UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION Case No. 09-34791-RBR Chapter 11 _____________________________________________________ In Re: ROTHSTEIN ROSENFELDT ADLER, P.A. Herb Stettin, Chapter 11 Trustee, Plaintiff, vs. RL Pearson and Associates, Inc., a Florida Corporation, Defendants. _____________________________________________________ DEPOSITION OF SCOTT W. ROTHSTEIN Volume I of II Taken on behalf of the Chapter 11 Trustee DATE TAKEN: TIME: PLACE: December 23, 2011 8:32 a.m. 10:30 a.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 cf32f1c1-7919-474f-9b81-ecd48865401f Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 APPEARANCES FOR RAZORBACK: CONRAD & SCHERER, LLP 633 South Federal Highway Eighth Floor Fort Lauderdale, Florida 33302 By: WILLIAM R. SCHERER, ESQUIRE ERIC RAYMAN, ESQUIRE IVAN J. KOPAS, ESQUIRE and KOZYAK, TROPIN & THROCKMORTON, P.A. 2525 Ponce de Leon Boulevard Ninth Floor Coral Gables, Florida 33134 By: HARLEY S. TROPIN, ESQUIRE APPEARANCES FOR THE CHAPTER 11 TRUSTEE, HERBERT STETTIN: BERGER SINGERMAN 350 East Las Olas Boulevard Suite 1000 Fort Lauderdale, Florida 33301 BY: CHARLES H. LICHTMAN, ESQUIRE and 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 JESUS SUAREZ, ESQUIRE APPEARANCES FOR SCOTT ROTHSTEIN: LAW OFFICE OF MARC S. NURIK 1 East Broward Boulevard Suite 700 Fort Lauderdale, Florida 33301 BY: MARC S. NURIK, ESQUIRE United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CLAUSIN MILLER One Chase Manhattan Plaza 39th Floor New York, New York 10005 BY: SCOTT L. SCHMOOKLER, ESQUIRE APPEARANCES FOR RLI ZURICH INSURANCE COMPANY, COLUMBIA INC. & ZURICH INSURANCE: APPEARANCES FOR TD BANK: GREENBERG TRAURIG, P.A. 401 E Las Olas Blvd Ste 2000 Fort Lauderdale, Florida 33301 By: HOLLY SKOLNICK, ESQUIRE DONNA EVANS, ESQUIRE MARK SCHNAPP, ESQUIRE APPEARANCES FOR THE COMMITTEE OF UNSECURED CREDITORS: AKERMAN, SENTERFITT One Southeast Third Avenue 25th Floor Miami, Florida 33131-1704 By: MICHAEL GOLDBERG, ESQUIRE JONATHAN S. ROBBINS, ESQUIRE APPEARANCES FOR PLATINUM PARTNERS VALUE ARBITRAGE CENTURION STRUCTURED GROWTH, LLC: GOLDSTEIN, TANEN & TRENCH, P.A. One Biscayne Tower, Suite 3700 Two South Biscayne Boulevard Miami, Florida 33131 By: SUSAN E. TRENCH, ESQUIRE United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 4 1 2 3 4 5 APPEARANCES FOR MORSES: APPEARANCES FOR FEDERAL INSURANCE COMPANY: ALEX HOFRICHTER, P.A 1430 South Dixie Highway Suite 204 Coral Gables, Florida 331463127 By: ALEX HOFRICHTER, ESQUIRE 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 APPEARANCES FOR ROSANNE CARETSKY: BILLING COCHRAN LYLES 515 E Las Olas Blvd Floor Six Fort Lauderdale, Florida 333012296 By: DAN GELBER, ESQUIRE TUCKER CRAIG, ESQUIRE APPEARANCES FOR ST. PAUL FIRE & MARINE: MILLS PASKERT DIVERS P.A. 100 N Tampa St Ste 2010 Tampa, Florida 33602 BY: JAMES A. BLACK, JR., ESQUIRE APPEARANCES FOR EMESS CAPITAL, LLC: KLUGER KAPLAN SILVERMAN, KATZEN & LEVINE, PL 201 S Biscayne Blvd Fl 17 Miami, Florida 33131 BY: CASEY H. CUSICK, ESQUIRE TRIPP SCOTT, P.A. 110 S.E. Sixth Street,15th Floor Fort Lauderdale, Florida 33301 By: GEORGE WALKER, ESQUIRE JOHN M. 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RASCO, ESQUIRE STEARNS WEAVER MILLER, et al. 150 W Flagler St Ste 2200 Miami, Florida 331301545 BY: MARY BARZEE-FLORES, ESQ. MATTHEW DATES, ESQUIRE United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 6 1 2 3 4 5 6 7 8 9 10 APPEARANCES FOR FRANK SPINOSA: APPEARANCES FOR THE US GOVERNMENT: U.S. DEPARTMENT OF JUSTICE UNITED STATES ATTORNEY'S OFFICE 500 E. Broward Blvd., Ste. 700 Ft. Lauderdale, Florida 33394 BY: CYNTHIA STONE, ESQUIRE KOPELOWITZ OSTROW 200 SW 1st Ave Ste 1200 Fort Lauderdale, Florida 33301 By: BART A. HOUSTON, ESQUIRE JAN ATLAS, ESQUIRE APPEARANCES FOR LEVINSON PEARSON & ASSOCIATES, WATCH U-WANT, INC.: 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SCHLESINGER AND COTZEN, P.L. 799 Brickell Plz Ste 700 Miami, Florida 33131 BY: MICHAEL J. SCHLESINGER, ESQUIRE and MICHAEL COTZEN, ESQUIRE and SAMUEL J. RABIN, ESQUIRE 799 Brickell Plaza Suite 606 Miami, Florida 33131 United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 7 1 2 3 DIRECT INDEX CONTINUED DEPOSITION OF SCOTT W. ROTHSTEIN 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mr. Lichtman CERTIFICATE OF OATH CERTIFICATE OF REPORTER TRUSTEE'S EXHIBIT INDEX NO. 1 2 3 4 5 6 7 8 9 DESCRIPTION April 14, 2009, Email April 17, 2009, Email April 29, 2009, Email April 24, 2009, Email April 30, 2009, Email July 6, 2009, Email July 22, 2009, Email May 6, 2009, Email May 13, 2009, Email PAGE NO 64 66 75 77 83 85 93 98 99 United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 sure. Whereupon, SCOTT W. ROTHSTEIN, acknowledged having been duly sworn to tell the truth and testified upon his oath as follows: Thereupon, the following proceedings were had: MR. LICHTMAN: Let the record reflect we're moving into the separate deposition transcript that will be incorporated by reference into what we call the big case. This is in the adversary proceeding pending in bankruptcy court, Herbert Stettin versus RL Pearson and Associates, Inc. case number 10-03710. Just to be sure -I've lost the witness. MR. NURIK: No. He's just -You're still under oath. It's MR. LICHTMAN: You're still under oath, you know that, even though you were -THE WITNESS: MR. LICHTMAN: the other case? THE WITNESS: MR. LICHTMAN: Yes. Just re-swear him to be Yes. -- technically sworn for United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. LICHTMAN: Q Okay. Mr. Rothstein, we're going to be THE WITNESS: MR. LICHTMAN: I do. Okay. Let the record reflect, also, that the Trustee has reached a stipulation with Pearson's counsel that the questions that I asked in the 2004 Exam respecting your motivations for telling the truth are deemed incorporated by reference to this transcript so that we don't have to repeat. You agree, Mr. Ferguson? MR. FERGUSON: Yes. DIRECT EXAMINATION very limited about time, so it's probably going to be a pretty snappy presentation. I have what I see to be about two hours and five minutes of questioning with you. A Q Okay? I'm ready to go. Okay. You have repeatedly over the course of the past two weeks referred to what has been known as the Pearson/Boden sub-Ponzi or Boden/Pearson sub-Ponzi. A Q Correct. Okay. For purposes of today, I'm going United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to, for the most part, try to refer to it as the sub-Ponzi for brevity's purpose, okay? A That's fine. I'll take that as Pearson/Boden's sub-Ponzi. Q Okay. I want to lay a foundation on some facts before I get into some documents. A Q A Okay. How did you meet David Boden? I met him -- he was the general counsel for a client of mine, National Beverage. Q with him? A Yes. I represented Nick Caporella and And I assume that means that you did work National Beverage, and I met David Boden that way. Q A Approximately, what year? You'd have to go back and look at that. It was litigation against Broward County, and I don't remember the year. Q What were the circumstances that led to you hiring him to come work at RRA? A I had a need for counsel to myself and David had a tremendous counsel to the law firm. amount of corporate practice protocol, governance. I was looking to buy a lot of companies; he had tremendous M&A experience, and he was a great United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 guy. Q When you say you were looking to buy a bunch of companies, are you referring to what has been known in many of the pleadings as the RRA entities, entities such as Georgio and Q Task? A Q A Q Correct. Okay. Bova, et cetera? Correct. In terms of the work in-house, what kind of work did you expect him to do in-house? A Help within in-house manuals, help with governance issues with regard to growing the firm, mostly I wanted him to be a personal adviser to me on financial matters. Q Is it a fair statement that, indeed, from the day that he joined the firm, the vast majority of work that he did was for you, personally, as opposed to legal work for clients in the firm? A Yes. I figure it was about 80 percent to We had to be careful having him do me; 20 percent. legal work for clients because he wasn't licensed to practice in the state. do the work, but... Q correct? And the firm paid for his services, That's not to say he didn't United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 He was technically an RRA employee, received a paycheck from RRA? A Q Yes. Now, you also agree that he was not employed by a law firm for a period of probably at least ten years? A Q That's correct. All right. And he wasn't a Florida lawyer; you just acknowledged that, right? A Q counsel? A Because he turned out to be a fantastic I could trust him. He was, within the New York only. Okay. Why did you make him RRA's general confidante. definitions as previously established over the last nine days, a "player." to be counsel to me. Q A Okay. That -He was exactly what I needed He was more like a conciliary than a general counsel. Q Well, is that the case -- no. I'm not going to go there. Fredo. MR. NURIK: I'm not going to talk about No, it's Tom Hagen. Yeah, or Tom Hagen. Okay. MR. LICHTMAN: United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A THE WITNESS: BY MR. LICHTMAN: Q In any event, I understand how that was Several Fredos. helpful to you. What impact was that? What impact did making him general counsel have on RRA, if any? A Q In actuality, none. Okay. Was the sub-Ponzi scheme Boden's first involvement in illegal activity with you, when he joined the firm? A Q A No. What did he do before that? There were certain parts of the National Beverage litigation that we had talked about where we were, I would say, fudging facts to aid Mr. Caporella. And then there was something else that he was involved in. THE WITNESS: into that? MR. LAVECCHIO: MR. LICHTMAN: Can I have one moment? Yes. Mr. Lavecchio, can I get And he, also -- on the legal side, he assisted us with certain campaign issues. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 it. Q A Q How about money laundering? He assisted with bank issues that I had. What do you mean by that? BY MR. LICHTMAN: Q A Q Campaign contributions? Various types of campaign issues. Okay. With respect to the National Beverage litigation, are you saying that he knowingly fudged facts or allowed facts that were untrue to be used in connection with that litigation? A Q Yes. So we can go to the record and find what those could possibly be? A If you give me the record, I could probably, more than likely, than not, point out for you what was created by him and I or what was not. Q Okay. And I'm leaving the political issues alone for right now -- or campaign issues alone for right now. Prior to his being involved in the sub-Ponzi, was he involved in any of your organized-crime activity? A He knew about it; he was not involved in United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A When I was moving money and the like, he He knew what was going on. He knew I assisted me. was having issues with moving money. with him. counsel. Q I discussed it It wasn't in depth, but I sought his If this transcript were part of the previous eight-and-a-half days, I could leave that alone; but because this is an independent transcript, I need you just to delve down a little bit so there's a clear record. A Q Okay. Okay? When the first -- When you say "moving money," do you mean that there was a large number accounts at TD Bank, and money was transferred in and among and between the various accounts to suit your purposes, to get money whenever you needed it? A Q Yes. And Mr. Boden assisted you how with respect to those transfers? A Guided me or attempted to guide me on We were never really able avoiding BSA AML issues. to come up with a plan to avoid them, other than to have Mr. Spinosa protect us, because -- just by the sheer velocity. I mean, we basically came to the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 conclusion, after studying what we studied, that we were going to have to have protection inside the bank because -- just as we had had with Gibraltar Bank, because the high velocity was a dead giveaway: the in and out of accounts, the way money was moving. Q Did he start doing that as soon as he joined the firm and started assisting you? A No. It was over a period of time. It was like everybody else that started engaging in illegal activity with us; it was over time as I was -became more and more certain that he was open to that sort of thing. Q To be sure, the process of him assisting you on these banking issues preceded the sub-Ponzi, though, correct? A Q Yes. Okay. Did he have any involvement in any of the settlement deals that you had been involved with prior to the sub-Ponzi? A Yes. That's how he created the sub-Ponzi. He was assisting me with those deals. Q A Q Do you remember -Go ahead. Do you remember any of the specific deals United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that he assisted you with? A He is the one -- he brought Richard Pearson to the table. Q Okay. Before Pearson, did he assist you with any actual Ponzi deals, any settlement deals? A I don't remember, specifically, because I remember him, for example, assisting -- well, he brought Florescue in; but Florescue was after Pearson, so I don't recall specific. Q Okay. Did he assist you with any of the documentation issues on any prior settlement deal? A He started to. That's how he understood what was -- what needed to be done for his sub-Ponzi. Q Yeah. I assume there had to be a predicate for him to look up one day and all of a sudden become involved in a running a sub-Ponzi; is that a fair statements? A Well, he had gotten involved in, originally, what he thought were legitimate deals, or at least I thought he thought they were legitimate deals; I don't know what was in his head. And as time went on, like with many of the people who ultimately became involved with the Ponzi scheme, he figured out what was going on and then United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ultimately developed his own sub-Ponzi with Mr. Pearson. Q Well, indeed, if he was your right hand inside the firm, he would have had access to more data than probably anybody else; is that a fair statement? A I would think the only people that would have had more access to data would have been Debra Villegas, Irene Stay and Stu Rosenfeldt. Q A Q Is it a fair statement -And myself. -- though, in terms of the paperwork, he would have been able to see that there was just a series of blacked-out documents, that there were no real supporting documents to establish that the actual plaintiffs existed in any of the lawsuits? A Well, here's the thing: David and I had conversations early on where he's asking me why aren't any of these cases coming up on conflict searches or why aren't there any files anywhere, that type of questioning. Q A Q And this preceded the sub-Ponzi, correct? That preceded the sub-Ponzi. Okay. Was he involved in any other money-laundering activities? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A He may have been. I don't specifically recall at this moment. Q Any public-corruption issues? Just generally, without getting into the privileged matter. A He knew certain things that were going on. He knew about my ties to law enforcement. Q Okay. Howard Gruverman, was he involved in any illegal activities that you might have engaged in with Howard Gruverman? A Q A Yes. Which ones? There were a couple of instances where Howard was taking kickbacks into -- from insurance companies that were doing business with Edify. There was actually one time where Howard was being investigated for -- I don't remember the exact circumstances, but David knew what was going on. David and I had met on a pretty regular basis with Mr. Gruverman to discuss his problems. He also knew of Mr. Gruverman's involvement in campaign issues inside his own company. Q How about Albert Peter, was he involved in any of the illegal activities that you described United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 like? A Q A All of it. Okay. He participated with some of the events I mean, he would go to the hockey He went to all He that? A level. He participated pretty much at every He flew with me to games on private planes. earlier on? A I don't recall, specifically, whether he He may have been. was or not. Q A Ron Pecou? I don't recall him having anything to do with Ron Pecou. Q Okay. You have testified about the Rothstein rock-star lifestyle. A Q Yes. To what extent did Boden participate in He had access to all of our firm's tickets at all venues. Q Whether it was sports, concerts and the more than I did. games, go to the basketball games. the football games, brought his family with him. traveled with us. He had an open tab, wide open, at Bova -- United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 limousine. all the Bova restaurants. He was heavily involved down at the Versace mansion and spent a lot of time partying down there, without having to pay anything. He had access to our firm -- to my He had access to our limousine service, which he utilized frequently, both for himself, and escorts, and with his family. Q family? A Q A Q there. A He used the limo service with -- by No, no. With his -That didn't come out right. Let's make sure there is some commas in You're saying he used escorts with his himself and for -- with friends of his, with his family, comma -- big comma -- and with escorts. Q escorts? A escorts? Q A Q Just the escorts. A dozen. You paid for them? The limos and the escorts or just the Approximately how many times with the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you sure. work? A David wanted to -- was looking to move. I A Q Yes. Okay. With regard to the house that he rented from you on Castilla Isle -A Q Oh, yeah, I forgot about that. That was previously owned by Rickie Williams, right? A Q Yes. Describe that transaction. How did that was moving out of 2308 to move on to Isla Bahia, and he always said he would love to be able to buy that house, rent the house, whatever. And I rented it to him for drastically under market. I think I rented it to him for $10,000 a month; and I don't know which months he paid and didn't -- you'd have to take a look at the records -- and we had discussion about it. And, you know, he kept saying to me: Are You're not asking for a lot of money for Thank you. I said, You it, you know. I said, It's good for you. know you have got to have that perception of having a lot of money. The more money you're perceived to have, the more money we will be able to generate. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So it became a tool to him, also, because he could use the house for entertaining and the like. Olas. Q Why do you think that $10,000 a month was It was prestigious on Seven Isles in Las under market value for rental? A Because the real estate agents that we had talked to previously, Kim and I, about -- before we decided to let the Bodens rent it, they told us we could get more than double that. Q Did he also receive cash, you know, like some of the other people that you have talked about over the course of the last eight, nine days? A Q A Q Yes. Do you know approximately how much? I do not. Was it a regular payment, like whenever he wanted cash, he could come and get it from you? A It wasn't like an open piggy bank, but yeah, he had access to cash when he needed it. Q He closed a number of deals for you on the Rothstein entities? A Q He closed a large percentage of them. Right. At the time that he closed, for instance, United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Bova, did he know what the source of funds was? A Mr. Lichtman, you have to go back and look and see what level his involvement is, because I don't want to guess. Q I would be guessing. Well, how about Casa Casaurina, because that was closer to the end, do you recall that? A Q Yes. Okay. Did he know what the source of funds was for Casa Casuarina? A Yes. You also have to understand that he I mean, he was knew what the firm's finances were. one of the people that had access to the billing records and, you know, would discuss financial issues with me. You know, it's pretty apparent how much money is coming in from legitimate law office services, and then there's got to be someplace the other money is coming in. And he, of all people, knew that many of our business enterprises at that point in time were losing money or they were in the very early, you know, stage where you had to -- where you are still investing huge sums of money to try to get them off the ground. The restaurants weren't making money. The Q Task wasn't at the stage where it was making United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 money. We were still investing. It was like that a for a lot of our businesses. So he knew there was not only money not coming from the law offices -- from the law office, but that -- also that the businesses I was buying were still in their early incubation stage so they weren't throwing off -- many of them were not throwing of any money. Q Would you agree or disagree with the statement that Mr. Boden knew each time that he closed one of those business transactions for you, that the money was obtained from illegal transactions? A He should have known, yes. We didn't discuss it. We didn't say, hey, this is illegal money going into these transactions; but from the information he had before him, he would have had to have been lying not to know that it had to be coming from someplace other than legitimate activity. And then, of course, once he was running the sub-Ponzi, from the day you determined that sub-Ponzi started, every deal after that, he would have known there was illegitimate money coming to the firm. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q So to boil it down, then, what facts did you know of that would indicate that Boden knew that the settlement transactions you were working on prior to the sub-Ponzi, Boden would have known those were illegal? A There were no plaintiffs; there were no defendants. Q A Q A And you say that he knew that? He knew that. Okay. The paperwork was turning around without the appearance of any plaintiffs or defendants. Literally, we would get a deal. It would be papered; and within hours it would have plaintiff's and defendant's signature on it and be ready for funding. There were no conflict searches. were no files anywhere. coming in and out. There No one ever saw any clients If you look at the sheer number of cases that we were settling, you would think you would see somebody wandering in and out of the offices. There was nobody. He had access to our financials. There was no money ever coming in from any legitimate big defendants sending millions of dollars to us. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Okay. That's probably a good start. I'm sure that there's more. Q Pearson? A Q A Through David Boden. Do you know how? Although, I think I had met him to say All right. Now, how did you meet Richard hello previously. Q A Do you know how Boden met Pearson? I'm not sure. I think he met him down at Bova, actually. Q Was RRA paying for Mr. Pearson's suite -- I think it was 1870 in the 401 building -- or was Pearson paying that himself? A Q A Q I think he was paying it himself. All right. Do you know -- I don't recall paying that. Do you know what the circumstances were of Pearson being located in the same building as you? A Q I do not. All right. Was Pearson's sub-Ponzi involvement the first illegal activity that he had engaged in with you? A Pearson? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q Yes. ALL PRESENT: Objection. To the best of my recollection, yes. BY MR. LICHTMAN: Q Okay. So to be sure, he did not engage in any of the other types of activity that we talked about over the preceding days, such as money laundering or banking issues or public corruption or any of those type of claims? A Q A Q A With me? Yes. No. With somebody else that you know? I knew Richard Pearson, after talking to David Boden, before I started doing business with him, to be a player. I knew that he had had a -- from speaking to him, tax issues and the like. He came from what he had described as a very wealthy family out of Canada, and I later learned things that he had done that were illegal; but that was after he became involved with the Ponzi. Q So the record is clear, what do you mean by "player"? A He was a -- he was a wheeler-and-dealer. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A He was involved in illegal activity. He was -- it's that phrase I used in the early days of the deposition, it was -Q A I know, but this is a separate transcript. Yes. Greed before morality, okay, and he was -he was in that genre. Q Okay. You made a conclusory statement that you knew he was involved in illegal activity. What facts do you know of that support that statement? A Boden told me. That's how I know -- and I trusted Boden. Q Okay. Did Boden tell you, specifically, what he knew that Pearson was doing? ALL PRESENT: Objection. He told me that Richard Pearson was a master of the other peoples' money, the OPM deals; that he was very good at convincing people that they should invest in things and give him large percentages of ownership with him putting nothing in. That's the type of thing David would discuss with me. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 us. is. Q Okay. Was Pearson involved, to any money." A It must have. I don't even know who that BY MR. LICHTMAN: Q As a quick aside, there's an investor in the RRA -- excuse me -- in your Ponzi whose name was "OP Monies." Do you know if the name "OP Monies" comes from "Other People's Money"? I just heard you say "other people's extent, in what you have called your rock-star lifestyle? A To a limited extent. He had his own rock-star lifestyle. Q What did he do with you -MR. HOUSTON: BY MR. LICHTMAN: Q A -- in terms of this rock-star lifestyle. He went to certain sporting events with Objection. I had gotten him concert tickets a couple of He never went to the Heat games. He didn't travel with us. He went to the times. strip clubs with us, and he ate at Bova for free on a multitude of occasions, but I can't tell you how many times. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A for free. Q After you start -- after he started the Whenever he ate with Boden, he was eating sub-Ponzi, was he involved in any other type of illegal activity with you? MR. HOUSTON: Objection. He may have been He was really tied to Directly with me, no. involved in stuff with Boden. Boden, not to me. BY MR. LICHTMAN: Q Okay. I'm going to give you a list of names and tell me if any of these people were involved in the sub-Ponzi. And if you say yes, tell me what their function was, as briefly as you can. A Q A To my knowledge. To your knowledge, yes. Because it was literally a separate whole thing, but... Q A Q A Curtis Renie? Yes. What was his role? Well, he had created the fake website, and Mr. Boden used that fake website from time to time. Q A How do you know that? Because I had given him access to my United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 office to use it -- or Deb had to give him access to my office to use it. Q A Q A Okay. It was the only place he could be access. How do you know he actually used it? Because I had to show him how to use it, and he had told me he used it. Q A level. Q A Irene Stay? And also Curtis -- there are times when Okay. Bill Corte? The same answer, Bill was involved at that David needed balances changed, and I was the one who had -- he had -- David would have to tell me, for example, in the -- I don't know -- there were all kinds of Argen --- Exito, all kinds of different company names. Most of their investors were, the Pearson/Boden investors, used separate companies for each investment. So we would constantly have to go in and segregate accounts and change balances. So David would tell me what the balances needed to be, and I would have Curtis or Bill change the balance. Q Okay. Irene Stay? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Yeah. Irene had to have known because she was moving his money; and he would send her emails and Pearson would send her emails, or be copied on the emails, telling her the payments needed to go out and the like. Q When you say "moving money," meaning moving money the same way that Irene Stay did with respect to the settlement transactions that you were working on? MR. HOUSTON: Yes. Objection. David would -- there would be email -- there's email traffic, Mr. Lichtman, where Pearson or Boden or both of them are cc'ing one another or the like and saying these are the payments that are due today. And that email would eventually be forwarded to Irene Stay. Irene would then have to move money from one of our other main feeder accounts into whatever account the money needed to go out from and then send the money out for the Boden-Pearson sub-Ponzi. Q Is it a fair statement that what you just described in the preceding answer is what would have been meant by the term "moving money"? A Q Yes. Okay. And what accounts did those United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 typically involve? A It was a TD bank account, so I don't know It would be from 0923 into which specific accounts. various trust accounts and then out again. Q A The myriad of TD Bank accounts, correct? Yes. Somewhere between 22 and 28 accounts, yes. Q A How about Debra Villegas? Debra was heavily involved with Boden because she did all his paperwork. Q A Q You mean documenting the transactions? Yes. To the same extent that she assisted you on transactions that you affected with other settlements? A Q Yes. Okay. Caputi, Steve Caputi, did he have any involvement in the sub-Ponzi? A I don't recall whether he did or not. I don't think so. Q A Andrew Barnet? Barnet brought in investors; but as I sit here today, still, Mr. Lichtman, I really don't think that Barnet knew with was going on, you know. He may have, because he was so close to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Boden. He was constantly in Boden's office; and, of course, if he was observant, he was seeing no clients, no files, no conflict searches. You know, that conflict search is a huge red flag for any lawyer anywhere near this, because you know, as a lawyer, no new case comes in -- you have got to send the plaintiff's name. how confidential any of this is. First of all, two important keys: The I don't care confidentiality one runs to everyone in the law firm, all the lawyers and all the staff, attorney-client privilege. So there's no reason for them not to know who these people are, and the only way to do a conflict search is to send the plaintiff's name and the defendant's name to the entire firm. Q It was never done. Was Andrew Barnet -- excuse me -- an employee of RRA? A Q A Yes, he was. In what capacity? He was my director of corporate We gave him some fancy development or something. title. Q A Is he a lawyer? No. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Was he paid a fee for any transactions that he brought to the table on the sub-Ponzi? A records. From me or RRA, you'd have to check the I believe he was. But my understanding from speaking to David Boden and Pearson was that he was paid finder's fees by them. Q Did he bring investors to you for any other deals besides the sub-Ponzi deals? A He tried to. I don't remember whether we ever actually closed the deals or not. Q What was the time period that you recall, in number of months, roughly, that he tried to bring you or Boden deals? A months. It wasn't very long. It was several He was only employed by us six, seven, eight months. Q How was it that he came to know that settlement deals even existed within your office? A about it. I told him about it, and Boden told him He saw us doing the deals. He spent a lot of time with David Boden. involved in papering deals. Q A Boden was heavily What did you tell him about the deals? I don't recall whether I told him anything one way or the other. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Again, I was very busy with the other Ponzi, the main Ponzi. Boden. I mean, but you literally -- I mean you have been in our offices. You have got to be blind His interaction was with to know that these -- it's just nothing there supporting this. Q Okay. Do you know if he knew whether or not the settlements were real? A Q I'm sorry? Do you know whether or not Barnet knew the settlements were real? A were fake. Q Okay. Spinosa, was he involved at all in I don't -- I don't think he knew that they the sub-Ponzi? A Q A Not directly, no. Does that suggest indirectly? Well, he was protecting the RRA bank accounts from scrutiny, so to that extent, yes. Q A Do you have personal knowledge -But he didn't -- he had no direct knowledge, to my knowledge, of interaction with Boden and Pearson. Q Meaning to your personal knowledge, did he United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 have direct communications with Boden about what Boden was doing in the sub-Ponzi? A Q I have no recollection of that. Do you know whether or not Spinosa was asked to execute any lock letter for sub-Ponzi deals? A He may have been. You would have to check the lock letters. other. Q Okay. I don't recall one way or the How about Ms. Caretsky, did she have any involvement, to the best of your knowledge, in the sub-Ponzi? A Q did not? A To my knowledge -- you said "to my To my knowledge, she did not know. Mr. Preve, did he? No, sir. No, sir, meaning you don't know or no, she knowledge." Q A Okay. You know, I don't know -- remember one way It was or the other if I discussed it with him. unimportant to my dealing with him, because it was just a separate source of funding. Q Let me ask you this. You can see I have a large stack of documents. From a time perspective, I'm not going able to get through them all, so I'm United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A going to ask you about some of the documents -A Q Go right ahead. -- without putting them into the record. I have an email from April 4, 2009, the subject of which is "G380." It's from you to Here's Richard Pearson, and it says to Mr. Pearson: your first case for funding. More to follow today as I review what I pulled from prior funding source, Banyan. Do you recall anything like that? MR. HOUSTON: Objection. It's certainly possible, but that doesn't mean that Banyan knew because I could have been lying to Pearson about it. BY MR. LICHTMAN: Q Indeed, did you pull funding transactions from Banyan to give to Pearson? A I didn't need to pull anything from It anywhere because it was all made up anyways. didn't need to really be pulled. okay, I'm pulling it from here. Q Okay. I would just say, Do you recall whether or not Banyan or Frank Preve had any involvement in the sub-Ponzi? A I don't recall specifically. You'd have to check the email traffic. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q A Q A Q A Q Did you ever discuss anything about the sub-Ponzi with Preve, to the best of your recollection? A I don't have a specific recollection of discussing it with him, we were so busy running around. Q Okay. John Harris, did he have involvement in the sub-Ponzi? A Q A No. Szafranski? No. Because Boden, strangely enough, was I don't recall them You'd have to acting as their own verifier. ever using Szafranski to verify. check the email traffic. Q I'll get to the verification in a moment. How about the funds? The hedge funds? Yes. No. Bob Kagan? No. Bob didn't know anything. Andrew Glass. Who's that? GNV Asset Management, LLC. I couldn't even tell you who that is. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Is there anybody else that you can think of that would have assisted Pearson and/or Boden in the sub-Ponzi? A Q A David Boden's secretary. Her name? I think it was Patricia something, but I don't recall. Q Do you have reason to believe that she knew that Boden was involved in illegal activity? A I would be guessing, but just from the circumstance that I've described over the last nine days, she would have to be blind not to know something was going on. the other. Q A Patricia, was that her name? I think so. Just look at the email traffic between him and whoever he sent the deals to. Q Was Barry Florescue -- Florescue, But I don't know one way or F-L-O-E-S-C-U-E, for the record -- an innocent investors? A My understanding is that Florescue came in through Barnet to the Boden/Pearson group. Q Okay. MR. SCHERER: Was he innocent investor? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A You didn't get the answer. MR. LICHTMAN: follow-up. MR. SCHERER: BY MR. LICHTMAN: Q A Q A Was he an innocent investor? Yes. Okay. And why do you say that? Thank you. I was asking him the Because I helped fool him; I never told him what was going on. Q Brayer? A Q started? MR. HOUSTON: Objection. I don't know who that is. All right. How did the sub-Ponzi get All right. How about Dan and Beatrice Originally, Boden/Pearson, or at least I know Pearson, believed these were real deals. that because -- at least I believe he believed that because I convinced him of it. due diligence. BY MR. LICHTMAN: Q A What due diligence did he do or not do? To my knowledge, all he did was talk to me He did very limited It was very easy to convince him. and talk to Boden, looked at some deal documents. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A It was probably -- other than the people who directly knew about, Mr. Lichtman, he did the least due diligence of anybody. Q When you say "deal documents," do you mean the standard package of blacked-out documents? A Q Blacked-out document. Did he ask to see any other files? You have to answer audibly. He may have. He may have. I don't have any specific recollection of him doing any real due diligence, other than sitting and talking to me. Q A Q And did he also talk to Boden? Yes. And to the best of your knowledge, when he talked to Boden, did he talk with him about due diligence issues? MR. HOUSTON: Objection. Some, but Boden did not come back to me He may have very frequently asking me anything. sent me some emails asking me some specific information, but it was, again, very limited due diligence. BY MR. LICHTMAN: Q To be sure, do you view Boden as your co-conspirator? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Q Do I view -- yes, absolutely I do. And you spoke to Boden frequently during the course of the time that he worked with you at RRA, right? A Q Every day. Okay. At least once a day, if not a running dialogue, would be that a fair statement? A Q Yes. You used the term "verifier" a few minutes What did you mean by ago with respect to Boden. that? A Szafranski was the third-party verifier, the person who was supposed to be completely independent coming in and verifying the existence of the plaintiff, existence of the defendant, actual signatures on documents, account balances and wires in and out. Q In connection with the sub-Ponzi, do you know what Boden's role was as a verifier, if any? MR. HOUSTON: Objection. Boden was, to my knowledge, the main, quote, unquote, third-party verifier for all the Boden/Pearson materials, which never made any sense to me. Q Tell me why that didn't make sense to you. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Because he's not independent. He was not an independent third-party verifier. selling the deals. He sold the deals. He was the guy It would be like me selling the deal to Mr. Damson; and then, when Damson wanted to know if the deal was real, I'm the one who looked and told him it was real. Q Indeed, isn't it correct that Boden knew -- that Boden had access to the TD Bank accounts? A Q The real TD Bank accounts? The real TD Bank accounts. MR. HOUSTON: Objection. He had He didn't have access to online. access to the statements from Irene. BY MR. LICHTMAN: Q Yes. So he would have had access to understand what dollars were in each account at any point in time, correct? A He needed to have access to that to help He me with all the other businesses we were doing. needed to know what real money was there. Q As an example, when Bova needed money regularly in the course of its operations, he had to know where to get the money to help fund the Bova operations, right? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Sure. And you'll see lots of correspondence with me copied directly between me, him and Irene. Q And Boden had access and knew of the trust account defalcations, correct? MR. HOUSTON: Yes. Objection. You could see it. BY MR. LICHTMAN: Q you mean? A Well, you see all these accounts with no When you say "you could see it," what did money in them; and then, all of a sudden, you see money go from one trust account, flying into the other one, and then flying right out to an investor. Q Let me rephrase that last question. To the best of your knowledge, what did David Boden know about the trust accounts and the money within them? A He knew that we had accounts that were supposed to have large sums in them that had nothing in them, that were then -- upon the need to fund a Ponzi payment, that suddenly money would be moved from one trust account into that specific, supposedly segregated trust account and then right out to the investor. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A And how do you know he knew that? Because he actually had to do that himself He was the one who handled those with Irene. transactions as time went on. Q Okay. And within the description that you just gave in your last answers, then, also tell me what you know that he knew respecting the flow of money in and out of TD Bank accounts? MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: Objection. Basis? Hearsay. To the best of my knowledge, he could see the sums coming in and out. BY MR. LICHTMAN: Q A Q A How do you know? Because he would talk to Irene about it. How do you know? Because Irene told me. He told me. I was there when they talked, and I was copied on a lot of emails. Q A So Boden told you this, then? Boden told me. Irene told me, and you can see it from the email traffic. Q Okay. You have already described Boden's use of the fake website, correct? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A anyone. A A MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: A Boden told you that he used the fake website, and you observed him using the fake website, correct? MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: Q Okay. Tell me your knowledge as to how -- I think you have covered it, but just so the record is clear, how do you know that Boden knew there was no real plaintiffs? MR. HOUSTON: Objection. He never talked to There He didn't see any. There were no conflict searches. There were no people. were no files. There was nobody to sign anything. BY MR. LICHTMAN: Q To be sure, you used the attorney-client privilege with respect to all business inside the office attached to Boden, didn't you? A Q Yes. Okay. So you indicated, with respect to Mr. Pearson, that you believed that when the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 sub-Ponzi started, he thought that the settlements were real? MR. HOUSTON: BY MR. LICHTMAN: Q A Is that what you said? When the sub-Ponzi started -- you're Objection. asking me about Pearson? Q A Pearson. Pearson. To the best of my knowledge, Pearson thought they were real. Q changed? MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: Objection. What is the basis? Could be from hearsay. If Is there a point in time that that he's going to testify that it was from conversations, it's hearsay. MR. LICHTMAN: MR. HOUSTON: "sub-Ponzi" means. BY MR. LICHTMAN: Q Well, just to make it crystal clear, Okay. And I'm still not clear what Scott, Mr. Rothstein, please, what is your understanding of what a "sub-Ponzi" means? A The sub-Ponzi was, as David Boden and United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Richard Pearson did more deals with us, eventually they broke off from me. They were bringing in their own investors; I was not involved, to any great extent, in doing the presentation to these investors. closed it. They picked it. They papered it. They It was running completely separate. My involvement was to give them the original numbers: The deal is, 800, 200, four months; 700, 300, six months, whatever it might be. Other than that, they would -- everything else, ultimately, was handled by them. They got to a point where they used Deb separately for the papering and for the signatures. That's what I mean by "sub-Ponzi." Did -And they even added things to it that weren't part of my original scheme, so... Q Did they ask your permission to engage in those transactions? A Q The additional things they did? No, no, no, just any of the sub-Ponzi transactions, did they say, we would like to do these? A How did that come about? They just started doing them. They kept Any asking me for deals, and I would send them. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A source of money was good to me. Q Indeed, they were most active in the time frame of starting around late April of 2009, all the way through the end of when the entire fraud was exploding in the country; is that right? MR. HOUSTON: Objection. To the best of my recollection, yes. BY MR. LICHTMAN: Q And it was in April that you had the issue with the funds arise that you had an even more critical need to bring in cash; is that correct? MR. HOUSTON: Correct. Objection. BY MR. LICHTMAN: Q So the extent that the sub-Ponzi went in business, that was a good thing for you because it enabled you to keep cash flow coming in that you were able to use for the purposes of the Ponzi, right? A Correct. MR. HOUSTON: BY MR. LICHTMAN: Q Just to be clear, so I don't have a Objection. problem with the record, describe for me, if you would, the relationship, in time, of how the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A sub-Ponzi impacted on your conducting the Ponzi scheme. MR. HOUSTON: Objection. It provided a sizeable amount of additional funds that I utilized to pay old investors. It enabled me to keep the Ponzi scheme alive, especially while we were going and seeking new sources of much more significant funding. BY MR. LICHTMAN: Q Was there a point in time that you came to believe that Mr. Pearson knew that the settlement deals that he was selling in the sub-Ponzi were not legitimate? A Yes. MR. HOUSTON: MR. LICHTMAN: Objection. What is the basis? There are a lot of -MR. LICHTMAN: Hold on. What is the basis of the objection? MR. HOUSTON: You're leading this witness. You're giving speeches, you're giving arguments, and then you're asking him to say yes. That's your -- he's your witness. MR. LICHTMAN: I asked him if there were facts that he knew of about that. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was? A MR. HOUSTON: BY MR. LICHTMAN: Q A Q Okay. Yes. What facts do you know of that existed to The objection stands. establish that Pearson came to learn that the settlements he was selling as the sub-Ponzi were not legitimate transactions? MR. HOUSTON: Objection. Several things in no particular order. Boden told me that he told him. He would regularly ask me where the plaintiffs and defendants were. to Boden. I would say, talk There were no plaintiffs and defendants coming in and out of our offices, and Pearson was in our offices frequently. There came a point in time when he wanted to see a plaintiff sign documents. Q A Q A Q "He" being Pearson? Pearson. What did you say? I said, that's impossible, talk to Boden. Do you remember which transaction that United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 54 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A one time. He asked for copies of documentation that we could not provide him, wire documents and the like, more detailed stuff. He wanted to have access to online stuff, since he was providing us with a lot of investors. I would not give it to him. And he was working so closely with Boden, that's what led me to believe that he was involved in all of this. There may be more stuff. I would He asked multiple times. It wasn't just have to really sit and go through all the emails. Q Is there a point in time that you can focus on that, in your mind, related to the issue of Pearson knowing the settlements were false? A Just prior to a large influx of deals with the Argentinean guys, okay, he asked me about them doing due diligence. Q A Q A "He" being who? Pearson. We were in my office, and -- What did he ask you, specifically? He asked -MR. HOUSTON: Objection. He said that these guys may want to do some significant due diligence, and he wanted to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A know how to handle it. I said, listen, I'll talk to them briefly. I said, but you have got to do this with Boden. I made a comment to him, I said: what's going on. can. Rich, you know And Do the best you can with what you Don't put yourself too far out there, okay, because a lot of this stuff you're asking for, we can't provide. Talk to Boden. I pushed almost all of it off on Boden. It was their deal. I tried to stay removed; and if you look at the email traffic, other than trying to push them along to close deals when I needed cash, I was uninvolved -- a lot of emails trying to push them, trying to twist them to get them to fund, other than that, I tried to stay away from it. Q Why were you uninvolved, because, typically, what I've come to learn over listening to you over the last eight days is you like to be involved and you like to make sure that you handle things yourself, manipulate it to your liking. MR. HOUSTON: Objection. Boden had proved himself an excellent He was running this without a hitch. confidante. Other than sometimes slow funding, he was running it United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A without a hitch. questions. As a matter of fact, there were times that he appeared, to me, to be doing a better job than I was because he wasn't having near the number of due-diligence hiccups that I was having with my feeder funds. BY MR. LICHTMAN: Q A operation. Q Okay. Is what you're suggesting that you So -He and Pearson ran a very smooth People weren't asking a lot of felt comfortable with what they were doing, in terms of how they were operating their sub Ponzi? MR. HOUSTON: BY MR. LICHTMAN: Q sub-Ponzi? MR. HOUSTON: Same objection. I mean, look, if How did you feel about them operating the Objection. I felt very comfortable. I didn't feel comfortable, I would not have them doing this. Okay. I assume you're doing a MR. LICHTMAN: cross-examination? MR. HOUSTON: No. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A MR. FERGUSON: MR. HOUSTON: I am. He is. I am doing the objections, evidentiary objections. MR. LICHTMAN: MR. HOUSTON: I see how that works. You saw it yesterday, too. He -- he -- I forget what I was saying. Oh, now I remember. He -- them, Boden and Pearson, were doing an excellent job. I didn't need to be involved. You have got to understand, this is -this was an extremely complicated scheme. Okay. My involvement with them, compared to what I normally had to do to sell one of these deals, was minuscule. I barely had to get involved on any of the selling, and I was minimally involved in due diligence. There is no way on God's green earth that Pearson didn't know what was going on. possible. It's not Boden couldn't have done this by himself. The mechanics call He was handling all those deals. for levels of knowledge that must have existed for these people to get sold. look at the traffic. The problem that you are going to have with questioning me, Mr. Lichtman, just so you're clear, they had their own Ponzi scheme going on. I All you have to do is United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A just took the cash. I wrote the deal out, the terms, gave it to them, they fund it. But they had no access, other than through me, to due-diligence material, unless they were creating it. So they had to have been lying to all these people because there was nothing real to show them. There were instances where investors, innocent investors are saying that they met with plaintiffs. They didn't meet with plaintiffs through me, so they had to have been by -- if -- by powers of deduction, it had to have been through Boden and Pearson. That's how I knew. MR. HOUSTON: unresponsive. BY MR. LICHTMAN: Q Are you familiar with how Pearson and Motion to strike, That's why I was comfortable. Boden made money on the sub-Ponzi? A They -MR. HOUSTON: I am. MR. LICHTMAN: MR. HOUSTON: They had -What's the objection? Hearsay. Objection. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 59 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A BY MR. LICHTMAN: Q Are you personally familiar as to how they made money on the sub-Ponzi? A Yes. MR. HOUSTON: BY MR. LICHTMAN: Q And tell me what the basis of your Same objection. knowledge is. A Email traffic and speaking to Mr. Boden and to Mr. Person. Q And what is it that you learned? MR. HOUSTON: Same objection. Pearson was charging a finder's fee, some sort of commission structure; and then they created this whole big lie about some plaintiffs finder's fee thing where the plaintiff was agreeing to pay them a finder's fee -- of course, there is no real plaintiff, so I don't know how they're agreeing to that. And on top of that, you have them creating all these false letters saying the plaintiff agreed to this finder's fee. And what they were really doing was, if I gave them a deal, for example, that was $700,000 fund, $300,000 ROI, over a specific period of United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A months, when they sold the deal to their investor, they would bump it, for example, for $800,000 fund, 300,000 ROI. The 100 additional they would take. BY MR. LICHTMAN: Q Okay. And to be sure, you learned that from Mr. Pearson; is that what your testimony was? MR. HOUSTON: Objection. Mr. Pearson and Mr. Boden. And I actually discovered it -- there was email traffic. There was an email where Rich was asking me for certain amount of money, and then told me that he needed a certain amount of it for Boden. And I went and asked Boden what the heck this money was for. BY MR. LICHTMAN: Q Because of the time, I'm going to kind of go through some documents and not introduce them all in. But I have an email from Scott to -- from you, excuse me, to Pearson, dated April 4th, 2009; and it talks about Pearson reviewing deals, advising as to funding schedules. And then it says, let's meet on Monday to discuss how best to handle. At that time you can have David verify our incoming wires for you. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A there. BY MR. LICHTMAN: Q And what was the source of the money Do you know what that -- what you meant when you wrote to Mr. Pearson that David would verify incoming wires to you? MR. HOUSTON: Objection. David was going to tell him the money was supposed to be, putative defendants? A Yes. MR. HOUSTON: BY MR. LICHTMAN: Q And what putative defendants were there? MR. HOUSTON: None. Objection. Objection. BY MR. LICHTMAN: Q A And what payments were there? None. MR. HOUSTON: MR. LICHTMAN: Objection. If you would like, you can have a standing objection to every question in the deposition. MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: I prefer to make them. Okay. I'm making them very simply United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 62 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and short. If you want to know the basis, I'll be glad to tell you. BY MR. LICHTMAN: Q Were there payments coming in from defendants on any of these cases? A No. MR. HOUSTON: BY MR. LICHTMAN: Q "G deals." A Q There's an email that references, quote, What were "G deals"? "G deals" were George Levin deals. And then you had deals that you labeled What were those? Objection. "RL deals." A Q RL Pearson deals. There was a point in time that you sent to Mr. Pearson a private placement memorandum from Banyan that had been all marked up; do you remember that? A Q A I do. What was the purpose of you doing that? They were going to do their own PPM. "They" meaning Boden and Pearson. Q And why did you send to them a version that was used by Levin or -A So they -- United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 63 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Q -- Preve, excuse me? So they could expedite the process. Did Levin and/or Preve know that you were sending that PPM to Pearson? A I don't know one way or the other. MR. LICHTMAN: MR. HOUSTON: I will mark as Exhibit 1 -Chuck, you didn't provide me Do you have a copy for any exhibits for this. me to look at? MR. LICHTMAN: Actually, we did. We emailed to you guys all the exhibits that you had. MR. HOUSTON: I didn't get them, so if you do you have a copy, or I can just look over your shoulder? I got -You waited until this MR. LICHTMAN: moment to say that you didn't get an email that you had? MR. HOUSTON: This is the first time you I'm just asking to Is that unreasonable? have introduced exhibits. look over your shoulder. MR. LICHTMAN: on it. Well, I have a work product I'll show you this exhibit first. Thank you. And the record should MR. HOUSTON: MR. LICHTMAN: United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 64 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A Q reflect that we have an email trail that shows that we sent these exhibits. MR. HOUSTON: Thank you. (Thereupon, the document was marked as Trustee's Exhibit No. 1 for Identification.) BY MR. LICHTMAN: Q Exhibit 1. I showing you what's been marked as It's from you to Pearson with a copy to "G 401." Boden, dated April 14th, 2009; subject: Do you see that? I do. The first sentence is: This is a deal that is pending funding. Do you know what you meant by that? I was telling them it was a deal I had sent to Levin that was pending funding that they could have. Q The second line says, please redact whatever you think is necessary for our protection. What did you mean by that? To the best of my recollection, once I realized that Pearson was involved, I was sending unredacted deals, which you have to take a look at the email traffic to be certain; which is one of the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 65 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A ways I knew he had to have known what was going on. Because you see the plaintiffs' names and you see the defendants' names, it doesn't take a rocket scientist to figure out there is no real people. Q Well, how is that? If you see a name on a document, how is someone supposed to understand that there are no real people involved? A Run the name; they don't exist. The defendant, they don't exist. connection between the people. Q redact. There is no real Were you directing -- you say, please Was that a comment to Pearson or was that a comment to Boden? MR. HOUSTON: Objection. It was to both of them. BY MR. LICHTMAN: Q A own deals. Okay. I wanted them -- they were running their I wanted them to take off whatever they needed to take off to protect us, don't leave on stuff that is going to hurt us. Q To the best of your recollection, did either party verify the existence of the plaintiff or defendant? A Attempt to? To my knowledge, no. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 66 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q Okay. I am showing you what's being It's an email from you to It talks about the questions for marked as Exhibit 2. Boden and Pearson. New York. (Thereupon, the document was marked as Trustee's Exhibit No. 2 for Identification.) MR. HOUSTON: MR. LICHTMAN: BY MR. LICHTMAN: Q There's a sentence that says, these are On the second page is What is the date of that? That's April 17, 2009. now ready to go to New York. a series of questions and answers, apparently. Are you familiar with this document? MR. HOUSTON: Objection. I recall seeing it at some point in time. BY MR. LICHTMAN: Q A Q A Take a look at the second page. Okay. Do you remember that page? I remember seeing it. MR. HOUSTON: BY MR. LICHTMAN: Q A Do you know who drafted that? Mr. Boden and Mr. Pearson. Objection. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 67 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A no? MR. HOUSTON: Why. Objection. A Q Did Mr. Pearson ask you if he could ever sit with a plaintiff? A Q He did. And what did you tell him? MR. HOUSTON: No. Objection. BY MR. LICHTMAN: Q Did you -- what did he say when you said BY MR. LICHTMAN: Q And then what did you say? MR. HOUSTON: Talk to Boden. Objection. BY MR. LICHTMAN: Q And that would be the conversation that you referenced earlier? A Q Yes. Did he ever ask to see a hard file of any of these cases? MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: Q And what did you say? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 68 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Okay. A Not that I recall one way or the other. A A A No. MR. HOUSTON: BY MR. LICHTMAN: Q And what did you say to him after that? MR. HOUSTON: Talk to Boden. Objection. Objection. BY MR. LICHTMAN: Q Okay. Do you know if -- did Pearson talk to you about the questions that are located on page two of this exhibit? MR. HOUSTON: No. Objection. I remember talking to David about it. I may have actually had some input into some of these answers; but, ultimately, it was compiled by and completed by Mr. Boden. BY MR. LICHTMAN: Q Did you say anything to Mr. Pearson about the answers on this page? MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: MR. LICHTMAN: Objection. What is that objection? Hearsay. What did he say to him. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 69 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A BY MR. LICHTMAN: Q All right. I have a document that is -- is authored by a Nabil Rhazi; do you know who he is? A Wait a second. I don't remember whether it was right at this time, but at some point in time I told Pearson -- I don't remember whether it was this script or another script. at Bova. We were downstairs We were both a little tipsy, but I was furious because I had just heard through Boden that Pearson had represented to investors that we had some big four or six, something like that, accounting firm doing audits. And I told Pearson directly, stick to the script, don't -- you don't need that to sell this product, don't do that because we have no way of substantiating it. MR. HOUSTON: Objection and move to strike, nonresponsive. BY MR. LICHTMAN: Q When you say "stay to the script," and the answer that you just gave, it seems as if your memory was jogged. page of Exhibit 2? MR. HOUSTON: Yes. Objection. Does that pertain to the second I don't know if it is specifically United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A York. this page, but it did jog my memory as to the fact that -- what would have been responsive to a number of the questions you had asked me previously is what I just stated, and that is the conversation that I had with Mr. Pearson about sticking to the script and to not exaggerate what was already exaggerated. Q Well, this email says, ready to go to New What was New York? MR. HOUSTON: Objection. There were a couple of different funding There was sources they were looking at in New York. something through Merrill Lynch, some guy named Paul Smith, I think. Again, I don't specifically recall. was their own little Ponzi scheme, sub-Ponzi. It I tried to stay uninvolved, except to guide and to assist, as need be, as little as possible. BY MR. LICHTMAN: Q What was your understanding as to what Was that the script? these questions meant, then? MR. HOUSTON: Objection. They're due diligence questions that are being asked by an investor. BY MR. LICHTMAN: Q Are those questions that you typically United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A encountered? A Q Yes. And with respect to the answers, what is the relationship of the answers that are typed here, to the questions? MR. HOUSTON: Objection. They're the same answers we tried to give consistently to all the investors. BY MR. LICHTMAN: Q A Including outside the sub-Ponzi, correct? Sure. From -- I'm meaning to my prior groups of investors. Q Is there anything that you can see, for instance, in the first question, the answer to the first question, that is true or untrue? MR. HOUSTON: BY MR. LICHTMAN: Q Strike that. Is there anything that you can see in the answer to the first question there, "who negotiates the purchase discount," that is inaccurate? MR. HOUSTON: Objection. There's Objection. The whole thing is inaccurate. not a plaintiff. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 72 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. LICHTMAN: Q question: account?" MR. HOUSTON: MR. LICHTMAN: objection be? MR. HOUSTON: hearsay. Chuck, this entire email is Objection. And what would that And the -- let's jump down to the third "Who controls the settlement escrow I am objecting to the entire email. Anything you ask from that email is hearsay. MR. LICHTMAN: Then I am taking a standing objection on hearsay. MR. HOUSTON: On this email, I'll be glad to do that; but on everything else, I'll assert them separately. BY MR. LICHTMAN: Q As to this question here, "who controls the settlement escrow account," the answer, you see that? A Q false? A It can't be true. There was no plaintiff. We commingled Yes. Do you know whether or not that's true or There was no plaintiff trust account. everything. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Q Boden knew that, right? Yes. Boden, to the best of your recollection, drafted this, right? A To the best of my recollection, yes. I added information or gave them information, but he drafted the document. Q Okay. Okay. Keep going. I was asking you about a Nabil Rhazi; do you know who he is? MR. LICHTMAN: For the record, it's Nabil N-A-B-I-L, last name is R-H-A-Z-I. A He was one of Pearson's salespeople. BY MR. LICHTMAN: Q Did you ever work with -- when you say "salespeople," salespeople doing what, to the best of your knowledge? A Q A Q A Selling Ponzi deals. How do you know that? I watched him do it. Who did you see him do it with? I don't recall who the investors were. They asked me to come down once to Pearson's office -- a couple of times, to answer a couple of quick questions, do a meet-and-greet; and Nabil United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 74 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 guy? A Q A Q A what? A gold, capital "G," Gold? It's not ringing a bell for me. All right. Are you aware that there were A A Rhazi was there pushing the settlement. Q And to the best of your recollection, is there any tie to Exhibit 2 and to what you observed when you went and saw the potential sale to investors? MR. HOUSTON: Objection. I don't recall one way or the other. BY MR. LICHTMAN: Q answers? MR. HOUSTON: Objection. How about in terms of the questions and It was always the same thing over and over again, Mr. Lichtman, so it's not jogging my memory. That was consistent throughout my Ponzi scheme and the sub-Ponzi, with the additions that David and Mr. Pearson kept adding to the thing. BY MR. LICHTMAN: Q Do you know anything about, quote, a gold two accounts opened up at TD Bank regarding Pearson? A Say that again. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 75 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q notation. email. Q That there were two accounts opened up at TD Bank regarding the Pearson transactions? A I remember accounts. I don't remember how many that we opened for Pearson transactions. MR. LICHTMAN: April 29th, 2009. I have an email, I'll mark this as Exhibit 3. (Thereupon, the document was marked as Trustee's Exhibit No. 3 for Identification.) BY MR. LICHTMAN: Q Showing you an email dated April 29th, 2009, it's from you to Bill Brock at the top and Irene Stay regarding new accounts needed. Do you see that? I do. If you go to the second page, there's a This is on the Bill Brock portion of the It says, please open the following trust accounts. It says Richard Pearson signors will be Scott W. Rothstein, David J. Boden, checks to require dual signatures. Do you see that? I do. Do you see underneath it, it says, RL United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 76 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Pearson signors will be Scott W. Rothstein and Stuart A. Rosenfeldt, checks to require dual signatures? A Q Yes. Okay. Why were there different signatories to the Pearson versus the RL Pearson accounts? MR. HOUSTON: Objection. I don't recall. BY MR. LICHTMAN: Q Do you know why Rosenfeldt would be on the RL Pearson account at all? MR. HOUSTON: Objection. I don't remember whether this is one of the deals or was one of the deals where Rosenfeldt actually came in and helped sell the investor. happened a few times. The whole thing is a little mysterious to me, because, remember, we did wires. This dual It signature thing is crazy because we weren't using checks and we weren't using signatures, so it sounds like just more of a scam. Q Well, even if you were doing wires, you would still need an account, wouldn't you? A Oh, no, no, the accounts are real. I'm United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 just -- the whole "requires dual signature," that sounds like something that was being told to investors as a sales technique because we don't require signatures. Q Could anyone besides yourself or Scott or Stuart execute wire transfers on the RL Pearson account, to the best of your knowledge? A Q A Q A Q Yes. Who? Irene. How do you know that? She did all the wire transfers. So if there was an account that was in RRA's name, she was authorized to execute wire transfers on it, right? A Q A Q Yes. Even if she wasn't a signatory? Yes. Okay. So this doesn't refresh your recollection at all as to why there were different names on the accounts? A It does not. MR. LICHTMAN: Okay. Let me show you what is next marked as Exhibit 4. (Thereupon, the document was United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 78 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A marked as Trustee's Exhibit No. 4 for Identification.). BY MR. LICHTMAN: Q This is an email from you to Pearson and Do you see that? Boden, dated April 24, 2009. A Q A Q A Q I do. Can you identify it? Yes. These are the deals I created. When you say "created," what do you mean? Made them up. So there were no -- obviously there were no plaintiffs in these deals, right? A Q A Q A No plaintiffs, no defendants, no money. Did you -Other than stolen money. How did you come up with the numbers? I made them up, based upon how much money we needed in house. Q Did you have any discussions, to the best of your recollection, with Boden regarding how you formulated this exhibit? MR. HOUSTON: No. Objection. BY MR. LICHTMAN: Q Take a look at the second page. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 79 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q Got it. You see a transaction there starting with "fund 890K"? A Q A Q A I do. What did that mean? It means fund $890,000. What does the "ROI 400K" mean? That means that's their return on investment, $400,000. Q And what was the time -- and when it says "pay over five months," what does that mean? A That means that they're going to get equal payments over five months. Q In terms of how you operated the Ponzi, what was the relevance to putting out into the marketplace in a deal on April 24th that you wanted to fund under those terms? A It reflected amounts of money that I needed at the time. We were starved for cash at this time, and I put as many deals out as I possibly could hoping they would grab any of them. Q Now, in terms of trying to sell these deals, what was it that the investor was being told in terms of, for instance, this deal: Fund 890,000 United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 80 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 along. A A ROI 400K, paid over five months. MR. HOUSTON: Objection. I Boden and Pearson were selling it. wasn't involved in the sale. BY MR. LICHTMAN: Q Had you been selling it yourself to a typical investor, what is it that the investor themself would have been told? MR. HOUSTON: Objection. We would have come up with what we call the "magic number," how much the total case was selling for. case it was. As you can see, we made it up as we went None of these say sexual harassment, whistle We kept it as vague so we We would have explained what type of blower, other employment. could create it as we went. We would sell the entire deal. talking about a fairly detailed process of You're explaining this is how much money the plaintiff is willing to take, that she is willing to take a $400,000 discount. defendant. Paid the money back from the We had already funded the money into our account over five months. Q You understand I'm making a record now? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 81 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A Q A Q I do. Okay. So with respect to -- I didn't think you had lost your mind. I may have, but that's a different issue. With respect to an investor, then, when an investor was going to be getting into a deal, using this one as an example, 809K, what does that tell that you the investor had expected about that figure, from your experience? MR. HOUSTON: Objection. That the investor would have to wire $890,000 to us, to a specific account, usually 0923, and that the investor could expect to get his or her 890K plus $400,000 out to them over five months? BY MR. LICHTMAN: Q And the investor would have affected this transaction with an understanding there was a legitimate plaintiff and putative defendant? A Yes. MR. HOUSTON: Objection. Unless it was a -- not an innocent investor and all of -- to my recollection, all the Pearson and Boden's investors were all innocent investors -- they were told a whole myriad of lies to get them to invest. That's how you got them to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 82 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A things. did. BY MR. LICHTMAN: Q What was the shelf life when you had one A invest, including the things that I told you a moment ago when my memory was jogged, that Pearson had created, I guess, to add impetus to the sale, that we were being audited by big 4 accounting firms. He also told investors, by the way, that he had 24-hour access to our online banking. Q A Q How do you know that? Because I saw it in an email traffic. Did he talk to you about that, also? MR. HOUSTON: Objection. I don't recall whether he did or David of these deals out there, you know, in terms of how long you perceived it being good for? MR. HOUSTON: Objection. Well, that's one of the interesting It's one of the, quote, unquote, tells, as to it whether this is real or not. I sent an email out saying immediate funding, and then some of these things get funded months down the road. So from my perspective, the deals were always open because I would take money United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 83 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A from any source. MR. LICHTMAN: I'm going to show you what's next marked as Exhibit 5. (Thereupon, the document was marked as Trustee's Exhibit No. 5 for Identification.) BY MR. LICHTMAN: Q Keep that one open to that page that I showed you. A Q Okay. Got it. This is an email from Richard Pearson to Do you recall you and Boden dated April 30, 2009. this document? MR. HOUSTON: Objection, mischaracterization of the exhibit. A Yes. BY MR. LICHTMAN: Q What is your understanding of what this document is? MR. HOUSTON: Objection. It's a calculation that either Pearson or It was sample deals that Boden did on percentages. he was -- they were putting together. BY MR. LICHTMAN: Q So these were not deals you were putting United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 84 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 together? A Q No, sir. Was it customary, when you put deals out to -- whether it was Szafranski or anybody else, that you would put percentages next to the offer. You'll see like subsection one down at the bottom of the page. MR. HOUSTON: BY MR. LICHTMAN: Q It say 4M, seven months, 2.95 M, Objection. 36 percent? A Q I never did that. That wasn't part of your practice as you affected the Ponzi scheme, right? A These must be deals that were created by They were making Unless you can Boden and Pearson sent to me. these up. This is not my deals. show me email traffic showing that this came to me, it looks like they created it and sent it to me for my approval. Q The emails from Pearson to you and Boden, do you notice that? A Yes. MR. LICHTMAN: show you Exhibit 6. Okay. Now I'm a going to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 85 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Q (Thereupon, the document was marked as Trustee's Exhibit No. 6 for Identification.). BY MR. LICHTMAN: Q Exhibit 6 is from Boden to you with a copy Do you see that? to Mr. Pearson, July 6, 2009. A Q I do. Okay. The top portion of the email says, deal number five below was sold as follows: fund 990K, ROI 300K, fee 100K. Do you see that? I do. Now, if you look at page -- they're not numbered, but it's the third page in. A Q I'm there. It says, fund 890K, ROI 400K. Do you have any understanding what the difference between numbers is that is at the top as to how the deal was sold and the deal, as it was initially portrayed on the April 24th memo that is incorporated as deal five? MR. HOUSTON: I do. Objection. BY MR. LICHTMAN: Q What is your understanding? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 86 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A this? MR. HOUSTON: Objection. A This is the whole scheme that Boden and Pearson came up with to steal additional money from the innocent investors. And this takes it to a completely new level, by the way, because they not only were bumping the funding, but they were reducing the return on investment in these deals. Q A And how do you know that? Then they were instructing me how to paper it, or instructing someone how to paper it; and it looks like telling someone that there was going to be a letter to Pearson giving him 110,000. Q A to me. Q Did you have discussions with Boden about And how do you know that? Because this is the way that they wrote it Early on, when they first started doing it -- I don't remember if this is when they first started doing it. Boden. Early on, I had a concern with I sat down and talked to him and said, you know you're taking an additional risk in doing this -- when I realized what they were doing -- I said, because you're changing the terms of the deal. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 87 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. LICHTMAN: Q A And why would that be additional risk? Because it created other red flags if people were looking through paperwork. You have got to remember something: It's by even sending me this email -- not that we were bashful about sending emails, but we tried to be careful -- we're taking -- I'm sending him deals that purportedly really exist; and then he's changing the entire term of the deal. Now, it's one thing -- take it step one -he changes the funding amount. could make the argument: Okay. Well, someone Well, he's just bumping it so he could create a greater commission, you know. But then he is reducing the amount of money that is going to the plaintiff. Well, if it was a real plaintiff, what plaintiff in their right mind -- now the plaintiff is giving up their money, too, when you know you don't have a plaintiff. And the other question that I said, I said, who is talking to this plaintiff to negotiate. You'll see that there is email traffic from Mr. Boden to various investors and the like, where he actually says, stand by, I'm negotiating terms with the plaintiff. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 88 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A well? MR. HOUSTON: Objection. did. A MR. HOUSTON: BY MR. LICHTMAN: Q Okay. So that -- oh, what did Mr. Boden Objection, motion to strike. say to you in response? MR. HOUSTON: Objection. That he's got it under control, and he I mean, his deals -- Mr. Lichtman, his deals and Pearson's deals went through nice and smooth. BY MR. LICHTMAN: Q Did you discuss this with Pearson, as The only conversations that I remember having with Pearson was basically scolding him -BY MR. LICHTMAN: Q A Q About this issue. Not this -- about this issue, no. Okay. Did you discuss with Boden what it meant on the third page in? A accurate. There was a time when he was -- he started changing the deals even more, and I said to him, I said -Q You said to who? No, that's not true. That is not United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 89 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A A To Pearson. I have told him, why don't you just increase your finder's fee instead of screwing around with the deal terms; and they -- again, it was basically, we've got it under control. Q Is that what he said, as well? Pearson said, we have it under control? MR. HOUSTON: Objection. Not using those exact words, but we have got it, we're good. BY MR. LICHTMAN: Q All right. It says on page three, letter to RLP, 110K. What did you understand that to mean? MR. HOUSTON: Objection. That there would be a plaintiff's finder's fee letter; but I wasn't creating those letters, so I guess that's just the way they notated how much Pearson would be getting. BY MR. LICHTMAN: Q How did you come to learn that? MR. HOUSTON: Objection. I hadn't I discovered it in an email. seen that letter. I ran across it accidentally. First I ran across the email saying that I think United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 90 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A $45,000 or some amount of money was going to Boden, and I confronted Boden about it. Not that I cared, I just wanted to know if he was getting additional money from someplace. feeling he was. And then, you have got to remember, if you look at this, it's from David Boden to David Boden and to Scott Rothstein. they're papering. These are their deals that I kind of always had the By July 6, 2009, they were doing all their own paper with Deb. Q You note that it also a copies Mr. Pearson? MR. HOUSTON: Yes. So this letter to RLP is not something I'm creating for him. It's something that they Objection. completely came up with, that whole fake plaintiff letter thing, and that they worked out with Deb. wasn't involved in that. BY MR. LICHTMAN: Q I want to make sure I understand what you I are telling me. So if they are reducing the return on investment, what they're basically saying is that somehow they changed the terms of what the putative United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 91 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A plaintiff was going to take, correct? A real -Q A Okay. -- that the plaintiff has agreed to give Yes, if you're assuming that the deal was up even more money. Q A Q folded. A Q 890,000? A Q A Q Yes, sir. The return of 400,000? Yes, sir. You see that the deal that is marked there Yes, sir. We looked at that deal before, fund Now, you have Exhibit 4 before you? I do. Okay. Keep it back to where it was as allegedly existing is a deal on April 24th, 2009, that that first deal of 890,000 and each of the next three underneath it are the identical deals that comprise deal five that was being sold in July 6th, 2009? MR. HOUSTON: Objection. That's correct. BY MR. LICHTMAN: United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 92 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A less. BY MR. LICHTMAN: Q deals? MR. HOUSTON: Yes, they are. Objection. You acknowledge that they're the same A Q If these were real deals, in fact, then they would have been opened around April 24th and closed shortly thereafter, correct? A Yes. They should have, actually, almost been done being paid for. Q Yet here you are in July 6th, 2009, and Pearson and Boden are selling the identical deals from two-and-a-half months earlier? A Yes, but when you're running a fraudulent investment scheme, "immediate" means whenever you can get the money. Q Did you have any discussions with Boden or Pearson about the fact that they were selling the same deals now that you had offered two-and-a-half months earlier? MR. HOUSTON: No. Objection. I couldn't have cared I did not. BY MR. LICHTMAN: Q Now, keep that document open right to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 93 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q A Q A Yes. where you have it. A Q Okay. One second. Showing you Exhibit 7, it's an email from Boden to Boden and yourself dated July 22, 2009. That's at the top entry. (Thereupon, the document was marked as Trustee's Exhibit No. 7 for Identification.). BY MR. LICHTMAN: Q There's some other emails that predate that, as well. A Q A Q Okay. Do you recall this document? Yes. Okay. You'll see that at the top of the email, it says it is deal five below. You see that? I do. You have Exhibit 4 in front of you? I do. You still have that page open? I do. Do you see that -- is that the same deal United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 94 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A five that was offered before? MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: Q deal five? A Q Yes. Those numbers are the same as between deal Okay. You see Exhibit 6, it talks about four -- excuse me, document four -- Exhibit 4 and Exhibit 6, right? MR. HOUSTON: Objection. That's correct. BY MR. LICHTMAN: Q Now, you see in Exhibit 7, it says: Deal was funded to 990,000. A Correct. MR. HOUSTON: BY MR. LICHTMAN: Q Is your understanding of what the 100,000 Objection. is there -MR. HOUSTON: BY MR. LICHTMAN: Q A -- the 100,000 difference? Money that Pearson and Boden were stealing Objection. from the investment. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 95 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A How do you know that? Because they tell the -- I'm preparing the deal at 890. If this was a real deal, they are then lying to their investor and saying the deal needs to be funded at 990. At the same time, if this was a real plaintiff, they would have contacted the plaintiff and negotiated the plaintiff to give up money on the other side on the ROI. Q Of course, that couldn't happen because there was no real plaintiff? A Q A Q A That's correct. Do you know who Marcelo is? I do. Who is Marcelo? He was one of the Argentinean fellows that they were doing business with. Q So the same deal that you had offered up on April 24th was then resold, again, pursuant to Exhibit 6, on July 6, correct? MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: Q And then it was resold a second time on United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 96 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A July 22nd as represented by Exhibit 7, correct? MR. HOUSTON: Objection. I'd have to see the deal paperwork to make certain; but, yes, that's what it certainly appears to be. BY MR. LICHTMAN: Q Okay. You'll see that pages starting -- go to page four of Exhibit 7. A Q Yes, sir. That's a cut-and-paste or a copy of the contents of Exhibit 4, correct? A Yes. MR. HOUSTON: BY MR. LICHTMAN: Q page -A Q Yes, sir. -- that's the same language that we showed Including, if you go to the third to last Objection. you before as to Exhibit 4, correct? MR. HOUSTON: Objection. It's exactly the same. That's correct. BY MR. LICHTMAN: Q Okay. Put those away. I'm going back in time a little bit now, and I'm going to do this -- I got still a lot of United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 97 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A stuff I need to cover. On May 6, 2009, you indicated to Boden that you were -- in an email to him -- tired of Rich's promises that never seem to happen, and you say he's starting off just as the hedge-fund guys ended: client. A Q Yes. Do you have -MR. HOUSTON: BY MR. LICHTMAN: Q Did you have issues with Richard Pearson Objection. Leaving me in a very bad position with around May 6th? A Pearson. He really loved the deals. a lot of money. He was making I remember having continuing issues with He wanted to take deals, but he would promise funding and then not deliver. Q What did you mean when you wrote: He is starting off just as the hedge-fund guys ended, leaving me in a very bad position with clients? MR. HOUSTON: Objection. That what the hedge funds did was they kept telling me they were going to fund and then it never funded. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 98 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A The client thing is just nonsense because there are no clients. used with everybody. BY MR. LICHTMAN: Q When you say -- you also wrote: Let's That was the impetus I always talk about the bank issue. night that gives me pause. I learned something late Do you know what you meant there? MR. HOUSTON: Objection. I don't recall. MR. LICHTMAN: You know, I'm just for the sake of it, going to try to get as many of these marked as exhibits and deal with the time problem. I'm going to mark this as Exhibit 8. (Thereupon, the document was marked as Trustee's Exhibit 8 for Identification.). MR. FERGUSON: Chuck, is that the email you were just using, the July 6th email? MR. LICHTMAN: MR. NURIK: Yeah. If you want to mark the whole thing as a composite and put it in front of him... MR. LICHTMAN: Pardon? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 99 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A MR. NURIK: If you want to mark the whole thing as a composite, he may be able to take a look at it and speed it up for you. BY MR. LICHTMAN: Q sentence: Ask you to take a look at that last Let's talk about this bank issue. Does that refresh your recollection? MR. HOUSTON: Objection. I don't want to I would be guessing. guess, Mr. Lichtman. BY MR. LICHTMAN: Q A Q Okay. Got it. Showing you Exhibit 9, it's an email from Nor do I want you to. you to Boden dated May 13th, 2009, and it incorporates an email down below from Boden to you and to himself. (Thereupon, the document was marked as Trustee's Exhibit No. 9 for Identification.). BY MR. LICHTMAN: Q A Q answers. You see that bottom portion? I do. It says: Here are the questions and my United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A I'd ask you to take a look at this document, if you would. A Q I remember this. What is it you recall about the document? MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: MR. LICHTMAN: Objection. Hearsay, I assume? Obviously. All right. It's questions from investors that Boden and Pearson were working with, Armoyan Verege and Barry Ward. I don't know if Barry was a lawyer involved with Verege or what it was, because he was involved with Verege. Q page in -A Q Yes, sir. -- the dotted line across the top of it, If you would take a look at the fourth and then there's questions with answers. A Q A Yes. Do you know who drafted that? It would have been either David or -- no, it would have to be either David Pearson, Ward, or Armoyan. Q It wasn't me. Take a look at page three. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 101 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A It looks -- actually, I'm reading it. It looks like David responding to someone else's questions. Q A Q Take a look at page three. Yes, sir. There's an email from Barry Ward. Do you know who Barry Ward is? A He was associated with Verege. I don't remember whether he was an investment counsel or a part of his investment or his lawyer, but he was involved with him. Q All right. As you take a look through that portion, through the email, does that give you any -- does that refresh your recollection? A Yes, he was -MR. HOUSTON: Yes. Objection. It's the guy who was assisting Verege Armoyan with due diligence. BY MR. LICHTMAN: Q A And who is Armoyan? Armoyan was a large investor that Pearson brought to the table. Q You had some issues with Armoyan, didn't you, some problems with Armoyan? A I did. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 102 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q What were those problems that you had, if you can recall? A Out of all the people that Pearson brought to the table, he was the most voracious with regard to due diligence. And, ultimately, Boden got me in a trick box with him where I ended up having to provide this guy with mortgages on properties I owned, all kinds of stuff. I was starving for the funds for the Ponzi scheme, so I was willing to give him anything and everything to get the guy to fund. Q A Okay. It was always something else. I mean, Boden was constantly drafting and redrafting documents. Q agreed? It was a mortgage on one of the properties on Castilla Isle, wasn't it? A I thought it was my empty property across I think was the big How did it come to pass, then, that you from Isla Bahia, from third. empty lot on the water. Q I could be mistaken. How did it come to pass that he understood that you had properties to possibly mortgage; do you know? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 103 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A or didn't. A Boden told him, and then I confirmed it, and they did all kinds of title searches. Q What role did Pearson have in you providing that mortgage, if any? A Q Just asking me to do it. And you did it because you needed to get the money in? A I needed the money. Pearson was also telling me that he was investing in this deal. So there would have been additional capital, but I don't recall him investing in it. Q Do you recall if Pearson invested in any of the deals. A As I sit here today, I have no knowledge of him ever actually putting a penny into the deals. Q A Did he tell you that he did? Yes. MR. HOUSTON: BY MR. LICHTMAN: Q invested? MR. HOUSTON: Objection. Did Boden tell you that Pearson had Objection. I don't remember whether he told me he did United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 104 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Pearson kept telling me he was going to invest, that he was putting money in with other investors; but, again, as I sit here today, I haven't seen any proof of him investing one penny. Q deals? A Q A to invest. Q A invest. MR. LICHTMAN: Showing you Exhibit 10 -Did he ever ask to? I don't recall him ever asking me to To my knowledge, no, sir. Did you ever ask him to? No. I -- I don't recall ever asking Boden Did Boden ever invest in any of your we're going to take a two-minute break so they can switch court reporters. (Thereupon, a recess was taken.) - United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 105 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ______________________________ Michele L. Savoy, RPR Notary Public - State of Florida My Commission No. EE 113173 Expires August 6, 2015 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 23rd day of December, 2011. THE STATE OF FLORIDA, ) COUNTY OF BROWARD. ) C E R T I F I C A T E United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 106 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ___________________________________ Michele L. Savoy, RPR Notary Public - State of Florida My Commission No. EE 113173 Expires August 6, 2015 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 1 to 106, inclusive, are a true and correct transcription of my shorthand notes of said deposition. I further certify that I am not an attorney or counsel of any of the parties, nor am I a relative or employee of any attorney or counsel or party connected with the action, nor am I financially interested in the action. The foregoing certification of this transcript does not apply to any reproduction of the same by any means unless under the direct control and/or direction of the certifying reporter. Dated this 23rd day of December, 2011. C E R T I F I C A T E THE STATE OF FLORIDA, ) COUNTY OF BROWARD. ) United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 107 A able 15:21 18:13 22:12,25 38:25 51:18 99:2 absolutely 44:1 access 18:4,8 20:14 21:5,6 23:20 24:12 26:23 31:25 32:1,4 45:9,13,14 45:16,19 46:4 54:6 58:3 82:7 accidentally 89:24 account 33:19 34:2 44:16 45:17 46:5 46:13,23,24 72:4 72:18,24 76:12,24 77:7,13 80:24 81:12 accounting 69:12 82:4 accounts 15:13,15 16:5 32:21 33:18 33:25 34:3,4,5,7 37:20 45:9,10,11 46:11,17,19 47:8 74:24 75:1,3,13 75:19 76:7,25 77:21 accurate 88:21 acknowledge 92:20 acknowledged 8:24 12:9 acting 40:12 action 106:13,14 active 51:2 activities 18:25 19:9 19:25 activity 13:9 14:20 16:11 25:20 27:23 28:6 29:1,9 31:5 41:9 actual 17:5 18:16 44:15 actuality 13:7 add 82:3 added 50:16 73:6 adding 74:16 additional 50:20 52:5 60:3 86:2,23 87:2 90:3 103:11 additions 74:15 adler 1:5 adversary 8:6 adviser 11:13 advising 60:21 agents 23:7 ago 44:10 82:2 agree 9:10 12:4 25:9 agreed 59:21 91:5 102:17 agreeing 59:16,18 ahead 16:24 39:2 aid 13:15 akerman 3:8 al 5:18 albert 19:24 alex 4:2,4 alive 52:7 allegedly 91:18 allowed 14:6 aml 15:21 amount 10:23 52:4 60:11,12 87:12,15 90:1 amounts 79:18 andrew 34:21 35:17 40:22 answer 32:9 33:22 42:1 43:8 69:21 71:14,20 72:18 73:24 answers 47:6 66:13 68:14,18 71:3,4,7 74:10 99:25 100:19 anybody 18:5 41:1 43:3 84:4 anyways 39:19 apparent 24:15 apparently 66:13 appearance 26:12 appearances 2:2,6 2:16 3:1,6,12,17 4:1,5,13,17,21 5:1 5:5,8,12,17,22 6:1 6:6,10 appeared 56:4 appears 96:4 apply 106:16 approval 84:20 approximately 10:15 21:19 23:15 april 7:8,9,9,10,10 39:4 51:3,9 60:20 64:10 66:9 75:6 75:11 78:5 79:16 83:12 85:20 91:18 92:2 95:20 arbitrage 3:1 arent 18:19,20 argen 32:16 argentinean 54:17 95:17 argument 87:13 arguments 52:22 armoyan 100:10,24 101:18,20,21,23 101:24 aside 30:2 asked 9:5 38:5 52:24 54:1,3,17 54:22 60:13 70:3 70:23 73:23 asking 18:18 22:20 42:2 43:19,20 49:7 50:25 52:22 55:7 56:1 60:11 63:20 73:9 103:5 104:9,12 assert 72:14 asset 40:24 assist 17:4,10 70:17 assisted 13:24 14:24 15:2,18 17:1 34:13 41:2 assisting 16:8,14,22 17:7 101:17 associated 101:8 associates 1:9 6:1 8:8 assume 10:11 17:15 56:23 100:6 assuming 91:2 ate 30:23 31:1 atlas 6:4 attached 48:22 attempt 65:24 attempted 15:20 attorney 106:10,12 attorneyclient 35:12 48:20 attorneys 6:7 audibly 43:8 audited 82:4 audits 69:12 august 105:13 106:23 authored 69:3 authorized 77:14 105:6 106:5 ave 6:3 avenue 1:24 3:8 5:2 5:14 avoid 15:22 avoiding 15:21 aware 74:23 B b 2:14 back 10:16 24:2 43:18 80:22 91:9 96:24 bad 97:6,21 bahia 22:11 102:21 balance 32:24 balances 32:13,21 32:22 44:16 bank 3:12 14:24 15:13 16:3,4 23:19 34:2,5 37:19 45:9,10,11 47:8 74:24 75:2 98:6 99:6 banking 16:15 28:8 82:7 bankruptcy 1:1 8:7 banyan 39:9,13,17 39:22 62:17 barely 57:14 barnet 34:21,22,24 35:17 37:11 41:23 barry 41:19 100:11 100:12 101:6,7 bart 6:4 barzeeflores 5:20 based 78:17 bashful 87:7 basically 15:25 88:14 89:5 90:24 basis 19:19 47:10 49:14 52:16,19 59:7 62:1 basketball 20:22 battista 2:11 beatrice 42:11 beckman 5:9 behalf 1:15 believe 36:4 41:8 42:19 52:11 54:10 believed 42:18,19 48:25 bell 74:22 berga 5:15 berger 2:8 best 28:3 38:11 40:2 43:14 46:16 47:12 49:9 51:7 55:5 60:24 64:22 65:22 73:3,5,16 74:2 77:7 78:19 better 56:4 beverage 10:10,14 13:14 14:5 big 8:5 21:18 26:24 59:15 69:11 82:4 102:21 bill 32:8,9,23 75:12 75:17 billing 4:22 24:12 biscayne 3:3,4 4:14 bit 15:10 96:24 black 4:19 blackedout 18:14 43:5,6 blind 37:5 41:12 blower 80:16 blvd 3:13 4:14,22 6:8 bob 40:20,21 boca 4:11 boden 9:22,23 10:8 10:14 15:18 20:10 25:10 26:2,4 27:6 27:10 28:15 29:12 29:13,14 31:1,8,9 31:23 32:19 33:13 34:9 35:1 36:5,13 36:19,21,21 37:3 37:24 38:1,2 40:11 41:2,9,23 42:17,25 43:12,15 43:18,24 44:2,10 44:21,23 45:8,9 46:4,17 47:21,22 48:4,12,22 49:25 53:11,14,23 54:9 55:3,8,9,23 57:8 57:18 58:13,19 59:9 60:8,12,13 62:22 64:10 65:13 66:3,25 67:15 68:6,15 69:9 73:1 73:3 75:21 78:5 78:20 80:3 83:12 83:22 84:16,21 85:5 86:1,16,22 87:23 88:3,18 90:1,2,7,7 92:7,12 93:5,5 94:24 97:2 99:15,16 100:9 102:6,14 103:1,21 104:5,9 bodenpearson 33:20 bodens 10:4 13:8 23:9 35:1 41:4 44:19 47:24 81:23 bodner 5:5 boil 26:1 boston 5:10 bottom 84:6 99:22 boulevard 2:3,8,21 3:4 bova 11:7 20:25 United Reporting, Inc. 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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION Case No. 09-34791-RBR Chapter 11 _____________________________________________________ In Re: ROTHSTEIN ROSENFELDT ADLER, P.A. Herb Stettin, Chapter 11 Trustee, Plaintiff, vs. RL Pearson and Associates, Inc., a Florida Corporation, Defendants. _____________________________________________________ DEPOSITION OF SCOTT W. ROTHSTEIN Volume I of II Taken on behalf of the Chapter 11 Trustee DATE TAKEN: TIME: PLACE: December 23, 2011 8:32 a.m. 10:30 a.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 cf32f1c1-7919-474f-9b81-ecd48865401f Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 APPEARANCES FOR RAZORBACK: CONRAD & SCHERER, LLP 633 South Federal Highway Eighth Floor Fort Lauderdale, Florida 33302 By: WILLIAM R. SCHERER, ESQUIRE ERIC RAYMAN, ESQUIRE IVAN J. KOPAS, ESQUIRE and KOZYAK, TROPIN & THROCKMORTON, P.A. 2525 Ponce de Leon Boulevard Ninth Floor Coral Gables, Florida 33134 By: HARLEY S. TROPIN, ESQUIRE APPEARANCES FOR THE CHAPTER 11 TRUSTEE, HERBERT STETTIN: BERGER SINGERMAN 350 East Las Olas Boulevard Suite 1000 Fort Lauderdale, Florida 33301 BY: CHARLES H. LICHTMAN, ESQUIRE and 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 JESUS SUAREZ, ESQUIRE APPEARANCES FOR SCOTT ROTHSTEIN: LAW OFFICE OF MARC S. NURIK 1 East Broward Boulevard Suite 700 Fort Lauderdale, Florida 33301 BY: MARC S. NURIK, ESQUIRE United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CLAUSIN MILLER One Chase Manhattan Plaza 39th Floor New York, New York 10005 BY: SCOTT L. SCHMOOKLER, ESQUIRE APPEARANCES FOR RLI ZURICH INSURANCE COMPANY, COLUMBIA INC. & ZURICH INSURANCE: APPEARANCES FOR TD BANK: GREENBERG TRAURIG, P.A. 401 E Las Olas Blvd Ste 2000 Fort Lauderdale, Florida 33301 By: HOLLY SKOLNICK, ESQUIRE DONNA EVANS, ESQUIRE MARK SCHNAPP, ESQUIRE APPEARANCES FOR THE COMMITTEE OF UNSECURED CREDITORS: AKERMAN, SENTERFITT One Southeast Third Avenue 25th Floor Miami, Florida 33131-1704 By: MICHAEL GOLDBERG, ESQUIRE JONATHAN S. ROBBINS, ESQUIRE APPEARANCES FOR PLATINUM PARTNERS VALUE ARBITRAGE CENTURION STRUCTURED GROWTH, LLC: GOLDSTEIN, TANEN & TRENCH, P.A. One Biscayne Tower, Suite 3700 Two South Biscayne Boulevard Miami, Florida 33131 By: SUSAN E. TRENCH, ESQUIRE United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 4 1 2 3 4 5 APPEARANCES FOR MORSES: APPEARANCES FOR FEDERAL INSURANCE COMPANY: ALEX HOFRICHTER, P.A 1430 South Dixie Highway Suite 204 Coral Gables, Florida 331463127 By: ALEX HOFRICHTER, ESQUIRE 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 APPEARANCES FOR ROSANNE CARETSKY: BILLING COCHRAN LYLES 515 E Las Olas Blvd Floor Six Fort Lauderdale, Florida 333012296 By: DAN GELBER, ESQUIRE TUCKER CRAIG, ESQUIRE APPEARANCES FOR ST. PAUL FIRE & MARINE: MILLS PASKERT DIVERS P.A. 100 N Tampa St Ste 2010 Tampa, Florida 33602 BY: JAMES A. BLACK, JR., ESQUIRE APPEARANCES FOR EMESS CAPITAL, LLC: KLUGER KAPLAN SILVERMAN, KATZEN & LEVINE, PL 201 S Biscayne Blvd Fl 17 Miami, Florida 33131 BY: CASEY H. CUSICK, ESQUIRE TRIPP SCOTT, P.A. 110 S.E. Sixth Street,15th Floor Fort Lauderdale, Florida 33301 By: GEORGE WALKER, ESQUIRE JOHN M. MULLIN, ESQUIRE and LAW OFFICES OF ROBERTA DEUTSCH 2499 Glades Road Suite 110 Boca Raton, Florida 33431 By: ROBERTA M. DEUTSCH, ESQUIRE United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 5 1 2 3 4 5 6 7 8 APPEARANCES FOR FEPICT, MS GROUP: APPEARANCES FOR MURRAY HUBERFELD, DAVID BODNER & MARK NORDLICHT: By: HARVEY WERBLOWSKY, ESQUIRE APPEARANCES FOR PLATINUM & CENTURION: CURTIS, MALLET-PREVOST, COLT & MOSLE, LLP 101 Park Avenue New York, NY 10178-0061 By: GABRIEL HERTZBERG, ESQUIRE ELIOT LAUER, ESQUIRE 9 10 11 12 APPEARANCES FOR MICHAEL SZAFRANKSI: NYSTROM, BECKMAN & PARIS One Marina Park Dr., 15th Flr. Boston, MA 02210 By: JACK SIEGAL, ESQUIRE 13 14 15 16 17 APPEARANCES FOR GIBRALTAR: LYDECKER, DIAZ 1221 Brickell Avenue Floor 19 Miami, Florida 33131 BY: CHRISTOPHER G. BERGA, ESQUIRE MIGUEL J. CHAMORRO, ESQUIRE 18 19 20 21 22 23 24 25 APPEARANCES FOR FRANK PREVE: PODHURST ORSEK 25 W Flagler St Ste 800 Miami, Florida 331301720 BY: RAMON A. RASCO, ESQUIRE STEARNS WEAVER MILLER, et al. 150 W Flagler St Ste 2200 Miami, Florida 331301545 BY: MARY BARZEE-FLORES, ESQ. MATTHEW DATES, ESQUIRE United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 6 1 2 3 4 5 6 7 8 9 10 APPEARANCES FOR FRANK SPINOSA: APPEARANCES FOR THE US GOVERNMENT: U.S. DEPARTMENT OF JUSTICE UNITED STATES ATTORNEY'S OFFICE 500 E. Broward Blvd., Ste. 700 Ft. Lauderdale, Florida 33394 BY: CYNTHIA STONE, ESQUIRE KOPELOWITZ OSTROW 200 SW 1st Ave Ste 1200 Fort Lauderdale, Florida 33301 By: BART A. HOUSTON, ESQUIRE JAN ATLAS, ESQUIRE APPEARANCES FOR LEVINSON PEARSON & ASSOCIATES, WATCH U-WANT, INC.: 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SCHLESINGER AND COTZEN, P.L. 799 Brickell Plz Ste 700 Miami, Florida 33131 BY: MICHAEL J. SCHLESINGER, ESQUIRE and MICHAEL COTZEN, ESQUIRE and SAMUEL J. RABIN, ESQUIRE 799 Brickell Plaza Suite 606 Miami, Florida 33131 United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 7 1 2 3 DIRECT INDEX CONTINUED DEPOSITION OF SCOTT W. ROTHSTEIN 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mr. Lichtman CERTIFICATE OF OATH CERTIFICATE OF REPORTER TRUSTEE'S EXHIBIT INDEX NO. 1 2 3 4 5 6 7 8 9 DESCRIPTION April 14, 2009, Email April 17, 2009, Email April 29, 2009, Email April 24, 2009, Email April 30, 2009, Email July 6, 2009, Email July 22, 2009, Email May 6, 2009, Email May 13, 2009, Email PAGE NO 64 66 75 77 83 85 93 98 99 United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 sure. Whereupon, SCOTT W. ROTHSTEIN, acknowledged having been duly sworn to tell the truth and testified upon his oath as follows: Thereupon, the following proceedings were had: MR. LICHTMAN: Let the record reflect we're moving into the separate deposition transcript that will be incorporated by reference into what we call the big case. This is in the adversary proceeding pending in bankruptcy court, Herbert Stettin versus RL Pearson and Associates, Inc. case number 10-03710. Just to be sure -I've lost the witness. MR. NURIK: No. He's just -You're still under oath. It's MR. LICHTMAN: You're still under oath, you know that, even though you were -THE WITNESS: MR. LICHTMAN: the other case? THE WITNESS: MR. LICHTMAN: Yes. Just re-swear him to be Yes. -- technically sworn for United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. LICHTMAN: Q Okay. Mr. Rothstein, we're going to be THE WITNESS: MR. LICHTMAN: I do. Okay. Let the record reflect, also, that the Trustee has reached a stipulation with Pearson's counsel that the questions that I asked in the 2004 Exam respecting your motivations for telling the truth are deemed incorporated by reference to this transcript so that we don't have to repeat. You agree, Mr. Ferguson? MR. FERGUSON: Yes. DIRECT EXAMINATION very limited about time, so it's probably going to be a pretty snappy presentation. I have what I see to be about two hours and five minutes of questioning with you. A Q Okay? I'm ready to go. Okay. You have repeatedly over the course of the past two weeks referred to what has been known as the Pearson/Boden sub-Ponzi or Boden/Pearson sub-Ponzi. A Q Correct. Okay. For purposes of today, I'm going United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to, for the most part, try to refer to it as the sub-Ponzi for brevity's purpose, okay? A That's fine. I'll take that as Pearson/Boden's sub-Ponzi. Q Okay. I want to lay a foundation on some facts before I get into some documents. A Q A Okay. How did you meet David Boden? I met him -- he was the general counsel for a client of mine, National Beverage. Q with him? A Yes. I represented Nick Caporella and And I assume that means that you did work National Beverage, and I met David Boden that way. Q A Approximately, what year? You'd have to go back and look at that. It was litigation against Broward County, and I don't remember the year. Q What were the circumstances that led to you hiring him to come work at RRA? A I had a need for counsel to myself and David had a tremendous counsel to the law firm. amount of corporate practice protocol, governance. I was looking to buy a lot of companies; he had tremendous M&A experience, and he was a great United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 guy. Q When you say you were looking to buy a bunch of companies, are you referring to what has been known in many of the pleadings as the RRA entities, entities such as Georgio and Q Task? A Q A Q Correct. Okay. Bova, et cetera? Correct. In terms of the work in-house, what kind of work did you expect him to do in-house? A Help within in-house manuals, help with governance issues with regard to growing the firm, mostly I wanted him to be a personal adviser to me on financial matters. Q Is it a fair statement that, indeed, from the day that he joined the firm, the vast majority of work that he did was for you, personally, as opposed to legal work for clients in the firm? A Yes. I figure it was about 80 percent to We had to be careful having him do me; 20 percent. legal work for clients because he wasn't licensed to practice in the state. do the work, but... Q correct? And the firm paid for his services, That's not to say he didn't United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 He was technically an RRA employee, received a paycheck from RRA? A Q Yes. Now, you also agree that he was not employed by a law firm for a period of probably at least ten years? A Q That's correct. All right. And he wasn't a Florida lawyer; you just acknowledged that, right? A Q counsel? A Because he turned out to be a fantastic I could trust him. He was, within the New York only. Okay. Why did you make him RRA's general confidante. definitions as previously established over the last nine days, a "player." to be counsel to me. Q A Okay. That -He was exactly what I needed He was more like a conciliary than a general counsel. Q Well, is that the case -- no. I'm not going to go there. Fredo. MR. NURIK: I'm not going to talk about No, it's Tom Hagen. Yeah, or Tom Hagen. Okay. MR. LICHTMAN: United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A THE WITNESS: BY MR. LICHTMAN: Q In any event, I understand how that was Several Fredos. helpful to you. What impact was that? What impact did making him general counsel have on RRA, if any? A Q In actuality, none. Okay. Was the sub-Ponzi scheme Boden's first involvement in illegal activity with you, when he joined the firm? A Q A No. What did he do before that? There were certain parts of the National Beverage litigation that we had talked about where we were, I would say, fudging facts to aid Mr. Caporella. And then there was something else that he was involved in. THE WITNESS: into that? MR. LAVECCHIO: MR. LICHTMAN: Can I have one moment? Yes. Mr. Lavecchio, can I get And he, also -- on the legal side, he assisted us with certain campaign issues. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 it. Q A Q How about money laundering? He assisted with bank issues that I had. What do you mean by that? BY MR. LICHTMAN: Q A Q Campaign contributions? Various types of campaign issues. Okay. With respect to the National Beverage litigation, are you saying that he knowingly fudged facts or allowed facts that were untrue to be used in connection with that litigation? A Q Yes. So we can go to the record and find what those could possibly be? A If you give me the record, I could probably, more than likely, than not, point out for you what was created by him and I or what was not. Q Okay. And I'm leaving the political issues alone for right now -- or campaign issues alone for right now. Prior to his being involved in the sub-Ponzi, was he involved in any of your organized-crime activity? A He knew about it; he was not involved in United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A When I was moving money and the like, he He knew what was going on. He knew I assisted me. was having issues with moving money. with him. counsel. Q I discussed it It wasn't in depth, but I sought his If this transcript were part of the previous eight-and-a-half days, I could leave that alone; but because this is an independent transcript, I need you just to delve down a little bit so there's a clear record. A Q Okay. Okay? When the first -- When you say "moving money," do you mean that there was a large number accounts at TD Bank, and money was transferred in and among and between the various accounts to suit your purposes, to get money whenever you needed it? A Q Yes. And Mr. Boden assisted you how with respect to those transfers? A Guided me or attempted to guide me on We were never really able avoiding BSA AML issues. to come up with a plan to avoid them, other than to have Mr. Spinosa protect us, because -- just by the sheer velocity. I mean, we basically came to the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 conclusion, after studying what we studied, that we were going to have to have protection inside the bank because -- just as we had had with Gibraltar Bank, because the high velocity was a dead giveaway: the in and out of accounts, the way money was moving. Q Did he start doing that as soon as he joined the firm and started assisting you? A No. It was over a period of time. It was like everybody else that started engaging in illegal activity with us; it was over time as I was -became more and more certain that he was open to that sort of thing. Q To be sure, the process of him assisting you on these banking issues preceded the sub-Ponzi, though, correct? A Q Yes. Okay. Did he have any involvement in any of the settlement deals that you had been involved with prior to the sub-Ponzi? A Yes. That's how he created the sub-Ponzi. He was assisting me with those deals. Q A Q Do you remember -Go ahead. Do you remember any of the specific deals United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that he assisted you with? A He is the one -- he brought Richard Pearson to the table. Q Okay. Before Pearson, did he assist you with any actual Ponzi deals, any settlement deals? A I don't remember, specifically, because I remember him, for example, assisting -- well, he brought Florescue in; but Florescue was after Pearson, so I don't recall specific. Q Okay. Did he assist you with any of the documentation issues on any prior settlement deal? A He started to. That's how he understood what was -- what needed to be done for his sub-Ponzi. Q Yeah. I assume there had to be a predicate for him to look up one day and all of a sudden become involved in a running a sub-Ponzi; is that a fair statements? A Well, he had gotten involved in, originally, what he thought were legitimate deals, or at least I thought he thought they were legitimate deals; I don't know what was in his head. And as time went on, like with many of the people who ultimately became involved with the Ponzi scheme, he figured out what was going on and then United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ultimately developed his own sub-Ponzi with Mr. Pearson. Q Well, indeed, if he was your right hand inside the firm, he would have had access to more data than probably anybody else; is that a fair statement? A I would think the only people that would have had more access to data would have been Debra Villegas, Irene Stay and Stu Rosenfeldt. Q A Q Is it a fair statement -And myself. -- though, in terms of the paperwork, he would have been able to see that there was just a series of blacked-out documents, that there were no real supporting documents to establish that the actual plaintiffs existed in any of the lawsuits? A Well, here's the thing: David and I had conversations early on where he's asking me why aren't any of these cases coming up on conflict searches or why aren't there any files anywhere, that type of questioning. Q A Q And this preceded the sub-Ponzi, correct? That preceded the sub-Ponzi. Okay. Was he involved in any other money-laundering activities? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A He may have been. I don't specifically recall at this moment. Q Any public-corruption issues? Just generally, without getting into the privileged matter. A He knew certain things that were going on. He knew about my ties to law enforcement. Q Okay. Howard Gruverman, was he involved in any illegal activities that you might have engaged in with Howard Gruverman? A Q A Yes. Which ones? There were a couple of instances where Howard was taking kickbacks into -- from insurance companies that were doing business with Edify. There was actually one time where Howard was being investigated for -- I don't remember the exact circumstances, but David knew what was going on. David and I had met on a pretty regular basis with Mr. Gruverman to discuss his problems. He also knew of Mr. Gruverman's involvement in campaign issues inside his own company. Q How about Albert Peter, was he involved in any of the illegal activities that you described United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 like? A Q A All of it. Okay. He participated with some of the events I mean, he would go to the hockey He went to all He that? A level. He participated pretty much at every He flew with me to games on private planes. earlier on? A I don't recall, specifically, whether he He may have been. was or not. Q A Ron Pecou? I don't recall him having anything to do with Ron Pecou. Q Okay. You have testified about the Rothstein rock-star lifestyle. A Q Yes. To what extent did Boden participate in He had access to all of our firm's tickets at all venues. Q Whether it was sports, concerts and the more than I did. games, go to the basketball games. the football games, brought his family with him. traveled with us. He had an open tab, wide open, at Bova -- United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 limousine. all the Bova restaurants. He was heavily involved down at the Versace mansion and spent a lot of time partying down there, without having to pay anything. He had access to our firm -- to my He had access to our limousine service, which he utilized frequently, both for himself, and escorts, and with his family. Q family? A Q A Q there. A He used the limo service with -- by No, no. With his -That didn't come out right. Let's make sure there is some commas in You're saying he used escorts with his himself and for -- with friends of his, with his family, comma -- big comma -- and with escorts. Q escorts? A escorts? Q A Q Just the escorts. A dozen. You paid for them? The limos and the escorts or just the Approximately how many times with the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you sure. work? A David wanted to -- was looking to move. I A Q Yes. Okay. With regard to the house that he rented from you on Castilla Isle -A Q Oh, yeah, I forgot about that. That was previously owned by Rickie Williams, right? A Q Yes. Describe that transaction. How did that was moving out of 2308 to move on to Isla Bahia, and he always said he would love to be able to buy that house, rent the house, whatever. And I rented it to him for drastically under market. I think I rented it to him for $10,000 a month; and I don't know which months he paid and didn't -- you'd have to take a look at the records -- and we had discussion about it. And, you know, he kept saying to me: Are You're not asking for a lot of money for Thank you. I said, You it, you know. I said, It's good for you. know you have got to have that perception of having a lot of money. The more money you're perceived to have, the more money we will be able to generate. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So it became a tool to him, also, because he could use the house for entertaining and the like. Olas. Q Why do you think that $10,000 a month was It was prestigious on Seven Isles in Las under market value for rental? A Because the real estate agents that we had talked to previously, Kim and I, about -- before we decided to let the Bodens rent it, they told us we could get more than double that. Q Did he also receive cash, you know, like some of the other people that you have talked about over the course of the last eight, nine days? A Q A Q Yes. Do you know approximately how much? I do not. Was it a regular payment, like whenever he wanted cash, he could come and get it from you? A It wasn't like an open piggy bank, but yeah, he had access to cash when he needed it. Q He closed a number of deals for you on the Rothstein entities? A Q He closed a large percentage of them. Right. At the time that he closed, for instance, United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Bova, did he know what the source of funds was? A Mr. Lichtman, you have to go back and look and see what level his involvement is, because I don't want to guess. Q I would be guessing. Well, how about Casa Casaurina, because that was closer to the end, do you recall that? A Q Yes. Okay. Did he know what the source of funds was for Casa Casuarina? A Yes. You also have to understand that he I mean, he was knew what the firm's finances were. one of the people that had access to the billing records and, you know, would discuss financial issues with me. You know, it's pretty apparent how much money is coming in from legitimate law office services, and then there's got to be someplace the other money is coming in. And he, of all people, knew that many of our business enterprises at that point in time were losing money or they were in the very early, you know, stage where you had to -- where you are still investing huge sums of money to try to get them off the ground. The restaurants weren't making money. The Q Task wasn't at the stage where it was making United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 money. We were still investing. It was like that a for a lot of our businesses. So he knew there was not only money not coming from the law offices -- from the law office, but that -- also that the businesses I was buying were still in their early incubation stage so they weren't throwing off -- many of them were not throwing of any money. Q Would you agree or disagree with the statement that Mr. Boden knew each time that he closed one of those business transactions for you, that the money was obtained from illegal transactions? A He should have known, yes. We didn't discuss it. We didn't say, hey, this is illegal money going into these transactions; but from the information he had before him, he would have had to have been lying not to know that it had to be coming from someplace other than legitimate activity. And then, of course, once he was running the sub-Ponzi, from the day you determined that sub-Ponzi started, every deal after that, he would have known there was illegitimate money coming to the firm. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q So to boil it down, then, what facts did you know of that would indicate that Boden knew that the settlement transactions you were working on prior to the sub-Ponzi, Boden would have known those were illegal? A There were no plaintiffs; there were no defendants. Q A Q A And you say that he knew that? He knew that. Okay. The paperwork was turning around without the appearance of any plaintiffs or defendants. Literally, we would get a deal. It would be papered; and within hours it would have plaintiff's and defendant's signature on it and be ready for funding. There were no conflict searches. were no files anywhere. coming in and out. There No one ever saw any clients If you look at the sheer number of cases that we were settling, you would think you would see somebody wandering in and out of the offices. There was nobody. He had access to our financials. There was no money ever coming in from any legitimate big defendants sending millions of dollars to us. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Okay. That's probably a good start. I'm sure that there's more. Q Pearson? A Q A Through David Boden. Do you know how? Although, I think I had met him to say All right. Now, how did you meet Richard hello previously. Q A Do you know how Boden met Pearson? I'm not sure. I think he met him down at Bova, actually. Q Was RRA paying for Mr. Pearson's suite -- I think it was 1870 in the 401 building -- or was Pearson paying that himself? A Q A Q I think he was paying it himself. All right. Do you know -- I don't recall paying that. Do you know what the circumstances were of Pearson being located in the same building as you? A Q I do not. All right. Was Pearson's sub-Ponzi involvement the first illegal activity that he had engaged in with you? A Pearson? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q Yes. ALL PRESENT: Objection. To the best of my recollection, yes. BY MR. LICHTMAN: Q Okay. So to be sure, he did not engage in any of the other types of activity that we talked about over the preceding days, such as money laundering or banking issues or public corruption or any of those type of claims? A Q A Q A With me? Yes. No. With somebody else that you know? I knew Richard Pearson, after talking to David Boden, before I started doing business with him, to be a player. I knew that he had had a -- from speaking to him, tax issues and the like. He came from what he had described as a very wealthy family out of Canada, and I later learned things that he had done that were illegal; but that was after he became involved with the Ponzi. Q So the record is clear, what do you mean by "player"? A He was a -- he was a wheeler-and-dealer. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A He was involved in illegal activity. He was -- it's that phrase I used in the early days of the deposition, it was -Q A I know, but this is a separate transcript. Yes. Greed before morality, okay, and he was -he was in that genre. Q Okay. You made a conclusory statement that you knew he was involved in illegal activity. What facts do you know of that support that statement? A Boden told me. That's how I know -- and I trusted Boden. Q Okay. Did Boden tell you, specifically, what he knew that Pearson was doing? ALL PRESENT: Objection. He told me that Richard Pearson was a master of the other peoples' money, the OPM deals; that he was very good at convincing people that they should invest in things and give him large percentages of ownership with him putting nothing in. That's the type of thing David would discuss with me. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 us. is. Q Okay. Was Pearson involved, to any money." A It must have. I don't even know who that BY MR. LICHTMAN: Q As a quick aside, there's an investor in the RRA -- excuse me -- in your Ponzi whose name was "OP Monies." Do you know if the name "OP Monies" comes from "Other People's Money"? I just heard you say "other people's extent, in what you have called your rock-star lifestyle? A To a limited extent. He had his own rock-star lifestyle. Q What did he do with you -MR. HOUSTON: BY MR. LICHTMAN: Q A -- in terms of this rock-star lifestyle. He went to certain sporting events with Objection. I had gotten him concert tickets a couple of He never went to the Heat games. He didn't travel with us. He went to the times. strip clubs with us, and he ate at Bova for free on a multitude of occasions, but I can't tell you how many times. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A for free. Q After you start -- after he started the Whenever he ate with Boden, he was eating sub-Ponzi, was he involved in any other type of illegal activity with you? MR. HOUSTON: Objection. He may have been He was really tied to Directly with me, no. involved in stuff with Boden. Boden, not to me. BY MR. LICHTMAN: Q Okay. I'm going to give you a list of names and tell me if any of these people were involved in the sub-Ponzi. And if you say yes, tell me what their function was, as briefly as you can. A Q A To my knowledge. To your knowledge, yes. Because it was literally a separate whole thing, but... Q A Q A Curtis Renie? Yes. What was his role? Well, he had created the fake website, and Mr. Boden used that fake website from time to time. Q A How do you know that? Because I had given him access to my United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 office to use it -- or Deb had to give him access to my office to use it. Q A Q A Okay. It was the only place he could be access. How do you know he actually used it? Because I had to show him how to use it, and he had told me he used it. Q A level. Q A Irene Stay? And also Curtis -- there are times when Okay. Bill Corte? The same answer, Bill was involved at that David needed balances changed, and I was the one who had -- he had -- David would have to tell me, for example, in the -- I don't know -- there were all kinds of Argen --- Exito, all kinds of different company names. Most of their investors were, the Pearson/Boden investors, used separate companies for each investment. So we would constantly have to go in and segregate accounts and change balances. So David would tell me what the balances needed to be, and I would have Curtis or Bill change the balance. Q Okay. Irene Stay? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Yeah. Irene had to have known because she was moving his money; and he would send her emails and Pearson would send her emails, or be copied on the emails, telling her the payments needed to go out and the like. Q When you say "moving money," meaning moving money the same way that Irene Stay did with respect to the settlement transactions that you were working on? MR. HOUSTON: Yes. Objection. David would -- there would be email -- there's email traffic, Mr. Lichtman, where Pearson or Boden or both of them are cc'ing one another or the like and saying these are the payments that are due today. And that email would eventually be forwarded to Irene Stay. Irene would then have to move money from one of our other main feeder accounts into whatever account the money needed to go out from and then send the money out for the Boden-Pearson sub-Ponzi. Q Is it a fair statement that what you just described in the preceding answer is what would have been meant by the term "moving money"? A Q Yes. Okay. And what accounts did those United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 typically involve? A It was a TD bank account, so I don't know It would be from 0923 into which specific accounts. various trust accounts and then out again. Q A The myriad of TD Bank accounts, correct? Yes. Somewhere between 22 and 28 accounts, yes. Q A How about Debra Villegas? Debra was heavily involved with Boden because she did all his paperwork. Q A Q You mean documenting the transactions? Yes. To the same extent that she assisted you on transactions that you affected with other settlements? A Q Yes. Okay. Caputi, Steve Caputi, did he have any involvement in the sub-Ponzi? A I don't recall whether he did or not. I don't think so. Q A Andrew Barnet? Barnet brought in investors; but as I sit here today, still, Mr. Lichtman, I really don't think that Barnet knew with was going on, you know. He may have, because he was so close to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Boden. He was constantly in Boden's office; and, of course, if he was observant, he was seeing no clients, no files, no conflict searches. You know, that conflict search is a huge red flag for any lawyer anywhere near this, because you know, as a lawyer, no new case comes in -- you have got to send the plaintiff's name. how confidential any of this is. First of all, two important keys: The I don't care confidentiality one runs to everyone in the law firm, all the lawyers and all the staff, attorney-client privilege. So there's no reason for them not to know who these people are, and the only way to do a conflict search is to send the plaintiff's name and the defendant's name to the entire firm. Q It was never done. Was Andrew Barnet -- excuse me -- an employee of RRA? A Q A Yes, he was. In what capacity? He was my director of corporate We gave him some fancy development or something. title. Q A Is he a lawyer? No. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Was he paid a fee for any transactions that he brought to the table on the sub-Ponzi? A records. From me or RRA, you'd have to check the I believe he was. But my understanding from speaking to David Boden and Pearson was that he was paid finder's fees by them. Q Did he bring investors to you for any other deals besides the sub-Ponzi deals? A He tried to. I don't remember whether we ever actually closed the deals or not. Q What was the time period that you recall, in number of months, roughly, that he tried to bring you or Boden deals? A months. It wasn't very long. It was several He was only employed by us six, seven, eight months. Q How was it that he came to know that settlement deals even existed within your office? A about it. I told him about it, and Boden told him He saw us doing the deals. He spent a lot of time with David Boden. involved in papering deals. Q A Boden was heavily What did you tell him about the deals? I don't recall whether I told him anything one way or the other. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Again, I was very busy with the other Ponzi, the main Ponzi. Boden. I mean, but you literally -- I mean you have been in our offices. You have got to be blind His interaction was with to know that these -- it's just nothing there supporting this. Q Okay. Do you know if he knew whether or not the settlements were real? A Q I'm sorry? Do you know whether or not Barnet knew the settlements were real? A were fake. Q Okay. Spinosa, was he involved at all in I don't -- I don't think he knew that they the sub-Ponzi? A Q A Not directly, no. Does that suggest indirectly? Well, he was protecting the RRA bank accounts from scrutiny, so to that extent, yes. Q A Do you have personal knowledge -But he didn't -- he had no direct knowledge, to my knowledge, of interaction with Boden and Pearson. Q Meaning to your personal knowledge, did he United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 have direct communications with Boden about what Boden was doing in the sub-Ponzi? A Q I have no recollection of that. Do you know whether or not Spinosa was asked to execute any lock letter for sub-Ponzi deals? A He may have been. You would have to check the lock letters. other. Q Okay. I don't recall one way or the How about Ms. Caretsky, did she have any involvement, to the best of your knowledge, in the sub-Ponzi? A Q did not? A To my knowledge -- you said "to my To my knowledge, she did not know. Mr. Preve, did he? No, sir. No, sir, meaning you don't know or no, she knowledge." Q A Okay. You know, I don't know -- remember one way It was or the other if I discussed it with him. unimportant to my dealing with him, because it was just a separate source of funding. Q Let me ask you this. You can see I have a large stack of documents. From a time perspective, I'm not going able to get through them all, so I'm United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A going to ask you about some of the documents -A Q Go right ahead. -- without putting them into the record. I have an email from April 4, 2009, the subject of which is "G380." It's from you to Here's Richard Pearson, and it says to Mr. Pearson: your first case for funding. More to follow today as I review what I pulled from prior funding source, Banyan. Do you recall anything like that? MR. HOUSTON: Objection. It's certainly possible, but that doesn't mean that Banyan knew because I could have been lying to Pearson about it. BY MR. LICHTMAN: Q Indeed, did you pull funding transactions from Banyan to give to Pearson? A I didn't need to pull anything from It anywhere because it was all made up anyways. didn't need to really be pulled. okay, I'm pulling it from here. Q Okay. I would just say, Do you recall whether or not Banyan or Frank Preve had any involvement in the sub-Ponzi? A I don't recall specifically. You'd have to check the email traffic. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q A Q A Q A Q Did you ever discuss anything about the sub-Ponzi with Preve, to the best of your recollection? A I don't have a specific recollection of discussing it with him, we were so busy running around. Q Okay. John Harris, did he have involvement in the sub-Ponzi? A Q A No. Szafranski? No. Because Boden, strangely enough, was I don't recall them You'd have to acting as their own verifier. ever using Szafranski to verify. check the email traffic. Q I'll get to the verification in a moment. How about the funds? The hedge funds? Yes. No. Bob Kagan? No. Bob didn't know anything. Andrew Glass. Who's that? GNV Asset Management, LLC. I couldn't even tell you who that is. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Is there anybody else that you can think of that would have assisted Pearson and/or Boden in the sub-Ponzi? A Q A David Boden's secretary. Her name? I think it was Patricia something, but I don't recall. Q Do you have reason to believe that she knew that Boden was involved in illegal activity? A I would be guessing, but just from the circumstance that I've described over the last nine days, she would have to be blind not to know something was going on. the other. Q A Patricia, was that her name? I think so. Just look at the email traffic between him and whoever he sent the deals to. Q Was Barry Florescue -- Florescue, But I don't know one way or F-L-O-E-S-C-U-E, for the record -- an innocent investors? A My understanding is that Florescue came in through Barnet to the Boden/Pearson group. Q Okay. MR. SCHERER: Was he innocent investor? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A You didn't get the answer. MR. LICHTMAN: follow-up. MR. SCHERER: BY MR. LICHTMAN: Q A Q A Was he an innocent investor? Yes. Okay. And why do you say that? Thank you. I was asking him the Because I helped fool him; I never told him what was going on. Q Brayer? A Q started? MR. HOUSTON: Objection. I don't know who that is. All right. How did the sub-Ponzi get All right. How about Dan and Beatrice Originally, Boden/Pearson, or at least I know Pearson, believed these were real deals. that because -- at least I believe he believed that because I convinced him of it. due diligence. BY MR. LICHTMAN: Q A What due diligence did he do or not do? To my knowledge, all he did was talk to me He did very limited It was very easy to convince him. and talk to Boden, looked at some deal documents. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A It was probably -- other than the people who directly knew about, Mr. Lichtman, he did the least due diligence of anybody. Q When you say "deal documents," do you mean the standard package of blacked-out documents? A Q Blacked-out document. Did he ask to see any other files? You have to answer audibly. He may have. He may have. I don't have any specific recollection of him doing any real due diligence, other than sitting and talking to me. Q A Q And did he also talk to Boden? Yes. And to the best of your knowledge, when he talked to Boden, did he talk with him about due diligence issues? MR. HOUSTON: Objection. Some, but Boden did not come back to me He may have very frequently asking me anything. sent me some emails asking me some specific information, but it was, again, very limited due diligence. BY MR. LICHTMAN: Q To be sure, do you view Boden as your co-conspirator? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Q Do I view -- yes, absolutely I do. And you spoke to Boden frequently during the course of the time that he worked with you at RRA, right? A Q Every day. Okay. At least once a day, if not a running dialogue, would be that a fair statement? A Q Yes. You used the term "verifier" a few minutes What did you mean by ago with respect to Boden. that? A Szafranski was the third-party verifier, the person who was supposed to be completely independent coming in and verifying the existence of the plaintiff, existence of the defendant, actual signatures on documents, account balances and wires in and out. Q In connection with the sub-Ponzi, do you know what Boden's role was as a verifier, if any? MR. HOUSTON: Objection. Boden was, to my knowledge, the main, quote, unquote, third-party verifier for all the Boden/Pearson materials, which never made any sense to me. Q Tell me why that didn't make sense to you. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Because he's not independent. He was not an independent third-party verifier. selling the deals. He sold the deals. He was the guy It would be like me selling the deal to Mr. Damson; and then, when Damson wanted to know if the deal was real, I'm the one who looked and told him it was real. Q Indeed, isn't it correct that Boden knew -- that Boden had access to the TD Bank accounts? A Q The real TD Bank accounts? The real TD Bank accounts. MR. HOUSTON: Objection. He had He didn't have access to online. access to the statements from Irene. BY MR. LICHTMAN: Q Yes. So he would have had access to understand what dollars were in each account at any point in time, correct? A He needed to have access to that to help He me with all the other businesses we were doing. needed to know what real money was there. Q As an example, when Bova needed money regularly in the course of its operations, he had to know where to get the money to help fund the Bova operations, right? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Sure. And you'll see lots of correspondence with me copied directly between me, him and Irene. Q And Boden had access and knew of the trust account defalcations, correct? MR. HOUSTON: Yes. Objection. You could see it. BY MR. LICHTMAN: Q you mean? A Well, you see all these accounts with no When you say "you could see it," what did money in them; and then, all of a sudden, you see money go from one trust account, flying into the other one, and then flying right out to an investor. Q Let me rephrase that last question. To the best of your knowledge, what did David Boden know about the trust accounts and the money within them? A He knew that we had accounts that were supposed to have large sums in them that had nothing in them, that were then -- upon the need to fund a Ponzi payment, that suddenly money would be moved from one trust account into that specific, supposedly segregated trust account and then right out to the investor. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A And how do you know he knew that? Because he actually had to do that himself He was the one who handled those with Irene. transactions as time went on. Q Okay. And within the description that you just gave in your last answers, then, also tell me what you know that he knew respecting the flow of money in and out of TD Bank accounts? MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: Objection. Basis? Hearsay. To the best of my knowledge, he could see the sums coming in and out. BY MR. LICHTMAN: Q A Q A How do you know? Because he would talk to Irene about it. How do you know? Because Irene told me. He told me. I was there when they talked, and I was copied on a lot of emails. Q A So Boden told you this, then? Boden told me. Irene told me, and you can see it from the email traffic. Q Okay. You have already described Boden's use of the fake website, correct? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A anyone. A A MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: A Boden told you that he used the fake website, and you observed him using the fake website, correct? MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: Q Okay. Tell me your knowledge as to how -- I think you have covered it, but just so the record is clear, how do you know that Boden knew there was no real plaintiffs? MR. HOUSTON: Objection. He never talked to There He didn't see any. There were no conflict searches. There were no people. were no files. There was nobody to sign anything. BY MR. LICHTMAN: Q To be sure, you used the attorney-client privilege with respect to all business inside the office attached to Boden, didn't you? A Q Yes. Okay. So you indicated, with respect to Mr. Pearson, that you believed that when the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 sub-Ponzi started, he thought that the settlements were real? MR. HOUSTON: BY MR. LICHTMAN: Q A Is that what you said? When the sub-Ponzi started -- you're Objection. asking me about Pearson? Q A Pearson. Pearson. To the best of my knowledge, Pearson thought they were real. Q changed? MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: Objection. What is the basis? Could be from hearsay. If Is there a point in time that that he's going to testify that it was from conversations, it's hearsay. MR. LICHTMAN: MR. HOUSTON: "sub-Ponzi" means. BY MR. LICHTMAN: Q Well, just to make it crystal clear, Okay. And I'm still not clear what Scott, Mr. Rothstein, please, what is your understanding of what a "sub-Ponzi" means? A The sub-Ponzi was, as David Boden and United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Richard Pearson did more deals with us, eventually they broke off from me. They were bringing in their own investors; I was not involved, to any great extent, in doing the presentation to these investors. closed it. They picked it. They papered it. They It was running completely separate. My involvement was to give them the original numbers: The deal is, 800, 200, four months; 700, 300, six months, whatever it might be. Other than that, they would -- everything else, ultimately, was handled by them. They got to a point where they used Deb separately for the papering and for the signatures. That's what I mean by "sub-Ponzi." Did -And they even added things to it that weren't part of my original scheme, so... Q Did they ask your permission to engage in those transactions? A Q The additional things they did? No, no, no, just any of the sub-Ponzi transactions, did they say, we would like to do these? A How did that come about? They just started doing them. They kept Any asking me for deals, and I would send them. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A source of money was good to me. Q Indeed, they were most active in the time frame of starting around late April of 2009, all the way through the end of when the entire fraud was exploding in the country; is that right? MR. HOUSTON: Objection. To the best of my recollection, yes. BY MR. LICHTMAN: Q And it was in April that you had the issue with the funds arise that you had an even more critical need to bring in cash; is that correct? MR. HOUSTON: Correct. Objection. BY MR. LICHTMAN: Q So the extent that the sub-Ponzi went in business, that was a good thing for you because it enabled you to keep cash flow coming in that you were able to use for the purposes of the Ponzi, right? A Correct. MR. HOUSTON: BY MR. LICHTMAN: Q Just to be clear, so I don't have a Objection. problem with the record, describe for me, if you would, the relationship, in time, of how the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A sub-Ponzi impacted on your conducting the Ponzi scheme. MR. HOUSTON: Objection. It provided a sizeable amount of additional funds that I utilized to pay old investors. It enabled me to keep the Ponzi scheme alive, especially while we were going and seeking new sources of much more significant funding. BY MR. LICHTMAN: Q Was there a point in time that you came to believe that Mr. Pearson knew that the settlement deals that he was selling in the sub-Ponzi were not legitimate? A Yes. MR. HOUSTON: MR. LICHTMAN: Objection. What is the basis? There are a lot of -MR. LICHTMAN: Hold on. What is the basis of the objection? MR. HOUSTON: You're leading this witness. You're giving speeches, you're giving arguments, and then you're asking him to say yes. That's your -- he's your witness. MR. LICHTMAN: I asked him if there were facts that he knew of about that. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was? A MR. HOUSTON: BY MR. LICHTMAN: Q A Q Okay. Yes. What facts do you know of that existed to The objection stands. establish that Pearson came to learn that the settlements he was selling as the sub-Ponzi were not legitimate transactions? MR. HOUSTON: Objection. Several things in no particular order. Boden told me that he told him. He would regularly ask me where the plaintiffs and defendants were. to Boden. I would say, talk There were no plaintiffs and defendants coming in and out of our offices, and Pearson was in our offices frequently. There came a point in time when he wanted to see a plaintiff sign documents. Q A Q A Q "He" being Pearson? Pearson. What did you say? I said, that's impossible, talk to Boden. Do you remember which transaction that United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 54 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A one time. He asked for copies of documentation that we could not provide him, wire documents and the like, more detailed stuff. He wanted to have access to online stuff, since he was providing us with a lot of investors. I would not give it to him. And he was working so closely with Boden, that's what led me to believe that he was involved in all of this. There may be more stuff. I would He asked multiple times. It wasn't just have to really sit and go through all the emails. Q Is there a point in time that you can focus on that, in your mind, related to the issue of Pearson knowing the settlements were false? A Just prior to a large influx of deals with the Argentinean guys, okay, he asked me about them doing due diligence. Q A Q A "He" being who? Pearson. We were in my office, and -- What did he ask you, specifically? He asked -MR. HOUSTON: Objection. He said that these guys may want to do some significant due diligence, and he wanted to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A know how to handle it. I said, listen, I'll talk to them briefly. I said, but you have got to do this with Boden. I made a comment to him, I said: what's going on. can. Rich, you know And Do the best you can with what you Don't put yourself too far out there, okay, because a lot of this stuff you're asking for, we can't provide. Talk to Boden. I pushed almost all of it off on Boden. It was their deal. I tried to stay removed; and if you look at the email traffic, other than trying to push them along to close deals when I needed cash, I was uninvolved -- a lot of emails trying to push them, trying to twist them to get them to fund, other than that, I tried to stay away from it. Q Why were you uninvolved, because, typically, what I've come to learn over listening to you over the last eight days is you like to be involved and you like to make sure that you handle things yourself, manipulate it to your liking. MR. HOUSTON: Objection. Boden had proved himself an excellent He was running this without a hitch. confidante. Other than sometimes slow funding, he was running it United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A without a hitch. questions. As a matter of fact, there were times that he appeared, to me, to be doing a better job than I was because he wasn't having near the number of due-diligence hiccups that I was having with my feeder funds. BY MR. LICHTMAN: Q A operation. Q Okay. Is what you're suggesting that you So -He and Pearson ran a very smooth People weren't asking a lot of felt comfortable with what they were doing, in terms of how they were operating their sub Ponzi? MR. HOUSTON: BY MR. LICHTMAN: Q sub-Ponzi? MR. HOUSTON: Same objection. I mean, look, if How did you feel about them operating the Objection. I felt very comfortable. I didn't feel comfortable, I would not have them doing this. Okay. I assume you're doing a MR. LICHTMAN: cross-examination? MR. HOUSTON: No. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A MR. FERGUSON: MR. HOUSTON: I am. He is. I am doing the objections, evidentiary objections. MR. LICHTMAN: MR. HOUSTON: I see how that works. You saw it yesterday, too. He -- he -- I forget what I was saying. Oh, now I remember. He -- them, Boden and Pearson, were doing an excellent job. I didn't need to be involved. You have got to understand, this is -this was an extremely complicated scheme. Okay. My involvement with them, compared to what I normally had to do to sell one of these deals, was minuscule. I barely had to get involved on any of the selling, and I was minimally involved in due diligence. There is no way on God's green earth that Pearson didn't know what was going on. possible. It's not Boden couldn't have done this by himself. The mechanics call He was handling all those deals. for levels of knowledge that must have existed for these people to get sold. look at the traffic. The problem that you are going to have with questioning me, Mr. Lichtman, just so you're clear, they had their own Ponzi scheme going on. I All you have to do is United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A just took the cash. I wrote the deal out, the terms, gave it to them, they fund it. But they had no access, other than through me, to due-diligence material, unless they were creating it. So they had to have been lying to all these people because there was nothing real to show them. There were instances where investors, innocent investors are saying that they met with plaintiffs. They didn't meet with plaintiffs through me, so they had to have been by -- if -- by powers of deduction, it had to have been through Boden and Pearson. That's how I knew. MR. HOUSTON: unresponsive. BY MR. LICHTMAN: Q Are you familiar with how Pearson and Motion to strike, That's why I was comfortable. Boden made money on the sub-Ponzi? A They -MR. HOUSTON: I am. MR. LICHTMAN: MR. HOUSTON: They had -What's the objection? Hearsay. Objection. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 59 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A BY MR. LICHTMAN: Q Are you personally familiar as to how they made money on the sub-Ponzi? A Yes. MR. HOUSTON: BY MR. LICHTMAN: Q And tell me what the basis of your Same objection. knowledge is. A Email traffic and speaking to Mr. Boden and to Mr. Person. Q And what is it that you learned? MR. HOUSTON: Same objection. Pearson was charging a finder's fee, some sort of commission structure; and then they created this whole big lie about some plaintiffs finder's fee thing where the plaintiff was agreeing to pay them a finder's fee -- of course, there is no real plaintiff, so I don't know how they're agreeing to that. And on top of that, you have them creating all these false letters saying the plaintiff agreed to this finder's fee. And what they were really doing was, if I gave them a deal, for example, that was $700,000 fund, $300,000 ROI, over a specific period of United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A months, when they sold the deal to their investor, they would bump it, for example, for $800,000 fund, 300,000 ROI. The 100 additional they would take. BY MR. LICHTMAN: Q Okay. And to be sure, you learned that from Mr. Pearson; is that what your testimony was? MR. HOUSTON: Objection. Mr. Pearson and Mr. Boden. And I actually discovered it -- there was email traffic. There was an email where Rich was asking me for certain amount of money, and then told me that he needed a certain amount of it for Boden. And I went and asked Boden what the heck this money was for. BY MR. LICHTMAN: Q Because of the time, I'm going to kind of go through some documents and not introduce them all in. But I have an email from Scott to -- from you, excuse me, to Pearson, dated April 4th, 2009; and it talks about Pearson reviewing deals, advising as to funding schedules. And then it says, let's meet on Monday to discuss how best to handle. At that time you can have David verify our incoming wires for you. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A there. BY MR. LICHTMAN: Q And what was the source of the money Do you know what that -- what you meant when you wrote to Mr. Pearson that David would verify incoming wires to you? MR. HOUSTON: Objection. David was going to tell him the money was supposed to be, putative defendants? A Yes. MR. HOUSTON: BY MR. LICHTMAN: Q And what putative defendants were there? MR. HOUSTON: None. Objection. Objection. BY MR. LICHTMAN: Q A And what payments were there? None. MR. HOUSTON: MR. LICHTMAN: Objection. If you would like, you can have a standing objection to every question in the deposition. MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: I prefer to make them. Okay. I'm making them very simply United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 62 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and short. If you want to know the basis, I'll be glad to tell you. BY MR. LICHTMAN: Q Were there payments coming in from defendants on any of these cases? A No. MR. HOUSTON: BY MR. LICHTMAN: Q "G deals." A Q There's an email that references, quote, What were "G deals"? "G deals" were George Levin deals. And then you had deals that you labeled What were those? Objection. "RL deals." A Q RL Pearson deals. There was a point in time that you sent to Mr. Pearson a private placement memorandum from Banyan that had been all marked up; do you remember that? A Q A I do. What was the purpose of you doing that? They were going to do their own PPM. "They" meaning Boden and Pearson. Q And why did you send to them a version that was used by Levin or -A So they -- United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 63 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Q -- Preve, excuse me? So they could expedite the process. Did Levin and/or Preve know that you were sending that PPM to Pearson? A I don't know one way or the other. MR. LICHTMAN: MR. HOUSTON: I will mark as Exhibit 1 -Chuck, you didn't provide me Do you have a copy for any exhibits for this. me to look at? MR. LICHTMAN: Actually, we did. We emailed to you guys all the exhibits that you had. MR. HOUSTON: I didn't get them, so if you do you have a copy, or I can just look over your shoulder? I got -You waited until this MR. LICHTMAN: moment to say that you didn't get an email that you had? MR. HOUSTON: This is the first time you I'm just asking to Is that unreasonable? have introduced exhibits. look over your shoulder. MR. LICHTMAN: on it. Well, I have a work product I'll show you this exhibit first. Thank you. And the record should MR. HOUSTON: MR. LICHTMAN: United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 64 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A Q reflect that we have an email trail that shows that we sent these exhibits. MR. HOUSTON: Thank you. (Thereupon, the document was marked as Trustee's Exhibit No. 1 for Identification.) BY MR. LICHTMAN: Q Exhibit 1. I showing you what's been marked as It's from you to Pearson with a copy to "G 401." Boden, dated April 14th, 2009; subject: Do you see that? I do. The first sentence is: This is a deal that is pending funding. Do you know what you meant by that? I was telling them it was a deal I had sent to Levin that was pending funding that they could have. Q The second line says, please redact whatever you think is necessary for our protection. What did you mean by that? To the best of my recollection, once I realized that Pearson was involved, I was sending unredacted deals, which you have to take a look at the email traffic to be certain; which is one of the United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 65 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A ways I knew he had to have known what was going on. Because you see the plaintiffs' names and you see the defendants' names, it doesn't take a rocket scientist to figure out there is no real people. Q Well, how is that? If you see a name on a document, how is someone supposed to understand that there are no real people involved? A Run the name; they don't exist. The defendant, they don't exist. connection between the people. Q redact. There is no real Were you directing -- you say, please Was that a comment to Pearson or was that a comment to Boden? MR. HOUSTON: Objection. It was to both of them. BY MR. LICHTMAN: Q A own deals. Okay. I wanted them -- they were running their I wanted them to take off whatever they needed to take off to protect us, don't leave on stuff that is going to hurt us. Q To the best of your recollection, did either party verify the existence of the plaintiff or defendant? A Attempt to? To my knowledge, no. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 66 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q Okay. I am showing you what's being It's an email from you to It talks about the questions for marked as Exhibit 2. Boden and Pearson. New York. (Thereupon, the document was marked as Trustee's Exhibit No. 2 for Identification.) MR. HOUSTON: MR. LICHTMAN: BY MR. LICHTMAN: Q There's a sentence that says, these are On the second page is What is the date of that? That's April 17, 2009. now ready to go to New York. a series of questions and answers, apparently. Are you familiar with this document? MR. HOUSTON: Objection. I recall seeing it at some point in time. BY MR. LICHTMAN: Q A Q A Take a look at the second page. Okay. Do you remember that page? I remember seeing it. MR. HOUSTON: BY MR. LICHTMAN: Q A Do you know who drafted that? Mr. Boden and Mr. Pearson. Objection. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 67 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A no? MR. HOUSTON: Why. Objection. A Q Did Mr. Pearson ask you if he could ever sit with a plaintiff? A Q He did. And what did you tell him? MR. HOUSTON: No. Objection. BY MR. LICHTMAN: Q Did you -- what did he say when you said BY MR. LICHTMAN: Q And then what did you say? MR. HOUSTON: Talk to Boden. Objection. BY MR. LICHTMAN: Q And that would be the conversation that you referenced earlier? A Q Yes. Did he ever ask to see a hard file of any of these cases? MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: Q And what did you say? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 68 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Okay. A Not that I recall one way or the other. A A A No. MR. HOUSTON: BY MR. LICHTMAN: Q And what did you say to him after that? MR. HOUSTON: Talk to Boden. Objection. Objection. BY MR. LICHTMAN: Q Okay. Do you know if -- did Pearson talk to you about the questions that are located on page two of this exhibit? MR. HOUSTON: No. Objection. I remember talking to David about it. I may have actually had some input into some of these answers; but, ultimately, it was compiled by and completed by Mr. Boden. BY MR. LICHTMAN: Q Did you say anything to Mr. Pearson about the answers on this page? MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: MR. LICHTMAN: Objection. What is that objection? Hearsay. What did he say to him. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 69 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A BY MR. LICHTMAN: Q All right. I have a document that is -- is authored by a Nabil Rhazi; do you know who he is? A Wait a second. I don't remember whether it was right at this time, but at some point in time I told Pearson -- I don't remember whether it was this script or another script. at Bova. We were downstairs We were both a little tipsy, but I was furious because I had just heard through Boden that Pearson had represented to investors that we had some big four or six, something like that, accounting firm doing audits. And I told Pearson directly, stick to the script, don't -- you don't need that to sell this product, don't do that because we have no way of substantiating it. MR. HOUSTON: Objection and move to strike, nonresponsive. BY MR. LICHTMAN: Q When you say "stay to the script," and the answer that you just gave, it seems as if your memory was jogged. page of Exhibit 2? MR. HOUSTON: Yes. Objection. Does that pertain to the second I don't know if it is specifically United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A York. this page, but it did jog my memory as to the fact that -- what would have been responsive to a number of the questions you had asked me previously is what I just stated, and that is the conversation that I had with Mr. Pearson about sticking to the script and to not exaggerate what was already exaggerated. Q Well, this email says, ready to go to New What was New York? MR. HOUSTON: Objection. There were a couple of different funding There was sources they were looking at in New York. something through Merrill Lynch, some guy named Paul Smith, I think. Again, I don't specifically recall. was their own little Ponzi scheme, sub-Ponzi. It I tried to stay uninvolved, except to guide and to assist, as need be, as little as possible. BY MR. LICHTMAN: Q What was your understanding as to what Was that the script? these questions meant, then? MR. HOUSTON: Objection. They're due diligence questions that are being asked by an investor. BY MR. LICHTMAN: Q Are those questions that you typically United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A encountered? A Q Yes. And with respect to the answers, what is the relationship of the answers that are typed here, to the questions? MR. HOUSTON: Objection. They're the same answers we tried to give consistently to all the investors. BY MR. LICHTMAN: Q A Including outside the sub-Ponzi, correct? Sure. From -- I'm meaning to my prior groups of investors. Q Is there anything that you can see, for instance, in the first question, the answer to the first question, that is true or untrue? MR. HOUSTON: BY MR. LICHTMAN: Q Strike that. Is there anything that you can see in the answer to the first question there, "who negotiates the purchase discount," that is inaccurate? MR. HOUSTON: Objection. There's Objection. The whole thing is inaccurate. not a plaintiff. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 72 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. LICHTMAN: Q question: account?" MR. HOUSTON: MR. LICHTMAN: objection be? MR. HOUSTON: hearsay. Chuck, this entire email is Objection. And what would that And the -- let's jump down to the third "Who controls the settlement escrow I am objecting to the entire email. Anything you ask from that email is hearsay. MR. LICHTMAN: Then I am taking a standing objection on hearsay. MR. HOUSTON: On this email, I'll be glad to do that; but on everything else, I'll assert them separately. BY MR. LICHTMAN: Q As to this question here, "who controls the settlement escrow account," the answer, you see that? A Q false? A It can't be true. There was no plaintiff. We commingled Yes. Do you know whether or not that's true or There was no plaintiff trust account. everything. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Q Boden knew that, right? Yes. Boden, to the best of your recollection, drafted this, right? A To the best of my recollection, yes. I added information or gave them information, but he drafted the document. Q Okay. Okay. Keep going. I was asking you about a Nabil Rhazi; do you know who he is? MR. LICHTMAN: For the record, it's Nabil N-A-B-I-L, last name is R-H-A-Z-I. A He was one of Pearson's salespeople. BY MR. LICHTMAN: Q Did you ever work with -- when you say "salespeople," salespeople doing what, to the best of your knowledge? A Q A Q A Selling Ponzi deals. How do you know that? I watched him do it. Who did you see him do it with? I don't recall who the investors were. They asked me to come down once to Pearson's office -- a couple of times, to answer a couple of quick questions, do a meet-and-greet; and Nabil United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 74 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 guy? A Q A Q A what? A gold, capital "G," Gold? It's not ringing a bell for me. All right. Are you aware that there were A A Rhazi was there pushing the settlement. Q And to the best of your recollection, is there any tie to Exhibit 2 and to what you observed when you went and saw the potential sale to investors? MR. HOUSTON: Objection. I don't recall one way or the other. BY MR. LICHTMAN: Q answers? MR. HOUSTON: Objection. How about in terms of the questions and It was always the same thing over and over again, Mr. Lichtman, so it's not jogging my memory. That was consistent throughout my Ponzi scheme and the sub-Ponzi, with the additions that David and Mr. Pearson kept adding to the thing. BY MR. LICHTMAN: Q Do you know anything about, quote, a gold two accounts opened up at TD Bank regarding Pearson? A Say that again. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 75 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q notation. email. Q That there were two accounts opened up at TD Bank regarding the Pearson transactions? A I remember accounts. I don't remember how many that we opened for Pearson transactions. MR. LICHTMAN: April 29th, 2009. I have an email, I'll mark this as Exhibit 3. (Thereupon, the document was marked as Trustee's Exhibit No. 3 for Identification.) BY MR. LICHTMAN: Q Showing you an email dated April 29th, 2009, it's from you to Bill Brock at the top and Irene Stay regarding new accounts needed. Do you see that? I do. If you go to the second page, there's a This is on the Bill Brock portion of the It says, please open the following trust accounts. It says Richard Pearson signors will be Scott W. Rothstein, David J. Boden, checks to require dual signatures. Do you see that? I do. Do you see underneath it, it says, RL United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 76 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Pearson signors will be Scott W. Rothstein and Stuart A. Rosenfeldt, checks to require dual signatures? A Q Yes. Okay. Why were there different signatories to the Pearson versus the RL Pearson accounts? MR. HOUSTON: Objection. I don't recall. BY MR. LICHTMAN: Q Do you know why Rosenfeldt would be on the RL Pearson account at all? MR. HOUSTON: Objection. I don't remember whether this is one of the deals or was one of the deals where Rosenfeldt actually came in and helped sell the investor. happened a few times. The whole thing is a little mysterious to me, because, remember, we did wires. This dual It signature thing is crazy because we weren't using checks and we weren't using signatures, so it sounds like just more of a scam. Q Well, even if you were doing wires, you would still need an account, wouldn't you? A Oh, no, no, the accounts are real. I'm United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 just -- the whole "requires dual signature," that sounds like something that was being told to investors as a sales technique because we don't require signatures. Q Could anyone besides yourself or Scott or Stuart execute wire transfers on the RL Pearson account, to the best of your knowledge? A Q A Q A Q Yes. Who? Irene. How do you know that? She did all the wire transfers. So if there was an account that was in RRA's name, she was authorized to execute wire transfers on it, right? A Q A Q Yes. Even if she wasn't a signatory? Yes. Okay. So this doesn't refresh your recollection at all as to why there were different names on the accounts? A It does not. MR. LICHTMAN: Okay. Let me show you what is next marked as Exhibit 4. (Thereupon, the document was United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 78 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A marked as Trustee's Exhibit No. 4 for Identification.). BY MR. LICHTMAN: Q This is an email from you to Pearson and Do you see that? Boden, dated April 24, 2009. A Q A Q A Q I do. Can you identify it? Yes. These are the deals I created. When you say "created," what do you mean? Made them up. So there were no -- obviously there were no plaintiffs in these deals, right? A Q A Q A No plaintiffs, no defendants, no money. Did you -Other than stolen money. How did you come up with the numbers? I made them up, based upon how much money we needed in house. Q Did you have any discussions, to the best of your recollection, with Boden regarding how you formulated this exhibit? MR. HOUSTON: No. Objection. BY MR. LICHTMAN: Q Take a look at the second page. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 79 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q Got it. You see a transaction there starting with "fund 890K"? A Q A Q A I do. What did that mean? It means fund $890,000. What does the "ROI 400K" mean? That means that's their return on investment, $400,000. Q And what was the time -- and when it says "pay over five months," what does that mean? A That means that they're going to get equal payments over five months. Q In terms of how you operated the Ponzi, what was the relevance to putting out into the marketplace in a deal on April 24th that you wanted to fund under those terms? A It reflected amounts of money that I needed at the time. We were starved for cash at this time, and I put as many deals out as I possibly could hoping they would grab any of them. Q Now, in terms of trying to sell these deals, what was it that the investor was being told in terms of, for instance, this deal: Fund 890,000 United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 80 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 along. A A ROI 400K, paid over five months. MR. HOUSTON: Objection. I Boden and Pearson were selling it. wasn't involved in the sale. BY MR. LICHTMAN: Q Had you been selling it yourself to a typical investor, what is it that the investor themself would have been told? MR. HOUSTON: Objection. We would have come up with what we call the "magic number," how much the total case was selling for. case it was. As you can see, we made it up as we went None of these say sexual harassment, whistle We kept it as vague so we We would have explained what type of blower, other employment. could create it as we went. We would sell the entire deal. talking about a fairly detailed process of You're explaining this is how much money the plaintiff is willing to take, that she is willing to take a $400,000 discount. defendant. Paid the money back from the We had already funded the money into our account over five months. Q You understand I'm making a record now? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 81 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A Q A Q I do. Okay. So with respect to -- I didn't think you had lost your mind. I may have, but that's a different issue. With respect to an investor, then, when an investor was going to be getting into a deal, using this one as an example, 809K, what does that tell that you the investor had expected about that figure, from your experience? MR. HOUSTON: Objection. That the investor would have to wire $890,000 to us, to a specific account, usually 0923, and that the investor could expect to get his or her 890K plus $400,000 out to them over five months? BY MR. LICHTMAN: Q And the investor would have affected this transaction with an understanding there was a legitimate plaintiff and putative defendant? A Yes. MR. HOUSTON: Objection. Unless it was a -- not an innocent investor and all of -- to my recollection, all the Pearson and Boden's investors were all innocent investors -- they were told a whole myriad of lies to get them to invest. That's how you got them to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 82 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A things. did. BY MR. LICHTMAN: Q What was the shelf life when you had one A invest, including the things that I told you a moment ago when my memory was jogged, that Pearson had created, I guess, to add impetus to the sale, that we were being audited by big 4 accounting firms. He also told investors, by the way, that he had 24-hour access to our online banking. Q A Q How do you know that? Because I saw it in an email traffic. Did he talk to you about that, also? MR. HOUSTON: Objection. I don't recall whether he did or David of these deals out there, you know, in terms of how long you perceived it being good for? MR. HOUSTON: Objection. Well, that's one of the interesting It's one of the, quote, unquote, tells, as to it whether this is real or not. I sent an email out saying immediate funding, and then some of these things get funded months down the road. So from my perspective, the deals were always open because I would take money United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 83 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A from any source. MR. LICHTMAN: I'm going to show you what's next marked as Exhibit 5. (Thereupon, the document was marked as Trustee's Exhibit No. 5 for Identification.) BY MR. LICHTMAN: Q Keep that one open to that page that I showed you. A Q Okay. Got it. This is an email from Richard Pearson to Do you recall you and Boden dated April 30, 2009. this document? MR. HOUSTON: Objection, mischaracterization of the exhibit. A Yes. BY MR. LICHTMAN: Q What is your understanding of what this document is? MR. HOUSTON: Objection. It's a calculation that either Pearson or It was sample deals that Boden did on percentages. he was -- they were putting together. BY MR. LICHTMAN: Q So these were not deals you were putting United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 84 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 together? A Q No, sir. Was it customary, when you put deals out to -- whether it was Szafranski or anybody else, that you would put percentages next to the offer. You'll see like subsection one down at the bottom of the page. MR. HOUSTON: BY MR. LICHTMAN: Q It say 4M, seven months, 2.95 M, Objection. 36 percent? A Q I never did that. That wasn't part of your practice as you affected the Ponzi scheme, right? A These must be deals that were created by They were making Unless you can Boden and Pearson sent to me. these up. This is not my deals. show me email traffic showing that this came to me, it looks like they created it and sent it to me for my approval. Q The emails from Pearson to you and Boden, do you notice that? A Yes. MR. LICHTMAN: show you Exhibit 6. Okay. Now I'm a going to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 85 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Q (Thereupon, the document was marked as Trustee's Exhibit No. 6 for Identification.). BY MR. LICHTMAN: Q Exhibit 6 is from Boden to you with a copy Do you see that? to Mr. Pearson, July 6, 2009. A Q I do. Okay. The top portion of the email says, deal number five below was sold as follows: fund 990K, ROI 300K, fee 100K. Do you see that? I do. Now, if you look at page -- they're not numbered, but it's the third page in. A Q I'm there. It says, fund 890K, ROI 400K. Do you have any understanding what the difference between numbers is that is at the top as to how the deal was sold and the deal, as it was initially portrayed on the April 24th memo that is incorporated as deal five? MR. HOUSTON: I do. Objection. BY MR. LICHTMAN: Q What is your understanding? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 86 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A this? MR. HOUSTON: Objection. A This is the whole scheme that Boden and Pearson came up with to steal additional money from the innocent investors. And this takes it to a completely new level, by the way, because they not only were bumping the funding, but they were reducing the return on investment in these deals. Q A And how do you know that? Then they were instructing me how to paper it, or instructing someone how to paper it; and it looks like telling someone that there was going to be a letter to Pearson giving him 110,000. Q A to me. Q Did you have discussions with Boden about And how do you know that? Because this is the way that they wrote it Early on, when they first started doing it -- I don't remember if this is when they first started doing it. Boden. Early on, I had a concern with I sat down and talked to him and said, you know you're taking an additional risk in doing this -- when I realized what they were doing -- I said, because you're changing the terms of the deal. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 87 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. LICHTMAN: Q A And why would that be additional risk? Because it created other red flags if people were looking through paperwork. You have got to remember something: It's by even sending me this email -- not that we were bashful about sending emails, but we tried to be careful -- we're taking -- I'm sending him deals that purportedly really exist; and then he's changing the entire term of the deal. Now, it's one thing -- take it step one -he changes the funding amount. could make the argument: Okay. Well, someone Well, he's just bumping it so he could create a greater commission, you know. But then he is reducing the amount of money that is going to the plaintiff. Well, if it was a real plaintiff, what plaintiff in their right mind -- now the plaintiff is giving up their money, too, when you know you don't have a plaintiff. And the other question that I said, I said, who is talking to this plaintiff to negotiate. You'll see that there is email traffic from Mr. Boden to various investors and the like, where he actually says, stand by, I'm negotiating terms with the plaintiff. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 88 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A well? MR. HOUSTON: Objection. did. A MR. HOUSTON: BY MR. LICHTMAN: Q Okay. So that -- oh, what did Mr. Boden Objection, motion to strike. say to you in response? MR. HOUSTON: Objection. That he's got it under control, and he I mean, his deals -- Mr. Lichtman, his deals and Pearson's deals went through nice and smooth. BY MR. LICHTMAN: Q Did you discuss this with Pearson, as The only conversations that I remember having with Pearson was basically scolding him -BY MR. LICHTMAN: Q A Q About this issue. Not this -- about this issue, no. Okay. Did you discuss with Boden what it meant on the third page in? A accurate. There was a time when he was -- he started changing the deals even more, and I said to him, I said -Q You said to who? No, that's not true. That is not United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 89 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A A To Pearson. I have told him, why don't you just increase your finder's fee instead of screwing around with the deal terms; and they -- again, it was basically, we've got it under control. Q Is that what he said, as well? Pearson said, we have it under control? MR. HOUSTON: Objection. Not using those exact words, but we have got it, we're good. BY MR. LICHTMAN: Q All right. It says on page three, letter to RLP, 110K. What did you understand that to mean? MR. HOUSTON: Objection. That there would be a plaintiff's finder's fee letter; but I wasn't creating those letters, so I guess that's just the way they notated how much Pearson would be getting. BY MR. LICHTMAN: Q How did you come to learn that? MR. HOUSTON: Objection. I hadn't I discovered it in an email. seen that letter. I ran across it accidentally. First I ran across the email saying that I think United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 90 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A $45,000 or some amount of money was going to Boden, and I confronted Boden about it. Not that I cared, I just wanted to know if he was getting additional money from someplace. feeling he was. And then, you have got to remember, if you look at this, it's from David Boden to David Boden and to Scott Rothstein. they're papering. These are their deals that I kind of always had the By July 6, 2009, they were doing all their own paper with Deb. Q You note that it also a copies Mr. Pearson? MR. HOUSTON: Yes. So this letter to RLP is not something I'm creating for him. It's something that they Objection. completely came up with, that whole fake plaintiff letter thing, and that they worked out with Deb. wasn't involved in that. BY MR. LICHTMAN: Q I want to make sure I understand what you I are telling me. So if they are reducing the return on investment, what they're basically saying is that somehow they changed the terms of what the putative United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 91 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A plaintiff was going to take, correct? A real -Q A Okay. -- that the plaintiff has agreed to give Yes, if you're assuming that the deal was up even more money. Q A Q folded. A Q 890,000? A Q A Q Yes, sir. The return of 400,000? Yes, sir. You see that the deal that is marked there Yes, sir. We looked at that deal before, fund Now, you have Exhibit 4 before you? I do. Okay. Keep it back to where it was as allegedly existing is a deal on April 24th, 2009, that that first deal of 890,000 and each of the next three underneath it are the identical deals that comprise deal five that was being sold in July 6th, 2009? MR. HOUSTON: Objection. That's correct. BY MR. LICHTMAN: United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 92 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A less. BY MR. LICHTMAN: Q deals? MR. HOUSTON: Yes, they are. Objection. You acknowledge that they're the same A Q If these were real deals, in fact, then they would have been opened around April 24th and closed shortly thereafter, correct? A Yes. They should have, actually, almost been done being paid for. Q Yet here you are in July 6th, 2009, and Pearson and Boden are selling the identical deals from two-and-a-half months earlier? A Yes, but when you're running a fraudulent investment scheme, "immediate" means whenever you can get the money. Q Did you have any discussions with Boden or Pearson about the fact that they were selling the same deals now that you had offered two-and-a-half months earlier? MR. HOUSTON: No. Objection. I couldn't have cared I did not. BY MR. LICHTMAN: Q Now, keep that document open right to United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 93 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q A Q A Yes. where you have it. A Q Okay. One second. Showing you Exhibit 7, it's an email from Boden to Boden and yourself dated July 22, 2009. That's at the top entry. (Thereupon, the document was marked as Trustee's Exhibit No. 7 for Identification.). BY MR. LICHTMAN: Q There's some other emails that predate that, as well. A Q A Q Okay. Do you recall this document? Yes. Okay. You'll see that at the top of the email, it says it is deal five below. You see that? I do. You have Exhibit 4 in front of you? I do. You still have that page open? I do. Do you see that -- is that the same deal United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 94 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A five that was offered before? MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: Q deal five? A Q Yes. Those numbers are the same as between deal Okay. You see Exhibit 6, it talks about four -- excuse me, document four -- Exhibit 4 and Exhibit 6, right? MR. HOUSTON: Objection. That's correct. BY MR. LICHTMAN: Q Now, you see in Exhibit 7, it says: Deal was funded to 990,000. A Correct. MR. HOUSTON: BY MR. LICHTMAN: Q Is your understanding of what the 100,000 Objection. is there -MR. HOUSTON: BY MR. LICHTMAN: Q A -- the 100,000 difference? Money that Pearson and Boden were stealing Objection. from the investment. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 95 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A How do you know that? Because they tell the -- I'm preparing the deal at 890. If this was a real deal, they are then lying to their investor and saying the deal needs to be funded at 990. At the same time, if this was a real plaintiff, they would have contacted the plaintiff and negotiated the plaintiff to give up money on the other side on the ROI. Q Of course, that couldn't happen because there was no real plaintiff? A Q A Q A That's correct. Do you know who Marcelo is? I do. Who is Marcelo? He was one of the Argentinean fellows that they were doing business with. Q So the same deal that you had offered up on April 24th was then resold, again, pursuant to Exhibit 6, on July 6, correct? MR. HOUSTON: Yes. Objection. BY MR. LICHTMAN: Q And then it was resold a second time on United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 96 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A July 22nd as represented by Exhibit 7, correct? MR. HOUSTON: Objection. I'd have to see the deal paperwork to make certain; but, yes, that's what it certainly appears to be. BY MR. LICHTMAN: Q Okay. You'll see that pages starting -- go to page four of Exhibit 7. A Q Yes, sir. That's a cut-and-paste or a copy of the contents of Exhibit 4, correct? A Yes. MR. HOUSTON: BY MR. LICHTMAN: Q page -A Q Yes, sir. -- that's the same language that we showed Including, if you go to the third to last Objection. you before as to Exhibit 4, correct? MR. HOUSTON: Objection. It's exactly the same. That's correct. BY MR. LICHTMAN: Q Okay. Put those away. I'm going back in time a little bit now, and I'm going to do this -- I got still a lot of United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 97 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A stuff I need to cover. On May 6, 2009, you indicated to Boden that you were -- in an email to him -- tired of Rich's promises that never seem to happen, and you say he's starting off just as the hedge-fund guys ended: client. A Q Yes. Do you have -MR. HOUSTON: BY MR. LICHTMAN: Q Did you have issues with Richard Pearson Objection. Leaving me in a very bad position with around May 6th? A Pearson. He really loved the deals. a lot of money. He was making I remember having continuing issues with He wanted to take deals, but he would promise funding and then not deliver. Q What did you mean when you wrote: He is starting off just as the hedge-fund guys ended, leaving me in a very bad position with clients? MR. HOUSTON: Objection. That what the hedge funds did was they kept telling me they were going to fund and then it never funded. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 98 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A The client thing is just nonsense because there are no clients. used with everybody. BY MR. LICHTMAN: Q When you say -- you also wrote: Let's That was the impetus I always talk about the bank issue. night that gives me pause. I learned something late Do you know what you meant there? MR. HOUSTON: Objection. I don't recall. MR. LICHTMAN: You know, I'm just for the sake of it, going to try to get as many of these marked as exhibits and deal with the time problem. I'm going to mark this as Exhibit 8. (Thereupon, the document was marked as Trustee's Exhibit 8 for Identification.). MR. FERGUSON: Chuck, is that the email you were just using, the July 6th email? MR. LICHTMAN: MR. NURIK: Yeah. If you want to mark the whole thing as a composite and put it in front of him... MR. LICHTMAN: Pardon? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 99 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A MR. NURIK: If you want to mark the whole thing as a composite, he may be able to take a look at it and speed it up for you. BY MR. LICHTMAN: Q sentence: Ask you to take a look at that last Let's talk about this bank issue. Does that refresh your recollection? MR. HOUSTON: Objection. I don't want to I would be guessing. guess, Mr. Lichtman. BY MR. LICHTMAN: Q A Q Okay. Got it. Showing you Exhibit 9, it's an email from Nor do I want you to. you to Boden dated May 13th, 2009, and it incorporates an email down below from Boden to you and to himself. (Thereupon, the document was marked as Trustee's Exhibit No. 9 for Identification.). BY MR. LICHTMAN: Q A Q answers. You see that bottom portion? I do. It says: Here are the questions and my United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A I'd ask you to take a look at this document, if you would. A Q I remember this. What is it you recall about the document? MR. HOUSTON: MR. LICHTMAN: MR. HOUSTON: MR. LICHTMAN: Objection. Hearsay, I assume? Obviously. All right. It's questions from investors that Boden and Pearson were working with, Armoyan Verege and Barry Ward. I don't know if Barry was a lawyer involved with Verege or what it was, because he was involved with Verege. Q page in -A Q Yes, sir. -- the dotted line across the top of it, If you would take a look at the fourth and then there's questions with answers. A Q A Yes. Do you know who drafted that? It would have been either David or -- no, it would have to be either David Pearson, Ward, or Armoyan. Q It wasn't me. Take a look at page three. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 101 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A It looks -- actually, I'm reading it. It looks like David responding to someone else's questions. Q A Q Take a look at page three. Yes, sir. There's an email from Barry Ward. Do you know who Barry Ward is? A He was associated with Verege. I don't remember whether he was an investment counsel or a part of his investment or his lawyer, but he was involved with him. Q All right. As you take a look through that portion, through the email, does that give you any -- does that refresh your recollection? A Yes, he was -MR. HOUSTON: Yes. Objection. It's the guy who was assisting Verege Armoyan with due diligence. BY MR. LICHTMAN: Q A And who is Armoyan? Armoyan was a large investor that Pearson brought to the table. Q You had some issues with Armoyan, didn't you, some problems with Armoyan? A I did. United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 102 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q What were those problems that you had, if you can recall? A Out of all the people that Pearson brought to the table, he was the most voracious with regard to due diligence. And, ultimately, Boden got me in a trick box with him where I ended up having to provide this guy with mortgages on properties I owned, all kinds of stuff. I was starving for the funds for the Ponzi scheme, so I was willing to give him anything and everything to get the guy to fund. Q A Okay. It was always something else. I mean, Boden was constantly drafting and redrafting documents. Q agreed? It was a mortgage on one of the properties on Castilla Isle, wasn't it? A I thought it was my empty property across I think was the big How did it come to pass, then, that you from Isla Bahia, from third. empty lot on the water. Q I could be mistaken. How did it come to pass that he understood that you had properties to possibly mortgage; do you know? United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 103 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A or didn't. A Boden told him, and then I confirmed it, and they did all kinds of title searches. Q What role did Pearson have in you providing that mortgage, if any? A Q Just asking me to do it. And you did it because you needed to get the money in? A I needed the money. Pearson was also telling me that he was investing in this deal. So there would have been additional capital, but I don't recall him investing in it. Q Do you recall if Pearson invested in any of the deals. A As I sit here today, I have no knowledge of him ever actually putting a penny into the deals. Q A Did he tell you that he did? Yes. MR. HOUSTON: BY MR. LICHTMAN: Q invested? MR. HOUSTON: Objection. Did Boden tell you that Pearson had Objection. I don't remember whether he told me he did United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 104 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Pearson kept telling me he was going to invest, that he was putting money in with other investors; but, again, as I sit here today, I haven't seen any proof of him investing one penny. Q deals? A Q A to invest. Q A invest. MR. LICHTMAN: Showing you Exhibit 10 -Did he ever ask to? I don't recall him ever asking me to To my knowledge, no, sir. Did you ever ask him to? No. I -- I don't recall ever asking Boden Did Boden ever invest in any of your we're going to take a two-minute break so they can switch court reporters. (Thereupon, a recess was taken.) - United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 105 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ______________________________ Michele L. Savoy, RPR Notary Public - State of Florida My Commission No. EE 113173 Expires August 6, 2015 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 23rd day of December, 2011. THE STATE OF FLORIDA, ) COUNTY OF BROWARD. ) C E R T I F I C A T E United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 106 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ___________________________________ Michele L. Savoy, RPR Notary Public - State of Florida My Commission No. EE 113173 Expires August 6, 2015 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 1 to 106, inclusive, are a true and correct transcription of my shorthand notes of said deposition. I further certify that I am not an attorney or counsel of any of the parties, nor am I a relative or employee of any attorney or counsel or party connected with the action, nor am I financially interested in the action. The foregoing certification of this transcript does not apply to any reproduction of the same by any means unless under the direct control and/or direction of the certifying reporter. Dated this 23rd day of December, 2011. C E R T I F I C A T E THE STATE OF FLORIDA, ) COUNTY OF BROWARD. ) United Reporting, Inc. (954) 525- 2221 cf32f1c1-7919-474f-9b81-ecd48865401f Page 107 A able 15:21 18:13 22:12,25 38:25 51:18 99:2 absolutely 44:1 access 18:4,8 20:14 21:5,6 23:20 24:12 26:23 31:25 32:1,4 45:9,13,14 45:16,19 46:4 54:6 58:3 82:7 accidentally 89:24 account 33:19 34:2 44:16 45:17 46:5 46:13,23,24 72:4 72:18,24 76:12,24 77:7,13 80:24 81:12 accounting 69:12 82:4 accounts 15:13,15 16:5 32:21 33:18 33:25 34:3,4,5,7 37:20 45:9,10,11 46:11,17,19 47:8 74:24 75:1,3,13 75:19 76:7,25 77:21 accurate 88:21 acknowledge 92:20 acknowledged 8:24 12:9 acting 40:12 action 106:13,14 active 51:2 activities 18:25 19:9 19:25 activity 13:9 14:20 16:11 25:20 27:23 28:6 29:1,9 31:5 41:9 actual 17:5 18:16 44:15 actuality 13:7 add 82:3 added 50:16 73:6 adding 74:16 additional 50:20 52:5 60:3 86:2,23 87:2 90:3 103:11 additions 74:15 adler 1:5 adversary 8:6 adviser 11:13 advising 60:21 agents 23:7 ago 44:10 82:2 agree 9:10 12:4 25:9 agreed 59:21 91:5 102:17 agreeing 59:16,18 ahead 16:24 39:2 aid 13:15 akerman 3:8 al 5:18 albert 19:24 alex 4:2,4 alive 52:7 allegedly 91:18 allowed 14:6 aml 15:21 amount 10:23 52:4 60:11,12 87:12,15 90:1 amounts 79:18 andrew 34:21 35:17 40:22 answer 32:9 33:22 42:1 43:8 69:21 71:14,20 72:18 73:24 answers 47:6 66:13 68:14,18 71:3,4,7 74:10 99:25 100:19 anybody 18:5 41:1 43:3 84:4 anyways 39:19 apparent 24:15 apparently 66:13 appearance 26:12 appearances 2:2,6 2:16 3:1,6,12,17 4:1,5,13,17,21 5:1 5:5,8,12,17,22 6:1 6:6,10 appeared 56:4 appears 96:4 apply 106:16 approval 84:20 approximately 10:15 21:19 23:15 april 7:8,9,9,10,10 39:4 51:3,9 60:20 64:10 66:9 75:6 75:11 78:5 79:16 83:12 85:20 91:18 92:2 95:20 arbitrage 3:1 arent 18:19,20 argen 32:16 argentinean 54:17 95:17 argument 87:13 arguments 52:22 armoyan 100:10,24 101:18,20,21,23 101:24 aside 30:2 asked 9:5 38:5 52:24 54:1,3,17 54:22 60:13 70:3 70:23 73:23 asking 18:18 22:20 42:2 43:19,20 49:7 50:25 52:22 55:7 56:1 60:11 63:20 73:9 103:5 104:9,12 assert 72:14 asset 40:24 assist 17:4,10 70:17 assisted 13:24 14:24 15:2,18 17:1 34:13 41:2 assisting 16:8,14,22 17:7 101:17 associated 101:8 associates 1:9 6:1 8:8 assume 10:11 17:15 56:23 100:6 assuming 91:2 ate 30:23 31:1 atlas 6:4 attached 48:22 attempt 65:24 attempted 15:20 attorney 106:10,12 attorneyclient 35:12 48:20 attorneys 6:7 audibly 43:8 audited 82:4 audits 69:12 august 105:13 106:23 authored 69:3 authorized 77:14 105:6 106:5 ave 6:3 avenue 1:24 3:8 5:2 5:14 avoid 15:22 avoiding 15:21 aware 74:23 B b 2:14 back 10:16 24:2 43:18 80:22 91:9 96:24 bad 97:6,21 bahia 22:11 102:21 balance 32:24 balances 32:13,21 32:22 44:16 bank 3:12 14:24 15:13 16:3,4 23:19 34:2,5 37:19 45:9,10,11 47:8 74:24 75:2 98:6 99:6 banking 16:15 28:8 82:7 bankruptcy 1:1 8:7 banyan 39:9,13,17 39:22 62:17 barely 57:14 barnet 34:21,22,24 35:17 37:11 41:23 barry 41:19 100:11 100:12 101:6,7 bart 6:4 barzeeflores 5:20 based 78:17 bashful 87:7 basically 15:25 88:14 89:5 90:24 basis 19:19 47:10 49:14 52:16,19 59:7 62:1 basketball 20:22 battista 2:11 beatrice 42:11 beckman 5:9 behalf 1:15 believe 36:4 41:8 42:19 52:11 54:10 believed 42:18,19 48:25 bell 74:22 berga 5:15 berger 2:8 best 28:3 38:11 40:2 43:14 46:16 47:12 49:9 51:7 55:5 60:24 64:22 65:22 73:3,5,16 74:2 77:7 78:19 better 56:4 beverage 10:10,14 13:14 14:5 big 8:5 21:18 26:24 59:15 69:11 82:4 102:21 bill 32:8,9,23 75:12 75:17 billing 4:22 24:12 biscayne 3:3,4 4:14 bit 15:10 96:24 black 4:19 blackedout 18:14 43:5,6 blind 37:5 41:12 blower 80:16 blvd 3:13 4:14,22 6:8 bob 40:20,21 boca 4:11 boden 9:22,23 10:8 10:14 15:18 20:10 25:10 26:2,4 27:6 27:10 28:15 29:12 29:13,14 31:1,8,9 31:23 32:19 33:13 34:9 35:1 36:5,13 36:19,21,21 37:3 37:24 38:1,2 40:11 41:2,9,23 42:17,25 43:12,15 43:18,24 44:2,10 44:21,23 45:8,9 46:4,17 47:21,22 48:4,12,22 49:25 53:11,14,23 54:9 55:3,8,9,23 57:8 57:18 58:13,19 59:9 60:8,12,13 62:22 64:10 65:13 66:3,25 67:15 68:6,15 69:9 73:1 73:3 75:21 78:5 78:20 80:3 83:12 83:22 84:16,21 85:5 86:1,16,22 87:23 88:3,18 90:1,2,7,7 92:7,12 93:5,5 94:24 97:2 99:15,16 100:9 102:6,14 103:1,21 104:5,9 bodenpearson 33:20 bodens 10:4 13:8 23:9 35:1 41:4 44:19 47:24 81:23 bodner 5:5 boil 26:1 boston 5:10 bottom 84:6 99:22 boulevard 2:3,8,21 3:4 bova 11:7 20:25 United Reporting, Inc. 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