10 11 12 13 14 15 16 17 18 20 21 22 23 24 25 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF WYOMING UNITED STATES OF AMERICA, Plaintiff, vs. No. 92CR01287 August 10, 1993 Volume XX E. LaVAY MCKINLEY, GEORGE JIM CONWAY, a/k/a JIM CONWAY, and STEVE EMERY, Defendants. TRANSCRIPT. OF TRIAL PROCEEDINGS Transcript of Trial Proceedings on the above- entitled case before the Honorable Alan B. Johnson, Judge, and a jury of twelvé, plus three alternates, commencing on the 30th day of June, 1993. Court Reporter: Jackie R. Jorstad, RPR Deputy Official Court Reporter 2120 Capitol Avenue, Room 2228 Cheyenne, wyoming 8200112 13 14 15 16 17 18 19 20 ai 22 23. 24 25 APP For the Plaintiff: For the Defendant =, LaVay McKinley: For 'the Defendant Geotge Jim Conway: For the Defendant Steve Emery: m xX, ARANCES MR. PATRICK J. CRANK Assistant U.S. Attorney District of Wyoming 111 South Wolcott, Room 138 Casper, Wyoming 82601 MS. LISA E. LESCHUCK Assistant U.S. Attorney 2120 Capitol Avenue Fourth Floor Cheyenne, Wyoming 82001 MR. RONALD G. PRETTY Attorney at Law 309 1/2 West 18th Street Cheyenne, Wyoming 82001 WIEDERSPAHN, LUMMIS & LIEPAS Attorneys at Law 2020 Carey Avenue, Suite 700 Cheyenne, Wyoming 82001 BY MR. MICHAEL H. REESE MR. LAURENCE P. VAN COURT Attorney at Law 1807 Capitol Avenue, Suite 108 Cheyenne, wyoming 82001 INDEX IN-REAR OF VOLUME10 a1 12 13 14 15 16 17) 19 20 21 22 23 24 25 these documents. MR. VAN COURT: That's Mr. Emery's understanding too, Judge. MR. REESE: Likewise, Your Honor. MR. PRETTY: That's true, Your Honor. THE COURT: The exhibits are received. You may proceed. (Plaintiff's Exhibits 4008, 4012, 4013, 4014, 4015, 4016, 4017, 4018, 4019, 4029, 4030, 4031 received into evidence.) MS. LESCHUCK: Thank you, Your Honor. DIRECT EXAMINATION CONTINUED Q. (BY MS. LESCHUCK) Mr. Skinner, when we left off on Friday, I believe we were talking about.an amount of approximately 118,000 that you had been paid by Mr. McKinley. Do you recall that testimony? A. Correct, yes. Q. And I believe you also indicated that you had at that time accounted for approximately $80,000; is that correct? A. Correct. Q. Did you return to Tulsa this weekend? A. Yes. : Q. And-at my request, did you review your reports to attempt to come up with a more accurate accounting? (i)10 a1 12 13 14 15 17 18 19 20 21 22 23 24 25 25 A. Yes. Q. All right. Of that 118,000, can you please expand what you spent those monies on? A. There were dry-off feeds for vessels. There were about 15 trips taken to look at vessels to port cities. Q. 15 trips? A. About 15 trips. There were telephone bills extensively to the Caymans that ran to pretty substantial numbers, faxes, requests by LaVay to gather information for him, some. electronic purchases, and some overhead draws and that kind of stuff, some hotel bills for trips and such. Q. And based upon that, what, if anything, did you come up ith? A. About a hundred and one thousand dollars. Q. What‘ accourits for the other $17,000? A. There was one trip to four different cities that I can't -+ I don't have the accounting-work. I amin ‘the process of trying to find it. And then I am missing a whole year's phone bills on one line. ‘And it's just’a matter of getting it out of accounting. I was only there over the weekend. Q. Did you spend any of this $118,000 for your own personal benefit? A. I can show that I have spent at least a hundred and one, maybe greater, a hundred and eighteen thousand dollars15 16 17 18 19 20 21 22 23 24 25 on this matter of getting a vessel and also special requests that LaVay made to me. Q. Did you ever provide Mr. McKinley. with an accounting of your expenditures? : A. No. Q. Why not? A. Because the nature of the transacticn changed after the initial investments due to a delay in the second wire, problem of obtaining clear title, plus we were in default on a lease. And even if we hadn't have been in default on a lease on a ship,. we couldn't have gotten clear title, because -- I don't know what the deal was with the thing. and so the nature of this became that now we had to go look for another boat. We had some time pressure on us from a standpoint of a deadline that had to be reached. Q. What is the total time frame that you spent attempting to purchase a vessel on Mr. McKinley's behalf? A. Oh, probably about a year and two months, something like that, maybe a little more than that. Q. Did you ever find a vessel? A. I found some. But at the the time that I found the vessels that were suitable, there was. a problem, one was because of my situation with the competition in the oil trade business, I was no longer as willing to buy and it was going.to be a substantial investment, and the second10 11 12. 13 14 15 16 7 18 20 21 22 23 25 27 thing was LaVay; whose situation had change. Q. All right. Perhaps I should rephrase my question. Did you ever find a vessel suitable for purchase by Mr. McKinley? Ae Yes, two or three. . Did you ever purchase one? No, |we entered into one contract. Q A Q. Dial you ever purchase a vessel? A. No. Q . I believe also on Friday before the break for the weekend, you were discussing Mr. McKinley's commodities and option trading; is that correct? A. Yes! Q. and’ believe you discussed options, but did you ever do any commodities trading with Mr. McKinley? A. No. Q. Did you ever'attempt to track the types of trades he told you about? A. Yes. Q.. Could you please explain that. A. LaVéy would give me a range and he would say, "I am just making a killing in this particular trade here." and a specific example I can remember tracking was the Dow Jones. iAnd he said every time it gets up to 3300 I sell it too short, and when it gets down to 3200, I go long. And24 25 he said he was making substantial returns on this. And I started tracking it, and my first problem was the numbers that he said, I just couldn't even come close to getting the strike prices. I couldn't come close to the future contracts and the Dow Jones were not trading through ‘the points he said he was trading at when he said he was trading at them. They were trading through the points with a.two-day delay. If I went, back and reversed the time two days, they were trading through those points. Q. What does that mean? A. It means that his data was very old. I think it was coming out of the Wall Street Journal and being mailed to the Cayman Islands, and that's with the delay to the Caribbean. He had no electronic data; and I couldn't imagine trading with no electronic data. At that time he had no electronic data. Q. and based upon what he was telling you about making a killing on certain commodities, what was your evaluation on that? A. Either something was severely wrong on my analysis site, or he was not making these trades at all. Q. And on approximately how many occasions did you track this type-of activity Mr. McKinley was talking about? A. For a period, LaVay and I spoke two or three times a day... And approximately 30 days after he started saying10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 XX 29 this, I started tracking this, and it's not a -- go ahead. Q. How did you become involved with the investigation in this case, Mr. Skinner? A. The!-- I received a call from a Ken Gassen, who identified himself as with the Security Exchange Commission from Wyéming. Now, if that doesn't sound like the right identification, my secretary said that; so I don't know what he said. But when I got on the phone, he explained what he|was doing, and I said, “I know about this situation, but I need to call you back, ‘because’I need to verify that you're really with the wyoming: state government or with the federal government," and I did so. Q. Did!you confirm that? : ees eee Q. Did you begin cooperating with the federal government? ie vee" Q. Havé you cooperated with the federal government on other o¢easions? A. Yes: Q. Approximately how many? A. Five to six times. Q. What types of investigations? A. One lwas a pyramid/ponzi scheme that ended around the 1985 period. Another one was fraudulent ‘gold mine airline that was started -- I don't know when -~ but ended around10 1 13 14 15 16 18 19 20 22 23 24 25 "82, '83. Are you -- well, let me rephrase that. Have you ever been convicted of a felony, Mr. Skinner? A. Yes. Q. When was that? A. 1992. Q. all right. And what type of felony did you -- were you convicted of? A. For possession -- conspiracy to possess. less than 30 grams of marijuana. Q. And where is that conviction out of? A, Southern New Jersey. 7 Q. All right. Is that a state or a federal conviction? A. A state conviction. : Q. Did you receive a sentence on that? A. A sentence and a fine. Q. And what was your sentence? A. I believe it was three years probation. Q. Did you serve any -- were you sentenced to any time of imprisonment? A. No. Q. What was your fine? A. I believe. $27, and some change. Q. Did you cooperate with the federal government in this10 1. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 31 particular case as a result of sustaining that conviction in New Jersey? A. No. Q. Are you being -- were you paid for any of your cooperation and terms of cooperation in this case? A. No., I am in the hole. Q. Why are you cooperating with the federal government this time? MR. PRETTY: Leading, Your Honor. THE COURT: Sustained. Q. (BY MS. LESCHUCK) Have you been promised anything in connection with this case in terms of your cooperation with the federal government? AL No. Q. Do you recall approximately when you spoke to Mr: Gassen? A. No.: I feel that it was something like April of '92 possibly. Possibly April to June: I'll have to give ‘it that kind of time frame. Q. As @ result of speaking to Mr. Gassen; what did you do? A. Weill, I proceeded to call LaVay McKinley and keep tabs and speak to him and find out what was going on. I asked him specifically what kind of problem was going on. ‘He even mentioned to me that he had spoke -- he knew there was a man by the name of Ken Gassen that was calling up several17 18 19 20 21 22 23 24 25 UY ne a 32 people, and he said he felt like it wouldn't be long before Ken Gassen would be calling me. And I proceeded to help Ken in whatever manner he needed. Q. Did you record any of your conversations with Mr. McKinley? A. Yes, I did. Q. Do you remenber how many conversations you recorded? A. Approximately three. Q. Who initiated those conversations that were recorded? A. I actually made the initial call. Some of them were call-backs. Q. Wwhat.was the purpose of your contacting Mr. McKinley on those occasions? A. To, again, find out how his -- how things were going for him, where his location was at, and to try and introduce him to other people that had, you know -- so that I wouldn't have to be involved on a daily basis. Q. Did you record all of the conversations that you had with Mr. McKinley? ine noe Q. Approximately how many other conversations did you have with him that you did not record after you spoke with Ken Gassen? A. I don't know, but I would suspect on the order of 20. Q. Andon those occasions, why were you not recording theRows w BS © @ ao n 13 14 15 16 17 18 19 20 21 22 23 24 25 XX i uv Uy 33 calls? A. The FBI wanted a person to be present, and’ they only had a certain amount. of time in Tulsa. And I traveled heavily through that period, and so there was not always the opportunity for a recording to take place. Q. All right. As a result of your conversations with Mr: McKinley, did you make any introductiéns*to Mr. McKinley? A. Yes, Q. what introductions did you make? A. I said that there was a man who would be calling him and his iname was John, and that he was -- he could proceed to deal with him on his own terms and I had nothing to do with it beyond that. Q- Allright. John who? A. Iwds -- I didn't know his last name. Q. Do you know it now? A. Yes, I believe John Home, the man that -- a man from England. @. Okay. John -- excuse me. What was the last name? A. Home. Q. noldman? A. Holzman. Q. Have you ever met John Holzman? A. Yes. Q. When did you meet him?10 a 12 13 14 15 16 17 18 19. 20 21 22 23 24 25 A. Friday. This last Friday? i This last Friday, shook hands with him. > Q. What did you tell Mr. McKinley about him? A. That he was a representative for ariother group of people who had money, that they might be interested in doing investing into mines for laundering of cash. Q. I am going to show you what's been marked for identification as Plaintiff's Exhibit 3. Do you recognize this? You can go ahead and open it. A. Yes. Q. What is it? A. This is a taped conversation, I assume, between myself and Mr. McKinley. Q. All right. And have you had an opportunity to listen to this taped conversation between yourself and Mr. McKinley? Ae ves. Q. Is it a copy or is it the original? A, I can’t tell ‘that. Q. Well, have you listened to it? ine veer I have Q. And what is the date on that particular tape? A, 6-3-92. ‘ Q. And is that an accurate recording of the conversation, | ij ty 10 i 12 13 14 15 16 17 18 19 20 21 22 23 24 25 35 between you and Mr. McKinley on 6-3-92?7 A. Yes, it is. Q. -I am going to show you also what's been marked for identification as Plaintiff's Exhibit 3A. Do you recognize that? A. Yes. a Q. What is it? A. This is a transcript of the conversation on 6-3-92. Q. Dia you read the transcript while you listened to the recording of the conversation? A. Yes. Q. All right. And is it a true and accurate transcription of the conversation that was recorded on June 3 of 19927 A. Yes. Q. Where was this recorded at? A. This, I believe, was recorded at the FBI's office in Tulsa, Oklahoma. Q. And who was present during its recording? A. Dave| Argo, there was another agent. that I am not familiar| with that kept coming in, and myself. Q. who is Dave Argo? . A. He is an FBI agent. Q. What! did you do with this tape after it was recorded? A, dust) gave it to him. I don't even know if I touched it after it) came out of the machine.17 18 19 20 21 22 23 24 25 MS..LESCHUCK: Your Honor, at this time I would offer Plaintiff"s,Exhibit 3 and 3a. MR. VAN COURT: No. objection. MR. REESE: No objection, Your Honor, other than the continuing one. MR. PRETTY: Same objection as to the continuing one, Your Honor, plus I think the foundation has been noted by the FBI agents that there has been the same substantial information that there was at the time of the recording. THE COURT: Thank you, Mr. Pretty.. Have you listened to the tape? THE WITNESS: Yes. Q. (BY MS. LESCHUCK) When was the last time. you listened: to the tape? A. Friday morning. 7 Q. Friday morning., This past Friday morning? A. Correct. Q. And at that time, did you review it with the ranscript? A. Yes. Q. And is it an accurate recollection that you have of the record that’ was made on June 3, 1992? A. Yes. THE COURT: The objection is overruled and the exhibit is received.“10 11 12) 13 14 15 16 17 18 19 20 21 22 23 24 25 37 (Plaintiff's Exhibit 3 received into evidence.) THE COURT: Again, ladies and gentlemen, the transcriot, the written transcript, is:not evidence; and to the extent it differs from what you hear, disregard it. MR. CRANK: Your Honor, may I distribute consecutively numbered copies to the jury? ! THE COURT: You may. (Plaintiff's Exhibit 3 was played.) ‘MR. CRANK: May I collect the copies of the transcript from the jury, Your Honor? THE COURT: Yes, you may. “MR. CRANK: Your Honor, may the record reflect we have collected all 15 copies of transcript 3A from the jury? THE COURT: The record will so reflect. Q. (BY lMS. LESCHUCK) Mr. Skinner, at the beginning of the conversation, you were talking about a boat deal in Jamaica, What was that all about? A. Actually it was a shipment deal. There was two things, one was lhe had collected some data of records that he said was a violation to all of his operations.in the Caymans. and he said that because they had tried to raid a service up in Clearwater or Tampa, Florida, he had just barely gotten 411 of the records out of there and he wanted to mail all of those down to somewhere in Jamaica -- well,1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 actually Montego. Bay, Jamaica. Q. "He" who? : A. LaVay was.going to have one of his employees mail or cargo freight these down. Q. Did he tell you what these records were in regard to? A. I don't know what the records in the Cayman Islands referred to. The records in Florida were banking transactions and such for the service center. Q. All right. And who was he dealing with down in Jamaica? A. He was sending it to a place called Fairfield Plantation. Q. Was there a contact person? A. Yes. There were three contact people, one was named Miss Crossdale, Miss Ferguson, and the other one was John Morgan. Q. And who was John Morgan? A. The owner of quite a few operations in Jamaica and Fairfield Plantation. I don't know if it was sent, to a car rental facility or a plantation. I can't remember. Q. Do you know if the records were, in fact, sent? A. Yes. Q. And do you know what became of them? A. They were turned over to an employee of Mr. McKinley's and then they were shipped out of Jamaica -- or they were10 11 12 13 14 15 16 18 13 20 21 22 23 24 25 XX 39 sitting on a dock. I don't know. LaVay's mother sent $10,000 ~~ . ‘MR. PRETTY: Objection, Your Honor, unless.he's testifying from direct knowledge from one of the defendants. Q. (BY MS. LESCHUCK). Mr. Skinner, do you have ‘knowledge of that from Mr. McKinley, what you were just about to say? ; A. No, I don't. Q. All right. MS. LESCHUCK: May I have just a moment, Your Honor? THE COURT: Yes. (Pause in proceedings.) MS. LESCHUCK: Your Honor, I have nothing further for this witness. n recess for ten THE COURT: Okay. We will stand minutes. (A Break was taken.) + THE COURT: Please be seated. You may proceed. f CROSS-EXAMINATION Q. (BY MR. VAN COURT) Mr. Skinner, I am Larry van Court. I represent Mr. Steve Emery. During the transactions to find and to possibly purchase a seacraft, did Mr. Emery play any part in any of those transactions? A. No.15 16 17 18 19 20 ai 22 23 24 25 Q. Have you had any business dealings, through Mr. McKinley or otherwise, with Mr. Emery? A. No. Q. Did Mr. Emery in any way figure into your plans or your dealings with Mr. McKinley?. A. No.’ MR..VAN COURT: Thank you, sir. I have nothing further. CROSS-EXAMINATION Q. (BY MR. REESE) Mr. Skinner, my name is Michael Reese. I represent Mr. Conway. Again, how many conversations in all did you have with Mr. McKinley? A. In excess of 200. 5 @. In all of these conversations you had with Mr. McKinley, did you have any conversations with Mr. Conway? A. No. Q. You've never had any dealings one-to-one with Mr. Conway? A. Correct. Q. Okay. Your understanding of Mr. Conway's role, if any, with Mr. McKinley came through Mr, McKinley? A. I have never heard the name of either of these two, so no. Q. Let me just ask you some questions. You mentioned, pe think it was Friday, that Mr. McKinley did not know some10 bl 12 13 14 15 16 17 18 19 20 22 23 24 25 41 trade and that indicated to you that it was impossible for him to be knowledgeable about commodity trading, What was that trade? A. The first thing is is that's not my statement. My statement was that he couldn't be doing option arbitrage. He could not be trading and writing options in ‘the matter that he said he was yielding money by doing -- by doing the things without knowing something called being dealt a neutral or dealt a gamma, vega, feta. He knew of none of the thecrétical terminology of optional trading. Q. So with respect to option trading, he didn't know or he wasn't an expert in option trading is what you're saying? A. I'misaying he didn't do option trading in those matters and yield profits the way he said he did. Q. But you did option trading; is that correct? A. That's correct. Q. You mentioned, though, that you lost. And again, correct me if I am wrong, I think you said you lost a little over a million dollars one year. . Yes} that's correct, in one year. Have you made money doing option trading? aA Q. a. “yes! Q. .I£ you lost over a million dollars, how much money have you mad¢ @oing option trading? A. I couldn't recall. I would have to go-over lots.of10 1. 12 13 14 15 22 23 24 25 figures. Q. You recall how much money you lost, but you. don't recall how much money you.have made? A. I made’ over $300,000 in an. hour trading options. Q. Are you also knowledgeable about other investment techniques, investment methods? For example, are you also knowledgeable about the stock market? You mentioned that you have tracked the Dow Jones. A. I,-as-of this morning, continue to track all the major industries and follow them very closely. Q. Do you consider yourself to be agophisticated investor? A. No, but I guess I would be considered by some terminology to be a sophisticated investor, but I don't consider myself that way. Q. But at least compared to me, you appear to be a sophisticated investor? . A How can-I compare myself to you? You may have 50 million dollars from trading options. Q. Well, the zeros are wrong, I can.tell you that. But in terms of Mr. McKinley, though, did it ever occur to you that a floating bank.on a ship was odd or this was okay? A. This was very unusual. I thought that I mentioned that too. o Q. But given your background in investments, you still10 1 12 13 14 16 17 18 19 20 21 22 23 24 25 43 went alohg with this idea? A. Yes,/as long as the firewall was between whatever operations he had on the vessel and myself. I am sure purely ih the business of moving fuel, so I really could cadre less. He is, in effect, renting space, taking space. aAnd'I said he would have to separate me from any sort of situations that would occur. ' I also had the final say to if I would have approached, for example, the church in Cayman Island and they would have said, "You're going to have to spend $50,000 @ year in accounting for this that you would not have to spend for this flag," I would have said, "You would have to put that up in a bank account with an attorney in catco (phonetic) Island." Q. So what you're saying is you didn't’ mind if he was doing something illegal, but as long as you were -- A. I'm sorry. “I didn't say that. Q. You're saying as long as he had a separate wall -- A. Zam saying that -- you're making a statement that I am saying something about, something illegal. I am saying he could have had liability that was a legitimate liability with thé bank, but the ship was never going to have some. The church in Catco Island would have said if there is a bank on [the boat, the liabilities of the bank do not reflect on the vessel.10 a 12 13 14 15 17 18 19 20 21 22 23 24 25 Q. So what you're saying is you didn't think what he's doing is illegal? A. I would have no interest in going through all those customers and having an illegal operation on a vessel. That is contrary to-good financial planning. Q. You stated Friday that you know a Mr. Bob Clements. A. Yes. Q. How many times have you talked to Mr. Clements? A. He called my 800 number on maybe as much as five times a day for about 30 days. I took about one.out of every three days of those phone calls. I met with him one time. Q. Do you also know the brother of Suzie McKinley? A. I don't know enough about that to answer that question. So -- I mean, that could be LaVay McKinley. so I just don't know. Q. Did Mr. Clements ever work for you? A. No. He useG to call up and would say on the 800 number “Let me speak to Boss," and that agitated my employees quite a bit. : Q. Is that because. you were considered the boss? A. No, it was because nobody called up and said those types of things.. There was more than one unusual occurrence from Bob Clements. Q. And, again, when did your conversations with Mr. Clements end? Do you recall?10 1. 12 13 14 15 16 17 18 20 21 22 23 24 25 cS u 45 A. YT can't recall. I would say sometime in ‘91, '92. Q. Was! your association with Mr. Clements continuing at the same time you had conversations with Mr. McKinley? A. Yes; Q. Okay. So Mr. Clements was feeding you information about Mr. McKinley? A. No.’ I mean, I don't understand that question. Could you rephrase it? 0. Was Mr. Clements providing you information concerning the activities of Mr. McKinley? A. In the narrowest of contexts, yes. Q. Well, in the broadests of contexts, what else was Mr. Clements =~ A. Well, Mr. Clements was an employee of LaVay McKinley. The kind of information he was giving me was "LaVay wants you to call him," this and that kind 6f stuff. There was no other data. One time Bob Clements flew into Tulsa and told me a bunch of personal life things about Lavay McKinley that I could care less to hear. ‘9. and|when Mr. Clements =~ he went to Houston to look for a boat, correct? A. No,|he flew into Houston -- I am going to guess -- it may have been Dallas, but he ended up taking a hotel room somewhere in the Houston area, I believe, for an extensive -- extensive period of time. And he was looking forS © a building materials, cement, and stuff like that. Q. To look for those kinds of things, does it require an extensive period of time? I have no idea. Q. dust to clear up some confusion, this cargo that went to -- it went to Jamaica, this cargo that: went to the Hatfield or Platte Field -- which plantation did it go to? A, Fairfield Plantation or a car rental agency. I don't recall. I didn't send it or receive it. Q. You arranged the transportation? A. No. I had nothing to do--- I don't know anything about the transportation. All I arranged was that there would be a place for it to be received if it. arrived in Montego Bay. Q. ~ So you have no knowledge whether it was ever received or not? A. Well, I was told by more than three employees at Fairfield and various other entities down there -- MR. PRETTY: Objection as hearsay if it's what these people told him. THE COURT: Sustained. Q. (BY MR. REESE) But you have no-firsthand knowledge? A. There was some sort of a notice from Jamaican customs. I don't know if that counts as firsthand. No, I was not down there at the dock and did not see it. Q. Mr. Skinner, are you still a licensed trader or options10 iL 12 13 14 ‘15 16 17 18 19 20 21 22 23 24 25 ) Yu xX 47 trader? A. No. Q. How! do you make your living now? A. I ain in the mechanical spring business. Q. And|what:exactly is that? A. Mechanical springs are in typewriters and pens and cars, ahything that moves just about has to have some form of a spting in it, and so that's the kind of business I am in, | Q. And'the reason you're no longer doing options is . because of the conviction you had in New Jersey? A. No, ‘that's not true. Q. So-why did you. get out of the options business? A, Simply a matter of the banks early on. It was very much an lentrepreneuer-type operation, and the banks, when they redlized the massive amounts of money being made, they moved in and they squeezed the margins out:to where anyone that was trading for less that 50 million dollars, and even though they were small players, didn't have a chance, just a supply-and-demand situation. Q. But you also testified that you had also helped out the government on maybe six previous occasions? A. I said five or six, I believe. Q. Five) or six? A. Yes.22 23 24 25 Q. Would you agree with me that seems to be a high number for work with the government over a number of years? I don't think so, not given the- situation I come-from in life, so, no. Q. You didnt find that six is ‘a -- that you find yourself involved in a number of questionable activities? A. No, I'm sorry, I don't. I mean, I find that my volvement with helping the government in the occasions I have have nothing to do with me doing anything questionable at all, nor was I ever looked at as someone. questionable. MR. REESE: Thank you. I have no more questions. CROSS+EXAMINATION Q. (BY MR. PRETTY) Good morning, Mr. Skinner. My name is Ronald Pretty. I represent Mr. McKinley. Do you have a copy of your 3A? A. No, I do not. Thank you very much. Q. Now when you say you had over 200‘ conversations with Mr. McKinley, a lot of those conversations took place prior to you getting involved with cooperating with the government; is that not correct? A. Yes. Q. I believe you testified on direct that there was approximately 20 conversations that you had when you were involved with the government? A. Oh, I said’there was in excess of 201 12 13 14 15 16 17 18 19 20 al 22 23 24 25 Q. And approximately three of them were recorded? A. Correct. Q.. Injone of the conversations, either recorded or unrecorded, did you ever tell Mr. McKinley that the.people that you were getting him involved with were people that have guns and kill people? A, I don't recall. Q. Is |it possible that you may have said something that the money would come from Spanish-speaking guys who are serious people with guns who hit peéple? A, I-don't know about the serious guys who hit people, but I do remember something: about indicating that they may have Latino. origins. Q. Alljright. So you may‘have said something like that, you just don't remember? A. That's correct. Q. When did the situation dealing with the -- when you started working for the government, how soon did the idea of these being Latin-speaking people and involved with drugs come up? A, I have no concept. I don't remember. Q. was it early on in your involvement with: u.s. volvement ? Government or later onin your A. I don't know. | os Q. Now, sir, you've said you've been involved in five or10 ai 12 13 14 15 16 17 18 19 20 21 22 23 24 25 six times when you've cooperated with government employees. Have these always been federal people or state people? A, Well, some cases, where as this is, I believe Mr. Gasser is a -- Gassen is a state employee and there was a federal employee also; and sometimes they. were purely with the federal government. Q. And the regulatory agencies or the investigatory agencies, were they always the FBI? A. No. Q. What other agencies? A. Customs, IRS, DEA, and maybe some sort of like state contractor, you know, people I don't know, because I have met more than one person. Q. Okay. And for the -- we all know who the IRS is. Who is the DEA? A. The Drug Enforcement Agency. Q. In this one that you were dealing with, who was your contact officer with the law enforcement agencies in this particular case? A. Doug, who is present here, and Ken Gassen. Q. I£ I was to say his name was Doug Wilhelmi, would I be correct? A. Yes, that's correct. Q. And Mr. Gassen? 5010 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 G C 51 A. That's correct. Q. Now, Agent Gassen and Agent Wilhelmi, after you made your phone calls, would you take notes of these various phone Galls? A. No! Q. ‘After you -- after you had made phone calls‘ to the -- and ‘talked with Mr. McKinley, you would not take any notes as to your conversations with him? A. You're talking about these types of phone calls’ here where they were recorded? Q. No, sir. I am talking about the ones, the 17 that you had that were not recorded. A. Yes, sometimes I would take a note. Q. an! right. Do you have those notes with you, sir? A. No,|I don't have those notes. Q. Do you know what you did with those notes? A. No,|but -- I mean --'no. I don't know what 1 did with them. Q. ATL; After your phone calls, would you contact w enforcement agencies and let them know what you had talked with Mr. McKinley about? A. Yes, I would. Q. How joften? A. .I would try and track someone down, and let's assume that I got ahold of -- how often? Every time that I could.10 1 12 13 14 15 16 17 19 20 2 22 23 24 25 Q. Would it be fair to say after each phone call, you would attempt to contact a law enforcement agency? A. That's correct. Q. And then, as such, were the law enforcement agencies giving you direction as to how they wanted you to steer the phone conversations? A. Early on, not really, later on, yes. Q. What do you mean by early on, no, later on, yes? A. Well, the first one or two calls, they just wanted to find out if I really knew him and could even talk to him. Q. And then the last 18 they were steering you on? A. They would suggest things, yes. Q. And what would be the nature of some of the things they would suggest to you? A, To find out if he's planning on leaving the Cayman Islands, find out where he is going, find out if he has a bank, find out where any deposits may be, these types of questions. Q. Did they ever ask you to ascertain where the assets were? A. ‘They asked me to find out if I knew or if I could find out where any bank deposits were. ©. Okay. The reason why I asked, there was one conversation that was recorded where they were dealing with Australian bonds:18 19 20 21 22 23 24 25 Q. Now that conversation, which was on June 3 of 1992, was that one of the later conversations? A. I don't know. Q. All right. was this one of the conversations that you had with him after the United States Government or the state 1kw énforcement agencies had given you direction as to where they wanted you to try to steer the conversations? A. I don't know that either. Q. Alljright. Well, now you've been involved in currency trading? A. That's correct. Q. I think you said you made $300,000 in an hour. That was on commodities? A, Trading options I made $300,000 in one hour. Q. Andi that was in options and commodities? A, It was options on fiscals. Q. What's that mean, sir? A. It teens it was options on the fiscal cash, or what it terms in the trading business as fiscal cash, which means most pegple that talk about trading options in commodities and currencies refer to it as trading options on the futures,| I was trading options on fiscals. Q. What's the difference between future and fiscal? A. Well, if you exercise your option on futures, you get a10 i 13 14 15 16 17 18 20 21 22 23 24 25 futures contract. If you exercise your option on a fiscal, you get the deutsche marks, French francs, or whatever delivered to an electronic bank account. Q. Now, when Mr. McKinley was talking. about the fact that he had money invested in Australian bonds, to the best of your knowledge, was he talking about governmental bonds? A. Possibly. Q. All right. And that would possibly be the same as U.S. securities, T-bills? A. Well, Australian bonds are not the same as U.S. securities. Q. ZI understand that, sir. A. Yes. Q. But it would be a note and a bond of the Australian government? A. Somewhat. There are differences in how the liabilities lie and how the pricing is done and such. And there is another fundamental difference, one\is in Australian dollars, and the other one is in U.S. dollars. Q. Now, you testified under cross-examination from Mr. Reese that you were not involved in these questionable dealings that you assisted through other government agencies in the past, correct? A. I said that -- I named two cases, one was involved with a ponzi/pyramid scheme, and I had nothing to do with that,aw Bow 14 15 16 17 18 19 20 21 22 23 24 25 55 and.oné was involved with a gold situation, and I had nothing to do with that. And in fact, I just immediately said this is the situation the FBI asked me to continue gaining information on that for them. Q. gust the situation in your occupation you heard about it andjyou went to the FBI? A. No. he men approached me at -- and made a meeting en eer trey ene teed cole tenet ses eeeetes seat gold mine; and I said I could care less about the gold mine, I want the records. “And they said you could take any records you want, and they were surprised that I took virtually all the records, went back to Tulsa, digested this stuff, and picked up the phone and called law enforcement, because there was heavy criminal activity going on and I wanted no part in the situation. Q. This s- and I will -- I wrote it down. The first time you theoretically dealt bait a scheme -- and I --. is that a -- inleffect a computer program? A. No, it's not. It's not, no. I'll answer your question no. | Q. wou} it be fair to say what it is is you just -- you know what the formula is and you plug in various values to it? A. No. Q. Then what is it? XX10 at 12 13 14 16 17 18 19 20 22 23 24 25 A. Do you’want a.full explanation, or what are you asking for here? Q. So that I will understand and the. jury understands exactly what this formula is that you say that Mr. McKinley didn't understand. A. You want me to give you an explanation on the. formula then? Q. Yes. A. It is easiest for me to give this with an analogy and the physics or something called the motion position equation that has time and different spots of movement. It's a general equation. It's very important. The derivative of that equation is called vicinity. The derivative of that is called acceleration. In options trading, everything is theoretical value if it's out of the money options. You have out of the money options on puts and calls. What you have is a situation of something called the theoretical pricing formula for an option. The derivative, which is a calculative figure in relation to time, is something called the delta. ‘The delta tells you how long or short you are, the underlying instrument. ‘The derivative of the delta tells you how rapidly your delta will change as the prices move through different positions. Q. I guess the best thing that you're saying is that youS 12 14 15 16 17 18 19 20 21 22 23 24 25 57 look .at what the high and the low is of the -- of that particular option and how fast it gets to that particular high of low at-the time? A. No, that's not the situation. A real options trader has no linterest in taking a position in the market, because it's tdo risky. You write options and you have to offset them with a negative or a positive delta, which means if you write a call, you have to write some put, because there are opposite positions. | If you do that and you create yourself a delta neutral| that means you have no long or short position with the deutsche mark. So, I mean, at that point, you're no longer in the market and you're just collecting premiun, And how|you figure it out is use your theoretical pricing equation, “and the ones that are overvalued. by your ne ——————_— and at the end of every second, you better hope that your delta neutral and the people that are delta neutral make the most) money. option Q. And jis that the only theory that is used trading?| A. There's hundreds of others combinations of the theory. Q. and js one better than the other? A. Well, one is a -- I'm giving you a ruler. I am not giving you a trading strategy. I am giving you a ruler by10 1. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 what you have to measure these things with, like the physics give you acceleration and validity. I am not telling you absolute strategy, because with the thing I just told you, it's an incomplete trading then, because it leaves you vega and feta exposed, which means you're exposed of volatility and you have to cover that volatility. @. But I guess the long and short of it is this is not the only program or theory that you can use in dealing with options? A. again, if you're doing option arbitrage, something called time arbitrage, which is kind of an oxymoron, except with options, it works better if you know this, because if you don't know this, you can't even stand for a day in Q. But you knew that and yet you lost a million and a half dollars? A. I had a technical problem on the floor. I did not have a problem with my hedge. We knew that we were highly exposed and knew that we could not get the leg put on in the broker system. It's a problem that occurs. And if anyone remembers the crash of. '87, nobody could be get their legs down, and lots of money was lost. I was trading in equivalencies in currencies equivalent to the drop in the stock market. I got caught exposed in a laid down inWD 10 1 12 14 15 16 a7) 18 19 20 21 22 23 24 25 59 the stock market. MR. PRETTY: This may be a good time to take our afternoon break. | THE COURT: We'll stand in recess until 1:30 o'clock). 0 p.m, (Trial process recessed 12:10 p.m. to August 10, 1993) | THE COURT: Mr. Skinner, please be seated. Mr. Pretty, you may continue cross-examination. Q. (BY|MR. PRETTY) Sir, earlier today you were talking about -- earlier today or last Friday, you were talking about the purchase, and today you mentioned Robert Clements. Was -- were you with Robert Clements when he was at the hotel in Houston at the purchase of the boat? A.. No. | All [risne. A. Didlyou ask why? Q. If you were out looking to purchase a boat, why was Mr. Clements. also out looking to purchase a boat? A. Again, when I answered that, to the best of my knowledge, I didn't say Bob Clements was looking for a . Do you know how long he spent there? A. I would like to say 30 days. He may have moved from vessel. | He was buying hardware stuff and cement and such.10 a 12 13 14 15 16 17 18 19 20 21 22 23 24 25 one hotel to another, but I think that's. correct. Q. In that entire 30 days, he was purchasing cement and the other types of building materials? A, That's what he ‘said he was doing. Q. Did you ever see him? A. Not in that 30-day period, no. Q. This Gardner Spring Company, it's.a family-owned business, is it not? A. ‘Specifically, my mother owns it. Q. And is it a sole proprietorship, is it a wholly-owned corporation? what is it? A. It's not a subchapter S. It is a true corporation that is wholly owned -- all the stock is owned by her. Q. She's the board of directors, she's everything, other than doesn't do all the work hersel£? A. Well, she's not everything. There's a treasurer, there's a vice-président, there's a president. Q. And the ‘president, vice-president, treasurer, they don't own any stock in the corporation? MR. CRANK: Your Honor, I will object as to the relevance of this. THE COURT: Sustained. Q. (BY MR. PRETTY) I would expect that Gardner Spring Company has a lot of patents, does it not? A. There are some --q 10 a 12 13 14 15 16 17 18 19 20 a1 22 23 24 25 61 MR. CRANK: Your Honor, I object to the relevancy. MR, PRETTY: it's foundational, Your Honor | THE COURT: You may proceed quickly. A, There's a foundation with patenting certain types of springs, and there are some processes ‘going on. Currently there co some work being done with patent lawyers to patent some items, I think it's about four different items Q. (BY|MR. PRETTY) So you have -~'I guess the best way to say it is you have trade secrets in your mother's company, things that they don't want the. general public to know about? A. I don't know how to answer that necessarily. The items that are currently in the process of being patented, yes, that would be the case, it's the nature of patent law. But beyond that, I don't think there's any necessary trade secrets. Q. Do you ever have any problems with employees taking trade secrets and giving them to other competitors in your business? [MR. CRANK: Your Honor, T will object as to the relevance THE COURT: Sustained. |MR. PRETTY: May we have a side bar at this time Your Hondr? THE COURT: I guess so.23. | there? 24 |. ‘Yes. 25 | A. Yes, that's true. i vu v x I 62 & 1 1 (The following proceedings occurred outside of the = 2 presence of the jury.) 1 3 MR. PRETTY: Your Honor, the relevancy of this 4 |-tine of questioning is that, A, it is known for business to t 5 | inscript secret devices; B, one of the things we're talking i 6 | about is security as to trade secrets;'C, the issue of 7 | dealing with competitors, in other words, trying to prevent i. employees from stealing, which is, in effect, what we're f 9 | saying Mr. Black did by not operating legally and lawfully 10 | with world Fidelity Bank; and so I think that's the lu | retevance. 12 THE COURT: Well, you're asking him -- he's just a 13. | not the right witness to make any of those statements. a 14 | There's no foundation for anything; and we're talking about 1s |a spring company, which has nothing to do with this case. q 16 MR. PRETTY: Okay. a” (The following proceedings occurred in the presence of 18 the jury.) Bois Jo. cay mm. prerry) Now, one of the reasons why you were 20 in the Cayman Islands was to’do with your bulk order, i 21 transfer, and sales? I 22 | A. You mean one of the reasons I used to send a vessel i ! I63 Q. Did you and Mr. McKinley enter into a business arrangement dealing with the bulk oil sales? a. Primarily I would say no, other than the transport of a vessel once there -- I explained the transaction, so I would have to say no to that. Q. Did-you get involved in.a Bahamian -- where fuel was to be shipped to the Bahamian Islands? A. ‘No specifically. Q. What do you mean by "no specifically"? A. There was going to be some jet fuel being moved toa few. of the islands in the Bahamas, but that was not a primary transaction, and Shell-.oil Caribbean had difficulty implementing the thing. So it was on the burner, but it was never a done deal, unlike the other things that we're talking| about as far as shipping fuel. g. ali|right. Now, that Bahamian fuel oi1 deal, was that with Mr, McKinley, or was that to be done through world Fidelity Bank? A. World Fidelity Bank, I had nothing to do with, whatever that means; but I was not dealing with World Fidelity Bank. Q. Were you dealing with Garston Grant? A, Well, I was dealing with Garston Grant and Lavay McKinley. Q. peers cry comer profit of those two deals -- of that deal?2 3a 9 A. You're talking about. the jet fuel deal? Q. Yes, in the Bahamas. MR. CRANK: Your Honor, I.object. It never happened, so what the profit was to be is irrelevant. THE COURT: Sustained. Q. (BY MR. PRETTY) How long were you in business with Mr. McKinley and Mr. Garston Grant with the fuel oil business? A. How long was I in business with Q. Mr. McKinley with the fuel oil business or any kind of A. But not Mr. Grant? Q. Right. A. I would say that we never actually did a: transaction of fuel oil. Q. All right. And how about -- well, I am talking about any kind of petroleum-based product. A. Oh, going back to '86, 1986. You've been involved with Mr. McKinley? No, no. With Mr. Grant? Poy ®S Correct, or with other people in the fuel business. 1 need to make a correction. That's not jet-fuel that we were moving, it was advab gas. I know it doesn't make a difference to you, but it's a technical point.1 2) 13 14 15 16 17 is 19 20 21 22 23 24 25 65 Q. The ship deal, why were you attempting to purchase a ship in the United States? A. We were not trying to specifically purchase a ship in the United States. Q. Okay. Were you trying to just purchase ‘a ship anywhere? A. Correct. Q. Were ships at a bargain at that particular time? A. Define "bargain". I am not’ being difficult, just need a little bit more parameters here. ping deal, or to Q. You were willing to enter into a s! attempt to buy a ship. Did you feel that you could get a make a profit if you were to get a ship? A. vessels were trading for between 10 and 20 cents on the dollar at the time. Q. And why was that? A. At the time, we were balancing out of a world-wide ship good, and that's why I said a "bargain," because in 1986, I could have bought the same thing for five cents on the dollar. Q. If this shipping oil business had come to fruition, approximately how many days per month would it have taken? AL ultimately if we would have been able:to get all of the bugs worked out, we would have tried to keep the vessel moving continuously or in a port and unloading |” 10 4 12 13 18 19 20 21 22 23 24 25 continuosly. That is the goal of a successful shipping operation. Dead time is very expensive. Q. And then what would have been the ports of call? A, The ones that we’had contracts with that were easy were Montego Bay. Q. ‘That*s in Jamaica? A. Correct. Possibly Kingston, that would have been just a cost consideration, and Cayman Brac, Little Cayman. Those were -ones that we had firm, easy transactions, and I had done that many tinies in the past. Q. All right. And where would you have picked up the petroleum product? A. Either in Kingston -- and the reason I give a difference here’is dne I bought from Petrogem, and the other I would have'brought from Shell Oil in Montego. It's a transportation cost. Q. And you're saying this shipment cost with World Fidelity Bank would have had to do with Mr. McKinley personally? A, World Fidelity Bank was only something that was introduced to me ‘as a project of his, and there was nothing that said "Here is a cable from World Fidelity Bank and they're going to enter into a shipping contract with you." I just didn't know much about World Fidelity Bank other than a couple brochures that were sent to me.10 1 12 14 15 16 17 18 19 20 ai 22 23 24 25 67 Q. Was Mr. McKinley to put up any money dealing with this shipping, situation? A. Yes. Q. Who was to purchase the name of the vehicle, the ship? In whose name would it have been in? A. This is a good question, because with ships, this is a very tricky situation. If it's a U.S. flag vessel, you have to buy it.in a corporate name, if you don't, there's something called the Jones Act that can expose you to unlimited liability. From my standpoint, it had to be bought by a corporation. From LaVay's standpoint, for the bank, it had to be bought by a foreign corporation; and for the ultimate situation for a legitimate tax status, it needed to probably: be bought by a Cayman corporation. Q. All right. None of which you had, did. you? A. Well, we had numerous people that knew how to do Cayman corporations, and Garston would have thrown up a Cayman corporation in a matter of day. Q. But you were not incorporated in Cayman Island? A. It's not a desirable place to be incorporated. Q. So the answer is you were not incorporated? A. No.| . Q. Now, Mr. Skinner, it's my understanding that approximately $118,000 worth of money was sent to you at least?A, That's all, $118,000 and some -- and 400 and something dollars, but there was no more money sent to me than that. Q. And you have checked through your records and you feel 000 of where that money you can show approximately $102 went out to? Correct. Q. And I think you testified earlier that it was a $50,000 check and I think a $68;000 check? A. I believe it was 60,000 and 58,000. Q. Okay. Of these checks, in what name was the bank account. number? A. The first wire was not given for a bank account number, and the second wire was given to Kelly Sue Roth. Q. So these were done by wire transfers? A. Correct. Q. When you were doing and paying expenses, were you ever idelity Bank? given checks from World A. Never. I don't know that I have seen such a check. Q. Is this computer -- this program that you were talking about, is it set forth on a computer formula so all you have to do is fill in the blanks? A. I suspect that you could buy variations of the blank shoe model on a computer. I see things like that advertised. Q. And then if you were traded in commodities, you would21 22 23 24 25 69 need t¢ go ahead and just fill in the formula to work it on the conputer program? A. Obviously in this day and age of computerization, yes, you can plug in the blanks. “But that doesn't mean you could trade from that. Q. Mr.| Skinner, you said you had over 200 phone conversations with Mr. McKinley. How many times did you go to his residence or the residence of Mr. Braley? A. To the best of my knowledge, I have never seen the residence of Mr. Braley. To the best of my knowledge, I ever never been in the residence of LaVay McKinley, and if I have Seen it, it probably did not belong to'LaVay at. the time I saw the house. Q. Did) you ever see this area that may or may not’ have belonged to Mr. McKinley, was he living there? A. One more time. Q. This area that may or may not have belonged to Mr. McKinley, was he living there at the time? A. Oh,/no: I am saying that I probably seen wherever he hung hig hat. I saw house. long before he had ever been to the Cayman or set up residency.. The Cayman bracket is not a large area. Q. Did lyou ever go to Mr. McKinley's house after he moved in there? A. No.wiv 7) 18 19 20 21 22 23 24 25 Q. Did you see any satellite dishes get put up at the house he was living? A. No, I did not. Q. Did you ever go in to see if there was any additional screens there? A. No, I did not. MS. LESCHUCK: Objection, Your Honor, he stated he's never been there. THE COURT: Sustained. Q. (BY MR. PRETTY) In commodities, a time dot is a recognized tool of the trade? A. Time dot? Q. Yes. A. Sorry, I don't know it. Q. After you make your trade, you stick it in there and it states what time it is? A. There's a registered time. The term "time dot" doesn't ring a bell with me. Q. Would another term be dot clock? A. You could have a time clock. It's.a registered technical name. Q. This 1992 conviction, was that for marijuana? A. ‘Possession of 30 grams or less of marijuana. Q. and aid that arise out of your incident -- or being in the Grand Cayman Islands?A vo 10 1 12 13 14 15 16 18 19 20 22 23 24 25 aa A. “Nol Q. I know it happened in New Jersey. A. Right, nothing to do with the Caymans. There's a long distance between those places. Q. Did you ever go to Mr. McKinley's wedding? A. No, I was invited. Q. And so you didn't go to his wedding? A. No] I did not go to his wedding. Q. Did you and Mr. McKinley ever talk about being paid commissions for your work? A. No. Q. What do you mean specifically? . A. No. Iwas going to say.something else. I am just saying no. Q. Did| you ever talk about you being compensated or being hired by Mr, McKinley? AL No.) Q. By orld Fidelity Bank? AL No. Q. Do you have 3A there, sir? a. yes! Q. Earlier you were talking about how material was sent to John -- may have been sent down to John in Jamaica. Do. you happen to know the page? I recall it. Q. We're not going to pages. You can keep it open.10 a 12 13 14 15 16 18 19 20 ai 22 23 24 25 Remember you talked about the fact that-packages were sent down to John in Jamaica? A. Yes. Q. All right. Did you ever have any dealings with John from Jamaica? A. What do you mean by "dealings"? Q. Was he involved in any way, shape or form with your problems in New Jersey? A, No, none at all. Q. Had you ever had any dealings with him in any other capacity? A. Yes, John Morgan invested and did well with export. He was @ -- he had very tight connections to Texaco in Jamaica, and he was always trying to arrange me to get fuel from Jamaica we exported acetylene oxygen, propane. We did very poorly with propane, but we exported Red Stripe beer, different ‘types of soda: pop, and fruit, and lobster. Now, not all -- and Rotel 40 motor oil. And he was a partner on the motor oil transactions. They’were huge drums -- we're not talking a small amount -- acetylene oxygen. Specifically he was a partner. Q. with you? A. Well, with the vessel. Q.- But you were a partner with him? A. Yes. I mean, through this transaction. I don’t want10 cee 73 to say|T was a general partner of his or anything. I mean, let's be careful with these words. But there was a financial agreement between the two of us. And I have known him many years. Q. In|certain projects you had been involved with him yourself? A. Comrect. Q. And you felt that these were reputable projects? A. Oh,| yes. Q. So would it be fair to say that John from Jamaica is a reputable businessman? A. I think he's very reputable with the banks, and there's a possibility with the banks he's been in newspapers. Q. «. Everybody has problems with banks, because you had to file bankruptcy, right? A. Right. But there was some sort of question here with how much influence he had over the banks in Jamaica, and because jof that, I would say there is a tainted situation there. |I had nothing to do with that. It's funny money, Jamaican stuff, so no American would be interested in it. Q. But you testified previously that you did not get involved in a scam deal and involved in another type of a scam deal, so I would expect that you checked to make sure that Mr. John fxom Janaica was an honest man before you got involved with him, didn't you?21 22 23 25 74 A. Yes, I checked his willingness to complete banking transactions. I don't think you understand what I am saying. By "banking transactions," I am talking about paying off governmental officials. This is stuff I read in the paper. I have no firsthand knowledge of this. This was high-level stuff. This was not anything involving any of his businesses. This was the major findings of- his business. Q. ‘The reason I am asking is -- and the anwer is yes, you checked to see if he was an honest businessman before you got involved with him to the best of your knowledge? A.- Yes, checked out quite a bit before I ever dealt with him extensively. Q.- Now, the -- on page 6 of your-transcript, sir -- A. Yes. Q. Now, at the time that this conversation took place, you were a governmental agent, were you not? A. Say that again. Q. At the time that this conversation took place, you were a governmental agent? A. I can't answer that, unless you define what a governmental agent is and we accept that and if it's something that all lawyers agree upon and I feel comfortable saying yes ‘or no to that, I will; but I cannot define government agent.10 11 12 13 14 15 16 17 18 19 20 ai 22 23 24 25 75 | Q. Were you working for the government at the time? A, I had no paycheck coming in, therefore,, I did not feel I was a government agent. I would,like to have the retirement plan. Q. How would you characterize what you were doing for the government? A. It |speaks for itself. Q. Were you an employee? A. xo, I wasn't an employee. An. employee usually has Social Security pulled out of their paycheck, they get paid in some|-normal period, they have some sort of benefits package. I had none of those, nor did I get any compensation of any form. Q. So should we call you a benefit factor? MR. CRANK: Your Honor, I object. THE COURT: Sustained. MR. PRETTY: Your Honor -- THE COURT: He can testify factually what he did, and that's what's important. Q. (BY MR. PRETTY) Now, Mr. Skinner, when you were doing whatever you were doing for the government 5- we can't seem to agree on the term -- did the government know that there pped from the Cayman Island? had been boxes st MR. CRANK: Your Honor, I object to the editorial comment at the beginning of the question, and ask that it0 wom w& 22 23 24 25 716 be stricken. THE COURT: Sustained. Repeat the question. Q. (BY MR. PRETTY) Mr. Skinner, at the time that the conversation about the five boxes came up, did you know or had you been asked by the government to attempt to find out about records from World Fidelity Bank and the service center and Mr. McKinley? A. I don't recall specifically, but I feel that at this point there was none of that involved and there was nothing about any boxes involved in any conversations with any government agencies at this time. Q. And do you know of your own personal knowledge what happened to those five boxes? A. I have no idea. I don't know if they ever existed, other than what I have been told. Q. Now, on page 7, I'm reading from what Mr. McKinley has, "Everybody having proper information, you know, -I. mean totally informed of what was happening with the money," and et cetera, so it went on. There was no question about that. Did you -- at that time, was it a concern of the government as to what had been conveyed to you as to a concern as to what Mr. McKinley had told the various investors in World Fidelity Benk? MR. CRANK: Your Honor, I object. That would all be hearsay.17 MR. PRETTY: Your Honor, I think I have the right to go into what instructions -- they opened up the area on direct | examination. as to what areas he was’ to talk about. MR. CRANK: Your Honor, you do that by saying, “what |areas*were you instructed to talk about?" You don't do that by saying, "What concerns did the: government’ have at that point?" MR. PRETTY: I think, Your Honor, we can show through him by asking him what they were to look for what the.coricerns the government had were; .and I think he's the best witness to testify as to what the government was telling him to do and:what to look out. for. THE COURT: He can state what his instructions were. Q. (BY MR. PRETTY) At this particular time, was the government looking and asking you to find out what Mr. NcKinley had told investors as to the bank? MR. CRANK: Same objection, Your Honor. THE COURT: Overruled. (BY|MR. PRETTY) Mr, Skinner, I think that would call A No.| Q. They did not asked you to find out what Mr. McKinley had said about the bank to the investors? A, To the investors, no.13 14 15 16 17 i8 19 20 21 22 23 25 Q. Did they ask you to find out about what Mr. McKinley had told the salesman to talk’to with. investors? A. No. Q. Page 10, sir. Mr: McKinley toward the stop says "Ah, I have the money. I am trying to get a guy to respond and do it, do it, you know, it gets things moving and ah, ah." When Mr.. McKinley made that statement to you, had the government asked you to find out where Mr. McKinley had his money at? A. I do not recall at this time. Q. I think you testified that the government had asked and you mentioned as to whether or not there was a -- where the bank was? A. Correct, but. I don't know that it was at this time. Q. All right. You don't remember the process of these things? A. That's correct, I don't. Q. All right.. Do you happen to know what happened to your notes as to these conversations? A. Maybe I should give you a little background on my notes; but the answer is no. Q. Is it my understanding that after you would do a note, you would send it to the government? A. No. Q. You would destroy your notes?10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 79 A." No. Q. What did you do with then? A. Again, I take many notes on the order of six legal: pads minimum a week, different legal pads for different items, some: of) them are mixed. Six is the minimum. I have on the order of -- I had two full-time secretaries that did nothing| but file and keep track of my stuff in the past. So I-don't know where the notes are at. The chances of them being thrown away are highly unlikely. Q. But/at least as of that point in time, you were not attempting to find out where Mr. McKinley had his money? A. No 7 | MR. CRANK: Asked and answered, Your Honor. THE COURT: Overruled. You may answer. A. I a not saying at that time. I am just saying no to your gudstion because it's fuzzy. Q. (BY MR. PRETTY): That's a fuzzy question? A.. Yeah, because the previous thing -- it's not a good Line of hovaht there. I mean, you're jumping from one phraseology to another. But no is the answer. Q. Now page -- bottom of page 10, your question was, “And how does|-- how are -- how is the bank process in the Dominican going?" Mr. McKinley answered, "Well, it should be finished |here very closely according to --" and then we --10 11 13 14 15 16 17 19 20 21 22 XX 80 here the telephone rings. Does that then go back to reinforce your status that the government was trying to find something out about the bank? A. At this time, I am going to say I don't recall. 1 had been asking LaVay McKinley about his banks before any government person ever spoke tome. * Q. But did the government ask you to ask him what the status of his bank was? A. I am going to answer it I don't recall. Q. So. you take six pages of notes a week and you didn't review your notes to find out what kind of questions the government asked you to ask? A. Again, I didn't say I took six pages. I said I take six notebooks full. Q. A week? A. Aweek. And this is a very minor incident. and if I had known how everything was going to go on, I would have had very good notes on this. Q. So you don't really remember what the government asked you to ask? A. Not at this day I don't. I'm sorry. Q. So then from your answer, and correct me if I am wrong, it evolved from your conversations with the government and Mr. McKinley as to what they were asking you to find out?v 10 11 12 13 14 15 16 17 18 19 20 ai 22 23 25 aL A. I would say that's correct. Q. And now this is the June 3 of '92. and do you remember when your last conversation was with-Mr. McKinley dealing with the situation? A. No] I do not. Q. We know that there was a telephone -- did you have a telephone conversation with Mr. McKinley on July 24, 1992? A, I dan't recall. MR, PRETTY: May I approach the witness, Your Honor? THE COURT: Yes. Q. (BY MR. PRETTY) Mr. Skinner, I am going to show to you what I will represent to you was given to me by United States Government dealing with a transcription of a telephone call that you are supposed to have had with Mr. McKinley. A. Yes, I recall this. Q. And the date of it was approximately July 24 of 1992? A. Yes, I recall this. Q. Do you happen to know if you had any other conversations with Mr. McKinley after July 24 of 1992? A, I cannot recall that. Q. Onelof the things you've testified to was that the government was trying to find out if Mr. McKinley was going to be leaving the Grand Cayman Islands. Did they ever13 14 15 16 a7) 18 19 20 21 22 23 24 instruct you as -- or tell you why they were wanting to know whether or not he was going to leave the Grand Cayman Islands and where he was going to? A. No, I do not recall an intensive conversation about that, just -- I don't recall that. Q. So it's possible and it's possible not? A. That's correct. But there wasn't a big issue made out of it. I would remember something if they said, "This is specifically what ‘we're looking for today." on page 26, sir. Q. The reason why I am asking A. Um-hum, okay. MS. LESCHUCK: 26 of what, Counsel? MR. PRETTY: 26 of the one that you introduced. It would be 3a. Q. (BY MR. PRETTY) Going about half way down, it says "Skinner: How about that --" read what you said at that ime sir. A. "Uh-huh. How about that. So you’ are going to leave the Caymans when the case is over? You're going to go somewhere like Dominica or something like that before you guys -- is there a chance you guys might get completely out of Dominica?" Q. "You know, from the looks of things, it seems like the situation in Dominica is not going to work’ out." I would speculate that that -- you were attempting to find outeos 10 2) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 83 where they, were going from that conversation. Your Honor, I object. Can he ask a MR. CRAWI question? | THE COURT: . Sustained. Q. (BY MR. PRETTY) Now, page 29. Now, do you remember the first day that you contacted the United States Govermhent to say that you wanted to cooperate with them? .[ MR. CRANK: Your Honor, I object. It mischaracterizes his testimony. I think he testified Mr. Gassen called him, THE COURT: Sustained. MR. PRETTY: All right. THE COURT: You'll have to ask Mr. Gassen. MR. PRETTY: Thank you, Mr. Crank. Q. (BY MR. PRETTY) ‘That day that Mr. Gassen called you to talk about this case, do you remember what day that was? A. No, I do not. Q. Did you immediately decide at that point in time that you were going to cooperate with the government? A. No. Q. How|-- did you call them back or did they call you back? A. Well, if anyone calls me up and says they're anybody, I'm calling back and I am checking their number out, or I am not even going to call them back if I don't have time to10 a 12 13 14 15 16 7] 18 19 20 21 22 23 24 25 check their number out and see that they're who they say they are, I don't call them back. Q. So I gather you called -- did you call’ them back? A. I called and got the number for both the -- two different numbers,’ and I called one of them and they said that this is not where Ken Gassen normally works, and I said, "But you know him?" And they said, "Yes." And at that point, I knew it was a legitimate situation and they probably told me -- it was his secretary -- what number to call. Q. And how soon after Mr. Gassen called you did you call back? A. I feel like it was a fairly early thing. I mean, it could have been five, ten minutes. It could have been two minutes. Q. Did you call Mr. Gassen back? A. Yes. Q. And then at that point in time, did you tell him you were going to cooperate with him? A. No. Q. How soon after that did you tell him you were going to cooperate with him? A. I do not recall. Q. This was approximately a year ago, because this tape xecorded conversation --ox 10 a 12 13 14 15 16 17 18 20 21 22 23 24 25 85 A. A little more than a year ago. Q. This is 6-3-'92. A, I am just saying it was a little age than a year ago. Things ‘happened in. late April, May, sometime like that. Q. All right. So it would have been late April, early May? A. Yes. Q. Approximately a month before this conversation? essere ‘Looks like that, yes. Q. Now, one of the questions you asked on the top of page 29 -- will you read the question, and I will read the responses, sir? A. “What do you think, about how long? Do you think that they have got any idea where the money is at now?" Q. "No." A. "You've been good about that?" Q. "Yeah." A, ‘And if Willard completely turned or Ron turned, could they calise you problems as far as identifying where any money is at?" Q. *No,* A, ‘Well, then things look pretty good. When do you think that we |could get together?" Q. Now) when they're talking about Ron, what Ron are you identifying there?A. Ron Bigalke. Q. Then Willard, is that Willard Thrash? A. That's correct. Q. All right. Now, in asking that question, were you attempting to elicit where the money was at? A. I will say yes to that question. Q. Was that -- A. The only other-possibility is I am just trying to keep him talking. So that's why I am saying -- I'am a-little confused about what the exact goals were with some of these statements. Q. and if you were attempting to find out that information, do you think that might have been. because that was areas that the government may have told you to look to? A. That's ‘a possibility. Q. Now page 32, sir. “And, again, we're talking closely about getting a license and then we're going down there." And I think you say, "Yeah. Dosyou think that guy you were involved with down there was a crook?" And his answer was, "No, uh-huh. I don't think he has a lot of money at his fingertips." And then he talks about him being prime minister. Did hé ever at ary other time identify to you who this gentleman was that he was talking about?10 a 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. Yes. Q. And who was that, please. A. Thé name is not something -- that's some sort of Prench/Canadian name like Philip or something like that. It was ‘just a name that went in one ear and out the other. But there is a more important side to the story he told me about the man that is fresh and easy to identify. Q. And this is the gentleman he said was going to be marrying a lady -- A. One of the daughters of Queen Beatrice:. And this is an impossibility; so I made specific calls to the Netherlands to identify this. Q. And I would be fair to say you're a very intelligible, articulate man? A. Wo, I am not going to say that. Q. But/ yet you didn't have it at your fingertips that the Queen of the Netherlands didn't have a daughter that was about to get married, and you felt you needed to call the Netherlands to check up on something like that? A. Yeah. I went to school with a man who was. -- Q. I think that.calls for a yes or no answer. A. I_wijll say no to that question. Q. And did Mr. McKinley tell you other things about this gentleman? A. Yes.S 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. From your’ impression of what he was telling you, did it seem like Mr. McKinley believed it? MR. CRANK: Your Honor, I will object to have him speculate to the statement. THE COURT: Sustained. Q. (BY MR. PRETTY) © Then I think on page 33 the -- where they were talking about the problems in Granada -- now you were in the Caribbean about that period of. time, were you not, down at the bottom? You can go ahead and read the answer, sir, if you want. A. You want me to read McKinley's statement at the bottom? Q. You don't need to read it out loud, just read it so that I can ask you questions about it, sir. A. Okay. Q. Now at that period of time, there were problems in the Caribbean, were there not? A, There are always problems in the Caribbean, but you're talking specifically -- Q. In Granada, what he was talking about there. A. I know nothing of Granada concerning this. 1 know nothing of Granada. I have never been to Granada. I have only read what everyone else knows about Granada, and I know nothing more. Q. Now, he mentioned that he has a hundred grand there10 A 12 13 14 15 16 7 18 19 20 21 22 23 24 25 89 too. Did you ask him what he meant by “a hundred grand," what he had been using that. money for? MR. CRANK: Your Honor, the transcript speaks for itself, It either does or doesn't. THE COURT: Sustained. Q.. (BY MR. PRETTY) At any later conversations that you had with any law enforcement officers, did they ever ask you to ask him what happened to that hundred grand in Granada? A. I don't recall on the hundred grand in Granada! and prior to reading this, I didn't remember ever talking about Granada; so, no, I just don't recall. Q. On page 3A it says this thing was transcribed 11 -- A. The front page? Q. The|very front page. When does it say this was transcribed? A. Where does it say it was transcribed? Q. Date. A. The ‘date was 11-17-92. Q. It's my understanding that you always had an FBI agent present (on all three of these conversations that were tape recorded? A. That}'s correct. Q. And while you were there, was the FBI agent taking notes frpm the tape recorder?15 16 17 18 19 20 21 22 23 24 A. In some cases, possibly, and in some cases, possibly Q. Now, all these times they were tape recorded, they were out of the Tulsa office? A. ‘They were tape recorded in Tulsa. Q. Right. And ‘to the best of your knowledge, were the FBI agents there from Tulsa? A. Yes. Q. Do you have any reason to believe that the Tulsa office was not cooperating with the Wyoming office? MS. LESCHUCK: Objection, speculation. THE'COURT: Sustained. Q. (BY MR. PRETTY) Page 35. A. Yes. Q. Now, one of the questions you ask -- and I am looking down, it's the third thing down. There's McKinley, McKinley Skinner. ‘what did you ask at that time, sir? A. “How is the bond position going? You still have money invested in some bonds?" Q. "Yeah." A. “All right. Hold one second I got to clear a call. Hold." Q. And after that, things started having problems with the tape recorder, because we see a lot of pauses and clicks and everything.iD 10 11 12 13 14 24 25 91 A. I don't know that the tape recorder had a problem. There was just problems with the whole situation. Q. How did you know that. Mr. McKinley had money invested in bonds? A. LaVay had numerous times told me that he had both Australian bonds, New-Zealand bonds, and possibly British gilts, and I believe they were long-term gilts, which is like the U.S. Treasury 30-year bond. and he had told me how much money he was making, because the interest. rates were relatively high on some of the interest rates at the time. ZI was very interested in this because I had done a lot of work with that trying to figure out how to capital that income, and I had heard a lot about it. Q. All right. A. And\ I made notes, times, figures, and it didn't work out because the currency exposure caused losses. So these positions, even though you were making a high interest rate on one side, you were making less than you would have made had youibeen in a U.S. instrument, unless you had a way of hedging the exposure. And most of the hedges, if they even existed, were more expensive than the interest rate differential. In the days after New Zealand bond, there was no way to hedge it in terms of fiscal cash, in that in New Zealand, you had no FX position, so it made it a very XXwow oN 10 11 12 13 14 15 16 1 18 19 20 21 22 23 24 25 expensive hedge and no one would want to do something in such a big way. Q. So the only way you were going to make something on the long-term gilt was to hold on to them the 30 years? A. You would be taking a tremendous ‘inflationary hit’ so today, for iristance, the British plenum had a substantial fall, and so as it's falling, any interest you're making on the income side is not offsetting the expense. Q. But the question-is if the bank had bought British term, long-term gilts, is that fraud? A> I never said it was fraud. Q. I am just asking you as a question is that fraud? MR. CRANK: It's irrelevant, Your Honor. THE COURT: Sustained. Q. (BY MR. PRETTY) Now, did you ever -- did you tell the United States Government that he said that he was dealing in Australian gilt -- Australian bonds, long-term British gilts and Australian bonds? A. It's possible I said he said that's where he was getting his income from or some of his income from. Q. Or where some of the money was invested at? A. It's possible. Q. When Mr. McKinley made this statement on-page 35, was the FBI agent in the room? Yes.11 12 13 14 15 16 17 18 19 20 ai 22 23 24 25 93 Q. And,Mr. McKinley also said on page 36 that he was dabbling in British -- in German bonds, did he not? A. Yes: Q. All right. And those are valid government securities, are they not? German bonds, Australian bonds, New Zealand bonds, British long-term gilts, those are government bonds, are they not? A. They're issued by the respective governments. You're listing governments and you're naming their paper, so the answer is implicitly yes. Q. Did'Mr, McKinley ever tell you that they were going to be getting some money out of Malaysia? A. Yes. Q. Didihe ever mention how much they would be getting out of Malaysia? A. Oh, different figures. One week it was 5 million,. one week it was 10 million. It was all over the world. Q. Didithe figure he say ever go as high as 40 million dollars? A. I am sure I have heard figures bigger than that. Q. Page 10. A. Okay. Q. Looking at about the middle of page 10, what did you mean "Getting them to get all the paperwork done," or what did you mean when you were asking him about getting all the15 16 17 18 19 20 al 22 23 24 25 paperwork done, when you asked him that question? A. Specifically LaVay was always talking about having to get paperwork done. That was one of the reasons he said he was sending stuff to Jamaica. That's one of the reasons he said he had to have something go up to Jamaica, because he said he had all these transactions to process. Q. After you asked that question, what was Mr. McKinley's answer? A. “Yeah, yeah. There's a little process." Is this the one you're talking about? Q. Yes. A. “A little paperwork needs to be processed to do it, and just, ah, it's absolutely critical that the funds are sent, you know." Q. The implication from that -- MR. CRANK: Your Honor, I object to "the implication." The document speaks for itself. THE COURT: Sustained. Q. (BY MR. PRETTY) But Mr. McKinley mentioned funds being sent at that point in time? A. He said he was trying to.send funds. Q. And the 20 phone calls that Mr. McKinley made, three of which were recorded, how many'times did he mention about the fact that monies were coming in or monies were ‘going out to the investors?ox 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 95 A. I don't recall. Q. Was it a -- would it be fair to say it was in most conversations? A. I would say that there is a -- again, trying to process paperwork, he mainly talked about bringing money in. That was the main concern, and his network to bring it in. Q. .Now on page’18 -- I guess we better start with page 17. A. Okay. Q. Well, let's go back to 16. A.. Okay. Q. I'm sorry, sir. That's the start of the conversation. ° "Skinner," bottom line, "How clear are these lines? Do you think they're on your lines?" at that point in time, were you asking him if he felt that his lines were being tapped? A. Yes. Specifically he felt that the British were tapping his lines. Q. Was there any other concerns that he expressed at. that time about how he felt the government was doing things about the case, specifically page 18? A. cive me a specific area. Q. Oh, Skinner says, "who was it that you think was informed against you?" I think he said Bob.. That was Bob Clements?A. That's correct. Q. All right. And then we have a thing, Mr. McKinley says "A lot of lies, you know, after his whatever." who did you get the impression that he was talking about -- was lying about him? MS. LESCHUCK: Objection, speculation, Your Honor. THE COURT: Overruled. A. From reading this, it seems that he was saying that Bob Clements was making a lot of liés. And I have no idea, “Ah, you know, after his whatever." Unfortunately, I don't know that one. Q. (BY MR. PRETTY) Now, on page 30, top of the line, you're talking about Mr. McKinley's projects. Is that what you're talking about there? A. It says that, "Things going on, other projects." Q. Were you attempting to find out about ‘his investments at that point in time? A. Maybe I was just making a conversation with him too. Q. What do you think would be more likely, that you were attempting to assist the governmient or you were just attempting to make conversation? A. Well, this conversation was coming to a close, and I was just trying to -- that looks more like a little chitchat to me. This is a very standard statement for me to make to my business people that do business, what are10 11 12 13 14 15 16 17 18 19 20 a 22 23 24 25 97 you doing, how are things going for you, that kind of stuff. I mean, as I see, I drop down to a lot of chitchat on’ this page. Q. Now, you were to’ -- if this deal was to go to fruition, you were playing the role that you would get a part of the money, were you not? A. Explain what deal. Q. The deal with the alleged money laundering that you eventually set up with Mr. Holzman. A. There was a conversation where I said I wanted 2 percent. Q. And that was 2 percent of what? : A. . The gross. MR. PRETTY: May I have a moment, Your Honor? THE COURT: Yes. Q. (BY MR. PRETTY) Mr. Skinner, one last question. Did you ever go down to Jamaica to talk to John on behalf or behest of the United States Government? Yes! MR. PRETTY: No further questions, Your Honor. i REDIRECT EXAMINATION | Q. (BY|MS. LESCHUCK) Mr. Skinner, Mr. McKinley's attorney at cross-examination asked you about the Australian bond situation. Do you recall that? A. Yes!10 a. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. And what was your. understanding from LaVay McKinley of the bonds that he was investing in? A. He claimed that he was trying to get higher rates. of return on the international market, and he said that he was paying Australian bonds, New Zealand, bonds, and British bonds. Q. And @id you make any attempt to track the truthfulness of his statements? A. Yes. Q. And what did you find out? A. Most of - MR. PRETTY: Your Honor, I fail to see the relevance of that that, because we don't know if Mr. McKinley was trading’ the bonds at“that particular point in time. We don't know whether he was holding them or trading them. I think it's irrelevant. THE COURT: Overruled. You may answer. Q. (BY MS. ‘LESCHUCK) Go ahead. A. The situation was‘that if you were holding on to them, which was what he claimed he was doing -- he did not say he was actively trading, he was buying them -- you would have had a currency loss at any point in those patterns, no matter where he bought them at, even if he would have bought them -- in fact, his currency loss would have gotten worse the closer we were at. The interest rate would have 98 Pe 10 FEE 12 13 14 15 16 17 18 aE} 20 ai 22 23 24 25 99 been lower, so he wouldn't have been getting the justified yield curve. : 7 Q. What do you mean by that? A. Why, would anybody want to hang money up in Australia if they're going to.get 8, 9 percent if they're going to get 7:1/2, 8 in the U.S. and you don't have to go through all the trading and dealing with foreign taxes and dealing with all these other problems? So if he would have held them back when he claimed he was buying them at these high rates, he would have taken a pretty substantial currency hit, meaning he would have lost money on these positions. Q. I don't understand why you're saying he would have lost money on these positions. A.’ If you would have bought’a car and you owned a car and this car was a 1974 Cadillac and it guzzled.gas and you would have decided you were going to save money and you would have gone to a.more modern car that used a lot less gas and when you that you discovered that your insurance premium was higher, your initial investment was higher, and your actual status was the small amount you saved on gas was more than offset. from the increased cost from purely a financial situation, you would be under water on that position. Therefore, if you had made that position strictly from a gas saving standpoint or dollar and cents, you would have lost money.10 11 12 3) 14 15 16 17 18 19 20 ai 22 23 24 25 Same thing exists with these bonds. The bonds have had high yield relative to the U.S. equivalent paper, but their currencies are weak and have been falling in the last six months. . The New Zealand dollar has -- MR. PRETTY: Your Honor, objection. This is post- indictment six months. Q. (BY MS. LESCHUCK) Why don't you take us back in’ the time frame you're talking about. a A. For more than eight years, the New Zealand dollar has basically had a down trend, and that down trend would offset the currency. You would make -- the currency difference would make a closer position to-hold it. Q. Would Mr. McKinley actually be making 8 or 9 percent on New Zealand bonds? A. No, not even close, and in some quarters he would have lost money, and he also had no way to hedge the position through future options or any of that, because the New Zealand dollar doesn't have no transferable instruments on it. Q. What about the German bonds he discussed with you? A. The German bond situation is not under the same guise of the New Zealand dollar ‘or ‘the:Australian dollar. and the fact that the German bond has ‘a high interest rate, its veal interest rate is high. You would have some difficulties in the last two years of.doing it, but it isox 10 1. 12 13 14 _ 15 16 17 18 19 20 21 22 23 24 25 101 => I cannot say that it is an impossibility. You could have done it. Q.' and what about the Australian bond? A. Very, very difficult. It's been a very weak currency. ©. Do you know, other than the fact that Mr. McKinley told you, that these investments have been made? A. No. Q. Did you ever see any advents on them? A. In the way he was talking, it would have been very likely -- MR. PRETTY: Objection, Your Honor, speculation. THE COURT: Overruled. A. It would have been very unlikely in the way he was describing this that he could have done it. He even.said, "I am going to hedge the currency rate on this New Zealand delay." I knew immediately that was impossible. Q. (BY MS. LESCHUCK) How did you know it was impossible? A. You would have to offset in fiscal accounts dollar for dollar,| and that makes it really hard because you have to average! the interest rates, and it's no good. The position doesn't] work. Q. After having checked out all of these bonds that he was telling, you that he was trading in, did you have any conversations with him about what you perceived to be the impossipility of his position?20 21 22 23 24 25 A. Oh, I asked him thoroughly. I said, "You know, what you tell me, it looks very difficult for me to do." And said, "This is a tough thing to do." and he didn't know of the -- the only profitable ways to have done these, he had no idea even the words I was using. Q. Did you tell him or did you have discussions with him about how he was doing it? A. Yes, I did. Q. And what did he tell you? A. He said he just bought the bond and would hold onto them, but there was no way he can pay income on a monthly or a quarterly basis. Q. All right. Given what you knew from markets and given what Mr. McKinley was telling you, why did you continue working with Mr. McKinley on these other deals? A. His knowledge of commodities markets had no bearing on him saying he could come up with X amount of dollars to do shipping deals. Q. Why did you do it? Why did you do the shipping deal? A. Because it was a source of cash. ‘ Q. Any other reasons? A. Garston Grant I had a long exposure with, and Garston felt that this was a good deal. I had had many years experience with Garston Grant. MS. LESCHUCK: May have just a moment, Yourwie ow S © wm aa 12 13 14 15 16 17 18 19 20 2. 22 23 24 25 103 Honor? THE COURT: Yes. (Peuse.) Q. (BY MS. LESCHUCK) What happened when you talked to John Mdrgan, Mr. Skinner? A. Concerning what? Q. The last question that counsel for Mr. McKinley asked you? . A. Interestingly there was -- MR. PRETTY: Objection, Your Honor. Anything Mrs, Morgan told him would be hearsay. MR, CRANK: Your Honor, then let's strike: the pregnant pause Mr. Pretty. left in that regard. THE COURT: I am not sure the jury would recall the pregnant pause. Overruled. Q.. (By/MS. LESCHUCK) Did you do anything as a result of your conversation with John Morgan? A. Well, I don't recall specifically what I did immediately after, but eventually I would have related some information that was given to me. Q. Related to who? A. Ultimately this information was going to someone in, the state department... Q. Did|you get the records from Mr. Morgan? A. Did|I get what records? 1 |10 a 12 13 14 15 16 17 18 1 20 21 22 23 24 25 vu Vv xx 104 Q. Did you get any records from Mr. Morgan? A. You're talking about these boxes of stuff? Q. Yes. A. No, I’ never got ‘them, Q. Did you have a corversation-with Mr. Morgan about the records?. Many conversations. Q. What was just the conversations you had with Mr. Morgan? MR. PRETTY: Same objection, Your Honor. THE COURT: Sustained. ‘MR. CRANK: I was under the impression -- THE COURT: I misunderstood. I thought you were referring to your objection. MS. LESCHUCK: TI have nothing further for this witness,’ Your’ Honor. MR. VAN COURT: -I have nothing further, Judge. RECROSS-EXAMINATION Q. (BY MR. REESE) Mr. Skinner, 200 and some odd conversation$ you had with with Mr. McKinley, when did they begin? A. It is possible that'I spoke to him in the end of ‘90, but I am for sure ‘91, '92 was the duration, and it's very possible the end of '90. Q. So this time’ span approximated about two years, year( yo aus 10 1 12 13 14 15 16 17] 18 19 21 22 23 24 25 105 and a hale to two years? A, Maybe just a little more than two years, maybe a little less than two years. Q. and I think you testified in response to questions by Mr. Pretty that you never knew or had any, knowledge about World Fidelity Bank; is that correct? A. No, I said I didn't have anything, more than two brochures that were sent to me. I heard stuff from Garston Grant. |I heard some minor things from Ron Bigalke, and he really boty briefly in passing described stuff and he asked me one time if I would print a brochure for him. Q. But! in all these 200 and some conversations, World Fidelity Bank came up only a few times. Is that a fair assessment? I mean, let's cap it off at maybe 20 times or less. Q. Would you characterize Mr. McKinley's representations to you about his activities as -- would you characterize him as being secretive? A. He wasn't very secretive to me. Q, But) he didn't spare you all of the things about’ world Fidelity Bank? A. He talked more than I wanted to listen on some of this stuff. Q. And|you didn't feel any compulsion to contact law enforcejnent agencies when you heard about World Fidelity10 1 12 13 15 16 17 18 20 21 22 23 24 25 Bank? I'm sorry. I just really didn't care’ about World Fidelity Bank. It was just one of those things in one ear and out the other. I didn't really care about it. MR. REESE: Okay.’ ‘Thank you. RECROSS-EXAMINATION Q. (BY MR. PRETTY) Mr. Skinner, were you offered money by the United States Government if you could get those records? A. No, I was not offered money. : Q.° Were you authorized to offer money to Mr. Morgan for those records? A. I was. Q. How much were you authorized to offer him? A. I believe the final figure was $3,000. Q. Now, from the way I understand your conversation, it is possible that, even though the value of the money that you hold is going down, that you can still make money on that currency by hédging in options? A. Give me the currency. . German -- British pounds. . British pounds, yes, you could. Q A Q. German marks? A. Yes, you could. ° Swiss francs?10 11 12 13 14 15 16 17 18 19 20 ad, 22 23 24 25 107 A. Yes, you could. Q. American. dollars? A. You're hedging against itself, so I can't answer that. I.mean,| there's no way to hedge'a dollar position if you're already in dollars. I mean, that doesn't make sense. Q. So it is possible, even though the value of your currency is going down, with the value of ‘the currencies that you. hold, depending upon the, currency, you can still make money on hedging and future? A, I future and options exist, .yes. Q. In that currency? A. In that currency. Q. And they exist in British pounds? A. Yes, Q. Swiss francs? A. Yes; Q. and |cerman marks? a. ves! Q. and/other currencies? A. Yes! MR. PRETTY: No further questions, Your Honor. | FURTHER REDIRECT EXAMINATION Q. (BY MS. LESCHUCK) Mr. Skinner, did you offer Mr. Morgan the $3,000? A. Yes, I did.2) 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. Did you get the records? A. No. Q. Did you have any conversations with Mr. Morgan after that? A. Oh, yes, yes. MS. LESCHUCK: Nothing further, Your Honor. MR. REESE: No more questions, Your Honor. MR. VAN COURT: No more questions. THE COURT: Mr. Skinner, you can step down. MR. CRANK: Your Honor, we would next call Mr. Carl Schauer. (Witness sworn.) CARL SCHAUER, called for examination by the Plaintiff, being first duly sworn under oath, testified as follows: DIRECT EXAMINATION Q. (BY MR. CRANK) Could you please state your name. esssssnas tase ne anes Q. And could you spell your last name, please. A, S-c-h-a-u-e-r. Q. Where do you live, Mr. Schauer? A. Dupree, South Dakota. Q. Could you spell Dupree, please. A. D-u-p-r-e-e. Q. Mr. Schauer, you need to wait until I am done with myBow Nye 10 121 12 13 14 15 16 17 18 19 20 2i 22 23 24 25 CPE R Tet ed ChAT TEE! I, JACKIE R. JORSTAD, Deputy Official Court Reporter for the United States District Court for the District of Wyoming, do hereby certify that I reported by stenographic machine shorthand the proceedings contained herein on the subject matter on the date hereinbefore set forth, and that the foregoing 175 pages constitute a full, true and correct transcript of said proceedings. Dated this 17th day of January, 1994. JACKIE R. JORSTAD Deputy Official Court Reporter