IN THE CIRCUIT COURT OF THE 17TH

JUDICIAL CIRCUIT IN AND FOR

BROWARD COUNTY, FLORIDA
Case No. 09-062943 (07)
_____________________________________________________
RAZORBACK FUNDING, LLC, et al.,
Plaintiffs,
vs.
SCOTT W. ROTHSTEIN, et al.,
Defendants.
____________________________________________________

DAY 4 - MORNING SESSION

DEPOSITION OF SCOTT W. ROTHSTEIN

DATE TAKEN:
TIME:
PLACE:

December 15, 2011

8:42 a.m. - 12:09 p.m.
James Lawrence King Federal
Justice Building
99 N.E. Fourth Street
Courtroom 11-3
Miami, Florida 33128

Examination of the witness taken before:

Michele L. Savoy, Registered Professional Reporter
United Reporting, Inc.
1218 S.E. Third Avenue
Fort Lauderdale, Florida 33316
(954) 525-2221

United Reporting, Inc.

(954) 525- 2221

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IN THE CIRCUIT COURT OF THE 17TH

JUDICIAL CIRCUIT IN AND FOR
BROWARD COUNTY, FLORIDA

2
3

____________________________________________________

Case No. 10-24110 CACE (19)

EDWARD J. MORSE and CAROL A. MORSE,

and MORSE OPERATIONS, INC.

6
Plaintiffs,

7
vs.

8
9

SCOTT W. ROTHSTEIN, et al.,

10
11

Defendants.
_____________________________________________________

12
13

Case No. 11-CV-61688-JIC/LSS

AMY ADAMS, et. al,

14

Plaintiffs,

15

vs.

16

SCOTT W. ROTHSTEIN, TD BANK, N.A. and GIBRALTAR

PRIVATE BANK AND TRUST COMPANY,

17
18
19

Defendants.
_____________________________________________________
10-03767-RBR Stettin v. Gibraltar Private
Bank & Trust Co.

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11-03802-RBR Stettin v. Fidelity Gift Fund

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11-02368-RBR Stettin v. TD Bank, N.A.

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United Reporting, Inc.

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APPEARANCE FOR SCOTT ROTHSTEIN:

LAW OFFICE OF MARC S. NURIK
1 East Broward Boulevard
Suite 700
Fort Lauderdale, Florida 33301
BY: MARC S. NURIK, ESQUIRE
APPEARANCE FOR THE TRUSTEE:
BERGER SINGERMAN
350 East Las Olas Boulevard
Suite 1000
Fort Lauderdale, Florida 33301
BY: CHARLES H. LICHTMAN, ESQUIRE
APPEARANCES FOR THE TRUSTEE:
GENOVESE, JOBLOVE & BATTISTA, P.A.
100 S.E. 2nd Street
Suite 4400
Miami, Florida 33131
By: JOHN. H. GENOVESE, ESQUIRE
DAVID C. CIMO, ESQUIRE
THERESA M.B. VAN VLIET, ESQUIRE
APPEARANCES FOR RAZORBACK:
CONRAD & SCHERER, LLP
633 South Federal Highway
Eighth Floor
Fort Lauderdale, Florida 33302
By: WILLIAM R. SCHERER, ESQUIRE
REID A. COCALIS, ESQUIRE
IVAN J. KOPAS, ESQUIRE
KOZYAK, TROPIN & THROCKMORTON, P.A.
2525 Ponce de Leon Boulevard
Ninth Floor
Coral Gables, Florida 33134
By: ADAM MOSKOWITZ, ESQUIRE

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United Reporting, Inc.

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APPEARANCE FOR PLATINUM PARTNERS VALUE ARBITRAGE

CENTURION STRUCTURED GROWTH, LLC:

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GOLDSTEIN, TANEN & TRENCH, P.A.

One Biscayne Tower, Suite 3700
Two South Biscayne Boulevard
Miami, Florida 33131
By: SUSAN E. TRENCH, ESQUIRE

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APPEARANCE FOR LEVINSON'S JEWELERS:

KOPELOWITZ OSTROW FERGUSON WEISELBERG KEECHL
200 SW 1st Ave
Suite 1200
Fort Lauderdale, Florida 33301-2073
BY: JAN ATLAS, ESQUIRE
APPEARANCE FOR THE COMMITTEE OF UNSECURED:
AKERMAN, SENTERFITT
One Southeast Third Avenue
25th Floor
Miami, Florida 33131-1704
By: MICHAEL GOLDBERG, ESQUIRE
APPEARANCE FOR T.D. BANK:
GREENBERG TRAURIG, P.A.
401 E Las Olas Blvd Ste 2000
Fort Lauderdale, Florida 33301
By: DONNA M. EVANS, ESQUIRE

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APPEARANCE FOR RLI ZURICH INSURANCE COMPANY,

COLUMBIA INC. & ZURICH INSURANCE:
CLAUSIN MILLER
One Chase Manhattan Plaza
39th Floor
New York, New York 10005
BY: SCOTT L. SCHMOOKLER, ESQUIRE
APPEARANCE FOR FEDERAL INSURANCE COMPANY:
Alex Hofrichter, P.A
1430 South Dixie Highway
Suite 204
Coral Gables, Florida 33146-3127
By: ALEX HOFRICHTER, ESQUIRE

United Reporting, Inc.

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APPEARANCES FOR MORSE:

TRIPP SCOTT, P.A.
110 S.E. Sixth Street,15th Floor
Fort Lauderdale, Florida 33301
By: GEORGE WALKER, ESQUIRE
JOHN M. MULLIN, ESQUIRE
APPEARANCE FOR EMESS CAPITAL, LLC:
Kluger Kaplan Silverman
Katzen & Levine PL
201 S Biscayne Blvd Fl 17
Miami, Florida 33131
BY: CASEY CUSICK, ESQUIRE
APPEARANCE FOR ST. PAUL FIRE & MARINE:
Mills Paskert Divers P A
100 N Tampa St Ste 2010
Tampa, Florida 33602-5145
JOHN A. BLACK, JR., ESQUIRE

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APPEARANCE FOR ROSEANNE CARETSKY:

Billing Cochran Lyles
515 E Las Olas Blvd
Floor Six
Fort Lauderdale, Florida 33301-2296
By: W. TUCKER CRAIG, ESQUIRE

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United Reporting, Inc.

(954) 525- 2221

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INDEX

CONTINUED DEPOSITION OF SCOTT W. ROTHSTEIN

3
DIRECT
776

Mr. Cimo

CERTIFICATE OF OATH
CETIFICATE OF REPORTER

945
946

6
7
8

TRUSTEE'S EXHIBITS INDEX

NO.
123

9
124

10
125

11
12
13
14
15
16
17
18
19
20
21
22
23

126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149

DESCRIPTION
Credit Agreement - Banyon
Investing
Credit Agreement - Banyon
Investments
Credit Agreement - Banyon
Resources
Platinum v. Kroll
Platinum v. Kroll Order
"Good Fellows" Email
Radinsky Email
ROTHSTEINS 000940-957
SW13-00735 - 805
PCL56665 - 56666
PCL56811 - 56815
Dec. 25, 2008, Email
Hertzberg Declaration
Email Chain
PCL59074
April 4, 2009, Email
April 8, 2009, Email
April 14, 2009, Email
April 17, 2009, Email
E027088
PCL59319
PCL59402 - 403
Email Chain
May 6, 2009, Email
PLATCENT 0021184
ROTHSTEINS 000931 - 932
PCL 0484 - 0489

PAGE NO
777
777
777
793
827
852
858
861
868
873
878
897
901
913
916
916
921
921
921
921
921
921
921
921
927
931
932

24
25

United Reporting, Inc.

(954) 525- 2221

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Whereupon,

SCOTT W. ROTHSTEIN,

acknowledged having been duly sworn to tell the truth

and testified upon his oath as follows:

THE WITNESS:

I do.

DIRECT EXAMINATION

BY MR. CIMO:

Good morning, Mr. Rothstein, how are you?

Good.

10

David Cimo.

Good morning to you.

I did the 2004 of you with

11

Mr. Lichtman, earlier, in the sessions that we have been

12

doing.

13

Stettin, and I'll be talking to you about the hedge

14

funds that you have previously spoken about but we are

15

going to cover some different areas.

As you know, I represent the Trustee Herb

16

First of all, do you know we have a lawsuit

17

pending against the hedge funds on behalf of the

18

estate --

19

COURT REPORTER:

20

down a little bit?

21

22

Excuse me, can you slow

-- to recover certain transfers as fraudulent

transfers?

23

24

BY MR. CIMO:

25

Do I know that, yes.

How did you come to learn about that?

United Reporting, Inc.

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Somewhere, someone along the line, in the

8 million sheets of paper that I looked at, told me that

was filed; and I may have actually seen the lawsuit.

don't recall, specifically.

Do you recall the entities that were involved,

the actual names of the entities that were involved

regarding Centurion, Platinum, Level 3?

their specific names?

Do you remember

No, I don't.

10

I'm going to show you Exhibits 123, 124, and

11

125 to refresh your memory.

12

(Thereupon, documents was marked as Trustee's

13

Exhibits No. 123, 124 and 125, respectively for

14

identification.)

15

Thank you.

16

I'll represent to you that Exhibit 123 is the

17

Centurion Structured Growth, LLC, credit agreement with

18

Banyon Funding, LLC; have you seen this agreement before

19

today?

20

No.

21

Did you know that there was an agreement

22

between Centurion Structured Growth, LLC, and an entity

23

known as Banyon Funding?

24
25

An agreement, yes; a credit agreement, I can't

tell you whether I knew one way or another.

It was

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inconsequential to me.

Thank you.

And for purposes of this deposition, I'm going

to refer to Centurion Structured Growth, LLC as

Centurion.

Is that okay with you?

Yes, sir.

I'm also going to refer to Banyon Funding LLC

as Banyon Funding.

Is that acceptable?

Yes, sir.

10

I would like you to look at Exhibit 124.

11

I've got it.

12

This is a credit agreement dated June 26,

13

2008.

Have you seen this before today?

14

I have not.

15

Did you know that there was some agreement

16

between an entity known as Banyon Investments, LLC, and

17

an entity known as Platinum Partners Value Arbitrage

18

Fund, LP?

19

Yes.

20

How did you come to learn about that?

21

I discussed it at some point in time with

22
23

Mr. Preve.
Q

For purposes of this deposition, I'm going to

24

refer to Banyon Investments as BIF.

25

to you?

Is that acceptable

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Yes, sir.

I'm going to refer to Platinum Partners Value

Arbitrage Fund, LP, as Platinum.

you?

Yes, it is.

Okay.

Is that acceptable to

Oh, I apologize, I'm going to call that Banyon

Investments.

That's fine.

10

Thank you.

11

And the last exhibit of the three I'm showing

12

you is an Exhibit No. 125, and it's a credit agreement

13

dated September 3rd, 2008, between Banyon Resources,

14

LLC, and an entity known as Level 3 Capital Fund, LP.

15
16
17

Do you recall such an agreement existing near

or about that date?
A

I have never seen this document, I don't

18

believe, but I remember there being an agreement of some

19

sort between Banyon and Level 3.

20

Okay.

And far purposes of this deposition

21

today, I'm going to refer to Banyon Resources, LLC, as

22

Banyon Resources.

Is that acceptable?

23

Yes, sir.

24

I'm going to refer to Level 3 Capital Fund,

25

LP, as Level 3.

Is that acceptable?

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Yes, sir.

I'm also going to refer to all three of the

entities that I just mentioned on the hedge fund level.

That would be Platinum, Centurion, and Level 3, as the

hedge funds, is that acceptable?

Yes, sir.

And I'm going to refer to the Banyon entities

that we went through, for purposes of this deposition,

unless I say otherwise, as the Banyon entities.

Is that

10

acceptable?

11

Yes, sir.

12

When did you first learn about the existence

13
14

of any one of the hedge funds?

A

My recollection, it would have been late 2007,

15

sometime in 2008 when Mr. Preve and Mr. Levin told me

16

that they were looking to go for hedge fund dollars, but

17

I don't recall the specific time period.

18

Before that time, had there been any

19

discussion with Mr. Preve about any other hedge funds

20

playing some type of role in the investments that you

21

were offering?

22

There was always talk between me and Mr. Preve

23

about alternative funding sources, other than Mr.

24

Levin's various personal entities.

25

whether specifically hedge funds were discussed.

I don't recall

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Before the hedge funds that we have defined

for purposes of this deposition were discussed, that

period that you referenced, had any hedge funds been

investors in any of the settlements that you were

purporting to offer?

And here's the issue with that question.

I was under the belief, at the time prior to

the hedge funds being involved, that all the money being

invested was Mr. Levin's personal funds.

I later came

10

to know that at some point in time, he was soliciting

11

other investors, so I can't tell you one way or other

12

whether Mr. Levin took money from a hedge fund

13

unbeknownst to me.

14

But to my knowledge, Centurion, Platinum,

15

Level 3 were the first hedge funds that I had knowledge

16

of investing in the Ponzi scheme.

17

When you say Mr. Levin, the Banyon entities

18

that we defined for purposes of this deposition, were

19

those entities that you understood were controlled

20

and/or owned by Mr. Levin?

21
22
23

Yes, as far as I was concerned, they were

interchangeable.
Q

Is it to your testimony that, as to the three

24

Banyon entities that we have defined for purposes of

25

this deposition, that to your knowledge, up until these

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hedge funds came along -- Platinum, Centurion and Level

3 -- prior to that period, it's your testimony that you

don't know whether other hedge funds may have invested

through Banyon -- other Banyon entities?

I have no idea who Mr. Levin took money from.

So, the hedge funds -- Platinum, Centurion and

Level 3 -- that did, ultimately, get involved, to your

knowledge, those were the first and only hedge funds

that you knew were either direct or indirect investors

10
11

in the structured -- supposed structured settlements?

A

Up until -- they were never supposed

12

structured settlement, but up until that point in time,

13

they were the first hedge funds to invest in the Ponzi

14

scheme, yes.

15

16
17

What was the importance, if any, to obtaining

hedge-fund money?
A

For me, it was just another source of money.

18

For Mr. Levin, it was another source of money.

19

Mr. Preve, it was another source of money.

20

think any of the three of us cared with where it came

21

from, as long as we were getting it.

22

For

I don't

And you also testified, I believe, that Mr.

23

Szafranski had certain entities that he had set up that

24

were to also soliciting investors that you did know

25

about, correct?

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Yes.

That occurred after the hedge funds,

basically, cut us off.

So this period of time that you mentioned,

this 2007, 2008 time period, in what context did you

come to learn that there were hedge fund -- that these

particular hedge funds had an interest in becoming

involved in settlements?

8
9

Either Mr. Preve, Mr. Levin, or likely both of

them, told me that they were going after some hedge

10

funds to become feeders into our settlement business and

11

that eventually we would likely have to go meet with

12

him.

13

And, ultimately, did you come to contact any

14

of them or meet with any of them directly, before any

15

investments were made?

16

Before any investments were made, I believe

17

that is when it was, I actually flew to New York with

18

Mr. Preve -- I don't believe Mr. Levin was on that

19

trip -- to meet with the various hedge fund folks.

20

I want to go back to Exhibit 123, which is the

21

April 3rd, 2008, credit agreement; and to your

22

recollection, was Centurion the first of the hedge fund

23

to become an investor?

24
25

To my recollection, it was -- yes.

Centurion

was the very first.

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And then I would like you to look at Exhibit

No. 124, which is the June 26th, 2008, credit agreement.

Does this refresh your memory as to whether Platinum was

the second hedge fund to invest?

Yeah, I -- for some reason, in my mind,

Centurion and Platinum were basically the -- for lack of

a better term, pitched together, and Level 3 came along

later in time.

9
10

But, yes, it seems to me Centurion was

primary; Platinum, second in line; and Level 3, third.

11

And, indeed, Exhibit No. 125, the credit

12

agreement November 3rd, 2008, between Banyan Resources

13

and Level 3 is, in fact, the latest of the three?

14

That's correct.

15

Now, in terms of this meeting that you said

16

was arranged, that meeting did occur in New York?

17

It did.

18

And do you know whether it occurred before or

19

after April 3rd of 2008, which is the date of Exhibit

20

123?

21

I have no specific recollection.

22

And who was in attendance at that meeting?

23

Well, let me tell you to the best of my

24

recollection:

25

Nordlicht, Mark Nordlicht, was in and out of meeting.

I was there.

Mr. Preve was there; Mayer

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If I recall correctly, Ari Glass I believe was in and

out of meeting; Gillad Kalter, same thing, in and out of

the meeting; Jack Simony.

There were some other folks that I met that

were wandering in and out of meeting.

a very informal meeting.

to it.

conference room.

questions.

10
11
12

It was -- it was

There was no formal structure

People were kind of wandering in and out of

We were shaking hands, answering

Before this meeting, had you ever heard of

Mr. Mark Nordlicht?

A

I may have heard the name from Mr. Preve in

13

preparing me for the meeting, but I didn't know who he

14

was, no.

15

Did Mr. Preve or anyone provide you any

16

information about Mr. Mark Nordlicht before this

17

meeting?

18

The only information that I was provided by

19

Mr. Preve about any of these guys is that they were good

20

guys and he thought we would get along well with them,

21

but that was basically the extent of it.

22

And you conducted no independent due diligence

23

in regard to any of these individuals before the meeting

24

in New York?

25

No, sir.

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Did Mr. Nordlicht go by another first name, in

addition to Mark?

Yeah.

M-A-Y-E-R, Mayer?

Yeah, I believe it was M-A-Y-E-R.

And you also mentioned at that meeting, in

His real first name, Mayer.

Yes.

addition to Mr. Nordlicht, you mentioned a Mr. Glass;

that would be Ari Glass, correct?

Yes.

10

And who did Mr. Glass represent to you he was

11

with or what entity he was with when you met him?

12

I have no recollection.

I ultimately learned

13

that he was part and parcel of Platinum and, then, Level

14

3.

15

formal business with Centurion.

16

I don't recall whether he had direct, let's say,

But you need to know, as you're asking this,

17

and to make your questions easier, that as far as I was

18

told, and as far as we were concerned, all the guys all

19

worked together; and it was a matter of the type of

20

product and the type of money they were getting that

21

determined who was the actual hedge fund investing, as

22

opposed to who the person was.

23

about Platinum business, Nordlicht about Ari's business,

24

et cetera; and, ultimately, all the decisions were being

25

made by Mr. Huberfeld anyway.

I could speak to Ari

So...

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(Mr. Nurik enters the deposition in progress.)

MR. CIMO:

And for the record Mr. Nurik

has arrived, and Mr. Rothstein was kind enough

to let us start.

MR. NURIK:

That's fine.

I apologize.

had a matter this morning in the office and

the extra 20 minutes made all the difference

from the traffic.

again, you all have my permission, with my

So, if that should happen

10

client's permission, of course, to begin

11

early.

12

MR. CIMO:

Thank you so much.

He did say

13

he was comfortable to proceed with the

14

Trustee's counsel asking questions.

15

BY MR. CIMO:

16

As a follow-up, Mr. Rothstein, Mr. Nordlicht,

17

then, also didn't make any representations to you as to

18

which entity or entities he was there on behalf of?

19
20

ALL PRESENT:
A

No, I don't have any specific recollection as

21

to that.

22

BY MR. CIMO:

23

24
25

Objection to the form.

I'll rephrase.
Based upon your testimony that you didn't make

any distinction between and among the entities I was

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just asking you about, what representations, if any,

Mr. Nordlicht made to you regarding which entities he

was there on behalf of?

None that I recall.

Now, you mentioned Mr. Nordlicht, Mr. Glass,

Mr. Kalter, and Mr. Simony, and then you just mentioned

another gentlemen named Mr. Huberfeld.

mention him as being a person at this meeting in New

York.

You didn't

Was he in there?

10

No.

11

Who is Mr. Huberfeld?

12

To my knowledge, because I never met the man,

13

nor have I ever spoken to him, he is the most senior

14

person over all three of the entities we're discussing:

15

Platinum, Level 3, and Centurion.

16

the final say as to all their business.

He was the one with

17

How did you come to learn that?

18

I was told that by Ari Glass, by Mark

19

Nordlicht, by Jack Simony and by Gil Kalter, all at

20

different times -- also told that by Mr. Preve and Mr.

21

Levin.

22

Let's go now to Mr. Kalter.

You said he was

23

as the meeting, and what representations, if any, did he

24

make to you about who he was there on behalf of?

25

My recollection, and I -- the problem is I

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don't know whether it came from that meeting or not; but

the only recollection I have as to who Gil was working

for, was Centurion.

people that was directly isolated to a company, and I

believe it was Centurion.

He seemed to be one of the very few

And other than that, again, let's try to stick

with just this initial meeting with Mr. Kalter, did you

come to learn anything more about Mr. Kalter or his

background at that initial meeting?

10
11
12

I think someone told me he was a lawyer, at

some point in time; but other than that, no.

Q

Now let's talk about Mr. Simony.

What did you

13

come to learn, if anything, about his background at this

14

meeting?

15
16

About Mr. Simony, nothing, just that they

worked for all the funds.

17

18

the meeting?

19

Now, you said Mr. Nordlicht was in and out of

As -- to the best of my recollection, they

20

were all in and out.

21

Everyone was kind of wandering in and out, getting

22

coffee, getting water, shaking hands, very informal.

It was a very informal meeting.

23

Where was the meeting conducted?

24

In the conference room of what I believe, at

25

that time, was the offices of all three hedge funds, in

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the -- I believe it was the Carnegie building.

And how long did the meeting last?

I don't have an independent recollection.

And other than yourself, Mr. Preve, you said

Mr. Levin was there, too?

No, I don't think Mr. Levin went with us.

So, you -- it was you, Mr. Preve,

Mr. Nordlicht, Mr. Glass, Mr. Kalter, Mr. Simony, anyone

else?

10

There definitely were other people that came

11

in and out; I have no independent recollection at this

12

moment who they were.

13

I'm trying to understand.

I have shown you

14

Exhibits 123, 124, and 125.

15

the hedge funds and Banyon entities.

16

Banyon representative at that meeting -- I'm talking an

17

officer or director of Banyon -- if you know?

18
19
20

They are agreements between

I don't have a clue.

Why isn't there a

I always assumed

Mr. Preve was Banyon's representative.

Q

Oh, did you understand Mr. Preve to be an

21

officer or director or some control person of Banyon, if

22

you know?

23

Those are two completely different questions.

24

Was he an officer and director, not to my knowledge.

25

Was he a control person, he seemed to act the full

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authority of Mr. Levin at all times.

Understood.

And was there ever discussion on Mr. Levin

being at that meeting?

There may have been, but George rarely

attended any of our meetings, and he -- it was more

one-on-one stuff with him.

in.

George did not attend very much.

Occasionally he would drop

Even later on, when we were doing due diligence,

10

When you say "George," you mean George Levin?

11

I do.

12

And Mr. Levin, how long had you known him

13
14

before this meeting happened with the hedge funds?

A

I don't remember when I met him.

I know the

15

event that I -- that was our first real sit-down talk.

16

I had met him through a friend, client of mine, Howard

17

Gruverman.

18
19

And did you develop a friendship with

Mr. Levin?

20

Yes, very close.

21

And up to this point where you met with the

22

hedge funds, how long, approximately, had you known Mr.

23

Levin?

24

I don't know.

25

Oh, just months?

It was months.

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2
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I think it was just months.

I really don't

have an independent recollection.

Q

And before this meeting with the hedge funds,

had any other Banyon entity provided any financing or

funds to any of your investments?

I don't recall whether it was a Banyon entity

or whether it was Mr. Levin, personally, or one -- one

of the other entities.

Mr. Preve and I never really -- in our

10

conversations, we didn't concern ourselves with where

11

the money was coming from, just that the money was

12

coming.

13

So, is it your recollection that there had

14

been some deals with Mr. Levin, or Levin-related

15

entities, before this hedge fund meeting?

16

Before the hedge fund -- yes, there were.

You

17

can -- notwithstanding my lack of knowledge as to

18

timing, my remembering the exact timing, you can figure

19

out when I met Mr. Levin, which was one of your

20

questions, by saying it was a very short period of time,

21

meaning a few months, prior to his very first investment

22

with me.

23

would have met him very shortly before that; and it

24

would have been directly after -- his first deal with us

25

would have been directly after a trip he took with me to

So the very first time he sent me money, I

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Cape Coral.

Would it be fair to say that Preve and

Mr. Levin were the ones that had made this introduction

by you to these hedge funds for this meeting in New

York?

Absolutely.

And without them, you would not have known

about the hedge funds?

That's correct.

10

Okay.

11
12

So, after that initial meeting, what

happened next, in terms of moving forward?

A

To the best of my recollection, we -- they did

13

some due diligence.

14

provided whatever information Mr. Preve was asking me

15

for, for them; and they started funding deals.

16
17

They asked for information.

I'm going to show you now what is going to be

marked as Exhibit 126 -- I'm sorry, 127.

18

No, 126.

(Thereupon, the document was marked as

19

Trustee's Exhibit No. 126 for Identification.)

20

BY MR. CIMO:

21

I'll represent to you, Mr. Rothstein, that

22

this is a lawsuit that was filed by Platinum Partners

23

Value Arbitrage Fund against Kroll Associates, Inc., and

24

Kroll, Inc. --

25

Okay.

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-- in the Supreme Court of New York?

Were you aware at some point, after you were

incarcerated, that a lawsuit had been filed by Platinum

against Kroll?

Yes.

How did you come to learn about it?

During one of my many meetings over the last

two years, someone brought it up.

9
10

You mentioned that the fund -- the hedge

funds, quote, did due diligence; do you recall that?

11

Sure.

12

Now, let's talk about the due diligence that

Yes.

13

you were aware of first, before we get to Exhibit No.

14

126.

15

What due diligence did you come to learn of,

16

not after the fact, but that you came to learn of in or

17

about April, May, June of 2008?

18
19
20
21

Just them asking questions of Mr. Preve and I

about our business model.

Q

Was there any documentation or records

provided?

22

Did we provide records?

23

Yes.

24

We may have provided deal packets.

25

I don't

know what status our deal packets were even at at that

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point in time.

created the purchase of transfer agreements, the

assignment documents.

what documents were even available at that time; but

whatever we had, I'm certain that, we did provide.

I don't know whether Frank and I had

I don't recall, document-wise,

And I'm trying to understand who, to your

recollection, was doing the due diligence?

Banyon entities, or was it the hedge funds or both?

No.

Was it the

To my knowledge, it was someone at the

10

hedge funds.

11

doing due diligence and Centurion was doing due

12

diligence or Level 3 was doing due diligence.

13

as far as I was concerned, and from my conversations

14

with Mr. Preve, it appeared that the hedge funds were

15

doing due diligence; but it was -- it appeared to me to

16

be very limited.

It was -- it wasn't like Platinum was

It was --

17

And why do you say that?

18

I have done due diligence before for clients,

19

and usually outside forensics people are hired, that

20

type of thing; books and records are examined,

21

accountants involved.

22

the hedge funds looking at our stuff.

23
24
25

There was none of that.

It was

What they were doing behind closed doors,

don't get me wrong, I don't know what they were doing.
Q

Were they invited to your offices in Fort

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Lauderdale?

I believe they were.

And did you show them around?

Can you give me a time frame?

This would be April 2008 through June of 2008?

Okay.

Their first investment appears to be in April

8
9

Was it before their first investment?

of 2008, based upon Exhibit 123.

A

I don't recall, other than answering a lot of

10

questions -- they did ask a lot of questions.

11

than answering a lot of their questions, I don't recall

12

any other kind of due diligence going on.

13

specific recollection of it.

14
15
16

Other

I have no

When you say "they," who was the "they" that

was asking you questions?

A

It would have been Jack Simony, Gil Kalter,

17

Mr. Nordlicht, to a much more limited extent, and I

18

don't remember whether --

19

Oh, you know what?

At that meeting I met

20

Brian Jedwab, also.

21

might have been a second meeting.

22

I believe it was that meeting.

It

So at an initial meeting -- it may not have

23

been the first meeting -- in addition to the four

24

gentlemen you mentioned earlier from the hedge funds,

25

you think you also may have met Brian Jedwab?

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Yes.

I definitely met him sometime early on,

and he was also doing, as best as I can recall, due

diligence.

You have to understand, I don't mean to seem

like I don't have specific memory of it, but it was a

very -- again, it was a very informal process:

Different people calling, different people asking

questions.

to the best of my knowledge, sending the documents off

I'm giving documents to Mr. Preve who was,

10

to them.

11

they had and coming up with responses.

12
13
14

Mr. Preve and I were discussing issues that

That's the process.

It wasn't like we were

filling out forms and responding to forensics people.

Q

And Mr. Jedwab, did he ever represent to you

15

or did you ever come to learn which hedge fund entity he

16

was related to?

17

I think that someone told me that his main

18

association was Centurion.

19

some point in time his main association was Platinum.

20

remember him coming to Fort Lauderdale with Ari Glass on

21

behalf of Level 3.

22

confusion as to who, exactly, Mr. Jedwab worked for.

23

I do remember me thinking at
I

So I have nothing but complete

Other than yourself and direct conversations

24

that were had with you -- and was there anyone else at

25

the Rothstein firm or affiliated with you, that was

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assisting in the due diligence?

Debra Villegas.

What did she do?

Helped us with documents, helped us with

files, anything I needed her to do.

meet-and-greets, no.

meet people, no, no one else was assisting in the due

diligence.

our bankers at that point in time.

10

When they came to the office to

I don't think I introduced them to any of

Now, at this point, the Ponzi scheme is in

11

full swing, isn't it, April 2008?

12

ALL PRESENT:

13

BY MR. CIMO:

14

15
16
17
18

Other than

Object to the form.

Let me rephrase.
What was the status of your Ponzi scheme that

you have pled guilty to, as of April of 2008?

A

How many deals has George invested in by this

date; do you know?

19

I can't tell you.

20

You know, "full swing" is such a vague term.

21

I'll rephrase it.

22

I'm going to retract "full

swing."

23

Okay.

24

Was there any component of your Ponzi scheme

25

in effect when you had your initial meeting in New York?

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Yes.

What was going on at this point?

I was doing deals with Mr. Levin.

There were

deals with the Morses.

Phony deals?

All -- any time I say "deals," unless I'm

talking about purchasing of the businesses that we were

laundering money through, I'm talking about phony deals.

The settlement deals were all phony.

10
11

And did you have an intention to do phony

deals in relation to these hedge funds?

12

Yes, sir.

13

It was not your intention to do any legitimate

14

deals?

15

No, sir.

16

So, in regard to this due diligence that's

17

being done -- and you used the term "limited."

18

it was limited due diligence, correct?

You said

19

By my definition, it was extremely limited.

20

And you did not receive any phone call from

21

any outside accounting firm?

22

Not to my knowledge, no.

23

And other than the individuals that you

24

mentioned, Mr. Jedwab and the others from Platinum,

25

Centurion or Level, 3 were there any other people that

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visited your offices at RRA, "RRA" meaning the Rothstein

firm?

From the hedge funds, not that I recall.

Now, let's go to Exhibit No. 126.

And I would like to turn your attention to one

of the attachments to this lawsuit, which is Exhibit A.

It's about 20, 30 pages in.

you'll see it's a letter dated May 14th, 2008, in which

Kroll is being retained jointly by the Troutman Sanders

10

Law Firm and by Platinum Partners Value Arbitrage Fund,

11

LP.

12
13
14
15

Have you seen this document before today?

A

It's -What is the page number

again?
MR. CIMO:

Just go to page 20 of the

complaint, Mr. Nurik, and then Exhibit A.

20

MR. NURIK:

21

BY MR. CIMO:

22

23

I have to see it first before I tell

MR. NURIK:

18
19

Hold on.

you whether I've seen it before.

16
17

It's page 20, actually; and

Okay.

There it is.

Have you seen this retention letter, three

pages, before today?

24

No, sir.

25

Okay.

Did you ever come to learn at any point

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while this due diligence was being conducted that one of

the hedge funds had hired Kroll?

I have no specific recollection of that.

And did you come to learn at any point after

you were incarcerated that Kroll had been retained?

Yes.

And how did you come to learn that?

Again, in one of my many meetings it came up.

I don't know.

10

11

and Sanders.

12

today?

13

Before today, sure.

14

And did you know about them before you were

15

Now, there's a law firm mentioned, Troutman

Had you ever heard of that law firm before

incarcerated?

16

I did.

17

And how did you come to learn about that firm?

18

I had had contact with this -- I don't know

19

how to say his last name.

20

Whatever his name is.

21

had contact with him.

22
23

Bourguigon.

Bourguigon.

Robert, from Troutman Sanders.

This is before you met any of the hedge fund

people?

24

I thought you said before I was incarcerated.

25

Yes.

But -- before this initial meeting in

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New York.

No, no, no --

With the hedge funds.

Timing-wise, after the initial meeting, before

the Ponzi exploded, earlier on I had conversations with

Mr. Robert Bourguigon of Troutman Sanders.

What did you discuss with him?

I don't have a specific recollection but it

was deal-related questions.

My understanding from

10

Mr. Preve and from Mr. Bourguigon was that he was the

11

hedge fund's attorney and that he was doing -- helping

12

prepare documents and the like.

13

I also recall that at some point in time we

14

had back and forth between Mr. Preve and him and then me

15

and Mr. Preve and him on coming up with language for

16

certain documents.

17
18

of any due diligence being conducted by the hedge funds?

19
20
21

Did anyone from that firm contact you as part

I don't have specific recollection of that,

I'd like you to now turn to Exhibit B.

no.

22

And would it be fair to say you didn't see

23

this report of investigation until after you were

24

incarcerated?

25

Actually --

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MR. SCHERER:

BY MR. CIMO:

Objection to form.

-- I don't think I've seen it until today.

Oh, good.

Okay.

So you -- do you know there

was some report done by Kroll but you didn't see it

until before today?

7
8

I actually thought that there were multiple

reports done by Kroll but I haven't seen them.

All right.

10

I didn't see anything that's dated this early

11

until today.

12

13

All right.

Let's look at Exhibit --

Let's go to Exhibit D.

Here.

would like you to turn to go past the table of contents.

14

Okay.

15

And it says "Kroll was retained."

After the

16

table of contents, it says "scope of investigation."

17

says "Kroll was retained by Troutman Sanders, LLP, to

18

conduct an investigation of Scott Rothstein."

19

And it's your testimony that you didn't know

20

that anyone was hired to conduct an investigation of

21

you --

22

That's correct.

23

-- before you were incarcerated?

24

I don't have an independent recollection of

25

It

that, no.

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And you also didn't come to learn that also

members of your law firm were going to be investigated,

too?

No, sir.

And you also didn't know about the fact that

George Levin, Gayla Levin, Frank Preve were also going

to be investigated?

ALL PRESENT:

Object to the form.

I have don't have any independent recollection

10

of anyone telling me that they were doing that, no.

11

BY MR. CIMO:

12

13

And, again, this is all before October of

2009.

14

Yes.

15

And it also is your testimony you weren't

16

aware of any investigation by Kroll or any other entity

17

doing due diligence for the hedge funds, that Banyon

18

Funding, LLC, and Banyon 1030-32 also would be

19

investigated?

20

ALL PRESENT:

21

I don't have a specific memory of that, no,

22

sir.

23

BY MR. CIMO:

24

25

Object to form.

Now, had Kroll contacted your law firm, would

you have known that?

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2
3
4

If an investigative agency contacted my law

firm, I can assure you I would have known about it.

Q

And you don't have any recollection of any

contact by Kroll?

I have no specific recollection of it, no.

Then there's the executive summary on page 2,

and it says, "Chief among the objectives of the

assignment were:

Adler was legal counsel in lawsuits, which in number and

Determine whether Rothstein Rosenfeldt

10

cause amounted to the actual or potential award of

11

settlement of at least tens of millions of dollars."

12

Were there ever any lawsuits that you settled

13

in the tens of millions of dollars in your entire legal

14

career?

15

No, sir.

16

Did the public records of any county anywhere

17

in the country reflect that you had any lawsuits that

18

had settled for tens of millions of dollars?

19
20
21

You know, I -- I don't think tens of millions,

no, sir.
Q

While you were a lawyer, before you were

22

disbarred, had your firm ever filed any lawsuit

23

regarding employment discrimination or similar claim in

24

which the demand was in the tens of millions of dollars?

25

Actually, in the written document?

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Yes.

No, sir.

Filed at the court?

I don't believe so, sir, no.

Go now to the portion where it says "pending

or recently settled Rothstein Rosenfeldt & Adler

lawsuits."

and tell me whether -- what you just testified about is

consistent with Kroll's findings underneath that

And I'd ask you now to read underneath that

10

subsection.

11

12
13

All right.

Just give me one second.

That appears to be consistent, yes.

Q

And I'm going to read one portion of it, where

14

it says, quote, The large majority of these suits, which

15

was the ones that Kroll found, were automobile injury or

16

other negligence cases."

17
18

Is that the kind of work your firm was doing?

A

In 2007, 2008, there was a lot of automobile

19

work, and my recollection -- I don't know if they were

20

in suit or not.

21

of employment-related lawsuits going on as well.

22

don't recall filed, not filed, where filed.

23

My recollection is we had a fair amount

I

And then it says, "Which by their content did

24

not appear to warrant settlements amounting to total

25

awards of $100 million."

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That would be accurate.

It says, "Additionally, Kroll did not identify

any wrongful death or massive tort claims leading to a

possible large settlement."

5
6
7

Was that consistent with what your law firm

was doing?
A

Yeah.

The only large awards that the firm

ever got during its existence were ones that were not

collectible.

10

Let's go now to the next paragraph.

It says,

11

"Kroll's review of media involving Rothstein Rosenfeldt

12

& Adler only identified two published articles reporting

13

that the law firm settled cases for amounts in excess of

14

a million dollars."

15

Then if you go to the next page, it defines

16

the Thigpin lawsuit and it identifies the United

17

Healthcare lawsuit.

18
19

Those are not tens of millions of dollars

lawsuits, though?

20

ALL PRESENT:

21

22

BY MR. CIMO:

23

24
25

Objection to form.

No, sir.

I'm sorry?

Your answer is yes -- let me

rephrase.
Did those lawsuits involve tens of millions of

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dollars of awards for settlements?

They did not.

Did anyone ever ask you -- irrespective of

this Kroll report making these findings, did anyone at

the hedge funds ever ask you why there appeared to be a

dearth of, at least, filed cases, regarding your law

firm's efforts?

8
9

At some point in time, somebody, I don't

remember whether it was Mr. Preve or someone from the

10

hedge funds, inquired about filed cases and I simply

11

said, That's the whole point:

12

cases.

13

These are not filed

Meaning that the way you get them settled is

14

by basically saying you're going to file it but the

15

defendant then does a confidential settlement that

16

prevents it from being filed?

17

ALL PRESENT:

18

19

BY MR. CIMO:

20

21

pitch?

22

Objection to form.

The pitch was --

Let me rephrase my question.

What was the

What was the pitch?

The pitch was, we approached the defendant,

23

the potential defendant, to settle the case before we

24

filed, to avoid negative publicity.

25

nature, they appeared to be looking for the wrong thing.

So by its very

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Given the fact there was no filed cases, was

there any solution that anyone recommended or suggested

to verify the existence of these settlements?

Not that I recall, sir.

Was there a Michael Szafranski that was

ultimately -- that ultimately became involved to

purportedly verify the existence of any settlements?

8
9
10
11
12
13

ALL PRESENT:
BY MR. CIMO:
Q

What role, if any, did Michael Szafranski play

in regard to the settlements?

A

He was hired, to my understanding, by the

hedge funds to be what we called a third-party verifier.

14

15

if you know?

16

17
18
19
20
21
22

Objection to form.

And whose idea was it to hire Mr. Szafranski;

The hedge funds and specifically Gillad

Kalter.
Q

And what relationship, if any, did Mr. Kalter

have to Michael Szafranski?

A

My understanding was that they were childhood

friends.
Q

So it's your testimony that Mr. Szafranski was

23

suggested by the funds to become an independent verifier

24

by one of the childhood friends of one of the hedge

25

funds?

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Correct.

And was the term "independent verifier"

actually used?

"Independent verifier"?

Yes.

Did you believe that Mr. Szafranski was an

independent verifier?

But --

You didn't care?

10

No.

11
12

He didn't appear to me to be independent.

He's --

ALL PRESENT:
A

He's who they gave us and that's who we

13

ultimately accepted.

14

BY MR. CIMO:

15

16

Let's rephrase the question to get around the

objection to form.

17
18

Objection to form.

What conclusion did you reach, if any, as to

whether Mr. Szafranski was a truly independent verifier?

19

That he wasn't independent.

20

Why not?

21

Because of his relationship with Mr. Kalter,

22
23
24
25

and ultimately his relationship with me.

Q

And what relationship did Mr. Szafranski have

with you?
A

He ultimately became part of the Ponzi scheme.

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And you were a lawyer for many years.

Did you

ever hire anybody to independently audit or review any

of your firms' business functions or financial

statements?

That's -- you used the word "independent."

Independent.

I hired accountants, like Tracy Weintraub from

Berenfeld Spritzer.

conducting criminal activity, I never hired anyone who

10
11

But during the point that we were

would fall within the heading of truly independent.

Q

12

Yes.
And was it important -- what -- how important

13

was it to you, if at all, that Michael Szafranski not be

14

independent?

15

16

It was important -ALL PRESENT:

17

18

BY MR. CIMO:

19

20

Object to form.

It was important to me that he be malleable.

Did you need him to be a player?

ALL PRESENT:

21

22

to be?

23

capable of being fooled.

Objection to form.

24
25

I was hoping that he would be.

Did I need him

I needed him to be capable of -- initially

Ultimately, it turned out -- I wasn't counting

on it -- but ultimately it turned out that he was not

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only extremely malleable but was extremely greedy, as

were the rest of the people involved in the Ponzi

scheme.

BY MR. CIMO:

What was your reaction, if any, when Michael

Szafranski, a childhood friend of Mr. Kolter, gets

proposed by these supposed sophisticated hedge funds, to

be the independent verifier for the settlements?

ALL PRESENT:

10

11

BY MR. CIMO:

12

13
14

I have to give you --

Wait.

Stop.

MR. CIMO:

What's wrong with the

question, Counsel?

15

ALL PRESENT:

16

investors."

17

know that.

18

BY MR. CIMO:

19

20

Objection to form.

Supposed sophisticated

There's no predicate for him to

Let's rephrase the question and let's go back

a little bit, Mr. Rothstein.

21

Okay.

22

These hedge funds, tell me what you learned

23

about them while you were transacting with them -- doing

24

transactions with them through Banyon entities?

25

That's a very broad question, Mr. Cimo.

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What did you learn?

I learned that they were good guys.

that a lot of them were players.

mean, you're asking such a poor question.

they had nice families.

with me.

I learned that -- I
I learned

They liked to go out and drink

They liked to go to strip clubs.

7
8

I learned

There's a whole myriad of things and there

were different personalities for each of the players.

Let's talk about the funds themselves.

What

10

did you learn about these hedge funds and what they were

11

doing with the money that they were taking from

12

investors?

13

ALL PRESENT:

14

BY MR. CIMO:

15

Objection to form.

Let me rephrase the question.

What did you

16

learn the function was of these hedge funds, if

17

anything?

18

To make money.

19

And is that what you thought hedge funds do?

20

Yes.

21

Okay.

22

legitimate hedge funds making money?

23
24
25

So did you believe that these were

When I first started doing business with them,

Did you come to think later -- changing that

yes.

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2
3
4
5
6

opinion?
A

I later believed that they were part

legitimate, part -- let's say not so legitimate.

Q

And what conclusions did you reach, if any, as

to what part was not legitimate?

A

As I was discussing yesterday during

testimony, there are certain people within the hedge

funds that I believed, based upon my knowledge, were

legitimate.

Straight.

There were other people who were

10

less than legitimate.

11

had knowledge of the Ponzi that we were involved in.

12

There were people that I believed had no knowledge or --

13

let me restate that.

14

figured out that we were involved in some type of fraud

15

that ultimately decided to just let it go.

16

other people who were pushing to get rid of us.

17

There were people who I believe

There were people I believed

There were

We'll talk about that later but for now I'll

18

give you an example.

19

Platinum, for example, or any affiliates of Platinum was

20

part of the group that was touted as being one of the

21

most successful hedge funds in the country --

22

Did you come to learn whether

ALL PRESENT:

Objection to form.

23

BY MR. CIMO:

24

-- at any time?

25

I did.

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How did you come to learn that?

Mark Nordlicht told me and so did Mr. Preve.

And did you come to learn that when Centurion

and Level 3 were acting as hedge funds, that they were

supposedly acting as legitimate hedge funds?

ALL PRESENT:

BY MR. CIMO:

Objection to the form.

Yes.

And did you know whether or not there was

10

actually reports in the media about what these hedge

11

funds were doing?

12

I later came to learn that there was -- doing

13

my own research, actually, after having a conversation

14

with Mr. Nordlicht, that some of the people involved in

15

the hedge funds had been involved in fraudulent activity

16

or allegedly fraudulent activity.

17

And how did you come to learn that?

18

Doing my own research.

19

And --

20

And also speaking to Mr. Nordlicht and

21
22
23

Mr. Preve.
Q

Who did you come to learn was involved in

fraudulent activity?

24

Mr. Huberfeld and Mr. Nordlicht.

25

And what did you learn specifically about

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2

those individuals?
A

I learned that Mr. Huberfeld had been involved

in some type of fraud.

one of the things was being involved in some government

tests with some fake IDs.

He was involved in being in --

There was something else involving the SEC

where he was banned from doing something and I don't

remember the technical language that was used.

I learned that Mr. Nordlicht and some of his

10

partners were involved in a large piece of litigation

11

called the "Optionable Litigation," involving all kinds

12

of allegations of fraud.

13
14
15

And when did you learn this before October of

2009, if at all?
A

It was different points in time.

I learned

16

about the Huberfeld fraud fairly early on, because when

17

I was trying to understand why Murray was -- Murray

18

Huberfeld was calling the shots but never seemed to be

19

available to us.

20

he was the Wizard of Oz; he was the man behind the

21

curtain.

22

got to see him.

23

We used to joke around and call -- say

He was pulling all the strings but no one ever

And you felt there was a nexus between that

24

activity and him not being one of the people that you

25

would meet with?

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2

ALL PRESENT:
A

Object to form.

Mr. Preve and I discussed that.

There was,

much later on, a private meeting that we discussed

yesterday, briefly, between Mr. Nordlicht and I when

everything was exploding where it became much clearer to

me Mr. Nordlicht's familiarity with fraud.

BY MR. CIMO:

Had another verifier been appointed instead of

Michael Szafranski, for example, a partner, at a big

10

four or big six accounting firm.

11

would that have had on your decision to do any type of

12

transactions with the hedge funds?

13
14

ALL PRESENT:
A

What effect, if any,

Objection to form.

I would have objected profusely to doing

15

business with him.

16

BY MR. CIMO:

17

Why?

18

Because I did not believe that our fraud was

19

sophisticated enough to get past a big-four type

20

accounting person who didn't want to be gotten past.

21

It's not to take away from any intelligence of anyone

22

who was looking at it but the people grouped.

23

And apart from the activities that you came to

24

learn, that you described as fraudulent regarding the

25

individuals associated with the funds, did you always

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believe throughout the entire time you dealt with the

hedge funds that these were actual legitimate hedge

funds with investors that were investing in these

enterprises?

Yes.

You never understood those hedge funds to be

operating any separate Ponzi scheme?

No, sir.

Okay.

So when I asked you that question, I

10

wanted to ask you what your reaction was when the friend

11

of Mr. Kolter was appointed as the independent verifier.

12

The first conversation that I recollect having

13

about that, was with Mr. Preve.

14

what I thought.

15

milk toast.

16

probably see it in the few dozen e-mails where we're

17

referring to "what is milk toast doing."

18

meant to be derogatory, it was just -- well, I guess it

19

was really derogatory, but it was meant in a -- it was

20

meant the way I would be as a, quote/unquote, wise ass,

21

that he was milk toast.

22

problem for us.

23

And he was asking me

And I said, "We're good to go.

And the name stuck, actually.

Okay.

He's

You can

It wasn't

He was just not going to be a

And when you use the term "milk toast,"

24

if you could describe to the fact finder, whether it be

25

a judge or a jury, what you meant by that term.

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Yes.

Milk toast means like vanilla.

He

doesn't ask a lot of questions.

that he was not emotional.

upset about something going wrong or someone was

aggravating him.

things the way they were.

He was -- it wasn't

He got emotional when he got

But he was -- he just kind of accepted

Very vanilla.

"Mike, this is the balance."

"Okay, this is the balance."

"Mike, these are the wires."

10

"Okay, these are the wires."

11

"Mike, these plaintiffs signed these

12

documents."

13

"Okay, the plaintiffs signed the documents."

14

Milk toast?

15

Yes.

16

I don't know any other way to describe

it.

17

He wasn't very inquisitive.

18

19

a mushroom?

At some point did you also consider him to be

20

ALL PRESENT:

Objection to form.

21

THE WITNESS:

A mushroom?

22

BY MR. CIMO:

23

Did you ever refer --

24

I don't think I called him a mushroom.

25

think Frank may have called him a mushroom.

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Really?

Just because -- yeah.

Why did Frank refer to him as a mushroom?

Whoever referred to him as a mushroom, it was

that we're just going to leave him in the dark and dump

shit on him, excuse my language.

7
8

MR. LICHTMAN:
kosher?

9
10

THE WITNESS:

Actually, he was kosher.

MR. SCHERER:

That was Lichtman making

Yes.

11
12

Does that mean he is

that response.

13

BY MR. CIMO:

14

But it's your testimony, at some point the

15

mushroom -- the person who is a vanilla, milk toast,

16

who's also a mushroom, turns into a co-conspirator in

17

your Ponzi scheme.

18

Is that your testimony, sir?

19

Yes.

20

Let's go back to the Exhibit No. 126.

21

They then do an analysis regarding your

22

individual property ownership and they identify multiple

23

high-end real estate purchases by you, but they point

24

out that -- that you're holding mortgages in excess of

25

$10 million.

I'm on page 3, by the way, of the Kroll

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report.

Do you see that?

Yes.

Did you, in fact, own these properties in this

report?

Yes.

And why were they burdened with over

$10 million in mortgages if you were doing so well in

your practice?

10

Free up cash.

11

And what did you need cash for?

12

Ponzi scheme and my lifestyle and the

13
14

lifestyle of my partners.
Q

I want you now to go to the bottom part where

15

it talks about the real estate and it says, quote --

16

these are the last two lines -- "While actual mortgage

17

balances are not in the public record, this analysis

18

would suggest that Rothstein's mortgage burden is

19

significant."

20

Do you agree with that?

21

I do.

22

It then goes on to state, quote, Even if

23

Rothstein is leasing all of his properties, rental

24

income would unlikely cover all associated ownership

25

costs, e.g., annual property tax, property insurance,

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maintenance, and management fees, monthly mortgage

payments, etc.

3
4

Is that a true statement?

A

They were leased?

I never gave a thought one way or the other.

I don't remember which properties I had leased or not

leased.

on, it was a nonevent for me.

8
9
10

Again, because of the nature of what was going

It says, "Furthermore, mortgage rates for

Rothstein properties are generally considered slightly

high, even for jumbo loans."

11

Did you care what interest rate you got on

12

these loans?

13

No, sir.

14

Why not?

15

Because of the other activity we were involved

16

in with the Ponzi scheme.

17

18

collection.

19

It then talks about Rothstein's watch

If you can go down to that bullet point.

20

Yes.

21

But it says they were all subject to liens

22

filed by Mayor's.

Do you see that?

23

That's not true.

24

Okay.

25

Did certain of them have liens that

they were purchased through financing?

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that before.

For a very short period of time.

I had heard

What happens is when you purchase something

from Mayor's on their line of credit -- you know, they

have a Mayor's credit card -- they file liens.

We generally paid that down right rapidly.

The bulk of my watches weren't purchased at

8
9

Mayor's.
Q

So...
I wanted to ask you, did the hedge funds and

10

anyone at the hedge funds ever ask you about the Mayor's

11

liens?

12

I don't recall one way or the other.

13

Did anyone at the hedge funds ever ask you

14

about the 10 million plus in mortgages on your

15

properties?

16

I have no specific recollection of that, no.

17

Did anyone at the hedge funds ask you about

18

the fact that you were sued for $36,000-plus regarding

19

the security service firm?

20

No, sir.

21

Did anyone at the hedge funds ask you about

22

your dissolution of marriage to your first wife and your

23

assets that were supposedly split, which is disclosed on

24

page 5, and how the numbers are only six figures, low

25

six figures, in terms of assets?

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2
3

I don't recall ever having that conversation,

no, sir.
Q

Did anyone at the hedge funds ever ask you

about your partners and what they were doing or what

their expertise was, getting these wonderful

settlements, mentioned in bold point on pages 5 and 6?

That's two different questions.

We did

discuss my partners as relates to, for example, the

power of the business, the image that I was attempting

10

to create.

11
12
13
14

They never asked me about the things you're

showing me here on pages 5 and 6.
Q

Okay.

So was Russell Adler touted as one of

your top litigators?

15

Yes.

16

Was he touted as one of the people that was

17

getting these multi-million-dollar settlements pre-suit?

18

Yes.

19

Okay.

And did anyone at the hedge funds ever

20

discuss with you the fact that American Express -- his

21

wife, was sued for $24,000 for credit card debt?

22

23
24
25

No.
I actually didn't even know that until I just

looked at this.
Q

Anyone at the hedge funds talk to you about

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the fact that Adler and his wife were listed as debtors

for $125,000 IRS claim for unpaid income taxes?

Anyone from the hedge funds?

Yes.

No, sir.

Did anyone from the hedge funds ever discuss

with you Mr. Cusick?

No, sir.

And that being the case, there was nothing

10

discussed about Mr. Cusick's personal finances in the

11

public record?

12

No, sir.

13

And did anyone at the hedge funds discuss with

14

you Dennis Kleinfeld?

15

No, sir.

16

Or anything about Mr. Kleinfeld's financial

17

dealings outside the firm?

18

No, sir.

19

And the investigation regarding the British

20
21
22
23

Virgin Islands, did you know about that?

A

I knew about it, yes, but no one ever asked me

about it from the hedge funds.

Q

And let's talk about the political donations.

24

Did anyone at the hedge funds talk to you about the

25

public records regarding political donations?

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Hold on a second, please.

Bless you.

Excuse me.

Did anyone ask me what, sir?

5
6
7

Q
top.

On page 6, bullet point 1, start up at the

Did anyone ask you about political donations?

I am certain that during the course of my

conversations with the hedge funds, we brought up our

involvement in politics because that was part of

10

painting the image of the firm and myself and the

11

partners.

12

I would like you now to turn to pages 7 and 8,

13

"Litigation review."

14

just would like you to read page 3 -- I mean section 3,

15

page 7, and let me know whether the findings of Kroll

16

are consistent with what your understanding of the types

17

of matters your firm was involved in.

And I'm not going to read this.

18

It's accurate.

19

Thank you.

20

And just to summarize, what, if anything, does

21

this report on this page 7 reflect about whether any

22

settlements existed in the tens of millions of dollars?

23

That they did not.

24

And so the conclusions in this report are

25

accurate?

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Yes, sir.

And now I would like you to look at the

next-numbered exhibit, which would be Exhibit No. 127.

Do I have that one already?

We're giving it to you right now.

6
7

(Thereupon, the document was marked as

Trustee's Exhibit No. 127 for Identification.)

8
9
10
11

THE WITNESS:
BY MR. CIMO:
Q

For the record, this is the order entered in

the lawsuit that was filed against Kroll by Platinum.

12
13

Okay.

It is dated October 5th, 2011.

Have you seen

this order before today?

14

Have you seen this before today?

15

Just give me one second.

16

Oh, yes.

17

I have.

18

In what context did you see this?

19

I saw it a week or two ago.

20

Lexis.

21

it online.

22

23
24
25

I'm sorry.

I was on the

I have access to Lexis where I live, and I read

And just give me one moment, please.

Okay.

Mr. Rothstein, I'm sorry, please go to

page 6 of 14.
A

Yes, sir.

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I would like to refer your attention to the

second full paragraph that starts with "Kroll has not

yet answered the complaint."

Yes, sir.

You see that?

Yes, sir.

And the Court says the following:

It says,

quote, In this pre-answer motion to dismiss all three

causes of action, Kroll takes the position that the

10

present lawsuit is merely an attempt to hold it

11

responsible for Platinum's own poor decision to invest

12

in a Ponzi scheme."

13
14

Do you believe -- do you agree that Kroll made

a poor decision to invest in your Ponzi scheme?

15

ALL PRESENT:

Objection.

16

THE WITNESS:

Kroll did not invest in the

17

Ponzi scheme.

18

MR. CIMO:

19

I withdraw and rephrase the question.

20

BY MR. CIMO:

21

I'm sorry.

Platinum.

Do you agree with the Court's conclusion that

22

the hedge funds made a poor decision to invest in the

23

Ponzi scheme?

24
25

ALL PRESENT:
A

Objection to form.

I think your question is -- has gone sideways.

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BY MR. CIMO:

Go ahead.

You just asked me if I agreed with the Court's

4
5

conclusion that it was a poor decision.

Q

Well, let me rephrase it.

Do you agree with Kroll's -- do you agree with

Kroll's assertion that there was a -- it was a poor

decision for Platinum to invest in the Ponzi scheme?

10
11

Listen, I think it's -ALL PRESENT:

Objection to form.

-- a poor decision by anyone that invests in

12

the Ponzi scheme but that's not to say that I didn't get

13

over on certain of these people.

14

Again, certain of these people -- just so

15

we're clear, certain of these people, I believe, tried

16

to do the right thing; others did not.

17

BY MR. CIMO:

18

Go to the next sentence, "Kroll claims that's

19

an explicitly warned Platinum that the contemplated

20

loans transaction bore the hallmarks of a Ponzi scheme."

21
22
23
24

Do you agree with that?

A

I do believe that it bore the trademarks of a

Ponzi scheme.
ALL PRESENT:

Objection to form.

25

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BY MR. CIMO:

Tell me specifically what you felt was

disclosed to the funds before they started to invest

that bore the hallmarks of a Ponzi scheme?

No, it wasn't what was disclosed --

What was disclosed?

-- it was what was not disclosed.

Please go ahead.

It was our refusal to give them any

10

information about who the parties were.

11

we were keeping our trust accounts, how we demanded our

12

control over them.

13

You would have to give me all the papers, to look at it,

14

but it was -- you know, hindsight is 20/20, so it's very

15

hard for me to do this this way.

16

things that I believed that they could have done better

17

in their due diligence that they did not do.

18

It was the way

There's a whole myriad of things.

But there were certain

But yes, there were certain hallmarks -- not

19

the least of which was "too good to be true" thing.

20

sheer level of interest that we were paying, and then

21

ultimately the sheer number of cases, because physically

22

it would have been impossible for me to handle that many

23

cases alone.

24

25

The

Ultimately, how did the hedge funds invest,

did they do it directly or did they do it through the

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Banyon entities?

No, no, it was through Banyon.

Were there any payments ever directly made by

4
5

RRA to any of the hedge funds?

A

You know, I'm not sure how that actually

worked because we were always directed to send the money

to these collection accounts.

I can't tell you whether I was sending the money to

Banyon and then it went to them or whether I was sending

So, as I sit here today,

10

it into an account over which they exercised some level

11

of control.

12

And, if you know, why was the decision made to

13

invest through the Banyon entities instead of the hedge

14

funds investing directly?

15

Because of Mr. Levin's reported wealth.

16

And what was the purported wealth of

17

Mr. Levin?

18

At different points in time it was different.

19

Was it over 100 million, to your knowledge?

20

Always well over 100 million, yes, sir.

21

And why was it that his wealth was important

22

in terms of the hedge funds, if you know, investing --

23
24
25

ALL PRESENT:
A

Object to the form.

Because they were getting -- to my knowledge,

from speaking to the people at the hedge funds, they

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were giving a level of security because they felt that

Mr. Levin's personal guarantees were collectible.

BY MR. CIMO:

If you know, why was the level of security

important if the way these deals are structured there

was no risk?

ALL PRESENT:

BY MR. CIMO:

10

Objection to form.

I have no idea.

No, I'm just asking.

I -- I thought the way

11

you described the way these investments went down, is

12

your firm is holding the money in escrow.

13

That's correct.

14

It's sitting there.

15

That's correct.

16

And did you tout these as no-risk investments?

17
18

ALL PRESENT:
A

Objection.

No-risk -- low-risk to no-risk, yes.

We tried

19

not to say "no risk" because that's another red flag, so

20

we said low-risk to no-risk.

21

in-house.

22

BY MR. CIMO:

23

The money is supposed to be at your law firm?

24

Locked in a trust account, yes, sir.

25

So was there any -- was there any discussions

But we said money is

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about the hedge funds ever investing directly and

bypassing the Banyon entities?

Not to my knowledge, no.

So right from the start, from the get-go with

that initial meeting, it was always understood by you

that the Banyon entities would be the vehicle by which

the hedge funds would provide funds?

Yes.

And did you play any role in the structure of

10

that or was that something that was done by somebody

11

else?

12

Mr. Preve and Mr. Levin may have asked me a

13

question or two but I played no real role in that at

14

all.

That was between Banyon and the hedge funds.

15
16

MR. CIMO:

this time, if that's okay.

17

(Whereupon, a recess was had.)

18

BY MR. CIMO:

19

20

We're going to take a break at

I just have a few follow-up questions,

Mr. Rothstein, before we move on to another area.

21

I want to ask you, in terms of the hedge

22

funds, what belief did you end up obtaining, if any,

23

regarding their level of sophistication?

24
25

I thought that certain members were

sophisticated and some members were a combination of

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either less sophisticated or less interested.

Who were the more sophisticated individuals?

Brian Jedwab was more sophisticated.

Jack Simony was sophisticated but less

interested and -- how do I say this?

interested in what was really going on.

He was less

Ari Glass was sophisticated, but at times he

seemed concerned about what was going on and at other

times, he would just go with the flow.

10

Gil Kalter seemed sophisticated and, for the

11

most part, very concerned about issues that were coming

12

up.

13

Mark Nordlicht, to me, seemed sophisticated

14

but really didn't care one way or the other as to how he

15

made his money, so long as he was getting his money.

16

Now, let's talk about the funds as entities.

17

Did you -- what opinion did you or belief did you hold,

18

if any, regarding the entities' sophistication?

19

I thought -- I thought that overall it was a

20

decent enterprise.

21

anything unsophisticated about them.

I didn't think that there was

22

Okay.

23

They certainly seemed to have their stuff

24

together as far as being able to bring investors in,

25

being able to fund things.

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In terms of a sliding scale, would you --

where would you have placed the hedge funds in terms of

low sophistication, medium or high sophistication?

ALL PRESENT:

BY MR. CIMO:

Objection to form.

I'll give you an example.

Let me rephrase the

question.

Sure.

Well, a woman that invests her $100 IRA in

10

your Ponzi scheme that never made an investment in her

11

life, would that be a low-sophisticated person?

12

ALL PRESENT:

13

You can answer.

14

Objection, form.

If I have such a person invest, yes, that

15

would be low sophistication person.

16

BY MR. CIMO:

17

Did RRA ever have any type of investment like

18

that where directly there was investment made in RRA

19

settlements?

20

Not through me, no.

21

Not through you directly?

22

No.

23
24
25

That would have had to have been Levin's

side of things that he was doing to raise money.

Q

So, again, I understand that the hedge funds

did not directly invest through RRA.

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Yes.

In terms of sophistication level, in regard to

the ones that were directly invested with RRA, where did

you place them in terms of sophistication?

ALL PRESENT:

Objection to form.

I thought they were a part of our

more-sophisticated group of investors -- laid back and

informal but more sophisticated.

BY MR. CIMO:

10

And what other --

11

A bright group of guys.

12

What other individuals or entities would you

13

put in that same category?

14

I put the Levins in that category.

I put the

15

Von Allmens in that category.

16

don't know, Bekkedam was more like a salesman, don't put

17

him in that category.

I put Barry Bekkedam -- I

18

Ira Sochet?

19

Ira Sochet, definitely sophisticated.

Ira

20

Sochet was as sophisticated as the guys at the hedge

21

fund.

22

Damson, also; Mel Klein, very sophisticated.

23

They were -- he was a very sharp man; Barry

Of the entities and the people you just

24

mentioned, were any of them, in your opinion, more

25

sophisticated than the hedge funds?

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ALL PRESENT:

Objection to form.

THE WITNESS:

More sophisticated?

BY MR. CIMO:

Yes.

I think that probably Ira Sochet and Barry

Damson had an overall -- they were more professional

businessmen, but not necessarily more-sophisticated

businessmen.

Had you dealt with any hedge funds in any of

10

your business transactions before these hedge funds in

11

New York got involved?

12

I had met with people from hedge funds, yes.

13

And did you learn anything about how hedge

14

funds work or how -- whether they're regulated, anything

15

at all about how hedge funds operate?

16

ALL PRESENT:

Objection.

17

18

regulation.

19

BY MR. CIMO:

20

21

investors --

22

Compared to other investment houses.

23

And do you know whether hedge funds, in fact,

Yes.

There were very low levels of

And do you know whether hedge funds had

24

take investments from individuals or entities; did you

25

come to learn that?

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Yes, I did.

Do you know that while were you meeting with

Platinum, Centurion and Level 3 up in New York?

I did.

So, that being the case, understanding that

these hedge funds had their own investors that they have

to answer to, did you reach any conclusions or have any

beliefs about their levels of sophistication, compared

to other investors?

10
11

ALL PRESENT:
A

Objection to form.

I believed that they were good at what they

12

did and that they were sophisticated enough to be able

13

to generate, from what I understood, what was in excess

14

of a billion dollars in investments.

15

BY MR. CIMO:

16

And did you ever get any financial data from

17

the hedge funds of a nature that would be submitted to

18

an investor regarding your performance results?

19
20
21

I saw some of it from time to time from Mr.

Preve, but I don't have a recollection of it.

Q

Did you understand that these hedge funds

22

were, in fact, earning high rates of return with their

23

investments?

24

25

That's what I was told.

I didn't learn it one

way or the other.

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Did you ever come to learn what percentage of

these hedge funds investments were tied to settlements

of this nature?

where -- real structured settlements, real plaintiffs

and defendants.

I'm talking about real settlements

ALL PRESENT:

BY MR. CIMO:

Objection to form.

I didn't think any of it was.

Oh, really?

So you didn't know what

10

percentage, if any, these hedge funds were investing in

11

these types of investments versus others?

12

My understanding was the closest that they

13

ever came to any product like the one we were pitching

14

was their involvement, to whatever extent it was, was

15

with Whitehaven.

16

product for them, as far as I was told.

17

18
19

Other than that, this was a new

Thank you.
And what did you learn about Whitehaven?

I learned that Whitehaven was a company that

20

Jack Simony was affiliated with, that other people from

21

the hedge fund may from time to time have been

22

affiliated with through investing or otherwise, and that

23

they were in the business of investing in lawsuits

24

during the course of, prior to the conclusion of,

25

litigation.

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Now, the one person that we did not discuss

that was at that initial meeting in New York was Jack

Simony.

about his relationship to the hedge funds?

What did you come to learn about -- anything

My understanding was that Jack Simony was like

the hedge fund's, for lack of a better word, salesman,

that they -- it was like a product -- project manager,

that he went out and found investors and also found

things to invest in; and that when he brought in an

10

investor or found a project to invest in, that it was

11

his job to oversee that project and handle the

12

participants, smooth over rough bump in the road, you

13

know, overall hand-holding of the -- of whatever project

14

it might have been.

15
16

constant interaction with him at some point?

17
18

I had more interaction with him than anyone

else at the hedge funds.

19
20

And would it be fair to say that you had

We'll get to the emails in a moment.

I want

to go back to Kroll very quickly.

21

You had testified that you did not know before

22

October of 2009 that Kroll had been retained by the

23

hedge funds, correct?

24
25

Yeah, I have no independent recollection of

that.

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Had you learned, at any point during the Ponzi

scheme, that Kroll had been retained by the hedge funds,

what reaction would you have had, if any?

I would have been concerned.

Why?

Because when you are running a Ponzi scheme,

you want as few people as possible, and definitely as

few sophisticated people as possible poking around in

your business.

10
11
12

What do you know, if anything, about Kroll

that had any impact on that reaction?

A

I knew that Kroll was an international

13

investigative company, that, to my knowledge, was

14

extremely sophisticated.

15
16
17

And had you -- your law firm ever used Kroll

in any of its investigations?

A

I don't think so.

To my knowledge, we didn't;

18

but it's certainly possible that one of the attorneys

19

that we ultimately had working for us did.

20

Would you have any -- would you have any

21

different reaction had it been ABC investigative agency

22

out of Hialeah in terms of the level of scrutiny that

23

you thought would have been conducted?

24
25

I have don't mean that to be funny.

I'm just

using an example.

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MR. SCHERER:

MR. CIMO:

MR. SCHERER:

MR. CIMO:

Why did you choose Hialeah?

Totally random, a random city.

Right.

Let the record reflect that

Mr. Rothstein is smiling.

BY MR. CIMO:

Had a less-sophisticated investigative firm

been retained that you had never heard of, would that

have made any difference in your reaction to an

10

investigative firm being retained?

11
12

ALL PRESENT:
A

Objection.

Depending on who was involved in the

13

investigative firm, it would have made a difference in

14

my reaction.

15

BY MR. CIMO:

16

Okay.

So, would you say Kroll, in terms of

17

investigative firms, is either the top of the food

18

chain, middle, low?

19

ALL PRESENT:

20

BY MR. CIMO:

21

22
23

I mean -Objection, form.

-- where did you place it in terms of

sophistication?
A

To my knowledge of everything, based upon what

24

I know, they were one of the more sophisticated

25

investment companies.

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Okay.

Excuse me, investigative companies.

Now, and had you learned that Kroll had, in

fact, been retained, what reaction would you have had,

if any, regarding its potential impact on your Ponzi

scheme?

7
8
9

ALL PRESENT:
A

Objection to form.

I would have been concerned about possibly

being discovered or having-- problems with law

10

enforcement because I knew that they had -- they hired,

11

frequently, retired law enforcement, so it would have

12

been of concern to me.

13

BY MR. CIMO:

14

Now, in addition to possibly learning that a

15

high-level-sophisticated firm, like Kroll, had been

16

retained but also had been requested to do due diligence

17

at RRA's offices, what reaction would you have had, if

18

any, with regard to that -- learning that information?

19
20

ALL PRESENT:
A

Same objection.

I probably would have told Preve to cut off

21

negotiations with the hedge funds and let's go look for

22

money elsewhere.

23

BY MR. CIMO:

24

Why?

25

Because when you're running a Ponzi, you don't

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want sophisticated investigators poking around in your

business.

You stated earlier that you believed certain

of these hedge-fund individuals were sophisticated, but

you said they were doing due diligence at RRA offices?

Yes.

Why didn't that concern you about it being

8
9

discovered, meaning the Ponzi scheme?

A

You have to differentiate between

10

sophisticated, and then you couple with sophistication,

11

are they straight and narrow, or are they heading

12

towards the direction of being a player, as I described

13

over the last several of days.

14

So you could have someone who is

15

sophisticated -- Mr. Preve was extremely sophisticated

16

in banking.

17

player.

18

Mr. Preve was also an extremely high-level

Doug Von Allmen was any extremely

19

sophisticated investor, not a player, if that helps you

20

with your understanding.

21

At any point did you reach the conclusion,

22

before October of 2009, that any of the individuals that

23

you dealt with at the hedge funds met the definition of

24

player that you previously testified about?

25

Yes.

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Who?

Mark Nordlicht, Jack Simony -- and Ari Glass

kept jumping over the line from one side to the other

depending upon his mood.

You mentioned earlier certain of these

gentlemen and I -- you didn't identify who, engaged in

what I would call extra-curricular activities with you,

in regard to, for example, going out and having fun with

the guys.

10

MR. SCHERER:

Objection to the form.

11

BY MR. CIMO:

12

Did you say that?

13

You're not saying that makes him a bad person,

14
15
16
17

are you?
Q

No, no.

I'm am just -- I'm just following up

on -- I think you gave -A

A lot of people that go out and have a good

18

time with extra curricular activities, and it doesn't

19

necessarily make them criminals.

20

I understand completely, but what I'm asking

21

about is just trying to get the scope of the

22

relationship on the gentlemen you described as players.

23
24
25

You have a lot of people in here panicking

right now, by the way, just -- just so you understand.

Q

Did any of the players you mentioned --

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Mr. Nordlicht, Mr. Simony or Mr. Glass -- ever go out

with you after hours for nonbusiness-related activities?

Mr. Simony did and Mr. Glass did.

And what was the general nature of those after

hour activities?

6
7

and was at my home when I had several escorts there.

8
9
10
11

Mr. Simony attended gentlemen's clubs with me

And Mr. Glass went to gentlemen's clubs with

me.
Q

Okay.

Were there any escorts at the

gentlemen's clubs?

12

ALL PRESENT:

Objection.

13

THE WITNESS:

Have you ever been to a

14

gentlemen's club?

15

MR. CIMO:

I'm not going to answer that.

16

I don't mean to be facetious.

17

18

BY MR. CIMO:

19

Yes.

What I'm asking is, did you actually observe

20

Mr. Simony and Mr. Glass engage in activities that would

21

be normal activities at a gentlemen's club?

22
23
24
25

Yes.

I paid for their activities at the

gentlemen's club.
Q

Okay.

Let's go back now to how you concluded

that the three gentlemen you mentioned were, in fact,

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players?

to conclude today that he was a player?

What was it about Mr. Nordlicht that led you

UNKNOWN SPEAKER:

Just clarification, you

said today?

MR. CIMO:

Yeah, his testimony is today,

he concluded that Mr. Nordlicht meets his

definition of player.

9
10

It was a number of factors, not the least of

which was that one-on-one conversation I had with him in

my office when this was blowing up.

11

At that meeting, I was explaining to him, what

12

I explained the other day, what DOMAD was, the doctrine

13

of mutually assured destruction:

14

everyone blows up.

15

He fires, we fire,

He was explaining to me that he was very

16

familiar with the whole process, that if I knew his

17

history, he started talking to me about the problems

18

that his father, Julius, had had with the government and

19

he had done time.

20

optionable litigation.

21

People don't say that.

22

He explained to me about the

He didn't say he was a player.

He said, you know, I have been through all

23

this.

24

want to do whatever I can do to help you get everything

25

back on track and make sure everyone get's their money.

I got it.

I just want to get us to a place, I

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He said, you're not going to -- he kept saying to me,

you're not going to tell me anything I haven't heard

before, you know.

That was the mantra of that meeting.

What event -- what transpired before that

meeting that precipitated this meeting or that

conversation with Mr. Nordlicht?

Them cutting us off and us cuttings them off.

Whenever you say "cutting off," can you

describe what you mean by that?

10
11

14
15
16

They cut us off from funding, and we cut

them off from funding.

12
13

Yes.

Well, when you say "we," who are you referring

"They" would be the hedge funds, and "we"

to?

would be me, Levin and Preve.

Q

Okay.

But, again, there's no direct funding

17

coming from the hedge funds to RRA; it's all going

18

through these three Banyon entities, correct?

19

Right, but I controlled the purse strings.

20

Okay.

Other than what you described already,

21

is there any other things that happened with Mr.

22

Nordlicht -- by the way, would this have been April of

23

2009 --

24

ALL PRESENT:

Objection.

25

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BY MR. CIMO:

-- when you had this conversation with

Mr. Nordlicht?

I would be guessing.

I don't remember when it

was, but it was immediately after we stopped paying

them.

would have been around that time.

We stopped paying them on April 13th, 2009, so it

Thank you.
And let me -- I have to -- there was an

10

objection to the form, so I have to just ask you the

11

question as an open-ended question.

12

Okay.

13

What event, if anything, had transpired that

14

would refresh your memory as to the approximate month

15

and year that this meeting had occurred with Mr.

16

Nordlicht?

17

We stopped sending payments to the hedge funds

18

on April -- on April 13th, 2009, which sent the hedge

19

funds into a wild panic.

20

And the meeting occurred shortly after that?

21

It did, to my recollection.

22

What was it about Mr. Simony that lead you to

23
24
25

conclude that he was a player?

A

Mr. Simony and I spent a lot of time together.

You have to understand, it wasn't one thing that he did;

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it was the way he conducted business.

He was doing side deals with Frank Preve that

he wasn't telling people about.

in investors from the side.

deal with Murray that people supposedly didn't know

about.

7
8

He was trying to bring

He was engaged in a side

He conducted business in a far more shady

manner, just his overall manner of doing business.

You know, there are people -- the best thing

10

to do is line them all up with Brian Jedwab.

11

Jedwab was straight.

12

about him.

13

if there was any fraud, he would have run for the hills,

14

calling the police as he was running.

Brian

There was -- there was no two ways

15

If he had figured out what we were doing or

Jack, no.

Okay?

That's just -- you spend a lot of

16

time with someone, you get a feel as to what they are

17

susceptible to, how malleable they are.

18

that category of "player," as was Mr. Nordlicht.

19

Jack was within

Mr. Glass, as I said earlier, he jumped back

20

and forth.

21

I mean, I thought he was in the middle of calling the

22

SCC; although, I'm now learning that may have been a

23

whole shtick he was pulling with me.

24
25

There were times when Ari Glass was berserk.

But when I went to the Bahamas with him and we

were drinking and running around and I realized he was

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engaged in this tax-fraud thing where he was supposed to

be doing things in the Bahamas, but, really, what we

were doing was drinking and sending on emails saying the

deals are approved, you start to feel like that person

is more of a player.

6
7

I hope that's helpful.

Q

8
9

Thank you so much.

And going back, before we move on, to Kroll,

or any other independent, sophisticated firm that may

10

have been requested to do due diligence, had -- had an

11

independent firm -- truly independent firm, of the

12

stature of Kroll, actually come in and examined books

13

and records of RRA, including those supposed settlements

14

that were being done, what, if anything, would have

15

happened?

16
17

ALL PRESENT:
A

Objection to form.

I have no way of knowing one way or the other.

18

Obviously, if someone is extremely

19

sophisticated that asks all the right questions, if I'm

20

not capable of getting over on them, they are going to

21

figure out that it's a fraud.

22

BY MR. CIMO:

23

Assume, for purposes of my question, that the

24

right questions get answered and there is true

25

independence and there is a true effort to determine the

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veracity of these settlements, what, if anything, would

have happened?

3
4

ALL PRESENT:
A

Objection to form.

It is my opinion that, ultimately, someone who

was sophisticated, that wanted to figure out that there

was a fraud, had they asked the right questions, would

have figured it out.

That's my opinion.

MR. CIMO:

10

128.

11
12

I am showing you, now, Exhibit

(Thereupon, a document was marked as Trustee's

Exhibit No. 128 for Identification.)

13

MR. CIMO:

And for the record, this is an

14

email dated July 24, 2008, 3:57 p.m., from

15

Frank Preve to Scott Rothstein, Bates stamped

16

FP, and I'll just give you the last digits,

17

2616/1.

18

BY MR. CIMO:

19

Have you seen this before today?

20

I have.

21

Who are the "good fellas" that you reference?

22

I didn't.

23

Let me rephrase my question.

24
25

I'm sorry.

When Mr. Preve uses the term "good fellows" in

the subject, what, if anything, do you know about that

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3

use of that phrase at that time?

A

That was his -- he says "good fellows" where I

say "good fellas."

That's all.

We used -- just so you understand, we used to

refer to the hedge funds as, you know, our associates.

They were in business with us.

Frank would be more proper.

He would say the

"good fellows," and I would say, "you mean the good

fellas, right?"

10
11

And "good fellas" is what?

reference to a movie or -- I mean or a pop culture term?

12

Yes.

13

Organized crime.

14
15

Is that a

It is a reference to organized crime.

Was there a movie by that title?

A

16

There was.
ALL PRESENT:

Objection.

17

BY MR. CIMO:

18

Did you see that movie?

19

I did.

20

And when you refer to the term "good fellas"

21

as the hedge funds, did you think about that movie?

22
23

ALL PRESENT:
A

Objection.

I think about the -- I thought about people

24

that I did business with.

I mean, it was just -- this

25

is -- it's "good fellas".

That's just the way you

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describe it.

our little group of -- merry band of -- it's Robin Hood

and his band of merry men.

BY MR. CIMO:

He was trying to be tongue-in-cheek about

Did you ever actually tell any of hedge fund

personnel that you were dealing with that they were your

"good fellas"?

8
9

Did I say that to them, no; but I mean --

listen, even in the short period of time, you know me,

10

you know me well enough to know that I am a wise ass.

11

So, yes, we had a lot of banter of that type.

12

my general nature.

13
14

Okay.

It's just

I try to be fun loving.

But, therefore, the reference to it

wasn't in regard to anything related to organized crime?

15

Was I saying that there --

16

Yes.

17

No, no, I wasn't saying it.

18

Okay.

It makes reference to Ari, Gil and

19

Mayer, who -- if you know, who is being referred to

20

there?

21

22

Mayer.

23

Ari Glass, Gil Kalter, and Mark Nordlicht,

And it talks about, "we'll all be there around

24

4:15 to 4:30"; do you recall where "there" was in or

25

about July of 2008?

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2

I don't recall specifically, but it appears to

be to my law firm.

And how often did any one of these gentlemen,

or any other gentlemen from the hedge fund, visit your

office?

Infrequently.

And why was it necessary for -- if you know,

for these gentlemen to visit your office, when they're

basically providing funding, loan -- whatever the term

10

is, to the Banyon entities, but they have no direct

11

agreement with RRA, if you know?

12

I don't know one way or the other.

Sometimes

13

it was due diligence, and sometimes it was just coming

14

over to visit.

15

All right.

And did anyone at Banyon have a

16

problem that their lender was meeting with -- lender

17

representatives were meeting with you at your law firm

18

without --

19

No.

Now you're getting it now as far as what

20

good fellas is a reference to.

21

all and all for one.

22
23

We're all in this to make money.

Now you are catching on as to what we are

talking about.

24
25

It's one -- it's one for

Was Preve intended to attend this meeting, as

well?

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Yes.

And was there a reason why the meeting is at

your office, instead of Banyon's offices, if you know?

Why was your law office picked as the location for this

particular meeting?

I have no independent recollection of why.

Did you ever meet at Banyon offices with the

8
9

hedge-fund personnel?
A

I recall a meeting over there where maybe Jack

10

was there; but most of the time, the meeting took place

11

in my offices.

12

Mr. Preve then talks about a forecast?

13

Yes.

14

What forecast is he referring to, if you know?

15

Funding forecast.

16

Funding means deals that are going to be

17
18
19
20

offered?
A

Meaning the amount of money we are going to

need and the amount of money we can expect coming in.

Q

If you know, why didn't you just convey that

21

information to Mr. Preve, and then he can convey that

22

information to his lender, instead of you all being

23

together in the same room doing it, if you know?

24
25

In reading this, he says he's either going to

come over before or after, which means, to me, in

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reading this now, that he was coming over to meet with

me, privately; not necessarily while they were there.

Okay.

Next question is:

During 2008, do you

have a recollection of actual deals being done with the

Banyon entities, if you know, and where the hedge funds

were providing the money for the deals?

Time frame, again?

During 2008, from and after July of 2008

9
10

I'm sorry.

through November of 2008, deals were already happening

at this point?

11

Sure.

12

And you have a recollection of the amount of

13

funds at this point through November of 2008?

14

I don't.

15

In terms --

16

It was a lot of money, but I don't recall the

17
18

amount.
Q

In terms of volume, do you have a recollection

19

whether the Banyon entities were providing most of the

20

volume for purposes of the settlements?

21
22
23

From July 2008 to November 2008, the bulk of

the Ponzi business went through Banyon.

Q

And Mr. Von Allmen and these other investors

24

you mentioned before, Mr. Sochet, are these gentlemen

25

that came in 2009, as opposed to 2008?

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Sorry.

Yeah.

Can you repeat the question?

Mr. Von Allmen, Mr. Sochet, these other

investors that you mentioned that had high

sophistication levels similar to the funds, equal to or

similar to the funds, are these people that came in 2008

or 2009?

ALL PRESENT:

BY MR. CIMO:

10

Objection to form.

My recollection is it was sometime in 2009.

Okay.

Other than these Banyon entity

11

investments, were there any other large players -- not

12

player, I should say large investors -- apart from the

13

Banyon entities funding them?

14

ALL PRESENT:

Objection.

15

THE WITNESS:

Of the same size as them?

16

BY MR. CIMO:

17

Yes.

18

No.

19

I consider the Morses to be fairly large.

On number of deals, Barry Lipsitz and Domenick

20

Tonacchio both were doing a bunch of business with us;

21

but nobody else that I can recall at this time.

22
23
24
25

MR. CIMO:

I will show you, now, Exhibit

129.
(Thereupon, a document was marked as Trustee's
Exhibit No. 129 for Identification.)

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BY MR. CIMO:

Mr. Rothstein, I'm showing you Exhibit 129.

It starts with an email from Brian Jedwab to a -- Ben

Radinsky.

5
6

Do you know who Ben Radinsky.

A

My recollection is he's someone that worked in

the back office at one of the hedge funds, but I don't

even remember if I -- I think I met him once or twice,

but I have no independent recollection.

10

And then it has an address and a title for

11

Mr. Jedwab, managing director, Centurion Credit

12

Management.

13

Mhm-mhm.

14

Do you recall seeing that title and that

15

Do you recall seeing that?

entity before?

16

Sure.

17

And that address, 152 West 57th Street, is

I've seen that before.

18

that the address in New York that you had the initial

19

meeting at?

20

Yeah.

21

And I notice this is not the same Centurion,

That's the Carnegie building.

22

by the way, that I showed you in the initial exhibits at

23

the beginning of the deposition that's under that credit

24

agreement.

25

Yeah.

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2
3

Did you know that there were other Centurion

entities besides the one that did -A

I remember seeing a whole host of -- a variety

of different Centurion names, Platinum names; but I

don't know if I stopped to think about who they were or

what they were doing.

7
8

You see in his email it says

BJedwab@CenturionLLC.com?

I do.

10

Do you recall ever getting any other emails

11

from Mr. Jedwab that had any other prefix in it, besides

12

Centurion?

13
14

I don't recall one way or the other.

I didn't

study his email address.

15

Jack Simony, which is in the middle --

16

Simony.

17

Simony, I'm sorry.

18

That's okay.

19

-- this Whitehaven Group, LLC, is that the

20

same Whitehaven that you mentioned before that was doing

21

structured settlements?

22

Yes, sir.

23

And did you know that Whitehaven Group was an

24
25

entity that Mr. Simony was affiliated with?

A

Yes.

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And how did you come to learn that?

Jack told me and Mr. Preve told me.

Okay.

Whitehaven Group is 350 5th Avenue.

5
6
7
8
9

I notice the address for Mr. Simony at

Did you ever go to that location?

A

I went to that location.

It's the Empire

State Building, but not to his offices.

Q

And do you know whether Mr. Simony had an

office, as well, at 152 West 57th Street?

10

To my knowledge he did, but I was never in it.

11

The document talks about an RRA AGMT; do you

12

know what that is referring to?

13

RRA agreement.

14

Do you know what agreement is being referenced

15

that may have involved Whitehaven Group?

16

I have no idea.

17

Let's now go to Exhibit 129 -- I'm sorry, 130.

18
19
20

UNKNOWN SPEAKER:

What's the date of that

last one, please?

MR. CIMO:

I'm sorry.

This document is

21

dated November 20th, 2008, and it also has a

22

separate email dated October 27, 2008.

23

UNKNOWN SPEAKER:

24

MR. CIMO:

25

Thank you.

I'm now going to show you

Exhibit No. 130, which is an email dated

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December 3rd, 2008, Bates stamped Rothstein's

940 through 957.

(Thereupon, the documents were marked as

Trustee's Exhibit No. 130 for identification.)

BY MR. CIMO:

All right.

Did you laugh when you saw this

document?

I did.

Why?

10

Because it has Mr. Preve's alias on it.

11

And what is his alias?

12

G. Steinbeck.

13

And do you know why that -- why that was used,

14
15

that particular alias?

A

He had told me at one point in time, but I

16

don't remember why; but when he was doing his private

17

funding deals away from Mr. Levin, he used this email

18

address.

19
20

And you see that the suffix of the email

address is SFS Funding?

21

Yes.

22

Did you come to learn whether SFS Funding was

23

involved in a deal, a side deal involving Regent?

24

It was.

25

And did you come to learn that Mr. Preve, in

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fact, was a control person and/or owner of SFS Funding?

A

It -- to my knowledge, it was Mr. Preve, Mr.

Nordlicht and Mr. Huberfeld.

SFS Funding?

That was my understanding, yes.

And did you know this before --

Who did I give you, Mr. Preve,

Mr. Nordlicht -- Mr. Simony, and Mr. Huberfeld, all in

different pieces.

10

That was my understanding, but I

would be completely wrong.

11

How did you come to learn that?

12

From conversations I had with Mr. Preve, Mr.

13

Nordlicht, Mr. Simony.

14

Before October of 2009?

15

Yes, I haven't spoke to any of those people

16
17

since October of 2009.

Q

Okay.

Now, this -- I asked you earlier

18

what -- what the RRA AGMT meant.

19

"Jack AGMT," and it says, "here is the Whitehaven

20

agreement."

21

Yes.

22

I'm okay with it.

23
24
25

This one is entitled

We need some clarification

on timing issues.
Why is Mr. Preve on this alias email sending
to you a document regarding Whitehaven Group?

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ALL PRESENT:

Objection to form.

BY MR. CIMO:

Go ahead.

To the best of my recollection, we were going

To the best --

to do funding through this SFS deal and Whitehaven was

involved in it.

8
9

I am going to rephrase the question regarding

the objection.

10

Do you have a recollection, sitting here

11

today, why this document was transmitted to you by Mr.

12

Preve?

13

Yes.

14

And why is that?

15

Whenever Mr. Preve was doing side deals, he

16
17

liked me to look at the paperwork, which I did for him.

Q

And did you know that at that time that that

18

was sent, that Mr. Preve was, in fact, doing side deals

19

without the knowledge of Mr. Levin?

20

Sure I did.

21

You did.

22

And did you also know before this date whether

23

any of the hedge-fund personnel that you testified about

24

were doing side deals, as well, with any other entities?

25

ALL PRESENT:

Objection.

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My recollection is that they were.

I'm just a

little unsure as to the -- as to the dates, whether it

was before or after this date.

BY MR. CIMO:

6
7
8
9

That's fine.
What is your definition of a side deal for the

purpose of these questions?

A

A side deal is what we refer to as a

"one-off," and that would be where members of -- members

10

of other entities that were funding to us, that had --

11

where all the members were supposed to be looking out

12

for the interests of each other, where one of those

13

members would drop off; cherry pick a solid, good,

14

high-interest-rate deal and fund it separate and apart,

15

confidentially, from the members of the other

16

organization.

17

And how did you know that it was confidential

18

from the members of the other organization?

19

you believe that?

20
21
22

What made

Everyone kept telling me not to tell the other

person what they were doing.

Q

So let's talk about, for example, SFS Funding

23

that you say, sitting here today, that Mr. Preve was in

24

with Mr. Nordlicht, Mr. Simony and Mr. Huberfeld.

25

Is it your testimony, sir, that Mr. Nordlicht,

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Mr. Simony and Mr. Huberfeld told you that you were not

to let the hedge funds know about whatever side deal SFS

Funding may have been involved in?

4
5
6

ALL PRESENT:
A

I have to break that down because you have all

these people grouped in there.

Let's start with Preve.

BY MR. CIMO:

10

Objection to form.

Let's take it back based upon the form

objection.

11

I'm just -- I'm not really concerned about

12

Preve; I just want to know, did Mr. Nordlicht ever tell

13

you that he wanted to do something defined as one of

14

your side deals, where his hedge funds would not know

15

about it?

16
17

No.

Mr. Simony told me, don't discuss this

with any anybody.

18

Not Mr. Huberfeld?

19

Mr. Simony told me.

20

And not Mr. Huberfeld?

21
22

You never spoke to Mr.

Huberfeld?
A

I never spoke to Mr. Huberfeld.

Mr. Simony

23

told me never discuss this with anyone other than me or

24

Frank.

25

And which specific deals do you recollect that

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Mr. Simony told you not to talk about?

It would have been the SFS/Regent deal.

don't remember other ones there may have been.

Actually, I -- I think there were.

specific recollection.

I don't have a

And this agreement that's part of Exhibit

No. 130, which is an attachment, do you recall seeing

this at or about the time this email was transmitted to

you?

10

You know, I don't have a specific recollection

11

of receiving this, as I sit here today; but, again,

12

remember, I've overlooked hundreds of thousands of

13

pages.

14

it certainly fits Mr. Preve's model of when he was doing

15

the side deals, sending the documents over to me under

16

this hidden email address for me to take a look at on

17

his behalf.

18

It says it came to me, so I'm sure it did; and

And do you know what revisions were to be made

19

to this document, such as that it would be consistent

20

with the subject called "Jack AGMT"?

21

No, I don't know one way or the other.

22

Do you know who was going to be the

23

participant under this loan and optionable litigation

24

agreement?

25

I can only tell by looking at it but I don't

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know who actually was putting up the money.

Q

Understood.

Do you recall -- do you recollect -- do you

recognize the handwritten comments on the document as

being yours or anyone else's?

No, no, those are Frank's.

And now I'm going to show you Exhibit No. 131.

Sure.

9
10

(Thereupon, the document was marked as

Trustee's Exhibit No. 131 for identification.)

11

MR. CIMO:

And for the record, this is

12

defined as RRA Deal G, as "girl," dash 350.

13

It is Bates stamped number SW 13000735, and

14

it's a composite document.

15

For purposes of my questions now, we're

16

just going to cover the first page, and the

17

last page on the composite is SW1300805.

18

BY MR. CIMO:

19

You mentioned earlier the Regent side deal,

20

and I ask you if you recognize these to be the deal

21

documents for the Regent side deal?

22

I do.

23

And do you know whether this deal was actually

24
25

funded?
A

It was.

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And I want you to look at the bottom portion

where it has dates and numbers.

those payments were actually made, and if not, which

ones were and which ones weren't.

Do you know whether

To my recollection, the bulk of them were

made.

believe part of it may have been delayed.

think we paid the entire thing off.

I don't know if we ever finished paying it.

Ultimately, I

And, if you know, sitting here today, did you

10

ever come to learn or understand who the owners and/or

11

control persons were at Regent Capital Partners, LLC?

12

I ultimately learned that Mr. Huberfeld and

13

Mr. Nordlicht were -- I first learned that Mr. Huberfeld

14

was absolutely involved in it; and then I learned that

15

Mr. Nordlicht either knew about it or was involved in

16

it --

17

Thank you.

18

-- and as I said earlier, Mr. Preve and

19

Mr. Simony.

20

Thank you.

21

And is -- am I correct in looking at the first

22

page and then comparing it to the third page, which is a

23

letter, dated December 2nd, 2008, that it was an

24

$11 million investment that would return 22 million?

25

That's correct.

That's what I was talking

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about in these one-off cherry-pick deals, yes.

2
3

And this is a deal that had a six-month timing

period; is that correct, according to page one?

Yes.

So, is it your testimony, then, that between

the first page of this exhibit and page three, which is

this letter you sent, that there was going to be an

$11-million return on an $11 million investment in six

months?

10

That's correct.

11

And this is one of the side deals that a hedge

12

fund -- two of the hedge funds principals did that you

13

were personally involved with?

14

ALL PRESENT:

15

BY MR. CIMO:

16

17
18

Objection to form.

Let me rephrase the question.

Did you have personal involvement in this side

deal?

19

I was the person who provided the deal.

20

And Banyon entities were not involved in this

21
22
23

deal?
A

Banyon itself, no, just Mr. Preve from Banyon,

but in his personal capacity as Mr. Steinbeck.

24

25

Preve?

As opposed to his individual capacity as Mr.

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Yes.

We're going to ask you more questions about

this later.

4
5

Then we're going to move on now.

Now I'm going to show you Exhibit 132 -A

Mr. Cimo, just one thing, I want to make sure

that I have clarified and made my answer complete as to

side deals.

8
9

In the same vein as the other side deals,

there was a whole series of side deals being done by Ari

10

Glass unbeknownst to his partners with a childhood

11

friend of his Bo Rosenblat.

12
13
14
15

And what are the names of entities, if you

know, involved in those side deals?

A

I think it was enter -- Intercoastal or

Intracoastal or something of that nature.

16

Intracoastal Group?

17

Yes.

18

(Thereupon, a discussion was held off the

19

record.)

20

BY MR. CIMO:

21

22

Thank you so much.

And do you recall the approximate amount of

23

funding in regard to that particular transaction or

24

transactions?

25

No, I don't remember off the top of my head.

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ALL PRESENT:

BY MR. CIMO:

Objection to form.

Do you know whether there was more than one

transaction involving Mr. Glass and this Intracoastal

Entity?

ALL PRESENT:

Objection.

BY MR. CIMO:

Do you recall how many?

10

I don't recall.

11
12
13

someplace.
Q

Was it more than six?

You should have the record

I don't remember the number of deals.

And do you know whether any of them had double

your money in six months, like the Regent transaction?

14
15

There was.

ALL PRESENT:
A

Objection to form.

I think the finest cherry-pick deal I ever

16

offered to them was the Regent deal.

17

BY MR. CIMO:

18

When you say "them," who are you referring to?

19

Well, the -- the way it would work was, Mr.

20

Preve, I suspect, would, behind the scenes, decide with

21

someone he was going to do a deal, apart from Mr. Levin,

22

with somebody.

23

cherry deal, a really good deal.

24
25

And would ask me directly:

I need a

And so I would put together a really good

deal, because you want to -- when you're running a Ponzi

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of this magnitude, you want to reward the people that

are taking care of you and helping you sustain the Ponzi

scheme.

Thank you.
I'm going to show you now Exhibit No. 132, an

email dated December 14th, 2008, Bates stamped BLC 56665

through 66.

8
9

(Thereupon, the document was marked as

Trustee's Exhibit No. 132 for Identification.)

10

BY MR. CIMO:

11

What I want to refer your attention to is

12

certain statements made in these emails regarding

13

insurance, and if you could just take a moment and just

14

read the email chain, I would appreciate it.

15

And then I want to direct your attention to

16

the last page where there's an email from you to

17

Mr. Simony.

18

All right.

19

Thank you so much.

20

I'm ready to go.

Let's start with the second page, first off,

21

an email dated December 11th, 2008, from you to

22

Mr. Simony.

23
24
25

Do you recall sending this at or about that

time?
A

I do.

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2

And what are these sample policies that are

referenced in your email?

The sample crime fraud policies.

And why are sample crime fraud policies being

mentioned on or about December of 2008, which is several

months after the hedge fund started investing?

Hedge funds had told us that if they don't get

crime fraud policies, that they were going to not be

able to do any further funding with us at all.

10

Was there any discussion about whether crime

11

fraud policies were, in fact, express conditions of

12

their agreements with the Banyon entities?

13

It wasn't discussed with me, no.

14

Was there any question by you or questions by

15

you why this was being asked for now in December of

16

2008?

17

ALL PRESENT:

18

19

BY MR. CIMO:

20

21
22

Objection to form.

Mr. Preve and I discussed it, yes.

What did you discuss with Mr. Preve about

that?
A

We discussed the fact that they were obviously

23

getting hinked up with the entire transaction because

24

they had already slowed down massive amounts of funding

25

and now were asking for a crime fraud policy, and

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ultimately it was decided I would just make an attempt

to get it.

Levin, going to try to get one, also.

And Mr. Preve was, supposedly, with Mr.

hedge funds?

I am.

Did you or Mr. Preve ever ask the hedge funds

When you say "they," are you talking about the

what was causing them to -- what was the word you used,

"hinked"?

10

Hinked up.

11

Hinked up.

12

Did you or Mr. Preve ever ask them,

13

specifically, what was causing them to being hinked up?

14

No.

15

Was there anything --

16

I didn't.

17

Was there anything going on at this time, if

I don't know what Mr. Preve did.

18

you recall, regarding Mr. Madoff or other Ponzi

19

schemes --

20

ALL PRESENT:

21

BY MR. CIMO:

22

23
24
25

Objection.

-- if you know, any recollection on what's

going on at that time in the media?

A

I recall that the entire insurance thing

started to come up.

When Madoff had hit the scene,

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Dreier had hit the seen, Petters had hit the scene,

there was all kinds of Ponzi stuff going on, and people

were getting, to use my phrase, hinked up, nervous,

edgy.

5
6

Before this insurance issue came to light in

December of 2008 --

ALL PRESENT:

MR. CIMO:

UNKNOWN SPEAKER:

Objection.

What's wrong with that?

Saying that before it

10

came to light, there is no predicate that that

11

is when it first came to light, in December

12

2008.

13

BY MR. CIMO:

14

15
16
17

When did the first issue, to your

recollection, first come to light?

A

My recollection is that they asked me sometime

before these emails to get this policy --

18

Yes?

19

-- but I didn't.

20

Oh, okay.

21
22
23
24
25

Do you recall how much before they asked you,

before December 11th of 2008?
A

It wouldn't have been much before.

I really

have no specific recollection.

Q

Let me ask you:

Did they mention it at that

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meeting that you had with them, the first initial

meeting?

Did they mention it back then?

No, sir.

Did they mention it in June of 2008, to your

recollection?

To my recollection, no, sir.

Did they mention it in July of 2008 to, your

recollection?

ALL PRESENT:

10

Objection to form.

I don't have an independent recollection;

11

towards the latter half of the year, sometime around

12

when all of the things started hitting the media about

13

people losing money to Ponzi schemes, my best

14

recollection is that's when they started talking about

15

it.

16

BY MR. CIMO:

17

Now, what reaction did you have, if any, when

18

this insurance issue came up, and what impact did it

19

have on your ongoing Ponzi scheme, where the word crime

20

insurance is mentioned?

21

I had a discussion with Mr. Preve about

22

whether or not he thought we could actually qualify for

23

this type of insurance.

24

The concern that I express -- the concern that

25

I expressed to Mr. Preve was the level of diligence that

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an insurance company might require in order to attempt

to get this type of insurance.

We didn't think it was going to be

problematic.

qualified for it, not the levels of insurance that they

wanted.

7
8

So what I did was I called my insurance agency

and got some sample policies.

9
10

We also really didn't think that I

I sent the samples over.

I, ultimately, of course, never got crime

fraud insurance.

11

When you say "I," you mean the Rothstein firm?

12

Yeah, the Rothstein firm.

13

I don't even think we actually did a

14

full-blown, formal application for crime fraud

15

insurance.

16

themselves.

17

I think that was all done by Banyon for

Thank you.

18

I now want to show you Exhibit No. 133.

19

(Thereupon, the document was marked as

20

Trustee's Exhibit No. 133 for Identification.)

21
22

MR. CIMO:

chain, December 23rd, 2008.

23

BY MR. CIMO:

24

25

PCL 56811 through 56851 email

I would like to start off with the email from

Mr. Scott Rothstein on the second page to Mr. Simony,

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with a copy to Mr. Preve -- Simony, I'm sorry, I don't

mean to say Simony.

3
4

UNKNOWN SPEAKER:
same.
BY MR. CIMO:

Mr. Simony?

11
12
13
14
15

In the record it's the

So...

10

It has a different context.

Mr. Rothstein, do you recall this email to

Just give me one second.

I do.

Okay.

Why did you send this email to

Mr. Simony in or about December of 2008?

A

Brian Jedwab was conducting enhanced due

diligence on behalf of the hedge funds.

Q

How did you find out that there was enhanced

due diligence being conducted?

16

Jack Simony told me.

17

And what relationship, if any, did it have to

18

the insurance policy request?

19

I don't recall.

20

What relationship did it have, if any, to the

21

Dreier and these other things hitting the media in or

22

about this time?

23

ALL PRESENT:

24

BY MR. CIMO:

25

Objection to form.

If you know?

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It's not that I don't know.

assuming to tell you that.

their heads.

I don't know what was in

I can assume --

No, no.

I mean, I don't know.

10
11
12

Don't assume.

No.
I don't know.

I know

that they were doing enhanced due diligence.

8
9

I would be

In a time-line fashion I can tell you it was

subsequent to all of these various Madoff, Dreier,
Petters hitting the newspaper.
Q

What was wrong with the initial due diligence

that it was done?

13

ALL PRESENT:

14

15

BY MR. CIMO:

16

Objection.

You would have to ask them.

What did you learn, if anything, about what

17

was missed with the initial due diligence that was

18

done --

19

ALL PRESENT:

20

BY MR. CIMO:

21

22
23
24

-- in or about the spring of 2008?

ALL PRESENT:

Objection to form.

Objection to form.

Again, that's -- you're asking me a very broad

question.

25

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BY MR. CIMO:

I am just asking you what you know.

What did

you learn, if anything?

ALL PRESENT:

Objection.

Again, here's the problem with the question:

You're asking me what they missed.

missed a Ponzi scheme.

BY MR. CIMO:

No.

Obviously, they

Please understand, my question is focused

10

on what were you told or what did you learn that was

11

being done as part of the enhanced due diligence?

12

I have that question.

13

Thank you.

14

They wanted to be able to substantiate deal

15
16

flow.
Q

Did anyone explain to you why it was important

17

to substantiate deal flow in December 2008, as opposed

18

to any other month?

19

Yes.

Mr. Preve told me that Mr. Jedwab had

20

told him and Mr. Simony had told him that Brian and Gil

21

Kalter had significant concerns about the shear

22

magnitude of the number of cases that we could possibly

23

be bringing into our law firm and ultimately handle

24

them, that it seemed -- the word they used was "absurd."

25

And then why do you have this paragraph one in

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here which explains, apparently, your understanding of

Florida law regarding settlement amounts being entered

into trust?

email to Mr. Simony?

Why is that in this first paragraph of your

Just give me a minute to read it again.

In -- in examining the records, the financial

records and the timing of when we got our money, we were

requesting deals to be funded before we had paperwork to

send them.

10

We would from time to time say we already had

11

the money in house.

12

time --

They then asked at some point in

13

"They" being who?

14

The hedge funds.

15

I'm sorry.

The hedge funds would then ask how the heck do

16

you have the money in house; there is no paperwork yet?

17

I came up with this explanation, you know, in

18

talking to Mr. Preve, that the way we had money in house

19

ahead is that just our agreement at mediation settlement

20

conference was enough to enforce it and they wanted to

21

pay the money as quickly as possible to be able to say

22

they had an enforceable settlement agreement.

23

But you're saying in your email that Florida

24

law provides this, right?

25

Florida law?

You're saying this is under

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Yes.

Okay.

If you know, what was discussed, or, if

you recall -- with them as to why they're asking you

what Florida law provides?

ALL PRESENT:

BY MR. CIMO:

I don't recall one way or the other.

Did they think you had some special gift about

what Florida law provided?

10

ALL PRESENT:

11

BY MR. CIMO:

12

13
14

Objection to form.

Objection.

I'm am just asking.

Was it discussed why they were asking you?

It was not discussed why they were asking me,

15

except that they asked, how are we possibly getting

16

these millions of dollars ahead of time, why would the

17

defendants send me all that money without having any

18

paper?

19

Is your explanation of Florida law accurate?

20

I don't know one way or the other.

21

the paragraph.

22

writing.

23

I made up

I did no research; I just started

So did Mr. Simony ever contact you, or anyone

24

from the hedge funds contact you, and say, hey, you

25

know, that December 22nd, 2008, email didn't accurately

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set forth Florida law?

ALL PRESENT:

BY MR. CIMO:

Objection to form.

No.

Did anybody ever follow up with you from the

hedge funds, at all, about what Florida law provided?

Not to my recollection.

Did anyone ever say to you, at all, at any

time during the Ponzi scheme, from the hedge funds, that

10

any aspect of it related to Florida law was not

11

consistent with their understanding of Florida law?

12

ALL PRESENT:

13

14

BY MR. CIMO:

15

Objection to form.

No.

Okay.

Let me just ask another question.

16

What discussions were there, if any, about

17

Florida law with the hedge funds where they told you

18

what they thought Florida law provided?

19
20

ALL PRESENT:
A

Objection to the firm.

From time to time they would tell me --

21

especially Jim Kalter and Brian Jedwab, because they --

22

my recollection is they were lawyers, they would tell me

23

what their understanding of the law was; and if it

24

matched what I wanted the law to be, I would say they

25

were correct.

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And if it conflicted with what I wanted and

needed the law to be for the purpose of the Ponzi

scheme, I would simply tell them they were wrong.

conversations ended at that point in time.

BY MR. CIMO:

its counsel?

No.

And with that -- with those responses that you

The

Did the hedge funds ever hire the RRA firm as

10

would give where you would disagree or agree, did anyone

11

ever come back to you from the hedge funds and correct

12

you on Florida law?

13
14

ALL PRESENT:
A

Objection to the form.

I have no recollection of them correcting me.

15

I have recollection of one or two occasions where they

16

questioned me a second time, where I then made it

17

abundantly clear that this is what the law was and they

18

left us alone.

19

BY MR. CIMO:

20

"They" meaning the hedge funds.

Did you ever receive a phone call or an email

21

or any communication from a Florida lawyer of high

22

stature, asking you -- having a discussion with you

23

about Florida law?

24
25

ALL PRESENT:
A

Objection to the form.

I don't --

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BY MR. CIMO:

I'll --

I don't recall them hiring a Florida lawyer to

4
5

talk to me, no, sir.

Q

Do you recall any law firm, any law firm

located anywhere in the world, ever contacting you on

behalf of the hedge funds, before October of 2009, that

had any discussion with you about any law?

9
10

ALL PRESENT:
A

Objection to form.

Troutman and Sanders may have.

They may have;

11

but, again, understand, for whatever reason, any time I

12

explained what Florida law was, other than a couple of

13

follow-up questions, that was it.

14

BY MR. CIMO:

15

Okay.

16

-- the gospel according to Scott.

17

Thank you.

18

It was a --

Let's go now to the next page of your email,

19

which we'll call paragraph two; and you say, "firms that

20

refer us employment cases," and you list Joseph Slama,

21

S-L-A-M-A -- is that the correct pronunciation?

22

Yes.

23

-- from Krupnick Campbell?

24

Yes.

25

Is that a well-respected firm?

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Very.
ALL PRESENT:

BY MR. CIMO:

What opinion do you have, if any, about the

respectability of the Krupnick Campbell firm?

6
7

Object to form.

ALL PRESENT:
A

Objection to form.

I thought they were an excellent and

professional personal injury law firm.

BY MR. CIMO:

10
11

Not -- not a firm that sticks their name on a

park bench or a bench by the side of the road?

12

ALL PRESENT:

13

BY MR. CIMO:

14

Let me rephrase the question.

15
16

Have you ever seen in South Florida the

Krupnick Campbell firm advertise on a bench?

17

No.

18

Oh, really.

19
20

Okay.

ALL PRESENT:
A

Objection, form.

Mr. Slama.

24

Mr. Slama?

I -- I don't believe Mr. Simony ever spoke to

23

25

And what did Mr. Simony tell you about

what his discussion was with Mr. Slama?

21
22

Objection, form.

I don't recall anyone ever speaking to

ALL PRESENT:

Objection, form.

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BY MR. CIMO:

Do you know why not?

Yes.

Why?

Because what had ultimately happened was when

Why not?

they were doing their enhanced due diligence -- I think

I described this yesterday, but let me go through it to

make sure we're clear.

When they were doing their enhanced due

10

diligence regarding deal flow, I immediately sent out an

11

email to my entire firm saying, I need to, you know, get

12

people who are going to say nice things about us in our

13

employment business, anybody that you have that will say

14

good things about us, about referring us cases and that

15

the results are favorable, let me know.

16

We went back and forth a little bit.

17

Originally it was going to be a set group of

18

questions I was going to ask.

19

responded.

20

Schlesinger that it looks like they called --

A couple of the lawyers

I can see here from Slama and Bob Kelley and

21

Shelly Schlesinger?

22

Shelly Schlesinger.

23

Is that a respectable firm to your knowledge?

24
25

ALL PRESENT:
A

Objection.

Yes.

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2

That those three came from Mr. Adler because

he was very close to all those people.

But, in any event --

BY MR. CIMO:

Go ahead.

-- Mr. Jedwab then decided that he's not going

to ask just my questions, that he wanted to ask a

broader base.

conversation with them.

10

He wanted to be able to have a

Obviously, Mr. Preve and I could not have that

11

happen.

12

that happen, because that could create a real problem

13

for us with these people, since they did not -- they

14

would not be able to substantiate the deal flow that we

15

had.

16

No one involved in the Ponzi scheme could have

So we went into phase two of the response to

17

their enhanced due diligence, which was this.

18

Russ Adler, who had been screaming to become involved

19

deeper in what we were doing; and I told him he was

20

going to have his chance.

21

I went to

I said, this is -- I explained to him what was

22

going on, and I told him that I needed several firms

23

that would lie for us, specifically, about referring us

24

a substantial amount of cases that were worth tens of

25

millions of dollars and that we were paying these firms

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significant amounts in the millions of dollars of

referral fees.

3
4

For the purposes of this deposition, can we

refer to those firms as the park-bench firms?

ALL PRESENT:

BY MR. CIMO:

I know, for the record, you're smiling.

Why

are you smiling?

9
10

Objection.

Because the way you're saying that is funny,

especially because Steve Rossi had a park-bench ad.

11

Okay.

Who was -- what's Steve Rossi's

12

relationship to this scam that you did with Mr. Adler

13

about these other three lawyers?

14

ALL PRESENT:

15

BY MR. CIMO:

16

Objection to form.

Mr. Rothstein, do you agree this was a scam to

17

have three lawyers that were supposedly going to say

18

that they were giving large amounts of business to your

19

firm?

20

Yes.

21

Okay.

22

scam?

23
24

Am I wrong in characterizing it as a

ALL PRESENT:
A

No.

Objection.

We were asking them to lie for us.

25

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BY MR. CIMO:

Okay.

So, Rossi did advertise on a park

bench, and he's one of the three lawyers that Mr. Adler

was going to get to talk about how great your firm is,

right?

Yes.

Correct.

8
9

Okay.

Did the other two get put on park

benches, too, or just Mr. Rossi?

10

ALL PRESENT:

Objection.

11

BY MR. CIMO:

12

If you know?

13

I don't recall seeing Mr. Herskowitz's name --

14

Okay.

15

-- I'm sorry, on a park bench or the Koppel

16

Bates.

17

18
19

We will call them the one-third park bench.

ALL PRESENT:

Objection to form.

Mischaracterization.

20

BY MR. CIMO:

21

I tell you what.

In order to get past the

22

objection, I'll call them the other firms; is that okay,

23

Mr. Rothstein?

24
25

Yes.
And we need to clarify, just the nature of

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this is, to make sure this is good, Mr. Nurik has

clarified that these are bus benches.

Park benches, I'm so sorry.

MR. CIMO:

Let the record reflect they

should be bus benches.

BY MR. CIMO:

What I'm going to do is, to avoid any

argumentative nature, I'm going to refer to them as

other firms.

10

Okay?

I'm sorry.

I'm not hearing anything you're

11

saying right now.

12

disrupting my train of thought.

13

14

firms.

15

Just give me one second.

This is

I'm going to refer to these as the other

You know this is such a sensitive topic with

16

lawyers, those benches, so let's just refer to them as

17

the firms given to me by Adler, and then I'll know what

18

you are talking about.

19

20

acceptable?

21

22

I'll call them the Adler firms; is that

Yes.

The Adler firms were the Rossi Firm,

Steve Rossi's firm, and the Herskowitz Firm.

23

And the Koppel Bates firm -- the Koppel Bates

24

firm was a firm that I brought in to help us with the

25

scam.

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Thank you.
But if you can just explain to me how these

Adler firms, I'm going to say the one that you referred

to as part of the Adler firms, how did the Adler firms

compare to the other three firms of Krupnick and

Campbell; Robert Kelley from Shelly Schlesinger's firm;

and Fisher and Phillips, in terms of stature and

reputation?

ALL PRESENT:

10

Objection to the form.

There is no comparison.

You're talking about

11

the Krupnick Campbell firm; the Schlesinger firm; Bob

12

Kelley's firm.

13

You're talking about the cream of the crop of personal

14

injury law firms.

15

BY MR. CIMO:

16

Bob used to be with Shelly Schlesinger.

But you did send an email, dated

17

December 22nd, 2008, you did send this email, to

18

Mr. Simony?

19

Yes.

20

You sent it to him, and do you know if he got

21

it?

22

ALL PRESENT:

23

24

BY MR. CIMO:

25

Objection to form.

Yes, he got it.

He got it, and the email expressly says,

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quote, you are hereby authorized to contact the

following individuals at the following firms and inquire

as to the following," and then it has A and B.

lists Krupnick Campbell, Robert Kelley, Shelly

Schlesinger's firm and then Fisher and Phillips.

And it

Is it your testimony that you understand

Mr. Simony or no one from the funds ever spoke to these

three firms?

ALL PRESENT:

Objection to form and

10

mischaracterization.

11

No, they did not speak to them because they

12

wanted to do a different level of due diligence, and we

13

could not have them asking these people the type of

14

questions that they were going to ask.

15

have them go to people who were in our pocket.

16

BY MR. CIMO:

17

We needed to

I understand that's your answer; but what I'm

18

trying to understand is, even though you gave them the

19

names of three other firms, the Adler firms, you had

20

given them authority in this email to talk to these

21

other three firms, correct?

22

I did.

23

Okay.

And what I just want to find out is,

24

not what you decided or what you thought was

25

appropriate, I just want to know, did you ever come to

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learn at any time that there was any attempt to talk to

the Schlesinger firm or the other two firms that were

mentioned in your December 2008 email?

ALL PRESENT:

misleading.

BY MR. CIMO:

Objection to form,

To my knowledge, no.

Am I misleading you by asking this question?

Am I mischaracterizing your testimony in any way?

10

You're not misleading me, no.

11

Okay.

12
13
14

And how do you know that these three

firms were not contacted by the hedge funds?

A

I don't know for certain that they weren't

contacted.

15

Okay.

16

To my knowledge, they were not contacted.

17

And how do you know that the Adler firms that

18

were recommended were contacted or not?

19

I was with them.

20

You were with them, meaning the hedge fund

21
22

representatives, when you visited the other Adler firms?

A

I brought the hedge fund representatives,

23

Mr. Jedwab and Mr. Glass, to the other firms, the two

24

that Mr. Adler set up and the one that I set up with

25

Mr. Adler's assistance.

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Did Mr. Simony ever ask you why you referred

these three firms, initially, in December 22, 2008, and

then crossed them off the list and then referred three

other firms?

Did Mr. Simony ask me that?

Yes.

No, Mr. Simony couldn't have cared less.

Why not?

Because Mr. Simony just wanted to get back to

10
11

business as usual.
Q

That's what made Jack, Jack.

And what role did the Adler firm

12

recommendations play in allowing, quote, business to go

13

back to usual, if any?

14

I don't think business ever went completely

15

back to usual with the hedge funds.

16

significant business with them afterwards.

17

We never did real

But it satisfied the people -- I know it

18

provided Ari Glass with a significant level of comfort

19

after he got to speak to those people.

20

that it made things much more comfortable for him.

21

He had told me

Do you know whether Ari Glass was ever

22

apprised of the fact that three other law firms had been

23

proposed to Mr. Simony, other than the Adler firms?

24

I have no way of knowing one way or the other.

25

Let me show you Exhibit No. 134.

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2

(Thereupon, the document was marked as

Trustee's Exhibit No. 134 for Identification.)

THE WITNESS:

entire email?

BY MR. CIMO:

Do you want me to read the

Please just refresh your recollection very

quickly.

First of all, this email is dated December 25,

correct, Christmas day, 2008, from you to Mr. Jedwab, to

10

Mr. Simony with a copy to Mr. Preve and Mr. Levin --

11
12

For my comfort level, let me read the entire

email, because it's rather long and detailed.

13

Okay.

14

Okay.

15

Do you recall this email?

16

I do.

17

Why did you send it?

18

I was making a very strong attempt to push the

19

hedge funds back.

20

Back to where?

21

Out of my way.

22

When you say out of your way, what did you

23
24
25

mean?
A

The continued requests by Mr. Jedwab, with

regard to enhanced due diligence, I mean, were creating

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a problem for myself, Ms. Villegas, Mr. Rosenfeldt.

were talking about it.

too deep as far as we were concerned.

for new things.

We

They were digging their noses in

They kept asking

And what I had learned over the term of this

Ponzi scheme was, the best way to get people in line, to

go the direction you want them to go, is to push back

and -- just to push back on what they're doing,

utilizing the things that, to the best of your ability,

10

make sense to them as to what they were attempting to

11

do.

12

But we were pushing back at them to try to get

13

them to come to some lower level of due diligence.

14

Ultimately, I was simply trying to get them to fund

15

again.

16

17

And how long had it been since they had

stopped funding?

18

ALL PRESENT:

19

20

BY MR. CIMO:

21

22
23

Objection, form.

I don't recall.

Did there come a point where they either

stopped or slowed down funding?

A

This was around the time when it was stopping,

24

and by reading this email, I recall that they were

25

telling us they weren't going to fund anything in

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December.

Do you have a recollection whether the

decision to either slow down or stop funding was around

the same time that this Regent side deal that you

testified about was being done?

Yeah, it was around that time.

Did you ever have a discussion with anyone

from the hedge funds about why -- the ones involved in

Regent, as to why their hedge funds didn't want to fund

10

anymore, but they were glad to do a side deal with you

11

where they doubled the money in six months?

12

ALL PRESENT:

Objection to form.

13

14

BY MR. CIMO:

15

And what did you discuss?

16

There had actually been discussions all along

Yes.

17

our relationship once we became friendly, and that was

18

there were really two different factions involved.

19

There actually should be an email some place

20

from Mr. Preve where we are discussing the factions,

21

that I think Simony was involved in those conversations,

22

also.

23

What I came to learn, actually through

24

Mr. Simony and Mr. Nordlicht, was that we had the Brian

25

faction, with Gil, Ari, who wanted to do, for example, a

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$50-million line first and then ease into everything.

And then we had the Nordlicht, Huberfeld,

Glass -- I mean, Nordlicht, Huberfeld, Simony faction

that wanted to go to $150 million and beyond right away.

It was full steam ahead.

That is the way it pretty much was the entire

time we did business.

and I some peace of mind, even during the enhanced due

diligence, because, obviously, we were involved in a

It's actually what gave Mr. Preve

10

massive crime.

11

noses into your business, that will, to use my term, get

12

you hinked up.

13

about that, as was Mr. Rosenfeldt.

14

When people are trying to stick their

Mr. Preve and I were both concerned

What ultimately happened was when we learned

15

that other people, people in control of the hedge funds,

16

still wanted to do business with us on the side, we

17

realized that it was more just trying to pacify the

18

Jedwab, Kalter, group from the hedge fund.

19

Let me show you --

20

Still needed to pacify them, but it was --

21

there were clearly two different groups of people in

22

there: people that were very concerned and people that

23

were not.

24
25

Thank you.
Let me show you Exhibit 135.

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2

(Thereupon, the document was marked as

Trustee's Exhibit No. 135 for identification.)

MR. CIMO:

It's a declaration of

Mr. Gabriel Hertzberg, court document number

144, case number 10-3802-RBR.

BY MR. CIMO:

I'm going to turn your attention to the

exhibits, in particular, exhibit B, as in "boy," and

I'll represent to you that in this declaration,

10

Mr. Hertzberg --

11

MR. NURIK:

12

to read the document?

13
14

MR. CIMO:
the record.

Could you give him a minute

Yes.

I am just saying it for

Please read it.

15

Under penalty of perjury, he states

16

Exhibit B is a true and correct copy of a due

17

diligence memoranda, prepared by Brian Jedwab

18

in 2009.

19

BY MR. CIMO:

20

And I don't want you to spend a lot of time

21

reading it; it's very detailed.

22

you saw the three-page memo before today?

23
24
25

I just wanted to see if

The three-page memo, that's -MR. NURIK:

You are talking about which

exhibit?

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MR. CIMO:

BY MR. CIMO:

Exhibit B, as in "boy."

My first question is, have you seen this

exhibit before today, before you read it?

I have.

Had you seen this exhibit before October of

2009, before you went to be incarcerated?

8
9
10

There was -- this doesn't have a date on it of

when it was prepared, but there was a due diligence

report.

11

Separate from this?

12

See, I don't know whether it was this one or

13

not.

Let me just -- let me tell you what I recall.

14

There was a due diligence report that was

15

internal, a copy of which was provided to Mr. Preve,

16

which he provided to me.

17

It looks like this.

This looks like the one;

18

but without a date on it, seeing what date it was

19

prepared, it's very difficult for me to recall at this

20

time.

21
22

But I have definitely seen this before.

recall reading it.

23

Does this --

24

I just can't tell you whether I read it during

25

the process of my cooperation or whether I -- this is

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actually the privileged internal document that Simony

snuck to Preve, which he then gave to me.

Does this memo accurately describe that there

was a visit by Mr. Jedwab to see you, from December 28

through December 31st of 2008?

Yes.

At -- during those days, did you make the

visit to those Adler law firms that we spoke about

earlier that were the three other law firms that were

10

provided as alternatives to the initial three law firms

11

that were provided?

12
13
14

I did make the visits that day to those three

law firms with those gentlemen, yes.

Q

And under the volume of cases, those meetings

15

with those lawyers, including Mr. Rossi, that you said,

16

you know, sometimes advertises on bus benches, does this

17

accurately describe the fact that there were meetings

18

with you and Mr. Jedwab with these three lawyers, just

19

the paragraph under volume of cases?

20

Yes.

21

Okay.

And the next paragraph where it talks

22

about Phillips and -- Fisher and Phillips, was that firm

23

visited, too?

24

I'm sorry, what about Fisher and Phillips?

25

Was Fisher and Phillips, mentioned in the next

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paragraph, were they also visited?

They were not visited, no.

They were not.

4
5

So which law terms were visited?

A

I took Mr. Jedwab, and I think Mr. Glass was

with us for all three, I took them to see Steve Rossi,

Mr. Herskowitz and to the Koppel and Bates firm.

8
9
10

Okay.

And why wasn't Fisher and Phillips

visited?
A

Because there's no way that I would have been

11

able to get -- or with Mr. Adler or Mr. -- even,

12

Rosenfeldt, have been able to get Charley Caulkins to

13

lie for us the way we would required.

14
15
16
17
18

As part of that visit from the 28th through

the 31st, were there any gentlemen's clubs visited?

A

I don't recall one way or the other.

It's

possible, but I have no independent recollection of it.

Q

And other than those meetings at the law firms

19

and then a reference to a paralegal, Adelita Cabello,

20

C-A-B-E-L-L-O, being met with, do you know whether there

21

was anyone else at the law firm for Rothstein,

22

Rosenfeldt & Adler that was spoken to by Mr. Glass or

23

Mr. Jedwab?

24

25

Spoken to, yes.

There were meet-and-greets.

Due-diligence-wise, I have no recollection of that.

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Now, what was your opinion of this due

diligence that's now being done in December, which you

have characterized, as -- you said, enhanced diligence?

Was that you called this, enhanced due diligence?

Okay.

My question was, this enhanced due diligence

What was the question?

I was reading.

that is happening in or about December of 2008, what

opinion or what conclusion did you reach, if any, as to

the adequacy of this enhanced due diligence?

10

ALL PRESENT:

11

12

BY MR. CIMO:

13

14

Okay.

Objection, form.

I'm sorry.

Now repeat the question.

No, gladly.
What opinion did you reach, if any, in regard

15

to the adequacy of the enhanced due diligence that it

16

was now being conducted?

17

I thought the due diligence, from my

18

standpoint, from a Ponzi standpoint, went well for us;

19

but it was not as enhanced as I was afraid it was going

20

to be.

21

So it went well for us and -Okay.

What did you specifically observe that

22

you felt led you to the conclusion that it wasn't as

23

enhanced as you thought it was going to be or detailed?

24
25

When we were at Mr. Rossi's firm,

Mr. Herskowitz's firm, and Koppel and Bates firm, there

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were things that I was concerned that Mr. Jedwab and/or

Mr. Glass might do during the course of this that could

have put both myself and my co-conspirators that were

assisting as the referring lawyers, in a very difficult

position, and none of these those things were done.

6
7
8
9
10
11

Did you ever use the term "going through the

motions"?
A

I probably did.

That's -- to ask me if I ever

used that phrase "going through the motions," yeah, I

probably did.
Q

Was there anything that you observed when the

12

lawyers were met with that just made you believe one way

13

or the other, if at all, that the due diligence was more

14

of a necessity that had to be gone through, as opposed

15

to something that was really trying to delve into the

16

true relationship between these three law firms and the

17

Rothstein Rosenfeldt & Adler firm?

18

ALL PRESENT:

19

20

BY MR. CIMO:

21

What's that?

22

Okay.

Objection, form.

Yes.

While we were there, before we went,

23

okay, you have to understand my frame of mind, when

24

we're going there, obviously I'm somewhat panic-stricken

25

because this is a major undertaking.

We've got, one,

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two, three -- three or four other lawyers at different

firms all having to basically stick to the exact same

false script while being questioned by people who, I

believed at that time, based upon my conversations with

Mr. Jedwab, Mr. Glass, Mr. Simony and Mr. Preve, were

going to ask some difficult questions during the course

of these meetings.

8
9

Fortunately for the Ponzi scheme,

unfortunately for the hedge funds, they did not go down

10

that road.

11

cases do you accept, what are the size of the cases,

12

what's the frequency, what kind of cases, what kind of

13

practice do you have and the dollar amounts that they

14

received -- how long they knew me, my reputation, that

15

type of thing.

16

They confined their questions to how many

They did not appear, to me, to be nearly as

17

attentive as I thought they were going to be; and one of

18

the big tells was, when we went to go see, for example,

19

Mr. Herskowitz -- I had never met Mr. Herskowitz before.

20

If I had, it was in passing.

21

office, I was going in and Mr. Glass and Jedwab were

22

with me, I believe, at least one of them was with me,

23

and we were walking in and Mr. Herskowitz comes up to me

24

and says, it's nice to finally meet you, at which time I

25

almost had a coronary.

When we walked in his

Because here is a guy who is

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supposed to be sending me millions of dollars worth of

cases.

Millions or tens of millions?

Tens of millions, yes, a lot of cases, and he

says, nice to finally meet you, and I was like -- and I

said, good to see you again, you know.

I tried to recover.

Now, had they been paying attention, that

could have caused a problem.

10

In the Rossi office, they started to ask him

11

questions about, you know, the type of practice, and the

12

fact that he was a criminal defense lawyer, primarily,

13

and where, these other cases, would he come up with.

14

And they never followed up on it.

15

There were a lot of things that I had expected

16

them to do that they never done -- they never did.

17

For example, asking to see -- without looking

18

at the names, can you just show us a case list of all

19

the cases.

20

They never did.

21

I expected them to say something like that.

Unfortunately for me, I only expected them say

22

it as I was driving there.

23

about them asking for some kind of documentation.

24
25

I actually started to panic

But they never did.

Q

So...

Had you already reached the conclusion that

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Mr. Glass was a player -- an in-and-out player when this

happened?

3
4

ALL PRESENT:
A

I did.

Objection to form.

I -- I more came to that conclusion

with Mr. Glass when he had his whole one-off side-deal

thing going on with Bo Rosenblat.

bringing a doctor in who's -- who has no knowledge of

what we do, knows nothing about investing, and he's

going to be the front man for this Intercoastal --

Because here he is

10

whatever the heck the name of it was, his private

11

investment company; and he was going to continue to do

12

these deals with us.

13

So, when someone is willing to go to that

14

level to deceive their partners, you have a player in

15

the works or a player in full bloom.

16

who they are.

17
18

It just depends on

Now, the next page of this exhibit talks about

follow-up and this is PCL 61985.

19

Okay.

20

It says that Mr. Jedwab visited you on

21

March 4th and 5th, 2009.

22
23
24
25

Do you know whether that, in fact, happened?

A

I remember him being there; I don't remember

the dates.
Q

You recall discussing Thigpen versus UPS with

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him?

Yes.

Was that at a 10 -- 10 -- multi-million --

4
5
6
7
8

tens-of-millions-of-dollars lawsuit?
A

I don't remember what it was.

It was several

million dollars.
Q

Did it result in a public record that resulted

in a judgment or some other verdict?

It did.

10

And -- but is that the only case that you

11
12

showed Mr. Jedwab at that time?

A

The actual case -- I gave him access --

13

according to this, I gave him access to Fortis, and he

14

looked at Thigpen, and then I showed him the fake

15

videotapes, and I showed him a letter to the Spanish

16

broadcasting company making a claim.

17

that, that would have been it, according to the letter.

18

But other than

That was the extent of what you had him review

19

during that March 4th/March 5th visit, to your

20

recollection?

21
22
23

Yeah.

He was fine with looking at that.

So I

wasn't offering if he wasn't asking.

Q

Then it says, "During my discussions with

24

Mr. Michael Szafranski" -- that's the same one as

25

Mr. Kalter's childhood friend?

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Yes, sir.

"I have asked him to look into the parties, to

the cases we are funding, to establish their ability to

pay, as well as their connection."

Did you know that that had happened?

I did.

Okay.

And what did you learn?

How did you

learn about that?

Mike told me.

10

And then there's a March 26, 2009, follow-up.

11

Michael Szafranski told me.

Did you play any role in regard to learning

12

about this follow-up where Szafranski verified cases at

13

RRA and you negotiated a purported settlement of them?

14
15
16

No.

Mike and I made that up.

That never

happened.
Q

But, again, this was something between you and

17

Michael Szafranski.

18

this information to Mr. Jedwab; it appears Michael

19

Szafranski provided it.

20

You did not pay any role in giving

I don't remember whether or not Mr. Jedwab

21

asked me about it subsequently, but it was Mike's job to

22

relay the information, initially, to Mr. Jedwab.

23

How did you compared this enhanced due

24

diligence in December 2008 to the initial due diligence

25

that was done at the start of the relationship.

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ALL PRESENT:

BY MR. CIMO:

You used the word "limited," I think, at the

ALL PRESENT:
A
limited.

it was going to be.

BY MR. CIMO:

11

Objection.

Form.

It was somewhat enhanced but also it remained

10

Form.

front end.

5
6

Objection.

It wasn't nearly what Mr. Preve and I thought

And that, therefore, enabled you to continue

with your Ponzi scheme?

12

That's correct.

13

And had the due diligence been more probative

14

and had it been -- had due diligence, for example, been

15

done on the three law firms that Mr. Adler had referred

16

you to to see the volume of their cases, do you believe

17

it could have been discovered that those firms, in fact,

18

had not provided such --

19

ALL PRESENT:

20

Speculation.

21

Objection to form.

My belief is, yes, it could have been

22

discovered, but I don't know how that would have

23

ultimately affected people at the hedge funds.

24

BY MR. CIMO:

25

Let me ask you to follow up on that:

What did

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you learn, if anything, as to what due diligence was

done by the hedge funds regarding Mr. Rossi and the

other two firms after the meeting happened in December

of 2008 -- the meetings happened?

I was never advised one way or the other.

And did you hear anything at all from the

hedge funds, other than doing these meetings with the

lawyers, any further questions of your firm about the

relationship between your firm and those Adler-related

10

law firms after those meetings in December of 2008.

11

Any follow-up?

12

13

Anything?

To my recollection, no.
MR. CIMO:

Let's take a break at this

14

time because I think we're going to streamline

15

our remaining questions.

16

(Thereupon, a recess was taken.)

17

MR. CIMO:

18

(Thereupon, a document was marked as Trustee's

Let's go back on.

19

Exhibit 136 for identification.)

20

BY MR. CIMO:

21

22

Mr. Rothstein, take a look at 136, please.

Mr. Rothstein, I'm showing you Exhibit 136.

23

Who is the center of the "from 19546072333," if you

24

know.

25

That's me.

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email?

It is.

Why did you send this email to Mr. Jedwab in

Is that a text message, instead of an

or about March 19th of 2009?

money.

Okay.

I was trying to push him to give us some

And you talk about "inability to fund old

deals has resulted in my receiving a Bar grievance."

10

Yes.

11

What is that about?

12

That's a lie I created.

13

And is this the same -- was the enhanced due

14

diligence already over at this point?

15

Yes.

16

Okay.

If the enhanced due diligence was over,

17

do you know why you were having difficulty getting the

18

hedge funds to provide more money?

19

I don't know why, no.

20

Did the hedge funds ever follow up with you in

21

regard to requesting documents after they had completed

22

their enhanced due diligence in December of 2008?

23
24
25

I have no recollection.
If they did, it was of no significance.

It

doesn't stick out in my mind.

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Do you recall Mr. Jedwab taking any notes or

Mr. Glass taking any notes while they met with the three

attorneys in December 2008, with you?

I don't recall one way or the other.

Do you know whether there was a request to see

any traffic reports regarding hits?

I -- I have no recollection of that.

Do you know if the hedge funds ever asked you

9
10

to see the amount of referral fees in the Rothstein

firm's records paid to those law firms?

11

They never asked me that, no.

12

Were you asked for any financial data

13

regarding the tens of millions of dollars in cases that

14

were supposedly being given to you by these three law

15

firms?

16

No, sir.

17

And the Bar grievance that you made up, what

18

was the story that you made up regarding the Bar

19

grievance?

20

It was an ongoing story that we were using to

21

explain why payments were not being made and also to try

22

to get people to fund deals that were involved.

23

We tried to make the hedge funds feel as if

24

they had created a Bar problem for us so that they would

25

pay us.

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2

Do you know whether the hedge funds were

current with the Banyon entities at this time period?

ALL PRESENT:

don't know.

I don't know.

Objection to form.
I don't think they were, but I

MR. CIMO:

(Thereupon, the document was marked as

Exhibit 137.

Trustee's Exhibit 137 for Identification.)

BY MR. CIMO:

10

Have you seen this before today?

11

I don't recall seeing this, no.

12

Do you recall a meeting in or about April 8th

13

to meet with George to discuss impact of nonfunding on

14

the operations of RRA?

15

I don't recall this.

16

Do you recall any meetings about alternatives

17

No.

to dealing with Scott and Centurion?

18

I -- I don't recall it.

19

And then, finally, do you recall any meetings

20
21

No.

to discuss Brian Jedwab or Regent?

A

I don't.

22

MR. CIMO:

23

(Thereupon, the document was marked as

24

Show you now Exhibit 138.

Trustee's Exhibit 138 for Identification.)

25

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BY MR. CIMO:

Mr. Preve makes mention to doing the exact

same default letter to Platinum.

Do you know what default letter is being

referred to in April of 2000 -- April 8th of 2009?

Yes, I do.

And what letter is that?

We were attempting to get the hedge funds to

continue to fund us money.

We were also looking for a

10

methodology to avoid paying them everything that we owed

11

them in the amounts and the timing that needed to be --

12

that were required to be paid.

13

idea of saying that they were in default for not

14

funding.

15
16
17
18

So we came up with the

They were in default, but they didn't have a

direct relationship with RRA.

A

I understand that, but I was dealing with

them, anyway, through Mr. Preve.

19

Understood.

20

But we did not have a direct relationship.

21

The only relationship I had with the hedge

22

fund was to try to convince them that these were real,

23

and they were not.

24
25

I understand.
So it was really the Banyon entities that were

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going to claim that the hedge funds were in default?

Correct.

Then the next sentence says, quote, They are

really the same company and we must treat them as such.

Do you know what he's referring to?

6
7

That's just me outlining what I consider to be

a pressure point to try to squeeze the hedge funds.

And what is the pressure point?

That they're supposed to be separate entities,

10

but to my knowledge, they were really not; they all

11

interacted.

12

13
14

How did that work to your advantage as part of

the Ponzi scheme?

A

I wanted to try to put them in a position

15

where they would believe that they had something to lose

16

in the course of cutting us off.

17

You have to remember something, that

18

throughout this entire thing, you're still dealing with

19

a hedge fund that is investing in a Ponzi scheme; and to

20

my knowledge, the entity itself doesn't know it's a

21

Ponzi scheme.

22
23
24
25

Okay?

So I've got to put pressure on them to try to

get them to, for whatever reason, go ahead and fund.
You have to always separate out the difference
between the entities and what they knew as a whole and

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what they were intending on doing or not doing or how

they would have proceeded or not proceeded based upon

their knowledge; and the acts of people associated with

but doing things on the side.

Understood.

Two completely different things.

And then the reference to "Murray legally

cannot be involved in both," do you know what Mr. Preve

is referring to there?

10

No, no.

11

Okay.

12
13

I'm writing that.

I'm sorry.

You're reference to Murray being legally

involved.

I apologize.

14
15

That's me.

What's that in reference to?

A

Okay.

To my knowledge, Murray Huberfeld had

16

had significant SCC problems and criminal problems.

17

This is based on conversations with Mr. Nordlicht, Mr.

18

Preve, and Mr. Simony.

19

I was looking for a methodology to pressure --

20

remember:

21

time for the Ponzi scheme.

22

methodology to squeeze the hedge fund entities into

23

investing.

24
25

We're very short on money at this point in

I am looking for a

When you are attempting to do that in a

criminal enterprise, you do it by finding a pressure

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point that you believe will put the players who are

pushing back, like Mr. Jedwab and them -- what I hoped

was, Mr. Huberfeld would find out we were doing this,

Mr. Nordlicht, and would tell the others, okay,

controlling the entity, that we should do this for these

reasons.

7
8

Okay.

You're trying to act on the internal

conflicts that are going on.

Okay?

The legitimate players and the -- what I'll

10

just call the not-so-legitimate players, you're looking

11

for a business pressure point.

12

just have to separate out who is who in the scheme of

13

things.

14

relative to trying to understand why I came up with the

15

Bar grievance thing.

16

That's all it is.

You

That's probably the most important thing

Okay.

The Bar grievance thing wasn't for

17

illegitimate players.

18

the legitimate players, the people that, had they known

19

it was a Ponzi scheme, would have stopped.

20

need to apply pressure to people who are criminals.

21

Those are people easy to apply pressure to.

The Bar grievance thing was for

You don't

22

It's the legitimate side of the hedge funds,

23

the people that were controlling the money flow to me,

24

to us, that were problematic.

25

MR. CIMO:

Exhibit Number 139 through

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146, as a composite.

(Thereupon, the documents were marked as

Trustee's Exhibit 139-146 for Identification.)

BY MR. CIMO:

Okay.

I want you to look at the email that

you wrote where you say, "Scott a/k/a Killem hood."

You see that?

Who is triple ggg?

UNKNOWN SPEAKER:

10

on in these, please?

11

MR. CIMO:

12

Dated April 8th, 2009.

Triple ggg is Frank Preve; that's Guido,

13

Guido, Guido.

14

BY MR. CIMO:

15

16

Can you put some dates

Let me just get the copy.

And what I wanted to ask you specifically

17

about this email is the reference to Murray -- Mayer

18

knowing about the secret deal with Murray, what secret

19

deal is that?

20

That's the Regent deal.

21

Thank you.

22

Look at Exhibit 140.

23

Why did you send this email to Mr. Preve?

24
25

Hang on a second.
This is Preve to me, actually.

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2
3

I'm sorry.

Why did Preve send this to you?

First of all, do you recall receiving this?

A

Yes.

Just give me one second, please.

Okay.

This is a perfect example of the

dichotomy between the entities and the players.

And how is that?

Because, to my belief, in all the business

dealings I'm dealing with Centurion, Platinum, and Level

10

3, they appear to me to be legitimate and sophisticated

11

hedge funds.

12

any criminal enterprise.

13

They don't appear to me to be involved in

Certain people that worked there, to me, had

14

the propensity to do things opposite of -- Ari, for

15

example, he's writing here where he says to me:

16

a by-the-book kind of guy.

17

kind of explosive thing before.

18

Ari is

He hasn't been through this

And you got to remember, the hedge funds all

19

together, they don't act by one man.

20

know, a group decision, at least that's certainly the

21

way it appeared to me.

22

ultimately calling the shots, I suspect he had all these

23

people, based upon what I had been told, as advisers.

24
25

They act by, you

Even though Huberfeld was

So, you have to differentiate between the fact

that I consider Jack Simony to be a player and Mark

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Nordlicht to be a player, from the entity itself.

not the same thing, and that is what's being set forth.

It's

In this, Frank is trying to explain to me,

with a copy to George, that, look, you're getting upset

with these guys, but you have to remember that the hedge

fund is a legitimate business, and just because we have

good -- what's called a subterranean relationship with

some of the guys, doesn't mean the hedge fund is going

to intentionally do anything wrong.

10

Look at exhibit --

11

That's what he's trying to tell me.

12

Thank you.

13
14

Look at Exhibit 141, an email dated -- emails

dated April 16th and 17th, 2009.

15
16

I want you to look at the one from Mr. Levin

to Ari Glass.

17

Did you know about this email before seeing it

18

today?

19

20
21
22

I remember seeing it.

saw it before he sent it.

Q

And then it talks about a meeting in or about

April 16th in the evening.

23
24
25

I don't remember if I

Did you attend this particular meeting?

Did

it happen?
A

I don't recall one way or the other.

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2
3

There's discussion in here about funding of

new cases; did that happen?

A

I don't believe it -- this looks like just one

of George's doing the same thing that I was trying to

do, trying to pressure the entity into funding.

6
7

Exhibit 142, email from Mr. Levin to Preve.

Have you seen this before today?

Yes.

Have you ever heard of Mr. -- well, do you

10

know who is referred to as the crazy man?

11

Yes.

12

Ari Glass?

13

Yes.

14

And were there discussions between Mr. Levin

It's Ari.

15

and Mr. Preve and yourself about Mr. Glass being the

16

crazy man?

17

Yes.

18

Why?

19

Because Ari, when he was dealing with the

20

business for the hedge funds, not for the Rosenblatt

21

thing, but for the -- in the Level 3, Centurion,

22

Platinum deals, he was a more by-the-book kind of guy

23

and very explosive emotionally when things did not go by

24

the book.

25

Look at Exhibit 143.

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2

Mr. Preve emails Mr. Glass about Florida Bar

questions.

3
4
5
6
7

Do you know about this email -- when it was

sent in or about April 22nd, 2009?
A

recollection of seeing this.

Q

8
9

12
13
14

Preve to you dated 4/27/2009, subject:

recall what was done in regard to it?

A

19

I recall the email.

I don't recall anything

actually being done.

Q

Go to Exhibit 145.
This email from Preve to Mr. Nordlicht talks

about restructuring a debt.

17
18

Suggestion.

Do you recall this email, and if so, do you

15
16

Go to Exhibit 144.
I would like you to look at the email from

10
11

I don't actually have any independent

Do you recall this going on in or about April

28th of 2009?
A

I remember there being conversations between

20

myself and Mr. Preve and Mr. Levin, that they were

21

trying to work out their business relationship with the

22

hedge funds.

23
24
25

What was actually done, I don't know one way

or the other.
Q

It talks about $15 million.

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Do you recall $15 million ever being discussed

with you as an amount that the funds wanted -- the hedge

funds wanted?

4
5
6

I do.

I actually think I received an email

from Mr. Nordlicht in that regard or Mr. Simony or both.

Q

Take a look at Exhibit No. 146.

Is this the email you're referring to?

It's an email to you to Mr. Nordlicht talking

9
10

about 15 million.
A

Well, this is the one that I sent to them, but

11

I believe there's other emails where they were

12

discussing it with me or maybe they sent it to Mr. Preve

13

and I got copied on it.

14
15

Okay.

Well, this email -- this is an email

you wrote in or about May 6th of 2009?

16

It is.

17

And it talks about the total wire to you

18

against the 15 million owed under the agreement with

19

Banyon to 8.5 million.

20

That's correct.

21

That's how much had actually been wired to

22

that point?

23

I assume that's correct.

24

And then it talks about the -- I expect to

25

I don't know.

wire the remainder in the next few days.

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Do you know whether that occurred?

I don't recall one way or the other.

You then say, "Given these and all other

pendent circumstances, Banyon and my firm expect that

you will not issue a default against Banyon."

6
7

Was a default ultimately issued?

A

I later came to learn that an internal default

had been declared as early as April, but as far as

saying we were in default, there were certain people

10

there who constantly say on the phone -- for example,

11

Ari Glass, Brian Jedwab would say, you -- Banyon's in

12

default.

13
14

You guys are in default.

We are going to sue.

I mean, I heard they were going to sue a 100

times from Ari glass.

15

But as far as actually declaring us in

16

default, no.

17

Exhibit --

18

Not to my knowledge.

19

Thank you.

20

(Thereupon, the document was marked as

21

Trustee's Exhibit 147 for Identification.)

22

BY MR. CIMO:

23

24
25

Exhibit Number 147, an email from you dated

April 29th to Jack Simony.

And you say, quote, I have borrowed the

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15 million do play Platinum this week, end quote.

Yes.

Did you send this email to Mr. Simony?

I did.

And why are you telling Mr. Simony that you

6
7

had borrowed 15 million to pay his hedge fund?

A

Because I didn't want him to think I was

taking the money from any of the internal accounts

because I had them under the belief that all the money

10

was locked up by the Florida Bar.

11

12

money from?

13

No, sir.

14

Did he inquire about what you had to provide

15

Did Mr. Simony ask you who you borrowed the

in terms of collateral to borrow such money?

16

No, sir.

17

Did you have any discussion at all about where

18

you would come to possess $15 million to give to

19

Platinum?

20

No, sir.

21

Did you have any impression as to whether he

22

cared or not where you got the money from?

23

UNKNOWN SPEAKER:

24

THE WITNESS:

Objection.

Jack himself?

25

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BY MR. CIMO:

Yes.

I think he was concerned.

4
5

You know what?

I'm really guessing as to what

he thinks.

No.

Yeah.

I am asking you, did you form an opinion or a

9
10

Don't guess.
I don't know what he thought.

belief in or about April 29th of 2009, as to whether you

thought he cared where you got the 15 million from?

11

ALL PRESENT:

Objection.

12

THE WITNESS:

In his role as a member of

13

Form.

the hedge fund or as Jack himself?

14

BY MR. CIMO:

15

You can split that answer into the two phases?

16

I think that the hedge fund itself would have

17

been concerned about where the money came from.

18

that Jack just wanted to make sure the hedge fund got

19

money.

20

21

But RRA didn't owe Platinum the money.

The

Banyon entities owed the money, correct?

22
23

I think

UNKNOWN SPEAKER:

Object.

Is there a

question?

24

BY MR. CIMO:

25

Let me rephrase.

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Who owed the $15 million to Platinum?

ALL PRESENT:

Objection.

BY MR. CIMO:

If you know.

Technically, Banyon.

Yes.

Form.

But why is it your problem to borrow

15 million to pay Banyon entities' obligation?

Because I'm controlling the funds.

10

When you say "the funds," what funds are you

11

talking about?

12

The funds that aren't really there.

13

The funds that are part of the Ponzi scheme?

14

Yes.

15

Okay.

16

Mr. Simony cared where the 15 million came from?

17
18

And as a person, do you think that

UNKNOWN SPEAKER:

Objection.

It's been

asked twice.

19

BY MR. CIMO:

20

As an individual?

21

As an individual.

22

Who you defined as a player.

23

ALL PRESENT:

Objection to form.

24

THE WITNESS:

I don't -- can I answer?

25

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BY MR. CIMO:

Yes.

Jack --

MR. SCHERER:

Overruled.

THE WITNESS:

Thank you.

cared.

8
9

I don't think he

I believe the hedge fund itself would have

cared, but not Jack particularly.

10
11

Jack, individually, no.

MR. CIMO:

Let me show you now Exhibit

Number 147 (sic).

12

(Thereupon, the document was marked as

13

Trustee's Exhibit 148 for Identification.)

14

BY MR. CIMO:

15

16

This is an email dated April 28th, 2009, from

you to Scott Preve and it's called Platinum --

17

Frank Preve.

18

From Frank Preve to Scott Rothstein regarding

19

Platinum.

20
21

And then underneath it, it has Mr. Nordlicht

to Preve.

22
23

No subject.
Did you see the one from Mr. Nordlicht to

Preve before today?

24

I have.

25

Did you know that 15 million was expected by

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April 29th?

I did.

And was that amount paid?

It was not.

5
6

MR. CIMO:

I apologize.

This was 148,

for the record.

Let me show you now Exhibit 149.

(Thereupon, the document was marked as

Trustee's Exhibit 149 for Identification.)

10

BY MR. CIMO:

11

12
13

It's an agreement dated April 30th, 2009.

Just going to ask you if you recall seeing

this before today?

14

I do.

15

In what context did you see this email?

16

This document.

I'm sorry.

17

I'm sorry?

18

In what context did you see this document?

19

Frank and George had sent it over to me for my

20

input.

21

I note that you're not --

22

It actually has my handwriting on it.

23

Oh.

24
25

That's your handwriting on it.

But you did not sign this document nor were

you requested to sign it, correct?

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2
3

No, sir.
MR. CIMO:

Just give me one moment,

please.

THE WITNESS:

MR. CIMO:

BY MR. CIMO:

Sure.

To wrap up.

From and after this time period, May 2009,

were there any other deals that you know, personal

knowledge, sitting here today, that were funded by the

10
11
12
13

three hedge funds?

A

I don't have any independent recollection of

any, no.
Q

Do you have any recollection whether the hedge

14

funds continued to receive payments either directly

15

through RRA or any of the Banyon entities, despite the

16

fact that there were no further settlements being

17

funded?

18
19

ALL PRESENT:
A

Objection to form.

My recollection is that we continued to pay

20

them money on a weekly basis, sometimes a couple times a

21

week, to try to pay down the debt.

22

BY MR. CIMO:

23

Yes.

And at any point before October of 2009, did

24

any of those payments stop, to your knowledge, to the

25

hedge funds?

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I don't know what you mean did they stop?

Meaning that you said weekly.

3
4

Was there any week that was missed?

A

There may have been.

I mean, when we had

funds available to send to them, and when they were --

you know, pushing us to send money, we did our best to

send it.

8
9

And before October of 2009 when the Ponzi

scheme was uncovered, was it your testimony that those

10

payments continued as best they could up until the point

11

that the Ponzi scheme was disclosed?

12

Yes, they did.

13

And that those payments that occurred during

14

that time period were in the multi millions of dollars?

15

ALL PRESENT:

16

17

BY MR. CIMO:

18

19

Yes.

Yes.

They weren't a few hundred thousand, they, in

the aggregate, total millions and millions of dollars.

20

ALL PRESENT:

21

22

BY MR. CIMO:

23

24
25

Objection to form.

Form.

Yes.

They were not insubstantial.

ALL PRESENT:

Objection.

Objection to form.

They were --

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BY MR. CIMO:

3
4
5

ALL PRESENT:
A

Objection.

Depending on who's looking at is substantial

or insubstantial.

6
7

They were substantial payments?

They were millions of dollars of payments.

Q

And whose money was used in order to make

those payments to the hedge funds between May of 2009

and October 2009?

10

It was likely a combination of Mr. Von

11

Allmen's money; Mr. Sochet's money; Mely Lifshitz's

12

money; Clockwork money; Discala money.

13
14
15

The combination of those people.

Q

These are all other investors in the Ponzi

scheme that came about from and after May of 2009?

16

Yes.

17

And were there any monies used from legitimate

18

RRA operations to pay for the hedge funds?

19
20

ALL PRESENT:
A

Objection to form.

Throughout the Ponzi scheme, to whatever

21

limited extent there were legitimate funds coming into

22

the law firm, those funds were thrown into the same

23

account.

24
25

So it is possible that some legitimate funds

ended up in someone's hands.

But you need to

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understand, if you look at our books and records, I

mean, I think we only did 8- or $9 million in that year,

total revenues.

So it's just by straight math, it's an

accounting impossibility for very much of it to have

gone to pay these other tens of millions of dollars in

moneys being paid out.

The lawsuit that I filed alleges that the

transfers that were made by your law firm to the hedge

10

funds were made with actual intent to hinder, delay or

11

defraud creditors.

12
13

Did you have any familiarity with the Florida

statute on fraudulent transfers while you were a lawyer?

14

I did.

15

Okay.

Were the transfers made to the hedge

16

funds, at any time in your -- in your belief, part of a

17

Ponzi scheme intended to hinder creditors?

18

ALL PRESENT:

Objection to form.

19

THE WITNESS:

To hinder creditors?

20

BY MR. CIMO:

21

Yes.

22

No.

The money was paid to pay creditors.

23

No.

I'm talking about when you're making --

Hinder them.

24

when you're taking other people's money as part of the

25

Ponzi scheme and then you're transferring it to the

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hedge funds, would you say that those payments were made

as part of your Ponzi scheme to hinder creditors?

ALL PRESENT:

4
5

Let me break it down for you and then you can

ask me a follow up.

8
9

You're asking -- that question seems to be, to

me, to be so many questions boiled into one.

6
7

Objection to form.

Let me see it can I respond.

BY MR. CIMO:

10

Go ahead.

11

In the Ponzi scheme with the hedge funds,

12

Level 3, Centurion, Platinum, we were making payments to

13

those hedge funds for fear that the legitimate portion

14

of those hedge funds, the victim portion of the hedge

15

funds, okay, would not go to the authorities in any

16

form.

17
18
19

Okay?
It wasn't that we were sitting here going,

let's hinder our creditors.

We were paying Ponzi first, because at the end

20

of the day, you got all these legitimate investors in

21

the hedge funds who are victims.

22

Those people, not getting money, any one of

23

them could have picked up the phone, including the

24

straight guys -- I'll call them the straight guys at the

25

hedge funds, guys like Jedwab and Kalter and Glass from

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time to time -- could have picked up the phone and

called the SCC, the FBI, any law enforcement agency or

filed a lawsuit against us.

So I think in answering your question, we're

sending the money to them with disregard to our

creditors.

Yes.

Does that help you?

Well, it does because I'm going to talk about

10

Mr. Von Allmen, for example, represented by Mr. Scherer.

11

You said part of his money was used to pay the

12

hedge funds, correct?

13

14

coming from.

15

I believe it was.

Sure.

That's where it was

So would you say that Mr. Von Allmen was being

16

hindered by virtue of you taking his money to pay the

17

hedge funds so the Ponzi scheme would not be revealed?

18

ALL PRESENT:

19

20

BY MR. CIMO:

21

Objection.

Form.

Yes.

Would you also say Mr. Sochet was being

22

hindered by taking his money and giving it to the hedge

23

funds under your Ponzi scheme?

24

Yes.

25

Would you say that any of the people that

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invested after May of 2009 were being hindered as a

result of you taking their money and paying it to the

hedge funds?

I absolutely would.

That's the question.

6
7

There's a concept called delaying.

delay or defraud.

8
9

Hinder,

Do you believe that the payments that you were

making to the hedge funds acted to delay Mr. Sochet and

10

Mr. Van Allmen and these other people invested after May

11

of 2009 from getting paid back their money?

12

13

Yes.
ALL PRESENT:

14

BY MR. CIMO:

15

Objection to form.

Do you believe that that intention to delay

16

was something that you did in order to allow the Ponzi

17

scheme to continue?

18

ALL PRESENT:

19

20

BY MR. CIMO:

21

Objection to form.

Yes.

Do you believe that had you not made these

22

payments to the hedge funds to delay Mr. Von Allmen and

23

all these other people invested after 2009, that the

24

Ponzi scheme would have been discovered, because the

25

hedge funds would have demanded payment and declared

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default?

ALL PRESENT:

BY MR. CIMO:

Object to form.

I do.

Now, let's talk about defraud.

Do you believe the payments that you made to

the hedge funds at any time were intended to defraud

creditors that were not getting repaid at the same time?

ALL PRESENT:

Objection to form.

10

THE WITNESS:

Were they intended to

11

defraud?

12

I think it's the way you're asking me.

13

BY MR. CIMO:

14

15

I'll rephrase it for you.

The payments that are made to anyone under a

16

Ponzi scheme, where the person whose money you're taking

17

to pay the later investor, would you agree that those

18

payments are paid to defraud those creditors that are

19

not being repaid?

20

ALL PRESENT:

Objection.

21

BY MR. CIMO:

22

Isn't that what a Ponzi scheme is?

23

Hang on a second.

24
25

MR. CIMO:

Just keep making your

objections, Counselor.

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THE WITNESS:

All right.

Now, go ahead.

Just go --

UNKNOWN SPEAKER:

Let the record at least

reflect that while the question was pending,

the witness was talking to his counsel.

BY MR. CIMO:

I'm going to rephrase the question for you.

Would you -- would you have an opinion sitting

here today that payments made to the hedge funds, at any

10

time while your Ponzi scheme was being engaged in, while

11

other investors are not being paid and their money is

12

being used to pay the hedge funds, do you have an

13

opinion whether those payments were being made with an

14

intention to defraud those creditors that were not being

15

paid?

16
17

ALL PRESENT:
A

Yes.

Objection.

That is what we were doing by the nature

18

of the Ponzi scheme.

19

BY MR. CIMO:

20

And you actually pled guilty to running a

21

conspiracy that engaged in activities that acted as a

22

Ponzi scheme?

23

That's correct.

24

Now, the most extreme thing about this thing

25

we spoke about is, you had an intention to defraud

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2

people, didn't you?

A

That's a better question.

Yes.

But that's a --

Yes, I did.

But a little bit less than defrauding is

hindering; wouldn't you agree?

MR. SCHERER:

Objection to form.

THE WITNESS:

To me?

10

BY MR. CIMO:

11

Yes.

12

I was -- me, my law firm, and my

13

co-conspirators were defrauding a ton of people that we

14

legitimately owed money to in order to pay off, in this

15

case, the hedge funds, to stop them from reporting us to

16

the authorities --

17

And as part --

18

-- and declaring a default.

19

As part of the Ponzi scheme the law firm

20

actually signed guarantees or promissory notes to

21

people, didn't it?

22

Through me, yes.

23

Yes.

24
25

And, therefore, the firm became obligated to

the Ponzi victims as part of the scheme?

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ALL PRESENT:

BY MR. CIMO:

Objection to the form.

In other words, there are promissory notes

signed to certain investors, correct?

Yeah.

Mr. Sochet got several promissory notes,

To a lot of them.

Sure.

didn't he?

He did.

And when the firm then became obligated, those

10

people became creditors of the law firm under the

11

promissory notes?

12

I viewed them, promissory notes or not, me and

13

my co-conspirators, we always viewed the legitimate

14

people we were taking money from as legitimate

15

creditors.

16

As legitimate creditors?

17

We viewed the hedge funds as legitimate

18
19

creditors.
Q

In regard to a liquidation of the Rothstein

20

firm, would their be sufficient money to pay all of

21

those quote, unquote, creditors in full?

22

23

If there were, I wouldn't be here.

No, there was not.

24

So throughout --

25

That's the very -- that's the very nature of a

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Ponzi scheme.

our creditors.

There was not sufficient money to pay all

So throughout the time that the Ponzi scheme

was being engaged in, it's your testimony that the

legitimate business operations of the Rothstein firm and

the assets were not sufficient to pay all creditors in

full, however you characterize them?

8
9
10
11

That's absolutely true.

MR. CIMO:

I have no further questions.

(Thereupon, a recess was taken.)

-

12
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14
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18
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C E R T I F I C A T E

2
3

THE STATE OF FLORIDA, )

COUNTY OF BROWARD.
)

4
5

I, Michele L. Savoy, Shorthand Reporter do

hereby certify that I was authorized to and did

report the foregoing proceedings and that the

transcript is a true record.

Dated this 15th day of December, 2011.

10
11

______________________________

12

Michele L. Savoy, RPR

Notary Public - State of Florida
My Commission No. EE 113173
Expires August 6, 2015

13
14
15
16
17
18
19
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21
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23
24
25

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2

C E R T I F I C A T E
THE STATE OF FLORIDA, )
COUNTY OF BROWARD.
)

3
4

I, Michele L. Savoy, Shorthand Reporter,

do hereby certify that I was authorized to and did

report said deposition in stenotype; and that the

foregoing pages, numbered from 770 to 946,

inclusive, are a true and correct transcription of

my shorthand notes of said deposition.

10

I further certify that I am not an

11

attorney or counsel of any of the parties, nor am I

12

a relative or employee of any attorney or counsel or

13

party connected with the action, nor am I

14

financially interested in the action.

15

The foregoing certification of this

16

transcript does not apply to any reproduction of the

17

same by any means unless under the direct control

18

and/or direction of the certifying reporter.

19

Dated this 15th day of December, 2011.

20
21
22
23

___________________________________
Michele L. Savoy, RPR
Notary Public - State of Florida
My Commission No. EE 113173
Expires August 6, 2015

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25

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United Reporting, Inc.

(954) 525- 2221

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United Reporting, Inc.

(954) 525- 2221

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lyles 774:14

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matters 826:17
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making 808:4
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manner 850:8,8
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mantra 848:3
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means 819:1
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meant 818:18,19
marine 774:9
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785:11,16 786:2
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medium 835:3
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856:7 857:1
862:3 868:9 873:8
907:24 908:5
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901:1 913:18
meetandgreets

United Reporting, Inc.

(954) 525- 2221

Page 961
798:6 904:24
meeting 784:15,16
784:22,25 785:2,3
785:5,6,10,13,17
785:23 786:6
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789:9,14,18,20,23
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792:3,15 793:4,10
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middle 842:18
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mortgages 820:24
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motion 828:8
motions 906:7,9
move 833:20 851:8
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853:21
moving 793:11
mullin 774:4
multi 934:14
multimillion 910:3
multimilliondollar
824:17
multiple 803:7
820:22

United Reporting, Inc.

(954) 525- 2221

murray 816:17,17
850:5 919:7,12,15
921:17,18
mushroom 819:19
819:21,24,25
820:3,4,15,16
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n 770:18 771:16,21
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narrow 844:11
nature 808:25
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839:3 846:4
854:12 871:15
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near 779:15
nearly 907:16
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need 786:16 811:19
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negative 808:24
negligence 806:16

Page 962
negotiations
843:21
nervous 876:3
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782:11 788:12
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okay 778:5 779:6
779:20 793:10,25
796:6 798:23

United Reporting, Inc.

(954) 525- 2221

800:20,25 803:4
803:14 812:21
813:21 818:9,23
819:8,10,13
822:24 824:13,19
827:8,23 833:16
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915:20
online 827:21
openended 849:11
operate 837:15
operating 818:7
operations 771:5

Page 963
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packets 794:24,25
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889:2,13 894:13
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938:25 939:10,23
942:1,13,21
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peoples 936:24
percentage 839:1
839:10
perfect 922:5
performance
838:18

United Reporting, Inc.

(954) 525- 2221

period 780:17
781:3 782:2 783:3
783:4 792:20
823:1 854:9 870:3
916:2 933:7
934:14
perjury 901:15
permission 787:9
787:10
person 786:22
788:8,14 790:21
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820:15 835:11,14
835:15 840:1
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863:1 865:21
870:19 930:15
940:16
personal 780:24
781:9 825:10
832:2 870:17,23
887:8 893:13
933:8
personalities 813:8
personally 792:7
870:13
personnel 854:6
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persons 869:11
petters 876:1
880:10
phase 889:16
phases 929:15
phillips 893:7
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903:24,25 904:8
phone 799:20
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937:23 938:1
phony 799:5,8,9,10
phrase 853:1 876:3
906:9
physically 830:21
pick 865:13
picked 856:4
937:23 938:1
piece 816:10

Page 964
pieces 863:9
pitch 808:18,21,21
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playing 780:20

plaza 773:19
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874:11 878:8
policy 874:25
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United Reporting, Inc.

(954) 525- 2221

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United Reporting, Inc.

(954) 525- 2221

reason 784:5 856:2

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United Reporting, Inc.

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United Reporting, Inc.

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(954) 525- 2221

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