1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL

1 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 REAL-TIME AND INTERACTIVE REAL-TIME TRANSCRIPT 3 ROUGH DRAFT DISCLAIMER 4 IMPORTANT NOTICE: AGREEMENT OF PARTIES 5 6 We, the party working with real-time and rough draft transcripts, understand that if we choose to 7 use the real-time rough draft screen or the printout that we are doing so with the 8 understanding that the rough draft is a noncertified copy. 9 We further agree not to share, give, copy, scan, 10 fax or in any way distribute this real-time rough draft in any form (written or computerized) to any 11 party. However, our own experts, cocounsel and staff may have limited internal use of same with 12 the understanding that we agree to destroy our real-time rough draft and/or any computerized 13 form, if any, and replace it with the final transcript upon its completion. 14 Case: Fortress v. Jeepers 15 Witness: David Lee Date: June 1, 2011 16 REPORTER'S NOTE: 17 Since this deposition has been real-timed and is in rough draft form, please be aware that there 18 may be discrepancies regarding page and line number when comparing the real-time screen, the 19 rough draft, and the final transcript. 20 Also please be aware that the real-time screen and the noncertified rough draft transcript may 21 contain untranslated steno, reporter's notes, misspelled proper names, incorrect or missing Q/A 22 symbols or punctuation, and/or nonsensical English word combinations. All such entries will be 23 correct on the final, certified transcript. 24 Court Reporter: Laurie A. Collins, RPR Reporting Firm: Veritext Reporting Company 25 EFTA01165407 2 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 THE VIDEOGRAPHER: Good morning. We're on the record. My name is Chris Martin. I'm 3 the videographer for Veritext Court Reporting. Today's date is June 1st, 2011, and the time 4 is 9:06 a.m. This deposition is being held at the 5 office of Susman Godfrey, 560 Lexington 09:06:52 Avenue, New York, New York. The caption on 6 this case is Fortress VRF I LLC and Fortress Value Recovery Fund LLC versus JEEPERS, Inc., 7 respondent, and Financial Trust Company, Inc., and JEEPERS, Inc., counterclaimants and third - 8 party claimants. This is filed with the Judicial Arbitration and Mediation Service, 9 Reference Number 1425006537. The name of the witness is David Lee. 10 And at this time will counsel please 09:07:27 introduce themselves for the record. 11 MR. SUSMAN: Harry Susman for JEEPERS and FTC, along with Darren Indyke. 12 MR. ARFFA: I'm Allan Arffa from Paul, Weiss, Rifkind, Wharton & Garrison LLP. We 13 represent the claimants in this proceeding. Also with me is Hannah Sholl from Paul, Weiss. 14 MS. JOHNSON: Megan Johnson from Fortress. 15 MR. SIFFERT: John Siffert, Lankler 09:07:53 Siffert & Wohl LLP, on behalf of Dan Zwirn 16 personally. MR. O'BRIEN: William O'Brien from 17 Cooley LLP for the Zwirn entity parties in the case. There are several of them. I don't 18 know all the names. MR. SIFFERT: And you're representing 19 the witness. MR. O'BRIEN: And the witnesses. 20 THE VIDEOGRAPHER: At this time the 09:08:16 court reporter, Laurie Collins, will swear in 21 the witness.' EXAMINATION BY 22 MR. SUSMAN: Q. Mr. Lee, can you give us your address 23 for the record? A. Sure. 5 Stokes Farm Road, Old Tappan, 24 New Jersey 07675. Q. Have you given testimony before? 25 A. Yes. 09:08:48 Q. In connection with this Zwirn fund? EFTA01165408 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL A. Yes. Q. How many times? A. I can't recall specifically, but more likely than five. Q. Did you give testimony to the SEC? A. No. Q. In what connection have you given testimony? What proceedings? A. Fund-related litigation with specific counterparties involving transactions. Q. Where do you currently work? A. I have my own firm. Q. What is the name of it? A. Colford Capital, C-O-L-F-O-R-D. Q. What does Colford Capital do? A. It is a merchant banking operation trying to find acquisitions and advising on corporate transactions. Q. How long has Colford been in existence? A. Today is its first anniversary. Q. Prior to working at Colford, where did you work? A. Dan Zwirn & Co. Q. How long of a gap was there between when you left D.B. Zwirn and Colford starting? MR. O'BRIEN: It's Colford. Q. I'm sorry, could you spell it? 09:10:21 A. C-O-L-F-O-R-D. Q. Okay. Got you. How long of a gap was there between work -- when you quit at Zwirn or stopped working and your starting up at Colford? A. None. Q. Does Dan Zwirn have any connection to Colford? A. No. Q. Anyone who worked with you at the Zwirn 09:10:45 enterprise connected to Colford in any way? A. On an affiliate basis, I do utilize the services of an assistant that previously worked with me at Dan Zwirn. Q. Is it a he or she? A. She. Q. What's her name? A. Alicia Ferraro. Q. And when you say "an affiliate basis," does she work somewhere else most of the time? 09:11:18 A. Yes. She actually works for Dan Zwirn 09:09:12 09:09:51 EFTA01165409 4 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 as well. Q. So you and Dan share the same 3 assistant? A. Yes. 4 Q. And "assistant," is she your secretary? A. Secretary. 5 Q. Do you and Dan share offices? 09:11:32 A. Yes. 6 Q. Where are those offices? A. 595 Madison Avenue. 7 Q. Who else offices at 595 Madison? A. A person named Todd Meister, 8 M-E-I-S-T-E-R. Q. Did he have any connection to the Zwirn 9 operation? A. No. 10 Q. And what business is it that Mr. Zwirn 09:12:01 runs out of 595 Madison Avenue? 11 A. As I understand it, he has an investment firm called Alda Capital that has made 12 investments in various financial businesses. (Mr. Schwartz joins proceedings.) 13 Q. Does Colford and Alda make investments together? 14 A. No, we have not made any investments together. 15 Q. Do you and Mr. Zwirn look at 09:12:31 investments together? 16 A. To date we have not looked at any investments together. 17 Q. Are there plans to do so in the future? A. Nothing definitive or concrete. 18 Q. I had asked you, I think, whether Mr. Zwirn had any connection to Colford. I also 19 mean does he provide any financing or investor in any way. 20 A. No 09:12:55 Q. How about does Fortress provide any 21 financing to Colford? A. No. 22 Q. Can you give me your educational background? 23 A. Wharton School, University of Pennsylvania, 1986 bachelor's. 24 Q. And then after graduating from Wharton, where did you go to work? 25 A. Dillon, Read. 09:13:35 Q. How long were you at Dillon, Read? EFTA01165410 5 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL A. 4. A. 4. A. A little under two years. What were you doing at Dillon, Read? I was an investment banking analyst. From Dillon, Read where did you go? Lazard. Q. How long were you at Lazard? A. I left Lazard in January 1999, so approximately 11 years. Q. And what were you doing at Lazard? A. I was an investment banker. Q. Where did you go from Lazard? A. Sandler Capital. How long were you at Sandler? Two years. What were you doing at Sandler? Making private equity investments. Sandler is a hedge fund? More of a private equity fund. Private equity fund? Okay. And where is Sandler located? New York City. So that takes us up to roughly 2001? Correct. In 2001 where did you go to work? I started a firm called Saturn Venture 4. A. 4. A. 4. A. 4. A. 4. A. 4. A. Partners. 4. Ventures? A. For about two years. Q. What did Saturn Ventures do? A. It was a venture capital firm. Q. So now 2003, roughly, where did you go to work? A. I started a firm called LLJ Capital. 09:13:53 09:14:32 How long did you keep operating Saturn 09:15:06 MR. O'BRIEN: Could you spell that? THE WITNESS: LLJ. Q. LLJ Capital. What does A. It was my last name, my partner's last name, and our wives' started with J. Q. A. I got you. What did LLJ do? It was funded by Dan Zwirn to make special situation debt investments. Q. Was LLJ owned by Dan Zwirn or just simply the financing was provided? A. It was financing was provided. Q. How did you come to meet Dan Zwirn? LLJ stand for? 09:15:40 junior names both 09:16:14 EFTA01165411 6 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. I hired Dan Zwirn out of Wharton in 1993, and he worked mostly under my supervision 3 for the first year and a half as an investment banking analyst. 4 Q. So that would have been at Lazard? A. Yes. 5 Q. So you basically gave Dan his first job 09:16:47 in finance? 6 A. Well, he had a summer internship before, but I guess his first full-time job. 7 Q. And do you remain friends with Dan? MR. O'BRIEN: Objection to form. 8 Q. I'm sorry, so from 1993 to 1996, roughly, he worked for you? 9 A. No, for about a year and a half. Q. Oh, for just a year and a half? 10 A. Yes. 09:17:14 And did he leave Lazard in 1994/'95? 11 Q. A. I actually left Lazard in mid '94 and then returned back to Lazard a year and a half 12 later. Dan left Lazard in '95. Q. Where did you go during this interim 13 period from Lazard between '94 and '95? A. Toronto Dominion Bank. 14 Q. So as I understand it, you hired Dan, he was at Lazard, you left; by the time you came 15 back, then he was leaving? 09:17:57 A. He had left when I came back. 16 Q. He had left. A. Yes. 17 Q. You remained friends with Dan from '95 through 2003? 18 MR. O'BRIEN: Objection to form. A. We maintained an acquaintance. 19 Q. So in 2003 when he or D.B. Zwirn provided the funding for LLJ Capital, how did that 20 come to be? 09:18:28 A. I reconnected with Dan in 2003 over 21 lunch, having not seen him for two or three years. And he discussed with me the possibility of 22 starting a new business with his funding. Q. So the funding that you mentioned that 23 D.B. Zwirn provided to LLJ Capital, what entity exactly provided the funding to LLJ? What Zwirn 24 entity? I'm not so much concerned with the name as was it one of the hedge funds or was it some 25 company he ran. 09:19:13 MR. ARFFA: Objection to form. EFTA01165412 7 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. All the funding we received came from the D.B. Zwirn Specialty Opportunities Fund L.P.. 3 Q. So that would have been the onshore fund; right? 4 A. Correct. Q. And how much funding did they initially 5 provide to LLJ? 09:19:32 A. It was on a deal-by-deal basis. 6 Q. How long did this -- did LLJ Capital remain in existence? 7 A. I remained with LLJ until April 2005. Q. What happened in April 2005? 8 A. I joined D.B. Zwirn & Co. Q. At that point how much -- did LLJ 9 Capital as of April 2005 get money from anyone else other than D.B. Zwirn? 10 A. No. 09:20:12 Q. How much money, roughly, by April 2005 11 did LLJ Capital have invested on behalf of D.B. Zwirn? 12 A. I think approximately a hundred million. 13 Q. So in 2005 you decided to go in-house, in effect, with the Zwirn management company? 14 A. Yes. MR. O'BRIEN: Objection. 15 MR. ARFFA: Objection to form. 09:20:40 Q. And what was your position that you 16 started in April 2005 with D.B. Zwirn? A. I was a managing director. 17 Q. What entity was it that actually employed you? 18 A. D.B. Zwirn & Co., L.P. Q. Were you a partner in D.B. Zwirn & Co., 19 L.P.? A. No. 20 Q. I meant when you first joined. Did you 09:21:20 ever become a partner in D.B. Zwirn & Co., L.P.? 21 A. No. Q. In the D.B. Zwirn & Co., L.P., what -- 22 it provided investment advisory services? A. It was the management company on behalf 23 of the funds and managed accounts. Q. By that you mean it would provide 24 management services for the onshore fund, the offshore fund, and the various managed accounts; 25 is that right? 09:22:00 A. Yes. EFTA01165413 8 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. O'BRIEN: Objection to form. Q. As the managing director, what were 3 your job responsibilities? What were you doing? A. Well, I was a managing director, and my 4 responsibilities were to originate and manage a portfolio of investments and to also manage a 5 portfolio of investments that had been originated 09:22:46 by others prior to my arrival. 6 Q. And how long were you a managing director of D.B. Zwirn & Co., L.P.? 7 A. Until October '06. Q. How big was the portfolio of 8 investments that you were managing between April '05 and October '06? 9 A. North of 300 million. Q. You mentioned a portfolio of 10 investments that had been made by someone else 09:23:32 that you were managing; is that correct? 11 A. By others. Q. By others. 12 Who were the others who had made those investments? 13 A. There was a person named Ivan Zinn and a person named Cameron Fleming. 14 Q. Was there some special area of investments that you were charged -- or type of 15 investment you were charged with making? 09:24:06 A. I generally focused on an industry, 16 which was media, telecommunications, and the services that provided those two industries. 17 Q. Now, as a managing director, did you have any role in the administrative functions of 18 the management company? A. None. 19 Q. Did you have any role in meeting with the investors in the actual funds or clients who 20 had managed accounts? 09:24:58 A. I occasionally was asked to come in for 21 portions of meetings. Q. What portions of the meetings would 22 those be? A. Most of the time -- frankly, all the 23 times that I can remember, I was asked to discuss the types of investments that I focused on and the 24 portfolio. Q. During that time period from April 2005 25 to October 2006, did you ever have any discussions 09:25:35 with investors about what the terms of any EFTA01165414 9 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 investment would be in the funds or in the managed accounts? 3 A. No. Q. Did you, when you were making 4 investments either at LLJ Capital or when you were a managing director, make any investments with 5 Fortress, side by side or in some sort of 09:26:07 partnership? 6 MR. O'BRIEN: Objection to form. MR. ARFFA: Objection to form. 7 A. I don't recall closing on any deals that I originated with Fortress. There were a 8 number of portfolio investments that had Fortress as a coinvestor that I inherited from Ivan and 9 Cameron. Q. Can you give me a rough estimate of the 10 size of those investments? 09:26:47 A. Of each investment or cumulative? 11 Q. Cumulatively. A. Including Fortress's piece or D.B. 12 Zwirn piece? Q. Just the D.B. Zwirn piece. 13 A. I'd have to guess, but I would estimate 200 million. 14 MR. O'BRIEN: Let me just say that you shouldn't guess. You can -- if you can 15 estimate in some range, but just a fat guess 09:27:25 you should not do. 16 THE WITNESS: Okay. No, I cannot. 17 Q. What's that? A. No, I cannot. 18 Q. Was it fair of the $300 million portfolio that you were in charge of looking after 19 that more than half of those investments had Fortress as a coparticipant? 20 A. No, that would be inaccurate because 09:27:58 investments mature and are repaid. So the numbers 21 that I threw out would be based -- at least on the 300 north number I threw out earlier was an 22 approximate running tally, and the guess I threw out was cumulative. 23 Q. So that I understand what you're saying, you're saying the 300 was a sort of 24 average amount of the portfolio over time, at any point in time, and the 200 million was some amount 25 of investment that may have run -- churned through 09:28:40 the portfolio over the year; is that fair? EFTA01165415 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 A. Q. fund? A. Q. interest than the offshore A. not sure Q. interest NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL MR. ARFFA: Objection to form. A. Roughly. Q. Did you yourself have any the onshore or offshore Zwirn funds prior to October 2006? Yes. What were you invested in? The onshore fund. When did you make that investment? The spring of 2006. How large of an investment did you A. Q. A. Q. A. Q. make? A. Q. was that A. Q. into the investment? No. Did investment in 09:29:08 400,000. Do you recall what the liquidity option applied to your investment? The one year plus liquidity. Did you make any subsequent investments 09:29:52 onshore funds after this initial you ever invest in the offshore No. Did you have at any point any ownership or in any of the Zwirn entities other investment you've mentioned in -- onshore fund? You'd have to be more specific. I'm I understand your question. Yeah. Did you have any ownership in any of the -- strike that. When we started, Mr. O'Brien said he is here representing a bunch of Zwirn entities. There are entities called Zwirn Holdings, D.B. Zwirn & Co., L.P., D.B. Zwirn & Co. LC. Did you have any ownership interest in any size in any entity that had the name Zwirn in 09:31:06 it, other than your investment in the onshore fund? A. So in your -- I just want to make sure I understand the question. When you're referring to the Zwirn entities, are you referring to entities that are affiliated with the management company? Q. Yes. A. No, I did not. Q. I'm also referring to just any company 09:31:43 that had the name Zwirn in it, or entity. 09:30:33 EFTA01165416 11 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. ARFFA: Objection to form. Q. It could have been part of the 3 management company, it could have been a hedge fund, any type of entity. 4 A. No. Q. What happened, by the way, to LLJ 5 Capital? 09:32:21 A. It was acquired by the onshore fund in 6 the second half of 2005. Q. When it was acquired, did you receive a 7 payment for your ownership interest in LLJ Capital? 8 A. Yes. Q. How much of a payment did you receive? 9 A. Approximately 800,000. Q. Do you remain a limited partner in the 10 onshore fund? 09:33:04 A. Yes. 11 Q. Did you ever withdraw any of your initial $400,000 investment? 12 A. No. Q. Prior to October of 2006, did you 13 had you ever heard of Jeffrey Epstein? A. Yes. 14 Q. In what connection had you heard of Mr. Epstein prior to October 2006? And I'm using 15 that October date because that's when I understand 09:33:37 you became the acting CFO. 16 MR. ARFFA: Objection to form. A. I heard of Jeffrey Epstein through 17 colleagues at Lazard. Q. By the way, what had you heard from 18 your colleagues at Lazard about Jeffrey Epstein? A. Not flattering things. 19 Q. Such as? A. That he was extremely difficult. 20 Q. Difficult in what way? 09:34:19 A. Generally difficult to do business with 21 and difficult to negotiate with and belligerent. Q. Other than what you heard from Lazard 22 folks about Jeffrey Epstein, had you heard anything else about him between -- prior to 23 October of 2006? A. Other than magazine or newspaper 24 articles, I do not recall anything else. Q. Did you know that he was an investor in 25 the Zwirn fund? 09:34:58 A. Prior to October 2006? EFTA01165417 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL Q. Yes. A. No. Q. Prior to October 2006, had you ever heard of an entity called Financial Trust Company? A. No. Q. Now, you mentioned -- oh, I want to ask you one last question about some of the background 09:35:26 we talked about earlier. How did you and Dan end up sharing office space currently? A. When I left, D.B. Zwirn was housed at Fortress's offices. Dan had a -- and Todd, who shares that floor, had an empty corner office. And Dan had also hired Alicia. And so he made an offer for me to sublet that space, which I found attractive and decided to put my office there. Q. So you left Fortress or D.B. Zwirn, I'm 09:36:18 sorry, in roughly June of 2010? A. May 31, 2010. Q. So you continued to work at D.B. Zwirn & Co. even after Fortress acquired the management company? MR. O'BRIEN: Objection. MR. ARFFA: Objection. Q. I'm sorry, I guess it didn't acquire. After Fortress took over management responsibilities of the funds, the onshore and 09:36:46 offshore funds -- MR. ARFFA: Objection to form. Q. -- did you become an employee of Fortress? A. No. Q. You remained an employee of D.B. Zwirn & Co.? A. Yes. Q. And it moved its offices, then, into Fortress's offices for some period of time? 09:3-:03 A. Yes. Q. And you made the move at that point? A. Yes. Q. Fortress took over management of the funds in roughly the summer of 2009? A. June 1, 2009. Q. So for roughly a year you were working for D.B. Zwirn & Co. but actually physically housed at Fortress's facilities? A. Yes. Q. In October of 2006 you became the 09:37:36 EFTA01165418 13 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 acting CFO of D.B. Zwirn & Co.? A. Yes. 3 Q. Do you remember what day it was that you were made the acting CFO in October? 4 A. October 5th. Q. Who suggested to you that you become 5 the acting CFO? 09:38:17 A. It was a discussion amongst myself, Dan 6 Zwirn, and David Proshan. Q. What was the discussion that occurred? 7 MR. O'BRIEN: I'm just going to caution the witness, since Mr. Proshan you said might 8 have been involved in these conversations, to not in your answer reveal any communications 9 that are in the nature of legal advice or seeking legal advice. 10 A. I don't recall the specifics of the 09:39:05 conversation. It's been a long time ago. 11 Q. At that point you obviously knew that Perry Gruss was no longer the CFO? 12 MR. O'BRIEN: Objection to form. Q. Right? 13 MR. O'BRIEN: Objection to form. MR. ARFFA: Objection. Can I just have 14 a rule that if any of us object to form that it counts for everyone and that way you don't 15 have to hear two or three people saying it? 09:39:30 MR. SUSMAN: Yeah, that's fine. I 16 don't know how you're going to do that in practice, but fair enough. 17 MR. ARFFA: The first one to say it; the others don't have to. 18 A. Can you repeat the question, please? Q. Yeah. Before you went to this meeting 19 with Mr. Zwirn and Mr. Proshan, did you know that Perry Gruss was no longer the CFO? 20 A. Yes. 09:39:52 Q. How did you learn that Perry Gruss was 21 no longer going to be the CFO? A. I learned in a discussion with Lawrence 22 Cutler over lunch. Q. The discussion with Mr. Cutler over 23 lunch, how -- how many days before or was it the day before the October 5th, 2006, meeting that you 24 had? A. It was on October 5th. 25 Q. So what did Mr. Cutler tell you at the 09:40:31 lunch that you had? EFTA01165419 14 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. He told me that Perry Gruss had resigned the night before. He told me that there 3 had been an internal investigation and that investigation had resulted in a number of issues 4 regarding management company expenses and the use of money from the funds for the purchase of an 5 airplane but that it had been remediated but the 09:41:30 decision had been made that Perry had to go and 6 that we were going to restructure senior management and implement a number of new 7 compliance procedures. Q. Did he at the lunch suggest to you that 8 you might become CFO as part of this restructuring? 9 A. No. Q. Prior to Mr. Cutler telling you at 10 lunch that there had been this internal 09:42:14 investigation, did you have any hint that there 11 was an investigation underway? MR. O'BRIEN: Objection to form. 12 A. No. Q. So was it the news that Mr. Cutler told 13 you that there had been an internal investigation that came as a surprise to you; first time you 14 heard of it was October 5th? A. Yes. 15 Q. Had you heard that there were any 09:42:44 issues with Perry Gruss's job performance at all 16 prior to October 5th? A. Yes. 17 Q. What issues had you heard existed about his job performance? 18 A. Dan had informed me around September 15th that he wanted to make management changes and 19 that he wanted me to consider possibly stepping into a role of managing the firm in the near 20 future. 09:43:25 Q. When Mr. Zwirn informed you that he 21 wanted to make management changes, did he specifically mention Mr. Gruss as one of those 22 changes he wanted to make? A. No, he did not. 23 Q. I think I asked you what issues you were aware of about Mr. Gruss's job performance, 24 and you told me in response that you had this discussion with Mr. Zwirn on September 15th. 25 MR. SIFFERT: Objection. 09:44:02 Q. My only question is did Mr. Zwirn EFTA01165420 15 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 mention Perry Gruss during this September 15th conversation. 3 MR. O'BRIEN: Objection to form. A. He mentioned that I should spend time 4 with Perry to learn more about the firm's business and finances. 5 Q. Did you infer from that that there was 09:44:20 some issue that he had with Perry Gruss? 6 A. I recall making an inference that there could have been an issue. 7 Q. Did you ask Mr. Zwirn specifically whether there was some problem with Perry Gruss's 8 performance? A. I don't recall asking him that 9 specifically. Q. And prior to the September 15th 10 discussion with Mr. Zwirn, had you heard of any 09:44:49 specific issues with Mr. Gruss's job performance? 11 A. No. Q. Did you ask Dan why he wanted to make 12 management changes? A. Yes. 13 Q. And what did he say? (Discussion off the record.) 14 A. My recollection was that he wanted somebody who had deal experience in a role of 15 leadership as opposed to someone that had more of 09:45:24 an operational background. 16 Q. So at least during the September 15th conversation, Mr. Zwirn did not mention to you 17 that there was any sort of investigation underway about any sort of improprieties involving 18 Mr. Gruss? A. No, he did not. 19 Q. The only explanation he gave you for why he might want to make management changes was 20 to bring somebody with more deal experience into a 09:46:05 leadership role? 21 A. Yes. Q. How is it, by the way, that you 22 remember that this discussion with Mr. Zwirn happened on September 15th, 2006? 23 MR. SIFFERT: Objection. A. I just happen to remember. There 24 were -- there were a number of events that occurred in that short window of time that I seem 25 to have specific recollection of, but obviously 09:46:41 there are other things I don't. EFTA01165421 16 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. So between September 5th and October 5th, did you hear any other news about Mr. Gruss's 3 job performance or any investigation about him or any issue with the management company? 4 MR. O'BRIEN: I take it you mean September 15. 5 MR. SUSMAN: Did I -- I did mean September 15. Sorry. 6 MR. ARFFA: Objection to form. A. Repeat the question. 7 Q. I'll ask the question again. Between September 15th, 2006, and October 5th, 2006, did 8 you hear any additional information about Mr. Gruss's job performance or any issues at the 9 management company in terms of how it was being run? 10 MR. ARFFA: Objection to form. Q. Any problems? 11 A. I was not aware of any problems associated with Mr. Gruss's performance. 12 Q. Essentially you had a discussion with Mr. Zwirn on September 15th where he mentioned he 13 might want to make some changes, and October 5th you go to lunch with Mr. Cutler and he tells you 14 Perry Gruss is going to have to leave, you come back from lunch, and you're offered his job on 15 October 5th? MR. SIFFERT: Objection as to form. 16 Q. Is that -- A. I'm not sure whether that was a 17 question or a statement. Q. Is that the chronology? Do I have it 18 right? 19 MR. SIFFERT: Objection as to form. A. Those two events occurred on those two dates, yes. 20 Q. I just want to make sure I'm not missing any events that occurred between September 21 15th and October 5th relative to your becoming CFO. 22 MR. ARFFA: Objection to form. A. Well, once again, define "events." 23 Q. Any conversations you had with anyone else, any information you learned in the interim 24 that gave you some indication you might become the CFO or have some leadership role. 25 MR. ARFFA: Objection to form. A. Part of the September 15th and 09:47:02 09:47:32 09:48:00 09:48:17 09:48:45 EFTA01165422 17 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 subsequent September 18th conversation with Dan, as I previously mentioned, Dan suggested I speak 3 with Perry and some others with regard to learning about the firm's operations and its finances and 4 in particular to spend time with Lawrence Cutler to learn about a number of the operational changes 5 that were planned. 09:49:21 Q. You mentioned there was a September 6 18th discussion with Dan? What was that discussion about? 7 A. On the 15th he mentioned the idea that he wanted me to think about that he wanted to 8 discuss with his partners. On the 18th we had a confirmation discussion that I was interested in 9 taking on the additional role, and he conferred to me that his partners were in agreement with him. 10 Q. By the 18th when you said you were 09:50:04 interested in taking on the additional role, did 11 you understand that role was going to be the CFO? A. At that point in time, no. I thought 12 the role would be more of a president- or CEO-type role sometime in the future. 13 Q. Did you actually talk to Mr. Gruss between September 15th, say, and October 5th, 14 2006? A. Yes. 15 Q. And what did you talk to him about? 09:50:30 A. I recall a couple of conversations and 16 a breakfast meeting where I was trying to gather as much information as I could from him about the 17 firm and the funds and its finances and inner workings. 18 Q. Did he ask you why you were asking for this information? 19 A. No, he did not. Q. Had you ever asked for that kind of 20 information from him before? 09:51:09 A. No. 21 Q. Did you also meet with Mr. Cutler? A. Yes. 22 Q. How many times do you think you met with him during -- between September 15th and 23 October 5th in an effort to learn more about the firm's management? 24 A. I can't recall how many times. Q. And Mr. Gruss during this time period 25 never, in any of your discussions, let on that he 09:51:38 was under some kind of investigation, perhaps, or EFTA01165423 18 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 that his job might be in jeopardy? A. No. 3 MR. ARFFA: Objection to form. Q. You say you talked to Mr. Gruss about 4 the firm's finances. By that do you mean the management company's finances or do you also 5 include the funds' finances? A. I would say all of the above. 6 Q. During those conversations did Mr. Gruss tell you anything about the liquidity 7 needs of the funds, the onshore and offshore funds? 8 MR. O'BRIEN: Objection to form. A. No. 9 Q. Did he express any concern to you that the funds did not have a lot of liquidity? 10 A. Not that I can recall. Q. So on October 5th you were offered the 11 job of acting CFO; is that right? A. Yes. 12 Q. Did you get a pay raise? A. At that point in time, no. 13 Q. Mr. Cutler had explained to you that there was this issue with the airplane and the 14 fund expenses that had been the subject of an internal investigation. He explained that to you 15 at lunch; right? A. It was management fees, not fund 16 expenses. Q. And you understood it was prepayment -- 17 early payment of management fees -- A. Yeah. 18 Q. -- that had occurred, was an issue? A. Yes. 19 Q. And was that the first you'd ever heard of investor money being used to finance an 20 airplane purchase? A. Yes. 21 Q. And was it also the first you ever heard of the early payment of management fees? 22 A. Yes. Q. Did anybody explain to you why the 23 management fees had been paid earlier or what the explanation that had been given for that practice 24 was? MR. ARFFA: Objection to form. 25 MR. O'BRIEN: Since the question doesn't have a time frame, I'm going to direct 09:52:00 09:52:38 09:53:19 09:53:39 09:54:04 EFTA01165424 19 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 you to not, in your answer, communicate something that was communicated to you by 3 counsel. A. I recall Lawrence saying that on a 4 number of occasions management fees were taken after they were accrued but prior to when they 5 were payable. 09:54:37 Q. Did Lawrence explain to you or tell you 6 what the explanation was for why that had occurred? 7 A. I can't really recall at that point in time. 8 Q. After you became the acting CFO on October 5th, was that news then conveyed to all 9 the other employees that day or the next day? A. It was conveyed on October 9th. 10 Q. What was the reason for delaying from 09:55:14 October 5th to October 9th to tell the employees 11 that you were the acting CFO? MR. ARFFA: Objection to form. 12 A. There was a strategy to make a comprehensive announcement to the employees about 13 Perry's departure and other organizational changes. 14 Q. After the announcement was made that you would be acting CFO, did you then make any 15 effort to contact investors in the funds or 09:55:59 managed accounts to let them know about your new 16 job responsibilities? A. There was no effort on my part. 17 Q. I understand there were a series of investor calls to inform investors, roughly about 18 October 10th or October 11th. Do you recall that happening? 19 MR. O'BRIEN: Objection to form. A. My understanding is that Dan and 20 possibly others from the IR department made a 09:56:35 number of investor calls I believe starting on 21 October 9th. Q. Did you participate in any of those 22 investor calls in any way? A. I don't recall participating in any of 23 those round of calls. Q. When did you first hear that there had 24 been advances made from the offshore fund to the onshore fund and from some of the managed accounts 25 to the onshore fund? 09:57:09 A. On October 9th. EFTA01165425 20 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. Was it before or after the announcement of your new job and that Perry was gone? 3 A. After. Q. Was the announcement in a conference 4 room? A. It was in Dan's office with a number of 5 employees dialed in globally. 09:57:36 Q. On a conference call? 6 A. Yes. Q. After that meeting how did you then 7 come to learn about the advances from the offshore fund to the onshore fund? 8 A. Lawrence came to my office, said that he had had a conversation with Alisa Butchkowski 9 and that Alisa had told him that when her prior boss, LeeAnn Law, left in the summer of 2006 that 10 LeeAnn had told her that the offshore fund was 09:58:42 owed money from the onshore fund and that two of 11 the accounting employees, Jason Pecora [phonetic] and Phil Ryu, also knew about it. 12 Q. How much was the amount of these -- the money that was owed at that point? 13 A. As of that moment, I didn't know. Q. Did Larry give you any indication of 14 how large a sum it was? A. I can't recall. 15 MR. SIFFERT: Lawrence? 09:59:34 MR. SUSMAN: Lawrence? Is that what it 16 is? Fair enough. Q. What was your reaction to Mr. Cutler 17 telling you about what Alisa had told him? A. Surprise. 18 Q. And then did Mr. Cutler explain to you when he'd had this conversation with Alisa? 19 A. It was shortly after the firm announcement. 20 Q. So after you had this conversation with 10:00:17 Mr. Cutler, what did y'all do about this 21 information you'd learn from Alisa? A. We asked Alisa to come up to my office, 22 and also Bob Sumberac, and we asked Alisa to repeat what she had told Lawrence just earlier. 23 Q. Did she repeat to you the same thing that Mr. Cutler had conveyed? 24 A. Yes. Q. After you had this discussion with 25 Alisa, what did y'all then do? 10:00:54 A. We asked Jason Pecora to come up to my EFTA01165426 21 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 office, and we asked Alisa to yet again explained what she had just explained. And then we asked Jason what he knew about this issue that Alisa had brought to our attention. Q. Did Jason confirm what Alisa had said? A. Jason said he had no idea what we were talking about. 10:01:24 Q. So what happened after you had this conversation with Jason and Alisa? A. I asked Dan Zwirn and the other two partners, Chris Swan and Vasan, into the office, and we explained what had just happened in the conversation with Alisa. Q. And what was their reaction? A. Dan had a look of utter surprise and shock, screamed out some expletives. And then I recall conversation about trying to figure out if 10:02:06 this was true and how do we figure this out. Q. Did y'all come up with a plan to try to figure out if it was true? MR. O'BRIEN: Objection to form. A. My recollection is that the first step we would take would be for Bob Sumberac, who was the controller, to dig into the firm's accounting systems and ledgers to see if he could figure out whether this was true or not. Q. So you tasked Bob with going and trying 10:02:40 to dig through the fund's ledgers to see if there were in fact these monies owed? A. Yes. 17 Q. And did Bob do that? A. Over the course of the next two days, 18 yes. Q. Did he report back in some form? 19 A. Well, we had multiple conversations over the course of those two days. 20 Q. Was it all oral? Was there anything 10:03:14 written that was prepared by Mr. Sumberac and 21 given to you or Mr. Zwirn? A. I recall a spreadsheet that he put 22 together at some point during those two days. Q. So that takes us to roughly like 23 October 11th, thereabouts? A. Yes 24 Q. Did the spreadsheet show the outstanding balance of the advance from the 25 offshore fund to the onshore fund? 10:03:57 A. The first analysis showed an estimated EFTA01165427 22 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 balance of 108 million. Q. Did that balance materially change over 3 the subsequent weeks? MR. O'BRIEN: Objection to form. 4 A. With regard to what we believed the onshore fund owed the offshore fund, no. 5 Q. Was there at this point any indication 10:04:40 that there had also been advances from the managed 6 accounts or the TE fund? A. As of October 11th, no. 7 Q. When did you discover that there had also been advances from the Highbridge managed 8 account and the TE fund? MR. ARFFA: Objection to form. 9 A. The weekend of the 14th and 15th, we discovered that there was possibly a balance of 10 approximately 50 million owed from the onshore 10:05:14 fund to the Highbridge account. And we also 11 thought that there might be balances owed from the onshore to the TE account as well. 12 Q. How did you discover the $50 million advance from the Highbridge account to the onshore 13 fund? A. We had engaged Deloitte & Touche that 14 week to assist us; and as part of some analyses and work that we saw, a wire transfer. 15 Q. When did Deloitte & Touche get hired, 10:06:31 roughly, relative to October 9th, when you first 16 heard about the issue from Alisa? A. It was either that Thursday or that 17 Friday, so either the 12th or the 13th. They were engaged by Fried Frank, so I 18 don't know if -- Q. So Fried Frank was also hired roughly 19 after -- shortly after October 9th? A. Yes. 20 Q. Did you participate in any of the 10:07:20 meetings to discuss what would be disclosed to 21 investors during the October 9th, 10th, and 11th series of calls? 22 A. No. Q. By the way, when you found out about 23 these advances to the onshore fund, did it cause you concern that this had occurred? 24 A. Yes. Q. And why? 25 A. Why -- I don't understand your 10:07:54 question. EFTA01165428 23 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. What about it was of concern to you? A. It caused a lot of concerns. One of 3 the concerns that was prominent was did we have an accurate NAV calculation. 4 Q. Any other concerns? A. Yes, of course. 5 Q. Such as? 10:08:38 A. The quality of the books and records. 6 Q. Anything else? A. I'm not sure -- do you want me to list 7 out all the emotions I went through that week? Q. Not really the emotions as much as the 8 issues that were potentially raised by having these loans or advances. 9 MR. ARFFA: Objection to form. A. Well, as I said, the primary concern 10 was did we have an accurate NAV. If we did not 10:09:17 have an accurate NAV, then there were a lot of, 11 you know, consequences. Q. Was there any -- were you concerned 12 that -- about how investors would react to hearing about it? 13 A. That would be one of the consequences. Q. But whether or not there was an 14 accurate NAV calculation, might investors be upset? Did you believe investors might be upset 15 about this having occurred? 10:09:50 A. Yes. 16 Q. Were there any tax issues that were raised by having these loans or advances occur? 17 MR. O'BRIEN: Does your question have any time frame? 18 MR. SUSMAN: Sure this October of 2006 time period. 19 MR. O'BRIEN: The whole month? MR. SUSMAN: Yeah. 20 MR. SIFFERT: Well, the concern I 10:10:09 have -- 21 MR. SUSMAN: Look, guys, I'm letting you all do this, but you've got to stop it. 22 Okay? Object to form. Don't -- you can quibble with the question all you want. 23 MR. SIFFERT: To the extent these involve privileged conversations -- we're 24 trying to avoid privilege, Harry. That's the issue. 25 MR. SUSMAN: So just instruct him. 10:10:30 MR. SIFFERT: It's not disruptive. EFTA01165429 24 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. O'BRIEN: Just instruct him, he said. 3 MR. SIFFERT: I'm not obstructing. MR. SUSMAN: Just instruct him. 4 MR. SIFFERT: Okay. Don't report anything about conversations with counsel on 5 these topics. A. Tax issues would be privileged. 6 Q. After October 14th when you also discovered that there might be money from 7 Highbridge's managed account that had been advanced plus you thought there was an issue with 8 the TE fund, were you involved in attempting to document these loans or advances so that there was 9 some piece of paper that actually memorialized, such as a note? 10 A. Yes. Q. Were in fact notes prepared that 11 obligated the onshore fund to repay the money at some point in time? 12 A. Yes. Q. Why didn't you just have the onshore 13 fund repay the money as opposed to entering into a -- a loan agreement that would allow 14 repayment over some period of time? MR. ARFFA: Objection to form. 15 You may answer. A. The onshore fund did not necessarily 16 have the liquidity at that point in time to repay it quickly. 17 Q. There was a second series of investor phone calls like at the end of October; is that 18 correct? A. Yes. 19 Q. Did you participate in those, any of those calls? 20 A. Yes. Q. How many of them did you participate 21 in? A. I can't recall specific number. 22 Q. Was your role to speak during the call or were you just there listening? 23 A. The vast majority of the calls I listened. 24 Q. Who else listened with you? A. It was split amongst Elise Hubsher and 25 I believe Lawrence Cutler. Q. Did you listen to a call that involved 10:10:46 10:11:29 10:12:14 10:12:43 10:13:21 EFTA01165430 25 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Financial Trust Corporation or Jeffrey Epstein? A. No, I did not, did not. 3 Q. What was the reaction of the investors on the call that you did listen in on? 4 A. Vast majority were supportive. Q. Were any agitated or upset? 5 A. I do not recall any of the calls in 10:14:15 which I listened in on an investor openly 6 expressing agitation. Q. Did you hear from Ms. Hubsher, 7 Mr. Cutler, or Mr. Zwirn that there had been other investors who were agitated during these calls, 8 during calls that you didn't listen to? A. The only one I can recall was the call 9 that he had with Financial Trust. Q. What were you told about the call that 10 he had with Financial Trust? 10:15:02 A. I recall Dan mentioning that Jeffrey 11 was upset. Q. Did Mr. Zwirn tell you anything more 12 than Jeffrey Epstein was upset? A. I can't recall specifically with regard 13 to that particular call what else was said. Q. We're talking about the second set of 14 investor calls Mr. Zwirn told you after he had had one with Financial Trust that Mr. Epstein was 15 upset? 10:15:59 A. Yes. 16 Q. At that point you knew who Financial Trust was and who Mr. Epstein was relative -- that 17 they were a big investor in the fund; is that right? 18 A. Yes. Q. Did Mr. Zwirn tell you what he planned 19 to do about Mr. Epstein's being upset? MR. ARFFA: Objection to form. 20 A. That he was going to call Glenn. 10:16:17 Q. Glenn? 21 A. Glenn Dubin. Q. Did you know who Glenn Dubin was at 22 that point? A. Yes. 23 Q. Had you ever spoken yourself to Glenn Dubin? 24 A. I don't recall speaking to Glenn prior to that second call to investors directly. 25 Q. I don't mean in any capacity. Had he 10:16:44 ever made an investment where you spoke to him at EFTA01165431 26 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 any point in time? A. I don't recall speaking to him before 3 that. Q. Did Mr. Zwirn explain to you why he was 4 going to talk to Mr. Dubin about Mr. Epstein being upset? 5 A. I recall that Glenn had a close 10:17:05 relationship with Jeffrey and that Dan almost 6 always conferred with Glenn on matters related to Jeffrey. 7 Q. In between the time of the second -- the first set of calls and the second set of 8 calls, before you made the second set of calls, you reached out to lenders to the fund; correct? 9 A. Yes. Q. Who was -- I think it's KBC? Do I have 10 the initials right? 10:17:52 A. Yes. That was one of the lenders. 11 Q. It was a lender to both the onshore and offshore fund? 12 A. Yes. Q. Were they the biggest lender? 13 A. No. Q. What kind of liquidity did they provide 14 to the funds? MR. ARFFA: Objection to form. 15 A. As of that particular day, they were 10:18:15 actually not a lender. We had a credit agreement 16 that was in the process of being closed. Q. Did you reach out to them because you 17 were concerned that the issues with Gruss had potentially -- strike that. 18 Did you have any problems with any of the lenders when you told them about the Perry 19 Gruss issues or these interfund notes? A. No. 20 MR. O'BRIEN: Objection to form. 10:18:50 Q. You've told me you heard Mr. Epstein 21 was upset after the second investor call. When was the first time that you heard that Mr. Epstein 22 wanted or was asking for some of his money back from the fund? 23 MR. ARFFA: Objection to form. A. I believe there was a letter faxed to 24 us around November 13th. Q. I'm going so to show you what was 25 previously marked as Exhibit 5. Is that the 10:19:59 letter? EFTA01165432 27 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 (Discussion off the record.) MR. SUSMAN: I'm not going to ask him 3 about the document other than is that the letter you're referring to. 4 MR. ARFFA: What's the exhibit number? MR. SUSMAN: It's Exhibit 5. 5 A. Yes. 10:20:20 Q. Prior to seeing Exhibit 5, had you 6 heard from any source that Mr. Epstein might want some of his money back from the fund? 7 A. I don't recall that I had heard he wanted his money back prior to this letter. 8 Q. Now, you had told me during the second set of calls that I think none of the investors 9 who you listened to were upset or agitated, were supportive. 10 Did you hear from Mr. Zwirn or 10:21:04 Mr. Cutler or Ms. Hubsher that any of the 11 investors on the calls they had listened to had asked for any of their money back? 12 A. No, I don't recall anyone asking for their money back around those calls. 13 Q. And certainly in the calls you listened to, did any of the investors ask for their money 14 back? A. Not that I recall. 15 Q. Prior to receiving Exhibit 5, had you 10:21:40 dealt with any investors attempting to redeem from 16 the fund? A. I don't believe so. 17 MR. SUSMAN: I think we've been going for about an hour and 20 minutes. Do you want 18 to take a break? Or keep going? Whatever you want to do. 19 THE VIDEOGRAPHER: There's eight minutes left on the video. 20 MR. SUSMAN: Let's go eight more 10:22:14 minutes. 21 Q. Exhibit 5, how did you come to see it first? Did it arrive on the fax machine and 22 someone deliver it to you or did somebody specifically bring it to your attention? 23 MR. ARFFA: Objection to form. A. I don't remember. 24 Q. After you saw Exhibit 5, did you participate in the discussions about Mr. Epstein's 25 $80 million request, on or about November 13th? 10:22:44 A. Can you be more specific? Participate EFTA01165433 28 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 with whom? Q. Were there any discussions either on 3 November 13th or, say, the next day that you remember about Mr. Epstein's $80 million request? 4 A. I recall us having discussions about this letter shortly after receiving it. 5 Q. And who were those discussions with 10:23:11 that you recall? 6 A. I believe it included counsel. Q. All of the discussions had included 7 counsel that you remember? MR. ARFFA: Objection to form. 8 A. I can't remember conversations that didn't include counsel. 9 Q. Did you have any discussions on November 13th, that day or the next day, with 10 anyone from Mr. Epstein's office about -- 10:24:02 specifically about the $80 million request? 11 A. I recall a telephone call with Harry