decisions not only
make that decision.
of our office, but also consulting with others to see if there was a need besides just -- you know, I am not the one that says there is a need and there is not a need. We
look for things, and then we consult with others to see if there is another need. Q. A. Q. Okay. If it is in our area of interest. So assuming, then, it is in your area of interest and
you have had a chance to consult with others who would have direct knowledge of a need in their areas, and you then determined collectively that there was no need or interest in that particular business product, what then would be the next course of action? A. Then we would -DARLENE M. MARTINEZ, RMR, CRR United States District Court For the District of Colorado
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MR. KIRSCH: much speculation. THE COURT:
Objection, Your Honor, calls for too
Sustained.
Try to break it down and
not ask for speculation. Q. (BY MR. WALKER)
Ask what happened in this case.
Is there a policy that governs
responses in that scenario? A. Q. No, there is not. There is not. So we'll break it down. The meeting
has been conducted with a vendor. others.
You have consulted with
What would your next step be -- I am sorry, when
you consulted with those others and they expressed no interest in the products -- in the vendor's product, what would you then do? A. Typically, then we would just do a letter and say, At this time the
thank you for presenting your product.
Bureau of Prisons does not see an application for your product at this time. Q. And you indicated earlier that if at the end of that
meeting you determined that there could potentially be an interest in this product, what would your response be in that scenario? A. Then we would let them know either that we would like
now to move to the next phase of either getting you in contact with the responsible or applicable division that might be of use of such product, or if it is in something
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in our area of interest, then we proceed to possibly getting one of those products, conducting evaluation, and a pilot program of that product. Q. Do you recall ever drafting a letter or
correspondence to IRP Solutions stating there was no interest in the product? A. No, sir. And I would not have done that. That would
have been the area of responsibility for whoever we referred it to. Q. Would you have been made aware, or would you have
informed them that such a letter was appropriate? A. Q. A. Yes, if it was appropriate, yes. But you do not recall informing them in this case? Once we referred it to OEP, in this case, then we
would have basically handed it over to them. MR. WALKER: THE COURT: MR. BANKS: THE COURT: Okay. No further questions.
Anybody else? I have a couple questions, Your Honor. Mr. Banks you may proceed. CROSS-EXAMINATION
BY MR. BANKS: Q. A. Q. Mr. Ely, you mentioned a pilot project. Yes, sir. Are you familiar with the types of pilot projects
related to software at the DOC?

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A.
I am not, because our office really doesn't get
involved too much in the information systems software/hardware, things like that. Q. Now, if there is a product of intense interest by --
whether it be OST or another division of the Bureau of Prisons, do you, as an executive in that area, have influence to push a product and say, we really want this product to procure? A. No way. I am not an executive. By the way, I am not But
even a supervisor.
So I am way down on the chain.
what we would do was -- would be to confer with the vendor of the product and say, okay, now there is an interest, we would like to proceed to the next stage, can we get a product from you, one each or two each, and put that out there for a long-term evaluation. MR. BANKS: Honor. THE COURT: Anybody else? No further questions. Thank you, Your
Any redirect? MR. KIRSCH: THE COURT: No, Your Honor, thank you. All right. Thank you very much. May
this witness be excused? MR. KIRSCH: THE COURT: Yes, please, Your Honor. All right. You are excused. At this
time, we are going to go ahead and take our mid-morning

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recess.
It is 10:55, we will reconvene at 11:10.
Court
will be in recess. (A break is taken from 10:55 a.m. to 11:12 a.m.) (The following is had in open court, outside the hearing and presence of the jury.) THE COURT: You may be seated.
Any matters to be brought to the Court's attention before we bring the jury in? MR. KIRSCH: MR. BANKS: THE COURT: No, Your Honor, thank you. No. All right. Ms. Barnes, would you
please bring in the jury. (The following is had in open court, in the hearing and presence of the jury.) THE COURT: You may be seated.
Government may call its next witness. MS. HAZRA: Dean Hale. COURTROOM DEPUTY: Remain standing, please. Thank you, Your Honor, Government calls
Your attention, please. DEAN HALE having been first duly sworn, testified as follows: COURTROOM DEPUTY: Please be seated.
Please state your name, and spell your first and last names for the record.
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THE WITNESS: H-A-L-E.
My name is Dean Hale, spelled D-E-A-N
DIRECT EXAMINATION BY MS. HAZRA: Q. A. Q. A. Q. A. Q. Good morning, sir. Good morning. Where are you currently working, Mr. Hale? I am with a company called the Spitfire Group. What is your position there? I am the vice president. Have you previously worked for a company known as
Systems Engineering Services Corporation? A. Q. A. Q. Yes, I have. How long did you work for that company? Approximately 2 years. Does Systems Engineering Services Corporation
sometimes go by an acronym? A. Q. A. SESC, correct. Do you recall when you worked for SESC? I started with them in early 2003, and ended my role
with them in late 2005. Q. A. What was your position there? My position was director of -- I was basically a
director for business development. Q. What kind of company is SESC?

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A. Q.
They are basically an IT contracting consultant firm. I would like to direct your attention to July 2003.
Did you reach out to a company called DKH Enterprises? A. Q. A. Yes, ma'am, I did. Why did you contact them? We had understood they had an opportunity for some
contract work as relates to state and federal contracts. Q. A. Q. A. Q. A. Whom did you contact there? I contacted a Mr. Stewart. Do you recall his first name? Clinton. What did you discuss in that first telephone call? It was basically a typical informal discussion about
our two organizations. Q. As a result of that telephone call, did you have any
further follow up with DKH Enterprises? A. Yes. We decided to have a much more formal
discussion as it relates to a meeting. Q. And what was the time lapse between your telephone
call and the meeting, just approximately? A. Q. A. Approximately just a week or two. Where did this meeting occur? We decided to meet for lunch at a restaurant called
J Alexanders in, I believe you would call it Littleton or Lakewood -- well, it is Littleton, Centennial.
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Q. A. Q.
Who was at the meeting? There was Mr. Stewart and Mr. Demetrius Harper. At that meeting, did Mr. Stewart and Mr. Harper tell
you more about DKH Enterprises? A. Q. Yes, they did. And what did they say? Did they describe what kind
of work DKH does? A. Yes. They were much more clearer about their
backgrounds; where they came from and, you know, what kind of experience they had. And, obviously, they discussed
the specifics around the type of work they were doing with their organization. And it does seem to be very focused
on state and federal contract work. Q. A. Did they identify any specific contracts? They were very specific around doing work for And they also discussed Homeland
agencies in New York.
Security -- federal contracts with Homeland Security. Those were probably the two that I recall. Q. At this meeting did either Mr. Harper or Mr. Stewart
explain their employment needs? A. Yes. They were looking for us to provide them some
level of support as relates to contract employment; to be able to initiate these contracts and provide the project effort. Q. When you say "initiate these contracts," just so we
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can be clear, they needed employees to initiate what contracts? A. Specifically, contracts that they were receiving
grants on that were either federal or state level contracts. Q. So Mr. Harper and Mr. Stewart explained to you that
they were receiving grants? A. Q. Yes, they did. And they needed extra employers to -- employees to
assist them with this grant? A. The idea was that they were looking for companies
that could assist them as either a prime or subcontractor to help facilitate these contracts. Q. During this meeting, do you discuss with Mr. Harper
or Mr. Stewart who would be identifying these additional contract employees? A. Q. Could you repeat that again? Sorry, I wasn't very clear. Did Mr. Harper or
Mr. Stewart tell you if they had individuals in mind already? A. Individuals with their organization specifically or
for -Q. I am so sorry, sir. Let me try again. I think you
have been saying that as a result of this meeting, Mr. Stewart and Mr. Harper told you they were looking for
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additional employees; is that right? A. Q. Correct. Who was going to provide those -- find those
employees? A. Q. They were. As a result of that meeting, did you have further
conversations with them regarding these employees? A. Q. Yes, we did. At some point in time do you come to learn who the
additional employees they wanted to hired were? A. Q. A. Yes, we did. And who were they? We only had dealings with Mr. Harper and Mr. Stewart
at the time. Q. And who did Mr. Harper and Mr. Stewart tell you they
wanted employed? A. It was -- ultimately, we entered into contracts with
both of them based on their level of experience. Q. And what was the work SESC was providing -- let me Are you familiar with the concept known as
back up.
payrolling? A. Q. A. I am familiar with it, yes. What is payrolling? Payrolling is basically a situation where a prime
contractor would provide payment to subcontractor

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employees during a project or program effort, typically. Q. And was SESC going to be doing payrolling for DKH
Enterprises? A. Q. That was ultimately what was placed, yes. Could you please look, sir, at what has been marked That should be in
for identification purposes as 390.04. a folder in front of you. A. Q. A. Q. A. Yes, I do. What is this document?
Do you recognize this document?
This is a Systems Engineering Service Agreement. And who is this agreement between? The agreement was between SESC, Systems Engineering,
and DKH Enterprises. Q. And did that memorialize what the contract was
between these two parties? A. Yes, it does. MS. HAZRA: Your Honor, I would ask that
Government's Exhibit 390.04 be admitted into evidence. THE COURT: MR. BANKS: THE COURT: Any objection? No objection, Your Honor. Exhibit 390.04 will be admitted.
(Exhibit No. 390.04 is admitted.) MS. HAZRA: Your Honor, could I publish the first
page of that exhibit, please? THE COURT: You may.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q.
MS. HAZRA:
If you could just highlight, Special
Agent, the very first paragraph. Q. (BY MS. HAZRA) That last sentence there, Mr. Hale,
is that the service that SESC was providing DKH Enterprises -- was going to provide some staff to help them in these projects? A. Yes, that is correct. MS. HAZRA: (BY MS. HAZRA) Thank you, Special Agent. I believe you stated previously that
Mr. Harper and Mr. Stewart told you about these additional staff; is that right, or did I mishear you? A. Q. A. I am sorry, can you -Who did SESC end up payrolling for DKH Enterprises? We ended up payrolling Mr. Harper and Mr. Stewart
specifically. Q. Okay. Did you hire other people to do work for Maybe I
Mr. Harper and Mr. Stewart at DKH Enterprises? can help you out, sir.
If you can please look at what has That
been marked for identification purposes as 390.01. is in another folder in front of you. that document? A. Yes.
Do you recognize
The Independent Subcontractor Agreement with
Systems Engineering. Q. A. And who is that with? That contract agreement is with Leading Team.
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Q. A.
Who is Leading Team? Leading Team is the subcontractor, and they would be
subcontractor to this particular series of projects. Q. To whom would Leading Team be the subcontractor to,
what entity? A. Q. A. Q. A. DKH. So Leading Team was going to work for DKH? That's how it was supposed to be, correct. Yes.
And who was going to pay Leading Team for their work? That would be us, Systems Engineering. MS. HAZRA: Your Honor, I would ask Government's
Exhibit 390.01 be admitted into evidence. THE COURT: MR. BANKS: THE COURT: Any objection? No objection, Your Honor. Exhibit 390.01 will be admitted.
(Exhibit No. 390.01 is admitted.) MS. HAZRA: please? THE COURT: Q. (BY MS. HAZRA) It may. Sir, this contract is between Systems Could it be published to the jury,
Engineering Services Corporation; is that correct? A. Yes, Subcontract Agreement between Systems
Engineering and Leading Team. MS. HAZRA: And if you could scroll down to No. 1,
Special Agent, and highlight that.

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Q.
(BY MS. HAZRA)
Does this portion of the
Subcontractor Agreement lay out where Leading Team would be working or what kind of work Leading Team would do? A. Yes. It basically outlines the engagement and their
responsibility as a subcontractor to provide programming, analytical support. Q. DKH Enterprises, even though it is abbreviated, is
that the entity to whom they would be providing that support? A. Q. That's correct. At some point in time did you come to learn what
individuals were associated with Leading Team, Incorporated? A. Q. A. Q. Yes, I did. And who were those individuals? Mr. Stewart and Mr. Harper. Could you please look at what has been marked for
identification purposes as Government's Exhibit 390.02. A. Q. A. Q. A. Yes. Do you recognize 390.02? Yes. Its an Independent Contractor Agreement.
Between whom? It is between Systems Engineering and Mr. David
Banks. Q. And are you aware, sir, of any relationship between

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David Banks and the entities we have been discussing today? A. Q. A. Yes. And what is that relationship? He is -- his relationship, as relates to our
understanding under this agreement, was that he would be a contract employee, contract employee at the time. Q. A. Q. A. Q. Of SESC? Right. We would be actually payrolling him.
And where would Mr. Banks be working? He would be working for the client, DKH. Okay. So did you say you would be payrolling
Mr. Banks for DKH Enterprises? A. Q. That's correct. Which means -- what would SESC's responsibilities be
in connection with Mr. Banks? A. Mr. Banks would be -- what he would do is he would
provide the services that were outlined in the contract. Subsequently, he would then issue a weekly or bi-weekly time sheet to us confirming the hours worked. And at that
point, we would then payroll based on the hours that he provided. Q. So in that arrangement, your company would be paying
Mr. Banks' salary, his wages? A. Yes.

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Q.
And how would SESC get paid in that arrangement?
How
do they make money? A. Typically what happens is then we, once we determine
the hours, we then have -- we then have an amount that is charged back to the client, to the customer. Q. A. Who was the customer in this case? It would be -- the client is DKH, but it would go to
Leading Team. Q. A. Why would it go to Leading Team, sir? Leading Team is actually the customer of SESC. That
is basically who we were payrolling to. correct. Q. A. Q.
I believe that's
If I could have you look back at 390.04, sir. Yep. I believe there it indicates the customer is DKH
Enterprises. A. Q. That is correct, yes. My apologies.
And I believe you mentioned David Banks was one of
the individuals being payrolled? A. Q. A. Q. Yes. Could you please now look at 390.03. Yes. Do you recognize the document that is marked for
identification purposes as 390.03? A. Yes. It is an Independent Contractor Agreement

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through Systems Engineering to Mr. Cliff Stewart. Q. And are you aware, sir, of any connection between
Cliff Stewart and the entities of people we have been talking about? A. Q. Yes. He is a part of DKH.
What was Systems Engineering doing with respect to
Mr. Stewart? A. It was the same -- we were basically payrolling him
as a contractor. Q. A. Where was Mr. Stewart going to be working? He was going to be working on behalf of SESC,
providing services to DKH? Q. So were Mr. Banks and Mr. Stewart the two individuals
that Systems Engineering were payrolling? A. Q. Correct. At some point in time, do you come to learn of the Did you have any
job duties of Mr. Banks and Mr. Stewart? understanding of what they would be doing? A.
There was -- it was various -- it varied.
There was
discussion around providing automation tools for -- as it relates to emergency response, specifically in New York, and then also providing that type of capability for Homeland Security at the federal level. Q. And I believe you mentioned previously that these two
individuals filled out a time sheet, did you say?

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A. Q. A.
That is correct. What is the purpose of this time sheet? The time sheet, basically, verifies the hours worked
against the contract to the customer. Q. If you could please look at what has been marked for Do
identification purposes as Government's Exhibit 1F. you recognize Government's Exhibit 1F? A. Q. A. Q. A. Yes, I do. What is Government's Exhibit 1F? It is a time sheet. Okay. Yes.
Do you know -- Systems Engineering time sheet? It is from Systems Engineering, and it is to --
and, in fact, it is from Mr. Cliff Stewart. MS. HAZRA: Your Honor, I ask Government's 1F be
admitted and published. THE COURT: MR. BANKS: THE COURT: be published. (Exhibit No. 1F is admitted.) Q. (BY MS. HAZRA) I believe you just said it is on I apologize. Any objection? No objection. Exhibit 1F will be admitted, and it may
behalf of Clint Stewart -- Cliff Stewart. Sorry, I am getting my names confused. MS. HAZRA:
If you could please highlight the box
on the bottom right.

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Q.
(BY MS. HAZRA)
Mr. Hale, is that the signature of Is that where they
the employee who works the hours? sign? A. Q. That is correct.
Does Systems Engineering also require the client to
approve the hours? A. That is correct. MS. HAZRA: And, Special Agent, if you could Is that the
highlight the box called "client signature."
area where the client would have approved the hours worked? A. Q. That is correct, yes, it is. That appears to be signed by Clint Stewart; is that
correct? A. Q. A. Yes. Is that correct, sir? Yes. MS. HAZRA: Special Agent, if you could highlight
the time part of it and the hours and the dates. Q. (BY MS. HAZRA) Does this time card cover a certain
period of time from September 2003? A. Q. 1st? A. It starts on September 1st, and then closes out for
Yes, it does. And what time period -- does that start on September
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pay period to September 15th. MR. ZIRPOLO: Objection, Your Honor, Ms. Suneeta It does not say
says this is Cliff Stewart's time sheet. that on the time sheet. MS. HAZRA:
Your Honor, I believe I said it was We have not got to whose time
approved by Clint Stewart. sheet it is. MR. ZIRPOLO: MS. HAZRA: THE COURT: Q. (BY MS. HAZRA)
You said Cliff Stewart's time sheet. I apologize. Sustained. Please clarify.
Does that indicate the total hours
worked by the employee during this time period? A. Q. A. Yes, it does. Is that 125-and-a-half hours? Yes, ma'am. MS. HAZRA: Could we go back, Special Agent to Does that Or if
where the employee signs that signature card.
indicate that David Banks signed that time card? you can't read it, sir, if you could go to the top left-hand corner.
Does that have the identification of
whose time card this is? A. Q. A. Q. Yes, it does. Whose time card is this? David A. Banks. For that period?
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A.
Yes. MS. HAZRA: Thank you, Special Agent. How do these time cards get submitted
Q.
(BY MS. HAZRA)
to Systems Engineering? A. Q. Either in person or via fax is typical. If you could please look at Government's Exhibit 391.
What is Government's Exhibit 391? A. Q. A. It is, again, Systems Engineering time sheets. For which individuals? David Banks. Cliff Stewart. Cliff Stewart. David
Banks.
David Banks. MS. HAZRA:
Cliff Stewart.
Cliff Stewart.
Your Honor, I would ask Government's
Exhibit 391 be admitted. THE COURT: MR. BANKS: THE COURT: Any objection? No objection, Your Honor. Exhibit 391 will be admitted.
(Exhibit No. 391.00 is admitted.) Q. (BY MS. HAZRA) Sir, do the time periods -- the
period end dates correspond with the periods of employment worked by Mr. Banks and Mr. Stewart? A. Q. Yes, they do. Mr. Hale, I am going to direct your attention again
to Government's Exhibit 1F. MS. HAZRA: THE COURT: Could that be published? It may.
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Q.
(BY MS. HAZRA)
So, again, as we discussed, this is
David Banks' time card for the period ending September 15, 2003? A. Q. A. Correct. That is a Systems Engineering time card? Correct. MS. HAZRA: Your Honor, may Exhibit 1G, which is
already in evidence, also be published to the jury? THE COURT: MS. HAZRA: side by side. Q. (BY MS. HAZRA) Can you identify the time period 1G It may. Special Agent, if you could put that
is covering? see.
Mr. Hale, it might be difficult for you to
Do you see the period ending there on the right-hand
side of your screen, which is part of the period ending for Government's Exhibit 1G? A. Q. A. Q. Yes, I do. Is that the period ending 9/15/2003? Correct. How does that date correspond to the time period in
the Systems Engineering time card, Government's Exhibit 1F? A. Is that the same time period? Yes, it is. MS. HAZRA: Special Agent, if you could expand 1G
to indicate whose time card it is.

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Q.
(BY MS. HAZRA)
Mr. Hale, can you see the name
identified in the right-hand side of Government's Exhibit 1G as to the identity of the time card? A. Q. It is Mr. David Banks. And on the Systems Engineering time card, that is
also David Banks? A. Q. Correct. And could you -- on the Systems Engineering time
card, I believe you already testified -- in Government's Exhibit 1F in front of you, can you identify the number of hours worked? A. Q. It might be easier to do on the paper.
125.5 hours. Is it possible to go back to 1G? Can you identify
the number of hours worked at the same time period on his other time card from Computer Horizons? A. Q. 123.5. Mr. Hale, did you have any knowledge of the time
period Mr. Banks was working for Computer Horizons at the same time he was working for you? A. Q. No. Would that have affected your decision to continue to
payroll Mr. Banks? A. Q. A. Yes, it would. In what way? Well, I mean, my experience has been that when we are
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-- when we are involving -- particularly for state and federal contract work, it is a full-time effort. So it
requires, obviously -- there is no time to actually enter into another contract. So I can just say that my
experience in this industry, as far as contractors are concerned that I have worked with, have full-time responsibility, in state and federal, specifically, as it relates to how much time and effort we have to put into it. Q. It is typically a 40 hour, if not more, work week. I talked about this previously. Did SESC invoice DKH
Enterprises? A. Q. A. Yes, we invoiced them. And what do those invoices reflect? Basically, they reflect the time that -- the work
that was done, based on time. Q. A. Q. The work that was done by Mr. Banks and Mr. Stewart? Correct. I would have you look at what has been marked for Do you
identification purposes as Government Exhibit 392. recognize Government Exhibit 392? A. Q. A. Q. A. Yes, I do. What is Government's Exhibit 392?
It's an invoice from Systems Engineering Services. To whom? DKH Enterprises.

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MS. HAZRA:
Your Honor, I would ask that
Government's Exhibit 392 be found admissible. THE COURT: MR. BANKS: THE COURT: admissible. (Exhibit No. 392.00 is found admissible.) (BY MS. HAZRA) Just so I am clear, these are the Any objection? No objection, Your Honor. Government 392 will be found
bills that Systems Engineering sent DKH Enterprises; is that right? A. Q. That is correct. If you could please look at what has been marked for Do you recognize these
identification purposes as 392.01. documents? A. Q. A. Q. for? A. Yes.
It is an invoice from Leading Team, Inc.
Who is Leading Team billing? They were billing Systems Engineering Services. What were they billing Systems Engineering Services
They were billing for the efforts from David Banks
and Clifford Stewart. Q. And based on these documents, do you understand David
Banks and Mr. Stewart's relation to Leading Team? A. Q. Yes. And what is that?
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A.
They were basically the contractor -- they were the
contractor for Leading Team, based on the hours that they had worked and reported. Q. And did this invoice form part of the basis for the And
invoices Systems Engineering sent to DKH Enterprises? that is not the clearest question, so let me back up. MS. HAZRA: First, Your Honor, I would ask
Government's Exhibit 392.01 be found admissible? THE COURT: MR. BANKS: THE COURT: admissible. (Exhibit No. 392.01 is found admissible.) Q. (BY MS. HAZRA) Mr. Hale, the Government's Exhibit Any objection. No objection, Your Honor. Exhibit 392.01 will be found
392.01 are the invoices from Leading Team to Systems Engineering; is that right? A. Q. That is correct. Government's Exhibit 392 is then the invoices from
Systems Engineering to DKH? A. Q. A. Q. A. Correct. Did Systems Engineering get paid by DKH Enterprises? No, they did not. What response, if any, did you take? Well, initially, obviously, there are terms and The typical terms
conditions as relates to a contract.
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are net 30.
And in the case of -- based on our
recollection of the terms, as far as us receiving payment, had exceeded the net 30. And so then I approached -- I did approach at that time, Mr. Stewart, and informed him that there was an issue, as far as getting payment. And they said that they
had had some delays in their receivables, but that it would be rectified. So we subsequently just continued to
move forward without them paying. Q. A. Q. Did you also have conversations with Mr. Harper? That is correct. So based on their assurance that they were having
trouble with receivables, what did you mean by I continued to move forward? A. We saw no reason at that point not to extend the
terms beyond the net 30, and that is not uncommon. Q. It is not uncommon to have a receivable coming in?
What is not uncommon, just to clarify? A. know. Q. A. Q. So then at some point in time did DKH pay? No, they did not. Did you then have further follow-up conversations It is not uncommon to have receivables delayed, you
with Mr. Harper? A. I was -- it was then escalated to me again at net 45.
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At that point, I did reach out to them again to inform them that accounting had informed me that we had not received a payment. was some delays. Again, it was referred to me as there
And then at that point we continued to
move forward with the expectation that we would get paid. Q. A. Q. A. Did you then get paid after this next contact? No, we did not. So then what additional steps, if any, did you take? At that point there is an escalation. Typically, if
I recall, there was an escalation at 60 days, which is, at that point, when it escalates to 60 days, then corrective action has to be taken by our accounting and executive team to make a decision on whether or not they need to move forward with the contract. Q. At some point in time, did you try to personally
visit, to go collect on the outstanding balance? A. Q. A. Q. A. Q. A. Yes, I did. And where did you go? I went to their location in Colorado Springs. Who do you mean by "their"? Pardon me? Whose location in Colorado Springs? It was the location that we had -- that we were given
as far as their headquarters. Q. By "their," do you mean DKH Enterprises?

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A. Q.
That's correct. Were you able to find the location based on the
information provided by DKH? A. Q. A. Initially, no. And why not? The location that we had had originally, quite There was no one there.
frankly, didn't exist. Q.
And how did you receive that original location
information? A. Q. A. From Mr. Banks and Mr. Stewart. How did you end up finding DKH's offices? Ultimately, we were able to determine a secondary That information was provided to me, and then I
location.
physically went to that location. Q. A. And what happened when you got there? I went there to -- I walked into the -- it was an And I walked in, and there was a front And it was basically just
office suite. desk. empty. Q.
There was no one there.
Did you try to speak with anyone or make contact with
anyone? A. The only thing I could do at that time, was there was
a couple of doors beyond the front desk, and I heard some activity in there. was no answer.
So I knocked on the door, but there
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Q.
Based on the continuing non-payment, did Systems
Engineering continue to employ and pay Mr. Banks and Mr. Stewart? A. There was some hesitancy. There was some discussions
about it, but we did again get some assurance from these gentlemen that the receivables were delayed, and that they were going to compensate us. And, subsequently, that We
never happened, so we did end our contract with them. shut down the payroll on them. Q.
And who informed Mr. Banks and Mr. Stewart that they
would no longer be getting paid? A. Q. A. I did. How did you communicate this information to them? By phone. They contacted me first that they had not
received a payroll on the date that they were supposed to get it. And at that time I did inform them that the
contract had to be frozen due to non-pay. MS. HAZRA: THE COURT: Q. (BY MS. HAZRA) Your Honor, if I could have a moment. You may. Mr. Hale, I want to go back a second I apologize.
to the invoices again. A. Q. That's fine.
If you could please look at Government's Exhibit 392
and 392.01. A. Yes.

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Q. A. Q.
If you could maybe turn and look at both of those. Uh-huh. And just for the record, 392.01 are the invoices from
Leading Team to Systems Engineering; is that right? A. Q. That is correct. Did Systems Engineering pay on these invoices? Did they pay Mr. Banks and Did
they pay Leading Team?
Mr. Stewart for the work that was performed? A. Q. Yes, they did. You will see the amount reflected on these invoices;
is that right? A. Q. Yes, I see the amount. And then I would have you look at Government's And those are the invoices from Systems
Exhibit 392.
Engineering to DKH Enterprises; is that right? A. Q. That is correct. And to what do those invoices reflect? What are you
billing for? A. We are basically billing for the hours and the rate
against those hours to the customer. Q. A. For the work performed by whom? For the work performed by David Banks and Cliff
Stewart. Q. And on the invoices from Leading Team, the amount of
money that Systems Engineering paid Mr. Banks and

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Mr. Stewart, how does that amount compare to the amount that Systems Engineering Services is billing DKH? A. There is a cost that we enter into with Mr. Banks and And subsequently there is a rate that is
Mr. Stewart.
then entered into with the customer DKH. Q. So are the invoices to DKH higher? Does Systems
Engineering bill them for more than what Systems Engineering pays Mr. Banks and Mr. Stewart for the work? A. Q. That is correct. There is a margin.
And what does that margin represent to Systems
Engineering? A. Q. Profit. I think we were discussing Systems Engineering's At some point in time, Mr. Hale, do
failure to get paid.
you refer these collection efforts to someone else in your company? A. Yeah. There is a point where once I was unable to
successfully get any form of payment, it's then escalated to the office of my chief financial officer. Q. A. Q. And what is that individual's name? Mr. Rodenas. To your knowledge did Mr. Rodenas follow up with
Mr. Harper concerning outstanding payment? A. There was a procedure follow up, yes. MS. HAZRA: Your Honor, I would ask that
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Government's Exhibit 396.01 be admitted. to, Your Honor. THE COURT: All right.
It is stipulated
396.01 will be admitted as
stipulated document. (Exhibit No. 396.01 is admitted.) MS. HAZRA: the jury? THE COURT: MS. HAZRA: page 4. Q. It may. Special Agent, if you could start with Your Honor, could it be published to
If you could highlight that bottom e-mail. You see, Mr. Hale, the "To" line is Do you recognize that
(BY MS. HAZRA)
"DHarper@DKHEnterprises.com." person? A. Q.
Is that Demetrius Harper?
That is correct. And there is a "cc" of "Drodenas@SESC.com." Is that
the Mr. Rodenas you have been discussing? A. Yes. The chief financial officer for Systems
Engineering. Q. And this is an e-mail from Clinton Stewart; is that
right? A. Q. A. Q. Yes. Regarding the outstanding invoices? Yes. So is this part of your effort, SESC's effort to
collect, as you have been discussing?

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A. Q.
That is correct. And if you could please look -- turn to page 3. Who
is the Dan mentioned up there at the top? Dan." A. Q. Is that Mr. Rodenas? That is correct.
It says "To:
This appears to be a response; is that right, from
DKH Enterprises? A. Q. Yes, it is. And it may be easier to look on the paper copy in This is Government's Exhibit 396.01. Special Agent, if we could scroll down
front of you, sir. MS. HAZRA:
to the next page to see who it is from. Q. (BY MS. HAZRA) It says, in the "Original Message"
line, "From: A. Yes.
Demetrius Harper;" is that right?
MS. HAZRA:
And then, Special Agent, if you could
go back to page 3, and bottom part of that. Q. (BY MS. HAZRA) The top part, is that the beginning
of a response from Mr. Rodenas to DKH Enterprises; is that right? A. Q. That is correct. If you could turn to the previous page and highlight Again, is that the beginning of a message
the bottom.
from Mr. Rodenas at SESC to Mr. Harper? A. That's correct. That's correct.
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Q.
Does that message, again, ask for payment of the
outstanding invoices? A. Yes, it does. MS. HAZRA: Special Agent, if you could highlight
the top portion of that, Government's Exhibit 2. Q. (BY MS. HAZRA) And, Mr. Hale, do you see the subject What
line there?
What is the subject of this e-mail?
does the subject line read, sir? A. "I was planning on giving him the same run down as Anything you think that I should add? I was
before.
going down the avenue of the procurement process, as well as several police departments that are very close to signing an agreement. Just wanted to touch base to see
what things I can discuss and what things I should leave out. Q. DKH." So the subject matter of that e-mail is the SESC
invoices, is it not? A. Q. A. Q. A. Yes. And that is an e-mail to someone named David? Correct. From DKH? Correct. MS. HAZRA: And if you could turn to the bottom of
the first page, Special Agent. Q. (BY MS. HAZRA) Is that the message that relates to
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that "run down" e-mail? David Banks? A. Q. That is correct.
Is it from Demetrius Harper to
Did you understand at the time, sir, that you were
getting a run around from DKH? A. No, I did not. MS. HAZRA: And then if you would highlight that
message on the first page, Special Agent. Q. (BY MS. HAZRA) Is this, again, I guess the response
that Mr. Harper sent to Mr. Rodenas in response to his request to get paid on the invoices? A. Q. That is correct. And this follows after he solicited David Banks'
advice on what to say? A. Q. That is correct. Sir, are you aware -- do you have any knowledge of
approximately how much money Systems Engineering lost on this contract? A. It was close to a hundred thousand dollars by the
time we closed out the contract. MS. HAZRA: Honor. Q. (BY MS. HAZRA) Just so -- I guess I was not very If I could have another minute, Your
clear about what you can see on the screen right now, sir. That is the Government's exhibit. The first page of the
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Government's exhibit that we were looking at previously 396.01? A. Q. Yes. The message body indicates it is an e-mail sent to But the top part is from David Banks
Dan; is that right?
to Demetrius Harper; is that correct? A. Q. That is correct. So it is concerning the outstanding invoices; is that
right? A. Correct. MS. HAZRA: Honor. THE COURT: You made reference to 390.02 and Do you I have no further questions, Your
390.03, but you never requested they be admitted. want them admitted? MS. HAZRA: THE COURT: MR. WALKER: THE COURT:
No, Your Honor, they don't need to be. All right. Cross-examination?
Yes, Your Honor. Mr. Walker, you may proceed. CROSS-EXAMINATION
BY MR. WALKER: Q. A. Q. Mr. Hale -Yes. -- turn to Government 396.01, the e-mail from I am going to have that
Demetrius Harper to David Banks.
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displayed for you now.
It says that:
We look forward to
that flow being restored and being able to satisfy receivables for $5 million with some major federal and state law enforcement agencies; is that correct? A. That is correct. MR. WALKER: I have another document here that I It is marked
will need to give to Mr. Hale, Your Honor. Defense Exhibit 328. THE COURT: MR. WALKER: that, Your Honor. MS. HAZRA: THE COURT: counsel. MR. WALKER: THE COURT: MS. HAZRA: Honor. Yes, Your Honor. Any objection?
It has not been admitted yet.
So 328? Yes, Your Honor. We just discovered
It is not in our current exhibit list. We don't have a copy. Would you show it to Government
I'm not objecting to marking it, Your
Not the showing it to the witness. THE COURT: I am sorry, any objection to his
showing it to the witness? MS. HAZRA: THE COURT: MS. HAZRA: Yes, Your Honor. All right. Do you have an objection?
Your Honor, he has not laid the proper
foundation to show it to the witness. THE COURT: My first question is, has the
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Government seen this document before? MS. HAZRA: THE COURT: Yes, Your Honor. All right. So with that being said,
let's mark it first.
And you want it marked as
Defendants' Exhibit -MR. WALKER: THE COURT: Ms. Barnes. MR. WALKER: Mr. Hale, this is a document that is a D328, Your Honor. All right. Would you provide that to
transcript of your interview with the FBI. THE COURT: objection is. All right. answer. You need to ask him a question, get an Okay. Now I understand what the
If he gives you an answer that is different, then
you can use that document, or if he doesn't remember. MR. WALKER: Q. (BY MR. WALKER) Yes, Your Honor. Mr. Hale, do you recall being
interviewed by the FBI in July of 2004? A. Q. Yes, sir, I do. And do you recall making statements concerning DKH's
involvement with the Department of Homeland Security and NYPD? A. Q. That is correct. What was the nature of your statements to the FBI
concerning those relationships between DKH, DHS and NYPD?

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A.
I basically relayed the information that I received
from your representatives as it relates to the contracts and grants that you were working on receiving and the clients that you were going to be working with; NYPD and Homeland Security. Q. And do you recall the details specific to the
relationship and the status with DKH, DHS and NYPD? A. I recall that it was -- how it was shared with me is
that you were in the process of a development of an automated processing system that they were all very interested in. Q. Did Mr. Harper or anyone at DKH state to you that
there was a contract in place with DHS or NYPD? A. At the time that we had -- at the time we had a And they also
meeting at lunch, they said that they did.
said that they also had pending grants in place, or they had some grants pending. MR. WALKER: Your Honor, could I provide the
document to Mr. Hale to refresh his memory of the statements? THE COURT: You can ask him -- well, it is not -Go ahead and show him the
it would be for impeachment. document. Q. (BY MR. WALKER)
Mr. Hale, if you could look at that
document.
Paragraph 2, the bottom of that paragraph, the

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last sentence, could you read that to refresh your memory, please. A. It says, "As active contracts --" MR. WALKER: THE COURT: THE WITNESS: Q. (BY MR. WALKER) Sir, please read it to yourself. Read it to yourself. That is correct. So that refreshes your memory of
your statement, and that is correct? A. Q. A. That is correct. Could you read that to the jury, please. "As active contracts --" MS. HAZRA: THE COURT: it. Q. (BY MR. WALKER) Please read the last sentence of I object to the reading. I am going to let it go. You may read
paragraph 2. A. "As active contracts open with different agencies,
pursuing opportunities with Homeland Security, and they have several trips planned to New York in order to actively pursue a large state contract." Q. Sir, so what you just read said that DKH was actively
pursuing contracts with DHS and NYPD? A. Okay. MR. WALKER: Your Honor, I move to admit
Defendants' Exhibit D328.

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THE COURT: an exhibit.
No.
It's inappropriate to admit it as
(Exhibit No. D328 is refused.) MR. WALKER: THE COURT: To admit it as evidence, Your Honor? It will be marked, but the statement, It is the impeachment you just
itself, doesn't come in. did that counts. MR. WALKER: (BY MR. WALKER)
Thank you, Your Honor. So, Mr. Hale, you mentioned that
your role at SES was as the director of business development? A. Q. Correct. For sales. For sales, yes. And prior to taking on that role, what
was your background? A. I have always been in sales and business development
in this industry. Q. So your entire career has consisted of sales and
business development? A. Q. That is correct. Did you ever work as a technical consultant or work
in IT? A. Q. A. Q. My entire career has been in IT. As sales and business development? Correct. Thank you. So in the course of working in sales and
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business development, have you ever heard of the term "moonlighting"? A. Q. term? A. It is typically -- it is typically associated with I have heard of the term. And what is your understanding of the meaning of that
people who provide work or an effort after hours. Q. And so given your description of that term, have you
encountered individuals in IT who do moonlight? A. Not -- as it relates to being under contract with me
and my companies? Q. Sir, my question is, in your experience in the
staffing industry. A. of it. Q. Thank you. Now, in the e-mail that we just saw, we I am sure the practice goes on, but I am not aware
saw that David Banks was addressing an e-mail to Demetrius Harper -A. Q. A. Q. Uh-huh. -- in the role of chief operating officer? Yes. And we saw previously the Government's exhibit with
his time sheet -A. Q. Uh-huh. -- as well. In your engagement with DKH, what roles
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and responsibilities did Mr. Banks have as far as what work he would be doing? A. It was all outlined in the contract agreement, as far
as development effort as relates to the contracts they were working on. Q. And so given that, Mr. Banks would be working as a
technical contributor, basically a billable consultant for DKH; correct? A. Q. That is correct. And we saw that in his e-mail to Mr. Harper, he was
acting in the role of chief operating officer for the company; correct? A. Q. That is correct. And that would then fit your prior description of
moonlighting; correct? A. Q. A. Q. Yeah, you can look at it that way. Is your answer yes? Yes. Thank you. And now when we go back to the
Government's exhibit, the e-mail from Demetrius Harper to David Banks, which is Government Exhibit 396.01, it mentions how Mr. Harper should respond to any inquiries from your company regarding e-mails or the lack of payment? A. Correct.
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Q.
And in saying that, Mr. Harper is asking the COO, how
do I respond to someone on behalf of the company; correct? A. Q. This is the first time I have seen this e-mail. I will give you an opportunity to read it again if
you would like. A. I mean, this is an internal e-mail that was between
the parties of DKH. Q. Okay. And in that internal e-mail between the
parties, Mr. Banks -- or Mr. Harper is asking for clarification on an accurate response to the inquiries by your company; correct? MS. HAZRA: foundation. THE COURT: Q. Sustained. So, Mr. Hale, is this document, this Objection, Your Honor, lack of
(BY MR. WALKER)
e-mail we are viewing from Demetrius Harper to David Banks -THE COURT: seeing this? MR. WALKER: THE COURT: THE WITNESS: Not at this point, Your Honor. Okay. The only thing you have on this And below that Mr. Walker, did you want the jury to be
e-mail is you have it addressed to David. you have DKH.
There is no way for me to even know who you
are responding to there.

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MR. WALKER:
Okay.
Do we have the ability to
project on Mr. Banks' laptop here and to the witness? THE COURT: It should be on yours. Mr. Hale, do you see at the top
(BY MR. WALKER)
there the "From" and "To" line of that e-mail? A. That is correct. It is from Demetrius Harper to
David Banks. Q. A. Q. Thank you, sir. Again, it is an internal e-mail. Thank you. And my earlier question -- I will give
you a chance to read it again if you need it. A. Q. No, I have read it. As you just said, the e-mail is from Demetrius Harper
to David Banks. A. Q. Correct. Would you agree that Mr. Harper is asking Mr. Banks
for direction on how to respond? MS. HAZRA: foundation. THE COURT: Sustained. I don't think this is the Objection, Your Honor, lack of
witness that can answer those questions. MR. WALKER: (BY MR. WALKER) Okay, Your Honor. Thank you.
So, Mr. Hale, you just stated that
you agree that the situation with Mr. Banks serving as COO of the company and working on technical projects would be
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in line with your own definition of moonlighting; correct? A. At the time that we entered into the contract, there
was no reason for us to be -Q. Sir, I want to confirm that you answered that
question "yes" previously. A. Q. That could be viewed as moonlighting, yes. Yes, thank you. And you also stated earlier in
answering the questions of the Government's attorney, that government contracts typically require hours worked to 40 hours per week. And in the previous exhibit that I showed
you, previous document I showed you that was labeled D328, it was clear, and you agree, that DKH employees said that they were working to procure a contract with DHS and NYPD; correct? A. Q. A. Q. The statement says "having active contracts open." No, sir. No, sir.
Yes, it does. I need you to refer to the last sentence. THE COURT: Now, you can't cut him off. You asked
about the statement. can ask a follow-up. MR. WALKER: question. THE COURT:
Let him give the answer, then you
Your Honor, he is not answering my
You asked him about the statement in
there and his interpretation, and he is telling you what

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the statement said. ask. MR. WALKER: THE COURT: THE WITNESS:
Let him answer it, and then you can
Can I clarify my question? Let him answer the question. In my statement to the Federal Bureau
I state "Clint Stewart stated that DKH had active contracts open with different agencies." Okay. That was
the basis of -- one of the basis of our decision to do business with your company. Q. (BY MR. WALKER) I understand. And could you go on
to read the following sentence, sir. A. "Pursuing opportunities with the Department of
Homeland Security, and that they have several trips planned to New York in order to actively pursue a large state contract." Q. So that indicates that DKH did not at that time have
a contract with DHS or NYPD? A. Q. Based on this statement; correct. Thank you, sir. And so going to your previous
statement that government contracts typically require employees to work 40 hours, that would not apply to this situation; is that correct? A. Q. A. No, I wouldn't agree with that. What information -We had a commitment.
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Q. A.
-- did you use -We had a commitment from Mr. Banks and Mr. Stewart. THE COURT: Let's wait until he asks you a
question, then you answer. Q. (BY MR. WALKER) What information did you have that
led you to believe that DHS had a government contract that would cause you to state that government contracts typically require you to work 40 hours? MS. HAZRA: confusing. THE COURT: THE WITNESS: THE COURT: MR. WALKER: Q. (BY MR. WALKER) Do you understand the question? No. Could you restate? Yes, Your Honor. So, Mr. Hale, your statement was Your Honor, I am going to object as
previously, in response to the Government's question, is that typically government contracts require them to work 40 hours per week. A. Q. Do you remember that statement?
I do recall that statement, yes. And the document we just reviewed, and the sentence
we just reviewed, we agree that DKH told you there was no contract -- I am sorry, they told you they were pursuing a contract with DHS and NYPD. question to you, sir -THE COURT: You have to ask him if he agrees with
We agreed on that.
So my
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that.
Do you agree with that, Mr. Hale? THE WITNESS: I agree with what I have stated in
this interview, correct. Q. (BY MR. WALKER) Thank you. Now, given those two
facts that we both agree on, what information did you use to believe that DKH had a Government contract? A. It was the information that Mr. Banks, Mr. Harper and
Mr. Stewart provided myself and the rest of my executive team at the time that we were doing an evaluation on whether or not we would enter into the agreement. Q. Mr. Hale, if I can refresh your memory, that sentence
read that they were pursuing Government contracts, being DHS and NYPD? A. well. Q. Sir, if you can look at that statement -MS. HAZRA: answered. THE COURT: It has been asked and answered. You Your Honor, I object, this is asked and But it also states you have active contracts, as
are interpreting it one way. that statement. answer. Q. (BY MR. WALKER)
There are different parts of
Ask a specific question to get a specific
So, Mr. Hale, you inferred that when
it said that DKH had active contracts, that those meant active government contracts?
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A.
Those were the only contracts that were ever The contracts that were discussed -- that DKH
discussed.
had discussed with me were specific around state entities and federal entities only, nothing outside of that. MR. WALKER: THE COURT: Q. May I have a moment, Your Honor? You may. Mr. Hale, let's go back to the Those were
(BY MR. WALKER)
contracts that the Government showed earlier. Government Exhibit 390.01 -- no, 390.03.
And Mr. Hale, do
you agree -- I will give you a chance to read just the first sentence there. A. Q. Okay, I got it. And it states, "I, Cliff Stewart, an independent Can you tell me what is the difference It says, "I, Cliff Stewart --"
contractor."
between an independent contractor and a W2 employee at SES? A. A W2 employee is a full-time employee that is an And then an
employee of Systems Engineering in this case.
independent contractor works basically for themselves. Q. And given that definition of a W2 employee and an
independent contractor, the independent contractor, is he tasked by SES? A. That is correct. Under an independent contractor
agreement, they would be tasked for providing special -providing work, correct.
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Q. A.
And who would define the details of that work? That's defined by the contractor, as well as the
customer. Q. Thank you, sir. MR. WALKER: review my notes? THE COURT: Q. You may. Earlier, Mr. Hale, you testified in Could I have a moment, Your Honor, to
(BY MR. WALKER)
response to the Government's question, that Cliff Stewart was -- and I quote, "part of DKH." Can you define -- can
you just explain what you mean by "part of DKH"? A. When I first met him, he had introduced himself as a
representative of that company. Q. A. Q. A. Q. Did he give you his title? I don't recall. And did you inquire as to what his position was? I don't recall if I ever did, no. Would you then have assumed, given that he was -- the
company was asking that he be payrolled in a technical capacity, that he was a technical contributor on projects? A. That is correct. That was the big reason why we made
the decision.
They had demonstrated -- they had both
stated that they had experience working -- they had worked previously with Oracle, and they had experience in that area.
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Q.
And, Mr. Hale, in the course of on-boarding
Mr. Stewart as an independent contractor with SES, was his resume reviewed by SES? A. Q. I don't recall if we ever saw a resume. Would that be part of the corporate policy and
procedure to have his resume on file? A. Typically, from a contract standpoint, you know, However, there is
there is a review of bio and resumes.
background checks and qualifying that takes place. Q. Would you agree with the following statement, then:
That SES performed due diligence to affirm that Cliff Stewart was qualified to do the work that DKH asked? MS. HAZRA: foundation. THE COURT: Just ask him whether or not they Objection, Your Honor, lack of
performed due diligence. Q. (BY MR. WALKER) Did SES perform due diligence on
Cliff Stewart for this role? A. There is a set of procedures that we did conduct as
far as qualifying them for the effort; correct. Q. And, Mr. Hale, you said earlier in your response to
the Government's questions, that you went to the offices of DKH. A. Q. That is correct. And you also said that no one was at the front desk?
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A. Q.
That is correct. Are there occasions where you have gone to other
companies and no one is at the front desk? A. Q. Certainly not recently. But have you ever gone to a company's building or
office and no one is at the front desk? A. I'm typically expected when I show up to a client's
place. Q. Sir, if you just answer the question. Have you ever
gone to an office and no one was at the front desk? A. Q. A. Sure. Did that raise alarm for you on those occasions? No, because I was probably there -MR. WALKER: THE COURT: MR. BANKS: THE COURT: MS. HAZRA: THE COURT: Thank you, sir. Any further cross? No further. Redirect? How long? No further questions.
Very brief, Your Honor. All right. REDIRECT EXAMINATION
BY MS. HAZRA: Q. Mr. Hale, I want to clarify a few things. You have
been asked in the document up on the screen still, the employee that was payrolled by SES was Cliff Stewart; is that right?
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A. Q.
Correct. And the name is Clint Stewart who you met initially
with Mr. Harper to discuss the payrolling? A. Q. Correct. There has been a lot of questions asking you about
that initial lunch meeting with Mr. Stewart and Mr. Harper. A. Q. Uh-huh. You testified on cross-examination that their
statements about active contracts was important to you. What effect did Mr. Harper's and Mr. Stewart's statements that DKH has active contracts, influence your decision to do business with them? A. It was based on the idea that they had active And it was also based on the idea that -- they
contracts.
alluded to the idea that they had pending grants for additional efforts with, specifically, the State of New York, NYPD and Homeland Security. Q. And were those important to you in deciding whether
or not to enter into a contract with them? A. Well, because it bases -- a couple of things. One,
it shows the validity of the products and service they provide. And, secondly, that they can actually -- they
would have the ability to pay their bills. Q. Mr. Hale, do you know what company David Banks is the
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COO of? A. Q. It is a little unclear these days. And had you known that Mr. Banks was the chief
operating officer of a company? MR. WALKER: Objection, Your Honor. We have
inconsistent statements by the witness. THE COURT: Q. (BY MS. HAZRA) Overruled. I am going to go back to the time Had you known
period when you were payrolling Mr. Banks.
at that time that he was the chief operating officer of a company, would that have affected your decision on whether or not to continue payrolling him? A. I was not aware of that. MS. HAZRA: May I have one moment, Your Honor? No
further questions, Your Honor. THE COURT: MR. ZIRPOLO: question. THE COURT: MR. ZIRPOLO: THE COURT: will. RECROSS-EXAMINATION BY MR. ZIRPOLO: Q. You stated that Mr. Stewart and Mr. Harper said they
May this witness be excused? Your Honor, I have a follow-up
Related to -To what she just said. I normally don't allow recross, but I
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had contracts with DHS and NYPD; is that correct? A. Q. A. Q. with? A. When we had an original discussion at the restaurant, There No, that is not what I stated. Please tell me what contracts they had. They alluded to active contracts. Did you ask them what agencies those contracts were
there were discussions around efforts in New York.
was a discussion around an effort in -- in fact, there was a discussion around an effort in Atlanta. course, Homeland at the federal level. discussions. And then, of
So those were the
Every discussion that we had revolved around
state and federal contract business only. Q. Thank you. Did you ask him how much the contracts
were for? A. Q. A. No, I don't recall I did. Did you ask them what type of contracts they were? No, but it is not -- but it is not really --
typically, that is a difficult thing to get, because there are certainly some proprietary issues that would come into play. Q. Did you do any research to find out about the award
of those contracts? A. We did. MS. HAZRA: Objection, Your Honor, this is way
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beyond the scope. MR. ZIRPOLO: I am trying to clarify what
information he had on the contracts. THE COURT: the redirect. asked on cross. MR. ZIRPOLO: they had contracts. THE COURT: That is going beyond. I am going to She was asking him to restate that This is beyond the scope, I believe, of
That was something that should have been
sustain the objection. MR. ZIRPOLO: questions. THE COURT: excused? MS. HAZRA: THE COURT: excused. We are going to go ahead and recess for lunch. Because we started late, I apologize, I am only going to give you an hour for lunch today. 1:30. So we will reconvene at Yes, Your Honor. Thank you. You may be All right. May this witness be Okay. Thank you. No further
Thank you very much.
So, remember, you are not to speak to anyone about If you could
this case or anything you have heard today.
be back here ready to go at 1:30, I would appreciate it. So we are in recess until 1:30. (Lunch break is taken from 12:31 p.m. to 1:30 p.m.)
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(The following is had in open court, outside the hearing and presence of the jury.) THE COURT: You may be seated.
Any matters to be brought to the Court's attention before we bring in the jury? MR. KIRSCH: MR. BANKS: THE COURT: No, Your Honor. Nothing from us, Your Honor. Ms. Barnes, please bring in the jury.
(The following is had in open court, in the hearing and presence of the jury.) THE COURT: All right. You may be seated.
Government may call their next witness. MR. KIRSCH: Thank you, Your Honor. The Government
calls Donald Crockett. COURTROOM DEPUTY: Your attention, please.
DONALD CROCKETT having been first duly sworn, testified as follows: COURTROOM DEPUTY: Please be seated.
Please state your name, and spell your first and last names for the record. THE WITNESS: My name is Donald Crockett, spelled
D-O-N-A-L-D C-R-O-C-K-E-T-T. DIRECT EXAMINATION BY MR. KIRSCH: Q. Mr. Crockett, can I make sure your chair is scooted
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forward so you are close to the microphone. Mr. Crockett, where is it that you live? A. Q. A. Q. A. Q. A. Q. A. I live in Boulder, Colorado. Where do you work? I work for CTG, Incorporated in Boulder. Do those initials, CTG, stand for something? Computer Task Group. What sort of company is that? IT consulting firm. What is your position there? I am the director of the strategic staffing services
business area. Q. All right. And you mentioned that CTG does IT
consulting. consulting? A.
What sort of things are involved in IT
Well, my area of strategic staffing services involve
staff augmentation; that is to say customers ask for certain skills, IT skills, and we resource for skills and then place them on assignment and an account. Q. When you use the term "resource for those skills,"
can you explain what that means? A. We have recruiters who go out on job boards and post
job positions in newspapers, et cetera and find candidates. Q. How long have you worked at Computer Task Group?
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A. Q. A. Q. A. Q. A.
For 15 years. So I take it you were there in 2003, as well? Yes. What was your position at that time? I was a site manager at that time. Site manager for what site? Around the general area. I had Colorado, Texas and
Oklahoma. Q. A. Q. And were you still working from Boulder at that time? Yes. During that time period, 2003, were you responsible
for setting up some business between CTG and a company called DKH? A. Q. Yes. Do you recall roughly when that began, that
relationship began? A. Q. A. Q. June. Latter part of June. June 26, I think it was.
Of 2003? 2003. And how is it that you first came into contact with
someone representing DKH? A. Q. A. Q. I got a call. Do you remember who that call was from? Clinton Stewart. Did Mr. Stewart give you any information during that
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call about how he got your information? A. Well, he said his boss, Demetrius Harper, gave him my
name and number, and that was the extent. Q. Was Demetrius Harper a name that you knew prior to
that telephone call? A. Q. No. Did Mr. Stewart say anything during this call about
the business in which DKH was engaged? A. Q. Not in a lot of detail. All right. Actually, no, they didn't.
Did he explain why it was that he had
called your company? A. They needed some IT skills, and they had some people
that they had selected, and they wanted to bring those people to work through CTG. Q. And just to be clear, when you say "they," who are
you referring to? A. Q. Clinton Stewart and Demetrius Harper. Okay. And the arrangement that you just -- that you
were just describing, did you say that those people would become employees of CTG? A. Q. Yes. Is there a name for that kind of a relationship in
the staffing industry? A. Q. Not really, but W2 employees. Of your company?

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A. Q.
Of our company. All right. And how is it, then, that CTG was going
to make money from hiring these new employees? A. Well, there is a certain fee in this case that we And I negotiated an uplift with DKH.
were to pay them.
And the difference between the two is what profit we make. Q. All right. So am I correct that the uplift is the
amount that you would bill DKH? A. Q. A. Q. Correct. All right. On top of the salary. On top of the salary that you paid to those
employees? A. Q. Correct. All right. Uh-huh. Did you have any -- let me ask you a Was that -- relative to other kinds
different question.
of business that you were doing at CTG at the time, was that a relatively profitable kind of business for you to do? A. Q. No. Did you have any expectation that the relationship
might lead to more profitable business? A. That was the reason I did it. It was more like an
investment. Q. And what was the basis for your thinking that you
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might get more profitable business out of this? A. Well, there was an indication from Clinton and
Demetrius that they would have other business they would give to me, and then I would make normal profits. Q. And why is it that you would make normal profits from
the other business, as opposed to from this initial set of business? A. I just wanted to get the relationship started. New
client, so I wanted to get some business, let them get to know me, I get to know them, and then usually business can come from that. Q. I see. Do you recall the names of the people that
you were asked to hire? A. Q. A. Q. Yes. What were those names? The first two were Larry Iverson, and Enrico Howard. And then -- you said "the first two." There was a
third? A. Q. A. Q. Yes. And that person didn't start at the same time? Wasn't discussed the first time. All right. At some point did you have a discussion
over e-mail about adding this other employee? A. Q. A phone call. A phone call?
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A. Q. A. Q. A.
The next day, June 27th. Okay. Who made that call?
From Clinton. Okay. And what did he say during that call?
He had one other person he would like to have me
bring on. Q. A. Q. Did he identify who that was? Barbara McKenzie. Did that, then, get followed up with an e-mail or a
series of e-mails? A. Q. We communicated back and forth, yes. Can I ask you, please, to look, Mr. Crockett, there There
is a folder in front of you that is marked 1.00B.
is an exhibit inside there that I would like you to take a look at, please. A. Q. A. Q. A. Q. A. Yes. Have you had a chance to review that? Yes. Do you recognize that exhibit? Yes. And what is that exhibit? This is the documented agreement for the uplift of 25
percent for Barbara McKenzie. Q. Does this reflect -- does this exhibit contain a
couple of e-mails?
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A. Q. A.
Yes. And who are the parties to those e-mails? Clinton Stewart. And Demetrius Harper was copied.
And, of course, it came to me. Q. Okay. And these e-mails related to the conversation
that you had with Mr. Stewart about adding Ms. McKenzie as an employee; is that right? A. Correct. MR. KIRSCH: Your Honor, I would move to admit and
publish Government Exhibit 1B. MR. BANKS: THE COURT: published. (Exhibit No. 1B is admitted.) MR. KIRSCH: Thank you, Your Honor. No objection. It will be admitted, and may be
Can we highlight that message right there in the middle, please. Q. All right. Can you see that on your screen now,
(BY MR. KIRSCH)
Mr. Crockett? A. Q. Yes, I can. This pay rate -- there is a reference here to a pay How does that relate to what you
rate, then a bill rate.
were explaining before in terms of the uplift and that sort of thing? A. Well, they asked that I pay Barbara McKenzie $60 an
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hour, salary.
And the 25 percent uplift would then make
the bill rate of $75. Q. I see. MR. KIRSCH: Can we now display the top part of
that message, please. Q. A. Q. A. Q. (BY MR. KIRSCH) Yes. Is that right? Yes. Now, you, at some point, signed -- did you sign an And then you agreed to do that?
agreement with DKH? A. Q. Yes. And let me ask you to look now, please, at what is
marked for identification as Government Exhibit 120.01. Do you have that in front of you? A. Q. A. Q. A. Yes. Do you recognize it? Yes. What is it? It is the Professional Service Agreement between DKH
and CTG. Q. A. Is your signature on this agreement? It is. MR. KIRSCH: Your Honor, I would move to admit
Government Exhibit 120.01.

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THE COURT: MR. BANKS: THE COURT:
Any objection? No objection, Your Honor. Exhibit 120.01 will be admitted.
(Exhibit No. 120.01 is admitted.) MR. KIRSCH: (BY MR. KIRSCH) Thank you, Your Honor. Mr. Crockett, did you have any
personal contact with Mr. Stewart or Mr. Harper around the beginning of this relationship? A. Q. A. Q. A. Q. A. Yes. I went down to Colorado Springs to visit them.
And how did that get arranged? I called -Okay. -- and asked for time. Why would you want -- why did you want to do that? I have new employees, and I had never met the
customer, and I wanted to do both of those things, which is starting a relationship, and it is very healthy to meet employees. Q. Okay. THE COURT: All right. May I ask, is the jury able to hear? They didn't know me, either.
Lean more into the microphone. I have this crazy voice. Do you recall roughly when that
THE WITNESS: (BY MR. KIRSCH)
meeting was? A. July 9th.

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Q. A.
And who is it that you met with? Clinton Stewart, Demetrius Harper. I also met with
Barbara McKenzie and Larry Iverson. lunch. Q. A. Okay.
We actually went to
And what happened at the lunch? We just got to know each other, and general
Chatter.
discussion. Q. Did you speak to everybody that was there at the
lunch? A. Q. A. Oh, sure. In equal parts? No. We were sitting around the table, and so And, of course,
exchanges were going back and forth.
between the employees and between the DKH, the executives -Q. A. All right. -- as well. So it was just a general non-specific
type conversation. Q. All right. After the lunch was finished, what
happened? A. Q. A. I-25. Q. And what city are we in?

We went back to the DKH office. And do you recall where that was? The street I don't. It is just a block or so off
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A. Q.
We are in Colorado Springs. Okay. And tell us what else you remember about the
office, itself. A. Well, it was not busy, I recall that. I wanted to
meet with the two employees that I had met, and there seemed to be offices open. those offices. And I was guided to one of So -- there
And then I saw no one else.
was a big wall there that I think something was on the other side of it at that time. going on. Q. Did you have any discussion when you were back at the But there wasn't very much
office about a company called IRP? A. Q. A. Q. Yes, briefly. What do you recall being said about IRP? IRP was the major company. DKH was a subsidiary.
Did you have any discussion, during this meeting back
at the office with Mr. Stewart, more about what DKH's business was? A. Q. A. A bit more. What else did he tell you about that? He talked about their supporting applications for I didn't get a lot of detail
criminal justice systems. about that.
I know one of the applications he talked That was the main software. And not a
about was Cobra.
lot more about the interrelationships of IRP and DKH.

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Q.
Was there more discussion about any companies with Was it explained who the
which DKH was doing business? software was being built for? A.
They didn't mention companies in specific.
But he
did say there was business that they were pursuing with New York. Q. Did you have an understanding after that conversation
about whether or not there was business in place with New York? A. Q. No. All right. At some point -- you did enter this
relationship; you hired the employees -A. Q. A. Q. Yes. -- and placed them at DKH; is that right? Yes. And once that relationship was under way, how was it
that your company kept track of the time that those employees were working? A. We have a time reporting system, electronic, that
they had to report time. Q. Okay. Let me ask you to look now, please, at what is
marked for identification as Government's Exhibit 121.00. A. Q. 121? Yes, sir. I'm sorry, I would like you to actually
look at 121.01.
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A. Q. 18.
Okay. There are a number of pages in this exhibit, about Have you reviewed this exhibit before you came to
court today? A. Q. Yes, I have seen it once. And are you able to recognize what this exhibit
contains? A. Q. A printout from the CTG time and attendance system. Is that the system that you were just describing a
moment ago? A. Q. Yes. And is this, then, the records of all of the time
reports that were made by the people -- the employees that you had placed at DKH? A. I am not sure if it is all of them. But there are
quite a few here, except I only see Barbara McKenzie on these. Q. All right. Does it appear to be a set for Barbara
McKenzie? A. Q. Yes. All right. MR. KIRSCH: Exhibit 121.01. MR. BANKS: THE COURT: Without objection. Exhibit 121.01 will be admitted.
I would move to admit Government
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(Exhibit No. 121.01 is admitted.) MR. KIRSCH: THE COURT: MR. KIRSCH: May we publish that, Your Honor? You may. Can you expand the top half of that
for us, Special Agent Smith. Q. (BY MR. KIRSCH) We have attempted to make that a Can you read that now?
little bigger on the screen. A. Q. Uh-huh.
So just sort of walk us through, if you will, the
information reflected here on the screen. A. Well, the first line is "Record Time." And this is She
for Barbara on this week ending date, which is 10/31. worked 8 hours Monday through Friday. of record time.
So she had 40 hours
And then the system works where you have
to actually enter a different line when you record your overtime or any other time. So, in this case, Barbara worked 2 hours of overtime on Monday; 1 hour on Tuesday; 2 hours on Wednesday, Thursday and Friday, for a total of 9 hours of overtime. Q. So she had 49 hours that week.
Thank you, sir. MR. KIRSCH: If we can now expand the bottom part There we
of that page, please, or the signature block. go. Q. (BY MR. KIRSCH)
Now, can you explain what the
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meaning of the signatures on this card are, Mr. Crockett? A. Well, that is -- one is -- it looks like Barbara's And this bottom line
signature, just verifying the time.
looks like the client's signature saying that he approved it. Q. It looks like Demetrius Harper's signature. And is that something -- was that a necessary step in
the payroll process that you had? A. Q. Yeah, that's normal. What is the significance of that from your company's
perspective? A. Just that the customer approves the time that is
being charged. Q. A. Q. A. Q. All right. Because we actually bill from this document. All right. Yes. And do you know where the computer server was that Did you say this was a web-based system?
received these entries? A. Q. Buffalo, New York. All right. Now I do want to ask you to look at what
is marked for identification as Government's Exhibit 121. A. Q. Okay. And please take a look at that, and then let me know
if you recognize that exhibit. A. This is a document that goes to the client.
I don't
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normally see this. Q. Okay. But, in this case, have you, prior to coming
to court today, have you had a chance to look at that document? A. Q. Yes. Were you able to verify that that is -- whether or
not that was an authentic CTG record? A. Q. Yes, it is. It is. And who is the client that this report
pertains to? A. DKH Enterprises. MR. KIRSCH: Your Honor, I would move to admit
Government's Exhibit 121.00. MR. BANKS: THE COURT: No objection, Your Honor. Exhibit 121.00 will be admitted.
(Exhibit No. 121.00 is admitted.) MR. KIRSCH: Q. (BY MR. KIRSCH) Thank you, Your Honor. The time that was reported,
Mr. Crockett, in the time cards that we've discussed, was -- did you -- did your company care about the accuracy of the information about that time? A. Well, we care about the accuracy, and we rely on the
client to verify what the employee does, the amount of time. Q. All right. If you had learned that there was time
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being reported that had actually been worked by someone before they had become a CTG employee, would that have caused you concern? A. Q. State that again, please. If you had learned that Mr. Iverson, for example, was
reporting time on the time cards that actually reflected hours that he had worked before he had become a CTG employee, would that have concerned you? MR. BANKS: him to speculate. THE COURT: Q. Sustained. Did you ever have any understanding Objection, Your Honor. He is asking
(BY MR. KIRSCH)
that there was any time being reported to you that reflected time that had actually been worked prior to any of those employees being hired by CTG? A. Q. No. Can I please direct your attention now to what is
marked for identification as Government's Exhibit 122.00. A. Q. A. Q. I am sorry 122. --- 00. Yes. And can you recognize what is contained in that Do you have that one now, sir?
exhibit? A. This is an invoice billing for Enrico Howard, Barbara They tell me the hours they
McKenzie and Larry Iverson.
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worked and what the rate of billing is for them. Q. A. Q. And who was the invoice directed to? DKH Enterprises. And I think you are looking at the first page now; is
that right? A. Q. Yes. Can you look through -- are all of the pages in the Are
exhibit related to that, what you just described? they all invoices? A. Q. A. Q. Yes. All from CTG to DKH? Yes.
And those are -- are those authentic copies of CTG's
records of those invoices? A. It looks like it to me. MR. KIRSCH: I move to admit Government's Exhibit
-- I would move to have declared admissible Government Exhibit 122.00, Your Honor. THE COURT: MR. BANKS: THE COURT: admissible. (Exhibit No. 122.00 is found admissible.) MR. KIRSCH: Q. Thank you, Your Honor. Any objection? Without objection, Your Honor. Government No. 122.00 will be made
(BY MR. KIRSCH) Were you ever informed, Mr. Crockett,

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that anyone other than the three employees that you've described, was actually performing the work that was reflected in any time cards? MR. ZIRPOLO: THE COURT: THE WITNESS: Q. (BY MR. KIRSCH) Objection, foundation. Overruled. No. If you had gotten that information,
would that have concerned you? A. Q. A. Very much. What would you have done if you had learned that? Well, first thing -MR. WALKER: THE COURT: THE WITNESS: Objection, speculation. Overruled. -- I would have called their employee And after talking to
to understand what was happening.
the employee, I probably would have called the client. Q. (BY MR. KIRSCH) Was DKH paying the amounts for which
it was being invoiced? A. Q. No. Do you recall when it was that you -- approximately
when it was that you realized that? A. Q. Early November. And did you take any action upon getting that
realization? A. I called Mr. Harper.

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Q. A. Q.
Did you speak to Mr. Harper when you called him? Well, I left a message, and he called me back. All right. Do you recall when he called you back in
relation to the call? A. Q. A. Three days later, on November 10. And what did you tell Mr. Harper during that call? That he was in arrears. I just found out he was in
arrears, and I wanted to understand when DKH would make payment. Q. A. Q. A. Did he have an answer for you? No. What did he say? He said that he knew. They had receivable issues.
But he had to get to IRP to get either a loan or a line of credit to pay the invoices. Q. Did those statements have any affect on how you moved
forward with this business? A. No. I just gave him time to do what he indicated he
was going to do. Q. Okay. You did give him time to try to make those
arrangements? A. Q. Yes. Did you -- and did he say when you would receive
payment during that conversation? A. No, not that conversation.

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Q.
All right.
Did you have a subsequent conversation
with Mr. Harper? A. Q. A. Yes. Do you recall roughly when that was? I need to refresh my memory, but it was about a week
later. Q. All right. That's fine. And did you -- what did you Do you remember?
say to Mr. Harper during that call? A.
Well, he called to let me know that the meeting that
he had with IRP didn't result in them getting the finances that they wanted. And so it was going to take longer for
them to pay invoices. Q. All right. And what -- did you have a response to
that information? A. Q. A. Yes. What did you tell Mr. Harper? Well, I wanted to know specifically when. And he
said he was going to send me -- or he would send me a schedule of payments. Q. Okay. Did you, in fact, get a letter that had a
schedule of payments? A. Q. Yes. Can I ask you to look at what has been marked for
identification as Government's Exhibit 126.01. A. Yes.

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Q. A. Q. A.
Do you recognize that letter? Yes. What is it? It is the letter from Demetrius Harper laying out
when he would make payments to cover the total number of invoices. Q. A. And is this a letter that you received? Yes. Actually, I wrote on the top of it, "received
January 9th." Q. A. That is your handwriting? That is my handwriting, yes. MR. KIRSCH: MR. BANKS: THE COURT: published. (Exhibit No. 126.01 is admitted.) MR. KIRSCH: Thank you, Your Honor. I move to admit and to publish 126.01. No objection, Your Honor. 126.01 will be admitted, and it may be
Can we enlarge just the text of that letter, please. Q. (BY MR. KIRSCH) There are some statements in the
middle paragraph here, Mr. Crockett, about slow payments during the procurement cycle. How did those statements
compare to any statements that Mr. Harper had previously made to you? A. Well, this is more specific ideas as to why he's
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unable to make the payments. Q. All right. There is also a reference there to What is your
outstanding invoices totaling $162,000.
understanding about the correctness of that amount? A. Q. I think it is accurate. You think that is an accurate estimate of the amount
of outstanding invoices? A. Q. Yes. Did you ever receive any payments from DKH on that
outstanding invoice amount? A. Q. A. Q. A. Q. A. No. Did that have any financial impact on you? Personally? Yes. Yes. In what way? It was revenue that I didn't get. And I'm evaluated
on revenue.
And, of course, that would effect the profit And I am on incentive on profit
margin that I make. margin. Q.
So it is all a negative factor on me.
At some point -- we are finished with that exhibit. At some point, did you terminate the relationship
with DKH? A. Q. Yes. And when you did that, did you take any action with
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respect to those three employees that you had placed there? A. Q. That's the action you take. All right. You pull the employees.
Did you communicate that to those
employees? A. Q. A. Q. Yes. How did you do that? By phone. Did you speak to them by phone, or did you leave
messages for them? A. At first I had to leave messages for two -- well, all
three of them I had to leave messages. Q. were? A. Q. To call me before you reported back to work. All right. Did you receive return calls from the Do you recall what the content of those messages
employees? A. Q. Yes, in time. At some point after you had terminated the employees,
did you ever call the DKH office again? A. Q. Yes. Do you recall when that was in relation to notifying
the employees that that relationship had been terminated? A. Q. A day later, I believe. Okay. And who did you -- who did you speak to when
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you called the office? A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. Barbara McKenzie. Was that a surprise to you? Yes. Why? She wasn't supposed to be there. Did you ask Ms. McKenzie to speak to anyone else? Yes. Who did you ask to speak to? Larry Iverson. Did you speak to Mr. Iverson? No. Did you speak to anyone else? Yes. Who? Andre Banks. Andre Banks? An Andre Banks. Is that a person that you had had contact with
before? A. Q. No. And who did -- what did Andre Banks say when he got
on the phone? A. Well, he was upset that I called in to -- it ended up I was calling for DKH.
being the IRP office at the phone.
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But he was upset that I was calling in to speak to Barbara and Larry. Q. A. Q. A. Q. A. Q. A. Did he explain why he was upset about that? He said I was disrupting his business calling them. What was your response? They are my employees. Did you get any -I am calling them because they shouldn't be there. And what did Mr. Banks say in response to that? He didn't really debate that. He just didn't want me
on the phone talking to them. Q. Did you ever, during the course of the relationship,
know Andre Banks by any other name? A. Well, that same phone call, he put me on hold for
about 7 minutes, and then he came back and he said David Banks. Q. All right. MR. KIRSCH: Honor? THE COURT: MR. KIRSCH: Your Honor. You may. Those are all of the questions I have, Can I have one moment, please, Your
Thank you. CROSS-EXAMINATION
BY MR. BANKS: Q. Hello, Mr. Crockett.

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A. Q.
Hello. I am going to start -- can you tell me a little bit,
in your experience, about the relationship -- the subcontract relationship between a staffing company and a client? A. Q. Subcontracting? Yes. Let me try to clarify that. If CTG has client
ABC, what is the relationship -- if CTG is supposed to provide a subcontract relationship to company ABC, what is that relationship like? A. Well, you didn't actually describe a subcontract
relationship. Q. A. Q. Prime contract, sir. There is a third party involved. Prime contract relationship. Direct relationship
between CTG and ABC.
How does that relationship work, if
you were providing staffing for that relationship? A. The employees are W2 employees, so they are CTG They are working -- the technical work is All of the personnel So
employees.
usually governed by the client.
activities and relationship is a CTG responsibility.
the client does not have a personnel relationship with the employees. The client would call CTG if there was some Then, in this case, I would call
issue, personnel issue. the employee.
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Q.
Okay.
Thank you.
If company ABC had a contract with
another company, is that company responsible for paying CTG? MR. KIRSCH: THE WITNESS: THE COURT: Q. (BY MR. BANKS) Objection, lack of foundation. No. Sustained. Who is responsible for paying CTG in
the relationship you just described? A. The company that we have the agreement with, the
Professional Service Agreement, the one I signed and the one Demetrius Harper signed, that company pays -- is responsible for the bills. Q. Is it your understanding Mr. Harper and DKH had a
similar relationship with IRP? A. Q. No. I don't understand that relationship.
Was your understanding that he was subcontracting to
IRP for staffing? MR. KIRSCH: THE COURT: THE WITNESS: Q. (BY MR. BANKS) Objection, asked and answered. Overruled. No, don't know that. Okay. So -- but, just to clarify, it
is company ABC responsible for paying CTG? A. Q. Correct. Thank you. Now, you don't have any evidence or
reason to believe, nor did you question whether or not the

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hours worked by Ms. McKenzie, Mr. Howard -- and I don't remember the other person, but the three employees, that those hours were not worked? A. Q. A. Q. No. Okay. They reported the time. Does CTG have a credit policy prior to extending I have no reason to believe they weren't worked.
credit? A. Q. Well, yes. Indirectly, yes.
Can you explain that -- a little bit about that, the
credit policy? A. When I have a new client, I call the corporate If
office, and they perform or ask for a D & B report.
that comes back okay, then I get a message from them that I can do business. Q. Okay. So based on that, CTG corporate, or their
credit department, approves for work to move forward for a contract, or whatever to move forward with DKH? A. Based on the D & B report they have, they send me a
report -- an e-mail, actually, that says I can proceed. Q. Okay. And that is what you base your decision on;
correct? A. Absolutely. MR. BANKS: THE COURT: Can I have one moment, Your Honor? You may.
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Q.
(BY MR. BANKS)
Now, Mr. Crockett, did you
communicate in previous interviews with the FBI that Mr. Harper told you he was trying to get a loan -- quote, unquote, get a loan? A. He said he was going to approach IRP to get a loan or
a line of credit. Q. The question is, did you tell the FBI that same thing
in your previous interview? A. Q. I think so. Okay. To clarify, you did say DKH, when you called,
did return your call; correct? A. Q. Yes. Thank you. MR. BANKS: THE COURT: MR. BANKS: questions. MR. WALKER: cross-examination. THE COURT: Okay. CROSS-EXAMINATION BY MR. WALKER: Q. A. Q. Hello, Mr. Crockett. Hello. Once you pulled your employees from DKH because of
Can I have one more moment, Your Honor? You may. Your Honor, I have no further
Your Honor, I request to continue
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non-payment, did your company instigate litigation against DKH? A. Q. Not at that time, that I know. Are you aware of the company starting litigation at
any time against DKH for non-payment? A. I advised our legal department, and they proceed.
And I really don't get involved in it. MR. WALKER: Okay. Thank you.
No further questions, Your Honor. THE COURT: All right. Anybody else?
Any redirect? MR. KIRSCH: THE COURT: excused? MR. KIRSCH: THE COURT: are excused. THE WITNESS: THE COURT: MR. KIRSCH: Miller. And, Ms. Barnes, if we could have available Exhibits 2, 6 and 61 through 67. COURTROOM DEPUTY: Your attention please. Thank you. Government may call its next witness. Your Honor, the Government calls Kathy Yes, please, Your Honor. Thank you very much, Mr. Crockett, you No, Your Honor. All right. Thank you.
May this witness be
KATHRYN LOSEY-MILLER
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having been first duly sworn, testified as follows: COURTROOM DEPUTY: Please be seated.
Please state your name, and spell your first and last names for the record. THE WITNESS: M-I-L-L-E-R. Kathryn Losey-Miller, K-A-T-H-R-Y-N
Losey, L-O-S-E-Y. You may proceed. Thank you, Your Honor. DIRECT EXAMINATION
THE COURT: MR. KIRSCH:
BY MR. KIRSCH: Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. Ms. Miller, where do you work? I work for Adecco. And where in -- what office for Adecco do you work? Their downtown Denver office at 518 17th Street. What is your position at Adecco? Regional vice president. And what sort of business, generally, is Adecco in? Employment. How long have you been with Adecco? Almost 4 years. And where did you work before you joined Adecco? I worked for AppleOne. What sort of company is AppleOne? They're an employment service company, as well. When were you at AppleOne?
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A. Q.
There from November 2001 to December 2008. And starting from about 2002, what was your position
at AppleOne? A. Q. A. Regional vice president. And what sort of region is that being? I had the Colorado region, and I had seven offices in
Colorado. Q. Okay. And how long have you been in the staffing
industry, generally? A. Q. Almost 15 years. Okay. A little over 15 years.
Let me ask you a little bit more about what
AppleOne did when you were the regional vice president there. A. What sort of services did AppleOne provide?
We provided temporary, temporary to hire, and direct
hire placement services. Q. Does that include -- do any of those categories
include something called payrolling? A. Q. A. Yes, payrolling, as well. How is it that payrolling worked for AppleOne? Typically, a client would come to us. We would be
doing temporary business with them, and they would come in and say, I have identified someone I would like to have start, that they had recruited, and ask us to payroll that person on our payroll. Q. When you would do that, would you create some sort of
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an employment relationship with that employee? A. Yes. They would work for AppleOne. They were an
employee of ours. Q. A. Q. A W2 employee? Yes. All right. And you mentioned direct hire, too. Can
you explain what that is? A. Direct hire, for lack of a better word, is a company We go
comes to us and says, I want to hire a salesperson.
out and do the recruiting end of it; a headhunter, and place that person with that company. That person goes to
work directly for that company; thus a direct hire. Q. I see. Let me go back to the payrolling example in a After you have hired the
payrolling relationship.
employee, who pays that employees' wages? A. Q. A. The employment company. AppleOne? Yeah. If you were payrolling, AppleOne would pay They are an employee of AppleOne.
that employee. Q. back? A. Uh-huh.
And how does AppleOne -- does AppleOne get that money
They mark up that pay rate and charge the
client company a bill rate for that person's services. Q. Okay. While you were at AppleOne, did you -- did
AppleOne engage in business with a company called IRP

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Solutions? A. Q. Yes, we did. Do you know -- what was your capacity when that
business was occurring? A. Q. A. Q. A. Q. I was a regional vice president. Okay. And do you know when that relationship began?
May 6, 2004. Were you responsible for setting that business up? No. Did you have direct contact with people from IRP at
the time that it was set up? A. Q. No. Are you familiar with the terms of the arrangement
that was made? A. Q. Yes. Was there anything about the initial arrangement that
was unusual? A. Initially, no. One of our branch manager who worked
for me in the Colorado Springs area had approached IRP doing what we call "skill marketing," thinking the candidate was very good to market, and called the company, and they had expressed interest. come over. They had asked her to
She came over -- went over to the company, and
she met with David, and received three job orders at that time. And that is how the relationship began.
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Q.
Okay.
And those job orders were for your employees
or for payrolled employees? A. At that time they were -- he wanted us to find the
people for him -Q. A. Q. A. Did that happen? -- on a temporary basis. And is that what happened? What happened was we received the three job orders.
My branch manager Lori Swafford, had made the initial contact in the meeting. She came back to the office -- at She was called by
the time, she came back to the office. IRP, by David, and said -Q.
I don't want to ask you about the contents of that
call right now. A. Q. Okay. What I need to ask you is what sort of -- what sort
of employment relationship did you ultimately put into place? A. Q. A payroll situation. Okay. And who, then, suggested the employees that
were put into this payroll situation? A. IRP. MR. BANKS: hearsay. Objection, Your Honor, this is all
Ms. Miller was not there. Your Honor, I didn't ask her for any
MR. KIRSCH:
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out-of-court statements. THE COURT: The relationship. You laid enough
foundation that she would have been knowledgeable. Overruled. Q. (BY MR. KIRSCH) Do you know what the mark up was on
those employees? A. Q. A. Q.
What was AppleOne's mark up?
It was 68 percent. How did that compare to a typical payrolling mark up? It was high. How is it that AppleOne kept track of the time that
was worked by those payrolled employees? A. One of two ways. We either did a web time, where
they would be sent -- they would put their time in via the web. It would be processed by AppleOne and then sent to
the supervisor for that employee at the client company who would approve the time. And/or it would be a paper time
card, where they would write their time out on a card, and their supervisor at the client company would approve it every Friday. Q. Can I ask you to look, please, at what is marked for It should be
identification as Government's Exhibit 61. in a folder there. A. Q. A. Okay. 61.00? Okay.

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Q.
And there are a number of pages in that document.
want to know, after you have had a chance to look at it, whether you recognize that exhibit? A. Q. A. Q. Yes, I do. What is it? These are our time cards and approval for time cards. And are these time cards that relate to the business
AppleOne did with IRP Solutions? A. Yes, they are. MR. KIRSCH: Your Honor, I would move to admit and
publish Government Exhibit 61.00. MR. BANKS: THE COURT: be published. (Exhibit No. 61.00 is admitted.) MR. KIRSCH: Q. (BY MR. KIRSCH) Thank you, Your Honor. Can you explain to the jury what -You described a couple of different How does this page 1, Without objection, Your Honor. Exhibit 61.00 will be admitted, and may
sort of the document.
ways the time could get entered.
that is on the screen, how does that fit into those ways that you were describing? A. This was a manual time sheet that we used all of the And the AppleOne associate or
time in those days.
temporary employee would fill out their hours for the week, and then have their supervisor, whoever was approved
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to approve the time card, would sign it, and then those time cards would be submitted to AppleOne for the employee to be paid. Q. Are you able to read the names of the employees
there? A. Looks like -- not on this first one. Looks like Amos
Clark, actually, is the first one. Q. A. Q. All right. Sylvia McGhee. Are those the employees that you recall being placed
at IRP? A. Those were the employees placed, yes. MR. KIRSCH: exhibit now, please. Q. (BY MR. KIRSCH) Can we display the second page of that Then enlarge that top part. Can you explain to the jury what
this page is, Ms. Miller? A. card. Yes. It is just the details. This is the web time
The first one that we talked about was the manual.
And then they went to the web, which meant the employee would log on with a user password and name. It was
specific to them -- password specific to their employment. They would log on, enter their time, submit the time. The
time would automatically be e-mailed to their supervisor, whoever was approved to sign off on the time card, and that person would review the time and approve it, and it
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would go via the web to our company for payment of the employee and invoices of the company. Q. Do you know where the server was that did that --
that received that information for your company? A. Q. A. I would assume it was in Glendale, California. Why would you assume that? Our headquarters -- that is where all of the payroll
processing was done. Q. All of the processing was done in Glendale? MR. ZIRPOLO: THE COURT: THE WITNESS: THE COURT: Objection, speculation. Sustained. It was done in California. I sustained. Rephrase. She assumes.
It is a speculation. MR. KIRSCH: Q. (BY MR. KIRSCH) I will, Your Honor. Do you know where the payroll
processing was done for AppleOne at that time? A. Q. A. Manual time cards were done in the office. Do you know where the web-based processing was? Web-based processing was done in Glendale,
California, which was our corporate headquarters. MR. KIRSCH: that exhibit. If we can now please display page 3 of And then how
Enlarge the text, please.
does this document, or type of document, fit into those categories?

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A.
It is a summary of -- for instance, this would be The hours worked Monday through
week 6/21 through 6/25. Friday.
The time taken for lunch, and calculates regular
time, overtime, double time and just standard summary. Q. All right. Ms. Miller, did AppleOne rely on the
information that was contained in those time cards? A. Q. A. Absolutely. For what purpose or purposes? To pay the employees for the time that they were due,
and to bill the clients. Q. And did AppleOne care about the identity of the
people actually doing the work reported in those time cards? A. Oh, absolutely. MR. ZIRPOLO: THE WITNESS: THE COURT: Q. Objection, foundation. Yes. Wait. Overruled.
(BY MR. KIRSCH) Did AppleOne care about the identity
of the people actually doing the work reported there? A. Q. A. Yes. Why? Because they were our employees, and we wanted to
make sure the time was valid, and that they were paying them for the time that they worked. Q. Were the time cards used in any fashion to do billing
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for AppleOne? A. Q. A. Q. A. To do -- I am sorry? Billing? Absolutely. How? Because whatever hours the employee reported and were
approved by the client, those are the hours the client was billed for. Q. Where -- do you know where the billing processing
took place? A. Q. Glendale, California. And were there documents that were created as a part
of the billing process? A. Q. Invoices. And do you know how the invoices were delivered to
AppleOne's clients? A. Q. A. Q. Yes. They were either mailed or e-mailed.
And did that occur from the office in California? Yes. Let me ask you to take a look now at what is marked
for identification as Government Exhibit 2.00. A. Q. A. Q. In the folder? Yes, it is in a different folder that says 2.00. Okay. Do you recognize that exhibit?
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A. Q.
Yes.
It is a standard AppleOne invoice.
Does this particular one pertain to IRP Solutions
Corporation? A. Q. Yes, it does. Am I right that you are describing the first page of
the exhibit? A. Q. A. Yes. Can you identify the next two pages of the exhibit? The web time card summary and approval for both
employees. Q. Do those second two pages relate to the invoice that
is the first page? A. Yes. MR. KIRSCH: Your Honor, I would move to admit and
publish Government Exhibit 2.00. MR. BANKS: THE COURT: may be published. (Exhibit No. 2.00 is admitted.) MR. KIRSCH: Thank you, Your Honor. Without objection, Your Honor. Exhibit 2.00 will be admitted, and it
Can we expand just the top quarter of that, please. Q. (BY MR. KIRSCH) Can you read that on the screen now,
Ms. Miller? A. Q. Uh-huh. This is an excerpt of one of the invoices that would
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have been sent to IRP from the central office; is that correct? A. Q. Uh-huh. Yes.
And the job descriptions that are listed there, what
was the -- do you know what the source of that information was? A. Yes. It would have come from our branch office,
based on the conversation with the client as to the duties that our employees were performing. Q. Did you ever get information that either of those
employees was performing a different job than the ones that are reflected there? A. Q. No. If you had gotten information that one of those
employees was acting as a security guard, would that have caused you to take any steps? A. Q. A. Q. Yes. Why is that? We didn't place a security guard. Can I ask you now to look at what is marked for
identification as Government Exhibit 6.00. A. Q. A. Q. Okay. Do you recognize that exhibit? Uh-huh. What is it?
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A. Q. A. Q. A.
An invoice. That is the first page, again, am I correct? Uh-huh. What about the next two pages. Again, the time card -- electronic time card. Time
card with approval and summary of hours. Q. And did those two time cards relate to the invoice
that is the first page of the document? A. Q. Yes. Is this invoice a document that would have been sent
from your headquarters to the client? A. Yes. MR. KIRSCH: Exhibit 6.00. THE COURT: MR. WALKER: THE COURT: Any objection? Without objection, Your Honor. Exhibit 6.00 will be admitted. I would move to admit Government
(Exhibit No. 6.00 is admitted.) Q. (BY MR. KIRSCH) Then, Ms. Miller, can I then ask you
to look at what is marked for identification as Government Exhibit 62.00. A. Q. Okay. Again, there are several pages in this document. Let
me know when you have had a chance to review that entire document, please.
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A. Q. A. Q. A. Q.
Uh-huh. Can you -Invoices. AppleOne invoices.
Are they all to a particular client? Yes, IRP Solutions. And do these reflect the series of invoices that were
sent to IRP Solutions over the course of AppleOne's relationship with them? A. Yes. MR. KIRSCH: Your Honor, I would ask that
Government Exhibit 62.00 be found admissible. THE COURT: MR. BANKS: THE COURT: Any objection? Without objection, Your Honor. Exhibit 62.00 will be found admissible.
(Exhibit No. 62.00 is found admissible.) MR. KIRSCH: Q. (BY MR. KIRSCH) Thank you, Your Honor. Ms. Miller, was -- did AppleOne
receive payments on these invoices? A. Q. No. Did you participate in any collection efforts once
you learned that payments weren't coming in? A. Q. A. Yes. How did you begin those efforts? It was in the middle of August of 2004, reviewing the Because of our VP, it
receivables and bad debt reports.
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came to my attention that the invoices that had been administered to IRP had never been paid. Q. A. Q. Did you say RVP? IRP. IRP, I am sorry. And once you made that
determination, did you take any action? A. Q. A. Yes. What did you do? Immediately instructed the branch to reach out to the
client to find out why the invoices had not been paid. Q. Okay. At some point did you, yourself, become
involved in collection activity? A. Q. A. Q. Yes. That is what I want to ask you about. Okay. What did you, yourself, do, other than give
instructions to people at the branch? A. Okay. I personally followed up and called IRP, and Did not get any returned
left multiple messages at first. messages. Q. A. Q.
Let me interrupt you for just a minute. Certainly. Were you directing those calls to a particular person
at IRP? A. Yes, David.

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Q. A. Q.
David Banks? Yes. And how is it that you were leaving messages; on
voicemail? A. Yes, uh-huh. THE COURT: THE WITNESS: Q. (BY MR. KIRSCH) Can I ask you to not say "uh-huh." Oh, yes. Sorry.
Did you get a returned call -- any
returned calls from Mr. Banks? A. Q. No. Were you ever successful in reaching Mr. Banks on the
telephone? A. Q. A. *67. Q. And after having placed a call from your cell phone Yes. How did you accomplish that? I called via my cell, and I blocked my number; the
with the number blocked, you reached Mr. Banks? A. Q. A. due. Yes. And what did you say to Mr. Banks? I let him know that his account was severely past We had not received payment, and wanted to know when
we could expect payment for our services. Q. A. How did Mr. Banks respond? He said that he was working with a venture capital
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firm, and he was expecting funding.
That he was going to
New York to sell his product to the New York City Police Department, and that he expected the deal to close, but that he had to wait until the Republican National Convention was over in that city until he could meet with the officials of the New York City Police Department. Once that happened, the contract would be signed, he would receive the funding, and we would be paid. Q. Did you believe that statement when Mr. Banks made it
to you? A. Q. Yes. Did you take any action based on your belief in that
statement? A. I told him I would call him in a week's time -- week
to 10 days, give him time to speak with the venture capital company, close the deal, get the money, and get us paid. Q. During that time period while you were waiting for
the money, did you continue to have those two employees placed at IRP? A. Q. Yes. And was AppleOne continuing to incur liability for
their wages during that time? A. Q. Yes. Did you receive the money when it had been promised?
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A. Q.
No. When you learned that, did you take additional steps
to try to collect? A. Q. A. Yes. What did you do? We phoned again. We e-mailed. I sent my branch
manager and colleague over to the office to meet with Mr. Banks to try to collect. Q. Let me ask you to focus in on your attempts to
telephone. A. Q. A. Q. A. Q. Okay. Did you ever reach Mr. Banks by telephone again? I did. How did you do that? Again, by cell phone. And what did you tell Mr. Banks during this
conversation? A. I asked him how did it go with the New York City Did he have the money
Police, did he close the contract.
from the venture capital firm, and when could we expect payment. Q. A. And did Mr. Banks respond? He did. He became very angry and said, "How dare you
call and ask me for money." Q. And did you have any further conversation?
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A.
I just said that I am calling to ask for money
because we have been payrolling your people, and I deserve to be paid. Q. And he hung the phone up on me.
Did your company continue to make collection efforts
after that telephone conversation? A. Q. We did. Can I ask you to look, please, at what is marked for
identification as Government Exhibit 66.04. A. Q. A. Q. A. Okay. Do you recognize that exhibit? Uh-huh. Can you identify that exhibit, please? This is an e-mail that I had sent to Mr. Banks on
September 28th regarding a payment plan. MR. KIRSCH: Your Honor, I would move to admit and
publish Government Exhibit 66.04. THE COURT: MR. WALKER: THE COURT: published. (Exhibit No. 66.04 is admitted.) MR. KIRSCH: Thank you, Your Honor. Any objection? No objection, Your Honor. 66.04 will be admitted, and it may be
Can we expand the lower the part that begins with "Original Message," please. Q. (BY MR. KIRSCH) Let's start here, Ms. Miller, and
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make sure we understand the name here. A. Q. A. Q. Uh-huh. This says Kathy-Losey. Yes. And there is a reference in the first line to Is that you?
outstanding debt of approximately $65,000? A. Q. Uh-huh. Was that the accurate amount of the outstanding debt,
as far as you knew? A. Q. A. Q. Yes. Did you ever get a response to this e-mail? No. Can I now, please, direct your attention to what has
been marked for identification as Government Exhibit 66.03. A. Q. Okay. There are several pages there again. Let me ask you
to let me know when you have had a chance to look at those. A. Q. Okay. Okay.
I want to direct your attention to the bottom of page What is reflected in -- well, bottom of
2, top of page 3.
page 2, continuing through to page 4. A. Q. Okay. There is a person named Brandy O'Donnell referenced
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there. A. Q.
Do you know who that is?
She is my branch manager. Okay. And then the top of -- bottom of page 2, top
of page 3, what is contained in the exhibit there? A. That is an e-mail from Mr. Banks to Brandy. MR. KIRSCH: Your Honor, I would move to admit
pages 2 through 4 of that exhibit, starting with where it says "Original Message" at the bottom of page 2. THE COURT: MR. KIRSCH: THE COURT: From David Banks? Yes, ma'am. And excluding -- redacting out that
that is not related to that conversation? MR. KIRSCH: Redacting out anything before that on
page 1 and on page 2, Your Honor. THE COURT: MR. BANKS: All right. Mr. Banks? Your Honor, we
One moment, Your Honor.
would like to stipulate to the entire -- we object to a partial for context purposes. THE COURT: All right. So your amenable to the
entire document coming in? MR. KIRSCH: THE COURT: That's fine, Your Honor. So Exhibit 66.03 will be admitted.
(Exhibit No. 66.03 is admitted.) MR. KIRSCH: that?

Thank you, Your Honor.
May we publish
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THE COURT: MR. KIRSCH:
You may. Can we go to page 3 of that exhibit,
Can we expand the e-mail at the bottom of that
(BY MR. KIRSCH)
You mentioned before, Ms. Miller,
that you had asked Ms. O'Donnell to take some collection efforts, as well? A. Q. A. Q. Yes. As far as -- you were copied on this e-mail? Yes. Did you have an understanding about whether this was
part of those collection efforts? A. Yes. MR. KIRSCH: And if we can then go to the next -And start at the bottom, where
the previous page, page 2.
it says the "Original Message" from David Banks. Q. (BY MR. KIRSCH) As far as you know, was this the
response that came to that message? A. Q. Yes. Did you -- I am going to withdraw that question. MR. KIRSCH: Can I have just a moment, please, Your
Thank you, Ms. Miller. No other questions, Your Honor. THE COURT: Mr. Banks, you may proceed.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. A. Q. A. Q.
MR. BANKS:
Thank you, Your Honor. CROSS-EXAMINATION
BY MR. BANKS: Q. Ms. Miller, you answered a question a minute ago
about whether or not Mr. Clark or some other employee may have worked as a security guard? A. Uh-huh. THE COURT: (BY MR. BANKS) Yes. How long have you been in the staffing industry? Over 15 years. Have you ever -- are you aware that a company's Please say yes or no. Is that's correct?
identification of a particular type of position may be different than that of what may be submitted to your company? A. Q. No, I have not experienced that. Let me put something else -- who were some of the
clients you have done business with over the years? A. Q. IBM, GE, Google, Apple. I am sorry, I didn't mean to interrupt you. Do you
do IT staffing, as well as clerical staffing? A. Q. My company does. You, specifically. Were you involved in the IT side
of the house?
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A. Q.
Not for AppleOne. Not for AppleOne. Is it safe to say that a security
department can have administrative people, in your opinion? A. Q. Yes. Does AppleOne -- I am going to withdraw that for the
moment. Did you ever speak or send an e-mail to Mike Hoyle? Are you familiar with that name? A. Q. Yes. And did you send an e-mail to him regarding the
collection process that was undergoing with IRP regarding your failure in catching the credit issue? that? A. I don't recall that. MR. BANKS: THE COURT: MR. KIRSCH: first? THE COURT: Q. (BY MR. BANKS) Yes. You can go ahead and read that to Your Honor, may I refresh her memory? You may hand that to Ms. Barnes. Your Honor, I am sorry, can I see that Do you recall
refresh your recollection. A. Q. I have read it. What is -- I will get back to that in a moment. What
is the credit policy for AppleOne prior to extending

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credit? A. Q. A. Q. We run a credit check. What type of credit check is that? We run a Dun & Bradstreet. And did you run a credit check for IRP Solutions in
this instance? A. Q. A. I did not personally run it. Are you aware if your company ran the credit check? I would assume that they did, yes; that Brandy would
have done that -- not Brandy, but Lori Swafford, who was branch manager at the time. Q. Okay. And based on that, AppleOne -- that is
determinative to whether or not they engage in business or don't engage in business; is that correct? A. Q. Right. Uh-huh.
Now, how much did AppleOne lose as a result of this
dealing with IRP? A. Q. A. Q. A. Q. A. Q. I believe the amount is $65,000. Okay. Do you know how much credit was extended to --
I do not. Is there a credit threshold -Yes. -- that is established? Uh-huh. In your mind, did this go over the threshold, or you
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don't know? A. Q. I don't know. Now, I want to take you back to the document there
with regards to you taking responsibility for the aging of invoices, as well as your credit department not following up in a timely fashion. goes on at AppleOne? A. Q. A. No. So what do you think happened in this instance? We changed managers. Our manager left. Her mother Is that the typical thing that
died from cancer.
She left employment.
We got a new
manager, Brandy O'Donnell, and basically the account had slipped through the cracks. Q. A. Slipped through your cracks, as well? Yes. But not that far through the cracks. I had
only been a couple months. MR. BANKS: That is all of the questions -- let me
try one more question. Q. (BY MR. BANKS) Do you have any reason to believe
that the hours worked or reported by your employees were not worked? A. Absolutely not. MR. BANKS: Honor. Thank you. THE COURT: Thank you. Anybody else? All right. That is all I have, Your
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MR. WALKER:
Your Honor, I would like to continue
THE COURT:
You may. CROSS-EXAMINATION
BY MR. WALKER: Q. Ms. Miller, you stated previously to the Government's
attorney that Mr. Banks agreed to a 60 percent mark up? A. Q. A. Q. Sixty-eight. Sixty-eight percent. Yes. Did you offer that mark up to Mr. Banks, or did he And that is correct?
offer that mark up to you? A. I was not involved in the negotiations. That would
have been Lori Swafford, my branch manager. Q. In the process of negotiating with customers or
clients, would AppleOne typically enter in and say this is the rate that we offer, the mark up rate? A. Q. A. Typically. What would that typical mark up have been? It would have been on the circumstances and how high
the risk level was; what type of position it was. Q. So if it was an average risk position, average risk
situation, what would the mark up be? A. Again, it would depend on the client's credit
standing, how many positions we had offered.

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Q. high? A. Q. A. Q.
So can you provide a range of the low mark up to
It varies by client. I am sorry? No, I cannot. It varies by client.
Would you say that this -- as far as an industry
standard, is 68 percent a typical mark up rate? A. Depending on how many other positions were given to For a payrolling
us, yes, that could be standard.
position with one or two positions, it appeared to be high. Q. But in some situations, it could be within the realm
of reasonableness? A. I can't really answer that. It depends, again, on
the client and the situation. Q. be? A. Q. Possibly, but it's unusual. Okay. And you also said that payroll was done in But you just said that in some situations it could
Glendale, California? A. Q. A. Yes. How do you know that? Because I am the vice president for them, and I deal
with payroll all of the time. Q. So you were aware of the location of the servers that
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ran that function? A. Uh-huh. Uh-huh. Okay. Thank you. No further
MR. WALKER: questions. THE COURT: MR. KIRSCH: THE COURT: excused? MR. KIRSCH: THE COURT: THE WITNESS: THE COURT:
Any redirect? No, Your Honor. All right. Thank you.
May this witness be
Yes, please. Thank you very much. Thank you. I think it is about time for us to take It is 2:54. Why don't we You are excused.
a mid-afternoon break. reconvene at 3:10.
Court will be in recess until 3:10.
(A break is taken from 2:54 p.m. to 3:11 p.m.) (The following is had in open court, outside the hearing and presence of the jury.) THE COURT: You may be seated.
Before we call in the jury, Ms. Barnes received a note from one of our jurors which reads, "Is Enrique Howard a potential witness? worked with Enrico Howard. If so, I believe I may have There was an employee at He
Trip.com/Cheap Tickets while I was there named Enrico. was a tech-type person, though I don't recall the title nor the dates we may have overlapped.
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My time at Trip.com/Cheap Tickets under the parent company of Cendant/Travelport was April 2000 to August 2006. I don't know if it is the same." I don't know, Enrico is not a common name. MR. WALKER: Your Honor, we know for a fact it is He worked at Trip.com.
the same Enrico Howard. THE COURT: MR. WALKER: MR. BANKS: THE COURT: Enrico Howard? MR. KIRSCH:
Do you know what times he worked there? I am not sure of the times. We can get that information. What was the testimony with respect to
Your Honor, so far the testimony about
Mr. Howard has been that he has been one of the payrolled employees. THE COURT: MR. BANKS: MR. KIRSCH: Okay. Is he on your witness list? He is not on the Government's witness
MR. BANKS:
And, actually, he is on a may-call for
THE COURT: MR. BANKS:
Okay. And for the sake of letting the
proceeding move forward, we will X him from our list. THE COURT: Take him off the list. Otherwise we
may have to excuse this jury.

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MR. KIRSCH:
I don't see Mr. Howard on the
defendants' witness list, Your Honor. MR. BANKS: I know he was on the initial list.
Maybe he didn't make our final list, so that will be good. THE COURT: MR. BANKS: THE COURT: had before. All right. We will agree not to call him. He is on the last page, the one you all
He is on the one I had at the final trial I don't think he made the final list you
prep conference.
gave me on the first day of trial. MR. BANKS: THE COURT: All right. So that works. We are okay? How would you like me to communicate to I will take
this juror that there is not a problem? suggestions from either of you. that he will not be a witness. MR. BANKS:
I can just write a note
It was a possibility that he was going
to be a witness, but he is not going to be a witness. MR. KIRSCH: I think the jury should simply be
advised that Mr. Howard will not be a witness at this trial, and that, therefore, if the juror has any association with him, it is not a problem. issue. THE COURT: from a juror. All right. So the issue is -- this was It is not an
Normally how I would handle this is I would

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just write on here, "This is not a problem. be testifying." MR. BANKS: THE COURT: MR. KIRSCH: THE COURT: Okay. Is that fine?
He will not
No objection to that, Your Honor. I will wait to the end of the trial day Ms. Barnes can hand it to her.
to give this to the juror.
Do you want me to make this part of the record? MR. KIRSCH: THE COURT: I would ask that happen, Your Honor. So, Ms. Barnes, at some point we need
to make a copy of this, of what I write, and we will make that part of the record. Let me write this. We can get a
copy, then we will be ready to go. MR. KIRSCH: Your Honor, I am sorry, but I'm And I'm wondering
thinking a little bit more about this.
whether in order to be absolutely sure that this isn't an issue, whether the Court would be willing to conduct a brief individual voir dire of that witness, with the idea that the question -- just to ask a couple of questions to make sure that nothing about the juror's prior association with Mr. Howard would prevent him or her from being fair and impartial in considering the testimony that is presented during the course of this trial. THE COURT: both sides.
I think that would probably be fair to
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MR. BANKS: THE COURT:
No objection. I would suggest that probably what we
do is we do that tomorrow morning, before the trial begins. We can just ask the juror to come in. I guess I
would prefer to do it informally, unless you want it on the record. MR. KIRSCH: it, Your Honor. THE COURT: It is so intimidating to them to have I do think we should make a record of
to come into the courtroom with everybody present. MR. KIRSCH: As long as we make a record, Your
Honor, we are not requesting it happen in the courtroom. If the Court would prefer to do it either in chambers or in the jury room with the juror by himself, as long as we have Ms. Martinez available to make a record, we are not requesting it occur in any particular place. THE COURT: MR. BANKS: THE COURT: All right. No objection, Your Honor. So, Ms. Barnes, could you make note
that tomorrow before we begin we will take this juror aside. And it is so difficult for Ms. Martinez to have to
uproot everything to go into chambers, and it would be a bit crowded with everyone in there, I would say only the parties present, nobody in the gallery, and I will conduct on the record voir dire as to her relationship with
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Mr. Howard to make sure there is no bias. MR. KIRSCH: MR. BANKS: THE COURT: MR. KIRSCH: Thank you, Your Honor. Thank you. All right. Your Honor, can I just make the Court
aware -- Ms. Barnes may have done this already. THE COURT: She did. She did. As long as we can
go to at least 4:30, I am happy. MR. KIRSCH: I am confident we can get to 4:30.
I'll let the Court know, we now have a better idea how long the cross is going to take, and we won't be in this position again. THE COURT: right. That is what I would anticipate. All
Anything further? MR. ZIRPOLO: Sorry, Your Honor, I don't know what
the issue is. THE COURT: They were anticipating your
cross-examination to be longer, so they don't believe they have enough witnesses to take us past 4:45. think the jury will be very happy. MR. BANKS: THE COURT: We will, too. So that was the issue. All right. I said I
(The following is had in open court, in the hearing and presence of the jury.) THE COURT: You may be seated.
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Government may call its next witness. MR. KIRSCH: Thank you Your Honor. The Government
calls Katherine Holmes. COURTROOM DEPUTY: Your attention, please.
KATHERINE HOLMES having been first duly sworn, testified as follows: COURTROOM DEPUTY: Please be seated.
Please state your name, and spell your first and last names for the record. THE WITNESS: My name is Katherine Holmes,
K-A-T-H-E-R-I-N-E H-O-L-M-E-S. DIRECT EXAMINATION BY MR. KIRSCH: Q. A. Q. A. Q. A. Q. A. Q. A. Q. Ms. Holmes, where do you live? In Boulder, Colorado. Where do you work? At Lockheed Martin. What is your position there? I'm a strategic sourcer. I work in recruiting.
Prior to joining Lockheed Martin, where did you work? Worked at AppleOne. When were you at AppleOne? Approximately 2002 through 2005. And was there a particular office at AppleOne where
you worked?
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A.
There was only one office in Colorado Springs, that
is where I worked at. Q. A. Q. What was your position there? An account executive. Did you -- at that time, did you work on an account
with a company called IRP? A. I did. I worked with people in my office that were
in charge of that account. Q. Okay. Did you have any responsibility for getting
that account or setting it up? A. Q. A. No, I did not. Who was it that managed that account? Initially it was Lori Swafford. And that was
followed by Brandy O'Donnell when Lori had left the office. Q. Okay. And did you know a person who was named Kathy
Losey? A. Q. A. Yes. And where did she fit into that? She is our regional VP. And she basically gave us
oversight at all times on the goings on in the office. Q. Okay. At some point did you get instructions from
Ms. Losey about trying to take some collection activity with respect to the IRP account? A. Yes, I did.
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Q.
What did you do after you received -- did you do
something after you received those instructions? A. I worked with Brandy O'Donnell. And we had been
informed of what Kathy was proceeding to do, because the account had been escalated after no invoices had been paid in approximately 3 months. Q. A. What does escalated mean? So, we had no -- we had outstanding invoices for And at that
three months' time that had not been paid.
point, Brandy had taken over as manager in our office. And she was gaining knowledge and understanding of management from Kathy. And it was a concern because
obviously it was showing as a deficit in our office. Q. At some point did you personally try to take some
action to help collect on that debt? A. IRP. Q. A. Do you remember where that was? It was in Colorado Springs, in an office building off I just don't remember the intersection. I physically went with Brandy O'Donnell on site to
of I-25. Q. A.
Okay. But we had been informed by Kathy that she had been
trying to collect and reach David Banks for some time to try to collect on the outstanding invoices. Q. I am going to interrupt you for just a minute because
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I don't mean to ask you about what Ms. Losey told you. A. Q. Okay. When you went to this office, describe the scene when
you get to the office, please. A. So, we showed up in the afternoon, and there was
basically a reception desk with two doors on either side that were closed and frosted. We talked to the security
guard, who basically we informed him we were from AppleOne, and we were trying to get in to talk with David Banks. And he told us that David Banks was unavailable to And --
speak with us. Q. A. Q.
Let me interrupt you for just a minute again. Okay. When you gave that information to the security guard,
you said that he gave you -- that he responded to you. Did he call anyone or go back into the office before he responded to you? A. I don't think that he did. He did not make any
attempt.
There was the feeling that there was already
knowledge that we were potentially going to try to come visit, and that we were being watched. MR. BANKS: speculation. THE COURT: Q. Sustained. Did you say anything to the security Objection, Your Honor, complete
(BY MR. KIRSCH)
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guard about whether or not AppleOne had employees there? A. Q. A. Yes, we did. What did you say? We informed the security guard that we had two
employees on staff, and that we had not received any payment on any of our invoices, and that if we weren't able to receive payment, that we needed to pull our employees from this job. Q. A. Q. A. Did you ask to speak to those employees that day? Yes, we did. Were you allowed to do that? No. We were told the employees were in a meeting,
and that we wouldn't be able to speak to them. Q. Did you ask to be able to go back behind either of
the frosted doors to speak to anyone? A. We did not ask, because we were already being told we So we didn't pursue going
couldn't speak with anybody. behind the doors. Q. All right. MR. KIRSCH:
Thank you, Ms. Holmes.
Those are all of my questions, Your Honor. THE COURT: All right. Mr. Banks?
CROSS-EXAMINATION BY MR. BANKS: Q. Hello, Ms. Holmes.

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A. Q.
Hi. Did you have an appointment to come to IRP Solutions
on the day in question you are talking about? A. Q. At the time we did not have an appointment. So you really don't know whether Mr. Banks was in a
meeting, in the building, or otherwise; is that correct? A. Q. Correct. Likewise, you were told that other employees of
AppleOne that you wanted to talk to were in a meeting? A. Q. Correct. Now, do you expect a security guard to know the
activities of one of the executives in the office? MR. KIRSCH: THE COURT: Q. (BY MR. BANKS) Objection, foundation and relevance. Sustained. Did the security guard provide you
with any information on where Mr. Banks was? A. Q. A. No, he did not. Did you inquire further about where Mr. Banks was? No, we did not. MR. BANKS: THE COURT: All right. No further questions, Your Honor. Any further cross-examination? May this witness be excused?
I am sorry, is there any redirect? MR. KIRSCH: Honor, thank you.

I do have just a little bit, Your
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. KIRSCH: Q.
REDIRECT EXAMINATION
Ms. Holmes, who was paying the employees that you
asked to see? A. Q. We were. And why didn't you make an appointment before you
went there? A. We were told by Kathy Losey that she had been in
contact with David Banks earlier that afternoon with an ultimatum, and that ultimatum is if we didn't receive the payment by noon -MR. ZIRPOLO: THE COURT: Objection, hearsay. It is not being offered for the truth
of the matter, it is being offered to indicate what she did. So overruled. THE WITNESS: So based on what Kathy had provided
us earlier that afternoon, the ultimatum was -- and she had called us and said she did not receive payment by David Banks by noon, and that we were to attempt to go visit on site to try to get further clarification of why we weren't getting payment. MR. KIRSCH: THE COURT: MR. BANKS: THE COURT: Thank you, Ms. Holmes. Anything further? No, Your Honor. All right. May this witness be
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excused? MR. KIRSCH: THE COURT: THE WITNESS: THE COURT: MR. KIRSCH: Castleberry. COURTROOM DEPUTY: Your attention, please. Yes, please, Your Honor. Thank you very much, you are excused. Thank you. Government may call its next witness. Your Honor, the Government calls Mel
MEL CASTLEBERRY having been first duly sworn, testified as follows: COURTROOM DEPUTY: Please be seated.
Please state your name, and spell your first and last names for the record. THE WITNESS: Mel Castleberry. M-E-L
C-A-S-T-L-E-B-E-R-R-Y. MR. KIRSCH: this. Ms. Barnes, I am sorry, I forgot to do
If Mr. Castleberry could have 170.01 through
172.02, please. May I proceed, Your Honor? THE COURT: You may. DIRECT EXAMINATION BY MR. KIRSCH: Q. A. Q. Mr. Castleberry, what do you do for a living? I run an IT staffing company with my wife. What is the name of that company?
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A. Q. A. Q. A. Q.
Sempera, S-E-M-P-E-R-A. What is your position? President of the company. How long have you done that work? Since 2005. And what did you do before you started your company
Sempera? A. Q. A. Q. A. Q. A. Q. Was with another IT consulting service company. What was that company called? Idea Integration. What was your position at Idea Integration? I was the regional president of the company. Where did you hold that position? Here in Denver, Colorado. And what sort of services did Idea Integration
provide when you were there? A. All sorts of IT consulting services, software
development, network support, project management, things of that nature. Q. A. Q. How long were you with Idea Integration? From 1992 until 2005. While you were working with Idea Integration, did you
and that company do business with a company called IRP? A. Q. Yes, we did. Do you recall roughly when that relationship began?
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A. Q. A.
It began in December of 2003. How is it that it began? A phone call was received at our offices. A
gentleman by the name of Vince Rosales, who worked for me, took the phone call. It was a gentleman named David Banks
on the other end of the phone with a business proposition. Q. Okay. And at some point did you, yourself,
participate in a meeting to flesh out this business proposition? A. Q. A. Q. A. Yes, I did, in January of 2004. And where did that meeting occur? At the IRP offices in Colorado Springs. Do you remember where in Colorado Springs they were? It was in an office building. It was on the frontage
road, on the east side of I-25, the north side of town. Q. A. Do you remember anything else about the office? I know on the outside there were large letters "IRP." The inside of the
So it had nice signage on the outside. office was very interesting. There were very few papers.
It was incredibly clean. It didn't look like there
were a lot of things under way there. Q. Who is it that you met with when you went to the IRP
office? A. Q. David Banks and Gary Walker. And during this meeting, did they explain to you what
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their business proposition was? A. Q. A. They were looking for a business partner, yes. Tell me, did you get more information about that? They indicated that they were developing a software Not exactly sure what it did, but it was some They
program.
sort of criminal justice-oriented software program.
were looking initially to try to place staff at the New York City Police Department, and they were looking for a business partner who could help them develop the software, then further help them implement that with other clients. Q. be? A. They said that they had an in with the New York Did they mention who any of those other clients might
Police Department, and that that was a fairly sure thing. They also talked about Homeland Security. Q. And how is it that they proposed that Idea
Integration could help them with this business? A. As I recall, I was there for roughly an hour. There
was a lot of back and forth talk about what both of the companies do, what they could bring to the table. I
recall a discussion where they asked if Idea Integration would be interested in any kind of financial assistance, some sort of an investment. I assured them we would not But what
be; that we were not in that sort of business.
we could provide them could be some software development

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service, which was our core business. Q. I believe you said there was a specific reference
made to the New York Police Department. A. Yes. There were numerous references to the New York
Police Department. Q. And based on the things that were said about the New
York Police Department, did you have an understanding about how far along negotiations were with the New York Police Department, or were they complete? ongoing? A. What was your understanding? Were they
They led me to believe that the negotiations were
ongoing, but that they had an inside track, and that it should be counted on as closed business very soon. Q. Those statements about the business with the New York
Police Department and others, did they have any effect on your decision about whether Idea Integration ought to do business with IRP? A. Q. It sounded credible, yes. Did they have any effect on your assessment about
whether or not IRP would be able to pay any invoices -any obligations -- financial obligations it incurred? A. At that point I had no reason to believe that they
would not be able to pay the invoices. Q. IRP?

Did you ultimately enter a business relationship with
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A. Q. A.
Yes, we did.
I believe it was in April of 2004.
And what is it that you actually agreed to do? We put four people to work on their account. These
people were software developers.
They were developing
software product for them on their software program. Q. And when you say that you put people to work on their
account, can you explain a little more about how the mechanics of that relationship worked? A. Exactly. As I recall, there were at least three of
the four people -- I am not exactly sure on the fourth, but at least three of the people were referred to our internal recruiters by another person who was associated with IRP, that we should payroll these people; that they were in need at IRP for the software development. Those people, then, executed an Employment Agreement with Idea Integration. employee with the company. So they became a W2
Idea Integration would then
payroll these people for whatever the agreed payroll amount was, with full taxes, that sort of thing. And
these people would work for the client, IRP, under their direction. Periodically -- and I believe it was twice a month at that time, time sheets would be produced, which would indicate how much work they had done for IRP. The client, They
IRP in this case, would approve those time sheets.

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would go into our payroll system, and those individuals would be payrolled and get a paycheck. Q. A. From Idea Integration? From Idea Integration. We, in turn, would then
invoice IRP for the payroll amount, plus a service charge. Q. All right. Let me ask you to take a look at what is
marked for identification as Government Exhibit 171. A. Q. Yes. There are a number of pages there. Have you had an
opportunity to review that exhibit, either now or before you came to court today? A. Q. A. Q. If I saw this, it would have been several years ago. Okay. Yes. As you sit here today, can you tell us what that is, Are you able to recognize that?
please. A. These are time sheets produced by the individuals There is a
that I was talking about on behalf of IRP.
project code, IRP 100.001, which would have been internally assigned by the company to track those charges through our accounting system. MR. KIRSCH: Your Honor, at this time I would move
to admit and publish Government Exhibit 171.00. THE COURT: MR. ZIRPOLO: Any objection? No objection.
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THE COURT: may be published.
Exhibit 171.00 will be admitted, and it
(Exhibit No. 171.00 is admitted.) MR. KIRSCH: Thank you, Your Honor.
Can we enlarge the top left quadrant of that? (BY MR. KIRSCH) The name that is listed here,
Mr. Castleberry, whose name is that? A. Q. David Harrier. And how does he fit into the scheme, this system you
have been describing? A. David Harrier is one of the four employees that I
spoke about who would have been assigned to the IRP account payrolled by Idea Integration. Q. The code you mentioned a moment ago, is that visible
on the screen now? A. Q. Yes, it is. Do you recall the names of the other employees who
were payrolled? A. Q. I believe I would recognize those, yes. If we could display page 4 of that exhibit. Do you
see the name at the top of that page? A. Q. A. Q. Yes, I do. Is that one of those people? Yes, it is. If we could go to page 7 of that exhibit.
There is
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another name there on the screen. name? A. Q. A. Q. Yes, I do.
Do you recognize that
Is that one of the people who was payrolled, as well? Yes, it is. And then I think you mentioned a fourth person. If
we could go to page 20 of that exhibit. name at the top of that sheet. recognize? A. Q. Yes, that is the fourth name.
There is another
Is that a name that you
And then, Mr. Castleberry, can I also ask you to look
at what is marked for identification as Government Exhibit 171.01. A. Q. A. Q. Yes. Do you recognize that exhibit? These are additional time sheets. And do they come from the same relationship that you
have been testifying about? A. Yes. MR. KIRSCH: Your Honor, I would move to admit
Government Exhibit 171.01. THE COURT: MR. WALKER: THE COURT: Any objection? No objection, Your Honor. Exhibit 171.01 will be admitted.
(Exhibit No. 171.01 is admitted.)

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Q.
(BY MR. KIRSCH)
Mr. Castleberry, I am sorry if you How is it, again, that this
explained this already.
information was actually entered into Idea Integration's system? A. The individuals who are performing the work would That time
keep track of their time via a time sheet.
sheet, at the end of the time accounting period, every two weeks, would be summarized. the client management. Typically it was approved by
At that point they would be
approving that the work had been done and, therefore, approving the receipt of an invoice. So they would not
have any objection to the receipt of the invoice at that time. Those time sheets would then be gathered. would be sent, then, to the Integration office. They They
would be accumulated, processed, and paychecks would be cut for those time sheets. Q. A. Q. A. Do you know where that processing occurred? It actually occurred at a couple of locations. Okay. Idea Integration had numerous offices. Denver was The
one of those offices.
I was assigned to that office.
corporate office, which did all of the timekeeping, accounting and payroll processing was in Jacksonville, Florida. So that process would have actually occurred in
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Denver and in Jacksonville, Florida. Q. And do you know how information was transmitted to
and from the Denver office and the Jacksonville office? A. You know, honestly, there were numerous ways that They could e-mail
people could get those time sheets in. them.
They could put them in an envelope and send them They could fax them in. You know,
through the U.S. Mail.
as long as they were received and accurate and they were timely, it didn't make a lot of difference in what manner they were received or sent. Q. All right. You also earlier, I think, mentioned that
invoices were generated after the time sheets were received? A. Q. A. Q. Yes. Do you know where the invoices were generated? They were generated out of Jacksonville, Florida. Do you know how the invoices were transmitted from
the office in Jacksonville to the clients? A. Q. A. They were generally mailed. Okay. The client could specify that they would be received
by e-mail, and we would accommodate that, but generally mail. Q. Can I ask you to look, please, at what is marked for
identification as Government Exhibit 172.00.

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A. Q.
Yes. Do you recognize the documents contained in that
exhibit? A. Q. Yes. These are invoices.
And are they invoices that pertain to a particular
client of Idea Integration? A. They pertain to IRP Solutions. And these invoices
reflect the employees that were being payrolled for IRP; the number of hours that they had worked; the rate that was being charged for these people; a total, subtotal; and then an invoice total. So this dollar amount was due and
payable to Idea Integration upon receipt. MR. KIRSCH: Your Honor, I would ask that
Government Exhibit 172.00 be found admissible. THE COURT: MR. WALKER: THE COURT: Any objection? No objection, Your Honor. Exhibit 172.00 is found admissible.
(Exhibit No. 172.00 is found admissible.) MR. KIRSCH: Q. (BY MR. KIRSCH) Thank you, Your Honor. Mr. Castleberry, was it ever
reported to you while Idea Integration was working with IRP Solutions that anyone other than the four employees that you've named was actually doing the work that was being reported? MR. ZIRPOLO: Objection, facts not in evidence.
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THE COURT: THE WITNESS:
Overruled. Can you please restate? Yes. Was it ever reported to you,
(BY MR. KIRSCH)
during the course of Idea Integration's business with IRP Solutions, that anyone other than the four employees that you have already named, was actually performing the work that was represented in the time cards? A. Q. No. Our concern is with those four individuals.
Would you have been concerned if you had learned that
another person was, in fact, doing some of that work? A. If another person were doing the work that that
person was reflecting on a pay card, I would be very concerned. Q. Did you ever go back to the IRP office after the
initial meeting that you have already described for us? A. Q. I did not. All right. Others in our office did. Did Idea Integration ever receive payment
on any of the invoices? A. As of 2005, when I left the company, they had not
received any payment. Q. Did you take any steps to try to collect on those
invoices while you were with Idea Integration? A. Because IRP was a relatively new -- they were a brand We watched all new clients and the age
new client to us.
of receivables very closely to make sure that there were

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not going to be any problems.
The invoices went unpaid. He assured
I did speak on the telephone with David Banks. me that the invoices would be paid in full. Q.
Did Mr. Banks give you any additional information
about what the source of the money would be that he would use to pay the invoices in full? A. He only said that the New York City Police Department
was very busy with the Republican National Convention, and it was delaying payment of the invoices. Q. When you first got that information from Mr. Banks,
did you terminate the contract immediately? A. Q. A. We did not terminate them immediately. Why not? Because he said that we would be receiving payment
within the next two weeks. Q. And so did you consider to have those four employees
work at IRP during that time? A. Q. They continued working, yes. And did Idea Integration incur additional liability
for payments to them during that time? A. Idea Integration did incur additional financial They payrolled those people. They sent them
obligations. paychecks. Q.
Did you speak to Mr. Banks -- did you get the payment
in two weeks?
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A. Q. A.
The payment was not received. Did you speak to Mr. Banks again? I don't know if I spoke to Mr. Banks at that point.
I had an individual who worked for me, by the name of Rich Rosedale, go to Colorado Springs to the IRP offices to meet with David Banks and to get the check. Q. Do you know whether or not Mr. Rosedale successfully
collected a check? A. Q. was? A. Q. A little over $80,000. You earlier said, I think, that you had, at your He was not admitted into their offices. Do you recall what the total amount of those invoices
meeting -- you had met with a person named David Banks and a person named Gary Walker. A. Q. Yes. I understand it has been some time, but I would ask
you to look around the courtroom and see whether you recognize either of those people that you met with in the courtroom today. A. It has been a long time. I believe that David Banks
is sitting on this side. Q. A. On the end of the table? I believe so, yes. MR. KIRSCH: Those are all of the questions I have
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for Mr. Castleberry, Your Honor. THE COURT: All right. Mr. Banks?
CROSS-EXAMINATION BY MR. BANKS: Q. Mr. Castleberry, during your initial meeting with IRP
Solutions, what was that meeting about, and what did it entail? A. Q. A. The initial meeting with IRP Solutions? Yes. When you attended the meeting at their office.
IRP Solutions was proposing a business venture with
Idea Integration. Q. A. What type of business venture? They were looking for someone who could assist with They also had proposed some
software development.
up-front financial investment in the company. Q. Did you receive any document from them with a
proposal? A. You know, as I recall, there was some information
about IRP supplied to us at that time. Q. you? A. You know, I would call it a prospectus. It was about You don't recall what information was supplied to
what IRP did; what their software program was. Q. Okay. And what did that prospectus say, to the best What did that prospectus outline?
of your recollection?
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A.
I don't recall. MR. BANKS: Your Honor, I would like to provide
Mr. Castleberry a document. THE COURT: Q. (BY MR. BANKS) Could you show it to Mr. Kirsch first. I know that is a little lengthy. Does it I
will try to -- try to guide you a little bit.
look like the document you received, one that was provided to you by one of your associates? A. This looks to be a document that was sent to a
gentleman by the name of Vince Rosales. Q. Okay. And was the meeting that you attended at IRP
related to this document? A. Q. I believe it was, yes. Okay. MR. BANKS: THE COURT: Q. (BY MR. BANKS) Could I have one moment, Your Honor? You may. Can you go to the section labeled
"Section No. 10." THE COURT: May I ask, is this a document that was
identified as a document to be used? MR. BANKS: knowledge. MR. KIRSCH: Could I ask for the exhibit number, Yes, Your Honor, to the best of my
because I don't have a copy, for the purposes of following along. At least I am not aware that I have a copy.
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MR. BANKS: MR. KIRSCH: specific. MR. BANKS:
Your Honor, it is a part of D400. Sorry, Mr. Banks, can you be more
He will provide that to you. Section J.
I will
tell you the section in a second. MR. KIRSCH: THE COURT: MR. WALKER: you are looking at. THE COURT: MR. WALKER: THE COURT: is in my notebook? MR. BANKS: THE COURT: MR. BANKS: THE COURT: MR. BANKS: you there? THE COURT: proceed. Q. (BY MR. BANKS) Yes. Letter J. Thank you. Thank you.
It now, Your Honor.
I don't know if I do. Your Honor, it is not in the document There was a separate notebook, D400. This blue one? Yes, Your Honor. Thank you. Do you know what letter it
I know that is a rather big exhibit. All right. And we're currently at Section 10. Are
Thank you.
I am sorry, you may
Mr. Castleberry, do you know what
Section 10 is? A. Q. I can tell you what I suspect it is. Okay.

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A.
It looks to be -MR. KIRSCH: Your Honor, I am going to object to
Mr. Castleberry testifying about his suspicions. THE COURT: MR. BANKS: THE COURT: Sustained. What was that again, Your Honor? He's supposing. It is conclusory. He
has to know it or he doesn't. MR. BANKS: THE COURT: Q. (BY MR. BANKS) Okay. So --
So speculation. Do you know what that is,
Mr. Castleberry? A. I can tell you that that this looks to be
software ascquisitions. MR. KIRSCH: THE COURT: Objection, Your Honor. All right. First, you need to lay the
foundation if you are going to get information from this document. So I believe he said this was sent to a
gentleman named -MR. BANKS: THE COURT: company? Q. (BY MR. BANKS) Does Vince Rosales work for Idea Vince Rosales. Is that somebody that works for his
Integration? A. He did at the time. THE COURT: You need to ask if he ever saw this
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document before. Q. A. Q. A. Q. (BY MR. BANKS) I don't know. You don't know? I don't know. A minute ago you said you thought that the meeting Did you ever see this document?
was related to this document. A. I believe that there was some prospectus information I don't recall looking at this, no. I couldn't
provided.
tell you whether I did -MR. BANKS: Q. (BY MR. BANKS) Okay. One moment, Your Honor.
So we'll get back to your I am
recollection of the meeting of the day in question.
going to ask you again, at least for my clarification, because I don't remember the answer, what did that meeting entail? A. I was asked by Vince Rosales to accompany him to a That
meeting at the IRP offices in Colorado Springs.
David Banks and Gary Walker had requested a meeting to explore a business partnership. Q. And after exploring that business partnership -Did you agree to the business let
me ask this first.
partnership set forth in the meeting? A. After that meeting -- there was nothing decided in
that meeting.
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Q. A.
When was something decided? A contractual agreement was entered into in April.
That would have been 3 months later. Q. So it is your testimony that this document was
received, and you met regarding this document, but no business between Idea Integration and IRP Solutions was engaged in for 3 months after that? A. What I can say is that this is a letter that you sent It states that on the first page. Nothing was agreed to. It did
to Mr. Rosales. not come to me. entered into.
No contracts were
No signatures were done in the meeting that
I had with you in January. Q. Correct. So you, your company, at the time -- what
was your title there, sir? A. Q. A. Q. I was president. President of Idea Integration? I was regional president of a series of offices. So if a business proposal came to you, you would have
to say "aye" or "nay" if a company was looking, say, for 6 months of staffing investment on your part, you would have to be the approving authority to engage in that business; is that correct? A. I was very clear in the meeting in January that Idea
Integration was in no position to make any investments to IRP.

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Q. A.
Did you offer any other alternatives at that time? We offered that we could put people to work; that we
could provide programming resources to IRP. Q. Okay. So, in other words, you need to -- IRP would
have to work through your normal staff augmentation business -A. Q. A. Q. That's correct. -- if they wanted to participate in that? That's correct. So was there any, at that time, mention -- obviously, Was
you were provided a prospectus, Mr. Rosales was. there any mention of -Let me ask you this.
Do you agree that this
document was provided to Mr. Rosales? A. What I can tell you is it says, "Hello, Vince," on
the first page. Q. A. Q. A. Do you remember receiving any type of prospectus? I do not recall receiving a prospectus. Do you remember viewing -It appears this prospectus, if this is correct, went
to Vince Rosales. Q. Do you remember Mr. Rosales providing you with a copy
of the prospectus prior to your meeting? A. No. MR. KIRSCH: Objection, Your Honor, this is asked
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and answered now. THE COURT: THE WITNESS: Q. (BY MR. BANKS) Overruled. I am sorry, I don't recall. You don't recall. But you do recall
-- you don't recall what Mr. Rosales said to you, but you recall everything that Mr. Walker and Mr. Banks said to you; is that correct? A. Q. A. I don't recall everything said by Mr. Walker, no. What about Mr. Banks? You know, I can tell you the discussions that were I honestly couldn't tell you who
held during that day. said what. Q. A. Q. A. Q. A. Q.
There were both of you speaking that day.
How did you prepare for your testimony here today? How did I prepare for my testimony today? Yes. I looked back over my notes. What notes would that be? Notes from 2003, 2004. And none of those notes had any information
associated with what Mr. Rosales -- your conversation with Mr. Rosales? A. Mr. Rosales worked for me. Mr. Rosales and I spoke It was
with each other numerous times each day.
Mr. Rosales who asked me to accompany him and Rich Rosedale to the IRP offices in January.
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Q.
But you have no recollection -- detailed recollection
of the meeting, and nothing in your notes about that particular meeting; is that correct? A. Yes. He told me IRP was looking for a business That they were developing some case management
partner.
software, and that it would be worth my while to listen. I accompanied Vince and Rich Rosedale. I met with David
Banks, Gary Walker and numerous things were talked about that day. Q. So, as you mentioned earlier, you were not in a
position to enter into any type of business partnership with IRP? A. My authorization would allow me to enter into a
business partnership with IRP, as long as that business partnership entailed the use of Idea Integration resources for a specified bill rate. I was in no position to offer
any sort of financial assistance. Q. Now, would you normally have attended a meeting for
your traditional staffing arrangement? A. Q. For a new client, yes, I would. Would you normally -- so you attend all meetings if a
company just calls and says, I want you to staff two people, you are going to take a meeting and go to their office? A. I elected to go to the meeting that day.
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Q.
Because you said a minute ago that Mr. Rosales
requested that you go to this meeting. A. Q. Yes. So the first offer you received from IRP Solutions
was a business partnership? A. Q. Yes. Okay. A business arrangement. In rejecting the business arrangement -- did
you reject the business arrangement? A. Q. A. yes. Q. So as an alternative, IRP executives David Banks and I rejected -You mentioned -I rejected what was proposed to Idea Integration,
Gary Walker moved towards the alternative at that point; to work with Idea Integration in a more traditional staffing relationship? A. Those discussions were held after my meeting in They would not have been done
January with Vince Rosales. then. Q.
But, yes, that was my understanding. So IRP just didn't come to Idea Integration saying we
need you to staff four people originally? A. Originally, they asked for some financial assistance,
and for -- if Idea Integration could provide programmers. Q. What you just said a minute ago is the first thing
they asked for was a business partnership.

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A.
A business partnership that was on the foundation of
providing some financial resources up front; an investment. Q. mean? A. Q. Money. So IRP asked Idea Integration for raw capital; is I did reject them.
When you say "financial resources," what does that
that your testimony? A. That is what I understood it to be. The discussion,
I believe, went something like, would Idea Integration be interested in an investment in IRP? I said that Idea
Integration was not in a position of making investments with client companies. would never do that. Q. By the very nature of your business, you make an That was not our business. We
investment in staffing people for companies; is that correct? A. No. We provide staffing to companies for a fee.
There is no investment. Q. A. So is there any credit extended on that basis? Only as long as the receivable is due. And it is due
upon receipt at that time. Q. A. Did you have a particular credit policy at the time? The credit policy was mandated out of our I would not have known at
Jacksonville office in Florida.
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the time what that was. the receivables. Q.
They managed all of the cash and
As far as credit to engage a client in new business,
do you know what that policy is? A. Q. work? I do not know. So Idea Integration -- well, how does the process Can you explain to me how the process works? A
company approaches you, and you have to send something to your credit department in Jacksonville in order -correct, to engage with a client to make some sort of determination if they're credit worthy? A. Q. Normally it is the name of the company. Do you know what they do with the name of the
company? A. I do not know what they do. That is somebody else's
responsibility in the credit department. Q. Okay. You say your title was regional vice
president? A. Q. Regional president of the Denver office. Okay. Now, there were four people staffed by Idea Do you know if Idea Integration did any
Integration.
recruiting for positions for IRP? A. Yes. Idea Integration did engage recruiters to look
for the positions that were told to us that were most important at the time.
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Q.
So this was not a straight payrolling relationship;
correct? A. You know, it is very interesting, because
simultaneous with us engaging our recruiters, we were recommended or referred several people to bring on and payroll. Q. A. Were you involved in that transaction? I was knowledgeable of that transaction. That would
have been Mr. Rosales who managed the Denver office. Q. Okay. Are you aware of the e-mail that Rich Rosales
received from IRP Solutions with numerous job descriptions for them to recruit on? A. Q. A. I am sorry, I don't know a Rich Rosales. Vince Rosales, I am sorry. I don't recall. MR. BANKS: Your Honor, I would like to refresh his
recollection to this particular document, see if he can verify. THE COURT: MR. BANKS: THE COURT: Was it sent to him? No, it was sent to Mr. Rosales. So your question is whether or not
Vince Rosales ever sent that to him? MR. BANKS: THE COURT: document?
Yes. Mr. Kirsch, are you aware of the
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 marked? marked.
MR. KIRSCH: Your Honor.
I would like to see it, if I could,
Your Honor, I have seen the document.
I don't
object to Mr. Banks showing Mr. Castleberry the document to ask him additional questions. is not marked as an exhibit. My understanding is it
I think it should be
assigned a defense exhibit number. THE COURT: this case? MR. BANKS: MR. WALKER: THE COURT: Yes, we will, Your Honor. Not yet. It has not been previously marked, but Has it been identified as an exhibit in
you have no objection to it? MR. KIRSCH: I have no objection to it being
I would ask for a copy later on. THE COURT: What number would you like to have this
MR. BANKS: THE COURT: have a D400.
Defense Exhibit D340, Your Honor. I think we already have a D340. We
So D340? Yes, Your Honor. So if you can give that to Ms. Barnes, Do you wish to have that provided to
MR. WALKER: THE COURT: she will mark it. the witness? MR. BANKS:
Yes.
If you can provide that to the
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witness. THE COURT: So the record will reflect the witness
has been handed what has now been marked for identification as Exhibit D340. Mr. Banks you may proceed. Q. (BY MR. BANKS) All right. Mr. Castleberry, you
mentioned a minute ago that after the initial meeting, then primarily the rest of the transactions would have been handled at that particular point by Mr. Rosales. that your testimony? A. And there was a gentleman by the name of Rich Was
Rosedale who would have been assigned to the account management of day-to-day communications with IRP. So,
yes, it would have been between the two of those people. Q. Okay. So you would not have known whether or not --
would you, that IRP engaged in a recruiting effort? A. Q. A. Yes, I would have known that. How would you have known? My office was in the Denver office. I would have
known the activities that went on there. Q. So was -- you said a minute ago, simultaneously, that
there was recruiting going on, as well as you were receiving resumes or personnel from IRP Solutions. A. Q. As I recall, it was at about the same time. And do you know what the outcome, as far as the -DARLENE M. MARTINEZ, RMR, CRR United States District Court For the District of Colorado
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how many people Idea Integration provided versus how many IRP Solutions provided? A. You know, as I looked back at my notes, there were
three people that were referred by someone named Demetrius Harper that were payrolled and placed on this account. And one other person, that I could not remember if it came through the normal recruiting channel or through another referral. Q. A. You just can't remember? Cannot remember. MR. BANKS: I have no further questions for this
witness, Your Honor. MR. WALKER: cross. THE COURT: You may. CROSS-EXAMINATION BY MR. WALKER: Q. Mr. Castleberry, you stated earlier that you went to Your Honor, I would like to further
the IRP office, and I'll quote, "it was incredibly clean and not a lot of things going on." A. Q. It was a very, very clean office. And when you entered the office, were you able to see
the entire office? A. As we walked through the office, I recall a
conversation where either myself or Vince or Rich said,

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well, where are the programming resources? that take place? Q. A. Q.
Where does all
And what was the answer given to that question? The answer was that it had took place elsewhere. And so given that answer; the developers,
programmers, other workers were in another part of the building, perhaps around the corner that you could not see? A. told. Q. All I know is it was done elsewhere, is what we were We don't know where it was done. Elsewhere.
And you mentioned several times now, in response to
questions, that you were offered by IRP a business proposal to provide some business financing or funding as a business arrangement. A. Yes. I recall that that is how the initial proposal
was made. Q. Would that be a normal request by a company to Idea
Integration? A. Q. No. And so when you heard that request, what was your --
if you can recall, what was your thought? A. That is one of the reasons that I was interested to
attend the meeting that subsequently took place in January, was to listen further to the proposal about what the business partnership was to entail.
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Q.
This an unusual business partnership for Idea
Integration? A. Very seldom, if ever, is Idea Integration asked for
investment from them. Q. And did you think at the time, when IRP asked you
about business funding and financing, that possibly the company was in need of funds? A. I did not have any reason to suspect that they were
in need of funds. Q. So the fact that they asked you for business funding
did not lead you to think they were in need of funds? A. I would assume they would have been in need of funds
for some particular reason for this software program. Beyond that, no. Q. You also mentioned that, in your testimony earlier,
that there were numerous references to the NYPD. A. Q. Yes. They were in the nature that IRP was looking to place
the software in the NYPD; correct? A. Q. That was my understanding. You also understood that IRP had an in with the NYPD;
is that correct? A. Q. That is what I was told by IRP, yes. In the course of making these numerous references to
NYPD, did IRP Solutions ever say that they had closed the
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business with NYPD? A. I believe they said it was imminent, or that it was
well along and was not in doubt. MR. WALKER: THE COURT: MR. BANKS: THE COURT: MR. KIRSCH: Honor? No, thank you, Your Honor. THE COURT: MR. KIRSCH: THE COURT: May this witness be excused? Yes, please. All right. Thank you very much, No further questions. Any further cross-examination? No further questions. Any redirect? Can I have just one moment, Your
Mr. Castleberry, you are excused. Government may call its next witness. MR. KIRSCH: Tran. COURTROOM DEPUTY: Your attention, please. PAUL TRAN having been first duly sworn, testified as follows: COURTROOM DEPUTY: Please be seated. Your Honor, the Government calls Paul
Please state your name, and spell your first and last names for the record. THE WITNESS: Last name is T-R-A-N.
My name is Paul C. Tran.
P-A-U-L.
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THE COURT: MR. KIRSCH: THE COURT: Ms. Barnes to pull? MR. KIRSCH:
Mr. Kirsch, you may proceed. Thank you, Your Honor. Do you know what exhibits we need for
I do, Your Honor.
It is Exhibits
502.01 through 502.04, please. DIRECT EXAMINATION BY MR. KIRSCH: Q. A. Good afternoon, Mr. Tran. Where do you work?
Currently I'm an engineering program manager for the Support mainly the National
Cyber Division of the FBI.
Cyber Investigative Joint Task Force, basically doing cyber investigation on cyber intrusion. Q. For anybody who doesn't know, what does the term
"cyber" mean, as you are using it? A. Cyber really mean over the computer or internet, you Communication through the internet, as
know, related.
well as over the networks that we're familiar with. Q. Okay. And how long have you been doing work in the
Cyber Division of the FBI? A. Q. In the FBI since 2009 to now. At some point prior to working for the FBI, did you
work for the Department of Homeland Security? A. Q. Yes, I have. When was that?
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A.
I work for the Department of Homeland Security since
the start of it, 2001, all of the way to 2009. Q. Okay. And while you were at the Department of
Homeland Security, what was your position? A. My position from 2001 to 2007 is an Enterprise System
Manager for the Immigration and Customs Enforcement. Q. That is actually the time period I am interested in, But I am going to
so I will have you stop there, please.
ask you what sort of things you did as an enterprise system manager. manager? A. As an enterprise system manager for ICE, I do the What did you do as enterprise system
consolidation of a lot of system that the federal government have, and bring them into an enterprise. What
I mean by enterprise is to consolidate them so that they can be run from a single place or multiple places, but be maintained by a whole group of people rather than a stand alone stovepipe system. Q. Let me ask you a little bit more about that. Do you
know, at least generally, about the process of the creation of the Department of Homeland Security? A. Q. Yes. And was that -- when that agency was created, was it
composed of a number of what had previously been separate law enforcement agencies?
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A.
That's correct.
The Department of Homeland Security A
actually is composed of 22 agencies all together. consolidation of 22 agencies all together.
And within
that -- as a matter of fact, I was previously a U.S. Customs employee prior to that. And so when I become -- when Homeland Security formed, I become part of Homeland Security. And,
eventually, with some of the work I did for the Office of Investigation, I move on to Immigration and Customs Enforcement. Q. Okay. So when you are talking about consolidation,
are you talking about either combining the different computer systems that those different agencies might have used, or at least figuring out a way to allow those systems to work together? A. That's correct. Integration type of event. So you
put all of the systems, that at one point belonged to U.S. Customs, at one point belong to the Marshals, and bring them all into these. And along with that, also the
consolidation and introduction of what they call COTS, commercial off-the-shelf software. Q. I think that leads me to my next question. You say
that the Department of Homeland Security at that time was beginning to consider the use of commercial off-the-shelf software?
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A.
That's correct.
And that has always been in the
federal government -- since the mid '90s, there was -that is always available. COTS software might do what the
federal government wanted or need be done? Q. Were you, in your position with the Department of
Homeland Security, were you involved in the process of reviewing or selecting software like that -- commercial software like that, that the Department of Homeland Security might consider using? A. Q. A. Yes, I have. What role did you play in that? The role is really actually bringing in for testing.
There is a process already in place in the mid '90s called the Technical Reference Model. And in that Technical
Reference Model, what the Government applied for is to create a set of approved -- federal approved software that could be bought by any agency, and hopefully by, you know, any group of law enforcement. Q. How did that Technical Reference Model, how did that
relate to the work that you were doing for the Department? A. How that work is that the model specified a
particular method of testing to qualify a piece of software to be listed as an approved piece of software. Q. I see. Was it your job, then, to carry out that
testing in accordance with those specifications?

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A. Q.
Yes. Okay. Now, the part of the Department of Homeland
Security in which you worked, does that part of the Department of Homeland Security actually buy software on behalf of the Department? A. Mainly it started out we would buy software for the But in this case, it would be ICE, But normally when
sub agency.
Immigration and Customs Enforcement.
the software made it into the approved list, when it made it into that, then any sub agency within the department could have purchased it. Q. Okay. But to be clear, the part of the agency that
you are working for -- what is the primary responsibility of the office that you are working in? Is it to buy
software or to test it or to do something else? A. Q. To buy software and recommend it. Okay. Now, at some point during your work there with
the Department of Homeland Security, did you begin to have meetings with vendors of software? A. Q. A. Yes, I do. Okay. Do you recall when that was?
There is a variety of vendors coming in; Microsoft
and everybody else, and along with IRP Solutions. Q. A. You participated in the meeting with IRP Solutions? That's correct.
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Q.
Okay.
Let me -Your Honor, at this time I am going to
MR. KIRSCH:
move to admit what I believe is a stipulated exhibit, and that is Government's Exhibit 502.04. THE COURT: All right. It does show as stipulated.
Is that correct, Mr. Banks? MR. BANKS: THE COURT: next stipulated. MR. BANKS: THE COURT: No objection. 502.04 will be admitted as stipulated. Does it show stipulated? It shows it on mine. 502.04 has an X
(Exhibit No. 502.04 is admitted.) MR. KIRSCH: that, please? THE COURT: MR. KIRSCH: please. Q. (BY MR. KIRSCH) Are you able to see that on your You may. Can you expand the text of that, Thank you, Your Honor. Can we publish
screen now, Mr. Tran? A. Q. Sure do. There is a reference here -- first of all, this
appears to contain an e-mail from a person named Steven Cooper. A. Q. Do you know Mr. Cooper?
Yes. Who is Mr. Cooper?

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A.
Mr. Cooper at the time was the -- one of the program Actually, program manager for a particular
manager.
program called the CEE program; the Consolidated Enforcement Environment program. Q. A. Do you know what that program was about? That program was really to look at new way of doing
business for the law enforcement, for agent, to really try to track case better, and really more tools for agent to utilize in their case investigation. Q. There is a reference in this e-mail to a presentation
from the IRP team that appears to have occurred on November 13th of 2003. A. Q. A. Q. A. That is right around that time. Did you attend that presentation? Yes, I have. Okay. And what happened at that presentation?
In that presentation -- actually, let me maybe give a
little background before we get there. Q. A. Okay. Actually, prior to this, there is an interest from
the field office. Q. A. Where was that? I believe it is New York field office was interested
in this particular software. Q. Okay. Did that have anything to do with the meeting
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getting scheduled, do you know? A. Q. know. A. Q. I wasn't the one that scheduled it. I don't want to ask you about something you don't But you attended this meeting? That's correct. And what is your end memory of what happened at this
meeting? A. My memory of that is, I believe a main group from IRP If I remember correctly, And the
come up to show us the software.
it is called Case Investigative Life Cycle, CILC.
software have a lot of feature that the law enforcement and case agent can really use, can utilize. Q. day? A. Q. Yes. And is that the -- is that the basis for your Was there a demonstration of the software made that
statement that the software had these features? A. Q. Yes, that's correct. Okay. Now, did you or anyone else at that meeting
indicate that you wanted to further pursue this software? A. Normally, most of the time I am not the one to make Usually it is up to business sponsor, the
that call.
business owner. Q. A. Okay. In this case, it would be most likely Mr. Steven
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Cooper. Q. Did you hear Mr. Cooper say anything during that
meeting that indicated that the Department of Homeland Security wanted to pursue the software further? A. Q. A. Not right away. Okay. At the time, they usually just say that the software And most of us usually try We usually sit
is very nice, and it is good.
to refrain from making too promising. behind, so it can be discussed further. Q.
At some point did you attempt to obtain the actual
software to do testing? A. Yes. I think maybe about a couple week after this
meeting is when I was requested by business owner that they want to take a close look at the software some more. And I think at that point in time I did contact -- Mr. Sam Thurman was the main contact that I had at the time. there was some phone call, and e-mail probably. Q. Did you make a request for a piece of the software to And
be able to test? A. Q. Yes, I did. Did you get a piece of the software to be able to
test at that time? A. Not immediately. There was a lot of talk about, you
know, what we need.
And partially because there was some

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maybe new feature that the Homeland Security was interested in that could have not been -- maybe not in the current version or the demo that was seen at the time. Q. So you didn't get a piece -- you didn't get the
software to test, at least not immediately at that time? A. Q. Not immediately. Okay. Just before we leave the Exhibit 502.04, if we On page 1, there is a reference And then do
could publish that again.
to the sample operations order, as requested.
you know how that relates to the remainder of this exhibit? A. Yes. Can we publish page 2, please. Sure, can explain that a little bit further.
What that does, most of the time is that when they download, we see a lot of features of the software and so on. But we didn't see some -- it might not capture
exactly what ICE was interested in, case agent was interested in. So normally at that point in time, it is not unusual for a vendor to ask for more information and say, what are you looking at capturing and so on. And in this
particular response, Mr. Cooper is giving a sample, actually, of case tracking information that we would be interested in keeping. Q. I see. All right. Now, I want to take you forward
in time a little bit -- we are finished with that

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exhibit -- to 2004.
Did you have another meeting with
folks from IRP in 2004? A. In 2004, I believe we had a meeting in May, or close
to that time anyway, as I recall it -- as best I recall it. And, basically, there were a couple of new features
that the IRP said that they have added to the software, and, you know, were willing to share with us and so on, so we met. MR. KIRSCH: Your Honor, at this time I move to
admit what I believe is stipulated as Exhibit 502.01. THE COURT: MR. BANKS: THE COURT: Mr. Banks? No objection, Your Honor. Okay 502.01 will be admitted.
(Exhibit No. 502.01 is admitted.) MR. KIRSCH: that? THE COURT: MR. KIRSCH: You may. And, Special Agent Smith, if you can Thank you, Your Honor. May we publish
expand the e-mail on the bottom there first, please. Q. (BY MR. KIRSCH) Now, is what is on the screen now,
Mr. Tran, is that an e-mail that was sent to you in May of 2004? A. Q. That's correct. Okay. And there is a reference here to the last
visit and a phone conversation?

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A. Q.
Yeah. Is that the visit that you were mentioning a moment
ago that you thought occurred around May of 2004? A. Uh-huh. MR. KIRSCH: Okay. Can we expand the top part of
that e-mail, or the top part of that exhibit. Q. (BY MR. KIRSCH) Now, what we have got on the screen
now, Mr. Tran, from the top of the page, is that your response to that e-mail? A. Q. That's correct. Okay. That is my response.
And you say there that you got IRP to be
included on the list for the next round? A. Q. A. Uh-huh. Can you explain what that means? Right. If you read the whole statement, you know,
talking about a meeting voting on what COTS -Q. A. What is COTS? COTS is commercial off-the-shelf software. And that
is what CILC was promoting as at that time. Q. Okay. When you say "on the list for the next round,"
the next round of what? A. Q. The next round of testing. Did you get a copy of the software to test in
response to that message? A. Yes. Probably -- just to my best recollection, is

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probably almost maybe several weeks after that I did receive a copy for testing. Q. Now, did you have any conversation with any of the
representatives from IRP in which you explained to them how -- what the duration of the testing process would be? A. Q. Yes. What did you tell them? Who did you have that
conversation with, do you remember? A. Yes. I remember the conversation I had was with
Mr. Thurman. Q. A. What did you tell Mr. Thurman? We had a phone conversation talking what needed to be And
done to the software to get the software approved.
what that entailed most of the time is a submission from the vendor, a 30-day trial. trial. A software package for 30-day
And after that 30-day trial, if everything pass
according to the rules established by ICE testing, then will be admitted to the approve list. Q. Okay. So that entire -- am I right that the entire
process of testing would take 30 days, or is the 30-day trial a part of the larger process? A. Normally, for a COTS software, we usually do it for But most of the COTS software -- most of the
30 days.
time, when they submit a copy, it is only good for 30 days.

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Q. A. Q. A. Q. A. Q.
Okay. It will expire. Okay. Yes. And you did that testing? Correct. It was submitted for testing. And you got a piece of software?
And then did you communicate the results of the
testing that you did to anyone? A. The testing, usually by the time it is finished, it And it was
mostly a team report that would go out.
submitted, saying whether or not it pass the test, and now is listed for approved list for anyone within the agency to buy, and so on. Q. Okay. At any time during any of the meetings that
you had with IRP representatives, did you make any representations that the Department of Homeland Security would buy the CILC software? A. No. Normally it is only if -- any statement that
related to that, it just related to testing and the chance of getting onto the list. Q. Okay. MR. KIRSCH: Honor? THE COURT: Q. You may. Mr. Tran, do you know, did the Could I have one moment, please, Your
(BY MR. KIRSCH)
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software that you tested, did that make it onto the -- did it make it on to the next round? A. Q. No, it did not make it on to the next round. So did it make it on to the approved list of the
software for the Department of Homeland Security to purchase? A. No, it did not. MR. KIRSCH: Thank you, Mr. Tran.
Those are all of my questions, Your Honor. THE COURT: MR. WALKER: THE COURT: All right. Thank you.
Yes, Your Honor. Mr. Walker. CROSS-EXAMINATION
BY MR. WALKER: Q. A. Q. A. Q. Hello. Hi, how are you doing today? Good. Good to see you.
Good to see you, too. Paul, you mentioned that IRP was referred to you by
the New York office? A. That is my best recollection. It would most likely
come from Mr. Cooper.
And all I remember, that it is a
New York office that make the initial request. Q. And Mr. Cooper's office was considered the business
owner for the Consolidated Enforcement Environment?

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A. Q.
Yes, management of that. And what does that mean to be the business owner and
having program management responsibilities? A. That is responsibility that really require looking at
new way of doing business, trying new way of doing business, as well as how to make it better, make it perform, helping the agent to do a better job. Q. And what type of software programs, COTS software
programs were you looking at? A. Look at quite a few COTS software programs. One
example that I can share with you is a COTS software program that allow us to do better analysis, better presenting data the we are looking at. Q. And how would you classify IRP Solutions' CILC
program? A. IRP actually came to us as a case management type of At least the first presentation I saw was very
software.
much indicative of that; had that capability. Q. And so the business owner, Mr. Cooper, who is a
program manager, let you know that the software had a lot of features he was interested in, as you said earlier. A. Q. was? A. The CEE program, after it formed, right from the
That's correct. Can you give us a feel for how large the CEE program
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beginning of ICE, or actually in 2002, actually formed right about that time. And part of that already in place, When the investigation
but under the U.S. Custom Service.
office, they split up from U.S. Custom Service and become part of ICE, the program go with it, and it become what they call CEE at that point in time. Q. Describe for us the importance of CEE within DHS. If
you had to pick a level from zero, of not important at all, to 10, of very important, where would you classify CEE? MR. KIRSCH: THE COURT: THE WITNESS: Objection, lack of foundation. Overruled. You may answer.
Importance would be very high.
Because if you look at the -- I would say at minimum probably a 7 to an 8. Q. A. Q. (BY MR. WALKER) Very important. You mentioned an evaluation, which was one of your So very important?
roles; evaluations after referral from the business owner. A. Q. Yes. And so would it be fair to say that the business
owner did the first level evaluation of software and products before they got passed to you? A. Q. Uh-huh. Do you have any idea of potentially how many
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companies' products were eliminated in the first round before being referred to you? MR. KIRSCH: THE COURT: Q. Objection, relevance. Sustained. Mr. Tran, in the evaluation of
(BY MR. WALKER)
products for CEE, the first round was the initial round of evaluations; is that correct? A. Q. That's correct. And if a product was eliminated in round one, what
would that mean? A. It doesn't mean anything much. What I meant is that If it failed first
it is all up to the business owner.
time, and if the failure is -- if the technical team deem that there is some failure that can be reversible or can be -- can be fixed, most likely the business owner would come back and request for more testing. Q. Okay. And so this is not a
one-strike-and-you-are-out situation? A. Q. Oh, no. Not at all.
And does that -- we were talking specifically about Does that also apply to following rounds? Normally it will apply for following round.
round one. A. Yes.
But most of the time, again, it all depend on business owner, whether or not business owner want to expand the resource and everything else that related so that could go
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on.
Just want to make a point that evaluation and testing
is costly. Q. Yes. And in the course of doing your evaluations,
your testings, how many features would you estimate were being considered, as far as the entire evaluation for software product? A. To make it to the so-called approved software list,
under the CIM model, the testing is a lot simpler than that. We are not looking at features yet. It is a little
bit further down the road.
We are looking at So --
compatibility, skill ability and reliability. Q.
And so in order to successfully be advanced to the
next round, a product would have to pass all of the tests that you just -A. Q. That's correct. -- named for us? Okay, thank you.
In doing your evaluation of the CILC product, do you recall getting software -- let me rephrase that question. How did you receive software from IRP
Solutions, in what form? A. I believe it was in the mail, a CD from -- either CD
disk, or even at that point in time diskettes being used. But I am pretty sure it was a CD. Q. And I know it has been many years. Do you recall how Was it one,
many CDs it was, or at least in the ballpark?

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three, ten? A. It is quite a few. But I really can't remember. It
was more than one, as far as I can recall. Q. Okay. And in doing your testing, you, of course, ran
the application? A. Q. Uh-huh. You evaluated its features. What type of application
was it?
Would you characterize it as a client server
application or a web application? A. Okay. The two terms you just referred to is fairly A client server is running from
synonymous in some ways. a particular server. group of server. Q.
Most web servers actually run off a
Let me clarify for you. MR. WALKER:
The --
Your Honor, we will get into technical
lingo here, so I will explain. THE COURT: MR. WALKER: May I ask what the relevance is? I am drawing a distinction between
different versions of the CILC product, and want to determine exactly which version Mr. Tran is referring to. THE COURT: Why don't you just ask him which It is almost going to be 5 o'clock. Your Honor, he wouldn't know. I would
version he received. MR. WALKER:
have to -- he wouldn't know. THE COURT: Ask it. If he says he doesn't know,
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you may question him. Q. (BY MR. WALKER) Mr. Tran, what version of the CILC
software did you have. A. I wouldn't know the particular version numbers, but
if I remember correctly, it was primarily a web-based. Q. While doing your testing, you evaluated -- this is to And
follow around in testing, you evaluated the product. what did you -- what test results did you give to the business owner? A.
Again, this just only to my best recollection, is the
first thing is we have to have compatibility. Compatibility, and what matters to ICE is the system need to be able to run off the ICE network environment, whether or not on an agency server, on a special server that have to be built. Q. And that test did not go well.
So, in summary, that version of the software you
failed because of the incompatibility with that system? A. Q. That's correct. Are you aware of all meetings between the CEE
business owner and IRP Solutions? A. Q. No. So you would not be notified by Mr. Cooper of all of
the meetings with IRP Solutions? A. Normally not. Normally, Mr. Cooper have to come back And, again, it is
to us and tell us what he want.
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probably not within -- I hate to use the term "not within my pay grade," but it is kind of that way. I am
particularly tasked to do a particular type of function, and I stay within those boundaries. Q. Okay. And I believe you stated earlier that a
company was allowed to go back and resubmit their product -A. Q. A. Q. That's correct. -- after evaluation and make an improvement on it? That's correct. Are you aware of any such re-evaluation submitted
through your office? A. Not really. Because -- let me rephrase that a little And then from
bit, is that I did that initial test.
2004 -- end of 2004 to 2007, I had not received any requests to re-test or anything. Q. And you stated earlier you would not have been made
aware of all of the meetings between Mr. Cooper and a company like IRP Solutions? A. Q. That's correct. So it is conceivable that Mr. Cooper could have met
with IRP Solutions after your evaluations; correct? MR. KIRSCH: THE COURT: Q. Objection, calls for speculation. Sustained. And so you stated earlier that the
(BY MR. WALKER)
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Department of Homeland Security would allow follow-up evaluations? A. Q. Yes. And would those follow-up evaluations also begin
again with the business owner? A. That's correct. It would come back with a business And it is -- normally,
owner who make another request. that is not unusual at all.
Many of the COTS software
that I have, sometimes it doesn't work 100 percent, and business owner will come back and say, you know, what is wrong with it? Q. Can we do something with it?
And if the business owner did say there was something
wrong with it and they would like to see some more, what would the business owner then do? MR. KIRSCH: THE COURT: Q. Objection, calls for speculation. Sustained. Are you aware of the process that
(BY MR. WALKER)
the business owner would take if that situation was true? A. Q. A. Not all of it. What part are you aware of? It need to be a formal request that usually go Because, again, like I said, all So business
through at the meetings.
of the testing have obligated only so long.
owner normally have to justify for it before it can go further.

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Q.
Would they have to justify having meetings and demos
prior to the next official round of testing? A. Q. I am not familiar -- I would not know. And so that -- the business owner could have had
meetings -- following meetings to your testing without your knowledge? A. Q. Again, I would not know. Is it possible that they could have had meetings
without your knowledge? MR. KIRSCH: Objection, asked and answered, and
calls for speculation. THE COURT: Q. Sustained. Mr. Tran, do you know Bill
(BY MR. WALKER)
Witherspoon? A. Q. A. Yes. And how do you know him? Bill Mr. Witherspoon actually was -- initially was And when ICE was started, eventually
part of my team.
Mr. Witherspoon actually become part of the program, CEE program. Q. And in his role within the CEE program, do you know
what type of responsibilities he had? A. He get involved with program management, that's his
main role, as well as some of the -- some of the testing capability and so on.
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Q.
Okay.
And did Mr. Witherspoon report to Mr. Cooper? Do you know
I am sorry, let me back up a little bit. Steven Cooper? A. Q. A. Q. A. Yes. And he is the business owner? That's correct.
Did Mr. Witherspoon report to Steven Cooper? Not during the time that I was dealing with I don't think Mr. Witherspoon was I believe Mr. Witherspoon was
Mr. Witherspoon.
reporting to Mr. Cooper.
reporting mainly to the main director, Ms. Jamie Ellis (phonetic). Q. A. Q. So he reported to the main director? That's correct. Are you aware of Mr. -- of quotation requests going
from DHS to IRP Solutions? A. Q. I wasn't aware of it. Have you seen a quotation provided to DHS from IRP
Solutions? MR. KIRSCH: THE COURT: Q. Objection, relevance. Well, overruled. Are you aware --
(BY MR. WALKER) THE COURT:
Actually, it is have you seen. Have you seen, Mr. Tran, a quotation
Q.
(BY MR. WALKER)
provided by IRP Solutions to the Department of Homeland

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Security for -- in the neighborhood of $100 million? A. Q. I have just seen it lately. Can you relate any details to that quotation? MR. KIRSCH: THE COURT: Q. Objection, Your Honor. Sustained. And the -- can you give some details
(BY MR. WALKER)
about what you saw -- the context of seeing that? MR. KIRSCH: THE COURT: Same objection. At this point, I understand the
relevance objection. What is the relevance? it? MR. WALKER: THE COURT: MR. WALKER: No. What is relevance? The relevance is trying to establish It wasn't sent to him, was
the details of the quotation based on the functionality improvement. THE COURT: with these issues. MR. WALKER: Your Honor, it has to do with the fact But the quotation has nothing to do
that there were modifications made to the software that would have been annotated. THE COURT: modifications. MR. WALKER: Yes, Your Honor.
Ask him directly, is he aware of any
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Q.
(BY MR. WALKER)
Mr. Tran, are you aware of any
modifications being made to the software by IRP Solutions? A. The only modification that I seen is the web on that, Once it didn't pass compatibility,
that was put on there.
we stopped the test there. Q. And in your relationship with the business owner
organization, did you then provide a detailed report, or did you provide just an overall pass/fail for this stage of the testing? A. It is only an overall -- for COTS software, it is Only when you make it on the
specifically an overall.
list, it become more detailed, because at that point in time we have to document every single step of the testing, as well as the results of every single testing, because now it become valid software that the agency can purchase. Q. In your report to the business owner organization
would you provide recommendations? A. type. Q. And so given that IRP Solutions' CILC product passed Normally not. Normally I just provide a pass/fail
the initial rounds of the testing for DHS, do you have knowledge of what percentage of applications got to that level of testing? MR. KIRSCH: THE COURT: Objection, relevance. Sustained.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. Q. Q.
MR. WALKER: THE COURT:
Could I have a moment, Your Honor? You may. Mr. Tran, after you provided your
(BY MR. WALKER)
evaluation to Mr. Cooper, did he -- what response did you receive from him? MR. KIRSCH: THE COURT: Objection, hearsay. Sustained. Did you and Mr. Cooper talk after
(BY MR. WALKER)
you made your evaluation of the CILC software? A. Q. Yes, we do. And did you talk in reference to the CILC application
and IRP Solutions? A. Q. Yes, we do. Tell us what your conversations entailed. MR. KIRSCH: THE COURT: Objection, hearsay. Sustained. Mr. Tran, when did you leave your
(BY MR. WALKER)
office, your role at CEE? A. Not at CEE. I leave my role with the Office of
Investigation in 2007. Q. 2007. MR. WALKER: Thank you.
No further questions, Your Honor. MR. BANKS: questions.

Your Honor, I have a couple of
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THE COURT:
We are already after 5:00. CROSS-EXAMINATION
You may.
BY MR. BANKS: Q. Mr. Tran, do you remember you said you saw the
web-based interface of the solution? A. Q. Uh-huh. Do you remember the original solution that you
received was the -- what original solution did IRP provide to DHS? A. The first demo I see ran on -- I remember was a
laptop that your company brought in and show how it run. And so it was very demo like. machine, that I can remember. A single, stand alone The second version, the one
I am testing on was a better web interfacer, and it was supposed to be sold on the server. Q. Okay. So what you are saying is -- did you -- let me
ask you, did you see a prototype that ran on the desktop, or did you see a client server version that was running on the desktop? A. I wouldn't make the difference at all. If I ask for
a piece of 30-day trial COTS software, whatever you submit me at that point in time, I call it a final production. MR. BANKS: THE COURT: MR. KIRSCH: No further questions. Any redirect? Very briefly, Your Honor.
Thank you.
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THE COURT:
Very briefly. REDIRECT EXAMINATION
BY MR. KIRSCH: Q. Mr. Tran, the compatibility testing that was
failed -A. Q. Yes. -- that occurred after your meeting in May of 2004;
is that right? A. Q. Yeah, that's correct. I just want to get the timeline down. So you had a
meeting in May of 2004? A. Q. A. Q. Uh-huh. You got the software after that meeting? That's correct. You did the testing after -- over the course of 30
days after you got the software? A. Q. That's correct. Am I correct that by this time we're in the middle of
the summer of 2004? A. Q. That's correct. And at that point, the CILC software submitted to the
Department of Homeland Security has failed compatibility testing; is that correct? A. That's correct. MR. KIRSCH: Those are all of my questions.
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Thank you, Your Honor. THE COURT: MR. KIRSCH: THE COURT: excused. All right. Ladies and gentlemen, I will let you May this witness be excused? Yes, please. Thank you, Mr. Tran, you may be
If you could report back -MR. WALKER: Your Honor, for the record I would
like to reserve the right to recall Mr. Tran. THE COURT: All right. You know the process you
have to do to do that, and it is not going to be solely for impeachment. the right. Ladies and gentlemen, I will let you go home. Everyone is going to be here on time tomorrow; right? won't promise you, but well will try to get started at 9:00 a.m. tomorrow morning. Remember, no talking to I So he is not excused. They've reserved
anybody about this case, at home or on your computers or anywhere. No research at all about any of the issues. Thank you very much. You are excused.
All right.
If counsel could stay. If the courtroom can empty, please. (The following is had in open court, outside the presence of the jury and closed to the public.) THE COURT: You may be seated.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 right.
I decided we should go ahead and proceed. So back on the record.
All
Ms. De Jong, thank you very much for your note. just need to ask a few questions about your familiarity with Mr. Enrico Howard.
So can you just give me a little
bit of information as to how you know him. JUROR DE JONG: If it is the same person, and I
wasn't dead certain of the last name, but given the area of expertise, and the first name seemed like an unlikely combination. I recall working at -- the company had, So some iteration of
like, four names by the time I left. Trip.Com Cheap Tickets. all kind of together.
Maybe -- I don't recall, it was
In any case, under the Cendant Corporation, and I don't recall what capacity he was in, he was in kind of the tech side. I was in ad operations, so I occasionally
had some contact with him, just regarding, you know, what pages they might be building or, you know, where they were going to put our ads. But I just thought it was relevant,
if it is the same person -THE COURT: I definitely appreciate that. Did you
ever have any face-to-face contact with him? JUROR DE JONG: Yeah. Not a ton, but we definitely
would have spoken on more than one occasion. THE COURT: It would have all been related to work?
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JUROR DE JONG:
A little bit of social chit chat,
but nothing more than that. THE COURT: And were these in offices for Trip.com
or Cheap Ticket, or where was it. JUROR DE JONG: Yeah. Most likely in the office
when they moved to Glenwood Plaza in Centennial, or Greenwood Village. THE COURT: And do you have any opinion, based on
those interactions, favorable or unfavorable about Mr. Howard? JUROR DE JONG: competent worker. I recall him being a fairly
But nothing -- I don't cringe when I
think of him, and I don't have any great feelings of love. THE COURT: So it is just somebody you knew? Yeah.
JUROR DE JONG: THE COURT:
Would that experience or that
familiarity with Mr. Howard cause you to be unable to be fair and impartial to either side in this case? not testify. JUROR DE JONG: I don't think so, no. The name He will
sounded familiar, and I thought I ought to bring it up. THE COURT: wish to ask? MR. KIRSCH: THE COURT: We had one, Your Honor. You may ask.
All right.
Any other questions you all
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor.
MR. KIRSCH:
Ma'am, do you recall the time frame
when this interaction would have occurred? JUROR DE JONG: Just because I am remembering him
in that office space -- and that could be wrong, but it would have -- I am trying to think when we moved. The
reason I brought it up is I think it might have been in this general 2003, 2005ish time frame. certain. But I can't be
I can go back and look at notes or -No, we don't want you to do anything
THE COURT: like that.
No additional research. No. Right in that ballpark.
JUROR DE JONG: MR. KIRSCH:
One other follow-up if I could, Your
If you concluded, or there was information presented that suggested that, in fact, it was the same person, given the nature of the allegations in this case, is there anything about your prior experiences with Mr. Howard that you think would prevent you from being able to fairly and impartially judge any evidence that might pertain to him? JUROR DE JONG: Possibly. If I thought that he
were presenting time cards for work weeks at a time when I could be certain that he was also doing full-time work for Cheap Tickets or Cendant, I would question -- it might make me question some of the other evidence I have heard.
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But my recollection of the precise timelines may not be good enough to know whether that would be a conflict or not. I don't know if that helps. THE COURT: MR. WALKER: Mr. Walker? Your Honor, I have a question, but I
want to ask if it would be proper. THE COURT: Approach.
(A bench conference is had). MR. WALKER: The Enrico Howard on our list has two He is very tall, 6
very distinctive physical features.
foot 7, and he has a very baritone voice. THE COURT: describe him? MR. WALKER: MR. KIRSCH: Yes. Your Honor, we don't have any However, Do you want me to ask if she could
objection to that additional inquiry being made. it is going to be the Government's position that
Ms. De Jong should be excused as a juror in this case. She has already indicated that if she found it were the same person and time cards were being submitted during this time period while he was working there, that might affect her ability to judge the evidence. The Government is going to be offering evidence that suggests that Mr. Howard's name was one of the alias names that was used in some of the documents that we
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intend to offer as evidence.
And we think -- we expect
that she would say that that would further -- might further cause her difficulty in analyzing the evidence in this case. THE COURT: I am concerned. The only way I would
be not concerned is if we ruled out that he was the person she knew. MR. WALKER: THE COURT: I agree. If we can't rule that out, I would She already said she
agree that I should excuse her. couldn't be fair.
If it is not the same person -- if we
can establish it is not the same person, would you still feel she needs to be excused? MR. KIRSCH: If it is not the same person, and we
can establish that, Your Honor, I think if we instruct the juror it was not the same person, we have no problem with her continuing to serve. MR. BANKS: THE COURT: We expect it is the same person. I would excuse her. I will ask for the
description, and then we excuse her if it turns out it is the possibility that it is the same person, because I think it would color her ability to be fair and impartial. All right. I will ask her away from bench.
(The following is had in open court, in the presence of Juror De Jong.)

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THE COURT:
Could you describe your best
recollection of what Mr. Enrico Howard looks like. JUROR DE JONG: I remember a tall, skinny, black
I am thinking I remember him wearing glasses. THE COURT: How tall was he? To me, everybody is tall. Maybe 6
JUROR DE JONG: foot-ish.
I am really bad at measurements. Do you recall whether he had any sort
THE COURT:
of distinctive voice. JUROR DE JONG: THE COURT: African-American. JUROR DE JONG: We only had two African-American I don't recall. Anything else that you recall?
Okay.
guys pretty much in the company, both of which I had interactions with. He was definitely -- I am pretty sure I didn't talk to But tall and
he was on the skinnier side of the two.
him as much as I talked to the other guy. fairly thin is what is coming to mind. THE COURT: All right.
Thank you very much.
If I
could ask you to wait in the jury deliberation room, we will be right back out with you. coming forward. JUROR DE JONG: Yes. Thank you so much for
(The following is had in open court, outside the presence of the jury and closed to the public.)
457
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that. is it. jurors.
THE COURT:
It's my opinion that tall, maybe not as
tall as he is, but that there is a good probability that this is the one in the same person. And she has indicated
that in her mind, if it is around the same time period she believes it is, that this would impact her ability, I think, to be fair and impartial. She didn't put it in those words, but I think that And I wouldn't want that to taint the rest of the It is outside information that is not going to be
provided here, and I don't think she could separate that. So, it would be my inclination, unless there is an objection, to go ahead and excuse this juror. MR. KIRSCH: Your Honor, the Government agrees with
MR. BANKS:
No objection, Your Honor. Does an alternate fill into
What is the process? that role? THE COURT:
We have four alternates.
That is the
reason I chose four alternates.
Over the course of 6
weeks, we don't know who is going to get sick, who will not show up. Hopefully we don't have more. But the first
alternate would take her place. the alternate.
They don't know who is
Right now they are all sitting on this
jury thinking they are all going to be part of the final jury deliberation team. They don't know. Only we know
458
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
which are the ones that are the alternates in this case. MR. BANKS: THE COURT: Okay. They won't be told anything about that. They won't be told
She will just not show up tomorrow. why she isn't here. of them on this jury. MR. BANKS: THE COURT: MR. BANKS: THE COURT: Very well.
They will just know there are now 15
Thank you, Your Honor.
Anything further? Not from us, Your Honor. If it is all right with you, I am just
going to have my courtroom deputy tell her she need not return, that she is excused from jury service. All right. o'clock. All right. Court will be in recess. We will see you on time tomorrow at 9
(Court is in recess at 5:17 p.m.)
459
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
R E P O R T E R ' S
C E R T I F I C A T E
I, Darlene M. Martinez, Official Certified shorthand Reporter for the United States District Court, District of Colorado, do hereby certify that the foregoing is a true and accurate transcript of the proceedings had as taken stenographically by me at the time and place aforementioned.
Dated this 5th day of December, 2011.
_____________________________ s/Darlene M. Martinez RMR, CRR

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188

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 time. MR. BANKS:

There was a bad accident on University Boulevard We actually got into

that had traffic backed up.

were all in the same car.

traffic when I was at Lincoln and Broadway, so it just kind of varied.

What time did you leave Colorado

It is known to have traffic delays. I will not

And if you do, I am going to

all didn't show up on time.

No, Your Honor.

MR. KIRSCH: THE COURT: the jury.

No, Your Honor.

Ms. Barnes, would you please bring in

jurors has not shown up, either. to a good start.

begin until they are all assembled.

ladies and gentlemen of the jury.

that is totally not 100 percent within your control.

What was your position with the Department of

Justice? A. I served as special assistant, just kind of like an

those kinds of companies? A. Yes. So we must -- I mean, probably in a given

meetings a week? A. It was about that. It ebbed and flowed, but

granted? A. As many as possible. The way that we saw the

But we thought it was important to

So there is a lot of places

All right. I would say to a degree, in a sense that you work

office that would do the procurement; is that right?

Unless it is a de minimis amount of something,

reporting structure outside of us.

But I can't name one that I was personally

Are you familiar with any rules that

non-procurement, this is my -Q. I am talking about your understanding based on your

request for proposal. acronym that is.

But before an RFP is officially

unfair advantage to said company.

you meet with all.

So what agencies do is they have an

All right 501.01 will be admitted.

Andy Anderson. Anderson? A. Q. A.

who has been at the DOJ, for Department of Justice, excuse

me, for 25 years or so.

And often inquiries came to him,

to Mr. Hitch? A. Correct. So that would be like sending it to the

briefly, please just expand that.

that exhibit, please.

And can we start by expanding the Yes. Thank you.

bottom message at the bottom. Q. (BY MR. KIRSCH)

Now, is this a message from you,

MR. KIRSCH: 2, please.

And expand from the top down to the message we

Andy actually controlled Van's schedule --

first page of this message, please.

have lots of meetings.

But that makes total sense.

to things that you would say to vendors at meetings like that?

Yes. All right. And what is it -- what information would

takes a really long time.

You know, our country

Can I have one moment, please, Your

You may. Your Honor, one more question, if I

(BY MR. KIRSCH)

Mr. Roe, do you have any reason to

tried to make himself available as often as possible.

I am quite sure it would have been.