Picard vs Katz Deposition of Noreen Harrington

8/3/2019 Picard vs Katz Deposition of Noreen Harrington

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Case 1:11-cv-03605-JSR Document 127 Filed 02/1 0/1 2 Page 2 of 3

I, REGINA GRIFFIN, declare pursuant to 28 U.S.C. g 1746, that the following is true:

1. I am an at torney with the firm of Baker & Hostetler LLP, counsel to Irving H.

Picard, Esq., Trustee (" Trustee" ) for the substantively consolidated liquidation of Bernard L.

Madoff Investment Securities LLC and Bernard L. Madoff ("Madoff ') . I submit this declaration

in Support of the Opposition to the Defendants' Motion for Summary Judgment pursuant to

Federal Rule of Civil Procedure 56. I am personally familiar with the facts set forth herein.

2. In m y role as counsel to the Trustee, I was involved in the Trustee's discovery

efforts pursuant to Rules 26, 30 and 45 of the Federal Rules of Civil Procedure.

3. On De cember 30, 2011, Noreen Harrington, former Chief Investment Officer of

Sterling Stamos, testified that in 2003, she and her colleague Ashok Chachra performed due

diligence analyses into Merkin's and Madoff's funds. Attached asExhibit A is a true and

correct copy of excerpts from the Deposition Transcript of Ms. Harrington, dated December 30,

2011.

4. The T rustee noticed the deposition of a Sterling Stamos corporate representative,

pursuant to Fed. R. Civ. P. 30(b)(6), to determine, among other things, the location, retention

and/or destruction of Ms. Harrington's files, including the due diligence files on Merkin and

Madoff referenced in Ms. Harrington's testimony. Attached asExhibit B is a true and correct

copy of the Rule 30(b)(6) Subpoena and Notice of Rule 30(b)(6) Deposition to Sterling Stamos,

dated January 2, 2012.

5. On J a nuary 12, 2012, the Trustee deposed Sterling Stamos' designated corporate

witness, Chief Financial Officer Kevin Barcelona. Mr. Barcelona testified that Sterling Stamos

kept "records literally going back to day one on all of our funds." Attached as Exhibit C is a

true and correct copy of excerpts from the Deposition Transcript of Kevin Barcelona, dated



Case 1:11-cv-03605-JSR Document 127 Filed 02/1 0/1 2 Page 3 of 3

January 12, 2012.

6. Despi te our repeated demands for the production of Sterling Stamos'

Merkin/Madoff f iles, and the analyses that both Ms. Harrington and Mr. Chachra described in

their testimony, these documents have not been produced and appear to be missing. Attached as

Exhibit D is a true and correct copy of a letter from Fernando A. Bohorquez, Jr. to Sterling

Stamos' counsel Tammy Bieber, dated January 23, 2012, again requesting the Merkin/Madoff

due diligence files. See also Exhibit C at 189- 97.

7. A tta ch ed asExhibit E is a response letter from Ms. Bieber, dated January 25,

2012.

Dated: New York, New YorkFebruary 9, 2012

Regina Gr in





Case 1:11-cv-03605-JSR Document 127-1 F i led 02/1 0/1 2 Page 2 of 17

Page 1

C 0 N F I D E N T I A L

UNITED STAT ES D ISTR ICT CO UR T

SOUTHERN DI ST RI CT OF NE W YO RK

11 — CV —03605(JSR)(HBP)

IRVING H. PI CA RD , Tr uste e for

the Liquidation of Bernard L.

Madoff Investment Securities LLC, V i d e o t a p e d

Deposition of:

Plaintiff,

NOREEN HARRINGTON

SAUL B . KAT Z , et a l . ,

Defenda nt s .

TRANSCRIPT of testimony as taken by and befo re

NANCY C . BE ND ISH , Ce rt if ied Co urt Re po rt er, RMR , CRR

and Notary Public of the St ates of New York and New

Jersey, at the offices of Baker & Hostetler, 45

Rockefeller Plaza, New York, New York on Friday,

December 30, 2011, commencing at 9:34 a.m.




PICARD v. KATZ, et al. CONFIDENTIAL NOREEN HARRINGTON 1 2/30/11

75

have to tal k in ge ne ral te rms be ca use I do no t

remember the ex act ba ck- and -forth que sti ons . It ' s

easier for me to de sc rib e wha t I th ou ght I ha d

ascertained in that meeting. So let me just finish

what I thou ght I as ce rta ined in the me et ing , bec aus e

it's just easier for me

Q . Su r e .

on that fro nt .

So, I wal ked out of th e me et in g . I

10 said to As ho k, tha t di dn 't go we ll an d it' s no t

going to go we ll . And I m ean t at SP Ca pi tal , thi s

12 isn't going to go well.

13 Peter and Sau l wan t to mak e th is

investment and my im me di ate rea ction to the me et in g

15 is, we cannot go for wa rd . A nd th e r ea son we can no t

go forward is we have an obligation to our investors

17 to do the wo rk . A s we ' ve talked ab out ear li er, we

18 charge a pretty hefty fee to our investors to do

19 work for them . W e tel l th em tha t our in ve stm ent s

20 are transparent to the in ve stm ent team and tha t

21 we' r e ea r n i ng ou r f ee by do i ng wo r k .

22 So, given Mer kin 's comm ent s, it

23 looked like a non — starter to me , an d I mean that

unless things were to rev ers e the mse lves f rom th e

25 way this mee ting we nt, it wo uld be v ery di ff icul t to

BENDISH REPORTING, INC.

877.404. 21 93




PICARD v. KATZ, et al. CONFIDENTIAL NOREEN HARRINGTON 12/30/11

76

make this in ve st ment .

So, I did te ll Ash ok we' re going to

have to do so me wo rk , you kn ow , to so rt of jus ti fy a

negative r ecom men dat ion . And so I w a lk ed out of th e

meeting with a co upl e of ot her th ing s. I w a lke d ou t

of the mee tin g kn ow ing the y we nt to ca sh at th e en d

o f a q u a r t e r .

" They " b e i n g ?

You know, my re col lec tion is th er e

10 was -- one of th e th in gs we lo ok ed at be fo re me et in g

was to -- you k no w, we l oo ked if we c ou ld gar ner an y

12 information on th e fu nd , and I'm not to ta ll y -- I

13 think we as ked a 13 D qu es tio n to hi m, be ca us e th e

answer -- I kn ow th e an sw er , I kno w th e an sw er wa s

15 w e go to cas h at th e en d of th e qu ar te r . Do I

16 remember specifically asking that question? I

17 b elieve I did . That 's my be st re co lle cti on. But I

18 definitely re me mbe r an an sw er tha t we go to ca sh at

t he e nd o f a q u a r t e r .

20 Q " We " be i ng?

21 A. M e rkin o r Mad o ff , and I ha ve to te ll

22 you, they were joined at the hip in this

23 c onve r s a t i o n .

The quest ion -- the ot he r th in g I

25 walked out of the of fi ce re me mb er ing is I ha d tr ie d


877.404.21 93





86

S P Capital. I 'm s or r y .

And was it your und er sta ndin g tha t

that's what Pe ter Stamo s and Sau l Ka tz wa nt ed ?

That was my und ers tan din g.

Q. After this meeting, did you do any

additional wor k in co nn ect ion with th is to jus ti fy

your negative recommendation?

A . Ye s .

Q. What did you do ?

10 A. You kn ow , a ga in , I ca n on ly ta lk in

general terms , be ca use I do n't remem ber exac tly wha t

12 I did, but I w il l te ll you I th ou ght a g r ea t de al

13 about it, and I al so -- an d I di d so me wo rk . Th e re

14 was a li ttle bi t -- we ll , I' ll put it in t hese

15 terms, not ver y pr of ess ional, but ther e was a li tt le

16 bit of stin k ar ound Nerki n in a man na med Vic to r

17 Teichers (phonetic) or -- I'm slaughtering his last

18 name, but th er e we re a co up le of th in gs we co ul d

19 find that we re a li tt le bit ne ga tiv e or - - ab ou t a

20 p erson who wo rk ed wit h or fo r him th at ha d a bi t o f

21 a checkered past, might be a way to put it.

22 You know, one o f th e th ing s th at I' ve

23 relied on in my p a st , in my c a re er , is nu mb er s do n' t

24 often lie, peo ple can . And so I' m ge ne ra lly mo re

25 comfortable w ith ma th an yw ay . So t he on e t h in g I

BENDISH REPORTING, INC.877.404.21 93





would say to yo u is I th in k I lo ok ed at -- a ga in ,

this is in ge ne ral te rms , but I th in k I lo ok ed at

options at the en d of a mo nt h, see if th er e wa s an y

increased vol ume . I thi nk -- I th ou ght a lot ab ou t

the issue of wh y wo ul d so me bod y go to c as h to av oi d

r egulatory aut hor itie s at the end of a qu ar te r,

Q A re you refer r ing to Me rk in or ar e

you referring to Ma dof f when you loo ked int o th is ?

A. I lo o ked in t o -- at t hi s po in t, no w

10 I'm trying to educate myself on both people.

Q. A nd was it you r un de rst anding that

12 M adoff went to ca sh at th e en d of th e mo nt h ?

13 A . Th at wa s m y un de rsta nding. I knew

there was some exp lan ation I had ga rn ere d abo ut ca sh

15 at the end of a qua rt er . So , no t on re gu la tor y

16 filings, and it is my re co ll ec tion tha t th at fe ll

17 out of the me et ing , alt hough I do n't reme mbe r al l

18 the specific ver bia ge aro und it . But I d o rem em be r

specifically asking myself why somebody would, you

20 know, do tha t . I m e a n, I ca n gi ve you a r ea so n .

21 You could sa y, you kno w, tha t th ey wa nt ed to f ly

22 below the ra da r . Y ou kn ow , th ey do n' t wa nt to

23 r eally have re gu lat ors know who they are .

Q Wh en you say a r ea so n, a r e you

25 talking about going to cash

BENDISH REPORTINC, INC.

877.404. 21 93





88

Yeah.

Q. a t the end o f t he qua rt er ?

So that your nam e mi ght not fa ll ou t

on a regulat ory rep ort , like a 13D, as to a ho ld in g

i n a s t oc k .

Could you explain what you mean by a

13D?

Well, it's just a regulatory filing

if you own mo re th an a ce rt ain pe rc ent of an y

10 outstanding com pa ny 's st ock tha t you fil e as a

significant investor in that company. And, you

12 know, there were thi ngs aro und thi s inv es tmen t th at

13 didn't add up in my own mind , an d I kno w I tr ie d to

do research at the ti me . I don 't re me mbe r ex ac tly

15 w hat I lo oke d at .

16 We did prepare notes for this

17 investment me et ing . I f I could ha ve th em, it wo ul d

18 be really he lpf ul .

19 Q. Wh en you say "we" did prepare notes

20 for this m ee ti ng, c oul d you te ll me wh o th at wo ul d

21 be?

22 That would be As ho k and my se lf . I

23 don' t, I don't thi nk we wa lk ed int o any in ve st me nt

meeting on a he dg e fun d in my en ti re ti me th er e th at

25 didn't have pa pe rwor k att ached to it .

BEND ISH REPORTING, INC.877.404. 21 93





89

So, in othe r wo rd s, th ere wo ul d be

these cha rts , I re co mm en ded how it wo ul d loo k in ou r

fund, Sharp e Ra ti os . You know , th er e wa s al wa ys a

lot of data tha t we wo uld dis cuss in th ese me et ing s.

So, there -- if I co ul d se e th at , it mi gh t he lp my

recollection. But w ith out it, it 's di ff icul t eig ht

years late r to te ll you wh at

Q* W ould it h a ve re si ded on yo ur

computer or did you have hard copy files of this?

10 A. Th e answer to th at que stio n wou ld

have been SP Ca pi tal was st ill in it s in fa ncy and we

12 did have a lot of paper. So I'm fully going to say

13 there was a lo t of pa pe r . Bu t w e wer e c r ea ti ng

files for he dge f und ma na ge rs . O ka y , so we ' re

15 c reating a fi le .

So you'd have a portfolio file on the

17 computer and the n you co ul d ha ve th e dr op -d own s to

18 the individual inv est men ts. It w oul d in cl ude th ing s

19 like notes from me et ings , it wou ld inc lude th ei r

20 letters to inv est ors, thei r ret urn s. Y ou kn ow , it

21 would have -- in my op in io n, thi s fi le wa s me an t to

22 be justificat ion to our in ve stor s as to th e du e

23 diligence we di d to ma ke a re co mm en da tio n for th at

investment.

25 This wo ul d ha v e - - you sa i d you had a


877.404. 21 93



Case 1:11-cv-03605-JSR Document 127-1 Filed 02/1 0/1 2 Page 9 of 17


90

lot of paper. That was a paper file. Did you keep

i t ?

A. W e , in the m e eti ng , in the in ve stm ent

meeting we wo uld hav e had , th ere wo uld have be en

handouts normally or paper in those meetings. Ashok

Chachra would hav e dr iven the cha rts and the da ta .

I would hav e re vi ewed it be for e the me et in g .

S o, again , I'm no t su re I can

differentiate exa ctly how muc h of that wo uld ha ve

10 been computerized at that point, but there is no way

we walked into this meet ing with not hin g in ou r

12 h ands. No , no way .

13 Q. Did you com mu nicate frequently with

14 people at SP Capital by email?

15 A. It 's, aga in, it 's a sma ll

16 o rganization and it 's rea lly me and As ho k . I f w e

17 were tal kin g to El le n, it mo st li ke ly was em ai l or a

18 phone cal l . I f w e w e r e -- if it we re As ho k an d I ,

19 no, I am no t a -- I am not a p e r son wh o wr it es yo u

20 if you' re next do or . I 'm s or t of ol de r th an th at ,

21 maybe, one way to put it . I don 't tw eet or -- bu t

22 the thing is , I wo ul d no rm al ly not be th e pe rs on

23 sending Ash ok em ai l if he wa s ac ro ss the ha ll fro m

me . I w oul d h av e ju st got up an d we nt to ta lk to

25 him personally.


877.404.21 93





94

that every quarter somebody owns Coca-Cola stock and

they liquidate it before the end of the quarter

because they want to avoid a regulatory report, you

know, the vo lum e at th e end of th e qu ar te r pr ob ab ly

would have gone up if they had, you know, if they

were a reasonably sized player in the market.

So, I was just trying to see if any

of the thi ngs Ezra Mer kin had sa id du ri ng th e

meeting -- again, I rather like numbers, so if there

10 was any way that I co uld may be s ee nu mb ers show ing

me that. To no ava il .

12 So, t h e s e w e r e ex e r c i s e s - - y o u s a i d

13 was I doing anything after the meeting. I was

trying to think about this investment and trying to

15 see if there was any way that I could see somebody

16 doing -- liquidating at the end of a quarter.

17 Q When you say to no avail, what do you

18 m ean by tha t? Firs t of al l, let me ask you th is :

Did you see a fo ot pr int in the ma rk et pl ace of an y

20 surge in volume options?

21 No .

22 Did you look at anything else after

23 this meeting with Me rk in?

A. Th e an sw er t o t ha t is ye s, I th in k we

25 l ooked at -- we lo ok ed mo re cl os ely at 13 Ds .


877.404. 21 93





95

Q. Wh en you sa y " we " ?

A. You kn ow , I 'm no t su re who di d it ,

whether it wa s As ho k or me . A nd I kn ow I di d m or e

than this, but I ac tu ally don 't reme mber all the

t hings I di d . So , I - - I 'm so rr y .

That's all rig ht .

Did you try at al l to re ve rs e

engineer Merkin's strategy?

No. I tho ug ht a lo t ab out th is

10 strategy. I h ad a sked -- I be li eve , my re co lle ctio n

is I aske d As ho k, who was my a na ly st , to se e if th is

12 made sens e to hi m . Bu t I h a v e to t el l yo u

13 When you say "t hi s" ma de se nse to

h im?

15 The r e t u r n s .

16 The r e t u r n s . Wh o s e r e t u r n s ?

17 I believe we lo ok ed at bo th Me rk in

18 and Madoff the n.

19 But I defin itely -- my re co ll ect ion

20 is -- I hav e one st rong rec oll ect ion, wh ich I

21 mentioned in the me et ing, that the numb ers wer e too

22 good.

23 The n u m b er s me a n i n g ?

The returns wer e too fl at -- we ll ,

25 going back to vo la til ity, not very vol at ile , and


877.404.21 93





102

That ' s c o r r e c t .

Q Did you ever look into the growth of

Merkin's organization?

A. It w ould h av e be en on -- mo st li ke ly

i t would hav e be en on a pi tc h bo ok t ha t I ha d se en ,

b ut I don' t rem emb er what th at gr owth wa s .

Q. Did you e ver look at the growth of

Madoff's organization?

A. I don 't recol le ct .

10 Q. A fter your m eet ing with Me rk in, did

you have the se ns e of wh et her or no t he g av e mo ne y

to any other th ird par ties bes ides Mad of f?

13 A. I recol lect th at he ha d th e ab il ity

14 to do it . I do n ' t recollec t — — I actual ly — — I

15 don't recoll ect any oth er name s me nt ion ed .

16 Q And wh en you me a n - - wh en yo u say

17 names, do you mean any other -- well, what do you

18 mean?

A . We l l , Me r k i n d i d n ' t g i v e me t h e n ame

o f another en tity that he was gi vin g mo ney to . I

understood that to be your qu es tio n.

Rig h t .

Was t h e r e - - o k a y .

Other than M ad of f?

Other than M ad of f.






103

0 D id you look i nt o th e in ve stm ent

history of Ma dof f at tha t tim e, af ter the me et in g

with Merkin ?

A. A gain , w ithou t the do cu me nts , I don ' t

remember e ve ry th ing tha t we lo ok ed at . Bu t I

definitely, I definitely looked at something or

to have the opi nion that the inv es tme nts wer e not

volatile and po si tiv ely skew ed .

And when you say inv est men ts, who

10 Madof f .

Madof f .

12 Madoff investments.

13 Did you do a correlation analysis at

the time into Me r kin ' s fund?

15 You know, my re co lle ction wou ld be

16 t ha t we d i d .

17 Q. D o you reca ll wh at the re su lts of

18 that corre lation ana lyses wer e?

19 A. You know , my recollection probably is

20 that it was go od , bu t I ha ve ab so lu tel y no - - I

21 haven't loo ked at an yt hin g for ei ght ye ar s, so my

22 recollection is that it was probably good, but it

23 was -- it's not a nu mbe r I re me mb er .

0 And when yo u sa y i t ' s pr ob ab l y good ,

25 could you ex pl ain wha t you me an by th at ?

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104

A . Th at it -- s im i la r to wh at I sa id

earlier, that the Sh arpe Ratio s wou ld be hi gh an d

the volatil ity woul d be low and th er ef ore th e

portfolio, addin g it to the po rt fo lio wou ld be mo re

positive than negative.

And when yo u' re refer rin g to th e

Sharpe Ratio s woul d be hig h and the vo la ti lity wou ld

be low, whic h inve stm ent are you ref er ring to ?

E i t h e r p er s on .

10 E it h e r

Either Mer kin or Ma do ff at th at

12 p oin t .

13 Did you do a liquidity analysis of

Merk i n ' s f u nd s ?

15 A. A gain , it 's -- yo u kn ow, I do n' t ha ve

16 the data. If I had the se do cum en ts, it wo uld be

17 much easie r for me to re co lle ct, but wi th out the

18 document s, the on ly th ing I ca n tel l yo u is it ' s

something tha t we al wa ys lo ok ed at . So I w ou ld

20 it would be, you know, my normal process, so I would

21 h ave -- I be li eve I wo uld hav e don e it .

22 Q T he files fo r th e di li ge nce tha t you

23 conducted, do you rec all who ma in ta ined them ?

A . Th e - - A s h o k wo u l d h a v e h a d t h e d a t a

25 coming to him , mor e tha n me . A ltho ug h -- th ey wo ul d


877.404. 21 93





105

come to him di re ctl y and he wo ul d co ll ate them , bu t

T believe T wo uld ha ve mo st of tha t da ta se co nd han d

f ro m h i m .

Would you kee p th is da ta , th es e

files -- wo uld SP Ca pi tal kee p th es e fi les wi th th e

results of your diligence, while you were there?

W ould we keep th em ? Yes .

Q A n d d o y o u k n o w wh e r e t h e y w ou l d b e

k e pt , wh e n y o u we r e t h e r e ?

10 A. W ould h ave ha d a d ra wer wi th fi les in

it. The re wo uld hav e bee n fi les on the he dge fun ds

12 and they wou ld have been als o on the c om pu te r.

13 Q And when you say on the computer, do

you mean you r c o mpu te r?

A. Zt wou ld ha ve be en on my co mpu ter ,

16 Ashok's computer. Again, the organization was in

17 its infancy and we were working out exactly how we

18 were going to keep these files, but it is my

recollection that we had cre ated th ese files alre ady

20 for the he dge fund ma na ge rs, tha t we co ul d dr aw do wn

21 the infor mat ion on any on e of th e in ve st me nts we ha d

22 in the portfolio.

23 Q • What kind of files would you keep on

y ou r c om p u t e r ?

D ocuments from our ow n fu nd ,


877.404.21 93





106

documents from the he dge fu nds , ag ain , alt hou gh

Ashok would hav e all of th at . I m igh t no t ha ve al l

of the indi vid ual docu men ts, but we wo uld keep

letters that the he dge fun d se nt us on a m o nt hl y

b asis, retu rns, we wo uld hav e re tu rns . W e wou ld

keep document s on our own cl ie nts . W e w oul d po st

notes. I m e an, th ere wo uld be

When you say po st no te s, wh at do yo u

mean?

10 Our cliff no tes fro m me et in gs or if

we, if we -- ev en if you ha d a p h on e co nv er sa ti on

12 with an in ve sto r and he sa id , th is is wh y ou r

13 performanc e was X at th e en d of th e mo n th , th er e

w ould eit her be s ome rec ord to a fi le or i f I ha d

15 the conversa tion, I pr oba bly wo uld hav e po sted Ash ok

and he may hav e po sted a fi le . B ut w e wou ld ha ve ,

17 if we had at tr ibut ion or co nv er sat ions with hedg e

18 funds, we wo uld nor ma lly kee p th at , some of th at

information.

20 Q When you say you would post them, how

21 would that ph ys ica lly wor k?

22 A. A gain , you can , yo u can wr ite the m

23 down on a piece of paper and put them in paper file.

Or, as I be li eve we we re in the st ag es of ma ki ng al l

25 this ele ctr onic whe n I wa s th er e, so we co ul d ju st


877.404.21 93





107

pull down a file on a hedge fund and make some

notes. B ut th at wa s so rt of a wo rk in pr og re ss at

the time, and I'm more of a paper person, so most

likely I wo uld hav e — — I proba bly wo uld h ave h an d

written. T h e id ea wa s th at th is wa s su pp os ed to be

all automated at some point.

Q. W as — — w hen yo u w er e at SP Ca pi ta l,

were the comp uter s on a ne tw or k?

Now you' re getting really, really

10 over me. 2 n etwo rk , you mea n lik e Mi cr oso ft?

Q. W ere you conne ct ed to one an ot he r,

12 could you em ail one an ot he r?

13 Oh, yeah, we co uld em a il , we al l ha d

email addre sses at SP Ca pi ta l.

15 Q. C ou ld you acce ss do cu me nts tha t As ho k

16 was working on on his computer from your computer?

Yes. W e ha d -- th at wa s wh at we we re

18 w orking on, sh ared fil es and th ing s lik e th at . S o

19 t ha t wa s a wo r k i n p r o g r e s s .

20 Q. The w o rk tha t yo u di d af ter th e

21 meeting with Merk in, and tho se do cum ents that yo u

22 keep referring to that you'd like to see, where

23 would they hav e be en lo ca ted at th e ti me th at yo u

worked at SP Ca pi ta l?

25 We would have had the pi tch bo ok s,








OAO 88 lRev. I/94) Subpoena in a Civil Case

Issued by the

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK

In re: Adv. Pro. No. 08-01789 (BRL)

BERNARD L. MADOFF INVESTMENT SECURITIES SIPA LIQUIDATIONLLC, (Substantively Consolidated)

Debtor,

IRVING H. PICARD, Trustee for the Liquidation of Bernard L.Madoff Investment Securities LLC, SUBPOENA IN A CIVIL CASE

Plaintiff,

Case NumberAdv. Pro. No. 10-5287(BRL)11-CV-03605 (JSR) (HBP)

SAUL B. KATZ, et al.,Defendants.

TO: Sterling Stamos Capital Management, L.P. andSterling Stamos Associates G.P.Attn:

Tammy BeiberTannenbaum Helpern Syracuse k, Hirschtritt, LLP900 Third Avenue

New York, New York 10022

YOU ARE COMMAN DE D to appear in the United States District court at the place, date, and time specified below totestify in the above case,

PLACE OF TESTIMONY COURTROOM

DATE AND TIME

H YOU ARE COMMANDED to appear at the place, date, and time specified below to testify at the taking of a depositionin the above case on the topics identified in the attached Notice of Deposition under Fed. R. Civ. P. 30(b)(6)

PLACE OF DEPOSITION DATE AND TIME

Baker & Hostetler, LLP, 45 Rockefeller Plaza, New York, New York 10111 01/12/2012 at 9:30 am

YOU ARE COMMANDED to produce and permit inspection and copying of the following documents or objects at theplace, date, and time specified below (list documents or objects):

PLACE DATE AND TIME

American LegaiNet, inc.www. USCourt Forms.corn






Rule 45, Federal Rules of Civil Procedure, Parts C k, D;

(c) PROTECTION OF PERSONS SUBJECT TO SUBPOENAS.

(I) A party or an attorney responsible for the issuance and service of a subpoenashall take reasonable steps to avoid imposing undue burden or expense on a person trial be commanded to travel from any such place within the state in which the

subject to that subpoena. The court on behalf of which the subpoena was issued trial is held, or

shall enforce this duty and impose upon the party or attorney in breach of this dutyan appropriate sanction which may include, but is not limited to, lost earnings and (iii) requires disclosure of privileged or other protected matter and

reasonable attorney's fee. no exception or waiver applies, or(iv) subjects a person to undue burden.(2) (A) A person commanded to produce and permit inspection and copying ol

designated books, papers, documents or tangible things, or inspection of premises (B) If a subpoenaneed not appear in person at the place of production or inspection unlesscommanded to appear for deposition, hearing or trial. (i) requires disclosure of a trade secret or other confidential research,

development, or commercial information, or

(B) Subject to paragraph (d) (2) of this rule, a person commanded to (ii) requires disclosure of an unretained expert's opinion orproduce and permit inspection and copying may, within 14 days after service of information not describing specific events or occurrences in dispute and resulting

subpoena or before the time specified for compliance if such time is less than 14 from the expert's study made not at the request of any party, or

days atter service, serve upon the party or attorney designated in the subpoena (iii) requires a person who is not a party or an officer of a party towritten objection to inspection or copying of any or all of the designated materials incur substantial expense to travel more than 100 miles to attend trial, the court

or of the premises, If objection is made, the party serving the subpoena shall not be may, to protect a person subject to or affected by the subpoena, quash or modify

entitled to inspect and copy materials or inspect the premises except pursuant to an the subpoena, or, if the party in who behalf the subpoena is issued shows a

order of the court by which the subpoena was issued. If object ion has been made, substantial need for the testimony or material that cannot be otherwise met

the party serving the subpoena may, upon notice to the person commanded to without undue hardship and assures that the person to whom the subpoena is

produce, move at any time for an order to compel the production. Such an order to addressed will be reasonably compensated, the court may order appearance or

comply production shall protect any person who is not a party or an officer of aproduction only upon specified conditions.

party Irom significant expense resulting Irom the inspection and copyingcommanded. (d) DUTIES IN RESPONDING TO SUBPOENA.

(3) (A) On timely motion, the court by which a subpoena was issued shall quash (I) A person responding to a subpoena to produce documents shall produceor modify the subpoena if it them as they are kept in the usual course of business or shall organize and label

them to correspond with the categories in the demand.

(i) fails to allow reasonable time for compliance,(ii) requires a person who is not a party or an officer of a party to travel (2) When information subject to a subpoena is withheld on a claim that it is

to a place more than 100 miles from the place where that person resides, is privileged or subject to protection as trial preparation materials, the claim shall

employed or regularly t ransacts business in person, except that, subject to the be made expressly and shall be supported by a description of the nature of theprovisions of clause (c) (3) (B) (iii ) of this rule, such a person may in order to attend documents, communications, or things not produced that is sufficient to enable

the demanding party to contest the claim.

300192572.1

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

In re: SIPA LIQUIDATION

BERNARD L. MADOFF, Adv. Pro, No. 08-01789 (BRL)

Debtor. Adv. Pro, No. 10-05287 (BRL)

IRVING H. PICARD, Trustee for the Liquidation Case No, 11-cv-03605 (JSR)

of Bernard L. Madof f Investment Securities LLC,ECF Case

Plaintiff,

SAUL B. KATZ, et al.,

Defendants.

To: Tammy Bieber

Tannenbaum Helpern Syracuse & Hirschtritt, LLP900 Third AvenueNew York, New York 10022

Attorney for Sterling Stamos

300192566




NOTICE OF RULE 30 b 6 DEPOSITION TO STERLING STAMOS

PLEASE TAKE NOTICE that, pursuant to Fed. R. Civ. P. 30(b)(6), Plaintiff, Irving H.

Picard, by and through his counsel Baker k Hostetler LLP, will take the deposition(s) upon oral

examination, before a notary public or other person authorized to administer oaths at the offices

of Baker k Hostetler LLP, 45 Rockefeller Plaza, New York, NY 10111, about information

known or reasonably available to Sterling Stamos regarding the topics in attached Exhibit A.

Rule 30(b)(6) requires Sterling Stamos to designate one or more officers, directors, or managing

agents, or designate other persons who consent to testify on its behalf, regarding these topics.

Said deposition wil l be taken by stenographic and videographic means by a certified court

reporter and videographer, The deposition(s) will commence at 9:30 a.m. January 12, 2012. If

necessary, each deposition will be adjourned until completed.

Date: January 2, 2012 BAKER A HOSTETLER LLP

New York, New YorkBy: /s/' Fernando A. Bohor uez JrDavid J. SheehanE-mai I: [email protected] A. Bohorquez, Jr.E-mail:[email protected]

Attorneys for Irving H, Picard, Trustee

for the Substantively Consolidated SIPA

Liquidationof Bernard L. Madoff Investment

Securities LLC and Bernard L, Madoff

300192566




EXHIBIT A

1. For t h e period between 2002 and 2008, the system(s) used to create, transmit,

store, retrieve, and delete e-mail including, but not limited to, name and version, installation

dates, number of users, and location of users' mail f iles.

2. For t h e pe riod between 2002 and 2008, how electronic documents are maintained,

archived, indexed, including descriptions of hardware and software used, and where this is

physically located.

3. For t h e pe riod between 2002 and 2008, how hard-copy documents are maintained,

archived, indexed,

4, For t h e pe riod between 2002 and 2008, corporate policies regarding the retention

and destruction of documents.

5. T he s epa ration of Sterling Stamos' IT inf rastructure from Sterling Equities

infrastructure in 2004, including which Sterling Stamos data, if any, was transferred to a new

server and/or remains available on back up tapes.

6. The c o l lec tion of documents responsive to the Trustee's Fed. R, Civ. P. 45

subpoena dated October 11, 2011.

7. The c o l lec tion of documents responsive to the Trustee's Bankruptcy Rule 2004

subpoena dated May 18, 2010,

8. The r e ten tion and/or destruction of Ms. Noreen Harrington's electronic and/or

hard copy files.

300192566







PICARD v. KATZ, et al. CONFIDENTIAL KEV IN B A RCELONA 1/12/

Page 1

C 0 N F I D E N T I A L

UNITED STATES DISTR ICT COU RT

SOUTHERN DIS TR IC T O F NEW YO RK

11 — CU —03605(JSR)(HBP)

IRVING H. PIC ARD, Tru stee for

the Liquid ation of Bernard L.

Madoff Investment Securities LLC, V i d e o t a p e dDeposition of:

Plaintiff,

KEVIN BARCELONA

SAUL B. KATZ , e t a l . ,

Defenda nt s .

TRANSCRIPT of testi mony as ta ken by and be fo re

MONIQUE UOUTHO URIS, Cert ified Court Repo rter, RPR ,

CRR ans1 Notary Public of the Stat es of New York and

New Jersey, at the offices of Baker & Ho stetler, 45

Rockefeller Pla za, New York, New Yo rk, on Th ur sday,

January 12, 2012, comm encing at 9 :51 a. m.


877.404.2193




PICARD v. KAT Z, et al . CON FIDENT IA L KEV IN BA RCEL ON A 1/ 12 /1 2

Page 143

0 1 :3 6 : 4 8 1 do c ume nt s ?

01 : 36 : 48 2 No , I ' m n o t

0 1:3 6: 5 0 3 Q- Do you know j us t as a pr actical matt er

01:36:53 4 wh ether ha rd copy docume nts have been dest royed?

0 1:3 6: 5 5 5 A. No , I 'm n o t awa re and I do n't believe

Q1:36:58 6 that we w o ul d hav e. We h av e re cord s liter ally going

Q1:37:01 7 b ac k to d a y on e on all of our funds , even though our

01:37:0 5 8 p olicy s ays we do n't have to ret ain them for tha t

01: 37 : 0 7 9 I ong .01 :37 :15 10 And with respect to the hard copy

01:37:16 1 1 docum e nt s that you ref erred to as being in an

Q1:37:1 9 12 ind iv i dua l emplo yee's office, what woul d happen to

01:37:23 1 3 th ose f i le s sho uld that employee leave Sterlin g

0 1 : 37 : 2 7 1 4 St amo s ?

01 : 37 : 27 15 Well, if for whatever reason if an

01 : 37 : 32 16 employee had, you know, working files, business files

01 : 37 : 34 17 in their office, you know, perh aps they were -- they

01 : 37 : 40 18 were working on, you know, diligence on a manager and

01 : 37 : 44 19 those files were still the re, we wo uld -- their

01 : 37 : 46 20 office would be reviewed for any materials and then

01:37:48 2 1 they w oul d be bro ught back to their approp riate

01:37:51 2 2 fil in g pl ac e.

01 37 : 5 2 2 3 And who would review those documents?

01 : 37 : 54 24 I t depended on the ind ividual . If i t

01:37:56 2 5 w as a por t fo lio team membe r that was no longer with

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Page 189

02: 4 6: 45 1 re cord , th e time is 2: 46.

0 2: 46:5 1 2 (Recess. )

03 : 44 : 02 3 THE VIDEOGRAPHER: W e ar e ba ck on the

03:44 :07 4 r ecord . The t im e is 3: 44. Th i s is dis k number 4.

03 : 44 : 12 5 MS. FEIN: Welc ome back , Mr .

03:44 :14 6 B arcelon a . I wa nt to than k you for your time today .

Q3:44:1 7 7 Th e 30 ( b ) (6) deposition will remain open , but you' re

03:44 :20 8 ex cused fo r tod ay. So t ha nk you very much .

0 3:4 4 : 2 3 9I have a few matters that I'm going

Q3: 44; 26 10 t o p ut on th e re cord with counsel pre sent, but,

03: 44: 29 11 p leas e , you can either go bac k to 1148 or wait in

03: 44: 34 12 th e lobb y, wh atever you prefer .

03 : 44 : 36 13 THE WITNESS: I w ill ex cus e mys elf

03:4 4: 3 7 14 and go .

15 MS. FEIN : Th an k y ou .

16 (The witness leaves the de position

0 3: 44: 47 1 7 r oom. )

03 : 44 : 47 18 (Comments off the record.)

03 : 44 : 51 19 THE VIDEOGRAPHER: Goi ng off the vid eo

03:44 :53 2 0 record, the time is 3:4 4.

21 (The following takes place off the

0 3 : 4 4 : 5 7 2 2 v i d e o r e c o r d . )

03:44 :57 23 MS. FEIN: S o, ju st to sum marize what

Q3:44 :59 2 4 w e discu ssed off the reco rd, the 30 (b) (6) witness you

Q3:45 :Q4 2 5 p rovid ed to day was unable to speak on behalf of the


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P IC AR D v . KA T Z , e t a l . CONFIDENTIA L KEVI N BARC EL ONA. 1/ 1 2 / 1 2

Page 190

03:45 :07 1 corporat ion wit h respect to thre e issues we

03:45:1 0 2 iden tif ie d to you : T he re te ntion of Nor een

03:45:13 3 H arringt on 's file data and the data coll ection and

03:45:1 5 4 p reservat ion that took place pre-2 004 before his

Q3:45 :1 9 5 arrival , as we ll as the document col lect ion process

Q3:45 :22 6 w ith re sp ec t to either the 2004 subpoena or the Rul e

0 3: 4 5 : 2 6 7 4 5 s u bp o en a .

03:4 5: 2 9 8 Just to summarize what we di scussed

Q3:45 :31 9 off the re cor d, we tal ked about ways that we cou ld

03:45 :34 1 Q contin ue to work out these issues with you sinc e they

03: 45: 37 11 w ere n o t clea red up during this 30 (b) (6) deposition.

Q3:45:4Q 1 2 Y ou in fo rm ed us that you recently disc overed that two

Q3:45:4 3 1 3 b oxes o f du e di lige nce materials relating to Ezra

03:45:46 1 4 M er kin 's Asc ot and Gabriel Funds were removed from

Q3:45:5Q 15 Iron M ounta in sto rage by Jennifer O' Neill, a Sterling

03:45:5 4 16 Stam o s an al yst, on December 22nd, 200 8.

03:45:57 17 You also informed us that these boxes

Q3:46:Q Q 18 have n o t be en loc ated since that time . You in fo rmed

03:4 6:03 1 9 us that yo u have looked for the boxes and tha t at

03:46:0 7 2 0 thi s p oin t they have not been loca ted .

03 : 46 : 10 21 You h a v e a l s o a g r e e d t o p r ov i d e u s

03: 46: 11 22 with a lo g of ha rd cop y documents tha t tracks a

Q3: 46: 15 23 desc ri pti on of thes e documents that are maintained at

Q3: 46: 17 24 Iron M o u nta in, as well as a log that re flects when

Q3: 46: 22 25 cert a in bo xes were removed . So w h eth er boxes wer e

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PICARD v. KATZ , et al . CON FIDENT IA L KE V IN BARC ELON A 1/ 12/1 2

Page 191

03: 46: 25 1 chec ke d ou t or ho wever that process exists, you

03:46:2 9 2 agreed t o pro vid e that to us .

03 : 46 : 32 3 We would like to kno w at whos e

Q3:46:35 4 dire ct ion Ms . O' Neill removed these boxes , and in

Q3:4 6:4Q 5 acco rd a nc e wit h tod ay's 30(b) (6) testimony and its

Q3:4 6:45 6 de ficie ncie s, we' ve agreed that -- tha t you wil l look

03:4 6:4 8 7 for th e se it ems for us .

0 3:4 6: 5 2 8 We also are curious to know in

03:4 6:54 9 add iti o n to at wh ose direction Ms. O' Neill removed

03:4 6:58 1 0 the box es, who you spoke to to inform you rself about

03:47:01 1 1 the se i s su es, where the documents were looked for,

03:47:04 1 2 wh at d ocu me nts were looked for and any disc ussions

03:47:07 1 3 you h ad w it h Ste rling Equities on these issue s.

03 : 47 : 11 14 Based on the deficiencies today, we

03: 47: 13 15 reser ve al l ri ghts to continue the 30 (b) (6)

03: 47: 16 16 d ep osi ti on at a later time . T hank yo u .

03 : 47 : 21 17 MR. GOUDISS: W e r es pe ctf ully

03:47:23 1 8 d isagree . W e t h in k that the witn ess was more than

Q3:47:2 6 19 adequa te for pur poses of the 30 (b)(6) and addresse d

03:47:2 9 2 0 all o f th e ar eas cove red by the 30 (b)(6) notice,

03:47:3 2 2 1 in cluding the three areas just identi fied. W e, to o,

03:47:3 5 2 2 reserv e all of our righ ts.

03:47 :37 23 With respect to the 20 02- 2004 perio d

03:47:40 2 4 in p artic ul ar, we think in cont ext, particul arly

03:47 :43 2 5 given t ha t this was a small family off ice as the

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P IC AR D v . KA T Z , e t a l . CON F I DENT I A L K E V I N BA RCE L O N A 1 / 1 2 / 1 2

Page 192

03: 47: 46 1 w itn ess te st ifi ed, a not ter ribly savvy or

03:47 :51 2 soph isti cate d org anization at the time, in its

03:47 :53 3 in fan cy , we be lieve that any pur ported or all eged

03:47 :58 4 g ap s in pr odu ction misstate both the rec ord, the

Q3:48 :02 5 e fforts th at we went to loc ate responsive documents,

Q3:48 :07 6 and the i n her ent limi tations, given the fact tha t

03:48 :10 7 d uring t hat pe riod of time the record well

03:4 8:1 3 8 e stablis he s that the host system was, in fac t,

03:48:1 8 9 S terlin g Eq uit ies' host system, and that the best

Q3:48:2Q 1 Q ev idenc e of that technology and reten tion would be

03:48:2 4 1 1 from Ster lin g Equit ies. A n d we pr esu me, witho ut

03:48 ;27 12 kn ow in g , that that is -- those are mat ters that have

Q3:48 :29 13 b een fully co vered in the exp ans ive discovery in this

0 3: 4 8 : 3 3 1 4 ma t t e r .

03 : 48 : 34 15 Where we do agree is that we wi ll

03:48 :36 1 6 c on tin ue to work with you to try to resolv e any

03:48 :40 17 l egiti mat e dispu tes that we have so that you have all

03:48 :43 1 8 th e info rm at ion that we have in our po sse ssion, or at

Q3:48;4 6 1 9 l east r e as onable and understandable answers as to the

Q3;48:5 1 2 Q e ffor t s we too k to locate documents that no long er

03:48:5 4 2 1 e xist o r ma ybe never existed .

03:48 :56 22 With that, I' ll turn it over to Ms .

Q3:48 :59 2 3 B ieb er , be ca use I think we do hav e an update on the

0 3 : 49 : 0 2 2 4 b o xes .

03 : 49 : 02 25 MS. BIEBER: So d u ring the break we


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PICARD v. KA TZ, et al . CON FIDENT IAL KEV IN BARC ELON A 1/12 /1 2

Page 193

Q3: 49: 04 1 h av e lo c ate d a box tha t has the — — apparently the

Q3: 49: Q9 2 d iligen ce fi les and five notebooks which look like

Q3;4 9;15 3 A sho k 's no tes that are actu ally tagged, so I believe

03:4 9:18 4 th o se w ere the notes that were pre viously prov ided .

Q3:4 9:2Q 5 W e be lie ve that eve rything in that box has pro bably

Q3:4 9:23 6 b een p roduced based on the descr iption, but I will go

Q3;4 9:26 7 ov er th ere th is aft ernoon, or som ebody will go ove r,

Q3:4 9:29 8 an d ch ec k an d ma ke sure that th at's the case, and if

9 so , w e w il l get what was in the bo x.

10 MS. GRIFFIN: A n d jus t to be cl ear

03 : 49 : 33 11 MS. BIEBER: If yo u wa nt to understand

03 : 49 : 34 12 what happened with the box

03 : 49 : 37 13 MS. GRIFFIN : Yo u' re saying one box?

03 : 49 : 39 14 MS. BIE BER: Yeah , one box . One b ox .

03:49 :40 15 It looks like what was in the two b oxes was

03:49 :42 16 consolidated. T h e tw o Iro n Mou ntain boxe s that we

03:49 :46 17 discussed, one had the Ascot files as well as other

Q3: 49: 49 18 m an age rs , the othe r had the Gab riel file, Gabr iel

03:49 :52 19 Ariel, as well as other managers, because they are in

03:4 9:54 2Q alph ab etical order. S o it lo ok s lik e what happene d

0 3: 49:5 7 2 1 was they were all put into one box, as well as with

03:50 :02 22 Ashok's notebooks of his note s from mee tings .

03 : 50 : 07 23 MS. GRIFFIN: A n d wher e was the box

03:50 :08 24 f ound?

03:50 :09 25 MS. BIEBER: T h e bo x wa s found in the

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P IC AR D v . K A T Z , e t a l . CON F I DE NT I A L K EV I N BA RCEL O N A 1 / 1 2 / 1 2

Page 194

Q3:5Q :1Q 1 b asem en t , wh ich we went thr ough the other day when ,

Q3:5Q;1 3 2 as you kn ow, we learned about the off-s ite storage in

Q3: 5Q: 17 3 Ch ris St amos ' dep osition, we pulle d the docum ents .

Q3:5Q:1 9 4 W e then le arned there was bas ement sto rage . I

Q3:5Q:2 3 5 ph ysica ll y went down to the basement with Caroline

Q3:5Q:26 6 Qu irke f ro m St erling Stamos and we wen t through about

7 80 b ox es down the re, in addition to the Iron Mountain

03:50:2 9 8 b oxes , in wh ich we didn' t find anythi ng.

03:5 0: 3 1 9 When this issue came up la ter that

0 3: 5 0 : 3 3 1 0 t h e s e we r e a b s en t , s h e a g r e e d t o g o b a c k d o w n an d

03:50:36 1 1 l ook to m ak e sur e we had n't mis sed anything down

03:50:4 0 12 th ere , th at they weren't mixed in with some othe r

13 file o r th at we missed something in one of tho se

1 4 b ox e s .

15 MR. BOHDRQUEZ: F o r th e re cord, this

Q3:5Q:4 6 16 i s M r . Bo ho rquez . I u n de rs tand that you have a log

03:50:4 7 1 7 and inde x for the Iron Mountain docume nts.

03 : 50 : 52 18 MS. B I E BE R : Y e s .

03 : 50 : 52 19 MR. BOHDRQUEZ: Do you have a log or

03:50:55 2 0 ind ex fo r the docum ents in the base ment?

03 : 50 : 56 21 MS. BIEBER: N o , th er e is no log or

03:50:58 2 2 ind ex fo r th ose documents . The y se em to be mos tly

Q3:5Q:59 2 3 inv oice s and that type of thing . My u n de rst anding is

03:51 :02 2 4 the y a r e do cu ment s that they may nee d more for audi t

03:51:0 5 2 5 wo rk ; i t 's not really investment documents so much .

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PICARD v. KA TZ , et al . CONF IDEN TIAL KEV IN BA RCEL ONA 1/ 12/1 2

Page 195

Q3:51:Q 8 1 There we r e 13 bo xes relating to inv estments, as I

03:51:12 2 recall , bu t we di dn't find anything rel evant to any

03:51:1 4 3 m atter s in th is case in those boxe s.

0 3:5 1: 1 8 4 MR. BOHORQUEZ: A n d wh o wa s the person

03:51:1 9 5 that ident if ied the basement boxe s?

0 3:5 1: 2 2 6 MS. BIEBER: Car ol ine -- Caroline

03:51:2 5 7 Q uirke , she' s the head of the New Yor k office as

03:5 1: 2 7 8 MR. GOUDISS: T h e of fic e mana ger.

MS. BIEBER: Th e o ff ice mana ger.

03:51 :28 10 MR. BOHORQUEZ: A nd yo u sa id the re

Q3:51:29 1 1 w ere 13 bo xe s rel ated to inves tment manag ers?

03:51 :31 12 MS. BIEBER: Gene ra ll y.

03:51 :32 13 MR. BOHORQUEZ: Cou ld you ide ntify for

03:51:33 1 4 u s wh o th os e inv estment managers were?

03 : 51 : 34 15 MS. BIEBER: I don 't remem ber off the

0 3 : 5 1 : 3 6 1 6 t o p o f my h e ad .

17 MR. BOHORQUEZ: If we ask you in a

1 8 l e t t e r

03 : 51 : 37 19 MS. BIEBER: I 'm hap py to give you a

Q3:51:38 2 0 list o f th em , and we can go bac k to the basement and

03:51:40 2 1 p ull the m ag ain . Th ey are unr elated to this case, as

0 3 : 51 : 4 6 2 2 f a r a s I k n ow .

03:51 :46 23 MS. GRIFFIN: Ta m my , wo uld you be

03: 51: 48 24 accept abl e to us coming to see the bo xes right now, I

25 m ean , no t ri ght this seco nd, but see ing it the way it

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Page 196

03: 51: 53 1 exists m ight be ea sier

03:5 1 : 5 3 2 MS. BIEBER: I th in k we nee d to

03: 51: 54 3 di scu s s tha t fi rst, but we' re certainly welcome to

03: 51: 55 4 talk abo ut it .

03 : 51 : 55 5 MS. GRIFFIN: I wo ul d ra the r see the

Q3:51 :56 6 way they wer e kep t in the ordin ary course, but, okay.

0 3:5 2: 0 0 7 MR. GOUDISS: W e ' ll take that under

0 3 :5 2 : 0 1 8 ad v i semen t .

0 3:5 2: 0 2 9MS. BIEBER: A n d in te rms of this one

03:52 :03 10 box we ' re talking about, I don't think we' re talking

0 3:52:06 1 1 ab out ho w it was kept in the ordin ary course . As I

03:52:0 8 12 sa id , it wa s pu lled December 22nd , these two boxes,

03:52 :11 13 and it l o ok s lik e they were kept for the pur pose of

03:52 :14 14 th e M erkin me eting and things relating to Merkin, so

03:52 :16 15 I w on 't wan t tha t deemed the ord inary course .

03 : 52 : 20 16 MS. GRIFFIN: W ell, ho wever they are

Q3:52 :21 1 7 b ein g k ep t in the ordinary course right now, I wou ld

03:52 :24 1 8 l ike to se e the de scription of the log of the two

03:52 :25 1 9 b oxes , an d then I would like to see the boxes that

03:52 :30 2 0 are b ein g kept now . A nd I wou ld lik e to do that

Q3:52:3 1 2 1 m yself , if th at's poss ible, but I under stand you' re

03; 52: 33 22 going to tak e it under advisem ent .

03 : 52 : 35 23 MR. BOHORQUEZ: T h e las t qu estion I

03:52:36 2 4 h ave w i th re spect to the docum ents, the boxes found

Q3:52 :38 2 5 in the b a sem ent , did you ide ntify any boxes that were

BENDI SH RE PORT INGf I N C8 7 7 . 4 0 4 . 2 1 9 3




PICARD v. KA TZ , et al . CON FID ENT IAL KEV IN BAR CE LON A. 1/12/12

Page 197

03:52:42 1 rel ate d to Ms . Harrington in those boxes in the

03: 52 : 4 5 2 b a s eme n t ?

03:52 :4 6 3 MS. BIEBER : No , w e did not .

03:5 2: 5 1 4 MS. FEIN: A l l ri ght . Tha nk yo u.

03:52:52 5 W e 're going off the reco rd.

03:52 : 5 5 6 (Endin g t i me : 3 : 52 p . m . )

10

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BENDI SH REPORT I NG ~ I NC

8 7 7 . 4 0 4 . 2 1 9 3







l,.Ãl.I';L i ! ir ';ZrCA.(.

Bakel S.HOStetiei. LLP

45 Rockefeller PlazaNew York, NY 10111

T 212,589.4200F 212.5B9.4201

January 23, 2012 www.bakerlaw.corn

Fernando A, Bohorquezdirect dial: 212.889.4242

VIIA E-IIAIL [email protected]

Tammy BieberTannenbaum Helpern Syracuse 8 Hirschtritt, LLP

900 Third AvenueNew York, New York [email protected]

Re: Pica rd v. Katz et al., 11-CV-03605 (JSR)

Dear Tammy:

I write to memorialize our numerous meet-and-confers regarding Sterling Stamos' duediligence files on Ascot Fund, LP, Gabriel Capital, LP, and other funds managed byEzra Merkin that tnvested all or some portion of their funds in Bernard L. Madoff!nvestment Securities (the "Merkin Funds" ). The Trustee has repeatedly requested theMerkin Funds' due diligence files in this proceeding, first identified in the Trustee's

October 11, 201'I subpoena to Sterling Stamos (the "Subpoena" ), and reiteratedthroughout the meet-and-confer process through numerous teleconferences, in-personmeetings, depositions, letters and e-mails. See, e.g,, Subpoena Request No. 20.

The significance of the documents requested by the Trustee was demonstrated duringthe deposition of Sterling Stamos' former Chief Investment Officer Noreen Harringtonon December 30, 2011. Ms. Harrington, who served as CIO of Sterling Stamos (thenknown as SP Capital) from October 2002 to August 2003, testified that after meetingwith Merkin to conduct ongoing due diligence into his funds — in which Sterling Stamosfirst invested in July 2002 — she advised her Sterling Stamos partners Saul Katz, DavidKatz and Peter Starnos, that Ezra Merkin was feeding investments in his fund toMadoff, and that it was her view that Madoff's investment returns were either theproduct of illegal front-running or were a "fiction." (N. Harrington Tr. at 67-68, 72-73,

78, 111-'l8,)

Ms. Harrington testified that while acting as CIO, she and Ashok Chachra — her thenassociate at Sterling Stamos — conducted due diligence analyses into the Merkin andMadoff funds that led her to the conclusion that Madoff was engaging in illegal activity,Ms. Harrington testified that she and/or Mr. Chachra prepared materials for a meetingwith Sterling Equities partners Saul Katz and David Katz at which she provided hernegative recommendation about investing in the Merkin Funds. (N. Harrington Tr, at

Chicago Cin ci nnati Cle ve land Colu mLios Cost a Mesa

Denver Ho u st on t os An geles Ne w Yort< O r lanclo Vv as htngton, DC




'I/IA E-IIAIL

Tammy BieberJanuary 23, 2012Page 2

86-88, 92-96.) Ms. Harrington further testified that her recollection of the events inquestion would be aided if she were able to review the documents she and Mr.Chachra had prepared in connection with the Merkin and Madoff funds, (N. HarringtonTr. 88:6-89:24; see a/so 1/2/2012 Ltr, from F. Bohorquez to T. Bieber.)

Mr. Chachra also testified that he performed due diligence analyses of the MerkinFunds and provided them to Ms. Harrington, including a review of "the monthlyperformance of the fund, the annualized volatility of the fund, the correlation of the fundto the broader equity markets, looked at the distribution of returns." (A, Chachra Rule2004 Tr. at 32-33). In addition, Peter Stamos testified that as of 2002, Sterling Starnos,and specifically Mr. Chachra, performed many different types of diligence analyses anits investment managers such as Merkin's Ascot and Gabriel funds, includingevaluations of the funds' historical performance, portfolio exposure, volatility analysis,

leverage, diversification and correlation with various market and portfolio factors. (P.Stamos Rule 45 Tr, 148-150).

As of January 2, 2012, despite the Trustee's repeated requests, Sterling Stamos hadnot produced the due diligence materials to which Ms. Harrington and Mr. Chachrareferred in their testimony. We then specifically requested the above-referenceddocuments and issued a subpoena and notice of a Sterling Stamos Fed, R, Civ. P.30(b)(6) deposition to determine, among other things, the location, retention and/ordestruction of Sterling Starnos' diligence files for Merkin's Ascot and Gabriel Funds, aswell as Ms. Harrington's files. See 1/2/2012 Ltr. from F, Bohorquez to T. Bieber. Youand your co-counsel, Alan Goudiss, agreed to provide a Rule 30(b)(6) witness whowould be able to testify as to these topics and assured that any gaps or deficiencies inSterling Stamos' production would be resolved prior to or at the Rule 30(b)(6)

deposition, (See P, Stamos Rule 45 Tr. 312:4-315;15),

Sterling Stamos designated Chief Financial Officer Kevin Barcelona as its Rule 30(b)(6)witness, but Mr. Barcelona was unable to testify concerning the whereabouts of Ms.Harrington's files. In fact, on January 12, 2012, Mr. Barcelona testified that he had noknowledge of what happened to her files and did nothing In advance of the depositionto educate himself on the topics specifically identified in the notice of deposition.(Sterling Stamos Rule 30(b)(6) Tr, 'l52:7-153:21).

During a break in the Rule 30(b)(6) deposition, we explained our position that SterlingStamos had failed to comply with its obligations pursuant to Rule 30(b)(6) because Mr.Barcelona had no knowledge about many topics identified in the notice, and admittedlyhad not educated himself on those topics in accordance with the requirements of aRule 30(b)(6) witness. (Sterling Stamos Rule 30(b)(6) Tr. 189:23-191:16). We thenquestionedyou about what you and your co-counsel, Alan Goudiss, knew aboutSterling Stamos' due diligence files and noted that it appeared that Sterling Starnos hadessentially produced no diligence materials at all for the Merkin Funds which pre-dated2005. /d, It was only then that you informed us that you had learned that two boxes ofhard copy materials relating to Merkin's Ascot and Gabriel Funds had essentially gonemissing three years ago on December 22, 2008- just a little more than one week afterthe revelation of Madoff's fraud, and at a time when Sterling Stamos was contemplating




VIA E-IIAIL


litigation arising out of the Merkin Funds which had invested in Madoff. Id. You stated

that Sterling Stamos had been unable to locate these boxes in the three years since(the "Missing Boxes" ). /d.Just minutes after you informed us that Ascot and Gabriel documents had gone missingfor nearly three years, you then informed us that Sterling Stamos believed it may havelocated materials from the Missing Boxes in Sterling Stamos' New York officebasement. Without having reviewed these materials yourself, you then suggested thatthe two Missing Boxes of Merkin Fund materials may have been consolidated into theone box you identified (the "Discovered Box"). (Sterling Stamos Rule 30(b)(6) Tr.192;25-194:14).

The next day, January 13, 2012, Regina Griffin and Stacey Bell of our offices inspectedthe Discovered Box. The Discovered Box contained two file folders for Ascot andGabriel entitled "Diligence," but they did not contain the due diligence analysesreferenced by Ms. Harrington or Mr. Chachra in their testimony. Indeed, theDiscovered Box did not contain any Sterling Stamos due diligence materials for theAscot and Gabriel funds which pre-dated late 2004,

You represented to us that in the days following the Rule 30(b)(6) deposition, youspoke to many Sterling Stamos former and current employees — Peter Stamos, SpiroStamos, Ashok Chachra, and Kevin Okirnoto, former consultant Tim Dick, and counselfor Sterling partner David Katz — but you indicated that none of them knew anythingabout the retention of Ms. Harrington's files, nor about the due diligence analyses shereferenced in her testimony. See 1/18/2012 E-mail from T. Bieber to K, Jenson.

During Mr. Barcelona's 30(b)(6) deposition, he testified to a September 2008 office

wide scanning project in which all hard copy documents in Sterling Starnos' New Yorkoffice were scanned to the firm's electronic database, (Sterling Stamos Rule 30(b)(6)Tr. 30:17-31:11). Based on this representation, we requested a copy of the September2008 scanned documents contained in the Missing Boxes (the "September 2008Scan" ). You represented that you searched for a September 2008 Scan and did notlocate it, During your search, however, you located and produced on January 13,2012, aDecember 2008 scanned copy of the Discovered Box."

On January 18, 2012 you advised that you had located an electronic directorycontaining the Sterling Stamos Investment Team's hard copy working files scannedstarting as of 2005, which you believed contained Merkin Funds' due diligencedocuments, The parties held a meet-and-confer conference on Jan, 19, 2012 duringwhich you agreed to produce the recently located additional scanned copies of Merkin

Fund documents. Our review of those files has uncovered no documents from prior to

" While we appreciate your production of the December 2008 Scan, you have represented thatthis file was created after the Missing Boxes were removed from Sterling Starnos' off-sitestorage,




VIIA E-MAllL


late 2004 resembling the due diiigence analyses referred to by Ms, Harrington or Mr.Chachra in their testimony.'

Nlith your production to us on January 19, 2012 of those scanned materials, yourepresented that you have now produced all hard copy and electronic copies ofdocuments pertaining to Merkin Funds which invested in Madoff, However, despite thetestimony of two former Sterling Stamos' employees concerning the existence of 20022003 Merkin Fund due diligence materials, we cannot find among the documentsproduced any such due diligence materials from prior to late 2004. This is also despitethe fact that Mr. Barcelona testified that Sterling Stamos has "records literally goingback to day one on all of our funds, even though our policy says we don't have to retainthem for that long," (Sterling Stamos Rule 30(b)(6) Tr. 142:24-143:9).'

Please confirm that you have already checked for all of the foregoing documentsdemanded by the Trustee with the law firms that have represented Sterling Stamosdirectly or indirectly since 2003, including Shearman Sterling and Davis Polk 8Wardwell, as well as any other agents of Sterling Stamos.

Finally, if you believe that l have misstated any of the foregoing, please advise, Thankyou,

Sincerely,

Fernando A. Bohorquez

cc: Da na Seshens, Esq.

' In fact, in the thousands of documents produced by Sterling Starnos, only a single one-pagedocument resembles the due diiigence described by Ms. Harrington and Mr. Chachra. SeeSSKVV00007066 "Ascot Partners, L.P."

Mr. Barcelona also testified that in "very early January" 2009, following Bernie Madoff's arrest,then-Sterling Stamos General Counsel Jared Kanover issued a written litigation hold to allemployees of Sterling Stamos that explicitly instructed all employees to preserve all recordsrelating to the Merkin Funds, (Sterling Starnos Rule 30(b)(6) Tr. 145.'17-146'.2),







TANNENBAUM HELPERN SYRACUSE & HIRSCHTRITT LLP900 THIRD AVENUE

NEW YORK, NEW YORK 10022-4775(2121 508-6700

FACSIMILE: (212) 371-1084

Writer's Direct Dial: (212) 508-6716E-mail: bieber®thsh.corn

January 25, 2012

VIA K-MAIL

Fernando A. Bohorquez, Jr., Esq.

Baker 4 Hostetler, LLP45 RockefellerPlaza,

New York, New York 10111

Re; Pic ard v, Katz, et al. 11 Civ 3605 (JSR)

Dear Fernando:

I write on behalf of Sterling Stamos Capital Management, L.P. (" Sterling Stamos") inresponse to your letter dated January 23, 2012, As a preliminary matter, we note that the Trustee'simplication that Sterling Stamos has been withholding, or continues to withhold documents relatingto any due diligence performed from 2002 through 2004 on the Ascot Partners, L.P, (" Ascot" ),Gabriel Capital L.P. (" Gabriel" ), and Ariel Fund Limited (" Ariel" ) managed by Ezra Merkin'sGabriel Capital Corporation (the "Merkin Fund documents"), is a gross mischaracterization of therecord and Sterling Stamos' good faith efforts to comply with the Rule 45 subpoena. Indeed, yourletter flatly ignores that Sterling Stamos, a third-party to this action, has produced over 2,38 millionpages of documents to date, which include hundreds, if not thousands, of pages relating to theMerkin Fund documents.

Your continued insistence on the existence of documents that, if created at all, were createdover nine years ago at the infancy of the firm when diligence procedures were informal and largelyhard copy,' no document retention policy existed, no archival system was in place, and the

' As Ms. Harrington explained when asked whether documents would have resided on her computer or in hardcopy files: "The answer to that question would have beenSP Capital was still in its infancy and we did have a lot ofpaper. But we were creating files for hedge fund inanagers," Harrington Tr. at 89. See also r'd, at 90 (" So, again, I'mnot sure I can differentiate exactly how much of that would have been computerized at that point...,"); id. at 104(" Again, the organization was in its infancy and we were working out exactly how we were going to keep thesefiles„ „" )„ 'id. at 107 (" [electronic meeting notes were] sort of a work in progress at the time, and I'm more of a paperperson, so most likeIy I would have — I probably would have handwritten, The idea was that this was supposed to be allautomated at some point,"),

[954334-4]




Fernando A, Bohorquez, Jr., Esq,January 25, 2012Page 2

computer server used by Sterling Stamos was not its own, ignores the realities of a small butgrowing business. That your doggedness is grounded solely in the wholly speculative testimony of

Noreen Harrington as to what she believed "would" have been created for an introductory meetin~with a fund manager in whose funds Sterling Stamos had already invested (Harrington Tr. at 89),approaches the bounds of responsible advocacy. Insinuating that there must be some nefariousreason for the absence of those documents years later is well beyond those bounds. Quite simply,there is no institutional memory as to what would have been in the files about which Ms. Harringtontesfified including, whether such files existed, where those files would have been located at thetime, and what might have happened to them in the years since her departure,

In response to the Trustee's Rule 45 subpoena, we have met and conferred with the Trusteein good faith on numerous occasions for several months now. Whenever you have sought tofollow-up as to the existence of certain documents, no matter how tangential to this litigation„wehave gone back and ascertained whether the requested documents exist and whether they have been

To the extent you are relying on Mr. Chachra's testimony, his recollection went generally to the type ofanalyses he would have conducted on the Merkin funds at the time. Like Ms, Harrington, he had no recollection ofspecific documents that might have existed or been prepared for the meeting with Merkin to which Ms, Harringtontestified. Chachra Tr, at 33;11-17. Nor did he testify as to the existence of any specific documents or their continuedexistence.

' Ms. Harrington's testimony outlines her usual practices for speaking with managers but provides no specificrecollection as to what documents, if any, she had prepared for her meeting with Merkin or for the subsequent internal

meeting, See Harrington Tr. at 88 (" I don' t, I don't think we walked into any investment meeting on a hedge fund inmy entire time there that didn't have paperwork attached to it,");id. at 90 (" [I]n the investment meeting we would havehad, there would have been handouts normally or paper in those meetings); id. at 104 ("[a liquidity analysis] would be,you know, my normal process, so I would have — I believe I would have done it"); id, at 107-08 (" We would have hadthe pitch books [for Gabriel and Ascot], and they would have — most of the time you have pitch books that are electronic,and we would have had hard copies as well.'*). The speculative nature of Ms. Harrington's testimony is best illustratedby the following exchange:

Q. Did you take any notes at that meeting, Ms. Harrington?A, You know, I most likely did.

Q And do you recall taking notes at that meeting?A. I don' t. I don't recall specifically.

Q And do you know whether Mr. Chachra took notes at that meeting?A. He generally took notes.

Q And do you remember him doing so at that particular ineeting?A, It was his — generally speaking, Ashok took notes. I really — I mean, do Iremember a notebook that he had? You know, I really don't remember.It's eight years ago. But it would be out of character if Ashok didn't takesome notes f'rom a meeting,

Harrington at 187-88, As you are aware, we have produced Mr. Chachra's notes from the meetings with Merkin duringthat time period.

[954334-4]




Fernando A, Bohorquez, Jr., Esq.January 25, 2012Page 3

produced. When necessary,we have made additional productions. Your repeated requests for the

Merkin Fund documents are no exception.

Iron Mountain Files

Contrary to your int imations, we have fully explained the issue with the Iron Mountainboxes to you and your colleagues on several occasions, Your selective recitation of those events,however, necessitates that I once again set forth the circumstances surrounding those fi les.

On Wednesday, January 4, 2012, we learned during Chris Stamos' deposition in Californiaof a possible off-site storage at "Blue Mountain." Consistent with Sterling Stamos' good faithefforts to comply with the Rule 45 subpoena, we followed-up and inquired into whether SterlingStamos had a "Blue Mountain" storage facility and, if so, whether those files had been searched forresponsive documents, We learned of the existence of storage at an "Iron" Mountain facility as well

as in the basement of 450 Park Avenue, Sterling Stamos' office, and understood that most of thecontents of those facilities had been scanned onto the computer system. Nevertheless, the NYoffice manager reviewed the basement storage and pulled several boxes for us to review upon ourreturn from the depositions in California. On Monday, January 9, I reviewed those boxes and didnot find any Merkin Fund documents, The NY Office manager and I went to the basement andagain looked through the storage area, unsuccessfully.

On January 10, we received and reviewed the boxes from Iron Mountain. Again, we did notlocate any Merkin Fund documents, We noted, however, that the Iron Mountain directory listedtwo boxes of fund manager files that the index suggested should contain files for Ariel, Gabriel andAscot, Those boxeshad been checked out on December 22, 2008 (the "Iron Mountain Merkin

files" ), We immediately undertook to locate those boxes and were able to locate the box that waslisted as containing Gabriel/Ariel files, which had been one of the boxes pulled from the basementfor review, On closer examination, the only files in that box were for funds that were alphabeticalneighbors to Gabriel, The search of Sterling Stamos' office continued,

During a break in the 30(b)(6) testimony on Thursday, January 12, I reached out to the clientto ensure that the California office was being searched. I was told that having conducted a thirdsearch of the basement that morning, they had located a box containing the Ascot, Gabriel, and

" Indeed, on January 2, 2012, the Trustee sought Noreen Harrington's personnel file for the first time,Notwithstanding that we believe such documents to be completely irrelevant to the present action, we conducted athorough search of Sterling Stamos' files and produced the requested documents on January 12, 2012. Moreover, asearly as November 10, 2011, the Trustee knew that Sterling Equities had back-up tapes Rom the time that Sterling

Stamos' files resided on Sterling Equities' computer systems, Nevertheless, the Trustee waited until two days beforethe discovery cutoff to ask that Ms. Harrmgton's e-mail be uploaded and reviewed for production, In response to theTrustee's last minute request, Sterling Stamos reviewed Ms, Harrington's electronic files and produced an additional2,000 documents by January 17, 2012. Th e record is abundantly clear that in compliance with Sterling Stamos'obligations pursuant to the Rule 45 subpoena, we have supplemented our production on multiple occasions uponlocating the requested documents, which has come at a great expense to our client.

' As we previously informed you, our review of the files and documents at Sterling Stamos' office revealedthat the Merkin Funds files that were retrieved from Iron Mountain in December 2008 had been consolidated in onebox,

I954334-4I






Fernando A. Bohorquez, Jr,, Esq,January 25, 2012Page 5

demanded those scans of the Iron Mountain Merkin files, In searching for documents scanned preDecember 11, 2008, we learned that the early investment management files were scanned into an

"Existing Manager" directory when Sterling Stamos moved offices in late-2005/early 2006. ThatExisting Manager directory, which was subdivided by fund name and then by types of documents,was the working directory for each fund and therefore contained documents created after theoriginal scans, We produced the contents of that directory as well.

As we explained to you, there is no single file that contains a scan of the Iron MountainMerkin files. Rather, scanned files were done document-by-document and each document was thenfiled in an appropriate directory. Thus, for example, a subscription agreement would be filed undera Legal Documents folder in a particular manager's directory under the Existing Manager directory.We have not identified a 2008 scan of the Iron Mountain Merkin file, but it seems likely such a scanwould have been redundant of the scanning that took place in the wake of the office move.

You now tell us that "while we appreciate your production of the December 2008 Scan, youhave represented that this file was created after the Missing Boxes were removed from SterlingStamos's off-site storage." Trustee's 1.23,12 letter n,1. Putting aside that you knew the timing ofthe scan when you insisted on having those documents, there is absolutely no basis on this record tosuggest the Sterling Stamos has intentionally withheld a single document or that that scan varies inany way from the original files.

Moreover, despite your characterization that Sterling Stamos only just recently produceddocuments relating to the Merkin Fund documents, most, if not all, of the documents referenced inyour letter that were inspected by your colleagues on January 13, 2012 or were subsequentlyproduced by Sterling Stamos in the past two weeks, are not new documents; these documents aresimply a reproduction of documents already produced by Sterling Stamos since 2010 albeit in a

different format. Therefore, your suggestion that we have failed to t imely produce responsivedocuments or have just recently produced documents related to the M erkin Funds is bothinappropriate and unfounded. That those files do not contain the documents you believe might haveexisted in 2003 does not lay the groundwork for baseless insinuations and accusations,

Con chision

To the extent that you have not been able to locate the Merkin Fund documents, we reiteratethat we have conducted a good faith search and have produced everything that we are aware of in

Sterling Stamos' possession, custody and control relating to the Merkin Funds. As you areundoubtedly aware by now, the firm was in its infancy stages during the short period of time Ms.Harrington was employed by Sterling Stamos between October 2002 and August 2003, and sharedits off ice space and its computer servers with Sterling Equities, We also note for the record thatdespite having been notified by the Defendants by at least November 10, 2011 that Sterling Equitiesmaintained back-up tapes containing Sterling Stamos' ESI prior to 2005, the Trustee failed toexplore during the discovery timeframe whether those back-up tapes contained any other diligence

' I have also represented that we are not aware of any Merkin Fund documents having been intentionallydestroyed,That representation you have apparently chosen to ignore,

1954334-4]

