12-2297pr

To be argued by:
D. B. KARRON
Uu|Icd 'IaIco <oa|I o| Jppca|o
FOR THE SECOND CIRCUIT
Docket No. 12-2297



DANIEL B. KARRON,
Petitioner - Appellant,
—v.—
UNITED STATES OF AMERICA,
Respondent - Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

APPENDIX Volume 10 FOR THE PETITIONER - APPELLANT










D. B. KARRON
pro se
348 East Fulton Street
Long Beach, New York 11561
(516) 515- 1474
drdbkarron@gmail.com

Table of Contents

NOTE: Page Numbers are not correct and need to be hand entered because
of hand insertion of PDF. Contents for ordering, not for reference. Citations into
page numbers are being checked.
Contents
Table of Contents ............................................................................................. 2
APPENDIX VOLUME COVERS .................................................................. 6
APPENDIX Volume 1 FOR THE PETITIONER – APPELLANT ................ 7
APPENDIX Volume 2 FOR THE PETITIONER – APPELLANT ................ 9
APPENDIX Volume 3 FOR THE PETITIONER – APPELLANT ..............11
APPENDIX Volume 4 FOR THE PETITIONER – APPELLANT ..............13
APPENDIX Volume 5 FOR THE PETITIONER – APPELLANT ..............15
APPENDIX Volume 6 FOR THE PETITIONER – APPELLANT ..............17
APPENDIX Volume 7 FOR THE PETITIONER – APPELLANT ..............19
APPENDIX Volume 8 FOR THE PETITIONER – APPELLANT ..............21
APPENDIX Volume 9 FOR THE PETITIONER – APPELLANT ..............23
APPENDIX Volume 10 FOR THE PETITIONER – APPELLANT ............25
APPENDIX Volume 11 FOR THE PETITIONER – APPELLANT ............27
APPENDIX TABS ........................................................................................29
Case Docket ..................................................................................................... 1
District Court Amended Opinion and Order ................................................... 2
Docketed Briefs ............................................................................................... 3
Originating 2255 Form Motion ....................................................................... 4
Originating Brief Memorandum of Facts and Law ......................................... 5
Reply Brief Corrected Sur Reply Memo of Facts and Law ............................ 6
Audit and Accounting Forensics (short) .......................................................... 7
GX114 .............................................................................................................. 8
GX114 in Focus ............................................................................................... 9
GX110 Year 1 ................................................................................................10
KARRON PERSONAL ACCOUNTS ..........................................................11
GX112 Year 1 ................................................................................................12
Year 1 SF269A ..............................................................................................13
Year 1 Source of Funds .................................................................................14
Karron Co-Funding Year 1 Schedule .....................................................15
Karron Co-Funding Check 1166 .........................................................16
Karron Co-Funding Check 5339 .........................................................17
Karron Co-Funding Check 5341 .........................................................18
Karron Co-Funding Check 1222 .........................................................19
Karron Co-Funding Check 1228 .........................................................20
Karron Co-Funding Check 1142 .........................................................21
Karron Co-Funding Check 1243 .........................................................22
Karron Co-Funding Check 1152 .........................................................23
Karron Co-Funding Check 1153 .........................................................24
Karron Co-Funding Check 1154 .........................................................25
Karron 75K Payroll Advance and Repayment......................................26
Salary Advance and Repayment Schedule .........................................27
Year 2 Source of Funds .................................................................................28
GX113 Year 2 Source of Funds ....................................................................29
Year 2 Karron Checks Source of Funds ........................................................30
Karron Co-Funding Year 2 Schedule .....................................................31
Karron Check 1142 for $5000 ..............................................................32
Karron Check 1152 for $2,500 .............................................................33
Karron Check 1153 for $2,500 .............................................................34
Karron Check 1154 for $2,500 .............................................................35
Karron Check 1166 for $2,000 .............................................................36
Karron Check 5339 for $2,000 .............................................................37
Karron Check 5341 for $1,000 .............................................................38
Karron check 1222 for $1000. ..............................................................39
Karron check 1228 for $20,000 ............................................................40
Karron Check 1243 for $25,000 ...........................................................41
Program Purchases during Program on Karron Personal ...............42
KARRON PERSONAL MASTERCARD ....................................................43
STATUTES ...................................................................................................44
15 USC §278n(2001) .....................................................................................45
Rules and Regulations ...................................................................................46
15 CFR §24.30 Changes ................................................................................47
15 CFR §14 DoC Uniform Administrative Rules ........................................48
OMB Cost Principles 2001 ............................................................................49
48 CFR Ch. 99 9903.201–5 Waiver (2001) ................................................50
Government Exhibits .....................................................................................51
Government Exhibit Contracts ......................................................................52
GX1 Proposal Preparation Kit .......................................................................53
GX2 ATP General Terms and Conditions 2001............................................54
GX3 DoC Financial Assistance Standard Terms and Conditions .................55
GX4 Grants and Agreements Management Division GAMA ......................56
GX12 Co Operative Agreement ....................................................................58
GX13 Special Conditions ..............................................................................59
GX14 Special Conditions ..............................................................................60
POPA Newsletter 1 ........................................................................................61
POPA Newsletter 2 ........................................................................................62
Case Law........................................................................................................63
Institute for Technology Development v. Brown, 63 F.3d 445 (C.A.5
(Miss.), 1995) ...........................................................................................................64
Scholarly Writing ...........................................................................................65
Legal Scholarly Writing ................................................................................66
Say What You Mean J Levine .......................................................................67
Financial Assistance And The Bona Fide Need Rule ...................................68
The Use of Sentencing Findings … ............................................................69
THESE PAGES INTENTIONALLY BLANK .............................................70
TRIAL and Sentencing TRASCRIPT (Long) ...............................................77
DUNLEVY FORENSIC RECONSTRUCTION (Long) ..............................77


APPENDIX VOLUME PAGES

Volume V1 KA-1 KA-300
Volume V2 KA-300 KA-599
Volume V3 KA-600 KA-899
Volume V4 KA-900 KA-1199
Volume V5 KA-1200 KA-1499
Volume V6 KA-1500 KA-1799
Volume V7 KA-1800 KA-2200a (oversize)
Volume V8 KA-2200 KA-2499
Volume V9 KA-2500 KA-2799
Volume V10 KA-2800 KA-3099
Volume V11 KA-3100 KA-3332 END
Table 1 Appendix Volume Pages

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1 MR. EVERDELL: Yes.
2 THE WI TNESS: Yes, si r .
3 MR. RUBI NSTEI N: I obj ect t o Gur f ei n.
4 THE COURT: Obj ect i on sust ai ned.
5 Q. Was t hat t he onl y cal l you r ecei ved aski ng your advi ce on
6 spendi ng r el at ed quest i ons?
7 A. No, si r . I r ecei ved maybe t hr ee ot her phone cal l s f r omDr .
8 Kar r on, as wel l as Mr . Ger f ei n, and basi cal l y t hey wer e al l
9 aski ng t he same quest i ons, how do I get t he r ent cover ed i n t he
10 ATP gr ant .
11 Q. And what was your r esponse on al l t hose occasi on?
12 A. Al l t hose occasi ons i t was t he same r esponse; i f i t ' s not
13 i n t he budget , you have t o go get an ATP budget amendment and
14 ATP aut hor i zat i on t o i ncl ude i t .
15 Q. Di d you t el l hi mwhet her r ent was gener al l y i ncl uded as an
16 al l owabl e expense?
17 A. No, i t ' s an i ndi r ect expense and i t ' s not usual l y al l owed
18 i n a si ngl e gr ant .
19 THE COURT: Di d you t el l hi mt hat ?
20 THE WI TNESS: Yes, si r , I di d.
21 Q. And appr oxi mat el y when di d t hese phone conver sat i ons
22 happen?
23 A. They happened ever y t hr ee or f our mont hs dur i ng 2000, t he
24 end of 2001 and 2002.
25 Q. Di d you gi ve t he def endant or Lee Ger f ei n any gener al
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1 advi ce about spendi ng ATP f unds dur i ng t hese conver sat i ons?
2 A. Do what ' s al l owed i n t he budget .
3 Q. And di d you r ecommend t hat t hey do anyt hi ng i n par t i cul ar
4 t o f ami l i ar i ze t hemsel ves wi t h t he r ul es?
5 A. Yes, si r , I di d. I gave t hemt he cat al og f or management
6 concept s, whi ch i s an or gani zat i on t hat does gr ant i ng educat i on
7 f or bot h f under s of gr ant s and r ecei ver s of gr ant s. I t ol d
8 hi m- - I gave hi mt hei r websi t e, I gave hi mt he cat al og and I
9 suggest ed t hat t hey go get t he educat i on.
10 Q. To your knowl edge, do you know i f t he def endant or anyone
11 on hi s st af f ever got t he educat i on t hat you wer e r equest i ng?
12 A. Not t o my knowl edge, no.
13 Q. How do you know t hat ?
14 A. Wel l , when I became empl oyed wi t h ATP, I di scussed t hi s
15 wi t h Dr . Kar r on, and he sai d he di d not know t hat .
16 Q. I ' msor r y, he sai d empl oyed - -
17 THE COURT: Empl oyed wi t h ATP?
18 A. I mean wi t h CASI . Dr . Kar r on sai d he di d not do t hat .
19 Q. Di d t her e come a t i me when you became mor e i nvol ved i n t he
20 CASI ATP gr ant ?
21 A. Yes, si r .
22 Q. And how di d you become mor e i nvol ved?
23 A. I had f i ni shed my consul t i ng wor k wi t h I BM at t he end of
24 2002, and r ecei ved a cal l f r omDr . Kar r on, who i ndi cat ed t hat
25 he was not get t i ng what he needed f r omhi s ATP admi ni st er s and
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1 was wonder i ng i f I woul d come t o wor k f or hi mas t he gr ant
2 admi ni st r at or .
3 Q. When di d he cal l you t o do - - t o ask you t hat ?
4 A. That was December 2002.
5 Q. And di d he say why he want ed t o hi r e you?
6 A. Because I had gr ant admi ni st r at i on backgr ound.
7 Q. Di d you accept t he j ob?
8 A. Yes, si r , I di d.
9 Q. What was your under st andi ng of what your j ob
10 r esponsi bi l i t i es woul d be at CASI ?
11 A. My j ob, as I under st ood i t , my j ob r esponsi bi l i t i es woul d
12 be t o admi ni st er t he gr ant t hat he had, whi ch was a si ngl e
13 gr ant , woul d r equi r e my l ooki ng at t he books assur i ng al l t he
14 expendi t ur es wer e al l owed by t he gr ant , and t hat t he r epor t s - -
15 and get t he r epor t s f i l ed t o ATP.
16 Q. How l ong di d you wor k f or CASI ?
17 A. I wor ked f or CASI f or about ei ght mont hs.
18 Q. So t hat ' s r oughl y unt i l when?
19 A. August - -
20 Q. Of ?
21 A. 2003.
22 Q. And wer e you pai d anyt hi ng f or t hi s j ob?
23 A. Yes.
24 Q. What ?
25 A. $60 an hour . I wor ked 20 hour s a week.
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1 Q. Di d you have any par t i cul ar t ask concer ni ng t he budget when
2 you st ar t ed wor ki ng at CASI ?
3 A. Fi r st t hi ng Dr . Kar r on want ed me t o do was t o submi t a
4 budget amendment . I bel i eve at t he t i me what he was t r yi ng t o
5 do was move money f r om- -
6 THE COURT: J ust what he t ol d you.
7 THE WI TNESS: Par don.
8 THE COURT: J ust what he t ol d you.
9 THE WI TNESS: He t ol d me t o do a budget amendment t o
10 move money f r omt he sal ar y l i ne i n hi s gr ant , t o t he equi pment
11 l i ne i n hi s gr ant , because he needed addi t i onal equi pment f or
12 t he pr oj ect .
13 Q. Do you know what sor t of equi pment he want ed t o buy?
14 A. No, si r , I don' t .
15 Q. What f acet s of t he budget - -
16 THE COURT: Par t i cul ar year ?
17 THE WI TNESS: Par don?
18 THE COURT: What year of t he gr ant ar e you r ef er r i ng
19 t o?
20 THE WI TNESS: I ' mr ef er r i ng t o t he year 2003.
21 Q. So t hat woul d be t he second year ?
22 A. Yes.
23 Q. What f acet s of t he budget r evi si on di d you wor k on?
24 A. I wor ked on doi ng t he budget amendment , I got t he f i nanci al
25 number s l i ned up, as he had r equest ed, and was r eady t o submi t
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1 t he budget amendment , but Dr . Kar r on added a si gni f i cant number
2 of t echni cal suppor t i ng document at i on t o t he amendment . I
3 advi sed he di dn' t need t hat dat a; t hat t he budget peopl e wer e
4 not goi ng t o be i nt er est ed i n i t ; i t woul dn' t mean anyt hi ng t o
5 t hem; t hey woul dn' t r ead i t , and i t woul d sl ow down t he
6 pr ocess. He t ol d me t hat t hat ' s what t hey l i ke. And we
7 i ncl uded t hat when we submi t t ed t he budget amendment .
8 Q. At t he t i me, t o your knowl edge, was t hi s t he f i r st budget
9 r evi si on t hat CASI submi t t ed?
10 A. To my knowl edge, si r , i t was.
11 Q. And what l ed you t o bel i eve t hat ?
12 A. I t was - - t her e wer e no budget amendment s number ed pr i or t o
13 t he one t hat I submi t t ed.
14 Q. Di d you l ear n l at er whet her t hi s was i n f act t he f i r st
15 budget amendment ?
16 A. No, si r , i t was not . Ther e wer e numer ous ot her budget
17 amendment s submi t t ed pr i or t o my get t i ng t o CASI .
18 ( Cont i nued on next page)
19
20
21
22
23
24
25
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1 BY MR. EVERDELL:
2 Q. Wer e t hose i n year one of t he gr ant ?
3 A. One and t wo, as f ar as I under st and.
4 Q. Di d you r ecei ve a r esponse f r omATP on t he pr oposed budget
5 amendment t hat you wor ked on?
6 A. No, si r , we di d not .
7 THE COURT: When di d you f i l e i t ?
8 THE WI TNESS: Fi l ed i t i n J anuar y 2003.
9 Q. So, was i t appr oved?
10 A. No, i t was not , not t o my knowl edge.
11 Q. Di d you ever vi si t t he si t e wher e CASI was conduct i ng i t s
12 r esear ch?
13 A. Yes, I di d.
14 Q. Wher e was t hat ?
15 A. I t was i n Manhat t an on 33r d St r eet , I bel i eve, East 33r d.
16 Q. Was t hat an apar t ment or an of f i ce?
17 A. I t was an apar t ment / of f i ce. Ther e was a ki t chenet t e, a
18 bat hr oomand a bedr oomi nt act , and t he r est of t he apar t ment
19 had been gut t ed and t ur ned i nt o a sof t war e devel opment l ab. I t
20 had t abl es t hat r an bot h si des of t he mai n r oom, wi t h comput er s
21 on bot h si des.
22 Q. And whose apar t ment was i t ?
23 A. Dr . Kar r on' s.
24 Q. When di d you f i r st go t her e?
25 A. J anuar y 2003.
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1 Q. Why di d you go t o t he apar t ment ?
2 A. I went t o t he apar t ment t o l ook at t he f i nanci al r ecor ds
3 and t o submi t t he quar t er l y r epor t f or t he f our t h quar t er of
4 2002.
5 Q. Why di d you need t o pr epar e a quar t er l y f i nanci al r epor t ?
6 A. I t ' s r equi r ed by t he ATP gr ant .
7 Q. What mat er i al di d you l ook at i n or der t o pr epar e t he
8 r epor t ?
9 A. I l ooked at t he Qui ck Book f i l es, whi ch i s t he account i ng
10 syst emused by CASI , and det er mi ned t hat we coul d not f i l e t he
11 r epor t based on t he dat a t hat was i n t hose r ecor ds.
12 Q. Wel l , what , i f anyt hi ng, di d you not i ce when you wer e
13 l ooki ng at t he books of CASI ?
14 A. I not i ced t hat al l of t he f unds wer e commi ngl ed, whi ch i s
15 not al l owed by ATP.
16 MR. RUBI NSTEI N: Obj ect i on. Move t o st r i ke, your
17 Honor .
18 THE COURT: Di sr egar d t he par t " whi ch i s not al l owed
19 by ATP. "
20 Q. J ust t o cl ar i f y. You sai d you not i ced t he f unds wer e
21 commi ngl ed, i s t hat r i ght ?
22 A. Yes, si r .
23 Q. We wi l l get t o t hat i n a second. What el se di d you not i ce?
24 A. I not i ced t hat t her e wer e no document ed pr ocedur es of any
25 ki nd i dent i f yi ng how t he account i ng r ecor ds wer e t o be t r eat ed
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1 or how t he benef i t s package was t o be admi ni st er ed.
2 Q. Di d you not i ce anyt hi ng el se? Who had cont r ol of t he books
3 and r ecor ds?
4 A. Dr . Kar r on had al l cont r ol of al l t he document at i ons.
5 Ther e wer e no separ at i ons of dut i es.
6 Q. OK. Let ' s t ake t hose one at a t i me. So you ment i oned
7 wr i t t en pr ocedur es.
8 A. Yes, si r .
9 Q. Or l ack of wr i t t en pr ocedur es. Can you expl ai n what you
10 meant when you sai d t her e wer e no wr i t t en pr ocedur es.
11 A. I n a nor mal busi ness envi r onment you woul d have pr ocedur es
12 t hat t el l you when t o pay bi l l s, what bi l l s t o pay, how t o
13 t r eat checks as t hey come i n, wher e t o deposi t t hem. Ther e was
14 not hi ng wr i t t en of any ki nd.
15 Q. And why do you have t hose pr ocedur es i n pl ace nor mal l y?
16 A. So you can ensur e a consi st ent oper at i on wi t hi n t he
17 f i nanci al r eal m.
18 Q. Di d you di scuss t he l ack of Wr i t t en pr ocedur es wi t h Dr .
19 Kar r on?
20 A. Dr . Kar r on sai d t hat t hei r busi ness was so smal l , he knew
21 what t o do and he di dn' t need t o spend t i me doi ng wr i t t en
22 pr ocedur es.
23 Q. Wer e wr i t t en pr ocedur es ever i nst i t ut ed whi l e you wer e
24 wor ki ng at CASI ?
25 A. They wer e not as f ar as I know. I know t hat we spent some
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1 t i me t r yi ng t o buy a handbook, an empl oyees handbook, and spent
2 some t i me t al ki ng t o peopl e t o do an HR, human r el at i ons or
3 human r esour ces manual , but t hat was pr i mar i l y done by J oan
4 Hayes.
5 Q. You ment i oned al so commi ngl i ng.
6 A. Yes, si r .
7 Q. Can you expl ai n what you mean by t he f unds wer e commi ngl ed.
8 A. Commi ngl i ng i s when you ar e t aki ng t he gr ant money, and you
9 ar e put t i ng i t i n t he same account s as nongr ant money.
10 Q. And what i f anyt hi ng di d you not i ce about t he books at CASI
11 wi t h r espect t o t hat ?
12 A. They wer e al l t oget her .
13 Q. What do you mean t hey wer e al l t oget her ?
14 A. Al l t he moni es wer e t oget her , al l t he expenses wer e
15 t oget her . Ther e was no separ at i on, so you coul d not t el l what
16 money was spent on ATP pr oj ect ver sus what money was bei ng
17 spent on ot her pr oj ect s.
18 Q. Di d you have any di scussi ons wi t h t he def endant about t hi s
19 i ssue?
20 A. He di d not seemt o be ver y i nt er est ed or ver y concer ned
21 about t hat .
22 THE COURT: No, j ust answer .
23 A. Yes, si r , I di d.
24 Q. What di d you t el l hi m?
25 A. I t ol d hi mhe coul d not do t hat , and I r equest ed t hat t hey
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1 separ at e t he books.
2 Q. And what do you mean by separ at e t he books?
3 A. Separ at e t he books so t hat we coul d t el l what was ATP
4 spendi ng and i ncome ver sus what was not non- ATP spendi ng and
5 i ncome.
6 Q. And what was t he def endant ' s r esponse t o t hat ?
7 A. He agr eed t o have t he bookkeeper s do t hat .
8 Q. Wer e t he f unds i n f act separ at ed out ?
9 A. Not bef or e I l ef t . They wer e wor ki ng on i t , but t hey never
10 compl et ed i t .
11 Q. Coul d you t el l what sour ces of f unds t he CASI was r ecei vi ng
12 f unds f r om?
13 A. I ni t i al l y I coul d not , but over t i me i t became appar ent
14 t hat t he onl y i ncome comi ng i n was t he money comi ng i n f r om
15 ATP.
16 Q. Di d you see any ot her sour ce of i ncome besi des t he ATP
17 f unds?
18 A. No, si r , I di d not .
19 Q. You ment i oned l ast l y t he cont r ol of t he books.
20 A. Yes, si r .
21 Q. Can you expl ai n what you mean by t hat .
22 A. Nor mal l y i n an account i ng oper at i on t her e i s a check and
23 bal ance. You can have one per son wr i t e checks, someone el se
24 has t o si gn t hem. Dr . Kar r on had compl et e cont r ol of
25 ever yt hi ng. He wr ot e t he checks, he si gned t he checks, he
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1 cont r ol l ed t he checkbooks.
2 Q. And over t i me di d you not i ce anyt hi ng el se about Dr .
3 Kar r on' s cont r ol of t he books t hat r ai sed an i ssue i n your
4 mi nd?
5 A. Yes, si r . Whi l e we wer e t r yi ng t o separ at e t he books, t he
6 bookkeeper s woul d make changes t o t he books and separ at i ng t hem
7 and cal l i ng cer t ai n expendi t ur es CASI expendi t ur es, cer t ai n
8 expendi t ur es ATP expendi t ur es. Dr . Kar r on woul d - -
9 MR. RUBI NSTEI N: I obj ect t o t hi s, your Honor , unl ess
10 he has per sonal knowl edge.
11 THE COURT: Obj ect i on sust ai ned unl ess i t ' s shown t hat
12 t hi s wi t ness had per sonal knowl edge of t he f act s and hadn' t
13 hear d t hemf r ombookkeepi ng.
14 Who wer e t he bookkeeper s at t he t i me?
15 THE WI TNESS: The J ackson gr oup, Fr ank Spr i ng.
16 Q. Di d you have any di scussi ons wi t h t he def endant about t hi s
17 i ssue t hat you ar e t al ki ng about ?
18 A. Yes.
19 Q. What wer e t he nat ur e of t hose di scussi ons?
20 A. The di scussi ons wer e Dr . Kar r on had changed ent r i es t hat
21 t he J ackson gr oup had made, and Dr . Kar r on sai d t hey j ust
22 di dn' t know what t hey wer e doi ng and he knew wher e t he
23 expendi t ur es needed t o be.
24 Q. What i f anyt hi ng di d you t r y t o do t o addr ess t hese i ssues
25 t hat you not i ced wi t h r espect t o cont r ol of t he books?
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1 A. The f i r st t hi ng we di d was we no l onger gave Dr . Kar r on
2 t r ansact i on capabi l i t y. He coul d see, r ead t he account i ng
3 r ecor ds, but he coul dn' t make any changes t o t he account i ng
4 r ecor ds.
5 Q. When di d you make t hat change?
6 A. I made t hat change i n t he Apr i l t i me f r ame, I bel i eve.
7 Q. Of whi ch year ?
8 A. 2003.
9 Q. And how di d you achi eve t hat ?
10 A. We basi cal l y st opped gi vi ng hi ma wr i t abl e copy of Qui ck
11 Books.
12 Q. Who had cont r ol of t he Qui ck Books af t er you di d t hat ?
13 A. Fr ank Spr i ng.
14 Q. And di d you do anyt hi ng el se wi t h r espect t o t hi s i ssue t o
15 r emedy i t ?
16 A. Yes, si r , we met wi t h hi s boar d.
17 Q. When you say hi s boar d, you' r e r ef er r i ng t o - -
18 A. The CASI boar d. Fr ank Spr i ng and I met wi t h t he CASI boar d
19 and t ol d t hemof our concer n wi t h hi mhavi ng t ot al cont r ol of
20 t he checkbook, and asked t hat t hey t ake t he checkbook away f r om
21 hi m, and t hey di r ect ed hi mt o t ur n t he checks over t o Fr ank
22 Spr i ng and t o no l onger wr i t e checks.
23 Q. When di d t hat happen?
24 A. That was i n t he J une t i me f r ame, I bel i eve i n 2003.
25 Q. Di d you ever have check wr i t i ng aut hor i t y your sel f ?
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1 A. No, si r .
2 Q. Di d Dr . Kar r on abi de by t hi s r est r i ct i on t hat he coul dn' t
3 si gn checks anymor e?
4 A. No.
5 MR. RUBI NSTEI N: I obj ect t o t hat . The t est i mony i s
6 not si gni ng checks.
7 THE COURT: Sor r y?
8 MR. RUBI NSTEI N: Ther e i s no t est i mony t hat he
9 coul dn' t si gn checks t hat I hear d.
10 THE COURT: Wel l , I haven' t hear d t hat , but wr i t abl e
11 aut hor i t y of Qui ck Books as I under st and i t . I ' mnot goi ng t o
12 t est i f y. I ' mnot t est i f yi ng.
13 Q. J ust so we' r e cl ear , Mr . Benedi ct - -
14 THE COURT: Di sr egar d my comment .
15 Q. Can you expl ai n what act i on t he boar d of di r ect or s t ook
16 wi t h r espect t o Dr . Kar r on?
17 A. The boar d of di r ect or s t ol d Dr . Kar r on t o t ur n al l t he
18 checks over t o Fr ank Spr i ng and t hat Fr ank woul d pr i nt checks
19 and gi ve t hemt o Dr . Kar r on t o si gn.
20 THE COURT: Under t he Qui ck Books?
21 THE WI TNESS: Under Qui ck Books.
22 THE COURT: Qui ck Books i s t he manner i n whi ch checks
23 wer e wr i t t en?
24 THE WI TNESS: Yes, si r , Qui ck Books i s t he account i ng
25 syst emt hat bot h wr i t es checks and makes deposi t s.
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1 Q. Do you know whet her or not t hi s was t he onl y way t hat
2 checks got si gned and pai d af t er t hi s r est r i ct i on was put i n
3 pl ace?
4 A. No, i t was not .
5 Q. Can you expl ai n.
6 A. Dr . Kar r on used PayPal , whi ch f or al l i nt ent s and pur poses
7 subver t ed t he di r ect i on pr ovi ded by t he boar d.
8 MR. RUBI NSTEI N: Obj ect i on. Move t o st r i ke subver t ed.
9 THE COURT: Obj ect i on sust ai ned. That ' s a concl usi on
10 of your s. J ust t el l us what happened.
11 A. PayPal i s a ser vi ce t hat al l ows you t o use your cr edi t car d
12 t o pay bi l l s, and Dr . Kar r on used t he CASI cr edi t car d and had
13 PayPal pay bi l l s t hat di d not go t hr ough Fr ank Spr i ng.
14 THE COURT: Does PayPal have check wr i t i ng capabi l i t y?
15 THE WI TNESS: Yes. PayPal , you use your cr edi t car d,
16 you gi ve t he cr edi t car d t o PayPal , PayPal char ges your cr edi t
17 car d and t hen pays t he bi l l , so PayPal act ual l y wr i t es t he
18 check.
19 THE COURT: Wr i t es t he check f or t he payment of t he
20 bi l l ?
21 THE WI TNESS: Yes.
22 THE COURT: To what ever cr edi t car d i t i s?
23 THE WI TNESS: No, t o what ever vendor you want t he bi l l
24 t o go t o.
25 THE COURT: To what ever vendor .
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1 Q. How di d you know t hat t he def endant was usi ng PayPal ?
2 A. We saw t he PayPal char ge on t he Amer i can Expr ess cr edi t
3 car d bi l l .
4 Q. Di d you di scuss t hi s wi t h t he def endant ?
5 A. Yes, si r .
6 Q. What i f anyt hi ng di d you say t o hi m?
7 A. He sai d he had t o pay t he bi l l s.
8 Q. Now, Mr . Benedi ct , i n t he cour se of r evi ewi ng CASI ' s books
9 and r ecor ds, wer e t her e any par t i cul ar expendi t ur es t hat you
10 not i ced?
11 A. Ear l y on t her e was a $75, 000 payr ol l advance.
12 Q. To who?
13 A. To Dr . Kar r on. Ther e wer e payment s f or r ent . Ther e wer e
14 payment s t o an empl oyee t hat I di d not know and act ual l y never
15 met . And t her e wer e some medi cal char ges.
16 Q. OK. And what di d you not i ce about t hese expendi t ur es i n
17 par t i cul ar ?
18 A. They wer e ei t her not al l owed by ATP or t hey woul d be
19 quest i oned by ATP.
20 Q. Al l r i ght . Let ' s t ake t hemone at a t i me. You ment i oned
21 r ent payment s t hat you not i ced.
22 A. Yes.
23 Q. Can you expl ai n what you not i ced about r ent payment s.
24 A. Rent payment s wer e bei ng made wi t h ATP f unds, and r ent i s
25 not i n t he budget so ar e not al l owed by ATP. They woul d be
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1 di sal l owed cost s.
2 Q. Di d you t al k t o t he def endant about t hi s i ssue wi t h r ent
3 payment s?
4 A. Yes, I di d, and as I sai d bef or e he sai d, " I have t o pay
5 t he bi l l s. " And on anot her occasi on he sai d, l ook, i f I don' t
6 pay t he r ent , I ' mgoi ng t o be out on t he st r eet and I can' t do
7 anyt hi ng f or t he gr ant t hen, so t hey ought t o under st and t hat .
8 Q. Di d he ment i on anyt hi ng el se wi t h r espect t o what he
9 pl anned t o do about t he r ent payment s?
10 THE COURT: These ar e cur r ent r ent payment s?
11 THE WI TNESS: Yes.
12 A. He sai d t hat he was goi ng t o move t o Connect i cut and t hat
13 he woul d conver t t he ent i r e apar t ment t o a pl ace of busi ness,
14 he woul d t ur n hi s bedr oomi nt o an of f i ce. However , none of
15 t hat act ual l y happened.
16 Q. What i f anyt hi ng di d you t el l hi mwhen he t ol d you about
17 t hi s Connect i cut pl an?
18 A. I t ol d hi mi t woul dn' t mat t er anyway because t he r ent was
19 not goi ng t o be al l owed by ATP.
20 Q. Al l r i ght . Let ' s t al k about t he empl oyee, t he char ges t o
21 t he empl oyee t hat you di dn' t know. Do you r ecal l what t hose
22 char ges wer e f or ?
23 A. As expl ai ned by Dr . Kar r on t he char ges wer e f or an
24 i ndi vi dual t o scan dat a i nt o hi s dat abase. The pr ocess was
25 t hat i nvoi ces and ot her dat a r el evant t o t he CASI busi ness
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1 woul d come i nt o t he of f i ce, t he dat a woul d be scanned i nt o a
2 pr ogr amcal l ed I bel i eve Paper Por t , and t hen t he or i gi nal
3 document woul d be shr edded.
4 Q. Di d you have any di scussi ons wi t h t he def endant about t hose
5 char ges?
6 A. Those char ges ar e not i n t he budget , t hey ar e not r el evant
7 t o t he per f or mance of t he gr ant , so t hey woul d not be al l owed.
8 Q. What was hi s r esponse?
9 A. Agai n he sai d he had t o pay t he bi l l s.
10 THE COURT: What sor t of document s ar e you t al ki ng
11 about ?
12 THE WI TNESS: Al l document s, or i gi nal i nvoi ces,
13 l et t er s, ever yt hi ng was scanned i nt o t hi s syst emcal l ed Paper
14 Por t .
15 THE COURT: Di dn' t t hey have backup f or bi l l s?
16 THE WI TNESS: No, t hey shr edded ever yt hi ng.
17 THE COURT: What per i od of t i me was t hi s?
18 THE WI TNESS: Whi l e I was t her e f r omJ anuar y unt i l
19 August 2003.
20 THE COURT: When di d t hi s par t i cul ar event t ake pl ace
21 t hat you l ear ned about shr eddi ng?
22 THE WI TNESS: I was t her e when he was doi ng i t . Dr .
23 Kar r on' s vi ew was t hat he was r unni ng a paper l ess of f i ce and
24 t hat he coul d f i nd any dat a or any document s he needed t o f i nd
25 i n Paper Por t , he di dn' t need or i gi nal s.
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1 THE COURT: And what do you cal l t hi s comput er syst em?
2 THE WI TNESS: I t hi nk i t ' s cal l ed Paper Por t .
3 THE COURT: So i t woul d be r ef l ect ed t hough i n t he
4 comput er .
5 THE WI TNESS: Yes.
6 THE COURT: The t r ansact i on woul d be.
7 THE WI TNESS: Yes, t he document s woul d be t her e.
8 THE COURT: I n comput er f or m.
9 THE WI TNESS: I n comput er f or m.
10 THE COURT: Ret r i evabl e, but t he or i gi nal s woul d be
11 shr edded - -
12 THE WI TNESS: Yes, si r .
13 THE COURT: - - because of st or age pr obl ems or
14 what ever .
15 THE WI TNESS: Yes.
16 Q. Di d you ever t r y t o access t he document s on Paper Por t ?
17 A. I di d. I t was di f f i cul t .
18 Q. What do you mean by di f f i cul t ?
19 A. The dat a woul d be f i l ed i n numer ous pl aces. You coul d f i nd
20 t he dat a. For exampl e, i f you wer e l ooki ng f or a vendor , you
21 coul d f i nd t he dat a by t he dat e t hat i t was submi t t ed or
22 ent er ed i nt o t he syst em, you coul d f i nd i t by t he vendor , but
23 some of t he dat a had comment s on i t . The same i nvoi ce st or ed
24 i n anot her pl ace di dn' t have t hose comment s on i t , so you coul d
25 never t el l what t he sour ce document r eal l y was.
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1 Q. Al l r i ght . You ment i oned medi cal expenses as wel l , r i ght ?
2 A. Yes.
3 Q. What di d you not i ce about t he medi cal expenses?
4 A. I n a t r adi t i onal busi ness you have a f r i nge benef i t s
5 package t hat ' s associ at ed wi t h payi ng a heal t h car e pr ovi der
6 l i ke Bl ue Cr oss/ Bl ue Shi el d or Humana or Uni t ed Heal t h Car e,
7 any one of t hose t ypes of pr ovi der s. I n CASI ' s case t he
8 medi cal expenses wer e al l pai d di r ect l y t o a medi cal pr ovi der ,
9 a doct or , a phar macy, somet hi ng, and as such ever y medi cal bi l l
10 woul d be quest i oned.
11 Q. What do you mean by t hat ?
12 A. They woul d want t o l ook at ever y medi cal bi l l and want t o
13 know exact l y what ever y medi cal bi l l was used f or .
14 THE COURT: Who i s t hey?
15 THE WI TNESS: ATP.
16 Q. Di d you have any conver sat i ons wi t h t he def endant about
17 t hi s medi cal benef i t s i ssue?
18 A. Yes. Dr . Kar r on' s vi ew was - -
19 MR. RUBI NSTEI N: I ' mgoi ng t o obj ect as not r el evant
20 i n vi ew of your Honor ' s i nst r uct i on.
21 THE COURT: Thi s doesn' t go t o t he nat ur e of t he
22 expenses. You ar e i nst r uct ed not t o - -
23 MR. RUBI NSTEI N: Then I wi l l wi t hdr aw t he obj ect i on.
24 THE COURT: - - get i nt o t he nat ur e of t he expenses.
25 A. Dr . Kar r on j ust sai d he had t he f r i nge benef i t money i n hi s
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1 gr ant and t hat he was under hi s f r i nge benef i t s budget , so he
2 coul d use hi s f r i nge benef i t expendi t ur es.
3 Q. Do you know whet her a wr i t t en benef i t s pol i cy i s r equi r ed
4 i n t he ATP r ul es?
5 A. I do not t hi nk so.
6 THE COURT: You do not t hi nk what ?
7 THE WI TNESS: That t her e i s a speci f i c r equi r ement
8 t hat you have a heal t h benef i t pl an. I don' t know of any such
9 gui del i ne i n ATP.
10 THE COURT: I n connect i on wi t h t hi s gr ant ? Di d you
11 exami ne t hi s gr ant ' s - -
12 THE WI TNESS: No, si r , I di d not .
13 Q. Let ' s t al k about t he $75, 000 payment t hat you ment i oned
14 bef or e.
15 A. Yes, si r .
16 Q. Who i s t hat payment t o?
17 A. Dr . Kar r on.
18 Q. And when di d t hat payment occur ?
19 A. Ri ght af t er he dr ew down t he f i r st money f r omATP.
20 Q. Di d you have any di scussi ons wi t h Dr . Kar r on about t hat
21 expense?
22 A. Yes. I t ol d Dr . Kar r on t hat payr ol l advances wer e not
23 al l owed by ATP gr ant s, and he sai d t hat he woul d pay t he gr ant
24 or pay t he payr ol l advance back.
25 Q. To your knowl edge, di d t he def endant ever pay back t he
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1 sal ar y advance?
2 A. No, si r .
3 Q. I n gener al what di d Dr . Kar r on do wi t h your advi ce
4 concer ni ng expendi t ur es?
5 A. My exper i ence was i f i t f i t what he want ed t o do, he
6 accept ed i t ; i f i t conf l i ct ed wi t h what he want ed t o do, he
7 i gnor ed i t .
8 Q. What ul t i mat el y happened t o CASI ' s ATP gr ant ?
9 A. The gr ant was suspended.
10 Q. And when was t hat ?
11 A. I bel i eve i t was J une/ J ul y 2003.
12 Q. Di d you do any f ur t her wor k f or CASI af t er t he gr ant was
13 suspended?
14 A. Yes, I di d.
15 Q. What di d you do?
16 A. I wor ked wi t h t he audi t or on t he f i r st and second audi t .
17 The i nt ent was t o t r y t o hel p t hemf i nd what ever t hey needed.
18 I al so pr epar ed t he - -
19 THE COURT: Who was t he audi t or you wor ked wi t h?
20 THE WI TNESS: Bel i nda Ri l ey.
21 A. I al so pr epar ed t he f i nanci al r epor t s f or t he f our t h
22 quar t er 2002, f i r st quar t er of 2003 and t he second quar t er of
23 2003. The i nt ent t her e was t o cor r ect pr evi ous r epor t s t hat
24 wer e f i l ed i naccur at el y.
25 Q. So t hese wer e r evi sed f i nanci al r epor t s?
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1 A. Yes, si r , t hey wer e.
2 Q. Wer e t hese quar t er l y f i nanci al r epor t s?
3 A. Yes, si r , t hey wer e.
4 Q. Whose i dea was i t t o cr eat e r evi sed f i nanci al r epor t s?
5 A. Mi ne.
6 Q. Why di d you want t o do t hat ?
7 A. Because t he i ni t i al r epor t s had i ndi cat ed t hat CASI had
8 cont r i but ed t he mat ch f undi ng r equi r ement t hat t hey had i n t he
9 gr ant , when i n r eal i t y t hey had not , t hey had not cont r i but ed
10 any i ncome t o t he gr ant .
11 Q. How di d you l ear n t hat CASI had not cont r i but ed t o t he cost
12 shar e?
13 A. By l ooki ng at t hei r books. You coul d t el l t her e was no
14 money comi ng i n f r omany ot her sour ce ot her t han ATP, so t her e
15 was no money t o cont r i but e t o t he pr oj ect ot her t han t he ATP
16 f undi ng. Ther e was not hi ng evi denced i n hi s books t hat
17 i ndi cat ed t hat any ATP mat ch had occur r ed.
18 Q. Di d you t al k t o t he def endant about cr eat i ng t hese r evi sed
19 f i nanci al r epor t s?
20 A. Yes, si r , I di d. The r epor t s wer e compl et ed i n t he mi ddl e
21 of J ul y, and i t t ook us about a mont h t o act ual l y f i l e t hem
22 because we wer e r ewor ki ng t he cover l et t er .
23 Q. Bef or e we get t o t he cover l et t er , l et ' s l ook at some of
24 t he r epor t s. Fi r st , who di d you send t he r evi sed r epor t s t o?
25 A. I sent t he r epor t s t o ATP.
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1 Q. I f you coul d l ook at Gover nment ' s Exhi bi t s 40A, 41A, 42A
2 and 43A, t hey shoul d be i n f r ont of you i n t hat st ack.
3 A. Yes, si r .
4 Q. Take a l ook at t hose.
5 A. The number s agai n?
6 Q. 40A, 41A, 42A and 43A.
7 A. Yes, si r .
8 Q. Ar e t hose t he r evi sed f i nanci al r epor t s you r ef er r ed t o?
9 A. Yes, si r , t hey ar e.
10 Q. Now i f you coul d l ook at 40, 41, 42 and 43. Do you see
11 t hose document s?
12 A. Yes, si r .
13 Q. Ar e t hose t he or i gi nal f i nanci al r epor t s t hat you r evi sed?
14 A. Yes, si r .
15 Q. Let ' s t ake an exampl e. I f you coul d l ook at 40 ver sus 40A.
16 We wi l l put t hose up on t he scr een.
17 A. Yes, si r .
18 Q. Whi ch t i me per i od do t hese r epor t s cover ?
19 A. Oct ober 2001 t hr ough December 2001.
20 Q. I s t hat t he f i r st quar t er of t he gr ant ?
21 A. I bel i eve so, yes, si r .
22 Q. And whi ch i s t he or i gi nal and whi ch i s t he r evi sed?
23 A. The or i gi nal i s 40, t he r evi sed i s 40A.
24 Q. I f you coul d l ook speci f i cal l y at l i ne I .
25 A. Yes.
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1 Q. Li ne I i n Gover nment Exhi bi t ' s 40, f i r st of al l , what i s
2 l i ne I supposed t o be? What i s t hat number supposed t o mean?
3 A. I t ' s supposed t o mean t he amount of money t hat t he gr ant
4 hol der used of hi s own f undi ng t o mat ch t he money t hat t he ATP
5 peopl e pr ovi ded.
6 Q. I s t hat t he cost shar e?
7 A. Yes, si r .
8 Q. What number i s r ef l ect ed i n 40 f or t he cost shar e?
9 A. $12, 320.
10 Q. And i f you l ook at 40A, whi ch i s t he r evi sed r epor t you
11 i dent i f i ed bef or e.
12 A. Yes, si r .
13 Q. What i s r ef l ect ed on l i ne I as t he cost shar e?
14 A. Zer o.
15 Q. So, what does t hat mean?
16 A. That means t her e was no CASI mat ch.
17 Q. And f or t he ot her r epor t s I showed you t hat I had you l ook
18 at , does t he same t hi ng appear i n al l of t hese r epor t s
19 compar i ng t he or i gi nal t o t he r evi sed?
20 A. Yes.
21 Q. And do you see al so i n 40 t he l i ne J ?
22 A. Yes.
23 Q. The f eder al shar e of net out l ays?
24 A. Yes.
25 Q. What i s t hat number supposed t o r epr esent ?
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1 A. That amount i s supposed t o r epr esent t he amount of money
2 t hat you spent on ATP' s pr oj ect .
3 Q. And i s t hat number i n f act accur at e?
4 A. No.
5 Q. Why not ?
6 THE COURT: Whi ch document ?
7 MR. EVERDELL: St i l l l ooki ng at 40, l i ne J .
8 Q. I s t hat number i n f act accur at e?
9 A. No.
10 Q. Why not ?
11 A. Because t her e was no way t o subst ant i at e any number based
12 on t he condi t i on of t he books.
13 Q. What about i n 40A, t he same l i ne, l i ne J ?
14 A. That number i s t he amount of money t hat Dr . Kar r on dr ew
15 down f r omATP. I t ' s not an accur at e number ei t her , but i t was
16 mor e accur at e t han anyt hi ng el se t hat I coul d put i n t her e, and
17 my i nt ent was t o make sur e, r egar dl ess of any ot her number s on
18 t hose r epor t s, t hat t he f act t hat t her e was no mat ch
19 cont r i but ed was r ecor ded.
20 Q. And your i nt ent meani ng your i nt ent i n submi t t i ng t hese t o
21 NI ST?
22 A. Was t o make sur e t hat t hey under st ood t hat t her e was no
23 mat ch and t hat t hey woul d t ake a har der l ook at t hi s pr oj ect .
24 Q. I s t hat why you submi t t ed t hese r evi sed r epor t s t o NI ST?
25 A. Yes.
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1 Q. Di d you submi t a r evi sed f i nanci al i nf or mat i on wi t h a cover
2 l et t er ?
3 A. Yes.
4 Q. Di d you dr af t t he l et t er ?
5 A. I dr af t ed t he i ni t i al l et t er . Thi s i s not t he i ni t i al
6 l et t er . Thi s i s a r evi sed l et t er t hat , as I sai d, we wor ked on
7 f or appr oxi mat el y a mont h.
8 Q. Al l r i ght . Let ' s l ook at t he l et t er you' r e r ef er r i ng t o,
9 Gover nment ' s 48. I f you coul d put t hat on t he scr een.
10 MR. RUBI NSTEI N: I s t hat i n evi dence?
11 MR. EVERDELL: I t ' s al r eady i n evi dence.
12 THE COURT: I s i t i n evi dence?
13 MR. EVERDELL: I bel i eve so. I t was i n evi dence
14 t hr ough Hope Snowden.
15 THE COURT: I don' t see i t .
16 DEPUTY COURT CLERK: J une 4. 48.
17 THE COURT: Oh, yes.
18 Q. Do you see t hat l et t er , Mr . Benedi ct ?
19 A. Yes, si r .
20 Q. I f we coul d bl ow up t he f i r st t wo par agr aphs.
21 I f you coul d pl ease r ead t he f i r st par agr aph of t he
22 l et t er ?
23 A. " Ms. Snowden, pl ease bel i eve Dr . Kar r on di d not knowi ngl y
24 mi sst at e hi s SF269A submi ssi ons t hr ough year one. He si gned
25 document s pr epar ed by hi s pr oj ect admi ni st r at or , who, al ong
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1 wi t h Dr . Kar r on, di d not under st and t he ATP gui del i nes or cost
2 pr i nci pl es FAR31. 2, and mi st ook cer t ai n f i nanci al deposi t s by
3 Dr . Kar r on f or member cont r i but i ons. "
4 Q. Now, Mr . Benedi ct , di d you wr i t e t hat par agr aph?
5 A. No.
6 Q. Who wr ot e t hat par agr aph?
7 A. Pr i mar i l y Dr . Kar r on. He di d ask me t o i ncl ude t he
8 f i nanci al number s t hat I was al ways r ef er enci ng.
9 THE COURT: Di d anyone el se par t i ci pat e i n t he
10 dr af t i ng?
11 THE WI TNESS: No, si r .
12 Q. But j ust t o be cl ear , t hat f i r st par agr aph was added at t he
13 r equest of Dr . Kar r on?
14 A. Yes, si r .
15 Q. Al l r i ght . I f you coul d pl ease r ead t he f i r st t hr ee
16 sent ences i n t he second par agr aph.
17 A. " We acknowl edge t hat t her e ar e di sal l owed expenses and t hey
18 do go back t o year one, but t hey pr i mar i l y come f r omt wo
19 sour ces. Fi r st , Dr . Kar r on was t r yi ng t o do t he bookkeepi ng
20 hi msel f and he i s not an account ant , mi st akes wer e made.
21 Secondl y, t her e wer e di f f er i ng opi ni ons on what i s and i sn' t
22 al l owabl e bet ween t he pr i or admi ni st r at or s of t he CA and t hose
23 now admi ni st er i ng t he CA. "
24 Q. What was t he CA?
25 A. That ' s t he gr ant .
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1 Q. That f i r st sent ence, " We acknowl edge t hat t her e ar e
2 di sal l owed expenses and t hey do go back t o year one, " who wr ot e
3 t hat sent ence?
4 A. I di d.
5 Q. What about t he second t wo sent ences, Dr . Kar r on was t r yi ng
6 t o do t he bookkeepi ng hi msel f , he i s not an account ant ,
7 mi st akes wer e made and t her e wer e di f f er i ng opi ni ons about what
8 i s and i sn' t al l owabl e bet ween t he pr i or admi ni st r at or of t he
9 CA and t hose now admi ni st er i ng t he CA?
10 A. Those wer e added by Dr . Kar r on.
11 THE COURT: What di d you say wer e added?
12 THE WI TNESS: The second and t he t hi r d sent ence.
13 THE COURT: " Secondl y" or " f i r st " ?
14 THE WI TNESS: " Fi r st " and " secondl y" .
15 Q. As f or t he f i r st sent ence whi ch you wr ot e, why di d you
16 wr i t e t hat sent ence?
17 A. Because I want ed t he ATP - -
18 MR. RUBI NSTEI N: I obj ect t o t he why quest i ons.
19 Q. What was t he pur pose f or i ncl udi ng t hat sent ence?
20 MR. RUBI NSTEI N: Obj ect i on, your Honor . I t speaks f or
21 i t sel f .
22 THE COURT: I wi l l al l ow t he answer .
23 Thi s i s t he sent ence " we acknowl edge" ?
24 A. The l et t er as I or i gi nal l y wr ot e i t st ar t ed " Mi ss Snowden,
25 we acknowl edge t her e ar e di sal l owed expenses and t hey do go
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1 back t o year one. " What I want ed t hemt o under st and was t hat
2 t her e wer e di sal l owed expenses i n addi t i on t o t he f act t hat
3 t her e was no mat ch. I was t r yi ng t o get ATP' s at t ent i on.
4 MR. RUBI NSTEI N: Coul d we have t he dat e of t hi s
5 exhi bi t , your Honor ?
6 THE COURT: Sor r y?
7 MR. RUBI NSTEI N: The dat e.
8 THE COURT: The dat e on t he l et t er i s August 13,
9 accor di ng t o t he copy.
10 MR. RUBI NSTEI N: 2003. Thank you.
11 THE COURT: Al l r i ght .
12 Q. You can put down t he l et t er . Mr . Benedi ct , ar e you
13 f ami l i ar wi t h someone named J oan Hayes?
14 A. Yes, si r .
15 Q. Who i s J oan Hayes?
16 A. J oan Hayes was t he audi t or empl oyed by CASI .
17 Q. Di d you ever have any di scussi ons wi t h t he def endant
18 r egar di ng J oan Hayes?
19 A. Yes.
20 Q. What wer e t hose di scussi ons?
21 A. Dr . Kar r on was gener al l y not happy wi t h J oan Hayes. He
22 f el t t hat she j ust wasn' t doi ng what he want ed her t o do.
23 Q. And di d he say t hat t o you?
24 A. Yes, si r .
25 Q. What ul t i mat el y happened t o t he gr ant ?
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1 A. The gr ant was suspended.
2 Q. And af t er t he gr ant was suspended di d you have any
3 di scussi ons wi t h t he def endant about t he st at e of t he pr oj ect ?
4 A. Yes, si r , I di d.
5 Q. What was t he nat ur e of t hose di scussi ons?
6 A. As t he audi t pr ogr essed i t became appar ent t hat t he
7 di sal l owed number s and t he quest i oned number s wer e goi ng t o be
8 ver y l ar ge. I had t ol d Dr . Kar r on t hat t hi s was ver y ser i ous.
9 MR. RUBI NSTEI N: I obj ect t o what he t ol d Dr . Kar r on.
10 THE COURT: Ar e you r ef er r i ng t o an audi t by J oan
11 Hayes or an audi t by Bel i nda - -
12 THE WI TNESS: By Bel i nda Ri l ey.
13 THE COURT: - - by Bel i nda Ri l ey?
14 I s t hat what you' r e i nqui r i ng about , Mr . Ever del l ?
15 MR. EVERDELL: Yes.
16 Q. Al l r i ght . So, you ar e f ami l i ar wi t h someone named Bel i nda
17 Ri l ey?
18 A. Yes, si r .
19 Q. Who i s Bel i nda Ri l ey?
20 A. Bel i nda Ri l ey i s t he Of f i ce of I nspect or Gener al ' s audi t or .
21 Q. And di d she compl et e an audi t r epor t ?
22 A. Yes.
23 Q. Di d you di scuss t hat r epor t wi t h Dr . Kar r on?
24 A. Yes, si r , I di d.
25 Q. And what di d you t el l hi m, i f anyt hi ng?
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1 A. I t ol d Dr . Kar r on t hi s was ver y ser i ous, he coul d go t o
2 j ai l f or t hi s, he coul d have bet ween 300 and 500, 000 of
3 di sal l owed expendi t ur es.
4 Q. What i f anyt hi ng was t he def endant ' s r esponse t o t hat ?
5 A. He sai d don' t wor r y about i t , my mom' s got i t .
6 MR. EVERDELL: No f ur t her quest i ons, your Honor .
7 THE COURT: Al l r i ght , Mr . Rubi nst ei n.
8 CROSS EXAMI NATI ON
9 BY MR. RUBI NSTEI N:
10 Q. Good mor ni ng, Mr . Benedi ct .
11 A. Good mor ni ng.
12 Q. Now, Exhi bi t 48 t hat was j ust shown t o you, t he l et t er t hat
13 you wr ot e t o Hope Snowden - -
14 A. Yes, si r .
15 Q. - - t hat was wr i t t en by you, r i ght ?
16 A. By mysel f and Dr . Kar r on.
17 Q. Was i t wr i t t en i n conj unct i on wi t h J oan Hayes?
18 A. No, si r .
19 Q. How di d you send t hat l et t er t o Hope Snowden?
20 A. Mai l ed i t .
21 Q. Di d you f ax i t t o Hope Snowden?
22 A. No, si r , I di dn' t .
23 Q. Wel l , di d J oan Hayes f ax i t t o Hope Snowden?
24 A. I don' t know whet her she di d or she di dn' t , si r . She i s on
25 copy of t he l et t er .
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1 Q. Now, i n f act you advi sed Dr . Kar r on i n August of 2003 t hat
2 t he f i nanci al di sal l owances pur suant t o t he audi t wer e ver y
3 ser i ous, cor r ect ?
4 A. Yes, si r .
5 Q. And i n August of 2003, t hi s i s af t er t he gr ant was
6 suspended, r i ght ?
7 A. Yes, si r .
8 Q. And t hat i s t he f i r st t i me t hat you ever t ol d Dr . Kar r on
9 t hat i t ' s possi bl e he coul d even go t o j ai l f or t hi s, r i ght ?
10 A. That ' s possi bl e, yes, si r .
11 Q. Hi s r esponse was he di dn' t t hi nk t hat was possi bl e, r i ght ?
12 A. I t ol d you what hi s r esponse was. He sai d don' t wor r y
13 about i t .
14 Q. He f el t t hat i f you pai d back t he money t her e i s no
15 pr obl em.
16 A. I don' t know what he f el t , si r . He di dn' t say t hat t o me.
17 Q. Wel l , di dn' t he t el l you t hat hi s momhas t he money?
18 A. Yes, si r , but Dr . Kar r on of t en gave me ver y f l i ppant
19 answer s.
20 Q. But he di d say t hat hi s momhad t he money, cor r ect ?
21 A. Yes, si r .
22 Q. Now, you wer e cal l ed a number of t i mes pr i or t o t he t i me
23 t hat you became t he gr ant manager , t he busi ness manager
24 act ual l y of t hi s CASI gr ant , cor r ect ?
25 A. Yes, si r .
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1 Q. Pr i or t o t hat t i me how many cal l s woul d you say you got
2 f r ommember s of CASI aski ng your advi ce and your opi ni on on
3 al l owabl e expenses?
4 A. Four maybe.
5 Q. And you spoke t o Dr . Kar r on hi msel f , cor r ect ?
6 A. Yes, si r .
7 Q. And he spoke t o you about t he r ent , r i ght ?
8 A. Yes, si r .
9 Q. He al so spoke t o you about ut i l i t i es expenses, cor r ect ?
10 A. I don' t r ecal l , si r .
11 Q. Di d you ever i n t hose conver sat i ons bef or e you came t o be
12 empl oyed by CASI ever say t o Dr . Kar r on, you know, i f you do
13 t hi s you mi ght wi nd up i n j ai l ?
14 A. No.
15 Q. Now, i t i s a f act , si r , t hat Dr . Kar r on had pr oj ect
16 admi ni st r at or s, di d he not , pr i or t o you?
17 A. Yes, si r .
18 Q. He had Lee Gur f ei n, r i ght ?
19 A. Yes, si r .
20 Q. You spoke t o t hat gent l eman?
21 A. Yes, si r .
22 Q. He cal l ed you f or advi ce?
23 A. Yes.
24 Q. He had Pet er Ross?
25 A. I never spoke wi t h Pet er Ross.
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1 Q. Ar e you awar e t hat Pet er Ross i s t he i ndi vi dual who
2 pr eceded you?
3 A. I l ear ned t hat af t er I j oi ned CASI , yes, si r .
4 Q. So i s i t f ai r t o say t hat t he st at ement t hat you have - - by
5 t he way, you aut hor ed t hi s l et t er , cor r ect ?
6 A. Yes, si r .
7 Q. You put your si gnat ur e on i t .
8 A. Yes, si r .
9 Q. Ar e you t el l i ng t hi s j ur y t hat you l i ed t o Hope Snowden i n
10 t hi s l et t er ?
11 MR. EVERDELL: Obj ect i on.
12 THE COURT: I wi l l al l ow t he quest i on.
13 A. No, si r .
14 Q. And Dr . Kar r on i ndi cat ed t o you t hat he had pr i or pr oj ect
15 admi ni st r at or s who di dn' t under st and t he ATP gui del i nes and
16 cost pr i nci pl es, cor r ect ?
17 A. Yes, si r . But I know t hat ATP i sn' t goi ng t o pay any
18 at t ent i on t o t hat because i gnor ance i sn' t an answer .
19 Q. But you knew t hat t her e was a l ot of i gnor ance her e i n
20 CASI , di d you not ?
21 A. Yes, si r .
22 Q. And when you f i r st met Dr . Kar r on, t he f i r st t hi ng he di d
23 bef or e you ever met hi mwas st and up i n an open meet i ng and
24 sai d he needs hel p on t he f i nanci al si de, under st andi ng t he
25 f i nanci al si de, cor r ect ?
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1 A. Yes, si r .
2 Q. Now - -
3 THE COURT: What year was t hat ?
4 THE WI TNESS: 2001.
5 MR. RUBI NSTEI N: 2001 at a NI ST - -
6 THE COURT: I n t he spr i ng?
7 THE WI TNESS: Yes, si r .
8 THE COURT: I s t hat bef or e - - i n t he spr i ng? Al l
9 r i ght .
10 THE WI TNESS: Yes, si r .
11 Q. And, by t he way, t hese pr oj ect admi ni st r at or s, at l east
12 Gur f ei n, i s somebody t hat was cal l i ng you f or gui dance,
13 cor r ect ?
14 A. Yes.
15 Q. Di d you ascer t ai n t hat i n t he ver y begi nni ng of CASI t hat
16 Dr . Kar r on was i n f act doi ng t he bookkeepi ng hi msel f ?
17 A. Af t er I got t her e, yes, si r .
18 Q. And i n f act he i s not an account ant , r i ght ?
19 A. That ' s cor r ect .
20 Q. And t hat ' what you' r e t el l i ng us he asked you t o
21 i ncor por at e i n t hi s l et t er , r i ght ?
22 A. Yes, si r .
23 Q. That ' s t r ue, r i ght ?
24 A. Yes, i t i s.
25 Q. And i n f act t her e wer e di f f er i ng opi ni ons on what i s
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1 al l owabl e and what wasn' t al l owabl e, cor r ect ?
2 MR. EVERDELL: Obj ect i on.
3 THE COURT: Obj ect i on sust ai ned.
4 Q. Wel l , you had di f f er ences of opi ni on wi t h Dr . Kar r on as t o
5 what was al l owabl e and what was unal l owabl e, cor r ect ?
6 A. Yes, si r .
7 Q. And i n f act CASI , pr i or t o t he appear ance of Bel i nda Ri l ey,
8 you wer e at t empt i ng t o get al l t he books st r ai ght ened out , wer e
9 you not ?
10 A. Yes, si r .
11 Q. You wer e i n t he pr ocess of doi ng t hat , cor r ect ?
12 A. Yes, si r .
13 Q. And your exper i ence wi t h NI ST ATP was based upon your
14 backgr ound wi t h I BM and t hi s company Compl ex, r i ght ?
15 A. Yes.
16 Q. How l ar ge a company i s Compl ex?
17 A. Say agai n?
18 Q. How l ar ge a company i s Compl ex?
19 A. You mean t he consor t i um?
20 Q. Wel l , you sai d you wor ked f or Compl ex. I s t hat a
21 consor t i um? I don' t know.
22 A. I di dn' t say anyt hi ng about a compl ex. I wor ked f or I BM
23 managi ng si ngl e gr ant s and consor t i umgr ant s. The consor t i um
24 gr ant s ar e mul t i - company gr ant s.
25 Q. And di d you wor k on gr ant s f or anybody el se?
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1 A. Axi om.
2 Q. Axi om. I ' msor r y. And how l ar ge a company i s Axi om?
3 A. Axi omi s a r el at i vel y smal l sof t war e devel opment company
4 t hat wor ked wi t h I BM.
5 Q. When you say r el at i vel y smal l , how many empl oyees di d Axi om
6 have?
7 A. 250.
8 Q. 250 empl oyees?
9 A. Um- hum.
10 Q. And Axi om, what ki nd of gr ant di d t hey get ?
11 A. They di dn' t have a gr ant . I was a consul t ant wor ki ng f or
12 t hem, and t hey hi r ed me out t o I BM. So al l of my gr ant
13 exper i ence i s r el at ed t o I BM exper i ence - - or ATP exper i ence
14 was al l r el at ed t o I BM pr oj ect s.
15 Q. Wi t hout bei ng f acet i ous, I BM i s a gi ant company, r i ght ?
16 A. Yes, si r .
17 Q. Now, wer e you t he sol e - - wer e you t he busi ness manager f or
18 I BM deal i ng wi t h t he gr ant s?
19 A. Yes, si r .
20 Q. And what ki nd of gr ant s di d I BM get ?
21 A. Sof t war e devel opment , hi gh- r i sk sof t war e devel opment
22 gr ant s.
23 Q. And what dol l ar amount ?
24 A. The f i r st one was t he same si ze as Dr . Kar r on' s. The l ast
25 t wo wer e 24 and $26 mi l l i on gr ant s.
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1 Q. Now, t he f i r st one i s what i s cal l ed a si ngl e gr ant ?
2 A. Yes.
3 Q. And t he ot her s wer e consor t i um, whi ch meant t hose gr ant s
4 i nvol ved mor e t han one company?
5 A. Yes, si r .
6 Q. Now, i n your si ngl e gr ant , di d you wr i t e t he budget f or
7 t hat gr ant ?
8 A. No, si r , I di d not .
9 Q. Di d you ever have - - was t he budget i n pl ace when you
10 became t he gr ant manager ?
11 A. Yes, si r , i t was.
12 Q. And t hat ' s t he onl y budget , si ngl e gr ant budget , deal i ng
13 wi t h NI ST ATP. Was t hat - - I ' msor r y. Was t hat t he onl y
14 si ngl e gr ant budget f r omATP NI ST?
15 A. Yes, si r .
16 Q. That you ever wor ked on?
17 A. Yes, si r .
18 Q. I n t hat budget wer e you pai d? Was I BM pai d up f r ont ? Di d
19 t hey have t he gr ant money up f r ont , or di d t hey have t o be
20 r ei mbur sed?
21 A. Rei mbur sement .
22 Q. So t hat I BM woul d have t o spend t hei r money f i r st , r i ght ?
23 A. Yes.
24 MR. EVERDELL: Obj ect i on.
25 THE COURT: Obj ect i on sust ai ned. When you st ar t wi t h
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1 " so" - -
2 MR. RUBI NSTEI N: Al l r i ght .
3 Q. I BM spent t hei r money f i r st , cor r ect ?
4 A. Yes, si r .
5 Q. Then woul d i t be your j ob t o r equest r ei mbur sement f r omt he
6 gr ant ?
7 A. Yes, si r .
8 Q. And how woul d you do t hat ?
9 MR. EVERDELL: Obj ect i on. Rel evance.
10 THE COURT: I ' mgoi ng t o al l ow t he quest i on.
11 A. I woul d submi t a r epor t t o ATP aski ng t hemf or
12 r ei mbur sement based on t he det ai l ed expendi t ur es I r evi ewed.
13 Q. And wer e you ever t ur ned down?
14 A. No, si r .
15 Q. Now, when you wer e doi ng t he consor t i umpr oj ect s, was t hat
16 a r ei mbur sement al so si t uat i on?
17 MR. EVERDELL: Obj ect i on.
18 THE COURT: Obj ect i on over r ul ed.
19 A. Yes.
20 Q. And di d you submi t t he r epor t s r equest i ng r ei mbur sement ?
21 A. Yes.
22 Q. And, by t he way, how much of t he 2 mi l l i on t hat I BM
23 r ecei ved i n t he f i r st gr ant , t he si ngl e gr ant , was act ual l y - -
24 I wi l l wi t hdr aw t hat .
25 How many year s was t hat gr ant f or , t he f i r st gr ant ?
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1 A. Two.
2 Q. Two year s?
3 A. Yes, si r .
4 Q. For $2 mi l l i on?
5 A. Yes, si r .
6 Q. And how much of t he 2 mi l l i on di d I BM spend?
7 A. Al l of i t .
8 Q. And t he t wo consor t i umgr ant s, t hose wer e f or 24 mi l l i on a
9 pi ece?
10 A. 24 and 26.
11 Q. And how much of t he $24 mi l l i on gr ant di d I BM spend, t he
12 consor t i um?
13 A. The consor t i umspent al l of t he money.
14 Q. And how about t he $26 mi l l i on gr ant , how much di d t he
15 consor t i umspend on t he 26 mi l l i on gr ant ?
16 A. They spent al l t he money.
17 Q. When you woul d submi t a document t o ATP, wer e any of t he
18 r ei mbur sed expendi t ur es ever r ej ect ed?
19 MR. EVERDELL: Obj ect i on.
20 THE COURT: Obj ect i on over r ul ed. Can I hear t he
21 quest i on agai n?
22 A. I don' t r ecal l any bei ng r ej ect ed.
23 Q. What year s wer e t hi s t hat you wer e deal i ng wi t h NI ST ATP on
24 t hese gr ant s?
25 A. 1994 t o 2002.
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1 Q. Now, di d you ever have occasi on t o speak t o any of t he
2 gr ant admi ni st r at or s f r omATP?
3 A. Yes, si r .
4 Q. And who di d you speak t o? I amt al ki ng on behal f of t he
5 I BM gr ant s. Di d you ever have occasi on t o speak t o any of t he
6 admi ni st r at or s?
7 MR. EVERDELL: Obj ect i on.
8 THE COURT: Obj ect i on sust ai ned.
9 Q. Di d you ever have occasi on t o submi t any budget r evi si ons
10 on behal f of any of t he I BM gr ant s?
11 MR. EVERDELL: Obj ect i on.
12 THE COURT: I wi l l al l ow t he quest i on.
13 A. Yes.
14 Q. What ki nd of budget r evi si ons di d you r equest ?
15 A. As t he pr oj ect s pr oceeded, you l ear n your i ni t i al budget
16 doesn' t have al l t he money i n al l t he r i ght pl aces, and so you
17 r equest movement of t he money f r omone budget l i ne t o anot her
18 budget l i ne. I don' t speci f i cal l y r ecal l any of t he det ai l s,
19 but , yes, t hey occur r ed.
20 Q. That ' s a common t hi ng i n t hese ki nd of hi gh- t ech, hi gh- r i sk
21 t ypes of gr ant s, r i ght ?
22 A. Yes.
23 Q. Now, you wer e i nvol ved, wer e you not , i n CASI ' s or i gi nal
24 budget submi ssi on?
25 A. No.
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1 Q. Wel l , di d you di scuss wi t h Dr . Kar r on t he or i gi nal budget
2 t hat he was submi t t i ng?
3 A. No.
4 Q. I n f act you wer e never appr oved by ATP NI ST f or t he CASI
5 pr oj ect .
6 A. I f ound t hat out l at er , yes, si r .
7 Q. When di d you f i nd t hat out ?
8 A. Dur i ng t he audi t by OI G, by Bel i nda Ri l ey.
9 Q. You wer e never f or mal l y r ej ect ed, cor r ect ?
10 A. Cor r ect .
11 Q. And i sn' t i t a f act t hat ATP woul dn' t speak t o you bef or e
12 Bel i nda Ri l ey showed up because you wer e not appr oved by t hem?
13 A. They di d not r et ur n phone cal l s.
14 Q. But you di d cal l t hembef or e t he gr ant was suspended on
15 J une 27, cor r ect .
16 A. Yes, si r .
17 Q. And af t er t he gr ant was suspended you l ear ned f r omRi l ey
18 t hat you wer e not appr oved, cor r ect ?
19 A. Yes.
20 Q. And when woul d you say t hat was i n t i me f r ame?
21 A. J ul y/ August somet i me.
22 Q. Had you r ecei ved any r emuner at i on, any payment f r omCASI
23 f or t he wor k you had done as manager ?
24 A. Yes.
25 Q. And i n f act Dr . Kar r on br ought you aboar d and t ol d you when
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1 you came aboar d he needed somebody who r eal l y knew what t hey
2 wer e doi ng?
3 A. Yes.
4 Q. And di d you hel p ear l y on? Bef or e wer e you act ual l y hi r ed,
5 when you wer e get t i ng t hese cal l s f r omCASI , di d you r ecommend
6 t hat any cat egor y be added t o t he budget cal l ed " ot her s" ?
7 A. I don' t r ecal l anyt hi ng l i ke t hat , no, si r .
8 THE COURT: For what ? For ot her ?
9 MR. RUBI NSTEI N: " Ot her s" .
10 Q. That i s a cat egor y i n t he budget , i s t hat cor r ect ?
11 A. No, si r , not as f ar as I know i t i sn' t .
12 Q. Now, you say you wer e get t i ng $60 an hour , cor r ect ?
13 A. Yes, si r .
14 Q. Wer e you awar e what Lee Gur f ei n was bei ng pai d?
15 A. No, si r .
16 Q. Di d you become awar e of what Lee Gur f ei n had been pai d?
17 A. No, si r .
18 Q. Di d you ever say t o Dr . Kar r on t hat what CASI pai d Lee
19 Gur f ei n was i nsane?
20 A. I don' t r ecal l , no, si r .
21 Q. Wel l , di d you have occasi on as t he manager - - you submi t t ed
22 r evi si ons, di d you not ?
23 A. Yes, si r .
24 Q. Revi si ons f or t he whol e budget , cor r ect ?
25 A. We submi t t ed a budget amendment , yes.
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1 Q. Di d you r evi ew t he pr i or budget s?
2 A. The onl y pr i or budget t hat I saw was t he one t hat was
3 or i gi nal l y f i l ed wi t h t he gr ant .
4 Q. And t hat had a sal ar y f or Lee Gur f ei n, di d i t not ?
5 A. Yes.
6 Q. Ar e you t el l i ng t hi s j ur y t hat you di dn' t not i ce what
7 Mr . Gur f ei n was bei ng pai d?
8 THE COURT: Obj ect i on t o t he f or mof t he quest i on.
9 MR. EVERDELL: Obj ect i on.
10 THE COURT: He di dn' t say he di dn' t not i ce.
11 Q. Wel l , di d you see i n t hat budget - -
12 THE COURT: He sai d he never made t he st at ement t o Dr .
13 Kar r on i s what he sai d.
14 Q. Wel l , di d you see i n t hat budget what Lee Gur f ei n was bei ng
15 pai d?
16 A. Yes, I saw what he was bei ng pai d.
17 Q. And how much was Gur f ei n bei ng pai d?
18 A. I don' t r ecal l .
19 Q. Af t er you saw t hat , di d you ever have any conver sat i on wi t h
20 Dr . Kar r on as t o t he amount t hat t hey wer e payi ng Lee Gur f ei n?
21 A. No, si r , not t o my memor y I don' t .
22 Q. Di d you di scuss wi t h Dr . Kar r on t he 10 per cent r ul e?
23 A. Yes.
24 Q. And di d you advi se hi mt hat i t ' s r eal l y a 20 per cent r ul e,
25 t hat you can add 10 per cent i f you t ake 10 per cent of f ?
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1 A. I don' t under st and t he quest i on.
2 Q. Wel l , t he 10 per cent r ul e per mi t s you, does i t not , si r , t o
3 i ncr ease any l i ne i n t he budget by 10 per cent ?
4 A. Yes, i t ' s a pl us or mi nus 10 per cent r ul e.
5 Q. So you woul d have t o r educe by 10 per cent i n or der t o
6 i ncr ease by 10 per cent ?
7 A. Yes, si r . You wer en' t goi ng t o get any mor e money.
8 Q. The dol l ar amount , i n t hi s case $800, 000 f or t he f i r st
9 year , was your seal i ng, t op amount .
10 A. Yes.
11 Q. So, i n ef f ect i t r eal l y was 10 per cent up and 10 per cent
12 down; you wound up wi t h t he same dol l ar amount budget .
13 A. Yes. You can go pl us or mi nus 10 per cent on any budget
14 l i ne wi t hout get t i ng a budget amendment .
15 Q. And ar e you f ami l i ar wi t h whet her or not t her e ar e speci al
16 condi t i ons t hat ar e somet i mes i mposed by ATP as par t of t he
17 gr ant ?
18 A. Ther e ar e sect i ons i n gr ant s t hat ar e cal l ed speci al t er ms
19 and condi t i ons. I don' t r ecal l what t hey wer e, i f t her e wer e
20 any wi t h Dr . Kar r on' s gr ant .
21 Q. Wel l , you t ol d us t hat you r ecommended t hat Dr . Kar r on get
22 gr ant manager t r ai ni ng?
23 A. Yes.
24 Q. You sent hi ma cat al og, r i ght ?
25 A. Yes.
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1 Q. Di d you al so suggest t hat t he peopl e who wor k f or hi mi n
2 t he admi ni st r at i on do t he same?
3 A. Yes.
4 Q. And you l ear ned i n f act t hat nei t her Dr . Kar r on nor anyone
5 i n t he admi ni st r at i on t ook t he cour se, cor r ect ?
6 A. That ' s cor r ect .
7 Q. And di d Dr . Kar r on advi se you t hat he woul d r el y upon hi s
8 net wor k of assi st ant s t o get hi mt hr ough t he gr ant pr ocess?
9 Ri ght ?
10 A. I don' t r ecal l t hat comment , no, si r .
11 Q. Wel l , when di d you speak t o somebody i nvol ved i n t he
12 pr osecut i on i n t hi s case?
13 A. Coul d you r epeat t he quest i on, pl ease.
14 Q. Yes. When wer e you f i r st appr oached by anybody at t hat
15 f i r st t abl e about t hi s case?
16 A. Two year s ago?
17 Q. And who wer e you appr oached by?
18 A. Agent Ondr i k.
19 Q. Do you see t hat agent her e?
20 A. Yes. She i s si t t i ng over t her e at t he t abl e. Ki r k was
21 al so t her e. He' s si t t i ng at t he end of t he t abl e.
22 Q. And how about t he pr osecut or s her e, when di d you meet t he
23 pr osecut or s f or t he f i r st t i me?
24 A. Two mont hs ago.
25 Q. 2008, cor r ect ?
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1 A. Yes, si r .
2 Q. Do you r ecal l t el l i ng t he agent s t hat i nst ead he, meani ng
3 Dr . Kar r on, depended on hi s net wor k of associ at es t o get hi m
4 t hr ough t he pr ocess?
5 A. Dr . Kar r on woul d - -
6 Q. Do you r ecal l sayi ng t hat t o t he agent s her e under oat h?
7 A. Not speci f i cal l y, no, si r .
8 Q. OK. Let me show you t hi s document whi ch has been
9 pr evi ousl y mar ked as 3506- A and ask you f i r st t o l ook at t he
10 t op on t he back, and t hen I wi l l di r ect you t o a speci f i c pl ace
11 i n t he document . Di d you r evi ew t hat , si r ?
12 A. Number 3?
13 Q. Wel l , f i r st of al l , di d you r evi ew t he f act t hat t hat ' s an
14 af f i davi t t hat you si gned and swor e t o?
15 A. Yes i t i s. Yes, si r .
16 Q. And you r ead i t bef or e you swor e t o i t ?
17 A. Yes, si r , I di d.
18 Q. And you i ni t i al ed ever y page?
19 A. Yes, si r .
20 Q. I di r ect your at t ent i on t o what I have as number t hr ee and
21 ask you i f t hat r ef r eshes your r ecol l ect i on t hat Dr . Kar r on
22 t ol d you he depended on a net wor k of associ at es t o get hi m
23 t hr ough t he pr ocess.
24 A. That ' s not what he t ol d me, si r . I t ' s what he di d.
25 ( Cont i nued on next page)
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1 BY MR. RUBI NSTEI N:
2 Q. You obser ved t hat , t hat he r el i ed upon ot her peopl e t o get
3 hi mt hr ough t he pr ocess?
4 A. Dr . Kar r on woul d ask a quest i on. I f he got an answer he
5 di dn' t l i ke, he' d ask somebody el se unt i l he got somet hi ng t hat
6 was cl ose t o what he want ed, and he woul d go i n t hat di r ect i on.
7 Q. And had you, i n your pr i or exper i ence wi t h ATP NI ST, ever
8 have occasi on on, asi de f r omCASI , of negot i at i ng as t o what
9 was al l owabl e or al l owed; di d your have t hat occasi on,
10 exper i ence?
11 A. Yes, si r .
12 Q. Now, somebody di d t ake t hat cour se t hat you r ecommended,
13 r i ght ?
14 A. Yes.
15 Q. And t hat was J oan Hayes, r i ght ?
16 A. Yes.
17 Q. And who pai d f or t hat cour se?
18 A. I have no i dea, si r .
19 Q. Ar e you awar e t hat whet her or not CASI pai d f or t hat cour se
20 f or J oan Hayes?
21 A. I have no r ecol l ect i on of t hat , si r . J oan Hayes was a CASI
22 empl oyee, not an ATP empl oyee. What CASI di d wi t h CASI ' s
23 money, I di dn' t car e.
24 Q. She was t hei r account ant , she was CASI ' s account ant ?
25 A. She was CASI ' s account ant CPA, audi t or .
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1 Q. She was wear i ng mul t i pl e hat s f or CASI , cor r ect ?
2 MR. EVERDELL: Obj ect i on.
3 THE COURT: Obj ect i on sust ai ned.
4 Q. Wel l - -
5 THE COURT: Let ' s - -
6 Q. I f Dr . Kar r on - - when you r ecommended t o Dr . Kar r on t hat he
7 or somebody i n CASI t ake t hi s cour se on audi t i ng - - i t was ki nd
8 of an audi t i ng cour se f or t he budget ?
9 A. The cour ses t hat ar e of f er ed by management concept s cover a
10 number of subj ect s. One i s t he A- 133 audi t , whi ch i s t he
11 f eder al gover nment audi t i ng pr ocess. Ther e wer e cour ses on
12 gr ant management , t her e wer e cour ses on gr ant wr i t i ng. I mean,
13 t hey have a number of cour ses.
14 Q. So t he per son t hat went down f or t he cour se on gr ant
15 management was t he account ant , cor r ect ?
16 A. Yes, si r .
17 Q. And t hat was pr i or t o t he t i me t hat you came aboar d,
18 cor r ect ?
19 A. I don' t know when she went .
20 Q. And i s i t your vi ew t hat t hat woul d not , woul d not be an
21 al l owabl e expense?
22 A. I t ' s not an al l owabl e expense t o t he gr ant , no, si r .
23 Q. Di d you ever di scuss t hat wi t h anybody at ATP?
24 A. No, si r .
25 Q. Di d Mar k St anl ey speak at t he conf er ence wher e you met Dr .
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1 Kar r on?
2 A. I don' t r ecal l i f he spoke at t hat conf er ence or not ; no,
3 si r .
4 Q. Have you been pr esent when Mar k St anl ey spoke t o gr ant , t o
5 hopef ul gr ant r eci pi ent s?
6 A. Yes.
7 Q. And i t ' s f ai r t o say t hat Mar k St anl ey sai d t hat t hey woul d
8 at t empt i ng t o, t o hel p anybody who got a gr ant ?
9 MR. EVERDELL: Obj ect i on.
10 A. I don' t speci f i cal l y r ecal l hi mmaki ng t hat comment .
11 Q. Wel l , di d you advi se Dr . Kar r on t hat NI ST ATP was one of
12 t he most f r i endl y or gani zat i ons t o t he r eci pi ent s?
13 A. That was my exper i ence.
14 Q. And - -
15 THE COURT: Di d you t el l hi m?
16 THE WI TNESS: I don' t r ecal l maki ng t hat , t hat
17 st at ement .
18 Q. Di d you advi se Dr . Kar r on t hat t her e i s al ways a way t o get
19 amendment s; di d you advi se Dr . Kar r on of t hat ?
20 A. I don' t under st and t he quest i on.
21 Q. Ther e' s al ways a way f or an expense t o be consi der ed, t o be
22 al l owabl e?
23 A. I don' t r ecal l t hat st at ement . That woul d seemt o be t oo
24 br oad.
25 Q. Ar e you f ami l i ar wi t h t ypes of equi pment t hat Dr . Kar r on
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1 had i n t he NI ST ATP pr oj ect ?
2 A. I was f ami l i ar t o t he ext ent t hat t hey wer e l ar ge and ver y
3 power f ul pi eces of equi pment . Ot her t han t hat , I don' t know.
4 I ' mnot a t echnol ogi st .
5 Q. And ar e you awar e t hat you coul d r evi se t he budget af t er
6 t he year was up?
7 A. Af t er what year was up?
8 Q. Wel l , i n t hi s case CASI had a budget f or - - st ar t i ng
9 Oct ober 1st , 2001 r unni ng t i l l Sept ember 30t h, 2002, cor r ect ;
10 f i r st year of t he gr ant ?
11 A. Yes.
12 Q. And t hat had you had t o r eappl y f or t he second - - di d you
13 have t o r epl y f or t he second year ?
14 A. No, si r .
15 Q. I t was aut omat i c?
16 A. I t was a t wo year gr ant .
17 Q. I sn' t i t a f act t hi s was a t hr ee year gr ant ?
18 A. Thr ee year gr ant . I don' t r ecal l whet her i t ' s t wo or
19 t hr ee.
20 Q. I BM was a t wo year gr ant ?
21 A. Yes.
22 Q. Now, i s t her e any r evi ew af t er t he f i r st year by, t hat
23 you' r e awar e of , by ATP NI ST of t he gr ant peopl e, t he CASI ?
24 MR. EVERDELL: Obj ect i on.
25 THE COURT: I ' l l al l ow t he quest i on. I ' d l i ke a t i me
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1 f r ame, t hough, Mr . Rubi nst ei n.
2 MR. RUBI NSTEI N: Okay. I ' l l wi t hdr aw t he quest i on,
3 J udge, even t hough you al l owed i t .
4 Q. Ar e you awar e t hat af t er t he f i r st year of t he gr ant , you
5 ar e r equi r ed t o submi t an audi t ?
6 A. I don' t r emember i f t hat was a speci f i c r equi r ement of t hi s
7 gr ant or not .
8 Q. Wel l , ar e you awar e as t o whet her or not you can, af t er t he
9 year i s over , i n ot her wor ds subsequent t o Sept ember 30t h,
10 2002, whet her or not you coul d r equest a budget r evi si on f or
11 t he year 2000 - - Oct ober 1, 2001, t o Sept ember 30t h, 2002?
12 A. My exper i ence wi t h ATP gr ant s i s t hat you have a t hr ee year
13 budget . You may or may not spend ever yt hi ng i n year one. You
14 can do budget amendment s as you need t hem.
15 Q. Coul d you - - you t ol d us bef or e about as you go on i n your
16 gr ant s you l ear n t hat you may have needs f or mor e money i n one
17 l i ne i t emt han anot her i t em, cor r ect ?
18 A. Yes, si r .
19 Q. You mi ght even need an addi t i onal l i ne i t emt hat you di dn' t
20 have bef or e, cor r ect ?
21 A. Yes, si r .
22 Q. The quest i on i s, af t er you f i ni sh your f i r st year , do you
23 know whet her or not i f you check over your act ual s, what you
24 r eal l y spent and what you r eal l y spent i t on, whet her you can
25 have your f i r st year budget r evi sed t o r ef l ect t hat ?
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1 A. I don' t bel i eve so.
2 Q. Wel l , l et me show you what ' s - - wel l , you' r e not sur e?
3 A. No, I ' mnot .
4 Q. Let me show you what ' s i n evi dence as gover nment Exhi bi t 4,
5 page 11.
6 MR. RUBI NSTEI N: Coul d you put t hat up on t he boar d,
7 pl ease?
8 Q. Wer e you ever pr esent at a ki ckof f meet i ng wi t h peopl e f r om
9 NI ST ATP wher e t hey - - wer e you ever pr esent at such a - -
10 A. Yes, si r , I ' ve been pr esent at ki ckof f meet i ngs, ATP
11 ki ckof f meet i ngs.
12 Q. Okay. And di d t hey gi ve you a l ot of mat er i al when you go
13 t her e?
14 A. Yes.
15 Q. And how vol umi nous i s t he mat er i al t hat t hey gi ve you.
16 A. I don' t r ecal l .
17 Q. Coul d you show us wi t h your hands as t o how - - do t hey gi ve
18 you t he CFR?
19 THE COURT: Wi t ness has i ndi cat ed about an i nch t hi ck.
20 A. No. They gave us t he CFR number s, t ol d us wher e t o go and
21 l ook.
22 Q. You have t o go l ook your sel f i n t he CFR?
23 A. Yes.
24 Q. And you see what ' s on t hat r eci pi ent r esponsi bi l i t y?
25 A. Yes.
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1 Q. And you see t he second por t i on?
2 MR. EVERDELL: Your Honor , obj ect i on. He wasn' t at
3 t he ki ckof f meet i ng f or t hi s gr ant .
4 BY MR. RUBI NSTEI N:
5 Q. Wel l , does t hat r ef r esh your r ecol l ect i on by l ooki ng at
6 t hat , t hat i n f act you coul d r evi se a budget af t er t he end of
7 each year ?
8 A. I don' t r ecal l t hat sl i de, but - - what I bel i eve t hey' r e
9 sayi ng t her e, t hough, i s i s as you go f or war d, you r evi se t he
10 t hr ee year budget , so t hat i t now l i nes up wi t h what you have
11 t o do goi ng f or war d, not t hat you go back and r evi se what ' s
12 al r eady happened, budget wi se.
13 Q. What di d you do at I BM i f you had an i t emt hat you spent
14 l ess money on dur i ng t he year ? You sai d you spent t he mi l l i on
15 dol l ar s t he f i r st year , r i ght , out of t he mi l l i on?
16 A. I don' t r ecal l what we spent t he f i r st year .
17 Q. Wel l , di d you t est i f y bef or e, you spent t he whol e mi l l i on?
18 A. I t est i f i ed t hat we spent al l t he money i n t he gr ant .
19 Q. Okay.
20 A. I di dn' t t est i f y t hat we spent i t by year .
21 Q. Di d t he l i ne i t ems - - di d you have any changes i n t he l i ne
22 i t ems?
23 A. Yes, si r .
24 Q. And when woul d you submi t t hose changes i n l i ne i t ems?
25 A. We woul d submi t t hemas we under st ood what we had t o do t o
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1 go f or war d, and t hen we woul d make t he changes t o t he budget .
2 So what we woul d t ake t he - - what we di dn' t spend i n t he pr i or
3 year on a speci f i c l i ne, and r ol l i t t o anot her l i ne i n t he - -
4 goi ng f or war d.
5 Q. And Dr . Kar r on advi sed you, when you wer e hi r ed, t hat he
6 had pr obl ems wi t h hi s pr i or gr ant admi ni st r at or s, cor r ect ?
7 A. Yes, si r .
8 Q. And t he submi ssi on - - excuse me. And Dr . Kar r on want ed you
9 t o submi t as par t of your r evi si on 100 page, 100 addi t i onal
10 pages, cor r ect ?
11 A. I don' t know how many pages wer e, but i t was a si gni f i cant
12 vol ume of document s, st at i ng t echni cal r ef er ences and such.
13 They r eal l y di dn' t have anyt hi ng t o do wi t h t he budget i t sel f .
14 Q. Why don' t you t ake a l ook at page t wo of t he document t hat
15 I gave you and see i f t hat r ef r eshes your r ecol l ect i on as t o
16 t he si ze?
17 THE COURT: Page t wo of what document ?
18 MR. RUBI NSTEI N: 3506A.
19 A. Yes, si r .
20 THE COURT: Ar e you goi ng t o show t hat t o hi m?
21 THE WI TNESS: I have i t .
22 THE COURT: You have i t ?
23 THE WI TNESS: I t ' s her e.
24 THE COURT: Oh.
25 Q. You see t he f i r st f ul l par agr aph?
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1 A. Yes.
2 Q. And, i n f act , he want ed you t o i ncl ude i n excess of a
3 hundr ed pages - -
4 A. Yes.
5 Q. - - t o j ust i f y t he budget ?
6 MR. EVERDELL: Obj ect i on. He' s r eadi ng f r omt he
7 document t hat ' s not i n evi dence.
8 THE COURT: I ' msor r y?
9 MR. EVERDELL: He' s r eadi ng f r oma document not i n
10 evi dence.
11 THE COURT: Yes, obj ect i on sust ai ned.
12 Q. Wel l , i s i t a f act t hat you t est i f i ed on di r ect as t o
13 di scussi ons wi t h Dr . Kar r on about t he submi ssi on of t hi s
14 r evi sed budget once you came aboar d, cor r ect ?
15 A. Yes.
16 Q. And Dr . Kar r on suggest s t hat you i ncl ude i n excess of 100
17 pages of backup t o t he budget r evi si on r equest ?
18 A. He pr ovi ded t he pages. He di d al l t hat wor k.
19 Q. And wer e you abl e t o convi nce hi mt o r educe t he number of
20 pages t hat you submi t t ed?
21 A. Not by much.
22 Q. He di d r educe t he pages, cor r ect ?
23 A. Yes, si r .
24 Q. And your f eel i ng was t hat ATP woul dn' t even l ook at al l
25 t hose pages, so t her e was no sense i n submi t t i ng t hem, cor r ect ?
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1 A. Si r , t hi s was a budget amendment . I t wasn' t a t echni cal
2 amendment . I t was - - he wasn' t changi ng t he t echni cal
3 di r ect i on of hi s pr oj ect , and submi t t i ng al l t hat t echni cal
4 dat a t o t he budget peopl e woul d make t hemwonder what we' r e
5 doi ng.
6 Q. You t hought t hat i t mi ght r ai se a r ed f l ag t hat peopl e
7 di dn' t know what t hey wer e doi ng at CASI ?
8 A. Yes.
9 Q. By submi t t i ng t hi s ki nd of pr ovi si on - -
10 MR. EVERDELL: Obj ect i on.
11 Q. - - r i ght ?
12 MR. EVERDELL: Obj ect i on.
13 THE COURT: Wel l , I ' l l al l ow t he quest i on i f you want
14 t o ask i t , Mr . Rubi nst ei n.
15 Q. I n f act , you wer e concer ned t hat t he r evi si on woul d be
16 r ej ect ed j ust on t he f or mof t he submi ssi on?
17 A. I was concer ned t hat i t woul d be sl owed down i n t he
18 pr ocess. I was not concer ned t hat t hey woul d r ej ect i t out of
19 hand.
20 Q. I sn' t i t a f act t hat you i ndi cat ed t o Dr . Kar r on t hat t he
21 pr i or r evi si on r equest appear ed - - woul d appear - - appear ed t o
22 ATP t hat CASI di dn' t know what t hey wer e doi ng?
23 A. I don' t r ecal l t hat .
24 Q. Why don' t you l ook at page t wo of your af f i davi t , 3506A,
25 and t ake a l ook at t he second f ul l par agr aph.
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1 A. Yes.
2 Q. And does t hat r ef r esh your r ecol l ect i on as t o t el l i ng Dr .
3 Kar r on t hat t he pr i or mul t i pl e budget r evi si ons appear ed t o ATP
4 l i ke CASI di dn' t know what t hey wer e doi ng?
5 ( Pause)
6 A. I was concer ned t hat t he ATP f i nanci al t eamwoul d not be
7 abl e t o get t hr ough al l of t he t echni cal babbl e.
8 Q. Now, when you wer en' t get t i ng r esponses f r omATP f r omyour
9 i nqui r i es, di d you ask whet her or not you had been appr oved?
10 A. I cal l ed ATP t o ask about t he st at us of t he budget
11 amendment and di d not r ecei ve any r esponse.
12 Q. And you knew t hat i n t hei r budget amendment was a r equest
13 t o have you r epl ace t he posi t i on t hat had or i gi nal l y been
14 occupi ed by Lee Gur f ei n, cor r ect ?
15 A. Yes, si r .
16 Q. And i t ' s f ai r t o say t hat you f el t your cr edent i al s
17 suppor t ed your bei ng appr oved f or t he posi t i on, r i ght ?
18 MR. EVERDELL: Obj ect i on.
19 THE COURT: Obj ect i on over r ul ed.
20 A. I - - yes.
21 Q. Di d t hi s r ai se a r ed f l ag i n your mi nd as t o t hat t her e
22 wer e pr obl ems her e at CASI ?
23 THE COURT: That what ?
24 MR. EVERDELL: Obj ect i on.
25 Q. The f act t hat nobody woul d speak t o you as t he busi ness
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1 manager f or CASI f r omATP?
2 A. I t was not consi st ent wi t h my exper i ence, so I was
3 concer ned t hat t her e was somet hi ng goi ng on, but I di dn' t know
4 what i t was or - - whet her i t was r el at ed t o CASI or somet hi ng
5 goi ng on at NI ST.
6 Q. Di d you speak t o Dr . Kar r on about i t ?
7 A. Dr . Kar r on was awar e t hat we had hear d not hi ng.
8 Q. Di d you ask hi mi f he coul d cal l t he peopl e at ATP?
9 A. He - - I knew he was cal l i ng and t al ki ng t o t hem.
10 Q. So because he r epor t ed t hat t o you, he r epor t ed he was
11 speaki ng t o t he peopl e at NI ST?
12 A. Yes.
13 Q. Di d you ask hi m, di d you ask about my appr oval ?
14 A. I don' t r ecal l t hat , no.
15 Q. Ar e you awar e, si r , t hat i f t he budget - - you know t hat you
16 never got a budget r evi si on appr oval , cor r ect ?
17 A. Yes, si r .
18 Q. And your appr oval was at t ached t o t he budget appr oval ,
19 r i ght ?
20 A. Yes.
21 Q. So t hat i f t he budget wasn' t appr oved, you had t o know, di d
22 you not , t hen you wer en' t appr oved?
23 A. I di dn' t know whet her t he budget was appr oved or not . I
24 knew t her e was no r esponse. I di dn' t have a yes, I di dn' t have
25 a no.
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1 THE COURT: I s t hi s a good pl ace t o br eak, Mr .
2 Rubi nst ei n?
3 MR. RUBI NSTEI N: Yes, your Honor .
4 THE COURT: Let ' s br eak f or t he mor ni ng br eak. Be
5 back bet ween f i ve and t en mi nut es.
6 ( J ur y exi t s t he cour t r oom)
7 ( I n open cour t ; j ur y not pr esent )
8 THE COURT: St ep down. You want an i nst r uct i on, Mr .
9 Rubi nst ei n?
10 MR. RUBI NSTEI N: No. I want hi mt o be car ef ul when he
11 wal ks by. I t seems l i ke i t ' s hi gher t oday t han bef or e, I .
12 MR. EVERDELL: You can wai t i n our wi t ness r oomand
13 we' l l cal l you.
14 THE COURT: You can use t he men' s r oom, and wat ch your
15 st ep.
16 MR. RUBI NSTEI N: J udge i n an abundance of caut i on, di d
17 we r esol ve t he i ssue on t he al t er at i ons i n t he apar t ment ?
18 Because I have a - - I don' t t hi nk we act ual l y r esol ved t hat
19 i ssue. I have a wi t ness r el at ed t o i t . I j ust want t o make
20 sur e t hat , you know.
21 THE COURT: Wel l , I asked you al l t o r esol ve t he
22 i ssue.
23 MR. RUBI NSTEI N: Yes.
24 THE COURT: And, appar ent l y, you coul dn' t r each a
25 r esol ut i on.
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1 MR. RUBI NSTEI N: Ri ght , al l r i ght .
2 THE COURT: I suggest ed one, but I wasn' t sur e i t met
3 wi t h your appr oval .
4 MR. RUBI NSTEI N: That was sor t of my r ecol l ect i on,
5 but - - t hank you.
6 THE COURT: I t hought you coul d - - I t hought your - -
7 as I under st and, your pr obl emi s t hat t hey use t he t er m
8 al t er at i ons t hat what t hey use i n t hei r - -
9 MR. RUBI NSTEI N: I mpr ovement s.
10 THE COURT: You say si t e i mpr ovement i s al l owed.
11 MR. RUBI NSTEI N: Yes, t hey use t he wor d - -
12 THE COURT: And you cl ai msi t e i mpr ovement , t hey cl ai m
13 i t ' s, you know, an al t er at i on t o t he - -
14 MR. RUBI NSTEI N: Wel l - -
15 THE COURT: I don' t know whet her i t ' s si t e i mpr ovement
16 or not . As I under st and i t , i t ' s basi cal l y shel ves.
17 MR. RUBI NSTEI N: Al l r i ght .
18 THE COURT: But t hey' r e not cl ai mi ng - - t hey woul d
19 st i pul at e, as I under st and i t , t hat t hey' r e not maki ng any
20 cl ai mt hat i t ' s i mpr oved t he, what ever t hey wer e i mpr oved, t he
21 val ue of t he apar t ment - -
22 MR. RUBI NSTEI N: Ri ght .
23 THE COURT: - - f or hi s per sonal benef i t .
24 MR. RUBI NSTEI N: Ri ght . Wel l , i t ' s a ver y - -
25 THE COURT: I t ' s j ust t hat t hey wer e not al l owed under
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1 t he t er ms of t he gr ant .
2 MR. RUBI NSTEI N: Exact l y, exact l y.
3 THE COURT: I ' d be gl ad t o i nst r uct t hemal ong t hose
4 l i nes. Your Honor , I t hi nk t hat ' s r i ght as your Honor j ust
5 phr ased i t . We' r e not cl ai mi ng t hat - - we' r e not t aki ng a
6 posi t i on on how t hose i mpr ovement s or r enovat i ons or
7 al t er at i ons cur r ent cost i ncr eased or decr eased t he val ue of
8 t hi s, hi s pr oper t y. Al l we' r e sayi ng i s t hat he used t hose, he
9 used gr ant f unds t o make t hose al t er at i ons.
10 Now, t her e may have been some busi ness pur pose t hat he
11 made t hese al t er at i ons; ot her wi se, he woul dn' t have made i t as
12 an economi c r at i onal bei ng. But we' r e not sayi ng t hat i t
13 i ncr eased t he mar ket val ue of hi s pr oper t y, j ust l i ke i f you
14 pai nt your house bl ack f or some r eason.
15 THE COURT: You' r e not sayi ng al so, as I under st and
16 i t , t hat t her e was - - t hat t he onl y - - t he onl y t hi ng t hey' r e
17 sayi ng i s, as I under st and i t , i s t hat t he al t er at i ons, t he
18 cost of t he al t er at i on was not a r ei mbur sabl e expense under t he
19 gr ant .
20 MR. RUBI NSTEI N: But t hey want t o l eave - -
21 THE COURT: Now, you' r e sayi ng t her e was si t e
22 i mpr ovement . I don' t know what si t e i mpr ovement means, and I
23 don' t know whet her what al t er at i ons mean. Obvi ousl y,
24 al t er at i on coul d be si t e i mpr ovement , and - -
25 MR. RUBI NSTEI N: Then I t hi nk I have t o cal l t he
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1 wi t ness. I t hi nk you' r e r i ght , J udge; t her ef or e, we' r e goi ng
2 t o cal l t he wi t ness.
3 THE COURT: I mean, i t may be j ust a mat t er of
4 semant i cs and maybe i t ' s not wor t h t he gover nment pr essi ng t he
5 i ssue. Maybe you can get - -
6 MR. RUBI NSTEI N: The wi t ness won' t be t hat l ong,
7 J udge.
8 THE COURT: Al l r i ght .
9 MR. KWOK: Your Honor , bef or e we r est and I guess
10 af t er we' r e done wi t h t hi s - -
11 THE COURT: Put t i ng al l t hose comput er s i nt o t he
12 apar t ment woul d al so pr obabl y di mi ni sh t he mar ket val ue of t he
13 apar t ment . I t j ust woul dn' t make i t easy t o sel l .
14 MR. RUBI NSTEI N: We di dn' t have t hat pr obl embecause
15 t he gover nment came and r emoved ever yt hi ng, J udge.
16 THE COURT: I n cr oss- exami nat i on, I can hear t hat
17 bei ng beat en and br ought up. Anyway.
18 MR. KWOK: Can we j ust move ont o a di f f er ent sl i ght l y
19 di f f er ent i ssue your , Honor ?
20 THE COURT: Yes.
21 MR. KWOK: Af t er we' r e done wi t h t hi s wi t ness and
22 bef or e t he gover nment r est s, we i nt end t o r ead a st i pul at i on
23 t hat i nt r oduces i nt o t he r ecor d a di sk pr ovi ded by t he
24 def endant whi ch cont ai ns e- mai l s bet ween Dr . Kar r on and ot her s
25 i n t he company, and we i nt end t o - -
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1 THE COURT: I haven' t seen t hat st i pul at i on i n t he
2 i ssues submi t t ed.
3 MR. KWOK: I t hi nk i t ' s - -
4 THE COURT: I s i t an exhi bi t ?
5 MR. KWOK: I t ' s gover nment exhi bi t 90 - -
6 THE COURT: Gover nment exhi bi t 90?
7 MR. KWOK: 902.
8 THE COURT: Oh 902. Wel l , 902 ment i ons Exhi bi t 1000.
9 I don' t know anyt hi ng about exhi bi t 1000.
10 MR. KWOK: That i s act ual l y t he di sk t hat I ' m
11 r ef er r i ng t o.
12 THE COURT: I don' t know what was i n 1000. You may
13 have a l ot of pr obl ems wi t h 1000.
14 MR. KWOK: I t ' s - -
15 THE COURT: How amI goi ng t o r ul e on t hat ? I mean
16 i t ' s st i pul at ed - - you st i pul at ed i t i n, so I don' t have t o.
17 MR. KWOK: We st i pul at ed t o i t .
18 Al l I ' msayi ng i s we want t o r ead t hat st i pul at i on
19 i nt o t he r ecor d, and t hen publ i sh a f ew of t he e- mai l s
20 ext r act ed f r omt hi s di sk t o publ i sh t hat t o t he j ur y. I t ' s not
21 goi ng t o t ake ver y l ong. I hope i t ' s goi ng t o be si x, r oughl y
22 shor t .
23 THE COURT: I f you' r e publ i shi ng e- mai l s, be sur e you
24 gi ve what comes bef or e or what comes - - I mean you' ve got t o - -
25 MR. RUBI NSTEI N: Wel l , t hey have t o show me what
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1 t he - - I st i pul at ed t hi s was - -
2 THE COURT: You bet t er show hi mwhat por t i ons you' r e
3 goi ng t o i f you' r e not goi ng t o publ i sh t he whol e t hi ng.
4 MR. KWOK: We wi l l do t hat , we wi l l .
5 THE COURT: You bet t er agr ee on t he por t i on you' r e
6 goi ng t o do.
7 Al l r i ght , l et ' s t ake our f i ve mi nut es and get back.
8 The j ur y' s had f i ve mi nut es.
9 ( Recess t aken)
10 THE COURT: Al l r i ght , l et ' s br i ng i n t he wi t ness - - I
11 mean t he j ur y and t he wi t ness.
12 ( J ur y ent er i ng)
13 THE COURT: Al l r i ght , pl ease be seat ed.
14 Mr . Rubi nst ei n.
15 BY MR. RUBI NSTEI N:
16 Q. Di d you send an e- mai l t o Dr . Kar r on on Apr i l 19t h, 2004
17 r el at ed t o your exper i ence at CASI ?
18 A. I don' t r ecal l .
19 Q. Let me show you t hi s document t hat ' s been mar ked as
20 def endant ' s U f or i dent i f i cat i on?
21 THE DEPUTY CLERK: U as i n under ?
22 MR. RUBI NSTEI N: Ri ght , Rober t .
23 THE COURT: What was t he dat e?
24 MR. RUBI NSTEI N: Apr i l 19t h, 2004.
25 THE COURT: Thank you.
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1 ( Pause whi l e wi t ness r evi ews document )
2 A. I ' ve r ead i t , yes.
3 Q. Di d you send t hat t o Dr . Kar r on?
4 A. I t appear s I di d.
5 Q. And was i t your eval uat i on of ATP t hat Hope Snowden was
6 onl y i nt er est ed i n whet her - -
7 MR. EVERDELL: Obj ect i on.
8 Q. - - CASI dot t ed al l t he I ' s and cr ossed al l t he T' s?
9 MR. EVERDELL: He' s r eadi ng f r omt he document .
10 THE COURT: Obj ect i on sust ai ned. I t ' s not i n evi dence
11 yet .
12 MR. RUBI NSTEI N: Okay. I woul d of f er t hi s i nt o
13 evi dence, def endant ' s U.
14 MR. EVERDELL: No obj ect i on, your Honor .
15 THE COURT: No obj ect i on? Exhi bi t U i s admi t t ed i n
16 evi dence.
17 ( Def endant ' s Exhi bi t U r ecei ved i n evi dence)
18 Q. Woul d you r ead - - t hi s i s pr i or t o t he t i me t hat you wer e
19 appr oached by t he f eder al agent s, cor r ect ?
20 A. Yes.
21 Q. Woul d you r ead what ' s i n evi dence as def endant ' s U?
22 A. Al l of i t ?
23 Q. Yes, pl ease.
24 A. As you know, one of my f i r st act s was t o assi st i n t he
25 submi ssi on of t he CASI r esponse t o t he mul t i page quest i onnai r e
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1 t ossed at CASI . Thi s r esponse i ncl uded a budget and amendment ,
2 al ong wi t h a r equest t o have i mmedi at e - -
3 THE COURT: You have t o sl ow down a l i t t l e bi t .
4 A. Thi s r esponse i ncl uded a budget amendment , al ong wi t h a
5 r equest t o have me acknowl edged as your admi ni st r at or . Hope
6 i gnor ed bot h r equest s. We never r ecei ved any acknowl edgment ,
7 ver bal or i n wr i t i ng, t hat our r esponse amendment r equest woul d
8 or woul d not be appr oved.
9 As such, I was never appr oved as t he admi ni st r at or ,
10 and Hope woul d not answer or r et ur n my phone cal l s. I was a
11 non- par t i ci pant and, t her ef or e, someone t o be i gnor ed.
12 The f act t hat I had ei ght year s exper i ence wi t h ATP
13 pr oj ect s as an admi ni st r at or , wi t hout any audi t pr obl ems, and a
14 l i t any of ATP r ef er ences whi ch Hope never bot her ed t o check,
15 di dn' t appear t o be vi ewed as a posi t i ve addi t i on t o t he
16 pr oj ect . The r ar e communi cat i ons we di d r ecei ve wer e addr essed
17 t o Dr . Kar r on or Pet er Ross, i gnor i ng t he f act t hat ATP was
18 i nf or med Pet er was no l onger i nvol ved. I t was ver y f r ust r at i ng
19 and, appar ent l y, i n di r ect opposi t i on t o what woul d have been
20 i n t he best i nt er est s of bot h CASI and NI ST. Ms. Snowden
21 appear ed t o be a bur eaucr at t ot al l y di si nt er est ed i n t he
22 success of t he pr oj ect and onl y i nt er est ed i n whet her CASI
23 dot t ed al l t he I ' s and cr ossed al l t he T' s, associ at ed wi t h a
24 r i gi d under st andi ng of t he ATP and ot her r el evant f eder al
25 gui del i nes. She consi st ent l y i gnor ed CASI at t empt s t o pr ovi de
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1 ser vi ce whi ch woul d hel p t he pr oj ect and her , i n t he meant i me.
2 She bel i eved CASI was out of cont r ol f r omt he begi nni ng, and
3 t he number of per sonnel changes and amendment r equest s pr oved
4 her r i ght i n her mi nd. Ther e was no way gi ven t o t he
5 possi bi l i t y t hat changes wer e dr i ven by Dr . K' s l ack of ATP
6 exper i ence or assi st ance of f er ed t o hel p Dr . Kar r on gr appl e
7 wi t h t he ATP quagmi r e.
8 ATP i s as r esponsi bl e f or t he st at e of t he CASI
9 pr oj ect as anyone. Sor r y, but t hat ' s t he best r ecol l ect i on I
10 can must er .
11 Q. Now, ar e you f ami l i ar wi t h - -
12 THE COURT: Now, t hi s, appar ent l y, has a - - t hi s
13 exhi bi t cont ai ns mor e t han j ust t he e- mai l of doct or - - of t he
14 wi t ness, Mr . Benedi ct . So i s i t goi ng t o be cr opped i n some
15 way?
16 MR. RUBI NSTEI N: Yes, your Honor . Yes.
17 THE COURT: So t hat i t ' s one page?
18 THE WI TNESS: Yes. Thi s l et t er was i n r esponse t o a
19 e- mai l f r omDr . Kar r on.
20 THE COURT: No, never mi nd.
21 MR. EVERDELL: Your Honor , I t hi nk we need t he f ul l
22 e- mai l f or t he under st andi ng.
23 THE COURT: What ?
24 MR. EVERDELL: I t hi nk we need t he f ul l under st and - -
25 THE COURT: You want i t i n?
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1 MR. EVERDELL: I ' msor r y?
2 THE COURT: You want bot h e- mai l s i n?
3 MR. RUBI NSTEI N: No pr obl em.
4 THE COURT: Bot h par t i es agr ee?
5 MR. RUBI NSTEI N: I f t hey want i t i n.
6 THE COURT: No obj ect i on?
7 MR. RUBI NSTEI N: I have no obj ect i on.
8 THE COURT: Al l r i ght . Then t he ent i r e exhi bi t wi l l
9 be admi t t ed i n evi dence. I j ust have t o make sur e t hat - - so
10 i t cont ai ns t wo messages, al l r i ght .
11 Q. Mr . Benedi ct , do you know what sunk cost s ar e?
12 A. Sunk?
13 Q. Yes, s- u- n- k cost s?
14 A. Those ar e cost s t hat have been i ncur r ed al r eady.
15 Q. And ar e t hey - - do t hey have t o be expended or coul d t hey
16 be accr ued?
17 A. Sunk cost s ar e - - dependi ng on your account i ng met hod, i f
18 you' r e on accr ual account i ng met hod, accr ued cost coul d be
19 consi der ed sunk cost . I f you' r e on a cash met hod, i t ' s onl y
20 cash cost s.
21 Q. Wel l , ar e you f ami l i ar wi t h pr e- gr ant pur chases?
22 A. They' r e not al l owed.
23 Q. I asked ar e you f ami l i ar wi t h i t ?
24 A. Yes.
25 Q. And i t ' s your opi ni on t hat t hey' r e not al l owed?
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1 A. I t ' s not my opi ni on. I t ' s ATP gui dance.
2 Q. ATP coul d wai ve any r ul e t hat t hey have, cor r ect ?
3 A. I don' t know what ATP can or wi l l do.
4 Q. Wel l , i f cost s ar e expended i n pr epar at i on f or t he gr ant t o
5 be used f or t he gr ant , i t ' s up t o ATP t o deci de whet her or not
6 t hey' r e goi ng t o pr ove t hose cost s or not ?
7 A. That woul d seemt o be okay.
8 Q. And j ust as i n r ent , whi ch i s consi der ed, gener al l y
9 speaki ng, al most al ways as an i ndi r ect cost , cor r ect ?
10 A. Yes.
11 Q. Now, do you under st and - - you have an account i ng
12 backgr ound, cor r ect ?
13 A. Yes, si r .
14 Q. Educat i on wi se and exper i ence wi se?
15 A. Yes, si r .
16 Q. And ar e you f ami l i ar wi t h t he backgr ound as t o why r ent i s
17 consi der ed by i n t he ATP gr ant as i ndi r ect cost ?
18 A. Yes.
19 Q. And why i s t hat ?
20 A. Busi nesses ar e pr esumed t o be i n exi st ence when t hey appl y
21 f or an ATP gr ant as a busi ness.
22 As a busi ness al r eady i n pl ace, you' r e al r eady payi ng
23 your r ent , you' r e al r eady payi ng your heat , you' r e al r eady
24 payi ng t hose t hi ngs.
25 ATP i s i nt er est ed i n f undi ng pr oj ect s, not r ent , not
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1 el ect r i ci t y, not ot her t hi ngs. So t hey wi l l not al l ow you t o
2 i ncl ude what you' r e al r eady spendi ng as a nor mal busi ness as
3 par t of t he gr ant , as a si ngl e gr ant .
4 Q. Does i t make a di f f er ence i f you' r e on t he accr ual basi s?
5 A. No. Whet her you' r e on accr ual or cash basi s, r ent i s r ent ;
6 i t ' s an i ndi r ect expense.
7 Q. And you had di scussi on so t hat - - what about an i t em
8 pur chased bef or e t he gr ant , pur chased l et ' s say - - r ent st ar t ed
9 Oct ober 1st , 2001, an i t emt hat was pur chased i n t he end of
10 Sept ember 2001 was del i ver ed af t er t he gr ant st ar t ed i n
11 Oct ober , pai d f or by year end, woul d t hat be an appr opr i at e
12 expense at t r i but abl e t o t he NI ST gr ant ?
13 A. Um, you' d have t o ask NI ST t hat quest i on. I don' t know.
14 Gi ve me t he speci f i c i t em.
15 Q. Let ' s say a - -
16 THE COURT: Let ' s not say. Let ' s gi ve - - he want s a
17 speci f i c i t em.
18 Q. An SGI comput er ?
19 A. I f you cont r act wi t h SGI t o del i ver a comput er af t er t he
20 st ar t dat e of t he gr ant , t hen yes.
21 I f you cont r act wi t h SGI t o del i ver t he comput er pr i or
22 t o t he st ar t dat e of t he gr ant , no.
23 Q. Now, you hel ped, di d you not , pr epar e r evi sed quar t er l i es
24 i n t hi s case?
25 A. Yes, I di d.
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1 Q. And when di d you do t hat ?
2 A. They wer e r eady i n t he mi ddl e of J ul y, but as we wer e
3 wor ki ng on t he cover l et t er , t hey di dn' t get submi t t ed t i l l t he
4 mi ddl e of August .
5 Q. Of ' 03?
6 A. Of ' 03.
7 Q. And t hey wer e act ual l y submi t t ed on August 13t h, ' 03, t he
8 same t i me you submi t t ed t he cover l et t er , cor r ect ?
9 A. Yes, si r .
10 Q. And what f i nanci al s di d you use t o cr eat e t he r evi sed
11 st at us r epor t ? I bel i eve i t ' s 41A, 42A, 43A?
12 A. I used t he moni es t hat t hey dr ew down f r omATP as t he
13 expendi t ur es, because t hat was t he onl y t hi ng t hat I coul d - -
14 t hat was t he onl y t hi ng i n t he books t hat I coul d dr aw a l i ne
15 t o and say t hi s i s wher e t he number came f r om. Anyt hi ng el se I
16 woul d' ve been guessi ng, and t hat woul d have been i naccur at e as
17 t he or i gi nal r epor t s.
18 Q. Wel l , when you ar r i ved at CASI , t he syst emwas - - t he
19 bookkeepi ng syst emwas i n di sar r ay, cor r ect ?
20 A. Yes.
21 Q. Di d you - - you l ooked at t he r ecor ds?
22 A. Yes.
23 Q. Your sel f ?
24 A. Yes.
25 Q. Was Ken J ackson Gr oup i nvol ved at t hat t i me when you
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1 ar r i ved?
2 A. Yes.
3 Q. And wer e t hey i nvol ved i n cr eat i ng new books f or CASI ?
4 A. They wer e - - I asked t hemt o cr eat e an ATP set of
5 f i nanci al s, whi ch woul d mean r ecl assi ng dat a on t he exi st i ng
6 syst em. I t doesn' t mean changi ng any number s. I t j ust means
7 put t i ng i t i n a di f f er ent bucket .
8 Q. And, i n f act , when you sai d t hat Dr . Kar r on woul d go t o t he
9 comput er , he woul d put st uf f i n a di f f er ent bucket , r i ght ?
10 A. Yes.
11 Q. He woul dn' t change anyt hi ng, cor r ect ?
12 A. He woul d change t he bucket .
13 Q. The bucket . But he woul dn' t del et e an expense?
14 A. No.
15 Q. Woul d he change what t he expense was f or ?
16 A. No.
17 Q. As a mat t er of f act , he had i nvoi ces or backup f or ever y
18 expense t hat he i ncur r ed, r i ght ?
19 A. They wer e al l on t hat paper r epor t syst em. I coul dn' t t el l
20 you whet her he di d or he di dn' t . I j ust knew ever yt hi ng was
21 t her e.
22 Q. And when you spent t i me i n New Yor k, how much t i me di d you
23 spend i n New Yor k?
24 A. I spent pr obabl y t hr ee days a mont h unt i l t he audi t s, and
25 t hen i t was a week at a t i me.
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1 THE COURT: Ful l week you sai d?
2 THE WI TNESS: Par don me?
3 THE COURT: Fi ve days a week?
4 THE WI TNESS: Fi ve days a week. The f i r st , f or t he
5 f i r st audi t , and when t he second audi t came I bel i eve I was
6 her e f or t wo consecut i ve weeks.
7 THE COURT: When you say t he f i r st audi t , what ar e you
8 r ef er r i ng t o t her e?
9 THE WI TNESS: OI G came i n i n J une, I bel i eve, and
10 st ar t ed somet hi ng, and t hen i t was br oken f or an OI G r eason and
11 t hen she l ef t and came back and compl et ed i t .
12 THE COURT: And when di d she come back?
13 THE WI TNESS: I bel i eve i n August .
14 THE COURT: I see.
15 Q. I t was your under st andi ng t hat you and J oan Hayes and Fr ank
16 Spr i ngs wer e t o wor k t oget her on t he - - t o char t t he account s
17 and cr eat e a new set of books f or CASI ?
18 A. I t was my under st andi ng t hat I was wor ki ng wi t h Fr ank
19 Spr i ngs and t hat J oan was an i nt er est ed par t y, but not act ual l y
20 i nvol ved i n maki ng any of t he cl assi f i cat i ons on t he books.
21 THE COURT: Why was she an i nt er est ed par t y?
22 THE WI TNESS: Because she' s t he audi t or of - - f or
23 CASI , and she woul d be i nt er est ed i n - - she had t o f i l e t ax
24 r epor t s and ot her f i nanci al dat a - - do an audi t f or Dr . Kar r on.
25 THE COURT: An audi t f or Dr . Kar r on?
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1 THE WI TNESS: Uh- huh.
2 THE COURT: Of what ?
3 THE WI TNESS: Of bot h t he ATP pr oj ect and of CASI as a
4 cor por at i on.
5 Q. Wer e you war e whet her or not J oan Hayes was doi ng Dr .
6 Kar r on' s per sonal t axes?
7 A. Yes, I was awar e of t hat .
8 Q. And she was, cor r ect ?
9 A. I have no f i r st hand evi dence t hat she was, but I l ear ned
10 t hat i n di scussi on.
11 Q. And when you woul d come t o New Yor k t hese t hr ee days a
12 week, woul d you go t o - -
13 A. That was once a mont h t hr ee days a week.
14 Q. Once a mont h t hr ee days a week, woul d you go t o CASI ?
15 A. Yes.
16 Q. Or woul d you go t o Fr ank Spr i ngs?
17 A. No. I woul d go t o CASI ' s f i r st . I woul d per i odi cal l y
18 spend t i me a day or so at Fr ank Spr i ngs.
19 Q. And di d t her e come a t i me whi l e Ken - - t he Ken J ackson
20 Gr oup was a bookkeepi ng gr oup?
21 A. Yes, si r .
22 Q. And Spr i ngs was assi gned t o t hi s pr oj ect ?
23 A. Yes.
24 Q. And di d t her e come a t i me t hat checks st ar t ed t o bounce
25 wi t h r egul ar i t y?
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1 A. Not t hat I ' mawar e of .
2 Q. And i s i t your t est i mony t hat you r ecommended t hat t he
3 bookkeepi ng be done of f - si t e?
4 A. Yes.
5 Q. And when di d you do t hat ?
6 A. Apr i l , Mar ch Apr i l , 2003.
7 Q. I sn' t i t a f act t hat - - f i r st , i sn' t i t a f act t hat you
8 came aboar d as wor ki ng f or CASI somet i me i n Mar ch of ' 03?
9 A. No. Came on boar d i n J anuar y.
10 Q. And do you have any document t hat you coul d poi nt t o t o
11 r ef r esh your r ecol l ect i on about t hat or ar e you sur e of t hat ?
12 A. I ' mr el at i vel y sur e of t hat , because t he budget amendment
13 was st ar t ed i n December of ' 02, and I was st i l l wor ki ng f or
14 Axi omat t hat t i me.
15 Q. Let me show you what ' s mar ked as def endant ' s R f or
16 i dent i f i cat i on and ask you i f you r ecogni ze what ' s i n
17 def endant ' s R f or i dent i f i cat i on?
18 A. Yeah. I t says Mar ch 1st .
19 Q. And i s t hat an e- mai l t hat you wer e c. c. ' d on?
20 A. Yes.
21 MR. RUBI NSTEI N: We' d of f er def endant ' s R i nt o
22 evi dence, your Honor ?
23 THE WI TNESS: I n r ef er ence t o t hat e- mai l addr ess,
24 however , I di dn' t use i t . So i t ' s qui t e possi bl e I never saw
25 t hat e- mai l .
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1 MR. EVERDELL: Obj ect i on, your Honor . He can' t
2 aut hent i cat e i t .
3 THE COURT: What ? Does i t r ef r esh your r ecol l ect i on?
4 THE WI TNESS: No, si r . I don' t r ecal l seei ng t hat
5 e- mai l .
6 Q. Wel l , does i t r ef r esh your - -
7 THE COURT: Do i t r ef r esh your r ecol l ect i on t hat you
8 f axed a document i n Mar ch?
9 THE WI TNESS: No.
10 THE COURT: The exhi bi t i s not admi t t ed.
11 ( Cont i nued on next page)
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1 BY MR. RUBI NSTEI N:
2 Q. I sn' t i t a f act t hat Dr . Kar r on suggest ed t o you i n Mar ch
3 of 2003 t hat t he bookkeepi ng be moved of f si t e?
4 A. I don' t r ecal l t hat , si r , no.
5 Q. And t o your knowl edge, how l ong was Fr ank Spr i ng wor ki ng on
6 t he books of CASI ?
7 A. He was t her e when I got t her e. I don' t know how l ong he
8 was t her e bef or e I got t her e.
9 Q. Di d you use hi s number s t o submi t your f i nanci al st at ement
10 r evi si on?
11 A. I used t he number s t hat wer e dr awn down f r omATP, t he
12 act ual s.
13 Q. And di d Fr ank Spr i ng cr eat e some ki nd of spr eadsheet
14 showi ng t he act ual s?
15 A. No.
16 Q. Now - -
17 THE COURT: What do you mean you used t he f unds t hat
18 wer e dr awn down f r omATP?
19 THE WI TNESS: Thi s gr ant was not a r ei mbur sement
20 gr ant , i t was an advance gr ant , whi ch means t hat as he needed
21 money he coul d submi t a r equest t o ATP f or a cer t ai n amount of
22 money and t hey woul d send hi mt he money, and i n gr ant par l ance
23 t hat ' s cal l ed dr awi ng down.
24 THE COURT: Once t he money was dr awn down, your r epor t
25 woul d r ef l ect what ?
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1 THE WI TNESS: My r epor t woul d r ef l ect t he amount of
2 money he t ook f r omATP.
3 THE COURT: Dr awn down.
4 THE WI TNESS: Yes. What t he r epor t shoul d have shown
5 was t he amount of ATP money t hat was dr awn down t hat was
6 act ual l y spent on t he gr ant , but si nce I coul dn' t t el l because
7 ever yt hi ng was mi xed t oget her what was spent on t he gr ant and
8 what was spent f or ot her non- gr ant r el at ed i t ems, I coul dn' t
9 accur at el y put any number i n t her e, so t he onl y accur at e number
10 I coul d f i nd t hat ATP mi ght f i nd some associ at i on wi t h was t he
11 dr aw- down.
12 Q. And t hi s i s i n J ul y or August of 2003?
13 A. Yes, J ul y of 2003.
14 Q. And - -
15 A. And you wi l l not i ce t hat f our t h quar t er 2002, f i r st quar t er
16 2003 and second quar t er 2003 r epor t s wer e al l submi t t ed on t hat
17 dat e.
18 Q. Cor r ect . August 13.
19 A. Yes.
20 Q. 2003. Now, t hese r epor t s wer e submi t t ed af t er - -
21 wi t hdr awn.
22 Wer e t hese r epor t s, t he r evi sed f i nanci al st at ement
23 r epor t s, submi t t ed af t er you r ecei ved t he f i r st r epor t f r om
24 Ri l ey, I t hi nk t hey cal l ed i t a f l ash audi t r epor t ? Had you
25 r ecei ved t hat ?
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1 A. I don' t r ecal l t he exact dat e of t hat r epor t , no, si r , but
2 I know t hat t hese r epor t s wer e pr epar ed i n t he mi ddl e of J ul y.
3 I don' t r ecal l t he dat e of t he f l ash r evi ew.
4 Q. Wel l , di d you r ecei ve i t - - do you know i f you r ecei ved a
5 f l ash r evi ew as soon as i t was submi t t ed?
6 A. I don' t know.
7 Q. Woul d J ul y 3, 2003 r ef r esh your r ecol l ect i on of t he dat e of
8 t he f l ash r epor t ?
9 A. No, si r , i t doesn' t .
10 Q. Now, di d t her e come a t i me you r ecei ved - - wi t hdr awn.
11 Di d J oan Hayes event ual l y compl et e her audi t ?
12 A. I have no i dea.
13 Q. Di d you ever see J oan Hayes' audi t r epor t ?
14 A. No, si r , I haven' t .
15 Q. Di d you ever use t he f i gur es of J oan Hayes' audi t r epor t t o
16 submi t your r evi sed f i nanci al st at ement s?
17 A. No, si r , I di dn' t .
18 Q. Ar e you awar e as you si t t her e now t hat J oan Hayes t ur ned
19 over her audi t r epor t t o OI G, Ms. Ri l ey, i n J une of 2003?
20 A. No, si r , I ' mnot .
21 Q. And who ar e you aski ng f or t he number s t o put i n i n your
22 r evi sed f i nanci al r epor t s?
23 A. Fr ank. Fr ank Spr i ng.
24 Q. Di d you ever hear t he expr essi on J oani f i ed?
25 MR. EVERDELL: Obj ect i on.
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1 THE COURT: Obj ect i on sust ai ned.
2 Q. You t el l us you went t o a boar d meet i ng, cor r ect ?
3 A. Yes.
4 Q. How many boar d meet i ngs di d you go t o?
5 A. One.
6 Q. And was t hat dur i ng t he day or at ni ght ?
7 A. Ni ght .
8 Q. And was i n a r est aur ant or i n a r oomsomewher e, or bot h?
9 A. I bel i eve i t was i n a r oomsomewher e, and t hat we went t o
10 di nner af t er t he meet i ng.
11 Q. And t hat was t he meet i ng at whi ch you r equest ed t hat t he
12 checks be wr i t t en of f si t e, cor r ect ?
13 A. Yes, si r . We r equest ed t hat checks be r emoved f r omt he
14 CASI pr emi ses and moved of f si t e.
15 Q. But t hey st i l l had t o be r et ur ned t o Dr . Kar r on f or hi mt o
16 si gn, r i ght ?
17 A. Yes, si r .
18 Q. Now, t hi s PayPal account , t hat was a separ at e account ,
19 cor r ect ?
20 A. I t had t o be. We di dn' t know anyt hi ng about i t at t he
21 t i me.
22 Q. Wel l , t he PayPal account was char geabl e t o Dr . Kar r on' s
23 Amer i can Expr ess car d, cor r ect ?
24 A. The ent r y I saw was, yes.
25 Q. And wer e you awar e t hat Dr . Kar r on had an Amer i can Expr ess
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1 cr edi t car d?
2 A. A company Amer i can Expr ess cr edi t car d, yes.
3 Q. Wer e you awar e t hat he al so had a per sonal Mast er car d?
4 A. No, si r , I wasn' t .
5 Q. Di d you ever di scuss wi t h Dr . Kar r on at any t i me whet her or
6 not he was usi ng hi s Mast er car d t o pur chase i t ems on behal f of
7 t he pr oj ect ?
8 A. No, si r , I di dn' t .
9 Q. Now, you say t he PayPal expense t hat you saw. When was
10 t hat ?
11 A. J ul y, August . I don' t r emember exact l y t he dat e, but i t
12 was af t er t he boar d meet i ng.
13 Q. And was t he amount over $200 t hat you saw?
14 A. I don' t r emember t he amount .
15 Q. Wel l , di d you di scuss i t wi t h Dr . Kar r on what he had
16 pur chased?
17 A. Al l I r emember f r omt he di scussi on was t hat he sai d he had
18 t o pay t he bi l l s.
19 Q. And t hat r el at ed t o t he PayPal .
20 A. That i nst ance, yes.
21 Q. I s t her e anyt hi ng t hat you coul d - - di d anybody f r omt he
22 pr osecut i on show you any document s of t he PayPal expendi t ur es?
23 A. No.
24 Q. Let me show you what ' s been mar ked f or i dent i f i cat i on as
25 Def endant ' s Exhi bi t Z.
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1 DEPUTY COURT CLERK: Z as i n zebr a?
2 MR. RUBI NSTEI N: Yes.
3 THE COURT: The l ast number was U, I t hi nk.
4 MR. RUBI NSTEI N: I wasn' t sur e, J udge. I di dn' t want
5 t o get a doubl e l et t er , so I went t o Z t o be saf e.
6 THE COURT: Z f or i dent i f i cat i on.
7 Q. I show you what ' s mar ked f or i dent i f i cat i on as Def endant ' s
8 Exhi bi t Z and ask you whet her t hat coul d r ef r esh your
9 r ecol l ect i on as t o what PayPal expense you obser ved on Dr .
10 Kar r on' s Amer i can Expr ess car d st at ement .
11 A. No, si r , i t doesn' t .
12 Q. OK. Thank you. So i t coul d have been as l i t t l e as l ess
13 t han a hundr ed dol l ar s, r i ght ?
14 A. Yes, si r .
15 Q. Di d you have exper i ence and backgr ound wi t h manual s,
16 pr epar at i on of manual s f or compani es, f or benef i t s and t hi ngs
17 l i ke t hat ?
18 A. No, not f or benef i t s.
19 Q. Di d you di scuss wi t h Dr . Kar r on t he cr eat i on of a benef i t s
20 manual ?
21 A. I don' t r emember speci f i cal l y di scussi ng a benef i t s manual ,
22 but I do r emember di scussi ng wr i t t en pr ocedur es.
23 Q. Was t her e a t i me whi l e you wer e t he busi ness manager at
24 CASI t hat you spoke t o an at t or ney or at t or neys about empl oyee
25 benef i t pr ogr ams?
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1 A. Ther e may have been. As I sai d ear l i er i n my t est i mony, we
2 di d t al k about t r yi ng t o buy a handbook of some ki nd, and t hat
3 woul d pr obabl y have t o be t hr ough an at t or ney.
4 Q. Wel l , di d you have an e- mai l addr ess as benedi ct @casi . net ?
5 A. I di d, but as I sai d ear l i er I di dn' t use i t .
6 Q. Wel l , l et me show you what ' s been mar ked Def endant ' s OO. I
7 show you t hat document .
8 A. Yes, si r .
9 Q. Have you ever seen t hat document bef or e?
10 A. Yes, si r .
11 Q. And when di d you see t hat document ?
12 A. I t appear s t o be somet hi ng t hat I st ar t ed wor ki ng on a
13 dr af t t o t r y t o put somet hi ng i n pl ace, yes, si r .
14 Q. And di d t hat r el at e t o benef i t s f or t he empl oyees of CASI ?
15 A. Yes, i t di d.
16 MR. RUBI NSTEI N: We of f er OO i nt o evi dence.
17 MR. EVERDELL: No obj ect i on.
18 THE COURT: No obj ect i on? OO i s admi t t ed i nt o
19 evi dence.
20 ( Def endant ' s Exhi bi t OO r ecei ved i n evi dence)
21 THE COURT: Coul d I have a copy?
22 MR. RUBI NSTEI N: Her e i s a copy f or your Honor .
23 THE COURT: Thank you.
24 MR. RUBI NSTEI N: I have an unor t hodox st i cker on i t ,
25 J udge.
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1 THE COURT: I wi l l mar k i t OO.
2 Q. Now, you ar e awar e t hat CASI had a budget l i ne i t emi n t he
3 f i r st year of $110, 000 f or f r i nge benef i t s?
4 A. Yes, si r .
5 Q. And di d t hey spend $110, 000 on - -
6 A. I don' t r emember .
7 Q. And f r i nge benef i t s i ncl udes, does i t not , wi t hhol di ng
8 t axes?
9 A. Yes, si r , i t does.
10 THE COURT: I t i ncl udes what ?
11 THE WI TNESS: Wi t hhol di ng t axes. FI CO, FUDA, t hose
12 t ypes of t hi ngs.
13 Q. Di d you have di scussi ons wi t h Dr . Kar r on as t o whet her or
14 not f r i nge benef i t s even wi t hout a manual coul d be al l owabl e i f
15 i t was r easonabl e and evenhandedl y appl i ed acr oss t he boar d of
16 t he company?
17 A. I don' t r ecal l t hat conver sat i on.
18 Q. Ar e you sayi ng i t never happened?
19 A. No, si r , I ' mnot .
20 Q. I n your vi ew, i s educat i on deduct i bl e as a f r i nge benef i t ?
21 A. I f i t ' s r el at ed t o t he gr ant .
22 Q. Now, t he r ent t hat was pai d was pai d by CASI t o t he
23 def endant , cor r ect ?
24 A. I don' t t hi nk - - I don' t under st and i t t hat way.
25 Q. Wel l , t her e was a NI ST account , was t her e not ?
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1 A. No, t her e was a CASI account .
2 Q. Wer en' t t her e i n f act f our account s?
3 A. Not on t he books when I got t her e t her e wer en' t .
4 Q. I sn' t i t a f act t hat t her e was a NI ST account i n pl ace and
5 checks wer e wr i t t en f r omt he NI ST account ?
6 A. Yes, checks wer e wr i t t en f r omt he NI ST account . Ever yt hi ng
7 was wr i t t en f r omt he NI ST account .
8 Q. But i sn' t i t a f act t he r ent check was wr i t t en f r oma CASI
9 I nc. account whi ch was a gr een check?
10 A. Al l of t he money t hat was i n al l of t he account s was NI ST
11 money, so t he col or of t he check di dn' t mat t er .
12 Q. Wel l , wer e t her e di f f er ent col or ed checks?
13 A. I don' t r emember i f t her e wer e di f f er ent col or ed checks or
14 not .
15 Q. I amgoi ng t o show you what i s i n evi dence as def endant ' s
16 P- 1 t hr ough P- 6?
17 THE COURT: What ' s t he exhi bi t ?
18 MR. RUBI NSTEI N: P- 1 t hr ough P- 6.
19 THE COURT: Have you ever seen t hose bef or e?
20 THE WI TNESS: No, si r , I have not .
21 Q. Di d you ever ask Dr . Kar r on i f he had cont r i but ed money t o
22 CASI ?
23 A. Yes. No, not t o CASI . To NI ST.
24 THE COURT: You sai d?
25 THE WI TNESS: I never asked hi mi f he cont r i but ed
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1 money t o CASI ; I onl y asked i f he cont r i but ed money t o NI ST, t o
2 t he NI ST pr oj ect .
3 Q. Now, you do r ecogni ze t hose checks now t hat you l ooked at
4 t hem, do you not ? Not as havi ng seen t hembef or e, but t hat
5 t hose ar e checks t hat went t o CASI .
6 MR. EVERDELL: Obj ect i on. He doesn' t r ecal l t hem.
7 THE COURT: Obj ect i on sust ai ned.
8 Q. So, i s i t f ai r t o say you never had occasi on t o l ook at Dr .
9 Kar r on' s per sonal account ?
10 A. Yes, t hat ' s t r ue. They have not hi ng t o do wi t h t he gr ant ,
11 so I had no i nt er est i n i t .
12 Q. I f he was put t i ng money i nt o t he company, t he company' s
13 onl y sour ce of i ncome was ATP, cor r ect ?
14 A. Yes.
15 Q. So, wasn' t i t i mpor t ant t o see whet her or not he made
16 cont r i but i ons - -
17 MR. EVERDELL: Obj ect i on.
18 Q. - - f r omhi s per sonal f unds?
19 MR. EVERDELL: Obj ect i on.
20 THE COURT: I f t hi s i s gr ounded on a hypot het i cal , I
21 wi l l al l ow t he quest i on.
22 A. Repeat t he quest i on, pl ease.
23 Q. Wasn' t i t r el evant t o det er mi ne whet her or not he used
24 per sonal f unds - -
25 A. Onl y i f I coul d see t hemi n t he NI ST r ecor ds. And t hey
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1 wer en' t i n t he NI ST r ecor ds, so, no, i t wasn' t r el evant . I
2 don' t car e what he was doi ng wi t h CASI money.
3 Q. I sn' t i t a f act t hat t he expenses, t he r ent expenses wer e
4 pai d out of CASI ? Wi t hdr awn.
5 How many checks - - r ent was $2, 000 a mont h, cor r ect ?
6 A. I bel i eve t hat ' s cor r ect .
7 Q. How many of t he $2, 000 checks wer e wr i t t en out of NI ST?
8 A. Si nce t he onl y money was NI ST money, al l of t hem.
9 Q. I sn' t i t a f act - - wel l , when Dr . Kar r on woul d get a
10 paycheck, i f he deposi t ed t he money i n CASI - -
11 A. I don' t know what he di d wi t h hi s paycheck, si r .
12 Q. Because you never bot her ed t o l ook at CASI .
13 MR. EVERDELL: Obj ect i on.
14 THE COURT: Obj ect i on sust ai ned. Let ' s have t he
15 quest i on. That ' s not a quest i on.
16 Q. Now, you had al r eady t ol d Dr . Kar r on he coul dn' t pay f or
17 r ent , cor r ect , a number of t i mes?
18 A. Yes, si r .
19 Q. And what mont hs wer e t hese r ent checks payabl e f or ?
20 A. I don' t r ecal l t he speci f i c mont hs.
21 Q. I sn' t i t a f act t hat t he maj or i t y of t hemwer e f or pr egr ant
22 t i me bef or e Oct ober 1, 2001?
23 A. Ther e wer e some, yes.
24 Q. So t hat was not r ent bei ng pai d f or t he gr ant t i me,
25 cor r ect , i f i t ' s pr egr ant ?
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1 A. Yes.
2 Q. And i f i t ' s pai d out of CASI , i t ' s not a NI ST account and
3 i t ' s not at t r i but abl e t o NI ST.
4 THE COURT: Obj ect i on t o t he f or mof t he quest i on.
5 Q. I n f act t her e came a t i me t hat ei t her you or Ms. Hayes
6 convi nced Dr . Kar r on t hat he coul dn' t deduct t he r ent f r omt he
7 apar t ment because he l i ved t her e, cor r ect ?
8 A. I don' t know anyt hi ng about deduct i ons. That has not hi ng
9 t o do wi t h t he gr ant .
10 Q. Wel l , t he r ent woul d not be al l owabl e.
11 A. I t ' s not an al l owabl e char ge t o t he gr ant , but i t has
12 not hi ng t o do wi t h what he can deduct or not deduct .
13 Q. Wel l , di dn' t you have a di scussi on about Dr . Kar r on movi ng
14 t o Connect i cut ?
15 A. Yes, we di d.
16 Q. And di d Dr . Kar r on advi se you t hat i f he moved t o
17 Connect i cut t hen t he ent i r e r ent shoul d be al l owabl e because
18 NI ST was t he onl y pr oj ect i n hand?
19 A. He may have sai d t hat , si r , but si nce i t ' s not i n t he
20 budget i t was a moot poi nt . What he bel i eved di dn' t mat t er .
21 Q. I t was moot t o you?
22 A. Yes, si r .
23 Q. I t wasn' t moot t o hi m.
24 A. I don' t know what - -
25 MR. EVERDELL: Obj ect i on.
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1 A. I don' t know what was r el evant t o hi mor not .
2 Q. I sn' t i t a f act t hat Dr . Kar r on af t er he - - he di dn' t move
3 t o Connect i cut , cor r ect ?
4 A. Not as f ar as I know, he di d not .
5 Q. And when he di d not move t o Connect i cut , i sn' t i t a f act
6 t hat he st opped get t i ng r ent checks f r omei t her CASI or NI ST
7 f or t he apar t ment ?
8 A. I don' t r ecal l .
9 Q. Now, you t ol d us bef or e t hat ut i l i t i es ar e al so an i ndi r ect
10 cost , cor r ect ?
11 A. Yes, si r .
12 Q. Was t her e or was t her e not negot i at i ons wi t h ATP t o per mi t
13 deduct i ons f or ut i l i t i es?
14 A. I don' t r ecal l anyt hi ng wi t h ut i l i t i es, si r .
15 THE COURT: You don' t r ecal l any such negot i at i ons?
16 THE WI TNESS: No, si r .
17 Q. Let me show you somet hi ng and see i f t hese document s - -
18 Let me show you what ' s been mar ked f or i dent i f i cat i on
19 as Def endant ' s RR.
20 THE COURT: For i dent i f i cat i on.
21 MR. RUBI NSTEI N: Yes, your Honor .
22 Q. Take a l ook at t hese document s, si r , and see - -
23 THE COURT: RR, I can al l ow hi mt o l ook at t hat . I f
24 you' r e showi ng hi msomet hi ng el se, we need t o have
25 i dent i f i cat i on of i t .
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1 MR. RUBI NSTEI N: Ther e ar e t hr ee document s, RR, RR- 1
2 and RR- 2.
3 THE COURT: What ' s your quest i on, Mr . Rubi nst ei n?
4 Q. Yes. My quest i on i s: By l ooki ng at t hose document s, does
5 t hat r ef r esh your r ecol l ect i on, si r , t hat t her e wer e
6 negot i at i ons goi ng on wi t h NI ST ATP f or al l owi ng Dr . Kar r on t o
7 be r ei mbur sed f or ut i l i t y expenses?
8 A. Yes.
9 Q. And do you now r ecal l t hose di scussi ons goi ng on?
10 A. I don' t r ecal l t he speci f i c di scussi ons, but I do r emember
11 t her e wer e, yes. And t he di scussi ons wer e t hat i f he coul d
12 demonst r at e t he f act t hat t her e was an i ncr ease, t hat t hey
13 coul d be cl assi f i ed as di r ect expenses, not as i ndi r ect
14 expenses.
15 Q. Even t hough nor mal l y speaki ng ut i l i t i es wer e never al l owed,
16 cor r ect ?
17 A. Cor r ect .
18 THE COURT: He coul d get t he i ncr ease or t he ent i r e
19 ut i l i t y amount ?
20 THE WI TNESS: The i ncr ement al amount of addi t i onal
21 expense caused by t he gr ant coul d be cl assi f i ed as a di r ect
22 expense and not an i ndi r ect expense. Di r ect expenses ar e
23 al l owed r egar dl ess of what t hey ar e. I ndi r ect expenses ar e not
24 al l owed.
25 Q. Now, di d you have a di scussi on wi t h Dr . Kar r on as t o usi ng
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1 equi pment t hat he owned pr i or t o t he gr ant f or cof undi ng
2 pur poses?
3 A. Yes.
4 Q. And di d you - -
5 THE COURT: I t ' s t en af t er . How much l onger ar e you
6 goi ng t o be?
7 MR. RUBI NSTEI N: About 20 mi nut es, J udge.
8 THE COURT: We wi l l t ake t he br eak and come back t en
9 mi nut es af t er t wo.
10 MR. RUBI NSTEI N: Thank you, J udge.
11 THE COURT: The j ur y i s excused.
12 ( Luncheon r ecess)
13 ( Cont i nued on next page)
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1 A F T E R N O O N S E S S I O N
2 2: 10
3 ( J ur y not pr esent )
4 MR. KWOK: J ust so t he r ecor d i s cl ear , I j ust amended
5 Gover nment Exhi bi t 902, whi ch i s t he pr oposed st i pul at i on we
6 r ef er r ed t o ear l i er i n t he mor ni ng. That r ef er s t o Gover nment
7 Exhi bi t 1000, whi ch i s a di sk cont ai ni ng e- mai l s pr oduced by
8 t he def ense. I have amended i t t o say Exhi bi t 1000 and 1000- A,
9 because subsequent t o t he si gni ng of t hi s st i pul at i on we
10 r ecei ved an addi t i onal CD, so now t he pr oposed st i pul at i ons
11 wi l l r ef er t o bot h di sks, and I have over l unch conf er r ed wi t h
12 Mr . Rubi nst ei n' s associ at e as t o t he e- mai l s we i nt end t o
13 publ i sh t o t he j ur y.
14 THE COURT: Al l r i ght . And t he st i pul at i on has been
15 si gned?
16 MR. KWOK: The pr oposed st i pul at i on has been si gned.
17 THE COURT: The f i r st exhi bi t ent r y i s 1000?
18 MR. KWOK: Yes. So, af t er t hat i t woul d say
19 Gover nment Exhi bi t 1000 and 1000- A, and t hen t he second
20 par agr aph i t woul d now r ead, " I f deemed r el evant , Gover nment ' s
21 Exhi bi t s 1000 and 1000- A may be r ecei ved i n evi dence. "
22 THE COURT: And what does i t say about def ense
23 exhi bi t ?
24 MR. KWOK: I t hi nk t hat can be cr ossed out .
25 THE COURT: Wel l , you bet t er conf er .
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1 MR. KWOK: And j ust so t he r ecor d agai n i s cl ear , t he
2 wor ds " Def ense Exhi bi t " i n par agr aphs 1 and 2 ar e now st r i cken.
3 ( Cont i nued on next page)
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1 ( J ur y pr esent )
2 THE COURT: Pl ease be seat ed.
3 Al l r i ght , Mr . Rubi nst ei n.
4 MR. RUBI NSTEI N: Thank you, your Honor .
5 ROBERT BENEDI CT, r esumed.
6 CROSS EXAMI NATI ON ( Cont i nued)
7 BY MR. RUBI NSTEI N:
8 Q. Now, di d you make any submi ssi on t o ATP on behal f of CASI
9 based upon cost shar e as an i nki nd cont r i but i on?
10 A. We submi t t ed t he r evi sed r epor t s and t he new r epor t s f or
11 t he f our t h quar t er of ' 02, f i r st quar t er and second quar t er of
12 ' 03.
13 Q. And di d you i ncl ude i n t hose r epor t s t he f act t hat Dr .
14 Kar r on, CASI , has cont r i but ed equi pment t hat t hey pr evi ousl y
15 owned?
16 A. No.
17 Q. Wer e you awar e of whet her or not t her e was equi pment t hat
18 was pr evi ousl y owned by CASI pr i or t o obt ai ni ng t he ATP gr ant ?
19 A. I was not .
20 Q. Di d you ascer t ai n - - t her e wer e a number of comput er s i n
21 t he apar t ment on East 33r d St r eet , cor r ect ?
22 A. Yes.
23 Q. I mean t hey wer en' t t he ki nd of comput er s - - wer e t hey t he
24 ki nd of comput er s - - wi t hdr awn.
25 Can you descr i be any of t hose comput er s f or t he j ur y?
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1 A. No, j ust t hat t hey wer e ver y l ar ge and ver y power f ul .
2 Q. And do you know whet her or not Dr . Kar r on expanded t he
3 capaci t y of t hose comput er s?
4 A. I do not .
5 Q. Di d you check any i nvoi ces t o det er mi ne when any of t hose
6 comput er s wer e pur chased?
7 A. Ther e wer e some comput er s pur chased dur i ng t he gr ant
8 per i od.
9 Q. Di d you det er mi ne whet her al l t he comput er s - -
10 A. No, si r , I di d not .
11 Q. You ar e f ami l i ar , ar e you not , wi t h t he f act t hat you coul d
12 get cr edi t f or coshar e cont r i but i on by usi ng your own equi pment
13 t hat you owned i n t he pr oj ect ?
14 A. Yes, si r , you can i f i t ' s i ncl uded i n t he budget . Ther e i s
15 a 30 per cent i nki nd al l owance f or cost shar e i f you i ncl ude i t
16 i n t he budget .
17 Q. So you coul d t ake 30 per cent of t he val ue of t he equi pment
18 i f i t ' s i ncl udabl e i n t he budget .
19 A. Yes, si r .
20 Q. Di d you ever ask Dr . Kar r on i f any of t he equi pment t hat
21 was t her e was pur chased pr i or t o t he budget ?
22 A. He t ol d me t hat t her e was.
23 Q. Di d you ask hi mi f he had any bi l l s or i nvoi ces showi ng t he
24 val ue of t hat equi pment ?
25 A. No, I di d not , because i t was not i n t he budget .
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1 Q. Di d you r equest t hat t hat be i ncl uded i n t he budget ar y
2 r evi si on or amendment ?
3 A. At t he begi nni ng when we wer e doi ng t he budget amendment I
4 di d not .
5 Q. Wel l , di d t her e come a t i me t hat you di d?
6 A. I suggest ed anot her budget amendment , yes, i n t he J une t i me
7 f r ame.
8 Q. Now, you ment i oned about - -
9 THE COURT: Was t hat amendment made?
10 THE WI TNESS: No, si r .
11 Q. At t he t i me you came t o CASI , no budget amendment r equest
12 was act ed upon, cor r ect ?
13 A. That ' s cor r ect .
14 Q. And you t ol d us t hat you became awar e t hat Dr . Kar r on t ook
15 an advance on sal ar y ear l y on i n t he gr ant .
16 A. Yes, si r .
17 Q. And di d you l ocat e t hat i n t he books and r ecor ds of CASI ?
18 A. I n t he books t hat I l ooked at , yes, t her e was a sal ar y
19 advance.
20 Q. And di d you - -
21 A. And Dr . Kar r on admi t t ed t hat he had t aken a sal ar y advance.
22 Q. And i n f act ar e you awar e t hat i n August of 2002, bef or e
23 t he end of t he f i r st year of t he gr ant , t hat t hat advance was
24 adj ust ed i n t he books of CASI ?
25 A. No, si r , I was not . Nor di d Dr . Kar r on i ndi cat e t hat t hat
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1 had happened.
2 Q. Di d he t el l you t hat i t happened?
3 A. No.
4 Q. Di d you ask hi m?
5 A. I asked hi mabout t he $75, 000 advance, and he sai d, yes, he
6 had t aken one. And when I asked hi mabout i t , he sai d he woul d
7 r epay i t . I saw no evi dence t hat i t had been r epai d.
8 Q. Di d you ever ascer t ai n how much sal ar y Dr . Kar r on had
9 r ecei ved i n t he f i r st year of t he gr ant ?
10 A. No. I wasn' t t her e.
11 Q. Wel l , do you know what hi s budget ed i t emf or hi s sal ar y was
12 f or t he f i r st year of t he gr ant ?
13 A. I bel i eve i t was i n excess of 200, 000. I don' t r emember
14 exact l y what i t was.
15 Q. So, i f he r ecei ved a gr oss amount of sal ar y of about
16 $35, 000 on a $175, 000 sal ar y, does t hat comput e t o you?
17 MR. EVERDELL: Obj ect i on.
18 A. I don' t r ecal l .
19 Q. Wel l , i n your account i ng exper i ence, i n your backgr ound,
20 bal l par k f i gur e, how much woul d a per son who r ecei ved $175, 000
21 i n sal ar y t ake home i n t ake- home pay?
22 MR. EVERDELL: Obj ect i on.
23 THE COURT: Obj ect i on sust ai ned.
24 Q. Do you know as you si t t her e now as t o how much sal ar y Dr .
25 Kar r on t ook home i n t he f i r st year of t he gr ant ?
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1 A. No, si r , I do not .
2 Q. Let me show you what ' s i n evi dence as Def endant ' s FFF, and
3 I ask you have you ever seen t hose checks bef or e.
4 A. No, si r , I don' t r ecal l t hem.
5 Q. Have you ever seen any checks f r omDr . Kar r on' s per sonal
6 account ?
7 A. No, si r .
8 Q. Now, ar e you f ami l i ar wi t h a t er mnet oper at i ng l oss?
9 A. Yes.
10 Q. What does t hat mean?
11 A. That means af t er t axes you have shown a l oss i n your
12 busi ness.
13 Q. And can you car r y t hat over t o t he next year so t hat i f you
14 make a pr of i t you can use t hat l oss agai nst a pr of i t ?
15 A. That ' s a t ax i ssue; i t ' s not a gr ant i ssue. I don' t know
16 anyt hi ng about t hat , si r .
17 Q. Ar e you awar e of whet her or not i f you change t he name of
18 your cor por at i on, of your ent i t y, whet her or not you have t o
19 not i f y t he gr ant of f i ces?
20 A. Yes, si r , you do.
21 Q. And do you know whet her or not i f you change t he f or mof
22 your ent i t y f r oma cor por at i on, an I nc t o an LLP, t hat you can
23 l ose your net oper at i ng l oss?
24 MR. EVERDELL: Obj ect i on.
25 A. I t ' s a t ax i ssue. I t ' s i r r el evant t o t he gr ant .
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1 Q. Wel l , I amaski ng you about i t on a t ax i ssue.
2 MR. EVERDELL: Obj ect i on.
3 THE COURT: Obj ect i on sust ai ned.
4 Q. By t he way, wer e payr ol l t axes pai d by CASI ?
5 A. Yes and i sn' t i t .
6 Q. And i sn' t i t a f act t hat when you - - what ' s a f or m269
7 r epor t ?
8 A. That ' s t he r epor t you have t o f i l e wi t h ATP on a quar t er l y
9 basi s, i dent i f yi ng t he amount of money you spent on t he pr oj ect
10 and t he amount of money t hat you cont r i but ed t o t he pr oj ect .
11 Q. And when you f i r st j oi ned CASI , di d you assume t hat Dr .
12 Kar r on used hi s sal ar y t o meet hi s mat chi ng r equi r ement s of t he
13 gr ant ?
14 A. No.
15 Q. Wel l , do you r ecal l swear i ng t o an af f i davi t on Sept ember
16 27, 2006 at Sout hpor t , Nor t h Car ol i na - - i s t hat wher e you' r e
17 f r om, si r ?
18 A. Yes, si r .
19 Q. Let me show you what ' s mar ked as Gover nment Exhi bi t 3506- B,
20 as i n boy.
21 A. I f Dr . Kar r on was pai d wi t h NI ST f unds, t hose can' t be used
22 as mat chi ng cont r i but i on. You can' t doubl e di p.
23 Q. Do you see t hi s document 3506- B?
24 A. Yes.
25 Q. Do you see your si gnat ur e on t he second page?
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1 A. Yes, I do.
2 Q. You swor e t o t he t r ut h of t hat ?
3 A. Yes, I di d.
4 Q. You r ead i t over bef or e you si gned i t ?
5 A. Yes.
6 Q. Take a l ook wher e I have t he S and see i f t hat r ef r eshes
7 your r ecol l ect i on as t o what you t ol d t he agent s.
8 A. Yes, i t does.
9 Q. And i n f act - -
10 A. What I meant by t hat st at ement , si r , was t hat I assumed he
11 was usi ng some of hi s CASI money, he was usi ng money t hat was
12 pai d t o hi mper sonal l y f or hi s wor k, and t hen he was
13 r ei nvest i ng t hat i nt o t he pr ogr am. That was not t he case.
14 Q. I n f act you sai d he was usi ng some of hi s sal ar y t o meet
15 t he mat ch r equi r ement s of t he gr ant , cor r ect ?
16 A. Yes, as I j ust expl ai ned.
17 Q. I s t hat what you sai d?
18 A. Yes, si r , t hat ' s what I sai d.
19 Q. And t o your knowl edge, whi l e Dr . Kar r on was wor ki ng on t he
20 ATP gr ant di d he have any ot her sal ar y?
21 A. No.
22 Q. So t he onl y sal ar y you coul d be t al ki ng about i s t he sal ar y
23 he i s get t i ng f r omt he ATP gr ant , cor r ect ?
24 A. Yes. But i f I pay you and you t ur n ar ound and use your own
25 money t o r ei nvest i t i n t he pr ogr am, t hat woul d mat ch. He di d
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1 not do t hat .
2 Q. You don' t know i f he di d or not .
3 A. Ther e was no r ecor d of i t i n t he ATP f unds. Ther e was no
4 r ecor d of any i ncome comi ng f r omany sour ce ot her t han ATP.
5 Q. Wher e di d he deposi t hi s paycheck, si r ?
6 A. I n hi s own bank account , I guess.
7 Q. You guess.
8 A. I di dn' t pay any at t ent i on t o hi s own account s.
9 Q. And you di dn' t pay any at t ent i on t o t he CASI account s and
10 t he deposi t s he made, cor r ect ?
11 A. They wer e not r el evant t o t he gr ant .
12 Q. But you sai d bef or e al l t hese f unds wer e commi ngl ed,
13 cor r ect ?
14 A. Yes.
15 Q. And you see P- 1 t hr ough P- 6, t he checks i n f r ont of you?
16 A. Yeah.
17 Q. You had never seen t hose bef or e, had you?
18 A. No.
19 Q. But t hose wer e checks t hat went i nt o CASI dur i ng t he t i me
20 of t he gr ant ' s f i r st year , cor r ect ?
21 A. They' r e made out t o CASI , yes.
22 Q. And you never saw t hembef or e.
23 A. No.
24 Q. So you mi ssed t hem, r i ght ?
25 A. Checks made out t o CASI don' t mean anyt hi ng. They' r e not
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1 r el evant t o t he gr ant .
2 Q. What i s CASI ' s - - what was CASI ' s onl y busi ness dur i ng t he
3 t i me of t he gr ant ?
4 A. The gr ant . But t hey wer e not deposi t ed t o t he ATP pr oj ect ,
5 and t he money he got f or t hese checks came f r omt he ATP
6 pr oj ect , so you can' t use ATP money t o cover an ATP mat ch. I t
7 doesn' t wor k t hat way.
8 Q. How about usi ng - -
9 A. The onl y money he had comi ng i n was comi ng f r omATP. Wher e
10 t he money went i s what ' s at quest i on her e.
11 Q. Yes. And you don' t know wher e i t went , r i ght ?
12 A. Thi s money went t o CASI .
13 Q. And i f CASI pai d ATP expenses, t hen i t woul d be spent on
14 ATP.
15 A. Yes.
16 Q. But you don' t know t hat because you never t r aced t hi s
17 money, r i ght ?
18 A. No, I di d not t r ace t hi s money.
19 Q. You never t r aced wher e he put hi s sal ar y or what he spent
20 hi s sal ar y on, r i ght ?
21 A. I f he spent i t on ATP, he di d not make t hat known t o me
22 t hat he had done t hat , so I woul d not have gone l ooki ng i nt o
23 hi s pr i vat e account s t o see what he was doi ng.
24 Q. Wel l , di dn' t you r el y upon Fr ank Spr i ng?
25 A. I r el i ed on t he account i ng t r ansact i ons.
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1 Q. And wasn' t Fr ank Spr i ng al so wor ki ng on hi s per sonal t axes,
2 Dr . Kar r on' s per sonal t axes?
3 A. Yes.
4 MR. EVERDELL: Obj ect i on.
5 A. But t hat agai n has not hi ng t o do wi t h t he gr ant .
6 Q. That ' s up t o t he j ur y.
7 A. Yes.
8 MR. EVERDELL: Obj ect i on.
9 THE COURT: Obj ect i on i s sust ai ned.
10 Q. Now, you l ear ned t hat t he gr ant was suspended, r i ght ?
11 A. Yes, si r .
12 Q. Di d you l ear n t he gr ant was suspended because of a
13 vi ol at i on of t he copay?
14 A. We never r eal l y got an expl anat i on why i t was suspended.
15 I t was suspended.
16 Q. Af t er t he gr ant was suspended - - wel l , wi t hdr awn. At t he
17 t i me t he gr ant was suspended on J une 27, 2003, wer e t her e any
18 moni es owed t o vendor s f or t he gr ant ?
19 A. I woul d assume so, yes.
20 Q. Do you have any i dea what t he number was?
21 A. No, si r , I don' t .
22 Q. Af t er t he gr ant was shut down on J une 27, 2003, i sn' t i t a
23 f act t hat Dr . Kar r on advanced money t o CASI f or t he pur poses of
24 t he gr ant ?
25 A. I don' t have any r ecol l ect i on of t hat , si r .
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1 Q. Wer e you i nvol ved at any t i me af t er t he gr ant was shut down
2 wi t h t he t el ephone conf er ence wi t h Mar i l yn Gol dst ei n?
3 A. No, si r .
4 Q. Do you know who Mar i l yn Gol dst ei n i s or was at t hat t i me?
5 A. Yes.
6 Q. And who was Mar i l yn Gol dst ei n?
7 A. Mar i l yn Gol dst ei n I bel i eve was t he manager of gr ant
8 compl i ance wi t h ATP. I don' t r emember her speci f i c t i t l e.
9 Q. And di d you not i f y Hope Snowden i n J ul y, J ul y 24, 2003 i n
10 r egar ds t o Dr . Kar r on? I ' msor r y.
11 THE COURT: What ' s t he quest i on?
12 MR. RUBI NSTEI N: I wi l l wi t hdr aw t he quest i on, J udge.
13 Q. Wer e you awar e t hat Dr . Kar r on advi sed Hope Snowden t hat he
14 had ar r anged an emer gency cr edi t l i ne t o appl y t o t he gr ant ?
15 Ar e you awar e of t hat , si r ?
16 A. No, si r , I ' mnot .
17 Q. Di d you r ecei ve an e- mai l on J ul y 24? Thi s i s mar ked as
18 Def endant ' s E f or i dent i f i cat i on. Di d you r ecei ve t hat e- mai l
19 i ndi cat i ng t hat Dr . Kar r on was t aki ng a l i ne of cr edi t t o
20 advance t o t he gr ant ?
21 A. No, si r , I don' t r emember seei ng t hi s e- mai l . And as I
22 t est i f i ed ear l i er , t hat casi . net e- mai l addr ess was one I
23 di dn' t use.
24 Q. I s i t your t est i mony, si r , t hat you as t he busi ness manager
25 of CASI had an e- mai l addr ess and you di d not check your
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1 e- mai l s?
2 A. Yes. I had a home e- mai l addr ess, and t hat ' s wher e we wer e
3 communi cat i ng. Per i odi cal l y t hey woul d send t hi ngs t o
4 casi . net . They set up t he account , t hey put a passwor d on i t .
5 And, as you know, f l oppi ng f r omone mai l ser vi ce t o anot her i s
6 a bi t of a hassl e, so I di dn' t use t he casi . net ser vi ce.
7 Q. But you wer e awar e, wer e you not , si r , t hat t her e was an
8 e- mai l addr ess t o you? You ar e awar e t her e was one?
9 A. I was awar e t hey set one up wi t h a passwor d t hat I di dn' t
10 know, so . . .
11 Q. And wer e you awar e t hat e- mai l s wer e comi ng t o you?
12 A. Not t her e.
13 Q. 2008 i s t he f i r st t i me t hat you became awar e of t he f act
14 t hat e- mai l s wer e sent t o you at casi . net ?
15 A. I have not seen t hi s e- mai l bef or e.
16 Q. Di d you see any e- mai l s t hat wer e sent t o you?
17 A. Not t o my r ecol l ect i on, casi . net , no.
18 Q. Wel l , when t he gr ant was suspended J une 27, 2003, how much
19 money was i n t he account s of NI ST or CASI ?
20 A. I don' t r ecal l .
21 Q. Wel l , ar e you awar e t hat t her e wer e peopl e st i l l wor ki ng at
22 CASI af t er t he gr ant was suspended?
23 A. Yes.
24 Q. And di d you r ecei ve moni es af t er t he gr ant was suspended?
25 A. I bel i eve so, I di d, yes.
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1 Q. And di d ot her peopl e get pai d f r omCASI af t er t he ATP gr ant
2 was suspended?
3 A. I bel i eve so.
4 Q. And ar e you awar e of suppl i er s who had al r eady del i ver ed
5 pr oduct t o CASI t hat wer e pai d af t er t he gr ant was suspended?
6 A. I don' t speci f i cal l y r emember any, but I can' t say t hat
7 t hat di dn' t happen.
8 Q. And di d you have cont act wi t h Bel i nda Ri l ey af t er t he gr ant
9 was suspended?
10 A. Yes, si r , I di d.
11 Q. And di d you i ndi cat e t o Bel i nda Ri l ey t hat $46, 000 was
12 deposi t ed by Dr . Kar r on and t hat 21, 000 i nki nd he' s cl ai med f or
13 hi s FMV of hi s pr eowned equi pment meet s t hi s obl i gat i on? Di d
14 you t el l t hat t o Bel i nda Ri l ey i n an e- mai l ?
15 A. I don' t r ecal l t hat , si r , no.
16 Q. Wel l , l et me show you t hi s document .
17 I ' mgoi ng t o show you what ' s been mar ked f or
18 i dent i f i cat i on Def endant ' s T.
19 THE COURT: Def endant ' s what ?
20 MR. RUBI NSTEI N: T as i n Thomas, your Honor .
21 Q. I show you what ' s been mar ked as Def endant ' s T, si r , and
22 ask you i f you r ecogni ze t hi s e- mai l .
23 A. Yes, si r , I do.
24 Q. I s t hat an e- mai l t hat you sent t o Fr ank Spr i ng?
25 A. Yes, i t i s.
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1 Q. Di d you send t hat on J ul y 28, 2003?
2 A. Yes, I di d.
3 Q. I t ' s af t er t he suspensi on of t he gr ant ?
4 A. Yes.
5 MR. RUBI NSTEI N: We of f er t hi s i nt o evi dence.
6 MR. EVERDELL: No obj ect i on.
7 THE COURT: No obj ect i on?
8 MR. EVERDELL: No.
9 THE COURT: Exhi bi t T i s admi t t ed i n evi dence.
10 ( Def endant ' s Exhi bi t T r ecei ved i n evi dence)
11 MR. RUBI NSTEI N: May I r ead t hi s t o t he j ur y, your
12 Honor ?
13 THE COURT: Yes.
14 MR. RUBI NSTEI N: Thi s i s def endant ' s T i n evi dence.
15 I t ' s f r omBob Benedi ct at ec. r r . comt o Fr ank Spr i ng.
16 Let me put i t up on t he El mo.
17 No, I ' l l r ead i t . I t ' s t o Fr ank Spr i ng. I t says,
18 " St i l l spar r i ng wi t h NI ST on t he 67K. "
19 67K means 67, 000, cor r ect ?
20 A. Yes, si r .
21 Q. " I st i l l cont end t he 46K he deposi t ed and t he 21K i nki nd he
22 cl ai med f or t he FMV of hi s pr eowned equi pment meet s t hi s
23 obl i gat i on. We' r e supposed t o get Bel i nda' s pr el i mi nar y audi t
24 r epor t t oday or t omor r ow, and once t hat ' s i n, we wi l l know what
25 we pl an t o do and get our sel ves oper at i onal agai n. "
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1 Di d you send t hat e- mai l , si r ?
2 A. Yes, si r .
3 Q. I n f act you wer e awar e when you sent t hi s e- mai l t hat Dr . K
4 had deposi t ed at l east $46, 000, cor r ect ?
5 A. Appar ent l y, yes, si r .
6 Q. And you al so wer e awar e t hat you wer e cl ai mi ng at l east
7 21, 000 i n ki nd f or t he cof undi ng, cor r ect ?
8 A. Yes, si r .
9 ( Cont i nued on next page)
10
11
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13
14
15
16
17
18
19
20
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25
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1 Q. Now, you of f er ed t o handl e t he audi t negot i at i ons on behal f
2 of CASI , di d you not ?
3 A. You don' t handl e audi t negot i at i ons. You wor k wi t h t he
4 audi t or s. I was par t of t he t eamt hat was doi ng t hat .
5 Q. Wel l , di d you advi se Dr . Kar r on t hat you had pr i or
6 exper i ence wi t h audi t negot i at i ons?
7 A. Yes, si r .
8 Q. And t hat you had been successf ul i n t he past i n audi t
9 negot i at i ons?
10 A. Yes, si r .
11 Q. And i n f act , Doct or - - do you know a man named Mel Spi t z?
12 A. No, si r .
13 Q. Di d Dr . Kar r on r et ai ned you t o handl e t he audi t
14 negot i at i ons, si r ?
15 A. No, si r .
16 MR. RUBI NSTEI N: No f ur t her quest i ons.
17 THE COURT: Al l r i ght . Redi r ect ?
18 MR. EVERDELL: Ver y br i ef l y, your Honor .
19 THE COURT: Coul d I ask a quest i on bef or e we get t o
20 r edi r ect ? On your - - i n t he 3500A, t he af f i davi t you si gned
21 f or t he agency?
22 MR. RUBI NSTEI N: J udge, I can' t hear you. Sor r y.
23 THE COURT: The af f i davi t you si gned f or t he agency,
24 I ' mt r yi ng t o get t he dat e, somewher e ar ound t he 15t h of
25 November , 2004?
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1 THE WI TNESS: Yes, si r .
2 THE COURT: Revi ewi ng t hat af f i davi t , does t hat
3 r ef r esh your r ecol l ect i on i n any way t hat t he meet i ng you met
4 Dr . Kar r on at was i n Oct ober , not t he Spr i ng of 2001?
5 THE WI TNESS: I t coul d have been.
6 THE COURT: I f you want t o l ook at t he - -
7 THE WI TNESS: I don' t have i t , si r .
8 THE COURT: - - exhi bi t ?
9 THE WI TNESS: I t hi nk t he gent l eman t ook i t back.
10 MR. RUBI NSTEI N: Her e you go.
11 THE COURT: I j ust want t o - -
12 ( Pr ovi ded t o t he wi t ness by Mr . Rubi nst ei n)
13 THE WI TNESS: Yes, si r .
14 THE COURT: Does t hat - -
15 THE WI TNESS: That i s t he cor r ect dat e.
16 THE COURT: Al l r i ght .
17 THE WI TNESS: I t must have been t he f al l conf er ence,
18 not t he spr i ng conf er ence.
19 THE COURT: The ki ckof f meet i ng.
20 THE WI TNESS: Yes.
21 THE COURT: Okay. That ' s al l I want ed.
22 REDI RECT EXAMI NATI ON
23 BY MR. EVERDELL:
24 Q. Al l r i ght , Mr . Benedi ct , I bel i eve you t est i f i ed on di r ect
25 and cr oss- exami nat i on t hat you t ol d t he def endant t hat he coul d
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1 not use ATP f unds t o pay f or r ent ; i s t hat r i ght ?
2 A. Yes, si r .
3 Q. Do you r emember , appr oxi mat el y, how many t i mes you t ol d hi m
4 t hat ?
5 A. Hal f a dozen t i mes.
6 Q. You t est i f i ed al so about get t i ng appr oval f or ATP expenses
7 t hat wer e not i n t he budget ?
8 A. Yes, si r .
9 Q. How do t hose appr oval s come; ar e t hey or al l y or i n wr i t i ng?
10 A. I n wr i t i ng.
11 Q. Ar e t hey ever or al ?
12 A. No.
13 Q. You - -
14 A. They' r e not bi ndi ng i f t hey' r e or al .
15 Q. Okay.
16 THE COURT: Sor r y, I di dn' t hear your answer .
17 THE WI TNESS: I sai d t hey' r e not bi ndi ng. I f you get
18 or al aut hor i zat i on, do somet hi ng, unt i l you get wr i t t en
19 aut hor i zat i on i t ' s not bi ndi ng.
20 Q. I bel i eve you wer e al so shown on cr oss- exami nat i on a dr af t
21 of a benef i t s pl an?
22 A. Yes, si r .
23 Q. That ' s exhi bi t s OO?
24 A. Yes, si r .
25 Q. You sai d you wor ked on t hat , i s t hat r i ght ?
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1 A. Yes.
2 Q. Al l r i ght I want t o show i t t o you. I s t hat t he dr af t pl an
3 t hat you sai d you wor ked on?
4 A. Yes, si r .
5 Q. What i s t he dat e of t hat dr af t pl an, j ust r i ght at t he t op
6 of t he exhi bi t ?
7 A. J ul y 2nd, 2003.
8 Q. I ' l l t ake t hat back. That dat e, J ul y 2nd, 2003, i s t hat
9 bef or e or af t er t he gr ant was suspended?
10 A. Af t er .
11 Q. You wer e al so asked about ut i l i t i es, I bel i eve, on
12 cr oss- exami nat i on?
13 A. Yes, si r .
14 Q. To your knowl edge, di d any of t he appr oved budget s f or CASI
15 cont ai n a l i ne i t emf or ut i l i t i es?
16 A. No, si r .
17 Q. And you asked ver y r ecent l y on cr oss- exami nat i on about an
18 e- mai l wher e you di scussed an i n ki nd - -
19 A. Uh- huh.
20 Q. - - shar e f or t he def endant ?
21 A. Yes.
22 Q. Was t hat r evi si on, budget r evi si on t hat you di scussed i n
23 t he e- mai l , ever appr oved?
24 A. No, si r .
25 MR. EVERDELL: No f ur t her quest i ons.
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1 MR. RUBI NSTEI N: May I , your Honor ?
2 THE COURT: Yes, you may.
3 MR. RUBI NSTEI N: Thank you.
4 RECROSS EXAMI NATI ON
5 BY MR. RUBI NSTEI N:
6 Q. OO, i s i t your t est i mony, si r , t hat 00, t hi s empl oyees
7 benef i t pr ogr am, was cr eat ed on J ul y 2nd, 2003?
8 A. That ' s t he dat e t hat ' s on t her e, yes, si r . I don' t
9 r emember t he dat e i t was cr eat ed.
10 Q. Wel l - -
11 A. I t wasn' t wr i t t en al l on t hat one day. I t was somet hi ng I
12 had been wor ki ng f or a whi l e.
13 Q. I mean, t hi s wasn' t cr eat ed because t he gr ant was
14 suspended, was i t , si r ?
15 A. No. Thi s was - - i t was par t of t he - - t her e wer e no
16 pr ocedur es i n pl ace. We needed t o get somet hi ng i n, some
17 pr ocedur es i n wr i t i ng so you coul d suppor t t he medi cal char ges
18 t hat wer e bei ng i ncur r ed.
19 Q. Di d Dr . Kar r on say, you bet t er sneak i n a - -
20 A. No, si r .
21 Q. - - a benef i t , or our gr ant wi l l be suspended, di d he?
22 A. No, si r .
23 MR. EVERDELL: Obj ect i on.
24 THE COURT: Obj ect i on sust ai ned.
25 MR. RUBI NSTEI N: No f ur t her quest i ons.
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1 THE COURT: Anyt hi ng el se?
2 MR. EVERDELL: Not f r omt he gover nment , your Honor .
3 THE COURT: Al l done? Al l r i ght , wi t ness i s excused.
4 Next wi t ness.
5 ( Wi t ness excused)
6 MR. KWOK: At t hi s t i me, your Honor , t he gover nment
7 woul d l i ke t o r ead i nt o t he r ecor d a pr oposed st i pul at i on.
8 THE COURT: Al l r i ght . What ' s t he number , st i pul at i on
9 what ?
10 MR. KWOK: I t ' s mar ked f or i dent i f i cat i on as
11 Gover nment exhi bi t 902.
12 THE COURT: Read i t .
13 MR. KWOK: Uni t ed St at es of Amer i ca ver sus Dani el B.
14 Kar r on, def endant . I t i s her eby st i pul at ed and agr eed by and
15 among t he Uni t ed St at es of Amer i ca by Mi chael J . Gar ci a, Uni t ed
16 St at es At t or ney f or t he Sout her n Di st r i ct of New Yor k, St eve
17 Kwok and Chr i st i an Ever del l , Assi st ant Uni t ed St at es At t or neys
18 of counsel , and def endant Dani el B. Kar r on, by and wi t h t he
19 consent of hi s at t or ney, Ronal d Rubi nst ei n, Esqui r e t hat : One,
20 t he document s cont ai ned i n t he compact di sk CD mar ked f or
21 i dent i f i cat i on as gover nment Exhi bi t 1000 and 1000 and - -
22 1, 000A and i dent i f i ed as e- mai l f or AUSA dat ed 5/ 31, 2008, ar e
23 aut hent i c e- mai l s cr eat ed at or near t he t i me shown on t hose
24 document s ar e what t hey pur por t t o be, and ar e admi ssi bl e as
25 of f er ed by t he gover nment under Feder al Rul es of Evi dence
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1 801( d) ( 2) and 901; t wo, i f r el evant , gover nment exhi bi t s 1000
2 and Exhi bi t 1000A may be r ecei ved i n evi dence.
3 I t i s f ur t her st i pul at ed and agr eed t hat t he
4 st i pul at i on may be r ecei ved i n evi dence as a gover nment exhi bi t
5 at t r i al , and i t ' s dat ed J ul y, I ' msor r y, J une 2nd, 2008 New
6 Yor k, New Yor k, and i s si gned on behal f t he Uni t ed St at es by
7 St eve Kwok, and on behal f Dani el B. Kar r on, by Ronal d
8 Rubi nst ei n, Esqui r e.
9 Your Honor , at t hi s t i me gover nment moves f or t he
10 admi ssi on of gover nment exhi bi t 902, 1000, and 1000A.
11 THE COURT: Exhi bi t 902, excuse me, 902, and exhi bi t s
12 1000, 1000A ar e admi t t ed i n evi dence.
13 ( Gover nment ' s Exhi bi t s 901, 1000 and 1000A r ecei ved i n
14 evi dence)
15 THE COURT: Ar e you goi ng t o pl ay t hose?
16 MR. KWOK: Yes, your Honor . Mr . Ever del l wi l l publ i sh
17 some of t hose e- mai l s t o t he j ur y.
18 MR. EVERDELL: I f we coul d have Gover nment ' s Exhi bi t
19 203 on t he scr een, pl ease. I f we can hi ghl i ght t he t hi r d
20 par agr aph.
21 MR. RUBI NSTEI N: Your Honor , I ask t hat t he ent i r e
22 Exhi bi t be r ead.
23 THE DEPUTY CLERK: 203?
24 MR. RUBI NSTEI N: I n r ul e of compl et eness.
25 THE COURT: Al l r i ght .
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1 MR. EVERDELL: Your Honor , t he ent i r e exhi bi t i s i n
2 evi dence now. The j ur y can r ef er t o i t as t hey - -
3 MR. RUBI NSTEI N: But t hey have not hear d i t .
4 THE COURT: But t hey won' t - - t hey wi l l have copi es i n
5 t he j ur y r oom, but t hey don' t have copi es i n t hei r books, I
6 don' t t hi nk. Let ' s do i t t hat way or by di st r i but i on.
7 MR. EVERDELL: Al l r i ght . St ar t wi t h 203. I t ' s an
8 e- mai l f r omDr . D. B. Kar r on t o Pr of essor Schwar t z. Dear
9 Pr of essor Schwar t z, I ami n a ver y pr ecar i ous posi t i on - -
10 THE COURT: What dat e? Can we have a dat e f or t hi s?
11 MR. EVERDELL: Sor r y. August 20t h, 2003.
12 I ami n a ver y pr ecar i ous posi t i on i n t hat t he
13 gover nment expect s, demands and f eel s i t i s due t he J oan Hayes
14 audi t r epor t . The gr ant speci al i st , Hope Snowden, t ol d me i n
15 no uncer t ai n t er ms t hat t he next t hi ngs she needed t o r est ar t
16 t he gr ant wer e r epl acement and up t o dat e SF269' s and J oan' s
17 audi t r epor t . Her at t i t ude was we pai d f or i t , we expect i t
18 and i t , and t he SF269 cash r econci l i at i ons wer e hol di ng t hi ngs
19 up f or t he r evi ew as t o how t o r est ar t t he gr ant . I had
20 al r eady i ssued t he st op wor k or der , and J oan went t o Hope and
21 got Hope' s or der s t o compl et e payment or not .
22 THE COURT: Sl ow down a l i t t l e bi t .
23 MR. EVERDELL: Yes, your Honor .
24 Hope used t he same at t i t ude wor di ng t hat J oan had used
25 wi t h me, don' t wor r y, we ar e payi ng f or i t . I went back t o
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1 J oan and asked her t o t el l Hope when she t hought t he audi t
2 woul d be done. My comment s t o J oan wer e t o t he ef f ect t hat
3 Hope was sor e and angr y. J oan' s r epl y was t hat I don' t have
4 any pr obl ems wi t h Hope. We get al ong j ust f i ne and don' t you
5 wor r y about pr obl emwi t h Hope.
6 I ' ve al ways had a good r el at i onshi p wi t h Hope and t he
7 gover nment i n gener al . Thi s at t i t ude sent chi l l s up my spi ne
8 because i t i ndi cat es t hat J oan cl ear l y sees her r ol e as bei ng
9 t he Gover nment ' s mol e, not my account ant . I al so deci ded t o
10 hol d of f shi t canni ng her by si c- ci ng you on her because i t has
11 t r emendous pot ent i al t o back f i r e on me gi ven Hope and J oan' s
12 cozy r el at i onshi p. J oan has cl ear l y at t empt ed t o cement her
13 r el at i onshi p wi t h t he gover nment agai nst me and i s possi bl y t he
14 bi ggest obst acl e t o get t i ng your our gr ant r est ar t ed. When I
15 asked J oan when she coul d get t he audi t r epor t done, she
16 st ar t ed back peddl i ng f r omher posi t i on t hat t he audi t r epor t
17 was done t o a posi t i on t hat she needed t o del i ver y, excuse me,
18 t he pr el i mi nar y r esul t s t o me i n per son wi t hout Bob Benedi ct or
19 any one el se on my t eam. And as soon as I made a dat e t o vi si t
20 wi t h her , she coul d gi ve me a bet t er sense of when she woul d be
21 done. She went out t o say t hat t hi s was, t hat i t was i r oni c
22 t hat I shoul d at t empt t o f i r e her and now I was aski ng her f or
23 mor e wor k or t o wor k f ast er . She l aced i nt o me wi t h comment s
24 t hat t hi s was a 40K audi t she was l osi ng money and she coul d
25 f i ni sh i t on her own t i me, and as such, she woul d not be
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1 r ushed. She kept sayi ng she had or der s f r omme, my l et t er f r om
2 Fr eddi e, t hat she was t o st op wor k. As such, she woul d wor k at
3 her pace and i t was onl y her sense of dut y t o t he gover nment
4 t hat she woul d f i ni sh t he audi t at al l . Af t er t he unusual l y,
5 af t er t he unusual l y ber at i ng and obnoxi ous t uggi ng on my
6 chai ns, di dn' t I say t hese t hi ngs wer e goi ng t o happen? I
7 war ned you, I t ol d you, you di d not l i st en, you t hought you
8 coul d f i r e me, ha- ha, wel l , l ook who i s beggi ng now. You' r e
9 l ucky I ' man honest audi t or , not l i ke so and so you had bef or e.
10 I shoul d have r epor t ed her bef or e. The end of t he conver sat i on
11 was t hat J oan woul d cont act Hope and gi ve a compl et i on dat e.
12 Two, J oan woul d r epor t t o me when she had pr omi sed a dat e t o
13 Hope. 3, she woul d st i ck t o t hat dat e.
14 I pr omi sed her I woul d send her a not e or der i ng her t o
15 compl et e t he audi t and she i nsi st ed on gi vi ng t he audi t r esul t s
16 onl y t o me and make cer t ai n I under st ood each and ever y
17 f i ndi ng. She woul d not gi ve t he audi t r epor t t o Bob, f ax t hem
18 t o my of f i ce, e- mai l t hemor over ni ght t hemt o any l ocat i on
19 ot her t han t o CASI . She sai d she di d not t r ust t he peopl e i n
20 my of f i ce, woul d not i nt er cept t he f i ndi ngs and so on. I send
21 J oan or der s t o del i ver t he audi t f i ndi ngs t o Bob and he woul d
22 wor k wi t h her t o get t hi s done. I have seen a st r eamof e- mai l
23 about t he audi t f ood not es t hat J oan want s me and onl y me t o
24 wr i t e. At t hi s poi nt I don' t know what I ' mf oot i ng t o. I Hope
25 Bob wi l l send me a dr af t so I have a cl ue what I ' mdoi ng. My
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1 sense i s t hat i f I ask J oan t o hur r y up, she wi l l sl ow down
2 even mor e. Si nce I have asked her t o hur r y up and t hat I am
3 out of t own unt i l Sept ember 1st , she won' t compl et e unt i l
4 Sept ember 1st . The wor st news i s t hat Mar i l yn Gol dst ei n, t he
5 gr ant s manager , has i ndi cat ed t hat what she has want ed was t he
6 co- payment pai d and her mai n pr obl emwas how t o get i t pai d
7 dur i ng t he suspensi on. I of f er ed t o pay some 67K of gr ant
8 bi l l s pendi ng, some of whi ch ar e f r omvendor s who may not even
9 get - - who may not even want t o get pai d. And she t hought t hat
10 may sol ve t he suspensi on i ssues, per amendment si x. I asked
11 Bob t o get t hi s nai l ed down, i . e. , a memo t hat payment of a
12 l i st of bi l l s woul d r est ar t t he gr ant , and Mar i l yn woul d not
13 commi t t o t hi s. So i t i s appar ent l y anot her bear t r ap wher e we
14 t hr ow away 67K and t hen get anot her bi l l , a bi l l f or anot her
15 200K di sal l owed, and t he mat ch get s absor bed i nt o di sal l owed
16 and we ar e st i l l wedged and I ' mal most compl et el y out of
17 cr edi t . Pl ease t al k t o Bob Benedi ct f or det ai l s on t hi s ver y
18 danger ous si t uat i on. I amwai t i ng abandoni ng t he gr ant at t hi s
19 poi nt and f or ci ng t he gover nment t o t r y t o col l ect one poi nt
20 f our mi l l i on f r omme and make t he gr ant enough of a t r ai n wr eck
21 t hat t hey have t o cooper at e on f i ndi ng a l i veabl e sol ut i on f or
22 al l of us. I t i s t hat bad and I amr eady t o shove t he
23 si t uat i on i nt o such an unpal at abl e end t hat we get some
24 cooper at i on f r omt hem. Yes - - shoul d I cont i nue j ust t o t he
25 end of t he e- mai l , your Honor ?
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1 THE COURT: Yes.
2 MR. EVERDELL: Okay. Yes, J oan Hayes was pai d way
3 mor e t han I was awar e of , i ncl udi ng a 1K r et ai ner never
4 r ef l ect ed i n her bi l l i ng. An ext r a payment on her l ast audi t
5 i nvoi ce br i ngi ng t he t ot al pai d t o dat e f or t he audi t of al most
6 13, 500. I f I gi ve you t he go ahead, we shoul d sue t o r ecover
7 f or nonper f or mance $13, 500 and damages caused by
8 nonper f or mance, as wel l as anyt hi ng el se you can t hi nk of . Her
9 t wo sons ar e l awyer s and audi t or s, and she has t hr eat ened t hat
10 i f sued i t woul d not cost her anyt hi ng t o def end her sel f wi t h
11 her f ami l y. She has t hr eat ened t o bur y me i n l egal pr obl ems
12 shoul d I t r y t o i nt er f er e wi t h her J ohn Val J ohn l i ke mi ssi on
13 t o put me out of busi ness and get me di sbar r ed at t he f eder al
14 t eet . At t hi s poi nt f eel I have t o r ei gn you i n and not appear
15 t o t he gover nment t o bl ock J oan' s compl et i on of her appoi nt ed
16 t ask i f she cont i nues t o hang on my neck wi t h t hi s audi t and
17 won' t commi t t o a compl et i on dat e or mi sses her own compl et i on
18 dat e, t hen I wi l l gi ve you t he go ahead t o dr op an at omi c bomb
19 on her head, as wel l as cer t ai n l egal deat h on mysel f .
20 Fi nal l y, I ' ve been di scussi ng a benef i t s r et i r ement pl an wi t h.
21 And t hat concl udes t hat e- mai l .
22 THE COURT: Al l r i ght . Mor e sl owl y f or me, al l r i ght .
23 MR. EVERDELL: Yes, your Honor .
24 Next Gover nment ' s Exhi bi t 204. Thi s i s an e- mai l f r om
25 D. B. Kar r on t o sever al peopl e, i ncl udi ng J er ome Schwar t z, dat e
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1 August 12t h 2003.
2 THE COURT: Has J oan Schwar t z been or Mr . Schwar t z
3 been i dent i f i ed i n t hi s case or - -
4 MR. EVERDELL: Not yet , your Honor .
5 THE COURT: Al l r i ght . Go ahead.
6 MR. EVERDELL: Al l r i ght . Readi ng f r omt he begi nni ng
7 of t he e- mai l :
8 We ar e goi ng t o gi ve J oan t he boot , as i t has t o be
9 har d, f ast and suf f i ci ent l y t hr eat eni ng so she st ops
10 col l abor at i ng wi t h t he I nspect or Gener al . But she does not
11 deci de t o t ur n St at e' s evi dence and r eal l y put me out of
12 busi ness mor e t han she has al r eady. Si nce she knows how t o get
13 under my ski n, and I l i ke t o be t he ni ce guy, I pr opose t hat a
14 par t ner shi p r esol ut i on di sengagi ng J oan and engagi ng Spi t z be
15 pr oduced, and a di schar ge or der t hat wi l l get her of f my case
16 and she wi l l be happy t o t ur n over her wor k paper s and wash her
17 hands of me.
18 I pr opose, one, she be hel d t o t he l et t er of her
19 engagement l et t er , copy at t ached, she was t o change - - char ge
20 $10, 000. She was over pai d. She shoul d r ef und t hat . Two, she
21 never compl et ed t he audi t by t he engagement l et t er deadl i ne.
22 She shoul d r ef und $10, 000. Thr ee, she mi ssed so many t ax
23 deadl i nes t hat she shoul d be di schar ged as a t ax at t or ney of
24 r ecor d, be hel d l i abl e f or l at e f ees and so on. Four , answer
25 char ges of mal f easance or st upi di t y my spect acul ar over payment
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1 of 120 t o 150K wi t hhol di ng t axes, f or exampl e; f i ve, f ai l ur e t o
2 i nst i t ut e any ki nd of t ax shel t er s; si x meddl i ng i n management
3 maki ng de f act o management deci si ons wi t hout wr i t t en
4 aut hor i zat i on or f r ami ng t he pr obl emand aski ng f or wr i t t en
5 aut hor i zat i on; seven, usi ng per sonal knowl edge gai ned f r om
6 bei ng on- si t e at CASI vi r t ual l y dai l y at some poi nt s; i . e. ,
7 per sonal r esi dence, medi cal knowl edge gai ned f r omusi ng her
8 knowl edge of my per sonal t axes, spendi ng t oo much t i me bei ng
9 f r i ends wi t h empl oyees and usi ng t he gossi p t o di sal l ow cost s
10 t o t he gover nment ; ei ght , she shoul d be hel d r esponsi bl e f or
11 di sal l owance of t he cost of her st udent s benef i t s, her st udent
12 was pai d, but she l at er di sal l owed; ni ne, r ef usal t o cer t i f y
13 CASI busi ness pr ocess af t er expendi ng t r emendous r esour ces t o
14 r ecr eat e books; 10, gover nment usi ng t he di sal l owed she shows
15 on t he books as a basi s f or decept i on on t he par t of t he P. I ,
16 as he shoul d have shown pr i or t o doi ng t he SF269 i n er r or
17 because i t i s so cl ear on t he books, t he ef f or t t o r ecr eat e t he
18 books has back f i r ed and i t appear s t hat t he P. I made wi l l f ul
19 st at ement s of f act evi dent on t hei r own books, has t he audi t
20 r epor t been compl et ed on t i me. Thi s appar ent bad f ai t h woul d
21 have been vol unt ar i l y cor r ect i on i nst ead of di scover y by t he
22 I nspect or Gener al ; 11, her f ai l ur e t o compl et e anyt hi ng on t i me
23 has caused t he ef f ect i ve bankr upt cy of her cl i ent .
24 THE COURT: Al l r i ght . 2003 and 2004. Al l r i ght , any
25 mor e?
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1 MR. EVERDELL: Yes, your Honor .
2 MR. KWOK: Yes, your Honor .
3 MR. EVERDELL: One mor e, your Honor . Thi s i s
4 Gover nment ' s Exhi bi t 213.
5 THE COURT: Dat es on t hese?
6 MR. EVERDELL: Yes, t hi s i s an e- mai l f r omDr . D. B.
7 Kar r on t o someone named T. L. Lor r ai ne at AOL. com. I t ' s dat ed
8 December 18t h, 2002.
9 THE COURT: What was t he dat e of - - 2004?
10 MR. EVERDELL: Thi s e- mai l ?
11 THE COURT: Yes.
12 MR. EVERDELL: December - -
13 THE COURT: 204, excuse me.
14 MR. EVERDELL: Oh 204 was - -
15 THE DEPUTY CLERK: August 12t h, ' 03?
16 THE COURT: August 12t h.
17 THE DEPUTY CLERK: August 12t h, ' 03.
18 MR. EVERDELL: August 12t h, 2003.
19 THE COURT: Thank you.
20 MR. EVERDELL: Thi s one i s December 18t h, 2002.
21 Lor r ai ne, I under st and your posi t i on f ul l y. I f you
22 can pr ovi de mat er i al and vi t al assi st ance t o CASI , me, dur i ng
23 our audi t , t hen you wi l l have a j ob. I have r eal concer ns as
24 t o whet her you can pr ovi de t hi s hel p, and i f I can pay you what
25 you ar e wor t h. My concer ns ar e t hat you have t he t echni cal
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1 exper t i se and t he pat i ence t o f ul l y exer ci se i t . Thi s i s maj or
2 bookkeepi ng and account i ng cr ap. I st and t o l ose a l ot of
3 money out of pocket . You wi l l be wor ki ng wi t h our audi t or and
4 account ant J oan Hayes pr epar i ng document s f or her audi t . I
5 have a bi g l i st of t hi ngs t hat need t o be pr epar ed. I need
6 mount ai ns of document at i on or gani zed, I need l ot s of t hi ngs
7 f ol l owed t hr ough t hat t he audi t or and I have di scussed. My
8 f ai l ur e t o have t hese t hi ngs r eady f or her wi l l mean I have t o
9 pay f or t hese t hi ngs out of pocket . I aml ooki ng at a gr ant
10 shor t f al l of about 60K whi ch I have t o make up out of my
11 pocket . I have a mount ai n of busi ness r ecor ds my secr et ar y was
12 supposed t o or gani ze f or t he audi t . She di d not do i t and now
13 I have t o pay f or i t . I need someone t o do i t . I was goi ng t o
14 hi r e a t emp t o do i t , I wi l l cover you t o do i t .
15 Now, you ar e a di f f i cul t per son t o wor k wi t h. You ar e
16 a pai n i n t he but t , you dr i nk, you smoke, you ar e combi nat i ve
17 and ar gument at i ve, you ar e spaced out , you f or get t hi ngs. You
18 t al k t oo much when you don' t know what you' r e t al ki ng about .
19 You say t oo l i t t l e when you r eal l y know what you' r e t al ki ng
20 about . I was not goi ng t o engage you af t er al l t he cr ap at
21 J anet ' s, I was goi ng t o engage you af t er t he meet i ng wi t h
22 Sat ava. I t hought i t was mor e i mpor t ant t hat you get a mor e
23 hi gh payi ng j ob wi t h t hese f ol ks at Gr eenbel t so I di d not
24 di scuss i t wi t h you. I di scussed your i nvol vement wi t h f r i ends
25 who know you and most r ai l ed agai nst i t . I - -
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1 THE COURT: I ' mt r yi ng t o r ead as you do i t . I t hi nk
2 t he j ur y may be wi t h you. The per son who someone moved t he
3 e- mai l , so you can' t r ead i t . Coul d you move i t back so we
4 can - -
5 MR. EVERDELL: I t hi nk we' r e at t he - - okay, t he l ast
6 was f r i ends who know you and most r ai l ed agai nst i t . Now we' r e
7 on, i t may dest r oy.
8 I t may dest r oy our f r i endshi p by my br i ngi ng you on as
9 an empl oyee. I don' t mi x f r i endshi p and empl oyment . I don' t
10 t hi nk i t i s a good i dea t hat we have a per sonal r el at i onshi p
11 whi l e you wor k f or me. I t i s not a good i dea t hat you st ay i n
12 my bed i f you wor k her e a f ew days a week. I l i ve i n a
13 gol df i sh bowl . Never t hel ess, i f you hel p me t hr ough t hi s audi t
14 f or t he next mont h, gi ve me a sol i d f ew weeks i nt ense wor k and
15 l ear ni ng and I sur vi ve t hi s gr ant , you wi l l have a j ob. Pet er
16 and I need t o f ocus on get t i ng a number of new gr ant s. A l ot
17 of wr i t i ng needs t o be done. A l ot of r esear ch needs t o be
18 done. A l ot of t r avel bet ween New Yor k and D. C. needs t o be
19 done. I f you i mpr ess mysel f , my boar d and Pet er , you wi l l
20 become a par t ner not j ust an empl oyee. One of t he t hi ngs we
21 need t o do i s f or mal i ze t he empl oyee benef i t pl an so as t o make
22 a T* f r i endl y company, and f or mal i ze t he empl oyee equi t y
23 par t i ci pat i on pl an I have i n mi nd f or somet i me now. These
24 t her e ar e si gni f i cant pr obl ems you can f i x. J oan wi l l br i ef
25 you on t hemand we wi l l di g i n and you wor k on t hemwi t h me
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1 t hen and on your own. I need t o f ocus on r esear ch and our 1Q
2 r epor t due December 31st . We ar e f al l i ng behi nd on our
3 mi l est ones because of my cont i nui ng di st r act i on wi t h t he audi t
4 and busi ness pr obl ems. I f you become a pr obl emt o manage, you
5 wi l l be asked t o l eave. I f you can do what we need done, you
6 wi l l become a par t ner and you par t i ci pat e i n each new gr ant and
7 cont r act we wi n. I suggest you gi ve up t he hot el r oom, st ay
8 her e wi t h me a f ew days a week and I wi l l ask Wi ndy t o put you
9 up at her house. You can get your cel l phone cal l s f or war ded
10 t o t her e. I amt hi nki ng of openi ng a r et r eat of f i ce at Wendy' s
11 house, so I can get some wor k done now t hat she has t hr own
12 Cor r i ne out . I f I pr omi se t o cover your r ent , I may f or mal l y
13 move i nt o Wi ndy' s house so t hat I can col l ect r ent on my
14 apar t ment f r omt he gr ant . I n t hat case, you wi l l be st ayi ng
15 bot h her e and at Wi ndy' s and so t her e ar e t wo pl ace f or t wo
16 peopl e. I wi l l make a l ease wi t h Wi ndy and make l i ke I onl y
17 keep a f ol di ng bed on 33r d St r eet . I f ATP buys i nt o t hi s i dea,
18 t hen I can char ge my r ent on t he apar t ment t o t he gr ant and pay
19 my mor t gage. So I ' mcont r adi ct i ng most of my pr evi ous
20 st at ement s by t aki ng you on and i nt o my l i f e, but i f I don' t
21 get t hese pr obl ems sol ved, I won' t have a gr ant .
22 Fur t her , I won' t make a cont r act wi t h you unt i l I am
23 convi nced you ar e t he gi r l f or t he j ob. You have t o spend a
24 l ot of t i me wi t h t he audi t or f i xi ng each audi t pr obl em. You
25 have t o l ear n my el ect r oni c r ecor ds syst emand how t o use i t .
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1 You need t o mast er our bookkeepi ng st yl e and r ecor d keepi ng.
2 You have t o l ear n, i f you ar e not al r eady f ami l i ar wi t h t hem,
3 t he FAR, Feder al Acqui si t i on Rul es, and cost pr i nci pl es.
4 Convi nce me you ar e on my si de and t he gi r l f or t he gi g and i t
5 i s your s f or r eal . I have been bur ned, bur n t oo many t i mes i n
6 t he past . I wi l l hel p you out out of pocket , as best I can
7 whi l e you ar e wi t h me, but wi t hout f or mal appr oval f or a
8 subcont r act wi t h you f r omt he f eds, I can' t make a f or mal of f er
9 t o you. I was yel l ed at by my gr ant speci al i st at NI ST over
10 maki ng per sonnel changes wi t hout t hei r appr oval . One t hi ng you
11 wi l l do i s i nt er f ace wi t h me at NI ST and l ear n how t o navi gat e
12 mul t i pl e r ol l i ng budget changes wi t h t hemso you can get your
13 appr oval t o wor k under my gr ant . I f you do t hi s r i ght , you
14 wi l l be wor ki ng di r ect l y wi t h t he gover nment and wr i t e your own
15 t i cket wi t h me t hem, pl us end up wi t h equi t y f or i n t he company
16 when we f i ni sh t he empl oyee benef i t pl an, whi ch you wi l l hel p
17 wr i t e. Hugs Di ane.
18 THE COURT: I t hought t hi s was supposedl y - - I ' m
19 sor r y, I t hought t hat t hi s was f r omt he def endant ?
20 MR. EVERDELL: I t i s f r omt he def endant ' s e- mai l
21 addr ess, D. B. Kar r on.
22 THE COURT: I see, al l r i ght .
23 Al l r i ght , do you need t o r ead anyt hi ng el se?
24 MR. KWOK: One moment , your Honor ?
25 MR. RUBI NSTEI N: Ar e t hey excl udi ng t he next - -
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1 t her e' s anot her , t her e i s t he or i gi nal message t her e. Ar e
2 we - -
3 MR. EVERDELL: J ust - -
4 THE COURT: You want somet hi ng el se r ead i n?
5 MR. RUBI NSTEI N: I don' t know, J udge. I ' mj ust aski ng
6 i f t hat ' s par t of - -
7 THE COURT: I coul dn' t hear your answer . You want
8 somet hi ng r ead i n?
9 MR. RUBI NSTEI N: I t ' s not necessar y, your Honor .
10 MR. EVERDELL: Your Honor , t he gover nment r est s.
11 THE COURT: Al l r i ght , t he gover nment r est s.
12 I s def ense r eady t o put on a case?
13 MR. RUBI NSTEI N: Let me - - can I st ep out si de, your
14 Honor ?
15 THE COURT: Al l r i ght . What ?
16 MR. RUBI NSTEI N: Okay.
17 THE DEPUTY CLERK: One of t he j ur or s - -
18 THE COURT: We' l l t ake a j ur y br eak, Mr . Rubi nst ei n.
19 We' l l t ake a j ur y br eak. Okay. 10 mi nut es.
20 ( Recess)
21 THE COURT: Ar e we r eady f or t he j ur y?
22 MR. KWOK: Yes, your Honor .
23 THE COURT: Get t he j ur y.
24 ( J ur y pr esent )
25 THE COURT: Al l r i ght , pl ease be seat ed.
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1 Mr . Rubi nst ei n.
2 MR. RUBI NSTEI N: Yes. My assi st ant went t o get t he
3 wi t ness, your Honor .
4 THE COURT: Al l r i ght .
5 MR. RUBI NSTEI N: Sor r y. I ' msor r y. The wi t ness i s
6 si t t i ng i n t he back of t he cour t r ooml i ke I t ol d hi mt o. I
7 f or got I t ol d hi m.
8 THE COURT: Al l r i ght .
9 THE DEPUTY CLERK: Wat ch your st ep.
10 WI LLI AM NI COLAI ,
11 cal l ed as a wi t ness by t he def endant ,
12 havi ng been dul y swor n, t est i f i ed as f ol l ows:
13 DI RECT EXAMI NATI ON
14 BY MR. RUBI NSTEI N:
15 THE COURT: Al l r i ght , go ahead.
16 Q. What i s your busi ness or occupat i on, Mr . Ni col ai ?
17 A. I ama vi ce- pr esi dent of Hal st ead Pr oper t y, whi ch i s a r eal
18 est at e company i n New Yor k.
19 Q. And ar e you l i censed?
20 A. Yes, I am.
21 Q. And how ar e you l i censed?
22 A. Li censed as a r eal est at e br oker .
23 Q. And how l ong have you been so engaged?
24 A. I ' ve been a br oker at Hal st ead si nce 1989.
25 Q. And bef or e t hat ?
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1 A. I used t o devel op spor t s pr ogr ams f or ki ds wi t h cer ebr al
2 pal sy.
3 Q. Now, and wher e i s your br oker age l ocat ed?
4 A. We' r e i n Manhat t an. My par t i cul ar of f i ce i s at 77t h and
5 Thi r d.
6 Q. And how l ong have you been i n Manhat t an as a r eal est at e
7 br oker ?
8 A. My whol e car eer as a br oker .
9 Q. And as a br oker , do you make br oker s appr ai sal s?
10 A. We do br oker s appr ai sal s, yes.
11 Q. And what i s a br oker s appr ai sal ?
12 A. Br oker s appr ai sal woul d be, basi cal l y, t he same t hi ng as an
13 appr ai ser woul d do, but we' r e not cer t i f i ed by t he St at e. We
14 use our knowl edge, we use al l of t he same i nf or mat i on and same
15 sour ces t o ar r i ve at a pr i ce f or an apar t ment .
16 Q. And do you do t hat - - and why do you do t hat ?
17 A. We do i t qui t e of t en when somebody comes t o us and asks i f
18 we' d l i ke t o sel l t hei r apar t ment , or t hey t el l us t hey' r e
19 t hi nki ng about sel l i ng an apar t ment , what woul d i t be wor t h or
20 somet i mes f or est at es when somebody has di ed and t he est at e
21 needs some sor t of a val ue of t he pr oper t y.
22 Q. Do you know t he def endant , Dr . Kar r on?
23 A. I met hi m, yes. He l i ves i n my bui l di ng.
24 Q. And what bui l di ng i s t hat , si r ?
25 A. I n Ki ps Bay, 300 East 33r d St r eet .
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1 Q. And how l ong have you l i ved t her e?
2 A. I ' ve l i ved t her e si nce 1984.
3 Q. And do you have - -
4 A. I ' mver y st abl e. What ?
5 Q. Do you have any posi t i on wi t h t he bui l di ng?
6 A. None what soever .
7 Q. And have you have you had l i st i ngs f r omt he bui l di ng?
8 A. I ' ve sol d at l east 20 apar t ment s t her e.
9 Q. And di d you have occasi on t o l i st Dr . Kar r on' s apar t ment ,
10 apar t ment 4N?
11 A. Yes, I di d.
12 Q. And wher e - - how di d you - - t el l t he j ur y how you go about
13 l i st i ng?
14 A. How I what ?
15 Q. How do you go about - - di d you have an excl usi ve?
16 A. Yes, I had t he excl usi ve on t he l i st i ng.
17 Q. And what does t hat mean?
18 A. That means t hat I was t he one br oker t hat cont r ol l ed t he
19 apar t ment , and anybody who want ed t o see i t , ever y br oker had
20 t o cal l me and ar r ange t o see i t t hr ough me. I was t he
21 cont r ol l i ng br oker .
22 Q. And how ar e you pai d as a br oker ?
23 A. We' r e pai d a commi ssi oni ng based on t he sal e. I f you sel l
24 i t as a co- br oke, your company spl i t s t he commi ssi on. I f you
25 sel l i t your sel f , your company get s t he whol e commi ssi on and
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1 i t ' s di vi ded wi t h your company.
2 Q. And you get a set amount or per cent age of t he sal es pr i ce?
3 A. I t ' s per cent age of t he sal es pr i ce.
4 Q. So t he hi gher you sel l i t f or t he mor e you make?
5 A. Yes.
6 Q. Now, di d you have occasi on t o l i st Dr . Kar r on' s apar t ment ?
7 A. Yes, I di d.
8 Q. And what when was t hat ?
9 A. You mean what pr i ce?
10 Q. When?
11 THE COURT: When ar e we t al ki ng about ?
12 A. Oh, we - - I ' msor r y.
13 THE COURT: When?
14 Q. Yeah. When di d you l i st t he apar t ment ?
15 A. I t hi nk i t was pr obabl y l ast Oct ober , somet hi ng l i ke t hat .
16 Q. And what di d you l i st i t at ?
17 A. We l i st i t at $650, 000.
18 Q. And what wer e apar t ment , compar abl e si ze apar t ment s sel l i ng
19 f or at t hat t i me i n t hat l ocat i on?
20 A. Compar abl e apar t ment s wer e sel l i ng i n t he seven' s.
21 Q. And when you say seven - -
22 A. 700' s, yeah, seven and a quar t er , 740, 750.
23 Q. Thousand?
24 A. Hundr ed t housand, yes. And we t hought t hat - - we t hought
25 t hi s was a hi gh pr i ce, but we t hought we' d get peopl e i n and
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1 see i f we coul d get mor e money, because my j ob i s basi cal l y t o
2 get as much money as I possi bl y can f or t he apar t ment . So we
3 l i st ed at 650, 000 whi ch I t hought was hi gh.
4 Q. And why i f si mi l ar apar t ment s i n t he same bui l di ng wer e
5 sel l i ng f or over 700, 000, why di d you l i st t hi s apar t ment f or
6 $650, 000?
7 A. Dr . Kar r on had t aken a r esi dent i al apar t ment and basi cal l y
8 t ur ned i t i nt o a l abor at or y. Ther e wer e r eal l y no vest i ges of
9 what you woul d consi der as a, as a nor mal r esi dent i al
10 apar t ment . I t was, basi cal l y, al l l ab. I t had desks bui l t al l
11 ar ound t he apar t ment , no t hi ngs l i ke sof as, j ust ki nd of of f i ce
12 chai r s wher e you coul d pul l up t o comput er s and moni t or s.
13 Ther e was a, basi cal l y, a mat t r ess on t he f l oor and a hammock
14 r unni ng acr oss t he r oomwher e peopl e coul d sl eep, and i t was
15 basi cal l y i t . The r est of i t i s al l wor k. And we f el t t hat i t
16 woul d t ake a l ot of money t o conver t t hi s apar t ment back
17 because of t he - - back t o a r esi dent i al apar t ment because of a
18 l ot of t hi ngs he di d t o i t .
19 Q. And di d you, event ual l y, di d you show t hi s apar t ment t o
20 peopl e?
21 A. I showed i t a l ot .
22 Q. And di d you event ual l y f i nd a buyer ?
23 A. I di d f i nd a buyer , yes.
24 Q. And when was t hat , si r ?
25 A. We f ound a buyer , I guess ear l i er t hi s year .
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1 Q. And had, f r omt he t i me you st ar t ed l i st i ng t he apar t ment i n
2 Oct ober , t i l l t he t i me you f ound a buyer , di d you change t he
3 of f er pr i ce?
4 A. We l ower ed i t t o 610, 000, and we had a l i t t l e mor e i nt er est
5 i n i t , but I showed i t at l east - - I must have shown i t 40
6 t i mes.
7 Q. And what was t he event ual sal es pr i ce f or t hi s apar t ment ?
8 A. Event ual says pr i ce was 510, 000, but i t was al l cash. We
9 di dn' t have t o get a bank i nvol ved i nt o i t , so we di dn' t have
10 t o wor r y about an appr ai sal comi ng or anyt hi ng l i ke t hat . And
11 i t was bought by somebody on boar d because t her e wer e cer t ai n
12 ci r cumst ances r egar di ng t he apar t ment t hat i t j ust wor ked out
13 wel l t o have somebody on t he boar d buy i t . Now, he f ound i t
14 because I had l i st ed t he apar t ment i n t he l aundr y r oom, not
15 because, you know, because he knew anyt hi ng about i t . He saw
16 i t l i st ed and came t o see i t and expr essed an i nt er est i n i t .
17 Q. And does t hi s per son own ot her apar t ment s i n t he bui l di ng?
18 A. Yes, he does, and he l i ves i n t he bui l di ng.
19 MR. RUBI NSTEI N: I have no f ur t her quest i ons.
20 THE COURT: Any cr oss- exami nat i on?
21 CROSS EXAMI NATI ON
22 BY MR. KWOK:
23 Q. Good af t er noon, Mr . Ni col ai .
24 A. Hel l o.
25 Q. Have you hear d anyt hi ng about t he Advanced Technol ogy
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1 Pr ogr am; do you know anyt hi ng about i t ?
2 A. No, I don' t .
3 Q. Do you know about t he r ul es and r egul at i on gover ni ng t hi s
4 pr ogr amcal l ed Advanced Technol ogy Pr ogr am?
5 A. I don' t know what i t i s.
6 Q. Di d you have any deal i ngs at al l wi t h a company cal l ed
7 CASI ?
8 A. No.
9 Q. Ar ound 2001 t o 2003?
10 A. No.
11 MR. KWOK: No f ur t her quest i ons.
12 THE COURT: Anyt hi ng f ur t her ?
13 MR. RUBI NSTEI N: No, your Honor .
14 THE COURT: Al l r i ght , you' r e excused. Next wi t ness.
15 THE WI TNESS: Thank you.
16 ( Wi t ness excused)
17 MR. RUBI NSTEI N: Your Honor , def ense cal l s J ohn Mason.
18 THE COURT: Al l r i ght .
19 J ONATHAN MASON,
20 cal l ed as a wi t ness by t he def endant ,
21 havi ng been dul y swor n, t est i f i ed as f ol l ows:
22 DI RECT EXAMI NATI ON
23 BY MR. RUBI NSTEI N:
24 THE COURT: Pl ease pr oceed.
25 Q. Mr . Mason, good af t er noon?
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1 A. Good af t er noon.
2 Q. Di d we ever meet bef or e?
3 A. J ust t oday.
4 Q. And what i s your busi ness and occupat i on, si r ?
5 A. I ' ma car pent er , bui l der .
6 Q. And do you know t he def endant , Dr . Kar r on?
7 A. I do.
8 Q. And do you see hi mi n cour t ?
9 A. I do.
10 Q. And wher e do you see hi m?
11 A. ( Poi nt i ng)
12 MR. RUBI NSTEI N: I ndi cat i ng t he def endant , your Honor ?
13 THE COURT: Yes, t he wi t ness has i dent i f i ed t he
14 def endant , t he r ecor d wi l l so r ef l ect .
15 MR. RUBI NSTEI N: Excuse me, your Honor . I have t o get
16 somet hi ng f r omt he wi t ness.
17 Q. Now, what i s your busi ness and occupat i on pl ease?
18 A. I ' ma bui l der .
19 Q. And when di d you meet Dr . Kar r on?
20 A. About t hr ee year s ago.
21 Q. And do you have accompany?
22 A. Yes, I do.
23 Q. And what ' s t he name of your company?
24 A. Bat or Bi nt oer , I ncor por at ed.
25 Q. And how l ong?
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1 THE COURT: I ' msor r y, I coul dn' t cat ch t he name.
2 THE WI TNESS: I t ' s Bat or Bi nt oer .
3 Q. And how l ong have you had t hat company?
4 A. 15, 17 year s.
5 Q. And do you have a speci al t y?
6 A. Um, no. I ' d say we' r e mor e gener al . We' ve done a f ew
7 di f f er ent t hi ngs and we sor t of di f f er ent t i mes had, you know,
8 been f ocused on di f f er ent t hi ngs. But mai nl y now we j ust do
9 cont r act i ng, f i x apar t ment s, t hat sor t of t hi ng.
10 Q. And how di d you come t o meet Dr . Kar r on?
11 A. Someone I knew t ol d me t hat a f r i end of t hei r s was l ooki ng
12 f or some wor k t o be done, and I went and i nt r oduced mysel f t o
13 Dr . Kar r on.
14 Q. And di d t hat r esul t i n you doi ng some wor k i n apar t ment 1N
15 at 300 East 23r d St r eet ?
16 A. I t di d.
17 THE COURT: 1N or 4N?
18 MR. RUBI NSTEI N: I ' msor r y, 4N, 4N.
19 Q. And - -
20 THE COURT: Coul d we have a dat e?
21 Q. Yeah. Do you r ecal l when i t was t hat you, or wi t hdr awn.
22 Di d you make a wr i t t en agr eement or t hi s was ver bal ?
23 A. No, t her e was a wr i t t en agr eement and I had t o get , you
24 know, we got some i nsur ance paper s and t hi ngs and - - I mean i t
25 was a l i t t l e whi l e ago. I ' mnot compl et el y up on al l my j obs
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1 f r omf our year s ago, but , you know.
2 Q. Wel l t hat ' s a st andar d t hi ng t o get i nsur ance when you do
3 wor k i nsi de of - -
4 A. Yeah.
5 Q. - - a coop bui l di ng?
6 A. Yes, i t i s. Most l y t o wor k i n any coop bui l di ng you have
7 t o show your wor ker s comp and wor k l i abi l i t y i nsur ance.
8 Q. Do you have t o meet wi t h anybody f r omt he bui l di ng bef or e
9 you ar e per mi t t ed i n t o wor k?
10 A. No. They j ust want t o see t he paper wor k. I mean, I t hi nk
11 l i ke I di d - - I pr obabl y di d at some poi nt t al ked t o some of
12 t he bui l di ng management at t he begi nni ng whenever we wer e
13 sor t i ng out t he paper wor k, but .
14 Q. What ki nd of wor k di d you do i n apar t ment 4N?
15 A. Most l y I was wor ki ng on - - I mean, I guess you' l l know hi s
16 apar t ment was l i ke a comput er l abor at or y. So mai nl y we l i ke,
17 we put l ot s of r unner s on t he wal l s t hat hel d al l t he scr eens.
18 One of t he bi g j obs t hat we di d was we made a vent i l at i ng
19 syst emf or t he comput er s, because i n t he summer i t had a l ot of
20 pr obl emwi t h t he comput er s over heat i ng, so we l i ke bui l t r acks
21 t o put al l t he comput er s i n. And t hen I bui l t - - l i ke we got
22 t hese f ans, ext r act or f ans, you know, bui l t i t , seal ed i t of f
23 so t hat t he ai r f r ombehi nd t he comput er s was i mmedi at el y
24 sucked out t o t he out si de and, and ai r condi t i on t her e coul d be
25 pul l ed i n.
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1 Q. What i s ext r act or s?
2 A. Yeah, ext r act - - we ar e ext r act i ng t he hot ai r f r ombehi nd
3 t he comput er s l i ke and vent i ng i t out si de. And t hen we had ai r
4 condi t i oner s and st uf f i n t he f r ont of t he comput er s so t hat ,
5 you know, i t woul d be cool ai r goi ng t hr ough t he comput er s.
6 Q. So what ki nd of - - di d you have t o do any st r uct ur al wor k?
7 A. No, i t wasn' t st r uct ur al wor k.
8 Q. Di d you have t o br eak t he wal l or anyt hi ng?
9 A. No, no.
10 Q. And how l ong di d t he j ob t ake?
11 A. Wel l , I mean t her e was l i ke - - as I sai d, t her e was a
12 coupl e of di f f er ent t hi ngs t hat I di d. And I woul d say l i ke
13 al l i n al l , l i ke i t was l i ke maybe a mont h' s wor t h of wor k,
14 maybe a bi t l ess. But , you know, i t wasn' t al l done l i ke one
15 day t o t he next , you know. I t wasn' t l i ke i n one t hi ng. Ther e
16 was l i ke space, we di d some I t hi nk one pr oj ect . Then we
17 act ual l y bui l t t he vent i l at i on syst emonce, and t hen we had t o
18 r et ake i t down, and l i ke i t di dn' t r eal l y wor k out , so l i ke a
19 mont h l at er we l i ke t ook i t down and di d i t agai n, you know,
20 and we changed t he f ans and st uf f t hat we used.
21 Q. Now, di d you f i l l out t i me sheet s on t hi s j ob?
22 A. I di d, act ual l y, whi ch act ual l y was a sor t of a bone of
23 cont ent i on bet ween me and Dr . Kar r on. Because I t ol d hi mI
24 never f i l l ed out t i me sheet s bef or e. I mean, usual l y I make a
25 bi l l and, you know, t hat ' s, t hat ' s what i t i s. But Dr . Kar r on
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1 was qui t e i nsi st ent . So I t hi nk we di d f i l l out t i me sheet s.
2 Q. And di d you si gn t hose t i me sheet s?
3 A. I ' msur e I di d.
4 Q. Now, l et me show you what ' s mar ked as def endant ' s MM f or
5 i dent i f i cat i on. I show you what ' s been mar ked MM f or
6 i dent i f i cat i on and ask you i f you r ecogni ze what t hat document
7 i s?
8 A. I do. I t ' s a t i me sheet i t ' s got my si gnat ur e on.
9 Q. And how many of t hose di d you f i l l out dur i ng t he t i me you
10 wer e wor ki ng t her e?
11 A. A bunch.
12 MR. RUBI NSTEI N: We of f er MM i nt o evi dence, your
13 Honor .
14 MR. KWOK: No obj ect i on.
15 THE COURT: Any obj ect i on?
16 MR. KWOK: No obj ect i on.
17 THE COURT: No obj ect i on? MM i s admi t t ed i n evi dence.
18 THE DEPUTY CLERK: That ' s MM?
19 MR. RUBI NSTEI N: MM.
20 THE COURT: MM.
21 ( Def endant ' s Exhi bi t MM r ecei ved i n evi dence)
22 Q. I show you what ' s mar ked as MM- 1 and MM- 2 and ask you i f
23 you r ecogni ze what i s depi ct ed i n t hese exhi bi t s?
24 THE COURT: What exhi bi t s ar e you showi ng?
25 MR. RUBI NSTEI N: MM- 1 and MM- 2.
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1 Q. Do you r ecogni ze anyt hi ng i n t her e, Mr - -
2 A. Yeah, I do. I mean i t ' s not t he gr eat est of pi ct ur es, but
3 yeah I do, I do r ecogni ze t hi s i s l i ke t he mai n r oomwi t h t he
4 book shel ves and t he t abl e and t he st uf f on t he cei l i ng.
5 Q. And - -
6 A. Yeah, t hi s i s, t hi s i s - - and t hi s one i s l i ke equi pment .
7 Q. Tel l us what number you' r e l ooki ng at on t he bl ue l i t t l e
8 st i cker ?
9 A. Yeah. MM- 1.
10 Q. Okay.
11 A. And t hese l ook l i ke bl ack and whi t e shot s of l i ke hi s
12 apar t ment .
13 Q. Does t hat f ai r l y and accur at el y r ef l ect t he way t he
14 apar t ment l ooked at some poi nt when you wer e wor ki ng t her e?
15 A. Yeah. I mean, t hey' r e not t he gr eat est pi ct ur es, but yeah,
16 I woul d say so. I mean, I can r ecogni ze t he st uf f .
17 Q. Do you see t he wor k you di d i n t hose pi ct ur es?
18 A. Yeah.
19 MR. RUBI NSTEI N: We of f er MM- 1 i nt o evi dence.
20 MR. KWOK: No obj ect i on.
21 THE COURT: No obj ect i on? MM- 1 i s admi t t ed i n
22 evi dence.
23 ( Def endant ' s Exhi bi t MM- 1 r ecei ved i n evi dence)
24 Q. Al l r i ght . Now t ake a l ook at MM- 2. Fi r st gi ve me MM- 1.
25 I ' mgoi ng t o put i t up on t he t hi ng her e. I s t hat one?
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1 A. Yeah.
2 Q. Thank you. Okay. Can you descr i be what we' r e l ooki ng at
3 i n MM- 1?
4 A. Yeah, I guess t hi s - -
5 Q. Coul d you st ar t on - -
6 A. I t ' s har d t o t el l . I t coul d be ei t her r oom, but bot h r ooms
7 ar e pr et t y much t he same. I t hi nk act ual l y t hi s i s what - - so
8 cal l ed t he bedr oombecause i t has t he book shel ves st i l l on.
9 Q. Di d you do wor k i n t he bedr oom?
10 A. Not so much. Act ual l y, I di d - - I - - act ual l y, I di d put
11 some - - I put t hese t hi ngs on t he cei l i ng, t he sl i de t hi ng on
12 t he cei l i ng.
13 Q. And what ' s t hat f or ?
14 A. The ones I put on wer e f or l i ke - - we had l i ke l i ght s t hat
15 l i ke went al ong t he desk, and t hey wer e l i ke l ong f l exi bl e
16 t hi ngs. They at t ached t o t he t r ack on t he cei l i ng. And t hey
17 wer e so t hat you coul d di r ect t he l i ght t o wor k on t he
18 comput er . You know, we had l i ke a bunch, so t hey l i ke wer e
19 behi nd you. And t he i dea was t he, you know, you coul d l i ke
20 adj ust i t t o l i ke, you know, adj ust abl e l i ght i ng so t hat you
21 coul d have f or peopl e t o wor k and st uf f .
22 Q. Al l r i ght . Now i n MM- 2, what do you r ecogni ze i n t hat
23 phot ogr aph.
24 A. I mean i t l ooks l i ke t he comput er r acks agai n. I t ' s not
25 t he easi est , ' cause i t ' s bl ack and whi t e, not t he easi est t hi ng
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1 t o see, but t hi s one l ooks l i ke some of t he comput er r acks t hat
2 we bui l t .
3 Q. Di d you bui l d t hose i n t he l i vi ng r oom?
4 A. Yeah, bui l t t hemi n t he l i vi ng r oom.
5 MR. RUBI NSTEI N: We of f er MM- 2 i nt o evi dence, your
6 Honor .
7 MR. KWOK: No obj ect i on.
8 THE COURT: MM- 2 i s admi t t ed i n evi dence.
9 ( Def endant ' s Exhi bi t MM- 2 r ecei ved i n evi dence)
10 Q. Coul d you descr i be what ' s depi ct ed i n t he t op phot ogr aph of
11 MM- 2?
12 A. The t op one, I don' t know. I t hi nk I need a - - I mean, i t
13 l ooks l i ke equi pment on t he f l oor . I don' t know what t hose
14 l i ght s ar e on t he si de. I ' mnot qui t e sur e what t hat i s of .
15 Q. And how about t he second phot ogr aph?
16 A. The second one l ooks l i ke t he r acks t hat we bui l t , l i ke
17 i t ' s ki nd of a cl oseup shot of t hem, but l i ke i t l ooks l i ke we
18 bui l t l i ke t hese sl i di ng r acks wher e t he comput er s t hey sl i de
19 i n, and t hat ' s wher e we had t he vent i l at i on syst em. Li ke what
20 he t r i ed t o do was put al l t he comput er s t oget her and l i ke - -
21 and t hen l i ke cool , l i ke t ake t he ai r out f r ombehi nd t he
22 comput er s so t hat i t was l i ke cool i ng t hem. So l i ke you don' t
23 need t hese bi g r acks l i ke st andi ng up l i ke, and t hey have t he
24 scr ews on t he f r ont , t he pi eces sl i de i n so t hat you can l i ke
25 sl i de, t hey' r e ki nd of on l i ke r ai l s so you can l i ke sl i de out
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1 t he equi pment t o get t o t he wi r es i n t he back and st uf f , and
2 t hen sl i de t he i t back i n, you know. So l i ke i f i t needs t o be
3 mai nt ai ned or what ever , t aken out , i t can be t aken out wi t hout
4 t he whol e t hi ng bei ng t aken apar t .
5 Q. Coul d you descr i be t he comput er s?
6 A. Wel l , I ' mnot a comput er exper t , but t her e wer e a l ot of
7 t hem, you know, and i t was ver y pr of essi onal l ooki ng, you know.
8 I mean, Dr . Kar r on made pl ans l i ke f or how ever yt hi ng was goi ng
9 t o go. And most l y t hey' r e l i ke sor t of l i ke l ong ki nd of t hi n
10 machi nes t hat l i ke sl i de l i ke, t hey l i ke, t hey' r e ki nd of bui l t
11 f or t hese r acks I t hi nk, or t he r acks ar e bui l t f or t hem. But
12 t hey have l i ke a f ace. They' r e qui t e l i ke deep and st uf f and
13 t hey l i ke cl i p t hemont o t hese r unner s and t hey l i ke sl i de i nt o
14 t he r ack, so.
15 Q. And what t i me woul d you gener al l y wor k at t he apar t ment ?
16 A. Ni ne t o f i ve. You know, t he bui l di ngs have codes. You
17 can' t - - you can l i ke - - you have t o abi de by t he bui l di ng' s
18 r ul es, whi ch i s usual l y ni ne t o f i ve.
19 Q. And wer e peopl e wor ki ng whi l e you wer e t her e?
20 A. Yeah.
21 Q. Now, what ot her wor k di d you do; di d you do any ot her wor k
22 i n t he l i vi ng r oom?
23 A. I n t he l i vi ng r oom, yes. What di d we do? Wel l we di d - - I
24 di d t he l i ght syst eml i ke, as I t ol d you about i n t he bedr oom.
25 We had t he l i ght s t hat came down f r omt he cei l i ng. We al so put
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1 some r acks up. One of t hemhel d l i ke a ai r pur i f i er and
2 t hi ngs. I di d l i ke a l ot of t he, t he st uf f t hat Dr . Kar r on
3 coul dn' t r eal l y do, because i t was physi cal and mor e
4 const r uct i on or i ent at ed l i ke put t i ng t he r ai l s up on t he
5 cei l i ng. You know, you have t o dr i l l wi t h t he, wi t h a concr et e
6 dr i l l and ever yt hi ng, ' cause t he whol e bui l di ng i s concr et e,
7 and st uf f l i ke t hat .
8 But usual l y I was - - I mean, Dr . Kar r on made t he
9 i nst r uct i ons and made t he pl ans of what he needed, and t hen I
10 t r i ed t o accommodat e hi mas best as I coul d.
11 Q. He dr ew t he pl ans f or your - -
12 A. He made t he pl ans - - yeah. He, I mean, he - - I di dn' t
13 desi gn t he st uf f . He desi gned t he st uf f and I was j ust mai nl y
14 i nst al l i ng and, you know, what came up. I ' mnot a comput er
15 desi gner or anyt hi ng.
16 Q. Now, your company, you set a pr i ce i ni t i al l y f or t he j ob?
17 A. Yeah.
18 Q. And what i s t hat ; what di d you char ge?
19 A. I ' msor r y, I can' t r emember l i ke of f hand. I haven' t
20 r eal l y - - I haven' t been - - st udi ed i t , you know, f or comi ng
21 her e. I mean, I do a l ot of j obs. I can' t r emember what
22 ever yt hi ng was. But I mean I - - we bi l l ed - - you know, t her e
23 wer e bi l l s f or ever yt hi ng so t hat I coul d get pai d, and I ' m
24 sur e i t must be al l on r ecor d.
25 Q. And di d you get pai d?
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1 A. I di d get pai d, yeah.
2 Q. Now - -
3 A. Somet i me.
4 Q. Dr . Kar r on pai d?
5 A. Yeah, I mean or t he - - act ual l y, usual l y I woul d act ual l y
6 get pai d by t he account ant . You know, he woul d have t o cl ear
7 t he check what ever , but he woul d act ual l y wr i t e t he check, t he
8 account ant woul d wr i t e t he check or , you know, maybe someone he
9 was wor ki ng f or , who i s wor ki ng f or hi m. Li ke somet i mes I l i ke
10 coor di nat ed wi t h Mat a l ot . Mat ' s ki nd of l i ke hi s r i ght hand
11 per son, does a l ot of st uf f f or hi m.
12 Q. For Dr . Kar r on?
13 A. Yeah, f or Dr . Kar r on. So I woul d, you know, l i ke - - ' cause
14 Dr . Kar r on was of t en ver y busy. You know of t en l i ke mai nl y I
15 went t hr ough Mat f or t hi ngs, you know.
16 Q. Al l r i ght . Di d you have occasi on t o do any ot her wor k
17 out si de of t he r oomwher e t he comput er was?
18 A. Yeah, we - - I changed t he cabi net i n t he ki t chen and t he
19 si nk cabi net , and t hat was pr et t y much t he onl y t hi ng we di d i n
20 t her e.
21 Q. And di d you char ge separ at el y f or t hat ?
22 A. Dr . Kar r on was ver y i nsi st ent t hat l i ke t hat wor k had t o be
23 pai d by a check f r omhi msel f , whi ch he wr ot e, as opposed t o t he
24 account ant or anybody.
25 Q. And l et me show you - - I show you what ' s mar ked def endant ' s
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1 MM- 3. I show you what ' s been mar ked f or i dent i f i cat i on as
2 def endant ' s MM- 3 and ask you i f you r ecogni ze what ' s depi ct ed
3 i n t hat exhi bi t ?
4 A. Yes. I t ' s a check t o my company Bat or Bi nt oer .
5 MR. RUBI NSTEI N: We of f er t hat i n evi dence.
6 MR. KWOK: No obj ect i on.
7 THE COURT: MM- 3 i s admi t t ed i n evi dence.
8 ( Def endant ' s Exhi bi t MM- 3 r ecei ved i n evi dence)
9 ( Cont i nued on next page)
10
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1 BY MR. RUBI NSTEI N:
2 Q. What wor k was per f or med t hat gener at ed t hat bi l l ?
3 A. Thi s i s f or t he cabi net , f or put t i ng t he cabi net i n t he
4 ki t chen.
5 Q. And how much di d you char ge f or t he cabi net i n t he ki t chen?
6 A. $620.
7 MR. RUBI NSTEI N: Let me publ i sh i t t o t he j ur y, your
8 Honor .
9 THE COURT: OK.
10 Q. Let me show you what ' s - - l et me show you t hi s check mar ked
11 MM- 4. And t hat i s a per sonal check f r omDr . Kar r on?
12 A. Yeah, because t he ot her checks say CASI on t hem.
13 Q. Let me show you what ' s been mar ked as MM- 4 and ask you i f
14 you can i dent i f y what ' s been mar ked f or i dent i f i cat i on as MM- 4.
15 A. Yeah, i t ' s a check t o Bat or Bi nt oer f r omComput er Ai ded
16 Sur ger y f or $1766. 66.
17 Q. And t hat was f or wor k done i nsi de t he l i vi ng r oompor t i on
18 t hat you t est i f i ed t o?
19 A. Yes.
20 THE COURT: Ar e you of f er i ng MM- 4 i nt o evi dence?
21 MR. RUBI NSTEI N: Yes, I ' mof f er i ng MM- 4 i nt o evi dence,
22 your Honor .
23 THE COURT: Any obj ect i on?
24 MR. KWOK: No obj ect i on.
25 THE COURT: MM- 4 i s admi t t ed i nt o evi dence.
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1 ( Def endant ' s Exhi bi t MM- 4 r ecei ved i n evi dence)
2 MR. RUBI NSTEI N: I want t o publ i sh i t t o t he j ur y.
3 THE COURT: I don' t t hi nk anybody can r ead t hat .
4 MR. RUBI NSTEI N: Shoul d I wal k i t ar ound t o t he j ur y?
5 Whi l e t he j ur y i s l ooki ng at t hat , I amgoi ng t o show
6 you what ' s mar ked f or i dent i f i cat i on as Def endant ' s MM- 6.
7 THE COURT: What MM- 5?
8 DEPUTY COURT CLERK: You' r e not usi ng 5?
9 MR. RUBI NSTEI N: That ' s not 5?
10 THE COURT: 5 hasn' t been admi t t ed i nt o evi dence. I f
11 i t ' s 5, you have a pr obl em.
12 MR. RUBI NSTEI N: Ther e i s no 5, J udge.
13 THE COURT: OK.
14 Q. Al l r i ght . Take a l ook at what ' s been mar ked as
15 Def endant ' s MM- 5. Do you r ecogni ze what ' s depi ct ed?
16 A. Yes, i t ' s one of my i nvoi ces.
17 THE COURT: Thi s i s 5 or 6?
18 MR. RUBI NSTEI N: 5.
19 THE COURT: What you ar e showi ng t he wi t ness i s 5, not
20 6?
21 MR. RUBI NSTEI N: Yes, your Honor .
22 THE COURT: OK, i t ' s now 5. Pl ease go ahead.
23 A. Yeah, i t ' s pr obabl y one of my f i r st i nvoi ces. I t ' s f or t he
24 pur chase and i nst al l of exhaust syst emf or t he comput er net wor k
25 hub. I t ' s f or $2, 000. I t says 50 per cent deposi t r equi r ed
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1 bef or e wor k commences.
2 Q. And di d you r ecei ve t hat money?
3 A. I ' msur e I di d, yes.
4 MR. RUBI NSTEI N: We of f er MM- 5 i nt o evi dence.
5 MR. KWOK: No obj ect i on.
6 THE COURT: Was t hi s pai d, or $1, 000 pai d?
7 THE WI TNESS: Thi s must have been bef or e I st ar t ed t he
8 wor k. I usual l y get 50 per cent deposi t , or when i t ' s done or
9 di f f er ent st ages I get t he r est of t he money.
10 THE COURT: You di d get pai d on t hi s.
11 THE WI TNESS: Yes. I mean l i ke i n my books.
12 THE COURT: MM- 5 admi t t ed i nt o evi dence.
13 ( Def endant ' s Exhi bi t MM- 5 r ecei ved i n evi dence)
14 Q. Let me show you what ' s mar ked f or i dent i f i cat i on as MM- 6
15 and MM- 7 and ask you i f you can i dent i f y what ' s depi ct ed i n
16 t hose t wo i t ems, si r .
17 A. OK. MM- 6 i s a t i me sheet f or 21 hour s, I t hi nk, and t hen
18 t he ot her one i s anot her t i me sheet t hat I must have f i l l ed out
19 f or Dr . Kar r on.
20 Q. And t hose ar e t he t i me sheet s you f i l l ed out ?
21 A. Yeah.
22 Q. And how of t en do you f i l l out a t i me sheet f or Dr . Kar r on?
23 A. Ever y week t hat I was wor ki ng t her e.
24 Q. And how of t en woul d you get pai d?
25 A. I can' t r emember exact l y, but I mean I t hi nk l i ke I got
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1 pai d - - I got pai d as l i ke wor k was compl et ed or wor k was due,
2 you know. He gave me t he money at t he begi nni ng, and I mi ght
3 have got pai d l i ke somet i mes at t he end of t he week t oo. But
4 i t was a l i t t l e conf usi ng because wi t h t he t i me sheet s i t ' s
5 ki nd of l i ke I ' man empl oyee but I wasn' t r eal l y an empl oyee,
6 i t ' s my own busi ness. But , as I sai d, he want ed me t o do t he
7 t i me sheet , so I di d t he t i me sheet s, but I al so bui l t i n f or
8 t he wor k I had done. So I mai nl y went of f my bi l l s f or hi m.
9 THE COURT: Wher e di d you get t he t i me sheet ?
10 THE WI TNESS: Dr . Kar r on pr ovi ded t hem. I don' t
11 usual l y do t i me sheet s f or anybody el se. Usual l y I wr i t e my
12 i nvoi ce and t hen, you know, i f i t get s changed, I get payment s
13 as t he wor k get s done. That ' s nor mal pr ocedur e.
14 Q. Now, t he t i me sheet s, we of f er t hemi n evi dence, your
15 Honor , t he t i me sheet s.
16 MR. KWOK: Can I j ust t ake a l ook?
17 THE COURT: MM- 6 and MM- 7.
18 MR. KWOK: No obj ect i on.
19 THE COURT: No obj ect i on, MM- 6 and MM- 7 admi t t ed i nt o
20 evi dence.
21 ( Def endant ' s Exhi bi t MM- 6 and MM- 7 r ecei ved i n
22 evi dence)
23 Q. Do t hose t i me sheet s al so i ndi cat e t he t ype of wor k t hat
24 you di d?
25 A. Yeah, r oughl y l i ke t hey say some t hi ngs.
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1 Q. Tel l us what number you ar e l ooki ng at .
2 A. Ei t her one. I t says - -
3 Q. Coul d you see t he number on t he l i t t l e st i cker ?
4 A. Yeah. MM- 6, t hi s has t o do wi t h t i me t hat I spent on i t
5 says hot ai r duct dump, but I know t hat means t he vent i l at i on
6 syst emf or t he comput er s.
7 Q. And how much t i me di d you spend on t hat ?
8 A. I spent qui t e a l ot . Thi s one says 21 hour s, but I t hi nk I
9 spent mor e t han t hat . I t was qui t e a compl i cat ed l i t t l e t hi ng,
10 and as I sai d we had t o wor k out t he bugs. As I sai d, usual l y
11 how i t wor ks i s he t el l me what t o do, I do i t , t hen he t el l s
12 me what he di dn' t l i ke about i t , and t hen I woul d have t o f i x
13 what ever he di dn' t l i ke about i t .
14 Q. Wer e you wor ki ng al one or wi t h ot her peopl e?
15 A. Wel l , I wor ked al one f or my company, but l i ke when we
16 di d - - when I wor ked on t he comput er r acks and st uf f , he had
17 some, I t hi nk t hey wer e l i ke st udent s, but he of t en had l i ke
18 peopl e come i n, hel pi ng comput er guys hel pi ng hi mwi t h t he
19 comput er st uf f , l i ke st udent s or somet hi ng.
20 Li ke when we di d t he r acks, l i ke I had somebody hel p
21 me as I ' mnot par t i cul ar l y t hat knowl edgeabl e on t he comput er
22 si de. You know, my si de was mor e l i ke bui l di ng t he r acks and
23 maki ng ever yt hi ng, so he had someone el se t her e who was l i ke
24 hooki ng up t he comput er s t o see i f t hey wor ked, and l i ke
25 r unni ng al l t he wi r es, and I woul d l i ke t r i p up t he wi r es or
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1 st uf f . But l i ke I di dn' t know how t o hook up t he comput er s or
2 anyt hi ng. He had somebody el se doi ng t hat st uf f .
3 Ther e wer e al ways a coupl e of peopl e. Mat t was al ways
4 t her e wor ki ng, and t her e wer e a coupl e of ot her peopl e usual l y
5 wor ki ng on t he comput er s. And t hen l i ke he woul d have l i ke
6 st udent guys l i ke t her e, and t hey woul d ei t her be wor ki ng on
7 st uf f f or t he comput er f or hi m, or somet i mes t hey woul d l i ke
8 hel p me and st uf f .
9 Q. Di d you pay t hem, t he ones t hat hel ped you?
10 A. Sor r y?
11 Q. Di d you pay t hem?
12 A. No, I di dn' t pay t hem.
13 Q. I amgoi ng t o show you what ' s mar ked as - - do you r ecal l
14 whet her or not t he checks - - t he col or of t he checks you
15 r ecei ved?
16 A. Wer e t he same? You mean l i ke hi s check and t he ot her
17 check?
18 Q. Cor r ect .
19 A. No, I t hi nk t hey wer e di f f er ent . I mean I can' t r emember .
20 I t hi nk t he Comput er Ai ded Sur ger y ones wer e al l pi nk. I t was
21 a l i t t l e whi l e ago, and I t hi nk - -
22 Q. Let me show you what ' s MM- 8 f or i dent i f i cat i on. Do you
23 r ecogni ze what ' s cont ai ned t her e?
24 A. Yeah, i t ' s a check f r omComput er Ai ded Sur ger y t o Bat or
25 Bi nt oer f or $1, 082.
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1 THE COURT: 8 hasn' t been admi t t ed i n evi dence.
2 MR. RUBI NSTEI N: No, I ' mof f er i ng i t i n evi dence.
3 MR. KWOK: No obj ect i on.
4 THE COURT: Al l r i ght . 8 i s i n evi dence.
5 ( Def endant ' s Exhi bi t MM- 8 r ecei ved i n evi dence)
6 Q. Now you can di scuss i t .
7 A. Yeah, i t ' s a check wr i t t en t o my company f r omComput er
8 Ai ded Sur ger y f or $1, 082. 67.
9 Q. I show you what ' s Exhi bi t MM- 9 and ask you i f you coul d - -
10 i f you r ecogni ze what i s cont ai ned i n t hat exhi bi t .
11 A. Yeah, MM- 9 i s anot her check t o Bat or Bi nt oer but t hi s one
12 i s f r omDr . Kar r on f or $200.
13 Q. Do you know what you di d f or t hat $200?
14 A. Pr obabl y t hat was st i l l somet hi ng t o do wi t h doi ng t he
15 cabi net i n t he ki t chen. You know, t hat maybe t hat came l at er
16 because I had t o hook up hi s wat er f i l t r at i on syst em.
17 THE COURT: You had t o do what ?
18 THE WI TNESS: I t was l i ke i n t he cabi net . He had l i ke
19 a wat er f i l t r at i on syst em, and when I put i t back I t hi nk I had
20 t o char ge ext r a because i t was qui t e compl i cat ed t o put i t
21 back.
22 Q. Now, do you r ecal l when you f i ni shed doi ng wor k f or Dr .
23 Kar r on?
24 A. I ' mnot t he gr eat est at dat es, but as I sai d I t hi nk t he
25 whol e t hi ng went on a coupl e of mont hs.
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1 Q. And when you f i ni shed your j ob, wer e you owed money?
2 A. I pr obabl y was owed a l i t t l e bi t of money. I can' t
3 r emember exact l y, but usual l y, you know, i t al ways t akes a
4 l i t t l e t i me t o get pai d. I never got pai d f r omanybody
5 st r ai ght away, but Dr . Kar r on was pr et t y good. I mean I got - -
6 THE COURT: Let ' s j ust answer yes or no i f you can.
7 THE WI TNESS: OK, sor r y.
8 A. I n my books I ' mf ul l y pai d by Dr . Kar r on. He never r eal l y
9 owed me any money over a l ong per i od of t i me or anyt hi ng.
10 Q. Ther e ar e checks and i nvoi ces f or any wor k you di d f or Dr .
11 Kar r on, i s t hat cor r ect ?
12 A. Yes.
13 Q. OK. I amgoi ng t o show you - - t hi s i s t he l ast one I ' m
14 goi ng t o show you. I t ' s Def endant ' s NN- 1 and NN- 2. Sor r y.
15 Ther e ar e t hr ee exhi bi t s. Ther e i s NN, NN- 1 and NN- 2. I show
16 you t hese exhi bi t s and ask you i f you r ecogni ze t hese t hr ee
17 exhi bi t s, si r .
18 A. Yeah, i t ' s a check made t o Bat or Bi nt oer f or - -
19 Q. Don' t di scuss i t . I t ' s not i n evi dence yet .
20 THE COURT: Do you r emember each of t hese checks?
21 Q. Do you r ecogni ze i t ?
22 A. Yeah, I t hi nk so. I don' t know. Thi s one i s f r omCASI LLC
23 whi ch mai nl y I r emember t hembei ng CASI . But maybe t hi s was
24 one of t he f i r st ones. I ' mnot sur e. But , yeah, i t ' s a check
25 made t o me.
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1 Q. Take a l ook at NN- 1. Do you r ecogni ze what t hat i s?
2 A. Yeah, i t ' s one of my i nvoi ces.
3 Q. Take a l ook at NN- 2.
4 A. OK. Yeah, t hi s i s anot her one of my i nvoi ces.
5 Q. And we of f er NN, NN- 1 and NN- 2 i nt o evi dence.
6 MR. KWOK: No obj ect i on.
7 THE COURT: No obj ect i on. Recei ved.
8 ( Def endant ' s Exhi bi t s NN, NN- 1 and NN- 2 r ecei ved i n
9 evi dence)
10 Q. Now, t hose t hr ee exhi bi t s, t he NN exhi bi t s, do t hey r el at e
11 t o one par t i cul ar epi sode, i n ot her wor ds, t he wor k, t he check
12 and what have you?
13 A. Yes. I woul d say t hese al l r el at e t o wor ki ng on t he
14 exhaust syst em, because I can see t he machi ne shop f or t he
15 handl es, whi ch I r emember happeni ng.
16 Q. Now, does i t show t he dat e t he wor k was done on your
17 i nvoi ce?
18 A. Yes.
19 Q. What dat e was t he wor k - - t el l us what exhi bi t you ar e
20 l ooki ng at .
21 A. I aml ooki ng at NN- 2.
22 THE COURT: As i n Nancy.
23 MR. RUBI NSTEI N: Named f or my wi f e. We had an
24 anni ver sar y l ast week.
25 A. Yeah, t o 6/ 20, 6/ 27 and 7/ 04 t he week af t er t hat .
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1 Q. What year ?
2 A. ' 03.
3 Q. What wer e you pai d?
4 A. 8 17 03.
5 Q. And how much wer e you pai d?
6 A. 2, 600.
7 MR. RUBI NSTEI N: I have no ot her quest i ons.
8 CROSS EXAMI NATI ON
9 BY MR. KWOK:
10 Q. Good af t er noon, Mr . Mason.
11 A. Good af t er noon.
12 Q. You sai d you got pai d f or your wor k?
13 A. I di d.
14 Q. You al so t est i f i ed a moment ago you got checks bot h f r om
15 Dr . Kar r on per sonal l y and f r omCASI , i s t hat r i ght ?
16 A. That ' s cor r ect .
17 Q. Wi t h r espect t o t he CASI checks, you di dn' t know wher e t hat
18 money came f r om, di d you?
19 A. No. I mean what do you mean do I know wher e t hat money
20 came f r om?
21 Q. Al l you knew i s i t came f r omCASI . You don' t know wher e i t
22 came f r omear l i er .
23 A. No.
24 Q. Woul d you br i ng your own t ool s when you went t o Dr .
25 Kar r on' s pl ace?
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1 A. Absol ut el y.
2 Q. Di d you go t o a har dwar e st or e t o buy addi t i onal i t ems t hat
3 you needed?
4 A. I di d.
5 Q. Di d you go t o a pl ace cal l ed Homef r ont Har dwar e St or e?
6 A. Of t en.
7 Q. Di d you go t o t hat st or e f or t hi s pr oj ect ?
8 A. I di d, yes.
9 Q. Di d you go t her e on or about J une 16, 2003?
10 A. Qui t e possi bl y.
11 Q. Do you r emember buyi ng somet hi ng cal l ed Combat Roach Gel
12 Bai t at t hat har dwar e?
13 A. Combat Roach Gel Bai t ? I s t hat l i ke r oach, ant i r oach
14 t hi ngs?
15 Q. Coul d I show you somet hi ng t hat woul d r ef r esh your
16 r ecol l ect i on?
17 A. Yeah.
18 Q. I amshowi ng hi m, your Honor , Gover nment Exhi bi t 101, page
19 20 of 21.
20 A. I t says my name.
21 Q. Does t hat r ef r esh your r ecol l ect i on why you bought Combat
22 Roach Gel Bai t s on J une 16, 2003?
23 A. I woul d i magi ne I put t hemi n t he ki t chen cabi net because
24 t her e wer e pr obabl y r oaches.
25 Q. For t hi s pr oj ect , f or t he def endant ?
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1 A. Yeah.
2 Q. Do you know how t hat was pai d f or , t he i t ems t hat you
3 bought f r omt he har dwar e st or e?
4 A. I pr esume - - l et me t hi nk. How was t hat pai d f or ?
5 Somet i mes I had t o pay f or i t mysel f , dependi ng - - i t was
6 al ways a l i t t l e awkwar d. He had an account t her e, but he
7 di dn' t al ways pay up wi t h hi s account , so somet i mes I went
8 t her e and t hey woul dn' t l et me put st uf f on t he account , so
9 t hen I woul d j ust have t o pay cash, whi ch i f i t was a l i t t l e
10 amount I woul d do. Ot her t han t hat , l i ke most l y l i ke i f t he
11 account was open I coul d put i t on t he account .
12 Q. For t he i t ems t hat you put on t he account , as you sai d, do
13 you know how t hose event ual l y got pai d f or ?
14 A. No.
15 Q. You don' t know what money went t o pay f or t hose i t ems?
16 A. No.
17 Q. Ar e you f ami l i ar wi t h a pr ogr amcal l ed Advanced Technol ogy
18 Pr ogr am, Mr . Mason?
19 A. Sor r y?
20 Q. The Advanced Technol ogy Pr ogr am, ATP?
21 A. No.
22 Q. Di d you at any t i me have any knowl edge about t he i nt er nal
23 f i nanci al si t uat i on of t he def endant ' s company, CASI ?
24 A. No.
25 MR. KWOK: No f ur t her quest i ons f or t hi s wi t ness.
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1 THE COURT: Mr . Rubi nst ei n? Any r edi r ect ?
2 MR. RUBI NSTEI N: J ust one second, your Honor .
3 REDI RECT EXAMI NATI ON
4 BY MR. RUBI NSTEI N:
5 Q. How much was spent on t he Combat Roach pur chase at t he home
6 f r ont har dwar e?
7 A. Wel l , I don' t know exact l y, but t hey' r e not ver y expensi ve,
8 a f ew dol l ar s. I mean i t ' s r oach t r aps.
9 Q. And do you have t he i nvoi ce i n f r ont of you t her e?
10 A. I don' t . I t hi nk t hey t ook i t back.
11 THE COURT: I t ' s j ust shown t o hi mt o r ef r esh hi s
12 r ecol l ect i on?
13 MR. KWOK: That ' s r i ght .
14 THE COURT: I t doesn' t have an exhi bi t number . I t
15 shoul d be mar ked act ual l y. You shoul d mar k i t as an exhi bi t .
16 A. I t says 9. 99.
17 Q. I s t hat $999?
18 A. No, $9. 99.
19 Q. Thank you.
20 A. I t ' s r oach t hi ngs, you know.
21 MR. RUBI NSTEI N: No f ur t her quest i ons, your Honor .
22 THE COURT: Al l r i ght . Al l done wi t h t hi s wi t ness?
23 You ar e excused. I ' mgoi ng t o excuse t he j ur y f i r st unt i l 9: 30
24 t omor r ow mor ni ng. I hope i t ' s not t oo hot out t her e. Maybe
25 you want t o st ay.
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1 ( J ur y not pr esent )
2 THE COURT: Al l r i ght . You may st ep down.
3 ( Wi t ness excused)
4 THE COURT: What do we have f or wi t nesses t omor r ow?
5 MR. RUBI NSTEI N: Wel l , we sent t he i nsur ance man home,
6 and we sent Ms. LeCl er c, t ol d her she i s not t est i f yi ng, so we
7 have t omor r ow char act er wi t nesses, Mr . Cox and pot ent i al l y t he
8 def endant . I t hi nk we shoul d be f i ni shed t omor r ow, J udge.
9 THE COURT: Oh, r eal l y? OK. And t he r ebut t al ? Ar e
10 you goi ng t o have any r ebut t al , do you t hi nk?
11 MR. EVERDELL: At t hi s poi nt , your Honor , I don' t
12 t hi nk we cont empl at e anyt hi ng.
13 THE COURT: Shoul d we have a char gi ng conf er ence
14 t omor r ow ni ght ?
15 MR. RUBI NSTEI N: Yes, your Honor .
16 MR. KWOK: Yes.
17 MR. EVERDELL: Yes.
18 THE COURT: OK. Thank you ver y much t hen. Not hi ng
19 el se t o t ake up.
20 MR. RUBI NSTEI N: No, your Honor .
21 MR. KWOK: No, your Honor .
22 ( Tr i al adj our ned t o J une 10, 2008 at 9: 15 a. m. )
23
24
25
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1 I NDEX OF EXAMI NATI ON
2 Exami nat i on of : Page
3 ROBERT BENEDI CT
4 Di r ect By Mr . Ever del l . . . . . . . . . . . 960
5 Cr oss By Mr . Rubi nst ei n . . . . . . . . . . 997
6 ROBERT BENEDI CT
7 Redi r ect By Mr . Ever del l . . . . . . . . . . 1077
8 Recr oss By Mr . Rubi nst ei n . . . . . . . . . 1080
9 WI LLI AM NI COLAI
10 Di r ect By Mr . Rubi nst ei n . . . . . . . . . . 1096
11 Cr oss By Mr . Kwok . . . . . . . . . . . . . 1101
12 J ONATHAN MASON
13 Di r ect By Mr . Rubi nst ei n . . . . . . . . . . 1102
14 Cr oss By Mr . Kwok . . . . . . . . . . . . . 1124
15 Redi r ect By Mr . Rubi nst ei n . . . . . . . . . 1127
16 GOVERNMENT EXHI BI TS
17 Exhi bi t No. Recei ved
18 901, 1000 and 1000A . . . . . . . . . . . 1082
19 DEFENDANT EXHI BI TS
20 Exhi bi t No. Recei ved
21 U . . . . . . . . . . . . . . . . . . . . 1032
22 OO . . . . . . . . . . . . . . . . . . . 1050
23 T . . . . . . . . . . . . . . . . . . . . 1074
24 MM . . . . . . . . . . . . . . . . . . . 1107
25 MM- 1 . . . . . . . . . . . . . . . . . . 1108
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1 MM- 2 . . . . . . . . . . . . . . . . . . 1110
2 MM- 3 . . . . . . . . . . . . . . . . . . 1114
3 MM- 4 . . . . . . . . . . . . . . . . . . 1116
4 MM- 5 . . . . . . . . . . . . . . . . . . 1117
5 MM- 6 and MM- 7 . . . . . . . . . . . . . . 1118
6 MM- 8 . . . . . . . . . . . . . . . . . . 1121
7 NN, NN- 1 and NN- 2 . . . . . . . . . . . . 1123
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1 UNI TED STATES DI STRI CT COURT
1 SOUTHERN DI STRI CT OF NEWYORK
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3 UNI TED STATES OF AMERI CA, New Yor k, N. Y.
3
4 v. S2 07 CR 541 ( RPP)
4
5 DANI EL B. KARRON,
5
6 Def endant .
6
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
7
8
8 J une 10, 2008
9 9: 30 a. m.
9
10
10 Bef or e:
11
11 HON. ROBERT P. PATTERSON, J R. ,
12
12 Di st r i ct J udge
13
13
14 APPEARANCES
14
KA-2964 KA-2964 KA-2964
15 MI CHAEL J . GARCI A
15 Uni t ed St at es At t or ney f or t he
16 Sout her n Di st r i ct of New Yor k
16 BY: STEVEN KWOK
17 CHRI STI AN EVERDELL
17 Assi st ant Uni t ed St at es At t or neys
18
18 RUBI NSTEI N & COROZZO, LLP
19 At t or neys f or Def endant
19 BY: RONALD RUBI NSTEI N
20
20 Al so Pr esent : Rachel Ondr i k, U. S. Dept . of Commer ce
21 Ki r k Yamat ani , U. S. Dept . of Commer ce
22
23
24
25
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1 ( Tr i al r esumed; j ur y not pr esent )
2 MR. RUBI NSTEI N: I do have an obj ect i on t o your
3 Honor ' s suggest i on yest er day as t o your pr oposed char ge.
4 THE COURT: I wi l l have t he pr oposed char ge f or you i n
5 t en mi nut es. I don' t know what I suggest ed yest er day.
6 MR. RUBI NSTEI N: Yest er day you sai d i n subst ance t he
7 way you r ead t he st at ut e t he " wi t hout aut hor i t y" phr ase appl i es
8 t o bot h t he mi sappl i cat i on of f unds as wel l as t he conver si on
9 of f unds.
10 THE COURT: I t hought t he gover nment was goi ng t o
11 obj ect t o t hat , not you.
12 MR. RUBI NSTEI N: Wel l , I t hi nk your Honor i s act ual l y
13 amendi ng t he i ndi ct ment , because t he gover nment opened and
14 t hei r t heor y i s mi sappl yi ng gover nment gr ant f unds, and t hat
15 shoul d be t he basi s of t he char ge, and not t o i ncl ude any ot her
16 l anguage t hat mi ght br oaden t hat concept . And I ci t e - -
17 THE COURT: That ' s t he whol e poi nt of t he " wi t hout
18 aut hor i t y" . Af t er al l , he coul d gi ve hi msel f aut hor i t y t o do
19 anyt hi ng wi t h CASI ' s f unds. That ' s t he whol e poi nt .
20 MR. RUBI NSTEI N: I t ' s not di r ect l y on poi nt , your
21 Honor , but i t does r ai se t he i ssue f r omt he Second Ci r cui t ,
22 U. S. v. Zvi .
23 THE COURT: Wel l , l et me see i t . Let me see t he case.
24 I don' t know t hi s case. U. S. v. what ?
25 MR. RUBI NSTEI N: Zvi . I have a copy wi t hout t he f i r st
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1 page. I wi l l gi ve you t he f i r st page, J udge. Her e i s a copy
2 of t he - -
3 THE COURT: What year was t hi s?
4 MR. RUBI NSTEI N: 1999, J udge Wal ker .
5 THE COURT: I t was not ci t ed t o me. We wi l l have t he
6 char gi ng conf er ence. I wi l l t ake i t i nt o account t hen.
7 MR. RUBI NSTEI N: But I t hi nk, J udge, of f t he r ecor d - -
8 THE COURT: Oh, I see. Zvi . Thi s i s f i l i ng f al se
9 i ncome t ax r et ur ns.
10 MR. RUBI NSTEI N: I know, but t her e i s l anguage about
11 const r uct i ve amendi ng of t he i ndi ct ment .
12 THE COURT: Oh, t he i ndi ct ment i sn' t amended; t he
13 i ndi ct ment i s r i ght t her e. You l ook at t he i ndi ct ment . I
14 l ooked at i t over t he weekend. I t ' s got t he wor ds of t he
15 st at ut e r i ght i n i t , and i t quot es t he wor ds of t he st at ut e.
16 We wi l l t ake i t up i n t he char gi ng conf er ence.
17 MR. RUBI NSTEI N: Al so, j udge t her e i s a case of U. S.
18 v. Mi l l st ei n t hat I wi l l gi ve t o t he cour t .
19 THE COURT: Mi l l st ei n Br ot her s? The f or mer r eal
20 est at e magnat es?
21 MR. RUBI NSTEI N: I don' t know about t hat , J udge.
22 THE COURT: You must have hear d of Mi l l st ei n.
23 MR. RUBI NSTEI N: Of cour se I ' ve hear d of Mi l l st ei n.
24 THE COURT: I don' t t hi nk t hat was t hi s t ype of case,
25 but I wi l l l ook at any case you' ve got .
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1 MR. RUBI NSTEI N: Thank you, J udge. I wi l l hand up
2 t he - -
3 THE COURT: How ar e we doi ng on t he j ur y, Rober t ?
4 DEPUTY COURT CLERK: I t hi nk we' r e good.
5 MR. RUBI NSTEI N: J udge, we' r e not good.
6 DEPUTY COURT CLERK: We have t he 14.
7 THE COURT: Wher e i s your cl i ent ? Cal l t he cl i ent .
8 MR. RUBI NSTEI N: Yes, your Honor .
9 THE COURT: He' s asl eep agai n?
10 OK. Her e he i s.
11 ( Cont i nued on next page)
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1 ( J ur y pr esent )
2 THE COURT: Good mor ni ng. Pl ease be seat ed. Ladi es
3 and gent l emen, Ms. Br own cal l ed i n, and her knee was swol l en up
4 so she was unabl e t o wal k, so I gat her she i s al l r i ght but
5 i t ' s somet hi ng t hat she has t o t ake car e of . Accor di ngl y, I
6 wi l l ask Mr . Br acer o t o t ake Ms. Br own' s seat as J ur or 12.
7 I don' t t hi nk t her e i s anyt hi ng el se t o say bef or e we
8 st ar t t he mor ni ng. So, Mr . Rubi nst ei n, your next wi t ness.
9 MR. RUBI NSTEI N: Yes. Def ense cal l s Dr . Edgar Coons.
10 EDGAR E. COONS,
11 cal l ed as a wi t ness by t he def endant ,
12 havi ng been dul y swor n, t est i f i ed as f ol l ows:
13 DEPUTY COURT CLERK: Pl ease st at e your name and spel l
14 your l ast name sl owl y.
15 THE WI TNESS: My name i s Edgar E. Coons. My l ast name
16 i s spel l ed C- O- O- N- S. And I ami nf or mal l y known as Ted. I ' ma
17 pr of essor at NYU.
18 DI RECT EXAMI NATI ON
19 BY MR. RUBI NSTEI N:
20 Q. Good mor ni ng, Dr . Coons. You say t hat you ar e a pr of essor
21 at NYU. How l ong have you been af f i l i at ed wi t h New Yor k
22 Uni ver si t y, si r ?
23 A. Si nce Febr uar y 1965.
24 Q. And i s t hat cont i nuous?
25 A. Yes.
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1 Q. And what i s your academi c backgr ound, si r ?
2 A. Wel l , as an under gr aduat e I gr aduat ed f r omCol or ado
3 Col l ege. I got my Ph. D. at Yal e i n physi ol ogi cal psychol ogy.
4 Q. And what year was t hat t hat you r ecei ved your Ph. D. ?
5 A. 1964.
6 Q. And ar e you a f ul l pr of essor at NYU?
7 A. I ama f ul l pr of essor , yes.
8 Q. And what depar t ment ar e you i n?
9 A. I ' mi n psychol ogy, and I have a j oi nt appoi nt ment i n t he
10 Depar t ment of Psychol ogy and Cent er f or Neur osci ence.
11 Q. What i s neur osci ence, si r ?
12 A. Wel l , i t ' s t he st udy of t he ner vous syst em, pr i mar i l y t he
13 br ai n and i n my vi ew i t s r el at i onshi p t o behavi or .
14 Q. And do you know Dr . Kar r on?
15 A. I do i ndeed.
16 Q. Do you see hi mi n t he cour t r oom?
17 A. I do.
18 Q. And how l ong do you know Dr . Kar r on?
19 A. Wel l , I have known hi msi nce at l east 1975.
20 Q. And how di d you come t o know hi m?
21 A. He was an under gr aduat e who t ook some cour ses wi t h me t o
22 begi n wi t h, and ver y br i ght , and I adopt ed hi mi nt o my
23 l abor at or y as a r esear ch assi st ant .
24 Q. Resear chi ng what , si r ?
25 A. Wel l , we wer e l ooki ng at t he r el at i onshi p bet ween some
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1 appet i t e suppr essant s and t hei r addi ct i veness. What we f ound
2 was t hat t hey cer t ai nl y suppr essed appet i t e but wer e not
3 addi ct i ve.
4 Q. And di d you cont i nue your r el at i onshi p wi t h Dr . Kar r on?
5 A. Wel l , I ' ve known hi mever si nce. And of cour se he went on
6 and got hi s own degr ee, event ual l y a Ph. D. i n appl i ed sci ence
7 at NYU. Beyond t hat , I know hi mcasual l y, qui t e f r equent l y, I
8 woul d say sever al t i mes a year .
9 Q. And di d you have any i nvol vement wi t h Dr . Kar r on i n hi s
10 quest f or a Ph. D. ?
11 A. Wel l , I was on hi s r eader s commi t t ee.
12 Q. What i s a r eader s commi t t ee?
13 A. Wel l , when you do a Ph. D. you have a commi t t ee, we cal l an
14 advi sor s commi t t ee, whi ch gi ves you advi ce al l dur i ng t he
15 cour se of your r esear ch. When you f i nal l y have concl uded i t
16 and wr i t t en i t up and ar e st andi ng f or or al s, t hey cal l i n a
17 f ew ot her peopl e t hat have not been di r ect l y i nvol ved i n t hat
18 r esear ch, t o r ead t he t hesi s and t o hel p exami ne t he candi dat e
19 i n an or al exami nat i on over t he t hesi s. And so I was one of
20 t hose peopl e.
21 Q. And ar e you f ami l i ar wi t h any of t he pr oj ect s t hat Dr .
22 Kar r on has wor ked on?
23 A. Wel l , sor t of , ki nd of bet ween vaguel y and yes.
24 Q. And do you know hi mon a soci al l evel ?
25 A. We' r e f r i ends. Yes, I woul d say so.
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1 Q. And do you have an opi ni on as t o hi s honest y and
2 t r ut hf ul ness?
3 A. I absol ut el y consi der hi mt o be a ver y f ai r and honest man.
4 Q. Have you ever had occasi on t o have f i nanci al deal i ngs wi t h
5 Dr . Kar r on?
6 A. Yes. I woul d say back i n t he mi d- ' 90s he had some pr obl em
7 meet i ng payr ol l deadl i ne and - -
8 MR. EVERDELL: Obj ect i on.
9 THE COURT: Obj ect i on sust ai ned. I t doesn' t r equi r e
10 an expl anat i on, t he quest i on. I t went beyond t he quest i on.
11 A. I l oaned hi m$10, 000.
12 Q. And was t hat ever r epai d?
13 A. Yes.
14 Q. Was t her e any quest i on i n your mi nd t hat i t woul d be
15 r epai d?
16 A. No pr obl em.
17 MR. RUBI NSTEI N: No f ur t her quest i ons.
18 THE COURT: Cr oss- exami nat i on.
19 CROSS EXAMI NATI ON
20 BY MR. EVERDELL:
21 Q. Good mor ni ng, Dr . Coons.
22 A. Hel l o.
23 Q. You t est i f i ed t hat you f i r st got t o know t he def endant I
24 bel i eve when he was a st udent of your s.
25 A. That ' s cor r ect .
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1 Q. And t hat he was i n your r esear ch l abor at or y?
2 A. That ' s cor r ect .
3 Q. About how l ong ago was t hat cont act wi t h t he def endant ?
4 A. Wel l , t hat woul d be about 1970, I woul d say about 1977,
5 ' 78, ' 79, i n t hat per i od.
6 Q. So, 30 year s ago.
7 A. 30 year s ago, yes.
8 Q. And si nce t hen you have had casual cont act wi t h t he
9 def endant ?
10 A. Casual except i n t he sense t hat we j ust sai d, t hat I had t o
11 r ead hi s t hesi s.
12 Q. Ri ght . So casual meani ng a coupl e t i mes a year ?
13 A. Mor e t han t hat pr obabl y.
14 Q. Wel l , Dr . Coons, ar e you f ami l i ar wi t h somet hi ng cal l ed t he
15 Advanced Technol ogy gr ant or ATP gr ant ?
16 A. I don' t t hi nk I am. I don' t know i t by t hat name i f I do.
17 Q. Wel l , you ar e not f ami l i ar , ar e you, wi t h t he r ul es t hat
18 gover n t he ATP gr ant , ar e you?
19 A. No.
20 Q. And you never wor ked at t he def endant ' s company CASI , di d
21 you?
22 A. No.
23 Q. And you never handl ed t he f i nances f or CASI , r i ght ?
24 A. No.
25 Q. So, you don' t have any knowl edge of what happened at CASI
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1 bet ween 2000 and 2003, do you?
2 A. I have no knowl edge.
3 Q. Dr . Coons, you al so sai d t hat t he def endant i s a f r i end of
4 your s, r i ght ?
5 A. Yes, I woul d say so.
6 Q. And you woul dn' t want anyt hi ng bad t o happen t o your
7 f r i end, r i ght ?
8 A. I woul d not want t o have anyt hi ng bad happen t o my f r i end.
9 MR. EVERDELL: Al l r i ght . No f ur t her quest i ons, your
10 Honor .
11 MR. RUBI NSTEI N: No quest i ons, your Honor .
12 THE COURT: Al l r i ght . Mr . Coons, you may st ep down.
13 ( Wi t ness excused)
14 THE COURT: Next wi t ness.
15 MR. RUBI NSTEI N: He wi l l be r i ght i n, your Honor .
16 THEODORE W. LESLI E,
17 cal l ed as a wi t ness by t he def endant ,
18 havi ng been dul y swor n, t est i f i ed as f ol l ows:
19 DEPUTY COURT CLERK: Pl ease st at e your name and spel l
20 your l ast name sl owl y f or t he r ecor d, pl ease.
21 THE WI TNESS: Theodor e W. Lesl i e, L- E- S- L- I - E.
22 DI RECT EXAMI NATI ON
23 BY MR. RUBI NSTEI N:
24 Q. Good mor ni ng, Mr . Lesl i e.
25 A. Good mor ni ng, si r .
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1 Q. What i s your busi ness or occupat i on?
2 A. I amr et i r ed.
3 Q. And how l ong have you been r et i r ed?
4 A. Si nce 1990.
5 Q. And what di d you do bef or e you r et i r ed?
6 A. I pr ogr ammed.
7 Q. What ' s your educat i onal backgr ound, si r ?
8 A. I have t wo degr ees, one i n musi col ogy and t he ot her i n
9 mat hemat i cs.
10 Q. And when you gr aduat ed f r omcol l ege what di d you do?
11 A. I t ' s act ual l y somewhat compl i cat ed. When I f i ni shed, I
12 went i nt o t he Ar my f or t wo year s. Then I went back and
13 compl et ed. I had t o pl ay a seni or r eci t al . I di d t hat , and I
14 got t he degr ee. Then I st udi ed gr aduat e wor k and musi col ogy
15 f or a whi l e.
16 Then I wor ked f or t he Soci al Secur i t y Admi ni st r at i on
17 f or a whi l e, and t he I RS f or a whi l e. Then I r et ur ned t o
18 school , got t he degr ee i n mat hemat i cs. Then on t he spur of t he
19 moment I went t o wor k f or I BM wher e I r emai ned f or 24 year s and
20 seven mont hs.
21 Q. And at I BM i n what capaci t y di d you wor k?
22 A. Most l y pr ogr ammi ng, some managi ng.
23 Q. Di d you have a backgr ound i n pr ogr ammi ng when you went t o
24 wor k f or I BM?
25 A. No. At t hat t i me I BM t aught pr ogr ammi ng.
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1 Q. To t hei r empl oyees?
2 A. Yes, t o peopl e who came on as woul d- be pr ogr ammer s.
3 THE COURT: What year s ar e we t al ki ng about ?
4 THE WI TNESS: ' 65.
5 Q. Fr om1965 t o 1990?
6 A. That ' s r i ght .
7 Q. And you r et i r ed i n 1990?
8 A. That ' s cor r ect .
9 Q. And have you had any gai nf ul empl oyment si nce 1990?
10 A. I have occupi ed mysel f wi t h t he st udy of mol ecul ar and cel l
11 bi ol ogy.
12 Q. Now at I BM as an empl oyee do you have a pensi on pl an?
13 A. Yes.
14 Q. Do you have st ock i n I BM?
15 A. Yes.
16 Q. As an empl oyee?
17 A. Yes. I haven' t st ar t ed t o st ar ve yet .
18 Q. How many mor e cent ur i es coul d you sur vi ve on your pensi on
19 f r omI BM?
20 A. One never knows.
21 Q. Now, di d t her e come a t i me t hat you met Dr . Kar r on?
22 A. Yeah.
23 Q. How - - di d you see hi mi n cour t ?
24 A. Yes, of cour se.
25 Q. I ndi cat i ng t he def endant , your Honor .
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1 THE COURT: Yes. The wi t ness has i dent i f i ed t he
2 def endant .
3 MR. RUBI NSTEI N: Thank you.
4 Q. And how di d you come t o meet Dr . Kar r on?
5 A. I audi t cour ses, and so - -
6 Q. Expl ai n t o t he j ur y what audi t i ng cour ses means.
7 A. You t ake a cour se, and you do ever yt hi ng t hat ' s r equi r ed,
8 and you don' t get cr edi t f or i t . And you can do t hi s i f you
9 ar e r et i r ed. So, t her e was a cour se t hat appear ed t o be
10 i nt er est i ng t o me. And i t was pr obabl y - - t hough I can' t t el l
11 you speci f i cal l y - - i t was pr obabl y comput er s and bi ol ogy.
12 Q. And wher e was i t ?
13 A. At CCNY. And I sat i n on t he cour se.
14 Q. And who t aught t he cour se?
15 A. Dr . Kar r on.
16 Q. Appr oxi mat el y how many st udent s wer e t her e?
17 A. Per haps 30.
18 Q. And di d you have occasi on whi l e you wer e i n t hat cour se t o
19 devel op a r el at i onshi p wi t h Dr . Kar r on?
20 A. I t hi nk we must have t al ked a l i t t l e bi t , but af t er t hat I
21 t hi nk wi t h some ot her member s of t he f acul t y we woul d have
22 cof f ee ei t her bef or e or af t er , and I got t o know hi msomehow or
23 t he ot her .
24 THE COURT: Can we have a dat e, Mr . Rubi nst ei n?
25 Q. Appr oxi mat el y when woul d you say t hat you f i r st met Dr .
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1 Kar r on?
2 A. 2002, maybe somet hi ng l i ke t hat . Not a l ong t i me but not
3 an i nsi gni f i cant t i me.
4 Q. Now, si nce t hat t i me t hat you met hi mi n 2002 have you had
5 cont act wi t h hi m?
6 A. Yes. I woul d say we get t oget her maybe once a mont h or so.
7 Q. And have you f or med an opi ni on as t o hi s honest y and
8 t r ut hf ul ness?
9 A. I cannot i magi ne anybody mor e honest or mor e
10 st r ai ght f or war d.
11 THE COURT: Cr oss- exami nat i on.
12 MR. KWOK: Thank you, your Honor .
13 CROSS EXAMI NATI ON
14 BY MR. KWOK:
15 Q. Good mor ni ng.
16 A. Good mor ni ng.
17 Q. You j ust ment i oned a moment ago t hat you r et i r ed i n 1990,
18 i s t hat r i ght ?
19 A. Yes.
20 Q. So t hat means you haven' t been wor ki ng si nce t hat t i me.
21 A. You mean I haven' t been ear ni ng money si nce t hat t i me.
22 Q. That ' s r i ght .
23 A. That ' s cor r ect .
24 Q. So you never wor ked i n t he def endant ' s company ar ound t he
25 t i me - -
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1 A. No, no, no.
2 Q. - - 2000 t o 2003?
3 A. No, I never wor ked f or hi mat al l .
4 Q. You know not hi ng about t he def endant ' s company CASI ?
5 A. No.
6 Q. And you have no knowl edge about how CASI got i t s money,
7 r i ght ?
8 A. No.
9 Q. Si mi l ar l y, you have no i dea how CASI spent i t s money.
10 A. No.
11 Q. Ar e you f ami l i ar wi t h a pr ogr amcal l ed Advanced Technol ogy
12 Pr ogr amgr ant ?
13 A. Yest er day by mi st ake I sat i n, so t her e i s some hazy
14 knowl edge of t hi s, but t o say t hat I under st and i t , no.
15 Q. Asi de f r omyest er day?
16 A. Oh, no, not at al l .
17 MR. KWOK: No f ur t her quest i ons.
18 MR. RUBI NSTEI N: No quest i ons, your Honor .
19 THE COURT: Not hi ng f ur t her ?
20 MR. RUBI NSTEI N: No. Coul d I st ep out and see i f my
21 next wi t ness i s her e?
22 THE COURT: The wi t ness i s excused.
23 ( Wi t ness excused)
24
25 MI CHAEL R. TREAT,
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1 cal l ed as a wi t ness by t he def endant ,
2 havi ng been dul y swor n, t est i f i ed as f ol l ows:
3 DEPUTY COURT CLERK: Pl ease st at e your name f or t he
4 r ecor d and spel l your l ast name sl owl y.
5 THE WI TNESS: My name i s Mi chael R. Tr eat , T- R- E- A- T.
6 DI RECT EXAMI NATI ON
7 BY MR. RUBI NSTEI N:
8 Q. Good mor ni ng, Dr . Tr eat .
9 A. Good mor ni ng.
10 Q. Now, what i s your busi ness or pr of essi on, si r ?
11 A. I ' ma gener al sur geon. I have been a gener al sur geon f or
12 many year s, al t hough I ' mnot pr act i ci ng sur ger y cur r ent l y. I
13 al so have a company t hat ' s pr oduci ng a r obot i c sur gi cal devi ce.
14 Q. And how l ong have you had t hat company?
15 A. The company was f ounded i n 2002, I t hi nk Mar ch of 2002.
16 Q. And have you - - wel l , wi t hdr awn.
17 Do you t each?
18 A. Wel l , I t aught on a r egul ar basi s when I was pr act i ci ng
19 gener al sur ger y. I wor ked at Col umbi a Uni ver si t y f or t hat
20 t i me.
21 Q. And how l ong di d you t each at Col umbi a Uni ver si t y?
22 A. Wel l , I guess I got my 25 year pi n j ust l ast week, so I
23 guess I have been t her e ar ound 25 year s as f acul t y basi cal l y.
24 THE COURT: Col l ege of Physi ci ans and Sur geons?
25 THE WI TNESS: Yes, si r .
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1 THE COURT: Up at Col umbi a Pr esbyt er i an?
2 THE WI TNESS: Yes. I t used t o be cal l ed Col umbi a
3 Pr esbyt er i an; now i t ' s New Yor k Pr esbyt er i an, but i t ' s t he
4 hospi t al af f i l i at ed wi t h Col umbi a Uni ver si t y.
5 Q. And t he name of your company i s Robot i c Syst ems and
6 Technol ogy, I nc. ?
7 A. Yeah, t he company i s cal l ed Robot i c Syst ems and
8 Technol ogi es, but i t used t o be cal l ed r obot i c Sur gi cal Tech.
9 Q. And what has i t devel oped?
10 A. We' r e wor ki ng on a r obot i c assi st ant f or sur ger y, somet hi ng
11 t hat hands t he sur geon i nst r ument s and t hen count s t he
12 i nst r ument s and keeps t r ack of t hemso t hey don' t get mi spl aced
13 or l ost .
14 Q. And have you r ecei ved any gr ant s or cont r act s f r omt he
15 f eder al gover nment ?
16 A. Yes, we have r ecei ved sever al gr ant s f r omdi f f er ent par t s
17 of t he f eder al gover nment .
18 Q. Now, do you know Dr . Kar r on?
19 A. Yes, I do.
20 Q. Do you see hi mi n cour t ?
21 A. Yes, he i s.
22 Q. Can you poi nt hi mout , pl ease, j ust f or t he r ecor d.
23 A. I r eal l y don' t have my gl asses on, but I t hi nk he i s t he
24 f el l ow si t t i ng r i ght over t her e. Yes.
25 THE COURT: The r ecor d wi l l i ndi cat e t hat t he wi t ness
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1 has i dent i f i ed t he def endant .
2 THE WI TNESS: Yes, I do see hi mover t her e.
3 Q. By t he way, I see you ar e wal ki ng wi t h a cane.
4 A. Yes, yes.
5 Q. Do you have a per manent di sabi l i t y?
6 A. Yes, I was i nj ur ed i n an acci dent , act ual l y a mot or cycl e
7 acci dent , about t hr ee year s ago. I t was a pr et t y ser i ous
8 acci dent .
9 Q. You wer e on t he mot or cycl e?
10 A. Yes, I was.
11 Q. Now, how do you know Dr . Kar r on?
12 A. Wel l , I t hi nk I met hi mat a meet i ng, l i ke one of t hose
13 sci ent i f i c meet i ngs. I t hi nk i t mi ght have been i n Cal i f or ni a.
14 I t was a meet i ng cal l ed Medi ci ne Meet s Vi r t ual Real i t y. I t ' s a
15 year l y t hi ng. I t hi nk I r an i nt o hi mt her e. Thi s i s qui t e a
16 f ew year s ago, maybe 2003 or t her eabout s, but I don' t r ecal l
17 wher e I f i r st met hi m, but i t woul d have been at one of t hose
18 meet i ng ki nds of t hi ngs.
19 Q. Di d you ever have occasi on t o wor k on t he same f acul t y as
20 he di d?
21 A. No, we have never been on act ual l y t he same pr oj ect or same
22 f acul t y or anyt hi ng l i ke t hat .
23 Q. And so what year woul d you say t hat you met Dr . Kar r on?
24 A. I ' mest i mat i ng about 2003. I t woul d have been ear l y i n our
25 get t i ng out t her e wi t h our wor k, so t hat ' s when I was speaki ng
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1 and goi ng t o t hose meet i ngs.
2 Q. And have you cont i nued t o have a r el at i onshi p wi t h Dr .
3 Kar r on si nce t hat t i me?
4 A. On and of f , yeah. I mean I do see hi mat meet i ngs and t hat
5 t ype of t hi ng.
6 Q. And dur i ng t hat cour se of t i me wer e you abl e t o f or man
7 opi ni on as t o hi s t r ut hf ul ness and honest y?
8 A. Yes.
9 Q. And what i s t hat opi ni on, si r ?
10 A. I t hi nk he i s a ver y honest per son. I t hi nk he i s a good
11 sci ent i st . I mean t hat ' s as pl ai n as I can put i t . I t hi nk he
12 i s a decent per son. I t hi nk he i s a good sci ent i st t oo.
13 MR. RUBI NSTEI N: Thank you ver y much, si r .
14 THE COURT: Any cr oss- exami nat i on?
15 MR. EVERDELL: Yes, your Honor .
16 CROSS EXAMI NATI ON
17 BY MR. EVERDELL:
18 Q. Good mor ni ng, Dr . Tr eat .
19 A. Good mor ni ng.
20 Q. You t est i f i ed t hat you have r ecei ved gr ant s bef or e f r om
21 di f f er ent par t s of t he f eder al gover nment , i s t hat r i ght ?
22 A. Yes.
23 Q. You never r ecei ved an ATP gr ant , have you?
24 A. No, no, I never got one of t hose.
25 Q. So you' r e not f ami l i ar wi t h t he r ul es of t he ATP gr ant ?
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1 A. I r eal l y - - wel l , I l ooked i nt o i t a f ew year s ago, but I
2 r eal l y can' t say I know t he r ul es ver y ser i ousl y, so basi cal l y,
3 no, I don' t know t he r ul es.
4 Q. And you never wor ked f or t he def endant , di d you?
5 A. Dan Kar r on, no, never wor ked f or hi m.
6 Q. So, you ar e not f ami l i ar wi t h t he company CASI ?
7 A. No, I ' ve hear d of i t , but I never wor ked f or i t basi cal l y.
8 Q. So you never wor ked at CASI ?
9 A. No.
10 Q. And you never handl ed t he f i nances at CASI ?
11 A. Oh, no, no.
12 Q. And you ar e not awar e of what happened i n CASI bet ween t he
13 year s 2001 and 2003, r i ght ?
14 A. Not r eal l y, no. I don' t know any of t he det ai l s of what ' s
15 goi ng on.
16 Q. I n f act you sai d you di dn' t even meet Dr . Kar r on unt i l
17 2003, i sn' t t hat r i ght ?
18 A. I n t hat t i me f r ame, yes.
19 Q. You al so sai d t hat you met hi mat a conf er ence, r i ght ?
20 A. Yes.
21 Q. And you have never been on t he same pr oj ect or f acul t y wi t h
22 Dr . Kar r on, i sn' t t hat r i ght ?
23 A. Wel l , no, no.
24 Q. And I t hi nk you sai d t hat you had an of f - and- on
25 r el at i onshi p, you woul d see hi mat meet i ngs, i s t hat r i ght ?
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1 A. That ' s pr et t y much i t , yes.
2 Q. So, you see hi mmaybe a coupl e t i mes a year ?
3 A. Yes, I t hi nk t hat ' s about r i ght .
4 Q. Maybe f our or f i ve t i mes a year ?
5 A. Yeah, I t hi nk t hat ' s about r i ght . I t ' s not l i ke a r egul ar
6 mont hl y meet i ng or anyt hi ng l i ke t hat , but , yeah.
7 Q. So you don' t r egul ar l y meet wi t h t he def endant , r i ght ?
8 A. No.
9 Q. So your opi ni on of hi mi s based on t hese f our t o f i ve
10 meet i ngs you had wi t h hi mf our or f i ve days a year ?
11 A. Yes, i t ' s j ust my gener al i mpr essi on of hi m.
12 MR. EVERDELL: Thank you. No f ur t her quest i ons.
13 THE COURT: Any r edi r ect ?
14 MR. RUBI NSTEI N: No, your Honor .
15 THE COURT: Thank you ver y much, doct or .
16 ( Wi t ness excused)
17 MR. RUBI NSTEI N: Your Honor , may I appr oach t he bench,
18 pl ease?
19 THE COURT: Yes, si r .
20 ( Cont i nued on next page)
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2 MR. RUBI NSTEI N: Your Honor , I have t wo shor t
3 wi t nesses. One i s pur por t edl y par ki ng t he car , appar ent l y came
4 wi t h Dr . Kar r on f r omwhat I under st and and i s par ki ng t he car ;
5 t he ot her one i s comi ng f r omPr i ncet on, New J er sey. I woul d
6 ask your Honor t o gi ve me a t en- mi nut e r ecess. I f we don' t
7 have t hemi n t en mi nut es, I wi l l make my det er mi nat i on about
8 cal l i ng Dr . Kar r on.
9 MR. EVERDELL: Who ar e t he wi t nesses?
10 THE COURT: Wi ndy?
11 MR. RUBI NSTEI N: Wi ndy f r omConnect i cut , and Lee
12 Gol dber g who i s a char act er wi t ness.
13 THE COURT: OK. Shal l I excuse t he j ur y f or t en
14 mi nut es?
15 MR. RUBI NSTEI N: Yes, pl ease, your Honor .
16 ( Cont i nued on next page)
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2 THE COURT: Ladi es and gent l emen, I t hi nk t he best
3 t hi ng t o do i s t ake a t en- mi nut e r ecess, and we wi l l come back
4 i n t en mi nut es. I bel i eve t her e wi l l be some wi t nesses at t hat
5 poi nt .
6 ( J ur y not pr esent )
7 THE COURT: Why don' t you hand out t he dr af t char ge so
8 t hat t he par t i es wi l l have t hat .
9 MR. EVERDELL: Your Honor , may I r ai se one i ssue as
10 wel l , as l ong as t he j ur y i s out ?
11 THE COURT: Of cour se.
12 MR. EVERDELL: I t ' s my under st andi ng f r omt he def ense
13 counsel t hat he was goi ng t o cal l possi bl y anot her char act er
14 wi t ness. And I want ed t o r ai se t he i ssue - - whi ch i s why I
15 obj ect ed wi t h t he f i r st char act er wi t ness - - t hat i t ' s my
16 under st andi ng of t he f eder al r ul es t hat char act er wi t nesses ar e
17 not al l owed t o r ai se speci f i c i nst ances of conduct . They ar e
18 al l owed t o t est i f y t o opi ni on and r eput at i on, t he def endant ' s
19 char act er , a per t i nent t r ai t of t he def endant ' s char act er onl y,
20 and t hey ar e not al l owed t o r ai se speci f i c i nst ances of conduct
21 i n t hei r t est i mony. So I r ai se t hi s ahead of t i me i n case t he
22 def endant i s pl anni ng on doi ng t hi s wi t h t he next char act er
23 wi t ness. I t ' s i nappr opr i at e under t he f eder al r ul es, and we
24 wi l l obj ect .
25 THE COURT: Mr . Rubi nst ei n?
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1 MR. RUBI NSTEI N: I t hi nk t he gover nment i s cor r ect ,
2 your Honor . I wi l l be so advi sed.
3 THE COURT: Al l r i ght . What do we do t hen wi t h
4 r espect t o Dr . Coons' t est i mony? I s t hat wai ved?
5 MR. EVERDELL: I won' t pr ess t hat i ssue, your Honor .
6 THE COURT: Al l r i ght .
7 MR. RUBI NSTEI N: Thank you ver y much, your Honor .
8 ( Recess)
9 MR. EVERDELL: Your Honor , now t hat Mr . Rubi nst ei n i s
10 back, I do want t o t ake up a mat t er wi t h t he cour t .
11 So, t he t wo wi t ness I under st and t hat he want s t o cal l
12 ar e Lee Gol dber g as a char act er wi t ness and t hen Wi ndy
13 Far nswor t h as a f act wi t ness. I s t hat cor r ect ?
14 MR. RUBI NSTEI N: That i s r i ght . Wi ndy Far nswor t h.
15 MR. EVERDELL: Wi ndy Far nswor t h as a f act wi t ness. As
16 t o Wi ndy Far nswor t h, t he gover nment obj ect s t o t hat at t hi s
17 poi nt . Thi s i s t he f i r st not i ce we ever had t hat t hey wer e
18 goi ng t o cal l her as a f act wi t ness.
19 You have mat er i al s f or her t hat we woul d l i ke t o be
20 abl e t o pr epar e f or her cr oss on, so t hi s i s ver y l at e not i ce
21 f or t he gover nment t o be abl e t o pr epar e f or cr oss f or her ,
22 gi ven t hi s i s t he ver y f i r st t i me we have even been awar e of
23 t he def endant ' s i nt ent t o cal l her as a wi t ness. So, we obj ect
24 t o her bei ng cal l ed as a wi t ness. I f anyt hi ng, we r equest some
25 t i me t o be abl e t o pr epar e f or her cr oss- exami nat i on.
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1 MR. RUBI NSTEI N: Wel l , A, t hey know about her , so
2 obvi ousl y t hey have mat er i al about her . B, her name has been
3 ment i oned - -
4 THE COURT: I f or got what her r ol e i s.
5 MR. RUBI NSTEI N: Her r ol e i s t hat she i s t he l ady f r om
6 Connect i cut t hat Dr . Kar r on was goi ng t o move i n wi t h. They
7 i nt r oduced e- mai l s t hat r ef er ence her , and so she i s a per son
8 t hat t hey br ought i nt o t hi s t r i al , and she i s ver y r el evant
9 because she gave Dr . Kar r on t he i nf amous shoe r ack t hat t hey
10 cl ai mhe bought wi t h gover nment f unds. And t hi s onl y came t o
11 my at t ent i on dur i ng t he cour se of t he t r i al because i t ' s such
12 a - - t o me i t ' s such a de mi ni mi s mat t er .
13 THE COURT: She i s goi ng t o t est i f y about t he shoe
14 r ack?
15 MR. RUBI NSTEI N: About t he shoe r ack and Connect i cut .
16 MR. EVERDELL: Ther e ar e mat er i al s t hat we have t hat
17 we want t o l ook t hr ough i n or der t o pr oper l y cr oss- exami ne her ,
18 and t hi s i s t he f i r st not i ce we have had t hat t he def ense
19 counsel was pl anni ng on cal l i ng her .
20 THE COURT: Wel l , i s she her e?
21 MR. RUBI NSTEI N: I under st and t hat she i s goi ng
22 t hr ough secur i t y, or she was goi ng t hr ough secur i t y.
23 THE COURT: I can' t see t hat t he t est i mony i s
24 par t i cul ar l y i mpor t ant .
25 MR. EVERDELL: Wel l , your Honor , t he t hi ng about
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1 Connect i cut , i f you r ecal l t he e- mai l , was t hat t hi s was at t he
2 end of t he day yest er day, t her e was t est i mony t hat t he
3 def endant wr ot e t o someone el se and sai d he was goi ng t o move
4 t o Connect i cut and move t o Wi ndy' s house and say t hat he st i l l
5 had a cot i n t he 33r d St r eet apar t ment , and t hey wer e hopi ng
6 t he ATP peopl e woul d buy t hat . That was t he subst ance of t he
7 e- mai l , so i t does go t o a poi nt i n our case t hat we want t o
8 make about r ent payment s and t hi ngs l i ke t hat and t he
9 def endant ' s knowl edge of t hat .
10 THE COURT: December 2002.
11 MR. EVERDELL: That ' s r i ght , t hat ' s when t he e- mai l
12 was.
13 THE COURT: Wel l , I guess you have a per son who want s
14 t o see you, Mr . Rubi nst ei n, one of t he char act er wi t nesses.
15 MR. RUBI NSTEI N: I ' mt ol d t hey have ar r i ved.
16 THE COURT: That was a year and a hal f i nt o t he gr ant .
17 MR. EVERDELL: That ' s t r ue, t hat ' s cer t ai nl y a poi nt
18 we woul d make as wel l . But we know t her e ar e mat er i al s t hat we
19 have t hat mi ght be r el evant f or cr oss- exami nat i on, and we woul d
20 l i ke t he chance t o at l east r evi ew t hem, get some t i me t o
21 r evi ew t hemso we ar e adequat el y pr epar ed.
22 THE COURT: Wel l , maybe I can gi ve you a shor t r ecess
23 but not hi ng l ong.
24 MR. EVERDELL: Thank you, your Honor .
25 MR. RUBI NSTEI N: Coul d I go speak t o t he wi t ness, your
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1 Honor ?
2 THE COURT: Yes. Let ' s get t he wi t nesses i n. Have
3 you got a wi t ness her e?
4 MR. RUBI NSTEI N: I under st and, but i t ' s a wi t ness I
5 never t al ked t o, J udge. I j ust need about t hr ee mi nut es.
6 THE COURT: Wel l , al l r i ght . We' ve got t o br i ng t he
7 j ur y back i n. We can' t keep t hemwai t i ng.
8 MR. RUBI NSTEI N: Ri ght .
9 ( Recess)
10 MR. RUBI NSTEI N: We have bot h our wi t nesses, J udge.
11 THE COURT: Al l r i ght . Do you have t he wi t ness her e?
12 MR. RUBI NSTEI N: Yes, your Honor .
13 THE COURT: Al l r i ght . Mr . Rubi nst ei n, do you have
14 your wi t ness?
15 MR. RUBI NSTEI N: Yes, your Honor .
16 THE COURT: Al l r i ght . I ' mcal l i ng i n t he j ur y.
17 ( Cont i nued on next page)
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1 ( J ur y pr esent )
2 THE COURT: Al l r i ght . Pl ease be seat ed.
3 Mr . Rubi nst ei n?
4 MR. RUBI NSTEI N: We' r e r eady t o pr oceed, your Honor .
5 Thank you. We cal l our next wi t ness.
6 LEE H. GOLDBERG,
7 cal l ed as a wi t ness by t he def endant ,
8 havi ng been dul y swor n, t est i f i ed as f ol l ows:
9 DEPUTY COURT CLERK: Pl ease st at e your name f or t he
10 r ecor d and spel l your l ast name sl owl y.
11 THE WI TNESS: Lee H. Gol dber g.
12 DI RECT EXAMI NATI ON
13 BY MR. RUBI NSTEI N:
14 Q. Good mor ni ng, Mr . Gol dber g.
15 A. Good mor ni ng.
16 THE COURT: G- O- L- D- B- E- R- G?
17 THE WI TNESS: Yes, si r .
18 THE COURT: Al l r i ght .
19 Q. Wher e do you r esi de, si r ?
20 A. I l i ve i n Pr i ncet on, New J er sey. Do you need an addr ess?
21 2002 Mayf ai r Avenue.
22 Q. How l ong have you r esi ded t her e?
23 A. A l i t t l e over t en year s.
24 Q. I s t hat wher e you came f r omt hi s mor ni ng?
25 A. Yes, si r , and t hat ' s why I ' ml at e. I apol ogi ze t o t he
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1 cour t . The t r ai ns, I don' t want t o t al k about i t .
2 Q. Now, what i s your busi ness or occupat i on, si r ?
3 A. I ' ma r ecover i ng engi neer . I used t o be an aer ospace
4 engi neer . Now I ' ma j our nal i st .
5 Q. How l ong have you been a j our nal i st ?
6 A. About 14 year s.
7 Q. I s t her e a par t i cul ar ar ea t hat you - -
8 A. I cover hi gh t echnol ogy. Technol ogy and t he envi r onment
9 ar e my t wo speci al t i es, most l y net wor ki ng communi cat i ons.
10 Q. Do you know t he def endant Dani el Kar r on?
11 A. Yes.
12 Q. Do you see t he def endant i n cour t ?
13 A. Yeah. Ri ght t her e.
14 THE COURT: The wi t ness has i dent i f i ed t he def endant .
15 Q. And how l ong do you know t he def endant ?
16 A. I ' mt r yi ng t o t hi nk of how many year s. I guess si nce I was
17 13 or 14. We went t o j uni or hi gh t oget her .
18 Q. And have you mai nt ai ned a r el at i onshi p wi t h t he def endant ?
19 A. We wer e i n cl ose cont act f or a l ong t i me. Then I f el l of f
20 t he f ace of t he pl anet . I was doi ng some r esear ch. We wer en' t
21 i n t ouch f or a coupl e of year s. Danny t r acked me down pr obabl y
22 i n 1979 and 1980, and we have been i n cont act ever si nce.
23 Q. And do you know a company cal l ed CASI ?
24 A. Yes, si r .
25 Q. And have you had any i nvol vement wi t h CASI ?
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1 A. I was nomi nal l y at l east on t he boar d of di r ect or s, and I
2 di d some i ni t i al f undi ng.
3 Q. Di d you ever go t o a boar d meet i ng?
4 A. No, si r .
5 Q. Over t he t i me t hat you have known Dr . Kar r on, have you been
6 abl e t o f or man opi ni on as t o hi s t r ut hf ul ness and honest y?
7 A. Yes, si r .
8 Q. What i s your opi ni on, si r ?
9 A. He i s one of t he peopl e I t r ust i n t hi s wor l d.
10 MR. RUBI NSTEI N: Thank you ver y much.
11 THE COURT: Cr oss- exami nat i on.
12 MR. EVERDELL: Yes, your Honor .
13 CROSS EXAMI NATI ON
14 BY MR. EVERDELL:
15 Q. Good mor ni ng, Mr . Gol dber g.
16 A. Good mor ni ng.
17 Q. You sai d t hat you wer e on t he boar d of di r ect or s nomi nal l y
18 f or CASI ?
19 A. Yeah.
20 Q. So you di dn' t at t end any boar d meet i ngs.
21 A. No.
22 Q. And you never wer e a par t of t he day- t o- day wor ki ngs of
23 CASI , wer e you?
24 A. No. I r evi ewed some document s, you know, when he was
25 maki ng pr oposal s, I woul d go over t hose t hi ngs. I spent some
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1 t i me gi vi ng advi ce f or what ever i t was wor t h, you know, but a
2 l ot of t i mes when i t was a t echni cal paper I woul d t ake a l ook
3 at i t t o make sur e t hat i t was at l east i n some sor t of or der
4 or i n Engl i sh, compr ehensi bl e.
5 Q. So on t he t echni cal si de of t hi ngs, r evi ewi ng document s, i s
6 t hat what you sai d?
7 A. Basi cal l y i t .
8 Q. So you di dn' t have any i nvol vement wi t h t he f i nances of
9 CASI ?
10 A. No, si r .
11 Q. You have no i dea how t hey spent t hei r money?
12 A. Not par t i cul ar l y.
13 Q. And you don' t know anyt hi ng about t he r ul es of t he ATP
14 gr ant s i n par t i cul ar , do you?
15 A. Not - - I ' mcer t ai nl y not wel l ver sed i n i t .
16 Q. And you di dn' t act ual l y wor k i n t he CASI wor k space i n 2001
17 t o 2003, di d you?
18 A. I spent t i me t her e, but most l y, you know, most l y as a
19 f r i end and what ever , but I wasn' t - - I was i n t he wor k space a
20 f ai r amount . I was i n t her e f or var i ous r easons t hat I woul d
21 be t her e.
22 Q. Now, Mr . Gol dber g, you own st ock i n CASI , don' t you?
23 A. I bel i eve t hat t her e i s a pi ece of paper i n my f i l es t hat
24 says somet hi ng t o t hat ef f ect .
25 Q. You own st ock?
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1 A. I guess so. I haven' t l ooked at i t i n I don' t know how
2 many year s. I t was gi ven t o me. I never asked.
3 Q. Ri ght . You sai d al so t hat you have known t he def endant
4 si nce you wer e 13 or 14, r i ght ?
5 A. Yes, si r .
6 Q. So, he i s a j uni or hi gh buddy of your s, r i ght ?
7 A. Yeah. And?
8 Q. And you woul dn' t want anyt hi ng bad t o happen t o your
9 f r i end, r i ght ?
10 A. No. And your poi nt i s?
11 Q. Si mpl y t hat . No f ur t her quest i ons.
12 THE COURT: Any r edi r ect ?
13 MR. RUBI NSTEI N: No, your Honor .
14 THE COURT: Al l r i ght . You ar e excused. Next
15 wi t ness.
16 ( Wi t ness excused)
17 ( Cont i nued on next page)
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1 THE COURT: Next wi t ness.
2 Do you need t i me or ar e you al l r i ght ?
3 MR. EVERDELL: I f t hi s i s t he next wi t ness, your
4 Honor , we woul d r equest some t i me.
5 THE COURT: Wel l , l et ' s see i f t he wi t ness i s her e.
6 MR. EVERDELL: Yes, your Honor .
7 THE COURT: You want t o see i f he' s her e, t hen I ' l l
8 make a deci si on on t he ot her . Woul d you j ust r un out and see
9 i f he' s her e.
10 ( Pause)
11 MR. RUBI NSTEI N: J udge, whi l e t he next wi t ness i s
12 wal ki ng i n, may I appr oach wi t h t he gover nment ?
13 ( At t he si debar )
14 MR. RUBI NSTEI N: Whi l e t he next wi t ness i s wal ki ng i n
15 t he cour t r oom, I want ed t o - -
16 THE COURT: Al l r i ght , si r . Let ' s hol d i t .
17 MR. RUBI NSTEI N: That ' s t he next wi t ness.
18 MR. EVERDELL: Your Honor - -
19 THE COURT: She' s been her e al l - -
20 MR. RUBI NSTEI N: That ' s why I asked t o appr oach t he
21 bench, your Honor . I gave t he Gover nment al l t he Mast er
22 Car d - - she' s a bookkeeper . She has been her e assi st i ng me.
23 THE COURT: She' s a bookkeeper ?
24 MR. RUBI NSTEI N: She' s a bookkeeper . She' s a
25 bookkeeper .
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1 THE COURT: I t hought i t was Wi ndy Far nswor t h you
2 sai d.
3 MR. RUBI NSTEI N: That ' s a di f f er ent wi t ness, your
4 Honor . The gover nment - -
5 THE COURT: No not i ce of t hi s.
6 MR. RUBI NSTEI N: Because t hey wer e supposed t o
7 st i pul at e t o t he Mast er Car d and t hey won' t st i pul at e. She
8 di d - - I gave t hemmy own book f or t he weekend t o check over
9 and t hey won' t st i pul at e t o t he Mast er Car d. I ' mf or ced t o
10 cal l a wi t ness. I mean, I st i pul at ed t o t he Amer i can Expr ess.
11 I gave t hemmy own copy t hat t hey di dn' t even r et ur n t i l l
12 Monday, J udge - -
13 THE COURT: I ' l l have t o - -
14 MR. RUBI NSTEI N: - - of t he Mast er Car d and - -
15 THE COURT: I ' l l have t o excuse t he j ur y 10 mi nut es or
16 so. How l ong do you need f or t he pr epar at i on?
17 ( J ur y exi t s t he cour t r oom)
18 MR. KWOK: Thi s wi t ness - -
19 THE COURT: What ? I ' mnot goi ng t o al l ow t hi s
20 wi t ness.
21 MR. RUBI NSTEI N: J udge, t hey - -
22 THE COURT: What i s t he pr obl em?
23 MR. RUBI NSTEI N: He t ol d me he woul d st i pul at e.
24 MR. KWOK: I di dn' t t el l you anyt hi ng.
25 MR. RUBI NSTEI N: They i ndi cat ed - - J udge, we have had a
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1 ver y pr of essi onal r el at i onshi p dur i ng t hi s case bet ween t he
2 pr osecut i on and t he def ense. When t hey' ve asked me f or
3 st i pul at i ons, I ' ve gi ven t hemst i pul at i ons, I had t al ked t o
4 t hemabout t he Mast er Car d. Par t of our def ense i s t hat he
5 spent money on Mast er Car d.
6 The onl y t hi ng t hi s wi t ness i s sayi ng, and t hei r
7 wi t nesses had my - - her books, her books f or t he ent i r e
8 weekend. I gave t hemmy or i gi nal copi es. I di dn' t even have a
9 copy f or mysel f . They t ook i t back t o At l ant a. They' ve been
10 wor ki ng wi t h i t . They came back l at e Sunday ni ght wi t h t hi s
11 st uf f . For t hemt o say t hat t hey don' t have t i me i s - -
12 THE COURT: Who i s t he wi t ness?
13 MR. RUBI NSTEI N: - - j ust wr ong.
14 THE COURT: So j ust I know, who i s t he - - what ' s t he
15 name of t he wi t ness?
16 MR. RUBI NSTEI N: Debor ah Dunl evy. And t he onl y t hi ng
17 I want t o do i s put t he Mast er - - I di dn' t expect t o have a
18 pr obl em, J udge, because t hese ar e r ecor ds t hat - -
19 THE COURT: Def endant can put i n t he Mast er Car d.
20 MR. RUBI NSTEI N: That ' s i f I deci de t o cal l hi m. I
21 don' t want t o - -
22 THE COURT: Ar e you goi ng t o cal l hi m?
23 MR. RUBI NSTEI N: I don' t know yet . I want t o see how
24 Ms. Far nswor t h does.
25 The bot t oml i ne i s t hat t hey ar e, t hey ar e, what do
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1 you ask cal l i t , t hey won' t st i pul at e. She went over t hese
2 r ecor ds. The gover nment has never l ooked at t hese r ecor ds
3 bef or e I made an i ssue about i t wi t h Ri l ey, and I t hi nk t hat
4 i t ' s goes t o t he hear t of t he def ense. Her e he spent al most
5 $50, 000 on hi s Mast er Car d f or gr ant i t ems, and I t hi nk t hat
6 t he def ense shoul d have t he oppor t uni t y t o put t hat i nt o
7 evi dence.
8 MR. KWOK: No, your Honor . Thi s i s - -
9 MR. RUBI NSTEI N: J ust l i ke t hey put i n t he Amer i can
10 Expr ess wi t h my st i pul at i ons.
11 MR. KWOK: Thi s i s compl et el y unf ai r . I di d not get
12 t he st i pul at i on unt i l t hi s mor ni ng. And i n r evi ewi ng t hose
13 r ecor ds, t hey ar e not r ecor ds f r omMast er Car d di r ect l y. They
14 ar e j ust a bunch of number s cr eat ed f r oma l edger . I have no
15 assur ance wher e t hose number s came f r om. To say t hat - - i n
16 f act , I t r i ed t o have Mr . Rubi nst ei n st i pul at e t o a si mi l ar
17 l edger , and he t ol d me he had no assur ance t hat t hose number s
18 r ef l ect ed i n t he l edger I want ed hi mt o st i pul at e t o.
19 THE COURT: We don' t have t he Mast er Car d bi l l s?
20 MR. RUBI NSTEI N: Yes, we do. We gave i t t o t hem.
21 THE COURT: Mast er Car d bi l l s t hemsel ves?
22 MR. RUBI NSTEI N: The - -
23 THE COURT: I under st ood f r om- -
24 MR. RUBI NSTEI N: The st at ement s.
25 THE COURT: J ust a second. I under st ood f r omt he
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1 t est i mony t o dat e, t hat al l t he or i gi nal t r anscr i pt s of al l
2 wer e dest r oyed and i nst ead t hey r el i ed on scanned document s.
3 MR. RUBI NSTEI N: That ' s cor r ect , J udge, scanned - - t he
4 scanned Mast er Car d bi l l s. The mont hl y st at ement s ar e - - you
5 know, i n t he moder n er a of paper l ess wor l d, t hi s i s what peopl e
6 do.
7 THE COURT: I j ust want ed t o - -
8 MR. RUBI NSTEI N: These ar e t he Mast er Car d - -
9 THE COURT: So t hese ar e scanned, t hey' r e not Mast er
10 Car d - - but t hey' r e t he r ecor ds of t he - - busi ness copi es of
11 Mast er Car d i nvoi ces.
12 MR. RUBI NSTEI N: Ri ght .
13 THE COURT: That have been scanned i n, i s t hat i t ?
14 MR. RUBI NSTEI N: That ' s cor r ect , your Honor .
15 THE COURT: Al l r i ght .
16 MR. RUBI NSTEI N: I ' ve gi ven t hemt o t he gover nment .
17 THE COURT: They' r e not t he or i gi nal s. Go ahead.
18 MR. KWOK: And when Mr . Rubi nst ei n gave me t hat - -
19 MR. RUBI NSTEI N: Excuse me, j ust t he Amer i can Expr ess.
20 THE COURT: I want t o hear hi m.
21 MR. KWOK: When Mr . Rubi nst ei n gave me t hat t hi ck
22 f ol der over t he weekend, t hat was i n r esponse t o our i f as when
23 subpoena, i f your Honor r ecal l s, i n t he event t hat t he
24 def endant t est i f i es, so we can cr oss hi mon t hose r ecor ds.
25 At t hat poi nt no ment i on was made about t hi s new
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1 wi t ness, whose name I j ust hear d a f ew mi nut es ago. We' ve
2 never known t hat t hi s wi t ness exi st ed. She has been i n t he
3 cour t r oomt he whol e t i me hear i ng al l t he t est i mony, and we have
4 not hear d a wor d t hat she woul d be t est i f yi ng.
5 MR. RUBI NSTEI N: J udge, I know - -
6 THE COURT: She wor ks f or t he busi ness?
7 MR. RUBI NSTEI N: She never wor ked f or CASI . She was
8 br ought aboar d af t er war ds t o hel p compi l e r ecor ds.
9 THE COURT: When was she br ought aboar d?
10 MR. RUBI NSTEI N: Pr obabl y i n 2004, l at e 2003, maybe
11 2005. I mean, she' s been - -
12 THE COURT: When, appr oxi mat el y? Let ' s f i nd out .
13 MR. RUBI NSTEI N: I have no - -
14 THE COURT: She wasn' t an empl oyee dur i ng t he t i me
15 i nvol ved?
16 MR. RUBI NSTEI N: No, not at al l .
17 MR. KWOK: And i f - -
18 THE COURT: How can she t est i f y t hat t hese wer e
19 r ecor ds kept i n t he r egul ar cour se of busi ness?
20 MR. EVERDELL: Dur i ng t he t i me of t he i ndi ct ment .
21 MR. KWOK: And t hese ar e per sonal Mast er Car d r ecor ds,
22 not even CASI cor por at e r ecor ds.
23 MR. RUBI NSTEI N: Exact l y exact l y.
24
25 MR. KWOK: So I don' t see t he r el evance.
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1 MR. RUBI NSTEI N: How coul d t he gover nment - -
2 THE COURT: I see. I ' msor r y.
3 MR. RUBI NSTEI N: I ' mgoi ng t o ask f or t he cont i nuance
4 t o get Mast er Car d her e. You know, f or t he gover nment t o have
5 t he r ecor ds - - and t hey had t he Mast er Car d r ecor ds bef or e, and
6 I ment i oned t he Mast er Car d a l ong t i me ago. They have al l of
7 t hi s. For t hemt o t r y t o keep out of evi dence l egi t i mat e
8 evi dence t hat woul d show t he def endant i s i nnocent i s, f r ankl y,
9 J udge, not pr of essi onal .
10 THE COURT: Wel l - -
11 MR. RUBI NSTEI N: Okay, i t ' s not pr of essi onal . I
12 expect mor e t han f r omt he r epr esent at i ves.
13 THE COURT: I hear t hat . I ' mnot goi ng t o get i nt o
14 t hat . But I ' ve got t o det er mi ne whet her t hey' r e admi ssi bl e,
15 and al so whet her t he Gover nment ' s had a f ai r oppor t uni t y. What
16 i s - - wher e ar e t he r ecor ds? Let me see a copy of t hese
17 t hi ngs - -
18 MR. RUBI NSTEI N: Okay, sur e.
19 THE COURT: - - t hat you' r e t al ki ng about .
20 Have you exami ned t hese r ecor d? I ' msor r y, I bet t er
21 wai t t i l l he comes back.
22 THE DEPUTY CLERK: Do you want me t o put t he wi t ness
23 i n t he r oomso ever ybody can go back t o t he t abl es? Because
24 t he j ur y i s not her e.
25 THE COURT: I ' ve got t o see t hese r ecor ds.
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1 THE DEPUTY CLERK: I under st and.
2 MR. EVERDELL: We' l l j ust wai t her e.
3 MR. RUBI NSTEI N: Al so, J udge, she or der ed t hemal so,
4 f r omwhat I under st and, or der ed t hemf r omt he bank and got
5 copi es and compar ed t hemt o t he or i gi nal of t he Mast er Car d
6 st at ement s.
7 THE COURT: Let me get my gl asses. Whi ch of t he
8 ent r i es, Mr . Rubi nst ei n - -
9 MR. RUBI NSTEI N: Par don? Yes, your Honor .
10 THE COURT: Come her e. Whi ch of t he ent r i es do you
11 cl ai mar e CASI expenses?
12 MR. RUBI NSTEI N: Whi ch ar e t he ent r i es, your Honor ?
13 THE COURT: Yes.
14 MR. RUBI NSTEI N: Ther e ar e medi cal - -
15 THE COURT: Whi ch ones? Let me j ust see.
16 MR. RUBI NSTEI N: I ' l l gi ve you t he char t t hat we have,
17 J udge.
18 THE COURT: What - - her e. Gi ve me t hi s. I j ust want
19 t o know - - check of f t he i t ems you t hi nk ar e busi ness expenses.
20 MR. RUBI NSTEI N: Okay. Let me get our char t .
21 THE COURT: I don' t want her - -
22 MR. RUBI NSTEI N: No, no, not her . I want t o get i t
23 f r omher so I coul d - -
24 THE COURT: Wel l , t hen gi ve me t hese r ecor ds. I ' l l go
25 t hr ough t hemf i r st .
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1 MR. RUBI NSTEI N: Okay. Wher e i s t he char t ?
2 Your Honor , t hi s i s an anal ysi s - - t hese ar e t he
3 expenses t hat we di d not at t r i but e t o t he gr ant .
4 THE COURT: What ?
5 MR. RUBI NSTEI N: These ar e over her e, your Honor .
6 THE COURT: That ' s t he ones you say he can char ge t o
7 t he gr ant .
8 MR. RUBI NSTEI N: I ' mgoi ng t o show you t he ones t hat
9 we' r e not char gi ng t o t he gr ant , your Honor . We have i t i n t he
10 negat i ve f ashi on.
11 THE COURT: Al l you' r e goi ng t o do i s show t hat t hese
12 char ges wer e not char ged t o t he gr ant .
13 MR. RUBI NSTEI N: And t hen t he ot her ones wer e
14 char ged - - ar e char ged t o t he gr ant ar e gr ant expenses; i n
15 ot her wor ds, her e i s t he schedul e, your Honor , t he def endant ' s
16 ZZZ- 1, and t hose ar e t he ones t hat i n our anal ysi s we di d not
17 char ge t o t he gr ant . Over her e, J udge.
18 THE COURT: You' r e sayi ng t hat al l t hese Mast er Car d
19 char ges wer e not char ged t o t he gr ant .
20 MR. RUBI NSTEI N: No. I ' msayi ng t hey' r e par t of i t .
21 Thi s i s t he summar y char t of what was - - we say was char ged t o
22 t he car d t hat wer e ATP expenses, at t r i but abl e ei t her medi cal - -
23 THE COURT: Tot al at t r i but abl e t o - - I mean, wher e
24 does t he - - t o busi ness expenses?
25 MR. RUBI NSTEI N: Ri ght .
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1 THE COURT: The St at ue of Li ber t y gi f t ?
2 MR. RUBI NSTEI N: Par don?
3 THE COURT: St at ue of Li ber t y gi f t , Gr i st edes?
4 MR. RUBI NSTEI N: No, we' r e not . That ' s - -
5 THE COURT: What ar e t hese?
6 MR. RUBI NSTEI N: J udge, wher e' s St at ue of Li ber t y
7 gi f t ? I don' t see anyt hi ng - - t hose ar e excl uded. The t ot al
8 amount i s - -
9 THE COURT: I don' t f ol l ow you.
10 MR. RUBI NSTEI N: The t ot al amount of t he car d i s
11 $90, 000, your Honor , t hat he spent .
12 THE COURT: I got t hese i n f r ont of me.
13 MR. RUBI NSTEI N: Yes. I t t ot al s t o $90, 000. We ar e
14 at t r i but i ng $49, 000 t o gr ant r el at ed expenses, and t he ot her
15 41, 000 - - $40, 000 ar e non- gr ant , and t hat goes wi t h t he
16 Gr i st edes and t he bi ke shop and cash advance, and cl ot hi ng, and
17 t hi ngs of t hat nat ur e.
18 THE COURT: Look, when was her exact per i od of
19 empl oyment ? I s she bei ng cal l ed as an exper t , i n ot her wor ds?
20 You' r e doi ng r econst r uct i on of t he books.
21 MR. RUBI NSTEI N: Exper t - -
22 MR. KWOK: That ' s exact l y what he' s doi ng wi t hout
23 not i ce.
24 THE COURT: What ?
25 MR. RUBI NSTEI N: Exper t bookkeeper - - you woul dn' t
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1 st i pul at e. I had no i nt ent i on of cal l i ng - - she' s pet r i f i ed of
2 t aki ng t he wi t ness st and.
3 MR. KWOK: I got t he st i pul at i on t hi s mor ni ng.
4 MR. RUBI NSTEI N: You got t he r ecor ds. I gave you her
5 or i gi nal r ecor ds on Fr i day. I gave you ever yt hi ng I had on
6 her .
7 MR. KWOK: You sai d not hi ng about exper t wi t ness on
8 Fr i day.
9 MR. RUBI NSTEI N: We t al ked about a st i pul at i on, we
10 t al ked about - - you sai d you' l l consi der a st i pul at i on. I gave
11 you al l t he r ecor ds on Fr i day t o l ook over .
12 MR. KWOK: You di dn' t - -
13 MR. RUBI NSTEI N: I t ' s amazi ng, and t hey knew about t he
14 mast er f i l e bef or e.
15 MR. KWOK: I don' t know about i t . I don' t know what
16 you' r e t al ki ng about , Mr . Rubi nst ei n. Those r ecor ds wer e
17 pr oduced i n r esponse t o t he gover nment ' s i f as when subpoena i n
18 t he event t he def endant t est i f i es.
19 THE COURT: I ' mnot goi ng t o al l ow her t est i mony as an
20 exper t , l at e not i ce. So she can not t est i f y t hat t hey
21 shoul d' ve char ged t o t he busi ness t hi ngs t hat , based on t he
22 Mast er Car d t hat t hey di dn' t - - she wasn' t empl oyed at t he
23 t i me, and she had not hi ng t o do wi t h t he br eak down, as I
24 under st and i t . She' s - - t her ef or e, she' s an exper t wi t ness
25 doi ng t hi ngs i n hi ndsi ght .
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1 MR. EVERDELL: Pl us she' s been i n t he cour t r oomt he
2 ent i r e t i me, she' s been an i nt egr al par t of def ense t eam, she' s
3 been at counsel t abl e, she' s been r evi ewi ng r ecor ds. She' s
4 been at counsel t abl e, she' s been r evi ewi ng r ecor ds wi t h
5 def ense counsel , she' s been t al ki ng t o wi t nesses. Thi s i s
6 compl et el y i nappr opr i at e t o cal l her i n any capaci t y, much l ess
7 i n an exper t capaci t y.
8 MR. RUBI NSTEI N: J udge, she' s mer el y aut hent i cat i ng
9 document s t hat t hey know ar e l egi t i mat e document s. She' s
10 aut hent i cat i ng t hemt o get t hemi nt o evi dence.
11 I woul d - - i f t he gover nment want s t o st i pul at e t hat ,
12 we' l l agr ee t o st i pul at e t o put t hese r ecor ds, al l t he Mast er
13 Car d r ecor ds i nt o evi dence, I won' t cal l her . I won' t ask t o
14 cal l her , I ' l l wi t hdr aw t he appl i cat i on. But I t hi nk t hat i t ' s
15 appr opr i at e t hat t he Mast er Car d r ecor ds go i nt o evi dence.
16 MR. KWOK: Ar e t hese t he r ecor ds we' r e t al ki ng about ,
17 Mr . Rubi nst ei n?
18 MR. RUBI NSTEI N: I bel i eve t hey ar e.
19 MR. KWOK: Thi s st ack? Can I r evi ew t hem?
20 MR. RUBI NSTEI N: Yeah, l et me - -
21 THE COURT: Let hi mr evi ew t hem.
22 MR. RUBI NSTEI N: I j ust gr abbed t hem, and I assume
23 t hat t hi s i s what - - yes. Ther e must be addi t i onal ones
24 because i t l ooks l i ke t her e' s onl y November , J anuar y ' 03. We
25 must be mi ssi ng a coupl e. Let me see i f t her e' s - -
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1 THE COURT: What ' s t hi s?
2 I want t o make a r ecor d of t hi s exhi bi t . ZZZ i s a
3 summar y Mast er Car d br eakdown f r omOct ober 1, 2001 t i l l
4 December 31st , 2003 pur por t i ng t o show t ot al spent , a Mast er
5 Car d 90, 114. 49 and at t r i but abl e t o CASI busi ness expenses
6 $49, 944. 59. I t ' s a pr oposed exhi bi t . I t seems t o me t hat
7 cl ear l y shows t hat i t ' s an exper t t est i mony concl usi on.
8 MR. RUBI NSTEI N: J udge, we' r e goi ng t o pr i nt t hemout .
9 We have t hemi n t he comput er .
10 THE COURT: Let ' s get back her e and get t hi s t hi ng
11 det er mi ned, Mr . Rubi nst ei n.
12 MR. RUBI NSTEI N: We' r e pr i nt i ng out of t he comput er
13 t he st at ement s t hat wer e - - t hese st at ement s.
14 THE COURT: The ones you handed me wer e i ncompl et e.
15 MR. RUBI NSTEI N: Yes, t hey' r e j ust ' 02 st at ement s.
16 We' r e mi ssi ng - -
17 THE COURT: Those ar e t he ones t hat t he wi t ness handed
18 you.
19 MR. RUBI NSTEI N: No. I t ook her book when she wasn' t
20 her e, J udge, and I br ought - - I t ook - -
21 THE COURT: And she doesn' t have t hem; t hey' r e comi ng
22 out of t he comput er now?
23 MR. RUBI NSTEI N: Yes. She had t hem. She' s - - i t ' s
24 not r el evant what - -
25 THE COURT: Now, what ar e we goi ng t o do?
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1 MR. RUBI NSTEI N: So we' r e pr i nt i ng out t he r est of t he
2 st at ement s dur i ng t he gr ant per i od, and we' l l - - and ask t he
3 gover nment t o st i pul at e t hat t hese ar e hi s Mast er Car d
4 st at ement s.
5 MR. KWOK: Hi s per sonal .
6 MR. RUBI NSTEI N: Per sonal Mast er Car d st at ement s.
7 MR. KWOK: Gover nment has no pr obl emwi t h t hat , j ust
8 t hat t hese ar e hi s Mast er Car d r ecor ds f or hi s per sonal Mast er
9 Car d, and t hey ar e what t hey pur por t t o be.
10 MR. EVERDELL: But l et ' s be speci f i c. We' r e not
11 st i pul at i ng t o any anal ysi s of t hem.
12 MR. KWOK: J ust t hese r ecor ds.
13 MR. RUBI NSTEI N: J ust t he r ecor d, j ust t he r ecor ds.
14 THE COURT: Al l r i ght , can we go ahead?
15 MR. RUBI NSTEI N: Yes.
16 MR. EVERDELL: We need t o l ook at t he f ul l set of
17 r ecor ds.
18 THE COURT: You' l l cal l Ms. Far nswor t h f i r st ?
19 MR. RUBI NSTEI N: I ' l l cal l Ms. Far nswor t h f i r st .
20 MR. KWOK: Do we have t i me t o pr epar e f or Ms.
21 Far nswor t h?
22 MR. EVERDELL: We haven' t been abl e - -
23 MR. KWOK: J ust deal i ng wi t h al l t hese new sur pr i ses.
24 MR. EVERDELL: I f we can have 15, 20 mi nut es j ust t o
25 l ook - -
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1 THE COURT: Al l r i ght , r un down get t hat . Let ' s go.
2 MR. EVERDELL: Thank you, your Honor .
3 THE COURT: Come back as soon as you can.
4 ( Recess)
5 ( I n open cour t ; j ur y not pr esent )
6 THE COURT: Al l r i ght , ar e we r eady, l adi es and
7 gent l emen?
8 MR. RUBI NSTEI N: Yes. I wi l l cal l t he next wi t ness.
9 I have my associ at e phot ocopyi ng al l t he st at ement s so t hat
10 ever ybody has a set , but I ' l l cal l Mi ss Far nswor t h now.
11 THE COURT: What ?
12 MR. RUBI NSTEI N: I ' l l cal l Mi ss Far nswor t h now and
13 we' l l have t he r ecor ds f or t hemi n t ot al .
14 THE COURT: Have you made a deci si on yet or has your
15 cl i ent made a deci si on yet about t he ot her aspect ?
16 MR. RUBI NSTEI N: Yes, we made a deci si on. We' l l r est
17 af t er we submi t t he Mast er Car d bi l l s.
18 THE COURT: I t hi nk t he gover nment consent ed t o t hat .
19 MR. RUBI NSTEI N: Yes.
20 MR. KWOK: Yes.
21 THE COURT: As per sonal - - hi s per sonal Mast er Car d.
22 MR. RUBI NSTEI N: Ri ght .
23 THE COURT: But I meant I wasn' t r ef er r i ng t o t hat
24 deci si on - - I was r ef er r i ng t o t he ot her deci si on, j ust because
25 I don' t want t o have t o excuse t he j ur y agai n i f you made a
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1 deci si on about cal l i ng t he def endant .
2 MR. RUBI NSTEI N: No, t hat ' s what I sai d, J udge, t hat
3 we made t hat deci si on not t o cal l t he def endant .
4 THE COURT: Not t o cal l .
5 MR. RUBI NSTEI N: Not t o cal l hi m.
6 THE COURT: Then I have t o ask Dr . Kar r on a coupl e - -
7 my pr act i ce, t o ask Dr . Kar r on a coupl e of quest i ons.
8 MR. RUBI NSTEI N: Oh, sur el y.
9 THE COURT: Dr . Kar r on, you under st and t hat you have a
10 r i ght t o t est i f y i n t hi s case.
11 THE DEFENDANT: Yes, I do.
12 THE COURT: And af t er consul t at i on wi t h Mr .
13 Rubi nst ei n, you' ve deci ded t hat you do not want t o t est i f y?
14 THE DEFENDANT: Mr . Rubi nst ei n has - -
15 THE COURT: I ' msor r y?
16 MR. RUBI NSTEI N: The J udge asked you a quest i on.
17 THE DEFENDANT: Mr . Rubi nst ei n has convi nced me t hat
18 i t woul d be i n t he best i nt er est not t o t est i f y.
19 THE COURT: Wel l , t hat i sn' t what I ' maski ng you. I ' m
20 aski ng you - - you have t he f i nal deci si on - -
21 THE DEFENDANT: I ' ve made t he f i nal deci si on.
22 THE COURT: - - about whet her you t est i f y or not . So I
23 want t o know whet her you' ve made t hat deci si on your sel f or
24 whet her your j ust goi ng al ong wi t h what ever Mr . Rubi nst ei n
25 says.
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1 THE DEFENDANT: I ' ve made t he f i nal deci si on.
2 THE COURT: You have?
3 THE DEFENDANT: Yes, si r .
4 THE COURT: Not t o t est i f y?
5 THE DEFENDANT: That i s cor r ect .
6 THE COURT: Al l r i ght . I j ust want ed t o - - and i t ' s
7 your own det er mi nat i on?
8 THE DEFENDANT: I n consul t wi t h my advi sor .
9 THE COURT: I ' msor r y.
10 THE DEFENDANT: I woul d - - yes. The answer i s yes.
11 I t ' s a wel l consi der ed deci si on. I ' ve t al ked about i t at
12 l engt h wi t h al l my advi sor s, al l my f r i ends, al l my char act er s.
13 THE COURT: Al l r i ght , t hat ' s al l . I j ust want ed t o
14 be sur e i t was your deci si on. Because somet i mes we have
15 l i t i gat i on t hat ar i ses af t er a case, and some j udges don' t
16 f ol l ow t he pr ocedur e t hat I f ol l ow. And I f ol l ow t hat
17 pr ocedur e because i t seems t o me t hat i s t he way i t shoul d be
18 asked. But t hat ' s my own. I won' t say t hat i t ' s appr opr i at e
19 si nce some J udges don' t do i t .
20 MR. RUBI NSTEI N: I t hi nk i t i s, and I ' ve - - you' r e t he
21 onl y J udge t hat ever di d i t , and I amappr eci at i ve t hat you do
22 i t , J udge.
23 THE COURT: Al l r i ght .
24 MR. RUBI NSTEI N: I t ' s ver y - -
25 THE COURT: Al l r i ght , l et ' s get t he j ur y. Let ' s have
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1 Mi ss Far nswor t h, l et ' s get t he Mast er Car d i n. And t hen t he
2 gover nment has r ebut t al ?
3 MR. KWOK: I don' t t hi nk we do.
4 THE COURT: Wel l , you' l l be asked.
5 ( J ur y ent er i ng; j ur y pr esent )
6 THE COURT: Al l r i ght , pl ease be seat ed.
7 Your next wi t ness, Mr . Rubi nst ei n.
8 MR. RUBI NSTEI N: Yes, your Honor .
9 WI NDY LYNNE FARNSWORTH,
10 cal l ed as a wi t ness by t he def endant ,
11 havi ng been dul y swor n, t est i f i ed as f ol l ows:
12 DI RECT EXAMI NATI ON
13 BY MR. RUBI NSTEI N:
14 Q. Good mor ni ng, Ms. Far nswor t h. Have we met ?
15 A. J ust bef or e I came t o cour t , out si de.
16 Q. Now - -
17 A. Out si de.
18 Q. What i s your busi ness or occupat i on?
19 A. I aman engi neer . I cur r ent l y wor k f or AS&L Li t hogr aphy i n
20 Wi l t on, Connect i cut . I ' ma seni or engi neer i n t hat posi t i on,
21 and I ' ve been t her e appr oxi mat el y t wo- and- a- hal f year s, and
22 I ' ve been an empl oyee of engi neer i ng pr et t y much my ent i r e
23 l i f e, adul t l i f e.
24 Q. And wher e do you r esi de?
25 A. I cur r ent l y r esi de i n New Mi l l f or d, Connect i cut .
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1 Q. And do you know - - how l ong do you r esi de i n New Mi l l f or d,
2 Connect i cut ?
3 A. I pur chased t hat home i n December , 2000, and I ' ve been
4 t her e ever si nce.
5 Q. And do you know t he def endant , Dani el Kar r on?
6 A. Yes, I do.
7 Q. Dr . Kar r on? Do you see t he def endant i n cour t ?
8 A. Yes.
9 Q. Coul d you poi nt hi mout , pl ease?
10 A. Ri ght t her e.
11 MR. RUBI NSTEI N: I ndi cat i ng t he def endant , your Honor .
12 THE COURT: The wi t ness - - t he r ecor d wi l l i ndi cat e
13 t he wi t ness has i dent i f i ed t he def endant .
14 Q. Now, when di d you meet t he def endant ?
15 A. I met t he def endant i n, I t hi nk ear l y Spr i ng, 1999 when I
16 was out on t he east coast f or a j ob i nt er vi ew. I had got t en
17 hi s name f r oma mut ual f r i end t o meet when I came out her e on
18 t he east coast f or t hat i nt er vi ew. And I don' t t hi nk we
19 act ual l y met at t hat t i me, but we spoke on t he t el ephone.
20 Q. And wher e di d you come f r om?
21 A. I came f r omt he Sal t Lake ar ea, Sout h J or dan, Ut ah.
22 Q. And di d t her e come a t i me when you met t he def endant ?
23 A. Yeah. Yes, I di d meet t he def endant i n, I bel i eve i t was
24 when I f i nal l y came out t o l i ve and r esi de i n t he New Yor k ar ea
25 i n Apr i l , 1999.
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1 Q. And when you came t o r esi de i n t he New Yor k ar ea, wher e di d
2 you r esi de?
3 A. I got an apar t ment i n Sel don on Long I sl and, and I was
4 t her e unt i l I l ost my j ob due t o f i nanci al cut backs i n t he
5 company I was wor ki ng f or , i n f al l of 1999.
6 Q. And wher e di d you move when - - f r omSel don af t er you l ost
7 your j ob?
8 A. I moved i nt o New Yor k i nt o t he def endant ' s apar t ment as a
9 r oommat e.
10 Q. And how l ong di d you st ay t her e?
11 A. Appr oxi mat el y a year .
12 Q. Di d you have a per sonal r el at i onshi p wi t h t he def endant ?
13 A. We wer e f r i ends, and t hat was about as f ar as i t went . We
14 wer e not i nt i mat e i n any way.
15 Q. And so how l ong di d you st ay i n t he - - was t hi s at t he
16 apar t ment at 300 East 33r d St r eet , apar t ment 4N?
17 A. That ' s cor r ect .
18 Q. And whi ch por t i on of t he apar t ment di d you ut i l i ze?
19 A. I l i ved i n t he l i vi ng r oom, whi ch i s - - essent i al l y, woul d
20 be cal l ed t he l i vi ng r oom. I had a st eel bunk bed. Al l of my
21 per sonal bel ongi ngs t hat I di dn' t have i n st or age wer e t her e,
22 my cl ot hi ng and my ot her per sonal ef f ect s, and t hat ' s pr et t y
23 much wher e I st ayed. I had t he bed above i t f or guest s, and
24 t hen I had t he bed on t he bot t omf or mysel f .
25 Q. Now, di d you pay t he def endant any f or l i vi ng t her e?
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1 A. Yes. I pai d r ent whi l e I was t her e each mont h. I al so
2 cont r i but ed t owar d gr ocer i es and ot her sor t of t hi ngs t hat , you
3 know, t r anspor t at i on, t hat sor t of t hi ng.
4 Q. So how l ong di d you st ay t her e al t oget her ?
5 A. I t hi nk - - my r ecol l ect i on i s I was t her e f r omf al l 1999
6 unt i l about November of 2000 when I moved i nt o my house i n New
7 Mi l l f or d.
8 Q. And have you r emai ned i n cont act wi t h t he def endant si nce
9 t hat t i me?
10 A. Yes, I have.
11 Q. On a r egul ar basi s?
12 A. Yeah, of f and on.
13 Q. And has t he def endant vi si t ed you i n New Mi l l f or d,
14 Connect i cut ?
15 A. Of f and on. Not t er r i bl y of t en, but yeah. I mean, as f ar
16 as f r i ends ar e concer ned, you know, on occasi on.
17 Q. Has t he def endant st ayed over your house?
18 A. Yes, over ni ght occasi onal l y.
19 Q. And how - - coul d you descr i be your house f or us?
20 A. I have a t wo st or y home, appr oxi mat el y 1600 squar e f eet .
21 Ther e' s t hr ee bedr ooms and a basement , l i vi ng r oomar ea, di ni ng
22 r oom.
23 Q. And di d you have, i n 2001 or 2002, di d you r ent out any
24 por t i on of your home?
25 A. D. B. Kar r on had pr oposed t o r ent a r oomf r omme dur i ng t he
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1 t i me of t he gr ant , when i t became di f f i cul t f or hi s apar t ment
2 t o be a r esi dence. He never act ual l y moved i n on a per manent
3 basi s, t hough, but di d st or e equi pment i n my basement f or a
4 per i od of t i me.
5 Q. Di d you si gn a l ease?
6 A. I di d si gn a l ease. We deci ded t o not honor i t because t he
7 condi t i ons changed wi t h t he gr ant .
8 Q. What was t he l engt h of t he l ease?
9 A. I bel i eve i t was f or a year .
10 Q. Now, di d Dr . Kar r on gi ve you any moni es?
11 A. Yes. D. B. Kar r on di d pay me f or a f i r st mont h and a l ast
12 mont h f or t he - - so upf r ont money f or t he l ease.
13 Q. Di d Dr . Kar r on ever act ual l y st ay at your home?
14 A. J ust br i ef l y.
15 Q. Pur suant t o t he l ease, di d he ever r eal l y - - di d he ever
16 act ual l y move i n?
17 A. He never act ual l y moved i n, i n l i ke t hat he br ought a l ot
18 of hi s per sonal ef f ect s, but he di d come and st ay on weekends,
19 f or i nst ance.
20 Q. Al l r i ght . Di d your have occasi on t o gi ve Dr . Kar r on any,
21 any i t ems t hat you owned?
22 A. Wel l , I gi ve t hi ngs t o peopl e, I ' mqui t e gener ous. And I
23 do r ecal l one of t he t hi ngs t hat I gave Dr . Kar r on was a shoe
24 r ack.
25 Q. Let me show you what ' s i n evi dence as a gover nment
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1 exhi bi t - - I show you what ' s i n evi dence as Gover nment ' s
2 Exhi bi t 125.
3 A. Uh- huh.
4 Q. Do you r ecogni ze t hi s i t em?
5 A. Yes, I do.
6 Q. And how do you r ecogni ze t hi s i t em?
7 A. I t was t he r ack t hat I gave D. B. Kar r on when I pur chased
8 one t hat sat on t he f l oor i nst ead of one t hat hung on t he door .
9 Q. Par don?
10 A. I gave i t t o Dr . Kar r on when I r epl aced i t wi t h a di f f er ent
11 t ype.
12 Q. And why di d you r epl ace i t ?
13 A. Because i t was on t he back of t he door , and when I cl osed
14 t he door t he shoes woul d f al l of f al l t he t i me. And so I put
15 one t hat was on t he f l oor t hat car r i ed mor e shoes and di dn' t
16 f al l of f al l t he t i me.
17 Q. And wher e di d you pur chase t hi s? Di d you pur chase t hi s or
18 was i t - -
19 A. My r ecol l ect i on i s I pur chased i t at K- mar t i n New
20 Mi l l f or d, i n t he t own t hat I l i ve i n.
21 Q. And do you r ecal l when i t was t hat you gave D. B. Kar r on
22 Gover nment ' s exhi bi t 125?
23 A. Wel l , I - - h' mm. I woul d guess pr obabl y somewher e ar ound
24 t he maybe 2002, 2003 t i mef r ame.
25 THE COURT: Di d you gi ve i t t o hi mi n Connect i cut ?
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1 MR. RUBI NSTEI N: No f ur t her quest i ons, your Honor .
2 I ' msor r y, J udge.
3 THE COURT: I ' msor r y.
4 MR. RUBI NSTEI N: You asked a quest i on?
5 THE COURT: Di d you gi ve i t t o hi mi n Connect i cut ?
6 THE WI TNESS: I ' mnot cer t ai n I know t he answer t o
7 t hat quest i on. I may have br ought i t wi t h me t o New Yor k on a
8 vi si t . I don' t - - r eal l y don' t r ecal l .
9 THE COURT: You don' t r ecal l ?
10 THE WI TNESS: No.
11 THE COURT: Al l r i ght .
12 BY MR. RUBI NSTEI N:
13 Q. Af t er - -
14 THE COURT: I do r ecal l gi vi ng i t t o hi m, but I don' t
15 r ecal l wher e I gave i t t o hi m.
16 BY MR. RUBI NSTEI N:
17 Q. When wer e you asked - - when wer e you asked about t hi s?
18 A. The J udge asked me wher e I gave i t t o hi m, was i t i n
19 Connect i cut t hat I gave i t t o hi m, and I wasn' t cer t ai n I knew
20 wher e I gave i t t o hi m.
21 Q. When was i t t hat you di scussed t he f act t hat you had gi ven
22 Dr . Kar r on t hi s r ack, when was t he - - when di d you di scuss t hi s
23 bef or e you came t o cour t ?
24 A. Wel l , I bel i eve yest er day eveni ng D. B. Kar r on t ol d me
25 t hat - -
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1 Q. Don' t t el l us what he t ol d you. You' r e not al l owed t o t el l
2 what he t ol d you.
3 A. Wel l , he - - he t ol d me t hat I was goi ng t o get a cal l f r om
4 you, and t hat I woul d be asked t o t est i f y about , among ot her
5 t hi ngs, per haps somet hi ng I gave hi m. And so he says, do you
6 r ecal l t he shoe r ack t hat you gave me? And I says, oh, yeah,
7 t hat shoe r ack, yeah. Wel l , t he gover nment t ook i t as
8 evi dence. And I sai d oh, r eal l y? And so he says, wi l l you - -
9 ar e you wi l l i ng t o t est i f y about t hat ? And I sai d yes, I
10 woul d, you know.
11 MR. RUBI NSTEI N: Thank you. No f ur t her quest i ons.
12 THE COURT: Al l r i ght .
13 CROSS EXAMI NATI ON
14 BY MR. KWOK:
15 Q. Good mor ni ng.
16 A. Good mor ni ng.
17 Q. You ment i oned a moment ago t hat t he def endant never l i ved
18 i n Connect i cut , cor r ect , wi t h you?
19 THE COURT: I ' msor r y, I di dn' t cat ch your quest i on.
20 Q. A moment ago you t est i f i ed t hat t he def endant never l i ved
21 wi t h you i n Connect i cut , i s t hat cor r ect ?
22 A. That ' s cor r ect .
23 Q. So f r omt he per i od f r om2000 t o 2003, as f ar as you know,
24 t he def endant was l i vi ng i n mi dt own Manhat t an, i sn' t t hat t r ue?
25 A. That ' s cor r ect .
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1 Q. The same pl ace t hat you l i ved at f or - -
2 A. The same r esi dence t hat I l i ved at , yes.
3 Q. Di d you vi si t hi mt her e at t hat l ocat i on?
4 A. On occasi on. On t he weekends we, you know, woul d do t hi ngs
5 l i ke, f or i nst ance, we woul d, woul d r i de our bi kes ar ound Lower
6 Manhat t an, and get exer ci se, and do t hi ngs t hat f r i ends do.
7 Q. Di d i t appear t o you whi l e you wer e vi si t i ng t hat
8 apar t ment , t hat t he def endant l i ved t her e?
9 A. Af t er a f ashi on, i t was a di f f i cul t pl ace t o l i ve. I t was
10 noi sy, and mor e an of f i ce t han an apar t ment .
11 Q. Ri ght . Let me show you gover nment Exhi bi t 101, page ei ght ,
12 i f we coul d pul l t hat up on t he scr een coul d we zoomi n - - zoom
13 i nt o t he hi ghl i ght ed i t em.
14 Now, a moment ago you t est i f i ed about t he shoe r ack;
15 you r emember t hat ?
16 A. Uh- huh.
17 Q. Do you know what happened t o t hi s shoe r ack?
18 A. Oh, I don' t r eal l y know. A Navy nyl on t en - - do you know
19 what t hat i s?
20 Q. Wel l , l et me zoomout . Can we zoomout ? Can we zoomi n on
21 t he name, j ust on t op of t hat l i st ?
22 THE COURT: I ' msor r y, what ar e you - -
23 BY MR. KWOK:
24 Q. What does t hat say?
25 A. I t says, D. B. Kar r on.
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1 MR. KWOK: No f ur t her quest i ons.
2 THE COURT: Any r edi r ect , Mr . Rubi nst ei n?
3 MR. RUBI NSTEI N: Woul d you put t hat exhi bi t back up,
4 pl ease?
5 THE COURT: Yes.
6 MR. RUBI NSTEI N: Woul d you move t he yel l ow l i ne down
7 t o her e? Over her e, yeah. Ri ght t her e.
8 REDI RECT EXAMI NATI ON
9 Q. Do you see t hat name, Mi ss Far nswor t h?
10 A. I see. I t says somet hi ng l i ke J onat han Mason.
11 Q. Di d you know a - - di d you ever come i n cont act wi t h a
12 cont r act or who di d some wor k at Dr . Kar r on' s apar t ment ?
13 A. Wel l , t her e wer e a number of cont r act or s who di d come i n
14 and do wor k on occasi on. I don' t speci f i cal l y r ecogni ze - - I
15 t hi nk t her e was somebody named J ohn, yes.
16 THE COURT: Di d he have a Br i t i sh accent ?
17 THE WI TNESS: Oh, yeah, I t hi nk so. Yeah.
18 MR. RUBI NSTEI N: Okay. I have no f ur t her quest i ons.
19 MR. KWOK: No f ur t her quest i ons, your Honor .
20 THE COURT: Al l r i ght . Thank you ver y much. Next
21 wi t ness.
22 THE DEPUTY CLERK: Wi t ness i s excused?
23 THE COURT: Yes, you' r e excused.
24 THE WI TNESS: AmI excused?
25 ( Wi t ness excused)
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1 THE COURT: Next wi t ness, Mr . Rubi nst ei n.
2 MR. RUBI NSTEI N: May I appr oach t he gover nment , your
3 Honor ?
4 THE COURT: Yes. Do you have an exhi bi t ?
5 ( Pause whi l e counsel conf er )
6 MR. RUBI NSTEI N: Your Honor , we wi l l - - your Honor , at
7 t hi s t i me t her e i s a st i pul at i on bet ween t he Uni t ed St at es of
8 Amer i ca by Assi st ant Uni t ed St at es At t or ney St even Kwok and Dr .
9 Kar r on, t hat - - and t hi s i s, t hi s st i pul at i on wi l l be mar ked as
10 def endant ' s ZZZ. St i pul at i on pr ovi des t hat t he def endant ' s
11 ZZZ- 1 ar e t he per sonal Mast er Car d account s, st at ement f or Dr .
12 D. B. Kar r on' s per sonal Mast er Car d account number 5263, 2710,
13 0928, 1872. St at ement s ar e f r omOct ober 1st , 2001, t hr ough
14 J une 30t h, 2003.
15 THE COURT: St i pul at ed i nt o evi dence?
16 MR. RUBI NSTEI N: I , or i nt o evi dence def endant ' s
17 ZZZ- 1.
18 THE COURT: St i pul at i on i s ZZZ, and t he Mast er Car d
19 r ecor ds of , per sonal Mast er Car d r ecor ds of Dr . Kar r on ar e
20 mar ked ZZZ- 1?
21 MR. RUBI NSTEI N: Yes, your Honor .
22 THE COURT: They ar e admi t t ed i n evi dence.
23 ( Def endant ' s Exhi bi t s ZZZ and ZZZ- 1 r ecei ved i n
24 evi dence)
25 THE COURT: Next wi t ness.
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1 MR. RUBI NSTEI N: And wi t h t hat , your Honor , t he
2 def endant r espect f ul l y r est s.
3 THE COURT: Gover nment ?
4 MR. KWOK: Gover nment r est s.
5 THE COURT: Wel l , j ur y, you' ve now hear d al l t he
6 evi dence and have t he exhi bi t s, but we have t o pr epar e f or t he
7 summat i ons of counsel . And i t i s my pr act i ce t o gi ve t hema
8 copy of t he char ge so t hey can be f ami l i ar wi t h what t he char ge
9 i s and make r ecommendat i ons f or changes i n i t . And I t hi nk i t
10 woul d be a wast e of your t i me t o r emai n her e t oday because t he
11 char gi ng conf er ence gener al l y t akes at l east an hour , and
12 counsel haven' t had an oppor t uni t y t o r ead t he char ge yet . I
13 t hi nk t hat ' s a bet t er way, and come back t omor r ow and, at 9: 30,
14 and you' l l hear t he summat i ons of counsel and t he char ge of t he
15 Cour t . You shoul d have t he case t omor r ow mor ni ng at t he end of
16 t he mor ni ng, i f you coul d get her e at 9: 30, and t he heat i sn' t
17 t oo bad. So you' r e excused unt i l 9: 30 t omor r ow mor ni ng.
18 Pl ease be pr ompt and we' l l t r y and get you t he case by
19 l uncht i me.
20 ( J ur y exi t s t he cour t r oom)
21 THE COURT: Al l r i ght .
22 ( J ur y not pr esent )
23 THE COURT: You' l l want t i me t o go over t he char ge.
24 What t i me do you want t o meet on t he char ge, counsel ?
25 MR. RUBI NSTEI N: You want t o meet at 2: 00 o' cl ock,
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1 your Honor ?
2 THE COURT: At 2: 00 o' cl ock. Enough t i me? Okay.
3 MR. RUBI NSTEI N: I woul d t hi nk so.
4 THE COURT: I t ought t o be. I t ' s 12: 00 o' cl ock now.
5 MR. EVERDELL: Yeah.
6 THE COURT: Fi ne.
7 MR. KWOK: That ' s f i ne.
8 THE COURT: Al l r i ght , see you at 2: 00 o' cl ock.
9 MR. KWOK: Thank you.
10 MR. RUBI NSTEI N: Thank you, your Honor .
11 THE COURT: For t he char ge.
12 ( Luncheon r ecess)
13 ( Cont i nued on next page)
14
15
16
17
18
19
20
21
22
23
24
25
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1 A F T E R N O O N S E S S I O N
2 2: 10 p. m.
3 THE COURT: Has ever yone had a chance t o go over t he
4 char ge? I have a number ever changes mysel f t hat I f ound, so
5 why don' t we go t o f our pages i n. I don' t t hi nk we have any
6 st i pul at i ons of t est i mony, di d we?
7 MR. KWOK: No, we di d not , your Honor .
8 THE COURT: St r i ke t hat bot t omof page 3.
9 MR. EVERDELL: To t he t op of page 4?
10 THE COURT: To t he t op of page 4, and st r i ke t he
11 " al so" i n t he f ol l owi ng par agr aph?
12 MR. RUBI NSTEI N: Yes, your Honor .
13 MR. KWOK: Yes.
14 THE COURT: Anyt hi ng up unt i l page 11?
15 MR. KWOK: At t he bot t omof page 11 t her e i s a sect i on
16 on l aw enf or cement wi t ness.
17 THE COURT: That ' s what I was comi ng t o. I don' t
18 t hi nk we need l aw enf or cement wi t ness. Does anyone want
19 gover nment empl oyee?
20 MR. RUBI NSTEI N: Wel l , i sn' t OI G l aw enf or cement ?
21 Ri l ey i s OI G.
22 THE COURT: She i s an enf or cement per son?
23 MR. RUBI NSTEI N: Wel l , she wor ks f or t he Of f i ce of
24 I nspect or Gener al .
25 THE COURT: She i s not enf or cement . She i s not l aw
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1 enf or cement . She i s an audi t or . I t hought gover nment empl oyee
2 woul d be suf f i ci ent .
3 MR. RUBI NSTEI N: That ' s f i ne.
4 THE COURT: And you can have t hat . So, I wi l l j ust
5 make t hat change i n t he f i r st , second and next t o l ast l i ne on
6 t hat page.
7 As I go t hr ough, t he next t hi ng woul d be def endant ' s
8 t est i mony, whi ch we woul d st r i ke. I s ever yone happy up t o page
9 13?
10 MR. RUBI NSTEI N: I have not hi ng goi ng on up t o page
11 13, your Honor .
12 THE COURT: Anyt hi ng f r om13 up t o 20? 18, I guess I
13 shoul d say.
14 MR. RUBI NSTEI N: None by t he def ense.
15 THE COURT: I wi l l r ead t he i ndi ct ment al oud. Then I
16 have quot ed f r omt he st at ut e. Does anyone have any pr obl em?
17 MR. RUBI NSTEI N: No, your Honor .
18 MR. KWOK: No, your Honor .
19 THE COURT: Now, I get over t o t he next sect i on, page
20 19. Can' t we el i mi nat e " pr oper t y" and j ust - - i t says money or
21 pr oper t y. And t hi s case doesn' t i nvol ve any pr oper t y as I
22 under st and i t . I t ' s i n t he st at ut e. Peopl e wi l l hear i t i n
23 t he st at ut e or hear i t i n t he i ndi ct ment , but i t r eal l y
24 i nvol ves money, so I t hought I coul d el i mi nat e t he wor d " or
25 pr oper t y" t hr oughout . But I want t o hear f r omcounsel .
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1 MR. KWOK: The gover nment has no pr obl emwi t h t hat .
2 MR. RUBI NSTEI N: I have no pr obl emwi t h i t , J udge.
3 THE COURT: So t hen on page 19 I wi l l st r i ke " or
4 pr oper t y" .
5 MR. RUBI NSTEI N: I t ' s i n t hi r d el ement and f i f t h
6 el ement .
7 THE COURT: Thi r d, f our t h and f i f t h el ement .
8 Now, I woul d put t he " wi t hout aut hor i t y" af t er t he
9 def endant , I t hi nk, i n t he t hi r d par agr aph as opposed t o havi ng
10 i t at t he end of t he par agr aph.
11 MR. RUBI NSTEI N: Wher e ar e you sayi ng, your Honor ?
12 THE COURT: I n t he t hi r d par agr aph, par agr aph t hr ee, I
13 woul d t ake t he " wi t hout aut hor i t y" whi ch I t agged on t o t he end
14 of t he t hi r d el ement and pl ace i t af t er t he def endant , so t hat
15 i t mi r r or s t he way i n whi ch t he st at ut e l anguage i s i n
16 par agr aph ( a) ( 1) ( A) of Sect i on 666. And I woul d al so be
17 i ncl i ned t o st r i ke " bel onged t o" i n t he f our t h par agr aph.
18 Mi sappl i ed money under t he car e, cust ody and cont r ol of CASI .
19 MR. RUBI NSTEI N: Wel l , l et ' s deal wi t h - - I don' t have
20 a pr obl emwi t h st r i ki ng " or pr oper t y" . What I have i s a
21 pr obl emwi t h t he l anguage " mi sappl i ed money bel ongi ng t o t he
22 car e and cont r ol of CASI " because ei t her - -
23 THE COURT: I woul d st r i ke t he " bel ong t o" and j ust
24 say " under t he car e, cust ody or cont r ol of CASI . "
25 MR. RUBI NSTEI N: But , your Honor , t hi s def i ni t i on - - I
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1 t hi nk your Honor shoul d put t hat t hi s def i ni t i on does not
2 i ncl ude any moni es of Dr . Kar r on, whet her sal ar y or ot her wi se.
3 I mean t he f act of t he mat t er i s i t ' s our cont ent i on t hat i t
4 wasn' t j ust money.
5 The way i t r eads now any money spent by CASI , you ar e
6 suggest i ng t hat i t bel ongs t o t he gr ant .
7 THE COURT: No, I ' mt r yi ng not t o suggest t hat . I ' m
8 t r yi ng t o l i mi t t hat so t hat i n f act i t has t o be gr ant money
9 t hat ' s mi sappl i ed.
10 MR. RUBI NSTEI N: Wel l , woul d your Honor consi der
11 " mi sappl i ed gr ant money" ?
12 THE COURT: Wel l , maybe t he smar t t hi ng t o do i s t o
13 addr ess how we phr ase t he t hi r d or f our t h el ement - - t he f our t h
14 el ement .
15 Af t er you r ead t he changes t hat I t hi nk ar e necessar y
16 i n t he l onger ver si ons of t he el ement s, si nce af t er we ment i on
17 what t he el ement s of t he cr i me char ged ar e, t hen I go i nt o what
18 t hose el ement s ar e and gi ve f ur t her i nst r uct i ons on t hem. And
19 I have got changes t her e t hat I t hi nk once you l i st en t o, t hen
20 we can go back and see whet her t he shor t ened ver si on t hat ' s
21 supposed t o t el l t he j ur y what t he el ement s ar e i s a f ai r
22 st at ement of t he l onger ver si on. Al l r i ght ?
23 So, by goi ng t o t he second el ement - - because I don' t
24 t hi nk t her e i s a pr obl emi n t er ms of t he f i r st el ement , bei ng
25 an agent of CASI . I t hi nk you pr obabl y al l agr ee wi t h t hat .
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1 MR. RUBI NSTEI N: We concede t hat .
2 THE COURT: The second el ement , I woul d l i ke t o add at
3 t he end - - I have t hi s l ast sent ence. " You can choose any
4 per i od of f eder al f undi ng you want , " and I woul d say, " as l ong
5 as" - - whi ch i s i n t her e - - " you unani mousl y f i nd t hat t he act s
6 of mi sappl i cat i on char ged i n t he i ndi ct ment occur r ed i n t hat
7 one year per i od. "
8 So, I woul d make t hemhave a unani mous f i ndi ng of a
9 per i od of one year , what t hat consi st s of , whet her i t begi ns
10 Oct ober 1 or J anuar y 1 and ends on Sept ember 30 or December 31.
11 MR. KWOK: The gover nment has no pr obl emwi t h t hat .
12 MR. RUBI NSTEI N: I have no pr obl emwi t h t hat , your
13 Honor .
14 THE COURT: Then when you get t o t he t hi r d el ement I
15 st r uck t he wor d " pr oper t y" out . Then I added i n t he f i r st f ul l
16 par agr aph on page 21, " I n t hi s case, t o i nt ent i onal l y mi sappl y
17 pr oper t y means t o i nt ent i onal l y appl y gr ant money r ecei ved by
18 CASI i n a manner i n whi ch t he def endant knew was unaut hor i zed
19 under t he t er ms and condi t i ons of t he gr ant . "
20 MR. RUBI NSTEI N: I woul d j ust ask t hat your Honor put
21 i n t her e " excl udi ng sal ar y" .
22 THE COURT: Ri ght af t er t hat , " Mi sappl i cat i on of
23 money, however , does not appl y t o bona f i de sal ar y, wages,
24 f r i nge benef i t s or ot her compensat i on pai d or expenses pai d or
25 r ei mbur sed i n t he usual cour se of busi ness. " So, t hat ' s t he
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1 f ol l owi ng sent ence. So, i t seems t o me t hat cover s what you
2 j ust suggest ed.
3 MR. RUBI NSTEI N: I t hi nk so, J udge. I know t hat t he
4 l ast l i ne i n t he par agr aph above i s what your Honor spoke t o us
5 about , " and even i f such use benef i t ed CASI i n some way, " and
6 t hat ' s l anguage f r omt he Tent h Ci r cui t case. I ' mnot ver y
7 happy wi t h t he Tent h Ci r cui t i n t hi s case, and I woul d have t o
8 obj ect t o t he i ncl usi on of - -
9 THE COURT: I ' mnot sur e whet her i t i s or i s not i n
10 t he Tent h Ci r cui t . I t hi nk i t ' s f r omEr l acker .
11 MR. RUBI NSTEI N: I amaf r ai d i t was i n Er l acker .
12 MR. EVERDELL: Er l acker i s t he Second Ci r cui t case.
13 MR. RUBI NSTEI N: Er l acker i s t he Sout her n Ci r cui t .
14 THE COURT: Second Ci r cui t .
15 MR. RUBI NSTEI N: Yeah. I saw Er l acker . A l ot of
16 t i mes cases ar e f act dr i ven.
17 THE COURT: I agr ee t hey ar e f act dr i ven, and t hat ' s
18 why I di dn' t f ol l ow Er l acker and I f ol l owed t he Tent h Ci r cui t .
19 I al so t hi nk i t ' s i n Sand as t hat way.
20 But I di st i ngui shed Er l acker , because i n Er l acker i t
21 i nvol ved f unds t hat t he pol i ce depar t ment r ecei ved, and what
22 t he def endant di d t her e was t o di sr egar d t he i nst r uct i ons of
23 hi s super i or s about how money shoul d be spent , and t hat seems
24 t o me t o be a di f f er ent si t uat i on t han t he case her e, wher e you
25 have a not - f or - pr of i t headed by t he def endant who r ecei ved t he
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1 gr ant . I t ' s mor e l i ke a not - f or - pr of i t i n t he Tent h Ci r cui t
2 case. Then we had anot her case wher e we f ound t he same
3 l anguage i n - - t he Tent h Ci r cui t case bei ng Uni t ed St at es v.
4 Fr asi er , 53 F. 3d 1105. And when I l ooked at t he Tent h Ci r cui t
5 case, t hey st at e t he act ual el ement s t hat t he gover nment was
6 r equi r ed t o pr ove, and t hat ' s what al er t ed me t o t he " wi t hout
7 aut hor i t y" bei ng appl i cabl e t o t he i nt ent i onal mi sappl i cat i on
8 of pr oper t y.
9 MR. RUBI NSTEI N: Wel l , t hat ' s what my concer n i s, t hat
10 t hat l anguage ki nd of gi ves an i nst r uct i on t hat says t hat ' s t he
11 i nt ent , and i t t akes t he i nt ent i ssue away f r omt he j ur y' s
12 det er mi nat i on. That ' s my concer n.
13 THE COURT: I ' msor r y. I don' t want t o t ake anyt hi ng
14 away f r omt he j ur y, so l et me under st and what your poi nt i s.
15 MR. RUBI NSTEI N: I j ust f eel , your Honor , t hat t he
16 l anguage " even i f such use benef i t ed CASI i n some way" - - now,
17 t he def endant ' s i nt ent was, we i nt end t o ar gue, was t o benef i t
18 CASI . And we have t he si t uat i on wher e we don' t have a
19 di r ect i on or a commandment t hat you have t o use t he money A, B
20 or C. We have a ki nd of f l ui d si t uat i on her e under t he ATP
21 gr ant t hat you ar e al l owed t o r evi se.
22 THE COURT: I n some ways t he ATP gr ant i s f l ui d i n f or
23 i nst ance t he 10 per cent r ul e and i n some ot her ways, but t hose
24 ar e - - I t r i ed t o avoi d i n t hi s l anguage anyt hi ng t hat woul d
25 i nf l uence t he j ur y i n any way.
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1 I n f act , what i t does i s - - I wi l l r ead t hat sent ence
2 agai n t o you, or I wi l l r ead t he par agr aph t o you so t o make
3 sur e you have i t , because I don' t qui t e under st and how I ' m
4 t aki ng away anyt hi ng f r omt he j ur y' s det er mi nat i on.
5 " I n t hi s case, t o i nt ent i onal l y mi sappl y money means
6 t o i nt ent i onal l y appl y t he gr ant money r ecei ved by CASI i n a
7 manner i n whi ch t he def endant knew i t was unaut hor i zed under
8 t he t er ms and condi t i ons of t he gr ant . Mi sappl i cat i on of
9 money, however , does not appl y t o bona f i de sal ar y, wages,
10 f r i nge benef i t s or ot her compensat i on pai d, or expenses pai d,
11 or r ei mbur sed i n t he usual cour se of busi ness. "
12 Now, t aki ng t he next par agr aph t oo. " As I sai d, t he
13 gover nment must pr ove beyond a r easonabl e doubt t hat t he
14 def endant act ed i nt ent i onal l y i n mi sappl yi ng CASI ' s money. To
15 f i nd t hat t he def endant act ed i nt ent i onal l y, you must be
16 sat i sf i ed beyond a r easonabl e doubt t hat t he def endant act ed
17 del i ber at el y and pur posef ul l y, t hat i s, t he def endant ' s
18 mi sappl i cat i on must have been t he pr oduct of t he def endant ' s
19 consci ous obj ect i ve t o spend t he money f or an unaut hor i zed
20 pur pose r at her t han t he pr oduct of a mi st ake or acci dent or
21 some ot her i nnocent r eason. "
22 The gover nment may have some obj ect i on.
23 MR. KWOK: No, t he gover nment t hi nks t hat t hi s i s a
24 ver y f ai r i nst r uct i on. We under st and why Mr . Rubi nst ei n mi ght
25 obj ect t o t he " even i f such use benef i t ed CASI i n some way"
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1 l anguage, but t hat ' s t he l aw accor di ng t o t he Second Ci r cui t
2 and t he Fr asi er case t hat your Honor ci t ed f r omt he Tent h
3 Ci r cui t .
4 MR. RUBI NSTEI N: J udge, I don' t t hi nk I want t o wai ve
5 t hi s obj ect i on.
6 THE COURT: You have made your obj ect i on. I have no
7 obj ect i on t o obj ect i on, but i f you want t o r eason wi t h me, I ' m
8 per f ect l y open t o hear i ng what ever r eason you have.
9 MR. RUBI NSTEI N: I t hi nk t hat I have exhaust ed my
10 r easoni ng at t hi s poi nt t hat t hi s i s a f l ui d si t uat i on and
11 t hat , t her ef or e, t her e was no commandment t hat i t was t hi s way
12 or t he hi ghway ki nd of t al k.
13 We had i n Exhi bi t 4 t hat you can r evi se t he budget at
14 t he end of t he year , cl ear l y and par t i cul ar l y i n t hi s case,
15 wher e t hey never went t hr ough t he pr ocess of r esol vi ng t hese
16 i ssues wi t hi n t he agency, so - -
17 THE COURT: Wel l , one of t he i ssues - - but I don' t
18 t hi nk you want me t o appr oach i t t hi s way - - but one of t he
19 i ssues, i t i s t r ue t hat some of t he evi dence t hat was
20 of f er ed - - and i f you want me t o st r i ke i t , I wi l l move t o
21 st r i ke some of t hat evi dence - - does not r eal l y go t o what t he
22 gover nment i s r equi r ed t o pr ove her e.
23 I t hi nk I ment i oned ear l i er t he pur chase of t he movi e
24 scr een or what have you, I don' t t hi nk t hat was shown t o have
25 exceeded t he budget , or t he f l exi bi l i t y under t he budget , or
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1 t hat i t was somet hi ng t hat was not - - t hat r equi r ed appr oval by
2 t he gr ant or . Ther e ar e some i t ems l i ke t hat t hat may have been
3 of f er ed i n evi dence t hat I don' t t hi nk - - and I haven' t hear d
4 f r omt he gover nment on t hi s. I t may be t hat t hey can show t hat
5 i t exceeded t he budget , but I di dn' t pi ck i t up i n l i st eni ng t o
6 t he evi dence t hat t her e was r equi r ed appr oval f or t hat
7 expendi t ur e.
8 And I don' t t hi nk t her e woul d be any r equi r ed
9 appr oval - - pr i or appr oval f or a number of t he expendi t ur es
10 t hat wer e made because t hey wer en' t appr opr i at e under t he t er ms
11 of t he gr ant , because t hey wer e f or i ndi r ect cost s of t he
12 busi ness and not shown t o be cost s f or t he r esear ch under t aken
13 by CASI f or t he Nat i onal I nst i t ut e of Technol ogy and Sci ence - -
14 or Sci ence and Technol ogy. Because t her e ar e - - I mean - -
15 Wel l , t hen t he f our t h el ement , I don' t t hi nk i t ' s
16 mi sappl i ed money bel ongi ng t o CASI . I t ' s under t he cont r ol of
17 CASI .
18 MR. EVERDELL: Your Honor , j ust so I ' mcl ear , ar e you
19 al so car r yi ng f or war d t he change " bel ong t o, " cut t i ng t hat out ?
20 THE COURT: I was goi ng t o st r i ke out t hat .
21 MR. RUBI NSTEI N: What ' s t hat ?
22 THE COURT: I was goi ng t o st r i ke out " bel ong t o" .
23 MR. EVERDELL: And t hen j ust have " was i n t he cont r ol
24 of CASI " ? I s t hat what you' r e pr oposi ng?
25 THE COURT: I n t he j oi nt cust ody or cont r ol of CASI .
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1 I was goi ng t o l eave t hat .
2 MR. EVERDELL: Yeah.
3 MR. RUBI NSTEI N: I woul d ask f or t he same l anguage
4 t hat you have i n t he f i r st f ul l par agr aph under el ement 3.
5 THE COURT: Fi r st f ul l par agr aph wher e?
6 MR. RUBI NSTEI N: On el ement 3, page 21, t hat t hat be
7 i ncl uded. I n ot her wor ds, what I ' mconcer ned about i s t hat
8 t hey may conf use money t hat was i n t he car e or cust ody.
9 THE COURT: Wel l , do you want me t o say mi sappl i ed
10 gr ant money?
11 MR. RUBI NSTEI N: Mi sappl i ed gr ant money subj ect t o t he
12 l i mi t at i on of el ement 3. Because i t ' s t he gr ant money r ecei ved
13 by CASI . And t hen i t goes on t o say bona f i de sal ar y, wages,
14 f r i nges and benef i t s. I mean I t hi nk t hat t hat has t o be
15 i ncl uded i n el ement 4.
16 THE COURT: Let me t hi nk about t hat a second.
17 t he second f ul l par agr aph shoul d be changed t o say - -
18 MR. RUBI NSTEI N: J udge, I t hi nk t hat you coul d
19 act ual l y char ge t hemj ust up t o t he wor d " i nt ent i onal l y
20 mi sappl i ed" .
21 " The f our t h el ement t he gover nment must pr ove beyond a
22 r easonabl e doubt i s t hat t he money was i nt ent i onal l y
23 mi sappl i ed. "
24 MR. KWOK: Your Honor - -
25 MR. EVERDELL: Your Honor , t hi s i s st ar t i ng t o sound
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1 suspi ci ousl y l i ke a t r aci ng r equi r ement . Thi s el ement si mpl y
2 t al ks about wher e t he money was housed, wher e t he f unds t hat
3 came i n wer e put . They wer e put i n CASI ' s bank account s. The
4 evi dence at t r i al was ampl e. They al l went i nt o CASI ' s bank
5 account s, t he company bank account s. Ther e i s no t r aci ng
6 r equi r ement under t he Second Ci r cui t l aw.
7 The i ssue about bona f i de wages and sal ar y i s
8 appr opr i at el y i n t he t hi r d el ement because t hat has t o do wi t h
9 i nt ent i onal mi sappl i cat i on of money and what doesn' t count as
10 i nt ent i onal mi sappl i cat i on of money. I t doesn' t count f or bona
11 f i de wages and sal ar y and al l t hose ot her exampl es.
12 Thi s el ement , on t he ot her hand, j ust t al ks about
13 wher e t he money was housed. And t he r eason why i t ' s her e i s
14 because t he st at ut e i nt ent i onal l y cont empl at es no t r aci ng.
15 That was one of t he r easons why t he st at ut e was enact ed i n t he
16 f i r st pl ace, was t o avoi d t he t r aci ng r equi r ement t hat exi st ed
17 i n I t hi nk 641, t he t hef t of gover nment f unds st at ut e. Thi s i s
18 i t s own st at ut e t o avoi d t he t r aci ng pr obl em.
19 So, t hi s el ement j ust t al ks about wher e t he money i s
20 housed, and i t shoul d be ver y si mpl e. Was i t under t he car e,
21 cust ody and cont r ol of CASI , t he cor por at e ent i t y, whi ch i t
22 was.
23 THE COURT: I t hi nk we shoul d say i n t hat mi ddl e
24 par agr aph, " The gover nment must pr ove beyond a r easonabl e doubt
25 t hat t he def endant act ed i nt ent i onal l y i n mi sappl yi ng gr ant
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1 money. " I t hi nk t hat ' s mor e consi st ent wi t h what was sai d
2 bef or e, and i t mi ght be mi si nt er pr et ed by t he j ur y i f we l ef t
3 i t as CASI ' s money.
4 MR. KWOK: That ' s sat i sf act or y t o t he gover nment .
5 MR. RUBI NSTEI N: That ' s sat i sf act or y t o t he def ense,
6 your Honor .
7 THE COURT: And t hi s one i s a separ at e poi nt . Thi s
8 one i s t hat t hey have t o f i nd t hat t he gr ant money was under
9 CASI ' s cont r ol , t hat t he gr ant money was under CASI ' s cont r ol .
10 And i t seems t o me - - i t says " mi sappl i ed gr ant money under t he
11 cont r ol of CASI , " and t hen " The f our t h el ement t he gover nment
12 must pr ove beyond a r easonabl e doubt i s t hat t he money t hat was
13 i nt ent i onal l y mi sappl i ed was i n t he car e and cust ody or cont r ol
14 of CASI . "
15 I f you want me t o say " t he gr ant money" - -
16 MR. RUBI NSTEI N: Yes.
17 THE COURT: - - I wi l l . " Al t hough t he wor ds car e,
18 cust ody and cont r ol have sl i ght l y di f f er ent meani ngs, f or t he
19 pur pose of t hi s el ement t hey expr ess a si mi l ar i dea. Al l t hat
20 i s necessar y i s t hat CASI had cont r ol over and r esponsi bi l i t y
21 f or t he pr oper t y. " For t he pr oper t y. " For t he money" . I wi l l
22 st r i ke " pr oper t y" .
23 MR. RUBI NSTEI N: J udge, can you r ead t he whol e t hi ng?
24 THE COURT: Whi ch el ement woul d you l i ke me t o r ead?
25 MR. RUBI NSTEI N: The f our t h el ement .
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1 THE COURT: Sur e. Four t h el ement : Mi sappl i ed gr ant
2 money under t he cont r ol of CASI . " The f our t h el ement t he
3 gover nment must pr ove beyond a r easonabl e doubt i s t hat t he
4 gr ant money t hat was i nt ent i onal l y mi sappl i ed was i n t he car e,
5 cust ody or cont r ol of CASI . Al t hough t he wor ds car e, cust ody
6 and cont r ol have sl i ght l y di f f er ent meani ngs, f or t he pur poses
7 of t hi s el ement t hey expr ess a si mi l ar i dea. Al l t hat i s
8 necessar y i s t hat CASI had cont r ol over and r esponsi bi l i t y f or
9 t he money. "
10 For t he gr ant money?
11 MR. RUBI NSTEI N: Yes.
12 THE COURT: Al l r i ght .
13 The f i f t h el ement , t he t hi r d par agr aph, t hi s shoul d be
14 changed. Ther e i s no al l egat i on of st eal i ng, so I woul d change
15 i t so i t r eads, " You may aggr egat e or add up t he val ue of
16 pr oper t y obt ai ned" - - or mi sappl i ed. Mi sappl i ed mi ght be
17 bet t er - - " mi sappl i ed f r oma ser i es of act s by t he def endant t o
18 meet t hi s $5, 000 r equi r ement , so l ong as you f i nd t hat each act
19 of mi sappl i cat i on was par t of a si ngl e scheme by t he def endant
20 t o mi sappl y money under t he car e, cust ody and cont r ol of CASI . "
21 Then i t goes on. We' r e changi ng t he t hi r d l i ne " f eder al
22 benef i t s" t o " f eder al gr ant " . And i n t he l ast l i ne I changed
23 " benef i t s" t o " gr ant " .
24 And on t he ver y l ast l i ne on page 23 of t hat sect i on I
25 woul d st r i ke " embezzl ed or st ol en" and say " mi sappl i ed" . So i t
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1 r eads, " The gover nment need not t r ace t he $5, 000. " I may
2 change t hat l anguage - -
3 MR. RUBI NSTEI N: J udge, I - -
4 THE COURT: - - " al l eged t o be mi sappl i ed back t o t he
5 f eder al gr ant pr ovi ded. " Back t o t he f eder al gr ant . I woul d
6 st r i ke " pr ovi ded by t he gover nment " because t he gover nment i s
7 t he pr osecut i on. I t ' s r ef er r ed t o as t he pr osecut i on i n t he
8 begi nni ng of t he sent ence, and i f you put i t at t he end of t he
9 sent ence t oo I t hi nk i t i s possi bl y conf usi ng t o t he j ur y
10 because of t he way i t r eads.
11 MR. EVERDELL: We don' t want i t t o be t hought t hat we
12 pr ovi ded t o CASI .
13 THE COURT: I di dn' t t hi nk you want ed i t t hat way.
14 MR. RUBI NSTEI N: Your Honor , J udge, you may t hi nk I ' m
15 l osi ng i t , but - -
16 THE COURT: No.
17 MR. RUBI NSTEI N: - - but I t hi nk t hat t he st at ut e
18 r equi r es t hat you use t he wor d " st eal s" .
19 THE COURT: What ?
20 MR. RUBI NSTEI N: The st at ut e r equi r es t hat you use t he
21 wor d " st eal s" .
22 THE COURT: St eal s?
23 MR. RUBI NSTEI N: The l anguage of t he st at ut e. And I
24 t hi nk t hat ' s i n - -
25 THE COURT: I don' t want t o say st eal , because I don' t
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1 t hi nk st eal - - st eal i mpl i es i t was used f or hi s own benef i t - -
2 MR. RUBI NSTEI N: Wel l - -
3 THE COURT: - - as opposed t o bei ng mi sused, as opposed
4 t o bei ng - - I mean - -
5 MR. RUBI NSTEI N: I t hi nk t hat mi sused di l ut es t he
6 i nt ent t hat a per son has t o have i n or der t o be gui l t y. As a
7 mat t er of f act , i t ' s i nt er est i ng because Mr . Gi sendo had
8 suggest ed I make t hat r equest , and I t ol d hi mI t hought i t
9 woul d di l ut e what t he st at ut e r equi r es, whi ch i s t hat embezzl e,
10 st eal or t ake - -
11 THE COURT: Wel l , I wi l l agr ee wi t h you t o t hi s
12 ext ent . I t hi nk i t has t o say i nt ent i onal l y mi sappl i ed.
13 MR. KWOK: That ' s f i ne wi t h t he gover nment . I mean
14 our obj ect i on i s t hat t he st at ut e has many par t s, embezzl es,
15 st eal s, obt ai ns by f r aud, and t hen i t goes on t o say
16 i nt ent i onal l y mi sappl i ed. The l at t er pr ong i s what t he
17 gover nment char ges. So, I don' t t hi nk Mr . Rubi nst ei n i s at al l
18 cor r ect when he says t he st at ut e r equi r es t he wor d st eal . We
19 ar e not char gi ng t hat par t of t he st at ut e.
20 MR. EVERDELL: I n f act t he Er l acker case speci f i cal l y
21 r ecogni zes t her e ar e f i ve separ at e pr ongs t o t he st at ut e,
22 i nt ent i onal l y mi sappl i ed bei ng t he f i f t h pr ong. And t hi s
23 r equi r ement of $5, 000 or mor e appl i es t o each of t he f i ve
24 pr ongs, so t her e i s no r equi r ement t o say st eal her e.
25 MR. RUBI NSTEI N: I t hi nk t hat i ncl udi ng t he wor d
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1 " i nt ent i onal l y" whi ch t he st at ut e has - -
2 MR. KWOK: That ' s per f ect l y f i ne.
3 THE COURT: I f I put i n " i nt ent i onal l y" doesn' t t hat
4 do i t ?
5 MR. RUBI NSTEI N: That does i t .
6 THE COURT: OK. Al l r i ght . My r i ght hand her e says,
7 goi ng back t o par agr aph f i f t h, t o say you may aggr egat e or add
8 up t he val ue of pr oper t y i nt ent i onal l y mi sappl i ed i n a ser i es
9 of act s by t he def endant t o meet t hi s $5, 000 r equi r ement , so
10 l ong as you f i nd out t hat each act of i nt ent i onal
11 mi sappl i cat i on was par t of a si ngl e scheme.
12 I t hi nk she has i mpr oved i t f or cl ar i t y so t her e wi l l
13 be no mi st ake about i t .
14 MR. RUBI NSTEI N: Yes, t hat sounds al l r i ght .
15 THE COURT: I don' t have much el se.
16 Uncal l ed wi t nesses?
17 MR. RUBI NSTEI N: My onl y pr obl em, your Honor - -
18 THE COURT: Wel l , do you want t o go back? We di dn' t
19 go back t o t he shor t ened ver si on of havi ng gone t hr ough t he
20 f our el ement s or f i ve el ement s. We di dn' t go back t o t he
21 shor t ened sor t of synopsi s or what ever you want t o cal l i t .
22 MR. RUBI NSTEI N: Ri ght . My pr obl emi s t hat i f t he
23 j ur y - - I agr ee wi t h your Honor t hat t he act ual el ement s
24 descr i be i n f ul l - - l ay i t out . But i f t he j ur y f ocuses - - and
25 t hi s i s not a si t uat i on - - because your Honor gi ves t he
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1 i ndi ct ment t o t he j ur y, and i t ' s not a si t uat i on wher e t he j ur y
2 comes back and you r ei nst r uct t hem. So, I ' mconcer ned t hat
3 somet i mes, because t he shor t ver si on i s much easi er f or peopl e
4 t o f ocus on, t hat I j ust amconcer ned t hat we shoul d have some
5 mor e neut r al l anguage.
6 THE COURT: Wel l , I r ead t he i ndi ct ment t o t he j ur y,
7 and I al so gi ve t hemt he i ndi ct ment , and I al so gi ve t hema
8 copy of t he char ge.
9 MR. RUBI NSTEI N: I know t hat , J udge, but I ' msayi ng
10 t hat ' s why we shoul d i ncor por at e some of t he l anguage t hat you
11 have i n t he br oader ver si on. Not t he whol e t hi ng obvi ousl y.
12 THE COURT: Wel l , I t hought - -
13 MR. RUBI NSTEI N: Par t i cul ar l y, your Honor - -
14 THE COURT: You wi l l see t hat each one of t hem
15 " i nt ent i onal l y" i s emphasi zed.
16 MR. RUBI NSTEI N: Wel l , t he onl y t hi ng I ' maski ng your
17 Honor t o i ncl ude i s t hat i n t he f our t h, on page 19 - -
18 THE COURT: Page 19.
19 MR. RUBI NSTEI N: " t he mi sappl i ed money " - -
20 THE COURT: - - " was under t he car e, cust ody and
21 cont r ol of CASI . "
22 MR. RUBI NSTEI N: No. The mi sappl i ed ATP money, gr ant
23 money - -
24 THE COURT: Al l r i ght . You' ve got a poi nt .
25 I put i n " gr ant money" af t er " mi sappl i ed. " Mi sappl i ed
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1 gr ant money" i n each case. Do you want t hat ?
2 MR. RUBI NSTEI N: Yes.
3 THE COURT: Good.
4 MR. RUBI NSTEI N: " Mi sappl i ed gr ant money was under t he
5 car e, cust ody or cont r ol of CASI . "
6 THE COURT: Al l r i ght . I wi l l r ead t hemback now. I
7 wi l l r ead t hi r d, f our t h and f i f t h back. Let ' s st r i ke " f eder al
8 benef i t s" i n second and j ust say " a f eder al gr ant i n excess of
9 $10, 000" . I s t hat al l r i ght ?
10 MR. RUBI NSTEI N: Yes.
11 MR. KWOK: Yes.
12 THE COURT: And t hen t he t hi r d wi l l r ead, " Dur i ng t hat
13 one year per i od, t he def endant wi t hout aut hor i t y i nt ent i onal l y
14 mi sappl i ed gr ant money. " Or shoul d i t be " t he gr ant money" ?
15 MR. RUBI NSTEI N: I guess so. I guess i t shoul d be
16 " t he gr ant money" .
17 THE COURT: Then t he next woul d be be, f our t h, " The
18 mi sappl i ed gr ant money was under t he car e, cust ody and cont r ol
19 of CASI . " Fi f t h, " The val ue of t he gr ant money i nt ent i onal l y
20 mi sappl i ed by t he def endant was at l east $5, 000. "
21 MR. RUBI NSTEI N: That ' s accept abl e.
22 THE COURT: OK?
23 MR. RUBI NSTEI N: Yes, your Honor .
24 MR. EVERDELL: Your Honor , t he onl y t hi ng I j ust want
25 t o be cl ear f or t he r ecor d i s t hat we al l under st and t hat t her e
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1 i s no t r aci ng r equi r ement f or t he st at ut e, and def ense counsel
2 i nt ends t o ar gue t hat we have t o t r ace each bi l l , because I
3 bel i eve he i s al l egi ng t he def endant cont r i but ed i n some way t o
4 t he pot of money wi t h hi s own f unds and t hat we can' t t i e up
5 cer t ai n pur chases t o act ual gr ant money as opposed t o t he money
6 he may have put i n hi msel f , even t hough he t ook out much mor e.
7 That i s i nappr opr i at e because t hat ' s not what t he st at ut e
8 r equi r es.
9 And t he onl y f ear t he gover nment has wi t h i ncl udi ng
10 al l of t hi s speci f i cal l y t i ed gr ant money i s t hat i t ' s goi ng t o
11 suggest t o t he j ur y t hat we have t o t i e i t up, whi ch i s not t he
12 case. I t ' s si mpl y t he case we have t o show t he gr ant money was
13 deposi t ed i n CASI and i t was i nt ent i onal l y mi sappl i ed wi t hout
14 aut hor i t y, as t he st at ut e says.
15 THE COURT: I s t he l anguage i n t he char ge suf f i ci ent
16 f or your pur poses t o show t hat i t ' s not necessar y t o t r ace t he
17 money? I f you' ve got some suggest i ons t her e, I wi l l l i st en t o
18 t hem.
19 MR. EVERDELL: One moment , your Honor .
20 THE COURT: What ?
21 MR. KWOK: One moment , your Honor .
22 MR. EVERDELL: J ust one moment .
23 THE COURT: Sur e.
24 MR. EVERDELL: Your Honor , we have been t al ki ng about
25 t hi s. I t ' s a l i t t l e har d t o i ncor por at e t hi s concept i nt o t hi s
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1 l anguage. I j ust not e i t f or t he r ecor d because I amput t i ng
2 def ense counsel on not i ce t hat i f he i nt ends t o ar gue about
3 t hi s i n hi s cl osi ng - -
4 THE COURT: Do you want somet hi ng about f ungi bl e? I
5 mean money i s f ungi bl e.
6 MR. EVERDELL: Cor r ect , your Honor .
7 THE COURT: I ' ve f or got t en i n what cases, but I have
8 gi ven i nst r uct i ons i n connect i on wi t h t he f act t hat money i s
9 f ungi bl e and not t r aceabl e.
10 MR. EVERDELL: Al l r i ght . We coul d say somet hi ng l i ke
11 t he val ue of t he money i nt ent i onal l y mi sappl ed by def endant was
12 at l east $5, 000.
13 THE COURT: Wher e ar e you?
14 MR. EVERDELL: I ' ml ooki ng at t he f i f t h el ement .
15 MR. RUBI NSTEI N: Page, pl ease?
16 MR. EVERDELL: Page 19. " The val ue of t he money
17 i nt ent i onal l y mi sappl i ed by t he def endant was at l east $5, 000
18 but need not be t r aceabl e t o t he f eder al gr ant , " or somet hi ng
19 l i ke t hat .
20 THE COURT: Wher e do you want t hi s?
21 MR. EVERDELL: I was l ooki ng at t he f i f t h el ement on
22 19.
23 THE COURT: I see t he f i nal el ement .
24 I see. You' r e l ooki ng at page 19.
25 MR. EVERDELL: Yes, your Honor .
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1 THE COURT: What woul d you l i ke t o get t her e?
2 MR. EVERDELL: I ' msuggest i ng f or t he f i f t h el ement on
3 19, somet hi ng t o t he ef f ect of , " Fi f t h, t he val ue of t he money
4 i nt ent i onal l y mi sappl i ed by def endant was at l east $5, 000 but
5 need not be t r aceabl e back t o t he f eder al gr ant . "
6 MR. RUBI NSTEI N: I t has t o be gr ant money.
7 THE COURT: I have a pr obl em. I began t hi nki ng of
8 t hi s whol e t hi ng as t o whet her t r aceabl e i s t he r i ght - -
9 MR. RUBI NSTEI N: J udge - -
10 THE COURT: - - wor d.
11 MR. RUBI NSTEI N: J udge, t hey have no concer n, because
12 I ' mnot goi ng t o ar gue i t . I ' mnot goi ng t o ar gue t r aci ng of
13 f unds and what have you.
14 THE COURT: Wel l , I woul d l i ke i t t o be r i ght anyway,
15 because j ur i es ar e i magi nat i ve. They ar e ver y good, j ur i es,
16 and t hey wor k har d, and t hey t ake t hei r dut i es ver y ser i ousl y.
17 So, I don' t want t o have somet hi ng i n t he char ge t hat we t hi nk
18 we mi ght have t o deal wi t h i n a not e. I f possi bl e, i t ' s good
19 t o ant i ci pat e t hese t hi ngs so we don' t have not es.
20 MR. KWOK: Wel l , i f I may, your Honor , I t hi nk Mr .
21 Ever del l ' s suggest i on i s a good one, especi al l y because we
22 added t he wor d " gr ant " t o money i n al l of t he shor t ver si ons of
23 t he char ge on page 19, and so I t hi nk t o bal ance i t out , t o
24 make t hi ngs even handed - -
25 THE COURT: I see t hat . I don' t have any pr obl emwi t h
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1 what he i s t r yi ng t o do. I ammer el y t r yi ng t o t hi nk of t he
2 best way t o accompl i sh what he says i n a way t hat i sn' t
3 conf usi ng t o t he j ur y. That ' s what I ' mwor r i ed about , i s t he
4 conf usi ng nat ur e. Because you get i nt o i t l at er . I t hi nk
5 maybe i t woul d be bet t er t o deal wi t h i t i n t he el ement r at her
6 t han under t he shor t ened ver si on.
7 MR. EVERDELL: Your Honor , I t hi nk i n al l f ai r ness f or
8 i t t o be bal anced, I t hi nk - -
9 THE COURT: You mean you want me t o l eave out " gr ant
10 money" i n t he f i f t h?
11 MR. EVERDELL: I f we' r e goi ng t o do t he shor t ver si ons
12 on page 19, I t hi nk t he concept your Honor i s t r yi ng t o get at
13 wi t h " i nt ent i onal l y mi sappl i ed" i s suf f i ci ent , and t hen l eavi ng
14 out " t he gr ant money" . So, f or t he t hi r d el ement , f or
15 exampl e - -
16 THE COURT: Because i t i s - - t he f our t h says i t ' s got
17 t o be - - t he t hi r d and f our t h - -
18 MR. RUBI NSTEI N: J udge, you have t hat l anguage. The
19 t r aceabl e l anguage i s on page 22. They have t hat i n t he char ge
20 al r eady.
21 THE COURT: I know, but I t hi nk what t hey ar e l ooki ng
22 at i s i n t he shor t ver si on. And when you get t o t he f i f t h
23 el ement , t hat i f you add i n gr ant t her e i t suggest s t hat t he
24 money mi ght have t o be t r aced.
25 MR. RUBI NSTEI N: I don' t have a pr obl emwi t h t aki ng
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1 out t he wor d " gr ant " .
2 MR. EVERDELL: Fr omal l of t he shor t el ement s?
3 MR. RUBI NSTEI N: No, j ust el ement f i ve, as t o el ement
4 f i ve.
5 THE COURT: J ust i n t he f i f t h el ement .
6 MR. RUBI NSTEI N: J ust t al ki ng about t he f i f t h el ement .
7 THE COURT: J ust t he f i f t h el ement .
8 I s t her e any change you want on 21, Mr . Ever del l ?
9 MR. EVERDELL: One second, your Honor .
10 THE COURT: Wai t a mi nut e. I t ' s not page 21. I t ' s
11 page 22.
12 MR. EVERDELL: I t hi nk t he f i f t h el ement , t he l onger
13 i nvest i gat i on of i t , f r om22 t o 23, was OK as i t was l ast r ead,
14 as i t was l ast amended.
15 THE COURT: Al l r i ght .
16 MR. EVERDELL: My concer n i s st i l l t hough on page 19,
17 t he shor t el ement s. We keep i ncl udi ng, f or exampl e, t he t hi r d
18 and t he f our t h t he wor d " gr ant " . So, f or exampl e, t hi r d
19 el ement , " Dur i ng t hat one year per i od t he def endant wi t hout
20 aut hor i t y i nt ent i onal l y mi sappl i ed t he gr ant money. Four t h:
21 The mi sappl ed gr ant money was under t he car e" - -
22 THE COURT: Yes, we added i n on al l t hose el ement s
23 j ust now.
24 MR. EVERDELL: Yes. But I t hi nk i t ' s a l i t t l e
25 unbal anced now, because t hat i s st ar t i ng t o suggest I bel i eve
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1 t o t he j ur y t hat t her e i s a t r aci ng r equi r ement f or t hi s money,
2 t hat i t al l has t o be t he gr ant money, t hat t her e has t o be
3 pr oof t hat al l of t hese expendi t ur es wer e made wi t h speci f i c
4 gr ant money as opposed t o i t was par t of a pot wher e ot her
5 money mi ght have been commi ngl ed at cer t ai n t i mes but t hat ' s
6 i r r el evant t o t he j ur y' s consi der at i on because i t doesn' t have
7 t o be speci f i c.
8 THE COURT: Wel l , we al l agr ee t hat i t ' s got t o be
9 money - -
10 MR. RUBI NSTEI N: And t hat ' s what el ement f i ve i s f or .
11 THE COURT: The f ungi bi l i t y i s what t he pr obl emi s,
12 i sn' t i t ?
13 MR. EVERDELL: Yes, your Honor , t hat ' s cor r ect , t he
14 f ungi bi l i t y, t he f act t hat - -
15 THE COURT: - - t hat i t does - -
16 MR. EVERDELL: And at l east as def endant has br ought
17 up i n t r i al sever al t i mes - - and I assume he wi l l ar gue i n some
18 way on cl osi ng, t hat t her e was an i nf usi on of $37, 000 by t he
19 def endant of hi s own per sonal l oans t o t he company. Of cour se
20 we ar gue t hat ' s of f set by t he amount of l oans t hat he t ook out ,
21 so t her e wasn' t r eal l y an addi t i onal sour ce of f undi ng. And
22 even so, $37, 000 pal es i n compar i son t o t he amount of money
23 t hat was r ecei ved by t he gr ant .
24 But we j ust want t o be sur e t hat not hi ng i n t hi s
25 l anguage i s goi ng t o suggest t o t he j ur y t hat f or any
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1 par t i cul ar pur chase or expense t hat we r ai se, t hat we have t o
2 pr ove t hat t hat expense i s t r aced speci f i cal l y t o ATP f unds,
3 because t hat ' s assumi ng a bur den t hat we don' t have t o under
4 t he st at ut e.
5 And I t hi nk t hat i f we keep sayi ng " i nt ent i onal l y
6 mi sappl i ed t he gr ant money, " at l east i n t he shor t f or ms, i t
7 mi ght suggest t o t he j ur y t hat t hey have t o concl ude t hat
8 each - -
9 MR. RUBI NSTEI N: Wel l , t hose ar e t hose el ement s.
10 THE COURT: Let ' s t hi nk about - - I don' t know what
11 your summat i ons ar e goi ng t o be, but i n t he l ast f ew l et t er s
12 t hat I have r ecei ved I got t he i mpr essi on t hat t he gover nment
13 i s goi ng t o ar gue t hat t he def endant ' s expendi t ur es vi ol at ed
14 t he t er ms of t he gr ant - -
15 MR. EVERDELL: That ' s cor r ect , your Honor .
16 THE COURT: And t o vi ol at e t he t er ms of t he gr ant t hat
17 woul d have t o mean t hat gr ant money was mi sappl i ed. Because
18 l et ' s al l ege t hat t he def endant had $100, 000 i n t he bank and i n
19 CASI ' s account , and he pai d t he r ent wi t h hi s $100, 000. That
20 was i n t he exi st i ng - - i n t he bank. That woul d not be a
21 vi ol at i on of t he l aw.
22 MR. EVERDELL: He used hi s own f unds t o pay of f - -
23 THE COURT: Or used CASI ' s f unds, pr eexi st i ng f unds.
24 MR. EVERDELL: Ri ght . No, t hat ' s cor r ect , your Honor .
25 MR. KWOK: I f I may, your Honor . I st i l l t hi nk on
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1 bal ance - -
2 THE COURT: So, you have t o di st i ngui sh somehow
3 bet ween CASI ' s pr eexi st i ng f unds and t he gr ant f unds.
4 MR. EVERDELL: Tr ue, al t hough t her e i s no evi dence i n
5 t he r ecor d t hat t her e was any pr eexi st i ng f unds. I mean al l
6 evi dence t o t he cont r ar y, was t hat t he gr ant f unds - -
7 THE COURT: The st at ed evi dence i s t hat t her e ar en' t
8 any.
9 MR. EVERDELL: That ' s r i ght , your Honor .
10 THE COURT: Wer en' t any.
11 MR. KWOK: J ust t o addr ess my comment s speci f i cal l y t o
12 - -
13 THE COURT: Ther e i s ci r cumst ant i al evi dence t hat
14 t her e wasn' t any because of t he i mmedi at e expendi t ur es f or past
15 due bi l l s.
16 MR. EVERDELL: Sor r y? I di dn' t f ol l ow, your Honor .
17 THE COURT: Ther e i s ci r cumst ant i al evi dence t hat
18 t her e wasn' t any because of i mmedi at e expendi t ur e of moni es
19 t hat wer e l ong past due.
20 MR. EVERDELL: Yes. And t her e was speci f i c t est i mony
21 by bot h busi ness manager s t hat t he ATP f unds wer e t he onl y
22 f unds t hey ever saw comi ng i nt o t he company, and t her e i s al so
23 Ms. Ri l ey' s anal ysi s whi ch shows exact l y what f unds went i nt o
24 t he CASI bank account s over t he t i me per i od we ar e t al ki ng
25 about , year one and year t wo of t he gr ant , none of whi ch - - and
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1 t hat i ncl udes t he $37, 000 t hat t he def endant sai d he made as an
2 emer gency l oan. That ' s t aken i nt o account .
3 Ther e i s si mpl y not hi ng el se, wi t h t he except i on of I
4 t hi nk she ment i oned about $1500 wor t h of r ef und checks or
5 somet hi ng i n t he second year whi ch f or ms t hat l i t t l e sl i ce of
6 t he pi e i n year t wo of t he gr ant .
7 THE COURT: I don' t r emember what t he bal ance was i n
8 t he begi nni ng i n t he account , however . But what I ' msayi ng i s
9 t hat I t hi nk you have t o show t hat t her e was a mi sappl i cat i on
10 of gr ant money, ot her wi se he doesn' t need aut hor i t y, ot her wi se
11 he doesn' t mi sappl y money.
12 MR. KWOK: Your Honor , I t hi nk - -
13 THE COURT: How do you mi sappl y i f i t was not gr ant
14 money?
15 MR. KWOK: I t hi nk t hat ' s r i ght , your Honor . My onl y
16 poi nt i s I j ust shar e def ense counsel ' s concer n t hat he
17 ment i oned a moment ago, t hat t he shor t ver si on al so needs t o be
18 accur at e, not j ust t he l ong ver si on.
19 THE COURT: I agr ee wi t h you.
20 MR. KWOK: And so i f we wer e t o add t he wor d " gr ant "
21 i n f r ont of ever y one of t he el ement s, t he t hi r d, t he f our t h
22 and t he f i f t h - -
23 THE COURT: The f i f t h has been - - Mr . - -
24 MR. RUBI NSTEI N: I agr eed t o t ake out t he " gr ant " on
25 t he f i f t h el ement f or t hat r eason, because of t he t r aci ng, so I
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1 t hought t hat i t woul d be bal anced t o t ake t he wor d " gr ant " out
2 of t he f i f t h el ement . So, on t hat el ement t hey have t he
3 t r aci ng pr ovi si on t hat you have i n your l anguage on pages I
4 bel i eve 22 and 23.
5 MR. KWOK: But , your Honor , r eal i st i cal l y I don' t
6 t hi nk any j ur or wi l l be abl e t o pi ck up on t he si gni f i cance of
7 t he absence of t he wor d " gr ant " i n t he f i f t h el ement whi ch i t
8 has j ust been ment i oned i n t he t hi r d and t he f our t h el ement i n
9 t he shor t ver si on.
10 So, t he gover nment woul d j ust ask you t o amend or t o
11 add t o t he end of t he f i f t h el ement i n t he shor t ver si on
12 somet hi ng al ong t he l i nes of what Mr . Ever del l j ust suggest ed,
13 t hat " at l east $5, 000, whi ch needs not be t r aceabl e back t o t he
14 f eder al gr ant " . I t hi nk t hat woul d do i t .
15 ( Cont i nued on next page)
16
17
18
19
20
21
22
23
24
25
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1 MR. RUBI NSTEI N: I don' t t hi nk t hat ' s appr opr i at e, and
2 I don' t t hi nk t hat ' s t he l anguage t hat - -
3 THE COURT: I t ' s unusual t o have t hat ki nd of a
4 st at ement i n t he el ement s.
5 I t hi nk my f eel i ng woul d be what we ought t o do i s
6 have a sect i on on t r aceabi l i t y, somet hi ng about f ungi bi l i t y. I
7 can' t t hi nk what ki nd of a case I mi ght have a char ge on t hat .
8 MR. RUBI NSTEI N: Your Honor , i n t hei r r equest , t he
9 gener al i nst r uct i ons, t hey don' t - - t hey mer el y ask, on page
10 f our of t hei r r equest , t he val ue of t he i nt ent i onal l y
11 mi sappl i ed money was at l east $5, 000.
12 MR. EVERDELL: Yes, but now we' ve amended t he ot her
13 t hi ngs and we' r e - -
14 THE COURT: I know.
15 MR. EVERDELL: - - we' r e t r yi ng t o make sur e i t ' s
16 bal anced.
17 THE COURT: Wel l , we coul d do somet hi ng l i ke t hi s - -
18 MR. RUBI NSTEI N: You know, J udge, I - -
19 THE COURT: Let me make a suggest i on.
20 MR. RUBI NSTEI N: I ' msor r y.
21 THE COURT: - - bef or e, and t hen I ' l l hear your s.
22 We can do somet hi ng - - now each of t hese el ement s
23 have - - need f ur t her descr i pt i on, so l i st en cl osel y as I
24 expl ai n t he r equi r ement s as t o each of t hese el ement s, and t hen
25 i ncl ude t he t r aci ng el ement i n t he f i f t h or t he end of t he
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1 f i f t h el ement .
2 MR. RUBI NSTEI N: You know, J udge - -
3 THE COURT: But I t hi nk i t ought t o be expanded a
4 l i t t l e t o show t hat because t he f ungi bi l i t y i ssue need not
5 t r ace.
6 MR. RUBI NSTEI N: I t hi nk t hat t hat t r aci ng r eal l y
7 appl i es mor e i n t he br i ber y sect i on t han t o 666 sect i on. I ' m
8 not r eal l y 100 per cent conf i dent - - I ' mnot exact l y comf or t abl e
9 wi t h t he t r aci ng on t hi s ki nd of case. I t r eal l y - - t her e' s a
10 di f f er ence bet ween t he mi sappr opr i at i on and t he br i ber y por t i on
11 of 666.
12 MR. EVERDELL: Your Honor , I t hi nk t hat was r esol ved
13 by t he Sabr i case i n t he Supr eme Cour t , whi ch I bel i eve
14 appl i ed, di dn' t speci f i cal l y appl y t o t he br i ber y cont ext . I t
15 sai d t her e' s si mpl y no nexus r equi r ement s f or t he f unds i n 666
16 cases. So I don' t t hi nk t hat t hat ' s cor r ect .
17 So, i f I coul d j ust t al k t o Mr . Kwok.
18 ( Pause)
19 MR. EVERDELL: Your Honor , I t hi nk - - you know, i f t he
20 Cour t i s i ncl i ned t o l eave t he shor t f or mof t he el ement s on
21 page 19 as i s, t hen we woul d wel come t he addi t i onal l anguage
22 t hat you suggest ed about needi ng f ur t her expl i cat i on, but al so
23 t o i ncl ude i n t he el ement t hat we' r e t al ki ng about f i f t h
24 el ement . A mor e expansi ve di scussi on of f ungi bi l i t y, I don' t
25 have a par t i cul ar char ge I can of f er you, but i f you have
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1 somet hi ng i n t he past - -
2 THE COURT: Your appel l at e gr oup ought t o have one.
3 MR. EVERDELL: That ' s possi bl e, your Honor .
4 THE COURT: I ' d cal l t hem.
5 MR. RUBI NSTEI N: J udge, i f you - - t he l anguage i n
6 Sabr i says - -
7 THE COURT: Whi ch, i n what , si r ?
8 MR. RUBI NSTEI N: I n Sabr i , t he l anguage sai d t hat i t
9 i s t r ue, J ust i ce Sabr i says, t hat not ever y br i be or ki ckback
10 of f er ed or pai d t o an agent of gover nment cover ed by 666( b)
11 wi l l be t r aceabl y ski mmed f r omspeci f i c f eder al payment s.
12 MR. EVERDELL: Your Honor , my under st andi ng of Sabr i
13 i s i t ' s not l i mi t ed t o t he br i ber y cont ext . I t t al ks about t he
14 pur poses of t he st at ut e and t he f act t ake i t was passed t o f i l l
15 gaps i n exi st i ng st at ut es.
16 The pur pose of t he st at ut e i s t o make sur e t hat t he
17 r eci pi ent s of f eder al f unds wer e pr oper r eci pi ent s and pr oper
18 st ewar ds of t he f eder al money. So i t was r el at ed not t o t he
19 money i n par t i cul ar , t her e wer e no t r aceabi l i t y r equi r ement s,
20 but si mpl y t hat t he per son or ent i t y t hat r ecei ved t he money
21 was a good st ewar d of t hat money, and t hat he di dn' t have t o
22 show par t i cul ar t r aceabi l i t y. Because t he pr i or exi st i ng
23 st at ut es, i f t he money got commi ngl ed enough, you coul dn' t use
24 t he st at ut e t o pr osecut e t he case. So t hi s was speci f i cal l y
25 passed i n or der t o avoi d t hat pr obl em, and i t appl i es t o, as I
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1 under st and i t , t o ever y si ngl e pr ong of t he st at ut e.
2 MR. RUBI NSTEI N: Wel l , how do you t r ace your own
3 money, your Honor ?
4 THE COURT: What ?
5 MR. RUBI NSTEI N: The pr obl emi s t hat unl i ke wher e you
6 get i l l egal money - - I can under st and you don' t get - - you get
7 i l l egal money, you accept t he br i be. Now what di f f er ence does
8 i t make i f you spent t he money t hat you got as a br i be or you
9 spent - - you have a $100 i n a br i be and you have $100 t hat you
10 got i n your sal ar y, so now you have $200. What di f f er ence does
11 i t make whi ch moni es you spent at t hat poi nt ? I under st and why
12 t her e' s no t r aci ng r equi r ement . But i f you have l egi t i mat e
13 money, you st ar t out wi t h l egi t i mat e money - - t he gr ant money
14 i s l egi t i mat e; why shoul d t her e be any, under t hese
15 ci r cumst ances, t r aci ng? I don' t t hi nk t hat t he cour t s have
16 gone t hat f ar . Ther e' s somet hi ng - - t o me t her e' s somet hi ng
17 wr ong wi t h t he i dea t hat i f I spent - -
18 THE COURT: The poi nt i s once you put i t i n a bank
19 account , anyt hi ng el se i n t he bank account , or you can' t - - you
20 can' t t r ace i t , because money i s f ungi bl e.
21 MR. RUBI NSTEI N: Ri ght . But I ' msayi ng t hat t hat ' s
22 because t he money, t he br i be money i s bad money. Her e t he
23 gr ant money i s good money, and so t her ef or e i t ' s a di f f er ent
24 concept . I f he i s spendi ng t he good money wr ongf ul l y, he' s
25 spendi ng t he good money - - what t hey' r e sayi ng, t hei r
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1 ar gument - -
2 THE COURT: St op and t hi nk a second, t he f eder al money
3 i sn' t gi ven f or br i bes.
4 MR. RUBI NSTEI N: Ri ght .
5 THE COURT: So i t ' s not bad money when i t ' s r ecei ved.
6 MR. RUBI NSTEI N: No, I ' msayi ng i t ' s not bad money.
7 I ' msayi ng t hat ' s r i ght . I n t hi s i nst ance, t he money r ecei ved
8 i s good money, as opposed t o a br i ber y si t uat i on wher e t he
9 money you' r e r ecei vi ng i s bad money.
10 THE COURT: Money you r ecei ved - - t he br i ber y par t of
11 666 appl i es t o money t hat was r ecei ved as good money and spent
12 as bad money, and i t ' s al l spent f r omt he same pot .
13 MR. RUBI NSTEI N: I di sagr ee wi t h your Honor . The
14 br i be money, I submi t , i s t he bad money, t hat pol l ut es t he good
15 money. And you can' t ar gue t hat , gee, I t ook t hi s br i be, but I
16 spent my good money and I kept t he br i be money separ at e. That
17 i s what I t hi nk i s t he cont ext of t hi s ar gument . Because t her e
18 i s a di f f er ence bet ween t he br i ber y por t i on of t he 666 - -
19 THE COURT: Wel l , i t pr esupposes an i nt ent , an i nt ent
20 t o br i be bef or e you r ecei ve t he f unds. Gener al l y, i n t hose
21 cases t he br i be i s made subsequent t o r ecei pt of f unds.
22 I t hi nk you bet t er cal l and see i f you haven' t got
23 somet hi ng on f ungi bi l i t y t r aci ng over t her e as t o char ge.
24 MR. KWOK: We wi l l do t hat .
25 THE COURT: I can' t t hi nk of a case j ust because
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1 I ' m- - what about t he money l aunder i ng cases? Mr . Kwok, money
2 l aunder i ng cases, ask t hemabout money l aunder i ng cases.
3 MR. KWOK: Cer t ai nl y.
4 MR. RUBI NSTEI N: I don' t t o get ahead of mysel f . I
5 st i l l haven' t made my Rul e 29 mot i on, whi ch woul d make al l of
6 t hi s academi c. I wi l l wai t f or t he gover nment .
7 THE COURT: You bet t er wai t t i l l t he gover nment comes
8 back.
9 MR. RUBI NSTEI N: To r et ur n.
10 ( Recess)
11 ( I n open cour t )
12 MR. RUBI NSTEI N: Your Honor , my l et me say t hat Sabi r
13 r el at es t o a vi ol at i on of Sect i on 666( a) ( 2) , whi ch i nvol ves t he
14 br i ber y por t i on.
15 THE COURT: I ' l l l ook at i t . Let ' s f i ni sh t he char ge
16 and come back t o t hi s.
17 MR. RUBI NSTEI N: Okay.
18 MR. KWOK: I t hi nk t hat ' s - -
19 THE COURT: Then I ' l l hear your Rul e 29 i f we don' t
20 have anyt hi ng and - - go ahead.
21 Af t er - - i s t her e any need f or uncal l ed wi t nesses
22 or - -
23 MR. RUBI NSTEI N: Yes, your Honor .
24 MR. KWOK: Yes, your Honor .
25 THE COURT: Okay, t hen l eave t hat i n.
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1 MR. RUBI NSTEI N: Your Honor , I not i ce i t ' s t he
2 st andar d l anguage on t he uncal l ed wi t nesses. But i n t hi s case
3 wher e t he gr avamen of t he Gover nment ' s case i s Mi ss Hayes, I
4 j ust f eel t hat - -
5 THE COURT: Have you got a suggest i on?
6 MR. RUBI NSTEI N: Par don?
7 THE COURT: What ' s your suggest i on?
8 MR. RUBI NSTEI N: Wel l , t hat t he, al t hough - - wel l , t he
9 gover nment has t he abi l i t y t o conf er i mmuni t y on a wi t ness and
10 t o ent er i nt o agr eement s wi t h t he non- pr osecut i on agr eement s
11 wi t h t he wi t ness. And t he def ense, who has t he same r i ght t o
12 cal l t he wi t ness, doesn' t have t hose t ool s avai l abl e.
13 THE COURT: But t hat doesn' t have t o do wi t h cal l i ng a
14 wi t ness. Ther e' s no al l egat i on her e t hat i mmuni t y has been
15 gr ant ed or - -
16 MR. RUBI NSTEI N: No. I ' msayi ng t hat t hey have t hat
17 abi l i t y. You know, t he l anguage i s bot h t he gover nment and t he
18 def ense have t he same power t o subpoena a wi t ness t o t est i f y.
19 THE COURT: I ' l l have t o see your r equest t o char ge
20 f r omyou al ong t hat . That ' s a di f f er ent i ssue and I ' d have t o
21 see your case and t he aut hor i t y f or i t .
22 MR. RUBI NSTEI N: I ' mhopi ng t o make aut hor i t y her e,
23 J udge.
24 THE COURT: Wel l , t hen you' l l have t o gi ve me speci f i c
25 l anguage and I ' l l have t o consi der i t based on t he l anguage.
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1 What about par t i cul ar i nvest i gat i ve t echni ques, you
2 want t hat ?
3 MR. RUBI NSTEI N: Never happy - -
4 THE COURT: What ?
5 MR. RUBI NSTEI N: I ' mnever happy wi t h t hat , but i t ' s
6 st andar d l anguage i n t he f eder al cour t s.
7 THE COURT: Al l r i ght . I s t he char act er al l r i ght ?
8 MR. RUBI NSTEI N: Char act er i s f i ne, your Honor .
9 THE COURT: Char t s and summar i es al l r i ght ?
10 MR. KWOK: Yes.
11 MR. RUBI NSTEI N: Yes, your Honor .
12 THE COURT: Li ke t hat ? See t he exhi bi t s, hear
13 t est i mony, communi cat i ons wi t h t he Cour t ?
14 MR. RUBI NSTEI N: That ' s f i ne, your Honor .
15 THE COURT: Submi t t i ng t he i ndi ct ment , need f or
16 unani mi t y, ver di ct f or m. We got a ver di ct f or m?
17 MR. RUBI NSTEI N: Yes. I ' ve appr oved t he ver di ct f or m
18 t hat - -
19 THE COURT: You have, al l r i ght .
20 Then I guess any t hought s about t he, any pr obl ems wi t h
21 j ur or number one bei ng t he chai r per son?
22 MR. KWOK: No, your Honor .
23 MR. RUBI NSTEI N: No pr obl em, your Honor .
24 THE COURT: Al l r i ght . Ar e we al l t hr ough wi t h t he
25 char ge t hen, wi t h t he except i on of our pr obl emon - -
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1 MR. KWOK: Your Honor , i f I may make a suggest i on. I
2 t hi nk f or pur poses of t hi s case, i t ' s r eal l y not necessar y t o
3 get i nt o t he nuance of t he l aw about t r aceabi l i t y, because as
4 t he gover nment cont ends at t he end of t he day i t ' s one bi g pot
5 and t her e' s r eal l y no ot her sour ce of f undi ng f or CASI , ot her
6 t han t he ATP money. So i f Mr . Rubi nst ei n i s f i ne l eavi ng i n
7 what i s i n t he l ong ver si on f or t he f i f t h el ement on pages 22
8 and 23, t he gover nment woul d have no pr obl eml eavi ng i n t he
9 shor t ver si on, wi t h t he sl i ght amendment s t hat we j ust made
10 i nser t i ng t he wor d gr ant i n f r ont of t he t hi r d and f our t h
11 el ement on page 19, j ust t o avoi d an ext ended di scussi on about
12 somet hi ng t hat i s r eal l y not - -
13 THE COURT: Al l r i ght , t hat i s si mpl e, I guess.
14 MR. RUBI NSTEI N: No - - wel l , no. I mean, i t ' s
15 cl assi cal , t hey want t hei r cake and eat i t .
16 THE COURT: Wel l , t hey want - -
17 MR. RUBI NSTEI N: They want me t o abandon i t .
18 THE COURT: You agr eed t hat t her e' s no - -
19 MR. EVERDELL: We' r e agr eei ng t o what you agr eed t o.
20 THE COURT: Tr aceabi l i t y, t hey' r e ent i t l ed t o
21 t r aceabi l i t y.
22 MR. KWOK: And Mr . Rubi nst ei n j ust ar gued t hat he
23 di dn' t i nt end t o ar gue i t .
24 MR. RUBI NSTEI N: J udge, t hat ' s what I sai d, I
25 r econsi der ed i t i n r er eadi ng.
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1 THE COURT: Al l r i ght . We' l l get - - t i l l we get
2 somet hi ng f r omt he t hei r gr oup, I ' mt r yi ng t o t hi nk of t he case
3 t hat I had t hi s pr obl emi n, and I t hi nk i t woul d be - - t her e i s
4 a bet t er char ge t hat goes i nt o f ungi bi l i t y and, t her ef or e, t he
5 f act t hat you don' t need t o t r ace f unds t o show t hat t hey wer e
6 t he act ual f unds t hat t he gover nment used.
7 MR. RUBI NSTEI N: But I t hi nk t her e has t o be a
8 di st i nct i on bet ween a case t hat i s char ged under 666( a) ( 2) , as
9 opposed t o - - you l ook at t he st at ut e, ( a) ( 2) r el at es t o
10 cor r upt l y gi ves - - of f i cer agr ees t o gi ve anyt hi ng of val ue
11 per son wi t h i nt ent t o i nf l uence or r ewar d. So I under st and
12 why - - t hat was what my ar gument was about good money and bad
13 money, why t her e shoul dn' t be a t r aceabi l i t y, i f you gi ve
14 somebody a br i be and t hat ' s t he money t hat you' r e t al ki ng about
15 usi ng.
16 But her e we' r e not t al ki ng about ( a) ( 2) money. We' r e
17 t al ki ng - - we' r e not t al ki ng about ( a) ( 2) . So t he cour t s have
18 never addr essed whet her or not t her e' s t r aceabi l i t y. And
19 t her e' s not hi ng - - as I sai d, t he br i be money i s di f f i cul t t o
20 t r ace because i t ' s f ungi bl e.
21 Her e we' r e not t al ki ng about br i be money. We' r e
22 t al ki ng about gr ant money, whi ch you can t r ace. And I ' mnot
23 aski ng f or a char ge t hat says t hat t hey have t o t r ace t he
24 money. I ' mj ust sayi ng t hat i t ' s mi sl eadi ng t o suggest t hat
25 t hey can' t consi der - - t he j ur y can' t consi der whi ch moni es i t
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1 was.
2 MR. EVERDELL: That ' s r i di cul ous, your Honor .
3 MR. RUBI NSTEI N: The Gover nment ' s ar gument , as Mr .
4 Kwok sai d, i s t hat t her e i s no t r aci ng pr obl embecause t her e' s
5 onl y one pot ; al l t hat money comes f r omone sour ce, t hat bei ng
6 t he gr ant . Ther ef or e, any moni es spent ar e gr ant money. So I
7 don' t know why t hey woul d want - - why t hey need any sor t of
8 t r aci ng l anguage i n t he char ge at al l .
9 MR. EVERDELL: Because t hat ' s case l aw, your Honor ,
10 and t hat i s t he case i n ever y Ci r cui t . The cases t al k about
11 and i n Sand as wel l , by enact i ng - - t hi s i s t he ni nt h Ci r cui t
12 case St evens, by enact i ng Sect i on 666, t he gener al st at ut e, not
13 any par t i cul ar subsect i on, Congr ess pl ai nl y deci ded t o pr ot ect
14 f eder al f unds by pr eser vi ng t he i nt egr i t y t he ent i t i es t hat
15 r ecei ved t he f eder al f unds r at her t han r equi r i ng t he t r aci ng of
16 f eder al f unds t o a par t i cul ar i l l egal t r ansact i on.
17 So t hi s i s not - - t hi s appl i es t o t he ent i r e st at ut e.
18 Now, t he f act t hat we may not have a par t i cul ar i ssue i n t hi s
19 case, because of t he f unds wer e ATP f unds, doesn' t mat t er . The
20 j ur y shoul d st i l l be i nst r uct ed on t he appr opr i at e l aw, whi ch
21 i s t hat t her e i s no t r aci ng r equi r ement wi t h t hi s st at ut e. And
22 t he st at ut e was speci f i cal l y enact ed t o avoi d commi ngl i ng
23 pr obl emt hat ot her st at ut es pr esent ed.
24 MR. KWOK: And, your Honor , i f I may, I mean t he
25 char ge we ci t e i n our r equest t o char ge, and t hat ' s now
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1 r ef l ect ed i n t he l ong ver si on of t he f i f t h el ement i s di r ect l y
2 l i f t ed f r omSand, t he model j ur y i nst r uct i ons. I t ' s not l i f t ed
3 f r om( a) ( 2) . I t ' s l i f t ed f r omt he st at ut e t hat we char ge. So
4 I don' t know what Mr . Rubi nst ei n' s t al ki ng about when he r ef er s
5 t o hi s on t he spot r esear ch.
6 ( Pause)
7 MR. RUBI NSTEI N: J udge, I ' d onl y poi nt out - -
8 THE COURT: I ' l l have t o t hi nk about i t , Mr - - I ' l l
9 have t o t hi nk about i t .
10 MR. RUBI NSTEI N: J udge, t her e i s anot her case - -
11 THE COURT: Your poi nt , as I see i t , i s t hat , okay,
12 i t ' s t r ue t hat Sand says t hat , but t hat appl i es t o an
13 embezzl ement case, but i t may not appl y t o mi sappl i cat i on case.
14 MR. RUBI NSTEI N: And I woul d suggest - -
15 THE COURT: I t seems t o be t aken f r omSol ant z, whi ch
16 i s an embezzl ement case, so l et me l ook at i t and see i f can - -
17 MR. RUBI NSTEI N: J udge, I hope t hat t hi s case t hat I ' m
18 goi ng t o ment i on t o t he Cour t .
19 THE COURT: - - sat i sf y mysel f t hat t her e' s not hi ng t o
20 your poi nt , but I ' l l have t o - - I ' l l have t o l ook at i t .
21 MR. RUBI NSTEI N: J udge - -
22 THE COURT: You' ve got a Rul e 29 mot i on.
23 MR. RUBI NSTEI N: Yes. I j ust want ed t o add an
24 addi t i onal case t hat I hope i s hel pf ul t o t he Cour t , and i t ' s
25 t he Second ci r cui t case, i t ' s U. S. ver sus Thompson, and i t ' s
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1 ci t ed at 484 Fed. 3d, i t ' s 877. And I j ust - - i t ' s not on al l
2 f our s, but I t hi nk i t gi ves t he sense of what we' r e t al ki ng
3 about her e. So I know your Honor wi l l t ake a, mor e t han j ust a
4 casual l ook at i t .
5 MR. EVERDELL: Your Honor - -
6 MR. RUBI NSTEI N: As f ar as - - I ' msor r y.
7 MR. EVERDELL: And, your Honor , i f I coul d al so di r ect
8 your at t ent i on t o t he cases i n, of our l et t er i n par t i cul ar l y
9 Uni t ed St at es V. Nei man, 211 F. 3d 40, whi ch I haven' t l ooked at
10 i t r ecent l y, but al t hough when I wr ot e t he l et t er , but I seemed
11 t o r ecal l t hat was an ( a) ( 1) ( a) case and had some l anguage
12 about t r aceabi l i t y, Second Ci r cui t case.
13 THE COURT: My - - i t ' s a not - f or - pr of i t par t t hat i s
14 what I ' m- - t he not - f or - pr of i t agency as opposed t o - - CASI
15 woul d - -
16 MR. KWOK: I t i s a pr of i t .
17 MR. RUBI NSTEI N: For pr of i t .
18 THE COURT: For pr of i t .
19 MR. RUBI NSTEI N: CASI was a f or pr of i t .
20 THE COURT: Wel l , t he appl i cat i on t o a f or pr of i t
21 or gani zat i on cont r ol l ed by t he def endant i s what i s di f f er ent
22 t han an embezzl ement si t uat i on and, t her ef or e, I want t o j ust ,
23 i f t her e ar e any cases on t hat , I ' d be i nt er est ed.
24 MR. EVERDELL: Your Honor , I t hi nk - -
25 THE COURT: You seemt o have a di f f er ent l egal
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1 st r uct ur e t hat you' r e exami ni ng i n t he cont ext of t he st at ut e.
2 MR. EVERDELL: Yes, your Honor . I t hi nk t hat t he
3 Ni eman case may be i nst r uct i ve. I f I r ecal l i t , I t hi nk i t
4 i nvol ves an or gani zat i on t hat r ecei ved f unds and t hat wer e
5 mi sappl i ed el sewher e and t her e wasn' t t he onl y sour ce of
6 f undi ng t hat t he - -
7 THE COURT: That ' s wher e we want .
8 MR. EVERDELL: Yeah.
9 MR. RUBI NSTEI N: J udge, woul d you hear me on Rul e 29,
10 your Honor ?
11 THE COURT: Yes, si r , r i ght away.
12 MR. RUBI NSTEI N: Thank you.
13 I t hi nk, your Honor , af t er you' ve hear d al l t he
14 evi dence her e, I t hi nk i t ' s cl ear t hat Dr . Kar r on had no i nt ent
15 t o spend gr ant moni es i nappr opr i at el y. The syst emi n pl ace
16 per mi t t ed r evi ew of al l expendi t ur es; not onl y per mi t t ed i t , i t
17 act ual l y encour aged i t . And t he t est i mony i s cl ear t hat when
18 t he gover nment i s t r yi ng t o t r y t hi s case, you had a budget and
19 t he budget i s your Bi bl e. When, i n f act , i n sci ence, ATP
20 knows, and ever ybody, any r easonabl e per son knows t hat as you
21 st ar t - - as you wor k on t he pr oj ect , you r eal i ze you have
22 di f f er ent pr i or i t i es, so t hat t hat ' s why you have t o wr i t e t o
23 change t he budget ar ound t o do i t wi t hout any appr oval
24 what soever of t he 10 per cent , whi ch i s r eal l y 20 per cent
25 because i t ' s down and up, as Mr . Benedi ct sai d. And t hat i s
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1 why you have a r i ght t o r evi se t he budget af t er t he f i r st year .
2 You coul d go back and change i t al l . And so when you have t hat
3 i n mi nd, and you under st and t hat , and t hi s i s st uf f t hat you
4 coul d negot i at e. And even we have evi dence t hat money i s
5 car r i ed f or war d t o t he next year on occasi on, i t t el l s t he
6 r eci pi ent one t hi ng; as l ong as you' r e usi ng t he money t o
7 advance t he pr oj ect , use i t and we' l l t al k about i t .
8 Even i n t hi s case, we even have evi dence wher e not hi ng
9 cl ear er t han ut i l i t i es, wher e t her e' s evi dence t hat t hat ' s an
10 i ndi r ect cost , t hat t her e was e- mai l s back and f or t h wi t h ATP
11 suggest i ng t hat ATP woul d absor b t he di f f er ence i n t he
12 ut i l i t i es expendi t ur es over what i t had been i n t he past . Why
13 el se woul d t hey be aski ng f or bi l l s t o show t he di f f er ence i n
14 t he expendi t ur e?
15 So - - and t he CFR says t hat t hey j udge t hese t hi ngs on
16 a case- by- case basi s. And nowher e - - when you t ake t hat ,
17 t oget her wi t h t he f act t hat t her e' s evi dence her e t hat Dr .
18 Kar r on havi ng r epai r s t o hi s - - havi ng wor k done, const r uct i on
19 wor k done i n hi s home, pai d f or wor k done i n t he ki t chen wi t h a
20 per sonal check, wor k done i n t he l i vi ng r oomwi t h a CASI check,
21 t hat t hat shows t he i nt ent . The f act t hat t he gover nment coul d
22 poi nt t o t hi ngs t hat mi ght have been a mi st ake or mi ght have
23 been i t ems t hat a bl i nd bookkeeper woul d r eal l ocat e? Thei r
24 ar gument i s t hat because he r esi st ed, Dr . K r esi st ed t he
25 opi ni ons of peopl e l i ke Benedi ct and Spr i ngs, and maybe even
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1 Hayes, t hat , t her ef or e, he mi sappr opr i at ed f unds.
2 I submi t t o your Honor t hat t hat doesn' t show
3 i nt ent i on at al l . As a mat t er of f act , t he conver sat i ons wer e
4 f r omBenedi ct ; wel l , i f I owe t hemmoney, I have a r i ch mot her ,
5 I ' l l pay t hemback.
6 So t hat al l goes t o t he i ssue of i nt ent , whi ch I t hi nk
7 t hat t he gover nment has woef ul l y f ai l ed t o est abl i sh i n t hi s
8 case, wi t hout get t i ng i nt o t he ni t t y- gr i t t y about what money
9 was spent , wher e nobody i s cont est i ng t hat t her e was wor k done
10 on t he gr ant . And so t he mai n ar eas ar e r ent , whi ch your Honor
11 may r ecal l most of t he r ent was back due r ent . So, t echni cal l y
12 speaki ng, t hat was not r ent at t r i but abl e t o t he gr ant per i od.
13 So, t her ef or e, i t shoul dn' t be consi der ed as a vi ol at i on of
14 t aki ng an i ndi r ect amount . Because i t was f or 2000 and 2001
15 pr e- gr ant , most of t he money.
16 And addi t i onal l y, t he def endant had a r i ght t o move
17 10 per cent i ncr ease i n sal ar y, whi ch woul d' ve moved hi s sal ar y
18 up by $80, 000 t o $255, 000, and he coul d absor b i t on t hat
19 l evel . So t hat ' s even wi t hout get t i ng appr oval , t o have a
20 budget , a budget change.
21 So i t j ust seems t o me, your Honor , t hat al l t he
22 evi dence her e, t her e i s no, no pr oof t hat Dr . Kar r on i nt ended
23 t o do anyt hi ng t o t he cont r ar y. We have r ecei pt s. He scanned
24 ever y document . He had back up f or ever y document . You know,
25 t hey opened t hat he made changes i n t he comput er . But what di d
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1 he change, how you cl assi f y an expense? He never changed an
2 i nvoi ce, he never changed a check. He never l ooked t o del et e
3 anyt hi ng. And we have uncont r over t ed evi dence her e f r omt he
4 Gover nment ' s own wi t ness t hat Dr . Kar r on i s an i ncompet ent
5 manager . He st ands up at t he CASI - - at a gover nment meet i ng
6 deal i ng wi t h gr ant s and says, I need hel p wi t h f i nanci al
7 gui dance about a gr ant , al l r i ght . Ever ybody t est i f i ed t hat i n
8 t he ear l y par t of t he gr ant , Dr . Kar r on was t aki ng car e of t he
9 books. And what i s t he - - t he i ndi sput ed t est i mony? That t he
10 books wer e i n hor r i f i c condi t i ons when t he J ackson Gr oup and
11 Spr i ngs came aboar d, and t hey had t o r edo t he ent i r e, t he
12 ent i r e books.
13 The one t hi ng t hat was consi st ent was t hat we had
14 checks, ever y check t hat was wr i t t en t her e was an i nvoi ce f or .
15 So I submi t t o your Honor t hat t her e' s absol ut el y no basi s t o
16 consi der t hat Dr . Kar r on i nt ended t o do anyt hi ng wr ong, and
17 t hat t hei r whol e t heor y of t hi s case i s mi sgui ded.
18 THE COURT: Wel l , t he pr obl emi s t hat gener al l y t he
19 i ssue of cr i mi nal i nt ent i s an i ssue f or t he j ur y, and i f
20 t her e' s any basi s f or t he j ur y t o dr aw such a concl usi on, I ' ve
21 got t o l eave i t t o t he j ur y.
22 Her e, t he gr ant was made a f ew weeks af t er t hey
23 at t ended a ki ckof f meet i ng. I gat her t he money came i n a f ew
24 weeks af t er t hey at t ended t he ki ckof f meet i ng, what ' s cal l ed a
25 ki ckof f meet i ng. And at t he ki ckof f meet i ng t her e wer e cer t ai n
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1 exhi bi t s and r ul es t hat wer e l ai d down t o t he r eci pi ent . And
2 t he t er ms, t he st andar d t er ms and condi t i ons wer e set f or t h.
3 And t hey had a sl i de show t o advi se t he r eci pi ent s of t he
4 nat ur e of t he agr eement so t hat t hose peopl e who wer e l ess t han
5 avi d of t er ms of condi t i ons woul d be al er t ed t o t he necessar y
6 i t ems.
7 And as I under st ood t he t est i mony, t hat t hey wer e
8 not - - t hey wer e not t o spend any money f or r ent and ut i l i t i es.
9 And I t hought t hat appear ed on one of t he sl i des - - and I may
10 be wr ong. And t hat t hen t hey had t o get pr i or appr oval s f or
11 cer t ai n t ypes of expendi t ur es.
12 Wel l , t he f i r st t hi ng t hat happens i s t hat t he money
13 comes i n - - I ' ve f or got t en whet her i t was $150, 000 or somet hi ng
14 l i ke t hat . The def endant t akes t hat check - - t akes t hat money,
15 deposi t s i t i n CASI , t hen dr aws hi msel f a check f or 75, 000 and
16 t hen pr oceeds t o - -
17 MR. RUBI NSTEI N: J udge - -
18 THE COURT: - - dr aw ot her checks i n payment of t he
19 back r ent .
20 MR. RUBI NSTEI N: J udge, your t i me l i ne - -
21 THE COURT: For some, f or some $36, 000.
22 MR. RUBI NSTEI N: The t i me l i ne i s of f , J udge.
23 THE COURT: What ?
24 MR. RUBI NSTEI N: Your t i me l i ne i s of f . The money - -
25 THE COURT: Ti me l i ne i s of f ?
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1 MR. RUBI NSTEI N: Yes. The money came i n i n Oct ober , I
2 t hi nk Oct ober 25t h.
3 THE COURT: Ri ght .
4 MR. RUBI NSTEI N: The ki ckof f and t he money was
5 wi t hdr awn - -
6 THE COURT: The ki ckof f - -
7 MR. RUBI NSTEI N: Was August , was November 8t h, 2001.
8 So t he money was wi t hdr awn pr i or t o t he t i me of t he ki ckof f ,
9 so - -
10 THE COURT: Wel l - -
11 MR. RUBI NSTEI N: That ' s my r ecol l ect i on - -
12 THE COURT: I don' t know. But - -
13 MR. RUBI NSTEI N: - - of t he evi dence.
14 THE COURT: You may be r i ght . My r ecol l ect i on was
15 t hat t he ki ckof f was i n Oct ober , but I may be wr ong. And I
16 not i ce t hat t he l ast wi t ness i ndi cat ed t hat t he ki ckof f was i n
17 Oct ober wher e he met Dr . Kar r on.
18 MR. RUBI NSTEI N: He wasn' t at t he ki ckof f , J udge.
19 Benedi ct was not at t he ki ckof f . He t est i f i ed t hat he was
20 not - - he was not aboar d. He sai d he was at a conf er ence wher e
21 he met - - t hat ' s when he met Dr . Kar r on.
22 THE COURT: Wel l , I t hought he sai d at one poi nt he
23 was at a conf er ence, but t hen he cal l ed i t ki ckof f al so. I may
24 be wr ong.
25 MR. RUBI NSTEI N: The t est i mony i s t hat t he peopl e at
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1 t he ki ckof f , besi des t he ATP peopl e, wer e Dr . Kar r on, Gur f ei n
2 and somebody whose name st ar t s wi t h an S, Dr . Sat ava.
3 THE COURT: Wel l , t he poi nt I ' mmaki ng i s t hat soon - -
4 I bel i eve t hey may have had such a meet i ng. I ' d have t o go
5 back t o my not es and l ook at i t . I wi l l go back t o t hem.
6 Exhi bi t 2 ment i ons a ki ckof f . I don' t seemt o have a dat e.
7 Then I bel i eve t hat t hat was al l bef or e t he money was
8 sent , but af t er t he awar d was announced, and t hen t he money
9 comes i n and t hese payment s wer e made out . But I ' d have t o go
10 back t o t he act ual r ecor d. Ther e was anot her meet i ng i n
11 November .
12 MR. EVERDELL: Your Honor , r egar dl ess - -
13 THE COURT: I t was t est i f i ed t o wher e he di scussed
14 changes i n t he equi pment budget . Those ar e j ust my not es. I
15 may be wr ong.
16 So, I mean t hey coul d dr aw an i nf er ence f r omt hat , i t
17 seems t o me, t hat he del i ber at el y deci ded not t o abi de by t he
18 agr eement , f or r easons of hi s own, or by t he gr ant t er ms
19 agr eement s of i t s own and wi t hout get t i ng - - and wi t hout
20 get t i ng any pr i or appr oval , and t hat ' s enough f or a j ur y t o
21 det er mi ne t hat he was act i ng i nt ent i onal l y and knowi ngl y.
22 Let me see i f maybe t he dat es wi l l be i n your
23 cr oss- exami nat i on.
24 MR. KWOK: Your Honor , i f I may, I t hi nk i f I r ecal l
25 t he t est i mony cor r ect l y, I t hi nk Mr . Rubi nst ei n i s r i ght , i n
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1 t hat t he ki ckof f meet i ng i n t hi s case happened af t er t he f unds
2 wer e made avai l abl e.
3 THE COURT: Al l r i ght .
4 MR. KWOK: But i n t he end i t doesn' t mat t er , because I
5 t hi nk t her e' s t est i mony al so t hat t hese conver sat i ons about
6 r ent and ut i l i t i es happened at t he pr oposer s meet i ng, even
7 bef or e t he ki ckof f meet i ng, Lee Ger f ei n and Dr . Kar r on cal l ed
8 Hope Snowden t o t al k about r ent . And so when Ms. Snowden went
9 t o t he ki ckof f meet i ng, t he same conver sat i ons happened and - -
10 THE COURT: What about t hi s Ms. Li de, Bet t i what ever
11 her name was, Bet t i - -
12 MR. KWOK: Bet t i J oyce Li de. She al so t est i f i ed t hat
13 she spoke t o t he def endant and t he def endant ' s busi ness manager
14 about t he same t opi c.
15 THE COURT: When?
16 MR. KWOK: Of r ent .
17 THE COURT: When?
18 MR. KWOK: Rent , exact l y cor r ect . When? I bel i eve
19 she t est i f i ed t hat i t was at t he end of 2001.
20 THE COURT: When?
21 MR. EVERDELL: I bel i eve she t est i f i ed - - I bel i eve
22 she t est i f i ed i t was somet i me i n 2001. I don' t know - -
23 THE COURT: Somet i me i n 2001?
24 MR. EVERDELL: I ' d have t o check t hat .
25 THE COURT: Bef or e t he gr ant ?
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1 MR. EVERDELL: Your Honor , t he conver sat i ons t hat I
2 t hi nk ar e par t i cul ar l y r el evant her e ar e t he ones wi t h Hope
3 Snowden, who t est i f i ed par t i cul ar l y t hat even bef or e t he gr ant
4 was awar ded t hat she had conver sat i ons wi t h t he def endant and
5 Lee Ger f ei n about r ent and not bei ng al l owed al l owabl e, and
6 agai n had conver sat i ons wi t h t hemaf t er t he gr ant was awar ded
7 and at t he ki ckof f meet i ng, and al l t hese conver sat i ons
8 happened bef or e t hese f unds wer e dr awn down, and r ent s st ar t ed
9 t o get pai d wi t h f unds. So he was on not i ce.
10 THE COURT: I t wasn' t at t he ki ckof f meet i ng, but
11 t her e was anot her meet i ng, i s t hat your - -
12 MR. EVERDELL: Ther e i s a pr oposer s meet i ng bef or e t he
13 ki ckof f meet i ng, when peopl e who want t o wr i t e pr oposal s f or
14 t he CASI gr ant - - sor r y - - f or t he ATP gr ant go and t hey get
15 educat ed on what t he r ul es ar e, and t hat happened wel l bef or e
16 t he gr ant was awar ded.
17 THE COURT: I guess I ' mt al ki ng about t he pr oposer s.
18 MR. EVERDELL: I t hi nk so.
19 MR. RUBI NSTEI N: I don' t t hi nk Snowden was - - my
20 r ecol l ect i on Ms. Snowden wasn' t at - -
21 THE COURT: I di dn' t t hi nk.
22 MR. RUBI NSTEI N: That - -
23 THE COURT: I don' t t hi nk she was at i t . I t hought
24 onl y Li de and some ot her women wer e at i t .
25 MR. EVERDELL: That ' s r i ght . I don' t t hi nk - - I don' t
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1 t hi nk Ms. Snowden - - wel l , I don' t t hi nk t her e' s t est i mony Ms.
2 Snowden was at t he pr oposer s meet i ng, but she had conver sat i ons
3 wi t h t he def endant hi msel f and wi t h doct or - -
4 THE COURT: No, but t hose ar e - - I mean, you can f i x
5 dat es, but you have t hi s pr obl emof act i ng knowi ngl y and
6 i nt ent i onal l y i n vi ol at i on of t he gr ant t er ms.
7 MR. EVERDELL: That ' s r i ght .
8 THE COURT: That ' s a pr obl em.
9 MR. EVERDELL: And t he conver sat i on was can we use
10 r ent - - or can we use ATP f unds t o pay f or r ent an. She sai d
11 absol ut el y not .
12 THE COURT: I f t he hor se was al r eady out of t he bar n,
13 i t doesn' t go t o i nt ent .
14 MR. EVERDELL: The hor se wasn' t al r eady out of t he
15 bar n. These conver sat i ons happened bef or e t he gr ant f unds
16 st ar t ed get t i ng dr awn down and bef or e t he r ent payment wer e
17 get t i ng pai d.
18 THE COURT: I don' t know whet her t hey di d or di dn' t ,
19 at t hi s poi nt .
20 MR. EVERDELL: Her t est i mony was t hat i t happened
21 bef or e t he gr ant was even awar ded, and t he f i r st dr awdown i s, I
22 bel i eve - -
23 THE COURT: That was my r ecol l ect i on, but - -
24 MR. RUBI NSTEI N: That can' t possi bl y be, your Honor ,
25 because t hey t est i f i ed t hat t hi s was - - Snowden par t i cul ar l y - -
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1 t hat nobody woul d know t hat t hey had t he gr ant unt i l t hey
2 r ecei ved of f i ci al not i f i cat i on and, t her ef or e - - so t he
3 gover nment i s, I submi t , i s a l i t t l e - - i s i naccur at e.
4 MR. EVERDELL: I t doesn' t pr event t hemf r omcal l i ng.
5 THE COURT: I haven' t got any ci t at i on t o t he evi dence
6 bef or e me. No one pr ovi ded me wi t h t hat . And - -
7 MR. EVERDELL: I t ' s al so - - your Honor , t he t est i mony
8 of Hope Snowden i s t hat she had numer ous conver sat i ons wi t h t he
9 def endant and Lee Ger f ei n r emember bet ween t he t i me t hat t he
10 gr ant was awar ded and t he day of t he ki ckof f meet i ng about r ent
11 ut i l i t i es. The f i r st dr awdown f unds, I bel i eve, was
12 Oct ober 26. The gr ant awar ded on 4t h of Oct ober , backdat ed
13 ef f ect i ve as of Oct ober 1st , but she had t hese conver sat i ons
14 wi t h t he def endant bef or e t he f und ar e even dr awn down. And
15 pl us t he f act - -
16 THE COURT: Wher e i s t hat i n t he r ecor d?
17 MR. EVERDELL: I t ' s 254 t o 259 and 303 t o 04. And,
18 your Honor , addi ng t o t hat , i s t hat t hese r ent checks - -
19 THE COURT: I ' ve got t o f i nd a dat e. Wher e i s t he
20 dat e?
21 MR. EVERDELL: I t hi nk i t shoul d be on 254 t o 259,
22 t hose pages.
23 THE COURT: 254?
24 MR. EVERDELL: Of t he t r anscr i pt .
25 THE COURT: I have t he wr ong book. I asked f or dat es.
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1 That - - 254 i s t he day of t he ki ckof f meet i ng, whi ch i s i n
2 November .
3 MR. EVERDELL: And I bel i eve t he quest i on was
4 somet hi ng l i ke, do you have any conver sat i ons bef or e t he
5 ki ckof f meet i ng wi t h - -
6 THE COURT: Wel l , wher e i s t hat ?
7 MR. EVERDELL: I t hi nk i t ' s i n one - -
8 THE COURT: Wai t a mi nut e. I got somet hi ng pr i or
9 t o - - yes, yes. Let me see. 254.
10 MR. EVERDELL: Thr ough 259 and 303.
11 THE COURT: J ust a second l et me - -
12 MR. EVERDELL: Yes, your Honor .
13 ( Pause)
14 THE COURT: I t doesn' t gi ve a dat e. I t doesn' t gi ve a
15 dat e. I can' t f i nd any dat e i n t her e.
16 MR. EVERDELL: Your Honor , I don' t know i f Ms. Snowden
17 r emember ed t he exact dat e when she had t he conver sat i ons, but
18 she sai d - -
19 THE COURT: But i t doesn' t have any dat e, any
20 r ef er ence dat e i n t hat page.
21 MR. EVERDELL: Your Honor , I t hi nk t he t i mef r ame we' r e
22 t al ki ng about her e - -
23 THE COURT: Wai t a mi nut e, wai t a mi nut e. I t hi nk I
24 may have f ound one on 257.
25 MR. EVERDELL: Okay.
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1 THE COURT: I n Oct ober . Thi s i s r i ght af t er he was
2 t ol d t hat he r ecei ved t he document s t hat he woul d be r ecei vi ng
3 t hi s f eder al f und.
4 MR. EVERDELL: Ri ght .
5 THE COURT: Then i t cont i nued.
6 MR. EVERDELL: Whi ch i s t he gr ant ' s awar ded on - -
7 THE COURT: That conver sat i on - - l et me j ust see who
8 t hi s i s wi t h. Thi s does seemt o be wi t h t he def endant . I
9 t hi nk t her e was ment i on of Gur f ei n t her e i n t he quest i on. And
10 t hat does i nvol ve r ent and ut i l i t i es.
11 MR. EVERDELL: That ' s cor r ect , your Honor . So she' s
12 havi ng conver sat i ons, act ual l y mul t i pl e conver sat i ons wi t h bot h
13 t he def endant and Lee Ger f ei n bef or e t he f unds ar e bei ng dr awn
14 down i n Oct ober of 2001, t el l i ng hi mspeci f i cal l y you can' t use
15 ATP f unds t o pay f or r ent , ut i l i t i es.
16 And f ur t her mor e, your Honor , i f you l ook at t he spr ead
17 sheet s, t hese r ent payment s wer e pai d out over t he cour se of
18 sever al mont hs, even af t er t he i ni t i al dr awdown. So t hese
19 conver sat i on he' s havi ng wi t h - -
20 THE COURT: 258 i s t he di scussi on. I t hought t her e
21 was somet hi ng f r omMs. Li de al so.
22 Wel l , t hat seems t o cover t he r ent and ut i l i t y, and
23 t hat seems t o r ai se t he i ssue of t he def endant ' s i nt ent , so I
24 have t o deny t he mot i on. That ' s what I got t o do.
25 Al l r i ght , anyt hi ng f ur t her ? No wor d on - -
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1 MR. EVERDELL: No, your Honor . The appeal s
2 di vi si on - - sor r y, your Honor . The appeal s di vi si on wasn' t
3 abl e t o f i nd anyt hi ng appl i cabl e, so I t hi nk we' l l j ust st ay
4 wi t h what we have.
5 THE COURT: Al l r i ght . I mi ght come up wi t h
6 somet hi ng. I ' l l l ook at a f ew t hi ngs. I want t o l ook at Mr .
7 Rubi nst ei n' s case t hat he r ef er r ed me t o. And you r ef er r ed me
8 t o U. S. ver sus Thompson.
9 MR. EVERDELL: I r ef er r ed you t o U. S. ver sus Ni eman.
10 THE COURT: Ni eman, 211 Fed. 3d. He want s me t o l ook
11 at U. S. ver sus Thompson.
12 MR. EVERDELL: Cor r ect . Mi ne' s 211 F. 3d, 40.
13 THE COURT: Yeah, I ' ve got t hat .
14 MR. EVERDELL: Thank you, your Honor .
15 THE COURT: Okay.
16 MR. RUBI NSTEI N: Thank you ver y much, your Honor .
17 MR. KWOK: Thank you, your Honor .
18 THE COURT: Al l r i ght , wor k har d on your summat i on.
19 MR. EVERDELL: I wi l l , your Honor .
20 MR. KWOK: Cer t ai nl y, your Honor .
21 THE COURT: Wor k har d on your summat i ons al l ni ght .
22 Be her e at 9: 30 i n t he mor ni ng.
23 MR. KWOK: Thank you, your Honor .
24 MR. EVERDELL: Thank you, your Honor .
25 ( Adj our ned t o J une 11, 2008 at 9: 30 a. m. )
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1 I NDEX OF EXAMI NATI ON
2 Exami nat i on of : Page
3 EDGAR E. COONS
4 Di r ect By Mr . Rubi nst ei n . . . . . . . . . . 1135
5 Cr oss By Mr . Ever del l . . . . . . . . . . . 1138
6 THEODORE W. LESLI E
7 Di r ect . . . . . . . . . . . . . . . . . . 1140
8 Cr oss By Mr . Kwok . . . . . . . . . . . . . 1144
9 MI CHAEL R. TREAT
10 Di r ect By Mr . Rubi nst ei n . . . . . . . . . . 1146
11 Cr oss By Mr . Ever del l . . . . . . . . . . . 1149
12 LEE H. GOLDBERG
13 Di r ect By Mr . Rubi nst ei n . . . . . . . . . . 1158
14 Cr oss By Mr . Ever del l . . . . . . . . . . . 1160
15 WI NDY LYNNE FARNSWORTH
16 Di r ect By Mr . Rubi nst ei n . . . . . . . . . . 1180
17 Cr oss By Mr . Kwok . . . . . . . . . . . . . 1187
18 Redi r ect Q. . . . . . . . . . . . . . . . . 1189
19 DEFENDANT EXHI BI TS
20 Exhi bi t No. Recei ved
21 ZZZ and ZZZ- 1 . . . . . . . . . . . . . . 1190
22
23
24
25
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1 UNI TED STATES DI STRI CT COURT
SOUTHERN DI STRI CT OF NEWYORK
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

3 UNI TED STATES OF AMERI CA, New Yor k, N. Y.

4 v. S2 07 CR 541 ( RPP)

5 DANI EL B. KARRON,

6 Def endant .

7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

8
J une 11, 2008
9 9: 2 a. m.

10
Bef or e:
11
HON. ROBERT P. PATTERSON, J R. ,
12
Di st r i ct J udge
13

14 APPEARANCES
KA-3084 KA-3084 KA-3084

15 MI CHAEL J . GARCI A
Uni t ed St at es At t or ney f or t he
16 Sout her n Di st r i ct of New Yor k
BY: STEVEN KWOK
17 CHRI STI AN EVERDELL
Assi st ant Uni t ed St at es At t or neys
18
RUBI NSTEI N & COROZZO, LLP
19 At t or neys f or Def endant
BY: RONALD RUBI NSTEI N
20 WI LLI AM Di CENZO

21
Al so Pr esent : Rachel Ondr i k, U. S. Dept . of Commer ce
22 Ki r k Yamat ani , U. S. Dept . of Commer ce

23

24

25


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1 ( Tr i al r esumed; j ur y not pr esent )

2 THE COURT: I f Mr . Rubi nst ei n i sn' t her e, and I t hi nk

3 i t ' s i mpor t ant t hat bot h si des check ei t her si de' s exhi bi t s and

4 make sur e t hey ar e t he exhi bi t s admi t t ed i n evi dence. Mr .

5 Rubi nst ei n nor hi s associ at e i s her e. So he bet t er get i n

6 her e, Rober t . We' ve got t o make sur e t hose exhi bi t s ar e

7 cor r ect .

8 They wer e of f er ed i n evi dence and t hey wer e admi t t ed

9 i n and not f or i dent i f i cat i on.

10 MR. KWOK: Cer t ai nl y, your Honor .

11 THE COURT: I s he out si de, t he associ at e?

12 MR. EVERDELL: I coul d go check, your Honor .

13 THE COURT: Because he shoul d be checki ng your

14 exhi bi t s.

15 Rober t , woul d you get Mr . Rubi nst ei n' s associ at e.

16 THE DEPUTY CLERK: He was i n t he bat hr ooma second

17 ago.

18 THE COURT: Oh.

19 ( Mr . Di Cenzo now pr esent )

20 THE COURT: Mr . Rubi nst ei n i sn' t her e, but - - I ' ve

21 f or got your name.

22 MR. Di CENZO: Wi l l i am.

23 THE COURT: You' l l have t o check t he Gover nment ' s

24 exhi bi t s t o be sur e t hat t hey' r e exhi bi t s admi t t ed i n evi dence

25 and t hey have t o exami ne your exhi bi t s t o be sur e t hey wer e


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1 admi t t ed i n evi dence, and not j ust f or i dent i f i cat i on.

2 MR. Di CENZO: Okay. I had - -

3 THE COURT: Because we don' t want t o somet hi ng ar i se

4 dur i ng summat i ons wher e t hey say, oh, t hat wasn' t admi t t ed i n

5 evi dence and you say oh, or Mr . Rubi nst ei n says t hat wasn' t

6 admi t t ed i n evi dence, so.

7 MR. Di CENZO: I t was - - t her e was one smal l , I t hi nk

8 i t ' s def ense exhi bi t Q t hat was a quest i on whet her i t was

9 admi t t ed i n evi dence. I want ed t o check t he r ecor d. I ' l l show

10 i t t o you.

11 THE COURT: When was i t of f er ed?

12 THE DEPUTY CLERK: J une 6t h, I t hi nk.

13 THE COURT: I can l ook at my not es, but i t woul d hel p

14 i f when i t was of f er ed, maybe I coul d hel p you. Take i t up

15 wi t h t he gover nment . Maybe t hey have no obj ect i on t o i t . I

16 don' t know. I have t o see Q - - show i t t o t hem. Show t hemQ.

17 Show t hemQ and t hey can det er mi ne whet her t hey have an

18 obj ect i on. I ' ve f or got t en what Q was.

19 MR. KWOK: I t hi nk i t ' s a chai n of e- mai l s, your

20 Honor , r el at i ng t o Fr ank Spr i ng.

21 THE COURT: Rel at i ng t o what ?

22 MR. KWOK: Fr ank Spr i ng, t he gover nment wi t ness wi t h a

23 sl i ght Br i t i sh accent .

24 THE COURT: Her e' s Mr . Rubi nst ei n.

25 THE DEPUTY CLERK: I t was par t of 3507.


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1 THE COURT: Oh, al l r i ght .

2 THE DEPUTY CLERK: Par t of 3507.

3 THE COURT: 3507 i s about 3 i nches t hi ck.

4 ( Mr . Rubi nst ei n now pr esent )

5 THE DEPUTY CLERK: I had i t as bot t omof page t wo, al l

6 of page t hr ee and t hen t he t op of page f our . That ' s t he not e

7 t hat I had on what i t act ual l y was f r omal l t hose document s,

8 but I never act ual l y saw t hat exhi bi t was - -

9 THE COURT: Do your r ecor ds show i t was admi t t ed?

10 THE DEPUTY CLERK: No. I have i t t he - - l ast t hi ng I

11 have was t hat you wer e sayi ng t hat i t shoul d be - - as t o what

12 i t shoul d be, but i t was never act ual l y sai d i t was admi t t ed,

13 but di scussi on was exact l y what i t was supposed t o be.

14 THE COURT: I t may have j ust been done t o r ef r esh hi s

15 r ecol l ect i on.

16 What page was i t ? What page was i t on?

17 THE DEPUTY CLERK: 885.

18 THE COURT: My r ecor d i s wher e?

19 THE DEPUTY CLERK: I s t hat i t , J une 6t h?

20 THE COURT: I don' t bel i eve so. Thi s i s 11.

21 THE DEPUTY CLERK: Today' s, t hey have i t .

22 THE COURT: Was i t used j ust t o r ef r esh r ecol l ect i on

23 or was i t - -

24 MR. KWOK: I t hi nk i t was t o - - we' r e l ooki ng r i ght

25 now. He di dn' t r ecol l ect t he subj ect of t he e- mai l t hat was


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1 shown t o hi m, and i t was not act ual l y admi t t ed - - t her e was

2 act ual l y an obj ect i on l odged.

3 THE COURT: I saw t he obj ect i on, but I di dn' t know

4 whet her - - what happened.

5 MR. EVERDELL: I t doesn' t l ook l i ke i t was ever

6 admi t t ed.

7 THE COURT: I t was used j ust t o r ef r esh r ecol l ect i on.

8 MR. KWOK: I t hi nk t hat ' s f ai r .

9 MR. EVERDELL: Yeah.

10 MR. Di CENZO: I t hi nk I i t was l i ke goi ng t o be

11 admi t t ed and t hen quest i oned i s i t t he whol e page, not t he

12 whol e page, and t hen t hey obj ect ed and t hey - - t her e was no

13 f ur t her di al ogue wi t h t he Cour t on whet her i t was admi t t ed or

14 i t wasn' t admi t t ed.

15 THE COURT: I don' t r emember t he subj ect mat t er .

16 MR. EVERDELL: He says, " I don' t r ecol l ect , your

17 Honor . "

18 THE COURT: Ask Mr . Rubi nst ei n. Exhi bi t Q, Mr .

19 Rubi nst ei n, f or i dent i f i cat i on or was i t admi t t ed? I t hi nk i t

20 was used t o r ef r esh r ecol l ect i on.

21 MR. RUBI NSTEI N: Who i s t he wi t ness?

22 MR. EVERDELL: Spr i ng.

23 MR. RUBI NSTEI N: I t hi nk i t was used t o r ef r esh

24 r ecol l ect i on.

25 MR. EVERDELL: I don' t t hi nk i t ' s admi t t ed.


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1 THE COURT: Wel l , t hen i t i sn' t - - i t ' s f or

2 i dent i f i cat i on onl y, Mr . Wi l l i am.

3 MR. EVERDELL: So no Q, r i ght .

4 THE COURT: Bef or e you came, Mr . Rubi nst ei n, I asked

5 bot h si des t o check t he ot her ' s exhi bi t s so t hat we don' t have

6 a di sput e i n t he mi ddl e of summat i ons as t o whet her somet hi ng' s

7 admi t t ed or not .

8 MR. RUBI NSTEI N: Absol ut el y, J udge. Mr . Di Cenzo i s

9 f i ne. Mr . Kwok saw me i n my new wor k pl ace hi di ng f r om

10 ever ybody I commandeer ed t he caf et er i a. The back wal l has a

11 ver y ni ce l edge, I don' t have t o hur t my back, and I can spr ead

12 my paper s out .

13 THE COURT: Okay. Ar e you al l t hr ough?

14 THE DEPUTY CLERK: Di d t hat wor k out wi t h your

15 exhi bi t s?

16 MR. KWOK: Yes, wi t h one mi nor change. I t hi nk we' l l

17 j ust admi t i t by st i pul at i on?

18 THE DEPUTY CLERK: Okay. Whi ch one?

19 MR. KWOK: 104.

20 THE DEPUTY CLERK: Okay.

21 THE COURT: What i s 104?

22 MR. KWOK: 104 i s an i nvoi ce, your Honor , t hat was

23 admi t t ed by st i pul at i on.

24 THE COURT: Each expect t o t ake what , 40 mi nut es?

25 MR. RUBI NSTEI N: Par don?


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1 THE COURT: Summat i ons, 40 mi nut es?

2 MR. KWOK: For me I t hi nk ar ound t hat nei ghbor hood.

3 MR. RUBI NSTEI N: I ser i ousl y doubt t hat , your Honor .

4 THE COURT: What ?

5 MR. RUBI NSTEI N: I woul d t hi nk an hour and a hal f .

6 THE COURT: I t ' s awf ul l ong.

7 MR. RUBI NSTEI N: Act ual l y i t ' s pr obabl y t he second

8 shor t est summat i on, maybe t he t hi r d shor t est summat i on t hat

9 I ' ve ever pl anned. I don' t even t hi nk I have one f ul l r edwel l .

10 THE COURT: Wel l , I ' l l r emi nd you t hr oughout t he - -

11 MR. RUBI NSTEI N: Okay.

12 THE COURT: Wher e you ar e. But an hour and a hal f ,

13 you' r e goi ng t o put peopl e t o sl eep. I don' t t hi nk i f you t ake

14 40 mi nut es, I don' t t hi nk you need t o t ake mor e t han an hour .

15 We have r ebut t al . I f t hat means I ' ve got t o gi ve t he

16 gover nment a l onger r ebut t al , I don' t want t o gi ve t he

17 gover nment a l onger r ebut t al . I don' t want t he gover nment - -

18 an hour and a hal f woul d mean t he gover nment woul d pr obabl y

19 have t o engage i n a hal f - hour or so of r ebut t al i nst ead of 10

20 or 15 mi nut es at t he most .

21 MR. RUBI NSTEI N: Wel l , I ' l l t r y and cut i t down t o an

22 hour , J udge.

23 THE COURT: Al l r i ght .

24 MR. EVERDELL: Do I have t i me t o r un t o t he r est r oom?

25 THE COURT: Excuse me?


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1 MR. EVERDELL: Do I have - -

2 THE COURT: Of cour se. Let me see i f t her e' s anyt hi ng

3 el se t hat we ought t o t ake up. I want ed t o t ake up t he smal l

4 changes I made i n t he char ge af t er our conf er ence.

5 MR. EVERDELL: Okay.

6 THE COURT: You want t o t ake t hose up now?

7 MR. KWOK: Sur e, we can t ake t hose up now.

8 MR. EVERDELL: Al l r i ght , t hen I ' l l - -

9 THE COURT: I ' ve handed out a copy of t he char ge, I

10 bel i eve you' ve got i t . And I , on t he t r aci ng, I added i n, t o

11 t hat sect i on, money i s f ungi bl e and t he gover nment need not

12 t r ace back.

13 MR. EVERDELL: Thi s i s i n el ement f i ve?

14 THE COURT: On page 22. On page - - I don' t t hi nk page

15 11 need di scussi on about gover nment empl oyee. You' r e awar e of

16 t hat .

17 On page 17 we t ook t he over al l descr i pt i on of t he

18 i ndi ct ment and made i t consi st ent wi t h t he l at t er par t of t he

19 char ge, sayi ng t hat i nt ent i onal l y mi sappl i ed $5, 000 and mor e i n

20 t he car e, cust ody and cont r ol of CASI , whi l e i t was t he

21 benef i ci ar y of a f eder al gr ant of mor e t han $10, 000 a year .

22 I t hi nk t hose ar e t he onl y changes. You mi ght l ook at

23 t he sect i on havi ng t o do, on page 23, havi ng t o do wi t h

24 t r aci ng; ot her wi se, i t ' s as we agr eed.

25 Al l r i ght , why don' t you t ake your br eak.


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1 MR. KWOK: Thank you, your Honor .

2 MR. EVERDELL: Thank you.

3 ( Recess)

4 ( J ur y ent er i ng)

5 THE COURT: Al l r i ght , pl ease be seat ed.

6 Ladi es and gent l emen, we' r e about t o hear - - l adi es

7 and gent l emen, we' r e about t o hear t he summat i ons of counsel .

8 You' r e r emi nded t hat summat i ons of counsel ar e not evi dence.

9 You have t he evi dence bef or e you i n t he f or mof t he t est i mony

10 and t he exhi bi t s r ecei ved i n evi dence and t he st i pul at i ons, but

11 summat i ons can be a hel p t o t he j ur y and hel p t hei r t hi nki ng i n

12 t er ms of t hei r r evi ew of t he evi dence. That ' s what summat i ons

13 ar e f or .

14 So you' l l f i r st hear f r omt he gover nment , and t hen

15 you' l l hear f r omt he def ense, and t hen t he gover nment get s a

16 shor t r ebut t al . So we' l l st ar t wi t h Mr . Kwok and t hen hear

17 f r omMr . Rubi nst ei n and, I don' t know, Mr . Ever del l or Mr .

18 Kwok - - Mr . Ever del l , you' r e goi ng t o do t he r ebut t al .

19 Mr . Kwok.

20 MR. KWOK: Thank you, your Honor .

21 For a year and a hal f , Dani el B- Kar r on, t he def endant ,

22 cheat ed t he gover nment f or over hal f a mi l l i on dol l ar s. He

23 cheat ed a pr ogr amt hat suppor t ed hi mand hi s company, ATP, t he

24 Advanced Technol ogy Pr ogr amt hat suppor t s hi gh r i sk sci ent i f i c

25 r esear ch. The r ul es wer e cl ear and si mpl e, and Dr . Kar r on knew


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1 what t hey wer e; expenses not i ncl uded i n appr oved budget coul d

2 not be pai d f or wi t h gr ant money. But t he def endant j ust

3 di dn' t car e. He sai d he coul d do what ever he want ed, and

4 t hat ' s exact l y what he di d. He t r eat ed t he gr ant l i ke hi s own

5 per sonal pi ggy bank. He woul dn' t t ake no f or an answer .

6 Bef or e t he gr ant was shut down, t he def endant used

7 t axpayer s money t o pay mor t gage on hi s condo, a cl eani ng l ady,

8 medi cal pr ocedur es and househol d i t ems l i ke t hi s bl ender , t hi s

9 GPS syst em, and t hese power t ool s. Al l t ol d, t he def endant

10 mi sappl i ed about hal f of t he $1. 3 mi l l i on hi s company CASI got .

11 When t hi s t r i al began, t he gover nment t ol d you t hat

12 t he evi dence woul d pr ove t o you, beyond a r easonabl e doubt ,

13 t hat t he def endant i s gui l t y of t he cr i me char ged i n t he

14 i ndi ct ment . The evi dence i s now i n, and t hat ' s exact l y what i t

15 shows.

16 Fi r st , t ake a l ook at what i s not i n di sput e i n t hi s

17 t r i al . At t he cl ose of t hi s case J udge Pat t er son wi l l i nst r uct

18 you on t he l aw. I t i s hi s i nst r uct i ons t hat cont r ol . I expect

19 t hat you wi l l l ear n t hat i n or der t o f i nd t he def endant gui l t y,

20 t he f i r st t hi ng t hat you have t o do i s t o deci de whet her he was

21 an agent of Comput er Ai ded Sur ger y, I nc. or CASI . Ther e i s no

22 di sput e t hat t he def endant was t he pr esi dent and t he chi ef

23 t echni cal of f i cer of CASI . How do you know? You know f r omt he

24 document s t he def endant si gned i n hi s capaci t y as pr esi dent and

25 C. T. O. Ther e' s no di sput e about any of t hese document s.


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1 Let ' s l ook at gover nment exhi bi t 10A. That ' s t he appl i cat i on

2 t he def endant submi t t ed t o appl y f or t he gr ant . D. B. Kar r on

3 Ph. D. , chi ef t echni cal of f i cer , Comput er Ai ded Sur ger y, I nc

4 gover nment exhi bi t 12 i s t he gover nment document def endant

5 submi t t ed as pr esi dent agr eei ng t o compl y wi t h t he awar d

6 pr ovi si ons.

7 Dr . Kar r on al so submi t t ed t hi s l et t er , gover nment

8 exhi bi t 21, agai n as CASI ' s pr esi dent and chi ef t echni cal

9 of f i cer , sayi ng t hat hi s busi ness manager Lee Ger f ei n had no

10 aut hor i t y t o si gn f or or commi t CASI f i nanci al l y.

11 I n addi t i on t o f i ndi ng t hat t he def endant was an agent

12 of CASI , I expect J udge Pat t er son wi l l al so t el l you t hat you

13 al so have t o deci de whet her CASI r ecei ved f eder al f unds i n

14 excess of $10, 000 dur i ng a one year per i od. Ther e' s al so no

15 di sput e about t hat .

16 You hear d t he uncont r adi ct ed t est i mony of Bet t i J oyce

17 Li de, t he f i r st wi t ness who came bef or e you. She was one of

18 t he t r ue pr oj ect manager s f or t he gr ant . And Ms. Li de t ol d you

19 t hat CASI got $800, 000 dur i ng year one of t he gr ant . And she

20 t ol d you CASI got about hal f a mi l l i on dol l ar s i n year t wo

21 bef or e t he gr ant was shut down.

22 Hope Snowden and Bel i nda Ri l ey bot h t ol d you t he same

23 t hi ng.

24 So, l adi es and gent l emen, what i s i n di sput e i n t hi s

25 t r i al ? I t al l comes down t o t hi s: Whet her t he def endant


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1 i nt ent i onal l y mi sappl i ed $5, 000 or mor e of f unds under CASI ' s

2 cont r ol t o pay f or unaut hor i zed expenses. Bef or e I t ur n t o t he

3 def endant ' s i nt ent , l et ' s go t hr ough t he evi dence bef or e you

4 t hat shows you t hat t he def endant di d i n f act mi sappl y $5, 000

5 or mor e i n f unds under CASI ' s cont r ol .

6 Now, t her e ar e a l ot of number s bei ng t hr own ar ound i n

7 t hi s t r i al , because huge sums of money ar e i nvol ved. But when

8 you get down t o i t , t he mi sappl i cat i on of f unds i s ver y si mpl e.

9 The gr ant speci al i st , Ms. Snowden, t ol d you t hat t he r ul es

10 under t he ATP pr ogr amar e si mpl e. She t est i f i ed t hat she t ol d

11 awar d r eci pi ent s, i ncl udi ng Dr . Kar r on, t hat your awar d budget

12 i s l i ke your Bi bl e; you must f ol l ow t he budget unl ess you get

13 advanced wr i t t en appr oval t o change i t . I t ems t hat don' t f al l

14 under any appr oved cat egor i es i n t he budget can' t be pai d f or

15 usi ng gr ant money. I t i s t hat si mpl e. Even f or t hi ngs t hat

16 can be pai d f or wi t h gr ant money i n t heor y, you need wr i t t en

17 appr oval i f you spent mor e t han what i s al l owed i n t he budget ,

18 unl ess t he change i s smal l , def i ned as any amount l ess t han

19 10 per cent of t he annual t ot al budget .

20 So how di d act ual spendi ng at CASI st ack up agai nst

21 t hat appr oved budget at CASI ? Now, t her e r eal l y i s no ser i ous

22 di sput e about how CASI spent i t s money, because al l of t he

23 t r ansact i ons ar e document ed i n bank r ecor ds and cr edi t car d

24 st at ement s. Wi t nesses may get f l ust er ed, t hey may not be abl e

25 t o do mat h on t he st and, t hey may get ner vous, but appr oved


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1 budget and t he col d har d number s i n t hese f i nanci al st at ement s,

2 t hey speak f or t hemsel ves.

3 Now you hear d about audi t s i n t hi s case. Audi t s ar e

4 not hi ng mor e t han a sampl e t est i ng based on t he company' s books

5 and r ecor ds. They' r e subj ect t o change as t he company' s

6 r ecor ds change. These audi t s ar en' t per f ect , especi al l y when

7 t he company books wer e a mess and t he gover nment al r eady

8 audi t or , Ms. Ri l ey, t ol d you t hat her sel f .

9 But you don' t have t o r el y on Ms. Ri l ey' s or on anyone

10 el se' s audi t s i n t hi s case, because t he gover nment has put

11 bef or e you bank r ecor ds, cr edi t car d st at ement s, and vendor

12 i nvoi ces showi ng exact l y wher e t he money t hat came i nt o CASI

13 came f r om, and wher e t hat money went . Ther e i s no guesswor k

14 i nvol ved i n t hi s case.

15 Now, i n hi s cr oss- exami nat i on, def ense counsel kept

16 r ef er r i ng t o di f f er ent set s of books kept at CASI at di f f er ent

17 t i mes by di f f er ent peopl e, and t hese changi ng books make i t

18 seemas t hough i t ' s cet er a i mpossi bl e t o t el l what r eal l y went

19 on. Ladi es and gent l emen, t hat ' s a r ed her r i ng. None of t hat

20 mat t er s. Those f i nanci al r ecor ds don' t depend on what CASI ' s

21 books say or don' t say. These r ecor ds come di r ect l y f r omt he

22 banks and f r omt he cr edi t car d company showi ng exact l y wher e

23 t he money went .

24 Now, t o hel p you r evi ew t hese r ecor ds, Ms. Ri l ey

25 cr eat ed a spr ead sheet , t hat spr ead sheet , gover nment Exhi bi t


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1 110, showi ng exact l y what went on i n CASI ' s busi ness account s.

2 So l et ' s go t hr ough some exampl es t o show you how t hat spr ead

3 sheet wor ks.

4 Now, her e' s a page f r omgover nment exhi bi t 90, t he

5 Amer i can Expr ess cr edi t car d st at ement s i ssued t o CASI f or t he

6 def endant ' s use. The l i st of t r ansact i ons on t hi s page and on

7 t he f ol l owi ng pages ar e t r ansact i ons made under t he name of

8 Dr . D. B. Kar r on. I t says t hat r i ght t her e on t he page. As an

9 exampl e, t ake a l ook at page t hr ee of t hi s mont hl y st at ement

10 and f i nd November 29t h, 2002. Ther e was a char ge f or $13. 91 at

11 St ar bucks Cof f ee, New Yor k. Now, t hat i nf or mat i on i s r ef l ect ed

12 i n t he spr ead sheet Ms. Ri l ey cr eat ed, gover nment Exhi bi t 110,

13 page 25 of 37; St ar bucks Cof f ee, $13. 91. As anot her exampl e,

14 l et ' s go t o December 3r d, 2002 of t he cr edi t car d st at ement .

15 Dr . Kar r on went t o I Hop, and i ncur r ed a char ge of $33. 84 i n

16 Ar l i ngt on, Vi r gi ni a. That i nf or mat i on i s once agai n r ef l ect ed

17 i n Ms. Ri l ey' s spr ead sheet , page 23 of 37, I Hop, f or $33. 94.

18 As a l ast exampl e, l et ' s go t o page t hr ee of t he cr edi t car d

19 st at ement . Dr . Kar r on went t o an I ndi an r est aur ant i n New Yor k

20 and i ncur r ed a char ge of $107. 75. Agai n, t hat i nf or mat i on i s

21 r ef l ect ed i n Ms. Ri l ey' s spr ead sheet , gover nment exhi bi t 110

22 agai n, page 25 of 37. The I ndi an r est aur ant , t he pr i ce,

23 $107. 25. Now, l et ' s go t o t he f i r st page of t hat cr edi t car d

24 st at ement t hi s page shows t hat t he char ges we j ust t al ked

25 about , as wel l as al l t he char ges dur i ng t hi s mont h, t ot al up


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1 t o ar ound $1, 450. 30. And how' s t hat pai d f or ? So l et ' s go t o

2 t he dat a base and see. Let ' s go t o gover nment Exhi bi t 110

3 agai n, page t hr ee of 37. Ther e i s an ent r y showi ng CASI made a

4 payment t o Amer i can Expr ess, mi nus $1, 450. 30 cent s. Ri ght

5 t her e. But don' t j ust t ake Ms. Ri l ey' s wor d f or i t . Check her

6 wor k agai nst t he bank st at ement s f r omChase Bank. So l et ' s

7 pul l t hat up, gover nment exhi bi t 81 f or t he December 21st ,

8 2002, t o J anuar y 23r d, 2003 per i od, page t hr ee of f our . Her e

9 i t i s. December 30t h, Amer i can Expr ess, $1, 450. 30. And what

10 money went i nt o t hi s Chase account ? Let ' s go t o t he f i r st page

11 of t he same exhi bi t . Ther e i t i s, l et ' s zoomt hat i n. ATP

12 gr ant , 12/ 31, 20K; J anuar y 10t h, 20K, J anuar y 22nd, 28K. And

13 Ms. Ri l ey put t hat i nf or mat i on on her spr ead sheet s. Let ' s go

14 back t o Ms. Ri l ey' s spr ead sheet , l et ' s zoomt hat i n, r i ght

15 t her e. 20K, 20K, 28K on t he dat es t hat I j ust r ef er r ed t o.

16 But Ms. Ri l ey di dn' t j ust put i nt o t hi s spr ead sheet money

17 comi ng i n f r omt he ATP. Wher e t her e was money comi ng f r om

18 el sewher e, Ms. Ri l ey put t hat i n as wel l . You r emember when

19 Ms. Ri l ey was up on t hat wi t ness st and, Mr . Rubi nst ei n wai ved

20 ar ound t hese cancel l ed checks, gover nment exhi bi t - - def ense

21 exhi bi t FFF t o show t hat Dr . Kar r on put hi s money i nt o CASI .

22 I t ' s not cl ear what t he poi nt of al l t hat was, but one t hi ng i s

23 cer t ai n, i f t he poi nt was t o show t hat Ms. Ri l ey made a

24 mi st ake, t hat di dn' t wor k. Ther e was no Per r y Mason moment

25 t her e, because al l of t hi s i nf or mat i on i s r ef l ect ed i n Ms.


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