QSGI Response To IBM Motion To Compel Compliance and For Sanctions For Non Compliance

Case 9:11-cv-80880-KLR Document 70 Entered on FLSD Docket 05/07/2012 Page 1 of 8
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA Case No. 09:11-cv-80880-KLR
QSGI, Inc., a Delaware Corporation, Plaintiff, v. IBM GLOBAL FINANCING, a Division of International Business Machines Corp., and INTERNATIONAL BUSINESS MACHINES CORP., Parent to and/or d/b/a IBM GLOBAL FINANCING, Defendants. _________________________________________/ PLAINTIFFS RESPONSE TO IBMS MOTION TO COMPEL COMPLIANCE WITH MARCH 16, 2012 AND FOR SANCTIONS FOR NONCOMPLIANCE Plaintiff, by and through undersigned counsel, hereby files this Response to IBMs Motion to Compel Compliance with March 16, 2012 and for Sanctions for Noncompliance pursuant to Fed. R. Civ. P. 37 and Local Rules 7.1 and 26.1. In support thereof, Plaintiff states as follows: 1. Dorsey v. Academy Moving & Storage, Inc. 423 F.2d 858, 860 (5th Cir. 1970), a
case emanating from Florida, long ago established standards governing the imposition of sanctions in circumstances such as the present: The sanctions available under Rule 37(b) for such conduct are predicated upon the presence of such factors as willful disobedience, gross indifference to the right of the adverse party, deliberate callousness, or gross negligence. The sanctions are not predicated upon a party's failure to satisfy fully the requirements of a production order when the failure was due to inability fostered neither by its own conduct nor by circumstances within its control. Societe Internationale Pour Participations Industrielles Et
Commerciales, S.A. v. Rogers, 1958, 357 U.S. 197, 211, 78 S.Ct. 1087, 1095, 2 L.Ed.2d 1255, 1266. 2. As this Court will readily see, IBMs Motion to Compel, IBMs Motion to
Expedite briefing and request for a hearing, are unnecessary, wasteful of the parties and Courts time and resources, and should be immediately withdrawn because it is without cause, legal basis and moreover, its attorneys good faith certification is an sham. (See, D.E. 64, p. 15.) 1
2
IBM
knows full well, but fails to mention, that the delayed receipt and production of documents and evidence responsive to IBMs discovery was not QSGIs fault and is excusable. QSGIs
documents and records have been in the possession and control of non-partiesthe Securities and Exchange Commission (SEC) and QSGIs SEC counsel, McDonald Hopkins LLC. Despite QSGIs and IBMs efforts to obtain QSGIs documents and records sooner, QSGI and IBM have been, and continue to be, at the mercy of McDonald Hopkins and the SEC, who only recently produced and allowed access to the millions upon millions of documents constituting the universe of QSGIs existing documents and records. 3. Correspondingly, IBM has not sought to resolve QSGIs objections to IBMs
discovery nor its Motion to Compel before or after filing it Motion in accordance with Rule 37,
Fed. R. Civ. P. 37(a)(1) requires Defendant, IBM, to include a certification that the movant has in good faith conferred or attempted to confer with theparty failing to makediscovery in an effort to obtain it without court action. Local Rule 7.1 entitled, Pre-filing Conference Required of Counsel, requires counsel to, confer (orally or in writing), or make reasonable effort confer (orally or in writing), with all parties or non-parties who may be affected by the relief sough tin the motion in a good faith effort to resolve by agreement the issues to be raised in the motion. Counsel conferring with movants counsel shall cooperate and act in good faith in attempting to resolve the dispute. 2
2
Local Rules 7.1 and 26.1, and this Courts Discovery Handbook.
Exacerbating this fatal
procedural defect, IBMs Motion is also rife with hyperbole and blatant inaccuracies regarding QSGIs past conduct; the status and whereabouts of QSGIs records and documents and their production; and the reviewability of the documents produced by QSGI in March and April 2012. Contrary to IBM generous claims, QSGI has never destroyed any document outside of its document retention policies or normal business practices. See, M. Sherman Depo. Trans. as Exhibit A. pp. 31-82. As of approximately April 26, 2012, QSGI possesses million upon millions of documents and records, most of which have been produced or will be produced to IBM. Only an unknown subset of QSGIs document and records were destroyed between in 2009, and to that extent, they were destroyed by a document storage facility in Minnesota which was not properly reimbursed by the Receiver in QSGIs bankruptcy. Id. at 53-54, 63-66, and 7282. This is despite QSGI properly submitting bills for these storage fees. Id. 4. Equally untrue is IBMs claim that the documents from McDonald Hopkins LLC
are unreadable, unreviewable, and unusable. QSGIs counsel is able to read, review, search and use the same documents and records, which have been produced exactly as they were organized, stored and maintainedreadable, reviewable and searchable .pdf and .tiff files with all accompanying metadata. See, D.E. 64-8. Moreover, any discrepancy between the documents and records produced and the previously agreed format is purely a consequence of QSGI and QSGIs counsel not knowing the format in which McDonald Hopkins created, organized, stored and maintained QSGIs documents and records. Id. QSGIs agreement to produce records in the format requested (ESI)(D.E. 27, pp. 5-6) by IBM was a gratuitous agreement based upon a
IBMs Motion requesting sanctions for QSGIs alleged failure to respond to IBMs first set of interrogatories is premature as there has been no attempt whatsoever to resolve QSGIs objections to the interrogatories. 3
mistake of fact regarding the electronic format of QSGIs existing documents and records. QSGI is only required to produce its records in the manner in which they were created, stored and maintained. It is not obligated to rearrange or reorganize these materials for IBM, let alone create new documents in an entirely new format. Handbook. 5. IBMs Motion to Compel and corresponding Motion to Expedite where no See, Section III.B.(1).b. of the Discovery
emergency or real prejudice exists is part of an emerging discourteousness on the part of IBM. It unreasonable demands and disrespect for counsels schedule is counterproductive and contrary to those rules governing discovery practice in the Southern District. Section I.A.(1), (2) and (4) of the Discovery Practices Handbook South District of Florida entitled, Courtesy and Cooperation Among Counsel clearly provides that: (1) Courtesy. Discovery in this District is normally practiced with a spirit of cooperation and civilityCourtesy suggest that a telephone call is appropriate before taking action that might be avoided by agreement of counsel. (2) Scheduling. A lawyer shall normally attempt to accommodate the calendars of opposing lawyers scheduling discovery. **** (4) Withdrawal of Motions. If counsel are able to resolve their differences after a discovery motion or response is filed, the moving party should file a notice of withdrawal of the motion to avoid unnecessary judicial labor. 6. From the inception of this lawsuit until approximately March 21, 2012, QSGIs
counsel conversed or corresponded with IBMs local Florida counsel nearly every day about every aspect of QSGIs lawsuit. As envisioned by the above guidelines, counsels near daily
conversations fostered a spirit of cooperation out of which, among other things, IBM learned the whereabouts of QSGIs documents leading to IBMs February 2012 subpoena and the April 2012 release of all of QSGIs records and documents from the third parties that possessed and controlled themMcDonald Hopkins LLC and the SEC. IBM now has access to and has begun its review of 382 boxes of documents controlled by the SEC; and pending the completion of copying four (4) million or so documents and 23 privilege logs, recently received and reviewed by QSGIs counsel, IBM will possess all documents that were in McDonald Hopkins LLCs and the SECs possession.
4
These millions upon millions of documents are responsive to IBMs
First Request for Production and First Set of Interrogatories, constitute the known universe of existing documents pertaining to QSGIs bankrupt business, and were arduously compiled, organized and produced in the manner they were created, kept and maintained at a cost of some $250,000.00. 7. Despite the proven success of conducting litigation in a cooperative and courteous
manner, IBM has abandoned this track and its local Florida counsel in favor of out-of-state attorneys, who are more concerned with creating litigation and collateral matters rather than bringing about their just and efficient end. As of March 21, 2012, IBMs local counsel has been non-communicative, despite having access to QSGIs counsels contact information, including personal cell phone number. And while, IBM and its battalion of out-of-state counselors are prolific at papering the record, they are very ineffective communicators. In just under nine (9) months of litigation, not one of IBMs out-of-state attorneys have thought to engage in an actual
QSGIs counsel received all of these records on approximately April 26, 2012. After an initial review, QSGIs counsel began copying these documents to an external flash drives on Thursday evening, May 3, 2012. As of Monday, May 7, 2012, these documents were still copying and will be shipped to IBMs counsel immediately upon completion. 5
conversation with any of QSGIs attorneys to discuss any substantive matters relating to this case, let alone anything of import. 5 Indeed, this dearth of conversation leads QSGI to believe IBMs out-of-state attorneys might not possess or know how to use a telephone. 8. IBMs sea of correspondence, sent upwards of four times a day, is a poor
substitute for live conversation, made all the poorer by IBMs out-of-states counsels unreasonable and untenable demands that QSGI respond to the same within 24 hours or else. This pattern of practice accomplishes little other than increase the amount and costs of litigation, and muddles and distorts the Courts record. Then again, this may be the entire purpose. 9. IBM knows that all QSGIs documents and records have been in the possession,
custody, and control of a third parties. IBM has known this since December 2011, and it is the reason precipitating IBMs subpoena to McDonald Hopkins LLCnot QSGIs recalcitrance. IBM also knows, having been repeatedly advised by QSGIs counsel and McDonald Hopkins, that QSGI has had no control whatsoever over the timing of these third parties production of QSGIs records. Rather than acknowledge these facts, IBM has discourteously taken to
completely misrepresenting QSGIs conduct to the Court to unfairly seek punishment where no punishment is due. WHEREFORE, for the reasons set forth herein, Plaintiff respectfully requests that this Court enter an Order Denying IBMs Motion to Compel Compliance with March 16, 2012 and for Sanctions for Noncompliance.
Respectfully submitted,
In seven months, QSGIs counsel knows of only one telephone message left by out-of-state counsel to QSGIs counsel. This message was about scheduling a deposition and is unrelated to anything having to do with IBMs immediate Motion or QSGIs discovery responses. 6
THE FERRARO LAW FIRM, P.A. Attorneys for the Plaintiff 4000 Ponce de Leon Blvd. Suite 700 Miami, FL 33146 Telephone (305) 375-0111 Facsimile (305) 379-6222 Email: cxd@ferrarolaw.com
By:
/s/ Case A. Dam CASE A. DAM, ESQ. Florida Bar No. 756091
CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing was served via CM/ECF on all counsel of record this 7th day of May 2012.
THE FERRARO LAW FIRM, P.A.
By: /s/ Case A. Dam CASE A. DAM, ESQ. Florida Bar No. 756091
Case 9:11-cv-80880-KLR Document 70-1 Entered on FLSD Docket 05/07/2012 Page 1 of 54
In The Matter Of:

QSGI,INC.,etal. v. IBMGLOBALFINANCING,etal.
___________________________________________________
MARCSHERMANVol.1
March12,2012
___________________________________________________

MARC SHERMAN - 3/12/2012 Page 1
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA Case No.: 9:11CV 80880-KLR
3 4 5 6 7 8 9 10 11 12 VIDEOTAPED DEPOSITION OF 13 MARC SHERMAN 14 TAKEN ON BEHALF OF THE DEFENDANTS 15 16 17 18 19 20 21 PAGES: 22 23 24 25 Reported By: Tamra K. Piderit, FPR, RMR, CRR, CLR 1-206 DATE TAKEN: TIME: LOCATION: March 12, 2012 10:19 a.m. - 3:53 p.m. Hogan Lovell 2525 Ponce De Leon Boulevard Suite 300 Coral Gables, Florida v. IBM GLOBAL FINANCING, a Division of INTERNATIONAL BUSINESS MACHINES CORPORATION, INTERNATIONAL BUSINESS MACHINES CORPORATION, Parent to and/or d/b/a IBM GLOBAL FINANCING, Defendants. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ QSGI, INC., a Delaware Corporation, Plaintiff,
1-800-325-3376
Merrill Corporation - New York
www.merrillcorp.com/law

MARC SHERMAN - 3/12/2012
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Steve Wolfe, Videographer 25 CRAVATH, SWAINE & MOORE, LLP BY: Benjamin H. Diessel, Esquire Brian M. Jenks, Esquire Worldwide Plaza 825 Eighth Avenue New York, New York 10019 212.474.1000 212.474.3700 Fax bdiessel@cravath.com bjenks@cravath.com -andHOGAN LOVELLS BY: Laura Besvinick, Esquire Mellon Financial Center 1111 Brickell Avenue Suite 1900 Miami, Florida 33131 305.459.6500 305.459.6550 Fax laura.besvinick@hoganlovells.com ALSO PRESENT: THE FERRARO LAW FIRM BY: Juan P. Bauta II, Esquire 4000 Ponce De Leon Boulevard Suite 700 Miami, Florida 33146 305.375.0111 305.379.6222 Fax jpb@ferrarolaw.com ON BEHALF OF THE DEFENDANTS: APPEARANCES OF COUNSEL ON BEHALF OF THE PLAINTIFF:
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Exhibit 8................................... 196 Schedule F Exhibit 6.................................. 161 Subpoena Exhibit 7.................................. 166 Plaintiff's Response to Defendants' Motion to Compel responses to Defendants Discovery Requests Exhibit 5.................................. 138 Summary of First Interim Application of Kinetic Advisors, LLC for Compensation and Reimbursement of Expenses as Restructuring Advisor to Debtors Exhibit 4.................................. 135 Debtors, QSGI, Inc., QSGI-CCSI, and Qualtech Services Group, Inc.'s Third Amended Disclosure Statement in Support of Third Amended Plan of Reorganization EXHIBITS NO. DESCRIPTION PAGE Exhibit 1.................................. 7 Amended Notice of Videotaped Deposition of QSGI Incorporated Exhibit 2.................................. 10 November 5, 2007, letter to Samuel Palmisano from Marc Sherman Exhibit 3.................................. 91 Form 8-K dated November 14, 2007
**Original exhibits retained by the court reporter and attached to the original transcript.**
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INDEX OF EXAMINATION WITNESS: PAGE MARC SHERMAN DIRECT EXAMINATION By Mr. Diessel 6 CROSS EXAMINATION By Mr. Bauta
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PROCEEDINGS VIDEOTAPED DEPOSITION OF MARC SHERMAN March 12, 2012 Videotaped deposition taken before Tamra K. Piderit, Florida Professional Reporter, Registered Merit Reporter, Certified Realtime Reporter, Certified LiveNote Reporter, and Notary Public in and for the State of Florida at Large, in the above cause. THE VIDEOGRAPHER: Good morning. I'm the video operator, Steve Wolfe, of Merrill Legal Solutions. Today's date is March 12, 2012, the time is 10:19 a.m. We are at the office the Hogan Lovells at 2525 Ponce De Leon Boulevard in Coral Gables, Florida, to take the video deposition of Marc Sherman in the matter of QSGI versus IBM. Tamra Piderit is our court reporter, also of Merrill Legal Solutions. As I said, we are on the record. Counsel please state your appearance for the record. MR. BAUTA: Juan Bauta on behalf of the plaintiff. MR. DIESSEL: Ben Diessel from Cravath,
2 (Pages 2 to 5) 1-800-325-3376 Merrill Corporation - New York www.merrillcorp.com/law

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Swaine & Moore for IBM. MR. JENKS: Brian Jenks from Cravath, Swaine & Moore for IBM. MS. BESVINICK: Laura Besvinick also for IBM. THE COURT REPORTER: Do you solemnly swear that the testimony you are about to give in the matter before you will be the truth, the whole truth, and nothing but the truth? THE WITNESS: Yes. MARC SHERMAN, having been duly sworn, was examined and testified as follows: DIRECT EXAMINATION BY MR. DIESSEL: Q. Can you state your name for the record. A. Marc Sherman, S-h-e-r-m-a-n. Q. What's your present address? A. Business or home? Q. Home address? A. 241 Tradewinds Ddrive, Palm Beach, Florida. Q. What's your present business address? A. 400 Royal Palm Way, suite 302, Palm Beach Florida 33480. Q. What's your present position at QSGI?
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right? A. Yes. Q. Have you had an opportunity to review Exhibit 1 with counsel? A. Briefly, yes. Q. What's your understanding as to which topics you are designated to testify on? A. Well, I understand that you are going to ask me questions around the topics of information for the company. Q. Is it your understanding that you are designated to testify as to the three topics in this amended deposition notice? A. Yes. Q. Are you prepared to provide complete testimony as to each topic? A. To the best of my knowledge, yes. Q. What did you do to prepare for this deposition? A. I spoke with a few of my internal people in my company, discussed this with my attorney, and I think that I have enough information to be able to give you accurate information. Q. Who did you speak with -- when you say at the company, you mean at QSGI?
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A. Chairman and CEO. Q. How long have you held that position? A. Since the inception of the company. Q. When was the inception of the company? A. I don't have the exact date. It's public record. Q. Roughly about what year was it? A. Ten, 12 years ago. Q. So roughly near 2000, give or take? A. 2000ish, yes. Q. So you have been chairman and CEO of QSGI since about 2000? A. Correct. Once again, it is public record so there is no reason to guess. Q. I'm going to hand you what I have marked as Exhibit 1. (Document marked as Exhibit 1 for identification) Q. This is the amended notice of videotaped deposition for QSGI Incorporated. Is it correct that you are here today as a corporate witness for QSGI? A. Yes. Q. And you understand that you have been designated to give testimony on behalf of QSGI,
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A. At QSGI. Q. How long -- who did you speak with? A. My current CFO, I spoke with my VP of IT, and I also discussed it with my attorney. Q. Other than the current CFO, the current VP of IT, and your attorney, did you speak to anybody else? A. No, I did not. Q. When you say you spoke with your attorney you mean Mr. Bauta? A. Yes. Q. Who is the current CFO? A. David Meynarez. Q. Who is the current VP of IT? A. David Harris. Q. How much time did you spend preparing for this deposition? A. Not much. Q. Can you ballpark it? A. Maybe 30 to 45 minutes. Q. When did you conduct that preparation? A. Over the last week. I think Juan sent this to me about a week ago. I quickly reviewed it and then we had some conversations about it and discussed it.

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Q. So other than speaking with the current CFO, the current VP of IT and speaking with your counsel, did you do anything else to prepare for this meeting or this deposition? A. No. No, I have not. Q. So you didn't review any documents to prepare for this deposition? A. No, I have not. (Document marked as Exhibit 2 for identification) Q. I'm going to hand you what I have marked as Exhibit 2. MR. BAUTA: Ben, I think you gave me some extra ones. MR. DIESSEL: Thanks. Q. Do you recognize Exhibit 2? A. Yes, I do. Q. What is it? A. It's a letter sent to Sam Palmisano, chairman of IBM regarding the issues surrounding IBM's policy change that affected our business adversely. Q. The letter refers to a recent IBM policy change, correct? A. Yes.
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designation. MR. DIESSEL: Is it your position that asking whether or not the policy change that was referred to in 2007, asking whether that is the subject of the lawsuit is outside the scope of this 30(b)(6)? MR. BAUTA: Absolutely. If you can show me where in this 30(b)(6) motion or 30(b)(6) notice, if you can tell me where it says that you are going to inquire into the substance of documents, I'm happy to let you proceed. MR. DIESSEL: Well, I'm going to ask for an answer to the question unless you are telling me you are going to file a protective order. I would like to know what your basis would be for the protective order. MR. BAUTA: Beyond the scope of this witness's knowledge for what he is being put forward. You specifically asked for an individual who had knowledge of regarding recordkeeping, not an individual who is here to testify about the substance of documents. That was your specific request. We have complied with that request. Mr. Sherman is here to speak exclusively about the issues regarding the
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Q. According to the letter the policy appears to have been enforced beginning in July 2007. Do you see that? A. Correct. Q. Is the policy change that's referred to in this letter the same policy change that is the subject of QSGI's present lawsuit? MR. BAUTA: Objection. It's beyond the scope of this deposition. If you want to ask him about how many documents were retained you can do so, but you are not getting into the substance of the documents. MR. DIESSEL: I'm not going to get into the substance of the claim. I do want to set the stage. I'm entitled to an answer to the question even if you think it's outside the scope. My position would be it's setting the stage for talking about the documents, and I would like an answer to that question, please. MR. BAUTA: I'm going to object to it and it is beyond the scope for which this witness was brought here today. If you insist, then you can go ahead and file the appropriate motion and have the court address it then. This is not a deposition beyond the scope of the 30(b)(6)
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document retention policy and where documents were stored by QSGI. MR. DIESSEL: Juan, what I'm trying to do here is QSGI brought this lawsuit alleging a policy change in 2007. I'm trying to set the stage for understanding the document retention and the document sources in 2007, and I'm entitled to that. MR. BAUTA: Sure. You can ask him what he was doing -- what the company was doing in 2007 to maintain documents. If that's your question, go ahead and ask him the question. But the exhibit that you have already marked as number 2, you are asking him substantive questions about what the basis of the lawsuit is. That's nowhere in your 30(b)(6) notice. If you show me where it is in the 30(b)(6) notice, I'm happy to let him speak about it. MR. DIESSEL: Juan, that doesn't matter. These depositions aren't limited by the scope of 30(b)(6). MR. BAUTA: Sure, they are. MR. DIESSEL: That's absolutely not true. I'm not limited to the questions that appear on the face of the 30(b)(6) notice, and you know

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that. MR. BAUTA: Absolutely. Absolutely you are. He was brought here for the sole purpose of answering your questions under the 30(b)(6) notice. MR. DIESSEL: So are you telling me that you are going to file a protective order? MR. BAUTA: I will file a protective order, absolutely. MR. DIESSEL: I'm going to ask the question, and I'm going to ask it one more time -MR. BAUTA: Sure. MR. DIESSEL: -- and if you instruct not to answer, then I'm expecting to see a protective order, a motion for protective order. MR. BAUTA: Absolutely. Absolutely. Go ahead. BY MR. DIESSEL: Q. So Exhibit 2, Mr. Sherman, do you see that the letter refers to a recent IBM policy change? A. Yes. Q. And is that the IBM policy change that is the subject of this lawsuit? MR. BAUTA: I'm going to instruct you not to answer, Mr. Sherman. We are going to file a
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THE WITNESS: Am I here to answer information about documents or questions about the case? MR. BAUTA: Absolutely. I'm going to instruct you not to answer. If you are not going to ask him any questions about your 30(b)(6) motion, 30(b)(6) notice, then just tell me now and we will walk away. MR. DIESSEL: I'm going to be asking lots of questions about documents and about retention, and I need to start by determining the time period. I would like to do that so I can ask my questions. MR. BAUTA: You have got the time periods encompassed within your notice. This witness is here to respond to your notice and only your notice. If your intention was to go beyond the notice, then you should have noticed a different deposition for today. MR. DIESSEL: Well, the notice covers the year 2004 through the present. I'm asking about QSGI's claim that it brought in this lawsuit about a purported policy change in 2007 to understand -Page 17
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motion for protective order. MR. DIESSEL: I appreciate it if you would state the basis for what -MR. BAUTA: Beyond the scope of this deposition, beyond the scope of what this witness is being produced for. MR. DIESSEL: Do you have any authority for the proposition that asking a question outside the scope of a 30(b)(6) notice is grounds for protective order? Not conceding that it's outside the scope, but if that's your position I would like to know what authority you have that I can't ask the question about QSGI's claims for in this lawsuit. MR. BAUTA: Wait for my motion for protective order. BY MR. DIESSEL: Q. In QSGI's complaint in this matter, you understand that QSGI makes an allegation about an IBM policy change that was purportedly put in place in 2007, correct? A. Yes. Q. And QSGI's claim, in essence, is that IBM started enforcing the policy in 2007? MR. BAUTA: Objection.
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THE WITNESS: You are asking me deposition. MR. BAUTA: Why don't you explain to me where in this notice it says that you are going to be asking about -- that you want a witness with knowledge as to the substance of documents regarding the subject matter of this lawsuit. MR. DIESSEL: I don't have to do that. MR. BAUTA: Okay. MR. DIESSEL: It's not my obligation to point out to you where in the notice a basic background question about the chronology, where that it is in the suit. MR. BAUTA: I'm going to make this really simple for you, Mr. Diessel. If you have no intention of asking questions about document retention, then go ahead and state that on the record, and we will close the deposition out, we will file a protective order, we will get the judge to rule on whether he believes that this notice properly encompasses the area of inquiry that you are seeking to address here. MR. DIESSEL: So, again, I will ask the question again, and if you want to instruct not to answer, I will expect to see a protective order from you.

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MR. BAUTA: Sure. BY MR. DIESSEL: Q. According to QSGI's complaint, IBM enacted a policy that it started enforcing in 2007, correct? MR. BAUTA: Same objection. I am going to instruct you not to answer. It's beyond the scope of this deposition. Q. I would like to focus on the time period from during 2007 up until roughly the point in time when QSGI sent the letter that is marked as Exhibit 2, which is November 2007. Can we agree to focus on that time for right now? A. Sure. Q. So what was QSGI's business during that time period in 2007? THE WITNESS: Does that relate to paperwork? MR. BAUTA: I'm going to give him a tiny bit of room to lay a little bit of groundwork, and if he decides he is going to go beyond that, then I will instruct you not to answer. A. Please repeat the question. Q. What was QSGI's business in 2007? A. We were in the computer remarketing of mainframes, PCs, servers, and laptops, and maintenance of like same product. Including data
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A. How many offices? There was one office in Minnesota that was the mainframe hardware division, and there were some salespeople that worked from their homes and other places as well. But the main focus would be the Minnesota operation where it was our warehouse, our testing facility, our main distribution hub for mainframes. Q. Where was that Minnesota office? A. I think it's on Neil Armstrong Boulevard. I'm not exactly sure of the exact address. Q. What city was it in? A. I think it was Eagan, Minnesota. Q. I think you said there was another warehouse or another facility that comprised the hardware division? A. No, no. Well, as I said, define "hardware." PC is considered hardware. So in New Jersey we also had hardware, but that was our PC group. So we didn't handle mainframes out of that group. Mainframes were handled out of Minnesota. Q. Any other offices or facilities that comprise the hardware division of QSGI? A. Not 100 percent sure of your question. I mean, my office was in Florida, but I didn't have mainframes in my office in Florida, and I also did
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security as well. Q. How was that business organized in terms of its divisions? A. The mainframe business was an operation that was run in Minnesota where we did mainframe resale, mainframe parts, mainframe maintenance, that was our Minnesota operation. Our New Jersey operation was our data security, data erasure, remarketing business. Q. So would it be accurate to refer to the Minnesota operation as the hardware division? A. Well, you know, define "hardware." Q. Well, I believe in QSGI's public filings it refers to hardware division, so I'm just trying to map on if that's the hardware division that QSGI refer to? A. Mainframe hardware, yes. That's where our mainframe hardware business was, yes. Q. So to the extent that QSGI was reselling IBM mainframes, that would have been part of the business of the hardware division? A. Yes, the Minnesota mainframe hardware division, yes. Q. So how many offices comprise the hardware division?
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communicate with my mainframe group. Are you talking about the physical location of where the equipment would be stored and tested; is that your question? Q. Let's start with the physical location where equipment would be stored and tested? A. That was Minnesota. Q. But I take it from your answer that there were other people that dealt with QSGI's mainframe resale business that weren't necessarily in Minnesota? A. We had outside sales reps and maintainers that would work from their homes or other demographic areas throughout the country, so the company had somewhat of a nationwide footprint. Q. Where was your office during the 2007 time period? A. My office was in Florida. Q. Was that where QSGI's headquarters was at that time? A. Same location, yes. Q. Roughly how many employees did QSGI have in 2007? A. Total amount of employees? Q. Yes.

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A. I would say somewhere around 70 or 80. Q. Of that 70 or 80 how many were in the hardware division? A. I can't be 100 percent sure. THE WITNESS: Can I speculate on the number? MR. BAUTA: No. A. You know, if you look through the SEC filings, it's all spelled out. These are questions that are available, it's of public knowledge, public record, so I don't have it off the top of my head. Q. What about roughly the number of people that were working on mainframe -- QSGI's mainframe resale business? A. I think the sales office had somewhere around 15 people, 14, 15 people. Q. Who were the employees that were involved in QSGI's mainframe resale business? A. It was Joel Owens, Jamie Owens, those are the two. Joel was the main salesman and Jamie was the lead tech. And then Joel hired his group of sales reps, you know, beneath him, so I don't have the names, the exact names of those individuals, just the managers. Q. Any others other than Joel Owens and Jamie Owens?
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are asking about? Q. No, I was asking if you also worked on QSGI's mainframe resale business? A. You know, I wasn't really intimately involved with direct sales. That wasn't my job at the company. Q. Did you have some involvement in QSGI's mainframe resale business? A. Yeah, I was the CEO of the company, so, of course, I was involved. Q. What about Seth Grossman. Can you tell me who Seth Grossman is? A. Seth was the president of QSGI. Q. As president of QSGI, did he have some involvement in QSGI's mainframe resale business? A. Seth was actually more involved. As the president his job was to oversee the activities of that company. Q. Did he have some oversight over QSGI's mainframe resale business? A. Yes, he did. Q. Who is Edward Cummings? A. Ed Cummings was the ex-CFO. Q. Is he a cofounder of QSGI? A. He was a cofounder of QSGI, yes.
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A. There were a lot of others, but I don't have those at my fingertips. Q. Who were some of the principal individuals that worked on the QSGI's mainframe resale business? A. As I said, Joel was probably one of the main salesmen. Joel had probably ten other reps under him that were salesmen, you know, selling products. We had our -- we also had, you know, outside -- not outside, inside commissioned sales reps as well selling maintenance and mainframes. Q. So other than Joel and Jamie Owens, who else worked on QSGI's mainframe resale business? A. Do you want to keep asking me the same question over and over again? Q. Yeah, I would like to get some more names. A. I don't have the names off the top of my head. Q. Did you work on QSGI's mainframe resale business? A. You know, I worked with Joel. Joel would discuss the business with me from time to time. He would discuss issues, he would talk to me about the obstacles that we had regarding, you know, IBM, things that they were doing to try to put us out of business, those types of things. Is that what you
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Q. As CFO did he have some oversight over QSGI's mainframe resale business? A. Well, oversight as a CFO. He would have had financial oversight. Q. And other than financial oversight, did he have any other involvement at QSGI's mainframe resale business? A. Not to my knowledge. Q. Who is Vivek Agarwal, V-i-v-e-k A-g-a-r-w-a-l. A. He was a sale rep for our company. Q. Did he have involvement in QSGI's mainframe resale business? A. No, he did not. Q. Who is Craig Heilman? A. He was -- what was he? He was the finance manager. Q. Was he QSGI's controller? A. Controller, yes. Q. Is it correct that he was controller from 2006 to 2010? A. I think that's accurate. Q. So he would have been controller in the 2007 time period? A. Yes.

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Q. Did he have any responsibility over QSGI's mainframe resale business? A. Only as far as the finance aspect of it. Q. So did he have some financial responsibility over QSGI's mainframe resale business? MR. BAUTA: I'm going to object. You are once again now getting way beyond the scope of your notice for today. MR. DIESSEL: Actually, I'm not. MR. BAUTA: No? MR. DIESSEL: I'm asking who the principals and the individuals are so I can ask about their documents. Juan, I can't conduct this deposition without figuring out where the facilities are and who the people are. How am I supposed to ask -MR. BAUTA: Let me -- maybe the problem is, and you will have to excuse me because English is not my primary English, so maybe it's that I misunderstood the topics of your inquiry to include and be limited to the document retention policies of QSGI. What specific individuals did unless they are tied to the document retention policy, I just need you to kind of educate me on how
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If you wanted to have the person with the most knowledge, QSGI's person with the most knowledge regarding every topic under the sun, you should have designated those topics. You chose not to, so here we are at a deposition that's been limited by you through your notice for the sole purpose of determining whether or not and how documents were retained by QSGI. MR. DIESSEL: Well, Juan, this is plainly within the topic. I don't know what else to tell you. Retention procedures and practices from 2004 to the present. MR. BAUTA: Well, I haven't heard you ask yet that question. MR. DIESSEL: Well, I'm establishing the people that I'm going to be asking that question about. I think if you can give me leeway to conduct this deposition, we are going to get there. So I would like to proceed. MR. BAUTA: I'm going to give you a little more leeway, Mr. Diessel, and then if you decide that this is a deposition that perhaps needs to be broadened in its scope, then maybe you should renotice it for that. MR. DIESSEL: It did not need to be
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that's within the topic. MR. DIESSEL: I would be happy to. MR. BAUTA: Sure. MR. DIESSEL: Topic 1 includes QSGI's document retention procedures, practices, and policies. MR. BAUTA: Okay. MR. DIESSEL: So asking about an individual's document retention procedures and practices is plainly within the scope of topic 1. MR. BAUTA: Let me stop you right there. Why don't you ask that question: What were these individuals' document retention policies rather than how were these individuals involved in the sales of mainframe computers. MR. DIESSEL: Juan, I intend to do that. But rather than going through every one of QSGI's 80 employees, I would like to establish which employees I should be asking questions about, and I'm entitled to do that. MR. BAUTA: You know what? You are not entitled to do anything. What you are entitled to do is follow the rules, and you are entitled to limit yourself to the topics of your notice.
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broadened in scope. And I would appreciate it if you would let me proceed, and if there comes a point where your instruction is not to answer where you start instructing not answer, I expect to see a protective order. MR. BAUTA: You are going to see a protective order, don't worry about that. MR. DIESSEL: It's improper under the rules for you to limit me in this way, especially when I'm asking questions that are plainly within the scope of the deposition notice. MR. BAUTA: I'm sure you are going to explain that to the Court. MR. DIESSEL: Well, you are going to explain to the Court in your motion for protective order that I expect to see because you have instructed twice now the witness not to answer. MR. BAUTA: I plan on instructing him more if you continue to deviate from your notice. MR. DIESSEL: I'm not deviating from the notice. MR. BAUTA: I guess the Court will determine that. BY MR. DIESSEL: Q. So I believe we were talking about Craig

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Heilman a second ago? A. You were, yes. Q. I think the last question, I'm not sure if I got an answer to it, I think my question was whether he had financial responsibility -- whether his financial responsibility included QSGI's mainframe resale business? A. He was the controller, so I'm sure when it came to collections and things like that, he had responsibility from a financial aspect of the business. Q. Okay. Having gone through a short list of some individuals who had at least some responsibility or involvement in QSGI's mainframe resale business, did I miss anyone or did someone else come to mind that you think that ought to be included within this set of individuals that worked on QSGI's mainframe business? MR. BAUTA: Objection to form. A. Not that I know of. Q. Did all of QSGI's employees have computers? A. Probably not. Q. What about the individuals that we have been discussing, did they all have computers? A. Probably so.
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employees have QSGI e-mail accounts? A. I'm sure they did, yeah. Q. Where would employees' e-mails to or from QSGI employees be stored? A. We had a tape retention program, and the New Jersey backup tapes were stored in New Jersey in a locked cabinet. The Minnesota backup tapes were stored in Minnesota in a locked cabinet. Q. So setting aside the backup tapes, we can get to those in a second, setting aside the backup tapes, did QSGI employee e-mails, were those stored on the individual's computer or on a server? A. Everything I'm pretty sure, and, you know, everything ran through the e-mail server that we had. Q. So it's your understanding that in 2007 QSGI had a central e-mail server? A. Yes. Q. And would that have included all e-mails that QSGI employees sent and received? A. Yes. Q. Was there a nightly purge process on that e-mail server that would automatically delete the older mails? A. No. We actually had a retention program
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Q. Would they have had laptops or desktop computers? A. I don't know. Q. Do you have a laptop? A. Yeah. Q. Did you have a laptop in 2007? A. Probably. I'm sure I did. I had many laptops and PCs and stuff like that. Q. How many laptops did you have in 2007? A. Me personally? Q. Yes. A. I don't know. In my house I probably had three or four. I have kids, I have laptops all the time. Q. Sure. I will limit it in a way that I think will be helpful. How many computers did you have that you used to work on QSGI-related work? A. I use my main desktop at work, which is my main computers that I use. Any time I would travel I would use a laptop. Q. So it sounds like you had at least one desktop computer in 2007 and at least one laptop that you used for work-related activities? A. Yes. Q. In the 2007 time frame, did all of the QSGI
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that would actually -- I think how it worked was everything was backed up on an 8-day period and then stored, and then I think after 30 days things were overwritten and then recopied over. So it was kind of a system that the e-mails would continuously build and grow. Q. When you say it was backed up, are you saying that QSGI's e-mail server in 2007 was backed up every 8 days? A. I'm pretty sure that was the process. I would have to get more information from Dave Harris, but that's to the best of my knowledge. Q. How would the e-mail server be backed up? A. It was automatically done through backup tapes on a nightly system however it was scheduled. Q. So I think I'm confused. Was there an 8-day backup of the severer or a nightly backup of the server? A. I think every day would back up and then it would consolidate. Q. What is the media onto which the e-mail server would be consolidated? A. It was on backup tapes. Q. What's the time period during which that backup procedure was in place?

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A. I'm not exactly sure of the date when we started the full procedure. I don't have the exact date. Q. Do you think it was in place as of 2004? A. We did have a backup program in place in 2004, I'm just not sure of the standard of it. Q. And do you think it was in place in 2005? A. I know it was in place in 2007. Q. Do you have a sense for when in 2007 it was put in place? A. I don't exactly know. I would say early 2007, but I don't have the exact date. Q. Did there come a point in time when QSGI stopped backing up its e-mail server? A. I would say around the bankruptcy when we no longer had access to the servers is when the backups stopped happening. Q. And roughly when was that? A. It was in 2009. Q. So it's your understanding that from early 2007 to 2009 QSGI backed up its e-mail server? A. Yes. We had a backup, you know, we had to keep our financial documents and everything safe, so everything was being backed up. Q. To what media were QSGI's e-mails backed up?
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Q. Who was in charge of the -- if I refer to this as the media, the e-mail backup procedure, will we understand that I'm talking about this procedure that you and I have been discussing? A. Yes. Q. Who was in charge of the e-mail backup procedure? A. David Harris. Q. How did you verify that these e-mails were being backed up from 2007 until bankruptcy? A. Well, we had to produce the e-mail documents for the informal SEC investigation, so we had all the backup files as part of the bankruptcy. We had them given back over to us, and they were sent off to our attorney and sent off to the SEC. So I know there are backup documents that existed. I know that they were handled properly. Q. Where is that tape archive today, if it still exists? A. The information was sent off to McDonald Hopkins, and it does exist. Q. So setting aside the information, the physical tape archives themselves, do those still exist or no? A. I'm not sure in what form they exist, but
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A. Once again, I'm pretty sure it was to a tape, a tape media. Q. Where was that tape media stored? A. In New Jersey. Q. Anywhere else? A. There should have been backup tape media also in Minnesota. Q. Where in New Jersey? A. It was in our QSGI main location, I forget the address. The address is a blank at the moment. Q. Was it at an office? A. Yeah, in our main New Jersey facility. Q. Would that be in Hightown, New Jersey? A. It would be Hightstown, yes. Q. Hightstown? A. Yes, Hightstown. Q. You said there was another location where QSGI kept tape media in Minnesota? A. It was in the Minnesota physical location where there was another server. Q. Where was that? A. You have the address. Q. Do you know the city? A. I think, like I said, I think it's Eagan. You can double check.
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they exist in either a downloadable form or some type of form, but the information still exists. Q. So I take it you are not sure whether the backup archive tapes still exist? A. I'm not sure. Q. You said a second ago that you think McDonald Hopkins has the information? A. Yes. Q. What did you mean by that? A. I said that they were provided all of the backup tapes for the informal SEC investigation, so they have the information that the company had turned over to them through the course. Q. Is it your understanding that McDonald Hopkins has every single e-mail that was included in on the backup archive? A. They have what was provided to them through the archives. I never went through all of the archives to be able to give you a yes or no whether I know for sure 100 percent. Q. Do you know if they were provided with the entire archive? A. They were provided with what was available at the time. Q. Do you know what was available at the time?

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A. Whatever was on the tapes. Q. Do you know what was on the tapes? A. Once again I said I don't know what was on the tapes. I never reviewed the tapes. Q. So you didn't review the tapes and you don't know whether QSGI's e-mails from 2007 to 2009 were on the tapes? MR. BAUTA: Objection. Form. A. I can only assume that I know that there were thousands of documents that were provided to the SEC, so there must have been a tremendous amount of documents left on those tapes. Q. So setting aside the amount of information on the tapes, you don't know whether all the e-mails from 2007 to 2009 were included on those tapes? A. I do not know. I think there may have been some things that may not be there, it could be there, I just don't know. I just don't know the answer to the question. Q. Is there anyone -A. I hope everything is there. For my benefit I truly do hope that every single document is on those tapes. MR. BAUTA: You need to just answer his question as succinctly as you can.
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and we turned them over to the law firm who then went through them, made copies, and sent information off to the SEC. I can only assume that the information was there. Q. But you didn't verify that it includes all the e-mails from 2007 to 2009? A. I did not verify. Q. Did anyone verify that the backup tapes included all of QSGI's e-mails from 2007 to 2009? A. I do not know. Q. Is there anyone that you can think of that would know the answer as to whether anyone verified that there exists a complete set of QSGI e-mails from 2007 to 2009? A. I would not know. Q. If you wanted to get an answer as to whether or not there exists a complete set of QSGI's e-mails from 2007 to 2009, who would you talk to? MR. BAUTA: Objection. Form. A. I don't know. Q. Is there any way that you can think of that it could be determined whether or not QSGI has retained a complete set of its e-mails from 2007 to 2009? MR. BAUTA: Objection to form.
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Q. Is there anyone at QSGI that would know whether those backup tapes would include all of QSGI's e-mails from 2007 to 2009? A. I don't know. Q. You don't know whether there is anyone that we can talk to to get an answer to this question? A. I don't know. Q. Are you aware of any document that we could look at where we could get an answer as to whether these backup tapes included all of QSGI's e-mails from 2007 to 2009? A. I don't really understand your question. Q. Is there any document that I could look at that you could refer me to from which I could tell whether or not those backup tapes included all of QSGI's e-mails from 2007 to 2009? A. I don't know what kind of documents it would be. I can only assume that all the information would be there. The way the system was set up it was automatic. I can't -- I mean, you are asking to deviate from the system that was set up. So there was a system, it was in place, the information should have been there. Q. But you have not verified that? A. We took the information and the documents
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A. I don't know. MR. DIESSEL: Juan, we have a little bit of a problem here. This is your designated witness on document retention topics, and I can't get any answers as to the retention of e-mails from the key periods -- from key periods leading up to the filing of the suit. MR. BAUTA: Poor questions give poor answers. How do you expect him to know whether every single e-mail was preserved? He would have to first know what every single e-mail was, and then he would have to cross check. He has told you what the policy and procedure was, there you go. MR. DIESSEL: No, it's not that simple, Juan. The notice asks for every document that's been destroyed from 2004 to the present. If your witness is unable to answer whether or not QSGI retained its entire set of e-mails, then a large scope of what this deposition is about is completely off the table. MR. BAUTA: I don't know what this deposition is about anymore, Mr. Diessel, because you strayed from your topics. So let me just say this: You are assuming that documents

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have been destroyed, he has told you they haven't been, you have asked him whether he has personally verified whether every single document that was ever generated in an e-mail account exists today. I will look forward to asking IBM's corporate person whether he has verified whether every single piece of paper that anyone at IBM has generated is in existence today. MR. DIESSEL: I'm not going to argue with you anymore about this. MR. BAUTA: Why don't you move forward and ask more questions. MR. DIESSEL: I will do that. Our position is this is plainly within the scope, and we have not gotten an answer to the question, so I'm going to reserve my rights on continuing this deposition. MR. BAUTA: You can reserve what you want. BY MR. DIESSEL: Q. We have been discussing a little bit about QSGI's e-mail system. Other than the tape backups, is there anywhere else that these e-mails might be backed up to? A. No.
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that, and he said we did that for purposes of compliance. So as we were implementing our Sarbanes procedures that we had a backup procedure and that was the reason we would back them up. The other reason why is in case we had a failure, we would be able to recreate our database and have our information in our systems. Q. Did you discuss anything else with David Harris? A. No. Q. Setting aside the e-mail system, did QSGI have a system for maintaining electronic documents? A. Electronic? Isn't that e-mails? Q. Aside from e-mails. A. That's not electronic documents. Q. So setting aside the e-mail system, did QSGI have, for example, a repository where it kept electronic documents that employees created? A. You mean like pdfs and things like that? I think that would be in the e-mail archives. Q. Did QSGI have any central servers where it included business documents? A. We had documents, you know, forms and things like that. But, once again, I think that would still reside when it was backed up.
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Q. If an individual that sent or received an e-mail deleted that e-mail from his or her In box, what would be the impact of that action during the 2007 time period? MR. BAUTA: Objection to form. A. I don't understand the question. Q. Yeah. Okay. So if someone deleted an e-mail in between backup cycles, would that e-mail have been included in the backup? A. I don't know the answer to that question. Q. Is there someone that would know the answer to that question? A. Dave Harris would know the answer to the question. Q. And how much time did you spend speaking with Dave Harris preparing for this deposition? A. We spoke briefly. It was more about the way the e-mails that we had in the past, how they were saved. I didn't really ask about the detail of if you delete an e-mail if it still resides. Q. What did he tell you about how QSGI's e-mails were saved? A. Well, that was what I had answered before. I said they were archived and they were saved on backup tapes. My main concern was why did we do
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Q. My question is in the 2007 time period, did QSGI have central servers where business documents were maintained? A. No. Q. Did QSGI have any electronic media where business documents were stored other than in e-mails or on an individual's computer? A. No. Q. Did QSGI have servers in 2007? A. Yes. Q. What did it use those servers for? A. We used them for our e-mail operations, we used it for running our PCs and our computer system. Q. Did QSGI use those servers for anything else? A. Other than selling them? Q. Did QSGI use those servers for storing documents? A. No. Q. Did QSGI electronically collect or maintain any repository of documents, again, setting aside e-mail? A. No. Q. Did QSGI maintain any server database that would include electronic repositories of documents?

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Again, I'm talking about the 2007 time period. A. No. Q. So I want to just establish some vocabulary which we have been using that I would like to refer to to make sure things stay clear. I would like to refer to as business documents those documents that a QSGI employee might make or work on in the course of his or her duties at work. Can we have that understanding? A. Okay. Q. So what are the various sources or repositories where the QSGI employee in 2007 could store his or her business documents? A. I guess they could store them on the server. We had shared files, is that the question you are asking? Q. What is the server that you are referring to? A. Within our network there was a server that was called public files where we would have files where we would have blank documents, and they would populate a document and send out a PO or what have. Q. And you referred to something else. I think you said it was a shared folder? A. Yeah, like a shared folder.
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Q. So that would include 2006? A. Sure. Q. 2007? A. I would imagine. Q. 2008? A. I would imagine. Q. Are there any other locations where a QSGI employee might store his or her electronic business documents? A. No, I think everything would have been stored up on the server. Q. When you say "everything," what are you referring to? A. The documents that you are referring to. Q. Can you describe some categories of documents that would be included on the server? A. We had photographs, we would have, you know, blank forms, we would have probably our wiring information, things that would be regular things that you would need to send off to a customer. I guess you could refer to them more as customer forms. Q. How, if at all, was that server backed up? A. Excuse me? Q. How, if at all, was that server backed up?
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Q. What's a shared folder? A. Shared folder would be blank documents where people could go and they could pull down a PO form and things like that to be able to use for populating an order. THE WITNESS: Is that all right? I had to move off the pole. Q. So it's your understanding that QSGI employees could keep business documents on a server; is that right? A. Yes. Q. Was there more than one server where documents might be stored or just a single server? A. I think it was a single server. Q. Where was that server stored? A. Out of New Jersey. Q. Would that, again, be in Hightstown, New Jersey? A. Yes. Q. Do you know what kind of server that was? A. No idea. Q. What are the years during which that server was used to store QSGI business documents? A. It was just -- it was always used for storing that type of a shared file.
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A. I'm not sure that that, you know, how that server was backed up. That wasn't like mission critical e-mail data and things like that. I'm sure it was backed up just for the safety if we lost power, but I don't know the answer to the question. Q. Did QSGI -- so let me just make sure that we have got the story so far. So in terms of electronic business documents, is it correct that the repositories that you are aware of are e-mail and the central server? A. Yes. Q. And there are no other electronic repositories where QSGI employees could have kept electronic documents? A. Correct. Q. What hard copy repositories sources existed in 2007 where QSGI employees could keep electronic -- could keep hard copy documents? A. Filing cabinets. Q. And where were these filing cabinets situated? A. We had files in New Jersey and we had files in Minnesota. Q. Did QSGI have files in any other locations besides New Jersey and Minnesota?

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A. No. All my stuff, you know, as far as like my Florida things that I would get there, I would make copies of and I would send it off to New Jersey and New Jersey would do all the filing up there to keep it as a central repository. Q. Who else was working in Florida in the 2007 time period? A. A handful of sales reps in the office. Q. Did you send each and every one of your documents for filing to either the Minnesota or New Jersey facility? A. If it was pertaining to that operation, I would send it off to wherever it needed to go. I didn't really house documents in Florida. Q. So I take it your answer is that you didn't send every single document to be filed in -A. No, because -Q. Sorry. Logistically I need to finish -it's going to mess up the court reporter. I need to finish my question before you answer so things stay clear on the record. I take it you didn't send every single one of your documents for filing to the filing facility in New Jersey? A. If it was redundant it would be shredded or
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A. Well, after we filed bankruptcy the files in New Jersey were stored up until a point where that building was shut down. And then I was able to get access to retain those documents and bring them over to our new facility. So I had, I would say, the majority of the known documents in the New Jersey facility. Q. What's QSGI's new facility? A. That's where we have a warehouse in New Jersey as well. I can get you the address of that one. That's in a different location. Q. So is it right that so beginning around 2000 QSGI started storing hard copy documents at a facility in New Jersey; is that right? A. We would maintain all the documents that were generated in the New Jersey facility, in the Hightstown facility. Q. Then at some point during bankruptcy those documents were transferred to another New Jersey facility? A. Well, actually, I was denied access to the building, so through the court I was able to convince them that those documents needed to be retained. So I was able to get them out of the building before they were thrown away and
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thrown in the garbage. Q. Did individuals keep hard copy documents in their offices? A. I'm sure they may have. Q. Who was in charge of the process of documents being filed in these filing facilities in New Jersey and Minnesota? A. Well, the process that our CFO set up was basically a 7-year retention of hard copy documents. So if was contracts, if it was SEC documents or financial documents, they would all be stored for 7 years in New Jersey. Put up on the racks, and just, you know, shrink-wrapped and stored. Q. What are the years during which this filing procedure was in place? A. From the beginning -- you know, from an accounting standpoint I think 7 years is the time frame, so from day one whatever the, you know, the rules are, they were followed. Q. So can you give me a year when this procedure would have been put in place? A. Well, if we started the business in 2000, it would have started in 2000. Q. Did there come a point in time when files stopped being stored at those facilities?
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transferred to our other facility. Q. What are the years during which -- let me back up. What time period were those documents transferred to the other New Jersey facility? A. Oh, it had to be 2010 time frame. THE VIDEOGRAPHER: Excuse me, Counsel. We have about 3 minutes left on this tape. MR. DIESSEL: I will just ask one or two more questions and we will take a break. Q. And what are the years during which the Minnesota facility was used for storing hard copy files? A. Well, that was another -- might as well stop there and we can go back. Q. Well, I need to get an answer before the break. You can give the answer and then we can take a break after your question. A. You may run out of time. Okay. The Minnesota facility was -- the original building where we were in Eagan, we had closed that lease to move into another smaller facility. So the boxes of records that were in the Minnesota facility were moved to a storage location, and they were stored in a, you know, in a storage facility. And the company subsequently filed for

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bankruptcy, and the documents that were in the Minnesota warehouse facility eventually ended up getting thrown out because the lender -- we would put in bills to the lender to be able to pay certain bills that had to get paid on a monthly basis. I found out later that those billed weren't paid. When I went to find out where those documents were, those documents were subsequently tossed out. I couldn't recover the documents that were left behind in Minnesota. MR. DIESSEL: Let's take a break. THE VIDEOGRAPHER: Tape number one of Marc Sherman's deposition. Off the record at 11:16. (Recess taken) THE VIDEOGRAPHER: Mark Sherman, tape two, on the record at 11:32. CONTINUED DIRECT EXAMINATION BY MR. DIESSEL: Q. We talked before the break about QSGI's tape archive of e-mails from 2007 to 2009. Do you recall that? A. Yes. Q. Was that archive overwritten every 30 days? A. Was it overwritten every 30 days? Yes, it was overwritten, yes.
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templates and things like that. Q. So I'm going to give you an illustration just to see how this plays out. Supposing that Joel Owens had created a, you know, a memo relating to QSGI's mainframe business, he created a memo in Microsoft Word. Are you following me so far? A. Um-hm. Q. If he elected to save that document somewhere electronically, is there any repository where he could put that memo? A. No. Q. So it would either be stored, if at all, in hard copy in one of the facilities in New Jersey or Minnesota? A. Probably not. Q. It probably would not be stored there? A. No, I don't think memos were stored. I don't think a memo was a document that we retained for 7 years. Q. What are the categories of documents that QSGI retained for 7 years? A. Primarily financial in nature. Q. What kind of financial documents did QSGI retain for 7 years? A. Things that were used pertaining to our
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Q. So the archive would only go back for a 30-day period? A. No, it was cumulative. So it would add to. It didn't go back and take the -- it was cumulative. Q. So what was the process that took place every 30 days, that additional e-mails were added; is that your testimony? A. Yes, additional e-mails were added. Q. Were any e-mails ever deleted or overwritten from that archive? A. Not that I know of. Q. We also talked before the break about the shared folder on the server that was stored at New Jersey. Do you recall that? A. Yes. Q. Were documents related in QSGI's mainframe resale business also stored on that server? A. Ask it one more time. Q. Were electronic documents relating to QSGI's mainframe resale business also stored on that server? A. There could have been templates for maintenance contracts and things like that, but I don't think there would have been any imperative data that would have been on there other than
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audits, financial records, invoices, things of that nature. Purchase orders, contracts. Q. Other than financial, certain financial information, did QSGI retain any other categories of information for 7 years? A. Not that I know of. Q. Did QSGI retain any documents that would show the impact, if any, that the IBM policy would have had on QSGI's sales? A. Yes. Q. Where would that have been retained? A. There is financial documents that show that information. Q. Other than embedded in financial information, would QSGI have retained any documents that showed the impact on QSGI's sales of the IBM policy? MR. BAUTA: Objection. Form. A. There are financial documents and SEC filings, and I'm sure there are even e-mails that were sent regarding the destruction of the business based on that policy change. Q. Were any of those e-mails included in the hard copy documents that were retained for 7 years? A. Please repeat the question.

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Q. Yeah. Were any of those categories of e-mails -- of documents that you just described included in the 7-year retention of hard copy documents? A. They could have been, yes. Q. Which documents could have been retained? A. Well, it would have been the financial documents, copies of the filings, all of the recordkeeping regarding the lack of sales or the reduction of sales along the way. Q. So other than SEC filings and audit information, are there any other categories of documents that would have been included in the 7-year retention of hard copy documents? A. I supplied Juan with some other documents. I had a PowerPoint presentation which actually showed the decline of the business in one of our earnings calls. There were also some press releases that were conveyed regarding the degradation of the business due to the policy change. Q. And earnings calls are calls that are made following an SEC filing; is that right? A. Correct. Q. So that's, again, a category of documents related to QSGI's filings?
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Q. So I'm trying to get a sense of how a document might -- what categories of documents might have been included in the Hightstown facility versus in the Minnesota facility. Was there any basis on which a document was selected for inclusion of one versus the other? A. Well, one would be the day-to-day contract-type documents which would have resided in Minnesota. And in New Jersey was the parent and all of the financial gathering and reporting would end up in New Jersey. So from a big picture you would have all the financial data recorded in New Jersey and retained in New Jersey, and Minnesota was a sub, so you would have a lot of the contractual paperwork and the day-to-day sales and things like that. Q. So is it right that the New Jersey facility included QSGI's hard copy documents relating to filings and audits? MR. BAUTA: Objection. Form. A. Yes. Q. And QSGI's New Jersey facility included -A. That was New Jersey. Q. Thanks. QSGI's Minnesota facility included documents relating to QSGI's day-to-day activities? A. Correct.
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A. Yes. Q. So other than documents relating to filings and audits, are there any other categories of documents that QSGI retained hard copies of for 7 years? A. That's all that I can think of. Q. To QSGI didn't retain information about prior sales of zSeries mainframes for 7 years? A. Prior sales? I'm trying to think of where those documents would reside. They would be probably in contracts. If you go through all the financial recordkeeping, you would see -- you could extrapolate those numbers and create the documents. Q. Were contracts a category of documents that were retained in the hard copy documents for 7 years? A. Yes. Q. So outside of contracts did QSGI retain in hard copy form any documents relating to resales of zSeries mainframes? A. We did keep sales orders in the Minnesota warehouse, which I had explained earlier a lot of those documents or all of those documents were subsequently destroyed, so we can only go off the financial data impact.
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Q. Is it the case that QSGI's documents relating to its mainframe resale business would have been included, if at all, in the hard copy documents of Minnesota? A. Repeat the question again. Q. Yeah. So where would QSGI's hard copy documents relating to its mainframe resale business have been stored? A. Transactional data? Q. Well, for example, you said that sales orders relating to the mainframe resale business were stored in Minnesota. A. Correct. Yes. Q. What other categories of documents relating to the mainframe resale business were stored in Minnesota? A. It would be their resale contracts, their parts, their orders, just the things that would run their day-to-day operation that would either create a purchase order or a sales order or invoice was stored within their documents. Q. So is it the case that documents relating to QSGI's sale of the zSeries mainframes would have been stored at the facility in Minnesota? A. Yes.

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Q. And those documents would not have been stored at the New Jersey facility, correct? A. The actual sales transaction documents would not be stored in New Jersey, but the overall revenue and the dollars and cents documents would have been stored in New Jersey. The consolidated financials would end up in New Jersey. Q. Setting aside the consolidated financials, information relating to QSGI's resale of used mainframes would have been retained, if at all, in the Minnesota facility, correct? A. Yes. Q. Information relating to QSGI's -- any prospective sale of used mainframes would have been stored, if at all, in the Minnesota facility? A. Correct. Q. And information relating to QSGI's inventory of used IBM mainframes would have been stored, if at all, in QSGI's Minnesota facility, correct? A. Correct. Q. And information relating to QSGI's strategies relating to its used mainframe business would have been stored, if at all, in its Minnesota facility, correct? A. Not correct.
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A. You know, I had a document that was a PowerPoint presentation that discussed the mainframe business and the growth and the degradation of the business. So I had a copy of a PowerPoint that I gave to Juan as well. So for the most part documentation was stored in Minnesota. If it was pertaining to financial records, hard copy financial records, maybe one or two other documents were copied and I ended up with a copy of it for review or Seth ended up with a copy of it for review. That wasn't a storage item. Q. And the PowerPoint that you are talking about, is that an example of an electronic document or hard copy document? A. It was an electronic document that was printed. Q. So I would like to focus on QSGI's -- well, I think let me stop and pause. I think we were speaking before about where, if at all, QSGI would have stored hard copy documents relating to its business. Do you recall that? A. Yes. Q. And I believe, and you can correct me or give a different answer now if you want to, but my
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Q. Where else would that have been stored? A. Those are e-mails. Once again, a lot of the strategic business plans and things like that were, you know, dynamic e-mails that would go back between Joel myself and Seth and Ed, and we would talk about the business and the growth, about the overall things that you would discuss in trying to grow and build a business. So that wasn't necessarily a storage item in the file, that was more correspondence between parties. Q. And I would like to focus just on -- I would like to set aside the e-mails and focus on the categories of documents that we have been talking about, just the hard copy documents. Can we do that? A. Sure. Q. So documents relating to QSGI's strategy concerning its used mainframe business would have been stored, if at all, in its Minnesota facility, correct? MR. BAUTA: Objection. Form. A. Primarily, yes. Q. When you say "primarily" is there any other physical location where those documents could have been stored?
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understanding was that QSGI would have kept those documents, if at all, in either the New Jersey facility or in the Minnesota facility; is that right or wrong? A. Still correct. Q. So QSGI's hard copy documents were retained, if at all, at the New Jersey facility or the Minnesota facility, right? A. Correct. Q. So to the extent that QSGI had retained hard copy documents relating to its strategy concerning its used mainframe business, those documents would have been stored, if at all, in its Minnesota facility, right? A. Correct. Q. And to the extent QSGI had any documents relating to planning concerning its used mainframe those documents would have been stored in Minnesota, correct? A. We are talking about hard copy documents? Q. Yes. A. Yes. Q. Any documents that QSGI had relating to marketing and promotional materials relating to its mainframe business would have been stored, if at

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all, in Minnesota, right? A. Correct. Q. Any documents that would show a lost sale by QSGI due to the IBM policy would have been stored, if at all, in the Minnesota facility, correct? A. I don't know how you document lost sales. Explain to me what you mean. Q. Did QSGI document any instances of lost sales due to the IBM policy in 2007? A. There were e-mails that would go back and forth saying we just lost this sale because we couldn't upgrade or downgrade the machine. There were e-mails. Q. Other than e-mails did QSGI document in any way any instance of a lost sale due to the IBM policy? A. Are you asking me on hard copy? Q. Yes. A. Not that I know of. Q. So QSGI would not have retained in hard copy any document that would show a lost sale due to the IBM policy, right? MR. BAUTA: Objection to form. A. Correct, it wouldn't be normal practice. Q. Well, and not only would it not be normal
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A. We had e-mails back and forth between the parties all the time. Q. What was within the scope of what you would have retained in hard copy? A. Financial records, purchase orders, sales orders, orders of parts from IBM, we would call IBM to do changes on machines, things like that. Things that would create sales orders or purchase orders where there is a financial exchange generally. Q. So it was outside the scope of QSGI's hard copy retention to retain documents relating to the impact of the IBM policy on QSGI's resale of mainframes? A. You have to start all over again. You lost me. Q. Yeah. So I think you said a moment ago that retention of documents showing a lost sale due to IBM's policy was outside of the scope of QSGI's retention of hard copy documents, right? MR. BAUTA: Objection. Form. A. Yes. Q. How was it determined what was within or out of the scope of retention of hard copy documents? A. Financial-type documents. In other words a purchase order or sales order, customer order,
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practice, QSGI did not, in fact, retain any hard copy documents at all that would show any lost sale due to the IBM policy, right? MR. BAUTA: Objection to form. A. Well, as I said earlier, the retention was primarily around purchase orders, sales orders, contracts, that type of information. So that wouldn't have been one of the things that we would have retained. Q. Okay. A. Even if we had retained it, it's something that we wouldn't. MR. DIESSEL: I'm going to object in part as nonresponsive. Q. It's just a lawyer thing I have to do. I'm going to ask my question again and ask that you give an answer to the specific question. So QSGI did not, in fact, retain any hard copy document that would show any instance of a lost sale due to IBM's policy, right? MR. BAUTA: Objection. Form. A. It would be outside the scope of what we would retain. In hard copy. Q. What was within the scope of what you retained in hard copy?
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purchase orders, contracts, things like that would have been retained in the files. If you had to retain every e-mail, you would fill up the universe in hard copy. Q. So if IBM wanted to find an example of the impact of the IBM policy on QSGI, it would have to find that evidence, if at all, in e-mails, right? MR. BAUTA: Objection. Form. A. Yes, I would presume so. Q. So is there any other document or category of documents that you can point me to in which IBM can find any evidence of the impact of its policy on QSGI's mainframe resale business? MR. BAUTA: Objection. Form. A. Our financial information, our press releases, our conference calls, things along those nature. Q. And those are all examples of public documents, correct? A. Yes. Q. So outside of public documents is there any internal document or category of documents that you can point me to that would show any impact on QSGI's mainframe resale business by the IBM policy? A. There have been documents that I turned over

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to my attorney that I think you have that could point you in that direction. Q. And those are e-mails? A. They are from e-mails, yes. Q. From what years are those e-mails? A. I don't know the exact years. Q. Are they from 2007? A. They could be e-mails of 7, 8, and 9. Q. How many e-mails comprise this group of documents that you are referring to that shows the impact on QSGI's mainframe resale business? A. I don't know off the top of my head. Q. Is it greater than 10? A. I would imagine so. Q. Is it greater than 20? A. I would imagine so. Q. Greater than 50? A. I don't know. Q. So other than these e-mails and setting the e-mails aside, is there any other source or category of documents -- let me strike that and let me start over. Setting aside these e-mails and the public filings that you were referring to, are there any other internal documents that would show any impact
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or not QSGI has and retained documents relating to its claim is outside the scope of this deposition? MR. BAUTA: No. You are asking him to identify documents that he believes support the position of QSGI in this case. That's beyond the scope of this deposition. MR. DIESSEL: So if I'm asking about categories of documents and sources, you would not object to that question? MR. BAUTA: That's correct. MR. DIESSEL: Okay. MR. BAUTA: Unless you preface those categories with if you wanted to prove this, where would I find those documents. BY MR. DIESSEL: Q. So I'm going to ask my question again and ask what sources of documents QSGI has other than e-mails, if any, that would show an impact on QSGI by the IBM policy? MR. BAUTA: That's the same question. MR. DIESSEL: Sources of documents you are objecting to? MR. BAUTA: That would show impact. Who is determining what impact is? You are asking him
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on QSGI by the IBM policy? MR. BAUTA: Objection. I'm going to instruct you not to answer. We are back to asking him substantive questions. You are asking him to make decisions and to render his opinion on what documents show what, not on the retention of documents. Same objection as before. Q. Are there any categories of documents other than e-mails and public documents that would show any impact on QSGI by the IBM policy? MR. BAUTA: Same objection. MR. DIESSEL: I'm asking about categories of documents, Juan. MR. BAUTA: No, no, no. You are asking him to render opinions. You are asking him in your opinion what documents are there that show this, and he is not here for that. You have gone beyond. I gave you lots of leeway, and you just keep going down that path, so I'm going to have to cut it down. If you want to ask him where the documents are maintained, go for it. MR. DIESSEL: So I just want to make clear for the record, it's your position that whether
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to do that, and it's beyond the scope of your notice. If you want to ask him what sort of documents are maintained by QSGI, go for it. MR. DIESSEL: I will ask him the questions that I decide to ask. MR. BAUTA: Okay. Then I will instruct him not to answer when you are asking him to make opinions as to what documents would show what. MR. DIESSEL: Just so the record is clear, you are instructing him not to answer the prior question? MR. BAUTA: Yes, I'm instructing him not to answer the prior question. Stick to your notice and you will be okay. BY MR. DIESSEL: Q. So we were discussing a moment ago categories of documents that would have been retained in hard copy form, if at all, in QSGI's Minnesota filing facility. Do you recall that? A. Yes. Q. And we were discussing documents relating to prior sales of zSeries mainframes. Do you recall that? A. Yes. Q. And you testified that documents were

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retained in hard copy format, if at all, in Minnesota, right? MR. BAUTA: Objection to form. A. Yes. Q. And you testified that documents relating to QSGI's prospective sales of zSeries mainframes would have been retained, if at all, in Minnesota? MR. BAUTA: Objection to form. A. Yes. Q. And you testified that any documents relating to QSGI's mainframe inventory would have been retained, if at all, in Minnesota, correct? MR. BAUTA: Objection to form. A. Yes. Q. And any documents relating to the valuation of QSGI's inventory of used mainframes would have been retained, if at all, in Minnesota, correct? MR. BAUTA: Objection to form. A. Yes. And we are talking about all hard copy documents, right? Q. That's right. A. Yes. Q. And all of those documents are now destroyed, right? A. Correct.
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A. Yes. Q. But any such documents that QSGI retained, if it retained them, have been destroyed, right? MR. BAUTA: Objection. Form. A. The Minnesota documents, yes. Q. So prior to the -- and if I refer to those as the Minnesota documents, will you understand what I'm talking about? A. Yes. Q. So prior to the Minnesota documents being destroyed, did QSGI make any copy of those documents? A. No. Q. What is the date on which those documents, the Minnesota documents were destroyed? A. I don't have the date. Q. What years of documents were destroyed? A. All the documents that we had in Minnesota. It had to be years. I don't know exactly the years, but it was quite a few. Q. It would include documents from 2004 related to QSGI's mainframe business, right? A. It must have, yes, because there were no documents available. Q. And documents relating to QSGI's mainframe
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Q. Did QSGI maintain an inventory of the documents that were stored in its Minnesota facility? A. Not that I know of. Q. Did QSGI maintain a list of the documents stored at its Minnesota facility? A. Not that I know of. Q. Did QSGI maintain a list of the categories of documents that were stored in its Minnesota facility? A. Not that I know of. Q. Did QSGI maintain any identifying information concerning the content of what was stored in its New Jersey facility? A. I answered that question prior. I said the content of the information was primarily financial records and invoices and contracts, purchase orders, invoices, and contracts. Q. So is it the case that -- to summarize this, is it accurate to say that hard copy documents relating to the day-to-day business of QSGI's mainframe resale business would have been maintained -- would have been retained in hard copy format, if at all, in Minnesota? MR. BAUTA: Objection. Form.
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resale business in 2005 were destroyed, right? A. Correct. Q. Documents relating to QSGI's mainframe resale business in to 2006 were destroyed? A. Correct. Q. And documents relating to QSGI's mainframe resale business in 2007 were destroyed? A. Correct. Q. And the same documents relating to QSGI's mainframe retail business in 2008 were destroyed? A. Correct. Q. QSGI didn't make any copies of those documents before they were destroyed? A. Correct. Q. Who destroyed the Minnesota documents? A. It was the company where the documents were being stored. Q. What was the name of that company? A. I don't know. It was a storage facility in Minnesota. Q. Who made the determination to store -actually, let me pause. So the storage facility in which the Minnesota documents were stored, that was not a QSGI-controlled storage facility? A. No, it was like a storage locker. We just

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put them in there temporarily while we were moving. Q. Okay. Something like a self store locker; is that right? A. Like "Storage Wars," you could have bought them. Q. When were those documents placed into that storage locker? A. I don't know the exact date. I don't know the exact date. Probably sometime in 2008 or early 2009. Q. So prior to the Minnesota documents being placed in the storage locker, where were they kept? A. They were kept in the Eagan facility. Q. Who made the determination to move the Minnesota documents -- the documents relating to QSGI's mainframe resale business into the storage locker? A. We had a very large facility in Minnesota which was only being basically half used, so we decided to move into a smaller facility since we were no longer trading in mainframes. We moved in there temporarily while we could move from one building to another. Q. Who made the determination that those documents should be placed in a storage locker?
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Q. You were the records custodian in the bankruptcy, right? A. I'm not sure I was the records custodian in the bankruptcy. I tried to assemble the records because it was important to me to get as much of the records as I could, but nobody authorized the company to get those documents. It was a fight to get the documents that I got out of the building. Q. In fact, you were in charge of QSGI's record retention during bankruptcy, right? A. I don't know that to be a fact. Q. Who was in charge of QSGI's record retention during bankruptcy? A. I really don't know the answer to that question. Q. It's your testimony that you don't know who was in charge of retaining QSGI's documents during bankruptcy? A. It was such a mess between our lender and the company, it was really just -- so many things were going on at one time, I don't know the answer to the question. Q. So during bankruptcy there were a lot of things going on, right? A. Yes.
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A. I think it was Hanks Laws who was managing the business at the time. Q. Who is Hank Laws? A. Hank Laws works for the company. He is our business development manager, VP. Q. How did it come to pass that the Minnesota documents were destroyed? A. It came to pass because they were put in the storage facility, the company subsequently filed Chapter 11, every week we would present a listing of invoices to our lender, certain bills would get paid, certain bills wouldn't. This happened to be a bill that didn't get paid, it fell through the cracks, and by the time we realized that those documents were sitting there and wanted to retrieve them, we called the storage facility and they said they had already disposed of them. They had given us some type of 3-month notice or something, and it just fell through the cracks, and they got disposed of by the storage facility. Q. Who was in charge of paying the bills on the storage locker? A. I don't know. Q. Were you in charge of paying those bill? A. No, I was not.
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Q. So many things that it wasn't clear who was even in charge of QSGI's documents? A. As far as the document retention goes because certain things that were not clear-cut, we were bouncing in and out of court, information, like the records in New Jersey were left there, we couldn't get any funds to transfer those records. We tried to move those records to Iron Mountain, the lender wouldn't even fund the movement of those records. Then at some point I just said I will come and get them and take them, there won't be any billing, I will just move them out of there because I didn't want to lose the records. I felt it was in my best interest as the CEO of the company to at least gather what records I could to make sure that we had them for the future. Q. In fact, there was a period of time during bankruptcy in which no one at QSGI was in charge of records retention. A. Are you telling me that? Q. Is that true? A. I don't know. I said before I'm not sure exactly what the policy was for that point in time. Q. I think your testimony was that it was such

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a mess that nobody was in charge of the record 1 retention at QSGI during bankruptcy; is that right? 2 MR. BAUTA: Objection to form. 3 A. I'm not sure exactly what the situation was 4 for a period of time until we were able to talk to 5 our lawyers and say look, we have to get these 6 records, they are important to the company, how do 7 you want to do it. It was a process to try to get 8 funding to be able to pay for the records. Like I 9 said, the lender wasn't willing to pay the bills to 10 fund some of these things. 11 Once again, I had to figure out which way to 12 go. And then eventually I took it upon myself to 13 get those New Jersey records out of the one 14 warehouse and put them into another warehouse that I 15 was in control of, not the lender. 16 Q. When did QSGI file for bankruptcy? 17 A. I don't know the exact date. 2000 -- I'm 18 not going to speculate. It's public record. 19 Q. Roughly the middle of 2009, would that be 20 consistent with your understanding? 21 A. I think it was somewhere around -- yeah, 22 July of 2009. 23 Q. And QSGI emerged from bankruptcy a couple 24 years later, right? 25
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we filed. Q. So that would have been from sometime in 2009 to 2010? A. Yes. Q. Was it during this gray area in QSGI's record retention that the Minnesota documents were destroyed? A. I don't know the exact date when they were destroyed. Q. Is it consistent with your recollection that those documents were destroyed during that gray area -A. It had to be -Q. Excuse me, I need to finish. -- during QSGI's record retention? MR. BAUTA: Objection to form. A. There was a period of time where the lender was in control of the finances and invoices were sent to the lender to be paid, and there is probably a 4- or 5-month period where certain bills just did not get paid and that was one of them. I didn't even know that that bill had never gotten paid or what have you. Q. I think that's why I'm asking whether or not the Minnesota documents were destroyed during the
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A. Yeah, a year ago roughly. Q. Who at QSGI was in charge of QSGI's record retention when QSGI filed for bankruptcy in 2009? A. Well, the record retention -- who was in charge of record retention? Our policy for record retention was what we said, it was 7 years for documents prior to all the things that we have gone over. And then it was a little bit, you know, gray until we got our arms around the documents again, and then we maintain the same policies now. Q. What was the period of time during which QSGI's record retention was gray? A. Well, when we filed for bankruptcy, we had to figure out where the records were, how to get them, and how to make sure that we were able to get our arms around them. The main reason for us to do that was we were behind on SEC filings, and we had to have as much of the documents as we could to be able to catch up with our SEC filings and take the company throughout the bankruptcy and emerge from Chapter 11. Q. What period of time would that have been during which QSGI was in a gray area with respect to its records retention? A. Probably about 6 or 7 months from the time
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gray area of records retention period of QSGI? MR. BAUTA: Objection to form. A. That would be correct. Q. During the gray area of QSGI's record retention, is it true that QSGI suspended its record retention policies? MR. BAUTA: Objection to form. A. There was nothing official regarding suspending or not suspending the record retention policy. When we were in bankruptcy, I'm not sure what the policy is at that time. When we exited bankruptcy we are retaining all of the documents. Once again, financial documents and purchase orders and contracts and all those kind of things from a going forward standpoint. Q. But in effect during that period QSGI wasn't, in fact, retaining its documents, correct? A. I think it just -- there were documents that were being retained. I'm not sure to what level until we instituted once again a new server. There were assets that were sold to the company, so our servers were gone. And things just changed very rapidly until we were able to get the company back on its foot again. Q. So during this gray area in QSGI's record

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retention period, the Minnesota documents at least were destroyed, right? MR. BAUTA: Objection to form. A. Correct. Q. How many documents were destroyed at the Minnesota facility? A. I have no idea. Q. Is it hundreds of boxes? A. I have no idea. Q. Is there anyone that would know how many documents were destroyed at the New Jersey facility? A. New Jersey facility? Q. Sorry, the Minnesota facility. A. I don't know. Q. But I guess aside from the specific quantity, all of QSGI's hard copy documents relating to the day-to-day activity of its mainframe resale business were destroyed during that gray area in QSGI's record retention period, right? MR. BAUTA: Objection to form. A. Well, I said we never preserved the day-to-day hard copy documents, so I don't know why you keep going back to it. Q. Okay. So aside from -- let's just start over, then.
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are there any other servers that QSGI lost during this gray area of its record retention? A. No. Q. Are there any other documents that QSGI lost during the gray area of its record retention? MR. BAUTA: Objection. Form. A. I have no idea. The question is so broad I don't even know the answer to the question. Q. You don't know whether QSGI destroyed any documents during its bankruptcy? MR. BAUTA: Objection to form. A. We never intentionally destroyed any documents. Q. Do you know whether QSGI unintentionally destroyed any documents during its bankruptcy? MR. BAUTA: Objection to form. A. We never intentionally destroyed any documents. Q. So my question was whether QSGI unintentionally destroyed documents during bankruptcy? A. If it was unintentional we wouldn't have known. MR. BAUTA: Mr. Sherman, no speculating. THE WITNESS: Oh, sorry.
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I would like to get a sense of what documents were destroyed during that gray area of records retention period. One of the things that you testified was destroyed during a gray area records retention period was the Minnesota hard copy documents, correct? MR. BAUTA: Objection. Form. A. The Minnesota hard copy documents were destroyed sometime in 2009 when paying the bill was out of our control. Q. And is it also the case that QSGI lost servers during that gray area period as well? A. There were servers that were sold with some of the assets. Q. And you are referring to the asset sale to SMS? A. Yes. Q. Outside of the asset sale to SMS, were there any servers that QSGI lost during that gray area records retention period? A. There was another New Jersey server that was also sold to another company. It was actually sold to Victory Park. The lender credit bid and they ended up with the assets as well. Q. So other than the sale of certain servers,
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Q. So one category of documents that was destroyed were the Minnesota documents, correct? A. Yes. Q. Do you know of any other documents that were discarded during QSGI's bankruptcy? MR. BAUTA: Objection. Form. A. No. Q. Do you know of any other category of documents that were destroyed by QSGI or another entity during QSGI's bankruptcy? MR. BAUTA: Objection to form. A. No. Q. Do you know of any other documents that were lost during QSGI's bankruptcy? MR. BAUTA: Objection to form. A. I don't know. Q. You don't know the answer or you don't know of any documents that were lost? MR. BAUTA: Objection to form. A. I don't know what documents were lost. Q. So as you sit here right now, you have no idea what documents QSGI lost during its bankruptcy? MR. BAUTA: Objection. Form. A. Are you asking hard copy or electronic? Q. Well, electronic.

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A. I don't know. Q. In fact, you can't be sure in that case that electronic documents weren't destroyed during bankruptcy? MR. BAUTA: Objection. Form. A. Correct. *Q. In fact, given the present sources of documents, it has to be the case that QSGI lost electronic documents during bankruptcy, right? MR. BAUTA: Objection to form. I'm going to instruct you not to answer. It goes beyond the scope of this witness's notice. MR. DIESSEL: Whether QSGI lost electronic documents is outside the scope of a 30(b)(6) on document retention, is that your position? MR. BAUTA: No, that wasn't your question. MR. DIESSEL: Can you read back the question, please. *(Question read) MR. DIESSEL: Can you answer the question, please. MR. BAUTA: If you can. A. Can you ask the question one more time? MR. DIESSEL: I'm sorry, what's the basis of
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MR. DIESSEL: Did I give you an extra copy? MR. BAUTA: Two. MR. DIESSEL: Yeah, can I have one. Q. I would like you to turn to about the fourth page -- first of all, this document is labeled From 8-K, November 14, 2007. Do you see that? A. Um-hm. Q. I would like you to turn to the fourth page entitled "QSGI Reports Third Quarter Results." Do you see that page? A. Um-hm. Q. Do you know what this document is? A. It's an 8-K. Q. So this is an example of something that QSGI filed with the SEC? A. Yes. Q. And the big paragraph that begins two-thirds of the way down the page and it starts with "Marc Sherman," do you see that paragraph? A. Um-hm. Q. And the paragraph says, "Marc Sherman, chairman and chief executive officer of QSGI, commented, 'The third quarter was characterized by strong growth and recurring services with both our Data Security and Compliance as well as our Data
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your objection, Juan? MR. BAUTA: I don't understand the question, number one. Number two is that I still think you are asking for his opinion. MR. DIESSEL: Topic 3, "The sources and location of QSGI's documents that remain or may remain following any instance from 2004 through the present in which QSGI's documents were destroyed, discarded, or otherwise not preserved." MR. BAUTA: So you think that's the basis for that question? MR. DIESSEL: Right. MR. BAUTA: I'm going to go ahead and object again. MR. DIESSEL: I'm not going to argue with you. MR. BAUTA: Then don't ask for an opinion, ask where are they because that's what your number three is asking for. Ask him if he knows where the documents are. (Document marked as Exhibit 3 for identification) Q. I'm going to hand you what I have marked as Exhibit 3.
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Center Maintenance divisions, which was offset by a sharp decline in our Data Center Hardware division due to what the company believes to be actionable anti-competitive business practice by a leading OEM.'" Do you see that? A. Um-hm. Q. Does this refer to the same policy that is the subject of QSGI's present lawsuit? A. Yes. MR. BAUTA: Objection. Do me a favor, he is going to go down this road. We are not going to answer any of these questions. THE WITNESS: Hit me next time. Q. So on November 6, 2007, the date of this document, QSGI believed it had an actionable claim against IBM regarding the IBM policy? MR. BAUTA: Objection. I'm going to instruct you not to answer. It's beyond the scope of this witness's notice. Q. What is the earliest point in time that QSGI believed it had an actionable claim against IBM regarding policy?

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MR. BAUTA: Same objection. I'm going to instruct you not to answer. Beyond the scope of this witness's notice. Q. What is the date on which QSGI anticipated litigation with IBM concerning its present lawsuit? MR. BAUTA: Same objection. MR. DIESSEL: You are instructing him not to answer? MR. BAUTA: That's correct. MR. DIESSEL: Okay. Q. I would like to focus on the 2007 time period again that we were focused on this morning. Can we do that? A. Sure. Q. Did QSGI take any steps in 2007 to preserve documents relating to this present lawsuit? A. No. Q. Did QSGI take any steps at any point in time to preserve documents for this lawsuit? A. No. Q. Did QSGI take any steps to preserve documents relating to QSGI's mainframe resale business for this lawsuit? A. No. Q. Did QSGI take any steps to preserve
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Q. So, in fact, there is no litigation hold notice governing this present lawsuit, correct? MR. BAUTA: Objection to form. A. Explain to me what a litigation hold notice is. Q. I think I asked you if you have an understanding of what a litigation hold notice is? A. I do not. Q. You as CEO have no knowledge of a litigation hold being issued in this lawsuit, correct? MR. BAUTA: Objection. Form. It's beyond the scope of this witness's notice. Q. Okay. You can answer. THE WITNESS: Answer? MR. BAUTA: If you can. A. I don't know the answer. Q. My question was whether you know. So you don't know whether QSGI has issued a litigation hold notice for this lawsuit, right? MR. BAUTA: Objection to form. A. Don't know. Q. Who at QSGI, if not you, would know whether or not QSGI issued a litigation hold notice? A. Probably our attorneys. Q. Anyone else?
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documents that would demonstrate any impact on QSGI of the IBM lawsuit -- strike that and ask it again. Did QSGI take any steps to preserve for this lawsuit documents that would demonstrate an impact on QSGI of the IBM policy? A. Our filings speak for themselves. Q. Okay. And I'm going to ask the question again, and I just need your answer to it. Did QSGI take any steps at all to preserve for this lawsuit documents that would demonstrate the impact on QSGI of the IBM policy? A. Can you ask the question one more time? Q. Did QSGI take any steps at all to preserve for this lawsuit any documents that would demonstrate the impact on QSGI of the IBM policy? A. I don't understand your question. Q. QSGI didn't issue a litigation hold notice in 2007, correct? A. What does that mean? Q. Are you familiar with a litigation hold notice? A. No. Q. Does QSGI issue litigation hold notices when it enters litigation? A. Not that I know of.
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A. Not that I know of. Q. When you say "our attorneys," who are you referring to? A. I would assume it would be Juan. Q. Any other attorneys that would know? A. Not that I know of. Q. You are not aware of QSGI issuing a litigation hold notice -- strike that. MR. DIESSEL: How are we on time? THE VIDEOGRAPHER: About 7 minutes. MR. DIESSEL: Is this a good time for you guys to break for lunch? MR. BAUTA: Sure. How long do you think you are going to go this afternoon? MR. DIESSEL: I'm going to take the time this afternoon. MR. BAUTA: So you are going the 7 hours? MR. DIESSEL: I don't know the exact time, but I intend to use my time, so we should take a break. MR. BAUTA: Okay. No problem. THE VIDEOGRAPHER: Tape number two. We are going off the video record at 12:26. (Recess taken)

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AFTERNOON SESSION THE VIDEOGRAPHER: Start tape three of Marc Sherman's deposition, 1:16, on the record. CONTINUED DIRECT EXAMINATION BY MR. DIESSEL: Q. Does QSGI have a written document retention policy? A. Not that I know of. Q. Has QSGI ever had a written document retention policy? A. Not that I know of. Q. I want to turn back to our prior focus which we have been doing in the morning talking about the 2007 time period, documents before QSGI's bankruptcy. Can you stay with me on that? A. Sure. Q. During that time period did QSGI maintain a customer management database? A. We had a customer management database. Q. What was the name of that database? A. I'm not sure which CRM we used. I'm not quite sure. Q. What's a CRM? A. Customer relationship, customer management. Q. Customer relationship management; is that
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was with Victory Park. Q. So QSGI maintained two CRM servers during the 2007-2008 time period; is that right? A. Yes. Q. And that CRM database included information relating to QSGI's used mainframe customers and opportunities? A. It would have all the customers. Q. It would have all the customers and opportunities, including used mainframe customer opportunities? A. Yes, I suppose. Q. Did QSGI make a copy of that information before it provided those servers to SMS and Victory Park? A. No, it did not. Q. Does QSGI have any ability -- strike that question. Do either Victory Park or SMS have the obligation to give that information to QSGI if it requests that information? A. No, they do not. Q. So for purposes of this lawsuit, whatever information was on the customer relationship management database is gone, correct?
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right? A. Yes. Q. What did QSGI store in its CRM? A. It was on the server. Q. What kind of information was included in the CRM? A. I don't really know the exact information that was stored on the CRM. Q. What about roughly what was on the CRM? What was it used for? A. It was used for managing customer accounts. It would have a client name, generally it would have their phone number, their e-mail address, and the contact person, and usually what the touch point was about the last time they contacted the person. Q. Would those clients include clients for resale of used mainframes? A. It could. Q. Did the CRM track sales opportunities? A. It could have. Q. Are there any other places where sales opportunities may have been tracked? A. Not that I know of. Q. Where is that server today? A. Well, one would have been with SMS and one
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A. Correct. Q. Are there any other databases that QSGI maintained on servers that QSGI used to support its business functions? A. Not that I know of. Q. Did QSGI use any databases for purposes of financial reporting? A. Not that I know of. Q. Did QSGI use any databases to support its auditing functions? A. Not that I know of. Q. Did QSGI have any other -- strike that. I think you testified before that QSGI had several servers during the 2007-2008 time period, correct? A. Correct. Q. Is that right? A. I know we had at least two. Q. What were on the at least two servers that QSGI had during that time period? MR. BAUTA: Objection to form. A. The servers were used for our e-mail. Q. Anything else? A. Also the servers were used to basically manage and run the company's operation.

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Q. What information was on those servers that QSGI used to manage and run its operations? A. Didn't we answer these questions already? Q. Well, if we did I'm not recalling it, so I'm just going to ask -- I'm just going to go through this again. So what information did QSGI keep on the servers that it used to manage and run its business? A. E-mails. MR. BAUTA: Objection. Form. Q. Anything other than e-mails? A. I said we had some, you know, templates on there that we would have in our used shared files. I do recall you going through these questions before. Q. The reason I'm asking, Mr. Sherman, is this morning we didn't talk about CRM, which I now understand was included on the server. So what I'm trying to get a sense of is if there are any other categories of documents besides e-mails and templates that were on the server. So can you help me understand that? A. I'm not really sure how the CRM that was, I guess, residing on the server as well, and the employee would bring it up to be able to use it as a
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I guess, aren't sure -- you are not sure that the e-mail archive was on these two servers, right? A. I'm not sure. Q. So for purposes of this lawsuit, whatever was on those servers is gone? MR. BAUTA: Objection to form. A. Yes. Q. Is there any correspondence or documentation that would show what QSGI kept on the servers? A. Repeat the question. Q. Is there any documentation or correspondence that would describe what information QSGI kept on the servers? A. No. Q. When you say that the servers included all the information that QSGI used to manage and run its business, what years did that cover? A. Can you be more specific with the question? Q. Sure. You testified before that these two servers included information and documentation that QSGI used to manage and run its business, correct? A. Correct. Q. Did these servers include information and documents that QSGI used to run its business in the 2007 time frame?
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database. Q. So other than CRM and the templates and the e-mail, what other information was on these servers? A. That's all that I can recall. Q. Did you do anything in preparation of this deposition to investigate what was on those servers? A. No, I did not. Q. Where are those servers today? A. One is -- one was sold to Victory Park, and the other one was sold to SMS. Q. Anything on those servers -- strike that. QSGI did not make any backup or copy of those servers before providing them to SMS and Victory Park, right? A. Correct. Q. So any e-mails or documents on those servers for purposes of this lawsuit are gone, right? A. The Court actually requested the documents, the backup tapes back from Victory Park, and that's how we were able to get back the documents that we -- the e-mails and everything that we have. Q. Were these archives on these two servers that you are describing? A. I'm not sure. Q. So other than the e-mail archive, which you,
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A. I don't know. Can you start over with the question one more time, please? Q. Sure. My question is in what -THE WITNESS: Let me turn this off. Q. Let's come at this another way, Mr. Sherman, and you can tell me when you are ready. A. One second. Q. What years were these two servers in use? A. They were in use from the starting of the company and the acquisition of Qualtech to the time that they were taken off line and sold with the assets of those two respective businesses. Q. So that would be roughly the year 2000 to the year 2009? A. If that's the dates, yes. Q. You don't have any reason to think that those dates are incorrect, do you? MR. BAUTA: Objection. Form. A. If you tell me that those are the dates, I... Q. So regardless of the specific dates, those servers were used to house QSGI's documents and information that it needed to manage and run its business during the point in time that QSGI was operating as a business, correct?

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A. Correct. Q. And QSGI provided the servers that contains the only copy of that information to Victory Park and SMS? MR. BAUTA: Objection. Form. A. We didn't provide them. They were taken. Q. So the only servers that contain that information were taken by QSGI and provided to -A. No. Start over again. Q. Yeah. Again, just for the benefit of the court reporter, we have to try not to get on top of each other with the questions and answers. I will start from the top and we will go through. So those two servers contain all of the documents and information that QSGI used to run and manage its business during the time period when QSGI was in business? MR. BAUTA: Objection. Form. A. Yes. Q. And QSGI -- strike that. And those two servers are no longer in the possession of QSGI, correct? A. Correct. Q. QSGI didn't make a copy or backup of any of the documents or information on that server,
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Q. And QSGI never made any copy of those books and records before it provided them to Victory Park? A. Correct. Q. As to SMS, QSGI as part of that asset sale provided all the books and records relating to its hardware division to SMS, correct? A. Correct. Q. It provided every document relating to its hardware division to SMS, correct? A. I don't know every document. I can't speculate. Q. Well, at least it provided every book, record, and document relating to its hardware division to SMS, correct? A. All the available documents that came with the business in the purchase. Q. So all of the available documents -- so in 2009 QSGI sold the assets comprising its hardware division to SMS, right? MR. BAUTA: Objection to form. A. Correct. Q. So all the records, documents, and information that QSGI had relating to the hardware division in 2009 transferred to SMS, correct? MR. BAUTA: Objection to form.
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correct? A. Correct. Q. QSGI has no ability to access the documents or information that were on those servers, correct? A. Correct. Q. Just to complete the record, QSGI provided one of the servers to SMS pursuant to an asset sale, correct? A. Correct. Q. What is the reason why the second server was provided to Victory Park? A. They bought the assets of the New Jersey facility, the credit assets, from the data security side of the business. Q. Did Victory Park acquire any other assets from the New Jersey facility other than that server? A. They bought all the assets that were part of the data security compliance business. Q. That would include the books and records, correct? A. That would include the books and records. Q. QSGI didn't make any copies of those books and records before it provided them to Victory Park, correct? A. QSGI did not have access to those records.
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A. Correct. Q. QSGI didn't make any copies of the books, records, and documents before it provided them to SMS, correct? MR. BAUTA: Objection to form. A. The only copies that we have are the copies that were electronic. Q. And you are referring to the e-mails? A. E-mails and anything that resided on the copies from the tapes. Q. So I appreciate that. My question wasn't about the e-mails. My question is about the books, records, and information that you provided to SMS pursuant to the asset sale. Can we stay on that, please? A. Sure. Q. So did QSGI make any copies of any of the books, records, or documents before transferring them to SMS? MR. BAUTA: Objection to form. A. Not that I know of. Q. So as far as this lawsuit is concerned, the books, records, and documents relating to QSGI's hardware division are gone, right? MR. BAUTA: Objection to form.

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A. Correct. THE WITNESS: Can I speak to you for a second? MR. BAUTA: Sure. Do you want to take a break? THE WITNESS: Yeah. MR. BAUTA: Sure. THE VIDEOGRAPHER: Off the video record at 1:32. (Recess taken) THE VIDEOGRAPHER: Back on the record at 1:37. CONTINUED DIRECT EXAMINATION BY MR. DIESSEL: Q. We were talking a second ago about the QSGI CRM? A. Yeah. Q. I'm not sure if we talked about the years during which that was in place. Is it the case that QSGI used that CRM database during the time in which QSGI was in business? A. We always had some type of a database for managing names. We went from rolodex to database. Q. Do you have -- when did QSGI start using the database?
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Q. using A. Q.
To the best of your knowledge, QSGI has been the CRM -We have been using. Excuse me. -- since at least 2007? A. We have used some type of a database. I don't know what it is, but we have used some type of a database. Q. Since 2007 at least? A. Yes. Q. I guess having, and I appreciate that was just an example, but having thought more about the rolodex, does it refresh your recollection as to how far back QSGI used a CRM database? A. No. Q. You mentioned earlier in the day a PowerPoint presentation. Do you recall that? A. Um-hm. Q. And you mentioned that it was an electronic PowerPoint that you printed out. Do you remember that? A. Um-hm. Q. Where is that PowerPoint stored electronically? A. No idea.
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A. I don't know exactly. I wasn't a user of it, so I don't know the exact date, but I know we had it for our employees. Q. Would it have been 2002? A. I don't know the answer to that. Q. Would it have been before 2005? A. I don't know. Q. Would it have been before 2007? A. I would imagine so. Q. QSGI is currently using it, right? A. QSGI currently uses a database, yes. Q. Where is the rolodex? A. What's the question? Q. Where is the rolodex of customer information? A. Where is the rolodex of customers? I don't know. Q. So there is two sources of customer information that QSGI has had while it's been in business, a rolodex and the CRM database, right? A. I used that as an example. I said before CRM there was such a thing as a rolodex. Q. What did QSGI use for its customer information before CRM? A. I don't know.
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Q. Does QSGI use PowerPoints? A. Presently? Q. Let's start with the 2007-2008 prebankruptcy time, did QSGI use PowerPoints then? A. Yes. Q. What did QSGI use PowerPoints for? A. Presentations. Q. What kinds of presentations? A. Could be customer presentations, could be investor presentations, customer -- I said customer presentations. Corporate presentations internally. Q. Are these presentations that individual employees would prepare using PowerPoint, a version of PowerPoint loaded on his or her laptop? A. Could be laptop, could be a desktop, I presume. Q. So in either case these PowerPoints, I take it, would have been created on some computer the employee was using? A. I would assume so. Q. And those PowerPoints, I take it, would have been stored on whatever computer they were created on, correct? A. If you say so. Q. Well, I'm asking you whether QSGI used

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PowerPoints, and your testimony was yes. A. Yes. Q. And I'm trying to understand where QSGI would have kept these PowerPoints that its employees were creating? A. I would imagine they would have been made from the server, you know, from Windows, some application, Office, right? Q. You are saying PowerPoint is part of Microsoft Office, correct? A. Correct. Q. When employees create PowerPoints, they would store them on their computer, correct? MR. BAUTA: Objection to form. A. I would assume, yes. Q. Does QSGI use Microsoft Excel? A. Yes. Q. What does it use Excel for? A. Spreadsheets. Q. What kinds of spreadsheets? A. Financial spreadsheets, inventory spreadsheets. Q. What kinds of inventory spreadsheets would QSGI create Excel -- I want to remind you that I want to ask you about the 2007-2008 prebankruptcy
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Q. No reason to think that that's not the case, right? A. I would assume that that would be the case. Q. You create PowerPoints, don't you? A. Occasionally. Q. Where do you store those PowerPoints when you create them? A. To a document file. Q. And where would the document file be stored? A. Usually on some sort of server. Q. And you also have PowerPoints on a computer, don't you? A. Yes, they are on the computer, but I do know that -- yes, on the computer. Q. Does QSGI use Microsoft Word? A. Yes. Q. What does it use Microsoft Word for? Again, sorry to interrupt your answer. I want to focus on the prebankruptcy time. A. Um-hm. Q. What did QSGI use Microsoft Word for? A. Documents. Q. When you say for documents, what do you mean? A. Writing or creating documents.
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period, so I will ask my question again. What kinds of inventory spreadsheets did QSGI create during that period of time? A. I don't know. Create. I don't understand the question completely. Q. What kinds of inventory spreadsheets did QSGI use? A. We would get inventories from customers and we would dump them into Excel and we would price them based on the inventory on an Excel spreadsheet, and then usually bid a deal and send it back to a customer in Excel. Q. Did QSGI use Excel to track sales information? A. I don't know the answer to that. Q. Did it use Excel to track opportunities? A. Opportunities? I don't know what that means. Q. Did it use Excel to track sales opportunities? A. Not that I can recall. Q. When QSGI employees created Excel spreadsheets, I take it those would have been stored on their computers? A. I would assume so, sure.
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Q. What kinds of documents? A. Letters. Q. What kinds of letters? A. Speeches and things like that. Q. Speeches delivered to whom? A. To -- I did my father's eulogy on a Word document. Q. What about business-related speeches? A. Could be, sure. Q. To whom -- what kinds of letters did QSGI create? A. Letters are created to customers and vendors, I would imagine, from time to time, collection letters. Q. What's the purpose for which letters were sent to customers and vendors? A. It could be for a proposal, for a bid. Q. Other than speeches and letters, what other Word documents did QSGI create? A. I don't know. MR. BAUTA: Objection. Form. A. I don't know. Q. You don't know whether QSGI used Microsoft Word for anything other than speeches or letters? MR. BAUTA: Objection to form. Beyond the

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scope of this deposition. A. I don't understand the meaning of the question. Yes, it was used for writing letters, putting letters on paper. Q. Okay. I'm just trying to get a general sense of the types of documents that QSGI was creating in 2007-2008. Okay? So when I'm asking what did QSGI use Microsoft Word for, what I'm really getting at is what kinds of documents was QSGI preparing. Do you understand that? A. Sure. Q. So other than speeches and letters, what other types of documents did QSGI create using Microsoft Word? A. Letters, documents. Q. What types of documents? A. We went through that already. Q. I don't think we did. What kind of Word documents did QSGI prepare? A. I really don't know. MR. BAUTA: Objection to form. A. I don't know. Q. You don't know what kinds of documents QSGI created in 2007 and 2008? MR. BAUTA: Objection.
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before bankruptcy? A. We always had strategic-type documents about the business on e-mails primarily. Q. So setting aside the documents which were primarily an e-mail, what were the formats of the other strategy documents? A. It would be, I would say, primarily e-mail. Q. Other than e-mail were there any strategy documents that QSGI created or prepared? MR. BAUTA: Objection to form. A. We had some PowerPoint documents. Q. Other than strategy documents other than -in Microsoft Word, for example? A. No, not that I can recall. Q. And those PowerPoint strategy documents, I take it, would have been stored on a computer? A. Yes. Q. What about documents relating to valuation of QSGI's mainframe inventory, did QSGI prepare those types of documents in 2007 and 2008? MR. BAUTA: I'm going to object and instruct you not to answer. THE WITNESS: Okay. MR. BAUTA: Beyond the scope of your notice. MR. DIESSEL: I don't agree with that.
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A. There is a broad spectrum of documents. Q. What's included in the broad spectrum of documents? A. Could be a collection letter to a customer that owed us money, could be a letter to an employee, could be a proposal to a customer. MR. BAUTA: Mr. Sherman, you are not here to guess, so... THE WITNESS: I'm just telling the things that I know. Q. What other categories of documents do you know about in 2007 and 2008? A. I don't know. Q. What about strategy documents? A. I don't know of any strategy-type documents. Q. The documents that QSGI created using Microsoft Word in 2007 and 2008 I take it would have been stored on a computer, right? A. Yes. Q. So your testimony is you are not sure that QSGI created any strategy documents before bankruptcy. MR. BAUTA: Objection. Form. A. That wasn't a question. Q. Did QSGI create any strategy documents
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MR. BAUTA: Show me where. Here is your notice, here is your three topics. MR. DIESSEL: I'm not going to engage with you on this because we are wasting time. I'm not arguing. I need to state my position on the record that I disagree, and I'm going to keep asking question. MR. BAUTA: Okay. MR. DIESSEL: That way every time you instruct not to answer, we don't have to keep having this colloquy. MR. BAUTA: I'm giving IBM's counsel the opportunity to explain to me of the three topics that were specifically listed for your 30(b)(6) notice which one covers the question that you just asked. MR. DIESSEL: I will repeat it is plainly in the scope, and I'm entitled to ask questions whether you think they are inside the notice or not. MR. BAUTA: Oh, I see. Okay. MR. DIESSEL: And you know that. That's what the local rules say. MR. BAUTA: Okay. MR. DIESSEL: It shouldn't be a surprise to

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you. I look forward to reading your motion for protective order. MR. BAUTA: Which of the local rules? Maybe I don't know them. MR. DIESSEL: It seems you don't know them. MR. BAUTA: Apparently not. Do you know which one it is? BY MR. DIESSEL: Q. Did QSGI use Microsoft Word to prepare financial documents? A. I don't know. Q. Your testimony is you don't know whether QSGI used Microsoft Word for financial documents? MR. BAUTA: Objection. Beyond the scope of this notice, and I'm going to instruct you not to answer. Q. So Seth Grossman worked at QSGI through 2009, correct? A. Correct. Q. And Seth Grossman had a computer, right? A. Correct. Q. And you would expect Seth Grossman would have prepared documents that were stored on his computer, correct? MR. BAUTA: Objection to form.
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There was nothing to back up, there was nothing to have. It was completely gone. My desktop had no information, his desktop had no information. There was nothing to recover. MR. DIESSEL: I'm going to object as nonresponsive. Q. You testified earlier that Seth Grossman had documents on his computer, correct? A. Seth Grossman had -MR. BAUTA: Objection to form. A. Seth Grossman had a computer, yes. Q. And on the computer he had documents, correct? MR. BAUTA: Objection to form. A. There were documents on his computer. Q. There were QSGI documents on his computer, correct? A. There were QSGI documents on his computer. Q. And QSGI didn't do anything to copy or preserve the information on his computer before he left, correct? A. The retention was handled in New Jersey through backup tapes. Q. So the answer to my question is -- my question is did QSGI do anything to copy or preserve
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A. What was the question? Q. Seth Grossman created documents that were stored on his computer, correct? A. Correct. Q. Did QSGI copy or preserve his documents before he left in 2009? A. All of his documents resided on the server. Q. What server? A. The server that was in New Jersey. Q. Which server in New Jersey are you referring to? A. The server that Victory Park took. Q. So to the extent that any of -- let me ask two questions. First, did QSGI do anything to preserve the documents and information on his laptop -- strike that. Did QSGI do anything to preserve a copy or copy of the documents Seth Grossman had on his computer before he left in 2009? A. I don't think you understand how the system worked. Okay? I would log into my computer, I would log into my server. When QSGI was shut out and Victory Park took over the assets, the server was disconnected. There was no log in, there was nothing there, you had no access, so it was gone.
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the documents and information on his computer before he left? A. Yes, they were backed up as normal protocol in New Jersey. Q. How were they backed up? A. Through backup data tapes. Q. When were Seth Grossman's documents backed up? A. I don't know the exact date, but it was our normal process. Q. What is the mechanism through which his documents would be backed up? A. Same process that we had in New Jersey, it was automatically backed up through their data tapes. Q. So the server to which you are referring is the server that QSGI provided to Victory Park? A. Correct. Q. QSGI never retained any of the information on that server, correct? A. Whatever we have is on the backup tapes. Q. And the backup tapes that you are referring to are the e-mail backup tapes, right? A. Right. There could be some additional information on those backup tapes as well, I'm just

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not sure. Q. So let's start over. So Seth Grossman worked at QSGI until 2009, correct? MR. BAUTA: Objection. Form. A. Yes. Q. He created documents and he stored those documents on his computer? MR. BAUTA: Objection. Form. A. I assume so. Q. To the extent that Seth Grossman had QSGI documents that he created on his computer, they would have either been stored on his computer or on the Victory Park -- or on the New Jersey server, correct? MR. BAUTA: Objection. Form. A. Yes. Q. QSGI didn't preserve a copy of his computer before he left, correct? MR. BAUTA: Objection to form. A. It was always backed up through the main server. Q. I appreciate that but I need to get an answer to my question, and then we will move on to the server. So Seth Grossman stored QSGI documents on
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Q. Why not? A. Because I normally would save them to -- I would save them and they would reside on our server. Q. Would I find any Microsoft Word files on your QSGI computer? A. Well, that's a -- maybe I can back up a second. If you are in my office and you logged in under my user name, you would see Word files and you would see everything. You can see everything as if you were working through a central server. Q. So is it your understanding that those documents exist only on a QSGI server and not on the local computer? A. That's my knowledge, yes. Q. Now, setting aside other QSGI employees and just focusing on you, there also are, in fact, QSGI documents that you retain locally on your computer, correct? MR. BAUTA: Objection. Form. A. I don't know the answer to that question. Q. Who would know the answer to that question? A. Dave Harris would know the answer to that question. Q. Is it your testimony that QSGI did not store any local Word, PowerPoint, or Excel files on
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his computer, correct? MR. BAUTA: Objection to form. A. I think that there is a disconnect here. The files that he would save would be saved to the server, it wouldn't be saved -- you are asking if it's saved to a local computer, is that your question? What is your question? MR. DIESSEL: I'm going to move to strike as nonresponsive. MR. BAUTA: He is asking you for clarification of the question, which is confusing. MR. DIESSEL: I got a speech. Q. Where is your laptop right now, Mr. Sherman? A. Where is my laptop? Q. Where is your laptop? A. I have a laptop at my home, I have one in my office. Q. And the one in your office you use for QSGI purposes? A. Yes. Q. If I were to go in your office and turn on your laptop, would I see PowerPoint files on your laptop? A. No.
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anyone's computer? A. That was my experience when the server was shut down in New Jersey when I tried to log in the next day. Q. So Seth Grossman's files your testimony is would only have existed on the QSGI server, correct? MR. BAUTA: Objection to form. A. That's my knowledge from my experience. Q. And all the information on that server is gone today? MR. BAUTA: Objection. Form. A. Unless it was saved and backed up. Q. Unless it was in an e-mail? MR. BAUTA: Objection. Form. A. Unless some of those additional documents were saved on the backup tapes. Q. And you have absolutely no knowledge that any documents were saved on that server? A. I don't know which ones were saved. Q. You don't know if any were saved? A. I don't know which ones -- I know that some were saved. Q. What was saved? A. I know that we have financial documents that were saved.

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Q. Where are those financial documents today? A. The current CFO has those -- has some of the old documents. I'm not sure he has all of them, but he has enough, because we have had to recreate our SEC documents. Q. The CFO has these financial documents where? A. On his computer. Q. He has local copies of financial documents on his computer? A. Yes. Q. So at least some QSGI employees have local documents in their computers? A. Some of the old records that we got back we were able to make copies of. Q. Did any of the QSGI employees in 2007 and 2008 have local copies of documents in their computers? A. Repeat that again. Q. Did any of the QSGI employees in 2007 and 2008 have local copies of documents in their computers? A. I'm not sure. I don't think so but maybe. Q. If they did they would be gone, correct? A. I don't know that. Q. Did QSGI take any effort at all to collect
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A. Correct. Q. QSGI has no documents from Jeffrey Smith from his tenure at QSGI, correct? A. Correct. Q. QSGI has no documents from R. Keith Elliott from his tenure at QSGI, correct? A. You are talking about physical hard copy paper documents, correct? Q. I'm talking about the documents that were on the computer during their time at QSGI? A. They could be in the backup tapes. Q. Your testimony is you don't know what's on the backup tapes? A. I said they could be on the backup tapes. Q. But you have no idea they are on the backup tapes? MR. BAUTA: Objection. Form. A. They could be on the backup tapes. Q. Do you know of any measure that QSGI has taken at all to preserve the documents of any of these individuals and put them on the backup tapes? MR. BAUTA: Objection. Form. A. All those documents were sent to the attorney, they were reviewed, and they were -- a lot of them were sent off to the SEC. I'm sure there is
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laptops of former employees when they left? A. All the technology was sent back to New Jersey, and it was sold with the assets to Victory Park. Q. So the answer to that question is QSGI has no information at all about what was on these former employees' computers in 2007 and 2008, correct? MR. BAUTA: Objection to form. A. Correct. Q. Whatever was there QSGI no longer has? MR. BAUTA: Objection to form. A. Correct. Q. So QSGI doesn't have Seth Grossman's documents from 2007 and 2008, correct? MR. BAUTA: Objection to form. A. Unless they are on the backup tapes. Q. The same backup tapes that you have no knowledge as to their contents, right? MR. BAUTA: Objection. Form. A. Yes, correct. Q. QSGI has no documents from Edward Cummings from his tenure at QSGI, correct? A. Correct. Q. QSGI has no documents from Robert VanHellemont from his tenure at QSGI, correct?
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lots of information and lots of documents, and I do know that a lot of those e-mails were compiled and sent off to the SEC. I don't know how many, what they were, what the correspondence was, but of those people's names there was -- if they were mentioned in the SEC question, then those documents were pulled and sent. Q. Okay. I'm not talking about e-mails. Okay? So QSGI doesn't have any of R. Keith Elliott's documents from his tenure as QSGI, correct? MR. BAUTA: Objection. Form. A. I would assume not. Q. QSGI doesn't have any documents from Joel Owens from his tenure at QSGI, correct? MR. BAUTA: Objection. Form. A. Hard copy documents I would assume -- let me think about this for a second. In the hard copy files that we had, there is probably Joel purchase and sale agreements and some other documents that there should be copies of. I would imagine we do have some hard copies. Also some issues, some signatures on documents from the board of directors we don't have in our possession at the time, but those physical copies should be available somewhere. Q. QSGI didn't retain any of Joel Owens'

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electronic documents from the time of his tenure, correct? MR. BAUTA: Objection to form. A. Correct. Q. QSGI didn't retain any electronic documents from Jamie Owens during the time of his tenure at QSGI, correct? A. Correct. Q. QSGI didn't retain any electronic documents from John Riconda from the time of his tenure at QSGI, correct? A. Correct. Q. And, in fact, QSGI hasn't retained electronic documents from any former employee during their tenure at QSGI, correct? A. Correct. THE WITNESS: I have a headache. MR. DIESSEL: Do you need a break? THE WITNESS: No, I'm fine. Keep on going. Q. Is it the case that you were the only QSGI employee retained during QSGI's bankruptcy? A. I was the only? Q. Let me ask the question another way. What I'm really getting at is who was employed by QSGI during the time of QSGI's bankruptcy?
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Q. What is this document? A. It's our plan of reorganization that was sent to the Bankruptcy Court. Q. Do you see at the top of the page there is some information including a page number? A. Yeah. Q. Can you turn to page 22 of the document, please. A. Okay. Q. Do you see a heading titled "Current Management"? A. Um-hm. Q. And it says, "Since the bankruptcy filing, Marc Sherman and David J. Meynarez have been running the Debtors' reorganization, and facilitating the Chapter 11 case in the following ways." Do you see that? A. Um-hm. Q. And then it lists some of the things that you and Mr. Meynarez have been doing to run the reorganization. Do you see that? A. Um-hm. Q. And six lines into that paragraph the first two words are "document retention." Do you see that?
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A. It was me and then Dave Meynarez came on board, and then we actually issued a new slate of directors. Q. So there was a point in time where the only employees of QSGI were you and Dave Meynarez? A. It was me for a short period of time. Q. So there was a period of time when you were the only employee at QSGI? A. I was the only employee. Q. What period of time was that? A. I don't know. Q. I'm going to hand you what I have marked as Exhibit 4. (Document marked as Exhibit 4 for identification) Q. Do you recognize this document? For the record it's titled "Debtor QSGI and QSGI-CCSI, Inc. and Qualtech Services Group, Inc.'s Third Amended Disclosure Statement In Support of Third Amended Plan of Reorganization." Do you see that, Mr. Sherman, on the front page? A. Yes. Q. And it's dated February 1, 2007, correct? A. Yes.
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A. Um-hm. Q. So you and Mr. Meynarez were running QSGI's document retention during this bankruptcy, correct? A. To the best that we could. Q. You couldn't always do as good of a job as you would have hoped, right? A. I don't understand your question. Q. Yeah, so I asked if you and Mr. Meynarez were running QSGI's document retention, and you have testified "the best that we could." A. The best that we could. Q. You guys did the best job preserving the documents that you were able to? A. Once we were able to isolate the documents, we were able to get our -- we could do what we could do with the documents that we had. Q. And there were some things that you couldn't do? A. Correct. Q. What are some of the things that you and Mr. Meynarez couldn't do? A. We couldn't get our hands on all the documents because some of the documents were destroyed. Q. What were the documents that were destroyed?

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A. The documents that were in Minnesota. Q. What other documents were destroyed? A. That's all that I know of. Anything that was on the server that we couldn't get our hands on. Once again, I don't know exactly what's on the backup tapes. Q. Who are Kinetic Advisors? A. Kinetic Advisors was the company that we used to help us through our bankruptcy. Q. You worked with Kinetic Advisors? A. Yes, we worked with Kinetic Advisors. Q. Did you specifically work with Kinetic Advisors? A. Yes. Q. Who is Rich Cartoon? A. Richard Cartoon was one of our advisors on the bankruptcy. Q. Did Rich Cartoon work for Kinetic Advisors? A. Yes, he did. (Document marked as Exhibit 5 for identification) Q. I would like to hand you what's been marked as Exhibit 5. For the record, this document is entitled "Summary of First Interim Application of Kinetic Advisors, LLC for Compensation and
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Q. Does this describe a teleconference that you had with Rich Cartoon at Kinetic Advisors? A. Um-hm. Q. And you see further to the right it says, "retention of corporate records." Do you see that? A. Um-hm. Q. At least according to this document you had a teleconference with Rich Cartoon at Kinetic Advisors on October 2, 2009, about retention of corporate records? A. Exactly. Q. Now, is this teleconference concerning record retention following QSGI's period of a gray area in its record retention? A. I don't understand your question. Q. I'm trying to understand the chronology of events of QSGI's record retention in the bankruptcy. Okay? So I would like to get an understanding from you as to whether this teleconference concerning records retention followed the period, the gray area period that you described earlier today? A. This conversation was about him speaking with Victory Park so we could get the records back from them that I wanted to be able to retain. It was about if we were to have a successful
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Reimbursement of Expenses As Restructuring Advisor to Debtors. Do you see that? A. Um-hm. Q. And it's dated November 2, 2009. Do you see that? A. Um-hm. Q. What is this document? A. It's a fee application. Q. Is it your understanding that this is a document in which Kinetic Advisors is seeking reimbursement for services that it's performed? A. Yes. Q. I would like you to turn to page 47 using the numbers at the top of the page. Keep going. A. Um-hm. Q. I would like you to go down the left column until you see an entry for the date October 2, 2009, and let me know when you are there. A. Um-hm. Q. Do you see an entry that says, "tc M Sherman about use of corporate shell"? A. Um-hm. Q. Would it be consistent with your understanding that TC refers to a teleconference? A. Yes.
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resurrection of the public entity, I needed to make sure that we had all of the records kept and preserved. So he was the go-between between me and Victory Park, and that was the reason of our corporate records record retention. I needed to get those records back. I was trying to get those records back. MR. DIESSEL: I'm going to object as nonresponsive. Q. Do you see an entry -- Mr. Sherman, I appreciate that, but I was just asking about the date. I was asking about the sequence of dates. A. I'm not sure exactly of the sequence of dates, but I'm telling you what it was for. Q. Thank you. Let's turn to the October 6, 2009, entry. Do you see that? A. Yeah. Q. It says, "tc C Heilman about impending closure of NJ facility." Do you see that? A. Um-hm. Q. C. Heilman, that's the QSGI controller, correct? A. Um-hm. Q. Do you know what "impending closure of NJ

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facility" refers to? A. Craig was actually the time after the sale of the assets was working for Victory Park, and they wanted to shut down the New Jersey facility and get rid of the documents. And he was talking about document destruction, and I was talking about getting the documents out of there before they were destroyed. So I was actually successful in getting the documents out of that building into another building, because Victory Park didn't want to pay to store those documents. Q. Is it correct that this is referring to the impending closer of the document facility of Hightstown, New Jersey? A. It wasn't a document facility. It was our operating facility where the documents were stored. The concern was, as you can see here, it says, "query from SEC," I didn't want any of those documents destroyed because I needed them for the SEC investigation, so I wanted to make sure they were preserved. Q. So there came a point after this discussion of document destruction when the documents were moved from the Hightstown, New Jersey, facility to another facility, correct?
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Q. What happened to the documents that you couldn't get? A. I don't know about what I don't know. Q. Okay. I believe your testimony was that financial documents were moved to the second New Jersey facility, correct? MR. BAUTA: Objection to form. A. I said all the documents. It could be financial. All the documents that were available to be had were moved. Q. Going back to my previous question, is it your testimony that every document at the New Jersey facility in Hightstown was transferred to the second New Jersey facility; is that your testimony? MR. BAUTA: Objection to form. A. I don't know that to be a fact. I wasn't there. Q. Who would know that? A. I don't know. Q. Is there anyone at QSGI that would know that? A. I don't know. I just don't know who was left in that building when things were moving around after the assets were sold. Craig Heilman might know that.
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A. Yes. Q. Another facility in New Jersey, correct? A. Correct. Q. Was every single document from the New Jersey facility moved into the second New Jersey facility? A. Well, I requested that every document that was pertaining to financial records for the company were moved to the facility that I was in control of. If you read down J. Page, Phil Landau were the attorneys at the time who made sure that I got those documents and moved them from one building to another. Q. So any document not related to financial information would have been destroyed pursuant to the document destruction being discussed in this teleconference, correct? A. I don't think -- I'm not sure that that's the case. I tried to get every document out of that building that was wrapped on a pallet that was always put aside under our 7-year retention rules because I wanted to get those documents out. So I don't know what the destruction aspect is, I have no idea. All I know is I got as many documents out of that building as I could get.
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Q. Who physically went to the building to collect the documents from Hightstown, New Jersey? A. We sent an independent truck over to pick them up. Q. Who gave the directions to the independent truck to pick up the documents? A. I think it was Carl Sarasino. Q. What instructions were provided to the truck with respect to what documents should be picked up? A. I don't know. You have to ask Carl. Q. Who is Carl? A. Carl runs our operations. Q. Can you spell his last name? A. S-a-r-a-s-i-n-o. THE VIDEOGRAPHER: Counsel, you have about 3 minutes left on this tape. Q. So you don't know one way or the other whether all or only some of the Hightstown documents were moved to the second New Jersey facility, correct? MR. BAUTA: Objection to form. A. We were told that all of the documents were moved. Now, I can't swear to that because I wasn't there, but that's what I was told. Q. Who told you that?

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A. That's what Carl told me, we picked up all the documents. Q. When did he tell you that? A. I don't know. Somewhere between 10/6 and whenever they ended up in our building. MR. DIESSEL: Why don't we hop off the record so we can change the tape. THE VIDEOGRAPHER: We will go off the video record, tape number three, at 2:19. (Discussion held off the record) THE VIDEOGRAPHER: Marc Sherman tape number four. On the record at 2:21. CONTINUED DIRECT EXAMINATION BY MR. DIESSEL: Q. I would like you to look at the entry dated October 7, 2009. Do you see that? A. Yes. Q. It states in the last two lines, "e-mails to C Heilman about which documents should be retained and need to obtain storage and shredding costs." Do you see that? A. Um-hm. Q. And C Heilman is QSGI's controller, correct? A. Um-hm. Q. So this describes a teleconference in which
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A. Any correspondence? No. Q. Is there any document anywhere that would describe what documents QSGI would shred and which documents it would not shred? A. Well, according to our old CFO, his policy was that anything that was duplicate would go in another bin and Cintas or whoever would come in on a monthly basis and they would shred the nonessential documents, and the things that were essential would get filed and put away. Q. So nonessential documents could get shredded? A. Correct. Q. And that would include nonessential documents irrespective of whether they are duplicates or not, right? A. Nonessential documents. I would imagine just paper. We didn't throw paper in the garbage, so as part of our process it would get shredded. Q. In this case it's not the CFO but QSGI's controller that's making the determination as to which documents should be shredded, correct? MR. BAUTA: Object to form. A. I'm not quite sure -- I'm not sure of your question. Rephrase the question, please.
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QSGI's controller discussed what documents QSGI should retain, correct? A. Um-hm. Q. And other documents that QSGI didn't retain that would be shredded, correct? MR. BAUTA: Objection. Form. A. I guess. Q. Do you have any reason to disagree with that? A. Well, they would shred duplicates. Q. Do you see the word "duplicates" anywhere on here? A. The process was things that were duplicate they would just shred. Q. Are you aware of any instances of QSGI shredding documents other than duplicates? A. No, only duplicates. Q. Your testimony under oath is that the only documents QSGI shredded were duplicate documents? MR. BAUTA: Objection. Form. A. Yes. Q. Is there any correspondence relating to what documents should be shredded that you could direct us to? MR. BAUTA: Objection. Form.
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Q. How did QSGI determine which documents were nonessential and, therefore, could be shredded? A. Duplicates. Q. What other basis? A. Just general, you know, paper that was not essential to financial documents or things that needed to be retained under financial reporting guidelines. Q. The documents other than those that needed to be retained for financial reporting guidelines could have been shredded? A. I presume so, yes. Q. Is that what this entry is referring to on October 7, 2009? MR. BAUTA: Objection to form. A. You are making assumptions. I don't know what that entry is relating to. Q. I'm asking you as the 30(b)(6) witness whether you know the answer to what this is referring to? MR. BAUTA: Objection to form. A. I know it's referring to Craig Heilman trying to get the finances to store the documents from Victory Park, that's what it was about. He couldn't get the finances from Victory Park to store

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those documents, and that's why I came to get those documents out. That's what this whole chain of e-mail correspondence is about. Q. So this entry refers to e-mails to Heilman about which documents should be retained. Do you see that? A. I don't see anything that says which documents should be retained. Where do you see that? Q. Let me read it to you. It's the October 7, 2009, entry. A. Okay. Q. Second line from the top. "E-mails to C Heilman about which documents should be retained and need to obtain storage and shredding costs." Do you see that? A. E-mails to John Page and Phil Landau about document storage and need to retain C Heilman to prepare MOR's and which documents should be retained and need to obtain -- right. So this was about Craig didn't want to make a decision on what documents should be shredded or whether it should be shredded or should be retained. And he was trying to make a decision on that asking the bankruptcy attorneys what he should do. That's
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Okay? Do you see that? A. Which one is that? Q. The entry that says, "e-mails to C Heilman about which documents should be retained and need to obtain storage and shredding costs." A. Right. Which documents need to be retained. Q. So where are those e-mails? A. I don't know. Check the e-mail archive files. Q. Has QSGI checked its e-mail archive files to find this e-mail relating to which documents should be retained? A. All the documents should be retained. I'm telling you as CEO I wanted to make sure that all -Craig wasn't the CEO. At that point in time I made sure that all those documents were retained. Q. So ultimately which documents were retained -A. All documents that were in the building. Q. Excuse me. Ultimately which documents were retained and which weren't retained were your responsibility? A. I have no idea what you just said. Start over again. Q. Ultimately which documents QSGI retained and
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what this e-mail was about. Q. Just to be clear, are Kinetic Advisors bankruptcy attorneys? A. No, they are advisors. Q. Is there something on the face of this entry that leads you to conclude that these were e-mails with attorneys? MR. BAUTA: Objection. Form. A. Do you see where it says John Page and Phil Landau? That's the law firm of Shraiberg, Ferrara & Landau, bankruptcy counsel. Q. I'm talking about the next entry after that that says, "e-mails to C Heilman about which documents should be retained and need to obtain storage and shredding costs." A. Isn't that 10/7/2009? Is that what you are talking about? MR. BAUTA: It's all one entry. A. It says, "e-mails to John Page and Phil Landau about document storage and need to retain C Heilman to prepare MOR's and e-mails to C Heilman about which documents should be retained and need to obtain storage and shredding costs." Q. I would like to focus you on that second set of e-mails from Kinetic Advisors to C Heilman.
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which it didn't retain was your responsibility? MR. BAUTA: Objection. Form. A. All the documents in the New Jersey facility, to the best of my knowledge, were retained and nothing was disposed of in that facility. Q. So what I want to know is whether you know one way or the other whether QSGI retained these e-mails between his controller and Kinetic Advisors relating to document retention? A. I would assume that those e-mails were on the backup tapes, if we were still backing up to the tapes on 10/9. Q. When did QSGI stop backing up its tapes? A. That's a good question. I don't know the date. Q. Do you have a rough sense of when QSGI stopped backing up its e-mails? A. I don't know. Q. Who would know when QSGI stopped backing up its e-mails? A. Dave Harris. Q. Did you do anything to investigate when QSGI would stop backing up its e-mails to prepare for this deposition? A. No, I did not.

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Q. Was it your understanding that that was outside the scope of this deposition? A. No. Q. So it's within the scope as far as you know, but you just didn't bother checking to see whether QSGI kept backing up e-mails? MR. BAUTA: Objection. Form. MR. DIESSEL: I will strike my last question. Q. Let me ask you this question: Is QSGI presently backing up its e-mails? A. Yes. Q. Was there a point in time when QSGI was not backing up its e-mails? MR. BAUTA: Objection to form. A. I would imagine, yes. Q. What was the duration of time during which QSGI wasn't backing up its e-mails? A. The time that QSGI was no longer active to the time it came out of bankruptcy, so I don't know the exact timeline. Q. There was some period of time that QSGI was in bankruptcy when it wasn't backing up its e-mails; is that your testimony? A. Yes.
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copy documents from the point of time which it was in business, correct? A. Correct. Q. What documents did QSGI provide to the SEC -- let me strike that last question. What documents were in the New Jersey facility at the point in time that QSGI provided them to the SEC? A. Financial documents, contract documents. Q. Any other documents? A. That's all that I know of. Q. Is it the case that the only documents that QSGI had at its Hightstown facility was financial documents and contract documents? MR. BAUTA: Objection. Form. A. The ones that were preserved were the financial documents and contract documents. There could have been some AR and AP documents, I'm not 100 percent sure. Q. So other than financial documents and contract documents which QSGI produced to the SEC, its other hard copy documents were destroyed, correct? A. Nonessential documents I guess would have gotten destroyed, yes.
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MR. DIESSEL: I'm sorry, do you need a break? THE WITNESS: No, keep going. It's not going to make my head feel any better if I stop. Q. So we have been talking about two facilities at which QSGI retained its only hard copy documents. Do you remember talking about that? A. Yes. Q. One of the facilities was the Minnesota facility, correct? A. Correct. Q. And all of those documents have been destroyed? A. Correct. MR. BAUTA: Objection to form. Q. And the other facility is the New Jersey facility that you and I were just talking about, correct? MR. BAUTA: Objection to form. A. Right. Q. But all the documents in that facility have been provided to the SEC, correct? MR. BAUTA: Objection to form. A. Correct. Q. So QSGI does not have access to any hard
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Q. When you refer to essential documents, are you, again, just referring to financial documents and contract documents? A. Yes. Q. So other than the financial documents and contract documents that QSGI produced to the SEC, all of QSGI's other hard copy documents have been destroyed, correct? A. Whatever was in the boxes in the New Jersey facility are still somewhere to be had. Q. Those are the documents that you are referring to that were SEC, correct? A. Correct. Q. QSGI doesn't have the ability to access those documents, correct? A. You mean the ones that are at the SEC right now? Q. Yes. A. When they send them back to us. When they send them back to us we will have it. Q. I'm going to go back to my question. Other than the financial documents and the contract documents that QSGI produced to the SEC, all of QSGI's other hard copy documents have been destroyed, correct?

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MR. BAUTA: Objection to form. A. Correct. Q. QSGI does not have the right or the authority to access the financial and contract documents that it produced to the SEC, correct? MR. BAUTA: Objection. Form. I'm going to instruct you not to answer. I think that calls for a legal opinion at a minimum, at a minimum. So if you know the answer, great. If not, I instruct you not to answer. Don't guess. A. What was the question again? Q. Does QSGI have the authority to access the financial and contract documents that it produced to the SEC? A. No. Q. So for purposes of this lawsuit, QSGI has no hard copy documents at all, correct? MR. BAUTA: Objection to form. A. Correct. Q. What's the status of the SEC investigation? MR. BAUTA: I'm going to object and instruct you not to answer. It's beyond the scope of this witness's designation.
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MR. DIESSEL: Well, you gave a speech so I need to put our position on the record. MR. BAUTA: Okay. MR. DIESSEL: Our position is from what we know, it's clear these are the only hard copy documents in existence. QSGI has failed to produce them, the basis for not producing them is that the SEC has them. QSGI has not provided any indication of when or even whether it will be able to produce them. Our position is questions going to who or what entity controls and possesses these documents are plainly within the scope of document retention 30(b)(6). MR. BAUTA: Well, subpoena the SEC for the documents. You are subpoenaing third parties for other things, go ahead and subpoena the SEC for the documents. Perhaps you will have better luck than we did. BY MR. DIESSEL: Q. Has the SEC provided any indication that it's going to return those documents? A. The SEC told us 6 months ago that they were going to return them to us. Q. Has QSGI had any correspondence with the SEC
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MR. DIESSEL: Well, I recall on your response you represented that those documents had been produced to the SEC, documents which are plainly responsive to our document requests. It seems to me we are entitled to know what the status of those documents are and what's going on with the SEC. MR. BAUTA: Why don't you approach the SEC? Q. What's the status of the SEC investigation? MR. BAUTA: I'm going to instruct you not to answer it. MR. DIESSEL: What's the basis of your instruction? MR. BAUTA: Beyond the scope of this particular witness's designation. It may involve an ongoing investigation with the Securities Exchange Commission, and I'm not his counsel for that aspect of it, so I don't believe he has authority to talk about it. If you question whether the documents are at the SEC, I'm sure you can find out. MR. DIESSEL: So our position is the SEC has the only QSGI hard copy documents in existence. MR. BAUTA: Is this a speech or is this a question?
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concerning those document? A. I instructed my attorneys to send a second request to them and a third request to send us back those documents. Q. Has QSGI received any response from the SEC about when or even whether it will provide those documents back to QSGI? A. Their position was that they were sending documents back to us 6 months ago. Q. Has the SEC provided any indication of when QSGI will receive these documents, if at all? A. Six months ago. I don't mean to be smug, but they told us they were sending them back 6 months ago. Q. Did QSGI produce documents to the SEC pursuant to a subpoena? A. There was an informal investigation. (Document marked as Exhibit 6 for identification) Q. I'm going to hand you what I have marked as Exhibit 6. Do you recognize this document? A. Yes. Q. Is this a subpoena from the SEC to QSGI? MR. BAUTA: Objection. Beyond the scope of this witness's designation.

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1 Don't answer the question. It's a document 2 that speaks for itself. 3 MR. DIESSEL: You are instructing him not to 4 answer whether this is a subpoena? 5 MR. BAUTA: You asked him earlier if they had been subpoenaed. You have the subpoena and 6 7 now you have shown the subpoena. He is a 8 30(b)(6) witness that's appearing here pursuant 9 to the topics. Show me where in your three 10 topics there is discussions about subpoenas and 11 the underlying bases for those subpoenas. 12 MR. DIESSEL: Well, when your client 13 produced the only existing copies of his 14 documents to the SEC, you don't give me any 15 choice but to talk about the SEC subpoena. 16 MR. BAUTA: You can easily subpoena the SEC. 17 You know how to do that. 18 Q. Is this a subpoena from the SEC to QSGI? 19 MR. BAUTA: I'm going to instruct you not to 20 answer. 21 Object. Instruct not to answer. It's 22 beyond the scope of this witness. The document 23 speaks for itself. Q. QSGI produced the 400 boxes of document from 24 25 the New Jersey warehouse to the SEC pursuant to a
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with what the SEC has asked for and whether the investigation is going appear here. MR. DIESSEL: I'm trying to find the documents since apparently the only copies were provided to the SEC. MR. BAUTA: I'm telling you where they are. They are at the SEC. Go get them. BY MR. DIESSEL: Q. Other than documents from the New Jersey facility, did QSGI produce any other documents to the SEC? MR. BAUTA: I'm going to instruct you not to answer on the same basis as previously. MR. DIESSEL: I think this is probably a good time for a break if you guys are ready for one. MR. BAUTA: I'm not. THE WITNESS: Let's keep on going. MR. BAUTA: Do you need a break? MR. DIESSEL: I could use a bio break. Why don't we hop of the record. THE VIDEOGRAPHER: Off the video record at 2:43. (Recess taken) THE VIDEOGRAPHER: Marc Sherman, tape number
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subpoena, correct? MR. BAUTA: You can answer that. A. Four hundred boxes? Okay. Yes, I guess. Q. Do you have a different recollection as to the number of boxes QSGI produced? A. I didn't know the number of boxes. I knew it was a lot of documents. Q. Is 400 boxes consistent with your understanding of how many boxes there were? A. I was just told it was a lot of boxes. Q. What else, if anything, did QSGI produce to the SEC pursuant to the subpoena? MR. BAUTA: If you know. A. E-mails. MR. BAUTA: Actually, you know what, I'm going to instruct you not to answer. We are getting into the SEC investigation and what they are asking for, and I'm going to tell you that I'm going to object and instruct him not to answer. It's an ongoing investigation of the Securities and Exchange Commission. I'm not his counsel. It's beyond the scope of your notice, and had we known that you were going to play this issue, then we would have had the SEC lawyers who are most intimate
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five. On the record, 2:57. CONTINUED DIRECT EXAMINATION BY MR. DIESSEL: Q. Before the break we were talking about QSGI's production hard copy documents from its New Jersey facility to the SEC. Do you recall that? A. Yes. Q. Did QSGI ever consider keeping a copy of those documents before it produced them to the SEC? A. No. Q. Do you have a list of what was sent to the SEC so that if and when you get it back you can determine if everything was sent back? A. I'm not sure if there was a listing by categories. I'm not sure. My attorneys did look at some of the documents and they did create some lists. It was getting so cumbersome I think they just decided they were going to send everything to them. Q. When you say "my attorneys," who specifically are you referring to? A. My SEC counsel. Q. That would be McDonald Hopkins? A. Yes. Q. This morning we talked a little bit about

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QSGI's backup archive. Do you recall that? A. Yes. Q. That backup archive, was that maintained on the server that QSGI provided to Victory Park? MR. BAUTA: Objection. Form. A. There were backup tapes created through the servers, yes. Q. Were those backup tapes provided to Victory Park? A. We were able to recover the backup tapes. Victory Park had the backup tapes, and we got them back from them. Q. Where are those backup tapes today? A. They are with McDonald Hopkins. Q. When you refer to backup tapes, are you referring to actual tape media, or are you referring to something else? A. I'm not quite sure what the media was that it was stored on, whether it was actually a physical tape or the package that was used. Q. I'm going to hand you what I have marked as Exhibit 7. (Document marked as Exhibit 7 for identification) MR. DIESSEL: I'm sorry, I keep giving you
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Q. Does QSGI have any documents other than those in the possession of McDonald Hopkins? A. Well, there are some documents that Juan has as well. Q. What documents does Juan have? A. Juan sent me over -MR. BAUTA: Let me tell you don't tell him anything, any conversations you and I have had. We still have attorney-client here remember. Okay? THE WITNESS: Yep. Q. To be clear, I obviously don't want those answers. That's not what I want to know. What documents does Juan have? A. Just as part of the discovery there are things that he asked me to provide to him that I have sent. Q. What categories of documents have you sent to him? MR. BAUTA: Well, I'm going to ask you to define for him what "categories" means. Without that he is going to become very close to disclosing something that he shouldn't, and rather than instruct him not to answer it at all, I'm going to give you a chance to fix it.
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my copies. Let me get one of those back. Q. This document is entitled "Plaintiff's Response to Defendants' Motion to Compel Responses to Defendants Discovery Requests." Do you see that? A. Um-hm. Q. It's dated March 2, 2012. Do you see that? A. Um-hm. Q. I would like you to turn to the second page of paragraph 4. The sentence states, "Since December 2011, Plaintiff's counsel has learned that QSGI's documents were in the possession, custody, and control of QSGI's counsel, McDonald Hopkins, LLC." Do you see that? A. Um-hm. Q. Is that true? MR. BAUTA: Objection. A. Um-hm. MR. BAUTA: I'm going to instruct you not to answer any of these questions, so wait for me. THE WITNESS: Thanks. Q. Does QSGI have any other documents other than those in the possession of McDonald Hopkins? MR. BAUTA: You can answer that one. A. What was the question again?
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Q. The documents that you sent to Mr. Bauta, do you know how many documents that set comprised? A. I don't off the top of my head. Q. What sources -- where did you find those documents? A. I had some PowerPoint presentations sitting around my office, I had some documents that were in an old credenza that I had sitting from some conference calls. Q. Was it greater than a hundred documents? A. No. Q. So other than these documents -- would it be accurate to say that you individually selected these and provided them to Mr. Bauta? A. I had to look through some things that I had hanging around my office, and I found them and I sent them off to him. Q. So other than these documents that you selected and sent to Mr. Bauta, is it true that QSGI does not have any documents other than those in the possession of McDonald Hopkins? MR. BAUTA: Objection to the form. A. That would be correct. Q. So the next sentence of the response states, "McDonald Hopkins, LLC, who is most familiar with

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the universe of QSGI documents, informed Plaintiff's counsel that the Firm possessed approximately 400 gigabytes of documents in its database and approximately 400 bankers boxes of additional documents in a warehouse located in New Jersey." Do you see that? A. Um-hm. Q. Now, the 400 boxes, those are the boxes that were produced to the SEC, correct? A. I assume so, yes. Q. Do you have an understanding as to what the 400 gigabytes of documents are? A. I have no idea. Q. Would it be accurate that these 400 gigabytes of documents are the only QSGI documents that exist presently? MR. BAUTA: Objection to form. No speculating, please. A. Please repeat the question. Q. Yeah. Is it true that -- is it the case that these 400 gigabytes of documents in the database are the only QSGI documents that presently exist? A. I don't know. Q. Do you know of any other documents that
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A. I don't know. Q. Does it include server documents? A. I don't know. Q. Does it include hard copy documents? A. I don't know. Q. Is there any set of documents that QSGI presently has that you can point me to other than the database of documents in the possession of McDonald Hopkins? A. No. Q. So any documents relating to this lawsuit would have to be produced, if at all, from the database that McDonald Hopkins possesses, correct? MR. BAUTA: Are you excluding the SEC documents? MR. DIESSEL: QSGI, as we know, doesn't have the SEC documents. So, yes, I'm excludeing the SEC. MR. BAUTA: If your question is outside of those two sources are there any other documents, which is where I think you are going with it, but it's a little confusing the way that you are saying it. MS. BESVINICK: And the documents that Mr. Sherman identified in his -Page 173
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exist? A. I don't know. Q. You don't know whether any other documents exist other than what's in this database? A. I only know that those are the documents that I know exist. I don't know if there is any other ones that exist. Q. When was that database created? A. I don't know. Q. Who created it? A. McDonald Hopkins apparently, right? Q. For what purpose? A. I don't know. Q. What years of documents does it include? A. I don't know. Q. Does it include metadata? A. Excuse me? Q. Does it include metadata? A. What is metadata? Q. Information about when the document was created, who the author was? A. I don't know. Q. Does it include e-mails? A. I don't know. Q. Does it include laptop images?
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MR. BAUTA: Right, and the documents that have already been produced. Q. So can you point me to -- let's set aside the SEC documents which QSGI doesn't have and the less than hundred documents that you selected. Can you point me to any source of documents for this lawsuit other than 400 gigabytes that McDonald Hopkins possesses? MR. BAUTA: I'm going to object to the form of the question, but you can answer if you can. A. Other than the information that I sent to Juan, that's it. Q. You testified this morning that McDonald Hopkins created a set of documents from a backup archive. Do you recall that? A. No, I don't. Q. Who, if anyone at QSGI -- strike that. Is there anyone at QSGI that knows what documents are included in the 400 gigabytes in the possession of McDonald Hopkins? A. No. Q. Where are -- so QSGI -- strike that. Is it your understanding that the documents in the possession of McDonald Hopkins include only e-mails?

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A. I don't know. MR. BAUTA: Objection to form. THE WITNESS: Sorry. Q. Is it your understanding that the 400 gigabytes of documents were created from a backup archive? A. I don't know what the 400 gigabytes of total information that McDonald Hopkins has is from. Q. From what sources did QSGI produce documents in this lawsuit? MR. BAUTA: Object. I'm going to object that it calls for legal conclusions, legal opinions, and possibly attorney-client issues. I'm going to instruct you not to answer. THE WITNESS: Okay. MR. DIESSEL: What the source of documents is calls for a legal conclusion? MR. BAUTA: Yeah, that you produced in this lawsuit, sure. You are going to tell me that -MR. DIESSEL: What's the legal conclusion? MR. BAUTA: Deciding whether they are responsive to whatever the request for production is. MR. DIESSEL: What a source is is not a legal conclusion, Juan. What source -Page 175
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A. No. Q. Where were they produced from? A. From my desktop. Q. Your desktop at your office? A. From my office. Q. What efforts has QSGI undertaken to collect documents for this lawsuit? A. What was the question? Q. What efforts has QSGI taken to collect documents for this lawsuit? A. We did our best to be able to collect the documents that were available to us. Q. Who did QSGI collect documents from? A. From myself, from, you know, backup tapes. Q. Which backup tapes? A. Tapes that are in the possession of McDonald Hopkins. Q. So McDonald Hopkins possesses QSGI's backup tapes? A. Yes. Q. When you are referring to the backup tapes, are you referring to the 400 gigabytes of documents in its database? A. Yes. Q. So the term "backup tapes" as we have been
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MR. BAUTA: Maybe I didn't understand what your source meant. Q. What sources has QSGI produced documents from? A. E-mails. Q. Where were these e-mails stored? THE WITNESS: I need to talk to you for a second. Q. You have to answer my question. A. What's the question? Q. Where were these e-mails stored? A. Where were they stored? I'm not quite sure. Q. It's your testimony that you don't know where the e-mails that were produced in this litigation were stored? A. No, that's not the question. Ask me the question again, I'm sorry. Q. So it's correct that QSGI has produced some e-mails in this lawsuit, correct? A. Correct. Q. Where did QSGI -- what is the source from which these e-mails were produced? A. From -- the source from where they were produced? They are some of my e-mails. Q. Were they produced from your laptop?
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using it in this deposition today is synonymous with the 400 gigabytes of documents in the McDonald Hopkins database, correct? A. I'm not sure of the answer to that. I think that's part and parcel. They have data and there is also backup tapes. Q. So the 400 gigabytes of documents is the data or it's the backup tapes? A. I don't know what is which, which is what. How much of what is what. Q. Other than e-mails that were produced from your desktop, has QSGI collected any other documents to produce in this lawsuit? A. Yes. Q. What documents? A. I received a statement of one of our -- from one of our suppliers of services that laid out the maintenance records and the machines that were being monitored from 2004 to 2009. Q. What are you referring to? A. It was maintenance records that show our mainframes that are -- that were under maintenance from 2004 to 2009. Q. What was the source from which you were able to obtain this information?

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A. It was a company that actually did our monitoring for us. Q. What company was that? A. I can't think of the name of it at the moment. Q. So other than obtaining maintenance -- these maintenance records from a third party and identifying some e-mails from your desktop, has QSGI undertaken any efforts to collect documents to produce in this lawsuit? A. No. Q. So you testified a moment ago that McDonald Hopkins has data and it has backup tapes, correct? MR. BAUTA: Objection. Form. A. Yes. Q. I would like to go over how the backup -the backup tapes, is that the same as the backup archive that we have been talking about? A. Yes. Q. I would like to go over again how the backup archive was created. Okay? So the backup archive is something that QSGI created, correct? A. Correct. Q. How did QSGI -- so if McDonald Hopkins has documents at all, it has a subset of the backup
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A. I don't know. Q. Did the e-mail archive back up every single employee's e-mails? A. I would assume so. Q. Are there any employee's e-mails that were not backed up? A. I don't know. Q. Did QSGI communicate using Blackberries? A. Yes. Q. Were those e-mails included in the backup archive? A. I would imagine so. Q. Were pin messages on the Blackberries included in the backup archive? A. I don't know how to use the pin. Q. Do you know whether pin messages were included in the backup archive? A. I don't know. Q. Do you know whether e-mails from personal accounts were included in the backup archive? A. I don't know. Everybody had their own corporate account. Q. Just so we are clear, I want to try and summarize, if I can, the state of QSGI's documents to see if this is all netted out. All right?
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archive that QSGI created, correct? MR. BAUTA: Objection. Form. A. Correct. Q. So how did QSGI create the backup archive? A. It was automatically set up to be backed up on a daily basis. Q. Are you, again, referring to the server that housed QSGI e-mails? A. Yes. Q. From the period of time of which QSGI was in business? A. Yes. Q. As far as you know, the only information that was backed up into the archive was e-mail, correct? A. To the best of my knowledge. Q. So the information that McDonald Hopkins would have relating to this lawsuit, if anything, would be a subset of the e-mails that QSGI backed up, correct? A. Correct. Q. What's the size of the backup archive? A. Don't know. Q. How many e-mails does the backup archive contain?
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A. Sure. Q. As to hard copy documents, QSGI had documents that it stored in Minnesota, correct? MR. BAUTA: Objection to form. A. Yes. Q. Those were destroyed? MR. BAUTA: Objection to form. A. Yes. Q. It had documents in New Jersey, correct? MR. BAUTA: Objection to form. A. Yes. Q. Those were produced to the SEC? MR. BAUTA: Objection to form. A. Yes. Q. Without QSGI making a copy? MR. BAUTA: Objection to form. A. Correct. Q. The only electronic information that remains from when QSGI was in business are e-mails that QSGI included in its backup archive? MR. BAUTA: Objection to form. A. Correct. Q. And QSGI doesn't possess the backup archive anymore, correct? MR. BAUTA: Objection to form.

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A. It's with its attorney. Q. It's with McDonald Hopkins? A. Correct. Q. So the only information that QSGI has from the point in time when it was in business is a backup archive containing e-mails, correct? MR. BAUTA: Objection to form. A. Well, also the documents that the SEC has. Nobody said that they were not going to give them back to us, we just don't have them back yet. Q. The only documents that QSGI has in its control are e-mails that were included in the backup archive, correct? MR. BAUTA: Objection. Form. A. Correct. Q. And you are not aware of whether all of the e-mails were even backed up in that archive, correct? MR. BAUTA: Objection to form. A. I can't be 100 percent correct -- I cannot be 100 percent sure. Q. Are there any documents that describe a protocol or procedure that would lay out QSGI's undertaking to back up its e-mails? MR. BAUTA: Objection to form.
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Q. The backup tapes are in the New Jersey facility, right? A. Yes. MR. BAUTA: Objection to form. Q. Have you checked the backup archive to see if all of your e-mails are contained in it? MR. BAUTA: Objection to form. A. No, I haven't. Q. Have you done any investigation to see what e-mails are contained in the backup archive? A. Well, I know there is a lot. Q. What's your basis for -- strike that. QSGI was sued by John Riconda, correct? A. Yes. Q. And as part of that legal dispute, John Riconda subpoenaed documents from QSGI, correct? A. I assume so. Q. Did QSGI produce documents to John Riconda? A. I don't know. Q. Did QSGI collect documents to produce to John Riconda? A. I don't know. Q. QSGI was also sued by Victory Park, correct? A. Yes. Q. And that lawsuit related to QSGI overstating
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Q. Let me strike that. Are there any documents that describe QSGI's backup procedure for its e-mails? A. You have to check the backups. I hate to say it. Q. Are you aware as you sit here today of any documents or e-mails that describe QSGI's backup procedures for its e-mails? MR. BAUTA: Objection to form. A. I am not aware. Q. Who had access to QSGI's backup archive during the period of time in which it was backed up? A. Dave Harris. Q. Anyone else? A. Not that I know of. Q. Who had access to QSGI's backup archive during QSGI's bankruptcy? A. I guess it would have been Craig Heilman who was in the building. Q. Anyone else? A. That's all that I can think of. Q. Who was Craig Heilman? A. He was the controller. Q. What building are you referring to? A. In New Jersey.
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the value of its inventory, correct? A. I assume so if you are saying. Q. Did QSGI collect documents as part of that litigation? A. Not that I know of. Q. After QSGI emerged from bankruptcy, it acquired a company called KruseCom, correct? A. Correct. Q. And KruseCom is a subsidiary that's wholly controlled by QSGI, correct? A. Correct. Q. What does KruseCom do? A. Remarkets computers. Q. It included -- strike that. QSGI specifically remarkets used mainframes, correct? A. No. Q. Remarketing used mainframes is one of the business activities that KruseCom does, correct? A. Almost nil. Q. There are, in fact, some used mainframe transaction that KruseCom has undertaken, correct? MR. BAUTA: I'm going to object and instruct you not to answer. Beyond the scope of the notice.

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MR. DIESSEL: Well, my position is it's within the scope. MR. BAUTA: How are you going to tie it in? MR. DIESSEL: I'm sorry? MR. BAUTA: How are you tying it in? MR. DIESSEL: I didn't understand. MR. BAUTA: How are you going to tie it in? MR. DIESSEL: I'm not going to keep engaging in an argument with you. I have already noted your sequence of objections, and by now there have been probably 15, and you have a pretty long protective order motion to write in the next couple of days. So let's try to get through the deposition. BY MR. DIESSEL: Q. What efforts has QSGI taken to collect documents from KruseCom to produce in this litigation? A. I don't understand your question. Q. Has QSGI collected any documents from KruseCom to produce in this litigation? A. I don't think so. Q. Has QSGI issued any instruction that KruseCom employees should preserve their documents for this lawsuit?
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QSGI, so all the documents are retained going forward. So we have a document retention program, so nobody would instruct anybody other than the normal course of business. MR. DIESSEL: I'm going to object and move to strike as nonresponsive. Q. Has QSGI instructed any of its employees to preserve documents for this lawsuit? MR. BAUTA: How many times are you going to ask him the same question? He has answered it. MR. DIESSEL: I will keep asking until I get an answer to the question. MR. BAUTA: He has given you an answer to the question. MR. DIESSEL: He has given me nonresponsive answers. MR. BAUTA: I see. Objection to form. Asked and answered. A. I don't understand the question. Q. Has QSGI instructed any of its employees to preserve documents for this lawsuit? MR. BAUTA: Objection to form. Asked and answered. A. No. Q. Did QSGI issue any instruction whatsoever in
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A. We have a document retention program at QSGI. Q. Did QSGI -MR. DIESSEL: I'm going to object as nonresponsive. Q. Did QSGI instruct KruseCom employees to preserve documents for this lawsuit? MR. BAUTA: Objection. Form. A. QSGI, the emerged QSGI preserves all of its documents. Q. My question is whether QSGI instructed KruseCom employees to preserve their documents for this lawsuit? A. It's a normal process. There is never an instruction made to do something out of character. It's the normal process. Q. So in this case there wasn't an instruction to preserve documents for use, correct? MR. BAUTA: Objection. Form. Q. Let me strike that and reask it. So there wasn't -- QSGI did not instruct any KruseCom employees to preserve documents for use in this litigation? MR. BAUTA: Objection. Form. A. QSGI did not instruct QSGI -- KruseCom is
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2007 to its employees -- strike that. In 2007 did QSGI ever instruct its employees to preserve documents for this lawsuit? A. Not that I know of. Q. Has QSGI undertaken any effort to collect documents from McDonald Hopkins to produce in this lawsuit? A. What was that again? I'm sorry. Q. Has QSGI undertaken any effort to obtain documents from McDonald Hopkins to produce in this lawsuit? MR. BAUTA: Objection to form. A. We have asked them to produce the documents that were requested. Q. Other than asking McDonald Hopkins to produce the requested documents, has QSGI done anything else to obtain the documents from McDonald Hopkins? MR. BAUTA: You are asking QSGI outside of its lawyers? Just asking for clarification. MR. DIESSEL: Yeah, I'm asking whether QSGI -MR. BAUTA: Independent of his lawyers. MR. DIESSEL: Correct. Q. What has QSGI done to -- strike that.

Page 190 Page 192
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What efforts has QSGI undertaken to obtain documents from McDonald Hopkins to produce in this lawsuit? MR. BAUTA: Independent of what I have done, independent of what your lawyers have done. A. You mean me asking them to provide the documents? Q. You or anyone else at QSGI. A. I have asked them to be very forthcoming and provide to my attorneys everything they needed under your request. Q. What's your understanding as to what documents QSGI -- McDonald Hopkins will provide to QSGI to produce in this lawsuit? MR. BAUTA: I'm going to instruct you not to answer. It's beyond the scope of your notice and deals with attorney-client. Q. Are you familiar with the Shraiberg law firm? A. Yes. Q. Were they your counsel in the bankruptcy? A. Yes. Q. What efforts has QSGI undertaken to obtain documents from the Shraiberg law firm to produce in this lawsuit?
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A. He didn't have any documents to pertain to this lawsuit. Q. Did Fildew Henks retain a copy of the documents that QSGI provided to the SEC? A. No, they weren't a party to it. Q. Who is Morison Cogen? A. They are our auditors. Q. What efforts has QSGI taken to obtain documents from Morison Cogen to produce in this lawsuit? A. I don't know if we had a request. I don't think they had any documents that would pertain to it as well. Q. Have you checked? A. They weren't our auditor in 2007. Q. Who is Rubin Brown? A. They were our previous auditor. Q. What efforts has QSGI undertaken to obtain documents from Rubin Brown to produced in this lawsuit? A. I'm not quite sure if we had requested any information from them or not. I just don't recall. Q. So the sum of QSGI's collection efforts as you recall it is you identifying a small set of e-mails, less than a hundred, correct?
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MR. BAUTA: Same instruction. If you have taken any efforts outside of what your lawyers are doing for you, you can answer it. If not, no. MR. DIESSEL: He can answer if he hasn't taken any other efforts, he can say I have taken no other efforts. That's the only answer I'm looking for. Q. I will ask the question again. What efforts has QSGI undertaken to collect documents from the Shraiberg law firm to produce in this case? A. None. They don't have any documents. Q. What efforts has QSGI undertaken to collect documents from the Kauffman law firm to produce in this case? A. They don't have any documents pertaining to this case. Q. What efforts has QSGI under -- by the way, who is the Kauffman law firm? A. He was the lawyer who ended up taking us through and out of the bankruptcy. Q. What's the Fildew Henks law firm? A. That's our SEC counsel. Q. What efforts has QSGI undertaken to obtain documents from Fildew Henks?
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MR. BAUTA: Object to the form. A. Other than what resides on the 400 gigabytes of information. MR. DIESSEL: Why don't we take a break. I'm going to caucus with my colleague here and see if we have something else we want to go over. If you guys want to take a quick break, and we will meet back here in a few minutes. THE VIDEOGRAPHER: We are off the record at 3:33. (Recess taken) THE VIDEOGRAPHER: Back on the record at 3:39. CONTINUED DIRECT EXAMINATION BY MR. DIESSEL: Q. You testified earlier that QSGI's production includes -- of documents to date to IBM includes less than a hundred documents that you have identified. Do you recall that? MR. BAUTA: Objection. Form. A. I don't know exactly how much it was. You threw out numbers, and I said it could be less than a hundred, it could be more than a hundred. Q. I will represent to you that QSGI has produced approximately 800 documents so far in this

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lawsuit. A. Oh. Q. What sources other than documents that you have identified from your credenza and your computer did QSGI produce documents from? A. Some of those documents are privileged. Q. Can you explain? What do you mean? MR. BAUTA: Some of those documents came from QSGI's counsel, whether it's former counsel or current counsel, so they are attorney-client. You are asking about sources, right? Q. Is it your testimony that the documents that QSGI produced in this lawsuit to date were supplied by counsel for QSGI? MR. BAUTA: No, that's not what he is saying. What he is saying -- you asked him for sources, where they got them from. MR. DIESSEL: Juan, I need to get an answer from the witness unless you are testifying here. MR. BAUTA: This is the problem: The problem is you are asking him where documents that were produced came from, and the documents that were produced came from me. You didn't get them from QSGI. So he doesn't know what documents I have produced or I haven't produced.
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A. I don't know which 800 documents you are referring to, so I don't know which ones you are talking about. Q. I'm referring to the only documents that QSGI has produced in this lawsuit. A. Once again, I don't know what documents you have and I don't know -- if you want to go through them document by document, we can start doing that now. Q. Well, as you sit here now, do you have any understanding as to how QSGI collected and produced those documents? A. They were documents that were through my attorney, they are documents that I had, they are documents that came from some of the backup. Q. And to be clear, those were not documents that QSGI looked specifically and collected for this litigation, correct? A. Correct. (Document marked as Exhibit 8 for identification) Q. I'm going to hand you what I have marked as Exhibit 8. Now, this document is called "Schedule F, Creditors Holding Unsecured Nonpriority Claims." Do you see that?
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So we can approach it that way or whichever way you want. I'm just telling you -- either that or I'm going to instruct him not to answer. MR. DIESSEL: Unless you are designating yourself, I need to get an answer from him, so I need to ask the question. BY MR. DIESSEL: Q. Do you have an understanding as to the sources from which QSGI produced the approximately 800 documents that it's produced so far to IBM? A. Some I do, yes. Q. What are they? A. Some are old SEC filings and documents that I was able to send Juan that were privileged. Other things that we got, I'm not 100 percent sure of the documents that you have in your possession right now, so unless you want to go through them piece by piece -Q. What other documents did you gather up? A. I don't recall. Q. Do you recall whether QSGI produced these documents to the SEC or to another party? A. I don't recall. Q. Do you have any idea where these 800 documents came from?
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A. Um-hm. Q. This is a list of QSGI's creditors in bankruptcy, right? A. Correct. Q. I would like you to turn to page 48. A. Okay. Q. Third from the top one of QSGI's creditors is named Polar Shredding. Do you see that? A. Um-hm. Q. They are based in Cinnaminson, New Jersey. Do you see that? A. Um-hm. Q. Is this a company that was retained at QSGI's New Jersey facility? A. I have no idea. Q. Do you know who Polar Shredding is? A. I do not. Q. Who would know at QSGI who Polar Shredding is? A. I don't know. Q. Does anyone at QSGI? A. They are on our creditor's list so somebody would know, but I don't know. Q. Who would you ask if you needed to know who Polar Shredding was?

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A. You could ask Craig Heilman. Q. Anyone else? A. I would say he is probably the right person to ask. Q. Did you do any investigation to determine which shredding and destruction companies QSGI retained during bankruptcy to prepare for this deposition? A. I did not. Q. I would like you to turn to page 64. Actually, let's go back to 47 for one second. A. Sure. Q. I would like to get your understanding as to what these entries mean. The Polar Shredding entry states an amount of claim for $620.60. Do you see that? A. What page was it, 47? Q. Yeah. MR. BAUTA: Forty-eight. A. 620.60. I see it. Q. Does that reflect that Polar Shredding is seeking payment for services that it provided QSGI? MR. BAUTA: Objection to form. A. I have no idea. Q. Let's turn to page 64.
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A. Correct. Q. Is there anyone at QSGI who would know about the retention of these document destruction and shredding firm? A. Carl Sarasino would probably know. Q. Did you talk to Carl Sarasino about QSGI's retention of shredding and destruction firms? A. I did not. Q. We have talked a little bit today about some of QSGI's document destruction. Do you recall that? MR. BAUTA: Objection. Form. A. Yes. Q. Other than the specific instances of document destruction that we have talked about, do you recall any other instance from 2004 to the present time in which QSGI destroyed documents? MR. BAUTA: Objection to form. A. I said earlier that documents would be shredded that were redundant and not needed outside of our document retention, so I'm not quite sure of the question. Q. So outside of that example, are you aware of any other instance in which QSGI documents were shredded or destroyed from 2004 to the present time? MR. BAUTA: Objection to form.
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A. I will get there. Okay. Q. I would like you to look at the bottom of the page for an entry for United Document Destruction. Do you see that? A. Um-hm. Q. They are a company with an address from Reading, Pennsylvania. Do you see that? A. Um-hm. Q. They have an amount of claim of QSGI of $1640. Do you see that? A. Um-hm. Q. Who is United Document Destruction? A. I have no idea. Q. Did QSGI retain United Document Destruction to destroy its document? A. I have no idea. Q. Who at QSGI would know who retained United Document Destruction? A. You could ask Craig Heilman once again. Q. Did you undertake -- did you speak with Craig Heilman about whether United Document Destruction was retained to destroy QSGI's documents? A. I did not. Q. Craig Heilman is no longer at QSGI, correct?
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A. No. Q. Are you aware of any other instances from 2004 to the present time of QSGI losing or giving up control of documents other than those that we have discussed today? MR. BAUTA: Objection to form. A. No. Q. Do you recall any other instance of QSGI giving documents to third parties other than the instances that we have discussed today? MR. BAUTA: Objection to form. A. No. MR. DIESSEL: So I'm going to note for the record that there were a number of topics about which -- I appreciate your help today, Mr. Sherman. I have to say for the record there are a number of topics about which Mr. Sherman was not prepared to provide testimony. He apparently prepared for only 30 minutes, and as such he was unable to give any answer at all to a large number of questions which are reflected in the transcript. I will also note that the deposition proceeding has been in large part obstructed by

Page 202 Page 204
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counsel's unfounded and improper instructions not to answer. As such we reserve our right to continue this deposition, reserve our right that this time not be counted into our hourly total, and I have no further questions. MR. BAUTA: Well, obviously I take issue with your self-serving statements, and the Court will review the transcript and come to whatever conclusions that the Court decides. In the future maybe you should broaden your topics a little. Are you finished? MR. DIESSEL: Yes. CROSS EXAMINATION BY MR. BAUTA: Q. Mr. Sherman, I just really have one question to just kind of get a better understanding of what you know with regard to the documents that comprise what we have called the 400 gigabytes. Okay. Let me start off by asking have you personally reviewed every document that's in the 400 gigabyte database? A. No. Q. Do you know what every document in the 400 gigabyte database has?
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filing it under seal? MR. BAUTA: I don't know. I have to take a look at it. THE VIDEOGRAPHER: Now we are going off the record for Marc Sherman's deposition, tape five at 3:53. (Thereupon, the deposition was concluded at 3:53 p.m.)
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Under penalty of perjury, I declare that I have read my deposition and that it is true and correct subject to any changes in form or substance entered here. ___________ Date ______________________ Signature ERRATA SHEET RE: QSGI, Inc. v IBM Global Financing, et al. DEPO OF: Marc Sherman TAKEN: March 12, 2012 DO NOT WRITE ON THE TRANSCRIPT. ENTER ANY CHANGES HERE. Page Line Correction _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ _____ _____ ______________________________ Please forward the original signed errata sheet to this office so that copies may be distributed to all parties.
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A. No. Q. Do you know whether they are exclusively comprised of e-mails? A. I do not know. Q. Do you believe that there are documents there other than just e-mails? A. There could be. Q. Okay. MR. BAUTA: Thank you, sir. I have no further questions. THE VIDEOGRAPHER: Anything else, Counsel? MR. DIESSEL: Nope. THE VIDEOGRAPHER: We will go off the video record. This is Marc Sherman's deposition, tape five. Off the record at 3:52. MR. BAUTA: We will read. THE COURT REPORTER: Did you need a copy of the transcript? MR. BAUTA: Yes. THE VIDEOGRAPHER: Back on the record, 3:53. MR. DIESSEL: Juan, my question is whether QSGI has an intention to designate any or all of this deposition as confidential or if it would object to IBM filing all or part of this deposition transcript with the Court without

Page 206
1 2 3 4 5 6 7 8 9 10 11 12 13 14 Witness my hand this 12th day of March 2012. 15 16 17 18 19 20 21 22 23 24 25 ________________________________ Tamra K. Piderit Florida Professional Reporter Registered Merit Reporter Certified Realtime Reporter Notary Public, State of Florida My commission #EE 133698 Expires January 19, 2016 That prior to being examined, the witness named in the foregoing deposition was duly sworn to testify the truth, the whole truth, and nothing but the truth; That said deposition was taken down by me in shorthand at the time and place therein named and thereafter reduced by me to typewritten form and that the same is a true, correct, and complete transcript of said proceedings. Before completion of the deposition, review of the transcript was requested. If requested, any changes made by the deponent (and provided to the reporter) during the period allowed are appended hereto. I further certify that I am not interested in the outcome of the action. STATE OF FLORIDA ) ) SS. COUNTY OF MIAMI-DADE ) I, Tamra K. Piderit, FPR, RMR, CRR, and Notary for the State of Florida do hereby certify:
53 (Page 206) 1-800-325-3376 Merrill Corporation - New York www.merrillcorp.com/law

QSGI Response To IBM Motion To Compel Compliance and For Sanctions For Non Compliance

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Exacerbating this fatal

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These millions upon millions of documents are responsive to IBMs

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THE FERRARO LAW FIRM, P.A.

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In The Matter Of:

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Merrill Corporation - New York

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