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IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA CASE NO: 09-062943 07

RAZORBACK FUNDING, LLC, et al, Plaintiffs, vs. SCOTT W. ROTHSTEIN, et al, Defendants. ________________________________/

DAY 2 - AFTERNOON SESSION DEPOSITION OF SCOTT W. ROTHSTEIN

DATE TAKEN: TIME: PLACE:

Tuesday, December 13, 2011 12:30 p.m. - 5:00 p.m. 99 N.E. Fourth Street, Miami, FL

Taken on Behalf of Razorback

Examination of the witness taken before:

Terri Wright United Reporting, Inc. 1218 Southeast Third Avenue Fort Lauderdale, Florida 33316 (954)525-2221

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Plaintiffs, EDWARD J. MORSE, CAROL A. MORSE, and MORSE OPERATIONS, INC., IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA CASE NO: 09-062943 07

6
vs.

7
SCOTT W. ROTHSTEIN, et al,

8 9 10 11 12 13 14
Case No: 10-03767 RBR AMY ADAMS, ET AL, PLAINTIFF VS. SCOTT ROTHSTEIN, ET AL. CASE NO: 0:11-CV-61688-JIC/LSS Defendants. ________________________________/ UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION

15 16
Case No: 10-03802-RBR

STETTIN VS. GIBRALTAR PRIVATE BANK & TRUST CO.

17 18
Case No: 11-02288-RBR

STETTIN VS. CENTURION STRUCTURED GROWTH LLC, ET AL.

19 20
Case No: 11-02368-RBR

STETTIN VS. FIDELITY CHARITABLE GIFT FUND

STETTIN VS. TD BANK, N.A.

21 22 23
Case No: 11-02604-RBR Case No: 11-02473-RBR STETTIN VS. REGENT CAPITAL PARTNERS, LLC ET AL STETTIN VS. MAPLE LEAF DRILLING PARTNERS, ET AL STETTIN VS. DON KING PRODUCTIONS,

24 25
Case No: 11-02605-RBR

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CARAN L. ROTHCHILD, ESQUIRE GREENBERG TRAURIG Appearing on behalf of TD Bank, N.A. THERESA M.B. VAN VLIET, ESQUIRE JOHN H. GENOVESE, ESQUIRE Appearing on behalf of the Trustee. MICHAEL GOLDBERG, ESQUIRE AKERMAN SENTERFITT Appearing on behalf of Official Committee of Unsecured Creditors. SUSAN E. TRENCH, ESQUIRE GOLDSTEIN, TANEN & TRENCH, P.A. Appearing on behalf of Platinum and Centurion. HARVEY SERBLOWSKY, ESQUIRE Appearing on behalf of Platinum & Centurion Funds. CHARLES L. LICHTMAN, ESQUIRE BERGER SINGERMAN Appearing on behalf of the Chapter 11 Trustee, Herbert Stettin. ************ MARC S. NURIK, ESQUIRE Appearing on behalf of SCOTT ROTHSTEIN. ADAM MOSKOWITZ, ESQUIRE KOZYAK, TROPIN & THROCKMORTON, P.A. APPEARANCES FOR RAZORBACK: WILLIAM R. SCHERER, ESQUIRE REID COCALIS, ESQUIRE IVAN KOPAS, ESQUIRE CONRAD & SCHERER, LLP

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SCOTT SCHMOOKLER, ESQUIRE Appearing on behalf of RLI Insurance, Columbia Insurance and Zurich Insurance. JESUS SUAREZ, ESQUIRE Appearing on behalf of the Trustee. JOHN MULLIN, ESQUIRE GEORGE WALKER, ESQUIRE TRIPP SCOTT Appearing on behalf of Morses. ALEX HOFRICHTER, ESQUIRE LAW OFFICES OF ALEX HOFRICHTER, P.A. Appearing on behalf of Federal Insurance Company. DAVID C. CIMO, ESQUIRE GENOVESE JOBLOVE & BATTISTA Appearing on behalf of the Trustee. TUCKER CRAIG, ESQUIRE BILLING, COCHRAN, LYLES, MAURO & RAMSEY, P.A. Appearing on behalf of Rosanne Caretsky. RAMON A. RASCO, ESQUIRE PODHURST ORSECK Appearing on behalf of Frank Preve. CHRISTOPHER G. BERGA, ESQUIRE LYDECKER DIAZ, LLC Appearing on behalf of Szfranski. MICHAEL SCHLESINGER, ESQUIRE SCHLESINGER & COTZEN Appearing on behalf of Frank Spinosa. MARY BARZEE FLORES, ESQUIRE MATTHEW DATES, ESQUIRE STEARNS WEAVER Appearing on behalf of Gibraltar Bank.

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ROBERTA M. DEUTSCH, ESQUIRE THE LAW OFFICE OF ROBERTA M. DEUTSCH Appearing on behalf of Carol Morse. JACK SIEGAL, ESQUIRE Appearing on behalf of Fepict, MS Group. LAWRENCE LAVECCHIO, ESQUIRE Appearing on behalf of the U.S. government. JAMES A. BLACK, JR., ESQUIRE Appearing on behalf of St. Paul Fire & Marine. BART HOUSTON, ESQUIRE Appearing on behalf of Levinson, Pearson & Associates, Roger Stone and Watch U-Want, Inc. CASEY CUSICK, ESQUIRE Appearing on behalf of Emess Capital, LLC.

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SCOTT W. ROTHSTEIN EXAMINATION INDEX PAGE I N D E X

6 7 8 9 10 11
EXHIBITS EXHIBIT INDEX PAGE CONTINUED DIRECT BY MR. SCHERER DIRECT BY MR. MR. LICHTMAN 287 411

12 13 14 15 16 17 18 19 20 21 22 23 24 25
Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. 46. 47. 48 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 325 337 350 358 366 372 375 377 381 385 387 392 393 394 398 400 406 408

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CONTINUED DIRECT EXAMINATION BY MR. SCHERER: Q A Q A Q Good afternoon, Mr. Rothstein. Good afternoon. You know you're still under oath, right? I do, sir. Okay. I know that one of the charities that you

supported with other people's money as you mentioned was the Boys and Girls Club of Fort Lauderdale. A Q That's correct. And you were pretty active there at auctions and

things like that? A Q Yes. And do you know who was on the board of

directors kind of running that thing, that couple of fellows that were involved in this Ponzi as investors? MR. SCHLESINGER: foundation. MR. SCHERER: Counsel. I'm just laying a foundation, Object to form; lack of

I'll do that.

BY MR. SCHERER: Q at all? A I believe that they were. I was actually on the Any of the board involved in this Ponzi scheme

board with them.

Ted Morse was on the board, Doug

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Von Allmen sat on the board, Linda Von Allmen sat on the board. If I saw a list of the Board I could tell you who

was and who wasn't. Q Did Ted know that Mr. Von Allmen was investing

in the Ponzi? A Q Yes. Now, did Mr. Von Allmen know that Ted was

investing in the Ponzi? A I don't actually know. I believe that he did

based upon conversations that we all had, but I'm not certain. Q Do you have any memory of any conversations

where they were together and talked about it? A Actually, yes. There was a Boys and Girls Club And I can't remember -- I

function that we were at.

don't remember which function it was, but Ted was bidding for something and Doug and I were kind of just standing off to the side watching. I think there may actually be a picture from this event of us kind of standing there watching Ted. may be in all the photos that we have. It

And Ted was going

crazy, as he and I tended to do when we were bidding. And Doug made a comment to me about how much he was bidding on this particular item. And my response was,

well, he's making a lot of money with us on the

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investments, so he's got it to spend. Q Do you know whether -- did Ted ever mention to

you any conversations that he might have had with Doug about investment in the Ponzi scheme? A Q No, he did not. Let me show you what we already marked. It's an Let me

go ahead and remark it as our next one. e-mail -MR. KOPAS: BY MR. SCHERER: Q

Plaintiff's 45, TD/Razor 1848, 1849.

I think we talked about that e-mail this

morning, and it's an e-mail about a show on December 17th, '08; correct? A Q Yes. We were trying to analyze that on the basis of

your testimony this morning about how to detect an e-mail that may have been forged as opposed to a real one. A Q Sure. Can you analyze that for us and tell us whether We were

you think that's a real one or a forged one? having a little difficulty with that one. A Q No, this is a real e-mail. Okay.

And that's an e-mail where the show and

how to do it was laid out between Caretsky and Kerstetter?

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A in this. In the beginning of this, I'm not even involved Until after the fact I don't have no way of And they had to have,

knowing this was even going on.

this is not an assumption, they had to have told the people in Deerfield Beach what to do because when I got there, they did it. Q Do you remember how come you went to Deerfield

instead of Weston? A Yes. It was a last minute change of plans. I

believe that the person I was taking up there was Jack Simony, one of the people that worked for the New York hedge funds. And he had gotten a call while we were

together to him telling him that instead of going to the branch we normally go to, to ask me to take him to a different branch. Q A Q As a precaution to make sure you weren't -Yes. Okay. Was not doing what I was doing, yes. As a part of a due diligence security

investigation, I guess; right? A Q Yes. How many shows did you take Mr. Simony or

anybody at the fund that would be Platinum and Centurion Level 3 to; do you recall? A Q I don't recall the specific number. Multiple numbers?

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not. did. Q maybe. A Q A many. Q There was one that they did in the beginning There was from memory, several, five, six Does that sound about right? Five, six visits? Yes. Yeah, I would think there would be at least that A Q Sure. They filed a lawsuit against TD and have set out

in that lawsuit a number of times that you provided them false balances. A Have you ever seen that, that lawsuit?

The actual lawsuit, I don't think I actually

that caused you some trouble, according to the e-mails. Do you recall that, where they apparently went to TD unannounced or something and you got upset on the e-mail chain about, don't go there anymore, you caused me problems with TD; does that ring a bell? A Yeah. You'd have to show me the e-mail. There

were two different circumstances:

One was someone poking

around at TD Bank elsewhere attempting to obtain account balances. Q A That was one situation. That would be Chris Bedaris; right? I don't remember whether it was Chris Bedaris or Also --

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Q A Go ahead. Sorry.

I just want to make sure I'm answering

accurately. Q A Right. I don't know who that was. I do know that

either Mel Lifshitz or one of his investors also attempted to obtain my account balances through another TD branch I believe up north someplace. Q Okay. Do you have a memory of Chris Bedaris

going into the TD branch in New York, Long Island, I think, and trying to verify the lock letter that Mr. Spinosa had signed that day for Razorback? MS. ROTHCHILD: BY MR. SCHERER: Q A Q Does that refresh your recollection? Yes. I heard about that after the fact. Object to the form.

Meaning after he did it or after the crash of

the Ponzi scheme? A Q No, no, after he had done it. Do you know that Wendy Laterio testified at the

Coquina trial that she answered Mr. Bedaris' call and told him, yes, that Frank had signed the lock letter? MS. ROTHCHILD: THE WITNESS: told me. Object to the form. I did not know that until you just

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BY MR. SCHERER: Q And that Frank said that was okay, according to

her testimony in the Coquina trial that's going on as we speak? MS. ROTHCHILD: THE WITNESS: told me. Object to the form. I did not know that until you just

It doesn't surprise me.

BY MR. SCHERER: Q Did Frank tell you that Wendy had mentioned to

him that she had told Chris Bedaris over the telephone that Frank Spinosa had signed the lock letter? MS. ROTHCHILD: THE WITNESS: BY MR. SCHERER: Q Sure. I mean, the question is not great, but Object to the form. Can you repeat that, Mr. Scherer?

did Frank ever discuss with you that his secretary had advised an investor, Bedaris, that in fact Frank had signed a lock letter for Razorback? A I understand what you're asking me. Frank

generally had told me at one point in time based on a question I asked him when I first saw him involving Ms. Laterio in what we were doing, I asked him over the phone if she could be trusted. His response was yes, and she's already had to answer questions on your accounts and she's, you know,

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part of the team so to speak. questions appropriately. specifics. Q You know, I neglected to ask you this morning She's answered the

But other than that, no

about Mr. Caputi's involvement in the shows. A Q Yes. And I'd like to discuss that a little bit. Let

me ask you this:

Do you know how many "shows," and by

shows we mean the charade at TD Bank, how many of those you asked Mr. Caputi to be involved in? A Yes. I asked him to play the role of a --

You're talking about the shows specifically, right? Q Yeah. Start with the shows, and then I'm going

to talk to you about the time he played like a Plaintiff, and we'll go into Mr. Caputi a little bit. A Okay. I asked him to play the role of a banker

at TD Bank. Q A How many times did you do that; do you recall? I would say it was less than half a dozen, but I

don't recall the specific number. Q If Mr. Caputi testified in a deposition that we

took that you asked him to do it on three occasions, would you quarrel with that? A No, I wouldn't quarrel with that. I don't have

a specific recollection.

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MS. ROTHCHILD: BY MR. SCHERER: Q Can you recall the instances, tell us about the Object to the form.

instances you recall, why you asked Caputi to do it if you can recall -A Q Sure. -- and the circumstances surrounding Mr. Caputi

playing like a banker. A Due diligence was heating up from various They wanted to do the bank trip. I needed

investors.

someone at the bank that was at a stage where they wanted to speak directly to a banker, rather than just go in and get an envelope. do this. And I asked Caputi, I needed someone to

So I asked Caputi to come on in and get dressed

up and play banker. Q Do you recall that Mr. Spinosa was on vacation Does that ring a bell for you? Object to the form. No, it doesn't ring a bell one way

on one of those times? MS. ROTHCHILD: THE WITNESS: or the other. BY MR. SCHERER: Q

Do you recall where Mr. Caputi played the role Was it in Weston on all

of the TD Banker on the shows? three times? A

I think he was -- He played one person, I think

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Mr. Maha (phonetic) he played at the Weston branch. And

I believe he played Mr. Garsis or someone working with Mr. Garsis at the Deerfield branch. Q There's an e-mail of a special way that Do you recall

Mr. Spinosa referred to the Weston branch. that? A Q No, I don't actually. If I can find it, I'll show you.

When Mr. Caputi played like the bank officer, I guess that would be sort of an enhanced show? I mean,

ordinarily your shows didn't have, other than the hand-off from Caretsky, but didn't have the sit down with the bank officer. A It was at a specific -(Whereupon, an objection to form was made.) THE WITNESS: It was at a specific time when

whichever investors I was taking there wanted specifically to meet with a bank officer. BY MR. SCHERER: Q were? A Q I do not at this moment. Mr. Caputi remembered that on two occasions Do you by any chance remember who the investors

there was the same woman, blond -- couldn't remember the hair. I think dark hair, kind of heavyset. Would you

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know who that might be? A The only person that has dark hair and heavyset I think

is someone that actually works at the bank. that's Rosanne Caretsky. Q

Did you take Kathleen White to a bank show.

Kathleen White, she's Coquina? A Q A Q I believe I did. She kind of fits that description; doesn't she? Yeah, she does actually. Then Mr. Caputi said at the other time it was a

man that he couldn't identify? A Caputi. As I sit here today, Mr. Scherer, I know I took I remember taking him. I remember my uncle

driving him there to get him to the bank to make sure he was there on time. Q A That was Uncle Bill? Uncle Bill Brock, yes. I don't have an

independent recollection at this moment of actually going through the process with him. Q Okay. Now, Mr. Caputi also did some other

things for you in terms of helping to perpetuate the fraud of the Ponzi scheme; correct? A Q He did. Let's kind of talk about that. And I direct

your attention to the meeting in your office with Barry

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Damson, Kathleen White. making their investments. started. And that was when Coquina was And we know when that

I don't have that date to memory, but it would

be in the summer of '09, I believe, summer and fall of '09. A Q Okay. Okay. Do you recall what you asked Mr. Caputi

to do in your office in front of Kathleen White and Barry Damson? A Yes. I remember asking him to play a Plaintiff.

I told him that I needed to have someone come in and see Plaintiff sign the settlement documents and the like. gave him very specific instructions as to things he needed to say about how much money he was getting and that he wanted his money, to ask when he was getting his money, to make it appear urgent. Other than that, to I

just go through the steps as I read off the documents to him and signed, and that's what he did for us. Q And Kathleen White was there to observe that and

Barry Damson as well? A Q They were both there, yes. Do you recall if that's the same day that you

then went from there to see Mr. Spinosa at the home branch headquarters on Cypress Creek? A My best recollection is that it was, yes.

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Q Did you ask Mr. Caputi to do anything else in

terms of the Ponzi fraud? A Q A Yeah. I did actually. Would you tell us about that. He played the Plaintiff. He played the banker. He

It was a subtext of everything, Mr. Scherer.

also pretended to be a reporter interested in Manfredi LeFebure and what was going on with Silversea and assisted in harassing Mr. LeFebure for Mr. Peters' and my benefit. Q And you categorize all of that as a part of your

Ponzi, if you will? A I categorize anything that yielded funds into

the law firm as far as illegal activity, yielding funds into the law firm, perpetrating a facade of real investments existing, increasing the power and prestige of the law firm and its partners. the Ponzi one way or the other. Q Would you use the money that you got from All of that is part of

Silversea and other illegal activities to pay off Ponzi investors? A Q Sure. So it all went into one big pot and you paid off

the folks that needed to be paid off -A That's correct.

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Q A Q -- based on their expected returns? That's correct. I want to speak to you a little bit. I want to

examine you a little bit about the Platinum and Centurion hedge funds, what we call the funds. Platinum and Centurion and Level 3. some basics in to start with. A Q Okay. First of all, do you know how this relationship I guess that was And I'd like to get

with the funds and Banyon came about? A To my knowledge it was achieved through some

broker that Mr. Levin and Mr. Preve had enlisted the assistance of in raising money. Q And were you involved in that process at all

with them in terms of the negotiations and the structure and any of the details in setting up that relationship? A Q I was not. Did they consult with you with respect to what

they could do and couldn't do in setting up this structure? A They involved me to the extent that it was

necessary to explain to the funds what was going to be occurring with the investment. Other than that, all what

I'll refer to as the back office work, their financing agreements, guarantees, percentages, equity positions as

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opposed to how they were going to borrow the money, whether it was going to be an AB or asset based loan or the like, that was all done between Mr. Preve, Levin and the funds. Q Did you have a concern that by bringing in some

institutional type financier that your Ponzi could be exposed? A Q Yes. How did you handle those fears with respect to

the involvement of the funds? A I spoke to Banyon, meaning Mr. Preve. Again,

most of my communication regarding day-to-day Banyon activity was with Mr. Preve. Not to say that I didn't But the

speak with Mr. Levin because I did frequently. day-to-day operations were done with Mr. Preve.

Any time they were introducing a new entity or new people into the Ponzi at any level, I expressed concern. Are we sure these people can be trusted? Are

these people going to be a headache? not going to create problems for us. it step-by-step with these people. that.

Make sure they're Make sure we take Conversations like

Frank and I were, we communicated frequently. If you would check my office phone records and my cell phone records, you'll see there must be literally

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bit. A Q Ponzi speak. Yeah, Ponzi speak. Problems, go slow. What you hundreds of calls between the two of us and thousands of e-mails, I would imagine. Q You just engaged in Ponzi speak there a little

meant by that Ponzi speak was, Let's make sure we don't get detected because if we do the fraud will blow up? A Yes. I think that one of the misnomers about

people who are engaged in fraud is that we actually talk about the fraud, and generally we do not. certainly did not. And we

We talked about it in fraudulent Although it does

terms I suppose as little as possible.

come quite clear in the e-mail traffic what was going on. But you don't sit down and say, okay, we don't want We say, usually with many

our fraud to blow up.

expletives, make sure these people don't F it up for us. We've got a good thing going. Is what they're going to

contribute, does it outweigh the risks that they're going to bring to the table. Q jury. A That we don't want them to discover we're That type of conversation. Explain that to a

And what would that be?

committing criminal acts. Q Would that also apply to when lawyers were doing

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diligence for some of the investors? A Q Of course. And the law firms that were writing pre-purchase

memoranda and things like that? A Q back up. Yesterday you testified that initially you thought Platinum and Centurion and Level 3 were different funds and different organizations, but you later learned something different. A Q I do. And so for the purpose of this record, what did Do you recall that testimony? Absolutely. Now, what is your understanding of -- Let me

you learn about the ownership of Platinum, Centurion and Level 3? A Let me explain it this way: It was initially

presented to me that we were speaking to several different hedge funds. I later learned that it was It was all

really one big, call it a mish-mash of funds. being run out of the same building.

The only separation

that existed was I believe Platinum was on a different floor, but that it was all being ultimately controlled, overseen, and all the major decisions were being made by a gentleman by the named of Murray Huberfeld. Q How did you become aware of that?

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is. Q You didn't know that he was a co-equal owner A Jack Simony told me. Mark Nordlicht told me.

Frank Preve told me. Q Now, did Nordlicht tell you he had an ownership

interest in all three of those funds? A Q A That Maurry Huberfeld had an interest? No, that Mark Nordlicht had a -Mark Nordlicht originally did not tell me that.

Originally Mark told me he was only involved with Platinum. But ultimately during subsequent conversations

I learned that he had an ownership interest, at least a financial -- let's differentiate between legal ownership and financial interest. I later came to learn both

through Mr. Nordlicht, Jack Simony, and Ari Glass that Mr. Nordlicht was receiving compensation from all three of the entities. In addition to some side entities that

came up such as Regent and the like, side deals that were going on. Q later. name? A Q A David Bodner? Uh-huh I heard the name, but I don't recall who that So he had his hands in everything. We're going to talk about that a little bit How about David Bodner, did you ever hear that

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that. with Murray Huberfeld in these funds? MS. ROTHCHILD: THE WITNESS: Object to the form. No. I don't recollect hearing

You've got to understand, what I was hearing

constantly on the phone was, on the phone and in person, well, Murray said do this. It would be the

same thing as my lawyers saying, well, Scott said you could do this, Scott said you can't do this. always, Murray said we're doing this. needs to be done this way. It was

Murray said it

And the key to doing that Murray. Neither

was keeping all of us isolated from

I, nor Preve, nor Mr. Levin to my knowledge have ever met or spoke to Mr. Huberfeld. BY MR. SCHERER: Q I guess we've talked about that. Let's talk

about who is Mark Nordlicht and how did you come to know about him? A I met all of -- obviously I was told about all But I was told by

these people before our first meeting.

Mr. Levin and Mr. Preve that Mr. Preve and I were going to fly up -- I don't remember if George came with us to this or not. I think just Mr. Preve and I did. But we

were going to do a dog and pony show for the funds at their offices in New York. Q And did you do a dog and pony show? I mean,

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that's a presentation, I assume? A Yeah. I did a presentation about the

investments, Frank did some of his stuff regarding the financials. It was more of a meet and greet with all the People came in and out of the

various people involved. meeting.

I remember Gil Colter, Gillad Colter came in Other people And it was an

and then left, came in and then left. wondered in and out of the meeting.

opportunity to get to know us and ask us questions. Q A Jack Simony, who is Jack Simony? Jack Simony was I guess the -- I guess you'd He was the guy who

call him the account manager for us.

handled all of the day-to-day handling of the relationship with Banyon. Q Did you understand that Simony had some

experience with financing law firms and settlements and things like that -A Q Yes. -- prior to being involved with Platinum and

Centurion? A It was my understanding from speaking to

Mr. Simony and from speaking to Mr. Preve as well was Mr. Glass that Mr. Simony had been involved in a company called Whitehaven that did the financing in a different methodology, did the financing of litigation. And it was

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explained to me that it was more during the course of litigation funding where they buy a piece of the action before there was any result. Q I notice that you frequently communicated to Do you recall that?

Mr. Simony with Whitehaven e-mail. A Sure.

As a matter of fact, I remember Mr. Preve

several times telling me, send it to Jack or Whitehaven. Q A Q A Did you say, why Whitehaven, why not Platinum? I said that to Jack once. What did he tell you? He told me that's where his offices still were. He had offices in the

He had offices in both places.

Empire State Building for Whitehaven and he had offices in that building right by Carnegie Hall for Platinum, Centurion and Level 3. Q Did you ever have any contact with the

Whitehaven people, and that would be the people that were involved with Mr. Simony at Whitehaven? A I may have, Mr. Scherer, but I don't have an

independent recollection of it as I sit here today. Q Do you recall in late fall of '09 that you were

going to rent an office, a spare office at Whitehaven's office and sent Whitehaven a check for $25,000 as a deposit? A Yes.

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Q A What was that all about? Why did you do that?

We had originally been using an apartment that

Roger Stone was renting in Manhattan off Central Park South as our New York office address. Mr. Stone subsequently lost the lease on that apartment, and we wanted to have a New York presence. So

we spoke to Mr. Simony about it, and he offered to lease us space. Q Do you know anything about efforts to acquire

Whitehaven, the company, either by Banyon or Mr. Levin or Mr. Preve or you? A Q No, sir. Just as a background, did you come to understand

that some of the Platinum, Centurion, Level 3 business was offshore and that the investments had to be made offshore for some tax reason or some reason? MS. ROTHCHILD: MR. SCHERER: that objection? MS. TRENCH: MR. SCHERER: objection? MS. TRENCH: MR. SCHERER: Leading. I know that. He's adverse. I'm I am. Okay, Susan. What's the Object to the form. What's the form? Who's making

suing him for $180 million.

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back. BY MR. SCHERER: Q What was your understanding of the structure of MS. TRENCH: MR. SCHERER: MS. TRENCH: foundation. MR. SCHERER: MS. TRENCH: MR. SCHERER: Oh, come on. I'll give you all of them. All right. Well, let me just go That and it's a compound question. Okay. What else? Lack of

Assumes facts.

Platinum, Centurion, and Level 3? A At some point in time during my relationship

with them it was told to me by Mr. Simony, Mr. Glass, Mr. Nordlicht, and Frank Preve that certain of the transactions, and I don't remember which of the hedge funds it was had to actually handle the entire transaction, meaning approve it and give instructions to fund offshore. And I actually got to take one of those

trips with Mr. Glass. Q Did he evaluate the investment, the Ponzi

investment that they were about to make in this trip offshore? MS. TRENCH: THE WITNESS: MR. SCHERER: Object to the form. No. Wait a minute. I like to see

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who's objecting. What's wrong with that? MS. TRENCH: Well, you implied that they said

they were investing in a Ponzi investment, which there's no foundation for that. BY MR. SCHERER: Q Okay. Why did you go to the Bahamas with

Mr. Glass? A What had occurred was we were getting ready to It was going

fund a bunch of the Ponzi settlements. through whichever entity.

I don't know why Platinum is I don't

sticking out in my head as the offshore entity. know which of the entities it was.

But in any event, Mr. Glass was going to be the person who went to the Bahamas. My understanding from

speaking to him and Mr. Nordlicht and Mr. Preve was that it was usually either Mr. Nordlicht or Mr. Glass that went offshore to handle this. Ari asked me if I'd like to go with him and I said, not only will I go with you, I said, but I'll charter the jet. I'll take us over there. And I'll

arrange, quote, unquote, entertainment for us for the trip. We went over there. When we arrived in the We got two rooms. We

Bahamas we checked into a hotel.

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had a guest with us. to do? And I said, okay, what do we need

His response was, we don't need to do anything.

We just need to wait until a certain time, and then they'll send us a packet, and I'll send back an e-mail saying it's been approved. Q A Q A Q A Now, did you -Let me just add this -Sure. -- just so I can complete the story. Have you completed your discussion of that? No. One of the key elements was when I said to

Mr. Glass when I was discussing, what do we have to do, and we decided we were going to go down to the pool and drink, was that the deals that we had gone over for had already been approved in New York by Murray and Mr. Nordlicht and anyone else that needed to play a role in it. So the going actually to the Bahamas was just simply to have, I guess, all the different receipts and things that we needed to have in case they were ever challenged from a tax prospective. Q What was your understanding about how Platinum And by "deals,"

and Centurion would approve the deals?

you're talking about the Ponzi settlements; correct? A This particular offshore transaction?

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Q No, generally. You said New York would be

approving the deal and I'd like you to explain your understanding of how that worked. A My understanding was that Frank would -- I'd Frank would decide

send the deal selection to Frank. what needed to be papered.

He would then tell me to

paper a certain selection of deals. Deb and I and whoever else was involved at that moment would paper the deals. We'd send the paperwork

over in the proper redacted format to Frank. My understanding from that point is Frank then repackaged it with all of the paperwork that was pertinent to their relationship with the hedge funds and ship that off to New York. Frank would then get a response back from New York saying, we're taking this deal, this deal, this deal, we're not taking this deal, this deal, this deal. Frank would notify me and we'd wait for the funding. Q And the deals would be in packaged form like the

rest of the settlement papers, the payout terms, the terms of the lump sum, that sort of thing; right? A My understanding is all of my paperwork went

over there along with additional paperwork that I didn't see until much later. Q Were you ever advised that -- Well, let me back

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up. How often did you get the paperwork wrong? that is, that the terms didn't quite match the money coming in and the payments going out and that sort of thing. A What I would call the math of everything. There were frequent errors attributable to the And

vast amount of paperwork that I had Ms. Villegas attempting to put together. She frequently got the

numbers wrong and paperwork was sent with wrong numbers on it, with wrong names on it, with improper case numbers and the like over to Mr. Preve. Q Did you ever get word that Mr. Preve would be

forwarding that defective paperwork on to Platinum and Centurion or the funds. A Let me call it that way. Sometimes, and

Two different scenarios arose.

this should be in all of your e-mails, sometimes Mr. Preve would catch the error and send it to me, telling me this needed to be corrected, that needed to be corrected. Once he got comfortable with Deborah Villegas

he would send it directly to her and copy me and tell her to fix it. Q A Okay. On occasions, more than several, he would He did not catch the error

actually send the paperwork.

and it went over to Platinum and Centurion and Level 3,

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et cetera. They sent it back for correction to Frank,

and then sent it to me. Deb would correct it and it would go back. Q A How would you correct it? We just changed the pages out. Sometimes we But we

made changes and did fraudulent initials on it. changed whatever they needed to change. Q

You put fraudulent initials on it as though you

went back to the punitive Defendant or Plaintiffs and had them initial the corrections? A Sure, if you think that was going on because it There's no way I could really

happened instantaneously.

possibly pull the Defendant and the Plaintiff in there unless they were sitting in my drawer. facetious, of course. Q I understand. In terms of some appreciation of I'm being

the fact that money wasn't in hand from a Defendant and the money wasn't paid out to a Plaintiff in a lump sum, if this happened after the fact, what would that demonstrate? A Q A Can you restate the question? Yeah. Lousy question. I just need you to

I didn't say it was lousy.

restate it. Q It was. It was a lousy question. I'll rephrase

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it. If the deal was a legitimate purchase of a settlement stream of payments and it had already happened and the money was in hand at trust at the bank, the Plaintiff had already gotten his or her, and it's usually her money, and then the deal had to be completely corrected, of course that would undermine the entire Ponzi scheme, at least as to that investment; correct? A Yes. There were frequent conversations, in

answer to your question, there were frequent conversations between Mr. Preve and I, Debra and I, from time to time about the fact that it was almost like a barometer as to whether we could tell what level of due diligence we were going to get from people, what level of scrutiny we were going to get when mistakes occurred. Because things were occurring that could not reasonably occur in any legitimate investment scenario such as these type of corrections. You would think that a Defendant maybe one time could perhaps miss the fact that the amount they're settling for is off by hundreds of thousands of dollars, which you would not think that that would happen with multiple Defendants, multiple defense counsel on a regular basis, which it did. Q That would tell you and Mr. Preve what, when

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that happened repeatedly without the investors catching it? A What it told us was we could rest a little bit

easier with regard to the scrutiny that we would be getting from the other side. There are clear indicators, skipping my testimony, there are clear indicators in the documents when you go through them, I believe, that indicate people who were in the know, meaning knew that there was some type of fraud going on, and people who did not, and you could tell by their level of due diligence, I believe. But more than that, you could tell by what they let pass. Q If there were mistakes made and investors would

come back to you for an explanation, and then you offered an explanation that they accepted, you would put those investors in one category as opposed to investors that never asked? A Of course. There's a difference between an

investor who is asking the proper questions and takes my explanation and an investor who asks no questions; sure. Q Let me refer back to Morse a little bit while

we're in the middle of Platinum and Centurion, but there were two deals to Morse Operations for payment of 700,000 with a return of 300 on top of the seven, so a million back.

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A Q Yes, sir. And do you recall that? And then immediately I

thereafter you would e-mail and say, I hit this again. got another seven and three. Are you in?

And the e-mail

back, yeah, we're in, and the money would be wired to you. Do you recall that scenario that you did four times

with Morse Operations? A I don't know how many times I did it, but I

recall several scenarios where we did that. Q Let me see that if you recall that on the first

one that you did two million deals based on the e-mails which I didn't ask you about this morning, but I could get them out if I had to, when you returned the paperwork you did one $2 million deal -A Q A Q Okay. -- rather than two, $1 million deals. That rings a bell. And then you repeated it again sometime later, a

short time later with the Morse Operations where you did two $1 million deals based on e-mails back and forth, and the paperwork was a $2 million deal. A Q Sure. I understand that.

Those were the only two Ponzi settled papered

deals that you ever did with the Morse family, Morse Operations, Ted and --

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A They were the only deals where we actually

provided them with full settlement packets. Q A Q A Q A Those two? Right. Well, nobody did.

That put me off track. Did you want to ask me another question? I've forgotten where we were. We were talking about the Morse, the only two

packets that we did. Q Yeah. Only two packets. And then do you recall

whether or not those two papered deals became promissory notes a year later? A I don't recall one way or the other, but I do

remember that whenever Ted got inquires from his auditors or from his father for that matter requiring that he wanted to see some paperwork, generally it was the auditors, that we provided whatever he needed. So if he Later

needed a deal packet, we gave him the deal packet. if he needed a Promissory Note, we'd give him that. Q

Your testimony yesterday was that when you got

that threatening e-mail from Carol Morse that you suspected was written by a lawyer because it didn't use normal English, it had lawyer speak in it; you recall that e-mail? MS. DEUTSCH: Objection to form.

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THE WITNESS: BY MR. SCHERER: Q What do you recall that e-mail where Carol I do.

threatened you to look like? MS. DEUTSCH: MR. SCHERER: MS. DEUTSCH: you rephrase? MR. SCHERER: testimony. BY MR. SCHERER: Q Do you recall how you phrased your testimony Well, I think that was his Object to the form. What's the matter with it? Use of the term threatened. Can

yesterday about that e-mail from Carol that precipitated the Judge Seltzer meeting? A Prior to -MR. DEUTSCH: THE WITNESS: Objection to form. Prior to receiving, actually prior

to the Judge Seltzer meeting, I received an e-mail from Carol Morse that we discussed yesterday that -I mean, it doesn't take a rocket scientist to read it and understand that she is very close to figuring out what we're doing. It was clear to me that it was

written by someone other than her, at least in part. And it did at the end of the e-mail threaten me. said, either you get me this stuff or I will take It

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alternative means. It said, if you have acted

ethically this shouldn't be a problem. BY MR. SCHERER: Q I think you testified yesterday that you had the

impression when you received that that it was written by a lawyer or she had a lawyer help her write that. recall that testimony? A Q I do. Now, from that point on, did you believe that Do you

Carol Morse had a lawyer that was advising her from that point to the -- that being September through the crash of the Ponzi? A Q Yes. Do you remember whether you and Ted talked about

that at all? A We did extensively. We talked about Carol

extensively frequently. Q Do you have a recollection of discussing with

Ted that Carol may have her own counsel involved? MR. MULLIN: John Mullin. I'm going to restate All of the

the objections I made yesterday.

questioning about Carol Morse and Ed Morse related not to the Razorback 2,100 page complaint for which Mr. Scherer got permission to take this depo, but to a separate action that to date we've not been served

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with. So, I think that this violates protocol order and we object to this entire line of questioning and move to strike. MR. SCHERER: You did that yesterday. I think

this is a continuing deposition, as I understand it. MR. MULLIN: I wanted to make sure you knew it I thought you were done

was a continuing deposition. with that topic. MR. SCHERER: say last?

Sorry, Mr. Mullin, what did you

I got interrupted. I said I wanted to make sure you

MR. MULLIN:

knew it was a continuing objection since I thought you were done with that topic. MR. SCHERER: MR. MULLIN: MR. SCHERER: my question? (The pending question was read back by the court reporter.) BY MR. SCHERER: Q A And the answer is? Here's the way it would work with Ted. Any time Okay. Thank you very much.

You're welcome. Madam Reporter, can you read back

that Carol was bothering me, making inquires that were problematic for me, create problems for his dad, for Ed,

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to Ed. driving him crazy, Ted and I would speak about it. frequently said to Ted on receipt of all the various e-mails I got from Carol that he needed to figure out, by talking to his dad, what the heck was going on, that she's making ridiculous inquires, that she's not letting me do what I need to do. If she's going to create a real problem between me, him, and Ed, a real problem for us, if she continues, we don't need this kind of headache. He would agree with me. He would generally talk I

And when this first occurred he came back to me

and said, she's got her - I believe it's either her sister or sister-in-law, I don't remember whether it was sister or sister-in-law that she was speaking to, and that when she's up in Maine this is all she has to do, so she's focused on it. But basically just try to appease

her as best as I could. As I told you yesterday, Ted had a very poor relationship with her. relationship. It then escalated with this e-mail. I called I wouldn't even qualify it as a

Ted and I remember it being a very heated conversation on my side basically saying what is the F is going on, this is isn't coming from the sister-in-law or whatever it was, or some lay person she's talking to this, is coming

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from a lawyer, which means I have a level of scrutiny on me and I can't get past. This is a real problem and you Don't worry, I'll talk to

need to do something about it. Ed. Q

And did you attempt to accelerate the payments

that you owed of this bond money and the investments that they had made because of this lawyer scrutiny? A Q Yes. Now, you used the word real problem and we don't

need this kind of problem; is that Ponzi speak again? A Yes. That is, we don't need people looking at You have to understand, Ted

what I'm doing or not doing. is very pragmatic.

He is result-oriented; with regard to

the investments, is he making money, the answer - if it's yes, fine, everything is good with him. Okay. Doesn't

really care how, just wants to make sure that everything is going according to the way he wants it to go. With regard to his father, he simply wanted his father happy, and whatever steps we needed to take to make his father happy, that's what needed to be done. Q While we're on that subject, do you have any

recollection of Mr. Ted Morse making some affectionate reference to you and your business in relation to a Cadillac store or Cadillac dealership? A Yes. It was frequently the joke around our

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friends, it was actually also repeated to another friend of ours, mutual friends, the Meldow, Margaret and Michael Meldow, that time by Patti. The statement was always

that one, we were their most profitable car dealership, meaning R.R.A. slash Scott was our most profitable car dealership. public. I later came to find out pre-explosion of the Ponzi, pre the crash, that Patti had actually - during a conversation with Margaret Meldow, had actually told her if it wasn't for the investments and all the things that I was doing for them financially that they wouldn't have been able to sustain the growth of the dealerships nor do all the things they were able to do for the family just as buying homes and the like for the children. MR. MULLIN: Objection, move to strike as non They used to say that all the time in

responsive and hearsay. Q Do you have a memory of any construction that

was going on at the Cadillac - one of the Morse Cadillac agencies during this period of time on Federal Highway there? A Q A Yes, sure. What do you recall about this? Ted telling me that it was the investment money

that was basically assisting the family in all of the car

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dealership expansion - they were doing an expansion, a large expansion at the Bayview dealership on Federal Highway. They were in the process of building a brand

new Toyota dealership in Delray and they were doing expansions of the dealerships up on the west coast of Florida, if I'm not mistaken, or the Tampa area. Ted and I -- and this was discussed amongst our group of friends, I used to joke around with Ted and say, you are the only car dealer -- this was during the automotive downturn, I used to say every time we saw Mike Jackson from AutoNation and he would say hello to us and I would joke around with Ted and say, he's pissed at you, he's pissed. Everyone else is having problems and you You're the only car dealership family

keep expanding.

that continues to expand during a major automotive contraction, he would say, that's because I have a very, very fine performing car dealership that doesn't require a floor plan, and that was me. Q 2008. MR. KOPAS: Plaintiff's 46, Bates labeled Let me show you an e-mail on December the 12,

Rothstein S 117 to 118. (Whereupon, Plaintiff's Exhibit No. 46 was marked for identification.) BY MR. SCHERER:

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A Q Q This is from Mr. Preve to you. And I have

highlighted down at the bottom there for you - it says in this e-mail: Also need to discuss the three million

dollar -- 3m, which I presume is million dollar licensing fee, paren, Jack, closed paren, and the 11 million pending transaction. mark. Do you recall what that was all about? Which part of it? Well, the three million dollar licensing fee and When you available. Question

the 11 million dollar pending transaction? A Q Yes. The date is 12/12/08. Excuse me, I can't read.

It's December 1, '08. A Q Yes, I do. Take them one at a time. The licensing fee, First of all,

what licensing fee was involved with Jack? who is Jack? A Q Jack? A Q There's no such thing. Okay. Jack Simony.

What is the licensing fee that was involved with

Did you have a discussion with either

Jack or Frank or both about the three million dollar licensing fee?

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A It was a methodology created by Mr. Preve and

Mr. Simony to get additional funds into Mr. Simony's personal hands. Q Do you know whether they were to be to

Mr. Simony or ultimately go to Murray Huberfeld? A I don't have a clue. I just knew in order to

keep Jack on board we needed to get him money. Q This licensing fee, was there any kind of

legitimate reason to grant a three million dollar licensing fee, to your knowledge? A Q To my knowledge, no. Now, are you aware that there was testimony from

David Ring in this case to the affect that Jack Simony had tried to rent the 1-800 retired judge website for a three million dollar fee? A No, sir. I don't know anything about that

testimony nor do I know anything about that agreement. Q Do you have any knowledge about Banyon, Preve,

or you trying to buy or rent a 1-800 retired judges number? A We had discussed it, but I was really not You understand there's no real business I have no real reason to buy an 800 number. Are you aware of e-mail traffic between Preve

interested. going on. Q

and Mr. Simony concerning that this would provide some

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A A of it. form of cover or some such Ponzi words like that? A Q I haven't seen that, no. Okay. You are not aware of Mr. Simony's

testimony that this three million dollar 1-800 ex-judge deal was a way to try to get three million dollars to Murray? MS. TRENCH: Object to the form.

My answer to the question is no, I was not aware I knew that the licensing fee thing that is in

here is not real because we weren't trying to license anything. What they were doing behind the scenes, all I knew is that Frank wanted me to get money as much as possible to Jack as quickly as possible. The way they

were going to do that, that was between them. Q Are you aware that Mr. Simony testified that the

folks that owned 1-800 ex-judge accused him of trying to involve them in a scam and that Mr. Simony agreed that he was indeed trying to scam them with respect to this three million dollar payment back to Mr. Huberfeld? MS. TRENCH: Object to the form.

I was unaware of that. MS. TRENCH: THE DEPONENT: MS. TRENCH: I didn't hear the answer. I said I was unaware of that. Thank you.

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THE DEPONENT: BY MR. SCHERER: Q You have used the term - they tell me I missed You're welcome.

it - that something about this three million dollar fee was to get Jack on board? A Q A Yes, I did use the words on board. What did you mean by that? If you look at the date that this was all going

on, we were having problems with the hedge funds by December of '08 with the amount of funding and the like, and it was constantly reiterated to me by Mr. Preve that in order to keep Jack happy we needed to make sure he made as much money as possible, and anything we could do in that regard would benefit us because I was told by Mr. Preve that he was our best advocate at the three hedge funds. Q Do you know how much the line of credit or the

facility - I'll use those words because those are the words I think that have been used in this case - that Platinum and Centurion and Level 3 had devoted or had agreed with Banyon to provide to Banyon to buy these settlements? A Q A I only know what Mr. Preve told me. What was that? That there was a 50 million dollar line and 150

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3? A Q That's correct. Were you ever aware of how much money Platinum million dollar line. Q Do you know if there was an additional 50

million dollars for Level 3? A My recollection is that there was at a

subsequent date. Q Okay. So, it started out 50 and 150 with I don't know which is which; do

Platinum and Centurion. you? A Q I do not.

And then at a later date another 50 with Level

had out at the highest level of their funding of Banyon settlements? A Q I do not know. From December through, April during that

time-frame - and so we're talking about December '08 through April of '09? A Q Yes, sir. Is it your understanding that the Funds in New

York started ramping down, if you will, or decreasing their level of funding? A Q That's correct. Did that cause a problem for you and Banyon and

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your investment scheme? A Q A Yes, it did. What kind of problems? It choked off our funding. We were strangled to

make payments to investors, including to them. Q Now, I think I represented to you yesterday that

the accounting records show that they stopped funding altogether in April? A Yes. I think my recollection was that they shut

us down pre-April 13, 2009 was my recollection, if I'm correct, April 13, 2009 is when we choked them off, stopped paying them. Q I'd like to spend a little time developing the

facts that transpired between December and April 13, and then we'll take it from April 13 to the Halloween crash. A Q Okay. Now, let me show you an e-mail. Let me ask you

this, if the Funds had stopped funding in April altogether, and I believe the record supports that, how did you carry on your Ponzi scheme from April through the crash? A I believe that the records, the financial I

records should establish that we had other sources.

had solicited -- he came to me to do it, Mr. Szafranski, his group - let's call them the Von Allmen, Clockwork,

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Discala group, the BIF. Q A Banyon Income Fund? Bekkedam, Banyon funds. We had replaced them as

we had previously when things like this occurred with new feeder funds. Q A Q A Q A And Pearson? And Pearson Boden, yes. And the Coquina? Yes, Coquina. Emess? That's also through Szafranski. Coquina, Emess

is also through Szafranski. Q A Q A Q And Sochet? Sochet is also through Szafranski. Did I leave anybody out? If I think of anybody I'll let you know. Didn't Balamore Bekkedam put some people

directly into 1030-32? A I believe, based upon what Mr. Preve told me, But I was always grouping some of

that that's correct.

these people, Mr. Scherer, this may help you in phrasing your questions to me. originated them. originating. I grouped everybody based upon who

I had people that Szafranski was

I had people that Banyon was originating.

We had a very large - as you can tell from the financial

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Q records - influx of capital at that point in time from new sources. Balamore, Bekkedam, all fall under, in my

mind, the way I associated it, under the Levin chain, although there's a cross-over into the Von Allmen chain. Q Were these new feeders doing due diligence all

during this time-frame that we're talking about here from April through the crash? A Q At different levels, yes. You were still paying off, were you not, the

Funds, the New York Funds, Platinum Centurion and Level 3 from April through the crash? A Q A At a minimal level, yes. Minimal relative to what you were doing before? Minimal based upon what they were actually owed

in payments, yes. Q Do you know how much they were owed in April of

'09, approximately? A Q I'm sorry, at this time I don't recall. All right. If I told you about 100,000 -- a a

hundred million, excuse me, would you have a quarrel with that? A I would not. MS. TRENCH: Object to the form.

And for the purposes of my examination, I want

you to assume that the forensic show that in December

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A Q they had about 108 million outstanding? A Q Okay. Ramped down to a hundred by April and then it

ramped down to 18 million at the crash -MS. TRENCH: Okay. Object to the form.

I will assume that.

I'm going to ask you to assume that based on our

forensic examination. A Q Okay. I'm going to talk to you generally and then I'll When these new investors were coming on or

get specific.

these new feeders and new investors that we talked about were coming on, do you have any knowledge about their contact with the Funds to determine how the Funds - how you had performed or how Banyon had performed prior to April of '09? A Q A Yes. What do you know about that? At the time that Preve was basically leading the

charge in that direction to bring on - I'll call them the BIF funders, the Clockwork, Von Allmen people, that particular group, part of that - an integral part of that according to what Mr. Preve was telling me was that we needed to get an A plus credit rating from the hedge funds. That without that we were dead in the water.

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Mr. Preve and I discussed that at length over many days. And we put into action a plan, the purpose of

which would be to make sure that the hedge funds, Centurion, Platinum, and Level 3 said that we were an excellent investment strategy and that they had had no problems with us and there were no defaults. Q plan? A We were going to do several things. We were We were going You said you put a plan together. What was that

going to choke them off, stop paying them.

to -- no polite way to put this - we were going to threaten them that if they did not give us a positive credit rating that the entire investment would come crashing down, that everyone would be exposed at all their various levels of knowledge, and that it would be apocalyptic for all of us. Q Let me go back and see if we can establish kind

of the order of funding with these new feeders that you got to replace Platinum and Centurion and Level 3. you recall which one was the first of the feeders? A Q I do not. Let me see if I can help you refresh your The Banyon Income Fund was made operative Do

recollection.

in April - at the end of April and began funding in May of '09?

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A Q Q A Q A Q MS. TRENCH: Objection, form.

I want you to assume that. I will assume that. At a hundred million dollar level. Okay. And then Clockwork came in after that with

Razorback and D-3 from May - didn't start up until October. I want you to assume that. MS. TRENCH: Object to form.

That makes sense to me. Now, I think Mr. Sochet and through Szafranski

jumped into the breach prior to October, so somewhere between May and October Szafranski, Sochet, Emess and those folks got involved. MS. TRENCH: Object to form and move to strike

Mr. Scherer's testimony. A Q That's correct. I'm asking you to assume that for the purpose of

getting in your mind how this may have happened. A Q Okay. I understand. Great.

All right.

Now, I'd like to show you an e-mail from Jack Simony to Brian Jedwab, April 24, '09. MR. KOPAS: PCL59353. Plaintiff's 47, Bates labeled

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(Whereupon, Plaintiff's Exhibit No. 47 was marked for identification.) BY MR. SCHERER: Q Now, I've highlighted the top of that. I'm

going to read this whole e-mail and then ask you some questions about it. A Q A Q Okay. Have you ever seen this before? I have not. It's from Jack Simony and I'm reading from the All right?

bottom to the top, I can do it because there's only three entries and I can do this. Friday April 24, '09 to -- I don't know if that's a Mr. Manella, I think. Gillad Colter and Brian Banyon. Tally, I

Jedwab and Murray Huberfeld, subject: guess that's the guy's first name.

Please send 35,000 to Curtis Mallet, attention Elliot Laur. And then it has -- jack Simony is

underneath there, I think he signed it above and below. Do you see that? A Q I do. Elliot Laur and Curtis Mallet are the lawyers

that are representing Platinum and Centurion Level 3 in our case here. MS. TRENCH: Object to the form.

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A Q A Q Up until you told me that, I had no idea. Not Susan but Susan's co-counsel, not Miss

Trench, excuse me. MS. TRENCH: That's okay.

And then above there you see there's an e-mail

from Brian Jedwab to Jack Simony, same day, re: Banyon. How you doing, Jack? A Q A I see that. Jack says, what does he say there? Just trying to focus on the job at hand and Thank you for being a friend,

protect our investors. it's just hard. Q

Well, what protection do you believe that Mr --

let me back up. Do you believe that Jack Simony was trying to protect Banyon -- I mean Platinum and Centurion and Level 3's investors at that time? MS. TRENCH: Object to form.

Do I believe he was trying to protect the

investors, to some extent, yes; and to some extent, no. Q A Q Okay. It varied. To the extent that he was trying to protect the

investors, do you read that as him trying to get their money back?

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A Q A Yes. MS. TRENCH: Object to the form. What do you think -- what

And it's just hard.

does this e-mail mean to you, given the context of what was going on there on April 24, '09? MS. TRENCH: Object to form.

I have to answer this way, it is consistent with

what I considered to be Jack's dual roles during most of what was going on. factions. I think he was torn between two

I think he felt a certain amount of loyalty -

I'm certain of this because we had discussions with Mr. Preve about it. He felt some amount of loyalty to

the people at the three hedge funds and he was also extremely attached and close to Frank Preve and he felt a certain amount of loyalty to him. So, as far as if you track his e-mails, what I believe you will find is that in writing to the people internally, like Mr. Jedwab, he is trying to state his objective of protecting the Funds. I think you'll see on the opposite end of the spectrum in e-mails to Mr. Preve and on occasion to me, he is trying to advocate his loyalty to us and his attempts to protect us. So, I think he's the one of the

people that fell on both sides of the track. Q Let me see if you still feel that way after I

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Q tell you what he said in his deposition. MS. TRENCH: Object, move to strike.

I want you to assume that he said in his

deposition that all of those good-boy trying to help Preve and the Fund were his efforts to cause you, pressure you to pay back money, and that he was essentially lying to you guys about doing any further deals, that they never had any intention of doing any further deals and it was all an effort to get you to be pressured to get their money back. something along those lines. I want you to assume that what he testified is, of course, in our case in deposition testimony. A Okay. MS. TRENCH: testimony. Q All right. I want you to also assume that we Object to form. Mischaracterizes He testified

took the deposition of David Ring, who said he was Jack Simony's childhood friend and he was his partner in Whitehaven. before? A Q Not until you mentioned it. I mentioned it yesterday but you didn't know David Ring, have you ever heard that name

about him; did you? A I had no recollection of ever hearing the name

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Q A Q before. Q He testified that in April of 2009 at Passover,

which I believe was April the 4th, that Jack told him it was the worse Passover he had ever had because the Funds were in trouble and that he was going to have to try to quote, save the fund, closed quote. A Okay. MS. TRENCH: Object to form.

Now, what do you think saving the Fund meant? MS. TRENCH: Object to form.

To me it sounds like he's trying to save us,

save us - save the three Funds from the Ponzi scheme. That's what it sounds like to me. Q A And trying to get their money back? Well, that's the only way to save them, correct,

to get their money back. Q They had a hundred million dollars in April,

they had a hundred million out, 98 million and they got it down to 18 million. A Okay. MS. TRENCH: Object to form.

Seems like that was pretty good, seems like he

did a pretty good job of getting most of their money out. A Let me ask this -We did a good job of getting the money to him,

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A A yes, with his assistance. Q A Q Whose money did you get? Other investors' money. My clients put 190 million dollars in it between

that time and now. Did you use any of that money to pay them back? MS. TRENCH: Object to the form.

Knowing the way the Ponzi scheme was operating,

I would have had to, yes, there was no other funds coming in. Q I want you to further assume that Mr. Ring, the

childhood friend of Jack Simony, testified that at the end of 2009 that he was disappointed - or some words like that, because he had, quote, saved the Fund, and he didn't get recognized with bonuses from his bosses at Platinum and Centurion and Level 3. A Now you're -MS. TRENCH: Object to form.

Now you're crossing into something that I do

know about. Q Okay. Are you asking us to assume that you

don't know anything about what you have been testifying to for two days? A No, not for two days but for the last several

minutes all the things you're telling me are new to me.

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Q The guys over here are laughing but you were They thought you were perfectly candid

great until now. until now.

They think now you're lying your fanny off. Object to form, and move to strike

MS. TRENCH:

that from the record. MR. SCHERER: I agree to strike that. Is that a stipulation?

UNKNOWN SPEAKER: MR. SCHERER: terrible. a Q A

I'll stipulate that that was

I won't do that anymore.

Just so I'm clear -Yes, sir. The information that you just gave me for the

last several minutes, this Ring and Jack Simony saving the day and all this other information that you were providing to me, I'm hearing this for the first time from you. Q A I know. That's what I meant from the statement. As far as Jack Simony not being properly compensated by the Funds, that is something that I do know about because Mr. Preve and Mr. Simony both told me that he felt he was working too hard for too little amount of recognition from the Funds. Now, he didn't say for not saving the day, but he did say he was not being properly compensated.

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A Q Mr. Ring also testified that in the golf season

of '09, which I presume living in New York has got to be in the spring? A Q A Golf season? Playing golf. I don't play golf, I don't know what the golf

season is. Q A Q I'm telling you what he testified to. Okay. He testified that during the golf season of '09,

that Mr. Simony offered to split a one million dollar settlement deal of your Ponzi scheme. MS. TRENCH: Object to form.

At the time period that the Funds had basically

cut us off, were no longer funding with us, Jack on more than several occasions -- one I can think of exactly, we were sitting at the - I don't remember if it was the Ritz or the Saint Regis on the beach? Which came first, the

Saint Regis or the Ritz, it changed hands? Q A Regis first, Ritz second. It was one or the other. We were sitting having

breakfast and we were talking about various ways that he was attempting to get us new money because all through this time period, you realize there should be e-mails where Simony is telling Preve and me he's out attempting

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to sell this investment strategy. And during this period

of time he is actually trying to invest with us. Q A He's telling you he's trying to invest with you? He is telling us that he wants to invest. As a

matter of fact, he once told me that he wanted to put his father or mother or both into this. Q And this was during this time from April through

the crash or before? A The mother father thing, before; the other

people, after. Q While we're talking about these folks who have

claimed in deposition that they were lying to you guys just in order to pressure you so you would pay them back -MS. TRENCH: the testimony. Q I'm asking you that. I want you to assume they Object to form, and move to strike

testified to that, I'm talking about Simony and Ari Glass and maybe some others, but for sure those two. A Q Okay. Do you have any recollection of a threatened SEC

action where Ari Glass -- where Jack Simony told you that Ari had gone to the SEC? A Q Yes. What do you recall about that?

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it? Q No, no. I want you to -- I'm asking you, have Q A A He didn't tell me he went to the SEC, he told he

was threatening to go to the SEC, that he contacted SEC lawyers. There were a series of see e-mails to us as

well as telephone calls -- when I say us, I mean to me and Mr. Preve from Jack Simony and also from Mr. Nordlicht that Ari was becoming completely uncontrollable, and he was threatening to bring the entire set of Funds down, that he was threatening them profusely with regard to going to the SEC to reporting Mark and the like. Q Do you know that that was a complete

fabrication -MS. TRENCH: Object to the form.

-- among Simony, Ari Glass and Preve? Are you asking me whether I know it or believe

subsequently learned that that was a complete lie? A Q No. Mr. Glass testified in his deposition that he

did no such thing that they did this to pressure you and Mr. Preve to pay them back more rapidly? A Q Okay. Did you pay them back more rapidly after this

threat about going to the SEC?

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A did, yes. Q Do you remember how you restructured that the I'm sure the financial records would say that we

100 million dollars that was owed - approximately 100 million dollars that was owed to them on the Ponzi structured -- or Ponzi settlements? A What we ultimately did was we agreed to give It was

them a certain amount of money each week.

originally - I think going to be 15 million dollars, but there was no way initially we could sustain that kind of pay-out, so we just started basically sending money on a daily or other every other day basis, whatever we could put together, that's what we were sending. We would send

a million -- there should be a ton of e-mails in this regard where Jack Simony is saying send a million to Platinum, send 500 to each of the little ones, he called it, Centurion and Level 3. By little ones, I believe he was referring to the size of the amount of money that was actually owed at that stage. I believe we owed the most to Platinum and then Centurion and then Level 3. So, we would regularly get e-mails like that and occasionally we'd say, okay, we're sending two million over and Jack would either send Mr. Preve or myself an e-mail saying send a million here, send 500, 500, and

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then he would send a later e-mail saying no, send the whole two million to Platinum or break it up some other way. Q Did you at that point abandon any pretext of

following the payment streams that were due under the papered Ponzi settlements? A Yeah, that was out the window. As of April 13,

2009 it was gone. Q Now, can you think of any reason why an investor

who thought he had cash locked up in TD Bank secured by security interests would not foreclose on that but take the money from you in dribs and drabs as you just expressed? A I can tell you why Mr. Simony told me they would

accept it. Q A Why? Because they were afraid if they declared us in

default it would be a run on the Funds in the form of what the called redemptions and it would level the Funds. Q Do you know that the Funds advised their

investors - and they had about a billion dollars worth of them -- Let me back up. Hold on. I need help here.

That Platinum advised its investors in April that you had defaulted on -- although it didn't say you, it had reference there, investment in Florida in

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Q A Q A settlements that had been defaulting on payments and that they were taking a write down of the funds in April of about 20 percent. Were you aware of that? Object to the form.

MS. TRENCH:

I only became aware of that after the fact,

meaning after the crash. Q Okay. And then they went on to tell the

investors that although you defaulted that you had started to make payments again or something like that and that they had every hope that they would be able to salvage the investment. A me that. MS. TRENCH: Object to the form. I did not know that portion until you just told

Do you know that at the end of the year or --

no, no, excuse me, in November, after the crash, that they advised their investors that because of their excellent risk management that they were able to salvage the losses attributable to the Rothstein Ponzi? MS. TRENCH: Object to form.

Are you aware of that? I am aware of it right now that you're telling

me, not before. Q All right. Let me show you an e-mail from Mike

Szafranski to Brian Jedwab, balance verification, on

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Q balances? A He was what they referred to as the third party January 25, '09. MR. KOPAS: Plaintiff's 48, PLATCENT0017952.

(Whereupon, Plaintiff's Exhibit No. 48 was marked for identification.) BY MR. SCHERER: Q Let me ask you a few questions first and then

we'll talk about that exhibit. Mr. Szafranski's job was to do what relative to

verifier verifying the actual existence of funds, wires in, wires out, and also identification of plaintiffs and defendants. Q How did you come to engage Mr. Szafranski in

this -- Back up. Who did Mr. Szafranski work for or who engaged him and paid him for this independent verification? MS. TRENCH: Object to the form. What was

That's a bunch of questions.

Mr. Szafranski's job? A He was a third party verifier for the purpose of

providing independent verification for the hedge funds, that's where he first came from, for the purposes of verifying both funds and parties. Q Did you --

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A Q And paperwork. Did you know Mr. Szafranski prior to being

introduced to him? A Q A Q I did not. And he was introduced to you by whom? By the hedge funds. Do you know he had some relationship with one of

them, I think? A Q A He was a childhood friend of Gill Colter's. Okay. How was he paid? His pay scale

You got to give me a time-frame.

changed drastically when he became involved. Q I know. His pay scale really changed when he

started into the Ponzi; right? A Q Yes. That was a bad question. In the beginning how was he compensated for this independent verification? A To the best of my recollection he was paid on a

per deal reviewed basis and the payments were to be made by Banyon. Q Now, I want you to check out these verifications I'm a little confused in

and let's talk about that. reading this exhibit.

It shows ending amounts that I have highlighted

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there; you see that? A Q Yes. Let me back up. It says from Michael

Szafranski:

I met with Mr. Rothstein on January 23, at

the time we signed on-line and verified the following balances in the five accounts as follows. there's these numbers there. And then

And these numbers appear to

be 500 -- on the first one, 500,000 and change, 590, almost 600,000; 100, 933, and 178,000. numbers? A Q I see those numbers. And then it says up above, amounts in thousands, If it's Do you see those

so I'm trying to figure out how to read that.

amount in thousands then in the first account it would be 501 million, and in the next account it would be 593 million and 107 million and then 933 million, and then 178 million? A Q Correct. If you read it without the zeros there's 500,000

down to a low of 100,000? A Q Right. Either way -- let me ask this. Can you explain

this exhibit to me? A I can't explain it to you one way or the other.

If it's my perception of it, is that what you want to

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know?. Q Let me ask you this. I mean, if in the

thousands means you add those three zeros like I just did, that's way more than you ever represented that you had in your phony trust accounts; isn't it? A Those balances changed. If you look at the

e-mails, Mr. Scherer, and I'm sure you know this by now, those amounts changed like the wind, depending upon what I was being - what I believed I needed to show in the accounts and also there are dozens of e-mails where Mr. Preve is telling me what amounts need to be in the accounts. So, it varies. This particular e-mail, I remember seeing this prior, and when I read it, amounts in thousands, I read it as being incorrect, $501,000, $593,000, that kind of thing. I suspect that the reader of it had to have interpreted it to be more as opposed to less. Because if

we only had half a million, half a million, a hundred, 900,000, 178,000, for lack of a better way to put it, I should have been in handcuffs way before I was. Q Mr. Rothstein, let me ask you this: If you add

in the thousands, even you didn't have the chutzpah to say you had 2.5 billion in your Ponzi account; did you? A I don't -- I know that we had balance statements

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Q A Q where we showed in the billion, I don't recall ever doing one where we said two billion. Q A This would be two and a half billion. Right. The problem with this e-mail was, as

said to me by Mr. Preve was these balances are going to create a problem one way or the other because it's either showing way, way too much money or it's showing basically what amounts to no money. Q Let's talk about the shows that we talked about

this morning. A Q Okay. You took Mr. Simony to the bank at various times

to give him a show about how much money was in your Ponzi trust account; correct? A Q Correct. So, that Mr. Simony would have had what was the

Ponzi amount that accurately reflected all of their investments because nobody else was investing in the Ponzi at this time. MS. TRENCH: Correct? Basically correct. So, all we have to do is we have to go back to Object to form.

January and see what the phony balances that you were projecting the phony balance was and then compare it to

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this either 2.5 billion 2.5 million schedule? A If I'm understanding your question correctly, That would tell you whether or

yes, that is accurate.

not this is crazy one way or the other. Q Well, we're in January of '09. And do you ever

recall anybody from Platinum, Centurion, Level 3, Simony or Nordlicht or any of those guys coming back to you and saying these verifications are crazy? A I don't recall that, no. I recall Mr. Preve on

several occasions when he got balance statements, not necessarily this one, sending me an e-mail saying this is crazy, we're supposed to have at least a billion in this account, make sure you adjust your numbers, telling me what to do. But I don't recall the people from the hedge funds speaking to me directly telling me what the hell is going on with these verifications. Q break. Okay. They tell me it's time for an afternoon

Is that already with everybody? (Thereupon, a short break was taken.) MR. SCHERER: Now we're back on the record, and

it's finally working. BY MR. SCHERER: Q Mr. Rothstein, I'd like to show you an exhibit And I neglected to ask you

we've already spoken about.

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about the second half of that e-mail. That's exhibit --

Would you read the number for us, please. A It's Exhibit 46. Down at the bottom it says

Rothstein S 000117. Q All right. And the second part of that e-mail

that's highlighted there is a reference to $11 million, right? parts. And you gave an answer that says there's two And you talked about the first part, I didn't

talk about the second. A Q about? A Yes. My recollection is that's what I refer to If you Okay. Do you know what that $11 million reference is

and they referred to as the Regent transaction.

examine all the e-mails you'll see that during the course of the Ponzi different factions of the hedge funds were investing in side deals with us. In this particular deal what was occurring was there was an investment in a deal while we were fighting with the hedge funds by Mr. Huberfeld. Mr. Nordlicht was involved in it. I believe

Jack Simony was

involved at least in orchestrating the deal and Frank Preve was involved in it. Q Was that a particularly lucrative transaction in

terms of the return?

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A Yes. I don't remember the exact terms, but it

was one of the most lucrative deals I believe we ever offered. Q Do you know whether Frank Preve was involved in

Regent also on the side? A I believe that the Regent deal involved all the I

people that I just mentioned, including Mr. Preve.

just don't know which level each of them participated. Q A We may get into that in a few minutes. As a matter of fact, now that I'm thinking about

it -- I don't mean to interrupt you, but there is an e-mail. You should have one, where Preve is trying to

tell the people involved in the Regent deal that he's not sticking with this particular format because other people involved other than him are not entitled to as much interest as they would be achieving based upon certain things that they did during the course of the transaction that changed the funding dates and the payback dates. Q Was there some change retroactive again after

the deal was supposedly consummated with the punitive plaintiff and the punitive defendant? A I believe that they agreed to something, but I I do remember that we paid

don't remember what it was. off. Q

If we have time I'll go back to the nuts and

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bolts of that. We have it here. We're going to try to

get through this and get out of here at 5:00, maybe even a little bit before. Let me show you an e-mail that is from you to Mr. Preve dated April 8, 2009. MR. KOPAS: 112310-0161648/1. (Whereupon, Plaintiff's Exhibit No. 49 was marked for identification.) BY MR. SCHERER: Q Actually it starts out at the bottom there with You CCed George Levin.

Plaintiff's 49, Bates labeled FC

an e-mail from Mr. Preve to you and then from you back to Mr. Preve. And its subject is a PPM. Mr. Preve says, I

know your plate is full, but assuming we have a business going forward, I need to get the PPM back to them today. I really don't think it impacts your side of the business at all in terms of revelations. A Q A Q Yes. All right. What did you take that to mean?

I'm going to have -Let me ask you this: First of all, the PPM

they're referring to, do you know what PPM that would be in April? A It was the private placement memorandum that

they were putting together I believe with your clients.

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yes. Q And then he also was involved in the Razorback Q A Q That would be the Banyon Income Fund placement? Yes. Now, do you know that Mr. Von Allmen and his

family were about 50 to 60 million of the 100 million in the Banyon Income Fund? A I knew that it was something to that effect,

and D-3 with his family in addition? A Q Yes. Clockwork wasn't involved in the Banyon Income

Fund that Balamore put together, but they were involved in the later transactions? A Yes. They became sort of warring factions over

the deal, yes. Q So you think the reference there is to that

pre-purchase memorandum of the Banyon Income Fund that Balamore was putting together? A Q Yes. The thing that says, I don't think it impacts

your side of the business at all in terms of revelations, do you see that? A Q Yes. What did you take him to mean by "in terms of

revelations"?

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A I read it as it's not revealing anything that

will create any issues for me, so they're going to go ahead and move it along. What he was telling me was to They needed to get it out.

just go through it quickly.

There's not a lot in there that concerns me. Q In terms of revelations, is that Ponzi speak for

you to be worried about that they would discover that you guys were involved in a fraud? (Objection to the form was made.) THE WITNESS: Yes. It's that there's nothing in

there that I needed to be concerned about being revealed to anybody. BY MR. SCHERER: Q Isn't revelations a Ponzi speak? (Objection to the form was made.) THE WITNESS: Yes. Based upon the way you're

using the term, yes, it is Ponzi speak. BY MR. SCHERER: Q Okay. Because we established yesterday you

didn't say to each other, They'll discover our Ponzi. You would use little terms like "business at all in terms of revelations"? A Yes. What you'll see frequently in e-mails from

Mr. Preve to me where he's trying to keep me calm where he uses, to use your term, Ponzi speak to let me know

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that he doesn't feel that there's any risk of being found out. Q Okay. Let's go up to your e-mail back to him.

And then you say, Make sure you do exact same default letter to Platinum? A Q Yes. They are really the same company and we must

treat them as such? A Q secret? A Q Correct. It is a serious pressure point for them. Murray Yes. Time to let them in on the fact that we know the

illegally cannot be involved in both? A Q Yes. All right. Would you explain what you meant by

that e-mail? A Yes. As I understood it, all of the three funds

Centurion, Platinum, and Level 3 had to have a certain wall, if you will, between them with regard to decision making, how certain business financial transactions were run through, separation of investors and the like. It was important as told to me by Jack Simony on multiple occasions and on several occasions by Mr. Nordlicht, that Murray be seen as the head of

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Centurion, that that was his fund, and not involved with Platinum or Level 3 when in fact we had been repeatedly told by Mr. Glass, Mr. Nordlicht and Mr. Simony that Murray was calling the shots with regard to all of them, and that based upon each one of them telling us at different points in time the same thing, it was time to let them know that we knew Murray was involved. It became more clear once that 11 million deal was going through because despite the fact that other funds were cutting us off, Murray was still investing with us through other means. Q Do you know whether that was a part of the

scheme to fund your Ponzi enough to keep it going rather than crashing at that time? A It was -MS. TRENCH: THE WITNESS: Object to form. The purpose of that, of what we

were doing to the funds was to apply pressure to them so that they would give us an A plus rating when our potential new investors contacted them. The key to securing new investment dollars to keep the Ponzi alive was a positive reference, a no default reference, from the people that we were doing business with up until that point. Without that we

would not have been able to secure new money.

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BY MR. SCHERER: Q Do you have information that they in fact were

giving positive credit references to potential investors? A Q I know that from multiple sources, yes. Would you tell us what those multiple sources

are, please. A Yes. I was told by Frank Preve and by George

Levin that it's a great strategy, they've had no problems with us, from the people at Platinum, at Level 3, at Centurion, or a representative of each or all. I was told by Ari Glass that we got, again, a perfect representation from whoever they were speaking to. I believe the funds were speaking to either Jack

Simony or Mark Nordlicht if my recollection serves me correctly. I heard this from Preve, from Levin, from Glass, from Simony, and I heard it in person actually in my office from Mr. Nordlicht that they had taken care of it and they expected that when we got new money in that I would be making sure that they were getting paid. Q Do you have any knowledge of whether or not any

of the people that you mentioned had any contact with the new feeder funds that you mentioned, including Discala, Von Allmen, or Clockwork, or any of those people? A I was told by Mr. Discala and separately by

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Mr. Von Allmen that they had spoken to people at the fund or funds and were told that it was what they believed to be an excellent investment strategy and they've had no problems with us. Q How about Mr. Simony, did he ever tell you the

same thing? A Yes. Mr. Simony was -- I should have included Mr. Simony was part of the Glass,

him in that group.

Preve, Nordlicht, Simony group of people who said that they had done what they were supposed to of done. Q When they said they had done what they were

supposed to have done, I would like to get you to be specific relative to the Clockwork, any of the Clockwork representatives. And let's start with AJ Discala and

whether you had any communication with Simony or Nordlicht regarding conversations with Mr. Discala or any of those due diligence people. A The conversations -MS. TRENCH: Before you continue I move to

strike the testimony that's being given to the extent that it relies on hearsay from non-fund individuals. MR. SCHERER: individuals. Was that Miss Trench? BY MR. SCHERER: Thank you. Well, let's start with fund

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Q I would like you to first of all limit your

testimony to the fund individuals that you identified, that being Nordlicht, Simony, Ari Glass and communication with potential investors or feeder funds that were doing due diligence during that time. A Okay. Let me see if I can do this in an order Ari Glass, Jack Simony, Mark

that's easy to follow.

Nordlicht all told me on separate occasions when questioned and pressed by me, that they had done, quote, unquote, what they were supposed to do, that they had given us a positive credit rating, a thumbs up to our future potential investors. Subsequent to that I spoke to AJ Discala and to Mr. Von Allmen. I don't remember where I was when I was

speaking to Doug, but I have a recollection of it actually being in front of my home because I lived down the street from him at that time and he was out doing his walk. And I asked if he had spoken to anyone from the funds yet, and he told me yes, and that everything was looking great; that he had spoke to people from the funds; and that they thought it was an excellent strategy and they'd be looking forward to doing business with us. The conversation with Mr. Discala I remember more clearly because we were in my restaurant in Bova

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having cocktails and we were drinking to the fact that he had gotten an excellent rating from the funds. At that

time you probably can pinpoint when this occurred if you get my cell phone records because there should be immediate calls to Mr. Preve. I stepped aside and called

Mr. Preve and said, We're good to go. Q Do you have a recollection of whether this was

before, or when was this relative to this April to the end of October time-frame we're talking about? A It was prior to the funds investing with us in

significant dollars, but prior to the crash. Q A By "the funds," you mean the new feeder funds? Sorry. I garbled that. Prior to the new feeder It was

funds investing with us and prior to the crash. in between that time period. Q Let me show you our next exhibit.

It's a letter

from Frank Preve.

Well, first of all, it's a letter from Go ahead.

you to Frank Preve and then his back to you. MR. KOPAS: 112310-0161400/1 MS. TRENCH: MR. SCHERER: MS. TRENCH: What's the date on that? April 8, 2009. Thank you.

Plaintiff's 50, Bates labeled FP

(Whereupon, Plaintiff's Exhibit No. 50 was marked for identification.)

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A Q A Q BY MR. SCHERER: Q And you state, Hey, Triple G. Do not forget to

let Jack know that we know that they are all in this together, i.e., Mira knowing about the secret deal with Murray. What the fuck? Who the hell does he think he is

fucking with? Did I read that correctly? Yes. Now -Colorful, I think we said. Mr. Preve writes you back, quote, He was shocked We will have the little one-on-one The grand question is what And then a bunch of

when I brought it up.

with you, me, and he later.

is going to make all of this right. question marks. A Q Okay. Okay.

So the "he was shocked," who did you

think he was referring to? A Q Jack. All right. And the "little one-on-one with

you," did you have that little one-on-one with Frank Preve? A Q A It was with Frank Preve and Jack Simony. Both? Yes. That's why it says you, me, and he.

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on. Q A Okay. At this stage we are very close to the Ponzi I as you can tell from my, quote, unquote, up. A Q And then "the grand question is what is going to

make of all of this," what do you think he meant by that? MS. TRENCH: BY MR. SCHERER: Q A What do you think he meant by that? What he meant by it was that, What are we going Object to form.

to all do together to avoid the Ponzi from exploding in all of our faces. Q A Q Did you talk to Jack about that as well? About what? About this being shocked about Murray being in

the Regent deal? A Q That Jack was shocked? Yeah. It says, He was shocked when I brought it

That would be Jack. Perhaps if I just explain to you what was going

imploding.

colorful language am more than a little bit perturbed. If you track my e-mails, I'm consistent. I am extremely vulgar. At this stage we were having to pressure the funds to make sure that they lied to our new investors When I'm upset

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and gave us a positive credit rating. it. We were in default. I mean, let's face

We weren't paying them

anymore.

We wanted them to say we were continually

paying them and they thought we were an excellent investment strategy regardless of what they thought. Q A But you were in default? I understand that, but that didn't mean I did They were going to blow up along

not want them to lie.

with us, Mr. Scherer, so they had every reason to lie. Q While we're talking about lying, do you know

that indeed Mr. Simony feigned like he was shocked, because not only did he know about it, he was a profit participating partner in the Regent deal? MS. TRENCH: THE WITNESS: BY MR. SCHERER: Q What did you come to learn about the Regent deal Object to form. Yes.

and about whether Mr. Simony was shocked or not? A I came to learn that he was not shocked about

anything because him and Frank were in this together, that portion of it. shocked. There was no reason for him to be

If he was going to be shocked at anything, it

was that I was ready to explode. Q A All right. Let me make sure I finish this.

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Q Go ahead. Have you finished your answer,

Mr. Rothstein? A Q please. A Yes. The whole purpose behind this series of No, sir. Thank you. Would you finish your answer for us,

e-mails is -- and there are other e-mails that are far more concise than this in existence between all the players where Preve and I are talking about the fact that we must do whatever is necessary to secure a positive rating both in terms of excellent investment strategy and no default from the funds. There are also e-mails that I directly recall between Mr. Preve, Simony, and Nordlicht and more to Nordlicht where he is actually saying to Mr. Nordlicht in basically no uncertain times, Listen, you're going to be contacted by BIF's other investors - at this particular e-mail I think it was Balamore directly - and you're going to be contacted, and it's critical that you give them a, quote, unquote, proper, accurate, whatever words he used, rating about us because it will help you get out of this, get you out of this quicker. for all involved. It will be good

It's fairly clear, actually I think

it's 100 percent clear, as to what was going on at the time.

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The funds were going to give us a positive credit rating. We were going to use as much of the new

money coming in to pay them off, and in fact that's what we did. Q But weren't you in default every single month

from April all through the crash in terms of the agreement to repay them at a certain level? A Yeah. The minute I changed payments we were in

default, yes. Q Well, then are you aware that there was some

kind of paperwork that Banyon and the funds did that you would pay a minimum of 15 million a month, plus another million-and-a-half of the others, so that you'd pay $16-and-a-half million a month every month thereafter to stay in compliance with their new documents; are you aware of that? MS. TRENCH: THE WITNESS: certain parties. the paperwork. BY MR. SCHERER: Q Are you aware that the forensic audit shows that Object to the form. I remember discussing it with I do not remember actually seeing

you never hit those numbers ever once from that point on? MS. TRENCH: BY MR. SCHERER: Object to form.

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pay. Q A Almost, but not quite. I could have told you we didn't hit it. You

didn't need to spend the money on a forensic. tell you that. Q

I could

You were close, though, because you got them

back everything except 18 million. A But we were doing it based upon our ability to At this stage, Mr. Scherer, you have to understand We are just trying to get whatever money

we're frantic.

we can get to them as quickly as possible to keep them quiet. They have every reason to do that because And

otherwise they're not going to get their money back. on top of that we are also having to pay off other investors that are due.

As Sochet and Von Allmen and the

like come in they're going to be due money also, so we have to structure this in a way that allowed us to pay everybody what we were supposed to pay. And obviously

you know the end result, we weren't able to pay anybody and it exploded. Q Let me show you an e-mail from Mr. Szafranski to

Ari Glass CC Will Slota and Jack Simony of Whitehaven. MR. KOPAS: Plaintiff's 51, bates labeled

PLATCENT001805710. MS. TRENCH: MR. SCHERER: And the date if you would. January 30, 2009.

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A (Whereupon, Plaintiff's Exhibit No. 51 was marked for identification.) BY MR. SCHERER: Q And Mr. Szafranski said that he had signed on to

your TD on-line and verified that account 5104 contained $178,847? A Q memory? A Q From memory, no. Okay. If I told you it was an account that was Yes. Now, do you know what account 5104 is from

supposed to have held the Platinum and Centurion funds, I would like you to assume that. And I'd ask you, did you

ever have a Ponzi balance, and that would be a balance in any of their trust accounts that reflected only $178,000 in it? MS. TRENCH: THE WITNESS: what occurred here. BY MR. SCHERER: Q I'd like. So let me ask again since there's an Object to form. No. If you'd like I can explain

objection to the question. Can you explain what occurred here? Yes. What occurred was, on occasion, this

happened unfortunately more than once, when

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Mr. Szafranski was in my office from time to time once he became aware of the Ponzi scheme, we would sign on to the real bank to look to see what monies we had and how much money we needed to bring in. It was more of me just kind of going on and trying to see where we were at and who I could pay when and what was going on. On several occasions Mr. Szafranski for whatever reason when we're looking at the real screen is writing down some semblance of what he's seeing at that time and sending it out, which of course generally resulted in someone having a conniption. Q Because they expected it to be 178 million, not

178,000, right? A Q Something to that effect, yes. Did anybody, Mr. Glass or Mr. Simony or anybody

ever come back to you following this January e-mail and ask you what in the world is going on with this account having only $178,000 in it? A Q They never addressed it to me, no. Well, did Mr. Preve ever address to you that

they had come to him and said, you know, Szafranski has verified numbers that are off by 10 times? A I recall a series of e-mails where Mr. Preve

wrote to me -- well, actually he was writing to Mike and

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2009. (Whereupon, Plaintiff's Exhibit No. 52 was marked for identification.) BY MR. SCHERER: Q This appears to be another Mr. Szafranski copied me or sent it to me saying, What the hell is going on? This can't be. These accounts are supposed to have

X dollars in it or whatever he was saying, and then a corrected balance sheet was eventually sent out. Q Let me show you the next exhibit. It's an

e-mail from Szafranski.

It's more of the same, Platinum

verifications in January of '09. MR. KOPAS: Plaintiff's 52 under Bates label cut

in half, looks PLATCENT001783. MR. SCHERER: what it is. MR. KOPAS: The date of that is January 30, It looks like 82. They'll know

verification of trust account balances, in addition verification on deals that are referenced there as G and a bunch of numbers, right? A Q Yes, sir. And he verified the cases and that the

appropriate forms were signed by the plaintiffs and defendant and they signed on-line and then he verified that your trust account contained a balance of 598,000.

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Do you see that? A Yeah. I think he's trying to say because it He's trying to say

says, all amounts in 000 dollars. 598 million. Q Okay.

Well, if that's so how does he reconcile

that with the former balance that we talked about a few minutes ago that had 2.5 billion? Did you spend that

much between January, the middle of January, and the end of January? A No. If you look at our balance statements, and

it was a point I was trying to make with the last e-mail. I'm not sure I made it completely. That is

there were times when Mr. Szafranski wrote down balances that I couldn't tell you whether they were there. I

don't know whether he was looking at the screen and saw perhaps in that that one of our accounts had $178,000 in it or he combined accounts or looked at totals or just wrote down whatever the heck he was thinking of at the time. But there were occasions where his balances did

not match the balances that he was supposed to be furnishing. Q I want to know whether or not anybody on that

e-mail chain you have there in front of you, that's Mr. Simony and Glass and -- Who else do they send that to?

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A Q Will Sloter. Whether any of those folks got back to you or

got back to Frank Preve who got back to you to say, How do you reconcile 590 million in the account at the end of January when you had billions in the account, you know, just a few days before? A I have no recollection of them coming back to me

about that particular issue. Q error? A Q Even in my math, yes. Let me show you the next exhibit. It's an You would agree that that's more than a rounding

e-mail from George Levin to Ari Glass, Nordlicht, Jack Simony, you, and it's dated April 16, '09. MR. KOPAS: Preve. (Whereupon, Plaintiff's No. 53 was marked for identification.) BY MR. SCHERER: Q I would like you to pay attention to the Plaintiff's 53 FP0163402/1 FP, Frank

highlighted, you can read the whole thing, of course. Dear Ari. This is George writing it, although I'm not But it said from George. Therefore,

sure he wrote it.

the following are our requirements for getting our businesses back on track, I hope you can support me in

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this effort because it will be to the benefit of everyone if we can move forward rather than spend all night gnashing our teeth. A Q Yes. And then he goes on to say, On April the 20th All impounded funds will be released. Do you see that?

funding is done. A Q Yes.

These terms will be memorialized in writing and

such writing will eliminate the current ROFR, which I believe to be right of first refusal, and then all credit inquiries will be responded to, quote, as agreed, closed quote. A Q Do you see that? Yes, I do. Are those the credit inquiries you were making

reference to previously? MS. TRENCH: THE WITNESS: Object to form. Yes. This is the polite version

of the same request. BY MR. SCHERER: Q What do you understand paragraph 7 and 8 to

represent, 6, 7, and 8 to represent? I had an objection there, so I want you to tell me what you believe this to have meant. A I don't know what 6 means, all impounded funds Number 7 and number 8, number 7 is

will be released.

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talking about the fact that the funds had a right of first refusal on all our settlement deals. We would have

to send them to them for either acceptance or rejection before they went anywhere else and we wanted to be released from that. The bottom line was what I'll refer

to as the survival term, how both they and our group would survive this. Q I thought, Mr. Rothstein, you testified that as

of April 13th you had frozen all of the payments to the New York funds. And so I presume all impounded funds

will be released, all underlined, might make reference to the stopping of those payments. MS. TRENCH: THE WITNESS: Form. It might, but I don't know for You are correct. I did But

certain that it does.

testify that as the 13th we stopped paying them. I wasn't part of actually drafting this. believe I was. I don't

So I don't know exactly what he means

by -- I don't recall it ever being referred to as impounded funds. But that's certainly possible that

that's what he meant. BY MR. SCHERER: Q Let me ask this: During this period of time

were you in discussions with Mr. Preve and Levin and anybody from the funds or relative to what it was going

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to take to get the Ponzi payments to be made to them that had been stopped as of April the 13th? A Yes. MR. KOPAS: THE WITNESS: with them. about it. Object to form. Mr. Preve and I were negotiating We were talking

Actually Preve was.

You'll see above in the non-highlighted

portions of this letter that we were demanding of them, and this is a part that I was involved in, that they will agree to fund no less than $20 million through cases, NLT meaning no later than April 20th. We felt that when we did our math if they had funded $20 million, we would then just simply turn those funds around, bring them up to speed as to payments. So that was the methodology we were going

to utilize to quote, unquote, release impounded funds. BY MR. SCHERER: Q It says that they agreed to buy an additional And, you know, it You

$5.5 million cases in paragraph 3.

talked about, We will release 5 million and so on. see that? A Q I do.

And that they will agree to put 20 million back

into new cases in April, right?

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'09. A Q A Q happened? A No, it didn't. Part of it did, but I don't 20. MR. SCHERER: BY MR. SCHERER: Q Centurion will agree to buy an additional 5.5 m Well, let's see what it says. MR. KOPAS: Object to form; mischaracterizes

what the e-mail says. MR. SCHERER: MS. TRENCH: What's wrong with the form? You said they will agree to fund

in cases NLT, April 20th and Plat Centurion will release up to 5 million in collection account funds owed to Banyon Funding/Banyon Investments. Do you see that? I do. Did I read that correctly? You did. Now, do you know whether any of that ever

recall it ever happening. Q Let me show you an April 18th e-mail, April 18, And it's an e-mail that starts out down at the I'm sorry. It's Bates From

bottom, George Levin, and then -- Go ahead. MR. KOPAS: This is Plaintiff's 54.

number that begins FP and ends in 163961/1.

(Whereupon, Plaintiff's Exhibit No. 54 was

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A Q marked for identification.) BY MR. SCHERER: Q Reading from the bottom to the top, it's from

George Levin, 19th of April, '09, subject, Re: Still not heard back. And actually down below it's Ari to George. Do you see that down at the

He still hasn't heard back. bottom? A Q Yes. I recall this.

You recall the e-mail?

And then George writes,

to Ari, Frank goes to church on Sunday. Do you see that? Yes. And then you got from Ari to George saying, I When is that done? Should I

certainly respect that.

have our lawyer call you instead? it all left for one day. couple of minutes? A Q

I'm afraid of having

Are you available to talk for a

Ari Glass.

I see all that. Then up at the top it's from George to Frank, And the e-mail says, Frank have If so, then what I had a

Still not heard back.

you touched bases with this crazy man?

does he want to inject a lawyer into this?

meeting with Barry after his luncheon with Doug Von Allmen. Doug is ready to invest 25 million along with Barry still

another 25 million from Barry's clients.

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believes he will have 10 million to 20 million by the end of the month. He also told me that Larry is going to New Did Scott ever give

York to finalize the PPM on Tuesday.

Rick what he needed, a signed representative agreement? Now, let me break that up. Do you know about

the reference to Doug Von Allmen and Barry's lunch with Doug Von Allmen? A thing. clear. What do you know about that? I know about the entire

I do know about it.

I just want to make sure that the record is Before when I said, I know about this, you said, And that's incorrect. I had

you've seen this e-mail.

not seen this e-mail until today, but I do remember what was going on. Q A Tell us what was going on at this time. There were frantic negotiations going on between

the Banyon folks, meaning Preve and Levin, and the Fund people, meaning Ari Glass, Nordlicht, and Simony, to try to get us to release funds, try to figure out what they were going to do. I believe they were trying to get

Banyon to sign a bunch of new paperwork according to what Frank was telling me. And they were also trying to make

sure obviously that they gave us the credit reference that we were requesting. What happened was Ari was, although now you're telling me that it was all a sham, Ari was crazy. I

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mean, he was literally off kilter during this time period. He had a couple of times -- and Ari and I always I had conversations with

had a very, very good rapport.

him during this time period where I had to hold the phone away from my head because he was screaming into the phone so loud. So what was occurring was Ari was frantic waiting to hear back from George -- excuse me, from Frank. Ari had a reporting deadline coming up,

Mr. Scherer, that he had to let his shareholders know something, his investors, one way or the other regarding something. Q A You know that because he told you that? I know that because Ari, Jack Simony, and Frank

all told me that. Q A Do you know whether that was true or not? No, I have no idea. I'm just telling you what I

know to have been going on as far as what they were telling me. Q A All right. Obviously George responded, he goes to church.

And Ari throws this line in about having the lawyer call. And then George gets involved, really gets

involved obviously, and is trying to make sure that Frank is aware that we're going to be getting money from other

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people. him calm. Q What do we basically need to do with Ari to keep That's basically what's going on. Do you have a recollection of whether or not

this is the first time you heard that Mr. Von Allmen was contemplating an investment into the Banyon income fund? A I actually heard that from Mr. Preve before

this, before Ari was going crazy. Q Do you know whether the fact that Mr. Von Allmen

was about to invest 25 million as it says in this e-mail was communicated to the people at Platinum and Centurion? A or not. Q I don't know whether it was communicated to them It was communicated to me. Okay. And at any time there in April did you

ever communicate that to any of the Platinum people? A At various points in time before we secured new

investors I had told Ari on separate occasions, Jack Simony and Mark Nordlicht that they should just take a deep breath that we were getting new investors and we'd get this all worked out. calm. Q Okay. Let me show you another document that's a I was trying to keep everything

chain of e-mails on April the 30th through May the 2nd. MR. KOPAS: Plaintiff's 55, E228396 to 97.

(Whereupon, Plaintiff's Exhibit No. 55 was marked for identification.)

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'09. MR. KOPAS: Plaintiff's 56, Bates labeled A A Q BY MR. SCHERER: Q I would like you to refer to the first page of

the e-mail from George Levin to you and Mr. Preve dated Saturday, the 2nd of May '09. have highlighted? You see that, the part I

However, at this late date we need to

get Doug's funds, paren, which are sitting in cash waiting for these documents, closed parens, in the game. You see that? Yes. And then you write back, I completely agree as

to getting Doug's money in right away. Do you recall that e-mail chain? I recall this going on. I was copied on it. I

don't have a specific recollection as to this. Q All right. I'm going to ask you to concentrated And, you know, who

on efforts to get Doug's money in.

knew about Doug's money coming in and whether there were any meetings involving you and the people at Banyon and the people at Platinum and Centurion regarding Doug's impending investment. But I'm going to show you some

e-mails to help that along a little bit. A Q Okay. I'm going to show you an e-mail on April 27,

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beginning FP ending 165897/1 and /2. (Whereupon, Plaintiff's Exhibit No. 56 was marked for identification.) BY MR. SCHERER: Q I'm going to direct your attention to the second There's an e-mail from Barry --

page down at the bottom.

well BRB, which is -- Do you recognize that at Ballamor? A Q A Q A Q Do you I recognize that? Do you know who BRB is? Sure. Who is that? Barry Bekkedam. To George Lavin. It says, FYI, Von Allmen Von Allmen

30 million between now and early next week.

kids, five to 10 million between now and 5/15 proposed now exact. And then up at the top there's an e-mail from George to you, Re: Cash. And it says, okay, guys. We

now need to sit down, paren, Frank, closed paren, and see what is coming in from all sources. ours from all sources. Barry's is enclosed,

The way I see it, we should have 50 million

Scott cleaned up totally in the next 10 days.

from Barry plus 40 million from us, some reinvestment from the 40 thieves. Frank, please verify my thoughts.

First of all, who is the 40 thieves?

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A Q there? A Q It is. Now, I'd like to go to the first page, and it's You see that? And It's the hedge funds. And the Von Allmen money is again referenced

an e-mail from you to Frank Preve.

you see you start talking about, If negotiations with the idiot goes well today we should be cleared up. Are who

are you referring to there on the first -- I don't have it highlighted. A That's okay. We should be cleared up this week

and use the additional funds -- we should be cleared up. I believe I'm referring to paying off the people we still owe money to, which would have been the hedge funds. Q right? A Q Banyon? A Q No, that exclusive was never exclusive. Well, I mean, wasn't the Ponzi funds through Right. Because the hedge funds had an exclusive with Nobody else was in these deals at that point;

Banyon just hedge -- I'm not talking about what you were doing, but I was talking about what Banyon was doing exclusively through the hedge funds up through April? A Almost exclusively except for side deals.

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A Q Q A The Regent side deal? Yeah. And I think -- I don't know the timing. I don't

You have to look at the LMB transactions also. remember the timing of those, Mr. Scherer. Q I think that was in February of '09.

So the LMB

would be a side deal as well? A Q Yes. Let me see if I can get back to this e-mail. He

says down there, and I have it highlighted, I pay off all outstanding clients. Frank, you have the list. I then

bring Platinum, Centurion and Level 3 current. See that? Yes. Now, do you recall that there was a meeting in That

your office with the Platinum and Centurion people.

would be Nordlicht, maybe Simony, you, regarding Mr. Von Allman's proposed investment into the Ponzi scheme? A Q April. Can you give me a time frame? Yes, sir. On April 27th, about the end of

And I'm going to show you an e-mail about when

that meeting might have occurred, but I want to get it generally speaking. A There was absolutely what I would call an

important meeting that involved at one point in time all those people you referenced and immediately subsequent to

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that a private meeting between Mr. Nordlicht and I, yes. Q Was there a discussion with him about

Mr. Von Allmen and his investment and what that might mean to you and the Ponzi scheme as far as going forward? A There was a discussion to the best of my

recollection between all the parties as to what the new infusion of cash coming from Mr. Von Allmen and others would mean to getting everybody paid down, yes. Q Well, I'm referring specifically to Do

Mr. Von Allmen and what his investment might mean.

you remember any discussion with the funds concerning Mr. Von Allman's proposed involvement? A Mr. Preve told the group as assembled we had a

local billionaire, Mr. Von Allmen, who was going to be taking over what he called the lead in investing, basically replacing the hedge funds and that everything should be fine once he came in. Q Was there something about it would mean some

kind of a rating for the funds or give your Ponzi scheme some kind of a rating? A Well, there were -MS. TRENCH: MR. SCHERER: MS. TRENCH: Object to form. What's the objection? I think that you were leading him,

putting words -- compound.

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MR. SCHERER: were we? (The pending question was read back by the court reporter.) BY MR. SCHERER: Q Do you recall specifically the discussion about We're going to start over. Where

what it would mean as far as giving some validity to or recognition to the Ponzi scheme if Mr. Von Allmen got involved? A Yes. It was several fold. But one of the main

things that Mr. Levin and Preve wanted to try to do was take us to several credit rating agencies. I remember

specific conversations about Standard & Poor's to attempt to get an actual rating for them on an investment strategy, and having Mr. Von Allmen involved along with his family members would be of significant impetus for us to achieve that positive rating. (Thereupon, a short break was taken.) BY MR. SCHERER: Q We're going to finish this on time, hopefully. Let me show you an e-mail from Jack Simony to Mark Nordlicht, Ari Glass, subject, hi, April 27, 2009. MR. KOPAS: PLATCENT21098. THE WITNESS: Okay. Plaintiff's 57, Bates labeled

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(Whereupon, Plaintiff's Exhibit No. 57 was marked for identification.) BY MR. SCHERER: Q And the chain starts on Sunday, April 26th. And

do you see down at the bottom it says it's from Simony to Frank Preve. Hey, Frank, sorry to bug you on Sunday.

Mira wants to come down to FL, paren, this evening, closed paren, to work out a way forward. Are you guys Best sent

available tomorrow and is the timing right? via Blackberry.

And Frank to Simony, We need to bring it to a head, so I'm all for this visit. Jack up at the top on the 27th, Mark, Ari, I was -- it says, I was trying to set up a meeting with Banyon all day. below. Does that e-mail refresh your recollection about a meeting among all of these folks on the 27th and -A I don't know that the meeting actually occurred Frank's e-mail response is enclosed

on the 27th, but I do know that the meeting was set up and sometime around there the meeting occurred. Q Let me see if I can help with that. Let me move I believe

on and then I'll try to come back to that.

there's an e-mail Mr. Nordlictht's waiting in the waiting room, you've left him hanging there and he e-mails you,

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come and get me, Scott, on the 27th. e-mail. A I know that the meeting occurred right around I just don't remember off the top of my head I do remember the meeting occurring. I'll find that

this date.

the exact date. Q

Let me show you another e-mail, April 22nd,

we're going back a little bit, try to keep these in order. Go ahead. MR. KOPAS: Plaintiff's 58, begins FP165165/1.

(Whereupon, Plaintiff's Exhibit No. 58 was marked for identification.) BY MR. SCHERER: Q Mr. Rothstein, this is an e-mail from Mr. Preve Says he's

to you on April 22 regarding Jack Simony.

presenting to three major outside investors tomorrow and we're welcome to be there. There is no cash available

without outside help and that's why he is presenting. You remember this e-mail? A Q A Yes, I do. What can you tell us about it? I can tell you that I know that at that point in

time Jack was still talking to both Frank and I about raising outside capital outside of the hedge funds. Q Do you know who the three majors that he was

speaking with?

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A A Q I do not remember. I want to show you an e-mail chain - no, it's

not a chain, it's on one page, which means I can follow it. It's from Mr. Preve to Mr. Nordlicht on June 24, '09, and then some back and forth. MR. KOPAS: Go ahead.

Plaintiff's 59 ends in 599359994.

(Whereupon, Plaintiff's Exhibit No. 59 was marked for identification.) BY MR. SCHERER: Q 24, '09. It starts out from Preve to Nordlicht on June Re: contact. And I want to - let's get it in

the record and I'll ask you some questions about it. A Q Okay. Down at the bottom it's Preve to Nordlicht

contact, Hi, Mark, hope you're hanging in there, I need a favor. One of the big Funds paren, I will get you their

names, is getting ready to buy into our PPM, but they want a contact at our lenders. I'm giving them your name

and Jack's, paren, for both Centurion and Level 3, closed paren. I need you to handle this personally because it

is a way to make you whole in a very short period of time. What number do you want me to give them? Did I read that correctly? Yes, sir.

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Q All right. And what do you -- during this

period of time in June of '09, were you trying to make you and Mr. Preve trying to make Platinum and Centurion whole in a short period of time? A Q Yes. And what do you think that means, make whole in

a short period of time? A It means that we have found a way - we are

trying to put together a way through new investors to bring in money into the Ponzi scheme to get it paid out to the old investors, in this case the hedge funds. Q And then the next e-mail is from Preve to Contact, Hi,

Mr. Nordlicht, cc this time to Jack Simony.

Mark, I have haven't heard you from you but I understand you're traveling. In any case let reiterate that the

registered investment advisors, paren, Ballamor Capital, closed paren, who handles on income fund -- I think that's a misstatement. But on income fund. Will be He's raising

touching base with you in the near future.

funds to purchase the, quote, old, closed quote R.R.A. deals which in turn will provide for the free flow of funds from the R.R.A. trust accounts to the appropriate collection accounts. In essence we anticipate a We

normalization of business flows once this happens. appreciate your cooperation with this RIA.

RIA being

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Registered Investment Advisor, I think. And then up at the top you have Mr. Nordlicht to Mr. Preve on June 25. Thanks. Just landed. Have him

call Jack first in the interim and then I will be happy to talk to him as well. Now, at this time, do you have a recollection of the efforts in June to have Platinum and Centurion give positive references to Ballamor? A Yes, I do. We were frantic to make sure we got

positive references. Q And raising funds to purchase old R.R.A. deals,

what do you think that refers to? A The old R.R.A. deals would have been to purchase

the money involved in the hedge funds deals. Q But those deals by June were already in default;

weren't they? A Q That's correct. And a free flow of funds from R.R.A. trust

accounts to the appropriate collection accounts; what does that mean to you? A It means so that we can pay back the hedge

funds, Centurion, Platinum, Level 3 using new investor money. Q But again, the free flow of funds from your

trust accounts to the appropriate collection accounts, do

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you agree that's Ponzi talk because there weren't any funds to free flow from these trust accounts; correct? A Q That's correct. Now, do you know whether Mark Nordlicht or

Simony indeed had conversations with Ballamor Bekkedam or any registered investment advisor from that group relative to this at this time? A them. I was told by Mr. Preve that he spoke with I was told by Mr. Simony that both he and Mark I did not speak to Mr. Nordlicht about

spoke to them.

this particular group. Q How about Barry Bekkedam, did you have any

conversations with him concerning his fund or his fund being available to purchase old, quotes around old, R.R.A. deals during this time? A deals. Barry. I don't recall talking about buying old R.R.A. I recall talking about buying new deals with I don't recall talking to him specifically about That's not to say it didn't

purchasing old deals.

happen, I just don't have an independent recollection of it. Q Let me show you a June 23, '09 e-mail from Frank

Preve to you. MR. KOPAS: Plaintiff's 60, the Bates labeled

number is unreadable on this copy.

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(Whereupon, Plaintiff's Exhibit No. 60 was marked for identification.) BY MR. SCHERER: Q It's unreadable, also. It's a Frank Preve Update. And it has

e-mail, June 23, '09 to Rothstein.

Bates stamp but our copy doesn't show it. Now, you'll see I have highlighted there on the middle part of the page: Also the RIA now wants to talk

to Platinum and Centurion about our credit rating. Great. Having Jack lay the ground work. You see that?

What did you think -- First of all, do you recall this? A Q Yes, I do. And tell us what you recall and what was going

on with that RIA now wanting to talk to Platinum and Centurion about the credit rating? A It's the same thing we referenced it the other

e-mails talking about - it's having the people from Ballamor from Bekkedam's group speak to Jack Simony and/or Mark Nordlicht about the fact that we are a solid investment and we pay on time. Q this. Let me ask this, I had forgotten to ask you Around the time back in April, at the end of April

and about a month before this or month and a half, when you were identifying - or when Mr. Von Allmen was identified to you through Barry Bekkedam; do you recall

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ever setting up a dinner at Bova in which Mr. Von Allmen had dinner with you and Ari Glass at Bova, your restaurant? A I really don't have a specific recollection of

the dinner, it's possible it happened but I don't have a specific recollection of it. Q Do you have a recollection of Mr. Von Allmen

having dinner with anybody from Platinum and Centurion at all? I think it's Ari Glass, but the question is

anybody; maybe Jack Simony or anybody? A I don't have that independent recollection,

Mr. Scherer. Q Okay. Thank you. I should have asked you this

this morning when I was questioning you concerning David Ring's testimony in his deposition concerning a statement made to him by Jack Simony of having a bad Passover in '09, which is I looked it up, I think it's April the 4 '09, Passover, April 4 to April 8th, I think. recall that question? Do you

You recall my question and your

responses to that question? A I recall you discussing it. I don't recall you

asking me specific questions about the bad Passover, no. Q Well, let me show you April 8, e-mail from Jack And I'm sorry we don't have a Bates stamp

Simony to you. on it.

I know it was Bates -- Let me tell everybody

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where it came from. It came from the Trustee's

production of the deleted e-mails, which were recently produced. MR. KOPAS: Plaintiff's 61.

(Whereupon, Plaintiff's Exhibit No. 61 was marked for identification.) MR. LICHTMAN: e-mails. Q Restored deleted e-mails, yes. And since that's Tell us from you To be clear, the restored deleted

my only copy, I'd ask you to read it. to Jack kind of hard to read. A Q Okay. And would you read it for us?

Read the date and

go ahead and publish that for me, please. A Sure. It's from Jack Simony, Whitehaven Group

dot com to Scott Rothstein, Wednesday, April 8, 2009 at 7:27:22 p.m. Hey buddy, this won't be the first Passover We will find

we Jews got through when things look bleak. a way through this one. I can. A.T.T. Q

I'm committed to helping any way Sent via Blackberry

Have a good chag, Jack.

Do you recall receiving that e-mail from Jack -

and now that I've put it in front of you, concerning his bad Passover? A Yes.

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Q Do you understand that he meant by having a bad

Passover that you folks were going to get through? A Everything was potentially crashing. The hedge

funds - we cut off our dealings basically with the hedge funds. We were at a standstill. They were not funding, We were insisting

we weren't going to pay, they knew it.

on certain things and they were insisting on certain things. So, it looked like the entire strategy was

blowing up from both sides. Q David Ring's memory concerning Jack's statements

to him is pretty consistent with that e-mail to you? A Q It is. And his statement about saving the funds during

that time is consistent with your understanding of what was happening to your relationship and Banyon's relationship with the hedge funds? A Q Absolutely. Now, yesterday you described Simony as a

confidant? A Q A Yes, sir. Would you explain that for us, please? Based upon all of the dealings that I had

witnessed between Mr. Simony and Mr. Preve, and based upon numerous conversations that I had with Mr. Simony over the phone and face-to-face and based upon trips we

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had taken and the like, hanging out together, I felt that Mr. Simony was one of the people that I could truly trust in the process to do the right thing for all parties concerned, not just for his particular group. the way I treated him for the most part. Q And if I went back to your letter to the Judge And that's

about investors that knew and some investors that didn't know about the Ponzi scheme, where would you place Mr. Simony? A Simony was conflicted. I believe that he knew

there was a fraud going on, but I do not necessarily know whether he knew what type of fraud was going on. All of

the different people, Mr. Scherer, that were involved in the hedge fund - at the hedge funds all had different levels as far as I was concerned of knowledge, people who -Q Take them through the most knowledge through the Let me do it this way.

least knowledge. A Q Sure.

Do you think that Mr. Nordlicht had knowledge

that what you were doing was an illegal Ponzi scheme? A with him? Q A Yes. I was confident that he knew that there was Following my April meeting at the end of April

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illegal activity going on, yes. Q A Q A And what do you base that on? A conversation that I had with him. And would you tell us about that conversation? We were discussing the fact that the explosion

of this entire ordeal, meaning the hedge funds not getting paid, us not having money, this was not good for anybody, them declaring us in default and potentially suing us, George potentially lighting up and suing them would only serve to harm all of us. I opened the meeting. I can remember vividly

sitting on the couch in my office, we were both sitting on the same piece of couch facing each other. And I laid

it out for him in no uncertain terms in my colorful fashion, that something has to be done, that we are not going to simply sit back and have this explode in our faces. If we go down -- and I said this on more than one If we go down, you go down. We're in this

occasion. together.

It's sink or swim, all for one, one for all, or nobody is going anywhere. He then went into this whole

thing and started describing to me some events that involved his father Julius and how he had been through a fraud thing with his father and how difficult it was and that he didn't want to go through it again. And then he

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started talking to me about this optionable litigation. And I got out of it from the conversation, clearly, that he was trying to explain to me without using the words that he was a player, that he got it. his first time at the dance. close at that. dance. That this is not

And he used words pretty

I don't know if he said first time at the

I know it wasn't the first time at a rodeo, he is

not a rodeo guy. He said first time at the dance, not my first trip down this lane. He kept saying whatever the issues We need to stick

are, we'll get through it together. together.

He said these things only blow up when the We can't let that happen. I'm

parties start fighting.

here to support you, you have to support me. And we decided at that moment that we would. told him that the most important thing that he could do was make sure that any future investors that contacted him were told we were a good investment strategy and that they had only positive experience with us with regard to payment and all the other details of the strategy, and he assured me that they would do that. Q A You believe he did do that? I know that he did at least with Von Allmen and I

Bekkedam, sure. Q And so essentially, what you asked him to do was

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Q Q lie about the your performance with his funds? A Q A Q Not essentially, I did ask him to lie. And he agreed to lie? Yes, sir. I think we're done, but let us have five minutes

to look and see if I have left anything on the table here. (Thereupon, a short break was taken.) BY MR. SCHERER: Q Mr. Rothstein, did you or Mr. Preve ever discuss

paying Jack Simony for all of the positive efforts that he had made to help to house your Ponzi scheme to the new investors? (An objection to form was made.) What was the objection about that? UNKNOWN SPEAKER: MR. SCHERER: like me to call. UNKNOWN SPEAKER: Investment strategy. Ponzi scheme.

I'll call it whatever you would

Did you ever discuss paying Mr. Simony for

assisting you and Mr. Preve in your investment strategies? A Q A Yes. Okay. With that understanding, yes. That's Ponzi speak for Ponzi.

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Q He objected to that. Let me ask the question

without -- Did you ever discuss with Mr. Preve compensating Mr. Simony for giving positive references to your investment program? A Q A Yes. Would you tell us about that, please? Yes. Mr. Preve spoke to me over the phone and

by e-mail; it was the e-mail first, then we had a telephone conversation, telling me that if we expected Jack to risk his credibility, which was later described to me when we talked about it, which was giving us the positive credit reference; if we expected him to risk his credibility he had to be paid. Q We're looking for that e-mail and we'll find it I'll show you - and then we'll end

probably next week.

it today, an e-mail from you to -- We found it. MR. KOPAS: 192479/1. (Whereupon, Plaintiff's Exhibit No. 62 was marked for identification.) BY MR. SCHERER: Q Go ahead I don't have a copy of it. I would Plaintiff's 62 begins FP ends

like you to take a look at this e-mail.

I don't have a

copy of it, but I would like you to publish it for us. A It's an e-mail from Mr. Frank Preve to me dated

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Thursday, October 15, 2009, 3:06 p.m. Subject: help. I

can't solve problems because lack of cash is tying my hands. Need the following: One, Banyon 1030 need to pay

Bob Mazzseo so he will get back on the bandwagon with A.J. plus regular bills. Two, S.F.S. Need to send something so I can send something to Jack. He's a key figure now and acting as a

go-between for the new hedge fund investors and Centurion Platinum. They are deeply suspicious that no If Jack is going to

one from Plat is calling them back.

risk his credibility he needs to be compensated. Three, LMB, please pay this today. I'm trying

to get him to step up for 15 million here shortly, but these late payments send the wrong message. you get a chance. Q A Q Frank Preve. Call me when

What was the date of that e-mail? Thursday, October 15, 2009 at 3:06 p.m. Do you know whether Mr. Simony got paid for

risking his credibility? A Q A My understanding is that he did, yes. Tell me what you know about that. There were payments made on the S.F.S. deal,

which was a side deal between Frank and Jack that Jack Simony was involved in, that we made payments on and those payments were forwarded to Jack.

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Q Now, I will show you the -- Thank you. That's

the e-mail you were making reference to in your testimony just before; correct? A Q Yes, sir. Let me show you another e-mail from you -

actually it starts out from George Levin to you -- Well, it does start out from George Levin to you, but I don't know what's in the George Levin one. I'm only interested Still

in the, to you part, so from you to George Levin: not heard from Frank. MS. TRENCH: MR. SCHERER: MR. KOPAS: 163968/1. (Whereupon, Plaintiff's Exhibit No. 63 was marked for identification.) BY MR. SCHERER: Q What was the date? April 19, '09

Plaintiff's 63, starts FP ends

I think this is that Sunday they hadn't heard

from Frank because he was in church, according to George. A Q I think that's the same e-mail we talked about. Okay, let me take a look. But I mean, that was the chain, but it led up to

this response from you on that Sunday, April 19, where it says Ari is a raving sociopath. A Psychopath.

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Q I can't even read that, yes. And he's driving

his own attorney crazy. A Q Okay. No, no.

That's the one; right?

You want me to read the whole e-mail? Read it to yourself and then I'm going

to talk to you about the part I highlighted. A Q Give me half a minute. Okay.

I'm going to talk to you about the two

highlighted portions that I have there. A Q Okay. You state that in that middle part of that

sentence, if there's any type of problem for me at all we will work around it. He also understands that the

re-investment of what we pay each week is a part of the deal and that absent that we have no deal, and you are referring to Mira on that? A Q A Q A Q A Q Yeah. Okay. Mr. Nordlicht. That's Nordlicht; right? Yes. We've been referring to as Mark Nordlicht? Yes. And then down below you say, I discussed with

Jack and Mira the fact that anyone going ballistic would serve no one well and I was quite specific as to Murray's

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A Q weakness and to Mira's weakness as it relates to an explosion. A Would you tell us what you meant?

Yes, I explained to Jack Simony and

Mr. Nordlicht the doctrine of dough mad, the doctrine of mutually assured destruction. Q A Was that Ponzi speak for -That was my way. I explained to them that this

all fell under now, what I referred to in e-mails and the like, as dough mad, the doctrine of mutually assured destruction, you fire, we fire, everybody goes down in a fiery ball of flames. I explained to them that we knew about Murray's cross involvement in all this stuff and other shinanigans that he was pulling, according to Mr. Preve. And that if

they put us in a position where we were going to explode that we would make sure they went down with us and it would serve nobody's purpose. Q Isn't that like telling him you're involved in

illegal activity and that you'll bring them down if they bring you down? MS. TRENCH: Object to form.

That is what I was telling them. You weren't talking about just losing your

credit rating? A There is no way anyone speaking to me at this

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point in time misinterpreted what I was saying and the way I was saying it as some general polite business discussion about having a bad business day. MR. SCHERER: questions. MR. LICHTMAN: I would like to start. I'll do Okay. Thanks. I have no further

this about 20 minutes to get out because I'm concerned about timing making sure everybody gets their time. DIRECT EXAMINATION BY MR. MR. LICHTMAN: Q Mr. Rothstein, as you know, I'm Counsel to Mr.

Stettin, the Trustee of R.R.A. A Q Yes, sir. I'm going to be asking you some questions about

T.D. Bank and I'll follow-up on some things that prior Counsel has gotten into. A Q Okay. One thing I want to start off with was a line of

inquiry I asked you about yesterday in the 2004 Exam where I spoke to you at the beginning of that examination about your A Q truthfulness. Do you remember that?

Okay. I think we obtained a stipulation that the

comments you made in the 2004 would carry over and extend

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to this transcript? A Q Yes, sir. And I listened to what you had to say and You said that you went to

something dawned on me.

Morocco and one of the reasons you went there was because there was no extradition treaty with the United States; correct? A Q That's correct. And you weren't extradited when you came back to

the United States; correct? A Q No, I returned voluntarily, sir. When you say that you came home voluntarily,

what do you mean by that? A While I was in Morroco, I contacted Mr. Nurik I did not

and I told him that I was in very big trouble. get into specifics. trouble.

I told him I was in very big

I discussed issues of representation, which I'm But I did tell him, once

not going to be specific about.

he told me that he would represent me, I asked him to please contact the U.S. Attorney's Office, tell them that I want to come in, that I'm going to completely de-brief as to everything I know both about my crimes and the crimes of many others and that I'm going to voluntarily return to the United States. the return. And I gave them the date of

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in? A Q That is what happened, I did turn myself in. You did that in conjunction with what you said Q Is it a fair statement that you turned yourself

yesterday because you wanted to be truthful and basically tell your story now? A Q I turned myself in -Did you do that because you wanted to be

truthful, as you mentioned yesterday and tell your story? A That was certainly one of the reasons. I did

not want my family to have to have this raining down upon them without me here. I created the mess, it should rain They didn't do anything wrong.

down on me, not on them.

I was concerned about my children, not about their safety but about their mental well-being and it was time for me to be a man and step up and actually do the right thing, probably for the first time in my life. Q I noticed that you've been talking about

potentially illegal conduct of many people that you were very close to or at least if they had knowledge of some of your activities, you mentioned as an example Ron Picou, who you said was in your very narrow circle of friends; Stu who has been your partner for years; Ted Morse who was like your brother; Uncle Bill, as an example?

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A Q Yes, sir. I note that you seem very open about talking Is there anything in your state of

about these items.

mind as to, seems almost like this is freeing you up as you go through this process? A In a lot of ways it's a combination. It's

extremely difficult because there's a lot of people I'm talking about that I care about tremendously and still care about. But at the same time when you have been living the type of lie that I lived for that many years and when you have hurt that many people you get to the point where something has to give, you're either going to remain on the run for your entire life or you're going to kill yourself; or you're going to do what I did and that is come back and -- I made my bed, I'm going to sleep in it, Chuck, that's what I decided to do. Q When I came back from lunch today one of my

colleagues that's in the room asked me how much time either I or the Trustee had promised you in connection with any testimony. And I think that it pertained to the

fact it's common knowledge and been talked about at length that the Trustee, including myself and my co-counsel, interviewed you for three days? A That's correct.

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Q Did the Trustee offer you anything or make any

promise to you whatsoever about your testimony? A Q A Q A Q No, sir. Have I? No, sir. Or Mr. Genovese? No, sir. By chance, has Mr. Scherer made any such

promises to you? A Q A No, sir. Okay. This is the first time, by the way, I'm speaking I haven't

to Mr. Scherer since I left the country. spoken to him the entire time. Q

Let me then start just for a few minutes so we

can be efficient with time and talk about how the relationship with T.D. Bank began. Do you recall how it

was that you actually got to T.D. Bank? A We got to T.D. Bank through my partner Steve

Lippman and a relationship he had with a gentleman who was heading up either Florida or this whole part of the country, a guy named John Tolimar (phonetic). Steve and

I were discussing the fact that we needed a new banking relationship for a number of reasons and he called Mr. Tolimar and we actually set up a meeting and I remember

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going to dinner with Mr. Tolimar and Mr. Rosenfeldt came with us. Myself, Mr. Lippman, Mr. Tolimar and Mr.

Rosenfeldt had dinner up in Boca Raton some place and discussed a banking relationship. Q At that point in time the bank was known as

Commerce Bank; right? A Q there. That's correct. You said there were reasons you were going Yesterday you mentioned some reasons as it

pertained, for instance, to matters related to Ponzi scheme. A Were there other reasons as well? No, the main instigating reason was the fact

that one of our investors or a group of our investors were telling us that we needed to be with a bigger bank. I suspect that as I'm sitting here thinking about it, the sub reason of course is I'm getting a real headache from Gibraltar and even though Mr. Harris and

Mr. Hayworth are doing a good job protecting me, it's still a headache and it's taking up a lot of time, both mentally and actually physically. So as long as we could

have a good relationship it was a welcome change for us. Q Is it a fair statement that the partners at

R.R.A. that you mentioned that went to the dinner with Mr. Tolimar up in Boca knew the reason for you wanting to move to a bigger and different bank?

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A They knew that we needed to go to a bigger bank,

I don't believe that Mr. Lippman - that it was discussed with Lippman, specifically about needing to go because of the hedge funds. briefly. MR. LICHTMAN: Let me ask the Court Reporter It was discussed with Mr. Rosenfeldt

what your next exhibit number is. (Whereupon, Trustee's Exhibit No. 64 was marked for identification.) BY MR. LICHTMAN: Q For the record, Exhibit 64 is the Adversary

Complaint that the trustee, Mr. Stettin filed in this action. A Q Okay. And I want to start with the issue of accounts.

We began -A Q A Q A Q Did you say counts or accounts? Bank accounts. Thank you. If you would take a look at Paragraph 14. Yes, sir. One of the allegations that we make is that Do you

numerous accounts were opened in R.R.A.'s name.

know ultimately how many accounts were opened at the bank?

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A Well, over a dozen. I don't remember how many Every

we ultimately had.

There was a lot of accounts.

time a new investor wanted to come in we opened up a separate account for them. Q Paragraph 26 of the Adversary Complaint we

alleged that there were 26 accounts, 22 of which were titled as trust accounts. recollection? A Q That sounds approximately correct, yes, sir. Okay. At the time that you opened up these 22 Does that refresh your

trust accounts, did the bank ever ask you why you would open 22 separate trust accounts? A Q No, sir. To the best of your recollection, was the

paperwork filled out appropriately so each of those 22 accounts could qualify as Florida Bar iolta accounts? A I didn't handle that paperwork. It would have

been handled by Irene Stay, possibly Bill Brock and Debra Villegas assisting. But I assume it was because they

were all opened up as authorized trust accounts. Q You know that from your personal knowledge

because you saw the accounts and you worked with -A I know it actually because I had conversations

with Tracy Weintraub about the accounts and the fact that they were unlimited accounts.

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Q Was there ever a point in time that Mr. Spinosa

asked you why you had 22 trust accounts? A Q A Q A Q No. Did Ms. Kerstetter ever ask you that? No, sir. Ms. Caretsky? No, sir. In any of the prior firms that you were

affiliated with, did you ever have 22 trust accounts? A Q A No, sir. Did you have more than one? We may have had more than one. We sometimes

broke it down into -- I remember at Phillip, Eisinger we had a trust account for certain condo work that Mr. Eisinger was doing and possibly one for other types of business, but never more than a small handful. Q Paragraph 14 of the Complaint our second One of his co-conspirators - and his

sentence says:

refers to you - was T.D. Bank, which acting through its authorized agents enabled and allowed Rothstein to use its name, facilities, and accounts to deceive investors and lenders. I want to break that down for you.

With respect to the authorized agents, you've mentioned three names so far, that would be Mr. Spinosa, Ms. Caretsky and Ms. Kerstetter.

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A Q A A Q Yes, sir. Would it be a fair statement that those three

people assisted you directly or indirectly in the course of your banking relationship at T.D.? MS. ROTHCHILD: Objection to form

Those three people assisted me directly. Was there anybody else that assisted you? That I knew that knew we were committing some No. Those were the three people that

type of fraud?

were in the know that we were doing something illegal. MR. CRAIG: Move to strike, non responsive.

Let me put my objection on the record. MR. LICHTMAN: I'm sorry.

MR. CRAIG: I move to strike, it's non responsive. BY MR. LICHTMAN: Q A Q the bank? A Q Generally assisted with day-to-day business? Yes, if you needed something done, whether it That's actually not what I was asking you. Okay. I want to first focus on is who assisted you at

was a wire transfer or lock letter or whatever it was? A If it was me specifically requesting, I always If I couldn't reach

went directly to Frank Spinosa.

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Mr. Spinosa I went to Ms. Caretsky. I suspect - I don't

know that this ever occurred - but if I couldn't reach Ms. Caretsky I have would have gone to Ms. Kerstetter. The general rule however was, unless I was doing something pertaining to business that I specifically was doing, that Irene Stay or Bill Brock would have contacted whoever it is that they deemed necessary to contact and I'm certain that their main contacts were not Frank Spinosa, were Ms. Caretsky and Ms. Kerstetter and probably a whole host of other individuals for our general banking business depending upon what they were doing. Q Within R.R.A. what was the difference in

responsibility between what Mr. Brock had to do and what Ms. Stay to had to do as it pertained to T.D. Bank? A Ms. Stay's primary responsible was one

overseeing all the financial work that was going on with T.D. but, let's call it sub-primarily she was trust accounting. Bill Brock was more towards the operating

side, though when Irene was unavailable he would fill in and handle trust items, especially if she was on vacation or out of the office. Q Forgive me, but if you would explain the

difference between when you say Ms. Stay was doing trust accounting and Uncle Bill was doing operating, I don't

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understand from a functional standpoint what the difference is. A Okay. If you could clarify that. Operating account, though it was used to

launder money through, once it came out of other accounts sometimes we put it in there to move it. occurred more at Gibraltar than T.D. Q A Was that the 0923 account? No, 0923 was the main trust account. The operating account at T.D. Bank, to the best of my memory, was basically a legitimate account. Meaning that legitimate bills and the like were paid through it. I'm sure some illegitimate things were paid Although that

through it also, but the bulk of it was costs and that kind of stuff. And Bill's responsibility was cut all the

cost checks, make sure the process servers are paid, make sure court filing fees are paid, that type of stuff. You'll see the series of checks in that regard. On the other side, you have trust accounting. In a firm that's running a massive Ponzi scheme where you have 22 trust accounts, there's a significant amount of movement in and out of those accounts at extremely high velocity. Irene was my right-hand confidant on the And her job was,

financial side of the Ponzi scheme.

when I say trust accounting, her main focus was the illegal trust accounting, moving money around in all the

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accounts, making sure investors got paid on time, making sure I knew how much money we would need on a daily, weekly, monthly basis to pay the Ponzi investors and the like. Q Can you tell me what the difference was between

the operating account that you had at Gibraltar Bank and the operating account at T.D. Bank? A There's actually a drastic difference. My best

recollection is that the operating account at T.D. Bank as I just expressed was used more for just general business. We were paying a lot of our legitimate bills I

through that account, but of course using Ponzi money. mean Ponzi money was going in there to pay most of the bills from the law firm.

In Gibraltar it was completely different because what we were doing, if you look at all the e-mails, and this is probably 99 percent true with almost out exception, if you look at all the e-mails between Ms. Ellis, Mr. Harris, me, Irene, Bill, regarding the movement of money, when it came, when it's Ponzi funds and it's coming from George Levin's, Banyon 1030-32 account into our Banyon, the R.R.A. Banyon account, it always went as a matter of course into that account, out of that account; before it went anywhere else we always put it in operating for the purposes that we saw as

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washing the money, in other words -Q A The Gibraltar operating account? Yes, for the purpose of having it look like it At that point we

was legitimate income to the law firm.

could do with it as we wish and we would instruct the people at Gibraltar through me, through Bill, through Irene, to move the money at that point in time through various accounts, whether it would be to my personal account. You saw e-mails yesterday with the real estate

trust account, all types of various accounts. And then ultimately when we had our accounts at Commerce T.D. we would move the money from on occasion from our Gibraltar operating account over to T.D. and then use the money there, and likewise back the other way. Q So, if I understood your testimony a few minutes

ago, you said that you principally work directly with Mr. Spinosa when it came to T.D. Bank issues; correct? A Q That's correct. As to Ms. Stay when she was dealing with trust

account issues and the activity that you described she was engaged in, who did she work with at T.D. Bank? A Q Her main contact was Ms. Caretsky. And do you know what type of things she did with

Ms. Caretsky under your direction?

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A head. You know, I don't recall off the top of my If you have e-mails it will help refresh my But you also have to remember, Mr.

recollection.

Lichtman, fortunately for us in the scheme of a Ponzi scheme it was much more limited, the need for contact, because we had Treasury Direct in our office, which allowed us to send out our own wires. So, we really only

needed contact them when we were doing what everyone has now come to call the show, and we made contact with them when we needed wires processed quicker, if things were getting hung up, overdrafts covered, that type of stuff. I believe that you'd find, in looking at the e-mails, that the contact was significantly less than we had to have with Gibraltar Bank. Q If there were wires that you needed to have

expedited that would be the type of thing Ms. Stay would have handled with Ms. Caretsky? A Yes, Ms. Stay or Mr. Brock with Ms. Caretsky or

perhaps even going directly to the wire department. Q If you were transferring money from one of the

accounts to another account, did you do that through Treasury Direct or would you have done that through conversation, meaning you at R.R.A. with someone at T.D.? A I don't recall off the top of my head, but I

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know we didn't do it through Treasury Direct because that was wires. I seem to have some recollection that we had

the ability to transfer money internally also, but I may be mistaken. The e-mails should show that if you have

e-mails from Irene or Bill to somebody else telling them to move money internally. Q the bank? A Q A He was the regional vice-president. Did he describe for you what his duties were? He told me that he had control over the Do you recall what Mr. Spinosa's title was at

southeast region of T.D. Bank. Q Did you believe that there was anyone more

senior in the southeast region of T.D. Bank than Mr. Spinosa? A In that region, no. Only Mr. Tolimar who was

his direct report while he was at the bank. Q Mr. Tolimar knew who you were because he passed

you off to Mr. Spinosa; right? A Yes. Mr. Tolimar and I actually became

friendly, yes. Q Was Mr. Tolimar at the bank throughout the

course of, we'll say October 2009, to the best of your knowledge? A No. My understanding is he got a better

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opportunity with another banking establishment and left. Q Do you know who Mr. Spinosa's senior officer

was over him, if any? A Q A After Mr. Tolimar left? Yes. It was my understanding that he reported to

someone up in the main office at Cherry Hill, New Jersey. That once Mr. Tolimar left they actually didn't The way

replace Mr. Tolimar with regard to him.

Mr. Spinosa explained it to me is that once Mr. Tolimar left he was give a lot more power and a lot more authority. Q A Q So he moved up? Yes. As to Ms. Caretsky, did she report to

Mr. Spinosa; do you know? A I don't know for certain. It always appeared

that she did because I saw e-mails back and forth, but I can't be certain. Q A Do you know what her title was? I don't remember whether she was the branch

manager, I don't recall off the top of my head. Q A How about Ms. Kerstetter? She eventually became one of the managers at the I think she was Ms. Caretsky's

17th Street branch.

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assistant, if I'm not mistaken at the Weston branch. Q A At Weston? At Weston. She was originally - ms. Kerstetter

was originally at Weston and moved to 17th Street. Q Now, the second sentence in Paragraph 14 of our

complaint, it says one of his co-conspirators from T.D. Bank, which acting through its authorized agents, enabled and allowed Rothstein to use its name, facilities, accounts to deceive investors and lenders. that? A Q Yes. From a factual standpoint do you believe that Do you see

statement to be true? A Q It is true. What facts do you know of that would support the

contention that I raised - and we're going to break this down, that T.D. Bank allowed you to use its name to deceive investors and lenders? A One of the great things from a Ponzi perspective

about moving our accounts to T.D. Bank and then finding an ally and co-conspirator in Mr. Spinosa was the fact that T.D. Bank was one of the largest and recognized as one of the largest, most powerful banks in the country and continued to grow at an extremely rapid pace. The fact that we were able to put their name all

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Q over everything we were doing when we were selling the investments lend a tremendous credibility. I no longer

had to answer any questions such as I've never heard of Gibraltar Bank. There were people from outside the region that really weren't familiar with Gibraltar Private. Q A Q A Did Mr. Spinosa know you were doing this? He helped me do that, sure. Give me examples how he helped you do it. Of the best example is when I had Barry Damson

and Kathleen White in his office up on Cypress Creek over and over again, when Mr. Spinosa was selling he would say you don't need to worry, we're as big as they get. There's a lot of money behind this, there's a lot of power, and there's very little we can't do to help our customers. If your money is safe, it's safe anywhere.

You know, it's touting the power of being an extremely large bank. Q How about issuing lock letters that came on T.D.

letterhead, would you view that as being consistent with that statement? (Objection was made to form.) Would you view the issuance of the lock letters

to be consistent with T.D. Bank lending its name to what you were doing? MS. ROTHCHILD: Object to form.

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A A That's one of the main things they did for us.

It turned out that those lock letters were instrumental to us continuing our business because we had investors that would not have invested with us but for our ability to pseudo faith, clock the accounts. Q The second component of the sentence in the Would it be a fair

complaint discusses facilities.

statement that the use of the T.D. Bank office was for your show, would qualify in your mind as the use of the facilities? MS. ROTHCHILD: Sure. Object to the form.

I mean, it clearly gave the investors the

impression that we were extremely tightly tied to the bank and a powerful client. able to use their facilities. We would walk in and we were I had very close

relationships with the people in there, as you can see from the one picture that makes it look like I was dancing with Ms. Kerstetter in the middle of the bank floor. So, yes, the use of their facility certainly helped and our ability to come and go as we pleased help as well. Q The last item would have been accounts, that's

self explanatory. MR. LICHTMAN: What I would like to do, it's 10

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to 5, if we stop right now that would give people enough time to possibly beat rush hour by a couple minutes. MR. NURIK: Before we go I want to put on the

record, I've explained this to certain of the Counsel that tomorrow morning I have another thing that I have to attend to in Broward County. But my client,

Mr. Rothstein, has agreed to proceed in my absence and continue answering the questions of Mr. Lichtman. so. MR. LICHTMAN: So, it's on the record, I will probably be here around 11:00 or

Mr. Rothstein, would you acknowledge that? THE WITNESS: MR. LICHTMAN: Yes, that's accurate. Okay.

(The proceedings were adjourned at 4:55 p.m.)

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______________________________________ Terri L. Wright Dated this 13TH day of DECEMBER, 2011. I, TERRI L. WRIGHT, Notary Public in and for the State of Florida at Large, certify that I was authorized to and did stenographically reported the foregoing proceedings and that the transcript is a true and complete record of my stenographic notes. STATE OF FLORIDA ) C E R T I F I C A T E

COUNTY OF BROWARD )

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United Reporting, Inc. (954) 525- 2221

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