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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA CASE NO. 97 14687-BKC-AJC
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IN RE: STEPHAN JAY LAWRENCE, Debtor.

DECEMBER 5, 2000 HEARING RE: TRUSTEE'S EX-PARTE MOTION TO RESET STATUS CONFERENCE - UNDER SEAL

The above-entitled cause came on for hearing before the HONORABLE THOMAS UTSCHIG, at the Claude Pepper Federal Building, 14th Floor, Miami, Dade County, Florida, at or about 1:30 p.m. on Tuesday, December 5, 2000, and the following proceedings were had:

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Case 97 14687 AJC Document 1733 Filed 12/22/2005 Page 3 of 31
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APPEARANCES: BERGER DAVIS & SINGERMAN by: JAMES FIERBERG, ESQUIRE PAUL AVRON, ESQUIRE on behalf of the Trustee U.S. ATTORNEY'S OFFICE by: GRISEL ALONSO, ATTORNEY-AT-LAW on behalf of the U.S. Attorney's Office. FEDERAL BUREAU OF PRISONS by: RICHARD DEAGUIAR, ESQUIRE on behalf of the Federal Bureau of Prisons.

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MR. FIERBERG: Good afternoon, Judge. Nice to see you again. THE COURT: Yeah, pleasure to be here. It's cold everywhere in the nation, but it's even cold down here which is surprising. MR. FIERBERG: We wanted you to feel comfortable and not suffer shock when you got here, Judge. THE COURT: Right. Well, this is the matter of Stephan Jay Lawrence, Case 97-14687. The matter before the Court is the Trustee's ex-parte motion under seal to reset status conference, and I would ask for the appearances, please. MR. FIERBERG: Thank you, Judge. James Fierberg, Berger Davis & Singerman, on behalf of Alan Goldberg the Chapter 7 Trustee. MR. AVRON: Paul Avron, Your Honor, Berger Davis & Singerman, for the Chapter 7 Trustee, Alan Goldberg. MR. DEAGUIAR: Richard Deaguiar, counsel for the Bureau of Prisons. MS. ALONSO: Good afternoon, Your Honor. Grisel Alonso, Assistant United States Attorney, co-counsel. THE COURT: Okay. Very good. Mr. Fierberg.

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MR. FIERBERG: Yes, Judge. First, let me thank you for setting this on an expedited basis. I'm hopeful that after the argument and discussion here today we will hopefully resolve many of these issues. By way of background, Judge, you are uniquely familiar with the history of this case. Mr. Lawrence was incarcerated on September 15th. He surrendered to the Federal Detention Center as a result of his contempt of the turnover order that you issued and Judge Cristol had it amended. You'll also recall that District Judge Gold released Mr. Lawrence two days after his initial incarceration pending appeal. That appeal was resounding affirmance of your order and the orders of Judge Cristol and as a result Mr. Lawrence is back in jail. I have shared some confidential matters with Mr. Deaguiar and so I will repeat them in court to the extent I can to try and underscore the urgency of what we are seeking. Judge, you're obviously familiar with the Lawrence Family 1991 Inter Vivos Trust, the trust that Mr. Lawrence established in the Mauritius Republic. You previously ruled that that trust

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was property of the estate, that Mr. Lawrence had continuing managerial and beneficial interest in the trust. Pursuant to certain orders that Judge Cristol has entered under seal there are representatives of the estate who are seeking diligently to locate those assets and have made significant progress in Europe in doing so. We seek the tapes that the Bureau of Prisons routinely make of inmate calls in order to tie together the materials we need in order to seek a Morava Injunction in England and potentially other countries where we believe the assets to be. When we were before Judge Cristol on this on November 16th, initially, Mr. Deaguiar presented a log to Judge Cristol and that log revealed, although I've not seen it nor has Mr. Avron, revealed approximately 354 telephone calls made by Mr. Lawrence in the short stay of 60 days incarceration. On that log Judge Cristol remarked that there were some international calls as well, these were all made from prison. We know that Mr. Lawrence signed for a handbook when he was incarcerated which advised him that his calls would be taped. I believe that

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there are stickers on the telephone and in the telephone area advising Mr. Lawrence that his calls are subject to being taped. We, therefore, submit that there is no privacy interest, no legitimate privacy interest of Mr. Lawrence as to the conversations that he may have had on those telephone calls. We believe that the Trustee has made a reasonable request. We think it is in furtherance of the orders of Your Honor and Judge Cristol, and we think under the equitable powers under Section 105 (a) the order we're seeking does enforce -does in fact assist in the enforcement of process and orders this Court has previously issued. The Bureau of Prisons has responded in prior hearing that there are certain regulations in the Code of Federal Regulations for certain statutes which preclude the release we're seeking. We were advised to make a formal written request to the Bureau of Prisons. We did that. We did that with the assistance of Mr. Deaguiar. We were told after we sought this emergency hearing that the Bureau of Prisons had declined to voluntarily provide those tapes to us. Prior to this hearing we were having some

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discussions with the Bureau of Prisons' representatives and I think that there may be some manner to assuage their concerns, give them comfort, to not over burden them unduly given the volume of calls Mr. Lawrence seems to be making, and yet still provide the estate with the much needed information in order to tie up what we need to satisfy the courts in Europe. With that said, I will turn the lecturing over to counsel and let them present their position. Thank you very much, Judge. THE COURT: Very well. MR. DEAGUIAR: Good afternoon, Your Honor. THE COURT: Good afternoon. MR. DEAGUIAR: The Bureau basically is objecting to the release of the records sought on three bases. The Bureau believes that there are some privacy interests involved and not necessarily going specifically to the inmate in our custody, but to those individuals who he is calling on the telephone. We don't believe that we can release their conversations absent a court order from this Court pursuant to the Privacy Act. The Bureau also objects to the release based on the argument that the Bureau is precluded from

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releasing the telephone tapes by Title 3, and that rational is based on the fact that the Bureau is able to monitor inmate telephone calls based on the Law Enforcement Exception to Title 3, and the Bureau monitors those calls exclusively for law enforcement purposes to maintain the security and orderly running of the institution. We don't believe that Title 3 would permit us to release the calls to the Trustee as requested. Finally, Your Honor, the Bureau would object to the release of the records based on the burdensome nature of the request. As counsel pointed out during the last hearing I presented Judge Cristol with a log of the calls made, and I can present Your Honor with a copy of that log if you'd like. THE COURT: Yes. MR. DEAGUIAR: Now, according to this log -this is a log run by the inmate's register number indicating how many calls he has made, and the log was run covering his date of incarceration on September 15th and covered through November 9th. I didn't have time to update the log in the short notice regarding the change in the status conference.

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According to that log there are approximately 354 telephone calls that this particular inmate has made, and part of the Bureau's objection is that it would be overly burdensome to require Bureau staff to record and provide each of those conversations. According to my conversation with officers in the special investigative section, it takes up to 20 minutes to record a single call. So given the number of calls that could take quite a bit of time and it would divert the Bureau's resources and specifically the Federal Detention Center's resources from maintaining security and monitoring inmate telephone calls which they're doing to maintain security and to protect the public and it would focus those resource instead on providing recorded telephone conversations which we are not certain would yield any evidence. Consequently, if the Court were to require production we would seek to narrow the scope of the Trustee's request. THE COURT: Very well. MR. FIERBERG: Your Honor, as to the privacy issue which really is the only one that I would address, I don't know any case that provides, nor has counsel delivered to me a case, which allows

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them to have standing to assert certain privacy rights of third-party recipients of these phone calls, so I don't really think that's an issue here. We are prepared to narrow the scope of our request both in terms of time and number. I was advised by Mr. Deaguiar that many of the calls in the log you have which, again, I have not seen, are considered zero calls, they are zero minutes. We would obviously not be asking for those to be pulled out of the tapes and recorded. We also would hope that after we reviewed the log we could further reduce the scope of the actual tapes that needed to be recorded. There is a procedure, Judge, that we've been told exists for this kind of undertaking. I have been advised this morning that it is, unfortunately, the law enforcement officers themselves, the F.B.I. agents, or whoever, come in and sit down and go through the tapes, and I've also been told that there is a $27 per hour rate for this kind of thing to be done. The estate is ready and willing to make that expenditure for whatever hours it takes to get these tapes. I would suggest as a first step if we could

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have the log, review the log. We, therefore, could then with our representatives who have been retained under seal, identify the calls that are important and hopefully reduce the scope significantly. We would also ask, Judge, that if an order is going to be entered with the appropriate comfort to the Bureau that this be a continuing process where logs are delivered to us on some basis and we will go through the process again of identifying those calls which are recorded. We had initially asked for tapes every two weeks, that's aggressive and that's burdensome, and we would withdraw from that, and I guess that's my position, Judge. We're happy to try and work out whatever gives the Bureau appropriate comfort. THE COURT: All right. Is there any other comment on this request? MR. DEAGUIAR: If I may briefly? THE COURT: Yes. MR. DEAGUIAR: I would just request if the Court is inclined to grant the order that the Trustee seeks, if it would weigh the privacy interests of the individuals involved against the

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benefit of ordering the production of these records; and also we would object to the continuing nature of this request and would request instead that if the Court is inclined to enter an order it be for a one-time disclosure and any future disclosures to be addressed at the time that the Trustee finds anything that may be of relevance on the tapes. THE COURT: Okay. MR. FIERBERG: Judge, one brief response? I'm sorry, were you done? MR. DEAGUIAR: Yes. MR. FIERBERG: Judge, Mr. Lawrence is a unique character and, again, you have the unique knowledge of the background of Mr. Lawrence. To have a cutoff date, basically gives Mr. Lawrence carte blanche to continue his money-moving operations. We are convinced by what our representatives, which have been retained under seal, tell us and the documents we've received from their undertaking that money is being moved at a precipitous rate through Mr. Lawrence and his operatives. It is imperative that we are able to continue tracing them until such time as the -- a Morava Injunction, hopefully is entered, which

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freezes those assets. So we would ask that it be continuing at least until that Morava Injunction is sought and approved by courts in the Commonwealth. THE COURT: Okay. Tell me how that would work, the Morava Injunction. MR. FIERBERG: I'm not sure I understand your question, Judge. THE COURT: You would seek this in England? MR. FIERBERG: Yes. Are you familiar with Morava injunctions? THE COURT: No, I am not. MR. FIERBERG: I'm sorry. A Morava Injunction -- Morava was the name of a ship, it's the name of a case, the Morava Injunction, and under it courts in England and other Commonwealth nations will put a freeze on assets assuming that sufficient evidence is presented. Now, we have gotten already an order from the court in England to compel certain financial institutions to deliver reams of evidence. The judge was satisfied over there by the amount of information we had, but before we go to the next step of actually freezing the assets, we need some more information, and once we get that information

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there would obviously -- and we get the Morava Injunction, there would be no need -- or the need would be significantly diminished, I should say, to get these further logs and tapes because we would have frozen Mr. Lawrence's assets in the UK and other places. THE COURT: Okay. Well, let me ask you, Mr. Fierberg, the first thing that came to my mind when I thought about access to these records would be, what about privileged communications with, for instance, you're the man who's incarcerated, what's his attorney informed? How is he protected in that regard? MR. FIERBERG: I'm told, and perhaps Mr. Deaguiar can expand on this, that there is a separate procedure if he needs to talk to his attorneys, and we're not looking for that. I mean, if he's foolish enough to have made a phone call to his attorney on an open line that is recorded then that's his loss, he's waived his privilege, there's no expectation of privacy on those phone calls. However, I understand there is a separate procedure for those calls. MR. DEAGUIAR: The way that works, Your Honor, is that the inmate can request an

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unmonitored legal telephone call and he can make those calls on a staff telephone, but there is obviously the possibility that he is speaking with counsel on the monitored telephone. THE COURT: Okay. Let me ask you as well, if you don't mind, what kind of precedent is there for this type of request? MR. DEAGUIAR: Well, generally, Your Honor, these requests are made in the course of a criminal case by criminal counsel and the government objects and usually at a minimum the court requires that the request be narrowed in scope. In those cases, Your Honor, the United States is a party to the case. Here, the United States -- the Bureau doesn't feel that the United States is necessarily a party to the case, so we would request that the Court look at this with more of a skeptical eye. There is some precedent that was referred to me by the U.S. Attorney's Office for the assertion that the United States is not a party. Given the short notice, however, Your Honor, I have not been able to review that precedent, although I can provide you with some cites to the case law.

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THE COURT: Okay. Mr. Fierberg, you have some comment? MR. FIERBERG: Did you want me to respond to that, Judge? THE COURT: Yes. MR. FIERBERG: At the last hearing Mr. Deaguiar presented us with a number of Federal regulations on this issue and among those entities that are considered the United States is the U.S. Trustee, and I'm citing to the Code of Federal Regulations to Title 28, Chapter 1, Section 16.21. While clearly Mr. Goldberg is not a U.S. Trustee he derives his existence through the Office of the United States Trustee, he's appointed by the United States Trustee, he operates under the guidelines of the United States Trustee, he can be removed by the U.S. Trustee, he can be suspended by the U.S. Trustee. So I think that there is enough of a nexus between Mr. Goldberg and the U.S. Trustee and that which is recognized in the regulations to justify this action. THE COURT: Well, let's just assume for a moment that he is a representative of the United States through this nexus he has to the U.S.

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Trustee, part of the Department of Justice, then what does that mean? MR. DEAGUIAR: The Government would argue, Your Honor, that providing the tapes to the Trustee would still be outside of the scope of Title 3 because Title 3 is specifically excepting law enforcement from the wire tapping requirements if they're monitoring calls for the purpose of law enforcement activity in the ordinary course of business. It isn't in the Bureau's ordinary course of business to record inmate telephone conversations for any purpose other than institutional security and ensuring public safety. It is our position that it would still fall outside the scope to provide it even to another arm of the United States Government. MR. FIERBERG: Mr. Avron can address our Title 3. THE COURT: Yes. MR. AVRON: Judge, just very briefly. It is true that the ordinary course of Law Enforcement Exception is one of the exceptions to Title 3, but there is another exception and that is the Consent Exception, and that derives from Mr. Lawrence's

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actual knowledge that all the calls monitored are subject to recording. In the letter dated November 21 attached to our motion to reset the status conference we cited case law, and I've previously given copies of those cases to Mr. Deaguiar and I have copies to give to Your Honor, and they specifically find that when an inmate has knowledge that his calls are really monitored and are subject to recording he has in fact consented, and therefore that is no exception to Title 3. Therefore, we think it's applicable here, and I have those cases with me if you'd like me to submit them to Your Honor and Mr. Deaguiar. I've cited them specifically on Page 2 of the letter and Footnote Number 1, it's specifically Footnote Number 1, I addressed that very issue on the second page of the letter, Your Honor. THE COURT: Okay. One question I would have, Mr. Fierberg, so if you had this information I'm just curious what you would do with it? For instance, let's say that I gave a limited order and said you may have access to the log and you need a further court order to go beyond that, would that be sufficient to get you started and

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would that be useful to you? MR. FIERBERG: It certainly would be a step in the right direction, Judge, but I think that we need to know what Mr. Lawrence is saying to certain parties in order to provide an affidavit to the British Court. So just having the log means we're going to have investigators go out and do the things that they do when the evidence may be right on the tape and all we have to do is listen to it. So, yes, we would very much appreciate the log, but I don't think it gives us really what we need. Again, I'm willing to -- the Trustee is willing to narrow the scope significantly, we're willing to undertake the expenses, but as you know this has been a three year hard court battle. We're so close to recovering this money for the estate that we think that the Holy Grail is in those tapes and it's very critical, Judge. THE COURT: Let me ask you as well, as you know the grant of jurisdiction to the Bankruptcy Court is extremely broad, and sometimes people looking at the bankruptcy system from the outside think, well, that's probably not very interesting because all they do is debtor/creditor type law,

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but this case actually proves otherwise. MR. FIERBERG: That is right. THE COURT: Nevertheless, one of the things that we don't do in Bankruptcy Court, of course, is criminal matters, it's one of the only things, even things like divorce law, for instance, are often in this court and questions of dischargeability of maintenance versus property division. So I'm just wondering, Mr. Fierberg, if you really want this relief from this court or if you'd rather have this court defer and bring it to the District Court that would have more experience in these matters than the Bankruptcy Court would? MR. FIERBERG: Judge, actually, I think not. I think that, respectfully, Judge Cristol at the prior hearing found he had jurisdiction over this matter, he found that he was a court of the United States in a matter we've litigated, and I'm satisfied with the jurisdiction of this court to enter the relief we're seeking. THE COURT: Okay. Specifically, what would you do to narrow the scope of your request, Mr. Fierberg? MR. FIERBERG: Judge, we would review the log

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and those many, many calls that I believe are on that log which are zero, those are clearly calls we don't need. Beyond that, and I understand it's well over a third of the calls is what you're telling me? I don't recall the number, but a significant number of the calls are zero minute calls. That automatically excises a tremendous amount. There are calls that I think we'll be able to match up numbers for that have no interest to us, personal type things, that have no interest to us. It is the calls to people that are connected with Lawrence directly or tertiary that are going to put this together. So once I see the log, Judge, I'll have a better idea. I don't want to keep running back to court to get this tape and that tape and the next tape. I'd rather have a tight order that perhaps we could draft together which satisfies the concerns of the Bureau, gives them the comfort that they need in terms of third-party, whatever they're looking for, and yet allows the Trustee to get the information that he so desperately needs. THE COURT: All right. Another item which is of interest to me would be the fact that,

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Mr. Fierberg, if you had this order from this court, ex-parte order, at some point Lawrence and his counsel may learn of course of the order, and I'm wondering if you're concerned that you may have any exposure in that regard? I'm not talking malpractice wise, but in terms of what you intend to accomplish here. MR. FIERBERG: I thought a lot about that, Judge. I don't think it's that much of a concern to us. I think Mr. Lawrence is incarcerated for a simple contempt of this Court's order. I think that the Bankruptcy Code allows you under 105 (a) with the power to do whatever is necessary to enforce orders. I think it would be clearly an act of absurdity to give Mr. Lawrence notice that we're trying to get tapes and then suddenly stop making phone calls. So the Trustee is willing to take the risk and the responsibility for his action. THE COURT: Okay. Anything further at this point? MR. DEAGUIAR: May I just rebut briefly, Your Honor? THE COURT: Yes. MR. DEAGUIAR: Merely referring to Counsel's

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assertion to the cases provided to the Government and cited in his letter, I would merely distinguish them. I've read the cases provided by Counsel, and they specifically address Title 3 in the perspective of whether evidence would be admissible against someone in a Criminal Court when Title 3 would ordinarily preclude telephone monitoring, and they address the fact that the Bureau does fall within the Law Enforcement Exception to Title 3, so the Bureau can monitor the telephone calls; and also that the inmate has consented to monitoring of phone calls and consequently they're admissible in a law enforcement proceeding, and that is a very different context than seeking to admit the call or the tapes for non-law enforcement purposes. I just wanted to make that clarification to the Court. I would seek perhaps if the calls are sought, if the order could be narrow in scope, perhaps to a specific area code, time of day, or number. I just wanted to reiterate that to the Court. THE COURT: All right. Anything further? The Court will recess briefly. I ask that you remain. You may want to discuss how you could

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