IN THE CIRCUIT COURT OF THE 17TH

IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA Case No. 09-062943 (07) RAZORBACK FUNDING, LLC, et al., Plaintiffs, vs. SCOTT W. ROTHSTEIN, et al., Defendants. DAY 9 - MORNING SESSION DEPOSITION OF SCOTT W. ROTHSTEIN DATE TAKEN: TIME: PLACE: December 22, 2011 8:37 a.m. - 12:00 p.m. James Lawrence King Federal Justice Building 99 N.E. Fourth Street Courtroom 11-3 Miami, Florida 33128 Examination of the witness taken before: Michele L. Savoy, Registered Professional Reporter United Reporting, Inc. 1218 S.E. Third Avenue Fort Lauderdale, Florida 33316 (954) 525-2221 United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726638 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 Page 2346 IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA Case No. 10-24110 CACE(19) EDWARD J. MORSE and CAROL A. MORSE, and MORSE OPERATIONS, INC. Plaintiffs, vs. SCOTT W. ROTHSTEIN, et al., Defendants. AMY ADAMS, et. al, Plaintiffs, vs. Case No. 11-CV-61688-JIC/LSS SCOTT W. ROTHSTEIN, TD BANK, N.A. and GIBRALTAR PRIVATE BANK AND TRUST COMPANY, Defendants. 10-03767-RBR Stettin v. Gibraltar Private Bank & Trust Co. 10-03802-RBR Stettin v. Centurion Structured Growth, LLC, et al 11-02368-RBR Stettin v. TD Bank, N.A. 11-02288-RBR Stettin v. Fidelity Charitable Gift Fund 11-02473-RBR Stettin v. Regent Capital Partners, LLC, et al 11-02604-RBR Stettin v. Maple Leaf Drilling Partners, et al 11-02605-RBR Stettin v. Don King Productions, Inc. United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726639 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 Page 2347 (Counsel appearing on the foregoing appearance pages reflect counsel that attended at least one day during the deposition. It does not reflect their appearance each and every session.) 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 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 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 United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726640 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 Page 2348 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 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 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 RLI ZURICH INSURANCE COMPANY, COLUMBIA INC. & ZURICH INSURANCE: CLAUSIN MILLER One Chase Manhattan Plaza 39th Floor New York, New York 10005 BY: SCOTT L. SCHMOOKLER, ESQUIRE United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726641 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 Page 2349 APPEARANCES FOR FEDERAL INSURANCE COMPANY: ALEX HOFRICHTER, P.A 1430 South Dixie Highway Suite 204 Coral Gables, Florida 331463127 By: ALEX HOFRICHTER, ESQUIRE APPEARANCES FOR MORSES: 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 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 APPEARANCES FOR ST. PAUL FIRE & MARINE: MILLS PASKERT DIVERS P.A. 100 N Tampa St Ste 2010 Tampa, Florida 33602 BY: JOHN A. BLACK, JR., ESQUIRE 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 United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726642 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 Page 2350 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 APPEARANCES FOR MURRAY HUBERFELD, DAVID BODNER & MARK NORDLICHT: By: HARVEY WERBLOWSKY, ESQUIRE APPEARANCES FOR FEPICT, MS GROUP: NYSTROM, BECKMAN & PARIS One Marina Park Dr., 15th Flr. Boston, MA 02210 By: JACK SEIGAL, ESQUIRE APPEARANCES FOR MICHAEL SZAFRANKSI: LYDECKER, DIAZ 1221 Brickell Avenue Floor 19 Miami, Florida 33131 BY: CHRISTOPHER G. BERGA, ESQUIRE MIGUEL J. CHAMORRO, ESQUIRE APPEARANCES FOR GIBRALTAR: STEARNS WEAVER MILLER, et al. 150 W Flagler St Ste 2200 Miami, Florida 331301545 BY: MARY BARZEE-FLORES, ESQ. MATTHEW DATES, ESQUIRE APPEARANCES FOR FRANK PREVE: PODHURST ORSEK 25 W Flagler St Ste 800 Miami, Florida 331301720 BY: RAMON A. RASCO, ESQUIRE United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726643 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 Page 2351 APPEARANCES FOR LEVINSON PEARSON & ASSOCIATES, WATCH U-WANT, INC.: KOPELOWITZ OSTROW 200 SW 1st Ave Ste 1200 Fort Lauderdale, Florida 33301 By: BART A. HOUSTON, ESQUIRE JAN ATLAS, ESQUIRE 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 APPEARANCES FOR FRANK SPINOSA: 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 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726644 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 Page 2352 INDEX CONTINUED DEPOSITION OF SCOTT W. DIRECT ROTHSTEIN FURTHER DIRECT Mr. Rasco 2356 Ms. Barzee-Flores 2393 Mr. Rabin 2458 Mr. Rasco 2510 CERTIFICATE OF OATH 2516 CERTIFICATE OF REPORTER 2517 PREVE'S EXHIBIT INDEX NO. DESCRIPTION PAGE NO 272 FP112310-0143388/1 2368 273 FP112310-0134610/1 2393 274 FP112310-0145380/1 2393 United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726645 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 Page 2353 Thereupon, the following proceedings were had: MR. RASCO: Ready to go? THE WITNESS: I'm ready. You represent who again? MR. RASCO: I represent Frank Preve. MR. CUSICK: Counsel, before you begin, I'm just going to put an objection on the record. On behalf of Emess Capital, as to not being permitted time in this deposition to depose Mr. Rothstein, I object to the counsel for the trustee's violation of the protocol orders, an order permitting Emess to depose Mr. Rothstein at this deposition by trying to shut us out of the deposition. THE COURT REPORTER: I'm having trouble hearing you, sir. Maybe you move closer. MR. CUSICK: We object to counsel for the trustee's violation of the various protocol orders in trying to shut us out of the deposition by refusing us time to depose Mr. Rothstein, by failing to timely send over his exhibits, in accordance with the protocol orders. On the same basis, we move to strike the United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726646 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 Page 2354 testimony taken by the Trustee and also the testimony taken by TD Bank, based upon the inability to cross-examine Mr. Rothstein as to that testimony, also the failure to abide by the court order by sending over exhibits timely. We reserve the right to depose Mr. Rothstein at a future date, and we reserve all rights against the Trustee and TD Bank. We further object on behalf of all other entities which are represented by the Law Firm of Kluger Kaplan to the extent that the Trustee served notices of taking deposition that were filed in those cases prior to those entities being served with the complaint; and we move to strike those notices of taking deposition. Thank you very much. Sorry to eat into your time. MR. LICHTMAN: Let the record reflect in the underlying Rothstein, Rosenfeldt & Adler case pending before Judge Cohn, as well as in the protocol orders, neither of them afforded Emess Capital any entitlement whatsoever to take or participate in the questioning of United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726647 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 Page 2355 Mr. Rothstein. It was a tightly negotiated order; and, indeed, Emess came late to the table, and as we have told Emess, and numerous other parties, we are hopeful that there will be another round of discrete depositions that don't focus on what we call "the big case" or the other two limited depositions that are commencing today. So I think that the objections are all completely frivolous and baseless and in bad faith. MR. CUSICK: Also let the record reflect that prior to the first date of the deposition, the Court entered an order permitting Emess to depose Mr. Rothstein and that we were not privy to any discussions concerning the protocols that the depositions and -- COURT REPORTER: I can't hear you, sir. MR. SCHLESIGNER: Guys, we can do all this during lunch time. MR. LICHTMAN: We can put this on the record later. Let's get going. Whereupon, SCOTT W. ROTHSTEIN, acknowledged having been duly sworn to tell the truth United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726648 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 Page 2356 and testified upon his oath as follows: THE WITNESS: I do. MR. NURIK: Counsel, did you send me the documents? MR. RASCO: No. I only have very limited exhibits. I'll bring them up to you -- well, actually, you know what, I'll bring them to you right now. I only have a few, and I'm probably not going to use them. I apologize, Mr. Nurik. Here you go. MR. NURIK: Thank you. MR. RASCO: And I'm not going to even get into those just yet. FURTHER DIRECT EXAMINATION BY MR. RASCO: Q Mr. Rothstein, my name is Ray Rasco. I represent Frank Preve. I, again, state for the record that we don't feel that this is sufficient time to fully depose you based on the amount of contact between you and Frank Preve by email, 7,000 emails, and the seriousness of the statements you have been making in your testimony regarding Mr. Preve over the past eight days. I just want to try and, with the limited time that I have, clarify some of the issues that we United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726649 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 Page 2357 discussed on Monday when I first spoke with you about Mr. Preve. The first thing that I want to ask is, you said yesterday in your testimony that one of the things that you learned in this massive crime was that you would keep your co-conspirators in the dark as to who the other co-conspirators were. Does that apply to Mr. Preve? A To a certain extent. Q Can you explain that a little bit more? A People on the -- what I'll call "outer circle," people who were doing very specific things, were isolated from other co-conspirators. I'll give you an example. Frank Preve had a very limited purpose for me. I didn't explain to do him what we were doing; I told him what needed to be done. He did it. I did not ever sit down with Frank and tell him Deb knows what's going on. I did not sit down with Frank and tell him David Boden knows what's going on. That's not the way it worked. Okay. With other people, a guy like Mr. Preve, okay, there was need for him to know about certain people; but there was also need, because I knew he was also having conversations with other people and I didn't now -- you United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726650 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 Page 2358 know, it's not like I knew this man for two decade, okay, I tried to limit, as best as I could, given all the vagaries of a crime of this size, people's knowledge to what they needed to know. I didn't always succeed. Q Well, would that apply to Mr. Preve? You tried to limit his knowledge; is that fair to say? A On certain issues, yes; and the unique thing about Mr. Preve is, is his knowledge grew over time. You can tell by his emails. If read his email traffic, you know it's clear that there was a point in time where he really didn't know what was going on; and there's a point in time where he is clearly committing fraud after fraud after fraud. Q And that's based on some of the indicators that you discussed with me on Monday, from his email traffic, as well as certain conversations, for example, that you had with Frank Preve? A You'd have to be more specific with me. I can't remember every word I said on Monday. I'd have to sit and read the transcript. Q Okay. Well, let me ask you this, then: The point at which he began to commit fraud, in your words just this morning, when was that? A You'd have to lay all the email traffic out in front of me, and I would be able to give you an estimate United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726651 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 Page 2359 of the date. Q Would it go back to December of 2008 or would it be later, if you recall? A By December of 2008, he was involved. Q By December of 2008 he was involved in what way? A I don't recall. Again, I'd have to see all the email traffic. Q Okay. What was his role? You said yesterday that you tried to limit each co-conspirator's role in the crime; can you explain what you limited Frank's role to be? A I'll have to look at all the email traffic. Q Okay. Okay. A He was in command of a major feeder fund. Q Okay. Was he aware of any other co-conspirators? A To a limited extent, yes. Would you like me to explain? Q Yes, please. A Okay. Let's use -- let's use Jack Simony, as an example. Okay. Jack's involvement was simply, whether he knew there was a fraud going on or not, to lie to our upcoming investor. Frank knew we needed Jack to lie. I United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726652 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 Page 2360 knew we needed Jack to lie, and Jack knew he had to lie. That's all Jack, to my knowledge, knew. He may have had other conversations with Frank about what was really going on; I don't know. That's what he was limited to. If you read emails about -- between me and Frank about John Harris, you'll see there are multiple emails from Frank telling me to get control of John, that he was creating problems. So Frank knew that John was doing things for me that were illegal. We had discussed it. The extent of it, I didn't get into it anymore than I needed to. The auditor, Tracy Weintraub, is probably one of the best examples. Frank knew that Tracy was in my pocket. Frank, knowing that, prepared phony balance -sheet audit statements for me, instructed me to scribble on them to make them look like they were real -- and this is all documented in email, okay -- and then to forward them to Tracy. There were other times when Tracy sent in questions. Frank would tell me, in email traffic, that we can't answer these questions, that I needed to rein Tracy in, that I needed to get control of him. Those are examples of control of certain people, control of the flow of information. Q Well, just going to John Harris, I don't United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726653 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 Page 2361 recall seeing any emails with respect to Mr. Preve asking to you rein John Harris in; but I do recall the email that we discussed on Monday, which is the email where he discussed where there was a $20-million trust balance in -- for Banyan at Gibraltar Bank. Do you recall that discussion? A Who indicated there was a $20-million trust balance? Q Mr. Preve emailed John Harris stating -- asking for a line of credit requests, enclosing documents, and saying that this was based on a $21-million trust account that they had, trust account, or trust proceeds that they had at Gibraltar that -- A I recall something -- I didn't mean to cut you off. Sorry. Q -- that they were seeking a line of credit? A I remember them seeking a line of credit. I remember there being an issue about the trust balance. I remember Frank being aware, through Mr. Harris, that the money was not there. I don't recall the other specifics of it. You'd have to show me the email traffic around that event. Q Do you recall emailing Mr. Preve and asking him not to further seek a line of credit at Gibraltar United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726654 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 Page 2362 because John Harris was asking you for settlement documentation? A It's certainly possible. I don't have a specific recollection of it, but it sounds like something I would do. Q Okay. Moving to Tracy Weintraub, there is the packet of emails that I just handed Mr. Nurik. There is one that's dated January 15th, 2009, 11:05 a.m., and it's Bate number FP 112310-0143388/1. Your email to him -- it begins with your email to him stating: Why is Tracy Weintraub asking for banking data from me, re: Banyan, for your audit. I cannot give him anything from my records, nada, zero, zippo. My law firm's records have nothing to do Banyan and audited financials, other than causing a massive explosion that might -- et cetera, et cetera. And that is -- A That's not bad. It says "burn my wee-wee." It's -- actually, it's not only funny, but it's also clear that Frank and I know that: Okay, we want to have as little information floating around as possible because the more information that floats, the more information that is passed between parties, the more likely we will have a detection. Q If Frank knew that, then why does he have over United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726655 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 Page 2363 7,000 emails between you and him? I mean, if Frank knew that, there is -- he is -- A Well, I understand what you're asking me. MR. SCHERER: Object to form. THE WITNESS: I'm sorry? MR. SCHERER: I just put an objection to form. A You really have to ask your client, because if you recall my earlier testimony over the last eight days, I was amazed at the level of inculpatory things that Frank would write to me on a regular basis, I mean, right down to the end where he said to me, if he doesn't hear from me, we're going to assume we're on our own. Do you expect us to just sit around and wait to be incarcerated, talking about money missing, talking about the fact that he's given me $25 million without any paper; I mean, one illegal activity after another. You are going to have to ask him why there is so much email traffic. Q Well, I mean, why would he put so much into email and seek so much information from you and seek so much information from third parties, if he was in on the fraud? A You would have to ask him that question; I would be guessing. United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726656 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 Page 2364 Q And if he knew how much money you were making and if he was in on the fraud, why didn't he make so much money? Why didn't he have the same financial results that you had? A I was always -- MR. SCHERER: Object to form. A I was under the impression, and this just my opinion, that he was making plenty of money. BY MR. RASCO: Q Making plenty of money through Banyan, you mean? A Him, George, other deals, yes, he seemed, to me, to be very well financially situated, and he benefited from our crime. Q Okay. Going back to the email that we were just discussing about Tracy Weintraub, the -- Frank responds to that email to January 15th, 2009, at 11:00 a.m.: The only thing he should be asking is for you to confirm our outstanding receivables, just like last year. A Yes. Q And is that what you did? A Do you want me to explain that? Q Yes, I would like you to explain that, please. A Okay. The year before, Berenfeld Spritzer, United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726657 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 Page 2365 through Tracy, tried to get a real significant amount of detailed data from us. Frank knew and I knew that that was a big no-no. I went ahead and met with Tracy, explained to him what I needed to explain to him relative to the fact that we're not turning over these documents; that if he wants to be in this game, he needs to go ahead and simply do as little as possible, okay, and get what we needed out; that if he couldn't do the Banyan audit, we would find someone else to do it. He agreed to do it. So when Frank is here saying, "just like last year," okay, he's telling me: Tracy should be adhering to the deal we established previously, which is a simple confirmation, in letter form, just like last year. That's it, nothing more. Q And was that a conversation that you had only with Tracy or that you later indicated to Frank that you had that conversation with Tracy or entered into that deal with Tracy? A I had conversations with both Frank and Tracy about it. Q Separately? A Never together. Q And you indicated that if he did not -- if he United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726658 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 Page 2366 sought too much information, he was not going to have the job next year; is that accurate? A I told him that on more than one occasion: my law firm's business, personal business and the Banyan business, yes. Q Okay. And are you suggesting that Frank at any time submitted false financials to Tracy? A He did. Q Can you explain that? A You'd have to show me all the records. Q Are you saying that they audited -- the -- any of Frank's financial information that he sent to Tracy, some of that was fraudulent? A To my knowledge, yes. Q With Frank's awareness? A To my knowledge, yes. Q And what do you base that knowledge on? A You'd have to show me all the financial data, and I could show it to you. I can give you a good example: He knew there wasn't money in a lot of those accounts, and he was saying that the money existed, and he wanted Tracy to say the money existed. Tracy knew the money didn't exist because he was my accountant. Q He knew in January of 2009 there wasn't money United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726659 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 Page 2367 in the trust accounts? A Certain accounts, correct. Q Based on those emails that we discussed on Monday where there were certain mistakes? A Emails and many conversations with him. Q Okay. If you turn further, there's another email on that subject that I handed you, or to Mr. Nurik. It's dated January 26, 2009, the subject is "Level 3 verification." It's an emailed, on the bottom, from Michael Szafranski to Ari Glass, indicating that he had met with you, and then indicating that trust account 5104 contained $178,857. Frank responds to that email saying, Mike, is it 187,000, or 17,000,800 or 178 million. Do you see that? A I do. MR. RABIN: If I could just ask, for the record, are you making these exhibits part of the record and identifying MR. RASCO: Yes. I'm sorry. This will be -- we had one just now. What number are we at? MR. RABIN: The next exhibit is 272. MR. RASCO: Thanks. United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726660 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 Page 2368 (Thereupon, the document was marked as Preve's Exhibit 272 for Identification.) MR. SCHLESIGNER: Sam, just read it out so everybody knows. MR. RABIN: All right. 272 is an email from Preve to Rothstein dated January 15th, 2009, at 11:05 a.m. BY MR. RASCO: Q You see the response from Mr. Szafranski stating, I'm sorry, the numbers aren't thousands of dollars, indicating that the proper balance is 178 million? A And this will be Exhibit 273. Q Yes. A Okay. I do see that, yes, sir. Q Okay. And are you indicating -- are you saying that that was an indicator that Mr. Preve believed that the money was not in the trust accounts? A Without seeing email traffic on either side of this, I can't tell you for certain. I don't know if Mike wrote that. On occasion Mike would write dollars in thousands, dollars in millions. At this point in time, in January 26, 2009, I don't know what Frank was thinking by reading that. I United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726661 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 Page 2369 would really have to see the email traffic going before that; and for some reason, the email traffic that would have been directed to me right around this time is not here. So without that, I really can't tell you. Q Okay. But you agree that Frank's financial statements, to the extent that he produced financial statements to you, were accurate, generally? A I can't say one way or the other. Q Did you rely on him for accurate financial information? A No. I relied on him to tell me what we were supposed to have in the accounts, minimum. You'll see he sends me a lot of emails, in fact you handed me one, where he's telling me what the minimum balance is. There is no investment that I've ever heard of -- maybe you have and you can tell me what it was -- where the investor tells the person handling all the money how much money he should have. Generally you ask me what the balance is. I tell what the balance is, and if I'm wrong, you pull your investment. That's not how we worked. Q If there are occasions where the trust balances were not reflecting what Mr. Preve thought they were -- well, first of all, he was telling you what he thought they were based on the deals that you were United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726662 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 Page 2370 entering into the bank, correct? A Based on the amount of money he was sending me -- you have got to remember, there came a long period of time where there really was no deal paperwork at all; he was simply relying on that little deal blurb and how much money he was sending me and how much, based upon that little blurb, I was sending him back. So there was a lot of confusion. There was also confusion because he would regularly send me money. I would send him payments, and then he would send me half back. Then he would say, just tell me where you apply. Then he would come back and say, tell me what old deals we're going to apply this to or should I have great example: Should I have Centurion fund this again, or is that just going to create too much of a headache trying to reverify the plaintiff receiving the money? Q Are you referring to a specific email there? A No, not -- that email is in the prior emails • Okay. Not in the ones that I handed you this morning? A No, I didn't see it here. Q Okay. Didn't you indicate to Mr. Preve that -- well, first of all, he was accounting for, on United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726663 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 Page 2371 his end, what he thought the deals were that Banyan had entered into, whether they were funding them specifically or somebody else was funding them? A You'd have to ask him what he was doing. He would send me what he thought needed to be in the accounts, and I would instruct Irene to correct it. On many occasions he would actually write directly to Irene and say these balances are off, fix it. Q If there were instances where there were balances that were less than the minimum requirement, do you recall if you indicated to Mr. Preve that that was as a result of you not having -- that was as a result of you putting the money in the wrong Banyan trust account? A I did that once or twice. I remember that. Q And if the balances sometimes weren't accurate, did you indicate to Mr. Preve that could be because you had not paid experts or you had not taken your attorney's fees out? A On certain occasions I did. You have to look at the timing. You have to look at specific emails, look at the timing, and then look at the emails around it to determine the full extent of Mr. Preve's knowledge at the time because at a point in time when he's fully aware of what's going on. There's a lot of Ponzi-speak United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726664 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 Page 2372 there. We are talking about "transferring money," for example. We're not transferring money; we're just changing balances. Okay. We talk about me "putting money someplace." "Putting money someplace," is simply putting the number someplace. Q I understand. The email that I just showed you regarding the 178 million, you testified on Monday about an email that indicated that there was a mistake of a billion dollars or about a billion dollars; do you recall that email? A I recall those emails. Q This is not that email, correct? A No. Q The second email in the packet that I just gave you is dated November 18th, 2008, 11:06 a.m. It's from -- the bottom is from Frank to you, and it's subject matter is "stuff." A Okay. Q The third point on that email, it states: Need Commerce balance numbers. And you respond above: See below. And you indicate the responses to the question is right after. Do you agree that those responses behind the United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726665 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 Page 2373 questions are your writing? A Yes. Q Okay. You indicate that you're going to provide him the balances in Commerce Bank when you get back to the office this afternoon? A Yes, the fake balance numbers, correct. Q And on number four, it says, do I get to sign in, quote, unquote, online like milk toast does? And you respond: Nope, I should not be showing him; but if you want to stand over his shoulder while he and I hold hands -- COURT REPORTER: I need you to slow down: "If you want to stand over his shoulder while he and I hold hands. .. BY MR. RASCO: Q "-- and sign on, be my guest." Is that your writing there, as well? A Yes. Would you like me to explain that? Q Yes, I would. A Look at the way he writes this: Do I get to sign, and the word "online" is in quotes. The word "online" is in quotes because he knows we're not going online. What Frank was pushing me to do was have United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726666 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 Page 2374 Curtis and Bill sets up a fake website for him so that he could use it with investors over at his office. It's my, also, humorous response to him. Q Well, you're indicating, now, that Frank knew that there was a fake website and that he wanted you to create a fake website for him? A I'll answer that with a question: Can you think of any reason why he would put the word "online" in quotes if we were really going online? Q I'm not sure why he wrote "online" in quotes, but I do know that he was seeking verification of trust balances from you, not just through this email, but through hundreds of emails. My question is: Was he aware that this -- that TD Bank/Commerce Bank website was a fake website? A Yes. Q How do you know? A I told him. Q You told him in a conversation or by email? A In a conversation. Q Was anybody else present? A Never. Q Do you know if he ever discussed that fact with Szafranski? A I have no idea one way or the other. I doubt United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726667 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 Page 2375 it. Q Okay. And you're indicating that by -- certainly by this time, November of 2008, he would have known that the trust balances either were nonexistent or not -- were certainly inaccurate? A Yes. Q And he knew that from this time, through the end of the Ponzi in October of 2009, right? A Yes. Q Okay. And we talked about an email on Monday relating to a $300-million shortage. It was October 30th or 31st. He was asking you exactly the amount that was in the trust balances. You had already left for Morocco. Do you recall that discussion? A I don't. You'd have to show me the email traffic. THE WITNESS: And just -- I don't mean to interrupt you, but just for your own record -keeping and since there is so many days and so many exhibits, you need to mark these. MR. RASCO: Can we mark them on break and in sequential order? UNKNOWN SPEAKER: Yes. THE WITNESS: It's okay with me. I just United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726668 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 Page 2376 don't want you to get documents -- because we have a lot of documents floating around here without stickers. MR. LICHTMAN: Does the record clearly indicate what the document is so it can be matched and there's clarity in the record? MR. RASCO: I specifically stated the dates in the emails and the subject each time I've asked about them. COURT REPORTER: Are you going to be marking more documents? MR. RASCO: Maybe one or two. COURT REPORTER: Okay. Because if it gets too far afield, that's how exhibits get out of order. MR. RASCO: I'm almost done with the exhibits. Can you read where I left off? (Whereupon, the requested portion of the record was read back by the court reporter as recorded above.) MR. RASCO: Okay. Thank you. BY MR. RASCO: Q And there was an email -- and I'm not going to go into it now, but I marked it as an exhibit in the United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726669 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 Page 2377 composite exhibit binder that I handed you on Monday -- stating that Frank was asking you, you know, what's the -- what's the amount -- he had asked you to authorize Debra to give him an account balances. You said you already did. And then you asked -- and then he said, she has, it she doesn't have the authority. He then asked you, what's the shortage, is it 300 million, something to that effect. And you said, that's not the shortage. That's the amount of money to repay the investors. Do you recall that? A I do. Q Okay. My question: What do you think he's referring to as the shortage? Do you have an idea? A Without seeing the email, I don't want to render a guess. I would be completely guessing. Q Okay. Do you think it might be shortage in funding; in other words, funding from sources like the Von Allmen Group or the hedge funds? A No. I think the shortage -- and I'm speculating, but I think the shortage he's referring to is, is how much money do we need to put into the trust accounts so that we could pay out everything we were supposed to pay out, had this all been real. United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726670 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 Page 2378 Q Did you often indicate -- A But I'm guessing. Q Okay. MR. NURIK: Excuse me, Counsel. If you have it there, why don't you show it to him? MR. RASCO: I -- I'm happy to show it, but give me a second. I'm going from memory on this. BY MR. RASCO: Q I'm sorry, I have don't have it in front of me. I don't want to take anymore time, but I'm just asking you, specifically: If you had used the word "shortage" in the past, during the Bar issue, indicating that the hedge funds weren't funding at the same levels that they were before? A I actually -- and I would have to see the email traffic; but I actually don't recall using the word "shortage" to describe money that hadn't been funded by the hedge funds. Normally I would just say "they haven't funded." I wouldn't say there's a shortage in funding. "Shortage," the way Frank is writing it to me is: what is the shortage in the accounts, how much have you stolen, what's missing. But, again, I'm just guessing. United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726671 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 Page 2379 Q Okay. You used, on various occasions, with Frank and other parties, starting with the April 2009 Bar issue, the fact that the hedge funds weren't funding at previous levels -- A Correct. Q -- you used that as an excuse to not pay out to Banyan or to other investors; is that fair? A Correct. Q Okay. And you used that again with the Von Allmen group and Barry Bekkedam's group? A I don't recall that. You'd have to show me that email traffic. Q Okay. I will show you this email. This is the Composite Exhibit 206, which I marked on Monday. A All right. Are you talking about the October 31st, 2009, email Q Yes. A -- from me to George? Q Correct, from you to George. A Yes. We have talked about this extensively. Q We have. I have a few more questions about it. You indicated that email was a false exculpation of Frank, not of George, right? United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726672 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 Page 2380 A Well, I've testified over and over that I'm not sure what George knew. As I sit here today, I still don't know what he knew. So -- Q Well, you did indicate. A Hang on. It would clearly be an exculpation of Frank -- Q It -- A -- and George, if he needed it. Q Okay. It would clearly be a false exculpation? A Yes, a false exculpation. Q Okay. You testified on Monday the latter part of the time about being a liar, thief and scum bag; that was true, in your mind at the time? A Yes. Q Okay. And the part about you either going to jail or dying, that was true or accurate in your mind at the time, as well, right? A Yes. Q Okay. And the -- that email was written, if you recall, in response to an email or various emails from George Levin trying to, quote, unquote, bail you out, trying to help you resolve the issues that you were in, without him fully understanding what was going on? A In part, yes. United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726673 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 Page 2381 Q And so the part about him asking you -- about you telling him, don't try to bail me out of this, that was accurate in your mind, as well, wasn't it? You already knew that it would be impossible for him to bail you? A I don't how what was possible or not possible. You'd have to define "bail" me out. If he could get access to a lot of money, he could bail out the financial part; but he certainly wasn't going to bail me out of the fact that I had committed a giant crime. Q So the only part of that email that is untrue is the part about the exculpation; you and George did nothing wrong? A The only part in here that I know for certain that is false is: Frank did nothing wrong. That is false. It is all together possible that to a great extent, George did, in fact, do nothing wrong. Q You've testified that this was the first time in your life that -- or at least the several past years, that you were coming clean, that you were being honest with yourself; is that fair, in this time period? A At this moment? I don't think at this moment I was coming clean with myself. I think I was trying United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726674 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 Page 2382 to. Until I made the decision to step foot on a plane and leave a non-extradition country, knowing that I was coming back to go to prison, I don't think until I made that ultimate decision that I had fully reconciled with myself that it was time to completely change the person that I am, to change my life and to do the right thing. Q And this was the only email that you recall that you were falsely exculpating Frank; is that right? A I don't recall. You'd have to show me the email traffic. I have sent so many emails, I need to see the traffic to tell you one way or the other. Q Did you -- do you recall falsely exculpating anybody else? A We looked at emails the other day. I don't want to speculate when we have definitive email traffic to establish one way or the other. So I would like to see the emails and answer based upon emails, instead of guessing. Q Just your independent recollection, anybody else that you were trying to falsely exonerate? A I don't recall. I believe there were, but the names are escaping me right at this moment. Q Okay. And to your recollection now, as you United Reporting. Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726675 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 Page 2383 sit here, was there anything else that you may have done to falsely exculpate Frank or anybody else? A Oh, wait. I tried -- I falsely exculpated Stu. Q Was that through email? A I'm -- yes, I think there was -- there was an email. Q Okay. A I think -- again, it makes no sense to me to try to have me guess when we have email traffic that establishes definitively one way or the other. Q I'm only asking you because I haven't seen any email traffic that establishes you sending any other emails that would falsely exculpate anybody else. A On, no, I did. Q Okay. And in doing so, when you did do so, do you recall if it was a simple statement like this one with respect to Frank, or was it more detailed? A I would be guessing. Q Okay. And you were aware, by that time, that there were thousands of emails between you and Mr. Preve that indicated that he may have known something was amiss? A You're asking me my opinion? Q Yes. United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726676 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 Page 2384 A At that point in time I believed that there were thousands of emails proving clearly that Frank was involved in a major fraud. Q Then why would you think that such a simple statement would be any help to Frank? A Fortunately for you, you've never had to be in a situation where your mind is as mine was. When a multi -billion -dollar Ponzi scheme is collapsing around you,you're picturing destroying your family and all the people that you love. And coming back to potentially dying in prison. The emotional and actually physical stress that your body goes through at the time is not something that I can describe in words. Why I was doing exactly what I was doing in those final days, I would have to sit and really read all these emails again, carefully. I was trying to do something good -- Q Okay. A -- that I perceived as good. The truth is, now, as I sit here today, after having made the decision to come clean and admit everything I've done wrong, I don't think that trying to falsely exculpate those people was the right thing. What I should have done was picked up the phone called them, called Mr. Preve and the others that United Reporting, Inc. (954) 525- 2221 21a897ab4911-49aa-8308-21d465585ba5 EFTA02726677 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 Page 2385 I knew was involved and said, I'm doing the right thing. You need to do the right thing. Turn yourself in. Let's tell everybody what we did. Let's do the right thing. That's what I should have done. Q Do you remember that both Frank and George were calling you and texting you or emailing you repeatedly? A Yes. Yes. Q And you indicated on Monday that you did not want to speak with them? A Correct. Q And why was it that you didn't want to speak with them? A I was very emotionally attached to them. I was very emotional at the time, okay, and I did not want to speak to them. I -- I just -- I couldn't bring myself to do it. I spoke to very limited people while I was away. Q Are you suggesting that Frank in any way created fake documents in the Ponzi scheme? A Yes. Q Can you explain that? A You'd have to show me the documents. I could tell you then whether they were fake or not. United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726678 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 Page 2386 Q Can you give me a time frame? A From -- I would be guessing. Throughout 2009 we created false documents together. Q You actually sat with Mr. Preve to create false documents together? A No. He created fake things and sent them to me, and I created fake things and sent them to him. Sometimes we were on the phone together. Q Do you mean agreements or trust balances? A Trust balances is a good example, but to me that's not creating it, you know. Again, you'd have to define the word "created" for me. If I create the document through Debra or Irene and then I send it to him and he doesn't like the balances and he wants me to change them to a different, false number, by your definition, is that him creating the document? He's giving me false input to help me create the false document, which is what he did; but you've got to be more precise with me. Q Okay. Well, just to be specific, are you talking about only deal documents here? We're not talking about anything outside of the deals that you were entering into with Banyan? A Well, sure. Sure I am, because Frank helped United Reporting, Inc. (954) 525- 2221 21a897ab-1911-49aa-8308-21d465585ba5 EFTA02726679 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 Page 2387 me create, at length, fake opinion letters that I then had other lawyers put on their letterhead. People who knew nothing, like Ken Padowitz knew nothing about this type of law, knows nothing about this type of business; he is a criminal defense lawyer. He took a fake opinion letter that we put together -- me, Boden, Preve. We put all this crazy stuff in there, okay, that we needed to perpetrate this scheme and to keep it going and to get people to invest more dollars in the fraud. And then, he knows -- he knows Ken Padowitz is a criminal defense lawyer. I put this thing on -- had Padowitz put it on his letterhead, have Padowitz sign it and then we tak