UNITED STATES SECURITIES AND EXCHANGE COMMISSION
In the Matter of: }
} File No. LA-1961
REED SLATKIN AND ASSOCIATES }
WITNESS: Reed E. Slatkin
PAGES: 1 through 155
PLACE: Securities and Exchange Commission
5670 Wilshire Boulevard
Los Angeles, California
DATE: Friday, January 23, 2000
The above-entitled matter came on for hearing at 10:12
a.m., pursuant to notice.
APPEARANCES:
On behalf of the Securities and Exchange Commission:
ANDREW J. DUNBAR, ESQ.
NICOLAS MORGAN, ESQ.
MARTIN J. MURPHY, ESQ.
Securities and Exchange Commission
Office of Enforcement
5670 Wilshire Boulevard, 11th Floor
Los Angeles, California 90036
(323)963-3985
On behalf of the Witness:
GERALD E. BOLTZ, ESQ.
Bryan Cave, LLP
120 Broadway, Suite 500
Santa Monica, California 90401-2305
(310)576-2134
Page 2
CONTENTS
WITNESSES: EXAMINATION
Reed E. Slatkin 11
EXHIBITS: DESCRIPTION IDENTIFICATION
29 List of banks and
brokerage firms 36
30 Position statement 102
Page 3
1 PROCEEDINGS
2 MR. DUNBAR: We're on the record at 10:12 a.m., on
3 Friday, January 21, 2000. Will you please raise your right
4 hand?
5 Whereupon,
6 REED E. SLATKIN
7 having been first duly sworn, was called as a witness herein,
8 and was examined and testified as follows:
9 MR. DUNBAR: Will you please state and spell your
10 full name for the record?
11 THE WITNESS: Reed Eliot Slatkin.
12 MR. DUNBAR: Please spell that.
13 THE WITNESS: R-e-e-d E-l-i-o-t S-l-a-t-k-i-n.
14 MR. DUNBAR: My name is Andy Dunbar, and with me is
15 Martin Murphy and Nick Morgan. We are all officers of the
16 United States Securities and Exchange Commission for the
17 purposes of this proceeding.
18 This is an investigation by the U. S. Securities and
19 Exchange Commission in the Matter of Reed Slatkin and
20 Associates, LA-1961, to determine if there have been any
21 violations of certain provisions of the federal securities
22 laws. However, the facts developed in this investigation
23 might constitute violations of other federal or state, civil
24 or criminal laws.
25 Prior to the opening of the record you were
Page 4
1 provided with a copy of the Formal Order of Investigation --
2 this one. It will be available for your examination during
3 the course of this entire proceeding. Have you had an
4 opportunity to review the Formal Order?
5 THE WITNESS: I have.
6 MR. DUNBAR: Do you have any questions about the
7 Formal Order?
8 THE WITNESS: No.
9 MR. DUNBAR: Prior to the opening of the record you
10 were also provided with a copy of the Commission's
11 Supplemental Information form 1662. A copy of that notice
12 has been previously marked as Exhibit Number 1. Have you had
13 an opportunity to look at this Exhibit?
14 THE WITNESS: I have.
15 MR. DUNBAR: Do you have any questions about this
16 exhibit?
17 THE WITNESS: No.
18 MR. DUNBAR: Are you represented by counsel today?
19 THE WITNESS: Yes.
20 MR. DUNBAR: Would counsel please identify himself
21 for the record?
22 MR. BOLTZ: I'm Gerald E. Boltz of the firm of
23 Bryan Cave, LLP, in Santa Monica, California.
24 MR. DUNBAR: Mr. Boltz, are you representing Mr.
25 Slatkin today?
Page 5
1 MR. BOLTZ: Yes, I'm representing Mr. Slatkin
2 personally.
3 MR. DUNBAR: Before we begin I'd also like to go
4 over a couple other procedures with you. First off, if you
5 do not understand a question just let me know and I'll
6 rephrase the question for you. Also, if you need to take a
7 break for any reason let me know: I'll instruct the court
8 reporter to go off the record and we'll take a break.
9 Also, even though we are taking your testimony at
10 our offices today, you should understand and consider
11 yourself to be testifying in a court. The oath you took to
12 tell the truth is the same as the one used in court, and the
13 Commission may submit today's testimony as evidence to a
14 court in a later proceeding. For this reason, you should
15 make every effort to give the best, most complete and honest
16 answers to our questions today. Do you understand?
17 THE WITNESS: I do.
18 MR. DUNBAR: Is there any reason you will be unable
19 to give your best testimony today?
20 THE WITNESS: No.
21 MR. DUNBAR: Also, just so you know, please provide
22 complete oral responses to my questions -- yes, no. Uh-huh
23 and uh-uh don't appear very well on the record; also, hand
24 gestures, head movements. Everything needs to be verbalized.
25 THE WITNESS: Okay.
Page 6
1 MR. DUNBAR: Have you reviewed any material or
2 records in preparation for your testimony today?
3 THE WITNESS: Yes.
4 MR. DUNBAR: What were those materials?
5 THE WITNESS: I reviewed the order, here, and I
6 reviewed some of my -- records of my background of some dates
7 and things that I thought you might ask me, so I could be
8 accurate about those questions.
9 MR. DUNBAR: What were those documents?
10 THE WITNESS: Well, it was mostly my photo albums,
11 just to see what years certain things occurred.
12 MR. DUNBAR: And anything else?
13 THE WITNESS: That's the best I can recall at this
14 point.
15 MR. BOLTZ: I think there was also some review of
16 some of the documents that we furnished to the staff.
17 THE WITNESS: Oh. Well, anything that Mr. Boltz
18 asked me to prepare to give to you, I mean, obviously, we
19 prepared those for you and sent them over to you. You know,
20 I didn't -- maybe I misunderstood the question, but that's --
21 of course, we did our search for the things that you asked
22 for.
23 MR. DUNBAR: I will now hand you what has
24 previously been marked as Exhibit Number 3, which is a letter
25 addressed to Mr. Reed Slatkin, with letterhead of the United
Page 7
1 States Securities and Exchange Commission. Is there a copy
2 of the subpoena in those documents which is why you're
3 appearing here today?
4 THE WITNESS: I was asked to come here for the
5 subpoena.
6 MR. DUNBAR: Correct. Is a copy of that subpoena
7 in those documents, in that Exhibit Number 3?
8 THE WITNESS: Oh, yes, I'm sorry, yes.
9 MR. DUNBAR: That subpoena also calls for the
10 production of certain documents. Have you tendered to the
11 staff of the Commission all documents called for by the
12 subpoena?
13 THE WITNESS: To the best of my knowledge, we have.
14 We are --
15 MR. BOLTZ: In the process of.
16 THE WITNESS: In the process of continuing, we have
17 some others that we're preparing for you, which Mr. Boltz has
18 been in touch with you about.
19 MR. DUNBAR: And what further documents are to be
20 produced?
21 THE WITNESS: Let's see here. I'm not sure what
22 you sent over. We are producing the most recent account
23 statements of institutions in which we own or control
24 accounts. It's Roman Number II, number 2. We are in the
25 process of preparing these for you.
Page 8
1 MR. DUNBAR: And anything else?
2 THE WITNESS: In number 4, that would include any
3 current statements from the Reed Slatkin Investment Club as
4 well, under number 4 there. We're waiting for those to
5 arrive. We can send them to you. And then we have a
6 document under number 11 on the last page regarding Montecito
7 Associates, which I've given to my counsel, and I think that
8 he's organizing that to get to you as well.
9 MR. BOLTZ: Yes, let me just add that there are
10 certain documents that are being copied today, this morning,
11 that will be messengered to us and should be available for
12 production. And those include some of the financial
13 institutions, most recent statements.
14 MR. DUNBAR: Can you please describe the search
15 that was conducted for these documents?
16 THE WITNESS: Describe the search. We went through
17 your list that you sent us, and there is a file for each of
18 these that was copied, per your instructions, and sent over
19 to you. That's the simplicity of it.
20 MR. DUNBAR: And you're making a file of --
21 THE WITNESS: For example, we have a file with the
22 bank statements and the institutional statements. Those were
23 taken out of the file cabinet and, per your instructions,
24 were copied. We kept the originals, in case you wanted them,
25 and sent them over.
Page 9
1 MR. DUNBAR: And where are those files located?
2 THE WITNESS: They're located at my -- either at my
3 -- in Studio City with -- I think you met Phyllis Rogers.
4 And then, some of these are in my file cabinets in my office
5 in Santa Barbara.
6 MR. BOLTZ: Jean Janu?
7 THE WITNESS: And others were in Santa Fe, New
8 Mexico with Jean Janu, who I think you also met with.
9 MR. DUNBAR: And other than the Santa Fe address,
10 the Studio City address, or the office address did you search
11 anywhere else for documents called for by the subpoena?
12 THE WITNESS: No.
13 MR. MORGAN: Do you keep any documents at your home
14 in Santa Barbara?
15 THE WITNESS: Don't keep documents in my home.
16 MR. MORGAN: So the Santa Barbara address is an
17 office address?
18 THE WITNESS: Yes.
19 MR. MORGAN: Formerly a home address?
20 THE WITNESS: Formerly a home -- yeah, I guess you
21 know about that. Right, it's in my garage there.
22 MR. DUNBAR: Have you withheld any documents called
23 for by the subpoena based on a claim of privilege?
24 THE WITNESS: No.
25 MR. DUNBAR: Were any documents called for by the
Page 10
1 subpoena not produced for any reason other than privilege?
2 THE WITNESS: No.
3 MR. DUNBAR: Do you know of any documents
4 responsive to the subpoena, but not provided, that were in
5 your possession at a prior time or that were lost, destroyed
6 or otherwise disposed of?
7 THE WITNESS: In the files that you have on the
8 quarterly statements you will find occasionally a printout --
9 you may have seen this -- listing in sort of raw form the
10 activity. This was because we either failed to file the
11 documents properly or they were misplaced or lost, and so
12 that's what that is, and that would answer your question, I
13 think.
14 MR. DUNBAR: How did you produce one of those
15 printouts?
16 THE WITNESS: From -- it's -- we have a software
17 program that we enter the raw information. And that's the
18 same program that produced the documents. They aren't done
19 on a typewriter.
20 MR. DUNBAR: So the information first gets entered
21 into this raw program, and then that program makes them into
22 a statement?
23 THE WITNESS: Yes.
24 MR. DUNBAR: What is the name of that program?
25 THE WITNESS: I think it's called RB Files. It's a
Page 11
1 data base management program.
2 MR. DUNBAR: At that raw information stage, when
3 information is entered into the program, who usually does the
4 entering of the information?
5 THE WITNESS: Jean Janu does that.
6 MR. DUNBAR: Does anybody else?
7 THE WITNESS: She's the -- it's her job. I don't
8 -- there have been -- she's had some help at the office from
9 time to time. I don't know, I don't know the answer.
10 MR. DUNBAR: When you say office, whose office?
11 THE WITNESS: Well, at her location in Santa Fe.
12 Her daughter may have -- I don't know if someone else may
13 have done so. I actually don't know the answer definitely.
14 MR. DUNBAR: Have you ever entered the information?
15 THE WITNESS: Uh-uh.
16 MR. MORGAN: Is that a no?
17 THE WITNESS: I'm sorry. I'm just trying to make
18 this a conversation and I realize it's not. No.
19 EXAMINATION
20 BY MR. DUNBAR:
21 Q Have you ever been known by any other names?
22 A Me personally?
23 Q Yes.
24 A No.
25 Q Could you state for the record your date and place
Page 12
1 of birth?
2 A I was born on January 22nd, 1949 in Detroit,
3 Michigan. I know, tomorrow is my birthday.
4 Q What is your Social Security number?
5 A [Redacted]
6 Q And can you please state your addresses for the
7 last five years?
8 A Yes. Where I live?
9 Q Where you live, your residence?
10 A 4480 Via Esperanza, just like it sounds; it's Santa
11 Barbara, zip code 93111.
12 Q Are there any other occupants at that residence?
13 A My wife and my two sons.
14 Q And what is your wife's name?
15 A Mary Jo, M-a-r-y J-o.
16 Q And what are your sons' names?
17 A Justin, J-u-s-t-i-n, and Brett, B-r-e-t-t.
18 Q And what are their ages?
19 A Justin is 20 and my younger son is 16.
20 Q Do you have any other residences?
21 A I have another residence in Santa Ynez, California
22 which is a vacation home.
23 Q And what's the address for that?
24 A I don't think I could tell you the number. It's on
25 Riley Road in Solvang, California. I certainly can come
Page 13
1 with that address for you at some point if you need it. I
2 might have it in my little address book. Do you want me to
3 look it up?
4 MR. MORGAN: We can get it later if we need it.
5 That's good enough for now.
6 BY MR. DUNBAR:
7 Q So other than the Santa Barbara and the Solvang
8 address, do you have any other residences?
9 A Clarification. Title in my name?
10 Q Yes.
11 A I think title in my name, I think that's it, I
12 think. I mean, I have -- there was a piece of property next
13 door to me in Santa Barbara, next to my -- it's called 4484
14 Via Esperanza, which it's now a part of 4484 Via Esperanza.
15 I mean, technically speaking, it's two properties, I suppose,
16 but we just combined them. I don't live there. It's just a
17 plot next door.
18 Q And the title is in your name?
19 A I think, yeah, it's in my name.
20 Q Who lives there?
21 A Nobody. It's like if your neighbor was going to --
22 a house got up for sale, and the way the lot is situated that
23 the 4480 is on what they call a flag lot. Do you
24 know what that means, where the driveway comes down in front
25 of another lot? And you're allowed to have horses in this
Page 14
1 neighborhood, and we were afraid that if the person in
2 front sold his house, and somebody else moved in and put
3 horses there, they'd be 15 feet from our front door. So we
4 bought the property when it came on the market. I suppose
5 that's an idea. No one lives there. There's a house on it,
6 but it's just empty.
7 BY MR. MORGAN:
8 Q It seemed like you were implying that you may have
9 had a beneficial interest in some other property in which
10 it's not in your name. Is there a property that fits that
11 description?
12 A Yeah. I have a -- and I'm sure that we'll go into
13 this later, but if you want me to talk about it now I'm happy
14 to. I have a business partner in Oregon, and he and I
15 purchased a home up there that we use as a sort of a family
16 retreat. It's got, you know, fishing and some TV's in there
17 for the kids and stuff, and I own it in a corporation called
18 Top Ridge, which I own with Mr. Neuman. It's not in my name,
19 but it's in this Top Ridge company.
20 BY MR. DUNBAR:
21 Q Who do you own it with?
22 A Douglas Neuman. Yeah, I'm sure we'll be talking
23 about that more later. I spent 11 days there last year,
24 maybe 10.
25 Q Where in Oregon is this?
Page 15
1 A In Ashland. Mr. Neuman lives in Ashland, Oregon.
2 Q Do you have any other addresses where you have
3 beneficial ownership?
4 A I was told that hesitation is okay, to be thinking
5 things over?
6 Q Hesitation is fine, if that helps.
7 A I'm not holding back on you. I'm just trying to
8 think it over so I can be accurate.
9 BY MR. MORGAN:
10 Q While you're thinking, what's the address on the
11 actual property? Does it have an address or a name?
12 A I'm going to give it a shot. I think it's 961
13 Emigrant Creek Road, but it could be 951. I'm going to have
14 to check that for you. That's the best of my knowledge of my
15 residences that I have. Oh, and, of course, I have my
16 office, I'm sorry.
17 Q We were talking about residence, so we'll get --
18 A Okay, yeah, I don't live in my office, although I
19 have spent the night there occasionally.
20 MR. MURPHY: Mr. Slatkin, because you're testifying
21 under oath, if at any time you're not sure you're welcome to
22 take a break, consult with counsel; take your time answering
23 the questions. It is a formal proceeding, so we don't want
24 to, you know, rush you in any way or -- so just take your
25 time. You're welcome at any time to -- you know, we'll go
Page 16
1 off the record, you can go ahead and consult with your
2 counsel.
3 THE WITNESS: Thank you. I just am a little
4 nervous and I don't want to --
5 MR. MURPHY: If you're not sure of an answer you
6 can just tell us, yeah.
7 THE WITNESS: Okay, I will.
8 BY MR. DUNBAR:
9 Q So other than what you've already told us, are
10 there any other addresses, residences?
11 A No.
12 Q Do you have any foreign residences?
13 A No.
14 Q Do you happen to know the phone numbers to those
15 residences?
16 A I think I can give them to you. The 4480 phone
17 number is area code (805) 683-2311. There's a modem line
18 there and don't know that one. The Riley Road phone number
19 is (805) 688-5531. The one in Oregon I cannot produce. I'm
20 going to guess -- if you'll let me look it up I could do
21 that. I mean, I have my little address book with me if you
22 want me to give it to you. I don't have it off the top of my
23 head. It's area code (541) and it ends in 1280, but I don't
24 know the first three digits.
25 Q We could get that later. Do you have any cellular
Page 17
1 phones?
2 A I have a cellular phone.
3 Q And what's the number on that?
4 A It's (805) 689-6100.
5 Q Do you have any other cellular phone numbers?
6 A My wife has a cellular phone. Do you want that
7 one?
8 Q Sure.
9 A Okay, (805) 570-4942.
10 Q And other than those two, do you have any other
11 phone numbers?
12 A My son has a cellular phone. Both my sons have
13 cellular phones.
14 Q Do you know their numbers?
15 A I do. I have to. My younger son's is 570-4941 and
16 my other son is (818) 517-7881.
17 Q Other than those phone numbers are there any other
18 cellular phone numbers?
19 A No. I mean, we've canceled some-- you know, they
20 steal your phone number. That's the best I could tell you
21 right now.
22 Q Do you have any cellular phone numbers that are
23 used for work or other purposes?
24 A The 689-6100 number. Am I missing something here?
25 MR. BOLTZ: No.
Page 18
1 MR. DUNBAR:
2 Q Well, let me ask, do you have any cell phone
3 numbers, other than your children and wife, which are in
4 your name but other people use?
5 A Oh, that other people use. Oh, I'm sorry, I didn't
6 understand the question. No, no -- use for other people, no.
7 Q And you personally don't have any more cellular
8 phone numbers?
9 A No.
10 Q Do you have any fax numbers?
11 A I do, two fax numbers. I have one at my office,
12 which is (805) 967-3844. And my house is (805) 683-0858.
13 Q And when you say office you're referring to which
14 address?
15 A 890 North Kellogg.
16 Q When did you purchase that property?
17 A Which property?
18 Q 890 North Kellogg.
19 A I believe it was -- I don't know the exact date; I
20 know the month and year. September, 1984.
21 Q And when did you move to your Via Esperanza
22 location?
23 A July, 1993.
24 Q Why did you move?
25 A Well, one of us was going to go, the office or my
Page 19
1 wife. That was the ball game. I mean, the house was ge[tting?]
2 too small for our large children and we also had the offic[e] [?]
3 in the office. And my wife said, it's good for us to mov[e]
4 and get a bigger place. Simple answer, that's it.
5 Q Were there any other reasons you moved?
6 A No.
7 Q Do you have any professional licenses?
8 A Like? Can you clarify what you mean by that?
9 Q Any sort of --
10 MR. MORGAN: Real estate license, attorney, C[PA,?]
11 dentist?
12 THE WITNESS: No. I am -- I guess I'm an ord[ained]
13 minister in the Church of Scientology. That's one
14 certification I have. And I have several other Scientolog[y]
15 certifications, which I can go into details if you like.
16 BY MR. DUNBAR:
17 Q How many other titles do you have?
18 A I have six or seven -- I have to list them for you
19 -- of Scientology certifications for -- as a trained
20 counselor in Scientology. They are called auditor
21 classification certificates.
22 Q Other than the Scientology licenses, do you ha[ve]
23 any other licenses?
24 A Driver's license, that's it.
25 Q In the past ten years have you had any other
Page 20
1 licenses?
2 A No.
3 Q Have you ever had any other licenses?
4 A No.
5 Q Can you please describe for the record your
6 education after high school?
7 A Okay. I'm going to explain what I would call my
8 secular education first, and then I will explain to you m[y]
9 Scientology and religious education second.
10 Q Okay.
11 A I went to the University of Michigan. I graduate[d]
12 in 1971, spent four years there. I have a degree, a liber[al]
13 arts degree. I studied -- my degree is in Chinese langua[ge?]
14 and literature. Do you want to know all the different
15 courses I took?
16 MR. MORGAN: No, that's fine.
17 THE WITNESS: And I went to the University [of]
18 California at Berkeley in 19 -- excuse me, I missed one[. I?]
19 spent a semester in 1971 at Stanford in the Asian langu[age?]
20 department there. And then I did graduate work in Chi[nese]
21 and Japanese language and literature at the University [of]
22 California at Berkeley, which I ended in the spring of 19[?].
23 And that's my secular education. And in order to disc[uss?]
24 Scientology education I have to start a little earlier than [?]
25 after high school to make it clear, if that's okay with y[ou.]
Page 21
1 MR. DUNBAR: That's fine.
2 THE WITNESS: When I was 14 years old my father
3 died, and our family was in a pretty bad state at the time.
4 And I had an uncle who was living in England and came to
5 visit us, and he was a student of L. Ron Hubbard. I don't
6 know if you guys have heard much about Scientology. I know
7 it's a word that will live in infamy in the press, and I'm
8 sure you've seen some things about it that are perhaps less
9 than positive. But let me assure you that if I had a moment
10 to talk to you about that you would get another viewpoint.
11 I'm not here to do that, but I just wanted to let you know
12 that I'm aware that it's a controversial subject, and I'm
13 going to be talking a lot about my experience with it today.
14 And it's important to me, and it's been the basis
15 of almost everything I've done in life. And so it's an area
16 of reverence for myself. So I don't want to offend you if I
17 begin talking about something that you may have heard bad
18 things about, or if you have any questions for me while I'm
19 talking I don't have any problem clarifying my points. But
20 it's an important thing to me, so I want you to know that I
21 understand that it's something that you may have heard
22 negative press reports or public relations about. So I'm
23 going to go on, anyway, even though I'm not trying to offend
24 you or make you feel that what I'm saying is an attempt to
25 overcome any of that. I'm just tell you about me; that's
Page 22
1 what you want to know.
2 So anyway, we were -- at that time my uncle helped
3 us through our grief of the loss of my dad, and the way he
4 did that was through the ministering of Scientology spiritual
5 counseling to us. And it offered us a great solace and got
6 us through that period. And based on the relief that I felt
7 from that I was curious about what that subject was. And my
8 mother started to -- she began to go to the local Scientology
9 church there in Detroit and began taking some courses there
10 and going to their services.
11 About six months later, when I was in the eighth
12 grade and I was in the wood shop, and I almost severed my
13 fourth finger here in a saw, you know, the wood shop there.
14 And I had a cast on it for six or eight weeks, then I went
15 off and had physical therapy and was told that I would never
16 use my finger again; it would just be stiff like this.
17 And my uncle came to town and administered some
18 more of these Scientology processes to help alleviate pain
19 and suffering that comes from experiences or incidents that
20 one goes through like this. And almost miraculously, within
21 a couple of days I had full use of my hands again. And it
22 was a big moment for me. And at that point I said, well, I
23 don't know how this works but it works for me, so I decided
24 that I was going to find out about this.
25 And so I began also to go to the church in Michigan
Page 23
1 and started taking courses in the basic tenets of
2 Scientology. Now, these tenets are rather far-reaching in
3 their meaning. The basic principle is that when you look at
4 a person or at a human being he's not just his body. He has
5 his body, and then there's his mind, which is sort of the
6 the machine that he uses to analyze information and make
7 correlations and recognize things. And then there's the
8 spirit, or what Scientology refers to as a thetan -- that's
9 spelled t-h-e-t-a-n. It refers to the part of the person
10 that is not physical.
11 And this person has certain abilities, certain
12 faculties of perception and intelligence, and in his pure
13 state is able to have a great sense of not only ability but
14 aesthetic interests and intelligence. And through its
15 association with the mind and the body it gets degraded to a
16 point where it makes poor judgments, has aches and pains, has
17 problems, has secrets, and becomes the result of all sorts
18 and manners of what we would call negative experiences. And
19 those experiences get stored in a part of the mind called the
20 reactive mind.
21 I won't make this too long. I just want you to get
22 this, because everything I'm about to tell you after this has
23 to do with this, if that makes sense to you.
24 The reactive mind is the mind which doesn't think,
25 it doesn't analyze. Often when you see hypnosis you see an
Page 24
1 example of this. Say that I were to hypnotize you and while
2 you were being hypnotized I said to you, Mr. Morgan, I'm
3 going to wake you up and if I say the word "chicken" you're
4 going to take off your tie. So take it off. Wake you up,
5 and chatting along, and I said, would you like to get some
6 chicken, and you take off your tie. You've seen this. And
7 if I were to ask you why you took off your tie he would say
8 -- he would not say it's because you told me if you use the
9 the word "chicken" I'd take off my tie -- he'd say, well, it's
10 hot in here, or too tight, or something like that.
11 Well, this sort of analogy, although it's trivial,
12 has a great deal to do with the whole basic, underlying
13 principle of Scientology. And that is, when a negative
14 experience happens to somebody, where they're under stress or
15 under pain or heavy emotions, because it's difficult for the
16 average person to confront or look at all this, he tends to
17 store it over here in this thing called the reactive mind.
18 And over a lifetime -- and we'll get into what I call
19 lifetimes momentarily -- these experiences can reactivate on
20 a person. So for example, if you fell out of a car when you
21 were a young child and bumped your head and had a headache
22 from it and got injured, and 20 years later you're driving
23 the car in a similar area of the circumstances -- the
24 environment or the time of day -- you might suddenly have a
25 headache, in the same way that the tie was taken off on the
Page 25
1 word "chicken." There's a stimulus response mechanism of the
2 mind; it's called the reactive mind.
3 And it made a lot of sense to me because the
4 techniques that my uncle had used when he was helping us
5 through our loss of my dad, and also when I had this
6 experience with my finger, had to do with going back and
7 looking over the experience carefully and thoroughly and in a
8 way bringing it to light and looking at it and confronting
9 it, and going through it over and over again until it became
10 -- it moved away from being something that you didn't want to look
11 at to something you could look at and you could analyze and
12 make sense out of. And that technique, in various forms, in
13 various levels, constitutes the body of the spiritual
14 counseling that is done in the Church of Scientology.
15 The word "dianetics," which you've also heard, I'm
16 sure, pertains particularly to the technique of looking for
17 physical aches and pains that a person might have, and going
18 back in time and finding potential incidents or experiences
19 in the past that may have caused the current situation to
20 happen. The literature speaks of tremendous amounts of
21 success stories of people who say that they no longer have
22 arthritis from doing this. Their headaches are gone. They
23 get along with their husbands and wives. I mean, it's a very
24 exciting area of change.
25 So Mr. Hubbard, who is a person that I really
Page 26
1 admire and venerate, wrote a body of material which is
2 thousands and thousands of pages, and books and recorded
3 tapes and lectures, in which he goes into his research into
4 the nature of the human mind and the human spirit. And this
5 body of information has been collated and organized into two
6 types of activities. One of these activities is the
7 spiritual counseling path, which is called the bridge in
8 Scientology. And that path has many steps that a person
9 follows, in which Hubbard divided up these techniques to deal
10 with certain aspects of a person's life and his experiences,
11 and his -- which takes him to various levels of awareness and
12 levels of ability.
13 And those spiritual counseling activities are
14 administered at churches of Scientology all over the world
15 and by independent -- I shouldn't say independent, by --
16 they're called field auditor. An auditor is someone who
17 listens, the counselor. He can work from his home or as an
18 independent person and administer those techniques. And then
19 a person goes on to one of the Scientology churches to do
20 various levels. And these levels are extensive and there is
21 several dozen of them.
22 The other activity that this work was divided into
23 was a training process to explain and to train individuals in
24 how to administer those counseling techniques; and how to ask
25 the right questions to get the answers, to develop a person
Page 27
[MISSING]
Page 28
[MISSING]
Page 29
1 A person who is perhaps enthusiastic or happy or even bored,
2 invigorated about life, would be someone who had a high tone.
3 And many of the reference points of a person's life when
4 they're receiving the spiritual counseling is the change in
5 their overall emotional tone from before they took these
6 courses and received this counseling till afterwards.
7 So when I was involved initially in a lot of grief
8 about my fathers death, that was a low tone. After I
9 received some of this counseling, I felt I could accept it
10 and I felt fine about it. That was the higher tone. I'm
11 just giving you some reference points. This is -- you know,
12 I think it's relevant.
13 So from '64 to I went to college, I studied at the
14 church in Michigan. And at that time Mr. Hubbard was
15 teaching his courses in a college -- he called it the Hubbard
16 Scientology College -- in East Grinstead, Sussex, England.
17 In the summer of 1966 I got on an airplane, and I was 17
18 years old, and I flew to England and I studied at Mr.
19 Hubbard's for my summer vacation, in 1966, for I believe it
20 was three months over there, in which I received mostly
21 spiritual counseling, and on some advanced levels that were
22 not available in the United States at that time. The name of
23 the location and the name of the college was called St. Hill.
24 That's the name of the location there. And that's where Mr.
25 Hubbard's residence was and that's where he taught his
Page 30
1 courses.
2 I came back and finished my last year of high
3 school. And then, in the summer of 1967, before I attended
3 the University of Michigan, I went back over to England again
4 and spent four months studying there at St. Hill, taking
5 further courses and receiving more spiritual counseling. At
6 that time, I was also at that point trained on the side of
8 the training enough to be able to audit other people. And in
9 the evenings, when I was going to high school, I would drive
10 downtown from where I lived to the church that was in
11 Detroit, and I would minister counseling to other people on
12 my evenings and weekends.
13 That was my, if you will, job -- although I didn't
14 get paid at all. I was volunteering to help others. I also
15 supervised -- once I had took a course and understood the
16 material I was allowed to supervise that course and I had a
17 role as a supervisor on some of those courses. I could list
18 them all out to you, but I'm trying to keep this as short as
19 possible.
20 In 1967 I attended the University of Michigan. At
21 that time, myself and two of my friends went to the
22 administration of the university and we applied for and
23 received a -- I don't know what you call it, but a
24 certificate that allowed us to start a Scientology student
25 club on the campus of the University of Michigan, which we
Page 31
1 had there for the four years that I was there, which I was in
2 charge of, and which we used for -- I'll use the word
3 "proselytize," if you like, but getting Scientology
4 information known to other people. Again, this was my
5 activity that I did while I was going to college. And on the
6 evenings and weekends I would drive down from Ann Arbor,
7 which is where the college was, down to Detroit to where the
8 church was there, and do my work as an auditor and also as a
9 student, depending on what I was doing at the time.
10 In the summer of 1968 I went to Mr. Hubbard. I had
11 established a group of volunteers to help him grow his
12 organization. This group was called the "sea" organization,
13 s-e-a, and he went and purchased a large boat and had his
14 officers on that boat, and gave training courses on this boat.
15 And I went onto that boat myself and spent most of the summer
16 of '68, at that time, receiving courses and training at that
17 time.
18 When I came back -- I'm sorry, I came back from
19 that. That was while I was going to the University of
20 Michigan. I continued my activities there. In 1968 I came
21 off the boat and I went to Edinburgh, Scotland, where there
22 was a Hubbard College in Scotland at the time. And in July,
23 1968 I was living there with several of my post-students
24 studying Scientology, and the British government decided that
25 they didn't want Scientologists in England anymore.
Page 32
1 This was one of these -- as I explained earlier,
2 one of these controversial times that you may have read
3 about. Scientology has been called a cult and, in essence,
4 certain people don't like it. But anyway, at the time the
5 minister of health at the British government was -- got a
6 ruling passed by their government that any foreign person who
7 was studying Scientology could no longer do so in the British
8 Isles. And so I was summarily thrown out of the country.
9 They took my passport and took me to the airport, put me on a
10 plane and sent me home, along with another 130 other people
11 that were studying there with me.
12 Our intention at that time was -- they shut down
13 our school. We were unable to receive the training that we
14 wanted to receive, that we were getting in England at the
15 time. And so, we made a decision that the 130 of us would
16 fly to Los Angeles and, with the church's assistance, a piece
17 of property was rented on Temple Avenue here in downtown Los
18 Angeles -- Temple near Rampart -- and the American St. Hill
19 College was started, which I was one of the people who helped
20 start that in the summer of 1968.
21 It was interesting. We felt like we were pioneers.
22 Certainly we felt like we had been in great danger. We had
23 been vilified in the press in England. There were marches in
24 the streets -- Scientologists go home. You could see this in
25 the German press today; it's still going on. But we were a
Page 33
1 dedicated group of young people, and we were really excited
2 about this. And so, we started the college in Los Angeles.
3 And my mother and I had agreed that I would come
4 and finish my education at the University of Michigan.
5 So in the summertime, in '69 and '79, I spent at the Hubbard
6 College in -- the American St. Hill organization in Los
7 Angeles. And in the winter time, when I was going to the
8 University of Michigan, I was spending my weekends and
9 evenings in the church in Detroit where I was doing the same
10 thing.
11 In 1971, I had enjoyed my studies of Oriental
12 languages and I wanted to pursue that. At the same time, I
13 decided to go to the University of California at Berkeley,
14 because there was a very good church of Scientology in San
15 Francisco and in Berkeley, California as well. And so, I
16 went to the graduate program there and worked in what they
17 called a mission, the Church of Scientology mission at
18 Berkeley, in the evenings and weekends there; where I
19 supervised courses and on the weekends would administer
20 Scientology counseling to people interested in Scientology.
21 So this is my continuing education.
22 I met my wife shortly thereafter, who was herself a
23 Scientologist. I should point out at this point that I have
24 never been paid one nickel or one dime for any of the service
25 that I've given to the Church of Scientology during this
Page 34
1 entire period. My wife was a volunteer working in the church
2 in Los Angeles. And when I was down in 19 -- met her in the
3 summer, and she came back with me up to Berkeley for a year;
4 in which we both worked at the center there. And then I
5 decided that -- I left graduate -- I went over to Taiwan for
6 my last year of graduate studies in Chinese. And while I was
7 over there I decided that I was really wasting my --
8 personally, for me, because I didn't want to do this anymore.
9 I really wanted to do nothing but Scientology full time. And
10 since my mother -- I was old enough to make my own decision
11 at this point, I decided I was going to do that.
12 So at that point my wife and I -- or my girlfriend
13 at that time, not quite my wife yet -- we moved down to Los
14 Angeles, got an apartment, and went on to a full time
15 training schedule to be trained. And those several
16 certificates I mentioned to you before that, aside from being
17 an ordained minister, the[r/s?]e were various upper level courses
18 now being offered in these various levels of counseling that
19 were offered in Los Angeles. And these courses consisted of
20 a course schedule that went from 9:00 o'clock in the morning
21 till 10:00 o'clock at night, seven days a week. They also
22 consisted of going through course materials, which included
23 lectures, and practicing the various techniques, learning how
24 to use the artifacts of the church and the various methods
25 that were employed there.
Page 35
1 And after studying a course for sometimes months [,?]
2 sometimes years, there were very strict -- I remember the[m?]
3 very well -- internships where you were heavily supervis[ed] [,?]
4 where you were administering these techniques to other
5 people. And they were administered by the course super[visors?]
6 and case supervisors, and we were interns on those cours[es.?]
7 So you would do the course and then you'd do the intern[ship]
8 and then you do another course and another internship. [And?]
9 these were -- these internships, characterized by a level o[f]
10 perfection, a level of -- in order to get the result of each
11 one of these levels that we talk about, you have to do the[m]
12 exactly right. So there was a tremendous amount of
13 supervision. Often the sessions were tape recorded to ch[eck?]
14 your technique, to make sure you were doing the right th[ing.]
15 This was very grueling and I did this and graduated from [the?]
16 highest courses available at that particular institution in
17 197 -- end of 1975. And my wife was still -- we weren'[t]
18 quite married yet, but getting there -- and my wife was s[till?]
19 a student there at that time. I decided at that point that I
20 was going to dedicate myself to being -- to helping other
21 people in Scientology.
22 MR. BOLTZ: Excuse me, when were you ordain[ed?]
23 THE WITNESS: I was ordained in 1975. Befor[e that?]
24 time the ordination procedure was not required. At that
25 point the church had gone through various -- shall we sa[y]
Page 36
1 activities, exercises? -- with the United States government
2 in various forms. You've read about this, the IRS, the Food
3 and Drug Administration, F.B.I. You know, you've read abou[t]
4 this. But anyway, the current thing was we were all ordained
5 in 1975.
6 And I went out on my own and began to disseminate,
7 to proselytize Scientology, to friends, family members of
8 people that I knew. Because I was, at that point, a very
9 highly trained counselor. And I, as it were, hung out my own
10 shingle, working under the auspices of the Church of
11 Scientology of Los Angeles. The Church of Scientology is in
12 something called Celebrity Center, which you've seen the
13 building over there on, I guess it's Franklin and Bronson,
14 that building there. And in those days, that building, the
15 offices of the -- Celebrity Center were located on Highland
16 and -- or La Brea and Sunset.
17 And so I took it upon myself to spend my days and
18 nights counseling others and teaching others Scientology.
19 And then weekends I would volunteer at the Celebrity Center
20 or at the American St. Hill organization. During this period
21 my wife finished her courses and she joined me in doing this.
22 We used our home as the place where we had an extra bedro[om]
23 and a room where we did our auditing and training of other
24 people. At one point we actually rented a little house and
25 had another auditor join us, and so we were able to do this.
Page 37
1 I did this activity full time. I think that to
2 call it a full e job is an understatement -- day and
3 night, seven days a week. We were very -- I guess to go back
4 now a little bit, just to explain a little bit more about
5 Scientology, is that the aims of the church -- I'm not going
6 to bore you with this too much. I just want to show you one
7 thing.
8 This is a book called What is Scientology Doing in
9 the World. There's much bigger books that I could have brought,
10 but I didn't bring them. But just to quote this from Mr.
11 Hubbard: "The aims of Scientology are civilization without
12 insanity, without criminals and without war, where the able
13 can prosper and honest beings can have rights, and where man
14 is free to rise to greater heights" are the aims of
15 Scientology. It goes on to say more things here, and I
16 believe in that very strongly.
17 I've dedicated my life to those aims, and I feel
18 that the world, you know, is not a pretty place. There's a
19 lot of trouble, a lot of bad things going on -- and I use the
20 word "bad" in a generic sense -- and have been part of this
21 movement, which has, you know -- I've seen tremendous changes
22 happen in the areas where Scientology has been put to work.
23 Some of the areas that my wife and I have been very
24 heavily involved in is a group called ABLE, which stands for
25 Association for Better Living Through Education, which has
Page 38
1 programs of using some of Hubbard's educational techniques in
2 the school systems. You may have read about it, down in
3 Compton here in Los Angeles. We've got this program in
4 several Compton schools, where we're taking young black
5 children who can't read, even to the 12th grade, and we've
6 taken them back to the beginning in teaching them how to read
7 and teaching them how to be educated.
8 Another one of the groups that we are very closely
9 allied with is the Citizens Commission on Human Rights, CCHR.
10 This group is a group dedicated to the abolition of
11 psychiatry and psychiatric abuses, including electroshock and
12 psychosurgery of any kind, under the idea that man can
13 improve and become better through his own journey of
14 exploration of his self, and not have to have his frontal
15 lobes cut out or icepicks put in his eyes.
16 These are groups that if you -- you have my bank
17 statements. You look through my bank statements and you'll
18 see where I've written checks and donated money to these
19 various groups -- the Church of Scientology, CCHR, the ABLE
20 group. There's also a group called the International
21 Association of Scientologists. The IAS was formed in
22 conjunction with some of the difficulties that the church was
23 having in countries around the world, where the church was
24 being either persecuted, or Scientologists were being
25 persecuted and weren't allowed to practice their religion.
Page 39
1 Its stated goal is to provide funds in a safe haven for
2 Scientologists who may not be able to practice their religion
3 in a certain country until such time that it's possible to do
4 that. I feel very strongly about that.
5 During that period, from 1974 until 1984, we'll just
6 call it, my wife and I, basically, did this volunteer work
7 full time. This was -- we did receive honoraria from people
8 from time to time; you can check my tax returns. I don't
9 think there was a year in which the two of us earned together
10 more than $40,000 or $45,000 during the whole time we did
11 this. And every time a new course would come out or an
12 upgrade or some kind of a retraining program would come out,
13 to keep our certificates that I told you before, to keep them
14 in force, the church was always rechecking to make sure that
15 we were delivering our training and techniques properly.
16 In 1984 -- 1983, actually, November, my second son
17 was born. And my wife and I were looking at each other and
18 we said, well, we've been volunteering this stuff here for,
19 you know, 20 years between us and it might be a good idea to
20 see if, while we're doing all this volunteer work, that we
21 have enough money to raise our family. And at that time I
22 was associated with a gentleman whose family I was -- and
23 friends I was administering counseling to. His name was
24 Robert Duggan, if you're going to want to have the name.
25 Robert Duggan --
Page 40
1 MR. MORGAN: How do you spell that?
2 THE WITNESS: D-u-g-g-a-n. Robert is -- I think
3 you know that. Mr. Duggan is a Scientologist, also a big
4 contributor to the church at that time. And I have helped
5 his family -- my wife and I had helped his family with some
6 of the problems they were having and helping them with
7 Scientology techniques.
8 Is it warm in here or is it just that I'm talking
9 too much?
10 MR. MORGAN: No, it is warm. Let's go off the
11 record.
12 (A brief recess was taken.)
13 MR. DUNBAR: Back on the record at 11:22. You can
14 continue.
15 THE WITNESS: Thank you. So I spoke about Mr.
16 Duggan. We're talking about my education; I'm still
17 answering that question.
18 MR. DUNBAR: Yes.
19 THE WITNESS: And Mr. Duggan, I told him what my
20 concerns were, and I said that I had these two young
21 children, and that I knew that he had been a successful
22 professional investor, primarily in the stock market. He had
23 studied with a professor at the University of California at
24 Santa Barbara and learned what he called Graham and Dodd,
25 which you gentlemen may know. It's the Bible of fundamental
Page 41
1 analysis, of stock market analysis. And he said that -- he
2 had offered to teach me about how to invest money. And I
3 took him up on it.
4 And so, for part of the time, during the next
5 couple of years that I was doing my audit Scientology
6 training and auditing, I spent some time with him, learning
7 this what I'll call fundamental analysis. Primarily we did -
8 - he taught me a lot about how to read financial statements
9 how to do comparative analysis of companies in the same
10 industry. He taught me how to interview company CEO's and
11 CFO's. He taught me how to lay out an earnings analysis pro
12 forma. He taught me how to buy and sell securities with a
13 stockbroker. He advised me on asset allocation. He advised
14 me on the pitfalls of reading newsletters and taking tips.
15 And anyway, it was somewhat of an apprenticeship, I would
16 call it, and it was paralleling my work as a volunteer in
17 Scientology during this time. And that went on for -- until
18 1986.
19 During that time until today I've been continuing
20 to study Scientology, where I often fly down to Clearwater,
21 Florida, where the large Scientology base is, that you've
22 heard about that, and that's where I do my courses now. And
23 I go there about six or eight times a year, for a week or two at a
24 time, and that's my education. That's the end of the
25 question.
Page 42
1 I wanted to say just one more thing about that,
2 just before I end. The education, basic education concept,
3 is helping other people and dedicating yourself to making
4 Scientology known, and helping other people to achieve their
5 goals through Scientology. Okay?
6 BY MR. DUNBAR:
7 Q Do you still speak with Mr. Duggan?
8 A Yes.
9 Q And is your wife an ordained minister?
10 A Yes.
11 Q When did she become ordained?
12 A It was in that -- I can't give you an exact date,
13 but it was in that same '75 -- 1975-76 time frame.
14 Q And with regards to your grad school work at
15 Berkeley, did you receive a degree there?
16 A I didn't.
17 Q How many years did you go there?
18 A I started there in -- actually, I don't know, I'm
19 going to count for you. I started there in the fall of 1971
20 and I finished there in -- I probably had my last class in
21 the latter part of '74, I would say; so, three years.
22 Q And other than your work with Mr. Duggan -- did I
23 pronounce that correct? -- have you had any other training in
24 the stock market or in investing?
25 A Can I clarify the question?
Page 43
1 Q Yes.
2 A Do you mean formal training?
3 Q Yes.
4 A No.
5 Q What about informal training?
6 A Well, 15 years of experience, I guess that's
7 informal training. Does that count? Is that what you m[ean]?
8 I've read a lot about it. I've been a student of it. I've
9 studied technical analysis very, very extensively -- work[ed?] [?]
10 Richard Arms and others on technical analysis, Mr. Will[iams?]
11 Mr. Larry Williams, Richard Ney. I can give you a who[le] [?]
12 of people whose works have been very influential in wh[at I?]
13 do. And I consider that to be a continuing education.
14 Q How would you describe your current employ[ment?]
15 A I'm a self-employed professional investor.
16 Q And how do you define that?
17 A Self-employed means that I don't get paid by
18 anybody else. In other words, I don't have a -- I work f[or]
19 myself. Professional investor, I invest in real estate, I
20 invest in public and private companies. I think that defi[nes]
21 it pretty well.
22 Q Other than a self-employed professional inves[tor,]
23 have you had any other occupations in the last ten y[ears?]
24 A No.
25 Q Before you became a self-employed professio[nal]
Page 44
1 investor, what was your occupation before that?
2 A I was a practicing minister of the Church of
3 Scientology -- and ongoing. It has not stopped. I am still
4 doing that.
5 Q And you mentioned you were doing that on a full
6 time basis?
7 A I'm doing it on a volunteer basis, part time.
8 Q But at that time?
9 A Oh, at that time it was full time, yeah.
10 Q And how were you compensated for your work the[n?]
11 Or you said, I'm sorry, volunteer full time. How did you [and]
12 your wife survive?
13 A We received some honoraria from some of the people
14 that we were helping at that time. You might call it -- I'm
15 trying to remember the word that the church uses for this,
16 but it's a donation, essentially.
17 MR. MORGAN: It's an exchange, or is that
18 different?
19 THE WITNESS: No, no. It's a donation to our
20 activities.
21 Q Have you ever testified in an investigation by the
22 Commission or its staff?
23 A The Securities and Exchange Commission?
24 Q Yes.
25 A No.
Page 45
1 Q Have you ever testified in an investigation by any
2 other federal agency?
3 A No.
4 Q Any state agency?
5 A No.
6 Q Stock exchange?
7 A No.
8 Q NASD?
9 A No.
10 Q Have you ever been named as a defendant or
11 respondent in any action brought by the Commission?
12 A No.
13 Q Any other federal agency?
14 A No.
15 Q Any state agency?
16 A No.
17 Q Stock exchange?
18 A No.
19 Q NASD?
20 A No.
21 Q Have you ever been indicted, been convicted or
22 pleaded guilty of any violation other than a traffic
23 violation?
24 A No.
25 Q Have you ever filed for bankruptcy?
Page 46
1 A No.
2 Q With regards to your bank accounts, how many
3 accounts do you currently maintain?
4 A Well, I have two at the Union Bank of California
5 that you're aware of -- I put this in the list -- a Wells
6 Fargo Bank. There are two other banks which I also gave you
7 the names of before, whose name have changed so many times
8 now that I can't guarantee you that the name I'm going to
9 give you is the right one. But let's just say there's five,
10 but there might be a couple more in the same bank. So --
11 MR. BOLTZ: So five institutions?
12 THE WITNESS: Five banks. And the other two banks,
13 I'm not -- I don't recall the names of them, but I did write
14 them down for you before. I think you probably have that
15 information. I'm happy to read that off a piece of paper
16 if you want to put it in front of me.
17 BY MR. DUNBAR:
18 Q Pacific Century Bank?
19 A If that's what it's called today that's the one.
20 Q Network Bank?
21 A Yes. That was called Golden Pacific at one time, I
22 think.
23 MR. BOLTZ: That's four.
23 THE WITNESS: That's five with Wells Fargo in
25 there. Oh, four banks, that's right, yeah, sorry.
Page 47
1 MR. BOLTZ: Union, Wells Fargo --
2 THE WITNESS: I put Union down twice, sorry.
3 BY MR. DUNBAR:
4 Q Are all these accounts at these banks in your name?
5 A Yes.
6 Q So other than Union Bank of California, Wells Fargo
7 Bank, Pacific Century Bank and Network Bank do you have any
8 other bank accounts?
9 MR. BOLTZ: In your name.
10 THE WITNESS: I'm just trying to think. That's the
11 best of my recollection.
12 BY MR. DUNBAR:
13 Q Starting with the Union Bank of California, how
14 many accounts do you have there?
15 A I believe it's two.
16 Q Do you know the account numbers?
17 A I might know the last four digits of them. I don't
18 think I know them by heart.
19 Q If we took a break a little later would you be able
20 to get those account numbers?
21 MR. MORGAN: I think we already have those, right?
22 MR. MURPHY: I think you can show him documents
23 later on when you show him the bank --
24 THE WITNESS: I think you have all those
25 statements. I have to identify them as the ones that have my
Page 48
1 name of them, sure.
2 MR. MORGAN: Is there a way you characterize one
3 account from the other, so we can talk about them and make
4 some sense? One is a such-and-such account at Union and the
5 other one is a something else account, so we can refer to
6 them later in the testimony by something that you call them?
7 THE WITNESS: I see. Well, one of them is for me,
8 my -- for my personal business, if you will -- pay my bills,
9 my personal investments. And I think that the other one, I
10 think we've made it clear, is primarily for monies that we
11 have for my friends that I help with their money. Friends
12 account? Something like that, to give you a word, something
13 like that.
14 BY MR. DUNBAR:
15 Q You said primarily. Is there anything else that
16 account is used for?
17 A That's about -- that's what it's used for.
18 Q Going back to your personal account, when was that
19 opened at Union Bank?
20 A I've been advised to give very terse, un-complex
21 answers and I'm trying my best. I became a customer of the
22 Bank of California in 1978, which was eventually bought by
23 the Union Bank of California -- Union Bank about a couple
24 years ago. So I've been a -- that account, or some version
25 of that account, has been at that bank since 1978. That
Page 49
1 particular one, I don't know when the exact changeover was.
2 It was a couple years back. I couldn't give you the exact
3 date. That's public knowledge, I'm sure.
4 Q And why did you open that account?
5 A In 1978?
6 Q Yes.
7 A Why did I open it. I think I got a car loan from
8 them and they wanted me to have an account at their bank to
9 give me a car loan.
10 Q And when you say you used it for your personal
11 account what do you mean by that?
12 A Pay my bills from it, and things to do with my --
13 it's an account that's used for my activities, whatever they
14 might be. Pay my gardener. I mean, you know --
15 Q Anything else you can think of that it's used for?
16 A Well, when I bought my house the down payment was
17 paid from that account. Make an investment in a company that
18 I'm investing in was paid from that account.
19 Q Other than personal business do you use it for
20 anything else?
21 A No.
22 Q The second account, the friends account, when did
23 you establish that account?
24 A I think -- I don't know what it goes back to, to be
25 honest with you. I don't know the exact date, but I would
Page 50
1 say in the late '80's maybe. I would have to -- I'd be hard
2 pressed to give you the exact date.
3 Q Can you recall why you opened it?
4 A To segregate the funds that we received from my
5 friends.
6 Q Why did you decide you needed to segregate the
7 funds, or why did you want to segregate the funds?
8 A Well, I felt it was very important to have very
9 clear records of monies that didn't belong to me.
10 Q And did you have money from friends before this
11 account was created?
12 A I'm actually trying to remember how it was set up.
13 (Witness confers with counsel.)
14 THE WITNESS: Yeah, I'm not sure, I don't recall.
15 It's possible.
16 BY MR. DUNBAR:
17 Q When you opened it did you put funds into the
18 account when you opened it?
19 A Did I put funds into it?
20 Q When you opened the account what funds did you use
21 to open it with?
22 A Money from these friends.
23 Q Did they send you checks or --
24 A Yes.
25 Q And so, you went to the bank and opened up the
Page 51
1 account with the checks they had?
2 A I think so. That's my recollection.
3 Q Is anybody a signatory on that account?
4 A Is any --
5 Q Is anybody else a signatory on the account?
6 A Phyllis Rogers.
7 Q On both accounts?
8 A Yes.
9 Q Other than Phyllis, anybody else?
10 A No. I take that back. It's possible that my wife
11 is a signatory on my account. I'm not sure.
12 Q On the personal account?
13 A Yeah. I'm not positive but it's possible.
14 Q Did you ever speak with anybody about openi[ng]
15 the account for the friends?
16 A I don't understand the question.
17 Q Did you ever mention to someone that you we[re]
18 opening an account to keep the friends' funds separ[ate?]
19 A I told Phyllis, certainly.
20 Q Did you tell anybody else?
21 A Did I tell anybody else? I'm sure I did when I w[as]
22 asked. I mean, I don't know exactly what you're going [?]
23 here, I'm a little confused, but it's not a secret.
24 Q When you told Phyllis what did you tell her?
25 A I said this is an account that we're -- needs to be
Page 52
1 opened to segregate funds.
2 Q Did you tell her anything else at that time?
3 A I don't recall.
4 Q Did she say anything in response?
5 A You've kind of lost me here. I mean --
6 Q I mean, did she say okay and --
7 A Yeah, I don't know. The account was opened.
8 Q Did Phyllis open it?
9 A I'm -- yes, I think she called the bank and asked
10 for the signature cards, and they were sent up, and they
11 opened the account.
12 Q Who opened the personal one?
13 A Like I said, I think it came over from the other --
14 Q The car loan?
15 A Yeah. That started in 1978, maybe '79.
16 Q Since the friends account has been opened what
17 money goes into the account; what money has gone into [the?]
18 account?
19 A Money from these friends.
20 Q From anywhere else?
21 A Shouldn't have.
22 Q Do you know if money has come in from anywhe[re]
23 else?
24 A Well, let me clarify that. I just want to ask
25 Gerry just a very short question.
Page 53
1 (Witness and counsel confer.)
2 THE WITNESS: After a position was sold in stocks
3 that belonged to these people, and from time to time money
4 was moved from wherever those securities were held after the
5 sale to that account, to allow for monies to be sent to those
6 friends if they requested them.
7 MR. BOLTZ: You mean from another financial
8 institution?
9 THE WITNESS: From another financial institution,
10 yes.
11 BY MR. DUNBAR:
12 Q So there would be money coming in from the
13 financial -- from that brokerage house?
14 A Right, right.
15 BY MR. MORGAN:
16 Q I think what we want to nail down is, did any money
17 not belonging to the friends end up in that account from
18 other source -- your personal funds, funds from somewhere
19 else?
20 A No. Not by design. Now, you tell me how many
21 times banks screw up in sending things to the wrong accounts.
22 We had times where we had checks stolen one time, right. And
23 we had to close all the -- we have all new numbers, and money
24 would just come rolling in anyway from various places. So
25 there's technical things would happen like that, but not
Page 54
1 purposely.
2 MR. BOLTZ: It would always be corrected, wouldn't
3 it?
4 THE WITNESS: Yes. That's Phyllis' job, is to make
5 sure those things are very carefully monitored. That was her
6 -- that is her role in this and that's what she does.
7 BY MR. DUNBAR:
8 Q Would you ever transfer money from one Union
9 account to the other?
10 A If money came to the wrong account and was
11 identified as such it was transferred.
12 Q Would there be any other reason it would be
13 transferred?
14 A Just to be direct, the only reason is to ensure
15 that the -- when money was received or sent to my friends it
16 occurred in that account. Anything that was done it was to
17 ensure that result. That was the intention of it.
18 MR. BOLTZ: Well, I'm not sure that answers his
19 question. In other words, aside from transfers that you've
20 described, either from the friends or from financial
21 institutions, for the benefit of those friends, and to
22 correct errors --
23 THE WITNESS: Right.
24 MR. BOLTZ: -- were there any other transfers?
25 THE WITNESS: Not that I know of.
Page 55
1 MR. BOLTZ: Okay.
2 BY MR. DUNBAR:
3 Q Did you ever transfer money from one Union account
4 to the other?
5 A Me, personally?
6 Q Yes.
7 A No.
8 Q Did you ever instruct Phyllis to transfer money
9 from one Union account to the other?
10 MR. BOLTZ: Except for these reasons.
11 THE WITNESS: Except for these --
12 BY MR. DUNBAR:
13 Q Except for these reasons?
14 A No.
15 Q Who makes the deposits to the friends' account?
16 A Who makes the deposits? The friends do.
17 Q Well, when somebody -- let's say somebody sends you
18 a check. Who makes that deposit into the account? Who
19 physically makes the deposit?
20 A It's unusually made from my -- well, if it comes to
21 my office in Santa Barbara, Joanne Rubenstein, who is our
22 administrative assistant, puts the checks on a deposit slip
23 and sends them down to the bank.
24 Q Besides Ms. Rubenstein does anybody else make a
25 deposit?
Page 56
1 A I have probably done it myself on a few occasions
2 when she wasn't in.
3 Q Other than you two, would anybody else make a
4 deposit in that account?
5 A I don't think so.
6 BY MR. MORGAN:
7 Q You said that was the case when checks got sent to
8 the Santa Barbara address?
9 A Right.
10 Q Is there another scenario where the checks could be
11 sent?
12 A Well, people could wire money into that account.
13 Q Might they send checks to Ms. Rogers?
14 A That could happen.
15 Q And that she'd do the deposit?
16 A Yeah, but that was pretty rare, I think.
17 BY MR. DUNBAR:
18 Q Would she do the deposit or would she send the
19 check to you?
20 A If she received -- if she did, and I'm not even
21 going to tell you I know for sure she did, because I think
22 it's highly unlikely -- but if she did she would probably
23 send the money to the bank, yeah.
24 Q. Would Ms. Janu ever get checks?
25 MR. BOLTZ: Mr. who?
Page 57
1 MR. DUNBAR: Ms. Jean Janu?
2 MR. BOLTZ: Oh.
3 THE WITNESS: No.
4 BY MR. DUNBAR:
5 Q Who made the withdrawals on the friends' account?
6 A Who made the withdrawal?
7 Q Who would write the checks and send them out?
8 A Phyllis Rogers.
9 Q Did she do that on her own or did she have
10 instructions from you to send --
11 A She had instructions from the people themselves.
12 Q So say somebody -- walk me through that. If
13 somebody wanted to make a withdrawal what would they do?
14 A It was our requirement that if anybody wanted to
15 withdraw money they would send a written request.
16 Q To who?
17 A It usually came to my office in Santa Barbara. And
18 then I would make a record of it and tell Ms. Rogers to make
19 sure that check went out.
20 Q You said it usually went to your office. Where
21 else would it go?
22 A I wouldn't be surprised if somebody sent a request
23 to Phyllis from time to time. You know, it's probably
24 happened.
25 Q To anybody else besides you or Phyllis?
Page 58
1 A It's possible that even Ms. Janu might have
2 received something like that from somebody, but it all came
3 -- everything that was sent through me. So either if Ms.
4 Rogers or Ms. Janu received any requests it would come
5 through me.
6 Q And you mentioned it was a requirement. How was
7 that -- how did you require that?
8 A I believe we sent a letter to everybody to tell
9 them if they wanted to remove funds they needed to put the
10 request in writing.
11 Q Was this a mass letter or --
12 A I think so.
13 Q Do you recall when it was sent?
14 A Well, I think it was sent a couple times over the
15 years.
16 Q Do you happen to have copies of this letter or --
17 A I could find it for you. I don't have it with me,
18 but I'd be happy to. So I'm sure we could find one.
19 Q Who would send them?
20 A It would come from my office.
21 Q And you also mentioned when somebody asked for a
22 withdrawal you make a record of it or you record it?
23 A Yeah.
24 Q Will you explain that?
25 A Well, I wrote it down on a piece of paper. So I
Page 59
1 call Phyllis the next morning and tell her, here's a check
2 that needs to go out.
3 Q Would you call her, fax her?
4 A I had a log of these, which we would compile and
5 then send down to her. And then, that would be like our --
6 to make sure that we completed the process.
7 Q And where was the log located?
8 A At my office.
9 Q Hard copy or on the computer?
10 A Just a -- it was a piece of accounting paper with
11 the name, the date and amount.
12 Q Where do you keep these logs?
13 A I think they're -- well, they get destroyed usually
14 the next week or within a couple weeks after they're made,
15 because the bank records are there.
16 Q Does Ms. Rogers ever write checks without your
17 authorization on the account?
18 A No.
19 Q With regard to the personal account, who writes the
20 checks -- who withdraws money from that account? Who writes
21 the checks?
22 A Ms. Rogers.
23 Q Do you ever write checks from that account,
24 personally?
25 A I have probably not written a check from that
Page 60
1 account in over ten years, because she won't let me.
2 Q Why won't she let you?
3 A Well, when I had checks and she had checks you can
4 imagine how it went. So she took care of that, as she
5 insisted. She's very meticulous.
6 Q Can anybody else write checks out of that account?
7 A No, no.
8 BY MR. MORGAN:
9 Q Before we get off Union Bank, Ms. Rogers alluded
10 A some accounts that you have for sort of pin money, or
11 something, that you can write checks to the grocery store,
12 something. Do you have another that you might write che[cks]
13 on?
14 A It's Wells Fargo.
15 Q Okay, so we'll get to that, okay.
16 A My wife and I maintain some small accounts up in
17 Santa Barbara.
18 MR. MORGAN: Okay, so we'll get to that.
19 BY MR. DUNBAR:
20 Q Moving on to the Wells Fargo Bank account, then,
21 you recall the account number of that?
22 A Sorry, I don't.
23 Q And what is that account used for?
24 A My wife buys groceries from it. Actually, I think
25 we each have one, or she might have a couple. I think she's
Page 61
1 got a CD in one and -- I mean, I don't know, I think she has
2 two accounts and I have one. And [to?] answer your question,
3 what it's used for, grocery money, for buying a gift for
4 somebody, buying a nice pot for the house.
5 MR. BOLTZ: Household expenses, generally?
6 THE WITNESS: Household expenses, yeah. That's
7 exactly what it's used for.
8 BY MR. DUNBAR:
9 Q And who writes checks on that account?
10 A She writes checks on hers and I write checks on
11 mine.
12 Q Anybody else have authority to write a check on
13 that account?
14 A No.
15 Q And when was that opened? When were those accounts
16 opened?
17 A Probably when we first moved to Santa Barbara,
18 1984. I think they were originally at another bank that was
19 bought by Wells Fargo, maybe Crocker or Security Pacific. I
20 don't know the --
21 Q Were all the accounts at Wells Fargo opened at the
22 same time?
23 A I think within the same time frame. It's possible
24 that she opened a second account a little later when she put
25 a -- she had some money from her father. I don't know the
Page 62
1 exact dates. That could be found, though.
2 Q And why did you open that account if you already
3 had a Union Bank account?
4 A Well, I mean, if I was sitting in the shoe store
5 and wanted to buy some Nikes and I didn't want to have to
6 call Phyllis to write a check to pay for the shoes, I mean --
7 sorry, I'm not trying to be cute, but that's the concept.
8 Q Was Ms. Rogers working for you when you opened the
9 Union Bank account?
10 A Oh sure. Well, no, well, she wasn't working for
11 me when I originally opened it. Because I was living in Los
12 Angeles when I originally opened it. It was my personal
13 account, 1979. Okay, Ms. Rogers came to work for me in 1983,
14 I think.
15 Q So after she came to work for you you opened up
16 another account that you could write checks on?
17 A I think in the early days, when she first worked
18 for me, we were living in Los Angeles and I think we were
19 both writing checks on the same account. And eventually that
20 changed. And when I moved to Santa Barbara I opened up a
21 local account that I could use, and then she took over the
22 main account for my activities.
23 Q And when did that change?
24 A I'm going to guess around 1984, '85. She could
25 probably tell you exactly. Might have been '86. You know, I
Page 63
1 just don't know.
2 Q Did you ever use the Wells Fargo account for your
3 friends' investment purposes?
4 A No.
5 Q How many accounts do you have at the Pacific
6 Century Bank?
7 A I think it's one.
8 Q Do you know the account number?
9 A No.
10 Q And when was that opened?
11 A I think it was originally opened at a bank in
12 Beverly Hills that is no longer with us. A gentleman that I
13 was friendly with had opened an account there. He moved to
14 another bank in Beverly Hills, and then that bank was bought
15 by this bank. So I would say originally that account was
16 opened in 19 -- it could have been as long ago as '82 or '83.
17 I mean, I just -- this is, again, these banks swallowing each
18 other up. I don't know how the -- what's the name of that bank?
19 Oh, I just can't remember the names of all the banks. That's
20 the one on Ventura Boulevard, the one, used to be called
21 Lincoln -- not the Lincoln but Lincoln, if that's the one
23 you're talking about. There's several leap frogs of times
24 that was opened.
24 MR. DUNBAR: Okay, let's go off the record at 12:05
25 p.m.
Page 64
1 (Whereupon, at 12:05 p.m., a lunch recess was
2 taken.)
3 AFTERNOON SESSION
4 MR. DUNBAR: Okay, back on the record at 1:15 p.m.
5 BY MR. DUNBAR:
6 Q I believe when we stopped we were talking about a
7 Pacific Century Bank account that was opened in either 1982
8 or '83; is that where we left off?
9 A Okay.
10 Q What was the purpose of that account?
11 A I was recalling during the lunch break that this
12 account -- a gentleman who worked at Bank of California,
13 where I had my original account, was someone in the loan
14 department there that I had worked with; moved to that bank,
15 whatever it was called at the time, I don't have the name for
16 you. And I went -- he asked me for some business and I
17 opened an account there with him, and opened up a little line
18 of credit there. And that's how that took place.
19 Q And what was his name?
20 A I'm going to not be able to deliver that to y.
21 The first name was Ron, I think. It's been a long time since
22 I've seen him.
23 Q And how did you know him?
24 A He was an employee at the Bank of California.
25 Q Well, how did you meet him?
Page 65
1 A When I went and got my car loan he worked at the
2 Bank of California.
3 Q Oh. And then he moved?
3 A He moved and I, as a courtesy, went with him,
5 opened an account with him there.
6 Q Do you use that account? What is the purpose of
7 that account?
8 A I still have a credit line there and I have some
9 money in the bank there so that -- that's it. That's the
10 only purpose of it.
11 Q Do you ever use the credit line?
12 A They like me to use it, yes.
13 Q And what do you use it for, generally?
14 A No particular purpose. I would have to go back and
15 check and see what I actually used it for.
16 Q Can you recall the last time you used it?
17 A My recollection is that I would use it to invest in
18 a real estate deal -- which one I don't know.
19 Q Have you used that account to do other types of
20 investing?
21 A No. Real estate is the main area -- is the area.
22 Q With this account?
23 A Uh-huh.
24 Q And that's currently still open?
25 A Yes.
Page 66
1 Q And Network Bank?
2 A The same idea. Another person that was working at
3 one of the other banks -- I'm not sure what the name was --
4 and I got to know him. And he called me and said he would
5 offer me a line of credit if I would do some business with
6 him, and I did the same thing there.
7 Q And when did that occur?
8 A I'm going to guess it's about maybe the same time
9 frame. I don't know exactly. Around early '80's, let's
10 just say.
11 Q And who was that person?
12 A The name was Mike something; don't recall.
13 Q And how did you meet him?
14 A He worked at one of the other banks, probably
15 either at the one that was Pacific Century before or at the
16 Bank of Cal also.
17 Q On the Pacific Century Bank account and the Network
18 Bank account, are there any other signatories on that
19 account?
20 A I believe Phyllis is a signatory on both those.
21 Q Both those? And do you know what the account
22 balance is in each of those, currently?
23 A I do not.
24 Q And what is the amount of credit line in each bank
25 that you can take?
Page 67
1 A I think one of them is $350,000.
2 Q Which one is that?
3 A I think that's the Network Bank. I think. I think
4 the other one is $1,500,000. Don't hold me to that, but I
5 believe that's what it is.
6 Q And why do you use the Pacific Century Bank for
7 investing in real estate deals? Why have you used the
8 Pacific Century Bank to invest in real estate deals?
9 A I had the relationship with the banker. I don't
10 know how to answer that question why.
11 Q Well, why would you use this bank as opposed to
12 your personal Union Bank account?
13 A Oh, I think to keep using the credit line so I
14 could continue to have it. It was a usage issue. Use it or
15 lose it.
16 Q Normally, would you use your personal Union Bank
17 account?
18 A I've done that as well. But normally is correct,
19 yes.
20 Q And with regards to the Network Bank, what's the
21 purpose of that account?
22 A I would say it's similar to the other one, same
23 idea.
24 Q You use it to invest?
25 A Yes.
Page 68
1 Q Do you recall when the last time you used it to
2 invest was?
3 A I don't recall. I know it's been fully at its
4 maximum for a number of years.
5 Q What do you mean by that?
6 A I don't think I've -- I don't think it's been used
7 in quite a long time.
8 Q Do you ever pay personal bills out of these two?
9 A No.
10 Q Do you ever use either of these accounts for friend
11 money?
12 A No.
13 Q What other bank accounts do you have that you kn[ow]
14 of where you have signatory ability, other than these four
15 mentioned?
16 A I think that's it.
17 Q Do you have any of the other accounts where you
18 have discretionary authority?
19 A Are you speaking of bank accounts now?
20 Q Yes, any other bank accounts which you have
21 discretionary authority over.
22 A No.
23 MR. BOLTZ: I want to be sure you understand that
24 question. That would mean if you had an account for your so[n?]
25 or your wife, if they an account but you had the authority to
Page 69
1 withdraw money or write checks on it.
2 THE WITNESS: Oh, okay, I'm sorry. Yeah, I mean, I
3 think that my two sons have small savings accounts at Wells
4 Fargo -- I'm sorry -- that I have authority over those.
5 MR. BOLTZ: You've identified those.
6 THE WITNESS: Yeah.
7 BY MR. DUNBAR:
8 Q Are there any other bank accounts that you know of
9 where you have the ability to withdraw money from?
10 A No. You know, I mean, if I do I don't remember.
11 If you know of one that I don't know of tell me and I'll
12 verify it.
13 Q Other than these four accounts -- or other than
14 these, I'm sorry, under these four banks -- go ahead.
15 A I did recall something. In some business
16 relationship -- there are some business relationships where I
17 am a signatory on the business account. If those are -- if
18 you want to talk about those --
19 Q Yes.
20 A --I could bring those up to you, okay.
21 Q The accounts that you have signatory authority on,
22 all bank accounts?
23 A Yeah, because the ones that weren't necessarily in
24 my name. Yeah, that's now called Network Bank. Yeah, that
25 was when I was getting a -- in the Mountain Park Development
Page 70
1 company that we, that myself -- I don't know if I've told you
2 about this or not. I have that home up in -- that my friend,
3 Mr. Neuman, and I own. There's a company called Mountain
4 Park Development that we are -- it's a partnership. And I
5 believe I'm a signatory on that account.
6 Q Mountain Park Development doesn't own the home,
7 correct?
8 A Right.
9 Q Top Ridge owns the home?
10 A Top Ridge owns it. And I am -- yeah, okay, yeah.
11 I am sure I'm a signatory on Top Ridge. Sorry. And now I'm
12 thinking of another one, and there's another one called Top
13 Sight. I'm a signatory on that.
14 Q Going back to Mountain Park Development, where do
15 they maintain a bank account?
16 A Valley of the Rogue Bank.
17 Q Where is that?
18 A It's in Oregon.
19 MR. BOLTZ: Valley of the what?
20 THE WITNESS: Rogue. It's the name of a river.
21 BY MR. DUNBAR:
22 Q And how much is in that account?
23 A I have no idea. Mr. Neuman administers that. And
24 I'm not even sure I'm a signatory on it. It's a maybe.
25 Q And who else is involved with Mountain Park
Page 71
1 Development?
2 A That's it, Mr. Neuman and myself.
3 Q Other than Valley of the Rogue Bank, any other
4 banks Mountain Park Development has control over?
5 A Don't think so, not to my knowledge.
6 Q Any other accounts.
7 A Right, understood.
8 Q Top Ridge, where are those bank accounts located?
9 A I think that's in Valley of the Rogue Bank too.
10 Q Do you know that the account value is on that
11 account?
12 A No.
13 MR. BOLTZ: Does Neuman administer it?
14 THE WITNESS: Neuman administers it, yes.
15 BY MR. DUNBAR:
16 Q Other than yourself and Mr. Neuman, is anybody else
17 involved with Top Ridge?
18 A No.
19 Q And with regards to Top Ridge and Mountain Park
20 Development, when were those accounts opened?
21 A Top Ridge would have been the summer of '98. And
22 the other ones could have been as long ago as -- I don't know
23 when Mountain Park Started -- it could be early '90's. I
24 could find out.
25 Q With regards to Top Ridge, other than Valley of the
Page 72
1 Rogue Bank, is there any other bank accounts Top Ridge has?
2 A No.
3 Q Top Sight, where is that bank account?
4 A I think it's at Wells Fargo also.
5 Q And which branch?
6 A Santa Barbara.
7 Q And who has access to that account?
8 A Phyllis Rogers is the -- she administers it.
9 Q When you say administer what do you mean?
10 A Well, okay, sorry. You ask the questions, I'll
11 answer them, sorry.
12 Q Well, what do you mean by administer?
13 A I mean she has the checkbook.
14 Q Anybody else have authority on Top Sight?
15 A I don't think so.
16 Q Who's involved in Top Sight?
17 A Just me.
18 Q Other than Wells Fargo does Top Sight have any
19 other bank accounts?
20 A No.
21 Q And how much is in that account at Wells Fargo?
22 A I'm going to guess about $400,000.
23 Q What is that account used for?
24 A It's used to -- wait a minute now, maybe that
25 account -- okay, I'm not sure that account isn't -- I'm
Page 72
1 confused about something. I just want to pick up the phone
2 and call Phyllis and tell her to explain to me where --
3 MR. BOLTZ: No, no, you have to go on your best
4 recollection.
5 THE WITNESS: My best recollection is that -- let's
6 just leave like it is for the point being and -- I'm giving
7 you the best of my recollection. The answer to the question
8 is it's used to pay for a jet airplane.
9 BY MR. DUNBAR:
10 Q What type of jet airplane?
11 A It's made by Cessna.
12 Q Other than Mountain Park Development, Top Ridge,
13 and Top Sight, any other bank accounts that you have
14 signatory authority on?
15 A The best of my recollection.
16 MR. BOLTZ: May I confer for a moment?
17 MR. DUNBAR: Of course.
18 (Witness confers with counsel)
19 THE WITNESS: There's a partnership called Tarzana
20 Partners, and there's a partnership called Aviarian Partners,
21 and there's a partnership called Orno Partners. And I
22 believe that they each have -- I'm not positive, but since I
23 am partners in each one of those it's very likely that I have
24 signatory authority on those accounts, to the best of my
25 recollection. I'm not sure but it's possible.
Page 74
1 BY MR. DUNBAR:
2 Q Do you know where Tarzana Partners maintains a bank
3 account?
4 A No. I could find out but I don't know.
5 Q Who else is involved with Tarzana Partners?
6 A My partner is Richard Levine.
7 Q And how do you know him?
8 A He's an old friend of mine; known him since the
9 '70's. We met through Scientology.
10 Q Aviarian Partners?
11 A Aviarian Partners and Orno Partners I have -- my
12 partner is named George Elvin.
13 MR. MORGAN: How do you spell that?
14 THE WITNESS: E-l-v-i-n. We provided you with the
15 documentation on that the other day.
16 BY MR. DUNBAR:
17 Q And where do they maintain a bank account?
18 A I believe it's Republic Bank in New York.
19 Q And Orno Partners, George Elvin is a partner in
20 that?
21 A That's correct.
22 Q Other than George Elvin is anybody else a partner
23 in these, in Aviarian Partners or Orno Partners?
24 A No.
25 MR. MORGAN: Just for the record, Orno Partners is
Page 75
1 O-r-n-o; is that right?
2 THE WITNESS: Yes, it's O-r-n-o. I don't think
3 there's a bank account for that partnership.
4 BY MR. DUNBAR:
5 Q So for Orno Partners you don't believe there's a
6 bank account?
7 A I don't know. If there is I'm probably a signatory
8 on it, but I -- Mr. Elvin watches over these and I don't
9 know.
10 Q Okay, so other than Mountain Park Development, T[op]
11 Ridge, Top Sight, Tarzana, Aviarian and Orno, are there an[y]
12 other bank accounts that you have signatory authority on?
13 (Witness confers with counsel.)
14 THE WITNESS: No.
15 BY MR. MURPHY:
16 Q Do you have signatory power over any foreign bank
17 accounts, any bank accounts located outside of the United
18 States?
19 A No.
20 MR. BOLTZ: The answers you've been giving involve
21 foreign as well as domestic?
22 THE WITNESS: I have been.
23 MR. DUNBAR: Brokerage accounts.
24 THE WITNESS: You've got that list, Gerry? Can I
25 just have the list? Thank you.
Page 76
1 MR. BOLTZ: Well, not unless they want me to give
2 it to you.
3 THE WITNESS: Oh, all right, sorry.
4 MR. MURPHY: Yeah, if you have a list we could
5 maybe copy it, and it'll make it easier for the witness, I
6 think.
7 THE WITNESS: No, you already have it, you already
8 have this list.
9 MR. BOLTZ: Well, the list I was referring to is
10 the list that apparently Mr. Cohen sent you in November.
11 MR. DUNBAR: Yes.
12 MR. BOLTZ: And that's the list of bank and
13 brokerage accounts.
14 MR. MORGAN: Let's go off the record for a minute.
15 (Whereupon, a brief recess was taken.)
16 MR. DUNBAR: Back on the record at 1:35. I'd like
17 to introduce Government Exhibit Number 29. Will you please
18 mark that?
19 (SEC Exhibit No. 29 was marked for
20 identification.)
21 BY MR. DUNBAR:
22 Q I am now handing you what has been marked as
23 Exhibit Number 29. It has a heading of Banks and Broker[age]
24 Firms and consists of two pages. Mr. Slatkin, do you
25 recognize that document?
Page 77
1 A I do.
2 Q And what is it?
3 A It's a document listing banks and brokerage firms.
4 Q Back to the brokerage accounts, where are your
5 brokerage accounts?
6 A Say it again?
7 Q How many brokerage accounts do you currently have
8 control over?
9 A Don't know the answer to the total number.
10 Q Do you know -- can you give us a -- can you start
11 listing where your brokerage accounts are?
12 A Yeah.
13 MR. BOLTZ: Always say verbally, remember?
14 THE WITNESS: Verbally, yes. Do you want to do
15 them one at a time and --
16 MR. DUNBAR: Yes.
17 THE WITNESS: So I'll just say one and wait for
18 your response? Okay.
19 MR. BOLTZ: Well, I think he wants you to say all
20 of them.
21 MR. MURPHY: Are they identified on that document
22 there?
23 MR. BOLTZ: Well, these are account statements of
24 each one.
25 MR. MURPHY: Oh, I see.
Page 78
1 MR. BOLTZ: There's no list --
2 THE WITNESS: And some of these have changed names,
3 and that's why, though, there's a possible --
4 MR. BOLTZ: Go ahead.
5 THE WITNESS: All right. So I'll just use this
6 then?
7 MR. BOLTZ: Use both, and give a list of the
8 current -- you want current -- brokerage accounts that you
9 have.
10 THE WITNESS: All right, Donaldson, Lufkin,
11 Jenrette. Account number?
12 MR. BOLTZ: Just the list for now.
13 THE WITNESS: All right, Donaldson, Lufkin,
14 Jenrette, okay.
15 MR. MURPHY: If you have the account number at the
16 same time you looking at it, it might be easier to do it now
17 and give us the full -- the account number as well.
18 THE WITNESS: 212-081640. Cruttenden, Roth,
19 71400138-1-9261. Okay, Donaldson, Lufkin & Jenrette, account
20 number 212-086904. Bank of Boston/Robertson Stephens,
21 account number 38000428-1-A33. Salomon Smith Barney, account
22 number 414-38533-17. Bank of America --
23 MR. BOLTZ: -- Securities.
24 THE WITNESS: -- Securities, account number
25 11012747-1-8527.
Page 79
1 MR. BOLTZ: You want to be sure, if there's a
2 second account at any institution, are you --
3 THE WITNESS: Yeah, I'm sure they're all -- yeah.
4 William Blair & Company, account number 15081862-1-8-176.
5 S.G. Cowan Securities, account number 77671318. Phillip
6 Louis Trading, Inc. -- L-o-u-i-s -- account number 73833415.
7 Philip Louis Trading, account number 73833439. Aegean
8 Group, Inc., account number LRJ000542-19. Bank of America
9 Securities, account number 20900010-1-3. That says 527,
10 sorry. Bear Stearns, account number -- let's see here,
11 72063184-38 -- it looks like a "G"; it might be a "Q." It's
12 hard to say. I don't know what do you make of that right
13 there?
14 MR. BOLTZ: I can't tell either.
15 THE WITNESS: Do you want to take a shot at it?
16 MR. DUNBAR: "G" or "Q"?
17 MR. BOLTZ: "G" or "Q."
18 THE WITNESS: Morgan Stanley Dean Witter, account
19 number 372013816. Legg Mason, account 302[1/I?]7392. Prudential,
20 EAS, like Sam, 062681-88. Merrill Lynch, account number
21 428129/33-083. This is Lehman Brothers, account number
22 83223853-14. Legg Mason, account number 38000530. Union
24 Bank of California, account number --
25 MR. BOLTZ: Now, is that securities?
Page 80
1 THE WITNESS: Yeah, it's securities.
2 MR. BOLTZ: All right, excuse me.
3 THE WITNESS: That's all right. I'm sure they
4 already have this, 270000630-01. Bear Hunter, formerly Kalb
5 Voorhis. Do you need me to spell anything there for you?
6 MR. DUNBAR: Spell Kalb Voorhis.
7 THE WITNESS: K-a-l-b, I believe it's V-o-o-r-h-i-
8 s. This is their new name, or whatever they did, merged, I
9 don't know. Account number -- I guess that's it, 49270705.
10 I think we already gave them this one.
11 MR. BOLTZ: No, I don't think you did.
12 THE WITNESS: PaineWebber, it looks like it's
13 EI3570806, although it might be E1. I don't know. What do
14 you think, Gerry?
15 MR. BOLTZ: I don't know, either.
16 THE WITNESS: And Warburg Dillon Read, 55507944.
17 That's that list. Now, from looking at page 2 of the
18 document that you handed to me.
19 MR. MORGAN: Exhibit 19?
20 THE WITNESS: Exhibit 29, looking on the second
21 page, where you see -- where it says closed accounts,
22 inactive accounts -- I don't know how you want me to handle
23 that, but I can read those off to you now too, if you like.
24 BY MR. DUNBAR:
25 Q What's your definition of inactive?
Page 81
1 A Well, like I read you off this S.G. Cowan account.
2 I think it has $6,000 in it. It was transferred over to
3 Aegean Group, and I didn't even know it was still active
4 until I saw this statement this morning. That's inactive.
5 MR. BOLTZ: Before you get to the inactive, if I
6 could suggest, are there any other active accounts as you
7 look through these lists? Let's finish that --
8 THE WITNESS: Yes, right, there are, yeah, a couple
9 more. All right, they may not be on -- well, let's just see
10 if they're on the list.
11 MR. BOLTZ: Is Hambrecht & Quist one?
12 THE WITNESS: No.
13 MR. BOLTZ: Because they were merged?
14 THE WITNESS: Yeah, those guys went over to
15 Robertson, so that's not a situation anymore. I have it down
16 here as closed, I think. Yeah, see, that's closed here.
17 MR. BOLTZ: Yeah. B of A Robertson is it.
18 THE WITNESS: B of A Montgomery is one and then
19 Robertson is -- I've already given them those. Those are in
20 here. Okay, what I don't have is what I wrote down here. I
21 don't have those in my hands. I should give them those.
22 MR. BOLTZ: Oh, you're right. Okay.
23 THE WITNESS: My wife has an account at Phillip
24 Louis Trading -- I do not know the number -- and I have an
25 IRA account there as well; I don't know the number. I have
Page 82
1 two other Merrill Lynch accounts, which I think are listed
2 here. In any case, I'm not sure which ones are not, but --
3 MR. BOLTZ: You mentioned a Merrill Lynch account.
4 THE WITNESS: Yeah, there's one here.
5 MR. MURPHY: EL63N10029.
6 THE WITNESS: Right, the one -- I guess I didn't
7 put account numbers on these. But there's another one that's
8 on the list here, it's located in Encino, California. It's
9 on page 1, in the first column, second from the bottom.
10 MR. BOLTZ: On Exhibit 29.
11 THE WITNESS: Exhibit 29. I don't have -- that
12 particular statement has not arrived in our hands yet for the
13 current month. So I don't know the account number of that
14 one, but it exists. And I think that's it.
15 BY MR. DUNBAR:
16 Q So other than the accounts you've just listed, are
17 there -- do you have any more active, current accounts --
18 brokerage accounts?
19 A No.
20 BY MR. MORGAN:
21 Q Unless I missed it, on Exhibit 29, the second page,
22 right hand column, Imperial Trust Company? I don't think you
23 mentioned that one there.
24 A Yeah, that was all transferred over to the Union
25 Bank, okay.
Page 83
1 MR. BOLTZ: Is that a bank account or a brokerag[e]
2 firm account, Imperial Trust?
3 THE WITNESS: It was both. But it was part of --
4 MR. BOLTZ: But it's over at Union Bank?
5 THE WITNESS: It's over at Union Bank, yeah.
6 BY MR. DUNBAR:
7 Q So Imperial Trust Company at one time held a [bank]
8 account and a brokerage account?
9 A Yes.
10 Q And the bank part got transferred over to the U[nion]
11 Bank?
12 A Both did.
13 Q And the brokerage account got sent over to the
14 brokerage account?
15 A That's what I read off to you, yes, that's right.
16 Oh, Paradise Valley Securities, closed. They had asked fo[r a?]
17 list of anything in the last three years.
18 MR. BOLTZ: Right, right, right.
19 BY MR. MURPHY:
20 Q Does that list include foreign brokerage account[s]
21 also?
22 A No. Oh, this list that I gave you here? Does not.
23 Q That you just told us about.
24 BY MR. DUNBAR:
25 Q Yeah, the list you just ran down verbally with u[s]
Page 84
1 Do you have any other current brokerage accounts?
2 A I want to just confer with counsel for a second.
3 (Witness confers with counsel.)
4 THE WITNESS: I think I need a little break here
5 just for a second to talk to you about this for a second.
6 MR. BOLTZ: He wants to confer with me outside,
7 just for --
8 MR. MURPHY: Yeah, of course. Why don't we go off
9 the record.
10 (A brief recess was taken.)
11 MR. DUNBAR: Back on the record at 2:00 o'clock.
12 BY MR. DUNBAR:
13 Q The question that was pending was, other than the
14 brokerage accounts you have listed to us, are there any othe[r]
15 current brokerage accounts that you maintain?
16 A No.
17 Q Do you maintain any foreign brokerage accounts?
18 A I have a foreign account with an investment
19 advisor, NAA Financial, and I do not know if they are a
20 broker dealer.
21 Q How do you categorize the account?
22 A How do I categorize it? Don't understand the
23 question.
24 Q Is it a brokerage account?
25 A It's a managed account.
Page 85
1 Q And who is the investment advisor?
2 A NAA Financial.
3 Q Where are they located?
4 A In Zurich.
5 Q Do you have any other -- domestic and foreign -- do
6 you have any other managed accounts?
7 A I do.
8 Q And can you tell us those, please?
9 A I have an account with -- can't think of the name
10 of it now -- I believe it's called Mindful Partners.
11 MR. BOLTZ: Located?
12 THE WITNESS: Located in San Rafael, I believe.
13 MR. BOLTZ: Any others?
14 THE WITNESS: I think that's all.
15 BY MR. DUNBAR:
16 Q So other than the NAA Financial account and the
17 Mindful Partners account, do you have any other managed
18 accounts?
19 A That's all I can recall.
20 Q In the accounts you just listed, the current
21 accounts and the managed accounts, is your name on all of
22 them; are they all in your name?
23 A Yes.
24 Q Is anybody else's name --
25 MR. BOLTZ: I think he testified earlier that his
Page 86
1 wife had one.
2 THE WITNESS: My wife has one, yeah, sorry.
3 MR. BOLTZ: Phillip Louis, that's in her name?
4 THE WITNESS: That's in her name, yeah.
5 MR. BOLTZ: But you have one in your name there
6 too?
7 THE WITNESS: I do.
8 MR. BOLTZ: In fact, you have an IRA plus another
9 one.
10 THE WITNESS: Right. And I think one of these
11 other accounts I even led off to you might even be --
12 MR. BOLTZ: You listed it.
13 THE WITNESS: Yeah, I'm not sure if my wife is on
14 one of these or not. I don't know.
15 BY MR. DUNBAR:
16 Q Okay, other than you or your wife, is anybody else
17 listed on these accounts?
18 A No.
19 Q Other than you or your wife, does anybody else have
20 signatory authority on any of these accounts?
21 A No.
22 Q And other than you and your wife, can anybody else
23 make trades in these accounts?
24 A Yes.
25 Q Which ones?
Page 87
1 A There are a few. And I am going to only be able to
2 guess at which ones they are exactly.
3 MR. BOLTZ: Do you want to take my list?
4 THE WITNESS: Yeah. The Morgan Stanley account and
5 the Salomon Smith Barney account and the Merrill Lynch
6 account in Encino. And I believe the William Blair account.
7 And one or both of the Legg Mason accounts. PaineWebber, did
8 I say PaineWebber?
9 MR. BOLTZ: No, you didn't. How about this one?
10 THE WITNESS: No.
11 MR. BOLTZ: The PaineWebber is one?
12 THE WITNESS: Uh-huh. That's a -- there may be one
13 or -- I'm not sure of all the accounts, not totally certain,
14 but that's the best I can do at this moment.
15 BY MR. DUNBAR:
16 Q Going back to the Morgan Stanley account, who has
17 trading authority on that account?
18 A My -- Richard Levine.
19 Q And why does he have trading authority?
20 A I need him to -- he watches over the account for
21 me.
22 Q The Morgan Stanley account?
23 A Yes, yes.
24 Q Does anybody else make trades in that account?
25 A No.
Page 88
1 Q The Salomon Smith Barney account who has trading
2 authority on that?
3 A Richard Levine.
4 Q And why does he have trading authority on that
5 account?
6 A Again, he watches over it.
7 Q And the Merrill Lynch account?
8 A Mr. Levine --
9 Q And why does he have --
10 A -- watches over that account for me.
11 Q William Blair?
12 A Same answers. Do you want me to say them again out
13 loud? Richard Levine watches over it for me.
14 Q Legg Mason?
15 A Richard Levine watches over it for me.
16 Q PaineWebber?
17 A Watches over, Richard Levine.
18 Q When you say "watches over," what do you mean by
19 that?
20 A Exactly those words.
21 MR. BOLTZ: Supervisor?
22 THE WITNESS: Supervisor. Watches over it.
23 BY MR. DUNBAR:
24 Q In addition to yourself?
25 A Yeah.
Page 89
1 Q In these six accounts who does the primary trading
2 in those accounts?
3 A It's mutual. He more likely would make the phone
4 call but it's mutual.
5 Q In any of these accounts, if he wants to make a
6 trade, will he contact you and say I'm making a trade?
7 A Yes.
8 Q Does he get your approval before he makes a trade?
9 A We -- like it's a mutual decision.
10 Q So he'll call and say, I'm looking at this stock.
11 You'll say that looks good, let's go ahead?
12 A Yeah, I mean, there are times when I'm not around.
13 That's why he has trading authority.
14 Q Well, has he ever made a trade without asking you?
15 A Definitely.
16 Q In all the accounts?
17 A I'm not sure.
18 Q Have you ever made a trade without asking him?
19 A Yes.
20 Q How often would he make a trade without asking you?
21 A Are you talking about percentages or per week, per
22 month?
23 Q Percentages.
24 A Half. Well, between 25 percent and half; up to
25 half, let's just say.
Page 90
1 Q Do you compensate him at all for the supervision of
2 these accounts?
3 A No.
4 Q Does he receive any sort of benefit for supervising
5 these accounts for you?
6 A You need to ask me to clarify my relationship with
7 Mr. Levine and then this will all become clear.
8 Q What is your relationship with Mr. Levine?
9 A Thank you. I'm not trying to be rude to you, but
10 I'm trying to help you save some time. We are very close
11 business partners. We do many types of investing together.
12 And this is just part of our normal practice of being close
13 partners. So it's -- we have Tarzana Partners, is our
14 partnership, okay. We've invested in companies together, and
15 we're old friends, and so this is sort of part of our
16 arrangement; this happens this way.
17 Q Do you have supervisory authority over any of his
18 accounts?
19 A I do, I do, yes.
20 Q In how many accounts?
21 A I don't know the answer, because it's rare that I
22 do it, it's rare that I do it.
23 MR. BOLTZ: Discretionary authority is -- I mean,
24 he's asking supervisory authority, not just trading
25 authority.
Page 91
1 THE WITNESS: Yeah, it's discretionary authority.
2 MR. BOLTZ: It's discretionary rather than
3 supervisory?
4 THE WITNESS: Yeah, right, discretionary, yeah.
5 BY MR. DUNBAR:
6 Q Are there any other accounts in other people's
7 names that you have trading authority in?
8 A I'm sure the one in my wife's name I do, okay. No.
9 Q Going back to the brokerage list, how many
10 brokerage -- well, could you please list for us the brokerage
11 accounts which are inactive.
12 A Okay.
13 MR. BOLTZ: Just as a clarification, I mean, going
14 back how far?
15 MR. DUNBAR: Well, that are --
16 MR. BOLTZ: Because, you know, he may have had an
17 account twenty years ago.
18 BY MR. DUNBAR:
19 Q Well, let me ask you what your definition of
20 inactive is, again?
21 A Good, that's what I would have said. My definition
22 is that if it's open it probably should be closed because
23 we're not using it; or, if it's open and we haven't closed
24 it, it's because I decided to see what would transpire with
25 my relationship with that firm or that broker in the future.
Page 92
1 And so, it was inactive.
2 Q So these are open accounts?
2 A They're open accounts but -- that's why I made th[e]
4 distinction between closed and inactive, because in tryin[g to]
5 be complete I was trying to let you know that you woul[d]
6 easily -- you would find this Dean Witter account open,
7 like in the Cowan account there's eight -- there's a mino[r]
8 amount of money. I'm not valuing that; it just has $8,0[00 in?]
9 it, but there's not a transaction for probably a year. It's
10 open but inactive. That's my definition.
11 Q Okay, using that definition can you please list [?]
12 us the inactive accounts that you have?
13 A Okay. Well, I'm going to be very thorough and j[ust?]
14 look through these very carefully, so I can give you the [?]
15 answer. I guess one with 14 pages is not inactive. Co[wan,?]
16 S.G. Cowan, I gave you that one.
17 MR. BOLTZ: You listed Cowan as an active ac[count]
18 when you were asked for the active accounts.
19 THE WITNESS: Did I? Well --
20 MR. BOLTZ: Yes.
21 THE WITNESS: Because it was in this pile.
22 MR. BOLTZ: Yes, I understand.
23 THE WITNESS: Okay, so --
24 MR. BOLTZ: So you'd like to change that?
25 THE WITNESS: I'd like to change that. I was[n't?]
Page 93
1 sure what question I was asking. What brokerage accounts do
2 I have? I don't -- w[as] the question accurate?
3 MR. BOLTZ: Current accounts.
4 THE WITNESS: Current accounts. But the word
5 active -- okay, so.
6 MR. BOLTZ: So it's inactive?
7 THE WITNESS: It's inactive, yes. Aegean is an
8 inactive account.
9 MR. BOLTZ: You listed that also as, I think, a
10 current account.
11 THE WITNESS: Current but inactive. Yes, yes, I'm
12 with you.
13 MR. BOLTZ: Just wanted to make it clear you're --
14 he's referring to the same account.
15 THE WITNESS: Thank you. I believe the Bear
16 Stearns account is under the same heading.
17 BY MR. DUNBAR:
18 Q The Bear Stearns that you mentioned was current?
19 A Yes. It looks from what I'm looking at it here
20 that it hasn't had any activity in it, so I'm assuming it's
21 one of the inactive ones. It's got an amount of money in it,
22 but I don't see any activity in it, and that makes me think
23 that it's inactive. There's a Prudential, number DAS162;
24 that's inactive. Can I just show you this page and you can
25 just know what I'm talking about? Do you see what that looks
Page 94
1 like?
2 MR. BOLTZ: That's a different account from the
3 other one you listed as current, is it not?
4 THE WITNESS: Uh-huh.
5 MR. BOLTZ: Right?
6 THE WITNESS: No, this is the one that I --
7 MR. BOLTZ: You listed a Prudential account --
8 THE WITNESS: That's this one.
9 MR. BOLTZ: BAS0626?
10 THE WITNESS: Right.
11 MR. BOLTZ: Same account?
12 THE WITNESS: Same account.
13 MR. BOLTZ: All right, that's inactive then.
14 THE WITNESS: Inactive. I'm just showing Mr.
15 Morgan and Mr. Dunbar the -- you know, it shows portfolio
16 detail, there's nothing on that. Distributions, account
17 activities -- there's nothing there. There's some cash in
18 the account.
19 MR. BOLTZ: Are you relying on the document to make
20 a decision on whether it's inactive or do you recall?
21 THE WITNESS: I'm recalling from my -- this is a
22 reminder.
23 MR. BOLTZ: Okay.
24 THE WITNESS: A.G. Edwards account.
25 MR. BOLTZ: The one you gave previously?
Page 95
1 THE WITNESS: Uh-huh. The 428129733. And
2 PaineWebber EI or E135[72?]8. I believe that one is also listed
3 as inactive over here. I'm not sure. Yes, that's -- that
4 one is listed as inactive over here too.
5 MR. DUNBAR: Is that different than the PaineWebber
6 you said was current?
7 MR. BOLTZ: Same account.
8 THE WITNESS: Same account.
9 MR. BOLTZ: Right.
10 THE WITNESS: Right. Current but inactive.
11 BY MR. DUNBAR:
12 Q Which is EI or 13570806?
13 A Right, that's the one. And I know for a fact that
14 this Warburg Dillon Read account was transferred to Donaldson
15 in the last few weeks. So just for the record, I'll just
16 tell you that. So it was closed.
17 Q Why was it transferred?
18 A I decided to end my relationship with that firm.
19 Q And why is that?
20 A Service. Didn't like the service.
21 Q Anything else?
22 A No.
23 Q Now, moving on to the accounts that you've had in
24 the last ten years which you've closed?
25 A Okay. Question: Do you want me to list them for
Page 96
1 you?
2 Q Yes, please.
3 A Okay. On Exhibit 29 there's a list of five here.
4 Should I just read them off?
5 Q Yes, please.
6 A One is Paradise Valley Securities, Phoenix,
7 Arizona. I don't have an account number on it -- written [not?]
8 here. Keep going? Fonstock (ph.) & Company in New York
9 City. H.J. Meyers & Company, Red Bank, New Jersey.
10 Hambrecht & Quist in Boston, Mass. And Vector Securities in
11 Illinois. It looks like somewhere near Chicago, Kerfield
12 (ph.), Illinois.
13 MR. BOLTZ: How about, are there others as a result
14 of merger or transfer? How about Imperial Trust; isn't that
15 also a brokerage firm, brokerage account?
16 THE WITNESS: Yeah, they did, yes. But they got
17 bought by Union Bank, the trust company. You said ten years?
18 Was this original request for ten years or three years? I
19 don't recall.
20 MR. DUNBAR: I believe the original request was for
21 three years.
22 THE WITNESS: Three years. Okay, well, with all
23 due respect, to answer that question I'd like to, at some
24 point, get your permission to check with Ms. Rogers to have
25 her go back over the records and see is she could find the
Page 97
1 names of anything that was closed previous to those three
2 years and supply that to you.
3 BY MR. DUNBAR:
4 Q Would she have that information?
5 A Yes.
6 MR. BOLTZ: That's all you can recall now?
7 THE WITNESS: Yeah, that's all I can recall now.
8 But if there are others she would have the information. And
9 I'm happy to --
10 BY MR. DUNBAR:
11 Q But out of those five that's what you can recall?
12 A That's what I could recall right now is on this
13 list. But this was only a three year request. The ten year
14 request, I'd have to check the reco[rds.]
15 Q So there's more that you have had and closed in the
16 last --
17 A I'm going to tell you that this is all I can
18 recall. And not knowing all the protocol, I wouldn't
19 absolutely, a hundred percent tell you that there wasn't
20 another account closed in those ten years that I had. I
21 can't think of it right now, but I would be happy to check
22 for you. In fact, if you requested me to I would have no
23 choice but to do so, and I will.
24 Q Back up to the list to DLJ, how many accounts --
25 actually, do you -- out of all these accounts, the current
Page 98
1 accounts -- the inactive accounts, the managed accounts, and
2 the closed accounts -- do you categorize any of those
3 accounts as your personal accounts, as your friends'
4 accounts; or how do you categorize each one of those
5 accounts?
6 A Well, I do categorize them that way. I have --
7 these accounts are my accounts, except for the NAA account,
8 which I categorize as friends.
9 Q So all the accounts that you listed in the closed,
10 inactive, current and Mindful Partners, all the accounts
11 other than the NAA Financial, are your personal accounts?
12 A That's correct.
13 Q Why do you have so many brokerage accounts?
14 A Well, there are a couple different answers to that
15 question.
16 Q I'll take them all.
17 A Very good. First answer is I've been doing this a
18 long time, since early -- you know, mid '80's. The brokers
19 that I used that I became friendly with often moved from one
20 account to another. For example, the Hambrecht & Quist
21 account was there. The people that covered me there moved to
22 Robertson. And I could think of four or five other examples
23 where that exact thing took place, and I left the account
24 open and I often had funds in that account. And some of
25 these accounts have sat there, money in them, and I've
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1 occasionally put a trade there, or whatever.
2 Also, I am very active in researching companies.
3 It's what I spend a lot of my time doing. And often time[s,?]
4 particularly today with all the competition there is to get
5 research, it's very difficult to get research from a firm if
6 you don't have an account with them. And information [is?]
7 everything in this arena.
8 And so, I might find a company that I think is
9 really a good opportunity, and I find out that they're bei[ng]
10 covered, in research form, by a particular -- a research
11 analyst. And I really want to make sure I have access to
12 that analyst. And so, I want to put some money in that
13 brokerage firm to make sure that when I call up and I say [I]
14 want to talk about this stock, that I can get the guy on th[e]
15 phone. Or I can tell you that even in some of these place[s]
16 when you have accounts you can't get the guy on the ph[one. I?]
17 don't know if you've experienced that, but it didn't used [to?]
18 be that way, I guess.
19 Secondly -- thirdly; I don't know what number I'[m]
20 on -- a couple of these are family friends. Would you p[lease?]
21 open an account with cousin so-and-so? You know, he [wants?]
22 some business. Or my brother-in-law is now working o[ver at?]
23 Merrill and he's got an account over there. This is a ni[ce?]
24 lady. I know one of these Merrill Lynch accounts here [was ?]
25 -- their daughter and the daughter of Mr. Levine went to [?]
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1 school together, and he got friendly, and he said, well,
2 let's -- going to open an account over there, would you?
3 Let's give her a little business. I mean, that's the answer
4 to your question of why there's so many.
5 MR. BOLTZ: Have any of these accounts been opene[d]
6 by your business partner, Mr. Levine, or other business
7 partners?
8 THE WITNESS: Yeah, Mr. Levine opened a few of
9 these -- not without me, but at his suggestion. For example,
10 that one right there, that Merrill Lynch account. Mr.
11 Levine's brother is a broker at Smith Barney, so I have an
12 account there.
13 BY MR. DUNBAR:
14 Q When you said, for example, the Merrill Lynch
15 account are you referring to the account that he also wat[ched]
16 over?
17 A Yeah. That was the answer to why there's so many
18 accounts.
19 Q Going back to the managed account with NAA
20 Financial, how does that account work?
21 A Specifically?
22 Q Yes, please.
23 A I mean, how does it work?
24 Q Well, who manages it? You said it's managed. D[o?]
25 you have an investment advisor?
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1 A Yes. I mean, I'm -- I call the shots in the
2 account, but it's done through that advisory. So I manage
3 the account through them.
4 Q What do they do?
5 A They execute.
6 Q Can anybody else trade in that account?
7 A No.
8 Q Only you?
9 A Only me.
10 BY MR. MORGAN
11 Q So you tell NAA what stocks to buy and sell and
12 they just do it?
13 A That's right.
14 Q They don't have any discretion?
15 A No, they have no discretion.
16 BY MR. DUNBAR:
17 Q How much money is in that account?
18 A I'm waiting to receive my current statement.
19 MR. BOLTZ: Well, we gave you some statements,
20 didn't we?
21 MR. DUNBAR: Right.
22 MR. BOLTZ: But you want the current --
23 MR. DUNBAR: Right.
24 THE WITNESS: Yeah, I don't have the current
25 balance. I'm expecting to have it and have it in your hands
Page 102
1 hopefully early next week, as soon as I get it.
2 MR. BOLTZ: You could -- as of the last date?
3 THE WITNESS: I guess there's September 30th in
4 there or --
5 MR. DUNBAR: I'd like to enter this as Exhibit
6 Numbe