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 investigatio 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 timeor 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 Orehon, 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 tkae 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 activitiy 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 weekeneds 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 abolution 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 wh 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 wnat 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 Page 99 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 [?] Page 100 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?
Page 101 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 Number 30. I'm now handing you Government Exhibit Number 30, 7 which at the top is labelled NAA Financial, Luxembourg, Bates 8 stamped RS 07819 to RS07821.
9 (SEC Exhibit No. 30 was marked for 10 identification.)
11 BY MR. DUNBAR:
12 Q Mr. Slatkin, do you recognize this document?
13 A Yeah.
14 Q What is it?
15 A It's a position statement.
16 Q What is the date on it?
17 A March 31, '99.
18 Q Is this reflective of all the stocks you owned in 19 this account?
20 A Yes.
21 Q And for each of these positions you called and 22 asked them to make this trade?
23 A Yes.
24 Q As of this date how much money was in the account?
25 MR. BOLTZ: As of March 31 you mean?
Page 102 1 MR. DUNBAR: Yes, March 31, '99?
2 THE WITNESS: Are you talking about the total value 3 of the account or how much money?
4 MR. DUNBAR: Total value of the account.
5 THE WITNESS: It says $187,376,213.
6 BY MR. DUNBAR:
7 Q Who were these statements sent to?
8 A It was sent to me.
9 BY MR. MURPHY:
10 Q Was that the total value or the total cost?
11 A I believe that was the total cost. I'm sorry, I 12 didn't read it right. It says total portfolio. I'm sorry, 13 you're right -- $217,155,720.
14 MR. BOLTZ: Your total value is what?
15 THE WITNESS: $217,155,720.
16 BY MR. DUNBAR:
17 Q Does anybody else see these statements?
18 A No.
19 Q How do you put money into this account?
20 A There has been money in this account for over 21 fifteen years.
22 MR. BOLTZ: That isn't his question. How does it 23 go in or where - 24 THE WITNESS: I believe originally it was bank 25 wired in there, I believe.
Page 104 1 BY MR. DUNBAR:
2 Q From which bank account?
3 A It was originally done -- let's see, I'm trying to 4 remember. It was originally from -- I don't recall exactly 5 where it came from originally.
6 Q Well, let me start with this. When was the account 7 opened?
8 A It was opened in 1987.
9 Q And why was it opened?
10 A It was opened to segregate monies that I was 11 receiving from my friends. That's the -- my idea at the time 12 was that I wanted to make sure that anything that was going 13 on with me over here might -- that might result in some claim 14 against myself would not affect monies that I had for other 15 people.
16 Q So that's why you opened up the account?
17 A Yes.
18 Q These people who were giving you money to invest 19 for them, where were you maintaining their stocks before 20 this?
21 A I don't exactly recall. It was not very much. I 22 could find that answer out for you.
23 Q Can you recall about how much it was?
24 A I think it was mid-seven figures, let's say.
25 Q So approximately -- I'm sorry, seven figures?
Page 105 1 A Uh-huh -- 7, 8 million.
2 Q You said 7 to 8 million?
3 A Uh-huh.
4 Q And was this all friends money that you initially 5 put into this managed account?
6 A Yes.
7 Q Did any other money go into this managed account?
8 A No.
9 Q How do you know it was all investor money?
10 A How do I know?
11 Q Yes. I mean, was it the checks, did you put the 12 checks right in; or did you put the checks and you had it 13 earmarked?
14 A Well, I had a -- I specifically opened it for that 15 reason. That's the money that was sent there.
16 Q And when you opened it how did you send the money 17 there?
18 A Like I said before -- 19 Q By wire?
20 A By wire.
21 Q And do you recall which account that came out of?
22 A I don't right now. I could find out for you.
23 Q So prior to opening that account this 7 to 8 24 million of your friends' money was in a separate bank 25 account?
Page 106 1 A I don't recall the way it was held exactly.
2 Q And this was around -- and you said you opened it 3 in '87?
4 A Around -- yes, the early part of '87.
5 Q The people who gave you money to invest with them, 6 did they know you were moving their money to this account?
7 A No.
8 Q Did you discuss with anybody that you were opening 9 this account for this purpose?
10 A Did I discuss it with anybody?
11 Q Yes.
12 A Anybody. Yes.
13 Q Who were those people?
14 A A gentleman named Mr. deLamoussaye.
15 Q Can you spell that?
16 A Yeah, I can spell it. I'll write it down first and 17 then I'll spell it for you. It's d-e-L-a-m-o-u-s-s-a-y-e.
18 Q And the first name was?
19 A Roland.
20 Q And who is he?
21 A He is an acquaintance of mine that I had met during 22 that time frame.
23 Q How did you meet him?
24 A Mutual acquaintances, people we both knew. I think 25 it was at some kind of a party, or something.
Page 107 1 Q And why did you tell him?
2 A Because I had discussed this with him -- we had 3 discussed this idea. He's the one that suggested this idea 4 to me.
5 Q The idea -- 6 A -- of having money over there.
7 Q Can you describe that discussion? Why did you f[ind] 8 it beneficial to have the money over there?
9 A Well, I was concerned about the concept of my own 10 potential liabilities, as I said before. And why don't you 11 put money overseas to resolve that issue? I have a good 12 contact for you. I'm just giving you the context; I can't 13 remember the exact words. And he became the person that I 14 talked to about it, to answer your question.
15 Q Other than him did you talk to anybody else about 16 opening this account?
17 A You're talking about at the time?
18 Q Yes, at the time.
19 A I'm trying to just, you know, recall. By discuss, 20 I'm just trying to clarify, a discussion of the actual 21 activity itself, not of the theory. I mean, I had 22 interviewed several lawyers at the time about what were the 23 ramifications that might be effective on myself if -- or on 24 my friends' funds -- if I were to get into some kind of a 25 situation where if I were to die, or something like that. So Page 108 1 I did discuss it with at least two or three different 2 attorneys at the time.
3 Q And do you recall what their names are?
4 A I can come up with that information. I just want 5 to just see if I can remember it. One gentleman was a family 6 friend in Michigan, and I'm trying to remember what his nam[e] 7 was. One of the people was James Fisher. He's an attorney 8 here in Los Angeles. And then this other gentleman, his name 9 is escaping me now. I want to remember it. Do you want to 10 give me a seconere to come up with it here?
11 Q Sure.
12 A I can picture his face but I can't think of his 13 name right now. I have it, I have it, I just have to go get 14 it for you. I just can't think of his name right now. He's 15 a friend of my father's in Detroit. In fact, he was my 16 father's attorney at the time. I can't think of his name 17 right now. Those are the two. And there was another 18 gentleman in New York whose -- I believe his last name was 19 Sheinfeld or Sheinberg -- Richard Sheinfeld, Richard 20 Sheinberg -- who was a -- presented himself as a -- I was 21 given his name as an expert in these matters.
22 Q Who gave you his name?
23 A I don't remember.
24 Q Was it Roland?
25 A No.
Page 109 1 Q So other than the three attorneys and Roland, at 2 the time you were opening the account did you inform anybody 3 else?
4 A Well, I'm sure I informed wherever the money came 5 from. They were aware that money was going there.
6 Q You're referring to -- 7 A -- the institution that sent that money over there.
8 MR. BOLTZ: I assume you also informed somebody at 9 NAA.
10 THE WITNESS: Yeah, no, I met them, I met those 11 people.
12 BY MR. DUNBAR:
13 Q You're referring to NAA and the bank which sent NAA 14 the money?
15 A Right.
16 Q Anybody else?
17 A I'm trying to remember if there's anybody else I 18 talked to at that time. I remember talking to the attorneys 19 and setting it up, and talking to the people there, and 20 talked to Mr. deLamoussaye. It seems to me there was -- I'm 21 drawing a blank. That's all I got right now.
22 MR. BOLTZ: Well, if you can't remember, you can't 23 remember.
24 THE WITNESS: That's it. That's all I got right 25 now.
Page 110 1 MR. BOLTZ: If you think there were others, but you 2 don't remember their names, you can say that. That's -- 3 THE WITNESS: I think there might have been a 4 couple other people I talked to about it. I'm just recalling 5 someone in a bank, and it might have been at Chase or 6 something in New York, and I was referred to that person.
7 But I don't remember if I -- at that time I was doing some 8 investigation of this idea, and I'm just trying to think of 9 anybody I would have talked to. I assume you're asking 10 anybody I was -- about this whole idea. And I received 11 material. I must have -- there was a firm -- I'm sorry.
12 BY MR. DUNBAR:
13 Q Well, since its inception in 1987, have you 14 informed anybody else about the account?
15 A My attorney, Mr. Cohen.
16 Q Anybody else?
17 A I would say that I -- Mr. Levine would have some 18 knowledge. I mean, I just -- if you would ask him he would 19 say he would know something about this.
20 Q And why do you say that?
21 A I think I'm just -- I'm trying to be thorough in 22 answering your question. I'm just -- I'm sure I've told him 23 about this account.
24 Q Do you recall what you said to him about it?
25 A That it existed.
Page 111 1 Q Anything else?
2 A That it was being used for the friends' money.
3 Q Anything else?
4 A Maybe. I don't know. What else is there to say?
5 Q You said initially when you opened it you put in 6 about 7 million to 8 million, to the best of your 7 recollection, of friends' money that you had. About how many 8 friends did that consist of at that time?
9 A Boy, I don't know for sure. I'm going to -- can I 10 guess, I mean, a range?
11 MR. BOLTZ: I don't think you should guess, but I 12 think if you have an estimate.
13 THE WITNESS: Okay, I would say there were -- 14 MR. BOLTZ: Range?
15 THE WITNESS: Yeah, I'd say less than 20.
16 BY MR. DUNBAR:
17 Q Can you recall the name of those 20?
18 A I can recall some of them for sure.
19 Q Can you give us some of them?
20 A Sure, yeah, I can start trying to bring up -- to 21 come up with them. May I ask a question back, just about 22 this? I could go back and figure out exactly who those 23 twenty people were and send you the list. Or, I mean, I 24 don't know how this works. If I don't have a full answer can 25 you ask me again, later, after -- or else ask me to go find out Page 112 1 exactly and look through any records I might have? Is that 2 possible or is it now or never?
3 MR. MURPHY: No, no, you're testifying under oath, 4 and we're not trying to trap you. So if you can't give us an 5 exact answer you can give us an approximation or you can come 6 back later. You can also send us a list with additional 7 information. All we want from you is we want to get the 8 information accurately and truthfully. And we're not trying 9 to trap you into any -- making a guess or anything.
10 THE WITNESS: Oh, I don't feel that way. I just 11 want to make sure that if I don't have a complete answer, a 12 complete list of something, like these brokerage houses here, 13 I mean, I was thinking that there may be another brokerage 14 house that I could -- I'm going to go check and see if it's 15 still there. You know that kind of thing. I don't want to 16 not be complete in my answer.
17 MR. BOLTZ: Well, you're giving an answer right now 18 on this question, to your best recollection.
19 THE WITNESS: Okay. My good and best 20 recollections.
21 MR. BOLTZ: If you recall names, fine; if you 22 don't, fine. They just want what you recall. You don't have 23 to be apologetic about it.
24 THE WITNESS: I'm not trying to. I just wanted to 25 be cooperative.
Page 113 1 MR. BOLTZ: I hate to tell you what I remember from 2 1987.
3 THE WITNESS: Of Boltz?
4 MR. BOLTZ: Yeah. Let the record show that that's 5 not an answer to the question.
6 THE WITNESS: Humor.
7 MR. BOLTZ: Humor, yes.
8 THE WITNESS: Okay, let me see if I can do this.
9 Many of those people's names are still on the list that I 10 provided you, and if I had that list and I could look at it, 11 I might be able to do this pretty quickly.
12 BY MR. DUNBAR:
13 Q And which list are you referring to?
14 A I gave -- there's a list that you have of all that, 15 what you call the current friends. Do we have a copy of that 16 list we can -- or is it against protocol? I don't know.
17 MR. BOLTZ: We do, but they do too. They have -- 18 it's up to them, if you do have such a list.
19 THE WITNESS: I could just take that list.
20 MR. DUNBAR:
21 Q I'm not handing you what has been marked as Exhibit 22 4. It appears to be a list, Bates stamped RS 00001 to RS 23 000010. Mr. Slatkin, do you recognize this document?
24 A I do.
25 Q Can you identify this document?
Page 114 1 A List of friends that I'm watching over 2 their money. Okay, let's go back here and see -- oh, here's 3 one, Joan Roswell. Now it's coming back to me. Anyway, I'm 4 sorry to interrupt you. Schmier, Ronald Schmier, Stevens.
5 MR. MURPHY: Which Stevens?
6 THE WITNESS: Joel Stevens. Butcher. B-u-t-c-h-e- 7 r; Faleen (ph.); Choder, C-h-o-d-e-r, Jill Choder. I was 8 thinking of the ones that go back that far. That's what I'm 9 trying to do. Oh, Richard Freedman, Arlo Gordin, G-o-r-d-i- 10 n. How many is that, six or seven?
11 MR. DUNBAR: Six.
12 MR. BOLTZ: I have seven.
13 MR. DUNBAR: Stevens, Schmier, Butcher, Choder, 14 Freedman, Gordin?
15 MR. BOLTZ: Roswell?
16 THE WITNESS: Roswell.
17 MR. DUNBAR: Roswell.
18 THE WITNESS: Oh, yes, Milton Katseles, K-a-t-s-e- 19 l-e-s. I've closed a lot of accounts. I don't know, but I'm 20 sure there are more. There's a few that I'm not positive.
21 I'd like to check their -- the dates when they started. I 22 wouldn't want to speculate unless I was sure. May we have a 23 short break?
24 MR. DUNBAR: Absolutely.
25 MR. MORGAN: Let's go off the record.
Page 115 1 (A brief recess was taken.)
2 MR. DUNBAR: Back on the record at 3:23. Start 3 where we left off, I believe we were at the list of -- 4 MR. MURPHY: --initial investors.
5 MR. DUNBAR: --initial investors, the twenty.
6 MR. BOLTZ: Well -- 7 THE WITNESS: Approximately.
8 MR. BOLTZ: Yeah.
9 THE WITNESS: I've given you the ones to the be[st] 10 of my recollection at this time.
11 BY MR. DUNBAR:
12 Q Out of the list you gave us, did they all invest a[t] 13 the same time or did they invest at different periods o[f] 14 time?
15 A It was not all at the same time.
16 Q Do you recall who was the first?
17 A The first is not on the list here. It's a closed 18 account.
19 Q And what was that name?
20 A Meyer, M-e-y-e-r.
21 MR. BOLTZ: And of those who were on the list [can?] 22 you remember who was first?
23 THE WITNESS: I think he was the first one.
24 MR. BOLTZ: He was -- 25 THE WITNESS: No, he's closed. That's why it j[ust?] Page 116 1 came to me as he asked me that. It just popped into my 2 head. The first guy who came to me and said to me, would yo[u] 3 take care of -- 4 BY MR. DUNBAR:
5 Q Going back to the NAA account, when you want to [?] 6 take money out of the account how do you go about doing [that?] 7 Describe the process.
8 A Right. I make a phone call.
9 Q To?
10 A To the company.
11 Q NAA?
12 A NAA.
13 Q You make the phone call?
14 A Yes.
15 Q Has anybody else made a phone call to take money 16 out?
17 A No.
18 Q And then, what do you tell them?
19 A I tell them the amount and the instructions of 20 where to send it.
21 Q And where do you send it?
22 A It arrives at Union Bank.
23 Q Which account?
24 A In the friends account.
25 Q Have you ever wired it anywhere else?
Page 117 1 A I think there was an error once where it went into 2 the other account by mistake, probably the bank's error;
3 which it was summarily moved over to the proper account.
4 Q Other than by error, has it ever been transferred 5 anywhere else, wired anywhere else?
6 A I believe -- I'm trying to recall. I just wanted 7 just to ask Gerry a quick question.
8 MR. DUNBAR: Certainly. Off the record.
9 (Off the record.)
10 MR. DUNBAR: Back on the record.
11 THE WITNESS: I'm certain that in the early days 12 before the Union Bank account it was wired to a brokerage 13 account.
14 BY MR. DUNBAR:
15 Q From NAA to a brokerage account?
16 A Yes, to a brokerage account.
17 Q Before the friends Union Bank account existed?
18 A Before it existed, yes.
19 Q And do you recall the name of that brokerage firm?
20 A I wouldn't know exactly for sure.
21 Q Besides that brokerage firm you just mentioned is 22 there anywhere else that it would have been wired to?
23 A No.
24 MR. BOLTZ: It all ended up in Union Bank?
25 THE WITNESS: Yes. And in any case, it would end Page 118 1 up at the bank, I mean, ultimately.
2 BY MR. DUNBAR:
3 Q So you opened the NAA account before the Union Bank 4 friends account?
5 A Yes.
6 Q How long before?
7 A I think it was pretty close.
8 Q A year?
9 A Yeah, within a year, months. This all came 10 together as a concept.
11 Q How did you come up with this concept to do this?
12 A Do this?
13 Q I'm sorry, how did you come up with the concept to 14 open the NAA account and the -- 15 A Segregation -- yes, yes, I'm sorry, I shouldn't do 16 that but I'm trying to get to the freeway.
17 MR. BOLTZ: You mean the timing of the two, is that 18 what -- 19 MR. DUNBAR: Well, you summed it up the best, the 20 segregation. Why did you -- 21 THE WITNESS: My main concern is all about the 22 segregation and the safety issues. That's what this was 23 about in my mind, all right. Because I could see that it was 24 important that I was -- that things were kept very safe, and 25 that it was in my best interest and the interest of the Page 119 1 people that I was helping that these funds were segregated.
2 That was the key issue. So that's the way it came togeth[er.] 3 BY MR. DUNBAR:
4 Q When you opened the NAA account how did you o 5 about opening that? What's the process to open an account 6 like that?
7 A I went to Zurich.
8 Q You flew to Zurich?
9 A I flew to Zurich.
10 Q Well, let's start before. You said you got a 11 contact from Roland?
12 A Uh-huh.
13 Q And did you call that contact?
14 A No, he came -- he and I both went to Zurich 15 together.
16 Q The contact?
17 A Roland and I went to Zurich to meet -- 18 Q To meet the contact?
19 A --the person at NAA that was his friend or his 20 associate.
21 Q And then what?
22 MR. BOLTZ: To check out the organization?
23 THE WITNESS: I went over to check them out. I 24 mean, I just -- I met with the person there and I visited 25 them and talked about what I wanted. And we went and got -- Page 120 1 we started to do this.
2 BY MR. DUNBAR:
3 Q And so, you opened the account then, when you were 4 in Switzerland?
5 A Yes.
6 Q Have you been back to Switzerland since then?
7 A I have.
8 Q How many times?
9 A Well, let's see -- how hard do I try to remember 10 how many times I've been to Switzerland since 1987?
11 MR. BOLTZ: How do you remember?
12 THE WITNESS: How hard do I try to remember exactly 13 how many times?
14 BY MR. MORGAN:
15 Q Or a best estimate. Less than twenty times?
16 A Yes, less than twenty times, less than ten times.
17 Q Less than ten times?
18 A Less than eight times, okay.
19 BY MR. DUNBAR:
20 Q What are the purposes for those trips?
21 A Well, okay, this last summer I took my son and his 22 friend to the Montreux Jazz Festival in Montreux, Switzerland 23 and spent a little time in Zurich while I was there. That's 24 one example.
25 Q When was that?
Page 121 1 A That was this last summer. I think it was July -- 2 June, July. I went there in 1997. Primarily went to Paris 3 to visit some friends. Went down to Zurich for a meeting, 4 stopped in there again. I mean, it's probably six or eight 5 times since the -- 6 Q When you went on these trips do you ever go by NAA?
7 A Yes.
8 Q And what do you do when you go by there?
9 A Well, I've had lunch with the principal person 10 there a few times.
11 Q Anything else?
12 A I guess we talk.
13 Q When you're there do you ever trade stocks while 14 you're there?
15 A On, oh, yeah, yeah. I've done that. Not much that 16 that's occurred.
17 Q Have you ever withdrawn money while you were there?
18 A No.
19 Q Have you ever deposited money while you were there?
20 A No.
21 Q Have you deposited money into the account, the NAA 22 account, within the last year?
23 A No.
24 Q When was the last time you deposited money into 25 that account?
Page 122 1 A It's been at least ten years.
2 Q Can you recall the last time you deposited money 3 into this account, the NAA account?
4 A I can't recall the exact time.
5 Q Have you withdrawn any in the last ten years?
6 A Yes.
7 Q How many times?
8 MR. BOLTZ: You might tell what you're doing now.
9 THE WITNESS: Yeah, well, right now we're in the 10 process of liquidating all these people's accounts. Are you 11 familiar with that, that that's occurring?
12 BY MR. MORGAN:
13 Q Maybe you could tell us a little bit about that.
14 We're familiar with it in general, but -- 15 A Okay, you want to spend five minutes talking about 16 that?
17 Q Let's talk about that for five minutes.
18 A And stop me if I'm -- you kick me, you stop me if 19 I'm going the wrong way.
20 MR. BOLTZ: I'm not going to kick you.
21 THE WITNESS: Obviously -- I don't know if you talk 22 about this off the record or on the record, so.
23 MR. BOLTZ: On the record.
24 THE WITNESS: On the record, okay. In 1997 I 25 received a letter from the Securities and Exchange Page 123 1 Commission, which you've seen, asking about my act[?] 2 My attorney at the time, Mr. Cohen, made a response [?] 3 never heard anything back from the Commission. An[d ?] 4 time Mr. Cohen was advising me that he felt that the s[ize ?] 5 the -- what's this called? -- the size of this particular 6 activity was at a point where it was in my best interes[ts to?] 7 consider winding it down. My dedication to helping t[he] 8 Scientologists was very strong and remains that way. [I?] 9 began a systematic liquidation process at that time, an[d I?] 10 think I sent you a list of the accounts that have been c[losed?] 11 over this time frame.
12 I have a strong feeling that several hundred peo[ple] 13 that are involved in this is a very small drop in the bu[cket] 14 compared to the people that I want to help relative to 15 Scientology. And I'm very anxious to get going on m[y ?] 16 activities with them in the broader sense of representin[g] 17 them in various and sundry public arenas that I like to [?] 18 involved in, particularly in this area of the internationa[l ?] 19 justice. We're being heavily persecuted in Germany r[ight] 20 now, and I've been over there a couple times, marchin[g and?] 21 things like that, and I want to get more involved in tha[t.] 22 And I've been somewhat nervous about telling [my] 23 Scientology friends that I was going to stop doing this. [I?] 24 won't bore you with the letters that have come to me i[n the?] 25 last week and a half, but if you're interested in that Page 124 1 activity, and just to verify that it's really occurring, I'm 2 happy to show them to you. So when we received your -- 3 MR. BOLTZ: You might explain why you're nervo[us.] 4 In other words, what was the reaction from these people?
5 THE WITNESS: Well, I mean, these are people who 6 are depending on me to -- they're, by and large, people who 7 are spending their time working in the church, or working to 8 help the church, or working to get themselves off this bridge 9 I talked to you about, or training themselves. This is what 10 they do, and they have been depending on me to be the 11 person to help them to ensure they had some financial 12 stability in order to do that.
13 And so, when we received your indication that we 14 were in a formal investigation I thought, well, here we are.
15 So I -- Mr. Boltz's advice, I said, well, it's time to speed 16 up this process, because I have no particular reason to not 17 listen to my attorney. And so, we drafted a letter, which 18 you may have seen; I don't know if you've seen it or not.
19 MR. MORGAN: We've seen two drafts of the letter.
20 THE WITNESS: Okay, well, I think the last draft 21 you have, which mentions the SEC by name, is the one we s[ent] 22 out to all the people on this list. That letter was sent out 23 on the [7]th of January. And the only reason it was sent out 24 on the 7th and not the 5th is because I sat there looking at 25 those boxes of letters, thinking to myself, what am I going Page 125 1 to do here? This is -- it's a big step for me. Anyway, 2 starting, for example, in October of last year, for example, 3 we liquidated accounts to the tune of over $27 million, which 4 you can see on the records from the Union Bank account.
5 MR. MORGAN: In what period of time?
6 THE WITNESS: Between October 1st and, I believe, 7 the end of January -- the end of December. Just that -- 8 October, November, December, we sent back over $27 million to 9 people.
10 BY MR. DUNBAR:
11 Q What year?
12 A Ninety-nine. This process of liquidating accounts 13 is now in full swing. I believe that in the last two weeks we 14 sent out over $6 million in liquidations. Now, of course, 15 some of these accounts are being liquidated partially as we 16 go along because we have -- as the letter stated, I felt that 17 it was important for us to be cognizant of the issues of 18 helping these people find -- have the time to find another 19 place to have their funds taken care of and their assets.
20 And so, while we were liquidating we were also expecting to 21 hear back from people if they have particular requests for 22 where they want their money to go -- other managers or other 23 advisors or people that they would pick on their own.
24 Many of them are at a complete loss of what to do, 25 and are writing me letters, which I can show you. I'm Page 126 1 completely dismayed to receive your letter. What am I going 2 to do? You know, I've depended upon you all this time.
3 These are a little bit -- I don't want to make a big deal 4 about this to you, but it's a big deal to me. This is a 5 very, you know, kind of a tough process to deal with every 6 day.
7 You know, a lot of these people are people who are 8 living in Clearwater, Florida, where the Scientology base is, 9 or living here in Los Angeles, and they're working full time.
10 And I sent this letter out to them and it was a shock. But I 11 felt, in good faith, for what was going on here, and in good 12 faith to them, not wanting them to have stress of what was -- 13 that it's going to happen. Might as well give them some time 14 to sort it out.
15 And so, money is coming back in as needed to 16 liquidate accounts, per my observation of, you know, when 17 there's excess cash in the accounts or the people had 18 actually -- several people who received my letter handed the 19 letter to their CPA's, who saw the SEC's name on it, and we 20 got a letter saying: Please send me all my money tomorrow.
21 There are a number of those around, which have been taken 22 care of and handled in good shape.
23 You know, we've had no complaints from any 24 investor. I don't know, if you have you've got me fooled. I 25 mean, maybe that's where this all started, I don't know. But Page 127 1 I have, you know, a lot of very happy people and people I've 2 been a stable point for, and I've kept their money really 3 safe; and this whole business of being over there in the NAA 4 account, which I thought was a lot safer than it might even 5 have been here.
6 And so, the process is continuing apace. In my 7 letter, which you read, it said over the next several months.
8 I have already gotten responses back from some people saying, 9 I've just met with Fidelity. Please transfer all my funds to 10 this account. I'm being very careful not to violate any of 11 your other rules, by referring people to people with any kind 12 of a, you know, recommendation that would put me in harm's 13 way.
14 But I do have a couple of advisors. There's a 15 gentleman in Portland who has a -- he is a fund to funds 16 manager, a pension fund manager. And he sent me a whole 17 bunch of brochures, which I'm going to -- with a cover letter 18 specifically stating: No guarantees, this is not a 19 recommendation, advance at your own risk. Ironically -- I'd 20 like to go off the record just for thirty seconds, just to 21 say something amusing. Can we just do that and then go right 21 back on?
23 MR. BOLTZ: That's not -- 24 THE WITNESS: --necessary?
25 MR. MORGAN: Either you can say it on the record or Page 128 1 you shouldn't say it at all.
2 THE WITNESS: I'll say it on the record, but don't 3 take it the wrong way. So they sent me all these brochures.
4 And of course, he doesn't exactly know, you know, that this 5 was all -- this Reed Slatkin & Associates thing was one of 6 the issues that came up. And so, inside the brochure he put 7 an extra piece of paper which says compliments of Reed 8 Slatkin & Associates. So I ripped all those out, because 9 obviously that doesn't get me anywhere here. We're not 10 trying to -- I'm not in this business. That's my whole 11 point. I'm not doing this as a business.
12 So we are really liquidating these accounts. And 13 Mr. Boltz can show you some of the letters that have come 14 back from the people verifying this. They're coming in every 15 day. I have hired extra help at my office to receive the 16 phone calls from the people who received the letter. I would 17 expect that over the next 60 or 90 days we will have this as 18 virtually a fait accompli.
19 I think the only thing that would slow me down at 20 this point is that we have some positions in the account, 21 which if you -- if I were to show you, just take this one, 22 for example, although this is not the current one, you'll see 23 some things that were bought in the March, April, May time 24 frame of last year, which would go long term at that time.
25 And I think it's unfair to force someone to pay short term Page 129 1 capital gain taxes when these are companies that I've 2 researched and I'm familiar with them, and I -- and, also, 3 just send people securities who don't know why they own them 4 or what they're about, I think, is kind of an unfriendly 5 thing to do.
6 So the process is that I'm not trying to -- I have 7 taken this as an opportunity. And for these people, when 8 they see the word SEC in there, it gives them, in a sense, a 9 sense of urgency, which makes it a little bit easier for me 10 to do this.
11 MR. MORGAN: Let me stop you there and just make a 12 point for the record. You know this and Mr. Boltz knows 13 this, that the SEC has neither requested that you do this -- 14 THE WITNESS: I know that.
15 MR. MORGAN: --nor ratified or blessed or blessed 16 in any way the way you're doing it.
17 THE WITNESS: Exactly.
18 MR. MORGAN: So -- but go ahead.
19 THE WITNESS: No, well, that's not the point of my 20 telling you this.
21 MR. MORGAN: No, I know.
22 THE WITNESS: This goes back to your question.
23 MR. MORGAN: Just, when we get this little booklet 24 back I want that to be understood. So go ahead.
25 MR. BOLTZ: What little booklet?
Page 130 1 MR. MORGAN: The transcript to the testimony, I'm 2 sorry.
3 MR. BOLTZ: Oh, the transcript.
4 THE WITNESS: No, No, I'm not asking for that.
5 MR. MORGAN: Right, I understand.
6 THE WITNESS: I'm just trying to let you know, 7 these are factual things that I would like -- I want them on 8 the record because I think it's important that you know this, 9 because, you know, you asked me about it again; and I want 10 you to, because I want to tell you the progress we're making.
11 You know, there's a policy in Scientology talking 12 about motivation. I'm just going to read it into the record.
13 It's very short. It talks about money motivation. And it 14 says here: "People in business that are motivated only by 15 money are wobbly people. The primary cause of failure is 16 money motivation. The scale of motivation from the highest 17 to the lowest is duty. Below that personal conviction.
18 Below that personal gain. Below that money, and it's 19 indicated lowest."
20 So you know, these people have got to know that I 21 consider this to be my duty to be taking care of them. And 22 when they find out that I'm not doing this any more, some of 23 these letters are extremely angry at me for -- I wear this 24 hat. I have this position. This is what I do to help my 25 group. And they're accusing me of abandoning this and Page 131 1 letting them down. And what are they going to do, and how 2 could I? Somebody sent me a questionnaire, you kno[w,] to 3 answer the following question: Is the SEC forcing you to do 4 this? What did you do wrong? How come you're not taking 5 responsibility for this and finding someone to replace you 6 before you sent out this letter?
7 So in a sense, the letter has, you know -- this has 8 created a big -- a lot of my work for me. And I've been 9 preparing to be with you people, and Gerry and I have been 10 together the last day or so, and I have 162 phone calls -- 11 and I'm not even exaggerating -- sitting at my office, 12 waiting for me to call people back to explain this all to 13 them.
14 But I take it very seriously that they're -- as I 15 said in my letter, the second draft of it, that a question 16 has once again been raised by the SEC of whether I'm in the 17 business of managing money and whether I'm -- you know, jus[t] 18 like I said, per your order here, wherever we put that.
19 MR. BOLTZ: That's all right.
20 THE WITNESS: And I said it was incumbent upon m[e] 21 to make a decision right now to dispel any doubts about this.
22 Therefore, I am not accepting any new accounts or any money 23 for existing accounts. And I plan to transition or close or 24 liquidate all accounts over the next few months. That's what 25 I've said.
Page 132 1 MR. BOLTZ: And I think since you made that 2 decision and have been liquidating and not taking any m[oney?] 3 notwithstanding that you've received funds which you [have ?] 4 return, have you not?
5 THE WITNESS: Oh, not to mention the fact that [?] 6 yeah, last week I received four checks from people at the [?] 7 of the year. Please deposit this in my account, please 8 deposit it in my account. And we're turning those check[s?] 9 right around and sending them right out again. I get -- I 10 mean, I can't tell you how many calls I've received.
11 I mean, this has gone on for years, people calling 12 me up wanting to open accounts. I hear you're a great m[oney?] 13 manager, or I hear you read this. And I said, well, you 14 know, these aren't Scientologists, they aren't people that [I?] 15 know. They heard my name from some broker. You kn[ow ?] 16 don't do this. This is not a business for me. But on the 17 other hand, you know, Mrs. Berkowitz, whose son is a f[ull?] 18 time Scientologist and he's trying to take care of her, an[d] 19 she gets a letter from me saying I'm closing her account [?] 20 goes: What are you doing to me?
21 You know, and so, I'm in kind of a funny spot h[?] 22 right now of, on the one hand, not opening anything, clo[sing?] 23 things, and people are still sending me money, asking [me ?] 24 I've turned down many, many more accounts in the las[t ?] 25 years than I've -- I mean, that I possibly could have op[ened.] Page 133 1 And it still goes on. I get calls every week from 2 institutions and other people who don't understand what I'm 3 doing.
4 MR. BOLTZ: Turned down accounts on what basis?
5 THE WITNESS: Pardon me?
6 MR. BOLTZ: Turned down accounts for what reasons?
7 THE WITNESS: Oh, lots of reasons. I mean, you 8 know, first of all, they're not Scientologists or connected 9 with Scientology in some way. I got a call from a lady who 10 was -- her name was B[i?]ance Enickem (ph.), and she was an old 11 Scientology friend of mine. You're welcome to write her name 12 down. I think she might even be dead now. But she called me 13 this last year, she was 81 years old, she says: I heard that 14 you were helping people and I just got an annuity that my 15 father left me 35 years ago. It's £26,000. Will you please 16 take care of it for me? I can't do that. This is too risky.
17 This is not something that you just do for anybody. And so, 18 there's lots of reasons why we haven't, you know, taken 19 accounts.
20 And so, you know, I'm experiencing stress in 21 explaining to all these people why we're doing this. And I'm 22 experiencing stress in the disappointment that I'm 23 experiencing. But I also got one letter from guy that 24 said: Dear Reed, Congratulations on your retirement. I miss 25 you already. You know, things like that.
Page 134 1 And Mrs. Adamina, whose name is on this list, her 2 father Bob was a person that I personally counseled when he 3 was -- he was a war veteran and I helped him through some of 4 his problems he had with his war wounds. He was a prisoner 5 at a German prison camp for three and a half years. And she 6 is a dear friend of mine, and her letter starts out: Dear 7 Reed, I was dismayed to receive your letter. And what do I 8 do? I start to cry, I get upset. I call her on the phone 9 and say, well, you know, I don't want to make a mess for your 10 life but this is the time, it's the right time, there's a 11 good reason for it. I need to get back to what I want to do 12 a little bit, and I don't know what's going to happen here if 13 I continue to do this.
14 MR. BOLTZ: While he's giving an overview I think 15 there might be a couple other facts that I would bring out, 16 but I don't want to take this over.
17 MR. MORGAN: Go ahead, if you have some questions.
18 MR. BOLTZ: Is that all right? You might just 19 explain how your handling of accounts for six, eight, or ten 20 of fifteen friends grew to the number it is today.
21 THE WITNESS: All right, exactly. I know you're 22 going there anyway, we're heading there, so we might as well 23 get it out now. I got really excited about the idea that I 24 could make a big -- I won't use the word "effect" -- I could 25 make a big -- I could really help my group.
Page 135 1 And this all started with Meyer and a few other 2 people calling me on the phone and saying, you know -- and I 3 was now looking for something that -- a way to really 4 participate in helping Scientology. And those people called 5 me and said, you know, I'm going to go on full time training 6 down in Clearwater. Can you help me? I said, okay, I'll do 7 what I can. I'll let you piggy-back on what I'm doing, let's 8 put it that way.
9 And then, there was some success to this. You 10 know, I did okay at it. I mean, there was some -- hard to 11 miss in '85 and '86 and '87 before the crash. It was a 12 pretty good market time. So people started telling their 13 friends about me. And I started going wow, this is a way I 14 can really make a dent. I can really help these people. And 15 you know, this gal came to me, she said I want to open up a 16 Scientology church in Kenya. Would you give me a hand? I 17 go, absolutely. Let me help you out there. And that's sort 18 of what happened.
19 And then someone would say, well, you got an 20 account for me, how about doing one for my son? You know, I 21 mean, you've got to do one for my son. And I know this is an 22 issue here, but I never -- and you can check with any of 23 these people, if I ever asked them to refer anybody to me.
24 It never, ever happened -- on the record, never occurred. I 25 don't have any material. I don't have a brochure. There's Page 136 1 nobody out there trying to get accounts for me. It's not 2 what I'm doing here. It's not a business.
3 And we'll get into some of the aspects, because I 4 know you have some questions. But it kept going and going, 5 and I was successful in making these people money. And they 6 were not in -- they used the largesse that I was able to help 7 them with to, you know, donate things to the church and spend 8 their time and help their families. And I felt like I was 9 really helping, you know, really helping a lot.
10 But I tell you, it's gotten big. It's gotten to 11 the point where, you know, I'm working too hard on this 12 thing. And that's why a couple years ago, along with my -- 13 Mr. Cohen's urging me that, you know, this isn't a few 14 friends and family anymore, Mr. Slatkin. You know, this 15 registration issue might come up again. And I decided to 16 really start cutting back. And then, with the current 17 situation, I'm taking advantage of the current environment to 18 really go ahead and close it down. So that's how it grew. I 19 wanted to give you that -- 20 MR. BOLTZ: In terms of your reference that it's 21 not a business, could you describe whether you have ever 22 solicited, suggested, initiated conversations about receiving 23 anything of value for your work you've described that you've 24 done?
25 THE WITNESS: It was very important to me at the Page 137 1 beginning of this, going back ot this duty scale here. Here 2 it is. This is signed by L. Ron Hubbard. There is is, L.
3 Ron Hubbard, that's the guy. Like him or not, he's my man.
4 This duty thing is a big thing for me, duty and personal 5 conviction.
6 If someone says to me thank you, what do I do? I 7 said, nothing required. If you're going up the bridge, if 8 you're taking your time to work on this group, and you're one 9 of the people that is actually producing in this area, that's 10 my reward. But I insist. I want to do something for you. I 11 say, that's completely up to you. I have no requirements for 12 this whatsoever.
13 Now, as you know, we sent you a bunch of files of 14 interesting documentation regarding people who have sent me 15 various gifts, et cetera. You don't see in that list what 16 was also sent to me: boxes of candy, fruit of the moh. I 17 get more fruit of the month from Harry & David -- it comes in 18 every month, I get thirty or forty -- it's terrible. You 19 know, I have more pears, peaches, apples than any one 20 man could possibly want. Some guy sent me a statue that he got 21 at an auction, from a Frank Sinatra memorabilia event. I 23 don't think you'd put it in your office here, let alone in 24 your house. A guy sends me a case of wine. Now, okay, sure.
24 And many people have made donations to the church. And I can 25 show you letters of those, that people say, thanks to your Page 138 1 assistance I've put X dollars over to the CCHR or the IAS or 2 the ABLE, you know, as an acknowledgment. And sometimes 3 it's hard because, you know, people feel strongly that they 4 would like to acknowledge me.
5 MR. BOLTZ: But have you ever initiated a 6 discussion with anyone about that?
7 THE WITNESS: No, no, never. In fact -- 8 MR. BOLTZ: Or suggested that -- 9 THE WITNESS: I have never. I mean, it's obviously 10 a canned question, but the answer is that -- the answer is 11 no. And you could ask the people. And they will tell you, 12 no, this guy drives me crazy. He won't let me pay him 13 anything.
14 MR. BOLTZ: I know it's -- I mean, people use 15 different words when they write to you. Some, obviously, 16 give gifts and a lot of them don't give anything. But some 17 talk about an award or a fee or a commission, and so forth.
18 Can you explain how they come up with -- 19 THE WITNESS: It doesn't look too good, does it?
20 MR. BOLTZ: -- well, how they come up with those 21 different words.
22 THE WITNESS: You know, I can only guess, okay.
23 Before I answer the question I'll just say that, you know, 24 I've always insisted that whatever they did that they always 25 put whatever it was in writing, so that we didn't have any Page 127 1 disagreement that I didn't send out a bill or an invoice or 2 some kind o[f a] fee schedule, or anything like that 3 whatsoever. That's their parlance. That's how they view 4 what it is that they're doing, okay. It's not from me. You 5 know, I didn't say any of those words. As far as I'm 6 concerned, if I didn't -- because you could see, you could 7 check this all over, there's, I'd say, more than half the 8 people haven't sent me anything over the years.
9 MR. BOLTZ: Has anybody lost money?
10 THE WITNESS: (Knocks on table.) Did you get that, 11 knock on wood? No. You can check it out. Nobody has lost 12 any money. I think the money has been safe. I've been very 13 diligent about this. Look, you know, these are the people 14 that I'm taking care of and it's important to me that they do 15 well. So those are just -- so, we're liquidating the 16 accounts. Does that answer all your promptings?
17 MR. BOLTZ: Yes.
18 THE WITNESS: And as money is needed we're bringi[ng] 19 it back in to do that, because I want to get this over with.
20 You know, I'd say between now and the next few months, at th[e] 21 rate we're going, I would say we'll be done.
22 BY MR. MORGAN:
23 Q How would you determine the order of the 24 liquidations?
25 A Until I sent the letter out there, let's just Page 140 1 say, a couple of different ways in which I viewed this. Last 2 year -- I don't know if you saw the letter that I have 3 everybody sign when we go into this endeavor. Have you seen 4 a copy of that letter?
5 MR. BOLTZ: We've sent that to them.
6 THE WITNESS: I don't know if you've seen it or 7 not, but it's a two-page document talking about, as their 8 friend, I will do this for you. There's no mention of any 9 fees or compensation, nor gifts or anything in it. There's 10 none mentioned in there. It talks about they could lose all 11 their money, they understand there's a risk.
12 But I take the position that, you know, when I 13 think things are risky out there, and I'm looking over these 14 accounts and I see a bunch of people whose last dollar is 15 here, or I think possibly it's their lost dollar, I put them 16 into cash; and then wrote them a letter and say I think it's 17 too risky for you to have your money in the stock market, and 18 sent the money back to them. People I know that aren't 19 working or don't have jobs. I mean, maybe that's a violation 20 of some law, I don't know. But to me it was altruistic in 21 that sense.
22 Now, as far as the order of liquidation -- and 23 then, of course, there are people who call up and say I want 24 my money. And when they ask for their money they get it.
25 And so, I'm sort of hoping that, as I have been over the last Page 138 1 couple of weeks, getting letters saying please liquidate my 2 account. And usually within a week or ten days we liquidate 3 the securities. I often am asked, what are the tax 4 ramifications of liquidating my account at this time? And I 5 always give the exact same answer: I don't give tax advice.
6 And then somebody's CPA will call me and say, are there any 7 stocks that are going to be long term here in the next short 8 period of time? And I say -- I give them the answer and then 9 wait for their response.
10 MR. BOLTZ: Well, in terms of the order of 11 liquidation, you're responding to specific requests in 12 liquidating the ones that asked.
13 THE WITNESS: That's what I'm doing, specific 14 requests -- 15 MR. BOLTZ: And there are others that, on the contrary, 16 who have said, I need to find an advisor or -- and then there 17 are still others that -- 18 THE WITNESS: Others say I want to be last.
19 MR. BOLTZ: And there are others that want to wait 20 for -- be sure it's a long term gain.
21 THE WITNESS: Right, that's how it's going. So I'm 22 not thinking of anything that -- if I'm asked for the money 23 the money goes. It's that simple. I'm not saying don't ask 24 for it; I'm not saying to ask for it. I've told them that 25 this is what my intention is. And you know, if they haven't Page 142 1 asked for their money, I'm calling everyone back in the next 2 couple of weeks and saying, have you found someone that you 3 would like me to transfer this account to?
4 BY MR. MORGAN:
5 Q Have you liquidated any accounts where there hasn't 6 been a request to do so? And I'm talking now about recent 7 history, the last six months or something?
8 A Like I said, the only ones I've liquidated in the 9 last year -- I do this as a matter of course. You could see 10 it over the last three or four years. I would just take a 11 position when the market, I felt, was somewhat more risky or 12 I felt there was just not -- this particular person, who I 13 knew well, you know -- it's not been with any particular 14 reason except to help them with any risk they might have. So 15 I don't have a pecking order at all.
16 Q And then, on the mechanics of the liquidation, you 17 say you bring money back in?
18 A Right.
19 Q You're referring to bringing money back in from the 20 NAA account -- 21 A Correct.
22 Q -- to the Union Bank account?
23 A That's correct. And you'll see in those 24 statements, you'll see money going in, money going out. It's 25 just right there. Take a look at the statement, you'll see 1 it right there.
2 MR. BOLTZ: As soon as we get the most recent 3 statement from NAA we'll send it.
4 THE WITNESS: Send it right over to you.
5 MR. BOLTZ: It should be shortly.
6 MR. MORGAN: We will probably want to just confirm 7 the information from NAA. Would we have any problem getting 8 your authorization to confirm it directly with NAA?
9 THE WITNESS: Not at all. I mean, I want to -- I 10 don't see why we would have any problem with that.
11 MR. MORGAN: Well, before we do that we'll talk to 12 you, Mr. Boltz, and figure out how we're going to do that.
13 MR. BOLTZ: Okay, thank you.
14 THE WITNESS: That would be something that I think 15 Mr. Boltz could take care of with you. He has a great 16 familiarity with the situation there.
17 MR. MURPHY: Who are the NAA? Who is NAA?
18 MR. BOLTZ: It's an organization, it's an 19 institution that, as I understand, is made up of a number 20 of individuals. And NAA originally was the last names of 21 certain individuals.
22 BY MR. MORGAN:
23 Q Do you have a principal contact over there?
24 A I do.
25 Q Who is that?
Page 144 1 A His name is Mitchell Axiall, A-x-i-a-l-l.
2 MR. MURPHY: Is it a bank or is it -- what is it?
3 MR. BOLTZ: You know, I can't answer that question 4 for you. I'm in the process of determining exactly how it's 5 registered in Switzerland.
6 MR. MURPHY: But how do you know that they're good 7 for the money?
8 MR. BOLTZ: Oh, well, he's been dealing with them 9 for -- go ahead.
10 THE WITNESS: A very, very long time. In the early 11 days we dealt with the Julius Bear Bank, and I had a contact 12 there that was very, very good; I felt a lot of confidence.
13 And I've known these guys a very, very long time, and in fifteen 14 years I've never -- 15 MR. BOLTZ: In other words, you checked with other 16 banks in Switzerland -- 17 THE WITNESS: Yes.
18 MR. BOLTZ: -- to verify the -- 19 THE WITNESS: Yes, to verify them, yeah.
20 MR. BOLTZ: --bona fides, if I can find -- 21 THE WITNESS: The Julius Bear people were very, very, 22 very high on these guys at that time. And that was my main 23 contact there. But it's been so many years now that I've 24 dealt with them, it's just so efficient and so -- executions 25 are great, and reliability, and a feeling of safety.
Page 145 1 Now, obviously, you know -- I don't know if I 2 should say this on the record or not, but I just -- you know, 3 I don't -- let me just say this. I don't want my people -- 4 my people! -- I don't want my friends to experience any more 5 stress than they need to. And so, I'm focusing on that. I'm 6 focusing on getting them their money. That's what I'm doing 7 now. And I'm dedicating myself over the next couple of 8 months to make sure that that takes place. That's all I'm 9 doing.
10 MR. BOLTZ: Have you ever used the money of the 11 friends, as we're using that term today, for your own 12 purposes, have commingled their funds?
13 THE WITNESS: No, never. No, I don't do that.
14 I've had a bit of a good fortune this last few years. I 15 don't know if you were going to ask me about this again, but 16 we can do it quickly now if you want, or not. I invested in 17 a company called EarthLink Networks. I'll tell you the story 18 sometime, if you want to hear it on the record, off the 19 record.
20 It created a very nice windfall for myself, you 21 know, and it has allowed me to be very charitable to my 22 church and other groups, both in Santa Barbara and around the 23 country. And I was born Jewish and take care of the Jewish 24 Federation. You know, you've got to take care of everybody, 25 just in case; you don't know for sure how it's going to turn Page 146 1 out in the end.
2 But I'm in the position where I'm -- you know, I've 3 been very, very lucky and all this help that I've given to 4 other people is -- I seem to have been a fortunate recipient 5 or a good fortune for doing that. That's an interesting 6 story if you want to hear it.
7 MR. MURPHY: But is the money that went to invest 8 in EarthLink, did any of that come from the investors or was 9 that entirely your money?
10 THE WITNESS: All right, I'll tell you the story 11 just briefly.
12 MR. BOLTZ: Well, first answer the question.
13 THE WITNESS: The answer to the question is it was 14 completely my money, 100 percent. And when I tell you how 15 much it was you'll understand -- not that there would be any 16 doubt anyway, but just so you know. I had invested in 17 several venture capital ideas before this, various, and 18 things I had tried to make some money in over the years, 19 invested my money. Just completely a loser, didn't make any 20 money. You know, $50,000 here, $25,000, just lose, lose 21 lose. I can give you a list of them. I might throw up, but 22 I'll give you the list.
23 And then one afternoon, there's a gentleman named 24 Kevin O'Donnell, who you may know is associated with me.
25 He's a fellow board member of mine at EarthLink. His son Page 147 1 went to school with a gentleman named Sky Dayton, who is a 2 a board member and the founder of EarthLink. He said, wou[ld] 3 you please have dinner with Sky Dayton. He's got an idea an[d] 4 I think you guys ought to hear it.
5 This guy is 22 years old. We met over at Louise's 6 Kitchen up there on Los Feliz and Vermont. He handed me o[ne?] 7 piece of paper, he said, I think the Internet is too 8 difficult. We should start an Internet provider where it's 9 really for the people. And I looked at this, I said, I 10 looked at Kevin, I went -- I'm nodding and making a funny 11 face like he's crazy. And Kevin looked at me, he says: He's 12 a friend. So I think we put up $75,000 apiece and got 40 13 percent of the company.
14 And that was the last thing in the world I thought 15 was going to work. And if you think three-quarters of these 16 guys who made all this money in all these high-tech companie[s] 17 are going to tell you a different story, it's not true. You 18 don't know. The one that looks like it's going to make it is 19 a dud and the one you think is just a shot in the dark comes 20 through.
21 So I have a lot of money of my net worth in that 22 company, which you can see. But what I had invested in that 23 company for the several years that I was there was a 24 relatively small amount. And mostly, what I did was sign 25 guaranties for leases and that got me some additional stock Page 148 1 during those early years. And I felt, from the rules I was 2 told by the counsel for EarthLink, that it was -- SEC 3 considered it to be breaking the rules to have unreported 4 investments in a public company, particularly -- I'm not 5 quoting your own -- 6 MR. BOLTZ: -- agency?
7 THE WITNESS: -- agency, but the only thing I can 8 tell you is that, damn the rules, a lot of people were mad at 9 me that I didn't put them in it, I can tell you that. Oh, 10 boy, I got some heat for this. How come you didn't put us in 11 this?
12 MR. BOLTZ: Did you ever assess or charge your 13 friends for a portion, or any portion, of the cost and 14 expenses, labor and other, of managing their money?
15 THE WITNESS: I think you'll also -- you could 16 check this out very carefully -- all the -- since I consider 17 myself a professional investor, and my personal business is 18 taking care of my own money. That's what I do. And I have 19 computer equipment and I have an office and I have telephon[es?] 20 and I have travel, and none of these expenses has ever been 21 in any way, in any form, any percentage of it, has been 22 transferred to any of these other people, ever -- just for 23 the record.
24 MR. BOLTZ: Have you ever solicited a new investo[r?] 25 THE WITNESS: No. And I think if you talk to som[e] Page 149 1 of these people they would say to you, I called Reed doznes 2 of times before he would even talk to me. I mean, I'm just 3 telling you this. This is the way it worked. I have no 4 agents, nobody does it for me.
5 BY MR. MORGAN:
6 Q When was the EarthLink investment, the initial 7 $75,000?
8 A That's a matter of record. You have it in your own 9 -- or on your computer. I'm sure you know a lot more about 10 me than I even know you know by now.
11 Q What is the name of the manager in Oregon who's 12 taking over some of the accounts?
13 A I know he's meeting with a couple of the people 14 this week. His name is called Compass Advisors.
15 MR. BOLTZ: They're registered advisors?
16 THE WITNESS: Registered advisors, yeah. And I'm 17 -- he is one of several people -- see, what I'm hoping is 18 going to happen is that I'm not going to have to recommend 19 anybody, because I don't want to do that. So my wife says I 20 can't win.
21 MR. MURPHY: Is it "K" or "C"?
22 THE WITNESS: "C." I can't win.
23 BY MR. MORGAN:
24 Q What's the individual's name at Compass?
25 A Joseph Meyer, M-e-y-e-r, different than the other Page 150 1 Meyer I mentioned to you before.
2 Q And do you have an interest in Compass Advisors?
3 A I had an interest in that company. When he first 4 started the company I lent him money. I was a creditor. You 5 can check that out. And that loan has been paid off. I have 6 no interest in it whatsoever. I was just about to tell you 7 that before you asked me.
8 But he's not the only one. There's another group 9 in Florida called Bulldog Capital, which is run by a 10 Scientologist named Ron Pollack, which is -- he has several 11 funds he manages and he's a registered advisor. He's another 12 person I'm thinking about. But he's a Scientologist. These 13 people will naturally gravitate to him. I don't have to do 14 anything. That's easy.
15 And then there's another gentleman named Rusty 16 Tweed from a company called Tweed Financial. He's a local 17 L.A. person who is -- I believe he primarily advises people 18 in the area of retirement and pension funds. And I think 19 he's got -- I would use the word stable of advisors that he 20 might recommend. And he's a Scientologist. And he called me 21 and wrote me a nice letter, asking if, you know, if I would 22 recommend him. And I said no, but if somebody calls you 23 please don't hesitate to have them call me and ask to have 24 their funds transferred to you.
25 So I'm thinking that over the next month or two I'm Page 151 1 not going to have to do much of anything, because these 2 people, they believe me. They don't like it, but they 3 believe that I'm done, I'm out. And so, I'm glad you've 4 given me next week to go full time on getting those phone 5 calls back. And when I see you in the week after again, I 6 will give you a report, a status of how we're doing on 7 liquidations. And I could even show you specifically, if you 8 like, which people have gotten their money and how much, and 9 I'd like to work with you. And I'm not trying to co-opt you 10 in any way. I know you're going to say -- you're not 11 approving anything I'm saying, but I'm offering to work 12 things through with you.
13 MR. BOLTZ: I think Mr. Slatkin has been under some 14 pressure from some of these investors because they're 15 desperate; they don't know who to go to. And I think he's 16 wanted to avoid making any recommendations, but they say, 17 well, at least give us the names of several, just like giving 18 the names of attorneys or -- 19 THE WITNESS: Did you bring over some of those 20 letters? Did you bring those letters with you?
21 MR. BOLTZ: I didn't bring them with me, but you're 22 welcome to see them. I mean, I could bring them next time, 23 of some of these people. So I think his compassion for them 24 causes him to want to help them to try to find someone 25 because they need help.
Page 152 1 THE WITNESS: It's a dilemma, it's a dilemma.
2 MR. BOLTZ: So if you have any concerns we'll 3 listen to them.
4 MR. MURPHY: Well, I mean, I think our general 5 concern, Mr. Slatkin, is to see that an investor, whatever is 6 represented to them as being monies that they're owed, that 7 they get those monies. And to the extent we can verify 8 independently what's occurring, as Mr. Dunbar asked you -- 9 like, for example, if we can confirm with the account in 10 Switzerland that the funds exist, things like that help.
11 MR. BOLTZ: Mr. Slatkin has told me he -- that 12 there is no doubt about that. And I think he's a person of 13 substantial means. He stands behind this.
14 THE WITNESS: I mean, my own net worth, which is 15 represented by that stack of stuff there adds up to an excess 16 of $100 million and there's other assets out there, too. And 17 I would never let these people lose their money. I mean, I 18 would not want to say that I would get -- you know, any 19 reason to believe otherwise, but -- 20 MR. BOLTZ: We'll be glad to show the verification 21 of the closing, the payments as they occurred; and, if you 22 like, give you period reports, even after the testimony next 23 week, or whenever it is -- just something like that.
24 BY MR. MORGAN:
25 Q I think we already covered this, but I just want to Page 153 1 get it clean once. Other than the money in the NAA account 2 and the friends Union Bank account, is there any other money 3 located anywhere that belongs to these friends?
4 A No.
5 MR. MORGAN: Is this a good breaking point? Let's 6 go off the record for a minute.
7 (Whereupon, a brief recess was taken.)
8 MR. DUNBAR: Mr. Slatkin, at this time we are 9 adjourning testimony to February 2nd, 2000. Although 10 testimony is adjourned you do remain under subpoena. Mr.
11 Slatkin, do you wish to clarify anything or add anything to 12 the statements you have made here today?
13 THE WITNESS: No, sir.
14 MR. DUNBAR: Mr. Boltz, do you wish to ask any 15 clarifying questions?
16 MR. BOLTZ: Not at this time, no. I think you've 17 been very lenient in letting us clarify certain things during 18 the course of this.
19 MR. DUNBAR: If we have any documents that we would 20 like further we'll contact Mr. Boltz for those documents.
21 Thank you very much for your time here, and have a good 22 weekend.
23 We are off the record at 4:18.
24 (Whereupon, at 4:18 p.m., the examination was 25 concluded.)
Page 154 1 PROOFREADER'S CERTIFICATE 2 3 In the Matter of: REED SLATKIN AND ASSOCIATES 4 Witness: Reed E. Slatkin 5 File Number: LA-1961 6 Date: Friday, January 21, 2000 7 Location: Los Angeles, California 8 9 10 This is to certify that I, David W. Baker (the 11 undersigned, do hereby swear and affirm that the attached 12 proceedings before the U.S. Securities and Exchange 13 Commission were held according to the record and that this is 14 the original, complete, true and accurate transcript that has 15 been compared to the reporting or recording accomplished at 16 the hearing.
17 18 19 20 _________________________________ _____________________________________ 21 (Proofreader's Name) (Date) 22 23 24 25
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