12-2297 Karron CoA Appendix v09

12-2297pr
To be argued by:
D. B. KARRON
Uu|Icd 'IaIco <oa|I o| Jppca|o
FOR THE SECOND CIRCUIT
Docket No. 12-2297

DANIEL B. KARRON,
Petitioner - Appellant,
v.
UNITED STATES OF AMERICA,
Respondent - Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

APPENDIX Volume 9 FOR THE PETITIONER - APPELLANT

D. B. KARRON
pro se
348 East Fulton Street
Long Beach, New York 11561
(516) 515- 1474
drdbkarron@gmail.com

Table of Contents

NOTE: Page Numbers are not correct and need to be hand entered because
of hand insertion of PDF. Contents for ordering, not for reference. Citations into
page numbers are being checked.
Contents
Table of Contents ............................................................................................. 2
APPENDIX VOLUME COVERS .................................................................. 6
APPENDIX Volume 1 FOR THE PETITIONER APPELLANT ................ 7
APPENDIX Volume 2 FOR THE PETITIONER APPELLANT ................ 9
APPENDIX Volume 3 FOR THE PETITIONER APPELLANT ..............11
APPENDIX Volume 10 FOR THE PETITIONER APPELLANT ............25
APPENDIX Volume 11 FOR THE PETITIONER APPELLANT ............27
APPENDIX TABS ........................................................................................29
Case Docket ..................................................................................................... 1
District Court Amended Opinion and Order ................................................... 2
Docketed Briefs ............................................................................................... 3
Originating 2255 Form Motion ....................................................................... 4
Originating Brief Memorandum of Facts and Law ......................................... 5
Reply Brief Corrected Sur Reply Memo of Facts and Law ............................ 6
Audit and Accounting Forensics (short) .......................................................... 7
GX114 .............................................................................................................. 8
GX114 in Focus ............................................................................................... 9
GX110 Year 1 ................................................................................................10
KARRON PERSONAL ACCOUNTS ..........................................................11
GX112 Year 1 ................................................................................................12
Year 1 SF269A ..............................................................................................13
Year 1 Source of Funds .................................................................................14
Karron Co-Funding Year 1 Schedule .....................................................15
Karron Co-Funding Check 1166 .........................................................16
Karron 75K Payroll Advance and Repayment......................................26
Salary Advance and Repayment Schedule .........................................27
Year 2 Source of Funds .................................................................................28
GX113 Year 2 Source of Funds ....................................................................29
Year 2 Karron Checks Source of Funds ........................................................30
Karron Co-Funding Year 2 Schedule .....................................................31
Karron Check 1142 for $5000 ..............................................................32
Karron Check 1152 for $2,500 .............................................................33
Karron Check 1153 for $2,500 .............................................................34
Karron Check 1154 for $2,500 .............................................................35
Karron Check 1166 for $2,000 .............................................................36
Karron Check 5339 for $2,000 .............................................................37
Karron Check 5341 for $1,000 .............................................................38
Karron check 1222 for $1000. ..............................................................39
Karron check 1228 for $20,000 ............................................................40
Karron Check 1243 for $25,000 ...........................................................41
Program Purchases during Program on Karron Personal ...............42
KARRON PERSONAL MASTERCARD ....................................................43
STATUTES ...................................................................................................44
15 USC 278n(2001) .....................................................................................45
Rules and Regulations ...................................................................................46
15 CFR 24.30 Changes ................................................................................47
15 CFR 14 DoC Uniform Administrative Rules ........................................48
OMB Cost Principles 2001 ............................................................................49
48 CFR Ch. 99 9903.2015 Waiver (2001) ................................................50
Government Exhibits .....................................................................................51
Government Exhibit Contracts ......................................................................52
GX1 Proposal Preparation Kit .......................................................................53
GX2 ATP General Terms and Conditions 2001............................................54
GX3 DoC Financial Assistance Standard Terms and Conditions .................55
GX4 Grants and Agreements Management Division GAMA ......................56
GX12 Co Operative Agreement ....................................................................58
GX13 Special Conditions ..............................................................................59
GX14 Special Conditions ..............................................................................60
POPA Newsletter 1 ........................................................................................61
POPA Newsletter 2 ........................................................................................62
Case Law........................................................................................................63
Institute for Technology Development v. Brown, 63 F.3d 445 (C.A.5
(Miss.), 1995) ...........................................................................................................64
Scholarly Writing ...........................................................................................65
Legal Scholarly Writing ................................................................................66
Say What You Mean J Levine .......................................................................67
Financial Assistance And The Bona Fide Need Rule ...................................68
The Use of Sentencing Findings ............................................................69
THESE PAGES INTENTIONALLY BLANK .............................................70
TRIAL and Sentencing TRASCRIPT (Long) ...............................................77
DUNLEVY FORENSIC RECONSTRUCTION (Long) ..............................77

APPENDIX VOLUME PAGES

Volume V1 KA-1 KA-300
Volume V7 KA-1800 KA-2200a (oversize)
Volume V11 KA-3100 KA-3332 END
Table 1 Appendix Volume Pages

669
8657KAR6 Gur f ei n - cr oss
1 BY MR. RUBI NSTEI N:
2 Q. Let me show you t hi s document and mar k i t as - - i t ' s par t
3 of act ual l y gover nment ' s 3507- S, at page 27 of 28 pages.
4 THE COURT: 3507 what ?
5 Q. Bef or e you t est i f i ed, di d you have an oppor t uni t y, si r , t o
6 go over e- mai l s t hat ei t her you sent or t hat wer e sent t o you?
7 A. No, not par t i cul ar l y, no.
8 Q. You ar e El i sha Gur f ei n and your e- mai l addr ess i s
9 egur f ei n@ear t hl i nk. net , r i ght ?
10 A. Cor r ect .
11 Q. I s t hat cor r ect , si r ?
12 A. Yes.
13 Q. I di r ect your at t ent i on t o page 28.
14 A. Page 28?
15 Q. Take a l ook at t hi s page her e.
16 THE COURT: Page what ?
17 MR. RUBI NSTEI N: I t ' s page 27, your Honor , and 28.
18 THE COURT: What ' s t he dat e?
19 THE WI TNESS: Thi s e- mai l was dat ed Febr uar y 1, 2003.
20 I don' t r ecal l ever r ecei vi ng t hi s e- mai l . Thi s i s mor e t han
21 si x mont hs or so af t er I l ef t . I don' t r emember seei ng t hi s
22 e- mai l .
23 THE COURT: Who i s t he e- mai l f r om?
24 MR. RUBI NSTEI N: I t ' s f r omDr . Kar r on t o Mr . Gur f ei n.
25 And I woul d of f er t hi s por t i on of Gover nment ' s 3507- S.
SOUTHERN DI STRI CT REPORTERS, P. C.
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1 MR. EVERDELL: Obj ect i on, your Honor .
2 THE COURT: Sor r y?
3 MR. EVERDELL: Obj ect i on.
4 THE COURT: I di dn' t hear t he st at ement .
5 MR. EVERDELL: He i s of f er i ng t he e- mai l i n evi dence.
6 THE COURT: Obj ect i on sust ai ned.
7 Q. Wel l , i s i t a f act , si r , whi l e i n t he year you had wor ked
8 f or CASI you had char ged $2, 000 f or par ki ng?
9 A. I don' t r emember t hat number , no.
10 Q. Do you r ecal l char gi ng CASI $1, 589 f or t r avel ?
11 A. I don' t r ecal l t hat number ei t her .
12 Q. Do you r ecal l bei ng asked by Dr . Kar r on t o pr ovi de backup
13 and j ust i f i cat i on f or expenses t hat you had?
14 A. No.
15 Q. Now, t her e was, was t her e not , i n t he budget t hat we ar e
16 t al ki ng about , $110, 500 appr oved f or f r i nge benef i t s, cor r ect ?
17 A. Show me wher e t hat i s.
18 Q. Do you st i l l have t hat Exhi bi t 22 i n f r ont of you?
19 A. Hol d on. What page i s t hat on her e?
20 THE COURT: 22, i t ' s t he t hi r d page i n what he i s
21 aski ng about .
22 MR. RUBI NSTEI N: J udge, I t hi nk, wi t h al l due r espect ,
23 t he f our t h page i n.
24 THE WI TNESS: What page?
25 MR. RUBI NSTEI N: I f you l ook on page 4, or on page 3
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1 as t he cour t sai d.
2 THE WI TNESS: I aml ooki ng f or a f i gur e of $110, 500.
3 I do not see t hat . Oh, yes, I do. Sor r y, I do see i t .
4 Q. Now, who was t he account ant f or CASI when you f i r st st ar t ed
5 wor ki ng t her e?
6 A. J i l l Fel dman, I t hi nk.
7 Q. And di d you have cont act wi t h her ?
8 A. Br i ef .
9 Q. Was she r epl aced?
10 A. Yes.
11 Q. And who r epl aced her ?
12 A. J oan Hayes.
13 Q. Appr oxi mat el y when was t hat ?
14 A. I t was l at er . I ' mnot sur e exact l y when J oan came i nt o t he
15 pi ct ur e.
16 Q. And what was her f unct i on as t he account ant f or CASI ?
17 THE COURT: Whi ch one? Hayes?
18 MR. RUBI NSTEI N: Hayes.
19 A. What was Hayes' f unct i on?
20 Q. Yeah. Di d she wor k under you? You wer e t he busi ness
21 manager ?
22 A. No, no. You have t o r emember al l my aut hor i t y was t aken
23 f r omme by Dr . Kar r on. The i dea t hat I had any aut hor i t y over
24 anybody i s j ust f al l aci ous.
25 Q. That l et t er mer el y sai d t hat you coul dn' t si gn checks,
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1 r i ght ?
2 A. That ' s cor r ect .
3 Q. You wer e get t i ng pai d a gr oss sal ar y of $100, 000 a year ,
4 r i ght ?
5 A. Cor r ect .
6 Q. And J oan Hayes was wor ki ng t her e as an account ant , cor r ect ?
7 A. Cor r ect .
8 Q. Di d you see her when you went t her e t o CASI ?
9 A. Sur e.
10 Q. How of t en - - you sai d you woul d be t her e l i ke t hr ee days a
11 week?
12 A. The quest i on i s how of t en was she t her e when I was t her e.
13 That var i ed.
14 Q. How of t en woul d you see her ?
15 A. She woul d be t her e dur i ng a cer t ai n t i me i nt er val . I
16 r emember seei ng her t her e mor e of t en t han ot her s but t hat was
17 l at er on. She st ar t ed showi ng up t her e l at er on, not ear l y i n
18 t he pr oj ect , not i n t he f i r st year anyhow.
19 Q. Wel l , when you say t he f i r st year , you mean 2001.
20 A. Wel l , Oct ober 1, 2001 unt i l Sept ember 30, 2002 when I was
21 t her e. That ' s t he f i r st year of t he gr ant .
22 Q. So, you di d not see her of t en when you wer e - -
23 A. Oh, I saw her ver y of t en t owar ds t he end of t hat per i od I
24 j ust ment i oned, but not at t he begi nni ng.
25 Q. Woul d you see her at al l ?
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1 A. Sur e.
2 Q. I n t he begi nni ng?
3 A. She wasn' t on i n t he begi nni ng. J i l l Fel dman was on i n t he
4 begi nni ng.
5 Q. J i l l Fel dman l ef t ear l y i n 2002, di d she not ?
6 A. Yeah, I don' t r emember t he exact dat e.
7 Q. I s i t your under st andi ng t hat Hayes had pur chased J i l l
8 Fel dman' s pr act i ce?
10 THE COURT: Sust ai ned.
11 Q. Wel l , di d you obser ve - - by t he way, di d you have access t o
12 t he comput er at CASI ?
13 A. Di d I have access t o i t ?
14 Q. Ri ght .
15 A. What does t hat mean?
17 Q. Coul d you use t he comput er at CASI ?
18 A. Yeah, sur e.
19 Q. Wer e you awar e t hat - -
20 THE COURT: You ar e t al ki ng about t he busi ness
21 comput er ?
22 MR. RUBI NSTEI N: Yes.
23 Q. Wer e you awar e t hat t hey had a pr ogr am, sof t war e pr ogr am
24 cal l ed Qui ck Books, i nst al l ed?
25 A. Yes.
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1 Q. And ar e you awar e t hat t hat was pur chased pr i or t o Oct ober
2 1, 2001, wi t h f unds of Dr . Kar r on?
3 A. I di d not know t hat .
4 Q. But you knew i t when you wer e wor ki ng t her e t hat t hi s Qui ck
5 Book syst emwas i n ef f ect .
6 A. Yes.
7 Q. And al so wer e you awar e t hat t her e was a pr ogr ami n ef f ect
8 t o scan al l document s i nt o t hat same comput er syst em?
9 A. Yes.
10 Q. Di d you par t i ci pat e i n scanni ng document s i nt o - -
11 A. No.
12 Q. Di d you par t i ci pat e i n t hat Qui ck Book syst emgener at i ng
13 i t s own checks?
14 A. No.
15 Q. Di d i t ?
16 A. That i t gener at ed i t s own checks? Di d I t ake par t i n t hat ?
17 No.
18 Q. No, no, but di d t he syst emgener at e a check?
19 A. I ' msor r y?
20 Q. The Qui ck Book syst em, di d i t gener at e checks?
21 A. I don' t know t hat .
22 Q. I s i t f ai r t o say t hat Dr . Kar r on woul d have vi r t ual l y
23 ever y pi ece of paper t hat came i nt o t he CASI - -
25 Q. - - gr ant scanned?
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2 Q. Wel l , who di d you see scan document s i nt o t hat comput er
3 syst em?
4 A. Dr . Kar r on f or t he most par t , and maybe some ot her peopl e.
5 Q. Wel l , Mar gar et Fer r and, di d you see her scan anyt hi ng?
6 A. No.
7 Q. As a mat t er of f act , how many peopl e wer e t he maxi mumt hat
8 wer e wor ki ng at CASI at 300 East 33r d St r eet at one t i me?
9 A. I can' t say f or sur e at t hi s poi nt . Wor ki ng f or CASI on
10 t he gr ant ?
11 Q. Yes.
12 A. Wel l , var i ous peopl e came and l ef t , so i t ' s a l i t t l e bi t
13 har d t o r eal l y know t hat number exact l y. I f you ask me how
14 many peopl e woul d be pr esent at any one t i me i n t hat l i vi ng
15 r oom? I woul d say pr obabl y maybe a maxi mumof si x or seven at
16 t he most . At most . But t hat was not t he usual .
17 Q. But you coul d have as many as t hat .
18 A. That woul d be t he absol ut e maxi mum, seven maybe, pr obabl y
19 l ess.
20 Q. Wer e t her e al so vol unt eer s t hat Dr . Kar r on had r ecr ui t ed t o
21 wor k on t hi s pr oj ect ?
22 A. I t hi nk he mi ght have had a gr aduat e st udent or t wo l i ke
23 t hat .
24 THE COURT: Woul d your si x or seven i ncl ude t he
25 vol unt eer s, or ar e you excl udi ng t he vol unt eer s?
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1 THE WI TNESS: I don' t r ecal l , your Honor , seei ng a
2 gr oup mor e t han - - except when t her e was a si t e r evi ew wi t h
3 peopl e f r omNI ST, I don' t r ecal l seei ng mor e t han hal f a dozen
4 peopl e, maybe seven, at any one t i me.
5 Q. How about - - was Dr . Wol ber g t her e?
6 A. Rar el y.
7 Q. Was J i mCox t her e?
8 A. Yes.
9 Q. Was Mat t Rot hman t her e?
10 A. Yes.
11 Q. Scot t Al bi n?
12 A. Scot t Al bi n? Yes, but not al l at t he same t i me.
13 Q. And you sai d t her e was a l i vi ng r oom. Was t her e any l i vi ng
14 r oomf ur ni t ur e i n t her e?
15 A. De mi ni mi s.
16 Q. I n f act i t was basi cal l y a comput er l ab, cor r ect ?
17 A. For t he most par t , cor r ect .
18 Q. Let me show you what has been mar ked as BBB f or
19 i dent i f i cat i on and al so mar ked CCC f or i dent i f i cat i on. I show
20 you t hese t wo pages of phot ogr aphs, and t hese ar e t he l et t er s.
21 Take a l ook at def endant ' s BBB f or i dent i f i cat i on.
22 A. Yes.
23 Q. Tel l me i f you r ecogni ze what ' s depi ct ed i n t hose
24 phot ogr aphs.
25 THE COURT: The quest i on i s: I s i t a f ai r and
( 212) 805- 0300
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1 accur at e r epr esent at i on?
2 THE WI TNESS: Yes, t hi s appear s t o be Dr . Kar r on' s
3 l i vi ng r oomas I r emember i t .
4 MR. RUBI NSTEI N: I woul d of f er BBB i nt o evi dence, your
5 Honor .
6 MR. EVERDELL: No obj ect i on.
7 THE COURT: BBB i s admi t t ed i n evi dence.
8 DEPUTY COURT CLERK: J udge, I t hi nk t hat ' s al r eady i n.
9 THE COURT: I t i s i n evi dence. I ' msor r y.
10 MR. RUBI NSTEI N: No, i t wasn' t . I t was mar ked f or
11 i dent i f i cat i on.
12 THE COURT: I t hi nk t he gover nment consent ed t o i t i n
13 evi dence. Go ahead.
14 MR. RUBI NSTEI N: CCC?
15 THE COURT: You had t hemup on t he boar d, di dn' t we?
16 Ar en' t t hese t he pi ct ur es we had up on t he scr een.
17 MR. RUBI NSTEI N: Oh, I ' msor r y. She sai d she coul dn' t
18 t est i f y about i t , I t hi nk. Thank you, Rober t . You' r e r i ght .
19 I apol ogi ze.
20 THE COURT: Go ahead.
21 Q. You r ecogni ze what t he phot ogr aphs ar e depi ct ed i n CCC?
22 A. Not al l of t he i t ems I do r ecogni ze i n CCC. I r ecogni ze - -
23 MR. RUBI NSTEI N: May I appr oach t he wi t ness?
24 A. I r ecogni ze t he bat hr oom, not much el se. I never saw t hi s
25 si gn. I don' t r emember t hi s her e. I r emember t hi s. I
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1 r emember t hi s t el ephone si t uat i on i n t he bat hr oom, but I don' t
2 r emember anyt hi ng el se on t hi s page.
3 Q. Do you r ecal l anyt hi ng about Dr . Kar r on' s r oomi t sel f ?
4 A. Ther e wer e some comput er s i n t her e.
5 Q. That ' s hi s bedr oom.
6 A. Yes.
7 MR. RUBI NSTEI N: Let me publ i sh BBB f or t he j ur y.
8 Q. Now, st ar t i ng, si r , at t he t op l ef t as we l ook at t hi s
9 exhi bi t , what por t i on of t he ar ea r ef er r ed t o as t he l i vi ng
10 r oomwas t hi s?
11 A. What does t hat mean?
12 Q. Wel l , do you see t hat l ar ge - - l et me poi nt t o i t - - I ' m
13 poi nt i ng t hi s at somet hi ng shown on t he r i ght hand - - t her e ar e
14 si x phot ogr aphs, cor r ect ?
15 A. Yes.
16 Q. I n t hi s exhi bi t ? Thi s i s on t he r i ght - hand si de, t he
17 mi ddl e phot ogr aph. Do you r ecogni ze what t hat i s?
18 A. That l ooks l i ke a scr een, but I - -
19 Q. How about down her e on t he l ower r i ght ?
20 A. That l ooks l i ke a scr een.
21 Q. Was t her e a scr een at t hat f aci l i t y?
22 A. Ther e was one i nst al l ed whi l e I was t her e.
23 Q. And who i nst al l ed i t ?
24 A. Abe Kar r on, t o my knowl edge. I saw hi mi nst al l i t .
25 Q. And t hat was a scr een si mi l ar t o t he scr een t hat we have
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1 her e. I mean - -
2 A. Yes, f or a r oomt hat ' s about one quar t er t he si ze or one
3 f i f t h t he si ze.
4 Q. And t her e was al so a pr oj ect or si mi l ar t o t he pr oj ect or
5 r i ght over her e, cor r ect ?
6 A. Pr obabl y was, yeah.
7 Q. Do you r ecogni ze t hi s i t emt hat ' s i n evi dence as Gover nment
8 Exhi bi t 123?
9 A. Wel l , not expl i ci t l y, but I coul d have seen i t bef or e.
10 Q. OK. Now, wer e you ever pr esent when pr esent at i ons wer e
11 made by t he peopl e at CASI on t hi s ATP pr oj ect ?
12 A. Yes.
13 Q. And when pr esent at i ons wer e made, was t hat scr een ut i l i zed?
14 A. One t i me I was at such a pr esent at i on, yes.
15 Q. And who el se was pr esent ?
16 A. Dr . Kar r on and a whol e bunch of ot her peopl e, i ncl udi ng
17 J ayne Or t hwei n and B. J . Li de and some ot her peopl e.
18 Q. Ar e you awar e - - ar e you awar e t hat Dr . Kar r on woul d go
19 somet i mes t o New J er sey t o l ect ur e and was cal l ed upon t o
20 l ect ur e on t he ATP pr oj ect ?
21 A. New J er sey? Not t o my knowl edge.
22 Q. Anywher e.
23 A. I f i t happened, i t was on no r egul ar basi s t hat I knew
24 about .
25 Q. Now, goi ng t o t he t op pi ct ur e on t he l ef t , do you see, ar e
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1 t hose t wo comput er s?
2 A. Yes.
3 Q. And - -
4 A. Wel l , t hey' r e moni t or s, anyhow.
5 Q. Moni t or s. And ar e t hose t he moni t or s you di scussed bef or e,
6 t he ones t hat cost - -
7 A. I don' t t hi nk so.
8 Q. And t hese, do you see t hose shel ves?
9 A. Yes.
10 Q. Do you know who const r uct ed t hose shel ves?
11 A. No.
12 Q. Do you know what was cont ai ned on t hose shel ves?
13 A. Oh, var i ous books and r ecor ds, I t hi nk.
14 Q. By t he way, was t her e an i nst al l at i on of wi r i ng done i n
15 t hat r oom?
16 A. I n t he l i vi ng r oom?
17 Q. Ri ght .
18 A. An i nst al l at i on of wi r i ng?
19 Q. Ri ght .
20 A. Pr obabl y.
21 Q. Was t her e an i ncr ease i n t he ai r condi t i oni ng?
22 A. Ther e cer t ai nl y was.
23 Q. I t woul d get pr et t y hot i n t her e, woul d i t not ?
24 A. I t di d.
25 Q. Bet ween t he comput er s and al l t he peopl e?
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1 A. Yes.
2 Q. And was i t messy i n t her e?
3 A. Was i t what ?
4 Q. Messy.
5 MR. EVERDELL: Obj ect i on. Obj ect i on.
6 THE COURT: Obj ect i on sust ai ned. I don' t see t he
7 r el evance of t hat .
8 Q. Wel l , you t est i f i ed - -
9 THE COURT: Pl ease go ahead. No speaki ng obj ect i ons.
10 Ask anot her quest i on.
11 Q. Do you know a per son named Chr i s Wegner ?
12 A. I met Chr i s Wegner .
13 Q. And ar e you awar e t hat Chr i s Wegner was a f or mer empl oyee
14 of CASI ?
15 A. I do.
16 Q. And ar e you awar e t hat when Chr i s Wegner was an empl oyee of
17 CASI pr i or - - wi t hdr awn - - t hat Chr i s Wegner had sur ger y
18 per f or med and was pai d f or by CASI ?
19 A. That ' s possi bl e, yes.
20 THE COURT: Was t hi s dur i ng t he gr ant per i od or not i n
21 t he gr ant per i od? We' r e t al ki ng about t he gr ant per i od,
22 Mr . Rubi nst ei n.
23 Mr . Gur f ei n, ar e we t al ki ng about t he gr ant per i od?
24 THE WI TNESS: I don' t know when t hat was pai d f or , but
25 I don' t t hi nk i t was pai d f or dur i ng t he gr ant per i od.
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1 Q. But i t was cust omar y f or CASI bef or e t hey got t he gr ant t o
2 have t hese - - t o pay f or empl oyee' s benef i t s, r i ght ?
4 THE COURT: You wer en' t connect ed wi t h CASI unt i l t he
5 t i me - - you don' t have knowl edge of anyt hi ng - -
6 THE WI TNESS: No. I have knowl edge, but I t hi nk i t
7 was pr i or t o my bei ng wi t h CASI .
8 THE COURT: But you don' t have knowl edge of anyt hi ng
9 t hat happened bef or e you. You don' t have per sonal knowl edge of
10 anyt hi ng t hat happened bef or e you wer e at CASI .
11 THE WI TNESS: Cor r ect .
12 THE COURT: Do you have knowl edge of t hi s?
13 THE WI TNESS: Dr . - -
14 THE COURT: Per sonal knowl edge.
15 THE WI TNESS: Dr . Kar r on t ol d me t hat - -
16 THE COURT: No, al l r i ght . That ' s hear say.
17 Q. When you wer e di scussi ng wi t h Dr . Kar r on t he medi cal
18 expenses t hat you t est i f i ed t o bef or e, di d Dr . Kar r on i n
19 r esponse t el l you anyt hi ng about t he pol i ci es of hi s company?
20 A. He sai d t o me t hat i n t he case of Chr i s Wegner he got I
21 t hi nk i t was $10, 000 f r omsome ot her f unds ot her t han NI ST
22 f unds t o pay f or t hat sur ger y. That ' s what he t ol d me.
23 Q. Di d he t el l you what hi s pol i cy was f or empl oyees and
24 f r i nge benef i t s and heal t h benef i t s pr i or t o get t i ng t he gr ant ?
25 A. Pr i or t o get t i ng t he gr ant ?
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1 Q. Ri ght .
2 A. No, he di dn' t t el l me what t he pol i cy was pr i or t o get t i ng
3 t he gr ant .
4 Q. Di d you ever ask hi mi f he ever char ged any - - what ki nd of
5 f r i nge benef i t s he was accust omed t o payi ng pr i or t o get t i ng
6 t he gr ant ?
7 A. I n t he most gener al way I know t hat hi s pol i cy unwr i t t en
8 was ver y l oose.
9 Q. Now, wer e you i nvol ved i n t he hi r i ng of J oan Hayes?
10 A. No.
11 Q. Di d you have deal i ngs wi t h her i nvol vi ng any f i nanci al
12 document s?
13 A. Yes.
14 Q. Whi ch f i nanci al document s wer e t hose?
15 A. I don' t r emember .
16 Q. You f i l ed I bel i eve t he quar t er l y f i nanci al st at ement s?
17 A. Yes.
18 Q. And di d Ms. Hayes pr ovi de any of t he f i gur es t hat you
19 i ncor por at ed i n t hose f i l i ngs?
20 A. I don' t t hi nk so. I t ' s possi bl e, but I don' t r ecal l t hat .
21 THE COURT: Wher e di d you get t he f i gur es?
22 THE WI TNESS: Wel l , basi cal l y t he f i gur es wer e not
23 r epr esent at i ve of what was act ual l y spent but r epr esent at i ve of
24 what was r ecei ved f r omNI ST.
25 THE COURT: So wher e di d you get t he f i gur es?
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1 THE WI TNESS: Wel l , t he f i gur es f or t he quar t er l y
2 r epor t s wer e basi cal l y a summat i on of dat a i n t he appl i cat i ons
3 made f or t he pr i or t hr ee mont hs t o NI ST f or t he pr ogr ess
4 payment s, wher e we had t o r epor t what was done i n t he pr i or
5 mont h.
6 THE COURT: Wher e woul d you get t hose f i gur es?
7 THE WI TNESS: Wel l , t hose f i gur es woul d agai n be
8 got t en f r omessent i al l y f r omwhat we r ecei ved as opposed t o
9 havi ng t he cor r ect f i gur es, whi ch woul d have been what was
10 act ual l y spent di r ect l y on t he pr oj ect .
11 THE COURT: Wel l , what you r ecei ved was $150, 000 and
12 t hen mont hl y payment s of - -
13 THE WI TNESS: - - 60, 000.
14 THE COURT: - - 60 or 65.
15 THE WI TNESS: 60.
16 THE COURT: So t hose don' t t el l you t he br eak- down.
17 THE WI TNESS: No.
18 THE COURT: Does t he quar t er l y r epor t show a
19 br eak- down?
20 THE WI TNESS: No, no br eak- down of t he quar t er l y
21 r epor t .
22 THE COURT: Let me see a quar t er l y r epor t .
23 MR. EVERDELL: Your Honor , Gover nment Exhi bi t 40 f or
24 exampl e.
25 THE COURT: He has one. He has handed me one.
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1 Exhi bi t 21, t he cover page. I see. But t hi s i sn' t one t hat
2 was f i l ed by you. Thi s i s an amendment t o t he f i nanci al
3 assi st ance r epor t .
4 THE WI TNESS: I apol ogi ze.
5 MR. EVERDELL: Your Honor , I t hi nk t hi s i s one.
6 THE WI TNESS: I ' msor r y. Wr ong i t em.
7 THE COURT: Her e i s one, Gover nment Exhi bi t 40. That
8 was al l egedl y f i l ed J anuar y 10, 2002. And t hi s shows t he t ot al
9 amount r ecei ved and t he t ot al amount cont r i but ed by CASI - -
11 THE COURT: - - t o t hi s awar d. The t ot al amount of
12 f unds r ecei ved i n t hat quar t er and t he t ot al cont r i but i on
13 al l egedl y made by CASI .
15 THE COURT: Wher e di d you get t he f i gur e f or t he
16 amount t hat CASI cont r i but ed?
17 THE WI TNESS: Wel l , CASI di dn' t cont r i but e anyt hi ng.
18 These number s wer e backed i nt o essent i al l y t o make i t l ook
19 r i ght , because t hat ' s what I was t ol d t o do.
20 THE COURT: By whom?
21 THE WI TNESS: By Dr . Kar r on.
22 THE COURT: That ' s t r ue f or t he next quar t er and next
23 quar t er ? Di d you f i l e a next quar t er ?
24 THE WI TNESS: I f i l ed f or t he f i r st quar t er , t he
25 second quar t er , t he t hi r d quar t er . The f our t h quar t er I don' t
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1 r ecal l f i l i ng because I was not t her e anymor e.
2 THE COURT: And t hey wer e done on al l t hr ee quar t er s
3 i n t he same f ashi on?
4 THE WI TNESS: Yes.
5 Q. Now, you wer e at CASI , wer e you not , i n Apr i l of 2002,
6 cor r ect ?
7 A. Yes.
8 Q. And ar e you awar e t hat an amended f i nanci al st at us r epor t
9 was f i l ed i n Apr i l of 2002?
10 A. I ' mnot sur e I r emember t hat .
11 Q. Let me show you what ' s i n evi dence as Gover nment Exhi bi t
12 2000. And I wi l l l eave 2001 up t her e.
13 THE COURT: 2000 and 2001.
14 Q. Do you want t o r evi ew t hose document s, si r ?
15 A. Yes.
16 Q. Do you r ecogni ze t hose document s?
17 A. Wel l , yes.
18 Q. And di d you f i l e t hose document s?
19 A. No, Dr . Kar r on f i l ed t hem.
20 Q. And di d you assi st hi mi n pr epar i ng t hem?
21 A. Yes.
22 Q. And di d J oan Hayes assi st i n pr epar i ng t hem?
23 A. I don' t r emember t hat .
24 Q. Wel l , do you r ecal l t hat you wer e at t empt i ng t o get a
25 budget r evi si on i n November of 2001, December 2001?
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1 A. A budget - -
2 Q. - - r evi si on.
3 A. Yes.
4 Q. And you wer e t al ki ng t o Hope Snowden about i t ?
5 A. Yes.
6 Q. And Hope Snowden at some t i me suggest ed you cal l J ayne
7 Or t hwei n t o di scuss t he changes?
8 A. I f r ankl y don' t r ecal l t hat , but i t ' s possi bl e.
9 Q. Wel l , l et me show you - -
10 THE COURT: We don' t want i t ' s possi bl e. You ei t her
11 r ecal l i t or you don' t r ecal l i t .
12 THE WI TNESS: I don' t r ecal l i t .
13 THE COURT: Anyt hi ng i s possi bl e.
14 Q. Let me show you what ' s mar ked f or i dent i f i cat i on as
15 Def endant ' s DDD.
16 DEPUTY COURT CLERK: Def endant ' s BBB?
17 MR. RUBI NSTEI N: D, dog dog dog. See i f t hi s
18 r ef r eshes your r ecol l ect i on, si r .
19 MR. KWOK: May I see i t ?
20 THE WI TNESS: Now t hat I r ead i t , I f r ankl y don' t
21 r ecal l i t t hat wel l , but , yes, I see i t and - -
22 THE COURT: No, j ust what you r ecal l . I t ' s onl y bei ng
23 shown t o you i f i t r ef r eshes your r ecol l ect i on. Don' t r ead t he
24 document i nt o t he r ecor d. I f i t r ef r eshes your r ecol l ect i on,
25 say yes i t does r ef r esh your r ecol l ect i on.
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1 THE WI TNESS: I t does not . I don' t r ecal l t hi s.
2 Q. That i s an e- mai l t hat was sent f r omyou t o Dr . Kar r on, was
3 i t not , on December 7, 2001?
4 MR. EVERDELL: Obj ect i on, your Honor . He sai d i t
5 doesn' t r ef r esh hi s r ecol l ect i on.
6 MR. RUBI NSTEI N: Wel l t hen I ' mof f er i ng i t i nt o
7 evi dence.
8 THE COURT: Wel l , wai t a mi nut es. December 7 - - he
9 can' t r ead i t unt i l i t ' s admi t t ed i nt o evi dence i n t he f i r st
10 pl ace.
11 MR. RUBI NSTEI N: Cor r ect .
12 THE COURT: But what you showed hi mwas somet hi ng t hat
13 was submi t t ed somet i me i n Apr i l , and now you ar e t al ki ng about
14 December . Ther e i s no r el at i onshi p i n t he dat es of your
15 quest i ons.
16 MR. RUBI NSTEI N: I t hi nk t her e i s, J udge.
17 THE COURT: Wel l , you may t hi nk t her e i s, but t hi s way
18 pr ecedes t he dat e you wer e i nqui r i ng about by mor e t han t hr ee
19 mont hs.
20 MR. RUBI NSTEI N: J udge, t hi s i s an e- mai l sent by t hi s
21 wi t ness.
22 THE COURT: Look, i t may be, but you t ol d me t he dat e.
23 Now, I don' t want t o hear a speaki ng obj ect i on. Br i ng i t over
24 her e t o t he si de. Ther e i s an obj ect i on about i t , l et ' s get i t
25 cl ear ed up.
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1 ( At t he si debar )
2 MR. EVERDELL: Thi s i s t he document , your Honor .
3 THE COURT: I have no i dea.
4 MR. EVERDELL: The def ense counsel i s usi ng t hi s t o
5 t r y t o r ef r esh t he wi t ness' s r ecol l ect i on. He hasn' t had hi s
6 r ecol l ect i on r ef r eshed, so i t can' t be used f or t hat pur pose
7 any mor e. He can' t admi t i t i n evi dence because he doesn' t
8 r ecogni ze t he e- mai l . Ther e i s no way t o admi t t hi s i nt o
9 evi dence.
10 MR. RUBI NSTEI N: He does r ecogni ze t he e- mai l account .
11 I t ' s hi s account .
12 MR. EVERDELL: He says he doesn' t r emember i t .
13 MR. RUBI NSTEI N: No, he doesn' t r emember t hi s
14 document , t hi s e- mai l .
15 THE COURT: He doesn' t r emember i t , and he has
16 admi t t ed al r eady t hat he at t empt ed t o go above Hope Snowden on
17 one occasi on t o get an appr oval .
18 MR. RUBI NSTEI N: Ri ght . And, J udge - -
19 THE COURT: He has al r eady t est i f i ed t o t hat . Thi s
20 doesn' t add a t hi ng.
21 MR. RUBI NSTEI N: J udge, t he f act of t he mat t er i s t hat
22 t her e i s an ent i r e l i ne comi ng f r omHope Snowden of t hese
23 negot i at i ons, al l t he whi l e she kept aski ng f or r evi si ons.
24 THE COURT: He has al r eady t est i f i ed about t hat .
25 MR. RUBI NSTEI N: No, he di dn' t .
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1 THE COURT: Yes, he di d t est i f y about i t ,
3 Now, how much l onger ar e you goi ng t o be?
4 MR. RUBI NSTEI N: Pr obabl y hal f hour , 45 mi nut es.
5 MR. EVERDELL: Your Honor , my di r ect was how l ong?
6 THE COURT: Wel l . Sor r y, we wi l l have t o go on a
7 l i t t l e whi l e l onger .
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1 ( I n open cour t )
2 MR. RUBI NSTEI N: You do r emember at t empt i ng t o get a
3 budget r evi si on near t he end of 2001?
5 THE COURT: He has al r eady t est i f i ed about t hat . He
6 sai d yes he di d t r y t o get t hem. He sai d t hat sever al t i mes.
7 That ' s t he cour t ' s r ecol l ect i on. I t ' s t he j ur y' s
8 r ecol l ect i on t hat gover ns.
9 Q. How many budget r evi si ons wer e submi t t ed bet ween December
10 2001 and Febr uar y 2002?
11 A. I don' t r emember .
12 Q. You do r ecal l Hope Snowden - - havi ng conver sat i ons wi t h
13 Hope Snowden, cor r ect ?
14 A. Yes.
15 Q. And you r ecal l her aski ng you or CASI t o submi t r evi sed
16 budget r equest s?
17 A. Wel l , we di scussed changes i n t he budget , yes.
18 Q. And do you r ecal l pr epar i ng or par t i ci pat i ng i n t he
19 pr epar at i on of r evi sed budget ?
20 A. Yes.
21 Q. And di d you consul t wi t h J oan Hayes as t o t he f i gur es, t he
22 act ual f i gur es t hat wer e expended by CASI dur i ng t he gr ant
23 per i od?
24 A. At whi ch poi nt ?
25 Q. Whi l e you wer e negot i at i ng wi t h Hope Snowden t o get a
( 212) 805- 0300
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1 r evi sed budget .
2 A. At whi ch poi nt ?
4 Q. Wel l , at what poi nt wer e you negot i at i ng wi t h Hope Snowden?
5 A. I don' t r ecal l expl i ci t l y, but i t was ear l y on.
6 Q. At what poi nt i n your negot i at i on di d you consul t wi t h J oan
7 Hayes about what number s wer e t o be ut i l i zed?
8 THE COURT: I f you di d.
9 THE WI TNESS: I don' t r ecal l consul t i ng wi t h J oan
10 Hayes.
11 Q. Now, you had t est i f i ed bef or e t hat t her e wer e a number of
12 l awyer s associ at ed wi t h CASI ?
13 A. Yes.
14 Q. And you sai d t her e was a Mr . Ber nst ei n?
15 A. Yes.
16 Q. You sai d t her e was a Ms. Mi l l er ?
17 A. Yes.
18 Q. And wer e t her e ot her at t or neys?
19 A. Those ar e t he onl y ones I r emember .
21 THE COURT: Those ar e t he onl y ones he r emember s.
22 Q. Di d you ever di scuss wi t h any of t hose at t or neys about t he
23 expenses t hat Dr . Kar r on was char gi ng t owar ds t he NI ST budget ?
24 MR. EVERDELL: Obj ect i on, r el evance.
25 THE COURT: I wi l l al l ow t he quest i on.
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1 A. I don' t r ecal l t hose di scussi ons on t hat poi nt .
2 Q. Di d you ever t al k t o Hope Snowden or anybody at ATP as t o
3 any speci f i c expense t hat Dr . Kar r on was char gi ng t o NI ST?
4 A. What ki nd of expense?
5 Q. Any ki nd of expense.
6 A. That ' s ver y br oad. I ' mt r yi ng t o - -
7 THE COURT: Di d you ever t el l hi mt hat he was spendi ng
8 money t hat was not pr ovi ded f or i n t he budget and at t r i but i ng
9 i t t o NI ST?
10 THE WI TNESS: I don' t r ecal l t hat conver sat i on.
11 Q. As a mat t er of f act , J oan Hayes was Dr . Kar r on' s per sonal
12 account ant , was she not ?
13 A. I don' t know t hat ei t her . I di dn' t know t hat .
14 Q. Ar e you awar e of whet her or not J oan Hayes pr epar ed Dr .
15 Kar r on' s per sonal t ax r et ur ns - -
17 Q. - - f or ' 99, 2000 and 2001?
19 A. I don' t know t hat .
20 THE COURT: He doesn' t know t hat .
21 Q. Di d you ever i n your di scussi ons wi t h Dr . Kar r on about your
22 vi ew of what was al l owabl e and not al l owabl e, t el l hi mt hat i f
23 he di d i t hi s way he coul d wi nd up i n j ai l ?
24 A. I t ol d hi mt hat he can' t do j ust anyt hi ng he want ed t o do
25 l i ke he t hought he coul d. He t hought he coul d spend t he way he
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1 t hought he coul d spend and not necessar i l y t he way t he r ul es
2 sai d he coul d spend.
3 Q. Di d you ever say t o hi m, you know, I t hi nk you mi ght be
4 commi t t i ng a cr i me by doi ng what you' r e doi ng?
5 A. Maybe not i n t hose wor ds but al ong t hose l i nes.
6 MR. RUBI NSTEI N: No f ur t her quest i ons, your Honor .
7 THE COURT: Any r edi r ect ?
8 MR. EVERDELL: Fi ve mi nut es, your Honor ?
9 THE COURT: Fi ve mi nut es, and t hat ' s i t , no mor e.
10 REDI RECT EXAMI NATI ON
11 BY MR. EVERDELL:
12 Q. Al l r i ght . Mr . Gur f ei n, you t est i f i ed on cr oss- exami nat i on
13 about a conver sat i on you had wi t h def endant ' s br ot her Abe
14 Kar r on, i s t hat cor r ect ?
15 A. Yes.
16 Q. That conver sat i on r el at ed t o a possi bl e i nvest ment of
17 $50, 000 i n t he company?
18 A. Yes.
19 Q. Can you expl ai n mor e br oadl y what t he ci r cumst ances of t hat
20 conver sat i on wer e?
21 A. Thi s conver sat i on was about my havi ng t he - - t he
22 conver sat i on was about t he f act t hat my si gnat ur e aut hor i t y was
23 t aken away, and I t hought t hat was a mi st ake, and hi s r esponse
24 was i f you i nvest $50, 000 i n t he company you can have t hat
25 r esponsi bi l i t y back. And I sai d I ' mnot i nvest i ng $50, 000 i nt o
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8657KAR6 Gur f ei n - r edi r ect
1 t hi s company, i t i s t oo r i sky.
2 I n f act t hi s i s t he poi nt t o be made. One of t he
3 r easons f or get t i ng t he ATP gr ant i n f act i s because i t i s
4 gi ven t o r i sky vent ur es t hat have di f f i cul t y r ai si ng f unds i n
5 t he pr i vat e sect or , and t hat ' s one of t he pur poses and one of
6 t he cr i t er i a f or get t i ng t he awar d. So, I t ol d hi mno, and I
7 of cour se di d not gi ve t he 50, 000, nor di d I get t he si gnat ur e
8 aut hor i t y back.
9 Q. You t est i f i ed al so on cr oss- exami nat i on about some
10 quar t er l y f i nanci al r epor t s.
11 A. Yes.
12 Q. And I bel i eve you t est i f i ed t hat t he def endant t ol d you t o
13 make i t wor k, i s t hat cor r ect ?
15 Q. Who act ual l y si gned t hose f i nanci al r epor t s t hat wer e
16 submi t t ed?
17 A. Dr . Kar r on.
18 Q. Di d you si gn t hose f i nanci al r epor t s?
19 A. I di d not . I had no such aut hor i t y.
20 THE COURT: Ar e you awar e of any cont r i but i ons t o t he
21 capi t al of CASI t hat wer e made by anyone ot her t han NI ST?
22 THE WI TNESS: No, I ' mnot awar e of any such
23 cont r i but i ons.
24 Q. You wer e al so asked about a scr een i n t he def endant ' s
25 apar t ment , i s t hat cor r ect ?
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8657KAR6 Gur f ei n - r edi r ect
1 A. Yes.
2 Q. You sai d you r ecal l ed when t hat was i nst al l ed?
3 A. Yes.
4 Q. Do you r ecal l how much was pai d f or t he i nst al l at i on?
5 A. I t hi nk Abe Kar r on was pai d $3, 000 r oughl y f or t hat .
6 Q. And you sai d I bel i eve on cr oss- exami nat i on i n r esponse t o
7 quest i ons about t he def endant get t i ng cost s appr oved, t hat he
8 woul d be abl e t o do i t because NI ST l oved hi m?
9 A. Yes.
10 Q. Di d you ever have any conver sat i on wi t h t he def endant al ong
11 t hose l i nes?
12 A. Yes, i t was a const ant r ef r ai n: They l ove me, t hey' l l
13 appr ove i t .
14 MR. EVERDELL: One moment . No f ur t her quest i ons, your
15 Honor .
16 THE COURT: Wi t hi n t he scope, Mr . Rubi nst ei n.
18 RECROSS EXAMI NATI ON
20 Q. Let me show you what i s mar ked as Def endant ' s FFF f or
21 i dent i f i cat i on and ask you, number one, i f you r ecogni ze - -
22 MR. EVERDELL: Can I see i t ?
23 Q. - - t he si gnat ur es on t hose document s.
24 MR. EVERDELL: Can I see t he document ?
25 THE COURT: You have t o show i t t o t he gover nment
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8657KAR6 Gur f ei n - r ecr oss
1 f i r st .
2 MR. RUBI NSTEI N: I am, your Honor .
3 Q. Do you r ecogni ze Dr . Kar r on' s si gnat ur e on t hose document s,
4 si r ?
5 I even have a copy f or your Honor .
6 A. I r ecogni ze hi s si gnat ur e on t hese document s, yes.
7 Q. And do you r ecogni ze t he check - - t he name on t he check - -
8 checks?
9 MR. EVERDELL: Your Honor , I ' mgoi ng t o obj ect t o
10 t hi s. Thi s i s cl ear l y goi ng t o be out si de t he scope of t he
11 r edi r ect .
12 MR. RUBI NSTEI N: That ' s what t hey asked on r edi r ect .
13 THE COURT: I asked i t .
14 MR. RUBI NSTEI N: That count s t oo, J udge.
15 THE COURT: I di d i t . I opened t hat door . Go ahead.
16 MR. RUBI NSTEI N: Thank you.
17 A. Yes, I see t hem.
18 THE COURT: Had you ever seen t hembef or e?
19 THE WI TNESS: No.
20 MR. RUBI NSTEI N: We of f er Def endant ' s FFF - -
22 MR. RUBI NSTEI N: - - i nt o evi dence.
23 MR. EVERDELL: The wi t ness has never seen t hem.
24 THE COURT: He can' t aut hent i cat e t hem.
25 MR. RUBI NSTEI N: He has aut hent i cat ed t hem.
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1 THE COURT: He says t hey' r e Kar r on' s si gnat ur e, but he
2 has never seen t hembef or e.
3 Next quest i on.
4 Q. You r ecei ved per sonal checks f r omDr . Kar r on, have you not ?
6 THE COURT: You' r e not goi ng t o be abl e t o get t hem
7 i n. I f he has never seen t hese checks bef or e, you cannot get
8 t hemi n t hat way.
9 MR. RUBI NSTEI N: Let me ask i t t hi s way.
10 Q. Does t hat r ef r esh your r ecol l ect i on as t o whet her or not
11 you ever had a conver sat i on wi t h Dr . Kar r on about hi ml oani ng
12 CASI money dur i ng t he gr ant per i od?
13 A. I do not r ecal l t hat .
14 Q. By t he way, t he cont r act t hat you si gned - -
16 THE COURT: Obj ect i on sust ai ned. That ' s out si de t he
17 scope.
18 MR. RUBI NSTEI N: Thi s i s not out si de, J udge. Wi t h al l
19 due r espect , can I ask t he quest i on?
20 THE COURT: The way you st ar t ed i t , you t al ked about
21 somet hi ng t hat was not i n t he scope, so you bet t er get i t i nt o
22 t he scope.
23 Q. When your aut hor i t y was t aken away i n Oct ober of 2001, di d
24 you r esi gn f r omCASI ?
25 A. No.
( 212) 805- 0300
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1 MR. RUBI NSTEI N: No f ur t her quest i ons.
2 MR. EVERDELL: No f ur t her quest i ons, your Honor .
3 THE COURT: Al l r i ght .
4 J ur y i s excused unt i l 9: 30 t omor r ow mor ni ng.
5 MR. RUBI NSTEI N: J ust one moment . J ust one moment . I
6 j ust f ound somet hi ng t hat I j ust want t o - -
7 THE COURT: Come on, we can' t wai t f or t hi s.
8 MR. RUBI NSTEI N: I have one document . I t ' s goi ng t o
9 come out of t he comput er r i ght now.
11 Q. I sn' t i t a f act t hat Dr . Kar r on l oaned you $4, 000 on J ul y
12 3, 2002?
14 THE COURT: I wi l l al l ow t he quest i on.
15 A. J ul y 3, 2002?
16 Q. Cor r ect .
17 A. I don' t r emember t hat .
18 Q. I show you t hi s document .
19 THE COURT: Does t hat r ef r esh your r ecol l ect i on?
20 THE WI TNESS: Yeah, a l i t t l e bi t , but I r eal l y don' t
21 r ecal l . I don' t r ecal l t hi s or t he r eason f or i t .
22 Oh, her e i s what i t says. I t says as a memo, " l oan
23 agai nst f r ozen sal ar y. " That ' s what i t says.
24 THE COURT: Do you r emember t hat ?
25 Q. So, you r emember i t now?
( 212) 805- 0300
KA-2531 KA-2531 KA-2531
701
1 A. Wel l , yeah, a l i t t l e bi t bet t er , yeah.
2 Q. Last quest i on. That r ef r eshes your r ecol l ect i on t hat i n
3 J ul y 2002 Dr . Kar r on l oaned you $4, 000, cor r ect ?
4 A. Cor r ect .
5 THE COURT: How much?
6 THE WI TNESS: $4, 000.
9 MR. EVERDELL: No f ur t her quest i ons, your Honor .
10 THE COURT: Excuse me?
11 MR. EVERDELL: No f ur t her quest i ons.
12 THE COURT: Al l r i ght . The j ur y i s excused. We wi l l
13 see you at 9: 30 t omor r ow mor ni ng.
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
KA-2532 KA-2532 KA-2532
702
1 ( J ur y not pr esent )
2 THE COURT: Now, we bet t er be i n her e what t i me? Who
3 i s your next wi t ness?
4 MR. EVERDELL: Wel l , your Honor , we shoul d pr obabl y
5 di scuss - -
6 MR. KWOK: I t hi nk, your Honor , t omor r ow we wi l l - - i f
7 Mr . Rubi nst ei n has f ur t her cr oss- exami nat i on of our pr i or
8 wi t ness, Bel i nda Ri l ey, we can pr oceed wi t h t hat , and t hen t he
9 gover nment wi l l cal l i t s next wi t ness Fr ank Spr i ng.
10 THE COURT: Fr ank who?
11 MR. EVERDELL: Spr i ng.
12 THE COURT: How many mor e wi t nesses have you got ?
13 MR. EVERDELL: The cont i nuat i on of Ms. Ri l ey,
14 Mr . Spr i ng and Bob Benedi ct . And I ant i ci pat e t hat Mr . Spr i ng
15 and Bob Benedi ct wi l l be a si mi l ar l engt h as Mr . Gur f ei n. I
16 can' t account f or cr oss, but t he di r ect wi l l be a si mi l ar
17 l engt h.
19 Do you have anyt hi ng el se t o come bef or e t he cour t ?
20 MR. RUBI NSTEI N: No, your Honor .
21 MR. KWOK: No, your Honor .
22 THE COURT: Al l r i ght . You bet t er be i n her e at 9
23 o' cl ock i f we have Ms. Ri l ey. Oh, I have a t el ephone
24 conf er ence at ni ne, so make i t 9: 15 as usual .
25 ( Tr i al adj our ned t o J une 6, 2008 at 9: 15 a. m. )
( 212) 805- 0300
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1 I NDEX OF EXAMI NATI ON
2 Exami nat i on of : Page
3 BELI NDA RI LEY
4 Di r ect By Mr . Kwok . . . . . . . . . . . . . 506
5 Cr oss By Mr . Rubi nst ei n . . . . . . . . . . 571
6 ELI SHA GURFEI N
7 Di r ect By Mr . Ever del l . . . . . . . . . . . 621
9 Redi r ect By Mr . Ever del l . . . . . . . . . . 695
10 Recr oss By Mr . Rubi nst ei n . . . . . . . . . 697
11 GOVERNMENT EXHI BI TS
12 Exhi bi t No. Recei ved
13 900A . . . . . . . . . . . . . . . . . . 507
14 61 . . . . . . . . . . . . . . . . . . . 510
15 62 . . . . . . . . . . . . . . . . . . . 516
16 110 and 111 . . . . . . . . . . . . . . . 528
17 112 and 113 . . . . . . . . . . . . . . . 548
18 114 and 115 . . . . . . . . . . . . . . . 550
19 120, 121, 122, 123, 124 and 125 . . . . . 559
20 126, 127, 128, 129, 130, 131 and 132 . . 559
21 901 . . . . . . . . . . . . . . . . . . . 559
22 DEFENDANT EXHI BI TS
24 BBB . . . . . . . . . . . . . . . . . . . 596
25
( 212) 805- 0300
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8667KAR1
1 UNI TED STATES DI STRI CT COURT
1 SOUTHERN DI STRI CT OF NEWYORK
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3 UNI TED STATES OF AMERI CA, New Yor k, N. Y.
3
4 v. S2 07 CR 541 ( RPP)
4
5 DANI EL B. KARRON,
5
6 Def endant .
6
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
7
8
8 J une 6, 2008
9 9: 15 a. m.
9
10
10 Bef or e:
11
11 HON. ROBERT P. PATTERSON, J R. ,
12
12 Di st r i ct J udge
13
13
14 APPEARANCES
14
KA-2535 KA-2535 KA-2535
15 MI CHAEL J . GARCI A
15 Uni t ed St at es At t or ney f or t he
16 Sout her n Di st r i ct of New Yor k
16 BY: STEVEN KWOK
17 CHRI STI AN EVERDELL
17 Assi st ant Uni t ed St at es At t or neys
18
18 RUBI NSTEI N & COROZZO, LLP
19 At t or neys f or Def endant
19 BY: RONALD RUBI NSTEI N
20
20 Al so Pr esent : Rachel Ondr i k, U. S. Dept . of Commer ce
21 Ki r k Yamat ani , U. S. Dept . of Commer ce
22
23
24
25
( 212) 805- 0300
KA-2536 KA-2536 KA-2536
705
8667KAR1
1 ( Tr i al r esumed; j ur y not pr esent )
2 THE COURT: Good mor ni ng. We have a not e f r oma j ur or
3 r ecei ved yest er day af t er noon t o J udge Pat t er son. " I ' d l i ke t o
4 speak wi t h you about my need t o f ol l ow up wi t h my medi cal
5 si t uat i on. Your t i me woul d be much appr eci at ed. Thank you. "
6 I t hi nk t hi s i s J ur or 7, Chr i st i ne Hul l . My
7 r ecol l ect i on i s t hat she di d not have an appoi nt ment dur i ng
8 j ur y sel ect i on but was t r yi ng t o get an appoi nt ment f or medi cal
9 f ol l owup, and I suggest ed she t r y and do i t af t er t he
10 schedul ed t r i al , but I don' t know t he nat ur e of her medi cal
11 f ol l owup. Of cour se i f i t ' s a l i f e- t hr eat eni ng di sease, I
12 woul d have pr obl ems. So, I guess we bet t er have her i n her e
13 and l i st en t o her , and I wi l l deci de accor di ngl y.
14 We st i l l have t hr ee j ur or s. I f t hi s case goes over
15 t wo weeks, we wi l l pr obabl y l ose J ur or 1; and i f i t goes t hr ee
16 weeks, we l ose J ur or 8, t he f or mer al t er nat e J ur or 1. And who
17 knows what el se.
18 Now, how ar e we comi ng on t r i al ? Ther e ar e t wo
19 wi t nesses t he gover nment has, i s t hat i t ?
20 MR. EVERDELL: Yes, your Honor . The gover nment af t er
21 we f i ni sh wi t h Ms. Ri l ey has t wo mor e wi t nesses. As I t hi nk I
22 i ndi cat ed yest er day, t hey ar e al ong t he l i nes of Mr . Gur f ei n i n
23 l engt h. One wi t ness has some e- mai l s t hat we need t o i nt r oduce
24 t hr ough hi m. That ' s Fr ank Spr i ng. So t hat may t ake a l i t t l e
25 l onger j ust wi t h t he i nt r oduct i on of exhi bi t s, but i t woul d
( 212) 805- 0300
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706
8667KAR1
1 t ake - - r oughl y al ong t he l i nes - - t he di r ect at l east wi l l
2 t ake r oughl y al ong t he l i nes of what i t t ook f or Mr . Gur f ei n.
3 THE COURT: Wel l , we have t o make pr ogr ess her e.
4 Let me say somet hi ng whi l e t hat subj ect i s up. I am
5 concer ned t hat t he gover nment - - as I hear t he evi dence t hat ' s
6 comi ng i n, I ' mnot sur e t hat so f ar anyway t he gover nment has
7 shown an i nt ent i onal mi sappl i cat i on of t he f unds of CASI .
8 Now, i f you ar e t al ki ng about t he gr ant f unds, t hat ' s
9 anot her mat t er , you may have somet hi ng wi t h r espect t o
10 mi sappl i cat i on of gr ant f unds. I don' t know. I haven' t hear d
11 al l of t he evi dence.
12 For i nst ance, wi t h r espect t o t he scr een, CASI got t he
13 benef i t of t hat scr een. I don' t t hi nk t hat can be consi der ed a
14 mi sappl i cat i on of f unds. And i f t he gover nment i s pr oceedi ng
15 i n t hat way, unl ess t hey show t hat t he cor por at i on di dn' t
16 benef i t i n any way by t he pur chase, I don' t t hi nk i t can be
17 consi der ed a mi sappl i cat i on of CASI ' s gener al f unds.
18 So, I don' t know what t he r est of t he evi dence i s, but
19 I ' d l i ke t o have a memor andumr eal l y by Monday mor ni ng
20 del i neat i ng, i f you wi l l , how you ar e goi ng t o go, because I
21 have t o char ge t he j ur y. Thi s i s a ver y di cey si t uat i on i f you
22 r ead cases i n t hi s ar ea, because you have t o have knowi ng
23 i nt ent t o mi sappl y t he f unds, and i t ' s vi r t ual l y t he same as
24 conver si on. And I t hi nk t he l eadi ng case i s Mor i set t e.
25 But you ought t o have somet hi ng by Monday t o show t hat
( 212) 805- 0300
KA-2538 KA-2538 KA-2538
707
8667KAR1
1 I shoul dn' t t hr ow t hi s case out .
2 By t he way, one of t he def ense exhi bi t s f or
3 i dent i f i cat i on was l ef t her e on t he bench, FFF. Maybe i t ' s
4 f our Fs or t hr ee Fs. Al l r i ght . Wel l , l et me get t hi s j ur or
5 i n. Rober t , can you ask Ms. Hul l t o come i n.
6 How much l onger do you t hi nk you ar e goi ng t o be wi t h
7 Ms. Ri l ey?
8 MR. RUBI NSTEI N: Possi bl y most of t he mor ni ng, your
9 Honor .
10 ( J ur or pr esent )
11 THE COURT: Good mor ni ng, Ms. Hul l . You sai d you
12 want ed t o t al k t o me about your doct or ' s si t uat i on.
13 J UROR: Act ual l y f or a coupl e of year s I have been
14 deal i ng wi t h sever al pr obl ems, and I have some br ai n l esi ons
15 t hat t hey' r e t r yi ng t o di agnose whet her i t ' s MS or some ot her
16 pr obl emgoi ng on. And t hen af t er I sent my r epl y back t o t he
17 j ur y pool I got a r esul t f r oma mammogr amt hat I have
18 cal ci f i cat i ons i n one br east r equi r i ng bi opsy. So I ' mi n t he
19 pr ocess now of get t i ng some speci al i st t o l ook at t hat .
20 But t hi s br ai n t hi ng and t he vest i bul ar weakness i s
21 causi ng me t o be ext r emel y t i r ed. I get r eal l y exhaust ed, and
22 I f el t yest er day I l i ke zoned out al most l i ke i f I ' mf al l i ng
23 asl eep or somet hi ng dur i ng t he pr ocess of wi t ness exami nat i on.
24 THE COURT: I di dn' t not i ce i t .
25 J UROR: You di dn' t ? I was st unned.
( 212) 805- 0300
KA-2539 KA-2539 KA-2539
708
8667KAR1
1 THE COURT: I may have been car r yi ng on.
2 J UROR: Ther e ar e j ust t hose i ssues goi ng on, and I
3 f eel ver y f eel good about t he pr ocess, but I don' t know i f I
4 can f ul f i l l t hi s. I f I get an appoi nt ment t o get t he bi opsy
5 done, I wi l l have t o get i t t aken car e of .
6 THE COURT: Wel l , i f you have t o l eave f or t he bi opsy,
7 we wi l l accommodat e you.
8 J UROR: So, you don' t see me ki nd of spaci ng out over
9 her e or anyt hi ng? Because I ' mt r yi ng t o pay at t ent i on, but
10 i t ' s - -
11 THE COURT: I t hi nk i f you know you ar e goi ng t o be
12 excused i f t he bi opsy appoi nt ment i s made dur i ng t he t r i al ,
13 t hat you wi l l be excused - -
14 J UROR: OK, I wi l l t r y my best t o hang i n t her e.
15 THE COURT: - - maybe you wi l l have an easi er mi nd.
16 MR. RUBI NSTEI N: Sounds good t o me, your Honor .
17 MR. KWOK: To t he gover nment as wel l .
18 THE COURT: Al l r i ght . Thank you f or bei ng so f r ank
19 and br i ngi ng i t t o our at t ent i on. And i f you need a br eak,
20 j ust r ai se your hand and you can have a br eak.
21 J UROR: I appr eci at e i t , your Honor .
22 ( J ur or not pr esent )
23 MR. RUBI NSTEI N: We' r e shor t one def endant , your
24 Honor . I di dn' t pi ck hi mup t hi s mor ni ng, because he pr omi sed
25 me he woul d be on t i me. I do want t o say somet hi ng about
( 212) 805- 0300
KA-2540 KA-2540 KA-2540
709
8667KAR1
1 sl eepi ng j ur or s. I was on a j ur y, and t he t wo har dest t hi ngs
2 was st ayi ng awake - - t hese seat s ar e so comf or t abl e you have no
3 i dea.
4 THE COURT: Ar e you sur e i t wasn' t t he j udge?
5 MR. RUBI NSTEI N: I t wasn' t t he j udge.
6 THE COURT: Somet i mes i t ' s t he at t or neys.
7 MR. RUBI NSTEI N: I t coul d have been. That coul d have
8 been.
9 J udge, can I make t he cal l t o my cl i ent ?
10 THE COURT: Sur e.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
KA-2541 KA-2541 KA-2541
710
8667KAR1
1 ( J ur y pr esent )
2 THE COURT: Good mor ni ng, l adi es and gent l emen. Thank
3 you f or bei ng so pr ompt . Al l r i ght , your next wi t ness.
4 You' r e r ecal l i ng Ms. Ri l ey?
5 MR. KWOK: Yes, your Honor .
6 BELI NDA RI LEY, r esumed.
7 THE COURT: You ar e r emi nded you ar e st i l l under oat h.
9 THE COURT: And t he j ur y i s r emi nded I have t o do t hat
10 as a mat t er of cour t pr ocedur e. OK, t hank you. Cont i nue your
11 cr oss.
12 MR. RUBI NSTEI N: Thank you, your Honor .
13 CROSS EXAMI NATI ON ( Cont i nued)
15 Q. Ms. Ri l ey, I bel i eve when we suspended your t est i mony you
16 wer e l ooki ng f or a r ecor d t o r ef r esh your r ecol l ect i on as t o
17 Mr . Gur f ei n' s sal ar y.
18 A. I was l ooki ng f or t he r ecor d - - I t hought I was l ooki ng f or
19 t he r ecor d f or t he gr ant , f or t he 75 per cent , t o show t he
20 mul t i pl i cat i on t o det er mi ne t he al l owabl e por t i on of hi s
21 sal ar y. Because t he r ecor d you had had a hundr ed t housand
22 t i mes 75 per cent equal ed a hundr ed t housand, and t her e was a
23 mat hemat i cal er r or . That shoul d have sai d - - wel l , I t hi nk t he
24 one I f ound sai d 133 t i mes 75 per cent was a hundr ed t housand,
25 whi ch I di dn' t check, but i t was t o show t hat t her e was a
( 212) 805- 0300
KA-2542 KA-2542 KA-2542
711
8667KAR1 Ri l ey - cr oss
1 mat hemat i cal er r or on t hat document .
2 Q. Mat hemat i cal er r or on what document ?
3 A. The budget document t hat was showi ng 100, 000 t i mes 75 i s a
4 100, 000. Because 100, 000 t i mes 75 per cent woul d be 75, 000 not
5 100, 000.
6 Q. Wel l , woul d $133, 333, comput e 75 per cent t o t hat , woul d
7 t hat comput e t o 100, 000?
8 A. I ' mnot sur e. I was j ust t r yi ng t o show t hat i t was
9 i ncor r ect f or t hat , f or t he 100, 000, t hat i t wasn' t - - i t
10 shoul d be a mat hemat i cal cor r ect number . I di dn' t check t he
11 ot her document .
12 Q. Wel l , ar e you awar e t hat t he budget was amended i n t hi s
13 case?
14 A. The budget was amended t o show - - yes, t he budget was
15 amended, but i t di dn' t have - - but t he amendment 2 di dn' t have
16 t hat par t i cul ar at t achment on i t .
17 Q. Wel l , I show you what ' s been mar ked as Def endant ' s Exhi bi t
18 H, whi ch i s a por t i on of Gover nment Exhi bi t 33. Do you have
19 Exhi bi t 33?
20 THE COURT: For i dent i f i cat i on?
21 Q. Yeah, f or i dent i f i cat i on, your Honor ?
22 MR. RUBI NSTEI N: Yeah, f or i dent i f i cat i on, your Honor .
23 ( Def endant pr esent )
24 Q. Do you r ecogni ze t hat document t hat i s par t of Exhi bi t 33
25 t hat ' s i n evi dence?
( 212) 805- 0300
KA-2543 KA-2543 KA-2543
712
1 A. Yes.
2 Q. I n f act , i n t he r evi sed budget f or t he f i r st year 2001 t o
3 2002 Mr . Gur f ei n' s sal ar y as pr oj ect manager was r ai sed t o
4 $133, 333, and 75 per cent of t hat was l i st ed as t he cost t o t he
5 pr oj ect , $100, 000, cor r ect ?
6 A. Cor r ect . So, i f Mr . Gur f ei n was act ual l y pai d $133, 000,
7 t hen t he 75 per cent woul d be appl i ed t o t he amount t hat he was
8 act ual l y pai d ver sus t he amount t hat was budget ed. He woul d be
9 al l owed up t o $100, 000 i f t hat was 75 per cent of t he amount he
10 was act ual l y pai d.
11 Q. So, i n f act your cal cul at i on of deduct i ng par t of
12 Mr . Gur f ei n' s sal ar y i n t he amount of $25, 000 was i ncor r ect .
13 A. On t he books and r ecor ds pr ovi ded by Mel , Mr . Gur f ei n' s net
14 pay was $100, 000 t i mes 75 per cent , whi ch woul d be 75, 000. And
15 t he wi t hhol di ng por t i on was separ at ed i nt o t he f r i nge benef i t s
16 sect i on, and so t hat por t i on of t he gr oss pay i s shown as an
17 adj ust ment i n t he f r i nge benef i t sect i on.
18 Q. When you say Mel , you mean Mr . Spi t z, cor r ect ?
19 A. Mr . Spi t z.
20 Q. But you di dn' t meet hi munt i l t he l at t er par t of 2003,
21 r i ght ?
22 A. Ri ght . And t he December 2003 r epor t i s based on hi s books
23 and r ecor ds pr ovi ded by Mr . Spi t z.
24 Q. Di dn' t you t el l us yest er day t hat you r el i ed upon t he books
25 and r ecor ds t hat you r ecei ved f r omCASI and Ms. Hayes?
( 212) 805- 0300
KA-2544 KA-2544 KA-2544
713
1 A. For t he J une 2003 r epor t , t he shor t r epor t , I r el i ed on t he
2 r ecor ds t hat wer e submi t t ed i n J une.
3 For t he December r epor t I r el i ed on t he books and
4 r ecor ds t hat wer e submi t t ed by Mr . Spi t z i n December .
5 On some of t he t hi ngs I mi ght have l ooked back t o see,
6 i f I needed addi t i onal cl ar i f i cat i on, how t hey wer e booked,
7 because t he check r egi st er s pr ovi ded by t he J une 2003 r ecor ds
8 wer e - - you know, I di dn' t quest i on whet her Dr . Kar r on' s books
9 pai d t he per son t hat t hese checks wer e wr i t t en t o; i t was j ust
10 t he al l ocat i on of t he cost bet ween t he budget cat egor i es.
11 Q. Ar e you sayi ng t hat t he r epor t s t hat Mr . Spi t z pr esent ed t o
12 you wer e di f f er ent t han t he f i nanci al r epor t s t hat you had
13 pr evi ousl y r ecei ved f r omCASI ?
14 A. Cer t ai n of t he budget cat egor i es wer e di f f er ent . The
15 per sonnel cat egor i es shoul d have been si mi l ar .
16 Q. Wel l , was i t ?
17 A. I di dn' t r econci l e bet ween t he t wo set s of books. I used
18 t he ones submi t t ed by Mr . Spi t z December 2003 f or t hat r epor t .
19 The cost cl ai med on t he December 2003 r epor t r econci l es back t o
20 t he Mel Spi t z books.
21 Q. But t he bot t oml i ne i s now t hat you l ooked at Def endant ' s
22 Exhi bi t H f or i dent i f i cat i on, whi ch i s act ual l y par t of
23 Gover nment Exhi bi t 33, t aki ng t hat i nt o account , t hen i t was
24 appr opr i at e t o pay Mr . Gur f ei n $100, 000, cor r ect ?
25 A. No, i t was appr opr i at e t o pay Mr . - - i t was appr opr i at e f or
( 212) 805- 0300
KA-2545 KA-2545 KA-2545
714
1 t he NI ST gr ant t o - - wel l , based on t hi s document , i f
2 Mr . Gur f ei n act ual l y wor ked 75 per cent of hi s t i me f or t he NI ST
3 gr ant , i t woul d be appr opr i at e t o pay hi m75 per cent of hi s
4 sal ar y as al l owabl e cost .
5 THE COURT: At t r i but abl e t o t he NI ST gr ant .
6 THE WI TNESS: At t r i but abl e t o t he gr ant . I f he spent
7 75 per cent of hi s t i me wor ki ng on t he gr ant , wi t h al l owabl e
8 t hi ngs f or t he gr ant , t hen he woul d be ent i t l ed t o - - t he gr ant
9 woul d r ei mbur se f or up t o 75 per cent of hi s sal ar y i f he spent
10 t hat much t i me wor ki ng.
11 I f he onl y spent 50 per cent of hi s t i me on al l owabl e
12 gr ant act i vi t i es, t hen even t hough t he budget woul d al l ow 75
13 per cent , he woul d have act ual l y onl y spent 50 per cent , so he
14 shoul d onl y be r ei mbur sed 50 per cent of t he t i me.
15 Q. But i n your f i ndi ngs you f ound t hat he wor ked 75 per cent of
16 t he t i me and, t her ef or e, you at t r i but ed a $25, 000 r educt i on i n
17 al l owabl e expenses, cor r ect ?
18 A. My audi t al l ows f or 75 per cent of hi s t i me.
19 Q. Whi ch r educed hi s sal ar y f r om$133, 333 t o $75, 000, cor r ect ,
20 accor di ng t o your cal cul at i ons?
21 A. No. Thi s woul d be t he gr oss sal ar y. The 133 shoul d be t he
22 gr oss sal ar y, but i n my cal cul at i ons t he r ecor ds pr ovi ded i n
23 December 2003 had di vi ded t he sal ar y i nt o net sal ar y, and t he
24 wi t hhol di ngs wer e i ncl uded as par t of f r i nge benef i t s, and so
25 t hat comput at i on i s ki nd of i n t wo par t s. Par t of i t shows up
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1 i n t he f r i nge benef i t s sect i on of t he r epor t , and par t of i t
2 shows up i n t he per sonnel sect i on of t he r epor t .
3 Q. But t he t ot al comes out t o $25, 000, cor r ect ?
4 A. The t ot al adj ust ment comes out t o - - can I have a copy of
5 my December r epor t ?
6 Q. Why don' t you t ake a l ook at I bel i eve i t ' s Exhi bi t 62.
7 THE COURT: She hasn' t got copi es of her r epor t s i n
8 f r ont of her ?
9 Al l t he document s she had on di r ect , not j ust one.
10 By t he way, H i s not i n evi dence. Def endant ' s H i s
11 f or i dent i f i cat i on. You have not of f er ed i t i n evi dence,
13 MR. RUBI NSTEI N: I t hi nk i t ' s par t of - -
14 THE COURT: I know, but - -
15 MR. RUBI NSTEI N: Al l r i ght . We wi l l of f er H i nt o
16 evi dence, your Honor .
17 THE COURT: You say t hat , but t he gover nment has t o
18 l ook at i t , makes sur e i t i s par t of i t , and I have t o l ook at
19 i t .
20 MR. RUBI NSTEI N: OK. I gave a copy t o t he gover nment ,
21 your Honor , and I woul d of f er def endant ' s H i nt o evi dence.
22 THE COURT: Any obj ect i on?
23 MR. KWOK: No obj ect i on.
24 THE COURT: Def endant ' s H i s i n evi dence.
25 ( Def endant ' s Exhi bi t H r ecei ved i n evi dence)
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1 A. OK. For t he chi ef oper at i ng of f i cer $25, 000 i s quest i oned,
2 pl us a per cent age on page 4 of 8 wher e i t says $8, 466 i s
3 quest i oned f or payr ol l f or t he chi ef oper at i ng of f i cer and
4 chi ef t echni cal of f i cer ' s sal ar y - -
5 THE COURT: J ust sl ow down.
6 A. OK. The addi t i onal amount quest i oned f or t he gr oss sal ar y
7 i s i ncl uded i n t he $8, 466.
8 Q. Now t hat you have r evi ewed Def endant ' s H, Gover nment
9 Exhi bi t 33 - - wi t hdr awn.
10 Now, you ar e an i ndependent audi t or f or t he of f i ce of
11 t he i nspect or gener al , cor r ect ?
12 A. Yes.
13 Q. I t ' s your r esponsi bi l i t y t o make sur e t he number s t hat you
14 submi t ar e cor r ect , r i ght ?
15 A. Yes.
16 Q. And you have access, do you not , t o al l t he r ecor ds of t he
17 NI ST ATP gr ant , cor r ect ?
18 A. Yes.
19 Q. And you had access t o what ' s i n evi dence as Gover nment ' s
20 33, cor r ect ?
21 A. Yes.
22 Q. And by l ooki ng at Gover nment ' s 33 i n def endant ' s H, whi ch
23 i s par t of i t , i s i t f ai r t o say t hat i t was an er r or on your
24 par t t o deduct $25, 000 as al l owabl e expenses on behal f of
25 Mr . Gur f ei n t he chi ef oper at i ng of f i cer ?
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1 A. No.
2 Q. And on what basi s do you say t hat ?
3 A. Thi s adj ust ment i s based on a sal ar y pai d t o Mr . Gur f ei n,
4 75 per cent of t he act ual sal ar y pai d.
5 Q. What was t he act ual sal ar y pai d?
6 A. I t hi nk i t was ar ound 125, 000.
7 Q. I sn' t i t accor di ng t o t he document t hat I showed you
8 $133 - -
9 THE COURT: Let ' s not have what you t hi nk. Go t o your
10 document s and t el l us.
11 MR. RUBI NSTEI N: She has Exhi bi t H t her e i n f r ont of
12 her , your Honor .
13 THE COURT: I under st and.
14 MR. RUBI NSTEI N: Can you l ook at Exhi bi t H?
15 THE COURT: You asked her . She sai d i t was act ual
16 sal ar y pai d. Thi s i s a concl usor y document . She has conduct ed
17 an audi t ; she di d t he bank r ecor ds; she di d t he ot her r ecor ds.
18 She can l ook at t hose t o det er mi ne what t he act ual sal ar y pai d
19 was.
20 MR. RUBI NSTEI N: Absol ut el y.
21 Q. What was t he act ual sal ar y pai d t o Mr . Gur f ei n, ma' am?
22 A. The act ual sal ar y was appr oxi mat el y $122, 000.
23 Q. And what ' s 25 per cent of $122, 000?
24 A. That was t he gr oss sal ar y. The net sal ar y was $100, 000. 75
25 per cent of t he $100, 000 i s t he $25, 000 adj ust ment .
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1 Q. I sn' t i t 25 per cent of t he gr oss, ma' am, t hat you t ook of f ?
2 A. The addi t i onal por t i on, t he gr oss, i s i n t he f r i nge
3 benef i t s number of t he $8, 466.
4 Q. I sn' t i t a f act t hat your audi t f ound t hat Mr . Gur f ei n was
5 t o be pai d $100, 000, ma' am? That was t he f i ndi ng of your audi t
6 t hat you j ust sai d you got f r omMr . Spi t z, t hat hi s gr oss
7 sal ar y was $100, 000 - -
8 A. Hi s net sal ar y was $100, 000. The r emai nder was i ncl uded i n
9 t he f r i nge benef i t br eak- down by Mr . Spi t z.
10 Q. Fr i nge benef i t s ar e consi der ed par t of sal ar y?
11 A. The wi t hhol di ngs wer e account ed f or i n t he books t hat way.
12 Q. Wel l , wi t hhol di ng i s a f r i nge benef i t , cor r ect ?
13 A. The cost s her e shoul d be t he - - t he annual sal ar y shoul d
14 i ncl ude t he wi t hhol di ngs as par t of i t i n t he budget .
15 THE COURT: So i t ' s wi t hhol di ng, not f r i nge benef i t s
16 t hat account s f or t he di f f er ence?
17 THE WI TNESS: Yes, wi t hhol di ngs. But i n t he books and
18 r ecor ds pr ovi ded, t he wi t hhol di ngs wer e i ncl uded as a f r i nge
19 benef i t number , and so i n my audi t adj ust ment I i ncl uded t hem
20 wher e t hey wer e i ncl uded f or t he books I was pr ovi ded.
21 Q. But when you t al k about f r i nge benef i t s l i ke heal t h
22 i nsur ance and vacat i on, t hat ' s not i ncl uded i n t he per son' s
23 sal ar y, i s i t ?
24 A. I n t he br eak- down t hat I was pr ovi ded - - I i ncl uded t hese
25 number s wher e Mr . Spi t z had i ncl uded t he accr ual f or t he cost .
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1 Q. Ma' am, you ar e an audi t or , cor r ect ?
2 A. Yes.
3 Q. You ar e f ami l i ar wi t h account i ng pr i nci pl es?
4 A. Yes. Wi t hhol di ngs woul d not be par t of t he f r i nge
5 benef i t s. But i n t he audi t - -
6 THE COURT: But t hey wer e i n t he books, i s t hat what
7 you' r e sayi ng?
8 THE WI TNESS: They wer e i n t he books, and so I
9 adj ust ed wher e t hi ngs wer e i n t he books.
10 Q. I t ' s your t ake- home pay pl us your wi t hhol di ng t hat makes up
11 f or your sal ar y, cor r ect ?
12 A. Cor r ect .
13 Q. I mean i f I get $1, 000 a week sal ar y and I ' mi n t he 28
14 per cent br acket , on t he books i t shows t hat I had $1, 000 t hat I
15 had t o pay t axes on, cor r ect ?
16 A. Can you r epeat t hat ?
17 Q. Your t axes ar e wi t hhel d i f you ar e a sal ar i ed empl oyee,
18 cor r ect ?
19 A. Cor r ect .
20 Q. So t hat i f you make $1, 000 a week and you ar e i n l et ' s say
21 t he 30 per cent br acket , you get a net check of $700 a week.
22 A. Cor r ect .
23 Q. Ri ght ?
24 A. Cor r ect .
25 Q. And t hose moni es t hat wi t h wi t hhel d ar e pr oper l y i n f r i nge
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1 benef i t s, cor r ect ?
2 A. The money f or wi t hhol di ng ar e par t of your gr oss sal ar y and
3 ar e of t en account ed f or i n t he f r i nge benef i t s sect i on.
4 THE COURT: But t hey' r e not par t of your - -
5 He asked you about f r i nge benef i t s. Ar e wi t hhol di ng
6 t axes deduct ed, f r oman audi t i ng poi nt of vi ew, pr oper as
7 f r i nge benef i t s?
8 THE WI TNESS: As an audi t i ng poi nt of vi ew we nor mal l y
9 adj ust t hemwher e t hey wer e cl ai med by t he per son doi ng t he
10 books. I n t hi s i nst ance t hey wer e cl ai med under f r i nge
11 benef i t s, and so we adj ust ed t hemunder what t hey wer e cl ai med.
12 We di dn' t adj ust per sonnel cost t o i ncl ude t he f r i nge
13 benef i t s because t hey - - i t was act ual l y consi der ed har der t o
14 expl ai n t hat way, but . . .
15 Q. Do you have a schedul e of t he act ual checks t hat wer e
16 r ecei ved by Mr . Gur f ei n, ma' am?
17 A. Yes.
18 Q. Wher e i s t hat schedul e?
19 A. My dat abase.
20 THE COURT: Exhi bi t ?
21 MR. KWOK: I bel i eve i t ' s Gover nment Exhi bi t 110, your
22 Honor .
23 THE COURT: Exhi bi t 100, i s t hat what you' r e r ef er r i ng
24 t o, Ms. Ri l ey?
25 DEPUTY COURT CLERK: I t hi nk t hey sai d 110.
( 212) 805- 0300
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1 THE COURT: 110? And 111?
2 MR. RUBI NSTEI N: And can you t el l us what page?
3 THE COURT: Ms. Ri l ey, you have a way when I ask you
4 f or a yes or no answer , i nst ead of gi vi ng me a yes or no
5 answer , you gi ve me an expl anat i on.
6 THE WI TNESS: OK.
7 THE COURT: Same goes - - gi ve a yes or no answer .
8 Then i f t hey ask f or an expl anat i on, gi ve t he expl anat i on. But
9 when you answer i t t hat way, no one knows whet her you ar e
10 answer i ng yes or no somet i mes. Maybe t hey don' t under st and
11 you.
12 THE WI TNESS: OK.
13 THE COURT: OK. Now, l et ' s f i nd t he pages t hat have
14 Mr . Gur f ei n' s sal ar y. Can you hel p us t her e?
15 MR. KWOK: Can we di r ect t he wi t ness t o a page?
16 THE COURT: Yes.
17 MR. RUBI NSTEI N: Pl ease.
18 MR. KWOK: Coul d I di r ect your at t ent i on t o page 36 of
19 44 i n Gover nment Exhi bi t 110.
21 Q. Ar e you l ooki ng at t hat page, ma' am?
22 A. I do.
23 Q. And you have a t ot al of t he net amount of Mr . Gur f ei n' s
24 sal ar y?
25 A. That shows t hat - -
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1 Q. Do you see t he t op of t he page, ma' am?
2 A. Sor r y. What page was t hat ?
3 Q. Par don?
4 A. What page?
5 Q. I t ' s 36 of 44 i n Exhi bi t - - ma' am, coul d you l ook at t he
6 t op of t hat page, page 36 of 44.
7 A. Yes.
8 Q. And i s t hat a schedul e of Mr . Gur f ei n' s net , t he checks
9 t hat wer e act ual l y wr i t t en t o Mr . Gur f ei n?
10 A. No, i t was a check t hat I had - - t he dat abase I had
11 cr eat ed, so I had t hought t hat t he net checks shoul d be t her e.
12 Q. Par don?
13 A. I t ' s t he dat abase t hat I had ent er ed al l t he checks f r om
14 Dr . Kar r on.
15 Q. So, t hat ' s not a Spi t z document .
16 A. No, t hat ' s not Spi t z document s.
17 Do we have Spi t z?
18 Q. Wel l , f r omt he checks t hat you saw f r omCASI t hat you put
19 i n t hi s exhi bi t t hat ' s i n evi dence, what i s t he t ot al amount of
20 net pay r ecei ved by Gur f ei n?
21 A. $70, 000 i n checks wr i t t en.
22 Q. Not 100, 000, r i ght ?
23 A. No.
24 Q. You j ust t est i f i ed under oat h t hat i t was 100, 000 t hat he
25 r ecei ved i n net sal ar y, cor r ect ?
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1 A. Accor di ng t o t he r ecor ds pr ovi ded by Mel Spi t z. So, t her e
2 mi ght have been some adj ust ed j our nal ent r i es.
3 Q. But not accor di ng t o t he r ecor ds you pr ovi ded.
4 A. Wel l , t hey wer e j ust based on t he checks wr i t t en.
5 Q. Your s i s based on t he act ual checks.
6 A. The act ual checks wr i t t en t o hi m.
7 Q. And you have t hose checks, do you not , or copi es of t hose
8 checks?
9 A. Yes, I do.
10 Q. I mean you have access t o any bank st at ement and copi es of
11 any checks t hat wer e wr i t t en, cashed on any account i n t hi s
12 case, cor r ect ?
13 A. Wr i t t en on - -
14 MR. KWOK: Obj ect i on.
15 THE COURT: Obj ect i on over r ul ed.
16 Q. You have aut hor i t y t o subpoena - - i f you di dn' t get t he
17 act ual r ecor ds f r omCASI , you can subpoena a bank, Chase Bank,
18 r i ght , t o get t he r ecor ds t hat t hey have, r i ght ?
19 A. We' r e t al ki ng about bank r ecor ds f or CASI ?
20 Q. Tal ki ng about t he checks - -
21 A. The checks f or CASI .
22 Q. The checks of CASI .
23 A. Yes.
24 Q. And di d you do a bank r econci l i at i on on t he checks t hat
25 wer e dr awn agai nst t he f our CASI account s t hat you ment i oned
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1 yest er day?
2 A. Yes.
3 Q. And i s i t f ai r t o say t hat t he schedul e t hat you have her e
4 on page 36 of 44 of Exhi bi t 110 was comput ed on t he basi s of
5 your anal ysi s of t hose checks?
6 A. Yes.
7 Q. So, now do you concede t hat your number bef or e of $100, 000
8 i n net pay t o Mr . Gur f ei n was i naccur at e?
9 THE COURT: Net pay?
10 MR. RUBI NSTEI N: Yeah, t hat ' s what she sai d, t he
11 100, 000 was t he net pay.
12 THE COURT: Di d you say t hat ?
13 MR. RUBI NSTEI N: Or somet hi ng l i ke 122, 000.
14 THE WI TNESS: Net pay, yes, based on Mr . Spi t z' s
15 r ecor ds.
16 THE COURT: Wel l , what was t he net pay t hat you put i n
17 your books, i n your audi t ?
18 THE WI TNESS: Fr ommy audi t t he net pay was $100, 000.
19 THE COURT: But yet your audi t says t hat he onl y got
20 70, 000 on page 36 of 44.
21 THE WI TNESS: I t says t hat 25 per cent of t he - -
22 THE COURT: Wel l , 36 of 44 says what ?
23 THE WI TNESS: 36 of 44 says 70, 000 was net pay.
24 THE COURT: Ri ght .
25 THE WI TNESS: And t hat came f r omt he act ual deposi t .
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1 THE COURT: Ri ght . And your audi t r epor t says net pay
2 was 100, 000?
3 THE WI TNESS: Wel l , t hey ar e f r omdi f f er ent sour ces.
4 The audi t r epor t i s f r omMr . Spi t z' s r ecor d, so i t may have
5 adj ust i ng j our nal ent r i es.
6 THE COURT: I don' t f ol l ow. Why woul d you use
7 Mr . Spi t z' s r ecor d when you have your own r ecor d of what i t i s?
8 THE WI TNESS: Because I di dn' t cr eat e t hemunt i l
9 l at er , unt i l af t er t he audi t was done.
10 THE COURT: You di dn' t cr eat e what ?
11 THE WI TNESS: Thi s r ecor d, t he 36 of 44, unt i l af t er
12 t he audi t was done. I di d not anal yze t he cancel ed checks
13 unt i l asked t o by i nvest i gat i ons.
15 THE WI TNESS: So t hey wer e done at di f f er ent t i mes.
16 THE COURT: So, i t ' s your t est i mony t hat based on your
17 under st andi ng of Mr . Spi t z' s r ecor ds t her e was a $25, 000
18 over payment t o Mr . Gur f ei n.
20 THE COURT: But when you act ual l y checked t he r ecor ds
21 l at er af t er t he audi t was done, and you f ound out i n f act i t
22 wasn' t 100, 000.
24 THE COURT: So, t he 100, 000 det er mi nat i on by you was
25 i ncor r ect - -
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2 THE COURT: - - based on t he r ecor ds.
3 THE WI TNESS: Based on t he cancel ed checks, yes.
5 Q. So, i s i t f ai r t o say t oday, J une 6, 2008, t hat t he
6 di sal l owance of t he $25, 000 i n sal ar y of Mr . Gur f ei n was an
7 er r or i n t he cal cul at i ons?
9 THE COURT: Obj ect i on sust ai ned. I t ' s not f ai r t o say
10 t hat . I t was based on an i ncor r ect concl usi on possi bl y.
11 MR. RUBI NSTEI N: OK, i ncor r ect concl usi on.
12 THE COURT: But based on t he r ecor ds - - but cor r ect
13 under t he r ecor ds t hat she had r ecei ved f r omMr . Spi t zer or
14 what ever hi s name i s.
15 Q. That ' s an accept abl e audi t i ng t echni que, ma' am, t o use t he
16 r epr esent at i ve of t he t axpayer , t hei r r ecor ds?
17 A. Yes.
18 Q. That ' s an accept abl e audi t i ng pr i nci pl e?
19 A. Yes, we use t hei r r ecor ds.
20 Q. I s t hat an audi t ? Ther e ar e pr i nci pl es of audi t i ng, ar e
21 t her e not , ma' am?
22 A. Yes.
23 Q. And i s i t your t est i mony t hat you do not do any i ndependent
24 eval uat i on of r ecor ds submi t t ed t o you?
25 A. I sampl ed cer t ai n t r ansact i ons i n Mr . Spi t z' s books.
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1 THE COURT: I s an audi t a r evi ew of t he r ecor ds of t he
2 company you' r e r evi ewi ng on accor di ng t o what t hey say, or does
3 an audi t or have t o go back t o t he under l yi ng r ecor ds t o
4 det er mi ne what t he t r ut h i s?
5 THE WI TNESS: We t est t he r ecor ds t hat t hey pr ovi de
6 us, and i f we t hi nk t hat t hey do a f ai r and accur at e
7 r epr esent at i on of t he expenses, t hen we st ar t our audi t usi ng
8 t hei r r ecor ds and make adj ust ment s.
9 So, i n t hi s case I woul d have l ooked at t he r ecor ds
10 pr ovi ded f r omMr . Spi t z, det er mi ned t hat NI ST onl y agr eed t o
11 pay 75 per cent of what Mr . Gur f ei n' s sal ar y was, and so my
12 audi t adj ust ment woul d be t he books showed he was pai d 100, 000
13 he was onl y ent i t l ed t o ATP r ei mbur sement of 75 per cent of
14 t hat , so CASI woul d have pai d 25, 000 t o Mr . Gur f ei n and NI ST
15 woul d have pai d t he 75, 000 t o Mr . Gur f ei n based on Mr . Spi t z' s
16 r ecor ds.
17 Q. And Spi t z' s r ecor ds show t hat t he gr oss, accor di ng t o you,
18 was 100, 000, cor r ect ?
19 A. The net sal ar y was 100, 000.
20 Q. Do you have t hose r ecor ds her e?
21 A. Mr . Spi t z' s r ecor ds?
22 Q. Yes, t hat you say t hat Spi t z sai d t hat t he net sal ar y was
23 $100, 000.
24 A. Yes.
25 THE COURT: Do you have t he r ecor ds her e?
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1 THE WI TNESS: I have comput er copi es.
2 THE COURT: A comput er copy of Mr . Spi t z' s r ecor ds?
4 THE COURT: But not i n f r ont of you.
5 THE WI TNESS: Not i n f r ont of me.
6 Q. And you di dn' t use Spi t z' s f i gur es f or Exhi bi t 110,
7 cor r ect ?
8 THE COURT: For exhi bi t - -
9 MR. RUBI NSTEI N: 110, t he one she i s t al ki ng about .
10 THE COURT: She sai d t hat 110 was cr eat ed af t er t he
11 December audi t .
12 MR. RUBI NSTEI N: But i f she - -
13 Q. I f you di dn' t use t hese f i gur es i n 110 f or your audi t , how
14 ar e t hey r el evant t o t hi s case?
15 A. Si nce t hey wer e t he - -
16 THE COURT: Wel l , t hat ' s not a good quest i on f or her
17 t o answer . That ' s not a quest i on f or her .
18 MR. RUBI NSTEI N: Al l r i ght . Wel l , I ' mnot goi ng t o - -
19 THE COURT: You can ar gue t hat on summat i on.
20 MR. RUBI NSTEI N: I have gone f ar enough on t hi s i ssue.
21 Q. The bot t oml i ne, ma' am, i s t hat bet ween Mr . Gur f ei n and Dr .
22 Kar r on, you di sal l owed a t ot al of $71, 550, r i ght ?
23 THE COURT: Based on Mr . Spi t z' s r ecor ds. I s t hat
24 r i ght ?
25 THE WI TNESS: Yes, f r omMr . Spi t z and Dr . Kar r on,
( 212) 805- 0300
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1 yes - - I mean f or Gur f ei n and Dr . Kar r on.
2 Q. And Spi t z' r ecor ds i ndi cat ed t hat Dr . Kar r on wasn' t
3 ent i t l ed t o a hundr ed per cent of hi s $175, 000 sal ar y?
4 A. The NI ST budget al l ows t hat a sal ar y can be up t o. I t ' s
5 not i n st one t he al l ocat i ons of t i me wor ked. These ar e
6 est i mat es of per cent age of pr oj ect ed t i me on pr oj ect .
7 Q. The budget per mi t t ed $175, 000 f or Dr . Kar r on, cor r ect ?
8 A. The budget woul d have per mi t t ed a hundr ed per cent of t he
9 t i me f or Dr . Kar r on i f he spent a hundr ed per cent of hi s t i me
10 wor ki ng on t he ATP pr oj ect .
11 Q. How many hour s a week i s he supposed t o wor k on t he ATP
12 pr oj ect t o j ust i f y hi s $175, 000 sal ar y?
13 A. He i s a sal ar i ed empl oyee, so i t doesn' t amount t o hour s.
14 I t i s t he per cent age of t i me wor ked. So, i f he wor ks - -
15 THE COURT: Not i f s. What wer e you t ol d by
16 Mr . Spi t z' s r ecor ds?
18 THE COURT: What di d Mr . Spi t z t el l you? What di d
19 Mr . Spi t z' s r ecor ds - - what di d he t el l you?
20 THE WI TNESS: Mr . Spi t z' s r ecor ds woul d have shown a
21 hundr ed per cent of hi s t i me. Wel l , i f Spi t z' s r ecor ds - - j ust
22 had t ot al sal ar y.
23 Q. Par don?
24 A. Mr . Spi t z' s r ecor ds showed net sal ar y under t he per sonnel
25 sect i on.
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1 Q. So, you r el i ed upon Mr . Spi t z' s r ecor ds f or Gur f ei n, but
2 you di dn' t r el y upon Mr . Spi t z' s r ecor ds f or Dr . Kar r on?
3 A. No, t he - - Dr . Kar r on i s t he CEO of CASI and i s al so car i ng
4 about t he pr oj ect . Mr . Gur f ei n' s r esponsi bi l i t i es i ncl uded
5 f undr ai si ng and pr oj ect managi ng, st r at egi c pl anni ng. Dr .
6 Kar r on woul d have made - - as owner of CASI and i nt er est ed i n
7 t he pr oj ect - - woul d have had di scussi ons wi t h Mr . Gur f ei n
8 concer ni ng t hose i ssues, and t hose i ssues, si nce t hey ar e not
9 al l owabl e cost s, t he t i me he woul d have spent di scussi ng t hose
10 ki nds of i ssues woul d not be al l owabl e char ges t o t he ATP
11 pr oj ect .
12 So, he di dn' t r eal l y - - he r eal l y wasn' t spendi ng a
13 hundr ed per cent of hi s t i me, and so as audi t or s, based on
14 i nt er vi ews - -
15 THE COURT: How di d you det er mi ne he wasn' t spendi ng a
16 hundr ed per cent of hi s t i me?
17 THE WI TNESS: Based on - -
18 THE COURT: For t hi s audi t r epor t .
19 THE WI TNESS: Based on - - j ust on what - - t hat i t ' s a
20 company, I guess pr of essi onal j udgment .
21 THE COURT: What ?
22 THE WI TNESS: Pr of essi onal j udgment . Knowi ng t he t ype
23 of busi ness, knowi ng t hei r r equi r ement s, t hat a hundr ed per cent
24 of t he t i me f or t he CEO i s not on j ust pr oj ect t i me.
25 THE COURT: I t wasn' t based on anyt hi ng t hat Mr . Spi t z
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1 or Dr . Kar r on t ol d you or anyt hi ng of t hat sor t ? I t ' s j ust
2 pr of essi onal j udgment .
3 THE WI TNESS: Ri ght . And I had asked Dr . Kar r on about
4 t hi ngs, var i ous empl oyees, and, you know.
5 THE COURT: And what ?
6 THE WI TNESS: And obser ved t hi ngs t hat peopl e di d.
7 THE COURT: You mean your obser vat i ons dur i ng t he
8 audi t ?
9 THE WI TNESS: Yeah, and t hi ngs di scussed dur i ng t he
10 audi t .
11 Q. So, i t ' s your t est i mony t hat i f I ' ma sal ar i ed - - i f a
12 per son i s a sal ar i ed empl oyee, and t hey wor k 80 hour s a week on
13 one pr oj ect , and t hey spend t wo hour s of t hat 80 hour s on
14 non- di r ect act i vi t i es, you ar e goi ng t o deduct par t of t hei r
15 sal ar y as an al l owabl e expense?
16 A. As a NI ST- r ei mbur sabl e expense f or - - t hey' r e bei ng
17 r ei mbur sed f or - - yes.
18 I f t hey' r e not wor ki ng on t he NI ST pr oj ect , and t hei r
19 dut i es ar en' t r el at ed t o t he NI ST pr oj ect , t hen onl y t he
20 por t i on t hat ' s r el at ed t o t he pr oj ect cost i s al l owabl e.
21 Q. Wel l , what i f t hey had t wo j obs, t hey had a NI ST j ob and at
22 ni ght t hey t aught at some uni ver si t y, and now t hey onl y wor k 40
23 hour s a week?
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1 Q. I s i t f ai r t o say t hat you ar e not t he l ast wor d on what ' s
2 al l owabl e and what ' s not al l owabl e i n t he OI G' s of f i ce?
3 A. Dur i ng r esol ut i on of t he audi t ?
4 Q. I n t he whol e pr ocess t hat a company can di sput e your
5 i nt er pr et at i ons, cor r ect ?
6 A. Cor r ect , i t goes t hr ough a r esol ut i on pr ocess.
7 Q. And ar e you par t of t hat r esol ut i on pr ocess?
8 A. Yes.
9 Q. Do you make t he f i nal deci si on at t hat r esol ut i on pr ocess?
10 A. The gr ant s of f i ce makes t he f i nal deci si on.
11 Q. The gr ant s of f i ce?
12 A. Um- hum.
13 Q. The gr ant s of f i ce of what ?
14 A. NI ST ATP.
15 Q. So t hey have a r i ght i n t he f i nal r esol ut i on t o appr ove any
16 of t hese expenses, cor r ect ?
17 A. Yes, t hey do.
18 Q. Now, you t al ked about f r i nge benef i t s. Di d you make any
19 det er mi nat i on i n your audi t as t o ot her f r i nge benef i t s ot her
20 t han t he payr ol l t ax, t ax wi t hhol di ng? Di d you make any
21 det er mi nat i ons as t o any ot her f r i nge benef i t s, whet her t hey
22 wer e al l owabl e or not ?
23 A. Yes.
24 Q. Because act ual l y you ar e maki ng a det er mi nat i on i n your
25 anal ysi s of what i s al l owed, cor r ect ?
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1 A. Yes.
2 Q. As di st i ngui shed f r omwhat i s al l owabl e.
3 A. I make t he det er mi nat i on f or what i s al l owabl e.
4 Q. Wel l , di d you r evi ew any mat er i al s t o det er mi ne what was an
5 appr opr i at e f r i nge benef i t f or t he CASI or gani zat i on?
6 A. What i s your - - I don' t under st and t hat quest i on.
7 Q. Di d you r evi ew anyt hi ng t o det er mi ne i n your mi nd what
8 f r i nge benef i t s woul d be, l i ke l et ' s say medi cal , what medi cal
9 f r i nge benef i t s shoul d be al l owabl e?
10 A. Yes.
11 Q. And what di d you r evi ew?
12 A. He had some ki nd of pl an document I t hi nk f r om' 96 t hat
13 di dn' t ment i on t hese ki nds of benef i t s.
14 THE COURT: What di d you say?
15 THE WI TNESS: He had a document t hat di dn' t ment i on - -
16 I don' t t hi nk i t ment i oned f r i nge benef i t s or ment i oned al l of
17 t hese.
18 THE COURT: Sor r y. What ? I can' t hear you.
19 THE WI TNESS: He had a pl an document or an of f i ce
20 pol i cy document .
21 THE COURT: Whi ch was i t ?
22 THE WI TNESS: Of f i ce pol i cy. That ' s t he onl y document
23 t hat I r evi ewed t hat ment i oned - - t hat was i n ef f ect dur i ng t he
24 per i od of t he gr ant .
25 THE COURT: That ' s what you wer e gui ded by her e?
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1 THE WI TNESS: And I r evi ewed - - wel l , I r evi ewed t he
2 expense r ecor ds, t he l edger r ecor ds.
3 THE COURT: Pr ovi ded t o you by?
4 THE WI TNESS: Mel Spi t z, Mr . Spi t z.
5 THE COURT: Go ahead. What el se?
6 THE WI TNESS: Ever yt hi ng el se was t he l og.
7 THE COURT: What ? The l og?
8 THE WI TNESS: Yeah, t he cr i t er i a t hat was pr ovi ded
9 by - -
10 THE COURT: What cr i t er i a?
11 Q. What cr i t er i a?
12 A. Wel l , ATP gui dance or what ever cr i t er i a woul d have t o do
13 wi t h f r i nge benef i t s.
14 Q. I sn' t t he company' s pol i ci es, even i f t hey' r e not wr i t t en,
15 ar en' t t hey t o be consi der ed i n maki ng t hat det er mi nat i on what
16 t he pr act i ce i s of t hat or gani zat i on?
17 A. I t di dn' t ment i on t hose ki nds of benef i t s i n t he pol i cy
18 t hat I saw.
19 THE COURT: The of f i ce pol i cy.
20 THE WI TNESS: I n t he of f i ce pol i cy.
21 Q. That ' s not t he quest i on.
22 A. OK.
23 Q. You say you saw a document f r om1996, cor r ect ?
24 A. I t was an ol d document . I ' mnot sur e. I don' t r ecal l t he
25 exact year but i t was - -
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1 Q. Di d you ask - -
2 THE COURT: Thi s document , what i s i t ? What ar e we
3 t al ki ng about ? Ar e you t al ki ng about t he of f i ce pol i cy manual ?
4 I s t hat what you mean by t he document , Mr . Rubi nst ei n?
5 MR. RUBI NSTEI N: That ' s what she i ndi cat ed.
6 THE COURT: Al l r i ght . But l et ' s be sur e we ar e
7 t al ki ng about what we' r e t al ki ng about .
8 Q. The document t hat you say t hat you saw, di d you di scuss
9 whet her or not t hat was st i l l i n ef f ect i n t he year 2003 when
10 you di d t he audi t ?
11 A. They wer e r evi si ng i t i n 2003.
12 Q. And di d t hey advi se you t hey wer e r evi si ng i t ?
13 A. Yes, t hat t hey wer e r evi si ng i t .
14 THE COURT: And who gave you t he document ?
15 THE WI TNESS: I don' t know i f I have a copy. I don' t
16 know t hat t hey had f i ni shed - - I don' t t hi nk I got a copy. I ' m
17 not sur e I have a copy of t hat document .
18 THE COURT: Whi ch document ?
19 THE WI TNESS: The r evi sed document .
20 THE COURT: I ' mnot aski ng you about t he r evi sed
21 document . Who handed you t he document t hat you di d see?
22 THE WI TNESS: I don' t r ecal l . I t hi nk I got t hat one
23 i n J une, but I don' t r ecal l speci f i cal l y.
24 THE COURT: When? Fr omwhomi s what I asked, not
25 when.
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1 THE WI TNESS: I don' t know whom.
2 THE COURT: I asked f r omwhom.
3 THE WI TNESS: I don' t r emember .
4 THE COURT: Li st en t o t he quest i on bef or e you answer ,
5 and t r y and gi ve a yes or no answer , pl ease.
6 THE WI TNESS: I don' t r emember whom.
7 THE COURT: OK.
8 Q. Now, you wer e i nf or med t hat t hey wer e wor ki ng on a r evi sed
9 manual , i s t hat cor r ect ?
10 A. Yes.
11 Q. And wer e you advi sed t hat t he r evi sed manual woul d have t he
12 f r i nge benef i t s t hat wer e i n pl ace i n CASI f r ombef or e t he
13 gr ant ?
15 Q. That t he r evi sed - -
16 THE COURT: Quest i on wi t hdr awn. St ar t over agai n,
18 Q. You had di scussi ons t hat t hey wer e wor ki ng on a r evi sed
19 manual , cor r ect , i ncl udi ng f r i nge benef i t s?
20 A. Yes, I knew t hat t hey wer e r evi si ng t hei r manual .
21 Q. And di d you quest i on as t o what pol i ci es had been i n ef f ect
22 pr i or t o t he ATP gr ant ?
23 THE COURT: For get about t he r evi sed manual now. He
24 i s aski ng you di d you ask what pol i ci es wer e i n ef f ect pr i or t o
25 t he ATP gr ant . Di d you ask t hat quest i on?
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1 THE WI TNESS: I don' t r ecal l .
2 Q. I s i t a f act t hat under t he audi t i ng pr ocedur e you can
3 i nqui r e as t o f r i nge benef i t s such as medi cal , as t o what t he
4 company' s pol i cy was and what i t had done pr evi ousl y?
5 A. That i s one consi der at i on.
6 THE COURT: Sor r y. What ?
7 THE WI TNESS: Yes. Yes.
8 Q. And di d you i nqui r e of anyone - - wel l , di d you i nqui r e of
9 Dr . Kar r on what t he pr act i ce of CASI was pr i or t o get t i ng t he
10 ATP gr ant as t o f r i nge benef i t s?
11 A. I don' t r ecal l .
12 Q. Wel l , l et me show you what ' s been mar ked f or i dent i f i cat i on
13 as Def endant ' s L and ask you i f you have ever seen t hat
14 document bef or e.
15 A. I don' t r ecal l seei ng t hi s document bef or e.
16 Q. Now, di d you r evi ew t he cont r act of Mr . Gur f ei n when you
17 wer e r evi ewi ng hi s sal ar y?
18 A. Yes.
19 Q. And l et me show you what ' s been mar ked f or i dent i f i cat i on
20 as Def endant ' s K.
21 THE COURT: 3505 what ?
22 MR. RUBI NSTEI N: I t ' s i n 3505. I t doesn' t have a
23 l et t er but i t ' s bef or e C. 3505, I guess i t must be i n t he B
24 par t .
25 Q. I s t hat a document t hat you r evi ewed whi ch was a CASI
( 212) 805- 0300
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1 document , ma' am?
2 A. Yes.
3 Q. As a mat t er of f act , you had a copy of t hat , di d you not ?
4 A. Yes.
5 Q. As a mat t er of f act , you t ur ned your copy over t o t he
6 pr osecut i on yest er day, cor r ect ?
7 A. Yes.
8 MR. RUBI NSTEI N: We of f er Def endant ' s K i nt o evi dence.
10 THE COURT: Def endant ' s K i s admi t t ed i nt o evi dence.
11 Can I see a copy?
12 MR. RUBI NSTEI N: I gave you one, J udge.
13 ( Def endant ' s Exhi bi t K r ecei ved i n evi dence)
14 THE COURT: Thi s i s an empl oyment agr eement - -
16 THE COURT: - - bet ween Mr . Gur f ei n and Comput er Ai ded
17 Sur ger y, dat ed as of Oct ober 1, 2001, si gned on December 26,
18 2001.
19 Q. And t hi s was pr ovi ded t o you as par t of t he audi t , cor r ect ?
20 A. Yes.
21 Q. To show - - wel l , I wi l l wi t hdr aw t hat . Thi s cont r act
22 pr ovi des f or f r i nge benef i t s, does i t not ?
23 A. Sor r y. What ?
24 Q. Thi s document pr ovi des f or f r i nge benef i t s?
25 A. Yes.
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1 Q. And wi l l you r ead t o t he j ur y what t he f r i nge benef i t s
2 pr ovi ded by CASI wer e.
3 A. On page 3, t he execut i ve wi l l be ent i t l ed t o par t i ci pat e i n
4 al l benef i t pl ans or pr ogr ams of t he company cur r ent l y i n
5 exi st ence or t o be est abl i shed, i ncl udi ng medi cal , dent al , l i f e
6 i nsur ance, r et i r ement , pensi ons, vacat i ons, si ck l eave and
7 hol i days.
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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866zkar 2 Ri l ey - cr oss
2 Q. Thank you. Now, you al so - - you al so di sal l owed cer t ai n
3 sal ar y of ot her peopl e, i s t hat cor r ect ?
4 A. Yes.
5 Q. And you di sal l owed sal ar y of Abe Kar r on?
6 A. Yes. Wel l - -
7 THE COURT: I ' msor r y, ar e you changi ng your - -
8 A. Abe di dn' t have sal ar y.
9 THE COURT: She say Abe di dn' t have a sal ar y.
10 Q. Di d Abe r ecei ve any moni es f r omCASI ?
11 A. For t he pr oj ect i on, pr oj ect or .
12 THE COURT: For what ?
13 THE WI TNESS: He di d, t he pr oj ect or and t he scr een.
14 He di dn' t have - - wasn' t sal ar i ed.
15 THE COURT: I f you answer f i r st yes or no, t hat hel ps.
16 THE WI TNESS: Oh, sor r y.
17 Q. And t hat was an al l owabl e expense, cor r ect ?
18 A. I ' msor r y, what ?
19 Q. That was al l owabl e?
20 A. What was al l owabl e?
21 Q. The money pai d t o Abe Kar r on?
22 THE COURT: What di d you say?
23 THE WI TNESS: What money pai d t o Abe Kar r on?
24 Q. The t housand dol l ar s and change?
25 A. I t hi nk t hat was quest i oned under equi pment , maybe.
( 212) 805- 0300
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1 Q. Di d you al l ow or di sal l ow t hat amount ?
2 THE COURT: Wer e any of t hese al l owed or di sal l owed or
3 wer e t hey quest i oned, any of t hese expenses?
4 What was your r ol e her e? Wer e you di sal l owi ng or wer e
5 you r ecommendi ng or wer e you quest i oni ng; what wer e you doi ng?
6 THE WI TNESS: We - -
7 THE COURT: You.
8 THE WI TNESS: Yes. We quest i oned, we quest i oned t he
9 cost and r ecommend t hat i t be di sal l owed.
10 THE COURT: Okay.
11 Q. And you r ecommended i n t hi s r epor t t hat over $500, 000 woul d
12 be di sal l owed, cor r ect ?
13 A. Cor r ect .
14 THE COURT: Thi s i s t he December r epor t ?
15 MR. RUBI NSTEI N: The audi t was i n December - -
16 act ual l y, i t was f i l ed I bel i eve i n Mar ch of 2004.
17 Q. I s t hat cor r ect , Ms. Ri l ey?
18 A. Cor r ect .
20 Q. Now, t her e was an empl oyee Mi ss Wi nt er ?
21 A. Yes.
22 Q. And di d you al l ow or di sal l ow par t of her sal ar y?
23 A. Di sal l ow.
24 Q. And how much of her sal ar y was di sal l owed.
25 A. 25 per cent , appr oxi mat el y.
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1 Q. What basi s was - - Ms. Wi nt er was a bookkeeper at CASI
2 cor r ect ?
3 A. Cor r ect .
4 Q. And on what basi s was 25 per cent di sal l owed?
5 A. On t he basi s t hat she al so kept t he books f or t he busi ness
6 CASI , and so she, she wor ked on - - so NI ST woul d r ei mbur se her
7 t ot al sal ar y.
8 THE COURT: I coul dn' t hear you.
9 THE WI TNESS: NI ST woul d onl y r ei mbur se t he por t i on of
10 t he t i me t hat she wor ked f or NI ST.
11 THE COURT: I see. And t he r est was f or t he
12 cor por at i on?
13 THE WI TNESS: Theor y Cor por at i on.
14 THE COURT: Theor y?
15 THE WI TNESS: Theor y Cor por at i on.
16 Q. Wasn' t her j ob as a bookkeeper f or CASI ?
17 A. Yes.
18 Q. Wer en' t empl oyee sal ar i es i ncl uded i n t he budget ?
19 A. Onl y t he por t i on of t he t i me t hat woul d be at t r i but abl e t o
20 NI ST wor k woul d be r ei mbur sed by t he gr ant .
21 Q. But t her e was onl y one pr oj ect goi ng on at CASI , cor r ect ?
22 A. Cor r ect , but - -
23 Q. So 100 per cent of her t i me was bei ng spent on CASI - r el at ed
24 i t ems, cor r ect , ATP r el at ed i t ems?
25 A. No.
( 212) 805- 0300
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1 Q. You al so - - she al so had some f r i nge benef i t s, di d she not ?
2 A. Yes.
3 Q. What ki nds of f r i nge benef i t s di d she have?
4 A. Medi cal expense and chi l d car e.
5 Q. And you di sal l owed her chi l d car e, cor r ect ?
6 A. Cor r ect .
7 Q. That was a f r i nge benef i t of CASI , cor r ect ?
8 A. Cor r ect .
9 Q. And you deci ded t hat - -
10 THE COURT: Was i t i n t he manual or not ?
11 THE WI TNESS: I t was not i n t he manual . That was
12 pr ovi ded t o me or i gi nal l y.
13 THE COURT: Wer e you gi ven anot her one l at er ?
14 THE WI TNESS: J ust t he one t hat I was - - j ust t he
15 r evi sed one I j ust r ecei ved now.
16 THE COURT: You wer e, you wer e gi ven t hat ?
17 THE WI TNESS: No, no. Thi s i s - - no, I wasn' t gi ven
18 t he r evi sed manual .
19 THE COURT: You wer e gi ven t he r evi sed manual ?
20 THE WI TNESS: No, I di d not , di d not r ecei ve t he
21 r evi sed manual .
22 THE COURT: Then why di d you answer yes?
23 THE WI TNESS: I j ust got i t - - I sai d yes, j ust now, I
24 r ecei ved t he r evi sed manual .
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1 THE WI TNESS: Because I j ust got t hi s r evi sed manual ,
2 yes. Not t he t i me of t he audi t .
3 THE COURT: I di dn' t - - I ' maski ng you about what you
4 di d at t he t i me you di d i t .
5 THE WI TNESS: Yeah, I di d not r ecei ve t he r evi sed
6 manual at t hat t i me.
7 THE COURT: Al l r i ght . So on t he i nf or mat i on you had,
8 you deci ded t o not al l ow chi l d car e?
10 THE COURT: Okay.
11 Q. Di d you di scuss wi t h anybody, wi t h Dr . Kar r on, as t o t he
12 f r i nge benef i t pol i cy r el at ed t o chi l d car e f or Mi ss Wi nt er ?
14 THE COURT: That r evi sed manual i sn' t i n evi dence, i s
15 i t ?
17 THE COURT: You' r e r el yi ng on somet hi ng t hat ' s not
18 even i n evi dence yet .
19 THE WI TNESS: Oh, okay.
21 THE WI TNESS: Al l r i ght .
22 THE COURT: Let ' s get i t t oget her .
23 THE WI TNESS: Okay.
24 MR. RUBI NSTEI N: Your Honor - -
( 212) 805- 0300
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1 THE COURT: Obj ect i on - - obj ect i on sust ai ned. I don' t
2 know what , what you' r e obj ect i ng t o. I t may have been my
3 r emar ks, so maybe.
4 MR. KWOK: No, I ' mobj ect i ng t o t he - -
5 THE COURT: I ' l l sust ai n i t , I ' l l sust ai n t hat al so.
6 MR. RUBI NSTEI N: You want t o st r i ke your r emar ks, your
7 Honor ?
8 THE COURT: Wel l - -
9 Q. Now, CASI wr ot e checks f or r ent , cor r ect ?
10 A. Cor r ect .
11 Q. Now, r ent i s or di nar i l y not per mi t t ed as a di r ect cost ,
12 cor r ect ?
13 A. Cor r ect .
14 Q. I n a si t uat i on wher e t he sol e - - and t he r eason, i s t he
15 r eason f or t hat because nor mal l y a busi ness i s conduct i ng ot her
16 busi nesses ot her t han t he gr ant pr oj ect and, t her ef or e, i t ' s
17 har d t o at t r i but e what por t i ons woul d be appl i cabl e?
18 A. I t ' s - - i t woul d need t o be i n t he budget .
19 Q. Ther e' s ot her s - - t her e' s a pr ovi si on f or ot her s i n t he
20 budget , cor r ect ?
21 A. Cor r ect .
22 Q. And you coul d i ncr ease t hat cat egor y by up t o 10 per cent of
23 t he 800, 000 i n t he f i r st year , cor r ect ?
24 A. Cor r ect .
25 Q. Now, but goi ng wi t h t he - - so t hat i s an i ssue t hat - -
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1 act ual l y whet her somet hi ng i s an i ndi r ect or a di r ect cost i s
2 somet hi ng t hat coul d be negot i at ed wi t h t he gr ant of f i ces,
3 r i ght ?
5 Q. Wel l , i n t he audi t r esol ut i on you coul d negot i at e whet her
6 or not t hat woul d be a di r ect cost as opposed t o an i ndi r ect
7 cost ?
8 A. Rent woul d be consi der ed an i ndi r ect cost .
9 Q. Gener al l y speaki ng, r i ght ; i s t hat cor r ect ?
10 A. Cor r ect .
11 Q. But t he CFR t hat you' r e gover ned by says t hat you deal on a
12 case- t o- case basi s?
13 A. Cor r ect .
14 Q. Now, l et ' s assume f or t hese quest i ons t hat t he r ent was, i n
15 f act , not al l owabl e; i t was i n f act an i ndi r ect cost , okay.
16 Fol l ow t hat ?
17 A. Not al l owabl e - - yes.
18 Q. I ' massumi ng t hat you' r e cor r ect , okay?
19 A. I ' mcor r ect .
20 Q. The r ent at t r i but abl e t o t he ATP gr ant woul d st ar t when?
22 A. St ar t ?
23 Q. Yeah, when woul d i t st ar t ? I f r ent was pai d - -
24 A. I f r ent was al l owabl e?
25 Q. No, no. I f i t was pai d, i t was an expense. I t ' s not
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1 al l owabl e, i t ' s an expense t hat ' s pai d, but not al l owabl e.
3 Q. Let me ask you - -
4 THE COURT: I don' t under st and t he quest i on.
5 Q. Let me ask you t hi s, was t her e - -
6 THE COURT: I don' t under st and t he quest i on. Ref r ame
7 t he quest i on.
8 Q. Okay. When you st ar t ed t o audi t CASI , di d you ascer t ai n
9 what t he f i nanci al condi t i on of CASI was bef or e t he gr ant
10 st ar t ed i n Oct ober of 2001?
11 A. Yes.
12 Q. And i s i t f ai r t o say t hat CASI Cor por at i on was i n debt i n
13 excess of bet ween 100 and $200, 000 at t hat t i me?
14 A. I don' t know how much t hey wer e i n debt .
15 Q. Wel l , i n f act - -
16 THE COURT: You don' t know whet her t hey wer e i n debt ?
17 THE WI TNESS: They wer e i n debt . I don' t know t he
18 amount .
19 Q. And CASI , pr i or t o t he ATP gr ant , was i n f act payi ng r ent
20 t o Dr . Kar r on f or use of t hat por t i on of t he apar t ment at 300
21 East 33r d St r eet ?
22 THE COURT: Bef or e t he gr ant ?
23 MR. RUBI NSTEI N: Bef or e t he gr ant .
24 THE COURT: I s t hat your knowl edge?
25 THE WI TNESS: No. My knowl edge i s t hey t ook - - t hey
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1 pai d t hemsel ves ni ne mont hs of back r ent when t hey f i r st got
2 t he check, CASI , pai d, t ook - -
3 Q. Go ahead.
4 A. The back - - t hey pai d, t hey pai d back r ent wi t h t he f i r st
5 dr awdown of NI ST f unds f or ni ne mont hs, $18, 000.
6 Q. And t hey l i st ed, t hey l i st ed what mont hs t he r ent was f or ,
7 cor r ect ?
8 A. Cor r ect .
9 Q. I mean, t her e i s a memo on each check, r i ght ?
10 A. Yes. Now t her e i s.
11 Q. Par don?
12 A. Yes.
13 Q. And t he memo says what mont h t hat $2, 000 check was payment
14 f or ?
15 A. Yes.
16 Q. Now, di d you do any - -
17 THE COURT: To whomwas t he check payabl e?
18 THE WI TNESS: Dr . Kar r on.
20 THE WI TNESS: Dr . Kar r on.
21 Q. And i f he r ecei ved r ent money, t hen he woul d have t o r epor t
22 t hat as i ncome on hi s t ax r et ur n, cor r ect ?
23 THE COURT: Obj ect i on - -
25 THE COURT: - - sust ai ned.
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1 Q. Wel l , ar e you awar e - - di d you exami ne Dr . Kar r on' s t ax
2 r et ur ns - -
4 Q. - - as par t of t hi s audi t ?
5 THE COURT: As par t of t he audi t , di d you l ook at hi s
6 t ax r et ur ns?
7 THE WI TNESS: I don' t r ecal l i f I have hi s t ax r et ur ns
8 or not .
9 Q. When, when was t he l ast - - wel l , i f you' r e cor r ect t hat - -
10 so t he f i r st ni ne checks, $18, 000 was pai d f or an expense t hat
11 was i ncur r ed pr i or t o t he gr ant , r i ght ?
12 A. Cor r ect .
13 Q. And i t woul dn' t mat t er i f you cal l ed i t r ent or you bought
14 a pi ece of equi pment unr el at ed t o t he gr ant pr i or t o t he gr ant ,
15 i t was an expense t hat he - - i t was a debt t hat he was payi ng
16 of f , cor r ect ?
17 A. Cor r ect .
18 Q. Now, he woul d be ent i t l ed, woul d he not , t o i ncr ease hi s
19 sal ar y under t he r ul es by as much as 10 per cent wi t hout pr i or
20 appr oval ?
21 A. Sal ar y woul d pr obabl y need t o be pr i or appr oval . The
22 per sonnel sal ar i es t ot al may not need pr i or appr oval .
23 Q. May?
24 A. But woul d need - - t he - - i f he wer e usi ng t he 10 per cent
25 r ul e f or - - and you had addi t i onal sal ar i es of 10 per cent . But
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1 f or a speci f i c sal ar y, you know, i f t hi ngs, i f t hi ngs changed
2 wi t h t he named peopl e, t hat ' s supposed t o get an appr oval f r om
3 t he gr ant peopl e.
4 Q. I sn' t he al l owed t o get 10 per cent of t he $800, 000 t o use
5 wi t hout any budget appr oval f or any l i ne i t emt hat had al r eady
6 been est abl i shed; i sn' t t hat t he r ul e?
7 A. He can r eal l ocat e t en per cent of t he l i ne i t ems i f i t ' s - -
8 i f i t ' s al l owabl e NI ST cost , at t r i but abl e t o t he gr ant .
9 Q. Hi s sal ar y was al l owabl e, cor r ect ?
10 A. At t he amount t hey appr oved.
11 Q. But he coul d, under t he 10 per cent r ul e, he coul d i ncr ease
12 t hat sal ar y, cor r ect ?
13 A. I ' mnot sur e about t hat .
14 Q. He coul d i ncr ease - - coul d he i ncr ease equi pment ?
15 A. Equi pment he coul d.
16 Q. Coul d he i ncr ease f r i nge benef i t s?
17 A. Fr i nge benef i t s, al l owabl e f r i nge benef i t s t o t he - - i t
18 woul d be abl e t o i ncr ease.
19 Q. That payment - - by t he way, Dr . Kar r on had, you sai d he had
20 f our account s, r i ght ?
21 A. Four checki ng account s.
22 Q. Four checki ng account s. And he had a di f f er ent col or ed
23 check f or each checki ng account , cor r ect ?
24 A. I don' t know.
25 Q. You saw t he checks, di d you not ?
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1 A. I saw copi es of t he checks.
2 Q. They wer e not i n col or ?
3 A. No.
4 Q. These r ent checks wer e pai d out of t he CASI , I nc. account ,
5 cor r ect ?
6 A. I don' t r ecal l , but t hat coul d be t r ue.
7 Q. Now, you have a schedul e as t o t he r ent checks, do you not ?
8 THE COURT: Wer e t hese checks t o t he l andl or d? Rent
9 checks, was t her e a l andl or d her e or i s i t - - or i s i t a - -
10 MR. RUBI NSTEI N: Wel l , Dr . Kar r on was t he l andl or d,
11 your Honor .
12 Q. Now, whi ch - -
13 THE COURT: I don' t know. The wi t ness t hen shoul d
14 t est i f y, Mr . Rubi nst ei n.
15 MR. RUBI NSTEI N: Okay.
16 Q. You have t hi s on t he schedul e i n t he 3500 mat er i al ,
17 cor r ect ? And I di r ect your at t ent i on t o 3500 t en - - 110, page
18 39 of 44?
19 MR. KWOK: Your Honor , I bel i eve t hat ' s gover nment
20 Exhi bi t 110.
21 MR. RUBI NSTEI N: Yeah, gover nment exhi bi t . I ' msor r y,
22 J udge.
23 THE COURT: Bef or e you get i nt o t hat , j ust so we' r e
24 cl ear , Ms. Ri l ey, was t hi s cr eat ed af t er your - - was t hi s
25 document 110 cr eat ed af t er your audi t was, December , was
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1 cr eat ed?
2 THE WI TNESS: Yes, yes.
3 THE COURT: Af t er t he r epor t was cr eat ed?
5 THE COURT: Al l r i ght . So you know, appr oxi mat el y,
6 when i t was cr eat ed?
7 THE WI TNESS: The dat a base was cr eat ed i n 2004, 2005
8 but t hi s speci f i c document was cr eat ed on May 28. I t ' s got t he
9 dat e on her e.
10 THE COURT: I see.
11 Q. Now, by l ooki ng at t hat document , ma' am, coul d you use t hat
12 t o r ef r esh your r ecol l ect i on as t o how - - t he r ent was $2, 000 a
13 mont h, cor r ect ?
14 A. Cor r ect .
15 Q. And by l ooki ng at t hat document , can you t el l t he j ur y how
16 many payment s wer e made of $2, 000 pr i or t o t he st ar t of t he
17 gr ant on Oct ober 1?
18 THE COURT: How many payment s wer e made?
19 Q. Yeah, at t r i but abl e t o r ent t hat was f or per i ods pr i or t o
20 t he st ar t of t he gr ant of J anuar y - - of Oct ober 1, 2001?
21 THE COURT: Do you have a page t o r ef er t o?
22 MR. RUBI NSTEI N: Yes. I t ' s page 39 of 44. i n exhi bi t ,
23 gover nment Exhi bi t 110, your Honor .
25 Q. Do you have t hat , ma' am?
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1 A. Yes.
2 THE COURT: By t he way, what i s GL?
3 THE WI TNESS: The gener al l edger , one of t he gener al
4 l edger s.
5 Q. And by r evi ewi ng t hat document , how many of t he r ent
6 payment s wer e made af t er f or t i me per i ods af t er Oct ober 1st ,
7 2001, st ar t - -
8 A. Af t er - - how many checks wer e made f or t he per i od st ar t i ng
9 Oct ober 1, 2001?
10 Q. When t he gr ant st ar t ed.
11 A. When t he gr ant st ar t ed, how many payment s wer e made, af t er
12 t hat ?
13 Q. Ri ght .
14 A. Ther e' s 21 payment s made dur i ng t he gr ant per i od and ni ne
15 payment s - -
16 Q. 21?
17 A. - - f or per i ods pr i or t o t he - -
18 Q. Dur i ng t he gr ant per i od - - excuse me, ma' am. Di d you say
19 dur i ng or bef or e t he gr ant per i od?
20 A. 21 t hat wer e pai d dur i ng t he gr ant per i od, and ni ne wer e
21 made f or a per i od pr i or t o t he gr ant awar d.
22 Q. I sn' t i t a f act t hat t he - - i f you st ar t at t he, wher e i t
23 says r ent on of f i ce, 30 det ai l ed r ecor ds, cor r ect ?
24 A. Yes.
25 Q. And you st ar t out , t he f i r st check was t o pay t he r ent owed
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1 f or J anuar y, 2000, cor r ect ?
2 A. Cor r ect .
3 Q. And you f ol l ow down t he next number of checks, t her e i s a
4 t ot al of ni ne checks t hat wer e at t r i but abl e t o r ent owed f r om
5 2000, cor r ect ?
6 A. Yes.
7 Q. And t hen t hat ' s al l pr i or t o t he gr ant , cor r ect ?
8 A. The ni ne, t he ni ne - - t he f i r st ni ne wer e pr i or t o t he
9 gr ant .
10 Q. And t hen you have t he next check i s J anuar y ' 01, goi ng down
11 t o t he bot t omof t hat page?
12 THE COURT: Wai t a mi nut e. Af t er t he f i r st ni ne
13 checks dat ed Oct ober 26, 2001?
15 THE COURT: The next check i s 11/ 9, not J anuar y.
16 MR. RUBI NSTEI N: No, your Honor . I f your Honor l ooks
17 at det ai l s f or t he check, t hey have - - t hey show t he dat e
18 t hat - - f r omt he memo as t o what per i od. We concede i t was
19 pai d af t er t he gr ant . But t hi s, t hese expenses wer e f or - -
20 wer e owed f r om2000.
21 THE COURT: I under st and. You' ve cover ed t hat . But
22 t hen you ski pped t hi s Oct ober 26 t o J anuar y, and t her e wer e
23 payment s made i n November and i n December whi ch you omi t t ed i n
24 your quest i on. You sai d i t was t he next check.
25 MR. RUBI NSTEI N: I amgoi ng by t he, t he checks i n t he
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1 schedul e, your Honor . Ther e' s - -
2 THE COURT: I ' mgoi ng by t he checks i n t he schedul e
3 t oo, page 39 of 44.
4 MR. RUBI NSTEI N: Ri ght . The f i r st - -
5 THE COURT: So l et ' s f r ame your quest i on pr oper l y.
7 Q. The f i r st check t hat was pai d was f or J anuar y 2000' s r ent ,
8 cor r ect ?
9 A. Yes.
10 Q. The next check was Febr uar y 2000' s r ent ?
11 A. Yes.
12 Q. Next i s Mar ch 2000 r ent ?
13 A. Yes.
14 Q. And Apr i l 2000 r ent ?
15 A. Yes.
16 Q. Then May 2000' s r ent ?
17 A. Yes.
18 Q. J une 2000' s r ent ?
19 A. Yes.
20 Q. J ul y 2000 r ent ?
21 A. Yes.
22 Q. August 2000 r ent ?
23 A. Yes.
24 Q. Sept ember 2000 r ent , cor r ect ?
25 A. Cor r ect .
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1 Q. Okay. So t hose ar e ni ne checks t hat wer e wr i t t en af t er t he
2 gr ant , but pai d f or expenses i ncur r ed bef or e t he gr ant ,
3 cor r ect ?
4 A. Cor r ect .
5 Q. Now, t hen you have t he next check i s f or J anuar y r ent 2001,
6 cor r ect ?
7 A. Cor r ect .
8 Q. Febr uar y r ent , 2001?
9 A. Cor r ect .
10 Q. Mar ch r ent , 2001?
11 A. Cor r ect .
12 Q. Apr i l r ent , 2001?
13 A. Cor r ect .
14 Q. We' l l t ake December out . Then J une r ent , 2001?
15 A. Cor r ect .
16 Q. May r ent , 2001?
17 A. Cor r ect .
18 THE COURT: But what dat e - - t hat ' s what you' r e
19 r eadi ng of f i s t he dat e on t he expl anat i on, i s t hat cor r ect ?
20 MR. RUBI NSTEI N: Cor r ect , your Honor .
21 THE COURT: Wel l , when wer e t he checks wr i t t en?
22 MR. RUBI NSTEI N: Checks wer e wr i t t en i n Oct ober ,
23 November , December and J anuar y - - Oct ober , November ,
24 December 2001, af t er t he gr ant .
25 THE COURT: I s t hat cor r ect , Ms. Ri l ey?
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1 THE WI TNESS: The checks - - t hi s i s t he dat e t he
2 checks cl ear ed t he bank on t hi s dat e.
4 THE WI TNESS: The checks cl ear ed t he bank. These
5 woul d have been t he t i mes t he checks cl ear ed t he bank.
6 THE COURT: When wer e t he checks - - yes or no, wer e
7 t he checks wr i t t en i n November , December , and J anuar y?
9 THE COURT: Ther e wer e checks wr i t t en i n November wer e
10 at t r i but ed on t he check t o payabl e f or t he J anuar y 1st r ent ?
11 THE WI TNESS: Yes, yes.
12 THE COURT: Al l r i ght . And si mi l ar l y - -
13 Q. So i s i t f ai r t o say t hat 18 of t hese $2, 000 checks wer e
14 wr i t t en t o pay f or expenses t hat occur r ed pr i or t o t he gr ant ?
15 A. Yes.
16 Q. That woul d come t o a t ot al of $36, 000?
17 A. Ri ght .
18 Q. Cor r ect ?
19 A. Yes.
20 Q. Okay. Fr i nge benef i t s wer e budget ed f or a $110, 000, i s
21 t hat cor r ect , accor di ng t o t he budget ?
22 A. Fr i nge benef i t s - -
23 Q. Do you have t he budget , ma' am?
24 A. Fr i nge benef i t s wer e f or - -
25 MR. KWOK: Your Honor , may I hand up t he budget t o t he
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1 wi t ness?
2 THE COURT: You may.
3 MR. KWOK: Gover nment exhi bi t 22.
4 ( Handi ng)
5 Q. Have you exami ned exhi bi t 22, ma' am?
6 A. For year one?
7 Q. Year one.
8 A. $110, 000 i s t he budget f or f r i nge benef i t s.
9 Q. And how much f r i nge benef i t s wer e expended by t he busi ness?
10 A. I don' t have t he, t he year one amount expended. The year
11 one - - wher e i s t he - -
12 Q. You want t o l ook - -
13 A. Wher e i s t he - -
14 Q. You want t o l ook at exhi bi t 62?
15 A. Less t han $110, 000.
16 Q. Par don? You want t o l ook at exhi bi t - - maybe t hi s wi l l
17 hel p you, exhi bi t 62. Ther e i s an appendi x number t hr ee.
18 A. Exhi bi t 62.
19 Q. Page 16. Does t hat , i n any way, r ef r esh your r ecol l ect i on
20 as t o t he amount of f r i nge benef i t s t hat wer e cl ai med by CASI ?
21 A. That doesn' t .
22 Q. Do you have anyt hi ng t hat , t hat shows you t he amount t hat
23 you di sal l owed, or suggest ed shoul d be di sal l owed?
24 THE COURT: What ar e you r ef er r i ng t o now?
25 MR. RUBI NSTEI N: Ther e i s an appendi x i n exhi bi t 62,
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1 gover nment exhi bi t 62, your Honor , appendi x number t hr ee,
2 page - -
3 THE COURT: What page?
4 MR. RUBI NSTEI N: Page 16.
5 MR. KWOK: Your Honor - -
6 THE COURT: Yes.
7 MR. KWOK: I t hi nk def ense counsel i s di r ect i ng t he
8 wi t ness' at t ent i on t o t he def endant ' s r esponse, not t o her
9 wor k.
10 MR. RUBI NSTEI N: No. I ' mdi r ect i ng her at t ent i on t o
11 t he l ef t si de of t he page. As you l ook at i t , t her e i s - -
12 THE COURT: I ' mj ust t r yi ng t o f i nd t he page, so I can
13 det er mi ne what you' r e r ef er r i ng t o. Page 16, appendi x t hr ee?
14 MR. RUBI NSTEI N: Appendi x t hr ee, yes, your Honor .
16 Q. Al l r i ght . As you l ook at t he page, t he l ef t - hand por t i on
17 ar e your number s, cor r ect , Ms. Ri l ey?
18 A. Okay. The l ef t - hand number s.
19 Q. As you l ook at t he page?
20 A. Yes.
21 Q. Wher e i t says, di sal l ows, t hen t her e i s a col umn?
22 A. Yes, quest i oned i s a col umn. Yes, okay.
23 Q. And t he ot her si de says answer . That was what was
24 submi t t ed by Mr . Spi t z i n hi s pr esent at i on, cor r ect ?
25 A. Cor r ect .
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1 THE COURT: So t he posi t i on - - t hi s i s a r esponse t o
2 t he dr af t audi t r epor t , as Mr . Kwok sai d, r i ght , Mr - -
3 MR. RUBI NSTEI N: No. These ar e her number s - - yes.
4 But t hose - - yes.
5 THE COURT: As cont ai ned i n t he r esponse - -
7 THE COURT: - - t o t he dr af t audi t r epor t .
8 MR. RUBI NSTEI N: Fai r enough, J udge.
9 THE COURT: What ?
11 Q. Di d you check t hat Mr . Spi t z had pr oper l y cal cul at ed and
12 i dent i f i ed what you had di sal l owed i n t hi s audi t ?
13 A. I ' msor r y, r epeat t hat ?
14 Q. I n ot her wor ds, t he di sal l owances ar e pur por t ed by
15 Mr . Spi t z t o be what you di sal l owed as t he OI G audi t or f r om
16 CASI ?
17 A. Cor r ect .
18 Q. And di d you check t hese f i gur es so t hat coul d you det er mi ne
19 t hat t hose wer e, i n f act , your di sal l owances?
20 A. Cor r ect .
21 Q. So t hese - - so i t ' s f ai r t o say t hat t he number s depi ct ed
22 on t he l ef t - hand si de of t he page, as you l ook at i t , mar ked
23 di sal l owance, ar e i n f act your number s?
24 A. Cor r ect .
25 Q. And by t he way, Mr . Spi t z submi t t ed an 80 page r esponse,
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1 di d he not ?
2 A. The r esponse? Dr . Kar r on, wi t h t he ai d of Mr . Spi t z. I - -
3 what , t hi s 38 page r esponse?
4 Q. Wel l , di d you - - was i t an 80 page r esponse?
5 THE COURT: I t says 16 of 38, Mr - -
6 MR. RUBI NSTEI N: I know what i t says, J udge. I ' mj ust
7 aski ng a quest i on.
8 THE COURT: Was i t i n f act mor e t han t hi s 38 pages,
9 Ms. Ri l ey?
10 THE WI TNESS: I - -
11 THE COURT: Do you know?
12 THE WI TNESS: I t hi nk t hi s i s al l .
13 THE COURT: Do you know? Yes or no, or you don' t
14 know?
15 THE WI TNESS: I don' t know.
16 THE COURT: Okay.
17 THE WI TNESS: Thi s i s al l I know.
18 Q. Your t ot al quest i onabl e i t ems was $547, 000, cor r ect ? You
19 want t o l ook at 3502B, t op of t he second page and see i f t hat
20 r ef r eshes your r ecol l ect i on?
21 A. 547?
22 Q. What ?
23 A. Yeah 547.
24 Q. 547, 000 was quest i onabl e, cor r ect ?
25 A. Cor r ect .
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1 Q. And you di dn' t change one dol l ar af t er you r evi ewed
2 Mr . Spi t z' s r esponse, cor r ect ?
3 A. Cor r ect .
4 Q. And i t ' s a f act t hat - -
5 THE COURT: Who gave t he r esponse; do you know who
6 wr ot e i t ?
7 THE WI TNESS: The r esponse says t hat Dr . Kar r on, wi t h
8 t he ai d of , wr ot e i t .
9 THE COURT: Dr . Kar r on, wi t h t he ai d of Mr . Spi t z?
10 THE WI TNESS: On page, on page one of 38.
11 THE COURT: Al l r i ght . Thank you.
12 Q. So wer e t her e addi t i onal r ebut t al s, ot her t han t hi s
13 appendi x? Wer e t her e ot her document s submi t t ed besi des t hi s
14 r ebut t al t hat we have her e i n appendi x t hr ee?
15 A. Af t er t he f i nal r epor t ? Af t er t he r epor t was - - af t er t he
16 dr af t ?
17 Q. No, when you r ecei ved - -
18 A. I don' t r ecal l any, any ot her .
19 Q. Wel l , do you r ecal l t el l i ng Mr . Kwok on Apr i l 22nd, 2008
20 t hat an 80 page r ebut t al was submi t t ed?
22 Q. Let me show i t t o you. You met wi t h Mr . Kwok on Apr i l - -
23 I ' msor r y - - Apr i l 22nd, cor r ect ?
24 A. I don' t r ecal l t he dat e.
25 Q. I show you what ' s - - when you met wi t h Mr . Kwok, di d he
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1 t ake not es when he spoke t o you?
2 A. I don' t r ecal l i f he t ook not es.
3 Q. Al l r i ght . I ' mgoi ng t o show you what ' s been mar ked as
4 3502B and i dent i f i ed as def endant ' s exhi bi t I f or
5 i dent i f i cat i on and ask you t o l ook at t he second page wher e I
6 have a number t en on t he r i ght - hand si de and see i f t hat
7 r ef r eshes your r ecol l ect i on as t o t el l i ng Mr . Kwok t hat an 80
8 page r ebut t al was submi t t ed?
9 A. I don' t r ecal l sayi ng an 80 page r ebut t al was submi t t ed.
10 Q. Okay. Now, do you have any cal cul at i on f or t he, f or t he
11 t ot al amount of f r i nge benef i t s t hat wer e expended?
12 A. Tot al amount - - yes.
13 Q. And what was t he t ot al amount - -
14 A. For - -
15 Q. - - of f r i nge benef i t s t hat wer e expended by CASI ?
16 MR. KWOK: Your Honor , i f I coul d di r ect t he wi t ness'
17 at t ent i on t o gover nment exhi bi t 114 and 115.
18 ( Handi ng)
19 THE COURT: I t ' s 10 af t er 11: 00. Whi l e you' r e
20 conf er r i ng, l et ' s have t he j ur y t ake a br eak whi l e you conf er
21 and get your exami nat i on t oget her .
22 ( J ur y exi t s t he cour t r oom)
24
25
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1 ( I n open cour t ; j ur y not pr esent )
2 THE COURT: Al l r i ght , ar e you near t he end?
3 MR. RUBI NSTEI N: Unf or t unat el y not , J udge, because I
4 can' t get yes or no answer s, and - -
5 THE COURT: You can get yes or no answer s.
6 MR. RUBI NSTEI N: Al l r i ght .
7 THE COURT: Al l you have t o do i s ask f or t hem, you' l l
8 have t hem.
9 MR. RUBI NSTEI N: I ' l l do t hat .
10 THE COURT: Al l r i ght , t hank you.
11 ( Recess)
12 THE COURT: Al l r i ght , pl ease be seat ed. Let ' s br i ng
13 i n t he j ur y.
14 ( J ur y ent er i ng)
15 THE COURT: Pl ease be seat ed.
16 Al l r i ght , Mr . Rubi nst ei n.
18 Q. I had asked you bef or e t he br eak i f you have a t ot al of t he
19 amount of f r i nge benef i t s t hat wer e pai d by CASI ?
20 THE COURT: I n any year ?
21 Q. I f t he year , f i r st year i n r ent . We' ve est abl i shed t hat
22 t hey wer e aut hor i zed t o pay 110, 000, and t he gover nment gave
23 you exhi bi t s one - - gover nment Exhi bi t 114 and 115 f or you t o
24 r ef r esh your r ecol l ect i on?
25 A. Cor r ect . And so t hey have an al l ocat i on f or 163, 460,
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1 accor di ng t o t he checks.
2 Q. Par don?
3 A. 160 - - 100 and - - i n t he checks wr i t t en - -
4 THE COURT: What ar e you l ooki ng at ?
5 THE WI TNESS: At t he gover nment 110.
6 Q. Looki ng at gover nment 110?
7 THE COURT: Wher e i n gover nment 110? What ?
8 THE WI TNESS: Oh, I ' msor r y. On page t en of 44. Page
9 t en, page t en.
10 THE COURT: 10 of 44?
11 THE WI TNESS: 10 of 44.
12 Q. What was t hat page agai n, pl ease?
13 THE COURT: Page t en of 44, Mr . Rubi nst ei n.
15 THE COURT: What i s 110 t aken f r om, Ms. Ri l ey; whose
16 r ecor ds ar e you basi ng t hi s on?
17 THE WI TNESS: On t he - - t hi s document i s t he one we
18 di d f r omt he cancel l ed checks af t er l ast year - - af t er t he
19 audi t .
20 Q. So i t ' s pages 110 and 111, i s t hat - - I ' msor r y, pages t en
21 and 11 of Exhi bi t 110, i s t hat what you' r e r ef er r i ng t o?
22 THE COURT: She sai d page t en of 44.
23 Q. 10 of 44?
24 A. 10 of 44, yes.
25 Q. What i s your t ot al amount of f r i nge benef i t s t hat was
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1 cl ai med?
2 A. 158 - - I don' t have t hat f or a year .
3 THE COURT: Do you have i t f or - -
4 THE WI TNESS: The cl ai ms, t he cl ai med amount i s
5 158, 576.
6 THE COURT: For what per i od?
7 THE WI TNESS: Oct ober 1, 2001 t hr ough J une 27t h, 2003.
8 Q. So t hat ' s f or a year and ni ne mont hs?
9 A. Yes.
10 Q. You do not have t he - - t hey wer e ent i t l ed t o 110, 000 i n
11 f r i nge benef i t s t he f i r st year , cor r ect ?
12 A. Cor r ect .
13 Q. And t hey wer e ent i t l ed, I t hi nk, t o 127, 000 t he second
14 year ; amI cor r ect or i ncor r ect about t hat ?
15 A. Cor r ect .
16 Q. So t hat t hat woul d be over 230, 000 f or f r i nge benef i t s, and
17 t hat i ncl udes t he payr ol l t axes, r i ght ?
18 A. Cor r ect .
19 Q. How much of t hi s f i gur e was t he payr ol l t axes; i s t hat on
20 t he bot t omof page 11?
21 A. How much of whi ch f i gur e?
22 Q. Of t he, your 163, 460. 37 i s your t ot al f r i nge benef i t
23 expenses, act ual expenses, f or 21 mont hs of t he gr ant , cor r ect ?
24 A. Can you r epeat t hat ?
25 Q. The f r i nge benef i t s f or - - f r omOct ober 1st , 2001 t o J une
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1 30t h, 2003, ar e r ef l ect ed i n t hi s number t hat says, wher e i t
2 says f r i nge benef i t s on t he l ef t , i f you go acr oss i n bol d
3 pr i nt , you go acr oss t hat l i ne, i t says 129 det ai l ed r ecor ds?
4 MR. KWOK: What document , your Honor ?
5 THE COURT: Yeah, l et ' s - - we don' t know what you' r e
6 r eadi ng f r om.
7 MR. RUBI NSTEI N: I ' msor r y, J udge.
8 THE COURT: You don' t i dent i f y i t .
9 MR. RUBI NSTEI N: I ' msor r y. I t hought we wer e al l - -
10 THE COURT: I t makes no sense f or t he r ecor d, Mr .
11 Rubi nst ei n.
12 MR. RUBI NSTEI N: I ' msor r y, J udge. I t hought we wer e
13 al l on page t en of 44 of Exhi bi t 110. That ' s what we' r e
14 t al ki ng about .
15 THE COURT: She' s t est i f i ed t o what i t was. Let ' s go
16 on, 160. I t shows t her e, f or t he r ecor d, 163, 460. I s t hat
17 cor r ect , Ms. Ri l ey?
19 Q. For a 21 mont h per i od, st ar t i ng - -
20 THE COURT: We' ve cover ed t hat .
21 Q. Okay. How much of t hat was wi t hhol di ng, payr ol l
22 wi t hhol di ng t axes t hat ar e consi der ed f r i nge benef i t s?
23 A. 135, 000.
24 THE COURT: How much?
25 THE WI TNESS: One - - i t ' s - - t he empl oyment t ax amount
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1 i ncl udes t he, t he empl oyer ' s shar e, but i t ' s 135, 000 f or t he
2 t ot al empl oyment t ax.
3 THE COURT: I ' msor r y?
4 THE WI TNESS: 135, 000 on page 11 of 44.
5 THE COURT: Page 11 of 44?
6 THE WI TNESS: Of 110.
8 Q. And so t he non- payr ol l t ax f r i nge benef i t s equal what ?
9 A. Appr oxi mat el y 35 - - appr oxi mat el y $30, 000.
10 Q. Now, and you di sal l owed - - your r ecommendat i on was a
11 di sal l owance of $68, 884, cor r ect ?
12 A. Cor r ect .
13 Q. Because when you di sal l owed sal ar y, you di sal l owed what t he
14 per cent age of payr ol l t ax woul d be appl i cabl e t o t hat sal ar y,
15 cor r ect ?
16 THE COURT: I s t hat t he r eason you di d i t ?
17 THE WI TNESS: Repeat t hat , pl ease?
18 Q. Yeah. When you di sal l owed sal ar y, you know, l i ke Gur f ei n' s
19 25, 000, Dr . Kar r on' s 40 some odd t housand, you t hen di sal l owed
20 as al l owabl e expense t he payr ol l t ax t hat was pai d on t hat
21 $71, 000?
22 A. Cor r ect .
23 Q. So t hat i f t he sal ar y was i n f act al l owabl e, t hen t he
24 f r i nge benef i t woul d' ve been al l owabl e, cor r ect ?
25 A. Cor r ect .
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1 Q. And di d you di sal l ow - - wel l , I ' l l wi t hdr aw t hat .
2 Now, you al so had a cat egor y of meal s, cor r ect ?
3 A. Cor r ect .
4 Q. And you had di sal l owance i n t hat cat egor y?
5 A. Cor r ect .
6 Q. You showed us an ent i r e schedul e r el at ed t o meal s, cor r ect ?
7 A. Cor r ect .
8 Q. And di d you ascer t ai n whet her or not - - wi t hdr awn. I t ' s
9 appr opr i at e, i f you have a busi ness meet i ng, t o - - meal s ar e
10 deduct i bl e, ar e t hey not ?
11 MR. KWOK: Obj ect i on. Deduct i bl e?
12 Q. Wel l , al l owabl e. I ' msor r y. I s t hat cor r ect ?
13 A. For what ?
14 Q. Ar e meal s an al l owabl e expense i f - -
15 A. Appr oved by t he budget .
16 Q. - - i f di scussi ng CASI busi ness at a cof f ee shop?
17 THE COURT: Al l owabl e gr ant expense?
18 THE WI TNESS: No, not f or di scussi ng CASI .
20 Q. Par don?
21 THE COURT: Why not ?
22 THE WI TNESS: No. The meal s - - t he meal s woul d not
23 be - - meal s woul d depend.
24 Q. Par don?
25 A. Meal s - - t hey woul d - - f or di scussi ng CASI busi ness, t hey
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1 woul d not be al l owabl e.
2 Q. On what t heor y?
3 A. Some - -
4 Q. What audi t i ng t heor y i s t her e t hat says t hat a busi ness
5 meet i ng conduct ed i n a r est aur ant or i n a boar d r oomwher e f ood
6 i s suppl i ed, i s not an al l owabl e expense?
7 A. They - - i t woul d - - t he some - - some may be al l owabl e f or - -
8 f or NI ST expense.
9 THE COURT: What , I ' msor r y?
10 A. To di scuss NI ST. But f or meet i ngs t o di scuss CASI busi ness
11 expense - -
12 Q. Wel l , t he onl y busi ness CASI had was NI ST, cor r ect ?
13 A. Al l of t he aspect s of a NI ST ar e not - - t he
14 commer ci al i zat i on of t he end pr oduct of t he mar ket i ng st r at egy
15 of t he pr oduct you' r e cr eat i ng i s not an al l owabl e expense,
16 even t hough i t ' s r equi r ed by NI ST f or t he gr ant .
17 Q. Di d you i nqui r e as t o what any of t hese meal deduct i ons
18 r el at ed t o?
19 A. I , I ' ve - - yes.
20 Q. And di d you ascer t ai n t hat i n t he comput er at CASI wi t h t he
21 scanned i nvoi ces and checks, wer e al so scanned r ecei pt s f r om
22 each one of t hese i t ems t hat you say ar e - - t hat you l i st i n
23 t he meal s cat egor y?
24 A. I don' t r ecal l i f I have a speci f i c sampl e f r omt he f ood
25 cat egor y.
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1 Q. I s i t f ai r t o say, ma' am, t hat you j ust t ook t he Amer i can
2 Expr ess st at ement , mont hl y st at ement s and j ust wr ot e down ever y
3 meal t hat was char ged, or cof f ee or Chi nese f ood or what ever ,
4 r i ght ?
5 A. For t he r evi ew of t he end anal ysi s of checks, yes.
6 Q. The anal ysi s of t he Amer i can Expr ess, t her e wer e no checks
7 wr i t t en f or t hese, quot e, meal s, cor r ect ?
8 A. Cor r ect .
9 Q. They wer e pai d f or by t he Amer i can Expr ess car d, r i ght ?
10 A. Cor r ect .
11 Q. Now, di d you ever r equest any backup t o show what - - who
12 was pr esent when t hese f unds wer e expended?
14 Q. Wel l , l et me show you what ' s been mar ked f or i dent i f i cat i on
15 as def endant ' s - - I show you what ' s been mar ked as def endant ' s
16 exhi bi t CCC.
17 MR. RUBI NSTEI N: Her e, your Honor .
18 ( Handi ng)
19 THE COURT: Thank you.
21
22
23
24
25
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2 Q. I show you what ' s been mar ked f or i dent i f i cat i on as CCC.
3 Ar e you f ami l i ar wi t h t hat document , ma' am?
5 Q. Wel l , why don' t you t ake a l ook at Gover nment Exhi bi t 110,
6 page 24 of 37. I n t he mi ddl e of t he page you have a Moonst r uck
7 East r est aur ant on 4/ 5/ 03, r i ght ?
8 A. Cor r ect .
9 Q. I n t he amount of $50, r i ght ?
10 A. Yes.
11 Q. And t hat ' s i n t he amount of $50, cor r ect ?
13 Q. CCC - -
14 A. Yes.
15 Q. I s t hat t he r ecei pt f or t he same dat e and t he same amount
16 - -
17 A. Yes.
18 Q. - - t hat you have i n your exhi bi t ?
19 A. Yes.
20 Q. And you never saw t hi s bef or e, cor r ect ?
21 A. CCC?
22 Q. Yes.
23 A. I don' t r ecal l seei ng t hi s bef or e.
24 Q. Di d you ever ask f or any document at i on of any of t he meal s
25 t hat you di sal l owed?
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2 Q. Page 2, do you see what ' s r ef l ect ed on page 2 of t hat
3 document , CCC?
4 A. Oh, yes.
5 MR. RUBI NSTEI N: We of f er CCC i nt o evi dence, your
6 Honor .
8 THE COURT: CCC i s admi t t ed i nt o evi dence.
9 ( Def endant ' s Exhi bi t CCC r ecei ved i n evi dence)
10 Q. Do you see on t he second page i t says di nner meet i ng,
11 cor r ect ?
12 A. Yes.
13 Q. And do you r ecogni ze Dr . Kar r on' s si gnat ur e?
14 A. Yes.
15 Q. And do you r ecogni ze - - t her e ar e t wo ot her si gnat ur es
16 t her e, cor r ect ?
17 A. Cor r ect .
18 Q. Do you r ecogni ze ei t her of t hose si gnat ur es?
19 A. I - - no.
20 THE COURT: She doesn' t r ecogni ze any of t he
21 si gnat ur es.
22 MR. RUBI NSTEI N: I j ust want t o exhi bi t t hat t o t he
23 j ur y, your Honor . That ' s t he r ear por t i on of t he r ecei pt .
24 Q. Bot t oml i ne says di nner meet i ng. Above t hat i s Dr .
25 Kar r on' s si gnat ur e, r i ght , Ms. Ri l ey?
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1 A. Cor r ect .
2 Q. And above t hat ar e t wo ot her i t ems, cor r ect ?
3 A. Cor r ect .
4 Q. That you cannot i dent i f y?
5 A. Cor r ect .
6 THE COURT: Let ' s move i t al ong, Mr . Rubi nst ei n. We
7 don' t need al l t hose ext ended conf er ences at t he t abl e t her e.
8 Let ' s pl ease move i t on. We don' t need t hose ext ended wai t s
9 and ext ended t i me. We ar e l osi ng a l ot of t i me by t hat .
10 Q. Di d you i n f act go wi t h Dr . Kar r on and Bob Benedi ct t o
11 Chr i st i ne' s on J une 25, 2003?
12 A. Yes.
13 THE COURT: What ? To wher e?
14 MR. RUBI NSTEI N: C- R- I - S- T- I - N- A- ' - s.
15 Q. Di d you go t her e?
16 A. I went t o a r est aur ant wi t h t hem.
17 THE COURT: You di d go t o a r est aur ant wi t h t hem?
18 THE WI TNESS: Um- hum.
19 Q. And di d you - - t he audi t i s deduct i bl e, cor r ect ? The cost
20 of t he audi t i s deduct i bl e.
21 THE COURT: The cost of whose audi t ?
22 Q. The payment f or an audi t or , Ms. Hayes i n t hi s case, i s a
23 deduct i bl e expense, al l owabl e expense, under t he NI ST gr ant ,
24 cor r ect ?
25 THE COURT: The cost f or Ms. Hayes audi t i ng t he books
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1 i s a deduct i bl e expense, t hat ' s t r ue. I s t hat cor r ect ?
2 THE WI TNESS: Yes, t he cost of t he audi t i s a
3 deduct i bl e expense.
4 Q. And i n f act when you went t o l unch - - r at her , when you went
5 out wi t h Dr . Kar r on and Ms. Hayes, Dr . Kar r on pai d f or t hat ,
6 di d he not ?
7 A. Yes, I guess.
8 Q. I show you what ' s been mar ked - -
9 THE COURT: Di d he pay f or i t ?
10 THE WI TNESS: I guess. I guess.
11 THE COURT: You don' t know.
13 THE COURT: Al l r i ght . Then answer t hat .
14 Q. Let me show you what ' s been mar ked as Def endant ' s N f or
15 i dent i f i cat i on and ask you t o l ook at t he f r ont .
16 THE COURT: Pl ease, l et ' s move i t al ong.
17 MR. RUBI NSTEI N: Wel l , I ' mwai t i ng f or an answer f r om
18 t he wi t ness.
19 THE COURT: What have you shown her ?
20 MR. RUBI NSTEI N: I have shown her Exhi bi t N, as i n
21 Nancy. My wi f e' s name.
22 THE COURT: Let me see i t . I haven' t got t en a copy.
23 MR. RUBI NSTEI N: I ' mt r yi ng t o pr i nt i t out now,
24 J udge.
25 THE COURT: What dat e i s i t ?
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1 MR. RUBI NSTEI N: The dat e i s J une 25, 2003. I t ' s
2 r ef l ect ed on Gover nment Exhi bi t 110, page 23 of 37.
4 Q. Ma' am, by l ooki ng at Exhi bi t N, does t hat r ef r esh your
5 r ecol l ect i on?
6 A. Exhi bi t N?
7 Q. Yes.
8 A. Yes.
9 Q. And, as a mat t er of f act , do you r ecal l t hat you pai d your
10 own shar e?
11 A. Yes.
12 Q. And so $17 even was t he shar e f or Ms. Hayes, Mr . Benedi ct
13 and Dr . Kar r on, cor r ect ?
14 A. Thi s i s showi ng t hat Ms. Hayes pai d separ at el y al so.
15 Q. Ms. Hayes pai d separ at el y, OK. And t hat was dur i ng, whi l e
16 you wer e t her e t o do your f i el d wor k.
17 A. Yes.
18 Q. Ri ght ?
19 A. Yes.
20 Q. You deduct ed - - you di sal l owed t hat meal , t hat $17 on your
21 schedul e, r i ght ?
22 THE COURT: J ust yes or no.
23 A. Yes.
24 Q. Di d you f eel t hat goi ng and di scussi ng - - you di scussed
25 audi t busi ness, di d you not ?
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1 A. Yes, we di d.
2 Q. Do you f eel t hat t hat meet i ng, di scussi ng audi t busi ness,
3 i s not an al l owabl e expense under NI ST?
4 A. No.
5 Q. No what ? I t ' s not al l owabl e?
6 A. I t woul d be al l owabl e.
7 THE COURT: I t what ?
8 THE WI TNESS: Woul d be al l owabl e.
9 THE COURT: I t woul d be al l owabl e.
10 THE WI TNESS: I f t her e was - - yes, i t woul d be
11 al l owabl e.
12 MR. RUBI NSTEI N: We of f er Def endant ' s N i nt o evi dence.
13 MR. KWOK: Obj ect i on, your Honor . The wi t ness has not
14 aut hent i cat ed t he document .
15 THE COURT: Let me see t he document .
16 Q. Di d you si gn t he back of t hat , ma' am? I s t hat your
17 si gnat ur e on t he back?
18 THE COURT: I s t hat your si gnat ur e, or i s t hat someone
19 el se' s wr i t i ng?
20 THE WI TNESS: I t ' s not my si gnat ur e.
21 Q. But t hat i s t he expense t hat you have on your sheet , do you
22 not ? That i s f or t he same dat e, t he same amount , t he same
23 r est aur ant t hat you have l i st ed i n Exhi bi t 110, cor r ect ?
24 THE COURT: I amal l owi ng i t i nt o evi dence. Let ' s go
25 ahead.
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1 MR. RUBI NSTEI N: OK.
2 THE COURT: What page i s t hi s on?
3 MR. RUBI NSTEI N: Page 23 of 37, your Honor , near t he
4 t op quar t er of t he page.
6 Q. Now, i n addi t i on t o t hat , you have on page 22, number 37 of
7 Exhi bi t 110, you have expenses f or a r est aur ant Benj ami n' s. Do
8 you see t hat ? I t says 530 i s t he number on t he l ef t - hand si de.
9 THE COURT: What page?
10 MR. RUBI NSTEI N: Page 22 of 37.
11 THE COURT: Go ahead. What dat e ar e you r ef er r i ng t o?
12 Q. Do you know what t he f i r st vi si t t o Benj ami n' s was at
13 November 5, 2002?
14 THE COURT: Di d you ever ask about November 5, 2002?
16 Q. Wel l , ar e you awar e - - di d you ever speak t o - - wi t hdr awn.
17 You spoke t o Ms. Li de and Ms. Or t hwei n of NI ST ATP,
18 cor r ect ?
19 A. Yes.
20 Q. Ar e you awar e as you si t t her e now whet her or not t hey went
21 wi t h Dr . Kar r on t o Benj ami n' s r est aur ant when t hey came f or
22 t hei r si t e vi si t at CASI ?
23 A. I don' t know what t hey di d.
24 Q. Now, you got t hese expenses f r omt he Amer i can Expr ess car d,
25 cor r ect ?
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1 A. Cor r ect .
2 Q. And wer e t her e meal s char ged ever y day t o t he Amer i can
3 Expr ess car d?
4 A. No.
5 Q. As a mat t er of f act , Dr . Kar r on had anot her cr edi t car d,
6 di d he not ?
7 A. A per sonal - - yes.
8 Q. He had a Mast er car d, r i ght ?
9 A. Yes.
10 Q. Have you ever r evi ewed hi s Mast er car d r ecor ds?
11 A. No.
12 Q. Ei t her i n your Gover nment Exhi bi t 110 or Gover nment Exhi bi t
13 111 you have a Mast er car d schedul e, do you not ?
14 A. I have an Amer i can Expr ess schedul e.
15 Q. No Mast er car d.
16 A. No.
17 Q. And you never saw a Mast er car d schedul e?
18 A. I don' t r ecal l seei ng a Mast er car d schedul e.
19 THE COURT: Let ' s move t hi s al ong, Mr . Rubi nst ei n.
20 MR. RUBI NSTEI N: Yes, your Honor .
21 Q. And t he equi pment - - sor r y, suppl i es, di d you di sal l ow
22 suppl i es?
23 A. Yes.
24 Q. And how much suppl i es di d you di sal l ow?
25 A. Suppl i es, 24, 000.
( 212) 805- 0300
KA-2611 KA-2611 KA-2611
780
1 THE COURT: Whi ch year ar e we t al ki ng about ?
2 MR. RUBI NSTEI N: The f i r st year of t he gr ant .
3 A. Oh, t he f i r st year ? That ' s t ot al gr ant .
4 THE COURT: I t ' s t he t ot al gr ant .
5 MR. RUBI NSTEI N: Par don?
6 THE COURT: You have t o move t hi s al ong. I mean you
7 ar e put t i ng me t o sl eep, Mr . Rubi nst ei n. Let ' s move i t al ong.
8 Al l r i ght ? I ' monl y goi ng t o al l ow you anot her 15 or 20
9 mi nut es. That ' s i t .
10 MR. RUBI NSTEI N: I agr ee wi t h you, J udge.
11 THE COURT: Let ' s go.
12 Q. You di sal l owed ut i l i t i es, di d you not ?
13 A. Di sal l owed ut i l i t i es?
14 Q. Yes.
15 A. Yes.
16 Q. Ar e you awar e t hat t her e wer e di scussi ons bet ween Dr .
17 Kar r on and NI ST as t o whet her t o al l ow a por t i on of t he
18 ut i l i t i es?
19 A. Yes.
20 THE COURT: When? Al l r i ght .
21 Q. And i s i t f ai r t o say t hat you det er mi ned t hat a por t i on of
22 t he ut i l i t i es shoul d be al l owabl e?
23 MR. KWOK: Your Honor , i s i t an audi t , or i s i t an
24 anal ysi s based on t he bank st at ement s? I don' t know what
25 Mr . Rubi nst ei n i s aski ng.
( 212) 805- 0300
KA-2612 KA-2612 KA-2612
781
1 THE COURT: The audi t ? Ar e you addr essi ng t he audi t ,
2 Mr . Rubi nst ei n?
4 THE COURT: I n t he audi t , di d you say t hat some - - di d
5 you det er mi ne t hat a por t i on of t he ut i l i t i es shoul d be
6 al l owabl e? Yes or no? Yes or no?
7 THE WI TNESS: No.
9 Q. And what about educat i on?
10 A. No.
11 Q. You di sal l owed al l t he educat i on, r i ght ?
12 A. Ri ght .
13 Q. Even i f t he educat i on was r el at ed t o t he NI ST ATP pr oj ect ,
14 cor r ect ?
15 THE COURT: Wer e you advi sed t hat any of i t r el at ed t o
16 t he pr oj ect ?
20 THE COURT: What por t i on?
21 THE WI TNESS: One of t he cost s was f or a st udent .
22 Ther e wer e t wo educat i onal cost s, and I t hi nk one was f or a
23 st udent .
24 THE COURT: One was f or a st udent .
25 THE WI TNESS: The Ph. D st udent , r i ght ? A st udent
( 212) 805- 0300
KA-2613 KA-2613 KA-2613
782
1 empl oyee t hat Dr . Kar r on had.
2 Q. And anot her one was J oan Hayes goi ng t o a semi nar t o l ear n
3 about audi t i ng f or f eder al gr ant s, cor r ect ?
4 A. Cor r ect .
5 Q. You di sal l owed bot h of t hem, cor r ect ?
6 A. Cor r ect .
7 Q. Now, you coul d per mi t f r i nge benef i t s ei t her under t he
8 budget i t emor i t coul d be char geabl e t o ot her s, r i ght ?
9 A. Cor r ect .
10 Q. By t he way, t her e was some t al k about medi cal bi l l s. Do
11 you know when Dr . Kar r on had sur ger y?
12 THE COURT: Di d you know he had sur ger y at al l ?
13 THE WI TNESS: I knew he had sur ger y. I don' t know
14 when.
15 Q. I sn' t i t a f act t hat i t was af t er t he gr ant was suspended?
16 A. I don' t know when.
17 THE COURT: The sur ger y was or t hat she l ear ned of i t ?
18 Q. Di d you see any expense, medi cal expense, f or sur ger y f or
19 Dr . Kar r on?
20 MR. KWOK: When?
21 Q. When you di d your audi t .
22 A. Ther e wer e medi cal expenses f or Dr . Kar r on.
23 Q. Di d you see anyt hi ng f or sur ger y?
24 A. I don' t r ecal l seei ng anyt hi ng speci f i cal l y, what
25 ever yt hi ng was.
( 212) 805- 0300
KA-2614 KA-2614 KA-2614
783
1 Q. Now t hi s audi t t hat NI ST r equi r es, r equi r es an i ndependent
2 audi t or , cor r ect ?
3 A. Cor r ect .
4 Q. And t hey had Ms. Hayes, cor r ect ?
5 A. Cor r ect .
6 Q. I n f act you wer e awar e t hat Ms. Hayes di d Dr . Kar r on' s
7 per sonal t ax r et ur ns, wer e you not ?
8 A. I don' t r ecal l i f I knew t hat at t he t i me or not .
9 Q. Woul d t hat di squal i f y her as an i ndependent audi t or ?
11 THE COURT: Di d you al l ow t he expense f or her as an
12 i ndependent audi t or ?
14 THE COURT: You di d. Obj ect i on sust ai ned.
15 Q. My quest i on i s she cr eat ed r ecor ds t hat she gave t o you,
16 cor r ect ?
17 A. Cor r ect .
18 Q. Now, i s i t f ai r t o say t hat t he per son t hat does t he
19 audi t - - i n t hi s case Ms. Hayes - - i s supposed t o be an
20 i ndependent audi t or ?
21 A. Cor r ect . Cor r ect .
22 Q. Because she mi ght have some i nt er est i f she wasn' t
23 i ndependent , cor r ect ?
24 A. Cor r ect .
25 Q. I n t hi s case wer e you awar e whet her or not she was i nvol ved
( 212) 805- 0300
KA-2615 KA-2615 KA-2615
784
1 i n management deci si ons?
3 THE WI TNESS: I ' mnot sur e how much her i nvol vement
4 was.
6 THE WI TNESS: I don' t - - I don' t know.
7 THE COURT: You di dn' t know t hat .
8 THE WI TNESS: I don' t know about her .
9 Q. Ar e you f ami l i ar wi t h Qui ck Books, t he syst emQui ck Books?
10 A. Yes.
11 Q. Wer e you f ami l i ar wi t h t hemi n 2003 when you di d t hi s
12 audi t ?
13 A. No.
14 THE COURT: You wer en' t f ami l i ar wi t h t he - -
15 THE WI TNESS: I ' mnot f ami l i ar - -
16 THE COURT: - - wi t h t hat syst emof bookkeepi ng?
17 THE WI TNESS: No, I ' mnot f ami l i ar . I wasn' t f ami l i ar
18 wi t h t hat syst emof bookkeepi ng.
19 Q. Now, you t ol d t hi s j ur y - - how much money of Dr . Kar r on was
20 at t r i but abl e as a cof und by Dr . Kar r on?
22 THE COURT: Sor r y. Coul d I hear t he quest i on.
23 Q. Yeah. How much money do you say was cont r i but ed by Dr .
24 Kar r on as hi s cont r i but i on t o t he NI ST ATP pr oj ect ?
25 A. Not hi ng.
( 212) 805- 0300
KA-2616 KA-2616 KA-2616
785
1 Q. Do you r ecal l t est i f yi ng her e and sayi ng i t was ver y smal l ,
2 bet ween $1200 and $1500?
3 THE COURT: That ' s not my r ecol l ect i on of t he quest i on
4 and t est i mony as t o hi s cont r i but i on.
5 Q. Wel l , you sai d i t was mi scel l aneous. Do you r ecal l t hat ?
6 A. Yes.
7 Q. And do you have a schedul e of what you say wer e
8 mi scel l aneous cont r i but i ons?
9 THE COURT: I s t he answer yes?
10 THE WI TNESS: Yes. I ' msor r y. Yes.
11 THE COURT: Do you want her t o l ook i t up?
12 MR. RUBI NSTEI N: No, your Honor , I want t o move al ong.
13 Q. How much was i n t he bank i n t he begi nni ng of Oct ober , i n
14 t he CASI account s i n t he begi nni ng of Oct ober 2001?
15 A. I don' t r ecal l . I s t her e a bank st at ement ?
16 Q. Wel l , l et me show you what ' s been mar ked as Def endant ' s O.
17 THE COURT: Def endant ' s O f or i dent i f i cat i on.
18 MR. RUBI NSTEI N: I ' msor r y. I wi l l wi t hdr aw t hat .
19 Q. Do you know what sunk cost s ar e?
20 A. What ?
21 Q. Do you know what sunk cost s means?
22 A. No.
23 THE COURT: Sunk cost s?
24 MR. RUBI NSTEI N: S- U- N- K cost s.
25 A. No.
( 212) 805- 0300
KA-2617 KA-2617 KA-2617
786
1 Q. Do you know whet her or not pur chases made f or t he gr ant ,
2 t hat wer e made pr i or t o t he gr ant ' s st ar t of Oct ober 1, 2001,
3 wer e pai d af t er Oct ober 1, 2001, whet her or not t hose ar e
4 pr oper expendi t ur es under t he gr ant ?
5 A. Gr ant s pai d pr i or t o t he gr ant awar d need wr i t t en
6 per mi ssi on.
7 THE COURT: Sor r y? Wi t ness.
8 A. Payment s made pr i or t o t he gr ant awar d need wr i t t en
9 appr oval by NI ST. They need wr i t t en appr oval . I s t hat what
10 we' r e aski ng? Cost s t hat wer e bef or e t he awar d? ATP cost s
11 t hat wer e made pr i or t o t he awar d, i s t hat al l owabl e i n t he
12 gr ant ? I f t he gr ant awar d document al l ows i t .
13 THE COURT: I f you have wr i t t en appr oval .
14 THE WI TNESS: Yes, i f you have wr i t t en appr oval .
15 Q. So, i f you pur chased somet hi ng, i f CASI pur chased t he Qui ck
16 Books sof t war e i n Sept ember of 2001 and i t was del i ver ed af t er
17 t he gr ant - - af t er Oct ober 1, 2001, and pai d f or i n November of
18 2001, woul d t hat be an al l owabl e or unal l owabl e i t em?
19 A. I f i t was used f or t he ATP gr ant , i t was par t of t he gr ant
20 cost i t coul d be al l owabl e.
21 THE COURT: I t coul d be. On what condi t i on?
22 THE WI TNESS: I f i t ' s speci f i cal l y f or t he ATP
23 pr oj ect , t he sof t war e f or a speci f i c account i ng - - i f t he
24 busi ness account i ng i s al so done on t hat syst emi t woul d not
25 necessar i l y be al l owabl e, because t he busi ness shoul d al r eady
( 212) 805- 0300
KA-2618 KA-2618 KA-2618
787
1 have i t i n pl ace as par t of t hei r busi ness.
2 Q. Di d you ent er t ai n how much cost s wer e i ncur r ed pr i or t o t he
3 Oct ober 2001 by CASI on behal f of t he ATP NI ST gr ant ?
4 A. Speci f i cal l y I used t he books pr ovi ded, and what ever t hey
5 r equest ed was consi der ed. So i f i t ' s a cost t hat was pr i or t o,
6 i t woul d have been consi der ed i f i t was on t he books, because I
7 t hi nk t hey went t o t he check t o cash basi s, so t hey woul d have
8 pai d - -
9 THE COURT: Sor r y. What di d you say?
10 THE WI TNESS: I t hi nk Mr . Spi t z had moved t o t he cash
11 basi s, so i f i t was i ncl uded as payment i t woul d have been one
12 of t he t hi ngs cl ai med, pr obabl y under equi pment or suppl i es,
13 and woul d be over budget , so i t woul d be over budget .
14 Q. How about t he cost shar e pr ovi ded by donat i ng equi pment , i s
15 t hat per mi ssi bl e?
16 A. I f i t ' s speci f i cal l y NI ST ATP pr oj ect cost s, yes.
17 Q. Di d you make any al l owance - - wi t hdr awn.
18 Wer e you awar e whet her or not Dr . Kar r on had comput er s
19 and equi pment pr i or t o t he ATP gr ant ?
20 A. Yes.
21 Q. Di d you make any al l owance t o gi ve hi mcr edi t f or hi s shar e
22 of t he cont r i but i on of about $36, 000 i n t he f i r st year of t he
23 gr ant t hat he was supposed t o cont r i but e?
24 A. I asked f or t hei r cost shar e. No one put f or t h t hat as an
25 answer .
( 212) 805- 0300
KA-2619 KA-2619 KA-2619
788
1 Q. No one ment i oned t hat ?
2 A. Ri ght , no one came up - - no one pr ovi ded document at i on t o
3 show t hat .
4 THE COURT: And no one sai d so?
5 THE WI TNESS: Ri ght . No one of f er ed t hat . I don' t
6 r ecal l anyone of f er i ng t hat as a t hi ng f or mat ch, but usual l y
7 you woul d have what ever you woul d go i nt o a busi ness, t hat
8 woul d not be what t hey consi der ed t hei r cost shar e or t hei r
9 mat ch shar e.
10 Q. I sn' t i t a f act t hat Mr . Spi t z gave you backup t o show when
11 t he equi pment was pur chased?
12 A. Most - - I was under t he i mpr essi on t hat t he equi pment had
13 been r epl aced by t he equi pment pur chased wi t h t hi s awar d.
14 Q. And who gave you t hat i mpr essi on?
15 A. Var i ous peopl e t hat I spoke t o, r evi ewi ng t he i nvoi ces of
16 t he equi pment cost .
17 Q. Now, i t ' s your t est i mony t hat Dr . Kar r on di d not cont r i but e
18 any f unds t o t he - -
19 THE COURT: You' ve got about f i ve mi nut es.
20 Q. I show you t hat Dr . Kar r on cont r i but ed not hi ng, no
21 f i nanci al f unds t o t he gr ant . I s t hat your t est i mony?
22 A. Cor r ect .
23 Q. You r evi ewed t he checks, Dr . Kar r on' s per sonal checks?
24 A. Cor r ect .
25 Q. And I show you what ' s been mar ked f or i dent i f i cat i on as
( 212) 805- 0300
KA-2620 KA-2620 KA-2620
789
1 Def endant ' s FFF and ask you do you r ecogni ze what ' s cont ai ned
2 i n t hat document ?
3 A. Checks.
4 Q. Par don?
5 A. They' r e checks.
6 Q. Ar e t hose checks of Dr . Kar r on' s on account endi ng 1665?
7 A. OK.
8 Q. Do you r ecogni ze t hose checks?
9 THE COURT: FFF.
10 Q. FFF?
11 A. Yes.
12 MR. RUBI NSTEI N: We of f er t hemi n evi dence, your
13 Honor .
14 THE COURT: FFF ar e admi t t ed i n evi dence.
16 ( Def endant ' s Exhi bi t FFF r ecei ved i n evi dence)
17 Q. Now, I show you what ' s i n evi dence. Thi s i s copi es of a
18 number of checks wi t h t he f r ont s and t he backs. Now, do you
19 see t hat exhi bi t , ma' am?
20 THE COURT: Thi s i s par t of FFF?
22 A. Yes.
23 Q. Do you see what dat e t hat i s?
24 A. 10/ 11/ 2001.
25 Q. And who i s t he payee?
( 212) 805- 0300
KA-2621 KA-2621 KA-2621
790
1 A. Comput er Ai ded Sur ger y.
2 Q. And i s t her e a memo on t her e?
3 A. Emer gency l oan t o t he Comput er Ai ded Sur ger y.
4 Q. So, t hat ' s $2, 000 t hat was - - and Comput er Ai ded Sur ger y,
5 I nc i s t he account t hat NI ST expenses wer e bei ng made out of ,
6 r i ght ?
8 A. Yes.
9 Q. NI ST expenses wer e bei ng pai d at t hat t i me out of t hi s
10 account .
11 A. Yes.
12 Q. And i n f act t hi s i s pr i or t o t he t i me t hat any NI ST moni es
13 wer e t r ansf er r ed t o Dr . Kar r on.
14 A. Yes.
15 THE COURT: To what account ?
16 MR. RUBI NSTEI N: Any account .
17 THE COURT: Thi s i s pr i or t o t he t i me t hat any money
18 was pai d t o t hat account ?
19 MR. RUBI NSTEI N: Cor r ect . I t hi nk t he f i r st t i me was
20 Oct ober 25, i f I ' mnot mi st aken.
21 Q. Now, I show you t hi s check mar ked 1052 as par t of Exhi bi t
22 FFF. See i f you r ecogni ze t hat check.
23 A. Yes.
24 Q. And t hat i s al so a check made t o Comput er Ai ded Sur ger y
25 I nc. i n t he amount of $1, 000, cor r ect ?
( 212) 805- 0300
KA-2622 KA-2622 KA-2622
791
1 A. Cor r ect .
2 Q. And i t says t he memo i s emer gency l oan t o cor por at i on.
3 Ri ght ?
4 A. Ri ght .
5 Q. And agai n t hat ' s t he cor por at i on t hat ' s payi ng NI ST bi l l s,
6 r i ght ?
7 A. At t hi s t i me - - when di d t he ATP account come i nt o
8 exi st ence?
9 THE COURT: I can' t hear you.
10 THE WI TNESS: I t may have been - -
11 Q. And on August 12, 2002 Dr . Kar r on' s per sonal check number
12 1121 was payabl e t o CASI , Comput er Ai ded Sur ger y, I nc. ?
13 A. Yes.
14 Q. The memo i s l oan t o t he company?
15 A. Yes.
16 Q. So he i s l oani ng hi s per sonal money t o t he company, r i ght ?
17 A. Yes.
18 Q. And how much i s t hat check f or ?
19 A. $20, 000.
20 Q. Do you have any r ecor d i n al l of your r ecor ds of any of
21 t hese checks so f ar ?
22 A. Yes. Yes.
23 Q. As cont r i but i ons of Dr . Kar r on?
24 A. No, no.
25 THE COURT: You have r ecor ds of t he checks?
( 212) 805- 0300
KA-2623 KA-2623 KA-2623
792
2 THE COURT: Wher e?
3 THE WI TNESS: They' r e - - t hey' r e bot h r ecor ds
4 act ual l y.
5 MR. KWOK: Your Honor , may we di r ect t he wi t ness t o a
6 par t i cul ar page of Gover nment Exhi bi t 110?
7 THE COURT: Yes.
8 MR. KWOK: Gover nment Exhi bi t 110, page 38 of 44.
9 Q. So, i s i t f ai r t o say i n r evi ewi ng your r ecor d t hat you
10 have a t ot al of $37, 000 at t r i but abl e t o cont r i but i ons made by
11 Dr . Kar r on, i s t hat r i ght ?
12 A. I consi der ed t heml oan r epayment t o t he $129, 000 t hat he
13 had t aken f r omt he NI ST ATP account .
14 Q. Par don?
15 THE COURT: Repeat your answer . You speak ver y
16 qui ckl y, and you j ust r at t l e i t of f . Al l r i ght ?
17 A. OK. I at t r i but ed t he $37, 000 payment s as l oan r epayment s
18 t o t he $129, 850 t hat Dr . Kar r on had t aken as l oans f r omt he
19 NI ST ATP gr ant .
20 Q. Ti me out . Dr . Kar r on t ook $75, 000 l oan i n Oct ober or ear l y
21 November 2001, af t er he got $150, 000 f r omNI ST ATP, cor r ect ?
22 A. Cor r ect .
23 Q. You di d your anal ysi s when?
24 A. Whi ch anal ysi s?
25 Q. When di d you do your anal ysi s?
( 212) 805- 0300
KA-2624 KA-2624 KA-2624
793
1 A. I - -
2 Q. When di d you make t hat det er mi nat i on t hat t hese wer e
3 r epayment of a l oan?
4 A. I ni t i al l y back - -
5 Q. I n J une of ' 03?
6 A. December of ' 03.
7 Q. December of ' 03?
8 A. Or J une of ' 03.
9 THE COURT: Wel l , wai t a mi nut e. She hasn' t f i ni shed.
10 A. Wai t . What ' s t he - -
11 THE COURT: What ' s t he r est of your answer ?
12 THE WI TNESS: J une of ' 03.
13 THE COURT: Par don?
14 THE WI TNESS: J une of 2003.
15 THE COURT: J une of 2003.
16 Q. I sn' t i t a f act , ma' am, t hat i n August and Sept ember of
17 2002 Dr . Kar r on r epai d t hat money out of hi s sal ar y i n f act ?
18 A. The r epayment s of t he sal ar y wer e par t of expendi t ur es t hat
19 wer e al so di sal l owed. I t depends on whi ch - -
20 Repeat your quest i on.
21 Q. I n August of ' 02 di d you see an ent r y on August 2, 2002 of
22 $61, 918. 07 as sal ar y t o Dr . Kar r on?
23 THE COURT: What ar e you r ef er r i ng t o, Mr . Rubi nst ei n?
24 I s i t an exhi bi t i n evi dence? What i s i t ?
25 Q. Di d you cal cul at e at any t i me t he moni es r ecei ved as sal ar y
( 212) 805- 0300
KA-2625 KA-2625 KA-2625
794
1 i n a schedul e, sal ar i es r ecei ved by Dr . Kar r on?
2 THE COURT: I don' t under st and t he quest i on.
3 MR. RUBI NSTEI N: He r ecei ved payment .
4 THE COURT: I j ust want t o hear t he quest i on phr ased
5 so t hat i t ' s under st andabl e.
6 MR. RUBI NSTEI N: The quest i on i s di d t hi s wi t ness
7 pr epar e a schedul e showi ng t he sal ar y checks of Dr . Kar r on f r om
8 Oct ober 1, 2001 unt i l Sept ember 30, 2002, t he f i r st year of t he
9 gr ant ?
10 THE COURT: What t i me ar e you aski ng?
11 MR. RUBI NSTEI N: Dur i ng t hat year , t he f i r st year of
12 t he gr ant .
13 THE COURT: Dur i ng t he year - - Oct ober 1, 2002.
14 MR. RUBI NSTEI N: 1, Oct ober 1, 2001.
15 THE COURT: 2001 t o Sept ember 30, 2002, di d you
16 pr epar e a schedul e? I s t hat your quest i on?
18 THE COURT: Of hi s sal ar y f or t hat year ?
19 MR. RUBI NSTEI N: Ri ght .
20 THE COURT: Wer e you assi gned t o t he audi t i n t hat
21 per i od of t i me?
22 THE WI TNESS: I di d t he audi t st ar t i ng J une of 2003.
23 THE COURT: So, you coul dn' t have done anyt hi ng dur i ng
24 t hat f i r st f i scal year , i s t hat r i ght ?
25 THE WI TNESS: Ri ght , yes.
( 212) 805- 0300
KA-2626 KA-2626 KA-2626
795
1 THE COURT: You di dn' t pr epar e any schedul es dur i ng
2 t he f i r st f i scal year .
3 THE WI TNESS: Ri ght .
4 THE COURT: Do you want t o r ef r ame your quest i on,
5 Mr . Rubi nst ei n?
6 Q. Do you know what a schedul e i s, ma' am?
8 THE COURT: Obj ect i on sust ai ned. Fi ve mor e mi nut es.
9 Fi ve mor e mi nut es, t hat ' s i t .
10 MR. RUBI NSTEI N: J udge, i t ' s not f ai r .
11 THE COURT: Fi ve mi nut es.
12 MR. RUBI NSTEI N: I ' mnot get t i ng answer s.
13 THE COURT: You' r e get t i ng answer s; you' r e not aski ng
14 quest i ons. You' r e dawdl i ng ar ound t her e i n t he back of t he
15 cour t r oom.
16 MR. RUBI NSTEI N: I amnot .
17 THE COURT: And you' r e not aski ng quest i ons. Now ask
18 quest i ons and do i t qui ckl y.
19 Q. How many checks di d Dr . Kar r on r ecei ve i n t he f i r st year of
20 t he gr ant f or sal ar y?
22 Q. Do you have any not es or not at i ons?
23 A. I have i t i n t hi s document I pr epar ed i n 2004. I don' t
24 have - -
25 Q. You have a f i gur e i n Gover nment Exhi bi t 114 and 115.
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1 That ' s t he backup f or t hat ?
2 A. Thi s document i s t he backup f or t he 114 and 115, and i n t he
3 f i r st year of t he gr ant - -
4 THE COURT: And you ar e l ooki ng now at Exhi bi t 110?
6 THE COURT: Al l r i ght . Wher e i n 110? Can we poi nt t o
7 a page wher e hi s sal ar y i s l i st ed? Can t he gover nment poi nt me
8 t o a page? Let ' s move t hi s on.
9 THE WI TNESS: Payr ol l i s on page 39 of 44.
10 THE COURT: Page 39 - -
11 THE WI TNESS: Of 44.
12 THE COURT: Thank you ver y much.
13 Q. And how much di d Dr . Kar r on - - how much was he pai d i n t hat
14 year , t he f i r st year of t he gr ant ?
15 A. I t shows net sal ar y of $35, 000.
16 MR. KWOK: Your Honor , I t hi nk t her e i s a conf usi on of
17 t he dat e. I t hi nk t he wi t ness i s l ooki ng at t he dat abase f or
18 year t wo. I t hi nk Mr . Rubi nst ei n i s aski ng i nf or mat i on about
19 year one. Oh, I ' msor r y, I t ake t hat back. I t ake t hat back.
20 Q. So you show $35, 000. I s t hat net or gr oss pai d t hat Dr .
21 Kar r on r ecei ved?
22 A. Net .
23 Q. That ' s af t er you deduct ed 45, 000 as di sal l owed? I s t hat
24 what you' r e sayi ng?
25 A. He al so r ecei ved $129, 000 t hat he cal l ed l oans.
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1 Q. Di dn' t he have a sal ar y of $14, 000 a mont h?
2 A. I don' t know.
3 Q. Ar e you awar e of t he f act t hat on Sept ember 2 - - sor r y - -
4 August 2, 2002 Dr . Kar r on, t her e was an ent r y on t he books of
5 CASI showi ng payment t o Dr . Kar r on of $61, 000 and change?
6 A. For ?
7 Q. Sal ar y.
8 A. But - -
9 MR. KWOK: What page, your Honor ?
10 THE COURT: Yes.
11 MR. KWOK: What exhi bi t ?
12 THE COURT: You' r e r ef er r i ng us t o, Ms. Ri l ey, t o page
13 38 of 49, and t he t op of t he page you have l oan and bot t omof
14 t he page you have l oan r epai d.
16 THE COURT: And on t he next page i t says payr ol l . So
17 basi cal l y t he checks - - t hen you have payr ol l on t he next page.
18 THE WI TNESS: Speci f i cal l y i dent i f i ed as payr ol l on
19 t he checks when I l ooked at t hemi n 2004 and 5.
20 THE COURT: Accor di ng t o your anal ysi s of t he checks,
21 t he onl y ones t hat wer e made f or payr ol l ar e t he ones on page
22 39 of 44?
24 THE COURT: And t he ot her s.
25 Q. Let me show you t hese exhi bi t s.
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1 THE COURT: Wel l , l ook, j ust l et me cl ear t hi s up. We
2 hear d about t he $75, 000 l oan i n Oct ober . On what basi s di d you
3 det er mi ne t hat t he ot her amount s wer e l oans by Dr . Kar r on?
4 Based on t he ent r i es of t he check or what ?
5 THE WI TNESS: I t ' s not ed i n t he check memo, some of
6 t hemf r omt hei r check r egi st er s or gener al l edger s.
7 THE COURT: Sor r y.
8 THE WI TNESS: Fr omt hei r r ecor ds, f r omt hei r check
9 r egi st er s or t hei r l edger s.
10 THE COURT: Fr omt hei r l edger s?
11 THE WI TNESS: Fr omt he l edger s or check r egi st er s
12 pr ovi ded by CASI t o me.
13 Q. Let me show you t hi s document , Def endant ' s Exhi bi t P f or
14 i dent i f i cat i on. I s t hi s t he document t hat was pr ovi ded t o you
15 as a r egi st er by CASI ?
17 Q. I sn' t i t a f act on t he r ecor ds of CASI t her e was an ent r y
18 on August 2, 2002 f or a payment of sal ar y of $61, 000 and change
19 t o Dr . Kar r on?
20 MR. KWOK: Obj ect i on. The wi t ness says she doesn' t
21 r ecal l .
22 THE COURT: I don' t know what she saw because I wasn' t
23 pr ovi ded wi t h a copy of i t . Can I have a copy?
24 I ' mgoi ng t o sust ai n t he obj ect i on.
25 Al l r i ght .
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1 MR. RUBI NSTEI N: I of f er i n evi dence, your Honor , as
2 P- 1, 2, 3, 4, 5, 6.
3 THE COURT: What ?
4 MR. RUBI NSTEI N: Checks, P- 1 t hr ough P6.
5 THE COURT: As what Exhi bi t ?
6 MR. RUBI NSTEI N: I sai d i t ' s P- 1 t hr ough P- 6.
7 THE COURT: Oh, Def endant ' s Exhi bi t s P- 1 f or
8 i dent i f i cat i on t hr ough P- 6 f or i dent i f i cat i on.
9 Q. I show you t hese checks and ask you i f you r ecogni ze t hese
10 checks, ma' am.
11 A. Ar e t hose - - yes.
12 Q. And ar e t hose - -
13 MR. RUBI NSTEI N: We of f er t hemi nt o evi dence, your
14 Honor .
16 THE COURT: Def endant ' s P- 1 t hr ough P- 6 admi t t ed i n
17 evi dence.
18 ( Def endant ' s Exhi bi t s P- 1 t hr ough P- 6 r ecei ved i n
19 evi dence)
20 Q. Do you know of any addi t i onal checks t hat wer e gi ven t o
21 doct or - - wi t hdr awn. Those checks have a memo as t o payr ol l
22 per i ods, cor r ect ?
23 A. Cor r ect .
24 Q. And t hey ar e payr ol l checks payabl e t o Dr . Kar r on, cor r ect ?
25 A. Cor r ect .
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1 Q. And t hey st ar t on May 11, 2002, cor r ect ?
2 A. Cor r ect .
3 Q. And i s i t f ai r t o say t hat on a $175, 000 sal ar y, Dr . Kar r on
4 woul d be pai d appr oxi mat el y $14, 000 a mont h gr oss?
5 A. Cor r ect .
6 Q. And so i f he bor r owed $75, 000 i n Oct ober , wi t hi n f i ve
7 mont hs he basi cal l y woul d pay t hat back, cor r ect ?
8 THE COURT: Answer , pl ease.
9 Q. 14 t i mes f i ve i s 70, cor r ect ?
10 A. Yes.
11 Q. And Oct ober , November , December , J anuar y, Febr uar y, by t he
12 end of Febr uar y he woul d have basi cal l y pai d back t he 75, 000,
13 cor r ect ?
14 A. For t he gr oss, cor r ect .
15 Q. And i n May he got a net check f or $5, 019. 84, r i ght ?
16 A. Cor r ect .
17 Q. For a pay per i od Apr i l 1, ' 02 t o Apr i l 30, ' 02, cor r ect ?
18 A. Cor r ect .
19 Q. And t hen - -
20 THE COURT: Let me see. How much i s t hat check?
21 MR. RUBI NSTEI N: $5, 019. 84.
22 I n J une he get s a check, memo pay per i od i t says
23 3/ 1/ 02 t o 5/ 31/ 02, i n t he amount of $5, 002. 25.
24 I n J ul y he r ecei ves a check f or t he payr ol l per i od of
25 December 1, 2001 t o December 31, 2001, and t hat net amount of
( 212) 805- 0300
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1 t hat check i s $9, 288. 07.
2 Al so i n J ul y, on J ul y 5 he r ecei ves a check, t he
3 paycheck f or t he pay per i od November 1, 2001 t o November 30,
4 2001, i n t he amount of $4, 756. 38. Cor r ect ?
5 A. Cor r ect .
6 Q. And t he t hi r d check on t he same day f or t he payr ol l Oct ober
7 1, 2001 t o Oct ober 31, 2001 pay per i od, he r ecei ved a check i n
8 t he amount of $5, 502. 01, cor r ect ?
9 A. Yes.
10 Q. And t hen he r ecei ved a check on August 2, 2002 f or pay
11 per i od J ul y 1, ' 02 t o J ul y 31, ' 02, i n t he amount of $5, 675. 03,
12 cor r ect ?
13 THE COURT: Ar e t hose checks i ncl uded i n your
14 schedul e?
15 THE WI TNESS: Yes, si r .
16 THE COURT: On page 39 of 44?
18 Q. And wher e was t he r est - - i f you pay t axes on t hose checks,
19 how much woul d have been t he gr oss appr oxi mat el y?
21 THE COURT: I don' t t hi nk she shoul d have t o - -
22 Q. Wel l , what happened t o t he r est of t he $175, 000? Di d he
23 r ecei ve any addi t i onal moni es ot her t han t he 34, 35, 000 t hat
24 ar e r ef l ect ed i n t hose checks?
25 A. Wi t hhol di ngs woul d have been pai d t hr ough t he company f or
( 212) 805- 0300
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1 t hose checks.
2 Q. Woul d t he wi t hhol di ngs be equal t o t he amount of t he
3 checks?
4 A. No.
5 Q. Even i f t hey wer e equal , you onl y have 70, 000. We' r e st i l l
6 mi ssi ng 105, 000, r i ght ?
7 A. Yes.
8 Q. Di d you gi ve hi many cr edi t f or t hat mi ssi ng sal ar y t hat he
9 never got ?
10 A. He got t he l oans. He st i l l had mor e l oans.
11 Q. Loans f or what ?
12 A. What ever he wi t hdr ew t he money f or .
13 Q. You don' t know, r i ght ?
14 A. I don' t know.
15 Q. The onl y one we know about i s t he $75, 000.
16 THE COURT: Ar e t he l oans r ef l ect ed on t he books?
17 THE WI TNESS: Yes. Wel l , t hey say l oans. They don' t
18 say what t hey' r e f or .
19 THE COURT: Or dr aws?
20 THE WI TNESS: The l oans say l oans.
21 Q. Show me some l oans ot her t han t he $75, 000 l oan. Not i n
22 your books. Show me. Show me a check.
23 MR. KWOK: Obj ect i on, your Honor .
24 THE COURT: Al l she has i s t he books.
25 MR. RUBI NSTEI N: Wel l , I want t he backup.
( 212) 805- 0300
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1 MR. KWOK: I t ' s i n f r ont of her i n t hat box. Does
2 Mr . Rubi nst ei n want t he wi t ness t o di g t hr ough t hat box of
3 checks?
4 MR. RUBI NSTEI N: Wel l , she di d yest er day.
5 THE COURT: Ar e t hey r eadi l y avai l abl e?
6 Q. Ma' am, i n your schedul e of Exhi bi t 114 - -
7 THE COURT: She i s l ooki ng. You asked f or her t o show
8 you.
9 MR. RUBI NSTEI N: I ' mgoi ng t o wi t hdr aw t hat .
10 THE COURT: You asked f or her t o show you t hose
11 checks.
12 MR. RUBI NSTEI N: I have a qui cker way. She can do
13 t hat on t he gover nment ' s t i me. Al l r i ght ?
14 Q. I n your schedul e Gover nment Exhi bi t 114 you have sal ar y t o
15 Dr . Kar r on, cor r ect ?
16 A. Yes.
17 Q. Budget ed 175, r i ght ?
18 A. Cor r ect .
19 Q. CASI spent $200, 488 on hi s sal ar y. How di d you get t hat
20 number ?
21 A. By i ncl udi ng t he wi t hhol di ngs por t i on of t he f r i nge
22 benef i t s as par t of t he sal ar y of what he r ecei ved. I t
23 i ncl udes t he sal ar y, i t i ncl udes t he di f f er ence bet ween t he
24 l oans he r ecei ved and t he l oans he pai d, and i t i ncl udes t he
25 f r i nge benef i t s.
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1 Q. You have f r i nge benef i t s l i st ed separ at el y, do you not ,
2 ma' am?
3 A. I j ust have t he i t ems t hat ar e - -
4 Q. Do you see 59, 500 i n f r i nge benef i t s?
5 THE COURT: She di dn' t f i ni sh her answer ,
7 MR. RUBI NSTEI N: She j ust sai d t hat t he f r i nge
8 benef i t s ar e i ncl uded, and I submi t , your Honor , t hat on t hat
9 same schedul e - -
11 MR. RUBI NSTEI N: - - t he f r i nge benef i t s ar e l i st ed
12 separ at el y as $59, 000.
14 MR. RUBI NSTEI N: $59, 500.
15 THE COURT: You' r e not a wi t ness.
16 MR. RUBI NSTEI N: I ' maski ng i f t hat ' s on her schedul e,
17 her exhi bi t , t he Gover nment ' s Exhi bi t 114.
18 THE COURT: Fi nd out what you' r e deal i ng wi t h and t he
19 exhi bi t and I wi l l al l ow your quest i on, but I ' mnot al l owi ng
20 t hat . And your t i me i s up. So t hi s i s t he l ast quest i on.
21 MR. RUBI NSTEI N: J udge, I ' d ask you t o gi ve me t en
22 mor e mi nut es.
23 THE COURT: Al l r i ght , t en mi nut es, and t hat i s al l .
25 Q. You have on Exhi bi t 114 an expense f or Dr . Kar r on' s f r i nge
( 212) 805- 0300
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1 benef i t s?
2 A. Yes.
3 Q. And i s t hat expense $59, 500? Do you see i t on t he
4 schedul e? I onl y have t en mi nut es.
5 THE COURT: J ust gi ve her a mi nut e.
6 MR. RUBI NSTEI N: I t ' s her schedul e, J udge.
7 THE COURT: You' r e l ooki ng not on t he schedul e. You
8 ar e l ooki ng at a char t . Exhi bi t 114 i s t he pi e char t .
9 MR. RUBI NSTEI N: On t he bot t omi s a br eak- down of
10 number s, your Honor .
11 THE COURT: I agr ee wi t h t hat , but l et ' s r ef er t o t he
12 document as t he pi e char t , 114. Now what ' s your quest i on?
13 Q. My quest i on i s: You j ust t est i f i ed t hat t he $200, 000 t hat
14 CASI spent on Dr . Kar r on f or sal ar y t hat you have her e was
15 because of f r i nge benef i t s, cor r ect ?
17 THE COURT: I don' t t hi nk t hat i s her t est i mony.
18 Obj ect i on sust ai ned.
19 Q. What was t he ext r a 25, 488, what i s t hat at t r i but abl e t o?
20 THE COURT: The 200, 488?
21 MR. RUBI NSTEI N: Wel l , i t ' s an addi t i onal $25, 488. I
22 wi l l t ake si l ence as an answer and move on.
23 THE COURT: Wel l , she has t o l ook. You' r e aski ng her
24 t o t ake her pi e char t and t hen gi ve you t he backup f or t he pi e
25 char t , and she has t o l ook t o t he exhi bi t s t o show wher e t hat
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1 i s.
2 THE WI TNESS: For year one, whi ch number ar e you
3 aski ng about ? 25?
4 THE COURT: Ar e you aski ng about t he 25, 000 or t he
5 200, 488?
6 MR. RUBI NSTEI N: I amaski ng her how she expl ai ns t hat
7 Dr . Kar r on, wher e t he addi t i onal - - of her number of 200, 000,
8 wi t h t he addi t i onal 165, 000 t hat she at t r i but es t o Dr . Kar r on,
9 wher e i s t hat ?
10 THE COURT: 165, 000?
11 MR. RUBI NSTEI N: Yeah. We onl y have checks of about
12 35, 000.
13 THE COURT: Look, st op a second. What f i gur e i s
14 165, 000, Mr . Rubi nst ei n, t hat you' r e r ef er r i ng t o?
15 Q. The checks P- 1 t hr ough P- 6 t ot al about $35, 000, cor r ect ,
16 ma' am?
17 A. Cor r ect .
18 Q. You have a f i gur e CASI spent f or Dr . Kar r on wi t hout f r i nge
19 benef i t s of $200, 488?
20 A. Cor r ect .
21 Q. You subt r act 35, 000 f r om200, 000, you come up wi t h r oughl y
22 $165, 000, r i ght ? Yes or no?
23 A. Cor r ect .
24 Q. Do you have any document at i on t o show $165, 000?
25 A. Thi s char t was pr epar ed f r omt he check r egi st er . The
( 212) 805- 0300
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1 200, 000 comes f r omt he l oan - - t he di f f er ence bet ween t he l oan,
2 t he l oan pay back and t he amount of sal ar i es t hat he r ecei ved,
3 pl us t he wi t hhol di ngs f r omappl i cabl e payr ol l , wi t hhol di ngs,
4 t hat woul d have been associ at ed wi t h hi s - -
5 Q. The gr ant was suspended at your r equest , r i ght ?
7 Q. At your r equest t he gr ant was suspended on J une 27, 2003,
8 cor r ect ?
9 A. Cor r ect .
10 Q. What wer e t he moni es owed by CASI t o NI ST suppl i er s at t he
11 t i me t he gr ant was suspended?
14 Q. Di d you make any ki nd of schedul e - - t hey' r e cal l ed
15 payabl es, r i ght ? I f you owe money and you di dn' t pay your
16 suppl i er s, i s t hat what you cal l t hem?
18 THE COURT: Let her gi ve an answer bef or e you ask a
19 second quest i on.
20 Now, what was t he quest i on you wer e aski ng?
21 MR. RUBI NSTEI N: Di d she make any l i st of payabl es,
22 moni es owed by CASI , t o suppl i er s who suppl i ed pr oduct f or t he
23 NI ST ATP gr ant .
24 THE COURT: I n J ul y 2003.
( 212) 805- 0300
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1 Q. Do you know af t er t he gr ant was suspended whet her or not
2 Dr . Kar r on i nvest ed addi t i onal money i nt o t he CASI pr oj ect , yes
3 or no?
4 A. No.
5 THE COURT: Do you know whet her he i nvest ed any money
6 i n t he CASI pr oj ect af t er t he gr ant was suspended?
7 THE WI TNESS: No.
8 THE COURT: I amended your quest i on because i t cal l ed
9 f or t wo concl usi ons, Mr . Rubi nst ei n.
10 MR. RUBI NSTEI N: Par don, your Honor ?
11 Q. I sn' t i t a f act - - do you have any document at i on t hat woul d
12 show whet her or not Dr . Kar r on cont r i but ed any moni es af t er t he
13 gr ant was suspended - -
14 MR. KWOK: Obj ect i on, r el evance.
16 Q. Wel l , when t he gr ant was suspended, di d NI ST say t hat he
17 was shor t on hi s cont r i but i on?
19 Q. Was t he gr ant - - I wi l l wi t hdr aw t hat .
20 Was t he gr ant suspended because he was shor t on hi s
21 copay por t i on accor di ng t o your audi t - -
22 THE COURT: I n?
23 Q. I n J une 27, 2003?
24 A. Yes.
25 Q. And i n f act wer e you i nf or med t hat he cont r i but ed $60, 000
( 212) 805- 0300
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1 i n t he begi nni ng of J ul y 2003?
2 THE COURT: You mean af t er t he audi t was compl et e?
3 MR. RUBI NSTEI N: No, af t er t he f i r st audi t , not t he
4 f i nal audi t i n December .
5 Q. I n J une 27 t he gr ant i s suspended, he doesn' t get anymor e
6 money, r i ght ?
7 A. Cor r ect .
8 Q. He' s got debt s out st andi ng on behal f of NI ST, r i ght ?
9 A. Cor r ect .
10 Q. To get t he gr ant r est ar t ed he i s supposed t o pay back
11 $54, 000, cor r ect ?
12 A. I t hi nk i t was mor e t han t hat , but he was supposed t o pay
13 back an amount .
14 Q. Al l r i ght . And i s i t f ai r t o say he deposi t ed mor e t han
15 t hat amount i n t he CASI account and pai d expenses of NI ST wi t h
16 t hat money af t er t he gr ant was suspended?
19 A. Was he aski ng me - -
20 THE COURT: He i s aski ng you i f you know what happened
21 af t er t he gr ant was suspended.
22 THE WI TNESS: I know t hat some money was deposi t ed.
23 Q. Now, you t ol d us bef or e t hat af t er your audi t t her e i s an
24 appeal s pr ocess, cor r ect ?
25 A. Cor r ect .
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1 Q. And t her e i s a negot i at i on on what ' s al l owabl e and
2 unal l owabl e, cor r ect ?
3 A. Cor r ect .
4 Q. Cal l ed a wr ap r epor t ?
5 A. I ' mnot f ami l i ar wi t h t hat t er m.
6 Q. I s i t a f act - - was Dr . Kar r on or CASI ever af f or ded an
7 oppor t uni t y t o have t hi s audi t r econci l i at i on?
8 A. No.
9 THE COURT: She sai d no, and t hen t he cour t r epor t er
10 sai d no, and t hen she sai d no.
11 MR. RUBI NSTEI N: I know t hat i t ' s no. Al l r i ght ?
12 Q. So nobody r evi ewed your number s f r omt he ATP gr ant of f i ces,
13 r i ght ?
14 A. I bel i eve t hat ' s pr obabl y cor r ect . They get a copy of my
15 r epor t , so I don' t know. I don' t know.
16 Q. You t ol d us t hat t hey' r e t he ones t hat shoul d have t he
17 f i nal say- so of what ' s al l owabl e and what ' s not al l owabl e i n a
18 gr ant , r i ght ?
19 A. Cor r ect .
20 Q. And what happened her e i s t hat t he speci al agent s j umped i n
21 on t hi s back i n 2003, r i ght ?
24 Q. And t hey made t hi s f r oma ci vi l mat t er i nt o a cr i mi nal
25 mat t er , cor r ect ?
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1 MR. KWOK: Obj ect i on. Obj ect i on.
3 Q. Wel l , i s t he audi t r esol ut i on a ci vi l pr ocedur e?
4 A. I t ' s j ust a pr ocedur e.
5 Q. Yeah, wher e you si t down wi t h t he gr ant of f i cer s and
6 di scuss whet her or not cer t ai n expenses ar e al l owed or
7 al l owabl e or not ?
8 A. Cor r ect .
9 Q. That never happened her e, r i ght ?
11 Q. I t never happened her e?
12 THE COURT: He says t hat never happened.
14 THE COURT: You never sat down wi t h hi m?
15 THE WI TNESS: Oh - -
16 MR. RUBI NSTEI N: I s my t en mi nut es up, J udge?
18 MR. RUBI NSTEI N: I r et i r e. I ' mf i ni shed.
19 THE COURT: We wi l l t ake a l uncheon br eak.
20 Do you have any r edi r ect ?
21 MR. KWOK: Ver y br i ef l y.
22 THE COURT: I t ' s got t o be br i ef . I mean we have t o
23 move t hi s case al ong.
24 MR. KWOK: Ver y br i ef .
25 THE COURT: Thi s i s t er r i bl e. J ur or 3 has got her
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1 eyes awake al l t he t i me, but I keep an eye on her because she
2 l i es back i n t hat chai r .
3 Al l r i ght . The j ur y i s excused unt i l t en af t er t wo.
4 Can I get away wi t h f i ve af t er t wo? Let ' s say f i ve af t er t wo.
5 ( J ur y not pr esent )
6 THE COURT: I s t her e anyt hi ng t o t ake up?
8 MR. KWOK: No, your Honor , not at t hi s t i me.
9 THE COURT: Wel l , l et ' s be back 2 o' cl ock t o t ake up
10 somet hi ng t hen.
11 MR. EVERDELL: Ther e i s one mat t er . I not e t hat
12 def endant has i nt r oduced CCC. I t hi nk t her e al r eady i s a
13 def ense CCC i n evi dence, so I t hi nk we may have t o r ename t hat
14 DEPUTY COURT CLERK: I haven' t seen t hem.
15 THE COURT: We have t o keep t r ack of t hese t hi ngs
16 because t hi s i s a compl ex si t uat i on.
17 THE DEFENDANT: I don' t t hi nk I ' ve seen any of t he
18 def ense exhi bi t s.
19 THE COURT: You have t o mar k t hem.
20 ( Luncheon r ecess)
22
23
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25
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866zkar 4
1 A F T E R N O O N S E S S I O N
2 2: 05 p. m.
3 THE COURT: Al l r i ght , pl ease be seat ed. Let ' s br i ng
4 i n t he j ur y, and t he wi t ness.
5 MR. KWOK: Ver y qui ck your Honor , hopef ul l y.
6 THE COURT: I ' l l bel i eve i t when I see i t .
8 THE COURT: I t hi nk your chai r - - t hose car t s ar e al l
9 i n t he mi ddl e of t he j ur y pat h.
10 ( J ur y pr esent )
11 THE COURT: Al l r i ght , pl ease be seat ed.
12 Go ahead, Mr . Kwok.
13 MR. KWOK: Thank you, your Honor .
15
16
17
18
19
20
21
22
23
24
25
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866zkar 4
2 BY MR. KWOK:
3 Q. Ms. Ri l ey, you r emember on cr oss Mr . Rubi nst ei n aski ng you
4 quest i ons about meal s?
5 A. Yes.
6 Q. And he showed you r ecei pt s of ever y meal s t hat Dr . Kar r on
7 had wi t h ot her peopl e?
8 A. Yes.
9 Q. Ms. Ri l ey, ar e meal s a l i ne i t emi n t he CASI budget
10 submi t t ed t o NI ST f or t he gr ant ?
11 A. No.
12 Q. Ms. Ri l ey, you r emember Mr . Rubi nst ei n showi ng you checks
13 t hat Dr . Kar r on wr ot e t o CASI ?
14 A. Yes.
15 Q. Let ' s pul l up gover nment Exhi bi t 114.
16 Ms. Ri l ey, di d you t ake t hose checks i nt o account i n
17 your anal ysi s f or year one?
18 A. Yes.
19 Q. And st i l l , what i s t he col or r epr esent ed i n r ed t her e?
20 A. $268, 638.
21 Q. Let ' s pul l up gover nment Exhi bi t 115. I n your - -
22 THE COURT: I ' msor r y, l et me j ust see - - t hi s i s 114?
23 MR. KWOK: 114, your Honor .
24 THE COURT: What i s t he t ot al amount f or what ?
25 MR. KWOK: Repr esent ed i n t he r ed.
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866zkar 4 Ri l ey - r edi r ect
1 THE COURT: The r ent ?
2 MR. KWOK: Red, not r ent .
3 THE DEPUTY CLERK: I n t he r ed, i n t he r ed.
4 MR. KWOK: Col or r ed.
5 THE COURT: Red, oh.
6 Q. Let ' s t ur n now t o gover nment Exhi bi t 115?
7 A. Okay.
8 Q. Di d you t ake t hose checks t hat Mr . Rubi nst ei n showed you
9 i nt o account i n your anal ysi s f or year t wo?
10 A. Yes.
11 Q. And st i l l what i s t he dol l ar amount r epr esent ed i n t he
12 col or r ed on your char t ?
13 A. 196, 504.
14 Q. Now, Ms. Ri l ey, you r emember Mr . Rubi nst ei n al so aski ng you
15 quest i ons about cost shar e?
16 A. Yes.
17 Q. And he asked you about t he equi pment and how i t mi ght
18 r el at e t o cost shar e?
19 A. Yes.
20 Q. Let ' s pul l up gover nment exhi bi t 40A, 40A. Let ' s f ocus on
21 l i ne I .
22 Ms. Ri l ey, what i nf or mat i on i s cal l ed f or on l i ne I of
23 gover nment exhi bi t 40A?
24 A. Cost shar e.
25 Q. And what i nf or mat i on i s r ef l ect ed - - what number i s
( 212) 805- 0300
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1 r ef l ect ed on l i ne I ?
2 A. Zer o.
3 Q. I f we coul d zoomout of - -
4 THE COURT: Thi s i s 40A?
5 MR. KWOK: 40A, your Honor .
6 THE COURT: And t hi s i s submi t t ed by - - t hi s i sn' t
7 your r ecor d, t hi s i s submi t t ed by CASI ?
9 Q. Who submi t t ed t hi s f or m?
10 A. Yes, CASI submi t s t hi s f or mt o us.
12 Q. Coul d we zoomi n on t he si gnat ur e bl ock on t he bot t omof
13 t hat ? Whose si gnat ur e appear s on t he bot t omof t hat f or m?
14 A. Dr . Kar r on.
15 Q. Let ' s go t o gover nment exhi bi t 41A. Let ' s zoomi nt o l i ne
16 I . Agai n, what i nf or mat i on i s cal l ed f or on l i ne I ?
17 A. Cost shar e.
18 Q. What i s t he number t her e?
19 A. Zer o.
20 Q. Let ' s zoomout . Go t o t he second bl ock. What si gnat ur e
21 appear s i n t he bot t om?
22 A. Dr . Kar r on' s.
23 Q. Go t o 42A. What i s t he number shown f or l i ne I i n 42A?
24 A. Zer o.
25 Q. And what si gnat ur e appear s on t he bot t ompor t i on of t hat
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1 f or m?
2 A. Dr . Kar r on.
3 Q. Go t o 43A, l i ne I ?
4 A. Zer o.
5 Q. Si gnat ur e bl ock, what si gnat ur e appear s t her e?
6 A. Dr . Kar r on' s.
7 Q. Now, Ms. Ri l ey, one l ast t hi ng. Coul d you r ead t he
8 cer t i f i cat i on above t he si gnat ur e bl ock?
9 A. I cer t i f y, t o t he best of my knowl edge and bel i ef , t hat
10 t hi s r epor t i s cor r ect and compl et e and t hat al l out l ays and
11 unl i qui dat ed obl i gat i ons ar e f or t he pur poses set f or t h i n t he
12 awar d document s.
13 MR. KWOK: No f ur t her quest i ons.
14 RECROSS EXAMI NATI ON
16 Q. When you consul t ed wi t h Mr . Spi t z i n December of 2003, di d
17 he di scuss wi t h you t he meal s i ssue?
19 Q. Wel l , under t he budget , i sn' t i t a f act t hat t her e i s a
20 cat egor y cal l ed " ot her s" ?
21 THE COURT: Thi s i s beyond t he scope.
23 MR. RUBI NSTEI N: I submi t i t ' s not . I t was asked
24 about meal s and whet her t her e' s a l i ne i t emi n t he budget about
25 meal s.
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866zkar 4 Ri l ey - r ecr oss
1 THE COURT: That i s, t he scope of t he di r ect di d not
2 have anyt hi ng t o do wi t h meal s.
4 THE COURT: J ust go r i ght ahead.
5 MR. RUBI NSTEI N: Your Honor - -
6 THE COURT: We have gone t hr ough meal s al r eady.
7 MR. RUBI NSTEI N: I know t hat .
8 THE COURT: You ar e i nst r uct ed not t o go beyond t he
9 di r ect . That i s an or der of t he Cour t , t hat i s a r ul e of
10 t r i al s.
11 MR. RUBI NSTEI N: Absol ut el y, J udge.
12 THE COURT: You ar e t o conf i ne your sel f t o t he
13 r edi r ect of t he gover nment .
14 MR. RUBI NSTEI N: Ri ght . But I submi t , your Honor , i f
15 you l ook at t he t r anscr i pt - -
17 MR. RUBI NSTEI N: I j ust aski ng your Honor t o l ook at
18 t he t r anscr i pt .
19 THE COURT: Don' t ar gue about i t . You have an
20 i nst r uct i on. I f you want a si debar , you can have i t .
23
24
25
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2 MR. KWOK: Your Honor , i n my r edi r ect I di dn' t ask a
3 si ngl e quest i on about t he audi t s. I si mpl y asked a quest i on
4 about whet her l i ne i t em- - wher e meal s ar e a l i ne i t emon t he
5 budget , t hat ' s al l I asked. I di dn' t go i nt o audi t s, I di dn' t
6 go t o meal s, I don' t know wher e he' s goi ng. On r ecr oss, he' s
7 goi ng t o t ake anot her hour i f we go t hi s way.
8 MR. RUBI NSTEI N: Wi t h t hei r di r ect s t hey shoul dn' t
9 compl ai n. Your Honor shoul d compl ai n, but not t hem.
10 Al l r i ght . They asked about meal s, and I ' maski ng her
11 whet her or not - -
12 THE COURT: They di dn' t ask meal s.
13 MR. RUBI NSTEI N: Yes, t hey di d. They sai d i s t her e a
14 l i ne i t emf or meal s.
15 THE COURT: They di dn' t ask.
16 MR. RUBI NSTEI N: They di d.
17 MR. EVERDELL: That ' s al l I asked. I di d ask t hat
18 quest i on, but I j ust asked - -
19 THE COURT: Di d you, a l i ne i t em? I di dn' t hear t he
20 meal s.
21 MR. RUBI NSTEI N: So I ' maski ng i f - -
23 MR. RUBI NSTEI N: I can go i nt o t hi s.
24 THE COURT: I ' l l al l ow i t .
( 212) 805- 0300
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2 THE COURT: I t hought t he quest i on was al l owed wi t h
3 r espect t o Exhi bi t 140. I s t hat t he exhi bi t t hat t he quest i on
4 was asked about ? No, not 140. I ' msor r y.
5 THE DEPUTY CLERK: 114 and 115.
6 THE COURT: 114 and 115.
7 Wi t h r espect t o 114 and 115, I wi l l al l ow i t .
9 Q. Now, t her e i s a cat egor y cal l ed ot her s, i s t her e not - -
10 A. Yes.
11 Q. - - Ms. Ri l ey?
12 A. Yes.
13 Q. And i s i t a f act t hat meal s coul d be cl assi f i ed under t he
14 l i ne i t emcal l ed ot her s?
15 THE COURT: The quest i on i sn' t whet her i t coul d be.
16 The quest i on i s was i t .
17 A. I t was not .
18 Q. Was i t ?
19 A. I t was not .
20 Q. What was l i st ed under ot her s?
21 A. Audi t i ng ser vi ces.
22 Q. Par don?
23 A. Audi t i ng ser vi ces.
24 Q. And what el se?
25 A. Under ot her s? That ' s al l I r ecal l .
( 212) 805- 0300
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1 Q. Now - -
2 A. I mean f or what , f or what ? On t he budget ? The budget was
3 f or audi t i ng. Cl assi f i ed - - al l owed f or ot her s, ot her cost i n
4 t he budget was audi t cost s. That was t he onl y t hi ng t hat was
5 al l owed i n t he budget .
6 Q. Ther e i s a cat egor y cal l ed ot her s. I s t her e a cat egor y
7 cal l ed audi t s, yes or no?
8 A. No.
9 Q. I s t her e a cat egor y cal l ed ot her s, yes or no?
10 A. Yes.
11 Q. And can meal s be consi der ed under t he cat egor y " ot her s" i f
12 i t r el at es t o t he pr oj ect ?
13 THE COURT: Ther e i s a cat egor y cal l ed audi t , i sn' t
14 t her e?
15 THE WI TNESS: Ther e' s ot her s, yes.
16 THE COURT: Audi t I sai d.
17 THE WI TNESS: Oh, i t was - - t hey - - no - - wel l , on
18 our , my char t may have a cost , but .
19 THE COURT: A char t has i t ?
20 THE WI TNESS: The char t has - -
22 THE WI TNESS: The char t has t hat cat egor y.
23 THE COURT: Look at t he char t , l ook at t he exhi bi t I ' m
24 t al ki ng about when you answer t he quest i on. Don' t j ust dr eam
25 about somet hi ng el se.
( 212) 805- 0300
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1 THE WI TNESS: I t hought we wer e t al ki ng about budget .
2 THE COURT: Not t al ki ng about budget , we' r e t al ki ng
3 about t he exhi bi t .
5 THE COURT: Al l r i ght , t he quest i on t hat was asked
6 was about t he exhi bi t 104 - - 114.
7 THE DEPUTY CLERK: 114.
8 THE COURT: 114.
9 THE WI TNESS: 114.
10 THE COURT: And 115, t hose ar e t he onl y quest i ons.
12 THE COURT: Now, you got a quest i on, Mr . Rubi nst ei n?
13 MR. RUBI NSTEI N: Di d we get an answer ? That ' s al l
14 I - -
15 THE COURT: Wel l , I don' t know what t he quest i on was.
16 MR. RUBI NSTEI N: Wel l , t he quest i on was coul d meal s
17 t hat ar e had r el at i ng t o NI ST ATP busi ness meet i ngs, can t hey
18 be al l owabl e under t he budget l i ne ot her s, yes or no.
19 THE COURT: You can ask about 114 and 115, t hat ' s al l .
20 Q. Wel l , ma' am, you t est i f i ed as t o 41A, 42A and 43A, cor r ect ?
21 THE COURT: Yes, she di d.
22 A. Yes.
23 Q. Li ne I ?
24 A. Yes.
25 Q. And i s t hat what you woul d ut i l i ze t o make a det er mi nat i on
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1 t hat t he equi pment coul d not be ut i l i zed as a cof undi ng
2 cont r i but i on?
4 THE COURT: Let me get t he exhi bi t . Obj ect i on
5 sust ai ned. Thi s document was f i l ed by Dr . Kar r on. She di dn' t
6 pr epar e i t . Dr . Kar r on pr epar ed i t .
7 MR. RUBI NSTEI N: I asked i f she - -
9 MR. RUBI NSTEI N: I f she ut i l i zed i t .
10 THE COURT: Al l we' r e t al ki ng about i s l i ne I , t hat ' s
11 al l .
12 MR. RUBI NSTEI N: Yeah, t hat ' s what I ' mt al ki ng about .
13 Wel l , al l r i ght , J udge.
14 THE COURT: Al l r i ght , t he document was not pr epar ed
15 by t hi s wi t ness. The document was pr epar ed by Dr . Kar r on,
16 appar ent l y. She cannot answer what was i n t hat or shoul d or
17 shoul d not have been i n t hat l i ne.
18 MR. RUBI NSTEI N: That wasn' t t he quest i on, J udge. The
19 quest i on was, di d she r evi ew t hat t o make a det er mi nat i on.
20 They br ought i t out on r edi r ect l i ke she had used t hat t o make
21 her det er mi nat i on.
23 THE COURT: I don' t - - obj ect i on sust ai ned.
24 Q. What wer e you asked about 41A, ma' am, by t he Pr osecut or ?
( 212) 805- 0300
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2 MR. RUBI NSTEI N: I ' maski ng her exact l y what she was
3 asked.
4 THE COURT: We al l hear d what she was asked her .
5 MR. RUBI NSTEI N: Obj ect i on.
6 THE COURT: She doesn' t have t o r epl y t o t hat
7 quest i on, now go ahead and ask a quest i on i f you' r e goi ng t o
8 ask one or t he cr oss- exami nat i on, r ecr oss i s over .
9 MR. RUBI NSTEI N: Wi t h al l due r espect , J udge, coul d I
10 have a si debar ?
11 THE COURT: No, you may not at t hi s poi nt . The r ul es
12 appl y t o r ecr oss- exami nat i on and t hey' r e goi ng t o be st r i ct l y
13 adher ed t o, i n l i ght of t he l engt hy l engt hy cr oss- exami nat i on
14 we' ve al r eady hear d.
15 MR. RUBI NSTEI N: I ' mgoi ng t o ask f or a l i mi t i ng
16 i nst r uct i on t o t he j ur y, your Honor , on t hat comment by your
17 Cour t . I t hi nk i t was, i n al l due r espect - -
18 THE COURT: I don' t know what t o i nst r uct t hem. Al l
19 I ' mdoi ng i s st at i ng t he f act s. I f you want t o have a si debar
20 on t hat , I ' l l t ake a si debar on t hat .
23
24
25
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2 THE COURT: I f I got annoyed enough so I made some
3 mi sst at ement s, I ' l l cor r ect i t , but ot her wi se t he r ul e i s, and
4 you know i t ver y wel l , t hat r ecr oss cannot exceed t he r edi r ect .
5 MR. RUBI NSTEI N: I agr ee, J udge.
6 THE COURT: The scope.
7 MR. RUBI NSTEI N: I agr ee, J udge. But when t he
8 gover nment , A, br i ngs out i s t her e a l i ne i t emf or meal s and
9 she says no, I t hi nk I have a r i ght t o ask i f i t coul d come
10 under t he cat egor y ot her s, t hat ' s number one. Number t wo, when
11 t he gover nment - -
12 THE COURT: A l i ne.
13 MR. RUBI NSTEI N: - - br i ngs out - -
14 THE COURT: The i nqui r y, I bel i eve, was was t her e a
15 meal s cat egor y or a meal s - - a f i gur e f or meal s i n t hose t wo
16 exhi bi t s. She sai d no.
17 MR. RUBI NSTEI N: They wer e asked speci f i cal l y, J udge,
18 whet her t her e' s a budget l i ne f or meal s. That ' s what t hey
19 asked. I t ' s mi sl eadi ng because i t doesn' t have t o be. I t
20 coul d be under ot her s and I f eel I have a r i ght t o st r ai ght en
21 i t out .
22 THE COURT: You can br i ng - - you br ought t hat out .
23 MR. KWOK: You went past t hat al r eady.
24 MR. RUBI NSTEI N: You obj ect ed t o i t and you sust ai ned
25 i t .
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1 THE COURT: We' r e her e t o - -
3 THE COURT: - - based on your want i ng me t o cor r ect
4 somet hi ng t hat I may have sai d t o t he j ur y.
5 MR. RUBI NSTEI N: Yes. The second t hat - - yeah, t hat
6 your Honor suggest ed t hat i t was i nappr opr i at e f or counsel t o
7 cr oss- exami ne t he l engt h he di d, par t i cul ar l y i n vi ew of t he
8 f act t hat you l i mi t ed me t o - -
9 THE COURT: I t ' s not - -
10 MR. RUBI NSTEI N: - - i n t he ki nd and I don' t t hi nk t hat
11 t he j ur y - - t hat counsel has an absol ut e r i ght t o cr oss- exami ne
12 j ust as t he gover nment has a r i ght - -
13 THE COURT: You got - -
14 MR. RUBI NSTEI N: - - t o show t he same exhi bi t s t hr ough
15 ever y wi t ness, show t he same exhi bi t on t he scr een. I
16 shoul dn' t be - - and as t o t he l et t er I i n 40, i n t he A' s
17 exhi bi t s i n t he 40s, i t says t ot al - -
18 THE COURT: The cost shar e.
19 MR. RUBI NSTEI N: Shar e. So t hey ar e suggest i ng t hat
20 because t her e' s not hi ng i n her e t hat she coul dn' t consi der i t .
21 She never consi der ed t hi s document , J udge. She never
22 consi der ed i t .
23 MR. KWOK: I never suggest ed t hat . I j ust asked her
24 what t he document says.
25 THE COURT: She - -
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1 MR. RUBI NSTEI N: What was t he pur pose of i t ?
2 THE COURT: To show t her e was no di sput e.
4 THE COURT: To show t her e was no di sput e about t hat
5 i t em.
6 MR. RUBI NSTEI N: But she consi der ed i t .
7 MR. KWOK: Who sai d she consi der ed - -
8 THE COURT: No one sai d she consi der ed i t .
10
11
12
13
14
15
16
17
18
19
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21
22
23
24
25
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2 MR. RUBI NSTEI N: Can I ask t he Cour t Repor t er i f t hat
3 was answer ed, t hat quest i on about t he meal s was asked answer ed?
4 THE COURT: No.
5 MR. RUBI NSTEI N: Coul d I ask i t agai n?
6 THE COURT: You can ask anot her quest i on, not t hat
7 one.
8 MR. RUBI NSTEI N: You sai d at t he si debar I coul d ask
9 i t .
11 MR. RUBI NSTEI N: You sai d at t he si debar , I coul d ask
12 i t .
13 THE COURT: I di dn' t say t hat .
15 Q. I n t he exhi bi t s, gover nment Exhi bi t 114 - -
17 Q. The gover nment asked you quest i ons about 114, cor r ect ?
18 THE COURT: Yes.
19 Q. By your - -
20 THE COURT: I f i t ' s wi t hi n t he scope of t he r edi r ect .
21 We' r e not goi ng t o go over al l of 114 and st ar t al l over agai n.
22 MR. RUBI NSTEI N: I don' t i nt end t o, J udge.
23 Q. By your r ed por t i on of t he ci r cl es, Dr . Kar r on owes t hr ee
24 t i mes t he amount of money t hat he r ecei ved, r i ght ; i s t hat
25 cor r ect ?
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2 THE COURT: I don' t under st and t he quest i on. You want
3 t o poi nt t o somet hi ng i n Exhi bi t 114 or 115, you can, but t he
4 quest i ons you' r e aski ng cal l f or comput at i ons.
5 Q. How much, accor di ng t o t hese r ed ci r cl es on Exhi bi t 114 and
6 115, how much does Dr . Kar r on, accor di ng t o you, owe NI ST ATP?
7 A. Accor di ng t o t he r ed ci r cl es? I t woul d be 268, 000 pl us - -
8 Q. Par don?
9 A. - - 196.
10 Q. What ?
11 A. 268, 000 pl us 196, 000 i s how much CASI woul d owe back.
12 MR. RUBI NSTEI N: I ' msor r y, J udge.
13 Q. Di d you say 196?
14 THE COURT: Tal ki ng about what CASI owes or what Dr .
15 Kar r on owes?
16 THE WI TNESS: CASI , r i ght . Dr . Kar r on woul d be - -
17 what CASI owes.
18 Q. And what does Dr . Kar r on owe?
19 THE COURT: What ' s t he r est of your quest i on? You' r e
20 aski ng what Dr . Kar r on owes, accor di ng t o Exhi bi t 114?
21 MR. RUBI NSTEI N: 115.
22 THE COURT: 115?
23 MR. RUBI NSTEI N: Ei t her one.
24 THE COURT: Whi ch one?
25 MR. RUBI NSTEI N: They' r e r el at ed. I can' t t el l .
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1 Q. I want t o know bet ween t hese t wo exhi bi t s, i f we coul d f i nd
2 out how much she cl ai ms Dr . Kar r on has i n unal l owabl e expenses?
3 A. Thi s shows t he CASI unal l owabl e expenses.
4 THE COURT: J ust Dr . Kar r on, j ust Dr . Kar r on, t hat ' s
5 al l you wer e asked. You' r e l ooki ng at Exhi bi t 114.
6 MR. RUBI NSTEI N: I have no f ur t her quest i ons, your
7 Honor .
8 MR. KWOK: Two quest i ons, your Honor , t wo quest i ons.
9 THE COURT: How ar e you goi ng t o be i n t he scope? Al l
10 r i ght .
11 MR. KWOK: Wi t hi n t he scope.
12 THE COURT: I t ' s got t o be wi t hi n t he scope.
14 BY MR. KWOK:
15 Q. Can you pul l up gover nment Exhi bi t 110B, page seven?
16 THE COURT: Wai t a mi nut e. Wher e ar e we goi ng now?
17 I t ' s a di f f er ent exhi bi t . That ' s not wi t hi n t he scope. I t ' s
18 not al l owed.
19 MR. KWOK: Fi nal quest i on.
20 Q. Ms. Ri l ey, i n your r evi ew of al l t he checks, who si gned al l
21 t hose checks f or CASI ?
22 MR. RUBI NSTEI N: Obj ect i on, your Honor , beyond t he
23 scope.
25 Al l r i ght . You' r e excused. Next wi t ness.
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1 MR. EVERDELL: Your Honor , t he gover nment cal l s Fr ank
2 Spr i ng.
3 FRANK SPRI NG,
4 cal l ed as a wi t ness by t he gover nment ,
5 havi ng been dul y swor n, t est i f i ed as f ol l ows:
6 DI RECT EXAMI NATI ON
7 BY MR. EVERDELL:
8 THE COURT: Pl ease, go ahead.
9 Q. Good af t er noon, Mr . Spr i ng.
10 A. Hel l o.
11 Q. What do you do f or a l i vi ng?
12 A. I ser ve as a consul t ant wor ki ng on bookkeepi ng and ot her
13 f i nanci al act i vi t i es f or a number of cl i ent s.
14 Q. What do you mean by bookkeepi ng?
15 A. Wel l , t hese ar e - - gener al l y, I wor k wi t h smal l busi nesses
16 and t hey have var i ous bookkeepi ng needs, keepi ng t r ack of t hei r
17 i ncome and expenses.
18 Q. How l ong have you been doi ng t hat ki nd of a wor k?
19 A. For , as a f r eel ance consul t ant , ei ght year s.
20 Q. And do you wor k al one or do you wor k f or a company?
21 A. I amsubcont r act ed by a gent l eman cal l ed Ken J ackson, who
22 owns a company cal l ed t he J ackson Gr oup, whi ch speci al i zes i n
23 ser vi ces l i ke t hi s.
24 Q. And how l ong have you been wor ki ng as a subcont r act or f or
25 J ackson Gr oup?
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866zkar 4 Spr i ng - di r ect
1 A. Si nce t he year 2000.
2 Q. What sor t s of cl i ent s do you have i n doi ng your wor k?
3 A. Most of t he cl i ent s I wor k f or cur r ent l y ar e smal l
4 busi nesses, whi ch i s t o say t hey mi ght be gr ossi ng about a
5 mi l l i on, a mi l l i on- and- a- hal f dol l ar s a year . We al so wor k f or
6 i ndi vi dual s.
7 Q. And do compani es t hat you deal wi t h as cl i ent s t ypi cal l y
8 come t o you at any par t i cul ar poi nt i n t he l i f e of t hei r
9 company?
10 A. Yes. Fr equent l y t he compani es t hat come t o us, and t he
11 i ndi vi dual s, mi ght be usi ng t he comput er syst ems or sof t war e
12 syst ems t hat we speci al i ze i n, and t hey f i nd t hat t hi ngs ar e
13 goi ng wr ong, t hey don' t under st and how t o use t he syst em, or
14 t hei r i n- house bookkeeper has not been doi ng t he j ob t o t he
15 company' s sat i sf act i on.
16 Q. And what ar e t hose syst ems t hat you' r e r ef er r i ng t o?
17 A. Ther e ar e t wo t hat we speci al i ze i n, bot h made by t he same
18 company; i nt ui t , and you mi ght be f ami l i ar wi t h t he names
19 Qui cken i s one of t hemwhi ch i s adver t i sed wi del y i n t hi s
20 count r y, i t ' s ki nd of a br and name. That ' s used most l y f or
21 f ol l owi ng your per sonal f i nances, f or t r acki ng t hem. And t hen
22 t he ot her syst emi s cal l ed Qui ck Books, and t hat ' s gener al l y
23 used f or smal l busi nesses.
24 Q. Mr . Spr i ng, do you have any f or mal t r ai ni ng i n account i ng?
25 A. Wel l , what we do i s not account i ng. What we do i s
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1 bookkeepi ng, whi ch i s subst ant i al l y di f f er ent . I n f act , par t
2 of t he j ob of a good bookkeeper i s i n f act t o pr epar e f i nanci al
3 dat a come t ax t i me, so t hat t he account ant , who i s t he per son
4 act ual l y doi ng t he t ax r epor t , can do i t i n t he most accur at e
5 way possi bl e.
6 Q. What t r ai ni ng di d you r ecei ve i n bookkeepi ng?
7 A. Most l y - - wel l , t her e ar e t wo aspect s t o t hat . Si nce 1980,
8 I ama smal l busi ness, smal l company owner mysel f . And
9 st ar t i ng i n 1980 I ' ve set up f our compani es, I ' ve owned f our
10 compani es over t he year s. And as par t of t hat busi ness, ei t her
11 as f ul l owner or co- owner of t hose compani es, I was r esponsi bl e
12 f or t he f i nanci al deal i ngs of t he company, t he day- t o- day
13 bookkeepi ng, t he f i nanci al pl anni ng, t he budget i ng, et cet er a.
14 And t hen when I st ar t ed act i ng, doi ng consul t ancy
15 ser vi ces f or Mr . J ackson, I was t r ai ned ext ensi vel y by hi m.
16 Q. How l ong di d you do t he, your compani es f or ?
17 A. Oh, we set up - - my par t ner and I set up our f i r st company
18 i n 1980.
19 Q. Mr . Spr i ng, di d t her e come a t i me when you met someone
20 named Dr . Kar r on, Dr . Dani el Kar r on?
21 A. Yes.
22 Q. Do you see Dr . Kar r on her e i n t he cour t r oomt oday?
23 A. I do.
24 Q. Woul d you pl ease poi nt hi mout and i dent i f y an ar t i cl e of
25 cl ot hi ng he' s wear i ng?
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1 A. I t ' s t he gent l eman over t her e wear i ng a l i ght col or ed t i e
2 and a f l ag pi n, i f my eyes ar e hol di ng up.
3 MR. EVERDELL: May t he r ecor d r ef l ect t he wi t ness has
4 i dent i f i ed t he def endant ?
5 THE COURT: Yes, t he wi t ness has i dent i f i ed t he
6 def endant .
7 Q. Mr . Spr i ng, how di d you f i r st meet t he def endant ?
8 A. I was i nt r oduced t o hi mby Mr . J ackson.
9 Q. And what was t he occasi on f or t hat meet i ng?
10 A. The f i r st meet i ng, I was asked t o come and meet wi t h Dr .
11 Kar r on, as t her e wer e some bookkeepi ng needs he need at t endi ng
12 t o f or t he pr oj ect he was wor ki ng on at t he t i me.
13 Q. Do you know what pr oj ect t hat was?
14 A. I t was t he ATP.
15 THE COURT: Coul d we have dat e?
16 Q. Do you r ecal l t he dat e of t hat meet i ng, r oughl y?
17 A. I began wor ki ng on t he ATP pr oj ect i n J ul y, l at e J ul y of
18 2002. And i f memor y ser ves cor r ect , i t woul d have been shor t l y
19 bef or e t hen, because hi s needs wer e i mmedi at e.
20 Q. Was t hi s t he f i r st t i me t hat t he def endant had sought out
21 t he ser vi ces of t he J ackson Gr oup?
22 A. No.
23 Q. Can you expl ai n?
24 A. Ken J ackson and t he J ackson Gr oup had wor ked pr evi ousl y
25 wi t h CASI on a pr oj ect cal l ed DARPA, and t hat woul d have been,
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1 I bel i eve t hat was about t wo or t hr ee year s bef or e t he ATP
2 pr oj ect .
3 Q. Can you say agai n when you wer e hi r ed by CASI ?
4 A. J ul y of 2002.
5 Q. And how l ong di d you wor k f or CASI ?
6 A. Up t hr ough Oct ober of 2003, about 15 mont hs.
7 Q. Wer e you pai d f or your wor k?
8 A. I was.
9 Q. What wer e you asked t o do, gener al l y, when you wer e hi r ed
10 by CASI ?
11 A. Wel l , when I was hi r ed by CASI , t her e was al r eady an
12 i n- house bookkeeper wor ki ng on t he ATP pr oj ect , so I wasn' t
13 i ni t i al l y i nvol ved i n t he day- t o- day act i vi t i es, nor mal
14 act i vi t i es of a bookkeeper , you know, i nput t i ng i nvoi ces,
15 wr i t i ng checks, payi ng st af f , et cet er a. But t her e was a - -
16 one of t he r equi r ement s, one of t he r equi r ement s of t he ATP
17 pr oj ect was t hat t her e was an audi t at t he end of t he f i r st
18 year . Thi s was si mpl y a r equi r ement of t he pr oj ect . And I
19 st ar t ed wor ki ng f or CASI about t en mont hs i nt o t hat f i r st year ,
20 so t he audi t was comi ng up and I was asked t o come i n and
21 assi st on pr epar i ng t he books f or t he audi t .
22 Q. And who i s conduct i ng t hat audi t ?
23 A. That woul d' ve been J oan Hayes.
24 Q. Now, when you wer e hi r ed t o par t i ci pat e i n t he audi t , what
25 was t he f i r st t hi ng your - - oh, wi t hdr awn.
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1 When you wer e hi r ed, di d you l ear n who had been
2 r esponsi bl e f or keepi ng t he books bef or e you ar r i ved?
3 MR. RUBI NSTEI N: Obj ect i on, your Honor .
4 THE COURT: Ther e was someone wor ki ng t her e. Di d you
5 meet t he per son wor ki ng t her e?
6 THE WI TNESS: No, your Honor . Ther e was - - wel l ,
7 t her e was a young woman, Ni ki Wi nt er s who had been wor ki ng on
8 t he pr oj ect books bef or e I ent er ed t he scene, and cont i nued t o
9 wor k on t he books f or I bel i eve anot her t hr ee or f our mont hs,
10 af t er I st ar t ed at t he end of J ul y of 2002. Pr evi ous t o t hat ,
11 I bel i eve - -
12 MR. RUBI NSTEI N: I obj ect .
14 Q. Di d you have any conver sat i ons wi t h t he def endant about who
15 kept t he books pr i or t o you bei ng t her e?
16 A. Yes, I di d.
17 Q. And what was t he nat ur e of t hose conver sat i ons?
18 A. Wel l , I asked who had been doi ng t hem, and t he books wer e
19 i n t wo separ at e syst ems, and so I i nqui r ed as t o how t hose wer e
20 done. And I was t ol d by t he def endant t hat he had been
21 r esponsi bl e f or some of i t , and t hat t her e had been ot her
22 bookkeeper s i n t he past .
23 Q. What wer e t hose t wo syst ems t hat you r ef er r ed t o t hat t he
24 company used?
25 A. Wel l , t he same company, I nt ui t , makes t hese t wo syst ems
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1 whi ch I ment i oned a f ew mi nut es ago. One i s t hi s t hi ng cal l ed
2 Qui ck Books, whi ch i s good f or smal l busi nesses, and t hen t he
3 ot her one i s cal l ed Qui cken, whi ch you see adver t i sed maybe a
4 l ot on t el evi si on and t hat ki nd of t hi ng. That i s mor e
5 sui t abl e f or househol ds and per sonal st uf f .
6 THE COURT: What ones wer e t hey usi ng; what syst em,
7 what wer e t hese t wo syst ems?
8 THE WI TNESS: The CASI and ATP af f ai r s wer e bei ng r un
9 out of Qui ck Books, and t hen Qui cken was bei ng used t o t r ack
10 t he def endant ' s per sonal f i nances.
11 Q. And di d you have any di scussi ons wi t h t he def endant about
12 t he par t i cul ar syst ems t hat he was usi ng?
13 A. To t he ext ent t hat I had t o become f ami l i ar wi t h t he way
14 t he i nf or mat i on had been i nput t ed up t o my comi ng i nt o wor k on
15 t hese syst ems, and we st ar t ed by l ooki ng at t he per sonal si de
16 of t hi ngs, whi ch was hel d wi t hi n t he Qui cken sof t war e.
17 Q. And what wer e you asked t o do wi t h r espect t o t he per sonal
18 si de of t hi ngs i n t he Qui cken sof t war e when you ar r i ved?
19 A. I was asked by t he def endant t o go i nt o t hose syst ems, and
20 on t he ver y f i r st day t hat I was t her e he sat me down i n f r ont
21 of Qui cken, i n f r ont of t he comput er and he navi gat ed me
22 t hr ough t he Qui cken books, t he per sonal f i nances, and asked me
23 t o ext r act cer t ai n ki nds of expenses f r omt hat , t hat I was t ol d
24 woul d be char ged back t o t he ATP pr oj ect .
25 Q. And do you r ecal l what sor t s of expenses t hose wer e?
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1 A. Wel l , t her e ar e a number of ki nds of cat egor i es. Ther e
2 wer e t hi ngs i n t he or der of medi cal expenses, equi pment , l ocal
3 t r avel , meal s, et cet er a, smal l er i t ems l i ke t hat .
4 Q. And who t ol d you t hat t hese woul d be ATP al l owabl e expenses
5 when you wer e asked t o do t hi s?
6 A. I was t ol d by t he def endant .
7 Q. And do you r ecal l when t hese expenses wer e i ncur r ed?
8 A. I was asked by t he def endant t o go back t o Apr i l of 2002 t o
9 ext r act some of t hese expenses.
10 Q. Ar e you cer t ai n about t he dat e Apr i l 2002?
11 A. I am. I - - t he pr oj ect st ar t ed - - I beg your par don. I am
12 get t i ng my year s wr ong. I began i n Sept ember of 2002. The
13 pr oj ect had been goi ng on f or t en mont hs. I t was 2001,
14 Apr i l 2001.
15 Q. So wer e t he char ges - - j ust t o be cl ear , you wer e asked t o
16 go back t o Apr i l 2001 t o l ook at t he char ges?
17 A. Ri ght , r i ght . The pr oj ect i t sel f st ar t ed i n Oct ober of
18 2001. So, basi cal l y, I was bei ng asked t o go back
19 f our - and- a- hal f , f i ve mont hs bef or e t he st ar t of t he pr oj ect t o
20 ext r act expenses.
22 ext r act i ng t hose expenses pr i or t o t he st ar t of t he gr ant ?
23 A. Wel l , t o t he ext ent t hat i t seemed unusual t o me. At t hi s
24 poi nt I was - - t hi s i s r eal l y l i t er al l y my f i r st week or so.
25 THE COURT: Di d you have any di scussi ons wi t h t he
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1 def endant i s what you wer e asked, not what was goi ng on i n your
2 mi nd.
3 A. Wel l - -
4 THE COURT: Di d you have di scussi ons wi t h hi mabout
5 i t , yes or no?
6 THE WI TNESS: No. I di d what I was t ol d, basi cal l y.
7 I had no r eason t o t hi nk t hat i f I was asked t o go back t o
8 Apr i l - -
9 THE COURT: No was t he answer . Let ' s go ahead.
10 A. No.
11 Q. Af t er ext r act i ng t he dat a f r omt he per sonal syst em, what
12 di d you do wi t h t hat dat a?
13 A. Wel l , t he dat a was ext r act ed by, basi cal l y, t wo met hods.
14 One woul d gener at e r epor t s usi ng t he sof t war e, whi ch woul d
15 det ai l what t hese expenses wer e, and t hen t hose woul d be
16 t r ansf er r ed vi a one met hod or anot her i nt o Qui ck Books, whi ch
17 was t r acki ng t he ATP expense, as wel l as t he CASI expenses.
18 Q. And when al l t he dat a was i n t he cor por at e Qui ck Books
19 syst em, what , i f anyt hi ng, di d you do t o t he Qui ck Books
20 syst em?
21 A. The Qui ck Book syst em, I t hen began t o gener at e what we
22 woul d cal l i ncome and expense st at ement s or pr of i t and l oss
23 st at ement s t hat showed t he act i vi t y f or t he pr evi ous 10 or 11
24 mont hs at t hat poi nt .
25 Q. And what , i f anyt hi ng, di d you do wi t h t he expendi t ur es
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1 t hat wer e r ef l ect ed i n t he Qui ck Book syst em?
2 A. Ther e wer e number of gr oups of expenses. Thi s woul d' ve
3 been - - I woul d have been wor ki ng sever al weeks now on t he
4 pr oj ect and I began t o - - I had begun t o under st and what we
5 wer e, you know, al l owabl e ATP expenses f r omexpenses t hat wer e
6 not al l owed by t he pr oj ect . And my basi c j ob was t o separ at e
7 out t he t wo, t hose t hi ngs we coul d al l ow f or t he pr oj ect t o pay
8 f or , and t hose t hi ngs we coul d not .
9 Q. And how di d you become f ami l i ar wi t h what was al l owabl e and
10 what was not al l owabl e?
11 A. I r ead t he r egul at i ons.
12 THE COURT: You say you r ed t he r egul at i on?
14 THE COURT: What di d you l ook at ?
15 THE WI TNESS: I f memor y ser ves cor r ect , i t was about a
16 30 page document pr oduced by ATP whi ch sai d, basi cal l y, t hese
17 ar e t he dos and don' t , what was al l owabl e expense and what
18 wasn' t .
19 Q. Di d you have any ot her hel p i n deci di ng what was al l owabl e
20 and what was not al l owabl e?
21 A. Wel l , t hi s i s sever al weeks af t er I had st ar t ed, maybe
22 agai n f our or f i ve weeks. And at t hat poi nt J oan Hayes and, I
23 because t he audi t was i mmi nent and she was aski ng t o have dat a
24 pr esent ed t o her , so she had began begun t o poi nt out t o me
25 cer t ai n t hi ngs t hat wer e not , by her def i ni t i on, al l owabl e.
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1 But by t hi s poi nt I had al so r ead t he document . And J oan Hayes
2 and I al so r evi ewed t he document t o make sur e t hat we bot h
3 under st ood what was an al l owabl e expense and what wasn' t .
4 Q. And by document , you' r e r ef er r i ng t o t he document ?
5 A. The r egul at i on, yes.
6 Q. Di d you have any di scussi ons wi t h t he def endant about
7 whet her cer t ai n expense woul d be cl assi f i ed as ATP r el at ed
8 expenses ver sus non ATP r el at ed expenses?
9 A. I di d quest i on a number of t hi ngs as my f ami l i ar i t y wi t h - -
10 THE COURT: You' r e asked - -
12 THE COURT: You wer e asked whet her you had a
13 conver sat i on wi t h t he def endant .
15 THE COURT: I t cal l s f or yes or no answer .
17 Q. What was t he nat ur e of t hose di scussi on you had wi t h t he
18 def endant ?
19 A. Wel l , I , as I became mor e f ami l i ar wi t h what was an
20 al l owabl e expense and what wasn' t , I began t o quest i on why
21 cer t ai n expense cat egor i es wer e bei ng cl assed one way or t he
22 ot her ; gener al l y, why t hey wer e bei ng cl assed as an al l owabl e
23 expense.
24 Q. And what sor t s of expenses di d you quest i on wi t h t he
25 def endant ?
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1 A. Oh, a r ange of t hi ngs; r ent , ut i l i t i es, cer t ai n amount s on
2 capi t al expendi t ur es, busi ness, you know, medi cal expenses.
3 Q. And what - - wi t hdr awn. What , i f anyt hi ng, di d Dr . Kar r on
4 do i f he di sagr eed wi t h your cl assi f i cat i on of whet her t hey
5 wer e ATP or non ATP r el at ed expenses?
6 A. Wel l , he woul d poi nt out t o me t hat I ei t her di dn' t know my
7 j ob, I di dn' t under st and what an ATP al l owabl e expense was or
8 wasn' t , or t hat he was i n conver sat i on wi t h t he ATP manager s i n
9 Washi ngt on t o ensur e t hat t hese expenses, whi ch I under st ood t o
10 be not al l owed by t he pr oj ect , woul d be al l owed i nt o t he
11 pr oj ect as an expense.
12 Q. Di d you see anyt hi ng i n par t i cul ar r ef l ect ed i n t he books
13 r egar di ng t hese conver sat i ons you had wi t h t he def endant ?
14 A. Wel l , as t he ki nd of per son i n char ge of keepi ng t he Qui ck
15 Books f i l e cor r ect , I t ook i t upon mysel f t o t ake what was an
16 al l owabl e expense and put i t i nt o t hat cat egor y, and i f i t was
17 not al l owed i nt o ATP, t o put i t i nt o t he gener al CASI expenses.
18 Q. And what , i f anyt hi ng, woul d t he def endant do af t er you di d
19 t hat ?
20 A. Nor mal l y I woul d go away - - I di dn' t wor k at t he of f i ce
21 ever y day, i t woul d be up t o t hr ee days a week on af t er noon.
22 And I woul d do my wor k i n t he of f i ce, go away, pr obabl y f or a
23 coupl e of days, come back f or my next sessi on and f i nd out t hat
24 t he expenses t hat I had t aken out of ATP, t ur ned t hemback i nt o
25 a CASI onl y expense, had been t ur ned - - had been r ei nput t ed as
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1 an ATP al l owabl e expense.
3 who had done t hat ?
4 A. I di d.
5 Q. And what wer e t hese di scussi ons?
6 A. He t ol d me he had done i t .
7 Q. And di d he t el l you why he had done i t ?
8 A. Yes. Rat her l i ke I , what I sai d a f ew mi nut es ago, I
9 di dn' t , ei t her di dn' t know what I was doi ng, or t he ATP
10 manager s woul d al l ow t hese expenses or I di dn' t , I di dn' t
11 under st and t he ATP r egul at i ons.
12 THE COURT: That he woul dn' t al l ow i t or hadn' t
13 al l owed i t , t he ATP manager ?
14 THE WI TNESS: No, your Honor t hat I had t aken, t hat I
15 had t aken out somet hi ng out of t he ATP and put i t i nt o a
16 gener al CASI expense, and t hat he woul d t hen t ake t hat and put
17 i t back i nt o ATP.
18 THE COURT: I got t hat par t . I ' mt al ki ng about t he
19 conver sat i on af t er war ds. Di d he say t hat t hey wer e - - had been
20 appr oved by - -
21 THE WI TNESS: He sai d t hey wer e i n t he pr ocess of
22 bei ng appr oved, and t hat he woul d be havi ng meet i ngs wi t h t he
23 ATP manager s t o cl ear up al l of t hese mat t er s t hat I was
24 quest i oni ng.
25 Q. About how many t i mes di d you not i ce changes l i ke t hi s
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1 occur r i ng i n t he books?
2 A. I never di d an exact count , but I woul d say somewher e
3 bet ween one dozen and t wo dozen t i mes.
4 Q. Do you r emember any par t i cul ar i nci dent , conver sat i on wi t h
5 t he def endant about t hi s i ssue?
6 A. Oh, yes, t hi ngs woul d get ver y heat ed. Because i t was l i ke
7 a t enni s game. I woul d do what I - - woul d f ol l ow t he
8 r egul at i ons, t ake i t out of ATP, come back a f ew days l at er , i t
9 was back i n ATP. I go away agai n, bang, bang, bang l i ke t hi s.
10 And af t er a coupl e of mont hs of t hi s happeni ng, i t r eached a
11 ki nd of a f ever pi t ch wher e I act ual l y wal ked out of t he
12 cl i ent ' s apar t ment whi ch i n what i s now cl ose t o 40 year s of
13 bei ng i n busi ness and pr ovi di ng pr of essi onal ser vi ces - -
14 MR. RUBI NSTEI N: I move t o st r i ke t hat por t i on, your
15 Honor .
16 THE COURT: Obj ect i on sust ai ned. You can' t go i nt o
17 how l ong you' ve been i n busi ness.
19 THE COURT: The j ur y wi l l di sr egar d t hat par t of i t .
20 Q. You sai d you wal ked out , Mr . Spr i ng?
21 A. Yes.
22 Q. Di d you ever r et ur n t o CASI ?
23 A. I di d.
24 Q. Why di d you r et ur n?
25 A. Wel l , I pr ovi ded ser vi ce t o cl i ent , and I ' ve al ways t aken
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1 my cl i ent s as t hey ar e t he peopl e t hat come f i r st . And as par t
2 of my j ob t o hel p t hemi n, t o do my j ob, t he j ob I was asked t o
3 do. The r eason I had wal ked out i s t hat I was bei ng asked t o
4 do a j ob and t hen bei ng pr event ed f r omdoi ng i t at t he same
5 t i me.
6 Q. Al l r i ght . I ' d l i ke you t o t ake a l ook at what ' s i n f r ont
7 of you Gover nment ' s exhi bi t s 144, what ' s been mar ked f or
8 i dent i f i cat i on, not yet i n evi dence as Gover nment ' s exhi bi t
9 144, 145, and 149. Can you pul l t hose out , pl ease. You can
10 t ake a l ook at each of t hose i n successi on, pl ease?
11 THE COURT: Bear wi t h us. You can' t l ook at t he
12 document s yet , al l r i ght . They' r e not admi t t ed i n evi dence.
13 Q. Do you see t hose document s, Mr . Spr i ng?
14 A. I do.
15 Q. Do you r ecogni ze t hose document s?
16 A. I do.
17 Q. What ar e t hey?
18 A. These ar e a ser i es of e- mai l chai ns f r omor t o - - ei t her
19 f r omor t o mysel f t o t he def endant .
20 Q. And how do you r ecogni ze t hem?
21 A. My name i s on t hem.
22 Q. And can you gi ve a basi c dat e r ange f or t hese e- mai l
23 st r i ngs?
24 A. November t hr ough, say, ear l y December of 2002.
25 MR. EVERDELL: Your Honor , t he gover nment of f er s
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1 Gover nment ' s exhi bi t 144, 145 and 149.
2 MR. RUBI NSTEI N: No obj ect i on, your Honor .
3 THE COURT: Al l r i ght 144, 145 and 149 ar e admi t t ed i n
4 evi dence.
5 ( Gover nment ' s Exhi bi t s 144, 145 and 149 r ecei ved i n
6 evi dence)
7 Q. Let ' s f i r st t ake a l ook at gover nment ' s 144.
8 THE COURT: Do we have a dat e? I see.
9 Q. Si nce t hese ar e e- mai l st r i ngs, we' r e act ual l y goi ng t o go
10 backwar ds t o f or war d, t he ear l y ones what begi n i n t he back.
11 So i f you coul d t ur n, pl ease, t o page t hr ee of Gover nment ' s
12 144?
13 A. Uh- huh.
14 Q. You see t hat e- mai l , page 3, 144?
15 A. Yes, yes. Sor r y.
16 Q. And do you see t he dat e of t hat e- mai l ?
17 A. Yes.
18 Q. What ' s t hat ?
19 A. November 29t h, 2002.
20 Q. And who sent t he e- mai l and who i s i t t o?
21 A. I t i s f r omt he def endant t o mysel f .
22 Q. Al l r i ght . I f you coul d l ook and j ust r ead t he f i r st f ew
23 sent ences up t o, I put t he pay- pal st uf f ?
24 A. Thi s i s f r omt he def endant . I f ound a number of er r or s i n
25 t he pr ogr amnon- pr ogr amspl i t s. We need t o f i x t hi s. I al so
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1 have pr obl ems wi t h t he ent i r e way you ar e spl i t t i ng t he cost s
2 bet ween ATP and non- ATP. We need t o f i x t hi s, as st uf f i s
3 f al l i ng i n t he cr acks and t her e can be no cr acks f or i t ems
4 mi ssi ng.
5 Q. What di d you under st and t he def endant t o mean about ATP
6 ver sus non- ATP spl i t s t hat he was di scussi ng t her e?
7 A. I t ' s a cont i nuat i on of t he wor k I had st ar t ed doi ng, wher e
8 havi ng become f ami l i ar wi t h t he r egul at i ons by t hi s poi nt i n
9 t he pr oj ect .
10 MR. RUBI NSTEI N: Obj ect i on, and I move t o st r i ke t hi s,
11 your Honor . I t ' s not r esponsi ve.
12 THE COURT: Let me hear t he quest i on.
13 Q. What was your under st andi ng, Mr . Spr i ng, as t o what was
14 meant by t he pr obl ems he was havi ng wi t h your spl i t t i ng t he
15 cost bet ween ATP and non- ATP?
16 A. Wel l , he di dn' t agr ee wi t h t he way, wi t h what I was sayi ng
17 was ATP al l owabl e and what wasn' t . As si mpl e as t hat .
18 Q. Al l r i ght . I f you coul d move now t o page t wo, whi ch i s t he
19 page bef or e t hat .
20 THE COURT: I t ' s t he page af t er , but i t ' s t he day
21 bef or e, t he message af t er t hat . Al l r i ght .
22 MR. EVERDELL: The message af t er t hat , even t hough
23 i t ' s t he page bef or e.
24 Q. I f you coul d l ook at t he e- mai l at t he bot t omof t hat page.
25 A. Uh- huh.
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1 Q. And i t i s one f r omyour sel f t o Dr . Kar r on, i s t hat cor r ect ?
2 A. I t i s.
3 Q. And i s t hat your r esponse t o t hat pr evi ous e- mai l we j ust
4 r ead?
5 A. I t i s.
6 Q. Coul d you r ead t he l ast t wo par agr aphs of your r esponse,
7 second t wo par agr aphs of your r esponse?
8 A. I r at her doubt your concl usi on about t he number of er r or s
9 i n my di vi si on of ATP and non- ATP cost s. I have t r i ed t o
10 squeeze ever yt hi ng t hat i s char geabl e, and t hen some, i nt o ATP.
11 Exampl e: I t r i ed t o get t hr ough payment s you made t o J i l l
12 Fel dman at t he begi nni ng of 2002, and Penni e & Edmonds.
13 However , J oan' s eagl e eye caught t hese and i s unl i kel y t o al l ow
14 t hemt o get t hr ough, par t i cul ar l y t he l egal f ees whi ch go back
15 t o pat ent i ssues r el at ed t o 1998- 1999. J oan made ext ensi ve
16 not es yest er day r el at i ng t o t hese and many ot her t hi ngs she
17 want s t o t ake a cl oser l ook at so some of what you want t o do
18 she shoul d be i nvol ved i n. Ot her wi se, t her e i s not hi ng but
19 mor e t i me, and money, expended put t i ng i t ems i n, t hen t aki ng
20 t hemout , t hen put t i ng t hemi n, ad nauseam.
21 Q. Al l r i ght . Let ' s t ake a l ook at i ndi vi dual t hi ngs i n
22 t her e. You say - - f i r st , do you r ecal l who J i l l Fel dman i s?
23 A. Yes. She i s an account ant t hat CASI had used pr evi ousl y.
24 Q. And do you r ecal l Penni e & Edmonds, what t hat was?
25 A. Yes, t hey, t hey ar e a l aw f i r mwho wer e wor ki ng on pat ent ,
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1 t hese pat ent i ssues I r ef er r ed t o l at er i n t he par agr aph.
2 Q. You ment i oned t hat you wer e t r yi ng t o squeeze ever yt hi ng
3 t hat i s char geabl e i nt o ATP; what di d you mean by t hat ?
4 A. Ri ght . We - - wel l , I was wi l l i ng t o gi ve t he def endant t he
5 benef i t of t he doubt wi t h hi s cont i nual l y t el l i ng me he was
6 goi ng t o get t hese char ges appr oved by t he ATP manager s, so I
7 woul d l eave t hi ngs i n i n t he hopes t hat t hey woul d get
8 appr oved.
9 Q. You see i n t he second par agr aph t hat you r ead, your comment
10 t hat t her e' s not hi ng but mor e t i me money expended put t i ng i t ems
11 i n and t aki ng t hemout , put t i ng t hemi n ad nauseum; you see
12 t hat ?
13 A. Yes.
14 Q. What di d you mean by t hat ?
15 A. Wel l , as I al l uded t o pr evi ousl y - -
16 THE COURT: I t ' s what you' r e r ef er r i ng t o pr evi ousl y,
17 i s t hat r i ght ?
18 THE WI TNESS: That ' s r i ght , your Honor .
19 THE COURT: Al l r i ght , next quest i on.
20 Q. Al l r i ght . I f you coul d t ur n t o t he pr evi ous page, whi ch
21 i s act ual l y t he next e- mai l r esponse t o your e- mai l , f r omt he
22 def endant . I f we coul d bl owup t hat e- mai l . I f you woul d l ook,
23 pl ease, at t he second gr oupi ng t her e, t hat l ooks l i ke a
24 par agr aph?
25 THE COURT: What dat e ar e we t al ki ng about ?
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1 Q. What ' s t he dat e of t hat e- mai l , Mr . Spr i ng?
3 Q. I s t hat t he day af t er t he - - wel l , i s t hat t he same day as
4 t he e- mai l t hat we j ust r ead?
5 A. I t i s t he same day. The pr evi ous e- mai l was wr i t t en at
6 9: 00 o' cl ock i n t he mor ni ng on Sat ur day. Thi s e- mai l you' r e
7 r ef er r i ng i s now was wr i t t en at a l i t t l e af t er 2: 00 p. m. on
8 t hat same day.
9 Q. Woul d you pl ease r ead t hat second par agr aph, t he
10 def endant ' s r esponse?
11 A. Ri ght . Thi s i s f r omt he def endant . You and she need t o
12 keep gr i ndi ng away on di sal l owed i t ems. Power , J i l l Fel dman,
13 Sol omon and Ber nst ei n, Pet er Ber ger , et cet er a, et cet er a, et
14 cet er a, ar e al l act ual l y and par t l y al l owabl e. Rent , some
15 cabl e, some t el ephone ar e not yet al l owed. I may get an
16 al l owance on r ent al of t he l i vi ng r oomt o t he pr oj ect , as i t i s
17 cl ear l y compl et el y t aken over by t he pr oj ect .
18 Q. Say agai n what ' s t he dat e of t hat e- mai l was?
20 Q. So about how l ong af t er t he st ar t day of t he gr ant was t hat
21 e- mai l sent by t he def endant ?
22 A. The gr ant st ar t ed i n Oct ober - - on Oct ober 1st , 2001, so by
23 t hi s dat e, end of November of 2002, we ar e i nt o t he second
24 mont h of t he, of f i scal year t wo, 14 mont hs af t er t he st ar t of
25 t he pr oj ect .
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1 Q. To your knowl edge, di d t he def endant ever get an al l owance
2 f or r ent and ut i l i t i es, t hi ngs l i ke t hat , f r omt he peopl e at
3 ATP?
4 A. No.
5 Q. Al l r i ght . Now i f you woul d l ook at Gover nment ' s 145 and
6 149. St ar t i ng wi t h 145. Wi t hout put t i ng i t on t he boar d, i f I
7 j ust t ake a l ook at . Ar e t hese e- mai l s, 145 and 149, par t of
8 t he same e- mai l chai n, or ar e t hey a br and new e- mai l chai n?
9 A. These ar e act ual l y par t of t he same chai n. They' r e dat ed
10 t he day bef or e, November 29t h, 2002.
11 Q. Let ' s l ook at Gover nment ' s 145, page t wo. I ' msor r y, i f we
12 coul d l ook at page t hr ee, f i r st .
13 J ust i dent i f y t hi s t o or i ent our sel ves, t hat e- mai l
14 t hat you sent t o Dr . Kar r on, i s t hat t he one we r ead bef or e,
15 about squeezi ng t he char ges i nt o t he ATP?
16 A. I t i s, on November t he 30t h.
18
19
20
21
22
23
24
25
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8667KAR5 Spr i ng - di r ect
1 BY MR. EVERDELL:
2 Q. Now, i f we coul d go t o page 2, whi ch i s a l at er e- mai l , t he
3 pr evi ous page, and you see your r esponse t o Dr . Kar r on on t he
4 bot t omof t he page t her e?
5 A. I do.
6 Q. I f you coul d r ead, pl ease, t he second t wo par agr aphs
7 st ar t i ng wi t h " hopef ul l y" .
8 A. " Hopef ul l y, you wi l l r et ur n f r omWashi ngt on wi t h a cl ear er
9 i dea of what t hey ar e goi ng t o al l ow and not al l ow as
10 char geabl e i t ems. Thi s r emai ns t he bi ggest hang- up, wi t h you
11 want i ng t o i ncl ude ever yt hi ng ( i ncl udi ng t he ki t chen si nk) and
12 J oan r esi st i ng you at ever y move, as she i s doi ng her j ob t o
13 t he l et t er of t he l aw, whi ch I f ul l y agr ee wi t h.
14 " Sayi ng t hat CASI can char ge t hi s and t hat i t emi s al l
15 ver y wel l , but J oan wi l l want wr i t t en conf i r mat i on of t hat f r om
16 t he gal s at NI ST, and hopef ul l y you wi l l be abl e t o get t hat
17 ( or at l east set t he wheel s i n mot i on) when you ar e i n D. C. "
18 Q. Mr . Spr i ng you r ef er r ed t o a t r i p t o D. C. Who i s goi ng t o
19 D. C. ?
20 A. The def endant .
21 Q. And what do you mean when you say " hopef ul l y you wi l l
22 r et ur n f r omWashi ngt on wi t h a cl ear er i dea of what t hey ar e
23 goi ng t o al l ow" ?
24 A. I amsuggest i ng t her e t hat t her e was st i l l t he hope t hat he
25 woul d be abl e t o get - - t he def endant woul d be abl e t o get
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1 t hese i t ems whi ch wer e by t he l et t er of t he l aw nonchar geabl e
2 or nonal l owabl e, he woul d somehow be abl e t o get t hose i nt o t he
3 pr oj ect .
4 Q. Was t he def endant goi ng t o meet wi t h peopl e at NI ST i n
5 D. C. ?
6 A. I bel i eve so, wi t h t he pr oj ect manager s.
7 Q. What ar e you r ef er r i ng t o when you ar e sayi ng " t hey wi l l
8 want wr i t t en conf i r mat i on f r omt he gal s at NI ST?
9 A. Wel l , i t ' s ver y cl ear f r omt he r egul at i ons and t he
10 cont r act - - t hi s was a gover nment cont r act af t er al l - - t her e
11 was not hi ng t hat one coul d j ust say, wel l , f i ne, somebody t ol d
12 me t hi s. I t woul d have t o be wr i t t en because, you know, i t was
13 goi ng out si de t he st andar d r egul at i ons t hat I had r evi ewed.
14 Q. To your knowl edge, di d t he def endant ever get wr i t t en
15 appr oval f r omt he peopl e at NI ST f or t hese i t ems?
16 A. To t he best of my knowl edge, no.
17 Q. I f you coul d now l ook at Gover nment ' s 149, and goi ng t o
18 page 2. Fi r st j ust t o or i ent our sel ves, do you see t he e- mai l
19 i n t he mi ddl e of t he page f r omyou t o Dr . Kar r on?
20 A. I do.
21 Q. I s t hat t he e- mai l we j ust r ead f r om?
22 A. Yes.
23 Q. Now, coul d you l ook at Dr . Kar r on' s r esponse at t he t op of
24 t he page.
25 A. OK.
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1 Q. What ' s t he f i r st l i ne of t hat r esponse?
2 A. " I under st and. "
3 Q. Al l r i ght . Mr . Spr i ng, you ment i oned r ent payment s, r ent
4 char ges you had not i ced i n t he books. I s t hat r i ght ?
6 Q. Di d you have any di scussi ons wi t h t he def endant about r ent
7 char ges, i n par t i cul ar r ent payment s?
8 A. Wel l , I di d. Especi al l y - - I di d. I di d. Yes.
9 Q. And what was t he nat ur e of t hose di scussi ons t hat you had
10 wi t h t he def endant ?
11 A. That , you know, we had not r ecei ved any wr i t t en
12 conf i r mat i on or any ot her conf i r mat i on t hat t hese woul d be
13 al l owabl e expenses, so t hey have t o come out of an al l owabl e
14 expense; and gi ven t hat i t was r ent on t he apar t ment , t hese
15 wer e t hi ngs t hat woul d happen ever y si ngl e mont h, so t he
16 conver sat i on came up a l ot , unt i l f i nal l y i t r eached a cl i max
17 i n one of our mor e heat ed debat es, wher e t he def endant t ol d me
18 he woul d t el l t hem, by whi ch I t hi nk he meant t he ATP manager s
19 - -
21 THE COURT: J ust gi ve t he st at ement s, don' t say what
22 you bel i eved.
23 A. Al l r i ght . The def endant t ol d me he woul d t el l t he ATP
24 manager s t hat he l i ved i n Connect i cut .
25 Q. Di d t he def endant i n f act l i ve i n Connect i cut , t o your
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1 knowl edge?
2 A. Absol ut el y not .
3 MR. RUBI NSTEI N: Obj ect i on. I move t o st r i ke t hat .
4 THE COURT: Wel l , t he j ur y i s not t o - - t he j ur y i s t o
5 di sr egar d t he concl usi on of t he wi t ness t hat t he def endant di d
6 not l i ve i n Connect i cut . I t ' s hear say. I t woul d be based on
7 hear say i nf or mat i on.
8 Q. Al l r i ght . Mr . Spr i ng, besi des t he i ssue wi t h t he r ent
9 t hat you j ust di scussed, di d you have any di scussi ons wi t h t he
10 def endant about ot her expenses?
11 A. Yes, medi cal expenses f or exampl e; t he cl eaner , t hi ngs
12 r el at ed t o t he r ent , ut i l i t i es, capi t al i mpr ovement s on t he
13 apar t ment , whi ch was usi ng ATP money.
14 Q. Let ' s st ar t wi t h medi cal expenses. What , i f anyt hi ng, di d
15 you di scuss wi t h t he def endant about medi cal expenses?
16 A. Wel l , a l ot of t he medi cal expenses went back t o f i ve
17 mont hs bef or e t he st ar t of t he pr oj ect , t hat he was get t i ng ATP
18 t o pay f or . That was a bi g i ssue as I l ear ned about t he
19 r egul at i ons f or t he ATP pr oj ect , you know, sever al weeks i nt o
20 st ar t i ng - -
21 MR. RUBI NSTEI N: I ' mgoi ng t o obj ect t o t hi s. He has
22 not been qual i f i ed as an exper t on t he ATP r egul at i ons. I t ' s
23 sel f ser vi ng.
24 THE COURT: The j ur y i s i nst r uct ed he i s not an exper t
25 on t he ATP r egul at i ons; however , he may st at e what hi s
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1 under st andi ng of t hose r egul at i ons was at t he t i me.
2 A. May I cont i nue?
3 Q. Yes, pl ease.
4 A. My under st andi ng of t he ATP r egul at i ons was such t hat t her e
5 woul d be no empl oyee benef i t s al l owed t o be pai d f or by ATP
6 such as medi cal expenses, i f t he r eci pi ent ' s company - - CASI i n
7 t hi s case - - di d not have a f or mal empl oyee benef i t s pl an,
8 whi ch CASI di d not have.
9 Q. What sor t of expenses di d you t al k t o t he def endant about ?
10 A. On t he medi cal expense si de t her e was a l ar ge amount of
11 expenses t o doct or s, and one t hat got my i mmedi at e at t ent i on
12 was f or el ect r ol ysi s.
13 Q. How di d you know i t was f or el ect r ol ysi s?
14 A. The def endant when he was doi ng hi s own dat a ent r y had
15 not ed t hese t hi ngs as zappi ng.
16 Q. What i s el ect r ol ysi s?
17 A. That ' s when you have al l of or some hai r r emoved f r omyour
18 body. Hai r r emoval .
19 THE COURT: Al l t hese expenses wer e wi t hi n t he gr ant
20 per i od?
21 THE WI TNESS: No, your Honor . A number of t hem
22 pr edat ed t he st ar t of t he gr ant by f our or f i ve mont hs.
23 Q. And what i f anyt hi ng di d t he def endant say t o you when you
24 di scussed t hese expenses wi t h hi m?
25 A. I woul d get t he usual r ef r ai n, whi ch I al r eady ci t ed t wi ce,
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1 whi ch i s t hat I di dn' t know what I was doi ng, I di dn' t
2 under st and t he ATP r egul at i ons, or t hat he was seeki ng appr oval
3 of t hese t hi ngs af t er t he f act f r omt he ATP manager s.
4 Q. Al l r i ght . I want you t o l ook at Gover nment Exhi bi t 143,
5 whi ch i s not i n evi dence yet . Do you see t hat document ?
6 A. I do.
7 Q. Do you r ecogni ze t hat document ?
8 A. I do.
9 Q. What i s i t ?
10 A. I t ' s anot her chai n of e- mai l s f r omt he same t i me per i od.
11 Q. Bet ween who and who?
12 A. Bet ween mysel f and t he def endant and - - yes, bet ween mysel f
13 and t he def endant .
15 Gover nment Exhi bi t 143.
16 THE COURT: 143 i s admi t t ed i n evi dence.
17 ( Gover nment ' s Exhi bi t 143 r ecei ved i n evi dence)
18 Q. Al l r i ght . Mr . Spr i ng, i f you coul d pl ease l ook at t he
19 l ast t wo pages of t hat exhi bi t - - t he l ast t hr ee pages of t hat
20 exhi bi t . Wi t hout r eadi ng di r ect l y f r omt he exhi bi t , coul d you
21 summar i ze t he di scussi on goi ng on bet ween your sel f and t he
22 def endant .
23 MR. RUBI NSTEI N: Do we have a page t hat he i s on, your
24 Honor ?
25 THE COURT: St ar t at t he back and st ar t r eadi ng
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1 f or war d.
2 Q. The l ast t hr ee pages, i f you coul d j ust summar i ze a bi t
3 what you ar e di scussi ng t her e, wi t hout havi ng t o r ead t hr ough
4 t he whol e e- mai l .
5 A. OK, r i ght . Thi s act ual l y r eal l y br eaks i nt o t wo par t s.
6 One i s st i l l addr essi ng some of t he i ssues we have been t al ki ng
7 about her e t oday r egar di ng what was ATP al l owabl e and not , as
8 wel l as t he ot her ar ea I was wor ki ng on whi ch wer e budget f or
9 t he upcomi ng f i scal year .
10 Q. I f we coul d now di spl ay page 2 of t hat exhi bi t , and i f you
11 coul d l ook at t he f our t h par agr aph t her e. Fi r st of al l , who
12 sent t hat e- mai l t o who?
13 A. Thi s i s f r omt he def endant t o mysel f .
14 THE COURT: Thi s i s t he next t o l ast page of t he
15 exhi bi t ?
16 MR. EVERDELL: Sor r y. Thi s i s page 2 of t he exhi bi t .
17 And we ar e at t he f our t h par agr aph f r omt he t op.
19 Q. So, t hi s i s an e- mai l f r omt he def endant t o your sel f ?
21 Q. Wi l l you pl ease r ead t hat par agr aph, t he f our t h par agr aph.
22 A. " What cost i t ems di d I submi t t hat J oan i s di sal l owi ng?
23 Any heal t h or f r i nge cost i t ems? I can over r ul e/ al l ow t hose
24 cost s even t hough CASI does not have a f or mal wr i t t en benef i t s
25 pl an based on t he behavi or of t he company i n t he past and
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1 showi ng i t i s consi st ent t hr ough t he pr oj ect . Even i f i t i s
2 not consi st ent t hr ough t he pr oj ect i t i s st i l l my opt i on do t o
3 t hese t hi ngs wi t h an unwr i t t en benef i t s pl an. "
4 Ther e ar e some t ypos i n t her e, I amaf r ai d.
5 Q. Let ' s t al k about t he capi t al i mpr ovement equi pment expenses
6 you ment i oned bef or e.
7 A. Yes.
8 Q. Di d you have any di scussi ons wi t h t he def endant about t hese
9 capi t al i mpr ovement equi pment expenses t hat you had ment i oned
10 bef or e?
11 A. We ar e at t hi s poi nt l i t er al l y t wo mont hs i nt o t he f i scal
12 year t wo of t he pr oj ect , and i t was my est i mat i on t hat t he cash
13 f l ow was goi ng t o be adver sel y af f ect ed because of t he amount
14 of money t hat was bei ng spent on t he pr oj ect . The f unds t hat
15 wer e bei ng t apped f r omATP at t hat t i me wer en' t goi ng t o al l ow
16 t he pr oj ect t o cont i nue t o f unct i on f i nanci al l y, and some of
17 t hi s had t o do wi t h capi t al expendi t ur e or equi pment
18 expendi t ur e.
19 Q. Why exact l y di d t hi s have t o do wi t h capi t al expendi t ur es
20 or equi pment expendi t ur es?
21 A. The ATP pr oj ect I bel i eve f or al l t hr ee of t he year s t hat
22 t he pr oj ect woul d have r un f or , t he r eci pi ent coul d access t he
23 f unds on a r egul ar basi s, and i n t he case of year t wo i t was on
24 a mont hl y basi s, and when I r an some pr oj ect i ons i t was obvi ous
25 t o me t hat we wer e t appi ng i nt o t oo much money t oo soon, and
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1 t her ef or e we woul d r un out of money bef or e t he end of f i scal
2 year t wo.
3 Q. Di d you have any conver sat i ons wi t h t he def endant about
4 t hat i ssue, about r unni ng out of money?
5 A. Wel l , when i t began t o af f ect t hi ngs l i ke payr ol l , I
6 cer t ai nl y di d.
7 Q. How di d i t af f ect payr ol l ?
8 A. Wel l , we got - - at one poi nt - - I don' t r emember t he exact
9 dat e - - i t was my est i mat i on t hat payr ol l coul dn' t be met ; and
10 as a busi ness owner mysel f t hat seemed ext r aor di nar y.
12 Q. Al l r i ght , wi t hout addi ng t hose comment s, di d you have a
13 di scussi on wi t h t he def endant about t hi s i ssue of cash f l ow?
14 A. I di d.
15 Q. And what i f anyt hi ng di d t he def endant say t o you about
16 t hi s i ssue of cash f l ow?
17 A. I n r egar ds t o payr ol l ?
18 Q. I n r egar ds t o payr ol l .
19 A. I n r egar ds t o payr ol l he t ol d me t hat peopl e woul d get pai d
20 when t hey get pai d.
21 Q. I woul d l i ke you t o l ook at Gover nment Exhi bi t 142 whi ch i s
22 not yet i n evi dence.
23 Do you see t hat document ?
24 A. I do.
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1 A. I do.
2 Q. And what i s i t ?
3 A. Thi s i s an e- mai l chai n f r ommi d- November of 2002.
4 Q. Bet ween who and who?
5 A. I t i s bet ween t he def endant and mysel f and - - yes, no one
6 was copi ed on t hose e- mai l s - - j ust t he def endant and mysel f .
8 Exhi bi t 142.
10 THE COURT: 142 i s admi t t ed i nt o evi dence.
12 Q. Pl ease t ur n t o t he l ast page of t hat exhi bi t , page 4. I s
13 t hat an e- mai l f r omyour sel f t o Dr . Kar r on?
14 A. I t i s.
15 Q. Coul d you pl ease l ook at wher e you have poi nt f i ve. Coul d
16 you r ead out poi nt f i ve?
17 A. " Tr ansf er r i ng 40K woul d mean t hat i n j ust over si x weeks
18 i nt o year t wo of t he pr oj ect CASI has t aken over 30 per cent of
19 t hi s year ' s f undi ng. I f you f act or ed i n ( as i f t hey wer e pai d)
20 t he addi t i onal $110, 000 pl us due CASI vendor s, t hi s woul d mean
21 t hat CASI has act ual l y used up cl oser t o 50 per cent of t he
22 NI ST- suppl i ed f unds. J ust somet hi ng t o ponder . . . "
23 Q. What di d you mean by sendi ng t he def endant t hat e- mai l ?
24 A. Wel l , t hi s i s mi d- November , f i scal year t wo, one and a hal f
25 mont hs i nt o t he begi nni ng of f i scal year t wo, and what I am
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1 sayi ng t her e i s t hat we woul d have used up 50 per cent of t he
2 year ' s f undi ng si x weeks i nt o i t , si x weeks i nt o t he pr oj ect .
3 Q. Does t hi s r el at e t o t he cash f l ow pr obl emyou ment i oned
4 bef or e?
5 A. Oh, absol ut el y.
6 Q. What i f anyt hi ng was t he def endant ' s r esponse af t er t hi s?
7 A. Pr et t y much i t was hi s company and he woul d do what he
8 want ed.
9 Q. Al l r i ght . You ment i oned cl eani ng expenses.
10 MR. RUBI NSTEI N: I s he r eadi ng f r oman e- mai l or
11 somet hi ng?
12 THE COURT: No, he wasn' t r eadi ng f r oman e- mai l . He
13 j ust gave hi s answer .
14 Q. Let ' s t al k about cl eani ng expenses whi ch you ment i oned
15 bef or e. You had some di scussi ons wi t h t he def endant about
16 cl eani ng expenses?
17 A. I di d.
18 Q. What di d you mean by cl eani ng expenses?
19 A. Wel l , t her e wer e weekl y char ges.
20 THE COURT: Let me go back. You ment i oned 40, 000.
21 THE WI TNESS: Yeah, 40K.
22 THE COURT: A t r ansf er . What di d t hat r ef er t o? Do
23 you r emember ?
24 THE WI TNESS: The $40, 000, t he way one accessed t he
25 ATP f unds was t hat i t was al l done el ect r oni cal l y. ATP di d not
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1 send CASI a check. We wer e abl e t o - - Dr . Kar r on was abl e t o
2 get onl i ne and access t he ATP f unds and shi f t t hemt o t he CASI
3 bank account . And t hat ' s what I meant by a t r ansf er .
4 THE COURT: A dr awdown.
5 THE WI TNESS: Yes, t hat ' s cor r ect .
6 Q. I f we coul d t al k about cl eani ng expenses you ment i oned
7 bef or e?
8 A. Ri ght . Sor r y. Ther e wer e weekl y or bi mont hl y cl eani ng
9 expenses wr i t t en and pai d f or by ATP.
10 Q. And who wer e t hese cl eani ng expenses goi ng t o?
11 A. A l ady cal l ed Mar gar et Fer r and.
12 Q. Who i s Mar gar et Fer r and?
13 A. Somebody t hat I met . She was a per son who was associ at ed
14 wi t h t he def endant .
15 Q. Di d you see Ms. Fer r and i n t he apar t ment ?
16 A. I di d.
17 Q. And what was she doi ng when you saw her i n t he apar t ment ?
18 A. I wasn' t t her e al l t he t i me, of cour se, but I di d see her
19 cl eani ng on occasi on, but I al so saw her sl eepi ng i n t he
20 apar t ment and j ust sor t of hangi ng out .
21 Q. Di d you ever see her doi ng any of f i ce wor k whi l e you wer e
22 i n t he apar t ment and saw her ?
23 A. Lat er , some mont hs af t er I began, she began t o do scanni ng
24 of r ecei pt s, i nvoi ces and so on.
25 Q. How l ong di d she do t hat f or as you obser ved?
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1 A. I bel i eve a f ew weeks.
2 Q. What happened af t er a f ew weeks?
3 A. She j ust di sappear ed.
4 THE COURT: How l ong was she t her e at t he busi ness
5 whi l e you wer e t her e?
6 THE WI TNESS: Wel l , your Honor , I r emember meet i ng her
7 r el at i vel y soon af t er I st ar t ed i n J ul y 2002, and I woul d t hi nk
8 by - - I don' t r emember t he exact dat e, but t o mi d- summer , ear l y
9 summer 2003. I woul dn' t want t o swear t o t hat because I don' t
10 r emember t he exact dat e.
11 Q. And wer e t hese cl eani ng expenses t hat you ment i oned
12 expenses pai d out t o Ms. Fer r and?
13 A. They wer e.
14 Q. Di d you have any di scussi ons wi t h t he def endant about
15 payi ng Ms. Fer r and f or cl eani ng?
16 A. Yes, as I di dn' t bel i eve t hat t hese wer e ATP- al l owabl e,
17 gi ven t hat t he apar t ment t hat she was cl eani ng was not an
18 al l owabl e expense.
19 Q. And what was t he nat ur e of t hose di scussi ons?
20 A. Pr et t y much mi nd my own busi ness.
21 Q. I woul d l i ke you t o l ook at Gover nment Exhi bi t 147 not yet
22 i n evi dence.
23 A. Coul d I get a gl ass of wat er , pl ease, whi l e we' r e doi ng
24 t hat ?
25 Q. Cer t ai nl y.
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1 Mr . Spr i ng, do you have t hat document i n f r ont of you,
2 147?
3 A. I do.
5 A. I do.
6 Q. What i s i t ?
7 A. An e- mai l chai n. The par t i es i nvol ved ar e t he def endant ,
8 mysel f and Mr . Bob Benedi ct , who was t he year t wo pr oj ect
9 busi ness manager .
10 Q. And what i s t he dat e on t hat chai n r oughl y?
11 A. J une 21, 2003.
13 Gover nment Exhi bi t 147 i n evi dence.
15 THE COURT: No obj ect i on, 147 i s admi t t ed i nt o
16 evi dence.
18 Q. I f you coul d t ake a l ook at page 2 of t hat exhi bi t . Take a
19 l ook i n par t i cul ar at poi nt 2. Sor r y. Thi s i s an e- mai l f r om
20 who t o who?
21 A. Thi s i s an e- mai l f r ommysel f t o t he def endant and Bob
22 Benedi ct .
23 Q. Coul d we l ook at your poi nt 2 t her e f or a second.
24 A. Um- hum.
25 Q. Coul d you expl ai n - - poi nt 2 begi ns wi t h " Fer r and" .
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1 A. That ' s Mar gar et Fer r and, t he cl eaner and scanner per son.
2 Q. What ar e you sayi ng i n t hi s poi nt i n your e- mai l t o t he
3 def endant ?
4 THE COURT: Thi s i s i n 2003.
5 THE WI TNESS: That ' s cor r ect , your Honor .
6 A. OK. What we' r e sayi ng her e - - what I ' msayi ng or
7 suggest i ng t o Dr . Kar r on and Bob Benedi ct i s t hat i n
8 Ms. Fer r and' s case on t he scanni ng si de of t hi ngs, her of f i ce
9 wor k, I was cer t ai nl y of t he opi ni on t hat par t of her t i me
10 coul d be spent - - you know, we can j ust i f y qui t e easi l y as an
11 ATP- al l owabl e expense.
12 Q. And woul d you j ust i f y a f ul l amount of her t i me as ATP
13 expense?
14 A. No, par t t i me. I say t her e speci f i cal l y on a r egul ar
15 bi weekl y basi s par t of her t i me spent on scanni ng, because what
16 she was doi ng was scanni ng masses of mat er i al , and I had
17 occasi on t o wi t ness some of t he scanni ng, and not ed at t he t i me
18 t hat some of i t was not r el at ed t o t he pr oj ect .
19 Q. I f you coul d l ook at t he f i r st page of t he exhi bi t . And i s
20 t hi s Dr . Kar r on' s r esponse t o you?
21 A. Yes.
22 Q. I f you l ook down at t he f i f t h par agr aph.
23 A. Um- hum.
24 Q. And what i s Dr . Kar r on sayi ng t o you, i f you coul d r ead
25 t hat out ?
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1 A. Thi s i s t he par agr aph begi nni ng, " Pl ease, you ar e not " ?
2 Q. Yes.
3 A. Do you want me t o r ead t hi s al oud?
4 Q. Yes.
5 A. OK. Thi s i s f r omt he def endant t o mysel f - - and Bob
6 Benedi ct , t he busi ness manager , was copi ed - - t o me. " Pl ease,
7 you ar e not t o make i nt er pr et at i ons as t o al l owabi l i t y or
8 cat egor y. You need t o be a bookkeeper , not " - - i ndeci pher abl e
9 - - " busi ness owner . I know you l i ke t o t hi nk l i ke an owner ,
10 but I own t hi s l i t t l e di nghy, not you. Because of t he
11 i mpr essi on t hat you ar e " - -
12 Q. You have r ead enough.
13 A. Sor r y.
14 Q. " Mr . Spr i ng, how of t en wer e you i n t he def endant ' s
15 apar t ment when you wer e doi ng your wor k?
16 A. I t woul d var y f r omweek t o week. On aver age t wo t o t hr ee
17 days a week, bet ween f our and si x hour s a day.
18 Q. And when you wer e i n t he apar t ment , how f r equent l y di d you
19 see t he def endant i n t he apar t ment ?
20 A. Of t en but not al ways.
21 Q. Al l r i ght . Mr . Spr i ng, what ul t i mat el y happened t o t he
22 gr ant ?
23 A. At some poi nt - - I don' t r emember t he exact dat e - - t he ATP
24 manager s cl osed down t he pr oj ect or at l east t he f undi ng f or
25 t he pr oj ect .
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1 Q. And when di d you t er mi nat e your empl oyment ?
2 A. I st opped wor ki ng t her e i n Oct ober of 2003.
3 MR. EVERDELL: One moment , your Honor .
4 No f ur t her quest i ons, your Honor .
5 THE COURT: Al l r i ght . Mr . Rubi nst ei n?
6 Remi nd me. Who i s Bel i nda?
7 THE WI TNESS: Bel i nda i s t he woman f r omt he
8 gover nment , t he gover nment audi t or . Bel i nda Ri l ey I bel i eve i s
9 her l ast name.
10 THE COURT: Thank you.
11 CROSS EXAMI NATI ON
13 Q. Good af t er noon, Mr . Spr i ng.
14 A. Hel l o.
15 Q. Now, j ust t o cl ar i f y somet hi ng, you wer e shown somet hi ng
16 f r omExhi bi t 147 t hat ' s i n evi dence.
17 THE COURT: Exhi bi t 147?
18 MR. RUBI NSTEI N: Yeah, Exhi bi t 147.
19 Q. Do you have t hat i n f r ont of you, si r ?
20 A. Hopef ul l y I wi l l i n a moment . Ther e i t i s. Yes, I do.
21 Q. Wher e i s t he par t about t he - - wher e i s t he par t about t he
22 di nghy?
23 THE COURT: About what , si r ?
24 Q. You sai d somet hi ng, a sent ence st ar t ed wi t h - -
25 THE COURT: I can' t hear you when you get a away f r om
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8667KAR5 Spr i ng - cr oss
1 t he mi ke.
2 MR. RUBI NSTEI N: Sor r y, J udge. I ' mj ust t r yi ng t o
3 l ocat e what was shown on t he pr oj ect or as Exhi bi t 47, t he f i r st
4 page.
5 THE COURT: 147?
6 DEPUTY COURT CLERK: 147?
7 MR. RUBI NSTEI N: I j ust want t he wi t ness t o t el l me,
8 because t her e was a l i ne put on t he scr een i t st ar t ed wi t h
9 " because" I t hi nk.
10 THE COURT: Do you want t he l i ne put back on t he
11 scr een?
13 THE COURT: Then we' l l put i t back on t he scr een.
14 Let ' s move i t al ong.
15 Ther e i t i s.
16 MR. RUBI NSTEI N: No, t hat wasn' t t he l i ne, J udge.
17 THE COURT: OK. I s t hat al l r i ght ? Do you have i t
18 now?
19 MR. RUBI NSTEI N: Oh, I see i t now. OK. OK.
20 Now, I j ust mi ssed i t i n r eadi ng i t , t hat ' s al l .
21 Q. You wer e wor ki ng f or t he Ken J ackson gr oup when you st ar t ed
22 your i nvol vement wi t h Dr . Kar r on?
24 Q. And how l ong di d you wor k f or t he Ken J ackson gr oup pr i or
25 t o get t i ng i nvol ved wi t h Dr . Kar r on and CASI ?
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1 A. My t r ai ni ng by Mr . J ackson st ar t ed i n l at e 1999, and I
2 began wor ki ng f or CASI as a subcont r act or i n J ul y of 2002, so
3 we' r e basi cal l y t al ki ng a l i t t l e over t wo year s.
4 Q. And you wer e t he sol e - - Ken J ackson i s a company?
5 A. He i s an LLC, t hat ' s cor r ect .
6 Q. And he has - - ar e you t he onl y empl oyee?
7 A. No. I don' t r emember t hen. Cur r ent l y he has f i ve peopl e
8 on hi s t eam. I amnot an empl oyee. I ama subcont r act or . I
9 ama 1099 per son.
10 Q. So, you wer e a subcont r act or of J ackson assi gned t o wor k at
11 CASI .
12 A. Cor r ect .
13 Q. And your mar chi ng or der s wer e t o cor r ect t he books,
14 cor r ect ? I s t hat r i ght ?
15 A. That was my under st andi ng f r omt he def endant , yes.
16 Q. Wel l , when J ackson - - when t hey sent you on t hi s
17 assi gnment , di d J ackson t el l you t hat t hey wer e havi ng pr obl ems
18 wi t h t hei r books?
19 THE COURT: Obj ect i on sust ai ned t o t he f or mof t he
20 quest i on.
21 Q. Wel l , i s t he f i r st t i me - -
22 THE COURT: I t cal l s f or a hear say answer .
23 Q. Was t he f i r st t i me you l ear ned t hat you wer e bei ng hi r ed t o
24 cor r ect t he books when you met wi t h Dr . Kar r on?
25 A. I don' t act ual l y r ecol l ect t he exact nat ur e of t he
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1 conver sat i on. I was awar e once I sat down wi t h Dr . Kar r on t hat
2 t her e wer e cor r ect i ons t hat needed t o be made f or t he books i n
3 pr epar at i on f or t he audi t by t he ATP- appoi nt ed per son J oan
4 Hayes.
5 Q. I t was your under st andi ng t hat J oan Hayes was appoi nt ed by
6 ATP?
7 A. Yes, she was t he t hi r d- par t y audi t or , t hat was my
8 under st andi ng.
9 THE COURT: You' r e cor r ect i ng your answer ?
10 THE WI TNESS: Wel l , she had t o come f r omsomewher e,
11 your Honor , and I don' t bel i eve she was hi r ed by CASI . So,
12 yes, I ammaki ng an assumpt i on t hat i f she was not appoi nt ed by
13 CASI , was not appoi nt ed by mysel f or Mr . J ackson, ATP was t he
14 onl y t hi ng.
15 THE COURT: You don' t know t he answer .
16 THE WI TNESS: But I do not know t he exact answer , no.
17 Q. I s t hat because J oan Hayes was an i ndependent audi t or ?
18 A. I - -
20 A. - - bel i eve Ms. Hayes i s an i ndependent audi t or , yes.
21 Q. And wer e you hi r ed t o r econci l e t he bookkeepi ng syst emat
22 CASI ?
23 A. That woul d have been one of t he f unct i ons t hat one woul d
24 have done i n pr epar at i on f or pr epar i ng i ncome and expense
25 st at ement s t hat woul d be sui t abl e f or an audi t , yes.
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1 Q. And you wer e gi ven t he t ask of get t i ng t he books i n or der
2 f or an i ndependent audi t r equi r ed by ATP, cor r ect ?
3 A. That was my under st andi ng.
4 Q. The f act t hat your - - and di d you f i nd - - di d you ascer t ai n
5 t hat t her e was a Qui ck Books syst emi n pl ace at CASI ?
6 A. Ther e was a Qui ck Books syst emi n pl ace at CASI , yes.
7 Q. And wer e you f ami l i ar wi t h Qui ck Books when you got t hi s
8 assi gnment t o wor k at CASI ?
9 A. Yes, yes.
10 Q. And i s i t f ai r t o say t hat t he Qui ck Books at CASI wer e a
11 mess?
13 THE COURT: Over r ul ed. I wi l l get hi s j udgment .
14 A. Yes. I mean t hat ' s ki nd of r el at i ve, but t hey coul d have
15 been i n bet t er shape.
16 Q. And t he books, i t was your opi ni on t hat t he books wer e not
17 i n good condi t i on, r i ght ?
18 A. Yes.
19 Q. Do you have any r ecor ds, any r ecor ds of how t he books wer e
20 i ni t i al l y kept i n t hi s Qui ck Books syst em?
21 A. You mean ear l i er ? I ' mnot qui t e sur e I under st and t he
22 quest i on.
23 Q. When you st ar t ed t her e and you say t hat t her e wer e pr obl ems
24 wi t h t he books, do you have any - - di d you downl oad any di sks,
25 or di d you - -
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1 A. No.
2 Q. - - or di d you make any har d copi es t o show us t hat - -
3 A. I don' t r ecol l ect . I was deal i ng bot h wi t h Qui ck Books and
4 t he per sonal si de of t hi ngs and Qui cken.
5 Q. Dr . Kar r on r equest ed t hat you go t hr ough hi s per sonal
6 account s, di d he not ?
7 A. Yes, he di d.
8 Q. And hi s per sonal account s, t hey wer e r el at ed or unr el at ed
9 t o CASI ?
10 A. I woul d say i t was bot h.
11 THE COURT: Wel l , l et me ask you, per sonal account s,
12 wer e you gi ven mor e t han Qui cken, t he Qui cken account ?
13 THE WI TNESS: My r ecol l ect i on, your Honor , was t hat
14 Qui cken t r acked t he def endant ' s per sonal expenses.
15 THE COURT: I see. But i f he had some ot her met hod of
16 keepi ng t r ack of hi s expenses separ at e and apar t f r omt hat - -
17 THE WI TNESS: - - I don' t r emember bei ng awar e of t hat .
18 Ther e may have been, but - -
19 THE COURT: When you ar e t al ki ng about per sonal
20 account s, you ar e t al ki ng about what ever was on Qui cken.
23 Q. And al so t he CASI books wer e kept i n Qui cken, r i ght ?
25 THE COURT: That ' s not t he t est i mony so f ar .
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1 Q. The CASI books, t he r ecor ds r el at ed t o t he NI ST ATP gr ant ,
2 wer e t hey al so kept i n t he Qui cken syst em?
3 A. Wel l , no, t hey wer e kept i n t he Qui ck Books syst em, except
4 f or t hose i t ems I was asked t o ext r act , as I t est i f i ed
5 pr evi ousl y, i n t he Qui cken.
6 Q. So, di d you f i nd when you wer e doi ng t he Qui cken par t f or
7 Dr . Kar r on' s per sonal t hat Dr . Kar r on had made advances t o t he
8 ATP gr ant l oans, l oans t o t he ATP gr ant ?
9 A. Loans t o t he ATP gr ant ?
10 Q. Ri ght .
11 A. He may have. I do not r ecol l ect t hat .
12 Q. Ther e wer e t i mes when Dr . Kar r on woul d go i nt o t he Qui ck
13 Books hi msel f , cor r ect ?
14 A. I bel i eve so, yes.
15 Q. And t he Qui ck Books ar e t he books you j ust sai d t hat wer e
16 r el at ed t o NI ST, i s t hat r i ght ?
17 A. Sor r y. Coul d you r epeat t hat , pl ease?
18 Q. The Qui ck Books wer e t he f i l es t hat wer e r el at ed t o NI ST,
19 cor r ect ?
20 A. Cor r ect .
21 Q. And i n f act when Dr . Kar r on woul d do t hat , he woul d
22 gener al l y mess up t he dat a t hat was i nsi de t he Qui ck Books,
23 cor r ect ?
24 A. I t wasn' t so much an i ssue of whet her , f or exampl e, t he
25 amount of t he check was wr i t t en cor r ect l y. I t was mor e of a
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1 quest i on as t o whet her t he pur pose of t he money bei ng spent was
2 assi gned cor r ect l y.
3 THE COURT: Let me ask you somet hi ng. You say t hat
4 Qui cken was Dr . Kar r on per sonal .
5 THE WI TNESS: Per sonal .
6 THE COURT: And you say t hat Qui ck Books was t he
7 busi ness.
8 THE WI TNESS: Busi ness si de.
9 THE COURT: But what about t he par t of CASI t hat was
10 not NI ST?
11 THE WI TNESS: That was al so Qui ck Books.
12 THE COURT: That was al so Qui ck Books.
13 THE WI TNESS: I n Qui ck Books, yes.
14 THE COURT: So i t was al l CASI r ecor ds wer e i n Qui ck
15 Books.
16 THE WI TNESS: Yes, t hat ' s cor r ect . Wi t hi n Qui cken,
17 however , as I t est i f i ed at t he begi nni ng of t he ot her
18 quest i oni ng, t her e wer e many busi ness expenses al so hel d wi t hi n
19 Qui cken, t he per sonal syst em, t hat I was t ol d needed t o go i nt o
20 t he busi ness syst em, t he Qui ck Books, so i t was a l i t t l e bi t of
21 a succot ash, a mi x, l i t t l e bi t of t hi s and a l i t t l e bi t of
22 t hat .
23 THE COURT: So wi t hi n t he qui ck book syst emwas t her e
24 any br eak- down bet ween what was t he ATP gr ant money and what
25 was ot her money?
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1 THE WI TNESS: Cer t ai nl y t he i ncome t hat came i n was
2 cl ear l y t agged as ATP. On t he expenses si de i t was a mi x of
3 some t hi ngs wer e cor r ect l y t agged as ATP.
4 But i f I can j ust t ake a moment t o expl ai n, i t ' s ver y
5 si mpl e. These ar e ver y si mpl e syst ems t o use, so one has t o
6 cr eat e a bl ock of account s t hat woul d say, f or exampl e,
7 ATP- al l owabl e, and t hen under ATP- al l owabl e you woul d have
8 t hi ngs, equi pment pur chases, et c. , et c. That woul d be one
9 chunk of dat a. I t mi ght have many ent r i es, but t hat woul d be
10 one chunk. And t hen wi t hi n t hat same syst em, wi t hi n what we
11 cal l a f i l e, you woul d have CASI expenses. That woul d be
12 non- ATP expenses. And agai n al l of t hose woul d have sever al
13 subgr oups. I t ' s not r ocket sci ence act ual l y. I t ' s l ogi cal and
14 st r ai ght f or war d. And t hese t hi ngs can br eak out ver y easi l y.
15 But i t ' s t he ol d sayi ng, gar bage i n, gar bage out .
16 Q. You sai d t hey coul d br eak up ver y easi l y?
17 A. They br eak out ver y easi l y.
18 Q. Wel l , when you say t hat t her e was a mess i n t hese books i n
19 t he comput er , what do you mean by t hat ?
20 A. Bot h i n t he Qui cken, t he per sonal f i nance si de, because I
21 was asked t o go back and r econci l e, bal ance t he checkbook i f
22 you wi l l , on t he Qui cken si de, onl y we ar e bal anci ng a check
23 book i nsi de t he comput er as opposed t o si t t i ng t her e and
24 wr i t i ng i t down wi t h an act ual checkbook. Ther e wer e t hi ngs I
25 see act ual l y qui t e a bi t , what we cal l bal ance hacks. Maybe we
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1 ar e al l f ami l i ar wi t h t hat . I f you can' t bal ance t he check
2 book and you get f r ust r at ed enough, you j ust wr i t e i n a number
3 and go checkbook i s bal anced and go on doi ng somet hi ng el se.
4 So t her e wer e some i nst ances of t hat . That wasn' t such a gr eat
5 concer n t o me because - -
6 THE COURT: J ust - - I t hi nk you answer ed t he quest i on.
7 Q. You wer e gi ven a f r ee r un of t he comput er syst em, cor r ect ?
8 A. I was al l owed access t o bot h Qui cken and Qui ck Books, yes.
9 Q. And i n f act t he Qui ck Books had i n i t what ' s cal l ed an
10 audi t t r ai l , di d i t not ?
11 A. Wel l , t her e ar e di f f er ent ways of l ooki ng at i nf or mat i on
12 you have pr evi ousl y put i nt o t he syst em, yes.
13 Q. Wel l , t her e i s a speci f i c syst em, i s t her e not , cal l ed an
14 audi t t r ai l ?
15 A. Yes.
16 Q. So you coul d det er mi ne who i nput t ed what i nt o t he syst em,
17 cor r ect ?
18 A. Yes.
19 Q. Di d you have a code your sel f t o go i nt o - -
20 A. Ther e was one - - t her e was one passwor d t hat mysel f , t he
21 def endant and Ni cki Wi nt er used t o open up t he pr ogr am. I
22 never used t he audi t t r ai l mysel f .
23 Q. And di d t her e come a t i me i n Apr i l t hat you began bui l di ng
24 a new Qui ck Books r egi st er f or CASI ?
25 A. I don' t r emember t he exact dat e, but t he t i me f r ame sounds
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1 cor r ect , because t he audi t or woul d have been - - J oan Hayes
2 woul d have pr obabl y been i nsi st i ng on such a t hi ng.
3 Q. Wel l , what does i t mean t o bui l d a new Qui ck Books
4 r egi st er ? What does t hat mean?
5 A. Qui t e si mpl e r eal l y. One l ooked at st ar t i ng, pr obabl y even
6 st ar t i ng pr i or t o t he dat e of t he pr oj ect Oct ober 1, 2001, and
7 st ar t ed out wi t h a cl ean f i l e so t hat al l t he ext r aneous dat a
8 f r ompr evi ous year s wer e out of t he syst em, st ar t i ng on a f r esh
9 page.
10 Q. You had t o change st uf f t hat was al r eady t her e?
11 A. Wel l , I mean t her e woul d have been many t hi ngs t hat wer e
12 ent er ed t hat wer e cor r ect , so t hat wasn' t changi ng t hem; t hat
13 was j ust r eent er i ng t hem.
14 Q. But you your sel f voi ded a number of checks, di d you not ?
15 A. Voi ded checks?
16 Q. Yes, i n t he syst em.
17 A. I f a check was wr i t t en, sent t o t he payee, pr esent ed at t he
18 bank and appear ed on t he bank st at ement , you woul d not voi d a
19 check l i ke t hat .
20 Q. But di d you voi d ot her checks?
21 A. I don' t have any r ecol l ect i on.
22 Q. Dur i ng t he t i me - -
23 A. I may have, but t hey woul d have been checks t hat wer e not
24 pr esent ed t o t he bank.
25 Q. Dur i ng t he t i me you wer e t he bookkeeper , you super vi sed
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1 t hi s woman Ni cki , r i ght ?
2 A. Cor r ect , t o some ext ent , yeah. She had some exper i ence,
3 but I was asked t o l ook at what she had done.
4 Q. And i t ' s a f act t hat you wer e i nf or med by Dr . Kar r on t hat
5 Ni cki got t hi ngs conf used and she di dn' t get t he dat a
6 cor r ect l y?
7 A. That I bel i eve was hi s assessment .
8 Q. Now, dur i ng t he t i me you st ar t ed bei ng t he bookkeeper i n
9 J ul y or August 2002 - - cor r ect ?
10 A. No, t hat i s not cor r ect . I n J ul y of 2002 Ni cki Wi nt er was
11 on st af f .
12 Q. No, I sai d you.
13 A. She was t he bookkeeper .
14 Q. And you wer e what ?
15 A. I was cal l ed i n t o hel p pr epar e f or t he ATP audi t , whi ch i s
16 t o say I wasn' t doi ng t he day- t o- day i nvoi ce i nput t i ng, check
17 wr i t i ng, payr ol l , et c.
18 Q. Di d t her e come a t i me t hat you t ook over t he
19 r esponsi bi l i t i es of t he bookkeeper ?
20 A. At some poi nt I di d because Ni cki Wi nt er l ef t .
21 Q. And when was t hat t hat you t ook over t he r esponsi bi l i t y of
22 t he bookkeeper ?
23 A. I don' t r ecol l ect t he dat e.
24 Q. Wel l , dur i ng t he t i me t hat - - f or how l ong a per i od of t i me
25 woul d you say t hat you wer e t he bookkeeper f or CASI ?
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1 A. I l ef t t he pr oj ect i n Oct ober of ' 03. I don' t know, f i ve
2 or si x mont hs.
3 Q. And dur i ng t hat per i od of t i me - -
4 A. Seven mont hs.
5 Q. - - wer e t her e any bounced checks?
6 A. Yes. I wasn' t t he onl y one wr i t i ng checks, however .
7 Q. How of t en wer e checks bounced dur i ng t he t i me t hat you wer e
8 t he bookkeeper , si r ?
9 A. I have absol ut el y no i dea. I was not doi ng t he sol e
10 bookkeepi ng ei t her .
11 THE COURT: Coul d you wr i t e checks?
12 THE WI TNESS: I wr ot e checks, but I di d not si gn t hem.
13 I was not a si gnat or y on t he account .
14 THE COURT: Wel l , how wer e t he checks si gned?
15 El ect r oni cal l y or per sonal l y?
16 THE WI TNESS: They wer e si gned per sonal l y by t he
17 def endant .
18 THE COURT: Coul d t hey be si gned el ect r oni cal l y under
19 t hat syst em?
20 THE WI TNESS: Yes. I don' t r ecol l ect t hat t hat ' s t he
21 syst emt hat we had i n pl ace, but t her e ar e ways t o wr i t e
22 el ect r oni c checks.
23 THE COURT: These ar e per sonal .
24 THE WI TNESS: Per sonal l y si gned. And Dr . Kar r on wr ot e
25 many of t he checks hi msel f .
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1 Q. And t he checks woul d be gener at ed t hr ough t he Qui cken
2 syst em.
3 A. Ri ght . You woul d i nput your dat a, you' r e wr i t i ng a bi l l t o
4 whoever , you ask t he syst emt o pay t he bi l l , and Qui cken and
5 Qui ck Books bot h make f or mat t ed checks, t hr ee- par t checks, you
6 st i ck t hemi nt o your pr i nt er , hi t pr i nt , and out comes t he
7 check, and al l i t needs i s si gni ng.
8 Q. And t hen you woul d pr esent t he checks t hat wer e gener at ed
9 t o Dr . Kar r on.
10 A. For hi s si gnat ur e.
11 Q. And he woul d r equi r e a backup, an i nvoi ce t o accompany t he
12 check.
13 A. The onl y way i f I was ent er i ng - -
14 THE COURT: Di d he or di dn' t he?
15 THE WI TNESS: Yes, he di d.
17 THE WI TNESS: Fr omme.
18 Q. And you al so wer e i nvol ved i n hel pi ng wi t h hi s per sonal t ax
19 r et ur ns, hi s bei ng Dr . Kar r on' s?
20 A. Hi s per sonal t ax r et ur ns?
21 Q. Ri ght .
22 A. Mysel f ? Not - - I have no t ax exper i ence. I amnot an
23 account ant . I t hi nk t hat ' s hi ghl y unl i kel y. The onl y t hi ng I
24 mi ght have done was gener at e r epor t s out of Qui cken.
25 Q. Di dn' t you cr eat e at Hayes' r equest spr ead sheet s out of
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1 t he Qui ck Books i n r egar d t o Dr . Kar r on' s i ncome and expenses?
2 A. I don' t r ecol l ect t hat . And Dr . Kar r on' s per sonal expenses
3 wer e not i n Qui ck Books, t hey wer e i n Qui cken.
4 Q. Wel l , di d you cr eat e spr ead sheet s f r omt he Qui ck Books f or
5 J oan Hayes?
6 A. Ms. Hayes woul d have asked me t o be pr epar i ng r epor t s out
7 of Qui ck Books r el at ed t o t he audi t , yes.
8 Q. So i t was t he document s t hat you cr eat ed t hat J oan Hayes
9 r el i ed upon i n r el at i on t o t he audi t , cor r ect ?
10 THE COURT: Obj ect i on sust ai ned. Ther e' s mor e t han
11 one concl usi on i n t hat quest i on.
13 THE COURT: Ther e i s mor e t han one concl usi on t he
14 wi t ness woul d have t o be r espondi ng t o i n t hat quest i on. Li mi t
15 your quest i on t o one concl usi on so t hat you' r e sur e t hat t he
16 wi t ness under st ood t hat t her e wer e t wo concl usi ons and not one
17 concl usi on.
18 Q. Di d you i nf or m- - di d J oan Hayes i n J anuar y of 2003 send
19 you an e- mai l r el at ed t o spr ead sheet s f or you t o cr eat e?
20 A. I woul d have t o see evi dence of t hat e- mai l . I have
21 absol ut el y no i dea of an e- mai l t hat may or may not have been
22 sent f i ve year s ago.
23 Q. Wel l , you wer e pr et t y good wi t h t he e- mai l s bef or e?
25 A. Wel l - -
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1 THE COURT: Obj ect i on sust ai ned. Let ' s go.
2 Q. Let me show you what i s mar ked as Gover nment Exhi bi t
3 3507- E. Thi s i s one of t he document s cont ai ned t her ei n. I t ' s
4 page 2 of 36 i t says on t op. Take a l ook at t hat st ar t i ng at
5 t he r ed under l i ni ng.
6 A. OK.
7 Q. Does t hat r ef r esh your r ecol l ect i on t hat Hayes asked you t o
8 cr eat e spr ead sheet s?
9 A. Yes, J oan Hayes i s r ef er r i ng t o spr ead sheet s. I pr obabl y
10 woul d have cal l ed t hemr epor t s, but I t hi nk t hat ' s j ust a
11 mat t er of t er mi nol ogy.
12 THE COURT: What does i t r ead, t hi s e- mai l you' r e
13 r ef er r i ng t o?
14 Q. Spr eadsheet , t her e i s a har d copy? I s t hat an act ual
15 document ?
16 A. I t woul d have been a pi ece of paper , yes.
17 Q. And, by t he way, di d you cr eat e t wo - -
18 THE COURT: I j ust want t o know wher e on page 2 you' r e
19 r ef er r i ng t o.
20 MR. RUBI NSTEI N: I t ' s - - can you see t hat , J udge?
21 THE COURT: The t op? Whi ch one?
22 MR. RUBI NSTEI N: The r ed under l i ni ng, J udge. Onl y t he
23 pi nk means somet hi ng, but t he r ed under l i ni ng.
24 THE COURT: Spr eadsheet sampl e f or sampl e cost f or - -
25 MR. RUBI NSTEI N: No, t hat ' s t he wr ong page. That ' s
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1 page 3 of 36. Thi s i s page 2.
2 THE COURT: I amon page 2 of 36.
3 MR. RUBI NSTEI N: Can I appr oach, your Honor ?
4 THE COURT: I don' t know wher e you ar e.
5 MR. RUBI NSTEI N: Mi ne says 2 of 36, J udge.
6 THE COURT: Oh, you' r e up i n her e.
8 Q. By t he way, di d you cr eat e t wo sampl e spr ead sheet s r el at ed
9 t o Dr . Kar r on' s i ncome t ax?
10 A. I don' t r ecol l ect t hat .
11 Q. Do you r ecal l t est i f yi ng bef or e t hat you di dn' t have
12 anyt hi ng t o do wi t h hi s per sonal i ncome t ax r et ur n? Cor r ect ?
13 A. I don' t f i l e i ncome t ax r et ur ns, per sonal or ot her wi se, f or
14 any of my cl i ent s.
15 Q. But t he quest i on i s whet her or not you as par t of your
16 r esponsi bi l i t i es t her e was t o hel p pr epar e i nf or mat i on f or Dr .
17 Kar r on' s per sonal i ncome t ax r et ur n f i l i ngs.
18 A. I t ' s possi bl e.
19 Q. Wel l , why don' t you t ake a l ook at page 3 of t he same
20 document , st ar t i ng one par agr aph down. Di d you send an e- mai l
21 t o J oan Hayes?
22 A. Yes, t hat ' s an e- mai l I woul d have wr i t t en, t hat ' s cor r ect .
23 Q. And i n t hat e- mai l di d you pr ovi de t hat - -
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1 MR. RUBI NSTEI N: Wel l , I wi l l of f er t hat por t i on of
2 t he e- mai l i n evi dence.
3 THE COURT: Do you want t he ent i r e e- mai l ? I t hi nk i t
4 woul d have t o be of f er ed i f you want t o of f er i t .
5 MR. RUBI NSTEI N: OK. I wi l l of f er t he ent i r e e- mai l .
6 MR. EVERDELL: Your Honor , I don' t under st and t he
7 r el evance of t hi s, so I obj ect .
8 THE COURT: He i s of f er i ng i t . I t ' s par t of hi s
9 cr oss- exami nat i on.
10 MR. RUBI NSTEI N: Q, Def endant ' s Q f or i dent i f i cat i on
11 we of f er i nt o evi dence, your Honor .
12 MR. EVERDELL: May I see what you' r e of f er i ng?
13 MR. RUBI NSTEI N: Sur e.
14 DEPUTY COURT CLERK: I s i t one page or t he whol e
15 t hi ng?
16 MR. RUBI NSTEI N: I t ' s one page.
17 THE COURT: Wel l , i t st ar t s on t he page bef or e and
18 r uns t hr ough t he page, t hat t hi r d page, and i t ends on t he
19 f our t h page.
20 DEPUTY COURT CLERK: So i t ' s pages 2, 3 and 4?
21 MR. RUBI NSTEI N: On t he t op i t says page 3 of 36 i s
22 what i t says, and so i t ' s - -
23 THE COURT: But t he subj ect mat t er .
24 MR. RUBI NSTEI N: Page 4 and t hen page 3.
25 DEPUTY COURT CLERK: J ust t wo pages, page 3 and page
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1 4.
2 MR. RUBI NSTEI N: The t op of page 4.
3 THE COURT: I t hi nk you need t he bot t omof page 2 t oo,
4 because t hat ' s t he subj ect mat t er .
5 MR. RUBI NSTEI N: OK. The bot t omof page 2, al l of
6 page t hr ee and t he t op of page 4.
7 May I pr oceed, your Honor ?
9 Q. Di d you wr i t e t he f ol l owi ng t o J oan Hayes: " so, what I di d
10 was cr eat e t wo sampl e spr ead sheet s f or t he f i r st t ax year i n
11 quest i on, 1998 t hr ough 1999. The f i r st t hi ngs t hat have mor e
12 det ai l i s I t hi nk t he one t hat you wi l l pr ef er . " Di d you
13 wr i t e t hat t o J oan Hayes?
14 A. Thi s i s i n r ef er ence t o Dr . Kar r on' s per sonal t axes?
15 Q. Ri ght .
16 A. Yes, i t sounds l i ke my ver bi age, yes.
17 Q. And i s i t a f act t hat Dr . Kar r on had not i n t hi s - - and
18 t hi s e- mai l was wr i t t en i n 2003, and Dr . Kar r on had yet t o f i l e
19 hi s 1999 t ax r et ur ns, cor r ect ?
20 A. One woul d make t hat pr esumpt i on. I don' t r emember . I t i s
21 pr obabl y a quest i on bet t er t o be asked of J oan Hayes si nce she
22 i s t he per son bei ng r ef er enced her e, not mysel f .
23 THE COURT: What about CASI ' s i ncome t ax?
24 THE WI TNESS: I don' t r ecol l ect , your Honor , whet her
25 t he def endant was f i l i ng hi s t axes or hi s company t axes. That
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1 wasn' t par t of my j ob.
2 THE COURT: But you don' t know whet her t hi s i s CASI
3 i ncome t axes or hi s i ncome t axes, do you?
4 THE WI TNESS: I don' t act ual l y. Fr ankl y, gi ven t hat
5 J oan Hayes i s t he per son t hat t hi s i s pr i mar i l y addr essed t o
6 and about , I woul d t hi nk i t had t o do wi t h CASI ' s t axes as
7 opposed t o hi s per sonal t axes.
8 Q. I n f act , di d you send an e- mai l t o J oan Hayes sayi ng t hat
9 you f el t t hat she was wear i ng t wo hat s by bei ng t he audi t or and
10 al so deal i ng wi t h Dr . Kar r on' s per sonal mat t er s?
11 A. Yes. Yes, I do r ecol l ect t hat .
12 Q. So, i n f act you quest i oned whet her or not she was an
13 i ndependent audi t or , cor r ect ?
14 A. Wel l , anyone who i s ever put i n t he posi t i on of wear i ng t wo
15 hat s, you know, you have t o make sur e t hat you can keep one
16 si de ver y separ at e f r omt he ot her .
17 Q. So, does t hat now r ef r esh your r ecol l ect i on as t o who
18 r et ai ned J oan Hayes' ser vi ce t o be " t he i ndependent audi t or " on
19 t he NI ST ATP audi t ?
21 THE COURT: Obj ect i on over r ul ed.
22 A. No, i t doesn' t .
23 Q. When you went i nt o - - besi des goi ng i nt o Qui cken f or Dr .
24 Kar r on' s per sonal account s, di d you have anyt hi ng t o do wi t h
25 hi s Mast er car d cr edi t car d?
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1 A. I n t er ms of ent er i ng dat a?
2 Q. Yes.
3 A. I don' t r ecol l ect .
4 Q. How about r evi ewi ng t he expendi t ur es t o see i f whet her or
5 not t her e wer e any ATP NI ST- t ype expenses t hat wer e absor bed by
6 Dr . Kar r on on hi s Mast er car d?
7 A. Wel l , as I was st at i ng i n my pr evi ous t est i mony, t her e wer e
8 expenses i n t he per sonal Qui cken account s whi ch I was i nf or med
9 of by t he def endant bef or e I st ar t ed t he gl eani ng pr ocess,
10 get t i ng t hi s dat a out of Qui cken. Some of t hose mi ght have
11 been on a cr edi t car d. I don' t r ecol l ect .
12 Q. Wer e you awar e t hough t hat Dr . Kar r on had an Amer i can
13 Expr ess car d t hat he ut i l i zed f or t he ATP gr ant ?
14 A. Ther e was I bel i eve wi t hi n Qui ck Books an Amer i can Expr ess
15 what we cal l l edger .
16 Q. And di d you have any under st andi ng t hat t he Amer i can
17 Expr ess car d was used st r i ct l y f or t he busi ness of CASI and t he
18 ATP gr ant ?
19 A. I woul d have t o see t he i ndi vi dual i t ems ent er ed t o
20 ascer t ai n whet her i t was per sonal , CASI or ATP.
21 Q. And i s i t f ai r t o say t hat you changed t he Qui ck Books
22 booki ng syst emt o i ncl ude non- NI ST cat egor i es?
23 A. Wel l , i n a sense t he CASI syst emor ever yt hi ng t hat wasn' t
24 ATP or NI ST was CASI , so t hat dat a was i n t her e al r eady. The
25 mai n j ob was t o make ver y cl ear what was al l owabl e ATP expenses
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1 and what was a nonal l owabl e ATP expense.
2 Q. Do you r ecal l bei ng i nt er vi ewed by t he agent s at t he f i r st
3 t abl e her e on Sept ember 21, 2001 and si gni ng an af f i davi t ?
4 A. I n 2001? No.
5 Q. 2004. Sor r y. I mi sspoke.
6 A. I t was a beaut i f ul aut umn day. I suppose Sept ember 21st
7 was t he act ual day. I don' t r ecol l ect .
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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866ZKAR6 Spr i ng - cr oss
2 Q. Do you r ecal l , wi t hout bei ng speci f i c as t o Sept ember 21st ,
3 2004, do you r ecal l meet i ng wi t h t he agent s seat ed at t he f i r st
4 t abl e her e, Ms. Gar r i son?
5 A. I r ecal l meet i ng t hem, yes, absol ut el y; Ki r k and Rachel ,
6 yes.
7 THE COURT: Ms. Gar r i son you' r e t al ki ng about ?
8 THE WI TNESS: That ' s cor r ect , your Honor .
10 Q. And wher e di d you meet t hem?
11 A. I was wor ki ng i n my home of f i ce on West 29t h St r eet , and on
12 t hat beaut i f ul aut umn day and wor ki ng on one of my cl i ent ' s
13 books and t he door bel l r ang, and t hey asked t o come i n t o see
14 me. They i dent i f i ed t hemsel ves and asked i f t hey coul d come up
15 and speak wi t h me.
16 Q. And di d you t el l t hemt hat you began wor ki ng f or Dr .
17 Kar r on, you changed t he Qui ck Books bookkeepi ng syst emf or t he
18 ATP pr oj ect t o i ncl ude a non- NI ST cat egor y f or CASI spendi ng?
19 A. I ' msor r y, coul d you r epeat t he quest i on?
20 Q. Yeah. Di d you t el l t hemat t hat i nt er vi ew, when I began
21 wor ki ng f or Dr . Kar r on, I changed t he Qui ck Books bookkeepi ng
22 syst emf or t he ATP pr oj ect t o i ncl ude a non- NI ST cat egor y f or
23 CASI spendi ng?
24 A. Wel l , yes. As I was sayi ng a f ew mi nut es ago, i f I may
25 r epeat mysel f j ust br i ef l y.
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1 Q. The quest i on i s di d you t el l t hat t o - -
2 THE COURT: J ust di d you say t hat .
3 Q. To t he agent s?
4 THE COURT: Yes or no.
5 A. I want t o be sur e i t ' s under st ood what t hat means, what I ,
6 what t hat st at ement means.
7 THE COURT: Wai t .
8 A. Okay.
9 THE WI TNESS: So maybe you coul d r ephr ase t he
10 quest i on.
11 THE COURT: The answer cal l s f or a yes or no.
12 Q. Now, i t ' s a j ob - -
13 THE WI TNESS: I have t o answer no si nce I don' t
14 under st and t he quest i on.
15 Q. You di dn' t say t hat t o t he agent s? I t ' s not your l anguage
16 i n an af f i davi t t hat you had wi t h t he agent s?
17 A. I f you want t o quot e di r ect l y f r omt he af f i davi t , I wi l l be
18 happy t o say yes or no.
19 Q. Al l r i ght . Wel l - -
20 THE COURT: Wel l , t hen show hi mwhat - -
21 Q. I ' l l show you what ' s been - -
22 THE COURT: The pr oper way i s not t o quot e f r om
23 somet hi ng t hat ' s not i n evi dence.
24 MR. RUBI NSTEI N: I t ' s 3507A?
25 THE DEPUTY CLERK: 3507A.
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1 Q. A, as i n appl e. I poi nt your at t ent i on wher e I have a
2 number ni ne on t he si de?
3 A. Uh- huh.
4 Q. See af t er r eadi ng t hat i f i t r ef r eshes your r ecol l ect i on as
5 t o what you sai d t o t he agent s?
6 A. Yes, t hat ' s cor r ect .
7 Q. So pr i or t o t he t i me t hat you became a bookkeeper or was
8 i nvol ved i n t he bookkeepi ng at CASI , t hei r Qui ck Books syst em
9 di d not have a cat egor y cal l ed non- NI ST i t ems?
10 A. Ever yt hi ng t hat was not ATP r el at ed woul d, by def i ni t i on,
11 be non- NI ST r el at ed, i t woul d be CASI r el at ed.
12 THE COURT: That i sn' t answer i ng t he quest i on.
13 THE WI TNESS: I ' msor r y, your Honor .
14 THE COURT: The quest i on i s when you came t her e,
15 bef or e you got t her e.
17 THE COURT: I t ' s onl y - - t he Qui ck Books was onl y used
18 f or t he ATP NI ST.
19 THE WI TNESS: No, your Honor , t hat ' s not cor r ect . I t
20 was used f or CASI .
21 THE COURT: And you cr eat ed - - and onl y when you got
22 t her e di d you cr eat e t he non- NI ST cat egor y f or CASI ' s spendi ng,
23 i s t hat t r ue; t hat onl y when you got t her e, t he non- NI ST
24 cat egor y f or CASI spendi ng was cr eat ed. Fol l ow me?
25 THE WI TNESS: I do f ol l ow you. No.
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1 THE COURT: About t wo bi g cat egor i es, r emember ?
2 THE WI TNESS: Cor r ect . Thi s i s ei t her CASI or ATP.
4 THE WI TNESS: Si mpl e as t hat . My r ecol l ect i on i s no,
5 t hat t he def endant was al r eady usi ng Qui ck Books f or hi s CASI
6 busi ness.
7 THE COURT: As di st i nct f r omhi s NI ST busi ness.
8 THE WI TNESS: Cor r ect , t hat ' s cor r ect .
10 THE WI TNESS: Si mpl e, yeah.
11 Q. And what was he usi ng f or hi s NI ST busi ness?
12 THE COURT: He sai d t hat he was usi ng Qui ck Books f or
13 hi s NI ST busi ness, and he was al r eady usi ng i t f or hi s non- NI ST
14 busi ness, wi t h CASI .
15 THE WI TNESS: That ' s cor r ect .
16 Q. I s i t f ai r t o say t hat t her e was no non- NI ST cat egor y i n
17 t he syst embef or e you got t her e?
18 A. No, t hat ' s not cor r ect .
19 Q. So t el l us what you meant i n your af f i davi t when you sai d
20 t hat , when I began wor ki ng f or Dr . Kar r on, I changed t he Qui ck
21 Books bookkeepi ng syst emf or t he ATP pr oj ect t o i ncl ude a
22 non- NI ST cat egor y f or CASI spendi ng?
23 A. Ri ght , t hi s was what we' ve been t al ki ng about f or a whi l e
24 now, whi ch i s, make sur e i t ' s cl ear i n Qui ck Books t hat
25 anyt hi ng t hat was an ATP/ NI ST expense was mar ked as such, and
( 212) 805- 0300
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1 ever yt hi ng t hat wasn' t , woul d be non- NI ST or CASI r el at ed.
2 Q. And you expl ai ned t hat t o Dr . Kar r on?
3 A. Oh, absol ut el y.
4 Q. Di d he ever t el l you, don' t do t hat , keep al l t he expenses
5 t oget her ?
6 A. Keep al l t he expenses t oget her ?
7 Q. Di d he ever t el l you not t o do t hat ?
9 Q. I n f act , you di d segr egat e NI ST expenses f r omnon- NI ST
10 expenses, r i ght ?
11 A. I di d separ at e t he t wo out , t hat ' s cor r ect .
12 Q. And t he quest i ons you had wi t h Dr . Kar r on was a di sput e as
13 t o whet her or not a par t i cul ar expense shoul d or shoul d not be
14 i ncl uded i n t hat cat egor y?
15 A. That i s cor r ect .
16 Q. And you r ecat egor i zed expenses t hat you bel i eved wer e not
17 f or t he ATP pr oj ect , cor r ect ?
18 A. Based on my under st andi ng t he r egul at i ons, yes.
19 Q. And t hen you al so put expenses t hat you bel i eve wer e f or
20 t he pr oj ect , cor r ect ?
21 A. Yes, based on my under st andi ng of t he r egul at i ons, t hat ' s
22 cor r ect .
23 Q. And you di d t hi s based upon t he NI ST gui del i nes as - - si nce
24 you had r ead t hemover ?
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1 Q. Ri ght ? Di d you al so r ead t he CFR t hat r el at e t o t hi s?
2 A. The CFR?
3 Q. Yes. You know what t he CFR i s?
4 A. Coul d you t el l me what acr onymst ands f or , pl ease?
5 THE COURT: Code of Feder al Regul at i ons.
6 THE WI TNESS: I f t hi s i s t he 30- page document t hat I
7 cal l ed t he r egul at i ons, t he answer woul d be yes.
8 Q. What i f i t ' s a 150- page document ?
9 A. I don' t r ecol l ect r eadi ng a 150 page document . That I
10 woul d r emember .
11 Q. Do you r emember r eadi ng a 70 page document ?
13 Q. Di d you ever have cont act wi t h anybody at ATP and ask t hem
14 any quest i ons as t o what you shoul d cl assi f y an expense as
15 whet her i t ' s t o be a NI ST expense or a non- NI ST expense?
16 A. I di d not , I di d not - - no.
17 Q. Di d Dr . Kar r on ever ask you t o change t he i nf or mat i on t hat
18 was t he backup f or a par t i cul ar expense?
19 A. I ' msor r y, what do you mean by t hat ?
20 Q. Wel l , any - - i n hi s syst em, di dn' t he scan vi r t ual l y ever y
21 pi ece of paper t hat he came i n cont act wi t h i nt o t he syst em?
22 A. Yes, he was f or ced t o.
23 Q. And t hat was i n pl ace bef or e you ever got t her e?
24 A. The scanni ng?
25 Q. The scanni ng.
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1 A. Not as most l y r el at ed t o t he ATP pr oj ect , t hat i s
2 i ncor r ect .
3 Q. Any check t hat Dr . Kar r on woul d si gn, you had t o pr esent t o
4 hi man i nvoi ce or some backup t o show t hat i t was a bona f i de
5 expense of t he pr oj ect , cor r ect ?
6 A. Any, any check t hat was wr i t t en t hat was based on a bi l l ,
7 of cour se, you coul dn' t ent er t he - - you coul dn' t cr eat e a
8 check unl ess you knew what t he amount was f or t o t he payee
9 shoul d be.
10 Q. Di d you di scuss whi ch cat egor i es, whet her some expense was
11 a NI ST expense or not a NI ST expense, wi t h any empl oyees of
12 CASI ?
13 A. Empl oyees, t hat woul d be Ni ki Wi nt er - - who el se, J i mCox,
14 ot her peopl e?
15 Q. Yes.
16 A. Per haps, i n gener al conver sat i on. I woul d not have t aken
17 gui dance f r omany of t hose peopl e. They wer e not appr opr i at e
18 t o t he f i nanci al deal i ngs of t he company or t he pr oj ect .
19 Q. Di d you speak t o J oan Hayes about what was an appr opr i at e
20 NI ST expense?
21 A. Yes, t hat ' s al r eady been r ef er enced i n some of t hose
22 pr evi ous e- mai l s I r ead.
23 Q. And di d you, i n your af f i davi t , say t hat you made your
24 det er mi nat i on as t o what was a non- NI ST expense based upon
25 di scussi ons wi t h CASI empl oyees and CASI account ant and your
( 212) 805- 0300
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1 under st andi ng t hat NI ST ATP r egul at i ons?
2 A. Yeah.
3 THE WI TNESS: Your Honor , may I go back and - -
4 Q. Di d you say t hat ?
5 THE WI TNESS: The quest i on has pr ompt ed somet hi ng, i f
6 I may r espond.
7 THE COURT: No.
8 Q. No.
9 THE COURT: J ust answer t he quest i on.
10 A. Yes, t her e wer e di scussi ons wi t h t he busi ness manager .
11 Q. And who was t he busi ness manager ?
12 A. For year one i t was Lee Ger f ei n, and f or year t wo, Bob
13 Benedi ct .
14 Q. And wer e you f ami l i ar wi t h Gur f ei n' s empl oyment cont r act ?
15 A. Ver y t angent i al l y.
16 Q. Wer e you f ami l i ar wi t h t he f r i nge benef i t s t hat Gur f ei n was
17 ent i t l ed t o?
18 A. I knew t her e was an empl oyee benef i t s pl an, he was t he
19 busi ness manager , he woul d pr obabl y be par t i ci pat i ng i n i t .
20 Ot her t han, t her e was no f or mal pl an.
21 Q. Wer e you awar e t hat t hose ki nd of expenses, even i f you
22 di dn' t have a f or mal pl an, i f t hey wer e, i f t hey wer e i n pl ace
23 pr i or t o t he st ar t of t he gr ant , t hat t hey wer e al l owabl e?
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1 Q. Wel l , di d you have di scussi ons wi t h Dr . Kar r on as t o t he
2 medi cal expenses and how t hey shoul d be t r eat ed?
3 A. I ' msur e I must have at some poi nt , cer t ai nl y.
4 Q. And di d Dr . Kar r on expl ai n t o you t hat you di dn' t have t o
5 have a wr i t t en pl an i n pl ace f or i t t o be al l owabl e?
6 A. He may have sai d t hat . I t doesn' t mean i t was t r ue.
7 Q. Doesn' t mean i t was f al se, r i ght ?
8 A. Cor r ect .
9 Q. Now, you sai d i n year t wo t hat by November , 50 per cent of
10 t he gr ant money had been expended i n year t wo?
11 THE COURT: I don' t t hi nk he sai d t hat .
13 A. That i s not what I sai d, no.
14 Q. Wel l you di scussed i n, i n e- mai l 142, exhi bi t - -
15 THE COURT: Exhi bi t 142.
16 MR. RUBI NSTEI N: Gover nment ' s exhi bi t 142.
17 Q. Do you r ecal l t est i f yi ng t hat wi t hi n a mont h and a hal f of
18 t he second year he was usi ng up 50 per cent ?
19 A. Yes. I f you f act or ed i n t he mont hl y r ecei vabl es, t he
20 expenses f r omyear one t hat he hadn' t pai d yet , whi ch I bel i eve
21 wer e i n excess of $110, 000.
22 Q. And was money avai l abl e i n t he NI ST account t o pay t hose
23 expenses?
24 A. Fr ankl y, no, because you wer e onl y al l owed t o dr awdown f r om
25 t he ATP or NI ST f unds a cer t ai n amount of f unds ever y mont h.
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1 You j ust coul dn' t go i n t her e and t ur n on t he t ap and t ake as
2 much as you want t o.
3 Q. How do you know t hat ?
4 A. How do I know t hat ?
5 Q. Ri ght .
6 A. Dr . Kar r on per sonal l y showed me on t he comput er t he
7 dr awdown syst emwhi ch i s, as I sai d, wer e was al l el ect r oni c.
8 Q. So he showed you, accor di ng t o your t est i mony, t hat he was
9 l i mi t ed?
11 Q. The amount of dr awdown he coul d t ake at any par t i cul ar
12 t i me?
13 A. Per mont h i n year t wo, t hat i s cor r ect .
14 Q. So i f t he ATP peopl e sai d t hat he coul d t ake al l t he money
15 at one t i me woul d t hat have any af f ect on your answer ?
17 THE COURT: Obj ect i on sust ai ned, f or mof t he quest i on.
18 Q. Ar e you awar e of Dr . Kar r on maki ng l oans t o CASI f or t he
19 pur poses of ATP?
20 A. I do not r ecol l ect any such l oan, no.
21 Q. Now, Dr . Kar r on expl ai ned t o you t hat he was goi ng t o
22 Washi ngt on t o at t empt t o convi nce t he peopl e at NI ST t o per mi t
23 amendment s and r evi si ons t o t he budget , r i ght ?
24 A. Yes, I r emember . I r ead r ode t hat e- mai l ear l i er .
25 Q. And do you know whet her or not he act ual l y went t o
( 212) 805- 0300
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1 Washi ngt on, D. C. ?
2 A. My r ecol l ect i on was he di d.
3 Q. And do you know i f he submi t t ed any budget r evi si ons,
4 r equest s f or budget r evi si ons?
5 A. I bel i eve one of t he poi nt s of t he t r i p was t o r esubmi t hi s
6 f i gur es, yes.
7 Q. And di d you have anyt hi ng t o do wi t h cr eat i ng number s t o
8 submi t on f i nanci al st at ement r evi si ons f or t he CASI NI ST
9 budget ?
10 A. I don' t r ecol l ect . Ther e wer e budget i ssues t hat wer e
11 happeni ng at t he same t i me as t he audi t by J oan Hayes was
12 happeni ng.
13 Q. Wasn' t Dr . Kar r on aski ng you f or act ual s, act ual expenses?
14 A. Wel l , t hat woul d be what was act ual l y spent , yes, at t he - -
15 I mean t hat woul d be par t of t he pr ocess.
16 Q. That ' s what he was aski ng f or wer e act ual - -
17 THE COURT: When ar e, when ar e we t al ki ng about ?
18 Mr - - l et ' s have a dat e, l et ' s have an exhi bi t we' r e t al ki ng
19 about . You can' t have t he open ended cover i ng t wo and a hal f
20 year s. No one can t el l t he r el evance of what t hey' r e aski ng
21 and we' r e get t i ng t o t he end her e.
22 MR. RUBI NSTEI N: J udge, I ' maski ng t o r ecess at t hi s
23 t i me.
24 THE COURT: No, you' r e not .
25 MR. RUBI NSTEI N: What ? I ' maski ng - - i t ' s my
( 212) 805- 0300
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1 anni ver sar y, J udge, and - -
2 THE COURT: I ' msor r y, I ' msor r y. We' r e get t i ng
3 t hr ough t hi s wi t ness, we ar e get t i ng t hr ough t hi s wi t ness.
4 Fi r st I ' ve hear d of any anni ver sar y par t y.
6 THE COURT: Fi r st I ' ve hear d of any anni ver sar y par t y.
7 MR. RUBI NSTEI N: I t ' s a f act . I ' mmar r i ed J une 6t h,
8 your Honor .
9 THE COURT: I don' t di sput e i t .
11 THE COURT: That ' s t he f i r st I hear d of i t and we' ve
12 got a wi t ness on cr oss- exami nat i on l onger t han he was on di r ect
13 exami nat i on, and we' r e get t i ng t hr ough t hi s wi t ness. But we' ve
14 got t o do i t i n t he next f ew mi nut es, not have t hese ext ended
15 pauses bet ween quest i ons.
16 These l ong conver sat i ons wi t h your associ at e, r eal l y.
17 MR. RUBI NSTEI N: J udge, t her e i s a l ot of mat er i al
18 her e, J udge, you know.
19 THE COURT: I t may be, but you have had a l ot of t i me
20 t o pr epar e f or i t .
21 MR. RUBI NSTEI N: I woul dn' t say t hat at al l , J udge.
22 THE COURT: You j ust go r i ght ahead, but you get i t
23 done. Put a quest i on.
25 Q. Wel l , do you r ecal l an exhi bi t 143, whi ch i s dat ed November
( 212) 805- 0300
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902
1 29t h, on page - -
2 THE WI TNESS: Coul d I get t he exhi bi t back, pl ease, so
3 I can r ef er ence i t ?
4 THE COURT: You don' t see exhi bi t s? Do you have a
5 copy of i t f or t he wi t ness? You ought t o have t he copi es. You
6 bet t er get t hemr eady.
7 MR. RUBI NSTEI N: 143.
8 A. Yes, i t ' s her e i n my hand.
9 Q. And t hat , t hat ' s an e- mai l t hat you r ecei ved f r omDr .
10 Kar r on on November 27t h, 2002, r i ght ?
11 A. You' r e r ef er r i ng t o, yes, November 27. I ' ml ooki ng at t hat
12 par t of e- mai l chai n.
13 Q. And i n t hat e- mai l , Dr . Kar r on advi ses you t hat he has t o
14 be - - an oppor t uni t y t o cover any cost or pr obl ems by a l at e
15 budget r evi si on, cor r ect ? ATP has gi ven hi man oppor t uni t y t o
16 cover any cost or pr obl ems by a l at e budget r evi si on, r i ght ?
17 A. Yes, t hat ' s what he' s t el l i ng me.
18 Q. And he t el l s you we need act ual s t hat we coul d cast i nt o
19 t he budget r evi si on, cor r ect ?
20 A. Yes.
21 Q. And he says, I t hought we had act ual s f r omt he end of
22 Sept ember ?
23 A. Yes.
24 Q. And t hen i f you go down, he says, I amal so - - you see i n
25 t he mi ddl e of t he page, I ' mal so concer ned - -
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1 A. I do.
2 Q. - - t hat a number of cost s ar e not i dent i f i abl e f r ommy
3 per sonal Qui ck Books?
4 A. Yes.
5 Q. Then on t he next he says, I amt r yi ng t o cl assi f y al l of
6 t he cost s by ATP or CASI . I can' t seemt o cl assi f y t he j our nal
7 ent r i es you made as bi l l payment s on my bi l l s t o CASI .
8 Cor r ect ?
9 A. I j ust want t o r ead t hat sent ence. Yes.
10 Q. He goes on t o say, I al so can' t f i nd t he r ecei pt s f r om, f or
11 each i nvoi ce and I can' t mat ch up t he amount s on some j our nal
12 ent r i es t o i nvoi ces ei t her ?
13 A. Yes, t hat i s what i t says.
14 Q. And what i s your r esponse t o hi mon t hat ?
15 A. I n t he e- mai l ?
16 Q. Yeah.
17 A. My e- mai l r esponse?
18 Q. Yeah.
19 A. Wr i t t en t he next day, Dr . K, I have my doubt s about j ust
20 how much we can get t hr ough on Fr i day, as t he pr i or i t i es seem
21 t o keep shi f t i ng, and J oan has her own needs, schedul e, agenda,
22 whi ch we must al so t ake i nt o account . I - -
23 THE COURT: Go ahead, r ead on.
24 A. I do bel i eve t hat most of t he dat a you ar e seeki ng f or any
25 f ur t her budget r evi si ons i s act ual l y t her e i n t he Q. B. ' s, or
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1 Qui ck Book' s or spr ead sheet f i l es and pr obabl y j ust needs some
2 r ef or mat t i ng. J oan wi l l be ar r i vi ng at t en on Fr i day, and I
3 wi l l be at CASI shor t l y bef or e t hat .
4 Q. Nowher e i n t her e do you di sput e any of Dr . Kar r on' s
5 compl ai nt s t o you on a pr i or e- mai l , r i ght ?
6 A. No.
7 Q. By t he way, do you know, di d Dr . Kar r on make sur e t hat al l
8 payr ol l t axes and ot her t axes wer e pai d?
10 Q. Di d Dr . Kar r on - -
12 Q. Make sur e t hat al l t axes, i ncl udi ng payr ol l t axes, wer e
13 pai d?
14 A. I was not i nvol ved i n payr ol l f or t he most par t , so I can' t
15 answer t hat quest i on. Those ar e t ax r epor t i ng i ssues.
16 Q. You know whet her or not Dr . Kar r on def er r ed r ecei vi ng hi s
17 sal ar y when t he bal ances wer e l ow?
18 A. I don' t know. My onl y r ecol l ect i on of payr ol l r el at es t o
19 what I t est i f i ed t o bef or e.
20 Q. Wel l , wer e you i nvol ved i n gener at i ng t he payr ol l checks?
21 A. Af t er Ni ki Wi nt er l ef t , what ever peopl e wer e bei ng pai d on
22 a weekl y or bi weekl y basi s. He di d not use a payr ol l ser vi ce.
23 THE COURT: Di d you, di d you do i t or di d he do i t ;
24 who di d i t ?
25 THE WI TNESS: I don' t r ecol l ect t ot al l y, si nce Dr .
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1 Kar r on al so wr ot e checks out of Qui ck Books, but I t hi nk I
2 pr obabl y woul d' ve wr i t t en some checks whi ch he woul d' ve si gned.
3 THE COURT: Payr ol l checks?
4 THE WI TNESS: Payr ol l checks, whi ch he woul d' ve
5 si gned.
7 Q. Now, you say t hat you had di sagr eement s wi t h Dr . Kar r on as
8 t o cer t ai n expenses t hat occur r ed bef or e t he gr ant st ar t ed
9 Oct ober 1st , 2001?
10 A. That ' s cor r ect . I t est i f i ed t o t hat , t hat ' s t r ue.
11 Q. And he bel i eved, Dr . Kar r on bel i eved t hat i f he pai d i t
12 af t er t he gr ant s st ar t ed - -
13 THE COURT: Obj ect i on sust ai ned as t o t he f or mof t he
14 quest i on. Next .
15 Q. Di d Dr . Kar r on t el l you t hat he bel i eved i f you pai d t he
16 expense af t er t he gr ant st ar t ed, i t was okay t o do t hat ?
17 A. I don' t r ecol l ect hi msayi ng t hat , no.
18 Q. Wel l , do you r ecal l i n your af f i davi t sayi ng - -
19 THE COURT: What ar e you r ef er r i ng t o as hi s
20 af f i davi t ?
21 MR. RUBI NSTEI N: He si gned an af f i davi t on
22 Sept ember - - on a beaut i f ul aut umn day.
23 THE COURT: I mi ssed t he page.
25 THE COURT: Has he got a copy of i t bef or e hi m?
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1 MR. RUBI NSTEI N: I don' t know, J udge.
2 THE COURT: You' r e aski ng about hi s af f i davi t .
4 THE COURT: Show i t t o hi mand do i t t he r i ght way.
5 Come on.
6 MR. RUBI NSTEI N: J udge, I woul d ask t hat - -
7 THE COURT: You' ve asked t he - -
8 MR. RUBI NSTEI N: He be gi ven hi s document s, hi s 3500
9 document s.
10 THE COURT: You' ve asked t he quest i on, you know t hat .
11 MR. RUBI NSTEI N: I know, but he shoul d have - -
12 THE COURT: Show hi mt he document s, does t hi s r ef r esh
13 your r ecol l ect i on, et cet er a.
14 MR. RUBI NSTEI N: I know, but i t woul d make a l ot of
15 sense, i n al l due r espect , your Honor , i f t hey had gi ven hi m
16 hi s own 3500 mat er i al .
17 THE COURT: I don' t know whet her t hey di d or di dn' t .
18 I don' t t hi nk he' s supposed t o r ecol l ect ever yt hi ng i n t her e
19 anyway. That ' s why t he r ul e i s t he way t he r ul e i s.
20 A. And what was your quest i on, pl ease?
21 Q. My quest i on i s whet her you st at ed i n your af f i davi t t hat
22 Dr . Kar r on bel i eved t hat i f an expense was pai d af t er t he st ar t
23 of t he pr oj ect , t hen i t was a pr oj ect expense?
24 A. Yes, t hat ' s t he way I ' ve wr i t t en cl ear l y. What I st at ed
25 t oo.
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1 Q. By t he way, di d he ever ask you t o change a dat e on some
2 expense so t hat i t woul d come wi t hi n t he t i me of t he gr ant ?
3 A. I don' t r ecol l ect t hat , whet her he di d or not .
4 THE COURT: I t hi nk you asked t hat quest i on bef or e.
5 MR. RUBI NSTEI N: I di d not , your Honor .
8 Q. I f he asked you t o do t hat , t hat ' s somet hi ng t hat you woul d
9 woul dn' t f or get , woul d you?
11 THE COURT: Obj ect i on sust ai ned t o t he f or mof t he
12 quest i on.
13 Q. I f he asked you - -
14 THE COURT: Obj ect i on sust ai ned. I t ' s obvi ousl y
15 hypot het i cal . Pl ease.
16 Q. Now, Dr . Kar r on advi sed you t hat he was speaki ng t o peopl e
17 at NI ST about equi pment char ges, cor r ect ?
18 A. Yes.
19 Q. Do you know - - ar e you a sci ent i st , by t he way?
20 A. Wel l , act ual l y, my one of my col l ege degr ees i s i n
21 exper i ment al psychol ogy, so i f you want t o consi der psychol ogy
22 a sci ence, t he answer i s yes.
23 THE COURT: Al l r i ght , l et ' s.
24 MR. RUBI NSTEI N: Wi t h t hat , can' t we l eave wi t h a
25 smi l e on our f ace J udge, f or t he day?
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1 THE COURT: The bi g smi l e wi l l come when you say - -
2 Q. So i t ' s f ai r t o say t hat you had no knowl edge of t he
3 r esear ch pr oj ect t hat Dr . Kar r on was gi ven $2 mi l l i on over
4 t hr ee year s t o devel op?
5 A. No, I di d ' cause he was ver y pr oud t o expl ai n t o me, and I
6 di d have an i nt er est .
7 Q. And di d you - - wer e you awar e of what each pi ece of
8 equi pment was used f or i n t he pr oj ect ?
9 A. Each pi ece, no.
10 Q. And you sai d t hat t he r ent was not deduct i bl e, al l owabl e by
11 NI ST, r i ght ?
12 A. That ' s cor r ect , i f t he gr ant r eci pi ent r esi ded i n a pl ace
13 of wher e t he pr oj ect happened.
14 Q. So i t ' s your under st andi ng t hat i t was because t he gr ant
15 r eci pi ent , Dr . Kar r on, r esi ded at t he l ocat i on wher e t he
16 comput er s wer e, t hat t hat was t he r eason t hat t hat r ent expense
17 woul d not be al l owed?
18 A. Rat her t he ot her way ar ound. The pr oj ect was housed i n t he
19 r eci pi ent , t he def endant ' s apar t ment . That ' s somet hi ng
20 somewhat di f f er ent .
21 Q. What ' s t he di f f er ence?
22 A. Wel l , t he di f f er ence i s t her e was an est abl i shed home wher e
23 t he gr ant r eci pi ent l i ved, and you coul dn' t r un - - i f you r an
24 your - - t her e was not hi ng per se r unni ng t he pr oj ect out of
25 your apar t ment . I t ' s j ust t hat you coul dn' t t ake your
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1 apar t ment as an al l owabl e expense. I t ' s ver y si mpl e. You
2 ei t her coul d or you coul dn' t .
3 Q. What i f he moved t o one f l oor down? Thi s i s a hi gh- r i se
4 bui l di ng, r i ght , on East 33r d St r eet ?
6 THE COURT: Hypot het i cal quest i on agai n, Mr .
7 Rubi nst ei n, come on.
8 Q. Wel l - -
9 THE COURT: Let ' s move i t on.
10 Q. I f you move one f l i ght down t o somebody el se' s apar t ment - -
12 Q. - - woul d you deduct t he expense?
13 THE COURT: I t hi nk i t ' s t he f i r st f l oor .
15 THE COURT: I t hi nk you t ol d us t hi s apar t ment was on
16 t he f i r st f l oor , so.
17 MR. RUBI NSTEI N: No, i t ' s on t he 4t h f l oor , J udge. I f
18 I sai d i t was on t he f i r st f l oor , I mi sspoke.
19 THE COURT: Okay.
20 MR. RUBI NSTEI N: Al l r i ght .
22 Q. So i t ' s cet er a your vi ew t hat a r ent expense, t he onl y
23 r eason t he r ent expense was not al l owabl e was because t he
24 def endant r esi ded at t he l ocat i on, cor r ect ?
25 A. Yes, and t hat was conf i r med by J oan Hayes.
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1 Q. Di d you ever hear of t he concept , di r ect and i ndi r ect
2 expenses r el at ed t o t he gr ant ?
3 A. Yes, I t hi nk I have i n t he past . I haven' t t hought about
4 i t f or some year s.
5 Q. Wel l , i n t he 30 pages t hat you r ead - -
6 A. I di dn' t .
7 Q. - - di d you happen t o not i ce anyt hi ng about i ndi r ect
8 expenses?
9 A. To my r ecol l ect i on r i ght now, no.
10 Q. By t he way, you al so sai d t hat you had di scussed wi t h Dr .
11 Kar r on t he unal l owabi l i t y of ut i l i t i es, cor r ect ?
12 A. Cor r ect .
13 Q. And, i n f act , ar e you awar e of negot i at i ons as t o havi ng as
14 an expense deduct i bl e f r omNI ST f or ut i l i t i es?
15 MR. EVERDELL: Obj ect i on, your Honor .
16 THE COURT: I don' t see t he r el evance. I ' mgoi ng t o
17 sust ai n t hat .
18 Q. Wel l , wer e you a r eci pi ent of any e- mai l s r el at ed t o r ent ,
19 ut i l i t i es expenses?
20 A. Ther e wer e hundr eds of e- mai l s wr i t t en i n t he cour se of 15
21 mont hs. Ther e may have been one r el at ed t o ut i l i t i es. I woul d
22 have t o see i t .
23 Q. You wer e pr esent i n t he summer of 2002, cor r ect ?
24 A. I - - my f i r st bi l l abl e day was J ul y 27t h, 2002.
25 Q. And wer e you awar e t hat Dr . Kar r on had t aken a $75, 000
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1 payment i n Oct ober of 2001?
2 A. Yes. Thi s was an i ni t i al dr awdown. The mi nut e t he ATP t ap
3 f und t ap was t ur ned on, some t en mont hs bef or e I st ar t ed
4 wor ki ng on t he pr oj ect .
5 Q. And ar e you awar e t hat i n August t hat t her e wer e
6 bookkeepi ng ent r i es made t o t ur n t hat $75, 000 i nt o sal ar y?
7 THE COURT: Obj ect i on.
9 THE COURT: Sust ai ned.
10 Q. Di d you see any r ecor ds i n t hi s, i n t hese Qui ck Books
11 i ndi cat i ng t hat 75 - - t hat Dr . Kar r on was cr edi t ed as sal ar y i n
12 August 2nd of 2002 f or $61, 000 and change?
13 A. I don' t r emember t he exact payment s Dr . Kar r on t ook as hi s
14 dr awdown or hi s sal ar y or advances on sal ar y, or money t hat he
15 pai d hi msel f bef or e t he pr oj ect st ar t ed.
16 Q. But wer e you awar e of a j our nal ent r y made i n t he books on
17 Sept ember 30t h, 2002, at t r i but i ng 60 - - $61, 000 t o Dr . Kar r on
18 as sal ar y and t hat no check was t hen i ssued?
20 THE COURT: Do you have any r ecol l ect i on of t hat ?
21 THE WI TNESS: No, your Honor , I don' t .
22 Q. Wel l , i n your - -
23 THE COURT: J ur y i s i nst r uct ed t hat you' r e not t o t ake
24 i nt o account t he quest i ons as bei ng evi dence. The quest i ons
25 ar e not evi dence. The onl y evi dence comes f r omt he wi t ness.
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1 Thi s wi t ness hasn' t t est i f i ed about t hose t hi ngs.
2 Q. Wel l , bef or e - -
3 THE COURT: Let ' s - -
4 THE WI TNESS: May I have some mor e wat er whi l e
5 we' r e - -
6 THE COURT: Let ' s br i ng i t t o an end, Mr . Rubi nst ei n.
7 MR. RUBI NSTEI N: Yes. I ' mget t i ng t her e, J udge.
8 THE COURT: And get t i ng t her e qui ckl y.
9 Q. Now, when you wer e doi ng t hi s f i nanci al wor k f or , f or t he
10 audi t , r i ght , you wer e get t i ng paper s f or t he audi t f or J oan
11 Hayes?
12 A. Pr epar i ng r epor t s, separ at i ng out t he NI ST al l owabl e f r om
13 t he non- NI ST al l owabl e, yes.
14 Q. Di d you f i nd any, i n your pr epar at i on, any $75, 000 l oan
15 out st andi ng t hat Dr . Kar r on owed?
16 THE COURT: Do you r emember ?
17 THE WI TNESS: Your Honor , what I r emember i s t hat when
18 I wor ked back i n t i me, si nce we' r e t al ki ng about t en mont hs
19 pr i or t o my st ar t i ng at ATP, t hat wi t hi n t he f i r st , l i t er al l y,
20 t he f i r st or second day of t he st ar t of t he pr oj ect on Oct ober
21 1st , 2001, Dr . Kar r on t ook $75, 000 out of t he NI ST f unds as a
22 what bookkeeper s or account ant s l i ke t o cal l dr aws. Thi s i s i n
23 f act , pay your sel f a l ump sumof money.
24 THE COURT: Wai t . You don' t have t o gi ve an
25 expl anat i on.
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2 Q. I n your wor ki ng wi t h t he Qui ck Books i n pr epar at i on f or t he
3 audi t , di d you f i nd t hat t her e was a $75, 000 l oan out st andi ng
4 t hat Dr . Kar r on owed on t he ATP pr oj ect ?
5 A. The check - -
6 THE COURT: Do you r emember ?
7 THE WI TNESS: Al l I r emember i s t he check t hat was
8 wr i t t en out of ATP t o t he def endant f or $75, 000 and, i t was
9 mar ked by t he def endant hi msel f , si nce t hi s was t en mont hs
10 bef or e I st ar t ed, as D. K. , Dan Kar r on dr aw. That was how t he
11 check was not ed.
12 Q. And you have no r ecol l ect i on of whet her or not t hat was
13 ever r epai d?
14 THE COURT: He sai d t hat was al l hi s memor y.
15 Q. Wel l , you di d f i nd - -
16 THE COURT: I ' l l al l ow t he quest i on, l et ' s go ahead.
17 Q. - - as a bookkeeper - -
18 THE COURT: Do you r emember whet her t hat was r epai d i n
19 August 2003? That was t he quest i on.
20 A. I don' t r ecol l ect one way or t he ot her , no.
21 Q. Woul dn' t i t be somet hi ng t hat you woul d, as a - -
23 Q. - - a bookkeeper somet hi ng t hat i f i t was not r epai d, you
24 woul d have t o make some ki nd of not e about ?
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2 Q. Di d you know a Mar k St anl ey?
3 A. Mar k St anl ey?
4 Q. Yeah.
5 A. Oh, no.
6 Q. Di d you know Mar i l yn Gol dst ei n?
7 A. The name sounds f ami l i ar , but I don' t r ecol l ect anyt hi ng.
8 Q. Hope Snowden?
9 A. Hope?
10 Q. Yes.
11 A. I bel i eve i f you' r e t al ki ng about Hope, one of t he ATP
12 manager s, I knew her by name.
13 Q. B. J . Li de?
14 A. B. J . i s anot her ATP manager .
15 Q. You ever speak t o any of t hose peopl e?
16 A. I sai d hel l o t o B. J . t wo weeks ago, and i t was j ust hel l o,
17 I ' mFr ank, and she sai d hi , I ' mB. J .
18 Q. Her e i n t he cour t house?
19 A. No, not i n t he cour t house, no.
20 Q. I n t he U. S. At t or ney' s Of f i ce?
21 A. That ' s t he bui l di ng next door ?
22 Q. Yes.
23 A. Yes. I sai d, I sai d hel l o t o her .
24 Q. And by t he way, t he, quot e, apar t ment , wer e you ever i n t he
25 bedr oomof t hat apar t ment wher e CASI was headquar t er ed?
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1 A. Yes, on a coupl e of occasi ons. When comput er s wer e down,
2 t he def endant had a comput er i n t hat r oom.
3 Q. How - -
4 A. Once or t wi ce, l i t er al l y once or t wi ce, pr obabl y.
5 Q. You wor ked t her e t hr ee days a weeks, cor r ect ?
6 A. I t woul d, as I ' ve t est i f i ed al r eady, i t woul d var y bet ween,
7 say, one and t hr ee days a week.
8 Q. And how many peopl e wer e gener al l y t her e wor ki ng on t he
9 pr oj ect when you wer e t her e?
10 A. Agai n, t hat woul d be - - woul d change. When Mi ss Wi nt er was
11 ar ound doi ng t he day- t o- day okay keepi ng f or t he f i r st coupl e
12 of mont hs af t er I j oi ned, Ni ki was of t en t her e. J i mCox, one
13 of t he pr ogr ammer s was of t en t her e. And t hen a gent l eman
14 cal l ed Mat , who appear ed t o be a bi t of a hanger on, I was
15 never qui t e sur e what Mat di d, and Mar gar et , anot her hanger on.
16 Q. Mar gar et di d a l ot of scanni ng, r i ght ?
17 A. I saw her scanni ng once or t wi ce.
18 Q. And how much was Mar gar et pai d a week?
19 A. I have absol ut el y no r ecol l ect i on at t hi s poi nt .
20 Q. Now, t her e came a t i me t hat a Bob Benedi ct was hi r ed,
21 cor r ect ?
22 A. Cor r ect . He i s t he busi ness manager f or f i scal year t wo.
24 THE COURT: Real l y, Mr . Rubi nst ei n, t hi s i s not - -
25 t hi s i s goi ng way beyond what ' s necessar y f or your
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1 cr oss- exami nat i on.
2 Q. Bob Benedi ct was t he busi ness manager f or CASI , cor r ect ?
4 THE COURT: He' s al r eady t est i f i ed t o t hat .
5 Q. And i n f act t her e came a t i me when t he bookkeepi ng syst em
6 got moved of f - si t e, r i ght ?
8 Q. And t hat ' s af t er Bob Benedi ct came aboar d?
10 Q. And was i t moved t o Ken J ackson Gr oup ar ea?
11 A. Yes.
12 Q. Now, t he pr oj ect was suspended, t he gr ant was suspended,
13 was i t not , i n t he l at t er par t of J une of 2003?
15 THE COURT: We' r e al l awar e of t hat . He' s t est i f i ed
16 t o i t bef or e. Now l et ' s go ahead.
17 Q. Di d Dr . Kar r on advance moni es t o pay bi l l s af t er t he gr ant
18 was suspended?
21 Q. Ar e you awar e of whet her or not Dr . Kar r on l oaned money t o
22 t he NI ST pr oj ect dur i ng t he t i me t hat you wer e t her e?
24 A. I amnot awar e of t hat .
25 Q. Par don?
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1 A. I amnot awar e of t hat .
2 Q. Wel l , l et me show you an e- mai l t hat ' s mar ked 3507Q?
3 THE COURT: What l et t er ?
4 THE DEPUTY CLERK: 3507Q?
5 MR. RUBI NSTEI N: Q.
6 THE DEPUTY CLERK: 3507Q.
7 Q. I show you t hi s e- mai l dat ed Sept ember 3r d, 2002?
8 A. Uh- huh.
9 Q. Fr omFr ank - - f r omyou?
10 A. Cor r ect .
11 Q. To Dr . Kar r on?
12 A. Ri ght .
13 Q. C. c. Hayes?
14 THE COURT: What page of t hi s?
15 MR. RUBI NSTEI N: Thi s i s page t en of 51, your Honor .
16 THE COURT: Thi s i s Sept ember 3r d, 2002?
17 MR. RUBI NSTEI N: Cor r ect .
18 Q. And di d you, i n t hat e- mai l , say t hat , my bi ggest concer n
19 i s maki ng sur e t hat ever yt hi ng i s kosher on t he f l ow of moni es
20 t hat has happened si nce t he i ncept i on of NI ST pr oj ect bet ween
21 CASI and t he NI ST sub account s i n CASI and Dr . Kar r on' s
22 per sonal f i nances. Dr . K, ver y under st andabl y, and as most
23 smal l busi ness owner s needs t o oper at e, has made per sonal l oans
24 i n var i ous ways t o meet hi s cash f l ow needs i n CASI , NI ST, and
25 I want t o make sur e t hat we t ake not e of ever y, ever yt hi ng and
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1 t hat i t i s al l cl ean.
2 Do you r ecal l sendi ng t hat e- mai l ?
3 A. Wel l , now, I - - t hat i s my wr i t i ng, yes. Thi s i s about
4 l ess t han f i ve weeks af t er I st ar t ed t he pr oj ect , st ar t ed
5 wor ki ng on t he pr oj ect .
6 Q. And does t hat r ef r esh your r ecol l ect i on t hat Dr . Kar r on
7 made l oans t o t hi s pr oj ect per sonal l oans?
8 A. Subsequent t o t he wr i t i ng of t hat e- mai l - -
9 Q. Does t hat r ef r esh your r ecol l ect i on?
10 A. I t doesn' t , i t doesn' t - - i t doesn' t r ef r esh my
11 r ecol l ect i on enough t o be speci f i c about whet her he act ual l y
12 di d make l oans or not . I was under t he i mpr essi on, l ooki ng at
13 t he dat a t hat was i n Qui ck Books and Qui cken, t hat he made
14 l oans.
16 THE COURT: Any r edi r ect ?
17 MR. EVERDELL: No r edi r ect , your Honor .
18 THE COURT: No r edi r ect ? Thank you. I ' msor r y, j ur y,
19 but i t saved us one wi t ness.
20 MR. RUBI NSTEI N: One l ast quest i on my associ at e asked
21 me t o ask.
22 THE COURT: Oh, no.
23 MR. RUBI NSTEI N: One quest i on.
24 THE COURT: J ur y' s excused.
25 ( J ur y exi t s t he cour t r oom)
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1 THE COURT: Have a good weekend. I hope t he weat her
2 i s good, not t oo hot . See you at 9: 30 i n t he mor ni ng, Monday
3 mor ni ng, not Sat ur day mor ni ng.
4 Okay, you' r e excused.
5 THE WI TNESS: Thank you.
6 THE COURT: Who i s t he next wi t ness.
7 MR. KWOK: The next wi t ness i s Bob Benedi ct .
8 MR. EVERDELL: Bob Benedi ct , your Honor , t hat i s t he
9 l ast gover nment wi t ness.
11 MR. EVERDELL: We bel i eve.
12 THE COURT: Okay.
13 MR. RUBI NSTEI N: I ' l l have wi t nesses her e Monday and
14 be pr epar ed t o go, your Honor .
16 MR. RUBI NSTEI N: Af t er I r evi ew t he Gover nment ' s
17 submi ssi on under Rul e 29.
18 MR. KWOK: When can we expect t he wi t ness l i st f r om
19 def ense counsel ?
20 THE COURT: You' r e goi ng t o have a submi ssi on - - what
21 about Rul e 29?
22 MR. RUBI NSTEI N: Yeah, your Honor had asked t he
23 gover nment t o submi t - -
24 THE COURT: Yes, I have, on Monday mor ni ng.
25 MR. RUBI NSTEI N: - - a submi ssi on.
( 212) 805- 0300
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1 THE COURT: Yeah. But you' l l have a wi t ness t o go.
2 MR. RUBI NSTEI N: No, t hey have - -
3 THE COURT: We have a - - Rul e 29 won' t come up unt i l
4 af t er t hei r l ast wi t ness.
5 MR. KWOK: When can we get a wi t ness l i st f r omdef ense
6 counsel ?
7 THE COURT: Oh, yes, your wi t ness - -
8 MR. RUBI NSTEI N: I ' l l pr ovi de i t as soon as - -
9 THE COURT: Mr . Rubi nst ei n.
10 MR. RUBI NSTEI N: You have t he names of t hr ee of t he
11 wi t nesses, and we had a wi t ness l i st t hat was submi t t ed f or t he
12 j ur or s. A number of t hemar e char act er wi t nesses.
13 THE COURT: Oh, no. You have a l i st of peopl e whose
14 names mi ght be ment i oned dur i ng t he cour se of t he t est i mony.
15 MR. EVERDELL: What t hr ee ar e you r ef er r i ng t o now?
16 THE COURT: That ' s di f f er ent t han t he wi t ness l i st .
17 MR. RUBI NSTEI N: I don' t know. I have t o get - - we' l l
18 e- mai l you somet hi ng, we' l l e- mai l you somet hi ng t omor r ow.
19 MR. EVERDELL: Your Honor , he st i l l hasn' t gi ven
20 r esumes f or t he exper t s t hat he not i ced as wel l .
21 THE COURT: We need t hose r esumes f or t he exper t s. We
22 asked f or t hose. My l aw cl er k asked f or t hose a week ago, I
23 bel i eve.
24 MR. RUBI NSTEI N: We' l l , e- mai l t hemt o t he gover nment .
25 He had gi ven t hemt o me t hr ee t i mes and I mi spl aced t hem.
( 212) 805- 0300
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1 MR. EVERDELL: I f your Honor i f he pl ans t o cal l an
2 exper t on Monday, I - -
3 THE COURT: What ?
4 MR. EVERDELL: We st i l l don' t have t he r esumes. I
5 mean t her e i s no way we can - - we st i l l st and on our obj ect i on
6 t o t hese exper t s. We haven' t had pr oper not i ce and - -
7 THE COURT: I want t o know t he name of t he wi t nesses
8 f or Monday and Tuesday r i ght now.
9 MR. RUBI NSTEI N: I have Mason, we' l l have - -
10 THE COURT: Who?
11 MR. RUBI NSTEI N: J ohn Mason.
12 MR. EVERDELL: Who i s J ohn Mason?
13 THE COURT: Who i s J ohn mason?
14 MR. RUBI NSTEI N: AmI r equi r ed t o gi ve t hem- -
15 THE COURT: Wel l , i s i t - -
16 MR. RUBI NSTEI N: - - i nf or mat i on?
17 THE COURT: He' s not one of t he exper t s.
18 MR. RUBI NSTEI N: No, he' s not an exper t .
20 MR. RUBI NSTEI N: Bi l l , Wi l l i amNi col i , who i s a r eal
21 est at e - -
22 MR. EVERDELL: He' s one of t he exper t s.
23 MR. RUBI NSTEI N: He' s one of t he exper t s.
24 MR. EVERDELL: We don' t have hi s r esume.
25 THE COURT: You have t o have t he r esume or I ' mnot
( 212) 805- 0300
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1 goi ng t o al l ow hi m.
2 MR. RUBI NSTEI N: I wi l l get i t t o - -
3 THE COURT: The gover nment ' s goi ng t o have t o get i t
4 wi t hi n t he next hal f - hour t o one hour .
5 MR. RUBI NSTEI N: I t ' s on al l - -
6 THE COURT: I ' msor r y, we' r e not goi ng t o al l ow you t o
7 do t hi s. You' ve had - -
8 MR. RUBI NSTEI N: We' l l gi ve i t t o you now.
9 THE COURT: My l aw cl er k cal l ed you on Fr i day a week
10 ago f or t hose t o be submi t t ed t o us and t o t he gover nment .
11 MR. RUBI NSTEI N: I know, and t hey dumped al l t hi s 3500
12 mat er i al on me, J udge, and I ' ve been wor ki ng seven days a week
13 and I ' mdoi ng t he best I can, I ' msor r y. And i f you want t o
14 pr ecl ude me - - we' l l gi ve you Ni col i ' s r esume - -
15 THE COURT: You' ve got assi st ant s.
16 MR. RUBI NSTEI N: - - now.
17 THE COURT: Al l r i ght . You' ve got i t on comput er
18 evi dent l y.
19 MR. RUBI NSTEI N: I t ' s not - -
20 THE COURT: Doct or has hi s comput er her e, Dr . Kar r on.
21 Punch i t out f or al l of t hem.
22 MR. EVERDELL: Your Honor , separ at e and par t f r omt he
23 r esume i ssues, we st i l l have a r el evance obj ect i on t o a l ot of
24 t hese exper t s. I t ' s j ust not r el evant t o t he - -
25 THE COURT: I know, but I t hi nk we shoul d have a
( 212) 805- 0300
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923
1 r esume. And, i n any event , you don' t know how I ' mgoi ng t o
2 hol d.
3 MR. EVERDELL: That ' s t r ue, your Honor .
4 MR. KWOK: I f I may, whi l e t he def ense i s wor ki ng on
5 t he r esume, I bel i eve t hey al so r ai sed t he i ssue of quashi ng
6 t he subpoena we i ssued i f as when, t he subpoena we i ssued t o
7 t he def endant i n case he t est i f i es. We st i l l haven' t got any
8 submi ssi on f r omt hemon t he gr ounds t hat t hey woul d l i ke t o
9 quash a subpoena. I bel i eve your Honor r equest ed f ur t her
10 br i ef i ng f r omdef ense counsel because t he case t hey ci t ed t o
11 your Honor was not on poi nt , t he case by J udge J ones.
12 THE COURT: I ' ve f or got t en whi ch - -
13 MR. KWOK: I bel i eve t hey ci t ed t he Wei ssman case,
14 your Honor , and your Honor r ead t he case on t he bench and was
15 of t he vi ew t hat because t hat concer ned a t hi r d par t y subpoena
16 i t was not on poi nt , and r equest ed f ur t her br i ef i ng f r om
17 def ense counsel . We haven' t got t en anyt hi ng at t hi s poi nt .
18 THE COURT: I ' ve f or got t en what happened. I r emember
19 t he J udge J ones case di d t hat , but I ' ve f or got t en t he i ssue i t
20 was r ai sed.
21 MR. KWOK: The i ssue, I bel i eve t hat t hey r ai sed, was
22 t hat 17C t r i al subpoena coul d not be i ssued f or i mpeachment
23 pur poses, but t he hol di ng of t hat case i s much di f f er ent
24 because t her e i t was i ssued t o a t hi r d par t y not t est i f yi ng.
25 THE COURT: Yes. And not hi ng f ur t her havi ng been
( 212) 805- 0300
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1 submi t t ed by t he def ense - -
2 MR. RUBI NSTEI N: We' r e get t i ng - -
3 THE COURT: And si nce not hi ng f ur t her has been
4 submi t t ed by t he def ense, i t ' s seems t o me t hat t he subpoena
5 has t o be compl i ed wi t h.
6 MR. RUBI NSTEI N: Wel l , when we make a deci si on i f
7 we' r e goi ng t o cal l hi m, I don' t t hi nk we have t o compl y wi t h
8 i t bef or e we make t hat f i nal deci si on.
9 MR. KWOK: The subpoena asks f or t wo days i n advance
10 of t est i mony.
11 THE COURT: I f you' r e goi ng t o cal l hi m, you have t o
12 submi t t he mat er i al i n advance so t hey can be pr epar ed f or t he
13 cr oss- exami nat i on, i f you' r e goi ng t o cal l hi m. I f you' r e not
14 goi ng t o cal l hi m, t hat ' s anot her mat t er , or i f he doesn' t want
15 t o be cal l ed, i t ' s up t o t he t wo of you. I t ' s act ual l y hi s
16 deci si on. So what ' s i t goi ng t o be?
17 MR. RUBI NSTEI N: We have t he exhi bi t s her e, somewher e,
18 J udge. I t mi ght be i n t he back, J udge.
19 ( Recess)
20 MR. RUBI NSTEI N: I t ur ned over document s f or you,
21 J udge.
22 MR. KWOK: I t ' s not al l of t he mat er i al s r equest ed,
23 however .
24 THE COURT: What ' s mi ssi ng?
25 MR. KWOK: On t he t r i al subpoena - -
( 212) 805- 0300
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1 THE COURT: What ?
2 MR. KWOK: Yeah, i n t he subpoena we r equest ed t he
3 f eder al and st at e t ax r et ur ns and/ or t ax f i l i ngs r el at i ng t o
4 t he t ax year 2001 t hr ough 2003, and second i t emi s any and al l
5 document s showi ng sour ces of i ncome f or t he year s 2001 t hr ough
6 2003, i ncl udi ng but not l i mi t ed t o W- 2 f or ms, i nt er est i ncome
7 st at ement s and i nvest ment i ncome st at ement s; t hi r d i t emi s bank
8 account st at ement s per t ai ni ng t o per sonal bank account s at
9 banks ot her t han Chase Bank f or t he year s 2001 t hr ough 2003;
10 f our t h i t emi s pr oof of payment and any, any and al l document s
11 showi ng sour ces of payment f or r ent and/ or mor t gage, medi cal
12 expenses, home r enovat i on expenses, home cl eani ng expenses, and
13 any and al l bi l l s and/ or i nvoi ces exceedi ng $2, 000, f or t he
14 year s 2001 t hr ough 2000.
15 THE COURT: What about mai nt enance, mai nt enance,
16 mai nt enance bi l l s?
17 MR. KWOK: Home cl eani ng expenses, r enovat i on
18 expenses.
19 THE COURT: I don' t mean t hat ki nd of mai nt enance.
20 MR. RUBI NSTEI N: Your Honor , t hey have ever yt hi ng f r om
21 Spi t z. Spi t z t ur ned over al l f i nanci al di scl osur e. He has no
22 ot her account s ot her t han Chase. They have al l hi s r ecor ds,
23 and.
24 THE COURT: What about hi s r ent and mai nt enance bi l l s?
25 MR. RUBI NSTEI N: Rent and mai nt enance bi l l s.
( 212) 805- 0300
KA-2757 KA-2757 KA-2757
926
1 THE COURT: Wer e t hose t ur ned over ?
2 MR. RUBI NSTEI N: They have ever y, ever y check he
3 ever - -
4 THE COURT: Those ar en' t your per sonal - -
5 MR. RUBI NSTEI N: They have al l of t hat , t hat ' s what
6 t hey have i n t hei r box.
7 THE COURT: Do you - -
8 MR. KWOK: I f t hat ' s what t hey r epr esent t hat we have
9 al l t he checks, we ar e f i ne wi t h t hat . I j ust want t hemt o not
10 say t hat t her e ar e some ot her checks he wr ot e r ent checks f r om
11 t hat ar e not avai l abl e t o t he gover nment t hat shows t hat he
12 used some ot her f unds t o pay f or hi s r ent . But i f t hey want t o
13 r epr esent t hat our r ecor ds ar e r epr esent at i ve of t he ent i r et y
14 of t he si t uat i on, we ar e sat i sf i ed wi t h t hat .
15 THE COURT: I s t hat t he case t hen?
16 MR. RUBI NSTEI N: I under st and t hat Dr . Kar r on gave
17 ever yt hi ng t o J oan Hayes and J oan Hayes has cooper at ed wi t h t he
18 gover nment t hr oughout , and t hey have al l of hi s document s. I f
19 t hey can poi nt t o a document t hat t hey ar e mi ssi ng, we wi l l
20 at t empt t o f i nd, f i nd i t i n our syst em, and maybe dupl i cat e i t ,
21 but t hey have ever yt hi ng, t hey sei zed ever yt hi ng. What t hey
22 di dn' t sei ze, Hayes gave t hem.
23 THE COURT: Wai t a mi nut e. The quest i on i s t hey' ve
24 asked f or t he per sonal bank r ecor ds, whi ch I gat her ed bot h
25 si des agr eed t hey have because t her e ar e no ot her bank r ecor ds
( 212) 805- 0300
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927
1 t han t he bank r ecor d f or t he account at Chase Manhat t an, i s
2 t hat wher e i t i s?
3 MR. RUBI NSTEI N: That ' s cor r ect , your Honor .
4 MR. KWOK: I bel i eve t hey r ef er r ed dur i ng t he cour se
5 of t hi s t r i al t o Mast er Car d of whi ch we ar e unawar e, so i f
6 t her e ar e Mast er Car d r ecor ds - -
7 MR. RUBI NSTEI N: I ' l l gl adl y gi ve you t he Mast er Car d
8 r ecor ds. Do we have t hemher e? Wher e ar e t hey? Gl adl y gi ve
9 t hem. Maybe t hey' l l di smi ss t he i ndi ct ment af t er t hey see t he
10 Mast er Car d r ecor ds.
11 I ' l l gi ve, I ' l l gi ve t hemal l of t hese and t hey coul d
12 dr op t hem- - I ' l l pi ck t hemback up on Sunday at t hei r of f i ce.
13 MR. KWOK: And t he l ast t wo i t ems ar e f i r st , pr oof of
14 r esi dency, t empor ar y and/ or per manent f r om2001 t hr ough 2003
15 i ncl udi ng but not l i mi t ed t o per sonal i dent i f i cat i on document s;
16 f or exampl e, dr i ver ' s l i cense, t ax document s, mai l i ng addr ess
17 l abel s, magazi nes, subscr i pt i ons bi l l s and/ or l abel s t el ephone
18 bi l l s and ut i l i t y bi l l s. And t he l ast i t emi s di ar i es,
19 cal endar pl anner s or appoi nt ment books r el at i ng year s 2001
20 t hr ough 2003.
21 MR. RUBI NSTEI N: You know what , J udge, t hey sei zed
22 ever yt hi ng t he man had, al l hi s comput er s as you wel l know f r om
23 your t r i al . Ever yt hi ng was scanned i n, t hey have a di sk t hat
24 t hey pai d $30, 000 f or . They have al l t he r ecor ds, per i od. And
25 I t hi nk t hi s i s out r ageous okay.
( 212) 805- 0300
KA-2759 KA-2759 KA-2759
928
1 THE COURT: I don' t know whet her - -
2 MR. RUBI NSTEI N: Wast e of t i me.
3 THE COURT: Or not - - al l I ' mdoi ng i s I know what t he
4 subpoena cal l ed f or and i f t hey had t hem, i t seemed t o me i t
5 shoul d be i n some ki nd of mot i on t o quash wi t h t he st at ement s
6 t hat you' ve made.
7 MR. RUBI NSTEI N: I made mot i on t o quash bef or e, but
8 t hey have - -
9 THE COURT: No, cont ai ns t he st at ement s.
10 MR. RUBI NSTEI N: - - al l t he document s f r omal l t he
11 comput er s. They know he doesn' t have any paper because t hey
12 know t hat he scanned ever yt hi ng, and al l t he t est i mony and al l
13 t hei r wi t nesses have sai d t hat he scans i t and dest r oys t he
14 or i gi nal .
15 MR. KWOK: Wel l - -
16 MR. RUBI NSTEI N: So I don' t know what t hei r pr obl em
17 i s, J udge, but I don' t t hi nk i t shoul d be your pr obl em, i t
18 shoul dn' t be my pr obl em.
19 MR. KWOK: The pr obl em, your Honor , i s t hat when we
20 agr eed t o essent i al l y pay f or t he def ense di scover y cost , we
21 made i t ver y cl ear t hat we do not i nt end t o go t hr ough any of
22 t hose document s. And subsequent t o t hat , we agr eed t o l et
23 def endant copy al l t he dat a on t hose comput er s. And so i t i s
24 i n t hei r possessi on now, whi ch t hey can r evi ew. The gover nment
25 has never agr eed t o r evi ew any of t he document s i n t hose
( 212) 805- 0300
KA-2760 KA-2760 KA-2760
929
1 comput er s, because we can' t si mpl y r evi ew 60 per cent of t he
2 t ot al hol di ngs of t he Li br ar y of Congr ess wi t hout knowi ng wher e
3 t he st uf f i s. So i f t hey deci de t o cal l t he def endant on t he
4 st and, we expect t hese document s t o be pr oduced. I f t hey' r e
5 not , I expect t hat t he gover nment wi l l be al l owed t o
6 cr oss- exami ne t he def endant , i ncl udi ng why t hese r ecor ds ar e
7 not f or t hcomi ng.
8 MR. RUBI NSTEI N: What r ecor ds ar e t hey cl ai mi ng, what
9 ar e t hey cl ai mi ng i s mi ssi ng?
10 MR. KWOK: For exampl e, i f t he def endant wer e - -
11 THE COURT: They' r e j ust aski ng f or t hose t hi ngs t hat
12 ar e i n t he subpoena t o be r et r i eved.
13 MR. RUBI NSTEI N: Wel l - -
14 THE COURT: Fr omyour comput er syst emor what ever
15 f r om.
16 MR. RUBI NSTEI N: Gi ve us a l i st , we' l l do what we can.
17 THE COURT: The l i st i s i n t he subpoena. Al l t hey' r e
18 aski ng f or i s t he subpoena?
19 MR. RUBI NSTEI N: I don' t have t he subpoena. I t ' s i n
20 t he box somewher e.
21 MR. KWOK: I ' l l gi ve i t t o you r i ght now.
22 ( Handi ng)
23 THE COURT: Al l r i ght , t he r ecor d wi l l r ef l ect t he
24 subpoenas' been handed over .
25 MR. RUBI NSTEI N: We have no di ar i es, cal endar s.
( 212) 805- 0300
KA-2761 KA-2761 KA-2761
930
1 THE COURT: Ther e may be some pl ace on t hat comput er
2 t hat ' s got - -
3 MR. RUBI NSTEI N: They di dn' t ask f or t hat , J udge. Al l
4 I have t o do i s what ' s on t he subpoena. Ther e' s no di ar i es,
5 cal endar , pl anner s, appoi nt ment books, r el at ed f or t hat per i od.
6 Pr oof of r esi dency? I don' t under st and t hat at al l ,
7 J udge, how do you pr ove your r esi dency? They want hi s dr i ver ' s
8 l i cense. They know he l i ves t her e. I mean t hey sei zed t he
9 document s, ever yt hi ng f r omhi mi n 2006.
10 THE COURT: I t says bot h t empor ar y and per manent .
11 MR. KWOK: Per manent - -
12 MR. RUBI NSTEI N: I move t o quash t hat as r i di cul ous.
13 THE COURT: Wel l , t her e' s - -
14 MR. RUBI NSTEI N: I s t her e any di sput e t hat he l i ves - -
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
KA-2762 KA-2762 KA-2762
931
8667KAR7
1 THE COURT: Excuse me. I l ooked t hr ough t he r ecor ds,
2 some dur i ng t he cour se of t he t r i al , and t her e i s some
3 i ndi cat i on t hat t he def endant may have l i ved i n Connect i cut f or
4 a whi l e dur i ng t hi s per i od.
5 MR. RUBI NSTEI N: And what i s t he r el evancy of t hat ?
6 THE COURT: What ?
7 MR. RUBI NSTEI N: What t he r el evancy of i t ?
8 THE COURT: I t i s char ged t o t he - -
9 MR. RUBI NSTEI N: No expenses f r omConnect i cut wer e
10 char ged.
11 THE COURT: They wer e char ged - - t hey wer e cont ai ned
12 i n t he r ecor ds. Whet her t hey wer e char ged or not , I don' t
13 know.
14 MR. RUBI NSTEI N: Not hi ng was cont ai ned i n t he r ecor ds
15 about Connect i cut . They sai d t hat - -
16 THE COURT: Ther e i s somet hi ng about Connect i cut i n
17 t hose r ecor ds. Ther e i s at l east t hr ee mont hs of r ent or
18 somet hi ng of t hat sor t .
19 MR. KWOK: That ' s cor r ect , your Honor . I t hi nk t he
20 ar gument wi l l be t hat def endant act ual l y t ol d t he NI ST peopl e
21 t hat he l i ved i n Connect i cut as a basi s f or cl ai mi ng r ent i n
22 hi s New Yor k apar t ment , t o show t hat he doesn' t l i ve t her e, and
23 so i t ' s act ual l y of f i ce expense. So, t o r ebut t hat ar gument ,
24 i f he does i n f act l i ve i n Connect i cut , we want t hat document .
25 MR. RUBI NSTEI N: I ' mnot goi ng t o ar gue t hat he l i ved
( 212) 805- 0300
KA-2763 KA-2763 KA-2763
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8667KAR7
1 i n Connect i cut and t her ef or e r ent , whi ch i s an i ndi r ect cost ,
2 i s deduct i bl e. I t ' s i r r el evant wher e he l i ved.
3 THE COURT: Mr . Kwok i s ant i ci pat i ng a di f f er ent
4 ar gument f r omt he def endant , t hat i n f act hi s mai n r esi dence
5 was i n Connect i cut and t hi s was j ust a t empor ar y r esi dence.
6 MR. RUBI NSTEI N: What r el evance i s t hat ? We' r e not
7 goi ng t o ar gue.
8 THE COURT: And t her ef or e he shoul d be ent i t l ed t o
9 r ent .
10 MR. RUBI NSTEI N: We' r e not goi ng t o r ai se t hat
11 ar gument . We don' t i nt end t o use t hat ar gument , because r ent
12 i s cl assi cal l y an i ndi r ect cost of t he gr ant . I t ' s i r r el evant
13 wher e he l i ved, and i t woul dn' t mat t er i f he l i ved i n Ti mbukt u.
14 THE COURT: No one knows what peopl e wi l l ar gue.
15 MR. RUBI NSTEI N: J udge, I amt el l i ng you now, I ' m
16 maki ng a r epr esent at i on as an of f i cer of t he cour t t hat I have
17 no i nt ent i on on r ai si ng an ar gument t hat he l i ved anypl ace
18 ot her t han wher e he i s cur r ent l y l i vi ng.
19 The cour t r epor t er i s her e, J udge.
20 THE COURT: Al l r i ght . I s t hat sat i sf act or y, Mr .
21 Kwok?
22 MR. KWOK: I t i s not . I di r ect t he cour t ' s at t ent i on
23 t o Exhi bi t 70, page 18. That ' s t he def endant ' s r ebut t al t o t he
24 audi t r epor t .
25 MR. RUBI NSTEI N: I amnot r ai si ng i t . I t ' s not mi ne.
( 212) 805- 0300
KA-2764 KA-2764 KA-2764
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8667KAR7
1 I t ' s not mi ne. I t was made by Spi t z.
2 MR. KWOK: Thi s document was submi t t ed by t he
3 def endant .
4 MR. RUBI NSTEI N: No, i t was put i n evi dence by t he
5 gover nment .
6 MR. KWOK: On t he cover page i t says pr epar ed by Dr .
7 D. B. Kar r on wi t h t he assi st ance f r omot her s.
8 THE COURT: That ' s my r ecol l ect i on, but I don' t have
9 i t i n f r ont of me.
10 MR. RUBI NSTEI N: Your Honor , I have t he r sums of
11 t hr ee char act er wi t nesses t hat I amsubmi t t i ng - - I mean t hr ee
12 exper t wi t nesses t hat I amsubmi t t i ng t o t he cour t .
13 THE COURT: I t ' s mor e i mpor t ant t hat t he gover nment
14 get i t . Thi s i sn' t def endant ' s pr oper t y.
16 THE COURT: I t ' s a di f f er ent addr ess, I gat her , on t he
17 f r ont page.
18 MR. RUBI NSTEI N: What , J udge?
19 THE COURT: I t hi nk you' ve got t o have somet hi ng
20 bet t er t han t hat .
21 MR. RUBI NSTEI N: Why? I t says what he di d. I t gi ves
22 you - -
23 MR. KWOK: We don' t have a summar y of hi s t est i mony.
25 MR. RUBI NSTEI N: The summar y i s t hat he sol d t he
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1 apar t ment f or $510, 000 and he i s a r eal est at e br oker .
2 THE COURT: What r el evance i s t hat ?
3 MR. RUBI NSTEI N: The r el evance i s t hat t he apar t ment
4 was wor t h $700, 000 bef or e al l of t hese changes.
5 MR. KWOK: And what i s t he r el evance of t hat , your
6 Honor ?
7 MR. RUBI NSTEI N: That t he gover nment cl ai ms t hat he
8 made st r uct ur al i mpr ovement s.
9 THE COURT: Oh, come on.
10 MR. EVERDELL: I t ' s whet her or not t hey wer e i n t he
11 budget . I t has not hi ng t o do wi t h what he sol d hi s house f or
12 l at er .
13 THE COURT: Have you got hi s pr oposed t est i mony i n sum
14 and subst ance? Have t hey got t hat ?
15 MR. RUBI NSTEI N: Yeah.
16 THE COURT: And have t hey got a r sum of hi s
17 empl oyment wher e he has been?
18 MR. RUBI NSTEI N: He says he spent t he l ast 20 year s
19 wor ki ng i n sal es and mar ket i ng, execut i ve posi t i on wi t h maj or
20 cor por at i ons bef or e j oi ni ng Hal st ead Pr oper t i es.
21 THE COURT: That i s not a r sum f or pur poses of an
22 exper t wi t ness.
23 MR. RUBI NSTEI N: J udge, 20 year s he i s at t he same
24 pl ace, r eal est at e.
25 THE COURT: That ' s not a r sum. You won' t be abl e t o
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1 get t he t est i mony i n. You' ve got t o say wher e he was empl oyed,
2 et c.
3 MR. RUBI NSTEI N: I t says her e t he l ast 20 year s he
4 wor ked f or one empl oyer i n r eal est at e. What mor e does he have
5 t o say?
6 THE COURT: I t doesn' t say t hat .
7 MR. RUBI NSTEI N: I t sur e does.
8 THE COURT: I t says - - bef or e j oi ni ng i n ' 88, al l
9 r i ght .
10 MR. RUBI NSTEI N: Passed t he r eal est at e boar d, br oker s
11 boar d. He says wher e he wor ked bef or e. I t gi ves hi s
12 backgr ound, hi s or gani zat i ons, hi s educat i on.
13 THE COURT: I t doesn' t gi ve hi s exper t i se.
14 MR. RUBI NSTEI N: I t says he i s a l i censed br oker f or
15 over 20 year s.
16 THE COURT: Br oker s ar e not appr ai ser s.
18 THE COURT: Br oker s ar e not appr ai ser s, i f t hat ' s what
19 you' r e put t i ng i t i n f or . So you need t o know what hi s
20 t est i mony i s goi ng t o be.
21 MR. RUBI NSTEI N: I ' mt el l i ng you what hi s t est i mony
22 i s, J udge. He l i st ed t he pr oper t y. Not onl y t hat he al so
23 l i ves i n t he bui l di ng. He knows t hat ot her apar t ment s si mi l ar ,
24 what t hey wer e sol d f or i n t he bui l di ng, $700, 000, and t hat
25 t hi s apar t ment sol d f or $510, 000 because of t he condi t i on i t
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1 was i n.
2 MR. KWOK: Your Honor , I f r ankl y don' t see t he
3 r el evance of t hat . The quest i on i s how t he def endant spent t he
4 gr ant money, not how t he mar ket val ues what ever r enovat i on he
5 deci ded t o make t o sui t hi s needs.
6 MR. RUBI NSTEI N: He di dn' t make i t t o sui t hi s needs.
7 He made i t t o sui t - - t hat ' s exact l y t he poi nt . He made i t t o
8 sui t t he needs of ATP, not hi s needs. And we shoul d be abl e t o
9 pr ove t hat .
10 THE COURT: What about t hi s pr i or gr ant t hat he had?
11 MR. RUBI NSTEI N: The DABRA cont r act ended i n 1999.
12 THE COURT: What was i t ?
13 MR. RUBI NSTEI N: I t was a cont r act he had t o devel op
14 t hi ngs f or , advanced r esear ch pr oj ect .
15 THE COURT: And what equi pment was used f or t hat ?
16 MR. RUBI NSTEI N: The equi pment t hat he bought . And
17 t hat ' s t he equi pment t hat he want ed cof undi ng cost s f r om. But
18 t he exper t s have no t est i mony on t hat . That ' s not what we' r e
19 t al ki ng about .
20 THE COURT: I was j ust wonder i ng about i t because i t
21 seemed t o me on t he val i di t y of t he ar gument t hat r ent was
22 not - - or shoul d or shoul d not be an appr opr i at e char ge.
23 MR. EVERDELL: I don' t t hi nk hi s t est i mony has
24 anyt hi ng t o do wi t h t hat . I t doesn' t sound l i ke hi s t est i mony
25 has anyt hi ng t o do wi t h t hat i ssue.
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1 THE COURT: No, I ' mt al ki ng about DABRA.
2 MR. RUBI NSTEI N: CASI pai d Dr . Kar r on r ent f or CASI .
3 They made money. They had a cont r act wi t h DABRA whi ch happened
4 t o be a f eder al cont r act , and t he cor por at i on pai d hi mr ent
5 t hat he r epor t ed on hi s t ax r et ur ns, and t hat ' s t he way he r an
6 hi s busi ness.
7 Can I get home t o my wi f e, pl ease?
8 THE COURT: What el se do we have? You need t he name
9 of t he wi t nesses.
10 MR. RUBI NSTEI N: I gave i t t o t hem. I gave t hemal l
11 of t he exper t s.
12 THE COURT: You j ust t ol d us t he name of t he exper t .
13 MR. RUBI NSTEI N: I al so gave t hemMason.
14 THE COURT: Mason wi l l be cal l ed. I don' t know how
15 l ong he wi l l t ake, but I can' t see i t bei ng ver y l ong. Who
16 el se do we have?
17 MR. RUBI NSTEI N: We have some char act er wi t nesses,
18 J udge. I wi l l gi ve you t he names i n a second.
19 THE COURT: But gi ve t hemt he names of t he wi t nesses
20 who wi l l be cal l ed on Monday and Tuesday.
21 MR. RUBI NSTEI N: I amgoi ng t o t r y t o get t hemal l
22 her e on Monday and wai t unt i l Tuesday i f I need t hemon
23 Tuesday. The char act er wi t nesses ar e Ted Coons, Theodor e
24 Coons. Pr of essor at NYU. Doct or Mi chael Tr eat i s an MD.
25 Possi bl y J i mCox, your Honor .
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1 THE COURT: That wi l l be a f act wi t ness? As a f act
2 wi t ness?
3 MR. RUBI NSTEI N: J i mCox? Yeah, he wor ked at CASI .
4 THE COURT: I j ust want t o make sur e I under st ood.
5 MR. RUBI NSTEI N: I don' t see us goi ng beyond Wednesday
6 mor ni ng. I don' t even know i f we wi l l f i ni sh t he day on
7 Tuesday, except of cour se i f t he def endant t est i f i es, and I
8 woul d assume we woul d pr obabl y ant i ci pat e f i ni shi ng up somet i me
9 on Wednesday, whi ch i s l ess t han was ant i ci pat ed. And al so Mel
10 Spi t z, your Honor , t he account ant . I haven' t made a deci si on.
11 I ' ml eani ng t owar ds not cal l i ng hi m.
12 THE COURT: Who?
13 MR. RUBI NSTEI N: Mel Spi t z, t he account ant , t he CPA.
14 The gover nment i s wel l awar e of hi m. He i s t he one t hey deal t
15 wi t h dur i ng t he audi t .
16 THE COURT: OK. Does t hat hel p?
17 MR. KWOK: I t ' s al l t he i nf or mat i on we have at t hi s
18 poi nt . We st i l l st and on our obj ect i ons on t he exper t
19 wi t nesses on gr ounds - -
20 THE COURT: I don' t t hi nk t hey' r e cal l i ng t hem.
21 MR. RUBI NSTEI N: Yes, I submi t t ed t hei r r sum t o you,
22 your Honor . They' r e wi t h t he exhi bi t .
23 THE COURT: Oh, you ar e goi ng t o cal l t hem. But t hey
24 wi l l be ver y shor t wi t nesses?
25 MR. RUBI NSTEI N: Sapi n and LeCl ai r e, yes.
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1 MR. KWOK: And we st i l l obj ect on r el evance gr ounds,
2 on l at eness of t he not i ce, and t he i nadequacy of t he not i ce.
3 THE COURT: Al l r i ght . Wel l , I don' t know whet her
4 I ' ve got al l t he submi ssi on on t he r el evance gr ounds, but . . .
5 MR. KWOK: We submi t t ed a l et t er t o t he cour t when we
6 f i r st hear d about t hese wi t nesses.
7 THE COURT: You' r e st andi ng on t hat l et t er .
8 MR. KWOK: That ' s cor r ect , your Honor .
9 THE COURT: OK.
10 ( Tr i al adj our ned t o J une 9, 2008 at 9: 15 a. m. )
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1 I NDEX OF EXAMI NATI ON
2 Exami nat i on of : Page
3 BELI NDA RI LEY
5 Redi r ect By Mr . Kwok . . . . . . . . . . . . 814
6 Recr oss By Mr . Rubi nst ei n . . . . . . . . . 817
7 Redi r ect By Mr . Kwok . . . . . . . . . . . . 830
8 FRANK SPRI NG
9 Di r ect By Mr . Ever del l . . . . . . . . . . . 831
11 GOVERNMENT EXHI BI TS
13 144, 145 and 149 . . . . . . . . . . . . 846
14 143 . . . . . . . . . . . . . . . . . . . 857
15 142 . . . . . . . . . . . . . . . . . . . 861
16 147 . . . . . . . . . . . . . . . . . . . 865
17 DEFENDANT EXHI BI TS
19 H . . . . . . . . . . . . . . . . . . . . 715
20 K . . . . . . . . . . . . . . . . . . . . 738
21 CCC . . . . . . . . . . . . . . . . . . . 773
22 FFF . . . . . . . . . . . . . . . . . . . 789
23 P- 1 t hr ough P- 6 . . . . . . . . . . . . . 799
24
25
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1 UNI TED STATES DI STRI CT COURT
1 SOUTHERN DI STRI CT OF NEWYORK
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3 UNI TED STATES OF AMERI CA, New Yor k, N. Y.
3
4 v. S2 07 CR 541 ( RPP)
4
5 DANI EL B. KARRON,
5
6 Def endant .
6
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
7
8
8 J une 9, 2008
9 9: 40 a. m.
9
10
10 Bef or e:
11
11 HON. ROBERT P. PATTERSON, J R. ,
12
12 Di st r i ct J udge
13
13
14 APPEARANCES
14
KA-2773 KA-2773 KA-2773
15 MI CHAEL J . GARCI A
15 Uni t ed St at es At t or ney f or t he
16 Sout her n Di st r i ct of New Yor k
16 BY: STEVEN KWOK
17 CHRI STI AN EVERDELL
17 Assi st ant Uni t ed St at es At t or neys
18
18 RUBI NSTEI N & COROZZO, LLP
19 At t or neys f or Def endant
19 BY: RONALD RUBI NSTEI N
20
20 Al so Pr esent : Rachel Ondr i k, U. S. Dept . of Commer ce
21 Ki r k Yamat ani , U. S. Dept . of Commer ce
22
23
24
25
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1 ( I n open cour t ; j ur y not pr esent )
2 THE COURT: Wel l , I ' ve got t en t he Gover nment ' s l et t er
3 of J une 9t h, and i t appear s t o agr ee wi t h t he Cour t , t hat t he
4 gover nment must pr ove mi sappl i cat i on of t he gr ant f unds and not
5 j ust mi sappl i cat i on of CASI money.
6 MR. EVERDELL: Your Honor , I t hi nk i n t hi s case t he
7 i ssue i s somewhat moot ed, because t he onl y f unds t hat CASI had
8 wer e ATP f unds. I don' t - -
9 THE COURT: That ' s - -
10 MR. EVERDELL: I t hi nk t he - -
11 THE COURT: That ' s, I t hi nk, f or t he smal l amount t hat
12 was f or r ef unds.
13 MR. EVERDELL: Ri ght . Ther e ar e a coupl e of t hi ngs
14 t hat f act or i nt o t hi s, r i ght . Ther e ar e t he r ef und checks i n
15 t he f i r st year , whi ch r eal l y don' t count so much, and t hen i n
16 t he second year t her e wer e, I t hi nk Ms. Ri l ey t est i f i ed about
17 $1500 wor t h of some ot her f unds t hat came i n, but ever yt hi ng
18 el se i s ATP. And as t he l et t er makes cl ear , Ms. Ri l ey di d t ake
19 i nt o account t he $37, 000, quot e unquot e, emer gency l oans t hat
20 t he def endant gave t o t he company, because he pul l ed out much
21 mor e t han t hat , t hat of f set . So r eal l y we' r e deal i ng wi t h ATP
22 f unds al one.
23 I t hi nk t he l aw i s cl ear t hat you don' t act ual l y need
24 t o t r ace t he f unds t o t he act ual pur chases, so t hat i f t hey
25 wer e commi ngl ed wi t h act ual separ at e CASI f unds, we coul d st i l l
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1 pr ove t hat he spent - - i mpr oper l y spent CASI money. However ,
2 i n t hi s case, because al l t he f unds ar e ATP f unds, i t doesn' t
3 r eal l y r ai se an i ssue.
4 THE COURT: Wel l , t he way I r ead t he st at ut e and go
5 back t o t he st at ut e, i t i s a l i t t l e i nconsi st ent f r omt he
6 Gover nment ' s r equest t o char ge. As I r ead t he st at ut e, t he
7 " wi t hout aut hor i t y" phr ase, I guess I shoul d say, appl i es t o
8 t he mi sappl i cat i on of f unds, as wel l as t he conver si on of
9 f unds. That ' s not r ef l ect ed i n t he r equest t o char ge.
10 MR. EVERDELL: I see, your Honor .
11 THE COURT: And I t hi nk i t shoul d be. Ther e' s no
12 comma. Do you f ol l ow me?
13 MR. EVERDELL: Yes, I see wher e you' r e l ooki ng, your
14 Honor . I di dn' t see any par t i cul ar case l aw addr essi ng t hat
15 i ssue.
16 THE COURT: Wel l , af t er r eadi ng your , what i s i t ,
17 Tent h Ci r cui t case - -
18 MR. EVERDELL: Fr azi er .
19 THE COURT: - - and r ef l ect i ng on i t , i t seemed t o me
20 t hat ' s t he way t he st at ut e shoul d be r ead, and I i nt end t o make
21 t he r equest t o char ge r ef l ect t hat .
22 MR. EVERDELL: So i f I coul d j ust be cl ear , do you
23 have an i dea of how t he char ge woul d r ead at t hi s poi nt ?
24 THE COURT: Wel l , i t i ncor por at es t he wi t hout
25 aut hor i t y. I t hi nk I dr af t ed somet hi ng over t he weekend. I
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1 put i t i nt o t he t hi r d el ement so t hat t he t hi r d el ement begi ns
2 t hat , t he gover nment must pr ove, beyond a r easonabl e doubt ,
3 t hat t he def endant wi t hout aut hor i t y i nt ent i onal l y mi sappl i ed
4 money or pr oper t y. I n t hi s case, t o i nt ent i onal l y mi sappl y
5 money or pr oper t y means t o i nt ent i onal l y appl y money or
6 pr oper t y, subj ect t o t he t er ms and condi t i ons of t he gr ant i n
7 an unaut hor i zed manner .
8 MR. EVERDELL: I mean I i n - - we wi l l consi der any
9 possi bl e obj ect i ons, but I t hi nk at t he moment t hat I don' t
10 t hi nk we woul d have any obj ect i on t o t hat , but we' l l consi der
11 i t and i f t her e' s anyt hi ng we want t o r ai se - -
12 THE COURT: That ' s what I - - t hat ' s t he way I - - t hen
13 i t goes on.
14 MR. EVERDELL: Okay.
15 THE COURT: And t hen i t goes ont o i ncor por at e t he
16 def endant ' s r equest t hat t he mi sappl i cat i on of money or
17 pr oper t y, however , does not appl y t o bona f i de as a sal ar y
18 wages f r i nge benef i t s and ot her compensat i on pai d and expenses
19 pai d or r ei mbur sed i n t he usual cour se of busi ness. Because
20 t hat ' s r i ght i n t he st at ut e.
21 MR. EVERDELL: Ri ght , t hat ' s i n t he 660.
22 THE COURT: Now, I don' t know whet her - - I haven' t
23 hear d anyt hi ng f r omMr . Rubi nst ei n.
24 MR. RUBI NSTEI N: J udge, I don' t know how t he
25 gover nment coul d - -
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1 THE COURT: I ' msor r y, si r ?
2 MR. RUBI NSTEI N: I don' t know how t he gover nment coul d
3 l egi t i mat el y ar gue t hat t her e wer e no cont r i but i ons by Dr .
4 Kar r on.
5 THE COURT: Ther e i s no what ?
6 MR. RUBI NSTEI N: Ther e wer e no cont r i but i ons by Dr .
7 Kar r on. Thei r ent i r e case was pr edi cat ed upon t wo concept s, as
8 f ar as I can under st and, t o f or cr i mi nal i t y. Unl ess your
9 Honor ' s onl y t al ki ng about t he r equest t o char ge i ssue.
10 THE COURT: I ' mr eal l y j ust t al ki ng about t he, t r yi ng
11 t o be sur e t hat what ever case goes t o t he j ur y i s f r amed as I
12 under st and t he st at ut e. And as I under st and t he st at ut e, t hat
13 wi t h aut hor i t y appl i es bot h t o conver si on of f unds and
14 mi sappl i cat i on of f unds and, t her ef or e, i t seems t o me t he
15 i ssue of aut hor i t y t o use t he f unds.
16 Now, you say you mai nt ai n t hat t he f unds wer e not al l
17 t he gover nment f unds and t hat Dr . Kar r on made cont r i but i ons i n
18 t he f or ms of l oans t o t he cor por at i on, as I under st and your
19 posi t i on.
20 MR. RUBI NSTEI N: That ' s cor r ect , J udge. The r est
21 of - - I t hi nk goes t o - - I don' t have any obj ect i on at t hi s
22 poi nt . I ' l l r ef l ect f ur t her on i t as your Honor ' s vi ew of
23 wi t hout aut hor i t y pr ovi si on of t he st at ut e.
24 My vi ew of t he evi dence, t hough, i s t hat t he
25 Gover nment ' s t r i ed t hi s case, and i n t hei r openi ng i ndi cat ed
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1 t hat , f or l ack of a bet t er wor d, t he def endant cooked t he
2 books, so he had a cr i mi nal i nt ent and - -
3 THE COURT: They have t o show i nt ent .
4 MR. RUBI NSTEI N: And t hey haven' t . They woef ul l y
5 f ai l ed t o do t hat , number one. And t he second pr ovi si on t hat
6 t hey ar gued was t hat t he def endant di dn' t cont r i but e any f unds.
8 MR. RUBI NSTEI N: That t he def endant cont r i but ed no
9 f unds, and t hey' r e st i l l beat i ng t he same dr umher e. But t he
10 evi dence, P- 1 t hr ough P- 6 di spr oves t hat ; over $30, 000 i n t he
11 f i r st year of t he gr ant t hat was gi ven t o CASI , and t hey
12 haven' t t r aced - - wel l , I ' mnot goi ng t o gi ve t hemany mor e
13 ar gument s, f r ankl y, because I ' l l save t hat f or summat i on i f I
14 have t o go t hat f ar .
15 So t hat ' s t he vi ew, whet her or not t hey' ve est abl i shed
16 t hei r case i s, woul d be f or your Honor t o under st and,
17 obvi ousl y, i n t he f i r st i nst ance.
18 MR. EVERDELL: Your Honor , i f I coul d j ust make a
19 f ew - -
20 THE COURT: Wel l , t he j ur y' s got t o make t hat
21 det er mi nat i on, not me. I t hi nk - -
22 MR. RUBI NSTEI N: Wel l , under Rul e 29 i t ' s up t o you,
23 J udge.
24 THE COURT: No, I ' ve got t o det er mi ne under Rul e 29
25 t hat t he j ur y coul d not r each t he Gover nment ' s - - concl ude as
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1 t he gover nment ar gues as a - -
2 MR. EVERDELL: Your Honor , j ust t o r espond br i ef l y t o
3 what was j ust sai d. I mean, I t hi nk t he wor d t r ace j ust
4 bet r ayed somet hi ng t hat ' s happeni ng i n Mr . Rubi nst ei n' s mi nd.
5 Ther e i s no t r aci ng r equi r ement .
6 And wi t h r espect t o t he $37, 000 t hat he' s r ef er r i ng
7 t o, Ms. Ri l ey' s anal ysi s t ook t hose checks i nt o account .
8 They' r e on her spr ead sheet , gover nment exhi bi t s 110. The f act
9 i s, t he def endant wi t hdr ew al most $130, 000 i n l oans and t hen he
10 pai d back possi bl y $37, 000. She t r eat ed t hemas l oan
11 r epayment s, such t hat i t net t ed out t o no addi t i onal f unds i n
12 t he, i n t he pool . So t hat ' s t aken i nt o account i n her
13 anal ysi s. And i t doesn' t mean we don' t - - t her e i s no t r aci ng
14 r equi r ement t o show t hat , you know, l et ' s assume f or a moment
15 i f we t r eat ed t he $37, 000 as a separ at e pool of money, t he
16 gover nment doesn' t need t o show t hat ever yt hi ng t hat we al l ege
17 was i mpr oper l y bought , came f r ommoney t hat was separ at e f r om
18 t hat $37, 000. I t al l went i nt o t he same pool . Ther e i s no
19 t r aci ng r equi r ement . And because of t he f act t hat he t ook out
20 so much money, i t doesn' t even mat t er , because i t net s out t o
21 zer o. So we r eal l y ar e t al ki ng about al l ATP f unds her e. But
22 even so, even i f we wer e t o consi der t he $37, 000 Mr . Rubi nst ei n
23 i s t al ki ng about , as a separ at e sour ce of f unds, i t woul dn' t
24 mat t er . I mean even on t he r ent al one, as t he gover nment
25 poi nt s out i n i t s l et t er , t hat ' s over $60, 000. So we' r e st i l l
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1 t al ki ng about $23, 000 t hat had t o have come f r omATP f unds, and
2 t hat ' s wel l over t he $5, 000 l i mi t .
3 So t hi s i ssue of not cont r i but i ng f unds i s r eal l y not
4 a r esi dent poi nt f or t he def endant . The gover nment has shown
5 t hat t he f unds t hat wer e at i ssue her e wer e ATP f unds, and t hat
6 t her e r eal l y wer en' t any ot her sour ces of f undi ng f or CASI at
7 t he t i me t hi s gr ant was goi ng on. I t was al l ATP f unds. And
8 we di d t ake i nt o account t he $37, 000 t hat he' s t al ki ng about .
9 And as f or i nt ent , i t i s not j ust t hat he cooked t he
10 books. We sai d i n our openi ng, even, t hat he wi l l f ul l y
11 di sr egar ded what many peopl e ar ound hi m, CASI of f i ci al s, hi s
12 own empl oyees kept t el l i ng hi mt hat he coul dn' t use f unds t o
13 pay f or X, Y and Z, r ent and ut i l i t i es i n par t i cul ar . That ' s
14 j ust one exampl e. And he di sr egar ded t hem. He wi l l f ul l y
15 di sr egar ded ever yt hi ng t hat was bei ng t ol d t o hi m. And t hat
16 t hat ki nd of avoi dance, t hat ki nd of consci ous i gnor ance of
17 what ever ybody had t ol d hi mt o do i s enough f or i nt ent t o
18 est abl i sh i nt ent i n t hi s case. He wi l l f ul l y mi sappl i ed t hose
19 f unds, despi t e what ever ybody, i ncl udi ng Hope Snowden, t he one
20 per son who coul d appr ove t he f unds f or hi m, t ol d hi m, whi ch was
21 no, you can' t do t hat .
22 So t hat ' s enough f or i nt ent , your Honor . We bel i eve
23 t hat t hi s case i s ampl y suf f i ci ent t o go t o t he j ur y on bot h of
24 t hose count s.
25 THE COURT: I t hought your posi t i on was t hat he had
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1 been or i gi nal l y t ol d he coul dn' t pay i t f or r ent or ut i l i t i es
2 r i ght at t he ki ckof f meet i ng.
3 MR. EVERDELL: Ri ght f r omt he begi nni ng. And he had
4 sever al conver sat i ons even bef or e t he ki ckof f meet i ng and af t er
5 t he ki ckof f meet i ng, he and Gur f ei n wi t h Hope Snowden, and wi t h
6 B. J . Li de, bot h of whomsai d no, you can' t do i t . No mat t er
7 how he f r amed t he i ssue, he was t ol d r epeat edl y, no. And he
8 was never t ol d yes on any of t hose t hi ngs, and yet he went
9 ahead and st ar t ed payi ng r ent t o hi msel f f or CASI ' s use of hi s
10 of f i ce space, despi t e t he f act t hat ever y ever ybody ar ound hi m
11 had t ol d hi mno, i ncl udi ng t he ver y of f i ci al s t hat he woul d
12 need t o get appr oval f or such cost s. So hi s i nsi st ence t hat he
13 was r i ght and t hat he woul d get t hese t hi ngs appr oved, doesn' t
14 absol ve hi mof cr i mi nal i nt ent . That ' s j ust wi l l f ul bl i ndness
15 on t he par t of t he def endant . Thank you, your Honor .
16 THE COURT: Al l r i ght . The par t t hat ' s not cl ear t o
17 me i s t he r educt i on of t he sal ar y and t he, and any r epayment of
18 l oans t hat was ar r anged by r educt i on i n sal ar y.
19 MR. EVERDELL: Wel l , your Honor , I t hi nk i f you l ook
20 at t he anal ysi s and spr ead sheet .
21 THE COURT: Or wai vi ng t he r i ght t o obt ai n sal ar y.
22 MR. EVERDELL: Wel l , okay. He di d end up payi ng
23 hi msel f I t hi nk $35, 000 i n, quot e unquot e, sal ar y, r i ght . But
24 i f you t ake - - i f you add t hat t o t he l oans, whi ch t ot al al most
25 $130, 000, pl us t he r ent t hat he pai d hi msel f i s $60, 000, he' s
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1 get t i ng an enor mous amount of money over hi s sal ar y.
2 THE COURT: I ' mnot aski ng you t o - -
3 MR. EVERDELL: Yeah.
4 THE COURT: - - expl ai n i t now, but I ' mj ust sayi ng
5 t hat ' s not cl ear t o me.
6 MR. EVERDELL: Okay.
7 THE COURT: We' ve been t ol d t hat j ur or s ar e goi ng t o
8 be l at e because of subway pr obl em. How do we, st and Rober t ?
9 THE DEPUTY CLERK: Mi ss Reyes i s her e, Mi ss I ppol i t o
10 i s not . She' s not her e yet . She' s t he al t er nat e j ur or .
11 THE COURT: Wel l , counsel , we have al l t he j ur or s
12 except Ms. I ppol i t o, who i s t he al t er nat e j ur or number - -
13 THE DEPUTY CLERK: She was al t er nat e j ur or number
14 f our , now she' s al t er nat e j ur or number t hr ee.
15 THE COURT: She t hought she mi ght be her e by 10: 15.
16 Do you t hi nk we shoul d wai t f or her or you t hi nk we shoul d go
17 ahead?
18 MR. RUBI NSTEI N: I t hi nk we shoul d wai t f or her .
19 She' s cal l ed a l ong t i me ago t hat she had t hi s pr obl em. She
20 spent - -
21 THE COURT: She di d cal l a l ong t i me ago, she i s
22 al t er nat e t hr ee. Al l r i ght , you bot h agr ee?
23 MR. EVERDELL: Your Honor , I t hi nk we may - - we
24 pr obabl y shoul d wai t al so because I st i l l don' t know how l ong
25 def ense counsel ' s case i s goi ng t o t ake, and I know we l ose t he
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1 f i r st j ur or at t he end of t he week, so we' r e r unni ng l ow of
2 al t er nat es.
3 THE COURT: Let me go t o - - l et me ask t he gover nment
4 a quest i on.
5 I n Mr . Rubi nst ei n' s l et t er about cal l i ng t he r eal
6 est at e exper t , he st at ed t hat t he gover nment was goi ng t o make
7 an ar gument - - I don' t have t he l et t er i n f r ont of me. Does
8 anyone have t he l et t er ? Does anyone have t hat l et t er ? Let me
9 see. We seemt o have i t - - st at ed t hat t he gover nment was
10 goi ng t o make an ar gument t hat he made per sonal i mpr ovement s t o
11 hi s apar t ment f or hi s own benef i t and t o enhance t he val ue of
12 t he apar t ment . I ' mnot sur e t he gover nment i s goi ng t o make
13 t hat ar gument at al l .
14 MR. KWOK: That ' s cor r ect , your Honor . I guess
15 especi al l y t he l at t er par t , we' r e not i nt endi ng t o ar gue t hat
16 i t enhanced t he val ue of hi s apar t ment . Al l we ar e sayi ng i s
17 t hat he di d make some r enovat i ons t o hi s apar t ment , what ever
18 t he mar ket val ue of t hat i mpr ovement , quot e unquot e,
19 i mpr ovement s mi ght be, but t hat he di d i t unl awf ul l y usi ng
20 gr ant f unds. I t doesn' t depend on how t he mar ket val ue, quot e,
21 r enovat i ons t hat he' s - -
22 THE COURT: As I under st and i t , you' r e not cl ai mi ng he
23 made t he i mpr ovement s t o enhance t he val ue of t he apar t ment or
24 f or hi s own per sonal benef i t , but r at her t hat he was not
25 al l owed t o, under t he t er ms of t he gr ant , t o make t hose
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1 i mpr ovement s.
2 MR. KWOK: That ' s exact l y r i ght , your Honor .
3 THE COURT: So i f t hat ' s t he case, i f t hey' r e not
4 goi ng t o ar gue t hat , as you say, Mr . Rubi nst ei n, I don' t see
5 how t he r eal est at e exper t ' s t est i mony i s r el evant .
6 MR. RUBI NSTEI N: Wel l , your Honor , f i r st of al l , t he
7 j ur y coul d - - whet her I ar gue i t or not , t he j ur y coul d
8 consi der i t . Because t hey' r e t al ki ng about - - t hey br ought out
9 const r uct i on, quot e, i mpr ovement s, okay. He made const r uct i on
10 t o t he apar t ment . Even i f we i gnor e i t , doesn' t mean t he j ur y
11 i s goi ng t o i gnor e i t , al l r i ght .
12 I f t hey wi l l consent t o a st i p - - t o a char ge t o t he
13 j ur y t hat t he j ur y wi l l f i nd - - i f t hey' l l st i pul at e t hat i t
14 di mi ni shed t he val ue of t he pr oper t y, t hen I t hi nk we' r e al l
15 r i ght . But once he made st r uct ur al changes, j ur or s coul d say,
16 wow, he got a benef i t her e. And t hat shows - - and, as a mat t er
17 of f act , i t shows - - i t goes t o hi s i nt ent not t o do anyt hi ng
18 i nappr opr i at e, t hat he had const r uct i on - -
19 THE COURT: Wel l , I agr ee wi t h you t hat a st i pul at i on
20 woul d be usef ul , but i t ' s t he t er ms of t he st i pul at i on. I ' m
21 not sur e t hat your or al st at ement i s what you i nt ended. But i t
22 does seemt o me t hat t he par t i es coul d st i pul at e t hat t he
23 t her e' s no cl ai mt hat t he def endant i nt ended t o per sonal l y
24 benef i t by maki ng t he i mpr ovement s t o t he pr oper t y.
25 MR. RUBI NSTEI N: See, t he wor d i mpr ovement s i s t he
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1 pr obl em.
2 THE COURT: Par don?
3 MR. RUBI NSTEI N: Ther e wer e not i mpr ovement s. They
4 wer e i mpr ovement s f or t he pr oj ect , not f or t he apar t ment , and
5 t hat i s - - t hat i s t he pr obl em. Once you say i mpr ovement s, t he
6 nat ur al t hi ng, i n al l due r espect , f l ows i s t hat t hey wer en' t
7 i mpr ovement s. They wer en' t i mpr ovement s t o an apar t ment . They
8 wer e an i mpr ovement t o a busi ness, and t her e i s a di st i nct i on.
9 And i t goes t o hi s i nt ent because we i nt end t o br i ng out pr oof ,
10 your Honor , t hat he had ot her const r uct i on done i n t hi s
11 apar t ment , t hat wer e f or i mpr ovement s t o t he apar t ment , and he
12 pai d f or t hem, per sonal l y, whi ch goes r i ght t o t he hear t of hi s
13 i nt ent . They want t o cher r y pi ck her e.
14 THE COURT: The i ssue - - t he poi nt i s t hat t he
15 gover nment i s not cont endi ng t hat he di d t hese t hi ngs f or
16 per sonal benef i t , t hose i mpr ovement s, f or per sonal benef i t .
17 Thei r onl y ar gument i s t hat t hose i mpr ovement s wer e not
18 per mi t t ed under t he t er ms of t he gr ant .
19 MR. RUBI NSTEI N: But , J udge, t hat - - t he f act t hat
20 t hey don' t ar gue i t i s i r r el evant .
21 THE COURT: No, I ' msayi ng - -
22 MR. RUBI NSTEI N: Because of t he f act of t he mat t er
23 i s - -
24 THE COURT: - - st i pul at e t o somet hi ng al ong t hose
25 l i nes.
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1 MR. RUBI NSTEI N: Al l r i ght . Wel l , I ' l l appr oach t hem
2 on t hat .
4 MR. RUBI NSTEI N: But I do, I do i nt end t o have t hat
5 wi t ness her e t hi s mor ni ng, so I ' l l - -
6 THE COURT: Make i t cl ear - -
7 MR. RUBI NSTEI N: I ' l l - -
8 THE COURT: I j ust - -
9 MR. RUBI NSTEI N: Yeah.
10 THE COURT: I t hought you mi ght - - i t mi ght be best i f
11 t he par t i es coul d wor k t hat out , because ot her wi se I t hi nk I ' d
12 t r y and gi ve t he gover nment an i nst r uct i on, or maybe you want
13 me t o gi ve an i nst r uct i on, or maybe t hat coul d be t he t er ms of
14 t he st i pul at i on, whi chever way you want . I t ' s a non- i ssue.
15 ( Counsel conf er r i ng)
16 THE COURT: Al so, I don' t t hi nk t hat t he Gover nment ' s
17 posi t i on i s t hat Dr . Kar r on mi sappr opr i at ed gover nment money
18 f or per sonal use by i ncl udi ng - - by payment of medi cal
19 expenses. I t ' s t hei r posi t i on t hat medi cal expenses wer e not
20 pr ovi ded f or i n any wr i t t en pl an by t he cor por at i on, and t hat
21 t he gui del i nes f or t he gr ant i ndi cat ed t hat t her e had t o be a
22 wr i t t en pl an. I may be wr ong.
23 MR. RUBI NSTEI N: Agai n, J udge, i t ' s not - - wel l , f i r st
24 I wi l l hear f r omt hemt o see i f you' r e wr ong. I don' t know i f
25 you' r e r i ght or wr ong, J udge. I can' t speak f or t hem.
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1 MR. KWOK: That ' s exact l y t he Gover nment ' s posi t i on,
2 your Honor . We have never t aken a posi t i on about what ar e
3 r eason or unr easonabl e pl ans out t her e i n cor por at e Amer i ca.
4 Our onl y posi t i on i s t hat under t he t er ms of t he gr ant i t i s
5 ver y cl ear t hat you' ve got t o have a wr i t t en pl an. And I don' t
6 t hi nk i t ' s ser i ousl y cont est ed t hat t hi s company di d not have a
7 pl an dur i ng t he per i od of t he gr ant . That ' s al l we ar e ar gui ng
8 about . So I don' t see t he r el evance of t hese wi t nesses who ar e
9 goi ng t o come i n and t est i f y about what gener al l y happens i n
10 t he i ndust r y. That si mpl y has no bear i ng. Obvi ousl y, t he
11 f i r st quest i on we' r e goi ng t o ask i s, you have no knowl edge
12 about t he gr ant .
13 THE COURT: Depends on how you ar gue. I mean, i f you
14 ar gue al ong t he l i ne t hat Mr . Rubi nst ei n suggest s, and ar gued
15 t hat t hi s i s a - - t hese wer e per sonal benef i t s t hat Mr . Kar r on,
16 Dr . Kar r on deci ded t o t ake, t hen I t hi nk i t ' s a di f f er ent - -
17 MR. KWOK: Wi t h r espect t o f r i nge benef i t s, we r eal l y
18 don' t i nt end t o make t hat ar gument . I t i s t r ue, your Honor ,
19 t hat on some of t he expenses t hey ar e used f or per sonal
20 benef i t s such as meal s l i ke cof f ee, and you know, per haps even
21 cl eani ng l ady f or hi s own apar t ment . But f or f r i nge benef i t s
22 we don' t i nt end on ar gui ng t hat at al l .
23 MR. RUBI NSTEI N: J udge, t hey can' t have i t bot h ways.
24 They el i ci t t est i mony of or al sur ger y al l eged t o have been f or
25 hi s i mpr ove hi s j aw, t hey el i ci t t est i mony of el ect r ol ysi s
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1 t r eat ment , of dent al use, t hey do al l of t hat and t hen t hey
2 st and her e and say, wel l , we' r e not goi ng t o ar gue t hat he
3 wasn' t ent i t l ed t o. I f t hey' l l st i pul at e, agai n, t hat t he
4 medi cal expenses ar e f ai r and r easonabl e, t he onl y quest i on i s
5 f or t he j ur y, i f your Honor - - i f t hey' l l agr ee t o a char ge,
6 t he onl y quest i on i s t o t he j ur y as t o whet her or not i t was
7 appr opr i at e t o deduct medi cal expenses, r egar dl ess of what t hey
8 wer e f or . And t hat woul d be f ai r . But - -
10 MR. RUBI NSTEI N: - - t o have t hi s vol ume of evi dence
11 about al l t he var i ous medi cal t r eat ment s i s j ust - -
12 THE COURT: I di dn' t i nt end - - I agr ee wi t h you on i t .
13 I ' l l ent er t ai n a mot i on t o st r i ke, i f you want , t o st r i ke
14 cer t ai n t est i mony i f you want .
15 MR. RUBI NSTEI N: Al l r i ght , I woul d make t hat mot i on,
16 J udge.
17 THE COURT: Wel l , you bet t er t el l me what you want
18 st r uck.
19 MR. RUBI NSTEI N: Al l r ef er ences t o t he t ypes of
20 medi cal t r eat ment t hat he had. I t ' s i r r el evant f or t hei r
21 det er mi nat i on, t he t ypes of medi cal expenses t hat he had;
22 t her ef or e, t hey have t he medi cal expenses. They don' t need t o
23 desi gnat e t hem.
24 THE COURT: Wel l , i f t he par t i es agr ee on such a
25 st i pul at i on, t hen I ' l l ent er t ai n i t and gi ve i t t o t he j ur y.
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1 ( Counsel conf er r i ng)
2 MR. KWOK: Your Honor , we j ust conf er r ed. I t hi nk
3 maybe t he most sensi bl e cour se woul d be f or t he Cour t t o
4 i nst r uct t he j ur y somet hi ng al ong t he l i nes of , you ar e t o
5 di sr egar d about t he par t i cul ar nat ur e of t he medi cal pr ocedur es
6 t hat t he medi cal expenses wer e used t o pay f or . You ar e onl y
7 t o consi der t hat t hose expendi t ur es wer e made, somet hi ng al ong
8 t hose l i nes.
9 THE COURT: Wel l , I dr af t ed somet hi ng. I st ar t i t
10 t hi s way. You ar e t o di sr egar d - - you ar e t o di sr egar d t he
11 t est i mony you hear d wi t h r espect t o t he nat ur e of t he medi cal
12 expenses whi ch wer e char ged by t he def endant . The gover nment
13 i s onl y cl ai mi ng t hat under t he t er ms of t he gr ant , medi cal
14 expenses woul d onl y be pai d pur suant t o a heal t h pl an.
15 MR. KWOK: Your Honor , can you r epeat t he l ast par t ?
16 I coul dn' t qui t e cat ch t he l ast f ew wor ds.
17 THE COURT: I sai d, t he gover nment i s onl y cl ai mi ng
18 t hat under t he t er ms of t he gr ant medi cal expenses coul d onl y
19 be pai d pur suant t o a wr i t t en heal t h pl an.
20 MR. KWOK: I t hi nk t hat ' s f i ne, your Honor . Thank
21 you.
22 MR. RUBI NSTEI N: That ' s accept abl e, your Honor .
23 THE COURT: Di d we r each an agr eement on t he r eal
24 est at e i ssue?
25 MR. KWOK: I don' t t hi nk so, your Honor . I suggest ed
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1 a st i pul at i on al ong t he l i nes of , you know, t her e i s no
2 evi dence t o show t hat t he, quot e unquot e, r enovat i ons ei t her
3 i ncr eased or decr eased t he val ue of t he pr oper t y. That ' s not
4 accept abl e t o t he def endant because t hey t ake t he vi ew t hat i t
5 di d decr ease, but we - -
6 THE COURT: I ' msor r y, I was r er eadi ng my i nst r uct i on.
7 MR. KWOK: No. We pr evi ousl y conf er r ed. I suggest ed
8 a pr oposed st i pul at i on al ong t he l i nes of , t her e i s no evi dence
9 i n t he case t hat t hese, quot e unquot e, r enovat i ons ei t her
10 i ncr eased or decr eased t he val ue of t he pr oper t y, t o t ake t hat
11 i ssue out of t he case. But I t hi nk Mr . Rubi nst ei n' s posi t i on
12 i s t hat i t di d i ncr ease t he val ue of t he pr oper t y.
13 THE COURT: Why i sn' t i t t her e' s no - - why i sn' t t he
14 i ssue - - t her e' s no cl ai mby t he gover nment t hat t he def endant
15 per sonal l y benef i t ed by any i mpr ovement s t hat wer e made t o t he
16 apar t ment . The onl y cl ai myou' r e - - t he cl ai myou' r e maki ng i s
17 t hat t he i mpr ovement s wer e not per mi t t ed, as I under st and i t ,
18 wer e not per mi t t ed under t he t er ms of t he gr ant because t hey
19 exceeded t he f l exi bi l i t y por t i on of t he gr ant whi ch al l owed
20 cer t ai n r eal l ocat i on of expenses, but I don' t - - i n ot her wor ds,
21 what I ' mt r yi ng t o do i s t hi nk about t he i ssue i n t he case
22 comes down, as Mr . Rubi nst ei n has st at ed ear l i er , as t o whet her
23 t he def endant i nt ended t o mi sappl y t he moni es wi t hout
24 aut hor i t y.
25 MR. RUBI NSTEI N: J udge, t hat ' s why I t hi nk t hat t he
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1 wor d i mpr ovement s i s j ust an i nappr opr i at e wor d.
2 THE COURT: You don' t l i ke i t , i mpr ovement s?
3 MR. RUBI NSTEI N: No, because I i nt end t o ar gue t hat
4 t hi s was si t e pr epar at i on, and i t wasn' t an i mpr ovement . I t ' s
5 si t e pr epar at i on, whi ch i s per mi ssi bl e under t he gr ant . So t he
6 whol e connot at i on of i mpr ovement s means i t benef i t ed t he
7 pr oper t y - - i t mi ght have benef i t ed an of f i ce, but i t di dn' t
8 benef i t r esi dence. And I ' mnot aski ng t hat t hey say t hat
9 anyt hi ng be sai d about t hat i t di mi ni shed t he val ue of t he
10 pr oper t y. I ' monl y aski ng t hat i t be, you know, cl ear t hat
11 t hi s was not any benef i t t o Dr . Kar r on f i nanci al l y.
12 J udge, coul d I r un out f or per sonal r eason?
13 THE COURT: Yeah, l et ' s al l do t hat . The j ur or ought
14 t o be her e any mi nut e.
16 ( Recess)
17 THE COURT: Al l r i ght , br i ng i n t he j ur y, Rober t .
19 THE COURT: Al l r i ght , pl ease be seat ed.
20 Ladi es and gent l emen, I guess you had as hot a t i me
21 get t i ng her e as I di d. I wal ked f or hal f an hour , and I must
22 say, st ay out of t he sun.
23 But on Fr i day we went over t he case and I was gi ven
24 assur ance t hat we ought t o be done t hi s week, whi ch i s what I
25 know you' r e anxi ous t o know, and so l et ' s see how i t goes.
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1 The next t hi ng i s t hat I got an i nst r uct i on t o gi ve
2 you, and t hat i s t hat you' r e t o di sr egar d any t est i mony you
3 hear d wi t h r espect t o t he nat ur e of t he medi cal expenses whi ch
4 wer e char ged by t he def endant . The gover nment i s onl y cl ai mi ng
5 t hat under t he t er ms of t he gr ant , medi cal expenses coul d onl y
6 be pai d pur suant t o a wr i t t en heal t h pl an.
7 Al l r i ght . Then your next wi t ness?
8 MR. EVERDELL: Yes, your Honor . The gover nment cal l s
9 Rober t Benedi ct .
10 ROBERT BENEDI CT,
11 cal l ed as a wi t ness by t he gover nment ,
12 havi ng been dul y swor n, t est i f i ed as f ol l ows:
13 DI RECT EXAMI NATI ON
14 BY MR. EVERDELL:
15 THE COURT: Pl ease pr oceed.
16 MR. EVERDELL: Thank you, your Honor .
17 Q. Good mor ni ng, Mr . Benedi ct .
18 A. Good mor ni ng.
19 Q. What do you do f or a l i vi ng?
20 A. I ' ma gr ant admi ni st r at or and gr ant manager .
21 Q. How l ong have you been doi ng t hat f or ?
22 A. I ' ve been doi ng i t f or 15 year s.
23 Q. Now, what do you do as a gr ant manager or gr ant
24 admi ni st r at or ?
25 A. I manage t he f i nanci al aspect s and pr ogr amaspect s of
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869zkar 1 Benedi ct - di r ect
1 f eder al gr ant s, st at e gr ant s.
2 Q. When you say you manage t he f i nanci al aspect s, what do you
3 mean by t hat ?
4 A. I make sur e al l of t he expendi t ur es ar e al l owabl e t o t he
5 gr ant , and t hat you f i l e r epor t s as r equi r ed by t he gr ant i ng
6 agency.
7 Q. And wher e di d you wor k as a gr ant manager ?
8 A. I wor ked f or I BM f or 35 year s, ni ne year s as a gr ant
9 manager , and I wor ked f or Axi omas a consul t ant f or t wo mor e
10 year s on I BM gr ant s. And t hen I wor ked f or a year f or CASI , or
11 si x mont hs f or CASI , and f i ve year s f or communi t i es and school s
12 of Br unswi ck Count y, Nor t h Car ol i na.
13 Q. And pr i or t o becomi ng a gr ant manager , what di d you do f or
14 a l i vi ng?
15 A. I was an account ant and f i nance manager f or I BM.
16 Q. For how l ong?
17 A. Ni ne year s i n, or 12 year s i n account i ng and 23 year s i n
18 management .
19 Q. And what ' s your educat i onal backgr ound?
20 A. I have a degr ee i n account i ng f r omChampl ai n Col l ege i n
21 Bur l i ngt on, Ver mont , f ur t her st udi es non- gr ant r el at ed at t he
22 Uni ver si t y of Ver mont , and Whar t on School of Busi ness at t he
23 Uni ver si t y of Vi r gi ni a, and I have a cer t i f i cat i on i n gr ant
24 management f r ommanagement concept s.
25 Q. Mr . Benedi ct , ar e you f ami l i ar wi t h an or gani zat i on cal l ed
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1 t he Nat i onal I nst i t ut e f or St andar ds and Technol ogy?
2 A. Yes, si r , I am.
3 Q. I s t hat somet i mes cal l ed NI ST?
4 A. Yes.
5 Q. And what i s NI ST?
6 A. NI ST i s a br anch of t he f eder al gover nment . And my
7 exper i ence wi t h NI ST i s t hat t hey have a pr ogr amcal l ed ATP,
8 whi ch i s Advanced Technol ogy Pr ogr ams, and t hey f und hi gh r i sk
9 t echnol ogy pr oj ect s.
10 Q. Have you done any gr ant managi ng or account i ng wor k f or
11 compani es t hat r ecei ved ATP gr ant s?
12 A. Yes. The ni ne year s I was wi t h I BM and t he t wo year s as a
13 consul t ant , wer e al l wi t h NI ST ATP gr ant s.
14 Q. And how many gr ant s di d you wor k on wi t h I BM and t he
15 consul t ant s t hat you ment i oned?
16 A. Thr ee. Ther e was a si ngl e gr ant and t wo consor t i umgr ant s.
17 Q. And about when wer e t hose gr ant s awar ded?
18 A. Those gr ant s wer e bet ween 1994 and 2002, t he end of 2002.
19 Q. And what di d you do as t he gr ant manager f or t hose gr ant s?
20 A. I managed, as I sai d ear l i er , t he f i nanci al aspect s of
21 t hose pr oj ect s. I n t he si ngl e gr ant i t was j ust I BM, so i t was
22 f i l i ng t he r epor t s wi t h NI ST ATP.
23 For t he I BM pr oj ect and t he consor t i um, i t was f i l i ng
24 t he f i nanci al r epor t s f or t he ni ne consor t i ummember s, pl us
25 I BM, and maki ng sur e t hat t hey al l had t hei r audi t s i n, and al l
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1 t he f i nanci al dat a as al l owed by t he gr ant .
2 Q. And you ment i oned you al so wor ked br i ef l y f or CASI , i s t hat
3 r i ght ?
4 A. Yes, si r .
5 Q. Di d CASI r ecei ve an ATP gr ant ?
6 A. Yes, si r , i t di d.
7 Q. Who i s t he head of CASI ?
8 A. Dr . Kar r on.
9 Q. Di d t her e come a t i me when you met Dr . Kar r on i n per son?
10 A. Yes, si r , I di d.
11 Q. Di d you - - do you see Dr . Kar r on her e i n t he cour t r oom
12 t oday?
13 A. Yes, si r .
14 Q. Coul d you pl ease poi nt hi mout and i dent i f y an ar t i cl e of
15 cl ot hi ng he' s wear i ng?
16 A. He' s t he gent l eman over t her e wi t h t he, excuse me, wi t h t he
17 r ed t i e.
18 THE COURT: The r ecor d wi l l r ef l ect t hat t he wi t ness
19 has i dent i f i ed t he def endant .
20 Q. How di d you f i r st meet t he def endant ?
21 A. I was at an ATP pr oposer s conf er ence i n t he Spr i ng of 2001.
22 Dr . Kar r on st ood up i n t he conf er ence dur i ng par t of t he
23 pr esent at i ons i n t he Q. and A. sessi on and he sai d t hat he had
24 j ust r ecei ved a gr ant and was wonder i ng i f anybody had any i dea
25 wher e he coul d get some f i nanci al gui dance wi t h t he gr ant s.
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1 Q. Bef or e we get t o what Dr . Kar r on sai d, can you j ust
2 descr i be what t he pr oposer s conf er ence was?
3 A. Pr oposer s conf er ence i s a conf er ence f or peopl e who ar e
4 i nt er est ed i n submi t t i ng appl i cat i ons f or ATP gr ant s, and f or
5 peopl e who have r ecei ved ATP gr ant s t o f i nd out what r ul es
6 gui dance t hey have t o f ol l ow i n or der t o meet t he r equi r ement s
7 of compl i ance r equi r ement s of t he gr ant s.
8 Q. And ar e t hese ATP peopl e pr esent at t hat pr oposal ?
9 A. Yes, si r , t hey ar e.
10 Q. And what , i f anyt hi ng, di d t hey di scuss about t he r ul es
11 about t he ATP gr ant ?
12 A. They t al k about - -
13 THE COURT: At t hat conf er ence.
14 Q. Yes, t he pr oposer s conf er ence.
15 A. They t al ked about t he f i nanci al r equi r ement s, t he r epor t i ng
16 r equi r ement s, what t he f eder al gui del i nes ar e f or , and r ul es
17 ar e f or gr ant s, and what r epor t s had t o be f i l ed when audi t s
18 had t o be f i l ed, t hose ki nd of i t ems.
19 Q. What , i f anyt hi ng, di d t hey di scuss about spendi ng t he
20 gr ant money?
21 A. The gr ant money i s t o be spent onl y as t he budget al l ows
22 and as t he gr ant speci f i es, and i n accor dance wi t h t he cost
23 pr i nci pl es t hat r ul e t hose gr ant s.
24 Q. Di d t hey di scuss any of t he cost pr i nci pl es?
25 A. They di dn' t speci f i cal l y di scuss i ndi vi dual cost
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1 pr i nci pl es, but t hey t al ked about whi ch cost pr i nci pl es
2 appl i ed.
3 Q. Such as?
4 A. A- 110 f or nonpr of i t s, A- 87 f or pr of i t s, 31- 2, whi ch i s a
5 FAR r egul at i on.
6 Q. Now, why wer e you at t hat meet i ng?
7 A. I was at t hat meet i ng r epr esent i ng I BM. We wer e l ooki ng at
8 doi ng anot her appl i cat i on.
9 Q. And you ment i oned t hat t he def endant st ood up at t he
10 meet i ng, i s t hat r i ght ?
11 A. Yes.
12 Q. And what exact l y di d he say?
13 A. He asked i f t her e was anybody who coul d gi ve hi mgui dance
14 on wher e he coul d get some f i nanci al assi st ance wi t h hi s gr ant .
15 Q. And di d you i n f act meet def endant ?
16 A. Yes, si r , I di d.
17 Q. And how di d t hat happen?
18 A. I met hi mat a br eakout sessi on dur i ng t he conf er ence. I
19 appr oached hi mand I sai d, I wasn' t l ooki ng f or a j ob, I was a
20 gr ant manager ; t hat i f he had any quest i ons, I woul d be happy
21 t o do what I coul d t o answer t hem.
22 Q. And what was hi s r esponse?
23 A. He asked me, why I woul d do t hat ? And I sai d, you asked
24 f or hel p and so I ' mof f er i ng i t .
25 Q. Di d you ask f or any payment f or your advi ce?
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1 A. No, si r , I di d not .
2 Q. Di d t he def endant ever t ake you up on your of f er t o gi ve
3 hi madvi ce on quest i ons r egar di ng t he ATP f unds?
4 A. I r ecei ved a phone cal l about t hr ee mont hs, f our mont hs
5 l at er f r omLee Gur f ei n, who i nt r oduced hi msel f as t he cur r ent
6 gr ant admi ni st r at or f or Dr . Kar r on, and he asked me some
7 quest i ons.
8 Q. Now, what quest i ons di d he ask you?
9 A. He was aski ng me how t hey coul d get t he expendi t ur es
10 associ at ed wi t h hi s of f i ce cover ed by t he gr ant .
11 Q. When you say expendi t ur es associ at ed wi t h hi s of f i ce, what
12 do you mean?
13 A. Hi s r ent .
14 Q. And what di d you t el l hi m?
15 A. I asked hi mi f i t was i ncl uded i n hi s budget - - I suspect ed
16 i t woul d not be, because - -
17 MR. RUBI NSTEI N: Obj ect t o what he suspect ed.
18 THE COURT: Obj ect i on sust ai ned as t o what you
19 suspect ed.
20 A. I asked hi mi f i t was cover ed i n hi s budget , and he sai d i t
21 wasn' t . I t ol d hi mt he onl y way t hat he coul d get t he r ent
22 cover ed was t o do a budget amendment and get ATP t o aut hor i ze
23 i t .
24 Q. And what was hi s r esponse, i f anyt hi ng?
25 MR. RUBI NSTEI N: Obj ect i on t o - - who i s t hi s, Gur f ei n?
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