USA V KARRON 07 CR 541 RPP Pre Trial Conf and Full Trial and Sentencing Transcript

The Silvif) J.
Mollo Building
One Saint Andrew's Plaza
NL'W York, New York 10007
The Honorable Robert P. Patterson
United States District Judge
500 Pearl street
New York, NY 10007
BY FACSIMILE
U.S,. Department of Justice
United States Attorney
Southern District ofNew York
Re: Un:!.ted States v. Danie1 B. Karron,
52 07 Cr. 541 (RPP)
Dear Judge Patterson:
The Government respectfully submits this letter to move
in limine to admit certain testimony that a number of Government
witnesses are expected to give.
I . Background
A number of Government witnesses who worked with the
defendant at Computer Aided Surgery, Inc. ("CASI") will testify
that, while they were employed at CASI, they had personal, direct
knowledge about the defendant's electronic bookkeeping system,
known as Quickbooks. They will further testify that, as part of
their everyday duties and responsibilities, they were asked by
the defendant to make data entries regarding the defendant's and
CASI's expenditures in Quickbooks. After they made these
entries, however, the defendant frequently altered their work -
for example, by changing what these witnesses characterized as an
"unallowable" or "non-grant-related expense" back into an
or expense" in the Quickbooks ledger.
These witnesses will testify that, individually and
collectively, they told the defendant on multiple occasions to
stop "mucking around the books," but the defendant persisted in
his conduct and repeatedly violated the controls that his own
employees sought to implement. As a result of this tug-of-war,
the Quickbooks ledger was not a stable document but was
constantly in a state of flux .
.,..-.......
80:12 2900 212 200'd 's'n
------------------
June 2, 2008
page 2
II. R e ~ e v a n c e
The Government submits that such testimony is directly
relevant to the defendant's state of mind and, hence, should be
admissible as evidence at trial. From defense counsel's opening
statement this afternoon, it is apparent that the defense intends
to argue to the jury that the defendant had nothing to hide, that
while mistakes were made, they were made by other people, and
that the defendant had no criminal intent to misapply grant
funds. Evidence that the defendant attempted actively to
interfere with accurate bookkeeping showing how grant funds were
spent at CASI goes directly to the defendant's criminal intent.
III. Non-hearsay
The Government also respectfully submits that such
testimony is not hearsay. Defense counsel has indicated to us
that, should the "Quickbooks ledger" not be admitted into
evidence, he might object to witness testimony about the ledger
on hearsay grounds. For the reasons set forth below, the
Government submits that any such hearsay objections are
meritless.
The Government witnesses' testimony about the ledger is
not for the truth of the information contained in the ledger.
Indeed, the Government's argument is just the opposite - that, as
a result of the defendant's interference with the work.of his
auditors
J
bookkeepers, and business managers, the ledger was
frequently inaccurate. The witnesses' testimony about the ledger
is offered for a different, non-hearsay, purpose: to show simply
that the defendant made alterations to Quickbooks against the
warnings of his employees - alterations of which these witnesses
had direct, personal knowledge - and which would, in turn,
illuminate the defendant's state of mind while the misapplication
of CASI's and the grant's funds was occurring.
Furthermore, to require the admissibility of the ledger
as a precondition of, or alternative to, such witnesses'
testimony is to require the impossible. As noted above, because
of the defendant's constant changes to the Quickbooks entries,
CASI's ledger was in a constant state of change, with the
witnesses making certain bookkeeping entries, only to have them
changed back in a manner that suited the defendant. There is no
comprehensive document that records every keystroke made in
Quickbooks that captures every alteration the defendant made.
Because the Government's witnesses are testifying as to what they
directly observed, however, their testimony is no different from
the typical percipient witness who testifies as to what he
2
SOO'd Z900 L89 ztz vo:tZ 800Z-Z0-Nnr
vOG d Tv&10J.

June 2, 2008
Page 3
observed from his own senses. The mere fact that the subject of
these witnesses' observation was an evolving document - as
opposed to, say, a car accident - does not make their testimony
hearsay. And just as an eyewitness's testimony about a car
accident is not made any less admissible because his observations
were not recorded on camera, the Government witnesses's testimony
about the changing ledger is not any less admissible because
there does not exist a contemporaneous record documenting such
changes over time.
'IV Expert Testimony
Finally, at least with respect to two of the
Government's witnesses - Joan Hayes and Belinda Riley - who are
expected to be qualified as expert the Rules of
Evidence explicitly do not require the admissibility of the
underlying documents for their expert testimony to be admissible.
Fed. R. Evid. 703 ("If of a type reasonably relied upon by
experts in the particular field in forming opinions or inferences
upon the subject, the facts or data need not be admissible in
evidence in order for the opinion or inference to be admitted. H) .
v. Conclusion
For the foregoing reasons, the Government respectfully
submits that the proffered te.stimony of Government witnesses
concerning changes to Quickbooks the defendant made is non-
hearsay evidence and admissible at trial.
By:
Respectfully submitted,
MICHAEL J. GARCIA
United States Attorney

Chi T. Steve Kwok
Christian R. Everdell
Assistant United States Attorneys
(212) 637-2415 / (212) 637-2556
cc: Ron Rubinstein, Esq. (by fax and email)
Counsel to Daniel B. Karron
3
tOO'd e900 2.,89 eTe 3JlddO 's'n vo:Ye BODe-eO-Nne
.,r-.... FACSIMILE COVER SHEET
U.S. ATTORNEY'S OFFICE, S.D.N.Y.
ONE ST. ANDREWS PLAZA
NEW YORK, NEW YORK 10007
**************************************+**********************************
From:
Phone:
Fax:
Steve Kwok
Assistant United States Attorney
(212) 637-2415
(212) 637-2390
,r--...
No. pages (including cover sheet): 4
Date sent: June 2) 2008
***************************************************************************
j _ _ - .._-_1
i FOR OFFICIAL USE ONLY - U.S. AlTORNEY FACSIMILE COMMUNICATION i
j !
1 The information contained in this facsimile message, and any and all accompanying documents. i
~ constitute "for official use ontyY> information. This information is the property of ~ e U.S. t
I Attorney's Office. If you are not the intended recipient of this information, any disclosure, I
~ : : . copying, distribution. or the taking of any action in reliance on this information is strictly ~ : : .
prohibited. If you received this information in error, please notify us immediately by telephone
i at the above n ~ ana destroy the information. !
~ _ _.._ _ i
* * * * * * * * * * * * * * * * * * * * * ~ * * * * * * + * * * * * * . * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
To: The Honorable Robert P. Patterson
212..805..7917
To: Mr. Ron Rubinstein
212-679-1844
Re: JlS v. Karton. 5207 Cr. 541 (RPP)
Message:
Please see the attached letter. Thank you.
lOO'd 2900 c!.89 ZlZ 3QIddO S'A3NHOllV 's'n 80:lZ BOD2-Z0-Nnr
76K9KARA Arraignment
1
1 UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
2 --------------------- -------x
3 UNITED STATES OF AMERICA,
4 v. 07 CR 0541 (RPP)
5 DANIEL B. KARRON,
6 Defendant.
7 ------------------------------x
8 New York, N.Y.
June 20, 2007
9 2:30 p.m.
10
Before:
11
HON. ROBERT P. PATTERSON, JR.,
12
District Judge
13
14 APPEARANCES
15 MICHAEL J. GARCIA
United States Attorney for the
16 Southern District of New York
CHI T. STEVE KWOK
17 Assistant United States Attorney
18 RON RUBINSTEIN
Attorney for Defendant
19
20
21
22
23
24
25
SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
2
1 (In open courtj case called)
2
3 matter?
4
THE DEPUTY CLERK: Is the government ready in this
MR. KWOK: We are. Good afternoon, your Honor, Steve
5 Kwok for the government.
6
7
8
THE COURT: Good afternoon, Mr. Kwok.
THE DEPUTY CLERK: Defendant ready in this matter?
MR. RUBINSTEIN: The defendant is ready. Good
9 afternoon, your Honor. The defendant is represented by Ron
10 Rubinstein of Rubinstein and Corozzo.
11 THE COURT: Good afternoon, Mr. Rubinstein. And good
12 afternoon Mr. Karron.
13 This is on for arraignment, is it?
14
15
16
17
MR. KWOK: Arraignment and presentment.
THE COURT: Excuse me?
MR. KWOK: Arraignment and presentment.
THE COURT: All right. Daniel B. Karron, you have a
18 right to remain silent. You need not make any statement. Even
19 if you have already made statements to the authorities, you
20 need not make any additional statements. Any statement you do
21 make can be used against you.
22 Is the defendant a citizen of the United States?
23
24
MR. RUBINSTEIN: Yes, your Honor.
THE COURT: Mr. Karron, you have the right to be
25 represented by an attorney today and at all future proceedings
(212) 805-0300
3
1 in this case and if you're unable to afford an attorney I will
2 appoint an attorney to represent you.
3 I believe you're represented by retained counsel; is
4 that correct?
5
6
THE DEFENDANT: That is correct.
THE COURT: I'll go on to arraignment. Daniel B.
7 Karron, Mr. Rubinstein, have you seen a copy of the indictment
8 charging the defendant with being an agent of an organization
9 which received benefits of more than ten thousand dollars under
10 a federal program and obtaining a property value of more than
11 five thousand dollars which was under the control of that
12 organization?
13 Have you seen a copy of the indictment charging the
14 defendant with one count, violation of Title 18, united States
15 Code, Section 666.
16 MR. RUBINSTEIN: Yes, your Honor. I have seen it,
17 reviewed it with the defendant. We would waive the public
18 reading and ask the court to enter a plea of not guilty on
19 behalf of Dr. Karron.
20 THE COURT: Dr. Karron, have you seen a copy of the
21 indictment charging you with obtaining -- misapplying more than
22 five thousand dollars in federal funds from an organization
23 receiving more than ten thousand dollars in a single year under
24 a federal program?
25 THE DEFENDANT: Yes, I have.
(212) 805-0300
1
THE COURT: Have you discussed the charges with
4
2 Mr. Rubinstein?
3
4
THE DEFENDANT: Yes, I have.
THE COURT: Do you wish to have the indictment read to
5 you at this time or
6
7
THE DEFENDANT: That's not necessary, sir.
THE COURT: You don't. You wish to waive a reading of
8 the indictment?
9
10
THE COURT: And you wish a plea of not guilty entered
11 at this time on your behalf?
12
13
THE COURT: A plea of not guilty will be entered on
14 behalf of the defendant at this time.
15 When will the government make the required discovery
16 to the defense?
17 MR. KWOK: We have discovery. I'd ask for about three
18 weeks from Mr. Rubinstein if that's satisfactory to the court.
19
20
21
22
23
24 defense.
THE COURT: So what date?
MR. KWOK: July 11.
THE COURT: July II?
MR. KWOK: Yes.
THE COURT: July 11, 2007 for discovery to the
25 How long, Mr. Rubinstein, would you like for any
(212) 805-0300
76K9KARA
1 motions?
2
Arraignment
MR. RUBINSTEIN: Well, your Honor, what lId ask if
5
3 your Honor could set a status conference after we get all
4 discovery. Mr. Kwok has indicated that the discovery is
5 voluminous.
6
7 have--
8
THE COURT: How many days after July 11 do you wish to
MR. RUBINSTEIN: 1
1
m going away on the 13
th
and I'll
9 be back on the 21st. So I would ask for the first week in
10 August, your Honor, to make motions.
11
12
13
14
15
16
17
18
19
THE COURT: All right.
THE DEPUTY CLERK: August 2.
THE COURT: August 8.
MR. RUBINSTEIN: That's fine, your Honor.
MR. KWOK: Is that the second?
THE DEPUTY CLERK: Eighth.
THE COURT: Second or eighth?
MR. RUBINSTEIN: Prefer the eighth, your Honor.
THE COURT: August 8. Is that for motions or to
20 advise us of motions?
21 MR. RUBINSTEIN: If I could advise you of the motions
22 on that day, your Honor.
23 THE COURT: All right. Since it's voluminous material
24 I think that's fair.
25 I would expect the motions to be made soon thereafter.
(212) 805-0300
6
1 So we'll put it down for August 8 at 4:00.
2
3
4
MR. RUBINSTEIN: That's fine, your Honor.
MR. KWOK: That's fine for the government.
THE COURT: Have the parties agreed on a bail package
5 or what is the situation with respect to pretrial detention?
6 MR. KWOK: The government's position is that the
7 defendant can be released on his own recognizance but I was
8 just told by Mr. Rubinstein that the defendant needs to travel
9 throughout the country for lecture purposes.
10
11
12
13
THE COURT: For what purposes?
MR. KWOK: For lecturing.
THE COURT: Oh.
MR. KWOK: For now I think the defendant can be
14 released on the condition that he surrender his passport, which
15 he already did, and no new applications for travel be made.
16 Once the defendant has satisfied the condition of
17 securing two cosigners for a $50,000 PRE, then the government
18 would consent to allowing him to travel for those lecture
19 opportunities.
20
21
THE COURT: Throughout the United States?
MR. KWOK: I was told that he only needs to go to the
22 District of Columbia and Philadelphia. I'm not aware of other
23 locations.
24 MR. RUBINSTEIN: Your Honor, he has business and he
25 travels for the purposes of his business and he -- right now
(212) 805-0300
7
1 he's involved in a contract negotiation between the company he
2 works for out of Washington, D.C., ATK, and the University of
3 Pennsylvania. So he anticipates going to Pennsylvania in the
4 near future and also to Washington, D.C.
5 He may be forced to sell his apartment in New York for
6 financial reasons and he would then look to reside with his
7 former roommate in Connecticut.
8 So we surrendered him this morning. This
9 investigation has been going on I think since 2004, he's been
10 aware of it, and we arranged a voluntary surrender with the
11 passport.
12 I would ask your Honor for at this time to give him
13 permission to go to Connecticut; Philadelphia, Pennsylvania;
14 and Washington, D.C. along with the Southern and Eastern
15 Districts of New York until we secure these two suretors.
16 Does your Honor want us to go before the magistrate
17 with the two suretors, or how should we arrange that?
18 THE COURT: Well, you can go before the magistrate
19 with two sureties and the U.S. Attorney. The U.S. Attorney, I
20 gather, wants to approve the sureties beforehand; is that
21 right?
22
23
MR. KWOK: Yes, of course.
THE COURT: So as I understand the parties agreed on
24 the personal recognizance bond signed by two sureties
25 satisfactory to the government?
(212) 805 0300
1
2
3
4
5
76K9KARA
8
Arraignment
MR. RUBINSTEIN: No, your Honor
THE COURT: Is that right?
MR. RUBINSTEIN: They've agreed
THE COURT: What?
MR. RUBINSTEIN: They've agreed temporarily to release
6 the doctor on a personal recognizance bond, his own, with
7 limited travel rights.
8
9
10
11
THE COURT: Without any sureties?
MR. RUBINSTEIN: Without any sureties.
THE COURT: Is that correct? I just want to be sure.
MR. KWOK: No. My position is that today Mr. Karron
12 can be released on his own recognizance but even after the
13 conditions are satisfied --
14 THE COURT: wait a minute. Today the parties are
15 agreed he will be released on his own recognizance?
16
17
18 sign?
19
20
21
22
MR. KWOK: That's correct.
THE COURT: When do you require the two sureties to
MR. KWOK: Within a week.
THE COURT: Within a week.
Is that agreed upon, Mr. Rubinstein?
MR. RUBINSTEIN: Could we have ten days, your Honor,
23 that would be a week from Friday?
24 THE COURT: That's fine. Within a week from Friday or
25 ten days from now he will provide a recognizance bond signed
(212) 805-0300
9
1 by -- personal recognizance bond for $50,000 signed by two
2 sureties acceptable by the government.
3
4
5
6
THE COURT: Now as to the areas which he may travel?
MR. KWOK: Exactly.
THE COURT: He can travel, as I understand it, to the
7 District of Columbia, to Pennsylvania, to New York, and
8 Connecticut. And any further travel would have to be upon
9 application to the court.
10
11
12
13
MR. KWOK: Exactly. That's the government's position.
THE COURT: Is that all right, Mr. Rubinstein?
THE COURT: All right. Now, then are there any other
14 conditions of release that I have to be aware?
15 Surrender the passport.
16
17
18
19
MR. KWOK: Which he already did today.
THE COURT: He's done that.
MR. KWOK: And no new applications.
THE COURT: And no new applications for a passport
20 will be made without notice to the government.
21
22
23
MR. KWOK: That's correct, your Honor.
THE COURT: Anything further?
MR. KWOK: The only other thing from the government is
24 we would ask for the exclusion of time to allow the government
25 to produce discovery and for the defense to review discovery
(212) 805-0300
10
1 until our next appearance on August 8.
2 THE COURT: Wait a minute. Exclusion of time. You
3 just want an exclusion of time from the Speedy Trial Actj is
4 that correct?
5
6
THE COURT: Your application is granted. Time will be
7 excluded under the Speedy Trial Act until August 8 because
8 discovery has to be made, and the unavailability of defense
9 counsel for a period of time, and for an opportunity for
10 defense to review that discovery and determine whether any
11 motions should be made. Under those conditions, the exclusion
12 is granted.
13
14
15
16
17
18
19
20
21
22
23
24
25
MR. KWOK: Thank you, your Honor.
THE COURT: Anything else?
MR. KWOK: Nothing from the government.
MR. RUBINSTEIN: Nothing from the defense, your Honor.
THE COURT: Thank you very much.
(Adj ourned)
(212) 805-0300
770AAKARA Arraignment
1
2 ------------------------------x
4 v. 07 CR 541 (RPP)
5 DANIEL B. KARRON,
6 Defendant.
7 ------------------------------x
8 New York, N.Y.
July 24, 2007
9 4:00 p.m.
10
Before:
11
12
District Judge
13
14 APPEARANCES
STEVE KWOK
18 RONALD RUBINSTEIN
Attorney for Defendant Karron
19
20
21
22
23
24
25
(212) 805-0300
2
1 (Case called)
2
3
MR. KWOK: Steve Kwok, for the government.
MR. RUBINSTEIN: Defendant is ready for the
4 arraignment is represented by Ron Rubinstein.
5 Good afternoon, your Honor.
6 THE COURT: Good afternoon, Mr. Rubinstein.
7 Good afternoon, Mr. Karron.
8 I have a superseding indictment here charging the
9 defendant with receiving federal benefits in the one year
10 period in excess of $10,000 and converting it to his own use or
11 the use of persons other than the rightful owner, $5,000 and
12 also containing the forfeiture allegation asking that the
13 proceeds of the alleged theft be forfeited upon construction
14 for the substitute assets belonging to the defendant. In that
15 event to be forfeited in the event forfeitable property is no
16 longer pliable.
17 Daniel B. Karron, Mr. Rubinstein, have you seen a copy
18 of the superseding indictment?
19
20
21
22
MR. RUBINSTEIN: We have, your Honor.
THE COURT: Have you discussed it where your client?
MR. RUBINSTEIN: I have, your Honor.
THE COURT: Does he wish to have it read to him at
23 this time or does he waive the reading?
24
25
MR. RUBINSTEIN: He waives the reading, your Honor.
THE COURT: All right. Mr. Karron, have you seen a
(212) 805-0300
3
1 copy of the superseding indictment?
2
3
THE DEFENDANT: Yes, I have.
THE COURT: And have you discussed it with
4 Mr. Rubinstein?
5
6
MR. RUBINSTEIN: Yes, I have.
THE COURT: Do you wish to have the indictment read to
7 you or do you waive the reading?
8
9
THE DEFENDANT: I waive the reading.
THE COURT: Do you wish a plea of not guilty be
10 entered in your behalf?
11
12
THE DEFENDANT: I wish to enter a plea of not guilty.
THE COURT: All right. A plea of not guilty will be
13 entered on your behalf.
14 Where do we stand on the discovery in this matter?
15
16
MR. KWOK: I've produced discovery to defense counsel.
MR. RUBINSTEIN: I don't know that they've produce all
17 the discovery but I have a problem that I think
18 THE COURT: I just want to be sure the discovery has
19 been produced.
20 MR. RUBINSTEIN: Some discovery was produced but I had
21 understood from the government last time it doesn't seem that
22 there's anywhere near the discovery that they indicated they
23 had, nor should it be what they have.
24 MR. KWOK: I don't know what Mr. Rubinstein was
25 expecting but that's the entirety of the discovery that we
(212) 805-0300
4
1 have. The only thing we did not produce
2 THE COURT: They are talking. Just a second. I want
3 you to have a chance to talk.
4
5
MR. RUBINSTEIN: Yes, sir.
THE COURT: So go ahead, Mr. Rubinstein, talk and we
6 will come back to you.
7 (Pause)
8 MR. RUBINSTEIN: They haven't produced anything from
9 the account and Joan Haze rolling documentation, this is a
10 document case and expenses and following expenses, they haven't
11 produced any of that. They seized all this stuff. They
12 haven't produced the records, employee records and what has
13 been paid to employees. They claim that the $400,000 out of
14 this grant was misappropriated but they
15 THE COURT: They haven't given you any indication of
16 how it was misappropriated.
17
18
MR. RUBINSTEIN: Correct, your Honor. Precisely.
MR. KWOK: This is the fist time that I've heard that
19 discovery was insufficient. I've produced discovery which is
20 about two boxes of it about two weeks ago to defense counsel
21 and that's the entirety of the documents that we have.
22
23
24
25
THE COURT: To Mr. Rubinstein?
MR. RUBINSTEIN: Mr. Rubinstein.
THE COURT: How was it produced to him?
MR. KWOK: It was packaged in a box in our office and
(212) 805-0300
5
1 Mr. Rubinstein sent someone from his office to pick them up.
2 MR. RUBINSTEIN: Correct, your Honor. And I just
3 thought that there was more discovery coming. Nobody had
4 indicated that this was the entirety of the discovery that was
5 available. And, frankly, from looking at it as we see it there
6 is all -- they seized all of Dr. Karron's records. They have
7 not produced for us his records. I don't know how he could
8 possibly defend this case if he doesn't have access to all his
9 records. Not only did they take all the records, they seized
10 all of the computers with all of the disks inside. They say
11 that they're not interested in the disks. They just want the
12 shells. But they haven't returned any disks and
13 THE COURT: All they have to produce is things
14 relative to the crime charged.
15
16
MR. RUBINSTEIN: Everything ask
THE COURT: They can have the seizure and then they
17 may be isolating for you and for your client's benefits those
18 records for safety will go to prove or may be used as proof of
19 the crime charged.
20 MR. RUBINSTEIN: Judge, we need the records of every
21 dime that was received from the government and how each dime
22 was spent. They just give us a blanket thing suggesting that
23 there was 300 and some odd thousand dollars that were
24 inappropriately expenses.
25 THE COURT: Well, now, wait. Let me ask you a
(212) 805-0300
6
1 question. These are the records of Computer Aided Surgery Inc.
2 you are talking about?
3
4
THE COURT: And Computer Aided Surgery Inc. financial
5 records aren't included in the documents that you have?
6 MR. KWOK: It was. I am honestly astounded by what
7 Mr. Rubinstein said. The documentary evidence is voluminous.
8 It includes the documentation of the grant money that
9 Dr. Karron and his company received. It also included bank
10 statements of how those money got spent. We have American
11 Express card statements documenting every transaction unrelated
12 to the grant that was spent.
13 THE COURT: American Express card statements cards
14 that were issued by the corporation?
15 MR. KWOK: No. It was an American Express card that
16 was in the company's name, but, nonetheless, used to purchase
17 unauthorized
18
19
THE COURT: It was in the company's name.
MR. KWOK: Exactly. It was.
20 Then we also produced bank account statements
21 belonging to the defendant himself personally as well as to the
22 company and then it was pretty obvious if you look at the money
23 flow, how money was spent, what type of money came from where.
24 And Mr. Rubinstein mentioned accountant Joan Haze's audit
25 report. Joan Haze is an accountant that for a while was
(212) 805-0300
7
1 employed by CASI Company to look into accounting and her full
2 audit report was any nooks and so that she relied on.
3 The only thing hasn't been turned over is the actual
4 physical checks also used to purchase unauthorized items. And
5 in my discovery letter I offered to make those available for
6 inspection. But copies of those checks are attached to the
7 bank statements that I've produced to defense counsel.
8 So I don't know what else is relative that he wants
9 THE COURT: The originals are available for
10 inspections and the copies have already been produced to the
11 defendant?
12
13
MR. KWOK: That is correct, your Honor.
MR. RUBINSTEIN: A number of which are illegible. We
14 don't have any of the card records of Mastercards and the other
15 cards charge cards that were used, Paypal where they paid
16 expenses. Dr. Karron produced to the government invoices
17 showing where these items were purchased. Those invoices
18 haven't been turned back over to the defense. This is a
19 technical case, your Honor.
20 THE COURT: But Mr. Rubinstein, as I understand the
21 thrust of the government's case is not that certain funds
22 weren't spent for business purposes, but that of the funds
23 received some were diverted to the defendant's personal use; is
24 that right?
25 MR. KWOK: That's correct, your Honor.
(212) 805-0300
8
1 THE COURT: So you don't need -- Mr. Kwok's point is
2 you don't need what the business expended properly. It's what
3 the business expended improperly that's at issue.
4 MR. KWOK: That is exactly right, your Honor. The
5 only thing the government needs to prove at the trial is'that
6 more than $5,000 of federal funds were misspent and so we don't
7 need to prove every dime that is granted through dr. Karron's
8 company was spent. We only need to prove $5,000. We currently
9 believe that about 390,000 was spent but an amount of about
10 $5,000 is considered relevant conduct. But the element of the
11 crime are just $5,000.
12 THE COURT: Mr. Kwok, you also have to prove that the
13 corporation Computer Aided Surgery Inc., CASI as you call it,
14 received benefits and in a one year period in excess.
15 MR. KWOK: That's correct, your Honor. And we did
16 turn over documents stating, documenting that fact including
17 proposed budgets, final approved budget and the bank statements
18 also would document the money that Dr. Karron's company
19 received was in excess of the statutory special amount.
20 THE COURT: Well, I think that they to prepare for
21 trial, Mr. Kwok, they would want to have all documents that you
22 contend were spent in excess of the $5,000, in other words, for
23 their personal benefits.
24 MR. KWOK: Yes. And I did turn over everything that I
25 had. I am not withholding anything relevant to the offense
(212) 805-0300
9
1 charged in this case. But my point is simply that in light of
2 the $5,000 threshold even
3 THE COURT: Have you got a covering letter that
4 accompanied these documents?
5
6
7
8
9
10
11
12
MR. KWOK: Yes, I have a cover letter.
THE COURT: Itemizes the items that were turned over?
Categorized?
MR. KWOK: Yes, in rough categorization.
THE COURT: In the period of time that's involved?
MR. KWOK: That is correct, your Honor.
MR. RUBINSTEIN: Categorized not itemized, number one.
THE COURT: They don't have to itemize as long as they
13 are complete.
14
15
16
17
MR. RUBINSTEIN: But they are not complete, Judge.
THE COURT: Are they Bates numbered?
MR. KWOK: They are Bates numbered.
MR. RUBINSTEIN: Let's say, Judge, that they say
18 expenditure and was inappropriate and we have an invoice that
19 we turned over to them that shows that it was appropriate.
20 They don't want to give us back the invoice. So how could
21 Dr. Karron prepare a defense? And also the issue of whether or
22 not he intended to commit a crime is important to how he
23 expended all the grant money in this case. And the employment
24 records are records which they claim that he overpaid employees
25 as I understand it. And, therefore, that was part of this
(212) 805-0300
10
1 390,000 and the monies that he received himself. He was a
2 salaried employee. We need all of these documentation. I
3 don't see how that's a burden on the government to give back
4 his own documents.
5 MR. KwOK: Mr. Rubinstein seems to have in mind
6 documents that we're not aware of. I've turned over
7 everything. In terms of documentary proof I think that
8 discovery that I produced numbered over 5000 or so pages. I am
9 not aware of any documents in the government's possession that
10 Mr. Rubinstein is referring to that would be relevant to this
11 case at all.
12 THE COURT: What he wishes to do is to go through the
13 expenditures that you have isolated and furnished him the
14 checks or charge accounts and he wants to look at them.
15 The invoices or receipts, as I understand it, that he
16 claims would show that that expenditure which made facially
17 look at appear to be diversion of improper diversion of funds,
18 was in fact the proper diversion of funds.
19 That is what, he wants it for his defense, so to
20 speak.
21 MR. KWOK: I think to the extent that there is a
22 defense based on the use of funds the documents that I have
23 produced are entirety of the documents and to the extent that
24 defense counsel can't marshal a defense based on those
25 documents--
(212) 805 0300
11
1 THE COURT: What about providing him with a copy of
2 the documents seized so that he can, perhaps, develop the
3 thesis that these expenditures from those documents were, in
4 fact, not for his personal use but were, in fact, for company
5 purposes?
6 MR. KWOK: I'm not aware of any seizure of documents,
7 per se. We did as part of a separate action filed a seizure
8 warrant in magistrate court to seize the computers. And the
9 only reason we did that is because a lot of the equipment used,
10 purchased using CASI's funds were unauthorized expenses and we
11 wanted to make sure after this case is over there will be
12 valuable property to satisfy the forfeiture allegation.
13 But after having done that, I spoke to defense counsel
14 and he was worried that in those computers there might be
15 attorney/client privilege materials and I assured him and he
16 was fine at the time from our conversation that the government
17 would not attempt to go into those computers to snoop around to
18 violate attorney/client privilege or other privileged
19 materials, but would just leave the computers as is and just
20 seize them without searching them.
21 So I don't know whether Mr. Rubinstein is now
22 suggesting that we go through those computers to try to search
23 for stuff that mayor may not be related to this case.
24 MR. RUBINSTEIN: I don't know why the government can't
25 just make duplicates of all the disks that are inside these
(212) 805-0300
12
1 computers that have nothing to do with the hardware and produce
2 them for the defense. Those are Dr. Karron's records in there.
3 THE COURT: Duplicate record made, is that what you
4 are saying?
5 MR. RUBINSTEIN: Yes. We want to be able to have the
6 orders records that are on the computer.
7 MR. KWOK: I believe to the extent that there are
8 those records, those records have already been turned over
9 because those records were used by the internal auditor to
10 conduct the audit and if specifically Dr. Karron as I
11 understand it, kept a very detailed Quicken books whether it be
12 personal checks or expenses of the company.
13
14
THE COURT: I don't follow you.
MR. KWOK: What I am saying is to the extent that
15 there are records in those computers, those records have
16 already been turned over to the defense.
17
18
19
20
THE COURT: How? In what? Who turned them over?
MR. KWOK: I did. And that's because --
THE COURT: The computer's hard drive, soft drive?
MR. KWOK: The documents the software, the documents
21 in the computers that may be relevant to this case. And that
22 is because even before the government indicted the defendant
23 there was an internal audit by the internal auditor that looked
24 at all the records that Dr. Karron had to prepare her
25 reasonable internal audit. And as part of our discovery to
(212) 805-0300
13
1 produce that audit report we also produced the underlying date
2 that supported that audit report. And, specifically, what I
3 was referring to is Dr. Karron's Quicken bookkeeping system in
4 which he would document in a spreadsheet format every check
5 that he wrote either on behalf of himself or on behalf of the
6 company, the date and the amount and that spreadsheet was also
7 included in the materials that I turned over.
8
9
THE COURT: Who did you deliver these materials to?
MR. KWOK: As I stated, I agreed with defense counsel
10 to put them on the first floor of our office and, subsequently,
11 defense counsel sent somebody to pick them up.
12 THE COURT: So that's separate and apart from the
13 discovery in that case?
14 MR. KWOK: No. That is part of the discovery, part of
15 the two boxes that I referred to.
16 THE COURT: But I thought from your description that
17 this had something to do with the internal audit.
18 MR. KWOK: Which preceded the indictment. So when I
19 produced discovery I had already gotten the underlying raw data
20 that supported the internal audit report that I also turned
21 over as part of my discovery.
22 THE COURT: Had you turned over the audit material to
23 them at the same time?
24
25
MR. KWOK: Yes, I did.
THE COURT: So that they have the computer or the
(212) 805-0300
770AAKARA
1 computer material.
Arraignment
14
2 MR. KWOK: They have a print out of it. The Quicken
3 bookkeeping system, the print out from the spreadsheet that he
4 was referring they have that already.
5 MR. RUBINSTEIN: I will submit a letter to the Court
6 outlining all the matters the government has that has not been
7 turned over. They haven't turned over the Quicken reports
8 showing the expenses line by line. They haven't turned over a
9 number of items and I don't understand why they are resisting
10 giving us these disks either. Since they don't want to use
11 these disks and they have no monetary value they could turn
12 over the disks and hard drive to us without it.
13 THE COURT: I don't know that they want to do that
14 because I suppose they could be modified.
15 MR. RUBINSTEIN: Let them duplicate it then. I don't
16 understand. Dr. Karron from day one has told me he has
17 voluminous records, as the government's indicated, he has
18 records showing every check he wrote, every credit card with a
19 back-up document, all of this is on the computers. All of this
20 stuff is on the computers, your Honor. He even took a little
21 parking ticket from me for a few dollars that he wanted to save
22 as an expense. I mean this is the kind of detailed stuff he
23 has in these records and I think these records are to show that
24 he never had any intention of doing anything illegal. But I
25 will produce for the Court the letter outlining exactly what
(212) 805-0300
15
1 was turned over and exactly what Dr. Karron claims is missing
2 and we can go forward from that.
3
4
THE COURT: Let's do it very promptly.
MR. RUBINSTEIN: I am willing to do that, judge, and I
5 will do it very promptly for the following reason: I, because
6 everything that Dr. Karron has has been seized, including his
7 apartment condominium. Frankly, I don't understand the theory
8 of it, but the government's seized it. It's part of the
9 forfeiture. He's owned this apartment for many years before
10 this grant. The only thing they say he paid is maintenance out
11 of money that came from the grant. The apartment is used as an
12 office.
13 But bottom line is he is not in a position to have
14 private counsel. I am willing to stay aboard I was going to
15 make a Monsanto application to see if we can get paid out of
16 forfeiture and he is not a position to leave the apartment. He
17 needs a place to live. So I am going to ask the Court at this
18 time since he is not in a position to retain counsel that your
19 Honor have him fill out forms for CJA.
20 THE COURT: I can't imagine -- receiving a retainer to
21 cover the work that's been done so far, Mr. Rubinstein. It
22 doesn't appear to me that there's been anything other than some
23 discovery produced and appearance on arraignment. So I don't
24 know about -- this man is alleged to have gotten $390,000.
25 MR. RUBINSTEIN: They don't claim he has it. They
(212-) 805 - 0300
16
1 claim that he spent it outside of the dictates of the grant. I
2 don't think anybody is claiming that he put any of this money
3 into his pocket or has it still in his pocket. They're
4 claiming that he expended items that he had no right to expend
5 outside of the budget. Had he to submit a budget. And the
6 money was spent. There is no issue that the money was spent.
7 I think the government will concede that. The question is
8 whether or not the monies was spent appropriately pursuant to
9 the grant and what was contained in the budget.
10 THE COURT: I understand. You'd better get your
11 letter in quickly so Mr. Kwok can respond to it. But I don't
12 see why the materials that Mr. Kwok, the printed material which
13 I gather is a print out from the computer isn't adequate for
14 your purposes. So you'd better cover that as an addition to
.15 the computer disks. Because computer disks, I supposej what I
16 would have to have is not only computer disk for you but a
17 computer disk for the Court. So if there is any dispute about
18 production or alteration of the records of the subsequent time
19 it can be readily ascertained through normal alterations. That
20 is an expense. I don't know what the expense is to duplicate
21 these documents.
22 MR. RUBINSTEIN: Dr. Karron says there's approximately
23 one thousand gigabytes which is ten terabytes. I, frankly,
24 Judge, don't know what those letters mean. But he says that it
25 would probably cost to have an expert duplicate that between
(212) 805-0300
770AAKARA
1 ten and $20,000.
Arraignment
17
2 MR. KWOK: Your Honor, if I may, I mean these
3 computers that we're talking about are not just your ordinary
4 laptop computers. They are very high powered super computers
5 primarily used for research and other purposes. I don't know
6 whether it's even cost effective or even technically feasible
7 to download or make a copy of everything on these hard drives
8 with terabytes of memory.
9 To the extent, again, that there is any record at all
10 in those computers I believe the government's already produced
11 a hard copy print out of those accounting records. The rest I
12 am not sure what Mr. Rubinstein is referring to in these
13 computers. But as far as records go relating to this case that
14 the government intends to rely on those have all been turned
15 over to defense counsel.
16 MR. RUBINSTEIN: The defense is this case is very
17 simple. He didn't intentionally do anything wrong, if he did
18 anything wrong at all. So showing all that he did for the
19 money is going to be part of the defense to show the jury that
20 he had no intention of doing anything improper. This man even
21 after the grant was stopped continued working on
22 THE COURT: I don't think that flies, Mr. Rubinstein.
23 I think you can't go into a defense that shows all the good
24 things he did and all the things that he did. The question is
25 whether or not these funds were misapplied and that is the
(212) 805-0300
770AAKARA
1 issue.
Arraignment
18
2 I agree that you have to have a record to be able to
3 show that they weren't misapplied but I think I haven't heard
4 anything so far. Maybe you can educate me, but I haven't heard
5 anything so far that indicates that we should do more than see
6 whether there's more than a financial record that you require
7 or any rebuttal of the case that this application of funds is
8 going is to be produced.
9 MR. RUBINSTEIN: There's also e-mails relating to the
10 grant, your Honor, and those documentation are important for
11 the defense. The government -- I'd ask your Honor that the
12 government provide us with a detail list outlining the $390,000
13 that they now claim was inappropriately spent by Dr. Karron and
14 then at least we have an idea what documents relate to that.
15
16
THE COURT: They've produced those to you?
MR. RUBINSTEIN: No, they have not shown us any list
17 of where the alleged missing money is.
18 THE COURT: Maybe you ought to go and have a personal
19 consultation with Mr. Kwok and maybe he can show them to you.
20 That would be the best way.
21 MR. KWOK: I'll be glad to do that, your Honor.
22 Again, I think your Honor has it exactly right. The government
23 is not contending that, for example, some of the money, for
24 example, that the government contends was misapplied was used
25 for example to renovate Dr. Karron's apartment. We are not
(212) 805-0300
19
1 saying every cent towards the renovation was spent out of
2 government funds. Dr. Karron did spend some of his own money
3 as part of that home renovation. But that doesn't take away
4 from the fact that the government funds were indeed misapplied
5 toward home renovations. So I don't know what the records that
6 Mr. Rubinstein had in mind
7 THE COURT: He is saying some of the home was used and
8 as na office.
9 MR. KWOK: That's actually quite irrelevant under the
10 rules of the grant because even if it was indeed used as an
11 office you cannot pay overhead expenses using grant money.
12 Grant" money can only be used for direct and research expense
13 and it is clear rent is not used for those items.
14 THE COURT: Not rent but what about fixings up the
15 office so that if that -- or bringing electricity or bringing
16 in high powered computers into the office.
17 MR. KWOK: That's also disallowed and the reason is
18 simply because there is an approved budget. Every item that
19 . Dr. Karron was allowed to use was listed in that budget and if
20 you deviate from that budget you first have to seek pre
21 approval to do that and at no point did Dr. Karron receive
22 that.
23
24
25
THE COURT: Renovation was a budgeted item?
MR. KWOK: It was not allowed.
THE COURT: Any renovation of the office was a
(212) 805-0300
770AAKARA
1 budgeted item?
Arraignment
20
2 MR. KWOK: I don't believe any of it was. We are only
3 allowed to pay, for example, to hire scientists and research
4 personnel and to buy a specified number of computers for your
5 research. But to renovate your apartment or office to eat out
6 which is another item that Dr. Karron spent money on or to even
7 pay for Internet services they are specifically disallowed
8 under the terms of the grant. And another big item is back
9 rent, and that is also clear that you are not supposed to pay
10 rent or mortgage under the grant.
11 MR. RUBINSTEIN: The government wants the grant to be
12 written in granite. The fact of the matter is that these
13 grants they have modifications all the time. People spend
14 money, as long as they're spending it legitimately that's an
15 issue at trial.
16 THE COURT: But, Mr. Rubinstein, it's very clear that
17 if there's a grant it'll have terms to it and you can argue it
18 but they are not binding. There can be modifications and the
19 jury will make a determination.
20 When will you have your letter that you wish to
21 produce to Mr. Kwok?
22 MR. RUBINSTEIN: I'll have that in a week from
23 tomorrow which is which is the first of August.
24
25
THE COURT: When can we hear the reply?
MR. KWOK: How about a week.
(212) 805-0300
21
1 THE COURT: August 8?
2 MR. KWOK: That would be fine.
3 THE COURT: Okay.
4 000
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
SOUTHERNDISTRICT REPORTERS, P.C.
(212 ) 805-0300
788rkarc
2 ------------------------------x
3 UNITED STATES OF AMERICA
1
4 v. 07 Cr. 541 (RPP)
5 DANIEL B. KARRON,
6 Defendant.
7 - - - - - - - - - - - - - - ~ - - - - ~ - - - - - - - - - - x
Conference
8 New York, N. Y.
August 8, 2007
9 4:15 p.m.
10 Before:
11 HON. ROBERT P. PATTERSON, JR.
12 District Judge
13
APPEARANCES
14
15
MICHAEL J. GARCIA
16 United States Attorney for the
Southern District of New York
17 One St. Andrews Plaza
New York, New York 10007
18 CHI T. STEVE KWOK
19
20 RONALD RUBINSTEIN, ESQ.
21 Rubinstein.& Corozzo,PC
260 Madison Avenue
22 New York, NY 10016
(212) 679-1844
23
24
25
(212) 805-0300
788rkarc 2
1 (Case called) .
2
3
THE CLERK: Is the government ready?
MR. KWOK: Yes, we are. Good afternoon again, your
4 Honor. Steve Kwok for the government.
5 MR. RUBINSTEIN: For the defendant, Rubinstein &
6 Corozzo by Ron Rubinstein. Good afternoon, your Honor.
7 THE COURT: Good afternoon, Mr. Rubinstein. Good
8 afternoon, Mr. Kwok.
9 Dr. Karron is excused from this conference, is that
10 correct?
11
12
MR. RUBINSTEIN: That's correct, your Honor.
THE COURT: Have you had a chance to see the
13 government's answer to your motion of August 2nd, Mr.
14 Rubinstein?
15 MR. RUBINSTEIN: Yes, your Honor. Frankly, it begs
16 the entire question. They have all of these documents which
17 are the property of Dr. Karron. They say in their letter that
18 they haven't accessed the CD's that were in these computers.
19 This is all we are looking for. We are looking for the records
20 that really are his records that he is entitled to under any
21 scenario.
22 THE COURT: How do not want to get them? How do you
23 want it to be done?
24 MR. RUBINSTEIN: We will provide an expert under the
25 government's supervision to duplicate the CD's and the hard
SOUTHERN DISTRICT REPORTERS,' P.C.
(212) 805-0300
788rkarc
3
1 drives that are in this equipment. That will resolve all the
2 issues, your Honor. Virtually everything that is asked for are
3 items that were taken from Dr. Karron, items that were either
4 prepared by his then accountant --
5 THE COURT: I don't see that they are. But from you
6 what you just said, I gather what you were saying is that he
7 has things stored in these computers that he wants to bring
8 out.
9
10
MR. RUBINSTEIN: That is correct, your Honor.
THE COURT: There they are in the computer drive or
11 whatever, and he wants to get them out of there. What's your
12 thought? I don't know how the expert is going to isolate them.
13 Let's say he hires an expert and gets them out. A copy to each
14 side?
15 MR. RUBINSTEIN: The government says that they haven't
16 accessed these, they haven't looked at them, they don't want it
17 for their case. That's fine with me. We want to get back
18 either the originals or we'll take a copy. I don't see why
19 they are entitled to
20 THE COURT: You have to have some way to verify that
21 what is then presented later is a copy.
22 MR. RUBINSTEIN: Yes, your Honor. We will provide to
23 the government, if we intend to introduce anything, copies of
24 that portion in both a hardcopy and CD format with a reference
25 to which CD's they already have the originals. They will still
(212) 805-0300
788rkarc
4
1 have the originals of them, so there can't be any question that
2 there was anything deleted or changed or anything like that.
3 They will still have the original product.
4 THE COURT: I don't know that they do, from my reading
5 of Mr. Kwok's letter.
6 MR. KWOK: The government would oppose that. First of
7 all, I understand that the defendant had his computer seized.
8 If he wants them back, the proper procedure is to file a motion
9 in that civil forfeiture action to challenge the seizure of the
10 computer. It's not by using the process of criminal discovery
11 to sort of try to get stuff that he wants back from those hard
12 drives that I understand he may find useful for his research
13 and other personal purposes.
14 But for this criminal case, as I stated previously and
15 in my letter, the government has absolutely produced everything
16 that we have seen to defense counsel. I'm not aware of any
17 other thing that we have not produced. They have not made the
18 threshold showing of relevance or materiality under Rule 16 to
19 have those documents in those computers.
20 Second of all, in the two cases I cited, and there are
21 more in this circuit, the cost is on the defendant to produce
22 and copy those. As the defendant himself told this Court last
23 time, the cost of duplicating and searching these super-
24 computers with terabytes of memory in them may run somewhere in
25 the neighbor of 10,000 to $20,000.
(212) 805-0300
788rkarc 5
1 I don't know whether the defendant is now prepared to
2 represent to this Court that he is prepared to pay those
3 expenses in addition to any necessary costs incurred by the
4 government in having agents present to ensure the proper
5 downloading and copying of those electronic documents.
6 For all of these reasons, I simply don't think it is
7 relevant to the defense in this case. I would urge the Court
8 to deny the request for additional discovery.
9 THE COURT: As I understand it, indeed looking at your
10 letter, you say Rule 16's clear import is that defendant must
11 pay the cost of copying documents legally held by the
12 government, which indicates it does come within Rule 16. I
13 just got your letter half an hour ago and I haven't had a
14 chance to check the cases.
15 But if it says Rule 16's clear import is that
16 defendants, at least nonindigent ones, must pay the ,cost of
17 copying documents legally held by the government, why isn't Mr.
18 Rubinstein's proposal to hire an expert to download them,
19 something that he would have to pay the cost of
20 MR. KWOK: Because those cases presume the relevance,
21 indeed the materiality, of the sought-for evidence, unlike in
22 this case, in which he hasn't even reached the threshold to
23 show the evidence that he is seeking for Rule 16.
24 MR. RUBINSTEIN: This is distinguishable, because
25 these are his own records, which changes a whole plethora of
(212) 805-0300
788rkarc
1 arguments. He is entitled to these records. In the days of
2 hardcopy, I have been in cases where --
6
3 THE COURT: They haven't made copies of these things.
4 They may well be his records, but they are not going to use
5 them. It is not their intention to use them in this trial. Is
6 this the right forum, as Mr. Kwok says, for you to get those
7 back, or shouldn't you use another means of getting them back?
8 He doesn't seem to object to your getting it back.
9 It's just that perhaps it will confuse the discovery in this
10 action to have the materials obtained in that way. He says
11 they are not relevant to this case, and I must say that I can't
12 see that they are relevant.
13 MR. RUBINSTEIN: How can he say that? He has never
14 reviewed them. He has never looked at them. How can he
15 possibly say something is not relevant that he has never seen?
16 That is just disingenuous, your Honor.
17
18
THE COURT: I don't think it is disingenuous.
MR. RUBINSTEIN: I already highlighted the fact about
19 the American Express bills in request number 3. There are
20 backup slips that are in these computers that show what the
21 expense is for, who was present, and what-have-you. If that is
22 not relevant to show that this is an expense that was a
23 legitimate expense pursuant to this grant, I think it is a
24 Brady violation on the government's part.
25 I asked for the color images of the checks. There are
(212) 805-0300
788rkarc
1 two different kinds of checks that are used. Each check,
7
2 depending on the color, has a different significance. We can't
3 tell the difference, because we don't have the colored check.
4 They can stand here and say this is what we have, this is what
5 we reproduced, 5,000 pages, but they haven't listed one page in
6 their response that says that something was produced that we
7 have ~ e q u e s t e d .
8 MR. KWOK: I did indeed do that. That is the first
9 category of documents under my categorization of defense
-10 counsel's request. I produced all the bank statements and
11 indeed the American Express statements that defense counsel
12 referred to.
13 THE COURT: Are they colored? His point is that
14 apparently they are not colored.
15 MR. KWOK: I'm not aware any of color. Again, I would
16 reiterate the government's invitation to counsel to corne in, if
17 he wishes, to inspect the original copies that we have. I
18 don't know what he is referring to when he mentions color
19 copies. The originals that I have certainly are in better
20 shape than the duplicate copies. If he wishes, he can make
21 arrangements with our office to look at them.
22 With respect to the American Express statements, I
23 have produced statements showing every charge that has been put
24 on the company's card and the running month-to-month expenses.
25 What he is seeking is the charge slips with ink pen signatures.
(212) 805-0300
788rkarc
1 I simply think that is duplicative "and imposes unnecessary
2 costs on the government.
8
3
4
THE COURT: Do you have signatures on them?
MR. KWOK: We don't have those documents, and I'm not
5 aware of how to get them, frankly, in an accessible way_ I
6 don't know whether American Express saves them somewhere.
7
8
9
THE COURT: If they are not in your possession
MR. KWOK: It is not in my possession.
MR. RUBINSTEIN: They are in his possession your
10 Honor. They are scanned into these computers and they are on
11 these disks. He just wants to put his head in the sand and
12 say, we don't have them because we haven't looked at them.
13 It's a very simple solution, with all due respect,
14 your Honor. Give us the disks. Let us get copies of the disks
15 at our" own expense with our own expert, with their people
16 sitting by. People make copies. They go and burn them. They
17 burn me copies of CD's all the time and send them to me. The
18 government does it, other lawyers "do it. He is making this
19 sound like it's a Herculean task.
20 I am a computer novice, your Honor, and I know this
21 isn't a Herculean task. So I don't see why we are having this
22 debate with the government, who is resisting us getting records
23 that they don't know what's in the records that are on a
24 computer disk or on a hard drive that they have never seen. We
25 say they have them. The fact that they never looked at it or
(212) 805-0300
788rkarc
9
1 they haven't gotten a search warrant to look at it, so be it.
2 We need these in order to prepare our case.
3 Also, your Honor, as you see,there are three other
4 credit cards that they have statements for. They have never
5 provided those to us. They never provided all the
6 correspondence between this accountant Hayes in the office of
7 the inspector general. They haven't provided any of these
8 things.
9
10
11
THE COURT: That is a little different.
MR. RUBINSTEIN: They haven't provided emails.
THE COURT: That isn't necessarily discoverable
12 material at this point.
13 MR. RUBINSTEIN: But it is on our computers. We have
14 copies of them. We want them. We're not looking to burden the
15 government. They are talking like they are going to be
16 burdened. They are not going to be burdened at all:
17 THE COURT: The last category it seemed to me was more
18 3500 material. Am I not right?
19
20 Honor.
21
MR. KWOK: I think that's absolutely right, your
THE COURT: That's 3500 material. But these other
22 things, Mr. Kwok, what about them? What about the receipts?
23 If they are on the computer and scanned in, why aren't they
24 documents which may contain evidence that somebody other than
25 Dr. Karron made these expenditures or got these things? You
(212) 805 0300
788rkarc
1 say you don't have signed copies.
10
2 MR. KWOK: Most of the information that Mr. Rubinstein
3 is asking for is already presented in a different format by the
4 government. Last time he referred repeatedly to these Quicken
5 bookkeeping databases.
6 THE COURT: You say they are in a different form.
7 Supposing there are differences between the two? Supposing the
8 Quicken book is different from the American Express records?
9 MR. KWOK: First of all, there is no way for me to
10 verify, because the government has not seen these documents.
11 And it is not as easy- as Mr. Rubinstein makes it out to be,
12 which is why I come back to Rule 16 and the relevance and the
13 materiality standard. These are not your usual desktop
14 computers.
15 We seized over 20 computers, and each of those
16 computers has a lot of memory in it. Unless the defendant can
17 pinpoint which computer and in which directory they are saved
18 under, I have spoken to an agent who is more knowledgeable than
19 I am about how these computers work, and it is really not as
20 easy as it sounds. It's not just a matter of just burning the
21 CD's. We have to search for them. It sounds like these may
22 not be saved in one place under one directory.
23 In light of the lack of relevance --
24 THE COURT: If we don't have a accurate map here, how
25 can I fashion an order that would protect you and protect them
(212) 805-0300
788rkarc
11
1 so that whatever search had to be made for these documents was
2 made in a way that doesn't harm either party?
3 MR. KWOK: I think the Court does not need to reach
4 that issue, because there has been no showing of materiality
5 under Rule 16 that this is relevant to the defense.
6 THE COURT: It gather what you want is a full-fledged
7 affidavit with backup and things like that. You are entitled
8 to it. On the other hand, I don't know how you're going to
9 respond to that. When he has requests for these color-coded
10 checks, for instance, which you haven't seen, you're going to
11 have to go through and search them, I suppose all through the
12 16 big computers, and you're going to have to file opposing
13 affidavits based on that search. By the time you get done,
14 we'll have two or three months go by. That's fine, but what's
15 the alternative? Is there a better way to do it than going
16 through that that doesn't harm either party?
17 MR. KWOK: Here is a proposal. If Mr. Rubinstein
18 insists that he that these materials are relevant, and he does
19 make that representation to the Court, one solution that is
20 simplest I think would be for Mr. Karron to tell the government
21 under what computer.
22 As I understand it, they are all numbered, all these
23 computers have numbers posted on them. Number X computer has
24 these documents and they are stored under this directory under
25 the C drive, under this directory labeled Y. At that point if
(212) 805-0300
788rkarc
12
1 the defendant is willing to bear the costs, the government will
2 send an agent to retrieve those documents..
3 Once he can tell us specifically not just what he
4 wants but where in those computers these electronic documents
5 are stored, I think that would take care of the logistical
6 difficulties that the Court mentions, if the Court is inclined
7 to allow the defendant some leeway to go beyond the dictates of
8 Rule 16.
9
10
MR. RUBINSTEIN: Judge, there is no backup.
THE COURT: It's not so much trying to get leeway as
11 that there seem to be a dispute about the validity of some of
12 the documents.
13
14
MR. KWOK: I understand.
THE COURT: If there is a dispute about the validity
15 of some of the documents, then it seems to me you want to have
16 both sides present when the search is made for whatever will
17 validate the document or evaluate the document.
18
19
MR. KWOK: Right.
THE COURT: I do think the government doesn't want to
20 run everything on the hard drive on 16 large computers and
21 produce thousands and thousands and thousands and thousands of
22 irrelevant documents that Mr. Karron really doesn't want. He
23 wants certain documents, not others, don't you agree, Mr.
24 Rubinstein?
25 MR. RUBINSTEIN: That's correct. The problem of
(212) 805-0300
788rkarc
13
1 identifying the documents, where they are stored, since they
2 have all of the computers, they have all the lists of
3 everything that he has there. He'd have to access it. He'd
4 have to someone, not himself but someone else, access the
5 computer to find where those documents are within which
6 computers. He probably has a general idea.
7 THE COURT: I suppose there is an index, isn't there,
8 in the computer?
9 MR. RUBINSTEIN: Yes. I would think in the computer.
10 But they have the computer.
11 MR. KWOK: Again, as defense counsel says, these are
12 his documents. Presumably he would know where they are stored.
13 I know where I store my documents pertaining to this case.
14 It's under a certain directory. So if he would provide that
15 information to the government.
16 The last thing the government wants is to get into a
17 dispute at the site with the agent and the representative from
18 the defense about whether this document is relevant to this
19 case. So I want to have a list of all the documents that he
20 wants and the places where they are stored. Then we can send
21 an agent with a representative from the defense to go to the
22 site to download exactly those limited universe of documents.
23 THE COURT: Does he have a printout of the index?
24 Does he have a printout of the index on the computer, or is it
25 all something that is kept on the computer? Does either side
(212) 805-0300
788rkarc
1 know?
14
2 MR. RUBINSTEIN: No, he doesn't have a printout,
3 Judge. It's one thing for the government to say
4
5
THE COURT: He doesn't have a printout, OK.
MR. RUBINSTEIN: He didn't know he had this case.
6 There are documents in various places that relate to this case.
7 THE COURT: But the index will show that, right? He
8 has an overall index for his documents for his filing system?
9 MR. RUBINSTEIN: I'm sure that each computer has an
10 index somewhere for all the documents separately, not
11 necessarily one. I don't know the answer, Judge, of whether or
12 not there is one particular computer that lists every single
13 document and which computer is on it.
14
15
16
THE COURT: He must know how to access it.
MR. RUBINSTEIN: Absolutely.
THE COURT: Why can't you go through something like
17 this: First, you will give the government the information on
18 how to access the index; then they will produce the index in
19 hardcopy for him to mark those items that he wishes to access.
20 I would think the computer expert could retrieve those
21 documents at that point, at his cost. Each side will have a
22 copy if you want to have a copy, so you'll have a record that
23 indeed these documents came from these computers, each of those
24 computers. Is that kind of thing workable?
25 MR. KWOK: I'm not certain whether there is an index
(212) 805-0300
788rkarc
1 in the computer to enable that solution.
15
2
3
THE COURT: Dr. Karron will have to tell us.
MR. KWOK: I think the easiest way, frankly --
4 unfortunately, Dr. Karron isn't here -- is for him to tell us,
5 if he were sitting in front of the computer, how would he
6 access these documents that he wants. Presumably, he saved
7 them so he could retrieve them at some later point.
8 He could tell us on this computer, if I were sitting
9 in front of it, this is where I would go. If he can tell us
10 that information with certain specificity, I'm more confident
11 that the expert will be able to find them. But if they were
12 just to say, I want XYZ documents, without telling us where to
13 find them, it is simply an exercise in futility, I believe.
14
THE COURT: I see the problem. It's like fishing in
15 the deep blue sea.
16
17
MR. KWOK: It is indeed.
THE COURT: Mr. Rubinstein, there are two
18 alternatives. I was suggesting that if he would tell us how to
19 access the indexes he needs, then the indexes would be produced
20 to him. Mr. Kwok says there might not be an index. Maybe he
21 can tell us without an index or maybe he can tell us the steps:
22 Go to the index on the computer, then press buttons such and
23 such and so and so for access to the necessary files, and then
24 press "print" to print.
25 MR. RUBINSTEIN: I would hope that that is available,
(212) 805-0300
788rkarc
1 your Honor.
16
2 THE COURT: He ought to be able to tell us the
3 mechanism.
4
5
THE COURT: If we follow one of those things, it seems
6 to me, and then they don't have to fish around in those
7 computers trying to find what they have not looked at and
8 haven't done anything to save, there won't be such a waste of
9 time by people trying to comply.
10 But I do think they should get a copy of what he gets,
. .
11 because you want to pe able to know that indeed the documents
12 did come from the computer and not from some other source, and
13 there will be questions about the authenticity of the documents
14 if you do it some other way.
15 MR. KWOK: We'll certainly make a copy and ensure that
16 the copying will not alter in any form the content of those
17 documents.
18 I understand that defense counsel is agreeing to bear
19 the cost of the process. I don't know how much it is going to
20 cost. If his estimate is correct, it could be nontrivial.
21
22
THE COURT: I don't hear Mr. Rubinstein.
MR. RUBINSTEIN: As your Honor may recall, we are in
23 the process of making a Monsanto application to have property
24 released so that Dr. Karron can have those resources and pay
25 his lawyer's legal fees. The government is well aware of that.
(212) 805-0300
1
2
788rkarc
17
THE COURT: That's the first I've heard of it.
MR. RUBINSTEIN: In the alternative, under CJA, he may
3 well be entitled to it.
4 The bottom line is that we will make every effort to
5 shoulder that expense. We don't expect the government to do
6 it. Whoever we produce for the government will be someone I'm
7 sure who the government will find to be of outstanding
8 credentials and reputation in the computer field.
9 THE COURT: I don't want to have the matter delayed
10 for a period of time.
, .
I want there to be some action here in
11 terms of t h ~ parties not only having the discovery but also
12 having access to whatever documents they think may bear
13 directly on their defense.
14 When is Dr. Karron coming back?
15
16 Honor".
17
MR. RUBINSTEIN: He will be back on Monday, your
THE COURT: Can we get something done here by
18 Wednesday?
19
20
21
MR. KWOK: To have the copying done?
THE COURT: To have him give you the directions.
MR. KWOK: As soon as we receive those directions and
22 if they are specific enough to be useful to tell the agents
23 where to go, then the government would make every effort to
24 expedite the retrieval and copying process. I don't want to
25 delay this case any longer than the Court does. I was hoping
(212)805-0300
788rkarc
I for a trial date before this motion came up.
18
2 We will make every effort to expedite that once we get
3 the list from the defendant.
4 THE COURT: Is that satisfactory? Why don't we have a
5 conference next week sometime if necessary.
6 MR. KWOK: Can we set a date by which the defendant
7 will provide that instruction?
8
9
10
11
12
THE COURT: I was saying by Wednesday.
THE'COURT: That would be the 15th.
THE COURT: Depending on what those instructions are
13 and assuming they are satisfactory, how long? You can't tell
14 how many documents are involved or how lengthy the searches
15 would be.
16 MR. KWOK: How about a control date a week from that
17 'point, so if we have any issues with the requests, we can have
18 them resolved.
19 MR. RUBINSTEIN: I'm going to be away. My daughter is
20 getting married in Las Vegas the week of the 20th.
21 THE COURT: Your daughter is going to get married in
22 Las Vegas? You shouldn't consent to that.
23 MR. RUBINSTEIN: I have no control, Judge. As a
24 matter of fact, August in Las Vegas is too hot. She's 41 and
25 she says she's liberated.
(212) 805-0300
1
2
788rkarc
THE COURT: She is probably very liberated.
MR. RUBINSTEIN: I can tell you that she is being
19
3 married by an Elvis Presley interpreter, so I have nothing else
4 to say about this wedding. I'm invited and I'm going and I'm
5 doing all the right things, Judge.
6 MR. KWOK: How about two weeks from the submission
7 date, which would take us to the 29th of August?
8
9
THE COURT: 22nd. You're going to be away how long?
MR. RUBINSTEIN: I would be away for a week. I would
10 ask your Honor that we put it down for Monday the 27th of
11 August.
12 THE COURT: All right.
13 MR. RUBINSTEIN: If we can't resolve things by then,
14 we will have a problem. I can always be in touch with Mr.
15 Kwok.
16 THE COURT: If you have problems early next week, ask
17 for a conference.
18
19 date.
20
21
22
23
MR. KWOK: Certainly. So August 27th is the control
THE CLERK: 4 o'clock.
MR. KWOK: OK.
MR. RUBINSTEIN: Sure.
THE COURT: We expect Karron to have given something
24 to Mr. Kwok.
25 MR. RUBINSTEIN: We intend to give it to him by the
(212) 805-0300
788rkarc
1 15th.
2
20
THE COURT: Right. If he can't or for some reason we
3 have to approach it another way, maybe you guys can work it
4 out.
5 MR. KWOK: Yes. I'll certainly look at the list. and
6 discuss with the agent and discuss with defense counsel to see
7 whether it is a workable plan. If we can work it out, I'll
8 produce the documents requested as expeditiously as possible.
9 If not, we'll try to schedule a conference. If not, we will be
10 in front of the Court again on August 27th.,
11 THE COURT: My trial for next week is off. Anything
12 else we should take up?
13 MR. KWOK: I think time is being excluded. But just
14 in an abundance of caution.
15 THE COURT: Time is excluded until the 27th if it
16 hasn"t been excluded already, August 27th.
17
18
19
20
21
22
23
24
25
MR. RUBINSTEIN: Thank you, your Honor.
(Adjourned)
(212) 805-0300
78THKARC
2 - - - - - - - - - - ~ - - - - - - - - - - - - - - - - - - - x
1
4 v. 07 Cr. 541 (RPP)
5 DANIEL B. KARRON,
6 Defendant.
7 ------------------------------x
8
9
10
11
12
13
14
Before:
New York, N.Y.
August 29, 2007
4:20 p.m.
HON. ROBERT P. PATTERSON
District Judge
APPEARANCES
"MICHAEL J. GARCIA
17
RON RUBINSTEIN
18 Attorney for Defendant
19
20
21
22
23
24
25
(212) 805-0300
2
78THKARC
1
2
3
4
(In open court)
THE DEPUTY CLERK: United States v. Daniel Karron.
Is the government ready in this matter?
MR. KWOK: Yes, we are. Good afternoon, your Honor.
5 Steve Kwok for the government. With me. at counsel table is
6 David Ton.from the U.S. Department of Commerce and Matthew
7 Schwartz from our civil division.
8 MR. RUBINSTEIN: For the defendant, Ron Rubinstein.
9 Good afternoon, your Honor.
10 THE COURT: Good afternoon, Mr. Rubinstein and good
11 afternoon, Mr. Karron.
12 I think there was a letter that I received from the
13 government requesting the conference, am I right?
14 MR. KWOK: I don't know. We sent a letter, but we did
15 request a conference I think through a telephone call to the
16 deputy.
17 THE COURT: Have the parties been able to work out the
18 procedure so we can make sure we don't have any more legal time
19 or what have you in this matter than is necessary?
20 MR. KWOK: Well, I think we have moved closer since
21 last time we were in front of you. The government is trying to
22 be accommodating. So I think what we are proposing is to do
23 the search that the defendant is asking for. We simply insist
24 that it be done by a firm that is competent to conduct the
25 examination and the duplication in a way that is forensically
SOUTHERN DISTRICT REPORTERS, P.C ..
(212) 8 0 5 ~ 0 3 0 0
3
78THKARC
1 sound. I have s ~ g g e s t e d a name of that firm to defense counsel
2 and I have given him the web site. If that is satisfactory to
3 them, we are ready to have that firm be the intermediary to
4 duplicate the hard drives to get all the documents that
5 Mr. Karron claims are necessary for his defense.
6 I just want to put two things on the record to be
7 clear. First is, I think there is no dispute that the costs
8 would be on the defendant. I think last time they agreed with
9 that. The second is simply that whatever is duplicated the
10 government be provided a copy and be able to inspect the
11 documents as Mr. Karron will have a chance to once those copies
12 are provided to him.
13 With that, we simply again just want to"make sure that
14 it is done in a proper way and we have an expert ready to go if
15 that is fine with the defense.
16 THE COURT: In a way that it protects the security of
17 the documents and in a way that Mr. Karron gets the information
18 he is seeking.
19
20 time.
21
22 do it.
23
MR. RUBINSTEIN: Judge, I hate to waste the court's
THE COURT:" I just want to be sure you have a way to
MR. RUBINSTEIN: Apparently our ways to do it, my
24 recollection was that the government had given me one name and
25 said that they were going to have others and they were going to
(212) 805-0300
4
78THKARC
1 bring an expert here for this conference to layout to your
2 Honor what it entails so we can see, since the cost is going to
3 have to be borne by Dr. Karron, as to what we are talking
4 about. That is why I say to you I don't like to corne to court
5 where the parties aren't on the same page.
6 It was my understanding Mr. Kwok was going to supply
7 us with a number of different experts so we can check out,
8 because we have our own experts that we would like to make
9 available and have our experts talking to the people that the
10 government suggests and work from there. I didn't know that
11 the one they suggested was the only one that was available.
12 MR. KWOK: If I may, your Honor, I just want to
13 clarify. We do have an expert --
14 THE COURT: Let me see if I haven't got the letter
15 here that I .read. You ask for the conference to allow the
16 government expert knowledgeable about computer forensic
17 procedure to be present at the next status conference to answer
18 any questions I may have. But I don't have any questions.
19 My concern is one that the parties agree on a
20 procedure that will, one, be able to establish that whatever is
21 taken off the hard drive or software is taken from the
22 particular computers that belong to the defendant and be sure
23 that those documents are in fact documents that don't corne from
24 some other place. That is what I want to be sure occurs.
25 MR. KWOK: Sure, your Honor. This is the expert that
(212) 805-0300
5
78THKARC
1 I --.
2
3
THE COURT: I am no computer expert.
MR. KWOK: He is the expert if the court has any
4 questions.
5 THE COURT: The exyert is here, and I gather that
6 Dr. Karron is an expert or is very familiar with his computer,
7 computers, and I think he is an expert. I may be wrong.
8
9
THE DEFENDANT: Are you asking me?
MR. RUBINSTEIN: He built these computers.
10 THE COURT: . So therefore, it seems to me that you
11 ought to be able to reach an agreement.
12 I don't want to put this matter over, Mr. Rubinstein,
13 because I have a two-week trial coming up starting Tuesday and
14 I am not going to be available for anything lengthy during that
15 period. I also happen to be the Part I judge. So I really
16 have my work cut out for me. I am trying to get relief on
17 that, but still there is a limit to my availability in this
18 time period.
19 So what is the matter with the proposal that Mr. Kwok
20 is proposing, that Mr. Karron designate the computers in
21 question and propose a method of obtaining the materials he
22 wants, he can search throughout them. There is no problem on
23 that as long as there is someone who can monitor that in fact
24 whatever he takes out are documents that were on the computer.
25 MR. RUBINSTEIN: We don't have a problem with that
(212) 805-0300
6
78THKARC
1 aspect of it, Judge. As a matter of fact, I assured the
2 government that anything that was taken we would duplicate, it
3 would be duplicated, and we would only have a copy. We don't
4 want the.original, so there is no question of the integrity of
5 whatever is taken.
6 The question was, they gave us the name of one firm.
7 It was my understanding -- maybe I misunderstood Mr. Kwok
8 that there were other firms that could do this work, that they
9 were going to have their expert here, that they were going to
10 share with us the names of firms so that our experts could talk
11 to their experts and see -- first of all, there is possibly an
12 extraordinary cost involved here.
13 THE COURT: That was my next question. Are you
14 concerned that the government's expert is going to be so costly
15 that it is a problem as opposed to yours? Because if they go
16 around to three or four experts, it seems to me it takes time,
17 and why is it necessary to have more than one?
18 MR. RUBINSTEIN: Well, we want our expert to speak to
19 whoever it is that the government is suggesting and see if that
20 person could be involved in the process so we make sure of the
21 integrity of what is going on. So far they have given us the
22 name of one company.
23 THE COURT: All right. As long as that is what his
24 role is going to be and he agrees to those .responsibilities,
25 why isn't that satisfactory?
(212) 805-0300
7
78THKARC
1 MR. RUBINSTEIN: It is. I want the names of other
2 they gave us one.
3
4
THE COURT: Why do we need more than one?
MR. RUBINSTEIN: Because that is what they told me
5 they were going to provide to me, so I can have the e x ~ e r t get
6 in touch with these people because I thought that there was
7 going to be a number of firms in the D.C. area, Washington,
8 D.C. area, who have the ability to do what we are attempting to
9 do.
10
11
12
THE COURT: Is everything down in Washington, D.C.?
MR. RUBINSTEIN: Yes.
MR. KWOK: Yes, it is. The computers are in D.C. and
13 the expert is in D.C.
14 If I may just clarify about the multiple experts. I
15 apologize to Mr. Rubinstein if I was unclear. We were going to
16 try to see whether we could get more than one after I sent him
17 the information on this particular expert, but according to our
18 government expert at the Department of Commerce, he wasn't able
19 to come up with more names that he could trust. Apparently it
20 is a small universe of people, and we just feel like since
21 this
22 THE COURT: This is a man they have confidence in is
,23 what he is saying. If they have confidence in this man, isn't
24 that satisfactory from your standpoint?
25 MR. RUBINSTEIN: If I 'knew that we were only going to
(212) 805-0300
8
78THKARC
1 deal with one firm, I would have checked out that one firm. I
2 have been waiting for a list of firms so that we could do some
3 due diligence.
4 THE COURT: How long will it take you? Is the name
5 unfamiliar to you all? If it is, how long do you need to check
6 it out? Today is Wednesday. Can we do it by Friday? I hate
7 to put time pressures on you. If we can't, we can't.
8 MR. RUBINSTEIN: Judge, finding people this week is
9 not an easy thing to do.
10 THE COURT: All right. I will go along with that.
11 Let's check out this one and get back to me as to whether or
12 not it is not satisfactory to get ahead.
13
14 days?
15
How long do you think it will take? Another week, ten
MR. RUBINSTEIN: A week tops, your Honor. I am sure
16 everybody is back at work on Tuesday, the, 4th. So I will be
17 ready by Friday, no later than Friday, a week from Friday,
18 which I think is either the 7th or the 8th.
19
20
21 OK.
22
23
24
25
THE DEPUTY CLERK: Friday, the 7th.
THE COURT: Yes. All you have to do 1S tell me it is
MR. RUBINSTEIN: Right.
THE COURT: If the two parties say it is OK, then --
MR. RUBINSTEIN: We need an estimate.
THE COURT: -- we have made progress.
(212) 805-0300
9
78THKARC
1
2
MR. RUBINSTEIN: Good.
THE COURT: What sort of progress I don't know, but we
3 have made progress.
4 You better do it by letter, and also it would be good
5 if you give me a time frame for this to be completed because it
6 seems to me we ought to get it completed relatively promptly.
7 That just means you have to get your thoughts in order so that
8 you know -- I think Dr. Karron knows what he is looking for and
9 where he can find it in all likelihood, and I won't say he can
10 find it exactly because I don't know anything about finding
11 things on a computer or what system he used.
12 MR. RUBINSTEIN: Unfortunately, you can't Google this
13 stuff, your Honor, and that is the problem.
14 THE COURT: By then you ought to be able to give me a
15 time frame so that I can be assured that he has had acc.ess to
16 the documents he wants for his defense.
17
18
THE COURT: So give me a time frame so that I can mark
19 it on my calendar and we can have a conference about where we
20 stand on the discovery situation as soon as possible. You may
21 have motions to make. I don't know what you are going to have.
22 MR. RUBINSTEIN: Maybe the government has a
\
23 suggestion. They have talked to these experts.
24 THE COURT: I have to have some control. If I do not,
25 I am a delinquent judge. I don't want to be one of those yet.
(212) 805-0300
10
78THKARC
1
2
MR. RUBINSTEIN: I don't know if this is being
3 disrespectful, but this is the first time I ever remember you
4 not being on the bench exactly at the time-appointed hour. So
5 I don't know.
6 THE COURT: That is me being on the bench. What I
7 have got to do is be sure that you get a schedule and we get
8 this matter tried or disposed of.
9 A letter by next Friday, the 7th of September, and I
10 would hope that it wouldn't take you more than a couple of
11 weeks to complete your discovery.
12 MR. RUBINSTEIN: We will know from the experts, Judge,
13 but I will get working on it tomorrow.
14 MR. KWOK: Thank you, your Honor.
15 The last item on discovery, I just want you to know
16 that I will turn over supplemental discovery to the defendant,
17 since he asked for in his discovery letter previously, notes
18 from the CPA auditor. I asked my agents to go back to their
19 files to turn over every scrap of paper they have, and so I
20 intend to produce supplemental discovery to the defense.
21
22
THE COURT: All right. Thank you very much.
MR. KWOK: The only other item I think on the agenda
23 for the government is we want to apprise the court of a civil
24 complaint that the government will be filing, which is why I
25 have my colleague from the civil division here.
(212) 805-0300
11
78THKARC
1 THE COURT:. You filed a.civil complaint in this
2 matter?
3 MR. SCHWARTZ: Yes. Good afternoon, your Honor.
4 Matthew Schwartz, also from the U.S. Attorney's Office.
5 We are intending to file a civil False Claims Act
6 complaint alleging essentially the same nucleus of facts in
7 this case. I wanted to put that on your Honor's radar screen
8 because we anticipate, unless we are able to come to some
9 agreement with Dr. Karron or Mr. Rubinstein, if he is retained
10 in the civil matter, injunctive relief in conjunction with our
11 civil complaint.
12 With your Honor's permission, we will mark the civil
13 action as related to this action so they could be consolidated
14 or at least dealt with by someone Who knows the facts.
15 THE COURT: Well, I don't know about that. I have a
16 vague recollection that there is some suggestion by the Court
17 of Appeals that .it is better not to handle both the civil
18 action and the criminal action at the same time. I have a
19 vague recollection that there is some sort of -- you can apply
20 for it, but that is my 'role, is to determine whether it is
21 appropriate for me to handle both the civil and the criminal.
22 MR. SCHWARTZ: That is absolutely our understanding as
23 well, that it is by no means mandatory that the two 'be
24 designated as related. But I think given the likely
25 proceedings in this case, especially the application for
(212) 805-0300
12
78THKARC
1 injunctive relief we anticipate making,it makes sense. I
2 wanted to at least preface that issue so that when the civil
3 complaint comes your way, you are aware of it.
4 THE COURT: It may have to be assigned to another
5 judge. All right. You might tell me the case so I won't have
6 to look it up, too.
7 MR. SCHWARTZ: We will put in a letter with our
8 complaint, your Honor.
9
10
THE COURT: Thank you.
MR. KWOK: I don't know whether we have a ,control
11 date, but I just want to exclude time for discovery process.
12
13 21st.
14
15
16
17
18
19
20
21
22
23
24
25
THE COURT: Time is excluded certainly until September
MR. RUBINSTEIN: Thank you very much, your Honor.
(Adjourned)
(212) 805-0300
7A9JKARC Conference
1
2 ------------------------------x
4 v. 07 Cr. 541 RPP
5 DANIEL B. KARRON,
6 Defendant.
7 --------------------- --------x
8
9
10
11
12 Before:
October 9, 2007
3:16 p.m.
13 HON. ROBERT P. PATTERSON, JR.,
14 District Judge
15
16
17
18
APPEARANCES
MICHAEL J. GARCIA,
20 CHI T. STEVE KWOK,
21
22
23 RON RUBINSTEIN,
Attorney for defendant Karron
24
25
(212) 805-0300
2
7A9JKARC Conference
1 (In open court)
2 (Case called)
3 THE COURT: How do we stand first on the discovery
4 situation?
5 MR. RUBINSTEIN: Your Honor, I think discovery has
6 been held in abeyance awaiting our ability to retrieve the
7 information from the computers that were seized by the
8 government. That is what this time has --
9 THE COURT: But we had a procedure set up. What is
10 the status of the procedure?
11 MR. RUBINSTEIN: The status of the procedure is as
12 follows, your Honor:
13 The company Digital First that was recommended by the
14 government is satisfactory to the defense. I have talked to
15 the CEO of that company. He has advised me of the following,
16 your Honor:
17 There are two computers that are in question that have
18 to be they need what is called forensic imaging, where they
19 bring out the data that is on the computer without changing the
20 date or the time stamps that are on any of the data. They
21 bring out what they call a clean environment.
22 The CASI I, which is one of the machines, has what is
23 called three terabytes of information and 35 hard drives. In
24 other words, these are converted computers. They're not your
25 standard IBM or what have you. The CASI I has 35 different
(212) 805-0300
7A9JKARC
1 hard drives on it.
Conference
3
2 Digital First said this is one of the ugliest setups
3 they've ever seen. The bottom line is, to cut to the chase,
4 CASI I -- by the way, your Honor, a terabyte, as explained to
5 me, each terabyte would be the equivalent of a tractor-trailer
6 full of paper.
7 CASI 18, which is the second machine, which is a newer
8 machine, has 20 hard drives, and First Digital advises me that
9 they believe in one week, in a 40-hour week, they could create
10 this duplicate that we need including the spreadsheets so that
11 we can find the information where it is individually in the
12 computer. It would take about a week and a half to do CASI 18.
13 So we're talking about, let's see, outside figure, three, three
14 weeks.
15 They get $350 an hour. They require one week's
16 payment in advance before we begin. Your Honor is probably
17 aware of the fact that we have submitted a request for a
18 Monsanto hearing because Dr. Karron has virtually no funds.
19 The government and I were discussing this matter, and
20 to see if we can resolve this without a Monsanto hearing, the
21 government will permit a second mortgage on Dr. Karron's
22 apartment. It would subjugate the government's lien on a
23 forfeiture, and also we have talked about the fact that putting
24 up part of the money that is obtained in the refinance with the
25 government so that they are protected to a degree on any
(212) 805-0300
7A9JKARC Conference
4
1 forfeitures should they be entitled to forfeiture.
2 That reality is the current problem that we have is
3 being able to get the funds to go forward with this project.
4 THE COURT: I thought that the procedure that you were
5 going to go through was going to be a procedure whereby there
6 would just be an index of what was on each of the computers and
7 that Dr. Karron was going to indicate where on that index, what
8 parts of that index he wanted to look at for his defense.
9 MR. RUBINSTEIN: Apparently, in order to do that, from
10 what First Digital, Digital First tells me is they have to make
11 an original copy and then they create a spreadsheet. Then from
12 the spreadsheet, we can determine what we need and they'll
13 extract that part.
14 THE COURT: There is no inventory on -- Dr. Karron
15 must be aware of how to retrieve the information he wants.
16 MR. RUBINSTEIN: Once he gets an index, he can
17 determine what it is, but this stuff is just stored in such a
18 manner that there is no index on it, and so you can't just find
19 something until they download everything they have there. This
20 is what I'm being told, your Honor.
21 THE COURT: I thought we were going to go by subject
22 matter, and he was going to bring the subject matter they
23 wanted and then the subject matter would be produced to them.
24 In this way, I have no idea what it will cost to get
25 it, and it seems to me that we aren't pursuing the matter in a
(212) 805-0300
7A9JKARC Conference
5
1 very efficient manner, but I may be naive. I am not a
2 computer -- have no knowledge of the interior workings of
3 computers and I don't believe I should try and gain that
4 knowledge.
5 I don't think Mr. -- I'll wait till you finish.
6 (Pause)
7 MR. RUBINSTEIN: Your Honor, the problem is that Dr.
8 Karron, the way he filed things, he had a daily tickler and he
9 just filed everything that would happen that particular day.
10
11
12
THE COURT: I understand.
MR. RUBINSTEIN: The expenses and what have you.
THE COURT: You gave me an argument as to which I
13 bought, which was that because of certain facts, there were
14 things that were relevant to Dr. Karron's defense --
15 MR. RUBINSTEIN: Correct.
16 THE COURT: in the file, and so he had to have
17 access to those things. I've forgotten exactly what they were,
18 but I guess I can get the transcript out and look at it, but
19 those things should be relatively easy to determine and
20 relatively easy for this expert to find just the way if Dr.
21 Karron was seeking to find them.
22 If I go back to the transcript, I suppose I can find
23 exactly what those things were, but by now that was supposed to
24 have been done in September, and here we are in practically
25 mid-October. That was over a month ago that I ordered that.
(212) 805-0300
1
7A9JKARC Conference
I don't see that there is any progress at all. It
6
2 seems to me that there is no progress, and I am afraid it may
3 be because you and I, Mr. Rubinstein, aren't as computer
4 literate as we might be and that this government expert, you
5 say, is satisfactory to the defense, but -- I'll have to go
6 back to the transcript to see exactly what it was that you
7 asked for and that I felt could be relevant to your defense,
8 but it has to be material relevant to your defense.
9
MR. RUBINSTEIN: We are trying to establish through
10 these records that expenses that the government claims were
11 inappropriate with criminal intent, were, in fact, spent on
12 matters totally related to the grant.
13 For instance, if Dr. Karron went to dinner and he went
14 to dinner with two other people that were related to grant
15 matters, he would have notations in these records showing that
16 he went to dinner and at least, at least an indication of what
17 the purpose of the meeting was to show he never had any intent
18 to inappropriately take funds that were grant-related.
19 There is no question, your Honor, in this case
20
21
22
THE COURT: He knows who he went to dinner with.
MR. RUBINSTEIN: He doesn't know, Judge.
THE COURT: He knows who he went to dinner with and
23 why those people would be relevant to this case. So it seems
24 to me that if you want to determine that, you can determine
25 that with names, signature, what have you. I don't see why
(212) 805-0300
7A9JKARC Conference
7
. 1 this business of a spreadsheet and all seems to me to be just
2 why the government opposes this thing in the first place.
3 Now, maybe I am wrong, but it sounds to me as if we
4 are getting into a very, overly prolix method of achieving a
5 result, and I've got to see better progress than that because
6 one thing, I can't tell and have any idea what the cost of this
7 is going to be.
8
9
MR. RUBINSTEIN: No. I said that the --
THE COURT: Therefore, how do you know what is a
10 reasonable charge in a Monsanto hearing?
11 I won't be able to make any sort of determination of
12 that sort unless you come up with something a little more hard
13 information. This is all too fuzzy to me.
14
15
16
MR. KWOK: If I may be heard, your Honor?
THE COURT: Wait till they finish their consult.
Mr. Kwok wanted to say something. I don't want him to
17 talk while you were talking, Mr. Rubinstein.
18
19
20
MR. RUBINSTEIN: Thank you.
THE COURT: Go ahead.
MR. KWOK: The government's position has always been
21 that these materials, we just don't see a way how it is
22 relevant to his defense. We have always maintained the
23 position that the discovery that we have produced to the
24 defense are the materials that we will use in the government's
25 case in chief and we are aware of no exculpatory evidence or
(2l2) 805-0300
7A9JKARC Conference
8
1 Brady materials or Giglio materials in the computers that are
2 in the government's possession.
3 Now, the government has tried to accommodate the
4 defense position by exploring whether this path is workable.
5 As your Honor has indicated, it seems like it is simply not a
6 workable or effective path to go down. Even assuming
7 everything goes well, according to Mr. Rubinstein, we are
8 talking about three weeks of copying, duplication and cost
9 along the lines of upward of $30,000.
10 I am sure you know or everyone who has even some
11 dealings with computers knows things like this don't go
12 smoothly, I am sure there will be obstacles in the course of
13 this which will fill the cost delays.
14 I have produced the materials Mr. Rubinstein referred
15 to such as the spreadsheets, the Quicken notations where the
16 defendant would note what he was doing that day, the charges
17 that he put --
18 THE COURT: I am sorry. I don't follow that. You say
19 you've done what?
20 MR. KWOK: As part of the discovery, I have produced
21 hard copies of the kind of spreadsheets that Mr. Rubinstein has
22 just referred to, namely, if he goes to dinner and he put a
23 charge of like, say, a hundred dollars on the card, on the
24 company, company card, he would note on the spreadsheet the
25 dollar amount and sometimes the purpose of the meeting or the
(212) 805-0300
7A9JKARC
1 dinner.
2
9
Conference
THE COURT: When you say you put them on spreadsheets,
3 why do you use that term?
4 MR. KWOK: Because it is on a, it is essentially a
5 table form, but it is on the computer.
6 THE COURT: So it is a spreadsheet taken from the
7 computer?
8 MR. KWOK: Right. The reason we have it is because
9 before the government got involved, there was an internal audit
10 done of the company's finances through an auditor, and she has
11 turned over all her papers to the government to support the
12 result for the audit.
13 THE COURT: I understand your papers. You're
14 suggesting these are spreadsheets. Are these spreadsheets
15 amongst or exhibits amongst her papers?
16 MR. KWOK: Exactly, these are the supporting
17 documentations taken from the auditor. The auditor had access
18 to these spreadsheets Mr. Rubinstein related to, and in turning
19 over her audit report, she has also turned over the underlying
20 documents that she looked at, and part of those materials are
21 precisely the daily notations Mr. Rubinstein is talking about.
22 To the extent those materials are relevant, and I
23 don't think they are, but to the extent they are, they are
24 already in the defense position. They are turned over. I
25 don't know what other materials they're talking about in those
(212) 805 0300
7A9JKARC Conference
10
1 computers that make it worth the trouble and expense and time
2 and delay of retrieving t h e m ~
3 THE COURT: I see. I haven't fully understood that
4 the auditor's work papers included spreadsheets from the
5 computers that you referred to. Are they also marked to
6 whether their source is CASI I or CASI II?
7 MR. KWOK: Where they came from, but those papers, all
8 the papers I have seen and have possession of I have turned
9 over. In fact, those are precisely the materials I have made a
10 point of to produce again as supplemental discovery just to
11 make sure that that every page I have was turned over to the
12 defense, and that was already done.
13 THE COURT: Let me ask you one further question. The
14 government's case, as I understand it, is based on this audit
15 by the auditor and the revelations or the conclusions drawn
16 from her work papers?
17 MR. KWOK: Correct, with one caveat. She is one of
18 the people who have looked into the finances. The government
19 has also, the agency that provided the grant has itself looked
20 into the finances.
21
22
THE COURT: There are two audits?
MR. KWOK: There are two audits, I think it would be
23 fair to say.
24
25 defense?
THE COURT: Are both audit papers available to the
(212) 805-0300
1
2
7A9JKARC Conference
MR. KWOK: Yes, they are.
THE COURT: Do both audits include the spreadsheets
11
3 from the computers?
4 MR. KWOK: I don't know the extent to which the
5 government's auditor looked at or relied on the audit of the
6 internal auditor, but those materials were available to both
7 audits.
8 THE COURT: If you don't know the extent, it seems to
9 me there are charges here, as I understand it, that these are
10 unauthorized expenses --
11
12
13
THE COURT: - under the grants.
MR. KWOK: Right. The reason I said that, I am not
14 sure whether the extent to which the government auditor relied
15 on the papers of the internal auditor is because the
16 government's understanding of the grant was pretty clear cut.
17 Using an example Mr. Rubinstein referred to earlier,
18 for example, the dinner, it is clear I think under the grant
19 rules that it doesn't matter who he was going to dinner with.
20 Those expenses are simply not covered by the grant because they
21 are --
22
23
THE COURT: They're not?
MR. KWOK: The grant only covers direct research
24 expenses, like you can pay your people doing research for you,
25 you can pay for the approved inventory of equipment, things
"
(212) 805-0300
7A9JKARC Conference
12
1 like rent, mortgage, home renovation, even internet services,
2 dinner, meals, those things are not covered.
3 So I think it was clear in the mind of everybody,
4 including the government auditor, that these expenses are not
5 approved, so there might not have been any reason to go any
6 deeper than that once it has been ascertained what the nature
7 of the expenses are.
8
9 that--
10
THE COURT: Is the grant document clear on its face
MR. KWOK: I think there are. If I understand Mr.
11 Rubinstein correctly, I don't think they're disputing what the
12 terms of the grant is. The debate has always been what has
13 been the defendant's intent or state of mind at the time those
14 charges were incurred. I think it is indisputable that the
15 terms of the grant prohibit the money to be spent in this way.
16 The only question open I think at trial would be what
17 the defendant's state of mind was, and I don't think that these
18 papers will be probative on that question.
19 THE COURT: Mr. Kwok, going back to Mr. Rubinstein's
20 example of a dinner with two other gentlemen or women or
21 whatever, and discussing having dinner with them and charging
22 the dinner you say is not valid under the grant?
23 MR. KWOK: Exactly, your Honor. To prove that the
24 defendant, for example, had the requisite intent, we would
25 prove, for example, that he had multiple conversations with the
(212) 805-0300
7A9JKARC Conference
13
1 agency people, with his own internal employees about whether
2 these type of charges would be allowable under the terms of the
3 grant. He was repeatedly told no and, nonetheless, kept
4 incurring these charges again and again over a period of time.
5 That is how the government would prove intent, and I
6 don't think these papers in these computers, if they exist at
7 all, would go to that question.
8
9
MR. RUBINSTEIN: Your Honor, accepting the
10 government's position that the issue is the intent, all
11 right--
12
13
THE COURT: Intent or
MR. RUBINSTEIN: -- in order to defend Dr. Karron, we
14 don't intend to defend this case on the grounds that there was
15 X amount of money that was allocated under the grant for
16 employees and he had volunteers, so he didn't have to pay them
17 money. So he spent it on equipment, which was overbudget.
18
19
20
The question is, and that is why in these dinners
THE COURT: Spent it on equipment?
MR. RUBINSTEIN: For the grant in order to do his
21 project. So technically he wasn't within the four corners of,
22 what the grant money was supposed to be for, but the bottom
23 line is the defense in this case is that he spent all of this
24 money for the legitimate purpose of fulfilling what the grant
25 was for in order to accomplish that end.
(212) 805-0300
14
7A9JKARC Conference
1 This information --
2 THE COURT: If he had these expenses and what have
3 you, he knows what they are and he can, by having a search made
4 on the computer for those expenses, whichever ones he claims he
5 wants, be it the refurbishing of the apartment or what have
6 you, or buying some equipment that he feels was serving of
7 improving the grant, he can locate those, those are locatable
8 and can be produced to him.
9 Then he will have in his hands whatever he needs for
10 his defense that, oh, well, it's true that this money didn't go
11 for direct salaries for employees the way the grant says, but I
12 intended that the equivalent would be produced for the
13 government.
14 They got their money's worth because I did these other
15 things for them, and that can be his defense, but he doesn't
16 need to have a spreadsheet to go through all of these things as
17 far as I can see. All he has to do is isolate what the
18 defenses are that he feels, although weren't authorized under
19 the grant, were for the purposes, were for the purpose of
20 obtaining the end result that he felt the government wanted, if
21 that is his defense.
22 MR. RUBINSTEIN: If you can give me till Tuesday, I
23 will - is it possible for me to come back at 4:00 o'clock on
24 Thursday, and I will make a report to your Honor, I'll speak to
25 the computer people and get a list of those topics and see
(212) 805-0300
7A9JKARC Conference
15
1 whether or not we can streamline this.
2 THE COURT: It seems to me that if you do it any other
3 way, Mr. Rubinstein, the clarity of your defense won't be made
4 clear to any member of the jury if you go in and get all of the
5 little dinner expenses and things like that that you talked
6 about, but if you get to the heart of the defense which, as I
7 understand, is what we got the -- these expenditures are not
8 technically, in the grant's language, don't conform to the
9 grant's language technically, but they're the substantial
10 equivalent type of argument and the government got what it paid
11 for by virtue of these expenses. It is true they weren't
12 within the terms of the grant.
13 MR. KWOK: It seems to me if that is the defense, the
14 defense is free to make that argument to the jury. They don't
15 need any underlying documents or papers in these computers
16 because it is clear I think based on the documents that are
17 already provided how much is spent on what.
18 So if that is the argument, they could say well, it
19 shows on this chart that X dollars were spent for a legitimate
20 purpose, but we also spend Y dollars in excess of what was
21 allotted to make up the difference. The numbers, the
22 information is out there already and I don't know what is to be
23 gained from this really onerous process and expensive process.
24
25
THE COURT: That is true.
MR. KWOK: If that is the only defense they'll make,
(212) 805-0300
7A9JKARC Conference
16
1 they're f r e ~ to argue that to the jury.
2 THE COURT: That is up to Mr. Rubinstein and Dr.
3 Karron how they wish to present it. I don't know the facts
4 well enough. I do see merit in your point, that the
5 substantial equivalent argument can be used, but the government
6 got its money's worth out of these expenses if they're detailed
7 enough for use by Dr. Karron, I would like to have it from you
8 if you think they are.
9 MR. KWOK: The documents I produced, yes, they are.
10 because they're sufficient for the government to put on its
11 case.
12 THE COURT: It sounds as if it might be true, Mr.
13 Rubinstein.
14 MR. RUBINSTEIN: The only documents that the
15 government has, you know, when they tell your Honor that they
16 have certain documents of Dr. Karron's that they turned over,
17 those were asked by the auditor at the time for backup. So the
18 auditor was supplied certain few items.
19 The reality is that if Dr. Karron has to testify and
20 he's asked questions, he doesn't have recollections of many
21 things that he does. That is why he is one of these people who
22 makes a record virtually of everything they do. They pigeon
23 hole everything and there is a record somewhere.
24 Unfortunately, he is not a great record-keeper. These
25 records have to be retrieved and analyzed so that he can
(212) 805-0300
7A9JKARC Conference
17
1 refresh his recollection, so that we can present a coherent
2 defense and not look like he is trying to hide anything here.
3 I asked the government if they would give -- and maybe
4 this can expedite things -- they say it is $395,000 and he
5 probably spent money. If they can give us a list, they have
6 it, they know what their road map is, of what the 395,000 is,
7 they probably could shorten what we have to look at in order to
8 properly prepare the defense.
9
10
11
12
13
14
15
16
THE COURT: Is the amount of the charge the 395,000?
MR. KWOK: Yes, that is the approximate amount.
THE COURT: Overcharges?
MR. KWOK: Charges spent, improper charges. I have
told Mr. Karron what those charges are since I think when --
THE COURT: Isn't there an audit or something that
reflects what those charges are and they can just --
MR. KWOK: I have told him repeatedly there is going
17 to be rent, the defendant's medical expenses.
18 THE COURT: Is there some document so that instead of
19 your doing it orally, is there some document that reflects what
20 those items are so that I would think there must be a
21 spreadsheet or something.
22 MR. KWOK: There is no one document in the discovery.
23 Essentially they're asking me to produce something like a trial
24 exhibit to help them sort of have a pretrial of the
25 government's case, and I am not about to do that.
(212) 805-0300
18
7A9JKARC Conference
1 I can say with a great degree of confidence that the
2 numbers will be borne out by the materials that I have already
3 produced in the form of checks, audit reports.
4 THE COURT: Didn't the government produce an audit?
5 Didn't they make a claim against Dr. Karron that
6 isolated these things?
7 MR. KWOK: Precisely. All I meant to say is that
8 we're not charging every disallowed expense. If you look at
9 the audit report, the items we claim are disallowed will be on
10 there, but there will be more stuff on there than will be in
11 issue in this case because we are only going after the big
12 categories such as the ones I referred to earlier.
13 Yes, you're correct, your Honor, all the numbers that
14 we believe are disallowed expenses will be in the audit reports
15 that have already been produced to the defendant.
16 THE COURT: If it is all in the audit report, why
17 isn't that sufficient, Mr. Rubinstein?
18 MR. RUBINSTEIN: Your Honor, the government claims
19 that they're aware of no exculpatory evidence, but they say
20 that in spite of the fact they don't know what any of these
21 computers contain. They have this audit report and they have a
22 witness
23 THE COURT: I don't follow you, Mr. Rubinstein. If
24 they're making a claim based on a claim that a certain amount
25 of - you're only entitled to make certain charges, and their
(212) 805-0300
7A9JKARC Conference
19
1 claim is look, here's what we found, an audit that instead of
2 charging only research salaries of associates or whatever under
3 the grant, the language of the grant, you're making other
4 charges and those amount to 300 and 75,000 or whatever and here
5 it is, and here they are.
6 I don't see on their case that there is any
7 exculpatory evidence that you could find in the computer
8 because the issue is whether the expenses were appropriate or
9 not, and the defense would be they're -- the only defense which
10 you say is the defense they're seeking to make is that look, we
11 gave you the substantial equivalent and we didn't intend to do
12 anything wrong, you got the benefit of the research. The
13 research product is good. We spent the money slightly
14 differently. I don't know how big your rent was and got this
15 result.
16 I don't see how anything can be Brady material. It
17 just doesn't seem to fit into the Brady context.
18 MR. RUBINSTEIN: Your Honor, these notes would show if
19 there was a dinner that they're claiming, what was discussed at
20 the dinner. I understand one of the government's witnesses in
21 this case is Dr. Karron's former accountant who was privy and
22 aware of all of these documents and what have you, and if I'm
23 not able to cross-examine this witness based upon documents
24 that she was aware of that, I could use to show the jury what
25 her thinking was and what her job was and why she filed this
(212) 805-0300
7A9JKARC
1 audit.
2
3
4
5
20
Conference
THE COURT: She is the auditor?
MR. RUBINSTEIN: She is the auditor.
THE COURT: She is his accountant?
MR. RUBINSTEIN: His accountant, yes. She is, what I
6 understand -- I could be mistaken -- she is the star witness or
7 one of the star witnesses for the government. All of these
8 items we are talking about --
9
10 witness.
11
THE COURT: I don't know if she is a star, but a
MR. RUBINSTEIN: She is at least a significant
12 witness. Additionally, apparently the government is claiming
13 today that if I could put the pieces together, I may be
14 mistaken, is going to say she advised Dr. Karron not to do
15 certain things, all right?
16 So these records became very important because she is
17 privy to all of these records. Nothing was concealed from her..
18
19
THE COURT: She is probably privy to everything.
MR. RUBINSTEIN: Yeah. How are we going to examine
20 her? Are we going to be stuck with her word because we're not
21 going to have the records?
22 The government says they're not aware of any. Sure
23 they're not aware of any because they're very happy with this
24 cookie cutter approach and they want to look at anything in the
25 computers. The only thing they have is what the defense handed
(212) 805-0300
7A9JKARC Conference
21
1 to them. We have stuff of the defense, including Dr. Karron's
2 prior lawyers gave to the government in the hope they won't
3 prosecute him, but this is what they have, but they don't have
4 the rest of that stuff.
5 THE COURT: I don't see going about this the way
6 you're going about it. I just can't see it.
7
8
(Pause)
MR. RUBINSTEIN: I understand what is also missing,
9 your Honor, the payroll records become very significant here.
10 We don't have the payroll records. The payroll records are
11 among the documents that are in these computers. They will
12 show where monies went and where they didn't go, all right?
13 Dr. Karron
14
15
THE COURT: Were they all for the research people?
MR. RUBINSTEIN: No. I am talking about, Judge, Dr.
16 Karron's salary. He was entitled under the grant to get X
17 amount of dollars. We need the payroll records to show he
18 wasn't taking -- he was taking less than X amount of dollars.
19 So that money was utilized for other grant purposes. It goes
20 to the heart of the man had no intent of doing anything wrong.
21 THE COURT: You want his payroll record? I am sure
22 theoretically he would have access to that from just his bank
23 account. Secondly, I don't think the government would object
24 to pulling out his payroll.
25 MR. KWOK: The government's position has always been
(212) 805-0300
7A9JKARC Conference
22
1 if they can tell us where to look for this stuff, we will pull
2 it for them. From what I have been understanding, they're
3 telling this court that they can't simply tell us where to
4 locate this stuff; and, therefore, the only course open to them
5 is to copy all the hard drives, create a spreadsheet and go
6 from there, which is this very expensive process.
7 If they're able to tell me or the computer expert
8 where precisely in these 35 or so hard drives in CASI I the
9 stuff is located and how to access it to accommodate their
10 requests, I have no problem providing that material.
11 THE COURT: The payroll, you would be glad to give his
12 payroll records?
13 MR. KWOK: I would be glad to give his payroll or
14 whatever materials they can pinpoint that would make it easy to
15 retrieve. From what they tell me, if the description is vague,
16 I obviously can't find it. If they can pinpoint the precise
17 location of the exact computer the directory is stored, the
18 name of the file, and if we can find it, we'll make a copy of
19 it, with one copy to them and one copy to the government.
20 If they're just making this wholesale global request,
21 I just don't think it is workable.
22 MR. RUBINSTEIN: We need the forensic Digital First to
23 find these because there are no file names. The unfortunate
24 thing --
25 THE COURT: You made an argument. Are you saying Dr.
(212) 805-0300
7A9JKARC Conference
23
1 Karron didn't take the full pay and he was entitled to full pay
2 at the higher figure under the contract, and they'll provide
3 you with the payroll for Dr. Karron, and you can prove that and
4 show that he didn't take his full pay. They can do that. That
5 is not something that is a problem.
6 Then you go into this spreadsheet of everything in the
7 world that took place when it doesn't have any relevance to
8 your defense or to theirs, their case, either one.
9 MR. RUBINSTEIN: Maybe I misheard the government, but
10 I think they said they would give me the payroll records if I
11 can tell them where they can find them.
12
13
THE COURT: They can find the payroll.
MR. KWOK: I am not sure of that because I don't know
14 where in the computer Mr. Karron stored his payroll files.
15
16 it?
17
THE COURT: Certainly the accountant, didn't she store
MR. KWOK: No. These are Mr. Karron's computers.
18 What the accountant
19
20
THE COURT: She didn't work on the computers?
MR. KWOK: I don't think she did. She got a printout
21 of this stuff, and to the extent she relied on them to prepare
22 her audit, we got them and turned them over. We have no way of
23 knowing where in the computers the stuff they're looking for is
24 stored.
25 THE COURT: But she has a payroll record for Dr.
(212) 805-0300
7A9JKARC Conference
24
1 Karron? That is the payroll she is relying on, right?
2
3
4
5
MR. KWOK: Right.
THE COURT: That is this payroll you're relying on?
MR. KWOK: Exactly.
THE COURT: The grant says he is, according to what I
6 have heard here, a different figure. What is the problem? You
7 have the documents already.
8
9
MR. RUBINSTEIN: I don't have the documents already.
THE COURT: You do have the documents. You were given
10 her records which is the purported payroll. She got it from
11 him or someone else and you say he's entitled to a higher
12 figure. Okay, he is entitled to a higher figure and he can
13 make his argument he wasn't stealing money, look, he took less
14 money than he was entitled to.
15
16
17
MR. RUBINSTEIN: My recollection of --
THE COURT: It is right there in her figures.
MR. RUBINSTEIN: -- my recollection of reviewing the
18 documents, I didn't see that. If your Honor will give me 48
19 hours to rereview the documents, possibly Mr. Kwok could point
20 me directly to what document it is, I'll be glad to come back
21 in here in two days, Judge, and I will talk to the computer man
22 about whether or not he can categoriz'e equipment, name
23 searches, refurbishing the apartment, medical, if he can show
24 you with that kind of name search whether or not he could
25 accomplish something in a less costly and more efficient
(212) 805-0300
7A9JKARC Conference
25
1 manner. I am only asking the court for 48 hours to try to make
2 a--
3
4
5
6
THE COURT: I don't know. I can't do it at 4:00
o'clock on Thursday because I have something else going on at
4:00 o'clock on Thursday, but if we can do it relatively fast,
i'
I can do it at 3:00 o'clock
," .... Lilt.
7 MR. RUBINSTEIN: appearance in the
,.;'
8 Eastern District at 2:30. I am free all day -
9
10
11
THE COURT: Friday morning?
MR. RUBINSTEIN: I am free in the morning.
THE CLERK: 9:30?
12 MR. RUBINSTEIN: 9:30 am free, your Honor.
13 THE COURT: We have got to get this -- then it seems
14 to me if we know, if we can get that then we can deal
15 with your problem for legal fees. I can't really, I can't get
16 a handle on that problem of the unless I know what

17 these other expenses are going to be.
18
19
20
21
22
23
24
25
MR. RUBINSTEIN: See you 9:30 Friday morning.
MR. KWOK: Thank your Honor.
THE COURT: Thank you.
(Court adjourned)
(212) 805-0300
7b6dkarc
CONFERENCE
2 --------------------- --------x
1
3
4
UNITED STATES OF AMERICA,
v.
New York
r
N.Y.
07 Cr. 541 (RPP)
5 DANIEL B. KARRON,
6 Defendant.
7 ~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
8
-9
10
Before:
11
November 6
r
2007
2:15 p.m.
. HON. ROBERT P. PATTERSON, JR.,
12
District Judge
13
14 APPEARANCES
BY: CHIT. STEVE KWOK
18 RONALD RUBINSTEIN
19
20
21
22
23
24
25
SOUTHERN DISTRICT REPORTERS
r
P.C.
(212) 805-0300
2
7b6dkarc
CONFERENCE
1
2
THE CLERK: United States vs. Daniel Karron.
MR. KWOK: Good afternoon, your Honor. Steve Kwok for
3 the government.
4 MR. RUBINSTEIN: Good afternoon, your Honor. Ronald
5 Rubinstein for the defendant.
6
7
8
9
10
11
THE COURT: Good afternoon, Mr. Rubinstein.
Good afternoon, Mr. Karron.
THE DEFENDANT: Good,afternoon.
THE COURT: Do we meet with success?
MR. RUBINSTEIN: No, your Honor.
MR. KWOK: As I understand it, the defense did not put
12 up the required deposit for Digital First to start work, and so
13 essentially we are back to where we were the last time.
14
15 have
16
17
MR. RUBINSTEIN: The problem is, your Honor, and I
THE COURT: I thought it was all agreed upon.
MR. RUBINSTEIN: Yes, and with the date of
18 November 1st. Unfortunately, the financing did not
19 materialize. The defendant's immediate family who at that time
20 I believed would come to the plate for him, as they had in the
21 past, decided not to. In the interim, a good friend of
22 Dr. Karron is attempting to buy the apartment and tells me that
23 within 30 days he should have the financing in place so that he
24 can purchase the apartment.
25 I have talked to the government about it, because your
(212) 805-0300
3
7b6dkarc
CONFERENCE
1 Honor knows that there is an outstanding Monsanto request, the
2 government has indicated that they would work something out
3 with me as far as a fee arrangement on the case, but as far as
4 the monies to --
5 THE COURT: Can't the friend -- we are going to lose
6 the other half of the equation here on this examination of the
7 computer files. Can't the friend loan money on the apartment
8 for the paYment?
9 MR. RUBINSTEIN: He doesn't have the money to loan it.
10 He would have to refinance the apartment --
11 THE COURT: You can't - I mean, he is not going to
12 have 100 percent financing on the apartment.
13 MR. RUBINSTEIN: No, he is not going to have
14 100 percent financing.
15 What he has indicated to me, through the e-mails that
16 he has sent me, is that he is putting together a group of
17 friends of Dr. Karron so that there is some leverage on
18 purchasing the apartment that they -- in case they lose the
19 apartment later on and they are obligated on the loan, he wants
20 to leverage his obligation between, I think he said a total of
21 three individuals. That being said, your Honor, that's where
22 we stand.
23 THE COURT: Somewhere there is going to be equity in
24 that apartment. Can't whoever is putting up the equity, the
25 amount of the computer expert fee, loan it in the interim?
(212) 805-0300
4
7b6dkarc
CONFERENCE
1 MR. RUBINSTEIN: It is not just a question of the
2 interim, they are not prepared to do that. What they want to
3 do is have a clean situation where they are able to get 2 to
4 $300,000. out of the apartment, put up $100,000 with the
5 government in lieu of -- towards their lien, use the rest for
6 the expenses of the trial, attorney fees and experts and what
7 have you, and they want to be in that position.
8 Unfortunately, Dr. Karron himself is not in a position
9 to refinance the apartment on his own because of his current
10 situation and his employment situation. So we have this
11 problem.
12 THE COURT: I don't understand it. If he sells the
13 apartment, the cash would be his, not theirs.
14 MR. RUBINSTEIN: Well, he has a mortgage. The cash
15 would be used, put in an escrow for the government, for the
16 attorney fees, and for expenses. A good portion of the cash
17 would be his. We're trying and do this within -- and they
18 suggested, or Mr. Goldberg suggested that within 30 days he
19 could have this done.
20 So that's where we stand.
21 THE COURT: I still feel that somehow it has to be
22 done that way.
23 What does the government have to say?
24 MR. KWOK: Well, the government would just ask the
25 Court to close discovery. In the prior order the Court signed,
(212) 805-0300
5
7b6dkarc
CONFERENCE
1 you set November 1st as the deadline for discovery. We have
2 been having this conversation back and forth for more than two
3 months now, and nothing -- absolutely nothing has happened.
4 THE COURT: Suppose I close the discovery and that 1S
5 the end of it?
6 (Pause)
7 MR. RUBINSTEIN: Well, then, Judge, I guess an
8 alternative situation is something I do not want to have to
9 engage in and create an additional litigation and what have you
10 is to bring a civil suit for return of his property that in our
11 view was improperly seized by the government prematurely.
12 I mean, we're in a Catch-22 here. I mean, possibly if
13 your Honor wants to relieve me and appoint CJA counsel,
14 Dr. Karron has filed a financial affidavit, maybe under the
15 aegis of the CJA system that is in place, monies would be
16 available through the government. We were trying to qvoid
17 that. Dr. Karron wanted me to remain as his attorney on this.
18
19
20
But I don't know the answer, Judge, I'm sorry.
(Pause)
THE COURT: Why c ~ n ' t the government pay for the fee
21 and take an additional lien on the apartment?
22 MR. KWOK: I don't know the mechanics of that, but
23 just as a matter of principle, I don't think that is a -- I
24 just don't believe that's a prudent course for the government.
25 First of all, I don't think there is anything material
(212) 805-0300
6
7b6dkarc
CONFERENCE
1 or relevant in those computers, which is our position at the
2 outset.
3 But beyond that, given the defendant's financial
4 means, I'm not sure we could ever get that money back. We do
5 have a lien on the apartment in the event of conviction, and I
6 would be happy to work with Mr. Rubinstein to make sure that he
7 stays on the case, if that's the defendant's desire. But in
8 terms of copying the computers, given that it is the
9 government's view that it is just essentially junk data, I
10 don't think that the expense and the delay are necessary,
11 especially in view of the fact that we have been having this
12 back and forth for two months and we have made absolutely no
13 progress, and I think that going in that direction is just
14 going to create further delay for no good reason.
15 And I might also add, your Honor, that, you know, if
16 you recall the last time, I had even offered to make the
17 arrangement to subordinate our liens to make funds.available
18 both for the retrieval process and so that Mr. Rubinstein can
19 get paid and, you know, and in the course of the p a s ~ few weeks
20 I also haven't heard anything from the defense about, you know,
21 moving that process forward so that they can get money for the
22 retrieval of the data.
23 So I think we have gone over this before and I don't
24 think any progress will be made regardless of the financial
25 arrangements we--
(212) 805-0300
7
7b6dkarc
CONFERENCE
1 THE COURT: Why can't the defendant execute a note to
2 the federal government for the lien on the proceeds of the
3 apartment for the amount of the fee of the computer specialist,
4 and then that would be a first lien on the purchase of the
5 property, and you pay it and let's get this thing moving? I.am
6 not going to make a decision; I don't know what is in those
7 computer files.
8 MR. KWOK: Because I think under settled Second
9 Circuit case law, if the government seizes property pursuant to
10 a lawful seizure warrant, the cost is on the defendant. And it
11 is true that we have a lien on the apartment, but in the event
12 of, let's say, a not guilty verdict, we can't forfeit that
i3 property and the government will be out of pocket for
14 potentially $20,000 of the cost of retaining --
15
16
THE COURT: Until such time as the lien is paid.
MR. KWOK: We would only get the lien only if there is
17 a conviction. If there is no conviction there will be no
18 forfeiture.
19
20
21
THE COURT: Or if there is a sale.
MR. KWOK: Or unless --
THE COURT: Mr. Rubinstein wants to get paid, too. So
22 there will be a couple of liens on the apartment. It is going
23 to have to be sold.
24 MR .. KWOK: And I don't know how soon that sale is
25 going to take place.
(212) 805-0300
8
7b6dkarc
CONFERENCE
1
2
THE COURT: Then have him draw on your note.
MR. KWOK: And what would -- I mean, I guess if we
3 proceed that way, what would the schedule be? will they have
4 another two weeks to complete discovery under that?
5 THE COURT: . Yes, I would extend it for the two-week
6 period, have the note payable that way. In the meanwhile,
7 Mr. Rubinstein can decide how he wants to handle his getting
8 paid. I am trying to corne up with something that --
9 MR; KWOK: I don't know how that would work. I would
10 have to confer with my office to see whether that's --
11 THE COURT: Why don't you call them and confer with
12 them now.
13
14
MR. KWOK: OK.
THE COURT: I don't know what is in those files and
15 I'm not going to make a prejudgment that it is worthless, or I
16 must admit that I don't know that it is -- it may be helpful,
17 but the defendant's time as it is, and apparently under Second
18 Circuit law it is a cost to the defense. So let's --
19 MR. KWOK: And I don't see what the incentive is at
20 that point for the defendant to sell the apartment. The
21 government would not get paid until the apartment --
22 THE COURT: Does he want to have a lawsuit with his
23 attorney? Does he want to get sued by his attorney for it?
24 No.
25 You have interest running so you are supposedly
(212) 805-0300
9
7b6dkarc
CONFERENCE
1 protected.
2 MR. KWOK: You want me to make the call now or when I
3 come back?
4
5
6
7
THE COURT: Sure. See if we can get it done.
MR. KWOK: OK. Hold on.
(Pause)
THE COURT: Is that all right with you,
8 Mr. Rubinstein?
9
10
11
12
13
MR. KWOK: Give me one second.
(Recess)
I just spoke to my unit chief and I was told that the
14 government does not do that in the ordinary course. However,
15 if the Court feels strongly in this case that that's the proper
16 course to take to facilitate the resolution of this issue, we
17 would not object to the Court's entering an order directing the
18 government to pay for the cost of the discovery with a note
19 from the defendant. And I would also add, if the Court agrees
20 to order the defendant to take all necessary steps, starting
21 right now, to sell his apartment, because I alerted to the
22 Court earlier that under this scenario I don't see what
23 incentive he has aside from avoiding litigation from his own
24 attorney to sell his. condo.
25 THE COURT: I was going to ask Mr. Rubinstein, what
(212) 805-0300
10
7b6dkarc
CONFERENCE
1 steps has the defendant taken to sell the apartment on the open
2 market?
3 MR. RUBINSTEIN: He has a real estate agent and he has
4 this buyer through -- the individual, Lee Goldberg, that I had
5 indicated to you --
6 THE COURT: But is it listed? Is the apartment listed
7 for sale?
8
9
THE DEFENDANT: We've got --
THE COURT: It should show up on the m u l ~ i p l e
10 listings.
11 (The defendant conferred with counsel)
12 MR. RUBINSTEIN: No, it is not listed, your Honor. It
13 has not been listed yet.
14
15
THE COURT: Well, it has got to be listed.
MR. RUBINSTEIN: Because from what I understood is
16 that this friend of the defendant's, this Lee Goldberg, who has
17 be'en in touch with me both by telephone and bye-mails, has
18 indicated to me that he is in the process of putting together
19 to buy the place with a group.
20 THE COURT: You want to get market value, so you might
21 as well list it and you will get bids.
22
23 Judge.
24
MR. RUBINSTEIN: They are getting it appraised now,
THE COURT: Appraisals are not the same as real live
25 bids, and you know this market, subprime and everything going
(212) 805-0300
11
7b6dkarc
CONFERENCE
lon, you don't know what kind of a price you are going to get
2 unless you --
3 MR. RUBINSTEIN: We will list it this week, Judge. We
4 will list the apartment.
5 THE COURT: Well, on the condition that you'll list
6 it, then I'll sign an order to be submitted by the government
7 so that they will pay the cost and take a note from Dr. Karron
8 in return therefor, and we'll get this thing done in the next
9 two weeks.
10 (Pause)
11
12 the --
13
MR. KWOK: . OK. So if I am counting my days correctly,
THE COURT: If you give me the order, I will sign it
14 right today.
15 MR. KWOK: And then for the completion of discovery,
16 the new deadline is, I guess, November 20th, two weeks from
17 now?
18 MR. RUBINSTEIN: Judge, could.we have until after --
19 Thanksgiving is that Thursday, November --
20
21
22 the --
23
THE COURT: It is just discovery.
MR. RUBINSTEIN: But we need the money to give to
THE COURT: Well, you'll have the money. If the
24 government says it is going to pay, I don't think that the
25 MR. KWOK: We will make the representation this
(212) 805-0300
12
7h6dkarc
CONFERENCE
1 afternoon to the forensic expert to say that the government
2 will pay, and I believe that they will then start work right
3 away.
4 THE COURT: I think they will, too. The government's
5 credit is good.
6
7
MR. RUBINSTEIN: Then it should work.
MR. KWOK: So I will submit two proposed orders to the
8 Court, one on the sale of the apartment and the second is the
9 revised order about the discovery process and what
10 Dr. Karron --
11
12 sign.
13
14
15.
THE COURT: And then you want a note for Dr. Karron to
MR. KWOK: Exactly.
(Pause)
THE COURT: I will be in chambers to sign those orders
16 and I guess the thing to do is get it off as soon as possible.
17
18
MR. KWOK: I will, your Honor.
THE COURT: Dr. Karron can be down here tomorrow
19 morning and start his work.
20
21
THE DEFENDANT: I can't come tomorrow morning.
THE COURT: Well, the day after, then, whatever day
22 you do it. It is important to you, Dr. Karron. You had better
23 do it, or you waive it. If you don't do it, you waive it.
24 THE CLERK: Did you set a date for the completion of
25 the discovery?
(212) 805-0300
13
7b6dkarc
CONFERENCE
1
2
3
MR. KWOK: I think it is November the 20th.
THE COURT: November 20th.
THE CLERK: Do you want to have a conference and have
4 them back because time will only be excluded until the 20th, I
5 think?
6
7
THE COURT: Time will be excluded until the 20th.
8 So I will submit the proposed orders to the Court
9 later this afternoon or tomorrow morning, and then I will
10 direct the forensic expert to start work and make arrangements
11 with Dr. Karron.
12
13
14
15
16
17
All right, Mr. Rubinstein?
MR. RUBINSTEIN: Yes, your Honor. Thank you.
MR. RUBINSTEIN: Thank you very much, Judge.
18
19
20
21
22
23
24
25
(212) 805-0300
7BQSKARRON
2 -------------------- ---------x
4
1
5
6
7
8
9
v.
DANIEL B. KARRON,
Defendant.
-------- ------- ------x
07 Cr. 541
November 26, 2007
10 3:45 p.m.
11 Before:
12 HON. ROBERT P. PATTERSON,
13 District Judge
14 APPEARANCES
CHI T. STEVE KWOK,
18 RON RUBINSTEIN, ESQ.
19
ART EHUAN (Via phone)
20
21
22
23
24
25
(212) 805-0300
....
2
7BQSKARRON
1
2
(case called)
MR. KWOK: Ready, your Honor. Steve Kowk for the
3 government.
4 Good afternoon.
5 MR. RUBINSTEIN: Good afternoon, your Honor, Ron
6 Rubinstein for the defendant.
7
8
9
THE COURT: Good afternoon.
Where do we stand at this point?
MR. KWOK: We are at the same place, your Honor. Last
10 time, as you recall, the court extended the deadline for the
11 close of discovery to November 20th and asked the government to
12 pay the advance fees and other fees to start the duplication
13 On that same day I instructed Digital First that we
14 are for now at least bearing the cost and discovery can begin.
15 I spoke to the expert this morning and he told me that they
16 still have not started the duplication process and that is
17 because instead of what I believed the parties agreed, which is
18 Dr. Karron or his representative would be at the site to
19 identify and retrieve those files, the specific files that he
20 claims he needs for his defense, they are now proposing to copy
21 all the files, which is not within the contemplation of the
22 government at the time. So he told me that at the earliest
23 that they can get that started would be early next Wednesday to
24 begin, not to say when to end, and so we are at the same place
25 where we were and I again urge the court that the time has come
(212) 805-0300
3
7BQSKARRON
1 for the close of discovery. The defendant has been afforded
2 plenty of opportunities to do what he wished to do. The last
3 time I even did the extraordinary. I was told by our deputy
4 chiefs that the government usually does not bear the cost of
5 discovery, that the defendant is required to pay. But we
6 nonetheless made that offer and even without the signing of a
7 stipulation, because I circulated a copy but haven't gotten the
8 signed copy back, we still made that offer good and extended it
9 for two weeks as the court instructed. And since the defendant
10 has simply not availed himself of these many opportunities, I
11 again urge the court to close discovery and set a trial date in
12 this matter.
13
14
THE COURT: Mr. Rubinstein.
MR. RUBINSTEIN: Your Honor, I spoke also to the
15 gentleman from Digital First and your Honor may recall this is
16 a company that the government found and found acceptable. This
17 gentleman was in Saudi Arabia. It's a very small company. He
18 was in Saudi Arabia and while he was gone --
19
20
THE COURT: I don't care where he was.
MR. RUBINSTEIN: He wasn't around to get started is
21. the problem. It's a very complicated situation, Judge. It's
22 apparently a very, very complicated situation in that the
23 equipment is not the kind of equipment that people that are
24 even conversant about computers understand. That is why they
25 have this specialist. This is a machine that basically was
(212) 805-0300
4
7BQSKARRON
1 built in part, built by Dr. Karron. The machine that
2 apparently is functional --
3
4
THE COURT: When was he available?
MR. RUBINSTEIN: He says he will be available, he told
5 me, starting Tuesday, a week from tomorrow.
6 MR. KWOK: That is certainly not my understanding
7 about why --
8
9
10
11
12
THE COURT: Get him on the phone now.
When did I sign this order? The 19th.
Didn't we sign this order on the 6th?
MR. KWOK: I believe the court signed two orders.
THE COURT: I signed an order November 6 and defendant
13 was ordered to take all necessary steps forthwith.
14
15 we did.
16
MR. RUBINSTEIN: That related to the apartment, which
THE COURT: That is to the apartment but it was
17 understood at that conference that it would be r.ight away.
18
19 First.
20
MR. RUBINSTEIN: But we have no control over Digital
THE COURT: I understand: Why wasn't I told about
21 this on November 19?
22 MR. KWOK: Your Honor,if I may, I believe that Mr.
23 Ehuan was out of the country for a while but it was not the
24 cause of delay. It's not a one-man show. There were people
25 from the Department of Commerce. There were also
(212) 805-0300
5
7BQSKARRON
1 representatives there designated by Mr. Ehuan to make
2 themselves available should the defendant choose to go forward.
3 My understanding for the reason of the delay is because at
4 first Dr. Karron wanted a woman named Janet or something to be
5 present.
6
7
8
9 phone.
10
THE COURT: Mr. 'Ivan, is that his name?
THE CLERK: Ehuan is the way it's pronounced.
THE COURT: I am going to put him on the speaker
Mr. Ehuan, I am told by defense counsel that you were
11 in Saudi Arabia and not available to conduct the discovery that
12 I ordered on November 6.
13 MR. EHUAN: Yes, sir, your Honor, I was out of the
14 country the week of the 12th and that week we did have
15 available two individuals that were available to do the work.
16 The issue was we didn't have the hardware that was supposed to
17 be provided for.usto make the copies.
18
19
THE COURT: Who was supposed to provide the hardware?
MR. EHUAN: Dr. Karron's designee. At that time it
20 was Janet or Matt Rothman, sir.
21' THE COURT: I see. So that was the only reason it
22 didn't go ahead?
23 MR. EHUAN: That is correct, sir. We didn't have the
24 hardware.
25 THE COURT: Which was to be provided by the defendant?
(212) 805-0300
6
7BQSKARRON
1
2
3
4
5
6
7
MR. EHUAN: Yes, your Honor, that is correct.
THE COURT: I see. And I am .trying to remember the
name of your company.
MR. EHUAN: Digital First, sir.
THE COURT: Digital First was always available during
that period?
MR. EHUAN: That is correct, sir. We had gone out the
8 previous Friday, the 16th, to look at the systems and of the
9 two systems one we could not get to turn on, to boot up. There
10 was some kind of hardware problems. The other machine we were
11 able to get up and running and at that point we were in a
12 position to that Monday start the imaging process of getting
13 the data.
14
15
16
17
THE COURT: ~ a t date was that?
MR. EHUAN: That would have been the 19th, sir.
THE COURT: So that is only a week ago?
MR. EHUAN: I am sorry, I am looking at my calendar.
18 That would have been the 12th. So we were there on the 9th,
19 which was Friday, at the Department of Commerce.
20 THE COURT: All right. You were there with the
21 materials on the 9th?
22 MR. EHUAN: We were there -- the first day we were
23 using essentially to see if we could get the machines up and
24 running. These machines are old, extremely complicated
25 machines, so we wanted to spend a minimum of a day to see if we
SOQTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
7
7BQSKARRON
1 could get the machines up and running and of the two machines
2 we were only able to get one up and running. The other one,
3 the one identified as Kasdi One, had hardware problems that we
4 could probably fix but not at that point in time. We didn't
5 have the equipment. But we were available as of that Friday
6 had we had the equipment to start imaging. We anticipate that
7 it will probably take us a week because of the large amount of
8 data there to get off of that machine. So we gave ourselves
9 the week of the 12th to do the imaging.
10
11
THE COURT: And what happened on the succeeding days?
MR. EHUAN: On the 9th after we had spun up the
12 machine which by sending ~ - m a i l out to the attorney or the
13 e-mail went out to Matt Rothman who we were advised by Dr.
14 Karron was his technical representative. So we advised we had
15 gone there. We had got the machine and they essentially said
16 hold off, we don't want to do anything at this point because we
17 want to make sure that the the concern was that potentially
18 if we did something we might break the remaining machine so
19 they wanted us to hold off, and the other issue was they didn't
20 have the hardware that we needed to copy the data out to. So
21 it was kind of two issues.
22
23
THE COURT: What happened next?
MR. EHUAN: So we have been talking with with them and
24 we have explained exactly what we need hardware-wise. Ispoke
25 with Mr. Rothman this morning and I said, what is the status,
(212) 805-0300
8
7BQSKARRON
1 and he said, I got the hard drives, he says, but I don't have
2 the case to go put the hard drives in and also the hard drives
3 had not been formatted to the specifics that we need. It's a
4 special type of formatting. It's not going to be your
5 traditional Windows-type of formatting so that is kind of our
6 issue right now.
7 THE COURT: Just so you understand, these records were
8 supposed to have been completely copied to the degree that the
9 defendant needed them over a week ago under the order and they
10 were to have last week to review those documents and determine
11 whether they were going to make any motions. Now, this isn't
12 funny. This is a very serious matter.
13
14
MR. EHUAN: It isn't funny at all, sir.
THE COURT: Yes, I know that and I am trying to
15 explain and we have court procedures that have to be complied
16 with and I have to know why they weren't complied with and from
17 what I gather the defendant doesn't have the machinery
18 necessary to make the copies, is that correct?
19 MR. EHUAN: Previously that had been the case, your
20 Honor. We have been ready to do this from the word go. We
21 have been ready for weeks. At this point in time it has been a
22 hardware issue where without the hardware we cannot make the
23 copies. Your Honor, the other thing I do want to make known is
24 that unfortunately this is an extremely complicated system so
25 it's going to take about a week once we have the hardware in
(212) 805 0300
9
7BQSKARRON
1 place just to make the copies just because of the tremendous
2 amount of data ..
4 Is there any questions that either the prosecution or
5 defense wants me to ask?
6 MR. KWOK: Yes, your Honor. I think in all fairness
7 to,Mr. Ehuan and his company, I think the original plan that
8 Mr. Rubinstein and Dr. Karron proposed was that Dr. Karron
9 would be at the site to identify specific files to be copied
10 which would take much less than the time that we are looking at
11 now. All these problems arose because in the middle of the
12 game they wanted much more.
13
14
MR. RUBINSTEIN: That is not accurate, Judge.
THE COURT: That is my recollection of the record, Mr.
15 Rubinstein. But I want to know if there are any more questions
16 of Mr. Ehuan. That is my question. No one has answered that
17 question.
18 MR. KWOK: If the court could direct a question to Mr.
19 Ehuan as to the cause of the delay aside from the ones that he
20 mentioned already, why that hardware specifically was not
21 available at the time.
22 THE COURT: Is ,there any reason why the hardware was
23 not available, Mr. Ehuan?
24 MR. EHUAN: I have been told that it is the case that
25 it's expensive and they are trying to acquire it and that is
(212) 805-0300
10
7BQSKARRON
1 .what I have been advised. It's just a cost issue requiring the
2 hardware.
3 MR. RUBINSTEIN: What I don't don't understand, Judge,
4 is they were hired to duplicate it. Don't they have the
5 hardware to duplicate it? I don't follow that. Why did it
6 become our burden?
8 The question, Mr. Ehuan, is why is this special
9 hardware that has to be acquired, why doesn't your company have
10 the duplication hardware?
11 MR. EHUAN: We do have the duplication, we just don'.t
12 have the actual storage media which we could have gone out, and
13 our original intent was to get it ourselves but we were told by
14 Janet several weeks ago that they would provide the hardware.
15 So we said, okay, if you are going to provide the hardware we
16 will wait for you to get us the hardware.
17 THE COURT: It seems to me that the problem is yours,
18 Mr. Rubinstein. You created your own problem.
19 MR. RUBINSTEIN: Judge, I was unaware that this is
20 what was told to Mr. Ehuan.
21 THE COURT: Apparently Dr. Karron doesn't want this
22 material at all. That is my conclusion, that he doesn't want
23 it at all. You are making this up for delay purposes. Not
24 you, your client. Otherwise we would have had them make the
25 copies as they were prepared to do. Instead, oh, no, we have
(212) 805-0300
11
7BQSKARRON
1 to have our machines We want the copies on these
2 machines. Well, look, that is pretty transparent.
3 MR. RUBINSTEIN: Just as one of the two machines was
4 one of Dr. Karron's concerns at the beginning was they were not
5 capable of booting up, we are not suggesting that anybody in
6 Mr. Ehuan's company did anything wrong but Dr. Karron was very
7 concerned about the integrity of these machines and the fact
8 that they were old and so complicated that it was easy to
9 create a malfunction here. I have been in touch with Dr.
10 Karron on a regular basis. I spoke to Mr. Ehuan on a number of
11 times after your Honor had signed the order. Until Mr. Kowk
12 contacted me last week I didn't even know there was a problem
13 here. I wasn't even aware there was a problem we had.
14 THE COURT: You knew you didn't copies. You were
15 supposed to have copies last week of whatever you wanted and it
16 was supposed to be, as Mr. Kowk says, a limited number of
17 documents. Now suddenly it's all the documents.
18
19
20 not use.
21
MR. RUBINSTEIN: If we --
THE COURT: At government expense for you to use and
MR. RUBINSTEIN: You may recall, Judge, that we needed
22 all the documents because there were imagings that you had to
23 copy in order to get all of the documents because there is no
24 current index and we have to create an index so that we can
25 reference what is actually kept in the computers.
SOUTHERN REPORTERS, P.C.
(212) 805-0300
12
7BQSKARRON
1 THE COURT: I am sorry, but I have. come to the end of
2 my patience. I have come to the end of my patience with Dr.
3 Karron and if he doesn't want to conduct this, get the
4 discovery.by whatever means it is, I am calling an end to it.
5 He can go down there this week and he can pick it up this week.
6 If he doesn't do it this week, it's done. It's over. $0 he
7 better get down there right now.
8 MR. RUBINSTEIN: We will get the disks to them
9 tomorrow. But the question is can Mr. Ehuan once he has the
10 disks, can he start the process?
11
12
THE COURT: Did you hear that, Mr. Ehuan?
MR. EHUAN: Yes, sir. I think by tomorrow we should
13 be able to have someone available if not tomorrow by Wednesday.
14 The only issue is going to be the hardware. If the hardware
15 isn't ready it does us no good. We still need the. hardware to
16 put the data onto.
17 THE COURT: That is if he wants to supply his
18 hardware. The hell with his hardware. As far as I am
19 concerned the hell with his hardware. I don't care if he
20 doesn't have the hardware there, use your hardware.
21 MR. EHUAN: Okay, your Honor. We will have to do the
22 same process though because, again, the only problem here is
23 it's a tremendous amount of data so we would have to
24 essentially do the same thing, acquire these very large hard
25 drives and format them, which is going to take us a few days.
(212) 805-0300
13
7BQSKARRON
1 THE COURT: To what, assemble or to prepare the
2 documents?
3 MR. EHUAN: Some to prepare the hardware to be able to
4 copy the hardware to, your Honor.
5 THE COURT: So when would you be ready?
6 I can't go along with'this the ball is in their court;
7 no, it's in your court, my court, your court.
8 MR. EHUAN: Your Honor, if you put it in our court we
9 can have these assembled and ready I would anticipate by either
10 Thursday or Friday.
11
12
THE COURT: And when would the documents be ready?
MR. EHUAN: We can start the imaging provided we get
13 access from the.Department of Commerce. If we got it ready by
14 Friday we can start the process on Friday and it would take
15 several days to copy the data off, your Honor.
16
17
THE COURT: When will it be ready?
MR. EHUAN: With no problems we could be done by next
18 Friday, the 7th, your Honor. We would have all of the data off
19 onto media that could then be examined.
20
21
THE COURT: Is there any objection to that?
MR. KWOK: Well, the government would certainly
22 object. I think at this point our position is that t h ~ time
23 has come for the close of discovery. At the very least
24 THE COURT: It certainly has come to a close of
25 discovery. I agree with that.
(212) 805-0300
14
7BQSKARRON
1 MR. KWOK: At the very least if the court is inclined
2 to give Dr. Karron one last chance we should not be talking
3 about the wholesale duplication and imaging of all the
4 documents. We should be talking about what we at first
5 contemplated, which is Dr. Karron or his representative would
6 be down there to identify specific files to be copied so we
7 don't run into these sorts of problems about their machines,
8 our machines, and truckloads of data that we don't know how
9 " they sort through.
10 MR. RUBINSTEIN: Why should 'we call it discovery?
11 This is really not discovery. This is the defense trying to
12 prepare its defense. If your Honor wants to technically close
13 discovery and figure out a trial schedule based upon
14 THE COURT: We made a deal, Mr. Rubinstein. Dr.
15 Karron was going to look at the index." He was going to select
16 out whatever documents needed copying. There were supposed to
17 be a discrete number. He says he has everything in the world
18 in there and we are not going to have a situation where we are
19 going to get a lot of irrelevant documents copied at government
20 expense. If you want those documents either you pay for them,
21 all of it, or if you want a selected number then do it
22 according to Hoyle and they will pay for it.
23
24
MR. RUBINSTEIN: There is no index, Judge.
THE COURT: I know there is no index. I am fully
25 aware of the facts.
(212) 805-0300
15
7BQSKARRON
1 MR. RUBINSTEIN: Ask Dr. Ehuan if without an index
2 they can determine where a particular item is to copy. I
3 understand you can't. If I am mistaken --
4 THE COURT: The disks belong to the government and you
5 can look at the disks and select the documents from that.
6 MR. KWOK{ Exactly. I can direct the question to Mr.
7 Ehuan. With Dr. Karron present or his designated
8 representative could they, by looking at the the files on the
9 computers, identify the files they need and have those files
10 copied?
11
12
THE COURT: I. don't understand the question.
MR. KWOK: Mr. Rubinstein just said that there is no
13 index and therefore there is no way to identify specific files
14 but that is not true. If Dr. Karron would get himself down
15 there to identify those files for Digital First to copy -- of
16 course, they couldn't do it without his help but that is sort
17 of what the parties have agreed, that he would be down there or
18 instruct somebody down there to look at the computer as if he
19 were sitting in front of the computer in the usual course and
20 point to the files that he needed which he hasn't done.
21
22
THE COURT: That is what was contemplated.
MR. RUBINSTEIN: I am asking whether or not that is
23 feasible or possible from Mr. Ehuan what the government is
2.4 suggesting that where you have no index that how can Dr. Karron
25 distinguish one file from another or how could they find
(212) 805-0300
16
7BQSKARRON
1
2
THE COURT: Because he made the files, right?
MR. KWOK: It seems to me we are going over old
3 ground. That is what he agreed to. If that is impossible he
4 should have said so at the outset. We did agree to pay for
5 duplication with that understanding and if he is saying it's
6 not possible that is it. If it's impossible they shouldn't
7 have agreed to it in the first place. Three months from now we
8 will be hearing the same argument about how big the machines
9 are, how much data, how delicate it is, and how time consuming
10 it is, and we will be in exactly the same place as now.
11 MR. RUBINSTEIN: Mr. Ehuan says within a week he will
12 have the material.
13 THE COURT: I am not going to have the government pay
14 for your ~ e t t i n g the copy of the material. If he needs a copy
15 for his defense he goes doWn there and he selects what he wants
16 and they make a copy of it and give it to him.
17 MR. RUBINSTEIN: We are reimbursing the government.
18 It's not at the government expense truly. We are reimbursing
19 the government on the sale. of the house. It's not at the
20 government's largess.
21 MR. KWOK: I am not optimistic about seeing the money
22 because assuming the house sells at a lesser value
23 THE COURT: You are changing the rules of the game
24 after you made an agreement and I entered two orders, Mr.
25 Rubinstein, and you are trying to change it and I am not going
(212) 805-0300
17
7BQSKARRON
1 to put up with that. So you either do it in accordance with
2 what was agreed on on the record or you forget about it.
3 Let me ask you, Mr. Ehuan, if you get the machinery
4 and you prepare, w h a ~ do you prepare, disks with the machinery?
5 MR.EHUAN: Your Honor, if we were going to make the
6 entire copy of the entire machine --
7 THE COURT: Not a copy but so that it can be read, a
8 copy that can be read.
9 MR. EHUAN: We would wind up initially putting it on
10 the hard drive and then we would put it on DVDs or CDs or it
11 could be read.
12
13
THE COURT: I see.
MR. EHUAN: That is if we were just going to do a copy
14 as opposed 'to an image. So if Dr. Karron was there and said
15 these are the things we need to copy off, then it obviously
16 makes it easier because we are making what is called a logical
17 copy as opposed to an image which is going to take some more
18 work on the back end.
19 THE COURT: Here is what I am trying to ask you I
20 guess. I presume that there is material that is relevant to
21 this case if you put it on the hard drive can it then be
22 displayed so that Dr. Karron could say I want that or I don't
23 want that and then when he says I want that you copy it until
24 he says stop and then you go on and visually review what is on
25 the hard drive and he says here, I need this, and you copy that
(212) 805-0300
18
7BQSKARRON
1 and can you go through the whole shebang, if I can call it
2 that, that way? Is that feasible?
3 MR. EHUAN: It is not, your Honor, to be able to
4 display what we would be able to show or display, not a visual,
5 but we would be able to display the directory structure as file
6 links so that if he said that directory or that file that I see
7 there is pertinent, we can then copy it out, but we wouldn't be
8 able to bring it up so that he could see it.
9 THE COURT: I see. So as he goes through he can say
10 what file n.ames he believes to be relevant and what ones he
11 believes are not relevant.
12
13
14
MR. EHUAN: Yes, your Honor.
THE COURT: Okay.
MR. RUBINSTEIN: Dr. Karron has already purchased 20
15 terabyte disks for copying purposes so from what I understand
16 that is what Mr. Ehuan, among other equipment, that is what he
17 needs, is that correct?
18 THE COURT: What he is saying wait a minute, let's
19 stay with where we are. It's on the hard drive. If you are
20 going to talk to Mr. Karron, Mr. Rubinstein isn't going it to
21 hear. As I understand it it's on the hard drive and can be
22 brought to view as to what files are on the hard drive and then
23 Dr. Karron would select those files that he wants on the disks
24 and that, then, you could copy those files for him onto the
25 disks, is that correct?
(212) 805-0300
19
7BQSKARRON
1
2.
MR. EHUAN: That is correct, your Honor.
THE COURT: And the only copying would be those files
3 that he says he wants, is that right?
4
5
MR. EHUAN: That is correct, your Honor.
THE COURT: Then how would you make a copy for the
6 government to have so that they would know what relevant
7 documents to keep?
8 MR. EHUAN: What I would want to do then is we would
9 have, once we made the copies for Dr. Karron onto his device
10 what we would do is take that information and copy it to
11 another hard drive that the government would retain. So that
12 you would each have a copy of everything.
13 THE COURT: I see. That is sort of what I had
14 envisaged the way this thing would go, Mr. Rubinstein. Why
15 isn't that satisfactory?
16 MR. RUBINSTEIN: Apparently the problem is that these
17 items were filed day-by-day without any headings or what have
18 you and Dr. Karron would need to see the image to know what he
19 he needs copied because it's like a file cabinet with tens of
20 thousands of pieces of papers just in a file cabinet with no
21 headings, no index, and no table of contents and because he
22 scans all these documents in you can't know what is in the
23 document unless you image it. Is this copying process going to
24 enable from the hard drive that is created, can a person get
25 the image? That is I guess the question.. Do you understand
(212) 805-0300
20
7BQSKARRON
1 that, Mr. Ehuan?
2
3
4
THE COURT: Can you hear him, Mr. Ehuan?
MR. EHUAN: No, your Honor.
THE COURT: He maintains that the files are, let's,
5 say, on a daily basis and that they were more in the nature of
6 a chronology rather than in the nature of a filing system and
7 that, accordingly, the only way he can find the documents that
8 he would want would be on reviewing every day of work that he
9 performed and he doesn't know what file they went into or what
10 have you for some reason, and I don't know what reason, but
11 nevertheless that seems to be what he is claiming. There is no
12 way we can --
MR. EHUAN:
THE COURT:
MR. EHUAN:
THE COURT:
MR. EHUAN:
18 We can potentially look at it that way if dates are important.
19 So if he says the month of August 2006 any document I created
20 from that we can filter that way and pull data off that way.
21
22 about?
23
MR. RUBINSTEIN: What kind of costs are we talking
THE COURT: What kind of costs are we talking about,
24 Mr. Ehuan?
25, MR. EHUAN: Your Honor, it's going to depend on how
(212) 805-0300
21
7BQSKARRON
1 long it's going to take for him to say this is the data. If
2 it's an hour it's going to be $350. If it's ten hours multiply
3 that by ten.
4 THE COURT: What is the cost going to be once you get
5 your machinery and you are asked to copy let's say I think what
6 Mr. Rubinstein is asking is what is the cost of the entire file
7 going to be?
8 MR. EHUAN: We had anticipated that if it took us a
9 week we were anticipating between 10 to 14, 15,000 if we were
10 on site the entire week doing the copying.
11 THE COURT: And before that you would ~ a v e what for
12 set-up costs?
13 MR. EHUAN: We haven't even taken that into
14 consideration because after they told us that they wanted to
15 use their hardware we kind of dropped that and said as long as
16 you provide us the hardware we would take care of the imaging.
17 I anticipate that would probably take -- we would have to buy
18 the equipment, set it up, so I anticipate that about a day's
19 worth of work to get everything ready.
20
21
22
23
THE COURT: Cost?
MR. EHUAN: 1000, 2000, your Honor.
THE COURT: Is that good enough?
MR. RUBINSTEIN: There still would be a budget, your
24 Honor. We have budgeted an amount.
25 THE COURT: Maybe the cheapest way to do it is just
(212) 805-0300
22
7BQSKARRON
1 run it off.
2 MR. KWOK: By that you mean copy the whole thing?
3 They have been given an opportunity to do that as well. I knew
4 when I called Mr. Ehuan.and spoke to him that they were
5 changing the rules in the middle of the game and proposing to
6 copy it all. I didn't object at that point. That wasn't the
7 reason why we are here and not making any progre$S, because
8 they kept insisting that they wanted certain people to be
9 there, certain equipment to be supplied by them a ~ d then they
10 didn't deliver, so it's not a matter of the government not
11 being accommodating even when they wanted to get more than they
12 requested of the court and the government the last time. They
13 had the opportunity to copy the whole thing and even though Mr.
14 Ehuan was out of the country there were people around to help
15 him to do that and they still didn't do it.
16 THE COURT: Let's proceed and have it all copied and
17 the cost will be paid for how, just so I know. By the
18 government so you get started but then reimbursed by the
19 defense from the proceeds of the apartment?
20 MR. KWOK: I know the last time the government agreed
21 to do that but I was told that that was really quite an
22 extraordinary measure that the government has agreed to. I
23 don't want to re-commit the government without checking with my
24 office, especially because we did offer this and they didn't
25 take us up on it and now the clock is running. We incurred
(212) 805-0300
23
7BQSKARRON
1 expenses even though nothing was done just by the setting up
2 process and and I am not protected right now by a signed
3 stipulation. I circulated it to Mr. Rubinstein and I still
4 haven't gotten it signed.
5
6
7
8
9
10
11
12
THE COURT: Do we need Mr. Ehuan any further?
MR. RUBINSTEIN: No, your Honor. I don't believe so.
THE COURT: Anyone?
MR. KWOK: I don't believe so.
THE COURT: Thank you very much, Mr. Ehuan.
MR. EHUAN: Thank you, your Honor.
THE COURT: What does the stipulation say, Mr. Kowk?
MR. KWOK: It just sets forth what the parties agreed
13 to on the record last time, namely, that the defendant will
14 take all necessary steps to sell his apartment, that the
15 proceeds will be forwarded to the custody and control of the
16 United States marshals and held there pending further order of
17 the court, and that the government will be reimbursed out of
18 the net proceeds from the sale of that condominium. It's
19 objectionable from my point of view and I got no objections
20 from defense but I haven't gotten it signed.
21
22
THE COURT: Any reason, Mr. Rubinstein?
MR. RUBINSTEIN: There was one thing that Mr. Kowk and
23 I agreed to put on the record and I was hoping that he would
24 memorialize it in the stipulation and that is that it's
25 understood that attorneys' fees would be considered by order of
(212) 805-0300
24
7BQSKARRON
1 the court to be paid out of these monies. There is nothing in
2 the stipulation for that but he said that he has no problem
3
4
5
THE COURT: What was to be paid out of these monies?
MR. RUBINSTEIN: Attorneys' fees.
THE COURT: That is something that when you payor
6 when you sell the apartment this would be up to a certain
7 amount.
8
9
MR. KWOK: The cost of duplication is set at $30,000.
THE COURT: We have the cost. of duplication but let's
10 get that taken care of. You haven't sold the apartment.
11 MR. RUBINSTEIN: We are executing the stipulation now.
12
13
THE COURT: Is it being listed?
MR. RUBINSTEIN: It has already been listed by
14 Halstead Brokerage.
15 THE COURT: You got it listed on what do they call it
16 nowadays, the multiple listings?
17 MR. RUBINSTEIN: Yes. They have an exclusive but they
18 have for multiple listings the co-broker. In other words, they
19 are the lead broker so if another broker sells the apartment
20 they go 50-50 on the commission. So it is multiple listed.
21 That is what I was informed by Mr. William Nicolai, who is the
22 vice president of Halstead.
23 THE COURT: The only thing I am concerned about, and I
24 signed the stipulation that you all have signed and I will hand
25 back the copy to the parties, and I am concerned now when we
(212) 805-0300
25
7BQSKARRON
1 get on to trial, and we have a jury I presume, and the problem
2 will be objections to documents in terms of their relevancy and
3 that is something that I don't want coming up at trial because
4 the jury while you are all arguing about the relevancy and why
5 it's relevant to that, that or the other thing, the jury is
6 sitting on their heels in there getting annoyed and more
7 annoyed and I don't want to see that happening. So you are
8 going to have to devise a way so that prior to trial some of
9 the issues or relevancy of documents are dealt with. I think
10 the documents have to be relevant to the costs or the
11 operations under the grant in one way or another and I can't on
12 the defense case have the government suddenly looking at
13 documents that on their face don't appear to be relevant in any
14 way. So if we got into arguments of that sort it seems to me
15 the parties ought to work out some way of managing
16 pre-screening or what have you.
17 MR. RUBINSTEIN: I don't have a problem pre-screening
18 and showing the government the documents that I intend to offer
19 on the defendant's case in chief.
20 THE COURT: Something like that it seems to me has to
21 be worked out because otherwise the jury is going to go crazy.
22 So you have no problem with that?
23
24
25
THE COURT: Okay. Anything else to take up?
MR. RUBINSTEIN: I don't know about the documents.
(212) 8 0 5 ~ 0 3 0 0
26
7BQSKARRON
1 Let me say this: If there are documents I intend to use for
2 cross examination that is a different thing. What I am talking
3 about is in the defense in chief the documents we would offer
4 into evidence I will make a complete list of that.
5 THE COURT: That is what I was talking about. Cross
6 examination is something 'else.
7 MR. KWOK: Just so I am clear on the resolution of the
8 issues we have been discussing, is there a deadline the court
9 now sets as the new deadline by which the duplication has to be
10 completed?
11 THE COURT: The duplication has to be completed a week
12 from Friday.
13
14
MR. KWOK: So the 7th of December?
THE COURT: The 7th of December. And I suppose we
15 better have a date for any motions you are going to make, Mr.
16 Rubinstein?
17 MR. RUBINSTEIN: I don't see any motions at this time,
18 your Honor.
19 THE COURT: All right. By the 7th of December I will
20 want to know whether that is a final motion application.
21 MR. RUBINSTEIN: I don't don't know if I want such an
22 infamous date.
23
24
25
THE COURT: That is my date, Pearl Harbor.
MR. RUBINSTEIN: You probably enlisted the next day.
THE COURT: That is my date.
(212) 805-0300
27
7BQSKARRON
1
2 11th.
3
4
5
6
7
By the 10th, I guess. I don't want to make it the
MR. KWOK: Do we have a conference date on the 10th?
THE COURT: Yes.
MR. KWOK: What time?
THE CLERK: 4 o'clock.
MR. KWOK: The government moves to exclude time until
8 then in the interest of justice so that discovery can be
9 completed.
10 THE COURT: All right. Time is excluded until then so
11 discovery can be completed and Mr. Rubinstein can give us a
12 final on his motions.
13
14
15
16
17
18
19
20
21
22
23
24
25
THE COURT: Okay.
(212) 805 0300
RUBINSTEIN & COROZZO, LLP
COUNSELORS AT LAW
RONALD RUBINSTEIN 260 MADISONAVENUE
22ND FLOOR
NEWYORK, N.Y. 10016
JOSEPH R. COROZZO
BRIANA L. HERMAN
TELEPHONE 12125 545-8777
FAX(212) 679-1844
November 29, 2007
Re: NIST Cooperative Agreement No.: 70NAB1H3050
Dear Dr. Karron:
On November 28, 2007, I spoke with Assistant United States Attorney Steve Kwok in
regards to the above entitled matter. According to NIST, there appears to be a balance of $54,500
available. The government believes we misread the letter and the funds are actually not available.
I advised AUSA Kwok that the funds were legitimately earned and if available I would
encourage you to obtain the funds and Mr. Clark advised me that the government's consent was
not necessary
I further suggest you place the funds in my escrow account to be used for expenses in the
criminal case.
Very truly yours,
An
6 2 .
Agorrly
Ron Rubinstein
ko
RUBINSTEIN & COROZZO, LLP
260 Madison Avenue
(212) 545 8777
I
UNITED STATES DEPARTMENT OF COMMERCE
National Institute of Standards and Technology
4."'$
41.1s
,
I
Gaithersburg, Maryland 201399-
November 05, 2007
Mr. Peter Ross
Computer Aided Surgery, I nc.
300 East 33rd Street, Suite 4N
RE: N1ST Cooperative Agreement No.: 70NANB 1113050
Dear Mr. Ross:
The above referenced cooperative agreement ended on September 30, 2004 with a
balance in the grant account totaling $:54,500. We want to be sure our records agree with
yours before we proceed to &obligate these funds.
I f there were additional claims made against the. account. please so indicate and we will
proceed to deobligat.e the remaining balance and finalize the closeout of this project.
You may submit the requested information to me via E-mail at the address noted below.
I f we do not hear from you by November 30, 2007, we will assume that the intbrmation
we have is correct and will proceed to deobligate the. remaining funds in the grant
aecoUnt.
Sincerely yours.
2
.ames M. Brow'mng ),
Grants Specialist
GAI VI DI DA/CFO/NI ST
100 Bureau Drive, MS 1650
Gaithersburg-. MD 20899-1650
Phone: 301-975-8088
FAX: 301-840-5976
[-mail: james.browningliktist.g,ov
C: I leather Manton
Grant File
MST
1
862ZKAR1
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 2, 2008
9 9: 30 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
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
SOUTHERN DI STRI CT REPORTERS, P. C.
( 212) 805- 0300
2
862ZKAR1
1 THE DEPUTY CLERK: Al l r i se.
2 THE COURT: Pl ease be seat ed.
3 ( Case cal l ed)
4 THE DEPUTY CLERK: I s t he gover nment r eady i n t hi s
5 mat t er ?
6 MR. KWOK: Yes, we ar e, your Honor . St eve Kwok f or
7 t he gover nment . Wi t h me at counsel t abl e i s Chr i st i an
8 Ever del l - -
9 MR. EVERDELL: Good mor ni ng, your Honor .
10 MR. KWOK: - - our par al egal and t he speci al agent s.
11 THE COURT: Good mor ni ng.
12 THE DEPUTY CLERK: Def endant r eady i n t hi s mat t er ?
13 MR. RUBI NSTEI N: Def endant i s r eady, good mor ni ng,
14 your Honor .
15 THE COURT: Good mor ni ng.
16 MR. RUBI NSTEI N: Def endant i s al so r epr esent ed by Ron
17 Rubi nst ei n.
18 THE COURT: Good mor ni ng, Mr . Rubi nst ei n, and Mr .
19 Kar r on.
20 What i s t he Gover nment ' s pr oj ect i on of t he l engt h of
21 t hi s t r i al ?
22 MR. KWOK: The Gover nment expect s t o concl ude i t s case
23 wi t hi n a week.
24 THE COURT: What about t he def ense?
25 MR. RUBI NSTEI N: Your Honor , I woul d hope t hat t he
( 212) 805- 0300
3
862ZKAR1
1 def ense wi l l t ake mor e t han t hr ee days, but I don' t t hi nk t hat
2 t he gover nment has f act or ed i n t he pot ent i al cr oss- exami nat i on
3 of t hei r wi t nesses i n t hei r one week.
4 THE COURT: I don' t know how many wi t nesses you have,
5 Mr . Kwok.
6 MR. KWOK: Ri ght now we have seven wi t nesses, your
7 Honor .
8 THE COURT: The nat ur e of t hem?
9 MR. KWOK: We have t wo wi t nesses who wi l l be
10 t est i f yi ng about t he pr ogr amand t he r ul es gover ni ng t hat
11 pr ogr am. We have a gover nment wi t ness, an audi t or , who wi l l
12 demonst r at e t hat t he r ul es wer e br oken and demonst r at e how t he
13 money was i n f act spent . We have anot her wi t ness, anot her
14 audi t or account ant t hat t he def endant hi r ed t o conduct a audi t
15 of t he company' s books. And t he r emai ni ng wi t nesses wer e al l ,
16 at one t i me or anot her , t he def endant ' s company' s empl oyees who
17 woul d t est i f y as t o what happened and t he consi der at i ons t hey
18 had wi t h t he def endant about t hese var i ous t hi ngs t hat ar e i n
19 di sput e.
20 THE COURT: I see. Those wi l l be shor t wi t nesses, I
21 pr esume. And t he - -
22 MR. KWOK: I bel i eve t hey woul d be shor t .
23 THE COURT: The account i ng may be l ong.
24 MR. KWOK: Maybe sl i ght l y l onger . But we have t r i ed
25 our best , and we wi l l cont i nue t o t r y t o st r eaml i ne t he
( 212) 805- 0300
4
862ZKAR1
1 pr esent at i on of evi dence.
2 THE COURT: Wel l , f r omt he - - I was wonder i ng af t er
3 Fr i day when I got not i ce of t he exper t wi t nesses, whet her some
4 of t he f act s coul dn' t be st i pul at ed. Mr . Rubi nst ei n.
5 MR. RUBI NSTEI N: I was t hi nki ng of t hat mysel f af t er I
6 r ecei ved t he Gover nment ' s l et t er of May 13t h. I t seemed t o me
7 t hat i t may wel l be t hat we can st i pul at e, because i t doesn' t
8 sound l i ke t he i ssue as f r amed by t he Gover nment ' s r esponse on
9 May 30t h i s, basi cal l y, we' r e not cont est i ng t hat t hi s can be
10 done. We' r e sayi ng t hat because i t wasn' t agr eed by t he
11 pr ogr am, NI ST or ATP t hat , t her ef or e, i t ' s not al l owabl e.
12 THE COURT: Ther e ar e t wo pr ongs, as I under st ood i t ,
13 and I haven' t r ead t he 3500 mat er i al - - I see i t ' s f our
14 vol umes, whi ch i s a l i t t l e daunt i ng.
15 But t he t wo i ssues t hat I ' mr asi ng; one, t hey' r e
16 mai nt ai ni ng t hat t her e has t o be a wr i t t en benef i t pr ogr am,
17 and, as I under st and i t , t hey' r e unawar e of any wr i t t en benef i t
18 pr ogr am.
19 Now, secondl y t hey' r e sayi ng t hat t he gr ant di d not
20 pr ovi de f or i t s f unds t o be expended i n t hi s way. Of cour se
21 t hat woul d i nvol ve t hei r pr ovi ng t hat gr ant f unds wer e used as
22 opposed t o CASI ' s f unds, whi ch r ai ses t he quest i on about how I
23 char ge t hi s mat t er .
24 MR. RUBI NSTEI N: Wel l , your Honor , our posi t i on i s
25 t hat al t hough t he quest i on i sn' t - -
( 212) 805- 0300
5
862ZKAR1
1 THE COURT: Appar ent l y t her e' s no quest i on t hat t he
2 f unds wer e expended i n cer t ai n, i n a cer t ai n f ashi on. Some of
3 t he f unds wer e. I n ot her wor ds, I gat her t hat f r omt he nat ur e
4 of t he def ense, t hat t he exper t s who t est i f y, t hat you' r e
5 pr of f er i ng, woul d t est i f y t hat , I guess, but t hese f unds wer e
6 expended i n t hi s way, but i t ' s per f ect l y appr opr i at e f or t hem
7 t o be expended i n t hi s way i n vi ew of t he, t he l aw per t ai ni ng
8 t o caf et er i a pl ans. That ' s sor t of what I t hought t he def ense
9 was.
10 MR. RUBI NSTEI N: Yes, your Honor . The def ense i s ver y
11 si mpl y t hat Dr . Kar r on had no i nt ent t o do anyt hi ng - - t o do
12 anyt hi ng t hat r i ses t o t he l evel of cr i mi nal r esponsi bi l i t y.
13 And t hat t he f act t hat t her e wasn' t a, quot e, wr i t t en pl an i n
14 pl ace i s not r eal l y r el evant on t he i ssue of i nt ent . I t goes
15 t o t he i ssue of i nt ent , al l r i ght , and t he quest i on i s t hat , as
16 t he gover nment seems t o concede, t hat t hese ki nd of f r i nge
17 benef i t s under ot her ci r cumst ances mi ght be bona f i de i f we
18 coul d wor k out a st i pul at i on on t hat , t hen t her e' s no need f or
19 t he exper t wi t nesses. The quest i on t hen comes whet her or not
20 spendi ng t hat money f or t hese f r i nge benef i t s wi t hout a wr i t t en
21 pl an i s a quest i on f or t he j ur y, whet her i t r i ses t o t he l evel
22 of cr i mi nal act i vi t y.
23 So t he r eason I was goi ng t o cal l Mr . Sapi n and Mi ss
24 LeCl ai r , was t o est abl i sh t he bona f i de of t he expense i t sel f
25 because t her e ar e peopl e who may not t hi nk t hat cer t ai n medi cal
( 212) 805- 0300
6
862ZKAR1
1 expenses shoul d be r ei mbur sed by t he empl oyer , but i n f act
2 t hese ki nd of medi cal expenses ar e r ei mbur sed by empl oyer s i n
3 cer t ai n f i el ds, and my exper t s i nf or mme Mi cr osof t per mi t s
4 t hese ki nd of expenses, and so t hat ' s t he i ssue - - t hat ' s our
5 i ssue. I f t hey' r e not - -
6 THE COURT: That t hen r ai ses a quest i on - - t her e ar e
7 t wo quest i ons i nvol ved. One, as I see i t , one was whet her or
8 not t he - - i t i nvol ves, i n par t , what f unds wer e used; wer e
9 t hey gr ant f unds or wer e t hey t he cor por at e cr edi t f or t hese
10 expenses. I f t he cor por at i on coul d af f or d t hese expenses wi t h,
11 or bor r owed f or t hese expenses, t hen t hat ' s - - your def ense i s
12 t hat , okay, maybe t her e wasn' t a wr i t t en pl an. But t hat goes
13 t o hi s i nt ent .
14 The second i ssue i s whet her or not gr ant f unds wer e
15 used, and i f t he gover nment can pr ove t hat gr ant f unds wer e
16 used f or t hese expenses, and t hat i t vi ol at ed t he t er ms of t he
17 gr ant , t hen t he quest i on of t he def endant ' s i nt ent wi t h r espect
18 t o t he gr ant f unds i s t he i ssue, whet her i t was r easonabl e f or
19 hi munder t he ci r cumst ances t o bel i eve he coul d expend gr ant
20 f r omt he moni es f or t hi s pur pose. That ' s a separ at e i ssue f r om
21 whet her or not t he def endant t hought t hat compani es of t en
22 cover ed peopl e f or ext r aor di nar y expenses of t hi s sor t under a
23 caf et er i a under t hei r pl ans and, t her ef or e, what I ' mdoi ng i s
24 per f ect l y al l r i ght as f ar as i t goes as a company expendi t ur e.
25 Now, maybe I ' m- - maybe my anal ysi s i s wr ong, but i t
( 212) 805- 0300
7
862ZKAR1
1 seems t o me t hat t hat ' s t he way i t br eaks down; whet her t hat
2 was a r easonabl e bel i ef on hi s par t t hat he coul d go ahead and
3 do i t because he hear d t hat ot her compani es di d t hat . That ' s a
4 separ at e i ssue f r omgoi ng t o hi s i nt ent and t he i ssue of t he
5 gr ant moni es bei ng r easonabl e, a r easonabl e bel i ef t hat t he
6 gr ant moni es coul d be spent f or t he pur pose. I don' t know how
7 t he pr oof s go, but t hose ar e t he t wo i ssues t hat ar e bei ng
8 r ai sed and shoul d be separ at el y addr essed.
9 Mr . Kwok woul d l i ke t o t al k?
10 MR. KWOK: No, I t hi nk your Honor i s exact l y r i ght .
11 We poi nt ed out i n our l et t er of May 30t h, we don' t r eal l y
12 concede anyt hi ng. We j ust t hi nk t hat i t ' s besi de t he poi nt . I
13 don' t know what caf et er i a pl ans adopt ed by ot her compani es say.
14 We si mpl y t ake t he posi t i on t hat i t ' s i r r el evant i n t hi s case,
15 because t he gover nment wi l l pr ove t hat t he medi cal expenses
16 wer e expended usi ng gr ant f unds. And what ot her compani es
17 mi ght have done i n cor por at e Amer i ca si mpl y has no bear i ng on
18 t he f act s at i ssue i n t hi s case.
19 THE COURT: Wel l , t hat ' s what t he - - i f t hat ' s what
20 t he Gover nment ' s pr oof wi l l be, and t hat ' s what t he
21 Gover nment ' s goi ng t o pr oceed i n t he case, t hen we go back t o
22 t he or i gi nal ar r ai gnment , or i gi nal i ndi ct ment and whet her we
23 have t o - - t hi s mor ni ng we' ve got t o ar r ai gn t he def endant on
24 t he second - - t he pr oposed super sedi ng i ndi ct ment .
25 But i t seems t o me t he pr oposed super sedi ng i ndi ct ment
( 212) 805- 0300
8
862ZKAR1
1 means t hat t he Cour t shoul d onl y r equi r e t hat CASI f unds wer e
2 used; wher eas as I r ead t he or i gi nal i ndi ct ment , and a mor e
3 r est r i ct i ve r eadi ng was i nvol ved and t her e t he gover nment had
4 t o pr ove t hat gr ant f unds wer e used f or i mpr oper pur poses.
5 MR. KWOK: I see.
6 THE COURT: You see my di st i nct i on.
7 MR. KWOK: I see your di st i nct i on, your Honor , and
8 t hat ' s why we went t o super sede t he i ndi ct ment because we want
9 t o pr eser ve t he l egal - -
10 THE COURT: You want t o have i t bot h ways. But now - -
11 MR. KWOK: And I t hi nk we ar e ent i t l ed t o ar gue i t
12 bot h ways t o t he j ur y. Not onl y i s t her e no - -
13 THE COURT: I f you' r e goi ng t o ar gue i t bot h ways t o
14 t he j ur y, t hen I t hi nk Mr . Rubi nst ei n may be - - maybe, I ' mnot
15 sur e, but may be ent i t l ed t hen t o r ai se t he i ssue of t hi s
16 i nt ent i ssue t hr ough t hese exper t wi t nesses by pr oof , t hat
17 ot her compani es i n f act do t hi s and t hat t her e ar e - - i t ' s a
18 r easonabl e bel i ef on hi s par t t hat company f unds coul d be spent
19 f or t hi s way.
20 MR. KWOK: I mean, your Honor , t he gover nment ' s
21 concer n i s t hat even what ever t her e may be any sl i ght
22 evi dent i ar y val ue t o t hat t ype of t est i mony, we bel i eve t hat
23 under Rul e 403 i t shoul d not be admi t t ed si mpl y because t he
24 r i sk of unf ai r pr ej udi ce t o t he gover nment , and conf usi on of
25 t he i ssues i s so gr eat . As Mr . Rubi nst ei n j ust pr of f er ed now,
( 212) 805- 0300
9
862ZKAR1
1 t hat wi t ness wi l l be t est i f yi ng most l y about , you know, i ssues
2 concer ni ng t r ansgender peopl e, whi ch we do not i nt end t o f ocus
3 on at t hi s t r i al . And our f ear i s t hat shoul d t hose t est i mony,
4 whi ch i s on i t s f ace i s i r r el evant , come i n, t hat i s what t hi s
5 t r i al may be i nvol vi ng t o, and we si mpl y have no i nt er est i n
6 pr ol ongi ng t hi s t r i al t o t al k about al l t hese ot her t hi ngs.
7 THE COURT: As l ong as t he - - I ' ve got t o be - - you
8 sai d pr ej udi ce t o t he gover nment , but I ' ve got t o t hi nk about
9 pr ej udi ce t o t he def ense. I f you' r e goi ng t o have t he br oader
10 case wi t h t wo pr ongs, t hen I may f eel t hat i n f ai r ness t o t he
11 def ense, t hey have t o be ent i t l ed t o pr esent t hei r def ense t o
12 t hat second pr ong. And so t hat ' s t he hor ns of t he di l emma you
13 put t he Cour t i n.
14 ( Pause)
15 MR. KWOK: Your Honor , j ust so we' r e cl ear about our
16 opt i ons t hat we ar e l ooki ng at , i s your Honor st i l l goi ng t o be
17 i ncl i ned t o char ge t he j ur y about t he absence of a t r aci ng
18 r equi r ement i f we now t el l you t hat we ar e not - - we' r e si mpl y
19 goi ng t o ar gue t hat CASI f unds ar e al l f eder al f unds, but ,
20 nonet hel ess, when i t comes t i me f or t he j ur y char ge, woul d t hat
21 l egal i nst r uct i on st i l l be i ncl uded i n t he char ge t o t he j ur y?
22 THE COURT: J ust t he CASI f unds?
23 MR. KWOK: That somet hi ng t o t he ef f ect of , t o sat i sf y
24 t he el ement of pr ovi ng $5, 000 or mor e of mi sspent money, t he
25 gover nment does not need t o t r ace t he amount t hat i t ' s - -
( 212) 805- 0300
10
862ZKAR1
1 THE COURT: I t hi nk you do have t o pr ove t he t r ace - -
2 I don' t t hi nk you have t o t r ace t he amount , but I t hi nk you
3 have t o show t hat t he expendi t ur e was made by usi ng t hose
4 f unds.
5 MR. KWOK: Can I have a moment your Honor ?
6 ( Pause)
7 MR. KWOK: Your Honor , we don' t want t o gi ve up on our
8 l egal poi nt . So i f t he def ense i s i ncl i ned because of t he way
9 r equest t o char ge i s wor ded now t o br i ng i n t hese exper t s, we
10 st i l l st and on our obj ect i ons, but we ar e under st and your
11 Honor ' s posi t i on.
12 THE COURT: Then we bet t er ar r ai gn t he def endant on
13 t he super sedi ng i ndi ct ment . Do we have a copy of i t , Rober t ?
14 He st epped out . Maybe I have i t , S2?
15 MR. RUBI NSTEI N: I have a copy.
16 THE COURT: Al l r i ght .
17 MR. RUBI NSTEI N: Does t he Cour t need one, your Honor ?
18 THE COURT: I ' l l ar r ai gn t he def endant at t hi s t i me.
19 I s t hat conveni ent ? I have a copy.
20 MR. RUBI NSTEI N: Oh, f i ne.
21 THE COURT: Dani el B. Kar r on - - Mr . Rubi nst ei n, have
22 you seen a copy of t he super sedi ng i ndi ct ment char gi ng t he
23 def endant wi t h st eal i ng $5, 000 of pr oper t y of CASI , whi l e CASI
24 was a r eci pi ent of f eder al gr ant of mor e t han $10, 000 i n a
25 si ngl e year ?
( 212) 805- 0300
11
862ZKAR1
1 MR. RUBI NSTEI N: Yes, your Honor .
2 THE COURT: And have you di scussed t he super sedi ng
3 i ndi ct ment wi t h your cl i ent ?
4 MR. RUBI NSTEI N: I have, your Honor .
5 THE COURT: You wi sh t o have t he super sedi ng
6 i ndi ct ment r ead t o t he def endant ?
7 MR. RUBI NSTEI N: No, your Honor . We wai ve f or mal
8 r eadi ng of t he super sedi ng i ndi ct ment S2, and def endant ent er s
9 a pl ea of not gui l t y, your Honor .
10 THE COURT: Mr . Kar r on, have you seen a copy of t he
11 super sedi ng i ndi ct ment char gi ng you wi t h st eal i ng $5, 000 or
12 mor e of pr oper t y f r omCASI dur i ng t he per i od t hat i t was
13 r ecei vi ng a $10, 000 gr ant or gr ant i n excess of $10, 000 f r om
14 t he f eder al gover nment ?
15 THE DEFENDANT: Yes, I have, your Honor .
16 THE COURT: And have you di scussed t he super sedi ng
17 i ndi ct ment wi t h Mr . Rubi nst ei n?
18 THE DEFENDANT: Yes, I have, your Honor .
19 THE COURT: Do you wi sh t o have t he super sedi ng
20 i ndi ct ment r ead t o you at t hi s t i me?
21 THE DEFENDANT: No, your Honor .
22 THE COURT: And woul d you l i ke a pl ea of not gui l t y
23 ent er ed i n your behal f at t hi s t i me?
24 THE DEFENDANT: Yes, your Honor .
25 THE COURT: Pl ea of not gui l t y wi l l be ent er ed on
( 212) 805- 0300
12
862ZKAR1
1 behal f of t he def endant , Dani el B. Kar r on. Al l r i ght .
2 Now, t he next t hi ng I t hi nk I shoul d br i ng up i s t hat
3 wi t h r espect t o t he voi r di r e, I have - - I t hi nk I ' ve i ncl uded
4 i n t he voi r di r e al l t he quest i ons t he gover nment r equest ed,
5 and I have al l t he quest i ons t hat t he def ense has r equest ed,
6 except I ' ve had a l i t t l e t r oubl e wi t h t he phr aseol ogy of one of
7 Mr . Rubi nst ei n' s r equest s, whi ch was a r equest t hat , as
8 f ol l ows: Can you r espect an i ndi vi dual ' s bel i ef t hat he or she
9 was bor n t he wr ong gender ?
10 I have t r oubl e wi t h r espect as wor di ng t hat quest i on.
11 I r ephr ased i t t o say. Can you t r eat , wi t hout bi as or
12 pr ej udi ce, any wi t ness or def endant who st at es t hat he or she
13 bel i eves he or she was bor n of t he wr ong gender .
14 MR. RUBI NSTEI N: That ' s accept abl e, your Honor .
16 MR. RUBI NSTEI N: That ' s f i ne.
18 MR. RUBI NSTEI N: I di d have one addi t i onal - -
19 THE COURT: I t seemed t o me r espect was not r eal l y a
20 t he pr oper quest i on.
21 MR. RUBI NSTEI N: I agr ee.
22 THE COURT: Whet her t her e woul d be any bi as or
23 pr ej udi ce - -
24 MR. RUBI NSTEI N: Yes.
25 THE COURT: - - wi t h r espect t o a per son of t hat sor t .
( 212) 805- 0300
13
862ZKAR1
1 MR. RUBI NSTEI N: I was wonder i ng i f we shoul dn' t , i n
2 vi ew of t he f act t her e' s appar ent l y goi ng t o be vol umi nous
3 f i nanci al r ecor ds or at l east f i nanci al r ecor ds submi t t ed t o
4 t he j ur y i n t hi s case, whet her or not you shoul d i nqui r e as t o
5 t he j ur or s i f t he case i nvol ves a l ot of number s or somet hi ng,
6 i s t hat goi ng t o pr esent a pr obl em.
7 THE COURT: Wel l , t hat ' s a good quest i on. Ar e t her e
8 goi ng t o be si gni f i cant f i nanci al r ecor ds?
9 MR. KWOK: Ther e ar e a l ot of r ecor ds, a l ot of
10 f i nanci al r ecor ds i n t he under l yi ng case, but our wi t nesses
11 wi l l t est i f y t o summar y char t s and r ecor ds t hat t hey' ve
12 pr epar ed i n t he cour se of anal yzi ng t hose r ecor ds. So our hope
13 i s t hat when t hese wi t nesses t est i f y, i t wi l l come acr oss i n a
14 ver y ver y si mpl e st r ai ght f or war d manner about what t hey
15 exact l y di d.
16 THE COURT: What about t he j ur y wi l l have a quest i on
17 of whet her t he summar y char t s, et cet er a, accur at el y r ef l ect
18 t he under l yi ng r ecor ds.
19 MR. KWOK: I guess t hat coul d be a subj ect f or Mr .
20 Rubi nst ei n' s cr oss- exami nat i on. But our posi t i on i s t hat i t i s
21 ver y si mpl e. I t ' s essent i al l y not hi ng mor e t han dat a ent r y and
22 t hen addi ng up t he number s and cr eat i ng some char t s t o see
23 wher e t he money went . I don' t bel i eve t hat f i nanci al
24 sophi st i cat i on of any ki nd i s r eal l y necessar y t o be qual i f i ed
25 as a j ur or i n t hi s case.
( 212) 805- 0300
14
862ZKAR1
1 THE COURT: Wel l , t hat ' s why I asked t he quest i on
2 about st i pul at i on, because i t seemed t o me t hat a st i pul at i on
3 t hat t he par t i es know what t he r ecor ds ar e, and i f we coul d
4 get - - t he i ssue i s whet her t hey wer e pr oper expendi t ur es or
5 not .
6 MR. KWOK: I bel i eve we - -
7 THE COURT: But coul dn' t t he par t i es ent er i nt o a
8 st i pul at i on wi t h r espect t o t he f act t hat t hese expendi t ur es
9 wer e made?
10 That woul d el i mi nat e t he f i nanci al , a l ot of f i nanci al
11 r ecor ds bei ng put i nt o bef or e t he j ur y, who coul d - - t o
12 det er mi ne whet her or not t he summar i es accur at el y r ef l ect t he
13 under l yi ng r ecor ds.
14 MR. KWOK: Your Honor , we have sent over a pr oposed
15 st i pul at i on t o - -
16 THE COURT: Why don' t you t al k t o Mr . Rubi nst ei n now.
17 I don' t want t o get i nt o t hat . I was j ust t r yi ng t o see i f - -
18 MR. RUBI NSTEI N: Ther e' s - - we have cer t ai n pr obl ems
19 wi t h t hei r ver si on of f i nanci al r ecor ds. That ' s why we
20 haven' t - - t her e' s one st i pul at i on out st andi ng t hat we ar e
21 st i l l t r yi ng t o wor k out . Because, f r ankl y, J udge, i t ' s a ver y
22 unusual si t uat i on t hat t he gover nment does not have a gener al
23 l edger , and so - -
24 THE COURT: Who has t he gener al l edger , no one?
25 MR. RUBI NSTEI N: We' ve cr eat ed one r ecent l y of f
( 212) 805- 0300
15
862ZKAR1
1 document s t hat we have, but - - i n ot her wor ds, t hey' r e goi ng t o
2 have wi t nesses t est i f yi ng as t o what t hey cal l summar i es, but
3 t he quest i on i s goi ng t o be, what i s t he basi s f or t he summar y
4 and wher e i s - - wher e ar e t he r ecor ds t hat t hese summar i es wer e
5 based upon, so t hat a - - and t hat , dependi ng on t hose
6 wi t nesses' t est i mony, wi l l det er mi ne what t he def ense - -
7 THE COURT: I woul d' ve t hought t hat t hose quest i ons
8 coul d be l i ned up pr et r i al .
9 MR. RUBI NSTEI N: We t r i ed t o, J udge, but we kept
10 aski ng f or - -
11 THE COURT: Because you have t he si t uat i on wher e t he
12 comput er s wer e - - r ecor ds wer e. So I don' t know how t o
13 descr i be i t , unusual .
14 MR. RUBI NSTEI N: That ' s a ki nd way t o descr i be i t ,
15 your Honor . 19 t er abyt es of i nf or mat i on i s ki nd of
16 ext r aor di nar y, but appar ent l y t hese comput er s t hat account ant s
17 have have t hei r own pr ogr ams t hat t hey i nser t and what have
18 you. But t her e ar e i ssues as t o t hese r ecor ds. So f ar we
19 haven' t been abl e t o r esol ve i t . We' r e st i l l wor ki ng on i t .
20 THE COURT: Wel l , i s t her e any di sput e t hat t he
21 cer t ai n f unds wer e expended f or cer t ai n pur poses? I t seems t o
22 me t hat t hat ought t o be abl e t o be, t o be st i pul at ed. I f
23 t her e wer e t hese cost s, t hey have t o be pai d f or by somebody,
24 and t her e ought t o be ent r i es showi ng t hat t hose expenses wer e
25 made and t hat woul d put an end t o i t . I t doesn' t mat t er - - I
( 212) 805- 0300
16
862ZKAR1
1 don' t under st and why t hat can' t be st i pul at ed t o and get
2 t hr ough t hi s t r i al .
3 MR. KWOK: We woul d def i ni t el y wel come t hat
4 st i pul at i on. I woul d di r ect - -
5 THE COURT: I f get i nt o a mount ai n, t hat ' s possi bl e,
6 of f i nanci al r ecor ds, t her e i s a possi bl e j ur y det er mi nat i on
7 t hat t hey' l l make t he deci si on based on t he mount ai n of
8 f i nanci al r ecor ds and not based on any par t i cul ar anal ysi s of
9 i t . So i t seems t o me t hat i t ' s - - i f moni es wer e expended f or
10 a cer t ai n pur pose, t hat i t t o be cl ear t hat t hey wer e t o bot h
11 par t i es t hat t hey wer e expended f or t hose pur poses.
12 MR. RUBI NSTEI N: J udge, I know a l ot of peopl e t hi nk,
13 and I guess a l ot of my col l eagues on t he def ense si de t hi nk
14 t hat conf usi on i s good f or t he def ense.
15 THE COURT: Okay.
16 MR. RUBI NSTEI N: But I don' t . I ' mnot - - I ' mnot an
17 advocat e of t hat .
18 THE COURT: Wel l - -
19 MR. RUBI NSTEI N: Al l r i ght . I f t he gover nment gi ves
20 me - -
21 THE COURT: I t hi nk i t somet i mes pr ej udi ces t he
22 def ense.
23 MR. RUBI NSTEI N: Par don?
24 THE COURT: I t hi nk i t somet i mes pr ej udi ces t he
25 def ense, but - -
( 212) 805- 0300
17
862ZKAR1
1 MR. RUBI NSTEI N: I f t he gover nment gi ves me what
2 checks and what have you, t hat t hey' r e cl ai mi ng wer e aut hor ed
3 and t hat ar e i mpr oper , and t hey squar e wi t h my r ecor ds of what
4 has been aut hor ed at t hi s poi nt , I assur e you we wi l l do
5 ever yt hi ng we can t o wor k i t out .
6 THE COURT: Okay.
7 MR. KWOK: I woul d - -
8 THE COURT: How l ong i s t he t r i al goi ng t o t ake?
10 MR. KWOK: I t hi nk t he gover nment has al r eady pr ovi ded
11 t hese mat er i al s. I di r ect t he def ense' s at t ent i on t o
12 gover nment exhi bi t s 110 t o 115. Those ar e, essent i al l y, t he
13 summar i es and spr ead sheet s and char t s t hat we cont i nued t o
14 el i ci t f r omt he wi t ness. I f t he def ense i s wi l l i ng t o
15 st i pul at e t o t hat , we wel come t hat ver y much, and I t hi nk i t
16 woul d shor t en t he t r i al dr ast i cal l y.
17 THE COURT: Wer e t he payment s made, Mr . Kwok, by
18 check?
19 MR. KWOK: They wer e.
20 THE COURT: Or wer e t hey made by el ect r oni c payment s?
21 MR. KWOK: They wer e made by var i et y of means,
22 i ncl udi ng wr i t t en checks, i ncl udi ng el ect r oni c t r ansmi t t al s,
23 i ncl udi ng an Amer i can Expr ess car ds. We have pr ovi ded al l
24 t hose under l yi ng r ecor ds. And t he exhi bi t s t hat I j ust
25 ment i oned ar e summar i es of ever y l i ne i t emof t hose ent r i es.
( 212) 805- 0300
18
862ZKAR1
1 And i t al so shows wher e t he money came f r om, how t he
2 out st andi ng bal ances wer e pai d. And i f t he def ense woul d l ook
3 at t hat and compar e t hose and do a spot check of t he under l yi ng
4 r ecor ds, and so t hat t hey have conf i dence t hat we f ai r l y and
5 accur at el y capt ur ed t he r aw dat a, agai n, we woul d ver y much
6 wel come t hat st i pul at i on.
7 MR. RUBI NSTEI N: I ' l l l ook at i t , J udge. But I t hi nk
8 what t hey' r e mi ssi ng i s t hat t hey t hey' r e goi ng on t he
9 assumpt i on t hat ever y penny t hat CASI spent was money t hat t hey
10 r ecei ved f r omt he f eder al gover nment pur suant t o t hi s ATP
11 gr ant , and t hat ' s j ust not accur at e. So I ' l l l ook at t hose
12 r ecor ds, J udge, dur i ng t he br eak bet ween now and when t he j ur y
13 get s up, i f we have a br eak. And I have t hemi n t he back. I
14 have bi g books.
15 THE COURT: Wel l , t hen, Mr . Rubi nst ei n i s aski ng f or
16 t hr ee al t er nat es, because he t hi nks i t ' s goi ng t o go t hr ee
17 weeks.
18 MR. KWOK: We have no obj ect i on t o t hat . I don' t - - I
19 hope i t doesn' t t ake t hr ee weeks, but we have no obj ect i on.
20 THE COURT: I don' t want t o t el l t he j ur y i t ' s goi ng
21 t o t ake t hr ee weeks, but I f eel t hat I ' l l have t o t el l t hemi t
22 mi ght . We' r e i n J une, t hat ' s gr aduat i on per i od, and we' r e
23 goi ng t o l ose j ur or s f or t hat r eason.
24 MR. RUBI NSTEI N: Lot s of weddi ngs, your Honor .
25 THE COURT: What ?
( 212) 805- 0300
19
862ZKAR1
1 MR. RUBI NSTEI N: Lot s of weddi ngs.
2 THE COURT: Lot s of weddi ngs and l ot s of gr aduat i ons.
3 Do we have a j ur y?
4 THE DEPUTY CLERK: Not yet . They' r e st i l l downst ai r s.
5 MR. RUBI NSTEI N: Your Honor , t her e' s t wo ot her mat t er s
6 I ' d l i ke t o addr ess wi t h t he Cour t .
7 THE COURT: Yes.
8 MR. RUBI NSTEI N: Fi r st , t he manner i n whi ch t o r ef er
9 t o Dr . Kar r on dur i ng t he cour se of t he t r i al . He has been
10 i ndi ct ed as Dani el B. Kar r on, and act ual l y t hat was - - he
11 doesn' t r eal l y go by t hat name any l onger . I was t hi nki ng t hat
12 possi bl y cal l hi mDr . D. B. Kar r on, because I j ust i nt end t o
13 r ef er t o hi mas Dr . Kar r on, per sonal l y.
14 THE COURT: He' s a Ph. D. , i s t hat r i ght ?
16 MR. KWOK: We have no obj ect i on. We' l l t r y t o r ef er
17 t o hi mas Dr . Kar r on as wel l .
19 MR. RUBI NSTEI N: Your Honor , t he l ast mat t er r ef er s t o
20 a subpoena t hat t he gover nment has ser ved on def ense, and I
21 woul d ask your Honor t o quash t hi s subpoena, 17C subpoena.
22 THE COURT: And t he gr ounds?
23 MR. RUBI NSTEI N: Yes, your Honor ; t hat t he gover nment
24 must est abl i sh under Rul e 16C t hat t he mat er i al t hey ar e
25 seeki ng ar e r el evant , admi ssi bl e and speci f i cal l y i dent i f i ed.
( 212) 805- 0300
20
862ZKAR1
1 By t hi s def i ni t i on, t hey can not use t hi s subpoena as an end
2 r un ar ound Rul e 16.
3 Mor eover , i t i s evi dent f r omt he nat ur e of t he
4 subpoena, whi ch i s condi t i onal t he def endant t est i f yi ng.
5 THE COURT: I ' msor r y?
6 MR. RUBI NSTEI N: Whi ch i s condi t i onal i f t he def endant
7 t est i f i es, t hat t he gover nment i s seeki ng i mpeachment mat er i al .
8 And I submi t t hat t hi s i s absol ut el y pr ohi bi t ed on t he use of
9 Rul e 17C subpoena f or i mpeachment pur poses. And I ci t e U. S.
10 ver sus Wei ssman, 2002 West l aw, 31857510 - - 31857510, Sout her n
11 Di st r i ct of New Yor k case.
12 THE COURT: 318?
13 MR. RUBI NSTEI N: 575.
14 THE COURT: Feder al Suppl ement , 575?
15 MR. RUBI NSTEI N: I t ' s West l aw, your Honor .
16 THE COURT: Oh, I ' m- - W- e- i - s- m- a- n?
17 MR. RUBI NSTEI N: I t ' s W- e- i - s- s- m- a- n.
18 THE COURT: I bet t er get t he ci t e agai n because I ' m
19 used t o Feder al - -
20 MR. RUBI NSTEI N: I ' l l gi ve i t t o you. The J udge
21 was - -
22 THE COURT: 1990?
23 MR. RUBI NSTEI N: BSJ , December 26, 2002. I ' l l gi ve
24 you - -
25 THE COURT: BSJ , Bar bar a J ones.
( 212) 805- 0300
21
862ZKAR1
1 MR. RUBI NSTEI N: Rober t .
2 THE DEPUTY CLERK: Thank you.
3 THE COURT: You got a copy?
4 Wel l , as I r ead t he case, you' r e r el yi ng on Mr . , t he
5 J ones, Bar bar a J ones case. She was deal i ng wi t h a si t uat i on
6 wher e t he def endant sought t o obt ai n t he r ecor ds of a t hi r d
7 par t y pr i or t o t r i al , t hi r d par t y bei ng not - - not t he
8 def endant ' s r ecor ds. So why i s i t r el evant t o t hi s case, Mr .
9 Rubi nst ei n?
10 MR. RUBI NSTEI N: Wel l , i t shows t hat t hey' r e j ust not
11 ent i t l ed t o r ecor ds f or cr oss- exami nat i on pur poses. You know,
12 we al so have t he pot ent i al of a f i f t h amendment i ssue. I never
13 saw a def endant bei ng subpoenaed t o get t he def endant ' s
14 per sonal r ecor ds and t ax r et ur ns. I mean, t hey have t he
15 abi l i t y t o get t ax r et ur ns.
16 THE COURT: Wel l , t hi s subpoena i s onl y t o t ake pl ace
17 i n t he event t hat t he def endant t akes t he st and. Now, I don' t
18 know whet her - - I don' t see t he - - I ' l l t ake f ur t her br i ef i ng
19 on i t , but I don' t t he Bar bar a J ones deci si on her e deal s wi t h
20 t hi s si t uat i on. Thi s was t o use i n cr oss- exami nat i on, as I
21 under st ood i t , subpoena i n t he event . So I need some, I need
22 some memor andumsuppor t i ng your mot i on t o quash, Mr .
23 Rubi nst ei n, and t he gover nment can r epl y. You can gi ve t hat t o
24 me i n t he next day or so.
25 MR. RUBI NSTEI N: Fi ne, your Honor .
( 212) 805- 0300
22
862ZKAR1
1 THE COURT: Okay, anyt hi ng el se t o t ake up?
2 MR. RUBI NSTEI N: Yes, your Honor . I j ust want t o
3 submi t t o your Honor - - I hope i t ' s l egi bl e enough, and some of
4 t hese ar e dupl i cat e names what t he gover nment has i ndi cat ed
5 mi ght be r el evant names t hat wi l l come up.
6 THE COURT: Oh, yeah, we bet t er have t he names of
7 peopl e who wi l l t est i f y.
8 MR. RUBI NSTEI N: Let me check t he t wo so I coul d cr oss
9 out my l i st so you don' t have t o - -
10 THE COURT: I don' t have t he Gover nment ' s l i st .
11 MR. KWOK: I have an ext r a copy. I bel i eve I handed
12 one t o your Deput y.
13 THE COURT: My cl er k? He' s not her e.
14 MR. KWOK: I can hand you my copy.
15 THE COURT: How woul d I know who t hese peopl e ar e? I n
16 ot her wor ds, some of t hese names ar e pr et t y pr et t y common, Mr .
17 Kwok. I need some i dent i f i cat i on f or t he j ur or s.
18 MR. KWOK: Whi ch names ar e you r ef er r i ng t o, your
19 Honor ?
20 THE COURT: Wel l , t her e' s a name - - number f i ve i s t he
21 per son named Far nswor t h, who i s a - - I don' t know wher e t hey
22 come f r omor wher e t hey' r e l ocat ed or anyt hi ng of t hi s sor t .
23 Ther e' s a pi t cher f or t he Yankees by t hat name and - - ki nd of
24 wi l d - - but I suppose he mi ght have a wi f e or somet hi ng, but
25 i t ' s not an uncommon name. Fel dman i s a pr et t y common name.
( 212) 805- 0300
23
862ZKAR1
1 MR. KWOK: I under st and, your Honor . I f we coul d
2 pr opose maki ng f ur t her i nqui r i es i f t hey answer af f i r mat i vel y
3 t o t hose, because I under st and - -
4 THE COURT: J ust wher e t hey l i ve. I mean, t hese
5 peopl e, t he j ur or s come f r omt he Sout her n Di st r i ct . I f t hese
6 peopl e l i ve i n Washi ngt on or somet hi ng l i ke t hat , t hen t hei r
7 concer ns wi l l be al l evi at ed. I f t hat per son i s a member of
8 such and such f ami l y t hat l i ves down t he st r eet , you know.
9 MR. KWOK: Sur e, we' l l t r y t o r ef i ne t he l i st f or your
10 Honor .
11 THE COURT: The j ur y shoul d be i n i n about f i ve
12 mi nut es, t en mi nut es. So l et ' s - - and I have t o go get a and
13 so l et ' s - - t r y and get t hemup her e ear l y. Somebody - - I need
14 some i dent i f i cat i on. We have some addr ess or somet hi ng of t hat
15 sor t , Mr - -
16 MR. RUBI NSTEI N: Yes, I ' l l gi ve you t he out - of - st at e
17 ones, your Honor .
18 THE COURT: Thi s l i st - - my Lor d, t hi s i s a l ong l i st .
19 MR. RUBI NSTEI N: The names ar e goi ng t o come up dur i ng
20 t he t r i al . They' r e not necessar i l y - - t hey' r e not al l
21 wi t nesses, J udge, but t hey' r e j ust names t hat ar e goi ng t o be
22 ment i oned, we bel i eve, dur i ng t he cour se of t he t est i mony. I
23 t hought t hat ' s one of t he t hi ngs t hat t he Cour t want ed.
24 THE COURT: Wel l , I see one i s a pl umbi ng company so.
25 The Fi nanci al I nst i t ut e of St andar ds and Technol ogy i n
( 212) 805- 0300
24
862ZKAR1
1 Washi ngt on?
2 MR. KWOK: Gat er sbur g, Mar yl and.
3 THE COURT: Ti a Lor r ai ne.
4 MR. KWOK: That we don' t know. We got t hat name f r om
5 one of t he e- mai l s t he def ense pr oduced.
6 THE COURT: Okay. What amI goi ng t o do about your
7 l i st , Mr . Rubi nst ei n?
8 MR. RUBI NSTEI N: Wel l f or out - of - st at er s, your
9 Honor - -
10 THE COURT: I mean Dunn Levy i s a ver y common name.
12 THE COURT: Dunn Levy and Levi n Mason, ver y common
13 names.
14 MR. RUBI NSTEI N: Dunn Levy i s a bookkeeper f r omNew
15 Yor k.
16 THE COURT: Mur phy i s a common name, but t hat ' s got
17 some i dent i f i cat i on her e. J ohn Mason, Mi l l er , Ross.
18 MR. RUBI NSTEI N: Mi l l er i s an at t or ney, your Honor .
19 THE COURT: I n New Yor k?
21 THE COURT: Maybe I ought t o gi ve you t he l i st and put
22 some addr ess on i t .
23 MR. RUBI NSTEI N: Okay. Mur phy i s a pr of essor .
24 THE COURT: I ' l l gi ve you back t he l i st so you can - -
25 MR. RUBI NSTEI N: Okay.
( 212) 805- 0300
25
862ZKAR1
1 THE COURT: The j ur y' s her e.
2 Why don' t I gi ve t hi s t o you, Mr . Rubi nst ei n. You can
3 f i l l i t i n. We' l l get t he j ur y i n and send t hemt o - - i t ' s my
4 pr act i ce t o get t hemt o go t o t he men' s and l adi es' r oombef or e
5 we st ar t .
6 Maybe you ought t o do t he same.
7 THE COURT: Al l r i ght ? Br i ng t hemi n.
8 THE DEPUTY CLERK: J udge, i f t hey' r e goi ng t o use - -
9 i f counsel ar e goi ng use t he r est r oom, t hey' l l have t o use t he
10 r est r oomout si de because t he j ur or s ar e goi ng t o be usi ng t he
11 one i n her e.
12 MR. RUBI NSTEI N: You want us t o do t hat bef or e t hey
13 come i n?
14 THE DEPUTY CLERK: I don' t know.
15 THE COURT: What do you want t o do? You want t o use
16 t he r est r oomnow?
17 MR. RUBI NSTEI N: Yeah, but I guess I ' l l wai t t i l l t hey
18 al l wal k i n r at her t han col l i de wi t h t hem.
19 THE COURT: Al l r i ght . Okay. They' l l do i t af t er
20 t hey' ve st ar t ed usi ng t he r est r ooms, t hey' l l use t he one
21 out si de.
22 Don' t f or get t he bi ogr aphi cal mat er i al f or t hose
23 wi t nesses, Mr . Rubi nst ei n.
25 ( Recess)
( 212) 805- 0300
26
862ZKAR1
1 ( A j ur y of 12 and 4 al t er nat es was chosen and swor n)
2 THE COURT: Mr . Mont eguedo has t o gi ve t hose j ur or s
3 sl i ps.
4 So, I wi l l gi ve you t hese st ar t i ng i nst r uct i ons,
5 because some of you may never have ser ved as j ur or s bef or e and
6 not know exact l y what t o expect , and al so some peopl e may not
7 have ser ved f or some t i me and coul d use a br ush- up on what j ur y
8 ser vi ce wi l l be l i ke i n t hi s case.
9 So, as I t ol d you t hi s mor ni ng, i n t he Amer i can syst em
10 of j ust i ce t he j udge and t he j ur y have separ at e r ol es. My j ob
11 i s t o i nst r uct you as t o t he l aw t hat gover ns or cont r ol s t he
12 case, and I wi l l gi ve you t hose i nst r uct i ons at t he end of t he
13 t r i al . Your j ob as j ur or s i s t o det er mi ne t he f act s based on
14 t he evi dence pr esent ed at t he t r i al .
15 You ar e t he onl y t r i er s of f act , and your deci si ons on
16 t he f act ual i ssues wi l l det er mi ne t he out come of t hi s l awsui t .
17 I want t o caut i on t hose of you t hat have wat ched TV
18 ver si ons of t r i al s not t o be di st r act ed i nt o at t empt i ng t o
19 eval uat e t he per f or mance of t he l awyer s i n t he cour t . I t i s
20 t he par t i es whose i nt er est wi l l be af f ect ed by t he out come of
21 t hi s t r i al , and your det er mi nat i on shoul d be based sol el y on
22 t he evi dence i n t hi s case.
23 You must pay cl ose at t ent i on t o al l t he evi dence
24 pr esent ed. Evi dence consi st s onl y of t he t est i mony of
25 wi t nesses, document s and ot her t hi ngs admi t t ed as evi dence or
( 212) 805- 0300
27
862ZKAR1
1 agr eed t o by t he at t or neys.
2 Cer t ai n t hi ngs ar e not evi dence and must not be
3 consi der ed by you. I wi l l l i st t hemf or you now:
4 One, st at ement s, ar gument s and quest i ons by l awyer s
5 ar e not evi dence, nor ar e my own st at ement s t o you.
6 Two, obj ect i ons t o quest i ons ar e not evi dence.
7 Lawyer s have an obl i gat i on t o t hei r cl i ent t o make an obj ect i on
8 when t hey bel i eve evi dence bei ng of f er ed i s i mpr oper under t he
9 l aws of evi dence. You shoul d not be i nf l uenced by t he
10 obj ect i on or by t he cour t ' s r ul i ng on t hat .
11 I f t he obj ect i on i s sust ai ned, i gnor e t he quest i on and
12 any answer t hat has been gi ven. I f i t i s over r ul ed, t r eat t he
13 answer l i ke any ot her . I f you ar e i nst r uct ed t hat some i t emof
14 evi dence i s r ecei ved f or a l i mi t ed pur pose onl y, you must
15 f ol l ow t hat i nst r uct i on.
16 Thi r d, t est i mony of t he cour t i s excl uded. I t ol d you
17 t o di sr egar d t hat t est i mony, and i t must not be consi der ed.
18 Four t h, anyt hi ng you may have seen or hear d out si de of
19 t he cour t r oomi s not evi dence and must be di sr egar ded.
20 You ar e t o deci de t he case sol el y on t he evi dence
21 pr esent ed her e i n t he cour t r oom. I n deci di ng t he f act s of t he
22 case, you wi l l have t o deci de t he cr edi bi l i t y of t he wi t nesses,
23 t hat i s, how t r ut hf ul and bel i evabl e t hey ar e.
24 Now, how do you deci de what t o bel i eve and what not t o
25 bel i eve? Wel l , you ar e goi ng t o l i st en t o t he wi t nesses, wat ch
( 212) 805- 0300
28
862ZKAR1
1 t hemand obser ve t hemand t hen deci de as you woul d deci de such
2 quest i ons i n your or di nar y l i f e. Di d t hey know what t hey wer e
3 t al ki ng about ? Wer e t hey candi d, honest , open and t r ut hf ul , or
4 di d t hey have a r eason t o f al si f y, exagger at e or di st or t t hei r
5 t est i mony? Somet i mes i t ' s not what a wi t ness says but how he
6 or she says i t t hat may gi ve you a cl ue as t o whet her or not t o
7 accept t hat wi t ness' s ver si on of an event or an i nci dent as
8 cr edi bl e and bel i evabl e. I n shor t , t he way a wi t ness t est i f i es
9 may pl ay an i mpor t ant par t i n your r eachi ng a j udgment as t o
10 whet her or not you can accept t he wi t ness' s t est i mony as
11 r el i abl e.
12 As t he t r i al pr oceeds, you may have i mpr essi ons of a
13 wi t ness, but you may not al l ow t hese i mpr essi ons t o become
14 f i xed or har dened, because i f you do, i n a sense you f or ecl ose
15 consi der at i on of t he t est i mony of ot her wi t nesses or ot her
16 evi dence t hat may be pr esent ed af t er t he wi t ness you hear d, and
17 t hat woul d be unf ai r t o one si de or t he ot her .
18 A case can be pr esent ed onl y st ep by st ep, wi t ness by
19 wi t ness, bef or e al l t he evi dence i s bef or e you.
20 We know f r omexper i ence t hat f r equent l y we wi l l hear a
21 per son gi ve hi s ver si on of an event whi ch sounds most
22 i mpr essi ve and even compel l i ng, and yet when we hear anot her
23 per son' s ver si on of t he same event , or even t he same wi t ness
24 cr oss exami ned wi t h r espect t o i t , what seemed t o be ver y
25 compel l i ng and i mpr essi ve may be compl et el y di ssi pat ed or
( 212) 805- 0300
29
862ZKAR1
1 weakened. I amsi mpl y sayi ng or t r yi ng t o say t o you i n ver y
2 si mpl e t er ms: Remember t hat t her e may be anot her si de t o any
3 wi t ness' s t est i mony.
4 You wi l l use your common sense and good j udgment t o
5 eval uat e each wi t ness' s t est i mony based on al l of t he
6 ci r cumst ances.
7 I cannot emphasi ze t oo st r ongl y t hat you must keep an
8 open mi nd unt i l t he t r i al i s over . You shoul d not r each any
9 concl usi ons unt i l you have al l t he evi dence bef or e you. I n
10 or der t o ensur e t hat you deci de t he case onl y on t he evi dence
11 and ar e not i nf l uenced by anyt hi ng t hat mi ght occur out si de t he
12 cour t r oom, I must gi ve you a set of speci f i c i nst r uct i ons.
13 Fi r st , do not di scuss t hi s case amongst your sel ves or
14 wi t h any ot her per son. You wi l l have t he oppor t uni t y and
15 i ndeed t he dut y t o di scuss t he case amongst your sel ves af t er
16 al l t he evi dence i s i n and t he case i s gi ven t o you t o di scuss
17 and deci de i n t he j ur y r oom. Now l et me expl ai n t he r easons
18 f or t hat .
19 The r eason f or t hat r ul e i s, f i r st , i f you st ar t
20 di scussi ng i t bef or ehand, bef or e you have al l t he evi dence
21 bef or e you, you won' t have al l t he evi dence bef or e you, and you
22 ar e apt t o r each a pr ej udgment i nst ead of r eachi ng a bal anced
23 j udgment based on al l of t he evi dence. J ur y del i ber at i ons
24 cont empl at e t hat t hose conf er ences wi l l t ake pl ace af t er t r i al
25 when al l of you ar e assembl ed i n t he j ur y r oomsi t t i ng ar ound
( 212) 805- 0300
30
862ZKAR1
1 t he t abl e, each of you exchangi ng vi ews and what have you, and
2 each of you l i st ens t o t he ot her s, and t hat ' s t he way t he j ur y
3 del i ber at i on i s supposed t o be conduct ed.
4 I f you st ar t havi ng conf er ences bef or e al l t he
5 evi dence i s i n, t he chances ar e you won' t have ever yone ar ound
6 t he r oomor si t t i ng ar ound t he t abl e di scussi ng t hat i ssue but ,
7 r at her , you onl y have a f ew of you. Fur t her mor e, t her ef or e t he
8 ot her peopl e woul d be excl uded f r omt he del i ber at i on and
9 woul dn' t be abl e t o exchange t hei r vi ews. Fur t her mor e, you
10 woul dn' t have al l of t he evi dence bef or e you. So, t he r ul e i s
11 you shoul d not di scuss t he case unt i l t he case has been
12 compl et ed.
13 Next , you ar e not t o r ead anyt hi ng i n t he newspaper s
14 or el sewher e about t hi s case i f t hat shoul d occur . Now, I
15 don' t t hi nk t hat t hat ' s goi ng t o occur , but what somet i mes
16 occur s i s t hat t her e ar e ar t i cl es i n t he newspaper t hat bear on
17 a case and t hat ar e not di r ect l y r el evant but t hey have some
18 r el evance. The t r oubl e wi t h vi ewi ng t hat or r eadi ng t hose
19 ar t i cl es i f t hey seemt o bear on t he case, i s t hat you ar e
20 obl i ged t o t el l me t hat you have r ead somet hi ng t hat bear s on
21 i t , and t hen I have t o conduct what i s cal l ed a t ai nt i ng
22 hear i ng, and what I have t o do i s make sur e t hat t hi s out si de
23 bi t of newspaper or what you saw on t el evi si on di dn' t t ai nt
24 you, i n ot her wor ds, cause you t o be l ess t han f ai r and
25 i mpar t i al i n t he case, and t hat you by r ecount i ng what you saw
( 212) 805- 0300
31
862ZKAR1
1 on t el evi si on or r ead on t he r adi o di dn' t t ai nt t he ot her
2 j ur or s. So, I have been t hr ough a case i n whi ch i t t ook al most
3 hal f a mor ni ng t o conduct a t ai nt hear i ng, and no j ur y needs
4 t hat . That ' s an ext r a day of ser vi ce, and you have bet t er
5 t hi ngs t o do. You ar e al l gi vi ng up your t i me. So, don' t r ead
6 anyt hi ng t hat bear s on t he case. J ust don' t do i t . I t j ust
7 means t hat we wi l l have t o have a t ai nt hear i ng, and t hat ' s
8 t i me.
9 Next , you ar e not t o al l ow anyone t o speak t o you
10 about t hi s case. I f you ar e appr oached by anyone t o speak
11 about t he case, pol i t el y t el l t hemt hat t he j udge has di r ect ed
12 you not t o do so. I f any per son seeks t o cont act you about t he
13 case, you ar e r equi r ed t o r epor t t he i nci dent pr ompt l y t o me.
14 Al so, be sur e t hat I ami nf or med i f any per son t hat
15 you know comes i nt o t he cour t r oom. Now t hi s i s a publ i c t r i al ,
16 and i t ' s per f ect l y appr opr i at e t hat t hey come i nt o t he
17 cour t r oom, but i t i s i mpor t ant t hat you do not hear f r omyour
18 f r i end what may have happened i n t he cour t whi l e t he j ur y was
19 not pr esent . I f you shoul d see a f r i end or r el at i ve come i nt o
20 t he cour t , pl ease send a not e t o me t hr ough t he cl er k at your
21 f i r st oppor t uni t y, and t hen I can t ake st eps t o make sur e t hat
22 t hey don' t hear somet hi ng t hat coul d possi bl y be r el at ed t o you
23 and t ai nt t he j ur y.
24 The at t or neys, t he par t i es and t he wi t nesses ar e not
25 supposed t o t al k t o t he j ur y out si de t he cour t r oom, even t o
( 212) 805- 0300
32
862ZKAR1
1 of f er a f r i endl y gr eet i ng, and t he j ur y i s not supposed t o t al k
2 t o t hem. So, i f you happen t o see any of t hemout si de t he
3 cour t r oom, t hey wi l l not and shoul d not speak t o you. Pl ease
4 t ake no of f ense at t hi s; t hey wi l l onl y be act i ng pr oper l y and
5 pr of essi onal l y by not doi ng so.
6 Fi nal l y, l et me say a f ew wor ds about t r i al pr ocedur e.
7 Fi r st , t he l awyer s have t he oppor t uni t y t o make openi ng
8 st at ement s t o you, and t hey wi l l do t hat shor t l y. These
9 st at ement s ar e not evi dence. They ser ve no pur pose ot her t han
10 t o gi ve you an i dea i n advance of t he evi dence what t he l awyer s
11 expect you t o hear f r omt he wi t nesses. These st at ement s al l ow
12 t he l awyer s t o gi ve you a pr evi ew of what t hi s case i s al l
13 about , but t he onl y evi dence wi l l come f r omt he wi t nesses and
14 t he exhi bi t s.
15 Now, af t er t he openi ng st at ement s you wi l l hear t he
16 t est i mony of t he wi t nesses. The gover nment ' s wi t nesses go
17 f i r st . Each wi t ness wi l l f i r st gi ve di r ect t est i mony. Then he
18 may be cr oss- exami ned by t he ot her si de. Somet i mes t her e i s
19 r edi r ect t est i mony and r ecr oss exami nat i on. Al so, exhi bi t s and
20 st i pul at i ons of f act may be r ecei ved i nt o evi dence.
21 Fol l owi ng t he gover nment ' s case, t he def endant may i f
22 he wi shes pr esent wi t nesses and ot her evi dence. Those
23 wi t nesses, i f t he def endant chooses t o pr esent wi t nesses, wi l l
24 be exami ned and cr oss- exami ned j ust as t he gover nment ' s
25 wi t nesses wer e. I f t he def endant chooses t o pr esent evi dence,
( 212) 805- 0300
33
862ZKAR1
1 i t ' s possi bl e t hat t he gover nment woul d t hen pr esent some
2 r ebut t al t o t hat evi dence.
3 And af t er al l t he evi dence has been r ecei ved, t he
4 l awyer s t hen have an oppor t uni t y t o sumup. They may r evi ew
5 t he evi dence and make ar gument s t o you as t o what concl usi ons
6 t hey t hi nk you shoul d or shoul d not dr aw f r omt he evi dence.
7 These ar gument s al so ar e not t hemsel ves evi dence, but t hey may
8 be hel pf ul t o you i n r evi ewi ng t he evi dence dur i ng your
9 del i ber at i ons.
10 Af t er t hese ar gument s, or summat i ons as t hey ar e
11 cal l ed, I wi l l gi ve you det ai l ed i nst r uct i ons as t o t he l aw
12 t hat appl i es and cont r ol s i n t hi s case, and you must f ol l ow my
13 i nst r uct i on. Then you wi l l go t o t he j ur y r oomt o del i ber at e
14 and di scuss t he evi dence i n or der t o deci de t he f act s and
15 r ender a ver di ct .
16 Al l r i ght . We wi l l now begi n wi t h t he gover nment ' s
17 openi ng st at ement . Mr . Ever del l .
18 MR. EVERDELL: Thank you, your Honor .
19 Ladi es and gent l emen, t he def endant , Dr . D. B. Kar r on
20 cheat ed t he gover nment out of hundr eds of t housands of dol l ar s.
21 I n 2001 t he def endant got what many sci ent i st s can onl y hope t o
22 get . He was gi ven a $2 mi l l i on gr ant f r omt he f eder al
23 gover nment t o conduct hi s sci ent i f i c r esear ch, $2 mi l l i on of
24 t axpayer money, and t he onl y t hi ng t hat t he gover nment r equi r ed
25 i n r et ur n f or t hi s money was t hat t he def endant spend i t on one
( 212) 805- 0300
34
8627KAR2 Openi ng - Mr . Ever del l
1 t hi ng and one t hi ng onl y: Hi s r esear ch, not hi ng el se.
2 But t he evi dence wi l l show t hat i nst ead of put t i ng
3 t hat money t owar ds hi s r esear ch, t he def endant chose t o spend
4 much of t hat money on hi msel f . For over a year and a hal f t he
5 def endant used t he gr ant money as hi s own per sonal pi ggy bank
6 t o pay f or per sonal expenses l i ke meal s at r est aur ant s,
7 el ect r oni c gadget s l i ke a GPS t r acki ng devi ce and a di gi t al
8 camer a, even a bl ender and shoe r ack f or hi s apar t ment , and he
9 bought al l t hese t hi ngs even t hough he was al r eady payi ng
10 hi msel f $175, 000 i n sal ar y out of t he gr ant f unds. And when
11 sever al di f f er ent peopl e t ol d t he def endant on mul t i pl e
12 occasi ons t hat he coul d not use t he gr ant money t o pay f or
13 t hese sor t s of t hi ngs t hat he want ed t o pay f or , t he def endant
14 i gnor ed t hemand di d i t anyway and i n t he end mi sspent r oughl y
15 hal f a mi l l i on dol l ar s.
16 Ladi es and gent l emen, my name i s Chr i st i an Ever del l ,
17 and t oget her wi t h my col l eague St eve Kwok and case agent s
18 Rachel Ondr i k and Ki r k Yamat ani f r omt he Depar t ment of Commer ce
19 and par al egal Noha Moussa, we r epr esent t he gover nment i n t hi s
20 t r i al .
21 Now, i n t he cour se of t he next f ew days you wi l l hear
22 f r omsever al wi t nesses, and you wi l l see t he evi dence i n t hi s
23 case, and i f you have ever t aken par t i n a r eal l i f e t r i al , you
24 wi l l qui ckl y see t hat i t ' s not l i ke i t i s on TV. I t ' s not
25 goi ng t o be l i ke a TV show l i ke Law and Or der wher e t he
( 212) 805- 0300
35
1 wi t nesses come i n and t hey t el l t hei r st or y i n chr onol ogi cal
2 or der and i t ' s al l wr apped up neat l y i n an hour . I nst ead, t he
3 pr oof i s goi ng t o come t o you i n bi t s and pi eces, because each
4 wi t ness knows hi s or her own smal l por t i on of t he l ar ger
5 pi ct ur e of t hi s case. So, t hi s openi ng st at ement i s my chance
6 t o gi ve you an over vi ew, a r oad map, t hat I hope wi l l hel p you
7 under st and t he evi dence t hat ' s t o come.
8 So, what wi l l t he evi dence i n t hi s case show? You
9 wi l l l ear n t hat i n 2001 t he def endant and hi s company, Comput er
10 Ai ded Sur ger y, I ncor por at ed, or CASI , appl i ed f or and r ecei ved
11 a $2 mi l l i on gr ant f r omt he f eder al gover nment t o pay f or hi s
12 r esear ch i n comput er i magi ng. Now, t hi s par t i cul ar gr ant was
13 supposed t o l ast f or t hr ee year s, wi t h t he $2 mi l l i on bei ng
14 di sbur sed i n i nst al l ment s over t hat t hr ee- year t i me per i od.
15 As you mi ght expect , wi t h such a l ar ge amount of
16 t axpayer money i nvol ved i n t hi s ki nd of gr ant , t he f eder al
17 gover nment has cer t ai n r ul es t hat t he r eci pi ent must f ol l ow
18 when he r ecei ves t hi s ki nd of money and what he can spend t he
19 money on. You wi l l hear what t hose r ul es ar e, but t he mai n
20 r ul e i s si mpl e and st r ai ght f or war d and i t ' s t hi s: You must
21 spent gr ant f unds on your r esear ch. That means t hat t he gr ant
22 money must be spent on t hi ngs t hat di r ect l y i mpact and f ur t her
23 t he r esear ch. The f unds cannot be used t o pay f or t hi ngs such
24 as r ent and ut i l i t i es f or your of f i ce space. Those cost s ar e
25 j ust t he cost of doi ng busi ness. Ever y company has t hose, and
( 212) 805- 0300
36
1 t hey ar e not cover ed under t he gr ant . And i t means t hat t he
2 f unds cannot be used t o pay f or per sonal expenses l i ke meal s or
3 per sonal debt s. Those ar e not r esear ch cost s, and t hey ar e not
4 cover ed ei t her . And you wi l l al so hear t hat i n or der t o keep
5 t r ack of t he gr ant money t he gover nment r equi r es t he gr ant
6 r eci pi ent t o submi t a budget t hat out l i nes what you ar e
7 spendi ng your gr ant money on. Al l t he cat egor i es of expenses
8 ar e l ai d out - - sal ar y, t r avel cost s, equi pment cost s - - and
9 agai n t he r ul e i s si mpl e, you must st i ck t o your budget . That
10 means i f you t el l t he gover nment you ar e goi ng t o spend t he
11 gr ant money f or cer t ai n t hi ngs, t hen you must spend t he gr ant
12 money f or t hose t hi ngs; and i f you want t o make any si gni f i cant
13 changes t o your budget , you must get appr oval i n wr i t i ng.
14 Now, t hose ar e t he r ul es i n a nut shel l , and t hey ar e
15 basi c, si mpl e and easy t o under st and, and you wi l l hear t hat
16 t hese r ul es wer e r epeat ed f or t he def endant on sever al
17 di f f er ent occasi ons by gr ant of f i ci al s. You wi l l al so hear
18 t hat t he def endant was gi ven t hese r ul es when he r ecei ved t he
19 gr ant and si gned a f or macknowl edgi ng t hat he under st ood t hose
20 r ul es, and you wi l l al so hear t hat t he def endant was t ol d t i me
21 and t i me agai n by gr ant of f i ci al s and by hi s own empl oyees t hat
22 he coul d not use t he gr ant f unds t o pay f or t he t hi ngs he
23 want ed t o pay f or . But t he evi dence wi l l show t hat t he
24 def endant r ef used t o l i st en t o t hemand went ahead and used t he
25 gr ant money as he want ed.
( 212) 805- 0300
37
1 And how di d he mi sspend t hi s money? Wel l , t o gi ve you
2 j ust one exampl e, l adi es and gent l emen, you wi l l hear t he
3 def endant set up hi s company, CASI , i n t he l i vi ng r oomof hi s
4 own apar t ment i n Mi dt own Manhat t an, and t he evi dence wi l l show
5 t hat when CASI r ecei ved i t s f i r st i nst al l ment of $150, 000 i n
6 gr ant f unds, t he f i r st t hi ng t he def endant di d was t r ansf er
7 $75, 000 of i t , hal f of i t , t o hi msel f and used i t t o pay f or
8 per sonal debt s l i ke hi s cr edi t car d bi l l s. And t hen he used
9 t hose same f unds t o pay hi msel f sever al t housand dol l ar s i n
10 r ent payment s f or CASI ' s use of hi s l i vi ng r oom, despi t e t he
11 f act t hat he was st i l l l i vi ng i n hi s apar t ment and despi t e t he
12 f act t hat he had been t ol d speci f i cal l y on mul t i pl e occasi ons
13 t hat r ent was not an al l owabl e expense under any ci r cumst ances.
14 The def endant ' s mi suse of t he gr ant f unds does not end
15 t her e. You wi l l al so hear t hat he used gr ant f unds t o pay f or
16 so- cal l ed equi pment , el ect r oni c gadget s l i ke a GPS t r acki ng
17 devi ce and a di gi t al camer a and househol d i t ems l i ke a bl ender
18 and shoe r ack, i t ems t hat had not hi ng what soever t o do wi t h hi s
19 r esear ch. And you wi l l hear t hat t he def endant used gr ant
20 f unds t o pay f or t housands of dol l ar s wor t h of dent al and ot her
21 cosmet i c medi cal pr ocedur es. And you wi l l al so hear about how
22 t he def endant adamant l y r esi st ed ef f or t s of ever yone ar ound hi m
23 t o convi nce hi mt hat he was spendi ng money on t hi ngs t hat
24 wer en' t al l owed and t o f i x what he had done bef or e.
25 For exampl e, you wi l l l ear n t hat t he def endant hi r ed a
( 212) 805- 0300
38
1 bookkeeper t o go t hr ough t he company' s books and r ecor ds i n
2 connect i on wi t h t he f i r st year audi t of hi s company, and when
3 t hat bookkeeper r ecl assi f i ed cer t ai n expenses and changed t hem
4 f r omgr ant expenses t o nongr ant expenses accor di ng t o t he
5 r ul es, t he def endant went back i nt o t he books and changed t hem
6 r i ght back agai n so t hat he coul d be sur e t hat gr ant f unds
7 coul d be used t o pay f or t hem.
8 The end r esul t of al l t hi s, l adi es and gent l emen, i s
9 t hat t he def endant has been char ged i n a one count i ndi ct ment
10 wi t h cr i me of mi sappl yi ng gover nment gr ant f unds.
11 So, how i s t he gover nment goi ng t o pr ove i t s case t o
12 you? Her e i s how:
13 You wi l l hear t est i mony f r omt wo of t he gover nment
14 of f i ci al s t hat wer e assi gned t o admi ni st er t he def endant ' s
15 gr ant , and t hey wi l l expl ai n t o you what t he r ul es of t he gr ant
16 ar e and whi ch expenses you can and cannot use gr ant f unds t o
17 pay f or . And t hey wi l l t el l you how t hey spoke t o t he
18 def endant on numer ous occasi ons bot h i n per son and on t he phone
19 and t ol d hi mover and over agai n t hat he coul d not use gr ant
20 f unds t o pay f or t hi ngs such as r ent and ut i l i t i es and ot her
21 nonal l owabl e expenses. And you wi l l hear f r omt wo audi t or s who
22 l ooked at t he company' s books, and t hey wi l l t el l you t hat when
23 t hey l ooked at t he company' s expenses and separ at ed out t he
24 expenses t hat wer e al l owabl e under t he gr ant f r omt he expenses
25 t hat wer e not al l owabl e under t he gr ant , t hey f ound t hat
( 212) 805- 0300
39
1 hundr eds of t housands of dol l ar s of gover nment money had been
2 spent on expenses t hat wer e ei t her not i n t he budget or wer e
3 unr el at ed t o t he r esear ch t hat t he gr ant was supposed t o f und.
4 And you wi l l al so hear f r omt hr ee peopl e who wor ked
5 f or t he def endant at CASI , hi s company. They wi l l t el l you
6 what i t was l i ke t o wor k wi t h t he def endant , how he r ef used t o
7 l i st en t o t hei r advi ce about what he coul d spend t he gr ant
8 money on, how he changed t he bookkeepi ng ent r i es i n t he CASI
9 books and r ecor ds t o make sur e t hat cer t ai n expenses wer e
10 cl assi f i ed as r esear ch- r el at ed expenses so t hat t hey coul d be
11 pai d f or wi t h gr ant f unds, and how he t ol d t hemhe t hought he
12 coul d do what he pl eased wi t h t he gr ant money.
13 Fi nal l y, you wi l l be seei ng a number of document s t hat
14 wi l l show you t he f r aud i n cl ear bl ack and whi t e. I n
15 par t i cul ar you wi l l see an anal ysi s of t he def endant ' s per sonal
16 bank account and t he bank account s of CASI , and you wi l l see
17 how vi r t ual l y 100 per cent of CASI ' s i ncome was f r omt he gr ant
18 f unds and how t hose f unds went t o pay f or al l of t he
19 nonal l owabl e expenses t hat I ment i oned bef or e.
20 Now, bef or e I si t down, l adi es and gent l emen, I woul d
21 l i ke you t o do t hr ee t hi ngs dur i ng t he cour se of t hi s t r i al :
22 Fi r st , pay cl ose at t ent i on t o what t he wi t nesses have
23 t o say, and pay cl ose at t ent i on t o t he exhi bi t s t hat ar e
24 i nt r oduced i nt o evi dence.
25 Second, l i st en ver y car ef ul l y t o J udge Pat t er son' s
( 212) 805- 0300
40
1 i nst r uct i ons on t he l aw and f ol l ow t hemcl osel y.
2 Thi r d, and most i mpor t ant l y, use your common sense,
3 t he same common sense t hat you use ever y day t o assess
4 si t uat i ons and eval uat e what peopl e t el l you. Your common
5 sense ser ves you ver y wel l i n t he out si de wor l d, and i t wi l l
6 al so hel p you do j ust i ce i n t hi s case.
7 The gover nment submi t s t hat i f you do t hose t hr ee
8 t hi ngs - - you pay cl ose at t ent i on t o t he evi dence, you l i st en
9 t o t he j udge and you use your common sense - - you wi l l make t he
10 onl y f i ndi ng t hat wi l l be consi st ent wi t h t he evi dence and t he
11 l aw: That t he def endant Dani el Kar r on i s gui l t y as char ged.
12 Thank you.
13 THE COURT: Thank you, Mr . Ever del l .
14 Mr . Rubi nst ei n?
15 MR. RUBI NSTEI N: Yes, your Honor . Thank you, J udge
16 Pat t er son. Ladi es and gent l emen of t he j ur y, l et me
17 r ei nt r oduce mysel f . My name i s Ron Rubi nst ei n. I r epr esent
18 t he def endant her e Dr . D. B. Kar r on.
19 You may ask your sel f why i s Ron Rubi nst ei n get t i ng up
20 her e t o gi ve an openi ng when J udge Pat t er son has t ol d us on a
21 number of occasi ons t hat t he def ense doesn' t have t o pr ove
22 anyt hi ng i n a cr i mi nal case, and t hat as Dr . Kar r on si t s over
23 t her e he i s pr esumed t o be i nnocent . And we cal l upon t he
24 gover nment t o pr ove t he al l egat i ons t hat t hey made i n t hei r
25 openi ng r emar ks. We cal l upon t hemt o pr ove beyond a
( 212) 805- 0300
41
8627KAR2 Openi ng - Mr . Rubi nst ei n
1 r easonabl e doubt . But I ' mgoi ng t o t el l you t hat t hey' r e not
2 goi ng t o even come cl ose t o beyond a r easonabl e doubt , because
3 you ar e goi ng t o f i nd what Dr . Kar r on i s and what he di d, and
4 you ar e goi ng t o ask your sel f at t he end of t he case why i s
5 t hi s per son si t t i ng her e i n t he f eder al cour t house bei ng
6 char ged wi t h t hi s ser i ous cr i me.
7 Dr . Kar r on r ecei ved hi s Ph. D i n 1992 f r omNew Yor k
8 Uni ver si t y. He was a vi si t i ng sci ent i st at New Yor k Uni ver si t y
9 af t er he gr aduat ed. He r ecei ved a f el l owshi p i n car di ac
10 sur ger y at New Yor k Uni ver si t y, i nvol ved i n car di ac i magi ng.
11 He r ecei ved a gr ant - - not a gr ant - - a cont r act f r oma f eder al
12 agency. You ar e goi ng t o hear a l ot of acr onyms. The f eder al
13 peopl e, ever yt hi ng i s l et t er s t hat t hey put t oget her , and he
14 r ecei ved a cont r act f r oma gover nment agency cal l ed BABR, and
15 t hat was i n 1999. Bef or e t hat he t aught at t he ci t y
16 uni ver si t i es. And when he r ecei ved hi s cont r act , he f or med a
17 cor por at i on cal l ed CASI , Comput er Ai ded Sur ger y, because t hat ' s
18 hi s speci al t y, usi ng comput er s t o ai d peopl e i n sur ger y.
19 He had t hi s company. He was an empl oyee of t hi s
20 company. Ever y penny he made he put i nt o CASI , and CASI woul d
21 pay hi ma sal ar y. What happened over t i me, af t er t hi s BABR
22 cont r act ended - - and t hat was f or a f ew hundr ed t housand
23 dol l ar s over t hr ee year s - - t hey ext ended i t . They have
24 di f f er ent phases, and t hey gave hi ma phase 1, and he pr oduced,
25 t hen t hey gave hi mphase 2 and t hen phase 3. What happened i s
( 212) 805- 0300
42
1 t hat CASI t he cor por at i on had l ean year s, and Dr . Kar r on l oaned
2 t he cor por at i on t hat he was a st ockhol der i n moni es over t he
3 per i od of t i me.
4 So, l o and behol d what happens i s he get s t hi s f eder al
5 gr ant . At t he t i me he get s t hi s f eder al gr ant f r omt he
6 Nat i onal I nst i t ut e of St andar ds and Technol ogy, under t he
7 advanced t echnol ogy pr ogr am, CASI , hi s cor por at i on t hat he i s
8 an empl oyee of , owes hi mi n excess of $100, 000. Now, you ar e
9 goi ng t o f i nd t hat he mi ght be a ver y good sci ent i st but he i s
10 not t he gr eat est manager i n t he wor l d. So, he get s t hi s money,
11 and he st ar t s payi ng back t he moni es t hat wer e owed t o hi mby
12 CASI cor por at i on f or t he per i od of t i me pr i or t o get t i ng t he
13 gr ant st ar t ed. He got hi s f i r st check on t he gr ant i n Oct ober
14 1, 2001, and i n or der t o get t hi s gr ant , he had t o submi t a
15 budget . He dr ew t he budget . He submi t t ed t he budget . The
16 budget cal l ed f or hi mi n t he f i r st year t o get $800, 000. The
17 budget cal l ed f or hi mt o get $175, 000 i n sal ar y. The budget
18 cal l ed f or f r i nge benef i t s of $110, 000 and ot her t hi ngs.
19 And what happened i s - - why di d NI ST gi ve hi mt hi s
20 money? NI ST you ar e goi ng t o l ear n i s a pr ogr amt hat gi ves out
21 $60 mi l l i on a year i n r ewar ds, i n gr ant s. They ar e f or
22 br oad- based economi c benef i t s. The concept s t hat t he
23 sci ent i st s pr esent t o NI ST, t o appl y and get t hese f unds, i s
24 t hat t he end r esul t of your r esear ch, even i f t hat ' s f i ve, t en
25 or 20 year s l at er , wi l l be commer ci al i zed i n t he mar ket pl ace
( 212) 805- 0300
43
1 and t her ef or e benef i t t he Uni t ed St at es by t hi s r esear ch. As a
2 mat t er of f act , t he way t he pr ogr amwor ks i s t hat even af t er
3 t he t hr ee year s and he devel ops a pr oduct , t hat 40 per cent of
4 t he t i me you ar e goi ng t o f i nd t hat t hese compani es t hat get
5 t hi s gr ant money devel op pr oduct s t hat ar e gr eat f or t hi s
6 count r y and gr eat f or man ki nd and 60 per cent f ai l . But t hat ' s
7 OK. That ' s OK. The end pr oduct , what ever Dr . Kar r on devel ops,
8 he i s ent i t l ed t o keep. The gover nment has no f i nanci al
9 i nt er est i n i t . They ar e i nt er est ed i n sci ent i st s doi ng t hi ngs
10 t hat ar e goi ng t o benef i t man ki nd f or t he next hundr ed year s.
11 That ' s t he gover nment pr ogr ami n t hi s ar ea.
12 So, one of t he mai n t hi ngs t o get t hese gr ant s - - and
13 t wo t hi r ds of t he gr ant s ar e gi ven t o smal l compani es, and Dr .
14 Kar r on' s company was a ver y, ver y smal l company - - t he gr ant
15 has t o be t he pr i or i t y of your company. You have t o be
16 devot i ng t he maj or i t y of your t i me t o t hi s pr ogr am. Thi s i s
17 i nnovat i ve and hi gh- r i sk t echnol ogy we ar e t al ki ng about , and
18 t he pr oj ect her e i s of nat i onal medi cal i mpor t ance, sci ent i f i c
19 and t echnol ogi cal mer i t of a di gi t al mor se t heor y based on - -
20 di gi t al mor se i s some mat hemat i cal t heor y t hat Dr . Kar r on wor ks
21 wi t h, and i t i s f or i magi ng based on ant i l ogi cal segment at i on
22 r egi st r at i on, r ever se engi neer i ng i n model i ng phenomenon f or
23 i mages. The concept i s i n t he end r esul t t hat t hr ough t he use
24 of comput er s i t ' s goi ng t o bet t er ai d i n di agnost i c t r eat ment
25 and pl anni ng so t hat i t wi l l be easi er f or doct or s t o oper at e
( 212) 805- 0300
44
1 and r emove - - one of t he i l l ust r at i ons i s cancer t umor s.
2 That ' s what t hi s pr oj ect i s cal l about . I wi l l t r y and say i t
3 i n a bet t er way. To devel op and demonst r at e novel comput er and
4 engi neer i ng t echnol ogy based on t he di gi t al mor se t heor y, t o
5 enhance t he qual i t y and usabi l i t y of comput er i zed anat omi c
6 model s f or pr eci se and accur at e cancer t r eat ment t her api es.
7 J ust t hi nk about i t , i t makes l i ke a map of an egg, wher e al l
8 t he whi t e i s i n one pl ace, t he yel l ow i s anot her pl ace, t he
9 yel l ow bei ng t he t umor i n a 3D f ashi on, and t hi s i s t he concept
10 t hat NI ST t hr ough t he ATP pr ogr amgave Dr . Kar r on a gr ant f or
11 $2 mi l l i on over t hr ee year s.
12 Now, t hi s i s hi gh t ech. I t ' s al so hi gh r i sk. And t he
13 gover nment gave Dr . Kar r on money t o make mi st akes, because
14 t hat ' s what sci ence i s. Sci ence i s exper i ment i ng. You make a
15 mi st ake, you t r y somet hi ng el se. And he, Dr . Kar r on, submi t s a
16 budget . They don' t di sappr ove hi s budget . They' r e gi vi ng
17 hi m- - t hey, NI ST, APD, ar e gi vi ng Mr . Kar r on' s company
18 $800, 000. He submi t s a budget . He has equi pment 300, 000, he
19 has empl oyees 300, 000. He has f r i nge benef i t s. And t hose ar e
20 r ound number s I ' musi ng r i ght now. But f r i nge benef i t s he has
21 $110, 000.
22 Thi s budget i s appr oved, and t he pr osecut i on her e
23 want s t o say t hat t hi s budget , anyt hi ng he spends di f f er ent
24 t han t hi s budget i s st eal i ng. And I submi t t o you t hat t hi s
25 budget i s a l i vi ng, br eat hi ng t hi ng, t hat t hi s budget i s
( 212) 805- 0300
45
1 amendabl e at any t i me, because as you ar e goi ng t hr ough sci ence
2 you f i nd out t hat , gee, I don' t need al l of t hese empl oyees, I
3 don' t have t o spend $100, 000 on t hi s f el l ow, I ' ma t eacher , I
4 wi l l get i nt er ns f or not hi ng, or $100 a week, and t hey wi l l
5 come and wor k, and I amgoi ng t o spend my money on equi pment .
6 Nobody i s goi ng t o come and t est i f y t hat Dr . Kar r on
7 di dn' t wor k si x, seven days a week, pr obabl y 80 t o 100 hour s a
8 week on t hi s pr oj ect . He wasn' t goi ng t o t he Bahamas or Ar uba
9 or anypl ace el se. He was l i vi ng t hi s pr oj ect , and he expect ed
10 t o get addi t i onal f undi ng f or t hi s concept . He was i n
11 negot i at i on wi t h t he St at e of New Yor k. Tr agi cal l y, as we al l
12 r emember , j ust pr i or t o Oct ober 1, 2001 when t hi s gr ant
13 st ar t ed, t hi s CASI gr ant st ar t ed, 9/ 11 happened, and t he st at e
14 of New Yor k cut back on t hei r f undi ng. They cut back on t hei r
15 f undi ng.
16 So, he get s t he money. And, by t he way, he i s
17 ent i t l ed - - you ar e goi ng t o f i nd out f r omt hese wi t nesses he
18 i s ent i t l ed t o t ake expenses t hat happened bef or e Oct ober 1.
19 He i s al l owed t o get st ar t - up pr egr ant money f or he st ar t s. He
20 i s al so al l owed t o cont r i but e hi s own equi pment , because t he
21 gr ant cal l s f or about a 5 per cent cof undi ng. I n ot her wor ds,
22 t he r eci pi ent has t o come up wi t h about f i ve per cent , whi ch i n
23 t hi s case i s i n t he nei ghbor hood of 35 or $36, 000.
24 And I st and her e and I t el l you t hat Dr . Kar r on i s
25 gui l t y of maki ng mi st akes, he i s gui l t y of not dot t i ng ever y I
( 212) 805- 0300
46
1 and cr ossi ng ever y T, he i s gui l t y of not f ol l owi ng t he
2 gui del i nes, and he i s gui l t y of not havi ng a manual i n pl ace.
3 But t hey ar e accusi ng hi mof i nt ent i onal l y mi susi ng f unds. He
4 di dn' t spend mor e t han t he money t hey gave hi m, and I submi t t o
5 you t hat t echni cal l y he may have mi sused t he f unds by
6 r edi r ect i ng moni es al l ocat ed t o per sonnel t o equi pment , but
7 t hi s benef i t ed t he pr oj ect . The concept I submi t t o you i s
8 what i s al l owed and what i s al l owabl e, and I say t o you
9 equi pment , pur chasi ng equi pment at a number hi gher t han what
10 you or i gi nal l y wer e budget ed f or , t hat you used i n t hi s
11 pr oj ect , i s al l owabl e, and t he def endant bel i eved t hat as l ong
12 as he gave r easonabl e use, t hat i t was OK because you coul d
13 amend t he budget .
14 So, her e i s Dr . Kar r on. CASI i s si t uat ed i n hi s
15 apar t ment . Hi s apar t ment becomes t he equi val ent of a comput er
16 l ab. Thei r agent s - - I amt aki ng i t out of t hei r agent ' s own
17 t est i mony, who came t o t hat apar t ment , and you woul d not cal l
18 i t an apar t ment . You woul d cal l i t a comput er l ab wher e he
19 l i ves. And he made r enovat i ons, because he had - - r emember ,
20 you ar e goi ng back t o 2001. The comput er s ar en' t as smal l as
21 t hey ar e t oday; t hey gener at e a l ot of heat ; t hey need t o be a
22 dust - f r ee at mospher e. Ther e i s al l ki nds of r enovat i ons t hat
23 go i n, and t he pur pose of t hose r enovat i ons ar e f or t he
24 sci ence, f or t he equi pment .
25 The gover nment i s sel ect i ve i n what expenses he made
( 212) 805- 0300
47
1 t hat t hey' r e compl ai ni ng about . And when t hey say t hat he i s
2 not al l owed t o spend money on r ent , wel l , t hat ' s i n t he
3 or di nar y cour se, t hat ' s i n t he r ul es, we concede t hat . But
4 t hey al so, t he gr ant admi ni st r at or s, coul d adj ust t he r ul es.
5 Because t he concept of r ent , as t he gover nment suggest ed i n
6 t hei r openi ng, i s t hat most compani es, t hey' r e doi ng di f f er ent
7 t hi ngs, so t he r ent , i t ' s har d t o at t r i but e r ent t o one
8 speci f i c t hi ng i f t hey ar e wor ki ng on t hr ee or f our pr oj ect s.
9 Her e CASI was wor ki ng on one pr oj ect . The el ect r i c ut i l i t i es
10 went up doubl e, we ar e goi ng t o show you, i n t he t i me t hat t he
11 gr ant was i n oper at i on.
12 And what di d Dr . Kar r on do? He di d ever yt hi ng he
13 coul d i n hi s power t o make t hi s pr oj ect wor k. And he hi r ed
14 account ant s. He hi r ed bookkeeper s, he hi r ed account ant s, and
15 he hi r ed an account ant who was pai d, Ms. Hayes. She i s t he
16 st ar gover nment wi t ness, hi s account ant , hi s account ant who
17 i mpr oper l y wor e t wo hat s because she al so became t he audi t or
18 f or t he pr oj ect , and she i s supposed t o be submi t t i ng t he audi t
19 budget , t he audi t , af t er t he f i r st year . Wel l , t he f i r st year
20 ended Sept ember 30, 2002. You know when Ms. Hayes got t hat
21 budget i n? I n J une of 2003. She got some ext ensi ons.
22 So, i n t he end Ms. Hayes, who was pai d by Dr . Kar r on,
23 was r eal l y not wor ki ng f or hi m, she was wor ki ng f or t he
24 gover nment .
25 And I submi t t o you you ar e goi ng t o f i nd out t hat bad
( 212) 805- 0300
48
1 audi t s ar e not cr i mi nal . Ther e ar e speci f i c l egi t i mat e
2 pat hways out l i ned i n t he r ul es t o r esol ve audi t pr obl ems
3 wi t hout maki ng i t cr i mi nal , and a gr ant r eci pi ent who i s
4 at t empt i ng t o r esol ve a di f f er ence of opi ni on may have
5 di f f er ent pr ocedur es. Dr . Kar r on says I ' ment i t l ed t o t hese
6 f r i nge benef i t s because al l of my empl oyees ar e ent i t l ed t o
7 t hese f r i nge benef i t s.
8 They want t o say he i s not ent i t l ed. They t al ked
9 about medi cal . Yes, t her e wer e speci f i c medi cal expenses, but
10 he has a r i ght t o negot i at e t hese t hi ngs ci vi l l y. And even i f
11 t hey don' t agr ee wi t h hi mci vi l l y, i t doesn' t mean t hat i t was
12 cr i mi nal . Because t he j udge i s goi ng t o t el l you what t he l aw
13 i s, and I amnot goi ng t o t r espass on hi s pr ovi nce, but you ar e
14 goi ng t o f i nd t hat Dr . Kar r on never i nt ended t o commi t a cr i me.
15 And what I ' mgoi ng t o show, what he di d i n hi s own convol ut ed
16 way i s goi ng t o pr ove t o you beyond a r easonabl e doubt t hat he
17 never i nt ended t o commi t a cr i me.
18 He had f our di f f er ent col or checks f or each di f f er ent
19 company t hat he had t hat was r el at ed t o t hi s. He t hen scanned
20 ever y si ngl e document , ever y si ngl e document he ever came i n
21 t ouch wi t h. He di dn' t hi de anyt hi ng. I cal l upon t hemt o
22 pr ove. They sai d i t , t hat he changed r ecor ds. He scanned
23 ever y si ngl e document he had, and t hey wer e i n t he comput er ,
24 and he hi d not hi ng, not hi ng. How do you st eal when you keep
25 r ecor ds? Thi s i s a ma and pa sci ence oper at i on st or e. I t ' s a
( 212) 805- 0300
49
1 ma and pa st or e. Thi s i s not I BM. Thi s i s not Xer ox,
2 Mi cr osof t . Thi s i s a smal l company t hat sel f i nsur es peopl e
3 f r omt he f i r st dol l ar , and t hey say - - and t hi s gr ant was
4 suspended. They di dn' t t er mi nat e t he gr ant . They suspended
5 i t . He bel i eves t hat t he gr ant i s goi ng t o get r est ar t ed,
6 because ever ybody knows t hat he i s maki ng pr ogr ess
7 sci ent i f i cal l y on t hi s gr ant . Al l t hei r wi t nesses ar e goi ng t o
8 say t hat , t hat he i s goi ng ahead and doi ng t hi ngs. So, when
9 t hey suspend t he gr ant , t hey t el l hi mt hat he i s $54, 000 shor t
10 on cof undi ng, hi s money t hat shoul d have been put i n by J une
11 27, 2003, a year and ni ne mont hs af t er t he gr ant i s gi ven,
12 cof unded. Dr . Kar r on says I di d cof und, I gave t he equi pment ,
13 I ' ment i t l ed t o an of f set f or t he equi pment t hat CASI had f r om
14 t he BARBR pr ogr amt hat we donat ed t o t hi s pr oj ect . But t he
15 gr ant i s suspended. And what does a per son i n busi ness do? He
16 goes and t akes a l oan on t he apar t ment , on a l i ne of cr edi t ,
17 and he put s $60, 000 i nt o CASI t o pay bi l l s and keep t he pr oj ect
18 goi ng, $60, 000 of hi s own money t hat he bor r owed f r omhi msel f .
19 And i t ' s not t he onl y t i me he bor r owed money f r omhi msel f t o
20 put i n t he CASI dur i ng t hi s gr ant per i od. And of cour se t he
21 gr ant peopl e say you wer en' t supposed t o do t hat , you wer e
22 supposed t o gi ve us t he 60, 000, so we ar e st i l l keepi ng you
23 suspended even t hough you ar e spendi ng t hi s 60, 000 on
24 gr ant - r el at ed i t ems, even t hough you ar e payi ng back bi l l s t hat
25 you i ncur r ed bef or e t he gr ant was suspended. He keeps goi ng
( 212) 805- 0300
50
1 wi t h t he pr oj ect because he bel i eves, hey, t hey' ve got t o keep
2 t he budget goi ng because I ' mwor ki ng har d and I ' mdoi ng
3 ever yt hi ng r i ght her e, and I have al l t he r ecor ds, and l et t he
4 account ant s deci de what i s r i ght or wr ong and t el l me.
5 Ms. Hayes act ual l y di d hi s per sonal t ax r et ur ns. I
6 mean t hey gave t hi s money t o Dr . Kar r on, a per son who hadn' t
7 pai d hi s t axes i n t hr ee year s. That ' s t he ki nd of manager he
8 i s, but he i s not a cr ook. He i s not a cr ook. And t hey t al k
9 about t he f r i nge benef i t s, and I submi t t o you t hat one of t he
10 mai n r easons t hey say t hat he t ook money t hat he wasn' t
11 ent i t l ed t o i s t hat he di dn' t have a manual t hat sai d what t he
12 f r i nge benef i t s ar e. Do you know who cr eat es t he manual ? Dr .
13 Kar r on does. Ther e i s not even a r evi ew syst emt o say we don' t
14 l i ke your manual , Dr . Kar r on, you can' t be havi ng dent al bi l l s
15 and per sonal sur ger y and what have you. No, i f we had i t
16 wr i t t en, i t woul d be OK. So, because i t wasn' t wr i t t en, he i s
17 a cr ook.
18 ( Cont i nued on next page)
19
20
21
22
23
24
25
( 212) 805- 0300
51
862ZKAR3 Openi ng - Mr . Rubi nst ei n
1 MR. RUBI NSTEI N: So t hat t el l s you how si gni f i cant t he
2 manual i s. And I submi t t o you t hat t her e came a t i me t hat he
3 di d st ar t . They di d pr epar e a manual . I t was af t er t he gr ant
4 was suspended, but t hey di d pr epar e a manual . And al l t he
5 i t ems, whi ch t he f r i nge benef i t s, t hey wer e budget ed f or
6 110, 000 a year , t hey spent l ess t han $110, 000 a year . Most of
7 t he empl oyees t hat Dr . Kar r on had, who wer e f ul l - t i me
8 empl oyees, wer e col l ege pr of essor s and peopl e at academi a who
9 had t hei r own heal t h i nsur ance. So t hey di dn' t need t he
10 benef i t . But i f someone needed t he benef i t , he gave chi l d car e
11 t o a bookkeeper .
12 They t al k about t he r ent . I submi t t o you t hat
13 doesn' t pr ove any cr i mi nal i t y. Most of t he r ent t hat was pai d
14 t o Dr . Kar r on was r ent t hat was due hi mpr i or t o t he gr ant .
15 They j ust di dn' t have t he money so t hey di dn' t , t hey di dn' t pay
16 i t .
17 And al so t her e' s l i t t l e quest i on t hat he coul d' ve
18 got t en per mi ssi on t o have t he r ent , because i t wasn' t what t hey
19 cal l an i ndi r ect expense any mor e, because i t was t he onl y
20 expense f or t hat pr oj ect . And t her e was no at t empt t o hi de
21 t hat t hese checks wer e wr i t t en f or r ent . I t ' s on t he memo of
22 t he checks. Does he i nt end t o commi t a cr i me i f he does t hat ?
23 Par t of t hi s $500, 000 t hey' r e t al ki ng about ar e on
24 sal ar i es, sal ar i es of ot her peopl e t hat t hey di sal l owed. The
25 gover nment or der , di sal l owed. Why? He had a manager , an
( 212) 805- 0300
52
1 oper at i ons manager . Fi r st year submi t t i ng a budget , Gur f ei n' s
2 maki ng $100, 000. He f i r es Gur f ei n. He hi r es somebody f or
3 30, 000, but t hey never appr oved t hi s per son. They di dn' t
4 di sappr ove t he per son. The per son has cr edent i al s. I t hi nk
5 he' s goi ng t o be a gover nment wi t ness. Bob Benedi ct has
6 cr edent i al s t hat you' r e goi ng t o say, t hi s i s t he ki nd of
7 per son you woul d want i nvol ved i n a gr ant l i ke t hi s f r omt he
8 busi ness st andpoi nt , but we di sal l ow i t ; t her ef or e, you st ol e
9 i t ' cause you gave i t t o Benedi ct t o be your manager .
10 They di sal l owed t hese sal ar i es r et r oact i vel y.
11 They t al k about t he l oan, $75, 000 l oan. As I sai d, he
12 had account ant s. Thi s was put on t he books as a l oan.
13 $75, 000. What happened? That was i n November , Oct ober or
14 November of 2001.
15 Bef or e t he year was out , i n August of 2002, t hey made
16 account i ng adj ust ment s wher e t hey char ged hi mand made t he l oan
17 and t he i ncome. So i t became par t of hi s sal ar y. The
18 account ant s sai d, t hi s i s your sal ar y. He t ook i t as sal ar y.
19 And you' r e goi ng t o f i nd t hat dur i ng t he cour se of t hi s gr ant
20 i n t he f i r st year he wasn' t t aki ng money. He di dn' t t ake hi s
21 f i r st paycheck - - st ar t ed Oct ober 1st , unt i l May, I t hi nk i t ' s
22 May 11t h, 2002. And t he account ant s had t o beg hi mt o t ake
23 mor e paychecks because he want ed t o make sur e t hat t her e was
24 money i n t he t i l l .
25 You' r e goi ng t o f i nd out f r omt he bookkeeper s, he
( 212) 805- 0300
53
1 woul d ask, how much money do we have i n t he bank. And he
2 di dn' t bounce any checks. When he got an account i ng ser vi ce,
3 bookkeepi ng ser vi ce, out si de payr ol l ser vi ce, al l ki nds of
4 checks st ar t ed t o bounce. He made sur e t hat t he t axes wer e
5 pai d. That ' s what he under st ood, t axes have t o be pai d. And
6 I ' mgoi ng t o pr ove t o you peopl e t hat he shoul dn' t have pai d
7 any t axes, because he had what ' s cal l ed a net oper at i ng l oss i n
8 CASI t hat he coul d wr i t e of f when he made a pr of i t . So now he
9 was goi ng t o make a pr of i t . What happened? The l awyer s and
10 t he account ant s t hat he has wi t h hi m, t hey deci de t o change t he
11 company f r omCASI , I nc. , I ncor por at ed, t o a CASI LLC. Wel l ,
12 unf or t unat el y, t echni cal l y, t echni cal l y when you do t hat , i t ' s
13 a new ent i t y. So because i t ' s a new ent i t y, he l oses t he
14 benef i t of t he car r yover l oss. So now he has t o pay i ncome t ax
15 on t he 175, 000 t hat he pr obabl y woul dn' t have t o pay a di me i f
16 t hey knew what t hey wer e doi ng.
17 But t hey' r e not cr i mi nal s ei t her . So j ust because you
18 make mi st akes, does not make you a cr i mi nal . And you' r e goi ng
19 t o f i nd at t he end of t hi s case, when I come back t o you af t er
20 t he gover nment pr esent s al l i t s wi t nesses, and we pr esent our
21 wi t nesses, you' r e goi ng t o say t o your sel f - - you mi ght not
22 even have t o l eave t he j ur y box t o say t hat t hi s man i s not
23 gui l t y. J ust keep an open mi nd, and I t hank you ver y much f or
24 your t i me.
25 THE COURT: Al l r i ght . Your f i r st wi t ness.
( 212) 805- 0300
54
1 Gover nment ' s f i r st wi t ness?
2 MR. KWOK: Gover nment cal l s Bet t i J oyce Li de. Wi t h
3 your Honor ' s per mi ssi on, we woul d l i ke t o hand out j ur y
4 bi nder s.
5 THE COURT: These ar e exhi bi t s t hat wi l l be admi t t ed
6 i n evi dence, you bel i eve?
7 MR. KWOK: That ' s cor r ect , your Honor .
8 THE COURT: Member s of t he j ur y, t he gover nment has
9 pr epar ed i ndi vi dual j ur y f ol der s whi ch cont ai n exhi bi t s t hey
10 expect t o have admi t t ed i n evi dence. I woul d al l ow t hemt o
11 di st r i but e t he i ndi vi dual books t o each of you, but you' r e not
12 t o l ook at any of t he exhi bi t s unt i l t hey' ve been admi t t ed i n
13 evi dence. So when t he t i me comes t hat I admi t somet hi ng i n
14 evi dence, t hen you ar e ent i t l ed t o l ook at t hat exhi bi t and
15 onl y t hat exhi bi t unt i l i t ' s admi t t ed, t i l l t he ot her exhi bi t s
16 ar e admi t t ed i n evi dence.
17 So wi t h t hat i nst r uct i on, I ' l l al l ow t he books t o be
18 di st r i but ed t o t he j ur y and t hey' l l be kept at your - - t hey' l l
19 be r eady f or you i n t he mor ni ng so you can check your book.
20 I don' t want t o t ake up t he t i me i n t he mor ni ng.
21 Whi l e t hey' r e di st r i but i ng t he book, I shoul d gi ve you
22 some i nst r uct i ons about t he t r i al day whi l e we' r e wai t i ng f or
23 t hi s wi t ness. I ' d l i ke t o begi n at 9: 30 i n t he mor ni ng and r un
24 unt i l 1: 00 o' cl ock wi t h a si ngl e br eak somet i me bet ween 11: 00
25 and 11: 30, 10 mi nut es. Then come back at 2: 00 af t er l unch and
( 212) 805- 0300
55
1 r un f r om2: 00 t i l l 4: 00 wi t hout a br eak. That way you had
2 chance t o get home bef or e t he eveni ng r ush. I f a j ur or - - i f a
3 wi t ness i s i n t he mi ddl e of somet hi ng or has t o get - - has
4 t r avel pl ans or somet hi ng of t hat sor t and i s near t he end of
5 t he t est i mony, I may l et t hemgo a l i t t l e l onger so t hey' r e
6 t hr ough f or t he day and don' t have t o spend an ext r a day i n a
7 ci t y t hat t hey' r e not r esi dent i n.
8 But t hose ar e t he gener al r ul es. Now, at t he end of
9 ever y day you' l l see peopl e come i nt o t he cour t r oom. They' r e
10 her e on ot her cases. I have ot her cases t hat go on af t er 4: 00
11 o' cl ock per i od. Don' t l et t hem- - don' t l et t hemi nt er f er e
12 wi t h your at t ent i on t o t he wi t nesses.
13 I bel i eve t hat t he gover nment has t hose books.
14 They' l l al so pr obabl y use t he scr een up her e, i sol at ed passages
15 f r omt he document s t hat ar e admi t t ed i n evi dence t o hi ghl i ght
16 t hemf or you.
17 Al l r i ght . Wi l l you swear i n t he wi t ness, pl ease.
18 THE DEPUTY CLERK: Pl ease st and and r ai se your r i ght
19 hand.
20 BETTI J OYCE LI DE,
21 cal l ed as a wi t ness by t he gover nment ,
22 havi ng been dul y swor n, t est i f i ed as f ol l ows:
23 DI RECT EXAMI NATI ON
24 BY MR. KWOK:
25 THE COURT: Al l r i ght , pl ease pr oceed, Mr . Kwok.
( 212) 805- 0300
56
862ZKAR3 Li de - di r ect
1 MR. KWOK: Thank you, your Honor .
2 Q. Good af t er noon, Ms. Li de.
3 A. Hi .
4 Q. How ar e you empl oyed?
5 A. I amwi t h t he Nat i onal I nst i t ut e of St andar ds and
6 Technol ogy, par t of t he U. S. Depar t ment of Commer ce.
7 Q. What i s your posi t i on now i n t hat ?
8 A. I amnow a physi cal sci ent i st i n t he i nf or mat i on t echnol ogy
9 l abor at or y.
10 Q. What was your posi t i on bef or e t hen?
11 A. I was wi t h t he advanced t echnol ogy pr ogr amser vi ng as
12 pr ogr ammanager and t he compet i t i ons manager .
13 Q. What i s t he advance t echnol ogy pr ogr am?
14 A. The advanced t echnol ogy pr ogr ami s a f undi ng agency, a
15 f undi ng par t of t he Nat i onal I nst i t ut e of St andar ds and
16 Technol ogy whi ch hel ps U. S. i ndust r y per f or mr esear ch t hat i s
17 t oo hi gh r i sk f or t he i ndust r y t o per f or mal one.
18 Q. You ment i oned you wer e a compet i t i ons manager ; what do you
19 do i n t hat capaci t y?
20 A. As compet i t i ons manager , I over saw t he r ecei pt of al l of
21 t he pr oposal s t o t hat pr ogr am, and t he eval uat i on of t hose
22 pr oposal s l eadi ng t o whi ch ones woul d r ecei ve f undi ng.
23 Q. Pr ogr ammanager , what di d you do i n t hat capaci t y?
24 A. As a pr ogr ammanager , I over saw t he t echni cal
25 commer ci al i zat i on pr ogr ess of each of t he pr oj ect s t hat I
( 212) 805- 0300
57
1 managed.
2 THE COURT: What year ar e we t al ki ng about ?
3 THE WI TNESS: We - - I st ar t ed wi t h t he advanced
4 t echnol ogy pr ogr amwhen i t began i n 1990, and I l ef t i t i n
5 2005.
6 Q. Ms. Li de, who ar e t he t ypi cal r eci pi ent s of t hi s advanced
7 t echnol ogy pr ogr amor ATP gr ant ?
8 A. The r eci pi ent s ar e U. S. i ndust r i es, and t hey can par t ner or
9 subcont r act t o uni ver si t i es and nonpr of i t s.
10 Q. How compet i t i ve i s t he sel ect i on pr ocess?
11 A. I t i s a ver y compet i t i ve pr ocess.
12 Q. Can you gi ve us a sense of how compet i t i ve i t i s?
13 A. Cer t ai nl y. Most compet i t i ons see onl y about one i n t en
14 pr oposal s bei ng gi ven an awar d.
15 Q. And what i s t he amount of t he gr ant awar ded t o each
16 successf ul appl i cant ?
17 A. A si ngl e appl i cant can r ecei ve a t ot al of $2 mi l l i on, and
18 t hat coul d be spr ead over anywher e f r omone t o t hr ee year s.
19 Q. And wher e does t hat money come f r om?
20 A. The money comes f r omt he f unds t hat t he U. S. Congr ess gi ves
21 t o t he Nat i onal I nst i t ut e of St andar ds and Technol ogy.
22 Q. How does t hat money get i nt o t he hands of t he successf ul
23 appl i cant ?
24 A. When t he appl i cant i s successf ul , t hat money i s put i nt o a
25 f und, basi cal l y, l i ke a bank account , agai nst whi ch t hat
( 212) 805- 0300
58
1 appl i cant can dr aw.
2 Q. Now what , i f anyt hi ng, does t he gr ant - -
3 THE COURT: I n whose i s name i s t he bank account ?
4 THE WI TNESS: I ' msor r y?
5 THE COURT: I n whose name i s t he bank account ?
6 THE WI TNESS: The bank account i s i n t he name of t he
7 f or pr of i t company. Thank you.
8 THE COURT: The f or pr of i t company.
9 THE WI TNESS: Cor r ect . The money must f l ow t o a
10 company t hat i s f or pr of i t . I t cannot f l ow, f or exampl e, t o a
11 uni ver si t y.
12 Q. And what , i f anyt hi ng, does t he gr ant r eci pi ent have t o
13 cont r i but e t o t he cost s of t he r esear ch?
14 A. A si ngl e appl i cant must pay al l of t he i ndi r ect cost s and
15 can cont r i but e t o t he di r ect cost s.
16 Q. What ar e t hese di r ect ver sus i ndi r ect cost s?
17 A. Di r ect cost s ar e t hose f unds t hat go di r ect l y t o t he
18 r esear ch, such as i ndi vi dual sal ar i es or equi pment needed t o
19 per f or mt hat r esear ch.
20 Q. How about i ndi r ect cost s?
21 A. I ndi r ect cost s ar e t hi ngs t hat woul d be spr ead over al l of
22 t he act i vi t i es of t hat company, such as f aci l i t i es, r ent ,
23 el ect r i ci t y, l egal f ees, secr et ar i al suppor t , admi ni st r at i ve
24 suppor t , l ooki ng f or ot her f undi ng, t hat sor t of t hi ng.
25 Q. So i f a gr ant has t he cost shar ed r equi r ement , wher e does
( 212) 805- 0300
59
1 t he cost r eci pi ent pay t he cost s shar e amount t o?
2 A. The r eci pi ent must pay hi s or her par t of t hat cost shar e
3 di r ect l y t o t he expenses of t he pr oj ect . So i f a bi g pi ece of
4 equi pment was bought - - was pur chased, t he gover nment woul d pay
5 i t s per cent age and t he r eci pi ent woul d pay i t s per cent age.
6 Q. And what i s t he t ypi cal per cent age of what t he cost shar e
7 i s?
8 A. I n addi t i on t o t he i ndi r ect cost s, t her e i s no t ypi cal
9 cost s, but what ever per cent age i s put i n t he or i gi nal pr oposal
10 must be adher ed t o f or t he l i f e of t he pr oj ect .
11 Q. Now, what , i f anyt hi ng, gover ns how gr ant ees can spend
12 awar d money t hat t hey get ?
13 A. Ther e ar e many document s out l i ni ng how awar dees can spend
14 t he money begi nni ng wi t h a ki t i t t hat t he pr oposer get s when
15 he - -
16 MR. RUBI NSTEI N: Obj ect i on, your Honor . Thi s i s
17 hear say.
18 THE COURT: Do we have t he document s t hat - -
19 MR. KWOK: Yes, I do.
20 THE COURT: Obj ect i on sust ai ned. But t hi s i s
21 i nt r oduct or y, and t he j ur y i s i nst r uct ed t hat t hey wi l l be
22 gui ded by t he document s t hemsel ves t hat deal wi t h t hi s
23 par t i cul ar gr ant . Thi s i s mor e of a - - what ever you' ve been
24 hear i ng i s not di r ect l y r el evant t o t hi s gr ant .
25 BY MR. KWOK:
( 212) 805- 0300
60
1 Q. Let me j ust ask a gener al i nt r oduct or y quest i on, i f I may.
2 What i s t he gener al r ul e t hat gover ns how gr ant ees can spend
3 t hei r money?
4 A. They can spend money on t he di r ect cost s of t he r esear ch.
5 Q. You ment i oned ear l i er t her e' s a budget . What obl i gat i ons
6 do t hey have under t he budget ?
7 A. They must adher e t o t he budget under whi ch t hey appl i ed.
8 Q. Ar e t her e ci r cumst ances under whi ch t hey can devi at e f r om
9 t hat budget ?
10 A. Yes. Ther e ar e cer t ai n ci r cumst ances. 10 per cent of t he
11 annual amount t hat t hey ar e goi ng t o spend can be moved wi t hi n
12 exi st i ng cat egor i es.
13 THE COURT: I s t her e any document at i on t o suppor t
14 t hi s?
15 MR. KWOK: Yes, I can i nt r oduce t hemnow.
16 THE COURT: Ot her wi se, I don' t t hi nk t hat ' s admi ssi bl e
17 t est i mony.
18 MR. KWOK: Okay. May I appr oach?
19 THE COURT: Yes.
20 Q. Mi ss Li de, I ' mhandi ng you what ' s on t op mar ked f or
21 i dent i f i cat i on gover nment Exhi bi t 1. And i f you coul d al so
22 l ook at act ual l y gover nment exhi bi t s t wo, t hr ee and f our as
23 wel l . Do you r ecogni ze t hese document s?
24 A. Yes, I do.
25 Q. How ar e you abl e t o r ecogni ze t hem?
( 212) 805- 0300
61
1 A. I hel ped pr epar e t hem, I used t hem, and t hey wer e gi ven t o
2 me as pr oj ect manager .
3 Q. Wer e al l of t hese document s pr epar ed by someone wi t h
4 knowl edge of or made f r omi nf or mat i on t r ansmi t t ed by per sons
5 wi t h knowl edge of t he i nf or mat i on appear i ng on t hem?
6 A. Yes.
7 Q. And wer e t hese document s made at or near t he t i me t he
8 i nf or mat i on cont ai ned i n t hembecame avai l abl e?
9 A. Yes.
10 Q. I s i t t he r egul ar pr act i ce of NI ST or t he ATP pr ogr amt o
11 pr epar e such document s?
12 A. Yes.
13 Q. And ar e t hese document s kept i n t he cour se of a r egul ar l y
14 conduct ed busi ness act i vi t y?
15 A. Yes.
16 MR. KWOK: Gover nment of f er s Exhi bi t one, t wo, t hr ee
17 and f our .
18 THE COURT: Any obj ect i on, Mr . Rubi nst ei n?
19 MR. RUBI NSTEI N: Yes, your Honor . These ar e
20 mul t i - page document s t hat t hey j ust have a coupl e of pages on.
21 MR. KWOK: No. Can we appr oach, your Honor ?
22 THE COURT: Let ' s t ake - - l et ' s l et t he j ur y go, and
23 we' l l deal wi t h i t because t hat wi l l t ake t i me. I t ' s af t er
24 4: 00 o' cl ock. So I ' l l excuse t he j ur y. Why don' t you go t o
25 t he j ur y r oomwi t h Mr . Mont eagudo so he can gi ve you t he pr oper
( 212) 805- 0300
62
1 i nst r uct i ons about how t o get back her e f or 9: 30 i n t he
2 mor ni ng. So t he j ur y i s excused unt i l 9: 30 i n t he mor ni ng.
3 ( J ur y exi t s t he cour t r oom)
4 THE COURT: Wat ch your st ep.
5 ( I n open cour t ; j ur y not pr esent )
6 THE COURT: You want t he wi t ness t o st ep out or - -
7 MR. RUBI NSTEI N: I don' t have a pr obl embecause she
8 mi ght be abl e t o hel p us.
9 THE COURT: What ?
10 MR. RUBI NSTEI N: She mi ght be hel pf ul , J udge. My
11 concer n i s t hat i t was my under st andi ng t hese document s ar e
12 mul t i pages, and I ' mt aki ng a l ook at what t he gover nment has
13 gi ven me, and i t seems l i ke t hey' ve ext r act ed cer t ai n por t i ons.
14 MR. KWOK: No, I t hi nk t hat ' s a mi sunder st andi ng. I
15 t hi nk Mr . Rubi nst ei n' s associ at e r ecei ved t he f ul l set of t he
16 gover nment exhi bi t s. What we handed out t o t he j ur y j ust now,
17 t he j ur y bi nder s onl y cont ai n t he set t hat we i nt end t o publ i sh
18 t o t hem. So t hey do have a f ul l set of t he document s i n t hei r
19 ent i r et y.
20 THE COURT: What i s t hi s? Thi s f i r st document i s
21 cal l ed - - i t ' s t i t l ed Advanced Technol ogy pr ogr ampr oposal
22 pr epar at i on ki t .
24 THE COURT: I s t hat compl et e?
25 MR. RUBI NSTEI N: No, i t ' s not compl et e, your Honor .
( 212) 805- 0300
63
1 I t mi sr epr esent s what t he document i s.
2 THE COURT: That ' s what I ' maski ng.
3 MR. KWOK: No, t he j ur y bi nder s cont ai n - - t he j ur y
4 bi nder s cont ai n sel ect ed pages t hat we i nt ends t o publ i sh on
5 t he scr een so t hey can f ol l ow al ong, but t he exhi bi t s t hat
6 woul d act ual l y be i nt r oduced i nt o evi dence, t hat copy i s t he
7 compl et e copy. And we have al so pr oduced f ul l set s of al l t he
8 document s t hat t he gover nment i nt ends t o i nt r oduce.
9 THE COURT: Thi s i s t hi s document t hat you' ve j ust
10 handed me, whi ch you sai d i s not compl et e.
11 MR. KWOK: No, t hat i s - -
12 THE WI TNESS: That i s compl et e, si r .
13 MR. KWOK: That i s a compl et e copy.
14 THE COURT: Thi s i s compl et e.
15 MR. KWOK: Exact l y.
16 THE COURT: What you handed t he j ur y i s onl y sel ect ed
17 par t s of t hat ?
18 MR. KWOK: Onl y par t s t hat we i nt end t o put on t he
19 scr een and publ i sh t o t hemwhi l e t hey can f ol l ow al ong, t hat ' s
20 cor r ect .
21 THE COURT: So, but gover nment Exhi bi t 1 wi l l be t hi s
22 f ol der .
24 THE COURT: Thi s par t wi l l onl y cont ai n t hose por t i ons
25 of t he f ol der , of t he f ol der you bel i eve ar e r el evant t o t hei r
( 212) 805- 0300
64
1 consi der at i on.
2 MR. KWOK: That ' s cor r ect .
3 MR. RUBI NSTEI N: J udge, I obj ect t o t hat . And I t hi nk
4 t hey coul d j ust as easi l y - - t hey want t o publ i sh cer t ai n pages
5 t o t he j ur y, I t hi nk t hat ' s f i ne. But I t hi nk i t i s mi sl eadi ng
6 t o have i n a bi nder t wo pi eces of - - t wo pages of somet hi ng
7 t hat i s - - has si gni f i cant l y mor e pages. And I , t hat - - so I
8 don' t have a pr obl emi f t hey gi ve t hat document t o t he j ur y and
9 say we' r e r ef er r i ng t o page so and so. But t hey' r e goi ng t o
10 of f er one i n evi dence, I assume, not , not t he ext r act ed ver si on
11 t hat t hey have i n t hei r bi nder s.
12 THE COURT: Wel l , ext r act ed i s no di f f er ent i n pages,
13 as I under st and i t . I t ' s - - t hey' ve mer el y got t hose sect i ons
14 t hat t hey f eel ar e r el evant t o - - f or t he j ur y' s consi der at i on
15 t o demonst r at e t hat t her e' s cer t ai n, I suppose, agr eement s t hat
16 wer e made bet ween t he gr ant or and t he gr ant ee. But , so I ' m
17 i ncl i ned t o l et t hemi n evi dence, but wi t h i nst r uct i on t o t he
18 j ur y t hat Exhi bi t 1, what t hey have i s mer el y excer pt s, what
19 t hey have i n t hei r books i s mer el y an excer pt of gover nment
20 exhi bi t one, i f we' r e deal i ng wi t h gover nment Exhi bi t 1. I
21 pr esume t her e' s a gover nment Exhi bi t 2, and t hat i s - -
22 THE WI TNESS: Woul d you l i ke - -
23 THE COURT: Gover nment Exhi bi t 2 doesn' t seemt o have
24 t he f ol der . What i s i t ?
25 THE WI TNESS: I t i s t he gener al t er ms and condi t i ons
( 212) 805- 0300
65
1 t hat , t hat t he pr ogr amused f or al l awar dees.
2 THE COURT: And who r ecei ves a copy of t hi s?
3 THE WI TNESS: I t ' s al ways avai l abl e and i t ' s wi t h t he
4 awar d document when i t ' s gi ven t o t he company.
5 THE COURT: What ' s t he gover nment Exhi bi t 3?
6 THE WI TNESS: I t ' s t he f i nanci al assi st ance st andar ds
7 t er ms and condi t i ons. Her e, agai n, i t ' s al ways avai l abl e.
8 I t ' s on t he websi t e, but i t ' s a par t of each awar d t hat i s
9 gi ven t o each r eci pi ent .
10 THE COURT: I t ' s del i ver ed t o each gr ant ee?
11 THE WI TNESS: Yes, si r . Yes, si r . I t ' s par t of t he
12 awar d document .
13 THE COURT: What ' s gover nment exhi bi t 4?
14 THE WI TNESS: Those ar e power poi nt pr esent at i ons t hat
15 we pr ovi de at what we cal l a ki ck of f meet i ng. We meet wi t h
16 each awar dee r i ght af t er t he pr oj ect st ar t s. And exhi bi t 4 ar e
17 t he sl i des t hat we used whi ch go over once agai n r ul es,
18 r egul at i ons, r epor t i ng r equi r ement s, et cet er a.
19 THE COURT: That ar e pr esent ed at t hat meet i ng?
20 THE WI TNESS: Yes, si r .
21 THE COURT: Seems t o me, as l ong as t her e' s an
22 adequat e and a cl ear st at ement made as r egar ds each of t hese
23 mat t er s t hat t hey - - each of t he mat t er s i nt r oduced i n evi dence
24 and t hei r r el at i onshi p t o t he mar ked document and t hei r
25 exhi bi t , t hat i t ' s admi ssi bl e.
( 212) 805- 0300
66
1 MR. RUBI NSTEI N: Your Honor , I have no obj ect i on t o
2 t he exhi bi t . I have an obj ect i on t o what t he gover nment i s
3 gi vi ng t o t he j ur y. Because I submi t t hat i t ' s mi sl eadi ng t o
4 t he j ur y because a pi ct ur e' s wor t h a t housand wor ds. I f
5 t hey' r e goi ng t o t ake and t hey t ake t hese bi nder s i nt o t he j ur y
6 r oom, when t hey go t o del i ber at e t hey' r e goi ng t o see t wo
7 pages, and I submi t t hat t hat ' s not t he evi dence. The evi dence
8 i s t he ent i r e - -
10 MR. RUBI NSTEI N: - - t he ent i r e exhi bi t .
11 THE COURT: That may be a good poi nt i n t er ms of what
12 goes i nt o t he j ur y r oomwi t h t hem. But why ar en' t t hey al l owed
13 t o - - why i sn' t i t f ai r f or t hemt o l ook at i t , excer pt s t hat
14 t he gover nment f eel s ar e r equi r ed f r omeach of t he exhi bi t s?
15 Act ual l y t he ot her s ar e not excer pt s. The ot her s ar e - - t he
16 ot her mat er i al s ar e not excer pt s. I t ' s onl y t hi s f i r st
17 exhi bi t , exhi bi t one.
18 MR. RUBI NSTEI N: J udge, i t ' s mi sl eadi ng. Somebody
19 l ooki ng at t hi s t hi ng woul d t hi nk t hat some - - someone pi cki ng
20 up t hi s exhi bi t , we t ur n t o t hi s page, wi t h t hi s i nf or mat i on i s
21 post ed and wher e - - i f a r easonabl e per son - - as a mat t er of
22 f act , i t st ar t s at page si x.
23 THE COURT: I have i t .
24 MR. RUBI NSTEI N: I mean t hat ' s t he f i r st page i s page
25 si x.
( 212) 805- 0300
67
1 THE COURT: Wel l , I got - - t hat ' s not what I have. I
2 have t he f or war d comes f i r st .
3 MR. RUBI NSTEI N: No, on Exhi bi t 1, your Honor .
4 MR. KWOK: I t hi nk your Honor has t he f ul l set of t he
5 bi nder s. Wi t h what t he j ur y - -
6 THE COURT: I don' t have t he bi nder s. Ar e t he bi nder s
7 di f f er ent t han my - - t he bi nder s ar e di f f er ent t han what I
8 have? Al l r i ght .
9 ( Handi ng t o t he cour t )
10 THE COURT: I guess you bet t er get - - I guess I di dn' t
11 get one of t hose. My gover nment exhi bi t s, I see wher e you' r e
12 sayi ng, Mr . Rubi nst ei n.
13 Wel l , what about t hat , Mr . Kwok? Thi s doesn' t seem- -
14 MR. KWOK: No, your Honor .
15 THE COURT: How woul d you - -
16 MR. KWOK: The r eason we di d i t t hat way i s because of
17 t he bul ki ness of some of t he document s.
18 THE COURT: That i sn' t t he i ssue, t hough. The i ssue
19 i s whet her t her e can be j ur y conf usi on.
20 MR. KWOK: No, because I bel i eve when t he j ur y r et ur ns
21 t o t he j ur y r oom, what i s i nt r oduced i nt o evi dence wi l l be, i f
22 t hey r equest i t or i f t he Cour t agr ees, wi l l be t he document s
23 t hat t hey br i ng back t o t he j ur y r oom.
24 We have no pr obl emwi t h keepi ng t he bi nder s j ust her e
25 i n cour t so t hey can f ol l ow al ong whi l e t he par al egal shows t he
( 212) 805- 0300
68
1 pages on t he scr een and t hey can l ook down, wi t hout havi ng t o
2 f l i p t hr ough 100 pages of t hi s book, 99 of whi ch we do not
3 i nt end t o show.
4 Si mi l ar l y, f or t he bank r ecor ds we di d i t f or , t o
5 conser ve - - t o, f r ankl y, make i t r eadabl e, i nst ead of f l i ppi ng
6 t hr ough 3, 000 pages of bank r ecor ds.
8 MR. KWOK: They can - -
9 THE COURT: Then my i nst r uct i on t o t he j ur y, as I
10 under st and i t , t he r eason f or t he Gover nment ' s pr oceedi ng i n
11 t hi s way, Mr . Rubi nst ei n, i s t hat because t he scr een i s t he
12 ot her si de of t he cour t r oom, and somet i mes i t ' s har d t o r ead
13 f r omt he pr oj ect or t o t he scr een, t hat t hey' r e pr ovi di ng t he - -
14 want s t o pr ovi de t he j ur y wi t h t hose pages t hat wi l l be
15 pr oj ect ed on t he scr een. And i f t hat ' s t he case, t hen i f I
16 i nst r uct t hemt hat t hey ar e onl y t o l ook at t hose exhi bi t s when
17 t hey' r e pr oj ect ed on t he scr een; i n ot her wor ds, l ook at t he
18 page of t he exhi bi t t hat i s i n t hei r books, whi ch i s bei ng
19 pr oj ect ed on t he scr een, and t hat ' s al l t hey' r e t o l ook at ,
20 t hat seems t o me t o be f ai r .
21 MR. RUBI NSTEI N: I suggest , your Honor , i f t hat ' s - -
22 THE COURT: They woul d not go i nt o t he j ur y r oomand
23 need onl y be used because of t he di st ance bet ween t he si ze of
24 t hi s cour t r oomand t he quest i on about eyesi ght of peopl e bei ng
25 abl e t o see i t , wher eas t hey can r ead r i ght al ong and check i t ,
( 212) 805- 0300
69
1 check t he wor ds i f t hey ar e havi ng di f f i cul t y r eadi ng what ' s up
2 on t he scr een.
3 MR. RUBI NSTEI N: Wel l , why do t hey need t he scr een?
4 Why do t hey need t he scr een i f t hey' r e gi vi ng, i f t hey - -
5 THE COURT: Wel l , some j ur or s woul d see i t on t he
6 scr een and some j ur or s woul dn' t .
7 MR. RUBI NSTEI N: J udge, I t hi nk i t j ust as easy i f
8 t hey gi ve t hemt he whol e document , as t hey appar ent l y gave your
9 Honor and t hey sai d t ur n t o page si x, and t hey publ i sh page si x
10 on t he scr een. I mean, I don' t see why - - peopl e who ar e used
11 t o handl i ng document s, t hey see i t i n t hei r mi nd a t wo page
12 i t em, and i t ' s a t en page or 20 page i t em, t her e i s a huge
13 di f f er ence. Al l r i ght . And I t hi nk t he j ur y has - - t hat i t ' s
14 mi sl eadi ng t o t he j ur y t o pr esent i t i n t hi s f ashi on. They
15 have t he bi nder mar ked as gover nment exhi bi t s. They' r e not
16 gover nment exhi bi t s. They' r e ext r act s of gover nment exhi bi t s,
17 and t hey - -
18 THE COURT: Wel l , maybe t hey shoul d be mar ked
19 ext r act s.
20 MR. KWOK: We' r e happy t o do t hat i nst ead of sayi ng
21 exhi bi t s, we can put t hat wor d ext r act on t op of ever y si ngl e
22 page. But t he r eason why we have t he scr een i s so t hat t hey
23 can see whi ch page we' r e t al ki ng about , and l ook at t he
24 appr opr i at e page i n t hei r bi nder s.
25 THE COURT: Be sur e t hey have t he r i ght page.
( 212) 805- 0300
70
1 MR. KWOK: Exact l y. And t hat ' s exact l y r i ght , your
2 Honor .
3 And wi t h r espect t o Mr . Rubi nst ei n, i t ' s t he
4 gover nment ' s case and wi t hi n r eason I t hi nk we ar e al l owed t o
5 t r y t he case t he way we t hi nk t hat i t woul d be most make sense
6 t o t he j ur y.
7 THE COURT: Al l I ' mt r yi ng t o do i s be sur e t hat what
8 you do i s f ai r and t hat i t ' s not - - I don' t gi ve a wr ong
9 i nst r uct i on t o t he j ur y, whi ch I al r eady have because I t hought
10 t hey wer e t he exhi bi t s, and I ' l l cl ar i f y t hat i n t he mor ni ng.
11 I ' l l make i t cl ear t hat t hey' r e ext r act s, and you bet t er have
12 some mar k t hat i t ' s an ext r act . And I ' l l make t he cl ear t hat
13 t hey' r e ent i t l ed t o f ul l exhi bi t s i n t hei r del i ber at i ons, and
14 t he j ur y bi nder s won' t go back wi t h t hem. I t hi nk t hat seems
15 t o me t o be f ai r .
16 I don' t see how t hat hur t s you, Mr . Rubi nst ei n. We' l l
17 have t o make t hose changes.
18 Al l r i ght , i s t her e anyt hi ng el se t o t ake up?
19 MR. RUBI NSTEI N: No, your Honor .
20 THE COURT: At l east we cl ear ed up one t hi ng, we don' t
21 have t o do i t t omor r ow. I t pays t o go t i l l 4: 00 o' cl ock.
22 Okay.
23 MR. RUBI NSTEI N: You went past 4: 00, J udge.
25 MR. RUBI NSTEI N: We' r e on over t i me.
( 212) 805- 0300
71
1 THE COURT: Wel l , I know, but t he j ur y - - i t al ways
2 pays t o get t hese t hi ngs cl ear ed up. At l east we cl ear ed i t up
3 and woul dn' t have a del ay i n t he pr oceedi ngs t omor r ow.
4 Al l r i ght , I have t o go t o ot her busi ness, unl ess you
5 al l need me f or somet hi ng.
6 MR. KWOK: Thank you, your Honor . Not hi ng f ur t her
7 f r omt he gover nment .
8 MR. EVERDELL: Thank you.
9 ( Adj our ned t o J une 3, 2008 at 9: 30 a. m. )
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300

72
1 I NDEX OF EXAMI NATI ON
2 Exami nat i on of : Page
3 BETTI J OYCE LI DE
4 Di r ect By Mr . Kwok . . . . . . . . . . . . . 55
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300

73
8637KAR1
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3
4 v. S2 07 CR 541 ( RPP)
4
5
6 Def endant .
6
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
7
8
8 J une 3, 2008
9 9: 20 a. m.
9
10
10 Bef or e:
11
12
13
13
14 APPEARANCES
14
16 BY: STEVEN KWOK
18
20
22
23
24
25
( 212) 805- 0300
74
8637KAR1
1 ( Tr i al r esumed; j ur y not pr esent )
2 THE COURT: Al l r i ght . Thank you f or bei ng on t i me
3 t hi s mor ni ng. Let ' s make a pr act i ce of get t i ng her e at l east
4 at 9: 15 so t hat we don' t hol d t he j ur y up i f t hey' r e her e at
5 9: 30. I s t her e anyt hi ng t o t ake up t hi s mor ni ng?
6 MR. KWOK: Yes, your Honor . Ther e ar e j ust t hr ee
7 i ssues about whi ch I want t o br i ef l y addr ess t he cour t . Fi r st ,
8 I submi t t ed a l et t er l ast ni ght . I don' t t hi nk we necessar i l y
9 need t o t ake t hat up now.
10 THE COURT: We haven' t got i t . I haven' t got i t .
11 MR. KWOK: I have an ext r a copy, act ual l y my onl y
12 copy. Do you want me t o hand i t up?
13 THE COURT: Wel l , I bet t er r ead i t .
14 I have r ead t he gover nment ' s l et t er . I s t her e any
15 comment ?
16 MR. RUBI NSTEI N: Yes, J udge. They ar e t r yi ng t o
17 backdoor t he f act t hat t hey don' t have r ecor ds. They br ought a
18 case based upon r ecor ds and i nappr opr i at e spendi ng, and t hey
19 can' t back i t up wi t h any evi dence t hat i s admi ssi bl e i n cour t ,
20 so now t hey want t o get i n ot her t est i mony t o suggest what
21 r ecor ds t hey ar e t al ki ng about . They don' t speci f y a
22 par t i cul ar document , and t hey don' t have any document s, f r om
23 what I under st and, f r omt hi s submi ssi on t o suppor t i t , so I
24 t hi nk t hat i t ' s i nappr opr i at e.
25 THE COURT: Wel l , I don' t know what t he si t uat i on i s
( 212) 805- 0300
75
8637KAR1
1 wi t h r espect t o t he document s. Thi s l et t er r eal l y onl y deal s
2 wi t h t he st at ement s and act i ons of t he def endant .
3 MR. RUBI NSTEI N: Wel l , hi s st at ement s ar e admi ssi ons
4 t hat he made i f t hey' r e r el evant . Thei r al l eged obser vat i ons
5 of hi m, t hat ' s what t hey' r e l ooki ng t o - -
6 THE COURT: Act i ons ar e admi ssi bl e.
7 MR. RUBI NSTEI N: Yes, as l ong as t hey don' t t al k about
8 t he document . I mean t her e i s no document t hat I know of t hat
9 t hey' r e r ef er r i ng t o, so we don' t r eal l y know. Act ual l y I
10 t hi nk i t shoul d be kept out on t he pr obat i ve val ue on 403, your
11 Honor , because i t i s so conf usi ng t o t he j ur y. Unf or t unat el y
12 i t won' t be conf usi ng t o t he j ur y, i t wi l l be mi sl eadi ng t o t he
13 j ur y f or t hese wi t nesses t o t al k about unknown document s t hat
14 we don' t know i f t her e wer e pr oper changes t hat he was maki ng,
15 i mpr oper changes. Thi s i s al l specul at i on on t hei r par t . Can
16 t hey i dent i f y what speci f i c document t hey ar e t al ki ng about ?
17 THE COURT: Wel l , ar en' t t hey goi ng t o have ent r i es
18 t hat t hey ar e t al ki ng about ?
19 MR. RUBI NSTEI N: That ' s t he pr obl em, I don' t bel i eve
20 t hey do. I f t hey do, l et t he gover nment t el l you.
21 THE COURT: I t may not be a document , but i t may be
22 ent r i es.
23 MR. RUBI NSTEI N: That ' s f i ne. That ' s f i ne. Let t hem
24 addr ess and l et us know what ent r i es t hey ar e t al ki ng about .
25 THE COURT: Wel l , I don' t t hi nk t hey have t o t el l you
( 212) 805- 0300
76
8637KAR1
1 what ent r i es i n advance t hat t hey ar e t al ki ng about , but t he
2 t est i mony wi l l have t o r el at e t o ent r i es and showi ng
3 expendi t ur es of some sor t i n or der t o pr ove t hat t hey wer e
4 i mpr oper expendi t ur es. Ther e has t o be a document somepl ace, I
5 don' t mean t hat i t i sn' t on comput er as opposed t o a l edger ,
6 but i f t hat ' s t he way t he def ense kept i t s books.
7 Mr . Kwok? Ar e you not goi ng t o of f er any evi dence
8 f r omcomput er r ecor ds or - -
9 MR. KWOK: Act ual l y, t o gi ve your Honor backgr ound t o
10 why t hi s i ssue even ar ose, we do have a snapshot of t hi s Qui ck
11 Books l edger t hat we have been t al ki ng about , but i t ' s j ust
12 t hat , a snapshot .
13 THE COURT: What do you mean by a snapshot ?
14 MR. KWOK: I t i s what t he l edger l ooks l i ke at a
15 par t i cul ar poi nt i n t i me, j ust l i ke i f you wer e wor ki ng on a
16 document , you save i t , you pr i nt i t out , t hat ' s what we have,
17 what we bel i eve t o be t he f i nal or cl ose t o f i nal ver si on t hat
18 one of t he audi t or s l ooked at .
19 THE COURT: But don' t you have anyt hi ng t o pr ove
20 expendi t ur es?
21 MR. KWOK: On t hat l edger i t shows a number of
22 expenses t hat wer e pai d f or usi ng gr ant money t hat shoul d not
23 have. But what we ar e r eal l y t al ki ng about - -
24 THE COURT: Ar en' t you goi ng t o go beyond t hat at some
25 poi nt i n t he t r i al and show t hat X, Y and Z suppl i er r ecei ved
( 212) 805- 0300
77
8637KAR1
1 payment of t hat ?
2 MR. KWOK: Yes, your Honor . And t he pr i mar y way we
3 ar e goi ng t o pr ove t hat i s not act ual l y t hr ough t he l edger s, as
4 I ' ve t ol d Mr . Rubi nst ei n numer ous t i mes. The way we ar e t r yi ng
5 t o pr ove t hat i s t hr ough t he bank r ecor ds, t hr ough i ndependent
6 r ecor ds t hat we got f r omt hi r d par t i es. So t her e can be no
7 di sput e t hat t her e i s some conf usi on about t he books and i t ' s
8 uncl ear what ' s goi ng on, we ar e l ooki ng out si de t he company, t o
9 l ook at vendor s, t o l ook at cr edi t car d st at ement s, t o l ook at
10 bank r ecor ds. That ' s how we' r e goi ng t o est abl i sh t hat f unds
11 wer e mi sappl i ed.
12 Now, I have been t r yi ng t o wor k wi t h Mr . Rubi nst ei n t o
13 get what he consi der s t he accur at e set of l edger s. We haven' t
14 been abl e t o come t o any agr eement , because he consi der s my
15 l edger t hat I pr ovi ded t o hi mt o be i ncompl et e or i naccur at e or
16 coul d possi bl y be t amper ed wi t h.
17 So, now t hat we ar e unl i kel y t o come t o an agr eement
18 on what t hat l edger i s goi ng t o l ook l i ke, I submi t t ed t he
19 l et t er t o t hi s cour t because I bel i eve t hat our wi t nesses can
20 t est i f y j ust l i ke any per ci pi ent wi t ness can as t o what t hey
21 obser ved. Si mpl y because t he t opi c of t hei r t est i mony r el at es
22 t o a document doesn' t make t hei r t est i mony hear say.
23 THE COURT: That ' s r i ght .
25 MR. RUBI NSTEI N: Your Honor , I t hi nk you have t o l ay a
( 212) 805- 0300
78
8637KAR1
1 f oundat i on. Let ' s assume t hat what t he wi t ness i s r ef er r i ng t o
2 i s an expense f or l unch at a r est aur ant and t hi s i s what t he
3 wi t ness put i n or suggest s i s a non- NI ST expense. Ri ght ? I f
4 t hey i dent i f y t hi s expense, t hen I i nt end on cr oss- exami nat i on
5 t o show t hemt he backup t o show t hat i t was a NI ST expense.
6 THE COURT: That i t was a?
7 MR. RUBI NSTEI N: That i t was an appr opr i at e expense.
8 J ust because t hey say i t wasn' t appr opr i at e, l et ' s see t he
9 expense. And t hen you wi l l know whet her he i s changi ng
10 somet hi ng because he i s t r yi ng t o cook t he books.
11 THE COURT: Wel l , whi ch way i s t he gover nment t o
12 pr oceed? I s i t goi ng t o st ar t wi t h t he snapshot s of t he
13 l edger , or i s i t goi ng t o st ar t wi t h t he expendi t ur es t hat wer e
14 made and t hen el i ci t t he t est i mony about t he l edger ?
15 MR. KWOK: I t hi nk i t ' s t he l at t er . We ar e goi ng t o
16 i nt r oduce t he gover nment audi t or ver y soon who i s goi ng t o t al k
17 about t he bank r ecor ds, basi cal l y t he r ecor ds I r ef er r ed t o
18 out si de of t he company, t o show t hat f unds wer e mi sappl i ed.
19 Then we ar e goi ng t o have anot her set of wi t nesses who
20 wor ked wi t h t he def endant i n hi s company, who ar e goi ng t o t el l
21 us t hat when t hey wor ked wi t h hi mt hey woul d make cer t ai n
22 bookkeepi ng ent r i es onl y t o have t hemchanged back t i me and
23 agai n i nt o a gr ant expense when t hey have t ol d hi mr epeat edl y
24 t o st op doi ng t hat . We ar e not goi ng t o el i ci t any - -
25 THE COURT: But ar en' t you goi ng t o el i ci t t he
( 212) 805- 0300
79
8637KAR1
1 expendi t ur es f i r st t hat you cont end wer e i mpr oper ?
2 MR. KWOK: Not pr eci sel y, your Honor . I don' t i nt end
3 t o el i ci t - -
4 THE COURT: I t ' s goi ng t o be har d f or t he j ur y t o
5 under st and t he r el evance of t he t est i mony unl ess you do i t t hat
6 way.
7 MR. KWOK: Wel l , we wi l l t al k about some of t he
8 backgr ound as t o what t hei r under st andi ng about t he r ul es wer e
9 and t he conver sat i ons t hey had on t hat subj ect wi t h t he
10 def endant , and t hen i t wi l l become r el evant or i t wi l l be
11 become obvi ous why i t ' s r el evant t hat t he def endant t hen went
12 agai nst t hei r r epeat ed war ni ngs t o go back i nt o t he books t o
13 change t hem. That ' s al l we ar e t r yi ng t o el i ci t .
14 THE COURT: You say t hat ' s al l you' r e t r yi ng t o
15 el i ci t . You' r e goi ng t o el i ci t t he expendi t ur es, ar e you not ?
16 I mean t he j ur y i s goi ng t o have a har d t i me. Not al l of t hese
17 j ur or s have a l aw degr ee or what have you. I f t hey don' t know
18 what t he expendi t ur es ar e, how ar e t hey goi ng t o be abl e t o
19 eval uat e t he t est i mony about changi ng t he books, et c. ?
20 MR. KWOK: Wel l , I mean t hey ar e goi ng t o t al k about
21 some exampl es as t o t he t ype of t hi ngs t hat got changed, so
22 t hey ar e goi ng t o t al k about some of t he exampl es wher e you
23 make bookkeepi ng ent r i es t hat t he def endant t hen changed, and
24 t hen t hey ar e goi ng t o t al k about , f or exampl e - -
25 THE COURT: Wel l , t hose exampl es ar e goi ng t o have t o
( 212) 805- 0300
80
8637KAR1
1 r el at e t o expendi t ur es - -
2 MR. KWOK: They wi l l .
3 THE COURT: - - whi ch wer e act ual l y made.
4 MR. KWOK: They wi l l . By t hat poi nt i n t i me when t hey
5 wi l l t est i f y, a r ecor d wi l l al r eady I bel i eve have been made by
6 t he gover nment audi t or t hat t hose wer e t he t ypes of t hi ngs t hat
7 gr ant f unds wer e mi sspent on, such as ut i l i t i es, meal s and so
8 f or t h, and t hey ar e goi ng t o r el at e back t o t hose t opi cs wi t h
9 quest i ons and answer s.
10 THE COURT: You say t he t ypes of t hi ngs. Don' t t hey
11 have t o be t he exact t hi ngs?
12 MR. KWOK: I don' t bel i eve t hey do, because t he way we
13 est abl i sh t hat t hose exact t hi ngs wer e mi sspent usi ng gr ant
14 money i s t hr ough our gover nment audi t or .
15 The ot her wi t nesses ar e goi ng t o show not so much t hat
16 t hose moni es wer e i n f act spent - - because we wi l l have al r eady
17 est abl i shed t hat - - but t o show t he def endant ' s cr i mi nal i nt ent
18 i n maki ng t hose t ypes of expenses, t hat he knew t hat he wasn' t
19 supposed t o spend money t hat way, and because he t r i ed t o hi de
20 i t , t hat ' s how we' r e t r yi ng t o est abl i sh cr i mi nal i nt ent . We
21 don' t have t o est abl i sh l i ne by l i ne.
22 THE COURT: I know how you' r e t r yi ng t o est abl i sh
23 cr i mi nal i nt ent , but what I ' mconcer ned about i s whet her i t ' s
24 possi bl e under t he r ul es of evi dence t o pr esent t o t he j ur y i n
25 a manner i n whi ch t hey can under st and t he si gni f i cance of t he
( 212) 805- 0300
81
8637KAR1
1 t est i mony of t hese i nsi de empl oyees at t he t i me t hat t hi s was
2 pr esent ed t o t hem. I t ' s j ust a mat t er of sequence.
3 MR. KWOK: I under st and t hat , and i t wi l l be t he
4 gover nment ' s bur den at summat i on t o t i e al l t he l oose ends
5 t oget her .
6 THE COURT: Wel l , I under st and t he summat i on, but
7 t her e i s some benef i t somet i mes t o havi ng t he j ur y not be
8 compl et el y sur pr i sed i n summat i on as t o t he way ever yt hi ng f i t s
9 t oget her .
10 MR. KWOK: I under st and, and I appr eci at e your Honor ' s
11 poi nt , but we wi l l do our best . I t hi nk when t he t est i mony
12 comes out , i t wi l l be cl ear why we ar e el i ci t i ng t hat t ype of
13 t est i mony.
14 THE COURT: Wel l , I ' mnot goi ng t o i nt er f er e wi t h your
15 manner of pr esent at i on. That ' s your manner of pr esent at i on.
16 But I amgoi ng t o make r ul i ngs on evi dence as t he quest i ons ar e
17 asked, and whet her t her e i s a f oundat i on. Foundat i on, I have
18 f ound t hat f or some r eason at t or neys i n t he U. S. at t or ney' s
19 of f i ce don' t al ways r ecogni ze t he si gni f i cance of , and I of t en
20 have t o sust ai n f or l ack of pr oper f oundat i on, and t hen you
21 have a pr obl em. I t ' s an obj ect i on t hat appar ent l y has f al l en
22 out of f avor i n some cour t r ooms, but i t ' s one whi ch i s
23 per f ect l y val i d.
24 MR. KWOK: Cer t ai nl y, your Honor .
25 THE COURT: And t hat ' s what Mr . Rubi nst ei n i s
( 212) 805- 0300
82
8637KAR1
1 basi cal l y sayi ng, t hat t he way you ar e appr oachi ng i t , you need
2 t o est abl i sh t he pr oper f oundat i on wi t h t est i mony.
3 MR. KWOK: We wi l l cer t ai nl y t r y t o est abl i sh t he
4 pr oper f oundat i on, but I want t o make t he ar gument t hat t o t he
5 ext ent - -
6 THE COURT: Foundat i on shows r el evance, and t hat ' s why
7 I have pr oceeded t he ot her way mysel f . But you do what ever you
8 want . I want t hi s case t o go f or war d pr ompt l y and ef f i ci ent l y,
9 and you deal wi t h t he expendi t ur es f i r st and t hen you have a
10 f oundat i on f or t hose quest i ons. When you don' t , I don' t know
11 how you' r e goi ng t o est abl i sh t he f oundat i on. You may be abl e
12 t o.
14 I f I may j ust r ai se one qui ck ot her poi nt . Wi t h
15 r espect t o t he f i r st wi t ness, bef or e we paused yest er day I
16 bel i eve def ense counsel obj ect ed on hear say gr ounds. I j ust
17 want t o make cl ear t he scope of your Honor ' s r ul i ng.
18 I mi ght have negl ect ed t o ask a wi t ness cer t ai n
19 f oundat i onal quest i ons about whet her she was per sonal l y
20 f ami l i ar wi t h t he r ul es and r egul at i ons of t he pr ogr am. I f I
21 have asked t hat , I don' t bel i eve I ' mbound by si mpl y
22 i nt r oduci ng document s and have her r ead f r omt hose document s,
23 i f she i s goi ng t o expl ai n t he r ul es of t he pr ogr amt hat she
24 per sonal l y knows about .
25 THE COURT: Wel l , t he bet t er t hi ng t o do i s t o l ay t he
( 212) 805- 0300
83
8637KAR1
1 f oundat i on by havi ng t he r ul es of t he pr ogr amof f er ed i n
2 evi dence, and t hen she can t est i f y about t hem.
3 MR. KWOK: Ver y wel l , your Honor .
4 MR. RUBI NSTEI N: Your Honor , we l ef t act ual l y wi t h t he
5 i ssue of what t he bi nder s cont ai n, and t hat your Honor was
6 goi ng t o gi ve an i nst r uct i on t o t he j ur y.
7 THE COURT: I ' mgoi ng t o gi ve t hemt he i nst r uct i on.
8 MR. RUBI NSTEI N: Coul d I st ep out f or a per sonal
9 mat t er , your Honor ?
10 THE COURT: Sur e. Maybe we al l ought t o. The j ur y - -
11 appar ent l y t her e i s a hol d- up on one of t he subway l i nes. Si x
12 j ur or s wer e not her e at 9: 30.
13 ( Recess)
14 THE COURT: Counsel , J ur or 8 i s mi ssi ng, Mr . Naveen.
15 I t hi nk we have t o go ahead wi t hout hi mi f he i sn' t her e by 10
16 o' cl ock. I have about t wo mi nut es t o t en. Or Naveen J ohn I
17 guess hi s name i s.
18 DEPUTY COURT CLERK: He' s her e.
19 THE COURT: OK.
21
22
23
24
25
( 212) 805- 0300
84
8637KAR1
1 ( J ur y pr esent )
2 THE COURT: Pl ease be seat ed. Good mor ni ng, l adi es
3 and gent l emen. I ' msor r y. I under st and t he subway, one of t he
4 subway l i nes had a pr obl emt hi s mor ni ng. I f i t woul d do any
5 good, I woul d speak t o t he mayor about i t , but I r ecogni ze i t
6 wasn' t your f aul t , but l et ' s pl ease be on t i me. I get t he
7 l awyer s her e 15 mi nut es ear l y so we can t ake up any mat t er s
8 t hat need t o be t aken up bef or e you get i nt o t he j ur y box.
9 Yest er day, I gave you some i nst r uct i on, and I wi l l
10 have t o r evi se t hose i nst r uct i ons because I di d not f ul l y
11 compr ehend how t he gover nment was goi ng t o pr oceed her e.
12 The books you have i n f r ont of you cont ai n excer pt s of
13 t he exhi bi t s t hat t hey i nt end t o of f er at t he t i me of t r i al ,
14 and t he excer pt s ar e what t hey ar e goi ng t o show on t he boar d
15 up her e. However , f or your conveni ence, because some peopl e
16 may have di f f i cul t y i n r eadi ng what ' s up on t he scr een, t her e
17 i s an ext r a copy i n t he books. So, i f you don' t have any
18 di f f i cul t y r eadi ng what ' s up on t he boar d, you don' t have t o
19 use t he books. I f on t he ot her hand you f i nd i t di f f i cul t
20 r eadi ng what ' s up on t he boar d because of t he di st ance, t hen
21 you have f r eedomt o l ook at t he books and wi t h r espect t o t hat
22 par t i cul ar exhi bi t . So, don' t l ook at ot her exhi bi t s or
23 excer pt s of exhi bi t s unl ess t hey have been admi t t ed i nt o
24 evi dence al r eady.
25 Al l r i ght . Wi t h t hat i nst r uct i on, I t hi nk we' r e r eady
( 212) 805- 0300
85
8637KAR1
1 t o go ahead.
3 BETTI J OYCE LI DE, r esumed.
4 THE COURT: Ms. Li de, you ar e r emi nded ar e you st i l l
5 under oat h, and t he j ur y i s i nst r uct ed t hat any t i me a wi t ness
6 t akes t he st and on a succeedi ng t he day, t he cour t as a mat t er
7 of cour t pr ocedur e must r emi nd t hemt hat t hey ar e st i l l under
8 oat h. You ar e not t o dr aw any i nf er ence f r omt he f act t hat t he
9 cour t r emi nded t hemt hey ar e st i l l under oat h. Al l r i ght .
11 Bef or e we br oke yest er day, t he gover nment of f er ed
12 Gover nment ' s Exhi bi t s 1, 2, 3 and 4.
13 THE COURT: Let ' s i dent i f y what Gover nment Exhi bi t 1
14 i s.
15 MR. KWOK: Gover nment Exhi bi t 1 i s a pr oposal
16 pr epar at i on ki t . Exhi bi t 2 mar ked f or i dent i f i cat i on i s - -
17 THE COURT: Wai t a mi nut e. I t ' s t he pr oposal
18 pr epar at i on ki t f or t he Advanced Technol ogy Pr ogr am.
20 THE COURT: That ' s Exhi bi t 1. That ' s admi t t ed i n
21 evi dence, t he f ul l exhi bi t .
22 ( Gover nment ' s Exhi bi t 1 r ecei ved i n evi dence)
23 MR. RUBI NSTEI N: Wi t hout obj ect i on.
24 THE COURT: Wi t hout obj ect i on.
25 MR. KWOK: And Gover nment Exhi bi t 2 i s t he gener al
( 212) 805- 0300
86
8637KAR1
1 t er ms and condi t i ons, Advanced Technol ogy Pr ogr am.
2 THE COURT: Al l r i ght . That i s admi t t ed i n evi dence
3 wi t hout obj ect i on.
5 MR. RUBI NSTEI N: That ' s cor r ect .
6 MR. KWOK: Gover nment Exhi bi t 3 i s Depar t ment of
7 Commer ce, f i nanci al assi st ance, st andar d t er ms and condi t i ons.
8 THE COURT: That ' s admi t t ed i n evi dence wi t hout
9 obj ect i on.
11 MR. KWOK: Gover nment Exhi bi t 4 i s a sl i de
12 pr esent at i on. The f i r st page i s gr ant s and agr eement s,
13 management di vi si on.
14 THE COURT: Of t he Advanced Technol ogy Pr ogr am.
16 THE COURT: Exhi bi t 4 i s admi t t ed wi t hout obj ect i on.
18 THE COURT: Go r i ght ahead.
19 DI RECT EXAMI NATI ON ( Cont i nued)
20 BY MR. KWOK:
21 Q. Ms. Li de, ar e you per sonal l y f ami l i ar wi t h t he r ul es and
22 r egul at i ons of t he Advanced Technol ogy Pr ogr am?
23 A. Yes, I am.
24 Q. How i s i t t hat you ar e f ami l i ar wi t h t he r ul es and
25 r egul at i ons of t hat pr ogr am?
( 212) 805- 0300
87
8637KAR1 Li de - di r ect
1 A. I hel ped devel op some of t he r ul es and r egul at i ons, and I
2 have f ol l owed t hemi n al l of t he pr oj ect s t hat I manage.
3 Q. What ar e a gr ant ee' s obl i gat i on under t hat pr ogr amwi t h
4 r espect t o t hei r budget ?
5 A. Thei r obl i gat i on i s t hat t hey adher e t o t he budget and al l
6 of t he r ul es and r egul at i ons i n t hese document s.
7 Q. Ar e t her e ci r cumst ances under whi ch t hey can devi at e f r om
8 t he budget ?
9 A. Yes, t her e ar e. For any gi ven budget year , f or t he amount
10 of money al l ocat ed t o t hat year , t hey can move up t o 10 per cent
11 f r omone cat egor y t o anot her as l ong as t hose cat egor i es exi st
12 i n t he budget .
13 Q. What i f t hey want t o move money t hat exceeds t he 10 per cent
14 annual budget amount ?
15 A. They must ask f or per mi ssi on and get wr i t t en pr i or appr oval
16 bef or e t he new budget i s aut hor i zed.
17 Q. What i f t hey want t o add a new cat egor y al t oget her ?
18 A. They must ask f or per mi ssi on and get wr i t t en pr i or appr oval
19 bef or e t hey add t hat cat egor y.
20 Q. Ms. Li de, ar e or al appr oval s ever gi ven?
21 A. No.
22 Q. Ar e t her e si t uat i ons wher e gr ant ees can spend t he money
23 f i r st and seek appr oval af t er t he f act ?
24 A. I t i s t he except i on t o t he r ul e. That happens
25 occasi onal l y, but when t hat happens, any of t he money spent
( 212) 805- 0300
88
1 bef or e t he wr i t t en appr oval i s gi ven i s at t he gr ant ee' s r i sk.
2 Q. Now, ar e t her e cer t ai n pr i nci pl es t hat di ct at e whet her ATP
3 wi l l pay f or cer t ai n expenses or not ?
4 A. Yes, t her e ar e, and t hose ar e al l i n t hese document s.
5 Q. What ar e some of t hose basi c r ul es?
6 A. Basi cal l y ATP wi l l not pay i ndi r ect cost s f or si ngl e
7 appl i cant s, such as r ent , f aci l i t y r enovat i ons, l egal f ees,
8 admi ni st r at i ve cost s f or secr et ar i es and t hat sor t of t hi ng,
9 whi ch i s spr ead over t he whol e company' s act i vi t i es.
10 Q. And do you pay f or expenses i ncur r ed bef or e t he st ar t of
11 t he gr ant pr ogr am?
12 A. No, we cal l t hemsunk cost s, and not hi ng i ncur r ed bef or e
13 t he act ual st ar t dat e of t he pr oj ect can be char ged t o t he U. S.
14 gover nment .
15 Q. How do gr ant ees know about al l of t hese r ul es t hat you j ust
16 descr i bed t o us?
17 A. They know about t hese r ul es i n t hese document s t hat ar e
18 exhi bi t s 1 t hr ough 4 t hr ough conf er ences t hat we gi ve, t hr ough
19 t el ephone advi ce t hat we al ways have avai l abl e, and t hr ough a
20 ki ckof f meet i ng whi ch i s what i s pr esent ed i n Exhi bi t 4.
21 Q. What i s a ki ckof f meet i ng?
22 A. A ki ckof f meet i ng i s a meet i ng bet ween t he gr ant ee and t he
23 pr oj ect management t eamat NI ST wher e we go t hr ough al l of t he
24 r ul es and r egul at i ons, ask i f t her e ar e any quest i ons, and make
25 sur e t hat t he gr ant ee under st ands t he r esponsi bi l i t i es of bei ng
( 212) 805- 0300
89
1 good st ewar ds of t he gover nment ' s money.
2 Q. When does t hi s ki ckof f meet i ng t ypi cal l y happen?
3 A. Shor t l y af t er t he st ar t of t he pr oj ect , as soon as
4 possi bl e, dependi ng on ci r cumst ances. And bef or e i t occur s, we
5 ar e al ways avai l abl e by t el ephone.
6 Q. How do you know t hat t hat ' s what happened at t hese
7 meet i ngs?
8 A. I was t her e, I was par t of t he pr oj ect management t eam, and
9 I par t i ci pat ed i n t hese meet i ngs.
10 Q. Now, l et ' s t ake a l ook at t he exhi bi t s I have i nt r oduced
11 i nt o evi dence j ust a moment ago one at a t i me. Let ' s t ake a
12 l ook at Gover nment Exhi bi t 1.
13 Your Honor , may we publ i sh t hat t o t he j ur y?
14 THE COURT: The excer pt s?
15 MR. KWOK: Yes, t o page 6.
16 THE COURT: Al l r i ght . Gover nment Exhi bi t 1 can be
17 publ i shed t o t he j ur y on t he scr een, and i f you have di f f i cul t y
18 i n r eadi ng t hat - - and I can under st and why you woul d - - I
19 t hi nk you bet t er t ake out your books and l ook at t he excer pt s.
20 Can i t be bl own up anymor e, counsel ? The par al egal
21 can' t bl ow t hat up mor e?
22 MR. KWOK: I t hi nk we need t he bot t ompar t of t he
23 page. I ' mj ust di r ect i ng Ms. Moussa t o t he bot t ompar t of t he
24 page.
25 THE COURT: The whol e t hi ng can' t be bl own up so t hey
( 212) 805- 0300
90
1 can r ead t he whol e t hi ng on t he boar d? You ar e usi ng l ess t han
2 hal f of t he scr een. You' r e st i l l usi ng l ess t han one hal f of
3 t he scr een. You bet t er get someone t her e who knows how t o use
4 i t .
5 Can' t you do t he whol e t hi ng?
6 MR. EVERDELL: Your Honor , I t hi nk t hi s i s as bi g as
7 i t get s on t he scr een. I t hi nk t hi s i s as bi g as i t get s on
8 t he scr een.
9 THE COURT: Why not show t he whol e page?
10 MR. EVERDELL: I t hi nk when you show t he whol e page,
11 i t shr i nks on t he page. We can' t show i t any bi gger t han t hat .
12 THE COURT: You can do mor e.
13 MR. EVERDELL: I don' t t hi nk so. That i s why we have
14 t he j ur y bi nder s as wel l .
15 THE COURT: You need t he j ur y bi nder s. I have f ai r
16 eyesi ght , but t he j ur y - - can al l t he j ur y r ead t hat , or does
17 ever yone have my pr obl em? I can' t r ead i t .
18 Al l r i ght . I see some shaki ng t hei r head sayi ng t hey
19 can' t r ead i t . Al l r i ght .
20 MR. EVERDELL: I bel i eve Mr . Kwok was aski ng f or a
21 speci f i c par t of t he document , whi ch can be bl own up.
22 THE COURT: Somet i mes we have smal l er boxes f or t he
23 j ur y t o wat ch. Ar e we goi ng t o have much mor e of t hese
24 document s i n t hi s case?
25 MR. EVERDELL: Yes, your Honor , we wi l l .
( 212) 805- 0300
91
1 THE COURT: Why don' t we cal l t he peopl e downst ai r s,
2 J oel , and he can set up i ndi vi dual scr eens - - not i ndi vi dual ,
3 but one f or ever y t hr ee or f our j ur or s.
4 MR. EVERDELL: We can t r y t hat , your Honor , but we
5 al so have t he j ur y bi nder s t her e so t hey can l ook at t he paper
6 copy i f t hey can' t see t he copy on t he scr een. The document s
7 ar e i n t he bi nder s.
8 THE COURT: But t he ot her di f f i cul t y i s t hat usual l y
9 when you show t hese t hi ngs on t he boar d you have a l aser or
10 somet hi ng l i ke t hat t o poi nt t o t he exact l anguage t hat you ar e
11 t r yi ng t o i sol at e. But , al l r i ght , al l r i ght . Pr oceed.
13 BY MR. KWOK:
14 Q. Ms. Li de, di r ect i ng your at t ent i on t o page 6, par agr aph 5,
15 can you j ust descr i be t o us what t hat says?
16 A. Yes. That i s descr i bi ng some of t he cost s t hat ar e
17 unal l owabl e under t he Advanced Technol ogy Pr ogr am.
18 Q. What ar e some of t hose exampl es?
19 A. Some of t hemar e t he const r uct i on of new bui l di ngs or
20 r enovat i ons of exi st i ng l abor at or i es, i ndi r ect cost s, as we
21 have al r eady di scussed, pr of i t management f ees, i nt er est ,
22 f aci l i t i es capi t al cost , i f money, and t hat goes on t o page 7
23 i f you want mor e exampl es.
24 Q. What ar e t hose?
25 A. Such as bi d and pr oposal cost s - - whi ch ar e exampl es of
( 212) 805- 0300
92
1 sunk cost s whi ch we di scussed - - t ui t i on, sur veys,
2 commer ci al i zat i on st udi es and t he l i ke.
3 Q. I amshowi ng you t he next page. I t ' s mar ked as - -
4 THE COURT: Page 7?
5 THE WI TNESS: 7, sor r y.
6 MR. KWOK: Ms. Moussa, can we have t he next page up?
7 THE COURT: Page 7 i s up.
8 MR. KWOK: The next page i n t he j ur y bi nder .
9 THE COURT: Page 7 i s t he next page, I bel i eve af t er
10 page 6.
11 MR. KWOK: I amr ef er r i ng t o t he next page i n t he j ur y
12 bi nder , your Honor . I t ' s t he i nst r uct i ons f or f or mNI ST 1262,
13 i t emK.
14 THE COURT: Sor r y. I ' munabl e t o f ol l ow you.
15 Page 6, and t hen t her e i s page 7. You use t he t er m
16 page 6, I pr esume you mean page 7 when you say t he next page.
17 Thi s does not seemt o have a number ed page.
18 MR. KWOK: I t does not have a number ed page, but i t i s
19 t he next page i n t he j ur y bi nder s.
20 MR. RUBI NSTEI N: The ext r act , your Honor .
21 THE COURT: Af t er 7?
22 MR. RUBI NSTEI N: I t ' s not t he next page i n Exhi bi t 1,
23 your Honor . I t ' s t he next page i n what has been gi ven t o t he
24 j ur y, t he ext r act s of Exhi bi t 1.
25 MR. KWOK: I f we coul d zoomi n t o i t emK.
( 212) 805- 0300
93
1 THE COURT: These ar e t he i nst r uct i ons f or f or mNI ST.
2 MR. KWOK: 1262.
3 THE COURT: I see. Al l r i ght .
4 Q. Mi ss Li de, can you t el l us what t hat says.
5 A. Yes. I t emK says t hat al l of t he i ndi r ect cost s must be
6 absor bed by t he pr oposer .
7 Q. And once agai n, what ar e i ndi r ect cost s?
8 A. I ndi r ect cost s ar e t hose t hat you cannot cl ear l y i dent i f y
9 wi t h onl y t hi s ATP pr oj ect but r at her ar e i ncur r ed by al l of
10 t he act i vi t i es of t hat company.
11 Q. And when do you t ypi cal l y hand out t hi s bookl et t hat we ar e
12 j ust l ooki ng at ?
13 A. Thi s bookl et i s avai l abl e t he mi nut e we announce a
14 compet i t i on. I t i s sent t o t housands of peopl e on our mai l i ng
15 l i st . We hol d conf er ences and we gi ve i t out t her e, and i t i s
16 el ect r oni cal l y avai l abl e on our websi t e.
17 Q. Let ' s go t o t he next Gover nment Exhi bi t , Gover nment Exhi bi t
18 2.
19 THE COURT: J ust so I under st and, ever yt hi ng i n
20 Exhi bi t 1 i s sent t o a pr oposed gr ant ee, i s t hat cor r ect ?
21 THE WI TNESS: That i s cor r ect , si r , yes.
22 Q. Mi ss Li de, what i s Gover nment Exhi bi t 2?
23 A. Thi s i s t he gener al t er ms and condi t i ons of t he Advanced
24 Technol ogy Pr ogr am.
25 Q. And when i s t hi s document gi ven out ?
( 212) 805- 0300
94
1 A. Once agai n i t ' s avai l abl e on t he web. I t ' s avai l abl e by
2 anyone who r equest s i t . I t ' s di scussed at t he pr oposer ' s
3 conf er ence, and i t i s par t of t he awar d t hat i s made when t he
4 company r ecei ves an awar d.
5 Q. Di r ect i ng your at t ent i on t o page 3 of t hat document - -
6 THE COURT: When t he company get s t he awar d?
7 THE WI TNESS: When t he company get s t he awar d, when
8 t hey get t he document t hat says you ar e now a r eci pi ent , t hi s
9 goes al ong wi t h t hat .
10 THE COURT: Thank you.
11 Q. Zoomi ng i n on par agr aph 9, up t o t he end of A.
12 Di r ect i ng your at t ent i on t o t hat par agr aph - -
13 MR. RUBI NSTEI N: Excuse me. What page ar e you on?
14 MR. KWOK: Page 3 of Gover nment Exhi bi t 2.
15 MR. RUBI NSTEI N: Thank you.
16 Q. What does t hat par agr aph say?
17 A. Thi s par agr aph i s r epeat i ng what we sai d ear l i er , t hat we
18 need pr i or wr i t t en appr oval f or any change i n t he budget over
19 10 per cent of t he annual amount .
20 Q. And what does i t say your obl i gat i ons ar e i f you cr eat e new
21 budget cat egor i es i n t he budget ?
22 A. One must al so get pr i or wr i t t en appr oval t o cr eat e a new
23 cat egor y.
24 Q. Let ' s go t o sect i on 12 of t he same page t i t l ed equi pment .
25 I t al so goes on t o t he next page, on page 4 of Gover nment
( 212) 805- 0300
95
1 Exhi bi t 2. Can you j ust summar i ze f or us what t hat par agr aph
2 says?
3 MR. RUBI NSTEI N: J udge, I ' mgoi ng t o obj ect t o t he
4 summar i zi ng. Thi s i s i n evi dence, and I submi t t hat
5 summar i zi ng i s not adequat e.
6 THE COURT: Wel l , coul d you r ead what t hat par agr aph
7 says, Ms. Li de.
8 THE WI TNESS: Cer t ai nl y. " Upon expi r at i on of t he
9 pr oj ect per i od, t he r eci pi ent shal l submi t t o t he NI ST gr ant s
10 of f i cer an i nvent or y of equi pment acqui r ed wi t h f eder al f unds,
11 as pr escr i bed i n 15 CFR 14. 34, al ong wi t h an equi pment
12 di sposi t i on cer t i f i cat i on. "
13 Q. I t goes on t o t he next page.
14 A. Ri ght . " Consi st ent wi t h t he r equi r ement s of t he gover nment
15 per f or mance" - -
16 Q. Sor r y, t hat ' s not t he next page.
17 A. No. Cont i nui ng t hen, " The cer t i f i cat i on pr ovi des t he
18 r eci pi ent an oppor t uni t y t o r equest aut hor i zat i on t o cont i nue
19 t o ut i l i ze t he equi pment f or t he pur poses of t he
20 commer ci al i zat i on i ni t i at i ve. I f appr oved by t he NI ST gr ant s
21 of f i cer , t he r eci pi ent shal l r epor t t o NI ST ever y t wo year s t he
22 condi t i on of t he equi pment as l ong as t he cur r ent mar ket val ue
23 i s mor e t han $5, 000. "
24 Q. What does t hat mean i n pl ai n Engl i sh?
25 A. I t basi cal l y means t hat t he equi pment i s pr oper t y of t he
( 212) 805- 0300
96
1 U. S. gover nment , and i f appr oval i s gi ven i n wr i t i ng, t he
2 r eci pi ent can cont i nue t o use i t f or t he pur poses of t hat
3 pr oj ect as l ong as t hey cont i nue t o r epor t ever y t wo year s t hat
4 i t ' s wor t h over $5, 000.
5 Q. What happens t o t he equi pment i f i t f al l s bel ow mar ket
6 val ue of $5, 000?
7 A. I t bel ongs t o t he company.
8 Q. That means t hey can keep i t .
9 A. Ri ght .
10 Q. Let ' s t ur n t o t he next exhi bi t , Gover nment Exhi bi t 3.
11 THE COURT: Gover nment Exhi bi t 3 i s?
12 MR. KWOK: Depar t ment of Commer ce, f i nanci al
13 assi st ance st andar d, t er ms and condi t i ons.
14 Q. Ms. Li de, what i s t hat document ?
15 A. I t i s a Depar t ment of Commer ce document wi t h r ul es and
16 r egul at i ons f or f i nanci al assi st ance, and agai n i t i s gi ven t o
17 ever y awar d t hat i s made.
18 Q. Di r ect i ng your at t ent i on t o page 2, par agr aph 4A and B, can
19 you expl ai n t o t he j ur y what t hat means?
20 MR. RUBI NSTEI N: I obj ect agai n, your Honor t o
21 expl ai ni ng somet hi ng wher e i t hasn' t been addr essed f i r st .
22 MR. KWOK: Your Honor , i t ' s i n evi dence. The wi t ness
23 has t est i f i ed t hat she has per sonal knowl edge of t hese r ul es
24 and r egul at i ons, and she r egul ar l y conduct s t hese meet i ngs as
25 par t of her j ob and r esponsi bi l i t y.
( 212) 805- 0300
97
1 THE COURT: Wel l , gi ve t he j ur y a chance t o r ead t he
2 document f i r st . Then I wi l l al l ow her t o expl ai n what i t
3 means. But f i r st t he j ur y i s i nst r uct ed t o r ead t he document .
5 May I pr oceed, your Honor ?
7 Q. Now, Ms. Li de, now t el l us what t hat means.
8 A. Par t A i s t he i nst r uct i on on how t o suggest a change one
9 want s t o make, and t hat i s put i n wr i t i ng t o t he pr ogr am
10 of f i cer , t he change i n budget one want s. The pr ogr amof f i cer
11 r evi ews i t and sends a r ecommendat i on t o t he gr ant s of f i ce.
12 The second par t , par t B, i s r epeat i ng t hat t hi s must be done
13 f or any per cent age over 10 per cent .
14 Q. Now, asi de f r omhandi ng out t hese document s t hat we j ust
15 l ooked at , what el se do you do t o make sur e t hat gr ant
16 r eci pi ent s under st and t he t er ms and condi t i ons of t he gr ant ?
17 A. Once agai n, we do go over t hemat any pr oposer ' s
18 conf er ence, whi ch i s an open meet i ng f or anybody who want s t o
19 appl y, and we ar e ver y cl ear at t hat . But agai n once t he gr ant
20 i s made, t hese document s become par t of t he awar d package, and
21 we have t hi s ki ckof f meet i ng I r ef er r ed t o, and we go over
22 t hese r ul es and r egul at i ons yet agai n.
23 Q. Let ' s now t ur n t o Gover nment Exhi bi t 4. What i s t hat
24 document ?
25 A. Thi s i s t he Power Poi nt pr esent at i on t hat was used f or t he
( 212) 805- 0300
98
1 ki ckof f meet i ng.
2 Q. Whi ch par t i cul ar pr ogr amgr ant di d you use t hi s par t i cul ar
3 sl i de show pr esent at i on?
4 A. The gr ant t o Comput er Ai ded Sur ger y, I ncor por at ed, CASI .
5 Q. Di r ect i ng your at t ent i on t o pages 6 and 7 of t hat sl i de
6 pr esent at i on. Let ' s go t o page 6 f i r st . I wi l l pause so
7 peopl e can r ead i t .
8 Ms. Li de, what ar e you t r yi ng t o convey by t hi s sl i de?
9 A. That i n t he cour se of t hi s pr oj ect al l of t he r ul es and
10 r egul at i ons l i st ed her e must be adher ed t o.
11 Q. Go t o t he next page.
12 THE COURT: Can you go back? So t he speci al awar d
13 condi t i ons ar e what ?
14 THE WI TNESS: They ar e par t of t he awar d document .
15 When t he awar d i s made, t her e can be speci al awar d condi t i ons
16 such as you must hi r e someone wi t h t hi s exper t i se, or you must
17 have a busi ness pl an i n 90 days, t hat sor t of t hi ng. They ar e
18 uni que t o each par t i cul ar awar d.
19 THE COURT: And t he ATP gener al t er ms and condi t i ons
20 ar e what exhi bi t ?
21 THE WI TNESS: That was Exhi bi t 2.
22 THE COURT: And t he Depar t ment of Commer ce st andar d
23 t er ms and condi t i ons, ar e t hey - -
24 THE WI TNESS: That was Exhi bi t 3.
25 THE COURT: And t hen what i s 15 Code of Feder al
( 212) 805- 0300
99
1 Regul at i ons ( CFR) par t 14? I s t hat r el evant her e?
2 MR. KWOK: I t may be at some poi nt , your Honor , but
3 not r i ght now.
4 THE COURT: And t hen t he cost pr i nci pl es f ound i n t he
5 f eder al acqui si t i on r egul at i on par t 31, i s t hat - -
6 MR. KWOK: Agai n, i t ' s not r el evant di r ect l y at t hi s
7 poi nt . I wi l l ask t he wi t ness t o expl ai n t he l ast i t em, ATP
8 audi t gui del i nes.
9 Q. Ms. Li de, what i s t hat ?
10 A. Each pr oj ect must under go audi t s at speci f i c i nt er val s, and
11 f or a t hr ee- year si ngl e company t her e i s an audi t af t er year
12 one and an audi t af t er t he pr oj ect ends, and t hese ar e t he
13 gui del i nes f or t he audi t or t o f ol l ow t o make sur e t hat t he
14 pr oj ect has f ol l owed t he above f eder al r ul es and r egul at i ons.
15 THE COURT: Ar e t hose i ncl uded i n t hi s Exhi bi t 4, t he
16 audi t gui del i nes, or does someone get t hemat t he t i me of t he
17 awar d?
18 MR. KWOK: I t i s par t of Gover nment Exhi bi t 4, t he
19 whol e set .
20 THE COURT: Par t of Gover nment Exhi bi t 4.
21 MR. RUBI NSTEI N: What i s t hat ? I mi ssed t hat , your
22 Honor .
23 THE COURT: I asked about t he ATP audi t gui del i nes,
24 and I don' t want Mr . Kwok t o t est i f y, I want Ms. Li de t o
25 t est i f y. You ar e not a wi t ness, Mr . Kwok.
( 212) 805- 0300
100
1 MR. KWOK: I under st and.
2 THE WI TNESS: These audi t gui del i nes ar e avai l abl e on
3 t he websi t e. They' r e gi ven t o each pr oj ect , and we al so have
4 a - -
5 THE COURT: I under st and on t he websi t e, but f or get
6 t he websi t e f or a second. They go t o t hem.
7 Ar e t hey gi ven t o t hemat t he t i me of t he meet i ng?
8 THE WI TNESS: No. I ' mnot sur e i f t hey ar e par t of
9 t he or i gi nal awar d package. I woul d have t o l ook t hat up.
10 THE COURT: Ar e t hey par t of t he ATP r eci pi ent
11 r egul at i ons package, r esponsi bi l i t i es?
12 THE WI TNESS: I woul d have t o l ook up t he cover page
13 of our awar d. I amnot sur e of t hat , si r .
14 MR. KWOK: We wi l l come back t o t hat .
15 THE COURT: I want t o know whet her i t ' s cl ear at t he
16 out set t hat t hey have t o adher e t o t he audi t gui del i nes.
17 MR. KWOK: Your Honor , I t hi nk we wi l l go i n sequence.
18 Ri ght now I j ust want t o est abl i sh t he t er ms and condi t i ons
19 t hat t hey have t o abi de by.
20 THE COURT: Wel l , t hat ' s one of t he t er ms and
21 condi t i ons. I t says r i ght up above. That ' s why I ' maski ng
22 about i t .
23 THE WI TNESS: Yes, si r , t hey ar e par t of t he or i gi nal
24 awar d package.
25 Q. And wher e ar e you l ooki ng, Ms. Li de?
( 212) 805- 0300
101
1 A. I aml ooki ng at t he cover page of t he awar d t hat ' s gi ven t o
2 t he r eci pi ent .
3 Q. Let ' s go t o t he next page of t hi s sl i de show pr esent at i on.
4 What message ar e you t r yi ng t o convey by t hat sl i de?
5 A. The sl i de i s t r yi ng t o convey t he message t hat any change
6 of any si gni f i cance t o t he r esear ch pr oj ect must r ecei ve pr i or
7 wr i t t en appr oval bef or e i t can be i n ef f ect .
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
102
1 Q. Now, Ms. Li de, ar e you f ami l i ar wi t h t he t er m, f r i nge
2 benef i t s?
3 A. Yes.
4 Q. What does t hat t er mmean?
5 A. That t er mencompasses such t hi ngs t hat we woul d nor mal l y
6 know as an empl oyee get t i ng - -
7 MR. RUBI NSTEI N: I obj ect t o t hat , your Honor .
9 MR. RUBI NSTEI N: I s she an exper t ? She' s - -
10 THE COURT: She' s t he manager of t he gr ant s.
11 MR. KWOK: Let me l ay some f oundat i on, your Honor .
13 BY MR. KWOK:
14 Q. Ms. Li de, do you deal wi t h r ul es and r egul at i ons deal i ng
15 how f r i nge benef i t s can be pai d f or usi ng gr ant money as par t
16 of your ar e day - - dut y as a gr ant speci al i st ?
17 A. As par t of t he pr oj ect management t eam, I amt asked wi t h
18 advi si ng compani es on what can and cannot be i ncl uded i n f r i nge
19 benef i t s.
20 Q. And so what does t hat t er m, as you under st and i t t o mean?
21 A. I t means t hi ngs beyond t he empl oyee' s sal ar y, such as
22 heal t h i nsur ance and vacat i on t i me.
23 THE COURT: What can or cannot be.
24 THE WI TNESS: I t depends on what wr i t t en pol i cy t he
25 company has, so.
( 212) 805- 0300
103
1 Q. What ar e some of t he basi c r ul es gover ni ng whet her f r i nge
2 benef i t s - -
3 A. Wel l - -
4 Q. - - can be pai d f or usi ng ATP gr ant money?
5 MR. RUBI NSTEI N: I obj ect , your Honor , unl ess t hey
6 coul d poi nt t o some r ul es.
7 THE COURT: That ' s what we' r e aski ng, I t hi nk t hat ' s
8 what he' s aski ng f or .
9 Q. Ms. Li de, coul d you - - ar e t her e r ul es and r egul at i ons i n
10 t he ATP pr ogr amgover ni ng whet her gr ant money can be spent
11 usi ng on f r i nge benef i t s, yes or no?
12 A. Yes t her e ar e. A company - -
13 Q. What ar e t hose r ul es?
14 A. A company must - -
15 MR. RUBI NSTEI N: I obj ect t o hear say. I f t her e ar e
16 r ul es, what exhi bi t ar e t hey i n?
17 MR. KWOK: Your Honor , t he wi t ness has j ust t est i f i ed
18 t hat she has per sonal knowl edge about t hese r ul es and
19 r egul at i ons gover ni ng f r i nge benef i t s.
20 THE COURT: I sust ai n t he obj ect i on.
21 Wher e ar e t he r ul es and r egul at i ons, Ms. Li de?
22 THE WI TNESS: I n t he f eder al acqui si t i on and
23 assi st ance t er ms and condi t i ons.
24 THE COURT: And t hey' r e exhi bi t what ?
25 THE WI TNESS: Thr ee.
( 212) 805- 0300
104
1 THE COURT: Thr ee?
3 THE COURT: Okay.
4 Q. So can you now t el l us what t hose r ul es ar e?
5 MR. RUBI NSTEI N: J udge, I ' mgoi ng t o obj ect . Can we
6 go t o Exhi bi t 3?
7 MR. KWOK: Exhi bi t 3 i s i n evi dence.
8 MR. RUBI NSTEI N: What page?
9 THE COURT: I t ' s not , i t ' s not i n t hi s excer pt s, i s
10 i t ? I s i t i n t he excer pt s, Mr . Kwok?
11 MR. KWOK: I do not bel i eve so.
12 THE COURT: You' l l have t o r ef er t o t he act ual
13 exhi bi t , Ms. Li de.
14 THE WI TNESS: I ' msor r y, I don' t t hi nk i t ' s i n t hi s
15 one. I t hi nk i t ' s i n t hat CFR number ed one. I t ' s not i n
16 Exhi bi t 3. I t ' s i n CFR - -
17 Q. Let ' s t ur n t o gover nment Exhi bi t 4.
18 THE COURT: Whi ch one?
19 MR. KWOK: Gover nment Exhi bi t 4, page si x.
20 THE COURT: I s t hat i n t he ext r act s or i s i t not ?
21 MR. KWOK: I t i s i n t he ext r act . I t ' s t he bul l et
22 poi nt f i ve.
23 Q. Ms. Li de - -
24 THE COURT: I ' msor r y.
25 MR. RUBI NSTEI N: Excuse me.
( 212) 805- 0300
105
1 THE COURT: Gi ve me a chance t o check t hi s.
2 MR. RUBI NSTEI N: My pages ar en' t number ed.
3 ( Pause)
4 THE COURT: She says i t ' s i n t he CFR, Mr . Kwok.
5 THE WI TNESS: Yes. I t ' s i n i t emone, t wo, t hr ee, f our
6 and f i ve on t hat char t .
7 MR. RUBI NSTEI N: I f Mr . Kwok woul d - -
8 THE COURT: What about - - wher e i n t hose i t ems i s i t ?
9 BY MR. KWOK:
10 Q. Wel l , Ms. Li de, do you - -
11 THE COURT: I ' msor r y, I ' maski ng t he quest i on, Mr .
12 Kwok. I want i t answer ed, al l r i ght .
13 THE WI TNESS: I ' m- -
14 THE COURT: Fr omt he wi t ness.
15 THE WI TNESS: Yes, si r . I amt he t echni cal per son on
16 t hi s pr oj ect , and I bel i eve my col l eague, who wi l l be her e
17 l at er , wi l l be abl e t o poi nt t o t he exact par t of t hat . She' s
18 f r omour gr ant s of f i ce and she knows t hose document s par t by
19 par t . So i f you woul d al l ow me t o def er t o her , I bel i eve I
20 woul d appr eci at e t hat .
21 THE COURT: Then I don' t want t o hear any t est i mony
22 about t he r egul at i ons on benef i t pl ans, at t hi s t i me.
23 MR. KWOK: That ' s f i ne. We' l l move on.
24 Q. Ms. Li de, di d t her e come a t i me when you became i nvol ved i n
25 a gr ant i nvol vi ng Dr . Dani el B. Kar r on?
( 212) 805- 0300
106
1 A. Yes.
2 Q. Do you see Dr . Kar r on i n t he cour t r oomher e t oday?
3 A. Yes.
4 Q. Coul d you poi nt hi mout and descr i be an ar t i cl e of cl ot hi ng
5 he' s wear i ng?
6 A. He' s at t he second t abl e wi t h t he dar k sui t and gl asses
7 and, l et ' s see, l ong - - l onger hai r .
8 MR. KWOK: Your Honor - -
9 MR. RUBI NSTEI N: J udge, t hat ' s not f ai r .
10 A. Okay, behi nd a bl ue box.
12 MR. KWOK: Your Honor , may t he r ecor d r ef l ect t hat t he
13 wi t ness has i dent i f i ed t he def endant ?
14 THE COURT: The r ecor d wi l l so i ndi cat e.
15 Q. Ms. Li de, how di d you f i r st meet t he def endant ?
16 A. I met t he def endant at a ki ckof f meet i ng f or a pr oj ect t hat
17 was awar ded t o hi s company by t he Advanced Technol ogy Pr ogr am.
18 Q. And what was t he name of t hi s company?
19 A. CASI , Comput er Ai ded Sur ger y I ncor por at ed.
20 Q. And, appr oxi mat el y, when di d t hi s meet i ng t ake pl ace?
21 A. Ear l y November of 2001.
22 Q. Wher e di d t hi s meet i ng t ake pl ace?
23 A. At t he Nat i onal I nst i t ut e of St andar ds and Technol ogy.
24 Q. And wher e i s t hat ?
25 A. I n Gai t her sbur g, Mar yl and.
( 212) 805- 0300
107
1 Q. Who at t ended t hi s meet i ng on behal f of CASI ?
2 A. Dr . Kar r on, Mr . Lee Gur f ei n, and Dr . Ri ck Sat ava.
3 Q. Now, what was your under st andi ng as t o t he def endant ' s r ol e
4 i n Comput er Ai ded Sur ger y, I nc. ?
5 THE COURT: How do you spel l t hat l ast name?
6 THE WI TNESS: S- a- t - a- v- a.
8 THE WI TNESS: Cer t ai nl y.
9 A. The def endant ' s posi t i on i n t he company was bot h chi ef
10 t echni cal of f i cer and pr esi dent .
11 Q. And you ment i oned Lee Gur f ei n. Who i s Lee Gur f ei n?
12 A. Lee Gur f ei n was par t i ci pat i ng as a busi ness cont act .
13 Q. How about Ri ck Sat ava, who was he?
14 A. Ri ck Sat ava was a cl i ni cal and t echni cal consul t ant .
15 Q. And who at t ended t he meet i ng on behal f of t he ATP pr ogr am,
16 on behal f of NI ST?
17 A. Mysel f and t wo col l eagues, Mi ss J ane Or t hwei n and Mi ss hope
18 Snowden.
19 Q. And who was Hope Snowden?
20 A. Hope Snowden r epr esent ed t he NI ST gr ant s of f i ce and was t he
21 gr ant s speci al i st f or t hi s awar d.
22 Q. How about J ane Or t hwei n?
23 A. J ane Or t hwei n was my par t ner i n managi ng t hi s f r oma
24 t echni cal per spect i ve. She was al so par t of t he Advanced
( 212) 805- 0300
108
1 Q. What happened at t hi s meet i ng?
2 A. As i n - - we used Exhi bi t 4 t hat pr esent at i on, t he sl i de
3 show. And as i n al l of our ki ckof f meet i ngs, we al l ow t he
4 r eci pi ent of t he awar d t i me t o gi ve us any updat es on t he awar d
5 t hat happened si nce i t was awar ded. And t hen we go over t hose
6 sl i des aski ng i f t her e ar e any quest i ons on r epor t i ng
7 r equi r ement s, r ul es and r egul at i ons and ot her gover nment
8 r esponse.
9 Q. What i f , any r ul es, about t he pr ogr amdi d you f ocus on i n
10 your pr esent at i on?
11 A. Wel l , as you saw i n t he pr esent at i on, we f ocus on maki ng i t
12 ver y cl ear t hat t he pr oposal i s - -
13 MR. RUBI NSTEI N: Obj ect i on, your Honor .
14 THE COURT: Obj ect i on sust ai ned. I t ' s a concl usor y
15 st at ement .
16 What was sai d at t he meet i ng wi t h r egar d t o t he r ul es
17 and r egul at i ons, not - - don' t char act er i ze i t . J ust say what
18 was sai d.
19 A. We r ei t er at ed t he need t o adher e t o gover nment r ul es and
20 r egul at i ons.
21 Q. And what ar e t hose r ul es t hat you ment i oned?
22 A. The r ul es t hat we ment i oned ar e par t of t he awar d document ,
23 some of t hemi n t he exhi bi t s, t he need f or pr i or appr oval among
24 t hem.
25 Q. And - -
( 212) 805- 0300
109
1 THE COURT: Pr i or appr oval .
2 THE WI TNESS: For any maj or change.
3 THE COURT: Over 10 per cent .
4 THE WI TNESS: Over 10 per cent of t he budget or i n key
5 per sonnel , and anyt hi ng t hat woul d af f ect t he t echni cal aspect
6 of t he pr oj ect .
7 Q. What , i f anyt hi ng, di d you di scuss about di r ect ver sus
8 i ndi r ect cost s?
9 THE COURT: About what , si r ?
10 Q. Di r ect ver sus i ndi r ect cost s?
11 A. We went over t he f act t hat di r ect cost s ar e pai d by t he
12 U. S. gover nment , and any cost shar e t hat t he pr oposer , pr oposed
13 i ndi r ect cost s must be pai d f or by t he pr oposer .
14 Q. What , i f anyt hi ng, was di scussed about how gr ant ee woul d
15 f i nd out whet her a r equest f or mor e occasi on, t he budget woul d
16 be gr ant ed or deni ed?
17 A. The onl y way t he r equest can be submi t t ed t o, whet her i t
18 was deni ed or appr oved i s submi t t ed i n wr i t i ng t o t he gr ant
19 r eci pi ent , f r omt he gr ant s of f i cer at NI ST.
20 THE COURT: What woul d be gi ven - - t he appr oval i n
21 wr i t i ng woul d be gi ven t o?
22 A. That i s cor r ect , t he appr oval i n wr i t i ng i s gi ven t o t he
23 awar ds r eci pi ent i n t he f or mof an amendment t o t he awar d. The
24 or i gi nal awar d i s an awar d document , and t hen t he f i r st
25 appr oved change i s amendment one, et cet er a. And t hat ' s an
( 212) 805- 0300
110
1 of f i ci al document si gned by t he gr ant s of f i cer at NI ST.
2 THE COURT: That woul d be Mi ss Snowden?
3 THE WI TNESS: No. Act ual l y i t ' s Mi ss Snowden' s boss
4 at t he t i me, i t was Mi ss Mar i l yn Gol dst ei n.
5 Q. At t he t i me t he pr oj ect was appr oved at CASI , di d you have
6 an under st andi ng as t o wher e Dr . Kar r on woul d be car r yi ng out
7 hi s r esear ch?
8 A. I t was our under st andi ng t hat of f i ce space was bei ng l ooked
9 f or i n l ower Manhat t an, and t hat t her e was a possi bi l i t y of
10 of f i ce space or l ab space at CUNY or at t he New Yor k Medi cal
11 Cent er .
12 Q. And how di d you l ear n t hi s?
13 A. I t was i n t he or i gi nal pr oposal and i t was di scussed.
14 Q. Ms. Li de, I ' mshowi ng you what has been mar ked f or
15 i dent i f i cat i on gover nment exhi bi t exhi bi t s 10, 10A, 10B, 11,
16 12, 13 and 14. Can you t ake a moment t o l ook at t hese?
17 THE COURT: These ar e not i n evi dence yet .
18 MR. KWOK: No t hey' r e not . I t ' s j ust f or
19 i dent i f i cat i on.
20 THE COURT: The j ur y shoul dn' t l ook at t hemunt i l such
21 t i me as t hey' ve been admi t t ed i n evi dence. J ust hol d on. Al l
22 r i ght . So we st ar t wi t h one document at a t i me Mr . Kwok.
23 THE WI TNESS: Okay.
24 MR. KWOK: Sur e, l et ' s l ook at gover nment exhi bi t 10.
25 THE COURT: Do you know what t hat i s, Ms. Li de?
( 212) 805- 0300
111
1 THE WI TNESS: Yes, I do.
2 THE COURT: And what i s i t ?
3 THE WI TNESS: I t i s t he f i r st par t of t he pr oposal
4 submi t t ed t o t he Advanced Technol ogy by CASI .
5 MR. KWOK: Gover nment of f er s gover nment exhi bi t 10?
6 THE COURT: No obj ect i on?
7 MR. RUBI NSTEI N: No obj ect i on, your Honor .
8 THE COURT: Gover nment ' s exhi bi t 10 i s admi t t ed i nt o
9 evi dence.
11 Q. Gover nment exhi bi t 10A.
12 THE COURT: The j ur y can l ook at 10 t hen.
13 Al l r i ght . 10A. ? Ms. Li de, do you know what t hat i s.
14 THE WI TNESS: Yes, I do. I t i s a - -
15 MR. RUBI NSTEI N: Your Honor , excuse me.
17 MR. RUBI NSTEI N: 10 i s a number of pages, your Honor .
18 I t ' s not j ust one page.
19 THE COURT: Yes, i t ' s a number of pages. You know
20 what i t i s?
21 THE WI TNESS: Wel l , t hi s i s, t hi s i s st i l l 10 on t he
22 boar d. Shal l I say what 10A i s? I ' msor r y, si r .
23 THE COURT: I ' maski ng about 10.
24 THE WI TNESS: 10A i s t he second par t of t he pr oposal
25 submi t t ed by CASI t o t he Advanced Technol ogy Pr ogr am. That
( 212) 805- 0300
112
1 year f or t he f i r st t i me, t o make i t easi er on pr oposer s, we l et
2 t hempr opose i n t wo par t s. So t hey submi t t ed t he t echni cal
3 pl an f i r st . I f t hat passed, t hen we asked t hemf or par t t wo,
4 whi ch i s t he commer ci al i zat i on pl an. So t hi s i s t he busi ness
5 pl an.
6 THE COURT: I s exhi bi t 10 t he t echni cal pl an?
7 THE WI TNESS: Yes, i t i s, si r .
8 THE COURT: And 10A i s what ?
9 THE WI TNESS: I s how t hey wi l l commer ci al i ze i f t he
10 t echnol ogy i s successf ul .
11 THE COURT: I see. What do you cal l t he second par t ?
12 THE WI TNESS: Wel l , we cal l i t gat e t wo pr oposal , but
13 t he cr i t er i a ar e t he commer ci al i zat i on cr i t er i a.
14 THE COURT: The commer ci al i zat i on cr i t er i a.
16 THE COURT: That ' s submi t t ed by t he pr oposed gr ant ee.
17 THE WI TNESS: Cor r ect .
19 MR. KWOK: Gover nment of f er s - -
20 THE COURT: Any obj ect i on, Mr - -
22 THE COURT: 10A i s t hen admi t t ed i n evi dence.
23 ( Gover nment ' s Exhi bi t 10A r ecei ved i n evi dence)
24 BY MR. KWOK:
25 Q. Ms. Li de, now t ake a l ook at gover nment exhi bi t of f er ed f or
( 212) 805- 0300
113
1 i dent i f i cat i on 10B. Do you know what t hat i s?
2 A. Yes. That ' s a det ai l ed budget , whi ch i s submi t t ed as par t
3 of gat e t wo, whi ch i s t he commer ci al i zat i on pl an.
4 Q. And who submi t t ed t hi s document ?
5 A. Thi s i s t he document submi t t ed as par t of pr oposal f r om
6 CASI .
7 MR. KWOK: Gover nment of f er s 10B.
8 THE COURT: 10B?
10 THE COURT: Any obj ect i on? No obj ect i on. 10B i s
11 admi t t ed i n evi dence.
12 ( Gover nment ' s Exhi bi t 10B r ecei ved i n evi dence)
13 THE COURT: Thi s i s, agai n, an appl i cat i on by CASI - -
14 par t of an appl i cat i on by CASI ?
17 BY MR. KWOK:
18 Q. Ms. Li de, now i f you coul d l ook at next exhi bi t , gover nment
19 exhi bi t 11 mar ked f or i dent i f i cat i on. Do you know what t hat
20 i s?
21 A. Yes. I t i s t he cover l et t er congr at ul at i ng Dr . Kar r on on
22 bei ng t he r eci pi ent of a ATP awar d, and i t ' s si gned by t he
23 act i ng di r ect or of t he advanced t echnol ogy pr ogr am, Mar k
24 St anl ey.
( 212) 805- 0300
114
1 THE COURT: What ' s t he dat e of t hat ?
2 THE WI TNESS: Dat e i s Oct ober - - I can' t r ead i t , but
3 I - - i t ' s pr obabl y ei t her one or f our . We al ways make awar ds
4 basi cal l y t he f i r st of t he gover nment f i scal year .
5 THE COURT: And what year ?
6 THE WI TNESS: 19 - - 2001.
7 THE COURT: Thi s i s not i ce of awar d?
8 THE WI TNESS: I ' msor r y, si r ?
9 THE COURT: I t ' s a not i ce of awar d, i s t hat - -
10 THE WI TNESS: Yes, t hat ' s cor r ect . I t ' s a cover
11 l et t er .
12 THE COURT: I t ' s a cover l et t er .
13 THE WI TNESS: Ri ght , whi ch - -
14 THE COURT: That CASI has r ecei ved an awar d?
19 THE COURT: Exhi bi t 11 i s admi t t ed i n evi dence.
21 Q. Now, l et ' s t ake a l ook at gover nment exhi bi t mar ked f or
22 i dent i f i cat i on 12. Do you know what i s t hat , Ms. Li de?
23 A. Yes, t hat i s t he cover f r omt he gr ant s of f i ce, of f i ce of
24 t he f i nanci al assi st ance awar d, and i t woul d be t he next page
25 of what Dr . Kar r on r ecei ved under t he pr evi ous l et t er f r omMar k
( 212) 805- 0300
115
1 St anl ey. Thi s i s t he act ual awar d document i t sel f .
2 MR. KWOK: Gover nment of f er s gover nment exhi bi t 12.
3 THE COURT: Any obj ect i on?
4 MR. RUBI NSTEI N: None, your Honor .
5 THE COURT: Gover nment exhi bi t 12 i s admi t t ed i n
6 evi dence.
8 Q. Now, l et ' s l ook at t he next document , Ms. Li de, gover nment
9 exhi bi t mar ked f or i dent i f i cat i on 13. Do you r ecogni ze t hat
10 i s?
11 A. Yes.
12 Q. What i s i t ?
13 A. I t pr ovi des det ai l s about t he awar d out l i ned i n gover nment
14 exhi bi t 12 gi vi ng cont act s t echni cal and admi ni st r at i ve, bot h
15 f or t he company and f r omNI ST and t hen descr i bi ng f undi ng
16 l i mi t at i ons f or t he t hr ee- year per i od, t he f i r st year
17 descr i bi ng how t o make changes and ot her r equi r ement s as
18 appr opr i at e t o t hi s awar d.
19 BY MR. KWOK:
20 Q. I s t hi s document par t of a package you r ef er r ed t o ear l i er
21 t hat was sent t o CASI ?
22 A. Yes. Thi s document woul d be t he next t wo pages af t er
23 gover nment exhi bi t 11 and 12, t hi s woul d f ol l ow.
25 MR. RUBI NSTEI N: Wi t hout obj ect i on, your Honor .
( 212) 805- 0300
116
1 THE COURT: No obj ect i on? Al l r i ght . 13 i s admi t t ed
2 i n evi dence.
4 Q. The next document , Ms. Li de, gover nment exhi bi t 14, mar ked
5 f or i dent i f i cat i on; do you r ecogni ze what t hat i s?
6 A. Yes.
7 Q. What i s i t ?
8 A. I t i s t he summar y budget t hat accompani ed t hi s pr oposal , so
9 i t woul d be t he budget of r ecor d when t he pr oj ect st ar t ed.
10 Q. And who submi t t ed t hi s pr oposal ?
11 A. CASI .
12 Q. And f or what gr ant s?
13 A. Comput er Ai ded Sur ger y I ncor por at ed.
14 Q. And what gr ant s, what t ype of pr ogr am?
15 A. I ' msor r y. I t was wi t h t he Advanced Technol ogy Pr ogr am.
17 THE COURT: Thi s accompani ed 11, 12 and 13?
18 THE WI TNESS: Yes, i t does, si r .
19 THE COURT: Al l r i ght , 14 i s admi t t ed i n evi dence.
21 Q. Now, l et ' s go back t o gover nment exhi bi t 12. Di r ect i ng
22 your at t ent i on t o t he mi ddl e of t he page, t he bl ock i n bol d,
23 can you r ead t he second sent ence i n t he bol ded par agr aph?
24 A. By si gni ng t he t hr ee document s, t he r eci pi ent agr ees t o
25 compl y wi t h t he awar d pr ovi si ons checked bel ow and at t ached.
( 212) 805- 0300
117
1 THE COURT: I ' msor r y, what - - i t ' s gover nment exhi bi t
2 12?
3 THE WI TNESS: Yes, si r . I t ' s name - - i t ' s f i nanci al
4 assi st ance awar d.
5 THE COURT: Yes.
6 THE WI TNESS: Okay. And I ' mr eadi ng - -
7 THE COURT: Wher e ar e you r eadi ng?
8 THE WI TNESS: The bol d - - t he second sent ence of bol d
9 i n t he l ar gest bl ock on t hat page. The sent ence st ar t s at t he
10 l ef t mar gi n, by si gni ng.
11 Q. And what ar e t hese i t ems checked bel ow and at t ached?
12 A. The i t ems checked bel ow and at t ached out l i ne al l of t he
13 r ul es and r egul at i ons whi ch t hi s gr ant must appl y.
14 Q. Ar e t hose t he same r ul es and condi t i ons t hat you out l i ned a
15 moment ago?
16 A. Yes, t hey' r e t he r ul es and condi t i ons t hat ar e i n pr evi ous
17 gover nment exhi bi t s and l i st ed i n exhi bi t wi t h t he power poi nt s
18 ki ckof f meet i ng sl i des.
19 THE COURT: The onl y ones t hat appl y ar e t he ones t hat
20 ar e mar ked wi t h an X?
21 THE WI TNESS: That i s cor r ect , si r .
22 THE COURT: I s t he speci al awar d condi t i ons, do you
23 know whet her t hat was mar ked wi t h an X or not . My copy has a
24 hol e i n i t .
25 THE WI TNESS: Yes, i t i s because t hi s awar d had t hem,
( 212) 805- 0300
118
1 as you saw, i n exhi bi t 13.
3 Q. I f we coul d go t o t he bot t omof t hat page. What si gnat ur e
4 appear s i n t he box l abel ed, aut hor i zed r eci pi ent of f i ci al ?
5 A. D. B. Kar r on.
6 Q. What i s t he t i t l e?
7 A. Pr esi dent .
8 Q. What i s t he dat e?
9 A. 5 Oct ober , ' 01.
10 Q. Let ' s t ur n t o gover nment exhi bi t 13. Ms. Li de, what i s
11 t hi s document agai n?
12 A. These ar e speci al awar d condi t i ons f or t hi s par t i cul ar
13 gr ant ee.
14 Q. I f we coul d zoomi n t o t he sect i on of t he f or mt i t l ed
15 f undi ng l i mi t at i ons? What does t hat say?
16 A. I t says t hat t hi s i s a t hr ee year pr oj ect f or $2, 000.
17 However , onl y $800, 000 ar e al l ocat ed.
18 Q. Ms. Li de, you sai d $2, 000?
19 A. Two mi l l i on - - I apol ogi ze - - $2 mi l l i on awar d f or t hr ee
20 year s, but onl y 800, 000 of t hat i s al l ocat ed t o t he f i r st year
21 budget per i od. And t hen i t ar t i cul at es t hat t he r eci pi ent
22 shal l submi t i n wr i t i ng a r evi sed budget and/ or budget
23 nar r at i ve t o t he gr ant s of f i ce f or appr oval i f ot her changes t o
24 t he budget ar e needed.
25 THE COURT: Wher e i s t hat ?
( 212) 805- 0300
119
1 THE WI TNESS: Under t he par t t hat ' s under l i ned sayi ng
2 Oct ober 1, 2001 t hr ough Sept ember 30, 2002. I t says t hat i f
3 t her e ar e r esul t s i n changes t o t he budget or budget nar r at i ve
4 t he r eci pi ent shal l submi t i n wr i t i ng a r evi sed budget and/ or
5 budget nar r at i ve t o t he gr ant s of f i cer f or appr oval .
6 THE COURT: I j ust don' t see wher e t hat i s, what you
7 r ead f r om.
8 THE WI TNESS: Okay, i t ' s under t he hi ghl i ght ed
9 Oct ober , under l i ned Oct ober 1, 2001, and i t st ar t s out , t he
10 gr ant s - -
11 THE COURT: I ' msor r y, j ust hol d up because I ' mnot
12 f ami l i ar wi t h t hese document s.
13 THE WI TNESS: I ' msor r y.
14 THE COURT: You ar e.
15 ( Pause)
16 THE COURT: You ar e r eadi ng t he gr ant s of f i cer may
17 r equi r e, i s t hat - -
19 THE COURT: Addi t i onal cl ar i f i cat i on t o suppor t
20 budget ?
22 THE COURT: I f t hat r esul t s i n changes t o t he budget s
23 or budget nar r at i ve, t he r eci pi ent shal l submi t i n wr i t i ng a
24 r evi sed budget f or appr oval . Al l r i ght .
( 212) 805- 0300
120
1 Q. I f we coul d go t o t he next page of t hi s exhi bi t under
2 par agr aph seven, cost shar e. Ms. Li de, what i s t he cost shar e
3 ar r angement at CASI ?
4 A. CASI , i n t he or i gi nal pr oposal pr oposed a cost shar e - - and
5 t hi s i s out l i ned i n i t emseven - - t hat NI ST - - f or di r ect cost s
6 NI ST woul d cont r i but e 96. 39 per cent or $800, 000 and CASI ' s
7 shar e woul d be 3. 61 per cent or 30 - - $30, 000, and t hat ' s f or
8 t he f i r st year .
9 Q. Do you know how much gr ant money awar ded t o CASI was
10 act ual l y wi t hdr awn?
11 A. Appr oxi mat el y $1. 3 mi l l i on.
12 THE COURT: I n t he f i r st year ?
13 THE WI TNESS: No, si r , over t wo year s. Onl y 800 coul d
14 be wi t hdr awn f or t he f i r st year .
15 Q. Now, l et ' s go t o gover nment exhi bi t 14. And what i s t hi s
16 document agai n, Ms. Li de?
17 A. Thi s i s t he summar y budget f or t he t hr ee year s of t he
18 pr oj ect .
19 Q. Now, Ms. Li de, af t er t he ki ckof f meet i ng, di d you have any
20 f ur t her i nt er act i ons wi t h t he def endant ?
21 A. Yes. We had phone cal l s, vi si t s, e- mai l s.
22 THE COURT: You, your sel f ?
24 Q. Coul d you descr i be your i nt er act i on wi t h t he def endant ?
25 A. Cer t ai nl y. As a member of t he pr oj ect management t eam, we
( 212) 805- 0300
121
1 ar e al ways avai l abl e f or consul t at i on, and t hat can be
2 f ace- t o- f ace, t hat can be vi a e- mai l , and t hat can be phone
3 cal l s. And i n t he case of t hi s gr ant , al l t hr ee occur r ed.
4 THE COURT: He asked f or what your r el at i onshi p was,
5 not what t he t eam' s r el at i onshi p was.
6 THE WI TNESS: I par t i ci pat ed i n al l t hr ee of t hose. I
7 exchanged e- mai l s wi t h Dr . Kar r on, I exchanged phone cal l s wi t h
8 Dr . Kar r on, and I had f ace- t o- f ace meet i ngs wi t h Dr . Kar r on.
9 Q. Who i ni t i at ed t hese phone cal l s t hat you' r e r ef er r i ng t o?
10 A. They can be i ni t i at ed on ei t her si de, but usual l y t he
11 r eci pi ent , Dr . Kar r on, i ni t i at ed t he cont act .
12 Q. Why was he r eachi ng out t o NI ST?
13 THE COURT: Obj ect i on sust ai ned. You don' t know why
14 he - -
15 Q. What di d he di scuss when he cal l ed you?
16 A. Di scussi ons had t o do wi t h per haps changes i n t he
17 pr oj ect - - not per haps - - wi t h changes i n t he pr oj ect t hat he
18 woul d l i ke t o pr opose. Per haps wi t h - - not per haps, sor r y - -
19 wi t h meet i ngs t o whi ch he woul d go and pr esent a paper , t he
20 possi bi l i t y of comi ng t o meet at NI ST or us t o go vi si t CASI ,
21 any sor t of act i vi t y i n t he day- t o- day pr ong management .
22 Q. What t ype budget changes was he r equest i ng?
23 A. Over t he l i f e of t he pr oj ect or ear l y i n t he l i f e, ear l y i n
24 t he pr oj ect ?
25 Q. Ear l y i n t he pr oj ect .
( 212) 805- 0300
122
1 A. Ear l y i n t he pr oj ect t her e wer e some mi nor changes t o
2 basi cal l y per sonnel and equi pment .
3 Q. And what , i f anyt hi ng, di d you di scuss wi t h t he def endant
4 about t he t opi c of r ent ?
5 A. Rent i s an unal l owabl e cost . He - -
6 THE COURT: No.
7 MR. RUBI NSTEI N: Obj ect i on, your Honor . I t ' s not
8 r esponsi ve.
9 THE COURT: What di d you say t o t he def endant about
10 r ent ?
11 THE WI TNESS: I t i s an unal l owabl e cost .
12 THE COURT: That came up i n t he conver sat i on?
13 THE WI TNESS: Yes, si r , i t di d.
15 Q. Now, Ms. Li de, what di f f er ence woul d i t have made i f t he
16 apar t ment was used, i n par t , as an of f i ce?
17 A. ATP does not pay r ent , so i t woul d make, make no
18 di f f er ence.
19 Q. Di d you expl ai n t hi s t o t he def endant ?
20 A. Yes.
21 Q. What , i f any, was hi s r esponse?
22 A. That i n - - f or t hi s gr ant s, t her e wer e uni que ci r cumst ances
23 and i t shoul d be consi der ed.
24 THE COURT: Can you t el l us, appr oxi mat el y, when t he
25 conver sat i on t ook pl ace?
( 212) 805- 0300
123
1 THE WI TNESS: Ver y cl ose t o t he begi nni ng of t he
2 pr oj ect , cer t ai nl y r i ght af t er t he begi nni ng of t he 2002.
3 That ' s t he best of my r ecol l ect i on.
5 Q. And what di d you say t o hi mi n r esponse t o t hat ?
6 A. That ATP does not pay r ent ; i t i s an unal l owabl e cost . He
7 coul d pr opose t hi s t o t he gr ant s of f i cer and see what woul d
8 happen, but t hat i t was - - i t has never been done.
9 Q. What , i f any, ot her cat egor i es di d you di scuss i n your
10 conver sat i ons wi t h t he def endant ?
11 A. One of t he ot her maj or cat egor i es was r enovat i ons t o t he
12 exi st i ng space, because t he comput er s wer e maki ng t he space
13 ext r emel y hot , and we di scussed i mpr ovi ng t hat space wi t h
14 addi t i onal el ect r i ci t y. And, once agai n, t hat i s a capi t al
15 i mpr ovement , whi ch ATP does not pay f or .
16 Q. Di d you t el l t hat t o t he def endant ?
17 A. Yes.
18 Q. What , i f anyt hi ng, di d you t al k about wi t h t he def endant
19 about t he equi pment ?
20 A. Equi pment must st ay wi t hi n t he amount on t hi s budget , and
21 any change i n t he amount of equi pment needed, any changes i n
22 maj or pur chases woul d have t o be appr oved i n wr i t i ng bef or e
23 t hat coul d occur .
24 Q. And what , i f anyt hi ng, di d you di scuss wi t h t he def endant
25 about f r i nge benef i t s?
( 212) 805- 0300
124
1 THE COURT: I ' msor r y, about what ?
2 Q. Fr i nge benef i t s?
4 THE COURT: Di d you di scuss anyt hi ng about f r i nge
5 benef i t s?
6 THE WI TNESS: Yes, we di d.
7 THE COURT: When was t hat , about ?
8 THE WI TNESS: Appr oxi mat el y t he same t i me.
10 Q. What di d you t el l t he def endant ?
11 A. That t her e must be a wr i t t en pol i cy f or f r i nge benef i t s
12 t hat i s adher ed t o f or al l pr oj ect s of t he company, and i s an
13 i ndust r y st andar d, and al l empl oyees of t he company must
14 r ecei ve t he same f r i nge benef i t s.
15 Q. Can you unpack some of t hose t er ms, what do you mean when
16 you say, has t o appl y t o al l empl oyees equal l y?
17 A. Wel l , once agai n, how we i nt er pr et f r i nge benef i t s,
18 accor di ng t o t he r egul at i ons t hat gover n us, t hey' r e ar e t hi ngs
19 l i ke heal t h i nsur ance and vacat i on t i me, and per haps t ui t i on
20 assi st ance what ever . And one must have a wr i t t en pl an f or what
21 one wi l l gi ve one' s empl oyees. Al l empl oyees must r ecei ve t he
22 same, and i t must be consi st ent wi t h what ot her compani es i n
23 your i ndust r y i s pr ovi di ng.
24 Q. So what happens i f t he company does not have a wr i t t en
25 pl an?
( 212) 805- 0300
125
1 A. Then t hey wi l l not be appr oved.
2 Q. What does t hat mean?
3 A. That ATP cannot accept t hose as an al l owabl e cost .
4 Q. Now, asi de f r omhavi ng t hese conver sat i ons wi t h Dr . Kar r on
5 over t he t el ephone, di d you t al k t o hi mi n per son?
6 A. Yes, we di d.
7 Q. How di d t hat come about ?
8 A. Si nce t he ki ckof f had been at t he Nat i onal I nst i t ut e of
9 St andar ds And t echnol ogy i n November , and t hat was at our
10 r equest , because t hat was r i ght af t er Sept ember 11t h and we - -
11 gover nment empl oyees wer e not al l owed t o t r avel . So af t er t he
12 f i r st of t he year we f el t i t i mpor t ant t o vi si t t he f aci l i t i es
13 of t hi s pr oj ect , and al so t o have a di scussi on wi t h Dr . Kar r on
14 about some of t hese changes and some of t hese conver sat i ons
15 t hat had occur r ed over t he phone. So we r equest ed a vi si t t o
16 hi s company' s f aci l i t i es.
17 Q. Di d you go, your sel f , t o t hi s meet i ng?
18 A. I went mysel f wi t h one ot her col l eague f r omNI ST, yes.
19 Q. And wher e di d you go?
20 A. We went t o Manhat t an t o CASI headquar t er s, whi ch was on
21 East 33r d St r eet .
22 THE COURT: About when was t hi s?
23 THE WI TNESS: Thi s was i n May of 2002.
24 Q. And what was t he bui l di ng or est abl i shment t hat you went
25 t o?
( 212) 805- 0300
126
1 A. The bui l di ng was an apar t ment bui l di ng.
2 Q. And whose apar t ment was t hat ?
3 A. I t was Dr . Kar r on' s apar t ment .
4 Q. What , i f anyt hi ng, di d Dr . Kar r on say about why he was
5 doi ng r esear ch out of hi s apar t ment ?
6 A. That at t empt s t o get l ab space i n Lower Manhat t an or at t he
7 uni ver si t y f aci l i t y had not yet come t o f r ui t i on.
8 Q. And what di d you obser ve when you went i nt o t hat apar t ment ?
9 A. I obser ved a r oomof l ar gel y comput er equi pment , and I
10 obser ved some i ndi vi dual s whose acquai nt ance I had not met
11 bef or e t hat .
12 Q. And what , i f anyt hi ng, di d Dr . Kar r on say about t hese
13 i ndi vi dual s t hat you had not met ?
14 A. Wel l , as usual wi t h si t e vi si t s - - we cal l t hese si t e
15 vi si t s - - and as usual wi t h si t e vi si t s we go ar ound and
16 i nt r oduce our sel ves. And Dr . Kar r on i nt r oduced t hese peopl e as
17 havi ng var i ous r esponsi bi l i t i es i n CASI .
18 Q. What , i f anyt hi ng, about t he budget di d you di scuss dur i ng
19 t hi s vi si t s?
20 A. We di scussed pr oposed changes i n equi pment cat egor i es.
21 Al so, si nce t her e wer e new peopl e t her e, we asked f or
22 j ust i f i cat i on of what t hose peopl e wer e doi ng, whet her t hey
23 wer e on ATP f unds or not . Because, as we sai d, f or t hemt o be
24 wor ki ng on our pr oj ect , t hey need pr i or appr oval . So we
25 expl ai ned t he need f or a r evi sed budget r equest and
( 212) 805- 0300
127
1 document at i on t o subst ant i at e i t .
2 Q. Di d you have t hi s conver sat i on wi t h Dr . Kar r on as wel l ?
3 A. Yes.
4 Q. Now, Ms. Li de, was t hi s t he onl y si t e vi si t s you made t o
5 CASI ?
6 A. No. That was i n May of 2002, and t he budget i ssues
7 cont i nued over t he summer , and so t he pr oj ect management t eam
8 f el t i t i mper at i ve t o have a voi ce- t o- voi ce conver sat i on agai n
9 wi t h Dr . Kar r on, and we pai d anot her si t e vi si t i n Oct ober of
10 2002.
11 Q. Now, f or t he ot her gr ant s t hat you over see, Ms. Li de, how
12 many si t e vi si t s do you t ypi cal l y do?
13 A. The t ypi cal - -
14 MR. RUBI NSTEI N: Obj ect i on, your Honor , not r el evant .
15 THE COURT: The obj ect i on' s sust ai ned.
16 Q. Ms. Li de, why di d you go t o t hi s si t e vi si t f or a second
17 t i me?
19 THE COURT: Was t her e a r eason?
20 THE WI TNESS: Yes si r . I t hought I ar t i cul at ed - -
21 THE COURT: I t hought she answer ed.
22 THE WI TNESS: I wi l l be happy t o r epeat i t you want .
23 THE COURT: No, i t ' s al l r i ght .
25 Q. What di d you hope t o accompl i sh goi ng back t he second t i me?
( 212) 805- 0300
128
1 A. What we hoped t o accompl i sh was t o have a di scussi on t o t r y
2 t o i r on out t he budget di f f er ences, because t hat had become a
3 maj or i ssue i n t hi s gr ant , was t o get a budget t hat t he awar dee
4 coul d l i ve wi t h, and yet met t he gover nment r ul es and
5 r egul at i ons.
6 By t hi s t i me, i f you r emember t he dat es cor r ect l y, t he
7 f i r st year of t he gr ant s was over . So what we hoped t o expl ai n
8 t o t he r eci pi ent was by t hen i t shoul d not be an est i mat ed
9 budget any mor e; he shoul d be abl e t o pr oduce act ual cost s f or
10 year one.
11 Q. Di d you di scuss t hi s wi t h Dr . Kar r on?
12 A. Yes. At t hat poi nt we st ar t ed r equest i ng t he act ual
13 f i gur es f or t he year one, what had act ual l y been spent .
14 Q. And what , i f anyt hi ng el se, di d you di scuss wi t h t he
15 def endant about t he budget dur i ng t hi s second si t e vi si t ?
16 A. Typi cal i ssues wer e equi pment and j ust i f i cat i on of who was
17 wor ki ng on t he pr oj ect , per sonnel who was wor ki ng as an
18 empl oyee ver sus subcont r act . We had t r oubl e get t i ng our hands
19 on t hat .
20 Q. And what di d you t el l Dr . Kar r on t hat he had t o do?
21 A. Submi t a r evi sed budget wi t h j ust i f i cat i on f or t he changes
22 i n equi pment and who was wor ki ng on t he pr oj ect under ATP money
23 and i n whi ch cat egor y, subcont r act or s or empl oyees.
24 Q. Now, asi de f r omt hese t wo si t e vi si t s, di d you have ot her
25 i n per son meet i ngs wi t h t he def endant ?
( 212) 805- 0300
129
1 A. Yes. Ther e was one, possi bl y t wo t i mes t hat t he def endant
2 came t o NI ST and we had di scussi ons wi t h hi mt her e.
3 Q. What di d t he def endant say about t he pur pose of t he
4 meet i ng?
5 A. Once agai n, t he budget was t he bi g deal , t o i r on out t he
6 budget was t he mai n i ssue.
7 Q. And what di d you di scuss when you met ?
8 THE COURT: When was t hi s meet i ng, when was t hi s
9 meet i ng?
10 THE WI TNESS: The one meet i ng I r emember di st i nct l y,
11 si r , was i n t he summer of 2002 bet ween my t wo si t e vi si t s, so I
12 bel i eve i t woul d be J ul y, i f I r emember cor r ect l y.
13 THE COURT: That was bef or e t he - -
14 THE WI TNESS: Bef or e t he second si t e vi si t .
15 THE COURT: Bef or e t he second si t e vi si t by your
16 st af f - -
17 THE WI TNESS: That i s cor r ect .
18 THE COURT: - - and your sel f .
20 Q. What , i f anyt hi ng, di d you di scuss?
21 A. The changes t hat wer e pr oposed and t he need t o document
22 t hem, j ust i f y t hemand get wr i t t en appr oval bef or e t he pr oj ect
23 coul d go f or t h wi t h t he new budget .
24 Q. And what , i f anyt hi ng, di d you di scuss r el at i ng t o t he
25 t echni cal aspect of your pr oj ect ?
( 212) 805- 0300
130
1 A. We al so t r i ed t o l ook ahead, because t he pr oj ect woul d need
2 some t echni cal i nput and changes i n year t hr ee because i t was
3 goi ng t o use some human and ani mal subj ect s, and we suggest ed
4 t hat we st ar t t hat pr ocess now because i t was t i me consumi ng.
5 Q. And what di d t he def endant say about t hat ?
6 THE COURT: Thi s i s i n J ul y?
7 THE WI TNESS: Yes, si r . That was i n J ul y; yes, si r .
9 A. I was act ual l y shocked, because i nst ead of sayi ng - -
10 MR. RUBI NSTEI N: Obj ect i on. I move t o st r i ke.
11 THE COURT: Obj ect i on sust ai ned.
12 Q. What di d t he def endant say?
13 A. That no appr oval woul d be needed i f he woul d j ust come and
14 schmooze and t ake us t o l unch.
15 Q. Let ' s t ur n t o gover nment exhi bi t mar ked f or i dent i f i cat i on
16 30. Ms. Li de, do you r ecogni ze t hi s document ?
17 A. Yes, I do.
18 Q. What i s t hi s document ?
19 A. Thi s i s a document t hat t he pr oj ect management t eamsent t o
20 t he gr ant s of f i cer r equest i ng a gover nment audi t of t hi s
21 pr oj ect .
22 Q. And whi ch gr ant s and company does t hi s l et t er r el at e t o?
23 A. The awar d t o CASI .
25 MR. RUBI NSTEI N: I ' mgoi ng t o obj ect , your Honor .
( 212) 805- 0300
131
1 THE COURT: You obj ect t o 30?
3 THE COURT: Seems t o me i t ' s obj ect i onabl e, Mr . Kwok.
4 BY MR. KWOK:
5 Q. Wel l , Ms. Li de, i s t hi s document kept i n t he cour se of a
6 r egul ar l y conduct ed busi ness act i vi t y?
7 A. Thi s woul d be t he way i n t he Advanced Technol ogy Pr ogr am
8 t hat we woul d r equest an audi t of a company.
9 Q. And was t hi s document pr epar ed by someone wi t h knowl edge
10 of - - t r ansmi t t ed by a per son wi t h knowl edge of t he i nf or mat i on
11 cont ai ni ng wi t hi n i t ?
12 A. Yes, t hi s document i s pr epar ed by t he ATP pr oj ect
13 management t eam, i ncl udi ng mysel f .
14 Q. And was t hi s document pr epar ed as soon as t he i nf or mat i on
15 cont ai ned wi t hi n i t became avai l abl e?
16 A. Yes, i t was.
17 MR. KWOK: Gover nment of f er s exhi bi t 30.
19 THE COURT: I s i t - - i s t he document l i ke t hi s
20 pr epar ed i n t he cour se of t he agency' s busi ness?
21 THE WI TNESS: Yes, si r , i t i s.
22 THE COURT: And i s i t t he r egul ar cour se of t he
23 agency' s busi ness t o keep t hese document s?
24 THE WI TNESS: Yes. The Advanced Technol ogy Pr ogr ami s
25 heavi l y audi t ed and i nspect ed, and we need document at i on of our
( 212) 805- 0300
132
1 act i ons.
2 THE COURT: That seems t o me i t ' s admi ssi bl e on t hose
3 gr ounds. But not i t ' s not - - t hi s has t o do wi t h an i nt er nal
4 communi cat i on i n t he agency, and i t woul d be admi ssi bl e on
5 t hose gr ounds, Mr . Rubi nst ei n.
6 MR. RUBI NSTEI N: I don' t bel i eve so, your Honor . I
7 st at ed my obj ect i on.
8 THE COURT: You want t o t el l me why not at si debar ?
9 I t hi nk t he smar t t hi ng t o do woul d be f or t he j ur y t o
10 get a br eak at t hi s poi nt and come back whi l e we have our
11 di scussi on and see i f we can ki l l t wo bi r ds wi t h one st one, as
12 t he expr essi on goes.
15 THE COURT: Can t he wi t ness can st ep down, Mr .
16 Rubi nst ei n?
18 THE COURT: You want t he wi t ness t o st ep down or not ?
19 MR. RUBI NSTEI N: Onl y i f she needs a br eak. I don' t
20 car e i f she' s her e.
21 THE COURT: You want a br eak?
22 THE WI TNESS: What ever i s good f or you.
23 THE COURT: Wel l , maybe you coul d expl ai n t o me why
24 you t hi nk I shoul dn' t admi t t hi s, i f i t ' s kept i n t he r egul ar
25 cour se of busi ness.
( 212) 805- 0300
133
1 MR. RUBI NSTEI N: Yes, your Honor . Because under
2 403 - -
3 THE COURT: What ?
4 MR. RUBI NSTEI N: I t hi nk when you bal ance i t , t hey' r e
5 maki ng al l ki nds of st at ement s and f i ndi ngs her e of f i ve
6 ver si ons of t he act ual - -
7 THE COURT: You want an i nst r uct i on t o t he j ur y of
8 some sor t ?
9 MR. RUBI NSTEI N: Wel l - - ar e t hey goi ng t o cal l anot her
10 wi t ness, J udge, i n r el at i on t o t hi s?
11 THE COURT: I don' t know.
12 MR. RUBI NSTEI N: Because i f t hey ar e, t hen maybe i t
13 may be academi c t o pr ess an obj ect i on.
14 THE COURT: Thi s i s a memor andumf r omMs. Li de, who i s
15 t he wi t ness.
16 MR. RUBI NSTEI N: I t ' s sel f - ser vi ng.
17 THE COURT: To t he NI ST gr ant s of f i cer t hr ough Mi ss
18 Sobol ewski and Mi ss Cut hi l l , her super vi sor , I gat her .
20 MR. RUBI NSTEI N: I t ' s sel f - ser vi ng, i t ' s but t r essi ng
21 what she' s t est i f yi ng t o.
22 THE COURT: She hadn' t t est i f i ed t o t hi s par t .
23 MR. RUBI NSTEI N: She want t o - - t hey' r e t r yi ng t o
24 i nt r oduce i t i nt o evi dence.
25 MR. KWOK: Your Honor , i f I may, i t ' s r eal l y a cl assi c
( 212) 805- 0300
134
1 busi ness r ecor d. I t i s made cont empor aneousl y wi t h t he event s
2 happeni ng at ar ound t he same t i me.
3 THE COURT: I t goes t hr ough a ser i es of event s. I t
4 goes t hr ough f i ve di f f er ent budget s. I t r el at es t o f i ve
5 di f f er ent budget s.
6 MR. KWOK: I t does, but t he - - I guess t he pr obl em
7 t hi s memo was t r yi ng t o r el at e t o was t hat t he number s i n t hose
8 f i ve di f f er ent budget s wer e al l di f f er ent , and t hi s memo was
9 pr epar ed t o not e t hat pr obl emwhen i t became obvi ous t o peopl e
10 at NI ST. And t hi s wi t ness i s on t he st and. She can be
11 cr oss- exami ned on i t i f def ense counsel seems t o t hi nk t hat
12 i t ' s sel f ser vi ng, but i t i s admi ssi bl e because t he aut hor of
13 t hi s memo was Ms. Li de, who i s t he wi t ness her e.
14 MR. RUBI NSTEI N: J udge t hat ' s why I f eel exact l y why
15 she shoul dn' t , because she' s her e t o t est i f y, and why but t r ess
16 her t est i mony wi t h a document ?
17 THE COURT: To show t hat she made a cont empor aneous
18 r epor t al ong t hose l i nes.
19 MR. KWOK: And i f Ms. Li de wasn' t t he aut hor of t hi s
20 document , Mr . Rubi nst ei n woul d obj ect t hat t he wi t ness woul d
21 have no per sonal knowl edge. So t hi s i s t he cl assi c t ype of
22 si t uat i on, i t seems t o me.
23 THE COURT: I t hi nk she shoul d t est i f y t o i t bef or e
24 i t ' s admi t t ed i n evi dence, t hough. I t hi nk she shoul d t est i f y
25 t o t he exhi bi t i n quest i on.
( 212) 805- 0300
135
1 MR. KWOK: Ver y wel l , your Honor .
3 MR. RUBI NSTEI N: Coul d we st ep out f or a moment ,
4 J udge?
5 THE COURT: Yeah.
7 THE COURT: Let ' s st ep out and come back as soon as
8 possi bl e.
9 MR. RUBI NSTEI N: I shal l , your Honor .
10 ( Recess)
11 ( J ur y ent er i ng)
12 THE COURT: Al l r i ght , pl ease be seat ed. Let ' s
13 pr oceed now, Mr . Kwok.
15 Q. Ms. Li de, i f you coul d t ake a l ook at gover nment exhi bi t
16 mar ked f or i dent i f i cat i on 31?
17 THE COURT: Let ' s - -
18 THE WI TNESS: 31?
19 THE COURT: We' r e not past 30 yet . I haven' t admi t t ed
20 30.
21 MR. KWOK: I under st and. I ' m- -
23 MR. KWOK: I t hi nk i t woul d l ay t he f oundat i on.
25 Q. Do you know what gover nment exhi bi t mar ked f or
( 212) 805- 0300
136
1 i dent i f i cat i on 31 i s?
2 A. I t ' s t he cover page of a r evi sed budget t hat was submi t t ed
3 by t he company CASI dat ed August 1, 2002.
6 MR. RUBI NSTEI N: None your Honor .
7 BY MR. KWOK:
8 Q. Let ' s t ur n - -
9 THE COURT: 31 i s admi t t ed i n evi dence.
11 Q. Ms. Li de, i f you coul d - -
12 MR. RUBI NSTEI N: Your Honor - -
13 THE COURT: I ' msor r y, Mr . Rubi nst ei n?
14 MR. RUBI NSTEI N: I ' mgoi ng t o obj ect , your Honor , t hat
15 i t ' s not a compl et e document .
17 MR. RUBI NSTEI N: I t ' s not a compl et e document .
18 THE COURT: I s i t - - i s t hi s t he budget t hat was
19 submi t t ed, Ms. Li de, or i s i t - -
20 THE WI TNESS: Yes, t hi s i s t he mul t i year budget and,
21 as such, i s a document - - i t does not cont ai n t he budget ,
22 budget nar r at i ve, i f - - but t hi s i s t he budget t hat woul d
23 gover n - - you know, i f i t wer e accept ed, i t woul d gover n t he
24 act i vi t i es of t he pr oj ect .
25 THE COURT: So what i s i t accompani ed by?
( 212) 805- 0300
137
1 THE WI TNESS: I n or der t o - -
2 THE COURT: I s i t a compl et e document or di d he submi t
3 ot her document s wi t h i t ?
4 THE WI TNESS: Al ong wi t h t hi s budget , we r equest t he
5 nar r at i ve, whi ch i s a expl anat i on of each of t hese l i ne i t ems
6 f or each year , whi ch i s not i n t hi s f ol der .
7 THE COURT: Al l r i ght . But t hat ' s, t hese - - t hese ar e
8 t wo document s, t hi s i s j ust t he budget ?
10 THE COURT: Al l r i ght , I ' l l al l ow 31.
12 Q. Now, l et ' s t ake a l ook at gover nment exhi bi t mar ked f or
13 i dent i f i cat i on 32. Do you r ecogni ze t hat document , Ms. Li de?
14 A. Yes.
15 Q. What i s t hat ?
16 A. I t i s anot her pr oposed budget submi t t ed by CASI on Oct ober
17 20t h.
19 MR. RUBI NSTEI N: Obj ect i on, your Honor . That - - i t ' s
20 mi ssi ng a nar r at i ve.
21 THE COURT: Same r ul i ng, I ' l l al l ow i t , t hese
22 document s exhi bi t , budget s, exhi bi t 32 i s admi t t ed i n evi dence.
24 Q. Next document , Ms. Li de, gover nment exhi bi t mar ked f or
25 i dent i f i cat i on 33, do you know what t hat i s?
( 212) 805- 0300
138
1 A. Yes. Ther e ar e act ual l y t wo document s i n her e. Ther e' s
2 t he est i mat ed mul t i year budget as submi t t ed on December 2nd,
3 al ong wi t h t he budget nar r at i ve expl ai ni ng al l of t he f i gur es
4 on t hat budget .
9 Q. The next document i s mar ked f or i dent i f i cat i on gover nment
10 exhi bi t 34; do you know what i t i s, Ms. Li de?
11 A. Yes. I t consi st s of t hr ee pi eces, t he f i r st of whi ch i s
12 t he e- mai l t r ansmi t t i ng anot her - - sor r y - - anot her pr oposed
13 budget ; t he second page i s t he est i mat ed budget s, and t hen t he
14 r est of t he page i s, agai n consi st s of t he budget nar r at i ve
15 descr i bi ng al l of t he l i nes on t he budget .
16 THE COURT: What dat e was t hi s?
17 THE WI TNESS: 12 - - t hi s one was 12/ 20.
18 THE COURT: That ' s exhi bi t 33?
19 THE WI TNESS: 34, si r .
20 THE COURT: What was t he exhi bi t 33, when was t hat ?
21 THE WI TNESS: 12/ 2.
22 THE COURT: I see. Sor r y.
23 THE WI TNESS: I t ' s conf usi ng.
24 THE COURT: 34.
( 212) 805- 0300
139
2 THE COURT: No obj ect i on, t o 34? Al l r i ght .
4 Q. Next document i s mar ked f or i dent i f i cat i on gover nment
5 exhi bi t 35. Do you know - - do you r ecogni ze what t hat i s?
6 A. Yes. Once agai n i t consi st s of t he t r ansmi ssi on of anot her
7 budget , t he budget i t sel f and t he nar r at i ve descr i bi ng each
8 l i ne i t emon t he budget .
10 THE COURT: That ' s - -
11 THE WI TNESS: 12/ 24.
12 THE COURT: 24, yes? 35 i s admi t t ed i n evi dence.
14 Q. The l ast document i s gover nment exhi bi t 36. Do you
15 r ecogni ze what t hi s i s?
16 A. Yes, I do. I t ' s a budget submi ssi on dat ed Febr uar y 25t h
17 ' 03, agai n t wo par t s t o i t , t he budget i t sel f , and t he
18 nar r at i ve descr i bi ng each of t he l i ne i t ems.
20 MR. RUBI NSTEI N: Wi t hout obj ect i on, your Honor .
21 THE COURT: Al l r i ght , 36 i s admi t t ed i n evi dence.
23 Q. Ms. Li de, what , i f any, i ssues di d you not i ce i n r ecei vi ng
24 t hese budget s f r omCASI and t he def endant ?
25 A. I n anal yzi ng t hese budget s, t o r ecommend appr oval or not
( 212) 805- 0300
140
1 appr oval t o t he gr ant s of f i ce, we r ecogni zed t hat i n each of
2 t he l ast f our budget s, whi ch shoul d have r ef l ect ed year one
3 act ual cost s, t her e wer e di scr epanci es.
4 Q. When you r ef er t o year one act ual cost s, what exact l y ar e
5 you r ef er r i ng t o?
6 A. Wel l , dur i ng t he cour se of t he f i r st year , one can est i mat e
7 t hat one i s goi ng t o spend a cer t ai n amount of money. Af t er
8 t he year ' s over , one shoul d have r ecei pt s and know exact l y how
9 much one spent , so t hat ' s what we cal l act ual cost s.
10 THE COURT: When you say di scr epanci es, you mean one
11 f r omanot her ?
12 THE WI TNESS: Yes, si r . The l ast f our wher e year one
13 shoul d have been act ual , because year one ended Sept ember 30t h.
14 So af t er Sept ember 30t h, a company knows exact l y how much i t
15 has spent i n each cat egor y. And yet when we l ooked at t hese
16 budget s, t he year ones had di scr epanci es i n t hem.
17 THE COURT: You say t her e wer e di scr epanci es i n t he
18 l ast f our . You mean exhi bi t 33, 34, 35 and 36?
19 THE WI TNESS: Ther e mi ght be t he l ast f i ve. One,
20 t wo - - wai t a mi nut e, Oct ober 20, December 2nd, December 20t h
21 and Febr uar y 25t h, so 32 - - sor r y. 32 t hr ough 36, so t hat ' s
22 one, t wo, t hr ee, f our , f i ve, act ual l y.
23 THE COURT: When was 32 submi t t ed?
24 THE WI TNESS: The dat e on 32 i s Oct ober 20t h of 2002.
25 THE COURT: I see.
( 212) 805- 0300
141
1 Q. Ms. Li de, what , i f any, document di d you pr epar e t o
2 document t hi s i ssue?
3 A. Because we f ound i t di f f i cul t t o r econci l e t hese budget s,
4 especi al l y t he act ual s f or year one, we wer e concer ned t hat t he
5 company was not abl e t o account f or gover nment spendi ng, and we
6 pr epar ed a document f or our super vi sor t o send t o t he gr ant s
7 of f i ce r equest i ng an audi t .
8 Q. I ' mnow showi ng you gover nment exhi bi t mar ked f or
9 i dent i f i cat i on gover nment exhi bi t 30.
10 MR. RUBI NSTEI N: Your Honor , t hat ' s - - I don' t bel i eve
11 t hat ' s i n evi dence, your Honor .
12 THE COURT: I t ' s not . He j ust sai d I ' mshowi ng i t t o
13 you.
14 MR. RUBI NSTEI N: The j ur or s, your Honor - -
15 THE COURT: We haven' t - - i t ' s not i n evi dence yet .
16 30 i s not i n evi dence?
17 A. I ' msor r y. Pl ease go ahead. Your quest i on.
18 Q. Do you r ecogni ze what t hat document i s?
19 A. Yes, t hat ' s t he r equest t hat I wr ot e wi t h my par t ner
20 r equest i ng an audi t .
23 THE COURT: Obj ect i on over r ul ed. Exhi bi t 30 i s
( 212) 805- 0300
142
1 Q. Ms. Li de, what was your pur pose i n sendi ng t hi s document ?
3 THE COURT: I t hi nk she' s expl ai ned her pur pose.
4 Q. Ms. Li de, why di d t he f act t hat t he number s wer e
5 i nconsi st ent a concer n t o you?
7 THE COURT: I wi l l al l ow t hat quest i on.
8 A. At t hat t i me, t he company shoul d have been abl e t o gi ve us
9 exact l y what was spent f or year one, and when i t was unabl e t o
10 do t hat over t he cour se of f i ve budget s, we wer e concer ned, as
11 r esponsi bl e gover nment empl oyees f or t he account i ng of t he
12 gover nment f unds t o t hat pr oj ect .
13 Q. Let ' s t ur n t o page t wo of t hi s exhi bi t , i f you coul d zoom
14 i n on t he t op. Ms. Li de, what i s t hat t abl e?
15 A. That i s a t abl e t hat we pr epar ed summar i zi ng t he year one
16 cost s f r omt he f i ve budget s submi t t ed af t er year one, and t hey
17 ar e gover nment exhi bi t s 32 t hr ough 36.
18 Q. Can you j ust wal k us t hr ough an exampl e of how i t shows t he
19 what you j ust t est i f i ed t o?
20 A. Wel l , cer t ai nl y. I f you l ook at any one of t he l i nes, f or
21 exampl e, equi pment on 10/ 20, t he company sai d i t spent $303, 400
22 on equi pment dur i ng year one, and t hat number changed on
23 December 2nd, and t hen changed agai n on December 20t h. And
24 l ooki ng at any l i ne i t em, t her e ar e many such changes.
25 Q. Af t er you had not i ced t hat , t he i nconsi st ency, di d you
( 212) 805- 0300
143
1 speak t o Dr . Kar r on?
2 A. I bel i eve we spoke t o Dr . Kar r on t hr oughout t he pr ocess. I
3 don' t r ecal l whet her we spoke t o Dr . Kar r on af t er t he
4 Febr uar y 25t h budget or not on t hi s i ssue.
5 Q. When you di d speak t o t he def endant on t hi s i ssue, what di d
6 you t el l hi m?
7 MR. RUBI NSTEI N: Obj ect i on, your Honor . Coul d we f i x
8 a - -
9 THE COURT: Coul d we have a dat e, pl ease?
10 MR. RUBI NSTEI N: I t hi nk she sai d she doesn' t r ecal l
11 t al ki ng t o hi m?
12 A. I do r ecal l t al ki ng t o hi mabout year one act ual s f r omt he
13 per i od of Oct ober . I n f act , when we vi si t ed i n Oct ober , we
14 di scussed t hat . Thr ough t he cour se of t hi s submi ssi on of t he
15 l ast budget i n Febr uar y, I do not r ecal l i f I had any f ur t her
16 conver sat i ons wi t h hi mon t hi s or not .
17 THE COURT: But i t ' s your t est i mony t hat you di d
18 di scuss wi t h hi myear one.
19 THE WI TNESS: That we needed year one act ual s,
20 cor r ect .
21 THE COURT: And di d you di scuss wi t h hi mt he f act
22 t her e wer e di scr epanci es i n t hese budget s?
24 THE COURT: Af t er each budget was submi t t ed?
25 THE WI TNESS: Yes, whi ch i s one of t he r easons we
( 212) 805- 0300
144
1 r equest ed a new budget wi t h t he r equi si t e document at i on t hat
2 woul d descr i be t he act ual s.
3 THE COURT: Al l r i ght . Obj ect i on over r ul ed. Go
4 ahead.
5 Q. Ms. Li de, di d t he def endant submi t any amendment s t o t he
6 pl an t hat wer e appr oved?
7 A. Yes, he di d.
8 Q. I ' mshowi ng you mar ked f or i dent i f i cat i on gover nment
9 exhi bi t 21. Do you r ecogni ze t hat document ?
10 A. Yes, I do.
12 A. I t i s amendment number one, whi ch means a change was
13 r equest ed and appr oved, and t hi s i s wr i t t en appr oval .
14 Q. And whi ch gr ant s - - and what company does t hi s document
15 r el at e t o?
16 A. Thi s i s t he gr ant t o CASI comput er Ai ded Sur ger y
17 I ncor por at ed, and t hi s par t i cul ar amendment changes t he name of
18 t he admi ni st r at i ve cont act .
19 MR. KWOK: Gover nment of f er s exhi bi t 21?
20 THE COURT: What ' s t he dat e on t hi s?
21 THE WI TNESS: The dat e i s, i t was si gned by our gr ant s
22 of f i cer on Oct ober 24t h, ' 01.
23 THE COURT: Al l r i ght . Exhi bi t 21, t her e i s no
24 obj ect i on t o, 21 i s admi t t ed.
( 212) 805- 0300
145
1 BY MR. KWOK:
2 Q. Let ' s l ook at t he next document mar ked f or i dent i f i cat i on
3 Gover nment Exhi bi t 22. Do you r ecogni ze what t hat document i s?
4 A. Yes.
5 Q. What i s i t ?
6 A. That i s amendment 2, and t he r easons f or t hi s amendment ar e
7 t o r evi se t he admi ni st r at i ve cont act ' s name, t o cor r ect t ot al
8 est i mat ed cost s f or t he budget year , t o i ncor por at e a new
9 budget , t o r emove a speci al awar d condi t i on, and t o i ndi cat e
10 what i s af f ect ed by t hese act i ons.
11 Q. What i s t he dat e on t hat document ?
12 A. J anuar y 4t h of 2002.
13 MR. KWOK: Gover nment of f er s Gover nment Exhi bi t 22.
16 MR. KWOK: J ust st ay wi t h t hat document f or a second.
17 THE COURT: Exhi bi t 22 i s admi t t ed i nt o evi dence.
19 Q. You ment i oned some changes t o t he budget . What was t he
20 nat ur e of t he changes t o t he budget ?
21 A. The nat ur e of t he changes ar e document ed act ual l y i n t hi s
22 amendment , as we al ways do. They wer e some mi nor changes i n
23 per sonnel sal ar i es and wages, mi nor changes i n f r i nge benef i t s,
24 i n t r avel and i n equi pment , and t hen i t added a new l i ne t o t he
25 budget as we di scussed ear l i er . To add a new l i ne one has t o
( 212) 805- 0300
146
1 get pr i or appr oval , and t hat l i ne i s mat er i al and suppl i es.
2 Q. Was t hat amendment appr oved?
3 A. Yes. When one get s a wr i t t en amendment l i ke t hi s si gned by
4 t he gr ant s of f i cer i t means t hat t he changes ar e appr oved.
5 Q. Let ' s t ur n t o t he next document mar ked f or i dent i f i cat i on,
6 Gover nment Exhi bi t 23.
7 THE COURT: Coul d we go back one second? I n t hi s
8 document i t says t hat t he admi ni st r at or i s El i sha Gur f ei n.
9 THE WI TNESS: Yes. Amendment number 1, si r , made Lee
10 Gur f ei n t he admi ni st r at i ve cont act , and t he company r equest ed
11 t hat t hat name be f or mal i zed t o i nst ead of Lee, El i sha f or t he
12 f i r st name.
14 Q. Looki ng at Gover nment Exhi bi t mar ked f or i dent i f i cat i on,
15 Gover nment Exhi bi t 23 now, do you r ecogni ze t hat document ?
16 A. Yes, I do.
18 A. I t i s amendment 3, and what i t does i s i t al l ocat es f undi ng
19 f or t he second year of t he pr oj ect . I f you r emember , f or t he
20 f i r st year I sai d t hat t he pr oj ect coul d expend $800, 000, and
21 what t hi s does i s i t aut hor i zes an addi t i onal expendi t ur e f or
22 t he second year of anot her $600, 000.
23 Q. What i s t he dat e on t hi s document ?
24 A. 7/ 16/ 02.
( 212) 805- 0300
147
3 ( Gover nment ' s Exhi bi t 23 r ecei ved i n evi dence.
4 Q. The next document i s mar ked f or i dent i f i cat i on as
5 Gover nment Exhi bi t 24. Do you r ecogni ze t hi s document ?
6 A. Yes, I do.
7 Q. What i s i t ?
8 A. I t ' s amendment 4.
9 Q. What ' s t he dat e?
10 A. 7/ 23/ 302.
11 Q. And what i s t he nat ur e of t hi s amendment ?
12 A. The nat ur e i s t o al l ow t he r eci pi ent t o use what we cal l
13 ASAP, whi ch i s Aut omat ed St andar d Appl i cat i on f or Payment s,
14 whi ch means one can wi t hdr aw on t hat bank account
15 el ect r oni cal l y pr i or t o t he mont h i n whi ch t he money i s spent .
18 THE COURT: Gover nment Exhi bi t 24 i s admi t t ed i n
19 evi dence.
21 Q. The l ast document of t he bat ch i s Gover nment Exhi bi t 25.
22 Do you r ecogni ze t hat document ?
23 A. Yes, I do.
25 A. I t i s aski ng f or a 60- day ext ensi on t o when t he f i r st year
( 212) 805- 0300
148
1 audi t shoul d be compl et ed.
2 Q. And what i s t he dat e?
3 A. 12/ 17/ 02.
4 MR. KWOK: The gover nment of f er s Gover nment Exhi bi t
5 25.
6 MR. RUBI NSTEI N: No obj ect i on.
7 THE COURT: 25 i s admi t t ed.
9 Q. Asi de f r omamendment 2 whi ch cont ai ns t he budget changes
10 you t est i f i ed about , do t hese ot her amendment s t hat I j ust
11 showed you make any changes t o t he budget - -
12 A. No.
13 Q. - - i n t er ms of what t he gr ant r eci pi ent can spend gr ant
14 money on?
15 A. No, wi t h t he except i on t hat we di d add year t wo money. I t
16 was not a change i n t he r eci pi ent ' s budget , but we di d make a
17 change t hat year t wo money coul d be ext ended.
18 Q. Asi de f r omt hat , anyt hi ng el se?
19 A. No.
20 THE COURT: Year t wo money coul d be expended i n year
21 one.
22 THE WI TNESS: No, si r , st ar t i ng Oct ober 1 i n year t wo.
23 We woul d have t o put t he second year money i n t he syst emear l y
24 j ust because i t t akes t i me.
25 Q. I s t hat a r out i ne t ype of amendment ?
( 212) 805- 0300
149
1 A. Sor r y. Whi ch one? Put t i ng year t wo i n?
2 Q. Yes.
3 A. Yes, we usual l y put t hose second year moni es i n dur i ng t he
4 summer mont hs, even t hough i t cannot be expended unt i l af t er
5 t he f i r st year i s compl et ed.
6 Q. I amshowi ng you what has been mar ked f or i dent i f i cat i on
7 Gover nment Exhi bi t 26. Do you r ecogni ze what t hat document i s?
8 A. Yes, I do.
9 Q. What i s i t ?
10 A. I t i s amendment 6, suspendi ng ef f ect i ve i mmedi at el y t hi s
11 awar d.
12 Q. What i s t he dat e on t hat document ?
13 A. J une 27, 2003.
16 THE COURT: 26 i s r ecei ved.
18 Q. What was t he r eason?
19 A. The r eason i s not - -
20 MR. RUBI NSTEI N: Obj ect i on. I obj ect t o t he quest i on
21 t he r eason f or t he suspensi on.
22 THE COURT: I haven' t hear d t he quest i on yet .
23 Q. What was t he r eason f or t he suspensi on of t he gr ant ?
24 A. The r eason - -
25 THE COURT: Wai t a mi nut e. The exhi bi t we' ve got
( 212) 805- 0300
150
1 her e - -
2 MR. KWOK: 26.
3 THE COURT: Wel l , I don' t want t hi s wi t ness t o gi ve
4 her summar y. I f t her e i s an of f i ci al r eason t hat ' s i n t he
5 document , she can r ead i t .
6 THE WI TNESS: Wi t h your per mi ssi on, I wi l l r ead i t .
8 THE WI TNESS: " Thi s cooper at i ve agr eement i s bei ng
9 amended t o suspend t hi s awar d ef f ect i ve i mmedi at el y f or
10 noncompl i ance of speci al awar d 7. "
11 BY MR. KWOK:
12 Q. I f we coul d zoomi n on t hat . And what i s speci al awar d
13 number 7?
14 A. I wi l l be happy t o r ead i t . " I t ' s based on pr el i mi nar y
15 audi t i nf or mat i on. You ar e i n noncompl i ance of speci al awar d
16 condi t i on 7, cost shar e. "
17 Q. And what does t hat mean?
18 A. As we di scussed ear l i er , t hi s pr oposer pr oposed t o shar e
19 t he di r ect cost s of t he pr oj ect . The gover nment was goi ng t o
20 put i n a l i t t l e over 96 per cent , and t he pr oposer was goi ng t o
21 put i n bet ween 3 and 4 per cent , and at t hi s poi nt our
22 pr el i mi nar y i nf or mat i on showed t hat t he r eci pi ent had not gi ven
23 hi s shar e of t he di r ect cost s.
24 Q. Ms. Li de, what i f any i nvol vement di d you have wi t h t he
25 gr ant f or CASI af t er t he gr ant was suspended?
( 212) 805- 0300
151
1 A. We cont i nued t o have e- mai l and t el ephone exchanges because
2 CASI was eager t o get t he gr ant back i n oper at i on.
3 Q. What i f anyt hi ng di d you t el l t he def endant about what he
4 needed t o do t o r est ar t t he gr ant ?
5 A. Basi cal l y t hat he needed t o make hi s par t of t he cost shar e
6 and wor k wi t h t he gr ant s of f i cer and gr ant s of f i ce t o make sur e
7 t hat happened.
8 Q. What happened?
9 A. Not hi ng.
10 MR. KWOK: One moment , your Honor ?
12 MR. KWOK: One moment .
13 No f ur t her quest i ons.
14 THE COURT: Al l r i ght . Cr oss- exami nat i on,
15 Mr . Rubi nst ei n.
16 MR. RUBI NSTEI N: Thank you, your Honor .
17 CROSS EXAMI NATI ON
18 BY MR. RUBI NSTEI N:
19 Q. Good mor ni ng, Ms. Li de.
20 A. Good mor ni ng.
21 Q. Now, when i s t he l ast t i me t hat you saw Dr . Kar r on bef or e
22 comi ng t o cour t her e yest er day?
23 A. To t he best of my knowl edge, i t woul d be when we made t he
24 second si t e vi si t i n Oct ober of 2002.
25 Q. And when wer e you cont act ed by t he f eder al l aw enf or cement
( 212) 805- 0300
152
8637KAR3 Li de - cr oss
1 aut hor i t i es on t hi s case?
2 A. That woul d have been spr i ng of 2005, i f I r emember
3 cor r ect l y.
4 Q. Wel l , l et me show you - -
5 A. Ei t her 2004 or 5.
6 Q. Di d you r evi ew any document at i on bef or e you came her e t o
7 t est i f y, Ms. Li de?
8 A. Yes, I di d.
9 Q. And di d you r evi ew not es of i nt er vi ews wi t h you?
10 A. An i nt er vi ew, no. I was r equest ed t o make some not es, but
11 i t was not an i nt er vi ew.
12 Q. And di d you pr epar e some not es?
13 A. Yes, I di d.
14 Q. And di d you submi t t hat - - di d you gi ve t hose not es t o
15 anybody?
16 A. Yes.
17 Q. And who di d you gi ve t he not es t o?
18 A. The speci al agent .
19 Q. And i s t hat somet i me shor t l y af t er you met t he speci al
20 agent f or t he f i r st t i me?
21 A. Yes.
22 Q. And i s t he speci al agent her e i n cour t ?
23 A. Yes.
24 Q. And who i s t hat speci al agent ?
25 A. Rachel Ondr i k.
( 212) 805- 0300
153
1 Q. And di d you t i t l e t hat r epor t " admi ni st r at i vel y
2 r est r i ct ed" ?
3 A. Absol ut el y.
4 Q. And l et me show you what ' s been mar ked as - -
5 Does she have any of t he 3500 mat er i al her e?
6 THE COURT: I woul d be sur pr i sed i f she does.
7 Q. Let me show you what has been mar ked as Gover nment Exhi bi t
8 351- A and ask you i f t hat i s t he r epor t t hat you submi t t ed t o
9 t he agent .
10 DEPUTY COURT CLERK: 3501- A?
11 MR. RUBI NSTEI N: 3501- A, as i n appl e.
12 THE COURT: I don' t know t hat she cal l ed i t t hat . She
13 sai d t hey wer e not es, i f I under st ood you.
14 THE WI TNESS: Ri ght . These wer e not es t hat I was
15 asked t o pr epar e based on my r ecol l ect i on of t hi s gr ant .
16 THE COURT: Who asked you t o pr epar e t hem?
17 THE WI TNESS: The speci al agent .
19 THE WI TNESS: And now t hat I see t he dat e on i t , i t
20 was not shor t l y af t er t he f i r st meet i ng.
21 Q. As a mat t er of f act , af t er you l ooked at t hi s document ,
22 does t hat r ef r esh your r ecol l ect i on as t o when you met t hi s
23 speci al agent f or t he f i r st t i me about t hi s case?
24 A. No. To t he best of my r ecol l ect i on, i t was spr i ng of ' 05.
25 Q. And when di d you pr epar e - - at t hat meet i ng, wer e you asked
( 212) 805- 0300
154
1 t o pr epar e not es of your r ecol l ect i on of your i nvol vement wi t h
2 Dr . Kar r on and CASI , I nc. ?
3 A. No.
4 Q. Di d t her e come a t i me t hat you wer e asked t o pr epar e not es?
5 A. Yes.
6 Q. And when was t hat ?
7 A. That was shor t l y bef or e t hose not es wer e pr epar ed.
8 Q. So, you met t he agent a second t i me?
9 A. The f i r st t i me, t he agent r equest ed t hat we have no mor e
10 cont act wi t h Dr . Kar r on.
11 Q. And di d t he agent di scuss t he case wi t h you on t he f i r st
12 occasi on?
13 A. No, i t was al l communi cat i on shoul d go t hr ough t he speci al
14 agent .
15 Q. Di d you pr epar e any not es af t er you met wi t h t he speci al
16 agent ?
17 A. The f i r st t i me?
18 Q. Yes.
19 A. No, si r .
20 Q. And you pr epar ed not es. Di d you use anyt hi ng t o r ef r esh
21 your r ecol l ect i on t o pr epar e t he not es t hat you subsequent l y
22 gave t o t he agent ?
23 A. We keep pr oj ect management f i l es whi ch ar e ext r emel y usef ul
24 as hi st or i cal document s.
25 THE COURT: And t hose wer e used t o pr epar e t hese
( 212) 805- 0300
155
1 not es?
2 THE WI TNESS: Yes, t hey ar e kept i n a secur e pl ace and
3 accessi bl e wi t h a need t o know.
4 Q. So, you have a whol e f i l e on CASI , cor r ect ?
5 A. I do not , no, si r ; t he Advanced Technol ogy Pr ogr amdoes.
6 Q. You ar e par t of NI ST t hough, ar e you not ?
7 A. I ampar t of NI ST, t hat i s cor r ect .
8 Q. And t he Advanced Technol ogy Pr ogr ami s a pr ogr amt hat i s
9 super vi sed by NI ST.
10 A. That i s cor r ect , but I ' mno l onger wi t h t hat pr ogr am.
11 Q. But t her e ar e a number of document s, ar e you t el l i ng us,
12 r el at ed t o t he CASI i nvol vement wi t h t he NI ST ATP pr oj ect
13 t hat - -
14 A. Ther e i s t he pr oj ect f i l e, cor r ect .
15 Q. And how vol umi nous woul d you say t hat pr oj ect f i l e i s?
16 A. I n t he Advanced Technol ogy Pr ogr amsecur e si t e wher e i t s
17 document s ar e hel d, i t ' s pr obabl y t wo f eet l ong. The of f i ci al
18 f i l e r esi des i n our gr ant s of f i ce t hough, and I don' t know how
19 l ar ge t hei r s i s.
20 Q. You have never seen t hat ?
21 A. I have seen i t . I have no cl ue how l ar ge i t i s.
22 Q. Have you seen i t i n pr epar at i on f or your t est i mony her e on
23 t hi s t r i al ?
24 A. Have I seen any pr epar at i on by whom?
25 Q. No. Have you seen t hat f i l e?
( 212) 805- 0300
156
1 A. The gr ant s f i l e?
2 Q. Ri ght .
3 A. No, si r . No, si r .
4 Q. Now you pr epar ed t hi s memor andumon J une 27, 2006, cor r ect ?
5 A. Cor r ect .
6 Q. And di d you go back t o your secur e f i l e t o r ef r esh your
7 r ecol l ect i on as t o event s t hat occur r ed?
8 MR. KWOK: Obj ect i on. Asked and answer ed.
9 THE COURT: Obj ect i on over r ul ed. I wi l l al l ow t he
10 quest i on. That ' s not r eal l y a pr oper obj ect i on. I t can be
11 i f - -
12 A. What ' s document ed i n t he document he has, I di d not need t o
13 go back t o t he compl et e f i l e. They wer e hi ghl i ght ed i n my
14 memor y.
15 Q. And di d you r evi ew t hi s document bef or e you came her e t o
16 t est i f y?
17 A. A whi l e ago, yes, si r .
18 Q. When you say a whi l e ago, how l ong ago was t hat ?
19 A. Two mont hs.
20 Q. And was t hat when you met - - wi t hdr awn.
21 Di d you meet t he member s of t he pr osecut i on t eami n
22 t hi s - - when di d you meet t he member s of t he pr osecut i on t eam
23 f or t he f i r st t i me i n t hi s case?
24 A. About t wo mont hs ago, i f I r emember cor r ect l y.
25 Q. And t hat was back i n Apr i l 21, 2008?
( 212) 805- 0300
157
1 A. Appr oxi mat el y.
2 Q. And bet ween t he t i me t hat you submi t t ed t he memor andumt o
3 t he agent i n 2006 unt i l 2008, di d you have any cont act wi t h
4 anybody i n l aw enf or cement r el at ed t o t hi s case?
5 A. Not t hat I can r emember .
6 Q. Do you make not es of your meet i ngs wi t h Dr . Kar r on? Di d
7 you make any not es at t he t i me t hat you met wi t h Dr . Kar r on?
8 A. For mal meet i ngs such as si t e vi si t s, t her e ar e some not es.
9 I nf or mal meet i ngs i n t he NI ST caf et er i a or phone cal l s ar e
10 document ed basi cal l y j ust by e- mai l s.
11 Q. And do you have wi t h you t he not at i ons of any not es of t he
12 f or mal meet i ngs t hat you had? Ar e you t al ki ng about t he t wo
13 si t e vi si t s?
14 A. Cor r ect .
15 Q. And you ar e al so t al ki ng about t he or i gi nal meet i ng wi t h
16 t he sl i de pr esent at i on?
17 A. Ri ght . But t he sl i de pr esent at i on i s our not es f or t hat .
18 Q. Al l r i ght . So your sl i de pr esent at i on and t he not es f or
19 t he f i r st meet i ng wi t h Dr . Kar r on, cor r ect ?
20 A. Cor r ect .
21 Q. You ar e f ami l i ar wi t h Mar k St anl ey, ar e you not ?
22 A. Yes, I am.
23 Q. And who i s Mar k St anl ey?
24 A. He i s cur r ent l y t he di r ect or of t he Advanced Technol ogy
25 Pr ogr am.
( 212) 805- 0300
158
1 Q. And back i n 2001 was he i n f act t he di r ect or of t he
2 Advanced Technol ogy Pr ogr am, ATP?
3 A. He was t he act i ng di r ect or .
4 Q. Al l r i ght . And you woul d have semi nar s, woul d you not ,
5 wi t h r espect t o gr ant appl i cant s?
6 A. We had what we cal l pr oposer s conf er ences f or peopl e who
7 want ed t o appl y.
8 Q. And do you know a Li nda Bet h Shel l i ng?
9 A. Yes.
10 Q. Who i s she?
11 A. She i s cur r ent l y - - wel l , t hey j ust r eor gani zed. She i s a
12 di vi si on di r ect or i n t he Advanced Technol ogy Pr ogr am.
13 Q. And back i n 2000, 2001, what was her t i t l e?
14 A. To t he best of my knowl edge, she was a di vi si on di r ect or
15 t hen of what was cal l ed t he bi ol ogy and chemi st r y di vi si on. I
16 f or get t he exact t i t l e of i t .
17 Q. And do you know a per son by t he name of St ephani e Shi p?
18 A. Yes, I do.
19 Q. And who i s St ephani e shi p?
20 A. She i s on a l eave of absence. Her posi t i on of r ecor d i s
21 t he di r ect or of t he economi c assessment of f i ce i n t he Advanced
23 Q. And what was her posi t i on back i n 2000/ 2001?
24 A. That ' s what i t was t hen.
25 Q. And what about Bar bar a Landi s?
( 212) 805- 0300
159
1 A. Bar bar a Lambi s?
2 Q. Lambi s, cor r ect . Thank you.
3 A. She i s l i ke a speci al assi st ant t o t he di r ect or and a
4 l i ai son t o t he gr ant s of f i ce.
5 Q. And i s i t f ai r t o say t hat t hese peopl e, Mar k St anl ey and
6 t he t hr ee l adi es t hat I ment i oned, t hey woul d make
7 pr esent at i ons t o pot ent i al gr ant appl i cat i ons?
8 A. Cer t ai nl y. They wor k as ar e our pr of essi onal st af f di d.
9 We want ed t o get t he wor d out as br oadl y as possi bl e, so al l
10 pr of essi onal st af f wer e encour aged t o make such pr esent at i ons.
11 Q. And di d you ever par t i ci pat e i n such a pr esent at i on?
12 A. I di d.
13 Q. Do you know whet her or not Dr . Kar r on at t ended a
14 par t i ci pat i on of t hat ki nd?
15 THE COURT: What dat e? At t ended what ? I ' mnot qui t e
16 sur e.
17 Q. A conf er ence wi t h Mar k St anl ey and ot her di r ect or s of t he
18 ATP pr ogr ami n 2001.
19 A. We keep at t endance - - we ask f or r egi st r at i on onl y t o see
20 t he si ze r oomwe need, and we don' t keep at t endance l i st s, so I
21 coul d not be sur e of t hat .
22 Q. I s i t f ai r t o say t hat i n 2001 your agency di st r i but ed
23 about $60 mi l l i on i n new awar ds?
24 A. That ' s t he - - I don' t know exact l y, but t hat i s t he usual
25 amount t hat we di st r i but ed, so, yes, si r , I t hi nk t hat ' s a f ai r
( 212) 805- 0300
160
1 assessment .
2 Q. And what i s t he maxi mumawar d t hat i s per mi t t ed by ATP?
3 A. For a si ngl e company, i t i s $2 mi l l i on over t hr ee year s,
4 and t hus many compani es di vi de i t equal l y, you know, r oughl y 6
5 or $700, 000 a year , but t hey coul d j ust as wel l appl y f or one
6 mi l l i on a year f or t wo year s.
7 Q. And i t ' s f ai r t o say t hat a number of t he compani es t hat
8 appl y ar e smal l compani es?
9 A. Al l si zed compani es appl y. A good per cent age of awar ds do
10 go t o smal l compani es.
11 Q. Now, i s CASI consi der ed a smal l company?
12 A. Yes.
13 Q. And what woul d be - - how woul d you cl assi f y a smal l company
14 f r oma l ar ger company?
15 A. Wel l , we act ual l y use t he gener al pr act i ce of 500 empl oyees
16 or l ess.
17 Q. And you do gi ve gr ant s t o l ar ge compani es, cor r ect ?
18 A. Yes. I ' d l i ke t o cl ar i f y t hat t he Advanced Technol ogy
19 Pr ogr amdoes not t oday exi st , so t o be act ual l y accur at e i t
20 woul d be i t di d gi ve gr ant s t o l ar ge compani es.
21 Q. Does i t exi st wi t h a di f f er ent name?
22 A. No. Ther e i s a new pr ogr amt her e, but i t i s not t he same
23 as t he Advanced Technol ogy Pr ogr amj ust wi t h a di f f er ent name.
24 Q. The admi ni st r at i on, t he pr esent admi ni st r at i on i s t aki ng
25 away sci ent i f i c r esear ch i n di f f er ent ar eas, cor r ect ?
( 212) 805- 0300
161
1 A. Who i s, si r ?
2 Q. The cur r ent admi ni st r at i on of t he gover nment .
3 A. Oh.
4 MR. KWOK: Obj ect i on. Rel evance.
6 Q. What per cent age of peopl e who r ecei ve gr ant s ar e successf ul
7 i n devel opi ng t echnol ogy?
8 A. A ver y l ar ge per cent age. I woul d gi ve an est i mat e of - - do
9 I need t o gi ve an est i mat e? I f you woul d l i ke one, I woul d say
10 80 t o 90 per cent .
11 Q. Woul d you agr ee or di sagr ee wi t h Mar k St anl ey i f he sai d
12 t her e wer e 40 per cent ?
13 A. I t hi nk i t ' s a def i ni t i on of what i s a successf ul
14 t echnol ogy. My answer was i f t he t echnol ogy r esear ch i s
15 successf ul . Mar k i s speaki ng f or t he pr ogr am. The pr ogr am
16 does not t hi nk of t he pr oj ect as a success unl ess not onl y t he
17 t echnol ogy i s devel oped but i t al so r eaches pr oduct i n t he
18 mar ket pl ace. I t hi nk t hat ' s t he di scr epancy i n our
19 per cent ages.
20 Q. And i s t hi s al l gover nment money t hat goes i nt o t hese
21 gr ant s?
22 A. Except f or t he cost shar e r equi r ement s.
23 Q. Wel l , i sn' t i t a f act t hat pr i vat e i ndust r y cont r i but es t o
24 t he f und?
25 A. And t hat ' s why I sai d except f or cost shar e, yes, si r .
( 212) 805- 0300
162
1 Q. Cost shar e i s a f i gur e gi ven by a r eci pi ent l i ke Dr .
2 Kar r on. He had a cost shar e por t i on, cor r ect ?
3 A. Um- hum.
4 Q. Of about 5 per cent .
5 A. Cor r ect .
6 Q. Ri ght ?
7 A. Yes.
8 Q. But i sn' t i t a f act t hat i ndust r y i t sel f donat es t o t hi s
9 ATP pr oj ect ?
10 A. I ndust r y must cont r i but e t o t he pr oj ect , as Dr . Kar r on
11 cont r i but ed i ndependent cost s and cost shar e. But t he pot of
12 money, t he 60 mi l l i on t hat we gi ve away, i s t ot al l y gover nment
13 f unds.
14 Q. And t he money t hat you gi ve away, wher e do you put t he
15 $800, 000 t hat Dr . Kar r on was ent i t l ed t o t he f i r st year of t he
16 gr ant ?
17 A. I n a bank account agai nst whi ch Dr . Kar r on can dr aw t hr ough
18 t hi s pr ogr amdescr i bed as ASAP.
19 Q. So t hat once t he gr ant i s appr oved, $800, 000 i s deposi t ed
20 i nt o an account , cor r ect ?
21 A. Cor r ect .
22 Q. And t hi s gr ant was appr oved Oct ober 1, 2001, cor r ect ?
23 A. Cor r ect .
24 Q. Bet ween Oct ober 1, 2001, when was money act ual l y avai l abl e
25 t o CASI ?
( 212) 805- 0300
163
1 A. I don' t r ecal l . I t hought t he f i r st dr awdown was wi t hi n
2 t he f i r st mont h or t wo.
3 Q. And t he cost s t hat ar e acqui r ed by i n t hi s case CASI bef or e
4 t he money i s avai l abl e i s bor ne by who?
5 A. I t depends on whet her t he st ar t dat e of t he pr oj ect had
6 occur r ed or not . I f t he st ar t dat e of t he pr oj ect was Oct ober
7 4, what ever t he dat e on t hat f i nanci al awar d assi st ance, t hen
8 no money of t he gover nment coul d be spent bef or e t hat dat e.
9 Q. I n t hi s case t he st ar t dat e i n f act was Oct ober 1, was i t
10 not ?
11 THE COURT: Do you have t o l ook at an exhi bi t ? The
12 awar d i s exhi bi t number - -
13 THE WI TNESS: I t was si gned by Dr . CASI on Oct ober 5.
14 THE COURT: By doct or who?
15 THE WI TNESS: Sor r y, by Dr . Kar r on. I ' msor r y. I t ' s
16 Exhi bi t 12.
17 THE COURT: Exhi bi t 12. And t hat ' s t he st ar t dat e?
18 THE WI TNESS: Act ual l y, no. I guess i f you l ook at
19 t he awar d per i od near t he t op i t says t he awar d per i od i s
20 Oct ober 1st .
21 Q. I t ' s f ai r t o say t hat as soon as t he money became
22 avai l abl e, wi t hi n a mont h or t wo mont hs, Dr . Kar r on coul d have
23 wi t hdr awn $800, 000.
24 A. As l ong as i t was - - wel l , one must account f or t he budget
25 mont h by mont h.
( 212) 805- 0300
164
1 Q. Wel l , but i n t he f i r st mont h i f he t ook down $800, 000, at
2 t he end of t he mont h he woul d account t hat he t ook $800, 000,
3 cor r ect ?
4 A. He woul d have t o account how he spent t hat $800 i n t hat
5 mont h.
6 THE COURT: 800, 000.
7 THE WI TNESS: I ' msor r y. Yes, 800, 000. My checkbook
8 i s a l i t t l e di f f er ent .
9 Q. But t he bot t oml i ne i s t hat under t hi s, he di dn' t need any
10 cosi gnat ur e f r omanybody at ATP, cor r ect ? Nobody had t o
11 appr ove any moni es bef or e what you cal l dr awdowns, i s t hat
12 r i ght ? I s t hat t he t er mi nol ogy you use?
13 A. My gr ant s par t ner woul d know t hat bet t er t han I , but t hat ' s
14 a f ai r t er m.
15 THE COURT: What ' s t he answer t o t he quest i on?
16 MR. RUBI NSTEI N: Par don.
17 THE COURT: What was t he quest i on?
18 MR. RUBI NSTEI N: The quest i on i s t hat t her e ar e no
19 r est r i ct i ons on how much of t he $800, 000.
20 THE COURT: That was your st at ement , but I di dn' t
21 under st and t hat t o be your quest i on.
22 Q. Ar e t her e any - - at t he t i me a per son, f or i nst ance Dr .
23 Kar r on or somebody wor ki ng at CASI - - once t he f unds ar e
24 avai l abl e, t he $800, 000 f or year one, Oct ober 1, 2001 t o
25 Sept ember 30, 2002, i s avai l abl e on day one t hat t he money i s
( 212) 805- 0300
165
1 deposi t ed. I t ' s not deposi t ed i n i ncr ement s, cor r ect ?
2 A. That i s cor r ect .
3 Q. And i s t her e any r est r i ct i on on who wor ki ng f or CASI has
4 t he aut hor i t y t o have moni es t r ansf er r ed f r omt hi s account t o
5 t he CASI cor por at i on?
6 A. I t has t o be a dul y r ecogni zed of f i cer of t hat cor por at i on.
7 THE COURT: Can t hey t ake t he whol e $800, 000 i n t he
8 f i r st mont h? That ' s what he i s aski ng.
9 THE WI TNESS: I t ' s hi ghl y unusual . I f t hey t ake i t i n
10 t he f i r st mont h, at t he end of t he f i r st mont h t hey have t o
11 j ust i f y how much of t hat was spent on ATP, and anyt hi ng t hat
12 was not spent on ATP r ever t s - - has t o be r et ur ned t o t hat bank
13 account .
14 So, I f i nd i t har d t o bel i eve - - you know, i f you l ook
15 at a year wher e X peopl e ar e get t i ng sal ar i es mont h by mont h, I
16 f i nd i t har d t o bel i eve t hat t hey coul d get t hei r whol e year l y
17 sal ar y i n t he f i r st mont h.
18 Q. Now, i sn' t i t a f act t hat Dr . Kar r on was advi sed t hat t hi s
19 gr ant was appr oved pr i or t o t he Oct ober dat e t hat you t ol d us
20 i n Exhi bi t 12?
21 A. I woul d have no knowl edge of t hat . I n f act , i t ' s agai nst
22 ATP pol i cy t o advi se t hat bef or e t he act ual awar d announcement
23 i s made t o t he publ i c.
24 Q. So you have no knowl edge whet her or not Dr . Kar r on was
25 awar e t hat he r ecei ved a gr ant pr i or t o Oct ober of 2001. I s
( 212) 805- 0300
166
1 t hat your t est i mony?
2 A. Wel l , Mar i l yn Gol dst ei n' s document - - whi ch agai n i s
3 Exhi bi t 12, i f I r emember cor r ect l y - - i s dat ed 9/ 29/ 01, and
4 once she si gns i t , t hey' r e Fed Exed out . So i t coul d be t hat
5 he r ecei ved i t on 9/ 30. But as a pr oj ect manager , t hat ' s not
6 i n my ar ea or was not i n my ar ea of r esponsi bi l i t y.
7 Q. I sn' t i t a f act , ma' am, t hat pr e- cont r act cost s ar e
8 per mi t t ed under t he gr ant ?
9 A. No.
10 Q. Ar e you f ami l i ar wi t h 48 CFR? Ar e you f ami l i ar wi t h t hat ?
11 A. No, I ' mnot .
12 Q. You' r e f ami l i ar , ar e you not , wi t h 15 - -
13 THE COURT: CFR - -
14 MR. RUBI NSTEI N: Sor r y, J udge. CFR 31. 205/ 32.
15 A. Wel l , I ' mcer t ai nl y f ami l i ar wi t h CFR. I have no cl ue what
16 t hat par t i cul ar r ef er ence i s. I do know t hough t hat ATP does
17 not al l ow any pr oj ect cost s bef or e t he st ar t of t he pr oj ect .
18 Q. Do you know whet her or not t he CFR, 48 CFR 31. 205/ 32, i s
19 r ef er enced i n any of t he exhi bi t s t hat you have t est i f i ed t o
20 her e t oday?
21 A. Coul d you r ead t hat number agai n, pl ease.
22 Q. 48 CFR 31.
23 THE COURT: 205/ 32.
24 MR. RUBI NSTEI N: 205/ 32.
25 A. 48 CFR i s par t of - - you know, i t ' s r ef er enced i n Exhi bi t
( 212) 805- 0300
167
1 12.
2 Q. And t he gr ant r eci pi ent i s supposed t o be r esponsi bl e f or
3 knowi ng what ' s i n 48 CFR 31. 205/ 32, i s t hat cor r ect ?
4 THE COURT: She di dn' t say t hat sect i on. I t was onl y
5 t hat 48 CFR sect i on 31 i s r ef er enced i n t he f i nanci al
6 assi st ance awar d Exhi bi t 12, Gover nment Exhi bi t 12.
7 THE WI TNESS: Ri ght . And t hese ar e document s t hat t he
8 r eci pi ent has as r ef er ence dur i ng t he cour se of t he awar d.
9 Q. And do you physi cal l y gi ve t he r eci pi ent - - you sai d you
10 gi ve t hema packet . Do you i ncl ude i n t hat packet somet hi ng
11 l i ke - - you showed us bef or e I t hi nk on Exhi bi t 3, 15 CFR 14. 4.
12 THE COURT: I don' t know what you' r e r ef er r i ng t o,
14 MR. RUBI NSTEI N: Wel l , I want t o know i f t hey gi ve t he
15 r eci pi ent - -
16 THE COURT: 15 CFR 24 i s not one of t he i t ems t hat i s
17 mar ked on Gover nment Exhi bi t 12.
18 MR. RUBI NSTEI N: I di dn' t say i t was, J udge. I sai d
19 t hat i t ' s ment i oned. I t may not be i n t he Power Poi nt . You
20 gi ve t hema sl i de.
21 THE COURT: Thi s i sn' t a Power Poi nt . Thi s i s t he
22 f i nanci al assi st ance awar d.
24 Q. What document ar e you l ooki ng at ?
25 A. I have Gover nment Exhi bi t 12, and i t l i st s 48 CFR par t 31,
( 212) 805- 0300
168
1 and, yes, t hat document i s par t of t he awar d package whi ch t he
2 r eci pi ent r ecei ves. I t says her e, " The r eci pi ent agr ees t o
3 compl y wi t h t he awar d pr ovi si ons checked bel ow and at t ached. "
4 THE COURT: Ther e i s al so anot her CFR sect i on, i sn' t
5 t her e? CFR - -
6 THE WI TNESS: Ther e ar e sever al CFRs.
7 THE COURT: 514?
9 THE COURT: That ' s al so at t ached?
10 THE WI TNESS: No, i t j ust says 48 CFR par t 31.
11 THE COURT: But I ' mon t he f our t h i t emdown.
12 THE WI TNESS: That ' s 15 CFR. Wai t , one, t wo - - yeah.
13 THE COURT: 14?
14 THE WI TNESS: Yes.
15 THE COURT: And t hat ' s al so sent .
16 THE WI TNESS: Yes, ever yt hi ng checked her e i s par t of
17 t hat awar d package.
18 Q. I n ot her wor ds, on Exhi bi t 12, you have 15 CFR par t 14,
19 cor r ect ?
20 A. Cor r ect .
21 Q. And t hat i s a document t hat has about 80 pages, cor r ect ?
22 A. Pr obabl y, yes.
23 Q. And you have CFR - - 48 CFR par t 31, cont r act cost
24 pr i nci pl es and pr ocedur es, and t hat ' s a document t hat ' s about
25 200 pages l ong.
( 212) 805- 0300
169
1 THE COURT: I t ' s t he Code of Feder al Regul at i ons.
2 Q. I s t hat cor r ect , ma' am?
3 A. Yes, si r .
4 Q. And you al so pr ovi de ot her mat er i al s t o a r eci pi ent ,
5 cor r ect ?
6 A. Al l of t he i t ems checked on Exhi bi t 12 ar e par t of t he
7 awar d package.
8 Q. And t hat i s pr ovi ded t o t he r eci pi ent at t hi s f i r st meet i ng
9 you t ol d us about ?
10 A. No, si r , t hat ' s Fed Exed t o t he r eci pi ent wi t h t he act ual
11 awar d t hat t he r eci pi ent si gns sever al copi es of and sends some
12 back t o t he gover nment .
13 Q. And coul d you descr i be t o t he j ur y i n vol ume how l ar ge t hi s
14 package woul d be t hat t he r eci pi ent woul d r ecei ve?
15 A. I t ' s not sent f r ommy of f i ce, so I don' t know. Ther e ar e
16 r ef er ence document s t o be r ead as needed.
17 Q. And i s i t f ai r t o say t hat t he concept of ATP i s t hat no
18 good pr oj ect shoul d go unf unded? That ' s your mant r a?
19 A. No, sadl y we di dn' t have enough money t o f ol l ow t hat
20 mant r a.
21 Q. Wel l , shoul d a pr oj ect t hat you f unded, shoul d i t go
22 unf i ni shed?
23 THE COURT: Sor r y, I don' t under st and t he quest i on.
24 MR. RUBI NSTEI N: I wi l l wi t hdr aw i t , J udge.
25 Q. Now, i f t he gr ant ee i s successf ul and devel ops a pr oduct
( 212) 805- 0300
170
1 t hat ' s used i n t he mar ket pl ace, i s i t f ai r t o say t hat t he
2 gr ant ee i s t he one who der i ves t he f i nanci al benef i t of t hat
3 pr oduct ?
4 A. One hopes t hat t he gr ant ee does and al so t he Uni t ed St at es
5 as a nat i on. We hope t hat t hey ar e al so an economi c benef i t t o
6 our nat i on.
7 Q. Ri ght . But not hi ng t o r epl ace t he $800, 000 or t he $2
8 mi l l i on t hat t hey got as st ar t - up money, cor r ect ?
9 A. The gover nment does not get any money back, no.
10 THE COURT: They' r e not a par t ner .
11 THE WI TNESS: Wel l , we' r e a par t ner i n t hat we gi ve
12 t hemt hi s f undi ng and we ar e ver y pl eased when t hey ar e
13 successf ul . That i s our goal , t o have successf ul - -
14 THE COURT: But t her e i s no f i nanci al benef i t .
15 THE WI TNESS: That ' s cor r ect , si r , r i ght , j ust
16 br aggi ng r i ght s.
17 Q. Now, t he speci al condi t i on t hat was i nvol ved i n t hi s
18 gr ant - - I t hi nk you sai d i t was i n - - was t hat i n Exhi bi t 12
19 t hat t hey r ef er r ed t o a speci al condi t i on?
20 A. I t mi ght have been 13, I bel i eve. Yeah, speci al awar d
21 condi t i ons ar e Gover nment Exhi bi t 13.
22 Q. Now, you wer e a gr ant admi ni st r at or ?
23 A. No, I ' mnot , si r . I ama t echni cal per son.
24 Q. So, your j ob i s t o advi se t he gr ant ee on what ?
25 A. Our j ob i s t o f ol l ow t he t echni cal pr ogr ess and t he
( 212) 805- 0300
171
1 commer ci al i zat i on pr ogr ess, t o advi se as needed, and t o br i ng
2 i n t he gr ant s speci al i st al so as needed. We ar e l i ai sons t o
3 t he gr ant s of f i ce.
4 Q. And her e t her e was - - ar e you i nvol ved i n det er mi ni ng who
5 i s t he r eci pi ent of t he gr ant ?
6 A. Yes, I act ual l y r an t he compet i t i on. But I obvi ousl y di d
7 not r evi ew ever y pr oposal mysel f .
8 Q. But i n t hi s i nst ance - - CASI was t he gr ant r eci pi ent ,
9 cor r ect ?
10 A. CASI i s a gr ant r eci pi ent i n t he 2001 compet i t i on, cor r ect .
11 Q. And t hat i s CASI , I nc. , I - N- C.
12 A. Yes.
13 Q. And Dr . Kar r on i s a pr i nci pal of t hat cor por at i on, cor r ect ?
14 A. He act ual l y si gned t he pr oposal I bel i eve as chi ef
15 t echni cal of f i cer , and ot her t i mes he si gned i t as pr esi dent .
16 Q. And t he onl y speci al condi t i on was t hat CASI cof und f or t he
17 5 per cent , cor r ect ?
18 THE COURT: Thr ee. I s i t 5 per cent ?
19 THE WI TNESS: I t ' s 3. 61 i n t he speci al awar d
20 condi t i on.
21 MR. RUBI NSTEI N: OK. I was r oundi ng i t of f , J udge,
22 but 3. 61 i s f i ne wi t h me.
23 Q. And t he number t hat you gave bef or e of 50 some odd t housand
24 dol l ar s, t hat was f or t he f i r st 21 mont hs of t he gr ant when t he
25 gr ant was suspended, cor r ect ?
( 212) 805- 0300
172
1 A. I don' t r emember sayi ng 50 some odd t housand dol l ar s.
2 THE COURT: I don' t t hi nk t her e was any such
3 t est i mony, Mr . Rubi nst ei n.
4 MR. RUBI NSTEI N: I ' msor r y.
5 Q. I n f act - -
6 THE COURT: The j ur y' s r ecol l ect i on wi l l gover n, but
7 t hat ' s my r ecol l ect i on.
8 Q. And i n Exhi bi t 26 i t gi ves a r eci pi ent shar e of t he cost i n
9 t hat Exhi bi t of $67, 000 even.
10 THE COURT: You ar e r ef er r i ng t o t he - -
11 MR. RUBI NSTEI N: Gover nment Exhi bi t 26, your Honor .
12 THE COURT: Al l r i ght . Thi s i s t he pr oposal f or t he
13 second year ?
14 MR. RUBI NSTEI N: No, your Honor . Thi s i s t he - - I ' m
15 sor r y. I must have gi ven you t he wr ong number .
16 THE WI TNESS: Thi s shows t he f i r st and second year
17 t oget her .
18 MR. RUBI NSTEI N: I ' msor r y, your Honor .
19 Q. I s i t f ai r t o say, Ms. Li de, t hat t he gr ant was suspended
20 f or not cont r i but i ng t he cof undi ng 3. 61?
21 A. That i s t he r eason f or t he suspensi on.
22 Q. And ar e you awar e t hat af t er t he suspensi on on J une 27,
23 2003, t hat Dr . Kar r on deposi t ed $60, 000 i n t he CASI account ?
24 A. I saw document at i on of t hat onl y i n t he ATP f i l e. I was
25 not awar e of i t at t he t i me. At t hat poi nt t he negot i at i on was
( 212) 805- 0300
173
1 bet ween CASI and our gr ant s of f i ce.
2 Q. So you wer e out of t he l oop basi cal l y?
3 A. I was a t echni cal pr oj ect manager , and Dr . Kar r on had t o
4 sat i sf y t he r equi r ement s f r omour gr ant s of f i ce, because al l
5 of f i ci al document at i on comes f r omt hem.
6 Q. Now, t her e ar e ot her speci al condi t i ons t hat can be pl aced
7 on a gr ant ee, i s t hat cor r ect ?
8 A. Yes.
9 Q. As a mat t er of f act , t her e ar e condi t i ons. Somet i mes you
10 have compani es t hat ar en' t f i nanci al l y sound or f i nanci al l y
11 st abl e t o qual i f y f or gr ant s, cor r ect ?
12 A. Coul d you pl ease def i ne f i nanci al l y sound.
13 Q. I n t he CASI gr ant t her e was t o be an audi t at t he end of
14 t he f i r st year .
15 A. That ' s t r ue of al l t hr ee- year si ngl e appl i cant s.
16 Q. I sn' t i t a f act t hat under t he r ul es of ATP, t hat you coul d
17 have wi t h a si ngl e appl i cant gr ant mor e - - you coul d have an
18 ear l i er audi t t han at t he end of t he year ?
19 THE COURT: The f i r st year .
20 MR. RUBI NSTEI N: Fi r st year .
21 A. I f you r equest ed i t .
22 Q. I s t he f i nanci al r esponsi bi l i t y of t he pr ospect i ve gr ant ee
23 somet hi ng t hat ' s l ooked at i n det er mi ni ng whet her or not t o
24 gr ant an awar d?
25 A. The or gani zat i onal st r uct ur e and t he abi l i t y t o sust ai n t he
( 212) 805- 0300
174
1 awar d i s l ooked at , yes.
2 Q. How about t he i ndi vi dual , t he i ndi vi dual s i nvol ved i n t he
3 gr ant ees, as t o t hei r f i nanci al management capabi l i t i es?
4 A. No, we l ook at t he cor por at i on. We do not l ook at t he
5 i ndi vi dual s. We do cl ear t he i ndi vi dual s f or ot her t hi ngs l i ke
6 cr i mi nal of f enses and di sbar ment , t hi ngs l i ke t hat , but we do
7 not , t o t he best of my knowl edge - - I have never l ooked at an
8 i ndi vi dual ' s r ecor ds.
9 Q. How about whet her or not t hey pay t hei r i ncome t ax, do you
10 check t hat ?
11 A. No, unl ess i t shows up on one of t he gover nment cl ear ances
12 t hat ar e done r out i nel y.
13 Q. That ar e done wi t h what ?
14 A. Ther e ar e cer t ai n r out i ne f or ms t hat pr i nci pal s of a
15 company f i l l out , and t hen t hey go t hr ough r out i ne cl ear ances
16 downt own at Depar t ment of Commer ce, Depar t ment of J ust i ce, so
17 unl ess t hey l ook at i ncome t ax. But ATP cer t ai nl y does not
18 l ook at an i ndi vi dual ' s i ncome t ax.
19 Q. So, i n ot her wor ds, bef or e a per son get s a gr ant t her e ar e
20 ot her or gani zat i ons i n gover nment t hat check t he per son or t he
21 company i n some way t o f i nd out i f t hey' r e f el ons or what ever .
22 A. Ther e ar e cl ear ances, t hat i s cor r ect .
23 Q. So CASI r ecei ved a cl ear ance, cor r ect ?
24 A. CASI r ecei ved a gr ant , so cl ear l y t he cl ear ance went
25 t hr ough.
( 212) 805- 0300
175
1 Q. And what agent - - do agenci es have t o submi t a document
2 wi t h ATP t hat t hey have cl ear ed CASI t o r ecei ve $800, 000 i n one
3 year ?
4 A. Do agenci es - -
5 THE COURT: Obj ect i on t o t he f or mof t he quest i on,
6 because t her e i s mor e t han one concl usi on.
7 Q. Let me ask you t hi s. You ar e f ami l i ar wi t h t he of f i ce of
8 t he i nspect or gener al of t he Depar t ment of Commer ce, cor r ect ?
9 A. Yes.
10 Q. And, as a mat t er of f act , t he speci al agent t hat you
11 poi nt ed out who was her e bef or e, she i s wi t h t hat or gani zat i on,
12 cor r ect ?
13 A. Yes.
14 Q. And does t he i nspect or gener al , do t hey i nvest i gat e on
15 behal f of ATP t he qual i f i cat i ons of a gr ant r eci pi ent ?
16 A. To t he best - -
17 THE COURT: I f you know.
18 A. Someone you ment i oned ear l i er handl ed t hat par t of t he
19 pr ocess, Ms. Bar t a Lambi s, and t hat was not par t of my
20 r esponsi bi l i t y. I do know t hat t her e ar e cl ear ances.
21 Q. And i t ' s f ai r t o say t hat t hese f unds, t hi s $800, 000, i s
22 not put i n escr ow, cor r ect ?
23 THE COURT: Asked and answer ed. She t ol d you wher e i t
24 was put .
25 Q. And when you wi t hdr aw t he f unds, i s t her e any r equi r ement
( 212) 805- 0300
176
1 t o segr egat e t hese ATP f unds f r omany ot her f unds t hat t he
2 company mi ght have?
3 A. Yes, one has t o have an account i ng syst emt hat account s f or
4 what goes t o t he ATP pr oj ect .
5 Q. A syst em, cor r ect ?
6 A. An account i ng syst em.
7 Q. But not a separ at e bank account f or t hese f eder al f unds,
8 cor r ect ?
9 A. As l ong as one can account f or t he spendi ng of t he f unds
10 f r omt hat account t o t he CASI pr oj ect .
11 Q. Now, di d t her e come a t i me t hat you had - -
12 By t he way, i s t he gr ant ee, i n t hi s case CASI , ar e
13 t hey per mi t t ed t o get addi t i onal f undi ng sour ces out si de of ATP
14 t o devel op t hei r pr oj ect ?
15 A. That ' s encour aged.
16 Q. And i n f act i n t hi s case wi t h CASI t hey wer e expl or i ng,
17 wer e t hey not , get t i ng f unds f r omNew Yor k st at e?
18 A. Cor r ect .
19 Q. And i n f act you l ear ned t hey wer e unabl e t o get f unds
20 because t hi s gr ant st ar t ed Oct ober 1, 2001 and 9/ 11 happened
21 2001.
22 A. I t was not my under st andi ng t hat t hat was t he r eason. I n
23 f act , i t was my under st andi ng t hat t hey wer e pur sui ng ot her
24 sour ces of f unds. Lat er i n t he cour se of t he pr oj ect , some of
25 t he quar t er l y r epor t s act ual l y had what t hey submi t t ed t o ot her
( 212) 805- 0300
177
1 f undi ng agenci es.
2 THE COURT: I t ' s your under st andi ng i n t hi s ar ea,
3 based on r epor t s f r omCASI .
4 THE WI TNESS: And conver sat i ons, yes, si r .
5 THE COURT: But not hi ng el se.
6 THE WI TNESS: No, si r .
7 THE COURT: So, you don' t have any i ndependent
8 knowl edge.
10 THE COURT: You ar e j ust r epeat i ng what t hey t ol d you.
11 THE WI TNESS: What t hey t ol d me ver bal l y and what we
12 got i n t he quar t er l y r epor t s.
13 THE COURT: Fr omt hem.
15 Q. Do you r ecal l bei ng a r eci pi ent of an e- mai l , Gover nment
16 Exhi bi t 3501- DDDDD?
17 THE COURT: 3501 what ?
18 MR. RUBI NSTEI N: DDDDD.
19 THE COURT: D, as i n dog?
21 THE WI TNESS: Do I have t hat ?
22 THE COURT: Do you want t o show i t t o t he wi t ness.
23 Q. I show you t hi s e- mai l , i t ' s act ual l y f r omyou. Do you
24 want t o r evi ew i t and see i f i t r ef r eshes your r ecol l ect i on?
25 A. Sur e.
( 212) 805- 0300
178
1 THE COURT: I s t hat DDD?
2 MR. RUBI NSTEI N: Fi ve Ds, your Honor .
3 THE COURT: Fi ve Ds, as i n dog.
4 MR. RUBI NSTEI N: 3501 f i ve Ds.
5 Your Honor , t he gover nment hasn' t pr ovi ded t hese
6 document s t o t he j ur y, your Honor .
7 THE COURT: I under st and.
8 MR. RUBI NSTEI N: I know, but t he j ur y i s l ooki ng.
9 THE COURT: You won' t have i t t her e i n your books.
10 What ' s your quest i on on t he document ?
11 Q. Yes. Does t hat r ef r esh your r ecol l ect i on of di scussi ons
12 about New Yor k st at e, at t empt i ng t o get New Yor k st at e f undi ng?
13 A. Even wi t hout t hat e- mai l , I acknowl edge t hat CASI was
14 t r yi ng t o get ot her f undi ng.
15 Q. And you sai d somet hi ng about t hat t hey had i ndi cat ed t hey
16 want ed t o open an of f i ce i n downt own Manhat t an, cor r ect ?
17 A. That ' s what I r ecal l Dr . Kar r on t el l i ng us, yes.
18 Q. And i n f act you ar e awar e t hat i t was vi r t ual l y i mpossi bl e
19 t o f i nd of f i ces i n downt own Manhat t an af t er 9/ 11/ 01, cor r ect ?
20 A. I honest l y t hought - - I r ecal l some di scussi on on per haps
21 r ent woul d be cheaper and i t woul d be easi er , and t her e wer e
22 al so ot her of f i ces bei ng consi der ed.
23 Q. And one of t hemwas at CUNY.
24 A. Cor r ect .
25 Q. And i n f act di d you l ear n t hat CUNY want ed $1 mi l l i on i n
( 212) 805- 0300
179
1 r ent t o r un t he CASI pr oj ect out of t hei r f aci l i t y?
2 A. I di d not know t hat .
3 Q. Di d you i nqui r e of Dr . Kar r on at any t i me what happened t o
4 t he f aci l i t y at CUNY?
5 A. Act ual l y t he quar t er l y r epor t s r epor t ed t hat t hey wer e
6 st i l l l ooki ng f or space, and al t hough i t hadn' t come t hr ough
7 yet i t was st i l l a possi bi l i t y, and t hat document at i on
8 i ndi cat ed t o us t hat he was st i l l pur sui ng ot her l ab space.
9 Q. And you came i n cont act wi t h t hi s Mr . Or t hwei n, cor r ect ?
10 A. Cor r ect .
11 Q. You met hi mper sonal l y?
12 A. Cor r ect .
13 Q. And you had a number of t el ephone cal l s wi t h hi m, cor r ect ?
14 A. Cor r ect .
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
180
863ZKAR4 Li de - cr oss
1 Q. And coul d you est i mat e how of t en he woul d cal l you on
2 behal f of CASI ?
3 A. I coul d not est i mat e. Many of t he communi cat i ons wer e f r om
4 Dr . Kar r on, hi msel f .
5 Q. Now, you say you went t o t he 300 East 33r d St r eet wher e
6 CASI was l ocat ed, cor r ect ?
7 A. Cor r ect .
8 Q. Coul d you, when you went t her e, on your - - you went t her e
9 on your f i r st si t e vi si t , r i ght ?
10 A. We went t her e t wo si t e vi si t s, cor r ect .
11 Q. And your f i r st si t e vi si t was i n 2001?
12 A. The f i r st - - bot h si t e vi si t s wer e i n 2002, May and
13 Oct ober .
14 Q. And when you went on t hi s si t e vi si t , coul d you descr i be t o
15 t he j ur y what t hi s f aci l i t y l ooked l i ke?
16 A. I t l ooked l i ke someone' s per sonal abode wi t h a l i vi ng r oom
17 wi t h a l ar ge number of comput er s.
18 Q. Was t her e anyt hi ng ot her t han comput er s i n t he l i vi ng r oom?
19 A. I r emember , you know, f aci l i t y l i ke a scr een t o show a
20 power poi nt pr esent at i on. The over whel mi ng i mpr essi on was a
21 l ot of comput er s.
22 Q. And, i n f act , you t ol d us t hat i t was ver y hot i n t her e?
23 A. No, I di dn' t t hi nk i t was hot at al l . I t was br ought t o
24 our at t ent i on t hat because of t he comput er s, Dr . Kar r on f el t
25 ATP shoul d pay f or addi t i onal el ect r i ci t y f or ai r condi t i oni ng.
( 212) 805- 0300
181
1 Q. And t hat was somet hi ng t hat was goi ng t o be negot i at ed,
2 cor r ect ?
3 A. No. We sai d t hat i t ' s nor mal l y not cover ed. We di dn' t
4 t hi nk i t woul d be cover ed. He coul d appl y and see what t he
5 gr ant s of f i ce sai d, but i t was not an i t emt hat we expect ed t o
6 negot i at e, because we' ve never seen i t done bef or e.
7 Q. Wel l , ar e you awar e t hat CASI was asked t o submi t t hei r
8 pr i or year bi l l s on el ect r i ci t y t o t hei r cur r ent year ' s usage?
9 A. No, I was not awar e. But any appr oval f or t hat woul d have
10 come f r omt he gr ant s of f i ce. I was not par t of t hat .
11 Q. You' r e not par t - -
12 THE COURT: I t hi nk I shoul d i nst r uct t he j ur y t hat
13 i t ' s t he wi t ness' answer s t hat ar e t he evi dence bef or e you.
14 I t ' s not t he l awyer s' quest i ons. So you' r e not t o dr aw any
15 concl usi ons f r omt he f act t hat t he l awyer asked t he quest i on.
16 I t ' s what t he wi t ness answer s t hat i s t he evi dence bef or e you.
17 Q. Wel l , t her e wer e - - di d you ever hear of t he t er m, si t e
18 pr epar at i on?
19 A. I ' ve not hear d t hat t er m. I can i magi ne what t he
20 def i ni t i on woul d be.
21 Q. I sn' t i t a f act t hat a gr ant ee i s per mi t t ed t o t o pr epar e
22 t he f aci l i t y wher e t he pr oj ect i s goi ng t o be r un t o
23 accommodat e t he equi pment , i f you need equi pment i n t he gr ant s;
24 i s t hat so?
25 A. The gr ant ee cer t ai nl y has aut hor i t y t o do what ever he or
( 212) 805- 0300
182
1 she want s wi t h t he space at t he l abor at or y. I t ' s a quest i on of
2 who pays f or t hat , and ATP does not pay f or maj or r enovat i ons.
3 Q. Wel l , Exhi bi t 1 t hat ' s act ual l y i n t he bi nder s, and page
4 si x of t hat exhi bi t , do you r ecal l t est i f yi ng about t hat on
5 di r ect exami nat i on?
6 A. Cor r ect .
7 Q. And you t est i f i ed t hat t he pr oj ect doesn' t pay f or
8 const r uct i on cost s, cor r ect ?
9 A. Cor r ect . I t says her e, t hose ar e unal l owabl e cost s t o ATP.
10 Q. Wel l , how about t he next l i ne, does i t say, r eadi ng f r om
11 Gover nment ' s one i n evi dence; however , const r uct i on of
12 exper i ment al r esear ch and devel opment f aci l i t i es t o be l ocat ed
13 wi t hi n a new or exi st i ng bui l di ng ar e al l owabl e, pr ovi ded t he
14 equi pment or f aci l i t i es ar e essent i al f or car r yi ng out t he
15 pr oposed sci ent i f i c and t echni cal pr oj ect and ar e appr oved by
16 NI ST gr ant s of f i ces?
17 THE COURT: You asked her i f i t says t hat ?
18 Q. I s t hat what t hat document says, i n whol e?
19 A. Yes, i t does. However , t hat was not pr oposed i n t he
20 pr oposal . I have managed over 50 ATP pr oj ect s over 15 year s
21 and we have never pai d f or t hat .
22 MR. RUBI NSTEI N: I move t hat be st r i cken as not
23 r esponsi ve.
24 THE COURT: Wel l , t he l at er t he par t of i t , t he l ast
25 t he j ur y i s i nst r uct ed t o di sr egar d t he par t about t he 15
( 212) 805- 0300
183
1 year s. But t he wi t ness t est i f yi ng t hat not t hi s l anguage i s
2 not i n t he gr ant pr oposal i s al l owed.
3 Q. The pr oposal , i t sel f , i n ot her wor ds when you met wi t h Dr .
4 Kar r on, di d you t el l hi mt hat , you know, i n 15 year s we' ve
5 never once al l owed any ki nd of si t e pr epar at i on cost s; di d you
6 ever say t hat , yes or no?
7 A. We sai d i t was hi ghl y unl i kel y t hat i t woul d be appr oved.
8 Q. Your depar t ment i s not t he one t hat appr oves or
9 di sappr oves, cor r ect ?
10 A. My depar t ment r ecommends appr oval or di sappr oval .
11 Q. And t her e i s an appeal pr ocess?
12 A. I t ' s no appeal pr ocess. The deci si on i s made i n our gr ant s
13 of f i ce, so we can r ecommend, but t hey make t he deci si on.
14 Q. And, i n f act , coul d you descr i be t he si ze of t hese
15 comput er s t hat wer e i n t hi s of f i ce of CASI ?
16 A. Ther e wer e sever al si l i con gr aphi c ser ver s and some wor k
17 st at i ons. Technol ogy has changed.
18 The ot her poi nt I ' d l i ke t o make i s t he r equest f or
19 t hese wer e not i n t he or i gi nal budget , so he woul d' ve needed an
20 appr oval of a di f f er ent budget anyway t o use t he money f or
21 t hese i t ems.
22 Q. Fi ne. But you can get budget r evi si ons, r i ght ?
23 A. You can get budget r evi si ons.
24 Q. And i t ' s a quest i on of whet her or not somebody says t hat
25 t hi s i s an appr opr i at e expense or not an appr opr i at e expense,
( 212) 805- 0300
184
1 cor r ect ?
2 A. He was advi sed t hat i f he want ed t o suggest i t , we woul d
3 cer t ai nl y see what t he gr ant s of f i ce sai d.
4 THE COURT: What t hey sai d or wr i t e?
5 THE WI TNESS: I ' msor r y, what t hey wr ot e, yes, si r ,
6 had t o be i n wr i t i ng - - sor r y. The deci si on t he gr ant s of f i ce
7 made woul d be appr opr i at e way t o say t hat .
8 Q. I sn' t i t a f act t hat i n November of 2001, t her e wer e
9 r equest s, or al r equest s f or budget r evi si ons by Dr . Kar r on?
10 A. And, i ndeed, a budget r evi si on was appr oved i n December of
11 ' 01. That ' s one of t he gover nment exhi bi t s, and not hi ng f or
12 t hose expenses occur r ed i n t hat budget r evi si on.
13 THE COURT: Submi t t ed by?
14 THE WI TNESS: CASI submi t t ed a new budget t hat was
15 appr oved i n December of 2001, and t her e wer e no changes i n t he
16 budget t hat woul d r ef l ect t he desi r e f or t hese r enovat i ons.
17 Q. What ki nd of r enovat i ons wer e t hey?
18 A. I woul d assume we ar e t al ki ng about t he ai r condi t i oni ng.
19 Q. And t he ai r condi t i oni ng, Dr . Kar r on advi sed you, was
20 necessar y because t he comput er s whi ch wer e r unni ng, cor r ect ?
21 A. Yes, si r .
22 Q. And i n f act t hese, you l ear ned t hat t hese comput er s wer e
23 r unni ng vi r t ual l y 24 hour s a day?
24 A. But my poi nt i s i f he want ed t hat r enovat i on, i t shoul d
25 have been r equest ed i n a r evi sed budget , i f he want ed t o spend
( 212) 805- 0300
185
1 t he Gover nment ' s money f or i t .
2 Q. Shoul d have been, cor r ect ?
3 A. Cor r ect .
4 Q. Now, t hey di d ask f or a r evi sed budget as t o empl oyees, di d
5 t hey not , i n November of 2001?
6 THE COURT: What ' s t he quest i on?
7 Q. To r educe par t of t he r evi si on r equest was t o r educe t he
8 sal ar i es f or empl oyees?
9 A. One of t he - - t her e was a mi nor r educt i on i n - - I ' d have t o
10 l ook up t hat budget i f we' r e goi ng t o do t hat , pl ease.
11 THE COURT: Exhi bi t what ?
12 THE WI TNESS: I t ' s one of t he amendment s, si r .
13 THE COURT: What dat e ar e we t al ki ng about ?
14 THE WI TNESS: Yeah, whi ch exhi bi t i s - -
15 THE COURT: Mr . Rubi nst ei n, what dat e ar e you t al ki ng
16 about ?
17 THE WI TNESS: I t ' s, i t ' s amendment s one or t wo, I
18 t hi nk.
19 THE COURT: What exhi bi t ar e you t al ki ng about , Mr .
20 Rubi nst ei n, so we can get al ong wi t h t hi s?
21 MR. RUBI NSTEI N: I bel i eve i t i s - -
22 THE WI TNESS: Let ' s see, i t ' s goi ng t o be 22.
24 THE WI TNESS: Cer t ai nl y.
25 THE COURT: 22?
( 212) 805- 0300
186
1 THE WI TNESS: Yes, si r . Exhi bi t 22. And t he sal ar i es
2 wer e r educed f r om375 t o 325. However , t hat was of f set by t he
3 i ncr ease i n subcont r act or s f r om200 t o 250.
4 Q. When t hey r educed t he sal ar i es, t hey al so r educed t he
5 f r i nge benef i t s, di d t hey not , i n t he r evi sed budget ?
6 A. Cor r ect , and t hey upped t he t r avel and t he mat er i al s. The
7 net change i n t he budget was zer o.
8 Q. The concept of ATP i s, don' t spend mor e t han t he 800, 000,
9 cor r ect ?
10 A. You cannot spend mor e t han 800, 000 dur i ng t he f i r st year of
11 t he pr oj ect or however much you' ve budget ed, cor r ect .
12 Q. And when CASI submi t t ed t hei r budget , di d anybody f r omATP
13 quest i on any l i ne i n t he budget ?
14 A. Ther e was - - t her e i s a sour ce of val uat i on boar d whi ch
15 consi st s of appr oxi mat el y 15 hi gh l evel i ndi vi dual s who l ook at
16 t hat pr oposal , i ncl udi ng t he budget . And, i ndeed, i f t her e ar e
17 any quest i ons, t hose ar e ei t her answer ed at what ' s cal l ed an
18 or al r evi ew, or t her e ar e document s t hat go back and f or t h wi t h
19 quest i ons and answer s. But t he f i nal document i s t he one t hat
20 i s appr oved i n t he awar d i t sel f .
21 THE COURT: Wel l , l ooki ng at exhi bi t 26, Ms. Li de.
22 THE WI TNESS: Yes, si r . 26?
23 THE COURT: Ar e t he expl anat i ons of t he changes i n t he
24 budget i ncl uded i n t he second page of t he budget r equest ?
25 THE WI TNESS: I ' maf r ai d I mi spl aced 26.
( 212) 805- 0300
187
1 THE COURT: I ' msor r y, di d I say 26? 22.
2 THE WI TNESS: 22? Ther e i s - -
3 THE COURT: I s t he one you say i s t he - -
4 THE WI TNESS: Yes, si r . And i n my exhi bi t I - - t her e
5 i s an e- mai l wher e t he changes - -
6 THE COURT: No, I don' t want somet hi ng - - oh, i t ' s a
7 par t of exhi bi t - -
8 THE WI TNESS: Yes, yes.
9 THE COURT: The second page?
10 THE WI TNESS: Oh, i t ' s t he one, t wo, t hr ee, t he f our t h
11 page of exhi bi t 22 i s t he expl anat i on and r at i onal f or t he
12 changes.
13 THE COURT: And t hen t her e' s one i t emt hat ' s cal l ed
14 cont r act i ng cost s.
15 THE WI TNESS: Cor r ect , so - -
16 THE COURT: What i s t hat f or ?
17 THE WI TNESS: Basi cal l y, t hey wer e changi ng t he st at us
18 of at l east one empl oyee t o a consul t ant i nst ead of an
19 empl oyee.
20 THE COURT: But who i s t hat consul t ant ?
21 THE WI TNESS: The one I ' mr eadi ng her e now i s
22 Pr of essor Geor ge Wol ber g.
23 THE COURT: That ' s not ai r condi t i oni ng, i s t hat
24 r i ght ?
25 THE WI TNESS: That i s cor r ect , i t i s not . Ther e' s no
( 212) 805- 0300
188
1 change i n t hi s budget t hat woul d anyway r ef l ect t he r equest f or
2 payi ng f or ai r condi t i oni ng.
4 Q. By t he way, i n Exhi bi t 1, t he pr oposal ki t ?
5 A. Yes, si r .
6 Q. Do t hey amend t hese ki t s f r omt i me t o t i me?
7 A. Absol ut el y.
8 Q. The pr oposal ki t we have i n evi dence says 2000?
9 A. That i s cor r ect , and i t was pr epar ed f or t he 2001
10 compet i t i on. That i s t he ki t under whi ch CASI appl i ed.
11 Q. And when you made t hat si t e vi si t , you saw a number of
12 i ndi vi dual s t her e who wer e not l i st ed i n t he budget t hat was
13 submi t t ed t o ATP, cor r ect ?
14 THE COURT: Whi ch si t e vi si t , Mr - -
15 Q. The f i r st si t e vi si t ?
16 A. Ther e was some conf usi on on our par t as t o who was i n t he
17 r oomver sus who was i n t he pr oposal , and we r emi nded Dr . Kar r on
18 t o f or mal l y submi t any changes i n per sonnel wi t h j ust i f i cat i on.
19 Q. And di d you di scuss who t hose peopl e wer e i n t he apar t ment ?
20 A. We go ar ound and we make i nt r oduct i ons and we di scuss - -
21 yes, who t hose peopl e wer e.
22 Q. And di d you l ear n t hat t hey wer e st udent s, gr aduat e
23 st udent s t hat wer e t her e?
24 A. Uh- huh. Some of t hem, r i ght .
25 Q. And wer e wor ki ng on t hi s pr oj ect , r i ght ?
( 212) 805- 0300
189
1 A. And what we wer e aski ng was f or of f i ci al document at i on so
2 t hat t hey coul d become par t of t he of f i ci al gr ant s.
3 Q. Di d you under st and t hat some of t hese peopl e wer e wor ki ng
4 wi t hout compensat i on?
5 A. And t hat i s per f ect l y accept abl e, and t hen we don' t need
6 t he of f i ci al appr oval as l ong as t hey' r e not get t i ng gover nment
7 f unds.
8 Q. You f ound t hat - - by t he way, when you woul d get e- mai l s
9 f r omDr . Kar r on, what hour s of t he day or ni ght woul d you say
10 you woul d get e- mai l s f r omhi m?
11 A. I assume you mean when t hey' r e wr i t t en?
12 Q. Yes.
13 A. I t hi nk i t ' s acr oss t he boar d, as most of us r ead e- mai l
14 and wr i t e e- mai l , basi cal l y, 24 hour s a day.
15 Q. And ar e you awar e of any ot her pr oj ect t hat CASI was
16 i nvol ved i n?
17 A. At t hat t i me, t her e wer e some l i st ed i n t he or i gi nal
18 pr oposal . We al ways ask what ot her pr oj ect s ar e you doi ng or
19 have you done, and t her e wer e sever al i n t he or i gi nal pr oposal .
20 Q. Of pr oj ect s t hat had been done, cor r ect ?
21 A. Cor r ect .
22 Q. And, i n f act , you knew t hat t hi s was t he onl y pr oj ect t hat
23 CASI was wor ki ng on was t hi s ATP gr ant s, cor r ect ?
24 A. That was our under st andi ng. At t he same t i me, i t was our
25 under st andi ng t hat t hey wer e l ooki ng f or ot her f undi ng t o do
( 212) 805- 0300
190
1 compl i ment ar y r esear ch.
2 Q. Now, i t ' s f ai r t o say t hat you, i n your capaci t y of wer e
3 wat chi ng over t hese var i ous pr oj ect s, cor r ect ?
4 A. Uh- huh.
5 Q. To assi st t hemi n devel opi ng, r i ght ?
6 A. Assi st t hemi n devel opi ng?
7 Q. Yeah, so t hat t hey coul d event ual l y meet what ever
8 sci ent i f i c end wer e capabl e bei ng; t hat ' s t he hope, r i ght ?
9 A. The r esear ch i s t hei r s t o per f or m.
10 Q. And you you eval uat e, do you not , how t hey' r e per f or mi ng,
11 cor r ect ?
12 A. We get quar t er l y r epor t s whi ch we r ead, and over see
13 pr ogr ess.
14 Q. I sn' t i t a f act t hat you f ound t hat CASI ' s pr oj ect was
15 t echni cal l y exci t i ng?
16 A. Yes. I t woul d not have r ecei ved an ATP awar d i f i t wer e
17 not .
18 Q. And i s i t a f act t hat whi l e t he CASI per f or mwas suspended,
19 i t seemed t o be maki ng t echni cal pr ogr ess?
20 A. Techni cal l y i t seemed t o be maki ng pr ogr ess, yes. I f i t ' s
21 not meet i ng t he goal s i n t he pr oposal , t hen cl ear l y i t ' s
22 suspended f or ot her r easons.
23 Q. Now, i n t he budget you' r e al l owed t o move any i t em- -
24 i ncr ease i t by 10 per cent , i s t hat cor r ect ?
25 A. I f you decr ease somet hi ng el se by t he equi val ent amount ,
( 212) 805- 0300
191
1 and i f i t ' s wi t hi n 10 per cent of t hat year ' s budget . So
2 cumut at i vel y over year one, onl y $80, 000 coul d have been moved
3 wi t hout pr i or appr oval .
4 Q. Can you - - i n ot her wor ds, t hey doesn' t ut i l i ze t he
5 10 per cent , t he t en mi l l i on - - t he t wo mi l l i on r at her ?
6 A. No. I t ' s on a year - t o- year basi s.
7 Q. And i s t hat speci f i ed i n some of t hi s mat er i al ?
8 A. Yes. I bel i eve i t ' s act ual l y i n t he speci al awar d
9 condi t i on, whi ch I can t r y t o f i nd, but t hat ' s ar t i cul at ed ver y
10 cl ear l y i n - - at al l t hese meet i ngs and ki ckof f s and pr oposer s
11 conf er ences, et cet er a. I t coul d al so be i n Exhi bi t 4 i n t hose
12 sl i des.
13 Q. I sn' t i t a f act t hat - - you' ve t est i f i ed about r ecei vi ng
14 pr i or appr oval , cor r ect , i n wr i t i ng bef or e you do somet hi ng?
15 A. Yes, si r .
16 Q. I sn' t i t a f act , ma' am, t hat you - -
18 Q. - - r ecei ved appr oval f or t he f i r st t i me at t he end of t he
19 t he year t hat you coul d seek budget r evi si ons?
20 MR. KWOK: Obj ect i on.
21 THE COURT: I don' t under st and t he quest i on, Mr - -
22 Q. Ar e you pr epar ed - -
23 THE COURT: You wi l l have t o st ar t over agai n because
24 I coul dn' t f ol l ow your quest i on.
25 THE WI TNESS: Thank you.
( 212) 805- 0300
192
1 Q. Ar e you per mi t t ed, at t he end of t he f i r st year , t o r evi ew
2 t he cost , your cost and submi t a r evi sed budget and a nar r at i ve
3 i f changes have occur r ed?
4 A. No. You ar e per mi t t ed t o r equest changes and get appr oval
5 i n wr i t i ng at any poi nt . But as I sai d ear l i er i n t est i mony,
6 af t er t he f act i t i s at your own r i sk.
7 Q. Let - - t he Exhi bi t 4 i s - - t he gover nment Exhi bi t 4 ar e t he
8 sl i des, cor r ect ?
9 A. Yes, si r .
10 Q. Now, I show you t hi s document . You have t he or i gi nal of
11 Exhi bi t 4, do you not ?
12 A. I have t he gover nment Exhi bi t 4. I assume i t ' s t he
13 or i gi nal , i f i t has a yel l ow st i cker .
14 THE COURT: You have t he excer pt s or t he whol e t hi ng?
15 THE WI TNESS: I bel i eve I have t he whol e t hi ng,
16 Exhi bi t 4.
17 Q. Why don' t you t ur n t o page 11. Unf or t unat el y, t he j ur or s
18 don' t have t hi s page.
19 THE COURT: I t ' s not i n your books, l adi es and
20 gent l emen, I don' t bel i eve.
21 MR. RUBI NSTEI N: I s t her e a way t o put t hat up on t he
22 boar d; do t hey have t he whol e document i n t her e?
23 THE COURT: Exhi bi t 11? Have we got exhi bi t 11?
24 MR. RUBI NSTEI N: Exhi bi t 4, page 11, your Honor .
( 212) 805- 0300
193
1 THE DEPUTY CLERK: Exhi bi t f our , page 11?
4 THE DEPUTY CLERK: Exhi bi t 4, page 11.
5 THE COURT: Al l r i ght , i t ' s pl aced on t he - - i s t hi s
6 t he - - you' ve got t he cor r ect page you want ?
7 THE COURT: Leave i t up t her e, who i s put t i ng i t up?
8 MR. RUBI NSTEI N: I ' l l show you what i t i s. No, j ust a
9 second. Her e.
10 Q. That i s one of t he pages t hat you show at t he f i r st meet i ng
11 wi t h t he peopl e f r omCASI , cor r ect ?
12 A. Cor r ect .
13 Q. Now, on t hat page i t says, r eci pi ent r esponsi bi l i t y, does
14 i t not , ma' am?
15 A. Yes, i t does.
16 Q. And i t says i n t he second par agr aph, r evi ew cost s at t he
17 end of each year and submi t a r evi sed budget and a nar r at i ve i f
18 changes have occur r ed, cor r ect ?
19 A. That ' s what i t says, yes, si r .
20 Q. And t hat was shown t o Dr . Kar r on, r i ght ?
21 A. Cor r ect .
22 Q. Lee Gur f ei n was t her e?
23 A. He was at t he ki ckof f .
24 Q. And Dr . Sat ava was t her e, cor r ect ?
25 A. Cor r ect .
( 212) 805- 0300
194
1 MR. RUBI NSTEI N: Your Honor , t hi s i s a good spot t o
2 br eak f or l unch.
3 THE COURT: Let ' s f i ni sh t he l i ne of quest i oni ng. Ar e
4 you al most done wi t h t hi s?
5 MR. RUBI NSTEI N: No, but wi t h t hi s exhi bi t . I f you
6 want me t o cont i nue wi t h t he exhi bi t , I have no - -
7 THE COURT: No, what ever your poi nt i s.
8 MR. RUBI NSTEI N: No, t hi s poi nt I ' mf i ni shed wi t h,
9 J udge.
10 THE COURT: Oh, you' r e f i ni shed wi t h i t ? Okay.
11 MR. RUBI NSTEI N: Yeah. I ' l l - - j ust a second, J udge,
12 maybe I ' mnot f i ni shed.
14 Q. So, i n f act , accor di ng t o t hi s page, page 11, you don' t
15 have t o submi t t o get wr i t t en appr oval bef or e you spend t he
16 money, cor r ect ?
17 A. No, t hat ' s t aken out of cont ext .
18 Q. Okay.
19 MR. RUBI NSTEI N: No f ur t her quest i ons on t hi s t opi c at
20 t hi s t i me.
21 THE COURT: Al l r i ght , t hen we' l l - - t he j ur y i s
22 excused. Pl ease come back at 2: 00 o' cl ock and we' l l r esume.
24 THE COURT: Counsel .
( 212) 805- 0300
195
1 THE COURT: Ms. Li de, I guess you' r e excused.
2 THE WI TNESS: I ' msor r y, I ' msor r y.
3 THE COURT: I t ' s al l r i ght .
4 THE WI TNESS: I ' mt r yi ng t o get - -
5 THE COURT: You have t o wai t t i l l t he j ur y l eaves, and
6 t hen be back her e by 2: 00 o' cl ock.
7 THE WI TNESS: Thank you, si r .
8 THE COURT: Do you want an i nst r uct i on t o t he wi t ness,
10 MR. RUBI NSTEI N: No, your Honor . I have no pr obl em
11 wi t h Ms. Li de.
12 THE COURT: Anyt hi ng el se?
13 MR. KWOK: Not hi ng f r omt he gover nment at t hi s t i me.
14 THE COURT: Let ' s be back her e about t en mi nut es t o
15 t wo, so we' r e - - i f you t hi nk of anyt hi ng at t hat t i me we' l l be
16 abl e t o deal wi t h i t and not hol d up t he j ur y.
17 MR. Di CENZO: Your Honor , I j ust want - - I ' man
18 associ at e of Mr . Rubi nst ei n' s my name i s Wi l l i amDi Cenzo and I
19 j ust want t o i nf or myou t hat I may be si t t i ng at counsel t abl e.
20 THE COURT: What ' s your name?
21 MR. Di CENZO: Wi l l i amDi Cenzo.
23 MR. Di CENZO: J ust t o l et you know.
24 MR. EVERDELL: Your Honor , t her e i s one ot her t hi ng.
25 I t i s possi bl e f or t he next wi t ness we may be i nt r oduci ng a
( 212) 805- 0300
196
1 document t hat we hadn' t ant i ci pat ed needi ng t o do, but t he CFR
2 r egs, and I have copi es of i t , I have enough f or t he j ur y, i t ' s
3 not i n t he sanct i on pr ogr am, but we can use t he El mo f or i t .
4 I f and when we need t o do t hat , woul d i t be al l r i ght f or me t o
5 j ust pass out t he appl i cabl e r egs t o t he j ur y and - -
6 MR. EVERDELL: - - do i t t hat way.
7 THE COURT: The whol e CFR?
8 MR. EVERDELL: J ust t he par t i cul ar r egs t hat t he
9 wi t ness wi l l be t est i f yi ng t o and t hat - - I mean I coul d mar k
10 i t as a gover nment exhi bi t or t he Cour t coul d t ake j udi ci al
11 not i ce of t he f act t hat i t ' s t he CFR r eg, ei t her way i s f i ne
12 wi t h me.
13 THE COURT: Wel l , gi ve Mr . Rubi nst ei n not i ce t hat
14 you' r e doi ng i t .
15 MR. RUBI NSTEI N: I have my own copy of t he r egs. I
16 have an obj ect i on t o, i f t hey t hey want t o put t hi s i n
17 evi dence, and t hen want t o show t hat one page, okay. I
18 don' t - - I t hi nk t hat ' s an appr opr i at e t hi ng t o do. But t o
19 gi ve t he j ur y one page of a r eg, I t hi nk i s absol ut el y
20 mi sl eadi ng.
21 THE COURT: You can - -
22 MR. EVERDELL: I can' t gi ve hi mt he ent i r e CFR, t hat
23 seems a l i t t l e si l l y. I ' mgi vi ng t hemt he r eg t hat ' s
24 appl i cabl e t o her t est i mony, and I don' t even need t o put i t
25 i nt o evi dence because i t ' s t he CFR and you can t ake not i ce of
( 212) 805- 0300
197
1 i t . I t doesn' t even need t o be i n evi dence. I t ' s a l aw. I ' m
2 j ust doi ng t hi s f or t he pur poses so t he j ur y t o f ol l ow al ong
3 and so t hat we can make i t go smoot hl y.
4 MR. RUBI NSTEI N: That put s i t i n evi dence i f i t ' s l aw,
5 CFR.
6 The poi nt of t he mat t er i s, J udge, t hat , you know,
7 t hey' r e cher r y pi cki ng. Thi s i s a t er mf or 2001, cher r y
8 pi cki ng, I l ear ned i t . And t hey have a 100 page document and
9 t hey want t o - - i f somebody was gi vi ng me $2 mi l l i on, I woul d
10 say, wher e do I si gn and be out t he door .
11 MR. EVERDELL: I t seems l i ke counsel woul d l i ke me t o
12 gi ve t hemt he ent i r e book of t he Code of Feder al Regul at i on,
13 whi ch i s not - -
14 THE COURT: I ' mgoi ng t o al l ow t hemt o j ust pr oduce
15 t he CFR and put i t up on t he boar d.
17 THE COURT: I t ' s Code of Feder al Regul at i on. Ther e
18 ar e mor e t han one sect i on of t he CFR t hat - -
19 MR. EVERDELL: Yes, your Honor . The onl y one t hat I
20 bel i eve t he wi t ness, I ' l l need t he wi t ness t o t est i f y about i s
21 a t wo page sect i on, we' l l j ust handl e i t wi t h t he el mo.
22 THE COURT: Of cour se you can put i n what ever r eg you
23 want t o.
24 MR. EVERDELL: We absol ut el y can.
25 ( Luncheon r ecess)
( 212) 805- 0300
198
863zkar 4 Li de - cr oss
1 A F T E R N O O N S E S S I O N
2 2: 00 p. m.
3 THE DEPUTY CLERK: Al l r i se.
5 ( J ur y not pr esent )
6 THE COURT: Ar e we r eady f or t he j ur y?
8 MR. KWOK: Yes, your Honor .
9 THE COURT: Al l r i ght , l et ' s get t he wi t ness; br i ng i n
10 t he j ur y. i f t hey' r e r eady.
12 THE COURT: Pl ease be seat ed, wi t ness t ake t he st and.
13 Pl ease be seat ed. Cont i nue, Mr . Rubi nst ei n.
16 Q. Mi ss Hayes, I ' msor r y, Ms. Li de, CASI was a uni que company,
17 was i t not , i n t he f act t hat i t onl y had t he ATP gr ant s t hat
18 t hey wer e wor ki ng on?
19 THE COURT: I t hi nk you' ve been t hr ough t hi s bef or e,
21 MR. RUBI NSTEI N: I ' mj ust l ayi ng - -
22 THE COURT: I t ' s get t i ng ver y dupl i cat i ve.
24 Q. I t ' s a f act t hat i ndi r ect cost s ar e not al l owed accor di ng
25 t o ATP gr ant s, cor r ect ?
( 212) 805- 0300
199
1 A. Yes.
2 Q. And i ndi r ect - - and t he r eason f or t hat i s t hat i f a
3 busi ness i s f unct i oni ng, t hey may have ot her cust omer s and
4 ot her wor k and t hey don' t appl y t o cost s, di vi de up t he cost s
5 of t he r ent bet ween a number of di f f er ent cust omer s?
6 A. I s t hat a quest i on, si r ?
7 Q. Yeah.
8 A. Or st at ement ?
9 Q. I t ' s a quest i on.
10 A. No. The r eason act ual l y f or a si ngl e company payi ng i t s
11 own i ndi r ect cost i s because t he U. S. Congr ess set up t he
12 Advanced Technol ogy Pr ogr amas a cost shar i ng pr ogr am, and t hey
13 want ed t he gover nment t o shar e t he r i sk. But t hey al so want ed
14 t o know t hat t he f or pr of i t company had somet hi ng at r i sk al so.
15 So i t ' s by st at ut e, t he ATP st at ut e, whi ch i s par t of t he
16 Omni bus Tr ade Bi l l of 1988 est abl i shed t hat , and t hat was t he
17 r eason f or i t .
18 Q. I n f act , t her e' s a 3. 61 copay, r i ght ? I s t hat so t hat t he
19 per son has t o put up a copay?
20 A. No si r . No, si r . The onl y r equi r ement , accor di ng t o t he
21 ATP st at ut e f or a si ngl e company, i s t hat t hey pay t hei r own
22 i ndi r ect cost s. They can al so pr opose t o pay some of t he
23 di r ect cost s, whi ch i n CASI ' s case was t he case.
24 Q. And t hey coul d r equest t hat ATP per mi t t hemt o pay some
25 i ndi r ect cost s and appr ove t hat , cor r ect ?
( 212) 805- 0300
200
1 A. They have t o pay al l t hei r own i ndi r ect cost s. They don' t
2 r equest t hat , i t ' s i n our l egi sl at i on.
3 Q. I sn' t i t a f act t hat CASI was negot i at i ng wi t h your agency
4 t o appr ove par t of t he el ect r i cal expenses as a di r ect cost t o
5 t he pr oj ect ?
6 A. I amnot awar e of t hat , si r .
7 Q. And how many - - do you have - - ar e you awar e of t he amount
8 of t i me t hat Dr . Kar r on spent on t he CASI pr oj ect ?
9 A. I t ' s my - -
10 THE COURT: Thi s - -
12 THE COURT: Thi s wi t ness was not pr esent dur i ng t he
13 t i me t hat doct or , al l t he t i me t hat Dr . Kar r on was wor ki ng on
14 t he pr oj ect . Let ' s, pl ease, l et ' s get t he quest i ons t hat t hi s
15 wi t ness can answer .
16 Q. Wel l , you quest i oned Dr . Kar r on as t o what he was doi ng,
17 di d you not ?
18 THE COURT: That - -
19 A. I don' t r emember quest i oni ng hi mas t o what he was doi ng.
20 Q. Now, t he Exhi bi t 4 you sai d wer e sl i des t hat you show - -
21 you showed CASI at t he i ni t i al ki ckof f meet i ng, cor r ect ?
22 A. Yes, t hat i s cor r ect .
23 Q. Now di d you - - when you cal l t hemsl i des, wer e t hey
24 act ual l y sl i des t hat you put on t he scr een or you j ust handed
25 t hem?
( 212) 805- 0300
201
1 A. I don' t r ecal l whet her t hey wer e on a scr een or not . I t
2 was i n a r oomt hat woul d have t hat capabi l i t y.
3 I know we al so gi ve har d copy, and we al so e- mai l t hem
4 so t hat we make sur e t he r eci pi ent has t hem. But whet her or
5 not we showed t hemon a scr een t hat day, i t was a smal l gr oup,
6 I ' mnot sur e.
7 Q. Wel l , di d you di scuss t her e wer e a number of pages, t he
8 act ual exhi bi t , cor r ect ?
9 A. Yes.
10 Q. Ther e ar e, f ai r t o say, t her e' s at l east 60 pages i n t he
11 or i gi nal exhi bi t ?
12 A. Uh- huh.
13 Q. Di d you di scuss each page wi t h Dr . Kar r on and Lee Gur f ei n,
14 and t he ot her doct or t hat was pr esent ?
15 THE COURT: Whi ch page of whi ch exhi bi t ?
16 MR. RUBI NSTEI N: Exhi bi t 4.
17 A. Ther e wer e t hr ee of us and, yes, we do go t hr ough page by
18 page hi ghl i ght i ng t he key event s on each page. Ther e ar e t hr ee
19 of us and we do go page by page, t hat i s cor r ect .
20 Q. You have no not es as t o whi ch you hi ghl i ght ed and whi ch you
21 di dn' t hi ghl i ght , cor r ect ?
22 A. Wel l , what we usual l y do i s al most r ead t he bul l et s and ask
23 t he r eci pi ent i f t her e ar e any quest i ons.
24 But each of t he t hr ee of us woul d have done i t
25 di f f er ent l y, and I cer t ai nl y cannot speak t o how t he ot her t wo
( 212) 805- 0300
202
1 i ndi vi dual s di d t hei r par t s t hi s much af t er t he f act .
2 I know I t end t o go bul l et by bul l et and make sur e
3 i t ' s under st ood by t he r eci pi ent .
4 Q. And wer e t her e, at t hi s ki ckof f meet i ng, wer e t her e
5 di scussi ons as t o t hese var i ous poi nt s?
6 A. We, we di scussed t hese var i ous poi nt s. Whet her or not
7 t her e wer e r espect quest i ons on CASI ' s par t , I do not r ecal l .
8 But we al ways ask, do you have any quest i ons about t hi s.
9 Q. Now, Exhi bi t 4, i s t hat t he act ual exhi bi t t hat was
10 pr esent ed t o CASI on t hi s ki ckof f vi si t ?
11 A. Yes.
12 Q. And t hat ki ckof f vi si t was what dat e?
13 A. I t was November of 2001. And i f I had t o come up wi t h a
14 day, I woul d say 8t h' i sh.
15 Q. Now, t ake a l ook at exhi bi t f our . You see t he f i r st page
16 of Exhi bi t 4?
17 A. Fi r st page, okay.
18 Q. Says CASI i nt r oduct i on t o ATP pr oj ect management ?
19 A. Wel l , act ual l y mi ne' s i n a di f f er ent or der , si r . My f i r st
20 page says gr ant s and agr eement s management di vi si on. I do see
21 t he page - - oh, and I was r i ght , i t ' s November 8t h. I do see
22 t he page t o whi ch you' r e r ef er r i ng.
23 THE COURT: What page i s i t , so t he r ecor d' s cl ear ?
24 MR. RUBI NSTEI N: The or i gi nal Exhi bi t 4 ar e 65 pages,
25 your Honor .
( 212) 805- 0300
203
1 THE COURT: Let ' s have t he page so we can put i t up on
2 t he boar d. I t i sn' t i n t he hi ghl i ght , t he ext r act s, r i ght ?
3 MR. KWOK: I don' t bel i eve so, your Honor , but we wi l l
4 at t empt t o show i t on t he scr een.
5 THE COURT: So t he j ur y won' t have i t i n t he ext r act s.
6 MR. RUBI NSTEI N: Coul d we put i t on t he el mo, your
7 Honor ?
8 THE COURT: Yes. Thi s i s a page f r omExhi bi t 4?
9 MR. RUBI NSTEI N: Even I know how t o do t hat one,
10 J udge.
11 Q. Now t hat ' s t he f i r st page, r i ght ?
12 A. I n my f ol der i t i s not . However , I do bel i eve t hat t hat i s
13 how we st ar t ed t he ki ckof f .
14 Q. Now, you see t he upper l ef t - hand por t i on of t hat scr een
15 wher e i t says, ATP?
16 A. I do, yes, si r .
17 Q. Ar e you t el l i ng us t hat t hi s i s t he same document t hat you
18 pr esent ed on November 8t h, 2001?
19 A. I woul d f i nd i t har d t o bel i eve t hat i t ' s not . I mean, t wo
20 pages l at er we have t he i nf or mat i on wi t h our names on i t ,
21 and - -
22 Q. Let me show you what ' s gover nment - - coul d we put t hi s
23 si de- by- si de, pl ease? I t ' s Gover nment ' s Exhi bi t 4. I s t her e
24 an exhi bi t page? I woul d l i ke t o put t hi s si de by si de.
25 A. That ' s t he f i r st page i n my exhi bi t , t hat i s cor r ect .
( 212) 805- 0300
204
1 Q. Okay. And coul d we put i t up, t he f i r st page?
2 A. Uh- huh.
3 Q. Now, do you see t hat t he ATP i s, you say t hat ' s f r omt he
4 same f i l e?
5 A. Absol ut el y.
6 Q. Di f f er ent f ont si zes of t he - -
7 A. Cor r ect . I can expl ai n t hat i f you l i ke.
8 Q. And wher e di d you r et r i eve t hi s Gover nment ' s Exhi bi t 4?
9 A. I n t he mast er f i l e, i n t he Advanced Technol ogy Pr ogr am, as
10 I ment i oned ear l i er , i t ' s a document ar y f i l e of al l of t he
11 i nf or mat i on f or t hat pr oj ect .
12 Q. Now, i ncl uded i n t hi s submi ssi on i s a page t hat I don' t
13 t hi nk i s i n t he bi nder s.
14 THE COURT: J ust ask t he quest i on, l et ' s not have a
15 speech.
16 Q. I show you t hi s page.
17 THE COURT: The j ur y i s i nst r uct ed you' r e not t o t ake
18 t he quest i ons as bei ng any evi dence what soever . Such f act s as
19 exi st s i n t he answer t hat mat t er s.
20 MR. RUBI NSTEI N: I ' l l wi t hdr aw t he quest i on, J udge.
21 Q. I n t he r eci pi ent r esponsi bi l i t y, di d your char t - - di d your
22 pr esent at i on advi se t he r eci pi ent t hat t hey wer e r equi r ed, i f
23 t her e was a change i n t he or gani zat i onal st r uct ur e, such as a
24 name change, t hat t hey had t o not i f y and get pr i or appr oval ?
25 THE COURT: Ar e you aski ng whet her on page t wo of
( 212) 805- 0300
205
1 gover nment exhi bi t - -
2 MR. RUBI NSTEI N: Thi s i s - -
3 THE COURT: Four .
4 MR. RUBI NSTEI N: Thi s has a number seven. Mi ne has a
5 number seven on t he r i ght - hand si de. I t ' s not up t her e, J udge.
6 Q. Thi s i s t he page t hat says pr i or appr oval s, not i f y t he
7 gr ant s speci al i st , r i ght ?
8 A. Okay. And t hose ar e t he ki nds of changes t hat we need t o
9 be appr i sed of i nst ant l y, and pr i or appr oval shoul d be r ecei ved
10 i n wr i t i ng.
11 Q. Di d you ever r ecei ve a r equest f or t he name change of CASI ?
12 A. I don' t r ecal l r ecei vi ng t hat .
13 Q. Ar e you - -
14 A. But - - I don' t r ecal l seei ng t hat .
15 Q. Ar e you awar e t hat t he pr i or appr oval , accor di ng t o t he, t o
16 exhi bi t f our , t hat somebody must have not i f i ed t he gr ant
17 speci al i st t he pr i or appr oval , i f t her e i s a name change?
18 A. That i s t he sor t of change t hat we l i ke t o r ecei ve as soon
19 as possi bl e, and pr i or appr oval t hen i s pr ovi ded as a wr i t t en
20 amendment .
21 Q. Now, when you came f or t he si t e, t he f i r st si t e vi si t and
22 you came - - you met wi t h Dr . Kar r on, di d you meet J oan Hayes at
23 t hat t i me?
24 A. I have met J oan Hayes. I woul d assume she was at t hat si t e
25 vi si t , but I cannot ver i f y t hat i n any cer t ai nt y.
( 212) 805- 0300
206
1 Q. Wel l , when you went t o t he si t e vi si t , i s i t a f act t hat
2 you went t o l unch wi t h Dr . Kar r on, wi t h your par t ner , J ane
3 Or t hwei n, you went t o a r est aur ant cal l ed Benj ami n' s f or l unch?
4 A. I bel i eve so.
5 Q. And you had gone t o l unch - - when Dr . Kar r on came t o
6 Washi ngt on, you had l unch t oget her wi t h hi mt her e t oo i n a
7 di ni ng r oom?
8 A. We met i n t he caf et er i a.
9 Q. And i t ' s par t of t he pr ot ocol , gover nment pr ot ocol t hat you
10 pay f or your own l unch when you go out wi t h somebody who i s a
11 r eci pi ent of t he gr ant s?
12 A. Yeah. We ar e onl y al l owed t o accept a cer t ai n l evel of any
13 f i nanci al r emuner at i on.
14 Q. So t her e never was a t i me t hat Dr . Kar r on t ook you out f or
15 some ki nd of a l avi sh meal somewher e and pi cked up t he check,
16 r i ght ?
17 A. We woul d not have per mi t t ed t hat , t hank you.
18 Q. And so di d you t hi nk t hat he was maki ng a j oke when you
19 t est i f i ed t hat he t ol d you i f he, i f he t ook you out f or a ni ce
20 meal , t hen he woul dn' t have t o make any budget r evi si ons?
23 Q. By t he way, do you r ecal l i f you ever went t o l unch wi t h
24 Dr . Kar r on and J oan Hayes, as you si t t her e now?
25 A. I cer t ai nl y do not r ecal l t hat .
( 212) 805- 0300
207
1 Q. Now, t he equi pment t hat was pur chased by Dr . Kar r on
2 pur suant t o t hi s gr ant s, coul d you descr i be what he pur chased?
3 A. I coul d descr i be what was i n t he pr oposal , whi ch wer e
4 sever al si l i con gr aphi cs ser ver s and some wor k st at i ons.
5 Q. I n f act , he woul d buy par t s and put t hemt oget her and
6 basi cal l y cr eat e hi s own comput er s, cor r ect ?
7 A. Um, t he di scussi on on t hat was not consi st ent .
8 Q. Wel l , i n ot her wor ds, i f I - - i f somebody want ed t o go buy
9 a comput er and t hey - -
10 THE COURT: Wel l , t he f or mof t he quest i on, Mr - -
11 Q. Wel l , was i t , t he comput er s t hat Dr . Kar r on had, di d t hey
12 have any br and name on t hem?
13 A. I t was my under st andi ng t hat t he ones he wi shed t o pur chase
14 wer e si l i con gr aphi cs. I n t he or i gi nal pr oposal , i t was sai d
15 t hat t he company had a st at e- of - t hear t comput er f aci l i t y.
16 Lat er i n t he quar t er l y r epor t s i t was sai d t hat t hi s was
17 pat ched t oget her . So I had some conf usi on as t o t he l evel of
18 sophi st i cat i on of t he equi pment and f r omwher e i t came. I do
19 know what was r equest ed i n t he budget , and as such, was
20 appr oved f or pur chase.
21 Q. Wel l , di d you di scuss wi t h Dr . Kar r on, when you met hi mor
22 on t el ephone or i n e- mai l , as t o t he equi pment t hat he was
23 ut i l i zi ng t o ef f ect hi s r esear ch on t hi s pr oj ect ?
24 THE COURT: At what poi nt of t i me?
25 Q. At any poi nt i n t i me bef or e t he gr ant was suspended, f r om
( 212) 805- 0300
208
1 Oct ober 2001 t hr ough J une of 2003?
2 A. As I ment i oned ear l i er , equi pment was al ways an i ssue, and
3 t hat ' s why we wer e r equest i ng modi f i ed budget s and
4 j ust i f i cat i on so t hat we coul d see exact l y what exi st ed, what
5 needed t o be pur chased.
6 Q. He had a budget t hat per mi t t ed hi mt o spend money on
7 equi pment , cor r ect ?
8 A. To a cer t ai n l evel , t hat i s cor r ect .
9 Q. And di d you ever check t he f i nanci al s t o see whet her or not
10 he had spent t he money on equi pment ?
11 A. The i nt er est i ng t hi ng i s t echni cal pr oj ect manager s - -
12 THE COURT: Obj ect i on - - answer yes or no.
13 A. I ' mnot pr i vy t o t hose f i nanci al s.
14 Q. Now, on di r ect exami nat i on you al l uded t o i n Exhi bi t 2,
15 page t hr ee r el at i ng t o t he di sposi t i on of equi pment , cor r ect ?
16 A. Yes, si r .
17 Q. And, i n f act , t he gover nment per mi t s t he gr ant ee, who
18 pur chases t he equi pment , t o r et ai n t he equi pment , r i ght ?
19 A. To r equest t o r et ai n t he equi pment .
20 Q. And, i n f act , t he r equest i s vi r t ual l y al ways gr ant ed,
21 cor r ect ?
22 A. I don' t know. I t i s usual l y gr ant ed.
23 Q. And, i n f act , t he gr ant ee i s not per mi t t ed t o depr eci at e
24 t hi s equi pment because r eal l y i t ' s t he Gover nment ' s equi pment ?
( 212) 805- 0300
209
1 Q. Ar e you awar e of t hat or not ?
3 THE COURT: I s t hat so, t hat t hey' r e not per mi t t ed t o
4 depr eci at e t he equi pment ?
5 THE WI TNESS: Um, I don' t know i n what sense.
6 I don' t under st and t hat quest i on, as our t er ms and
7 condi t i ons say t hat t hey have t o account f or i t ever y t wo year s
8 unt i l i t r eaches l ess t han 5, 000. So t hat i ndi cat es t o me t hat
9 i t ' s bei ng depr eci at ed.
10 But as a pr oj ect manager , I ' maf r ai d I don' t
11 under st and how you ar e usi ng t he t er mdepr eci at e, t he company
12 depr eci at i ng i t .
13 Q. Wel l , i n ot her wor ds, t hey have t o account , so i f t hey say
14 t hey st i l l have t he equi pment , t he gover nment doesn' t come and
15 t ake t he equi pment back, cor r ect ? I ' l l wi t hdr aw i t .
16 I s i t f ai r t o say i t ' s not t hei r s t o sel l , i t ' s t hei r s
17 t o use?
18 A. Yes.
19 Q. And i t ' s t hei r s t o use unt i l i t ' s not wor t h $5, 000 cor r ect ?
20 A. And as l ong as t hey' r e usi ng i t on t he goal s of t he pr oj ect
21 f or whi ch we gave t hemt he awar d.
22 Q. But af t er i t ' s not wor t h $5, 000, t hen t hey coul d keep i t
23 r i ght ?
24 A. Cor r ect .
25 Q. Now, CASI had equi pment when t hey r ecei ved t he gr ant s t hat
( 212) 805- 0300
210
1 t hey owned pr i or t o r ecei vi ng t he gr ant s, di d t hey not ?
2 A. Yes.
3 Q. And t her e i s a concept i n co- f undi ng t hat you coul d use
4 equi pment or i n ki nd, ot her t han cash, as your cont r i but i on f or
5 co- f undi ng, cor r ect ?
6 A. Onl y t o a cer t ai n l evel .
7 Q. But you can use i t . I n ot her wor ds, i f someone has
8 $100, 000 wor t h of equi pment when t he gr ant st ar t s, t hey coul d
9 ut i l i ze t hat hundr ed t housand dol l ar s t o a per cent age of t he
10 hundr ed t housand as t hei r cont r i but i on t o t he gr ant s i n l i eu of
11 money?
12 A. No. I t woul d not be a per cent age of t he hundr ed t housand.
13 I t woul d be a per cent age of t he depr eci at i on of t he equi pment ,
14 f or each year i t was used f or t hat pr oj ect .
15 Q. And t hat woul d appl y t owar ds your co- f undi ng as t he
16 gr ant ee, you woul d get cr edi t f or t hat ?
17 A. Wi t h appr oval , yes.
18 Q. Now, i n your pr esent at i on on November 8t h, 2001, you
19 al so - - t hi s mi ght be i n t he book.
20 MR. RUBI NSTEI N: Thi s i s i n Exhi bi t 4, not i n t he
21 bi nder s t hat t he j ur or s have.
22 THE COURT: I s t hat t he pr oper page t hat ' s been shown,
23 pr ocur ement st andar ds?
25 Q. Now, t her e has t o be a wr i t t en pol i ci es and pr ocedur es,
( 212) 805- 0300
211
1 cor r ect ?
2 A. Yes.
3 Q. Was t her e any wr i t t en - - di d CASI have any wr i t t en pol i ci es
4 and pr ocedur es?
5 A. I amnot awar e t hat t hey di d.
6 Q. And i n addi t i on t o t hat r el at i ng t o f r i nge benef i t s,
7 t her e' s supposed t o be a manual cr eat ed by t he company?
8 A. Ther e' s supposed t o be a document out l i ni ng t hem, yes, si r .
9 Q. And who cr eat es t hat document ?
10 A. The company.
11 Q. And who r evi ews t hat document ?
12 A. Not t he gover nment .
13 Q. I n ot her wor ds, i f an empl oyer - - i f CASI had a wr i t t en
14 manual f or f r i nge benef i t s i n pl ace, no one i n t he gover nment
15 woul d r evi ew t hat document ?
16 A. Not - -
17 Q. Cor r ect ?
18 A. - - bef or e t he gr ant was gi ven. I t cer t ai nl y coul d come
19 i nt o an audi t .
20 Q. Now, when was t he l ast r evi si on gr ant ed of t he budget ?
21 A. I can l ook up t he dat e. I t was t he ver y ver y end of
22 J anuar y, t he ear l y days - - end of December , ear l y J anuar y
23 bet ween 2001 and 2002, and - - I ' msor r y, and i t ' s - - l et ' s see.
24 Okay. I t i s si gned by our gr ant s of f i cer on J anuar y 4t h of
25 2002.
( 212) 805- 0300
212
1 Q. What exhi bi t number i s t hat , ma' am?
2 A. I t i s exhi bi t 22.
3 Q. Now, i n t hat exhi bi t t her e i s a r educt i on i n amount of
4 sal ar i es f or empl oyees, cor r ect ?
5 A. Yes, si r .
6 Q. And t her e i s al so a r educt i on i n t he t ot al amount t hat
7 coul d be spent on f r i nge benef i t s, i s t hat r i ght ?
8 A. Wel l , yes, and t hat makes sense because f r i nge benef i t s i s
9 a per cent age of sal ar i es.
10 Q. So, i s t hat anywher e i n any l i t er at ur e t hat f r i nge benef i t s
11 i s a per cent of sal ar y?
12 A. Wel l , i t ' s - - yeah. I even i t comes i n t he budget
13 nar r at i ve. I f you l ook at t he sal ar i es and t hen t he next bl ock
14 says what ar e t he f r i nge benef i t s and i t says, you know,
15 34 per cent or what ever .
16 Q. Can you pi ck your own per cent age?
17 A. As l ong as i t ' s - - wel l , can you pi ck your own per cent age?
18 I t cl ear l y goes wi t h t he wr i t t en document t hat you have t hat i s
19 i ndust r y pr act i ce. We don' t ask f or det ai l ed expl anat i on or
20 br eakdown i f i t ' s under 35 per cent .
21 THE COURT: I s i t a wr i t t en pol i cy of t he company t hat
22 t hey have t o pr esent t o you?
23 THE WI TNESS: I f t hey do not pr esent i t at awar d, i t ' s
24 t he honor syst em, but i t does come t o pl ay when t he company i s
25 audi t ed.
( 212) 805- 0300
213
1 THE COURT: But i t ' s t he company' s wr i t t en - - t he
2 company has t o have adopt ed wr i t t en pol i cy.
3 THE WI TNESS: Yes, si r , and t hat per cent age i s i n
4 t hei r budget document at i on.
5 THE COURT: As opposed t o t he i ndust r y pol i cy.
6 THE WI TNESS: The compani es shoul d be i n l i ne wi t h
7 ot her compani es i n t hat par t i cul ar i ndust r y.
8 THE COURT: I t has t o be i n wr i t i ng.
9 THE WI TNESS: The company' s pol i cy shoul d be i n
10 wr i t i ng, yes, si r - - has t o be, yes.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
214
2 Q. Now, i s i t f ai r t o say t hat f r omt he end of 2001 goi ng
3 t hr ough t he summer of 2002 t her e wer e a l ot of di scussi on about
4 budget r evi si on bet ween you and your agency and CASI ?
5 A. That woul d be ver y f ai r .
6 Q. And who was - - wer e you i nvol ved i n t hose di scussi ons and
7 budget r evi si on?
8 A. I was i nvol ved. I was cer t ai nl y not al one i n t he
9 di scussi ons.
10 Q. And who was i nvol ved? Was Lee Gur f ei n i nvol ved f r omt he
11 CASI si de?
12 A. Lee Gur f ei n was cer t ai nl y i nvol ved. Ther e wer e sever al
13 peopl e i nvol ved dur i ng t he cour se of event s, and I don' t r ecal l
14 exact l y t he t i me f r ame f or each of t hem, but Lee Gur f ei n was
15 one of t hem.
16 Q. And af t er Lee Gur f ei n, t her e was a f el l ow named Pet er Ross?
17 A. I r emember t hat name.
18 Q. And he was i nvol ved i n submi t t i ng budget r evi si on r equest s?
19 A. I bel i eve so, yes, si r .
20 Q. The budget r evi si on t hat i s submi t t ed, di d t hey r equi r e t he
21 si gnat ur e of Dr . Kar r on?
22 A. Let ' s see. They di d not - - t hey shoul d have had ei t her Dr .
23 Kar r on' s si gnat ur e or anot her r ecogni zed ent i t y f r omt he
24 company, whi ch woul d have been Lee Gur f ei n.
25 Q. Now, you wer e t r yi ng t o hel p CASI get t hese budget
( 212) 805- 0300
215
1 r evi si ons i n, cor r ect ?
2 A. Absol ut el y. I t i s our goal t o have ever y pr oj ect succeed
3 i f possi bl e.
4 Q. And i n f act you even sent - - i n f act t hey even sent you at
5 one t i me t he wr ong r epor t ?
6 A. Sor r y. They sent me what ?
7 Q. The wr ong r epor t i nvol ved wi t h t he budget r evi si on? You
8 had asked t hemf or di f f er ent document at i on, cor r ect ?
9 A. Ri ght .
10 Q. And do you know who woul d pr ovi de t he document at i on f r om
11 CASI ?
12 A. As I sai d, sever al i ndi vi dual s suppl i ed i t . Fr equent l y i t
13 was Dr . Kar r on hi msel f .
14 Q. And i s i t a f act t hat at t i mes when you asked f or
15 document s, t he wr ong document s wer e submi t t ed?
16 A. I woul d have no way of knowi ng t hat unl ess i nf or med by Dr .
17 Kar r on. As pr esi dent , one woul d assume t hat he woul d r evi ew
18 t he submi ssi ons.
19 Q. You know what t hey say when you assume.
20 THE COURT: J ust - -
22 THE COURT: Let ' s j ust ask a quest i on.
23 Q. Let me show you - -
24 THE COURT: The j ur y i s i nst r uct ed t o di sr egar d t he
25 l ast st at ement .
( 212) 805- 0300
216
1 Q. Let me show you what has been mar ked as Gover nment Exhi bi t
2 3501- FFFF and ask you i f you can l ook at t hat and see i f i t
3 r ef r eshes your r ecol l ect i on t hat you wer e suppl i ed wr ong
4 r epor t s af t er a r equest f or r epor t s wer e made.
5 THE COURT: Thi s i s f our F?
6 MR. RUBI NSTEI N: FFFF, yes, your Honor .
7 Q. Does t hat r ef r esh your r ecol l ect i on, ma' am?
8 A. Thi s i s an e- mai l t r ai l t o my col l eague t hat sai d some
9 r epor t , wr ong r epor t . J ane opened some e- mai l t hat sai d i t was
10 t he wr ong r epor t , and J ane and I i n t he subsequent e- mai l wer e
11 t r yi ng t o f i nd t i me t o meet . Fr omt hi s e- mai l I have no cl ue
12 whet her i t ' s a f i nanci al r epor t , a t echni cal r epor t . I ' m
13 sor r y, si r , but j ust " wr ong r epor t " doesn' t t el l me what ki nd
14 of r epor t i t was.
15 Q. Wel l , I onl y asked i f t hey sent t he wr ong r epor t . What ever
16 you wer e l ooki ng f or , t hei r r esponse was i ncor r ect , cor r ect ?
17 A. And i n most pr oj ect s I woul d expect t he r i ght r epor t t o
18 f ol l ow.
19 Q. Now, you al so, di d you not , you want ed t o get t he act ual s,
20 r i ght ?
21 A. Absol ut el y.
22 Q. The act ual expenses t hat CASI had, cor r ect ?
23 A. Af t er year one, act ual s shoul d have been avai l abl e,
24 cor r ect .
25 Q. And i n f act you i nf or med CASI i n Oct ober and November of
( 212) 805- 0300
217
1 2002 t hat you want ed t o get t he i nf or mat i on back so t hat you
2 coul d expedi t e t he appr oval .
3 A. I t was our under st andi ng t hat CASI want ed a r evi sed budget ,
4 and we wer e l ooki ng f or t he appr opr i at e document at i on t o al l ow
5 us t o r ecommend appr oval .
6 Q. And who di d you under st and was r esponsi bl e f or gi vi ng t he
7 act ual expenses of CASI ?
8 A. That ' s not i n my - -
10 THE COURT: Obj ect i on sust ai ned. Let ' s move t hi s on a
11 l i t t l e bi t , Mr . Rubi nst ei n.
12 Q. When you wer e i nt r oduced t o J oan Hayes, wer e you i nt r oduced
13 by Dr . Kar r on?
14 A. I don' t r ecal l . You don' t want t o hear t he wor d assume, so
15 I won' t assume anyt hi ng. I do not r ecal l .
16 Q. Do you r ecal l bei ng t ol d by Dr . Kar r on t hat J oan Hayes was
17 hi s busi ness mom?
18 A. Mom?
19 Q. Yeah, l i ke mot her .
20 A. No, I don' t r ecal l t hat , si r .
21 Q. Now, t he audi t i s supposed t o be submi t t ed, i s i t not ,
22 wi t hi n 90 days of t he end of t he f i scal year f or t he
23 gover nment ?
24 A. The end of t he f i r st year of t he pr oj ect . I t doesn' t have
25 t o do wi t h our f i scal year .
( 212) 805- 0300
218
1 Q. Wel l , t hi s pr oj ect ended Sept ember 30, 2002.
2 A. The f i r st year of i t di d, yes, si r .
3 Q. Fi r st year . And an audi t was due, r i ght ?
4 A. Cor r ect .
5 Q. Fr oman i ndependent audi t or , cor r ect ?
6 A. I f t hat ' s t he company' s choi ce, t hat i s cor r ect .
7 Q. And wer e you i nvol ved i n at t empt i ng t o get t he company t o
8 compl y and submi t an audi t ?
9 A. Act ual l y we have a separ at e depar t ment at NI ST i n t he
10 gr ant s of f i ce t hat ' s r esponsi bl e f or audi t s, and t hat ' s wi t h
11 whomt he company wor ks i f t hey need an ext ensi on or anyt hi ng
12 l i ke t hat .
13 Q. And di d Dr . Kar r on suggest t o you t hat you and J ane shoul d
14 speak have a t el econf er ence wi t h J oan hi s audi t or and
15 account ant about t he act ual s?
16 A. I don' t r ecal l , but we woul d need t hose act ual s i n wr i t i ng
17 f or any r evi si on t o t he budget .
18 Q. Let me show you what i s - - see i f t hi s r ef r eshes your
19 r ecol l ect i on. I show you what has been mar ked as Gover nment
20 Exhi bi t 3501- PPP.
21 THE COURT: Tr i pl e P?
22 MR. RUBI NSTEI N: PPP.
23 Q. And 3501- KKK and 3501- LLL. Take a l ook at t hese document s
24 and see i f i t r ef r eshes your r ecol l ect i on as t o whet her or not
25 Dr . Kar r on want ed you and your par t ner J ayne Or t hwei n t o speak
( 212) 805- 0300
219
1 t o Ms. Hayes hi s audi t or and account ant .
2 A. Yes, t hese e- mai l s do seemt hat a conf er ence cal l - - whi ch
3 hopef ul l y accor di ng t o t hese e- mai l s woul d i ncl ude Ms. Hayes - -
4 i s what ' s document ed i n t hese e- mai l s.
6 THE WI TNESS: I t sounds l i ke f r omt hi s l ar ge t r ai l of
7 e- mai l t hat Dr . Kar r on was suggest i ng a conf er ence cal l and by
8 hi s own wor ds i t says hopef ul l y J oan Hayes can j oi n us.
9 THE COURT: That ' s al l i t says. The r est of hi s
10 quest i on about empl oyi ng an account ant , i s t hat i n t her e?
12 THE WI TNESS: Wel l , I mean I wi l l be happy t o t ake t he
13 t i me - -
14 THE COURT: Show her t he document .
15 MR. RUBI NSTEI N: I wi l l show her exact l y wher e i t i s.
16 THE COURT: Let ' s move t hi s al ong.
17 THE WI TNESS: Thank you, because t hese ar e not i n
18 chr onol ogi cal or der .
19 MR. RUBI NSTEI N: They ar e. They ar e not i n l et t er
20 or der . I had t o put t hemi n chr onol ogi cal or der .
21 Q. Do you see wher e i t ' s under l i ned?
22 A. I cer t ai nl y do.
23 Q. Good.
24 A. So i t says, " I f appr opr i at e, can I br i ng J oan our audi t or
25 and account ant i n f or t he meet i ng?"
( 212) 805- 0300
220
1 THE COURT: What document i s t hat ?
2 MR. RUBI NSTEI N: Thi s i s 3501- PPP, your Honor .
3 MR. KWOK: Obj ect i on. I t ' s not i n evi dence.
4 MR. RUBI NSTEI N: The j udge asked me t o i dent i f y t he
5 document .
6 THE COURT: Do you r ecal l t hat ?
7 THE WI TNESS: I mean my name i s on t he e- mai l , so
8 t her ef or e i t ' s one of many e- mai l s. I do not r ecal l .
9 THE COURT: Does i t r ef r esh your r ecol l ect i on?
10 THE WI TNESS: No, si r , i t does not .
12 quest i on and answer . I t ' s not pr oper evi dence.
13 Q. Then I wi l l ask you, i s t hi s an e- mai l t hat you sent ,
14 3501- PPP, i s t hi s an e- mai l t hat you sent on December 3, 2002
15 at 11: 54? I ' msor r y. I s t hi s an e- mai l t hat you r ecei ved f r om
16 Dr . Kar r on on December 3, 2002, about 11: 54 i n t he mor ni ng?
18 THE COURT: I nst ead of r ef er r i ng - - i f you want t o put
19 t hose i n evi dence, move t hemi nt o evi dence.
20 MR. RUBI NSTEI N: I do. OK. I move - -
21 THE COURT: Don' t appr oach i t t hi s way. Let ' s get i t
22 over wi t h and get i t done.
23 MR. RUBI NSTEI N: I of f er i nt o evi dence Gover nment
24 Exhi bi t 3501- PPP.
( 212) 805- 0300
221
1 THE COURT: On what gr ound?
2 MR. KWOK: The wi t ness says she does not r ecal l .
3 THE COURT: I t doesn' t mat t er , does i t ? I sn' t t hi s a
4 document kept i n t he r egul ar cour se of busi ness, t hese e- mai l s?
5 THE WI TNESS: Yes, si r , we keep al l of t he e- mai l s.
6 MR. KWOK: Wi t hdr awn.
7 THE COURT: Put i t i n evi dence and t hen can you
8 di spl ay i t t o t he j ur y. But l et ' s move i t al ong.
9 MR. RUBI NSTEI N: I wi l l j ust r ead a por t i on of i t i n
10 t he mi ddl e of t he page, i t says, " Pl ease r el ay your concer ns t o
11 mysel f and Pet er . " Thi s i s f r omDr . Kar r on. " Once we have
12 NI ST' s appr oval , we wi l l f or mal l y br i ng hi monboar d. When you
13 and J ayne ar e r eady, we can have a t el econf er ence i f
14 appr opr i at e. I can br i ng J oan our audi t or and account ant i n
15 f or t he meet i ng, and we can per haps whack each audi t i ssue dead
16 wi t h al l onboar d one at a t i me l i ke ducks i n a r ow. "
17 THE COURT: Gi ve us a dat e.
18 MR. RUBI NSTEI N: Thi s i s on December 3, 2002.
19 Q. Now, as a mat t er of f act , Ms. Li de - -
20 THE COURT: So Def endant ' s A i n evi dence?
22 ( Def endant ' s Exhi bi t A r ecei ved i n evi dence)
23 Q. You had r equest ed t hat Dr . Kar r on speak on behal f of ATP at
24 conf er ences?
25 A. That i s cor r ect , we ask t hat of al l of our r eci pi ent s.
( 212) 805- 0300
222
1 Q. And Dr . Kar r on di d speak at conf er ences f or you?
2 A. I bel i eve at one he di d. One he was unavai l abl e, i f I
3 r emember cor r ect l y.
4 Q. And I t hi nk t hi s mor ni ng you sai d t hat i n f act t her e wer e
5 f i ve di f f er ent submi ssi ons f or r evi si ons t hat had di f f er ent
6 number s on t hem, cor r ect ?
7 A. I bel i eve t hat was t he number , yes.
8 Q. And i n f act Dr . Kar r on r equest ed - - wi t hdr awn.
9 You had cont act wi t h a man named Bob Benedi ct , di d you
10 not ?
11 A. I do not r ecal l cont act i ng Bob Benedi ct per sonal l y, no,
12 si r .
13 Q. Do you r ecal l bei ng i nf or med t hat he was t he new busi ness
14 manager f or CASI ?
15 A. I r ecal l bei ng i nf or med t hat he woul d be j oi ni ng t he
16 company, but t her e was no pr i or appr oval t hat he was named as
17 t he new busi ness manager . I have no amendment showi ng me t hat .
18 Q. Wel l , was he ever appr oved?
19 A. To t he best of my knowl edge, no. Ther e i s no amendment i n
20 my f ol der t hat says he was appr oved.
21 Q. But i t i s a f act t hat you had cont act wi t h Bob Benedi ct , he
22 on behal f of CASI and you on behal f of t he ATP pr oj ect .
23 THE COURT: I s t hat cor r ect ?
24 A. I know we had an e- mai l f r omBob Benedi ct . I ' mnot sur e i f
25 t her e wer e any phone conver sat i ons.
( 212) 805- 0300
223
1 Q. I n f act dur i ng t he t i me t hat t hese var i ous budget r evi si ons
2 wer e bei ng submi t t ed, you had Dr . Kar r on pr esent a paper at a
3 conf er ence Wher e Medi cal Meet s Vi r t ual Real i t y, on Mar ch 22 and
4 23r d of - -
5 THE COURT: What i s t he r el evance of t hi s,
7 MR. RUBI NSTEI N: The r el evance i s t hat up unt i l - -
8 THE COURT: No, I don' t want a speaki ng - - t hi nk about
9 i t bef or e you do i t , and we can have a si debar and al l ow i t
10 l at er , but l et ' s go ahead wi t h t he exami nat i on.
11 MR. RUBI NSTEI N: I ' mnot goi ng t o spend t he t i me t o do
12 t hat , your Honor .
13 THE COURT: Let ' s ask t he quest i on t hen. Let ' s keep
14 t o r el evant quest i ons.
15 Q. I n f act i n J une of 2003 di d you i nvi t e Dr . Kar r on t o come
16 t o NI ST f or a wor kshop?
17 THE COURT: I don' t see t he r el evance of t hat ei t her ,
18 so I ' mgoi ng t o r ul e t he obj ect i on sust ai ned. Let ' s go ahead
19 wi t h t hi s case.
20 Q. Wel l , you had sent a l et t er , Exhi bi t 30 - -
21 THE COURT: You can make an appl i cat i on l at er .
22 Q. Exhi bi t 30, you sent a l et t er i n on Apr i l 16 out l i ni ng
23 pr obl ems t hat you wer e havi ng wi t h Dr . Kar r on and CASI ,
24 cor r ect ?
25 A. I don' t know. To whomdi d I send t hi s l et t er ? Oh, you
( 212) 805- 0300
224
1 mean t he one t o t he gr ant s of f i ce?
2 Q. Ri ght .
3 A. OK. No, al l we sai d was we wer e havi ng t r oubl e r econci l i ng
4 t he year one act ual s, and we wer e aski ng f or an audi t or ' s hel p.
5 Many of our audi t s - - i n f act t he maj or i t y of our audi t s have
6 ver y sat i sf act or y endi ngs. So, we di d not say we wer e havi ng
7 t r oubl e wi t h t he company or Dr . Kar r on. We sai d we wer e havi ng
8 t r oubl e r econci l i ng year one act ual s. To me t hat ' s a bi g
9 di f f er ence.
10 Q. Wel l , on J une 27 t he gr ant was suspended, cor r ect ?
11 A. Cor r ect .
12 Q. And t hat was on your r ecommendat i on, cor r ect ?
13 A. We r ecommended t hat , yes, t hat i s cor r ect .
14 Q. And f our days ear l i er , bef or e you made t hat r ecommendat i on,
15 on J une 23, 2003 you i nvi t ed Dr . Kar r on t o a NI ST wor kshop t he
16 24t h and 25t h of J une.
17 MR. KWOK: Obj ect i on. Cor r ect ?
18 THE COURT: I wi l l al l ow t he quest i on.
19 A. Cer t ai nl y, but t hey' r e mut ual l y excl usi ve. At t he t i me we
20 i nvi t ed hi m, we di d not know - - we di d not have t he i nf or mat i on
21 t hat woul d cause us t o suspend t he awar d.
22 Q. What di d you acqui r e bet ween J une 25 and J une 27 t hat you
23 di dn' t have bef or e?
24 A. Some i nf or mat i on f r omt he gover nment audi t or t hat he had
25 not sat i sf i ed a r equi r ement of t he gr ant .
( 212) 805- 0300
225
1 Q. And you got t hat i n wr i t i ng?
2 A. I don' t r ecal l . I suspect - - I know t her e was a phone
3 cal l . Ther e i s pr obabl y an e- mai l t r ai l al so. I know our
4 r ecommendat i on t o t he gr ant s of f i ce t o suspend was i n wr i t i ng.
5 THE COURT: That was when?
6 THE WI TNESS: Ther e i s an e- mai l t hat I ' msur e someone
7 i n t hi s cour t house has. I t was l i ke maybe J une 26.
8 THE COURT: Wel l , you wr ot e a l et t er .
9 THE WI TNESS: No, I sent an e- mai l , si r . I t was about
10 J une 26t h. I t was l i ke t he day of t he suspensi on, per haps t he
11 day bef or e.
12 Q. And t he day bef or e t hat you i nvi t ed hi mt o speak on behal f
13 of NI ST, r i ght ?
14 A. Absol ut el y. We di dn' t have t he i nf or mat i on t hat woul d
15 cause us any r eason t o suspend.
16 Q. Now, ar e t hese gr ant s on a cash or an accr ual basi s?
17 A. Ar e t hey a cash - -
18 Q. I n ot her wor ds, ar e you f ami l i ar wi t h t he di f f er ence
19 bet ween cash and accr ual ?
20 A. I ' maf r ai d not . I ' ma t echni cal per son. Sor r y.
21 Q. OK. Now, at t he t i me t hat t he gr ant was suspended on J une
22 27, 2003, ar e you awar e whet her or not Dr . Kar r on had
23 out st andi ng debt s t hat he had i ncur r ed on behal f of t he ATP
24 pr oj ect ?
25 A. I woul d have no knowl edge of t hat , si r .
( 212) 805- 0300
226
1 Q. And i n f act Dr . Kar r on t hen communi cat ed wi t h Mar i l yn
2 Gol dst ei n?
3 A. OK. She was t he gr ant s - -
4 Q. Ar e you awar e of t hat ?
5 A. He shoul d. She i s our gr ant s of f i cer . She had si gnat ur e
6 aut hor i t y at t he t i me f or ever y amendment and hi s awar d, and
7 t hat woul d be ver y appr opr i at e f or hi mt o communi cat e wi t h her .
8 Q. And dur i ng al l t hi s t i me, i n August and Sept ember , he i s
9 at t empt i ng - -
10 THE COURT: What year ?
11 MR. RUBI NSTEI N: Sept ember of ' 03.
12 Q. August , Sept ember , Oct ober ' 03 he i s at t empt i ng t o get t he
13 gr ant r est ar t ed, cor r ect ?
14 A. That was hi s i nt ent , t o t he best of our knowl edge, cor r ect .
15 Q. And he at t empt ed t o get i n t ouch wi t h you, cor r ect ?
16 A. Yes.
17 Q. And t o have a meet i ng wi t h you, cor r ect ?
18 THE COURT: Wi t h you?
19 THE WI TNESS: I guess. I don' t r ecal l t hat . I f t her e
20 i s an e- mai l , t hen, yes, t hat ' s t r ue.
21 THE COURT: Wel l , di d you get a l et t er or an e- mai l
22 f r omhi mdur i ng t hat t i me, or ar e you answer i ng you as r egar ds
23 t o t he agency? I t ' s i mpor t ant t o make a di st i nct i on.
24 THE WI TNESS: You as an agency I can at t est got
25 communi cat i on. I got communi cat i on per sonal l y; I ' mnot sur e
( 212) 805- 0300
227
1 whet her i t was a phone cal l or an e- mai l .
2 THE COURT: A communi cat i on t o - -
3 THE WI TNESS: To wor k t oget her t o r est ar t t he gr ant ,
4 whi ch i s of cour se what we woul d l i ke t o do. Our goal i s t o
5 make t hese gr ant s successf ul , yes, si r .
6 Q. I n f act , ma' am, on August 11, ' 03 Dr . Kar r on sent you and
7 J ayne an e- mai l r equest i ng t o schedul e a phone conf er ence t o
8 r est ar t t he gr ant .
9 THE COURT: I s t hat t he quest i on?
11 A. I don' t r ecal l t he dat e, but , as I sai d, I had
12 communi cat i on wi t h Dr . Kar r on, as di d J ayne, on what t o do t o
13 r est ar t t he gr ant .
14 Q. I sn' t i t a f act t hat you r ecei ved a communi cat i on on
15 Sept ember 4, ' 03 f r omMar k St anl ey - - t he act i ng di r ect or at
16 t hat t i me, and now t he di r ect or of t he pr oj ect - - t o you sayi ng
17 t hat Dr . Kar r on want s a qui ck f i x on a ver y compl i cat ed
18 pr obl em? And you r esponded you wi l l br i ef hi m?
19 A. I don' t r emember t he wor ds qui ck f i x, but I do r emember an
20 e- mai l f r omMar k St anl ey and a subsequent meet i ng.
21 THE COURT: Subsequent meet i ng bet ween whom?
22 THE WI TNESS: Bet ween Mar k St anl ey and t he pr oj ect
23 t eam. Mysel f , J ayne Or t hwei n and ei t her Hope Snowden and/ or
24 Mar i l yn Gol dst ei n or bot h.
25 THE COURT: Was Dr . Kar r on pr esent ?
( 212) 805- 0300
228
1 THE WI TNESS: No, t hi s was an i nt er nal NI ST meet i ng.
3 Q. Di d Mar k St anl ey ask you f or advi ce whet her or not he
4 shoul d meet wi t h Dr . Kar r on on Sept ember 4, 2003?
5 A. I don' t r emember Mar k St anl ey aski ng me whet her he shoul d
6 meet or not . And we don' t make t hose deci si ons f or t he
7 di r ect or , we j ust br i ef t he di r ect or . So t hat woul d be hi s
8 deci si on af t er t he br i ef i ng.
9 Q. And i sn' t i t a f act t hat on Oct ober 14, 2003 Dr . Kar r on
10 sent you and J ayne Or t hwei n an e- mai l aski ng when can we t al k?
11 A. OK.
12 Q. I s t hat a f act ?
13 A. We di d have mul t i pl e communi cat i on. I ' msor r y, I don' t
14 r emember t he exact dat es.
15 Q. But i n f act t he mul t i pl e communi cat i ons wer e al l Dr . Kar r on
16 aski ng you i f he coul d si t down and t al k t o you about get t i ng
17 t he gr ant r est ar t ed, cor r ect ?
18 A. I do bel i eve t hose communi cat i ons wer e answer ed by us al so.
19 Q. But i s i t a f act , ma' am, t hat he kept - -
20 THE COURT: Wer e you st onewal l i ng hi m?
21 THE WI TNESS: No, we cer t ai nl y wer e not , si r . Our
22 goal i s t o hel p t hese pr oj ect s succeed, and t hat ' s why I am
23 sur e we answer ed t he communi cat i ons.
24 Q. Di d you ever meet hi m?
25 A. Di d we meet hi maf t er t hat ? No, we di d not meet hi m.
( 212) 805- 0300
229
1 THE COURT: Di d you have a t el ephone conf er ence.
2 THE WI TNESS: I amsur e we woul d have ei t her e- mai l
3 exchanges or t el ephone conf er ences or t el l hi mt o whomt o go,
4 whi ch at t hat poi nt woul d have been t he gr ant s of f i ce.
5 THE COURT: I t wasn' t i n your bai l i wi ck; i t was t he
6 gr ant s of f i ce?
7 THE WI TNESS: That i s cor r ect . At t hat poi nt i t was
8 out of my hands and J ayne' s hands, and i t woul d have been i n
9 t he gr ant s of f i ce t hat t hi s woul d have t o be r esol ved.
10 Q. I n f act , t he i nt er nal pr ocess of audi t r esol ut i on was
11 st opped on t hi s case.
12 A. That i s not my depar t ment .
13 Q. But t hat ' s what happened. Whoever ' s depar t ment i t was, t he
14 ci vi l audi t r esol ut i on was st opped.
16 THE COURT: Do you have per sonal knowl edge of t hat ?
17 THE WI TNESS: No, I don' t because I don' t do audi t
18 r esol ut i ons.
19 THE COURT: I ' mj ust aski ng - -
21 Q. I sn' t i t a f act - -
22 THE COURT: The j ur y i s t o di sr egar d t he quest i on
23 unt i l we get an answer . Thi s wi t ness i s appar ent l y not i n a
24 posi t i on t o answer t hat .
25 Q. Let me show you what ' s been mar ked f or i dent i f i cat i on as
( 212) 805- 0300
230
1 Gover nment Exhi bi t 3501- FF and ask you t o r evi ew t hi s document .
2 THE COURT: FF or SS?
3 MR. RUBI NSTEI N: FF.
4 Q. See i f t hat r ef r eshes your r ecol l ect i on as t o whet her or
5 not you had knowl edge t hat t he audi t i ng r esol ut i on was
6 suspended.
7 A. I was copi ed on t hi s e- mai l , so I guess I di d have
8 knowl edge. I t was not my r esponsi bi l i t y, so I di dn' t act on
9 i t .
10 THE COURT: What ' s t he dat e?
11 THE WI TNESS: Fr i day, Oct ober 1, 2004.
12 MR. RUBI NSTEI N: I of f er t hat i nt o evi dence, your
13 Honor , Def endant ' s Exhi bi t B.
14 THE COURT: Def endant ' s Exhi bi t B i s admi t t ed i n
15 evi dence.
16 MR. KWOK: No obj ect i on.
17 ( Def endant ' s Exhi bi t B r ecei ved i n evi dence)
18 THE COURT: Do you want t o publ i sh i t ?
19 MR. RUBI NSTEI N: I wi l l r ead a por t i on of i t , your
20 Honor . Thi s i s an e- mai l f r omRachel Gar r i son t o Angel a
21 McI nner ny, Mar i l yn Gol dst ei n, cc' d t o a number of peopl e,
22 i ncl udi ng Ms. Li de, and i t says, " Addi t i onal l y, pl ease do not
23 pr oceed wi t h audi t r esol ut i on f or CASI . I t ' s ext r emel y
24 i mpor t ant t hat a bi l l not be gener at ed f or t he f unds t hat CASI
25 mi sappr opr i at ed f r omt he awar d. "
( 212) 805- 0300
231
1 I have no f ur t her quest i ons, your Honor .
2 THE COURT: Al l r i ght . Redi r ect .
4 REDI RECT EXAMI NATI ON
5 BY MR. KWOK:
6 Q. Ms. Li de, Mr . Rubi nst ei n asked you a coupl e of quest i ons at
7 t he begi nni ng of hi s cr oss- exami nat i on about a l i st of names.
8 Do you r emember t hat l i ne of quest i oni ng?
9 A. Yes, I do.
10 Q. Wer e any of t hese peopl e i nvol ved i n t he day- t o- day r unni ng
11 of t he CASI gr ant , t he ATP gr ant awar ded t o CASI ?
12 THE COURT: As f ar as you know.
13 A. I don' t r emember t he whol e l i st , but t he t hr ee t hat wer e
14 i nvol ved i n t he day- t o- day woul d be J ayne Or t hwei n, mysel f and
15 Hope Snowden. I don' t bel i eve t hey wer e on your l i st .
16 Q. Ms. Li de, who had sol e si gnat or y aut hor i t y at CASI whi l e i t
17 was r ecei vi ng t he ATP gr ant ?
18 A. Dr . Kar r on.
19 Q. Di d any of hi s busi ness manager s or audi t or s or bookkeeper s
20 have si gnat or y aut hor i t y at any poi nt ?
21 A. No, we never got document at i on t o t hat , no.
22 Q. Ms. Li de, do you r emember Mr . Rubi nst ei n' s quest i ons about
23 t he t i t l e 48 of t he Code of Feder al Regul at i on, 48 CFR?
24 A. Um- hum.
25 Q. And he asked you about cer t ai n quest i ons about cont r act
( 212) 805- 0300
232
8637KAR5 Li de - r edi r ect
1 cost s bei ng abl e t o be pai d out of ATP f unds. Do you r emember
2 t hat ?
3 A. I t hi nk so.
4 MR. KWOK: I f we coul d publ i sh t o t he j ur y what ' s
5 al r eady i n evi dence as Gover nment Exhi bi t 4, page 6.
6 I ' msor r y. I gave t he wr ong number . I t ' s Gover nment
7 Exhi bi t 1, page 6.
8 THE COURT: I can' t r ead i t . I s t hi s i n t he j ur y
9 book?
10 MR. KWOK: I bel i eve so, your Honor .
12 MR. KWOK: I f we coul d zoomi nt o t he t op of par agr aph
13 5.
14 Q. Coul d you r ead us t he f i r st sent ence af t er j ust t he second
15 headi ng?
16 A. " Regar dl ess of whet her t hey ar e al l owabl e under t he f eder al
17 cost pr i nci pl es, t he f ol l owi ng ar e unal l owabl e under ATP: "
18 Q. What does t he f i r st of t hat phr ase mean, " Regar dl ess of
19 whet her t hey ar e al l owabl e under t he f eder al cost
20 pr i nci pl es. . . " ?
21 A. I t means what ' s st at ed her e over r ul es any ot her f eder al
22 cost pr i nci pl es.
23 Q. What i n f act ar e t he ATP r ul es r egar di ng pr egr ant cost s?
24 A. We do not pay any what we cal l sunk cost s, whi ch ar e cost s
25 i ncur r ed bef or e t he st ar t of t he gr ant .
( 212) 805- 0300
233
1 Q. And on what occasi ons di d you t el l gr ant r eci pi ent s t hat
2 r ul e, t hat you do not pay f or pr egr ant cost s?
3 A. That ' s t ol d at bi dder s' conf er ences, vi a phone cal l s, i n
4 t he ki ckof f meet i ng, on our websi t e. I t ' s r epeat ed.
5 Q. Ms. Li de, do you r emember Mr . Rubi nst ei n aski ng you about
6 t he $60, 000 some odd dol l ar s t hat Dr . Kar r on al l egedl y put i nt o
7 CASI af t er t he - -
8 A. Yes, cor r ect .
9 Q. Do you have any per sonal knowl edge about what happened
10 t her e?
11 A. I t i s my - - I know t hat t he gr ant s of f i ce sai d t hat was not
12 an accept abl e way t o do i t .
13 MR. RUBI NSTEI N: I ' mgoi ng t o obj ect . The quest i on i s
14 do you have any per sonal knowl edge.
16 Q. Do you have any per sonal knowl edge?
17 A. Yes, I do. The gr ant s of f i ce sai d i t was not accept abl e,
18 i t di d not meet - -
19 MR. RUBI NSTEI N: I obj ect t o t hat and move t o st r i ke
20 i t . I t ' s hear say.
21 THE COURT: Obj ect i on sust ai ned, what ever t he gr ant s
22 of f i ce sai d. The j ur y i s i nst r uct ed t o di sr egar d t he answer .
23 Q. Asi de f r omwhat you mi ght have hear d f r omot her peopl e, do
24 you have any ot her per sonal knowl edge about t he $60, 000
25 i nf usi on of cash i nt o CASI ?
( 212) 805- 0300
234
1 A. Accor di ng t o ATP r ul es - -
2 THE COURT: No, no.
3 A. I have per sonal knowl edge t hat i t woul d not be accept ed
4 because i t was not account ed f or f or t he ongoi ng r esear ch or
5 pr oj ect .
6 Q. Mi ss Li de, di d Dr . Kar r on or CASI ever get an appr oved
7 budget r evi si on t o al l ow so- cal l ed pr epar at i on cost s, si t e
8 pr epar at i on cost s?
9 A. No, no.
10 Q. How about any ot her r enovat i on cost s?
11 A. No. Ther e was onl y t he one appr oved budget t hat we have
12 di scussed sever al t i mes i n December of ' 01. That was t he onl y
13 r evi si on t o t he budget t hat was appr oved.
14 Q. And what i s t he nat ur e of t hose changes agai n t o t he
15 budget ?
16 A. Ther e wer e mi nor changes i n equi pment . I t added a new l i ne
17 t o mat er i al s and suppl i es. I t r educed sal ar i es and t her ef or e
18 f r i nge benef i t s but upped subcont r act s.
19 THE COURT: That exhi bi t i s what ?
20 THE WI TNESS: 22 I bel i eve, i f I r emember . Yes, i t ' s
21 22, si r .
22 MR. KWOK: I f we coul d put up Gover nment Exhi bi t 2,
23 page 3. I f we coul d zoomi nt o t he t op of par agr aph 9. I f you
24 coul d cut t hat i n hal f so we coul d bl ow i t up.
25 Q. Di r ect i ng your at t ent i on t o subpar agr aph A, what wor d i s
( 212) 805- 0300
235
1 under l i ned t her e?
2 THE COURT: Subpar agr aph A of par agr aph 9?
3 MR. KWOK: Yes, 9A.
5 Q. What wor d i s under l i ned i n t hat par agr aph?
6 A. Annual .
7 Q. What does t hat say t o you?
8 A. That t he 10 per cent r ef er s t o t he t ot al annual budget , not
9 t he over al l budget over t he t hr ee year s.
10 MR. KWOK: I f we coul d put up Gover nment Exhi bi t 4,
11 page 7. Sor r y, I have t he wr ong page agai n. I t ' s page 11
12 act ual l y.
13 THE COURT: Of what ?
14 MR. KWOK: I t ' s page 11 of Gover nment Exhi bi t 4.
15 THE COURT: I s t hat i n t he j ur y bi nder , or i s t hat - -
16 MR. KWOK: No, i t ' s not , but i t ' s now di spl ayed on t he
17 scr een.
19 Q. Ms. Li de, do you r emember Mr . Rubi nst ei n aski ng you about
20 t he second bul l et poi nt ?
21 A. Yes.
22 Q. And you sai d t hat i t was t aken out of cont ext - -
23 A. Yes.
24 Q. - - what he was t r yi ng t o say. What wer e you t r yi ng t o
25 expl ai n t o us?
( 212) 805- 0300
236
1 A. I was t r yi ng t o expl ai n t hat sever al sl i des ear l i er had
2 sai d t hat any change i n t he budget had t o be appr oved i n
3 advance. What t hat i s r ef er r i ng t o i s t he over al l pr oj ect .
4 At t he end of each year your t echni cal goal s mi ght
5 change sl i ght l y. You mi ght r eal i ze i n subsequent year s t hat
6 your est i mat ed budget f or year t wo and t hr ee wer e not cor r ect ,
7 and t hi s i s sayi ng t hi s i s a good t i me t o r evi ew t hat . I n
8 f act , bef or e we r enew t he pr oposal s - - bef or e we r enew t he
9 awar d and add year t wo, we ask i f t her e ar e any such changes,
10 and t hat ' s t o what t hat i s r ef er r i ng.
11 Q. J ust t o be cl ear , t he second bul l et poi nt t her e i s not
12 over r ul i ng t he pr i or appr oval r equi r ement .
13 A. No.
14 MR. RUBI NSTEI N: Obj ect i on t o t he l eadi ng.
15 THE COURT: What budget i s cont empl at ed by t hat second
16 bul l et poi nt ?
17 THE WI TNESS: I t means l ook at your t hr ee- year budget ,
18 and i f you ant i ci pat e changes i n year t wo or year t hr ee, t hi s
19 i s a good t i me t o ask f or appr oval of a new budget .
20 THE COURT: I s t hat gone i nt o i n t he or i gi nal meet i ng
21 wi t h t he gr ant ee?
22 THE WI TNESS: That ' s how - - t hi s i s not my sl i de. I
23 do not do t hi s par t of t he pr esent at i on, but t hat ' s as I
24 i nt er pr et t hat . Sever al sl i des pr i or t o t hi s - -
25 THE COURT: You have answer ed my quest i on.
( 212) 805- 0300
237
1 Q. Let ' s go back t o page 7 of t he same exhi bi t . How does t he
2 sl i de t hat we j ust l ooked at r el at e t o t hi s sl i de?
3 A. Wel l , t hi s sl i de cl ear l y st at es pr i or appr oval - -
4 MR. RUBI NSTEI N: I obj ect t o t hi s as i mpr oper
5 r edi r ect , your Honor .
6 THE COURT: Obj ect i on over r ul ed.
7 MR. RUBI NSTEI N: I di dn' t ask anyt hi ng about t hi s.
8 THE COURT: I wi l l al l ow i t . But i nst ead of doi ng
9 t hi s, poi nt t o t he sect i on you ar e t al ki ng about , and t hen you
10 can expl ai n.
11 Q. Di r ect i ng your at t ent i on t o t he second bul l et poi nt , how
12 does t hat poi nt r el at e t o t he poi nt t hat we j ust l ooked at i n
13 t he pr evi ous sl i de?
14 A. That any t i me dur i ng year one t hat a new budget i s
15 r equest ed, i t must be pr esent ed at t he t i me of t he r equest and
16 get pr i or wr i t t en appr oval .
17 Q. Now, Ms. Li de, do you r emember Mr . Rubi nst ei n al so aski ng
18 you about t he pur pose of not al l owi ng ATP gr ant f unds t o be
19 expended on i ndi r ect cost s? Do you r emember t hat quest i on?
20 A. I do.
21 Q. And he asked you whet her one of t he pur poses of t hat r ul e
22 was so t hat somet i mes a company mi ght spend t i me on di f f er ent
23 pr oj ect s? Do you r emember t hat ?
24 A. I do.
25 Q. Ar e t her e any ot her pur poses asi de f r omt hat t hat ATP does
( 212) 805- 0300
238
1 not pay f or i ndi r ect cost s? What was your under st andi ng as t o
2 why ATP does not pay f or i ndi r ect cost s?
3 A. Wel l , t he f i r st under st andi ng i s t hat t hat i s t he way t hat
4 a si ngl e company cost shar es wi t h t he U. S. gover nment .
5 The second under st andi ng i s t hat i f t he company has no
6 i ndi r ect cost s t o shar e, i t may not be a vi abl e company.
7 And t he t hi r d r eason woul d be t hat any company, no
8 mat t er how smal l , engages i n ot her act i vi t i es t han t he ATP
9 pr oj ect . For exampl e, i n CASI ' s case t hey wer e l ooki ng f or
10 f undi ng f r omot her ent i t i es, t hat woul d be act i vi t i es out si de
11 of t he ATP pr oj ect .
12 Q. Ms. Li de, l et ' s go back t o Gover nment Exhi bi t 4. You
13 r emember Mr . Rubi nst ei n showi ng you t he f ont at t he upper
14 l ef t - hand cor ner of t he sl i de and you wer e t r yi ng t o expl ai n?
15 A. I do.
16 Q. What i s t hat expl anat i on?
17 A. Yes. The expl anat i on i s t hat we wor k as a t eam. Two of us
18 ar e f r omAdvanced Technol ogy Pr ogr am, one of us i s f r omt he
19 gr ant s of f i ce; and because we have di f f er ent knowl edge of par t s
20 of t hi s gr ant s, we al l put t hese sl i des t oget her wi t h our
21 knowl edge. So, t he l ar ger f ont came f r omt he gr ant s per son.
22 She cr eat ed her own sl i des because she has t he i nt i mat e
23 knowl edge of t hat . Those of us i n t he Advanced Technol ogy
24 Pr ogr amcr eat ed our own sl i des usi ng a smal l er f ont . Our goal
25 i sn' t t o have t he pr et t i est sl i de set ; i t ' s t o gi ve t he
( 212) 805- 0300
239
1 i nf or mat i on t o t he company.
2 Q. You r emember bei ng asked a quest i on about t he " i n ki nd"
3 cont r i but i on and how i t r el at es t o t he cost shar e?
4 A. Yes, I do.
5 Q. You r emember hi maski ng you about t he l i mi t t hat can be
6 done?
7 A. Yes.
8 MR. KWOK: May I appr oach, your Honor ?
9 THE COURT: Yes, you may.
10 Q. I amshowi ng you a document t o see i f t hat r ef r eshes your
11 r ecol l ect i on.
12 MR. RUBI NSTEI N: I obj ect . She di dn' t i ndi cat e t hat
13 she needs i t .
14 THE COURT: I don' t know what t he document - - I
15 haven' t got t en anyt hi ng on t hi s.
16 ( Recor d r ead)
17 THE COURT: You can show a document t o see i f i t
18 r ef r eshes her r ecol l ect i on.
19 ( Recor d r ead)
20 THE COURT: You need anot her quest i on i n t her e,
21 Mr . Kwok.
22 Q. Do you know t he per cent age l i mi t wher e t hat can be done,
23 t he " i n ki nd" cont r i but i on can be consi der ed as par t of t he
24 cost shar e?
25 A. I bel i eve i t i s a t hi r d, but I woul d l i ke t o be r ef r eshed
( 212) 805- 0300
240
1 i f possi bl e.
2 MR. KWOK: Your Honor ?
4 MR. RUBI NSTEI N: I t hi nk i t ' s i nappr opr i at e, your
5 Honor . I t ' s absol ut el y i nappr opr i at e.
6 THE COURT: She says - -
7 MR. RUBI NSTEI N: They have a document t hat she never
8 saw bef or e. How can she be r ef r eshed?
9 THE COURT: I don' t know whet her i t ' s a document she
10 has seen bef or e or not .
11 MR. RUBI NSTEI N: Wel l , I t hi nk t hey have t o ask her .
12 THE COURT: You have t o ask her whet her she has seen
13 t hi s document bef or e.
14 MR. KWOK: Maybe a f ew quest i ons, your Honor .
15 THE COURT: You can show her t he document and ask her
16 i f she has seen i t bef or e. She can' t t el l unl ess she l ooks at
17 i t .
18 MR. RUBI NSTEI N: He shoul d show her t he f i r st page
19 onl y.
20 THE COURT: Al l r i ght , j ust t he f i r st page.
21 THE WI TNESS: Yes, I have seen t hat document .
22 THE COURT: Al l r i ght . Let her l ook t hr ough t he
23 document . Let her l ook t hr ough t he document .
24 THE WI TNESS: I shoul d have conf i dence i n mysel f . The
25 t ot al val ue of any " i n ki nd" cont r i but i ons used t o sat i sf y t he
( 212) 805- 0300
241
1 caut i onar y r equi r ement may not exceed 30 per cent of t he
2 nonf eder al shar e of t he t ot al pr oj ect cost s. And I had sai d a
3 t hi r d.
4 THE COURT: You r emember t hat of your own knowl edge,
5 not j ust r eadi ng i t .
6 THE WI TNESS: No, no, si r , I answer ed - - I bel i eve you
7 woul d f i nd i t - - I sai d I bel i eved i t was a t hi r d, so . . .
8 Q. Ms. Li de, you r emember Mr . Rubi nst ei n aski ng you quest i ons
9 about mul t i pl e communi cat i ons t o NI ST, i ncl udi ng your sel f , f r om
10 Dr . Kar r on?
11 A. I do.
12 Q. Af t er t he gr ant was suspended, what was t he r eason t hat you
13 your sel f st opped meet i ng wi t h hi m?
14 A. At t he begi nni ng - - we wer e i nst r uct ed by our gener al
15 counsel t o st op meet i ng wi t h hi maf t er t he suspensi on of t he
16 awar d.
19 Q. I amshowi ng you what ' s been mar ked as Def endant ' s Exhi bi t
20 I bel i eve 2, 3501- FF?
21 DEPUTY COURT CLERK: That ' s B.
22 THE COURT: B as i n boy.
23 Q. Ms. Li de, Mr . Rubi nst ei n asked you a moment ago t o r ead a
24 por t i on of t hat e- mai l . Can you r ead t he e- mai l i n i t s
25 ent i r et y?
( 212) 805- 0300
242
1 THE COURT: Act ual l y what he r ead - - he r ead a por t i on
2 of i t .
3 Q. He r ead a por t i on of i t . Can you r ead t he ent i r et y of t hat
4 e- mai l ?
5 A. Cer t ai nl y. The dat e i s Oct ober 1, 2004. " The Depar t ment
6 of J ust i ce has f or mal l y i ni t i at ed a gr and j ur y i nvest i gat i on
7 r egar di ng t he NI ST ATP awar d made t o Comput er Ai ded Sur ger y.
8 I n or der t o ensur e t hat DOJ and t he I nspect or Gener al ' s of f i ce
9 ar e abl e t o compl et e a t hor ough and t i mel y i nvest i gat i on, we
10 ar e r equest i ng t hat al l NI ST" - - " al l " i s al l i n caps - - " NI ST
11 per sonnel cease cont act wi t h Comput er Ai ded Sur ger y ( CASI ) , Dr .
12 Kar r on and al l CASI r epr esent at i ves. I nqui r i es f r omt hose
13 par t i es shoul d be di r ect ed t o mysel f or SA Ki r k Yamat ani .
14 Addi t i onal l y" - -
15 Shal l I cont i nue?
16 Q. Yes.
17 A. " Addi t i onal l y pl ease do not pr oceed wi t h t he audi t
18 r esol ut i on f or CASI . I t i s ext r emel y i mpor t ant t hat a bi l l not
19 be gener at ed f or t he f unds t hat CASI mi sappr opr i at ed f r omt he
20 awar d. Pl ease cont act me i f t her e ar e any f ur t her concer ns or
21 quest i ons. I l ook f or war d t o wor ki ng wi t h al l of you over t he
22 next f ew mont hs. Thank you. "
23 Q. And who wr ot e t hat e- mai l ?
24 A. Rachel A Gar r i son, speci al agent .
25 THE COURT: For t he Depar t ment of Commer ce?
( 212) 805- 0300
243
1 THE WI TNESS: Sor r y. Yes, Uni t ed St at es Depar t ment of
2 Commer ce.
3 Q. And do you see Rachel Gar r i son i n t hi s cour t r oom?
4 A. I do.
5 Q. Can you poi nt her out ?
6 A. She i s at t he f r ont t abl e wi t h a dar k sui t and a bl ue
7 bl ouse under i t .
8 MR. KWOK: No f ur t her quest i ons.
9 THE COURT: Recr oss.
11 RECROSS EXAMI NATI ON
13 Q. I s i t f ai r t o say t hat - -
15 THE COURT: Let ' s r ephr ase t he quest i on.
16 Q. Thank you, J udge.
17 Ar e you - - i s cof undi ng par t of your j ob? Ar e you
18 i nvol ved i n cof undi ng and advi se on cof undi ng?
19 THE COURT: I don' t - -
20 A. No, I don' t bel i eve i t i s.
21 THE COURT: I don' t see t he r el evance of t hi s.
22 MR. RUBI NSTEI N: He j ust asked her on cr oss. He
23 showed her a document .
24 Q. Di dn' t you say when you f i r st answer ed t hat quest i on t hat
25 i t was one t hi r d - - t hat one t hi r d?
( 212) 805- 0300
244
8637KAR5 Li de - r ecr oss
1 A. I t i s our r esponsi bi l i t y t o t he best of our knowl edge t o
2 under st and t he r ul es and cr i t er i a and t o advi se our r eci pi ent s,
3 and when i n doubt our exper t i s our gr ant speci al i st who wor ks
4 wi t h us on t he pr oj ect .
5 Q. I sn' t i t f ai r t o say t hat your answer was, bef or e you wer e
6 shown t he document , t hat i t ' s about a t hi r d of t he budget ?
7 A. No, def i ni t el y not of t he budget , absol ut el y not . Of t he
8 cost shar e.
9 Q. Now?
10 THE COURT: The cost shar e bei ng t he cost s put up by
11 t he gr ant ee?
12 THE WI TNESS: That i s cor r ect , si r . Yes.
13 Q. Now, sunk cost i s a t er myou used, cor r ect ?
14 A. Um- hum.
15 Q. I s t hat r i ght ?
16 A. Cor r ect .
17 Q. I s t hat what you sai d?
18 A. Cor r ect , we use t he t er msunk cost .
19 Q. And t hat i s cost s t hat a gr ant ee spends bef or e t hey
20 act ual l y get t he gr ant money.
21 A. Bef or e t he st ar t of t he gr ant .
22 Q. Bef or e. That t hey act ual l y spend t he money. They pai d f or
23 t he expense. They buy a comput er on Sept ember 29t h and t hey
24 pay f or t hat comput er t hat t hey' r e goi ng t o st ar t usi ng af t er
25 Oct ober 1st f or t he pur poses of t hat gr ant , t hat ' s a sunk cost ,
( 212) 805- 0300
245
1 r i ght ?
2 A. I f t hey pai d f or i t , yes, i t i s a sunk cost . Anyt hi ng t hey
3 pur chase, yes.
4 Q. You j ust sai d t hey pai d f or ?
5 A. Or , wel l , i f t hey or der i t . They can' t or der i t bef or e t he
6 st ar t of t he gr ant and t hen char ge ATP. They or der ed i t bef or e
7 t he gr ant .
8 Q. I sn' t i t a f act t hey can' t pay f or i t bef or e t he gr ant and
9 get r ei mbur sed, but i f t hey char ge i t and pay f or i t af t er t hey
10 get t he money, t hen t hat i s accept abl e?
11 A. I t cer t ai nl y woul dn' t be, i n my opi ni on, but t he gr ant s
12 of f i ce woul d have t o answer t hat quest i on mor e accur at el y.
13 I t ' s my under st andi ng t hat i t was ent er ed i nt o bef or e t he st ar t
14 of t he gr ant and t her ef or e r egar dl ess of when you pai d f or i t
15 i t woul d be a sunk cost .
16 Q. The gover nment showed you Gover nment Exhi bi t 4, page 11.
17 Coul d we have t hat up, pl ease?
18 MR. RUBI NSTEI N: I t ' s t he one t hat t he gover nment
19 showed t he wi t ness on r edi r ect .
20 THE COURT: That ' s what you want up, Mr . Rubi nst ei n?
23 Q. Anywher e i n t hat exhi bi t does i t addr ess a t hr ee- year
24 budget ?
25 A. That ' s what ' s meant by a r evi sed budget .
( 212) 805- 0300
246
1 THE COURT: But does i t st at e i t i n t he - -
2 THE WI TNESS: No, i t does not st at e a t hr ee- year
3 budget .
4 Q. Does i t speci f i cal l y say t he cost s of each year ?
5 A. Yes.
6 Q. Now you wer e aski ng f or t he act ual cost s of CASI i n or der
7 t o hel p CASI get a r evi sed budget , cor r ect ?
8 A. Yes.
9 Q. And anywher e i n your exhi bi t 4, t he sl i de pr esent at i on, i s
10 t her e anyt hi ng about cof undi ng and equi pment ?
11 A. I woul d be happy t o go t hr ough t hi s.
12 Wel l , cer t ai nl y t he page t hat says " adher e t o t er ms
13 and condi t i ons and r el at ed awar d document s, " l i st s t hi ngs t hat
14 woul d addr ess equi pment .
15 The pr i or appr oval says sol e sour ce cont r act s over
16 $100, 000. That woul d r el at e t o equi pment .
17 The next sl i de says r epor t changes and equi pment use.
18 That cer t ai nl y af f ect s equi pment .
19 The pr ocur ement st andar ds r el at es t o equi pment and how
20 one pur chases i t wi t h compet i ng pr ocur ement s and document i ng.
21 The budget sl i de, of cour se equi pment pl ays a bi g r ol e
22 i n t he budget , especi al l y i n a pr oj ect such as t hi s.
23 The audi t woul d have t o audi t t he equi pment .
24 An audi t pr obl emi s est i mat ed ver sus act ual cost s
25 r equest ed or f ai l ur e t o document cost shar e. Bot h of t hose
( 212) 805- 0300
247
1 coul d - - a pr i ce- based val ue of cont r i but i on, al l of t hose
2 coul d r el at e t o equi pment , i f t hat ' s what ' s i n quest i on.
3 And I suspect i t won' t be under t he t echni cal and
4 busi ness pr oj ect management , so - -
5 Q. So, i t ' s f ai r t o say t her e i s no pl ace i n your sl i de
6 pr esent at i on t hat says you can onl y use equi pment up t o 30
7 per cent as t o nonf eder al expenses, r i ght ? Ther e i s not hi ng
8 t hat says t hat .
9 A. Not i n t hat document , but i t occur s i n many ot her
10 document s.
11 Q. Not i n t he sl i de show t hough?
12 A. Not i n t he sl i de show di r ect l y.
13 Q. And t he gover nment asked you quest i ons about Def endant ' s
14 Exhi bi t B. You r ecei ved t hi s e- mai l on Oct ober 4, 2004. Di d
15 you ever t el l Dr . Kar r on i n al l t he t i mes he e- mai l ed you or
16 cal l ed you t hat you can' t speak t o hi mand t hat he shoul d be
17 di r ect ed t o ei t her Rachel Gar r i son her sel f or speci al agent
18 Ki r k Yamat ani ? Di d you ever t el l Dr . Kar r on t hat t hat ' s what
19 you wer e advi sed t o do?
20 A. Those wer e not my i nst r uct i ons. My i nst r uct i ons wer e
21 i nqui r i es f r omDr . Kar r on shoul d be r ef er r ed t o t hose speci al
22 agent s. My i nst r uct i ons wer e t o cease cont act . And I f ol l ow
23 i nst r uct i ons.
24 Q. Di d you t el l hi myou can' t t al k t o hi mmont h af t er mont h?
25 THE COURT: Di d you have any of t hese i nqui r i es t o
( 212) 805- 0300
248
1 t hose peopl e?
2 THE WI TNESS: Yes. My i nst r uct i ons wer e t o send
3 e- mai l - -
4 THE COURT: But di d you f ol l ow your i nst r uct i ons?
5 THE WI TNESS: Absol ut el y t o t he l et t er .
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
249
863ZKAR6 Li de - r ecr oss
2 Q. Di d you ever not i f y Dr . Kar r on t hat you had been i nst r uct ed
3 t o send al l hi s i nqui r i es t o Agent s Gar r i son and Yamat ani , i f
4 I ' mpr onounci ng hi s name cor r ect l y?
5 A. I ' ma gover nment empl oyee and I was f ol l owi ng my
6 i nst r uct i ons f r omt he U. S. Gover nment .
7 Q. So you had Dr . Kar r on keep cal l i ng you and beggi ng you t o
8 see i f he coul d get hi s gr ant s r est ar t ed; r i ght ?
10 A. No.
11 THE COURT: Obj ect i on sust ai ned. J ur y i s i nst r uct ed
12 t o di sr egar d t he quest i on.
13 You' r e excused. Next wi t ness, br i ng hi mon.
14 MR. EVERDELL: Your Honor , t he gover nment cal l s Hope
15 Snowden.
16 HOPE DENI SE SNOWDEN,
20 BY MR. EVERDELL:
21 MR. EVERDELL: May I pr oceed, your Honor ?
22 THE COURT: Yes.
23 Q. Good af t er noon, Ms. Snowden.
24 A. Good af t er noon.
25 Q. Wher e do you wor k?
( 212) 805- 0300
250
863ZKAR6 Snowden - di r ect
1 A. I wor k at t he Nat i onal I nst i t ut e of St andar ds and
2 Technol ogy i n Gai t her sbur g.
3 Q. I s t hat somet i mes cal l ed NI ST?
4 A. Yes.
5 Q. For shor t ? And i s NI ST par t of t he f eder al gover nment ?
6 A. Yes.
7 Q. And what par t ?
8 A. The Depar t ment of Commer ce.
9 Q. What i s your t i t l e at NI ST?
10 A. Gr ant s speci al i st .
11 Q. And how l ong have you been a gr ant s speci al i st ?
12 A. About ei ght - and- a- hal f year s.
13 Q. What do you do as a gr ant s speci al i st ?
14 A. I admi ni st er gr ant s.
15 Q. So can you descr i be a l i t t l e bi t what you do, your
16 r esponsi bi l i t i es?
17 A. I do l i ke budget r evi si ons. I admi ni st er - - I admi ni st er
18 t he gr ant s when - - per t ai ni ng t o t he r ul es and r egul at i ons. I
19 expl ai n t o t he gr ant ees what ar e al l owabl e and unal l owabl e
20 cost s.
21 Q. Do you have any r esponsi bi l i t i es concer ni ng budget s f or
22 gr ant s?
23 A. Yes. I r evi ew t he budget f or t he gr ant s, al t hough at t he
24 end of t he day my super vi sor , her si gnat ur e her - - wi t h an
25 amendment and her of f i ci al si gnat ur e, t hat ' s how our budget s
( 212) 805- 0300
251
1 ar e appr oved.
2 Q. Do you know B. J . Li de or Bet t i J o Li de?
3 A. Yes, I do.
4 Q. And who i s t hat ?
5 A. They' r e pr ogr ammanager s, and we par t ner up wi t h ATP
6 gr ant s.
7 Q. How does your j ob di f f er f r omMs. Li de' s j ob?
8 A. B. J . i s on a mor e t echni cal aspect s of t he gr ant s. I ' mon
9 mor e t han admi ni st r at i ve and l i ke budget anal ysi s, and my
10 of f i ce does al l t he appr oval s t hat have t o be aut hor i zed and
11 si gned f or by t he gr ant of f i cer .
12 Q. What di d you do bef or e becomi ng a gr ant speci al i st ?
13 A. I was a pr ocur ement anal yst f or Uni t ed St at es.
14 Q. And how l ong di d you do t hat f or ?
15 A. Ni ne year s.
16 Q. Ar e you f ami l i ar wi t h t he advanced t echnol ogy pr ogr am
17 gr ant ?
18 A. Yes.
19 Q. Or ATP gr ant s?
20 A. Yes.
21 Q. Have you been i nvol ved as a gr ant s speci al i st wi t h ATP
22 gr ant s i n t he past ?
23 A. Yes, I have.
24 Q. And about how many ATP gr ant s have you been a gr ant speci al
25 l i st f or ?
( 212) 805- 0300
252
1 A. Wel l , over 60.
2 Q. I n your capaci t y as a gr ant s speci al i st f or t he ATP gr ant s,
3 ar e you f ami l i ar wi t h t he r ul es gover ni ng t he ATP gr ant s?
4 A. Yes, I am.
5 Q. And ar e you f ami l i ar wi t h t he r ul es gover ni ng gover nment
6 gr ant s, i n gener al ?
7 A. Yes.
8 Q. How ar e you f ami l i ar wi t h t hose r ul es?
9 A. I ' ma gr ant s speci al i st and, t her ef or e, par t of my posi t i on
10 of my j ob i s t o be f ami l i ar wi t h t hose r ul es and r egul at i ons
11 t hat gover n t he gr ant s.
12 Q. And t hose r ul es i ncl ude spendi ng r ul es?
13 A. Spendi ng r ul es, unal l owabl e and al l owabl e cost s.
14 Q. Al l r i ght . Ms. Snowden, di d t her e come a t i me when you
15 wer e i nvol ved i n handl i ng, excuse me, i n handl i ng an ATP gr ant
16 awar ded t o Comput er Ai ded Sur ger y I ncor por at ed or CASI ?
17 A. Yes.
18 Q. And who i s t he head of CASI ?
20 Q. Do you see Dr . Kar r on her e i n t he cour t r oom?
21 A. Yes, I do.
22 Q. Woul d you pl ease poi nt hi mout and descr i be an ar t i cl e of
23 cl ot hi ng he' s wear i ng?
24 A. Wi t h t he gl asses on, t i e, and j acket .
25 MR. EVERDELL: May t he r ecor d r e - -
( 212) 805- 0300
253
1 MR. RUBI NSTEI N: I concede she' s i dent i f i ed - -
2 A. He has - -
3 MR. RUBI NSTEI N: - - Dr . Kar r on.
4 A. He has somet hi ng i n hi s hand - - t her e he i s, has a pony
5 t ai l . That ' s hi m, yes.
6 MR. EVERDELL: May t he r ecor d so r ef l ect t he wi t ness
7 has i dent i f i ed t he def endant ?
8 THE COURT: The r ecor d wi l l r ef l ect t he wi t ness has
9 i dent i f i ed t he def endant .
10 Q. Ms. Snowden - - excuse me, your Honor .
11 Ms. Snowden, what posi t i on di d t he def endant occupy
12 wi t hi n CASI ?
13 A. He' s t he pr esi dent .
14 Q. And when di d you f i r st meet t he def endant ?
15 A. I met hi mNovember 2001.
16 Q. And what was t he occasi on f or t hat meet i ng?
17 A. He came t o NI ST, hi mand hi s associ at es, t o what we cal l a
18 ki ckof f meet i ng. That ' s when you' r e awar ded a f eder al f unded
19 gr ant , you come t o our l ocat i on - - wel l , usual l y we go t o your
20 l ocat i on. But si nce 9/ 11 t hey came t o our l ocat i on. And we
21 have a - - gi ve a pr esent at i on, and we go t hr ough r ul es and
22 r egul at i ons t hat gover n t he gr ant s and go over what t hei r
23 r esponsi bi l i t i es ar e, our r esponsi bi l i t i es t o t hem, and t hen
24 t hey gi ve us l i ke a pr esent at i on of what t hey expect t o
25 accompl i sh t hr oughout t he pr oposal .
( 212) 805- 0300
254
1 Q. And you say t hat ' s a ki ckof f meet i ng?
2 A. I t ' s cal l ed a ki ckof f .
3 Q. And what gr ant s di d Dr . Kar r on and CASI r ecei ve at t hat
4 poi nt ?
5 A. A f eder al f unded gr ant wi t h f eder al f unds.
6 Q. Was i t an ATP gr ant ?
7 A. Thr ough ATP, yes, ATP pr ogr am.
8 Q. And when was t hat gr ant appr oved?
9 A. The gr ant was appr oved i n Oct ober 2001.
10 Q. How much f undi ng was aut hor i zed f or t hat gr ant ?
11 A. $2 mi l l i on.
12 Q. And how i s t he t wo mi l l i on goi ng t o be di sbur sed?
13 A. Over t hr ee year per i od, t he f i r st year bei ng 800, 000, and
14 second year 600, 000 and t hi r d year 600, 000.
15 Q. And wher e di d money come f r omt hat f unded t he gr ant ?
16 A. Feder al appr opr i at i ons, f eder al - - i t ' s a f eder al gr ant .
17 Q. Now, you ment i oned ki ckof f meet i ng bef or e. When, agai n,
18 di d t hat ki ckof f meet i ng occur ?
19 A. I t was i n November 2001.
20 Q. So how l ong af t er t he gr ant was appr oved di d t he ki ckof f
21 meet i ng happen?
22 A. Pr obabl y wi t hi n l i ke si x weeks.
23 Q. Now, pr i or t o t he ki ckof f meet i ng, di d you have any
24 conver sat i ons wi t h anyone f r omCASI ?
25 A. Yes, yes.
( 212) 805- 0300
255
1 Q. Who di d you have conver sat i ons wi t h?
2 A. Dr . Kar r on and hi s associ at e, Lee Gur f ei n.
3 Q. And who i s Lee Gur f ei n?
4 A. Lee Gur f ei n, under t hi s pr oposal , was an admi ni st r at or
5 under t hi s pr oposal .
6 Q. And what does an admi ni st r at or do?
7 A. Usual l y t hey do al l t he admi ni st r at i ve wor k. He woul d cal l
8 me t o ask me quest i ons f or about al l owabl e and unal l owabl e
9 cost s, j ust about any changes or changes t hat t hey pr opose;
10 j ust quest i ons.
11 Q. I s he t he poi nt of cont act ?
12 A. He was t he poi nt of cont act , yes.
13 Q. Al l r i ght . St ar t i ng f i r st wi t h your conver sat i ons wi t h Lee
14 Gur f ei n, di d he cont act you or di d you cont act hi m?
15 A. He cont act ed me.
16 Q. And why di d he cont act you?
17 A. He cont act ed me t o ask me about unal l owabl e and al l owabl e
18 cost s. He - - f or exampl e - -
19 MR. RUBI NSTEI N: Obj ect i on t o t he hear say, your Honor .
20 MR. KWOK: Your Honor , t hese ar e quest i ons, t hey' r e
21 not st at ement s.
22 THE COURT: Obj ect i on sust ai ned as t o why he cont act ed
23 her . She can st at e what he sai d i n t he conver sat i on and what
24 she sai d i n t he conver sat i on, but she can' t t est i f y as t o what
25 i s i n hi s mi nd.
( 212) 805- 0300
256
1 MR. EVERDELL: Yes, your Honor . Under st ood.
2 Q. Al l r i ght , Ms. Snowden, l et me ask you t hi s quest i on. You
3 sai d he cont act ed you, i s t hat r i ght ?
4 A. Yes.
5 Q. Di d you t wo have a di scussi on?
6 A. Yes.
7 Q. What quest i ons di d he ask you, i f any, dur i ng t hat , t hose
8 conver sat i ons?
9 A. Was he al l owed t o pay f or r ent and ut i l i t i es, wi t h t he ATP
10 f eder al f unded gr ant .
11 Q. And r ent f or what , r ent and ut i l i t i es f or what ?
12 A. For t he condo i n whi ch t he - - at t hi s poi nt I guess CASI ,
13 t he company, was bei ng housed.
14 Q. And whose condo was t hat ?
15 A. Dr . Kar r on' s condo.
16 Q. And what was your r esponse t o t he quest i on, can r ent and
17 ut i l i t i es be pai d f or wi t h ATP f unds?
18 A. No, t hey' r e unal l owabl e cost s.
19 Q. And why i s r ent not , and ut i l i t i es not al l owabl e cost ?
20 A. For one t hi ng, t hey' r e consi der ed i ndi r ect cost s, and
21 t hey' r e - - i ndi r ect cost s f or us i s gener al and admi ni st r at i ve
22 cost s l i ke wat er , el ect r i ci t y, heat , somet hi ng t hat ATP and
23 f eder al f unds we do not pay f or .
24 Q. Now, somet hi ng l i ke r ent s and ut i l i t i es be an al l owabl e
25 expense under t he gr ant r ul es i f t he onl y pr oj ect t hat t he
( 212) 805- 0300
257
1 gr ant was r eci pi ent was wor ki ng on was t he pr oj ect t hat was
2 f unded by t he ATP money?
3 A. No.
4 Q. I t woul dn' t make any di f f er ence?
5 A. I t makes no di f f er ence at al l .
6 Q. What i f t he def endant was l i vi ng i n t he apar t ment wher e t he
7 company was housed, woul d t hat make any di f f er ence whet her
8 gr ant money coul d be used f or r ent ?
9 A. No, not at al l .
10 Q. Al l r i ght . Now, t ur ni ng t o your conver sat i ons wi t h t he
11 def endant , di d he cont act you or di d you cont act hi m?
13 Q. And why - - oh, wi t hdr awn, your Honor . Di d you t wo have a
14 conver sat i on?
15 A. Yes.
16 Q. And what di d you t al k about ?
17 A. He had t he same conver sat i on - - quest i on as Lee Gur f ei n.
18 Q. Whi ch was what ?
19 MR. RUBI NSTEI N: Can we est abl i sh a t i me, your Honor ,
20 wi t h t hese conver sat i ons?
21 THE COURT: Yes. Appr oxi mat el y when di d t hese
22 conver sat i ons t ake pl ace, appr oxi mat el y?
23 THE WI TNESS: Oh, t hi s i s - - t hey f i r st st ar t ed t aki ng
24 pl ace bef or e t he ki ckof f . So t hat ' s i n Oct ober of 2001.
25 THE COURT: Thi s i s about t he r ent ?
( 212) 805- 0300
258
1 THE WI TNESS: Thi s i s about t he r ent and ut i l i t i es.
2 Thi s i s r i ght af t er he was t ol d t hat he - - he r ecei ved t he
3 document s t hat he woul d be r ecei vi ng t hi s f eder al f und, and
4 t hen i t cont i nued.
5 THE COURT: Al l r i ght . Then t he next conver sat i on you
6 sai d t hat was wi t h Gur f ei n. What about t he conver sat i on
7 wi t h - -
8 THE WI TNESS: They - -
9 THE COURT: - - Dr . Kar r on?
10 THE WI TNESS: They bot h woul d cal l me, j ust - -
11 THE COURT: Same t i me?
12 THE WI TNESS: Yeah. No, l i ke a di f f er ent day. Li ke
13 Lee woul d cal l me one day, and t hen Dr . Kar r on woul d cal l me
14 anot her day and ask t he same exact quest i on.
15 THE COURT: They bot h wer e al l i n Oct ober ?
16 THE WI TNESS: No. Some wer e i n Oct ober , and t hen
17 l at er on af t er t he ki ckof f , t hey cont i nued t o cal l me and ask
18 me t he same exact quest i ons.
21 Q. Al l r i ght . Agai n, j ust t o cl ar i f y t he conver sat i ons wi t h
22 t he def endant , we di scussed your conver sat i ons wi t h Lee
23 Ger f ei n, but what di d you t wo di scuss, you and t he def endant ?
24 A. We di scussed r ent and ut i l i t i es.
25 Q. And what speci f i cal l y di d t he def endant ask you?
( 212) 805- 0300
259
1 A. He asked me wer e t her e al l owabl e cost , and I t ol d hi mover
2 and over agai n, no. He al so - - we had a conver sat i on about - -
3 dur i ng t hi s t i me was 9/ 11, and t he St at e of New Yor k had t ol d
4 t hemt hey woul d gi ve hi msome space. And I guess, I don' t know
5 what agr eement t hey had, but si nce 9/ 11 t hey r esci nded t he
6 of f er . So, t her ef or e, he was i nsi de of hi s apar t ment . I sai d
7 I under st and t hi s, but I ' msor r y; unf or t unat el y, f eder al
8 f undi ng gr ant s, we do not pay f or r ent and ut i l i t i es, so
9 t her ef or e, t he answer was no, t i me and t i me agai n.
10 Q. And about how many t i mes wer e you cont act ed about t hi s?
11 A. Numer ous t i mes. Bet ween Lee and Dr . Kar r on, t hey woul d t ag
12 t aki ng t eam. They woul d bot h cal l me and ask t he same
13 quest i ons l i ke a day apar t , and t hey woul d consi st ent l y get t he
14 same exact answer .
15 Q. What answer was t hat ?
16 A. They wer e unal l owabl e cost s and, no, you can not use
17 f eder al f unds.
18 Q. Di d you ever t el l t he def endant or Lee Ger f ei n t hat r ent
19 and ut i l i t i es wer e al l owabl e expenses under t he ATP f unds?
20 A. Never .
21 Q. Di d you ever appr ove any r ent or r ent payment r equest s f r om
22 t he def endant or anybody at CASI ?
23 A. No, never .
24 Q. Al l r i ght . Asi de f r omcal l i ng you wi t h quest i ons, wer e
25 t her e any r esour ces avai l abl e t o t he def endant t o i nst r uct hi m
( 212) 805- 0300
260
1 about t he r ul es gover ni ng t he expendi t ur e of gr ant s f unds?
2 A. Yes.
3 Q. And what ar e t hose?
4 A. You have, you have ATP r ul es. You have a management .
5 Under t he f eder al gover nment , you have r egul at i ons and t he
6 r egul at i ons you have - - you have t o you have t o have wr i t t en
7 pr oper management pr ocedur es i n pl ace. So, yes you have r ul es.
8 Q. Ar e t her e ways t hat t he def endant woul d be abl e t o access
9 t hese r ul es at any poi nt ?
10 A. Yes. Ther e i s mor e t han one way. When you r ecei ve a gr ant
11 f r omus when you r ecei ve a document , even bef or e you si gn i t
12 say you' r e goi ng t o accept i t , we send t hat document , al ong
13 wi t h al l t he r egul at i ons t hat gover n t he awar d, al so t her e ar e
14 i nt er net , on t he i nt er net you can al ways access t hemt hr ough
15 t he i nt er net .
16 Q. And di d you i n f act send t hese r egul at i ons t o t he def endant
17 when he was awar ded t he gr ant ?
18 A. Yes.
19 Q. I ' d l i ke t o show you what ' s al r eady i n evi dence as
20 gover nment exhi bi t 12, and i f we coul d di spl ay t hat on t he
21 scr een. I know t he f ol der s ar e j umbl ed, but i f you coul d f i nd
22 exhi bi t 12.
23 A. Okay.
24 Q. You see t hat document ?
25 A. Yes.
( 212) 805- 0300
261
1 Q. Do you know what t hat document i s?
2 A. Yes.
4 A. When a r eci pi ent i s goi ng t o r ecei ve a f eder al f und, t hey
5 wi l l r ecei ve t hi s document . Thi s document , i t - - basi cal l y, i t
6 t el l s you t o - - i t out l i nes t he per i od of per f or mance and how
7 much money you' r e goi ng t o r ecei ve, and i t al so has ever y
8 r egul at i on and r ul e checked t hat gover ns your awar d.
9 Q. And ar e t her e r egul at i ons and r ul es t hat ar e checked on
10 t hi s one?
11 A. Yes.
12 Q. And i s t hi s t he one t hat was sent t o Dr . Kar r on and CASI ?
13 A. Yes.
14 Q. And t hese checked i t ems, do you see t he ones t hat ar e
15 t her e?
16 A. Yes.
17 Q. Al l r i ght . And t hey i ncl ude - - whi ch ones do t hey i ncl ude?
18 A. They i ncl ude Depar t ment of Commer ce, f i nanci al assi st ance
19 st andar ds t er ms and condi t i ons. You have your speci al awar d
20 condi t i ons, l i ne i t embudget , 15 CFR par t 14, uni f or m
21 admi ni st r at i ve r equi r ement s f or gr ant s and agr eement s wi t h
22 hi gher - - i nst i t ut i ons of hi r e educat i on hospi t al s, ot her
23 nonpr of i t and commer ci al or gani zat i ons; 48 CFR par t 31,
24 cont r act cost pr i nci pl es and pr ocedur es. And t hen we have
25 ot her s. And ot her s ar e t he gener al t er ms, condi t i ons of
( 212) 805- 0300
262
1 Advanced Technol ogy Pr ogr am, and you have pr ogr ams speci f i c
2 gui del i nes f or t he ATP cooper at i ve agr eement s wi t h si ngl e
3 compani es.
4 Q. And wer e t hese document s sent al ong wi t h t he gr ant awar d?
5 A. Yes.
6 Q. And whose si gnat ur e appear s on t he bot t omof t hat ?
8 Q. And i n si gni ng t hat , what i s t he si gnat or y agr eei ng t o do?
9 A. When you si gn t hi s, you' r e - - you' r e - - by si gni ng t hi s
10 document , you si mpl y agr ee t o compl y wi t h t he awar ds pr ovi si ons
11 checked bel ow. Upon accept ance of doubl e si gned copy, you' r e
12 sayi ng t hat you' r e not onl y si gni ng t hese, t hat you' r e
13 accept i ng t hem, but you under st and t hese r ul es and r egul at i ons
14 t hat gover n your awar d.
15 Q. Al l r i ght , l et ' s di scuss now t he ki ckof f meet i ng t hat you
16 ment i oned bef or e. What i s t he ki ckof f meet i ng?
17 A. A ki ckof f meet i ng i s when t he f eder al Gover nment and t he
18 pr ogr amsi de of t he house and t he r eci pi ent , t hat t he per son
19 r ecei vi ng t he gr ant s, we come t oget her and we gave a
20 pr esent at i on. The pr esent at i on out l i nes t he r ul es and
21 r egul at i ons of t he gr ant , what you expect t o r ecei ve f r omus,
22 and our r esponsi bi l i t i es and your r esponsi bi l i t i es t o us.
23 I t al so - - al so, t he gr ant ee i s abl e t o gi ve us a
24 pr esent at i on of what he expect s t o accompl i sh i n t he pr oposal .
25 So, basi cal l y, i t ' s a t i me wher e we come t oget her you can see
( 212) 805- 0300
263
1 each ot her f ace- t o- f ace and, basi cal l y, you coul d t al k and be
2 mor e f ami l i ar wi t h each ot her .
3 Q. And who at t ended t he ki ckof f meet i ng f r omCASI ?
4 A. I r ecal l Dr . Kar r on and Dr . Lee Ger f ei n - - and Lee Ger f ei n.
5 Q. And who on behal f of NI ST was t her e?
6 A. B. J . Li de, J ane Or t hwei n and mysel f , Hope Snowden.
7 Q. And what does t he NI ST gr ant of f i ce hope t o achi eve at t hi s
8 ki ckof f meet i ng?
9 A. We hope t o gi ve you a ni ce out l i ne and t el l you about t he
10 r ul es and r egul at i ons. I expl ai n t o t hemever y t i me t hat I ' m
11 t hei r l i ai son f or t he gr ant s of f i ce. I mean, you have t hese
12 r ul es and r egul at i on. I f you don' t under st and t hem, don' t t r y
13 t o i nt er pr et t hemyour sel f . That ' s what I ' mt her e f or . You
14 cal l me and I ' l l hel p you out , and i f I don' t know t he answer ,
15 I ' l l def i ni t el y go f i nd out what i t i s.
16 Q. What was your r ol e at t he ki ckof f meet i ng?
17 A. I r epr esent t he gr ant s of f i ce.
18 Q. Di d you gi ve a pr esent at i on t her e?
19 A. Yes, I di d.
20 Q. Al l r i ght . I ' d l i ke you t o l ook at Gover nment ' s exhi bi t 4
21 whi ch i s i n evi dence, i f you can f i nd t hat f ol der ?
22 THE COURT: You have t he f ul l exhi bi t , i s t hat i t ?
23 MR. EVERDELL: The wi t ness has t he f ul l exhi bi t and I
24 wi l l di r ect her .
25 THE COURT: The j ur y j ust has t he ext r act .
( 212) 805- 0300
264
1 MR. EVERDELL: J ur y j ust has t he ext r act s, t hat ' s
2 cor r ect , your Honor .
3 Q. Do you see t hat document i n f r ont of you?
4 A. Yes.
5 Q. And what i s t hat document t her e?
6 A. Thi s i s a copy of t he pr esent at i on t hat I , t hat I gave at
7 t he ki ckof f .
8 Q. I ' d l i ke you t o t ur n t o page si x of t hat document ?
9 A. Okay.
10 Q. Put t hat up on t he scr een. I ' mnot sur e t he j ur y has page
11 si x. You see t hat page?
12 A. Yes.
13 Q. I s t hat par t of t he pr esent at i on you gave?
14 A. Yes.
15 Q. And what i s, what i s t hi s sl i de desi gned t o i mpar t t o t he
16 peopl e pr esent ?
17 A. Thi s i s t o r ei t er at e t he r ul es and r egul at i ons and as i t
18 says, t er ms condi t i ons and r egul at i ons t hat gover n t hi s awar d.
19 So I usual l y go over t hi s sl i de and t el l t hemt hat t hese ar e
20 t he r ul es and r egul at i ons t hat not onl y gover n each one
21 super sedes, l i ke you have your speci al awar d condi t i ons, your
22 ATP gener al t er ms and condi t i ons and so f or t h.
23 Q. Di d you t el l t hemi f t hey have any quest i ons what t hey can
24 do?
25 A. I f t hey have any quest i ons, t hey have t o cal l me. I ' mt he
( 212) 805- 0300
265
1 gr ant l i ai son, cal l me.
2 Q. Can t hey quest i on you about any quest i ons about t he r ul es
3 and r egul at i ons t hat ar e out l i ned her e?
4 A. Yes, yes.
5 Q. I s i t your j ob t o r espond t o t hose quest i ons?
6 A. That i s my j ob t o r espond.
7 Q. What , i f anyt hi ng, do you t el l t he peopl e pr esent at t he,
8 or di d you t el l t he CASI peopl e pr esent at t hei r ki ckof f
9 meet i ng about t hei r r esponsi bi l i t i es concer ni ng t hei r pr oposal ?
10 A. I usual l y gi ve my spi el , and i t ' s l i ke - - and I t el l t hem,
11 I sai d your pr oposal ' s l i ke your Bi bl e; you don' t go out si de of
12 t he ot her gui dance of your pr oposal . Anyt hi ng out si de t her e,
13 you need t o have pr i or appr oval . So your pr oposal , you must
14 f ol l ow i t .
15 Q. And what speci f i cal l y di d you t el l t hem, i f anyt hi ng, about
16 t hei r r esponsi bi l i t i es concer ni ng t hei r budget ?
17 A. The budget t hat ' s appr oved wi t hi n your pr oposal , t hat ' s
18 your own appr oved budget . Anyt hi ng out si de t hat , you need,
19 pr i or appr oved - - you need pr i or appr oval . Par t of t hat pr i or
20 appr oval i s never ver bal . I t al ways comes i n a si gned document
21 si gned by my gr ant of f i cer .
22 Q. Al l r i ght . So j ust t o be cl ear , i f you want t o get pr i or
23 appr oval - - i f you want t o get pr i or appr oval f or a change i n
24 your budget , can you get i t or al l y?
25 A. No.
( 212) 805- 0300
266
1 Q. Have you ever gr ant ed somet hi ng, a change i n t he budget
2 or al l y?
3 A. No.
4 Q. So t hese ar e wr i t t en appr oval s, i s t hat r i ght ?
5 A. That ' s i t . That ' s t he onl y how you can get appr oval .
6 THE COURT: Thi s i s what you t ol d t hemat t he t i me of
7 t he meet i ng?
9 Q. I ' d l i ke you t o l ook at page 11 of t hat same exhi bi t t hat ' s
10 not i n t he j ur y bi nder s, but we have been di scussi ng i t . So
11 you have t o l ook up on t he scr een, Ms. Snowden even - - oh, I
12 suppose you have a f ul l exhi bi t . Yes, you can t ur n t o page 11.
13 A. Okay, I have i t .
14 Q. Al l r i ght . You see t hat page t hei r ?
15 A. Yes.
16 Q. I t says budget s?
17 A. Uh- huh.
18 Q. I s t hi s par t of t he pr esent at i on t hat you gave as wel l ?
19 A. Yes.
20 Q. And you see t hat second, I guess bul l et poi nt , r evi ew cost s
21 at t he end of each year and submi t a r evi sed budget and
22 nar r at i ve i f changes have occur r ed or has occur r ed?
23 A. Yes.
24 Q. Can you expl ai n what you mean what you mean by t hat bul l et ?
( 212) 805- 0300
267
1 THE COURT: Obj ect i on sust ai ned. I t ' s what she sai d
2 at t he meet i ng t hat ' s bi ndi ng.
3 Q. Di d you di scuss anyt hi ng at t he meet i ng about t hat bul l et ?
4 A. Yes.
5 Q. What di d you di scuss at t he meet i ng about t hat bul l et ?
6 A. Thi s bul l et r epr esent s - - ever y year , j ust l i ke I sai d, you
7 get over a t hr ee year per i od, you get al l ot ment of money. The
8 f i r st year was 800, 00, second year 600, 000, t hi r d year 600, 000.
9 So t hi s i s, t hi s i s a commer ci al - - t hi s i s a gr ant . We expect
10 t o make changes. So bef or e you al l ocat ed your next per i od of
11 f undi ng, we act ual l y l ook at your budget see i f t her e' s goi ng
12 t o be any changes. And i f you need changes, you have t o
13 r equest appr oval of a r evi sed budget . Ot her t han t hat , t he
14 budget t hat was appr oved i s t he budget t hat you have t o abi de
15 by. But i f you have changes, you can' t r equest changes.
16 THE COURT: Budget f or what per i od of t i me?
17 THE WI TNESS: Whenever your gr ant i s i nst at ed. Li ke
18 t hi s gr ant was l i ke Oct ober 1st , 2001 unt i l Sept ember , so i t ' s
19 a year . I t ' s one year . But wi t hi n, wi t hi n t hat year you coul d
20 l ook at i t and say t hat I see t hat I want t o make changes or I
21 need t o r eal l ocat e money, and you' r e al l owed t o r equest a
22 change but you have t o get appr oval and i t has t o be wr i t t en
23 and has t o be si gned of f by my gr ant s of f i cer , my super vi sor .
24 THE COURT: But you t al ked about maki ng - - you t ol d us
25 t hei r wer e t hr ee.
( 212) 805- 0300
268
1 THE WI TNESS: Yeah, t hr ee budget s per i od.
2 THE COURT: 800, 600 and 600. How does t hat r el at e t o
3 what ' s up on t he boar d?
4 THE WI TNESS: Wel l , your f i r st year i s goi ng t o - -
5 THE COURT: How does t hat r el at e t o what you t ol d
6 peopl e about t he t hr ee year per i od?
7 THE WI TNESS: Thi s i s at t he end of t he year . So,
8 basi cal l y, t he end of t he year woul d be Sept ember 30t h. So,
9 t her ef or e, you shoul d r evi ew your budget f or t he f ol l owi ng year
10 and see i f you need t o make changes so you can r equest an
11 appr oval . And your next year st ar t s Oct ober 1. That ' s when
12 you' r e goi ng get your al l ocat i on of your new f unds.
13 Q. So j ust t o be cl ear , Ms. Snowden, you' r e r ef er r i ng t o t he
14 next year ' s budget s al l ocat i on?
15 A. Yes.
16 Q. - - i n t hi s bul l et , i s t hat r i ght ?
17 A. Yes.
18 Q. Now, i f you' r e goi ng t o make pr i or changes t o t he exi st i ng
19 year ' s budget t hat you' r e oper at i ng i n, how ar e t hose appr oval s
20 goi ng t o come, i f at al l ?
21 A. I t woul d come st i l l - - you have t o r equest i t and i t ' s
22 goi ng t o come i n a wr i t t en f or m. My super vi sor has t o si gn of f
23 on i t . You' r e goi ng t o get an amendment t hat says t hat we
24 appr ove your r evi sed budget dat ed Oct ober 1st , 2004 and we' l l
25 send you a si gned document , wi t h my super vi sor ' s si gnat ur e on
( 212) 805- 0300
269
1 i t .
2 Q. Okay. Now I ' d l i ke you t o l ook at page seven of t he same
3 exhi bi t , whi ch I bel i eve i s i n t he bi nder s f or t he j ur y. Pul l
4 t hat up. See page seven? You see page seven, Ms. Snowden?
5 A. Yes.
6 Q. Al l r i ght . And you see t he bul l et t hat says, budget l i ne
7 i t emchanges gr eat er t han 10 per cent of t ot al number appr oved
8 budget f or each r eci pi ent f or each pr oj ect year ?
9 A. Yes.
10 Q. Di d you di scuss t hat i t emwi t h peopl e pr esent ?
11 A. Yes, I di d.
12 Q. And what di d you di scuss wi t h t hemabout t hat ?
13 A. That t hi s bul l et means t hat any l i ne i t emt hat i s
14 10 per cent or mor e, you have t o get pr i or appr oval and t hat
15 appr oval wi l l come i n a wr i t t en document si gned by t he gr ant s
16 of f i cer .
17 Q. And i s t hat i n t he exi st i ng year ' s budget t hat you' r e
18 oper at i ng under , you want t o make changes t o t hat budget ?
19 A. Yes.
20 Q. Al l r i ght . I ' d l i ke you t o t ur n t o page 17 of t hat exhi bi t
21 as wel l . See t hat sl i de?
22 A. Yes.
23 Q. I s t hat par t of your pr esent at i on as wel l ?
24 A. Yes, i t i s.
25 Q. And you see t he t i t l e r el at i onshi p bet ween cost shar e and
( 212) 805- 0300
270
1 ATP f unds?
2 A. Yes.
3 Q. Di d you di scuss t hi s i ssue of cost shar e wi t h t he peopl e
4 f r omCASI ?
5 A. Yes.
6 Q. What di d you t el l t hemabout cost shar i ng?
7 A. When we expl ai n t hi s sl i de, i t ' s expl ai ned t o t he ext ent
8 ATP f unds ar e t he f eder al f unds. Those ar e t he f unds t hat t he
9 f eder al gover nment i ncor por at es i nt o t he pr oj ect .
10 Cost shar e i s t he f unds t hat t he r eci pi ent t hat he
11 i ncor por at es i nt o t he, t o t he pr oj ect . The ATP and t he - -
12 whi ch i s t he f eder al f unds and t he non- f eder al f unds f r omt he
13 company, t oget her t hey t ot al ed t he ATP pr oj ect budget . So base
14 t hemt oget her , t hat ' s t he f ul l budget s.
15 Q. And di d CASI have a cost shar e i n t hei r gr ant ?
16 A. Yes, t hey di d.
17 Q. Do you know i f , wi t h r espect t o cost shar e, ar e i n ki nd
18 cont r i but i ons al l owed i n or der t o cover t he cost shar e
19 r equi r ement ?
20 A. I n ki nd i s al l owabl e i f i t was i ncor por at ed i nt o t he
21 or i gi nal pr oposal and appr oved i n t he begi nni ng of t he pr oj ect .
22 Q. And do you know what t he l i mi t i s on whet her i n ki nd
23 cont r i but i on can appl y, i f t hey' r e goi ng t o appl y?
24 A. 30 per cent .
25 Q. And how do you know t hat ?
( 212) 805- 0300
271
1 A. They' r e par t of - - t hey' r e par t of , t hey' r e par t of t he
2 r egul at i ons under t he gener al t er ms and condi t i ons of t hi s
3 awar d - - of gr ant of ATP awar ds acr oss t he boar d.
4 Q. So onl y 30 per cent i n ki nd?
5 A. That ' s i t .
6 Q. Cont r i but i on?
7 A. Yes.
8 Q. Al l r i ght . Ms. Snowden, appr oxi mat el y, how many pr i or
9 t i mes bef or e t he CASI ki ckof f meet i ng di d you gi ve t hi s sl i de
10 pr esent at i on?
11 A. Bef or e CASI , I had pr obabl y gi ven t hi s pr esent at i on
12 pr obabl y about si x or seven t i mes bef or e CASI .
13 Q. Di d you do anyt hi ng di f f er ent l y f or t he CASI gr oup when you
14 gave t hi s pr esent at i on?
15 A. No, not at al l .
16 MR. EVERDELL: Your Honor , I not i ce i t ' s al most f our .
17 Thi s i s pr obabl y a good br eaki ng poi nt i f you want t o br eak
18 her e or I can cont i nue i f you l i ke?
19 THE COURT: Wel l , l et ' s go a l i t t l e whi l e. I do have
20 a conf er ence t hat ' s i mpor t ant , but l et ' s go f or a l i t t l e whi l e
21 i f you can. We don' t - - al l t he peopl e don' t seemt o be her e
22 f or t hat conf er ence.
23 MR. EVERDELL: Okay, your Honor . I happen t o know I ' m
24 one of t hem, so.
25 Q. Al l r i ght .
( 212) 805- 0300
272
1 THE COURT: Oh, you' r e one of t hem?
2 MR. EVERDELL: I ' mone of t hem.
3 THE COURT: Al l r i ght . I f or got t hat .
4 Q. Al l r i ght . Ms. Snowden, I want t o t al k t o you a l i t t l e bi t
5 mor e about t he r ul es of t he ATP gr ant . Let ' s t al k f i r st about
6 t he r ul es concer ni ng f r i nge benef i t s, al l r i ght . Ar e you
7 f ami l i ar wi t h t he r ul es concer ni ng f r i nge benef i t s f or t he ATP
8 f und?
9 A. Yes.
10 Q. Al l r i ght . I ' d l i ke t o show you what ' s al r eady i n
11 evi dence - - oh, and what ar e f r i nge benef i t s?
12 A. Fr i nge benef i t s ar e i ndi r ect cost s.
15 MR. RUBI NSTEI N: I obj ect t o t he wi t ness t est i f yi ng as
16 t o what f r i nge benef i t s ar e.
17 THE COURT: Wel l , di d you, i n your di scussi on wi t h t he
18 par t i es, do you expl ai n what you mean by f r i nge benef i t s?
19 THE WI TNESS: They' r e det ai l ed i n ATP ki t t hat t he
20 company r ecei ved, t hey have an i t emi zed l i st of what we woul d
21 consi der f r i nge benef i t s.
22 THE COURT: I see. Wher eabout s i s t hat ?
23 THE WI TNESS: I t ' s i n t he pr ep ki t under t he budget
24 nar r at i ve and f r i nge benef i t s i n t he ATP ki t . 35 per cent or
25 mor e, t hey have t o i t emi ze t hemand under t hat t hey don' t , so
( 212) 805- 0300
273
1 i t was l i ke - - sor r y.
2 MR. EVERDELL: Your Honor , I ' mgoi ng t o di r ect t he
3 wi t ness' at t ent i on t o t he document s. I ' mspeci f i cal l y aski ng
4 her t o t est i f y about what ' s i n t he document s i n t he r egs now.
5 I ' mnot t al ki ng about t he ki ckof f meet i ng.
7 MR. EVERDELL: Okay.
8 THE COURT: Go ahead.
9 Q. Al l r i ght , Ms. Snowden, you sai d you' r e f ami l i ar wi t h t he
10 r ul es concer ni ng f r i nge benef i t s, r i ght ?
11 A. Yes.
12 Q. Al l r i ght . I f you coul d l ook, pl ease, at Gover nment ' s
13 Exhi bi t 2, i f we coul d have t hat up, and page t wo of t hat
14 exhi bi t .
15 Thi s i s t he gener al t er ms and condi t i ons Advanced
16 Technol ogy Aspect s Pr ogr ams, and i f we coul d hi ghl i ght on t he
17 l ef t - hand si de C( 1) . You see t hat l i ne t hei r , t hat par agr aph
18 excuse me, C( 1) ?
19 A. Yes.
20 Q. Al l r i ght . And you see wher e i t says, by si gni ng t hi s
21 awar d, t he r eci pi ent agr ees t o ensur e t hat onl y act ual cost s
22 i ncur r ed wi l l be char ged t o t he awar d and t hat al l cost s wi l l
23 be r easonabl e, al l ocabl e and al l owabl e i n accor dance wi t h t he
24 f eder al cost pr i nci pl es; i s t hat r i ght ?
25 A. Yes.
( 212) 805- 0300
274
1 Q. And t hen bel ow t he next l i ne says, r eci pi ent s shal l al so
2 ensur e t hat al l sal ar y wages, et cet er a, f r i nge benef i t s,
3 t r avel , et cet er a, et cet er a, t he r est of t hat I won' t r ead i t
4 al l , but do you see t hat whol e par agr aph?
5 A. Yes.
6 Q. What does t hat whol e par agr aph mean?
8 THE COURT: What do you t el l - - do you di scuss t hi s
9 par agr aph wi t h t he - - at t he ki ckof f meet i ng?
10 THE WI TNESS: No, we don' t - - not i n- dept h. Thi s i s
11 t hi s i s par t of t hei r r egul at i ons t hat t hey f ol l ow, t hi s i s
12 t hi s i s - -
13 THE COURT: I s t hi s di st r i but ed t o t hem?
14 THE WI TNESS: Yes, i t i s.
15 THE COURT: To t he - -
17 THE COURT: And i f t her e ar e quest i ons about , i s i t
18 appr opr i at e, you ask t hemi f t hey have any quest i ons about t he
19 mat er i al s?
20 THE WI TNESS: Exact l y. They can ask al l t he
21 quest i ons, yes.
22 MR. EVERDELL: Your Honor , t hi s i s t he per son who i s
23 t he r ul es per son so her i nt er pr et at i on of t he r ul es i s r el evant
24 about what i t means.
25 MR. RUBI NSTEI N: I move t o st r i ke t hat , your Honor ,
( 212) 805- 0300
275
1 t he comment .
2 THE COURT: Let ' s not have ar gument .
3 MR. EVERDELL: I apol ogi ze, your Honor .
4 Q. Al l r i ght . Ms. Snowden, I ' l l ask t he quest i on agai n t hi s
5 par agr aph whi ch ment i ons r easonabl e, al l ocabl e and al l owabl e
6 cost s, as wel l as f r i nge benef i t s, what does t hat mean, t hat
7 t er m?
8 MR. RUBI NSTEI N: Obj ect i on, your Honor . She' s al r eady
9 t est i f i ed t hat she di dn' t di scuss t hi s wi t h Dr . Kar r on.
10 THE COURT: I s t her e a pr ovi si on i n t he mat er i al s t hat
11 ar e di st r i but ed t o t he r eci pi ent s t hat expl ai ns what t hat
12 means?
13 THE WI TNESS: Wel l , j ust l i ke t he r est of t he
14 r egul at i ons, we gi ve t hema copy of i t . I f t hey don' t
15 under st and i t , t hey' r e t o cal l and ask.
16 THE COURT: Wher e do t hey - - wher e ar e t he, wher e i s
17 i t expl ai ned?
18 THE WI TNESS: Wel l , i t ' s not det ai l ed. I t ' s not , i t ' s
19 not expl ai ned i n det ai l .
20 THE COURT: Not ?
21 THE WI TNESS: You' r e - - t hey' r e j ust gi ven a
22 di st r i but i on and copy of t he t er ms and condi t i ons. And at t he
23 ki ckof f I j ust expl ai n, t hese ar e t he r egul at i ons t hat gover n
24 t he awar d. I f you don' t under st and t hemand need t hemt o be
25 expl ai ned, cal l me.
( 212) 805- 0300
276
1 So t hi s was par t of t he handout t hat was gi ven t o t he
2 r eci pi ent . So i f he di dn' t under st and, or she or whoever
3 di dn' t under st and what t hi s meant , i t was up t o t hemt o gi ve me
4 a cal l and ask me t o expl ai n i t f ur t her .
5 MR. EVERDELL: Your Honor , i f I coul d have a moment ,
6 pl ease?
7 THE COURT: Yes, si r . I see t he ot her - -
8 BY MR. EVERDELL:
9 Q. Al l r i ght . Ms. Snowden, i f I coul d f or a moment , i f we
10 coul d t ake down t hat and put up Gover nment ' s exhi bi t 10B, whi ch
11 i s al r eady i n evi dence i f you want t o r ef er t o t hat , and I
12 bel i eve t hi s i s t he l ast page of t hat document ?
13 THE COURT: What i s exhi bi t 10B?
14 BY MR. EVERDELL:
15 Q. Ms. Snowden, do you see 10B?
16 A. Yes, I have 10B. I t ' s your budget l et t er , l ooks l i ke t hi s.
17 THE COURT: I s t hat di st r i but ed t o t he r eci pi ent s?
19 THE COURT: What t i me?
20 THE WI TNESS: They get a copy of t hi s. Thi s i s f i l l ed
21 out by t hem, t he r eci pi ent f i l l s t hi s por t i on out . Thi s i s how
22 t hey out l i ne how - - t hi s cor r esponds wi t h t he budget t hat t hey
23 gi ve us. So l i ne by l i ne, al l t hi s t hese l i ne i t ems
24 ul t i mat el y, t he t ot al cor r esponds wi t h t he budget t hey gi ve us
25 f or per sonnel l , t r avel so on and so f or t h.
( 212) 805- 0300
277
1 THE COURT: Wi t h t hei r appl i cat i on f or t he gr ant s.
2 THE WI TNESS: Yes, t hey gi ve t hi s t o us. And t hen
3 when we send t hemt he document s t o si gn, t hi s i s at t ached. So
4 t hey si gn t he document , and t hi s i s at t ached and t hey' r e sayi ng
5 ever yt hi ng i s cor r ect .
6 Q. So j ust t o be cl ear , t hi s i s a document t hat was pr epar ed
7 by t he peopl e at CASI and submi t t ed t o NI ST t o you?
8 A. Yes.
9 Q. Al l r i ght . Seei ng t he same page now t hat I bel i eve i s t he
10 l ast page of t hat exhi bi t , you see t he t op por t i on t her e?
11 A. Yes.
12 Q. Fr i nge benef i t s, i t says?
13 A. Yes.
14 Q. And i t says makes up t he - -
15 THE COURT: She' s j ust , she' s j ust made i t so you
16 can' t r ead i t .
17 MR. EVERDELL: I f we coul d zoomj ust a t ouch mor e?
18 THE COURT: J ust t he t op sect i on.
19 MR. EVERDELL: Al l r i ght , I t hi nk t hat ' s pr obabl y - -
20 THE COURT: I guess you can r ead i t . Can ever yone
21 r ead i t ? Al l r i ght .
22 Q. Ms. Snowden, woul d you j ust r ead t hat af t er f r i nge
23 benef i t s?
24 A. I dent i f y per cent age r at e. I f gr eat er t han 35 per cent ,
25 pr ovi de a br eakdown of what makes up t he f r i nge benef i t s, i . e. ,
( 212) 805- 0300
278
1 vacat i on, si ck, mi l i t ar y l eave, heal t h and l i f e i nsur ance,
2 r et i r ement , Soci al Secur i t y, et cet er a. I f f r i nge benef i t s ar e
3 nor mal l y i ncl uded i n your or gani zat i on' s i ndi r ect cost r at e,
4 t hey shoul d be budget ed as such and check t he appr opr i at e l i ne
5 bel ow.
6 Q. And i s t hi s par t of t he budget t hat was submi t t ed by CASI ?
7 A. Yes.
8 Q. And t hi s i s t hei r al l ocat i on of f r i nge benef i t r at es?
9 A. Yes.
10 Q. Al l r i ght . So does t hi s document expl ai n what f r i nge
11 benef i t s ar e f or t he ATP gr ant s?
13 THE COURT: What t hey may i ncl ude.
14 MR. EVERDELL: Excuse me, your Honor .
15 Q. Ms. Snowden, does t hi s document expl ai n what f r i nge
16 benef i t s may i ncl ude i n a budget pr oposal - -
17 A. Yes.
18 Q. - - submi t t ed by a company who r ecei ves an ATP gr ant ?
20 Q. And do t hose f r i nge benef i t s i ncl ude heal t h i nsur ance,
21 accor di ng t o t hi s l i st ?
22 THE COURT: I t hi nk t hat t hey' ve been r ead t o t he j ur y
23 and I t hi nk t he j ur y knows whet her t hat ' s i ncl uded or not .
24 MR. EVERDELL: Al l r i ght . Thank you, your Honor .
25 Q. Can you expl ai n what t he l ast sent ence means, i f f r i nge
( 212) 805- 0300
279
1 benef i t s ar e nor mal l y i ncl uded i n your or gani zat i on' s i ndi r ect
2 cost r at e, t hey shoul d be budget ed as such and check t he
3 appr opr i at e l i ne bel ow?
4 A. Ri ght . Usual l y f r i nge benef i t s ar e i ndi r ect cost s. That ' s
5 t he cost of doi ng busi ness. I f t hey' r e nor mal l y put i n your
6 i ndi r ect cost s, j ust because you r ecei ve a f eder al gr ant
7 doesn' t mean al l of a sudden t hey' r e goi ng t o be a par t of your
8 di r ect cost s, and t he gover nment i s goi ng t o pay f or i t . I f
9 you, i n your nor mal , i n your nor mal busi ness day, your
10 pr ocedur es t hat you use i t , t hat you char ge t hese as an
11 i ndi r ect cost t o your company, you st i l l must f ol l ow t he same
12 account i ng pr i nci pl es when you r ecei ve t he gr ant s, or t he
13 f eder al f unds. That ' s what t hat means.
14 Q. Al l r i ght . Now, i s t her e anyt hi ng t hat ATP r equi r es of a
15 company t hat r ecei ves an ATP gr ant i f t hey' r e goi ng t o spend
16 ATP f unds on f r i nge benef i t s?
17 A. The r equi r ement i s i f i t ' s over 35 per cent , you have t o
18 i t emi ze. Under , you don' t have t o gi ve us det ai l .
19 Q. I s t her e any ot her r equi r ement as t o pr ocedur es t hat t he
20 ATP r equi r es of a r eci pi ent ?
21 A. You must have wr i t t en, wr i t t en pr ocedur es. So under , under
22 r egul at i ons, you must have management , and you must have
23 wr i t t en, wr i t t en pr ocedur es t hat gover n.
24 THE COURT: You say wr i t t en pr ocedur es, you mean
25 wr i t t en st andar ds?
( 212) 805- 0300
280
1 THE WI TNESS: Wr i t t en st andar ds, pr ocedur es f or your
2 company, t hat wi l l out l i ne.
3 THE COURT: As t o what const i t ut es.
4 THE WI TNESS: Yeah, what const i t ut es your cour se of
5 busi ness, yes.
6 THE COURT: Al l r i ght . I s t hi s a good pl ace t o br eak?
7 MR. EVERDELL: Ther e i s a good pl ace, your Honor .
8 THE COURT: Al l r i ght , l et ' s t ake a br eak and pl ease
9 come back at 9: 30. And I have a not e f r omone of t he j ur or s,
10 but I can' t t ake i t up unt i l I ' ve had a chance t o di scuss i t
11 wi t h counsel , al l r i ght . I ' l l do i t f i r st t hi ng i n t he
12 mor ni ng, t hough I ' l l t r y and do i t 9: 15.
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
281
2 THE COURT: Al l r i ght , i s t her e anyt hi ng t o t ake up?
4 THE COURT: Al l r i ght , see you at 9: 15 i n t he mor ni ng.
6 MR. KWOK: Your Honor , I do have t wo i ssues. I don' t
7 know whet her t hi s i s a good t i me or whet her i t ' s bet t er t o
8 r ai se i t t omor r ow mor ni ng. Essent i al l y, I j ust - -
9 THE COURT: Maybe i t woul d be good t o gi ve Mr .
10 Rubi nst ei n and mysel f a head' s up about what t he t wo i ssues ar e
11 and maybe we' d be abl e t o t ake l ess t i me t omor r ow mor ni ng on
12 t hem.
13 MR. KWOK: The f i r st one i s j ust exper t wi t nesses. We
14 want t o once agai n advi ce t he Cour t and def ense counsel we may
15 soon be cal l i ng t he f i r st of our t wo exper t wi t nesses on
16 account i ng, and I j ust want t o know whet her t her e ar e goi ng t o
17 be any obj ect i ons so we don' t have an ar gument i n f r ont of
18 j ur y.
19 The second i s I pr epar ed some exhi bi t s t hat wi l l be
20 di scussed by t hat wi t ness and I al so want t o know whet her t hose
21 ar e accept abl e t o t he Cour t and def ense counsel .
22 THE COURT: Wel l , I haven' t had ei t her . I have no
23 knowl edge about ei t her appl i cat i on. I don' t even know t he
24 names of t he exper t wi t nesses.
25 MR. KWOK: The f i r st , t he wi t ness exper t I ' mr ef er r i ng
( 212) 805- 0300
282
1 t o i s Bel i nda Ri l ey and I can show t he Cour t and def ense
2 counsel t he bl owups i f - -
3 THE COURT: Who ar e t he t wo peopl e?
4 MR. KWOK: The t wo exper t wi t nesses ar e Bel i nda Ri l ey
5 and J oan Hayes. The f i r st one up woul d be Bel i nda Ri l ey.
6 THE COURT: Any obj ect i on, Mr . Rubi nst ei n?
7 MR. RUBI NSTEI N: None your Honor .
8 THE COURT: None, okay.
10 THE COURT: Next .
11 MR. KWOK: And t he char t s I have pr evi ousl y pr ovi ded
12 t hemt o def ense counsel , but t hese ar e t he bl owups. I don' t
13 know whet her t her e ar e any obj ect i ons t o expl ai ni ng t hese t o
14 t he j ur y.
15 THE COURT: Show t hemt o Mr . Rubi nst ei n.
16 MR. RUBI NSTEI N: Act ual l y he showed t hemt o me bef or e
17 and I t ol d hi masi de f r omt he col or , I had no pr obl em. Now
18 t hat I have a ni ght t o pr epar e f or t hat col or , I ' l l have no
19 pr obl emwi t h i t t omor r ow.
20 MR. KWOK: Thank you, your Honor . That ' s al l .
21 MR. EVERDELL: I s t he wi t ness excused, your Honor ?
22 THE COURT: Yes.
25 ( Adj our ned t o J une 4, 2008, at 9: 30 a. m. )
( 212) 805- 0300
283
3 BETTI J OYCE LI DE
4 Di r ect By Mr . Kwok . . . . . . . . . . . . . 86
5 Cr oss By Mr . Rubi nst ei n . . . . . . . . . . 151
6 Redi r ect By Mr . Kwok . . . . . . . . . . . . 231
7 Recr oss By Mr . Rubi nst ei n . . . . . . . . . 243
8 HOPE DENI SE SNOWDEN
9 Di r ect By Mr . Ever del l . . . . . . . . . . . 249
10 GOVERNMENT EXHI BI TS
11 Exhi bi t No. Recei ved
12 1 . . . . . . . . . . . . . . . . . . . . 85
13 2 . . . . . . . . . . . . . . . . . . . . 86
14 3 . . . . . . . . . . . . . . . . . . . . 86
15 4 . . . . . . . . . . . . . . . . . . . . 86
16 10 . . . . . . . . . . . . . . . . . . . 111
17 10A . . . . . . . . . . . . . . . . . . . 112
18 10B . . . . . . . . . . . . . . . . . . . 113
19 11 . . . . . . . . . . . . . . . . . . . 114
20 12 . . . . . . . . . . . . . . . . . . . 115
21 13 . . . . . . . . . . . . . . . . . . . 116
22 14 . . . . . . . . . . . . . . . . . . . 116
23 41 . . . . . . . . . . . . . . . . . . . 136
24 31 . . . . . . . . . . . . . . . . . . . 137
25 32 . . . . . . . . . . . . . . . . . . . 137
( 212) 805- 0300
284
1 33 . . . . . . . . . . . . . . . . . . . 138
2 34 . . . . . . . . . . . . . . . . . . . 139
3 35 . . . . . . . . . . . . . . . . . . . 139
4 36 . . . . . . . . . . . . . . . . . . . 139
5 30 . . . . . . . . . . . . . . . . . . . 141
6 21 . . . . . . . . . . . . . . . . . . . 144
7 22 . . . . . . . . . . . . . . . . . . . 145
8 23 . . . . . . . . . . . . . . . . . . . 147
9 24 . . . . . . . . . . . . . . . . . . . 147
10 25 . . . . . . . . . . . . . . . . . . . 148
11 26 . . . . . . . . . . . . . . . . . . . 149
12 DEFENDANT EXHI BI TS
14 A . . . . . . . . . . . . . . . . . . . . 221
15 B . . . . . . . . . . . . . . . . . . . . 230
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
285
8647KAR1
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3
4 v. S2 07 CR 541 ( RPP)
4
5
6 Def endant .
6
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
7
8
8 J une 4, 2008
9 9: 20 a. m.
9
10
10 Bef or e:
11
12
13
13
14 APPEARANCES
14
16 BY: STEVEN KWOK
18
20
22
23
24
25
( 212) 805- 0300
286
8647KAR1
2 THE COURT: Good mor ni ng. We have t hi s l et t er f r om
3 Ms. McCaf f er t y, and t he e- mai l t o her onl y says how i mpor t ant
4 i t i s t hat you t r y t o get of f t he panel you' r e on, we need you
5 i n t he of f i ce t hi s week. Of cour se t hen she says she r ecei ved
6 t en cal l s, et c. What do t he at t or neys advi se me woul d be a
7 wi se way t o handl e t hi s?
8 MR. KWOK: Your Honor , I spoke wi t h Mr . Rubi nst ei n
9 ear l i er t hi s mor ni ng br i ef l y. I t hi nk t he par t i es agr ee we
10 shoul d i nqui r e br i ef l y of t he j ur or t o see whet her she can
11 r emai n f ai r and i mpar t i al i n l i ght of t he wor k pr essur e. The
12 onl y concer n t he gover nment has i s i t ' s j ust t he t hi r d day of
13 t r i al , and we woul d be r el uct ant .
14 THE COURT: Wel l , i sn' t t hi s conduct i n vi ol at i on of
15 l aw, t r yi ng t o put pr essur e on a j ur or t o get of f t he panel
16 t hat she i s al r eady on?
17 MR. EVERDELL: I l ooked br i ef l y i nt o t hat . I can' t
18 say I di d an exhaust i ve sear ch, but I di d see t her e i s a ci vi l
19 r emedy i f an empl oyer di schar ges, t hr eat ens t o di schar ge,
20 i nt i mi dat es or coer ces any per manent empl oyee by r eason of such
21 empl oyee' s j ur y ser vi ce. Usual l y t hat ' s t hr eat eni ng t o f i r e or
22 t hr eat eni ng some sor t of i mmedi at e empl oyment act i on.
23 THE COURT: Wel l , t her e i s an i mpl i ci t t hr eat t o f i r e
24 and t hen t hey' r e cal l i ng her . They shoul dn' t be i nt er f er i ng
25 wi t h her ser vi ce i n t hi s way.
( 212) 805- 0300
287
8647KAR1
1 MR. EVERDELL: I t ' s cer t ai nl y t r ue t hat t hey shoul dn' t
2 be i nt er f er i ng wi t h her ser vi ce. Whet her or not i t r i ses t o
3 t he l evel of an i l l egal act t hat woul d cause ci vi l penal t i es,
4 t hat I can' t say. But obvi ousl y t her e i s a ci vi l pr ovi si on i n
5 t he U. S. Code i f i t r i ses t o t he l evel of t hr eat eni ng. I t ' s 28
6 U. S. C. 1875.
7 THE COURT: What does i t say?
8 MR. EVERDELL: I t says no empl oyer shal l di schar ge,
9 t hr eat en t o di schar ge, i nt i mi dat e or coer ce any per manent
10 empl oyee by r eason of such empl oyee' s j ur y ser vi ce i n any cour t
11 of t he Uni t ed St at es.
12 THE COURT: Coer ce.
13 MR. EVERDELL: I suppose. I don' t want t o make an
14 ar gument one way or t he ot her what t he empl oyer ' s act i ons ar e
15 l i ke, but obvi ousl y t her e i s r eason t o bel i eve t hat he
16 shoul dn' t be doi ng t hi s. Whet her or not i t ul t i mat el y r i ses t o
17 t he l evel of a vi ol at i on i s anot her mat t er .
18 THE COURT: Wel l , l et ' s cal l t he j ur or i n,
19 Ms. McCaf f er t y.
20 Good mor ni ng, Ms. McCaf f er t y.
21 Wel l , I got your not e yest er day and I r ead i t , but
22 empl oyer s ar e not supposed t o put empl oyees such as your sel f
23 under pr essur e. Ther e i s a pr ovi si on i n t he Code of Ci vi l
24 Pr ocedur e t hat st at es t hat t hey' r e not supposed t o do t hi s.
25 And I don' t know how best t o apr i se t hemof t hi s, but t hey
( 212) 805- 0300
288
8647KAR1
1 shoul dn' t be cal l i ng you and t el l i ng you about al l of t hei r
2 pr obl ems and what have you. I f t he bosses chose t o go of f on
3 t r i ps and what have you, some of t hemcan come back. I t
4 shoul dn' t be i nt er f er i ng wi t h your ser vi ce.
5 What I ' mconcer ned about i s how t o best t el l your
6 empl oyer i n some way so t hat t hey don' t put you under t hi s
7 pr essur e anymor e. They shoul dn' t put you under t hi s pr essur e.
8 I don' t know how t o best t el l t hem.
9 J UROR: I ' mt he onl y one t hat does my j ob and has been
10 f or t he l ast t en year s.
11 THE COURT: I know, but ot her peopl e.
12 J UROR: I under st and what you' r e sayi ng. I t ' s j ust
13 l i ke I wor ked unt i l 1: 30 t hi s mor ni ng, and can I see t hi s case
14 i s goi ng t o t ake - -
15 THE COURT: I know. I got t hi s l et t er .
16 J UROR: That ' s f i ne.
17 THE COURT: What i s t he empl oyer ' s name? I ' msor r y.
18 I bet t er wr i t e i t down her e.
19 J UROR: The name of t he company?Savanna Real Est at e
20 Fund. Savanna wi t hout an H on t he end. S- A- V- A- N- N- A.
21 THE COURT: Savannah?
22 J UROR: Yes.
23 THE COURT: Li ke Savannah, Geor gi a?
24 J UROR: Li ke Savannah, Geor gi a wi t hout t he H on t he
25 end.
( 212) 805- 0300
289
8647KAR1
1 THE COURT: And what ' s t he r est of t he name?
2 J UROR: Real Est at e Fund.
3 THE COURT: And t he addr ess?
4 J UROR: 10 East 53r d St r eet , and t he zi p code i s
5 10022.
6 THE COURT: Fax number ?
7 J UROR: ( 212) 229- 1113.
8 THE COURT: Al l r i ght . Wel l , I ' mgoi ng t o f ax t hema
9 l et t er t hi s mor ni ng and t el l t hemt o st op.
10 J UROR: They' r e not har assi ng me. I don' t want you t o
11 t ake i t l i ke t hat .
12 THE COURT: I t ' s j ust t hat - - I guess you can go back.
13 I wi l l t r y t o wr i t e somet hi ng t hat doesn' t say har ass or
14 anyt hi ng of t hat sor t .
15 J UROR: OK, t hank you.
16 THE COURT: I don' t want t o gi ve you t he i mpr essi on - -
17 I don' t want t o gi ve t hemt he i mpr essi on t hat you' ve compl ai ned
18 t hat t hey' r e har assi ng you.
19 J UROR: No, t hat ' s not t he case. I j ust f eel ver y
20 pr essur ed, t hat ' s al l .
21 THE COURT: Of cour se.
22 J UROR: You know, I ' mwor ki ng at ni ght now, and i t ' s
23 j ust t hat ' s al l .
24 THE COURT: Thank you ver y much.
25 J UROR: Thank you.
( 212) 805- 0300
290
8647KAR1
1 ( J ur or not pr esent )
2 Thi s i s what I dr af t ed, so you mi ght be abl e t o
3 i mpr ove i t .
4 " Ki mMcCaf f er t y i s a member of t he j ur y panel i n a
5 cr i mi nal case whi ch wi l l l ast t wo weeks. She has at t empt ed t o
6 be excused f r omt he panel as you r equest ed i n your e- mai l of
7 J une 3. I have deni ed t hat r equest . The case i s somewhat
8 compl ex, and i t i s i mpor t ant t hat i t be compl et ed wi t hout a
9 mi st r i al based on t oo f ew j ur or s. I t i s i mpor t ant t hat she not
10 f eel pr essur ed ei t her by t el ephone cal l s dur i ng t he day or
11 oner ous dut i es at ni ght . "
12 MR. KWOK: I t hi nk t hat ' s per f ect .
13 THE COURT: Sound al l r i ght ?
14 MR. RUBI NSTEI N: No pr obl emat al l , J udge.
16 DEPUTY COURT CLERK: We' r e st i l l shor t one j ur or . A
17 coupl e of t he j ur or s have asked about t aki ng not es.
18 THE COURT: Anyt hi ng el se t o t ake up?
19 MR. KWOK: Yes, your Honor . J ust t wo qui ck t hi ngs.
20 The f i r st i s bef or e we br oke yest er day your Honor asked how
21 we' r e doi ng on t i me, and I r epl i ed t hat I t hi nk we' r e r unni ng a
22 l i t t l e behi nd.
23 THE COURT: What ' s t hat mean?
24 MR. KWOK: I don' t know what t hat means, but her e i s
25 t he punch l i ne. We went back l ast ni ght t o l ook at wher e we
( 212) 805- 0300
291
8647KAR1
1 ar e, and we may be abl e t o t r i mour wi t ness l i st up t o and
2 i ncl udi ng cut t i ng out one of t he CPAs who mi ght be t est i f yi ng.
3 We' r e not commi t t ed t o t aki ng t hat cour se yet , but I want ed t o
4 advi se t he cour t and def ense counsel t hat ' s what we ar e
5 ser i ousl y consi der i ng so we can al l pl an accor di ngl y.
6 The second i ssue i s af t er Ms. Snowden' s t est i mony t hi s
7 mor ni ng or maybe t hi s af t er noon t he next wi t ness up i s Bel i nda
8 Ri l ey. I woul d r equest a sl i ght br eak, because t her e i s goi ng
9 t o be some set t i ng up t o do f or t hi s wi t ness, so I woul d j ust
10 put t hat r equest t o t he cour t now.
11 THE COURT: OK.
12 MR. KWOK: Thank you.
13 MR. RUBI NSTEI N: Excuse me, your Honor , we have a
14 sl i ght pr obl em.
15 THE COURT: Wher e i s your cl i ent ?
16 MR. RUBI NSTEI N: He i s not her e yet .
17 THE COURT: You shoul d have t ol d me ear l i er t hi s
18 mor ni ng.
19 MR. RUBI NSTEI N: I was hopi ng he woul d get her e by
20 9: 30. Yest er day I pi cked hi mup mysel f . And I spoke t o hi m
21 t hi s mor ni ng at 7: 30 when I was l eavi ng my house, and he sai d
22 t hat he woul d come hi msel f . I f I coul d use t he cour t phone, I
23 wi l l cal l hi s cel l phone.
24 THE COURT: Cal l hi s cel l phone.
25 MR. RUBI NSTEI N: Thank you. I know t hat he sent an
( 212) 805- 0300
292
8647KAR1
1 e- mai l 3: 41 t hi s mor ni ng, so . . .
2 Your Honor , I j ust spoke t o my cl i ent who i nf or ms me
3 he has a cab wai t i ng downst ai r s. He i s i n t he pr ocess of
4 l eavi ng hi s home on East 33r d and Second Avenue.
5 THE COURT: At quar t er of t en?
6 MR. RUBI NSTEI N: At quar t er of t en, yes.
7 THE COURT: He i s supposed t o be her e at quar t er af t er
8 ni ne?
9 MR. RUBI NSTEI N: J udge, I wi l l pi ck hi mup f or t he
10 r est of t he t r i al .
11 THE COURT: Wel l , si nce i t ' s vol unt ar y, I suppose we
12 can go ahead. You bet t er cal l your of f i ce, Mr . Kwok and Mr .
13 Ever del l . That ' s what I pr opose t o do.
14 MR. EVERDELL: I f we coul d have a moment t o cal l j ust
15 t o make sur e t hat t hat ' s accept abl e.
16 THE COURT: Sur e.
17 MR. RUBI NSTEI N: Can I use t he cour t r oomphone t o cal l
18 my of f i ce t o see i f t hey have some gui dance?
19 THE COURT: OK. You can use our phone.
20 MR. RUBI NSTEI N: Thank you ver y much, your Honor .
21 ( Recess)
22 THE COURT: That ' s how I i nt end t o pr oceed.
23 MR. KWOK: I j ust conf er r ed wi t h our chi ef of appeal s.
24 Based on j ust t he qui ck conver sat i ons, she i s i ncl i ned t o wai t
25 because - -
( 212) 805- 0300
293
8647KAR1
1 THE COURT: Oh, come on. Get an answer f r omhi m. Of
2 cour se he woul d. Get an answer f r omhi mone way or t he ot her
3 on t he l aw. We can' t have t hi s go on.
4 MR. KWOK: I guess t he onl y t hi ng I woul d ask, i f
5 def ense counsel woul d t el l us i s - -
6 THE COURT: No, t her e i s no excuse.
7 MR. RUBI NSTEI N: I know t hat , J udge, but - -
8 THE COURT: He has no excuse. I t i sn' t t hat he has
9 been i n t he hospi t al or anyt hi ng el se. He has no excuse.
10 MR. RUBI NSTEI N: I under st and t hat , your Honor , but
11 unf or t unat el y i t woul d send I t hi nk a t er r i bl e message - -
12 THE COURT: That ' s hi s choi ce.
13 MR. RUBI NSTEI N: - - t o t he j ur y, and he coul dn' t get a
14 f ai r t r i al .
15 THE COURT: Oh, come on, t hat ' s hi s choi ce. That was
16 hi s choi ce when he was l azy about get t i ng up or what ever he was
17 doi ng.
18 MR. RUBI NSTEI N: J udge, he was up at 3: 41 i n t he
19 mor ni ng because he sent me an e- mai l .
20 THE COURT: He di dn' t have t o. He coul d have gone t o
21 bed at a decent hour l i ke ever yone el se.
22 MR. RUBI NSTEI N: I woul d ask your Honor - - as we know
23 f r ommy conver sat i on wi t h hi m, he shoul d be her e.
24 THE COURT: You can' t t el l wi t h t r af f i c and possi bl e
25 r ai n and what have you.
( 212) 805- 0300
294
8647KAR1
1 MR. RUBI NSTEI N: That i s accur at e, your Honor , but I
2 woul d ask i f your Honor - -
3 THE COURT: I mean i t , l et ' s get an answer on t he l aw
4 f r omt he assi st ant , whoever you ar e checki ng wi t h, t he
5 appel l at e gr oup.
6 MR. EVERDELL: We wi l l do t hat . May we be excused?
7 THE COURT: Ther e i s no excuse what soever f or t hi s.
8 Good mor ni ng, Ms. Koel evel d.
9 MS. KOELEVELD: As you can see, t her e was a consul t .
10 THE COURT: I can r emember J udge McMann put t i ng t he
11 j ur or s i n t he j ur y box and wai t i ng f or t he def endant t o come.
12 MS. KOELEVELD: I don' t see a pr obl emwi t h t hat .
13 MR. RUBI NSTEI N: J udge Ni cker son i n t he East er n
14 Di st r i ct used t o do t hat , and i f t he l awyer wasn' t t her e, t hey
15 woul d st ar t .
16 THE COURT: Do i t wi t h t he l awyer t oo. Of cour se t he
17 mar shal s woul d br i ng t he def endant i n t hose cases.
18 MR. KWOK: Your Honor , I t hi nk t he r el evant r ul e t hat
19 gover ns t hi s si t uat i on i s Rul e 43 of t he cr i mi nal pr ocedur e,
20 subsect i on ( c) ( 1) ( A) , whi ch r eads, " The def endant who was
21 i ni t i al l y pr esent at t r i al or who had pl eaded gui l t y or nol o
22 cont ender e wai ves t he r i ght t o be pr esent under t he f ol l owi ng
23 ci r cumst ances: A, when t he def endant i s vol unt ar y absent af t er
24 t he t r i al has begun, r egar dl ess of whet her t he cour t i nf or med
25 t he def endant of an obl i gat i on t o r emai n dur i ng t r i al . "
( 212) 805- 0300
295
8647KAR1
1 Fr omwhat we have j ust hear d so f ar , I t hi nk t he onl y
2 excuse i s per haps t he def endant over sl ept . And I t hi nk as l ong
3 as your Honor makes a f i ndi ng on t he r ecor d t hat t he def endant
4 vol unt ar i l y absent ed hi msel f and t her e i s no l egi t i mat e excuse
5 f or an absence, I t hi nk we ar e f i ne goi ng f or war d.
6 THE COURT: Al l r i ght , l et ' s cal l i n t he j ur y.
7 MR. RUBI NSTEI N: I woul d have t o, wi t h al l due
8 r espect , ask f or a mi st r i al .
9 THE COURT: Your appl i cat i on i s deni ed.
10 MR. RUBI NSTEI N: I woul d ask f or a l i mi t i ng
11 i nst r uct i on t hat t he def endant i s absent and t hey shoul dn' t
12 specul at e as t o t he r eason t hat he i s not pr esent .
13 THE COURT: Al l r i ght . Pl ease cal l i n t he j ur y.
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
296
8647KAR1
2 THE COURT: Pl ease be seat ed. Ladi es and gent l emen,
3 you wi l l not e t hat t he def endant i s not her e. You ar e not t o
4 specul at e as t o why he i s not her e or not pr esent at t hi s t i me.
5 He i s expect ed at some poi nt .
6 I want t o t hank you f or bei ng on t i me, but obvi ousl y
7 we got del ayed a l i t t l e bi t .
8 Some of you have asked about t aki ng not es. I al l ow
9 t aki ng not es, but I do want t o gi ve you a war ni ng. The
10 di f f i cul t y t hat not et aki ng pr esent s somet i mes i s t hat peopl e
11 who t ake t he not es become wedded t o t he not es and t hi nk t hat
12 t hey have t aken ver bat i mnot es, and when you get i nt o j ur y
13 del i ber at i ons somet i mes t hat har dens t he j ur or ' s posi t i on, and
14 peopl e who wat ched and l i st ened f eel t hat t hei r r ecol l ect i on i s
15 cor r ect , and t he per son who t akes t he not es says I ' ve got i t
16 down her e i n bl ack and whi t e t hat ' s what he sai d.
17 Wel l , t he answer i s you can cal l f or a t r anscr i pt , and
18 t he t r anscr i pt wi l l t el l you exact l y what t he wi t ness sai d,
19 because t he cour t r epor t er has t he benef i t of l ong exper t i se i n
20 t aki ng not es and mechani cal assi st ance so t hat he or she can
21 get ever y wor d t hat i s sai d.
22 So, I al l ow t aki ng not es, but I want t o war n you t hat
23 i t does somet i mes cause di f f i cul t y i n t he j ur y r oombecause of
24 t he peopl e t aki ng not es havi ng a conf l i ct wi t h t he peopl e who
25 di dn' t t ake not es. Ther e i s a r esol ut i on t o i t . I f I expl ai n
( 212) 805- 0300
297
8647KAR1
1 t he r esol ut i on i n advance, t hat somet i mes pr event s di sput es i n
2 t he j ur y r oom.
3 So, I t hi nk I ' ve answer ed t he onl y quest i ons I have
4 out st andi ng. We wi l l go ahead wi t h t he wi t ness Ms. Snowden.
5 HOPE SNOWDEN, r esumed.
6 THE COURT: Ms. Snowden, you ar e r emi nded you ar e
7 st i l l under oat h. The j ur y i s r emi nded t hat t hat i s an
8 obl i gat i on of t he cour t t o gi ve her such an i nst r uct i on when
9 t he wi t ness t akes t he st and on a subsequent day.
10 DI RECT EXAMI NATI ON ( Cont i nued)
11 BY MR. EVERDELL:
12 Q. Good mor ni ng, Ms. Snowden.
14 Q. Bef or e we st ar t , i f I coul d ask Ms. Moussa t o put up
15 Gover nment Exhi bi t 4, whi ch i s al r eady i n evi dence, page 7.
16 THE COURT: Thi s i s what ?
17 MR. EVERDELL: Gover nment Exhi bi t 4, page 7.
18 Act ual l y, i f I have a moment , I need t o r eposi t i on t he
19 exhi bi t s back on t he wi t ness st and.
20 Q. Ms. Snowden, i f you can r ef er t o t he scr een or t he exhi bi t
21 i n f r ont of you, Gover nment Exhi bi t 4.
22 A. I wi l l l ook at t he exhi bi t s. They ar e not i n or der , so. . .
23 Q. You r ecal l when we br oke yest er day we had some di scussi on
24 about t hat second bul l et poi nt t her e, t he budget l i ne i t em
25 changes t her e.
( 212) 805- 0300
298
8647KAR1 Snowden - di r ect
1 A. Yes.
2 Q. Gr eat er t han 10 per cent . What was t he f i r st year of CASI ' s
3 budget under t hei r ATP gr ant t hey r ecei ved?
4 A. $800, 000.
5 Q. What year di d t hat span?
6 A. Oct ober 1, 2001 unt i l Sept ember 30, 2002.
7 Q. So t he i ni t i al budget t hat was appr oved, what year di d t hat
8 cover , t hat budget ?
9 A. Oct ober 1, 2001 unt i l Sept ember 30, 2002.
10 Q. So, woul d t hat budget cover cost s t hat wer e i ncur r ed dur i ng
11 t hat year , dur i ng t hat Oct ober 1 t o Sept ember - -
12 A. That ' s t he onl y t i me t hey wer e cover ed. I t onl y cover s
13 expendi t ur es dur i ng t hat per i od of t i me onl y.
14 Q. Woul d i t cover any expendi t ur es t hat occur r ed bef or e t hat
15 t i me?
16 A. No.
17 Q. We t al ked a bi t al so about t he r egul at i ons gover ni ng t he
18 ATP gr ant s yest er day.
19 A. Yes.
20 Q. J ust a f ew mor e quest i ons about t hat . Ar e t her e
21 gover nment - wi de r egul at i ons t hat appl y t o t he ATP gr ant s t hat
22 ar e not ATP gr ant speci f i c?
23 A. Yes.
24 Q. And do t hese r egul at i ons appl y t o mor e t han one gover nment
25 gr ant ?
( 212) 805- 0300
299
1 A. Yes.
2 Q. Ar e t her e r ul es speci f i c t o t he ATP gr ant t hat j ust cover
3 t he ATP gr ant ?
4 A. Yes, t her e i s.
5 Q. And whi ch r ul es cont r ol i f t her e i s an ATP- speci f i c r ul e
6 ver sus a gover nment - wi de r ul e?
7 A. Your ATP speci al wor k condi t i ons and your gener al t er ms and
8 condi t i ons, t hey ar e speci f i ed wi t hi n t he awar d, so . . .
9 Q. So, i f t her e i s an ATP r ul e t hat appl i es t o t he ATP gr ant
10 and a gover nment - wi de r ul e - -
11 A. Your ATP r ul es super sede al l ot her r ul es, because t hey' r e
12 pr ogr amspeci f i c r ul es, so you have your ATP r ul es and t hen
13 ot her r ul es, but ATP super sedes ever yt hi ng.
14 Q. OK. Ms. Snowden, whi l e t he gr ant was i n ef f ect f or CASI ,
15 do you know who had t he aut hor i t y t o si gn checks f or CASI or
16 make ot her f i nanci al commi t ment s on behal f of t he company?
17 A. Yes.
18 Q. And who had t he si gnat or y aut hor i t y f or CASI ?
21 A. Because I r ecei ved - - I r ecei ved t he e- mai l . I act ual l y
22 r ecei ved a l et t er f r omhi mst at i ng t hat no ot her per son was
23 aut hor i zed t o cer t i f y anyt hi ng under t he company besi des
24 hi msel f .
25 Q. I woul d l i ke you t o l ook i f i t ' s i n your st ack t her e
( 212) 805- 0300
300
1 Gover nment Exhi bi t 21 al r eady i n evi dence, and i f we can
2 di spl ay t hat on t he scr een.
3 Do you have t hat i n f r ont of you, Ms. Snowden?
4 A. Yes, I do.
5 Q. Do you r ecogni ze t hat document ?
6 A. Yes.
8 A. Thi s i s an amendment t o t he or i gi nal pr oposal .
9 Q. And whi ch number ed amendment i s t hat ?
10 A. Number 1, t he f i r st one.
11 Q. Woul d you pl ease f l i p t o t he t hi r d page of t hat exhi bi t .
12 I f we coul d zoomi n on t he f i nal par agr aph or t he f i nal - - t he
13 l et t er subst ance i s f i ne. Ri ght t her e.
14 Al l r i ght . Ms. Snowden, what i s t hi s l et t er ?
15 Act ual l y i f you coul d j ust r ead f r omt he t wo par agr aphs t her e.
16 A. " Thi s l et t er aut hor i zes Mr . Lee Gur f ei n as admi ni st r at i ve
17 cont act on cooper at i ve agr eement number 70NANB1H3050 wi t h
18 Comput er Ai ded Sur ger y, I nc.
19 " Thi s aut hor i zat i on i s val i d f or t he per i od of one
20 year f r omt he st ar t of t he agr eement on Oct ober 1, 2001 t hr ough
21 Sept ember 30. Thi s aut hor i zat i on can be r evoked i n wr i t i ng t o
22 you and hi mby mysel f at any t i me t hi s aut hor i zat i on i s i n
23 ef f ect . Unt i l speci f i cal l y aut hor i zed t o do so, Mr . Gur f ei n i s
24 not an of f i cer of t he cor por at i on and i s not aut hor i zed t o si gn
25 f or t he cor por at i on. The aut hor i zat i on f or Mr . Gur f ei n t o
( 212) 805- 0300
301
1 commi t t he cor por at i on wi l l be made by separ at e l et t er
2 aut hor i zat i on i f t he need ar i ses. "
3 Q. Let ' s j ust t ake t hat one bi t at a t i me. That f i r st
4 par agr aph t her e, i t says i t aut hor i zes Mr . Gur f ei n as an
5 admi ni st r at i ve cont act . What i s t hat agai n?
6 A. The per son who cal l s me and asks quest i ons. I t coul d be
7 about what ' s al l owed i n t hi s gr ant .
8 Q. OK. Now t hi s l ast sent ence her e, " unt i l speci f i cal l y
9 aut hor i zed t o do so, Mr . Gur f ei n i s not an of f i cer of t he
10 cor por at i on and i s not aut hor i zed t o si gn f or t he cor por at i on, "
11 what does t hat mean?
12 A. That means he can' t si gn of f i ci al document s. So, he can
13 cont act me and t al k t o me ver bal l y, but when i t comes t o
14 of f i ci al document s and si gni ng t o commi t t he company, he i s not
15 aut hor i zed t o do so.
16 Q. Who di d have t hat aut hor i zat i on?
18 Q. And t hen i t says at t he end, " The aut hor i zat i on f or
19 Mr . Gur f ei n t o commi t t he cor por at i on wi l l be made by separ at e
20 l et t er aut hor i zat i on i f t he need ar i ses. "
21 Do you see t hat ?
22 A. Yes.
23 Q. Di d NI ST or ATP ever r ecei ve anot her l et t er gi vi ng Mr . Lee
24 Gur f ei n aut hor i zat i on t o commi t t he company i n any way?
25 A. No.
( 212) 805- 0300
302
1 Q. I f we can zoomout t o t he f ul l l et t er on page 3. When i s
2 t hat l et t er dat ed?
3 A. Oct ober 11, 2001.
4 Q. And about how l ong af t er t he gr ant was awar ded di d t hat
5 l et t er come i n?
6 A. Wi t hi n t wo weeks.
7 Q. Al l r i ght . Ms. Snowden, di d you hear f r omDr . Kar r on agai n
8 af t er t he ki ckof f meet i ng t hat we di scussed yest er day?
9 A. Yes, I di d.
10 Q. And how di d you hear f r omhi m?
12 Q. I n what ways di d he cont act you?
13 A. He cal l ed me on t he phone. I mean dur i ng t he cour se he
14 e- mai l ed me al so.
15 Q. And about how of t en di d he cont act you i n t hese ways?
16 A. Qui t e of t en, qui t e of t en.
17 Q. And do you know whet her he cont act ed anyone el se at NI ST?
18 A. Yes.
19 Q. Who el se di d he cont act ?
20 A. B. J . Li de, J ayne Or t hwei n, and my f or mer super vi sor Mar i l yn
21 Gol dst ei n.
22 Q. Di d t hese peopl e al l have some r esponsi bi l i t y wi t h t he ATP
23 gr ant ?
24 A. We wor ked as a t eamon t he ATP gr ant , and any i ssues and
25 pr obl ems, we di scuss i t ; and anyt hi ng t hat happens wi t hi n my
( 212) 805- 0300
303
1 of f i ce, of cour se I have t o di scuss i t wi t h my super vi sor
2 Mar i l yn Gol dst ei n.
3 Q. What sor t s of t hi ngs di d t he def endant di scuss wi t h you i n
4 t hese subsequent cont act s?
5 A. Subsequent cont act s wer e basi cal l y about coul d he use
6 f eder al f unds t o pay f or r ent and ut i l i t i es.
7 Q. So, i s t hi s a si mi l ar t opi c as bef or e?
8 A. Exact si mi l ar . I t ' s t he exact t opi c.
9 Q. And what was your r esponse t o hi mon t hose occasi ons t hat
10 he t al ked t o you?
11 A. I t was al ways no. No mat t er what he sai d, how he sai d i t
12 t o me, i t ' s no, t hese ar e t axpayer s money and we do not use
13 t hat t o pay f or r ent and ut i l i t i es.
14 Q. Di d you hear f r omanybody el se f r omCASI af t er t he ki ckof f
15 meet i ng?
16 A. Yes.
17 Q. Who di d you hear f r om?
18 A. Dr . Kar r on and Lee Gur f ei n.
19 Q. And how di d Lee Gur f ei n cont act you?
20 A. He cal l ed me.
21 ( Def endant pr esent )
22 Q. And what i f anyt hi ng di d you di scuss wi t h Lee Gur f ei n?
23 A. The same t hi ng, about cal l s, coul d he use t he f eder al f unds
24 t o pay f or r ent and ut i l i t i es.
25 Q. And what i f anyt hi ng was your r esponse t o Mr . Gur f ei n?
( 212) 805- 0300
304
1 A. No. Agai n and agai n, absol ut el y not .
2 Q. Al l r i ght , Ms. Snowden. Di d t her e come a t i me when t her e
3 wer e amendment s t o t hi s gr ant , t he CASI ATP gr ant ?
4 A. Yes.
5 Q. And i f you can pul l out i n f r ont of you t he f ol der s t hat
6 ar e i n evi dence, Gover nment ' s Exhi bi t s 22, 23, 24, 25 and 26.
7 A. OK.
8 Q. Have you had a chance t o l ook at t hose document s?
9 A. Yes.
10 Q. Do you r ecogni ze t hose document s?
11 A. Yes.
12 Q. What ar e t hose document s?
13 A. These ar e amendment s t o t he awar d.
14 Q. And over what cour se of t i me wer e t hese amendment s
15 submi t t ed and appr oved?
16 A. I ncl udi ng t he or i gi nal document t hat he si gned t o accept
17 t he gr ant , Oct ober 2001 t hr ough J une 2003.
18 Q. Wer e t hese amendment s act ual l y appr oved by NI ST?
19 A. Yes, t hese ar e al l appr oved amendment s, yes.
20 Q. I n gener al , what ki nds of changes wer e made t o t he gr ant as
21 a r esul t of t hese amendment s?
22 A. Admi ni st r at i ve changes and a budget change.
23 Q. Why don' t you t ake a l ook at Gover nment Exhi bi t 22. I f you
24 can di spl ay t hat as wel l . Do you see t hat document ,
25 Ms. Snowden?
( 212) 805- 0300
305
1 A. Yes, I do.
2 Q. Whi ch amendment i s t hat ?
3 A. Amendment 2.
4 Q. And what ki nd of changes wer e made wi t h amendment 2?
5 A. Admi ni st r at i ve changes and a budget change, r evi sed budget .
6 Q. Ther e was a r evi sed budget wi t h t hi s amendment ?
7 A. Yes, i t was appr oved, yes.
8 THE COURT: You say admi ni st r at i ve changes. What ar e
9 you cover i ng?
10 A. We r evi sed t he cont act ' s name. When I or i gi nal l y got t hi s,
11 I put t he admi ni st r at i ve cont act as Lee Gur f ei n, and t hen Dr .
12 Kar r on sent me somet hi ng sayi ng t hat he want ed hi s whol e name
13 put i n, so t hat was i ncor por at ed i nt o t hi s, so t hat was an
14 admi ni st r at i ve change.
15 THE COURT: Whose whol e name?
16 THE WI TNESS: Lee Gur f ei n' s name, and i t ' s El i sha
17 Gur f ei n. But i n t he or i gi nal document i t had Dr . Kar r on as a
18 t echni cal and Lee Gur f ei n, not El i sha.
19 Q. I f we coul d di spl ay page 3.
20 And, Ms. Snowden, i f you coul d l ook at page 3.
21 Bl ow t hat up as much as possi bl e. I bel i eve t hese ar e
22 al so i n t he j ur y bi nder s i f i t ' s t oo smal l t o r ead t her e.
23 Ms. Snowden, you ment i oned a r evi sed budget as par t of
24 amendment 2. I s t hi s t he r evi sed budget t hat ' s par t of t hat
25 amendment ?
( 212) 805- 0300
306
1 A. Yes.
2 Q. Now, i f you coul d l eave t hat on t he scr een and al so t ake a
3 l ook at Gover nment Exhi bi t 14 whi ch i s al r eady i n evi dence.
4 THE COURT: Leave what on t he scr een?
5 MR. EVERDELL: Gover nment Exhi bi t 22, page 3, whi ch i s
6 what Ms. Snowden was comment i ng on bef or e, t he budget
7 amendment s, and compar i ng t hat t o Gover nment Exhi bi t 14, whi ch
8 i s al r eady i n evi dence.
9 Q. Ms. Snowden, l ooki ng f i r st at Gover nment Exhi bi t 14, do you
10 know what t hat document i s?
11 A. Yes.
12 Q. What i s t hat document ?
13 A. Thi s i s t he or i gi nal budget t hat was appr oved wi t h t he
14 or i gi nal pr oposal .
15 Q. Was t hat t he l ast appr oved budget bef or e amendment 2?
16 A. Yes.
17 Q. Al l r i ght . What shi f t s i n budget i f any ar e r ef l ect ed
18 bet ween Gover nment Exhi bi t 14, t he l ast appr oved budget , and
19 gover nment ' s 22, t he f i r st amended budget ?
20 A. The per sonnel , f r i nge benef i t s, t r avel , equi pment .
21 Q. Can you j ust poi nt us t o an exampl e on t he scr een bet ween
22 t he t wo of t hose cat egor i es you ar e t al ki ng about and t he
23 number s t her e.
24 A. The f i r st one i s dat ed.
25 THE COURT: Can t he j ur y see t hi s? Because my
( 212) 805- 0300
307
1 eyesi ght used t o be excel l ent , but I can' t r ead i t now.
2 MR. EVERDELL: Wel l , I ' msor r y.
3 THE COURT: Can t he j ur y r ead i t ?
4 MR. EVERDELL: I f t he j ur y has t he bi nder s i n f r ont of
5 t hem, t hey can l ook at t he number s.
6 THE COURT: You have t he bi nder s so you can f ol l ow i t .
7 MR. EVERDELL: I wi l l not e wi t h t he poi nt er wher e
8 t hese ar e, so hopef ul l y t hat wi l l make i t a l i t t l e easi er .
9 THE COURT: Let ' s make sur e t hey have t he r i ght pages.
10 MR. EVERDELL: I t ' s Gover nment Exhi bi t ' s 14, whi ch I
11 bel i eve i s one page, and t hen t he t hi r d page of Gover nment
12 Exhi bi t 22.
13 Al l r i ght . Ms. Snowden, you ment i oned a f ew
14 cat egor i es.
15 THE COURT: J ust hol d i t a second unt i l t hey have a
16 chance t o get i t t oget her .
17 MR. EVERDELL: Yes, your Honor .
18 THE COURT: Because t hey wi l l have t o do a l i t t l e
19 f l i ppi ng back and f or t h.
21 THE COURT: What page of 22 i s t hi s?
22 MR. EVERDELL: I t ' s 3.
23 THE COURT: Page 3.
24 DEPUTY COURT CLERK: 22, page 3.
( 212) 805- 0300
308
1 BY MR. EVERDELL:
2 Q. Al l r i ght . Ms. Snowden, you ment i oned a f ew cat egor i es
3 wher e t her e wer e some shi f t s. Do you want t o j ust gi ve an
4 exampl e t hat we can hi ghl i ght her e?
5 A. On t he f i r st document dat ed 9/ 20/ 01.
6 Q. Gover nment ' s 14?
7 A. Yes, per sonnel sal ar i es was $375, 000.
8 Q. I s t hat t hi s one r i ght her e?
9 A. Yes. On t he r evi sed budget i t went t o $325, 000.
10 Q. Ri ght t her e? I f you l ook at t he scr een. I j ust want t o
11 make sur e I ' mmar ki ng t he r i ght t hi ng.
12 A. Yes.
13 Q. OK. Hol d on.
14 I f you can j ust bl ow up t he f i r st f our cat egor i es.
15 Q. So we di d per sonnel sal ar i es and wages. Can you gi ve us
16 anot her exampl e?
17 A. Tr avel or i gi nal l y was $4, 000.
18 Q. Ri ght her e?
19 A. Yes.
20 Q. OK.
21 A. Cat egor y C, on t he or i gi nal budget . And on t he r evi sed
22 budget i t i s now $20, 000 cat egor y C.
23 Q. Ri ght t her e?
24 A. Yes.
25 Q. OK, t hat ' s f i ne. Now, as you compar e t hese t wo budget s,
( 212) 805- 0300
309
1 t he appr oved budget wi t h t he f i r st amended budget - -
2 THE COURT: Now j ust one second. Al so you ski pped
3 over f r i nge benef i t s. Was t her e a change i n f r i nge benef i t s?
4 THE WI TNESS: Ther e' s qui t e a f ew changes. I onl y
5 gave you guys a coupl e. Ther e ar e a l ot of changes. I di dn' t
6 t hi nk you want ed ever y l ast one of t hem.
7 Q. Woul d you mi nd doi ng f r i nge benef i t s?
8 A. Sur e. Fr i nge benef i t s was or i gi nal l y $127, 500 on t he
9 or i gi nal appr oved budget . The r evi sed appr oved budget i t went
10 down t o $110, 500.
11 Q. Now, l ooki ng at t he r evi sed budget amendment 2 compar ed t o
12 t he l ast appr oved budget , ar e any of t he changes t hat wer e
13 af f ect ed by t he amended budget - - di d any of t hese changes
14 r el at e t o an i ncr ease f or ai r condi t i oni ng cost ?
15 A. No.
16 Q. Do any of t hese r el at e t o an i ncr ease f or const r uct i on
17 cost s or si t e i mpr ovement cost s?
18 A. No, we don' t pay f or const r uct i on cost s.
19 Q. And di d any of t hese shi f t s - - sor r y. Ar e any of t hese
20 shi f t s f or si t e i mpr ovement cost s?
21 A. No.
22 Q. Act ual l y, i f you coul d al so l ook at t he nar r at i ve whi ch i s
23 page 4 and 5 of Gover nment Exhi bi t 22. Do you see t hat
24 document ?
25 A. Yes.
( 212) 805- 0300
310
1 Q. And do you see - - i f you want t o hi ghl i ght t he bot t omhal f
2 of t hat f i r st page.
3 Do you see wher e i t says r easons f or r equest ed
4 budget ar y changes?
5 A. Yes.
6 Q. Do you see al l t hose r easons l i st ed t her e?
7 A. Yes.
8 Q. Do any of t hose r easons ment i on ai r condi t i oni ng?
9 A. No.
10 Q. Do any of t hose r easons ment i on const r uct i on cost s?
11 A. No.
12 Q. Do any of t hose r easons ment i on si t e i mpr ovement cost s?
13 A. No.
14 Q. Ms. Snowden, di d NI ST appr ove t hi s amendment ?
15 A. Yes, we di d.
16 Q. Of t he ot her amendment s I showed you i n t hat l i st , 21, 22,
17 23, 24, 25 and 26, ar e t her e any ot her changes t o t he budget
18 number s i n t hose amendment s besi des t he ones we deal t wi t h i n
19 amendment 2?
20 A. No, t hi s was t he onl y appr oved budget .
21 Q. To your knowl edge, wer e any ot her wr i t t en amendment s i n t he
22 CASI gr ant appr oved by NI ST ot her t han t hese document s I showed
23 you?
24 A. No, t hi s i s i t .
25 Q. Di d anyone f r omCASI make any or al r equest f or amendment s
( 212) 805- 0300
311
1 t o t he gr ant ?
2 A. Yes.
3 Q. And who made t hose r equest s?
4 A. Dr . Kar r on.
5 Q. What di d he want t o modi f y wi t h t hese r equest s?
6 A. He want ed t o modi f y t he equi pment cat egor y.
7 Q. And how so?
8 A. He want ed t o add money t o t he equi pment cat egor y t o buy a
9 pi ece of equi pment .
10 Q. And di d you have any conver sat i ons wi t h t he def endant about
11 t hi s?
12 A. Yes.
13 Q. About what t i me was t he f i r st conver sat i on you had wi t h t he
14 def endant about t hat ?
15 A. November 2002.
16 THE COURT: November 2002.
18 THE COURT: Af t er t he end of t he f i r st f i scal year ?
19 THE WI TNESS: The f i r st f i scal year ended Sept ember
20 30, r i ght . Thi s shoul d have been hi s si t e vi si t , yes.
21 Q. You r ef er enced t he si t e vi si t . Do you know about when t he
22 si t e vi si t occur r ed?
23 A. I t was November 2002.
24 Q. Wer e you per sonal l y at t he si t e vi si t ?
25 A. No, I wasn' t her e.
( 212) 805- 0300
312
1 Q. But i t t hi s ar ound t he t i me when you had t hese
2 conver sat i ons wi t h t he def endant about equi pment ?
3 A. Yes.
4 Q. On how many ot her occasi ons di d t hi s same t opi c of
5 equi pment come up?
6 A. Qui t e a f ew t i mes.
7 Q. What ar e t he ATP r ul es about equi pment af t er t he gr ant i s
8 done usi ng t he equi pment ?
9 A. The r ul es gover ni ng equi pment i s anyt hi ng t hat ' s val ued at
10 $5, 000 or mor e you have t o do what ' s cal l ed a di sposi t i on f or m,
11 so t hat ' s al l equi pment t hat you own. You have t o ask t he
12 f eder al gover nment can you ei t her keep i t and r euse i t f or
13 anot her f eder al gr ant or can you use i t f or commer ci al i zat i on.
14 And t he f eder al gover nment has a r i ght t o say yes or no. And
15 i f t hey say no, you have t o gi ve us back our equi pment .
16 Anyt hi ng under $5, 000 t hat depr eci at es you can keep i t , we
17 don' t want i t back.
18 THE COURT: You can keep i t , you mean t he gr ant ee.
19 THE WI TNESS: The gr ant ee can keep i t , and t he f eder al
20 gover nment , t hey don' t want i t back.
21 Q. Al l r i ght . Now when t he def endant t al ked t o you about
22 buyi ng mor e equi pment , what i f anyt hi ng di d you t el l hi m?
23 A. Af t er hi s si t e vi si t , si nce t her e was t al k about t hi s pi ece
24 of equi pment , I t ol d hi mt hat he had t o do a r evi sed budget
25 because he want ed t o add addi t i onal money t o t he cat egor y, t o
( 212) 805- 0300
313
1 t he equi pment cat egor y, so he needed t o r evi se t he budget , send
2 me a copy of t he budget and a nar r at i ve t hat cor r esponds wi t h
3 t he budget .
4 Q. And di d t he def endant i n f act submi t a pr oposed r evi sed
5 budget t o you?
6 A. Yes, he di d.
7 Q. I ' mshowi ng you, i f you coul d t ake a l ook at Gover nment ' s
8 Exhi bi t s 31, 32, 33, 34, 35 and 36 al r eady i n evi dence.
9 THE COURT: Sor r y. Gi ve me t hose number s agai n.
10 MR. EVERDELL: Sur e. 31, 32 - -
11 THE COURT: 31 t hr ough 36?
12 MR. EVERDELL: Yes.
14 Q. Ms. Snowden, i f you woul d j ust t ake a mi nut e t o l ook
15 t hr ough t hose. Do you have t hose i n f r ont of you?
16 A. Yeah, I j ust want t o l ook at t wo mor e. I have t wo mor e I
17 want t o gl ance at r eal l y qui ckl y. Thanks.
18 Q. Al l set wi t h t hose?
19 A. Yes.
20 Q. Do you know what t hose document s ar e?
21 A. These ar e r evi sed budget s.
22 Q. Ar e t hese r evi sed budget s t hat wer e submi t t ed by CASI ?
23 A. Yes.
24 Q. And what i f anyt hi ng - - di d you r ecei ve t hese budget
25 r equest s?
( 212) 805- 0300
314
1 A. Yes, I di d.
2 Q. And di d you r evi ew t hemwhen t hey came i n?
3 A. Yes, I r evi ewed each and ever y one of t hem.
4 Q. And what i f anyt hi ng di d you not i ce when you began
5 r ecei vi ng t hese amendment s?
6 A. I not i ced t hat t he number s changed. Number one, t he dat es
7 wer e ver y, ver y cl ose wi t h t he r evi si ons, and on each r evi si on
8 t he monet ar y, t he cat egor y, t he number s changed.
9 Q. Let ' s j ust be cl ear . Do you know t he dat es of t hese
10 r evi si ons, t hese pr oposed r evi si ons, I shoul d say?
11 A. Yes, because I wr ot e t he dat es on t hemso t hat I coul d keep
12 up wi t h t he r evi si ons and t he day t hat t hey wer e dat ed, so I
13 wr ot e dat es on al l of t hese.
14 Q. And do you r ecal l when t hose r evi si ons wer e made or when
15 t hose pr oposed r evi si ons wer e submi t t ed?
16 A. One was August 1, 2002 and t hen - -
17 Q. You' r e r ef er r i ng t o whi ch one?
18 A. Exhi bi t 31.
19 Q. OK.
20 A. And t hen Oct ober 20, 2002, Exhi bi t 32. December 2, 2002,
21 Exhi bi t 33. Got an e- mai l f or December 20, 2002, t hat ' s
22 Exhi bi t 34. Exhi bi t 35 came i n f our days l at er . Exhi bi t 35
23 was dat ed December 24, 2002. And Febr uar y 25, 2003, t hat was
24 anot her r evi si on.
( 212) 805- 0300
315
, 864ZKAR2at i onu Snowden - di r ect
1 BY MR. EVERDELL:
2 Q. And t hese ar e pr oposed r evi si ons?
3 A. These ar e al l pr oposed r evi si ons. None of t hese wer e
4 appr oved.
5 Q. Why di d t hey come i n i n qui ck successi on l i ke t hi s?
8 MR. EVERDELL: Your Honor , l et me r ephr ase.
9 Q. What , i f any, di scussi ons di d you have wi t h t he def endant
10 about t hese budget r evi si ons comi ng i n?
11 A. Um, pol i cy - - what I do i s I t ake, I wi l l t ake t hi s
12 r evi si on and I wi l l cor r espond i t t o t he appr oved budget . So
13 t hen I have quest i ons because t her e ar e ot her changes i n t he
14 cat egor i es besi de t he cat egor y t hat he want ed t o change.
15 Q. Whi ch cat egor y was t hat ?
16 A. He want ed t o change t he equi pment cat egor y. That ' s wher e
17 he was addi ng money.
18 Q. And what di d you not i ce about t hese r evi sed budget s, asi de
19 f r omt he equi pment cat egor y?
20 A. That per sonnel changed, mat er i al s and suppl i es changed
21 acr oss, acr oss t he boar d. They came i n f r equent l y, and al l t he
22 number s wer e changi ng, and i n each of t he cat egor i es none of
23 t hemwer e consi st ent .
24 Q. And - -
25 THE COURT: These r el at e t o t he f i r st year ?
( 212) 805- 0300
316
1 THE WI TNESS: What happened was he asked f or - -
2 THE COURT: Whi ch, do t hey r el at e t o t he f i r st year or
3 not ?
4 THE WI TNESS: The f i r st budget was wi t hi n t he f i r st
5 year . That ' s - - so i t was, i t was i n t he per i od.
6 And t hen when I asked quest i ons and he sent anot her
7 budget i n, t hat came i n Oct ober 20t h, so i t cr ossed - - so i t
8 came wi t hi n year t wo.
9 THE COURT: But al l t hese changes r el at e t o f i r st year
10 expenses?
11 THE WI TNESS: Let me l ook. No. He changed some of
12 t he out year s t wo t oo, so i t wasn' t j ust f i r st year . He
13 changed - - i f you l ook at even August 1st , exhi bi t 31, and you
14 can l ook at t he second one, exhi bi t 32, l ook at year t wo, t wo
15 changed, and t he change was onl y r eal l y supposed t o be i n year
16 one, but some of t he number s i n year t wo al so changed.
19 Q. Al l r i ght . So j ust so we can cl ar i f y t hat , Ms. Snowden,
20 t hat f i r st r equest ed amendment t hat came i n, was t hat - - di d
21 t hat - - was t hat submi t t ed when t he gr ant was st i l l i n your
22 year one or was i n year t wo at t hat poi nt ?
23 A. Thi s i s year one.
24 Q. And i n t he subsequent r equest f or amendi ng t he budget , what
25 year of t he gr ant di d t hose get submi t t ed i n?
( 212) 805- 0300
317
1 A. Year t wo, ' cause year t wo st ar t ed Oct ober 1st , 2002.
2 Q. And what , i f anyt hi ng, di d you not i ce about t hese budget ,
3 r equest ed budget amendment s t hat came i n whi l e t he gr ant was i n
4 year t wo?
5 A. Not onl y wer e t he number s changi ng, but once you get i n
6 year t wo, you shoul d have act ual cost s f or year one.
7 Q. Why shoul d you have act ual cost s f or year one?
8 A. Because year one i s over and ever yt hi ng shoul d be act ual ,
9 because you' r e goi ng t o be r equi r ed t o get an audi t , and your
10 audi t ed agai nst act ual number s f or t hat f i r st year . So we' r e
11 wel l i nt o year t wo, so year one and year t wo i s changi ng,
12 f r equent l y.
13 Q. Al l r i ght . Wel l , l et ' s - - l et me ask you t hi s bef or e we
14 get t o t hat . Di d you appr ove any of t hese pr oposed budget
15 amendment s?
16 A. No.
17 Q. I f we coul d t ake a l ook at gover nment exhi bi t 33, page one,
18 and Gover nment ' s exhi bi t 34 page t wo, al l r i ght . So 33 i s up
19 on t he l ef t - hand si de of t he scr een, 34 i s on t he r i ght - hand
20 si de of t he scr een. You can use t he ones i n f r ont of you.
21 Whi ch - - t he Gover nment ' s 33 i s, was submi t t ed on what dat e?
22 A. 33, um, December 2nd, 2002.
23 Q. And i s t hat i n year one of t he gr ant or year t wo of t he
24 gr ant when t hat was submi t t ed?
25 A. Year t wo.
( 212) 805- 0300
318
1 Q. And Gover nment ' s exhi bi t 34 was submi t t ed on what dat e?
2 A. December 20t h, 2002.
3 Q. I s t hat year one of t he gr ant or year t wo of t he gr ant when
4 t hat was submi t t ed?
5 A. Year t wo.
6 Q. Bot h i n year t wo?
7 A. Yes.
8 Q. Okay. I want t o l ook at t he year one number s her e as a
9 exampl e of what you wer e t al ki ng about bef or e. You ment i oned
10 bef or e t he year one act ual s wer e changi ng, i s t hat r i ght ?
11 A. Yes.
12 Q. Can you show us on t hi s document an exampl e of what you
13 mean by t he year one number s changi ng?
14 A. Let ' s see. You can go - - we can j ust go r i ght ont o - - we
15 go t o f r i nge benef i t s. Fr i nge benef i t s on document one was
16 109, 700. On exhi bi t number 34 i t ' s 11 - - i t ' s 112, 565.
17 Q. So what ' s t he di f f er ence t hei r bet ween t he t wo?
18 A. That di f f er ence was l i ke a l i t t l e over $3, 000. I t wasn' t
19 ver y bi g. But keep on goi ng.
20 Q. What ot her cat egor i es do you not i ce her e?
21 A. You got t r avel changed, or i gi nal t r avel . The t r avel t hat
22 was pr oposed i n t he f i r st budget was 10, 800, and t hen wi t hi n a
23 coupl e weeks l at er t he number s changed t o 19, 920, wi t h a
24 di f f er ence of , wel l , $9, 000.
25 Q. Okay. Mat er i al ?
( 212) 805- 0300
319
1 A. Mat er i al and suppl y i s anot her budget .
2 Q. Okay. What l i ne i s t hat ?
3 A. Sor r y about t hat . That ' s E.
4 Q. Okay.
5 A. I t was $35, 000 i n t he f i r st pr oposed r evi sed budget .
6 Coupl e weeks l at er t he number changed t i l l 22, 449.
7 Q. What ' s t he di f f er ence t hei r , r oughl y?
8 A. Pr obabl y about a l i t t l e over $10, 000.
9 Q. And agai n ar e t hese year one number s or year t wo number s
10 t hat you' r e t al ki ng about t her e?
11 A. These ar e al l year one number s, and t hi s i s i n December of
12 t wo - - December of t he second year . So t hi s, t hese shoul d be
13 consi st ent . They shoul d never change. You shoul d have act ual
14 number s.
15 Q. And what , i f anyt hi ng, di d t hese shi f t i ng number s i n t he
16 year one number s i ndi cat e t o you?
17 A. That t her e i s some pr obl ems, t her e was a r ed f l ag t o me
18 t her e coul d be some i ssues of appr opr i at i ons of t hese f unds;
19 t her ef or e, I t al ked t o my t eamand my super vi sor about t hese
20 i ssues.
21 Q. And what di d you t al k about ?
23 THE COURT: I ' msor r y? We can' t get i nt o t he, what
24 t he super vi sor s t ol d her .
25 Q. Al l r i ght . Ms. Snowden, di d you have a di scussi on wi t h
( 212) 805- 0300
320
1 your super vi sor s?
2 THE COURT: For t he t r ut h of t he st at ement , you can' t
3 of f er i t f or t hat .
4 MR. EVERDELL: J ust si mpl y t o show t he f ur t her act i ons
5 t hat happened l at er .
7 Q. Ms. Snowden, di d you have conver sat i ons wi t h your
8 super vi sor s about t hi s?
9 A. Yes.
10 Q. And what , i f any, act i on l at er di d you t ake as a r esul t of
11 t hese conver sat i ons wi t h your super vi sor s?
12 A. We cal l ed t he Of f i ce of I nspect or Gener al and r equest ed
13 t hemt o go t o CASI and check out t hei r account i ng pr act i ces and
14 pr ocedur es.
15 Q. And how wer e t hey goi ng t o do t hat , how wer e you goi ng t o
16 do t hat or have t hat done?
17 A. We made a phone cal l , we sent t heman of f i ci al document and
18 t hey go out , t hey went out t o check on t he books.
19 Q. Who i s t hey?
20 A. The Of f i ce of I nspect or Gener al , whi ch we consi der t he OI G,
21 t he OI G went out t her e.
22 Q. And i f you coul d l ook now at gover nment ' s exhi bi t 30, whi ch
23 i s al r eady i n evi dence.
24 THE COURT: Exhi bi t what ?
25 THE DEPUTY CLERK: 30.
( 212) 805- 0300
321
1 MR. EVERDELL: 30.
2 A. Okay.
3 Q. Bl owup t he t ext of t hat l et t er . Ms. Snowden, do you see
4 t hat exhi bi t i n f r ont of you?
5 A. Yes, I do.
7 A. Yes, I do.
9 A. Thi s i s an or i gi nal r equest f or t he OI G, Of f i ce of
10 I nspect or Gener al , t o go t o t he company CASI and do an audi t
11 r evi ew.
12 Q. And what i s t he r eason f or t he audi t ?
13 A. Because t he number s wer e f l uct uat i ng and t hey wer e
14 f l uct uat i ng qui t e f r equent l y wi t hi n weeks of each ot her , as a
15 gr ant speci al i st and my anal ysi s t hat t her e, t her e coul d be
16 some mi sappr opr i at i ons and some somebody needed t o check i t
17 out .
18 Q. What , i f any, audi t i ng r equi r ement was i n pl ace f or
19 compani es r ecei vi ng ATP gr ant s al r eady?
20 A. ATP gr ant s, dependi ng on how many year s you have - - t hi s
21 gr ant was a t hr ee year gr ant , you' r e r equi r ed t o have an audi t
22 90 days af t er t he f i r st year and wi t hi n 90 days of t he f i nal
23 year .
24 Q. And what was your under st andi ng as t o whet her or not
25 CASI ' s, CASI was al r eady havi ng t hat audi t at t he t i me?
( 212) 805- 0300
322
1 A. My under st andi ng i s t hat t hey wer e al r eady - - t hey had
2 al r eady got t en an i ndependent CPA and t hey wer e al r eady - - t hey
3 had audi t i n pr ocess.
4 Q. So why was i t necessar y t o have t he I nspect or Gener al ' s
5 Of f i ce do an audi t when an i ndependent of f i cer , audi t or had
6 al r eady been hi r ed f or t hat pur pose?
7 MR. RUBI NSTEI N: Obj ect i on t o t he why quest i on, your
8 Honor .
10 Q. Do you know t he r esul t of t he I nspect or Gener al ' s audi t ?
11 A. Yes.
13 THE COURT: Obj ect i on sust ai ned. You can answer yes
14 or no, but you can' t go i nt o t he - -
15 THE WI TNESS: Okay, yes.
16 Q. Al l r i ght . Ms. Snowden, ar e you f ami l i ar wi t h someone
17 named Bob Benedi ct ?
18 A. Yes.
19 Q. Who i s he?
20 A. When Lee Gur f ei n l ef t t he company, Bob Benedi ct was
21 pr oposed t o be - - t her e was a pr oposal t hat he woul d ent er t he
22 company as an admi ni st r at i ve cont act f or CASI .
23 So I r ecei ved a l et t er f r omDr . Kar r on sayi ng t hat he
24 was goi ng t o be t he new admi ni st r at i ve cont act .
25 Q. Di d he, i n f act , become t he admi ni st r at i ve cont act at CASI ?
( 212) 805- 0300
323
1 A. He became t he admi ni st r at i ve cont act at CASI f or CASI , but
2 not under t hi s gr ant .
3 Q. The l et t er t hat you ment i oned wer e, what i s t hat l et t er
4 f r omDr . Kar r on aski ng?
5 A. The l et t er was - - t he l et t er was j ust sayi ng t hat t hey had
6 t hat I guess Lee Gur f ei n had l ef t t he company and t hat t hey
7 wer e - - t hey - - t hat he was goi ng t o - - he was hi r i ng somebody
8 el se t o do t he admi ni st r at i ve wor k.
9 Q. And you sai d t hat t hi s new per son, Bob Benedi ct , was not ,
10 i n f act , appr oved as - - by t he ATP peopl e as t he admi ni st r at i ve
11 cont act ; i s t hat r i ght ?
12 A. No.
13 Q. Why was he not appr oved?
14 THE COURT: I ' msor r y, whose appr oval was r equi r ed?
15 Q. Ms. Snowden, whose appr oval i s r equi r ed f or t hese sor t s of
16 changes?
17 A. For anybody t hat ' s goi ng t o be i nvol ved i n t he ATP gr ant s,
18 ATP, we have t o - - t he gr ant of f i cer has t o appr ove i t . He can
19 have anybody i n hi s company do any wor k wi t hi n hi s company, but
20 not on t he gr ant by t he f eder al gover nment , unl ess t he f eder al
21 gover nment appr oves i t .
23 THE WI TNESS: He' s a commer ci al company. He can do
24 what ever he want s.
25 Q. So why was, why was Mr . Benedi ct not appr oved as t he
( 212) 805- 0300
324
1 admi ni st r at i ve cont act ?
2 A. Because he was pr oposed i n one of t he budget s t hat we' ve
3 seen al l t hese exhi bi t s, but t he budget s wer e never appr oved,
4 so he was never appr oved.
5 Q. And why wer e t hese budget s never appr oved?
6 A. Because t he f r equent changes and - - because of t he f r equent
7 changes, and t hat I had t o send t he OI G out t o l ook at t he
8 books so we coul d - - I never appr oved hi mbecause t hey wer e
9 f l uct uat i ng t oo much.
10 Q. And ar e you abl e t o appr ove budget amendment s or r equest ed
11 budget amendment s t hat ar e submi t t ed by an unappr oved cont act ?
12 A. No.
13 Q. Al l r i ght . One moment .
14 Al l r i ght . Ms. Snowden, I ' ve handed up t o you a bunch
15 of document s. Fi r st I ' d l i ke you t o t ake a l ook at
16 Gover nment ' s, what ' s been mar ked as i dent i f i cat i on as
17 Gover nment ' s exhi bi t 47. Do you see t hat document Ms. Snowden?
18 A. Yes, I do.
20 A. Yes, I do.
21 Q. And how ar e you abl e t o r ecogni ze t he document ?
22 A. Because i t was sent t o me.
23 Q. And what i s t he document ?
24 A. The document i s an e- mai l t o mysel f .
25 Q. Fr omwho?
( 212) 805- 0300
325
1 A. Fr omDr . D. B. Kar r on.
2 MR. EVERDELL: Gover nment of f er s Gover nment ' s exhi bi t
3 47?
4 THE COURT: What i s t hi s document t hat ' s E- mai l ed t o
5 you?
6 THE WI TNESS: Thi s document i s t he e- mai l t o me wi t h
7 at t achment s, and at t achment s ar e r evi sed f i nanci al st at us
8 r epor t s. So i t ' s j ust expl ai ni ng t hat t hese ar e r evi sed.
9 THE COURT: When was i t e- mai l ed t o you?
10 THE WI TNESS: Sept ember 2nd, 2003.
12 MR. RUBI NSTEI N: None.
13 THE COURT: 47 i s admi t t ed i n evi dence t hen.
15 Q. I f we can di spl ay i t , pl ease. I f we can hi ghl i ght j ust t he
16 bot t ompor t i on of t he e- mai l .
17 Okay, Ms. Snowden, can you j ust t el l us what t hi s
18 e- mai l says?
19 A. I t says t hat at t ached ar e r evi sed, ar e r evi sed f i nanci al - -
20 i t says 269s, and t hat ' s j ust t he document - - t hat ' s t he number
21 t hat t he f eder al gover nment gi ves t he document . I t ' s a
22 f i nanci al st at us r epor t s.
23 Q. Thi s i s wher e i t says 269?
24 A. Yes, as r evi sed by our pr oj ect manager , Mr . Bob Benedi ct .
25 Q. And does e- mai l say why t hese ar e bei ng submi t t ed?
( 212) 805- 0300
326
1 A. They sai d t hese r evi si ons r ef l ect changes i n our books made
2 by our account ant and audi t or J oan Hayes, CPA. I t says - -
3 Q. And what ' s t he dat e of t hi s e- mai l agai n?
4 A. Sept ember 2nd, 2003.
5 Q. Now you sai d t hese 269s you r ef er r ed t o, t hey' r e r evi sed
6 f i nanci al st at us r epor t s, i s t hat r i ght ?
7 A. Yes.
8 Q. Okay. What i s a f i nanci al st at us r epor t ?
9 A. A f i nanci al st at us r epor t i s - - t hi s i s how we keep up wi t h
10 t he spendi ng of gr ant s. So t he r epor t i s on a quar t er l y basi s.
11 An exampl e, cal endar quar t er l i ke J anuar y t hr ough Mar ch, t hat
12 shows t he t ot al out l ays, t hat ' s t he t ot al amount t hat t hey
13 spent dur i ng t hat quar t er .
14 I t al so shows what t he f eder al gover nment i s goi ng
15 t o - - what t hei r por t i on of t he f unds i s and what t he
16 r eci pi ent ' s por t i on of t he f unds i s, so i t gi ves me a pi ct ur e.
17 And I amabl e t o l ook at t hat and l ook at a dr awdown, i t ' s
18 cal l ed l i ke - - i t ' s ASAP, so i t ' s anot her r epor t so I can see
19 t he money t hat was dr awn down by t he gr ant ee, t he r eci pi ent . I
20 cor r espond j ust t o make sur e t hat t hey' r e t aki ng money out at
21 t he appr opr i at e r at e, t hey' r e al so i ncor por at i ng t hei r cost
22 shar e and t hey' r e not t aki ng t oo much of t he f eder al
23 Gover nment ' s por t i on of t he f unds. So ever yt hi ng has t o
24 bal ance out . So t hi s i s why I do my budget anal ysi s.
25 Q. And why does NI ST r equi r e t hese r epor t s?
( 212) 805- 0300
327
1 A. To make sur e t hat t he f eder al f unds ar e bei ng appr opr i at ed
2 accor di ng t o t he appr oved r evi sed budget , or t he appr oved
3 budget , per i od; make sur e t hat i t ' s appr opr i at e.
4 Q. And at t he t i me t hese e- mai l r evi sed f i nanci al r epor t s wer e
5 sent , what was t he st at us of t he gr ant ?
6 A. The gr ant had been suspended.
7 Q. I f you coul d t ake a l ook now at gover nment what ' s been
8 mar ked f or i dent i f i cat i on as Gover nment ' s exhi bi t s 40A, 41A,
9 42A, 43A, 44, 45, and 46.
10 THE COURT: These ar en' t admi t t ed i n evi dence yet , Mr .
11 Ever del l .
12 MR. EVERDELL: No, t hey' r e not . I ' mj ust aski ng her
13 t o l ook at t hemf or t he pur poses of admi t t i ng t hem. I ' msor r y,
14 t he j ur y - -
15 THE COURT: The j ur y i s j ur i st not t o l ook at t hese.
16 I t st ar t ed wi t h 40A?
17 MR. EVERDELL: St ar t i ng at 40A, 41A, 42A, 43A, 44, 45,
18 and 46.
19 THE COURT: Don' t l ook at t hose document s unt i l
20 t hey' ve been admi t t ed i n evi dence.
21 Q. Do you see t hose document s, Ms. Snowden?
22 A. Yes. I want t o l ook at one mor e, one mor e I have t o get
23 t hr ough one mor e.
24 Q. Sur e.
25 A. Okay.
( 212) 805- 0300
328
2 A. Yes.
3 Q. What ar e t hose document s?
4 A. These ar e f i nanci al st at us r epor t s.
5 Q. Ar e t hose or i gi nal f i nanci al st at us r epor t s or ar e t hey
6 r evi sed st at us r epor t s?
7 A. They' r e bot h, t hey' r e bot h.
8 Q. Looki ng at t he A' S onl y?
9 A. Yes.
10 Q. 40A, 41A, 42A, 43A - - act ual l y, I ' l l t el l you what , l ook
11 al so at Gover nment ' s exhi bi t s mar ked f or i dent i f i cat i on as
12 Gover nment ' s exhi bi t s 40, 41, 42 and 43, i f you can add t hose
13 t o your st ack.
14 THE COURT: What number s ar e t hose?
15 MR. EVERDELL: 40, 41, 42, and 43.
16 A. Okay.
17 Q. Okay. Let ' s j ust do t hemi ndi vi dual l y, f i r st st ar t i ng
18 f i r st wi t h Gover nment ' s exhi bi t 40. Do you r ecogni ze t hat
19 document ?
20 A. Yes.
21 Q. Okay. What i s t hat document ?
22 A. Thi s i s a f i nanci al st at us r epor t .
23 Q. What quar t er does t hat cover , t hat f i nanci al st at us r epor t ?
24 A. Bl ock ni ne gi ves you t he per i od cover ed, and i t ' s cover ed
25 f r omOct ober 1st , 2001 t hr ough December 31st , 2001. So i t ' s
( 212) 805- 0300
329
1 t he f i r st quar t er of t he awar d.
2 Q. Okay. And t hen l ooki ng at 40A now?
3 A. Okay.
5 A. Yes.
6 Q. Okay. What i s t hat document ?
7 A. Thi s i s a r evi si on t o t hat f i r st - - t o t he or i gi nal
8 f i nanci al st at us r epor t .
9 Q. And - -
10 THE COURT: Gover nment 40?
11 A. For t he same exact same per i od Oct ober 1st , 2000 - - I ' m
12 l ooki ng at t he wr ong one. I shoul d be l ooki ng - - f or t he exact
13 per i od, Oct ober 1st , 2001 t hr ough December 31st , 2001.
14 Q. So j ust t o be cl ear , 40 i s t he or i gi nal of 40A i s t he
15 r evi si on?
16 A. Exact l y.
17 Q. And t hey cover t he same quar t er ?
18 A. Yes, t hey do.
19 Q. Okay. And l ooki ng now at 41 ver sus 41A?
20 A. Okay, I have i t .
21 Q. Okay. Do you r ecogni ze t hose document s?
22 A. Yes.
23 Q. Okay. And what ar e t hey?
24 A. These ar e - - i t ' s a r evi si on.
25 Q. Whi ch quar t er do t hose r epor t s cover ?
( 212) 805- 0300
330
1 A. I t cover s t he second.
2 THE COURT: Whi ch one ar e we l ooki ng at now?
3 MR. EVERDELL: 41A.
4 THE COURT: Whi ch ar e we l ooki ng at 41 or 41A?
5 MR. EVERDELL: Sor r y, your Honor - -
6 Q. Sor r y. Ms. Snowden, l ook at 41 f i r st .
7 A. Yes.
8 Q. Do you see t hat document ?
9 A. Yes.
10 Q. And do you r ecogni ze i t ?
11 A. Yes, I do.
12 Q. What quar t er does t hat document cover ?
13 A. I t ' s suppose - - i t cover s t he second quar t er , al t hough he
14 has t he per i od of per f or mance t he f i r st .
15 THE COURT: I s t hi s t he or i gi nal ?
16 THE WI TNESS: The second quar t er , yes, i t cover s t he
17 second quar t er because i t ends Mar ch 31st , 2002, so i t cover s
18 t he second quar t er of t he awar d.
19 Q. I s t hat t he or i gi nal r epor t or i s t hat t he r evi sed r epor t ?
20 A. 41 i s t he or i gi nal . 41A i s t he r evi sed r epor t .
21 Q. Does 41A cover t he same t i me per i od as 41?
23 Q. And i f you coul d l ook now at 42, and 42A. Do you see t hese
24 document s?
25 A. Yes.
( 212) 805- 0300
331
2 A. Yes.
3 Q. Looki ng f i r st at 42, what per i od does t hat f i nanci al r epor t
4 cover ?
5 A. I t cover s t he second quar t er .
6 THE COURT: Second quar t er of what year ?
7 THE WI TNESS: Of - -
8 THE COURT: Of what year ?
9 THE WI TNESS: Of 2002.
10 THE COURT: So i t cover s f r omf our - -
11 THE WI TNESS: Apr i l 1st , 2002 unt i l J une 30t h, 2002.
12 Q. So i s t hat t he next quar t er af t er t he ones you j ust l ooked
13 at bef or e?
15 Q. And i s 42 t he or i gi nal or t he r evi sed f i nanci al r epor t ?
16 A. Or i gi nal .
17 Q. And what about 42A?
18 A. Revi sed document .
19 Q. And 42A cover t he same per i od as 42?
20 A. Yes.
21 Q. Movi ng t o 43 and 43A.
22 A. Yes.
23 Q. Do you r ecogni ze t hem?
24 A. Yes.
25 Q. Looki ng at 43, what per i od does t hat cover f or t hi s
( 212) 805- 0300
332
1 f i nanci al r epor t ?
2 A. The t hi r d quar t er of 2002 bei ng J ul y 1st , 2002, t hr ough
3 Sept ember 30t h, 2002.
4 Q. I s t hat t he next quar t er af t er 40 - - t he exhi bi t s 42 and
5 42A t hat we l ooked at bef or e?
6 A. Yes.
7 Q. I s 43 t he or i gi nal or t he r evi sed?
8 A. 43 i s t he or i gi nal .
9 Q. And 43A, i s t hat t he or i gi nal or t he r evi sed?
10 A. Revi sed.
11 Q. Does 43A cover t he same per i od as 43?
12 A. Yes.
13 Q. Now, i f you coul d l ook si mul t aneousl y at 44, 45 and 46.
14 THE COURT: Have you of f er ed anyt hi ng i n evi dence?
15 MR. KWOK: I ' mt r yi ng t o do t hat i n a mi nut e.
16 Q. Thi s i s our l ast t hr ee, I bel i eve. Ms. Snowden, i f you
17 coul d l ook f i r st at 44?
18 A. Yes.
19 Q. What per i od does t hat cor r espond?
20 A. Oct ober 1st , 2002. So t hi s i s t he f our t h quar t er of 2002
21 t hr ough December 31st , 2002.
22 Q. And what about 45?
23 A. 45 cover s t he f i r st quar t er of 2003 J anuar y, J anuar y 1st
24 2003 t hr ough Mar ch 31st , 2003.
25 Q. And 46?
( 212) 805- 0300
333
1 A. 46 i s a second quar t er 2003 cover i ng Apr i l 1st , 2003
2 t hr ough J une 30t h, 2003.
3 Q. Do you r ecogni ze al l t hese document s?
4 A. Yes.
5 Q. And di d you r evi ew al l t hese document s when t hey came i n?
6 A. Yes, I di d.
7 MR. EVERDELL: Your Honor , t he gover nment moves
8 Gover nment ' s exhi bi t s 40, 40A, 41, 41A, 42, 42A, 43, 43A, 44,
9 45 and 46 i n evi dence.
10 THE COURT: Exhi bi t s 40 and 40A, 41, and 41A, 42, and
11 42A, 43, and 43A and exhi bi t s 44, 45, 46 ar e admi t t ed i n
12 evi dence.
13 ( Gover nment ' s Exhi bi t s 40, 40A, 41, 41A, 42, 42A, 43,
14 43A, 44, 45 and 46 r ecei ved i n evi dence)
15 Q. Okay. Let ' s l ook at , i f we can put si de by si de,
16 Gover nment ' s exhi bi t s 40 and 40A. Put t hose up on t he scr een.
17 THE COURT: What page or - -
18 MR. EVERDELL: They' r e one page.
19 THE COURT: One page document s? Al l r i ght .
20 Q. I t may i n f act be a l i t t l e di f f i cul t t o r ead t hemf r omt he
21 scr een so I wi l l do my best t o poi nt t hemt o t he r el evant
22 sect i ons.
23 But l et ' s l ook at t hese document s, Ms. Snowden.
24 Looki ng f i r st at Gover nment ' s exhi bi t 40, whi ch t i me per i od
25 does t hi s cover agai n?
( 212) 805- 0300
334
1 A. I t cover s t he f our t h quar t er of 2001, Oct ober 1st , 2001
2 t hr ough December 31st , 2001.
3 Q. I s t hat t he f i r st quar t er of t he awar d?
4 A. That ' s t he f i r st quar t er of t he awar d.
5 Q. And i s t hi s Gover nment ' s exhi bi t 40 t he or i gi nal or t he
6 r evi sed ver si on of t he pl an?
7 A. I t ' s t he or i gi nal .
8 Q. Looki ng at f i r st at t he l i ne I , see t hat , l i ne I ?
9 A. Yes.
10 Q. I t says, t ot al r eci pi ent shar e of net out l ays?
11 A. Yes.
12 Q. What does t hat col umn mean?
13 A. That ' s r eci pi ent , t hat ' s t he non- f eder al cost shar e of , f or
14 t hi s pr oj ect .
15 Q. So t hat ' s t he cost shar e?
16 A. Yes.
17 Q. And what i s t he cost shar e agai n?
18 A. The cost shar e i s t he por t i on of t he, of t he pr oj ect t hat
19 i s pai d by t he r eci pi ent . The r eci pi ent , i t ' s non- f eder al
20 f unds.
21 Q. Sor r y. And what number appear s t her e f or t he cost shar e
22 amount s i n t he or i gi nal r epor t ?
23 A. $12, 320.
24 Q. Now, i f you l ook at 40A i n t he same l i ne, of l i ne I ?
25 A. Uh- huh.
( 212) 805- 0300
335
1 Q. I s t hat al so t he cost shar e amount t her e?
2 A. Yes.
3 Q. And what number i s r ef l ect ed t her e?
4 A. Zer o.
5 Q. And what does t hat i ndi cat e?
6 A. That t he r eci pi ent di d not pay t he r equi r ed cost shar e.
7 Q. Whose si gnat ur e appear s at t he bot t omof Gover nment ' s 40?
8 A. D. B. Kar r on, Ph. D.
9 Q. And whose si gnat ur e appear s at t he bot t omof 40A?
10 A. D. B. Kar r on, Ph. D.
11 Q. Now, i f you - - we won' t put t hemup on t he scr een, but i f
12 you l ook at 40 ver sus 41A, whi ch you t est i f i ed t o i s t he next
13 quar t er , what , i f anyt hi ng, i s r ef l ect ed - -
14 THE COURT: You l ooked at exhi bi t 41 and 41A.
15 MR. KWOK: I apol ogi ze, your Honor .
16 Q. I f you l ook at exhi bi t 41 and 41A, you don' t need t o put
17 t hemup on t he scr een necessar i l y, but j ust t ake a l ook at
18 t hose.
19 A. Okay.
20 Q. And agai n at l i ne I , i s t hat cost shar e number t her e?
21 A. Yes.
22 Q. And i f you' r e l ooki ng at t he or i gi nal 41, ar e t her e amount s
23 r ef l ect ed i n t hat l i ne?
24 A. Yes.
25 Q. And i f you l ook at t he 41A, t he r evi sed, what number ' s
( 212) 805- 0300
336
1 r ef l ect ed i n t hose boxes on t hat same l i ne?
2 A. Zer o.
3 Q. Does t hat i ndi cat e t he same t hi ng you t est i f i ed bef or e?
4 A. Yes.
5 Q. And what i s t hat ?
6 A. I t i ndi cat es t hat t he or i gi nal showed t hat t he r eci pi ent
7 had i ncor por at ed and pai d i nt o t he pr oj ect hi s cost shar e, and
8 i n t he r evi sed t her e was no cost shar e, no r equi r ed cost shar e
9 pai d, whi ch means you' r e noncompl i ance.
10 Q. And i n t he r emai ni ng exhi bi t s t hat we l ooked at , does t he
11 same phenomenon appear ?
12 A. Consi st ent l y.
13 THE COURT: I ' msor r y, what ?
14 Q. I n t he r emai ni ng - - I ' mj ust t r yi ng t o summar i ze t he
15 r emai ni ng exhi bi t s wi t hout showi ng each of t hem.
16 THE COURT: I t hi nk you want got t o go t hr ough i t .
17 MR. EVERDELL: I ' msor r y, your Honor ?
18 THE COURT: I t hi nk you shoul d go t hr ough 42 and 43.
19 Q. Al l r i ght . I f you coul d t ake out 43 and 43A?
20 A. Okay.
21 Q. Sor r y. 42 and 42A. You have t hose di agr ams, Ms. Snowden?
22 A. Yes.
23 Q. Agai n l ooki ng at t he cost shar e amount i n t he or i gi nal
24 f i nanci al r epor t , i s t her e a cost shar e r epor t ed t her e?
25 A. Yes, i t i s.
( 212) 805- 0300
337
1 Q. I n t he r evi sed 42A, i s t her e a cost shar e r epor t ed?
2 A. No cost shar e r epor t ed.
3 Q. And what ' s t he number t her e?
4 A. Zer o.
5 Q. Fi nal l y l ooki ng at 43 and 43A. Do you have t hose
6 document s, Ms. Snowden?
7 A. Yes, I do.
8 Q. Agai n, l ooki ng at t he cost shar e bal ance i n t he or i gi nal
9 43, i s t her e a cost shar e number r epor t ed t her e?
10 A. Yes, t her e i s.
11 Q. And what does t he r evi sed r epor t r ef l ect ?
12 A. I t shows zer o cost shar e.
13 Q. Thank you. I f you can t ake a l ook at what ' s been mar ked as
14 gover nment exhi bi t 48 mar ked f or i dent i f i cat i on?
15 THE COURT: 48?
16 MR. EVERDELL: 48.
18 THE COURT: Exhi bi t 48 f or i dent i f i cat i on.
19 MR. EVERDELL: Not have i t on t he scr een as of yet .
20 Q. Ms. Snowden, do you see t hat document ?
21 A. Yes.
23 A. Yes.
25 A. I t ' s a l et t er sent t o me on Oct ober - - August 13t h, 2003
( 212) 805- 0300
338
1 f r omRober t Benedi ct .
2 Q. And how do you r ecogni ze i t ?
3 A. ' Cause i t was sent t o mysel f , Hope Snowden.
4 MR. EVERDELL: Your Honor , t he gover nment moves t o
5 admi t Gover nment ' s 48.
6 MR. RUBI NSTEI N: I ' mobj ect i ng t o gover nment exhi bi t
7 48, your Honor .
9 MR. EVERDELL: Your Honor , i f I coul d l ay some
10 f oundat i onal quest i ons?
11 Q. Ms. Snowden, when you r ecei ved t hi s l et t er , what di d you do
12 wi t h t he l et t er ?
13 A. I r evi ewed t he l et t er .
14 Q. Do you keep t hi s l et t er ?
15 A. Yes.
16 Q. And wher e do you keep t he l et t er ?
17 A. Thi s l et t er , al ong wi t h al l ot her document s, ar e kept i n
18 t he or i gi nal awar d f i l e, t he or i gi nal awar d - - t he gr ant f i l e.
19 Q. And wher e i s t hat gr ant s f i l e l ocat ed?
20 A. I n t he gr ant s of f i ce.
21 Q. Now, i t t he r egul ar pr act i ce of your of f i ce t o keep al l
22 cor r espond t hat you r ecei ve, i n t he gr ant s f i l e?
23 A. Yes.
24 Q. And was t hi s document r ecei ved and mai nt ai ned i n t he
25 r egul ar l y conduct ed cour se of busi ness act i vi t y t o keep t hese
( 212) 805- 0300
339
1 r ecor ds?
2 A. Yes.
3 MR. EVERDELL: Your Honor , t he gover nment moves t o
4 admi t Gover nment ' s 48.
6 THE COURT: I s t hi s t he or i gi nal copy you r ecei ved?
7 THE WI TNESS: Yes, t hi s i s.
8 THE COURT: Di d you r ecei ve i t by e- mai l or somet hi ng?
9 THE WI TNESS: No, t hi s, I t hi nk t hi s - - I don' t t hi nk
10 t hi s was r ecei ved by e- mai l t he - - yeah, I t hi nk okay, i t came
11 f r omBob Benedi ct . I don' t r ecal l i f i t was r ecei ved by e- mai l
12 or my by mai l cor r espondence.
13 THE COURT: Wel l , t he i ssue i s whet her you' r e of f er i ng
14 t hi s f or t he t r ut h of t he cont ent s, Mr . Ever del l .
15 MR. EVERDELL: Your Honor , i f I coul d have a moment ?
16 THE COURT: Yes.
17 MR. EVERDELL: Your Honor , we' d l i ke t o of f er t hi s not
18 f or t he t r ut h of t he mat t er cont ai ned i n i t . I n f act , t her e i s
19 cer t ai n st at ement s - - per haps we shoul d have a si debar on t hi s.
20 MR. RUBI NSTEI N: Your Honor , I ' mwi t hdr awi ng, I ' m
21 wi t hdr awi ng my obj ect i on.
22 THE COURT: You' r e wi t hdr awi ng your obj ect i on. Then
23 I ' l l al l ow i t .
24 MR. EVERDELL: Al l r i ght .
( 212) 805- 0300
340
2 MR. EVERDELL: I f we can di spl ay i t on t he scr een.
4 Q. Ms. Snowden, you see t he second par agr aph t her e i t says, we
5 acknowl edge t hat t her e ar e di sal l owed expenses, and t hey do go
6 back t o year one, t hey pr i mar i l y come f r omt wo sour ces; i s t hat
7 r i ght ?
8 A. Yes.
9 Q. What , i f anyt hi ng, di d you do when you r ecei ved t hi s
10 l et t er ?
11 A. I r evi ewed t he l et t er , but I di dn' t r espond t o t hi s l et t er .
12 So i t was r evi ewed by mysel f and my pr oj ect t eam.
13 MR. EVERDELL: One moment .
14 Al l r i ght , your Honor , we' l l move ont o t he next .
15 THE COURT: Thi s l et t er was r ecei ved at or about t he
16 t i me t hat exhi bi t s 40A, 41A, 42A and 43A wer e r ecei ved by your
17 agency?
18 THE WI TNESS: I woul d have t o go back and l ook at t he
19 e- mai l .
20 THE COURT: The r evi sed f i nanci al st at us r epor t s wer e
21 r ecei ved?
22 THE WI TNESS: I t was pr obabl y r ecei ved dur i ng t hat
23 t i me, and t hi s awar d was suspended and Bob Benedi ct i s t he one
24 who sent me t hi s cor r espondence, and he wasn' t appr oved as a
25 cont act , so I coul dn' t cor r espond wi t h hi m. We coul d r evi ew,
( 212) 805- 0300
341
1 but not cor r espond wi t h hi m.
3 Q. Al l r i ght , we can t ake t hat down.
4 Ms. Snowden, ear l i er you r ef er r ed t o an audi t t hat was
5 al r eady bei ng conduct ed at CASI bef or e you cal l ed t he I nspect or
6 Gener al ' s audi t ?
7 A. Yes.
8 Q. I s t hat r i ght ? Do you know who t he i ndependent audi t or ' s
9 name was?
10 A. J oan Hayes.
11 Q. Di d you have any di scussi ons wi t h J oan Hayes?
12 A. Yes.
13 Q. And what di d you t wo di scuss?
16 Q. Di d J oan Hayes ask you any quest i ons?
17 A. Yes, she di d.
18 Q. What quest i ons di d she ask you?
21 MR. EVERDELL: Your Honor , quest i ons ar e not
22 st at ement s, t hey' r e not hear say. They' r e j ust aski ng
23 quest i ons.
24 THE COURT: Yes, t hat ' s t r ue, but I ' ve got t o put up
25 r ed l i ght s so t hat - - you know, I ' msur e t he wi t ness has been
( 212) 805- 0300
342
1 pr oper l y i nst r uct ed she can' t - -
3 THE COURT: She can' t get i nt o st at ement s beyond j ust
4 t he quest i on.
5 MR. EVERDELL: I f I can make sur e we' r e cl ear on t hat .
6 Q. Ms. Snowden, j ust r ef er r i ng sol el y t o what quest i ons
7 Ms. Hayes asked you, what wer e t hose quest i ons?
8 A. She asked me a quest i on r egar di ng coul d r ent be pai d wi t h
9 f eder al f unds; she asked me a quest i on, coul d ut i l i t i es be pai d
10 wi t h f eder al f unds. I r esponded t o her no, nei t her one can be
11 pai d wi t h f eder al f unds.
12 THE COURT: When was t hi s conver sat i on?
13 THE WI TNESS: Excuse me?
14 THE COURT: When di d you have t hi s conver sat i on wi t h
15 Ms. Hayes?
16 THE WI TNESS: I n 2002, somet i me i n 2002. I t was wi t h
17 J oan Hayes. So she cal l ed me on t he phone somet i me i n 2002.
18 I t was - - once she was - - she was i ndependent CPA, so I guess
19 once he pi cked her t o, once she was - -
20 THE COURT: No, no you - - don' t specul at e.
22 THE COURT: The j ur y i s t o di sr egar d why, t he l at t er
23 par t of answer about why she, J oan Hayes, was hi r ed.
24 Q. Di d t her e come a t i me when you r ecei ved an audi t r epor t
25 f r omher ?
( 212) 805- 0300
343
1 A. Yes.
3 A. J une 2003.
4 Q. What i s t he st at us of t he gr ant t o CASI as of t oday?
5 A. I t ' s t er mi nat ed.
6 Q. And do you know t he t ot al amount of ATP gr ant money t hat
7 CASI had dr awn down bef or e t he gr ant was shut down?
8 A. Over a mi l l i on dol l ar s.
9 MR. EVERDELL: One moment , your Honor .
10 THE COURT: Can I j ust hear t hat quest i on and answer
11 back.
12 ( Recor d r ead)
13 THE COURT: What dat e was i t shut down?
14 THE WI TNESS: We suspends t hi s gr ant i n J une of 2003.
15 THE COURT: Okay, t hank you.
16 MR. EVERDELL: Your Honor , I have no f ur t her
17 quest i ons.
18 THE COURT: Shoul d we t ake t he br eak now or - - I guess
19 we bet t er t ake t he br eak now and be back at 1: 00 o' cl ock - - I
20 mean back i n t en mi nut es.
21 10 mi nut es.
23 THE COURT: 10 mi nut es. Al l r i ght .
( 212) 805- 0300
344
1 ( Recess)
2 THE COURT: Get t he j ur or s.
4 THE COURT: Al l r i ght , pl ease be seat ed.
9 Q. Good mor ni ng, Ms. Snowden.
11 Q. You wor k i n - - wher e i s your of f i ce?
12 A. My of f i ce i s i n Gat hur sbur g, Mar yl and.
13 Q. Now, you ar e t he l i ai son t o t he r eci pi ent of t he gr ant s?
14 A. Yes.
15 Q. And i t ' s your j ob t o i nt er pr et t he r ul es and r egul at i on f or
16 t hem?
17 A. Yes.
18 Q. And t hat ' s i f t hey cal l and ask you a par t i cul ar quest i on
19 about a par t i cul ar r ul e or r egul at i on, cor r ect ?
20 A. Yes.
21 Q. Now, among t he t hi ngs t hat - - coul d we put up Exhi bi t 4,
22 page seven.
23 A number of t hi ngs t hat t he r eci pi ent r esponsi bi l i t y
24 t hat i s i n Exhi bi t 4 i s t hat a - - you wer e pr esent at t he what
25 you cal l ed t he sl i de show?
( 212) 805- 0300
345
864ZKAR2 Snowden - cr oss
1 A. The ki ckof f .
2 Q. The ki ckof f ?
3 A. Yes.
4 Q. The ki ckof f i s a t er mt hat ' s usual l y r ef er r ed t o f oot bal l .
5 The ki ckof f on November 8t h, I bel i eve 2001, you wer e pr esent
6 and you pr esent ed, cor r ect ?
7 A. Yes.
8 Q. And i s t hi s a f or mt hat you submi t t ed t hat you used or i s
9 i t a f or mt hat ei t her Ms. Li de or J ane Or t hwei n used?
10 A. No, I used t hi s - - t hi s i s par t of my pr esent at i on.
11 Q. Okay. Now, t hi s i s pr i or appr oval , you have t o not i f y a
12 gr ant s speci al i st , r i ght ?
13 A. For pr i or appr oval , not i f y t he gr ant s speci al i st , yes.
14 Q. And among t he t hi ngs you have t o not i f y t he gr ant s of f i cer
15 f or t o get pr i or appr oval i s i f you go bankr upt ?
16 THE COURT: I s what ?
17 Q. Go bankr upt ?
18 A. Yes, t hat ' s on t her e, yes.
19 Q. When you' r e bankr upt , you' r e br oke, r i ght ; do you need
20 pr i or appr oval t o go br oke?
21 A. Wel l , what we say i s we know t hese ar e commer ci al compani es
22 t hat we' r e deal i ng wi t h; t her ef or e, i f you see t hat you' ve - -
23 you' r e havi ng f i nanci al di f f i cul t i es and you' r e goi ng t hr ough a
24 bankr upt cy pr ocess, we' d l i ke t o be not i f i ed ahead of t i me.
25 Q. Okay. But you t el l us t hat t hi s, t hat ki ckof f pr esent at i on
( 212) 805- 0300
346
1 t hat you' r e pr esent i ng, t hat your pr oposal i s t he Bi bl e?
2 A. Yes.
3 Q. And t hat means t he pr oposal submi t t ed by t he gr ant ee,
4 cor r ect ?
5 A. The pr oposal , yes.
6 Q. But t hat - - and t hat i ncl udes t he pr oposal i s r eal l y t he
7 budget , r i ght ?
8 A. I t i ncl udes t he budget .
9 Q. And t he budget i s subj ect t o al l ki nds of r evi si ons, i s i t
10 not ?
11 A. You can pr opose r evi si ons, but t hey st i l l must be appr oved
12 i n wr i t i ng by t he gr ant of f i cer .
13 Q. And i f t hey' r e appr oved i n wr i t i ng by t he gr ant of f i cer - -
14 A. Uh- huh.
15 Q. - - t hen t hey become par t of your budget , r i ght ?
16 A. They become an amendment t o t he or i gi nal budget , yes.
17 Q. And you coul d r evi se t he budget at t he end of your f i r st
18 year , can you not ?
19 A. Yes.
20 Q. Because you' r e gi ven $800, 000 i n CASI ' s case, t o spend on
21 t he pr oj ect t hat was appr oved by ATP, r i ght ?
22 A. No, i t ' s appr oved - - i t ' s appr oved by t he gr ant of f i cer .
23 She' s t he one who has t he si gnat ur e aut hor i t y t o, t o aut hor i ze
24 f unds f or t he f eder al gover nment . So ATP i s t he pr oj ect , but
25 t he gr ant s of f i cer i s a cer t i f yi ng of f i ci al .
( 212) 805- 0300
347
1 Q. Okay. And t he pr oj ect gi ves t he per son, t he gr ant ee,
2 $800, 000, cor r ect ?
3 A. The - - t he gr ant of f i cer appr oves t he budget f or $8, 000.
4 THE COURT: $800, 000.
5 A. For $800, 000, appr oved budget , and i t gi ves t he gr ant ee t he
6 aut hor i t y t o spend what i s appr oved wi t hi n t he budget ed
7 cat egor i es.
8 Q. When you submi t a budget , you submi t a budget f or t he t ot al
9 of $800, 000 r i ght ?
10 A. When you pr opose a change, i t ' s f or t he t ot al amount of
11 $800, 000.
12 Q. But your or i gi nal budget - -
13 A. Uh- huh.
14 Q. - - t hat you submi t - -
15 A. Uh- huh.
16 Q. - - you submi t - - CASI submi t t ed a budget f or 800, 000 and
17 t he gover nment , whi chever agency i t was, deposi t ed $800, 000 i n
18 a bank account f or CASI t o use?
19 A. CASI submi t t ed a budget f or a t ot al of $2 mi l l i on, wi t h
20 money del egat ed each year . The f i r st year was $800, 000 f or
21 CASI t o use wi t hi n t he appr oved pr oposal and t he appr oved
22 budget cat egor i es. Anyt hi ng out si de of what i s appr oved i s
23 consi der ed a pr oposed r evi si on. And i f you r evi se i t i n any
24 way or manner , i t needs t o be appr oved i n wr i t i ng by t he gr ant
25 of f i cer .
( 212) 805- 0300
348
1 THE COURT: But t hat appl i es t o t he l i ne i t ems, i s
2 t hat r i ght ?
4 THE COURT: So $800, 000 compr i sed of so many l i ne
5 i t ems.
7 THE COURT: Changes i n t he l i ne i t ems r equi r e
8 appr oval .
9 THE WI TNESS: I f t hey' r e over 10 per cent , yes.
10 Q. So, we' l l get back t o t he 10 per cent .
11 A. Sur e.
12 Q. But l et ' s - - so i f t he gr ant ee, whi l e t hey have a budget
13 wi t h l i ne i t ems f or var i ous t hi ngs t hat adds up t o $800, 000,
14 r i ght ?
15 A. Yes.
16 Q. I f t he gr ant ee doesn' t spend t he 800, 000 i n t he f i r st year ,
17 what happens t o t he money?
18 A. I f he doesn' t spend al l of t he $800, 000, he can r equest a
19 r evi sed budget . Hi s f i r st year wi l l have t he act ual amount s,
20 and t he out year s whi ch wi l l be year t wo and t hr ee. He can
21 i ncor por at e t he money t hat was unspent i nt o year s t wo and
22 t hr ee. That budget has t o be r evi ewed by t he pr oj ect t eam, and
23 i t has t o be appr oved i n wr i t i ng by t he gr ant of f i cer .
24 Q. I s t her e - - have you ever had - - how l ong have you been
25 doi ng t hi s, Ms. Snowden?
( 212) 805- 0300
349
1 A. Ei ght - and- a- hal f year s.
2 Q. Have you ever had an occasi on wher e a gr ant ee r et ur ned
3 money t o t he gover nment t hat was unused pur suant t o t he gr ant s?
4 A. Yes.
5 Q. And on how many occasi ons?
6 A. Wel l , I ' ve been doi ng i t ei ght - and- a- hal f year s. Qui t e a
7 bi t . A l ot of t i mes t hat you st ar t a pr oj ect , and you say I
8 need t hi s much money, and t hen you may not use t he money, so
9 i t ' s r et ur ned t o t he gover nment , and we r eput i t back i nt o our
10 pr ogr amf or f ut ur e use.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
350
8647KAR3 Snowden - cr oss
2 Q. And i f t he money i s spent , t he $800, 000, i n t he f i r st year ,
3 on what i s al l owabl e expendi t ur es, t hat ' s OK, cor r ect ?
4 A. I f i t ' s spent on al l owabl e appr oved budget , i t i s OK.
5 Q. Wel l , Dr . Kar r on submi t t ed a budget wher e he was t o r ecei ve
6 $175, 000 i n sal ar y, cor r ect ?
7 A. Yes.
8 Q. And t hat was appr oved.
9 A. Yes.
10 Q. I f he want ed t o i ncr ease hi s sal ar y by $80, 000, whi ch i s 10
11 per cent of t he appr oved budget , t o $255, 000, he woul dn' t need
12 any appr oval t o do t hat , cor r ect ?
13 A. He can move i t among budget cat egor i es wi t hout t he
14 appr oval , wi t hi n 10 per cent , but he must not i f y; we ask f or
15 not i f i cat i on t o t he f eder al gover nment .
16 THE COURT: I s i t 10 per cent of t he t ot al or i s i t 10
17 per cent of t he l i ne i t em?
18 THE WI TNESS: No, 10 per cent of t he annual budget ,
19 whi ch i s $80, 000. He can move t he l i ne i t ems wi t hi n 80, 000.
20 THE COURT: Each t i t l e?
21 THE WI TNESS: Tot al , so not each. So i t can be t ot al .
22 So, he can move money t o t he equi pment , money t o mat er i al s and
23 suppl i es, but i t coul dn' t go over $80, 000.
24 THE COURT: I n t ot al .
25 THE WI TNESS: I n t ot al .
( 212) 805- 0300
351
1 MR. RUBI NSTEI N: I n ot her wor ds he woul d have t o - -
2 THE COURT: $80, 000, coul d i t be al l ot t ed t o any
3 si ngl e l i ne i t emwhi ch woul d br i ng t he l i ne i t emup t o say a
4 hundr ed per cent of what t he l i ne i t emwas?
5 THE WI TNESS: I t ' s not usual l y done, but t he 10
6 per cent r ul e sai d he can move i t .
7 THE COURT: Does he need pr i or appr oval f or t hat ?
8 THE WI TNESS: No. We ask t hat we be not i f i ed, but he
9 does not need pr i or appr oval .
10 Q. I n t he or i gi nal budget t hat he submi t t ed, whi ch i s i n
11 evi dence as Exhi bi t 10B, do you have t hat t her e, ma' am?
12 A. I have a 10A. I don' t have a 10B.
13 Q. Let me see i f I can get somebody t o hel p you get t he 10B.
14 A. I f ound 10B. I have i t r i ght her e.
15 Q. Now, i n t hat document , whi ch i s i n t he exhi bi t book as
16 Gover nment Exhi bi t 10B, on t he second page i t says per sonnel ,
17 cor r ect ?
18 A. Yes.
19 Q. Now, i n f act i n t hat budget t he pr oj ect manager ,
20 Mr . Gur f ei n, was t o get $100, 000, cor r ect ?
21 A. Yes.
22 Q. And t hat was t o put 75 per cent of t hei r t i me, hi s t i me,
23 i nt o t he pr oj ect .
24 A. Wel l , hi s annual sal ar y was $100, 000.
25 Q. Tel l i ng you t hat he i s onl y goi ng t o spend 75 per cent of
( 212) 805- 0300
352
1 hi s t i me t o t he pr oj ect , cor r ect ?
2 A. That ' s t he per cent age of t i me t o t he pr oj ect , 75 per cent .
3 Q. And Dr . Kar r on i s t o spend a hundr ed per cent of hi s t i me.
4 A. Yes.
5 Q. And how many hour s a week does a hundr ed per cent wor ki ng,
6 how many hour s a week - -
7 THE COURT: I don' t see t he r el evance of t hat
8 quest i on.
9 MR. EVERDELL: Obj ect i on.
10 THE COURT: Obj ect i on sust ai ned. Let ' s go ahead.
11 I t ' s an annual amount . Pl ease go ahead.
12 Q. Wel l , di d you ever di scuss wi t h Dr . Kar r on as t o how many
13 hour s a week he was expect ed t o devot e t o t he pr oj ect ?
14 A. No.
15 Q. And al so on t hat page t hey have $100, 000 whi ch was appr oved
16 f or mat h and gr aphi c pr ogr ammer s, TBD. And t hat was appr oved,
17 r i ght ?
18 A. Yes, t o be det er mi ned.
19 Q. What does TBD mean?
20 A. To be det er mi ned.
21 Q. And t hat was appr oved.
22 A. Yes.
23 Q. Now, di d you l ear n t hat t her e wer e peopl e i n t he f i r st year
24 who wer e not l i st ed on t hi s budget t hat wer e wor ki ng at CASI ?
25 THE COURT: Wor ki ng at CASI or on t he pr ogr am?
( 212) 805- 0300
353
1 MR. RUBI NSTEI N: On t he pr ogr am.
2 A. Thi s nar r at i ve r ef l ect s t hat t her e i s goi ng t o be one, t wo,
3 t hr ee, f our peopl e t hat ' s goi ng t o be wor ki ng on t hi s pr oj ect .
4 Two peopl e ar e t o be det er mi ned. So you have t wo peopl e t hat
5 t hey don' t have a name. But onl y f our peopl e on t hi s pr oj ect .
6 Q. Wel l , i n f act i t has a syst ems admi ni st r at or , cor r ect ?
7 A. Yes.
8 Q. I t has Dr . Kar r on.
9 A. Um- hum.
10 Q. I t has Mr . Gur f ei n.
11 A. Yes.
12 Q. And i t has a mat h and gr aphi cs pr ogr ammer . Those ar e t he
13 t wo peopl e t her e, r i ght ? So t hat ' s a t ot al of f i ve?
14 A. No.
15 THE COURT: Syst ems admi ni st r at or .
16 A. The syst ems admi ni st r at or , i t ' s a syst ems admi ni st r at or
17 net wor k pr ogr ammer . I t ' s one t i t l e. Thi s budget onl y r ef l ect s
18 f our budget , f our sal ar i es, so t hat ' s one t i t l e. That ' s why i t
19 was i ndent ed.
20 Q. Ther e came a t i me t hat you l ear ned t hat t her e wer e ot her
21 peopl e wor ki ng on t he ATP pr oj ect . Di d you have any
22 conver sat i on wi t h Dr . Kar r on about t hese - - wel l , wi t hdr awn.
23 You l ear ned t hat ot her peopl e wer e wor ki ng on t he
24 pr oj ect , cor r ect , on t he ATP pr oj ect ?
25 THE COURT: Di d you l ear n t hat ?
( 212) 805- 0300
354
1 THE WI TNESS: He r equest ed a r evi sed budget t o add
2 peopl e t hat had t o be appr oved, and i t was l at er appr oved, but ,
3 no, he can' t j ust t el l me I ' maddi ng peopl e.
4 THE COURT: That i sn' t what you ar e bei ng asked. Di d
5 you l ear n t hat mor e t han f our peopl e wer e wor ki ng on t he ATP
6 pr oj ect at any t i me?
7 THE WI TNESS: No, I j ust assumed t hat t hese wer e t he
8 f our t hat wer e goi ng t o be wor ki ng on t he pr oj ect .
9 Q. Wel l , di dn' t you get t oget her wi t h your t eamMs. Li de and
10 Ms. Or t hwei n and di scuss what was goi ng on wi t h t he CASI ATP
11 gr ant and what was goi ng on at CASI ?
12 A. We had di scussi ons.
13 Q. And di d you l ear n i n t hose di scussi ons t hat t her e wer e
14 peopl e wor ki ng on t he ATP pr oj ect who wer e not appr oved by your
15 of f i ce?
16 A. No.
17 Q. Di d you ever hear of a man named J i mCox?
18 A. Yes.
19 Q. And was he appr oved t o wor k on t he pr oj ect ?
20 A. I don' t r ecal l . I woul d have t o l ook at t he ot her appr oved
21 document .
22 Q. Now, Gur f ei n was appr oved f or $100, 000 - -
23 A. Yes.
24 Q. - - as t he pr oj ect manager . Di d you ever appr ove someone
25 el se as a pr oj ect manager af t er Gur f ei n?
( 212) 805- 0300
355
1 A. No, not t hat I r ecal l .
2 Q. Do you know t he name Pet er Ross?
3 A. I ' mf ami l i ar wi t h t he name.
4 Q. And do you know who r epl aced Gur f ei n when he l ef t t he
5 pr oj ect ?
6 A. Ther e was - - no, I don' t know who r epl aced Gur f ei n. Ther e
7 was never an appr oved per son managi ng.
8 Q. Wel l , as t he per son who was i nvol ved wi t h hel pi ng CASI , di d
9 you i nqui r e as t o who woul d be t he pr oj ect manager af t er
10 Gur f ei n l ef t ?
11 A. Once Lee Gur f ei n l ef t - - and I ' mnot sur e on t he dat e t hat
12 he l ef t - - i t was up t o Dr . Kar r on - - t hi s i s a commer ci al
13 busi ness - - t o l et us know t hat he was sear chi ng f or somebody
14 t o r epl ace Lee Gur f ei n, and t hen i f he want s t hat per son t o
15 r epl ace t hem, of f i ci al l y he has t o r equest i t , put i n a r evi sed
16 budget t o add t hat per son' s name, and i t has t o be appr oved i n
17 wr i t i ng by t he gr ant of f i cer .
18 So, wi t hi n hi s commer ci al company he can add anyone
19 t hat he l i kes, but t o wor k on t hi s pr oj ect i t has t o be
20 appr oved by t he gr ant of f i cer . So, we don' t get i nt o hi s
21 per sonal , hi s commer ci al busi ness. He coul d have had a l ot of
22 peopl e wor ki ng wi t hi n hi s company but not necessar i l y on t hi s
23 ATP- appr oved pr oj ect .
24 Q. Di d you ever t el l Dr . Kar r on t hat you wer e not appr ovi ng
25 Bob Benedi ct as a r epl acement as t he pr oj ect manager ?
( 212) 805- 0300
356
1 A. What happened was - -
2 Q. No, no. Di d you hear t he quest i on?
3 A. Yeah, I hear d t he quest i on. No, I never t ol d hi mt hat he
4 was not goi ng t o be appr oved. The budget was not appr oved,
5 whi ch woul d have i ncor por at ed hi m. Ther ef or e, under l yi ng he i s
6 not appr oved.
7 THE COURT: Di d he ever ask f or hi mt o be appr oved?
8 THE WI TNESS: He sent cor r espondence, and i n t he
9 cor r espondence he sai d t hat Bob Benedi ct was goi ng t o be t he
10 new pr oj ect manager , so t hat ' s what he want ed. That i s who was
11 r epr esent i ng CASI as a company, and t hat ' s f i ne, he can
12 r epr esent hi s company, but unt i l he was appr oved i n our budget ,
13 he wasn' t an aut hor i zed of f i ci al .
14 THE COURT: Di d he ever ask you t o appr ove hi mi n t he
15 budget ?
16 THE WI TNESS: Yes, he di d t r y t o i ncor por at e hi mi nt o
17 t he budget .
19 THE WI TNESS: Yes, he di d t r y t o i ncor por at e hi mi nt o
20 t he budget .
21 THE COURT: OK.
22 Q. But he was never appr oved?
23 A. He was never appr oved because t he budget was never
24 appr oved.
25 Q. But he was never appr oved, cor r ect ?
( 212) 805- 0300
357
1 A. No, he was never appr oved.
2 THE COURT: And when di d he ask f or hi mt o be
3 appr oved?
4 THE WI TNESS: Ther e i s a l et t er , and I know i t ' s i n
5 one of t hese exhi bi t s, when he t ol d us he was get t i ng a new, I
6 guess, admi ni st r at or .
7 THE COURT: I j ust want t o know t he dat e.
8 THE WI TNESS: I have no i dea what t he dat e was.
9 THE COURT: Don' t you have t he r ecor ds t her e t hat show
10 i t ?
11 THE WI TNESS: OK, I don' t know wher e i t woul d be
12 l ocat ed.
13 THE COURT: Wel l , I can' t under st and whet her t he
14 quest i on and answer ar e r el evant t o t he j ur y' s det er mi nat i on.
15 Q. CASI was appr oved t o spend $100, 000 on t he pr oj ect manager ,
16 cor r ect ?
17 A. Yes, t hey wer e appr oved. The sal ar y was $100, 000, and i t
18 was a hundr ed per cent , so yes.
19 Q. I t was i n f act 75 per cent , r i ght ?
20 A. I t was 75 per cent of $100, 000 sal ar y.
21 Q. Dr . Kar r on was not supposed t o - - he wasn' t bei ng pai d as
22 t he pr oj ect manager , cor r ect ?
23 A. Cor r ect .
24 Q. You have a busi ness, so i s i t your t est i mony t hat $100, 000,
25 because you di dn' t appr ove Bob, a pr oj ect manager dur i ng a
( 212) 805- 0300
358
1 poi nt i n t i me, t hat t hat 100, 000 shoul dn' t be spent on t he
2 gr ant ?
5 A. Coul d you r epeat t he quest i on, pl ease?
6 Q. I f Lee Gur f ei n had cont i nued as t he pr oj ect manager af t er
7 t he f i r st year , t her e woul d be no pr obl emwi t h hi s bei ng
8 appr oved?
9 A. Lee Gur f ei n was appr oved t hr oughout t hi s budget , so Lee
10 Gur f ei n was appr oved.
11 Q. Do you know what Lee Gur f ei n' s cr edent i al s wer e t o be a
12 pr oj ect manager ?
13 A. Hi s r sum was par t of t he pr oposal package, yes.
14 Q. And was Bob Benedi ct ' s r sum submi t t ed t o pr opose hi mas a
15 pr oj ect manager ?
16 A. I don' t r ecal l .
17 Q. I sn' t i t a f act t hat Bob Benedi ct was f ar super i or ?
19 THE COURT: Obj ect i on sust ai ned. Go ahead.
20 Q. Do you r ecal l what sal ar y was r equest ed f or Bob Benedi ct ?
21 A. No.
22 Q. Now, wer e you awar e of Dr . Kar r on' s backgr ound as t o
23 f i nance when t he gr ant was awar ded?
24 A. No, I ' mt he gr ant speci al i st . When i t comes t o hi s
25 backgr ound, t hat ' s not f or me t o r evi ew. I ' mt he gr ant
( 212) 805- 0300
359
1 speci al i st , I do t he budget anal ysi s. I don' t l ook at peopl e' s
2 backgr ounds. I ' msur e i t was l ooked at by t he sci ent i st s and
3 t he pr oj ect t eamwho r evi ewed t hi s pr oposal and appr oved i t .
4 Q. As t he gr ant speci al i st , coul d you pr ovi de a speci al
5 condi t i on of t he awar d t hat a gr ant ee be audi t ed mor e t han once
6 a year ?
7 A. As a gr ant speci al i st you can i ncor por at e speci al wor kd
8 condi t i ons t hat have t o be appr oved by t he gr ant of f i cer , but
9 t he f eder al gover nment can aut hor i ze an audi t any t i me t hey
10 f eel t hat f unds ar e bei ng mi sappr opr i at ed. So, i t can be mor e
11 t han once, i t coul d be t wi ce, i t coul d be t hr ee t i mes.
12 Q. That wasn' t t he quest i on.
13 A. The quest i on i s yes.
14 Q. The quest i on i s: As a speci al condi t i on, when t he per son
15 get s t he money, as a speci al condi t i on t hey' r e advi sed t hat
16 t hey ar e goi ng t o be audi t ed mor e t han once a year , cor r ect ?
17 A. As a speci al awar d condi t i on you ar e audi t ed accor di ng t o
18 your pr oj ect .
20 THE COURT: Obj ect i on sust ai ned t o t he f or mof t he
21 quest i on. I don' t t hi nk i t was - -
22 Q. Most pr oj ect s l i ke i n t hi s case CASI wer e audi t ed at t he
23 end of t hei r f i r st year , cor r ect ?
24 A. They have t o get an i ndependent CPA, t hey' r e r equi r ed t o,
25 t he company, and, yes, t hey get audi t ed. Wi t hi n 90 days t hey
( 212) 805- 0300
360
1 have t o gi ve t he f eder al gover nment a copy of an audi t at t he
2 end of t he year , wi t hi n 90 days af t er t he end of t hei r year .
3 Q. And ar e t her e compani es t hat get ATP awar ds t hat as a
4 condi t i on of t he awar d t hey ar e t o be audi t ed mor e t han once a
5 year ?
6 A. Under f eder al r egul at i ons t he gr ant of f i ce has t he r i ght t o
7 or der an audi t by t he of f i ce of I nspect or Gener al whenever t hey
8 f eel t hat f unds ar e bei ng mi sappr opr i at ed, so, yes, acr oss t he
9 boar d wi t h any gr ant of f eder al f unds you can be audi t ed mor e
10 t han once a year .
11 Q. Do you under st and t he quest i on, ma' am, about t he speci al
12 condi t i ons - -
14 Q. - - when you get an awar d, t hat t her e ar e speci al condi t i ons
15 as par t of t he awar d?
16 THE COURT: You' r e not aski ng your quest i on
17 appr opr i at el y.
18 MR. RUBI NSTEI N: Then i t ' s my f aul t . I apol ogi ze t o
19 Ms. Snowden.
20 THE COURT: I t hi nk she i s answer i ng t he quest i on as
21 she i nt er pr et s i t , but you have t o ask t he quest i on pr oper l y.
22 Q. As par t of t he gr ant , gi vi ng a gr ant , can t her e be speci al
23 condi t i ons i mposed on t he gr ant ee?
24 THE COURT: Thi s woman does not make t he gr ant s; she
25 i s a per son who over sees a gr ant once i t ' s made. AmI cor r ect ?
( 212) 805- 0300
361
2 THE COURT: You don' t det er mi ne whet her or not t he
3 gr ant wi l l be i ssued, i s t hat r i ght ?
5 THE COURT: That ' s done by someone el se i n t he - -
6 THE WI TNESS: Anot her t eamr evi ews t he pr oposal and
7 deci des t o gi ve t he money, and t hen our of f i ce admi ni st er s i t .
8 THE COURT: I s t hat cl ear ? Di d you f ol l ow t hat ,
9 Mr . Rubi nst ei n? She does not make t he gr ant . Al l she does i s
10 admi ni st er a gr ant once i t i s made. Anot her t eamdeci des about
11 maki ng t he gr ant .
12 Q. But t her e ar e si t uat i ons, ar e t her e not , Ms. Snowden, wher e
13 you who admi ni st er s t he gr ant has - - t her e ar e i n pl ace speci al
14 condi t i ons t hat you have t o admi ni st er , r i ght ?
17 A. Coul d you r epeat t he quest i on, pl ease?
18 THE COURT: I n some gr ant s ar e t her e speci al
19 condi t i ons t hat you have t o admi ni st er ?
20 THE WI TNESS: I n some gr ant s you have speci al wor k
21 condi t i ons. I n al l gr ant s t her e ar e speci al wor k condi t i ons
22 i ncor por at ed i nt o t he gr ant .
23 Q. And f r omt i me t o t i me i s one of t he speci al condi t i ons t hat
24 t he gr ant ee, t he per son get t i ng t he money, wi l l be audi t ed mor e
25 t han once a year ?
( 212) 805- 0300
362
1 THE COURT: Do you know t he answer t o t hat ? Have you
2 ever had a gr ant t hat had a speci al condi t i on i n i t t hat
3 r equi r ed t he company t o pr ovi de an audi t mor e t han once a year ?
4 THE WI TNESS: No. You ar e pr ogr amspeci f i c, so up
5 f r ont you consi der t hat ever yt hi ng i s goi ng t o go smoot hl y, so,
6 no, t her e i s not - - you j ust f ol l ow t he audi t gui del i nes, so,
7 no, t her e i s not a speci al wor k condi t i on t hat i s usual l y put
8 i n pl ace t hat you have an audi t . We do have condi t i ons t hat we
9 can - - you can' t - - you can' t t ake any money wi t hout get t i ng
10 our appr oval , but when i t comes t o audi t s, no.
11 Q. You sai d t hat Ms. Hayes was an i ndependent audi t or ,
12 cor r ect ?
13 A. Yes.
14 Q. You had cont act wi t h Ms. Hayes?
15 A. Yes.
16 Q. Over what per i od of t i me di d you have cont act wi t h Ms.
17 Hayes?
18 A. The year 2002, over a per i od of t i me.
19 Q. Do you have any not es or memor andumt hat woul d enabl e you
20 t o be a l i t t l e mor e pr eci se as t o what per i od of t i me i n 2002?
21 A. No, I don' t .
22 Q. Now, coul d you est i mat e f or us how many t i mes you spoke t o
23 her dur i ng t hi s per i od i n 2002?
24 A. Pr obabl y a handf ul of t i mes, so guest i mat e f i ve.
25 Q. And among t he t i mes you spoke t o her , I t hi nk you sai d you
( 212) 805- 0300
363
1 spoke t o her about t he r ent and some ot her expense, cor r ect ,
2 whet her or not i t was al l owabl e?
3 A. She cal l ed and asked me a quest i on, yes.
4 Q. And when about was t hat , ma' am?
5 A. I n 2002.
6 Q. Was i t t he wi nt er ? Spr i ng? Summer or f al l ?
8 THE COURT: Do you know?
9 THE WI TNESS: No. I mean you have t o - - you can
10 assume t hat t he year ended Sept ember 30, 2002, so i t ' s anyt hi ng
11 af t er Sept ember 30, 2002, when t he gr ant ended and when you ar e
12 supposed t o get an i ndependent audi t or t o audi t your books.
13 THE COURT: She was an audi t or ?
15 THE COURT: So you assumed she came i n af t er t he end
16 of t he year .
18 Q. Wer e you awar e t hat she was t he account ant f or CASI ?
19 A. That she was t he i ndependent audi t or f or CASI , i ndependent
20 CPA. She was doi ng t he audi t .
21 Q. But you ar e supposed t o have an i ndependent audi t or ,
22 cor r ect ?
23 A. You have t o get an - - t he f eder al gr ant pays f or an
24 i ndependent audi t or t o audi t t he books, yes.
25 Q. And i s i t f ai r t o say t hat a per son who i s t he account ant
( 212) 805- 0300
364
1 f or t he company cannot be an i ndependent audi t or f or t he
2 company?
3 MR. KWOK: Obj ect i on, your Honor .
4 MR. EVERDELL: Obj ect i on, your Honor . I t ' s out si de of
5 t he - -
6 THE COURT: Do you know whet her she was an account ant ?
7 THE WI TNESS: I di dn' t know she was an account ant t o
8 t he company. Al l I know i s t hat she cal l ed me as an
9 i ndependent CPA f or t he company, and t hat ' s who she was
10 r epr esent i ng t he company as an i ndependent . Any ot her , I have
11 no i dea.
12 Q. And you ar e awar e of r equest s f or change i n cost s f or
13 equi pment t o be changed, i s t hat cor r ect ?
14 A. I amawar e t hat t her e was a r equest t o add a pi ece of
15 equi pment .
16 Q. And was t hat appr oved?
17 A. No.
18 Q. And was t he r eason i t wasn' t appr oved i s because t he
19 r equest wasn' t i n wr i t i ng?
20 A. The r eason why i t wasn' t appr oved - - he sent i n a r evi sed
21 budget . I had quest i ons f or t he budget t hat he sent i n. He
22 sent me anot her budget . So, he f r equent l y sent i n budget s, so
23 none of t hemever got appr oved.
24 Q. But he had a r i ght t o spend up t o $80, 000 i n addi t i onal
25 moni es f or equi pment wi t hout appr oval , cor r ect ?
( 212) 805- 0300
365
1 A. He had a r i ght t o move addi t i onal money wi t hi n 80 per cent
2 of t he annual budget wi t hout appr oval but wi t h not i f i cat i on,
3 but i t has t o - - you can spend i t wi t hi n t he budget , but you
4 can' t add i t ems t o t he budget .
5 When you come i n wi t h a pr oposal , you have an i t emi zed
6 budget down t o, f or exampl e, t he penci l s you want t o buy.
7 That ' s t he onl y t hi ng appr oved wi t hi n t hat budget , so you can' t
8 j ust ar bi t r ar i l y go out and say I want t o buy a comput er i f a
9 comput er wasn' t i ncor por at ed and appr oved wi t hi n your appr oved
10 budget . The cat egor i es have t o al r eady exi st . You can' t add
11 cat egor i es. I f i t ' s a zer oed out cat egor y, you can' t add t hat .
12 So, t hen he woul d al r eady have t o be appr oved.
13 Q. Di d t he CASI budget have a cat egor y cal l ed equi pment ?
14 A. Yes, t hey di d.
15 Q. Di d you t est i f y t hat t hey had or i gi nal l y $375, 000 appr oved
16 f or t he pur chase of equi pment ?
17 A. I woul d have t o l ook at i t t o know exact l y what i t says.
18 Q. But do you r ecal l t est i f yi ng t hat t hey submi t t ed a r evi si on
19 f or r educt i on i n t he equi pment when t he pr osecut or asked you
20 quest i ons?
21 A. He asked me quest i ons. But l i ke I sai d, what exhi bi t ? So
22 I can l ook. I want t o make sur e I ' mcor r ect . Tel l me t he
23 exhi bi t and we can t al k about i t .
24 Q. Wel l , bef or e you l ook at an exhi bi t , ar e you awar e as you
25 si t t her e now t hat t her e was i n t he budget a cat egor y f or
( 212) 805- 0300
366
1 equi pment ?
2 A. Yes.
4 THE COURT: Whi ch budget ar e you t al ki ng about ?
5 MR. RUBI NSTEI N: Al l of t he budget submi t t ed by CASI .
6 MR. EVERDELL: Obj ect i on, your Honor . The document s
7 ar e i n evi dence. We can l ook at t he document s.
8 THE COURT: Let ' s deal wi t h i t document by document so
9 t he j ur y can f ol l ow i t .
10 MR. RUBI NSTEI N: Can I pl ease do i t my way? I t mi ght
11 be a l i t t l e f ast er t han t aki ng out document s.
12 MR. EVERDELL: Your Honor , I t hi nk i t woul d be
13 conf usi ng.
14 MR. RUBI NSTEI N: Conf usi ng?
15 Q. Does ever y budget f or CASI have a l i ne f or equi pment ? Yes
16 or no?
17 THE COURT: Yes.
18 MR. RUBI NSTEI N: Thank you, J udge.
19 THE COURT: Ever y budget has an i t emf or equi pment and
20 a number i n i t .
23 MR. RUBI NSTEI N: So, do I have t o show each one of
24 t hose on t he scr een?
25 THE COURT: Whi ch one do you want ?
( 212) 805- 0300
367
1 Q. So, t her e was al r eady est abl i shed an equi pment l i ne,
2 cor r ect ?
3 A. Accor di ng t o t est i mony, yes, t her e was, and t he j udge sai d
4 t her e was, and t her e i s.
5 Q. You don' t r ecal l t est i f yi ng t o t hat wi t h t he pr osecut i on
6 asked you quest i ons?
7 A. I t est i f i ed t o t he f l uct uat i on of t he monet ar y val ues i n
8 each cat egor y. I have t o l ook at a budget as I woul d do i n my
9 of f i ce, and I can t el l you speci f i cal l y. But t her e i s a l ot of
10 budget her e.
11 Q. So, now t hat we concede t hat equi pment i s i n t he budget ,
12 Dr . Kar r on di d not need your appr oval i f he was buyi ng a pi ece
13 of equi pment t hat cost l ess t han $80, 000 above what ever t he
14 number i s t hat he was budget ed f or equi pment , r i ght ?
15 A. He di d not need my appr oval , but t he equi pment t hat he
16 r equest ed was over 10 per cent . That ' s why he had t o put i n and
17 r equest a r evi sed budget . I f i t was j ust wi t hi n t he 80, 000, I
18 woul d never have t ol d hi myou have t o r evi se your budget .
19 Ther ef or e, i t was over $80, 000.
20 Q. What was t hat pi ece of equi pment t hat he was r equest i ng?
22 Q. Do you have any not e about i t anywher e?
23 A. No.
24 Q. Do you have any e- mai l about t hat ?
25 A. No, I don' t .
( 212) 805- 0300
368
1 Q. You t ol d us about - -
2 THE COURT: Do you know what t ype of equi pment i t was?
3 THE WI TNESS: No, I j ust know i t was over t he 10
4 per cent . That ' s why I t ol d hi m, when we di scussed i t , t hat he
5 had t o do a r evi sed budget , because under t he 10 per cent I
6 woul d have sai d j ust gi ve us not i f i cat i on and we coul d have
7 moved on. I t was over 10 per cent .
8 Q. So, wi t h a si gni f i cant r evi sed budget di d you appr ove t hat
9 amount f or t he equi pment t hat he had r equest ed?
10 A. The f i r st ? No.
11 Q. Even t hough - - di d you make an eval uat i on as t o whet her or
12 not t hat equi pment woul d ai d and assi st t he pr oj ect t hat he was
13 wor ki ng on?
14 A. When you do a r evi sed budget you not onl y l ook at t hat one
15 l i ne, I l ook at al l t he l i ne i t ems, because I have t o make sur e
16 t hat none of t he number s change and t hat at t he end of t he day
17 t hat ever yt hi ng st i l l equal s t o t he amount of money f or t hat
18 annual year . The number s f l uct uat ed. I l ooked at t hem, and I
19 had t o l ook at what he had at t ached, so i t never got appr oved
20 because t her e wer e ot her changes i n t he budget t hat we di dn' t
21 know about .
22 Q. He never asked f or mor e t han $800, 000 t hough, cor r ect ?
23 A. I t doesn' t make a di f f er ence.
24 Q. Di d he ever ask f or mor e t han $800, 000, yes or no?
25 A. He never asked t o exceed t he annual appr oved amount f or
( 212) 805- 0300
369
1 t hat year .
2 THE COURT: Whi ch was 800, 000.
3 THE WI TNESS: Whi ch was 800, 000, yes.
4 Q. So you coul d not - - coul d you appr ove - - i f he submi t t ed
5 t en r equest s f or r evi si ons, coul d you appr ove one and r ej ect
6 ni ne, or do you have t o accept t hemal l t o get t he r evi si on?
8 THE COURT: The manner i n whi ch t hi s comes t o your
9 at t ent i on i s by way of a pr oposed r evi sed budget .
11 THE COURT: I s doesn' t come i n si ngl e i t ems.
12 THE WI TNESS: No, i t comes i n a budget , and ever y
13 cat egor y has a number i n i t , and t hey al l have t o equal .
14 THE COURT: But i n addi t i on you r ecei ved an or al
15 r equest , i s t hat r i ght , f r omDr . Kar r on f or equi pment ?
16 THE WI TNESS: No. What he di d - - af t er J ay and B. J .
17 di d t he si t e vi si t , he cal l ed me and sai d he want ed t o add
18 f unds f or equi pment , and so t hen I t ol d hi m, I sai d si nce you
19 want t o add money, I sai d - -
20 You ask how much i t i s, and I don' t r ecal l t he amount .
21 I sai d, wel l , t hat ' s over $80, 000, you must submi t a r evi sed
22 budget .
23 THE COURT: Appr oxi mat el y when was t hat conver sat i on?
24 THE WI TNESS: I n November of 2002, soon af t er t he si t e
25 vi si t .
( 212) 805- 0300
370
1 THE COURT: But t hen you never got a pr oposed budget
2 i ncor por at i ng t hat $80, 000 r equest .
3 THE WI TNESS: The change was mor e t han $80, 000. I t
4 was wel l over 80, 000.
5 THE COURT: You never got a pr oposed budget - -
6 THE WI TNESS: I got a r equest f or a r evi sed budget .
7 So, I don' t l ook at - -
8 THE COURT: Let me ask a quest i on.
9 THE WI TNESS: OK.
10 THE COURT: Di d you ever get a pr oposal i n wr i t i ng i n
11 a r evi sed budget f or an addi t i onal pur chase of equi pment over
12 $80, 000?
14 THE COURT: You di d. Whi ch budget di d you get t hat
15 i n?
16 THE WI TNESS: The next budget , so i t came i n November ,
17 so i t pr obabl y had t o be t he Oct ober 20 budget i n 2002. That
18 woul d be t he budget , because t hat woul d be t he budget af t er .
19 THE COURT: That ' s Exhi bi t - -
20 MR. RUBI NSTEI N: 31, I bel i eve, your Honor .
21 THE COURT: 35? 45?
22 THE WI TNESS: No, t her e i s anot her one f or Oct ober , so
23 I have t o t el l you whi ch one.
24 MR. RUBI NSTEI N: Ar e you l ooki ng f or t he Oct ober 2002,
25 Ms. Snowden?
( 212) 805- 0300
371
2 MR. RUBI NSTEI N: That i s Gover nment Exhi bi t 32.
3 THE WI TNESS: 32?
4 THE COURT: Whi ch i t emar e you r ef er r i ng t o t her e?
5 THE WI TNESS: The quest i on was about t he equi pment .
6 And i f you see t he equi pment cat egor y i t ' s l i ke $303, 400, so I
7 woul d l ook i n t he one t hat ' s pr evi ous, t he appr oved one. So,
8 you know t hat t hat cat egor y i t ' s wel l over $80, 000. So, we can
9 l ook i n any appr oved budget .
10 THE COURT: I ' ml ooki ng her e. I ' ml ooki ng at Exhi bi t
11 32.
13 THE COURT: And t he equi pment number s i n Exhi bi t 32
14 ar e $303, 400 i n year one.
15 THE WI TNESS: Ri ght .
16 THE COURT: I n year one. I n year t wo i t ' s $133, 000.
17 And I ' ml ooki ng back t o Exhi bi t 1, and t he equi pment i s
18 $250, 000, whi ch i s $53, 000 l ess t han t he amount i n Exhi bi t 32,
19 so i n year t wo i t ' s $133, 000, whi ch i s over $120, 000 hi gher
20 t han t he amount i n Exhi bi t 31.
21 THE WI TNESS: Ri ght . So i t ' s over $80, 000. He has t o
22 get appr oval .
23 THE COURT: That ' s f or year t wo.
24 THE WI TNESS: We' r e onl y l ooki ng at year one r i ght
25 now, because - -
( 212) 805- 0300
372
1 THE COURT: I ' ml ooki ng at bot h of t hem, and you' r e
2 not l i st eni ng t o me.
3 THE WI TNESS: OK.
4 THE COURT: Al l r i ght ? I ' ml ooki ng at Exhi bi t 32.
5 THE WI TNESS: I ' ml ooki ng at Exhi bi t 32.
6 THE COURT: That ' s $303, 400.
8 THE COURT: And Exhi bi t 31 i s $250, 000 i n year one.
9 THE WI TNESS: I f you can bear wi t h me, t hese ar e not
10 i n or der . I need t o get 31 so we can - - her e we go.
11 THE COURT: 250, 000, i s t hat r i ght ?
12 THE WI TNESS: Ri ght , 250, 000.
13 THE COURT: And t hi s budget f or August 1, 2002 i s
14 appr oved, i sn' t t hat r i ght ?
15 THE WI TNESS: No.
16 THE COURT: No? I t wasn' t ?
18 THE COURT: Do I have t o go back t o Exhi bi t 30? Whi ch
19 one was appr oved.
20 THE WI TNESS: I t ' s amendment 2 t hat was - -
21 THE COURT: Wher e do I see t hat ?
22 THE WI TNESS: Yeah, amendment 2 was t he l ast appr oved
23 budget .
24 DEPUTY COURT CLERK: I s t hat 22? I s t hat Gover nment
25 Exhi bi t 22?
( 212) 805- 0300
373
1 THE WI TNESS: I t sai d amendment 2 on t he f r ont of i t .
2 THE COURT: I want t o know what one was appr oved.
3 THE WI TNESS: OK. The l ast appr oved budget was
4 amendment 2.
5 THE COURT: The one t hat says submi t t ed - - oh, come
6 on.
7 THE WI TNESS: Ri ght , i t ' s Exhi bi t 22.
8 DEPUTY COURT CLERK: Gover nment 22.
9 THE COURT: Thi s i s J anuar y 17, 2002?
11 THE COURT: And t hat had a f i gur e or a number of
12 $110, 000.
14 THE COURT: So, what you ar e sayi ng i s t hat you shoul d
15 l ook at Exhi bi t 22 - -
17 THE COURT: - - and t hen compar e Exhi bi t 22 wi t h
18 Exhi bi t 33 - - 32.
19 THE WI TNESS: Wel l , August 2002 i s Exhi bi t 31. That
20 woul d be t he f i r st t i me t hat I r ecei ved t he budget t hat I
21 quest i oned.
22 THE COURT: What I want t o know i s what t est you
23 appl i ed on t he r equest f or addi t i onal equi pment . Di d you l ook
24 t o t he pr i or appr oved budget ?
( 212) 805- 0300
374
1 THE COURT: So, you l ooked at Exhi bi t 22, i s t hat
2 cor r ect ?
4 THE COURT: And you saw t hat t he amount f or equi pment
5 i n year one was $110, 000.
7 THE COURT: And t hen when you l ooked at Exhi bi t 32,
8 whi ch cont ai ned t he r equest , you say - -
9 THE WI TNESS: No, f i r st i t ' s goi ng t o be Exhi bi t 31.
10 THE COURT: Exhi bi t 31.
11 THE WI TNESS: Because t hat ' s August 2002. That wi l l
12 be t he next budget .
13 THE COURT: So, t hat ' s t he t i me t hat he made t he
14 r equest f or t he addi t i onal equi pment ?
15 THE WI TNESS: Oh, you know what , you' r e t ot al l y r i ght ,
16 because of t hi s, i t woul d be Oct ober - - you' r e r i ght . 32.
17 Sor r y about t hat , because t hat woul d be i n Oct ober . You' r e
18 cor r ect . Yes.
19 THE COURT: So, when you l ooked at Exhi bi t 32 - - or
20 maybe when you l ooked at Exhi bi t 31 you l ooked at t he
21 di f f er ence bet ween $110, 000 i n Exhi bi t 22 t he appr oved budget
22 and t he ent r i es i n Exhi bi t 32 of $303, 000.
24 THE COURT: 110 t o 303.
( 212) 805- 0300
375
1 THE COURT: And t hat was over $80, 000?
3 THE COURT: OK, al l r i ght . I j ust want ed t o
4 under st and what pr ocess you used i n det er mi ni ng t hat .
6 Q. Now, as f ar as f r i nge benef i t s, t her e was an appr oved
7 budget , was t her e not , i n November of 2001?
8 A. The or i gi nal appr oved budget was dat ed Sept ember of 2001.
9 That was i ncor por at ed i nt o t he document t hat CASI si gned
10 Oct ober 5, 2001.
11 Q. Wasn' t t her e a r evi si on of - -
12 THE COURT: What exhi bi t ar e we deal i ng wi t h her e?
13 The j ur y has t o f ol l ow t hi s. What exhi bi t i s i t ? They mi ght
14 want t o l ook at t hei r books t o see what you ar e t al ki ng about .
15 MR. RUBI NSTEI N: I ' mt r yi ng.
16 THE COURT: I s t hat t he one exhi bi t 21?
17 THE WI TNESS: No, Exhi bi t 21 i s t he f i r st amendment ,
18 so i t woul d have t o be I guess 20.
19 THE COURT: Was t he f i r st amendment appr oved?
20 THE WI TNESS: The or i gi nal document was appr oved.
21 THE COURT: Was Exhi bi t 21 appr oved i s what I ' maski ng
22 you.
23 THE WI TNESS: Exhi bi t 21 was appr oved.
24 THE COURT: And t he or i gi nal document was Exhi bi t 14?
25 THE WI TNESS: I ' ml ooki ng.
( 212) 805- 0300
376
1 THE COURT: I ' mj ust aski ng. I don' t know.
2 Q. Exhi bi t 21, ma' am, i s t he f i r st r evi sed - -
3 THE COURT: Wel l , l et ' s get an answer f i r st t o what
4 was t he or i gi nal budget .
5 THE WI TNESS: Exhi bi t 14.
6 THE COURT: Al l r i ght , t hat ' s t he or i gi nal budget . Go
7 on f r omt her e, Mr . Rubi nst ei n. I t ur n i t over t o you.
8 Q. OK. Exhi bi t 21 was t he f i r st amended budget , cor r ect ?
9 A. Yes.
10 Q. And i t i s dat ed 10/ 24/ 01, si gned by Dr . Kar r on 11/ 7/ 01,
11 cor r ect ?
12 A. Yes.
13 Q. What wer e t he amendment s t hat wer e made t o t he budget at
14 t hat t i me?
15 A. Ther e was no changes t o t he budget at t hat t i me.
16 Q. That was t he t i me t hat Gur f ei n' s name was changed, cor r ect ?
17 A. Yes.
18 Q. The next one i s 22. I t ' s amendment number 2 dat ed J anuar y
19 4, ' 02.
20 A. That ' s when my f or mer super vi sor si gned i t , yes.
21 Q. And i n t hat amendment t hey' r e aski ng t o r educe sal ar i es
22 f r om375 t o 325, 000, r i ght ?
23 A. Yes.
24 Q. And t hey want t o r educe f r i nge benef i t s f r om127, 500 t o
25 10, 500, r i ght ?
( 212) 805- 0300
377
1 A. 110, 500.
2 Q. And equi pment t hey want t o r educe 10, 000, f r om120 t o
3 110, 000.
4 A. Yes.
5 Q. And t hey want t o i ncr ease subcont r act or s f r om200, 000 t o
6 250, 000.
7 A. Yes.
8 Q. And t he net t ot al i s t hat t he same amount of money i s bei ng
9 spent , cor r ect , t he $800, 000?
10 A. I t st ays wi t hi n t he 800, 000 but i t ' s over 10 per cent change
11 i n t he annual year , so i t ' s over $80, 000 of changes.
12 Q. Whi ch cat egor y was changed by $80, 000?
13 A. I t ' s not per cat egor y, i t ' s per annual budget .
14 Q. When you t al k about t he 10 per cent , you ar e t al ki ng about
15 an i ncr ease, cor r ect ?
16 A. No, t he 10 per cent i s a change wi t hi n t he annual budget of
17 over 10 per cent .
18 Q. I s i t gi vi ng 10 per cent mor e money t han you had bef or e?
19 A. The annual budget r emai ns t he same, but i t ' s when you
20 change cat egor i es. You can make t he changes but i f i t ' s
21 over - - f or exampl e, year one, i f i t was over $80, 000, i f you
22 l ook at t he changes t hat was r equest ed i t was wel l over
23 $80, 000, and t hat ' s why he had t o r equest and get an appr oved
24 r evi sed budget nar r at i ve. The changes have t o be 10 per cent or
25 gr eat er wi t hi n al l cat egor i es.
( 212) 805- 0300
378
1 Q. Changes of mor e money spent i n a par t i cul ar cat egor y.
2 A. No, i t coul d be mor e, i t coul d be t aki ng money away. I t ' s
3 changes i n gener al , changes per i od.
4 Q. Any t i me you i ncr ease a cat egor y, you have t o t ake away
5 f r omanot her cat egor y i n or der t o st ay wi t hi n t he 800, 000,
6 cor r ect ?
7 A. Yes.
8 Q. Now, i n t hat year t hey r educed t he f r i nge benef i t s t o
9 $110, 000, cor r ect ?
10 A. Yes.
11 Q. And di d you have any di scussi ons - - when you had t he
12 ki ckof f on November 8, 2001, was t her e di scussi ons about
13 f r i nge benef i t s?
14 A. Not speci f i cal l y.
15 Q. And di d you ever have any di scussi on wi t h Dr . Kar r on as t o
16 f r i nge benef i t s t hat you r ecal l ?
17 A. No.
18 Q. Di d you ever have any conver sat i ons wi t h Lee Gur f ei n as t o
20 A. No.
21 Q. Di d you ever have any conver sat i on wi t h J oan Hayes as t o
23 A. No.
24 THE COURT: You ar e t al ki ng dur i ng t he cour se of
25 t he - -
( 212) 805- 0300
379
1 MR. RUBI NSTEI N: Dur i ng t he cour se of t he gr ant .
2 THE COURT: I s t hi s bef or e or af t er t he ki ckof f ?
3 Does i t i ncl ude at t he ki ckof f , any di scussi on of f r i nge
4 benef i t s?
5 THE WI TNESS: No.
6 Q. At any t i me up unt i l you l ast spoke t o anybody f r omCASI ,
7 di d you ever have any di scussi ons about t he f r i nge benef i t s?
8 A. No. Ther e i s r egul at i ons t o r egul at e t hat .
9 Q. So when t hey l ower ed t he f r i nge benef i t s f or 2001 by
10 $17, 000, t hey coul d have i ncr eased t he sal ar y by 17, 000 at t hat
11 t i me, cor r ect ?
12 A. Ther e i s r easons f or why he di d what he di d i n t hi s
13 exhi bi t .
14 THE COURT: But - -
15 Q. I ' mnot t al ki ng about a par t i cul ar exhi bi t , ma' am.
16 A. You' r e r ef er r i ng t o - -
17 THE COURT: We ar e t al ki ng about t he 17, 000.
18 MR. RUBI NSTEI N: Tal ki ng about t he 17, 000.
19 THE WI TNESS: Exhi bi t 22, 17, 000, yeah.
20 Q. Ri ght .
21 A. So, he deduct ed f r i nge benef i t s of 17, 000 because per sonnel
22 was decr eased, so t he f r i nge benef i t s went down.
23 Q. He coul d use t he 17, 000 somepl ace el se, cor r ect ?
24 A. Yes, he can use i t somewher e el se.
25 Q. Now, you t ol d us t hat you had t hese di scussi ons wi t h
( 212) 805- 0300
380
1 Gur f ei n about t he r ent , cor r ect ?
2 A. Yes.
3 Q. And t hat was ear l y on i n t he gr ant ?
4 A. The di scussi on was bef or e t he ki ckof f pr esent at i on and
5 af t er t he ki ckof f pr esent at i on, so i n Oct ober and i n November .
6 Q. 2001.
7 A. 2001.
8 Q. And t hen - -
9 THE COURT: You had t hose wi t h Gur f ei n.
10 THE WI TNESS: Wi t h bot h Gur f ei n and Dr . Kar r on.
11 Q. And you t ol d t hem- - and I t hi nk you t est i f i ed t hat t hey
12 doubl e t eamed you.
13 A. Yes.
15 Q. They kept aski ng and cal l i ng about t he same r equest about
16 t he r ent , r i ght ?
17 A. They asked t he same quest i ons and r ecei ved t he same answer .
18 Q. Same answer was?
19 A. Same r esponse f r omme i s no.
20 Q. And t hen when Hayes cal l ed i n t he f al l of 2002 - -
21 THE COURT: I t hi nk i t ' s af t er . Her t est i mony i s t hat
22 i t occur r ed af t er t he end of t he f i scal year .
23 MR. RUBI NSTEI N: Ri ght , whi ch i s t he f al l of 2002,
24 af t er Oct ober 1st .
25 THE COURT: I t mi ght be wi nt er .
( 212) 805- 0300
381
1 Q. Your audi t i s due at t he end of t he year , r i ght ?
2 A. The audi t i s due 90 days af t er t he end of awar d per i od.
3 Q. Ri ght . Af t er t he f i r st year ?
4 A. Of year one, whi ch ended Sept ember 30, 2002.
5 Q. And i s i t f ai r t o say t hat Hayes cal l ed bet ween Sept ember
6 30, 2002 and t he end of t hat year 2002 and asked you about t he
7 deduct i bi l i t y of t he r ent , cor r ect ?
8 A. I t ' s f ai r t o say t hat wi t hi n t hat t i me per i od I was cal l ed
9 by J oan Hayes and she di d ask about t he r ent .
10 Q. And i n your di scussi ons wi t h ei t her Lee Gur f ei n or Dr .
11 Kar r on about t he deduct i bi l i t y of t he r ent di d you suggest t o
12 ei t her of t hemt hat t hey coul d i ncr ease Dr . Kar r on' s sal ar y and
13 he coul d pay t he r ent out of an i ncr ease i n sal ar y?
14 A. No.
15 Q. I mean he coul d do anyt hi ng he want s wi t h hi s $175, 000 t hat
16 he get s pai d i n t he i ni t i al year , cor r ect ?
17 A. I f he get s a paycheck, j ust l i ke me and you when we get our
18 paycheck, you can do what ever you want wi t h i t once you' r e pai d
19 f or ser vi ces r ender ed.
20 Q. And i n f act you appr oved t he second year budget f or CASI ,
21 di d you not ?
22 A. Yes, I t hi nk f unds f or year t wo was appr oved.
23 Q. And di d t her e come a t i me - -
24 THE COURT: When woul d t hat have been?
25 THE WI TNESS: I woul d have t o l ook at t he amendment ,
( 212) 805- 0300
382
1 but we usual l y appr ove t he f unds f or t he f ol l owi ng year mont hs
2 ahead of t i me, but t hey cannot spend t hat amount of money unt i l
3 t hei r second year begi ns. So, f or exampl e, you coul d have
4 appr oved i t i n J une, but t her e woul d be a cl ause t hat says
5 al t hough we' r e obl i gat i ng aut hor i zi ng money J une 1, i t can' t be
6 spent unt i l your next year st ar t s, whi ch woul d have been
7 Oct ober 1. So, i t ' s aut hor i zed ahead of t i me, but i t can' t be
8 spent unt i l t he new year st ar t s.
10 Q. Now, di d t her e come a t i me t hat you l ear ned t hat Dr . Kar r on
11 had t aken any l oan f r omt he f unds, t he ATP f unds of $75, 000?
12 A. I hear d - - I wasn' t - -
13 THE COURT: No. Di d you - -
14 THE WI TNESS: Di d I ever hear t hat ?
15 THE COURT: I n your capaci t y.
16 THE WI TNESS: I hear d t hat .
17 Q. And di d you have any conver sat i ons wi t h Dr . Kar r on about
18 t hat $75, 000?
19 A. No.
20 THE COURT: When di d you hear i t ?
21 THE WI TNESS: Fr omJ oan Hayes.
23 THE WI TNESS: Fr omJ ones Hayes t he audi t or .
24 THE COURT: Appr oxi mat el y when di d you hear i t ?
25 THE WI TNESS: So i t woul d be November 2002, wi t hi n
( 212) 805- 0300
383
1 t hat t i me.
2 Q. November what ?
3 A. Dur i ng t he audi t , whi ch woul d be any t i me af t er Sept ember
4 2002, dur i ng t he audi t per i od of t he i ndependent CPA.
5 Q. Di d you ever have a conver sat i on wi t h Dr . Kar r on t el l i ng
6 hi mi t was i nappr opr i at e t o t ake t hat check of $75, 000? Di d
7 you ever t el l hi mt hat ?
8 A. I never t al ked t o Dr . Kar r on about t he check.
9 Q. And di d you ever r equest of Dr . Kar r on t hat he r et ur n t he
10 f unds t o t he pr oj ect ?
11 A. No.
12 Q. Di d you speak t o f eder al agent s i n Gai t her sbur g? That ' s
13 wher e your of f i ce i s, Gai t her sbur g?
14 A. I ' ml ocat ed i n Gai t her sbur g, Mar yl and.
15 Q. Gai t her sbur g. And di d you speak t o agent Rachel , bet t er
16 known as Rachel Gar r i son?
17 A. Rachel .
18 Q. Rachel . Di d you speak t o l et t er ?
19 A. Yes, I have spoken t o her .
20 Q. Di d you speak t o her on Sept ember 8, 2003?
21 A. I spoke t o her dur i ng t hat per i od. I don' t know t he exact
22 dat e, but Sept ember 2003, yes.
23 Q. And when you spoke t o her i n Sept ember of 2003, t hat woul d
24 be pr i or t o t he t i me you spoke t o J oan Hayes about t he $75, 000,
25 cor r ect ?
( 212) 805- 0300
384
1 A. I spoke t o J oan Hayes f i r st .
2 Q. Di dn' t you t el l us - - I ' msor r y, you' r e r i ght . I st and
3 cor r ect ed. Thank you.
4 Di d you t el l agent Gar r i son t hat you t ol d Dr . Kar r on
5 t hat i t was i nappr opr i at e f or hi mt o wr i t e hi msel f a check f or
6 $75, 000 out of pr oj ect f unds t o cover di sal l owed cost s? On
7 Sept ember 8, 2003.
8 A. I don' t r ecal l t hat conver sat i on.
9 Q. Wel l , l et me show you t hi s document .
10 A. Sur e.
11 Q. I t ' s mar ked as Gover nment Exhi bi t 3504- A. I di r ect your
12 at t ent i on t o t he t hi r d par agr aph t her e.
13 DEPUTY COURT CLERK: I t ' s not i n t he book.
14 MR. RUBI NSTEI N: These ar e gover nment document s t hat
15 ar e not i n t he book. Woul d your Honor i nst r uct t he j ur y about
16 3500 mat er i al ?
17 THE COURT: You want an i nst r uct i on?
18 MR. RUBI NSTEI N: About 3500 mat er i al , because t he
19 j ur or s don' t have i t i n t hei r book.
20 THE COURT: 3500 mat er i al i s mat er i al whi ch i n t hi s
21 case t he gover nment t ur ns over t o t he def ense r el at i ng t o al l
22 t he document s t hat mi ght possi bl y be i n some way r el evant t o
23 t he t est i mony of t he wi t ness, and def ense get s a copy of t hat
24 t o ai d t hemi n t hei r exami nat i on of t he wi t nesses. But t hey' r e
25 not admi t t ed i n evi dence, because al t hough t hey may be abl e t o
( 212) 805- 0300
385
1 use t hemf or cr oss- exami nat i on pur poses, t hey may not be
2 admi ssi bl e i n evi dence f or a number of l egal r easons. But t hey
3 ar e - - but t hey - - but i t i s di scover y t hat t he gover nment i s
4 obl i ged t o pr ovi de t o t he def endant s i n al l cr i mi nal cases.
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
386
1 Q. I show you t hat document , I show you t hat document , 3504 - -
2 A. Yes.
3 Q. - - 8.
4 A. Uh- huh.
5 Q. And does t hat r ef r esh your r ecol l ect i on f i r st t hat you had
6 t hi s conver sat i on wi t h - -
7 A. I t - - yes.
8 Q. Par don?
9 THE COURT: Wi t h whom?
10 Q. Wi t h t he agent woul d, was t hen known as Gar r i son, who I
11 under st and she got mar r i ed and she now i s Or t hwei n?
12 A. No.
13 THE COURT: The quest i on i s - -
14 Q. And I di r ect - - I ' msor r y. Al l r i ght . Does t hat r ef r esh
15 your r ecol l ect i on of t hat conver sat i on?
17 Q. On Sept ember 8t h, 2003, cor r ect ?
18 A. Yes.
19 Q. And di d you t el l t he agent t hat you spoke t o Dr . Kar r on and
20 r equest ed t he r et ur n of f unds, of t he $75, 000?
21 A. I made t he st at ement , yes. Because t hi s wasn' t par t of hi s
22 sal ar y. Thi s was j ust money he t ook out of t he gr ant s as a
23 whol e. Thi s wasn' t a sal ar i ed money. Thi s was gr ant money
24 t hat was t o be used f or t he di r ect pr oj ect cost .
25 Q. You j ust sai d bef or e t hat you never had conver sat i ons wi t h
( 212) 805- 0300
387
1 Dr . Kar r on about t hi s $75, 000, cor r ect ?
2 A. Yes. I sai d I di dn' t r ecal l havi ng a conver sat i on wi t h Dr .
3 Kar r on. Yes.
4 Q. Ar e you awar e t hat t he money was pai d back i n August ?
5 THE COURT: Do you have a r ecol l ect i on now t hat you - -
6 THE WI TNESS: Yeah.
7 THE COURT: Di d you have a conver sat i on wi t h hi m?
8 THE WI TNESS: Now t hat I ' mr eadi ng t hi s, yes.
9 THE COURT: Not - -
10 THE WI TNESS: Yes, I - -
11 THE COURT: You' r e not t o answer t he quest i on based on
12 what ' s i n t he document .
14 THE COURT: The quest i on i s, do you now r emember t hat
15 i n f act you di d have a conver sat i on wi t h Dr . Kar r on?
17 THE COURT: Regar dl ess of t he document ?
19 THE COURT: You do r emember , okay.
20 Q. And - -
21 THE COURT: Do you r emember when t hat conver sat i on
22 was?
23 THE WI TNESS: I woul d - - 2003.
25 Q. When i n 2003?
( 212) 805- 0300
388
2 Q. Di d you - - was i t t he ear l y par t of 2003?
4 Q. Was i t bef or e you sent t he l et t er aski ng f or an audi t of
5 CASI t o t he OI G?
6 A. No. I woul d not have known i t bef or e t he audi t .
7 Q. The audi t by OI G?
8 THE COURT: What audi t ar e you r ef er r i ng t o, t he audi t
9 by Mi ss Hayes or t he audi t by OI G?
10 THE WI TNESS: The audi t by Mi ss Hayes.
11 Q. So coul d you est i mat e when you had t hi s al l eged
12 conver sat i on wi t h Dr . Kar r on?
13 A. No.
14 Q. Di d you ask Dr . Kar r on f or r et ur n of t he f unds?
15 A. Yes.
16 Q. And di d Dr . Kar r on r et ur n t he f unds?
17 A. Not t o my knowl edge.
18 Q. Di d you f ol l ow up on get t i ng t hese f unds r et ur ned?
19 A. Dur i ng t hi s t i me Sept ember 8t h of 2003, I had, I had no
20 cont act wi t h Dr . Kar r on.
21 Q. Di d you r epor t t hi s t o your super i or , Ms. Gol dst ei n?
22 A. She was awar e of t hi s, of t he si t uat i on at hand.
23 Q. Di d you r epor t i t t o her , ma' am?
24 A. Yes.
25 Q. I s t her e any wr i t i ng of you r epor t i ng t hi s t o Mi ss
( 212) 805- 0300
389
1 Gol dst ei n?
2 A. No, t her e' s no wr i t i ng. I t ' s ver bal conver sat i on.
3 Q. I s t her e any wr i t i ng t o t he OI G whi ch i ndi cat es t hat Dr .
4 Kar r on t ook $75, 000 as per sonal money?
5 THE COURT: I s t her e any what ?
6 Q. Di d you wr i t e anyt hi ng t o t he OI G?
7 A. I di d not wr i t e anyt hi ng t o t he OI G. I don' t r ecal l
8 wr i t i ng anyt hi ng t o t he OI G.
9 Q. Now, you t el l us t hat - - have you ever been t o CASI ' s
10 headquar t er s at 300 East 33r d St r eet ?
11 A. No.
12 Q. Par don?
13 A. No.
14 Q. So i t ' s f ai r t o say t hat you have no i dea what ki nd of
15 const r uct i on, i f any, was done t her e, cor r ect ?
16 A. Cor r ect .
17 Q. Now, under t he t er ms of t he budget , I di r ect your at t ent i on
18 t o t he exhi bi t 35. And t hi s i s a st andar d f or m, i s i t not , f or
19 each year of t he budget ?
20 MR. EVERDELL: Your Honor , I obj ect . Thi s i s not an
21 appr oved budget , J udge.
23 THE COURT: I t ' s not a budget .
24 MR. RUBI NSTEI N: I t ' s a pr oposed budget .
25 THE COURT: You r ef er r ed t o i t as t he budget .
( 212) 805- 0300
390
2 Q. Pr oposed budget . I s t hat cor r ect , ma' am?
3 A. Thi s i s a pr oposed budget .
4 Q. And whose f or ms ar e t hese?
5 A. The f or ms t hat ar e at t ached ar e gover nment f or ms.
6 Q. So t hey' r e suppl i ed t o t he gr ant s r eci pi ent , t hese f or ms,
7 r i ght ?
8 A. They' r e par t of your - - t he package, yes. When t he gr ant
9 deci des t hat t hey want t o appl y f or pr oposal , t hey get a
10 pr oposal ki t , and t hese f or ms ar e i ncor por at ed i nt o t hat ki t .
11 Q. And do you want t o t ur n t o par agr aph D wher e i t says,
12 equi pment ; see t hat , ma' am?
13 A. Yes.
14 Q. And r eadi ng f r omt he f i f t h l i ne f r omt he bot t omof t hat
15 par agr aph: ATP f unds may, however , be used f or const r uct i on of
17 wi t h a new or exi st i ng bui l di ng, pr ovi ded t he equi pment or
18 f aci l i t i es ar e essent i al f or car r yi ng out t he pr oj ect . I f such
19 cost s ar e pr oposed, i ncl ude i t bel ow and pr ovi de j ust i f i cat i on.
20 I s t hat cor r ect ?
21 THE COURT: What page ar e you on?
22 MR. RUBI NSTEI N: I t ' s par agr aph D, your Honor , of
23 t hat - - t hese ar e - - I don' t know i f t hey' r e number ed or - -
24 i t ' s par agr aph D at t he t op of t he page. I t says " equi pment " .
25 Q. I s t hat cor r ect , ma' am?
( 212) 805- 0300
391
1 A. I don' t see - - I ' mnot f ol l owi ng wher e t hi s says t hat .
2 Because i f you l ook at t he at t achment , whi ch i s D, t hat ' s al so
3 i ncor por at ed i nt o t hi s.
4 THE COURT: Wai t a mi nut e. Let ' s make sur e you' r e
5 l ooki ng at what he want s you t o be l ooki ng at .
7 Q. See at t he t op of t he page i t says D, i n bol d pr i nt ,
8 equi pment ?
9 A. Yes.
10 Q. Go down f i ve l i nes f r omt he bot t om, wher e t he sent ence
11 st ar t s, ATP f unds may, however , be used?
12 A. Okay, yes, I see t hat .
13 Q. You see t hat ? For const r uct i on of exper i ment al r esear ch
14 and devel opment f aci l i t i es t o be l ocat ed wi t h a new or exi st i ng
15 bui l di ng, pr ovi ded t he equi pment or f aci l i t i es ar e essent i al
16 f or car r yi ng out t he pr oj ect , i f such cost s ar e pr oposed,
17 i ncl ude bel ow pr ovi de j ust i f i cat i on?
18 A. Yes, I see t hat .
19 Q. You see t hat ?
20 A. Yes.
21 Q. I s i t f ai r t o say t hat not al l const r uct i on cost s ar e not
22 al l owabl e under t he gr ant , cor r ect ?
23 A. We don' t - - i f you r ead above t hat , f unds may not be used
24 f or const r uct i on of new bui l di ngs or ext ensi ve r enovat i ons of
25 ext ensi on - - of ext endi ng - - of exi st i ng l abor at or y bui l di ngs.
( 212) 805- 0300
392
1 Q. But t hey may be expended. And i t says may, however ;
2 t hey' r e gi vi ng you an except i on?
3 A. I f cost s ar e pr oposed, i ncl ude and pr ovi de a j ust i f i cat i on.
4 So i f t hey wer e cl osed and t hey wer e appr oved, t hat ' s may - -
5 i t - - t hey may be appr oved, t hey may not be appr oved. But i n
6 t hi s i nst ance, t hey' r e not a par t of t hi s pr oposal .
7 Q. Wel l , t hi s pr oposal her e i s t he wr ong year , okay. That ' s
8 2002, cor r ect ?
9 A. Thi s i s a pr oposed budget - - t hi s r i ght her e i s a f or m.
10 Thi s i s a f or m. Thi s has not hi ng t o do wi t h t he pr oposal .
11 Thi s r i ght her e i s a f or mt hat ' s used no mat t er what year
12 you' r e i n. Thi s i s a t empl at e.
13 Q. But t hat t empl at e - -
14 A. Uh- huh, i s al ways used.
15 Q. - - i s pr ovi ded by t he gover nment ?
16 A. Yes.
17 Q. That happens t o be f or 2002, not 2001, cor r ect ?
18 A. No, no. I t ' s t he same. No. I t ' s t he same t empl at e used
19 f or 2001, 2002, 2003. I t ' s an exi st i ng t empl at e.
20 Q. Ri ght . But i t ' s f i l l ed i n. Ther e ar e l i nes f i l l ed i n?
21 A. I t ' s f i l l ed i n f or t he pr oposed budget of 12/ 24/ 02. I t ' s
22 f i l l ed i n. But t hi s i s t he same t empl at e t hat woul d be f or
23 2000, 2001, 2002, and 2003. I t ' s a t empl at e t hat ' s used as
24 par t of t he pr oposal package, no mat t er what year s i t ' s i n.
25 Q. The t empl at e does not i ncl ude, ma' am- -
( 212) 805- 0300
393
1 A. Excuse me?
2 Q. The number s t hat ar e f i l l ed i n, r i ght , gr ant ee, r i ght ;
3 under neat h you see under D, i t says met hodol ogy? Those number s
4 ar e not par t of a t empl at e, ar e t hey, addi ng up t o $95, 900?
5 That ' s not a t empl at e.
6 THE COURT: Wher e ar e you r eadi ng?
7 MR. RUBI NSTEI N: I ' mon t he same page.
8 THE COURT: Locat e her t he page.
9 MR. RUBI NSTEI N: The same page.
10 A. But when you ask about t hi s, you asked me about t he wor di ng
11 wi t hi n D, equi pment . You di dn' t ask me about t he number s on
12 t her e. You asked me about t he wor di ng and how t hey wer e
13 i nt er pr et ed. And I j ust comment ed on t he wor di ng and t ol d you
14 t hat t hese, t hi s wor di ng i s t empl at ed f or al l year s i n al l t he,
15 i n al l t he awar ds as par t of your ki t .
16 Q. Di d you di scuss t hi s at t he ki ckof f , t hi s par agr aph, at t he
17 ki ckof f on November 8t h, 2001?
18 A. Ther e was no need f or di scussi on. Ther e was no
19 const r uct i on.
20 THE COURT: I ' ml ost her e, Mr . Rubi nst ei n. Exhi bi t D
21 f r om, you' ve been r eadi ng f r om.
22 MR. RUBI NSTEI N: No, no. I t ' s not exhi bi t D, your
23 Honor . I t ' s par agr aph D.
24 THE COURT: Par agr aph D, ent i t l ed equi pment .
( 212) 805- 0300
394
1 THE COURT: Exhi bi t .
3 THE COURT: 35.
4 MR. RUBI NSTEI N: Ri ght .
5 THE COURT: And t hen af t er t he, what seems t o be f or m
6 l anguage i n t he f or m, t her e i s a t ot al under neat h of $231, 714.
7 But up above i t says, see at t ached exhi bi t . And I don' t see
8 t he at t ached exhi bi t . So I can' t det er mi ne and make any
9 det er mi nat i on what i t i s you' r e t al ki ng about .
10 MR. RUBI NSTEI N: J udge, my quest i on onl y r el at ed t o
11 t he f act t hat t he wi t ness i nsi st ed t hat t hi s was al l a
12 t empl at e, and I want t o show i t ' s not j ust a t empl at e, i t ' s
13 i nf or mat i on i n - - i n - - t hat i s i n addi t i on t o t he t empl at e
14 l et t er . That ' s al l t he pur pose of t he quest i on was.
15 THE COURT: I ' mnot sur e you have est abl i shed t hat .
16 So l et me under st and what you' r e sayi ng. I s t her e a di sput e
17 bet ween you and t he wi t ness as t o what appear s i n t he f i r st
18 f ul l par agr aph t her e?
19 MR. RUBI NSTEI N: We agr ee on - -
20 THE COURT: Bef or e we get t o i t emmet hodol ogy
21 comput at i on and cost ?
22 MR. RUBI NSTEI N: We agr ee t hat t he wor ds t hat I spoke
23 ar e i n t he document t hat she has.
24 Q. We' r e i n agr eement , cor r ect , Ms. Snowden?
25 THE COURT: Yes.
( 212) 805- 0300
395
1 Q. I r ead cor r ect l y f r omt hat document ?
2 A. I agr ee t hat you r ead t hemcor r ect l y f r omt he document .
3 Q. Thank you.
4 THE COURT: And t hat t hat par agr aph, as I under st and
5 i t , i s par t of t he gover nment f or mt hat i s submi t t ed - -
7 THE COURT: - - t o t he gr ant ee t o f i l l out .
9 THE COURT: So i s t her e any di sput e about t hat , Mr .
10 Rubi nst ei n? I j ust - -
11 MR. RUBI NSTEI N: Not at al l .
13 MR. RUBI NSTEI N: None at al l . I j ust want ed t o
14 show - -
15 THE COURT: I don' t see any di sput e bet ween you and
16 t he wi t ness, so pl ease go ahead.
18 Q. Now Dr . Kar r on, di d t her e come a t i me he r equest ed t hat - -
19 can I have t hat document , back, ma' am, t hat 3504 t hat I gave
20 you?
21 ( Handi ng)
22 Q. Now, i n t hese di scussi ons t hat you had wi t h Dr . Kar r on
23 about , r ent and ut i l i t i es asi de, di d you say anyt hi ng el se
24 ot her t han no, when he asked you about t he gr ant money cover i ng
25 r ent and ut i l i t i es?
( 212) 805- 0300
396
1 A. I sai d no.
2 Q. Di d you di scuss t hi s wi t h Mi ss Gol dst ei n, t he super vi sor - -
3 A. Yes.
4 Q. - - t he f act t hat Ms. Gol dst ei n advi sed you t hat i f CASI got
5 commer ci al space and i f t hey made a l ease i n t he name of t he
6 gr ant ATP, DMT, t hat t hat woul d be an accept abl e expense?
7 A. No, i t ' s not an accept abl e expense.
8 Q. No, no. Di d you have t hat di scussi on wi t h Ms. Gol dst ei n?
9 Di d you - - di d Ms. Gol dst ei n t el l you t hat ?
10 A. No.
11 Q. Di d you ever t el l Dr . Kar r on t hat , why don' t you i ncr ease
12 your sal ar y and pay i t out of your sal ar y, t hi s r ent f i gur e?
13 A. Never .
14 Q. Di d Dr . Kar r on advi se you at any t i me t hat t he r ent moni es
15 t hat wer e bei ng pai d wer e bei ng pai d f or a t i me per i od bef or e
16 t he ATP gr ant , and i t was back r ent owed?
17 A. No.
18 Q. So i t was your under st andi ng, when you spoke t o Dr . Kar r on,
19 t hat he was t al ki ng about cur r ent r ent whi l e he was r ecei vi ng
20 f unds f r omATP?
21 A. I t was t o my under st andi ng t hat he was aski ng t o pay f or
22 cur r ent , cur r ent - - use cur r ent f unds t o pay f or r ent , and t he
23 cur r ent f unds wer e di r ect cost s. You can not use - - you can' t
24 use ATP money. Once he r ender ed ser vi ces and he had a pay
25 check at t he end of t he day, he coul d do what ever he want ed.
( 212) 805- 0300
397
1 But he coul d not char ge t hi s gr ant f or di r ect as a - - r ent as
2 di r ect cost of t hi s pr oj ect .
3 Q. I s i t a f act t hat , t hat f unds, t hat pr e- gr ant - - i n ot her
4 wor ds, t hi s gr ant st ar t ed Oct ober 1st , 2001?
5 A. Uh- huh.
6 Q. That t her e wer e st ar t up cost s ant i ci pat ed pr i or t o t he t i me
7 t hat t he gr ant was act ual l y f or mal l y appr oved, cor r ect ?
8 A. No.
9 Q. Wel l , i sn' t i t a f act t hat a gr ant ee can pay pr e- gr ant
10 expenses r el at ed t o t he gr ant , but t hat t her e i s no obl i gat i on
11 f or NI ST t o r epay t hose moni es?
14 quest i on.
15 Q. I s i t a f act , ma' am, t hat pr e- gr ant expenses, i n ot her
16 wor ds, i n t hi s case expenses i ncur r ed pr i or t o Oct ober 1st ,
17 2001, t hat wer e f or i t ems or mat er i al s r el at ed t o t he ATP
18 gr ant , ar e al l owed t o be char ged t o t he gr ant ?
19 A. No.
20 Q. What i f you buy a pi ece of equi pment on Sept ember 30t h,
21 2001 f or t he gr ant ' s use, i t get s del i ver ed on Oct ober 2, 2001,
22 you pay f or i t on Oct ober 3, 2001, i s t hat expense an al l owabl e
23 expense or nonal l owabl e expense?
24 A. Non- al l owabl e. You don' t even have a gr ant unt i l
25 Oct ober 1, 2001. And accor di ng t o t he f undi ng l i mi t at i on
( 212) 805- 0300
398
1 cl ause t hat ' s i ncor por at ed i nt o t hi s gr ant , f unds can onl y be
2 expended dur i ng a per i od of t i me. And t he per i od of t i me f or
3 t hi s par t i cul ar gr ant was st ar t i ng Oct ober 1, 2001 t hr ough
4 Sept ember 30t h, 2002. So t hat ' s when f unds ar e t o be expended,
5 and t hat i s al l document ed as par t of speci al wor k condi t i ons,
6 whi ch super sede ot her r egul at i ons i ncor por at ed t o t hi s gr ant .
7 Q. Ar e you f ami l i ar wi t h Feder al Regi st er Vol ume 66, November
8 1M?
9 THE COURT: Have you ever hear d of t hat ?
10 THE WI TNESS: I mean, I need a t i t l e. I mean, he
11 coul d at l east gi ve me a t i t l e or a CFR, some ki nd of
12 f eder al - - some gui del i nes.
13 Q. Wel l , di d you send an e- mai l on August 17t h, 2006 about
14 5: 53 p. m. t o Agent Ondr i k and c. c. i t t o Mar i l yn Gol dst ei n?
15 A. Ther e' s a possi bi l i t y. I don' t r ecal l . Thi s i s - -
16 Q. Let me show you what ' s been - -
17 A. Okay.
18 Q. - - mar ked as gover nment exhi bi t 3504/ C.
19 By t he way, your e- mai l addr ess i s Hope. Snowden@NI ST.
20 Gov, cor r ect ?
21 A. Yes, t hat ' s cor r ect .
22 THE COURT: You want t o show - -
23 MR. EVERDELL: She' s r eadi ng.
24 THE COURT: Show - - al l r i ght , good.
25 A. Okay. Okay.
( 212) 805- 0300
399
1 Q. I s t hat your e- mai l , ma' am?
2 A. Thi s i s my e- mai l .
3 Q. And ar e t he wor ds cont ai ned t her ei n, wor ds t hat you sent i n
4 t hat e- mai l ?
5 A. These ar e wor ds t hat I sent i n my e- mai l .
6 Q. May I have t he document , pl ease, ma' am.
7 ( Handi ng)
8 Q. Di d you, i n t hat e- mai l , say cost s - - wr i t e: Cost s
9 i ncur r ed bef or e t he pr oj ect , Feder al Regi st er , J anuar y 2, 2001,
10 Vol ume 66, Vol ume 1M. st at es, pr eawar d act i vi t i es, appl i cant s
11 or i nst i t ut i ons who i ncur any cost pr i or t o an awar d bei ng
12 made, do so sol el y at t hei r own r i sk of not bei ng r ei mbur sed by
13 t he gover nment . Not wi t hst andi ng any ver bal assur ance t hat may
14 have been pr ovi ded, t her e i s no obl i gat i on on t he par t of NI ST
15 t o cover t he pr eawar d cost . Thi s not i ce i s appl i cabl e t o t hi s
16 awar d.
17 Di d you - -
18 THE COURT: Anyt hi ng el se? Ther e does seemt o be
19 anot her - -
20 A. I s t her e a quest i on wi t h t hat ? Because I wr ot e t hat and
21 under t her e, up under neat h t her e i t al so says, we do not pay
22 pr eawar d cost s, whi ch ar e consi der ed sunk cost s.
23 Q. Sunk cost s - -
24 THE COURT: That ' s s- u- n- k cost ?
( 212) 805- 0300
400
1 Q. And, i n f act , what I j ust r ead says t hat you do, on
2 occasi on, pay pr e- gr ant cost s, cor r ect ?
3 A. I t says t hat we, t he gover nment , has no - - we have no
4 obl i gat i on t o pay. So i t doesn' t say t hat we pay i t . I t says
5 we - -
6 Q. Does i t say you don' t pay i t ?
7 A. I t says we don' t have any obl i gat i on.
8 Q. Does i t say you do not pay i t ; yes or no?
9 A. No. But t he sent ence under t hat says t hat we don' t pay i t ,
10 t he sent ence r i ght under t hat .
11 Q. You know what sunk cost i s, ma' am?
12 A. To - - we i nt er pr et i t as pr e- awar d cost , cost t hat you
13 i ncur r ed bef or e you wer e gi ven a pr oposal . That ' s how - -
14 t hat ' s t he i nt er pr et at i on.
15 Q. That ' s j ust your i nt er pr et at i on?
16 A. That ' s t he ATP i nt er pr et at i on, and i t ' s al so l ocat ed i n a
17 r egul at i on and i t says sunk cost s.
18 Q. And i s i t f act t hat sunk cost s i s cost s t hat you al r eady
19 pai d out of your pocket pr i or t o t he t i me t hat t he gr ant
20 st ar t s, and t hat t her e' s - - i sn' t t hat cor r ect ?
21 A. Sunk cost s i s any cost t hat you i ncur pr i or t o a pr oposal
22 or cont r act or what have you.
23 THE COURT: Pr oposal bei ng appr oved.
24 THE WI TNESS: Ri ght . I t ' s unappr oved cost . Because
25 you r eal l y don' t even know i f you' r e goi ng t o get t he pr oposal ,
( 212) 805- 0300
401
1 so you ar e j ust spendi ng money at your own r i sk i f you' r e ever
2 goi ng t o r ecei ve i t .
4 Q. When was Dr . Kar r on not i f i ed, of f i ci al l y, t hat he r ecei ved
5 t hi s awar d, t hat CASI r ecei ved t hi s awar d?
6 THE COURT: Do you know of your own knowl edge?
7 THE WI TNESS: My own knowl edge i s t hat i t was sent out
8 pr obabl y ar ound ver y t he end of Sept ember . So he shoul d have
9 got t en i t Oct ober 1st , 2001.
10 Q. And when i s a deci si on made by ATP as t o who i s goi ng t o be
11 a r eci pi ent of an awar d?
12 A. Depends on when t he pr oposal s ar e bei ng r ead, and t hen
13 deci si ons ar e made l at er on.
14 But no pr oposer can ever know t hat t hey r ecei ve a
15 gr ant unt i l appr opr i at i ons ar e appr oved. And appr opr i at i ons i s
16 t he money t hat we' r e gi ven f or t he t hese compet i t i ons. So,
17 basi cal l y, you go t hr ough a compet i t i on, you go t hr ough
18 ever yt hi ng, and you get - - you get al l your cl ear ances, and
19 appr opr i at i ons - - Congr ess can st i l l say at t he end of t he day,
20 you' ve done al l t hi s wor k and we don' t have money. So unt i l
21 you r ecei ve t hat paper document i n your hand, t hat ' s t he onl y
22 not i f i cat i on t hat you get knowi ng t hat you r ecei ved t hi s awar d.
23 You get no ot her not i f i cat i on, ' cause we don' t know t i l l t he
24 l ast mi nut e. Ever yt hi ng i s si t t i ng out t her e wai t i ng, and i t ' s
25 si gned. I t cannot be mai l ed unt i l we ar e not i f i ed we can mai l
( 212) 805- 0300
402
1 out t hese document s.
2 Q. Don' t you have a $60 mi l l i on appr opr i at i on i n 19, i n 2001
3 t o gi ve t o peopl e who r ecei ve awar ds?
4 A. I don' t know how much was al l ocat ed i n 2001.
5 Q. Ar e you t el l i ng t hi s j ur y t hat peopl e go t hr ough al l ki nds
6 of submi ssi ons and at t he end of t he day t her e' s no money
7 t her e; i s t hat what you' r e t el l i ng t hi s j ur y?
8 A. No. I ' mt el l i ng t he j ur y t hat we r ecei ve over 300 or mor e
9 pr oposal s, and t hat at t he end of t he day nobody knows. We
10 have t o get not i f i cat i on. The per son who i s goi ng t o r ecei ve
11 t hat awar d does not know unt i l he r ecei ves t he paper document .
12 He doesn' t - - he, she, t he company does not know. Unt i l you
13 r ecei ve somet hi ng i n t he mai l , you' r e one of - - you coul d be
14 one of a mi l l i on appl i cant s. You don' t know unt i l you r ecei ve
15 t hat document i n t he mai l , so you' r e j ust , you' r e unawar e. The
16 money - -
17 Q. What i f I have a f r i end at ATP and I cal l ed my f r i end and I
18 say, di d I get t he awar d?
20 quest i on.
22 Q. Do you know whet her or not - -
23 THE COURT: I t ' s a hypot het i cal quest i on. Let ' s - -
24 Q. Do you know whet her or not Dr . Kar r on has a per sonal
25 r el at i onshi p wi t h Mar k St anl ey?
( 212) 805- 0300
403
1 A. Not - -
2 THE COURT: Obj ect i on - - do you know?
3 A. Not t o my knowl edge. I have no i dea.
4 THE COURT: Al l r i ght , okay.
5 Q. You don' t know one way or t he ot her ?
6 A. No.
7 Q. Cor r ect ? Now - -
8 THE COURT: Have you got any ot her quest i ons?
10 THE COURT: Have you got much mor e?
11 MR. RUBI NSTEI N: Yes, a di f f er ent t opi c.
13 MR. RUBI NSTEI N: Di f f er ent t opi c.
14 THE COURT: Have you got much mor e?
15 MR. RUBI NSTEI N: I t hi nk I have enough, J udge, t hat i f
16 your Honor want s t o br eak f or l unch now f or ever ybody, I t hi nk
17 i t woul d be appr opr i at e t i me.
18 THE COURT: I t hi nk we bet t er br eak and come back at
19 f i ve mi nut es af t er t wo.
21 THE COURT: You can st ep down.
23 THE COURT: I s t her e anyt hi ng t o t ake up?
24 MR. KWOK: Not f r omt he gover nment at t hi s moment .
25 MR. RUBI NSTEI N: Not f r omt he def ense, your Honor .
( 212) 805- 0300
404
1 THE COURT: How much l onger ar e you goi ng t o be, Mr .
2 Rubi nst ei n?
3 MR. RUBI NSTEI N: I don' t t hi nk I shoul d be mor e t han a
4 hal f - hour , J udge, t ops.
5 THE COURT: Redi r ect ?
6 MR. EVERDELL: Your Honor , I have a f ew t hi ngs t o
7 cover , I t hi nk t o cl ar i f y. Maybe 15 mi nut es. I ' l l t r y t o keep
8 i t as br i ef as possi bl e.
9 THE COURT: Al l r i ght . Wel l , we may have t o r un a
10 l i t t l e l at e t oday.
11 MR. EVERDELL: I ' l l t r y t o be as br i ef as I can.
12 THE COURT: Al l r i ght . Thank you.
15 2: 05 p. m.
16 THE COURT: Good af t er noon. Okay, i s Rober t her e?
17 Fi ve af t er t wo.
18 MR. RUBI NSTEI N: Your Honor , I have a housekeepi ng
19 mat t er t hat I have t o addr ess t he Cour t on.
20 THE COURT: Yes, si r .
21 MR. RUBI NSTEI N: I aman at t or ney i n a 62 def endant
22 case i n t he East er n Di st r i ct of New Yor k, and a pl ea has been
23 wor ked out wi t h t he gover nment t hat i f 52 of t he 62, I t hi nk
24 t he number i s, def endant s pl ead gui l t y, t hey' r e goi ng t o be
25 af f or ded t hr ee poi nt s r educt i on f or gl obal pl ea.
( 212) 805- 0300
405
1 They have schedul ed my pl ea f or 5: 00 o' cl ock t hi s
2 af t er noon i n t he East er n Di st r i ct . I want t o ask your Honor i f
3 i t ' s possi bl e f or me t o be - - f or us t o br eak at 4: 00 o' cl ock,
4 so t hat I coul d handl e t he pl ea t her e.
5 THE COURT: I don' t see a pr obl em. I mi ght go a
6 coupl e mi nut es af t er , but l et ' s see i f we can get t hese peopl e
7 i n. Who i s i t bef or e?
8 MR. RUBI NSTEI N: I t ' s bef or e Magi st r at e J udge Levy.
9 I t ' s act ual l y, t he case i s bef or e J udge Wei nst ei n, but he has
10 t he pl ea t aken by a magi st r at e j udge.
12 MR. RUBI NSTEI N: Who doesn' t l i ke t o st ay past 5: 00
13 o' cl ock.
14 THE COURT: Doesn' t , t he magi st r at e J udge doesn' t ?
15 MR. RUBI NSTEI N: I hear d what you sai d about t he
16 pr obat i on depar t ment s, J udge. I ' mnot goi ng t o say anyt hi ng
17 about t he magi st r at e j udges.
18 THE COURT: Wel l , wher e i s Rober t ? Not her e. I ' l l go
19 i n and see. I ' l l do i t . I ' l l see i f t hey' r e r eady.
20 THE DEPUTY CLERK: I ' l l check.
21 THE COURT: The j ur y i s comi ng i n.
23 THE COURT: Pl ease be seat ed. Pl ease pr oceed, Mr .
24 Rubi nst ei n. Oh, t he wi t ness, t he wi t ness.
25 MR. RUBI NSTEI N: I coul d st ar t wi t hout her , J udge.
( 212) 805- 0300
406
1 ( Wi t ness r esumi ng t he wi t ness st and)
2 THE COURT: Mr . Rubi nst ei n.
4 Q. Good af t er noon, Ms. Snowden.
6 Q. Ear l i er t oday t he gover nment di scussed wi t h you exhi bi t 30
7 whi ch i s a - - whi ch i s t he l et t er f r om- - memor andumf r omyour
8 boss, Mar i l yn Gol dst ei n, dat ed August 16t h, 2003, cor r ect ?
9 A. No. I t ' s a memor andumf or Mar i l yn, not f r omher .
10 Q. Okay. For her ?
11 A. Uh- huh.
12 Q. And, i n f act , t he l et t er pr ovi des t hat t her e ar e f i ve
13 budget r evi si ons?
14 A. I t says t her e' s qui t e a f ew budget r evi si ons.
15 Q. And, i n f act , al l of t hose budget r evi si ons appl y t o t he
16 f i r st year of t he gr ant s, i s t hat cor r ect ?
17 A. No.
18 Q. Does i t say at t he t op l i ne i n f i ve communi cat i ons, copi es
19 at t ached. CASI has r equest ed ATP appr ove t he r evi sed budget
20 l i st i ng act ual cost s f or year one.
21 I sn' t t hat what t hey say, al l t hese r evi si ons r el at e
22 t o t he f i r st year ?
23 A. No. I mean, t he f i r st quest i on you asked me wer e ar e t he
24 r evi si ons i n year one and I t ol d you no.
25 THE COURT: Ar e you aski ng whet her t he memor andumsays
( 212) 805- 0300
407
1 t hat or ar e you aski ng t he wi t ness f or her r ecol l ect i on of t he
2 budget s?
3 Q. You t est i f i ed on di r ect exami nat i on - -
4 THE COURT: I j ust want t o know whi ch you' r e aski ng
5 because i t ' s not cl ear .
6 Q. I ' maski ng - - i sn' t i t a f act , ma' am, t hat t he f i ve
7 r evi si ons submi t t ed on behal f of CASI dat ed August 1st , 2002,
8 Oct ober 20t h, 2002, December 2nd, 2002, December 20t h, 2002,
9 and Febr uar y 25t h, 2003, al l r el at e t o t he f i r st year of t he
10 gr ant s?
11 A. No, t hey don' t . The f i r st year of t he gr ant ended
12 Sept ember 30t h, 2002. These exceed t hat dat e.
13 Q. Ar e you f ami l i ar wi t h t he budget r evi si ons?
14 A. Yes, I am.
15 Q. And ar e you f ami l i ar wi t h t he - - t hat you can r evi se a
16 budget af t er t he f i r st year ?
17 A. Yes, you can r evi se a budget af t er t he f i r st year .
18 Q. So i sn' t i t a f act t hat t hi s memor andumt al ks about
19 r evi si ng t he budget f or t he f i r st year ?
20 A. No. I t says has - - af t er t hese dat es, i t says has
21 i ndi cat ed on t he l ast f our of t he submi ssi ons t hat t he f i r st
22 year ' s cost l i st s ar e act ual .
23 So, basi cal l y, i t ' s st at i ng t hat t hese budget s
24 r epr esent r evi si ons and t her e wer e r evi si ons made t o year one,
25 but year one was over . So t hey shoul d have been act ual
( 212) 805- 0300
408
1 number s. That ' s what t hi s i s sayi ng.
2 Q. I f CASI had submi t t ed one budget r evi si on i nst ead of f i ve
3 wi t h f i ve di f f er ent number s - -
4 THE COURT: No hypot het i cal s, pl ease.
5 MR. RUBI NSTEI N: Okay. You' r e r i ght , J udge.
6 Q. So i t ' s your t est i mony t hat t he f i ve dat es when budget
7 r evi si ons wer e submi t t ed, t hey wer e submi t t ed f or year ot her
8 t han - - endi ng Oct ober - - Sept ember 1st , 2002?
10 THE COURT: I t hi nk her t est i mony speaks f or i t sel f
11 and I ' mgoi ng t o sust ai n t he obj ect i on. Let ' s have anot her
12 quest i on.
13 Q. What year was - - t he r evi sed budget f or Febr uar y 25t h, t hat
14 was submi t t ed Febr uar y 25t h 2003, what year was t hat r evi si on
15 r equest f or ?
16 A. Thi s r evi si on r equest was st i l l unappr oved budget t hat had
17 st ar t ed i n Oct ober 20t h of 2002. But I cont i nuousl y r ecei ve
18 r evi sed budget s wi t hi n shor t per i ods of t i me t hat wer e never
19 ever appr oved. So i t was j ust , he' d send me one and t hen a
20 week or l at er I get anot her one. But t hey al l st ar t ed f r om
21 or i gi nal , t he or i gi nal Oct ober 20t h. So i t was - - one
22 or i gi nat ed, I had quest i ons, t hen he r evi sed t hemand sent me
23 anot her budget . I had ot her quest i ons because t her e was ot her
24 changes, and so i t cont i nued on, unt i l t hi s war d was suspended.
25 Q. The awar d was suspended on J une 27t h, ' 03, cor r ect ?
( 212) 805- 0300
409
1 A. J une - - yes.
2 Q. The quest i on i s, ma' am, t he year t hat t hese r equest s f or
3 budget r evi si ons, what year ar e t hese r equest s f or , t he f i r st
4 year , t he second year , t he t hi r d year of t he gr ant ?
5 THE COURT: Mr - -
7 THE COURT: Mr - - t he budget cover s t hr ee year s. Each
8 budget cover s t hr ee year s.
9 MR. RUBI NSTEI N: The r evi si on - -
10 THE COURT: I t ' s t he gr ant budget cover s t hr ee year s.
11 I f you want t o f r ame your quest i on r i ght , f r ame i t wi t h r espect
12 t o t he f i r st year , and ask her a quest i ons about t he f i r st year
13 and whet her t her e wer e r evi si ons t her e. Ther e ar e r evi si ons i n
14 ot her year s as wel l as t he f i r st year , i n or der t o end up wi t h
15 a t ot al amount of t he gr ant .
16 Q. You can' t move money bet ween year s, can you, i n t he
17 budget s?
18 A. When one - - when one year ends; f or exampl e, i f year one
19 ends or i t ' s get t i ng r eady t o end, you can r equest - - i f al l
20 t he money wasn' t expended wi t hi n t hat year , you can r equest t o
21 car r y over money t o t he second year . So t hat means your year
22 one woul d have al l your act ual s, and t hen you woul d t ake t he
23 money t hat you' r e not goi ng t o use and you can car r y i t over
24 i nt o year t wo.
25 But when - - i f year one had t ot al l y t ot al l y ended, you
( 212) 805- 0300
410
1 can not car r y any of t hat , t hose f unds over , none. So i f you
2 r equest f or r evi si on bef or e t hat year ends, and say I see t hat
3 i t ' s now t he end of my per i od, I ' mnot goi ng t o spend $100, 000,
4 I woul d l i ke t o r evi se and car r y i t over t o year t wo, you' r e
5 al l owed t o do t hat . But once t he year ends, i t ' s ended, you
6 can' t have any r evi si ons once t he dat e has expi r ed.
7 Q. Year one ended Sept ember 30t h, 2002, cor r ect ?
8 A. Yes.
9 Q. Budget was appr oved f or t he year st ar t i ng Oct ober 1st , 2002
10 endi ng Sept ember 30t h, 2003, cor r ect ?
11 A. No. Ther e wasn' t anot her appr oved budget . The l ast
12 appr oved budget , whi ch was amendment t o, was st i l l i n ef f ect .
13 Ther e was no ot her budget s appr oved.
14 What happened - - what you' r e t al ki ng about i s t hat we
15 obl i gat ed money f or t he second year dur i ng t hat f undi ng per i od.
16 Q. Ri ght .
17 A. Under - -
18 Q. You gave t hat money t o CASI f or t he second year , $600, 000
19 and change, cor r ect ?
20 A. We aut hor i zed t hat money st ar t i ng Oct ober 1st , 2002 f or t he
21 pur poses of spendi ng i t accor di ng t o t he r evi sed budget of
22 amendment t wo.
23 Q. Wer e any of t he f i ve r evi si ons r ef er r ed t o i n gover nment
24 exhi bi t 30 r el at ed t o year t wo?
( 212) 805- 0300
411
1 THE COURT: Look t hr ough t hem. Look t hr ough t hemand
2 see i f t her e ar e any r evi si ons t o year t wo. You can compar e i t
3 what , 21 t o - -
4 THE WI TNESS: Yeah, 32 st ar t s year t wo, t hat ' s goi ng
5 t o be wi t hi n t hat per i od, exhi bi t 32.
6 THE COURT: What wer e you compar i ng t o do - - t o
7 det er mi ne t hi s?
8 THE DEPUTY CLERK: I woul d have t o l ook at exhi bi t 32
9 because year t wo st ar t ed and t he or i gi nal budget .
10 THE COURT: Al l r i ght . And what ' s - - or i gi nal budget
11 i s exhi bi t 21; i s t hat t he one you' r e t al ki ng about ?
12 THE WI TNESS: No, t her e' s no budget i n 21, so l et ' s
13 l ook at - -
14 THE COURT: What exhi bi t number i s i t ?
15 THE WI TNESS: I f you l ook at exhi bi t 14.
17 THE WI TNESS: That ' s t he or i gi nal budget .
18 THE COURT: Al l r i ght . 14 and 32, i s t hat cor r ect ?
19 THE WI TNESS: Yes, I can, I can do a compar i son t her e.
20 THE COURT: Any changes i n t he second year ?
22 THE COURT: Tel l us what t hey ar e.
23 THE WI TNESS: The per sonnel - - t her e wer e per sonnel
24 changes f r omt he or i gi nal t o t he, t he r equest ed r evi sed
25 per sonnel changes. The per sonnel went down. Your f r i nge
( 212) 805- 0300
412
1 benef i t s went down i n t he r evi sed, pr oposed r evi sed budget t hat
2 was not appr oved. Tr avel decr eased i n t he pr oposed r evi sed
3 budget t hat was not appr oved. Equi pment i ncr eased i n t he
4 pr oposed r evi sed budget t hat was not appr oved.
5 You have money t hat i s i ncor por at ed f or mat er i al and
6 suppl i es. I n t he or i gi nal budget t her e was zer o f or mat er i al
7 and suppl i es. Then you have your subcont r act or . Your
8 subcont r act or , i t decr eased i n t he r evi sed unappr oved budget .
9 The ot her changed. I t i ncr eased i n t he unappr oved
10 budget . And t hat ' s i t . So t hose changes f or ever y cat egor y,
11 t her e wer e pr oposed changes f or ever y cat egor y.
12 Q. And t hey wer e based upon t he act ual s, cor r ect ?
13 A. They coul dn' t be based on t he act ual s. Because i f you l ook
14 at - - i f you compar e year one t o year one, year one shoul d have
15 been act ual s, not year t wo. Year one and year one, t hey have
16 changes t oo.
17 Q. You r ecei ved t he audi t i n J une of 2003?
18 A. Yes.
19 Q. And do you know when Dr . Kar r on or CASI r ecei ved a copy of
20 t hat audi t f r omJ oan Hayes?
21 A. No.
22 Q. Di d you have a di scussi on, pr i or t o r ecei vi ng t he audi t ,
23 wi t h Dr . Kar r on as t o t he l at eness of t he submi ssi on of t he
24 audi t ?
25 A. Yes, I di d have a di scussi on wi t h hi mabout t he l at eness of
( 212) 805- 0300
413
1 t he submi ssi on of t he audi t .
2 Q. Because t he audi t was due wi t hi n 90 days af t er t he end of
3 t he f i r st year , cor r ect ?
4 A. Yes.
5 Q. That woul d t ake you t i l l t he end, December 31st , 2002,
6 cor r ect ?
7 A. Yes.
8 Q. And t hey had r ecei ved an ext ensi on of t hat , cor r ect ?
9 A. Yes. They asked f or a 60 day ext ensi on.
10 Q. And t hey got 60 day ext ensi on?
11 A. Yes.
12 Q. And you st i l l hadn' t r ecei ved t he budget af t er 60 days,
13 cor r ect ?
14 A. Yes.
15 Q. And because t hat woul d t ake you t i l l t he begi nni ng of
16 Mar ch, r i ght ?
17 A. End of Febr uar y, begi nni ng of Mar ch, yes.
18 Q. And i n f act t hat Dr . Kar r on asked you i f he coul d f i r e
19 Hayes?
20 A. He never asked me coul d he f i r e J oan Hayes.
21 Q. I sn' t t he expense of t he audi t a deduct i bl e expense f r om
22 NI ST?
23 A. When you pr opose your budget , you i ncor por at e - - t her e i s a
24 pr i ce associ at ed wi t h t he audi t under ot her f or year s one and
25 year t hr ee, and t hat ' s i n your or i gi nal pr oposed budget , and
( 212) 805- 0300
414
1 t hat was appr oved.
2 Q. So t hat ' s an aut hor i zed expense - -
3 A. I t ' s aut hor i zed.
4 Q. - - on t he budget , r i ght ?
5 A. Yes, i t i s.
6 Q. And di d you t el l Dr . Kar r on, we pai d f or t he budget f or t he
7 audi t and we want i t ?
8 A. I asked, af t er 60 days - -
9 Q. Di d you t el l Dr . Kar r on - - you hear t he quest i on? Di d you
10 t el l Dr . Kar r on - -
11 A. I ' manswer i ng your quest i on. Af t er 60 days - -
12 THE COURT: Wai t , l et hi mask t he quest i on.
13 THE WI TNESS: Okay, al l r i ght .
14 Q. You pai d f or t he budget f or t he audi t and you want i t ; di d
15 you say t hat , yes or no?
16 A. Yes.
17 Q. And, i n f act , moni es had been spent and gi ve t o J oan Hayes
18 f or t he audi t , cor r ect ?
19 A. I don' t know what was done wi t hi n hi s cor por at i on.
20 Q. Now, and i n f act t he gr ant was suspended because of t he
21 absence of t he cof undi ng por t i on, cor r ect ?
22 A. I t was suspended because of noncompl i ance, whi ch
23 cor r esponded wi t h t he r equi r ed cost shar e t hat was not pai d.
24 Q. Now, di d you have di scussi on wi t h Dr . Kar r on about t he use
25 of equi pment as a por t i on of t he cost shar e cont r i but i on?
( 212) 805- 0300
415
1 A. No.
2 Q. Di d you have di scussi ons wi t h Mar i l yn Gol dst ei n as t o t he
3 cost s shar e cont r i but i on of pr eowned equi pment ?
4 A. No.
5 Q. I show you what ' s been mar ked i n evi dence, I ' msor r y, i s
6 mar ked f or i dent i f i cat i on as Gover nment ' s 3504/ M and ask you i f
7 you r ecogni ze t hi s document , ma' am?
8 A. Yes, I r ecogni ze t hi s document .
9 Q. Can I have i t back, pl ease?
10 A. Sur e.
11 Q. Thank you.
12 And t hi s i s a l et t er t hat ' s wr i t t en t o Dr . Kar r on?
13 A. Yes.
14 Q. On J ul y 25t h, 2003, r i ght ?
15 A. Yes.
16 Q. Fr omyour boss, Mar i l yn Gol dst ei n?
17 A. Fr ommy f or mer super vi sor , yes, i t i s.
18 Q. Now, by t he way, di d you have cont act wi t h Dr . Kar r on af t er
19 t he gr ant was suspended on J une 27t h, 2003?
20 A. I pr obabl y had l i mi t ed cont act wi t h hi maf t er , af t er i t was
21 suspended.
22 Q. Now, gover nment exhi bi t - - had you had cont act wi t h t hi s
23 Bob Benedi ct bef or e t he gr ant was suspended?
24 A. Yes, I t hi nk I di d. I ' m- - I don' t r ecal l .
25 Q. Wel l , i n f act , i n Gover nment ' s 48 i s t he l et t er t hat he
( 212) 805- 0300
416
1 wr ot e on August 13t h, 2003?
2 A. Okay.
3 Q. Cor r ect ?
4 A. Yes.
5 Q. And t her e wer e - - you t est i f i ed as t o r evi si ons i n t he
6 f i nanci al st at us r epor t s; r ecal l t hat ?
7 A. Yes.
8 Q. And t hose r epor t s, you' r e supposed t o submi t a f i nanci al
9 st at us r epor t ever y quar t er , ever y t hr ee mont hs?
10 A. Yes.
11 Q. And, i n f act , CASI had submi t t ed such r epor t s, cor r ect ?
12 A. Yes.
13 Q. And who r ecei ves t hose r epor t s?
14 A. I do.
15 Q. And how much was - - and t hose ar e our exhi bi t s 41, t he
16 or i gi nal r epor t ?
17 THE COURT: St ar t wi t h 40 t o 46, i s t hat cor r ect ?
18 MR. RUBI NSTEI N: Yeah.
19 THE COURT: The r evi si ons ar e 48, 41A, 42A.
20 Q. The f i r st - - i n exhi bi t 40, do you have t hat , ma' am?
21 A. Yes.
22 Q. They show t he - - and we' r e t al ki ng about , I , t he cost shar e
23 out l ay?
24 A. Yes.
25 Q. The f i r st year i t ' s r epor t ed at $12, 320?
( 212) 805- 0300
417
1 A. Fi r st quar t er i s r epor t ed.
2 Q. Fi r st quar t er , r at her ?
3 A. Yes.
4 Q. And t hen t he second l i ne on t hat - - t he t hi r d l i ne on t hat
5 page shows you t ot al so f ar , cor r ect ? That ' s what was t he
6 amount t hat was pai d f or t he year ?
7 A. Woul d you t el l me what number - -
8 Q. Ther e ar e t hr ee col umns.
9 A. Ther e i s t hr ee col umns. I s i t a, b, c?
10 Q. Ri ght . No, t her e' s - - my eyes ar en' t so good. You see i t
11 says, pr evi ous r epor t , t hi s per i od cumul at i ve r epor t ?
12 A. Uh- huh, yes.
13 Q. So t hat because t hi s was t he f i r st r epor t , t he same number
14 $12, 320 i s t hi s r epor t , and t he t ot al amount t hey' r e cl ai mi ng
15 cumul at i ve i s 12 - -
16 A. Yes.
17 Q. - - 320. And you r evi ewed t hat r epor t ?
18 A. Yes.
19 Q. How l ong af t er you r ecei ved i t di d you, woul d you say you
20 r evi ewed i t ? You don' t have t o gi ve me a speci f i c dat e.
21 A. Maybe wi t hi n 30 days.
22 Q. Okay.
23 A. Because t he r epor t i s f or t he quar t er endi ng December 31st ,
24 2001, t he dat e at t he bot t omsays J anuar y 10t h. So you gave
25 t i me t hat i t was mai l ed i n. So we have - - pr obabl y wi t hi n 30
( 212) 805- 0300
418
1 days of when i t came i nt o my of f i ce.
2 Q. Okay. Now, i n gover nment exhi bi t 41, t hat ' s t he or i gi nal
3 f i nanci al st at us r epor t t hat ' s submi t t ed f or t he second
4 quar t er ?
5 A. Yes.
6 Q. And t hat i s on l i ne I , t hey have $9, 582. 58, whi ch was
7 pr evi ousl y r epor t ed, cor r ect ?
8 A. That - - wel l , t hat ' s an i ncor r ect number .
9 Q. I agr ee wi t h you, but t hat ' s what ' s r epor t ed?
10 A. On t hi s r evi sed budget - -
11 Q. Thi s i s not r evi sed. Thi s i s t he or i gi nal .
12 A. 41.
13 Q. The second quar t er ?
14 THE COURT: 41?
16 Q. 41?
17 A. Yes.
18 Q. They say t hat t her e was - -
19 A. Uh- huh.
20 Q. - - 9, 582. 58, r i ght , t hat was r epor t ed what we now know as
21 gover nment exhi bi t 40?
22 A. Yes.
23 Q. When i n f act t her e i t was act ual l y $12, 320 t hat shoul d have
24 been t her e?
25 A. Yes.
( 212) 805- 0300
419
1 Q. And t hen t hey showed an addi t i onal 8, 213. 64, r i ght ?
2 A. For t he cur r ent per i od.
3 Q. The cur r ent per i od. Then t hey t ot al t he 9, 000 and 8, 000
4 and t hey get 17, 796. 22, cor r ect ?
5 A. Yes.
6 Q. And t hat number i s wr ong, r i ght ; cor r ect ?
7 A. I have t o do t he mat h.
8 Q. I mean i f t he 12 - - no. I f i t shoul d have been 12, 000 f or
9 t he - -
10 A. Ul t i mat el y, yes.
11 Q. - - f i r st quar t er , t hen t hat number woul d be wr ong?
12 A. Yes.
13 Q. Okay. Nobody comment ed on t hat t o CASI , cor r ect , t hat
14 t her e was, t hese r epor t s, t hese f i nanci al st at us r epor t s wer e
15 i nconsi st ent and i naccur at e?
16 A. Yes, t her e wer e comment s on i t .
17 Q. Wher e wer e comment s made?
18 A. Excuse me?
19 Q. Wher e wer e comment s made?
20 A. Pr obabl y ver bal . They wer e pr obabl y - - t he - - what I
21 usual l y do i f t her e i s a budget t hat comes i n t hat ' s wr ong,
22 I ' l l j ust gi ve t he company a cal l and say, your number s ar e
23 wr ong, pl ease r evi se and r esend your document .
24 THE COURT: Di d you make t hat cal l ?
( 212) 805- 0300
420
1 THE COURT: Ar e you sur e you made t hat cal l ?
3 THE COURT: Your sel f ?
5 THE COURT: You t ol d t hemt he f i r st quar t er was wr ong?
6 THE WI TNESS: Yes, even - - one - - I t hi nk t he number s
7 ar e - - t he dat es wer e wr ong t oo. Yes, I ' msur e I made t he
8 cal l .
9 Q. Who di d you speak t o?
10 A. Usual l y when I woul d cal l t he doct or - - I pr obabl y - -
11 usual l y I woul d speak t o Lee Gur f ei n.
12 Q. And di d you memor i al i ze t hat i n any way wi t h an e- mai l t hat
13 you had made t hat cal l ?
14 A. No.
15 Q. Di d you put anyt hi ng i n your gover nment f i l e t o i ndi cat e
16 t hat you had made t he cal l because you not i ced t hese number s
17 wer e wr ong?
18 A. The pr act i ce i s t hat I woul d put t hi s document i n t he f i l e,
19 make a not e t o i t , and t hen when a new f or mcame i n, I woul d
20 j ust di scar d t he ol d f or mand put i n t he cor r ect f or m.
21 Q. Wel l , di d a new f or mcome i n?
22 A. Thi s - - a new f or m, a new f or mcame i n.
23 Q. How l ong af t er you cl ai myou made t hi s cal l ?
24 A. Wel l , t hi s one i s a r evi si on. I ' mnot get t i ng t he
25 quest i on.
( 212) 805- 0300
421
1 THE COURT: Nei t her of t hese ar e r evi si ons - -
2 THE WI TNESS: These ar e t he or i gi nal document s, okay.
3 THE COURT: 2000.
5 THE COURT: One i n J anuar y and one i n, appar ent l y,
6 Apr i l 2002.
7 THE WI TNESS: So t her e - - I don' t see a r evi si on her e,
8 t hat i t was ever r evi sed.
9 Q. As a mat t er of f act , t he next quar t er , whi ch i s
10 gover nment ' s exhi bi t 42 - -
11 A. Uh- huh.
12 THE COURT: I t i sn' t a mat t er of bei ng r evi sed. Ms.
13 Snowden, t he f i r st quar t er i s a di f f er ent number - -
15 THE COURT: - - i n t hi s r epor t t han i s t he one i n t he
16 second r epor t .
17 THE WI TNESS: Exact l y.
18 THE COURT: Now, as I under st ood you, you t est i f i ed
19 t hat af t er you r ecei ved t he second r epor t , you cal l ed and t ol d
20 t hemt her e was an er r or i n t he f i r st r epor t , t he f i r st r epor t
21 number and t he second r epor t number f or t he f i r st - -
23 THE COURT: - - per i od wer e i ncor r ect .
24 THE WI TNESS: Uh- huh.
25 THE COURT: Di d you make t hat cal l ?
( 212) 805- 0300
422
1 THE WI TNESS: I made t hat cal l , and t her e i s an
2 or i gi nal gr ant f i l e her e, I ' msur e t hat t he or i gi nal gr ant f i l e
3 wi l l r ef l ect t hat .
4 Q. Wel l , when you got t he next r epor t , t he t hi r d quar t er , J une
5 30t h, 2002, t hey car r i ed f or war d t he number f r omt he mi st aken
6 second quar t er r epor t ?
7 A. Uh- huh.
8 THE COURT: You' r e aski ng her t o l ook at what ?
9 Q. To l ook at exhi bi t 42, gover nment exhi bi t 42.
10 A. They act ual car r i ed over t o 17, 792. 26.
11 Q. Whi ch was t he mi st aken number f r omt he second r epor t ?
12 A. Yes. And i f you l ook at t he bot t omof t he f or m, t hi s f or m
13 wasn' t even si gned by hi m. I t wasn' t - - i t wasn' t aut hor i zed,
14 i t wasn' t si gned.
15 Q. But i t was submi t t ed, r i ght ?
16 A. I t was - - of cour se, yes, i t was submi t t ed.
17 Q. And t he number s, accor di ng t o you, wer e wr ong because t hey
18 used t he number s f r omt he second quar t er , not f r omt he f i r st
19 quar t er , t he 12, 000 number ?
20 A. Yes.
21 Q. Ri ght ? Di d you make anot her cal l af t er you got t he t hi r d
22 quar t er f i nanci al st at ement ?
23 A. Yes.
24 Q. And who di d you speak t o t hen?
25 A. Pr obabl y Lee Gur f ei n or Dr . Kar r on. I don' t r ecal l who I
( 212) 805- 0300
423
1 t al ked t o.
2 Q. And you say you made a not e, you wr ot e somet hi ng down i n a
3 f i l e about i t ?
4 A. Yes.
5 Q. How many cal l s di d you make?
6 A. Qui t e a f ew.
7 Q. Af t er you got t he second f i nanci al st at ement , I ' msor r y.
8 Af t er you got t he t hi r d f i nanci al st at ement , and you had not
9 r ecei ved a r evi si on of t he second f i nanci al st at ement yet ,
10 cor r ect ?
11 A. Yes.
12 Q. How many cal l s di d you make about t hat ?
13 A. I made cal l s unt i l i t was cor r ect ed, and t hat i s r ef l ect ed
14 i n t he or i gi nal gr ant f i l e.
15 Q. When was i t cor r ect ed?
16 A. I have no i dea, because t he f or ms ar e not i n f r ont of me.
17 Q. Wel l , i n f act , t he f i r st t i me you ever got a r evi sed
18 f i nanci al st at us r epor t i s r ef l ect ed i n t he exhi bi t s A t o 40,
19 41, 42, 43, cor r ect ?
20 A. No, t hat ' s not cor r ect .
21 Q. Ar en' t t hose t he r evi si on r epor t s?
22 A. These ar e, t hese ar e r evi sed r epor t s, but t hese ar e not t he
23 f i r st r evi sed r epor t s.
24 Q. Wher e i s t he f i r st r evi sed r epor t ?
25 A. I n t he or i gi nal gr ant f i l e.
( 212) 805- 0300
424
1 Q. You never t ur ned i t over t o t he Pr osecut or ?
2 A. Yes.
3 Q. So you' r e t el l i ng us t her e ar e addi t i onal r epor t s t han what
4 we have her e as exhi bi t s, wi t hi n exhi bi t 40 t hr ough 43?
5 A. I ' mt el l i ng you t hat t her e ar e cor r espondence, addi t i onal
6 cor r espondence t o t hese exhi bi t s.
7 Q. I sn' t i t a f act , ma' am, t hat t he f i r st r evi sed r epor t s you
8 got f or any quar t er of t he f i r st year of t he gr ant was on
9 August 13t h, 2003?
10 A. No.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
425
2 Q. Woul d you t ake a l ook at Exhi bi t 40A, pl ease. Do you see
3 t hat exhi bi t t hat ' s i n evi dence, ma' am?
4 A. Yes.
5 Q. Do you see t hat i s a r evi sed f i nanci al st at us r epor t ?
6 A. Yes.
7 Q. And t hat i s a r epor t f or t he f i r st per i od Oct ober 1, 2001
8 t o December 31, 2001?
9 A. Yes.
10 Q. Si gned by Dr . Kar r on?
11 A. Yes.
12 Q. Dat ed?
13 A. Oh, i t ' s dat ed August 13, 2003.
14 Q. And i n t he next quar t er t ake a l ook at 41A t hat ' s i n
15 evi dence, and t hat ' s f or t he second quar t er endi ng Mar ch 31,
16 2002, cor r ect ?
17 A. Yes.
18 Q. And what dat e? I s t hat dat ed as dat e r epor t submi t t ed?
19 A. August 13, 2002. 2003, sor r y.
20 Q. Same dat e as t he f i r st one, r i ght ?
21 A. Yes.
22 Q. Now l et ' s go t o 42A. I s t her e a 42A?
23 A. Yes.
24 Q. And 42 i s t he one, t he or i gi nal one t hat was submi t t ed. I t
25 was not si gned by Dr . Kar r on. 42A i s si gned by Dr . Kar r on,
( 212) 805- 0300
426
1 cor r ect ?
2 A. Yes.
3 Q. And t hat cover s t he per i od of J une 30, 2002 endi ng, r i ght ?
4 A. Yes.
5 Q. And t hat ' s si gned by Dr . Kar r on?
6 A. Yes.
7 Q. And what dat e was t hat r epor t submi t t ed?
8 A. August 13, 2003.
9 Q. Same dat e, r i ght ?
10 A. Yes.
11 Q. And l et ' s t ake a l ook at 43A, and t hat r el at es t o t he
12 f our t h quar t er Sept ember 30, 2002, si gned by Dr . Kar r on,
13 cor r ect ?
14 A. Yes.
15 Q. And what dat e i s t hat r evi sed?
16 A. August 13, 2003.
17 Q. So, al l f our of t hese r evi sed r epor t s wer e submi t t ed on t he
18 ver y same day, cor r ect ?
19 A. Yes. They wer e si gned on - - yes.
20 Q. As a mat t er of f act , t hat was t he ver y same day t hat Bob
21 Benedi ct wr ot e you a l et t er t hat ' s Exhi bi t 48, t hat he cc' d t o
22 Mar i l yn Gol dst ei n, cor r ect ?
23 THE COURT: Do you have 48?
24 A. Yes, i t ' s t he same dat e.
25 Q. By t he way, di d you ever r evi ew - - wi t hdr awn.
( 212) 805- 0300
427
1 I s a gr ant ee supposed t o have a busi ness manual ?
2 A. Under r egul at i on t he gr ant ee shoul d have t he pr oper wr i t t en
3 management pr ocedur es wi t hi n hi s company.
4 Q. Do you know whet her or not CASI , I nc. had pr oper - - had any
5 sor t of manual or busi ness pr ocedur es?
6 A. Accor di ng t o a document t hat was sent t o us by hi s
7 account i ng f i r mt hat he hi r ed, he di d have a pr oper account i ng
8 syst emwi t hi n hi s cor por at i on.
9 Q. And what about di d he have a manual f or f r i nge benef i t s?
10 A. Not hi ng t hat I r evi ewed. Al l I know i s t hat we r ecei ved a
11 document f r oman i ndependent CPA sayi ng t hat Dr . Kar r on' s
12 company, CASI , had t he pr oper management pr ocedur es t o pr ocess
13 f eder al gover nment f unds.
14 Q. Di d you ever ask Dr . Kar r on or any busi ness admi ni st r at or
15 f or CASI whet her or not t hey had a manual t hat encompassed
17 A. No.
18 Q. Now, di d you have cont act wi t h Dr . Kar r on i n J ul y of 2003
19 af t er t he gr ant was suspended?
20 A. Possi bl y.
21 Q. Let me show you what has been mar ked f or i dent i f i cat i on as
22 Def endant ' s D and E.
23 THE COURT: Can I have t he desi gnat i on agai n? B and
24 C?
25 MR. RUBI NSTEI N: D and E.
( 212) 805- 0300
428
1 MR. KWOK: May we appr oach, your Honor ?
2 THE COURT: Have you l ooked at bot h document s?
3 MR. KWOK: Yes.
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
429
1 ( At t he si debar )
2 MR. EVERDELL: Your Honor , t hi s e- mai l , she i s not
3 even on t hi s e- mai l , not on ei t her one of t hese e- mai l s. Hope
4 Snowden i s not on ei t her of t hese t wo e- mai l s at al l , so I
5 don' t see how i t ' s possi bl e he coul d i nt r oduce i t t hr ough her .
6 Secondl y, t hi s e- mai l her e and act ual l y t hat e- mai l
7 t her e i s out si de t he i ndi ct ment per i od. Thi s ends J une 2003.
8 These ar e e- mai l s J ul y 24, 2003.
9 MR. RUBI NSTEI N: J udge, we have t he l et t er f r om
10 Ms. Gol dst ei n i n t he 3500 t hat I showed bef or e t hat ' s dat ed
11 J ul y I t hi nk 24t h or 25t h. I ' l l get i t .
12 Thi s i s a l et t er J ul y 25 f r omMs. Gol dst ei n, t hat she
13 has i dent i f i ed t hat she i s awar e of and she has seen. That ' s
14 her boss. These e- mai l s r el at e t o what was goi ng on at t hat
15 t i me.
16 THE COURT: But t hi s doesn' t l ook l i ke t he or i gi nal
17 document .
18 MR. RUBI NSTEI N: No, i t ' s a copy of t he e- mai l .
19 THE COURT: But i t doesn' t l ook l i ke an or i gi nal copy
20 or a phot ost at or anyt hi ng of t hat sor t .
21 MR. RUBI NSTEI N: No, we t ook i t of f what t he
22 gover nment has pr ovi ded - - what we have, sor r y. Thi s i s of f
23 e- mai l s t hat we had on t he comput er t hat we had r et r i eved f r om
24 t he comput er s.
25 THE COURT: But i t doesn' t l ook l i ke a r et r i eved
( 212) 805- 0300
430
1 e- mai l . I t ' s i n di f f er ent pr i nt , et c. I mean i t j ust doesn' t
2 l ook l i ke any - -
3 MR. RUBI NSTEI N: She can say whet her or not t hi s i s - -
4 THE COURT: I f you have t he or i gi nal , why not use t he
5 or i gi nal ?
6 MR. RUBI NSTEI N: I don' t have t he or i gi nal . That ' s
7 why I ' mshowi ng t hi s one.
8 THE COURT: I t hought I saw i t i n t he 3500 mat er i al ,
9 somet hi ng about cheer s.
10 MR. RUBI NSTEI N: I t mi ght be i n t her e, but - - l et me
11 t ake a l ook at t he 3500 mat er i al .
12 THE COURT: What ' s t he mat t er wi t h t he ot her l et t er
13 f r omBenedi ct ?
14 MR. EVERDELL: Wel l , f i r st of al l , i t ' s f r omBob
15 Benedi ct t o Dr . Kar r on, and t hat ' s a hear say pr obl em.
16 Secondl y, t hi s i s out si de t he scope. Thi s i s J ul y 24,
17 2003. The i ndi ct ment onl y al l eges up t o J une 2003. How i s
18 t hi s r el evant ?
19 MR. RUBI NSTEI N: I t ' s r el evant on t he i ssue of i nt ent ,
20 your Honor . I t ' s al so r el evant i n t he - - I saw t hose e- mai l s
21 mysel f , J udge, but I coul dn' t r emember wher e i t was, so I
22 pr i nt ed out new ones. I don' t know what I di d wi t h t he
23 or i gi nal e- mai l s, so I had t hempr i nt ed of f t he comput er t hat
24 i t was saved.
25 MR. KWOK: I f I may, I j ust don' t see how i t goes t o
( 212) 805- 0300
431
1 t he i ssue of i nt ent f or somet hi ng t hat ' s happeni ng af t er t he
2 end of t he i ndi ct ment t hat ' s bei ng char ged.
4 MR. KWOK: Al l of t hese. I t ' s l i ke i n J ul y of 2003.
5 Thi s i s al so J ul y 2003, and so i s t hi s one.
6 The i ndi ct ment char ges i t ends i n J une 2003. You
7 can' t unr i ng a bel l . I f he had t he i nt ent t o st eal , t he f act
8 t hat he l at er want ed t o cor r ect i t af t er he knows t hat he i s i n
9 t r oubl e does not undo t hat i nt ent .
10 MR. RUBI NSTEI N: Wel l , he doesn' t know; he j ust knows
11 t he gr ant i s suspended.
12 THE COURT: I don' t t hi nk you can get i t i n t hr ough
13 t hi s wi t ness.
14 MR. RUBI NSTEI N: Then I wi l l j ust ask about t hi s
15 r ef er ence over her e i n t he document t hat she has i dent i f i ed
16 wher e t hey t al k about - -
17 MR. KWOK: But i t ' s st i l l not i n evi dence. You can' t
18 r ead i t .
19 MR. RUBI NSTEI N: No, I can ask her . She has
20 i dent i f i ed t hi s.
21 MR. KWOK: We wi l l obj ect i f you ask her .
22 THE COURT: I f you al l t al k at t he same t i me, I can' t
23 concent r at e on what you' r e sayi ng.
24 Wel l , I don' t know t he wi t ness has seen t hi s.
25 MR. RUBI NSTEI N: I di d. I showed i t t o her , and she
( 212) 805- 0300
432
1 has i dent i f i ed t hi s, and she r ecogni zed i t .
2 THE COURT: Any obj ect i on t o 3504- M?
3 MR. EVERDELL: Ar e you t r yi ng t o i nt r oduce i t i nt o
4 evi dence?
5 THE COURT: Yes, he i s.
6 MR. EVERDELL: That ' s not what I under st ood.
7 MR. KWOK: I t hi nk i t ' s f i ne. No obj ect i on t o t hat .
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
433
1 ( I n open cour t )
2 MR. RUBI NSTEI N: Your Honor , I woul d at t hi s t i me l i ke
3 t o of f er what has been pr evi ousl y mar ked as Gover nment Exhi bi t
4 3504- M - -
5 THE COURT: For - -
6 MR. RUBI NSTEI N: - - f or i dent i f i cat i on, as Def endant ' s
7 Exhi bi t F i n evi dence.
9 MR. EVERDELL: No obj ect i on.
10 THE COURT: I t ' s a l et t er f r omMs. Gol dst ei n?
11 MR. RUBI NSTEI N: That i s cor r ect , your Honor .
12 THE COURT: Dat ed J ul y what ?
13 MR. RUBI NSTEI N: Dat ed J ul y 25, ' 03.
14 THE COURT: That ' s af t er t he gr ant was suspended?
16 ( Def endant ' s Exhi bi t F r ecei ved i n evi dence)
17 THE COURT: Do you want t o di spl ay i t t o t he j ur y?
18 MR. RUBI NSTEI N: Yes. I wi l l r ead t he document t o t he
19 j ur y. I t ' s f r omt he Uni t ed St at es Depar t ment of Commer ce,
20 Nat i onal I nst i t ut e of St andar ds and Technol ogy, Gai t her sbur g,
21 Mar yl and, J ul y 25, 2003, Dr . D. B. Kar r on, Comput er Ai ded
22 Sur ger y, I nc. , 300 East 33r d St r eet , Sui t e 4N, New Yor k, New
23 Yor k 10016. Re cooper at i ve agr eement number 70NANB1H3050.
24 " Dear Dr . Kar r on. I n r esponse t o your e- mai l dat ed
25 J ul y 16, 2003, t he money i n your bank account does not
( 212) 805- 0300
434
1 const i t ut e cost shar e. To qual i f y as cost shar e you woul d have
2 t o act ual l y appl y your cont r i but i on t o t he pr oj ect cost . I n
3 or der t o r esol ve amendment 6, noncompl i ance of t he speci al
4 awar d commi ssi on 7, cost shar e, you need t o r ef und t o t he
5 gover nment your appl i cabl e por t i on of t he pr oj ect cost and
6 r esubmi t cor r ect ed 269 r ef l ect i ng t hat cont r i but i on.
7 " I n r ef er ence t o your pr oposed i n ki nd cont r i but i on,
8 you cannot cl ai mt he f ul l cost of pr eowned equi pment .
9 Accor di ng t o t he cost pr i nci pl es, you can onl y cl ai mf ai r use
10 al l owance ( wi t h r ent al s) .
11 " I f you need addi t i onal i nf or mat i on, pl ease cont act
12 Hope Snowden at 301- 975- 602 or vi a e- mai l at
13 Hope. snowden@NI ST. gov. Si ncer el y, Mar i l yn Gol dst ei n, gr ant
14 of f i cer . "
15 Ms. Snowden, af t er J ul y 25, 2003 di d Dr . Kar r on
16 cont act you?
18 Q. Di d you cont act Dr . Kar r on?
19 A. No.
20 MR. RUBI NSTEI N: No f ur t her quest i ons, your Honor .
21 THE COURT: Al l r i ght . Thank you ver y much.
22 Redi r ect ?
23 MR. EVERDELL: Yes, pl ease, your Honor .
24 THE COURT: Let ' s make i t shor t .
25
( 212) 805- 0300
435
2 BY MR. EVERDELL:
3 Q. Hel l o agai n, Ms. Snowden.
4 A. Hel l o.
5 Q. You wer e asked sever al quest i ons on cr oss- exami nat i on, and
6 I want t o di scuss a f ew of t hem.
7 I f we coul d put up Gover nment Exhi bi t 4, page 7.
8 Do you r ecal l bei ng asked about t hat sl i de?
9 A. Yes.
10 Q. And you r ecal l bei ng asked about bankr upt cy i n t hat sl i de?
11 A. Yes.
12 Q. What ' s t he wor d af t er " bankr upt cy" on t hat sl i de?
13 A. " Pr ot ect i on" .
14 Q. So bankr upt cy pr ot ect i on. What exact l y ar e you r ef er r i ng
15 t o when you have " bankr upt cy pr ot ect i on" on t hat sl i de?
16 A. Bankr upt cy pr ot ect i on i s a r eor gani zat i on. A company
17 r eor gani zes so t hat t hey don' t want t o t ot al l y - - t he company
18 i s not t ot al l y goi ng t o go away, t hey ar e goi ng t o r eor gani ze
19 so t hey can pay t hei r f i nanci al debt .
20 Q. And i s t hat somet hi ng you have t o not i f y t he gr ant
21 speci al i st of ?
22 A. Yes.
23 Q. So, i t ' s not i f you ar e br oke, i s i t ?
24 A. No, i t ' s not i f you ar e br oke; i t ' s when you r eor gani ze
25 f i nanci al l y.
( 212) 805- 0300
436
8647KAR5 Snowden - r edi r ect
1 Q. You wer e al so asked some quest i ons about r evi si ng budget s.
2 A. Yes.
3 Q. Ther e ar e a f ew t her e I want t o t ouch on. Fi r st , you sai d
4 t hat I bel i eve you can r evi se your budget at t he end of t he
5 f i r st year , i s t hat r i ght ?
6 A. Yes.
7 Q. But i f your year one has al r eady ended, can you r evi se your
8 year one number s at t hat poi nt ?
9 A. No.
10 Q. So, what can you r evi se at t he end of t he f i r st year of
11 your budget ?
12 A. I f your year one has ended, you can r evi se your out year s,
13 whi ch woul d be year s t wo and t hr ee.
14 Q. And you wer e al so asked I bel i eve about r evi si ng budget s,
15 speci f i cal l y t he t en per cent r ul e whi ch i s on t hat sl i de. I s
16 t hat r i ght ?
17 A. Yes.
18 Q. And you t est i f i ed about what t hat 10 per cent r ul e means,
19 r i ght ?
20 A. Yes.
21 Q. And i s t hat 10 per cent of t he t ot al awar d amount or 10
22 per cent of t he annual budget t hat you' r e al l owi ng?
23 A. I t ' s 10 per cent of t he annual budget .
24 Q. So, i f you ar e al l owed $800, 000 i n t he f i r st year of your
25 gr ant , how much can you move ar ound i n t he f i r st year of your
( 212) 805- 0300
437
1 gr ant wi t hout get t i ng pr i or appr oval ?
2 A. $79, 999. 99, under $80, 000.
3 Q. And can t hose r evi si ons be addi t i ons and subt r act i ons?
4 A. The 80, 000 i ncl udes addi t i ons and subt r act i ons.
5 Q. And does t he t ot al have t o be 80, 000 under t hat exampl e?
6 A. Yes.
7 Q. Now, when you r evi se your budget t hough can you cr eat e
8 br and new cat egor i es wi t hout appr oval ?
9 A. No.
10 Q. You need pr i or appr oval f or t hat ?
11 A. Yes.
12 Q. OK. Do you r ecal l bei ng asked about Bob Benedi ct ?
13 A. Yes.
14 Q. Do you r ecal l who Bob Benedi ct i s?
15 A. Ther e was a l et t er f r omDr . Kar r on sayi ng t hat he was goi ng
16 t o be t he new admi ni st r at or under CASI .
17 Q. And do you r ecal l when t hat l et t er was sent ?
18 A. I t hi nk i t was l i ke Sept ember 2003.
19 Q. Ar e you cer t ai n of t hat ?
20 A. No.
21 Q. Do you need somet hi ng t o r ef r esh your r ecol l ect i on?
22 A. Pl ease.
23 THE COURT: Has Mr . Rubi nst ei n seen t he document t hat
24 you ar e showi ng t he wi t ness?
25 MR. EVERDELL: Sor r y. Mr . Rubi nst ei n, t hi s i s - -
( 212) 805- 0300
438
1 THE COURT: Show hi mwhat you ar e goi ng t o show t he
2 wi t ness.
3 MR. EVERDELL: I t ' s 3504- L.
4 MR. RUBI NSTEI N: I have a copy of i t .
5 THE COURT: OK.
6 A. Oh, i t ' s Febr uar y 25, 2003.
7 Q. So, say agai n t he dat e of when Dr . Kar r on r equest ed Bob
8 Benedi ct be made t he - -
9 A. Febr uar y 25, 2003.
10 Q. Now, I bel i eve you t est i f i ed on di r ect t hat you di dn' t
11 appr ove Mr . Benedi ct , i s t hat r i ght ?
12 A. No, I di d not .
13 Q. And what was t he r eason why he was not appr oved?
14 A. He was not appr oved because t he budget had f l uct uat ed so
15 many t i mes none of t he budget s wer e appr oved.
16 He was i ncor por at ed i nt o t he budget as a pr oposed
17 r evi si on, and si nce t hey wer en' t appr oved, he was never
18 appr oved, so he was never aut hor i zed t o make any deci si ons
19 under t he ATP gr ant .
20 Q. And do you r ecal l when t he l ast pr oposed budget r evi si on
21 was submi t t ed?
22 A. I n 2003. The l ast one I t hi nk was l i ke Febr uar y 2003.
23 Q. I f you r ef er t o Gover nment Exhi bi t 36. Do you have t hat i n
24 f r ont of you?
25 A. Yes.
( 212) 805- 0300
439
1 Q. I s t hat t he l ast pr oposed budget r evi si on?
2 A. To my r ecol l ect i on, t hi s i s t he l ast pr oposed budget .
3 Q. And what ' s t he dat e on t he l ast pr oposed budget r evi si on?
4 A. Febr uar y 25, 2003.
5 Q. I s t hat t he same dat e as t he l et t er r equest i ng Mr . Benedi ct
6 be appoi nt ed as t he admi ni st r at or at CASI ?
7 A. Yes.
8 Q. And was t hi s amendment ever appr oved?
9 A. No, i t never was.
10 Q. Ar e you st i l l abl e t o have di scussi ons wi t h an unappr oved
11 cont act per son l i ke t hat ?
12 A. I f t hey' r e unappr oved I can have di scussi ons wi t h hi m, but
13 not hi ng he says can be val i dat ed because you' r e not an appr oved
14 per sonnel . So, I can t al k t o t hemver bal l y, but unt i l you ar e
15 i ncor por at ed i nt o t he budget , i n t he appr oved budget , i t ' s not
16 aut hent i c, so you can' t make any deci si ons under t he ATP
17 pr oj ect .
18 Q. Now, i n t er ms of hi r i ng deci si ons i n gener al , whi ch I
19 bel i eve you wer e asked about , does t he gr ant s of f i ce, your
20 of f i ce, r evi ew hi r i ng deci si ons of t he compani es t hat r ecei ve
21 ATP gr ant s?
22 A. No, t he compani es, t hey' r e commer ci al compani es, t hey can
23 hi r e and f i r e whoever t hey want , but anybody t hat par t i ci pat es
24 on t he ATP gr ant , we have t o - - t he gr ant of f i cer has t o
25 appr ove. But ot her wi se j ust nor mal busi ness day, t hey can hi r e
( 212) 805- 0300
440
1 and f i r e whoever t hey want ; we have not hi ng t o do wi t h t hat .
2 Q. So, you don' t r evi ew r sums necessar i l y of peopl e t hat ar e
3 hi r ed by compani es?
4 A. No.
5 Q. Al l r i ght . You wer e asked a ser i es of quest i ons about t he
6 budget amendment s and t he $80, 000 10 per cent cap i n t hi s case.
7 Do you r emember t hat ?
8 A. Yes.
9 Q. I j ust want t o go t hr ough t hat ver y qui ckl y i f possi bl e,
10 but I t hi nk we shoul d go t hr ough t hat .
11 I f we coul d have Gover nment ' s 14 on t he scr een.
12 Do you see t hat document ?
13 A. Yes.
14 Q. I bel i eve you t est i f i ed bef or e t hat t hi s was t he l ast
15 appr oved budget , i s t hat r i ght ?
16 A. No, 14, t hi s i s t he or i gi nal budget .
17 Q. Sor r y, you' r e r i ght , t hat ' s t he or i gi nal budget .
18 A. Thi s i s t he or i gi nal budget .
19 Q. OK. And t hen i f you l ook at amendment 2, whi ch i s
20 Gover nment Exhi bi t 22, t he t hi r d page of t hat exhi bi t . We
21 di scussed t hi s on di r ect , i s t hat r i ght ?
22 A. Yes.
23 Q. And t hat i s I bel i eve t he onl y amendment t hat was appr oved
24 t o t he act ual budget number s, i s t hat r i ght ?
25 A. Thi s i s t he onl y appr oved r evi sed budget .
( 212) 805- 0300
441
1 Q. What was t he dat e on t hat budget ?
2 A. Thi s budget was dat ed 12/ 27/ 01.
3 Q. Now, you t est i f i ed on cr oss- exami nat i on and on di r ect about
4 conver sat i ons you had wi t h Dr . Kar r on about equi pment cost s,
5 r i ght , an addi t i onal pi ece of equi pment ?
6 A. About addi ng addi t i onal equi pment t o t he pr ogr am, yes.
7 Q. And I bel i eve t hat you t est i f i ed t hat you needed hi mt o
8 submi t a budget amendment r equest because i t was over $80, 000,
9 i s t hat r i ght ?
10 A. Yes.
11 Q. OK. I j ust want t o compar e - - t hi s i s t he f i nal appr oved
12 budget , i s t hat r i ght , t he l ast appr oved budget amendment ?
13 A. Yes.
14 Q. Then l et ' s compar e t hat t o Gover nment Exhi bi t 32.
15 THE COURT: Wel l , we ar e l ooki ng at Gover nment Exhi bi t
16 22.
17 MR. EVERDELL: Gover nment Exhi bi t 22 i s on t he scr een.
18 I don' t know i f i t ' s possi bl e t o do a si de- by- si de compar i son.
19 Yes? On t he l ef t - hand si de Gover nment Exhi bi t 22.
20 THE COURT: No one can see t hese. No one can see
21 t hem. I ' mcl oser t han t hey ar e, and I can' t see t hem.
22 MR. EVERDELL: Then we wi l l j ust di scuss i t .
23 THE COURT: You have t o go t o t he exhi bi t number s.
24 MR. EVERDELL: Absol ut el y, your Honor .
25 Q. We j ust l ooked at Gover nment Exhi bi t 22, whi ch was
( 212) 805- 0300
442
1 amendment t o t he f i nal r evi sed budget t hat was appr oved, r i ght ?
2 A. Yes.
3 Q. Do you see t he equi pment cost s t her e?
4 A. Yes.
5 Q. For year one.
6 A. Yes.
7 Q. What i s t he number t her e?
8 A. $110, 000.
9 Q. OK. And t hen you' r e now l ooki ng at Gover nment ' s 32, whi ch
10 I bel i eve you wer e l ooki ng at on cr oss- exami nat i on.
11 A. Yes.
12 Q. I s t hi s a pr oposed budget or was t hi s appr oved?
13 A. Pr oposed.
14 Q. So t hi s i s pr oposed. Wi l l you l ook at t he equi pment l i ne
15 t her e.
16 A. Yes.
17 Q. For year one?
18 A. Yes.
19 Q. What ' s t he number t her e?
20 A. $303, 400.
21 Q. And i s t hat mor e t han $80, 000 mor e t han t he l ast appr oved
22 budget f or t hat equi pment l i ne i n year one?
23 A. Yes.
24 THE COURT: I ' msor r y. I ' ve got t he wr ong exhi bi t .
25 J ust a second. Al l r i ght . Go ahead.
( 212) 805- 0300
443
1 Q. So, t hen l ooki ng at 32, whi ch i s a pr oposed budget , I t hi nk
2 you t est i f i ed, r i ght - -
3 A. Yes.
4 Q. - - t he equi pment l i ne t her e says - - and now i t ' s on t he
5 scr een - - $303, 400, r i ght ?
6 A. Yes.
7 Q. Wher eas bef or e you sai d t he l ast appr oved budget t he
8 equi pment l i ne f or year one was $110, 000, i sn' t t hat r i ght ?
9 A. Yes.
10 Q. So, t hat i s an i ncr ease of j ust bel ow $200, 000, i sn' t i t ?
11 A. Yes.
12 Q. Al l r i ght . So, i s t hat mor e t han $80, 000?
13 A. Yes, i t i s.
14 Q. The 10 per cent l i mi t ?
15 A. Yes.
16 Q. And i s t hat why you had di scussi ons wi t h Dr . Kar r on about
17 submi t t i ng a r evi sed budget amendment ?
18 A. Yes.
19 Q. And l et ' s go t o Gover nment Exhi bi t 35, page 7.
20 Do you have t hat i n f r ont of you?
21 A. Yes, I do.
22 Q. Do you r ecal l bei ng asked quest i ons on cr oss- exami nat i on
23 about t hi s equi pment cat egor y?
24 A. Yes.
25 Q. OK. Now, woul d equi pment cost s - - wel l , l et me r ead t he
( 212) 805- 0300
444
1 l ast sent ence, t he l ast t wo sent ences her e. I t says, " ATP
2 f unds may not be used f or const r uct i on of new bui l di ngs or
3 ext ensi ve r enovat i ons of exi st i ng l abor at or y bui l di ngs. ATP
4 f unds may, however , be used f or const r uct i on of exper i ment al
5 r esear ch and devel opment f aci l i t i es t o be l ocat ed wi t hi n a new
6 or exi st i ng bui l di ng pr ovi ded t hat t he equi pment or f aci l i t i es
7 ar e essent i al f or car r yi ng out t hat pr oj ect . I f such cost s ar e
8 pr oposed, i ncl ude bel ow and pr ovi de j ust i f i cat i on. "
9 That ' s what i t says, r i ght ?
10 A. Yes.
11 Q. Now t hat l ast sent ence, ' i f such cost s ar e pr oposed,
12 i ncl ude bel ow and pr ovi de j ust i f i cat i on, " why i s t hat sent ence
13 t her e?
14 A. " I f such cost s ar e pr oposed, i ncl ude bel ow and pr ovi de
15 j ust i f i cat i on, " because i t may - - i t coul d be consi der ed. But
16 t hat ' s a consi der at i on. But t her e was none i ncor por at ed i nt o
17 t hi s pr oposal . Ther e was no cost s.
18 Q. Do const r uct i on cost s, t hi ngs l i ke t hat , have t o be
19 appr oved i n t he budget bef or e you can spend money on t hem?
20 A. Yes.
21 Q. OK.
22 THE COURT: Wel l , what i s t he i t emt hat appear s at t he
23 end of t hat exhi bi t - - or not t he end - - a f ew pages l at er ,
24 t ot al down bel ow i s $231, 719 at t he bot t omof t he page? Now,
25 as I see i t , t her e i s a document at t he end t hat says i t em
( 212) 805- 0300
445
1 met hodol ogy, comput at i on and cost s, t hr ee pages l at er i s i t ,
2 counsel ? And t her e i t says vi deo syst em, wor k st at i on,
3 ser ver s, pr i nt er , f i r e wal l , l ab camer a, scanner s, t ape dr i ve,
4 l i br ar y, swi t ches, ai r condi t i oni ng and sof t war e.
5 Have you got t hat ?
7 THE COURT: Wel l , t hat t ot al s up t o $231, 719 at t he
8 bot t om?
9 THE WI TNESS: Um- hum.
10 THE COURT: What ' s t he pr obl em?
11 Q. The quest i on i s: Wer e t hese cost s ever appr oved?
12 A. No, t hey wer e never appr oved.
13 Q. And i f you t ake a l ook at Gover nment Exhi bi t 1, page 6.
14 Fi r st , l ooki ng at Gover nment Exhi bi t 1 when you get i t , j ust
15 t el l us what t hat i s.
16 THE COURT: You say t hey wer e never appr oved, but t hat
17 i sn' t qui t e what I was aski ng you. Thi s i s f or equi pment , but
18 t hi s i s not f or - - none of t hose f unds wer e, as I r ead i t , ar e
19 f or const r uct i on of new bui l di ngs or ext ensi ve r enovat i ons,
20 ot her t han possi bl y t he ai r condi t i oni ng and swi t ches. AmI
21 wr ong, counsel ?
22 MR. EVERDELL: Your Honor , t he cat egor y was l i st ed as
23 equi pment i n subcat egor y D, and you ar e r i ght t hat t hat number
24 i s f ul l y el abor at ed, i t emi zed l at er on i n t he exhi bi t , and i t
25 does add up, so t hese ar e t he cost s t hat ar e bei ng cl ai med
( 212) 805- 0300
446
1 under equi pment .
2 THE COURT: I t doesn' t i ncl ude i nst al l at i on.
3 MR. EVERDELL: That ' s cor r ect . I t i ncl udes - - t hi s
4 t al ks about usi ng t hese f unds f or const r uct i on of new bui l di ngs
5 and ext ensi ve r enovat i on of exi st i ng l abor at or i es, and t hat ' s
6 wher e t hese cost s - - accor di ng t o t hat l anguage we r ead out ,
7 t hese cost s ar e cont empl at ed f or t hat pur pose.
8 THE COURT: Wel l , what about const r uct i on on
10 i n exi st i ng bui l di ngs, not new, pr ovi ded t hat t he equi pment and
11 f aci l i t i es ar e essent i al f or car r yi ng out t he pr oj ect ?
12 MR. EVERDELL: Cor r ect . I t hi nk my quest i on was wer e
13 t hese f unds i n f act ever appr oved.
14 THE WI TNESS: No, t hey wer en' t . They wer e r equest ed
15 and pr oposed but never appr oved.
16 Q. And i f you coul d l ook at - -
17 THE COURT: The i ssue i s whet her or not t hey pr oper l y
18 come wi t hi n t hat f r amewor k of Exhi bi t D; i t ' s j ust t hat t hey
19 wer e not appr oved. I s t hat r i ght ?
20 MR. EVERDELL: Cor r ect , your Honor .
21 THE COURT: That ' s what I want t o f i nd out .
22 MR. EVERDELL: Sor r y.
24 Q. And what i s Exhi bi t 1 agai n?
25 A. Exhi bi t 1 i s t he Advanced Technol ogy Pr ogr ampr oposal
( 212) 805- 0300
447
1 pr epar at i on ki t .
2 Q. Was t hat gi ven t o t he def endant as par t of hi s pr oposal
3 when he submi t t ed i t f or an ATP gr ant ?
4 A. Yes. I don' t know - - he pr obabl y went t o a pr oposer ' s
5 conf er ence, and anybody t hat want s t o pr opose a gr ant , t hi s i s
6 a package t hat gi ves you an out l i ne, gi ves you di r ect i on and
7 gui dance on how t o compl et e a pr oposal t o submi t t o ATP. So,
8 he pi cked i t up, he got i t f r omsomewher e.
9 Q. OK. And t hen i f we coul d hi ghl i ght 5A, and I wi l l j ust
10 r ead i t . " What t ypes of cost s ar e unal l owabl e. " Ri ght ?
11 And t hen 5A says " Regar dl ess of whet her t hey ar e al l ow
12 under t he f eder al cost pr i nci pl es, t he f ol l owi ng ar e
13 unal l owabl e under ATP: Const r uct i on of new bui l di ngs or
14 ext ensi ve r enovat i on of exi st i ng l abor at or y bui l di ngs.
15 However , const r uct i on of exper i ment al r esear ch and devel opment
16 f aci l i t i es t o be l ocat ed wi t hi n a new or exi st i ng bui l di ng ar e
17 al l owabl e pr ovi ded t hat t he equi pment or f aci l i t i es ar e
18 essent i al f or car r yi ng out t he pr oposed sci ent i f i c and
19 t echni cal pr oj ect and ar e appr oved by t he NI ST gr ant s of f i cer . "
20 I s t hat what t hat says?
21 A. Yes.
22 Q. Ar e you t he NI ST gr ant s of f i cer f or t he ATP gr ant f or CASI ?
23 A. No.
24 Q. I s t hat your super vi sor ?
25 A. That ' s my super vi sor . I ' mt he gr ant speci al i st .
( 212) 805- 0300
448
1 Q. And you wor k i n t he gr ant s of f i ce.
2 A. Yes.
3 THE COURT: Who i s your super vi sor ?
4 THE WI TNESS: For mer l y, when t hi s was goi ng on her
5 name i s Mar i l yn Gol dst ei n. Ri ght now her name i s Mel i nda
6 Tukr am.
7 Q. I s Mar i l yn Gol dst ei n t he act ual gr ant s of f i cer , t he one who
8 woul d si gn of f on t he act ual amendment s t hat wer e appr oved?
9 A. Yes.
10 Q. OK. You wer e al so asked on cr oss- exami nat i on about sunk
11 cost s, cost s i ncur r ed bef or e t he gr ant was act ual l y awar ded.
12 A. Yes.
13 Q. What i s t he r ul e on t hat agai n?
14 A. We don' t pay f or pr eawar d cost s.
15 Q. I f you can go t o Gover nment Exhi bi t 13 and hi ghl i ght
16 f undi ng l i mi t at i ons number 6.
17 Do you know what t hi s document i s, Ms. Snowden?
18 A. Yes.
19 Q. What ' s t hi s?
20 A. These ar e t he speci al awar d condi t i ons t hat ar e at t ached t o
21 t he gr ant .
22 Q. And was t hi s at t ached t o t he CASI ' s ATP gr ant ?
23 A. Yes, i t was.
24 Q. I wi l l j ust r ead t he f undi ng l i mi t at i ons. " The scope of
25 wor k and budget i ncor por at ed i nt o t hi s awar d cover t he t hr ee
( 212) 805- 0300
449
1 year per i od ( r ef er r ed t o as t he pr oj ect per i od) f or a t ot al
2 amount of $2 mi l l i on i n f eder al f unds. However , f eder al
3 f undi ng avai l abl e at t hi s t i me i s l i mi t ed t o $800, 000 f or t he
4 f i r st year per i od f r omOct ober 1, 2001 t hr ough Sept ember 30,
5 2002, r ef er r ed t o as t he budget per i od. "
6 Do you see t hat ?
7 A. Yes.
8 Q. So, what does t hat mean t hat t he $800, 000 ar e avai l abl e f or
9 t hat per i od Oct ober 1, 2003 t hr ough Sept ember 2 - - 30, 2002?
10 A. That ' s t he per i od t hat t hese f unds can be expended so t hey
11 can be spent wi t hi n st ar t i ng Oct ober 1, 2001 t hr ough Sept ember
12 30, 2002.
13 Q. So, i f you want ed t o expend t hese ATP f unds f or a cost t hat
14 occur r ed bef or e t hat per i od, coul d you do i t ?
15 A. No.
16 Q. And was t hi s speci al condi t i ons awar d document gi ven t o t he
17 def endant as par t of hi s gr ant pr oposal when he r ecei ved t he
18 gr ant ?
19 A. Yes.
20 THE COURT: Any f ur t her quest i ons?
21 MR. EVERDELL: Sor r y?
22 THE COURT: Do you have anyt hi ng f ur t her wi t h t hi s
23 wi t ness?
24 MR. EVERDELL: Your Honor , I do have t o cover j ust a
25 f ew mor e t opi cs.
( 212) 805- 0300
450
1 THE COURT: Let ' s move al ong.
2 Q. Al l r i ght . Ms. Snowden you wer e asked a quest i on about t he
3 audi t s on cr oss- exami nat i on. I bel i eve you sai d t hat you t ol d
4 t he def endant t hat you pai d f or t he audi t and you want ed i t .
5 A. Yes.
6 Q. What pr ompt ed you t o say t hat ?
7 A. The audi t was ver y del i nquent and past due. We needed - -
8 t he audi t was due, i t was del i nquent , and t her ef or e I r equest ed
9 a copy of t he audi t .
10 Q. OK.
11 MR. EVERDELL: Al most done, your Honor .
12 Q. You wer e al so quest i oned about t he f i nanci al st at us r epor t s
13 and t he r evi si ons t o t he f i nanci al st at us r epor t s.
14 A. Yes.
15 Q. And I bel i eve you t est i f i ed on cr oss- exami nat i on t hat t her e
16 wer e ot her r evi si ons t hat you had put i n t he gr ant f i l e.
17 A. Yes.
18 Q. And i n f act t he f i r st r evi si ons wer e not on August 13,
19 2003, t her e wer e ot her r evi si ons t hat you r ecal l ed?
20 A. Qui t e a f ew i n t he mi ddl e of t hat dat e.
21 MR. EVERDELL: Your Honor , I haven' t mar ked t hese yet ,
22 but I woul d l i ke t o mar k t hemf or i dent i f i cat i on. I woul d l i ke
23 t o mar k t hese f or i dent i f i cat i on as Gover nment Exhi bi t 2000 and
24 2001.
25 Q. Do you see t hose document s?
( 212) 805- 0300
451
1 A. Yes.
3 A. Yes.
4 Q. How do you r ecogni ze t hem?
5 A. They wer e sent t o me by Dr . Kar r on.
6 Q. And what ar e t hose document s?
7 A. These ar e f i nanci al st at us r epor t s.
8 MR. EVERDELL: The gover nment moves 2000 and 2001 be
9 admi t t ed i nt o evi dence.
10 THE COURT: May I see t hem? No obj ect i on, Exhi bi t
11 2000 and 2001 ar e admi t t ed i nt o evi dence.
12 MR. EVERDELL: Your Honor , may I publ i sh?
14 ( Gover nment ' s Exhi bi t s 2000 and 2001 r ecei ved i n
15 evi dence)
16 THE COURT: Bl ow i t up so t hey can r ead i t .
17 Q. Al l r i ght . Ms. Snowden, you t est i f i ed t hat t hi s i s a
18 r evi sed f i nanci al r epor t you r ecei ved f r omDr . Kar r on?
19 A. Yes.
20 Q. And what per i od does t hat r evi sed f i nanci al r epor t supposed
21 t o cover ?
22 A. Oct ober 1, 2001 t hr ough Mar ch 31, 2002.
23 Q. Do you see t he dat e on t he bot t omof t hat r evi si on?
24 A. Yes.
25 Q. What i s t he dat e on t he ver y bot t omof t hat r evi si on?
( 212) 805- 0300
452
1 A. Apr i l 21, 2002.
2 Q. Who si gned t hat ?
3 A. Dr . Kar r on.
4 Q. And do you see t he scr at ch- out s on t ot al out l ays up t op?
5 A. Yes.
6 Q. What ar e t hose?
7 A. Those ar e mat hemat i cal er r or s t hat I not i ced.
8 THE COURT: Ar e t hey.
9 THE WI TNESS: Yes, t hat ' s my handwr i t i ng.
10 Q. And what ar e t hose r evi si ons based on?
11 A. The pr evi ous r epor t t hat was sent . Now because i t says
12 pr evi ousl y r epor t ed, t he number s ar e wr ong, so I have - - I di d
13 t he mat h, scr at ched t hemout and t hen cal l ed Dr . Kar r on f or hi m
14 t o r evi se t hemagai n.
15 Q. And was t hi s r evi sed suppor t submi t t ed by Dr . Kar r on?
16 A. Yes.
17 Q. I show you Gover nment Exhi bi t 2001.
18 MR. RUBI NSTEI N: Can I have 2000, pl ease?
19 Q. Do you see t hat document ?
20 A. Yes.
21 Q. What per i od i s t hi s supposed t o cover ?
22 A. Apr i l 1, 2002 - -
23 MR. RUBI NSTEI N: J udge, I ' mgoi ng t o obj ect and ask
24 f or a si debar . These document s have never been gi ven t o me
25 bef or e.
( 212) 805- 0300
453
1 THE COURT: Wel l , you shoul d have r ai sed t hat bef or e
2 we admi t t ed t hemi n evi dence, Mr . Rubi nst ei n.
3 MR. RUBI NSTEI N: I ' msor r y, J udge. They shoul d have
4 gi ven me a copy, J udge. I amsor r y. I was t r yi ng t o get
5 somet hi ng el se. I t ' s my f aul t .
6 THE COURT: I ' msor r y, but t hi s i s not a pr oper way t o
7 r ai se i t . I wi l l go over and hear you at t he si debar , but i t ' s
8 a l i t t l e l at e.
9 MR. RUBI NSTEI N: You' r e r i ght .
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
454
2 MR. RUBI NSTEI N: I apol ogi ze, J udge, but I di dn' t
3 t hi nk t hat t he gover nment was goi ng t o of f er somet hi ng t hat
4 t hey never t ur ned over , t hat ' s cl ear l y 3500 mat er i al .
5 MR. KWOK: Wel l - -
6 MR. RUBI NSTEI N: And t o i nt r oduce i t i s i nappr opr i at e.
7 OK? And t hey vi ol at ed Rul e 3500, and your Honor shoul d st r i ke
8 t hese document s f r omt he r ecor d.
9 THE COURT: I wi l l t ake i t under advi sement and hear
10 you af t er t he end of t he cour t day.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
455
2 BY MR. EVERDELL:
3 Q. J ust l ooki ng agai n at Gover nment Exhi bi t 2001.
4 A. Yes.
5 Q. What per i od i s t hat supposed t o cover ?
6 A. That ' s Apr i l 1, 2002 t hr ough J une 30, 2002.
7 Q. I s t hat a r evi sed f i nanci al r epor t ?
8 A. Yes, i t i s.
9 Q. And what ' s t he dat e on t hat r evi sed f i nanci al r epor t ?
10 A. J ul y 2002.
11 Q. Do you know who submi t t ed t hi s t o you? I know t he
12 si gnat ur e i s obscur ed.
13 A. Dr . Kar r on. He was t he onl y aut hor i zed of f i ci al si gner of
14 t hese document s.
15 Q. What i s t hat not e " r evi ew al l 269, 7/ 19/ 02" ?
16 A. Because t her e wer e so many r evi si ons i n bet ween t he
17 or i gi nal and t he f i nal t hat was gi ven t o me - - t he or i gi nal - -
18 t her e was a l ot of r evi si ons i n bet ween, so I woul d cal l hi m
19 al l t he t i me, t hese number s ar e wr ong, you need t o r evi ew,
20 r evi se, cor r ect and r esend.
21 So, I was maki ng not es t o mysel f , and t he not e was
22 check t hemal l , because t her e ar e t oo many f l uct uat i ng number s
23 i n her e; you can' t keep maki ng so many mat hemat i cal mi st akes;
24 t her e i s t oo many mi st akes i n her e.
25 Q. Di d you i n f act have conver sat i ons wi t h Dr . Kar r on about
( 212) 805- 0300
456
1 t hat ?
2 A. Yes.
3 THE COURT: And t hat not e i s 7/ 19/ 02.
5 MR. EVERDELL: Your Honor , no f ur t her quest i ons f or
6 t hi s wi t ness.
7 MR. RUBI NSTEI N: J ust one, your Honor .
10 Q. Coul d we have Exhi bi t 10B, t he page t hat st ar t s wi t h D,
11 equi pment .
12 DEPUTY COURT CLERK: What pages?
13 MR. RUBI NSTEI N: I wi l l put i t on t he El mo.
14 DEPUTY COURT CLERK: I s t her e a number on i t ?
15 MR. RUBI NSTEI N: I t ' s 10B.
16 THE COURT: I t ' s about f our pages i nt o 10B.
17 MR. RUBI NSTEI N: Thank you, J udge. Maybe we can put
18 i t on t he El mo.
19 THE COURT: I t ' s been up t her e a f ew t i mes.
20 MR. RUBI NSTEI N: I s t hi s page i n t he bi nder s? OK.
21 Q. Now, t he gover nment showed you on r edi r ect a por t i on f r om
22 an exhi bi t t hat pr ovi ded t hat pr i or appr oval was r equi r ed f or
23 const r uct i on r el at ed t o t he r esear ch and devel opment , cor r ect ?
24 Do you r emember j ust bei ng shown somet hi ng on t he scr een
25 bef or e?
( 212) 805- 0300
457
8647KAR5 Snowden - r ecr oss
1 A. Yes.
2 Q. Now, i n 10B, Exhi bi t 10B, i t ' s a f act t hat i t st at es " I f
3 such cost s ar e pr oposed, i ncl ude bel ow and pr ovi de
4 j ust i f i cat i on. " Cor r ect ?
5 A. Yes.
6 Q. Ther e i s not hi ng i n 10B t hat suggest s t hat you need pr i or
7 appr oval , cor r ect ?
8 A. Cor r ect .
9 MR. RUBI NSTEI N: No f ur t her quest i ons, J udge.
10 THE COURT: Do you want t o r eopen?
11 MR. EVERDELL: No.
12 THE COURT: Al l done? You ar e excused.
13 ( Wi t ness excused)
14 THE COURT: Next wi t ness.
15 MR. KWOK: Bef or e I cal l t he next wi t ness, t he
16 gover nment want s t o r ead a pr oposed st i pul at i on i nt o t he r ecor d
17 at t hi s t i me.
18 THE COURT: Al l r i ght . Read i t .
19 Get t he wi t ness r eady. Ti me i s wast i ng.
20 I shoul d have sai d somet hi ng t o t he j ur y.
21 Dur i ng t hat l ast exami nat i on I asked qui t e a f ew
22 quest i ons, and i t ' s not my pur pose t o i nt er f er e wi t h t he
23 exami nat i on goi ng on. I asked t he quest i ons f or cl ar i f i cat i on
24 pur poses when I t hi nk t hat t he t est i mony i sn' t cl ear or and
25 t i mes i n an at t empt t o speed t hi ngs up. You ar e not t o dr aw
( 212) 805- 0300
458
8647KAR5 Snowden - r ecr oss
1 any concl usi ons f r omt he f act t hat I asked quest i ons of one
2 wi t ness or anot her . I j ust have ver y much i n mi nd t he t i me
3 pr obl ems i n t he case, and I want t o get t he case over as soon
4 as possi bl e. I t hi nk I ' mhel pi ng, but I may not be hel pi ng,
5 and I t r y t o ant i ci pat e quest i ons I t hi nk t he j ur y mi ght have
6 so t hat t hi ngs ar e cl ear f or t he j ur y. That ' s t he pur pose of
7 t he quest i oni ng, but i t ' s not t hat I ' mt aki ng si des wi t h one
8 si de or t he ot her .
9 MR. RUBI NSTEI N: Your Honor , whi l e t he gover nment
10 r eads t he st i pul at i on, whi ch I have agr eed t o, can I r un out
11 f or a second so we don' t st op anyt hi ng?
12 THE COURT: Yes, you may. Thank you.
13 MR. KWOK: May I pr oceed, your Honor ?
14 THE COURT: Yes.
15 MR. KWOK: I amr eadi ng i nt o t he r ecor d what ' s been
16 mar ked f or i dent i f i cat i on Gover nment Exhi bi t 900, and i t r eads
17 as f ol l ows:
18 Uni t ed St at es of Amer i ca v. Dani el B. Kar r on, t he
19 def endant , S2 07 Cr i m. 541. " I t i s her eby st i pul at ed and
20 agr eed by and among t he Uni t ed St at es of Amer i ca, by Mi chael J .
21 Gar ci a, Uni t ed St at es at t or ney f or t he Sout her n Di st r i ct of New
22 Yor k, St even Kwok and Chr i st i an Ever del l , assi st ant Uni t ed
23 St at es at t or neys, of counsel , and def endant Dani el B. Kar r on by
24 and wi t h t he consent of hi s at t or ney Ronal d Rubi nst ei n, Esq.
25 t hat :
( 212) 805- 0300
459
8647KAR5
1 " 1. The document s mar ked f or i dent i f i cat i on as
2 Gover nment Exhi bi t 80 ar e t he r ecor ds of t he bank account s of
3 Dani el B. Kar r on, def endant , at J P Mor gan Chase Bank f r omi n or
4 about Oct ober 2001 t o i n or about August of 2003.
6 Gover nment Exhi bi t 81 ar e t he r ecor ds of t he bank account s of
7 Comput er Ai ded Sur ger y, I nc. ( CASI ) at J P Mor gan Chase Bank
8 f r omi n or about Oct ober 2001 t o i n or about August 2003.
10 Gover nment Exhi bi t 90 ar e t he cr edi t car d st at ement s f or t he
11 Amer i can Expr ess car d bear i ng account number 3783- 490172- 15000
12 f r omi n or about Oct ober 2001 t o i n or about Apr i l 2003.
14 Gover nment Exhi bi t 100 ar e t he r ecor ds of pur chases at Dat a
15 Vi si on by CASI f r omi n or about Oct ober 2001 t o i n or about
16 Oct ober 2003.
18 Gover nment Exhi bi t 101 ar e t he r ecor ds of pur chases at Home
19 Fr ont Har dwar e St or e by CASI f r omi n or about Sept ember 2002 t o
20 i n or about Sept ember 2003.
22 Gover nment Exhi bi t 102 ar e t he r ecor ds of pur chases at Gener al
23 Comput er and Ser vi ce by CASI f r omi n or about Oct ober 2001 t o
24 i n or about May 2003.
25 " 7. Document s mar ked f or i dent i f i cat i on as Gover nment
( 212) 805- 0300
460
8647KAR5
1 Exhi bi t 103 ar e t he r ecor ds of pur chases at Si l i con Gr aphi cs,
2 I nc. by CASI f r omi n or about December 2001 t o i n or about
3 J anuar y 2003.
5 Gover nment Exhi bi t 104 ar e t he r ecor ds of pur chases at Si l i con
6 Ci t y, I nc. by CASI i n or about November 2001 t o i n or about May
7 2003.
9 Gover nment Exhi bi t 120A ar e t he r ecor ds of pur chases at Si l i con
10 Ci t y, I nc. by CASI on or about May 10, 2002, Mar ch 27, 2002 and
11 Oct ober 1, 2002, wi t h pr oof of pur chase and payment , and t he
12 r ecor ds of pur chase at Dat a Vi si on by CASI on or about
13 Sept ember 20, 2002.
14 " The r ecor ds mar ked f or i dent i f i cat i on as Gover nment ' s
15 Exhi bi t s 80, 81, 90, 100, 101, 102, 103, 104 and 120A ar e f ul l
16 and compl et e r ecor ds of t he act s, t r ansact i ons and event s
17 descr i bed t her ei n; wer e made and/ or r ecei ved and t her eaf t er
18 mai nt ai ned i n t he r egul ar cour se of busi ness; wer e made at or
19 near t he t i me of t he act s, t r ansact i ons and event s r ecor ded
20 t her ei n; and cont ai n t he i nf or mat i on set f or t h by or obt ai ned
21 f r omper sons wi t h knowl edge of t hose mat t er s.
22 " I t i s f ur t her st i pul at ed and agr eed t hat t he
23 Gover nment ' s Exhi bi t s 80, 81, 90, 100, 101, 102, 103, 104 and
24 120A, and t hi s st i pul at i on, whi ch i s mar ked f or i dent i f i cat i on
25 as Gover nment Exhi bi t 900, may be r ecei ved i n evi dence as
( 212) 805- 0300
461
8647KAR5
1 Gover nment Exhi bi t i n t hi s t r i al , and i t i s si gned J une 3,
2 2008, New Yor k, New Yor k, on behal f of t he Uni t ed St at es by
3 St eve Kwok, and on behal f of Dani el B. Kar r on by Ronal d
4 Rubi nst ei n, Esqui r e. "
5 Your Honor , t he gover nment moves f or t he admi ssi on of
6 t hi s st i pul at i on and t he exhi bi t s ment i oned t her ei n.
8 THE COURT: No obj ect i on? Let me have a copy of t he
9 st i pul at i on, pl ease.
10 Gover nment ' s Exhi bi t s 80, 81, 90 and 100, and Exhi bi t s
11 101, 102, 103, 104 and 104A ar e admi t t ed i n evi dence pur suant
12 t o st i pul at i on t o t he par t i es.
13 DEPUTY COURT CLERK: 104A or 120A?
14 THE COURT: I ' msor r y. 104 and 120A. They ar e
15 admi t t ed i nt o evi dence. Thank you.
16 ( Gover nment ' s Exhi bi t s 80, 81, 90, 100, 101, 102, 103,
17 104, 120A r ecei ved i n evi dence)
19 MR. KWOK: The gover nment cal l s Bel i nda Ri l ey.
20 BELI NDA RI LEY,
23
24 DEPUTY COURT CLERK: Pl ease st at e you name, and spel l
25 you f i r st and l ast name sl owl y f or t he r ecor d, pl ease.
( 212) 805- 0300
462
8647KAR5
1
2 THE WI TNESS: My name i s Hazel Ri l ey, H- A- Z- E- L
3 R- I - L- E- Y, but I go by Bel i nda.
5 BY MR. KWOK:
6 Q. Good af t er noon, Ms. Ri l ey.
9 A. Depar t ment of Commer ce, Of f i ce of I nspect or Gener al , t he
10 At l ant a r egi on.
11 Q. What ' s your j ob t i t l e?
12 A. Assi st ant r egi onal i nspect or gener al f or audi t s, At l ant a
13 r egi on.
14 Q. I s t hat a super vi sor y posi t i on?
15 A. Yes, i t i s.
16 Q. How l ong have you been a super vi sor ?
17 A. For about t wo year s.
18 Q. What do you do i n your cur r ent j ob?
19 A. I super vi se sever al empl oyees, and I pl an audi t s and ot her
20 dut i es assi gned.
21 Q. What di d you do bef or e you became a super vi sor ?
22 A. I was an audi t or r evi ewi ng gover nment gr ant s or gover nment
23 pr ogr ams.
24 Q. You wer e an audi t or wi t h whi ch depar t ment ?
25 A. The Depar t ment of Commer ce, Of f i ce of I nspect or Gener al ,
( 212) 805- 0300
463
8647KAR5 Ri l ey - di r ect
1 si nce J une of ' 97.
2 Q. What wer e your dut i es and r esponsi bi l i t i es when you wer e an
3 audi t or wi t h t he Depar t ment of Commer ce?
4 A. To audi t commer ce pr ogr ams, wor k up commer ce gr ant s, under
5 t he var i ous agenci es.
6 Q. What di d you do bef or e t hen, bef or e you j oi ned t he commer ce
7 depar t ment ?
8 A. I was a r evenue agent wi t h I RS f or about 11 year s.
9 Q. Can you gi ve us a t i me f r ame i f you r emember ?
10 A. I st ar t ed i n Sept ember of ' 86 and l ef t i n J une of ' 97.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
464
864ZKAR6 Ri l ey - di r ect
1 Q. And what di d you do as an agent wi t h t he I RS?
2 A. For t he f i r st - - I audi t ed i ndi vi dual t ax r et ur ns,
3 cor por at e t ax r et ur ns, exci se t ax r et ur ns.
4 Q. Ms. Ri l ey, what ' s your educat i onal backgr ound?
5 A. I have a bachel or s of - - I have a B. A. i n account i ng, a
6 B. A. i n account i ng i nf or mat i on syst ems, a Bachel or of Sci ence
7 i n Comput er Sci ence Pr ogr ammi ng Opt i on, and I ama cer t i f i ed
8 CPA.
9 Q. How di d you become a cer t i f i ed CPA, what - -
10 A. Cer t i f i ed Publ i c Account ant .
11 Q. What does CPA st and f or ?
12 A. Cer t i f i ed Publ i c Account ant .
13 Q. How di d you become cer t i f i ed?
14 A. I t ook a CPA examat t he t i me, I t hi nk i t was a
15 t wo- and- a- hal f day t est t hat ' s l i ke 19 hour s, and you al so had
16 t o have f i ve year s f or gover nment t o become a CPA i n
17 account i ng.
18 Q. Mi ss Ri l ey, what , i f any, pr of essi onal r ecogni t i on have you
19 r ecei ved f or your account i ng and audi t i ng wor k?
20 A. I have t wo br onze medal s and a si l ver medal awar ded f r om
21 t he Depar t ment of Commer ce.
22 MR. KWOK: Your Honor , gover nment of f er s Bel i nda Ri l ey
23 as an exper t i n account i ng and audi t i ng pr ocedur es.
25 THE COURT: Al l r i ght . Ms. Ri l ey i s accept ed as an
( 212) 805- 0300
465
1 exper t i n account i ng audi t i ng pr ocedur es - - account i ng and
2 audi t i ng pr ocedur es.
3 BY MR. KWOK:
4 Q. Ms. Ri l ey, what ki nds of gr ant s does your of f i ce audi t ?
5 A. We audi t NI ST ATP gr ant s, whi ch i s Nat i onal I nst i t ut e of
6 St andar ds and Technol ogy Advanced Technol ogy Pr ogr am, audi t s
7 f or r esear ch. We audi t NTI A gr ant s i n t el ecommuni cat i ons. We
8 audi t EDA gr ant s, whi ch i s Economi c Devel opment Admi ni st r at i on,
9 what ever - - we can audi t any gr ant t hat one of our commer ce
10 agenci es gi ve.
11 Q. Do al l gr ant s awar ded by t he Commer ce Depar t ment get
12 audi t ed by t he Of f i ce of t he I nspect or Gener al ?
13 A. No.
14 Q. How does your of f i ce become i nvol ved?
15 A. Our of f i ce becomes i nvol ved by r equest f r omNI ST or i t
16 coul d be f r omt he hot l i ne cal l t hat says t hat t hey suspect an
17 or gani zat i on i s usi ng f r audul ent , doi ng f r audul ent act i vi t y.
18 Or we have a - - we r evi ew al l of t he NI ST ATP r esear ch gr ant
19 awar ds submi t t ed by t he CPA f i r ms, and so i f dur i ng one of our
20 r evi ews someone sees suspi ci ous, we may audi t t hat awar d.
21 Q. How many audi t s have you handl ed si nce you j oi ned t he
22 depar t ment ?
23 A. Pr obabl y about 10 or 15.
24 Q. How many t i mes have you t est i f i ed i n a cr i mi nal t r i al
25 bef or e i n connect i on wi t h your audi t i ng wor k?
( 212) 805- 0300
466
1 A. None.
2 Q. Ms. Ri l ey, di d t her e come a t i me when you became i nvol ved
3 i n audi t i ng an Advanced Technol ogy Pr ogr amgr ant or ATP gr ant
4 awar ded t o a company known as CASI ?
5 A. Yes.
6 Q. Who was t he pr i nci pal i nvest i gat or of t hat gr ant ?
7 A. Dan Kar r on.
8 Q. Do you see Dan Kar r on i n t he cour t r oomher e t oday?
9 A. Yes, he' s over t her e.
10 Q. Coul d you descr i be an ar t i cl e of cl ot hi ng he' s wear i ng?
11 A. He' s got gl asses - - he' s got on gl asses, a pony t ai l and i s
12 t hat a whi t e and gr een t i e?
13 MR. KWOK: Your Honor , may t he r ecor d r ef l ect t hat t he
14 wi t ness has i dent i f i ed t he def endant ?
15 THE COURT: Al l r i ght , t he r ecor d wi l l so r ef l ect .
16 Q. Ms. Ri l ey, how di d you become i nvol ved i n t he CASI audi t ?
17 A. The NI ST gr ant s of f i cer s sent a l et t er t o our - - t he Of f i ce
18 of I nspect or Gener al r equest i ng an audi t , and I was assi gned
19 t he audi t .
20 Q. What di d t hey ask you t o do?
21 A. To det er mi ne t he f i nanci al st at us of t he gr ant pr oj ect .
22 Q. And when was t hi s, appr oxi mat el y?
23 A. We r ecei ved r equest s i n May of 2003, appr oxi mat el y.
24 Q. What di d you do upon r ecei vi ng t hi s r equest ?
25 A. I cal l ed CASI t o schedul e an i ni t i al appoi nt ment f or t he
( 212) 805- 0300
467
1 audi t .
2 Q. Wher e di d you go t o conduct t hi s audi t ?
3 A. To t he CASI of f i ce apar t ment .
4 Q. And wher e i s t hat ?
5 A. I n Manhat t an.
6 Q. You sai d apar t ment . How do you know i t was an apar t ment ?
7 A. Wel l , on some of t he vi si t s, Mr . Kar r on woul d be get t i ng
8 out of bed t o answer t he door because I woul d get t her e ear l y
9 i n t he mor ni ng, 10: 00 o' cl ock, 9, 10: 00 o' cl ock, and he was a
10 l at e ni ght per son.
11 Q. And what was t he obj ect i ve of your vi si t ?
12 A. To det er mi ne t he f i nanci al st at us of t he gr ant cost .
13 Q. How do you get up t o speed on t he company' s f i nanci al
14 si t uat i on?
15 A. Okay. Pr i or - - by r evi ewi ng t he l edger s and i nvoi ces
16 pr ovi ded by CASI t o me. Pr i or t o goi ng t o t he - - pr i or t o
17 comi ng t o Manhat t an, I i nt er vi ewed t he NI ST gr ant s of f i ce
18 peopl e and r evi ewed t hei r gr ant f i l es concer ni ng CASI .
19 Q. As par t of t hat pr epar at i on, di d you t al k t o anyone at
20 CASI ?
21 A. Yes. At CASI I t al ked t o Dan Kar r on, t o J oan Hayes, t he
22 CPA t hat he pr ovi ded t o, Fr ank Spr i ng, a book keeper , t o Bob
23 Benedi ct , t he pr oj ect manager .
24 Q. And i s t hat consi st ent wi t h what you usual l y do?
25 A. Yes.
( 212) 805- 0300
468
1 Q. Your usual pr act i ce?
2 A. Yes.
3 Q. You ment i oned i nvoi ces. Can you t el l us how t hose i nvoi ces
4 r el at ed t o what you do as an audi t or ?
5 A. Wel l , we t r ace - - we' r e pr ovi ded j our nal ent r i es or
6 what ever , we' r e pr ovi ded a l i st of expense, expendi t ur es f or
7 awar d, we t r ace a sampl e of t hem, j ust t he suppor t i ng voi ce or
8 cancel l ed check.
9 Q. And wer e you abl e t o f i nd t hose i nvoi ces at CASI ?
10 A. They pr ovi ded some i nvoi ces. The i nvoi ces at CASI had
11 been - - t he or i gi nal i nvoi ces had been scanned i nt o t he
12 comput er , and t he or i gi nal document s had been dest r oyed. And
13 so f or some of t he i nvoi ces, t her e wer e mul t i pl e copi es and
14 some of t hemwe had a har d t i me f i ndi ng or di dn' t f i nd.
15 Q. Di d t her e come a t i me whi l e you wer e conduct i ng t he audi t
16 t hat you spoke as t o an i ndi vi dual by t he name of J oan Hayes?
17 A. Yes.
18 Q. And what i s your under st andi ng as t o what J oan Hayes was
19 doi ng at CASI ?
20 A. She had done t he f i r st year audi t , t hey' r e r equi r ed t o have
21 an audi t by ATP, and she was - - I guess she was t her e t o hel p
22 me wi t h my audi t or t o pr ovi de i nf or mat i on about t he CASI books
23 and r ecor ds or f or answer i ng quest i ons I mi ght have concer ni ng
24 t he books and r ecor ds.
25 Q. And what di d you do wi t h t he mat er i al s t hat J oan Hayes
( 212) 805- 0300
469
1 pr ovi ded you?
2 A. I used, I used t hemas a sour ce of my audi t .
3 Q. And how l ong wer e you at CASI f or t hi s audi t ?
4 A. I t hi nk I got t her e on Wednesday and I l ef t Thur sday or
5 Fr i day of t he next week.
6 Q. Di d you pr epar e a r epor t af t er t he audi t ?
7 A. Yes. I pr epar ed a memo r epor t , a shor t r epor t .
8 Q. I f you coul d f i nd what ' s been mar ked f or i dent i f i cat i on as
9 gover nment exhi bi t 60 i n t hat pi l e t hat i s i n f r ont of you?
10 A. Oh, okay. 60.
11 THE COURT: What per i od of t i me di d you audi t ?
12 THE WI TNESS: I audi t ed t he t i me 10/ 1 - - Oct ober ,
13 Oct ober 1st , 2001 t hr ough 6/ 30 - - 6/ 27, 2003.
14 Q. Do you have t hat document i n f r ont of you?
15 A. Yes.
16 Q. Gover nment exhi bi t 60 mar ked f or i dent i f i cat i on? Do you
17 r ecogni ze t hat document ?
18 A. Yes.
19 Q. Who pr epar ed t hat document ?
20 A. I di d.
21 Q. And what i s i t ?
22 A. I t i s our memo r epor t t hat was pr epar ed af t er t he J une 2003
23 vi si t s.
24 Q. I s t hat t he vi si t you j ust r ef er r ed t o - -
25 A. Yes.
( 212) 805- 0300
470
1 Q. - - a moment ago?
2 A. Yes.
3 MR. KWOK: Your Honor , t he gover nment of f er s exhi bi t
4 60?
5 MR. RUBI NSTEI N: I ' d l i ke a br i ef voi r di r e, your
6 Honor .
8 VOI R DI RE:
10 Q. Good af t er noon, Ms. Ri l ey.
12 Q. Now, you pr epar ed t hi s r epor t f r omwhat document s?
13 A. Thi s r epor t s wer e pr epar ed, my audi t , as a r esul t of t he
14 document s t hat Dr . Kar r on pr ovi ded dur i ng t hat J une vi si t .
15 Q. Dr . Kar r on or Ms. Hayes?
16 A. Dr . Kar r on, J oan Hayes, Bob Benedi ct , t hey wer e al l t her e.
17 Mi ss Hayes was supposed t o be t he r epr esent at i ve l eadi ng me
18 t hr ough t he books and r ecor ds, and she was r epr esent i ng Dr .
19 Kar r on.
20 Q. Do you have copi es of t hose document s?
21 A. The document s - -
22 Q. That you used t o - -
23 A. Yes.
24 Q. - - cr eat e t hi s r epor t ?
25 A. Yes.
( 212) 805- 0300
471
1 Q. Wher e ar e t hey?
2 A. What - - my audi t r epor t s, my audi t - -
3 Q. Your what ?
4 A. I n my audi t f i l es. I t hi nk t he document t hat my r epor t ,
5 t hat t he r epor t was cr eat ed f r omwas pr ovi ded. I mean, what - -
6 my own - - I have my audi t r epor t t hat I used t o pr epar e t hi s.
7 Q. I n ot her wor ds, do you make a r epor t or cr eat e some
8 wr i t i ngs t o show t hat you used t o put i nt o t hi s r epor t ,
9 Gover nment ' s 60?
10 A. Yes.
11 MR. RUBI NSTEI N: May I appr oach t he gover nment , your
12 Honor .
14 ( Pause)
15 Q. I s i t cor r ect , ma' am, t hat you used J oan Hayes' wor k paper s
16 t o do your - - t hi s r epor t ?
17 A. I used t he wor k - - t he gener al l edger s, t he cash
18 di sbur sement r egi st er s, t he - - what ever i nf or mat i on, t he books
19 t hat wer e pr epar ed by - - some t hi ngs t hat J oan Hayes pr ovi ded.
20 The books t hat wer e bei ng r epr epar ed by Fr ank Spr i ng. He
21 al so - - I al so t al ked t o hi mwhi l e I was t her e, t o do - - t o
22 come up wi t h t he wor k paper s f r omt hi s r epor t .
23 Q. Di d you cr eat e any wor k paper s, ma' am?
24 A. Yes, I di d.
25 Q. Di d you cr eat e a gener al l edger ?
( 212) 805- 0300
472
1 A. For t hi s r epor t ?
2 Q. Yes.
3 A. No. I mean no.
4 Q. You used J oan Hayes' - -
5 A. I di dn' t use J oan Hayes' audi t f or t hi s as a, my - - t he
6 f i nal number f or t hi s r epor t .
7 Q. You t est i f i ed t hat you used J oan Hayes' i nf or mat i on,
8 cor r ect ?
9 A. I used J oan Hayes' - - I used i t , t he i nf or mat i on t hat J oan
10 Hayes - - t hat CASI under Kar r on had asked J oan Hayes t o pr ovi de
11 t o me f or t hi s audi t .
12 Q. Di d you i ndependent l y check what ever document at i on J oan
13 Hayes pr ovi ded f or you, t o you?
14 A. I di d sel ect a sampl e of t he i nvoi ces t o t r ace t he sampl e
15 of t he l edger ent r i es t o t r ace t o t he i nvoi ces f or t hi s r epor t .
16 Q. I sn' t i t a f act t hat J oan Hayes had no gener al l edger ?
17 Ther e was no gener al l edger f or CASI ; i s t hat a f act ?
18 A. Ther e wer e - - CASI used Qui ck Books, and so what ever t he
19 syst emof qui ck books t her e wer e - - t her e wer e - - t her e wer e
20 t hi ngs f or Qui ck Books.
21 Fr ank Spr i ng, I guess Fr ank Spr i ng was cr eat i ng a new
22 gener al l edger or a new l edger syst emor j our nal ent r y syst em
23 f or CASI at t he t i me I was t her e.
24 When I cal l ed t o schedul e t he i ni t i al appoi nt ment ,
25 CASI coul dn' t meet wi t h me because t hey wer e i n t he pr ocess of
( 212) 805- 0300
473
1 r edoi ng t hei r books and r ecor ds, and so i t del ayed my vi si t f or
2 a coupl e of weeks t o gi ve t hemt i me.
3 When I ar r i ved, t he new books wer en' t compl et ed yet ,
4 so t hey wer e goi ng t o be compl et ed t he next day so I wai t ed
5 t i l l t he next day.
6 The - - I used t he r ecor ds t hat t hey pr ovi ded and,
7 i ncl udi ng J oan Hayes, what J oan Hayes had pr ovi ded t o come up
8 wi t h t he number s f or t hi s. I di d not t ake J oan Hayes' r epor t
9 and copy t he number s t o come up wi t h t hi s.
10 Q. I n f act , you never - - do you have, ei t her f r omyour own
11 wor k, f r omFr ank Spr i ng' s - - he was a book keeper of some sor t ?
12 A. Yes.
13 Q. Or f r omJ oan Hayes, a gener al l edger , ma' am?
14 A. I know I have some summar i es pr ovi ded di f f er ent cat egor i es,
15 and I t hi nk t her e ar e some l edger s t her e. I know I have t o - -
16 Q. Di d you do - -
17 A. Yes.
18 Q. - - a r econci l i at i on? Ther e wer e checki ng account s, wer e
19 t her e not ?
20 A. Yes when I - - f or t he audi t ?
21 Q. Yes. Ther e wer e checki ng account s, CASI had a number of
22 checki ng account s, di d i t not ?
23 A. Yes.
24 Q. Di d you do a bank r econci l i at i on of t he var i ous bank
25 account s of CASI ?
( 212) 805- 0300
474
1 A. For t hi s, f or t hi s audi t ?
2 Q. Ri ght .
3 A. No.
4 MR. RUBI NSTEI N: Your Honor , I obj ect .
5 MR. KWOK: Si debar , your Honor ?
6 THE COURT: Yes.
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
475
2 MR. KWOK: Gr ounds?
3 MR. RUBI NSTEI N: The gr ounds - - t hese ar e some
4 summar y, some document s t hat she doesn' t have, t hat she' s
5 unawar e of , and she came up wi t h t hese number s f r omwher e we
6 wi l l never never know because we don' t have or i gi nal sour ce
7 document s t o l ook at , j udge. She cl ear l y r el i ed upon ot her
8 peopl e' s wor k t o det er mi ne t he cost . I t ' s har d t o bel i eve t hat
9 someone coul d be an audi t or and not r econci l e bank account s
10 t hat pr obabl y had l ess t han 500 checks i n t ot al , f or t he per i od
11 t hat we' r e t al ki ng about .
12 MR. KWOK: Your Honor , we of f er her as an exper t
13 wi t ness under Feder al Rul es of Evi dence 703. Under l yi ng
14 document s t hat an exper t r el y upon does not have t o be
15 admi ssi bl e. That ' s what audi t or s do, t hey don' t necessar i l y
16 have t he under l yi ng document s. They go t o si t es t o l ook at t he
17 company books. They don' t necessar i l y t ake t hose document s
18 back wi t h t hemaf t er t hey' ve compl et ed an audi t . I bel i eve
19 t hat ' s what happened i n t hi s case, t hat she wasn' t - - went t o
20 CASI t o l ook at t he books. She t r i ed t o ver i f y some of i t t o
21 have some conf i dence about t he accur acy of t he number s. She
22 i ssued a r epor t . I t doesn' t mean she t ook away t hose document s
23 and at t ached t hemas some sor t of at t achment t o her r epor t .
24 She went t her e, saw t hi ngs, t al ked t o peopl e make some
25 det er mi nat i ons and i ssue a r epor t . The f act t hat she doesn' t
( 212) 805- 0300
476
1 have t he under l yi ng document s shoul d not be an i ssue, and she' s
2 an exper t . Under Rul e 703 t he under l yi ng document s - -
3 THE COURT: I ' mgoi ng t o al l ow her t o t est i f y because
4 a audi t or does not have t o t ake t he r ecor ds wi t h t hemor copi es
5 of t he r ecor ds. They may have t o t ake copi es of por t i ons t hat
6 t hey r el y on. But f or i l l ust r at i on pur poses, t he audi t or does
7 not have t o - - j ust has t o use gener al accept ed audi t i ng
8 met hods t o ver i f y t he books and account s of t he company.
9 MR. KWOK: I t hi nk t hat ' s exact l y r i ght .
10 THE COURT: I t ' s t he company, i t ' s t he company' s
11 account t hat t he audi t or i s ver i f yi ng.
12 MR. RUBI NSTEI N: Her e he di dn' t have account s, J udge
13 wi t h al l due r espect , so t hat ' s why - -
14 THE COURT: I don' t know. I mean t hat ' s anot her
15 mat t er .
16 MR. KWOK: You can cr oss on i t .
17 MR. RUBI NSTEI N: I don' t want - -
18 THE COURT: They' r e supposed t o have an account ant ,
19 sor r y, as I under st ood i t .
21
22
23
24
25
( 212) 805- 0300
477
2 MR. KWOK: Your Honor , gover nment of f er s gover nment
3 exhi bi t 60.
4 THE COURT: Gover nment 60 i s admi t t ed i n evi dence.
6 MR. RUBI NSTEI N: I obj ect t o t he - -
7 THE COURT: I under st and. I haven' t r ead i t , so I
8 don' t know what i t i s. I t may be a val i d obj ect i on af t er I see
9 i t .
10 MR. KWOK: Do you st i l l have t he document i n f r ont of
11 you?
12 THE COURT: Di d you use your or di nar y audi t i ng
13 pr ocedur es i n r evi ewi ng t he books of - -
15 THE COURT: CASI ?
17 THE COURT: What ever books you wer e pr esent ed wi t h?
19 THE COURT: Those i ncl uded t he r epor t of what was her
20 name, Mi ss Hayes?
22 THE COURT: And al so mat er i al s suppl i ed by t he book
23 keeper ?
25 THE COURT: Was t her e - - so, and t hey wer e i n l edger
( 212) 805- 0300
478
1 f or mso you coul d check t hem?
2 THE WI TNESS: Thi ngs wer e i n l edger f or ms.
3 THE COURT: I see, al l r i ght .
5 Q. Ms. Ri l ey, what ' s t he dat e of t hi s r epor t ?
6 A. J ul y 2003.
7 Q. Di r ect i ng your at t ent i on t o pages t hr ee and f our , l et ' s put
8 up page - - i f we coul d put t hemsi de by si de.
9 Ms. Ri l ey, what ar e t he f i ndi ngs t hat you r eached i n
10 t hi s audi t r epor t ?
11 A. That , t hat CASI had not met t he mat chi ng cost shar e
12 r equi r ement ; t hat CASI had excess dr awdowns of over $200, 000,
13 and t hat t hey had submi t t ed a - -
14 THE COURT: Sor r y, what was t he f i r st t hi ng you sai d?
15 THE WI TNESS: That t hey had not met t he mat chi ng
16 r equi r ement s of t he NI ST awar d.
17 THE COURT: Second.
18 THE WI TNESS: That t hey had excess dr awdowns of over
19 $200, 000.
20 Q. And t he t hi r d?
21 A. The t hi r d, t hey had f i l ed i naccur at e f i nanci al st at us
22 r epor t wi t h us.
23 Q. Ms. Ri l ey, l et ' s t ake t hi s one at a t i me now. What does i t
24 mean when you sai d t he company had not cont r i but ed mat chi ng
25 f unds?
( 212) 805- 0300
479
1 A. That t hey, t hey had not - - t hey had not cont r i but ed
2 anyt hi ng t o t he, t o t he NI ST awar d.
3 Q. What ar e t hey supposed t o do?
4 A. They wer e supposed t o cont r i but e 4. 57 per cent of t he f unds.
5 MR. RUBI NSTEI N: I ' msor r y, I di dn' t di gi t hear t hat .
6 A. Of t he pr oj ect cost .
7 MR. RUBI NSTEI N: I mi ssed t he per cent age, your Honor .
8 THE WI TNESS: The 4. 57 per cent .
9 Q. And what i n f act happened?
10 A. They hadn' t cont r i but ed anyt hi ng t o t he cost , t he cost
11 shar e t o t he pr oj ect .
12 Q. And, Ms. Ri l ey, how di d you ar r i ve at t hi s concl usi on?
13 A. By r evi ewi ng t he, t he r ecor ds of what , and t r ansact i ons of
14 t he l edger s.
15 Q. The document s pr ovi ded t o you by t he company?
16 A. Ri ght , t he document s pr ovi ded.
17 Q. The second i ssue you ment i oned was t he excessi ve dr awdowns.
18 Can you expl ai n t o us what t hat means?
19 A. They had, t hey had - - t hey had r ecei ved NI ST gr ant f unds
20 t hat had been spent on CASI expenses i nst ead of t he pr oj ect
21 expenses. They - -
22 THE COURT: You dr opped your voi ce, I can' t hear you.
23 You' l l have t o speak up.
24 THE WI TNESS: They had, t hey had - - t hey had dr awn
25 down f unds f r omNI ST t hat wer e spent on CASI busi ness expenses
( 212) 805- 0300
480
1 or not al l owabl e NI ST pr oj ect expenses.
2 Q. I n ot her wor ds, expenses not appr oved?
3 MR. RUBI NSTEI N: Obj ect i on, your Honor , t o - -
4 Q. Can you expl ai n what you mean by t hat ?
5 THE COURT: Your obj ect i on' s sust ai ned, f or mof t he
6 quest i on, Mr . Kwok.
7 MR. KWOK: I apol ogi ze, your Honor .
8 Q. What do you mean by t hat ?
9 A. They had spent - - t he money had been spent on r ent or
10 ut i l i t i es or on t hi ngs t hat wer e not al l owed per t he gr ant
11 budget .
12 Q. And what i s t he appr oxi mat e si ze of t hi s excess dr awdown?
13 A. 205, 000.
14 Q. And agai n how wer e you abl e t o make t hat det er mi nat i on?
15 A. Fr omr evi ewi ng t hei r books, f r omt he l edger s - - f r omt he
16 books t hat wer e pr ovi ded t o us by CASI .
17 Q. Fi nal l y, you ment i oned f i nanci al st at us r epor t s. Fi r st of
18 al l , what ar e f i nanci al st at us r epor t s?
19 A. Gr ant r eci pi ent s ar e r equi r ed t o submi t f i nanci al st at us
20 r epor t s quar t er l y t o i nf or mNI ST how t hey spent t he gr ant
21 moni es t hat t hey dr ew down f or t hat quar t er .
22 Q. And what t ype of i nf or mat i on ar e t hey supposed t o r epor t on
23 t hese f i nanci al st at us r epor t s?
24 A. Fi nanci al st at us r epor t i ncl udes t he amount of mat ched
25 shar e t hey pr ovi de, and t he amount of cost spent wi t h t he NI ST
( 212) 805- 0300
481
1 gr ant pr oj ect .
2 Q. What was your audi t f i ndi ng about CASI ' s f i nanci al st at us
3 r epor t s?
4 A. They r epor t ed t he dr awdown amount s t hey r ecei ved f r omNI ST,
5 not t he expense of what t hey spent dr awdowns on.
6 Q. Can you - -
7 A. Not t he cost . They di dn' t - - t hey di dn' t r epor t how t hey
8 spent t he gr ant moni es.
9 Q. What , i n f act , di d t hey r epor t ?
10 A. They r epor t ed t he dr awdown, t he moni es t hey r ecei ved.
11 Q. Any ot her i ssue wi t h t he f i nanci al st at us r epor t s?
12 A. They r epor t ed a mat ch shar e. They di d not gi ve a mat ch
13 shar e.
14 Q. And how wer e you abl e t o make t hose det er mi nat i ons?
15 A. By r evi ewi ng t he f i nanci al st at us r epor t s.
16 Q. I s t hat what you do as an audi t or ?
17 A. Yes.
18 Q. Ms. Ri l ey, what , i f any, r ecommendat i ons do you make i n
19 your audi t r epor t ?
20 MR. RUBI NSTEI N: I obj ect t o t hat , your Honor .
21 Q. I f you coul d di r ect us t o t he page of t he document ?
22 A. I t ' s on page f i ve.
23 THE COURT: I don' t see t he r el evance of t hat .
24 MR. KWOK: Your Honor , t he audi t r epor t cont ai ns a
25 r ecommendat i on or ser i es of r ecommendat i ons.
( 212) 805- 0300
482
1 THE COURT: The - -
2 MR. RUBI NSTEI N: That ' s what I obj ect ed t o, J udge.
3 THE COURT: That ' s what he obj ect ed t o, t he
4 r ecommendat i on par t .
6 MR. KWOK: The r el evance, t he r el evance i s - -
7 THE COURT: I don' t want t o hear your ar gument i n
8 f r ont of t he j ur y.
9 MR. KWOK: Coul d we have a si debar ?
10 THE COURT: I ' l l have i t at t he si debar i f you want t o
11 hal f i t . I t seems t o me i t ' s - -
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
483
2 MR. KWOK: Your Honor , t hi s audi t r epor t i s t he f i r st
3 of I bel i eve t hr ee audi t r epor t s t hat t hi s audi t or pr epar ed.
4 She made a ser i es of r ecommendat i ons i n her f i r st audi t r epor t ,
5 and t hen l at er on she went back t o t he company t o audi t t he
6 books f or a second t i me. And I ' mi nt endi ng t o show t hat t he
7 r ecommendat i ons t hat she made t he f i r st t i me wer e not
8 under t aken even si x mont hs l at er when she went back t o t he
9 company.
10 THE COURT: That has not hi ng t o do wi t h whet her or not
11 t hi s man i mpr oper l y used - -
12 MR. KWOK: I t goes t o hi s i nt ent , i t goes t o hi s
13 i nt ent because t he f i r st r epor t t ol d hi mwhat was wr ong, and
14 when si x mont hs l at er she came back, t he same t hi ng st ays t he
15 same. I t goes t o hi s i nt ent .
16 MR. RUBI NSTEI N: I submi t , your Honor , i t doesn' t go
17 t o hi s i nt ent t hat he - - t he audi t r epor t r ecommendat i on. He
18 hi r ed a separ at e account ant who submi t t ed r esponses t o Ri l ey,
19 t o ar gue t he i ssue of her f i ndi ngs, as t o her number of
20 f i ndi ngs. So I submi t i t doesn' t go t o hi s i nt ent , and t hey
21 know i t . They have t hi s, one of t he exhi bi t s.
22 THE COURT: Why can' t you deal wi t h i t i n ot her ways
23 i nst ead of deal i ng wi t h t he r ecommendat i ons, whi ch i nvol ves
24 suspensi on, whi ch doesn' t seemt o me t o be r el evant t o t he
25 i ssue i n t he i ndi ct ment . Why can' t you r ai se t he i ssue about
( 212) 805- 0300
484
1 whet her t hi s r epor t and i t s r ecommendat i ons wer e, wer e pr ovi ded
2 t o Mr . , Dr . Kar r on, and whet her she had f ur t her di scussi ons
3 wi t h hi m. And t hey had anot her audi t , et cet er a, and you can
4 get i nt o what t he subj ect mat t er i s of t hose i t ems at t hat
5 t i me, not get i nt o t he r ecommendat i on of suspensi on by - -
6 MR. KWOK: The wi t ness i s act ual l y not goi ng t o
7 answer , I don' t bel i eve, t hat I r ecommended t he gr ant s be
8 suspended. She i s goi ng t o say, I t ol d hi mt hat he needs t o
9 amend hi s f i nanci al st at us r epor t and make t he cost - -
10 THE COURT: But you asked f or t he r ecommendat i on. She
11 i sn' t bei ng asked what she t ol d hi m.
12 MR. KWOK: Okay, can I ask t hat ?
13 THE COURT: The f or mof your quest i on.
14 MR. KWOK: Okay. I under st and. Thank you, your
15 Honor .
17 MR. RUBI NSTEI N: Your Honor , i t ' s past f our .
18 THE COURT: Yeah, wel l , l et ' s j ust l et hi mget t hi s
19 quest i on i n.
20 MR. RUBI NSTEI N: Sur e.
22
23
24
25
( 212) 805- 0300
485
2 THE COURT: Ref r ame your quest i on, Mr . Kwok.
4 Q. Ms. Ri l ey, what , i f any, act i ons di d you suggest t he
5 company under t ake t o i mpr ove t he negat i ve audi t f i ndi ngs i n
6 t hi s r epor t ?
8 THE COURT: What act i ons? I ' l l al l ow i t .
9 The j ur y i s i nst r uct ed t o di sr egar d anyt hi ng about
10 negat i ve or possi bl y, what have you.
11 What act i ons di d you t ake wi t h r espect t o Dr . Kar r on
12 and CASI af t er you made t hi s r epor t ? Di d you pr ovi de hi mwi t h
13 a copy?
14 THE WI TNESS: Oh, t hi s r epor t ? Yes, we pr ovi ded a
15 copy of t hi s r epor t t o CASI .
16 THE COURT: And what act i on di d you t ake t her eaf t er ?
17 Q. What act i ons di d you ask t hat t he company t ake?
18 A. We asked t hat t hey r ei mbur se NI ST f or t he f unds dr awn down
19 i n excess of t he f eder al amount , and we asked t hat t hey pr ovi de
20 cor r ect ed f i nanci al st at us r epor t s f or t he per i od of 2002 and
21 f or - - and f i nanci al st at us r epor t s f or t he 2003 year .
22 Q. Af t er you i ssued t hi s audi t r epor t , what , i f any, f ur t her
23 i nvol vement di d you have wi t h CASI ?
24 A. We went - - we di d a - - we di d anot her audi t i n December of
25 2003.
( 212) 805- 0300
486
1 Q. Why do you do anot her audi t i n December of 2003?
2 A. Wel l , we had al ways pl anned on i ssui ng - - t hi s i s a shor t
3 r epor t , our r epor t s nor mal l y ar e l onger , and pr ovi de mor e
4 i nf or mat i on i n quest i oned cost s, so we al ways pl anned on
5 i ssui ng anot her r epor t . But CASI had obt ai ned anot her CPA f or
6 t he audi t when we wer e r eady t o go back, and so - - i t cr eat ed
7 new books and r ecor ds, and so we had anot her si t e vi si t .
8 Q. Appr oxi mat el y, how much t i me passed bet ween t hi s second
9 vi si t and t he i ssuance of t hat r epor t ?
10 A. The second - - t he r epor t was i ssued i n J ul y, and t he second
11 vi si t was i n December 2003, so about f i ve mont hs.
12 Q. Now, by t hi s t i me had CASI under t aken any of t he act i ons
13 t hat you suggest ed?
14 A. They had - -
16 THE COURT: I t hi nk t hi s may be a good poi nt t o
17 suspend f or t he day, sor r y. But I ' mawar e of obl i gat i on, ot her
18 obl i gat i ons t hat I have t o car r y out and have t o be car r i ed out
19 by t he at t or neys. So I t hi nk we bet t er suspend t en mi nut es
20 af t er f our . Thank you f or bei ng so pr ompt t hi s mor ni ng. I
21 hope you get of f t o a good st ar t t omor r ow at 9: 30, and we' l l
22 see you.
23 I hope you get cof f ee and cooki es or what ever t hey
24 ser ve you.
( 212) 805- 0300
487
2 THE COURT: Oh, di d you gi ve Ms. - - al l r i ght , you can
3 st ep down.
5 THE COURT: I s t her e anyt hi ng el se t o t ake up? How
6 l ong wi l l wi t h t hi s wi t ness t ake?
7 MR. KWOK: I bel i eve appr oxi mat el y 45 mi nut es t o an
8 hour .
9 THE COURT: I t ' s awf ul l ong. Go ahead. I ' mj ust
10 t r yi ng t o move t hi s al ong.
11 MR. KWOK: I under st and, but as I t ol d your Honor we
12 bel i eve t hat we may be abl e t o move t hi s case a l i t t l e bi t .
13 Whi l e we' r e her e, shoul d we addr ess t he obj ect i on t hat
14 Mr . Rubi nst ei n j ust made?
15 THE COURT: Yes, you bet t er .
16 MR. KWOK: I t ' s our posi t i on t hat t hat goes t o hi s
17 i nt ent , as Ms. Ri l ey t est i f i es she suggest ed a number of
18 act i ons t hat t he company under t ake, i ncl udi ng payi ng back t he
19 money. And f i ve mont hs l at er she went back t o i ssue t he mor e
20 f ul some r epor t , and at t hat t i me i t was st i l l out st andi ng. So
21 I under st and par t of def ense' s ar gument i s t hey di d ever yt hi ng
22 t hey coul d t o r emedy t he si t uat i on, and t hat ' s si mpl y not t he
23 case. And i t goes t o t he def endant ' s st at e of mi nd. And i f he
24 i nt ends t o ar gue t hat t her e wer e some ot her peopl e i nvol ved who
25 wer e advi si ng t he def endant , he can cr oss on t hat . But t hat
( 212) 805- 0300
488
1 seems t o be a maj or pr i mar y i ssue i n t hi s case and we shoul d be
2 al l owed t o have t he wi t ness t est i f y t o t hat , i n f act .
3 THE COURT: Wel l , t est i f y t o what went on. I f ol l ow
4 your ar gument . But i s t her e any t est i mony about whet her
5 t her e - - f unds wer e avai l abl e f or t he r epayment s t hat t he
6 gover nment want ed?
7 MR. KWOK: Wel l , I bel i eve t her e' s goi ng t o be
8 t est i mony t hat al l - - t he CASI money comes f r omt he NI ST gr ant ,
9 and t he company had pr omi sed t o put some cost shar e wi t hi n, i n
10 t he pr oposal and i t was never pai d.
11 THE COURT: 280, 000 i s a l ot mor e t han t he cost shar e.
12 I t ' s a l i t t l e har d t o pay 280, 000 and meet your cost shar e t oo.
13 They - -
14 MR. KWOK: But t he wi t ness, I bel i eve, i s goi ng t o
15 t est i f y t hat t he company has pai d zer o, t hat - -
17 MR. KWOK: Had not pai d back anyt hi ng, even af t er t he
18 i ssuance of her r epor t , not t he f ul l amount , j ust not hi ng at
19 al l . I bel i eve t hat ' s goi ng t o be t he t est i mony, and I t hi nk
20 t hat goes t o t he i nt ent i onal mi sappl i cat i on of gr ant f unds.
21 THE COURT: They have f unds; t he company have f unds?
22 MR. KWOK: The company does not have i ndependent
23 sour ces of f unds, t hat ' s t he Gover nment ' s posi t i on. However ,
24 t he r eason t hey di dn' t have f unds i s because t hey mi sspent al l
25 t hose f unds t hat t hey had al r eady dr awn down, so i t ' s not - -
( 212) 805- 0300
489
1 THE COURT: How does i t go t o t he i nt ent ?
2 MR. KWOK: Wel l , i t goes t o t he i nt ent because t hey
3 di dn' t even t r y t o put i n t he cost shar e t hat t hey had pr omi sed
4 t he gover nment t hat t hey woul d.
5 THE COURT: They di dn' t have any f unds, how coul d t hey
6 do i t ?
7 MR. KWOK: Wel l , I bel i eve Mr . Kar r on - - Mr .
8 Rubi nst ei n el i ci t ed t est i mony f r omsome wi t nesses t hat at some
9 poi nt i n t i me t he def endant mor t gaged, t ook out a second
10 mor t gage of hi s apar t ment t o r epay $60, 000.
11 THE COURT: I s t he apar t ment owned by CASI ?
12 MR. KWOK: No. I t was owned by Dr . Kar r on per sonal l y.
13 THE COURT: The gr ant was t o CASI , was i t not ?
14 MR. KWOK: I t was. But i f Mr . Rubi nst ei n, as he t r i ed
15 t o el i ci t f r omsome of t hese wi t nesses, t hat at some poi nt i n
16 t i me he, al t hough af t er t he per i od al l eged on t he f ace of t he
17 i ndi ct ment , he t ook out a second mor t gage on hi s home t o t r y t o
18 pay back some of t hat money t hat he mi sappl i ed, t o suggest t hat
19 he t r i ed t o r emedy t he si t uat i on, he put s t hat i ssue squar el y
20 at pl ay and we shoul d be al l owed t o count er t hat suggest i on.
21 THE COURT: Oh, but you' r e maki ng a cl ai mt hat - - I
22 don' t know what you' r e maki ng. I don' t know t he nat ur e of t he
23 f ul l case, but you can' t j ust - - t he gover nment made t he gr ant
24 not t o Dr . Kar r on, but t he gover nment made t he gr ant t o CASI .
25 MR. KWOK: That ' s cor r ect , your Honor . But t he r eason
( 212) 805- 0300
490
1 t he company di d not have f unds was because i t had been al r eady
2 mi sspent al l t hose f unds.
3 THE COURT: That ' s al l r i ght , but t hey over spent .
4 MR. KWOK: I ' msor r y?
5 THE COURT: They di d, t hey over spent .
6 MR. KWOK: I nt ent i onal l y mi sspent . The onl y basi c
7 poi nt I ' mt r yi ng t o el i ci t f r omt hi s wi t ness i s t he def endant
8 knew about t hese pr obl ems. He under t ook some of t he r emedi al
9 act i ons t hat she r ecommended; namel y, t o r evi se t he f i nanci al
10 st at us r epor t t hat we saw t o cor r ect t he cost shar e amount t hat
11 t hey f al sel y r epor t ed t o t he gover nment wher e t hey di dn' t pay
12 anyt hi ng t hey had r epor t ed t hat t hey had pai d t en' s of
13 t housands of dol l ar s, but t hey never pai d t hat money back, and
14 t hat ' s an i nt egr al par t of what went on at t he company, t hat - -
15 THE COURT: They di dn' t have t he f unds t o pay i t back.
16 They spent i t .
17 MR. KWOK: But t hey cont i nued t o dr aw - - act ual l y,
18 t hey - - I , I don' t t hi nk t hat ' s qui t e t r ue, because t he company
19 cont i nued t o dr awdown ATP money.
20 THE COURT: But you have t o convi nce me - - I ' l l have
21 t o hear i t - - you' l l have t o convi nce me pr ompt l y t hat
22 ar gument , but - -
23 MR. KWOK: As I sai d a moment ago, I bel i eve Mr .
24 Rubi nst ei n had suggest ed i n t he past t wo days t hat at some
25 poi nt i n t i me Dr . Kar r on t ook out a second mor t gage on hi s home
( 212) 805- 0300
491
1 t o t r y t o pay back t he money t hat he - -
2 THE COURT: Tel l me wher e, show me i n t he r ecor d. I
3 don' t r ecal l hi msayi ng t hat i n t hi s case on t r i al . I f he - -
4 maybe one of your cohor t s does. I don' t r emember hi msayi ng
5 t hat . I ' mawar e of t he f act t hat t her e was a mor t gage, but - -
6 MR. KWOK: We wi l l go get t he t r anscr i pt .
7 THE COURT: I ' mnot sur e about t hi s whol e t heor y of
8 t hi s evi dence pr ovi ng t he - - bei ng admi ssi bl e. So you bet t er
9 have somet hi ng f or me i n t he mor ni ng.
10 MR. KWOK: We wi l l do t hat . And - -
11 THE COURT: I n wr i t i ng so I can r ead i t , or t oni ght i f
12 you want t o r ead t he cases t hat you' r e r el yi ng on.
13 MR. KWOK: Ver y wel l , your Honor . And i n t he
14 al t er nat i ve, I wi l l go back t o r evi si t t he t est i mony t hat I
15 i nt end t o el i ci t and maybe we can avoi d t he whol e pr obl emby
16 j ust movi ng qui ckl y t hr ough t he audi t r epor t s wi t hout dwel l i ng
17 t oo much on t he r ecommendat i on por t i ons of t he r epor t , because
18 t her e' s ot her ways we can show what we need t o show.
19 THE COURT: I ' mhavi ng t r oubl e wi t h t hi s whol e t heor y
20 t hat t he f ai l ur e t o r epay may be evi dence of hi s i nt ent i n
21 mi sspendi ng t he money.
22 MR. KWOK: Even i f - -
23 THE COURT: I ' mhavi ng t r oubl e wi t h t hat , so you' l l
24 have t o gi ve me cases, maybe Mr . Rubi nst ei n' s of f i ce can t oo,
25 si nce he' s got hi s assi st ant her e t oday.
( 212) 805- 0300
492
1 MR. RUBI NSTEI N: We have anot her quest i on t hat mi ght
2 hel p t hat , J udge, but t hat ' s when we f i ni sh wi t h t hi s f i r st .
3 I t ' s mor e i n t he housekeepi ng nat ur e.
4 MR. KWOK: I wi l l do some r esear ch and t r y t o gi ve
5 your Honor case l aw.
6 But t he onl y ot her poi nt I woul d make on t hi s poi nt i s
7 t hat even i f i t does not go t o hi s i nt ent , i t goes t o t he basi c
8 f act s of what happened t o t he money. She' s goi ng t o - -
9 THE COURT: I t doesn' t go t o basi c. What ever happened
10 t o t he money, happened t o t he money. Ther e may be, t her e may
11 be cl ar i f i cat i on as t o. But t he conver sat i ons wi t h Dr . Kar r on
12 don' t have anyt hi ng t o do wi t h what happened t o t he money, as I
13 under st and i t . I mean, she may have got t en f ur t her , f ur t her
14 mat er i al s f r omt he new audi t or , t he new account ant s or what
15 have you, but I ' mhavi ng t r oubl e wi t h t he, t hi s el ement of t he
16 case.
17 MR. KWOK: We' l l submi t a l et t er t o t he Cour t .
18 THE COURT: I don' t know t he ot her wi t nesses you have.
19 MR. RUBI NSTEI N: Your Honor , i n or der t o f aci l i t at e
20 what your Honor suggest ed of hopef ul l y hel pi ng t he Cour t i n
21 r esol vi ng t he i ssue, t her e i s a car d t hat t he secur i t y t ook
22 t hat per mi t s us t o use t he i nt er net , and we woul d need a - -
23 i t ' s a Spr i nt PCS car d t hat - - i n ot her wor ds, t hey don' t l et
24 you br i ng i n a comput er t hat gi ves you access t o t he i nt er net ,
25 but act ual l y t hat woul d be - -
( 212) 805- 0300
493
1 THE COURT: Why do we need t he i nt er net ?
2 MR. RUBI NSTEI N: We want t o be abl e t o go i nt o West l aw
3 and, you know, do some r esear ch and st uf f .
4 THE COURT: Oh- - don' t - - bet t er not do i t her e,
5 t hat ' s al l .
6 MR. RUBI NSTEI N: Okay, J udge. Thank you.
7 THE COURT: Al l r i ght . Ar e we al l done?
8 MR. KWOK: Yes, t hank you.
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
494
3 HOPE SNOWDEN
6 Redi r ect By Mr . Ever del l . . . . . . . . . . 435
8 BELI NDA RI LEY
9 Di r ect By Mr . Kwok . . . . . . . . . . . . . 462
12 47 . . . . . . . . . . . . . . . . . . . 325
13 40, 40A, 41, 41A, 42, 42A, 43, 43A, 44, 45 and333
14 48 . . . . . . . . . . . . . . . . . . . 340
15 2000 and 2001 . . . . . . . . . . . . . . 451
16 [ Exhi bi t s] *[ r ecei ved] . . . . . . . . . . . 461
17 900 . . . . . . . . . . . . . . . . . . . 461
18 60 . . . . . . . . . . . . . . . . . . . 477
21 F . . . . . . . . . . . . . . . . . . . . 433
22
23
24
25
( 212) 805- 0300
495
865ZKAR1
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3
4 v. S2 07 CR 541 ( RPP)
4
5
6 Def endant .
6
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
7
8
8 J une 5, 2008
9 9: 20 a. m.
9
10
10 Bef or e:
11
12
13
13
14 APPEARANCES
14
16 BY: STEVEN KWOK
18
20
22
23
24
25
( 212) 805- 0300
496
865ZKAR1
2 THE COURT: We have sever al mat t er s t o t ake up.
3 MR. RUBI NSTEI N: Fi r st of al l , I want t o t el l t he
4 Cour t t hat Dr . Kar r on i s her e. I pi cked hi mup and dr ove hi m
5 her e mysel f , as I pr omi sed your Honor I woul d. He' s doi ng
6 somet hi ng - -
7 THE COURT: He' s her e?
8 MR. RUBI NSTEI N: Yes, he i s. I br ought hi mher e.
9 Much t o my chagr i n, I pi cked hi mup and deposi t ed hi m. But
10 he' s maki ng a cal l f or me now, so he' s - - he consent ed t o be
11 excused dur i ng t he l egal , any l egal ar gument s we make her e.
12 THE COURT: You consent t o hi s absence?
14 THE COURT: For t hese ar gument s? Al l r i ght , t hank
15 you.
16 Now, we had some i ssues about whet her t he Gover nment ' s
17 Exhi bi t 2, 000, and 2, 001 wer e 3500 mat er i al t hat wer e not
18 pr oduced t o t he def endant .
19 MR. RUBI NSTEI N: Yes, your Honor . And t he r eason f or
20 t hat i s t hat when I was cr oss- exami ni ng - -
21 THE COURT: I t came up i n cr oss as a r esul t of your
22 cr oss- exami nat i on.
23 MR. RUBI NSTEI N: Yes, because I had never been
24 pr ovi ded wi t h t hose document s, so I was t ot al l y unawar e.
25 THE COURT: Why i s i t 3500 mat er i al ?
( 212) 805- 0300
497
865ZKAR1
1 MR. RUBI NSTEI N: Wel l , j ust as al l t he ot her f i nanci al
2 st at ement r evi si ons was 3500 mat er i al t hat was t ur ned over of
3 t hi s wi t ness.
4 THE COURT: I t ' s not a f i nanci al st at ement , as I r ead
5 i t . But why i s i t 3500 mat er i al ?
6 MR. RUBI NSTEI N: I t ' s t he same as - - i t was a r evi sed
7 f i nanci al st at ement . The wi t ness t est i f i ed t hat she had
8 r ecei ved f i nanci al st at ement - - i n ot her wor ds, I showed t hat
9 t he f i nanci al st at ement s t hat t he gover nment had i n evi dence
10 wer e submi t t ed August 13t h, 2003. The wi t ness sai d t hat she
11 had seen ear l i er ones. We di dn' t have any ear l i er ones. We
12 had t he ones August 13t h, and I - - and she sai d she had t hemi n
13 her f i l e. So obvi ousl y t he gover nment has a whol e f i l e t hat
14 t hey never t ur ned over , never made avai l abl e ei t her on Rul e 16
15 or under 3500 mat er i al as t o t hi s wi t ness, and t hen t hey
16 i nt r oduce i t . And i t ' s my f aul t because I was doi ng somet hi ng
17 el se at t he t i me, and I shoul d' ve known when t hey came up wi t h
18 a number l i ke 2, 000, t hat ' s what got my i nt er est , i t was a new
19 number sequence i n t hi s case and - -
20 THE COURT: Wel l , l et me hear f r omt he gover nment .
21 MR. EVERDELL: Wel l , your Honor , a f ew t hi ngs. I
22 t hi nk your Honor ' s r i ght , I don' t see how t hese ar e her
23 st at ement s. These ar e r evi sed f i nanci al r epor t s t hat somehow
24 she r ecal l s seei ng, so I don' t see how t hese become her pr i or
25 st at ement s.
( 212) 805- 0300
498
865ZKAR1
1 THE COURT: Wel l , t hey' r e pr oposed - - what wer e t hey
2 exact l y? They' r e pr oposed f i nanci al st at ement r evi si ons, i s
3 t hat what t hey ar e?
4 MR. EVERDELL: These wer e t hese f i nanci al st at us,
5 quar t er l y f i nanci al st at us r epor t s.
6 THE COURT: Fi nanci al , pr oposed f i nanci al st at us
7 r epor t s.
8 MR. EVERDELL: Ri ght .
9 THE COURT: Whi ch wer e not appr oved.
10 MR. EVERDELL: Ther e, as t he wi t ness t est i f i ed, t her e
11 was some di scussi on about pr oposed f i nanci al st at us r epor t s
12 wi t h t he def endant . And she r ecal l s seei ng t hese and havi ng
13 ot her , ot her pr oposed r evi sed f i nanci al st at us r epor t s t hat she
14 saw i n t he gr ant f i l e. So t hese, I don' t t hi nk, ar e her
15 st at ement s. And pl us t he f act t hat I bel i eve t he i ssue i s
16 wai ved as wel l because def ense counsel di dn' t obj ect when I
17 showed i t t o hi mand onl y came up af t er t he f act , so.
18 THE COURT: Wel l , t hese ar e not st at ement s by her or
19 do t hey cont ai n st at ement s by her ? I f t hey' r e wi t ness
20 st at ement s, I have a pr obl em. I r emember t her e was some
21 not at i on on one of t hemas I r ecol l ect .
22 MR. EVERDELL: Ther e was some ar e ar i t hmet i c not at i ons
23 and t her e was a not at i on down at t he bot t omof one of t hem,
24 t hat ' s cor r ect . I ' mnot sur e i f i t came out whose t hose wer e.
25 THE COURT: Her s, I bel i eve - -
( 212) 805- 0300
499
865ZKAR1
1 MR. EVERDELL: Yeah.
2 THE COURT: - - i s t he t est i mony.
3 MR. EVERDELL: I n addi t i on, your Honor , f or t he 3500
4 mat er i al we wr ot e a l et t er t o def ense counsel sayi ng t hat ,
5 because di scover y was so vol umi nous i n t hi s case, t hat i f we
6 had al r eady pr ovi ded i t i n di scover y, we wer en' t goi ng t o
7 pr ovi de i t agai n at separ at e 3500 mat er i al . We di d pr ovi de a
8 copy of t he gr ant f i l e i n di scover y, and you know, I mean - -
9 THE COURT: You di d pr ovi de t he gr ant f i l e? I t hought
10 t hey wer e i ncl uded.
11 MR. EVERDELL: I t woul d have. Your Honor , I conf ess
12 t hat when we t r i ed t o l ook t hr ough t he di scover y l ast ni ght t o
13 see i f we can see t hese exact document s t hat we showed
14 yest er day, t he di scover y copy, t he Bat es st amped di scover y
15 copy, I conf ess we coul dn' t f i nd t hemi n t he Bat es st amped
16 di scover y copy.
17 The i ssue i s t hat t he gr ant f i l e was copi ed sever al
18 year s ago when t he agent s went t o D. C. t o copy t he gr ant f i l e,
19 t hat was what we pr oduced. And, appar ent l y, t hese wer e not
20 copi ed, f or what ever r eason.
21 The agent s at t he t abl e had her own copy of t he gr ant
22 f i l e t hat she r equest ed some, a l i t t l e bi t l at er , j ust because
23 t he copy por t i on t hat we pr oduced was - - i t wasn' t or gani zed as
24 ef f ect i vel y as she woul d have l i ked i t t o be, so she j ust
25 r equest ed anot her copy of i t . That ' s what we wer e usi ng
( 212) 805- 0300
500
865ZKAR1
1 yest er day when I was t ol d of t hese document s. So I had assumed
2 t hat because we had pr oduced t he gr ant f i l e, t hat t hose
3 document s wer e al so i ncl uded i n t he gr ant f i l e. Appar ent l y, i n
4 my r evi ew of t he di scover y l ast ni ght , I don' t see t hem.
5 But I r ai se i t t hat , you know, t hi s onl y came up on
6 cr oss- exami nat i on as t he def endant was t r yi ng t o appar ent l y
7 maki ng i t seen l i ke Ms. Snowden wasn' t doi ng her j ob pr oper l y.
8 I hadn' t i nt ended t o br i ng t hese t o t he j ur y' s at t ent i on at
9 al l . And pl us t hi s i s a conver sat i on she had wi t h t he
10 def endant hi msel f , so t hi s i sn' t r eal l y any gr eat sur pr i se on
11 t he par t of t he def endant . She' s t est i f yi ng about di scussi ons
12 she had wi t h hi mabout addi t i onal r evi si ons t o t he f i nanci al
13 st at us r epor t s. So t hi s i sn' t r eal l y a gr eat sur pr i se t o hi m
14 or shoul dn' t have been. So whi l e I admi t I t hi nk because of
15 t he r evi ew of di scover y l ast ni ght I can' t say f or cer t ai n t hat
16 t hese par t i cul ar t wo document s wer e t ur ned over t o t he
17 def endant i n di scover y, I don' t t hi nk t hi s i s any gr eat
18 sur pr i se t o t he def endant . And gi ven t he nat ur e of how t he
19 document s came up and t he f act t hat def ense counsel di dn' t
20 obj ect when we f i r st t r i ed t o i nt r oduce t hem, I don' t t hi nk
21 t hi s i s - - shoul d be an i ssue.
22 THE COURT: He di dn' t obj ect unt i l af t er t hey wer e
25 THE COURT: I don' t know what t he l aw i s on t hat ,
( 212) 805- 0300
501
865ZKAR1
1 under t hose ci r cumst ances.
2 MR. RUBI NSTEI N: Your Honor , I woul d have no pr obl em
3 i f your Honor want ed t o gi ve a l i mi t i ng i nst r uct i on t hat Rul e
4 3500 r equi r es t he gover nment t o t ur n over al l t he mat er i al
5 about - - t hat a par t i cul ar wi t ness who was goi ng t o t est i f y and
6 t hat , you know, and i t wasn' t done as t o Exhi bi t 2, 000 and
7 t hat ' s - -
8 THE COURT: Those document s wer e over l ooked? I s t hat
9 what you want ?
10 MR. EVERDELL: Your Honor , I don' t - - unt i l yest er day
11 when t hi s i ssue came up, I don' t t hi nk we knew t hat t hose
12 document s, t hose not at i ons wer e Hope Snowden' not at i ons. We
13 saw t hemi n t he gr ant f i l e because i t l ooked l i ke t hese wer e
14 r evi si ons and we want ed t o, because t he i ssue came up on
15 cr oss- exami nat i on, i t was cl ear t hat t her e wer e ot her r evi si ons
16 t o t he f i nanci al st at us r epor t s. And so we t hought , okay, t hi s
17 i s a copy of t he gr ant f i l e, we t hought we pr oduced t he gr ant
18 f i l e so we' r e goi ng t o i nt r oduce t hese ' cause we don' t want i t
19 t o l ook as i f Hope Snowden wasn' t doi ng her j ob, whi ch i s
20 cl ear l y what t he - -
21 THE COURT: Tel l i ng t he t r ut h i s - -
22 MR. EVERDELL: Wasn' t t el l i ng t he t r ut h, whi ch i s
23 exact l y what t he def ense counsel was I t hi nk t r yi ng t o do wi t h
24 t hat cr oss- exami nat i on. So i t was done i n good f ai t h. I don' t
25 t hi nk a l i mi t i ng i nst r uct i on t o t hat ef f ect i s appr opr i at e
( 212) 805- 0300
502
865ZKAR1
1 her e. Pl us t he i ssue of wai ver , I mean t hese wer e t hi ngs t hat
2 we showed t o t he def endant and he di d not obj ect t o i t . He had
3 t he oppor t uni t y t o r evi ew t hembef or e I el i ci t ed t hemf r omt he
4 f r omt he wi t ness, so.
5 MR. RUBI NSTEI N: That ' s not exact l y accur at e, your
6 Honor . They di dn' t gi ve me a copy. They di dn' t hand me a
7 copy.
8 THE COURT: They - -
9 MR. RUBI NSTEI N: They - -
10 THE COURT: They di d show t hemt o you, Mr - -
11 MR. RUBI NSTEI N: No. They of f er ed t o show t hemand I
12 di d not l ook at t hem. I t ' s my f aul t .
13 THE COURT: I saw t hemshow t hemt o you.
14 MR. RUBI NSTEI N: I di dn' t l ook at - -
15 THE COURT: Whet her you exami ned t hemi s anot her
16 i ssue.
17 MR. RUBI NSTEI N: I conceded t hat , J udge.
19 MR. RUBI NSTEI N: I conceded t hat f r omt he out set , f r om
20 yest er day, t oday. I ' mnot suggest i ng t hey di dn' t of f er i t t o
21 show me t hem, okay. And as I sai d, I was l at e i n maki ng t he
22 obj ect i on. You know, j ust as t he def endant ' s not ent i t l ed t o a
23 per f ect t r i al , he' s not ent i t l ed t o a per f ect l awyer .
24 THE COURT: I want t o see t hose document s, but I want
25 t o - - and t hen I want t o consi der what t o do. Because I t hi nk
( 212) 805- 0300
503
865ZKAR1
1 i t ' s acknowl edged t hat t he t wo document s wer e appar ent l y not at
2 t he di scover y mat er i al s t ur ned over .
3 Now whet her , whet her t he di scover y mat er i al s - - and I
4 t hi nk t he wi t ness t est i f i ed, I may be wr ong, t hat t he
5 handwr i t t en not at i ons on t he document wer e her s. So I suppose
6 t hey coul d be consi der ed pr i or st at ement s of a wi t ness.
7 MR. EVERDELL: Your Honor , I mean t he wr i t t en
8 st at ement s t her e wer e not t he subj ect of t est i mony. The
9 t est i mony was - -
10 THE COURT: That ' s t r ue.
11 MR. EVERDELL: - - was di d she i n f act have di scussi ons
12 wi t h t he def endant about addi t i onal r evi sed f i nanci al st at us
13 r epor t s.
14 THE COURT: They wer en' t t he subj ect of her di r ect
15 t est i mony.
16 MR. EVERDELL: Cor r ect .
17 THE COURT: She was r esponded t o on cr oss- exami nat i on.
18 MR. EVERDELL: Exact l y. I di d not i nt end t o get i nt o
19 t hi s at al l unt i l Mr . Rubi nst ei n was, appar ent l y, t r yi ng t o
20 t est her cr edi bi l i t y and I f el t l i ke t hi s was somet hi ng I
21 needed t o addr ess on r edi r ect .
22 The i ssue r eal l y was di d she have di scussi ons wi t h t he
23 def endant about addi t i onal r evi sed f i nanci al st at us r epor t s,
24 whi ch she t est i f i ed t o bef or e I even i nt r oduced t he document s.
25 She sai d, yes, I had di scussi ons wi t h hi m; yes, t her e wer e
( 212) 805- 0300
504
865ZKAR1
1 f ur t her r evi si ons. I was si mpl y t r yi ng t o f i nd document ar y
2 evi dence because t he def ense counsel was t r yi ng t o - - was
3 aski ng t he wi t ness, di d you make any not es. She sai d yes. So
4 I l ooked t o see i f we had evi dence of t hi s, and i t appear s
5 t her e was. Now, i t ' s t r ue t hat t hese wer e not - - appar ent l y
6 wer e not t ur ned over i n di scover y, but - -
7 THE COURT: I t hi nk you mi sspoke about any not es. But
8 what he asked her was i f t her e had been any ot her f i nanci al
9 st at us r epor t s i n bet ween t he t wo, t he f i nanci al st at us r epor t
10 of t he f i r st one and t he so- cal l ed r evi sed one of 8/ 13
11 somet hi ng or ot her .
12 MR. EVERDELL: That ' s cor r ect , your Honor .
13 THE COURT: Wel l , I want t o consi der t hi s and see
14 what , i f anyt hi ng, shoul d be done about i t .
15 MR. EVERDELL: And your Honor , addi t i onal l y - -
16 THE COURT: Now l et ' s - - we' ve got a j ur y wai t i ng
17 her e. We got anot her pr obl em.
18 Mr . J ur or number ei ght wi l l not be i n, Mr . Naveen
19 spr ai ned hi s ankl e and has di f f i cul t y wal ki ng and wi l l not be
20 i n t oday, so we' l l have t o r epl ace hi m.
21 Al l r i ght . Now, t her e' s anot her i ssue we have t hat
22 came at t he end of t he day, r i ght ?
23 MR. KWOK: That ' s cor r ect . I wi l l not pr ess t hat l i ne
24 of quest i oni ng, your Honor .
25 THE COURT: Not r ef er t o i t i n summat i on ei t her ; not
( 212) 805- 0300
505
865ZKAR1
1 make t hat ar gument i n summat i on.
2 MR. KWOK: Cer t ai nl y. But t he onl y ot her t hi ng I want
3 t o f l ag f or t he Cour t , I bel i eve your Honor now has a pr oposed
4 new st i pul at i on whi ch I wi l l r ead i nt o t he r ecor d bef or e we
5 cal l t he wi t ness.
6 THE COURT: Al l r i ght . Ot her wi se ar e we r eady?
7 MR. KWOK: The gover nment i s r eady.
8 MR. RUBI NSTEI N: Def ense i s r eady, your Honor . I f I
9 can j ust r un out and so I don' t have t o r un out l at er .
10 THE COURT: Maybe I shoul d t oo.
11 MR. EVERDELL: Shoul d we get t he wi t ness, your Honor ?
12 THE COURT: You bet t er have t he wi t ness r eady.
13 ( Recess)
15 Al l r i ght , we' r e br i ngi ng i n t he j ur y.
17 THE COURT: Good mor ni ng. Pl ease be seat ed. Good
18 mor ni ng, l adi es and gent l emen.
19 THE J URY: Good mor ni ng.
20 THE COURT: Mr . Mont eagudo r ecei ved a message f r om
21 Mr . Naveen J ohn, j ur or number ei ght . He spr ai ned hi s ankl e
22 yest er day and cannot wal k t hi s mor ni ng, and as a r esul t he wi l l
23 not be i n t oday. And, accor di ngl y, I ' mgoi ng t o ask Ms. Chang,
24 t he f i r st al t er nat e j ur or , t o t ake hi s pl ace as j ur or number
25 ei ght and we' l l pr oceed wi t h t he t r i al , and I guess we' r e st i l l
( 212) 805- 0300
506
865zkar 1
1 on t he di r ect exami nat i on wi t h Ms - -
2 MR. KWOK: Ms. Ri l ey, your Honor .
4 MR. KWOK: Ms. Ri l ey.
5 THE COURT: Ms. Ri l ey, yes.
6 MR. KWOK: May I pr oceed?
7 THE COURT: Ms. Ri l ey, you' r e r emi nded you' r e st i l l
8 under oat h. The j ur y i s r emi nded t hat on t he succeedi ng day
9 when t he wi t ness t akes t he st and, I ' mobl i ged, as a mat t er of
10 cour t pr ocedur e, t o r emi nd t hemt hey' r e st i l l under oat h.
11 Pl ease.
13 BELI NDA RI LEY,
15 havi ng been pr evi ousl y swor n, t est i f i ed as f ol l ows:
17 BY MR. KWOK:
18 MR. KWOK: Your Honor , bef or e I pr oceed wi t h t he
19 di r ect exami nat i on, I woul d l i ke t o r ead a pr oposed st i pul at i on
20 i nt o t he r ecor d.
21 THE COURT: Al l r i ght , si r .
22 MR. KWOK: Uni t ed St at es of Amer i ca ver sus Dani el B.
23 Kar r on, def endant S2 07 Cr i m. 542. I t i s her eby st i pul at ed and
24 agr eed by and among t he Uni t ed St at es of Amer i ca by Mi chael J .
25 Gar ci a, Uni t ed St at es At t or ney f or t he Sout her n Di st r i ct of New
( 212) 805- 0300
507
865zkar 1 Ri l ey - di r ect
1 Yor k, St eve Kwok and Chr i st i an Ever del l , Assi st ant Uni t ed
2 St at es At t or neys of counsel , and def endant Dani el B. Kar r on, by
3 and wi t h t he consent of hi s at t or ney Ronal d Rubi nst ei n,
4 Esqui r e, par agr aph t hr ee of Gover nment exhi bi t 900 i s amended
5 t o r ead as f ol l ows: The document s mar ked as gover nment exhi bi t
6 0 ar e t he cr edi t car d st at ement s f or t he Amer i can Expr ess car ds
7 of Comput er Ai ded sur ger y, I nc. CASI , and Dani el B. Kar r on, t he
8 def endant , f r omi n or about Oct ober 2001 t o i n or about Apr i l
9 of 2003.
10 I t i s f ur t her st i pul at ed and agr eed t hat gover nment
11 exhi bi t 90 and t hi s st i pul at i on mar ked f or i dent i f i cat i on as
12 gover nment exhi bi t 900A, may be r ecei ved i n evi dence as
13 gover nment exhi bi t s at t r i al , and i t i s si gned New Yor k, New
14 Yor k, J une 5t h, 2008 on behal f of t he Uni t ed St at es by St eve
15 Kwok and on behal f of Dani el B. Kar r on, Ronal d B. Rubi nst ei n,
16 Esqui r e.
17 THE COURT: Al l r i ght , Gover nment ' s exhi bi t 90 i s
18 admi t t ed i n evi dence. I t hi nk Gover nment ' s exhi bi t 900 was
20 THE DEPUTY CLERK: Thi s i s 900A?
21 THE COURT: Excuse me. Gover nment ' s exhi bi t 900A i s
23 ( Gover nment ' s Exhi bi t 900A r ecei ved i n evi dence)
25 BY MR. KWOK:
( 212) 805- 0300
508
1 Q. Good mor ni ng, Ms. Ri l ey.
3 Q. Bef or e we br oke yest er day you ment i oned you went back t o
4 CASI t o do a second audi t ; i s t hat r i ght ?
5 A. Yes.
6 Q. When di d you go back t o t hat , t o do t hat second audi t ?
7 A. I n December of 2003.
8 Q. So how l ong was t hat bet ween your f i r st audi t and t hi s
9 t i me?
10 A. About f i ve mont hs.
11 Q. Wher e di d you go t o conduct t hi s second audi t ?
12 A. To hi s account ant , Mel Spi t z' s of f i ce i n Manhat t an.
13 Q. I n conduct i ng your second audi t , what mat er i al s di d you
14 exami ne?
15 A. I exami ned t he books and r ecor ds pr ovi ded by Mel Spi t z.
16 Q. So ar e t hese mat er i al s t hat you exami ned f or t he second
17 audi t di f f er ent or t he same f r omt he mat er i al s you r el i ed on
18 t he f i r st t i me?
19 A. I t was di f f er ent l edger s. The i nvoi ces or what ever woul d
20 been t he same, but t he l edger s wer e new.
21 Q. Di d t her e come a t i me when you compl et ed t hi s second audi t ?
22 A. Yes.
23 Q. When was t hat , appr oxi mat el y?
24 A. I t hi nk t he r epor t was pr obabl y i ssued i n Febr uar y or
25 Mar ch 2004.
( 212) 805- 0300
509
1 Q. And what per i od di d your second audi t cover ?
2 A. I t cover ed t he per i od 10/ 1, 2001 t hr ough J une 27t h, 2003.
3 THE COURT: What dat e i n 2003?
4 THE WI TNESS: J une 27t h, when t he awar d was suspended.
5 Q. Di d you i ssue a r epor t af t er t he second audi t ?
6 A. Yes.
7 Q. Ms. Ri l ey, i f you coul d t ake a l ook at t he st ack of
8 document s i n f r ont of you. I bel i eve t her e' s one mar ked f or
9 i dent i f i cat i on gover nment exhi bi t 61?
10 A. Yes.
11 THE COURT: 61 f or i dent i f i cat i on?
13 THE COURT: I t ' s not admi t t ed i n evi dence yet , l adi es
14 and gent l emen.
15 Q. Do you r ecogni ze t hi s document , Ms. Ri l ey?
16 A. Yes.
18 A. I di d.
20 A. I t ' s t he dr af t r epor t t hat we i ssued as a r esul t of t he
21 December 2003 r evi ew of CASI ' s r ecor ds.
22 Q. I s t hat t he r epor t you j ust r ef er r ed t o?
23 A. Yes.
25 MR. RUBI NSTEI N: Your Honor , except f or concl usi ons, I
( 212) 805- 0300
510
1 have no obj ect i on, your Honor .
2 THE COURT: Exhi bi t 61 i s admi t t ed i n evi dence. I t ' s
3 kept i n t he r egul ar cour se of busi ness by t he agency; i s t hat
4 cor r ect ?
5 THE WI TNESS: I ' msor r y, what ?
6 THE COURT: Thi s r epor t i s kept i n t he r egul ar cour se
7 of busi ness by t he Of f i ce of I nspect or Gener al ?
9 THE COURT: And i t ' s t he r egul ar cour se of busi ness t o
10 keep t hese, t hi s r epor t - -
12 THE COURT: - - i n i t s r ecor ds?
14 THE COURT: Al l r i ght , I ' l l al l ow i t .
18 Q. Now, Ms. Ri l ey, I di r ect your at t ent i on t o page seven of
19 t hat document . I f you coul d put t hat up on t he scr een.
20 THE COURT: What I have i s page seven - - Mr - - I don' t
21 have a page seven t o t hat document , 61. I have - - I have i n
22 61 - -
23 MR. KWOK: You have t o keep f l i ppi ng t o - - t he i ni t i al
24 pages don' t have number s on i t , and t hen t her e ar e l i t t l e one,
25 l i t t l e t wo, and t hen - -
( 212) 805- 0300
511
1 THE COURT: Those ar e mar ked dr af t .
3 MR. KWOK: Yes.
4 THE WI TNESS: I t ' s a dr af t r epor t .
5 THE COURT: I t ' s not a f i nal r epor t .
6 THE WI TNESS: Ri ght . The f i nal - -
7 MR. KWOK: I can - - I ' mhappy t o expl ai n t hat at
8 si debar .
9 THE COURT: Not you expl ai n i t , l et t he wi t ness
10 expl ai n i t .
11 MR. KWOK: Okay. I wi l l l ay some f oundat i on, your
12 Honor .
13 THE COURT: She' s t he wi t ness, not you.
14 Q. Ms. Ri l ey, can you expl ai n t he di f f er ence bet ween a dr af t
15 r epor t and a f i nal r epor t ?
16 A. Yes. We i ssue t he dr af t - - we i ssue a dr af t r epor t and
17 gi ve t he gr ant ee an oppor t uni t y t o r espond t o our f i ndi ngs and
18 any er r or s we may have i n our number s, our wor di ngs or any - -
19 and t hen we i ssue a f i nal r epor t and i ncl ude t hei r r esponse t o
20 our dr af t r epor t .
21 Q. Thank you.
22 THE COURT: So you want page seven of t he dr af t r epor t
23 t hat ' s accompanyi ng t he - -
24 MR. KWOK: Yes.
25 THE COURT: - - t hat i s at t ached t o exhi bi t 61?
( 212) 805- 0300
512
1 MR. KWOK: That ' s cor r ect , your Honor , page seven of
2 t he dr af t r epor t , exhi bi t 61, we' r e j ust wai t i ng f or i t t o be
3 up on t he scr een. Can we bl ow t hat up.
4 Q. Ms. Ri l ey, what ar e t he f i ndi ngs t hat you r eached?
5 MR. RUBI NSTEI N: I obj ect t o t hi s. Ther e' s no
6 f oundat i on.
8 A. We det er mi ned t hat t he gover nment was - - we f ound t hat t he
9 gover nment - - t he r ef und was due t he f eder al gover nment of
10 $582, 000, appr oxi mat el y.
11 Q. Now, i f we coul d go t wo pages af t er t hat . I t ' s appendi x
12 one, page one of ei ght . What ar e some of t he exampl es of t he
13 f unds t hat you di sal l owed?
14 A. Funds t hat wer e used t o pay f or r ent , i nt er net - -
15 MR. RUBI NSTEI N: I can' t hear t he wi t ness, your Honor .
16 I ' msor r y.
17 THE COURT: I ' msor r y, I ' msor r y?
18 MR. RUBI NSTEI N: I can' t - - I coul dn' t hear t he
19 wi t ness.
21 THE COURT: I t hi nk you' r e t oo - - I t hi nk you' r e t oo
22 cl ose - - Rober t i s not her e t o.
23 THE WI TNESS: Oh, i f I si t back, i s t hi s bet t er ?
25 THE COURT: I t ' s bet t er i f you speak up.
( 212) 805- 0300
513
3 THE WI TNESS: I t sounds l oud t o me. Okay.
4 Moni es t hat wer e spent f or r ent s, i nt er net - -
5 THE COURT: Keep t al ki ng i nt o t he mi ke. As soon as
6 you st ar t t ur ni ng l ooki ng ar ound t o t he Cour t Repor t er your
7 voi ce get s muf f l ed.
9 A. For r ent , i nt er net , ut i l i t i es, and cer t ai n ot her CASI
10 expendi t ur es.
11 Q. And I di r ect your at t ent i on t o page ei ght now of t he
12 r epor t , t he one page pr evi ous t o t he one we j ust l ooked at .
13 Di r ect i ng your at t ent i on t o t he t hi r d f ul l par agr aph. What
14 f i ndi ng di d you make t her e?
15 A. That on Oct ober 26 CASI r ecei ved gr ant f unds of 100 and - -
16 THE COURT: Oct ober 26 of what year ?
17 THE WI TNESS: Oh, of 2001, CASI r ecei ved gr ant f unds
18 of $150, 000, and t hey i mmedi at el y wr ot e Dr . Kar r on a check f or
19 $75, 000 as an advance on sal ar y and pai d back r ent of $2, 000 a
20 mont h f or t he per i od, J anuar y 2000 t hr ough Sept ember of 2000,
21 whi ch was pr i or t o t he awar d of t he gr ant .
22 Q. And what di d you concl ude about t hese ser i es of
23 t r ansact i ons?
25 THE COURT: I t hi nk you need - -
( 212) 805- 0300
514
2 THE COURT: Obj ect i on - - I t hi nk you need a f oundat i on
3 quest i on, Mr . Ever del l . Fi r st , di d she - - was t hi s based on
4 any - -
6 THE COURT: On what di d she base t hi s concl usi on.
7 Q. Ms. Ri l ey, bef or e you conduct ed t hi s audi t , di d you have
8 occasi on t o r evi ew t he t er ms and condi t i ons of t he ATP gr ant ?
9 A. Yes, I di d.
10 Q. And what di d you concl ude about t hese ser i es of
11 t r ansact i ons?
12 A. The r ent woul d be an i ndi r ect cost , whi ch woul d be
13 unal l owabl e on t hat , but t hat was al so pr i or t o t he awar d so i t
14 woul d not be al l owed.
15 THE COURT: Rober t , woul d you f i x t he mi ke so i t ' s i n
16 t he r i ght spot her e. We' r e havi ng t r oubl e hear i ng her voi ce.
17 J ust so she get s up t o i t cl ose and t hen i t ' s al l - -
18 THE WI TNESS: Do I need t o si t back?
19 THE DEPUTY CLERK: She' s al so got - - l ooki ng at
20 document s so i t ' s sor t of har d. She' s up cl oser . I t ' s okay.
21 Keep - -
23 THE DEPUTY CLERK: Ri ght wher e you ar e. I ' mgoi ng t o
24 move your wat er r i ght her e.
( 212) 805- 0300
515
1 THE DEPUTY CLERK: You shoul d be okay. I t ' s okay.
2 Q. I ' msor r y, can you cont i nue wi t h t he answer ? The quest i on
3 was, what di d you concl ude about t he ser i es of t r ansact i ons?
4 A. That t he r ent payment s wer e - - woul d have been pr eawar d
5 cost and not al l owabl e, but t hey wer e al so i ndi r ect cost s t hat
6 t hey woul d not have been al l owabl e cost s. And t he advance, we
7 don' t , we don' t - - we consi der ed t hi s l i ke t hat he used i t as a
8 per sonal l oan account . You' r e not - - you don' t , you don' t pay
9 advance sal ar y out of gr ant cost .
10 Q. I f you coul d speak up, Ms. Ri l ey, t hat woul d be ver y
11 hel pf ul .
12 A. Okay.
13 Q. Ms. Ri l ey, do you know whet her t he gr ant - - t he def endant
14 gave a wr i t t en r esponse t o your audi t r epor t ?
15 A. Yes, he di d.
17 A. Because i t was sent t o me, or t o our of f i ce.
18 Q. And di d you i ssue a f i nal r epor t af t er r evi ewi ng t he
19 def endant ' s r esponse?
20 A. Yes, we di d.
21 Q. I ' mshowi ng you what i s next i n t he pi l e, I bel i eve, mar ked
22 f or i dent i f i cat i on gover nment exhi bi t 62. Do you know what
23 t hat i s?
24 A. Yes.
( 212) 805- 0300
516
1 A. I t ' s our f i nal r epor t t hat we i ssued.
2 Q. Who pr epar ed t he document ?
3 A. I di d.
5 MR. RUBI NSTEI N: Same l i mi t ed obj ect i on, your Honor ,
6 as t o opi ni ons of t hi s wi t ness.
7 THE COURT: Thi s i s kept i n t he r egul ar cour se of
8 busi ness by t he agency.
10 THE COURT: Al l r i ght . I ' l l al l ow i t , 62 i n evi dence.
12 Q. Ms. Ri l ey, af t er t hi s audi t r epor t , exhi bi t 62, di d you
13 conduct a t hi r d anal ysi s of CASI ' s bank account s?
14 A. Yes, I di d.
15 Q. What di d you do?
16 A. Af t er I was pr ovi ded t he bank account r ecor ds f or t he, f or
17 t he year - and- a- hal f per i od of t he gr ant , and I schedul ed out
18 t hem, t he checks by payee, amount , dat e, and t he el ect r oni c
19 f unds t r ansf er s wer e t aken f r omt he bank st at ement s.
20 Q. What bank ar e we t al ki ng about ?
21 A. Chase.
22 Q. And t hese bank st at ement s bel onged t o what per son or what
23 ent i t y?
24 A. CASI .
25 Q. Di d you al so r evi ew t he bank st at ement s of Dr . Kar r on
( 212) 805- 0300
517
1 per sonal l y?
2 A. Yes, I di d.
3 Q. How about Dr . Kar r on st at ement s?
4 A. Yes, t he Amer i can Expr ess st at ement s f or t he CASI busi ness
5 account and f or one of t he account s f or Donal d Kar r on onl y.
6 Q. Di d you r evi ew any i nvoi ces?
7 A. Yes, t her e wer e some i nvoi ces.
8 Q. Di d CASI have one account or mul t i pl e account s?
9 A. Ther e wer e f our CASI busi ness account s.
10 Q. And how di d you t r eat t hese mul t i pl e account s i n your
11 anal ysi s?
12 A. I n my anal ysi s - -
13 THE COURT: What ki nd account s ar e we t al ki ng about ?
14 THE WI TNESS: Checki ng.
15 THE COURT: Checki ng account s. Ther e wer e f our
16 checki ng account s?
17 THE WI TNESS: Yeah, yeah. Ther e may have been - -
18 yeah, t her e wer e f our checki ng account s, and t hen a per sonal
19 account had a savi ngs account and a per sonal account .
20 Q. And how do you t r eat CASI ' s mul t i pl e busi ness account s?
21 A. I t r eat ed t hemas one bank account .
22 Q. And why di d you do t hat ?
23 A. Because al l - - t he maj or i t y of t he deposi t s wer e f r omt he
24 NI ST ATP gr ant , and t her e was a l ot of t r ansf er s bet ween t he
25 account s.
( 212) 805- 0300
518
1 Q. Now, i n t er ms of t he i nf or mat i on t hat you r el i ed on, how
2 does t hi s anal ysi s di f f er or t he same f r omyour , t he mat er i al s
3 you r el i ed on i n your audi t r epor t s?
4 A. The audi t r epor t I r el i ed on t he what ever books and r ecor ds
5 or l edger s t hat wer e pr ovi ded by CASI . For t he anal ysi s of t he
6 checki ng account , I was r el yi ng j ust on t he checks.
7 Q. Ms. Ri l ey, I ' mshowi ng you - - i n, f r ont of you t he box
8 mar ked al r eady i n evi dence as gover nment exhi bi t 80.
9 THE COURT: I ' mconf used, Mr . Kwok. I f we used t he
10 exhi bi t number s, I ' d be much happi er , but when you f ai l t o use
11 t he exhi bi t number s I t hi nk i t ' s conf usi ng and not cl ear t o t he
12 j ur y what t he wi t ness i s t al ki ng about .
13 MR. KWOK: I wi l l use t he exhi bi t number . I
14 apol ogi ze, your Honor .
16 Q. I ' mdi r ect i ng your at t ent i on, Ms. Ri l ey, t o exhi bi t 80,
17 whi ch i s t he box i n f r ont of you, i f you coul d st and up?
18 THE COURT: Exhi bi t 80 i sn' t admi t t ed i n evi dence.
19 MR. KWOK: I t ' s by st i pul at i on, your Honor .
20 THE COURT: Oh, al l r i ght .
21 A. Okay. Yes.
22 THE COURT: And what does exhi bi t 80 consi st of so
23 t hat you don' t - - we know what we' r e t al ki ng about ?
24 THE DEPUTY CLERK: Move t hose f ol der s.
25 BY MR. KWOK:
( 212) 805- 0300
519
1 Q. Ms. Ri l ey, what i s exhi bi t 80?
2 A. 80 - - exhi bi t 80 i s Dr . Kar r on' s per sonal checki ng account s
3 and savi ngs account .
4 Q. How about gover nment exhi bi t 81?
5 A. 81 i s t he busi ness checki ng account s, t he f our busi ness
6 checki ng account s.
7 THE COURT: Four checki ng?
8 THE WI TNESS: Yes, si r . I t ' s t hr ough - - t her e i s a
9 CASI busi ness account , and t hen t her e' s NI ST pr oj ect busi ness
10 account , and t hen t her e' s a CASI cor por at i on - - CASI has
11 changed i t s - - become an LLC Cor por at i on, and t her e' s, so
12 t her e' s al so a NI ST LLC cor por at i on account .
13 Q. So, and what i s gover nment - -
14 A. They wer e j ust changi ng di f f er ent ent i t i es.
15 Q. And what i s gover nment exhi bi t 90, 90?
16 A. 90?
17 Q. I t ' s t o your r i ght ?
18 THE COURT: J ust so I ' mcl ear , i n 81 t her e ar e f our ,
19 t hose f our account s wer e i n 81, amI r i ght , Ms. Ri l ey?
20 THE WI TNESS: I ' msor r y, what ?
21 THE COURT: The f our account s t hat you j ust ment i oned
22 t he CASI busi ness account , t he CASI LLC busi ness account , t he
23 NI ST - -
24 THE WI TNESS: NI ST - -
25 THE COURT: CASI NI ST account s and CASI ' s NI ST LLC
( 212) 805- 0300
520
1 account - -
3 THE COURT: - - ar e al l par t of exhi bi t 81, i s t hat
4 cor r ect ?
8 Q. Now t ur ni ng t o exhi bi t 90 al r eady i n evi dence, what i s
9 t hat ?
10 A. Thi s i s t he Amer i can Expr ess st at ement s f or t he CASI
11 account s.
12 THE COURT: I t ' s a what ?
13 THE WI TNESS: Amer i can Expr ess account .
14 THE COURT: I n t he name of ?
15 THE WI TNESS: I t ' s - - t her e ar e var i ous Amer i can
16 Expr ess account s and - -
17 THE COURT: I n whose name?
18 THE WI TNESS: The Comput er Ai ded Sur ger y, and Dr - -
19 t her e' s one i n D. B. Kar r on.
20 THE COURT: Dr . Kar r on?
22 THE COURT: That ' s t wo.
23 THE WI TNESS: Oh, t hey' r e t he same. They' r e - -
24 t hey' r e var i ous account number s wi t h t he same name.
25 THE COURT: They' r e var i ous - -
( 212) 805- 0300
521
1 THE WI TNESS: Doct or D. B Kar r on Comput er Ai ded
2 Sur ger y, t her e i s an account number t hr ee - -
3 THE COURT: I coul dn' t under st and you.
4 THE WI TNESS: Doct or D. B. Kar r on Comput er Ai ded
5 sur ger y, t her e' s an account number 37834901721500, and al so
6 account 378349017217006.
7 THE COURT: And i n whose name i s t hat ?
8 THE WI TNESS: Doct or D. B. Kar r on, Comput er Ai ded
9 Sur ger y.
10 THE COURT: Any ot her account s i n t he Amer i can
11 Expr ess.
13 THE COURT: Exhi bi t 90?
14 THE WI TNESS: Al so f or Dr . D. B. Kar r on - -
16 THE WI TNESS: Anot her one under t hat same name i s
17 378349017216008.
18 THE COURT: I n t he name of ?
19 THE WI TNESS: Dr . D. B. Kar r on, Comput er Ai ded Sur ger y.
20 THE COURT: Any ot her s?
21 THE WI TNESS: Ther e i s al so under Dr . D. B. Kar r on
22 Comput er Ai ded Sur ger y 378349017218004.
23 THE COURT: Any ot her s?
24 THE WI TNESS: These t wo - -
( 212) 805- 0300
522
1 THE WI TNESS: Thi s, t hese - - al so i n t hi s t her e ar e
2 sect i ons t hat ar e f or ot her peopl e l i ke f or Lee Gur f ei n wher e
3 i t ' s not - -
4 THE COURT: Tel l us whi ch ones you r evi ewed.
5 THE WI TNESS: Okay. So t hen al so t her e' s a per sonal
6 Dr . D. B. Kar r on f or 371543567491006, and one f or Dr . D. B.
7 Kar r on 372893053176002.
8 THE COURT: And what about t he ones f or t he ot her
9 peopl e you say ar e par t of 90?
10 THE WI TNESS: They' r e i n - - l et ' s see. They' r e i n
11 par t of t he st at ement .
13 THE WI TNESS: They' r e l i ke t he one, l i ke account
14 number Dr . D. B. Kar r on.
15 THE COURT: We can' t r emember t hose number s so you
16 have t o t el l us what you' r e doi ng.
17 THE WI TNESS: Okay. So i ncl uded i n some of t he
18 account s t her e' s a, f or Dr . D. B. Kar r on, Al i ci a Gur f ei n and
19 Char l es Desal a, cr edi t car ds under t he account number or t he
20 mai n account number .
21 THE COURT: You mean wer e separ at e cr edi t car ds i ssued
22 under t he - -
23 THE WI TNESS: Under t he same bi l l i ng account number
24 t hey had - - yeah, t hey had t hr ee - - t hi s one cr edi t car d
25 account number had t hr ee separ at e cr edi t car ds t hat appear ed on
( 212) 805- 0300
523
1 t hat bi l l f or t hat account number , so i t ' s associ at ed wi t h.
2 THE COURT: I see. Who ar e t hey at t r i but ed t o?
3 THE WI TNESS: Al i ci a Ger f ei n and Char l es Desal a.
4 Q. Ms. Ri l ey - -
5 MR. KWOK: Sor r y, your Honor .
7 Q. Yes. Ms. Ri l ey, now I ' mshowi ng you gover nment Exhi bi t
8 100. Do you r ecogni ze what t hat i s, al r eady i n evi dence?
9 A. Yes. I t ' s i nvoi ces f r omDat avi si oi n.
10 Q. How about gover nment Exhi bi t 101?
11 THE COURT: What ar e i nvoi ces f r omdat a bases?
12 THE WI TNESS: I nvoi ces f r omDat avi si oi n i s a - -
13 THE COURT: Dat avi si on.
14 THE WI TNESS: I t ' s a comput er company.
15 THE COURT: Al l r i ght . Suppl i er of some sor t ?
16 THE WI TNESS: Yes, equi pment suppl y, equi pment per son.
18 Q. Gover nment Exhi bi t 101, do you have t hat document i n f r ont
19 of you?
20 A. Yes.
21 Q. Do you r ecogni ze i t ?
22 A. I t ' s i nvoi ces f r omHomef r ont Har dwar e.
23 Q. Ar e t hose i nvoi ces as wel l ?
24 A. Yes.
25 Q. How about gover nment Exhi bi t 102 al r eady i n evi dence?
( 212) 805- 0300
524
1 A. 102, i nvoi ces f r omGener al Comput er Ser vi ce.
2 Q. Gover nment exhi bi t 103 al r eady i n evi dence?
3 A. I nvoi ces f r omSi l i con Gr aphi cs I ncor por at ed.
4 Q. Gover nment Exhi bi t 104?
5 A. I nvoi ces f r omSi l i con Ci t y.
6 Q. Now, Ms. Ri l ey, bef or e I showed you t hose document s, had
7 you l ooked at t hose document s bef or e?
8 A. Yes.
9 Q. And what di d you do wi t h t hose document s?
10 A. I r evi ewed t he t hi ngs on t he document s and t r aced t hemback
11 t o t he sour ce r ecor ds. I al so i ni t i al ed and dat ed t hat I had
12 seen t hem.
13 Q. Di d you summar i ze t he i nf or mat i on i n t he bank r ecor ds, t he
14 Amer i can Expr ess car d st at ement s and t he i nvoi ces, i n a summar y
15 document ?
16 A. Yes, t hey' r e summar i zed i n my r evi ew of t he checks and bank
17 st at ement s.
18 Q. I ' mshowi ng next what ' s been mar ked f or i dent i f i cat i on as
19 gover nment Exhi bi t 110?
20 A. 110.
21 THE COURT: Okay.
22 Q. Do you r ecogni ze what t hat i s?
23 A. Yes.
25 A. I di d.
( 212) 805- 0300
525
1 Q. What i s t he summar y of ?
2 A. I t ' s a summar y of t he bank, anal ysi s of t he bank st at ement s
3 and checks.
4 Q. Of ?
5 A. Of CASI , and t he f our bank account s of CASI .
6 MR. KWOK: Gover nment of f er s gover nment Exhi bi t 110?
8 THE COURT: Let me j ust see. I want t o know exact l y
9 what i t i s. 110 i s t he summar y of whi ch exhi bi t s, t he 70 - -
10 does i t al so i ncl ude cr edi t car ds?
11 THE WI TNESS: Yes, si r , i t does.
12 THE COURT: So i t ' s 70 and 80. And what about - - and
13 81, i s t hat r i ght ?
14 THE WI TNESS: The cr edi t car ds ar e 90, and t he checks
15 wer e 81 - - t he checks wer e 81, r i ght . Checks ar e 81. So i t
16 i ncl udes 90, t he Amer i can, t he Amer i can Expr ess bi l l s and 81,
17 t he checks f r omt he f our bank account s.
18 THE COURT: 90 you mean?
19 THE WI TNESS: Yeah.
22 THE COURT: I ncl udes 90?
23 THE WI TNESS: 90 i s, what i s 90? Oh, yes, t he
24 Amer i can Expr ess - - yes, t he Amer i can Expr ess bi l l i s 90, 90
25 and 81.
( 212) 805- 0300
526
1 THE COURT: J ust 90 and 81, not 70, not 80.
2 THE WI TNESS: 70 i s - -
3 Q. I f I can ask t he next quest i on, I t hi nk i t woul d cl ear i t
4 up.
5 Ms. Ri l ey, di d you pr epar e a separ at e summar y f or t he
6 i nf or mat i on cont ai ned i n gover nment exhi bi t 80?
7 A. Yeah, t he separ at e, 80 - -
8 Q. What i s gover nment exhi bi t 80?
9 A. Oh, yes, I di d. Dr . Kar r on' s checks has a separ at e
10 summar y.
11 THE COURT: Al l r i ght . 80 i s a separ at e one. What i s
12 i n t hi s one, 110; what i s i ncl uded i n 110?
13 MR. KWOK: Let me ask t he wi t ness.
14 THE COURT: That ' s what I ' maski ng t he wi t ness.
15 Q. Ms. Ri l ey, does gover nment exhi bi t 110 i ncl ude gover nment
16 exhi bi t 81, gover nment exhi bi t whi ch i s t he CASI bank account
17 st at ement , and gover nment exhi bi t 90, whi ch ar e t he Amer i can
18 Expr ess car d st at ement s?
19 A. Yes.
20 Q. And does what i s mar ked f or i dent i f i cat i on as gover nment
21 exhi bi t 111, i ncl ude a summar y of gover nment exhi bi t 80, whi ch
22 i s t he Chase Bank account st at ement s f or Dr . Kar r on,
23 per sonal l y?
24 A. Yes, pl us i t al so i ncl udes t he per sonal cr edi t car d
25 st at ement s t hat wer e i ncl uded i n 90 Amer i can Expr ess.
( 212) 805- 0300
527
1 MR. KWOK: Gover nment of f er s - -
2 THE COURT: I ' mabsol ut el y conf used as t o what i t
3 cover s. I don' t f ol l ow what she' s cover i ng i n each of t hese
4 exhi bi t s.
6 THE COURT: She doesn' t seemt o make i t cl ear .
8 THE COURT: 90 i s i ncl uded i n bot h, appar ent l y.
9 Q. Ms. Ri l ey, why i s gover nment exhi bi t 90 i ncl uded i n bot h
10 summar i es?
11 A. Gover nment exhi bi t 90 has busi ness cr edi t car ds and i t ' s
12 st at ement s, and i t al so has a coupl e of per sonal cr edi t car d
13 st at ement s. So t he busi ness cr edi t car d st at ement s ar e
14 i ncl uded, al ong wi t h exhi bi t 81, t he busi ness checks and
15 anal yzed, and t he per sonal cr edi t car d st at ement s i n 90 ar e
16 i ncl uded wi t h t he per sonal bank account checks f or Dr . Kar r on
17 and i n Exhi bi t 110, 111 - - 111.
18 THE COURT: So i s t he st i pul at i on you' r e maki ng
19 bet ween Exhi bi t 110 and 111 i s t hat one i s f or per sonal r ecor ds
20 of Dr . Kar r on and t he ot her i s f or t he busi ness r ecor ds of - -
21 t hat or busi ness account s of CASI ?
22 THE WI TNESS: Yes, si r ; yes, si r .
23 THE COURT: Whi ch Dr . Kar r on may have had dr awi ng
24 power over as a - -
( 212) 805- 0300
528
1 THE COURT: - - an execut i ve of CASI ?
2 THE WI TNESS: Yes, he di d have dr awi ng power as an
3 execut i ve of CASI .
4 THE COURT: So whi ch i s whi ch, t he per sonal - - Dr .
5 Kar r on, per sonal l y, i s 110?
7 THE COURT: And CASI and Dr . Kar r on busi ness wi se i s
8 111; i s t hat r i ght ?
9 THE WI TNESS: No, Dr . Kar r on per sonal i s 111, because
10 on t he per sonal - -
12 Q. Ms. Ri l ey, j ust t o be cl ear , gover nment Exhi bi t 111, i sn' t
13 t hat Dr . Kar r on' s - - summar y of Dr . Kar r on' s per sonal expenses
14 as r ef l ect ed i n t he Amer i can Expr ess car d st at ement s and hi s
15 per sonal Chase Bank st at ement s?
16 A. Yes.
17 Q. And j ust t o be cl ear , i s gover nment Exhi bi t 110 a summar y
18 of t he busi ness expenses as r ef l ect ed i n t he Chase Bank
19 st at ement s and t he bank expenses - - CASI ' s expenses as
20 r ef l ect ed i n t he Amer i can Expr ess cr edi t car d st at ement s.
21 A. Yes.
22 MR. KWOK: Gover nment of f er s 110 and 111.
23 THE COURT: 110 and 111 ar e admi t t ed wi t hout
24 obj ect i on.
( 212) 805- 0300
529
1 evi dence)
2 Q. Now, Ms. Ri l ey - - Ms. Moussa, i f we coul d put up gover nment
3 Exhi bi t 110 on t he scr een, whi ch i s t he summar y f or CASI
4 expenses. I f we coul d zoomi n on t he t op hal f of t he page.
5 Ms. Ri l ey, coul d you t el l us what t he col umn headi ngs
6 of your dat a base i ndi cat e?
7 A. Okay. The f i r st one t he I D i s j ust a number assi gned by
8 t he comput er . The descr i pt i on i s t he payee of t he check. I t
9 was el ect r oni c f unds t r ansf er , t he i nf or mat i on f r omt he bank
10 st at ement concer ni ng t he payee. The dat e i s f r omt he dat e
11 t hat - - t he dat e on t he bank st at ement t hat t he check was
12 cl ear ed. The - - and t he t ot al of t he, of t he check. The check
13 memo ent r i es ar e f r om, ar e f r om- - i f t her e was a check memo on
14 t he account , and f or some of t he account s i f I - - I may have
15 gone back t o one of t he l edger s f r omt he pr evi ous audi t t o get
16 a check, an ent r y t her e. But i t nor mal l y says per l edger i f i t
17 di dn' t come f r omt he check.
18 THE COURT: I ' msor r y, what exhi bi t i s t hat f r om? I ' m
19 a st ep behi nd you al l .
20 MR. KWOK: What i s on t he scr een, your Honor , i s
21 gover nment exhi bi t 110.
22 THE COURT: And t hi s i s not t he f i r st page, i t ' s - - oh
23 i t i s t he f i r st page.
24 THE WI TNESS: I t i s t he f i r st page.
25 THE COURT: But i t ' s cut of f , i s t hat t he pr obl em?
( 212) 805- 0300
530
1 THE DEPUTY CLERK: They bl ew up a sect i on of i t .
2 THE COURT: You can' t - - you' r e not - - you haven' t got
3 t he whol e page on t her e, because i t says bank t r ansf er , r i ght ?
6 THE COURT: Al l r i ght . Okay.
7 MR. KWOK: Ms. Moussa, i f we coul d put up what i s
8 al r eady i n evi dence, pages f r omgover nment exhi bi t 81, whi ch i s
9 t he CASI bank st at ement s. I f we coul d zoomi n on t he t op
10 check. May I appr oach, your Honor ?
11 THE COURT: Thi s i s par t of what , 80?
12 MR. KWOK: Thi s i s exhi bi t 81. I t ' s not i n t he j ur y
13 bi nder s because i t ' s par t of vol umi nous bank r ecor ds, but i t i s
14 on t he scr een.
16 MR. RUBI NSTEI N: Coul d I j ust ask one quest i on, your
17 Honor ?
18 THE COURT: What f or ? You mean voi r di r e of some
19 sor t ?
21 MR. KWOK: I t ' s al r eady i n evi dence.
22 THE COURT: I t ' s a l i t t l e l at e.
23 MR. RUBI NSTEI N: Coul d I ask one quest i on, J udge? I t
24 may hel p l at er on.
25 THE COURT: Maybe I ' l l ask i t . Why don' t you come up.
( 212) 805- 0300
531
1 I hat e t o i nt er r upt .
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
532
2 MR. RUBI NSTEI N: Each one of t hese account s t hat she
3 ment i oned has a di f f er ent col or check. Showi ng i t up her e i s
4 i n bl ack and whi t e. I j ust want t o ask her what col or check i t
5 i s so t he j ur y wi l l know. That way t hey' l l know what account
6 i t comes f r om.
7 THE COURT: Whet her she knows what col or check?
8 MR. RUBI NSTEI N: She has t he or i gi nal .
9 MR. KWOK: We don' t - - your account ant di d - -
11 MR. KWOK: That ' s t he way i t ' s pr ovi ded t o us by t he
12 bank. I t ' s i n evi dence i n bl ack and whi t e.
13 MR. RUBI NSTEI N: Okay, al l r i ght .
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
533
1 BY MR. KWOK:
2 Q. Ms. Ri l ey, do you r ecogni ze t he document s t hat ar e bei ng
3 di spl ayed on t he scr een t her e?
4 A. Yes.
5 Q. What ar e t hey?
6 A. They ar e checks f r omt he Comput er Ai ded Sur ger y checki ng
7 account .
8 Q. Who i s t he payee?
9 A. Dr . D. B. Kar r on.
10 Q. For how much?
11 A. $2, 000.
12 THE COURT: Whi ch check ar e you t al ki ng about ?
13 Q. Can you t el l us t he check number ?
14 A. The t op check, 2977.
15 Q. What does i t say on t he memo l i ne?
16 A. Rent al of f i ce, 300 East 33r d St r eet , Sui t e 4N.
17 Q. How about t he handwr i t t en not at i on?
18 A. J anuar y 2000 r ent .
19 MR. RUBI NSTEI N: Excuse me?
20 THE WI TNESS: J anuar y 2000 r ent .
21 Q. Can you t el l me how t hat i nf or mat i on i s r ef l ect ed on your
22 dat abase, Gover nment Exhi bi t 110.
23 A. Exhi bi t 110, on page 39 of 44. Exhi bi t 110, page 39 of 44.
24 MR. KWOK: I f we coul d zoomi n on t he bot t ompor t i on
25 of t he page.
( 212) 805- 0300
534
1 Q. Coul d you t el l us how t he i nf or mat i on we j ust l ooked at on
2 t he check i s r ef l ect ed her e?
3 A. OK. I t ' s under r ent on of f i ce. Under t he descr i pt i on i t
4 has i n par ens i t ' s got Dr . Kar r on, and t he ot her t hi ng i s hi s
5 bank account number t hat t he check was deposi t ed i nt o, hi s
6 per sonal account . I t showed t hat t her e was a t r ansf er i nt o hi s
7 checki ng account . And t he dat e of t he t r ansact i on was
8 10/ 26/ 2001.
9 Q. I s t hat t he same or di f f er ent f r omt he check we j ust l ooked
10 at ?
11 A. I t ' s t he same.
12 Q. What i s t he check number r ef l ect ed on t he dat abase?
13 A. 2977.
14 Q. I s t hat t he same check number as we j ust l ooked at ?
15 A. Yes. And t he memo i s r ent on of f i ce per gener al l edger ,
16 f r omt he check memo, and i t ' s $2, 000. I t ' s t he amount f or
17 check number 2977.
18 Q. Now, I ' mshowi ng you anot her page f r omGover nment Exhi bi t
19 81 whi ch i s t he CASI bank st at ement . Do you r ecogni ze t hi s
20 check?
21 A. Yes, i t ' s f r omt he CASI / NI ST checki ng account .
22 Q. What i s t he check number t her e?
23 A. 10325.
24 Q. And who i s t he payee?
25 A. D. Fer r and.
( 212) 805- 0300
535
1 Q. And do you see a si gnat ur e t her e?
2 A. Yes, i t ' s Dr . Kar r on.
3 Q. Coul d you expl ai n t o us how t hi s i nf or mat i on i s r ef l ect ed
4 on your dat abase.
5 I f we coul d go back t o t he dat abase, pl ease.
6 THE COURT: What i s t he amount of t he check?
7 Q. What i s t he amount of t he check?
8 A. $100. OK. Thi s i s on - -
9 Q. Coul d you di r ect us t o t he page of t he dat abase wher e t hat
10 check i s r ef l ect ed?
11 A. The check number was 10325 on page 37 of 44 on Exhi bi t 110.
12 MR. KWOK: Can we zoomi n?
13 MR. RUBI NSTEI N: We' r e st i l l on 110, ar e we?
14 THE WI TNESS: Yes, Exhi bi t 110, page 37 of 44.
15 Q. Wher e shoul d we be l ooki ng?
16 A. I n t he mi ddl e of t he page. I f you l ook, t he check number
17 i t ' s 10325, so i f you l ook under t he check number col umn i t ' s
18 down under - - yeah - - you see t he not at i on.
19 THE COURT: I ' msor r y. She shoul d be doi ng t he
20 poi nt i ng out t o what she i s t est i f yi ng. I t shoul dn' t be you,
21 Mr . Kwok. Al l r i ght ?
22 A. OK. The check number of 10325 f or cl eani ng of f i ce char ges
23 f or t he week endi ng 6/ 22/ 02 i n t he amount of $100. 10325 i s
24 t he check number . I t was f or cl eani ng of f i ces. The amount i s
25 $100, and t he pay payee St eve Kor and, t hat ' s shown under t he
( 212) 805- 0300
536
1 descr i pt i on of t he col umn.
2 Q. I f we coul d l ook at t he r est of t he page. Under t he check
3 memo.
4 THE COURT: The r est of t he page of exhi bi t - - you ar e
5 maki ng a r ecor d, Mr . Kwok. The r ecor d has t o be cl ear as t o
6 what exhi bi t s you ar e r ef er r i ng t o at al l t i mes.
7 MR. KWOK: I apol ogi ze.
8 THE COURT: No one can r evi ew t he r ecor d i f you don' t
9 ment i on t he exhi bi t number at al l t i mes.
10 MR. KWOK: I amst i l l l ooki ng at Gover nment Exhi bi t
11 110. I amst i l l l ooki ng at page 37 of 44.
12 Q. Now, di r ect i ng your at t ent i on t o t he t op por t i on of t hat
13 page, what appear s under t he check memo col umn?
14 A. The check memo i s i nf or mat i on t aken f r omt he memo sect i on
15 of t he check.
16 Q. What does i t say on t he check memo?
17 A. Oh, cl eani ng.
18 Q. And what di d you base t hat i nf or mat i on on?
19 A. Some of t he checks wer e based on, i f t hey di dn' t have - - i n
20 or der t o i dent i f y t he check and what t he check was f or , on some
21 of t he checks I l ooked back at t he l edger s t hat I had got t en
22 f r omCASI ' s audi t s pr epar ed by ei t her Mel Spi t z or f or t he
23 check r egi st er s I had got t en f r omt he J une audi t 2003.
24 Q. Ms. Ri l ey, I ' mshowi ng you a check f r omGover nment Exhi bi t
25 81 al r eady i n evi dence, whi ch i s t he bank account st at ement s
( 212) 805- 0300
537
1 f or CASI .
2 Can we put one by one up on t he scr een?
3 What i nf or mat i on i s r ef l ect ed - - what check number i s
4 t hat , f i r st of al l ?
5 A. 10330.
6 Q. And what i nf or mat i on i s next t o t he memo l i ne of t he check?
7 MR. RUBI NSTEI N: Sor r y. I mi ssed t he check number .
8 THE WI TNESS: 10330.
9 Q. And what i nf or mat i on i s r ef l ect ed next t o t he memo l i ne of
10 t he check?
11 A. Cl eani ng of f i ce char ges f or t he week endi ng 6/ 29/ 2002.
12 Q. Look at t he next check, st i l l Gover nment Exhi bi t 81. What
13 i s t he check number on t hat check?
14 A. 10325.
15 Q. What i s t he i nf or mat i on r ef l ect ed next t o t he memo l i ne?
17 Q. And di r ect i ng your at t ent i on t o t he upper l ef t - hand cor ner
18 of t he check, what does t hat say?
19 A. Comput er Sur ger y, I ncor por at ed, NI ST ATP DMT Pr ogr am.
20 Q. Let t he r ecor d r ef l ect t hese ar e col or ed checks.
21 A. I t hi nk t hey' r e col or ed, ar en' t t hey pi nk?
23 THE WI TNESS: Yeah, t hey' r e col or ed.
24 Q. And who i s t he payee on t hat par t i cul ar check?
25 A. The payee i s D. Fer r and.
( 212) 805- 0300
538
1 Q. What ' s t he amount of t he check?
2 A. $100.
3 Q. Let ' s l ook at t he next and f i nal check, st i l l Gover nment
4 Exhi bi t 81, par t of t he bank r epor t s. What i s t he check number
5 on t hi s check?
6 A. 10509.
7 Q. How about t he upper l ef t - hand cor ner of t he check, what
8 does t hat say?
9 A. Comput er Ai ded Sur ger y, I nc. NI ST ATP DMT pr ogr am.
10 Q. And who i s t he payee on t hat check?
11 A. D. Fer r and.
12 Q. For how much?
13 A. $100.
14 Q. And what i s t he i nf or mat i on r ef l ect ed next t o t he memo
15 l i ne?
17 Q. What ' s t he si gnat ur e t hat appear s on t hat check?
19 Q. Now, Ms. Ri l ey, a moment ago you ment i oned Amer i can Expr ess
20 car d st at ement s.
21 A. Yes.
22 Q. How i s t he i nf or mat i on on t he Amer i can Expr ess car d
23 st at ement s, whi ch i s Gover nment Exhi bi t 90, r ef l ect ed on your
24 dat abase?
25 A. The t r ansact i on of t he cr edi t car d i s t aken f r omt he cr edi t
( 212) 805- 0300
539
1 car d i nvoi ce, but t he t r ansact i on f or payi ng t he cr edi t car d
2 was pi cked up whenever I anal yzed t he CASI bank st at ement s.
3 THE COURT: What ?
4 THE WI TNESS: The payment of t he cr edi t car d was
5 al r eady i n t he dat abase because I had t hat i nf or mat i on when I
6 r evi ewed t he bank st at ement s, t he bank st at ement s and cancel ed
7 checks. So t he payment was al r eady i n t he dat abase. I j ust
8 added t he t r ansact i ons, t he pur chase t r ansact i ons f r omt he
9 cr edi t car d.
10 THE COURT: You j ust added t he i nf or mat i on about who
11 t he pur chaser was?
12 THE WI TNESS: And t he amount and t he dat e of t he
13 t r ansact i on.
14 THE COURT: I see. So t he t ot al payment f or t he
15 cr edi t car d i s al r eady i n t he dat abase?
17 THE COURT: So, t hese wer e j ust i ndi vi dual - -
19 THE COURT: - - t r ansact i ons.
20 THE WI TNESS: Ri ght . And so t hat i t woul dn' t show as
21 a doubl e payment I handl ed t he cr edi t car d, I t ook t he cr edi t
22 car d payment s out of t he deposi t wi t hdr awal sect i on of t he
23 dat abase.
25 Q. Ms. Ri l ey, I j ust handed you pages f r omGover nment Exhi bi t
( 212) 805- 0300
540
1 90, whi ch i s t he Amer i can Expr ess car d st at ement s. I t ' s i n t he
2 j ur y bi nder s. Now, coul d you show us an exampl e of how some of
3 t he i nf or mat i on i n t he document t hat I j ust handed you i s
4 r ef l ect ed on your dat abase, Gover nment Exhi bi t 110.
5 A. OK. I f we go t o - - does ever ybody have 90?
6 Q. What page ar e you l ooki ng at i n your dat abase, Ms. Ri l ey?
7 THE COURT: What page of 110 ar e you l ooki ng at ? I s
8 t hat what you' r e aski ng her ?
9 MR. KWOK: That ' s what I ' maski ng t he wi t ness.
10 Q. What page of Gover nment Exhi bi t 110 ar e you l ooki ng at ?
11 A. Page 24 of 37 of Exhi bi t 110. Act ual l y - -
12 MR. KWOK: Your Honor , may I di r ect t he wi t ness' s
13 at t ent i on t o a par t i cul ar page?
14 THE COURT: Of 110?
15 MR. KWOK: Yes.
16 THE COURT: She sai d 24 of 37.
17 Q. I s t hat t he cor r ect page?
18 A. I don' t t hi nk so.
19 THE COURT: I t depends on what she i s compar i ng i t t o.
20 Q. Let me do i t t hi s way. Ms. Ri l ey can I di r ect your
21 at t ent i on t o page 29 of 44 of your dat abase. Do you have t hat
22 page?
23 A. Page 29 of 44? Yes.
24 Q. OK.
( 212) 805- 0300
541
1 Q. 29 of 44, Exhi bi t 110, do you have t hat page?
2 A. Oh, you' r e r i ght , OK. I ' msor r y. 29 of 44, yes.
3 Q. OK. Let ' s put your f i nger on t hat page, and l ook back at
4 t he Amer i can Expr ess car d st at ement s t hat I j ust showed you.
5 I f we coul d have t hat up on t he scr een, pl ease.
7 THE COURT: What ar e you aski ng t o have put up on t he
8 scr een.
9 MR. KWOK: Gover nment Exhi bi t 90, t he st at ement f or
10 August 7, 2002.
11 THE COURT: Fi r st page?
12 MR. KWOK: Page 2.
13 Q. Now, l ooki ng at t he scr een, Ms. Ri l ey, and i f you coul d use
14 your poi nt er , what t r ansact i on i s r ef l ect ed f or J ul y 12, 2002?
15 A. I mi spl aced my poi nt er .
16 MR. RUBI NSTEI N: Ar e t her e number s on t he bot t omof
17 t he page t hat I can' t see? OK. I have my r evi sed.
18 Q. OK. Ms. Ri l ey, what t r ansact i on i s r ef l ect ed - - what i s
19 t he f i r st t r ansact i on f or J ul y 12, 2002?
20 A. J ul y 12, 2002, t he Amer i can Expr ess shows a char ge t o Sam' s
21 Noodl e Shop i n t he amount of 29. 10. On page 29 of 44 - -
22 Q. Let ' s go t hr ough t he Amer i can Expr ess car d st at ement s
23 f i r st . Let ' s t ur n t o t he next page of t he Amer i can Expr ess
24 car d st at ement , Gover nment Exhi bi t 90, page 3.
25 A. OK.
( 212) 805- 0300
542
1 Q. What t r ansact i on i s shown f or J ul y 22, 2002?
2 A. J ul y 22, 2002 t her e i s a char ge t o Sam' s Noodl e Shop f or
3 23. 55.
4 Q. And i s t her e a char ge r ef l ect ed on t he same page,
5 Gover nment Exhi bi t 90, page 3 of 7, f or August 7, 2002 t o t he
6 same vendor ?
7 THE COURT: What ' s your quest i on agai n?
8 Q. Di r ect i ng your at t ent i on t o J ul y 30, 2002, Ms. Ri l ey.
9 A. Oh, yes, on J ul y 30 t her e i s Sam' s Noodl e Shop f or t he
10 amount of 19. 45.
11 Q. OK. Now, l et ' s t ur n back t o Gover nment Exhi bi t 110 t hat we
12 j ust l ooked at , page 29 of 44. Can you t el l us how t he
13 i nf or mat i on t hat we j ust l ooked at i s r ef l ect ed on your
14 dat abase?
15 A. I t comes t hr ough t he dat e col umn t o J ul y.
16 MR. RUBI NSTEI N: Your Honor , excuse me. Ar e we on
17 page 24 or 29?
18 THE WI TNESS: 29 of 44.
20 A. On J ul y 12 t her e i s a t r ansact i on t o Sam' s Noodl e Shop i n
21 t he amount of 29. 10, and on J ul y 22 t her e i s a t r ansact i on t o
22 Sam' s Noodl e Shop of 23. 55, and on J ul y 30, Sam' s Noodl e Shop
23 i n t he amount of 19. 45.
24 THE COURT: So, how was t hi s cr edi t car d pai d f or ?
25 THE WI TNESS: I t ' s pai d f or out of t hi s account .
( 212) 805- 0300
543
1 THE COURT: What account ?
2 THE WI TNESS: Out of one of t he CASI - - at t he CASI
3 account s. Thi s one - -
4 THE COURT: You t ol d us t her e ar e mul t i pl e CASI
5 account s.
6 THE WI TNESS: Ri ght . But i n my dat abase t hey ar e
7 t r eat ed as one account , one bi g account , because t he deposi t s
8 come f r omNI ST, f r omone sour ce.
9 THE COURT: The deposi t s come f r omwher e?
10 THE WI TNESS: Fr omNI ST, t he ATP gr ant awar d. Ther e
11 i s a l ot of i nt er account t r ansf er s, but f or t he most par t t he
12 deposi t s ar e comi ng f r omt he gr ant moni es.
13 MR. KWOK: I f we coul d put back up on t he scr een
14 Gover nment Exhi bi t 90, t he Amer i can Expr ess car d st at ement , t he
15 August 7, 2002 st at ement , page 1. I f we coul d zoomi nt o t he
16 mi ddl e por t i on of t hat page t her e hi ghl i ght ed i n gr ay.
17 Q. What does t hi s st at ement show r egar di ng payment t o t he
18 out st andi ng cr edi t car d bal ance?
19 A. I t shows on J ul y 14, 1, 074. 91 was r ecei ved by Amer i can
20 Expr ess f r omCASI , and on J ul y 29 t hat Amer i can Expr ess
21 r ecei ved a payment of $2, 940. 01 f r omCASI .
22 Q. And wher e di d t he money come f r omt hat pai d of f t hese
23 cr edi t car d bal ances?
24 A. Fr omt he CASI / NI ST bank account s.
25 Q. How do you know t hat ?
( 212) 805- 0300
544
1 A. OK. Those t r ansact i ons ar e r ef l ect ed on page 3 of 44 of
2 Exhi bi t 110.
3 Q. Ar e you t al ki ng about Gover nment Exhi bi t 110, Ms. Ri l ey?
4 A. Yes, Gover nment Exhi bi t 110, page 3 of 44.
5 Q. And wher e ar e you l ooki ng?
6 A. Ki nd of t he mi ddl e of t he page, under t he payment s of t he
7 cr edi t car d.
8 THE COURT: Sor r y. What was t hat page agai n?
10 Q. Can you poi nt t hemout on t he scr een?
11 A. Yes. I t shows t hat Amer i can Expr ess el ect r oni c r emi t t ance
12 was made f r omt he CASI bank st at ement account on 7/ 15 i n t he
13 amount of $1, 074. 91 t o pay Amer i can Expr ess, and t hat anot her
14 el ect r oni c r emi t t ance was made f r omt he account on J ul y 31,
15 2002 t o pay Amer i can Expr ess i n t he amount of $2, 940. 01.
16 Q. Di d you base t hi s i nf or mat i on on t he Chase cr edi t car d
17 st at ement s of CASI ?
18 A. Thi s i nf or mat i on came f r omt he bank st at ement s and t he
19 payment of t he bank st at ement s.
20 Q. Chase Bank?
21 A. Chase Bank.
22 Q. I amhandi ng you a f ew pages f r omGover nment Exhi bi t 81,
23 t he CASI Chase Bank account st at ement s, whi ch i s al so i n t he
24 j ur y bi nder s. Di r ect i ng your at t ent i on t o t he J une 22 t o J ul y
25 22 st at ement per i od, page 3.
( 212) 805- 0300
545
1 MR. RUBI NSTEI N: Excuse me. What ar e t hose dat es?
2 MR. KWOK: I ' ml ooki ng at Gover nment Exhi bi t 81, t he
3 Chase st at ement s f or CASI , t he per i od f r omJ une 22 t o J ul y 22,
4 page 3 of 4.
5 THE COURT: Let t he wi t ness poi nt t o t he ar ea you ar e
6 r ef er r i ng t o.
7 A. The bank st at ement shows t hat on 7/ 15 t her e was an Amer i can
8 Expr ess el ect r oni c payment i n t he amount of 1, 074. 91 f r omt he
9 Chase bank account .
10 MR. KWOK: And i f you coul d zoomout f or a second.
11 Q. Di r ect i ng your at t ent i on t o t he upper r i ght - hand cor ner ,
12 under t he pr i mar y account number , what i s t he t ext t hat ' s
13 under neat h t hat ?
14 A. I t says Comput er Ai ded Sur ger y, I ncor por at ed, NI ST ATP DMT
15 Pr ogr am.
16 Q. And di r ect i ng your at t ent i on now t o t he same exhi bi t ,
17 Gover nment Exhi bi t 81, but now we ar e l ooki ng at t he next
18 st at ement per i od f r omJ ul y 23 t o August 21, 2002, page 3 of 4.
19 Do you have t hat page, Ms. Ri l ey?
20 A. Sor r y. What page?
21 Q. J ul y 23 t o August 21, 2002, t hat per i od st at ement ?
22 THE COURT: Wher e do I f i nd t he dat e?
23 MR. KWOK: I t ' s on t he upper r i ght - hand cor ner of
24 ever y page.
25 THE COURT: I see. J ul y what ?
( 212) 805- 0300
546
1 MR. KWOK: J ul y 23 t o August 21, 2002, t he st at ement
2 f or t hat account per i od.
3 THE COURT: J ust one second. So t hat ' s si x or ei ght
4 pages i n.
5 MR. KWOK: That ' s page 3 of 4. I t ' s t he page on t he
6 scr een.
7 THE COURT: J ul y 23, page - -
8 MR. KWOK: I t ' s act ual l y page 10 on t he bot t omof t he
9 page.
10 THE COURT: Page 10 at t he bot t omr i ght - hand cor ner ?
11 MR. KWOK: Of t he page, yes.
12 THE COURT: Of t hat st at ement .
13 MR. KWOK: Of t hat st at ement , cor r ect .
14 Q. Do you have t hat page, Ms. Ri l ey?
15 A. Yes.
16 Q. Di r ect i ng your at t ent i on t o t he wi t hdr awal and debi t s
17 por t i on of t hat page, what ar e you poi nt i ng at , Ms. Ri l ey?
18 A. Thi s shows t he payment on 7/ 31, t he el ect r oni c r emi t t ance
19 t o Amer i can Expr ess of $2, 940. 01. That cor r esponds t o t he
20 amount t hat we j ust l ooked at on t he Amer i can Expr ess
21 st at ement .
22 Q. So, i s t hat t he same or di f f er ent number t han t he one we
23 j ust l ooked at i n t he Amer i can Expr ess car d st at ement
24 Gover nment Exhi bi t 90?
25 A. I t ' s t he same number .
( 212) 805- 0300
547
1 THE COURT: Same account number .
2 THE WI TNESS: The payment .
3 THE COURT: Same - -
4 THE WI TNESS: - - payment .
5 Q. When you say same number , what number ar e you r ef er r i ng t o?
6 A. The same payment , t he J ul y 29 on t he Amer i can Expr ess bi l l
7 shows t hat t hey r ecei ved $2, 940. 01 f r omCASI , and t he bank
8 st at ement el ect r oni c r emi t t ance shows t hat t hi s bank account
9 pai d $2, 940. 01 t o Amer i can Expr ess.
11 Q. Now, Ms. Ri l ey, ot her t han summar i zi ng i nf or mat i on on your
12 dat abases, what el se di d you do i n your anal ysi s of t he bank
13 r ecor ds?
14 A. Cr eat ed char t s and gr aphs.
15 Q. I amshowi ng you what ' s been mar ked f or i dent i f i cat i on as
16 Gover nment Exhi bi t 112 and 113. They ar e not yet i n evi dence
17 but mar ked f or i dent i f i cat i on. Do you have t hat i n f r ont of
18 you, Ms. Ri l ey?
19 A. Yes, I do.
20 Q. Do you r ecogni ze what t hey ar e?
21 A. Yes.
22 Q. And what ar e t hey?
23 A. They ar e pi e char t s t hat I cr eat ed f r omt he bank st at ement s
24 of CASI .
25 Q. How di d you cr eat e t hese gr aphs?
( 212) 805- 0300
548
1 A. I used t he i nf or mat i on t hat was i n Exhi bi t 110, t he bank
2 r ecor ds, t o cr eat e t hese gr aphs.
3 MR. KWOK: The gover nment of f er s Exhi bi t 112 and 113.
6 THE COURT: 112 and 113 ar e admi t t ed i nt o evi dence.
8 evi dence)
9 Q. Now, l et ' s t ake t hemone at a t i me, Ms. Ri l ey. Let ' s go
10 f i r st t o Gover nment Exhi bi t 112. What gr aph i s t hat of ?
11 A. Thi s i s a gr aph of t he deposi t s i nt o t he CASI bank account s
12 f or t he per i od 10/ 1/ 2001 t hr ough 9/ 30/ 2002 whi ch i s t he f i r st
13 year of t he gr ant awar d.
14 Q. And what does t he pur pl e ar ea r epr esent ?
15 A. I t r epr esent s t he deposi t s i nt o t he account f or t he NI ST - -
16 f or t he gr ant money.
17 Q. Was t her e any ot her sour ce of f undi ng t hat ' s not f r omt he
18 ATP gr ant ?
19 A. Ther e wer e a coupl e of mi nor deposi t s, but t hey wer e r eal l y
20 cr edi t , r ef unds t o ot her account s, so t hey wer e used as
21 of f set s, not as deposi t s. They wer e r ef und checks.
22 Q. Now, l et ' s go t hr ough Gover nment Exhi bi t 113. Ms. Ri l ey,
23 what i s t hi s a gr aph of ?
24 A. The CASI busi ness account - - deposi t s i nt o t he CASI
25 busi ness account s f or t he per i od 10/ 1/ 2002 t hr ough 6/ 30/ 2003,
( 212) 805- 0300
549
1 whi ch i s t he ni ne mont hs of t he second year of t he awar d.
2 Q. What does t he pur pl e ar ea of t he gr aph r epr esent ?
3 A. Deposi t s of gr ant moni es r ecei ved by CASI .
4 Q. And how about t hat l i ne t hat ' s br eaki ng up t he ci r cl e?
5 A. Thi s i s mi scel l aneous ot her deposi t s i nt o t he account .
6 Q. Ms. Ri l ey, di d you pr epar e any addi t i onal gr aphs asi de f r om
7 t hese ones t hat we j ust l ooked at ?
8 A. Yes.
9 Q. What di d you pr epar e?
10 THE COURT: What was t he amount of t hose ot her
11 deposi t s i nt o t he account ?
12 THE WI TNESS: The deposi t s f r omNI ST wer e $545, 000,
13 and t he mi scel l aneous deposi t s wer e l i ke 1200, 1500, somet hi ng
14 r eal l y smal l .
15 THE COURT: Sor r y.
16 Q. Ms. Ri l ey, asi de f r omt hese gr aphs, di d you cr eat e any
17 addi t i onal char t s and gr aphs?
18 A. Yes.
19 Q. What di d you pr epar e?
20 A. I anal yzed t he expendi t ur es f r omt he account s.
21 Q. I amshowi ng you what have been mar ked f or i dent i f i cat i on
22 as Gover nment ' s Exhi bi t s 114 and 115. Do you have t hose i n
23 f r ont of you?
24 A. Yes.
25 Q. Do you r ecogni ze what t hey ar e?
( 212) 805- 0300
550
1 A. Yes, t hey ar e t he pi e char t s t hat I cr eat ed f or t he
2 anal ysi s of t he expendi t ur es.
3 Q. And what document s di d you l ook at t o cr eat e t hese gr aphs
4 and char t s?
5 A. Cancel ed checks and Amer i can Expr ess st at ement s wer e t he
6 mai n sour ce document s used t o cr eat e t hese.
7 MR. KWOK: Gover nment of f er s Gover nment ' s Exhi bi t s 114
8 and 115.
10 THE COURT: 114 and 115 ar e admi t t ed i nt o evi dence.
12 evi dence)
13 MR. KWOK: May we publ i sh t hat t o t he j ur y?
14 THE COURT: You say t hese ar e expendi t ur es?
15 THE WI TNESS: Yes, si r . For 114 and 115 I di d
16 anal ysi s and expendi t ur es.
17 THE COURT: Fi r st f or t he year ended Oct ober 10, 2002?
18 THE WI TNESS: OK. And t hat i s because of t he
19 br eakdown f or t he f r i nge benef i t s f or check pai d t o I RS f or
20 wi t hhol di ngs or what ever , t he br eakdown I had f or check and
21 f r i nge benef i t s, I had an anal ysi s f or t he year pr epar ed by one
22 of t he account ant s t hat I coul d r econci l e t he number s - - t he
23 check payment s t hr ough Oct ober 10. So, i t doesn' t - -
24 THE COURT: 114 and 115 ar e admi t t ed i n evi dence.
25 Q. Now, Ms. Ri l ey l ooki ng f i r st at Gover nment Exhi bi t 114,
( 212) 805- 0300
551
1 what i s t he pi e char t at t he upper l ef t - hand cor ner ?
2 A. The upper l ef t - hand cor ner pi e char t i s j ust a br eakdown of
3 t he budget , t he NI ST budget , gr ant budget t o CASI , and i t has
4 t he budget cat egor i es by amount .
5 THE COURT: Whi ch budget ?
6 THE WI TNESS: For t he year one CASI / NI ST ATP budget .
7 THE COURT: Appr oved t he f i r st one or t he subsequent ?
8 THE WI TNESS: Amendment t o appr oved budget .
9 Q. So, st ayi ng wi t h t hat gr aph f or a second, j ust wal k us
10 t hr ough an exampl e, f or exampl e, what subcont r act or shows.
11 A. Subcont r act or shows t hat t he NI ST- appr oved budget had a
12 budget of $250, 000 f or subcont r act or cost s f or year one f or t he
13 NI ST ATP gr ant awar d.
14 Q. How about , f or exampl e, Dr . Kar r on' s sal ar y, accor di ng t o
15 t he appr oved budget ?
16 A. The appr oved budget had al l owed - - Dr . Kar r on' s sal ar y f or
17 t he appr oved budget was $175, 000.
18 MR. KWOK: OK. Now l et ' s zoomback out . Let ' s t ur n
19 t o t he upper r i ght - hand cor ner of t he char t . I f we coul d zoom
20 t hat i n.
21 Q. What i s t hi s char t ?
22 A. Thi s char t shows accor di ng t o t he checks. The checks ar e
23 t he Amer i can Expr ess t r ansact i ons f r omt he CASI busi ness
24 account . Thi s i s a br eakdown by t he budget cat egor i es of how
25 t he checks wer e wr i t t en.
( 212) 805- 0300
552
1 Q. OK. And what i s t he yel l ow ar ea of t hat char t ?
2 A. The yel l ow ar ea f or t he most par t i s what i s l i mi t ed by t he
3 budget cat egor y. I f i t was spent over budget , t hen t her e i s a
4 por t i on t hat ' s r ed and a por t i on t hat ' s yel l ow. I t ' s cost s
5 t hat ar e al l ocabl e t o t hose budget cat egor i es i n t he anal ysi s
6 of checks and Amer i can Expr ess t r ansact i ons. Li ke f or t he - -
7 Q. And what does t he r ed ar ea of t he gr aph r epr esent ?
8 A. The r ed ar ea r epr esent s cost s t hat wer e over budget s, t hat
9 wer e consi der ed i ndi r ect cost s and nonal l owabl e, l i ke dues and
10 subscr i pt i ons, l awyer s, and t he r ent pai d t o Dr . Kar r on, was
11 not al l owabl e per t he budget .
12 MR. KWOK: Let ' s zoomi t back out . Let ' s t ur n t o t he
13 bot t omr i ght - hand cor ner of t he page.
14 Q. What i s t hat t he char t of ?
15 A. Ther e i s a 10 per cent budget cat egor y adj ust ment t hat ' s
16 al l owed by NI ST ATP.
17 Q. What i s a 10 per cent adj ust ment ? Can you expl ai n t hat ?
18 A. 10 per cent of t he budget amount can be r eal l ocat ed f r omsay
19 subcont r act or cost s t o per sonnel expense, i f you have l ess
20 subcont r act or cost s t han you t hought .
21 So, t hi s i s t o show t hat $83, 000 whi ch coul d be
22 r eal l ocat ed bet ween t he budget cat egor y i f t hat ' s t he onl y
23 t hi ng t hat made somet hi ng unal l owabl e, but i t was over budget .
24 Q. Accor di ng t o t hi s char t , what i s t he t ot al of di sal l owabl e
25 amount f or year one of t he gr ant per i od?
( 212) 805- 0300
553
1 A. Thi s one shows $268, 638.
2 Q. Let ' s zoomi t back out , and l et ' s f ocus on t he t abl e f or
3 now. What does t he t abl e show?
4 A. The t abl e shows t he budget cat egor i es compar ed t o t he
5 amount of money spent by CASI , and t he di f f er ence bet ween what
6 CASI spent and what t he budget al l owed t o be spent , and t hen i t
7 shows t he per cent age di f f er ence.
8 Q. Can you wal k us t hr ough an exampl e of t hat .
9 A. Wel l , f or l i ke Dr . Kar r on' s sal ar y t he budget was $175, 000,
10 CASI spent $200, 000 f or year one, a di f f er ence of $25, 488, f or
11 a di f f er ence of 14. 56 per cent over .
12 Q. OK. Let ' s zoomi t back out . Let ' s go back t o t he upper
13 r i ght - hand cor ner por t i on of t he page, t he pi e char t wi t h t he
14 r ed. Does t hi s char t t ake i nt o account t he l ack of any cost
15 shar e t hat you t est i f i ed about yest er day?
16 A. No, i t doesn' t have cost shar e.
17 Q. What woul d t hi s char t have l ooked l i ke i f t hat i nf or mat i on
18 had been r ef l ect ed on t he char t ?
19 A. Some of t he r ed number s mi ght be yel l ow i f some of t he cost
20 shar e had been r ef l ect ed.
21 Q. I ' msor r y. Let me r ephr ase. I f you had i ncl uded i n your
22 char t t he absence of any cost shar e t hat you t est i f i ed about
23 yest er day, what woul d t hi s char t l ook l i ke?
24 A. I f I t ook i nt o consi der at i on t hat t her e was no cost shar e,
25 none of t he cost woul d be al l owabl e, and al l ot her cost s woul d
( 212) 805- 0300
554
1 be r ed.
2 Q. Let ' s go t o Gover nment Exhi bi t 115. What i s t hi s a char t
3 of ?
4 A. Thi s i s a char t of t he same t ype i nf or mat i on f or year t wo
5 of t he awar d, t he ni ne mont hs of year t wo.
6 Q. Let ' s go t o t he f i r st gr aph, t he upper l ef t - hand cor ner .
7 Agai n, what i nf or mat i on i s r ef l ect ed on t hi s char t ?
8 A. Thi s i s t he expendi t ur es by budget cat egor y i n t he NI ST
9 budget awar d.
10 Q. So, usi ng subcont r act or as an exampl e, what i s budget ed f or
11 year t wo?
12 A. $110, 000.
13 Q. Let ' s go t o t he f ul l page, t o t he upper r i ght - hand cor ner .
14 And once agai n, what i s t hi s a char t of f or year t wo?
15 A. Thi s i s t he expendi t ur es f r omt he CASI NI ST account s br oken
16 down by budget cat egor y, f r omt he check account s and t he
17 Amer i can Expr ess account s.
18 Q. What i s r epr esent ed by t he r ed por t i on?
19 A. The r ed por t i on woul d be cost s t hat woul d be over t he
20 budget cat egor y or maybe not al l owabl e because t hey ar e
21 i ndi r ect cost s.
22 Q. What ar e some of t hose exampl es?
23 A. The equi pment cost over budget her e of $90, 169, suppl y
24 cost s over budget of $8, 800.
25 Q. Let ' s zoomi t back out and l ook at t he char t t o t he bot t om
( 212) 805- 0300
555
1 r i ght . What i s t he t ot al di sal l owed expense t hat you f ound f or
2 year t wo?
3 A. Accor di ng t o t hi s anal ysi s, i t woul d be $196, 504.
4 Q. Once agai n, what i s t hat l i t t l e por t i on t hat ' s a l i t t l e of f
5 t o t he si de?
6 A. I t ' s al l owed, t he 10 per cent r ul e t hat you can al l ow,
7 al l owi ng f or 10 per cent adj ust ment t o t he budget cat egor i es,
8 t her e woul d st i l l be - - t her e woul d onl y be 50, 000 of t he
9 196, 000 t hat woul d be OK.
10 THE COURT: So wi t h t he adj ust ment i t woul d be
11 $146, 017.
13 Q. Now, Ms. Ri l ey, l et ' s go t o what ' s been mar ked f or - -
14 act ual l y what i s al r eady i n evi dence as Gover nment Exhi bi t 101.
15 Do you have t hat document i n f r ont of you?
16 A. 101?
17 Q. That ' s cor r ect .
18 MR. KWOK: I t ' s Gover nment Exhi bi t 101, your Honor .
19 Q. Do you have t hat document ?
20 A. Yes.
22 A. Yes, i t ' s t he Homef r ont Har dwar e i nvoi ce.
23 Q. And di d you anal yze t hi s document i n t he cour se of your
24 anal ysi s?
25 A. Yes.
( 212) 805- 0300
556
1 Q. Wer e you abl e t o det er mi ne how t he bal ances r ef l ect ed on
2 t hese i nvoi ces wer e pai d f or ?
3 A. Yes. They wer e pai d f or f r omt he CASI / NI ST bank account ,
4 or Amer i can Expr ess or except f or one t r ansact i on f or $301 t hat
5 was pai d f r omDr . Kar r on' s per sonal cr edi t car d account .
6 Q. Asi de f r omt hat , wer e t her e any i nvoi ces pai d f or f r omDr .
7 Kar r on' s per sonal account ?
8 A. Yes, one f or $301.
9 Q. Asi de f r omt hat , i s t her e anyt hi ng el se?
10 A. No, t he r est of t hemwer e pai d f or f r omt he CASI / NI ST
11 account .
12 Q. And how wer e you abl e t o make t hat det er mi nat i on?
13 A. I t r aced t he payment back t o my dat abase of check payment s,
14 back t o t he bank st at ement s, t o t he cancel ed checks, or t o t he
15 Amer i can Expr ess st at ement t hat pai d t hem.
16 MR. KWOK: Your Honor , at t hi s t i me t he gover nment
17 woul d l i ke t o r ead i nt o t he r ecor d anot her st i pul at i on mar ked
18 f or i dent i f i cat i on as Gover nment Exhi bi t 901.
19 THE COURT: Yes.
20 MR. KWOK: Uni t ed St at es of Amer i ca v. Dani el B.
21 Kar r on, def endant , S1 07 Cr i m. 541.
22 " I t i s her eby st i pul at ed and agr eed by and among t he
23 Uni t ed St at es of Amer i ca, by Mi chael J . Gar ci a, t he Uni t ed
24 St at es at t or ney f or t he Sout her n Di st r i ct of New Yor k, St eve
25 Kwok and Chr i st i an Ever del l , assi st ant Uni t ed St at es at t or neys,
( 212) 805- 0300
557
1 of counsel , and def endant Dani el B. Kar r on, by and wi t h t he
2 consent of hi s at t or ney, Ronal d Rubi nst ei n, Esq. t hat :
3 " 1. The document mar ked f or i dent i f i cat i on as
4 Gover nment Exhi bi t 120 i s an i nvent or y of i t ems sei zed on or
5 about J une 26, 2007 f r om300 East 33r d St r eet , Apar t ment 4N,
6 New Yor k, New Yor k, pur suant t o a sei zur e war r ant i ssued by t he
7 Honor abl e Dougl as F. Eat on, Uni t ed St at es magi st r at e j udge of
8 t he Sout her n Di st r i ct of New Yor k.
9 " 2. The i t emmar ked f or i dent i f i cat i on as Gover nment
10 Exhi bi t 112 cor r esponds t o i t em79, GPS syst em, i dent i f i ed i n
13 Exhi bi t 122 cor r esponds t o i t em20, Sony Cyber shot camer a
14 DSC- F707, i dent i f i ed i n Gover nment Exhi bi t 120.
16 Exhi bi t 123 cor r esponds t o i t em23, I nf ocus LCD pr oj ect or wi t h
17 mount , i dent i f i ed i n Gover nment Exhi bi t 120.
19 Exhi bi t 124 cor r esponds t o i t em18, pr oj ect or scr een,
20 i dent i f i ed i n Gover nment Exhi bi t 120.
22 Exhi bi t 125 cor r esponds t o i t em75, shoe r ack, i dent i f i ed i n
25 Exhi bi t 126 cor r esponds t o i t em37, Ki t chen Cl assi cs bl ender by
( 212) 805- 0300
558
1 War i ng, i dent i f i ed i n Gover nment Exhi bi t 120.
3 Exhi bi t 127 cor r esponds t o i t em46, Lar ge STABI LA bubbl e l evel ,
6 Exhi bi t 128 cor r esponds t o i t em36, Dust Bust er , i dent i f i ed i n
9 Exhi bi t 129 cor r esponds t o i t em82, f ol di ng l adder , i dent i f i ed
10 i n Gover nment Exhi bi t 120.
12 Exhi bi t 130 cor r esponds t o i t em41, Por t er cabl e r echar geabl e
13 t ool set , i dent i f i ed i n Gover nment Exhi bi t 120.
15 Exhi bi t 131 cor r esponds t o i t ems 38 and 39, Por t er cabl e Ti ger
16 Saw qui ckchar ge and t wo bat t er i es and char ger f or i t em38,
18 " 13. The i t ems mar ked f or i dent i f i cat i on as
19 Gover nment Exhi bi t 132 cor r espond t o i t ems 42 and 74, set of
20 t hr ee r echar geabl e f l ashl i ght s wi t h char ger s, and set of t wo
21 r echar geabl e f l ashl i ght s wi t h char ger s, i dent i f i ed i n
23 " I t i s f ur t her st i pul at ed and agr eed t hat Gover nment
24 Exhi bi t s 120 and 121, 122, 123, 124, 125, 126, 127, 128, 129,
25 130, 131, 132 may be r ecei ved i n evi dence as Gover nment ' s
( 212) 805- 0300
559
1 Exhi bi t s at t r i al . "
2 Si gned and dat ed, si gned on behal f of t he Uni t ed
3 St at es by St eve Kwok, and on behal f of Dani el B. Kar r on by
4 Ronal d Rubi nst ei n, Esqui r e.
5 MR. RUBI NSTEI N: What was t hat exhi bi t , si r ?
6 MR. KWOK: I t ' s mar ked f or i dent i f i cat i on as
8 THE COURT: That ' s t he st i pul at i on number ?
10 THE COURT: Wel l , I wi l l have t o have t he st i pul at i on,
11 a copy of t he st i pul at i on, t o r ead of f t he exhi bi t s.
12 Oh, I see i t .
13 Al l r i ght . Exhi bi t s 120, 121, 122, 123, 124, 125,
14 126, 127, 128, 129, 130, 131 and 132 ar e r ecei ved i n evi dence.
15 And Exhi bi t 901 i s r ecei ved i n evi dence.
16 ( Gover nment ' s Exhi bi t s 120, 121, 122, 123, 124 and 125
17 r ecei ved i n evi dence)
18 ( Gover nment ' s Exhi bi t s 126, 127, 128, 129, 130, 131
19 and 132 r ecei ved i n evi dence)
21 MR. KWOK: Your Honor , may we publ i sh t hese i t ems t o
22 t he j ur y?
24 MR. KWOK: Your Honor , may I go t hr ough t he i t ems one
25 by one, j ust r ead of f t he exhi bi t number ?
( 212) 805- 0300
560
2 MR. KWOK: Gover nment Exhi bi t 120, Gover nment Exhi bi t
3 122.
4 MR. RUBI NSTEI N: Can I see t hat when you hol d i t up,
5 pl ease, Mr . Kwok?
6 MR. KWOK: Gover nment Exhi bi t 123. Gover nment Exhi bi t
7 124 i s t he scr een on t he f l oor . Gover nment Exhi bi t 125.
8 Gover nment Exhi bi t 126. Gover nment Exhi bi t 127. Gover nment
9 Exhi bi t 128. Gover nment Exhi bi t 129. Gover nment Exhi bi t 130.
10 MR. RUBI NSTEI N: Can I see t hat , pl ease?
11 MR. KWOK: Gover nment Exhi bi t 131 and Gover nment
12 Exhi bi t 132.
13 BY MR. KWOK:
14 Q. Ms. Ri l ey, di d you r evi ew addi t i onal i nvoi ces i n t he cour se
15 of your anal ysi s?
16 A. Yes.
17 Q. I amshowi ng you a document al r eady i n evi dence as
18 Gover nment Exhi bi t 120A. Do you r ecogni ze what ' s al r eady i n
19 evi dence as Gover nment Exhi bi t 120A, Ms. Ri l ey?
20 A. Yes, i t ' s an i nvoi ce f or Si l i con Ci t y.
21 Q. How ar e you abl e t o r ecogni ze i t ?
22 A. The company name i s at t he t op, and I have i ni t i al ed at t he
23 bot t omt hat I have seen i t .
24 Q. Now l et ' s st ar t wi t h t he f i r st page. What i s t he i t em
25 shown on t he f i r st page of t hat i nvoi ce?
( 212) 805- 0300
561
1 A. A t en f oot scr een f or $2, 315. 50.
2 Q. And what i s t he t ot al amount of t hat i nvoi ce?
3 A. $2, 583. 05.
4 Q. And what i s at t he bot t ompor t i on of t hat page?
5 A. At t he bot t om?
6 Q. That ' s cor r ect .
7 A. I t ' s Comput er Ai ded Sur ger y, NI ST ATP DMT Pr ogr amcheck
8 number 10220 pai d i n t he amount of $2, 583. 05.
9 Q. And what i s t he check number agai n f or t hat check?
10 A. 10220.
11 Q. Ms. Ri l ey, I amshowi ng you a page f r omGover nment Exhi bi t
12 81.
13 THE COURT: What account was t hat on?
14 MR. KWOK: Sor r y, your Honor .
15 THE COURT: 10220, what account i s i t dr awn on?
16 THE WI TNESS: I t ' s shown on t he bot t omof t he page of
17 t he i nvoi ce.
18 THE COURT: What account was i t dr awn on?
19 THE WI TNESS: Fr omt he Comput er Ai ded Sur ger y NI ST ATP
20 DMT Pr ogr amaccount .
21 Q. I amshowi ng you a page f r omGover nment Exhi bi t 81. I t ' s
22 al r eady i n evi dence and i s mar ked as page 23 at t he bot t om
23 r i ght - hand cor ner of t he j ur y bi nder s. I f we coul d put t hat up
24 on t he scr een, page 23 of t he Chase st at ement s.
25 THE COURT: I ' msor r y. I l ost t r ack. What ' s t he
( 212) 805- 0300
562
1 exhi bi t number ?
2 MR. KWOK: I t ' s Gover nment Exhi bi t 81, your Honor .
4 MR. KWOK: And t he bot t omi s page 23 of t he j ur y
5 bi nder s.
6 Q. Do you have t hat page, Ms. Ri l ey?
7 A. Yes.
8 Q. Can you show us wher e check 10220 appear s on t hat page?
9 A. On t he bank st at ement i t appear s her e dat ed 6/ 07/ 2002 and
10 i t ' s i n t he amount of $2, 583. 05.
11 Q. Now st ayi ng on t he same page, f ocusi ng your at t ent i on t o
12 t he upper r i ght - hand cor ner por t i on of t he page, under neat h
13 pr i mar y account number , what does t hat say?
14 A. Comput er Ai ded Sur ger y I nc. , NI ST ATP DMT pr ogr am.
15 Q. Now l et ' s go back t o Gover nment Exhi bi t 120A, t he second
16 page. What ar e t he i t ems shown on t hat i nvoi ce?
17 A. A pr oj ect or and a l amp.
18 Q. And how much f or ei t her of t hose i t ems?
19 A. For $3, 482. 72.
20 MR. RUBI NSTEI N: I di dn' t hear .
21 A. 3, 482. 72.
22 THE COURT: Whi ch exhi bi t i s on t he boar d?
23 MR. KWOK: Exhi bi t 120A i s on t he boar d, your Honor ,
24 page 2.
25 Q. What i s t he shi ppi ng cost ?
( 212) 805- 0300
563
1 A. $35.
2 Q. And what i s t he amount mi nus t he shi ppi ng cost ?
3 A. The t ot al amount i s $3, 482. 72 wi t hout t he shi ppi ng cost .
4 Q. And l et ' s l ook at t he bot t ompor t i on of t he same page. I
5 amst i l l st ayi ng wi t h Gover nment Exhi bi t 120A, page 2. What i s
6 r ef l ect ed on t he bot t ompor t i on of t hat page?
7 A. OK. The f i r st Comput er Ai ded Sur ger y, I nc. name, check
8 number 10127, of $35 pays t he shi ppi ng, t he $35 shi ppi ng. And
9 t he next check number 10114 f or $3, 482. 72 on 3/ 29/ 2002 pays f or
10 t he pr oj ect or and t he l amp.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
564
1 Q. And can you r ead of f t he check number s once agai n?
2 A. 10114 and 10127.
3 Q. Now, l et ' s go back t o gover nment exhi bi t 81 now, whi ch i s
4 t he Chase Bank account st at ement s. Di r ect i ng your at t ent i on t o
5 page 19 of t he j ur y bi nder s, do you have t hat check?
6 A. Yes, on t he bank st at ement . On check number 10114 dat ed
7 4/ 11, f or $3, 482. 72.
8 Q. Now about f or check number 10127?
9 A. 10127 i s f or $35, and i t i s al so on 4/ 11.
10 Q. Let ' s zoomout on t hat page. And once agai n di r ect i ng your
11 at t ent i on t o t he upper r i ght - hand cor ner of t he page, what does
12 t hat say?
13 A. I t ' s f or t he checki ng account Comput er Ai ded Sur ger y
14 I ncor por at ed, NI ST ATP DMT pr ogr amaccount .
15 Q. Do you know what NI ST ATP DMT st ands f or ?
16 A. Nat i onal I nst i t ut e of St andar ds and Technol ogy, Advanced
17 Technol ogy Pr ogr am, Di gi t al Mor se Theor y.
18 MR. RUBI NSTEI N: J udge, I can' t hear her .
19 A. I ' msor r y.
20 MR. RUBI NSTEI N: I don' t know i f anybody el se i s
21 havi ng a pr obl em, but she dr ops her voi ce.
22 THE COURT: J ust - -
24 THE COURT: Don' t be shy, j ust speak up.
25 THE WI TNESS: Nat i onal I nst i t ut e of St andar ds and
( 212) 805- 0300
565
1 Technol ogy, and Advanced Technol ogy Pr ogr am, Di gi t al Mor se
2 Theor y.
3 Q. Thank you, Ms. Ri l ey. I f you coul d keep your voi ce up.
4 Let ' s go back t o t he i nvoi ces, gover nment Exhi bi t
5 120A, page t hr ee. Can we zoomi n on t he t op of t hat page.
6 What i t emi s r ef l ect ed on t hi s i nvoi ce?
7 A. A Gar mi n St r eet Pi l ot , a GPS.
8 Q. How much i s t hat ?
9 A. For $979. 99.
10 Q. How about i ncl udi ng shi ppi ng and t axes?
11 A. $25 shi ppi ng, i t ' s $1, 004. 99.
12 Q. And what appear s on t he bot t omof t hat page? Let ' s zoomi t
13 back out .
14 A. That , t hat i t i t was pai d wi t h - - f r omt he Comput er Ai ded
15 Sur ger y NI ST ATP DMT pr ogr amaccount , check number 10598 f or
16 1, 004. 99 on 11/ 11, 2002.
17 Q. Let ' s go back now t o gover nment exhi bi t 81, whi ch i s agai n
18 t he Chase Bank st at ement s f or t he CASI account , page 25 of t he
19 j ur y bi nder s.
20 THE COURT: I don' t - - page 25 i n t he j ur y bi nder ?
22 THE COURT: What ' s t he exhi bi t number ?
23 MR. KWOK: Exhi bi t number 81, your Honor .
24 THE COURT: And what page of 81?
25 MR. KWOK: I t ' s page 25 of t he j ur y bi nder s on t he
( 212) 805- 0300
566
1 bot t omof t he page.
2 THE COURT: Page 25 of t hat exhi bi t ?
5 Q. Do you see t hat check on t hi s page, Ms. Ri l ey?
6 A. Yes. Check 10598 f or on 11/ 25 f or $1, 004. 99.
7 Q. Now, l et ' s go back t o t he i nvoi ce gover nment , Exhi bi t 120A,
8 t he l ast page. What i t ems ar e shown on t hi s i nvoi ce,
9 Ms. Ri l ey?
10 A. Okay. Thi s i nvoi ce t o Dat avi si on has a di gi t al camer a wi t h
11 accessor i es.
12 Q. And how much al t oget her f or t hose i t ems?
13 A. $1, 519. 95
14 Q. And whose handwr i t i ng i s t hat on t he bot t omof t he page, i f
15 we coul d show t hat ?
16 A. Okay. I t ' s my handwr i t i ng. I t says HBR. I t ' s sayi ng t hat
17 t he Amer i can Expr ess t r ansact i on was on 9/ 20 of ' 02.
18 Q. And how much i s t hat t r ansact i on?
19 A. Amer i can Expr ess i s goi ng t o be - - $1, 519. 95.
20 Q. Okay. Now di r ect i ng your at t ent i on now t o gover nment
21 exhi bi t 90, 90, l ooki ng at t he st at ement , t he cl osi ng dat e?
22 THE COURT: Hol d on a second.
23 MR. KWOK: Gover nment exhi bi t 90, your Honor ?
24 THE COURT: I have t o swi t ch books her e. Al l r i ght
25 exhi bi t 90. What page?
( 212) 805- 0300
567
1 MR. KWOK: I ' mshowi ng you - - what page i s t hat , ?
2 I t ' s page f i ve of ei ght , exhi bi t 90.
3 THE DEPUTY CLERK: Fi ve of ei ght ?
4 MR. KWOK: Exhi bi t 90. I ' ml ooki ng at t he st at ement
5 wi t h cl osi ng dat e of Oct ober 8t h, 2002, page f i ve of ei ght .
7 Q. Okay. Ms. Ri l ey, di r ect i ng your at t ent i on t o Sept ember
8 20t h, 2002.
9 A. Ther e i s an Amer i can expr ess t r ansact i on t o Dat avi si on f or
10 $1, 519. 95.
11 Q. I s t hat t he same amount or di f f er ent f r omt he amount we
12 l ooked at i n gover nment exhi bi t 120A, t he i nvoi ce j ust now?
13 A. I t ' s t he same amount .
14 Q. And st i l l l ooki ng at t hat page, st i l l gover nment exhi bi t
15 90 - -
16 THE COURT: Let me j ust see - - I ' msor r y, I mi ssed her
17 expl anat i on.
18 Q. Ms. Ri l ey, can you - -
19 THE COURT: I have t he wr ong page up now. Let ' s see
20 wher e we ar e. Thi s i s what page? I have f i ve of ei ght . What
21 page shoul d I be on?
22 MR. KWOK: I t ' s page f i ve of ei ght f or t he st at ement
23 wi t h cl osi ng dat e Oct ober 8, 2002.
24 THE COURT: I don' t have t hat . That ' s not - -
25 MR. KWOK: We coul d hand up an ext r a copy.
( 212) 805- 0300
568
1 THE COURT: Ther e i s mor e t han 1 f i ve of ei ght . Al l
2 r i ght , okay. Go ahead.
4 Q. Di r ect i ng your at t ent i on agai n, Ms. Ri l ey, t o Sept ember
5 20t h, 2002, what does t hat show?
6 A. The Amer i can Expr ess shows t he t r ansact i on payment t o
7 Dat avi si on of $1, 519. 95.
8 Q. And how does t hat amount compar e t o t he amount we j ust
9 l ooked at i n gover nment exhi bi t 120A?
10 A. I t ' s t he same amount t hat ' s on t he i nvoi ce t o Dat avi si on.
11 Q. And st i l l st ayi ng wi t h t hat page, gover nment exhi bi t 90,
12 page f i ve of ei ght , what i s t he sect i on headi ng j ust above t hat
13 l i st of t r ansact i ons?
14 A. Oh, Expo t r ansact i ons f or Dr . D. B. Kar r on.
15 MR. KWOK: One moment , your Honor .
16 THE COURT: Thi s i s an Amer i can Expr ess char ge?
18 THE COURT: We don' t have how i t ' s pai d f or yet , do
19 we?
20 MR. KWOK: I ' msor r y?
21 THE WI TNESS: Thi s i s - -
22 THE COURT: We don' t know how t he cr edi t , t he Amer i can
23 Expr ess car d cr edi t account was pai d f or , do we?
24 MR. KWOK: Okay.
25 Q. Ms. Ri l ey, can you show us how t hat out st andi ng cr edi t car d
( 212) 805- 0300
569
1 bal ance i s pai d f or .
2 A. Okay, l et ' s see. Okay, i t shoul d show up i n t he - - next
3 mont h' s payment s.
4 Q. Can I di r ect your at t ent i on t o gover nment exhi bi t 110, t he
5 dat a base?
6 A. Yes.
7 ( Pause)
8 Q. Di r ect i ng your at t ent i on t o page, gover nment exhi bi t 110,
9 page t hr ee of 37. What i nf or mat i on i s r ef l ect ed f or Oct ober
10 18t h, 2002?
11 A. That an Amer i can expr ess el ect r oni c r emi t t ance $5, 736. 51.
12 THE COURT: Fr omwhat account ?
13 THE WI TNESS: Fr omt he CASI busi ness account , or t he
14 busi ness account s f r omt he CASI bank.
15 THE COURT: CASI busi ness, what account ? You sai d
16 t her e wer e mor e t han one, di dn' t you?
17 THE WI TNESS: Yes. I t ' s f r omt he - - t hi s r epor t
18 doesn' t i dent i f y i t .
20 THE WI TNESS: Thi s r epor t doesn' t i dent i f y t he
21 speci f i c account , but i n my - - I have a not e i n my dat a base, I
22 know whi ch one i t ' s f r om. I t ' s f r omt he - - i t ' s f r omone of
23 t he CASI busi ness account s.
24 Q. And how i s t hi s account f unded, Ms. Ri l ey?
25 A. Fr omt he NI ST deposi t s.
( 212) 805- 0300
570
1 Q. Does i t have any sour ce of f undi ng f r omanywher e el se?
2 A. J ust a smal l - - a smal l a mi scel l aneous, smal l amount f r om
3 somewher e el se.
4 MR. KWOK: No f ur t her quest i ons, your Honor .
6 MR. RUBI NSTEI N: Good t i me t o t ake a l i t t l e r ecess.
7 THE COURT: Let ' s t ake t he mor ni ng br eak and come
8 back.
9 ( Recess)
10 THE COURT: Al l r i ght , l et ' s br i ng i n t he j ur y. I s
11 Dr . Kar r on her e? You want t o cal l Dr . Kar r on? No one' s goi ng
12 t o go out af t er hi m?
13 MR. RUBI NSTEI N: Aye aye, si r .
14 THE COURT: You got an assi st ant .
15 MR. RUBI NSTEI N: He' s doi ng somet hi ng el se, J udge.
16 THE COURT: He has no aut hor i t y.
17 MR. RUBI NSTEI N: He' s not admi t t ed t o t he Ci r cui t ,
18 J udge.
22
23
24
25
( 212) 805- 0300
571
865zkar 3
1 THE COURT: Mr . Rubi nst ei n, cr oss- exami nat i on.
5 Q. Good mor ni ng, Ms. Ri l ey.
7 Q. Now, you ar e wor ki ng f or t he OI G' s of f i ce?
8 A. Yes, si r .
9 Q. And how l ong have you - - ar e you wor ki ng t her e?
10 A. Si nce J une of ' 97.
11 Q. And pr i or t o t hat , you wer e an I nt er nal Revenue Agent ?
12 A. Yes, I RS.
13 Q. I RS?
14 A. Yes.
15 Q. And how l ong wer e you wi t h I RS?
16 A. Fr om' 86 t o ' 97.
17 Q. Now, di d you do f i el d audi t s or - -
18 A. Yes.
19 Q. - - wor k i nsi de?
20 A. Fi el d audi t s.
21 Q. And when di d you meet peopl e f r omt he f eder al gover nment on
22 t hi s case f or t he f i r st t i me, I mean peopl e at t he pr osecut i on
23 t abl e her e, f i r st t i me?
24 THE COURT: Ar e you r ef er r i ng t o - - one per son' s f r om
25 t he agency, Mr - - ar e you r ef er r i ng t o her ?
( 212) 805- 0300
572
865zkar 3 RI LEY - CROSS
1 MR. RUBI NSTEI N: Wel l , l et ' s st ar t wi t h her .
2 Q. Do you know t he l ady seat ed i n t he mi ddl e?
3 A. Yes.
4 Q. And who i s she?
5 A. Rachel Ondr i k.
6 Q. And t he gent l eman at t he end?
7 A. Ki r k Yamat ani .
8 Q. And on t hi s case i n deal i ng wi t h t hi s ATP gr ant t o CASI ,
9 when di d you meet ei t her or bot h of t hemf or t he f i r st t i me?
10 A. I don' t - - I don' t - - I ' mnot sur e.
11 Q. Was i t i n t he year 2003?
12 A. I ' mnot sur e i f i t was 2003, 2004.
13 Q. Was i t i n 2008?
14 THE COURT: She sai d she was not sur e whet her i t was
15 2003 or 2004.
16 Q. Wel l , do you have anyt hi ng t hat coul d r ef r esh your
17 r ecol l ect i on as t o when you met t hese peopl e f or t he f i r st
18 t i me?
19 A. For t hi s case, I don' t know - - I ' mnot sur e - - I ' mnot sur e
20 when t hat woul d be.
21 Q. Al l r i ght . When i s t he - - bef or e you came her e t o
22 t est i f y - - you' r e f r omanot her st at e, cor r ect ?
23 A. Yeah, I ' mf r omAt l ant a, At l ant a r egi on.
24 Q. Okay, f r omt he At l ant a r egi on. When di d you come her e t o
25 t est i f y on t hi s case?
( 212) 805- 0300
573
1 A. For t hi s?
2 Q. Yeah.
3 A. I came - - you mean f or t hi s week f or t he t r i al or - -
4 Q. No. When di d you come f r omAt l ant a, Geor gi a, r i ght ;
5 At l ant a, Geor gi a, r i ght ?
6 A. For t he t r i al , I came Monday.
7 Q. Bef or e you came Monday, wer e you her e i n pr epar at i on f or
8 your t est i mony on t hi s t r i al ?
9 A. Yes.
10 Q. And when di d you come f or t he f i r st t i me f or your
11 pr epar at i on f or t hi s t r i al ?
12 A. That I ' d have t o l ook back. I ' mnot sur e.
13 Q. Wel l , was i t a mont h ago, t wo weeks ago?
14 A. For pr epar at i on f or t he t r i al , i t woul d' ve pr obabl y been
15 maybe t he end of Apr i l .
16 Q. And you st ayed; you di dn' t commut e back and f or t h t o
17 At l ant a, Geor gi a, cor r ect ? Di d you commut e back and f or t h
18 whi l e you wer e pr epar i ng f or t hi s t r i al ?
19 A. Yes.
20 Q. And how l ong di d you st ay when you came somet i me i n Apr i l ?
21 A. For a day.
22 Q. And t hen you woul d go back?
23 A. Yes.
24 Q. And t hen you woul d come back agai n?
25 A. Yes.
( 212) 805- 0300
574
1 Q. For anot her day?
2 A. Yes.
3 Q. About how many t r i ps, day t r i ps di d you make, ma' am?
4 A. I t hi nk maybe t hr ee.
5 Q. And di d you have t el ephone cont act wi t h ei t her t he agent
6 t hat you poi nt ed - - t he agent s you poi nt ed out or anybody i n
7 t he U. S. At t or ney' s Of f i ce?
8 THE COURT: When?
9 Q. Bet ween Apr i l when you st ar t ed comi ng her e?
10 A. Yes.
11 Q. And how of t en woul d you have cont act ?
12 A. Wel l , Ki r k and Rachel wor k i n t he same of f i ce I do.
13 Q. Okay. So you woul d see t hemi n At l ant a?
14 A. I f we al l happened t o be i n t hat day.
15 Q. Wel l , di d you have an i nt er vi ew wi t h t hem, wi t h Ki r k and
16 Rachel on Apr i l 22nd, 2008?
17 A. I coul d have. I ' m- -
18 Q. Wel l , woul d meet wi t h you i n At l ant a, Geor gi a or woul d t hey
19 meet wi t h you her e i n New Yor k?
20 A. For t r i al pr ep?
21 Q. For t r i al pr ep.
22 A. I t woul d - - i t - -
23 THE COURT: What was your answer ?
24 A. For - - how do we def i ne t r i al pr ep? I mean, I can meet at
25 ei t her - - I mean f or t r i al pr ep, I woul d come up and meet wi t h
( 212) 805- 0300
575
1 St eve.
2 Q. Mr . Kwok, t he Assi st ant U. S. At t or ney, cor r ect ?
3 A. Yes.
4 Q. When you met wi t h Rachel di d you - -
5 MR. RUBI NSTEI N: Let me j ust appr oach t he Gover nment
6 f or a moment , your Honor .
7 Q. When di d you meet Mr . Kwok f or t he f i r st t i me?
8 A. I ' mnot sur e.
9 Q. Was i t pr i or t o 2008?
10 A. Pr i or t o 2000 - - I ' mnot sur e when I met hi m.
11 Q. Now, you, as member of t he Of f i ce of t he I nspect or Gener al ,
12 you' r e i n t he ci vi l por t i on of t hat of f i ce, cor r ect ?
13 A. I ' mi n t he audi t por t i on of t hat of f i ce.
14 Q. And i s t hat ci vi l or cr i mi nal end?
15 A. Nei t her . I t ' s - - I do - - I nor mal l y do audi t s.
16 Q. And t he t wo agent s her e ar e?
17 A. I nvest i gat or s.
18 Q. I nvest i gat or s. I n t he cr i mi nal di vi si on?
19 A. Yes - - wel l , what ever , ci vi l or cr i mi nal .
20 THE COURT: I s t her e a cr i mi nal di vi si on and ci vi l
21 di vi si on?
22 THE WI TNESS: No, no. Ther e' s onl y - - t her e' s - - t hey
23 handl e - - I t hi nk - - I under st and t hey handl e bot h.
24 Q. You under st and t hey' r e cal l ed speci al agent s, cor r ect ?
25 A. Yes.
( 212) 805- 0300
576
1 Q. So you under st and t hat t hey have t he power t o ar r est
2 peopl e, cor r ect ?
3 A. Yes.
4 Q. Now, I asked you yest er day on t he voi r di r e i f you had any
5 document s t hat you used i n pr epar i ng your r epor t i n J ul y of
6 2003, t he f i r st r epor t t hat you pr epar ed her e?
7 A. Yes.
8 Q. And di d you have any document s?
9 A. Yes.
10 Q. Di d you r evi ew t hose document s bet ween yest er day and t oday?
11 A. Yes.
12 Q. Do you have t hemwi t h you?
13 A. Um, I - - my comput er . I don' t have a pr i nt ed copy of t hem.
14 Q. Wel l , di d you pr i nt a copy out i n 2003, i n J une or J ul y of ,
15 or August of 2003, whi l e you wer e pr epar i ng your f i r st audi t ?
16 A. I had pr i nt ed copi es of t he document s. Yes, I got pr i nt ed
17 copi es of t he document s somewher e.
18 THE COURT: On t he comput er , t he comput er document s;
19 i s t hat what you' r e sayi ng? Or ar e you t al ki ng about t he
20 document s you - - any document s you i nspect ed at t he of f i ces of
21 CASI ?
22 THE WI TNESS: I ' ve got ei t her - - some of t he document s
23 I have ar e comput er document s and some of t he document s I have
24 have been pr i nt ed.
25 THE COURT: By?
( 212) 805- 0300
577
1 THE WI TNESS: By - - I don' t know i f i t was by me or by
2 CASI , I mean because i t was 2003.
3 THE COURT: Wer e t hey pr i nt ed by comput er - - out of
4 t he comput er ?
5 THE WI TNESS: They wer e pr i nt ed, and I had comput er
6 r ecor ds t hat wer e pr ovi ded by CASI , copi es of some comput er
7 r ecor ds and some of t hemwer e pr i nt ed and some of t hemwer e
8 not .
9 THE COURT: So some of t hemwer e pr i nt ed of f CASI ' s
10 comput er ?
11 THE WI TNESS: Possi bl y some.
12 THE COURT: Some wer e pr i nt ed of f your comput er ?
13 THE WI TNESS: Possi bl y, yes.
14 THE COURT: Wel l , not possi bl y.
16 THE COURT: Yes or no?
17 THE WI TNESS: Yes, yes. I t coul d be at t he - - i t
18 coul d be ei t her one. I mean - -
19 THE COURT: I ' m- - not possi bl y. Yes or no.
20 THE WI TNESS: Of f t he t op of my head, I don' t r emember
21 whi ch document s wer e pr i nt ed and gi ven t o me or whi ch document s
22 I got back t o At l ant a.
23 THE COURT: They wer e ei t her pr i nt ed - -
25 THE COURT: - - of f t he CASI ' s comput er - -
( 212) 805- 0300
578
2 THE COURT: Or of f your s?
3 THE WI TNESS: Or me.
5 MR. KWOK: Coul d we have a si debar , your Honor ?
6 THE COURT: No, you can not .
8 Q. Now, so you di d have what ' s cal l ed t he har d copi es of i t ems
9 t hat wer e on t he comput er , cor r ect ?
10 A. Some of - -
11 THE COURT: She' s answer ed t hat .
12 A. Yes.
13 Q. And wher e ar e t hose har d copi es t hat you obt ai ned i n t he
14 summer of 2003?
15 A. They' r e i n t he audi t f i l e.
16 Q. And wher e i s t he audi t f i l e?
17 A. Her e.
18 Q. Al l r i ght . And have you t ur ned t hat over t o t he
19 Pr osecut or ?
20 A. The audi t f i l e?
21 Q. Ri ght .
22 A. I pr ovi ded copi es of t he document s t hat we had f r omCASI t o
23 hi m.
24 Q. And i t ' s f ai r t o say you di d not have a gener al l edger ,
25 cor r ect ?
( 212) 805- 0300
579
1 A. I had what ever document s t hat CASI - - I guess i t depends
2 how you' r e def i ni ng gener al l edger t her e. The t hi ng t hat
3 t hat - -
4 Q. You' r e sayi ng - -
5 THE COURT: Let t er her f i ni sh her answer .
6 A. The number , t he number s t hat - - t he number t hat you' r e
7 r ef er r i ng t o came f r omt he books and r ecor ds pr ovi ded t o me by
8 CASI ' s r epr esent at i ve Fr ank Spr i ng, J oan Hayes, Bob Benedi ct .
9 Dr . Kar r on was awar e of t he document s t hat t hey pr ovi ded, and
10 t her e' s, t her e' s summar i es by budget cat egor y of expenses.
11 Those number s wer e t aken f r om, f r omt he - - I guess i t woul d be
12 t he l i ke t he pr of i t l oss st at ement .
13 Q. The summar i es?
14 A. Summar i es.
15 Q. Ri ght ?
16 A. Wel l , i t ' s - - t her e' s al so - - because we used di f f er ent
17 r ecor ds f or 2003, t hey may not have been pr i nt ed. They may
18 st i l l be on a di sk somewher e.
19 Q. You' r e a CPA, ar e you not , ma' am?
20 A. Yes.
21 Q. And you know what a gener al l edger i s, do you not ?
22 A. Yes.
23 Q. And t el l t he j ur y what a gener al l edger i s?
24 A. A gener al l edger i s t he l edger of account s and how t he
25 cost s ar e cat egor i zed by t he account i ng syst em.
( 212) 805- 0300
580
1 Q. Does a gener al l edger r ef l ect ever y t r ansact i on made by t he
2 or gani zat i on?
3 A. Yes, i t shoul d.
4 Q. I t shoul d?
5 THE COURT: Shoul d.
6 Q. And i f t her e ar e changes made or adj ust ment s, somet i mes
7 t her e ar e adj ust ment s because - -
8 A. Yes, t her e ar e adj ust ment s.
9 Q. - - somet hi ng i s mi ssed or some i ncome i s mi ssed, cor r ect ?
10 A. Yes.
11 Q. Wher e woul d t hose adj ust ment s be r ef l ect ed?
12 A. They woul d be r ef l ect ed i n t he gener al l edger , but t hey
13 shoul d al so be car r i ed f or war d t o t he pr of i t and l oss
14 st at ement s.
15 Q. Now, you never saw a gener al l edger her e, cor r ect ? What
16 you j ust descr i bed, di d you ever see t hat at any t i me f r omJ une
17 of 2003, t o t oday?
18 A. I ' ve got t en t he, what ever t he Qui ck Book r ecor ds t hat t hey
19 pr ovi ded t o me.
20 Q. You know t hat t hei r r ecor ds t hat t hey pr ovi ded t o you wer e
21 summar i es; you j ust t est i f i ed t o t hat , cor r ect ?
22 THE COURT: Obj ect i on.
23 THE WI TNESS: But i t ' s some of t he - -
24 THE COURT: One quest i on you' r e aski ng. That ' s a
25 doubl e quest i on. Ask your si ngl e quest i on, Mr . Rubi nst ei n, so
( 212) 805- 0300
581
1 i t ' s cl ear what she' s bei ng asked and what she' s answer i ng t o.
2 Q. I s i t a f act t hat what you wer e suppl i ed wer e summar y
3 char t s?
4 A. I was pr ovi ded summar i es, but I al so saw t he suppor t f or
5 t he summar i es.
6 Q. You made copi es of t hose suppor t f or t he summar y?
7 A. I don' t know t he - - I don' t r emember . I t hi nk t hat t her e
8 shoul d be somewher e, but I don' t r emember speci f i cal l y.
9 Q. Do you r ecal l - - you met wi t h a man named Mar k Spi t z,
10 cor r ect - - Mel Spi t z?
11 A. Mel Spi t z, yes.
12 Q. And he was i nt r oduced t o you as t he new audi t or f or CASI
13 LLC?
14 A. Yes.
15 Q. Cor r ect ? And you met hi msomet i me i n December of 2003,
16 r i ght ?
17 A. Yes.
18 THE COURT: I t hought we' r e t al ki ng about J une, J ul y
19 2003, Mr - -
20 MR. RUBI NSTEI N: We wer e.
21 THE COURT: So now we' r e movi ng t o December . Okay. I
22 j ust want - -
23 MR. RUBI NSTEI N: Two year s l at er .
24 THE COURT: Al l r i ght , okay. So she' s or i ent ed al l
25 r i ght .
( 212) 805- 0300
582
1 MR. RUBI NSTEI N: Wel l get her back t o J ul y, J udge.
2 We' l l get her back t o At l ant a t oo.
3 THE COURT: I hope we' r e f i ni shed wi t h J ul y.
4 Q. Di d Mr . Spi t z pr ovi de you wi t h t wo comput er di sks?
5 A. He pr ovi ded me wi t h new books and r ecor ds.
6 Q. Di d he pr ovi de you wi t h - -
7 A. I don' t r emember i f t her e wer e t wo di sks or not .
8 Q. Wel l , di d you l ook at what he had pr ovi ded you wi t h?
9 A. Yes, I di d.
10 Q. Di d t hey - - di d what Mr . Spi t z pr ovi ded you wi t h cont ai n a
11 gener al l edger ?
12 A. He pr ovi ded expenses by budget cat egor y as - - I don' t - - I
13 don' t r emember i f i t was necessar i l y - -
14 THE COURT: Was i t i n t he f or mof a pr oposed gener al
15 l edger or a gener al l edger of any sor t , or i s i t j ust pr oposed,
16 a summar y of - -
18 THE COURT: - - t he t ot al expense; whi ch was i t ?
19 THE WI TNESS: Yes, he pr ovi ded - - he pr ovi ded us a
20 gener al l edger and he pr ovi ded summar i es of expenses.
21 Q. And di d you ut i l i ze hi s document s, i n any way, i n cr eat i ng
22 t he f i nanci al r ecor ds t hat you r el i ed upon?
23 A. Yes.
24 Q. And we have bef or e us i n evi dence Exhi bi t 110 and 111. Ar e
25 you - - do you r ecal l what t hose ar e, ma' am?
( 212) 805- 0300
583
1 A. 110, okay. Yes.
2 Q. And when di d you cr eat e t hose exhi bi t s 110 and 111 t hat ' s
3 i n t he books t hat we al l have, t he j ur or s and what have you?
4 A. I n 2004 or - - yeah 2004, 2005.
5 Q. I sn' t i t a f act , ma' am, t hat you cr eat ed t hemi n
6 pr epar at i on f or t hi s t r i al ?
7 A. I cr eat ed t hemat t he r equest f r omt he r equest of
8 i nvest i gat i ons.
9 Q. Par don?
10 A. I cr eat ed t hemat t he r equest of i nvest i gat i ons.
11 THE COURT: Who i nvest i gat i on?
12 THE WI TNESS: Fr omRachel or Ki r k pr ovi ded me wi t h t he
13 r ecor ds I had subpoenaed.
15 THE WI TNESS: Fr omt he, f r omour i nvest i gat or s t hey
16 had subpoenaed t he checks, cor r obor at ed t hi s f r omt he banks,
17 t he subpoenaed checks.
18 Q. And, i n f act , you di d t hat i n May of 2008, about a week or
19 t wo bef or e - - a week bef or e t he t r i al st ar t ed, r i ght ?
20 A. No. These wer e cr eat ed - - t hi s, t he dat a base was cr eat ed
21 pr i or t o t hat . I was st i l l - - di d some anal ysi s on t he account
22 because i t had been cr eat ed.
23 THE COURT: When was t hi s r ecor d or i gi nal l y cr eat ed
24 t hat you' r e t al ki ng about her e i n t he comput er , 2004, 2003,
25 2005?
( 212) 805- 0300
584
1 THE WI TNESS: I t was cr eat ed - - i t was cr eat ed i n
2 t wo - - I ' mnot - - because - - I ' ve got a coupl e dat a bases. I t
3 was cr eat ed somet i me i n 2004, 2005. I woul d have t o l ook back
4 and see t he exact - - l ook at my t i me, l ook t o see t he exact
5 t i me i t was cr eat ed.
6 THE COURT: That ' s sat i sf act or y. Now go ahead.
7 Q. Now, di d you exami ne t he CASI , pr i or t o t hemr ecei vi ng you
8 or any member , t o your knowl edge, of t he Of f i ce of The
9 I nspect or Gener al - -
11 Q. - - exami ne CASI pr i or t o t hemr ecei vi ng t he act ual gr ant on
12 Oct ober 1st - -
14 Q. - - 2001?
15 THE COURT: Obj ect i on t o t he f or mof t he quest i on i s
16 sust ai ned. You' r e not aski ng f or her knowl edge, so - -
18 THE COURT: Pl ease.
19 Q. I s i t a - - does t he - -
20 MR. RUBI NSTEI N: Wel l , she i s an exper t , your Honor .
21 She was qual i f i ed as an exper t .
22 THE COURT: Not an exper t on t hat , not on when ot her
23 peopl e mi ght have done t hi ngs.
24 Q. Di d you exami ne, on behal f of NI ST, CASI pr i or t o t he
25 gr ant i ng, pr i or t o t hemr ecei vi ng t he gr ant ?
( 212) 805- 0300
585
1 THE COURT: Bef or e t hey r ecei ved t he gr ant , di d you
2 exami ne - - have anyt hi ng t o do wi t h CASI ?
3 THE WI TNESS: No, no.
4 THE COURT: Okay.
5 Q. I t ' s a f act t hat under - - you' r e gover ned by Ti t l e 15, CFR
6 14, cor r ect ?
7 A. For t he gr ant , yes.
8 Q. Yes?
9 A. Yes.
10 Q. And as par t of your r esponsi bi l i t y of t he Of f i ce of t he
11 At t or ney Gener al , t he pr i nci pal of f i cer of t he r eci pi ent of t he
12 gr ant i s eval uat ed f or f i nanci al r esponsi bi l i t y, cor r ect ?
14 THE COURT: By t he At t or ney Gener al ?
15 Q. No, by t he Of f i ce of t he I nspect or Gener al .
17 THE WI TNESS: They submi t - - yeah. They - -
19 THE WI TNESS: That doesn' t come t o me. That goes t o
20 anot her sect i on of t he or gani zat i on.
21 Q. I sn' t i t a f act t hat t he key of f i ci al s ar e exami ned as t o
22 t hei r f i nanci al r esponsi bi l i t y?
23 THE COURT: Do you know t hat ?
24 THE WI TNESS: They' r e - -
25 THE COURT: Do you have any knowl edge of t hat ?
( 212) 805- 0300
586
1 THE WI TNESS: They do a backgr ound check bef or e t hey
2 gi ve t he awar ds I t hi nk, yeah.
3 THE COURT: You t hi nk?
4 THE WI TNESS: Yeah, t hey have a sect i on f or NI ST
5 gr ant s f i l e, t hey have backgr ound i nf or mat i on, f i nanci al st uf f .
6 THE COURT: You' r e not i nvol ved i n t hat ?
7 THE WI TNESS: I ' mnot i nvol ved i n t hat .
9 Q. But you' r e f ami l i ar wi t h t he f act t hat under t hat sect i on,
10 t he quest i on of whet her or not OI G r evi ews t he appl i cant as t o
11 t hei r r esponsi bi l i t y and as t o t hei r honest y and t hei r
12 f i nanci al st abi l i t y - -
14 Q. - - i s t he of f i ci al s, cor r ect ?
16 THE COURT: Do you have any knowl edge - - obj ect i on - -
17 I t hi nk t hi s i s not t he r i ght wi t ness f or t hi s, Mr . Rubi nst ei n.
18 MR. RUBI NSTEI N: J udge, t hey want Dr . Kar r on t o know
19 ever y l i ne i n t hi s st at ut e.
20 THE COURT: I don' t want t o have an ar gument i n f r ont
21 of t he j ur y of t hi s sor t . I f you want t o r ai se i t , you can
22 r ai se i t at t he si de bar , but you can pr obabl y get a
23 st i pul at i on.
24 Q. Ar e you f ami l i ar wi t h Chapt er Ei ght of 15 CFR, 14?
25 A. What i s i t t al ki ng about ?
( 212) 805- 0300
587
1 THE COURT: I f you want t o put t he - - i f you want t o
2 put somet hi ng f r omt he Code of Feder al Regul at i ons i n, you can
3 put i t i nt o evi dence. Let ' s not wast e our t i me wi t h t hi s
4 wi t ness on t hi s subj ect .
5 MR. RUBI NSTEI N: I ' d l i ke t o mar k i t t hen f or
6 i dent i f i cat i on at t hi s t i me as def endant ' s AAA.
7 THE COURT: Show i t t o t he gover nment and - -
9 THE COURT: Gi ve i t t o t he Cl er k and I ' l l have i t
10 mar ked.
11 MR. RUBI NSTEI N: I mar ked i t , J udge.
13 MR. RUBI NSTEI N: I mar ked i t .
14 THE COURT: They Code of Feder al Regul at i ons,
15 par agr aph ei ght , 14, i s t hat cor r ect ?
16 MR. RUBI NSTEI N: Your Honor , i t ' s chapt er ei ght .
17 THE COURT: What have you mar ked i t as?
18 MR. RUBI NSTEI N: AAA.
19 THE COURT: Def endant ' s AAA?
20 MR. RUBI NSTEI N: Yes. I t ' s chapt er ei ght , r ef er r i ng
21 t o page f i ve, your Honor .
22 THE COURT: J ust chapt er ei ght , page f i ve?
23 MR. RUBI NSTEI N: And chapt er ni ne.
24 THE COURT: Not par agr aph 14.
25 MR. RUBI NSTEI N: Chapt er ni ne, page seven.
( 212) 805- 0300
588
1 THE COURT: I ' msor r y, I di dn' t hear t hat .
2 MR. RUBI NSTEI N: Chapt er ni ne, page seven.
3 THE COURT: Ei ght code of Feder al r egul at i ons, chapt er
4 ni ne, page seven; i s t hat cor r ect ?
6 THE COURT: We coul d do t hi s out si de t he pr esence of
7 t he j ur y.
10 Q. As par t of your r esponsi bi l i t y as a member of t he Of f i ce of
11 t he I nspect or Gener al , you' r e pr ovi ded wi t h al l of t hese 15 CFR
12 sect i ons, cor r ect ?
14 THE COURT: Obj ect i on sust ai ned. Now l et ' s get ahead
15 wi t h t hi s. I t doesn' t bear on t hi s wi t ness' t est i mony. Come
16 on.
17 MR. RUBI NSTEI N: J udge, t hey put on t he boar d - -
19 MR. RUBI NSTEI N: - - 15 CFR.
20 THE COURT: You coul d put up on t he boar d CFR t oo.
21 Al l you got t o do i s move i t i nt o evi dence.
22 MR. RUBI NSTEI N: I t ' s i n evi dence, J udge. Coul d you
23 put Exhi bi t 4 - -
24 THE COURT: What i s i n evi dence?
25 MR. RUBI NSTEI N: Exhi bi t 4, Gover nment ' s exhi bi t 4.
( 212) 805- 0300
589
1 THE COURT: Al l r i ght . I f i t ' s al r eady i n evi dence,
2 t hen why ar e we mar ki ng t hi s ot her t hi ng f or ?
3 MR. RUBI NSTEI N: Because i t ' s onl y r ef er enced i n
4 Exhi bi t 4. Thi s i t page 11, your Honor .
6 MR. RUBI NSTEI N: 7 or 11, l et me see.
7 THE COURT: Do you want t o have i t mar ked i n evi dence,
8 of f er i t i n evi dence.
9 MR. RUBI NSTEI N: Par don, J udge?
10 THE COURT: Look, we' r e i nt er r upt i ng t he
11 cr oss- exami nat i on her e. Let ' s get t hi s t hi ng movi ng. We' ve
12 had a hal f - hour of exami nat i on and we haven' t yet got t en t o
13 anyt hi ng about t hi s wi t ness' t est i mony. Let ' s get on.
15 Q. When wer e you f i r st cont act ed about t he audi t of t he - -
16 r evi ew what was al l owabl e f or CASI Cor por at i on, CASI , I nc. ?
17 A. End of Apr i l - - appr oxi mat el y May of 2003.
18 Q. And who not i f i ed you?
19 A. Our of f i ce got a r equest f r omNI ST gr ant s of f i ce t o do an
20 audi t , t o r evi ew t he f i nanci al st at us of CASI .
21 Q. And di d you - - and di d you speak t o a per son f r omNI ST,
22 per sonal l y?
23 A. I spoke t o Hope and t o B. J . , Hope Snowden, and who i s t he
24 gr ant s of f i cer , and B. J . Li de, who was t he pr ogr amof f i cer .
25 Q. And di d - -
( 212) 805- 0300
590
1 THE WI TNESS: I t hi nk J ane Or t hwei n, who i s al so a
2 pr ogr amof f i cer .
4 THE WI TNESS: And t o J ane Or t hwei n, who i s al so a
5 pr ogr amof f i cer .
6 THE COURT: Who? What ' s t he ot her name?
7 THE WI TNESS: B. J . Li de and J ane Or t hwei n, I t hi nk
8 i t ' s O- r - t - h- w- e- i - n.
9 THE COURT: And i s t her e a t hi r d per son?
10 THE WI TNESS: I coul d' ve t al ked t o one of Hope' s
11 super vi sor s, whi ch - -
13 THE WI TNESS: Mar i l yn.
14 Q. Di d you have a meet i ng wi t h t hese peopl e i n per son or over
15 t he t el ephone or what ?
16 A. I had a meet i ng wi t h t hemi n per son.
17 Q. Al l t hr ee of t hem?
18 A. Yes.
19 Q. And di d you subsequent l y - - who i s Wi l l i amF. Bedwel l ?
20 A. He was t he r egi onal I nspect or Gener al f or At l ant a at t he
21 t i me.
22 Q. And di d he assi gn you t o i nvest i gat e t he expenses of CASI ?
23 A. He woul d' ve pr ovi ded t he audi t assi gnment when t he audi t
24 st ar t ed i n May of 2003.
25 Q. And when di d t he audi t act ual l y st ar t ?
( 212) 805- 0300
591
1 A. Wel l , when I got t her e when, when our of f i ce deci ded t o
2 per f or mt he audi t , I cal l ed t o r equest a meet i ng wi t h Dr .
3 Kar r on, wi t h CASI r epr esent at i ves, and t hey wer e r edoi ng t he
4 books.
5 THE COURT: What ' s t he dat e? Al l we need i s t he dat e
6 when, t hat ' s al l , t hat ' s al l he asked.
7 THE WI TNESS: I don' t know - - okay. I don' t - - i n May
8 of 2003. I don' t know t he speci f i c dat e.
9 Q. Di d you have t hat - - i s t hat cal l ed an ent r ance conf er ence?
10 A. We had t he ent r ance conf er ence on J une 18t h when I ar r i ved
11 i n New Yor k.
12 Q. And who di d you meet wi t h?
13 A. Dr . Kar r on and Bob Hayes and J oan Benedi ct , and I don' t
14 r emember Fr ank Spr i ng was t her e or not .
15 Q. And t hat was at - - you met wi t h t hemat t he headquar t er s of
16 CASI ?
17 A. Yes.
18 Q. Cor r ect ? And CASI - - what or gani zat i on had r ecei ved t he
19 gr ant f r omNI ST, t he ATP gr ant f r omNI ST?
20 A. I t hi nk i t was Comput er Ai ded Sur ger y, I ncor por at ed.
21 Q. And you ascer t ai ned t hat Dr . Kar r on was t he pr i nci pal
22 of f i cer of t hat cor por at i on?
23 A. Yes.
24 Q. Wer e you awar e, when you began t he audi t , what t he of f i ci al
25 name of CASI was?
( 212) 805- 0300
592
1 A. I t was at one t i me CASI , Comput er Ai ded Sur ger y I nf or mat i cs
2 Cor por at i on, and so t hey pr ef er r ed t o be cal l ed CASI . So
3 t hat ' s nor mal l y t he name t hat I used f or t hem.
4 Q. Wer e t hey i ncor por at ed; was i t t hen as CASI , I nc?
5 A. Oh, I t hi nk i t coul d have been, yes. Maybe.
6 Q. Wel l , ar e you awar e whet her or not at any t i me t hey changed
7 t hei r name f r omCASI , I nc. t o CASI LLC?
8 A. Yes, t hey had changed t hei r name t o CASI LLC.
9 Q. Now, when you went t o t he l ocat i on at 300 East 33r d St r eet ,
10 apar t ment , i t was apar t ment 1N, cor r ect ?
11 A. I t hi nk t hat ' s t he addr ess.
12 Q. And you had made an appoi nt ment bef or e you got t her e?
13 A. Yes.
14 Q. And when you ar r i ved - - appr oxi mat el y, what t i me di d you
15 get t her e?
16 A. I don' t r emember i f t hat was a mor ni ng or eveni ng. I had
17 come over f r om- - I had t aken t he t r ai n f r omD. C, and I don' t
18 r emember i f I went - - i f i t was i n t he mor ni ng appoi nt ment or
19 eveni ng appoi nt ment or af t er noon appoi nt ment .
20 Q. And f or sur e J oan Hayes was t her e, cor r ect ?
21 A. Yes, I t hi nk J oan Hayes was t her e.
22 Q. Bob Benedi ct was t her e?
23 A. Yes.
24 Q. And Dr . Kar r on was t her e?
25 A. Yes.
( 212) 805- 0300
593
1 Q. Now, wer e t her e ot her peopl e pr esent when you ar r i ved
2 t her e?
3 A. Yes. I t hi nk pr obabl y J i mCox was t her e, and maybe Mat
4 Rot hman.
5 Q. And t hey wer e i dent i f i ed t o you as empl oyees of CASI ?
6 A. Yes.
7 Q. They wer e - - you wer e i nf or med t hey wer e wor ki ng on t he ATP
8 pr oj ect ?
9 A. Yes.
10 Q. And when di d you - - had you t al ked t o J oan Hayes pr i or t o
11 your vi si t on J une 18, 2001?
12 A. I don' t r emember speci f i cal l y i f I t al ked t o her . I coul d
13 have and, i n schedul i ng t he appoi nt ment , because t hey wer e
14 t r yi ng t o r edo t he books, and so we had r eschedul ed. So I ' m
15 not sur e who I - - i f I spoke di r ect l y wi t h Dr . Kar r on f or t hat
16 or i f I t al ked t o one of hi s r epr esent at i ves.
17 Q. And how l ong di d t hi s vi si t t ake, t hi s f i r st vi si t ?
18 A. I t st ar t ed I t hi nk pr obabl y on Wednesday of one week and
19 t hr ough Thur sday or Fr i day t he next week.
20 Q. Now t hi s - - what r oomdi d you meet t hese t hr ee peopl e i n,
21 Dr . Kar r on, Bob Benedi ct - -
22 A. At CASI ' s, at t he CASI , Dr . Kar r on' s apar t ment , CASI
23 of f i ce, t hat , t he f i r st meet i ng?
24 Q. Yes.
25 A. Okay. The f i r st meet i ng was t her e at t he busi ness.
( 212) 805- 0300
594
1 Q. At t he busi ness. And i t was i n t he busi ness sect i on of t he
2 apar t ment ?
3 A. I t was i n t he l i vi ng r oom, I guess t he l i vi ng r oomof t he
4 apar t ment , t he busi ness.
5 Q. You say l i vi ng r oom. Was t her e, wer e t her e couches i n
6 t her e?
7 A. No, t her e wer e comput er s i n t her e.
8 Q. Wer e t her e f ur ni t ur e t hat you woul d expect t o f i nd i n what
9 woul d commonl y be cal l ed a l i vi ng r oom?
10 A. No.
11 Q. And, appr oxi mat el y, how many comput er s wer e t her e?
12 A. I t hi nk t her e wer e f our .
13 Q. And how l ar ge wer e t hey?
14 A. They wer e, t hey wer e l ar ge. I mean, t hey - - I know a
15 coupl e of t hemhad t wo moni t or s. I don' t r emember i f al l f our
16 of t hemhad t wo moni t or s.
17 Q. And wer e t her e wor k ar eas f or peopl e t o wor k at t hat had
18 smal l er comput er s?
19 A. Ther e wer e - - t her e wer e - - I , I don' t r emember . Ther e
20 was, t her e wer e - - I don' t r emember t he si ze of al l t he
21 comput er s.
22 Q. But t her e was al so a bedr oomt her e, cor r ect ?
23 A. Yes.
24 Q. And - -
25 MR. KWOK: Obj ect i on, r el evance.
( 212) 805- 0300
595
1 THE COURT: I wi l l al l ow t he quest i on. I ' l l al l ow t he
2 quest i on. I s t her e a bedr oomi n t he apar t ment ?
3 THE WI TNESS: Oh, I ' msor r y. Yes.
4 Q. I ' mgoi ng t o show you what ' s bei ng mar ked as def endant ' s
5 BBB f or i dent i f i cat i on?
6 THE COURT: 3 B' s?
7 MR. RUBI NSTEI N: 3 B' s, yes, your Honor .
8 Q. And ask you i f you r ecogni ze what i s depi ct ed i n t hat
9 document ?
10 MR. KWOK: Your Honor , may we appr oach t o l ook at i t ?
11 THE COURT: Ther e ar e f our - - i t ' s mor e t han one
12 pi ct ur e.
14 THE COURT: Si x pi ct ur es.
15 THE WI TNESS: Yeah, i t ' s - - i t ' s t he CASI of f i ce
16 apar t ment s.
17 Q. Thank you.
18 THE COURT: Al l of i t , t he ent i r e apar t ment ?
19 THE WI TNESS: I t ' s t he sect i on t hat was known as t he
20 l i vi ng r oomof t he apar t ment , woul d have been t he l i vi ng r oom
21 sect i on of t he apar t ment .
22 THE COURT: Pi ct ur es of t he par t of t he l i vi ng r oom?
23 THE WI TNESS: Yeah, i t ' s t he - - i t ' s a smal l l i vi ng
24 r oom. I t has comput er desks ar ound i t .
25 THE COURT: Let ' s get on wi t h t hi s, Mr . Rubi nst ei n,
( 212) 805- 0300
596
1 i nst ead of - -
2 MR. RUBI NSTEI N: Yes, J udge.
3 THE COURT: Let ' s move i t on. We' ve got t o get t o t he
4 t est i mony and what she' s t est i f i ed about , now l et ' s move i t
5 al ong.
6 MR. RUBI NSTEI N: We of f er t hi s i n evi dence.
7 THE COURT: We' ve been her e al most 45 mi nut es on t hi s
9 MR. RUBI NSTEI N: The gover nment t ol d me t hey wer e
10 goi ng t o be 45 mi nut es l ong.
11 THE COURT: Let ' s move i t al ong.
12 MR. RUBI NSTEI N: I want t o of f er BBB i n evi dence.
14 THE COURT: No obj ect i on? BBB i s r ecei ved i n
15 evi dence.
16 ( Def endant ' s Exhi bi t BBB r ecei ved i n evi dence)
17 MR. RUBI NSTEI N: Put t hi s on t he El mo, pl ease.
18 THE COURT: I guess you have t o - - you have t o move i t
19 si deways t oo f or t he j ur y t o get any i dea. That ' s upsi de down.
20 Q. Now, you see t he scr een i n t he bot t omas you f ace t he
21 pi ct ur e on t he bot t omr i ght por t i on; you see what ' s depi ct ed
22 t her e?
23 A. Yes.
24 Q. Par don?
25 A. The scr een, yes.
( 212) 805- 0300
597
1 Q. And di d you see t hat scr een i n t he apar t ment ?
2 A. I don' t r ecal l i f I saw t he scr een or not . They di d a
3 pr esent at i on, but I was t hi nki ng i t was on t he moni t or ,
4 comput er moni t or s, but I don' t r ecal l i f I saw.
5 Q. And di d you see i n t he, i n 120A t hey pr esent ed an exhi bi t
6 t hat sor t of l ooked l i ke t hi s i t emover her e, a l amp wi t h a
7 pr oj ect i on; di d you see t hat ?
8 A. At t he apar t ment ?
9 Q. At t he apar t ment .
10 A. I don' t r ecal l i f I saw t hat at t he apar t ment .
11 THE COURT: Wel l , when you i dent i f i ed t hi s as Dr .
12 Kar r on' s apar t ment , does i t l ook l i ke t he apar t ment at t he t i me
13 t hat you vi ewed i t i n J ul y 2003; i s t hat a f ai r r epr esent at i on
14 of t he apar t ment and equi pment i n i t at t he t i me i n J ul y 2003?
15 THE WI TNESS: I t , i t had a - - i t had - - I don' t
16 r emember t he - - i f I saw t he scr een, but t he ot her st uf f i s
17 pr obabl y so.
19 THE WI TNESS: The ot her , t he r est of i t pr obabl y.
20 THE COURT: Not pr obabl y.
21 THE WI TNESS: Oh, yeah.
22 THE COURT: You know when t hi s pi ct ur e was t aken?
24 THE COURT: Al l r i ght . Wel l , does i t - -
( 212) 805- 0300
598
1 THE COURT: Ther ef or e, t hat ' s why I ' maski ng you t he
2 quest i on.
3 THE WI TNESS: Yes. I t l ooks - - yeah, but I was - -
4 THE COURT: Not t he apar t ment i t sel f , t he equi pment i n
5 i t .
6 THE WI TNESS: Um, yes, t hey had si mi l ar - - t hey woul d
7 have had - - except f or t he - - I don' t know about t he - - I don' t
8 r emember about t he scr een - - but i t had - - di d have comput er s
9 l i ke t hat and t hi ngs under t he deck and al l t he t hi ngs.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
599
8657KAR4 Ri l ey - cr oss
2 Q. And t her e was shel vi ng ar ound t he r oom?
3 A. Ther e was shel f i ng.
4 Q. And i t wasn' t f or kni ckknacks, r i ght ? I t was f or
5 comput er - r el at ed i t ems, cor r ect ?
6 THE COURT: That cal l s f or a concl usi on. Let ' s go
7 ahead.
8 Q. Wel l , you as t he audi t or , wer e you i nt er est ed i n
9 det er mi ni ng whet her or not gover nment money was spent on
10 comput er - r el at ed i t ems?
11 A. They had a budget f or equi pment .
12 Q. Now, wer e you at t he apar t ment when t he - - t he pr osecut or
13 r ead t o you a whol e l i st of i t ems t hat wer e sei zed. Wer e you
14 pr esent when t he i t ems wer e sei zed?
15 A. No.
16 Q. At t hat meet i ng i n J une of 2001 wi t h J oan Hayes and Bob
17 Benedi ct , who di d you under st and Bob Benedi ct was?
18 A. J une of - -
19 Q. J une of 2003 when you wer e conduct i ng your audi t .
20 A. He was t he pr oj ect manager .
21 Q. And whi l e you wer e i n t he - - whi l e you wer e at CASI , wer e
22 you pr ovi ded wi t h any document at i on?
23 MR. KWOK: Ti me f r ame, your Honor .
24 A. Document at i on f or what ?
25 MR. KWOK: Ti me f r ame.
( 212) 805- 0300
600
1 THE COURT: Ti me f r ame.
2 MR. RUBI NSTEI N: When she was at t he apar t ment .
3 THE COURT: Whi ch ar e you t al ki ng about ? J ul y?
4 MR. RUBI NSTEI N: I sai d J une, J udge.
5 THE COURT: Al l r i ght . I n J une.
6 MR. RUBI NSTEI N: Fi r st I sai d 2001 and t hen I sai d
7 2003.
8 THE COURT: I don' t want t o hear t hat . I want t o hear
9 her gi ve some t est i mony t hat ' s accur at e and st r ai ght .
10 THE WI TNESS: He sai d document s.
11 Q. Any f i nanci al st at ement s?
12 A. I was gi ven what ever t he Qui ck Book r ecor ds wer e t hat t hey
13 pr ovi ded t o me.
14 Q. Who i s t hey?
15 A. Pr obabl y J oan Hayes, Bob Benedi ct , Fr ank Spr i ng, Dr .
16 Kar r on. I don' t know who speci f i cal l y handed me t he
17 i nf or mat i on.
18 Q. Was t he i nf or mat i on r eady f or you, or di d t hey have t o
19 pr i nt i t out f r omone of t he comput er s?
20 A. They wer e st i l l i n t he pr ocess of r edoi ng t he second set of
21 books.
22 THE COURT: Di d t hey hand i t out t o you or not ?
23 THE WI TNESS: They gave me some of i t i n comput er and
24 some of i t i n har d copy.
25 Q. And wer e you shown t he syst emt hat was used by t he
( 212) 805- 0300
601
1 pr i nci pal - - by t he peopl e at CASI t o keep t hei r r ecor ds?
2 A. Yes.
3 Q. And i n f act ever y check was scanned i nt o t hi s syst em,
4 cor r ect ?
5 A. Yes, t hey scanned i n checks and i nvoi ces.
6 Q. And t he checks, i nvoi ces and backup, cor r ect ?
7 A. Yeah, t he i nvoi ces woul d be t he backup. They scanned i nt o
8 t he comput er and dest r oyed t he or i gi nal i nvoi ce.
9 Q. And i n your audi t of r evi ewi ng whenever a check was i ssued
10 and cashed was t her e an i nvoi ce t hat backed up t hat par t i cul ar
11 i t em?
12 A. I don' t r emember speci f i cal l y what i t l ooked l i ke, what
13 t hat r ecor d l ooked l i ke.
14 Q. I ' mnot aski ng you what t he r ecor d l ooked l i ke, ma' am.
15 A. You' r e aski ng me i f t her e was a check backi ng up t he
16 i nvoi ce at t ached t o each i nvoi ce.
17 Q. Ri ght .
18 A. I don' t r emember speci f i cal l y i n t he i nst ance of CASI i f
19 t hey had copi es of checks and copi es of i nvoi ces at t ached t o
20 each ot her . I t ' s possi bl e, but I don' t speci f i cal l y r ecol l ect
21 i f t hey di d or not .
22 Q. Wel l , i f t hey had an expense t hat t hey wr ot e a check f or
23 and t her e was no i nvoi ce as a backup, woul d you make a not e of
24 t hat as an audi t or ?
25 A. Yes.
( 212) 805- 0300
602
1 Q. And i n f act i n t hi s case you made no not es of mi ssi ng
2 i nvoi ces t o mat ch wi t h checks, cor r ect ?
3 A. Ri ght , I don' t t hi nk so, r i ght .
4 Q. Now - -
5 A. For t he sampl e r evi ewed.
6 Q. That was t he f i r st r evi ew, t he sampl e r evi ew, cor r ect ?
7 A. Bot h of t hem- - yes, t hey woul d have sampl e r evi ew.
8 Q. Di d you ask quest i ons of Dr . Kar r on?
9 A. Yes.
10 Q. And di d you ask hi mf or speci f i c i nf or mat i on?
11 A. Yes.
12 Q. And gi ve us an i l l ust r at i on of somet hi ng you asked Dr .
13 Kar r on f or .
14 THE COURT: I f you r emember .
15 A. Wel l , I know I asked hi mwhat t he empl oyees di d. That ki nd
16 of i nf or mat i on? I mean - -
17 Q. Di d he r espond t o you?
18 A. Yes.
19 Q. Di d he r espond t o any quest i on you asked hi m?
20 A. I t hi nk so.
21 Q. Di d he of f er t o l et you use t he - - excuse me one second - -
22 and di d t hey act ual l y show you on a comput er scr een document s
23 t hat had been st or ed i n t he comput er - -
24 A. Yes, yes.
25 Q. - - t o show t he expenses t hat wer e i ncur r ed and t he backup
( 212) 805- 0300
603
1 why i t was l egi t i mat e? Ri ght ?
2 A. They showed, document s - -
3 MR. KWOK: Obj ect i on t o f or m.
4 Q. Wel l , backup t o expl ai n what t he expense was f or .
5 THE COURT: Over r ul ed. Coul d I hear t he quest i on
6 back.
7 ( Recor d r ead)
8 THE COURT: I t doesn' t sound l i ke a compl et e answer .
9 THE WI TNESS: Ther e was an obj ect i on, so I di dn' t know
10 i f you - -
11 A. They showed document s. They showed copi es of i nvoi ces t hat
12 t hey had scanned i nt o t he comput er .
13 Q. Now, you used as a st ar t i ng poi nt - - di d you use as a
14 st ar t i ng poi nt f or your audi t what was t he schedul es of t he
15 most r ecent l y appr oved budget ?
16 A. Yes.
17 THE COURT: What you wer e t ol d was t he most r ecent l y
18 appr oved budget .
19 THE WI TNESS: Yes, what I was t ol d was t he most
20 r ecent l y appr oved budget . I t hi nk i t was amendment 2.
21 Q. And i n f act when you wer e i n t he apar t ment - - wi t hdr awn.
22 You became awar e dur i ng t he cour se of your audi t t hat
23 t her e wer e cer t ai n expenses at t r i but abl e t o wor k t hat had been
24 done i n t he apar t ment , shel vi ng and i nst al l at i on of wi r i ng and
25 t hi ngs of t hat nat ur e, cor r ect ?
( 212) 805- 0300
604
1 A. Yes. Yes.
2 Q. Di d you see when you wer e i n t hat apar t ment anyt hi ng t hat
3 you woul d descr i be as const r uct i on?
4 A. The shel ves and t he desks, t he t abl es.
5 THE COURT: Wer e t hey under const r uct i on?
6 THE WI TNESS: No, t hey wer en' t under const r uct i on at
7 t he t i me.
8 Q. The shel ves and t he desks. And i s i t f ai r t o say t hat you
9 di sal l owed t hat expense?
10 A. Yes.
11 Q. And ar e you f ami l i ar wi t h - - and on what basi s di d you
12 di sal l ow t hat expense?
13 A. I t wasn' t al l owabl e per t he budget .
14 Q. Equi pment was al l owabl e, was i t not ?
15 A. I di dn' t quest i on t he equi pment amount up t o t he budget
16 cat egor y.
17 Q. Wel l , ar e you awar e t hat under t he cat egor y of equi pment
18 you ar e per mi t t ed t o do a cer t ai n amount of what you woul d cal l
19 si t e pr epar at i on?
20 A. They st i l l had mor e cost - - t he equi pment was st i l l over
21 t he budget wi t hout t hat cost , so sayi ng whet her t hat was
22 al l owabl e or not al l owabl e was i r r el evant as t o whet her i t
23 woul d be qual i f i ed as al l owabl e equi pment cost s.
24 Q. The money was spent - - i n ot her wor ds, ar e you sayi ng now
25 t hat what ever changes wer e made, physi cal changes wer e made t o
( 212) 805- 0300
605
1 t he apar t ment , wer e made f or t he benef i t of t he pr ogr amf or
2 car r yi ng out t he pr oj ect ?
4 THE COURT: I di dn' t hear her say t hat .
5 Q. Wel l , ar e you f ami l i ar wi t h t he f act t hat under equi pment
6 you ar e per mi t t ed - - " ATP f unds may, however , be used f or
7 const r uct i on of exper i ment al r esear ch and devel opment
8 f aci l i t i es t o be l ocat ed wi t hi n a new or exi st i ng bui l di ng,
9 pr ovi ded t he equi pment or f aci l i t i es ar e essent i al f or car r yi ng
10 out t he pr oj ect . I f such cost s ar e pr oposed, i ncl ude bel ow and
11 pr ovi de j ust i f i cat i on. " Ar e you f ami l i ar wi t h t hat ?
12 A. Yes.
13 Q. And sal ar i es, you r evi ewed t he sal ar i es, di d you not ?
14 A. Yes.
15 Q. And what was your - - you di sal l owed sal ar i es, di d you not ,
16 as par t of you comi ng t o t hi s hal f a mi l l i on dol l ar f i gur e,
17 r i ght ?
18 A. Whi ch f i gur e ar e we t al ki ng about now?
19 Q. Sal ar i es.
20 A. Ar e we t al ki ng about t he J ul y r epor t or t he December
21 r epor t ?
22 Q. I n your t est i mony di d you say t hat you di sal l owed - -
23 THE COURT: No, you' ve got t o gi ve her some t i me
24 f r ame, Mr . Rubi nst ei n.
25 Q. Wel l , how about di d t her e come a t i me t hat you i n your
( 212) 805- 0300
606
1 eval uat i on and anal ysi s of CASI , t hat you eval uat ed t he
2 sal ar i es t hat wer e bei ng pai d?
3 A. Yes.
5 A. I n t he December 2003 r evi ew.
6 Q. And at t hat t i me di d you make a det er mi nat i on as t o how
7 much sal ar y was appr ovabl e?
8 A. Yes.
9 Q. How much sal ar y was budget ed f or CASI f or t he f i r st year ,
10 Oct ober 1, 2001 t o Sept ember 30, 2002, t he f i r st year of t he
11 gr ant ?
12 A. I woul d have t o l ook back at some document at i on t o know t he
13 speci f i c number .
14 Q. Par don? Do you have anyt hi ng t hat - -
15 A. Dr . Kar r on' s sal ar y was budget ed 175, 000, and t he ot her
16 empl oyees' sal ar i es wer e budget ed at 150, 000.
17 Q. And how much of Dr . Kar r on' s $175, 000 sal ar y di d you al l ow?
18 A. I t hi nk 85 per cent of i t . I s t hat r i ght ?
19 THE COURT: You l ook at t he paper s and t el l us. Don' t
20 say you t hi nk.
21 MR. KWOK: Your Honor , I don' t know whet her
22 Mr . Rubi nst ei n i s aski ng per t he audi t or per t he bank r ecor ds
23 anal ysi s.
24 MR. RUBI NSTEI N: I ' maski ng her audi t , what she
25 al l owed.
( 212) 805- 0300
607
1 THE COURT: Whi ch audi t ?
2 MR. RUBI NSTEI N: I n any audi t .
3 THE COURT: 2004? J ul y 2003? Whi ch audi t ? The f i nal
4 audi t ? The one t hat went up on t he boar d?
5 Q. Wel l , di d your number s change bet ween your f i r st audi t and
6 your second audi t ?
7 A. The f i r st - - t he number s - - t he number on t he f i r st audi t
8 di dn' t get t hat det ai l ed. The shor t r epor t number of t he
9 205, 000 number came f r omt he r evi sed books, how much t hat CASI
10 sai d i t spent f or t he NI ST pr oj ect , excl udi ng t he expenses t hat
11 i t had f or CASI , t he di f f er ence bet ween t hat and t he deposi t s.
12 So, t hat number di dn' t come f r oman anal ysi s of t he speci f i c
13 budget cost cat egor i es. The December r epor t , af t er I met wi t h
14 Mel Spi t z, was an anal ysi s of t he speci f i c budget cat egor i es,
15 si nce Dr . Kar r on t ol d me he had addi t i onal new r ecor ds.
16 Q. Do you want t o l ook at t he appendi x t o your dr af t r epor t
17 t hat ' s i n evi dence, whi ch i s Exhi bi t - -
18 A. Ri ght . And t hat one says - -
19 THE COURT: Wai t . Wai t unt i l he gi ves you t he
20 exhi bi t .
22 Q. 61. I ' msor r y. 62. Appendi x 1, page 2 of 8. Does t hat
23 r ef r esh your r ecol l ect i on of how much of Dr . Kar r on' s appr oved
24 sal ar y you di sal l owed t o come t o your f i gur e of over $500, 000?
25 A. I t hi nk 15 per cent .
( 212) 805- 0300
608
1 Q. Par don?
2 A. 15 per cent . The chi ef t echni cal of f i cer , r i ght ?
3 Q. And t hat was based on an hour l y comput at i on?
4 A. That was based on an est i mat e of t i me spent on ot her
5 act i vi t i es ot her t han t he NI ST gr ant .
6 Q. What act i vi t i es was t hat ?
7 A. The busi ness of CASI .
8 Q. I s i t a f act t hat CASI had no ot her busi ness?
9 A. CASI was a busi ness t hough.
10 Q. But t hei r onl y pr oj ect was t he ATP pr oj ect ?
11 A. Ri ght , but t her e woul d st i l l be expenses associ at ed wi t h
12 t he exi st ence of t he busi ness.
13 Q. When t he budget was appr oved, i t was appr oved f or $175, 000,
14 cor r ect , sal ar y?
15 A. Cor r ect .
16 Q. And was t her e any i ndi cat i on of how many hour s Dr . Kar r on
17 woul d spend i n or der t o ear n hi s $175, 000 on t hi s ATP pr oj ect ?
18 A. I don' t r emember i f t hey speci f i cal l y had t i me sheet s or
19 not .
20 Q. Di d you det er mi ne how many hour s a week Dr . Kar r on wor ked
21 on t he ATP gr ant ?
22 A. The sal ar y, t he hour s don' t - - i t doesn' t necessar i l y
23 mat t er t he hour s. I t ' s per cent of t i me wor ked.
24 Q. Wel l , what about Mr . Gur f ei n, was he budget ed f or sal ar y?
25 A. Yes.
( 212) 805- 0300
609
1 Q. How much was he budget ed f or sal ar y?
2 A. I don' t r ecal l . I don' t have a copy of t he budget i n f r ont
3 of me.
4 Q. So you over r ul ed ATP t hat aut hor i zes $175, 000 f or Dr .
5 Kar r on, cor r ect ?
8 quest i on.
9 Q. I n f act , does i t r ef r esh your r ecol l ect i on t hat Mr . Gur f ei n
10 was t o r ecei ve $100, 000 annual sal ar y?
11 THE COURT: Does t hat r ef r esh your r ecol l ect i on?
12 A. I f I coul d see a copy.
13 Q. Why don' t you l ook at t he same page. See i f i t r ef r eshes
14 your r ecol l ect i on. He was t he chi ef oper at i ng of f i cer ,
15 cor r ect ?
16 A. Yes.
17 Q. Di d t hat r ef r esh your r ecol l ect i on of what Mr . Gur f ei n' s
18 sal ar y was?
19 A. You sai d t hat i t was $100, 000 accor di ng t o t he budget .
20 Q. And di d you al l ow $100, 000 i n cost s f or Mr . Gur f ei n?
21 A. J ust because i t ' s al l owabl e i n t he budget cat egor y doesn' t
22 make i t al l owabl e - -
23 THE COURT: The quest i on i s di d you or di dn' t you.
24 THE WI TNESS: I - -
25 THE COURT: Yes or no?
( 212) 805- 0300
610
1 THE WI TNESS: I don' t have t he i nf or mat i on her e t o
2 t el l how much was al l owabl e.
3 THE COURT: What does your r epor t say r i ght on t he
4 f r ont page?
5 THE WI TNESS: I t says how much.
6 THE COURT: Page 2 of 8 on t he appendi x.
7 THE WI TNESS: Ri ght . I t says how much i s quest i oned;
8 i t doesn' t say how much was al l owed.
9 THE COURT: Wel l , when you say i t ' s quest i oned, i sn' t
10 t hat you di sal l ow i t subj ect t o t hei r comi ng back t o you t o
11 show t hat i t was appr opr i at e?
12 THE WI TNESS: J ust because t her e i s a budget cat egor y
13 wi t h an al l owabl e amount , t hat means t hey al l ow up t o t hat
14 amount i f appl i cabl e t o t he NI ST pr oj ect or par t of t he NI ST
15 pr oj ect cost . I t doesn' t mean you ar e ent i t l ed t o t hat amount
16 of money no mat t er what .
17 Q. I t doesn' t mean you ar e not ent i t l ed t o i t ei t her , cor r ect ?
18 A. I f i t ' s al l owabl e i n t he NI ST ATP gr ant cost i t ' s al l owabl e
19 up t o t hat amount . J ust because you have an amount i n a budget
20 f or an expense doesn' t mean you ar e ent i t l ed t o t hat amount i f
21 you di dn' t have al l owabl e cost s f or t hat amount .
22 Q. I f you have a budget f or $100, 000 f or equi pment and you
23 spend $100, 000 on equi pment f or your pr oj ect , i s t hat OK?
24 A. I f i t ' s a NI ST ATP pr oj ect equi pment .
25 Q. Wel l , her e t her e i s onl y one pr oj ect , cor r ect ?
( 212) 805- 0300
611
2 Q. I n your audi t di d you f i nd t hat CASI was doi ng any ot her
3 pr oj ect ot her t han t he NI ST ATP pr oj ect ?
4 A. They wer e wor ki ng on t he NI ST ATP pr oj ect . They may - -
5 t hey al so had been t r yi ng t o get ot her awar ds.
6 Q. For t hi s pr oj ect .
7 THE COURT: Obj ect i on. Do you know what t hey wer e
8 f or , ot her awar ds?
9 THE WI TNESS: Onl y t he one t hat kept comi ng up f r om
10 t he St at e of New Yor k t hat di dn' t happen.
11 Q. They want ed t o get f unds f r omt he St at e of New Yor k t o add
12 t o t hi s NI ST ATP pr oj ect , cor r ect ?
15 Q. How much of Mr . Gur f ei n' s $100, 000 sal ar y di d you di sal l ow?
16 A. 25 per cent .
17 Q. So, t hat woul d be $25, 000, cor r ect ?
18 A. Yes.
19 Q. I f he got 100, 000, i t woul d be 25, 000?
20 A. Yes.
21 Q. And on what basi s di d you r educe hi s sal ar y by 25 per cent ?
22 A. Because of t he dut i es t hat he di d.
23 Q. He spent onl y 75 per cent of hi s t i me on NI ST ATP pr oj ect s,
24 i s t hat your t est i mony?
25 A. Wel l , t he t hi ngs t hat Mr . Gur f ei n was doi ng wer e not
( 212) 805- 0300
612
1 necessar i l y t hi ngs f or t he r esear ch, t hey wer e t o cont i nue t he
2 pr oj ect . So, t hey wer en' t necessar i l y al l al l owabl e NI ST
3 pr oj ect expendi t ur es f or gr ant pur poses.
4 Q. Wel l , i sn' t i t a f act t hat Mr . Gur f ei n' s sal ar y was
5 appr oved on t he basi s t hat onl y 75 per cent of hi s t i me woul d be
6 devot ed t o t he NI ST pr oj ect ?
7 A. Ri ght . And so when he car r i ed i t out t hen he woul dn' t have
8 had - -
9 Q. Ar e you awar e of t hat , ma' am?
10 THE COURT: Do you know what t he si t uat i on was i n
11 t er ms of how hi s sal ar y was comput ed - -
12 THE WI TNESS: I have t o see t he budget .
13 THE COURT: - - f or t he budget ?
14 THE WI TNESS: I know i t was a per cent age of what ever
15 hi s sal ar y was was al l owabl e.
16 Q. I amaski ng you, ma' am, whet her or not when you made t he
17 det er mi nat i on and you put i n your r epor t t hat $25, 000 - - t hi s
18 i s r eadi ng f r omappendi x A, page 2 of 8 pages, i t says, $25, 000
19 of t he 71, 550 i s quest i oned f or t he chi ef oper at i ng of f i cer due
20 t o 25 per cent of hi s t i me and sal ar y bei ng al l ocat ed t o
21 non- NI ST act i vi t i es. Cor r ect ?
22 A. That ' s what i t says, yes.
23 Q. So, t hat he i s supposed t o i nvest 75 per cent of hi s t i me t o
24 a NI ST act i vi t y, accor di ng t o your cal cul at i on, r i ght ?
25 A. Yes.
( 212) 805- 0300
613
1 Q. But i sn' t i t a f act t hat t he budget speci f i cal l y appr oved
2 by NI ST ATP pr ovi ded t hat Gur f ei n was onl y t o spend 75 per cent
3 of hi s t i me on t he pr oj ect ?
4 A. So, i t had 75 per cent of hi s sal ar y t i mes t hat came up wi t h
5 a l ower number t han a hundr ed per cent of hi s sal ar y t hat was
6 al l owed f or t he budget .
7 THE COURT: What ar e you sayi ng?
8 THE WI TNESS: Wel l , i f hi s - - I don' t r emember . But
9 i f hi s sal ar y was $100, 000 a year , and NI ST al l owed 75 per cent
10 of t hat as NI ST ATP f or t he budget , t hen 75 t i mes a hundr ed
11 woul d be $75, 000 of hi s sal ar y coul d be r ei mbur sed by t he NI ST
12 pr oj ect cost s, and t he ot her 25, 000 woul d be pai d by CASI .
13 THE COURT: Let me ask you a quest i on. What di d you
14 under st and t he budget $100, 000 t o be payi ng hi m? Di d you
15 expect i t t o be f or 75 per cent of hi s t i me?
16 THE WI TNESS: 75 per cent of t he t i me, t he sal ar i ed
17 amount .
18 THE COURT: That ' s what i t was i n t he budget .
19 THE WI TNESS: That ' s what t he budget woul d al l ow i f he
20 devot ed t hat much t i me t o t he pr oj ect , yes.
21 THE COURT: Now, so i f he spent 75 per cent of hi s t i me
22 on t he budget , why wasn' t he ent i t l ed t o t he f ul l amount of t he
23 $100, 000?
24 THE WI TNESS: No, not wor ki ng on t he budget . But t he
25 NI ST budget mul t i pl i es i t out acr oss t hat says $100, 000, t i mes
( 212) 805- 0300
614
1 75 per cent of hi s t i me, so t hat woul d be $75, 000 t hat NI ST
2 woul d r ei mbur se of t he sal ar y t hat he was pai d. I ' mnot sur e
3 i f hi s sal ar y was $100, 000. What ever hi s sal ar y was, t i mes 75
4 per cent of t he t i me, t hen NI ST woul d pay t hat amount .
5 I s t hat how t hat ' s wr i t t en? I don' t - -
6 THE COURT: I s t hat how what i s wr i t t en?
7 THE WI TNESS: The budget .
8 THE COURT: So, you ar e j ust accept i ng what Mr . - -
9 THE WI TNESS: No, I ' msayi ng how i t ' s wr i t t en.
10 THE COURT: Wel l , you ar e t he one we' r e aski ng how
11 i t ' s wr i t t en, not hi m.
12 THE WI TNESS: OK, I need a copy of t he budget t o see.
13 THE COURT: Wel l , you bet t er exami ne a copy of t he
14 budget bef or e you st ar t answer i ng quest i ons.
15 THE WI TNESS: OK.
16 THE COURT: Thi s i sn' t hypot het i cal st uf f .
18 THE COURT: Do you under st and?
21 MR. RUBI NSTEI N: Why don' t we t ur n t o Gover nment
22 Exhi bi t 10B.
23 THE COURT: Do you have a copy bef or e you?
( 212) 805- 0300
615
1 Q. Have you r evi ewed t hat , ma' am?
2 A. Yes. Wher e i s t he t hi ng t hat - - t hi s i s - - wher e i s t he
3 t hi ng t hat i ncor por at es t hi s par t of t he awar d or of t he
4 budget ? Because f or amendment 2 what i t shoul d say i s i f hi s
5 annual sal ar y i s $100, 000, t hen 75 per cent of t hat woul d be
6 $225, not $300, 000, so t hi s shoul d be mul t i pl yi ng t hi s acr oss.
7 I t hi nk t hese ar e pr epar ed by I t hi nk CASI and submi t t ed.
8 THE COURT: 10B?
10 THE COURT: I s submi t t ed by t hem?
11 THE WI TNESS: I s submi t t ed by CASI t o NI ST.
12 THE COURT: Wher e i s what t he awar d appr oved, t he
13 budget t hat t he awar d appr oved? Do we have t hat exhi bi t ?
14 MR. KWOK: I t ' s Gover nment Exhi bi t 22, I bel i eve, your
15 Honor .
17 DEPUTY COURT CLERK: Gover nment 22.
18 THE COURT: 22.
19 MR. RUBI NSTEI N: Your Honor , I dr aw. I f you l ook
20 at - -
21 THE COURT: She i s l ooki ng at 22 now. Let ' s st ay wi t h
22 what she i s l ooki ng at and t hen you can ask a quest i on.
23 THE WI TNESS: Ther e shoul d be somet hi ng t hat br eaks
24 down t he expenses by year s.
25 MR. RUBI NSTEI N: Can I ask a quest i on, your Honor ?
( 212) 805- 0300
616
1 THE COURT: She hasn' t answer ed t he quest i on yet .
2 THE WI TNESS: Ther e shoul d be - -
3 THE COURT: Thi s i s t he budget t hat was appr oved.
4 THE WI TNESS: Ther e shoul d be somet hi ng t hat br eaks
5 down f or t he year one t hat l ooks si mi l ar t o t hi s, t hat br eaks
6 down by year one, year t wo, year t hr ee, i nst ead of j ust al l
7 t hr ee t oget her , and i t shoul d - -
8 THE COURT: I don' t f ol l ow what you' r e sayi ng. But
9 now you can see t hat t hey r equest ed f or t he t hr ee year s
10 $1, 330, 000, l ooki ng at 10B - -
12 THE COURT: - - f or per sonnel .
13 THE WI TNESS: And t hen l ooki ng at page 2 of t hi s
14 exhi bi t , t he t hr ee year t ot al i s $1, 075, 000.
15 THE COURT: So, t her e was some adj ust ment made.
16 THE WI TNESS: Yes, t her e i s some adj ust ment .
17 THE COURT: But you don' t know what adj ust ment was
18 made.
19 THE WI TNESS: Mat hemat i cal l y t hi s shoul d show - - t he
20 annual sal ar y i s $100, 000. I t shoul d be t hr ee t i mes a 100, 000,
21 t i mes 75 per cent , and t hat woul dn' t be $300, 000, so t her e i s a
22 mat hemat i cal t hi ng t her e.
23 Q. Ar e you awar e t hat t he $325, 000 al l ocat i on f or sal ar y and
24 wages was of f an amended budget t hat i ni t i al l y had $375, 000
25 t hat was appr oved?
( 212) 805- 0300
617
1 A. Yes.
2 THE COURT: You ar e?
3 THE WI TNESS: Wel l , I know t hat t hi s budget was
4 adj ust ed, and t hey had moved some money t o consul t i ng t o pay
5 f or Geor ge Wol ber g.
6 THE COURT: What ?
7 THE WI TNESS: They moved some money f r ompayr ol l cost
8 t o consul t i ng cost s or subcont r act i ng cost t o pay f or Wol ber g.
9 THE COURT: I ' mt r yi ng t o have you t el l us what you
10 wer e l ooki ng at - -
11 THE WI TNESS: Oh.
12 THE COURT: - - whi ch al l owed you t o deduct or di sal l ow
13 Mr . El i sha Gol dber g' s sal ar y i n t he amount of $25, 000. That ' s
14 what I ' maski ng you t o show us, what you wer e r el yi ng on t o do
15 t hat . Now, woul d you show i t t o us.
16 THE WI TNESS: OK. The suppor t i ng document t hat shows
17 t he br eakdown of cost s by year , t hat l ooks si mi l ar t o 10B, has
18 si mi l ar per sonnel , f r i nge benef i t s, t r avel , i t br eaks down t he
19 cost as a year one, year t wo, year t hr ee, i nst ead of a t ot al
20 cost . On t hi s i t says l i ke Lee Gur f ei n, $100, 000 annual
21 sal ar y, per cent age of t i me on pr oj ect i s est i mat ed, t he
22 budget ed i s est i mat ed t o be 75 per cent , and so t hat shoul d not
23 be $300, 000, i t shoul d be i t shoul d be 225. Pl us
24 mat hemat i cal l y i t ' s not r i ght .
25 THE COURT: Al l r i ght . Wel l , we have t o t ake - -
( 212) 805- 0300
618
1 THE WI TNESS: But t her e i s some ot her document .
2 THE COURT: You bet t er st udy your document s, and we
3 bet t er t ake a l uncheon br eak. I t ' s t en af t er one, so t he j ur y
4 i s excused unt i l t en af t er t wo. And t he par t i es ar e i nst r uct ed
5 t hey ar e not t o t al k t o t he wi t ness dur i ng t he br eak.
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
619
1 AFTERNOON SESSI ON
2 2: 05 p. m.
4 MR. KWOK: Your Honor , may we j ust r ai se one qui ck
5 i ssue wi t h t he cour t - -
6 THE COURT: Yes.
7 MR. KWOK: - - bef or e we cal l i n t he j ur y? I bel i eve
8 t he wi t ness j ust now was r ef er r i ng t o some wor k paper s or ot her
9 mat er i al s t hat she used t o assi st her i n conduct i ng her audi t .
10 I bel i eve she i s r ef er r i ng t o t hat box of document s t her e whi ch
11 we j ust got on Monday. I t l ooks l i ke mat er i al s t hat she
12 gat her ed t o assi st her i n her wor k. We haven' t l ooked at i t .
13 Def ense hasn' t l ooked at i t . But i f she i s r ef er r i ng t o and i f
14 she want s t o l ook at t hat t o assi st her , I was wonder i ng i f
15 anyone had any obj ect i on t o gi ve t hat t o t he wi t ness.
16 MR. RUBI NSTEI N: J udge, I suggest ed t o Mr . Kwok t hat I
17 woul d have no pr obl emi f she r evi ewed i t and showed us whi ch
18 document she was goi ng t o r el y upon. I don' t want t o have
19 anot her 2000 si t uat i on.
20 THE COURT: Do you want t o r ecal l her and have her
21 come back, have anot her wi t ness? The j ur y i s al r eady i nqui r i ng
22 about wher e we ar e i n t hi s case, how many mor e wi t nesses, how
23 l ong.
24 MR. KWOK: We can t ake t hat out of or der .
25 THE COURT: Wel l , bot h l awyer s have t o agr ee.
( 212) 805- 0300
620
1 MR. KWOK: We have our next wi t ness her e who i s Lee
2 Gur f ei n. We can t ake hi mf i r st , and i n t he meant i me we can
3 have t he pr i or wi t ness r evi ew t he box of document s she was
5 MR. RUBI NSTEI N: I t sounds al l r i ght . I amj ust goi ng
6 t o use t he f aci l i t i es f or a second.
7 THE COURT: Let ' s cal l t he j ur y i n.
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
621
2 THE COURT: Ladi es and gent l emen, Ms. Ri l ey want s t o
3 r evi ew her per sonal f i l e i n or der t o gi ve you an answer t o t he
4 quest i on t hat was pendi ng, so she i s subj ect t o r ecal l f or t hat
5 quest i on and cont i nued cr oss- exami nat i on. I n or der t o save
6 t i me, we have anot her wi t ness.
7 Wi l l t he cl er k swear i n t he wi t ness, pl ease.
8 ELI SHA GURFEI N,
11 DEPUTY COURT CLERK: St at e your name, spel l your f i r st
12 and your l ast name sl owl y f or t he r ecor d, pl ease.
13 THE WI TNESS: El i sha Gur f ei n, E- L- I - S- H- A. Last name
14 G- U- R- F- E- I - N.
15 THE COURT: Pl ease pr oceed, Mr . Ever del l .
17 BY MR. EVERDELL:
18 Q. Good af t er noon, Mr . Gur f ei n.
21 A. I cur r ent l y wor k at New Yor k Uni ver si t y and Wi l l i am
22 Pat t er son Uni ver si t y.
23 Q. What do you do at t hose uni ver si t i es?
24 A. I t each.
25 Q. What do you t each?
( 212) 805- 0300
622
8657KAR4 Gur f ei n - di r ect
1 A. I t each economi cs and f i nance at Wi l l i amPat t er son, and I
2 t each cour ses on nat ur al r esour ces at New Yor k Uni ver si t y.
3 Q. How l ong have you t aught at t hose uni ver si t i es?
4 A. For a f ew year s.
5 Q. What di d you do bef or e you wer e a t eacher ?
6 A. I had a company of my own i n commodi t y t r adi ng.
7 Q. How l ong di d you do commodi t i es t r adi ng?
8 A. Oh, wi t h my own company about 20 year s and bef or e t hat f or
9 t en.
10 Q. And bef or e you wer e a commodi t i es t r ader , what di d you do?
11 A. I wor ked f or t he def ense i ndust r y. I wor ked f or a company.
12 The name of t he company was Fur k & El mer .
13 Q. What di d you do f or t hat company?
14 A. I was i nvol ved i n get t i ng - - pur sui ng gover nment cont r act s
15 f or t he company.
16 Q. How l ong di d you do t hat f or ?
17 A. Ten year s.
18 Q. What i s your educat i onal backgr ound?
19 A. I have a bachel or ' s degr ee i n mat hemat i cs, and I have an
20 MBA wi t h a speci al t y i n f i nance.
21 Q. And you ment i oned gover nment cont r act s. Coul d you expl ai n
22 t hat a l i t t l e bi t mor e.
23 A. Wel l , I was i nvol ved i n t r yi ng t o obt ai n gover nment
24 cont r act s f or t he company, but most l y t he Def ense Depar t ment
25 and ot her agenci es of t he gover nment .
( 212) 805- 0300
623
1 Q. Mr . Gur f ei n, di d t her e come a t i me when you met a man named
2 Dani el Kar r on?
3 A. Yes.
4 Q. Do you see Mr . Kar r on i n t he cour t r oomt oday?
5 A. Yes.
6 Q. Coul d you pl ease poi nt hi mout and descr i be an ar t i cl e of
7 cl ot hi ng.
8 A. He i s si t t i ng i n t he cour t r oomwi t h a pl ai d shi r t .
9 MR. EVERDELL: Let t he r ecor d i ndi cat e t hat he has
10 i dent i f i ed t he def endant .
11 THE COURT: The r ecor d wi l l so i ndi cat ed.
12 Q. How di d you f i r st meet t he def endant ?
13 A. A mut ual acquai nt ance some t i me back, pr obabl y i n 2000
14 r oughl y, I ' mnot sur e.
15 Q. Was t hat t he f i r st t i me you met hi m?
16 A. Yes.
17 Q. Di d t her e come anot her t i me when you met hi m?
18 A. Yes.
19 Q. When was t hat r oughl y?
20 A. I n t he spr i ng or ear l y summer of 2001.
21 Q. And what was t he r eason f or t hat second meet i ng?
22 A. Dr . Kar r on t ol d me t hat he was goi ng t o pur sue a gr ant f r om
23 t he Depar t ment of Commer ce and t hat he i ndi cat ed t o me t hat
24 because I had backgr ound i n gover nment cont r act s and i n
25 busi ness, he asked me t o hel p hi mwr i t e t hat pr oposal .
( 212) 805- 0300
624
1 Q. And was he appl yi ng f or t he gr ant on behal f of hi msel f or a
2 company?
3 A. On behal f of a company.
4 Q. What company was t hat ?
5 A. CASI .
6 Q. What ' s CASI st and f or ?
7 A. Comput er Ai ded Sur ger y, I nc.
8 Q. And what was t he def endant ' s posi t i on at CASI ?
9 A. I bel i eve he was t he owner and pr esi dent .
10 Q. What gr ant was he appl yi ng f or ?
11 A. He was appl yi ng f or an ATP gr ant wi t h NI ST.
12 Q. Do you r ecal l what NI ST i s?
13 A. The Nat i onal I nst i t ut e of St andar ds and Technol ogy.
14 Q. And what was your under st andi ng of why t he def endant asked
15 you t o hel p wi t h t he gr ant wr i t i ng pr oposal ?
16 A. Because of my f ami l i ar i t y wi t h gover nment cont r act i ng and
17 wi t h wr i t i ng pr oposal s f or gover nment cont r act s.
18 Q. Di d you and t he def endant di scuss whet her you woul d have
19 any cont i nui ng r ol e - - oh, sor r y.
20 Di d you t wo di scuss what your r ol e wi t h t he company
21 woul d be i f you wer e t o r ecei ve a gr ant ?
22 A. Yes.
23 Q. What di d you di scuss?
24 A. I was t o be t he busi ness manager i n t he event of an awar d.
25 Q. And what woul d t he busi ness manager do?
( 212) 805- 0300
625
1 A. Basi cal l y be r esponsi bl e f or al l nont echni cal i ssues.
2 Q. Woul d t hose i ncl ude budget i ng i ssues?
3 A. The pur chasi ng of equi pment , hi r i ng of peopl e, t he
4 budget i ng, var i ous ot her f i nanci al mat t er s.
5 Q. Wer e you goi ng t o have any ot her r ol e wi t h CASI besi des
6 managi ng t he gr ant f unds?
7 A. Yes, I was t o be at t empt i ng t o obt ai n addi t i onal f unds f or
8 CASI t hat woul d be suppl ement al t o t he f unds comi ng f r omNI ST.
9 Q. Addi t i onal f unds?
10 A. Yes.
11 Q. And how much of your t i me was goi ng t o be spent on
12 nonf undr ai si ng?
13 A. Wel l , 75 per cent was t o be f or CASI di r ect l y on t he gr ant ,
14 and 25 per cent was t o be f or ot her f undr ai si ng, at t empt i ng t o
15 get mor e f unds, whi ch was par t of t he gr ant s r equi r ement , by
16 t he way.
17 Q. How l ong di d t he gr ant wr i t i ng pr ocess t ake, t he pr oposal
18 wr i t i ng pr ocess?
19 A. Sever al mont hs. I can' t r emember exact l y, but sever al
20 mont hs.
21 Q. Dur i ng t hat t i me di d you become f ami l i ar wi t h t he f i nanci al
22 t er ms of t he gr ant and what const i t ut ed pr oper and i mpr oper
23 expendi t ur es?
24 A. Yes.
25 Q. How di d you do t hat ?
( 212) 805- 0300
626
1 A. Wel l , t he package t hat we r ecei ved f r omNI ST spel l ed out
2 t he var i ous r equi r ement s and t he qual i f i cat i ons of t he gr ant .
3 Q. Was t hat t he pr oposer ' s package?
4 A. Yes, t he pr oposer ' s package, cor r ect .
5 Q. And di d you r evi ew t hose mat er i al s dur i ng t he t i me of t he
6 gr ant wr i t i ng pr ocess?
7 A. Yes.
8 Q. And what di d t hose mat er i al s say about al l owabl e ver sus
9 unal l owabl e cost s?
10 A. Wel l , i t def i ned what was al l owed and what woul d not be
11 al l owed i n wor ki ng on t he gr ant .
12 Q. What sor t s of t hi ngs wer e t hose?
13 A. Wel l , i t i ndi cat ed t hat al l di r ect cost s woul d be al l owed
14 pr et t y much, but t her e wer e cer t ai n i t ems t hat wer e not t o be
15 al l owed l i ke r ent , ut i l i t i es, account i ng, l egal , ot her s I can' t
16 r emember .
17 Q. Di d you ever di scuss t hese r ul es wi t h Dr . Kar r on whi l e you
18 wer e pr epar i ng t he pr oposal ?
19 A. Yes.
20 Q. How many t i mes woul d you di scuss t hese spendi ng r ul es?
21 A. At var i ous t i mes, numer ous t i mes, but at var i ous t i mes
22 under di f f er ent condi t i ons or what ever par t i cul ar i t emwe wer e
23 di scussi ng.
24 Q. Di d you di scuss any par t i cul ar cost s wi t h t he def endant
25 dur i ng t hat per i od?
( 212) 805- 0300
627
1 A. Yes. We di scussed at t he t i me of t he wr i t i ng t he pr oposal
2 t he wr i t i ng cost s, t he var i ous cost s associ at ed wi t h t hat .
3 Q. Can you be mor e speci f i c?
4 A. Wel l , I mean t her e wer e var i ous cost s t hat we had. I n
5 par t i cul ar , t her e wer e cost s f or t r avel t o Gai t her sbur g wher e
6 NI ST was l ocat ed, t her e wer e some host t r avel cost s, t her e wer e
7 mot el s what ever , f ood, what ever we expended t hat way, whi ch
8 act ual l y at t he t i me I was l ayi ng out t hat money. And Dr .
9 Kar r on and I di scussed t hat .
10 Q. You had some di scussi ons about t hose cost s?
11 A. Yeah.
12 Q. What was t he nat ur e of t hose di scussi ons?
13 A. Dr . Kar r on sai d we wi l l t r y and see i f we can get t hose
14 t hi ngs pai d, and you wi l l get your money back and so f or t h.
15 Q. What i f anyt hi ng di d you say t o hi m?
16 A. I sai d, you know, t hey' r e not al l owabl e, t hose cost s ar e
17 not al l owabl e, so, you know, l et ' s not wor r y about i t . Because
18 t her e wasn' t t hat much money t o begi n wi t h, but
19 not wi t hst andi ng, t hey wer en' t al l owed.
20 Q. Al l r i ght . Mr . Gur f ei n, di d CASI event ual l y r ecei ve an ATP
21 gr ant .
22 A. Yes.
23 Q. And how much money was aut hor i zed?
24 A. My memor y says $2. 1 mi l l i on, but I coul d be of f by a l i t t l e
25 bi t .
( 212) 805- 0300
628
1 Q. And how was t hat money goi ng t o be di sbur sed?
2 A. I n pr ogr ess payment s over a t hr ee- year per i od.
3 Q. Di d you i n f act have any cont i nui ng i nvol vement wi t h CASI
4 af t er t he gr ant was awar ded?
5 A. Yes.
6 Q. What was t hat i nvol vement ?
7 A. I was t aken on as t he busi ness manager .
8 Q. How l ong wer e you t he busi ness manager ?
9 A. For one year .
10 Q. St ar t i ng when and endi ng when?
11 A. St ar t i ng Oct ober 1, 2001, endi ng Sept ember 30, 2002.
12 Q. Wer e you pai d anyt hi ng f or t hi s j ob?
13 A. Yes.
14 Q. How much wer e you pai d?
15 A. I was pai d $100, 000.
16 Q. Mr . Gur f ei n, di d t her e come a t i me when you met wi t h peopl e
17 at NI ST af t er t he gr ant was awar ded t o di scuss t he gr ant ?
18 A. Yes.
19 Q. About when was t hat ?
20 A. Appr oxi mat el y a mont h or so af t er t he awar d.
21 Q. When was t he awar d?
22 A. The awar d was ef f ect i ve Oct ober 1, 2001. We wer e advi sed
23 of i t on Oct ober 4, 2001.
24 THE COURT: For t he $100, 000, was t hat a f ul l - t i me
25 j ob?
( 212) 805- 0300
629
1 THE WI TNESS: The $100, 000 was f or 75 per cent of my
2 t i me.
3 THE COURT: So, you spent 75 per cent on busi nesses
4 ot her t han CASI , i s t hat cor r ect ? I mean 25 per cent - -
6 THE COURT: - - on busi nesses of your s ot her t han CASI .
7 THE WI TNESS: Yes, si r . But t he 25 per cent was al so
8 on CASI ' s behal f - -
9 THE COURT: Yes.
10 THE WI TNESS: - - i n pur sui ng ot her f unds.
11 THE COURT: I see. Al l r i ght . Sor r y, Mr . Ever del l .
12 MR. EVERDELL: That ' s al l r i ght , your Honor .
13 Q. So, you ment i oned t he meet i ng you had wi t h t he NI ST peopl e
14 af t er t he gr ant was awar ded.
15 A. Sor r y?
16 Q. You ment i oned a meet i ng you had wi t h NI ST peopl e af t er t he
17 gr ant was awar ded.
18 A. Yes.
19 Q. About when di d t hat t ake pl ace agai n?
20 A. About a mont h or so, maybe a l i t t l e mor e t han a mont h af t er
21 t he awar d.
22 Q. Di d t hat meet i ng have a name i n par t i cul ar ?
23 A. That was r ef er r ed t o as a ki ckof f meet i ng.
24 Q. What was t he ki ckof f meet i ng?
25 A. Wel l , i t was a meet i ng t o essent i al l y r est at e t he r ul es,
( 212) 805- 0300
630
1 t he gr ound r ul es, what was expect ed of us, what t hat agency was
2 al l about , namel y t he NI ST agency, what t he r epor t i ng of t he
3 f undi ng woul d be, what t he r epor t i ng of pr ogr ess woul d be, what
4 was al l owed, what was not al l owed, under what condi t i ons woul d
5 we have t o appl y f or a change t o t he budget t hat was appr oved.
6 Q. And who at t ended t hi s meet i ng f r omCASI ?
7 A. Dr . Kar r on and I at t ended t hat meet i ng.
8 Q. And who at t ended f r omNI ST?
9 A. Wel l , Hope Snowden, who was t he gr ant admi ni st r at or
10 at t ended, as di d J ayne Or t hwei n and B. J . Li de, and t her e mi ght
11 have been some ot her peopl e. I t hi nk maybe Mar i l yn Gol dst ei n,
12 and I t hi nk even t he di r ect or mi ght have popped i n f or a l i t t l e
13 bi t , Mar k St anl ey. I r emember shaki ng hi s hand. That ' s al l I
14 r emember .
15 Q. Those ot her peopl e t hat you ment i oned - - Hope Snowden,
16 J ayne Or t hwei n, B. J . Li de - - who ar e t hey?
17 A. Hope Snowden was a gr ant admi ni st r at or .
18 Q. Was she on t hi s par t i cul ar gr ant wi t h CASI ?
19 A. Yes, yes. B. J . and J ayne wer e super vi sor y management t ype
20 per sons who wer e mor e i nvol ved i n t he t echni cal aspect s, as
21 wel l as t he busi ness but i n t he over al l aspect s of t he gr ant .
22 Q. And what happened at t he ki ckof f meet i ng?
23 A. How do you mean?
24 Q. Di d t he peopl e at NI ST have any di scussi ons wi t h you at
25 t hat meet i ng?
( 212) 805- 0300
631
1 A. Yes, t hey t ol d us what t hey expect ed of us.
2 Q. And how di d t hey i mpar t t hat i nf or mat i on t o you?
3 A. Ther e was a pr esent at i on made t o us.
4 Q. I want you t o t ake a l ook at what ' s al r eady i n evi dence as
5 Gover nment Exhi bi t 4, whi ch i n t he f ol der i n f r ont of you, one
6 of t hose t wo f ol der s.
7 A. Yeah.
8 Q. Di spl ay t he f i r st page.
9 A. I see i t .
10 Q. Do you r ecogni ze what t hat i s?
11 A. Yes.
13 A. That was par t of t he pr esent at i on made t o us at t he
14 ki ckof f meet i ng.
15 Q. What di d t hat pr esent at i on i nvol ve?
16 A. That pr esent at i on i nvol ved a st at ement of what t he ATP
17 pr ogr amwas and what our r esponsi bi l i t i es woul d be i n r epor t i ng
18 and so f or t h.
19 Q. What i f anyt hi ng wer e you t ol d about t he r esponsi bi l i t i es
20 concer ni ng t he budget ?
21 A. Wi t h r espect t o t he budget ?
22 Q. Yes.
23 A. Wel l , one of t he t hi ngs we t al ked about was i f we wer e mor e
24 t han a cer t ai n per cent age f r omt he budget ed number s, t hen we
25 had t o appl y f or per mi ssi on t o do t hat .
( 212) 805- 0300
632
865ZKAR5 Gur f ei n - di r ect
1 BY MR. EVERDELL:
2 Q. And how di d t hat per mi ssi on come?
3 A. That woul d be i n wr i t i ng.
4 Q. What , i f anyt hi ng, wer e you t ol d about spendi ng out si de t he
5 budget ?
6 A. That i t coul d be al l owed, but i t woul d have t o be appr oved.
7 Q. What about di r ect ver sus i ndi r ect cost s, wer e you t ol d
8 anyt hi ng about t hat ?
9 A. Ri ght . I mean we wer e abl e pr et t y much t o spend on
10 i ndi r ect - - I ' msor r y - - on di r ect cost s i n a most gener al way,
11 but i ndi r ect cost s wer e gener al l y not al l owed.
12 Q. What wer e t hose t hi ngs cover ed at t hi s meet i ng?
13 A. Wel l , agai n, t he r ent , t he ut i l i t i es, account i ng, l egal ,
14 maybe some ot her i t ems. I can' t r ecal l .
15 Q. Now, ar ound t he t i me when t he gr ant was awar ded and t he
16 ki ckof f meet i ng occur r ed, di d you have any di scussi ons wi t h Dr .
17 Kar r on about any par t i cul ar expendi t ur es?
18 A. Wel l , agai n l eadi ng up t o t he awar d, we had di scussed
19 var i ous of t hose i t ems t hat wer e not al l owed. Agai n, we
20 di scussed t he pr oposal wr i t i ng cost s.
21 Q. What exact l y di d you di scuss about ?
22 A. Wel l , whet her t hey woul d be al l owed and - - you know, i t was
23 I t hought pr et t y cl ear t hat we wer en' t al l owed, but he sai d
24 maybe we' l l get t hemal l owed. But I ' mnot sur e how t hat was
25 goi ng t o happen.
( 212) 805- 0300
633
1 Q. To your knowl edge, wer e any of t hose pr epr oposal cost s ever
2 appr oved by NI ST peopl e?
4 Q. What ot her speci f i c expendi t ur es di d you di scuss wi t h t he
5 def endant ar ound t hi s t i me when t he gr ant was awar ded?
6 A. Wel l , af t er t he awar d, we di scussed r ent and ut i l i t i es and
7 l egal and account i ng.
8 Q. Let ' s t al k about r ent s and ut i l i t i es f or a moment . What
9 was t he nat ur e of your di scussi ons about r ent and ut i l i t i es?
10 A. Wel l , we had, i n t he pr oposal , and as appr oved i n t he
11 gr ant , we had i ndi cat ed t hat we wer e goi ng t o be i nvol ved wi t h
12 t he Ci t y Uni ver si t y at Fi f t h Avenue and 34t h St r eet wi t h t he
13 gr aduat e cent er t her e, t he comput er sci ence par t of i t , wher e
14 we woul d have a f aci l i t y t her e, and t hat f aci l i t y woul d be a
15 company wi t h some suppor t st af f f r omgr aduat e st udent s or
16 what ever , who wer e i n t he comput er sci ence ar ea.
17 Q. What happened wi t h r espect t o t hat f aci l i t y?
18 A. Wel l , i t was deci ded t hat we woul d not be usi ng t hat
19 f aci l i t y.
20 Q. Why not ?
21 A. I t hi nk Dr . Kar r on had i ndi cat ed t hat t he over head r at es
22 f or t he peopl e t her e was hi gh, and t hat i t was somet hi ng t hat
23 woul d not be desi r abl e.
24 Q. So wher e di d CASI set up i t s busi ness l ocat i on?
25 A. We set up, basi cal l y, i n Dr . Kar r on' s apar t ment .
( 212) 805- 0300
634
1 Q. And what , i f any, di scussi ons di d you have wi t h t he
2 def endant about r ent and ut i l i t i es wi t h r espect t o t he busi ness
3 space of CASI ?
4 A. Wel l , yeah, he f el t t hat - - I mean, he i ndi cat ed t o me t hat
5 t he r ent shoul d be pai d t o hi mby CASI , because t hat ' s wher e we
6 wer e doi ng al l t he wor k, and i t was essent i al l y an of f i ce
7 l abor at or y si t uat i on.
8 Q. Thi s was r ent f r omCASI t o t he def endant ?
9 A. Fr omCASI t o t he def endant , yes.
10 Q. And when t he def endant t ol d you t hi s, what , i f anyt hi ng,
11 was your r eact i on?
12 A. Wel l , i t was cl ear t hat t he r ul es, or t he gui del i nes gi ven
13 t o us by t he peopl e at NI ST sai d no, t hat ' s - - t hat was not
14 al l owed.
15 Q. And what , i f anyt hi ng, di d t he def endant r espond?
16 A. Wel l , he asked me t o see i f we can get i t appr oved. So I
17 wound up cal l i ng Hope Snowden at NI ST and aski ng her i f i t
18 coul d be appr oved.
19 Q. What , i f anyt hi ng, was her r esponse?
20 A. She sai d no.
21 Q. And what di d you do af t er you hear d no f r omHope Snowden?
22 A. I r epor t ed t o Dr . Kar r on. And he sai d, wel l , we t al ked
23 about i t and he sai d, wel l , why don' t you go back and t r y
24 agai n. But under t he i dea t hat t hi s i s a one gr ant company,
25 and so i t ' s cl ear t hat ever yt hi ng we do her e i s f or t hi s gr ant
( 212) 805- 0300
635
1 and t her e wer e no ot her f unds, and so t hat t her e' s no ot her
2 act i vi t y at t he moment . So t hat we coul d si mpl y - - you know,
3 i t woul d be, as he expr essed i t , appr opr i at e f or us t o get pai d
4 r ent f or t hat f aci l i t y.
5 Q. And di d you, i n f act , cal l Hope Snowden agai n?
6 A. Yes, I di d.
7 Q. And di d you ask her t hat quest i on?
8 A. Yes, I di d.
9 Q. That way?
10 A. Wi t h r egar d, wi t h r egar d t o i t bei ng a one gr ant oper at i on,
11 yes.
12 Q. And what was her r esponse?
13 A. She sai d no, we can' t - - we don' t appr ove t hat .
14 Q. And what , i f anyt hi ng, di d you do wi t h t hat r esponse?
15 A. I t ol d i t t o Dr . Kar r on.
16 Q. And what was hi s r esponse?
17 A. I don' t know. I t hi nk he was a l i t t l e none pl used by i t , I
18 don' t know exact l y. For t hat moment we dr opped i t at t he
19 moment at t hat poi nt .
20 Q. About how many t i mes di d you speak t o Hope Snowden about
21 t hi s i ssue of r ent ?
22 A. Wel l , cer t ai nl y t wi ce, maybe mor e, but cer t ai nl y t wi ce.
23 Q. And di d you - - di d Hope Snowden ever t el l you t hat r ent was
24 an al l owabl e expense?
25 A. No.
( 212) 805- 0300
636
1 Q. Di d you have any ot her di scussi ons wi t h Hope Snowden about
2 ot her expense?
3 A. Yes. We di scussed ot her expenses. I t hi nk I pr obabl y
4 di scussed t he pr oposal cost s expense and ut i l i t i es. I t hi nk we
5 di scussed agai n si mi l ar t o t he r ent di scussi on.
6 THE COURT: Di d you ever t al k t o anyone besi des Hope
7 Snowden about t hese t hi s r ent and ut i l i t i es?
8 THE WI TNESS: I t ' s possi bl e. I mi ght ' ve di scussed - -
9 I mi ght have cal l ed her super vi sor , Mar i l yn Gol dst ei n, on a f ew
10 occasi ons.
11 THE COURT: And di d you get a - - what answer di d you
12 get ?
13 THE WI TNESS: Essent i al l y, no.
15 Q. And about how of t en di d you cal l Hope Snowden and t hese
16 ot her peopl e you ment i oned?
17 A. Wel l , at t he begi nni ng of t he gr ant per i od t hat I was
18 t her e, I woul d cal l her t wo t i mes a week or so. As t i me went
19 on, I cal l ed her maybe t wo t i mes a mont h.
20 Q. Al l r i ght . Mr . Ger f ei n, do you know, appr oxi mat el y, when
21 CASI r ecei ved i t s f i r st i nst al l ment of ATP gr ant money?
22 A. I ' ve been t r yi ng t o f i gur e t hat out . But I know i t was
23 ver y ear l y. I t was not ver y much af t er t he not i ce of awar d.
24 The not i ce of awar d was Oct ober 4t h. I keep t hi nki ng i t was
25 r i ght af t er t hat , but I ' mnot sur e.
( 212) 805- 0300
637
1 Q. Do you r ecal l how much was t r ansf er r ed i nt o t he CASI bank
2 account ?
3 A. Yes. $150, 000.
4 Q. And wher e di d t hat money go?
5 A. That money went i nt o a CASI gener al account of some ki nd.
6 Q. Di d you - -
7 A. At Chase Bank.
8 Q. I ' msor r y?
9 A. I t was at Chase Bank, I r ecal l t hat .
10 Q. Di d you ever have any di scussi ons wi t h t he def endant about
11 t hat i ni t i al t r ansf er of $150, 000?
12 A. Yes. He, he - - we had appl i ed f or , I bel i eve, or we had t o
13 appl y f or i t , and I t hi nk wi t h happi ness he t ol d me one mor ni ng
14 when I ar r i ved at hi s apar t ment t hat t he money came i n, t he
15 150, 000 came i n. And i n t he same sent ence I r ecal l he sai d,
16 and I ' ve t r ansf er r ed $75, 000 out of t he account .
17 Q. Di d he say why he di d t hat ?
18 A. Yes. He sai d he had some per sonal obl i gat i ons t o hi s
19 f ami l y, money owed t o hi s f ami l y, and he sai d t hat he had
20 cr edi t car d payment s t o make.
21 Q. Wi t h r espect t o hi s obl i gat i ons t o hi s f ami l y t hat you
22 ment i oned, di d you ever have any ot her di scussi ons wi t h hi m
23 about t hat t opi c?
24 A. Wel l , I mean i n t he cour se of wr i t i ng t he pr oposal , he had
25 al l owed t hat he had not had a - - been empl oyed i n any way, nor
( 212) 805- 0300
638
1 had any ot her gr ant money f or somet i me, and so t hat he had t o
2 r esor t t o cr edi t car ds and t o f ami l y hel p.
3 Q. And what i n par t i cul ar di d you - - di d he say what he was
4 spendi ng t he cr edi t car d money on?
5 A. Wel l , my sense was t hat f r omwhat t he di scussi ons wer e was
6 t hat he was spendi ng i t on j ust l i vi ng. He sai d he had t o
7 l i ve, and so he used hi s cr edi t car ds t o l i ve.
8 Q. When you hear d f r omt he def endant t hat he had t r ansf er r ed
9 $75, 000 out of t he $150, 000, what , i f anyt hi ng, di d you say?
10 A. I t ol d hi mhe coul dn' t do t hat .
11 Q. And what was t he def endant ' s r esponse?
12 A. He sai d, I have t o do i t .
13 Q. Di d he expand on t hat ?
14 A. Wel l , he sai d he had no choi ce; he had t o get r i d of t hose
15 debt s he had and he was t aki ng t hose f unds at t he get - -
16 i ni t i al l y, he had t o j ust t ake t hose f unds i mmedi at el y.
17 Q. Di d you have any ot her di scussi ons wi t h t he def endant about
18 wher e t he gr ant money was bei ng deposi t ed?
19 A. Yes.
20 Q. What wer e t hose di scussi ons?
21 A. Wel l , I t ol d hi mt hat we had t o open up a separ at e account
22 f or t he gr ant so t hat we don' t have i t mi xed up wi t h any ot her
23 act i vi t i es of CASI , i f t her e wer e any.
24 Q. And what was t he def endant ' s r esponse t o t hat ?
25 A. Wel l , at f i r st he r ej ect ed t he i dea, I t hi nk sayi ng t hat i t
( 212) 805- 0300
639
1 was - - i t woul d j ust cost t oo much t o open up anot her account .
2 But I di dn' t - - I di dn' t under st and what t hat meant about t he
3 cost woul d be so gr eat . But I t ol d hi mi t was a r equi r ement of
4 t he gr ant t hat we had t o have a separ at e account .
5 Q. And was a separ at e account event ual l y opened?
6 A. Yes.
7 Q. Mr . Ger f ei n, when you accept ed t he j ob at CASI as busi ness
8 manager , what was your under st andi ng about who woul d have t he
9 aut hor i t y t o si gn checks f or t he company?
10 A. Our i ni t i al di scussi ons wer e t hat I was goi ng t o have sol e
11 r esponsi bi l i t y f or si gni ng checks. I t ol d hi mt hat , l ook,
12 t hat ' s okay, but t hi s i s your company and r eal l y t her e shoul d
13 be dual si gnat ur e r equi r ement f or most checks. And we agr eed
14 t hat t her e woul d be dual si gnat ur e r esponsi bi l i t y, but anyt hi ng
15 under $250 coul d be si gned by one per son.
16 Q. I s t hi s i n f act t hat ar r angement you j ust descr i bed, i s
17 t hat i n f act what happened af t er t he gr ant was awar ded?
18 A. No.
19 Q. How di d i t wor k i n pr act i ce af t er t he gr ant was awar ded?
20 A. Wi t hi n one week exact l y on Oct ober 11t h, Dr . Kar r on sent a
21 not e t o Hope Snowden sayi ng t hat , whi l e I had admi ni st r at i ve
22 r esponsi bi l i t y, I had no si gnat ur e or of f i cer r esponsi bi l i t y at
23 CASI .
24 Q. And what di d you under st and t hat t o mean?
25 A. That means t hat I was st r i pped of my abi l i t y t o cont r ol t he
( 212) 805- 0300
640
1 busi ness as I was t ol d I woul d have.
2 Q. Take a l ook at Gover nment ' s exhi bi t 21 i n t he ot her f ol der
3 i n f r ont of you. Coul d we di spl ay t hat on t he scr een, page
4 t hr ee. I t ' s al so i n t he j ur y bi nder s.
5 A. Uh- huh. Yes.
6 Q. You see t hat document ?
7 THE COURT: I t ' s a l i t t l e har d t o see, but can you
8 r ead i t ?
10 THE COURT: I can' t , I can' t r ead i t .
11 THE WI TNESS: Her e' s my copy.
12 THE DEPUTY CLERK: J udge, he has a copy.
13 THE COURT: Al l r i ght . He was l ooki ng up t her e, so I
14 was - -
15 Q. Act ual l y, he, i f you coul d bl owup exact l y what you bl ew up.
16 Mr . Ger f ei n, do you see t hat document ?
17 A. Yes.
19 A. That document i s t he l et t er t hat Dr . Kar r on sent t o Hope
20 Snowden dat ed Oct ober 11t h, 2001 and i ndi cat i ng t hat I onl y had
21 t he admi ni st r at or r esponsi bi l i t y, but not t he si gnat ur e
22 aut hor i t y. And i t says her e, and i s not aut hor i zed t o si gn f or
23 t he cor por at i on.
24 Q. Wher e do you see t hat ?
25 A. Fr omt he t hi r d - - on t he r i ght si de, t hi r d l i ne f r omt he
( 212) 805- 0300
641
1 bot t om.
2 Q. And you see t he f i nal sent ence whi ch says, t he
3 aut hor i zat i on f or Mr . Ger f ei n t o commi t t he cor por at i on wi l l be
4 made by separ at e l et t er aut hor i zat i on i f t he need ar i ses?
5 A. Cor r ect . I see t hat .
6 Q. Wer e you ever gi ven si gnat or y aut hor i t y f or t he company
7 whi l e you wer e wor ki ng at CASI ?
8 A. No.
9 Q. And what ' s t he dat e on t hi s l et t er ?
10 A. I ' msor r y?
11 Q. What ' s t he dat e on t hi s l et t er ?
12 A. The dat e on t he l et t er above, Oct ober 11t h - - r i ght t her e,
13 yeah.
14 Q. And about how l ong af t er t he gr ant was awar ded was t hat
15 l et t er dat ed?
16 A. I t ' s dat ed - - wel l t he gr ant was - - not i f i cat i on of awar d
17 was Oct ober 4t h, and t hi s l et t er i s dat ed Oct ober 11t h. So
18 i t ' s exact l y one week af t er t he not i ce of awar d.
19 Q. Al l r i ght . Mr . Ger f ei n, di d you have any f ur t her
20 di scussi ons wi t h t he def endant about spendi ng gr ant money af t er
21 t hat l et t er was submi t t ed?
22 A. About spendi ng gr ant money?
23 Q. About par t i cul ar expendi t ur es?
24 A. Sur e, I mean we di scussed var i ous t hi ngs t hat - - I mean Dr .
25 Kar r on ki nd of l i ked equi pment . I mean he - -
( 212) 805- 0300
642
1 Q. Why di d you di scuss t he equi pment di scussi ons you had?
2 A. I n par t i cul ar , we di scussed - - t her e wer e many i t ems of
3 di scussi on, but we di scussed some moni t or s t hat he bought t hat
4 wer e ver y expensi ve. I mean as moni t or s go, I t hi nk t hese
5 wer e, i f I r emember cor r ect l y, a coupl e t housand dol l ar s a
6 pi ece. They wer e l ar ge, at t r act i ve, but I di dn' t t hi nk t hey
7 wer e necessar y, and t hey wer e not par t - -
8 MR. RUBI NSTEI N: Obj ect i on, move t o st r i ke.
9 A. They wer e not par t of t he gr ant .
10 MR. RUBI NSTEI N: I move t o st r i ke what he t hought .
12 THE COURT: Obj ect i on sust ai ned, I guess.
13 Q. Ar e you - -
14 THE COURT: As t o what he t hought . You sai d you
15 t hought t hat you t ol d hi mt hey wer e not par t of t he gr ant .
17 THE COURT: Go ahead, what . Di d you t el l hi manyt hi ng
18 el se?
19 Q. I ' msor r y, Mr . Ger f ei n, you ment i oned moni t or s i n
20 par t i cul ar ?
21 A. Ri ght .
22 Q. I s t her e any ot her pi eces of equi pment ?
23 A. They wer e not par t of t he gr ant . Al so, t he poi nt t hey wer e
24 not par t of appr oved gr ant .
25 Q. Al l r i ght , l et ' s - - what , i f any, di scussi ons di d you have
( 212) 805- 0300
643
1 wi t h def endant about t hese pi eces of equi pment not bei ng par t
2 of t he gr ant ?
3 A. Wel l , t hat , you know, he coul dn' t j ust buy anyt hi ng he
4 want ed; t hat he had t o do t hi ngs t hat wer e par t of t he gr ant .
5 I f he want ed t o get somet hi ng t hat was not par t of t he gr ant ,
6 he woul d have t o appl y f or a wr i t t en appr oval . And hi s
7 r esponse t o me was I ' mt he PI , meani ng I ' mt he pr i nci pal
8 i nvest i gat or , and I can do anyt hi ng I want . I sai d, you can' t
9 do anyt hi ng you want . And t hat went on and on. That , t hat
10 i nt er change t ook pl ace a number of t i mes.
11 Q. Di d you appr ove or di sappr ove your sel f of t hese
12 expendi t ur es?
14 THE COURT: Obj ect i on sust ai ned. As I under st ood i t ,
15 hi s t est i mony i s t hat he di dn' t have appr oval aut hor i t y af t er
16 Oct ober 11t h.
17 MR. EVERDELL: I ' msor r y, your Honor , I j ust meant not
18 wi t h r espect t o your appr oval , si gnat or y aut hor i t y, but di d you
19 t hi nk t hat t hese expendi t ur es - -
20 THE COURT: The quest i on i s whet her t hey came wi t hi n
21 t he gr ant or not , not whet her he per sonal l y appr oved t hi ngs.
22 Thi s i sn' t a t r i al i n connect i on wi t h - -
23 MR. EVERDELL: Cer t ai nl y, your Honor .
24 THE COURT: - - per sonal appr oval s or di sappr oval s.
25 Q. When you sai d t hat t hese wer e not par t of t he gr ant , t hese
( 212) 805- 0300
644
1 expendi t ur es t hat you wer e t al ki ng t o t he def endant about , what
2 di d you mean by t hat ?
3 A. Wel l , we had i ncl uded i n our pr oposal var i ous f i gur es,
4 i ncl udi ng f i gur es f or equi pment , and t he equi pment was
5 del i neat ed, and t he i t ems t hat we j ust t al ked about wer e not
6 i ncl uded. And when t hose i t ems wer e bei ng pur chased t hat wer e
7 not r equi r ed by t he gr ant , or not appr oved by t he gr ant , I
8 shoul d say, t hen t hey r eal l y shoul d not have been bought .
9 Q. Di d you di scuss t hi s wi t h t he def endant ?
10 A. Yes, but - -
11 Q. What was hi s r esponse?
12 A. Wel l , f i r st of al l , i t was al ways af t er t he f act t hat I
13 f ound out t hat t hese t hi ngs wer e bought , because I di dn' t have
14 anyway of st oppi ng i t . And so I ' d come i n t her e one day as an
15 exampl e, and t her e woul d be t hi s movi e si zed t heat er - - t hese
16 t heat er si ze movi e scr een goi ng up, pr oj ect i on scr een pr obabl y
17 as bi g as t hat , maybe bi gger , don' t know. And I sai d t o hi m,
18 what i s t hat al l about ? And he sai d, wel l , we need t hat . And
19 I sai d, f or what ? And I j ust di dn' t under st and why we' d have
20 t o spend anot her f ew t housand dol l ar s when we - -
21 MR. RUBI NSTEI N: Obj ect i on t o what - - hi s f eel i ngs.
23 l ast t hr ee or f our wor ds. What t he i ssue i s t hat , was t hat
24 amongst t he equi pment t hat was del i neat ed i n t he gr ant ?
25 THE WI TNESS: I t i s not . That equi pment was not
( 212) 805- 0300
645
1 i ncl uded i n t he gr ant .
2 Q. What was t he def endant ' s r esponse when you woul d t al k t o
3 hi mabout t hese non- del i neat ed equi pment pi eces?
4 A. He sai d, we needed i t .
5 Q. Do you know what f unds wer e used t o buy t hese i t ems,
6 equi pment ?
7 A. The onl y f unds we had wer e f unds f r omNI ST, ATP f unds. So
8 t her e wer e no ot her f unds t hat I knew about t hat came i nt o t he
9 company.
10 Q. How do you know t he onl y f unds you had wer e ATP f unds?
11 A. Wel l , because I had been t r yi ng t o get ot her f unds and I
12 had not been successf ul i n doi ng t hat .
13 THE COURT: Di d you r evi ew - - wer e you i n char ge of
14 t he books and r ecor ds?
15 THE WI TNESS: Essent i al l y not . I mean, I shoul d have
16 been, but I had no cont r ol over i t .
17 THE COURT: What about t he bank account ?
18 THE WI TNESS: Same.
19 THE COURT: You di dn' t - -
20 THE WI TNESS: I had no cont r ol over i t .
21 THE COURT: You di dn' t r evi ew t he bank account s?
22 THE WI TNESS: I di d, but I had no cont r ol over i t .
23 Q. Di d you have any di scussi ons wi t h t he def endant on t he
24 subj ect of f r i nge benef i t s f or medi cal expenses?
25 A. Yes.
( 212) 805- 0300
646
1 Q. And what wer e t he nat ur e of t hose di scussi ons?
2 A. The nat ur e of t hose di scussi ons wer e t hat t he, t he f i gur e
3 of 34 per cent of an empl oyee' s gr oss sal ar y was al l owabl e f or
4 medi cal and ot her expenses l i ke t hat , f r i nge benef i t s. And Dr .
5 Kar r on was of t he opi ni on t hat , because he t ol d me so, t hat i f
6 i t was 34 per cent of t he t ot al payr ol l , t hat woul d be okay.
7 Q. What do you mean, i f i t was 34 per cent of t he t ot al ?
8 A. I f we di d not exceed 34 per cent of t he ent i r e payr ol l as
9 opposed t o j ust 34 per cent of each i ndi vi dual , t hat woul d be
10 okay. So t hat i f one per son had, say, 20 per cent and one
11 per son had 50 per cent , t he aver age woul d be l i ke 35 per cent or
12 somet hi ng cl ose t o t hat , so t hat woul d be okay.
13 THE COURT: Di d t he company have a benef i t pl an? Di d
14 t he company have a benef i t pl an?
15 THE WI TNESS: Not t hat I ever saw.
16 THE COURT: And how wer e f r i nge benef i t s admi ni st er ed?
17 THE WI TNESS: They wer e ver y l oosel y ar r anged at t hat
18 t i me.
19 THE COURT: What do you mean by t hat ?
20 THE WI TNESS: Wel l , t her e was, t her e was an assi gnment
21 gi ven t o an at t or ney t o gener at e a benef i t pol i cy, but t hat
22 never happened whi l e I was t her e.
23 THE COURT: But how - - you sai d t hey wer e l oosel y
24 admi ni st er ed. Someone had t o document somet hi ng l i ke t hat .
( 212) 805- 0300
647
1 THE COURT: What woul d happen?
2 THE WI TNESS: Doct or ' s bi l l , i f t he per son woul d have
3 i nsur ance or t he bi l l woul d be submi t t ed, but basi cal l y t he
4 company pai d f or i nsur ance i n my case.
5 THE COURT: Was t her e i nsur ance; t her e was heal t h
6 i nsur ance?
7 THE WI TNESS: Ther e was no - - t o my knowl edge, t her e
8 mi ght have been a pol i cy, but I can' t r ecal l . I do know t hat
9 i n my case i t was handl ed a l i t t l e bi t di f f er ent l y, but st i l l
10 i t was, t her e was no f or mal pol i cy.
11 THE COURT: What di d t hey do, pay t hemas t he bi l l s
12 came i n?
13 THE WI TNESS: I was cover ed by - - I was cover ed by an
14 i nsur ance pol i cy. I t hi nk Dr . Kar r on had one t oo. But I t hi nk
15 t her e wer e ot her bi l l s t hat he mi ght have had, as I r ecal l ,
16 t hat wer e pai d possi bl y di r ect l y. I r eal l y don' t know.
17 THE COURT: So t hat ' s what you mean by " l oosel y"
18 admi ni st er ed.
21 BY MR. EVERDELL:
22 Q. Mr . Ger f ei n, di d t he def endant have any heal t h expendi t ur es
23 t hat you' r e awar e about dur i ng t hi s per i od you wor ked wi t h
24 CASI ?
25 A. Yes, he had - - I t hi nk he had a l ot of heal t h expendi t ur es.
( 212) 805- 0300
648
1 I n par t i cul ar , I r emember he had dent al expendi t ur es.
2 Q. How do you know he had dent al expendi t ur es?
3 A. Wel l , of t en t i mes he asked me t o pi ck hi mup at t he dent i st
4 on my way i nt o t he of f i ce.
5 Q. And do you know what ki nd of dent al pr ocedur es he was
6 havi ng?
7 A. I n par t i cul ar , he had i ndi cat ed t hat he had a j aw
8 r econst r uct i on act i vi t y goi ng on wi t h t he dent i st .
9 Q. And di d you have any sense about why t he def endant was
10 havi ng hi s j aw - -
11 A. Based on hi s di scussi on wi t h me, and some ot her peopl e who
12 had such pr ocedur e, and t hat t hey wer e get t i ng a sex change
13 oper at i on, i t became cl ear t hat t hat j aw r econst r uct i on was f or
14 a sex change oper at i on.
15 Q. And j ust t o r epeat , di d you see any wr i t t en pl an f or t he
16 empl oyees at CASI f or heal t h benef i t s?
17 THE COURT: Wai t . I don' t under st and. A dent i st
18 can' t - - doesn' t do a sex change oper at i on.
19 THE WI TNESS: Cor r ect ; yes, si r .
20 THE COURT: You pi cked hi mup at t he dent i st .
21 THE WI TNESS: Ri ght , but - -
22 THE COURT: So al l you know i s t hat he had dent al
23 expenses.
24 THE WI TNESS: Ri ght . But based on hi s descr i pt i ons he
25 made of some ot her peopl e who he knew who had a si mi l ar
( 212) 805- 0300
649
1 pr ocedur e, and t hat was as t he cosmet i cs f or i n cont empl at i on
2 of a sex change oper at i on.
3 Q. Al l r i ght . Mr . Ger f ei n, di d you ever see a wr i t t en pl an i n
4 pl ace f or CASI f or heal t h expendi t ur es?
5 A. I di d not .
6 Q. Mr . Ger f ei n, when you had di scussi ons wi t h t he def endant
7 about spendi ng, wher e woul d you have t hose conver sat i ons?
8 A. Wel l , t ypi cal l y we woul d l eave t he of f i ce, whi ch was
9 usual l y ver y noi sy and poor l y vent i l at ed, and we' d go t o a
10 cof f ee shop, one of sever al cof f ee shops acr oss t he st r eet .
11 Q. And when you had meet i ngs wi t h t he def endant , woul d you
12 schedul e meet i ngs or woul d you j ust show up?
13 A. Wel l , bot h. Somet i mes I j ust show up and somet i mes t hey
14 wer e schedul ed.
15 Q. When you di d schedul e meet i ngs, di d t he def endant al ways
16 at t end your schedul ed meet i ngs?
17 A. Ver y of t en not .
18 Q. Can you expand on t hat ?
19 A. Wel l , I woul d t r y t o see hi mon var i ous occasi ons havi ng t o
20 do wi t h budget ar y t hi ngs and ot her mat t er s, and somet i mes I ' d
21 show up at t he appoi nt ed t i me, l et ' s say 11: 00 o' cl ock and he
22 was ei t her sl eepi ng or he' s i n t he gymor what ever , but ver y
23 of t en he was not t her e.
24 Q. You say he was sl eepi ng; how do you know he' s sl eepi ng?
25 THE COURT: I don' t see t he r el evance of whet her he' s
( 212) 805- 0300
650
1 sl eepi ng or not , Mr . Ever del l . You have t o - -
2 Q. As a - -
3 MR. EVERDELL: Your Honor , i f we coul d have a br i ef
4 si debar ?
5 THE COURT: I f you got - - al l r i ght , go ahead t hen.
6 MR. EVERDELL: Al l r i ght .
7 THE COURT: You got a r el evant poi nt , but I j ust
8 want ed t o cal l your at t ent i on t o t he possi bl e l ack of
9 r el evance.
10 Q. How, i f anyt hi ng, di d t hi s, di d t hese - - di d t he
11 def endant ' s wor k habi t s i mpact your wor k?
13 THE WI TNESS: Ver y of t en i t was di f f i cul t t o - -
14 MR. RUBI NSTEI N: I have an obj ect i on.
16 Q. How, i f any - -
17 A. Wel l , ver y of t en I woul d t r y t o meet wi t h hi mand - - wel l ,
18 one t i me I had an appoi nt ment t o see hi mon a Sunday eveni ng
19 ' cause I coul d get hi s at t ent i on wi t hout i nt er f er ence, and I ' d
20 show up and I wai t f or an hour , and he di dn' t show up.
21 Q. Do you ever have any di scussi ons wi t h Dr . Kar r on about hi s
22 wor k habi t s?
23 A. Yes, I di d. I t ol d hi mt hi s i s not j ust accept abl e. I
24 used t o get f r ust r at ed j ust showi ng up t i me and t i me agai n, and
25 he' d be out doi ng what he was doi ng.
( 212) 805- 0300
651
1 Q. Mr . Ger f ei n do you know someone named Mar gar et Fer r and?
2 A. I know t he name Mar gar et .
3 Q. Who i s Mar gar et ?
4 A. Mar gar et was a cl eani ng l ady.
5 Q. And what di d you - - oh, di d you ever see her i n t he
6 apar t ment , Mar gar et ?
7 A. Sur e.
8 Q. How of t en?
9 A. I woul d guess once a week, but I ' mnot r eal l y sur e.
10 Q. And what was she doi ng when you saw her i n t he apar t ment ?
11 A. She' d be cl eani ng di shes or t oi l et s or , you know, what ever ;
12 dust i ng, what ever a cl eani ng l ady does.
13 Q. Di d you ever see Mar gar et doi ng any of f i ce wor k, asi de f r om
14 cl eani ng, whi l e you wer e t her e?
15 A. Not when I was t her e.
17 Q. Mr . Ger f ei n, when di d you t er mi nat e your empl oyment at
18 CASI ?
19 A. I t er mi nat ed my empl oyment Sept ember 30t h, 2002.
20 Q. Why di d you l eave af t er onl y one year ?
21 A. Wel l , Dr . Kar r on sai d he coul dn' t af f or d t o pay me t he
22 hundr ed t housand dol l ar s a year . And he asked i f I woul d st ay
23 on at $50, 000 a year . And i t di dn' t t ake much t i me f or me t o
24 know t hat I woul dn' t st ay t her e ei t her way, at 100 or 50,
25 because my ment al heal t h was mor e val uabl e t han bei ng par t of
( 212) 805- 0300
652
1 t hat oper at i on.
2 MR. EVERDELL: Thank you. No f ur t her quest i ons.
7 Q. I n f act , Mr . Gur f ei n, you had a cont r act , di d you not ?
8 A. I di d.
9 Q. And your cont r act was f or one year , cor r ect ?
10 A. Cor r ect .
11 Q. And at t he end of t he year wer e you of f er ed a r enewal of
12 t hat cont r act ?
13 A. No.
14 Q. You wer e a member of t he boar d of di r ect or s, wer e you not ?
15 A. For one mont h.
16 Q. And - -
17 A. Appr oxi mat el y.
18 Q. Was t hat t he f i r st mont h?
19 A. That was - - no. I t was somet i me bet ween J ul y and August ,
20 somet hi ng l i ke t hat .
21 Q. J ul y and August of 2002?
22 A. Cor r ect .
23 Q. And wer e you an of f i cer i n t he cor por at i on?
24 A. For about t hat one mont h. I was made an of f i cer of t he
25 cor por at i on wi t hout my bei ng t ol d i n advance, and I r esi gned
( 212) 805- 0300
653
865ZKAR5 Gur f ei n - cr oss
1 t hat wi t hi n a mont h, r oughl y, of t he t i me t hat I had t hat ,
2 whi l e I t hat mai nt ai ned my posi t i on as t he busi ness manager .
3 Q. You r esi gned as member of t he boar d, cor r ect ?
4 A. Yes.
5 Q. Who el se was on t he boar d?
6 A. Dr . Kar r on, I t hi nk t her e was a Mr . Ber nst ei n I bel i eve who
7 was an at t or ney, t her e was Abe Kar r on, who was Dr . Kar r on' s
8 br ot her . Ther e wer e, t her e pr obabl y was one ot her per son, I
9 t hi nk possi bl y Fr eder i ca Mi l l er at t or ney. I ' mnot sur e. She
10 mi ght have been a member of t he boar d as wel l .
11 Q. And t hese - - di d you at t end any boar d meet i ngs?
12 A. That one. Oh, as a di r ect or or as a vi si t or ?
13 Q. At any t i me?
14 A. I t hi nk I at t ended t wo boar d meet i ngs i n t ot al , i f I
15 r emember cor r ect l y.
16 Q. And wher e wer e t he boar d meet i ngs hel d?
17 A. They wer e hel d at t he of f i ce of Mr . Ber nst ei n.
18 Q. And what t i me of day or ni ght ?
19 A. I t hi nk pr obabl y i n t he eveni ng.
20 Q. And you, when you wor ked at CASI , what wer e your wor k
21 hour s?
22 A. The wor k hour s wer e pr et t y var i abl e. They wer e up t o me.
23 And some days I wor ked at CASI ' s of f i ces l i ke t hr ee days a
24 week, maybe f our , maybe t wo, and t he r est of t he t i me I wor ked
25 at home. But r emember I was t her e on 75 per cent of t he t i me.
( 212) 805- 0300
654
1 Q. When you came t o t he of f i ce, how l at e woul d you st ay on a
2 non- boar d member day?
3 A. I t var i ed.
4 Q. Wel l , what was t he l at est t hat you ever st ayed at t he
5 of f i ce when you wer e t he - - you wer e t he chi ef oper at i ng
6 of f i cer ?
7 A. No, I was not .
8 Q. What was your t i t l e?
9 A. Busi ness manager , I t hi nk.
10 Q. How l at e di d you - - what ' s t he l at est you ever wor ked at
11 CASI t he year as t he busi ness manager ?
12 A. Pr obabl y mi dni ght .
13 Q. And how of t en di d you do t hat ?
14 A. I don' t r emember .
15 Q. Mor e t han once?
16 A. Oh, sur e.
17 Q. And you wer e asked t o i nvest money i n CASI , wer e you not ?
18 A. I was.
19 Q. You wer e asked t o i nvest money by Dr . Kar r on' s br ot her , Abe
20 Kar r on, r i ght ?
21 A. I t wasn' t qui t e l i ke you' r e sayi ng.
22 Q. Wel l , wer e you asked t o i nvest $50, 000?
23 A. That ' s cor r ect .
24 Q. And when you wer e asked t o i nvest , when was i t ?
25 THE COURT: Coul d we have a dat e, Mr . Rubi nst ei n?
( 212) 805- 0300
655
1 Q. Was t hat ear l y on - -
2 A. Yes.
3 Q. - - your empl oyment , cor r ect ?
4 A. Cor r ect .
5 Q. I t was pr i or t o t he t i me t hat t he l et t er was gener at ed t o
6 Mar i l yn Gol dst ei n l i mi t i ng your f unct i ons?
7 A. No, i t was af t er t hat .
8 Q. When was i t ?
9 A. I don' t know t he dat e, but i t was af t er t hat .
10 Q. Wer e you a si gnat or y at one t i me on t he checki ng account s?
11 A. Was I a si gnat or y on t he checki ng account ? Di d I si gn
12 paper , document s at Chase t o do t hat at some poi nt ? I t hi nk I
13 di d. Di d I ever si gn a check? No.
14 Q. How wer e t he checks cr eat ed?
15 A. How wer e t hey cr eat ed?
16 Q. Yeah. You got pai d, di dn' t you?
17 A. Yes.
18 Q. Pai d ever y week, cor r ect ?
19 A. No.
20 Q. Got pai d ever y t wo weeks?
21 A. No.
22 Q. How of t en you get pai d?
23 A. Once a mont h.
24 Q. Each mont h?
25 A. Each mont h.
( 212) 805- 0300
656
1 Q. Now, you t ol d us about Dr . Kar r on i n t he f i r st mont h of t he
2 gr ant he t ook $75, 000 f or as a l oan f or hi s per sonal use,
3 cor r ect ?
4 A. Cor r ect .
5 Q. Now, he was ear ni ng $175, 000 f or t he year , cor r ect ?
6 A. Cor r ect .
7 Q. And t hat comes out t o about $14, 000 and change a mont h?
8 A. Cor r ect .
9 Q. Di d you know i f Dr . Kar r on t ook a check, a paycheck i n
10 November of 2001?
11 A. I don' t know.
12 Q. Do you know i f he t ook a paycheck i n December of 2001?
14 Q. Do you know i f he got a paycheck i n J anuar y of 2002?
15 A. I don' t r emember t hat .
16 Q. I sn' t i t a f act t hat t he f i r st paycheck t hat Dr . Kar r on got
17 was i n May of 2002?
18 A. I don' t know t hat .
19 Q. Wel l , as t he - -
20 THE COURT: The j ur y i s t o dr aw no i nf er ences.
21 Quest i ons onl y ar e what i s t he evi dence bef or e you. Don' t dr aw
22 any i nf er ences f r omt he quest i on.
23 Q. Now, t her e wer e a number of peopl e who wor ked at CASI on
24 t hi s pr oj ect , wer e t her e not ?
25 A. Sever al , yes.
( 212) 805- 0300
657
1 Q. And what was t he or i gi nal budget f or sal ar i es?
2 A. For what ?
3 Q. For sal ar i es, f or t ot al sal ar i es?
4 A. I don' t r emember . I don' t r ecal l t hat of f hand.
5 Q. Let me show you an exhi bi t t o see i f i t r ef r eshes your
6 r ecol l ect i on?
7 THE COURT: What exhi bi t ?
8 Q. Okay. Af t er t he i ni t i al budget was submi t t ed, was t her e an
9 amendment , a r equest f or an amendment t o t he budget submi t t ed?
10 A. I ' msor r y, coul d you r epeat t hat ?
11 Q. Yeah. Af t er t he i ni t i al budget was submi t t ed, you
12 submi t t ed a budget bef or e you r ecei ved t he f unds, cor r ect ?
13 A. Yes.
14 Q. And t hat was t o get $800, 000 t he f i r st year , cor r ect ?
15 A. Cor r ect .
16 Q. And af t er - -
17 THE COURT: Tot al budget .
18 Q. For t he f i r st year ?
19 A. I bel i eve, I bel i eve 800, 000 sounds about r i ght . I t mi ght
20 have been a l i t t l e bi t mor e.
21 THE COURT: Budget . We' r e not t al ki ng sal ar i es at
22 t hi s poi nt . Budget .
23 MR. RUBI NSTEI N: No, t al ki ng t ot al budget .
24 A. Yes.
25 Q. The f i r st year . And t hen t he t ot al you t ol d us was f or t he
( 212) 805- 0300
658
1 t hr ee year s was about 2. 1 mi l l i on?
2 A. Cor r ect .
3 Q. Now, i n Oct ober di d you f i l e f or a budget amendment , a
4 r evi si on ear l y on?
5 A. Yes.
6 Q. And I t ur n your at t ent i on t o exhi bi t - - do you have t he
7 exhi bi t s i n f r ont of you, si r ? I s t her e a book wi t h exhi bi t s
8 t her e?
9 A. Whi ch exhi bi t ar e you - -
10 Q. I ' mr ef er r i ng t o exhi bi t 22.
11 A. I don' t have such an exhi bi t .
13 MR. RUBI NSTEI N: I ' l l gi ve hi mmy exhi bi t , your Honor .
14 MR. EVERDELL: Her e.
15 Q. Mr . Ger f ei n - -
16 THE COURT: The wi t ness has been handed exhi bi t 22.
17 Q. Di d you r evi ew t hat , si r ?
18 A. Whi ch pi ece of paper ar e you aski ng me t o l ook at ?
19 Q. The ent i r e exhi bi t .
20 A. Okay. I , I have an i dea what t hi s i s.
21 Q. Di d you have di scussi ons wi t h peopl e, ei t her Hope Snowden
22 or anybody at ATP about a r evi si on i n t he budget ?
23 A. About a pr ovi si on i n t he budget ?
24 Q. No, a r evi si on?
25 A. Oh, yes. The chances ar e I di d, al t hough t hi s was
( 212) 805- 0300
659
1 submi t t ed - - we di d make a submi ssi on.
2 Q. And di d you pr epar e t he submi ssi on?
3 A. I bel i eve I di d. I can' t be 100 per cent sur e. But i f I
4 di d i t , I di d i t wi t h t he Dr . Kar r on. I mean, we cer t ai nl y
5 di scussed i t .
6 Q. Al l r i ght . And by l ooki ng at t hat document , does i t
7 r ef r esh your r ecol l ect i on as t o what t he budget was f or t he
8 f i r st year ?
9 A. Ri ght . I see t hat .
10 Q. And t her e wer e submi t t ed r easons f or t he r equest f or
11 r evi si ons, cor r ect ?
12 A. Yes.
13 Q. As a mat t er of f act , t hi s was t he second r evi si on f or
14 budget ?
15 A. I don' t r ecal l t hat . I , I j ust don' t r ecal l whi ch r evi si on
16 i t was, i f t her e was a f i r st or second.
17 Q. Do you r ecal l submi t t i ng a r evi si on t o change your name
18 f r omLee t o El i sha?
19 A. I f t her e was such changes, I do not r emember i t .
20 Q. Now, t he sal ar y - - di d you under st and, si r , as t he busi ness
21 manager , t hat you di d not need appr oval i f you changed a
22 cat egor y by 10 per cent ?
23 A. Wi t hi n 10 per cent .
24 Q. Of t he gr ant ?
25 A. Yes.
( 212) 805- 0300
660
1 Q. So t hat you coul d add $80, 000 t o a cat egor y as l ong as you
2 t ook 80, 000 away f r omt hat cat egor y, cor r ect ?
3 A. Um, t hat coul d be cor r ect . I can' t be sur e 100 per cent i f
4 t hat ' s cor r ect .
5 Q. Now, you t ol d us t hat you had heal t h i nsur ance. You
6 act ual l y had a cont r act , cor r ect ?
7 A. Yes.
8 Q. And di d t hat pr ovi de f or heal t h benef i t s f or you?
9 A. I t hi nk so, but I can' t r emember exact l y. I don' t have i t
10 i n f r ont of me.
11 Q. Do you r ecal l who t he l awyer was who you ment i oned was
12 cont act ed t o devel op a f r i nge benef i t manual ?
13 A. My best r ecol l ect i on - -
14 THE COURT: Pl an or manual ?
15 Q. Pl an or manual ?
16 A. My best r ecol l ect i on was Fr eder i ca Mi l l er .
17 Q. And do you know i f Fr eder i ca Mi l l er was pai d anyt hi ng t o do
18 t hi s wor k?
19 A. I have no i dea.
20 Q. Now, i n addi t i on t o t he - - your wi f e had separ at e cover age,
21 di d she not ?
22 A. My wi f e had separ at e cover age, yes.
23 Q. And CASI r ei mbur sed you f or your wi f e' s medi cal expense,
24 r i ght ?
25 A. Not our medi cal expense, our i nsur ance.
( 212) 805- 0300
661
1 Q. What ki nd of i nsur ance?
2 A. I t was a gr oup i nsur ance, I t hi nk. I t was our por t i on of
3 t he gr oup i nsur ance.
4 Q. Gr oup i nsur ance cover i ng what ?
5 A. Cover i ng medi cal .
6 Q. And wer e you al so on t he medi cal pl an t hat CASI had f or i t s
7 empl oyees?
8 A. No.
9 THE COURT: Whose gr oup medi cal wer e you t al ki ng
10 about ?
11 THE WI TNESS: My wi f e' s medi cal . My wi f e was par t of
12 a gr oup, and so - -
13 THE COURT: I see. Di f f er ent , separ at e gr oup?
14 THE WI TNESS: Agai n, t her e was no - - I must make a
15 poi nt . Ther e was no pol i cy, and Dr . Kar r on sai d, okay, we' l l
16 j ust pay your medi cal i nsur ance. And t he way i t was set up,
17 t hat my wi f e woul d be cover ed under t hat as wel l .
18 Q. And t her e wer e f r i nge benef i t s pr ovi ded f or i n your budget ,
19 wer e t her e not ?
20 A. Cor r ect .
21 Q. And how much wer e t he f r i nge benef i t s pr ovi ded f or i n t he
22 CASI budget ?
23 A. I woul d have t o l ook t hat up. I don' t know t hat exact l y.
24 The f r i nge benef i t s wer e pr obabl y 34 per cent of t he t ot al
25 payr ol l . The payr ol l - - and t hat f i r st year says her e
( 212) 805- 0300
662
1 $325, 000. So f r i nge benef i t s shoul d have been 34 per cent of
2 what ever t hat number i s, whi ch shoul d be somet hi ng over
3 $100, 000, I t hi nk.
4 Q. And do you see on - - so t hat was - - di d you ar gue wi t h Dr .
5 Kar r on as t o whet her or not you - - your wi f e shoul d be
6 r ei mbur sed f or your medi cal i nsur ance?
7 A. Ar gue? No, t her e was no ar gument . He - - t her e was never
8 an ar gument about t hat .
9 Q. Di d you say t o hi m, I don' t t hi nk t hat ' s an al l owabl e
10 f r i nge benef i t ?
11 A. No.
12 Q. Di d you t hi nk i t was al l owabl e?
13 A. Based on t he, t he l oose pol i cy t hat he had est abl i shed, i t
14 was.
15 Q. What about ATP, di d you t hi nk t hat hi s l oose pol i cy
16 vi ol at ed t he ATP - -
17 A. I ' mnot sur e how. I f i t was f or me, wi t hi n 34 per cent of
18 my, of my gr oss pay, i t was not vi ol at i ng, no.
19 Q. Was i t - - di d you know of any r ul e t hat suggest ed t hat t he
20 f r i nge benef i t amount was r el at ed t o an i ndi vi dual ' s gr oss pay?
21 A. Yes.
22 Q. Wher e, wher e i s i t t hat i t ' s - - wher e i s t he document t hat
23 suggest s t hat f r i nge benef i t s ar e i n di r ect pr opor t i on t o one' s
24 sal ar y?
25 A. As f ar as - - I r emember r eadi ng t hat i n t he document s.
( 212) 805- 0300
663
1 Q. You had t hat di scussi on wi t h Dr . Kar r on, di d you not ?
2 A. Yes. Wel l , we di scussed t he subj ect i n gener al , mor e wi t h
3 r espect t o hi s r equi r ement s f or medi cal t han mi ne. I was way
4 wi t hi n t he 34 per cent .
5 Q. And hi s vi ew was t hat i f you had f r i nge benef i t s f or t he
6 company, what ever was ut i l i zed, as l ong as i t was a f r i nge
7 benef i t , anybody coul d use i t ?
8 A. I don' t under st and your quest i on.
9 Q. Di d you have a di scussi on wi t h Dr . Kar r on as t o t he use of
11 A. Yes.
12 Q. And di dn' t he advi se you t hat i t was hi s under st andi ng t hat
13 f r i nge benef i t s - - t hat he coul d ut i l i ze up t o what ever f r i nge
14 benef i t money was not used by ot her empl oyees t hat was
15 avai l abl e f or hi m?
16 A. He sai d t hat .
17 Q. And ar e you awar e - - di d you have anyt hi ng t o do wi t h t he
18 quar t er l y f i nanci al st at ement s?
19 A. Yes.
20 Q. Di d you hel p pr epar e t hem?
21 A. Yes.
22 Q. Wher e di d you get t he number s f r omt o put i nt o t he
23 quar t er l y f i nanci al st at ement s?
24 A. Those number s wer e t he aggr egat e of what was i n t he mont hl y
25 appl i cat i ons f or , f or t he var i ous pr ogr ess payment s. That ' s
( 212) 805- 0300
664
1 wher e t hese number s came f r om.
2 Q. Di d t hey come f r omact ual expenses?
3 A. No, t hey di d not .
4 Q. And who det er mi ned t hat t hat was t he pr oper number s, t hose
5 wer e t he pr oper number s t o use?
6 A. Wel l , t he f i r st t i me we went i n af t er Dr . Kar r on wi t hdr ew
7 t he $75, 000, and we had we had a di scussi on about t hat , about
8 how t hat $75, 000, f or exampl e, coul d be appl i ed t o di r ect - - on
9 t he di r ect char ges f or t he gr ant , whi ch we coul dn' t possi bl y do
10 because i t wasn' t - - I mean t hat money was not spent on t he
11 gr ant . So Dr . Kar r on sai d j ust , okay, make i t t hat i t wor ks;
12 make sur e t hat , you know, you don' t r ai se any r ed f l ags and
13 j ust submi t t he number s t hat wi l l make i t wor k. And t hat ' s
14 what we di d.
15 Q. You ar e awar e, si r , t hat Dr . Kar r on pai d back t hat $75, 000
16 i n t hat f i r st year ; you' r e awar e of t hat ?
17 A. I am. But i t caused us gr eat pai n t o have t hat $75, 000
18 t aken out , so at t he end of ever y mont h we wer e down t o al most
19 zer o on t he bank account .
20 Q. And whenever you got down t o zer o, Dr . Kar r on woul d put hi s
21 own money i nt o t he company, cor r ect ?
23 Q. Wel l , how di d you get above zer o?
24 A. We got anot her pr ogr ess payment .
25 Q. Di d you get a per sonal l oan f r omCASI dur i ng t hi s per i od?
( 212) 805- 0300
665
1 A. Di d I get a per sonal l oan?
2 Q. Yes.
4 Q. Di d you get a per sonal l oan f r omDr . Kar r on dur i ng t hi s
5 per i od?
7 Q. You al so had a t el ephone i nst al l ed i n your house r el at ed t o
8 CASI busi ness wi t h t he ATP gr ant , di d you not ?
9 A. Cor r ect .
10 Q. And t hat t el ephone was pai d f or by CASI ?
11 A. Cor r ect .
12 Q. And you used t hat phone st r i ct l y f or company busi ness?
13 A. Cor r ect .
14 Q. Di d you have a cr edi t car d t o use f or CASI ?
15 A. I don' t r ecal l i f I had a cr edi t car d. I f I di d, i t was
16 har dl y used. I n f act , I t hi nk I gave i t back t o hi m. I f I had
17 one, I gave i t back t o hi m.
18 Q. At what poi nt ?
19 A. Ri ght away. I mean i t was - - I , I , I can' t r emember t he,
20 any cr edi t car d bei ng of any subst ance.
21 Q. Di d you cal l anybody at ATP t o r epor t t hat Dr . Kar r on had
22 bor r owed $75, 000?
23 A. I di d not .
24 Q. When you say t hat you wer e, t he company was shor t money,
25 t her e was $800, 000 deposi t ed by ear l y Oct ober or by t he mi ddl e
( 212) 805- 0300
666
1 of Oct ober i nt o an account f or you t o dr awdown; i s t hat
2 cor r ect ?
3 A. I ncor r ect .
4 Q. Wher e was t he money t hat was gi ven by ATP, t he $800, 000,
5 how di d t hat - -
6 A. The $800, 000 came i n pi eces. The f i r st pi ece was 150, 000
7 and ever y mont h i n t he f i r st year af t er t hat i t was $60, 000.
8 We had t o appl y f or t hat money each mont h.
9 Q. Ar e you awar e t hat you coul d have appl i ed f or t he f i r st - -
10 i n t he f i r st mont h f or t he whol e $800, 000?
11 A. I was not awar e of t hat .
12 Q. So i f somebody f r omATP had t est i f i ed her e at t he t r i al ,
13 you wer e unawar e of t hat , cor r ect ?
14 A. I ' munawar e of t hat .
15 Q. You wer e pr esent at - - on November 8t h, 2001 at what ' s
16 cal l ed a ki ckof f meet i ng?
17 A. Yes. Yes, I was.
18 Q. And you went over r ul es and r egul at i ons wi t h t he peopl e - -
19 A. Yes.
20 Q. - - at NI ST?
21 A. Cor r ect .
22 Q. And I t hi nk you t ol d us t hat you met Mar k St anl ey t her e?
23 A. I t hi nk I shook hands wi t h hi mat most .
24 Q. And di d Dr . Kar r on know Mar k St anl ey?
25 A. Yes.
( 212) 805- 0300
667
1 Q. And t hey had a cor di al comf or t abl e r el at i onshi p?
3 THE COURT: Do you know? Wer e you pr esent ? Do you
4 r emember any of t hei r meet i ngs bef or e t he gr ant ?
5 THE WI TNESS: No, I was not .
6 Q. Wel l , di d Dr . Kar r on or you di scuss t hese, t hi s agr eement
7 agr eement s you had wi t h hi mas t o whet her or not an expense,
8 was a pr oper NI ST expense, you had a number of t hese di scusses,
9 cor r ect ?
10 A. Yes.
11 Q. And di d he advi se you t hat he woul d get t he appr oval
12 because NI ST l oved hi mand he bought i t ems bef or e he asked or
13 r ecei ved appr oval f r omNI ST?
14 A. I can' t hear what you' r e sayi ng.
15 Q. Di d he t el l you t hat - -
16 THE COURT: You bet t er get back t o t he mi cr ophone, Mr .
17 Rubi nst ei n, because I coul dn' t hear hal f t hat quest i on.
18 MR. RUBI NSTEI N: Sor r y.
19 Q. When you quest i oned t he pr opr i et y of cer t ai n expendi t ur es
20 by Dr . Kar r on, wi t hout pr i or appr oval , and i n f act t hat Dr .
21 Kar r on t ol d you t hat he woul d get appr oval because NI ST l oved
22 hi m?
23 A. Yes, he sai d t hat .
24 Q. Di d you bi l l a, and be r ei mbur sed f or par ki ng whi l e you
25 wer e a CASI empl oyee?
( 212) 805- 0300
668
1 A. Yes.
2 Q. And di d you al so bi l l f or t r avel ?
3 A. For mi l eage you mean?
4 Q. Yes.
5 A. I don' t r ecal l t he mi l eage. I r ecal l I t hi nk par ki ng at
6 t he met er . Possi bl y t ol l s. I don' t r emember t hat . That ' s
7 possi bl e. But I don' t r ecal l mi l eage, al t hough t hat ' s possi bl e
8 t oo.
9 Q. Do you r ecal l r ecei vi ng an e- mai l f r omDr . Kar r on
10 r equest i ng t hat you r epay cer t ai n expenses t hat wer e not
11 appr oved by ATP?
12 A. I don' t r ecal l such an e- mai l .
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
669
8657KAR6 Gur f ei n - cr oss
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.
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.
( 212) 805- 0300
670
1 MR. EVERDELL: Obj ect i on, your Honor .
2 THE COURT: Sor r y?
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.
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
( 212) 805- 0300
671
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,
( 212) 805- 0300
672
1 r i ght ?
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 ?
( 212) 805- 0300
673
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 ?
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.
( 212) 805- 0300
674
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?
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?
( 212) 805- 0300
675
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?
( 212) 805- 0300
676
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
677
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 .
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.
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
( 212) 805- 0300
678
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
( 212) 805- 0300
679
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
( 212) 805- 0300
680
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?
( 212) 805- 0300
681
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,
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.
( 212) 805- 0300
682
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 .
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 ?
( 212) 805- 0300
683
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?
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?
( 212) 805- 0300
684
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.
16 THE COURT: So t hose don' t t el l you t he br eakdown.
18 THE COURT: Does t he quar t er l y r epor t show a
19 br eakdown?
20 THE WI TNESS: No, no br eakdown 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.
( 212) 805- 0300
685
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
( 212) 805- 0300
686
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?
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.
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?
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?
( 212) 805- 0300
687
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.
( 212) 805- 0300
688
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.
( 212) 805- 0300
689
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
690
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 .
( 212) 805- 0300
691
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 .
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
692
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?
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
693
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.
( 212) 805- 0300
694
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?
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
( 212) 805- 0300
695
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.
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.
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
( 212) 805- 0300
696
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?
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 ?
( 212) 805- 0300
697
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.
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
( 212) 805- 0300
698
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.
17 A. Yes, I see t hem.
18 THE COURT: Had you ever seen t hembef or e?
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.
( 212) 805- 0300
699
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
700
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 .
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?
15 A. J ul y 3, 2002?
16 Q. Cor r ect .
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
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.
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
702
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 ?
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
703
3 BELI NDA RI LEY
4 Di r ect By Mr . Kwok . . . . . . . . . . . . . 506
6 ELI SHA GURFEI N
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
24 BBB . . . . . . . . . . . . . . . . . . . 596
25
( 212) 805- 0300
704
8667KAR1
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3
4 v. S2 07 CR 541 ( RPP)
4
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
12
13
13
14 APPEARANCES
14
16 BY: STEVEN KWOK
18
20
22
23
24
25
( 212) 805- 0300
705
8667KAR1
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
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
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
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
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 ?
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
710
8667KAR1
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?
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.
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
711
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
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
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
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
( 212) 805- 0300
715
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.
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)
( 212) 805- 0300
716
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 ?
( 212) 805- 0300
717
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 .
( 212) 805- 0300
718
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 eakdown 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 eakdown 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 .
( 212) 805- 0300
719
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
( 212) 805- 0300
720
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
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
721
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.
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 - -
( 212) 805- 0300
722
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 ?
( 212) 805- 0300
723
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 - -
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
( 212) 805- 0300
724
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 .
( 212) 805- 0300
725
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 - -
( 212) 805- 0300
726
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.
( 212) 805- 0300
727
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?
( 212) 805- 0300
728
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
729
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.
( 212) 805- 0300
730
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 .
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
( 212) 805- 0300
731
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?
( 212) 805- 0300
732
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 ?
( 212) 805- 0300
733
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?
( 212) 805- 0300
734
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 - -
( 212) 805- 0300
735
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.
( 212) 805- 0300
736
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?
( 212) 805- 0300
737
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?
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.
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
738
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.
( 212) 805- 0300
739
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
( 212) 805- 0300
740
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
741
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.
( 212) 805- 0300
742
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
743
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 .
( 212) 805- 0300
744
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 .
( 212) 805- 0300
745
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 ?
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 - -
( 212) 805- 0300
746
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
( 212) 805- 0300
747
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
( 212) 805- 0300
748
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.
( 212) 805- 0300
749
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
( 212) 805- 0300
750
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 ?
25 Q. You saw t he checks, di d you not ?
( 212) 805- 0300
751
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.
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
( 212) 805- 0300
752
1 cr eat ed?
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.
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?
( 212) 805- 0300
753
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
( 212) 805- 0300
754
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
( 212) 805- 0300
755
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 .
( 212) 805- 0300
756
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?
( 212) 805- 0300
757
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 ?
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
( 212) 805- 0300
758
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,
( 212) 805- 0300
759
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.
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 .
( 212) 805- 0300
760
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,
( 212) 805- 0300
761
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 - -
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 .
( 212) 805- 0300
762
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
( 212) 805- 0300
763
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 .
24
25
( 212) 805- 0300
764
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.
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,
( 212) 805- 0300
765
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?
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
( 212) 805- 0300
766
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
( 212) 805- 0300
767
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
( 212) 805- 0300
768
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.
4 THE WI TNESS: 135, 000 on page 11 of 44.
5 THE COURT: Page 11 of 44?
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 .
( 212) 805- 0300
769
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
( 212) 805- 0300
770
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.
( 212) 805- 0300
771
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)
21
22
23
24
25
( 212) 805- 0300
772
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?
( 212) 805- 0300
773
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?
( 212) 805- 0300
774
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
( 212) 805- 0300
775
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 ?
( 212) 805- 0300
776
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
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 ?
( 212) 805- 0300
777
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.
( 212) 805- 0300
778
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 ?
( 212) 805- 0300
779
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.
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
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 .
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
781
1 THE COURT: The audi t ? Ar e you addr essi ng t he audi t ,
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
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
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
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
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
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
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
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
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
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
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
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
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
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 ?
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
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 .
4 THE COURT: Do you want t o r ef r ame your quest i on,
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.
( 212) 805- 0300
796
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 - -
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.
( 212) 805- 0300
797
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.
( 212) 805- 0300
798
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 .
( 212) 805- 0300
799
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 .
( 212) 805- 0300
800
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
801
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?
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
802
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 ?
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
803
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.
( 212) 805- 0300
804
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
805
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 eakdown 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
( 212) 805- 0300
806
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
807
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
808
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
809
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 .
( 212) 805- 0300
810
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 ?
( 212) 805- 0300
811
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
( 212) 805- 0300
812
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.
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.
22
23
24
25
( 212) 805- 0300
813
866zkar 4
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.
12 Go ahead, Mr . Kwok.
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
814
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.
( 212) 805- 0300
815
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
816
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?
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
( 212) 805- 0300
817
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?
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.
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.
( 212) 805- 0300
818
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.
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
( 212) 805- 0300
819
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
820
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
821
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
822
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.
8 THE COURT: 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
( 212) 805- 0300
823
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
824
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
( 212) 805- 0300
825
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 .
( 212) 805- 0300
826
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 - -
( 212) 805- 0300
827
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
20
21
22
23
24
25
( 212) 805- 0300
828
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 ?
( 212) 805- 0300
829
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?
22 THE COURT: 115?
23 MR. RUBI NSTEI N: Ei t her one.
25 MR. RUBI NSTEI N: They' r e r el at ed. I can' t t el l .
( 212) 805- 0300
830
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.
( 212) 805- 0300
831
1 MR. EVERDELL: Your Honor , t he gover nment cal l s Fr ank
2 Spr i ng.
3 FRANK SPRI NG,
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?
( 212) 805- 0300
832
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
( 212) 805- 0300
833
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
( 212) 805- 0300
834
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,
( 212) 805- 0300
835
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.
( 212) 805- 0300
836
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?
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
( 212) 805- 0300
837
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?
( 212) 805- 0300
838
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
( 212) 805- 0300
839
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
( 212) 805- 0300
840
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.
( 212) 805- 0300
841
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 ?
( 212) 805- 0300
842
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
( 212) 805- 0300
843
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
( 212) 805- 0300
844
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
( 212) 805- 0300
845
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.
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
( 212) 805- 0300
846
1 Gover nment ' s exhi bi t 144, 145 and 149.
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 paypal 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
( 212) 805- 0300
847
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.
( 212) 805- 0300
848
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 ,
( 212) 805- 0300
849
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,
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 ?
( 212) 805- 0300
850
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 .
( 212) 805- 0300
851
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
( 212) 805- 0300
852
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
( 212) 805- 0300
853
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.
( 212) 805- 0300
854
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
( 212) 805- 0300
855
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
( 212) 805- 0300
856
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,
( 212) 805- 0300
857
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.
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 .
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
( 212) 805- 0300
858
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
( 212) 805- 0300
859
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
( 212) 805- 0300
860
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.
( 212) 805- 0300
861
1 A. I do.
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
( 212) 805- 0300
862
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
( 212) 805- 0300
863
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?
( 212) 805- 0300
864
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.
( 212) 805- 0300
865
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" .
( 212) 805- 0300
866
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 ?
( 212) 805- 0300
867
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 .
( 212) 805- 0300
868
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.
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.
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
( 212) 805- 0300
869
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 ?
( 212) 805- 0300
870
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?
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
( 212) 805- 0300
871
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.
( 212) 805- 0300
872
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 - -
( 212) 805- 0300
873
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 .
( 212) 805- 0300
874
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
( 212) 805- 0300
875
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 eakdown bet ween what was t he ATP gr ant money and what
25 was ot her money?
( 212) 805- 0300
876
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
( 212) 805- 0300
877
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
( 212) 805- 0300
878
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
( 212) 805- 0300
879
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 ?
( 212) 805- 0300
880
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 .
( 212) 805- 0300
881
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
( 212) 805- 0300
882
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 - -
( 212) 805- 0300
883
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
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
( 212) 805- 0300
884
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 - -
( 212) 805- 0300
885
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
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
( 212) 805- 0300
886
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
( 212) 805- 0300
887
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 ?
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?
( 212) 805- 0300
888
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
( 212) 805- 0300
889
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
( 212) 805- 0300
890
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.
( 212) 805- 0300
891
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.
( 212) 805- 0300
892
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.
( 212) 805- 0300
893
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
894
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?
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 ?
( 212) 805- 0300
895
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.
( 212) 805- 0300
896
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
897
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?
( 212) 805- 0300
898
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 - -
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.
( 212) 805- 0300
899
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.
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
900
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
901
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
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.
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 - -
( 212) 805- 0300
903
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
( 212) 805- 0300
904
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 .
( 212) 805- 0300
905
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?
( 212) 805- 0300
906
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.
( 212) 805- 0300
907
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?
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?
( 212) 805- 0300
908
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
( 212) 805- 0300
909
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.
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.
( 212) 805- 0300
910
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
( 212) 805- 0300
911
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?
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.
( 212) 805- 0300
912
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 - -
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.
( 212) 805- 0300
913
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 ?
( 212) 805- 0300
914
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?
( 212) 805- 0300
915
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
( 212) 805- 0300
916
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?
( 212) 805- 0300
917
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
( 212) 805- 0300
918
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.
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.
( 212) 805- 0300
919
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.
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
920
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 - -
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
921
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
922
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
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
924
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
925
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
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
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
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
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
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
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
932
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
933
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
( 212) 805- 0300
934
8667KAR7
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 ?
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
( 212) 805- 0300
935
8667KAR7
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
( 212) 805- 0300
936
8667KAR7
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.
( 212) 805- 0300
937
8667KAR7
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 .
( 212) 805- 0300
938
8667KAR7
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.
( 212) 805- 0300
939
8667KAR7
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 .
9 THE COURT: OK.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
940
3 BELI NDA RI LEY
8 FRANK SPRI NG
13 144, 145 and 149 . . . . . . . . . . . . 846
14 143 . . . . . . . . . . . . . . . . . . . 857
15 142 . . . . . . . . . . . . . . . . . . . 861
16 147 . . . . . . . . . . . . . . . . . . . 865
19 H . . . . . . . . . . . . . . . . . . . . 715
20 K . . . . . . . . . . . . . . . . . . . . 738
21 CCC . . . . . . . . . . . . . . . . . . . 773
22 FFF . . . . . . . . . . . . . . . . . . . 789
23 P- 1 t hr ough P- 6 . . . . . . . . . . . . . 799
24
25
( 212) 805- 0300
941
869zkar 1
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3
4 v. S2 07 CR 541 ( RPP)
4
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
12
13
13
14 APPEARANCES
14
16 BY: STEVEN KWOK
18
20
22
23
24
25
( 212) 805- 0300
942
869zkar 1
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
( 212) 805- 0300
943
869zkar 1
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
( 212) 805- 0300
944
869zkar 1
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.
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 - -
( 212) 805- 0300
945
869zkar 1
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
( 212) 805- 0300
946
869zkar 1
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
( 212) 805- 0300
947
869zkar 1
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
( 212) 805- 0300
948
869zkar 1
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
( 212) 805- 0300
949
869zkar 1
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
( 212) 805- 0300
950
869zkar 1
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 - -
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.
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
( 212) 805- 0300
951
869zkar 1
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
( 212) 805- 0300
952
869zkar 1
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
( 212) 805- 0300
953
869zkar 1
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.
( 212) 805- 0300
954
869zkar 1
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 - -
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.
( 212) 805- 0300
955
869zkar 1
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
( 212) 805- 0300
956
869zkar 1
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.
( 212) 805- 0300
957
869zkar 1
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
( 212) 805- 0300
958
869zkar 1
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
( 212) 805- 0300
959
869zkar 1
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 .
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.
( 212) 805- 0300
960
869zkar 1
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,
14 BY MR. EVERDELL:
15 THE COURT: Pl ease pr oceed.
17 Q. Good mor ni ng, Mr . Benedi ct .
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
( 212) 805- 0300
961
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 nongr 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
( 212) 805- 0300
962
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
( 212) 805- 0300
963
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
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.
( 212) 805- 0300
964
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
( 212) 805- 0300
965
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 ?
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?
( 212) 805- 0300
966
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?
( 212) 805- 0300
967
3 MR. RUBI NSTEI N: I obj ect t o Gur f ei n.
5 Q. Was t hat t he onl y cal l you r ecei ved aski ng your advi ce on
6 spendi ng r el at ed quest i ons?
7 A. No, si r . I r ecei ved maybe t hr ee ot her phone cal l s f r omDr .
8 Kar r on, as wel l as Mr . Ger f ei n, and basi cal l y t hey wer e al l
9 aski ng t he same quest i ons, how do I get t he r ent cover ed i n t he
10 ATP gr ant .
11 Q. And what was your r esponse on al l t hose occasi on?
12 A. Al l t hose occasi ons i t was t he same r esponse; i f i t ' s not
13 i n t he budget , you have t o go get an ATP budget amendment and
14 ATP aut hor i zat i on t o i ncl ude i t .
15 Q. Di d you t el l hi mwhet her r ent was gener al l y i ncl uded as an
16 al l owabl e expense?
17 A. No, i t ' s an i ndi r ect expense and i t ' s not usual l y al l owed
18 i n a si ngl e gr ant .
19 THE COURT: Di d you t el l hi mt hat ?
20 THE WI TNESS: Yes, si r , I di d.
21 Q. And appr oxi mat el y when di d t hese phone conver sat i ons
22 happen?
23 A. They happened ever y t hr ee or f our mont hs dur i ng 2000, t he
24 end of 2001 and 2002.
25 Q. Di d you gi ve t he def endant or Lee Ger f ei n any gener al
( 212) 805- 0300
968
1 advi ce about spendi ng ATP f unds dur i ng t hese conver sat i ons?
2 A. Do what ' s al l owed i n t he budget .
3 Q. And di d you r ecommend t hat t hey do anyt hi ng i n par t i cul ar
4 t o f ami l i ar i ze t hemsel ves wi t h t he r ul es?
5 A. Yes, si r , I di d. I gave t hemt he cat al og f or management
6 concept s, whi ch i s an or gani zat i on t hat does gr ant i ng educat i on
7 f or bot h f under s of gr ant s and r ecei ver s of gr ant s. I t ol d
8 hi m- - I gave hi mt hei r websi t e, I gave hi mt he cat al og and I
9 suggest ed t hat t hey go get t he educat i on.
10 Q. To your knowl edge, do you know i f t he def endant or anyone
11 on hi s st af f ever got t he educat i on t hat you wer e r equest i ng?
12 A. Not t o my knowl edge, no.
14 A. Wel l , when I became empl oyed wi t h ATP, I di scussed t hi s
15 wi t h Dr . Kar r on, and he sai d he di d not know t hat .
16 Q. I ' msor r y, he sai d empl oyed - -
17 THE COURT: Empl oyed wi t h ATP?
18 A. I mean wi t h CASI . Dr . Kar r on sai d he di d not do t hat .
19 Q. Di d t her e come a t i me when you became mor e i nvol ved i n t he
20 CASI ATP gr ant ?
21 A. Yes, si r .
22 Q. And how di d you become mor e i nvol ved?
23 A. I had f i ni shed my consul t i ng wor k wi t h I BM at t he end of
24 2002, and r ecei ved a cal l f r omDr . Kar r on, who i ndi cat ed t hat
25 he was not get t i ng what he needed f r omhi s ATP admi ni st er s and
( 212) 805- 0300
969
1 was wonder i ng i f I woul d come t o wor k f or hi mas t he gr ant
2 admi ni st r at or .
3 Q. When di d he cal l you t o do - - t o ask you t hat ?
4 A. That was December 2002.
5 Q. And di d he say why he want ed t o hi r e you?
6 A. Because I had gr ant admi ni st r at i on backgr ound.
7 Q. Di d you accept t he j ob?
9 Q. What was your under st andi ng of what your j ob
10 r esponsi bi l i t i es woul d be at CASI ?
11 A. My j ob, as I under st ood i t , my j ob r esponsi bi l i t i es woul d
12 be t o admi ni st er t he gr ant t hat he had, whi ch was a si ngl e
13 gr ant , woul d r equi r e my l ooki ng at t he books assur i ng al l t he
14 expendi t ur es wer e al l owed by t he gr ant , and t hat t he r epor t s - -
15 and get t he r epor t s f i l ed t o ATP.
16 Q. How l ong di d you wor k f or CASI ?
17 A. I wor ked f or CASI f or about ei ght mont hs.
18 Q. So t hat ' s r oughl y unt i l when?
19 A. August - -
20 Q. Of ?
21 A. 2003.
22 Q. And wer e you pai d anyt hi ng f or t hi s j ob?
23 A. Yes.
24 Q. What ?
25 A. $60 an hour . I wor ked 20 hour s a week.
( 212) 805- 0300
970
1 Q. Di d you have any par t i cul ar t ask concer ni ng t he budget when
2 you st ar t ed wor ki ng at CASI ?
3 A. Fi r st t hi ng Dr . Kar r on want ed me t o do was t o submi t a
4 budget amendment . I bel i eve at t he t i me what he was t r yi ng t o
5 do was move money f r om- -
6 THE COURT: J ust what he t ol d you.
7 THE WI TNESS: Par don.
8 THE COURT: J ust what he t ol d you.
9 THE WI TNESS: He t ol d me t o do a budget amendment t o
10 move money f r omt he sal ar y l i ne i n hi s gr ant , t o t he equi pment
11 l i ne i n hi s gr ant , because he needed addi t i onal equi pment f or
12 t he pr oj ect .
13 Q. Do you know what sor t of equi pment he want ed t o buy?
14 A. No, si r , I don' t .
15 Q. What f acet s of t he budget - -
16 THE COURT: Par t i cul ar year ?
17 THE WI TNESS: Par don?
18 THE COURT: What year of t he gr ant ar e you r ef er r i ng
19 t o?
20 THE WI TNESS: I ' mr ef er r i ng t o t he year 2003.
21 Q. So t hat woul d be t he second year ?
22 A. Yes.
23 Q. What f acet s of t he budget r evi si on di d you wor k on?
24 A. I wor ked on doi ng t he budget amendment , I got t he f i nanci al
25 number s l i ned up, as he had r equest ed, and was r eady t o submi t
( 212) 805- 0300
971
1 t he budget amendment , but Dr . Kar r on added a si gni f i cant number
2 of t echni cal suppor t i ng document at i on t o t he amendment . I
3 advi sed he di dn' t need t hat dat a; t hat t he budget peopl e wer e
4 not goi ng t o be i nt er est ed i n i t ; i t woul dn' t mean anyt hi ng t o
5 t hem; t hey woul dn' t r ead i t , and i t woul d sl ow down t he
6 pr ocess. He t ol d me t hat t hat ' s what t hey l i ke. And we
7 i ncl uded t hat when we submi t t ed t he budget amendment .
8 Q. At t he t i me, t o your knowl edge, was t hi s t he f i r st budget
9 r evi si on t hat CASI submi t t ed?
10 A. To my knowl edge, si r , i t was.
11 Q. And what l ed you t o bel i eve t hat ?
12 A. I t was - - t her e wer e no budget amendment s number ed pr i or t o
13 t he one t hat I submi t t ed.
14 Q. Di d you l ear n l at er whet her t hi s was i n f act t he f i r st
15 budget amendment ?
16 A. No, si r , i t was not . Ther e wer e numer ous ot her budget
17 amendment s submi t t ed pr i or t o my get t i ng t o CASI .
19
20
21
22
23
24
25
( 212) 805- 0300
972
8697KAR2 Benedi ct - di r ect
1 BY MR. EVERDELL:
2 Q. Wer e t hose i n year one of t he gr ant ?
3 A. One and t wo, as f ar as I under st and.
4 Q. Di d you r ecei ve a r esponse f r omATP on t he pr oposed budget
5 amendment t hat you wor ked on?
6 A. No, si r , we di d not .
7 THE COURT: When di d you f i l e i t ?
8 THE WI TNESS: Fi l ed i t i n J anuar y 2003.
9 Q. So, was i t appr oved?
10 A. No, i t was not , not t o my knowl edge.
11 Q. Di d you ever vi si t t he si t e wher e CASI was conduct i ng i t s
12 r esear ch?
13 A. Yes, I di d.
14 Q. Wher e was t hat ?
15 A. I t was i n Manhat t an on 33r d St r eet , I bel i eve, East 33r d.
16 Q. Was t hat an apar t ment or an of f i ce?
17 A. I t was an apar t ment / of f i ce. Ther e was a ki t chenet t e, a
18 bat hr oomand a bedr oomi nt act , and t he r est of t he apar t ment
19 had been gut t ed and t ur ned i nt o a sof t war e devel opment l ab. I t
20 had t abl es t hat r an bot h si des of t he mai n r oom, wi t h comput er s
21 on bot h si des.
22 Q. And whose apar t ment was i t ?
24 Q. When di d you f i r st go t her e?
25 A. J anuar y 2003.
( 212) 805- 0300
973
1 Q. Why di d you go t o t he apar t ment ?
2 A. I went t o t he apar t ment t o l ook at t he f i nanci al r ecor ds
3 and t o submi t t he quar t er l y r epor t f or t he f our t h quar t er of
4 2002.
5 Q. Why di d you need t o pr epar e a quar t er l y f i nanci al r epor t ?
6 A. I t ' s r equi r ed by t he ATP gr ant .
7 Q. What mat er i al di d you l ook at i n or der t o pr epar e t he
8 r epor t ?
9 A. I l ooked at t he Qui ck Book f i l es, whi ch i s t he account i ng
10 syst emused by CASI , and det er mi ned t hat we coul d not f i l e t he
11 r epor t based on t he dat a t hat was i n t hose r ecor ds.
12 Q. Wel l , what , i f anyt hi ng, di d you not i ce when you wer e
13 l ooki ng at t he books of CASI ?
14 A. I not i ced t hat al l of t he f unds wer e commi ngl ed, whi ch i s
15 not al l owed by ATP.
16 MR. RUBI NSTEI N: Obj ect i on. Move t o st r i ke, your
17 Honor .
18 THE COURT: Di sr egar d t he par t " whi ch i s not al l owed
19 by ATP. "
20 Q. J ust t o cl ar i f y. You sai d you not i ced t he f unds wer e
21 commi ngl ed, i s t hat r i ght ?
22 A. Yes, si r .
23 Q. We wi l l get t o t hat i n a second. What el se di d you not i ce?
24 A. I not i ced t hat t her e wer e no document ed pr ocedur es of any
25 ki nd i dent i f yi ng how t he account i ng r ecor ds wer e t o be t r eat ed
( 212) 805- 0300
974
1 or how t he benef i t s package was t o be admi ni st er ed.
2 Q. Di d you not i ce anyt hi ng el se? Who had cont r ol of t he books
3 and r ecor ds?
4 A. Dr . Kar r on had al l cont r ol of al l t he document at i ons.
5 Ther e wer e no separ at i ons of dut i es.
6 Q. OK. Let ' s t ake t hose one at a t i me. So you ment i oned
7 wr i t t en pr ocedur es.
8 A. Yes, si r .
9 Q. Or l ack of wr i t t en pr ocedur es. Can you expl ai n what you
10 meant when you sai d t her e wer e no wr i t t en pr ocedur es.
11 A. I n a nor mal busi ness envi r onment you woul d have pr ocedur es
12 t hat t el l you when t o pay bi l l s, what bi l l s t o pay, how t o
13 t r eat checks as t hey come i n, wher e t o deposi t t hem. Ther e was
14 not hi ng wr i t t en of any ki nd.
15 Q. And why do you have t hose pr ocedur es i n pl ace nor mal l y?
16 A. So you can ensur e a consi st ent oper at i on wi t hi n t he
17 f i nanci al r eal m.
18 Q. Di d you di scuss t he l ack of Wr i t t en pr ocedur es wi t h Dr .
19 Kar r on?
20 A. Dr . Kar r on sai d t hat t hei r busi ness was so smal l , he knew
21 what t o do and he di dn' t need t o spend t i me doi ng wr i t t en
22 pr ocedur es.
23 Q. Wer e wr i t t en pr ocedur es ever i nst i t ut ed whi l e you wer e
24 wor ki ng at CASI ?
25 A. They wer e not as f ar as I know. I know t hat we spent some
( 212) 805- 0300
975
1 t i me t r yi ng t o buy a handbook, an empl oyees handbook, and spent
2 some t i me t al ki ng t o peopl e t o do an HR, human r el at i ons or
3 human r esour ces manual , but t hat was pr i mar i l y done by J oan
4 Hayes.
5 Q. You ment i oned al so commi ngl i ng.
6 A. Yes, si r .
7 Q. Can you expl ai n what you mean by t he f unds wer e commi ngl ed.
8 A. Commi ngl i ng i s when you ar e t aki ng t he gr ant money, and you
9 ar e put t i ng i t i n t he same account s as nongr ant money.
10 Q. And what i f anyt hi ng di d you not i ce about t he books at CASI
11 wi t h r espect t o t hat ?
12 A. They wer e al l t oget her .
13 Q. What do you mean t hey wer e al l t oget her ?
14 A. Al l t he moni es wer e t oget her , al l t he expenses wer e
15 t oget her . Ther e was no separ at i on, so you coul d not t el l what
16 money was spent on ATP pr oj ect ver sus what money was bei ng
17 spent on ot her pr oj ect s.
18 Q. Di d you have any di scussi ons wi t h t he def endant about t hi s
19 i ssue?
20 A. He di d not seemt o be ver y i nt er est ed or ver y concer ned
21 about t hat .
22 THE COURT: No, j ust answer .
24 Q. What di d you t el l hi m?
25 A. I t ol d hi mhe coul d not do t hat , and I r equest ed t hat t hey
( 212) 805- 0300
976
1 separ at e t he books.
2 Q. And what do you mean by separ at e t he books?
3 A. Separ at e t he books so t hat we coul d t el l what was ATP
4 spendi ng and i ncome ver sus what was not non- ATP spendi ng and
5 i ncome.
6 Q. And what was t he def endant ' s r esponse t o t hat ?
7 A. He agr eed t o have t he bookkeeper s do t hat .
8 Q. Wer e t he f unds i n f act separ at ed out ?
9 A. Not bef or e I l ef t . They wer e wor ki ng on i t , but t hey never
10 compl et ed i t .
11 Q. Coul d you t el l what sour ces of f unds t he CASI was r ecei vi ng
12 f unds f r om?
13 A. I ni t i al l y I coul d not , but over t i me i t became appar ent
14 t hat t he onl y i ncome comi ng i n was t he money comi ng i n f r om
15 ATP.
16 Q. Di d you see any ot her sour ce of i ncome besi des t he ATP
17 f unds?
19 Q. You ment i oned l ast l y t he cont r ol of t he books.
20 A. Yes, si r .
21 Q. Can you expl ai n what you mean by t hat .
22 A. Nor mal l y i n an account i ng oper at i on t her e i s a check and
23 bal ance. You can have one per son wr i t e checks, someone el se
24 has t o si gn t hem. Dr . Kar r on had compl et e cont r ol of
25 ever yt hi ng. He wr ot e t he checks, he si gned t he checks, he
( 212) 805- 0300
977
1 cont r ol l ed t he checkbooks.
2 Q. And over t i me di d you not i ce anyt hi ng el se about Dr .
3 Kar r on' s cont r ol of t he books t hat r ai sed an i ssue i n your
4 mi nd?
5 A. Yes, si r . Whi l e we wer e t r yi ng t o separ at e t he books, t he
6 bookkeeper s woul d make changes t o t he books and separ at i ng t hem
7 and cal l i ng cer t ai n expendi t ur es CASI expendi t ur es, cer t ai n
8 expendi t ur es ATP expendi t ur es. Dr . Kar r on woul d - -
9 MR. RUBI NSTEI N: I obj ect t o t hi s, your Honor , unl ess
10 he has per sonal knowl edge.
11 THE COURT: Obj ect i on sust ai ned unl ess i t ' s shown t hat
12 t hi s wi t ness had per sonal knowl edge of t he f act s and hadn' t
13 hear d t hemf r ombookkeepi ng.
14 Who wer e t he bookkeeper s at t he t i me?
15 THE WI TNESS: The J ackson gr oup, Fr ank Spr i ng.
16 Q. Di d you have any di scussi ons wi t h t he def endant about t hi s
17 i ssue t hat you ar e t al ki ng about ?
18 A. Yes.
19 Q. What wer e t he nat ur e of t hose di scussi ons?
20 A. The di scussi ons wer e Dr . Kar r on had changed ent r i es t hat
21 t he J ackson gr oup had made, and Dr . Kar r on sai d t hey j ust
22 di dn' t know what t hey wer e doi ng and he knew wher e t he
23 expendi t ur es needed t o be.
24 Q. What i f anyt hi ng di d you t r y t o do t o addr ess t hese i ssues
25 t hat you not i ced wi t h r espect t o cont r ol of t he books?
( 212) 805- 0300
978
1 A. The f i r st t hi ng we di d was we no l onger gave Dr . Kar r on
2 t r ansact i on capabi l i t y. He coul d see, r ead t he account i ng
3 r ecor ds, but he coul dn' t make any changes t o t he account i ng
4 r ecor ds.
5 Q. When di d you make t hat change?
6 A. I made t hat change i n t he Apr i l t i me f r ame, I bel i eve.
7 Q. Of whi ch year ?
8 A. 2003.
9 Q. And how di d you achi eve t hat ?
10 A. We basi cal l y st opped gi vi ng hi ma wr i t abl e copy of Qui ck
11 Books.
12 Q. Who had cont r ol of t he Qui ck Books af t er you di d t hat ?
13 A. Fr ank Spr i ng.
14 Q. And di d you do anyt hi ng el se wi t h r espect t o t hi s i ssue t o
15 r emedy i t ?
16 A. Yes, si r , we met wi t h hi s boar d.
17 Q. When you say hi s boar d, you' r e r ef er r i ng t o - -
18 A. The CASI boar d. Fr ank Spr i ng and I met wi t h t he CASI boar d
19 and t ol d t hemof our concer n wi t h hi mhavi ng t ot al cont r ol of
20 t he checkbook, and asked t hat t hey t ake t he checkbook away f r om
21 hi m, and t hey di r ect ed hi mt o t ur n t he checks over t o Fr ank
22 Spr i ng and t o no l onger wr i t e checks.
23 Q. When di d t hat happen?
24 A. That was i n t he J une t i me f r ame, I bel i eve i n 2003.
25 Q. Di d you ever have check wr i t i ng aut hor i t y your sel f ?
( 212) 805- 0300
979
1 A. No, si r .
2 Q. Di d Dr . Kar r on abi de by t hi s r est r i ct i on t hat he coul dn' t
3 si gn checks anymor e?
4 A. No.
5 MR. RUBI NSTEI N: I obj ect t o t hat . The t est i mony i s
6 not si gni ng checks.
8 MR. RUBI NSTEI N: Ther e i s no t est i mony t hat he
9 coul dn' t si gn checks t hat I hear d.
10 THE COURT: Wel l , I haven' t hear d t hat , but wr i t abl e
11 aut hor i t y of Qui ck Books as I under st and i t . I ' mnot goi ng t o
12 t est i f y. I ' mnot t est i f yi ng.
13 Q. J ust so we' r e cl ear , Mr . Benedi ct - -
14 THE COURT: Di sr egar d my comment .
15 Q. Can you expl ai n what act i on t he boar d of di r ect or s t ook
16 wi t h r espect t o Dr . Kar r on?
17 A. The boar d of di r ect or s t ol d Dr . Kar r on t o t ur n al l t he
18 checks over t o Fr ank Spr i ng and t hat Fr ank woul d pr i nt checks
19 and gi ve t hemt o Dr . Kar r on t o si gn.
20 THE COURT: Under t he Qui ck Books?
21 THE WI TNESS: Under Qui ck Books.
22 THE COURT: Qui ck Books i s t he manner i n whi ch checks
23 wer e wr i t t en?
24 THE WI TNESS: Yes, si r , Qui ck Books i s t he account i ng
25 syst emt hat bot h wr i t es checks and makes deposi t s.
( 212) 805- 0300
980
1 Q. Do you know whet her or not t hi s was t he onl y way t hat
2 checks got si gned and pai d af t er t hi s r est r i ct i on was put i n
3 pl ace?
4 A. No, i t was not .
5 Q. Can you expl ai n.
6 A. Dr . Kar r on used PayPal , whi ch f or al l i nt ent s and pur poses
7 subver t ed t he di r ect i on pr ovi ded by t he boar d.
8 MR. RUBI NSTEI N: Obj ect i on. Move t o st r i ke subver t ed.
9 THE COURT: Obj ect i on sust ai ned. That ' s a concl usi on
10 of your s. J ust t el l us what happened.
11 A. PayPal i s a ser vi ce t hat al l ows you t o use your cr edi t car d
12 t o pay bi l l s, and Dr . Kar r on used t he CASI cr edi t car d and had
13 PayPal pay bi l l s t hat di d not go t hr ough Fr ank Spr i ng.
14 THE COURT: Does PayPal have check wr i t i ng capabi l i t y?
15 THE WI TNESS: Yes. PayPal , you use your cr edi t car d,
16 you gi ve t he cr edi t car d t o PayPal , PayPal char ges your cr edi t
17 car d and t hen pays t he bi l l , so PayPal act ual l y wr i t es t he
18 check.
19 THE COURT: Wr i t es t he check f or t he payment of t he
20 bi l l ?
22 THE COURT: To what ever cr edi t car d i t i s?
23 THE WI TNESS: No, t o what ever vendor you want t he bi l l
24 t o go t o.
25 THE COURT: To what ever vendor .
( 212) 805- 0300
981
1 Q. How di d you know t hat t he def endant was usi ng PayPal ?
2 A. We saw t he PayPal char ge on t he Amer i can Expr ess cr edi t
3 car d bi l l .
4 Q. Di d you di scuss t hi s wi t h t he def endant ?
5 A. Yes, si r .
6 Q. What i f anyt hi ng di d you say t o hi m?
7 A. He sai d he had t o pay t he bi l l s.
8 Q. Now, Mr . Benedi ct , i n t he cour se of r evi ewi ng CASI ' s books
9 and r ecor ds, wer e t her e any par t i cul ar expendi t ur es t hat you
10 not i ced?
11 A. Ear l y on t her e was a $75, 000 payr ol l advance.
12 Q. To who?
13 A. To Dr . Kar r on. Ther e wer e payment s f or r ent . Ther e wer e
14 payment s t o an empl oyee t hat I di d not know and act ual l y never
15 met . And t her e wer e some medi cal char ges.
16 Q. OK. And what di d you not i ce about t hese expendi t ur es i n
17 par t i cul ar ?
18 A. They wer e ei t her not al l owed by ATP or t hey woul d be
19 quest i oned by ATP.
20 Q. Al l r i ght . Let ' s t ake t hemone at a t i me. You ment i oned
21 r ent payment s t hat you not i ced.
22 A. Yes.
23 Q. Can you expl ai n what you not i ced about r ent payment s.
24 A. Rent payment s wer e bei ng made wi t h ATP f unds, and r ent i s
25 not i n t he budget so ar e not al l owed by ATP. They woul d be
( 212) 805- 0300
982
1 di sal l owed cost s.
2 Q. Di d you t al k t o t he def endant about t hi s i ssue wi t h r ent
3 payment s?
4 A. Yes, I di d, and as I sai d bef or e he sai d, " I have t o pay
5 t he bi l l s. " And on anot her occasi on he sai d, l ook, i f I don' t
6 pay t he r ent , I ' mgoi ng t o be out on t he st r eet and I can' t do
7 anyt hi ng f or t he gr ant t hen, so t hey ought t o under st and t hat .
8 Q. Di d he ment i on anyt hi ng el se wi t h r espect t o what he
9 pl anned t o do about t he r ent payment s?
10 THE COURT: These ar e cur r ent r ent payment s?
12 A. He sai d t hat he was goi ng t o move t o Connect i cut and t hat
13 he woul d conver t t he ent i r e apar t ment t o a pl ace of busi ness,
14 he woul d t ur n hi s bedr oomi nt o an of f i ce. However , none of
15 t hat act ual l y happened.
16 Q. What i f anyt hi ng di d you t el l hi mwhen he t ol d you about
17 t hi s Connect i cut pl an?
18 A. I t ol d hi mi t woul dn' t mat t er anyway because t he r ent was
19 not goi ng t o be al l owed by ATP.
20 Q. Al l r i ght . Let ' s t al k about t he empl oyee, t he char ges t o
21 t he empl oyee t hat you di dn' t know. Do you r ecal l what t hose
22 char ges wer e f or ?
23 A. As expl ai ned by Dr . Kar r on t he char ges wer e f or an
24 i ndi vi dual t o scan dat a i nt o hi s dat abase. The pr ocess was
25 t hat i nvoi ces and ot her dat a r el evant t o t he CASI busi ness
( 212) 805- 0300
983
1 woul d come i nt o t he of f i ce, t he dat a woul d be scanned i nt o a
2 pr ogr amcal l ed I bel i eve Paper Por t , and t hen t he or i gi nal
3 document woul d be shr edded.
4 Q. Di d you have any di scussi ons wi t h t he def endant about t hose
5 char ges?
6 A. Those char ges ar e not i n t he budget , t hey ar e not r el evant
7 t o t he per f or mance of t he gr ant , so t hey woul d not be al l owed.
8 Q. What was hi s r esponse?
9 A. Agai n he sai d he had t o pay t he bi l l s.
10 THE COURT: What sor t of document s ar e you t al ki ng
11 about ?
12 THE WI TNESS: Al l document s, or i gi nal i nvoi ces,
13 l et t er s, ever yt hi ng was scanned i nt o t hi s syst emcal l ed Paper
14 Por t .
15 THE COURT: Di dn' t t hey have backup f or bi l l s?
16 THE WI TNESS: No, t hey shr edded ever yt hi ng.
17 THE COURT: What per i od of t i me was t hi s?
18 THE WI TNESS: Whi l e I was t her e f r omJ anuar y unt i l
19 August 2003.
20 THE COURT: When di d t hi s par t i cul ar event t ake pl ace
21 t hat you l ear ned about shr eddi ng?
22 THE WI TNESS: I was t her e when he was doi ng i t . Dr .
23 Kar r on' s vi ew was t hat he was r unni ng a paper l ess of f i ce and
24 t hat he coul d f i nd any dat a or any document s he needed t o f i nd
25 i n Paper Por t , he di dn' t need or i gi nal s.
( 212) 805- 0300
984
1 THE COURT: And what do you cal l t hi s comput er syst em?
2 THE WI TNESS: I t hi nk i t ' s cal l ed Paper Por t .
3 THE COURT: So i t woul d be r ef l ect ed t hough i n t he
4 comput er .
6 THE COURT: The t r ansact i on woul d be.
7 THE WI TNESS: Yes, t he document s woul d be t her e.
8 THE COURT: I n comput er f or m.
9 THE WI TNESS: I n comput er f or m.
10 THE COURT: Ret r i evabl e, but t he or i gi nal s woul d be
11 shr edded - -
13 THE COURT: - - because of st or age pr obl ems or
14 what ever .
16 Q. Di d you ever t r y t o access t he document s on Paper Por t ?
17 A. I di d. I t was di f f i cul t .
18 Q. What do you mean by di f f i cul t ?
19 A. The dat a woul d be f i l ed i n numer ous pl aces. You coul d f i nd
20 t he dat a. For exampl e, i f you wer e l ooki ng f or a vendor , you
21 coul d f i nd t he dat a by t he dat e t hat i t was submi t t ed or
22 ent er ed i nt o t he syst em, you coul d f i nd i t by t he vendor , but
23 some of t he dat a had comment s on i t . The same i nvoi ce st or ed
24 i n anot her pl ace di dn' t have t hose comment s on i t , so you coul d
25 never t el l what t he sour ce document r eal l y was.
( 212) 805- 0300
985
1 Q. Al l r i ght . You ment i oned medi cal expenses as wel l , r i ght ?
2 A. Yes.
3 Q. What di d you not i ce about t he medi cal expenses?
4 A. I n a t r adi t i onal busi ness you have a f r i nge benef i t s
5 package t hat ' s associ at ed wi t h payi ng a heal t h car e pr ovi der
6 l i ke Bl ue Cr oss/ Bl ue Shi el d or Humana or Uni t ed Heal t h Car e,
7 any one of t hose t ypes of pr ovi der s. I n CASI ' s case t he
8 medi cal expenses wer e al l pai d di r ect l y t o a medi cal pr ovi der ,
9 a doct or , a phar macy, somet hi ng, and as such ever y medi cal bi l l
10 woul d be quest i oned.
11 Q. What do you mean by t hat ?
12 A. They woul d want t o l ook at ever y medi cal bi l l and want t o
13 know exact l y what ever y medi cal bi l l was used f or .
14 THE COURT: Who i s t hey?
15 THE WI TNESS: ATP.
16 Q. Di d you have any conver sat i ons wi t h t he def endant about
17 t hi s medi cal benef i t s i ssue?
18 A. Yes. Dr . Kar r on' s vi ew was - -
19 MR. RUBI NSTEI N: I ' mgoi ng t o obj ect as not r el evant
20 i n vi ew of your Honor ' s i nst r uct i on.
21 THE COURT: Thi s doesn' t go t o t he nat ur e of t he
22 expenses. You ar e i nst r uct ed not t o - -
23 MR. RUBI NSTEI N: Then I wi l l wi t hdr aw t he obj ect i on.
24 THE COURT: - - get i nt o t he nat ur e of t he expenses.
25 A. Dr . Kar r on j ust sai d he had t he f r i nge benef i t money i n hi s
( 212) 805- 0300
986
1 gr ant and t hat he was under hi s f r i nge benef i t s budget , so he
2 coul d use hi s f r i nge benef i t expendi t ur es.
3 Q. Do you know whet her a wr i t t en benef i t s pol i cy i s r equi r ed
4 i n t he ATP r ul es?
5 A. I do not t hi nk so.
6 THE COURT: You do not t hi nk what ?
7 THE WI TNESS: That t her e i s a speci f i c r equi r ement
8 t hat you have a heal t h benef i t pl an. I don' t know of any such
9 gui del i ne i n ATP.
10 THE COURT: I n connect i on wi t h t hi s gr ant ? Di d you
11 exami ne t hi s gr ant ' s - -
12 THE WI TNESS: No, si r , I di d not .
13 Q. Let ' s t al k about t he $75, 000 payment t hat you ment i oned
14 bef or e.
15 A. Yes, si r .
16 Q. Who i s t hat payment t o?
18 Q. And when di d t hat payment occur ?
19 A. Ri ght af t er he dr ew down t he f i r st money f r omATP.
20 Q. Di d you have any di scussi ons wi t h Dr . Kar r on about t hat
21 expense?
22 A. Yes. I t ol d Dr . Kar r on t hat payr ol l advances wer e not
23 al l owed by ATP gr ant s, and he sai d t hat he woul d pay t he gr ant
24 or pay t he payr ol l advance back.
25 Q. To your knowl edge, di d t he def endant ever pay back t he
( 212) 805- 0300
987
1 sal ar y advance?
2 A. No, si r .
3 Q. I n gener al what di d Dr . Kar r on do wi t h your advi ce
4 concer ni ng expendi t ur es?
5 A. My exper i ence was i f i t f i t what he want ed t o do, he
6 accept ed i t ; i f i t conf l i ct ed wi t h what he want ed t o do, he
7 i gnor ed i t .
8 Q. What ul t i mat el y happened t o CASI ' s ATP gr ant ?
9 A. The gr ant was suspended.
11 A. I bel i eve i t was J une/ J ul y 2003.
12 Q. Di d you do any f ur t her wor k f or CASI af t er t he gr ant was
13 suspended?
14 A. Yes, I di d.
15 Q. What di d you do?
16 A. I wor ked wi t h t he audi t or on t he f i r st and second audi t .
17 The i nt ent was t o t r y t o hel p t hemf i nd what ever t hey needed.
18 I al so pr epar ed t he - -
19 THE COURT: Who was t he audi t or you wor ked wi t h?
20 THE WI TNESS: Bel i nda Ri l ey.
21 A. I al so pr epar ed t he f i nanci al r epor t s f or t he f our t h
22 quar t er 2002, f i r st quar t er of 2003 and t he second quar t er of
23 2003. The i nt ent t her e was t o cor r ect pr evi ous r epor t s t hat
24 wer e f i l ed i naccur at el y.
25 Q. So t hese wer e r evi sed f i nanci al r epor t s?
( 212) 805- 0300
988
1 A. Yes, si r , t hey wer e.
2 Q. Wer e t hese quar t er l y f i nanci al r epor t s?
3 A. Yes, si r , t hey wer e.
4 Q. Whose i dea was i t t o cr eat e r evi sed f i nanci al r epor t s?
5 A. Mi ne.
6 Q. Why di d you want t o do t hat ?
7 A. Because t he i ni t i al r epor t s had i ndi cat ed t hat CASI had
8 cont r i but ed t he mat ch f undi ng r equi r ement t hat t hey had i n t he
9 gr ant , when i n r eal i t y t hey had not , t hey had not cont r i but ed
10 any i ncome t o t he gr ant .
11 Q. How di d you l ear n t hat CASI had not cont r i but ed t o t he cost
12 shar e?
13 A. By l ooki ng at t hei r books. You coul d t el l t her e was no
14 money comi ng i n f r omany ot her sour ce ot her t han ATP, so t her e
15 was no money t o cont r i but e t o t he pr oj ect ot her t han t he ATP
16 f undi ng. Ther e was not hi ng evi denced i n hi s books t hat
17 i ndi cat ed t hat any ATP mat ch had occur r ed.
18 Q. Di d you t al k t o t he def endant about cr eat i ng t hese r evi sed
19 f i nanci al r epor t s?
20 A. Yes, si r , I di d. The r epor t s wer e compl et ed i n t he mi ddl e
21 of J ul y, and i t t ook us about a mont h t o act ual l y f i l e t hem
22 because we wer e r ewor ki ng t he cover l et t er .
23 Q. Bef or e we get t o t he cover l et t er , l et ' s l ook at some of
24 t he r epor t s. Fi r st , who di d you send t he r evi sed r epor t s t o?
25 A. I sent t he r epor t s t o ATP.
( 212) 805- 0300
989
1 Q. I f you coul d l ook at Gover nment ' s Exhi bi t s 40A, 41A, 42A
2 and 43A, t hey shoul d be i n f r ont of you i n t hat st ack.
3 A. Yes, si r .
4 Q. Take a l ook at t hose.
5 A. The number s agai n?
6 Q. 40A, 41A, 42A and 43A.
7 A. Yes, si r .
8 Q. Ar e t hose t he r evi sed f i nanci al r epor t s you r ef er r ed t o?
9 A. Yes, si r , t hey ar e.
10 Q. Now i f you coul d l ook at 40, 41, 42 and 43. Do you see
11 t hose document s?
12 A. Yes, si r .
13 Q. Ar e t hose t he or i gi nal f i nanci al r epor t s t hat you r evi sed?
14 A. Yes, si r .
15 Q. Let ' s t ake an exampl e. I f you coul d l ook at 40 ver sus 40A.
16 We wi l l put t hose up on t he scr een.
17 A. Yes, si r .
18 Q. Whi ch t i me per i od do t hese r epor t s cover ?
19 A. Oct ober 2001 t hr ough December 2001.
20 Q. I s t hat t he f i r st quar t er of t he gr ant ?
21 A. I bel i eve so, yes, si r .
22 Q. And whi ch i s t he or i gi nal and whi ch i s t he r evi sed?
23 A. The or i gi nal i s 40, t he r evi sed i s 40A.
24 Q. I f you coul d l ook speci f i cal l y at l i ne I .
25 A. Yes.
( 212) 805- 0300
990
1 Q. Li ne I i n Gover nment Exhi bi t ' s 40, f i r st of al l , what i s
2 l i ne I supposed t o be? What i s t hat number supposed t o mean?
3 A. I t ' s supposed t o mean t he amount of money t hat t he gr ant
4 hol der used of hi s own f undi ng t o mat ch t he money t hat t he ATP
5 peopl e pr ovi ded.
6 Q. I s t hat t he cost shar e?
7 A. Yes, si r .
8 Q. What number i s r ef l ect ed i n 40 f or t he cost shar e?
9 A. $12, 320.
10 Q. And i f you l ook at 40A, whi ch i s t he r evi sed r epor t you
11 i dent i f i ed bef or e.
12 A. Yes, si r .
13 Q. What i s r ef l ect ed on l i ne I as t he cost shar e?
14 A. Zer o.
15 Q. So, what does t hat mean?
16 A. That means t her e was no CASI mat ch.
17 Q. And f or t he ot her r epor t s I showed you t hat I had you l ook
18 at , does t he same t hi ng appear i n al l of t hese r epor t s
19 compar i ng t he or i gi nal t o t he r evi sed?
20 A. Yes.
21 Q. And do you see al so i n 40 t he l i ne J ?
22 A. Yes.
23 Q. The f eder al shar e of net out l ays?
24 A. Yes.
25 Q. What i s t hat number supposed t o r epr esent ?
( 212) 805- 0300
991
1 A. That amount i s supposed t o r epr esent t he amount of money
2 t hat you spent on ATP' s pr oj ect .
3 Q. And i s t hat number i n f act accur at e?
4 A. No.
5 Q. Why not ?
6 THE COURT: Whi ch document ?
7 MR. EVERDELL: St i l l l ooki ng at 40, l i ne J .
8 Q. I s t hat number i n f act accur at e?
9 A. No.
10 Q. Why not ?
11 A. Because t her e was no way t o subst ant i at e any number based
12 on t he condi t i on of t he books.
13 Q. What about i n 40A, t he same l i ne, l i ne J ?
14 A. That number i s t he amount of money t hat Dr . Kar r on dr ew
15 down f r omATP. I t ' s not an accur at e number ei t her , but i t was
16 mor e accur at e t han anyt hi ng el se t hat I coul d put i n t her e, and
17 my i nt ent was t o make sur e, r egar dl ess of any ot her number s on
18 t hose r epor t s, t hat t he f act t hat t her e was no mat ch
19 cont r i but ed was r ecor ded.
20 Q. And your i nt ent meani ng your i nt ent i n submi t t i ng t hese t o
21 NI ST?
22 A. Was t o make sur e t hat t hey under st ood t hat t her e was no
23 mat ch and t hat t hey woul d t ake a har der l ook at t hi s pr oj ect .
24 Q. I s t hat why you submi t t ed t hese r evi sed r epor t s t o NI ST?
25 A. Yes.
( 212) 805- 0300
992
1 Q. Di d you submi t a r evi sed f i nanci al i nf or mat i on wi t h a cover
2 l et t er ?
3 A. Yes.
4 Q. Di d you dr af t t he l et t er ?
5 A. I dr af t ed t he i ni t i al l et t er . Thi s i s not t he i ni t i al
6 l et t er . Thi s i s a r evi sed l et t er t hat , as I sai d, we wor ked on
7 f or appr oxi mat el y a mont h.
8 Q. Al l r i ght . Let ' s l ook at t he l et t er you' r e r ef er r i ng t o,
9 Gover nment ' s 48. I f you coul d put t hat on t he scr een.
10 MR. RUBI NSTEI N: I s t hat i n evi dence?
11 MR. EVERDELL: I t ' s al r eady i n evi dence.
12 THE COURT: I s i t i n evi dence?
13 MR. EVERDELL: I bel i eve so. I t was i n evi dence
14 t hr ough Hope Snowden.
15 THE COURT: I don' t see i t .
16 DEPUTY COURT CLERK: J une 4. 48.
17 THE COURT: Oh, yes.
18 Q. Do you see t hat l et t er , Mr . Benedi ct ?
19 A. Yes, si r .
20 Q. I f we coul d bl ow up t he f i r st t wo par agr aphs.
21 I f you coul d pl ease r ead t he f i r st par agr aph of t he
22 l et t er ?
23 A. " Ms. Snowden, pl ease bel i eve Dr . Kar r on di d not knowi ngl y
24 mi sst at e hi s SF269A submi ssi ons t hr ough year one. He si gned
25 document s pr epar ed by hi s pr oj ect admi ni st r at or , who, al ong
( 212) 805- 0300
993
1 wi t h Dr . Kar r on, di d not under st and t he ATP gui del i nes or cost
2 pr i nci pl es FAR31. 2, and mi st ook cer t ai n f i nanci al deposi t s by
3 Dr . Kar r on f or member cont r i but i ons. "
4 Q. Now, Mr . Benedi ct , di d you wr i t e t hat par agr aph?
5 A. No.
6 Q. Who wr ot e t hat par agr aph?
7 A. Pr i mar i l y Dr . Kar r on. He di d ask me t o i ncl ude t he
8 f i nanci al number s t hat I was al ways r ef er enci ng.
9 THE COURT: Di d anyone el se par t i ci pat e i n t he
10 dr af t i ng?
12 Q. But j ust t o be cl ear , t hat f i r st par agr aph was added at t he
13 r equest of Dr . Kar r on?
14 A. Yes, si r .
15 Q. Al l r i ght . I f you coul d pl ease r ead t he f i r st t hr ee
16 sent ences i n t he second par agr aph.
17 A. " We acknowl edge t hat t her e ar e di sal l owed expenses and t hey
18 do go back t o year one, but t hey pr i mar i l y come f r omt wo
19 sour ces. Fi r st , Dr . Kar r on was t r yi ng t o do t he bookkeepi ng
20 hi msel f and he i s not an account ant , mi st akes wer e made.
21 Secondl y, t her e wer e di f f er i ng opi ni ons on what i s and i sn' t
22 al l owabl e bet ween t he pr i or admi ni st r at or s of t he CA and t hose
23 now admi ni st er i ng t he CA. "
24 Q. What was t he CA?
25 A. That ' s t he gr ant .
( 212) 805- 0300
994
1 Q. That f i r st sent ence, " We acknowl edge t hat t her e ar e
2 di sal l owed expenses and t hey do go back t o year one, " who wr ot e
3 t hat sent ence?
4 A. I di d.
5 Q. What about t he second t wo sent ences, Dr . Kar r on was t r yi ng
6 t o do t he bookkeepi ng hi msel f , he i s not an account ant ,
7 mi st akes wer e made and t her e wer e di f f er i ng opi ni ons about what
8 i s and i sn' t al l owabl e bet ween t he pr i or admi ni st r at or of t he
9 CA and t hose now admi ni st er i ng t he CA?
10 A. Those wer e added by Dr . Kar r on.
11 THE COURT: What di d you say wer e added?
12 THE WI TNESS: The second and t he t hi r d sent ence.
13 THE COURT: " Secondl y" or " f i r st " ?
14 THE WI TNESS: " Fi r st " and " secondl y" .
15 Q. As f or t he f i r st sent ence whi ch you wr ot e, why di d you
16 wr i t e t hat sent ence?
17 A. Because I want ed t he ATP - -
18 MR. RUBI NSTEI N: I obj ect t o t he why quest i ons.
19 Q. What was t he pur pose f or i ncl udi ng t hat sent ence?
20 MR. RUBI NSTEI N: Obj ect i on, your Honor . I t speaks f or
21 i t sel f .
22 THE COURT: I wi l l al l ow t he answer .
23 Thi s i s t he sent ence " we acknowl edge" ?
24 A. The l et t er as I or i gi nal l y wr ot e i t st ar t ed " Mi ss Snowden,
25 we acknowl edge t her e ar e di sal l owed expenses and t hey do go
( 212) 805- 0300
995
1 back t o year one. " What I want ed t hemt o under st and was t hat
2 t her e wer e di sal l owed expenses i n addi t i on t o t he f act t hat
3 t her e was no mat ch. I was t r yi ng t o get ATP' s at t ent i on.
4 MR. RUBI NSTEI N: Coul d we have t he dat e of t hi s
5 exhi bi t , your Honor ?
7 MR. RUBI NSTEI N: The dat e.
8 THE COURT: The dat e on t he l et t er i s August 13,
9 accor di ng t o t he copy.
10 MR. RUBI NSTEI N: 2003. Thank you.
12 Q. You can put down t he l et t er . Mr . Benedi ct , ar e you
13 f ami l i ar wi t h someone named J oan Hayes?
14 A. Yes, si r .
15 Q. Who i s J oan Hayes?
16 A. J oan Hayes was t he audi t or empl oyed by CASI .
17 Q. Di d you ever have any di scussi ons wi t h t he def endant
18 r egar di ng J oan Hayes?
19 A. Yes.
20 Q. What wer e t hose di scussi ons?
21 A. Dr . Kar r on was gener al l y not happy wi t h J oan Hayes. He
22 f el t t hat she j ust wasn' t doi ng what he want ed her t o do.
23 Q. And di d he say t hat t o you?
24 A. Yes, si r .
25 Q. What ul t i mat el y happened t o t he gr ant ?
( 212) 805- 0300
996
1 A. The gr ant was suspended.
2 Q. And af t er t he gr ant was suspended di d you have any
3 di scussi ons wi t h t he def endant about t he st at e of t he pr oj ect ?
5 Q. What was t he nat ur e of t hose di scussi ons?
6 A. As t he audi t pr ogr essed i t became appar ent t hat t he
7 di sal l owed number s and t he quest i oned number s wer e goi ng t o be
8 ver y l ar ge. I had t ol d Dr . Kar r on t hat t hi s was ver y ser i ous.
9 MR. RUBI NSTEI N: I obj ect t o what he t ol d Dr . Kar r on.
10 THE COURT: Ar e you r ef er r i ng t o an audi t by J oan
11 Hayes or an audi t by Bel i nda - -
12 THE WI TNESS: By Bel i nda Ri l ey.
13 THE COURT: - - by Bel i nda Ri l ey?
14 I s t hat what you' r e i nqui r i ng about , Mr . Ever del l ?
16 Q. Al l r i ght . So, you ar e f ami l i ar wi t h someone named Bel i nda
17 Ri l ey?
18 A. Yes, si r .
19 Q. Who i s Bel i nda Ri l ey?
20 A. Bel i nda Ri l ey i s t he Of f i ce of I nspect or Gener al ' s audi t or .
21 Q. And di d she compl et e an audi t r epor t ?
22 A. Yes.
23 Q. Di d you di scuss t hat r epor t wi t h Dr . Kar r on?
25 Q. And what di d you t el l hi m, i f anyt hi ng?
( 212) 805- 0300
997
1 A. I t ol d Dr . Kar r on t hi s was ver y ser i ous, he coul d go t o
2 j ai l f or t hi s, he coul d have bet ween 300 and 500, 000 of
3 di sal l owed expendi t ur es.
4 Q. What i f anyt hi ng was t he def endant ' s r esponse t o t hat ?
5 A. He sai d don' t wor r y about i t , my mom' s got i t .
7 THE COURT: Al l r i ght , Mr . Rubi nst ei n.
10 Q. Good mor ni ng, Mr . Benedi ct .
12 Q. Now, Exhi bi t 48 t hat was j ust shown t o you, t he l et t er t hat
13 you wr ot e t o Hope Snowden - -
14 A. Yes, si r .
15 Q. - - t hat was wr i t t en by you, r i ght ?
16 A. By mysel f and Dr . Kar r on.
17 Q. Was i t wr i t t en i n conj unct i on wi t h J oan Hayes?
18 A. No, si r .
19 Q. How di d you send t hat l et t er t o Hope Snowden?
20 A. Mai l ed i t .
21 Q. Di d you f ax i t t o Hope Snowden?
22 A. No, si r , I di dn' t .
23 Q. Wel l , di d J oan Hayes f ax i t t o Hope Snowden?
24 A. I don' t know whet her she di d or she di dn' t , si r . She i s on
25 copy of t he l et t er .
( 212) 805- 0300
998
8697KAR2 Benedi ct - cr oss
1 Q. Now, i n f act you advi sed Dr . Kar r on i n August of 2003 t hat
2 t he f i nanci al di sal l owances pur suant t o t he audi t wer e ver y
3 ser i ous, cor r ect ?
4 A. Yes, si r .
5 Q. And i n August of 2003, t hi s i s af t er t he gr ant was
6 suspended, r i ght ?
7 A. Yes, si r .
8 Q. And t hat i s t he f i r st t i me t hat you ever t ol d Dr . Kar r on
9 t hat i t ' s possi bl e he coul d even go t o j ai l f or t hi s, r i ght ?
10 A. That ' s possi bl e, yes, si r .
11 Q. Hi s r esponse was he di dn' t t hi nk t hat was possi bl e, r i ght ?
12 A. I t ol d you what hi s r esponse was. He sai d don' t wor r y
13 about i t .
14 Q. He f el t t hat i f you pai d back t he money t her e i s no
15 pr obl em.
16 A. I don' t know what he f el t , si r . He di dn' t say t hat t o me.
17 Q. Wel l , di dn' t he t el l you t hat hi s momhas t he money?
18 A. Yes, si r , but Dr . Kar r on of t en gave me ver y f l i ppant
19 answer s.
20 Q. But he di d say t hat hi s momhad t he money, cor r ect ?
21 A. Yes, si r .
22 Q. Now, you wer e cal l ed a number of t i mes pr i or t o t he t i me
23 t hat you became t he gr ant manager , t he busi ness manager
24 act ual l y of t hi s CASI gr ant , cor r ect ?
25 A. Yes, si r .
( 212) 805- 0300
999
1 Q. Pr i or t o t hat t i me how many cal l s woul d you say you got
2 f r ommember s of CASI aski ng your advi ce and your opi ni on on
3 al l owabl e expenses?
4 A. Four maybe.
5 Q. And you spoke t o Dr . Kar r on hi msel f , cor r ect ?
6 A. Yes, si r .
7 Q. And he spoke t o you about t he r ent , r i ght ?
8 A. Yes, si r .
9 Q. He al so spoke t o you about ut i l i t i es expenses, cor r ect ?
10 A. I don' t r ecal l , si r .
11 Q. Di d you ever i n t hose conver sat i ons bef or e you came t o be
12 empl oyed by CASI ever say t o Dr . Kar r on, you know, i f you do
13 t hi s you mi ght wi nd up i n j ai l ?
14 A. No.
15 Q. Now, i t i s a f act , si r , t hat Dr . Kar r on had pr oj ect
16 admi ni st r at or s, di d he not , pr i or t o you?
17 A. Yes, si r .
18 Q. He had Lee Gur f ei n, r i ght ?
19 A. Yes, si r .
20 Q. You spoke t o t hat gent l eman?
21 A. Yes, si r .
22 Q. He cal l ed you f or advi ce?
23 A. Yes.
24 Q. He had Pet er Ross?
25 A. I never spoke wi t h Pet er Ross.
( 212) 805- 0300
1000
1 Q. Ar e you awar e t hat Pet er Ross i s t he i ndi vi dual who
2 pr eceded you?
3 A. I l ear ned t hat af t er I j oi ned CASI , yes, si r .
4 Q. So i s i t f ai r t o say t hat t he st at ement t hat you have - - by
5 t he way, you aut hor ed t hi s l et t er , cor r ect ?
6 A. Yes, si r .
7 Q. You put your si gnat ur e on i t .
8 A. Yes, si r .
9 Q. Ar e you t el l i ng t hi s j ur y t hat you l i ed t o Hope Snowden i n
10 t hi s l et t er ?
13 A. No, si r .
14 Q. And Dr . Kar r on i ndi cat ed t o you t hat he had pr i or pr oj ect
15 admi ni st r at or s who di dn' t under st and t he ATP gui del i nes and
16 cost pr i nci pl es, cor r ect ?
17 A. Yes, si r . But I know t hat ATP i sn' t goi ng t o pay any
18 at t ent i on t o t hat because i gnor ance i sn' t an answer .
19 Q. But you knew t hat t her e was a l ot of i gnor ance her e i n
20 CASI , di d you not ?
21 A. Yes, si r .
22 Q. And when you f i r st met Dr . Kar r on, t he f i r st t hi ng he di d
23 bef or e you ever met hi mwas st and up i n an open meet i ng and
24 sai d he needs hel p on t he f i nanci al si de, under st andi ng t he
25 f i nanci al si de, cor r ect ?
( 212) 805- 0300
1001
1 A. Yes, si r .
2 Q. Now - -
3 THE COURT: What year was t hat ?
5 MR. RUBI NSTEI N: 2001 at a NI ST - -
6 THE COURT: I n t he spr i ng?
8 THE COURT: I s t hat bef or e - - i n t he spr i ng? Al l
9 r i ght .
11 Q. And, by t he way, t hese pr oj ect admi ni st r at or s, at l east
12 Gur f ei n, i s somebody t hat was cal l i ng you f or gui dance,
13 cor r ect ?
14 A. Yes.
15 Q. Di d you ascer t ai n t hat i n t he ver y begi nni ng of CASI t hat
16 Dr . Kar r on was i n f act doi ng t he bookkeepi ng hi msel f ?
17 A. Af t er I got t her e, yes, si r .
18 Q. And i n f act he i s not an account ant , r i ght ?
20 Q. And t hat ' what you' r e t el l i ng us he asked you t o
21 i ncor por at e i n t hi s l et t er , r i ght ?
22 A. Yes, si r .
23 Q. That ' s t r ue, r i ght ?
24 A. Yes, i t i s.
25 Q. And i n f act t her e wer e di f f er i ng opi ni ons on what i s
( 212) 805- 0300
1002
1 al l owabl e and what wasn' t al l owabl e, cor r ect ?
4 Q. Wel l , you had di f f er ences of opi ni on wi t h Dr . Kar r on as t o
5 what was al l owabl e and what was unal l owabl e, cor r ect ?
6 A. Yes, si r .
7 Q. And i n f act CASI , pr i or t o t he appear ance of Bel i nda Ri l ey,
8 you wer e at t empt i ng t o get al l t he books st r ai ght ened out , wer e
9 you not ?
10 A. Yes, si r .
11 Q. You wer e i n t he pr ocess of doi ng t hat , cor r ect ?
12 A. Yes, si r .
13 Q. And your exper i ence wi t h NI ST ATP was based upon your
14 backgr ound wi t h I BM and t hi s company Compl ex, r i ght ?
15 A. Yes.
16 Q. How l ar ge a company i s Compl ex?
17 A. Say agai n?
18 Q. How l ar ge a company i s Compl ex?
19 A. You mean t he consor t i um?
20 Q. Wel l , you sai d you wor ked f or Compl ex. I s t hat a
21 consor t i um? I don' t know.
22 A. I di dn' t say anyt hi ng about a compl ex. I wor ked f or I BM
23 managi ng si ngl e gr ant s and consor t i umgr ant s. The consor t i um
24 gr ant s ar e mul t i - company gr ant s.
25 Q. And di d you wor k on gr ant s f or anybody el se?
( 212) 805- 0300
1003
1 A. Axi om.
2 Q. Axi om. I ' msor r y. And how l ar ge a company i s Axi om?
3 A. Axi omi s a r el at i vel y smal l sof t war e devel opment company
4 t hat wor ked wi t h I BM.
5 Q. When you say r el at i vel y smal l , how many empl oyees di d Axi om
6 have?
7 A. 250.
8 Q. 250 empl oyees?
9 A. Um- hum.
10 Q. And Axi om, what ki nd of gr ant di d t hey get ?
11 A. They di dn' t have a gr ant . I was a consul t ant wor ki ng f or
12 t hem, and t hey hi r ed me out t o I BM. So al l of my gr ant
13 exper i ence i s r el at ed t o I BM exper i ence - - or ATP exper i ence
14 was al l r el at ed t o I BM pr oj ect s.
15 Q. Wi t hout bei ng f acet i ous, I BM i s a gi ant company, r i ght ?
16 A. Yes, si r .
17 Q. Now, wer e you t he sol e - - wer e you t he busi ness manager f or
18 I BM deal i ng wi t h t he gr ant s?
19 A. Yes, si r .
20 Q. And what ki nd of gr ant s di d I BM get ?
21 A. Sof t war e devel opment , hi gh- r i sk sof t war e devel opment
22 gr ant s.
23 Q. And what dol l ar amount ?
24 A. The f i r st one was t he same si ze as Dr . Kar r on' s. The l ast
25 t wo wer e 24 and $26 mi l l i on gr ant s.
( 212) 805- 0300
1004
1 Q. Now, t he f i r st one i s what i s cal l ed a si ngl e gr ant ?
2 A. Yes.
3 Q. And t he ot her s wer e consor t i um, whi ch meant t hose gr ant s
4 i nvol ved mor e t han one company?
5 A. Yes, si r .
6 Q. Now, i n your si ngl e gr ant , di d you wr i t e t he budget f or
7 t hat gr ant ?
9 Q. Di d you ever have - - was t he budget i n pl ace when you
10 became t he gr ant manager ?
11 A. Yes, si r , i t was.
12 Q. And t hat ' s t he onl y budget , si ngl e gr ant budget , deal i ng
13 wi t h NI ST ATP. Was t hat - - I ' msor r y. Was t hat t he onl y
14 si ngl e gr ant budget f r omATP NI ST?
15 A. Yes, si r .
16 Q. That you ever wor ked on?
17 A. Yes, si r .
18 Q. I n t hat budget wer e you pai d? Was I BM pai d up f r ont ? Di d
19 t hey have t he gr ant money up f r ont , or di d t hey have t o be
20 r ei mbur sed?
21 A. Rei mbur sement .
22 Q. So t hat I BM woul d have t o spend t hei r money f i r st , r i ght ?
23 A. Yes.
25 THE COURT: Obj ect i on sust ai ned. When you st ar t wi t h
( 212) 805- 0300
1005
1 " so" - -
3 Q. I BM spent t hei r money f i r st , cor r ect ?
4 A. Yes, si r .
5 Q. Then woul d i t be your j ob t o r equest r ei mbur sement f r omt he
6 gr ant ?
7 A. Yes, si r .
8 Q. And how woul d you do t hat ?
9 MR. EVERDELL: Obj ect i on. Rel evance.
10 THE COURT: I ' mgoi ng t o al l ow t he quest i on.
11 A. I woul d submi t a r epor t t o ATP aski ng t hemf or
12 r ei mbur sement based on t he det ai l ed expendi t ur es I r evi ewed.
13 Q. And wer e you ever t ur ned down?
14 A. No, si r .
15 Q. Now, when you wer e doi ng t he consor t i umpr oj ect s, was t hat
16 a r ei mbur sement al so si t uat i on?
19 A. Yes.
20 Q. And di d you submi t t he r epor t s r equest i ng r ei mbur sement ?
21 A. Yes.
22 Q. And, by t he way, how much of t he 2 mi l l i on t hat I BM
23 r ecei ved i n t he f i r st gr ant , t he si ngl e gr ant , was act ual l y - -
24 I wi l l wi t hdr aw t hat .
25 How many year s was t hat gr ant f or , t he f i r st gr ant ?
( 212) 805- 0300
1006
1 A. Two.
2 Q. Two year s?
3 A. Yes, si r .
4 Q. For $2 mi l l i on?
5 A. Yes, si r .
6 Q. And how much of t he 2 mi l l i on di d I BM spend?
7 A. Al l of i t .
8 Q. And t he t wo consor t i umgr ant s, t hose wer e f or 24 mi l l i on a
9 pi ece?
10 A. 24 and 26.
11 Q. And how much of t he $24 mi l l i on gr ant di d I BM spend, t he
12 consor t i um?
13 A. The consor t i umspent al l of t he money.
14 Q. And how about t he $26 mi l l i on gr ant , how much di d t he
15 consor t i umspend on t he 26 mi l l i on gr ant ?
16 A. They spent al l t he money.
17 Q. When you woul d submi t a document t o ATP, wer e any of t he
18 r ei mbur sed expendi t ur es ever r ej ect ed?
20 THE COURT: Obj ect i on over r ul ed. Can I hear t he
21 quest i on agai n?
22 A. I don' t r ecal l any bei ng r ej ect ed.
23 Q. What year s wer e t hi s t hat you wer e deal i ng wi t h NI ST ATP on
24 t hese gr ant s?
25 A. 1994 t o 2002.
( 212) 805- 0300
1007
1 Q. Now, di d you ever have occasi on t o speak t o any of t he
2 gr ant admi ni st r at or s f r omATP?
3 A. Yes, si r .
4 Q. And who di d you speak t o? I amt al ki ng on behal f of t he
5 I BM gr ant s. Di d you ever have occasi on t o speak t o any of t he
6 admi ni st r at or s?
9 Q. Di d you ever have occasi on t o submi t any budget r evi si ons
10 on behal f of any of t he I BM gr ant s?
13 A. Yes.
14 Q. What ki nd of budget r evi si ons di d you r equest ?
15 A. As t he pr oj ect s pr oceeded, you l ear n your i ni t i al budget
16 doesn' t have al l t he money i n al l t he r i ght pl aces, and so you
17 r equest movement of t he money f r omone budget l i ne t o anot her
18 budget l i ne. I don' t speci f i cal l y r ecal l any of t he det ai l s,
19 but , yes, t hey occur r ed.
20 Q. That ' s a common t hi ng i n t hese ki nd of hi gh- t ech, hi gh- r i sk
21 t ypes of gr ant s, r i ght ?
22 A. Yes.
23 Q. Now, you wer e i nvol ved, wer e you not , i n CASI ' s or i gi nal
24 budget submi ssi on?
25 A. No.
( 212) 805- 0300
1008
1 Q. Wel l , di d you di scuss wi t h Dr . Kar r on t he or i gi nal budget
2 t hat he was submi t t i ng?
3 A. No.
4 Q. I n f act you wer e never appr oved by ATP NI ST f or t he CASI
5 pr oj ect .
6 A. I f ound t hat out l at er , yes, si r .
7 Q. When di d you f i nd t hat out ?
8 A. Dur i ng t he audi t by OI G, by Bel i nda Ri l ey.
9 Q. You wer e never f or mal l y r ej ect ed, cor r ect ?
10 A. Cor r ect .
11 Q. And i sn' t i t a f act t hat ATP woul dn' t speak t o you bef or e
12 Bel i nda Ri l ey showed up because you wer e not appr oved by t hem?
13 A. They di d not r et ur n phone cal l s.
14 Q. But you di d cal l t hembef or e t he gr ant was suspended on
15 J une 27, cor r ect .
16 A. Yes, si r .
17 Q. And af t er t he gr ant was suspended you l ear ned f r omRi l ey
18 t hat you wer e not appr oved, cor r ect ?
19 A. Yes.
20 Q. And when woul d you say t hat was i n t i me f r ame?
21 A. J ul y/ August somet i me.
22 Q. Had you r ecei ved any r emuner at i on, any payment f r omCASI
23 f or t he wor k you had done as manager ?
24 A. Yes.
25 Q. And i n f act Dr . Kar r on br ought you aboar d and t ol d you when
( 212) 805- 0300
1009
1 you came aboar d he needed somebody who r eal l y knew what t hey
2 wer e doi ng?
3 A. Yes.
4 Q. And di d you hel p ear l y on? Bef or e wer e you act ual l y hi r ed,
5 when you wer e get t i ng t hese cal l s f r omCASI , di d you r ecommend
6 t hat any cat egor y be added t o t he budget cal l ed " ot her s" ?
7 A. I don' t r ecal l anyt hi ng l i ke t hat , no, si r .
8 THE COURT: For what ? For ot her ?
9 MR. RUBI NSTEI N: " Ot her s" .
10 Q. That i s a cat egor y i n t he budget , i s t hat cor r ect ?
11 A. No, si r , not as f ar as I know i t i sn' t .
12 Q. Now, you say you wer e get t i ng $60 an hour , cor r ect ?
13 A. Yes, si r .
14 Q. Wer e you awar e what Lee Gur f ei n was bei ng pai d?
15 A. No, si r .
16 Q. Di d you become awar e of what Lee Gur f ei n had been pai d?
17 A. No, si r .
18 Q. Di d you ever say t o Dr . Kar r on t hat what CASI pai d Lee
19 Gur f ei n was i nsane?
20 A. I don' t r ecal l , no, si r .
21 Q. Wel l , di d you have occasi on as t he manager - - you submi t t ed
22 r evi si ons, di d you not ?
23 A. Yes, si r .
24 Q. Revi si ons f or t he whol e budget , cor r ect ?
25 A. We submi t t ed a budget amendment , yes.
( 212) 805- 0300
1010
1 Q. Di d you r evi ew t he pr i or budget s?
2 A. The onl y pr i or budget t hat I saw was t he one t hat was
3 or i gi nal l y f i l ed wi t h t he gr ant .
4 Q. And t hat had a sal ar y f or Lee Gur f ei n, di d i t not ?
5 A. Yes.
6 Q. Ar e you t el l i ng t hi s j ur y t hat you di dn' t not i ce what
7 Mr . Gur f ei n was bei ng pai d?
8 THE COURT: Obj ect i on t o t he f or mof t he quest i on.
10 THE COURT: He di dn' t say he di dn' t not i ce.
11 Q. Wel l , di d you see i n t hat budget - -
12 THE COURT: He sai d he never made t he st at ement t o Dr .
13 Kar r on i s what he sai d.
14 Q. Wel l , di d you see i n t hat budget what Lee Gur f ei n was bei ng
15 pai d?
16 A. Yes, I saw what he was bei ng pai d.
17 Q. And how much was Gur f ei n bei ng pai d?
19 Q. Af t er you saw t hat , di d you ever have any conver sat i on wi t h
20 Dr . Kar r on as t o t he amount t hat t hey wer e payi ng Lee Gur f ei n?
21 A. No, si r , not t o my memor y I don' t .
22 Q. Di d you di scuss wi t h Dr . Kar r on t he 10 per cent r ul e?
23 A. Yes.
24 Q. And di d you advi se hi mt hat i t ' s r eal l y a 20 per cent r ul e,
25 t hat you can add 10 per cent i f you t ake 10 per cent of f ?
( 212) 805- 0300
1011
1 A. I don' t under st and t he quest i on.
2 Q. Wel l , t he 10 per cent r ul e per mi t s you, does i t not , si r , t o
3 i ncr ease any l i ne i n t he budget by 10 per cent ?
4 A. Yes, i t ' s a pl us or mi nus 10 per cent r ul e.
5 Q. So you woul d have t o r educe by 10 per cent i n or der t o
6 i ncr ease by 10 per cent ?
7 A. Yes, si r . You wer en' t goi ng t o get any mor e money.
8 Q. The dol l ar amount , i n t hi s case $800, 000 f or t he f i r st
9 year , was your seal i ng, t op amount .
10 A. Yes.
11 Q. So, i n ef f ect i t r eal l y was 10 per cent up and 10 per cent
12 down; you wound up wi t h t he same dol l ar amount budget .
13 A. Yes. You can go pl us or mi nus 10 per cent on any budget
14 l i ne wi t hout get t i ng a budget amendment .
15 Q. And ar e you f ami l i ar wi t h whet her or not t her e ar e speci al
16 condi t i ons t hat ar e somet i mes i mposed by ATP as par t of t he
17 gr ant ?
18 A. Ther e ar e sect i ons i n gr ant s t hat ar e cal l ed speci al t er ms
19 and condi t i ons. I don' t r ecal l what t hey wer e, i f t her e wer e
20 any wi t h Dr . Kar r on' s gr ant .
21 Q. Wel l , you t ol d us t hat you r ecommended t hat Dr . Kar r on get
22 gr ant manager t r ai ni ng?
23 A. Yes.
24 Q. You sent hi ma cat al og, r i ght ?
25 A. Yes.
( 212) 805- 0300
1012
1 Q. Di d you al so suggest t hat t he peopl e who wor k f or hi mi n
2 t he admi ni st r at i on do t he same?
3 A. Yes.
4 Q. And you l ear ned i n f act t hat nei t her Dr . Kar r on nor anyone
5 i n t he admi ni st r at i on t ook t he cour se, cor r ect ?
7 Q. And di d Dr . Kar r on advi se you t hat he woul d r el y upon hi s
8 net wor k of assi st ant s t o get hi mt hr ough t he gr ant pr ocess?
9 Ri ght ?
10 A. I don' t r ecal l t hat comment , no, si r .
11 Q. Wel l , when di d you speak t o somebody i nvol ved i n t he
12 pr osecut i on i n t hi s case?
13 A. Coul d you r epeat t he quest i on, pl ease.
14 Q. Yes. When wer e you f i r st appr oached by anybody at t hat
15 f i r st t abl e about t hi s case?
16 A. Two year s ago?
17 Q. And who wer e you appr oached by?
18 A. Agent Ondr i k.
19 Q. Do you see t hat agent her e?
20 A. Yes. She i s si t t i ng over t her e at t he t abl e. Ki r k was
21 al so t her e. He' s si t t i ng at t he end of t he t abl e.
22 Q. And how about t he pr osecut or s her e, when di d you meet t he
23 pr osecut or s f or t he f i r st t i me?
24 A. Two mont hs ago.
25 Q. 2008, cor r ect ?
( 212) 805- 0300
1013
1 A. Yes, si r .
2 Q. Do you r ecal l t el l i ng t he agent s t hat i nst ead he, meani ng
3 Dr . Kar r on, depended on hi s net wor k of associ at es t o get hi m
4 t hr ough t he pr ocess?
5 A. Dr . Kar r on woul d - -
6 Q. Do you r ecal l sayi ng t hat t o t he agent s her e under oat h?
7 A. Not speci f i cal l y, no, si r .
8 Q. OK. Let me show you t hi s document whi ch has been
9 pr evi ousl y mar ked as 3506- A and ask you f i r st t o l ook at t he
10 t op on t he back, and t hen I wi l l di r ect you t o a speci f i c pl ace
11 i n t he document . Di d you r evi ew t hat , si r ?
12 A. Number 3?
13 Q. Wel l , f i r st of al l , di d you r evi ew t he f act t hat t hat ' s an
14 af f i davi t t hat you si gned and swor e t o?
15 A. Yes i t i s. Yes, si r .
16 Q. And you r ead i t bef or e you swor e t o i t ?
18 Q. And you i ni t i al ed ever y page?
19 A. Yes, si r .
20 Q. I di r ect your at t ent i on t o what I have as number t hr ee and
21 ask you i f t hat r ef r eshes your r ecol l ect i on t hat Dr . Kar r on
22 t ol d you he depended on a net wor k of associ at es t o get hi m
23 t hr ough t he pr ocess.
24 A. That ' s not what he t ol d me, si r . I t ' s what he di d.
( 212) 805- 0300
1014
869zkar 3 Benedi ct - cr oss
2 Q. You obser ved t hat , t hat he r el i ed upon ot her peopl e t o get
3 hi mt hr ough t he pr ocess?
4 A. Dr . Kar r on woul d ask a quest i on. I f he got an answer he
5 di dn' t l i ke, he' d ask somebody el se unt i l he got somet hi ng t hat
6 was cl ose t o what he want ed, and he woul d go i n t hat di r ect i on.
7 Q. And had you, i n your pr i or exper i ence wi t h ATP NI ST, ever
8 have occasi on on, asi de f r omCASI , of negot i at i ng as t o what
9 was al l owabl e or al l owed; di d your have t hat occasi on,
10 exper i ence?
11 A. Yes, si r .
12 Q. Now, somebody di d t ake t hat cour se t hat you r ecommended,
13 r i ght ?
14 A. Yes.
15 Q. And t hat was J oan Hayes, r i ght ?
16 A. Yes.
17 Q. And who pai d f or t hat cour se?
18 A. I have no i dea, si r .
19 Q. Ar e you awar e t hat whet her or not CASI pai d f or t hat cour se
20 f or J oan Hayes?
21 A. I have no r ecol l ect i on of t hat , si r . J oan Hayes was a CASI
22 empl oyee, not an ATP empl oyee. What CASI di d wi t h CASI ' s
23 money, I di dn' t car e.
24 Q. She was t hei r account ant , she was CASI ' s account ant ?
25 A. She was CASI ' s account ant CPA, audi t or .
( 212) 805- 0300
1015
1 Q. She was wear i ng mul t i pl e hat s f or CASI , cor r ect ?
4 Q. Wel l - -
6 Q. I f Dr . Kar r on - - when you r ecommended t o Dr . Kar r on t hat he
7 or somebody i n CASI t ake t hi s cour se on audi t i ng - - i t was ki nd
8 of an audi t i ng cour se f or t he budget ?
9 A. The cour ses t hat ar e of f er ed by management concept s cover a
10 number of subj ect s. One i s t he A- 133 audi t , whi ch i s t he
11 f eder al gover nment audi t i ng pr ocess. Ther e wer e cour ses on
12 gr ant management , t her e wer e cour ses on gr ant wr i t i ng. I mean,
13 t hey have a number of cour ses.
14 Q. So t he per son t hat went down f or t he cour se on gr ant
15 management was t he account ant , cor r ect ?
16 A. Yes, si r .
17 Q. And t hat was pr i or t o t he t i me t hat you came aboar d,
18 cor r ect ?
19 A. I don' t know when she went .
20 Q. And i s i t your vi ew t hat t hat woul d not , woul d not be an
21 al l owabl e expense?
22 A. I t ' s not an al l owabl e expense t o t he gr ant , no, si r .
23 Q. Di d you ever di scuss t hat wi t h anybody at ATP?
24 A. No, si r .
25 Q. Di d Mar k St anl ey speak at t he conf er ence wher e you met Dr .
( 212) 805- 0300
1016
1 Kar r on?
2 A. I don' t r ecal l i f he spoke at t hat conf er ence or not ; no,
3 si r .
4 Q. Have you been pr esent when Mar k St anl ey spoke t o gr ant , t o
5 hopef ul gr ant r eci pi ent s?
6 A. Yes.
7 Q. And i t ' s f ai r t o say t hat Mar k St anl ey sai d t hat t hey woul d
8 at t empt i ng t o, t o hel p anybody who got a gr ant ?
10 A. I don' t speci f i cal l y r ecal l hi mmaki ng t hat comment .
11 Q. Wel l , di d you advi se Dr . Kar r on t hat NI ST ATP was one of
12 t he most f r i endl y or gani zat i ons t o t he r eci pi ent s?
13 A. That was my exper i ence.
14 Q. And - -
15 THE COURT: Di d you t el l hi m?
16 THE WI TNESS: I don' t r ecal l maki ng t hat , t hat
17 st at ement .
18 Q. Di d you advi se Dr . Kar r on t hat t her e i s al ways a way t o get
19 amendment s; di d you advi se Dr . Kar r on of t hat ?
20 A. I don' t under st and t he quest i on.
21 Q. Ther e' s al ways a way f or an expense t o be consi der ed, t o be
22 al l owabl e?
23 A. I don' t r ecal l t hat st at ement . That woul d seemt o be t oo
24 br oad.
25 Q. Ar e you f ami l i ar wi t h t ypes of equi pment t hat Dr . Kar r on
( 212) 805- 0300
1017
1 had i n t he NI ST ATP pr oj ect ?
2 A. I was f ami l i ar t o t he ext ent t hat t hey wer e l ar ge and ver y
3 power f ul pi eces of equi pment . Ot her t han t hat , I don' t know.
4 I ' mnot a t echnol ogi st .
5 Q. And ar e you awar e t hat you coul d r evi se t he budget af t er
6 t he year was up?
7 A. Af t er what year was up?
8 Q. Wel l , i n t hi s case CASI had a budget f or - - st ar t i ng
9 Oct ober 1st , 2001 r unni ng t i l l Sept ember 30t h, 2002, cor r ect ;
10 f i r st year of t he gr ant ?
11 A. Yes.
12 Q. And t hat had you had t o r eappl y f or t he second - - di d you
13 have t o r epl y f or t he second year ?
14 A. No, si r .
15 Q. I t was aut omat i c?
16 A. I t was a t wo year gr ant .
17 Q. I sn' t i t a f act t hi s was a t hr ee year gr ant ?
18 A. Thr ee year gr ant . I don' t r ecal l whet her i t ' s t wo or
19 t hr ee.
20 Q. I BM was a t wo year gr ant ?
21 A. Yes.
22 Q. Now, i s t her e any r evi ew af t er t he f i r st year by, t hat
23 you' r e awar e of , by ATP NI ST of t he gr ant peopl e, t he CASI ?
25 THE COURT: I ' l l al l ow t he quest i on. I ' d l i ke a t i me
( 212) 805- 0300
1018
1 f r ame, t hough, Mr . Rubi nst ei n.
2 MR. RUBI NSTEI N: Okay. I ' l l wi t hdr aw t he quest i on,
3 J udge, even t hough you al l owed i t .
4 Q. Ar e you awar e t hat af t er t he f i r st year of t he gr ant , you
5 ar e r equi r ed t o submi t an audi t ?
6 A. I don' t r emember i f t hat was a speci f i c r equi r ement of t hi s
7 gr ant or not .
8 Q. Wel l , ar e you awar e as t o whet her or not you can, af t er t he
9 year i s over , i n ot her wor ds subsequent t o Sept ember 30t h,
10 2002, whet her or not you coul d r equest a budget r evi si on f or
11 t he year 2000 - - Oct ober 1, 2001, t o Sept ember 30t h, 2002?
12 A. My exper i ence wi t h ATP gr ant s i s t hat you have a t hr ee year
13 budget . You may or may not spend ever yt hi ng i n year one. You
14 can do budget amendment s as you need t hem.
15 Q. Coul d you - - you t ol d us bef or e about as you go on i n your
16 gr ant s you l ear n t hat you may have needs f or mor e money i n one
17 l i ne i t emt han anot her i t em, cor r ect ?
18 A. Yes, si r .
19 Q. You mi ght even need an addi t i onal l i ne i t emt hat you di dn' t
20 have bef or e, cor r ect ?
21 A. Yes, si r .
22 Q. The quest i on i s, af t er you f i ni sh your f i r st year , do you
23 know whet her or not i f you check over your act ual s, what you
24 r eal l y spent and what you r eal l y spent i t on, whet her you can
25 have your f i r st year budget r evi sed t o r ef l ect t hat ?
( 212) 805- 0300
1019
1 A. I don' t bel i eve so.
2 Q. Wel l , l et me show you what ' s - - wel l , you' r e not sur e?
3 A. No, I ' mnot .
4 Q. Let me show you what ' s i n evi dence as gover nment Exhi bi t 4,
5 page 11.
6 MR. RUBI NSTEI N: Coul d you put t hat up on t he boar d,
7 pl ease?
8 Q. Wer e you ever pr esent at a ki ckof f meet i ng wi t h peopl e f r om
9 NI ST ATP wher e t hey - - wer e you ever pr esent at such a - -
10 A. Yes, si r , I ' ve been pr esent at ki ckof f meet i ngs, ATP
11 ki ckof f meet i ngs.
12 Q. Okay. And di d t hey gi ve you a l ot of mat er i al when you go
13 t her e?
14 A. Yes.
15 Q. And how vol umi nous i s t he mat er i al t hat t hey gi ve you.
17 Q. Coul d you show us wi t h your hands as t o how - - do t hey gi ve
18 you t he CFR?
19 THE COURT: Wi t ness has i ndi cat ed about an i nch t hi ck.
20 A. No. They gave us t he CFR number s, t ol d us wher e t o go and
21 l ook.
22 Q. You have t o go l ook your sel f i n t he CFR?
23 A. Yes.
24 Q. And you see what ' s on t hat r eci pi ent r esponsi bi l i t y?
25 A. Yes.
( 212) 805- 0300
1020
1 Q. And you see t he second por t i on?
2 MR. EVERDELL: Your Honor , obj ect i on. He wasn' t at
3 t he ki ckof f meet i ng f or t hi s gr ant .
5 Q. Wel l , does t hat r ef r esh your r ecol l ect i on by l ooki ng at
6 t hat , t hat i n f act you coul d r evi se a budget af t er t he end of
7 each year ?
8 A. I don' t r ecal l t hat sl i de, but - - what I bel i eve t hey' r e
9 sayi ng t her e, t hough, i s i s as you go f or war d, you r evi se t he
10 t hr ee year budget , so t hat i t now l i nes up wi t h what you have
11 t o do goi ng f or war d, not t hat you go back and r evi se what ' s
12 al r eady happened, budget wi se.
13 Q. What di d you do at I BM i f you had an i t emt hat you spent
14 l ess money on dur i ng t he year ? You sai d you spent t he mi l l i on
15 dol l ar s t he f i r st year , r i ght , out of t he mi l l i on?
16 A. I don' t r ecal l what we spent t he f i r st year .
17 Q. Wel l , di d you t est i f y bef or e, you spent t he whol e mi l l i on?
18 A. I t est i f i ed t hat we spent al l t he money i n t he gr ant .
19 Q. Okay.
20 A. I di dn' t t est i f y t hat we spent i t by year .
21 Q. Di d t he l i ne i t ems - - di d you have any changes i n t he l i ne
22 i t ems?
23 A. Yes, si r .
24 Q. And when woul d you submi t t hose changes i n l i ne i t ems?
25 A. We woul d submi t t hemas we under st ood what we had t o do t o
( 212) 805- 0300
1021
1 go f or war d, and t hen we woul d make t he changes t o t he budget .
2 So what we woul d t ake t he - - what we di dn' t spend i n t he pr i or
3 year on a speci f i c l i ne, and r ol l i t t o anot her l i ne i n t he - -
4 goi ng f or war d.
5 Q. And Dr . Kar r on advi sed you, when you wer e hi r ed, t hat he
6 had pr obl ems wi t h hi s pr i or gr ant admi ni st r at or s, cor r ect ?
7 A. Yes, si r .
8 Q. And t he submi ssi on - - excuse me. And Dr . Kar r on want ed you
9 t o submi t as par t of your r evi si on 100 page, 100 addi t i onal
10 pages, cor r ect ?
11 A. I don' t know how many pages wer e, but i t was a si gni f i cant
12 vol ume of document s, st at i ng t echni cal r ef er ences and such.
13 They r eal l y di dn' t have anyt hi ng t o do wi t h t he budget i t sel f .
14 Q. Why don' t you t ake a l ook at page t wo of t he document t hat
15 I gave you and see i f t hat r ef r eshes your r ecol l ect i on as t o
16 t he si ze?
17 THE COURT: Page t wo of what document ?
18 MR. RUBI NSTEI N: 3506A.
19 A. Yes, si r .
20 THE COURT: Ar e you goi ng t o show t hat t o hi m?
21 THE WI TNESS: I have i t .
22 THE COURT: You have i t ?
23 THE WI TNESS: I t ' s her e.
24 THE COURT: Oh.
25 Q. You see t he f i r st f ul l par agr aph?
( 212) 805- 0300
1022
1 A. Yes.
2 Q. And, i n f act , he want ed you t o i ncl ude i n excess of a
3 hundr ed pages - -
4 A. Yes.
5 Q. - - t o j ust i f y t he budget ?
6 MR. EVERDELL: Obj ect i on. He' s r eadi ng f r omt he
7 document t hat ' s not i n evi dence.
9 MR. EVERDELL: He' s r eadi ng f r oma document not i n
10 evi dence.
11 THE COURT: Yes, obj ect i on sust ai ned.
12 Q. Wel l , i s i t a f act t hat you t est i f i ed on di r ect as t o
13 di scussi ons wi t h Dr . Kar r on about t he submi ssi on of t hi s
14 r evi sed budget once you came aboar d, cor r ect ?
15 A. Yes.
16 Q. And Dr . Kar r on suggest s t hat you i ncl ude i n excess of 100
17 pages of backup t o t he budget r evi si on r equest ?
18 A. He pr ovi ded t he pages. He di d al l t hat wor k.
19 Q. And wer e you abl e t o convi nce hi mt o r educe t he number of
20 pages t hat you submi t t ed?
21 A. Not by much.
22 Q. He di d r educe t he pages, cor r ect ?
23 A. Yes, si r .
24 Q. And your f eel i ng was t hat ATP woul dn' t even l ook at al l
25 t hose pages, so t her e was no sense i n submi t t i ng t hem, cor r ect ?
( 212) 805- 0300
1023
1 A. Si r , t hi s was a budget amendment . I t wasn' t a t echni cal
2 amendment . I t was - - he wasn' t changi ng t he t echni cal
3 di r ect i on of hi s pr oj ect , and submi t t i ng al l t hat t echni cal
4 dat a t o t he budget peopl e woul d make t hemwonder what we' r e
5 doi ng.
6 Q. You t hought t hat i t mi ght r ai se a r ed f l ag t hat peopl e
7 di dn' t know what t hey wer e doi ng at CASI ?
8 A. Yes.
9 Q. By submi t t i ng t hi s ki nd of pr ovi si on - -
11 Q. - - r i ght ?
13 THE COURT: Wel l , I ' l l al l ow t he quest i on i f you want
14 t o ask i t , Mr . Rubi nst ei n.
15 Q. I n f act , you wer e concer ned t hat t he r evi si on woul d be
16 r ej ect ed j ust on t he f or mof t he submi ssi on?
17 A. I was concer ned t hat i t woul d be sl owed down i n t he
18 pr ocess. I was not concer ned t hat t hey woul d r ej ect i t out of
19 hand.
20 Q. I sn' t i t a f act t hat you i ndi cat ed t o Dr . Kar r on t hat t he
21 pr i or r evi si on r equest appear ed - - woul d appear - - appear ed t o
22 ATP t hat CASI di dn' t know what t hey wer e doi ng?
23 A. I don' t r ecal l t hat .
24 Q. Why don' t you l ook at page t wo of your af f i davi t , 3506A,
25 and t ake a l ook at t he second f ul l par agr aph.
( 212) 805- 0300
1024
1 A. Yes.
2 Q. And does t hat r ef r esh your r ecol l ect i on as t o t el l i ng Dr .
3 Kar r on t hat t he pr i or mul t i pl e budget r evi si ons appear ed t o ATP
4 l i ke CASI di dn' t know what t hey wer e doi ng?
5 ( Pause)
6 A. I was concer ned t hat t he ATP f i nanci al t eamwoul d not be
7 abl e t o get t hr ough al l of t he t echni cal babbl e.
8 Q. Now, when you wer en' t get t i ng r esponses f r omATP f r omyour
9 i nqui r i es, di d you ask whet her or not you had been appr oved?
10 A. I cal l ed ATP t o ask about t he st at us of t he budget
11 amendment and di d not r ecei ve any r esponse.
12 Q. And you knew t hat i n t hei r budget amendment was a r equest
13 t o have you r epl ace t he posi t i on t hat had or i gi nal l y been
14 occupi ed by Lee Gur f ei n, cor r ect ?
15 A. Yes, si r .
16 Q. And i t ' s f ai r t o say t hat you f el t your cr edent i al s
17 suppor t ed your bei ng appr oved f or t he posi t i on, r i ght ?
20 A. I - - yes.
21 Q. Di d t hi s r ai se a r ed f l ag i n your mi nd as t o t hat t her e
22 wer e pr obl ems her e at CASI ?
23 THE COURT: That what ?
25 Q. The f act t hat nobody woul d speak t o you as t he busi ness
( 212) 805- 0300
1025
1 manager f or CASI f r omATP?
2 A. I t was not consi st ent wi t h my exper i ence, so I was
3 concer ned t hat t her e was somet hi ng goi ng on, but I di dn' t know
4 what i t was or - - whet her i t was r el at ed t o CASI or somet hi ng
5 goi ng on at NI ST.
6 Q. Di d you speak t o Dr . Kar r on about i t ?
7 A. Dr . Kar r on was awar e t hat we had hear d not hi ng.
8 Q. Di d you ask hi mi f he coul d cal l t he peopl e at ATP?
9 A. He - - I knew he was cal l i ng and t al ki ng t o t hem.
10 Q. So because he r epor t ed t hat t o you, he r epor t ed he was
11 speaki ng t o t he peopl e at NI ST?
12 A. Yes.
13 Q. Di d you ask hi m, di d you ask about my appr oval ?
14 A. I don' t r ecal l t hat , no.
15 Q. Ar e you awar e, si r , t hat i f t he budget - - you know t hat you
16 never got a budget r evi si on appr oval , cor r ect ?
17 A. Yes, si r .
18 Q. And your appr oval was at t ached t o t he budget appr oval ,
19 r i ght ?
20 A. Yes.
21 Q. So t hat i f t he budget wasn' t appr oved, you had t o know, di d
22 you not , t hen you wer en' t appr oved?
23 A. I di dn' t know whet her t he budget was appr oved or not . I
24 knew t her e was no r esponse. I di dn' t have a yes, I di dn' t have
25 a no.
( 212) 805- 0300
1026
1 THE COURT: I s t hi s a good pl ace t o br eak, Mr .
2 Rubi nst ei n?
4 THE COURT: Let ' s br eak f or t he mor ni ng br eak. Be
5 back bet ween f i ve and t en mi nut es.
8 THE COURT: St ep down. You want an i nst r uct i on, Mr .
9 Rubi nst ei n?
10 MR. RUBI NSTEI N: No. I want hi mt o be car ef ul when he
11 wal ks by. I t seems l i ke i t ' s hi gher t oday t han bef or e, I .
12 MR. EVERDELL: You can wai t i n our wi t ness r oomand
13 we' l l cal l you.
14 THE COURT: You can use t he men' s r oom, and wat ch your
15 st ep.
16 MR. RUBI NSTEI N: J udge i n an abundance of caut i on, di d
17 we r esol ve t he i ssue on t he al t er at i ons i n t he apar t ment ?
18 Because I have a - - I don' t t hi nk we act ual l y r esol ved t hat
19 i ssue. I have a wi t ness r el at ed t o i t . I j ust want t o make
20 sur e t hat , you know.
21 THE COURT: Wel l , I asked you al l t o r esol ve t he
22 i ssue.
24 THE COURT: And, appar ent l y, you coul dn' t r each a
25 r esol ut i on.
( 212) 805- 0300
1027
1 MR. RUBI NSTEI N: Ri ght , al l r i ght .
2 THE COURT: I suggest ed one, but I wasn' t sur e i t met
3 wi t h your appr oval .
4 MR. RUBI NSTEI N: That was sor t of my r ecol l ect i on,
5 but - - t hank you.
6 THE COURT: I t hought you coul d - - I t hought your - -
7 as I under st and, your pr obl emi s t hat t hey use t he t er m
8 al t er at i ons t hat what t hey use i n t hei r - -
9 MR. RUBI NSTEI N: I mpr ovement s.
10 THE COURT: You say si t e i mpr ovement i s al l owed.
11 MR. RUBI NSTEI N: Yes, t hey use t he wor d - -
12 THE COURT: And you cl ai msi t e i mpr ovement , t hey cl ai m
13 i t ' s, you know, an al t er at i on t o t he - -
15 THE COURT: I don' t know whet her i t ' s si t e i mpr ovement
16 or not . As I under st and i t , i t ' s basi cal l y shel ves.
18 THE COURT: But t hey' r e not cl ai mi ng - - t hey woul d
19 st i pul at e, as I under st and i t , t hat t hey' r e not maki ng any
20 cl ai mt hat i t ' s i mpr oved t he, what ever t hey wer e i mpr oved, t he
21 val ue of t he apar t ment - -
23 THE COURT: - - f or hi s per sonal benef i t .
24 MR. RUBI NSTEI N: Ri ght . Wel l , i t ' s a ver y - -
25 THE COURT: I t ' s j ust t hat t hey wer e not al l owed under
( 212) 805- 0300
1028
1 t he t er ms of t he gr ant .
2 MR. RUBI NSTEI N: Exact l y, exact l y.
3 THE COURT: I ' d be gl ad t o i nst r uct t hemal ong t hose
4 l i nes. Your Honor , I t hi nk t hat ' s r i ght as your Honor j ust
5 phr ased i t . We' r e not cl ai mi ng t hat - - we' r e not t aki ng a
6 posi t i on on how t hose i mpr ovement s or r enovat i ons or
7 al t er at i ons cur r ent cost i ncr eased or decr eased t he val ue of
8 t hi s, hi s pr oper t y. Al l we' r e sayi ng i s t hat he used t hose, he
9 used gr ant f unds t o make t hose al t er at i ons.
10 Now, t her e may have been some busi ness pur pose t hat he
11 made t hese al t er at i ons; ot her wi se, he woul dn' t have made i t as
12 an economi c r at i onal bei ng. But we' r e not sayi ng t hat i t
13 i ncr eased t he mar ket val ue of hi s pr oper t y, j ust l i ke i f you
14 pai nt your house bl ack f or some r eason.
15 THE COURT: You' r e not sayi ng al so, as I under st and
16 i t , t hat t her e was - - t hat t he onl y - - t he onl y t hi ng t hey' r e
17 sayi ng i s, as I under st and i t , i s t hat t he al t er at i ons, t he
18 cost of t he al t er at i on was not a r ei mbur sabl e expense under t he
19 gr ant .
20 MR. RUBI NSTEI N: But t hey want t o l eave - -
21 THE COURT: Now, you' r e sayi ng t her e was si t e
22 i mpr ovement . I don' t know what si t e i mpr ovement means, and I
23 don' t know whet her what al t er at i ons mean. Obvi ousl y,
24 al t er at i on coul d be si t e i mpr ovement , and - -
25 MR. RUBI NSTEI N: Then I t hi nk I have t o cal l t he
( 212) 805- 0300
1029
1 wi t ness. I t hi nk you' r e r i ght , J udge; t her ef or e, we' r e goi ng
2 t o cal l t he wi t ness.
3 THE COURT: I mean, i t may be j ust a mat t er of
4 semant i cs and maybe i t ' s not wor t h t he gover nment pr essi ng t he
5 i ssue. Maybe you can get - -
6 MR. RUBI NSTEI N: The wi t ness won' t be t hat l ong,
7 J udge.
9 MR. KWOK: Your Honor , bef or e we r est and I guess
10 af t er we' r e done wi t h t hi s - -
11 THE COURT: Put t i ng al l t hose comput er s i nt o t he
12 apar t ment woul d al so pr obabl y di mi ni sh t he mar ket val ue of t he
13 apar t ment . I t j ust woul dn' t make i t easy t o sel l .
14 MR. RUBI NSTEI N: We di dn' t have t hat pr obl embecause
15 t he gover nment came and r emoved ever yt hi ng, J udge.
16 THE COURT: I n cr oss- exami nat i on, I can hear t hat
17 bei ng beat en and br ought up. Anyway.
18 MR. KWOK: Can we j ust move ont o a di f f er ent sl i ght l y
19 di f f er ent i ssue your , Honor ?
20 THE COURT: Yes.
21 MR. KWOK: Af t er we' r e done wi t h t hi s wi t ness and
22 bef or e t he gover nment r est s, we i nt end t o r ead a st i pul at i on
23 t hat i nt r oduces i nt o t he r ecor d a di sk pr ovi ded by t he
24 def endant whi ch cont ai ns e- mai l s bet ween Dr . Kar r on and ot her s
25 i n t he company, and we i nt end t o - -
( 212) 805- 0300
1030
1 THE COURT: I haven' t seen t hat st i pul at i on i n t he
2 i ssues submi t t ed.
3 MR. KWOK: I t hi nk i t ' s - -
4 THE COURT: I s i t an exhi bi t ?
5 MR. KWOK: I t ' s gover nment exhi bi t 90 - -
6 THE COURT: Gover nment exhi bi t 90?
7 MR. KWOK: 902.
8 THE COURT: Oh 902. Wel l , 902 ment i ons Exhi bi t 1000.
9 I don' t know anyt hi ng about exhi bi t 1000.
10 MR. KWOK: That i s act ual l y t he di sk t hat I ' m
12 THE COURT: I don' t know what was i n 1000. You may
13 have a l ot of pr obl ems wi t h 1000.
14 MR. KWOK: I t ' s - -
15 THE COURT: How amI goi ng t o r ul e on t hat ? I mean
16 i t ' s st i pul at ed - - you st i pul at ed i t i n, so I don' t have t o.
17 MR. KWOK: We st i pul at ed t o i t .
18 Al l I ' msayi ng i s we want t o r ead t hat st i pul at i on
19 i nt o t he r ecor d, and t hen publ i sh a f ew of t he e- mai l s
20 ext r act ed f r omt hi s di sk t o publ i sh t hat t o t he j ur y. I t ' s not
21 goi ng t o t ake ver y l ong. I hope i t ' s goi ng t o be si x, r oughl y
22 shor t .
23 THE COURT: I f you' r e publ i shi ng e- mai l s, be sur e you
24 gi ve what comes bef or e or what comes - - I mean you' ve got t o - -
25 MR. RUBI NSTEI N: Wel l , t hey have t o show me what
( 212) 805- 0300
1031
1 t he - - I st i pul at ed t hi s was - -
2 THE COURT: You bet t er show hi mwhat por t i ons you' r e
3 goi ng t o i f you' r e not goi ng t o publ i sh t he whol e t hi ng.
4 MR. KWOK: We wi l l do t hat , we wi l l .
5 THE COURT: You bet t er agr ee on t he por t i on you' r e
6 goi ng t o do.
7 Al l r i ght , l et ' s t ake our f i ve mi nut es and get back.
8 The j ur y' s had f i ve mi nut es.
9 ( Recess t aken)
10 THE COURT: Al l r i ght , l et ' s br i ng i n t he wi t ness - - I
11 mean t he j ur y and t he wi t ness.
16 Q. Di d you send an e- mai l t o Dr . Kar r on on Apr i l 19t h, 2004
17 r el at ed t o your exper i ence at CASI ?
19 Q. Let me show you t hi s document t hat ' s been mar ked as
20 def endant ' s U f or i dent i f i cat i on?
21 THE DEPUTY CLERK: U as i n under ?
22 MR. RUBI NSTEI N: Ri ght , Rober t .
23 THE COURT: What was t he dat e?
24 MR. RUBI NSTEI N: Apr i l 19t h, 2004.
( 212) 805- 0300
1032
1 ( Pause whi l e wi t ness r evi ews document )
2 A. I ' ve r ead i t , yes.
3 Q. Di d you send t hat t o Dr . Kar r on?
4 A. I t appear s I di d.
5 Q. And was i t your eval uat i on of ATP t hat Hope Snowden was
6 onl y i nt er est ed i n whet her - -
8 Q. - - CASI dot t ed al l t he I ' s and cr ossed al l t he T' s?
9 MR. EVERDELL: He' s r eadi ng f r omt he document .
10 THE COURT: Obj ect i on sust ai ned. I t ' s not i n evi dence
11 yet .
12 MR. RUBI NSTEI N: Okay. I woul d of f er t hi s i nt o
13 evi dence, def endant ' s U.
14 MR. EVERDELL: No obj ect i on, your Honor .
15 THE COURT: No obj ect i on? Exhi bi t U i s admi t t ed i n
16 evi dence.
17 ( Def endant ' s Exhi bi t U r ecei ved i n evi dence)
18 Q. Woul d you r ead - - t hi s i s pr i or t o t he t i me t hat you wer e
19 appr oached by t he f eder al agent s, cor r ect ?
20 A. Yes.
21 Q. Woul d you r ead what ' s i n evi dence as def endant ' s U?
22 A. Al l of i t ?
23 Q. Yes, pl ease.
24 A. As you know, one of my f i r st act s was t o assi st i n t he
25 submi ssi on of t he CASI r esponse t o t he mul t i page quest i onnai r e
( 212) 805- 0300
1033
1 t ossed at CASI . Thi s r esponse i ncl uded a budget and amendment ,
2 al ong wi t h a r equest t o have i mmedi at e - -
3 THE COURT: You have t o sl ow down a l i t t l e bi t .
4 A. Thi s r esponse i ncl uded a budget amendment , al ong wi t h a
5 r equest t o have me acknowl edged as your admi ni st r at or . Hope
6 i gnor ed bot h r equest s. We never r ecei ved any acknowl edgment ,
7 ver bal or i n wr i t i ng, t hat our r esponse amendment r equest woul d
8 or woul d not be appr oved.
9 As such, I was never appr oved as t he admi ni st r at or ,
10 and Hope woul d not answer or r et ur n my phone cal l s. I was a
11 nonpar t i ci pant and, t her ef or e, someone t o be i gnor ed.
12 The f act t hat I had ei ght year s exper i ence wi t h ATP
13 pr oj ect s as an admi ni st r at or , wi t hout any audi t pr obl ems, and a
14 l i t any of ATP r ef er ences whi ch Hope never bot her ed t o check,
15 di dn' t appear t o be vi ewed as a posi t i ve addi t i on t o t he
16 pr oj ect . The r ar e communi cat i ons we di d r ecei ve wer e addr essed
17 t o Dr . Kar r on or Pet er Ross, i gnor i ng t he f act t hat ATP was
18 i nf or med Pet er was no l onger i nvol ved. I t was ver y f r ust r at i ng
19 and, appar ent l y, i n di r ect opposi t i on t o what woul d have been
20 i n t he best i nt er est s of bot h CASI and NI ST. Ms. Snowden
21 appear ed t o be a bur eaucr at t ot al l y di si nt er est ed i n t he
22 success of t he pr oj ect and onl y i nt er est ed i n whet her CASI
23 dot t ed al l t he I ' s and cr ossed al l t he T' s, associ at ed wi t h a
24 r i gi d under st andi ng of t he ATP and ot her r el evant f eder al
25 gui del i nes. She consi st ent l y i gnor ed CASI at t empt s t o pr ovi de
( 212) 805- 0300
1034
1 ser vi ce whi ch woul d hel p t he pr oj ect and her , i n t he meant i me.
2 She bel i eved CASI was out of cont r ol f r omt he begi nni ng, and
3 t he number of per sonnel changes and amendment r equest s pr oved
4 her r i ght i n her mi nd. Ther e was no way gi ven t o t he
5 possi bi l i t y t hat changes wer e dr i ven by Dr . K' s l ack of ATP
6 exper i ence or assi st ance of f er ed t o hel p Dr . Kar r on gr appl e
7 wi t h t he ATP quagmi r e.
8 ATP i s as r esponsi bl e f or t he st at e of t he CASI
9 pr oj ect as anyone. Sor r y, but t hat ' s t he best r ecol l ect i on I
10 can must er .
11 Q. Now, ar e you f ami l i ar wi t h - -
12 THE COURT: Now, t hi s, appar ent l y, has a - - t hi s
13 exhi bi t cont ai ns mor e t han j ust t he e- mai l of doct or - - of t he
14 wi t ness, Mr . Benedi ct . So i s i t goi ng t o be cr opped i n some
15 way?
16 MR. RUBI NSTEI N: Yes, your Honor . Yes.
17 THE COURT: So t hat i t ' s one page?
18 THE WI TNESS: Yes. Thi s l et t er was i n r esponse t o a
19 e- mai l f r omDr . Kar r on.
20 THE COURT: No, never mi nd.
21 MR. EVERDELL: Your Honor , I t hi nk we need t he f ul l
22 e- mai l f or t he under st andi ng.
24 MR. EVERDELL: I t hi nk we need t he f ul l under st and - -
25 THE COURT: You want i t i n?
( 212) 805- 0300
1035
1 MR. EVERDELL: I ' msor r y?
2 THE COURT: You want bot h e- mai l s i n?
3 MR. RUBI NSTEI N: No pr obl em.
4 THE COURT: Bot h par t i es agr ee?
5 MR. RUBI NSTEI N: I f t hey want i t i n.
7 MR. RUBI NSTEI N: I have no obj ect i on.
8 THE COURT: Al l r i ght . Then t he ent i r e exhi bi t wi l l
9 be admi t t ed i n evi dence. I j ust have t o make sur e t hat - - so
10 i t cont ai ns t wo messages, al l r i ght .
11 Q. Mr . Benedi ct , do you know what sunk cost s ar e?
12 A. Sunk?
13 Q. Yes, s- u- n- k cost s?
14 A. Those ar e cost s t hat have been i ncur r ed al r eady.
15 Q. And ar e t hey - - do t hey have t o be expended or coul d t hey
16 be accr ued?
17 A. Sunk cost s ar e - - dependi ng on your account i ng met hod, i f
18 you' r e on accr ual account i ng met hod, accr ued cost coul d be
19 consi der ed sunk cost . I f you' r e on a cash met hod, i t ' s onl y
20 cash cost s.
21 Q. Wel l , ar e you f ami l i ar wi t h pr e- gr ant pur chases?
22 A. They' r e not al l owed.
23 Q. I asked ar e you f ami l i ar wi t h i t ?
24 A. Yes.
25 Q. And i t ' s your opi ni on t hat t hey' r e not al l owed?
( 212) 805- 0300
1036
1 A. I t ' s not my opi ni on. I t ' s ATP gui dance.
2 Q. ATP coul d wai ve any r ul e t hat t hey have, cor r ect ?
3 A. I don' t know what ATP can or wi l l do.
4 Q. Wel l , i f cost s ar e expended i n pr epar at i on f or t he gr ant t o
5 be used f or t he gr ant , i t ' s up t o ATP t o deci de whet her or not
6 t hey' r e goi ng t o pr ove t hose cost s or not ?
7 A. That woul d seemt o be okay.
8 Q. And j ust as i n r ent , whi ch i s consi der ed, gener al l y
9 speaki ng, al most al ways as an i ndi r ect cost , cor r ect ?
10 A. Yes.
11 Q. Now, do you under st and - - you have an account i ng
12 backgr ound, cor r ect ?
13 A. Yes, si r .
14 Q. Educat i on wi se and exper i ence wi se?
15 A. Yes, si r .
16 Q. And ar e you f ami l i ar wi t h t he backgr ound as t o why r ent i s
17 consi der ed by i n t he ATP gr ant as i ndi r ect cost ?
18 A. Yes.
19 Q. And why i s t hat ?
20 A. Busi nesses ar e pr esumed t o be i n exi st ence when t hey appl y
21 f or an ATP gr ant as a busi ness.
22 As a busi ness al r eady i n pl ace, you' r e al r eady payi ng
23 your r ent , you' r e al r eady payi ng your heat , you' r e al r eady
24 payi ng t hose t hi ngs.
25 ATP i s i nt er est ed i n f undi ng pr oj ect s, not r ent , not
( 212) 805- 0300
1037
1 el ect r i ci t y, not ot her t hi ngs. So t hey wi l l not al l ow you t o
2 i ncl ude what you' r e al r eady spendi ng as a nor mal busi ness as
3 par t of t he gr ant , as a si ngl e gr ant .
4 Q. Does i t make a di f f er ence i f you' r e on t he accr ual basi s?
5 A. No. Whet her you' r e on accr ual or cash basi s, r ent i s r ent ;
6 i t ' s an i ndi r ect expense.
7 Q. And you had di scussi on so t hat - - what about an i t em
8 pur chased bef or e t he gr ant , pur chased l et ' s say - - r ent st ar t ed
9 Oct ober 1st , 2001, an i t emt hat was pur chased i n t he end of
10 Sept ember 2001 was del i ver ed af t er t he gr ant st ar t ed i n
11 Oct ober , pai d f or by year end, woul d t hat be an appr opr i at e
12 expense at t r i but abl e t o t he NI ST gr ant ?
13 A. Um, you' d have t o ask NI ST t hat quest i on. I don' t know.
14 Gi ve me t he speci f i c i t em.
15 Q. Let ' s say a - -
16 THE COURT: Let ' s not say. Let ' s gi ve - - he want s a
17 speci f i c i t em.
18 Q. An SGI comput er ?
19 A. I f you cont r act wi t h SGI t o del i ver a comput er af t er t he
20 st ar t dat e of t he gr ant , t hen yes.
21 I f you cont r act wi t h SGI t o del i ver t he comput er pr i or
22 t o t he st ar t dat e of t he gr ant , no.
23 Q. Now, you hel ped, di d you not , pr epar e r evi sed quar t er l i es
24 i n t hi s case?
25 A. Yes, I di d.
( 212) 805- 0300
1038
1 Q. And when di d you do t hat ?
2 A. They wer e r eady i n t he mi ddl e of J ul y, but as we wer e
3 wor ki ng on t he cover l et t er , t hey di dn' t get submi t t ed t i l l t he
4 mi ddl e of August .
5 Q. Of ' 03?
6 A. Of ' 03.
7 Q. And t hey wer e act ual l y submi t t ed on August 13t h, ' 03, t he
8 same t i me you submi t t ed t he cover l et t er , cor r ect ?
9 A. Yes, si r .
10 Q. And what f i nanci al s di d you use t o cr eat e t he r evi sed
11 st at us r epor t ? I bel i eve i t ' s 41A, 42A, 43A?
12 A. I used t he moni es t hat t hey dr ew down f r omATP as t he
13 expendi t ur es, because t hat was t he onl y t hi ng t hat I coul d - -
14 t hat was t he onl y t hi ng i n t he books t hat I coul d dr aw a l i ne
15 t o and say t hi s i s wher e t he number came f r om. Anyt hi ng el se I
16 woul d' ve been guessi ng, and t hat woul d have been i naccur at e as
17 t he or i gi nal r epor t s.
18 Q. Wel l , when you ar r i ved at CASI , t he syst emwas - - t he
19 bookkeepi ng syst emwas i n di sar r ay, cor r ect ?
20 A. Yes.
21 Q. Di d you - - you l ooked at t he r ecor ds?
22 A. Yes.
23 Q. Your sel f ?
24 A. Yes.
25 Q. Was Ken J ackson Gr oup i nvol ved at t hat t i me when you
( 212) 805- 0300
1039
1 ar r i ved?
2 A. Yes.
3 Q. And wer e t hey i nvol ved i n cr eat i ng new books f or CASI ?
4 A. They wer e - - I asked t hemt o cr eat e an ATP set of
5 f i nanci al s, whi ch woul d mean r ecl assi ng dat a on t he exi st i ng
6 syst em. I t doesn' t mean changi ng any number s. I t j ust means
7 put t i ng i t i n a di f f er ent bucket .
8 Q. And, i n f act , when you sai d t hat Dr . Kar r on woul d go t o t he
9 comput er , he woul d put st uf f i n a di f f er ent bucket , r i ght ?
10 A. Yes.
11 Q. He woul dn' t change anyt hi ng, cor r ect ?
12 A. He woul d change t he bucket .
13 Q. The bucket . But he woul dn' t del et e an expense?
14 A. No.
15 Q. Woul d he change what t he expense was f or ?
16 A. No.
17 Q. As a mat t er of f act , he had i nvoi ces or backup f or ever y
18 expense t hat he i ncur r ed, r i ght ?
19 A. They wer e al l on t hat paper r epor t syst em. I coul dn' t t el l
20 you whet her he di d or he di dn' t . I j ust knew ever yt hi ng was
21 t her e.
22 Q. And when you spent t i me i n New Yor k, how much t i me di d you
23 spend i n New Yor k?
24 A. I spent pr obabl y t hr ee days a mont h unt i l t he audi t s, and
25 t hen i t was a week at a t i me.
( 212) 805- 0300
1040
1 THE COURT: Ful l week you sai d?
2 THE WI TNESS: Par don me?
3 THE COURT: Fi ve days a week?
4 THE WI TNESS: Fi ve days a week. The f i r st , f or t he
5 f i r st audi t , and when t he second audi t came I bel i eve I was
6 her e f or t wo consecut i ve weeks.
7 THE COURT: When you say t he f i r st audi t , what ar e you
8 r ef er r i ng t o t her e?
9 THE WI TNESS: OI G came i n i n J une, I bel i eve, and
10 st ar t ed somet hi ng, and t hen i t was br oken f or an OI G r eason and
11 t hen she l ef t and came back and compl et ed i t .
12 THE COURT: And when di d she come back?
13 THE WI TNESS: I bel i eve i n August .
15 Q. I t was your under st andi ng t hat you and J oan Hayes and Fr ank
16 Spr i ngs wer e t o wor k t oget her on t he - - t o char t t he account s
17 and cr eat e a new set of books f or CASI ?
18 A. I t was my under st andi ng t hat I was wor ki ng wi t h Fr ank
19 Spr i ngs and t hat J oan was an i nt er est ed par t y, but not act ual l y
20 i nvol ved i n maki ng any of t he cl assi f i cat i ons on t he books.
21 THE COURT: Why was she an i nt er est ed par t y?
22 THE WI TNESS: Because she' s t he audi t or of - - f or
23 CASI , and she woul d be i nt er est ed i n - - she had t o f i l e t ax
24 r epor t s and ot her f i nanci al dat a - - do an audi t f or Dr . Kar r on.
25 THE COURT: An audi t f or Dr . Kar r on?
( 212) 805- 0300
1041
1 THE WI TNESS: Uh- huh.
2 THE COURT: Of what ?
3 THE WI TNESS: Of bot h t he ATP pr oj ect and of CASI as a
4 cor por at i on.
5 Q. Wer e you war e whet her or not J oan Hayes was doi ng Dr .
6 Kar r on' s per sonal t axes?
7 A. Yes, I was awar e of t hat .
8 Q. And she was, cor r ect ?
9 A. I have no f i r st hand evi dence t hat she was, but I l ear ned
10 t hat i n di scussi on.
11 Q. And when you woul d come t o New Yor k t hese t hr ee days a
12 week, woul d you go t o - -
13 A. That was once a mont h t hr ee days a week.
14 Q. Once a mont h t hr ee days a week, woul d you go t o CASI ?
15 A. Yes.
16 Q. Or woul d you go t o Fr ank Spr i ngs?
17 A. No. I woul d go t o CASI ' s f i r st . I woul d per i odi cal l y
18 spend t i me a day or so at Fr ank Spr i ngs.
19 Q. And di d t her e come a t i me whi l e Ken - - t he Ken J ackson
20 Gr oup was a bookkeepi ng gr oup?
21 A. Yes, si r .
22 Q. And Spr i ngs was assi gned t o t hi s pr oj ect ?
23 A. Yes.
24 Q. And di d t her e come a t i me t hat checks st ar t ed t o bounce
25 wi t h r egul ar i t y?
( 212) 805- 0300
1042
1 A. Not t hat I ' mawar e of .
2 Q. And i s i t your t est i mony t hat you r ecommended t hat t he
3 bookkeepi ng be done of f - si t e?
4 A. Yes.
5 Q. And when di d you do t hat ?
6 A. Apr i l , Mar ch Apr i l , 2003.
7 Q. I sn' t i t a f act t hat - - f i r st , i sn' t i t a f act t hat you
8 came aboar d as wor ki ng f or CASI somet i me i n Mar ch of ' 03?
9 A. No. Came on boar d i n J anuar y.
10 Q. And do you have any document t hat you coul d poi nt t o t o
11 r ef r esh your r ecol l ect i on about t hat or ar e you sur e of t hat ?
12 A. I ' mr el at i vel y sur e of t hat , because t he budget amendment
13 was st ar t ed i n December of ' 02, and I was st i l l wor ki ng f or
14 Axi omat t hat t i me.
15 Q. Let me show you what ' s mar ked as def endant ' s R f or
16 i dent i f i cat i on and ask you i f you r ecogni ze what ' s i n
17 def endant ' s R f or i dent i f i cat i on?
18 A. Yeah. I t says Mar ch 1st .
19 Q. And i s t hat an e- mai l t hat you wer e c. c. ' d on?
20 A. Yes.
21 MR. RUBI NSTEI N: We' d of f er def endant ' s R i nt o
22 evi dence, your Honor ?
23 THE WI TNESS: I n r ef er ence t o t hat e- mai l addr ess,
24 however , I di dn' t use i t . So i t ' s qui t e possi bl e I never saw
25 t hat e- mai l .
( 212) 805- 0300
1043
1 MR. EVERDELL: Obj ect i on, your Honor . He can' t
2 aut hent i cat e i t .
3 THE COURT: What ? Does i t r ef r esh your r ecol l ect i on?
4 THE WI TNESS: No, si r . I don' t r ecal l seei ng t hat
5 e- mai l .
6 Q. Wel l , does i t r ef r esh your - -
7 THE COURT: Do i t r ef r esh your r ecol l ect i on t hat you
8 f axed a document i n Mar ch?
9 THE WI TNESS: No.
10 THE COURT: The exhi bi t i s not admi t t ed.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1044
2 Q. I sn' t i t a f act t hat Dr . Kar r on suggest ed t o you i n Mar ch
3 of 2003 t hat t he bookkeepi ng be moved of f si t e?
4 A. I don' t r ecal l t hat , si r , no.
5 Q. And t o your knowl edge, how l ong was Fr ank Spr i ng wor ki ng on
6 t he books of CASI ?
7 A. He was t her e when I got t her e. I don' t know how l ong he
8 was t her e bef or e I got t her e.
9 Q. Di d you use hi s number s t o submi t your f i nanci al st at ement
10 r evi si on?
11 A. I used t he number s t hat wer e dr awn down f r omATP, t he
12 act ual s.
13 Q. And di d Fr ank Spr i ng cr eat e some ki nd of spr eadsheet
14 showi ng t he act ual s?
15 A. No.
16 Q. Now - -
17 THE COURT: What do you mean you used t he f unds t hat
18 wer e dr awn down f r omATP?
19 THE WI TNESS: Thi s gr ant was not a r ei mbur sement
20 gr ant , i t was an advance gr ant , whi ch means t hat as he needed
21 money he coul d submi t a r equest t o ATP f or a cer t ai n amount of
22 money and t hey woul d send hi mt he money, and i n gr ant par l ance
23 t hat ' s cal l ed dr awi ng down.
24 THE COURT: Once t he money was dr awn down, your r epor t
25 woul d r ef l ect what ?
( 212) 805- 0300
1045
1 THE WI TNESS: My r epor t woul d r ef l ect t he amount of
2 money he t ook f r omATP.
3 THE COURT: Dr awn down.
4 THE WI TNESS: Yes. What t he r epor t shoul d have shown
5 was t he amount of ATP money t hat was dr awn down t hat was
6 act ual l y spent on t he gr ant , but si nce I coul dn' t t el l because
7 ever yt hi ng was mi xed t oget her what was spent on t he gr ant and
8 what was spent f or ot her nongr ant r el at ed i t ems, I coul dn' t
9 accur at el y put any number i n t her e, so t he onl y accur at e number
10 I coul d f i nd t hat ATP mi ght f i nd some associ at i on wi t h was t he
11 dr awdown.
12 Q. And t hi s i s i n J ul y or August of 2003?
13 A. Yes, J ul y of 2003.
14 Q. And - -
15 A. And you wi l l not i ce t hat f our t h quar t er 2002, f i r st quar t er
16 2003 and second quar t er 2003 r epor t s wer e al l submi t t ed on t hat
17 dat e.
18 Q. Cor r ect . August 13.
19 A. Yes.
20 Q. 2003. Now, t hese r epor t s wer e submi t t ed af t er - -
21 wi t hdr awn.
22 Wer e t hese r epor t s, t he r evi sed f i nanci al st at ement
23 r epor t s, submi t t ed af t er you r ecei ved t he f i r st r epor t f r om
24 Ri l ey, I t hi nk t hey cal l ed i t a f l ash audi t r epor t ? Had you
25 r ecei ved t hat ?
( 212) 805- 0300
1046
1 A. I don' t r ecal l t he exact dat e of t hat r epor t , no, si r , but
2 I know t hat t hese r epor t s wer e pr epar ed i n t he mi ddl e of J ul y.
3 I don' t r ecal l t he dat e of t he f l ash r evi ew.
4 Q. Wel l , di d you r ecei ve i t - - do you know i f you r ecei ved a
5 f l ash r evi ew as soon as i t was submi t t ed?
6 A. I don' t know.
7 Q. Woul d J ul y 3, 2003 r ef r esh your r ecol l ect i on of t he dat e of
8 t he f l ash r epor t ?
9 A. No, si r , i t doesn' t .
10 Q. Now, di d t her e come a t i me you r ecei ved - - wi t hdr awn.
11 Di d J oan Hayes event ual l y compl et e her audi t ?
12 A. I have no i dea.
13 Q. Di d you ever see J oan Hayes' audi t r epor t ?
14 A. No, si r , I haven' t .
15 Q. Di d you ever use t he f i gur es of J oan Hayes' audi t r epor t t o
16 submi t your r evi sed f i nanci al st at ement s?
18 Q. Ar e you awar e as you si t t her e now t hat J oan Hayes t ur ned
19 over her audi t r epor t t o OI G, Ms. Ri l ey, i n J une of 2003?
20 A. No, si r , I ' mnot .
21 Q. And who ar e you aski ng f or t he number s t o put i n i n your
22 r evi sed f i nanci al r epor t s?
23 A. Fr ank. Fr ank Spr i ng.
24 Q. Di d you ever hear t he expr essi on J oani f i ed?
( 212) 805- 0300
1047
2 Q. You t el l us you went t o a boar d meet i ng, cor r ect ?
3 A. Yes.
4 Q. How many boar d meet i ngs di d you go t o?
5 A. One.
6 Q. And was t hat dur i ng t he day or at ni ght ?
7 A. Ni ght .
8 Q. And was i n a r est aur ant or i n a r oomsomewher e, or bot h?
9 A. I bel i eve i t was i n a r oomsomewher e, and t hat we went t o
10 di nner af t er t he meet i ng.
11 Q. And t hat was t he meet i ng at whi ch you r equest ed t hat t he
12 checks be wr i t t en of f si t e, cor r ect ?
13 A. Yes, si r . We r equest ed t hat checks be r emoved f r omt he
14 CASI pr emi ses and moved of f si t e.
15 Q. But t hey st i l l had t o be r et ur ned t o Dr . Kar r on f or hi mt o
16 si gn, r i ght ?
17 A. Yes, si r .
18 Q. Now, t hi s PayPal account , t hat was a separ at e account ,
19 cor r ect ?
20 A. I t had t o be. We di dn' t know anyt hi ng about i t at t he
21 t i me.
22 Q. Wel l , t he PayPal account was char geabl e t o Dr . Kar r on' s
23 Amer i can Expr ess car d, cor r ect ?
24 A. The ent r y I saw was, yes.
25 Q. And wer e you awar e t hat Dr . Kar r on had an Amer i can Expr ess
( 212) 805- 0300
1048
1 cr edi t car d?
2 A. A company Amer i can Expr ess cr edi t car d, yes.
3 Q. Wer e you awar e t hat he al so had a per sonal Mast er car d?
4 A. No, si r , I wasn' t .
5 Q. Di d you ever di scuss wi t h Dr . Kar r on at any t i me whet her or
6 not he was usi ng hi s Mast er car d t o pur chase i t ems on behal f of
7 t he pr oj ect ?
9 Q. Now, you say t he PayPal expense t hat you saw. When was
10 t hat ?
11 A. J ul y, August . I don' t r emember exact l y t he dat e, but i t
12 was af t er t he boar d meet i ng.
13 Q. And was t he amount over $200 t hat you saw?
14 A. I don' t r emember t he amount .
15 Q. Wel l , di d you di scuss i t wi t h Dr . Kar r on what he had
16 pur chased?
17 A. Al l I r emember f r omt he di scussi on was t hat he sai d he had
18 t o pay t he bi l l s.
19 Q. And t hat r el at ed t o t he PayPal .
20 A. That i nst ance, yes.
21 Q. I s t her e anyt hi ng t hat you coul d - - di d anybody f r omt he
22 pr osecut i on show you any document s of t he PayPal expendi t ur es?
23 A. No.
24 Q. Let me show you what ' s been mar ked f or i dent i f i cat i on as
25 Def endant ' s Exhi bi t Z.
( 212) 805- 0300
1049
1 DEPUTY COURT CLERK: Z as i n zebr a?
3 THE COURT: The l ast number was U, I t hi nk.
4 MR. RUBI NSTEI N: I wasn' t sur e, J udge. I di dn' t want
5 t o get a doubl e l et t er , so I went t o Z t o be saf e.
6 THE COURT: Z f or i dent i f i cat i on.
7 Q. I show you what ' s mar ked f or i dent i f i cat i on as Def endant ' s
8 Exhi bi t Z and ask you whet her t hat coul d r ef r esh your
9 r ecol l ect i on as t o what PayPal expense you obser ved on Dr .
10 Kar r on' s Amer i can Expr ess car d st at ement .
11 A. No, si r , i t doesn' t .
12 Q. OK. Thank you. So i t coul d have been as l i t t l e as l ess
13 t han a hundr ed dol l ar s, r i ght ?
14 A. Yes, si r .
15 Q. Di d you have exper i ence and backgr ound wi t h manual s,
16 pr epar at i on of manual s f or compani es, f or benef i t s and t hi ngs
17 l i ke t hat ?
18 A. No, not f or benef i t s.
19 Q. Di d you di scuss wi t h Dr . Kar r on t he cr eat i on of a benef i t s
20 manual ?
21 A. I don' t r emember speci f i cal l y di scussi ng a benef i t s manual ,
22 but I do r emember di scussi ng wr i t t en pr ocedur es.
23 Q. Was t her e a t i me whi l e you wer e t he busi ness manager at
24 CASI t hat you spoke t o an at t or ney or at t or neys about empl oyee
25 benef i t pr ogr ams?
( 212) 805- 0300
1050
1 A. Ther e may have been. As I sai d ear l i er i n my t est i mony, we
2 di d t al k about t r yi ng t o buy a handbook of some ki nd, and t hat
3 woul d pr obabl y have t o be t hr ough an at t or ney.
4 Q. Wel l , di d you have an e- mai l addr ess as benedi ct @casi . net ?
5 A. I di d, but as I sai d ear l i er I di dn' t use i t .
6 Q. Wel l , l et me show you what ' s been mar ked Def endant ' s OO. I
7 show you t hat document .
8 A. Yes, si r .
9 Q. Have you ever seen t hat document bef or e?
10 A. Yes, si r .
11 Q. And when di d you see t hat document ?
12 A. I t appear s t o be somet hi ng t hat I st ar t ed wor ki ng on a
13 dr af t t o t r y t o put somet hi ng i n pl ace, yes, si r .
14 Q. And di d t hat r el at e t o benef i t s f or t he empl oyees of CASI ?
15 A. Yes, i t di d.
16 MR. RUBI NSTEI N: We of f er OO i nt o evi dence.
18 THE COURT: No obj ect i on? OO i s admi t t ed i nt o
19 evi dence.
20 ( Def endant ' s Exhi bi t OO r ecei ved i n evi dence)
21 THE COURT: Coul d I have a copy?
22 MR. RUBI NSTEI N: Her e i s a copy f or your Honor .
24 MR. RUBI NSTEI N: I have an unor t hodox st i cker on i t ,
25 J udge.
( 212) 805- 0300
1051
1 THE COURT: I wi l l mar k i t OO.
2 Q. Now, you ar e awar e t hat CASI had a budget l i ne i t emi n t he
3 f i r st year of $110, 000 f or f r i nge benef i t s?
4 A. Yes, si r .
5 Q. And di d t hey spend $110, 000 on - -
7 Q. And f r i nge benef i t s i ncl udes, does i t not , wi t hhol di ng
8 t axes?
9 A. Yes, si r , i t does.
10 THE COURT: I t i ncl udes what ?
11 THE WI TNESS: Wi t hhol di ng t axes. FI CO, FUDA, t hose
12 t ypes of t hi ngs.
13 Q. Di d you have di scussi ons wi t h Dr . Kar r on as t o whet her or
14 not f r i nge benef i t s even wi t hout a manual coul d be al l owabl e i f
15 i t was r easonabl e and evenhandedl y appl i ed acr oss t he boar d of
16 t he company?
17 A. I don' t r ecal l t hat conver sat i on.
18 Q. Ar e you sayi ng i t never happened?
20 Q. I n your vi ew, i s educat i on deduct i bl e as a f r i nge benef i t ?
21 A. I f i t ' s r el at ed t o t he gr ant .
22 Q. Now, t he r ent t hat was pai d was pai d by CASI t o t he
23 def endant , cor r ect ?
24 A. I don' t t hi nk - - I don' t under st and i t t hat way.
25 Q. Wel l , t her e was a NI ST account , was t her e not ?
( 212) 805- 0300
1052
1 A. No, t her e was a CASI account .
2 Q. Wer en' t t her e i n f act f our account s?
3 A. Not on t he books when I got t her e t her e wer en' t .
4 Q. I sn' t i t a f act t hat t her e was a NI ST account i n pl ace and
5 checks wer e wr i t t en f r omt he NI ST account ?
6 A. Yes, checks wer e wr i t t en f r omt he NI ST account . Ever yt hi ng
7 was wr i t t en f r omt he NI ST account .
8 Q. But i sn' t i t a f act t he r ent check was wr i t t en f r oma CASI
9 I nc. account whi ch was a gr een check?
10 A. Al l of t he money t hat was i n al l of t he account s was NI ST
11 money, so t he col or of t he check di dn' t mat t er .
12 Q. Wel l , wer e t her e di f f er ent col or ed checks?
13 A. I don' t r emember i f t her e wer e di f f er ent col or ed checks or
14 not .
15 Q. I amgoi ng t o show you what i s i n evi dence as def endant ' s
16 P- 1 t hr ough P- 6?
17 THE COURT: What ' s t he exhi bi t ?
18 MR. RUBI NSTEI N: P- 1 t hr ough P- 6.
19 THE COURT: Have you ever seen t hose bef or e?
20 THE WI TNESS: No, si r , I have not .
21 Q. Di d you ever ask Dr . Kar r on i f he had cont r i but ed money t o
22 CASI ?
23 A. Yes. No, not t o CASI . To NI ST.
24 THE COURT: You sai d?
25 THE WI TNESS: I never asked hi mi f he cont r i but ed
( 212) 805- 0300
1053
1 money t o CASI ; I onl y asked i f he cont r i but ed money t o NI ST, t o
2 t he NI ST pr oj ect .
3 Q. Now, you do r ecogni ze t hose checks now t hat you l ooked at
4 t hem, do you not ? Not as havi ng seen t hembef or e, but t hat
5 t hose ar e checks t hat went t o CASI .
6 MR. EVERDELL: Obj ect i on. He doesn' t r ecal l t hem.
8 Q. So, i s i t f ai r t o say you never had occasi on t o l ook at Dr .
9 Kar r on' s per sonal account ?
10 A. Yes, t hat ' s t r ue. They have not hi ng t o do wi t h t he gr ant ,
11 so I had no i nt er est i n i t .
12 Q. I f he was put t i ng money i nt o t he company, t he company' s
13 onl y sour ce of i ncome was ATP, cor r ect ?
14 A. Yes.
15 Q. So, wasn' t i t i mpor t ant t o see whet her or not he made
16 cont r i but i ons - -
18 Q. - - f r omhi s per sonal f unds?
20 THE COURT: I f t hi s i s gr ounded on a hypot het i cal , I
21 wi l l al l ow t he quest i on.
22 A. Repeat t he quest i on, pl ease.
23 Q. Wasn' t i t r el evant t o det er mi ne whet her or not he used
24 per sonal f unds - -
25 A. Onl y i f I coul d see t hemi n t he NI ST r ecor ds. And t hey
( 212) 805- 0300
1054
1 wer en' t i n t he NI ST r ecor ds, so, no, i t wasn' t r el evant . I
2 don' t car e what he was doi ng wi t h CASI money.
3 Q. I sn' t i t a f act t hat t he expenses, t he r ent expenses wer e
4 pai d out of CASI ? Wi t hdr awn.
5 How many checks - - r ent was $2, 000 a mont h, cor r ect ?
6 A. I bel i eve t hat ' s cor r ect .
7 Q. How many of t he $2, 000 checks wer e wr i t t en out of NI ST?
8 A. Si nce t he onl y money was NI ST money, al l of t hem.
9 Q. I sn' t i t a f act - - wel l , when Dr . Kar r on woul d get a
10 paycheck, i f he deposi t ed t he money i n CASI - -
11 A. I don' t know what he di d wi t h hi s paycheck, si r .
12 Q. Because you never bot her ed t o l ook at CASI .
14 THE COURT: Obj ect i on sust ai ned. Let ' s have t he
15 quest i on. That ' s not a quest i on.
16 Q. Now, you had al r eady t ol d Dr . Kar r on he coul dn' t pay f or
17 r ent , cor r ect , a number of t i mes?
18 A. Yes, si r .
19 Q. And what mont hs wer e t hese r ent checks payabl e f or ?
20 A. I don' t r ecal l t he speci f i c mont hs.
21 Q. I sn' t i t a f act t hat t he maj or i t y of t hemwer e f or pr egr ant
22 t i me bef or e Oct ober 1, 2001?
23 A. Ther e wer e some, yes.
24 Q. So t hat was not r ent bei ng pai d f or t he gr ant t i me,
25 cor r ect , i f i t ' s pr egr ant ?
( 212) 805- 0300
1055
1 A. Yes.
2 Q. And i f i t ' s pai d out of CASI , i t ' s not a NI ST account and
3 i t ' s not at t r i but abl e t o NI ST.
4 THE COURT: Obj ect i on t o t he f or mof t he quest i on.
5 Q. I n f act t her e came a t i me t hat ei t her you or Ms. Hayes
6 convi nced Dr . Kar r on t hat he coul dn' t deduct t he r ent f r omt he
7 apar t ment because he l i ved t her e, cor r ect ?
8 A. I don' t know anyt hi ng about deduct i ons. That has not hi ng
9 t o do wi t h t he gr ant .
10 Q. Wel l , t he r ent woul d not be al l owabl e.
11 A. I t ' s not an al l owabl e char ge t o t he gr ant , but i t has
12 not hi ng t o do wi t h what he can deduct or not deduct .
13 Q. Wel l , di dn' t you have a di scussi on about Dr . Kar r on movi ng
14 t o Connect i cut ?
15 A. Yes, we di d.
16 Q. And di d Dr . Kar r on advi se you t hat i f he moved t o
17 Connect i cut t hen t he ent i r e r ent shoul d be al l owabl e because
18 NI ST was t he onl y pr oj ect i n hand?
19 A. He may have sai d t hat , si r , but si nce i t ' s not i n t he
20 budget i t was a moot poi nt . What he bel i eved di dn' t mat t er .
21 Q. I t was moot t o you?
22 A. Yes, si r .
23 Q. I t wasn' t moot t o hi m.
24 A. I don' t know what - -
( 212) 805- 0300
1056
1 A. I don' t know what was r el evant t o hi mor not .
2 Q. I sn' t i t a f act t hat Dr . Kar r on af t er he - - he di dn' t move
3 t o Connect i cut , cor r ect ?
4 A. Not as f ar as I know, he di d not .
5 Q. And when he di d not move t o Connect i cut , i sn' t i t a f act
6 t hat he st opped get t i ng r ent checks f r omei t her CASI or NI ST
7 f or t he apar t ment ?
9 Q. Now, you t ol d us bef or e t hat ut i l i t i es ar e al so an i ndi r ect
10 cost , cor r ect ?
11 A. Yes, si r .
12 Q. Was t her e or was t her e not negot i at i ons wi t h ATP t o per mi t
13 deduct i ons f or ut i l i t i es?
14 A. I don' t r ecal l anyt hi ng wi t h ut i l i t i es, si r .
15 THE COURT: You don' t r ecal l any such negot i at i ons?
17 Q. Let me show you somet hi ng and see i f t hese document s - -
18 Let me show you what ' s been mar ked f or i dent i f i cat i on
19 as Def endant ' s RR.
20 THE COURT: For i dent i f i cat i on.
22 Q. Take a l ook at t hese document s, si r , and see - -
23 THE COURT: RR, I can al l ow hi mt o l ook at t hat . I f
24 you' r e showi ng hi msomet hi ng el se, we need t o have
25 i dent i f i cat i on of i t .
( 212) 805- 0300
1057
1 MR. RUBI NSTEI N: Ther e ar e t hr ee document s, RR, RR- 1
2 and RR- 2.
3 THE COURT: What ' s your quest i on, Mr . Rubi nst ei n?
4 Q. Yes. My quest i on i s: By l ooki ng at t hose document s, does
5 t hat r ef r esh your r ecol l ect i on, si r , t hat t her e wer e
6 negot i at i ons goi ng on wi t h NI ST ATP f or al l owi ng Dr . Kar r on t o
7 be r ei mbur sed f or ut i l i t y expenses?
8 A. Yes.
9 Q. And do you now r ecal l t hose di scussi ons goi ng on?
10 A. I don' t r ecal l t he speci f i c di scussi ons, but I do r emember
11 t her e wer e, yes. And t he di scussi ons wer e t hat i f he coul d
12 demonst r at e t he f act t hat t her e was an i ncr ease, t hat t hey
13 coul d be cl assi f i ed as di r ect expenses, not as i ndi r ect
14 expenses.
15 Q. Even t hough nor mal l y speaki ng ut i l i t i es wer e never al l owed,
16 cor r ect ?
17 A. Cor r ect .
18 THE COURT: He coul d get t he i ncr ease or t he ent i r e
19 ut i l i t y amount ?
20 THE WI TNESS: The i ncr ement al amount of addi t i onal
21 expense caused by t he gr ant coul d be cl assi f i ed as a di r ect
22 expense and not an i ndi r ect expense. Di r ect expenses ar e
23 al l owed r egar dl ess of what t hey ar e. I ndi r ect expenses ar e not
24 al l owed.
25 Q. Now, di d you have a di scussi on wi t h Dr . Kar r on as t o usi ng
( 212) 805- 0300
1058
1 equi pment t hat he owned pr i or t o t he gr ant f or cof undi ng
2 pur poses?
3 A. Yes.
4 Q. And di d you - -
5 THE COURT: I t ' s t en af t er . How much l onger ar e you
6 goi ng t o be?
7 MR. RUBI NSTEI N: About 20 mi nut es, J udge.
8 THE COURT: We wi l l t ake t he br eak and come back t en
9 mi nut es af t er t wo.
11 THE COURT: The j ur y i s excused.
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1059
2 2: 10
4 MR. KWOK: J ust so t he r ecor d i s cl ear , I j ust amended
5 Gover nment Exhi bi t 902, whi ch i s t he pr oposed st i pul at i on we
6 r ef er r ed t o ear l i er i n t he mor ni ng. That r ef er s t o Gover nment
7 Exhi bi t 1000, whi ch i s a di sk cont ai ni ng e- mai l s pr oduced by
8 t he def ense. I have amended i t t o say Exhi bi t 1000 and 1000- A,
9 because subsequent t o t he si gni ng of t hi s st i pul at i on we
10 r ecei ved an addi t i onal CD, so now t he pr oposed st i pul at i ons
11 wi l l r ef er t o bot h di sks, and I have over l unch conf er r ed wi t h
12 Mr . Rubi nst ei n' s associ at e as t o t he e- mai l s we i nt end t o
13 publ i sh t o t he j ur y.
14 THE COURT: Al l r i ght . And t he st i pul at i on has been
15 si gned?
16 MR. KWOK: The pr oposed st i pul at i on has been si gned.
17 THE COURT: The f i r st exhi bi t ent r y i s 1000?
18 MR. KWOK: Yes. So, af t er t hat i t woul d say
19 Gover nment Exhi bi t 1000 and 1000- A, and t hen t he second
20 par agr aph i t woul d now r ead, " I f deemed r el evant , Gover nment ' s
21 Exhi bi t s 1000 and 1000- A may be r ecei ved i n evi dence. "
22 THE COURT: And what does i t say about def ense
23 exhi bi t ?
24 MR. KWOK: I t hi nk t hat can be cr ossed out .
25 THE COURT: Wel l , you bet t er conf er .
( 212) 805- 0300
1060
1 MR. KWOK: And j ust so t he r ecor d agai n i s cl ear , t he
2 wor ds " Def ense Exhi bi t " i n par agr aphs 1 and 2 ar e now st r i cken.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1061
3 Al l r i ght , Mr . Rubi nst ei n.
5 ROBERT BENEDI CT, r esumed.
6 CROSS EXAMI NATI ON ( Cont i nued)
8 Q. Now, di d you make any submi ssi on t o ATP on behal f of CASI
9 based upon cost shar e as an i nki nd cont r i but i on?
10 A. We submi t t ed t he r evi sed r epor t s and t he new r epor t s f or
11 t he f our t h quar t er of ' 02, f i r st quar t er and second quar t er of
12 ' 03.
13 Q. And di d you i ncl ude i n t hose r epor t s t he f act t hat Dr .
14 Kar r on, CASI , has cont r i but ed equi pment t hat t hey pr evi ousl y
15 owned?
16 A. No.
17 Q. Wer e you awar e of whet her or not t her e was equi pment t hat
18 was pr evi ousl y owned by CASI pr i or t o obt ai ni ng t he ATP gr ant ?
19 A. I was not .
20 Q. Di d you ascer t ai n - - t her e wer e a number of comput er s i n
21 t he apar t ment on East 33r d St r eet , cor r ect ?
22 A. Yes.
23 Q. I mean t hey wer en' t t he ki nd of comput er s - - wer e t hey t he
24 ki nd of comput er s - - wi t hdr awn.
25 Can you descr i be any of t hose comput er s f or t he j ur y?
( 212) 805- 0300
1062
1 A. No, j ust t hat t hey wer e ver y l ar ge and ver y power f ul .
2 Q. And do you know whet her or not Dr . Kar r on expanded t he
3 capaci t y of t hose comput er s?
4 A. I do not .
5 Q. Di d you check any i nvoi ces t o det er mi ne when any of t hose
6 comput er s wer e pur chased?
7 A. Ther e wer e some comput er s pur chased dur i ng t he gr ant
8 per i od.
9 Q. Di d you det er mi ne whet her al l t he comput er s - -
11 Q. You ar e f ami l i ar , ar e you not , wi t h t he f act t hat you coul d
12 get cr edi t f or coshar e cont r i but i on by usi ng your own equi pment
13 t hat you owned i n t he pr oj ect ?
14 A. Yes, si r , you can i f i t ' s i ncl uded i n t he budget . Ther e i s
15 a 30 per cent i nki nd al l owance f or cost shar e i f you i ncl ude i t
16 i n t he budget .
17 Q. So you coul d t ake 30 per cent of t he val ue of t he equi pment
18 i f i t ' s i ncl udabl e i n t he budget .
19 A. Yes, si r .
20 Q. Di d you ever ask Dr . Kar r on i f any of t he equi pment t hat
21 was t her e was pur chased pr i or t o t he budget ?
22 A. He t ol d me t hat t her e was.
23 Q. Di d you ask hi mi f he had any bi l l s or i nvoi ces showi ng t he
24 val ue of t hat equi pment ?
25 A. No, I di d not , because i t was not i n t he budget .
( 212) 805- 0300
1063
1 Q. Di d you r equest t hat t hat be i ncl uded i n t he budget ar y
2 r evi si on or amendment ?
3 A. At t he begi nni ng when we wer e doi ng t he budget amendment I
4 di d not .
5 Q. Wel l , di d t her e come a t i me t hat you di d?
6 A. I suggest ed anot her budget amendment , yes, i n t he J une t i me
7 f r ame.
8 Q. Now, you ment i oned about - -
9 THE COURT: Was t hat amendment made?
11 Q. At t he t i me you came t o CASI , no budget amendment r equest
12 was act ed upon, cor r ect ?
14 Q. And you t ol d us t hat you became awar e t hat Dr . Kar r on t ook
15 an advance on sal ar y ear l y on i n t he gr ant .
16 A. Yes, si r .
17 Q. And di d you l ocat e t hat i n t he books and r ecor ds of CASI ?
18 A. I n t he books t hat I l ooked at , yes, t her e was a sal ar y
19 advance.
20 Q. And di d you - -
21 A. And Dr . Kar r on admi t t ed t hat he had t aken a sal ar y advance.
22 Q. And i n f act ar e you awar e t hat i n August of 2002, bef or e
23 t he end of t he f i r st year of t he gr ant , t hat t hat advance was
24 adj ust ed i n t he books of CASI ?
25 A. No, si r , I was not . Nor di d Dr . Kar r on i ndi cat e t hat t hat
( 212) 805- 0300
1064
1 had happened.
2 Q. Di d he t el l you t hat i t happened?
3 A. No.
4 Q. Di d you ask hi m?
5 A. I asked hi mabout t he $75, 000 advance, and he sai d, yes, he
6 had t aken one. And when I asked hi mabout i t , he sai d he woul d
7 r epay i t . I saw no evi dence t hat i t had been r epai d.
8 Q. Di d you ever ascer t ai n how much sal ar y Dr . Kar r on had
9 r ecei ved i n t he f i r st year of t he gr ant ?
10 A. No. I wasn' t t her e.
11 Q. Wel l , do you know what hi s budget ed i t emf or hi s sal ar y was
12 f or t he f i r st year of t he gr ant ?
13 A. I bel i eve i t was i n excess of 200, 000. I don' t r emember
14 exact l y what i t was.
15 Q. So, i f he r ecei ved a gr oss amount of sal ar y of about
16 $35, 000 on a $175, 000 sal ar y, does t hat comput e t o you?
19 Q. Wel l , i n your account i ng exper i ence, i n your backgr ound,
20 bal l par k f i gur e, how much woul d a per son who r ecei ved $175, 000
21 i n sal ar y t ake home i n t ake- home pay?
24 Q. Do you know as you si t t her e now as t o how much sal ar y Dr .
25 Kar r on t ook home i n t he f i r st year of t he gr ant ?
( 212) 805- 0300
1065
1 A. No, si r , I do not .
2 Q. Let me show you what ' s i n evi dence as Def endant ' s FFF, and
3 I ask you have you ever seen t hose checks bef or e.
4 A. No, si r , I don' t r ecal l t hem.
5 Q. Have you ever seen any checks f r omDr . Kar r on' s per sonal
6 account ?
7 A. No, si r .
8 Q. Now, ar e you f ami l i ar wi t h a t er mnet oper at i ng l oss?
9 A. Yes.
10 Q. What does t hat mean?
11 A. That means af t er t axes you have shown a l oss i n your
12 busi ness.
13 Q. And can you car r y t hat over t o t he next year so t hat i f you
14 make a pr of i t you can use t hat l oss agai nst a pr of i t ?
15 A. That ' s a t ax i ssue; i t ' s not a gr ant i ssue. I don' t know
16 anyt hi ng about t hat , si r .
17 Q. Ar e you awar e of whet her or not i f you change t he name of
18 your cor por at i on, of your ent i t y, whet her or not you have t o
19 not i f y t he gr ant of f i ces?
20 A. Yes, si r , you do.
21 Q. And do you know whet her or not i f you change t he f or mof
22 your ent i t y f r oma cor por at i on, an I nc t o an LLP, t hat you can
23 l ose your net oper at i ng l oss?
25 A. I t ' s a t ax i ssue. I t ' s i r r el evant t o t he gr ant .
( 212) 805- 0300
1066
1 Q. Wel l , I amaski ng you about i t on a t ax i ssue.
4 Q. By t he way, wer e payr ol l t axes pai d by CASI ?
5 A. Yes and i sn' t i t .
6 Q. And i sn' t i t a f act t hat when you - - what ' s a f or m269
7 r epor t ?
8 A. That ' s t he r epor t you have t o f i l e wi t h ATP on a quar t er l y
9 basi s, i dent i f yi ng t he amount of money you spent on t he pr oj ect
10 and t he amount of money t hat you cont r i but ed t o t he pr oj ect .
11 Q. And when you f i r st j oi ned CASI , di d you assume t hat Dr .
12 Kar r on used hi s sal ar y t o meet hi s mat chi ng r equi r ement s of t he
13 gr ant ?
14 A. No.
15 Q. Wel l , do you r ecal l swear i ng t o an af f i davi t on Sept ember
16 27, 2006 at Sout hpor t , Nor t h Car ol i na - - i s t hat wher e you' r e
17 f r om, si r ?
18 A. Yes, si r .
19 Q. Let me show you what ' s mar ked as Gover nment Exhi bi t 3506- B,
20 as i n boy.
21 A. I f Dr . Kar r on was pai d wi t h NI ST f unds, t hose can' t be used
22 as mat chi ng cont r i but i on. You can' t doubl e di p.
23 Q. Do you see t hi s document 3506- B?
24 A. Yes.
25 Q. Do you see your si gnat ur e on t he second page?
( 212) 805- 0300
1067
1 A. Yes, I do.
2 Q. You swor e t o t he t r ut h of t hat ?
3 A. Yes, I di d.
4 Q. You r ead i t over bef or e you si gned i t ?
5 A. Yes.
6 Q. Take a l ook wher e I have t he S and see i f t hat r ef r eshes
7 your r ecol l ect i on as t o what you t ol d t he agent s.
8 A. Yes, i t does.
9 Q. And i n f act - -
10 A. What I meant by t hat st at ement , si r , was t hat I assumed he
11 was usi ng some of hi s CASI money, he was usi ng money t hat was
12 pai d t o hi mper sonal l y f or hi s wor k, and t hen he was
13 r ei nvest i ng t hat i nt o t he pr ogr am. That was not t he case.
14 Q. I n f act you sai d he was usi ng some of hi s sal ar y t o meet
15 t he mat ch r equi r ement s of t he gr ant , cor r ect ?
16 A. Yes, as I j ust expl ai ned.
17 Q. I s t hat what you sai d?
18 A. Yes, si r , t hat ' s what I sai d.
19 Q. And t o your knowl edge, whi l e Dr . Kar r on was wor ki ng on t he
20 ATP gr ant di d he have any ot her sal ar y?
21 A. No.
22 Q. So t he onl y sal ar y you coul d be t al ki ng about i s t he sal ar y
23 he i s get t i ng f r omt he ATP gr ant , cor r ect ?
24 A. Yes. But i f I pay you and you t ur n ar ound and use your own
25 money t o r ei nvest i t i n t he pr ogr am, t hat woul d mat ch. He di d
( 212) 805- 0300
1068
1 not do t hat .
2 Q. You don' t know i f he di d or not .
3 A. Ther e was no r ecor d of i t i n t he ATP f unds. Ther e was no
4 r ecor d of any i ncome comi ng f r omany sour ce ot her t han ATP.
5 Q. Wher e di d he deposi t hi s paycheck, si r ?
6 A. I n hi s own bank account , I guess.
7 Q. You guess.
8 A. I di dn' t pay any at t ent i on t o hi s own account s.
9 Q. And you di dn' t pay any at t ent i on t o t he CASI account s and
10 t he deposi t s he made, cor r ect ?
11 A. They wer e not r el evant t o t he gr ant .
12 Q. But you sai d bef or e al l t hese f unds wer e commi ngl ed,
13 cor r ect ?
14 A. Yes.
15 Q. And you see P- 1 t hr ough P- 6, t he checks i n f r ont of you?
16 A. Yeah.
17 Q. You had never seen t hose bef or e, had you?
18 A. No.
19 Q. But t hose wer e checks t hat went i nt o CASI dur i ng t he t i me
20 of t he gr ant ' s f i r st year , cor r ect ?
21 A. They' r e made out t o CASI , yes.
22 Q. And you never saw t hembef or e.
23 A. No.
24 Q. So you mi ssed t hem, r i ght ?
25 A. Checks made out t o CASI don' t mean anyt hi ng. They' r e not
( 212) 805- 0300
1069
1 r el evant t o t he gr ant .
2 Q. What i s CASI ' s - - what was CASI ' s onl y busi ness dur i ng t he
3 t i me of t he gr ant ?
4 A. The gr ant . But t hey wer e not deposi t ed t o t he ATP pr oj ect ,
5 and t he money he got f or t hese checks came f r omt he ATP
6 pr oj ect , so you can' t use ATP money t o cover an ATP mat ch. I t
7 doesn' t wor k t hat way.
8 Q. How about usi ng - -
9 A. The onl y money he had comi ng i n was comi ng f r omATP. Wher e
10 t he money went i s what ' s at quest i on her e.
11 Q. Yes. And you don' t know wher e i t went , r i ght ?
12 A. Thi s money went t o CASI .
13 Q. And i f CASI pai d ATP expenses, t hen i t woul d be spent on
14 ATP.
15 A. Yes.
16 Q. But you don' t know t hat because you never t r aced t hi s
17 money, r i ght ?
18 A. No, I di d not t r ace t hi s money.
19 Q. You never t r aced wher e he put hi s sal ar y or what he spent
20 hi s sal ar y on, r i ght ?
21 A. I f he spent i t on ATP, he di d not make t hat known t o me
22 t hat he had done t hat , so I woul d not have gone l ooki ng i nt o
23 hi s pr i vat e account s t o see what he was doi ng.
24 Q. Wel l , di dn' t you r el y upon Fr ank Spr i ng?
25 A. I r el i ed on t he account i ng t r ansact i ons.
( 212) 805- 0300
1070
1 Q. And wasn' t Fr ank Spr i ng al so wor ki ng on hi s per sonal t axes,
2 Dr . Kar r on' s per sonal t axes?
3 A. Yes.
5 A. But t hat agai n has not hi ng t o do wi t h t he gr ant .
6 Q. That ' s up t o t he j ur y.
7 A. Yes.
9 THE COURT: Obj ect i on i s sust ai ned.
10 Q. Now, you l ear ned t hat t he gr ant was suspended, r i ght ?
11 A. Yes, si r .
12 Q. Di d you l ear n t he gr ant was suspended because of a
13 vi ol at i on of t he copay?
14 A. We never r eal l y got an expl anat i on why i t was suspended.
15 I t was suspended.
16 Q. Af t er t he gr ant was suspended - - wel l , wi t hdr awn. At t he
17 t i me t he gr ant was suspended on J une 27, 2003, wer e t her e any
18 moni es owed t o vendor s f or t he gr ant ?
19 A. I woul d assume so, yes.
20 Q. Do you have any i dea what t he number was?
21 A. No, si r , I don' t .
22 Q. Af t er t he gr ant was shut down on J une 27, 2003, i sn' t i t a
23 f act t hat Dr . Kar r on advanced money t o CASI f or t he pur poses of
24 t he gr ant ?
25 A. I don' t have any r ecol l ect i on of t hat , si r .
( 212) 805- 0300
1071
1 Q. Wer e you i nvol ved at any t i me af t er t he gr ant was shut down
2 wi t h t he t el ephone conf er ence wi t h Mar i l yn Gol dst ei n?
3 A. No, si r .
4 Q. Do you know who Mar i l yn Gol dst ei n i s or was at t hat t i me?
5 A. Yes.
6 Q. And who was Mar i l yn Gol dst ei n?
7 A. Mar i l yn Gol dst ei n I bel i eve was t he manager of gr ant
8 compl i ance wi t h ATP. I don' t r emember her speci f i c t i t l e.
9 Q. And di d you not i f y Hope Snowden i n J ul y, J ul y 24, 2003 i n
10 r egar ds t o Dr . Kar r on? I ' msor r y.
11 THE COURT: What ' s t he quest i on?
12 MR. RUBI NSTEI N: I wi l l wi t hdr aw t he quest i on, J udge.
13 Q. Wer e you awar e t hat Dr . Kar r on advi sed Hope Snowden t hat he
14 had ar r anged an emer gency cr edi t l i ne t o appl y t o t he gr ant ?
15 Ar e you awar e of t hat , si r ?
17 Q. Di d you r ecei ve an e- mai l on J ul y 24? Thi s i s mar ked as
18 Def endant ' s E f or i dent i f i cat i on. Di d you r ecei ve t hat e- mai l
19 i ndi cat i ng t hat Dr . Kar r on was t aki ng a l i ne of cr edi t t o
20 advance t o t he gr ant ?
21 A. No, si r , I don' t r emember seei ng t hi s e- mai l . And as I
22 t est i f i ed ear l i er , t hat casi . net e- mai l addr ess was one I
23 di dn' t use.
24 Q. I s i t your t est i mony, si r , t hat you as t he busi ness manager
25 of CASI had an e- mai l addr ess and you di d not check your
( 212) 805- 0300
1072
1 e- mai l s?
2 A. Yes. I had a home e- mai l addr ess, and t hat ' s wher e we wer e
3 communi cat i ng. Per i odi cal l y t hey woul d send t hi ngs t o
4 casi . net . They set up t he account , t hey put a passwor d on i t .
5 And, as you know, f l oppi ng f r omone mai l ser vi ce t o anot her i s
6 a bi t of a hassl e, so I di dn' t use t he casi . net ser vi ce.
7 Q. But you wer e awar e, wer e you not , si r , t hat t her e was an
8 e- mai l addr ess t o you? You ar e awar e t her e was one?
9 A. I was awar e t hey set one up wi t h a passwor d t hat I di dn' t
10 know, so . . .
11 Q. And wer e you awar e t hat e- mai l s wer e comi ng t o you?
12 A. Not t her e.
13 Q. 2008 i s t he f i r st t i me t hat you became awar e of t he f act
14 t hat e- mai l s wer e sent t o you at casi . net ?
15 A. I have not seen t hi s e- mai l bef or e.
16 Q. Di d you see any e- mai l s t hat wer e sent t o you?
17 A. Not t o my r ecol l ect i on, casi . net , no.
18 Q. Wel l , when t he gr ant was suspended J une 27, 2003, how much
19 money was i n t he account s of NI ST or CASI ?
21 Q. Wel l , ar e you awar e t hat t her e wer e peopl e st i l l wor ki ng at
22 CASI af t er t he gr ant was suspended?
23 A. Yes.
24 Q. And di d you r ecei ve moni es af t er t he gr ant was suspended?
25 A. I bel i eve so, I di d, yes.
( 212) 805- 0300
1073
1 Q. And di d ot her peopl e get pai d f r omCASI af t er t he ATP gr ant
2 was suspended?
3 A. I bel i eve so.
4 Q. And ar e you awar e of suppl i er s who had al r eady del i ver ed
5 pr oduct t o CASI t hat wer e pai d af t er t he gr ant was suspended?
6 A. I don' t speci f i cal l y r emember any, but I can' t say t hat
7 t hat di dn' t happen.
8 Q. And di d you have cont act wi t h Bel i nda Ri l ey af t er t he gr ant
9 was suspended?
11 Q. And di d you i ndi cat e t o Bel i nda Ri l ey t hat $46, 000 was
12 deposi t ed by Dr . Kar r on and t hat 21, 000 i nki nd he' s cl ai med f or
13 hi s FMV of hi s pr eowned equi pment meet s t hi s obl i gat i on? Di d
14 you t el l t hat t o Bel i nda Ri l ey i n an e- mai l ?
15 A. I don' t r ecal l t hat , si r , no.
16 Q. Wel l , l et me show you t hi s document .
17 I ' mgoi ng t o show you what ' s been mar ked f or
18 i dent i f i cat i on Def endant ' s T.
19 THE COURT: Def endant ' s what ?
20 MR. RUBI NSTEI N: T as i n Thomas, your Honor .
21 Q. I show you what ' s been mar ked as Def endant ' s T, si r , and
22 ask you i f you r ecogni ze t hi s e- mai l .
23 A. Yes, si r , I do.
24 Q. I s t hat an e- mai l t hat you sent t o Fr ank Spr i ng?
25 A. Yes, i t i s.
( 212) 805- 0300
1074
1 Q. Di d you send t hat on J ul y 28, 2003?
2 A. Yes, I di d.
3 Q. I t ' s af t er t he suspensi on of t he gr ant ?
4 A. Yes.
5 MR. RUBI NSTEI N: We of f er t hi s i nt o evi dence.
8 MR. EVERDELL: No.
9 THE COURT: Exhi bi t T i s admi t t ed i n evi dence.
10 ( Def endant ' s Exhi bi t T r ecei ved i n evi dence)
11 MR. RUBI NSTEI N: May I r ead t hi s t o t he j ur y, your
12 Honor ?
13 THE COURT: Yes.
14 MR. RUBI NSTEI N: Thi s i s def endant ' s T i n evi dence.
15 I t ' s f r omBob Benedi ct at ec. r r . comt o Fr ank Spr i ng.
16 Let me put i t up on t he El mo.
17 No, I ' l l r ead i t . I t ' s t o Fr ank Spr i ng. I t says,
18 " St i l l spar r i ng wi t h NI ST on t he 67K. "
19 67K means 67, 000, cor r ect ?
20 A. Yes, si r .
21 Q. " I st i l l cont end t he 46K he deposi t ed and t he 21K i nki nd he
22 cl ai med f or t he FMV of hi s pr eowned equi pment meet s t hi s
23 obl i gat i on. We' r e supposed t o get Bel i nda' s pr el i mi nar y audi t
24 r epor t t oday or t omor r ow, and once t hat ' s i n, we wi l l know what
25 we pl an t o do and get our sel ves oper at i onal agai n. "
( 212) 805- 0300
1075
1 Di d you send t hat e- mai l , si r ?
2 A. Yes, si r .
3 Q. I n f act you wer e awar e when you sent t hi s e- mai l t hat Dr . K
4 had deposi t ed at l east $46, 000, cor r ect ?
5 A. Appar ent l y, yes, si r .
6 Q. And you al so wer e awar e t hat you wer e cl ai mi ng at l east
7 21, 000 i n ki nd f or t he cof undi ng, cor r ect ?
8 A. Yes, si r .
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1076
1 Q. Now, you of f er ed t o handl e t he audi t negot i at i ons on behal f
2 of CASI , di d you not ?
3 A. You don' t handl e audi t negot i at i ons. You wor k wi t h t he
4 audi t or s. I was par t of t he t eamt hat was doi ng t hat .
5 Q. Wel l , di d you advi se Dr . Kar r on t hat you had pr i or
6 exper i ence wi t h audi t negot i at i ons?
7 A. Yes, si r .
8 Q. And t hat you had been successf ul i n t he past i n audi t
9 negot i at i ons?
10 A. Yes, si r .
11 Q. And i n f act , Doct or - - do you know a man named Mel Spi t z?
12 A. No, si r .
13 Q. Di d Dr . Kar r on r et ai ned you t o handl e t he audi t
14 negot i at i ons, si r ?
15 A. No, si r .
17 THE COURT: Al l r i ght . Redi r ect ?
18 MR. EVERDELL: Ver y br i ef l y, your Honor .
19 THE COURT: Coul d I ask a quest i on bef or e we get t o
20 r edi r ect ? On your - - i n t he 3500A, t he af f i davi t you si gned
21 f or t he agency?
22 MR. RUBI NSTEI N: J udge, I can' t hear you. Sor r y.
23 THE COURT: The af f i davi t you si gned f or t he agency,
24 I ' mt r yi ng t o get t he dat e, somewher e ar ound t he 15t h of
25 November , 2004?
( 212) 805- 0300
1077
2 THE COURT: Revi ewi ng t hat af f i davi t , does t hat
3 r ef r esh your r ecol l ect i on i n any way t hat t he meet i ng you met
4 Dr . Kar r on at was i n Oct ober , not t he Spr i ng of 2001?
5 THE WI TNESS: I t coul d have been.
6 THE COURT: I f you want t o l ook at t he - -
7 THE WI TNESS: I don' t have i t , si r .
8 THE COURT: - - exhi bi t ?
9 THE WI TNESS: I t hi nk t he gent l eman t ook i t back.
10 MR. RUBI NSTEI N: Her e you go.
11 THE COURT: I j ust want t o - -
12 ( Pr ovi ded t o t he wi t ness by Mr . Rubi nst ei n)
14 THE COURT: Does t hat - -
15 THE WI TNESS: That i s t he cor r ect dat e.
17 THE WI TNESS: I t must have been t he f al l conf er ence,
18 not t he spr i ng conf er ence.
19 THE COURT: The ki ckof f meet i ng.
21 THE COURT: Okay. That ' s al l I want ed.
23 BY MR. EVERDELL:
24 Q. Al l r i ght , Mr . Benedi ct , I bel i eve you t est i f i ed on di r ect
25 and cr oss- exami nat i on t hat you t ol d t he def endant t hat he coul d
( 212) 805- 0300
1078
869zkar 5 Benedi ct - r edi r ect
1 not use ATP f unds t o pay f or r ent ; i s t hat r i ght ?
2 A. Yes, si r .
3 Q. Do you r emember , appr oxi mat el y, how many t i mes you t ol d hi m
4 t hat ?
5 A. Hal f a dozen t i mes.
6 Q. You t est i f i ed al so about get t i ng appr oval f or ATP expenses
7 t hat wer e not i n t he budget ?
8 A. Yes, si r .
9 Q. How do t hose appr oval s come; ar e t hey or al l y or i n wr i t i ng?
10 A. I n wr i t i ng.
11 Q. Ar e t hey ever or al ?
12 A. No.
13 Q. You - -
14 A. They' r e not bi ndi ng i f t hey' r e or al .
15 Q. Okay.
16 THE COURT: Sor r y, I di dn' t hear your answer .
17 THE WI TNESS: I sai d t hey' r e not bi ndi ng. I f you get
18 or al aut hor i zat i on, do somet hi ng, unt i l you get wr i t t en
19 aut hor i zat i on i t ' s not bi ndi ng.
20 Q. I bel i eve you wer e al so shown on cr oss- exami nat i on a dr af t
21 of a benef i t s pl an?
22 A. Yes, si r .
23 Q. That ' s exhi bi t s OO?
24 A. Yes, si r .
25 Q. You sai d you wor ked on t hat , i s t hat r i ght ?
( 212) 805- 0300
1079
1 A. Yes.
2 Q. Al l r i ght I want t o show i t t o you. I s t hat t he dr af t pl an
3 t hat you sai d you wor ked on?
4 A. Yes, si r .
5 Q. What i s t he dat e of t hat dr af t pl an, j ust r i ght at t he t op
6 of t he exhi bi t ?
7 A. J ul y 2nd, 2003.
8 Q. I ' l l t ake t hat back. That dat e, J ul y 2nd, 2003, i s t hat
9 bef or e or af t er t he gr ant was suspended?
10 A. Af t er .
11 Q. You wer e al so asked about ut i l i t i es, I bel i eve, on
12 cr oss- exami nat i on?
13 A. Yes, si r .
14 Q. To your knowl edge, di d any of t he appr oved budget s f or CASI
15 cont ai n a l i ne i t emf or ut i l i t i es?
16 A. No, si r .
17 Q. And you asked ver y r ecent l y on cr oss- exami nat i on about an
18 e- mai l wher e you di scussed an i n ki nd - -
19 A. Uh- huh.
20 Q. - - shar e f or t he def endant ?
21 A. Yes.
22 Q. Was t hat r evi si on, budget r evi si on t hat you di scussed i n
23 t he e- mai l , ever appr oved?
24 A. No, si r .
25 MR. EVERDELL: No f ur t her quest i ons.
( 212) 805- 0300
1080
1 MR. RUBI NSTEI N: May I , your Honor ?
6 Q. OO, i s i t your t est i mony, si r , t hat 00, t hi s empl oyees
7 benef i t pr ogr am, was cr eat ed on J ul y 2nd, 2003?
8 A. That ' s t he dat e t hat ' s on t her e, yes, si r . I don' t
9 r emember t he dat e i t was cr eat ed.
10 Q. Wel l - -
11 A. I t wasn' t wr i t t en al l on t hat one day. I t was somet hi ng I
12 had been wor ki ng f or a whi l e.
13 Q. I mean, t hi s wasn' t cr eat ed because t he gr ant was
14 suspended, was i t , si r ?
15 A. No. Thi s was - - i t was par t of t he - - t her e wer e no
16 pr ocedur es i n pl ace. We needed t o get somet hi ng i n, some
17 pr ocedur es i n wr i t i ng so you coul d suppor t t he medi cal char ges
18 t hat wer e bei ng i ncur r ed.
19 Q. Di d Dr . Kar r on say, you bet t er sneak i n a - -
20 A. No, si r .
21 Q. - - a benef i t , or our gr ant wi l l be suspended, di d he?
22 A. No, si r .
( 212) 805- 0300
1081
869zkar 5 Benedi ct - r ecr oss
2 MR. EVERDELL: Not f r omt he gover nment , your Honor .
3 THE COURT: Al l done? Al l r i ght , wi t ness i s excused.
4 Next wi t ness.
6 MR. KWOK: At t hi s t i me, your Honor , t he gover nment
7 woul d l i ke t o r ead i nt o t he r ecor d a pr oposed st i pul at i on.
8 THE COURT: Al l r i ght . What ' s t he number , st i pul at i on
9 what ?
10 MR. KWOK: I t ' s mar ked f or i dent i f i cat i on as
11 Gover nment exhi bi t 902.
12 THE COURT: Read i t .
13 MR. KWOK: Uni t ed St at es of Amer i ca ver sus Dani el B.
14 Kar r on, def endant . I t i s her eby st i pul at ed and agr eed by and
15 among t he Uni t ed St at es of Amer i ca by Mi chael J . Gar ci a, Uni t ed
16 St at es At t or ney f or t he Sout her n Di st r i ct of New Yor k, St eve
17 Kwok and Chr i st i an Ever del l , Assi st ant Uni t ed St at es At t or neys
18 of counsel , and def endant Dani el B. Kar r on, by and wi t h t he
19 consent of hi s at t or ney, Ronal d Rubi nst ei n, Esqui r e t hat : One,
20 t he document s cont ai ned i n t he compact di sk CD mar ked f or
21 i dent i f i cat i on as gover nment Exhi bi t 1000 and 1000 and - -
22 1, 000A and i dent i f i ed as e- mai l f or AUSA dat ed 5/ 31, 2008, ar e
23 aut hent i c e- mai l s cr eat ed at or near t he t i me shown on t hose
24 document s ar e what t hey pur por t t o be, and ar e admi ssi bl e as
25 of f er ed by t he gover nment under Feder al Rul es of Evi dence
( 212) 805- 0300
1082
1 801( d) ( 2) and 901; t wo, i f r el evant , gover nment exhi bi t s 1000
2 and Exhi bi t 1000A may be r ecei ved i n evi dence.
3 I t i s f ur t her st i pul at ed and agr eed t hat t he
4 st i pul at i on may be r ecei ved i n evi dence as a gover nment exhi bi t
5 at t r i al , and i t ' s dat ed J ul y, I ' msor r y, J une 2nd, 2008 New
6 Yor k, New Yor k, and i s si gned on behal f t he Uni t ed St at es by
7 St eve Kwok, and on behal f Dani el B. Kar r on, by Ronal d
8 Rubi nst ei n, Esqui r e.
9 Your Honor , at t hi s t i me gover nment moves f or t he
10 admi ssi on of gover nment exhi bi t 902, 1000, and 1000A.
11 THE COURT: Exhi bi t 902, excuse me, 902, and exhi bi t s
12 1000, 1000A ar e admi t t ed i n evi dence.
13 ( Gover nment ' s Exhi bi t s 901, 1000 and 1000A r ecei ved i n
14 evi dence)
15 THE COURT: Ar e you goi ng t o pl ay t hose?
16 MR. KWOK: Yes, your Honor . Mr . Ever del l wi l l publ i sh
17 some of t hose e- mai l s t o t he j ur y.
18 MR. EVERDELL: I f we coul d have Gover nment ' s Exhi bi t
19 203 on t he scr een, pl ease. I f we can hi ghl i ght t he t hi r d
20 par agr aph.
21 MR. RUBI NSTEI N: Your Honor , I ask t hat t he ent i r e
22 Exhi bi t be r ead.
23 THE DEPUTY CLERK: 203?
24 MR. RUBI NSTEI N: I n r ul e of compl et eness.
( 212) 805- 0300
1083
1 MR. EVERDELL: Your Honor , t he ent i r e exhi bi t i s i n
2 evi dence now. The j ur y can r ef er t o i t as t hey - -
3 MR. RUBI NSTEI N: But t hey have not hear d i t .
4 THE COURT: But t hey won' t - - t hey wi l l have copi es i n
5 t he j ur y r oom, but t hey don' t have copi es i n t hei r books, I
6 don' t t hi nk. Let ' s do i t t hat way or by di st r i but i on.
7 MR. EVERDELL: Al l r i ght . St ar t wi t h 203. I t ' s an
8 e- mai l f r omDr . D. B. Kar r on t o Pr of essor Schwar t z. Dear
9 Pr of essor Schwar t z, I ami n a ver y pr ecar i ous posi t i on - -
10 THE COURT: What dat e? Can we have a dat e f or t hi s?
11 MR. EVERDELL: Sor r y. August 20t h, 2003.
12 I ami n a ver y pr ecar i ous posi t i on i n t hat t he
13 gover nment expect s, demands and f eel s i t i s due t he J oan Hayes
14 audi t r epor t . The gr ant speci al i st , Hope Snowden, t ol d me i n
15 no uncer t ai n t er ms t hat t he next t hi ngs she needed t o r est ar t
16 t he gr ant wer e r epl acement and up t o dat e SF269' s and J oan' s
17 audi t r epor t . Her at t i t ude was we pai d f or i t , we expect i t
18 and i t , and t he SF269 cash r econci l i at i ons wer e hol di ng t hi ngs
19 up f or t he r evi ew as t o how t o r est ar t t he gr ant . I had
20 al r eady i ssued t he st op wor k or der , and J oan went t o Hope and
21 got Hope' s or der s t o compl et e payment or not .
22 THE COURT: Sl ow down a l i t t l e bi t .
24 Hope used t he same at t i t ude wor di ng t hat J oan had used
25 wi t h me, don' t wor r y, we ar e payi ng f or i t . I went back t o
( 212) 805- 0300
1084
1 J oan and asked her t o t el l Hope when she t hought t he audi t
2 woul d be done. My comment s t o J oan wer e t o t he ef f ect t hat
3 Hope was sor e and angr y. J oan' s r epl y was t hat I don' t have
4 any pr obl ems wi t h Hope. We get al ong j ust f i ne and don' t you
5 wor r y about pr obl emwi t h Hope.
6 I ' ve al ways had a good r el at i onshi p wi t h Hope and t he
7 gover nment i n gener al . Thi s at t i t ude sent chi l l s up my spi ne
8 because i t i ndi cat es t hat J oan cl ear l y sees her r ol e as bei ng
9 t he Gover nment ' s mol e, not my account ant . I al so deci ded t o
10 hol d of f shi t canni ng her by si c- ci ng you on her because i t has
11 t r emendous pot ent i al t o back f i r e on me gi ven Hope and J oan' s
12 cozy r el at i onshi p. J oan has cl ear l y at t empt ed t o cement her
13 r el at i onshi p wi t h t he gover nment agai nst me and i s possi bl y t he
14 bi ggest obst acl e t o get t i ng your our gr ant r est ar t ed. When I
15 asked J oan when she coul d get t he audi t r epor t done, she
16 st ar t ed back peddl i ng f r omher posi t i on t hat t he audi t r epor t
17 was done t o a posi t i on t hat she needed t o del i ver y, excuse me,
18 t he pr el i mi nar y r esul t s t o me i n per son wi t hout Bob Benedi ct or
19 any one el se on my t eam. And as soon as I made a dat e t o vi si t
20 wi t h her , she coul d gi ve me a bet t er sense of when she woul d be
21 done. She went out t o say t hat t hi s was, t hat i t was i r oni c
22 t hat I shoul d at t empt t o f i r e her and now I was aski ng her f or
23 mor e wor k or t o wor k f ast er . She l aced i nt o me wi t h comment s
24 t hat t hi s was a 40K audi t she was l osi ng money and she coul d
25 f i ni sh i t on her own t i me, and as such, she woul d not be
( 212) 805- 0300
1085
1 r ushed. She kept sayi ng she had or der s f r omme, my l et t er f r om
2 Fr eddi e, t hat she was t o st op wor k. As such, she woul d wor k at
3 her pace and i t was onl y her sense of dut y t o t he gover nment
4 t hat she woul d f i ni sh t he audi t at al l . Af t er t he unusual l y,
5 af t er t he unusual l y ber at i ng and obnoxi ous t uggi ng on my
6 chai ns, di dn' t I say t hese t hi ngs wer e goi ng t o happen? I
7 war ned you, I t ol d you, you di d not l i st en, you t hought you
8 coul d f i r e me, ha- ha, wel l , l ook who i s beggi ng now. You' r e
9 l ucky I ' man honest audi t or , not l i ke so and so you had bef or e.
10 I shoul d have r epor t ed her bef or e. The end of t he conver sat i on
11 was t hat J oan woul d cont act Hope and gi ve a compl et i on dat e.
12 Two, J oan woul d r epor t t o me when she had pr omi sed a dat e t o
13 Hope. 3, she woul d st i ck t o t hat dat e.
14 I pr omi sed her I woul d send her a not e or der i ng her t o
15 compl et e t he audi t and she i nsi st ed on gi vi ng t he audi t r esul t s
16 onl y t o me and make cer t ai n I under st ood each and ever y
17 f i ndi ng. She woul d not gi ve t he audi t r epor t t o Bob, f ax t hem
18 t o my of f i ce, e- mai l t hemor over ni ght t hemt o any l ocat i on
19 ot her t han t o CASI . She sai d she di d not t r ust t he peopl e i n
20 my of f i ce, woul d not i nt er cept t he f i ndi ngs and so on. I send
21 J oan or der s t o del i ver t he audi t f i ndi ngs t o Bob and he woul d
22 wor k wi t h her t o get t hi s done. I have seen a st r eamof e- mai l
23 about t he audi t f ood not es t hat J oan want s me and onl y me t o
24 wr i t e. At t hi s poi nt I don' t know what I ' mf oot i ng t o. I Hope
25 Bob wi l l send me a dr af t so I have a cl ue what I ' mdoi ng. My
( 212) 805- 0300
1086
1 sense i s t hat i f I ask J oan t o hur r y up, she wi l l sl ow down
2 even mor e. Si nce I have asked her t o hur r y up and t hat I am
3 out of t own unt i l Sept ember 1st , she won' t compl et e unt i l
4 Sept ember 1st . The wor st news i s t hat Mar i l yn Gol dst ei n, t he
5 gr ant s manager , has i ndi cat ed t hat what she has want ed was t he
6 co- payment pai d and her mai n pr obl emwas how t o get i t pai d
7 dur i ng t he suspensi on. I of f er ed t o pay some 67K of gr ant
8 bi l l s pendi ng, some of whi ch ar e f r omvendor s who may not even
9 get - - who may not even want t o get pai d. And she t hought t hat
10 may sol ve t he suspensi on i ssues, per amendment si x. I asked
11 Bob t o get t hi s nai l ed down, i . e. , a memo t hat payment of a
12 l i st of bi l l s woul d r est ar t t he gr ant , and Mar i l yn woul d not
13 commi t t o t hi s. So i t i s appar ent l y anot her bear t r ap wher e we
14 t hr ow away 67K and t hen get anot her bi l l , a bi l l f or anot her
15 200K di sal l owed, and t he mat ch get s absor bed i nt o di sal l owed
16 and we ar e st i l l wedged and I ' mal most compl et el y out of
17 cr edi t . Pl ease t al k t o Bob Benedi ct f or det ai l s on t hi s ver y
18 danger ous si t uat i on. I amwai t i ng abandoni ng t he gr ant at t hi s
19 poi nt and f or ci ng t he gover nment t o t r y t o col l ect one poi nt
20 f our mi l l i on f r omme and make t he gr ant enough of a t r ai n wr eck
21 t hat t hey have t o cooper at e on f i ndi ng a l i veabl e sol ut i on f or
22 al l of us. I t i s t hat bad and I amr eady t o shove t he
23 si t uat i on i nt o such an unpal at abl e end t hat we get some
24 cooper at i on f r omt hem. Yes - - shoul d I cont i nue j ust t o t he
25 end of t he e- mai l , your Honor ?
( 212) 805- 0300
1087
1 THE COURT: Yes.
2 MR. EVERDELL: Okay. Yes, J oan Hayes was pai d way
3 mor e t han I was awar e of , i ncl udi ng a 1K r et ai ner never
4 r ef l ect ed i n her bi l l i ng. An ext r a payment on her l ast audi t
5 i nvoi ce br i ngi ng t he t ot al pai d t o dat e f or t he audi t of al most
6 13, 500. I f I gi ve you t he go ahead, we shoul d sue t o r ecover
7 f or nonper f or mance $13, 500 and damages caused by
8 nonper f or mance, as wel l as anyt hi ng el se you can t hi nk of . Her
9 t wo sons ar e l awyer s and audi t or s, and she has t hr eat ened t hat
10 i f sued i t woul d not cost her anyt hi ng t o def end her sel f wi t h
11 her f ami l y. She has t hr eat ened t o bur y me i n l egal pr obl ems
12 shoul d I t r y t o i nt er f er e wi t h her J ohn Val J ohn l i ke mi ssi on
13 t o put me out of busi ness and get me di sbar r ed at t he f eder al
14 t eet . At t hi s poi nt f eel I have t o r ei gn you i n and not appear
15 t o t he gover nment t o bl ock J oan' s compl et i on of her appoi nt ed
16 t ask i f she cont i nues t o hang on my neck wi t h t hi s audi t and
17 won' t commi t t o a compl et i on dat e or mi sses her own compl et i on
18 dat e, t hen I wi l l gi ve you t he go ahead t o dr op an at omi c bomb
19 on her head, as wel l as cer t ai n l egal deat h on mysel f .
20 Fi nal l y, I ' ve been di scussi ng a benef i t s r et i r ement pl an wi t h.
21 And t hat concl udes t hat e- mai l .
22 THE COURT: Al l r i ght . Mor e sl owl y f or me, al l r i ght .
24 Next Gover nment ' s Exhi bi t 204. Thi s i s an e- mai l f r om
25 D. B. Kar r on t o sever al peopl e, i ncl udi ng J er ome Schwar t z, dat e
( 212) 805- 0300
1088
1 August 12t h 2003.
2 THE COURT: Has J oan Schwar t z been or Mr . Schwar t z
3 been i dent i f i ed i n t hi s case or - -
4 MR. EVERDELL: Not yet , your Honor .
5 THE COURT: Al l r i ght . Go ahead.
6 MR. EVERDELL: Al l r i ght . Readi ng f r omt he begi nni ng
7 of t he e- mai l :
8 We ar e goi ng t o gi ve J oan t he boot , as i t has t o be
9 har d, f ast and suf f i ci ent l y t hr eat eni ng so she st ops
10 col l abor at i ng wi t h t he I nspect or Gener al . But she does not
11 deci de t o t ur n St at e' s evi dence and r eal l y put me out of
12 busi ness mor e t han she has al r eady. Si nce she knows how t o get
13 under my ski n, and I l i ke t o be t he ni ce guy, I pr opose t hat a
14 par t ner shi p r esol ut i on di sengagi ng J oan and engagi ng Spi t z be
15 pr oduced, and a di schar ge or der t hat wi l l get her of f my case
16 and she wi l l be happy t o t ur n over her wor k paper s and wash her
17 hands of me.
18 I pr opose, one, she be hel d t o t he l et t er of her
19 engagement l et t er , copy at t ached, she was t o change - - char ge
20 $10, 000. She was over pai d. She shoul d r ef und t hat . Two, she
21 never compl et ed t he audi t by t he engagement l et t er deadl i ne.
22 She shoul d r ef und $10, 000. Thr ee, she mi ssed so many t ax
23 deadl i nes t hat she shoul d be di schar ged as a t ax at t or ney of
24 r ecor d, be hel d l i abl e f or l at e f ees and so on. Four , answer
25 char ges of mal f easance or st upi di t y my spect acul ar over payment
( 212) 805- 0300
1089
1 of 120 t o 150K wi t hhol di ng t axes, f or exampl e; f i ve, f ai l ur e t o
2 i nst i t ut e any ki nd of t ax shel t er s; si x meddl i ng i n management
3 maki ng de f act o management deci si ons wi t hout wr i t t en
4 aut hor i zat i on or f r ami ng t he pr obl emand aski ng f or wr i t t en
5 aut hor i zat i on; seven, usi ng per sonal knowl edge gai ned f r om
6 bei ng on- si t e at CASI vi r t ual l y dai l y at some poi nt s; i . e. ,
7 per sonal r esi dence, medi cal knowl edge gai ned f r omusi ng her
8 knowl edge of my per sonal t axes, spendi ng t oo much t i me bei ng
9 f r i ends wi t h empl oyees and usi ng t he gossi p t o di sal l ow cost s
10 t o t he gover nment ; ei ght , she shoul d be hel d r esponsi bl e f or
11 di sal l owance of t he cost of her st udent s benef i t s, her st udent
12 was pai d, but she l at er di sal l owed; ni ne, r ef usal t o cer t i f y
13 CASI busi ness pr ocess af t er expendi ng t r emendous r esour ces t o
14 r ecr eat e books; 10, gover nment usi ng t he di sal l owed she shows
15 on t he books as a basi s f or decept i on on t he par t of t he P. I ,
16 as he shoul d have shown pr i or t o doi ng t he SF269 i n er r or
17 because i t i s so cl ear on t he books, t he ef f or t t o r ecr eat e t he
18 books has back f i r ed and i t appear s t hat t he P. I made wi l l f ul
19 st at ement s of f act evi dent on t hei r own books, has t he audi t
20 r epor t been compl et ed on t i me. Thi s appar ent bad f ai t h woul d
21 have been vol unt ar i l y cor r ect i on i nst ead of di scover y by t he
22 I nspect or Gener al ; 11, her f ai l ur e t o compl et e anyt hi ng on t i me
23 has caused t he ef f ect i ve bankr upt cy of her cl i ent .
24 THE COURT: Al l r i ght . 2003 and 2004. Al l r i ght , any
25 mor e?
( 212) 805- 0300
1090
3 MR. EVERDELL: One mor e, your Honor . Thi s i s
4 Gover nment ' s Exhi bi t 213.
5 THE COURT: Dat es on t hese?
6 MR. EVERDELL: Yes, t hi s i s an e- mai l f r omDr . D. B.
7 Kar r on t o someone named T. L. Lor r ai ne at AOL. com. I t ' s dat ed
8 December 18t h, 2002.
9 THE COURT: What was t he dat e of - - 2004?
10 MR. EVERDELL: Thi s e- mai l ?
11 THE COURT: Yes.
12 MR. EVERDELL: December - -
13 THE COURT: 204, excuse me.
14 MR. EVERDELL: Oh 204 was - -
15 THE DEPUTY CLERK: August 12t h, ' 03?
16 THE COURT: August 12t h.
17 THE DEPUTY CLERK: August 12t h, ' 03.
18 MR. EVERDELL: August 12t h, 2003.
20 MR. EVERDELL: Thi s one i s December 18t h, 2002.
21 Lor r ai ne, I under st and your posi t i on f ul l y. I f you
22 can pr ovi de mat er i al and vi t al assi st ance t o CASI , me, dur i ng
23 our audi t , t hen you wi l l have a j ob. I have r eal concer ns as
24 t o whet her you can pr ovi de t hi s hel p, and i f I can pay you what
25 you ar e wor t h. My concer ns ar e t hat you have t he t echni cal
( 212) 805- 0300
1091
1 exper t i se and t he pat i ence t o f ul l y exer ci se i t . Thi s i s maj or
2 bookkeepi ng and account i ng cr ap. I st and t o l ose a l ot of
3 money out of pocket . You wi l l be wor ki ng wi t h our audi t or and
4 account ant J oan Hayes pr epar i ng document s f or her audi t . I
5 have a bi g l i st of t hi ngs t hat need t o be pr epar ed. I need
6 mount ai ns of document at i on or gani zed, I need l ot s of t hi ngs
7 f ol l owed t hr ough t hat t he audi t or and I have di scussed. My
8 f ai l ur e t o have t hese t hi ngs r eady f or her wi l l mean I have t o
9 pay f or t hese t hi ngs out of pocket . I aml ooki ng at a gr ant
10 shor t f al l of about 60K whi ch I have t o make up out of my
11 pocket . I have a mount ai n of busi ness r ecor ds my secr et ar y was
12 supposed t o or gani ze f or t he audi t . She di d not do i t and now
13 I have t o pay f or i t . I need someone t o do i t . I was goi ng t o
14 hi r e a t emp t o do i t , I wi l l cover you t o do i t .
15 Now, you ar e a di f f i cul t per son t o wor k wi t h. You ar e
16 a pai n i n t he but t , you dr i nk, you smoke, you ar e combi nat i ve
17 and ar gument at i ve, you ar e spaced out , you f or get t hi ngs. You
18 t al k t oo much when you don' t know what you' r e t al ki ng about .
19 You say t oo l i t t l e when you r eal l y know what you' r e t al ki ng
20 about . I was not goi ng t o engage you af t er al l t he cr ap at
21 J anet ' s, I was goi ng t o engage you af t er t he meet i ng wi t h
22 Sat ava. I t hought i t was mor e i mpor t ant t hat you get a mor e
23 hi gh payi ng j ob wi t h t hese f ol ks at Gr eenbel t so I di d not
24 di scuss i t wi t h you. I di scussed your i nvol vement wi t h f r i ends
25 who know you and most r ai l ed agai nst i t . I - -
( 212) 805- 0300
1092
1 THE COURT: I ' mt r yi ng t o r ead as you do i t . I t hi nk
2 t he j ur y may be wi t h you. The per son who someone moved t he
3 e- mai l , so you can' t r ead i t . Coul d you move i t back so we
4 can - -
5 MR. EVERDELL: I t hi nk we' r e at t he - - okay, t he l ast
6 was f r i ends who know you and most r ai l ed agai nst i t . Now we' r e
7 on, i t may dest r oy.
8 I t may dest r oy our f r i endshi p by my br i ngi ng you on as
9 an empl oyee. I don' t mi x f r i endshi p and empl oyment . I don' t
10 t hi nk i t i s a good i dea t hat we have a per sonal r el at i onshi p
11 whi l e you wor k f or me. I t i s not a good i dea t hat you st ay i n
12 my bed i f you wor k her e a f ew days a week. I l i ve i n a
13 gol df i sh bowl . Never t hel ess, i f you hel p me t hr ough t hi s audi t
14 f or t he next mont h, gi ve me a sol i d f ew weeks i nt ense wor k and
15 l ear ni ng and I sur vi ve t hi s gr ant , you wi l l have a j ob. Pet er
16 and I need t o f ocus on get t i ng a number of new gr ant s. A l ot
17 of wr i t i ng needs t o be done. A l ot of r esear ch needs t o be
18 done. A l ot of t r avel bet ween New Yor k and D. C. needs t o be
19 done. I f you i mpr ess mysel f , my boar d and Pet er , you wi l l
20 become a par t ner not j ust an empl oyee. One of t he t hi ngs we
21 need t o do i s f or mal i ze t he empl oyee benef i t pl an so as t o make
22 a T* f r i endl y company, and f or mal i ze t he empl oyee equi t y
23 par t i ci pat i on pl an I have i n mi nd f or somet i me now. These
24 t her e ar e si gni f i cant pr obl ems you can f i x. J oan wi l l br i ef
25 you on t hemand we wi l l di g i n and you wor k on t hemwi t h me
( 212) 805- 0300
1093
1 t hen and on your own. I need t o f ocus on r esear ch and our 1Q
2 r epor t due December 31st . We ar e f al l i ng behi nd on our
3 mi l est ones because of my cont i nui ng di st r act i on wi t h t he audi t
4 and busi ness pr obl ems. I f you become a pr obl emt o manage, you
5 wi l l be asked t o l eave. I f you can do what we need done, you
6 wi l l become a par t ner and you par t i ci pat e i n each new gr ant and
7 cont r act we wi n. I suggest you gi ve up t he hot el r oom, st ay
8 her e wi t h me a f ew days a week and I wi l l ask Wi ndy t o put you
9 up at her house. You can get your cel l phone cal l s f or war ded
10 t o t her e. I amt hi nki ng of openi ng a r et r eat of f i ce at Wendy' s
11 house, so I can get some wor k done now t hat she has t hr own
12 Cor r i ne out . I f I pr omi se t o cover your r ent , I may f or mal l y
13 move i nt o Wi ndy' s house so t hat I can col l ect r ent on my
14 apar t ment f r omt he gr ant . I n t hat case, you wi l l be st ayi ng
15 bot h her e and at Wi ndy' s and so t her e ar e t wo pl ace f or t wo
16 peopl e. I wi l l make a l ease wi t h Wi ndy and make l i ke I onl y
17 keep a f ol di ng bed on 33r d St r eet . I f ATP buys i nt o t hi s i dea,
18 t hen I can char ge my r ent on t he apar t ment t o t he gr ant and pay
19 my mor t gage. So I ' mcont r adi ct i ng most of my pr evi ous
20 st at ement s by t aki ng you on and i nt o my l i f e, but i f I don' t
21 get t hese pr obl ems sol ved, I won' t have a gr ant .
22 Fur t her , I won' t make a cont r act wi t h you unt i l I am
23 convi nced you ar e t he gi r l f or t he j ob. You have t o spend a
24 l ot of t i me wi t h t he audi t or f i xi ng each audi t pr obl em. You
25 have t o l ear n my el ect r oni c r ecor ds syst emand how t o use i t .
( 212) 805- 0300
1094
1 You need t o mast er our bookkeepi ng st yl e and r ecor d keepi ng.
2 You have t o l ear n, i f you ar e not al r eady f ami l i ar wi t h t hem,
3 t he FAR, Feder al Acqui si t i on Rul es, and cost pr i nci pl es.
4 Convi nce me you ar e on my si de and t he gi r l f or t he gi g and i t
5 i s your s f or r eal . I have been bur ned, bur n t oo many t i mes i n
6 t he past . I wi l l hel p you out out of pocket , as best I can
7 whi l e you ar e wi t h me, but wi t hout f or mal appr oval f or a
8 subcont r act wi t h you f r omt he f eds, I can' t make a f or mal of f er
9 t o you. I was yel l ed at by my gr ant speci al i st at NI ST over
10 maki ng per sonnel changes wi t hout t hei r appr oval . One t hi ng you
11 wi l l do i s i nt er f ace wi t h me at NI ST and l ear n how t o navi gat e
12 mul t i pl e r ol l i ng budget changes wi t h t hemso you can get your
13 appr oval t o wor k under my gr ant . I f you do t hi s r i ght , you
14 wi l l be wor ki ng di r ect l y wi t h t he gover nment and wr i t e your own
15 t i cket wi t h me t hem, pl us end up wi t h equi t y f or i n t he company
16 when we f i ni sh t he empl oyee benef i t pl an, whi ch you wi l l hel p
17 wr i t e. Hugs Di ane.
18 THE COURT: I t hought t hi s was supposedl y - - I ' m
19 sor r y, I t hought t hat t hi s was f r omt he def endant ?
20 MR. EVERDELL: I t i s f r omt he def endant ' s e- mai l
21 addr ess, D. B. Kar r on.
22 THE COURT: I see, al l r i ght .
23 Al l r i ght , do you need t o r ead anyt hi ng el se?
24 MR. KWOK: One moment , your Honor ?
25 MR. RUBI NSTEI N: Ar e t hey excl udi ng t he next - -
( 212) 805- 0300
1095
1 t her e' s anot her , t her e i s t he or i gi nal message t her e. Ar e
2 we - -
3 MR. EVERDELL: J ust - -
4 THE COURT: You want somet hi ng el se r ead i n?
5 MR. RUBI NSTEI N: I don' t know, J udge. I ' mj ust aski ng
6 i f t hat ' s par t of - -
7 THE COURT: I coul dn' t hear your answer . You want
8 somet hi ng r ead i n?
9 MR. RUBI NSTEI N: I t ' s not necessar y, your Honor .
10 MR. EVERDELL: Your Honor , t he gover nment r est s.
11 THE COURT: Al l r i ght , t he gover nment r est s.
12 I s def ense r eady t o put on a case?
13 MR. RUBI NSTEI N: Let me - - can I st ep out si de, your
14 Honor ?
15 THE COURT: Al l r i ght . What ?
17 THE DEPUTY CLERK: One of t he j ur or s - -
18 THE COURT: We' l l t ake a j ur y br eak, Mr . Rubi nst ei n.
19 We' l l t ake a j ur y br eak. Okay. 10 mi nut es.
20 ( Recess)
21 THE COURT: Ar e we r eady f or t he j ur y?
23 THE COURT: Get t he j ur y.
( 212) 805- 0300
1096
869zkar 5
2 MR. RUBI NSTEI N: Yes. My assi st ant went t o get t he
3 wi t ness, your Honor .
5 MR. RUBI NSTEI N: Sor r y. I ' msor r y. The wi t ness i s
6 si t t i ng i n t he back of t he cour t r ooml i ke I t ol d hi mt o. I
7 f or got I t ol d hi m.
9 THE DEPUTY CLERK: Wat ch your st ep.
10 WI LLI AM NI COLAI ,
11 cal l ed as a wi t ness by t he def endant ,
15 THE COURT: Al l r i ght , go ahead.
16 Q. What i s your busi ness or occupat i on, Mr . Ni col ai ?
17 A. I ama vi ce- pr esi dent of Hal st ead Pr oper t y, whi ch i s a r eal
18 est at e company i n New Yor k.
19 Q. And ar e you l i censed?
20 A. Yes, I am.
21 Q. And how ar e you l i censed?
22 A. Li censed as a r eal est at e br oker .
23 Q. And how l ong have you been so engaged?
24 A. I ' ve been a br oker at Hal st ead si nce 1989.
25 Q. And bef or e t hat ?
( 212) 805- 0300
1097
869zkar 5 Ni col ai - di r ect
1 A. I used t o devel op spor t s pr ogr ams f or ki ds wi t h cer ebr al
2 pal sy.
3 Q. Now, and wher e i s your br oker age l ocat ed?
4 A. We' r e i n Manhat t an. My par t i cul ar of f i ce i s at 77t h and
5 Thi r d.
6 Q. And how l ong have you been i n Manhat t an as a r eal est at e
7 br oker ?
8 A. My whol e car eer as a br oker .
9 Q. And as a br oker , do you make br oker s appr ai sal s?
10 A. We do br oker s appr ai sal s, yes.
11 Q. And what i s a br oker s appr ai sal ?
12 A. Br oker s appr ai sal woul d be, basi cal l y, t he same t hi ng as an
13 appr ai ser woul d do, but we' r e not cer t i f i ed by t he St at e. We
14 use our knowl edge, we use al l of t he same i nf or mat i on and same
15 sour ces t o ar r i ve at a pr i ce f or an apar t ment .
16 Q. And do you do t hat - - and why do you do t hat ?
17 A. We do i t qui t e of t en when somebody comes t o us and asks i f
18 we' d l i ke t o sel l t hei r apar t ment , or t hey t el l us t hey' r e
19 t hi nki ng about sel l i ng an apar t ment , what woul d i t be wor t h or
20 somet i mes f or est at es when somebody has di ed and t he est at e
21 needs some sor t of a val ue of t he pr oper t y.
22 Q. Do you know t he def endant , Dr . Kar r on?
23 A. I met hi m, yes. He l i ves i n my bui l di ng.
24 Q. And what bui l di ng i s t hat , si r ?
25 A. I n Ki ps Bay, 300 East 33r d St r eet .
( 212) 805- 0300
1098
1 Q. And how l ong have you l i ved t her e?
2 A. I ' ve l i ved t her e si nce 1984.
3 Q. And do you have - -
4 A. I ' mver y st abl e. What ?
5 Q. Do you have any posi t i on wi t h t he bui l di ng?
6 A. None what soever .
7 Q. And have you have you had l i st i ngs f r omt he bui l di ng?
8 A. I ' ve sol d at l east 20 apar t ment s t her e.
9 Q. And di d you have occasi on t o l i st Dr . Kar r on' s apar t ment ,
10 apar t ment 4N?
11 A. Yes, I di d.
12 Q. And wher e - - how di d you - - t el l t he j ur y how you go about
13 l i st i ng?
14 A. How I what ?
15 Q. How do you go about - - di d you have an excl usi ve?
16 A. Yes, I had t he excl usi ve on t he l i st i ng.
17 Q. And what does t hat mean?
18 A. That means t hat I was t he one br oker t hat cont r ol l ed t he
19 apar t ment , and anybody who want ed t o see i t , ever y br oker had
20 t o cal l me and ar r ange t o see i t t hr ough me. I was t he
21 cont r ol l i ng br oker .
22 Q. And how ar e you pai d as a br oker ?
23 A. We' r e pai d a commi ssi oni ng based on t he sal e. I f you sel l
24 i t as a co- br oke, your company spl i t s t he commi ssi on. I f you
25 sel l i t your sel f , your company get s t he whol e commi ssi on and
( 212) 805- 0300
1099
1 i t ' s di vi ded wi t h your company.
2 Q. And you get a set amount or per cent age of t he sal es pr i ce?
3 A. I t ' s per cent age of t he sal es pr i ce.
4 Q. So t he hi gher you sel l i t f or t he mor e you make?
5 A. Yes.
6 Q. Now, di d you have occasi on t o l i st Dr . Kar r on' s apar t ment ?
7 A. Yes, I di d.
8 Q. And what when was t hat ?
9 A. You mean what pr i ce?
10 Q. When?
11 THE COURT: When ar e we t al ki ng about ?
12 A. Oh, we - - I ' msor r y.
13 THE COURT: When?
14 Q. Yeah. When di d you l i st t he apar t ment ?
15 A. I t hi nk i t was pr obabl y l ast Oct ober , somet hi ng l i ke t hat .
16 Q. And what di d you l i st i t at ?
17 A. We l i st i t at $650, 000.
18 Q. And what wer e apar t ment , compar abl e si ze apar t ment s sel l i ng
19 f or at t hat t i me i n t hat l ocat i on?
20 A. Compar abl e apar t ment s wer e sel l i ng i n t he seven' s.
21 Q. And when you say seven - -
22 A. 700' s, yeah, seven and a quar t er , 740, 750.
23 Q. Thousand?
24 A. Hundr ed t housand, yes. And we t hought t hat - - we t hought
25 t hi s was a hi gh pr i ce, but we t hought we' d get peopl e i n and
( 212) 805- 0300
1100
1 see i f we coul d get mor e money, because my j ob i s basi cal l y t o
2 get as much money as I possi bl y can f or t he apar t ment . So we
3 l i st ed at 650, 000 whi ch I t hought was hi gh.
4 Q. And why i f si mi l ar apar t ment s i n t he same bui l di ng wer e
5 sel l i ng f or over 700, 000, why di d you l i st t hi s apar t ment f or
6 $650, 000?
7 A. Dr . Kar r on had t aken a r esi dent i al apar t ment and basi cal l y
8 t ur ned i t i nt o a l abor at or y. Ther e wer e r eal l y no vest i ges of
9 what you woul d consi der as a, as a nor mal r esi dent i al
10 apar t ment . I t was, basi cal l y, al l l ab. I t had desks bui l t al l
11 ar ound t he apar t ment , no t hi ngs l i ke sof as, j ust ki nd of of f i ce
12 chai r s wher e you coul d pul l up t o comput er s and moni t or s.
13 Ther e was a, basi cal l y, a mat t r ess on t he f l oor and a hammock
14 r unni ng acr oss t he r oomwher e peopl e coul d sl eep, and i t was
15 basi cal l y i t . The r est of i t i s al l wor k. And we f el t t hat i t
16 woul d t ake a l ot of money t o conver t t hi s apar t ment back
17 because of t he - - back t o a r esi dent i al apar t ment because of a
18 l ot of t hi ngs he di d t o i t .
19 Q. And di d you, event ual l y, di d you show t hi s apar t ment t o
20 peopl e?
21 A. I showed i t a l ot .
22 Q. And di d you event ual l y f i nd a buyer ?
23 A. I di d f i nd a buyer , yes.
24 Q. And when was t hat , si r ?
25 A. We f ound a buyer , I guess ear l i er t hi s year .
( 212) 805- 0300
1101
1 Q. And had, f r omt he t i me you st ar t ed l i st i ng t he apar t ment i n
2 Oct ober , t i l l t he t i me you f ound a buyer , di d you change t he
3 of f er pr i ce?
4 A. We l ower ed i t t o 610, 000, and we had a l i t t l e mor e i nt er est
5 i n i t , but I showed i t at l east - - I must have shown i t 40
6 t i mes.
7 Q. And what was t he event ual sal es pr i ce f or t hi s apar t ment ?
8 A. Event ual says pr i ce was 510, 000, but i t was al l cash. We
9 di dn' t have t o get a bank i nvol ved i nt o i t , so we di dn' t have
10 t o wor r y about an appr ai sal comi ng or anyt hi ng l i ke t hat . And
11 i t was bought by somebody on boar d because t her e wer e cer t ai n
12 ci r cumst ances r egar di ng t he apar t ment t hat i t j ust wor ked out
13 wel l t o have somebody on t he boar d buy i t . Now, he f ound i t
14 because I had l i st ed t he apar t ment i n t he l aundr y r oom, not
15 because, you know, because he knew anyt hi ng about i t . He saw
16 i t l i st ed and came t o see i t and expr essed an i nt er est i n i t .
17 Q. And does t hi s per son own ot her apar t ment s i n t he bui l di ng?
18 A. Yes, he does, and he l i ves i n t he bui l di ng.
19 MR. RUBI NSTEI N: I have no f ur t her quest i ons.
20 THE COURT: Any cr oss- exami nat i on?
22 BY MR. KWOK:
23 Q. Good af t er noon, Mr . Ni col ai .
24 A. Hel l o.
25 Q. Have you hear d anyt hi ng about t he Advanced Technol ogy
( 212) 805- 0300
1102
869zkar 5 Ni col ai - cr oss
1 Pr ogr am; do you know anyt hi ng about i t ?
2 A. No, I don' t .
3 Q. Do you know about t he r ul es and r egul at i on gover ni ng t hi s
4 pr ogr amcal l ed Advanced Technol ogy Pr ogr am?
5 A. I don' t know what i t i s.
6 Q. Di d you have any deal i ngs at al l wi t h a company cal l ed
7 CASI ?
8 A. No.
9 Q. Ar ound 2001 t o 2003?
10 A. No.
12 THE COURT: Anyt hi ng f ur t her ?
14 THE COURT: Al l r i ght , you' r e excused. Next wi t ness.
17 MR. RUBI NSTEI N: Your Honor , def ense cal l s J ohn Mason.
19 J ONATHAN MASON,
24 THE COURT: Pl ease pr oceed.
25 Q. Mr . Mason, good af t er noon?
( 212) 805- 0300
1103
869zkar 5 Mason - di r ect
2 Q. Di d we ever meet bef or e?
3 A. J ust t oday.
4 Q. And what i s your busi ness and occupat i on, si r ?
5 A. I ' ma car pent er , bui l der .
6 Q. And do you know t he def endant , Dr . Kar r on?
7 A. I do.
8 Q. And do you see hi mi n cour t ?
9 A. I do.
10 Q. And wher e do you see hi m?
11 A. ( Poi nt i ng)
12 MR. RUBI NSTEI N: I ndi cat i ng t he def endant , your Honor ?
13 THE COURT: Yes, t he wi t ness has i dent i f i ed t he
14 def endant , t he r ecor d wi l l so r ef l ect .
15 MR. RUBI NSTEI N: Excuse me, your Honor . I have t o get
16 somet hi ng f r omt he wi t ness.
17 Q. Now, what i s your busi ness and occupat i on pl ease?
18 A. I ' ma bui l der .
19 Q. And when di d you meet Dr . Kar r on?
20 A. About t hr ee year s ago.
21 Q. And do you have accompany?
22 A. Yes, I do.
23 Q. And what ' s t he name of your company?
24 A. Bat or Bi nt oer , I ncor por at ed.
25 Q. And how l ong?
( 212) 805- 0300
1104
1 THE COURT: I ' msor r y, I coul dn' t cat ch t he name.
2 THE WI TNESS: I t ' s Bat or Bi nt oer .
3 Q. And how l ong have you had t hat company?
4 A. 15, 17 year s.
5 Q. And do you have a speci al t y?
6 A. Um, no. I ' d say we' r e mor e gener al . We' ve done a f ew
7 di f f er ent t hi ngs and we sor t of di f f er ent t i mes had, you know,
8 been f ocused on di f f er ent t hi ngs. But mai nl y now we j ust do
9 cont r act i ng, f i x apar t ment s, t hat sor t of t hi ng.
10 Q. And how di d you come t o meet Dr . Kar r on?
11 A. Someone I knew t ol d me t hat a f r i end of t hei r s was l ooki ng
12 f or some wor k t o be done, and I went and i nt r oduced mysel f t o
13 Dr . Kar r on.
14 Q. And di d t hat r esul t i n you doi ng some wor k i n apar t ment 1N
15 at 300 East 23r d St r eet ?
16 A. I t di d.
17 THE COURT: 1N or 4N?
18 MR. RUBI NSTEI N: I ' msor r y, 4N, 4N.
19 Q. And - -
20 THE COURT: Coul d we have a dat e?
21 Q. Yeah. Do you r ecal l when i t was t hat you, or wi t hdr awn.
22 Di d you make a wr i t t en agr eement or t hi s was ver bal ?
23 A. No, t her e was a wr i t t en agr eement and I had t o get , you
24 know, we got some i nsur ance paper s and t hi ngs and - - I mean i t
25 was a l i t t l e whi l e ago. I ' mnot compl et el y up on al l my j obs
( 212) 805- 0300
1105
1 f r omf our year s ago, but , you know.
2 Q. Wel l t hat ' s a st andar d t hi ng t o get i nsur ance when you do
3 wor k i nsi de of - -
4 A. Yeah.
5 Q. - - a coop bui l di ng?
6 A. Yes, i t i s. Most l y t o wor k i n any coop bui l di ng you have
7 t o show your wor ker s comp and wor k l i abi l i t y i nsur ance.
8 Q. Do you have t o meet wi t h anybody f r omt he bui l di ng bef or e
9 you ar e per mi t t ed i n t o wor k?
10 A. No. They j ust want t o see t he paper wor k. I mean, I t hi nk
11 l i ke I di d - - I pr obabl y di d at some poi nt t al ked t o some of
12 t he bui l di ng management at t he begi nni ng whenever we wer e
13 sor t i ng out t he paper wor k, but .
14 Q. What ki nd of wor k di d you do i n apar t ment 4N?
15 A. Most l y I was wor ki ng on - - I mean, I guess you' l l know hi s
16 apar t ment was l i ke a comput er l abor at or y. So mai nl y we l i ke,
17 we put l ot s of r unner s on t he wal l s t hat hel d al l t he scr eens.
18 One of t he bi g j obs t hat we di d was we made a vent i l at i ng
19 syst emf or t he comput er s, because i n t he summer i t had a l ot of
20 pr obl emwi t h t he comput er s over heat i ng, so we l i ke bui l t r acks
21 t o put al l t he comput er s i n. And t hen I bui l t - - l i ke we got
22 t hese f ans, ext r act or f ans, you know, bui l t i t , seal ed i t of f
23 so t hat t he ai r f r ombehi nd t he comput er s was i mmedi at el y
24 sucked out t o t he out si de and, and ai r condi t i on t her e coul d be
25 pul l ed i n.
( 212) 805- 0300
1106
1 Q. What i s ext r act or s?
2 A. Yeah, ext r act - - we ar e ext r act i ng t he hot ai r f r ombehi nd
3 t he comput er s l i ke and vent i ng i t out si de. And t hen we had ai r
4 condi t i oner s and st uf f i n t he f r ont of t he comput er s so t hat ,
5 you know, i t woul d be cool ai r goi ng t hr ough t he comput er s.
6 Q. So what ki nd of - - di d you have t o do any st r uct ur al wor k?
7 A. No, i t wasn' t st r uct ur al wor k.
8 Q. Di d you have t o br eak t he wal l or anyt hi ng?
9 A. No, no.
10 Q. And how l ong di d t he j ob t ake?
11 A. Wel l , I mean t her e was l i ke - - as I sai d, t her e was a
12 coupl e of di f f er ent t hi ngs t hat I di d. And I woul d say l i ke
13 al l i n al l , l i ke i t was l i ke maybe a mont h' s wor t h of wor k,
14 maybe a bi t l ess. But , you know, i t wasn' t al l done l i ke one
15 day t o t he next , you know. I t wasn' t l i ke i n one t hi ng. Ther e
16 was l i ke space, we di d some I t hi nk one pr oj ect . Then we
17 act ual l y bui l t t he vent i l at i on syst emonce, and t hen we had t o
18 r et ake i t down, and l i ke i t di dn' t r eal l y wor k out , so l i ke a
19 mont h l at er we l i ke t ook i t down and di d i t agai n, you know,
20 and we changed t he f ans and st uf f t hat we used.
21 Q. Now, di d you f i l l out t i me sheet s on t hi s j ob?
22 A. I di d, act ual l y, whi ch act ual l y was a sor t of a bone of
23 cont ent i on bet ween me and Dr . Kar r on. Because I t ol d hi mI
24 never f i l l ed out t i me sheet s bef or e. I mean, usual l y I make a
25 bi l l and, you know, t hat ' s, t hat ' s what i t i s. But Dr . Kar r on
( 212) 805- 0300
1107
1 was qui t e i nsi st ent . So I t hi nk we di d f i l l out t i me sheet s.
2 Q. And di d you si gn t hose t i me sheet s?
3 A. I ' msur e I di d.
4 Q. Now, l et me show you what ' s mar ked as def endant ' s MM f or
5 i dent i f i cat i on. I show you what ' s been mar ked MM f or
6 i dent i f i cat i on and ask you i f you r ecogni ze what t hat document
7 i s?
8 A. I do. I t ' s a t i me sheet i t ' s got my si gnat ur e on.
9 Q. And how many of t hose di d you f i l l out dur i ng t he t i me you
10 wer e wor ki ng t her e?
11 A. A bunch.
12 MR. RUBI NSTEI N: We of f er MM i nt o evi dence, your
13 Honor .
17 THE COURT: No obj ect i on? MM i s admi t t ed i n evi dence.
18 THE DEPUTY CLERK: That ' s MM?
19 MR. RUBI NSTEI N: MM.
20 THE COURT: MM.
21 ( Def endant ' s Exhi bi t MM r ecei ved i n evi dence)
22 Q. I show you what ' s mar ked as MM- 1 and MM- 2 and ask you i f
23 you r ecogni ze what i s depi ct ed i n t hese exhi bi t s?
24 THE COURT: What exhi bi t s ar e you showi ng?
25 MR. RUBI NSTEI N: MM- 1 and MM- 2.
( 212) 805- 0300
1108
1 Q. Do you r ecogni ze anyt hi ng i n t her e, Mr - -
2 A. Yeah, I do. I mean i t ' s not t he gr eat est of pi ct ur es, but
3 yeah I do, I do r ecogni ze t hi s i s l i ke t he mai n r oomwi t h t he
4 book shel ves and t he t abl e and t he st uf f on t he cei l i ng.
5 Q. And - -
6 A. Yeah, t hi s i s, t hi s i s - - and t hi s one i s l i ke equi pment .
7 Q. Tel l us what number you' r e l ooki ng at on t he bl ue l i t t l e
8 st i cker ?
9 A. Yeah. MM- 1.
10 Q. Okay.
11 A. And t hese l ook l i ke bl ack and whi t e shot s of l i ke hi s
12 apar t ment .
13 Q. Does t hat f ai r l y and accur at el y r ef l ect t he way t he
14 apar t ment l ooked at some poi nt when you wer e wor ki ng t her e?
15 A. Yeah. I mean, t hey' r e not t he gr eat est pi ct ur es, but yeah,
16 I woul d say so. I mean, I can r ecogni ze t he st uf f .
17 Q. Do you see t he wor k you di d i n t hose pi ct ur es?
18 A. Yeah.
19 MR. RUBI NSTEI N: We of f er MM- 1 i nt o evi dence.
21 THE COURT: No obj ect i on? MM- 1 i s admi t t ed i n
22 evi dence.
23 ( Def endant ' s Exhi bi t MM- 1 r ecei ved i n evi dence)
24 Q. Al l r i ght . Now t ake a l ook at MM- 2. Fi r st gi ve me MM- 1.
25 I ' mgoi ng t o put i t up on t he t hi ng her e. I s t hat one?
( 212) 805- 0300
1109
1 A. Yeah.
2 Q. Thank you. Okay. Can you descr i be what we' r e l ooki ng at
3 i n MM- 1?
4 A. Yeah, I guess t hi s - -
5 Q. Coul d you st ar t on - -
6 A. I t ' s har d t o t el l . I t coul d be ei t her r oom, but bot h r ooms
7 ar e pr et t y much t he same. I t hi nk act ual l y t hi s i s what - - so
8 cal l ed t he bedr oombecause i t has t he book shel ves st i l l on.
9 Q. Di d you do wor k i n t he bedr oom?
10 A. Not so much. Act ual l y, I di d - - I - - act ual l y, I di d put
11 some - - I put t hese t hi ngs on t he cei l i ng, t he sl i de t hi ng on
12 t he cei l i ng.
13 Q. And what ' s t hat f or ?
14 A. The ones I put on wer e f or l i ke - - we had l i ke l i ght s t hat
15 l i ke went al ong t he desk, and t hey wer e l i ke l ong f l exi bl e
16 t hi ngs. They at t ached t o t he t r ack on t he cei l i ng. And t hey
17 wer e so t hat you coul d di r ect t he l i ght t o wor k on t he
18 comput er . You know, we had l i ke a bunch, so t hey l i ke wer e
19 behi nd you. And t he i dea was t he, you know, you coul d l i ke
20 adj ust i t t o l i ke, you know, adj ust abl e l i ght i ng so t hat you
21 coul d have f or peopl e t o wor k and st uf f .
22 Q. Al l r i ght . Now i n MM- 2, what do you r ecogni ze i n t hat
23 phot ogr aph.
24 A. I mean i t l ooks l i ke t he comput er r acks agai n. I t ' s not
25 t he easi est , ' cause i t ' s bl ack and whi t e, not t he easi est t hi ng
( 212) 805- 0300
1110
1 t o see, but t hi s one l ooks l i ke some of t he comput er r acks t hat
2 we bui l t .
3 Q. Di d you bui l d t hose i n t he l i vi ng r oom?
4 A. Yeah, bui l t t hemi n t he l i vi ng r oom.
5 MR. RUBI NSTEI N: We of f er MM- 2 i nt o evi dence, your
6 Honor .
8 THE COURT: MM- 2 i s admi t t ed i n evi dence.
10 Q. Coul d you descr i be what ' s depi ct ed i n t he t op phot ogr aph of
11 MM- 2?
12 A. The t op one, I don' t know. I t hi nk I need a - - I mean, i t
13 l ooks l i ke equi pment on t he f l oor . I don' t know what t hose
14 l i ght s ar e on t he si de. I ' mnot qui t e sur e what t hat i s of .
15 Q. And how about t he second phot ogr aph?
16 A. The second one l ooks l i ke t he r acks t hat we bui l t , l i ke
17 i t ' s ki nd of a cl oseup shot of t hem, but l i ke i t l ooks l i ke we
18 bui l t l i ke t hese sl i di ng r acks wher e t he comput er s t hey sl i de
19 i n, and t hat ' s wher e we had t he vent i l at i on syst em. Li ke what
20 he t r i ed t o do was put al l t he comput er s t oget her and l i ke - -
21 and t hen l i ke cool , l i ke t ake t he ai r out f r ombehi nd t he
22 comput er s so t hat i t was l i ke cool i ng t hem. So l i ke you don' t
23 need t hese bi g r acks l i ke st andi ng up l i ke, and t hey have t he
24 scr ews on t he f r ont , t he pi eces sl i de i n so t hat you can l i ke
25 sl i de, t hey' r e ki nd of on l i ke r ai l s so you can l i ke sl i de out
( 212) 805- 0300
1111
1 t he equi pment t o get t o t he wi r es i n t he back and st uf f , and
2 t hen sl i de t he i t back i n, you know. So l i ke i f i t needs t o be
3 mai nt ai ned or what ever , t aken out , i t can be t aken out wi t hout
4 t he whol e t hi ng bei ng t aken apar t .
5 Q. Coul d you descr i be t he comput er s?
6 A. Wel l , I ' mnot a comput er exper t , but t her e wer e a l ot of
7 t hem, you know, and i t was ver y pr of essi onal l ooki ng, you know.
8 I mean, Dr . Kar r on made pl ans l i ke f or how ever yt hi ng was goi ng
9 t o go. And most l y t hey' r e l i ke sor t of l i ke l ong ki nd of t hi n
10 machi nes t hat l i ke sl i de l i ke, t hey l i ke, t hey' r e ki nd of bui l t
11 f or t hese r acks I t hi nk, or t he r acks ar e bui l t f or t hem. But
12 t hey have l i ke a f ace. They' r e qui t e l i ke deep and st uf f and
13 t hey l i ke cl i p t hemont o t hese r unner s and t hey l i ke sl i de i nt o
14 t he r ack, so.
15 Q. And what t i me woul d you gener al l y wor k at t he apar t ment ?
16 A. Ni ne t o f i ve. You know, t he bui l di ngs have codes. You
17 can' t - - you can l i ke - - you have t o abi de by t he bui l di ng' s
18 r ul es, whi ch i s usual l y ni ne t o f i ve.
19 Q. And wer e peopl e wor ki ng whi l e you wer e t her e?
20 A. Yeah.
21 Q. Now, what ot her wor k di d you do; di d you do any ot her wor k
22 i n t he l i vi ng r oom?
23 A. I n t he l i vi ng r oom, yes. What di d we do? Wel l we di d - - I
24 di d t he l i ght syst eml i ke, as I t ol d you about i n t he bedr oom.
25 We had t he l i ght s t hat came down f r omt he cei l i ng. We al so put
( 212) 805- 0300
1112
1 some r acks up. One of t hemhel d l i ke a ai r pur i f i er and
2 t hi ngs. I di d l i ke a l ot of t he, t he st uf f t hat Dr . Kar r on
3 coul dn' t r eal l y do, because i t was physi cal and mor e
4 const r uct i on or i ent at ed l i ke put t i ng t he r ai l s up on t he
5 cei l i ng. You know, you have t o dr i l l wi t h t he, wi t h a concr et e
6 dr i l l and ever yt hi ng, ' cause t he whol e bui l di ng i s concr et e,
7 and st uf f l i ke t hat .
8 But usual l y I was - - I mean, Dr . Kar r on made t he
9 i nst r uct i ons and made t he pl ans of what he needed, and t hen I
10 t r i ed t o accommodat e hi mas best as I coul d.
11 Q. He dr ew t he pl ans f or your - -
12 A. He made t he pl ans - - yeah. He, I mean, he - - I di dn' t
13 desi gn t he st uf f . He desi gned t he st uf f and I was j ust mai nl y
14 i nst al l i ng and, you know, what came up. I ' mnot a comput er
15 desi gner or anyt hi ng.
16 Q. Now, your company, you set a pr i ce i ni t i al l y f or t he j ob?
17 A. Yeah.
18 Q. And what i s t hat ; what di d you char ge?
19 A. I ' msor r y, I can' t r emember l i ke of f hand. I haven' t
20 r eal l y - - I haven' t been - - st udi ed i t , you know, f or comi ng
21 her e. I mean, I do a l ot of j obs. I can' t r emember what
22 ever yt hi ng was. But I mean I - - we bi l l ed - - you know, t her e
23 wer e bi l l s f or ever yt hi ng so t hat I coul d get pai d, and I ' m
24 sur e i t must be al l on r ecor d.
25 Q. And di d you get pai d?
( 212) 805- 0300
1113
1 A. I di d get pai d, yeah.
2 Q. Now - -
3 A. Somet i me.
4 Q. Dr . Kar r on pai d?
5 A. Yeah, I mean or t he - - act ual l y, usual l y I woul d act ual l y
6 get pai d by t he account ant . You know, he woul d have t o cl ear
7 t he check what ever , but he woul d act ual l y wr i t e t he check, t he
8 account ant woul d wr i t e t he check or , you know, maybe someone he
9 was wor ki ng f or , who i s wor ki ng f or hi m. Li ke somet i mes I l i ke
10 coor di nat ed wi t h Mat a l ot . Mat ' s ki nd of l i ke hi s r i ght hand
11 per son, does a l ot of st uf f f or hi m.
12 Q. For Dr . Kar r on?
13 A. Yeah, f or Dr . Kar r on. So I woul d, you know, l i ke - - ' cause
14 Dr . Kar r on was of t en ver y busy. You know of t en l i ke mai nl y I
15 went t hr ough Mat f or t hi ngs, you know.
16 Q. Al l r i ght . Di d you have occasi on t o do any ot her wor k
17 out si de of t he r oomwher e t he comput er was?
18 A. Yeah, we - - I changed t he cabi net i n t he ki t chen and t he
19 si nk cabi net , and t hat was pr et t y much t he onl y t hi ng we di d i n
20 t her e.
21 Q. And di d you char ge separ at el y f or t hat ?
22 A. Dr . Kar r on was ver y i nsi st ent t hat l i ke t hat wor k had t o be
23 pai d by a check f r omhi msel f , whi ch he wr ot e, as opposed t o t he
24 account ant or anybody.
25 Q. And l et me show you - - I show you what ' s mar ked def endant ' s
( 212) 805- 0300
1114
1 MM- 3. I show you what ' s been mar ked f or i dent i f i cat i on as
2 def endant ' s MM- 3 and ask you i f you r ecogni ze what ' s depi ct ed
3 i n t hat exhi bi t ?
4 A. Yes. I t ' s a check t o my company Bat or Bi nt oer .
5 MR. RUBI NSTEI N: We of f er t hat i n evi dence.
7 THE COURT: MM- 3 i s admi t t ed i n evi dence.
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1115
8697KAR6 Mason - di r ect
2 Q. What wor k was per f or med t hat gener at ed t hat bi l l ?
3 A. Thi s i s f or t he cabi net , f or put t i ng t he cabi net i n t he
4 ki t chen.
5 Q. And how much di d you char ge f or t he cabi net i n t he ki t chen?
6 A. $620.
7 MR. RUBI NSTEI N: Let me publ i sh i t t o t he j ur y, your
8 Honor .
9 THE COURT: OK.
10 Q. Let me show you what ' s - - l et me show you t hi s check mar ked
11 MM- 4. And t hat i s a per sonal check f r omDr . Kar r on?
12 A. Yeah, because t he ot her checks say CASI on t hem.
13 Q. Let me show you what ' s been mar ked as MM- 4 and ask you i f
14 you can i dent i f y what ' s been mar ked f or i dent i f i cat i on as MM- 4.
15 A. Yeah, i t ' s a check t o Bat or Bi nt oer f r omComput er Ai ded
16 Sur ger y f or $1766. 66.
17 Q. And t hat was f or wor k done i nsi de t he l i vi ng r oompor t i on
18 t hat you t est i f i ed t o?
19 A. Yes.
20 THE COURT: Ar e you of f er i ng MM- 4 i nt o evi dence?
21 MR. RUBI NSTEI N: Yes, I ' mof f er i ng MM- 4 i nt o evi dence,
22 your Honor .
25 THE COURT: MM- 4 i s admi t t ed i nt o evi dence.
( 212) 805- 0300
1116
2 MR. RUBI NSTEI N: I want t o publ i sh i t t o t he j ur y.
3 THE COURT: I don' t t hi nk anybody can r ead t hat .
4 MR. RUBI NSTEI N: Shoul d I wal k i t ar ound t o t he j ur y?
5 Whi l e t he j ur y i s l ooki ng at t hat , I amgoi ng t o show
6 you what ' s mar ked f or i dent i f i cat i on as Def endant ' s MM- 6.
7 THE COURT: What MM- 5?
8 DEPUTY COURT CLERK: You' r e not usi ng 5?
9 MR. RUBI NSTEI N: That ' s not 5?
10 THE COURT: 5 hasn' t been admi t t ed i nt o evi dence. I f
11 i t ' s 5, you have a pr obl em.
12 MR. RUBI NSTEI N: Ther e i s no 5, J udge.
13 THE COURT: OK.
14 Q. Al l r i ght . Take a l ook at what ' s been mar ked as
15 Def endant ' s MM- 5. Do you r ecogni ze what ' s depi ct ed?
16 A. Yes, i t ' s one of my i nvoi ces.
17 THE COURT: Thi s i s 5 or 6?
19 THE COURT: What you ar e showi ng t he wi t ness i s 5, not
20 6?
22 THE COURT: OK, i t ' s now 5. Pl ease go ahead.
23 A. Yeah, i t ' s pr obabl y one of my f i r st i nvoi ces. I t ' s f or t he
24 pur chase and i nst al l of exhaust syst emf or t he comput er net wor k
25 hub. I t ' s f or $2, 000. I t says 50 per cent deposi t r equi r ed
( 212) 805- 0300
1117
1 bef or e wor k commences.
2 Q. And di d you r ecei ve t hat money?
3 A. I ' msur e I di d, yes.
4 MR. RUBI NSTEI N: We of f er MM- 5 i nt o evi dence.
6 THE COURT: Was t hi s pai d, or $1, 000 pai d?
7 THE WI TNESS: Thi s must have been bef or e I st ar t ed t he
8 wor k. I usual l y get 50 per cent deposi t , or when i t ' s done or
9 di f f er ent st ages I get t he r est of t he money.
10 THE COURT: You di d get pai d on t hi s.
11 THE WI TNESS: Yes. I mean l i ke i n my books.
12 THE COURT: MM- 5 admi t t ed i nt o evi dence.
14 Q. Let me show you what ' s mar ked f or i dent i f i cat i on as MM- 6
15 and MM- 7 and ask you i f you can i dent i f y what ' s depi ct ed i n
16 t hose t wo i t ems, si r .
17 A. OK. MM- 6 i s a t i me sheet f or 21 hour s, I t hi nk, and t hen
18 t he ot her one i s anot her t i me sheet t hat I must have f i l l ed out
19 f or Dr . Kar r on.
20 Q. And t hose ar e t he t i me sheet s you f i l l ed out ?
21 A. Yeah.
22 Q. And how of t en do you f i l l out a t i me sheet f or Dr . Kar r on?
23 A. Ever y week t hat I was wor ki ng t her e.
24 Q. And how of t en woul d you get pai d?
25 A. I can' t r emember exact l y, but I mean I t hi nk l i ke I got
( 212) 805- 0300
1118
1 pai d - - I got pai d as l i ke wor k was compl et ed or wor k was due,
2 you know. He gave me t he money at t he begi nni ng, and I mi ght
3 have got pai d l i ke somet i mes at t he end of t he week t oo. But
4 i t was a l i t t l e conf usi ng because wi t h t he t i me sheet s i t ' s
5 ki nd of l i ke I ' man empl oyee but I wasn' t r eal l y an empl oyee,
6 i t ' s my own busi ness. But , as I sai d, he want ed me t o do t he
7 t i me sheet , so I di d t he t i me sheet s, but I al so bui l t i n f or
8 t he wor k I had done. So I mai nl y went of f my bi l l s f or hi m.
9 THE COURT: Wher e di d you get t he t i me sheet ?
10 THE WI TNESS: Dr . Kar r on pr ovi ded t hem. I don' t
11 usual l y do t i me sheet s f or anybody el se. Usual l y I wr i t e my
12 i nvoi ce and t hen, you know, i f i t get s changed, I get payment s
13 as t he wor k get s done. That ' s nor mal pr ocedur e.
14 Q. Now, t he t i me sheet s, we of f er t hemi n evi dence, your
15 Honor , t he t i me sheet s.
16 MR. KWOK: Can I j ust t ake a l ook?
17 THE COURT: MM- 6 and MM- 7.
19 THE COURT: No obj ect i on, MM- 6 and MM- 7 admi t t ed i nt o
20 evi dence.
21 ( Def endant ' s Exhi bi t MM- 6 and MM- 7 r ecei ved i n
22 evi dence)
23 Q. Do t hose t i me sheet s al so i ndi cat e t he t ype of wor k t hat
24 you di d?
25 A. Yeah, r oughl y l i ke t hey say some t hi ngs.
( 212) 805- 0300
1119
1 Q. Tel l us what number you ar e l ooki ng at .
2 A. Ei t her one. I t says - -
3 Q. Coul d you see t he number on t he l i t t l e st i cker ?
4 A. Yeah. MM- 6, t hi s has t o do wi t h t i me t hat I spent on i t
5 says hot ai r duct dump, but I know t hat means t he vent i l at i on
6 syst emf or t he comput er s.
7 Q. And how much t i me di d you spend on t hat ?
8 A. I spent qui t e a l ot . Thi s one says 21 hour s, but I t hi nk I
9 spent mor e t han t hat . I t was qui t e a compl i cat ed l i t t l e t hi ng,
10 and as I sai d we had t o wor k out t he bugs. As I sai d, usual l y
11 how i t wor ks i s he t el l me what t o do, I do i t , t hen he t el l s
12 me what he di dn' t l i ke about i t , and t hen I woul d have t o f i x
13 what ever he di dn' t l i ke about i t .
14 Q. Wer e you wor ki ng al one or wi t h ot her peopl e?
15 A. Wel l , I wor ked al one f or my company, but l i ke when we
16 di d - - when I wor ked on t he comput er r acks and st uf f , he had
17 some, I t hi nk t hey wer e l i ke st udent s, but he of t en had l i ke
18 peopl e come i n, hel pi ng comput er guys hel pi ng hi mwi t h t he
19 comput er st uf f , l i ke st udent s or somet hi ng.
20 Li ke when we di d t he r acks, l i ke I had somebody hel p
21 me as I ' mnot par t i cul ar l y t hat knowl edgeabl e on t he comput er
22 si de. You know, my si de was mor e l i ke bui l di ng t he r acks and
23 maki ng ever yt hi ng, so he had someone el se t her e who was l i ke
24 hooki ng up t he comput er s t o see i f t hey wor ked, and l i ke
25 r unni ng al l t he wi r es, and I woul d l i ke t r i p up t he wi r es or
( 212) 805- 0300
1120
1 st uf f . But l i ke I di dn' t know how t o hook up t he comput er s or
2 anyt hi ng. He had somebody el se doi ng t hat st uf f .
3 Ther e wer e al ways a coupl e of peopl e. Mat t was al ways
4 t her e wor ki ng, and t her e wer e a coupl e of ot her peopl e usual l y
5 wor ki ng on t he comput er s. And t hen l i ke he woul d have l i ke
6 st udent guys l i ke t her e, and t hey woul d ei t her be wor ki ng on
7 st uf f f or t he comput er f or hi m, or somet i mes t hey woul d l i ke
8 hel p me and st uf f .
9 Q. Di d you pay t hem, t he ones t hat hel ped you?
10 A. Sor r y?
11 Q. Di d you pay t hem?
12 A. No, I di dn' t pay t hem.
13 Q. I amgoi ng t o show you what ' s mar ked as - - do you r ecal l
14 whet her or not t he checks - - t he col or of t he checks you
15 r ecei ved?
16 A. Wer e t he same? You mean l i ke hi s check and t he ot her
17 check?
18 Q. Cor r ect .
19 A. No, I t hi nk t hey wer e di f f er ent . I mean I can' t r emember .
20 I t hi nk t he Comput er Ai ded Sur ger y ones wer e al l pi nk. I t was
21 a l i t t l e whi l e ago, and I t hi nk - -
22 Q. Let me show you what ' s MM- 8 f or i dent i f i cat i on. Do you
23 r ecogni ze what ' s cont ai ned t her e?
24 A. Yeah, i t ' s a check f r omComput er Ai ded Sur ger y t o Bat or
25 Bi nt oer f or $1, 082.
( 212) 805- 0300
1121
1 THE COURT: 8 hasn' t been admi t t ed i n evi dence.
2 MR. RUBI NSTEI N: No, I ' mof f er i ng i t i n evi dence.
4 THE COURT: Al l r i ght . 8 i s i n evi dence.
6 Q. Now you can di scuss i t .
7 A. Yeah, i t ' s a check wr i t t en t o my company f r omComput er
8 Ai ded Sur ger y f or $1, 082. 67.
9 Q. I show you what ' s Exhi bi t MM- 9 and ask you i f you coul d - -
10 i f you r ecogni ze what i s cont ai ned i n t hat exhi bi t .
11 A. Yeah, MM- 9 i s anot her check t o Bat or Bi nt oer but t hi s one
12 i s f r omDr . Kar r on f or $200.
13 Q. Do you know what you di d f or t hat $200?
14 A. Pr obabl y t hat was st i l l somet hi ng t o do wi t h doi ng t he
15 cabi net i n t he ki t chen. You know, t hat maybe t hat came l at er
16 because I had t o hook up hi s wat er f i l t r at i on syst em.
17 THE COURT: You had t o do what ?
18 THE WI TNESS: I t was l i ke i n t he cabi net . He had l i ke
19 a wat er f i l t r at i on syst em, and when I put i t back I t hi nk I had
20 t o char ge ext r a because i t was qui t e compl i cat ed t o put i t
21 back.
22 Q. Now, do you r ecal l when you f i ni shed doi ng wor k f or Dr .
23 Kar r on?
24 A. I ' mnot t he gr eat est at dat es, but as I sai d I t hi nk t he
25 whol e t hi ng went on a coupl e of mont hs.
( 212) 805- 0300
1122
1 Q. And when you f i ni shed your j ob, wer e you owed money?
2 A. I pr obabl y was owed a l i t t l e bi t of money. I can' t
3 r emember exact l y, but usual l y, you know, i t al ways t akes a
4 l i t t l e t i me t o get pai d. I never got pai d f r omanybody
5 st r ai ght away, but Dr . Kar r on was pr et t y good. I mean I got - -
6 THE COURT: Let ' s j ust answer yes or no i f you can.
7 THE WI TNESS: OK, sor r y.
8 A. I n my books I ' mf ul l y pai d by Dr . Kar r on. He never r eal l y
9 owed me any money over a l ong per i od of t i me or anyt hi ng.
10 Q. Ther e ar e checks and i nvoi ces f or any wor k you di d f or Dr .
11 Kar r on, i s t hat cor r ect ?
12 A. Yes.
13 Q. OK. I amgoi ng t o show you - - t hi s i s t he l ast one I ' m
14 goi ng t o show you. I t ' s Def endant ' s NN- 1 and NN- 2. Sor r y.
15 Ther e ar e t hr ee exhi bi t s. Ther e i s NN, NN- 1 and NN- 2. I show
16 you t hese exhi bi t s and ask you i f you r ecogni ze t hese t hr ee
17 exhi bi t s, si r .
18 A. Yeah, i t ' s a check made t o Bat or Bi nt oer f or - -
19 Q. Don' t di scuss i t . I t ' s not i n evi dence yet .
20 THE COURT: Do you r emember each of t hese checks?
22 A. Yeah, I t hi nk so. I don' t know. Thi s one i s f r omCASI LLC
23 whi ch mai nl y I r emember t hembei ng CASI . But maybe t hi s was
24 one of t he f i r st ones. I ' mnot sur e. But , yeah, i t ' s a check
25 made t o me.
( 212) 805- 0300
1123
1 Q. Take a l ook at NN- 1. Do you r ecogni ze what t hat i s?
2 A. Yeah, i t ' s one of my i nvoi ces.
3 Q. Take a l ook at NN- 2.
4 A. OK. Yeah, t hi s i s anot her one of my i nvoi ces.
5 Q. And we of f er NN, NN- 1 and NN- 2 i nt o evi dence.
7 THE COURT: No obj ect i on. Recei ved.
8 ( Def endant ' s Exhi bi t s NN, NN- 1 and NN- 2 r ecei ved i n
9 evi dence)
10 Q. Now, t hose t hr ee exhi bi t s, t he NN exhi bi t s, do t hey r el at e
11 t o one par t i cul ar epi sode, i n ot her wor ds, t he wor k, t he check
12 and what have you?
13 A. Yes. I woul d say t hese al l r el at e t o wor ki ng on t he
14 exhaust syst em, because I can see t he machi ne shop f or t he
15 handl es, whi ch I r emember happeni ng.
16 Q. Now, does i t show t he dat e t he wor k was done on your
17 i nvoi ce?
18 A. Yes.
19 Q. What dat e was t he wor k - - t el l us what exhi bi t you ar e
20 l ooki ng at .
21 A. I aml ooki ng at NN- 2.
22 THE COURT: As i n Nancy.
23 MR. RUBI NSTEI N: Named f or my wi f e. We had an
24 anni ver sar y l ast week.
25 A. Yeah, t o 6/ 20, 6/ 27 and 7/ 04 t he week af t er t hat .
( 212) 805- 0300
1124
1 Q. What year ?
2 A. ' 03.
3 Q. What wer e you pai d?
4 A. 8 17 03.
5 Q. And how much wer e you pai d?
6 A. 2, 600.
7 MR. RUBI NSTEI N: I have no ot her quest i ons.
9 BY MR. KWOK:
10 Q. Good af t er noon, Mr . Mason.
12 Q. You sai d you got pai d f or your wor k?
13 A. I di d.
14 Q. You al so t est i f i ed a moment ago you got checks bot h f r om
15 Dr . Kar r on per sonal l y and f r omCASI , i s t hat r i ght ?
17 Q. Wi t h r espect t o t he CASI checks, you di dn' t know wher e t hat
18 money came f r om, di d you?
19 A. No. I mean what do you mean do I know wher e t hat money
20 came f r om?
21 Q. Al l you knew i s i t came f r omCASI . You don' t know wher e i t
22 came f r omear l i er .
23 A. No.
24 Q. Woul d you br i ng your own t ool s when you went t o Dr .
25 Kar r on' s pl ace?
( 212) 805- 0300
1125
8697KAR6 Mason - cr oss
1 A. Absol ut el y.
2 Q. Di d you go t o a har dwar e st or e t o buy addi t i onal i t ems t hat
3 you needed?
4 A. I di d.
5 Q. Di d you go t o a pl ace cal l ed Homef r ont Har dwar e St or e?
6 A. Of t en.
7 Q. Di d you go t o t hat st or e f or t hi s pr oj ect ?
8 A. I di d, yes.
9 Q. Di d you go t her e on or about J une 16, 2003?
10 A. Qui t e possi bl y.
11 Q. Do you r emember buyi ng somet hi ng cal l ed Combat Roach Gel
12 Bai t at t hat har dwar e?
13 A. Combat Roach Gel Bai t ? I s t hat l i ke r oach, ant i r oach
14 t hi ngs?
15 Q. Coul d I show you somet hi ng t hat woul d r ef r esh your
17 A. Yeah.
18 Q. I amshowi ng hi m, your Honor , Gover nment Exhi bi t 101, page
19 20 of 21.
20 A. I t says my name.
21 Q. Does t hat r ef r esh your r ecol l ect i on why you bought Combat
22 Roach Gel Bai t s on J une 16, 2003?
23 A. I woul d i magi ne I put t hemi n t he ki t chen cabi net because
24 t her e wer e pr obabl y r oaches.
25 Q. For t hi s pr oj ect , f or t he def endant ?
( 212) 805- 0300
1126
1 A. Yeah.
2 Q. Do you know how t hat was pai d f or , t he i t ems t hat you
3 bought f r omt he har dwar e st or e?
4 A. I pr esume - - l et me t hi nk. How was t hat pai d f or ?
5 Somet i mes I had t o pay f or i t mysel f , dependi ng - - i t was
6 al ways a l i t t l e awkwar d. He had an account t her e, but he
7 di dn' t al ways pay up wi t h hi s account , so somet i mes I went
8 t her e and t hey woul dn' t l et me put st uf f on t he account , so
9 t hen I woul d j ust have t o pay cash, whi ch i f i t was a l i t t l e
10 amount I woul d do. Ot her t han t hat , l i ke most l y l i ke i f t he
11 account was open I coul d put i t on t he account .
12 Q. For t he i t ems t hat you put on t he account , as you sai d, do
13 you know how t hose event ual l y got pai d f or ?
14 A. No.
15 Q. You don' t know what money went t o pay f or t hose i t ems?
16 A. No.
17 Q. Ar e you f ami l i ar wi t h a pr ogr amcal l ed Advanced Technol ogy
18 Pr ogr am, Mr . Mason?
19 A. Sor r y?
20 Q. The Advanced Technol ogy Pr ogr am, ATP?
21 A. No.
22 Q. Di d you at any t i me have any knowl edge about t he i nt er nal
23 f i nanci al si t uat i on of t he def endant ' s company, CASI ?
24 A. No.
25 MR. KWOK: No f ur t her quest i ons f or t hi s wi t ness.
( 212) 805- 0300
1127
1 THE COURT: Mr . Rubi nst ei n? Any r edi r ect ?
2 MR. RUBI NSTEI N: J ust one second, your Honor .
5 Q. How much was spent on t he Combat Roach pur chase at t he home
6 f r ont har dwar e?
7 A. Wel l , I don' t know exact l y, but t hey' r e not ver y expensi ve,
8 a f ew dol l ar s. I mean i t ' s r oach t r aps.
9 Q. And do you have t he i nvoi ce i n f r ont of you t her e?
10 A. I don' t . I t hi nk t hey t ook i t back.
11 THE COURT: I t ' s j ust shown t o hi mt o r ef r esh hi s
13 MR. KWOK: That ' s r i ght .
14 THE COURT: I t doesn' t have an exhi bi t number . I t
15 shoul d be mar ked act ual l y. You shoul d mar k i t as an exhi bi t .
16 A. I t says 9. 99.
17 Q. I s t hat $999?
18 A. No, $9. 99.
19 Q. Thank you.
20 A. I t ' s r oach t hi ngs, you know.
22 THE COURT: Al l r i ght . Al l done wi t h t hi s wi t ness?
23 You ar e excused. I ' mgoi ng t o excuse t he j ur y f i r st unt i l 9: 30
24 t omor r ow mor ni ng. I hope i t ' s not t oo hot out t her e. Maybe
25 you want t o st ay.
( 212) 805- 0300
1128
8697KAR6 Mason - r edi r ect
2 THE COURT: Al l r i ght . You may st ep down.
4 THE COURT: What do we have f or wi t nesses t omor r ow?
5 MR. RUBI NSTEI N: Wel l , we sent t he i nsur ance man home,
6 and we sent Ms. LeCl er c, t ol d her she i s not t est i f yi ng, so we
7 have t omor r ow char act er wi t nesses, Mr . Cox and pot ent i al l y t he
8 def endant . I t hi nk we shoul d be f i ni shed t omor r ow, J udge.
9 THE COURT: Oh, r eal l y? OK. And t he r ebut t al ? Ar e
10 you goi ng t o have any r ebut t al , do you t hi nk?
11 MR. EVERDELL: At t hi s poi nt , your Honor , I don' t
12 t hi nk we cont empl at e anyt hi ng.
13 THE COURT: Shoul d we have a char gi ng conf er ence
14 t omor r ow ni ght ?
16 MR. KWOK: Yes.
18 THE COURT: OK. Thank you ver y much t hen. Not hi ng
19 el se t o t ake up.
23
24
25
( 212) 805- 0300
1129
3 ROBERT BENEDI CT
6 ROBERT BENEDI CT
9 WI LLI AM NI COLAI
10 Di r ect By Mr . Rubi nst ei n . . . . . . . . . . 1096
11 Cr oss By Mr . Kwok . . . . . . . . . . . . . 1101
12 J ONATHAN MASON
14 Cr oss By Mr . Kwok . . . . . . . . . . . . . 1124
15 Redi r ect By Mr . Rubi nst ei n . . . . . . . . . 1127
18 901, 1000 and 1000A . . . . . . . . . . . 1082
21 U . . . . . . . . . . . . . . . . . . . . 1032
22 OO . . . . . . . . . . . . . . . . . . . 1050
23 T . . . . . . . . . . . . . . . . . . . . 1074
24 MM . . . . . . . . . . . . . . . . . . . 1107
25 MM- 1 . . . . . . . . . . . . . . . . . . 1108
( 212) 805- 0300
1130
1 MM- 2 . . . . . . . . . . . . . . . . . . 1110
2 MM- 3 . . . . . . . . . . . . . . . . . . 1114
3 MM- 4 . . . . . . . . . . . . . . . . . . 1116
4 MM- 5 . . . . . . . . . . . . . . . . . . 1117
5 MM- 6 and MM- 7 . . . . . . . . . . . . . . 1118
6 MM- 8 . . . . . . . . . . . . . . . . . . 1121
7 NN, NN- 1 and NN- 2 . . . . . . . . . . . . 1123
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1131
86A7KAR1
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3
4 v. S2 07 CR 541 ( RPP)
4
5
6 Def endant .
6
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
7
8
8 J une 10, 2008
9 9: 30 a. m.
9
10
10 Bef or e:
11
12
13
13
14 APPEARANCES
14
16 BY: STEVEN KWOK
18
20
22
23
24
25
( 212) 805- 0300
1132
86A7KAR1
2 MR. RUBI NSTEI N: I do have an obj ect i on t o your
3 Honor ' s suggest i on yest er day as t o your pr oposed char ge.
4 THE COURT: I wi l l have t he pr oposed char ge f or you i n
5 t en mi nut es. I don' t know what I suggest ed yest er day.
6 MR. RUBI NSTEI N: Yest er day you sai d i n subst ance t he
7 way you r ead t he st at ut e t he " wi t hout aut hor i t y" phr ase appl i es
8 t o bot h t he mi sappl i cat i on of f unds as wel l as t he conver si on
9 of f unds.
10 THE COURT: I t hought t he gover nment was goi ng t o
11 obj ect t o t hat , not you.
12 MR. RUBI NSTEI N: Wel l , I t hi nk your Honor i s act ual l y
13 amendi ng t he i ndi ct ment , because t he gover nment opened and
14 t hei r t heor y i s mi sappl yi ng gover nment gr ant f unds, and t hat
15 shoul d be t he basi s of t he char ge, and not t o i ncl ude any ot her
16 l anguage t hat mi ght br oaden t hat concept . And I ci t e - -
17 THE COURT: That ' s t he whol e poi nt of t he " wi t hout
18 aut hor i t y" . Af t er al l , he coul d gi ve hi msel f aut hor i t y t o do
19 anyt hi ng wi t h CASI ' s f unds. That ' s t he whol e poi nt .
20 MR. RUBI NSTEI N: I t ' s not di r ect l y on poi nt , your
21 Honor , but i t does r ai se t he i ssue f r omt he Second Ci r cui t ,
22 U. S. v. Zvi .
23 THE COURT: Wel l , l et me see i t . Let me see t he case.
24 I don' t know t hi s case. U. S. v. what ?
25 MR. RUBI NSTEI N: Zvi . I have a copy wi t hout t he f i r st
( 212) 805- 0300
1133
86A7KAR1
1 page. I wi l l gi ve you t he f i r st page, J udge. Her e i s a copy
2 of t he - -
3 THE COURT: What year was t hi s?
4 MR. RUBI NSTEI N: 1999, J udge Wal ker .
5 THE COURT: I t was not ci t ed t o me. We wi l l have t he
6 char gi ng conf er ence. I wi l l t ake i t i nt o account t hen.
7 MR. RUBI NSTEI N: But I t hi nk, J udge, of f t he r ecor d - -
8 THE COURT: Oh, I see. Zvi . Thi s i s f i l i ng f al se
9 i ncome t ax r et ur ns.
10 MR. RUBI NSTEI N: I know, but t her e i s l anguage about
11 const r uct i ve amendi ng of t he i ndi ct ment .
12 THE COURT: Oh, t he i ndi ct ment i sn' t amended; t he
13 i ndi ct ment i s r i ght t her e. You l ook at t he i ndi ct ment . I
14 l ooked at i t over t he weekend. I t ' s got t he wor ds of t he
15 st at ut e r i ght i n i t , and i t quot es t he wor ds of t he st at ut e.
16 We wi l l t ake i t up i n t he char gi ng conf er ence.
17 MR. RUBI NSTEI N: Al so, j udge t her e i s a case of U. S.
18 v. Mi l l st ei n t hat I wi l l gi ve t o t he cour t .
19 THE COURT: Mi l l st ei n Br ot her s? The f or mer r eal
20 est at e magnat es?
21 MR. RUBI NSTEI N: I don' t know about t hat , J udge.
22 THE COURT: You must have hear d of Mi l l st ei n.
23 MR. RUBI NSTEI N: Of cour se I ' ve hear d of Mi l l st ei n.
24 THE COURT: I don' t t hi nk t hat was t hi s t ype of case,
25 but I wi l l l ook at any case you' ve got .
( 212) 805- 0300
1134
86A7KAR1
1 MR. RUBI NSTEI N: Thank you, J udge. I wi l l hand up
2 t he - -
3 THE COURT: How ar e we doi ng on t he j ur y, Rober t ?
4 DEPUTY COURT CLERK: I t hi nk we' r e good.
5 MR. RUBI NSTEI N: J udge, we' r e not good.
6 DEPUTY COURT CLERK: We have t he 14.
7 THE COURT: Wher e i s your cl i ent ? Cal l t he cl i ent .
9 THE COURT: He' s asl eep agai n?
10 OK. Her e he i s.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1135
86A7KAR1
2 THE COURT: Good mor ni ng. Pl ease be seat ed. Ladi es
3 and gent l emen, Ms. Br own cal l ed i n, and her knee was swol l en up
4 so she was unabl e t o wal k, so I gat her she i s al l r i ght but
5 i t ' s somet hi ng t hat she has t o t ake car e of . Accor di ngl y, I
6 wi l l ask Mr . Br acer o t o t ake Ms. Br own' s seat as J ur or 12.
7 I don' t t hi nk t her e i s anyt hi ng el se t o say bef or e we
8 st ar t t he mor ni ng. So, Mr . Rubi nst ei n, your next wi t ness.
9 MR. RUBI NSTEI N: Yes. Def ense cal l s Dr . Edgar Coons.
10 EDGAR E. COONS,
13 DEPUTY COURT CLERK: Pl ease st at e your name and spel l
14 your l ast name sl owl y.
15 THE WI TNESS: My name i s Edgar E. Coons. My l ast name
16 i s spel l ed C- O- O- N- S. And I ami nf or mal l y known as Ted. I ' ma
17 pr of essor at NYU.
20 Q. Good mor ni ng, Dr . Coons. You say t hat you ar e a pr of essor
21 at NYU. How l ong have you been af f i l i at ed wi t h New Yor k
22 Uni ver si t y, si r ?
23 A. Si nce Febr uar y 1965.
24 Q. And i s t hat cont i nuous?
25 A. Yes.
( 212) 805- 0300
1136
86A7KAR1 Coons - di r ect
1 Q. And what i s your academi c backgr ound, si r ?
2 A. Wel l , as an under gr aduat e I gr aduat ed f r omCol or ado
3 Col l ege. I got my Ph. D. at Yal e i n physi ol ogi cal psychol ogy.
4 Q. And what year was t hat t hat you r ecei ved your Ph. D. ?
5 A. 1964.
6 Q. And ar e you a f ul l pr of essor at NYU?
7 A. I ama f ul l pr of essor , yes.
8 Q. And what depar t ment ar e you i n?
9 A. I ' mi n psychol ogy, and I have a j oi nt appoi nt ment i n t he
10 Depar t ment of Psychol ogy and Cent er f or Neur osci ence.
11 Q. What i s neur osci ence, si r ?
12 A. Wel l , i t ' s t he st udy of t he ner vous syst em, pr i mar i l y t he
13 br ai n and i n my vi ew i t s r el at i onshi p t o behavi or .
14 Q. And do you know Dr . Kar r on?
15 A. I do i ndeed.
16 Q. Do you see hi mi n t he cour t r oom?
17 A. I do.
18 Q. And how l ong do you know Dr . Kar r on?
19 A. Wel l , I have known hi msi nce at l east 1975.
20 Q. And how di d you come t o know hi m?
21 A. He was an under gr aduat e who t ook some cour ses wi t h me t o
22 begi n wi t h, and ver y br i ght , and I adopt ed hi mi nt o my
23 l abor at or y as a r esear ch assi st ant .
24 Q. Resear chi ng what , si r ?
25 A. Wel l , we wer e l ooki ng at t he r el at i onshi p bet ween some
( 212) 805- 0300
1137
1 appet i t e suppr essant s and t hei r addi ct i veness. What we f ound
2 was t hat t hey cer t ai nl y suppr essed appet i t e but wer e not
3 addi ct i ve.
4 Q. And di d you cont i nue your r el at i onshi p wi t h Dr . Kar r on?
5 A. Wel l , I ' ve known hi mever si nce. And of cour se he went on
6 and got hi s own degr ee, event ual l y a Ph. D. i n appl i ed sci ence
7 at NYU. Beyond t hat , I know hi mcasual l y, qui t e f r equent l y, I
8 woul d say sever al t i mes a year .
9 Q. And di d you have any i nvol vement wi t h Dr . Kar r on i n hi s
10 quest f or a Ph. D. ?
11 A. Wel l , I was on hi s r eader s commi t t ee.
12 Q. What i s a r eader s commi t t ee?
13 A. Wel l , when you do a Ph. D. you have a commi t t ee, we cal l an
14 advi sor s commi t t ee, whi ch gi ves you advi ce al l dur i ng t he
15 cour se of your r esear ch. When you f i nal l y have concl uded i t
16 and wr i t t en i t up and ar e st andi ng f or or al s, t hey cal l i n a
17 f ew ot her peopl e t hat have not been di r ect l y i nvol ved i n t hat
18 r esear ch, t o r ead t he t hesi s and t o hel p exami ne t he candi dat e
19 i n an or al exami nat i on over t he t hesi s. And so I was one of
20 t hose peopl e.
21 Q. And ar e you f ami l i ar wi t h any of t he pr oj ect s t hat Dr .
22 Kar r on has wor ked on?
23 A. Wel l , sor t of , ki nd of bet ween vaguel y and yes.
24 Q. And do you know hi mon a soci al l evel ?
25 A. We' r e f r i ends. Yes, I woul d say so.
( 212) 805- 0300
1138
1 Q. And do you have an opi ni on as t o hi s honest y and
2 t r ut hf ul ness?
3 A. I absol ut el y consi der hi mt o be a ver y f ai r and honest man.
4 Q. Have you ever had occasi on t o have f i nanci al deal i ngs wi t h
5 Dr . Kar r on?
6 A. Yes. I woul d say back i n t he mi d- ' 90s he had some pr obl em
7 meet i ng payr ol l deadl i ne and - -
9 THE COURT: Obj ect i on sust ai ned. I t doesn' t r equi r e
10 an expl anat i on, t he quest i on. I t went beyond t he quest i on.
11 A. I l oaned hi m$10, 000.
12 Q. And was t hat ever r epai d?
13 A. Yes.
14 Q. Was t her e any quest i on i n your mi nd t hat i t woul d be
15 r epai d?
16 A. No pr obl em.
18 THE COURT: Cr oss- exami nat i on.
20 BY MR. EVERDELL:
21 Q. Good mor ni ng, Dr . Coons.
22 A. Hel l o.
23 Q. You t est i f i ed t hat you f i r st got t o know t he def endant I
24 bel i eve when he was a st udent of your s.
( 212) 805- 0300
1139
86a7kar 1 Coons - cr oss
1 Q. And t hat he was i n your r esear ch l abor at or y?
3 Q. About how l ong ago was t hat cont act wi t h t he def endant ?
4 A. Wel l , t hat woul d be about 1970, I woul d say about 1977,
5 ' 78, ' 79, i n t hat per i od.
6 Q. So, 30 year s ago.
7 A. 30 year s ago, yes.
8 Q. And si nce t hen you have had casual cont act wi t h t he
9 def endant ?
10 A. Casual except i n t he sense t hat we j ust sai d, t hat I had t o
11 r ead hi s t hesi s.
12 Q. Ri ght . So casual meani ng a coupl e t i mes a year ?
13 A. Mor e t han t hat pr obabl y.
14 Q. Wel l , Dr . Coons, ar e you f ami l i ar wi t h somet hi ng cal l ed t he
15 Advanced Technol ogy gr ant or ATP gr ant ?
16 A. I don' t t hi nk I am. I don' t know i t by t hat name i f I do.
17 Q. Wel l , you ar e not f ami l i ar , ar e you, wi t h t he r ul es t hat
18 gover n t he ATP gr ant , ar e you?
19 A. No.
20 Q. And you never wor ked at t he def endant ' s company CASI , di d
21 you?
22 A. No.
23 Q. And you never handl ed t he f i nances f or CASI , r i ght ?
24 A. No.
25 Q. So, you don' t have any knowl edge of what happened at CASI
( 212) 805- 0300
1140
86a7kar 1 Coons - cr oss
1 bet ween 2000 and 2003, do you?
2 A. I have no knowl edge.
3 Q. Dr . Coons, you al so sai d t hat t he def endant i s a f r i end of
4 your s, r i ght ?
5 A. Yes, I woul d say so.
6 Q. And you woul dn' t want anyt hi ng bad t o happen t o your
7 f r i end, r i ght ?
8 A. I woul d not want t o have anyt hi ng bad happen t o my f r i end.
9 MR. EVERDELL: Al l r i ght . No f ur t her quest i ons, your
10 Honor .
11 MR. RUBI NSTEI N: No quest i ons, your Honor .
12 THE COURT: Al l r i ght . Mr . Coons, you may st ep down.
15 MR. RUBI NSTEI N: He wi l l be r i ght i n, your Honor .
16 THEODORE W. LESLI E,
19 DEPUTY COURT CLERK: Pl ease st at e your name and spel l
20 your l ast name sl owl y f or t he r ecor d, pl ease.
21 THE WI TNESS: Theodor e W. Lesl i e, L- E- S- L- I - E.
24 Q. Good mor ni ng, Mr . Lesl i e.
25 A. Good mor ni ng, si r .
( 212) 805- 0300
1141

1 Q. What i s your busi ness or occupat i on?
2 A. I amr et i r ed.
3 Q. And how l ong have you been r et i r ed?
4 A. Si nce 1990.
5 Q. And what di d you do bef or e you r et i r ed?
6 A. I pr ogr ammed.
7 Q. What ' s your educat i onal backgr ound, si r ?
8 A. I have t wo degr ees, one i n musi col ogy and t he ot her i n
9 mat hemat i cs.
10 Q. And when you gr aduat ed f r omcol l ege what di d you do?
11 A. I t ' s act ual l y somewhat compl i cat ed. When I f i ni shed, I
12 went i nt o t he Ar my f or t wo year s. Then I went back and
13 compl et ed. I had t o pl ay a seni or r eci t al . I di d t hat , and I
14 got t he degr ee. Then I st udi ed gr aduat e wor k and musi col ogy
15 f or a whi l e.
16 Then I wor ked f or t he Soci al Secur i t y Admi ni st r at i on
17 f or a whi l e, and t he I RS f or a whi l e. Then I r et ur ned t o
18 school , got t he degr ee i n mat hemat i cs. Then on t he spur of t he
19 moment I went t o wor k f or I BM wher e I r emai ned f or 24 year s and
20 seven mont hs.
21 Q. And at I BM i n what capaci t y di d you wor k?
22 A. Most l y pr ogr ammi ng, some managi ng.
23 Q. Di d you have a backgr ound i n pr ogr ammi ng when you went t o
24 wor k f or I BM?
25 A. No. At t hat t i me I BM t aught pr ogr ammi ng.
( 212) 805- 0300
1142

1 Q. To t hei r empl oyees?
2 A. Yes, t o peopl e who came on as woul d- be pr ogr ammer s.
3 THE COURT: What year s ar e we t al ki ng about ?
4 THE WI TNESS: ' 65.
5 Q. Fr om1965 t o 1990?
6 A. That ' s r i ght .
7 Q. And you r et i r ed i n 1990?
9 Q. And have you had any gai nf ul empl oyment si nce 1990?
10 A. I have occupi ed mysel f wi t h t he st udy of mol ecul ar and cel l
11 bi ol ogy.
12 Q. Now at I BM as an empl oyee do you have a pensi on pl an?
13 A. Yes.
14 Q. Do you have st ock i n I BM?
15 A. Yes.
16 Q. As an empl oyee?
17 A. Yes. I haven' t st ar t ed t o st ar ve yet .
18 Q. How many mor e cent ur i es coul d you sur vi ve on your pensi on
19 f r omI BM?
20 A. One never knows.
21 Q. Now, di d t her e come a t i me t hat you met Dr . Kar r on?
22 A. Yeah.
23 Q. How - - di d you see hi mi n cour t ?
24 A. Yes, of cour se.
25 Q. I ndi cat i ng t he def endant , your Honor .
( 212) 805- 0300
1143

1 THE COURT: Yes. The wi t ness has i dent i f i ed t he
2 def endant .
4 Q. And how di d you come t o meet Dr . Kar r on?
5 A. I audi t cour ses, and so - -
6 Q. Expl ai n t o t he j ur y what audi t i ng cour ses means.
7 A. You t ake a cour se, and you do ever yt hi ng t hat ' s r equi r ed,
8 and you don' t get cr edi t f or i t . And you can do t hi s i f you
9 ar e r et i r ed. So, t her e was a cour se t hat appear ed t o be
10 i nt er est i ng t o me. And i t was pr obabl y - - t hough I can' t t el l
11 you speci f i cal l y - - i t was pr obabl y comput er s and bi ol ogy.
12 Q. And wher e was i t ?
13 A. At CCNY. And I sat i n on t he cour se.
14 Q. And who t aught t he cour se?
16 Q. Appr oxi mat el y how many st udent s wer e t her e?
17 A. Per haps 30.
18 Q. And di d you have occasi on whi l e you wer e i n t hat cour se t o
19 devel op a r el at i onshi p wi t h Dr . Kar r on?
20 A. I t hi nk we must have t al ked a l i t t l e bi t , but af t er t hat I
21 t hi nk wi t h some ot her member s of t he f acul t y we woul d have
22 cof f ee ei t her bef or e or af t er , and I got t o know hi msomehow or
23 t he ot her .
24 THE COURT: Can we have a dat e, Mr . Rubi nst ei n?
25 Q. Appr oxi mat el y when woul d you say t hat you f i r st met Dr .
( 212) 805- 0300
1144

1 Kar r on?
2 A. 2002, maybe somet hi ng l i ke t hat . Not a l ong t i me but not
3 an i nsi gni f i cant t i me.
4 Q. Now, si nce t hat t i me t hat you met hi mi n 2002 have you had
5 cont act wi t h hi m?
6 A. Yes. I woul d say we get t oget her maybe once a mont h or so.
7 Q. And have you f or med an opi ni on as t o hi s honest y and
8 t r ut hf ul ness?
9 A. I cannot i magi ne anybody mor e honest or mor e
10 st r ai ght f or war d.
14 BY MR. KWOK:
15 Q. Good mor ni ng.
17 Q. You j ust ment i oned a moment ago t hat you r et i r ed i n 1990,
19 A. Yes.
20 Q. So t hat means you haven' t been wor ki ng si nce t hat t i me.
21 A. You mean I haven' t been ear ni ng money si nce t hat t i me.
22 Q. That ' s r i ght .
24 Q. So you never wor ked i n t he def endant ' s company ar ound t he
25 t i me - -
( 212) 805- 0300
1145
86A7KAR1 Lesl i e - cr oss
1 A. No, no, no.
2 Q. - - 2000 t o 2003?
3 A. No, I never wor ked f or hi mat al l .
4 Q. You know not hi ng about t he def endant ' s company CASI ?
5 A. No.
6 Q. And you have no knowl edge about how CASI got i t s money,
7 r i ght ?
8 A. No.
9 Q. Si mi l ar l y, you have no i dea how CASI spent i t s money.
10 A. No.
11 Q. Ar e you f ami l i ar wi t h a pr ogr amcal l ed Advanced Technol ogy
12 Pr ogr amgr ant ?
13 A. Yest er day by mi st ake I sat i n, so t her e i s some hazy
14 knowl edge of t hi s, but t o say t hat I under st and i t , no.
15 Q. Asi de f r omyest er day?
16 A. Oh, no, not at al l .
18 MR. RUBI NSTEI N: No quest i ons, your Honor .
19 THE COURT: Not hi ng f ur t her ?
20 MR. RUBI NSTEI N: No. Coul d I st ep out and see i f my
21 next wi t ness i s her e?
22 THE COURT: The wi t ness i s excused.
24
25 MI CHAEL R. TREAT,
( 212) 805- 0300
1146
86A7KAR1 Lesl i e - cr oss
3 DEPUTY COURT CLERK: Pl ease st at e your name f or t he
4 r ecor d and spel l your l ast name sl owl y.
5 THE WI TNESS: My name i s Mi chael R. Tr eat , T- R- E- A- T.
8 Q. Good mor ni ng, Dr . Tr eat .
10 Q. Now, what i s your busi ness or pr of essi on, si r ?
11 A. I ' ma gener al sur geon. I have been a gener al sur geon f or
12 many year s, al t hough I ' mnot pr act i ci ng sur ger y cur r ent l y. I
13 al so have a company t hat ' s pr oduci ng a r obot i c sur gi cal devi ce.
14 Q. And how l ong have you had t hat company?
15 A. The company was f ounded i n 2002, I t hi nk Mar ch of 2002.
16 Q. And have you - - wel l , wi t hdr awn.
17 Do you t each?
18 A. Wel l , I t aught on a r egul ar basi s when I was pr act i ci ng
19 gener al sur ger y. I wor ked at Col umbi a Uni ver si t y f or t hat
20 t i me.
21 Q. And how l ong di d you t each at Col umbi a Uni ver si t y?
22 A. Wel l , I guess I got my 25 year pi n j ust l ast week, so I
23 guess I have been t her e ar ound 25 year s as f acul t y basi cal l y.
24 THE COURT: Col l ege of Physi ci ans and Sur geons?
( 212) 805- 0300
1147
86A7KAR1 Tr eat - di r ect
1 THE COURT: Up at Col umbi a Pr esbyt er i an?
2 THE WI TNESS: Yes. I t used t o be cal l ed Col umbi a
3 Pr esbyt er i an; now i t ' s New Yor k Pr esbyt er i an, but i t ' s t he
4 hospi t al af f i l i at ed wi t h Col umbi a Uni ver si t y.
5 Q. And t he name of your company i s Robot i c Syst ems and
6 Technol ogy, I nc. ?
7 A. Yeah, t he company i s cal l ed Robot i c Syst ems and
8 Technol ogi es, but i t used t o be cal l ed r obot i c Sur gi cal Tech.
9 Q. And what has i t devel oped?
10 A. We' r e wor ki ng on a r obot i c assi st ant f or sur ger y, somet hi ng
11 t hat hands t he sur geon i nst r ument s and t hen count s t he
12 i nst r ument s and keeps t r ack of t hemso t hey don' t get mi spl aced
13 or l ost .
14 Q. And have you r ecei ved any gr ant s or cont r act s f r omt he
15 f eder al gover nment ?
16 A. Yes, we have r ecei ved sever al gr ant s f r omdi f f er ent par t s
17 of t he f eder al gover nment .
18 Q. Now, do you know Dr . Kar r on?
19 A. Yes, I do.
20 Q. Do you see hi mi n cour t ?
21 A. Yes, he i s.
22 Q. Can you poi nt hi mout , pl ease, j ust f or t he r ecor d.
23 A. I r eal l y don' t have my gl asses on, but I t hi nk he i s t he
24 f el l ow si t t i ng r i ght over t her e. Yes.
25 THE COURT: The r ecor d wi l l i ndi cat e t hat t he wi t ness
( 212) 805- 0300
1148
1 has i dent i f i ed t he def endant .
2 THE WI TNESS: Yes, I do see hi mover t her e.
3 Q. By t he way, I see you ar e wal ki ng wi t h a cane.
4 A. Yes, yes.
5 Q. Do you have a per manent di sabi l i t y?
6 A. Yes, I was i nj ur ed i n an acci dent , act ual l y a mot or cycl e
7 acci dent , about t hr ee year s ago. I t was a pr et t y ser i ous
8 acci dent .
9 Q. You wer e on t he mot or cycl e?
10 A. Yes, I was.
11 Q. Now, how do you know Dr . Kar r on?
12 A. Wel l , I t hi nk I met hi mat a meet i ng, l i ke one of t hose
13 sci ent i f i c meet i ngs. I t hi nk i t mi ght have been i n Cal i f or ni a.
14 I t was a meet i ng cal l ed Medi ci ne Meet s Vi r t ual Real i t y. I t ' s a
15 year l y t hi ng. I t hi nk I r an i nt o hi mt her e. Thi s i s qui t e a
16 f ew year s ago, maybe 2003 or t her eabout s, but I don' t r ecal l
17 wher e I f i r st met hi m, but i t woul d have been at one of t hose
18 meet i ng ki nds of t hi ngs.
19 Q. Di d you ever have occasi on t o wor k on t he same f acul t y as
20 he di d?
21 A. No, we have never been on act ual l y t he same pr oj ect or same
22 f acul t y or anyt hi ng l i ke t hat .
23 Q. And so what year woul d you say t hat you met Dr . Kar r on?
24 A. I ' mest i mat i ng about 2003. I t woul d have been ear l y i n our
25 get t i ng out t her e wi t h our wor k, so t hat ' s when I was speaki ng
( 212) 805- 0300
1149
1 and goi ng t o t hose meet i ngs.
2 Q. And have you cont i nued t o have a r el at i onshi p wi t h Dr .
3 Kar r on si nce t hat t i me?
4 A. On and of f , yeah. I mean I do see hi mat meet i ngs and t hat
5 t ype of t hi ng.
6 Q. And dur i ng t hat cour se of t i me wer e you abl e t o f or man
7 opi ni on as t o hi s t r ut hf ul ness and honest y?
8 A. Yes.
9 Q. And what i s t hat opi ni on, si r ?
10 A. I t hi nk he i s a ver y honest per son. I t hi nk he i s a good
11 sci ent i st . I mean t hat ' s as pl ai n as I can put i t . I t hi nk he
12 i s a decent per son. I t hi nk he i s a good sci ent i st t oo.
13 MR. RUBI NSTEI N: Thank you ver y much, si r .
14 THE COURT: Any cr oss- exami nat i on?
17 BY MR. EVERDELL:
18 Q. Good mor ni ng, Dr . Tr eat .
20 Q. You t est i f i ed t hat you have r ecei ved gr ant s bef or e f r om
21 di f f er ent par t s of t he f eder al gover nment , i s t hat r i ght ?
22 A. Yes.
23 Q. You never r ecei ved an ATP gr ant , have you?
24 A. No, no, I never got one of t hose.
25 Q. So you' r e not f ami l i ar wi t h t he r ul es of t he ATP gr ant ?
( 212) 805- 0300
1150
86A7KAR1 Tr eat - cr oss
1 A. I r eal l y - - wel l , I l ooked i nt o i t a f ew year s ago, but I
2 r eal l y can' t say I know t he r ul es ver y ser i ousl y, so basi cal l y,
3 no, I don' t know t he r ul es.
4 Q. And you never wor ked f or t he def endant , di d you?
5 A. Dan Kar r on, no, never wor ked f or hi m.
6 Q. So, you ar e not f ami l i ar wi t h t he company CASI ?
7 A. No, I ' ve hear d of i t , but I never wor ked f or i t basi cal l y.
8 Q. So you never wor ked at CASI ?
9 A. No.
10 Q. And you never handl ed t he f i nances at CASI ?
11 A. Oh, no, no.
12 Q. And you ar e not awar e of what happened i n CASI bet ween t he
13 year s 2001 and 2003, r i ght ?
14 A. Not r eal l y, no. I don' t know any of t he det ai l s of what ' s
15 goi ng on.
16 Q. I n f act you sai d you di dn' t even meet Dr . Kar r on unt i l
17 2003, i sn' t t hat r i ght ?
18 A. I n t hat t i me f r ame, yes.
19 Q. You al so sai d t hat you met hi mat a conf er ence, r i ght ?
20 A. Yes.
21 Q. And you have never been on t he same pr oj ect or f acul t y wi t h
22 Dr . Kar r on, i sn' t t hat r i ght ?
23 A. Wel l , no, no.
24 Q. And I t hi nk you sai d t hat you had an of f - and- on
25 r el at i onshi p, you woul d see hi mat meet i ngs, i s t hat r i ght ?
( 212) 805- 0300
1151
86A7KAR1 Tr eat - cr oss
1 A. That ' s pr et t y much i t , yes.
2 Q. So, you see hi mmaybe a coupl e t i mes a year ?
3 A. Yes, I t hi nk t hat ' s about r i ght .
4 Q. Maybe f our or f i ve t i mes a year ?
5 A. Yeah, I t hi nk t hat ' s about r i ght . I t ' s not l i ke a r egul ar
6 mont hl y meet i ng or anyt hi ng l i ke t hat , but , yeah.
7 Q. So you don' t r egul ar l y meet wi t h t he def endant , r i ght ?
8 A. No.
9 Q. So your opi ni on of hi mi s based on t hese f our t o f i ve
10 meet i ngs you had wi t h hi mf our or f i ve days a year ?
11 A. Yes, i t ' s j ust my gener al i mpr essi on of hi m.
12 MR. EVERDELL: Thank you. No f ur t her quest i ons.
15 THE COURT: Thank you ver y much, doct or .
17 MR. RUBI NSTEI N: Your Honor , may I appr oach t he bench,
18 pl ease?
19 THE COURT: Yes, si r .
21
22
23
24
25
( 212) 805- 0300
1152
86A7KAR1
2 MR. RUBI NSTEI N: Your Honor , I have t wo shor t
3 wi t nesses. One i s pur por t edl y par ki ng t he car , appar ent l y came
4 wi t h Dr . Kar r on f r omwhat I under st and and i s par ki ng t he car ;
5 t he ot her one i s comi ng f r omPr i ncet on, New J er sey. I woul d
6 ask your Honor t o gi ve me a t en- mi nut e r ecess. I f we don' t
7 have t hemi n t en mi nut es, I wi l l make my det er mi nat i on about
8 cal l i ng Dr . Kar r on.
9 MR. EVERDELL: Who ar e t he wi t nesses?
10 THE COURT: Wi ndy?
11 MR. RUBI NSTEI N: Wi ndy f r omConnect i cut , and Lee
12 Gol dber g who i s a char act er wi t ness.
13 THE COURT: OK. Shal l I excuse t he j ur y f or t en
14 mi nut es?
15 MR. RUBI NSTEI N: Yes, pl ease, your Honor .
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1153
86A7KAR1
2 THE COURT: Ladi es and gent l emen, I t hi nk t he best
3 t hi ng t o do i s t ake a t en- mi nut e r ecess, and we wi l l come back
4 i n t en mi nut es. I bel i eve t her e wi l l be some wi t nesses at t hat
5 poi nt .
7 THE COURT: Why don' t you hand out t he dr af t char ge so
8 t hat t he par t i es wi l l have t hat .
9 MR. EVERDELL: Your Honor , may I r ai se one i ssue as
10 wel l , as l ong as t he j ur y i s out ?
11 THE COURT: Of cour se.
12 MR. EVERDELL: I t ' s my under st andi ng f r omt he def ense
13 counsel t hat he was goi ng t o cal l possi bl y anot her char act er
14 wi t ness. And I want ed t o r ai se t he i ssue - - whi ch i s why I
15 obj ect ed wi t h t he f i r st char act er wi t ness - - t hat i t ' s my
16 under st andi ng of t he f eder al r ul es t hat char act er wi t nesses ar e
17 not al l owed t o r ai se speci f i c i nst ances of conduct . They ar e
18 al l owed t o t est i f y t o opi ni on and r eput at i on, t he def endant ' s
19 char act er , a per t i nent t r ai t of t he def endant ' s char act er onl y,
20 and t hey ar e not al l owed t o r ai se speci f i c i nst ances of conduct
21 i n t hei r t est i mony. So I r ai se t hi s ahead of t i me i n case t he
22 def endant i s pl anni ng on doi ng t hi s wi t h t he next char act er
23 wi t ness. I t ' s i nappr opr i at e under t he f eder al r ul es, and we
24 wi l l obj ect .
25 THE COURT: Mr . Rubi nst ei n?
( 212) 805- 0300
1154
86A7KAR1
1 MR. RUBI NSTEI N: I t hi nk t he gover nment i s cor r ect ,
2 your Honor . I wi l l be so advi sed.
3 THE COURT: Al l r i ght . What do we do t hen wi t h
4 r espect t o Dr . Coons' t est i mony? I s t hat wai ved?
5 MR. EVERDELL: I won' t pr ess t hat i ssue, your Honor .
8 ( Recess)
9 MR. EVERDELL: Your Honor , now t hat Mr . Rubi nst ei n i s
10 back, I do want t o t ake up a mat t er wi t h t he cour t .
11 So, t he t wo wi t ness I under st and t hat he want s t o cal l
12 ar e Lee Gol dber g as a char act er wi t ness and t hen Wi ndy
13 Far nswor t h as a f act wi t ness. I s t hat cor r ect ?
14 MR. RUBI NSTEI N: That i s r i ght . Wi ndy Far nswor t h.
15 MR. EVERDELL: Wi ndy Far nswor t h as a f act wi t ness. As
16 t o Wi ndy Far nswor t h, t he gover nment obj ect s t o t hat at t hi s
17 poi nt . Thi s i s t he f i r st not i ce we ever had t hat t hey wer e
18 goi ng t o cal l her as a f act wi t ness.
19 You have mat er i al s f or her t hat we woul d l i ke t o be
20 abl e t o pr epar e f or her cr oss on, so t hi s i s ver y l at e not i ce
21 f or t he gover nment t o be abl e t o pr epar e f or cr oss f or her ,
22 gi ven t hi s i s t he ver y f i r st t i me we have even been awar e of
23 t he def endant ' s i nt ent t o cal l her as a wi t ness. So, we obj ect
24 t o her bei ng cal l ed as a wi t ness. I f anyt hi ng, we r equest some
25 t i me t o be abl e t o pr epar e f or her cr oss- exami nat i on.
( 212) 805- 0300
1155
86A7KAR1
1 MR. RUBI NSTEI N: Wel l , A, t hey know about her , so
2 obvi ousl y t hey have mat er i al about her . B, her name has been
3 ment i oned - -
4 THE COURT: I f or got what her r ol e i s.
5 MR. RUBI NSTEI N: Her r ol e i s t hat she i s t he l ady f r om
6 Connect i cut t hat Dr . Kar r on was goi ng t o move i n wi t h. They
7 i nt r oduced e- mai l s t hat r ef er ence her , and so she i s a per son
8 t hat t hey br ought i nt o t hi s t r i al , and she i s ver y r el evant
9 because she gave Dr . Kar r on t he i nf amous shoe r ack t hat t hey
10 cl ai mhe bought wi t h gover nment f unds. And t hi s onl y came t o
11 my at t ent i on dur i ng t he cour se of t he t r i al because i t ' s such
12 a - - t o me i t ' s such a de mi ni mi s mat t er .
13 THE COURT: She i s goi ng t o t est i f y about t he shoe
14 r ack?
15 MR. RUBI NSTEI N: About t he shoe r ack and Connect i cut .
16 MR. EVERDELL: Ther e ar e mat er i al s t hat we have t hat
17 we want t o l ook t hr ough i n or der t o pr oper l y cr oss- exami ne her ,
18 and t hi s i s t he f i r st not i ce we have had t hat t he def ense
19 counsel was pl anni ng on cal l i ng her .
20 THE COURT: Wel l , i s she her e?
21 MR. RUBI NSTEI N: I under st and t hat she i s goi ng
22 t hr ough secur i t y, or she was goi ng t hr ough secur i t y.
23 THE COURT: I can' t see t hat t he t est i mony i s
24 par t i cul ar l y i mpor t ant .
25 MR. EVERDELL: Wel l , your Honor , t he t hi ng about
( 212) 805- 0300
1156
86A7KAR1
1 Connect i cut , i f you r ecal l t he e- mai l , was t hat t hi s was at t he
2 end of t he day yest er day, t her e was t est i mony t hat t he
3 def endant wr ot e t o someone el se and sai d he was goi ng t o move
4 t o Connect i cut and move t o Wi ndy' s house and say t hat he st i l l
5 had a cot i n t he 33r d St r eet apar t ment , and t hey wer e hopi ng
6 t he ATP peopl e woul d buy t hat . That was t he subst ance of t he
7 e- mai l , so i t does go t o a poi nt i n our case t hat we want t o
8 make about r ent payment s and t hi ngs l i ke t hat and t he
9 def endant ' s knowl edge of t hat .
10 THE COURT: December 2002.
11 MR. EVERDELL: That ' s r i ght , t hat ' s when t he e- mai l
12 was.
13 THE COURT: Wel l , I guess you have a per son who want s
14 t o see you, Mr . Rubi nst ei n, one of t he char act er wi t nesses.
15 MR. RUBI NSTEI N: I ' mt ol d t hey have ar r i ved.
16 THE COURT: That was a year and a hal f i nt o t he gr ant .
17 MR. EVERDELL: That ' s t r ue, t hat ' s cer t ai nl y a poi nt
18 we woul d make as wel l . But we know t her e ar e mat er i al s t hat we
19 have t hat mi ght be r el evant f or cr oss- exami nat i on, and we woul d
20 l i ke t he chance t o at l east r evi ew t hem, get some t i me t o
21 r evi ew t hemso we ar e adequat el y pr epar ed.
22 THE COURT: Wel l , maybe I can gi ve you a shor t r ecess
23 but not hi ng l ong.
25 MR. RUBI NSTEI N: Coul d I go speak t o t he wi t ness, your
( 212) 805- 0300
1157
86A7KAR1
1 Honor ?
2 THE COURT: Yes. Let ' s get t he wi t nesses i n. Have
3 you got a wi t ness her e?
4 MR. RUBI NSTEI N: I under st and, but i t ' s a wi t ness I
5 never t al ked t o, J udge. I j ust need about t hr ee mi nut es.
6 THE COURT: Wel l , al l r i ght . We' ve got t o br i ng t he
7 j ur y back i n. We can' t keep t hemwai t i ng.
9 ( Recess)
10 MR. RUBI NSTEI N: We have bot h our wi t nesses, J udge.
11 THE COURT: Al l r i ght . Do you have t he wi t ness her e?
13 THE COURT: Al l r i ght . Mr . Rubi nst ei n, do you have
14 your wi t ness?
16 THE COURT: Al l r i ght . I ' mcal l i ng i n t he j ur y.
18
19
20
21
22
23
24
25
( 212) 805- 0300
1158
86A7KAR1
2 THE COURT: Al l r i ght . Pl ease be seat ed.
4 MR. RUBI NSTEI N: We' r e r eady t o pr oceed, your Honor .
5 Thank you. We cal l our next wi t ness.
6 LEE H. GOLDBERG,
9 DEPUTY COURT CLERK: Pl ease st at e your name f or t he
10 r ecor d and spel l your l ast name sl owl y.
11 THE WI TNESS: Lee H. Gol dber g.
14 Q. Good mor ni ng, Mr . Gol dber g.
16 THE COURT: G- O- L- D- B- E- R- G?
19 Q. Wher e do you r esi de, si r ?
20 A. I l i ve i n Pr i ncet on, New J er sey. Do you need an addr ess?
21 2002 Mayf ai r Avenue.
22 Q. How l ong have you r esi ded t her e?
23 A. A l i t t l e over t en year s.
24 Q. I s t hat wher e you came f r omt hi s mor ni ng?
25 A. Yes, si r , and t hat ' s why I ' ml at e. I apol ogi ze t o t he
( 212) 805- 0300
1159
86A7KAR1 Gol dber g - di r ect
1 cour t . The t r ai ns, I don' t want t o t al k about i t .
2 Q. Now, what i s your busi ness or occupat i on, si r ?
3 A. I ' ma r ecover i ng engi neer . I used t o be an aer ospace
4 engi neer . Now I ' ma j our nal i st .
5 Q. How l ong have you been a j our nal i st ?
6 A. About 14 year s.
7 Q. I s t her e a par t i cul ar ar ea t hat you - -
8 A. I cover hi gh t echnol ogy. Technol ogy and t he envi r onment
9 ar e my t wo speci al t i es, most l y net wor ki ng communi cat i ons.
10 Q. Do you know t he def endant Dani el Kar r on?
11 A. Yes.
12 Q. Do you see t he def endant i n cour t ?
13 A. Yeah. Ri ght t her e.
14 THE COURT: The wi t ness has i dent i f i ed t he def endant .
15 Q. And how l ong do you know t he def endant ?
16 A. I ' mt r yi ng t o t hi nk of how many year s. I guess si nce I was
17 13 or 14. We went t o j uni or hi gh t oget her .
18 Q. And have you mai nt ai ned a r el at i onshi p wi t h t he def endant ?
19 A. We wer e i n cl ose cont act f or a l ong t i me. Then I f el l of f
20 t he f ace of t he pl anet . I was doi ng some r esear ch. We wer en' t
21 i n t ouch f or a coupl e of year s. Danny t r acked me down pr obabl y
22 i n 1979 and 1980, and we have been i n cont act ever si nce.
23 Q. And do you know a company cal l ed CASI ?
24 A. Yes, si r .
25 Q. And have you had any i nvol vement wi t h CASI ?
( 212) 805- 0300
1160
86A7KAR1 Gol dber g - di r ect
1 A. I was nomi nal l y at l east on t he boar d of di r ect or s, and I
2 di d some i ni t i al f undi ng.
3 Q. Di d you ever go t o a boar d meet i ng?
4 A. No, si r .
5 Q. Over t he t i me t hat you have known Dr . Kar r on, have you been
6 abl e t o f or man opi ni on as t o hi s t r ut hf ul ness and honest y?
7 A. Yes, si r .
8 Q. What i s your opi ni on, si r ?
9 A. He i s one of t he peopl e I t r ust i n t hi s wor l d.
10 MR. RUBI NSTEI N: Thank you ver y much.
14 BY MR. EVERDELL:
15 Q. Good mor ni ng, Mr . Gol dber g.
17 Q. You sai d t hat you wer e on t he boar d of di r ect or s nomi nal l y
18 f or CASI ?
19 A. Yeah.
20 Q. So you di dn' t at t end any boar d meet i ngs.
21 A. No.
22 Q. And you never wer e a par t of t he day- t o- day wor ki ngs of
23 CASI , wer e you?
24 A. No. I r evi ewed some document s, you know, when he was
25 maki ng pr oposal s, I woul d go over t hose t hi ngs. I spent some
( 212) 805- 0300
1161
86A7KAR1 Gol dber g - cr oss
1 t i me gi vi ng advi ce f or what ever i t was wor t h, you know, but a
2 l ot of t i mes when i t was a t echni cal paper I woul d t ake a l ook
3 at i t t o make sur e t hat i t was at l east i n some sor t of or der
4 or i n Engl i sh, compr ehensi bl e.
5 Q. So on t he t echni cal si de of t hi ngs, r evi ewi ng document s, i s
6 t hat what you sai d?
7 A. Basi cal l y i t .
8 Q. So you di dn' t have any i nvol vement wi t h t he f i nances of
9 CASI ?
10 A. No, si r .
11 Q. You have no i dea how t hey spent t hei r money?
12 A. Not par t i cul ar l y.
13 Q. And you don' t know anyt hi ng about t he r ul es of t he ATP
14 gr ant s i n par t i cul ar , do you?
15 A. Not - - I ' mcer t ai nl y not wel l ver sed i n i t .
16 Q. And you di dn' t act ual l y wor k i n t he CASI wor k space i n 2001
17 t o 2003, di d you?
18 A. I spent t i me t her e, but most l y, you know, most l y as a
19 f r i end and what ever , but I wasn' t - - I was i n t he wor k space a
20 f ai r amount . I was i n t her e f or var i ous r easons t hat I woul d
21 be t her e.
22 Q. Now, Mr . Gol dber g, you own st ock i n CASI , don' t you?
23 A. I bel i eve t hat t her e i s a pi ece of paper i n my f i l es t hat
24 says somet hi ng t o t hat ef f ect .
25 Q. You own st ock?
( 212) 805- 0300
1162
86A7KAR1 Gol dber g - cr oss
1 A. I guess so. I haven' t l ooked at i t i n I don' t know how
2 many year s. I t was gi ven t o me. I never asked.
3 Q. Ri ght . You sai d al so t hat you have known t he def endant
4 si nce you wer e 13 or 14, r i ght ?
5 A. Yes, si r .
6 Q. So, he i s a j uni or hi gh buddy of your s, r i ght ?
7 A. Yeah. And?
8 Q. And you woul dn' t want anyt hi ng bad t o happen t o your
9 f r i end, r i ght ?
10 A. No. And your poi nt i s?
11 Q. Si mpl y t hat . No f ur t her quest i ons.
14 THE COURT: Al l r i ght . You ar e excused. Next
15 wi t ness.
18
19
20
21
22
23
24
25
( 212) 805- 0300
1163
86azkar 2
2 Do you need t i me or ar e you al l r i ght ?
3 MR. EVERDELL: I f t hi s i s t he next wi t ness, your
4 Honor , we woul d r equest some t i me.
5 THE COURT: Wel l , l et ' s see i f t he wi t ness i s her e.
7 THE COURT: You want t o see i f he' s her e, t hen I ' l l
8 make a deci si on on t he ot her . Woul d you j ust r un out and see
9 i f he' s her e.
10 ( Pause)
11 MR. RUBI NSTEI N: J udge, whi l e t he next wi t ness i s
12 wal ki ng i n, may I appr oach wi t h t he gover nment ?
14 MR. RUBI NSTEI N: Whi l e t he next wi t ness i s wal ki ng i n
15 t he cour t r oom, I want ed t o - -
16 THE COURT: Al l r i ght , si r . Let ' s hol d i t .
17 MR. RUBI NSTEI N: That ' s t he next wi t ness.
18 MR. EVERDELL: Your Honor - -
19 THE COURT: She' s been her e al l - -
20 MR. RUBI NSTEI N: That ' s why I asked t o appr oach t he
21 bench, your Honor . I gave t he Gover nment al l t he Mast er
22 Car d - - she' s a bookkeeper . She has been her e assi st i ng me.
23 THE COURT: She' s a bookkeeper ?
24 MR. RUBI NSTEI N: She' s a bookkeeper . She' s a
25 bookkeeper .
( 212) 805- 0300
1164
86azkar 2
1 THE COURT: I t hought i t was Wi ndy Far nswor t h you
2 sai d.
3 MR. RUBI NSTEI N: That ' s a di f f er ent wi t ness, your
4 Honor . The gover nment - -
5 THE COURT: No not i ce of t hi s.
6 MR. RUBI NSTEI N: Because t hey wer e supposed t o
7 st i pul at e t o t he Mast er Car d and t hey won' t st i pul at e. She
8 di d - - I gave t hemmy own book f or t he weekend t o check over
9 and t hey won' t st i pul at e t o t he Mast er Car d. I ' mf or ced t o
10 cal l a wi t ness. I mean, I st i pul at ed t o t he Amer i can Expr ess.
11 I gave t hemmy own copy t hat t hey di dn' t even r et ur n t i l l
12 Monday, J udge - -
13 THE COURT: I ' l l have t o - -
14 MR. RUBI NSTEI N: - - of t he Mast er Car d and - -
15 THE COURT: I ' l l have t o excuse t he j ur y 10 mi nut es or
16 so. How l ong do you need f or t he pr epar at i on?
18 MR. KWOK: Thi s wi t ness - -
19 THE COURT: What ? I ' mnot goi ng t o al l ow t hi s
20 wi t ness.
21 MR. RUBI NSTEI N: J udge, t hey - -
22 THE COURT: What i s t he pr obl em?
23 MR. RUBI NSTEI N: He t ol d me he woul d st i pul at e.
24 MR. KWOK: I di dn' t t el l you anyt hi ng.
25 MR. RUBI NSTEI N: They i ndi cat ed - - J udge, we have had a
( 212) 805- 0300
1165
86azkar 2
1 ver y pr of essi onal r el at i onshi p dur i ng t hi s case bet ween t he
2 pr osecut i on and t he def ense. When t hey' ve asked me f or
3 st i pul at i ons, I ' ve gi ven t hemst i pul at i ons, I had t al ked t o
4 t hemabout t he Mast er Car d. Par t of our def ense i s t hat he
5 spent money on Mast er Car d.
6 The onl y t hi ng t hi s wi t ness i s sayi ng, and t hei r
7 wi t nesses had my - - her books, her books f or t he ent i r e
8 weekend. I gave t hemmy or i gi nal copi es. I di dn' t even have a
9 copy f or mysel f . They t ook i t back t o At l ant a. They' ve been
10 wor ki ng wi t h i t . They came back l at e Sunday ni ght wi t h t hi s
11 st uf f . For t hemt o say t hat t hey don' t have t i me i s - -
12 THE COURT: Who i s t he wi t ness?
13 MR. RUBI NSTEI N: - - j ust wr ong.
14 THE COURT: So j ust I know, who i s t he - - what ' s t he
15 name of t he wi t ness?
16 MR. RUBI NSTEI N: Debor ah Dunl evy. And t he onl y t hi ng
17 I want t o do i s put t he Mast er - - I di dn' t expect t o have a
18 pr obl em, J udge, because t hese ar e r ecor ds t hat - -
19 THE COURT: Def endant can put i n t he Mast er Car d.
20 MR. RUBI NSTEI N: That ' s i f I deci de t o cal l hi m. I
21 don' t want t o - -
22 THE COURT: Ar e you goi ng t o cal l hi m?
23 MR. RUBI NSTEI N: I don' t know yet . I want t o see how
24 Ms. Far nswor t h does.
25 The bot t oml i ne i s t hat t hey ar e, t hey ar e, what do
( 212) 805- 0300
1166
86azkar 2
1 you ask cal l i t , t hey won' t st i pul at e. She went over t hese
2 r ecor ds. The gover nment has never l ooked at t hese r ecor ds
3 bef or e I made an i ssue about i t wi t h Ri l ey, and I t hi nk t hat
4 i t ' s goes t o t he hear t of t he def ense. Her e he spent al most
5 $50, 000 on hi s Mast er Car d f or gr ant i t ems, and I t hi nk t hat
6 t he def ense shoul d have t he oppor t uni t y t o put t hat i nt o
7 evi dence.
8 MR. KWOK: No, your Honor . Thi s i s - -
9 MR. RUBI NSTEI N: J ust l i ke t hey put i n t he Amer i can
10 Expr ess wi t h my st i pul at i ons.
11 MR. KWOK: Thi s i s compl et el y unf ai r . I di d not get
12 t he st i pul at i on unt i l t hi s mor ni ng. And i n r evi ewi ng t hose
13 r ecor ds, t hey ar e not r ecor ds f r omMast er Car d di r ect l y. They
14 ar e j ust a bunch of number s cr eat ed f r oma l edger . I have no
15 assur ance wher e t hose number s came f r om. To say t hat - - i n
16 f act , I t r i ed t o have Mr . Rubi nst ei n st i pul at e t o a si mi l ar
17 l edger , and he t ol d me he had no assur ance t hat t hose number s
18 r ef l ect ed i n t he l edger I want ed hi mt o st i pul at e t o.
19 THE COURT: We don' t have t he Mast er Car d bi l l s?
20 MR. RUBI NSTEI N: Yes, we do. We gave i t t o t hem.
21 THE COURT: Mast er Car d bi l l s t hemsel ves?
22 MR. RUBI NSTEI N: The - -
23 THE COURT: I under st ood f r om- -
24 MR. RUBI NSTEI N: The st at ement s.
25 THE COURT: J ust a second. I under st ood f r omt he
( 212) 805- 0300
1167
86azkar 2
1 t est i mony t o dat e, t hat al l t he or i gi nal t r anscr i pt s of al l
2 wer e dest r oyed and i nst ead t hey r el i ed on scanned document s.
3 MR. RUBI NSTEI N: That ' s cor r ect , J udge, scanned - - t he
4 scanned Mast er Car d bi l l s. The mont hl y st at ement s ar e - - you
5 know, i n t he moder n er a of paper l ess wor l d, t hi s i s what peopl e
6 do.
7 THE COURT: I j ust want ed t o - -
8 MR. RUBI NSTEI N: These ar e t he Mast er Car d - -
9 THE COURT: So t hese ar e scanned, t hey' r e not Mast er
10 Car d - - but t hey' r e t he r ecor ds of t he - - busi ness copi es of
11 Mast er Car d i nvoi ces.
13 THE COURT: That have been scanned i n, i s t hat i t ?
14 MR. RUBI NSTEI N: That ' s cor r ect , your Honor .
16 MR. RUBI NSTEI N: I ' ve gi ven t hemt o t he gover nment .
17 THE COURT: They' r e not t he or i gi nal s. Go ahead.
18 MR. KWOK: And when Mr . Rubi nst ei n gave me t hat - -
19 MR. RUBI NSTEI N: Excuse me, j ust t he Amer i can Expr ess.
20 THE COURT: I want t o hear hi m.
21 MR. KWOK: When Mr . Rubi nst ei n gave me t hat t hi ck
22 f ol der over t he weekend, t hat was i n r esponse t o our i f as when
23 subpoena, i f your Honor r ecal l s, i n t he event t hat t he
24 def endant t est i f i es, so we can cr oss hi mon t hose r ecor ds.
25 At t hat poi nt no ment i on was made about t hi s new
( 212) 805- 0300
1168
86azkar 2
1 wi t ness, whose name I j ust hear d a f ew mi nut es ago. We' ve
2 never known t hat t hi s wi t ness exi st ed. She has been i n t he
3 cour t r oomt he whol e t i me hear i ng al l t he t est i mony, and we have
4 not hear d a wor d t hat she woul d be t est i f yi ng.
5 MR. RUBI NSTEI N: J udge, I know - -
6 THE COURT: She wor ks f or t he busi ness?
7 MR. RUBI NSTEI N: She never wor ked f or CASI . She was
8 br ought aboar d af t er war ds t o hel p compi l e r ecor ds.
9 THE COURT: When was she br ought aboar d?
10 MR. RUBI NSTEI N: Pr obabl y i n 2004, l at e 2003, maybe
11 2005. I mean, she' s been - -
12 THE COURT: When, appr oxi mat el y? Let ' s f i nd out .
13 MR. RUBI NSTEI N: I have no - -
14 THE COURT: She wasn' t an empl oyee dur i ng t he t i me
15 i nvol ved?
16 MR. RUBI NSTEI N: No, not at al l .
17 MR. KWOK: And i f - -
18 THE COURT: How can she t est i f y t hat t hese wer e
19 r ecor ds kept i n t he r egul ar cour se of busi ness?
20 MR. EVERDELL: Dur i ng t he t i me of t he i ndi ct ment .
21 MR. KWOK: And t hese ar e per sonal Mast er Car d r ecor ds,
22 not even CASI cor por at e r ecor ds.
23 MR. RUBI NSTEI N: Exact l y exact l y.
24
25 MR. KWOK: So I don' t see t he r el evance.
( 212) 805- 0300
1169
86azkar 2
1 MR. RUBI NSTEI N: How coul d t he gover nment - -
2 THE COURT: I see. I ' msor r y.
3 MR. RUBI NSTEI N: I ' mgoi ng t o ask f or t he cont i nuance
4 t o get Mast er Car d her e. You know, f or t he gover nment t o have
5 t he r ecor ds - - and t hey had t he Mast er Car d r ecor ds bef or e, and
6 I ment i oned t he Mast er Car d a l ong t i me ago. They have al l of
7 t hi s. For t hemt o t r y t o keep out of evi dence l egi t i mat e
8 evi dence t hat woul d show t he def endant i s i nnocent i s, f r ankl y,
9 J udge, not pr of essi onal .
11 MR. RUBI NSTEI N: Okay, i t ' s not pr of essi onal . I
12 expect mor e t han f r omt he r epr esent at i ves.
13 THE COURT: I hear t hat . I ' mnot goi ng t o get i nt o
14 t hat . But I ' ve got t o det er mi ne whet her t hey' r e admi ssi bl e,
15 and al so whet her t he Gover nment ' s had a f ai r oppor t uni t y. What
16 i s - - wher e ar e t he r ecor ds? Let me see a copy of t hese
17 t hi ngs - -
18 MR. RUBI NSTEI N: Okay, sur e.
19 THE COURT: - - t hat you' r e t al ki ng about .
20 Have you exami ned t hese r ecor d? I ' msor r y, I bet t er
21 wai t t i l l he comes back.
22 THE DEPUTY CLERK: Do you want me t o put t he wi t ness
23 i n t he r oomso ever ybody can go back t o t he t abl es? Because
24 t he j ur y i s not her e.
25 THE COURT: I ' ve got t o see t hese r ecor ds.
( 212) 805- 0300
1170
86azkar 2
1 THE DEPUTY CLERK: I under st and.
2 MR. EVERDELL: We' l l j ust wai t her e.
3 MR. RUBI NSTEI N: Al so, J udge, she or der ed t hemal so,
4 f r omwhat I under st and, or der ed t hemf r omt he bank and got
5 copi es and compar ed t hemt o t he or i gi nal of t he Mast er Car d
6 st at ement s.
7 THE COURT: Let me get my gl asses. Whi ch of t he
8 ent r i es, Mr . Rubi nst ei n - -
9 MR. RUBI NSTEI N: Par don? Yes, your Honor .
10 THE COURT: Come her e. Whi ch of t he ent r i es do you
11 cl ai mar e CASI expenses?
12 MR. RUBI NSTEI N: Whi ch ar e t he ent r i es, your Honor ?
13 THE COURT: Yes.
14 MR. RUBI NSTEI N: Ther e ar e medi cal - -
15 THE COURT: Whi ch ones? Let me j ust see.
16 MR. RUBI NSTEI N: I ' l l gi ve you t he char t t hat we have,
17 J udge.
18 THE COURT: What - - her e. Gi ve me t hi s. I j ust want
19 t o know - - check of f t he i t ems you t hi nk ar e busi ness expenses.
20 MR. RUBI NSTEI N: Okay. Let me get our char t .
21 THE COURT: I don' t want her - -
22 MR. RUBI NSTEI N: No, no, not her . I want t o get i t
23 f r omher so I coul d - -
24 THE COURT: Wel l , t hen gi ve me t hese r ecor ds. I ' l l go
25 t hr ough t hemf i r st .
( 212) 805- 0300
1171
86azkar 2
1 MR. RUBI NSTEI N: Okay. Wher e i s t he char t ?
2 Your Honor , t hi s i s an anal ysi s - - t hese ar e t he
3 expenses t hat we di d not at t r i but e t o t he gr ant .
4 THE COURT: What ?
5 MR. RUBI NSTEI N: These ar e over her e, your Honor .
6 THE COURT: That ' s t he ones you say he can char ge t o
7 t he gr ant .
8 MR. RUBI NSTEI N: I ' mgoi ng t o show you t he ones t hat
9 we' r e not char gi ng t o t he gr ant , your Honor . We have i t i n t he
10 negat i ve f ashi on.
11 THE COURT: Al l you' r e goi ng t o do i s show t hat t hese
12 char ges wer e not char ged t o t he gr ant .
13 MR. RUBI NSTEI N: And t hen t he ot her ones wer e
14 char ged - - ar e char ged t o t he gr ant ar e gr ant expenses; i n
15 ot her wor ds, her e i s t he schedul e, your Honor , t he def endant ' s
16 ZZZ- 1, and t hose ar e t he ones t hat i n our anal ysi s we di d not
17 char ge t o t he gr ant . Over her e, J udge.
18 THE COURT: You' r e sayi ng t hat al l t hese Mast er Car d
19 char ges wer e not char ged t o t he gr ant .
20 MR. RUBI NSTEI N: No. I ' msayi ng t hey' r e par t of i t .
21 Thi s i s t he summar y char t of what was - - we say was char ged t o
22 t he car d t hat wer e ATP expenses, at t r i but abl e ei t her medi cal - -
23 THE COURT: Tot al at t r i but abl e t o - - I mean, wher e
24 does t he - - t o busi ness expenses?
( 212) 805- 0300
1172
86azkar 2
1 THE COURT: The St at ue of Li ber t y gi f t ?
3 THE COURT: St at ue of Li ber t y gi f t , Gr i st edes?
4 MR. RUBI NSTEI N: No, we' r e not . That ' s - -
5 THE COURT: What ar e t hese?
6 MR. RUBI NSTEI N: J udge, wher e' s St at ue of Li ber t y
7 gi f t ? I don' t see anyt hi ng - - t hose ar e excl uded. The t ot al
8 amount i s - -
9 THE COURT: I don' t f ol l ow you.
10 MR. RUBI NSTEI N: The t ot al amount of t he car d i s
11 $90, 000, your Honor , t hat he spent .
12 THE COURT: I got t hese i n f r ont of me.
13 MR. RUBI NSTEI N: Yes. I t t ot al s t o $90, 000. We ar e
14 at t r i but i ng $49, 000 t o gr ant r el at ed expenses, and t he ot her
15 41, 000 - - $40, 000 ar e nongr ant , and t hat goes wi t h t he
16 Gr i st edes and t he bi ke shop and cash advance, and cl ot hi ng, and
17 t hi ngs of t hat nat ur e.
18 THE COURT: Look, when was her exact per i od of
19 empl oyment ? I s she bei ng cal l ed as an exper t , i n ot her wor ds?
20 You' r e doi ng r econst r uct i on of t he books.
21 MR. RUBI NSTEI N: Exper t - -
22 MR. KWOK: That ' s exact l y what he' s doi ng wi t hout
23 not i ce.
25 MR. RUBI NSTEI N: Exper t bookkeeper - - you woul dn' t
( 212) 805- 0300
1173
86azkar 2
1 st i pul at e. I had no i nt ent i on of cal l i ng - - she' s pet r i f i ed of
2 t aki ng t he wi t ness st and.
3 MR. KWOK: I got t he st i pul at i on t hi s mor ni ng.
4 MR. RUBI NSTEI N: You got t he r ecor ds. I gave you her
5 or i gi nal r ecor ds on Fr i day. I gave you ever yt hi ng I had on
6 her .
7 MR. KWOK: You sai d not hi ng about exper t wi t ness on
8 Fr i day.
9 MR. RUBI NSTEI N: We t al ked about a st i pul at i on, we
10 t al ked about - - you sai d you' l l consi der a st i pul at i on. I gave
11 you al l t he r ecor ds on Fr i day t o l ook over .
12 MR. KWOK: You di dn' t - -
13 MR. RUBI NSTEI N: I t ' s amazi ng, and t hey knew about t he
14 mast er f i l e bef or e.
15 MR. KWOK: I don' t know about i t . I don' t know what
16 you' r e t al ki ng about , Mr . Rubi nst ei n. Those r ecor ds wer e
17 pr oduced i n r esponse t o t he gover nment ' s i f as when subpoena i n
18 t he event t he def endant t est i f i es.
19 THE COURT: I ' mnot goi ng t o al l ow her t est i mony as an
20 exper t , l at e not i ce. So she can not t est i f y t hat t hey
21 shoul d' ve char ged t o t he busi ness t hi ngs t hat , based on t he
22 Mast er Car d t hat t hey di dn' t - - she wasn' t empl oyed at t he
23 t i me, and she had not hi ng t o do wi t h t he br eak down, as I
24 under st and i t . She' s - - t her ef or e, she' s an exper t wi t ness
25 doi ng t hi ngs i n hi ndsi ght .
( 212) 805- 0300
1174
86azkar 2
1 MR. EVERDELL: Pl us she' s been i n t he cour t r oomt he
2 ent i r e t i me, she' s been an i nt egr al par t of def ense t eam, she' s
3 been at counsel t abl e, she' s been r evi ewi ng r ecor ds. She' s
4 been at counsel t abl e, she' s been r evi ewi ng r ecor ds wi t h
5 def ense counsel , she' s been t al ki ng t o wi t nesses. Thi s i s
6 compl et el y i nappr opr i at e t o cal l her i n any capaci t y, much l ess
7 i n an exper t capaci t y.
8 MR. RUBI NSTEI N: J udge, she' s mer el y aut hent i cat i ng
9 document s t hat t hey know ar e l egi t i mat e document s. She' s
10 aut hent i cat i ng t hemt o get t hemi nt o evi dence.
11 I woul d - - i f t he gover nment want s t o st i pul at e t hat ,
12 we' l l agr ee t o st i pul at e t o put t hese r ecor ds, al l t he Mast er
13 Car d r ecor ds i nt o evi dence, I won' t cal l her . I won' t ask t o
14 cal l her , I ' l l wi t hdr aw t he appl i cat i on. But I t hi nk t hat i t ' s
15 appr opr i at e t hat t he Mast er Car d r ecor ds go i nt o evi dence.
16 MR. KWOK: Ar e t hese t he r ecor ds we' r e t al ki ng about ,
18 MR. RUBI NSTEI N: I bel i eve t hey ar e.
19 MR. KWOK: Thi s st ack? Can I r evi ew t hem?
20 MR. RUBI NSTEI N: Yeah, l et me - -
21 THE COURT: Let hi mr evi ew t hem.
22 MR. RUBI NSTEI N: I j ust gr abbed t hem, and I assume
23 t hat t hi s i s what - - yes. Ther e must be addi t i onal ones
24 because i t l ooks l i ke t her e' s onl y November , J anuar y ' 03. We
25 must be mi ssi ng a coupl e. Let me see i f t her e' s - -
( 212) 805- 0300
1175
86azkar 2
1 THE COURT: What ' s t hi s?
2 I want t o make a r ecor d of t hi s exhi bi t . ZZZ i s a
3 summar y Mast er Car d br eakdown f r omOct ober 1, 2001 t i l l
4 December 31st , 2003 pur por t i ng t o show t ot al spent , a Mast er
5 Car d 90, 114. 49 and at t r i but abl e t o CASI busi ness expenses
6 $49, 944. 59. I t ' s a pr oposed exhi bi t . I t seems t o me t hat
7 cl ear l y shows t hat i t ' s an exper t t est i mony concl usi on.
8 MR. RUBI NSTEI N: J udge, we' r e goi ng t o pr i nt t hemout .
9 We have t hemi n t he comput er .
10 THE COURT: Let ' s get back her e and get t hi s t hi ng
11 det er mi ned, Mr . Rubi nst ei n.
12 MR. RUBI NSTEI N: We' r e pr i nt i ng out of t he comput er
13 t he st at ement s t hat wer e - - t hese st at ement s.
14 THE COURT: The ones you handed me wer e i ncompl et e.
15 MR. RUBI NSTEI N: Yes, t hey' r e j ust ' 02 st at ement s.
16 We' r e mi ssi ng - -
17 THE COURT: Those ar e t he ones t hat t he wi t ness handed
18 you.
19 MR. RUBI NSTEI N: No. I t ook her book when she wasn' t
20 her e, J udge, and I br ought - - I t ook - -
21 THE COURT: And she doesn' t have t hem; t hey' r e comi ng
22 out of t he comput er now?
23 MR. RUBI NSTEI N: Yes. She had t hem. She' s - - i t ' s
24 not r el evant what - -
25 THE COURT: Now, what ar e we goi ng t o do?
( 212) 805- 0300
1176
86azkar 2
1 MR. RUBI NSTEI N: So we' r e pr i nt i ng out t he r est of t he
2 st at ement s dur i ng t he gr ant per i od, and we' l l - - and ask t he
3 gover nment t o st i pul at e t hat t hese ar e hi s Mast er Car d
4 st at ement s.
5 MR. KWOK: Hi s per sonal .
6 MR. RUBI NSTEI N: Per sonal Mast er Car d st at ement s.
7 MR. KWOK: Gover nment has no pr obl emwi t h t hat , j ust
8 t hat t hese ar e hi s Mast er Car d r ecor ds f or hi s per sonal Mast er
9 Car d, and t hey ar e what t hey pur por t t o be.
10 MR. EVERDELL: But l et ' s be speci f i c. We' r e not
11 st i pul at i ng t o any anal ysi s of t hem.
12 MR. KWOK: J ust t hese r ecor ds.
13 MR. RUBI NSTEI N: J ust t he r ecor d, j ust t he r ecor ds.
14 THE COURT: Al l r i ght , can we go ahead?
16 MR. EVERDELL: We need t o l ook at t he f ul l set of
17 r ecor ds.
18 THE COURT: You' l l cal l Ms. Far nswor t h f i r st ?
19 MR. RUBI NSTEI N: I ' l l cal l Ms. Far nswor t h f i r st .
20 MR. KWOK: Do we have t i me t o pr epar e f or Ms.
21 Far nswor t h?
22 MR. EVERDELL: We haven' t been abl e - -
23 MR. KWOK: J ust deal i ng wi t h al l t hese new sur pr i ses.
24 MR. EVERDELL: I f we can have 15, 20 mi nut es j ust t o
25 l ook - -
( 212) 805- 0300
1177
86azkar 2
1 THE COURT: Al l r i ght , r un down get t hat . Let ' s go.
3 THE COURT: Come back as soon as you can.
4 ( Recess)
6 THE COURT: Al l r i ght , ar e we r eady, l adi es and
7 gent l emen?
8 MR. RUBI NSTEI N: Yes. I wi l l cal l t he next wi t ness.
9 I have my associ at e phot ocopyi ng al l t he st at ement s so t hat
10 ever ybody has a set , but I ' l l cal l Mi ss Far nswor t h now.
12 MR. RUBI NSTEI N: I ' l l cal l Mi ss Far nswor t h now and
13 we' l l have t he r ecor ds f or t hemi n t ot al .
14 THE COURT: Have you made a deci si on yet or has your
15 cl i ent made a deci si on yet about t he ot her aspect ?
16 MR. RUBI NSTEI N: Yes, we made a deci si on. We' l l r est
17 af t er we submi t t he Mast er Car d bi l l s.
18 THE COURT: I t hi nk t he gover nment consent ed t o t hat .
20 MR. KWOK: Yes.
21 THE COURT: As per sonal - - hi s per sonal Mast er Car d.
23 THE COURT: But I meant I wasn' t r ef er r i ng t o t hat
24 deci si on - - I was r ef er r i ng t o t he ot her deci si on, j ust because
25 I don' t want t o have t o excuse t he j ur y agai n i f you made a
( 212) 805- 0300
1178
86azkar 2
1 deci si on about cal l i ng t he def endant .
2 MR. RUBI NSTEI N: No, t hat ' s what I sai d, J udge, t hat
3 we made t hat deci si on not t o cal l t he def endant .
4 THE COURT: Not t o cal l .
5 MR. RUBI NSTEI N: Not t o cal l hi m.
6 THE COURT: Then I have t o ask Dr . Kar r on a coupl e - -
7 my pr act i ce, t o ask Dr . Kar r on a coupl e of quest i ons.
8 MR. RUBI NSTEI N: Oh, sur el y.
9 THE COURT: Dr . Kar r on, you under st and t hat you have a
10 r i ght t o t est i f y i n t hi s case.
11 THE DEFENDANT: Yes, I do.
12 THE COURT: And af t er consul t at i on wi t h Mr .
13 Rubi nst ei n, you' ve deci ded t hat you do not want t o t est i f y?
14 THE DEFENDANT: Mr . Rubi nst ei n has - -
16 MR. RUBI NSTEI N: The J udge asked you a quest i on.
17 THE DEFENDANT: Mr . Rubi nst ei n has convi nced me t hat
18 i t woul d be i n t he best i nt er est not t o t est i f y.
19 THE COURT: Wel l , t hat i sn' t what I ' maski ng you. I ' m
20 aski ng you - - you have t he f i nal deci si on - -
21 THE DEFENDANT: I ' ve made t he f i nal deci si on.
22 THE COURT: - - about whet her you t est i f y or not . So I
23 want t o know whet her you' ve made t hat deci si on your sel f or
24 whet her your j ust goi ng al ong wi t h what ever Mr . Rubi nst ei n
25 says.
( 212) 805- 0300
1179
86azkar 2
1 THE DEFENDANT: I ' ve made t he f i nal deci si on.
2 THE COURT: You have?
3 THE DEFENDANT: Yes, si r .
4 THE COURT: Not t o t est i f y?
5 THE DEFENDANT: That i s cor r ect .
6 THE COURT: Al l r i ght . I j ust want ed t o - - and i t ' s
7 your own det er mi nat i on?
8 THE DEFENDANT: I n consul t wi t h my advi sor .
10 THE DEFENDANT: I woul d - - yes. The answer i s yes.
11 I t ' s a wel l consi der ed deci si on. I ' ve t al ked about i t at
12 l engt h wi t h al l my advi sor s, al l my f r i ends, al l my char act er s.
13 THE COURT: Al l r i ght , t hat ' s al l . I j ust want ed t o
14 be sur e i t was your deci si on. Because somet i mes we have
15 l i t i gat i on t hat ar i ses af t er a case, and some j udges don' t
16 f ol l ow t he pr ocedur e t hat I f ol l ow. And I f ol l ow t hat
17 pr ocedur e because i t seems t o me t hat i s t he way i t shoul d be
18 asked. But t hat ' s my own. I won' t say t hat i t ' s appr opr i at e
19 si nce some J udges don' t do i t .
20 MR. RUBI NSTEI N: I t hi nk i t i s, and I ' ve - - you' r e t he
21 onl y J udge t hat ever di d i t , and I amappr eci at i ve t hat you do
22 i t , J udge.
24 MR. RUBI NSTEI N: I t ' s ver y - -
25 THE COURT: Al l r i ght , l et ' s get t he j ur y. Let ' s have
( 212) 805- 0300
1180
86azkar 2
1 Mi ss Far nswor t h, l et ' s get t he Mast er Car d i n. And t hen t he
2 gover nment has r ebut t al ?
3 MR. KWOK: I don' t t hi nk we do.
4 THE COURT: Wel l , you' l l be asked.
5 ( J ur y ent er i ng; j ur y pr esent )
7 Your next wi t ness, Mr . Rubi nst ei n.
9 WI NDY LYNNE FARNSWORTH,
14 Q. Good mor ni ng, Ms. Far nswor t h. Have we met ?
15 A. J ust bef or e I came t o cour t , out si de.
16 Q. Now - -
17 A. Out si de.
18 Q. What i s your busi ness or occupat i on?
19 A. I aman engi neer . I cur r ent l y wor k f or AS&L Li t hogr aphy i n
20 Wi l t on, Connect i cut . I ' ma seni or engi neer i n t hat posi t i on,
21 and I ' ve been t her e appr oxi mat el y t wo- and- a- hal f year s, and
22 I ' ve been an empl oyee of engi neer i ng pr et t y much my ent i r e
23 l i f e, adul t l i f e.
24 Q. And wher e do you r esi de?
25 A. I cur r ent l y r esi de i n New Mi l l f or d, Connect i cut .
( 212) 805- 0300
1181
86azkar 2 Far nswor t h - di r ect
1 Q. And do you know - - how l ong do you r esi de i n New Mi l l f or d,
2 Connect i cut ?
3 A. I pur chased t hat home i n December , 2000, and I ' ve been
4 t her e ever si nce.
5 Q. And do you know t he def endant , Dani el Kar r on?
6 A. Yes, I do.
7 Q. Dr . Kar r on? Do you see t he def endant i n cour t ?
8 A. Yes.
9 Q. Coul d you poi nt hi mout , pl ease?
10 A. Ri ght t her e.
11 MR. RUBI NSTEI N: I ndi cat i ng t he def endant , your Honor .
12 THE COURT: The wi t ness - - t he r ecor d wi l l i ndi cat e
13 t he wi t ness has i dent i f i ed t he def endant .
14 Q. Now, when di d you meet t he def endant ?
15 A. I met t he def endant i n, I t hi nk ear l y Spr i ng, 1999 when I
16 was out on t he east coast f or a j ob i nt er vi ew. I had got t en
17 hi s name f r oma mut ual f r i end t o meet when I came out her e on
18 t he east coast f or t hat i nt er vi ew. And I don' t t hi nk we
19 act ual l y met at t hat t i me, but we spoke on t he t el ephone.
20 Q. And wher e di d you come f r om?
21 A. I came f r omt he Sal t Lake ar ea, Sout h J or dan, Ut ah.
22 Q. And di d t her e come a t i me when you met t he def endant ?
23 A. Yeah. Yes, I di d meet t he def endant i n, I bel i eve i t was
24 when I f i nal l y came out t o l i ve and r esi de i n t he New Yor k ar ea
25 i n Apr i l , 1999.
( 212) 805- 0300
1182
1 Q. And when you came t o r esi de i n t he New Yor k ar ea, wher e di d
2 you r esi de?
3 A. I got an apar t ment i n Sel don on Long I sl and, and I was
4 t her e unt i l I l ost my j ob due t o f i nanci al cut backs i n t he
5 company I was wor ki ng f or , i n f al l of 1999.
6 Q. And wher e di d you move when - - f r omSel don af t er you l ost
7 your j ob?
8 A. I moved i nt o New Yor k i nt o t he def endant ' s apar t ment as a
9 r oommat e.
10 Q. And how l ong di d you st ay t her e?
11 A. Appr oxi mat el y a year .
12 Q. Di d you have a per sonal r el at i onshi p wi t h t he def endant ?
13 A. We wer e f r i ends, and t hat was about as f ar as i t went . We
14 wer e not i nt i mat e i n any way.
15 Q. And so how l ong di d you st ay i n t he - - was t hi s at t he
16 apar t ment at 300 East 33r d St r eet , apar t ment 4N?
18 Q. And whi ch por t i on of t he apar t ment di d you ut i l i ze?
19 A. I l i ved i n t he l i vi ng r oom, whi ch i s - - essent i al l y, woul d
20 be cal l ed t he l i vi ng r oom. I had a st eel bunk bed. Al l of my
21 per sonal bel ongi ngs t hat I di dn' t have i n st or age wer e t her e,
22 my cl ot hi ng and my ot her per sonal ef f ect s, and t hat ' s pr et t y
23 much wher e I st ayed. I had t he bed above i t f or guest s, and
24 t hen I had t he bed on t he bot t omf or mysel f .
25 Q. Now, di d you pay t he def endant any f or l i vi ng t her e?
( 212) 805- 0300
1183
1 A. Yes. I pai d r ent whi l e I was t her e each mont h. I al so
2 cont r i but ed t owar d gr ocer i es and ot her sor t of t hi ngs t hat , you
3 know, t r anspor t at i on, t hat sor t of t hi ng.
4 Q. So how l ong di d you st ay t her e al t oget her ?
5 A. I t hi nk - - my r ecol l ect i on i s I was t her e f r omf al l 1999
6 unt i l about November of 2000 when I moved i nt o my house i n New
7 Mi l l f or d.
8 Q. And have you r emai ned i n cont act wi t h t he def endant si nce
9 t hat t i me?
10 A. Yes, I have.
11 Q. On a r egul ar basi s?
12 A. Yeah, of f and on.
13 Q. And has t he def endant vi si t ed you i n New Mi l l f or d,
14 Connect i cut ?
15 A. Of f and on. Not t er r i bl y of t en, but yeah. I mean, as f ar
16 as f r i ends ar e concer ned, you know, on occasi on.
17 Q. Has t he def endant st ayed over your house?
18 A. Yes, over ni ght occasi onal l y.
19 Q. And how - - coul d you descr i be your house f or us?
20 A. I have a t wo st or y home, appr oxi mat el y 1600 squar e f eet .
21 Ther e' s t hr ee bedr ooms and a basement , l i vi ng r oomar ea, di ni ng
22 r oom.
23 Q. And di d you have, i n 2001 or 2002, di d you r ent out any
24 por t i on of your home?
25 A. D. B. Kar r on had pr oposed t o r ent a r oomf r omme dur i ng t he
( 212) 805- 0300
1184
1 t i me of t he gr ant , when i t became di f f i cul t f or hi s apar t ment
2 t o be a r esi dence. He never act ual l y moved i n on a per manent
3 basi s, t hough, but di d st or e equi pment i n my basement f or a
4 per i od of t i me.
5 Q. Di d you si gn a l ease?
6 A. I di d si gn a l ease. We deci ded t o not honor i t because t he
7 condi t i ons changed wi t h t he gr ant .
8 Q. What was t he l engt h of t he l ease?
9 A. I bel i eve i t was f or a year .
10 Q. Now, di d Dr . Kar r on gi ve you any moni es?
11 A. Yes. D. B. Kar r on di d pay me f or a f i r st mont h and a l ast
12 mont h f or t he - - so upf r ont money f or t he l ease.
13 Q. Di d Dr . Kar r on ever act ual l y st ay at your home?
14 A. J ust br i ef l y.
15 Q. Pur suant t o t he l ease, di d he ever r eal l y - - di d he ever
16 act ual l y move i n?
17 A. He never act ual l y moved i n, i n l i ke t hat he br ought a l ot
18 of hi s per sonal ef f ect s, but he di d come and st ay on weekends,
19 f or i nst ance.
20 Q. Al l r i ght . Di d your have occasi on t o gi ve Dr . Kar r on any,
21 any i t ems t hat you owned?
22 A. Wel l , I gi ve t hi ngs t o peopl e, I ' mqui t e gener ous. And I
23 do r ecal l one of t he t hi ngs t hat I gave Dr . Kar r on was a shoe
24 r ack.
25 Q. Let me show you what ' s i n evi dence as a gover nment
( 212) 805- 0300
1185
1 exhi bi t - - I show you what ' s i n evi dence as Gover nment ' s
2 Exhi bi t 125.
3 A. Uh- huh.
4 Q. Do you r ecogni ze t hi s i t em?
5 A. Yes, I do.
6 Q. And how do you r ecogni ze t hi s i t em?
7 A. I t was t he r ack t hat I gave D. B. Kar r on when I pur chased
8 one t hat sat on t he f l oor i nst ead of one t hat hung on t he door .
9 Q. Par don?
10 A. I gave i t t o Dr . Kar r on when I r epl aced i t wi t h a di f f er ent
11 t ype.
12 Q. And why di d you r epl ace i t ?
13 A. Because i t was on t he back of t he door , and when I cl osed
14 t he door t he shoes woul d f al l of f al l t he t i me. And so I put
15 one t hat was on t he f l oor t hat car r i ed mor e shoes and di dn' t
16 f al l of f al l t he t i me.
17 Q. And wher e di d you pur chase t hi s? Di d you pur chase t hi s or
18 was i t - -
19 A. My r ecol l ect i on i s I pur chased i t at K- mar t i n New
20 Mi l l f or d, i n t he t own t hat I l i ve i n.
21 Q. And do you r ecal l when i t was t hat you gave D. B. Kar r on
22 Gover nment ' s exhi bi t 125?
23 A. Wel l , I - - h' mm. I woul d guess pr obabl y somewher e ar ound
24 t he maybe 2002, 2003 t i mef r ame.
25 THE COURT: Di d you gi ve i t t o hi mi n Connect i cut ?
( 212) 805- 0300
1186
2 I ' msor r y, J udge.
4 MR. RUBI NSTEI N: You asked a quest i on?
5 THE COURT: Di d you gi ve i t t o hi mi n Connect i cut ?
6 THE WI TNESS: I ' mnot cer t ai n I know t he answer t o
7 t hat quest i on. I may have br ought i t wi t h me t o New Yor k on a
8 vi si t . I don' t - - r eal l y don' t r ecal l .
9 THE COURT: You don' t r ecal l ?
13 Q. Af t er - -
14 THE COURT: I do r ecal l gi vi ng i t t o hi m, but I don' t
15 r ecal l wher e I gave i t t o hi m.
17 Q. When wer e you asked - - when wer e you asked about t hi s?
18 A. The J udge asked me wher e I gave i t t o hi m, was i t i n
19 Connect i cut t hat I gave i t t o hi m, and I wasn' t cer t ai n I knew
20 wher e I gave i t t o hi m.
21 Q. When was i t t hat you di scussed t he f act t hat you had gi ven
22 Dr . Kar r on t hi s r ack, when was t he - - when di d you di scuss t hi s
23 bef or e you came t o cour t ?
24 A. Wel l , I bel i eve yest er day eveni ng D. B. Kar r on t ol d me
25 t hat - -
( 212) 805- 0300
1187
1 Q. Don' t t el l us what he t ol d you. You' r e not al l owed t o t el l
2 what he t ol d you.
3 A. Wel l , he - - he t ol d me t hat I was goi ng t o get a cal l f r om
4 you, and t hat I woul d be asked t o t est i f y about , among ot her
5 t hi ngs, per haps somet hi ng I gave hi m. And so he says, do you
6 r ecal l t he shoe r ack t hat you gave me? And I says, oh, yeah,
7 t hat shoe r ack, yeah. Wel l , t he gover nment t ook i t as
8 evi dence. And I sai d oh, r eal l y? And so he says, wi l l you - -
9 ar e you wi l l i ng t o t est i f y about t hat ? And I sai d yes, I
10 woul d, you know.
11 MR. RUBI NSTEI N: Thank you. No f ur t her quest i ons.
14 BY MR. KWOK:
15 Q. Good mor ni ng.
17 Q. You ment i oned a moment ago t hat t he def endant never l i ved
18 i n Connect i cut , cor r ect , wi t h you?
19 THE COURT: I ' msor r y, I di dn' t cat ch your quest i on.
20 Q. A moment ago you t est i f i ed t hat t he def endant never l i ved
21 wi t h you i n Connect i cut , i s t hat cor r ect ?
23 Q. So f r omt he per i od f r om2000 t o 2003, as f ar as you know,
24 t he def endant was l i vi ng i n mi dt own Manhat t an, i sn' t t hat t r ue?
( 212) 805- 0300
1188
86azkar 2 Far nswor t h - cr oss
1 Q. The same pl ace t hat you l i ved at f or - -
2 A. The same r esi dence t hat I l i ved at , yes.
3 Q. Di d you vi si t hi mt her e at t hat l ocat i on?
4 A. On occasi on. On t he weekends we, you know, woul d do t hi ngs
5 l i ke, f or i nst ance, we woul d, woul d r i de our bi kes ar ound Lower
6 Manhat t an, and get exer ci se, and do t hi ngs t hat f r i ends do.
7 Q. Di d i t appear t o you whi l e you wer e vi si t i ng t hat
8 apar t ment , t hat t he def endant l i ved t her e?
9 A. Af t er a f ashi on, i t was a di f f i cul t pl ace t o l i ve. I t was
10 noi sy, and mor e an of f i ce t han an apar t ment .
11 Q. Ri ght . Let me show you gover nment Exhi bi t 101, page ei ght ,
12 i f we coul d pul l t hat up on t he scr een coul d we zoomi n - - zoom
13 i nt o t he hi ghl i ght ed i t em.
14 Now, a moment ago you t est i f i ed about t he shoe r ack;
15 you r emember t hat ?
16 A. Uh- huh.
17 Q. Do you know what happened t o t hi s shoe r ack?
18 A. Oh, I don' t r eal l y know. A Navy nyl on t en - - do you know
19 what t hat i s?
20 Q. Wel l , l et me zoomout . Can we zoomout ? Can we zoomi n on
21 t he name, j ust on t op of t hat l i st ?
22 THE COURT: I ' msor r y, what ar e you - -
23 BY MR. KWOK:
24 Q. What does t hat say?
25 A. I t says, D. B. Kar r on.
( 212) 805- 0300
1189
86azkar 2 Far nswor t h - cr oss
2 THE COURT: Any r edi r ect , Mr . Rubi nst ei n?
3 MR. RUBI NSTEI N: Woul d you put t hat exhi bi t back up,
4 pl ease?
5 THE COURT: Yes.
6 MR. RUBI NSTEI N: Woul d you move t he yel l ow l i ne down
7 t o her e? Over her e, yeah. Ri ght t her e.
9 Q. Do you see t hat name, Mi ss Far nswor t h?
10 A. I see. I t says somet hi ng l i ke J onat han Mason.
11 Q. Di d you know a - - di d you ever come i n cont act wi t h a
12 cont r act or who di d some wor k at Dr . Kar r on' s apar t ment ?
13 A. Wel l , t her e wer e a number of cont r act or s who di d come i n
14 and do wor k on occasi on. I don' t speci f i cal l y r ecogni ze - - I
15 t hi nk t her e was somebody named J ohn, yes.
16 THE COURT: Di d he have a Br i t i sh accent ?
17 THE WI TNESS: Oh, yeah, I t hi nk so. Yeah.
18 MR. RUBI NSTEI N: Okay. I have no f ur t her quest i ons.
19 MR. KWOK: No f ur t her quest i ons, your Honor .
20 THE COURT: Al l r i ght . Thank you ver y much. Next
21 wi t ness.
22 THE DEPUTY CLERK: Wi t ness i s excused?
23 THE COURT: Yes, you' r e excused.
24 THE WI TNESS: AmI excused?
( 212) 805- 0300
1190
86azkar 2 Far nswor t h - r edi r ect
1 THE COURT: Next wi t ness, Mr . Rubi nst ei n.
2 MR. RUBI NSTEI N: May I appr oach t he gover nment , your
3 Honor ?
4 THE COURT: Yes. Do you have an exhi bi t ?
5 ( Pause whi l e counsel conf er )
6 MR. RUBI NSTEI N: Your Honor , we wi l l - - your Honor , at
7 t hi s t i me t her e i s a st i pul at i on bet ween t he Uni t ed St at es of
8 Amer i ca by Assi st ant Uni t ed St at es At t or ney St even Kwok and Dr .
9 Kar r on, t hat - - and t hi s i s, t hi s st i pul at i on wi l l be mar ked as
10 def endant ' s ZZZ. St i pul at i on pr ovi des t hat t he def endant ' s
11 ZZZ- 1 ar e t he per sonal Mast er Car d account s, st at ement f or Dr .
12 D. B. Kar r on' s per sonal Mast er Car d account number 5263, 2710,
13 0928, 1872. St at ement s ar e f r omOct ober 1st , 2001, t hr ough
14 J une 30t h, 2003.
15 THE COURT: St i pul at ed i nt o evi dence?
16 MR. RUBI NSTEI N: I , or i nt o evi dence def endant ' s
17 ZZZ- 1.
18 THE COURT: St i pul at i on i s ZZZ, and t he Mast er Car d
19 r ecor ds of , per sonal Mast er Car d r ecor ds of Dr . Kar r on ar e
20 mar ked ZZZ- 1?
22 THE COURT: They ar e admi t t ed i n evi dence.
23 ( Def endant ' s Exhi bi t s ZZZ and ZZZ- 1 r ecei ved i n
24 evi dence)
( 212) 805- 0300
1191
1 MR. RUBI NSTEI N: And wi t h t hat , your Honor , t he
2 def endant r espect f ul l y r est s.
3 THE COURT: Gover nment ?
4 MR. KWOK: Gover nment r est s.
5 THE COURT: Wel l , j ur y, you' ve now hear d al l t he
6 evi dence and have t he exhi bi t s, but we have t o pr epar e f or t he
7 summat i ons of counsel . And i t i s my pr act i ce t o gi ve t hema
8 copy of t he char ge so t hey can be f ami l i ar wi t h what t he char ge
9 i s and make r ecommendat i ons f or changes i n i t . And I t hi nk i t
10 woul d be a wast e of your t i me t o r emai n her e t oday because t he
11 char gi ng conf er ence gener al l y t akes at l east an hour , and
12 counsel haven' t had an oppor t uni t y t o r ead t he char ge yet . I
13 t hi nk t hat ' s a bet t er way, and come back t omor r ow and, at 9: 30,
14 and you' l l hear t he summat i ons of counsel and t he char ge of t he
15 Cour t . You shoul d have t he case t omor r ow mor ni ng at t he end of
16 t he mor ni ng, i f you coul d get her e at 9: 30, and t he heat i sn' t
17 t oo bad. So you' r e excused unt i l 9: 30 t omor r ow mor ni ng.
18 Pl ease be pr ompt and we' l l t r y and get you t he case by
19 l uncht i me.
23 THE COURT: You' l l want t i me t o go over t he char ge.
24 What t i me do you want t o meet on t he char ge, counsel ?
25 MR. RUBI NSTEI N: You want t o meet at 2: 00 o' cl ock,
( 212) 805- 0300
1192
1 your Honor ?
2 THE COURT: At 2: 00 o' cl ock. Enough t i me? Okay.
3 MR. RUBI NSTEI N: I woul d t hi nk so.
4 THE COURT: I t ought t o be. I t ' s 12: 00 o' cl ock now.
6 THE COURT: Fi ne.
7 MR. KWOK: That ' s f i ne.
8 THE COURT: Al l r i ght , see you at 2: 00 o' cl ock.
9 MR. KWOK: Thank you.
11 THE COURT: For t he char ge.
14
15
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1193
2 2: 10 p. m.
3 THE COURT: Has ever yone had a chance t o go over t he
4 char ge? I have a number ever changes mysel f t hat I f ound, so
5 why don' t we go t o f our pages i n. I don' t t hi nk we have any
6 st i pul at i ons of t est i mony, di d we?
7 MR. KWOK: No, we di d not , your Honor .
8 THE COURT: St r i ke t hat bot t omof page 3.
9 MR. EVERDELL: To t he t op of page 4?
10 THE COURT: To t he t op of page 4, and st r i ke t he
11 " al so" i n t he f ol l owi ng par agr aph?
13 MR. KWOK: Yes.
14 THE COURT: Anyt hi ng up unt i l page 11?
15 MR. KWOK: At t he bot t omof page 11 t her e i s a sect i on
16 on l aw enf or cement wi t ness.
17 THE COURT: That ' s what I was comi ng t o. I don' t
18 t hi nk we need l aw enf or cement wi t ness. Does anyone want
19 gover nment empl oyee?
20 MR. RUBI NSTEI N: Wel l , i sn' t OI G l aw enf or cement ?
21 Ri l ey i s OI G.
22 THE COURT: She i s an enf or cement per son?
23 MR. RUBI NSTEI N: Wel l , she wor ks f or t he Of f i ce of
24 I nspect or Gener al .
25 THE COURT: She i s not enf or cement . She i s not l aw
( 212) 805- 0300
1194
1 enf or cement . She i s an audi t or . I t hought gover nment empl oyee
2 woul d be suf f i ci ent .
4 THE COURT: And you can have t hat . So, I wi l l j ust
5 make t hat change i n t he f i r st , second and next t o l ast l i ne on
6 t hat page.
7 As I go t hr ough, t he next t hi ng woul d be def endant ' s
8 t est i mony, whi ch we woul d st r i ke. I s ever yone happy up t o page
9 13?
10 MR. RUBI NSTEI N: I have not hi ng goi ng on up t o page
11 13, your Honor .
12 THE COURT: Anyt hi ng f r om13 up t o 20? 18, I guess I
13 shoul d say.
14 MR. RUBI NSTEI N: None by t he def ense.
15 THE COURT: I wi l l r ead t he i ndi ct ment al oud. Then I
16 have quot ed f r omt he st at ut e. Does anyone have any pr obl em?
19 THE COURT: Now, I get over t o t he next sect i on, page
20 19. Can' t we el i mi nat e " pr oper t y" and j ust - - i t says money or
21 pr oper t y. And t hi s case doesn' t i nvol ve any pr oper t y as I
22 under st and i t . I t ' s i n t he st at ut e. Peopl e wi l l hear i t i n
23 t he st at ut e or hear i t i n t he i ndi ct ment , but i t r eal l y
24 i nvol ves money, so I t hought I coul d el i mi nat e t he wor d " or
25 pr oper t y" t hr oughout . But I want t o hear f r omcounsel .
( 212) 805- 0300
1195
1 MR. KWOK: The gover nment has no pr obl emwi t h t hat .
2 MR. RUBI NSTEI N: I have no pr obl emwi t h i t , J udge.
3 THE COURT: So t hen on page 19 I wi l l st r i ke " or
4 pr oper t y" .
5 MR. RUBI NSTEI N: I t ' s i n t hi r d el ement and f i f t h
6 el ement .
7 THE COURT: Thi r d, f our t h and f i f t h el ement .
8 Now, I woul d put t he " wi t hout aut hor i t y" af t er t he
9 def endant , I t hi nk, i n t he t hi r d par agr aph as opposed t o havi ng
10 i t at t he end of t he par agr aph.
11 MR. RUBI NSTEI N: Wher e ar e you sayi ng, your Honor ?
12 THE COURT: I n t he t hi r d par agr aph, par agr aph t hr ee, I
13 woul d t ake t he " wi t hout aut hor i t y" whi ch I t agged on t o t he end
14 of t he t hi r d el ement and pl ace i t af t er t he def endant , so t hat
15 i t mi r r or s t he way i n whi ch t he st at ut e l anguage i s i n
16 par agr aph ( a) ( 1) ( A) of Sect i on 666. And I woul d al so be
17 i ncl i ned t o st r i ke " bel onged t o" i n t he f our t h par agr aph.
18 Mi sappl i ed money under t he car e, cust ody and cont r ol of CASI .
19 MR. RUBI NSTEI N: Wel l , l et ' s deal wi t h - - I don' t have
20 a pr obl emwi t h st r i ki ng " or pr oper t y" . What I have i s a
21 pr obl emwi t h t he l anguage " mi sappl i ed money bel ongi ng t o t he
22 car e and cont r ol of CASI " because ei t her - -
23 THE COURT: I woul d st r i ke t he " bel ong t o" and j ust
24 say " under t he car e, cust ody or cont r ol of CASI . "
25 MR. RUBI NSTEI N: But , your Honor , t hi s def i ni t i on - - I
( 212) 805- 0300
1196
1 t hi nk your Honor shoul d put t hat t hi s def i ni t i on does not
2 i ncl ude any moni es of Dr . Kar r on, whet her sal ar y or ot her wi se.
3 I mean t he f act of t he mat t er i s i t ' s our cont ent i on t hat i t
4 wasn' t j ust money.
5 The way i t r eads now any money spent by CASI , you ar e
6 suggest i ng t hat i t bel ongs t o t he gr ant .
7 THE COURT: No, I ' mt r yi ng not t o suggest t hat . I ' m
8 t r yi ng t o l i mi t t hat so t hat i n f act i t has t o be gr ant money
9 t hat ' s mi sappl i ed.
10 MR. RUBI NSTEI N: Wel l , woul d your Honor consi der
11 " mi sappl i ed gr ant money" ?
12 THE COURT: Wel l , maybe t he smar t t hi ng t o do i s t o
13 addr ess how we phr ase t he t hi r d or f our t h el ement - - t he f our t h
14 el ement .
15 Af t er you r ead t he changes t hat I t hi nk ar e necessar y
16 i n t he l onger ver si ons of t he el ement s, si nce af t er we ment i on
17 what t he el ement s of t he cr i me char ged ar e, t hen I go i nt o what
18 t hose el ement s ar e and gi ve f ur t her i nst r uct i ons on t hem. And
19 I have got changes t her e t hat I t hi nk once you l i st en t o, t hen
20 we can go back and see whet her t he shor t ened ver si on t hat ' s
21 supposed t o t el l t he j ur y what t he el ement s ar e i s a f ai r
22 st at ement of t he l onger ver si on. Al l r i ght ?
23 So, by goi ng t o t he second el ement - - because I don' t
24 t hi nk t her e i s a pr obl emi n t er ms of t he f i r st el ement , bei ng
25 an agent of CASI . I t hi nk you pr obabl y al l agr ee wi t h t hat .
( 212) 805- 0300
1197
1 MR. RUBI NSTEI N: We concede t hat .
2 THE COURT: The second el ement , I woul d l i ke t o add at
3 t he end - - I have t hi s l ast sent ence. " You can choose any
4 per i od of f eder al f undi ng you want , " and I woul d say, " as l ong
5 as" - - whi ch i s i n t her e - - " you unani mousl y f i nd t hat t he act s
6 of mi sappl i cat i on char ged i n t he i ndi ct ment occur r ed i n t hat
7 one year per i od. "
8 So, I woul d make t hemhave a unani mous f i ndi ng of a
9 per i od of one year , what t hat consi st s of , whet her i t begi ns
10 Oct ober 1 or J anuar y 1 and ends on Sept ember 30 or December 31.
11 MR. KWOK: The gover nment has no pr obl emwi t h t hat .
12 MR. RUBI NSTEI N: I have no pr obl emwi t h t hat , your
13 Honor .
14 THE COURT: Then when you get t o t he t hi r d el ement I
15 st r uck t he wor d " pr oper t y" out . Then I added i n t he f i r st f ul l
16 par agr aph on page 21, " I n t hi s case, t o i nt ent i onal l y mi sappl y
17 pr oper t y means t o i nt ent i onal l y appl y gr ant money r ecei ved by
18 CASI i n a manner i n whi ch t he def endant knew was unaut hor i zed
19 under t he t er ms and condi t i ons of t he gr ant . "
20 MR. RUBI NSTEI N: I woul d j ust ask t hat your Honor put
21 i n t her e " excl udi ng sal ar y" .
22 THE COURT: Ri ght af t er t hat , " Mi sappl i cat i on of
23 money, however , does not appl y t o bona f i de sal ar y, wages,
24 f r i nge benef i t s or ot her compensat i on pai d or expenses pai d or
25 r ei mbur sed i n t he usual cour se of busi ness. " So, t hat ' s t he
( 212) 805- 0300
1198
1 f ol l owi ng sent ence. So, i t seems t o me t hat cover s what you
2 j ust suggest ed.
3 MR. RUBI NSTEI N: I t hi nk so, J udge. I know t hat t he
4 l ast l i ne i n t he par agr aph above i s what your Honor spoke t o us
5 about , " and even i f such use benef i t ed CASI i n some way, " and
6 t hat ' s l anguage f r omt he Tent h Ci r cui t case. I ' mnot ver y
7 happy wi t h t he Tent h Ci r cui t i n t hi s case, and I woul d have t o
8 obj ect t o t he i ncl usi on of - -
9 THE COURT: I ' mnot sur e whet her i t i s or i s not i n
10 t he Tent h Ci r cui t . I t hi nk i t ' s f r omEr l acker .
11 MR. RUBI NSTEI N: I amaf r ai d i t was i n Er l acker .
12 MR. EVERDELL: Er l acker i s t he Second Ci r cui t case.
13 MR. RUBI NSTEI N: Er l acker i s t he Sout her n Ci r cui t .
14 THE COURT: Second Ci r cui t .
15 MR. RUBI NSTEI N: Yeah. I saw Er l acker . A l ot of
16 t i mes cases ar e f act dr i ven.
17 THE COURT: I agr ee t hey ar e f act dr i ven, and t hat ' s
18 why I di dn' t f ol l ow Er l acker and I f ol l owed t he Tent h Ci r cui t .
19 I al so t hi nk i t ' s i n Sand as t hat way.
20 But I di st i ngui shed Er l acker , because i n Er l acker i t
21 i nvol ved f unds t hat t he pol i ce depar t ment r ecei ved, and what
22 t he def endant di d t her e was t o di sr egar d t he i nst r uct i ons of
23 hi s super i or s about how money shoul d be spent , and t hat seems
24 t o me t o be a di f f er ent si t uat i on t han t he case her e, wher e you
25 have a not - f or - pr of i t headed by t he def endant who r ecei ved t he
( 212) 805- 0300
1199
1 gr ant . I t ' s mor e l i ke a not - f or - pr of i t i n t he Tent h Ci r cui t
2 case. Then we had anot her case wher e we f ound t he same
3 l anguage i n - - t he Tent h Ci r cui t case bei ng Uni t ed St at es v.
4 Fr asi er , 53 F. 3d 1105. And when I l ooked at t he Tent h Ci r cui t
5 case, t hey st at e t he act ual el ement s t hat t he gover nment was
6 r equi r ed t o pr ove, and t hat ' s what al er t ed me t o t he " wi t hout
7 aut hor i t y" bei ng appl i cabl e t o t he i nt ent i onal mi sappl i cat i on
8 of pr oper t y.
9 MR. RUBI NSTEI N: Wel l , t hat ' s what my concer n i s, t hat
10 t hat l anguage ki nd of gi ves an i nst r uct i on t hat says t hat ' s t he
11 i nt ent , and i t t akes t he i nt ent i ssue away f r omt he j ur y' s
12 det er mi nat i on. That ' s my concer n.
13 THE COURT: I ' msor r y. I don' t want t o t ake anyt hi ng
14 away f r omt he j ur y, so l et me under st and what your poi nt i s.
15 MR. RUBI NSTEI N: I j ust f eel , your Honor , t hat t he
16 l anguage " even i f such use benef i t ed CASI i n some way" - - now,
17 t he def endant ' s i nt ent was, we i nt end t o ar gue, was t o benef i t
18 CASI . And we have t he si t uat i on wher e we don' t have a
19 di r ect i on or a commandment t hat you have t o use t he money A, B
20 or C. We have a ki nd of f l ui d si t uat i on her e under t he ATP
21 gr ant t hat you ar e al l owed t o r evi se.
22 THE COURT: I n some ways t he ATP gr ant i s f l ui d i n f or
23 i nst ance t he 10 per cent r ul e and i n some ot her ways, but t hose
24 ar e - - I t r i ed t o avoi d i n t hi s l anguage anyt hi ng t hat woul d
25 i nf l uence t he j ur y i n any way.
( 212) 805- 0300
1200
1 I n f act , what i t does i s - - I wi l l r ead t hat sent ence
2 agai n t o you, or I wi l l r ead t he par agr aph t o you so t o make
3 sur e you have i t , because I don' t qui t e under st and how I ' m
4 t aki ng away anyt hi ng f r omt he j ur y' s det er mi nat i on.
5 " I n t hi s case, t o i nt ent i onal l y mi sappl y money means
6 t o i nt ent i onal l y appl y t he gr ant money r ecei ved by CASI i n a
7 manner i n whi ch t he def endant knew i t was unaut hor i zed under
8 t he t er ms and condi t i ons of t he gr ant . Mi sappl i cat i on of
9 money, however , does not appl y t o bona f i de sal ar y, wages,
10 f r i nge benef i t s or ot her compensat i on pai d, or expenses pai d,
11 or r ei mbur sed i n t he usual cour se of busi ness. "
12 Now, t aki ng t he next par agr aph t oo. " As I sai d, t he
13 gover nment must pr ove beyond a r easonabl e doubt t hat t he
14 def endant act ed i nt ent i onal l y i n mi sappl yi ng CASI ' s money. To
15 f i nd t hat t he def endant act ed i nt ent i onal l y, you must be
16 sat i sf i ed beyond a r easonabl e doubt t hat t he def endant act ed
17 del i ber at el y and pur posef ul l y, t hat i s, t he def endant ' s
18 mi sappl i cat i on must have been t he pr oduct of t he def endant ' s
19 consci ous obj ect i ve t o spend t he money f or an unaut hor i zed
20 pur pose r at her t han t he pr oduct of a mi st ake or acci dent or
21 some ot her i nnocent r eason. "
22 The gover nment may have some obj ect i on.
23 MR. KWOK: No, t he gover nment t hi nks t hat t hi s i s a
24 ver y f ai r i nst r uct i on. We under st and why Mr . Rubi nst ei n mi ght
25 obj ect t o t he " even i f such use benef i t ed CASI i n some way"
( 212) 805- 0300
1201
1 l anguage, but t hat ' s t he l aw accor di ng t o t he Second Ci r cui t
2 and t he Fr asi er case t hat your Honor ci t ed f r omt he Tent h
3 Ci r cui t .
4 MR. RUBI NSTEI N: J udge, I don' t t hi nk I want t o wai ve
5 t hi s obj ect i on.
6 THE COURT: You have made your obj ect i on. I have no
7 obj ect i on t o obj ect i on, but i f you want t o r eason wi t h me, I ' m
8 per f ect l y open t o hear i ng what ever r eason you have.
9 MR. RUBI NSTEI N: I t hi nk t hat I have exhaust ed my
10 r easoni ng at t hi s poi nt t hat t hi s i s a f l ui d si t uat i on and
11 t hat , t her ef or e, t her e was no commandment t hat i t was t hi s way
12 or t he hi ghway ki nd of t al k.
13 We had i n Exhi bi t 4 t hat you can r evi se t he budget at
14 t he end of t he year , cl ear l y and par t i cul ar l y i n t hi s case,
15 wher e t hey never went t hr ough t he pr ocess of r esol vi ng t hese
16 i ssues wi t hi n t he agency, so - -
17 THE COURT: Wel l , one of t he i ssues - - but I don' t
18 t hi nk you want me t o appr oach i t t hi s way - - but one of t he
19 i ssues, i t i s t r ue t hat some of t he evi dence t hat was
20 of f er ed - - and i f you want me t o st r i ke i t , I wi l l move t o
21 st r i ke some of t hat evi dence - - does not r eal l y go t o what t he
22 gover nment i s r equi r ed t o pr ove her e.
23 I t hi nk I ment i oned ear l i er t he pur chase of t he movi e
24 scr een or what have you, I don' t t hi nk t hat was shown t o have
25 exceeded t he budget , or t he f l exi bi l i t y under t he budget , or
( 212) 805- 0300
1202
1 t hat i t was somet hi ng t hat was not - - t hat r equi r ed appr oval by
2 t he gr ant or . Ther e ar e some i t ems l i ke t hat t hat may have been
3 of f er ed i n evi dence t hat I don' t t hi nk - - and I haven' t hear d
4 f r omt he gover nment on t hi s. I t may be t hat t hey can show t hat
5 i t exceeded t he budget , but I di dn' t pi ck i t up i n l i st eni ng t o
6 t he evi dence t hat t her e was r equi r ed appr oval f or t hat
7 expendi t ur e.
8 And I don' t t hi nk t her e woul d be any r equi r ed
9 appr oval - - pr i or appr oval f or a number of t he expendi t ur es
10 t hat wer e made because t hey wer en' t appr opr i at e under t he t er ms
11 of t he gr ant , because t hey wer e f or i ndi r ect cost s of t he
12 busi ness and not shown t o be cost s f or t he r esear ch under t aken
13 by CASI f or t he Nat i onal I nst i t ut e of Technol ogy and Sci ence - -
14 or Sci ence and Technol ogy. Because t her e ar e - - I mean - -
15 Wel l , t hen t he f our t h el ement , I don' t t hi nk i t ' s
16 mi sappl i ed money bel ongi ng t o CASI . I t ' s under t he cont r ol of
17 CASI .
18 MR. EVERDELL: Your Honor , j ust so I ' mcl ear , ar e you
19 al so car r yi ng f or war d t he change " bel ong t o, " cut t i ng t hat out ?
20 THE COURT: I was goi ng t o st r i ke out t hat .
21 MR. RUBI NSTEI N: What ' s t hat ?
22 THE COURT: I was goi ng t o st r i ke out " bel ong t o" .
23 MR. EVERDELL: And t hen j ust have " was i n t he cont r ol
24 of CASI " ? I s t hat what you' r e pr oposi ng?
25 THE COURT: I n t he j oi nt cust ody or cont r ol of CASI .
( 212) 805- 0300
1203
1 I was goi ng t o l eave t hat .
3 MR. RUBI NSTEI N: I woul d ask f or t he same l anguage
4 t hat you have i n t he f i r st f ul l par agr aph under el ement 3.
5 THE COURT: Fi r st f ul l par agr aph wher e?
6 MR. RUBI NSTEI N: On el ement 3, page 21, t hat t hat be
7 i ncl uded. I n ot her wor ds, what I ' mconcer ned about i s t hat
8 t hey may conf use money t hat was i n t he car e or cust ody.
9 THE COURT: Wel l , do you want me t o say mi sappl i ed
10 gr ant money?
11 MR. RUBI NSTEI N: Mi sappl i ed gr ant money subj ect t o t he
12 l i mi t at i on of el ement 3. Because i t ' s t he gr ant money r ecei ved
13 by CASI . And t hen i t goes on t o say bona f i de sal ar y, wages,
14 f r i nges and benef i t s. I mean I t hi nk t hat t hat has t o be
15 i ncl uded i n el ement 4.
16 THE COURT: Let me t hi nk about t hat a second.
17 t he second f ul l par agr aph shoul d be changed t o say - -
18 MR. RUBI NSTEI N: J udge, I t hi nk t hat you coul d
19 act ual l y char ge t hemj ust up t o t he wor d " i nt ent i onal l y
20 mi sappl i ed" .
21 " The f our t h el ement t he gover nment must pr ove beyond a
22 r easonabl e doubt i s t hat t he money was i nt ent i onal l y
23 mi sappl i ed. "
25 MR. EVERDELL: Your Honor , t hi s i s st ar t i ng t o sound
( 212) 805- 0300
1204
1 suspi ci ousl y l i ke a t r aci ng r equi r ement . Thi s el ement si mpl y
2 t al ks about wher e t he money was housed, wher e t he f unds t hat
3 came i n wer e put . They wer e put i n CASI ' s bank account s. The
4 evi dence at t r i al was ampl e. They al l went i nt o CASI ' s bank
5 account s, t he company bank account s. Ther e i s no t r aci ng
6 r equi r ement under t he Second Ci r cui t l aw.
7 The i ssue about bona f i de wages and sal ar y i s
8 appr opr i at el y i n t he t hi r d el ement because t hat has t o do wi t h
9 i nt ent i onal mi sappl i cat i on of money and what doesn' t count as
10 i nt ent i onal mi sappl i cat i on of money. I t doesn' t count f or bona
11 f i de wages and sal ar y and al l t hose ot her exampl es.
12 Thi s el ement , on t he ot her hand, j ust t al ks about
13 wher e t he money was housed. And t he r eason why i t ' s her e i s
14 because t he st at ut e i nt ent i onal l y cont empl at es no t r aci ng.
15 That was one of t he r easons why t he st at ut e was enact ed i n t he
16 f i r st pl ace, was t o avoi d t he t r aci ng r equi r ement t hat exi st ed
17 i n I t hi nk 641, t he t hef t of gover nment f unds st at ut e. Thi s i s
18 i t s own st at ut e t o avoi d t he t r aci ng pr obl em.
19 So, t hi s el ement j ust t al ks about wher e t he money i s
20 housed, and i t shoul d be ver y si mpl e. Was i t under t he car e,
21 cust ody and cont r ol of CASI , t he cor por at e ent i t y, whi ch i t
22 was.
23 THE COURT: I t hi nk we shoul d say i n t hat mi ddl e
24 par agr aph, " The gover nment must pr ove beyond a r easonabl e doubt
25 t hat t he def endant act ed i nt ent i onal l y i n mi sappl yi ng gr ant
( 212) 805- 0300
1205
1 money. " I t hi nk t hat ' s mor e consi st ent wi t h what was sai d
2 bef or e, and i t mi ght be mi si nt er pr et ed by t he j ur y i f we l ef t
3 i t as CASI ' s money.
4 MR. KWOK: That ' s sat i sf act or y t o t he gover nment .
5 MR. RUBI NSTEI N: That ' s sat i sf act or y t o t he def ense,
6 your Honor .
7 THE COURT: And t hi s one i s a separ at e poi nt . Thi s
8 one i s t hat t hey have t o f i nd t hat t he gr ant money was under
9 CASI ' s cont r ol , t hat t he gr ant money was under CASI ' s cont r ol .
10 And i t seems t o me - - i t says " mi sappl i ed gr ant money under t he
11 cont r ol of CASI , " and t hen " The f our t h el ement t he gover nment
12 must pr ove beyond a r easonabl e doubt i s t hat t he money t hat was
13 i nt ent i onal l y mi sappl i ed was i n t he car e and cust ody or cont r ol
14 of CASI . "
15 I f you want me t o say " t he gr ant money" - -
17 THE COURT: - - I wi l l . " Al t hough t he wor ds car e,
18 cust ody and cont r ol have sl i ght l y di f f er ent meani ngs, f or t he
19 pur pose of t hi s el ement t hey expr ess a si mi l ar i dea. Al l t hat
20 i s necessar y i s t hat CASI had cont r ol over and r esponsi bi l i t y
21 f or t he pr oper t y. " For t he pr oper t y. " For t he money" . I wi l l
22 st r i ke " pr oper t y" .
23 MR. RUBI NSTEI N: J udge, can you r ead t he whol e t hi ng?
24 THE COURT: Whi ch el ement woul d you l i ke me t o r ead?
25 MR. RUBI NSTEI N: The f our t h el ement .
( 212) 805- 0300
1206
1 THE COURT: Sur e. Four t h el ement : Mi sappl i ed gr ant
2 money under t he cont r ol of CASI . " The f our t h el ement t he
3 gover nment must pr ove beyond a r easonabl e doubt i s t hat t he
4 gr ant money t hat was i nt ent i onal l y mi sappl i ed was i n t he car e,
5 cust ody or cont r ol of CASI . Al t hough t he wor ds car e, cust ody
6 and cont r ol have sl i ght l y di f f er ent meani ngs, f or t he pur poses
7 of t hi s el ement t hey expr ess a si mi l ar i dea. Al l t hat i s
8 necessar y i s t hat CASI had cont r ol over and r esponsi bi l i t y f or
9 t he money. "
10 For t he gr ant money?
13 The f i f t h el ement , t he t hi r d par agr aph, t hi s shoul d be
14 changed. Ther e i s no al l egat i on of st eal i ng, so I woul d change
15 i t so i t r eads, " You may aggr egat e or add up t he val ue of
16 pr oper t y obt ai ned" - - or mi sappl i ed. Mi sappl i ed mi ght be
17 bet t er - - " mi sappl i ed f r oma ser i es of act s by t he def endant t o
18 meet t hi s $5, 000 r equi r ement , so l ong as you f i nd t hat each act
19 of mi sappl i cat i on was par t of a si ngl e scheme by t he def endant
20 t o mi sappl y money under t he car e, cust ody and cont r ol of CASI . "
21 Then i t goes on. We' r e changi ng t he t hi r d l i ne " f eder al
22 benef i t s" t o " f eder al gr ant " . And i n t he l ast l i ne I changed
23 " benef i t s" t o " gr ant " .
24 And on t he ver y l ast l i ne on page 23 of t hat sect i on I
25 woul d st r i ke " embezzl ed or st ol en" and say " mi sappl i ed" . So i t
( 212) 805- 0300
1207
1 r eads, " The gover nment need not t r ace t he $5, 000. " I may
2 change t hat l anguage - -
3 MR. RUBI NSTEI N: J udge, I - -
4 THE COURT: - - " al l eged t o be mi sappl i ed back t o t he
5 f eder al gr ant pr ovi ded. " Back t o t he f eder al gr ant . I woul d
6 st r i ke " pr ovi ded by t he gover nment " because t he gover nment i s
7 t he pr osecut i on. I t ' s r ef er r ed t o as t he pr osecut i on i n t he
8 begi nni ng of t he sent ence, and i f you put i t at t he end of t he
9 sent ence t oo I t hi nk i t i s possi bl y conf usi ng t o t he j ur y
10 because of t he way i t r eads.
11 MR. EVERDELL: We don' t want i t t o be t hought t hat we
12 pr ovi ded t o CASI .
13 THE COURT: I di dn' t t hi nk you want ed i t t hat way.
14 MR. RUBI NSTEI N: Your Honor , J udge, you may t hi nk I ' m
15 l osi ng i t , but - -
16 THE COURT: No.
17 MR. RUBI NSTEI N: - - but I t hi nk t hat t he st at ut e
18 r equi r es t hat you use t he wor d " st eal s" .
20 MR. RUBI NSTEI N: The st at ut e r equi r es t hat you use t he
21 wor d " st eal s" .
22 THE COURT: St eal s?
23 MR. RUBI NSTEI N: The l anguage of t he st at ut e. And I
24 t hi nk t hat ' s i n - -
25 THE COURT: I don' t want t o say st eal , because I don' t
( 212) 805- 0300
1208
1 t hi nk st eal - - st eal i mpl i es i t was used f or hi s own benef i t - -
3 THE COURT: - - as opposed t o bei ng mi sused, as opposed
4 t o bei ng - - I mean - -
5 MR. RUBI NSTEI N: I t hi nk t hat mi sused di l ut es t he
6 i nt ent t hat a per son has t o have i n or der t o be gui l t y. As a
7 mat t er of f act , i t ' s i nt er est i ng because Mr . Gi sendo had
8 suggest ed I make t hat r equest , and I t ol d hi mI t hought i t
9 woul d di l ut e what t he st at ut e r equi r es, whi ch i s t hat embezzl e,
10 st eal or t ake - -
11 THE COURT: Wel l , I wi l l agr ee wi t h you t o t hi s
12 ext ent . I t hi nk i t has t o say i nt ent i onal l y mi sappl i ed.
13 MR. KWOK: That ' s f i ne wi t h t he gover nment . I mean
14 our obj ect i on i s t hat t he st at ut e has many par t s, embezzl es,
15 st eal s, obt ai ns by f r aud, and t hen i t goes on t o say
16 i nt ent i onal l y mi sappl i ed. The l at t er pr ong i s what t he
17 gover nment char ges. So, I don' t t hi nk Mr . Rubi nst ei n i s at al l
18 cor r ect when he says t he st at ut e r equi r es t he wor d st eal . We
19 ar e not char gi ng t hat par t of t he st at ut e.
20 MR. EVERDELL: I n f act t he Er l acker case speci f i cal l y
21 r ecogni zes t her e ar e f i ve separ at e pr ongs t o t he st at ut e,
22 i nt ent i onal l y mi sappl i ed bei ng t he f i f t h pr ong. And t hi s
23 r equi r ement of $5, 000 or mor e appl i es t o each of t he f i ve
24 pr ongs, so t her e i s no r equi r ement t o say st eal her e.
25 MR. RUBI NSTEI N: I t hi nk t hat i ncl udi ng t he wor d
( 212) 805- 0300
1209
1 " i nt ent i onal l y" whi ch t he st at ut e has - -
2 MR. KWOK: That ' s per f ect l y f i ne.
3 THE COURT: I f I put i n " i nt ent i onal l y" doesn' t t hat
4 do i t ?
5 MR. RUBI NSTEI N: That does i t .
6 THE COURT: OK. Al l r i ght . My r i ght hand her e says,
7 goi ng back t o par agr aph f i f t h, t o say you may aggr egat e or add
8 up t he val ue of pr oper t y i nt ent i onal l y mi sappl i ed i n a ser i es
9 of act s by t he def endant t o meet t hi s $5, 000 r equi r ement , so
10 l ong as you f i nd out t hat each act of i nt ent i onal
11 mi sappl i cat i on was par t of a si ngl e scheme.
12 I t hi nk she has i mpr oved i t f or cl ar i t y so t her e wi l l
13 be no mi st ake about i t .
14 MR. RUBI NSTEI N: Yes, t hat sounds al l r i ght .
15 THE COURT: I don' t have much el se.
16 Uncal l ed wi t nesses?
17 MR. RUBI NSTEI N: My onl y pr obl em, your Honor - -
18 THE COURT: Wel l , do you want t o go back? We di dn' t
19 go back t o t he shor t ened ver si on of havi ng gone t hr ough t he
20 f our el ement s or f i ve el ement s. We di dn' t go back t o t he
21 shor t ened sor t of synopsi s or what ever you want t o cal l i t .
22 MR. RUBI NSTEI N: Ri ght . My pr obl emi s t hat i f t he
23 j ur y - - I agr ee wi t h your Honor t hat t he act ual el ement s
24 descr i be i n f ul l - - l ay i t out . But i f t he j ur y f ocuses - - and
25 t hi s i s not a si t uat i on - - because your Honor gi ves t he
( 212) 805- 0300
1210
1 i ndi ct ment t o t he j ur y, and i t ' s not a si t uat i on wher e t he j ur y
2 comes back and you r ei nst r uct t hem. So, I ' mconcer ned t hat
3 somet i mes, because t he shor t ver si on i s much easi er f or peopl e
4 t o f ocus on, t hat I j ust amconcer ned t hat we shoul d have some
5 mor e neut r al l anguage.
6 THE COURT: Wel l , I r ead t he i ndi ct ment t o t he j ur y,
7 and I al so gi ve t hemt he i ndi ct ment , and I al so gi ve t hema
8 copy of t he char ge.
9 MR. RUBI NSTEI N: I know t hat , J udge, but I ' msayi ng
10 t hat ' s why we shoul d i ncor por at e some of t he l anguage t hat you
11 have i n t he br oader ver si on. Not t he whol e t hi ng obvi ousl y.
12 THE COURT: Wel l , I t hought - -
13 MR. RUBI NSTEI N: Par t i cul ar l y, your Honor - -
14 THE COURT: You wi l l see t hat each one of t hem
15 " i nt ent i onal l y" i s emphasi zed.
16 MR. RUBI NSTEI N: Wel l , t he onl y t hi ng I ' maski ng your
17 Honor t o i ncl ude i s t hat i n t he f our t h, on page 19 - -
18 THE COURT: Page 19.
19 MR. RUBI NSTEI N: " t he mi sappl i ed money " - -
20 THE COURT: - - " was under t he car e, cust ody and
21 cont r ol of CASI . "
22 MR. RUBI NSTEI N: No. The mi sappl i ed ATP money, gr ant
23 money - -
24 THE COURT: Al l r i ght . You' ve got a poi nt .
25 I put i n " gr ant money" af t er " mi sappl i ed. " Mi sappl i ed
( 212) 805- 0300
1211
1 gr ant money" i n each case. Do you want t hat ?
3 THE COURT: Good.
4 MR. RUBI NSTEI N: " Mi sappl i ed gr ant money was under t he
5 car e, cust ody or cont r ol of CASI . "
6 THE COURT: Al l r i ght . I wi l l r ead t hemback now. I
7 wi l l r ead t hi r d, f our t h and f i f t h back. Let ' s st r i ke " f eder al
8 benef i t s" i n second and j ust say " a f eder al gr ant i n excess of
9 $10, 000" . I s t hat al l r i ght ?
11 MR. KWOK: Yes.
12 THE COURT: And t hen t he t hi r d wi l l r ead, " Dur i ng t hat
13 one year per i od, t he def endant wi t hout aut hor i t y i nt ent i onal l y
14 mi sappl i ed gr ant money. " Or shoul d i t be " t he gr ant money" ?
15 MR. RUBI NSTEI N: I guess so. I guess i t shoul d be
16 " t he gr ant money" .
17 THE COURT: Then t he next woul d be be, f our t h, " The
18 mi sappl i ed gr ant money was under t he car e, cust ody and cont r ol
19 of CASI . " Fi f t h, " The val ue of t he gr ant money i nt ent i onal l y
20 mi sappl i ed by t he def endant was at l east $5, 000. "
21 MR. RUBI NSTEI N: That ' s accept abl e.
22 THE COURT: OK?
24 MR. EVERDELL: Your Honor , t he onl y t hi ng I j ust want
25 t o be cl ear f or t he r ecor d i s t hat we al l under st and t hat t her e
( 212) 805- 0300
1212
1 i s no t r aci ng r equi r ement f or t he st at ut e, and def ense counsel
2 i nt ends t o ar gue t hat we have t o t r ace each bi l l , because I
3 bel i eve he i s al l egi ng t he def endant cont r i but ed i n some way t o
4 t he pot of money wi t h hi s own f unds and t hat we can' t t i e up
5 cer t ai n pur chases t o act ual gr ant money as opposed t o t he money
6 he may have put i n hi msel f , even t hough he t ook out much mor e.
7 That i s i nappr opr i at e because t hat ' s not what t he st at ut e
8 r equi r es.
9 And t he onl y f ear t he gover nment has wi t h i ncl udi ng
10 al l of t hi s speci f i cal l y t i ed gr ant money i s t hat i t ' s goi ng t o
11 suggest t o t he j ur y t hat we have t o t i e i t up, whi ch i s not t he
12 case. I t ' s si mpl y t he case we have t o show t he gr ant money was
13 deposi t ed i n CASI and i t was i nt ent i onal l y mi sappl i ed wi t hout
14 aut hor i t y, as t he st at ut e says.
15 THE COURT: I s t he l anguage i n t he char ge suf f i ci ent
16 f or your pur poses t o show t hat i t ' s not necessar y t o t r ace t he
17 money? I f you' ve got some suggest i ons t her e, I wi l l l i st en t o
18 t hem.
21 MR. KWOK: One moment , your Honor .
22 MR. EVERDELL: J ust one moment .
24 MR. EVERDELL: Your Honor , we have been t al ki ng about
25 t hi s. I t ' s a l i t t l e har d t o i ncor por at e t hi s concept i nt o t hi s
( 212) 805- 0300
1213
1 l anguage. I j ust not e i t f or t he r ecor d because I amput t i ng
2 def ense counsel on not i ce t hat i f he i nt ends t o ar gue about
3 t hi s i n hi s cl osi ng - -
4 THE COURT: Do you want somet hi ng about f ungi bl e? I
5 mean money i s f ungi bl e.
7 THE COURT: I ' ve f or got t en i n what cases, but I have
8 gi ven i nst r uct i ons i n connect i on wi t h t he f act t hat money i s
9 f ungi bl e and not t r aceabl e.
10 MR. EVERDELL: Al l r i ght . We coul d say somet hi ng l i ke
11 t he val ue of t he money i nt ent i onal l y mi sappl ed by def endant was
12 at l east $5, 000.
13 THE COURT: Wher e ar e you?
14 MR. EVERDELL: I ' ml ooki ng at t he f i f t h el ement .
15 MR. RUBI NSTEI N: Page, pl ease?
16 MR. EVERDELL: Page 19. " The val ue of t he money
17 i nt ent i onal l y mi sappl i ed by t he def endant was at l east $5, 000
18 but need not be t r aceabl e t o t he f eder al gr ant , " or somet hi ng
19 l i ke t hat .
20 THE COURT: Wher e do you want t hi s?
21 MR. EVERDELL: I was l ooki ng at t he f i f t h el ement on
22 19.
23 THE COURT: I see t he f i nal el ement .
24 I see. You' r e l ooki ng at page 19.
( 212) 805- 0300
1214
1 THE COURT: What woul d you l i ke t o get t her e?
2 MR. EVERDELL: I ' msuggest i ng f or t he f i f t h el ement on
3 19, somet hi ng t o t he ef f ect of , " Fi f t h, t he val ue of t he money
4 i nt ent i onal l y mi sappl i ed by def endant was at l east $5, 000 but
5 need not be t r aceabl e back t o t he f eder al gr ant . "
6 MR. RUBI NSTEI N: I t has t o be gr ant money.
7 THE COURT: I have a pr obl em. I began t hi nki ng of
8 t hi s whol e t hi ng as t o whet her t r aceabl e i s t he r i ght - -
9 MR. RUBI NSTEI N: J udge - -
10 THE COURT: - - wor d.
11 MR. RUBI NSTEI N: J udge, t hey have no concer n, because
12 I ' mnot goi ng t o ar gue i t . I ' mnot goi ng t o ar gue t r aci ng of
13 f unds and what have you.
14 THE COURT: Wel l , I woul d l i ke i t t o be r i ght anyway,
15 because j ur i es ar e i magi nat i ve. They ar e ver y good, j ur i es,
16 and t hey wor k har d, and t hey t ake t hei r dut i es ver y ser i ousl y.
17 So, I don' t want t o have somet hi ng i n t he char ge t hat we t hi nk
18 we mi ght have t o deal wi t h i n a not e. I f possi bl e, i t ' s good
19 t o ant i ci pat e t hese t hi ngs so we don' t have not es.
20 MR. KWOK: Wel l , i f I may, your Honor , I t hi nk Mr .
21 Ever del l ' s suggest i on i s a good one, especi al l y because we
22 added t he wor d " gr ant " t o money i n al l of t he shor t ver si ons of
23 t he char ge on page 19, and so I t hi nk t o bal ance i t out , t o
24 make t hi ngs even handed - -
25 THE COURT: I see t hat . I don' t have any pr obl emwi t h
( 212) 805- 0300
1215
1 what he i s t r yi ng t o do. I ammer el y t r yi ng t o t hi nk of t he
2 best way t o accompl i sh what he says i n a way t hat i sn' t
3 conf usi ng t o t he j ur y. That ' s what I ' mwor r i ed about , i s t he
4 conf usi ng nat ur e. Because you get i nt o i t l at er . I t hi nk
5 maybe i t woul d be bet t er t o deal wi t h i t i n t he el ement r at her
6 t han under t he shor t ened ver si on.
7 MR. EVERDELL: Your Honor , I t hi nk i n al l f ai r ness f or
8 i t t o be bal anced, I t hi nk - -
9 THE COURT: You mean you want me t o l eave out " gr ant
10 money" i n t he f i f t h?
11 MR. EVERDELL: I f we' r e goi ng t o do t he shor t ver si ons
12 on page 19, I t hi nk t he concept your Honor i s t r yi ng t o get at
13 wi t h " i nt ent i onal l y mi sappl i ed" i s suf f i ci ent , and t hen l eavi ng
14 out " t he gr ant money" . So, f or t he t hi r d el ement , f or
15 exampl e - -
16 THE COURT: Because i t i s - - t he f our t h says i t ' s got
17 t o be - - t he t hi r d and f our t h - -
18 MR. RUBI NSTEI N: J udge, you have t hat l anguage. The
19 t r aceabl e l anguage i s on page 22. They have t hat i n t he char ge
20 al r eady.
21 THE COURT: I know, but I t hi nk what t hey ar e l ooki ng
22 at i s i n t he shor t ver si on. And when you get t o t he f i f t h
23 el ement , t hat i f you add i n gr ant t her e i t suggest s t hat t he
24 money mi ght have t o be t r aced.
25 MR. RUBI NSTEI N: I don' t have a pr obl emwi t h t aki ng
( 212) 805- 0300
1216
1 out t he wor d " gr ant " .
2 MR. EVERDELL: Fr omal l of t he shor t el ement s?
3 MR. RUBI NSTEI N: No, j ust el ement f i ve, as t o el ement
4 f i ve.
5 THE COURT: J ust i n t he f i f t h el ement .
6 MR. RUBI NSTEI N: J ust t al ki ng about t he f i f t h el ement .
7 THE COURT: J ust t he f i f t h el ement .
8 I s t her e any change you want on 21, Mr . Ever del l ?
9 MR. EVERDELL: One second, your Honor .
10 THE COURT: Wai t a mi nut e. I t ' s not page 21. I t ' s
11 page 22.
12 MR. EVERDELL: I t hi nk t he f i f t h el ement , t he l onger
13 i nvest i gat i on of i t , f r om22 t o 23, was OK as i t was l ast r ead,
14 as i t was l ast amended.
16 MR. EVERDELL: My concer n i s st i l l t hough on page 19,
17 t he shor t el ement s. We keep i ncl udi ng, f or exampl e, t he t hi r d
18 and t he f our t h t he wor d " gr ant " . So, f or exampl e, t hi r d
19 el ement , " Dur i ng t hat one year per i od t he def endant wi t hout
20 aut hor i t y i nt ent i onal l y mi sappl i ed t he gr ant money. Four t h:
21 The mi sappl ed gr ant money was under t he car e" - -
22 THE COURT: Yes, we added i n on al l t hose el ement s
23 j ust now.
24 MR. EVERDELL: Yes. But I t hi nk i t ' s a l i t t l e
25 unbal anced now, because t hat i s st ar t i ng t o suggest I bel i eve
( 212) 805- 0300
1217
1 t o t he j ur y t hat t her e i s a t r aci ng r equi r ement f or t hi s money,
2 t hat i t al l has t o be t he gr ant money, t hat t her e has t o be
3 pr oof t hat al l of t hese expendi t ur es wer e made wi t h speci f i c
4 gr ant money as opposed t o i t was par t of a pot wher e ot her
5 money mi ght have been commi ngl ed at cer t ai n t i mes but t hat ' s
6 i r r el evant t o t he j ur y' s consi der at i on because i t doesn' t have
7 t o be speci f i c.
8 THE COURT: Wel l , we al l agr ee t hat i t ' s got t o be
9 money - -
10 MR. RUBI NSTEI N: And t hat ' s what el ement f i ve i s f or .
11 THE COURT: The f ungi bi l i t y i s what t he pr obl emi s,
12 i sn' t i t ?
13 MR. EVERDELL: Yes, your Honor , t hat ' s cor r ect , t he
14 f ungi bi l i t y, t he f act t hat - -
15 THE COURT: - - t hat i t does - -
16 MR. EVERDELL: And at l east as def endant has br ought
17 up i n t r i al sever al t i mes - - and I assume he wi l l ar gue i n some
18 way on cl osi ng, t hat t her e was an i nf usi on of $37, 000 by t he
19 def endant of hi s own per sonal l oans t o t he company. Of cour se
20 we ar gue t hat ' s of f set by t he amount of l oans t hat he t ook out ,
21 so t her e wasn' t r eal l y an addi t i onal sour ce of f undi ng. And
22 even so, $37, 000 pal es i n compar i son t o t he amount of money
23 t hat was r ecei ved by t he gr ant .
24 But we j ust want t o be sur e t hat not hi ng i n t hi s
25 l anguage i s goi ng t o suggest t o t he j ur y t hat f or any
( 212) 805- 0300
1218
1 par t i cul ar pur chase or expense t hat we r ai se, t hat we have t o
2 pr ove t hat t hat expense i s t r aced speci f i cal l y t o ATP f unds,
3 because t hat ' s assumi ng a bur den t hat we don' t have t o under
4 t he st at ut e.
5 And I t hi nk t hat i f we keep sayi ng " i nt ent i onal l y
6 mi sappl i ed t he gr ant money, " at l east i n t he shor t f or ms, i t
7 mi ght suggest t o t he j ur y t hat t hey have t o concl ude t hat
8 each - -
9 MR. RUBI NSTEI N: Wel l , t hose ar e t hose el ement s.
10 THE COURT: Let ' s t hi nk about - - I don' t know what
11 your summat i ons ar e goi ng t o be, but i n t he l ast f ew l et t er s
12 t hat I have r ecei ved I got t he i mpr essi on t hat t he gover nment
13 i s goi ng t o ar gue t hat t he def endant ' s expendi t ur es vi ol at ed
14 t he t er ms of t he gr ant - -
15 MR. EVERDELL: That ' s cor r ect , your Honor .
16 THE COURT: And t o vi ol at e t he t er ms of t he gr ant t hat
17 woul d have t o mean t hat gr ant money was mi sappl i ed. Because
18 l et ' s al l ege t hat t he def endant had $100, 000 i n t he bank and i n
19 CASI ' s account , and he pai d t he r ent wi t h hi s $100, 000. That
20 was i n t he exi st i ng - - i n t he bank. That woul d not be a
21 vi ol at i on of t he l aw.
22 MR. EVERDELL: He used hi s own f unds t o pay of f - -
23 THE COURT: Or used CASI ' s f unds, pr eexi st i ng f unds.
24 MR. EVERDELL: Ri ght . No, t hat ' s cor r ect , your Honor .
25 MR. KWOK: I f I may, your Honor . I st i l l t hi nk on
( 212) 805- 0300
1219
1 bal ance - -
2 THE COURT: So, you have t o di st i ngui sh somehow
3 bet ween CASI ' s pr eexi st i ng f unds and t he gr ant f unds.
4 MR. EVERDELL: Tr ue, al t hough t her e i s no evi dence i n
5 t he r ecor d t hat t her e was any pr eexi st i ng f unds. I mean al l
6 evi dence t o t he cont r ar y, was t hat t he gr ant f unds - -
7 THE COURT: The st at ed evi dence i s t hat t her e ar en' t
8 any.
9 MR. EVERDELL: That ' s r i ght , your Honor .
10 THE COURT: Wer en' t any.
11 MR. KWOK: J ust t o addr ess my comment s speci f i cal l y t o
12 - -
13 THE COURT: Ther e i s ci r cumst ant i al evi dence t hat
14 t her e wasn' t any because of t he i mmedi at e expendi t ur es f or past
15 due bi l l s.
16 MR. EVERDELL: Sor r y? I di dn' t f ol l ow, your Honor .
17 THE COURT: Ther e i s ci r cumst ant i al evi dence t hat
18 t her e wasn' t any because of i mmedi at e expendi t ur e of moni es
19 t hat wer e l ong past due.
20 MR. EVERDELL: Yes. And t her e was speci f i c t est i mony
21 by bot h busi ness manager s t hat t he ATP f unds wer e t he onl y
22 f unds t hey ever saw comi ng i nt o t he company, and t her e i s al so
23 Ms. Ri l ey' s anal ysi s whi ch shows exact l y what f unds went i nt o
24 t he CASI bank account s over t he t i me per i od we ar e t al ki ng
25 about , year one and year t wo of t he gr ant , none of whi ch - - and
( 212) 805- 0300
1220
1 t hat i ncl udes t he $37, 000 t hat t he def endant sai d he made as an
2 emer gency l oan. That ' s t aken i nt o account .
3 Ther e i s si mpl y not hi ng el se, wi t h t he except i on of I
4 t hi nk she ment i oned about $1500 wor t h of r ef und checks or
5 somet hi ng i n t he second year whi ch f or ms t hat l i t t l e sl i ce of
6 t he pi e i n year t wo of t he gr ant .
7 THE COURT: I don' t r emember what t he bal ance was i n
8 t he begi nni ng i n t he account , however . But what I ' msayi ng i s
9 t hat I t hi nk you have t o show t hat t her e was a mi sappl i cat i on
10 of gr ant money, ot her wi se he doesn' t need aut hor i t y, ot her wi se
11 he doesn' t mi sappl y money.
12 MR. KWOK: Your Honor , I t hi nk - -
13 THE COURT: How do you mi sappl y i f i t was not gr ant
14 money?
15 MR. KWOK: I t hi nk t hat ' s r i ght , your Honor . My onl y
16 poi nt i s I j ust shar e def ense counsel ' s concer n t hat he
17 ment i oned a moment ago, t hat t he shor t ver si on al so needs t o be
18 accur at e, not j ust t he l ong ver si on.
19 THE COURT: I agr ee wi t h you.
20 MR. KWOK: And so i f we wer e t o add t he wor d " gr ant "
21 i n f r ont of ever y one of t he el ement s, t he t hi r d, t he f our t h
22 and t he f i f t h - -
23 THE COURT: The f i f t h has been - - Mr . - -
24 MR. RUBI NSTEI N: I agr eed t o t ake out t he " gr ant " on
25 t he f i f t h el ement f or t hat r eason, because of t he t r aci ng, so I
( 212) 805- 0300
1221
1 t hought t hat i t woul d be bal anced t o t ake t he wor d " gr ant " out
2 of t he f i f t h el ement . So, on t hat el ement t hey have t he
3 t r aci ng pr ovi si on t hat you have i n your l anguage on pages I
4 bel i eve 22 and 23.
5 MR. KWOK: But , your Honor , r eal i st i cal l y I don' t
6 t hi nk any j ur or wi l l be abl e t o pi ck up on t he si gni f i cance of
7 t he absence of t he wor d " gr ant " i n t he f i f t h el ement whi ch i t
8 has j ust been ment i oned i n t he t hi r d and t he f our t h el ement i n
9 t he shor t ver si on.
10 So, t he gover nment woul d j ust ask you t o amend or t o
11 add t o t he end of t he f i f t h el ement i n t he shor t ver si on
12 somet hi ng al ong t he l i nes of what Mr . Ever del l j ust suggest ed,
13 t hat " at l east $5, 000, whi ch needs not be t r aceabl e back t o t he
14 f eder al gr ant " . I t hi nk t hat woul d do i t .
16
17
18
19
20
21
22
23
24
25
( 212) 805- 0300
1222
86azkar 4
1 MR. RUBI NSTEI N: I don' t t hi nk t hat ' s appr opr i at e, and
2 I don' t t hi nk t hat ' s t he l anguage t hat - -
3 THE COURT: I t ' s unusual t o have t hat ki nd of a
4 st at ement i n t he el ement s.
5 I t hi nk my f eel i ng woul d be what we ought t o do i s
6 have a sect i on on t r aceabi l i t y, somet hi ng about f ungi bi l i t y. I
7 can' t t hi nk what ki nd of a case I mi ght have a char ge on t hat .
8 MR. RUBI NSTEI N: Your Honor , i n t hei r r equest , t he
9 gener al i nst r uct i ons, t hey don' t - - t hey mer el y ask, on page
10 f our of t hei r r equest , t he val ue of t he i nt ent i onal l y
11 mi sappl i ed money was at l east $5, 000.
12 MR. EVERDELL: Yes, but now we' ve amended t he ot her
13 t hi ngs and we' r e - -
14 THE COURT: I know.
15 MR. EVERDELL: - - we' r e t r yi ng t o make sur e i t ' s
16 bal anced.
17 THE COURT: Wel l , we coul d do somet hi ng l i ke t hi s - -
18 MR. RUBI NSTEI N: You know, J udge, I - -
19 THE COURT: Let me make a suggest i on.
21 THE COURT: - - bef or e, and t hen I ' l l hear your s.
22 We can do somet hi ng - - now each of t hese el ement s
23 have - - need f ur t her descr i pt i on, so l i st en cl osel y as I
24 expl ai n t he r equi r ement s as t o each of t hese el ement s, and t hen
25 i ncl ude t he t r aci ng el ement i n t he f i f t h or t he end of t he
( 212) 805- 0300
1223
86azkar 4
1 f i f t h el ement .
2 MR. RUBI NSTEI N: You know, J udge - -
3 THE COURT: But I t hi nk i t ought t o be expanded a
4 l i t t l e t o show t hat because t he f ungi bi l i t y i ssue need not
5 t r ace.
6 MR. RUBI NSTEI N: I t hi nk t hat t hat t r aci ng r eal l y
7 appl i es mor e i n t he br i ber y sect i on t han t o 666 sect i on. I ' m
8 not r eal l y 100 per cent conf i dent - - I ' mnot exact l y comf or t abl e
9 wi t h t he t r aci ng on t hi s ki nd of case. I t r eal l y - - t her e' s a
10 di f f er ence bet ween t he mi sappr opr i at i on and t he br i ber y por t i on
11 of 666.
12 MR. EVERDELL: Your Honor , I t hi nk t hat was r esol ved
13 by t he Sabr i case i n t he Supr eme Cour t , whi ch I bel i eve
14 appl i ed, di dn' t speci f i cal l y appl y t o t he br i ber y cont ext . I t
15 sai d t her e' s si mpl y no nexus r equi r ement s f or t he f unds i n 666
16 cases. So I don' t t hi nk t hat t hat ' s cor r ect .
17 So, i f I coul d j ust t al k t o Mr . Kwok.
18 ( Pause)
19 MR. EVERDELL: Your Honor , I t hi nk - - you know, i f t he
20 Cour t i s i ncl i ned t o l eave t he shor t f or mof t he el ement s on
21 page 19 as i s, t hen we woul d wel come t he addi t i onal l anguage
22 t hat you suggest ed about needi ng f ur t her expl i cat i on, but al so
23 t o i ncl ude i n t he el ement t hat we' r e t al ki ng about f i f t h
24 el ement . A mor e expansi ve di scussi on of f ungi bi l i t y, I don' t
25 have a par t i cul ar char ge I can of f er you, but i f you have
( 212) 805- 0300
1224
86azkar 4
1 somet hi ng i n t he past - -
2 THE COURT: Your appel l at e gr oup ought t o have one.
3 MR. EVERDELL: That ' s possi bl e, your Honor .
4 THE COURT: I ' d cal l t hem.
5 MR. RUBI NSTEI N: J udge, i f you - - t he l anguage i n
6 Sabr i says - -
7 THE COURT: Whi ch, i n what , si r ?
8 MR. RUBI NSTEI N: I n Sabr i , t he l anguage sai d t hat i t
9 i s t r ue, J ust i ce Sabr i says, t hat not ever y br i be or ki ckback
10 of f er ed or pai d t o an agent of gover nment cover ed by 666( b)
11 wi l l be t r aceabl y ski mmed f r omspeci f i c f eder al payment s.
12 MR. EVERDELL: Your Honor , my under st andi ng of Sabr i
13 i s i t ' s not l i mi t ed t o t he br i ber y cont ext . I t t al ks about t he
14 pur poses of t he st at ut e and t he f act t ake i t was passed t o f i l l
15 gaps i n exi st i ng st at ut es.
16 The pur pose of t he st at ut e i s t o make sur e t hat t he
17 r eci pi ent s of f eder al f unds wer e pr oper r eci pi ent s and pr oper
18 st ewar ds of t he f eder al money. So i t was r el at ed not t o t he
19 money i n par t i cul ar , t her e wer e no t r aceabi l i t y r equi r ement s,
20 but si mpl y t hat t he per son or ent i t y t hat r ecei ved t he money
21 was a good st ewar d of t hat money, and t hat he di dn' t have t o
22 show par t i cul ar t r aceabi l i t y. Because t he pr i or exi st i ng
23 st at ut es, i f t he money got commi ngl ed enough, you coul dn' t use
24 t he st at ut e t o pr osecut e t he case. So t hi s was speci f i cal l y
25 passed i n or der t o avoi d t hat pr obl em, and i t appl i es t o, as I
( 212) 805- 0300
1225
86azkar 4
1 under st and i t , t o ever y si ngl e pr ong of t he st at ut e.
2 MR. RUBI NSTEI N: Wel l , how do you t r ace your own
3 money, your Honor ?
4 THE COURT: What ?
5 MR. RUBI NSTEI N: The pr obl emi s t hat unl i ke wher e you
6 get i l l egal money - - I can under st and you don' t get - - you get
7 i l l egal money, you accept t he br i be. Now what di f f er ence does
8 i t make i f you spent t he money t hat you got as a br i be or you
9 spent - - you have a $100 i n a br i be and you have $100 t hat you
10 got i n your sal ar y, so now you have $200. What di f f er ence does
11 i t make whi ch moni es you spent at t hat poi nt ? I under st and why
12 t her e' s no t r aci ng r equi r ement . But i f you have l egi t i mat e
13 money, you st ar t out wi t h l egi t i mat e money - - t he gr ant money
14 i s l egi t i mat e; why shoul d t her e be any, under t hese
15 ci r cumst ances, t r aci ng? I don' t t hi nk t hat t he cour t s have
16 gone t hat f ar . Ther e' s somet hi ng - - t o me t her e' s somet hi ng
17 wr ong wi t h t he i dea t hat i f I spent - -
18 THE COURT: The poi nt i s once you put i t i n a bank
19 account , anyt hi ng el se i n t he bank account , or you can' t - - you
20 can' t t r ace i t , because money i s f ungi bl e.
21 MR. RUBI NSTEI N: Ri ght . But I ' msayi ng t hat t hat ' s
22 because t he money, t he br i be money i s bad money. Her e t he
23 gr ant money i s good money, and so t her ef or e i t ' s a di f f er ent
24 concept . I f he i s spendi ng t he good money wr ongf ul l y, he' s
25 spendi ng t he good money - - what t hey' r e sayi ng, t hei r
( 212) 805- 0300
1226
86azkar 4
1 ar gument - -
2 THE COURT: St op and t hi nk a second, t he f eder al money
3 i sn' t gi ven f or br i bes.
5 THE COURT: So i t ' s not bad money when i t ' s r ecei ved.
6 MR. RUBI NSTEI N: No, I ' msayi ng i t ' s not bad money.
7 I ' msayi ng t hat ' s r i ght . I n t hi s i nst ance, t he money r ecei ved
8 i s good money, as opposed t o a br i ber y si t uat i on wher e t he
9 money you' r e r ecei vi ng i s bad money.
10 THE COURT: Money you r ecei ved - - t he br i ber y par t of
11 666 appl i es t o money t hat was r ecei ved as good money and spent
12 as bad money, and i t ' s al l spent f r omt he same pot .
13 MR. RUBI NSTEI N: I di sagr ee wi t h your Honor . The
14 br i be money, I submi t , i s t he bad money, t hat pol l ut es t he good
15 money. And you can' t ar gue t hat , gee, I t ook t hi s br i be, but I
16 spent my good money and I kept t he br i be money separ at e. That
17 i s what I t hi nk i s t he cont ext of t hi s ar gument . Because t her e
18 i s a di f f er ence bet ween t he br i ber y por t i on of t he 666 - -
19 THE COURT: Wel l , i t pr esupposes an i nt ent , an i nt ent
20 t o br i be bef or e you r ecei ve t he f unds. Gener al l y, i n t hose
21 cases t he br i be i s made subsequent t o r ecei pt of f unds.
22 I t hi nk you bet t er cal l and see i f you haven' t got
23 somet hi ng on f ungi bi l i t y t r aci ng over t her e as t o char ge.
24 MR. KWOK: We wi l l do t hat .
25 THE COURT: I can' t t hi nk of a case j ust because
( 212) 805- 0300
1227
86azkar 4
1 I ' m- - what about t he money l aunder i ng cases? Mr . Kwok, money
2 l aunder i ng cases, ask t hemabout money l aunder i ng cases.
3 MR. KWOK: Cer t ai nl y.
4 MR. RUBI NSTEI N: I don' t t o get ahead of mysel f . I
5 st i l l haven' t made my Rul e 29 mot i on, whi ch woul d make al l of
6 t hi s academi c. I wi l l wai t f or t he gover nment .
7 THE COURT: You bet t er wai t t i l l t he gover nment comes
8 back.
9 MR. RUBI NSTEI N: To r et ur n.
10 ( Recess)
12 MR. RUBI NSTEI N: Your Honor , my l et me say t hat Sabi r
13 r el at es t o a vi ol at i on of Sect i on 666( a) ( 2) , whi ch i nvol ves t he
14 br i ber y por t i on.
15 THE COURT: I ' l l l ook at i t . Let ' s f i ni sh t he char ge
16 and come back t o t hi s.
18 MR. KWOK: I t hi nk t hat ' s - -
19 THE COURT: Then I ' l l hear your Rul e 29 i f we don' t
20 have anyt hi ng and - - go ahead.
21 Af t er - - i s t her e any need f or uncal l ed wi t nesses
22 or - -
25 THE COURT: Okay, t hen l eave t hat i n.
( 212) 805- 0300
1228
86azkar 4
1 MR. RUBI NSTEI N: Your Honor , I not i ce i t ' s t he
2 st andar d l anguage on t he uncal l ed wi t nesses. But i n t hi s case
3 wher e t he gr avamen of t he Gover nment ' s case i s Mi ss Hayes, I
4 j ust f eel t hat - -
5 THE COURT: Have you got a suggest i on?
7 THE COURT: What ' s your suggest i on?
8 MR. RUBI NSTEI N: Wel l , t hat t he, al t hough - - wel l , t he
9 gover nment has t he abi l i t y t o conf er i mmuni t y on a wi t ness and
10 t o ent er i nt o agr eement s wi t h t he nonpr osecut i on agr eement s
11 wi t h t he wi t ness. And t he def ense, who has t he same r i ght t o
12 cal l t he wi t ness, doesn' t have t hose t ool s avai l abl e.
13 THE COURT: But t hat doesn' t have t o do wi t h cal l i ng a
14 wi t ness. Ther e' s no al l egat i on her e t hat i mmuni t y has been
15 gr ant ed or - -
16 MR. RUBI NSTEI N: No. I ' msayi ng t hat t hey have t hat
17 abi l i t y. You know, t he l anguage i s bot h t he gover nment and t he
18 def ense have t he same power t o subpoena a wi t ness t o t est i f y.
19 THE COURT: I ' l l have t o see your r equest t o char ge
20 f r omyou al ong t hat . That ' s a di f f er ent i ssue and I ' d have t o
21 see your case and t he aut hor i t y f or i t .
22 MR. RUBI NSTEI N: I ' mhopi ng t o make aut hor i t y her e,
23 J udge.
24 THE COURT: Wel l , t hen you' l l have t o gi ve me speci f i c
25 l anguage and I ' l l have t o consi der i t based on t he l anguage.
( 212) 805- 0300
1229
86azkar 4
1 What about par t i cul ar i nvest i gat i ve t echni ques, you
2 want t hat ?
3 MR. RUBI NSTEI N: Never happy - -
4 THE COURT: What ?
5 MR. RUBI NSTEI N: I ' mnever happy wi t h t hat , but i t ' s
6 st andar d l anguage i n t he f eder al cour t s.
7 THE COURT: Al l r i ght . I s t he char act er al l r i ght ?
8 MR. RUBI NSTEI N: Char act er i s f i ne, your Honor .
9 THE COURT: Char t s and summar i es al l r i ght ?
10 MR. KWOK: Yes.
12 THE COURT: Li ke t hat ? See t he exhi bi t s, hear
13 t est i mony, communi cat i ons wi t h t he Cour t ?
14 MR. RUBI NSTEI N: That ' s f i ne, your Honor .
15 THE COURT: Submi t t i ng t he i ndi ct ment , need f or
16 unani mi t y, ver di ct f or m. We got a ver di ct f or m?
17 MR. RUBI NSTEI N: Yes. I ' ve appr oved t he ver di ct f or m
18 t hat - -
19 THE COURT: You have, al l r i ght .
20 Then I guess any t hought s about t he, any pr obl ems wi t h
21 j ur or number one bei ng t he chai r per son?
23 MR. RUBI NSTEI N: No pr obl em, your Honor .
24 THE COURT: Al l r i ght . Ar e we al l t hr ough wi t h t he
25 char ge t hen, wi t h t he except i on of our pr obl emon - -
( 212) 805- 0300
1230
86azkar 4
1 MR. KWOK: Your Honor , i f I may make a suggest i on. I
2 t hi nk f or pur poses of t hi s case, i t ' s r eal l y not necessar y t o
3 get i nt o t he nuance of t he l aw about t r aceabi l i t y, because as
4 t he gover nment cont ends at t he end of t he day i t ' s one bi g pot
5 and t her e' s r eal l y no ot her sour ce of f undi ng f or CASI , ot her
6 t han t he ATP money. So i f Mr . Rubi nst ei n i s f i ne l eavi ng i n
7 what i s i n t he l ong ver si on f or t he f i f t h el ement on pages 22
8 and 23, t he gover nment woul d have no pr obl eml eavi ng i n t he
9 shor t ver si on, wi t h t he sl i ght amendment s t hat we j ust made
10 i nser t i ng t he wor d gr ant i n f r ont of t he t hi r d and f our t h
11 el ement on page 19, j ust t o avoi d an ext ended di scussi on about
12 somet hi ng t hat i s r eal l y not - -
13 THE COURT: Al l r i ght , t hat i s si mpl e, I guess.
14 MR. RUBI NSTEI N: No - - wel l , no. I mean, i t ' s
15 cl assi cal , t hey want t hei r cake and eat i t .
16 THE COURT: Wel l , t hey want - -
17 MR. RUBI NSTEI N: They want me t o abandon i t .
18 THE COURT: You agr eed t hat t her e' s no - -
19 MR. EVERDELL: We' r e agr eei ng t o what you agr eed t o.
20 THE COURT: Tr aceabi l i t y, t hey' r e ent i t l ed t o
21 t r aceabi l i t y.
22 MR. KWOK: And Mr . Rubi nst ei n j ust ar gued t hat he
23 di dn' t i nt end t o ar gue i t .
24 MR. RUBI NSTEI N: J udge, t hat ' s what I sai d, I
25 r econsi der ed i t i n r er eadi ng.
( 212) 805- 0300
1231
86azkar 4
1 THE COURT: Al l r i ght . We' l l get - - t i l l we get
2 somet hi ng f r omt he t hei r gr oup, I ' mt r yi ng t o t hi nk of t he case
3 t hat I had t hi s pr obl emi n, and I t hi nk i t woul d be - - t her e i s
4 a bet t er char ge t hat goes i nt o f ungi bi l i t y and, t her ef or e, t he
5 f act t hat you don' t need t o t r ace f unds t o show t hat t hey wer e
6 t he act ual f unds t hat t he gover nment used.
7 MR. RUBI NSTEI N: But I t hi nk t her e has t o be a
8 di st i nct i on bet ween a case t hat i s char ged under 666( a) ( 2) , as
9 opposed t o - - you l ook at t he st at ut e, ( a) ( 2) r el at es t o
10 cor r upt l y gi ves - - of f i cer agr ees t o gi ve anyt hi ng of val ue
11 per son wi t h i nt ent t o i nf l uence or r ewar d. So I under st and
12 why - - t hat was what my ar gument was about good money and bad
13 money, why t her e shoul dn' t be a t r aceabi l i t y, i f you gi ve
14 somebody a br i be and t hat ' s t he money t hat you' r e t al ki ng about
15 usi ng.
16 But her e we' r e not t al ki ng about ( a) ( 2) money. We' r e
17 t al ki ng - - we' r e not t al ki ng about ( a) ( 2) . So t he cour t s have
18 never addr essed whet her or not t her e' s t r aceabi l i t y. And
19 t her e' s not hi ng - - as I sai d, t he br i be money i s di f f i cul t t o
20 t r ace because i t ' s f ungi bl e.
21 Her e we' r e not t al ki ng about br i be money. We' r e
22 t al ki ng about gr ant money, whi ch you can t r ace. And I ' mnot
23 aski ng f or a char ge t hat says t hat t hey have t o t r ace t he
24 money. I ' mj ust sayi ng t hat i t ' s mi sl eadi ng t o suggest t hat
25 t hey can' t consi der - - t he j ur y can' t consi der whi ch moni es i t
( 212) 805- 0300
1232
86azkar 4
1 was.
2 MR. EVERDELL: That ' s r i di cul ous, your Honor .
3 MR. RUBI NSTEI N: The Gover nment ' s ar gument , as Mr .
4 Kwok sai d, i s t hat t her e i s no t r aci ng pr obl embecause t her e' s
5 onl y one pot ; al l t hat money comes f r omone sour ce, t hat bei ng
6 t he gr ant . Ther ef or e, any moni es spent ar e gr ant money. So I
7 don' t know why t hey woul d want - - why t hey need any sor t of
8 t r aci ng l anguage i n t he char ge at al l .
9 MR. EVERDELL: Because t hat ' s case l aw, your Honor ,
10 and t hat i s t he case i n ever y Ci r cui t . The cases t al k about
11 and i n Sand as wel l , by enact i ng - - t hi s i s t he ni nt h Ci r cui t
12 case St evens, by enact i ng Sect i on 666, t he gener al st at ut e, not
13 any par t i cul ar subsect i on, Congr ess pl ai nl y deci ded t o pr ot ect
14 f eder al f unds by pr eser vi ng t he i nt egr i t y t he ent i t i es t hat
15 r ecei ved t he f eder al f unds r at her t han r equi r i ng t he t r aci ng of
16 f eder al f unds t o a par t i cul ar i l l egal t r ansact i on.
17 So t hi s i s not - - t hi s appl i es t o t he ent i r e st at ut e.
18 Now, t he f act t hat we may not have a par t i cul ar i ssue i n t hi s
19 case, because of t he f unds wer e ATP f unds, doesn' t mat t er . The
20 j ur y shoul d st i l l be i nst r uct ed on t he appr opr i at e l aw, whi ch
21 i s t hat t her e i s no t r aci ng r equi r ement wi t h t hi s st at ut e. And
22 t he st at ut e was speci f i cal l y enact ed t o avoi d commi ngl i ng
23 pr obl emt hat ot her st at ut es pr esent ed.
24 MR. KWOK: And, your Honor , i f I may, I mean t he
25 char ge we ci t e i n our r equest t o char ge, and t hat ' s now
( 212) 805- 0300
1233
86azkar 4
1 r ef l ect ed i n t he l ong ver si on of t he f i f t h el ement i s di r ect l y
2 l i f t ed f r omSand, t he model j ur y i nst r uct i ons. I t ' s not l i f t ed
3 f r om( a) ( 2) . I t ' s l i f t ed f r omt he st at ut e t hat we char ge. So
4 I don' t know what Mr . Rubi nst ei n' s t al ki ng about when he r ef er s
5 t o hi s on t he spot r esear ch.
6 ( Pause)
7 MR. RUBI NSTEI N: J udge, I ' d onl y poi nt out - -
8 THE COURT: I ' l l have t o t hi nk about i t , Mr - - I ' l l
9 have t o t hi nk about i t .
10 MR. RUBI NSTEI N: J udge, t her e i s anot her case - -
11 THE COURT: Your poi nt , as I see i t , i s t hat , okay,
12 i t ' s t r ue t hat Sand says t hat , but t hat appl i es t o an
13 embezzl ement case, but i t may not appl y t o mi sappl i cat i on case.
14 MR. RUBI NSTEI N: And I woul d suggest - -
15 THE COURT: I t seems t o be t aken f r omSol ant z, whi ch
16 i s an embezzl ement case, so l et me l ook at i t and see i f can - -
17 MR. RUBI NSTEI N: J udge, I hope t hat t hi s case t hat I ' m
18 goi ng t o ment i on t o t he Cour t .
19 THE COURT: - - sat i sf y mysel f t hat t her e' s not hi ng t o
20 your poi nt , but I ' l l have t o - - I ' l l have t o l ook at i t .
22 THE COURT: You' ve got a Rul e 29 mot i on.
23 MR. RUBI NSTEI N: Yes. I j ust want ed t o add an
24 addi t i onal case t hat I hope i s hel pf ul t o t he Cour t , and i t ' s
25 t he Second ci r cui t case, i t ' s U. S. ver sus Thompson, and i t ' s
( 212) 805- 0300
1234
86azkar 4
1 ci t ed at 484 Fed. 3d, i t ' s 877. And I j ust - - i t ' s not on al l
2 f our s, but I t hi nk i t gi ves t he sense of what we' r e t al ki ng
3 about her e. So I know your Honor wi l l t ake a, mor e t han j ust a
4 casual l ook at i t .
5 MR. EVERDELL: Your Honor - -
6 MR. RUBI NSTEI N: As f ar as - - I ' msor r y.
7 MR. EVERDELL: And, your Honor , i f I coul d al so di r ect
8 your at t ent i on t o t he cases i n, of our l et t er i n par t i cul ar l y
9 Uni t ed St at es V. Nei man, 211 F. 3d 40, whi ch I haven' t l ooked at
10 i t r ecent l y, but al t hough when I wr ot e t he l et t er , but I seemed
11 t o r ecal l t hat was an ( a) ( 1) ( a) case and had some l anguage
12 about t r aceabi l i t y, Second Ci r cui t case.
13 THE COURT: My - - i t ' s a not - f or - pr of i t par t t hat i s
14 what I ' m- - t he not - f or - pr of i t agency as opposed t o - - CASI
15 woul d - -
16 MR. KWOK: I t i s a pr of i t .
17 MR. RUBI NSTEI N: For pr of i t .
18 THE COURT: For pr of i t .
19 MR. RUBI NSTEI N: CASI was a f or pr of i t .
20 THE COURT: Wel l , t he appl i cat i on t o a f or pr of i t
21 or gani zat i on cont r ol l ed by t he def endant i s what i s di f f er ent
22 t han an embezzl ement si t uat i on and, t her ef or e, I want t o j ust ,
23 i f t her e ar e any cases on t hat , I ' d be i nt er est ed.
24 MR. EVERDELL: Your Honor , I t hi nk - -
25 THE COURT: You seemt o have a di f f er ent l egal
( 212) 805- 0300
1235
86azkar 4
1 st r uct ur e t hat you' r e exami ni ng i n t he cont ext of t he st at ut e.
2 MR. EVERDELL: Yes, your Honor . I t hi nk t hat t he
3 Ni eman case may be i nst r uct i ve. I f I r ecal l i t , I t hi nk i t
4 i nvol ves an or gani zat i on t hat r ecei ved f unds and t hat wer e
5 mi sappl i ed el sewher e and t her e wasn' t t he onl y sour ce of
6 f undi ng t hat t he - -
7 THE COURT: That ' s wher e we want .
9 MR. RUBI NSTEI N: J udge, woul d you hear me on Rul e 29,
10 your Honor ?
11 THE COURT: Yes, si r , r i ght away.
13 I t hi nk, your Honor , af t er you' ve hear d al l t he
14 evi dence her e, I t hi nk i t ' s cl ear t hat Dr . Kar r on had no i nt ent
15 t o spend gr ant moni es i nappr opr i at el y. The syst emi n pl ace
16 per mi t t ed r evi ew of al l expendi t ur es; not onl y per mi t t ed i t , i t
17 act ual l y encour aged i t . And t he t est i mony i s cl ear t hat when
18 t he gover nment i s t r yi ng t o t r y t hi s case, you had a budget and
19 t he budget i s your Bi bl e. When, i n f act , i n sci ence, ATP
20 knows, and ever ybody, any r easonabl e per son knows t hat as you
21 st ar t - - as you wor k on t he pr oj ect , you r eal i ze you have
22 di f f er ent pr i or i t i es, so t hat t hat ' s why you have t o wr i t e t o
23 change t he budget ar ound t o do i t wi t hout any appr oval
24 what soever of t he 10 per cent , whi ch i s r eal l y 20 per cent
25 because i t ' s down and up, as Mr . Benedi ct sai d. And t hat i s
( 212) 805- 0300
1236
86azkar 4
1 why you have a r i ght t o r evi se t he budget af t er t he f i r st year .
2 You coul d go back and change i t al l . And so when you have t hat
3 i n mi nd, and you under st and t hat , and t hi s i s st uf f t hat you
4 coul d negot i at e. And even we have evi dence t hat money i s
5 car r i ed f or war d t o t he next year on occasi on, i t t el l s t he
6 r eci pi ent one t hi ng; as l ong as you' r e usi ng t he money t o
7 advance t he pr oj ect , use i t and we' l l t al k about i t .
8 Even i n t hi s case, we even have evi dence wher e not hi ng
9 cl ear er t han ut i l i t i es, wher e t her e' s evi dence t hat t hat ' s an
10 i ndi r ect cost , t hat t her e was e- mai l s back and f or t h wi t h ATP
11 suggest i ng t hat ATP woul d absor b t he di f f er ence i n t he
12 ut i l i t i es expendi t ur es over what i t had been i n t he past . Why
13 el se woul d t hey be aski ng f or bi l l s t o show t he di f f er ence i n
14 t he expendi t ur e?
15 So - - and t he CFR says t hat t hey j udge t hese t hi ngs on
16 a case- by- case basi s. And nowher e - - when you t ake t hat ,
17 t oget her wi t h t he f act t hat t her e' s evi dence her e t hat Dr .
18 Kar r on havi ng r epai r s t o hi s - - havi ng wor k done, const r uct i on
19 wor k done i n hi s home, pai d f or wor k done i n t he ki t chen wi t h a
20 per sonal check, wor k done i n t he l i vi ng r oomwi t h a CASI check,
21 t hat t hat shows t he i nt ent . The f act t hat t he gover nment coul d
22 poi nt t o t hi ngs t hat mi ght have been a mi st ake or mi ght have
23 been i t ems t hat a bl i nd bookkeeper woul d r eal l ocat e? Thei r
24 ar gument i s t hat because he r esi st ed, Dr . K r esi st ed t he
25 opi ni ons of peopl e l i ke Benedi ct and Spr i ngs, and maybe even
( 212) 805- 0300
1237
86azkar 4
1 Hayes, t hat , t her ef or e, he mi sappr opr i at ed f unds.
2 I submi t t o your Honor t hat t hat doesn' t show
3 i nt ent i on at al l . As a mat t er of f act , t he conver sat i ons wer e
4 f r omBenedi ct ; wel l , i f I owe t hemmoney, I have a r i ch mot her ,
5 I ' l l pay t hemback.
6 So t hat al l goes t o t he i ssue of i nt ent , whi ch I t hi nk
7 t hat t he gover nment has woef ul l y f ai l ed t o est abl i sh i n t hi s
8 case, wi t hout get t i ng i nt o t he ni t t y- gr i t t y about what money
9 was spent , wher e nobody i s cont est i ng t hat t her e was wor k done
10 on t he gr ant . And so t he mai n ar eas ar e r ent , whi ch your Honor
11 may r ecal l most of t he r ent was back due r ent . So, t echni cal l y
12 speaki ng, t hat was not r ent at t r i but abl e t o t he gr ant per i od.
13 So, t her ef or e, i t shoul dn' t be consi der ed as a vi ol at i on of
14 t aki ng an i ndi r ect amount . Because i t was f or 2000 and 2001
15 pr e- gr ant , most of t he money.
16 And addi t i onal l y, t he def endant had a r i ght t o move
17 10 per cent i ncr ease i n sal ar y, whi ch woul d' ve moved hi s sal ar y
18 up by $80, 000 t o $255, 000, and he coul d absor b i t on t hat
19 l evel . So t hat ' s even wi t hout get t i ng appr oval , t o have a
20 budget , a budget change.
21 So i t j ust seems t o me, your Honor , t hat al l t he
22 evi dence her e, t her e i s no, no pr oof t hat Dr . Kar r on i nt ended
23 t o do anyt hi ng t o t he cont r ar y. We have r ecei pt s. He scanned
24 ever y document . He had back up f or ever y document . You know,
25 t hey opened t hat he made changes i n t he comput er . But what di d
( 212) 805- 0300
1238
86azkar 4
1 he change, how you cl assi f y an expense? He never changed an
2 i nvoi ce, he never changed a check. He never l ooked t o del et e
3 anyt hi ng. And we have uncont r over t ed evi dence her e f r omt he
4 Gover nment ' s own wi t ness t hat Dr . Kar r on i s an i ncompet ent
5 manager . He st ands up at t he CASI - - at a gover nment meet i ng
6 deal i ng wi t h gr ant s and says, I need hel p wi t h f i nanci al
7 gui dance about a gr ant , al l r i ght . Ever ybody t est i f i ed t hat i n
8 t he ear l y par t of t he gr ant , Dr . Kar r on was t aki ng car e of t he
9 books. And what i s t he - - t he i ndi sput ed t est i mony? That t he
10 books wer e i n hor r i f i c condi t i ons when t he J ackson Gr oup and
11 Spr i ngs came aboar d, and t hey had t o r edo t he ent i r e, t he
12 ent i r e books.
13 The one t hi ng t hat was consi st ent was t hat we had
14 checks, ever y check t hat was wr i t t en t her e was an i nvoi ce f or .
15 So I submi t t o your Honor t hat t her e' s absol ut el y no basi s t o
16 consi der t hat Dr . Kar r on i nt ended t o do anyt hi ng wr ong, and
17 t hat t hei r whol e t heor y of t hi s case i s mi sgui ded.
18 THE COURT: Wel l , t he pr obl emi s t hat gener al l y t he
19 i ssue of cr i mi nal i nt ent i s an i ssue f or t he j ur y, and i f
20 t her e' s any basi s f or t he j ur y t o dr aw such a concl usi on, I ' ve
21 got t o l eave i t t o t he j ur y.
22 Her e, t he gr ant was made a f ew weeks af t er t hey
23 at t ended a ki ckof f meet i ng. I gat her t he money came i n a f ew
24 weeks af t er t hey at t ended t he ki ckof f meet i ng, what ' s cal l ed a
25 ki ckof f meet i ng. And at t he ki ckof f meet i ng t her e wer e cer t ai n
( 212) 805- 0300
1239
86azkar 4
1 exhi bi t s and r ul es t hat wer e l ai d down t o t he r eci pi ent . And
2 t he t er ms, t he st andar d t er ms and condi t i ons wer e set f or t h.
3 And t hey had a sl i de show t o advi se t he r eci pi ent s of t he
4 nat ur e of t he agr eement so t hat t hose peopl e who wer e l ess t han
5 avi d of t er ms of condi t i ons woul d be al er t ed t o t he necessar y
6 i t ems.
7 And as I under st ood t he t est i mony, t hat t hey wer e
8 not - - t hey wer e not t o spend any money f or r ent and ut i l i t i es.
9 And I t hought t hat appear ed on one of t he sl i des - - and I may
10 be wr ong. And t hat t hen t hey had t o get pr i or appr oval s f or
11 cer t ai n t ypes of expendi t ur es.
12 Wel l , t he f i r st t hi ng t hat happens i s t hat t he money
13 comes i n - - I ' ve f or got t en whet her i t was $150, 000 or somet hi ng
14 l i ke t hat . The def endant t akes t hat check - - t akes t hat money,
15 deposi t s i t i n CASI , t hen dr aws hi msel f a check f or 75, 000 and
16 t hen pr oceeds t o - -
18 THE COURT: - - dr aw ot her checks i n payment of t he
19 back r ent .
20 MR. RUBI NSTEI N: J udge, your t i me l i ne - -
21 THE COURT: For some, f or some $36, 000.
22 MR. RUBI NSTEI N: The t i me l i ne i s of f , J udge.
24 MR. RUBI NSTEI N: Your t i me l i ne i s of f . The money - -
25 THE COURT: Ti me l i ne i s of f ?
( 212) 805- 0300
1240
86azkar 4
1 MR. RUBI NSTEI N: Yes. The money came i n i n Oct ober , I
2 t hi nk Oct ober 25t h.
3 THE COURT: Ri ght .
4 MR. RUBI NSTEI N: The ki ckof f and t he money was
5 wi t hdr awn - -
6 THE COURT: The ki ckof f - -
7 MR. RUBI NSTEI N: Was August , was November 8t h, 2001.
8 So t he money was wi t hdr awn pr i or t o t he t i me of t he ki ckof f ,
9 so - -
11 MR. RUBI NSTEI N: That ' s my r ecol l ect i on - -
12 THE COURT: I don' t know. But - -
13 MR. RUBI NSTEI N: - - of t he evi dence.
14 THE COURT: You may be r i ght . My r ecol l ect i on was
15 t hat t he ki ckof f was i n Oct ober , but I may be wr ong. And I
16 not i ce t hat t he l ast wi t ness i ndi cat ed t hat t he ki ckof f was i n
17 Oct ober wher e he met Dr . Kar r on.
18 MR. RUBI NSTEI N: He wasn' t at t he ki ckof f , J udge.
19 Benedi ct was not at t he ki ckof f . He t est i f i ed t hat he was
20 not - - he was not aboar d. He sai d he was at a conf er ence wher e
21 he met - - t hat ' s when he met Dr . Kar r on.
22 THE COURT: Wel l , I t hought he sai d at one poi nt he
23 was at a conf er ence, but t hen he cal l ed i t ki ckof f al so. I may
24 be wr ong.
25 MR. RUBI NSTEI N: The t est i mony i s t hat t he peopl e at
( 212) 805- 0300
1241
86azkar 4
1 t he ki ckof f , besi des t he ATP peopl e, wer e Dr . Kar r on, Gur f ei n
2 and somebody whose name st ar t s wi t h an S, Dr . Sat ava.
3 THE COURT: Wel l , t he poi nt I ' mmaki ng i s t hat soon - -
4 I bel i eve t hey may have had such a meet i ng. I ' d have t o go
5 back t o my not es and l ook at i t . I wi l l go back t o t hem.
6 Exhi bi t 2 ment i ons a ki ckof f . I don' t seemt o have a dat e.
7 Then I bel i eve t hat t hat was al l bef or e t he money was
8 sent , but af t er t he awar d was announced, and t hen t he money
9 comes i n and t hese payment s wer e made out . But I ' d have t o go
10 back t o t he act ual r ecor d. Ther e was anot her meet i ng i n
11 November .
12 MR. EVERDELL: Your Honor , r egar dl ess - -
13 THE COURT: I t was t est i f i ed t o wher e he di scussed
14 changes i n t he equi pment budget . Those ar e j ust my not es. I
15 may be wr ong.
16 So, I mean t hey coul d dr aw an i nf er ence f r omt hat , i t
17 seems t o me, t hat he del i ber at el y deci ded not t o abi de by t he
18 agr eement , f or r easons of hi s own, or by t he gr ant t er ms
19 agr eement s of i t s own and wi t hout get t i ng - - and wi t hout
20 get t i ng any pr i or appr oval , and t hat ' s enough f or a j ur y t o
21 det er mi ne t hat he was act i ng i nt ent i onal l y and knowi ngl y.
22 Let me see i f maybe t he dat es wi l l be i n your
24 MR. KWOK: Your Honor , i f I may, I t hi nk i f I r ecal l
25 t he t est i mony cor r ect l y, I t hi nk Mr . Rubi nst ei n i s r i ght , i n
( 212) 805- 0300
1242
86azkar 4
1 t hat t he ki ckof f meet i ng i n t hi s case happened af t er t he f unds
2 wer e made avai l abl e.
4 MR. KWOK: But i n t he end i t doesn' t mat t er , because I
5 t hi nk t her e' s t est i mony al so t hat t hese conver sat i ons about
6 r ent and ut i l i t i es happened at t he pr oposer s meet i ng, even
7 bef or e t he ki ckof f meet i ng, Lee Ger f ei n and Dr . Kar r on cal l ed
8 Hope Snowden t o t al k about r ent . And so when Ms. Snowden went
9 t o t he ki ckof f meet i ng, t he same conver sat i ons happened and - -
10 THE COURT: What about t hi s Ms. Li de, Bet t i what ever
11 her name was, Bet t i - -
12 MR. KWOK: Bet t i J oyce Li de. She al so t est i f i ed t hat
13 she spoke t o t he def endant and t he def endant ' s busi ness manager
14 about t he same t opi c.
15 THE COURT: When?
16 MR. KWOK: Of r ent .
17 THE COURT: When?
18 MR. KWOK: Rent , exact l y cor r ect . When? I bel i eve
19 she t est i f i ed t hat i t was at t he end of 2001.
20 THE COURT: When?
21 MR. EVERDELL: I bel i eve she t est i f i ed - - I bel i eve
22 she t est i f i ed i t was somet i me i n 2001. I don' t know - -
23 THE COURT: Somet i me i n 2001?
24 MR. EVERDELL: I ' d have t o check t hat .
25 THE COURT: Bef or e t he gr ant ?
( 212) 805- 0300
1243
86azkar 4
1 MR. EVERDELL: Your Honor , t he conver sat i ons t hat I
2 t hi nk ar e par t i cul ar l y r el evant her e ar e t he ones wi t h Hope
3 Snowden, who t est i f i ed par t i cul ar l y t hat even bef or e t he gr ant
4 was awar ded t hat she had conver sat i ons wi t h t he def endant and
5 Lee Ger f ei n about r ent and not bei ng al l owed al l owabl e, and
6 agai n had conver sat i ons wi t h t hemaf t er t he gr ant was awar ded
7 and at t he ki ckof f meet i ng, and al l t hese conver sat i ons
8 happened bef or e t hese f unds wer e dr awn down, and r ent s st ar t ed
9 t o get pai d wi t h f unds. So he was on not i ce.
10 THE COURT: I t wasn' t at t he ki ckof f meet i ng, but
11 t her e was anot her meet i ng, i s t hat your - -
12 MR. EVERDELL: Ther e i s a pr oposer s meet i ng bef or e t he
13 ki ckof f meet i ng, when peopl e who want t o wr i t e pr oposal s f or
14 t he CASI gr ant - - sor r y - - f or t he ATP gr ant go and t hey get
15 educat ed on what t he r ul es ar e, and t hat happened wel l bef or e
16 t he gr ant was awar ded.
17 THE COURT: I guess I ' mt al ki ng about t he pr oposer s.
18 MR. EVERDELL: I t hi nk so.
19 MR. RUBI NSTEI N: I don' t t hi nk Snowden was - - my
20 r ecol l ect i on Ms. Snowden wasn' t at - -
21 THE COURT: I di dn' t t hi nk.
22 MR. RUBI NSTEI N: That - -
23 THE COURT: I don' t t hi nk she was at i t . I t hought
24 onl y Li de and some ot her women wer e at i t .
25 MR. EVERDELL: That ' s r i ght . I don' t t hi nk - - I don' t
( 212) 805- 0300
1244
86azkar 4
1 t hi nk Ms. Snowden - - wel l , I don' t t hi nk t her e' s t est i mony Ms.
2 Snowden was at t he pr oposer s meet i ng, but she had conver sat i ons
3 wi t h t he def endant hi msel f and wi t h doct or - -
4 THE COURT: No, but t hose ar e - - I mean, you can f i x
5 dat es, but you have t hi s pr obl emof act i ng knowi ngl y and
6 i nt ent i onal l y i n vi ol at i on of t he gr ant t er ms.
7 MR. EVERDELL: That ' s r i ght .
8 THE COURT: That ' s a pr obl em.
9 MR. EVERDELL: And t he conver sat i on was can we use
10 r ent - - or can we use ATP f unds t o pay f or r ent an. She sai d
11 absol ut el y not .
12 THE COURT: I f t he hor se was al r eady out of t he bar n,
13 i t doesn' t go t o i nt ent .
14 MR. EVERDELL: The hor se wasn' t al r eady out of t he
15 bar n. These conver sat i ons happened bef or e t he gr ant f unds
16 st ar t ed get t i ng dr awn down and bef or e t he r ent payment wer e
17 get t i ng pai d.
18 THE COURT: I don' t know whet her t hey di d or di dn' t ,
19 at t hi s poi nt .
20 MR. EVERDELL: Her t est i mony was t hat i t happened
21 bef or e t he gr ant was even awar ded, and t he f i r st dr awdown i s, I
22 bel i eve - -
23 THE COURT: That was my r ecol l ect i on, but - -
24 MR. RUBI NSTEI N: That can' t possi bl y be, your Honor ,
25 because t hey t est i f i ed t hat t hi s was - - Snowden par t i cul ar l y - -
( 212) 805- 0300
1245
86azkar 4
1 t hat nobody woul d know t hat t hey had t he gr ant unt i l t hey
2 r ecei ved of f i ci al not i f i cat i on and, t her ef or e - - so t he
3 gover nment i s, I submi t , i s a l i t t l e - - i s i naccur at e.
4 MR. EVERDELL: I t doesn' t pr event t hemf r omcal l i ng.
5 THE COURT: I haven' t got any ci t at i on t o t he evi dence
6 bef or e me. No one pr ovi ded me wi t h t hat . And - -
7 MR. EVERDELL: I t ' s al so - - your Honor , t he t est i mony
8 of Hope Snowden i s t hat she had numer ous conver sat i ons wi t h t he
9 def endant and Lee Ger f ei n r emember bet ween t he t i me t hat t he
10 gr ant was awar ded and t he day of t he ki ckof f meet i ng about r ent
11 ut i l i t i es. The f i r st dr awdown f unds, I bel i eve, was
12 Oct ober 26. The gr ant awar ded on 4t h of Oct ober , backdat ed
13 ef f ect i ve as of Oct ober 1st , but she had t hese conver sat i ons
14 wi t h t he def endant bef or e t he f und ar e even dr awn down. And
15 pl us t he f act - -
16 THE COURT: Wher e i s t hat i n t he r ecor d?
17 MR. EVERDELL: I t ' s 254 t o 259 and 303 t o 04. And,
18 your Honor , addi ng t o t hat , i s t hat t hese r ent checks - -
19 THE COURT: I ' ve got t o f i nd a dat e. Wher e i s t he
20 dat e?
21 MR. EVERDELL: I t hi nk i t shoul d be on 254 t o 259,
22 t hose pages.
23 THE COURT: 254?
24 MR. EVERDELL: Of t he t r anscr i pt .
25 THE COURT: I have t he wr ong book. I asked f or dat es.
( 212) 805- 0300
1246
86azkar 4
1 That - - 254 i s t he day of t he ki ckof f meet i ng, whi ch i s i n
2 November .
3 MR. EVERDELL: And I bel i eve t he quest i on was
4 somet hi ng l i ke, do you have any conver sat i ons bef or e t he
5 ki ckof f meet i ng wi t h - -
6 THE COURT: Wel l , wher e i s t hat ?
7 MR. EVERDELL: I t hi nk i t ' s i n one - -
8 THE COURT: Wai t a mi nut e. I got somet hi ng pr i or
9 t o - - yes, yes. Let me see. 254.
10 MR. EVERDELL: Thr ough 259 and 303.
11 THE COURT: J ust a second l et me - -
13 ( Pause)
14 THE COURT: I t doesn' t gi ve a dat e. I t doesn' t gi ve a
15 dat e. I can' t f i nd any dat e i n t her e.
16 MR. EVERDELL: Your Honor , I don' t know i f Ms. Snowden
17 r emember ed t he exact dat e when she had t he conver sat i ons, but
18 she sai d - -
19 THE COURT: But i t doesn' t have any dat e, any
20 r ef er ence dat e i n t hat page.
21 MR. EVERDELL: Your Honor , I t hi nk t he t i mef r ame we' r e
22 t al ki ng about her e - -
23 THE COURT: Wai t a mi nut e, wai t a mi nut e. I t hi nk I
24 may have f ound one on 257.
( 212) 805- 0300
1247
86azkar 4
1 THE COURT: I n Oct ober . Thi s i s r i ght af t er he was
2 t ol d t hat he r ecei ved t he document s t hat he woul d be r ecei vi ng
3 t hi s f eder al f und.
4 MR. EVERDELL: Ri ght .
5 THE COURT: Then i t cont i nued.
6 MR. EVERDELL: Whi ch i s t he gr ant ' s awar ded on - -
7 THE COURT: That conver sat i on - - l et me j ust see who
8 t hi s i s wi t h. Thi s does seemt o be wi t h t he def endant . I
9 t hi nk t her e was ment i on of Gur f ei n t her e i n t he quest i on. And
10 t hat does i nvol ve r ent and ut i l i t i es.
11 MR. EVERDELL: That ' s cor r ect , your Honor . So she' s
12 havi ng conver sat i ons, act ual l y mul t i pl e conver sat i ons wi t h bot h
13 t he def endant and Lee Ger f ei n bef or e t he f unds ar e bei ng dr awn
14 down i n Oct ober of 2001, t el l i ng hi mspeci f i cal l y you can' t use
15 ATP f unds t o pay f or r ent , ut i l i t i es.
16 And f ur t her mor e, your Honor , i f you l ook at t he spr ead
17 sheet s, t hese r ent payment s wer e pai d out over t he cour se of
18 sever al mont hs, even af t er t he i ni t i al dr awdown. So t hese
19 conver sat i on he' s havi ng wi t h - -
20 THE COURT: 258 i s t he di scussi on. I t hought t her e
21 was somet hi ng f r omMs. Li de al so.
22 Wel l , t hat seems t o cover t he r ent and ut i l i t y, and
23 t hat seems t o r ai se t he i ssue of t he def endant ' s i nt ent , so I
24 have t o deny t he mot i on. That ' s what I got t o do.
25 Al l r i ght , anyt hi ng f ur t her ? No wor d on - -
( 212) 805- 0300
1248
86azkar 4
1 MR. EVERDELL: No, your Honor . The appeal s
2 di vi si on - - sor r y, your Honor . The appeal s di vi si on wasn' t
3 abl e t o f i nd anyt hi ng appl i cabl e, so I t hi nk we' l l j ust st ay
4 wi t h what we have.
5 THE COURT: Al l r i ght . I mi ght come up wi t h
6 somet hi ng. I ' l l l ook at a f ew t hi ngs. I want t o l ook at Mr .
7 Rubi nst ei n' s case t hat he r ef er r ed me t o. And you r ef er r ed me
8 t o U. S. ver sus Thompson.
9 MR. EVERDELL: I r ef er r ed you t o U. S. ver sus Ni eman.
10 THE COURT: Ni eman, 211 Fed. 3d. He want s me t o l ook
11 at U. S. ver sus Thompson.
12 MR. EVERDELL: Cor r ect . Mi ne' s 211 F. 3d, 40.
13 THE COURT: Yeah, I ' ve got t hat .
15 THE COURT: Okay.
18 THE COURT: Al l r i ght , wor k har d on your summat i on.
19 MR. EVERDELL: I wi l l , your Honor .
21 THE COURT: Wor k har d on your summat i ons al l ni ght .
22 Be her e at 9: 30 i n t he mor ni ng.
( 212) 805- 0300
1249
3 EDGAR E. COONS
5 Cr oss By Mr . Ever del l . . . . . . . . . . . 1138
6 THEODORE W. LESLI E
7 Di r ect . . . . . . . . . . . . . . . . . . 1140
8 Cr oss By Mr . Kwok . . . . . . . . . . . . . 1144
9 MI CHAEL R. TREAT
12 LEE H. GOLDBERG
15 WI NDY LYNNE FARNSWORTH
17 Cr oss By Mr . Kwok . . . . . . . . . . . . . 1187
18 Redi r ect Q. . . . . . . . . . . . . . . . . 1189
21 ZZZ and ZZZ- 1 . . . . . . . . . . . . . . 1190
22
23
24
25
( 212) 805- 0300

1250
86bzkar 1

SOUTHERN DI STRI CT OF NEWYORK
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


4 v. S2 07 CR 541 ( RPP)


6 Def endant .

7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

8
J une 11, 2008
9 9: 2 a. m.

10
Bef or e:
11
HON. ROBERT P. PATTERSON, J R. ,
12
Di st r i ct J udge
13

14 APPEARANCES

Uni t ed St at es At t or ney f or t he
BY: STEVEN KWOK
Assi st ant Uni t ed St at es At t or neys
18
RUBI NSTEI N & COROZZO, LLP
BY: RONALD RUBI NSTEI N
20 WI LLI AM Di CENZO

21
Al so Pr esent : Rachel Ondr i k, U. S. Dept . of Commer ce

23

24

25

( 212) 805- 0300

1251
86bzkar 1


2 THE COURT: I f Mr . Rubi nst ei n i sn' t her e, and I t hi nk

3 i t ' s i mpor t ant t hat bot h si des check ei t her si de' s exhi bi t s and

4 make sur e t hey ar e t he exhi bi t s admi t t ed i n evi dence. Mr .

5 Rubi nst ei n nor hi s associ at e i s her e. So he bet t er get i n

6 her e, Rober t . We' ve got t o make sur e t hose exhi bi t s ar e

7 cor r ect .

8 They wer e of f er ed i n evi dence and t hey wer e admi t t ed

9 i n and not f or i dent i f i cat i on.


11 THE COURT: I s he out si de, t he associ at e?

12 MR. EVERDELL: I coul d go check, your Honor .

13 THE COURT: Because he shoul d be checki ng your

14 exhi bi t s.

15 Rober t , woul d you get Mr . Rubi nst ei n' s associ at e.

16 THE DEPUTY CLERK: He was i n t he bat hr ooma second

17 ago.

18 THE COURT: Oh.

19 ( Mr . Di Cenzo now pr esent )

20 THE COURT: Mr . Rubi nst ei n i sn' t her e, but - - I ' ve

21 f or got your name.

22 MR. Di CENZO: Wi l l i am.

23 THE COURT: You' l l have t o check t he Gover nment ' s

24 exhi bi t s t o be sur e t hat t hey' r e exhi bi t s admi t t ed i n evi dence

25 and t hey have t o exami ne your exhi bi t s t o be sur e t hey wer e

( 212) 805- 0300

1252
86bzkar 1

1 admi t t ed i n evi dence, and not j ust f or i dent i f i cat i on.

2 MR. Di CENZO: Okay. I had - -

3 THE COURT: Because we don' t want t o somet hi ng ar i se

4 dur i ng summat i ons wher e t hey say, oh, t hat wasn' t admi t t ed i n

5 evi dence and you say oh, or Mr . Rubi nst ei n says t hat wasn' t

6 admi t t ed i n evi dence, so.

7 MR. Di CENZO: I t was - - t her e was one smal l , I t hi nk

8 i t ' s def ense exhi bi t Q t hat was a quest i on whet her i t was

9 admi t t ed i n evi dence. I want ed t o check t he r ecor d. I ' l l show

10 i t t o you.

11 THE COURT: When was i t of f er ed?

12 THE DEPUTY CLERK: J une 6t h, I t hi nk.

13 THE COURT: I can l ook at my not es, but i t woul d hel p

14 i f when i t was of f er ed, maybe I coul d hel p you. Take i t up

15 wi t h t he gover nment . Maybe t hey have no obj ect i on t o i t . I

16 don' t know. I have t o see Q - - show i t t o t hem. Show t hemQ.

17 Show t hemQ and t hey can det er mi ne whet her t hey have an

18 obj ect i on. I ' ve f or got t en what Q was.

19 MR. KWOK: I t hi nk i t ' s a chai n of e- mai l s, your

20 Honor , r el at i ng t o Fr ank Spr i ng.

21 THE COURT: Rel at i ng t o what ?

22 MR. KWOK: Fr ank Spr i ng, t he gover nment wi t ness wi t h a

23 sl i ght Br i t i sh accent .

24 THE COURT: Her e' s Mr . Rubi nst ei n.

25 THE DEPUTY CLERK: I t was par t of 3507.

( 212) 805- 0300

1253
86bzkar 1

1 THE COURT: Oh, al l r i ght .

2 THE DEPUTY CLERK: Par t of 3507.

3 THE COURT: 3507 i s about 3 i nches t hi ck.

4 ( Mr . Rubi nst ei n now pr esent )

5 THE DEPUTY CLERK: I had i t as bot t omof page t wo, al l

6 of page t hr ee and t hen t he t op of page f our . That ' s t he not e

7 t hat I had on what i t act ual l y was f r omal l t hose document s,

8 but I never act ual l y saw t hat exhi bi t was - -

9 THE COURT: Do your r ecor ds show i t was admi t t ed?

10 THE DEPUTY CLERK: No. I have i t t he - - l ast t hi ng I

11 have was t hat you wer e sayi ng t hat i t shoul d be - - as t o what

12 i t shoul d be, but i t was never act ual l y sai d i t was admi t t ed,

13 but di scussi on was exact l y what i t was supposed t o be.

14 THE COURT: I t may have j ust been done t o r ef r esh hi s


16 What page was i t ? What page was i t on?


18 THE COURT: My r ecor d i s wher e?

19 THE DEPUTY CLERK: I s t hat i t , J une 6t h?

20 THE COURT: I don' t bel i eve so. Thi s i s 11.

21 THE DEPUTY CLERK: Today' s, t hey have i t .

22 THE COURT: Was i t used j ust t o r ef r esh r ecol l ect i on

23 or was i t - -

24 MR. KWOK: I t hi nk i t was t o - - we' r e l ooki ng r i ght

25 now. He di dn' t r ecol l ect t he subj ect of t he e- mai l t hat was

( 212) 805- 0300

1254
86bzkar 1

1 shown t o hi m, and i t was not act ual l y admi t t ed - - t her e was

2 act ual l y an obj ect i on l odged.

3 THE COURT: I saw t he obj ect i on, but I di dn' t know

4 whet her - - what happened.

5 MR. EVERDELL: I t doesn' t l ook l i ke i t was ever

6 admi t t ed.

7 THE COURT: I t was used j ust t o r ef r esh r ecol l ect i on.

8 MR. KWOK: I t hi nk t hat ' s f ai r .


10 MR. Di CENZO: I t hi nk I i t was l i ke goi ng t o be

11 admi t t ed and t hen quest i oned i s i t t he whol e page, not t he

12 whol e page, and t hen t hey obj ect ed and t hey - - t her e was no

13 f ur t her di al ogue wi t h t he Cour t on whet her i t was admi t t ed or

14 i t wasn' t admi t t ed.

15 THE COURT: I don' t r emember t he subj ect mat t er .

16 MR. EVERDELL: He says, " I don' t r ecol l ect , your

17 Honor . "

18 THE COURT: Ask Mr . Rubi nst ei n. Exhi bi t Q, Mr .

19 Rubi nst ei n, f or i dent i f i cat i on or was i t admi t t ed? I t hi nk i t

20 was used t o r ef r esh r ecol l ect i on.

21 MR. RUBI NSTEI N: Who i s t he wi t ness?

22 MR. EVERDELL: Spr i ng.

23 MR. RUBI NSTEI N: I t hi nk i t was used t o r ef r esh


25 MR. EVERDELL: I don' t t hi nk i t ' s admi t t ed.

( 212) 805- 0300

1255
86bzkar 1

1 THE COURT: Wel l , t hen i t i sn' t - - i t ' s f or

2 i dent i f i cat i on onl y, Mr . Wi l l i am.

3 MR. EVERDELL: So no Q, r i ght .

4 THE COURT: Bef or e you came, Mr . Rubi nst ei n, I asked

5 bot h si des t o check t he ot her ' s exhi bi t s so t hat we don' t have

6 a di sput e i n t he mi ddl e of summat i ons as t o whet her somet hi ng' s

7 admi t t ed or not .

8 MR. RUBI NSTEI N: Absol ut el y, J udge. Mr . Di Cenzo i s

9 f i ne. Mr . Kwok saw me i n my new wor k pl ace hi di ng f r om

10 ever ybody I commandeer ed t he caf et er i a. The back wal l has a

11 ver y ni ce l edge, I don' t have t o hur t my back, and I can spr ead

12 my paper s out .

13 THE COURT: Okay. Ar e you al l t hr ough?

14 THE DEPUTY CLERK: Di d t hat wor k out wi t h your

15 exhi bi t s?

16 MR. KWOK: Yes, wi t h one mi nor change. I t hi nk we' l l

17 j ust admi t i t by st i pul at i on?

18 THE DEPUTY CLERK: Okay. Whi ch one?

19 MR. KWOK: 104.

20 THE DEPUTY CLERK: Okay.

21 THE COURT: What i s 104?

22 MR. KWOK: 104 i s an i nvoi ce, your Honor , t hat was

23 admi t t ed by st i pul at i on.

24 THE COURT: Each expect t o t ake what , 40 mi nut es?


( 212) 805- 0300

1256
86bzkar 1

1 THE COURT: Summat i ons, 40 mi nut es?

2 MR. KWOK: For me I t hi nk ar ound t hat nei ghbor hood.

3 MR. RUBI NSTEI N: I ser i ousl y doubt t hat , your Honor .

4 THE COURT: What ?

5 MR. RUBI NSTEI N: I woul d t hi nk an hour and a hal f .

6 THE COURT: I t ' s awf ul l ong.

7 MR. RUBI NSTEI N: Act ual l y i t ' s pr obabl y t he second

8 shor t est summat i on, maybe t he t hi r d shor t est summat i on t hat

9 I ' ve ever pl anned. I don' t even t hi nk I have one f ul l r edwel l .

10 THE COURT: Wel l , I ' l l r emi nd you t hr oughout t he - -


12 THE COURT: Wher e you ar e. But an hour and a hal f ,

13 you' r e goi ng t o put peopl e t o sl eep. I don' t t hi nk i f you t ake

14 40 mi nut es, I don' t t hi nk you need t o t ake mor e t han an hour .

15 We have r ebut t al . I f t hat means I ' ve got t o gi ve t he

16 gover nment a l onger r ebut t al , I don' t want t o gi ve t he

17 gover nment a l onger r ebut t al . I don' t want t he gover nment - -

18 an hour and a hal f woul d mean t he gover nment woul d pr obabl y

19 have t o engage i n a hal f - hour or so of r ebut t al i nst ead of 10

20 or 15 mi nut es at t he most .

21 MR. RUBI NSTEI N: Wel l , I ' l l t r y and cut i t down t o an

22 hour , J udge.


24 MR. EVERDELL: Do I have t i me t o r un t o t he r est r oom?


( 212) 805- 0300

1257
86bzkar 1

1 MR. EVERDELL: Do I have - -

2 THE COURT: Of cour se. Let me see i f t her e' s anyt hi ng

3 el se t hat we ought t o t ake up. I want ed t o t ake up t he smal l

4 changes I made i n t he char ge af t er our conf er ence.


6 THE COURT: You want t o t ake t hose up now?

7 MR. KWOK: Sur e, we can t ake t hose up now.

8 MR. EVERDELL: Al l r i ght , t hen I ' l l - -

9 THE COURT: I ' ve handed out a copy of t he char ge, I

10 bel i eve you' ve got i t . And I , on t he t r aci ng, I added i n, t o

11 t hat sect i on, money i s f ungi bl e and t he gover nment need not

12 t r ace back.

13 MR. EVERDELL: Thi s i s i n el ement f i ve?

14 THE COURT: On page 22. On page - - I don' t t hi nk page

15 11 need di scussi on about gover nment empl oyee. You' r e awar e of

16 t hat .

17 On page 17 we t ook t he over al l descr i pt i on of t he

18 i ndi ct ment and made i t consi st ent wi t h t he l at t er par t of t he

19 char ge, sayi ng t hat i nt ent i onal l y mi sappl i ed $5, 000 and mor e i n

20 t he car e, cust ody and cont r ol of CASI , whi l e i t was t he

21 benef i ci ar y of a f eder al gr ant of mor e t han $10, 000 a year .

22 I t hi nk t hose ar e t he onl y changes. You mi ght l ook at

23 t he sect i on havi ng t o do, on page 23, havi ng t o do wi t h

24 t r aci ng; ot her wi se, i t ' s as we agr eed.

25 Al l r i ght , why don' t you t ake your br eak.

( 212) 805- 0300

1258
86bzkar 1


2 MR. EVERDELL: Thank you.

3 ( Recess)



6 Ladi es and gent l emen, we' r e about t o hear - - l adi es

7 and gent l emen, we' r e about t o hear t he summat i ons of counsel .

8 You' r e r emi nded t hat summat i ons of counsel ar e not evi dence.

9 You have t he evi dence bef or e you i n t he f or mof t he t est i mony

10 and t he exhi bi t s r ecei ved i n evi dence and t he st i pul at i ons, but

11 summat i ons can be a hel p t o t he j ur y and hel p t hei r t hi nki ng i n

12 t er ms of t hei r r evi ew of t he evi dence. That ' s what summat i ons

13 ar e f or .

14 So you' l l f i r st hear f r omt he gover nment , and t hen

15 you' l l hear f r omt he def ense, and t hen t he gover nment get s a

16 shor t r ebut t al . So we' l l st ar t wi t h Mr . Kwok and t hen hear

17 f r omMr . Rubi nst ei n and, I don' t know, Mr . Ever del l or Mr .

18 Kwok - - Mr . Ever del l , you' r e goi ng t o do t he r ebut t al .

19 Mr . Kwok.


21 For a year and a hal f , Dani el B- Kar r on, t he def endant ,

22 cheat ed t he gover nment f or over hal f a mi l l i on dol l ar s. He

23 cheat ed a pr ogr amt hat suppor t ed hi mand hi s company, ATP, t he

24 Advanced Technol ogy Pr ogr amt hat suppor t s hi gh r i sk sci ent i f i c

25 r esear ch. The r ul es wer e cl ear and si mpl e, and Dr . Kar r on knew

( 212) 805- 0300

1259
86bzkar 1 Summat i on - Mr . Kwok

1 what t hey wer e; expenses not i ncl uded i n appr oved budget coul d

2 not be pai d f or wi t h gr ant money. But t he def endant j ust

3 di dn' t car e. He sai d he coul d do what ever he want ed, and

4 t hat ' s exact l y what he di d. He t r eat ed t he gr ant l i ke hi s own

5 per sonal pi ggy bank. He woul dn' t t ake no f or an answer .

6 Bef or e t he gr ant was shut down, t he def endant used

7 t axpayer s money t o pay mor t gage on hi s condo, a cl eani ng l ady,

8 medi cal pr ocedur es and househol d i t ems l i ke t hi s bl ender , t hi s

9 GPS syst em, and t hese power t ool s. Al l t ol d, t he def endant

10 mi sappl i ed about hal f of t he $1. 3 mi l l i on hi s company CASI got .

11 When t hi s t r i al began, t he gover nment t ol d you t hat

12 t he evi dence woul d pr ove t o you, beyond a r easonabl e doubt ,

13 t hat t he def endant i s gui l t y of t he cr i me char ged i n t he

14 i ndi ct ment . The evi dence i s now i n, and t hat ' s exact l y what i t

15 shows.

16 Fi r st , t ake a l ook at what i s not i n di sput e i n t hi s

17 t r i al . At t he cl ose of t hi s case J udge Pat t er son wi l l i nst r uct

18 you on t he l aw. I t i s hi s i nst r uct i ons t hat cont r ol . I expect

19 t hat you wi l l l ear n t hat i n or der t o f i nd t he def endant gui l t y,

20 t he f i r st t hi ng t hat you have t o do i s t o deci de whet her he was

21 an agent of Comput er Ai ded Sur ger y, I nc. or CASI . Ther e i s no

22 di sput e t hat t he def endant was t he pr esi dent and t he chi ef

23 t echni cal of f i cer of CASI . How do you know? You know f r omt he

24 document s t he def endant si gned i n hi s capaci t y as pr esi dent and

25 C. T. O. Ther e' s no di sput e about any of t hese document s.

( 212) 805- 0300

1260

1 Let ' s l ook at gover nment exhi bi t 10A. That ' s t he appl i cat i on

2 t he def endant submi t t ed t o appl y f or t he gr ant . D. B. Kar r on

3 Ph. D. , chi ef t echni cal of f i cer , Comput er Ai ded Sur ger y, I nc

4 gover nment exhi bi t 12 i s t he gover nment document def endant

5 submi t t ed as pr esi dent agr eei ng t o compl y wi t h t he awar d

6 pr ovi si ons.

7 Dr . Kar r on al so submi t t ed t hi s l et t er , gover nment

8 exhi bi t 21, agai n as CASI ' s pr esi dent and chi ef t echni cal

9 of f i cer , sayi ng t hat hi s busi ness manager Lee Ger f ei n had no

10 aut hor i t y t o si gn f or or commi t CASI f i nanci al l y.

11 I n addi t i on t o f i ndi ng t hat t he def endant was an agent

12 of CASI , I expect J udge Pat t er son wi l l al so t el l you t hat you

13 al so have t o deci de whet her CASI r ecei ved f eder al f unds i n

14 excess of $10, 000 dur i ng a one year per i od. Ther e' s al so no

15 di sput e about t hat .

16 You hear d t he uncont r adi ct ed t est i mony of Bet t i J oyce

17 Li de, t he f i r st wi t ness who came bef or e you. She was one of

18 t he t r ue pr oj ect manager s f or t he gr ant . And Ms. Li de t ol d you

19 t hat CASI got $800, 000 dur i ng year one of t he gr ant . And she

20 t ol d you CASI got about hal f a mi l l i on dol l ar s i n year t wo

21 bef or e t he gr ant was shut down.

22 Hope Snowden and Bel i nda Ri l ey bot h t ol d you t he same

23 t hi ng.

24 So, l adi es and gent l emen, what i s i n di sput e i n t hi s

25 t r i al ? I t al l comes down t o t hi s: Whet her t he def endant

( 212) 805- 0300

1261

1 i nt ent i onal l y mi sappl i ed $5, 000 or mor e of f unds under CASI ' s

2 cont r ol t o pay f or unaut hor i zed expenses. Bef or e I t ur n t o t he

3 def endant ' s i nt ent , l et ' s go t hr ough t he evi dence bef or e you

4 t hat shows you t hat t he def endant di d i n f act mi sappl y $5, 000

5 or mor e i n f unds under CASI ' s cont r ol .

6 Now, t her e ar e a l ot of number s bei ng t hr own ar ound i n

7 t hi s t r i al , because huge sums of money ar e i nvol ved. But when

8 you get down t o i t , t he mi sappl i cat i on of f unds i s ver y si mpl e.

9 The gr ant speci al i st , Ms. Snowden, t ol d you t hat t he r ul es

10 under t he ATP pr ogr amar e si mpl e. She t est i f i ed t hat she t ol d

11 awar d r eci pi ent s, i ncl udi ng Dr . Kar r on, t hat your awar d budget

12 i s l i ke your Bi bl e; you must f ol l ow t he budget unl ess you get

13 advanced wr i t t en appr oval t o change i t . I t ems t hat don' t f al l

14 under any appr oved cat egor i es i n t he budget can' t be pai d f or

15 usi ng gr ant money. I t i s t hat si mpl e. Even f or t hi ngs t hat

16 can be pai d f or wi t h gr ant money i n t heor y, you need wr i t t en

17 appr oval i f you spent mor e t han what i s al l owed i n t he budget ,

18 unl ess t he change i s smal l , def i ned as any amount l ess t han

19 10 per cent of t he annual t ot al budget .

20 So how di d act ual spendi ng at CASI st ack up agai nst

21 t hat appr oved budget at CASI ? Now, t her e r eal l y i s no ser i ous

22 di sput e about how CASI spent i t s money, because al l of t he

23 t r ansact i ons ar e document ed i n bank r ecor ds and cr edi t car d

24 st at ement s. Wi t nesses may get f l ust er ed, t hey may not be abl e

25 t o do mat h on t he st and, t hey may get ner vous, but appr oved

( 212) 805- 0300

1262

1 budget and t he col d har d number s i n t hese f i nanci al st at ement s,

2 t hey speak f or t hemsel ves.

3 Now you hear d about audi t s i n t hi s case. Audi t s ar e

4 not hi ng mor e t han a sampl e t est i ng based on t he company' s books

5 and r ecor ds. They' r e subj ect t o change as t he company' s

6 r ecor ds change. These audi t s ar en' t per f ect , especi al l y when

7 t he company books wer e a mess and t he gover nment al r eady

8 audi t or , Ms. Ri l ey, t ol d you t hat her sel f .

9 But you don' t have t o r el y on Ms. Ri l ey' s or on anyone

10 el se' s audi t s i n t hi s case, because t he gover nment has put

11 bef or e you bank r ecor ds, cr edi t car d st at ement s, and vendor

12 i nvoi ces showi ng exact l y wher e t he money t hat came i nt o CASI

13 came f r om, and wher e t hat money went . Ther e i s no guesswor k

14 i nvol ved i n t hi s case.

15 Now, i n hi s cr oss- exami nat i on, def ense counsel kept

16 r ef er r i ng t o di f f er ent set s of books kept at CASI at di f f er ent

17 t i mes by di f f er ent peopl e, and t hese changi ng books make i t

18 seemas t hough i t ' s cet er a i mpossi bl e t o t el l what r eal l y went

19 on. Ladi es and gent l emen, t hat ' s a r ed her r i ng. None of t hat

20 mat t er s. Those f i nanci al r ecor ds don' t depend on what CASI ' s

21 books say or don' t say. These r ecor ds come di r ect l y f r omt he

22 banks and f r omt he cr edi t car d company showi ng exact l y wher e

23 t he money went .

24 Now, t o hel p you r evi ew t hese r ecor ds, Ms. Ri l ey

25 cr eat ed a spr ead sheet , t hat spr ead sheet , gover nment Exhi bi t

( 212) 805- 0300

1263

1 110, showi ng exact l y what went on i n CASI ' s busi ness account s.

2 So l et ' s go t hr ough some exampl es t o show you how t hat spr ead

3 sheet wor ks.

4 Now, her e' s a page f r omgover nment exhi bi t 90, t he

5 Amer i can Expr ess cr edi t car d st at ement s i ssued t o CASI f or t he

6 def endant ' s use. The l i st of t r ansact i ons on t hi s page and on

7 t he f ol l owi ng pages ar e t r ansact i ons made under t he name of

8 Dr . D. B. Kar r on. I t says t hat r i ght t her e on t he page. As an

9 exampl e, t ake a l ook at page t hr ee of t hi s mont hl y st at ement

10 and f i nd November 29t h, 2002. Ther e was a char ge f or $13. 91 at

11 St ar bucks Cof f ee, New Yor k. Now, t hat i nf or mat i on i s r ef l ect ed

12 i n t he spr ead sheet Ms. Ri l ey cr eat ed, gover nment Exhi bi t 110,

13 page 25 of 37; St ar bucks Cof f ee, $13. 91. As anot her exampl e,

14 l et ' s go t o December 3r d, 2002 of t he cr edi t car d st at ement .

15 Dr . Kar r on went t o I Hop, and i ncur r ed a char ge of $33. 84 i n

16 Ar l i ngt on, Vi r gi ni a. That i nf or mat i on i s once agai n r ef l ect ed

17 i n Ms. Ri l ey' s spr ead sheet , page 23 of 37, I Hop, f or $33. 94.

18 As a l ast exampl e, l et ' s go t o page t hr ee of t he cr edi t car d

19 st at ement . Dr . Kar r on went t o an I ndi an r est aur ant i n New Yor k

20 and i ncur r ed a char ge of $107. 75. Agai n, t hat i nf or mat i on i s

21 r ef l ect ed i n Ms. Ri l ey' s spr ead sheet , gover nment exhi bi t 110

22 agai n, page 25 of 37. The I ndi an r est aur ant , t he pr i ce,

23 $107. 25. Now, l et ' s go t o t he f i r st page of t hat cr edi t car d

24 st at ement t hi s page shows t hat t he char ges we j ust t al ked

25 about , as wel l as al l t he char ges dur i ng t hi s mont h, t ot al up

( 212) 805- 0300

1264

1 t o ar ound $1, 450. 30. And how' s t hat pai d f or ? So l et ' s go t o

2 t he dat a base and see. Let ' s go t o gover nment Exhi bi t 110

3 agai n, page t hr ee of 37. Ther e i s an ent r y showi ng CASI made a

4 payment t o Amer i can Expr ess, mi nus $1, 450. 30 cent s. Ri ght

5 t her e. But don' t j ust t ake Ms. Ri l ey' s wor d f or i t . Check her

6 wor k agai nst t he bank st at ement s f r omChase Bank. So l et ' s

7 pul l t hat up, gover nment exhi bi t 81 f or t he December 21st ,

8 2002, t o J anuar y 23r d, 2003 per i od, page t hr ee of f our . Her e

9 i t i s. December 30t h, Amer i can Expr ess, $1, 450. 30. And what

10 money went i nt o t hi s Chase account ? Let ' s go t o t he f i r st page

11 of t he same exhi bi t . Ther e i t i s, l et ' s zoomt hat i n. ATP

12 gr ant , 12/ 31, 20K; J anuar y 10t h, 20K, J anuar y 22nd, 28K. And

13 Ms. Ri l ey put t hat i nf or mat i on on her spr ead sheet s. Let ' s go

14 back t o Ms. Ri l ey' s spr ead sheet , l et ' s zoomt hat i n, r i ght

15 t her e. 20K, 20K, 28K on t he dat es t hat I j ust r ef er r ed t o.

16 But Ms. Ri l ey di dn' t j ust put i nt o t hi s spr ead sheet money

17 comi ng i n f r omt he ATP. Wher e t her e was money comi ng f r om

18 el sewher e, Ms. Ri l ey put t hat i n as wel l . You r emember when

19 Ms. Ri l ey was up on t hat wi t ness st and, Mr . Rubi nst ei n wai ved

20 ar ound t hese cancel l ed checks, gover nment exhi bi t - - def ense

21 exhi bi t FFF t o show t hat Dr . Kar r on put hi s money i nt o CASI .

22 I t ' s not cl ear what t he poi nt of al l t hat was, but one t hi ng i s

23 cer t ai n, i f t he poi nt was t o show t hat Ms. Ri l ey made a

24 mi st ake, t hat di dn' t wor k. Ther e was no Per r y Mason moment

25 t her e, because al l of t hi s i nf or mat i on i s r ef l ect ed i n Ms.

( 212) 805- 0300

1265

1 Ri l ey' s dat a base. So l et ' s go t ake a l ook at gover nment

2 Exhi bi t 110, page 38 of 44, t hey ar e al l r i ght t her e.

3 Ms. Ri l ey i s an audi t or . She mi ght not have been t he most

4 ar t i cul at e wi t ness, but she di dn' t over l ook t hese checks. What

5 gover nment exhi bi t 110, page 38 of 44 shows, i s t hat whi l e Dr .

6 Kar r on di d put money i nt o CASI , he al so made CASI l oan hi m

7 money, a l ot of money. And at t he end of t he day, once you

8 subt r act t he number s, and you t ake i nt o account t ax

9 wi t hhol di ng, Dr . Kar r on ended up t aki ng out mor e money f r om

10 CASI t han what he l oaned CASI and what he i s ent i t l ed t o i n

11 sal ar y. And t he ATP gr ant ended up bei ng t he onl y sour ce of

12 f undi ng t hat went i nt o CASI ' s busi ness account i n year one.

13 And t hat ' s exact l y what gover nment Exhi bi t 112 shows.

14 But you don' t have t o r el y on number s al one. You al so

15 hear d t he t est i mony of Lee Ger f ei n. Mr . Ger f ei n t ol d you t hat

16 he spent 25 per cent of hi s t i me at CASI f und r ai si ng t r yi ng t o

17 get CASI addi t i onal sour ces f undi ng, asi de f r omt he ATP f und.

18 But Mr . Ger f ei n t ol d you he was unsuccessf ul and di dn' t br i ng

19 i n any money at al l whi l e he was at t he company dur i ng year one

20 of t he gr ant . Hi s t est i mony i s f ul l y consi st ent wi t h what

21 gover nment Exhi bi t 112 shows.

22 Now l et ' s go t o year t wo, gover nment Exhi bi t 113.

23 Agai n f or year t wo, t he pur pl e ar ea r epr esent s how CASI ' s

24 account s wer e f unded by t he ATP gr ant on t hat . You can see f or

25 your sel ves t hat f or vi r t ual l y al l t he money, i t came f r omATP

( 212) 805- 0300

1266

1 except f or a t i ny sl i ce t her e, whi ch summed up t o appr oxi mat el y

2 $1700, whi ch came f r ommi scel l aneous r ef und checks. Agai n,

3 t hi s i s f ul l y consi st ent wi t h t he t est i mony of t he l ast

4 busi ness manager , Bob Benedi ct , who t ol d you t hat ATP was

5 CASI ' s onl y sour ce of f undi ng.

6 Let ' s t ur n now t o how t he def endant spent al l t hat

7 money. I sai d how t he def endant spent al l t hat money, because

8 as you hear d f r omt he busi ness manager s Lee Gur f ei n and Bob

9 Benedi ct , t he def endant was t he onl y per son who had si gni ng

10 aut hor i t y. And as you can see f or your sel f i n t he checks, D.

11 B. Kar r on was t he onl y one who act ual l y si gned checks.

12 When J udge Pat t er son i nst r uct s you on t he l aw l at er , I

13 expect you wi l l l ear n t hat t o sat i sf y t he r equi r ement of t he

14 st at ut e, t he amount of mi sappl i cat i on t he gover nment woul d need

15 t o pr ove i s $5, 000 and mor e. So l et ' s t ake a l ook at

16 gover nment exhi bi t 114 and see what happened t o t he money i n

17 year one.

18 As Ms. Ri l ey expl ai ned t o you, t he char t t o t he l ef t

19 shows t he br eak down by budget cat egor i es, accor di ng t o t he

20 appr oved budget , how t he money i s supposed t o be spent . The

21 char t t o t he r i ght shows what act ual l y happened, what act ual l y

22 happened t o t he money. Remember , al l t he gover nment needs t o

23 pr ove i s $5, 000 i n mi sappl i ed f unds. For get about ever yt hi ng

24 el se i n t hi s char t f or now, j ust l ook at t he r ent . Rent al one

25 was $60, 000, 12 t i mes, 12 t i mes, l adi es and gent l emen, above

( 212) 805- 0300

1267

1 t he $5, 000 t hr eshol d.

2 You hear d a l ot of t est i mony about r ent . Hope Snowden

3 t est i f i ed t hat you coul dn' t use r esear ch money t o pay r ent ,

4 per i od. I t doesn' t mat t er whet her you used t he condo i n par t

5 as an of f i ce. I t doesn' t mat t er t hat ATP i s t he onl y pr oj ect

6 t he company i s wor ki ng on; no means no. And t hat ' s because t he

7 ATP pr oj ect i s t o f und hi gh r i sk sci ent i f i c r esear ch, not

8 over head expenses t hat ever y busi ness has t o pay. And t he

9 def endant t r i ed t o get r ent appr oved, usi ng di f f er ent

10 j ust i f i cat i ons, but he was expl i ci t l y t ol d no, t i me and t i me

11 and t i me agai n. And t he def endant di dn' t j ust hear i t f r omt he

12 NI ST peopl e. The def endant got t he same no answer f r omhi s t wo

13 busi ness manager s, Lee Ger f ei n and Bob Benedi ct , who cont act ed

14 NI ST at t he def endant ' s r equest , got t he same no answer and

15 t ol d t he def endant no. The def endant got t he same no answer

16 f r omhi s bookkeeper Fr ank Spr i ng. Despi t e al l t hese no

17 answer s, we al l know what happened. The def endant sai d he

18 coul d do what ever he want ed. He sai d t he peopl e at NI ST l oved

19 hi m. He went ahead and he di d i t anyway.

20 Ladi es and gent l emen, t he gover nment coul d st op r i ght

21 her e and meet t he $5, 000 t hr eshol d r equi r ed by t he st at ut e, but

22 we di dn' t st op t her e because t he cr i me t he def endant commi t t ed

23 got wor se, much wor se. Once t he def endant deci ded t o cheat , he

24 deci ded t o go al l out . Af t er al l , why l i mi t your sel f t o r ent .

25 Ut i l i t i es ar e sor t of l i ke r ent , r i ght . You can' t wor k or l i ve

( 212) 805- 0300

1268

1 i n a pl ace wi t hout el ect r i ci t y or ai r condi t i oni ng, r i ght . So

2 l et ' s use gr ant money t o pay f or t hat t oo. And t hat ' s exact l y

3 what he di d, over $16, 000 i n ut i l i t i es i n year one al one. But

4 wai t . Why l i mi t t o r epr esent and ut i l i t i es? Af t er al l , you

5 can' t l i ve or wor k i n a pl ace t hat ' s t oo messy, r i ght , so l et ' s

6 hi r e a cl eani ng l ady and t o do some dust i ng and wi pi ng and have

7 t axpayer s pay f or t hat t oo. And t hat ' s exact l y what he di d,

8 cl eani ng over $5, 000 i n year one. Why st op t her e? Af t er al l ,

9 you can' t wor k i f you' r e hungr y, r i ght . So l et ' s t hr ow i n

10 meal s f or good measur e, and have Uncl e Sampay f or t hat t oo.

11 Cl ose t o $2, 000 i n year one al one.

12 Now, you r emember Mr . Rubi nst ei n aski ng Ms. Ri l ey

13 quest i ons about meal s. He showed her r ecei pt s of meal s t hat

14 Dr . Kar r on had wi t h handwr i t t en not at i on on t he back showi ng

15 t hat he at e wi t h ot her peopl e. You r emember t hat . Wel l , so

16 what . Does anyone ser i ousl y t hi nk t hat you can go t o I Hop as

17 def endant di d, and have t axpayer s pi ck up t he t ab because you

18 cl ai myou t al ked about t he pr oj ect over pancakes? Ther e' s no

19 l i ne i t emi n appr oved budget f or meal s, so you can' t pay f or

20 meal s wi t h gr ant money, per i od. I t i s t hat si mpl e.

21 But no, def ense counsel sai d i t ' s not so si mpl e

22 because t her e' s t hi s cat egor y cal l ed ot her s t hat maybe you can

23 f i t i t i n. Wel l , guess what ? Thi s i s not a game t o see who

24 coul d come up wi t h t he cl ever est ar gument t o see whet her you

25 coul d make somet hi ng f i t . Ther e ar e r ul es. Ther e ar e wr i t t en

( 212) 805- 0300

1269

1 budget s. And so l et ' s go t o gover nment exhi bi t 10B, page

2 seven. Thi s i s t he pr oposed budget t he def endant hi msel f

3 submi t t ed t hat NI ST l at er appr oved. You can see what ot her s i s

4 r ef er r i ng t o. I t ' s r ef er r i ng t o audi t s, not meal s; audi t s,

5 t hat ' s i t . And so no, t he def endant coul dn' t go t o a

6 r est aur ant , cl ai mhe was t al ki ng about t he pr oj ect over di nner

7 and have t he f eder al gover nment pay f or i t . I nst ead, he needed

8 t o pay f or i t hi msel f f r omhi s own sal ar y, j ust l i ke ever ybody

9 el se i n New Yor k Ci t y who doesn' t get a f eder al gr ant .

10 Bef or e I l eave gover nment exhi bi t 114, l et me j ust

11 make one mor e poi nt . Remember when Ms. Ri l ey was up on t he

12 st and. Mr . Rubi nst ei n spent a good par t of t he mor ni ng

13 cr oss- exami ni ng her about her audi t f i ndi ng about Lee Ger f ei n' s

14 sal ar y. Remember t hat ? Mr . Rubi nst ei n kept aski ng Ms. Ri l ey

15 why she di sal l owed 25 per cent of Mr . Ger f ei n' s sal ar y, when t he

16 appr oved budget - - i t was made cl ear t hat Mr . Ger f ei n coul d

17 spl i t hi s t i me 75 on t he pr oj ect , 25 on ever yt hi ng el se? And

18 Mr . Rubi nst ei n kept pushi ng and pushi ng t o t r y Ms. Ri l ey t o

19 admi t t hat she made a mi st ake i n her audi t . And Ms. Ri l ey

20 t r i ed t o expl ai n how she di dn' t make a mi st ake t hat had

21 somet hi ng t o do wi t h t ax wi t hhol di ng and t he di f f er ence bet ween

22 expect ed and act ual sal ar y; you r emember al l t hat ? But you

23 know what , l adi es and gent l emen, at t he end of t he day, none of

24 t hat mat t er s. As you can see on t hi s char t , when Ms. Ri l ey di d

25 her anal ysi s usi ng t he bank r ecor ds as opposed t o her audi t s,

( 212) 805- 0300

1270

1 whi ch wer e based on t he company' s books and r ecor ds, she gave

2 t he def endant ever y benef i t of t he doubt . Look at t hi s

3 your sel f . Under t he budget f or ot her empl oyees sal ar y, l et ' s

4 go back t o t he l ast page. For ot her empl oyees sal ar y budget ed

5 f or $450, 000, not a si ngl e cent of ot her empl oyees sal ar y was

6 di sal l owed. I n f act , accor di ng t o gover nment Exhi bi t 114, t he

7 company was act ual l y under budget under t he cat egor y of ot her

8 empl oyees sal ar i es. For equi pment , Mr . Rubi nst ei n al so asked

9 Ms. Ri l ey about whet her she exami ned ever y pi ece of equi pment

10 t hat CASI bought . Remember al l t hat ? Agai n, Ms. Ri l ey gave

11 t he def endant ever y benef i t of t he doubt . Agai n, i n t hi s

12 anal ysi s, Ms. Ri l ey wasn' t even second guessi ng whet her

13 def endant bought t he equi pment r el at ed t o hi s r esear ch f or

14 equi pment . The onl y amount t hat she di sal l owed was t he amount

15 over budget , t hat ' s i t .

16 So what i s t he end r esul t of t he def endant ' s conduct ?

17 Even gi vi ng hi mt he benef i t of t he doubt ? Over $268, 000 i n

18 mi sappl i ed f unds i n year one al one. Make no mi st ake, t hi s i s

19 t axpayer s money, because as you saw i n t he pur pl e char t s j ust

20 now, t he ATP pr ogr amwas t he onl y sour ce of f undi ng i n CASI ' s

21 busi ness account s i n year one.

22 And i n year t wo, def endant di dn' t get t hr ough t he

23 whol e year because he got shut down, but he bl ew away over

24 $196, 000 i n j ust ni ne mont hs, spendi ng money on t he same i t ems

25 t hat he was t ol d t i me and agai n he coul d not spend gr ant money

( 212) 805- 0300

1271

1 on; t hi ngs l i ke r ent , ut i l i t i es, cl eani ng l ady, and meal s.

2 Now t hat we' ve wal ked t hr ough t he number s, l et ' s t ur n

3 t o t he def endant ' s i nt ent . I expect J udge Pat t er son wi l l

4 i nst r uct you l at er t hat t o f i nd t he def endant gui l t y you need

5 t o f i nd t hat he i nt ent i onal l y mi sappl i ed t he gr ant money; i n

6 ot her wor ds, t hat t he def endant ' s conduct wasn' t si mpl y t he

7 r esul t of a mi st ake or mi sunder st andi ng. So what i s t he

8 evi dence t o show you t hat t he def endant knew f ul l wel l what he

9 di d was wr ong? Let ' s st ar t f r omt he begi nni ng wher e t he

10 def endant hi r ed Mr . Lee Ger f ei n as hi s busi ness manager .

11 Mr . Ger f ei n t ol d you t hat when he was f i r st hi r ed, t he

12 def endant agr eed t o an ar r angement wher e each check over $250

13 woul d have t o be cosi gned by hi msel f , Mr . Ger f ei n, and Dr .

14 Kar r on. That was t he under st andi ng Mr . Ger f ei n had when he got

15 j ob. Then what happened? Wi t hi n a week t he gr ant money came

16 i n, t he def endant wr ot e t hi s l et t er , Gover nment exhi bi t 21,

17 page t hr ee, t aki ng t he si gni ng aut hor i t y away f r omMr . Ger f ei n.

18 Now, l adi es and gent l emen, why di d t he def endant do t hat ? I t ' s

19 si mpl e. The def endant di d t hat because he want ed excl usi ve

20 cont r ol of t he gr ant money. St r i ppi ng Lee Ger f ei n of hi s

21 si gni ng aut hor i t y was necessar y because def endant was al r eady

22 pl anni ng t o use money f or hi s own benef i t . One week i nt o t he

23 pr ogr am, and t he def endant was al r eady t hi nki ng ahead. I n

24 f act , t he def endant made no secr et of t hi s at t he t i me.

25 Mr . Ger f ei n t ol d you t hat when t he gr ant money came i n, Dr .

( 212) 805- 0300

1272

1 Kar r on t r ansf er r ed $75, 000 i nt o hi s own account t o pay of f

2 f ami l y and cr edi t car d debt t hat he had been r acki ng up f r om

3 ever y day l i vi ng expenses. Mr . Ger f ei n t est i f i ed t hat he t ol d

4 t he def endant he coul dn' t do t hat , he coul dn' t spend gr ant

5 money t hi s way. The def endant sai d he had t o do i t , he had t o

6 pay t he bi l l s. And Mr . Ger f ei n, af t er he had been st r i pped of

7 hi s si gni ng aut hor i t y, coul dn' t st op hi mbecause t hi s was

8 al r eady a done deal .

9 What el se shows you t he def endant knew f ul l wel l what

10 he di d was wr ong? Let ' s f ocus on r ent agai n, because i t ' s such

11 a bi g i t em. Ti me and agai n, peopl e t ol d hi mhe coul dn' t use

12 gr ant money t o pay r ent , no mat t er what . The gr ant peopl e,

13 Ms. Li de, Ms. Snowden, t ol d hi mno at t he ki ckof f meet i ng, t hey

14 t ol d hi mno i n t el ephone and i n per son conver sat i ons.

15 Def endant ' s own empl oyees t ol d hi mno. Dr . Kar r on asked Lee

16 Ger f ei n t o cal l t he gr ant on hi s behal f . And when Mr . Ger f ei n

17 got t he no answer , he r el ayed t hat i nf or mat i on back t o t he

18 def endant . And Bob Benedi ct even bef or e he was hi r ed, t ol d t he

19 def endant no, and he kept t el l i ng t he def endant no af t er he

20 came on boar d t o CASI .

21 Af t er al l t hese conver sat i ons, does anyone bel i eve f or

22 a mi nut e t hat t he def endant di dn' t know he coul dn' t use gr ant

23 money t o pay r ent ? Of cour se not .

24 But what cl i nches t he case agai nst t he def endant on

25 hi s i nt ent i s t he def endant ' s own st at ement s. Look now at

( 212) 805- 0300

1273

1 gover nment Exhi bi t 213. Thi s i s an e- mai l you saw a f ew days

2 ago f r omDr . Kar r on t o someone named Ti a Lor r ai ne, dat ed

3 December 18t h, 2002. Readi ng f r omt he f our t h l i ne of t he

4 bot t omof t he page, l et ' s zoomt hat i n.

5 " I wi l l make a l ease wi t h Wi ndy and make l i ke I onl y

6 keep a f ol di ng bed on 33r d St r eet . I f ATP buys i nt o t hi s i dea,

7 t hen I can char ge my r ent on t he apar t ment t o t he gr ant and pay

8 my mor t gage. "

9 Ther e' s no mi st aki ng t he def endant ' s i nt ent her e. He

10 t ol d a f r i end he woul d " make l i ke" t hat he keeps a f ol di ng bed

11 on 33r d St r eet and he was hopi ng t hat ATP woul d " buy i nt o t hi s

12 i dea. " Thi s e- mai l i s devast at i ng pr oof of t he def endant ' s

13 i nt ent i n hi s own wor ds. But i f you need mor e pr oof of t he

14 def endant ' s cr i mi nal i nt ent , t ake a l ook at t hese i t ems; a

15 bl ender , a GPS t r acki ng devi ce, di gi t al camer a, a box of

16 dr i l l s, a dust bust er .

17 Now, l adi es and gent l emen, t hese may not be t he most

18 expensi ve i t ems i n t he wor l d, but can anyone ser i ousl y t hi nk

19 t hat t hese i t ems ar e r el at ed t o t he def endant ' s r esear ch on

20 sur ger y and comput er i magi ng? These i t ems he bought j ust show

21 you hi s mi nd set . They t el l you t hat , when t he def endant sai d

22 he coul d do what ever he want ed, t hat he coul d j ust schmooze

23 wi t h peopl e and t ake t hemout t o l unch and ever yt hi ng woul d be

24 okay, he meant ever y wor d he sai d. But t her e' s mor e. When

25 year one was over and t he audi t or was begi nni ng t o l ook at t he

( 212) 805- 0300

1274

1 books, what di d t he def endant do? Fr ank Spr i ng t ol d you what

2 t he def endant di d, t he def endant changed t he books. You saw

3 t hose e- mai l s. Mr . Spr i ng asked def endant t o st op mucki ng

4 about i n t he books, and st op r echar act er i zi ng expenses as

5 r el at ed t o t he gr ant when t hey r eal l y wer en' t . And what

6 happened? The def endant kept changi ng t he books. I s t hat t he

7 behavi or of someone who has no cl ue what he di d was wr ong? Of

8 cour se not . Common sense t el l s you t hat ' s t he behavi or of

9 someone who knew what he di d was wr ong and was doi ng hi s mi ght y

10 best t o hi de i t as best he coul d.

11 Ladi es and gent l emen, make no mi st ake, t hi s i sn' t a

12 case about a mi sunder st andi ng. Thi s i sn' t a case about someone

13 get t i ng caught up i n some compact gr ant r ul es and f or got t o dot

14 t he I ' s or cr oss t he T' s. Thi s i s a si mpl e case about t he

15 def endant , a Ph. D. sci ent i st , wi l l f ul l y cheat i ng t he gover nment

16 wi t h hi s eyes wi de open.

17 When you appl y your common sense t o t he evi dence

18 pr esent ed bef or e you, and when you l i st en cl osel y t o J udge

19 Pat t er son' s i nst r uct i ons on t he l aw, t her e' s one and onl y one

20 concl usi on t hat ' s suppor t ed by t he evi dence and t he l aw, and

21 t hat i s a ver di ct of gui l t y on t he count t hat ' s char ged i n t he

22 i ndi ct ment . Thank you.

23 THE COURT: Al l r i ght . Mr . Rubi nst ei n.

24 MR. RUBI NSTEI N: Coul d I st ep out f or a mi nut e J udge?

25 Coul d I have a per sonal moment ? Thank you.

( 212) 805- 0300

1275

1 THE COURT: Al l r i ght . Does t he j ur y need a br eak?

2 Anyone of you need a br eak? Al l r i ght .

3 ( Cont i nued on next page. )

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

( 212) 805- 0300

1276
86B7KAR2 Summat i on - Mr . Rubi nst ei n

1 MR. RUBI NSTEI N: May I pr oceed, your Honor ?

2 THE COURT: Yes. Go ahead.

3 MR. RUBI NSTEI N: I f t he Cour t pl eases, peopl e of t he

4 pr osecut i on, Dr . Kar r on and my associ at e you never met , Wi l l i am

5 Di Sent o, madamf or el ady, l adi es and gent l emen of t he j ur y, t hi s

6 i s my oppor t uni t y t o shar e wi t h you what I bel i eve t hat t he

7 evi dence showed.

8 Now, l et me say at t he out set t hat i t ' s your

9 r ecol l ect i on t hat cont r ol s. You have been si t t i ng her e

10 wat chi ng t he wi t nesses, obser vi ng t he exhi bi t s t hat ar e i n

11 evi dence. I have been concent r at i ng on my exami nat i on of t he

12 wi t nesses, and i f I mi sspeak as t o what any par t i cul ar wi t ness

13 may have sai d, i t ' s your r ecol l ect i on t hat cont r ol s, not mi ne.

14 I f t her e i s a quest i on amongst you as t o what a

15 par t i cul ar wi t ness sai d, you have t he r i ght t o come back and

16 ask f or t he t r anscr i pt t o be gi ven t o you or r ead t o you by t he

17 cour t r epor t er , what ever t he syst emi s t hat J udge Pat t er son may

18 have. But you get t he exact wor ds t hat wer e sai d. And I wi l l

19 at t empt t o be as accur at e as humanl y possi bl e.

20 What i s t he pur pose of summat i on? The pur pose of

21 summat i on i s f or each par t y t o gi ve t he j ur y t hei r sense of

22 what t he evi dence shows and what i nf er ences can f ai r l y and

23 r easonabl y be dr awn.

24 Now, af t er I f i ni sh speaki ng, t he pr osecut or has an

25 oppor t uni t y t o r ebut . He can si t t her e wi t h a pad, wr i t e down

( 212) 805- 0300

1277

1 not es and gi ve you answer s t o what I have r ai sed i n t hi s

2 summat i on. And ever ybody i n l i f e l i kes t o have t he l ast wor d,

3 but t he r eal i t y i s t hat you f ol ks have t he l ast wor d, because

4 you col l ect i vel y and i ndi vi dual l y coul d answer t hei r ar gument s

5 f or Dr . Kar r on t hat I ' mnot abl e t o because I don' t have a

6 chance t o t al k agai n.

7 As a mat t er of f act , no mat t er how har d I may pr epar e,

8 t her e i s no way i n t he wor l d t hat I amgoi ng t o come and gi ve

9 you al l t he ar gument s t her e ar e or even t he best ar gument s.

10 You f ol ks have a f ant ast i c oppor t uni t y as j ur or s. The

11 second hi ghest cal l i ng i n t hi s count r y next t o war t i me ser vi ce

12 i s si t t i ng on a cr i mi nal j ur y, j udgi ng a f el l ow human bei ng.

13 Thi s i s a hi gh cal l i ng. I t ' s what di st i ngui shes our soci et y

14 f r ommany ot her s, because you st and bet ween j ust i ce and

15 i nj ust i ce. Ever y pl ace has a pr osecut or , but not many pl aces

16 have j ur or s who come and si t and del i ber at e.

17 Now, you may not i ce t hat when you come i nt o t hi s

18 cour t r oomand when you l eave t hi s cour t r oomwe al l r i se f or

19 you, and we do t he same when J udge Pat t er son comes i n, because

20 t hat i s t he r ever ance and t he r espect t hat we have f or each and

21 ever y one of you as j ur or s.

22 You ar e t he sol e and excl usi ve j udges of t he f act s.

23 They can' t t el l you what t he f act s ar e. I can' t t el l you what

24 t he f act s ar e. You t el l me what t he f act s ar e.

25 I can t al k about t he evi dence. I can t al k about t he

( 212) 805- 0300

1278

1 l ack of evi dence. I can t al k about bur dens, but you ar e t he

2 sol e t r i er s of t he f act s. You deci de what you bel i eve, what

3 you accept , what you don' t bel i eve, what you quest i on. That i s

4 your r ol e.

5 The j udge, he i s t he j udge of t he l aw, t he sol e and

6 excl usi ve j udge of t he l aw. I as a l awyer have a r i ght t o

7 di sagr ee wi t h hi mr espect f ul l y, but I t el l you one t hi ng about

8 J udge Pat t er son t hat you know by now: Nobody r espect s j ur or s

9 mor e t han he does. Get t i ng i n on t i me, keepi ng hi s commi t ment

10 t o you of endi ng a case, t hat ' s t he way he f unct i ons, because

11 he under st ands what a hi gh dut y you have and what a ser vi ce you

12 ar e per f or mi ng.

13 Now, when you come i nt o t hi s cour t house and you ar e

14 goi ng t owar ds t he el evat or s you have seen t he Lady of J ust i ce

15 wi t h her scal es out t her e. And i t ' s i nt er est i ng t hat our

16 f or eper son i s a l ady. And what i s she? She i s bl i ndf ol ded;

17 she i s not bl i nd. She i s bl i ndf ol ded. The r eason t hat she i s

18 bl i ndf ol ded i s t hat she has t he scal es, she want s t o t r eat

19 ever ybody f ai r l y r egar dl ess of your backgr ound, or how you

20 l ook, or how you act , whet her you ar e a bower y bumor a per son

21 of hi gh st andi ng. And t hen she put s on t hose scal es of

22 evi dence and t hen she sees, she f eel s because she i s

23 bl i ndf ol ded. But she can see - - she i s not bl i nd. She i s onl y

24 bl i ndf ol ded - - whet her or not t he bur den has been met by t he

25 gover nment , whet her or not t hey have pr oved t hei r case beyond a

( 212) 805- 0300

1279

1 r easonabl e doubt .

2 We' r e her e because t her e was an i ndi ct ment f i l ed

3 agai nst Dr . Kar r on. You hear d how many year s t hey wer e

4 i nvest i gat i ng hi m. The j udge wi l l t el l you t he i ndi ct ment i s

5 no evi dence of gui l t . Dr . Kar r on came i nt o t hi s cour t and he

6 sai d I amnot gui l t y, I di dn' t do anyt hi ng wr ong i n t hi s case,

7 and I chal l enge t he gover nment t o pr ove me gui l t y beyond a

8 r easonabl e doubt . And I submi t t o you t hat t he j udge i s goi ng

9 t o char ge you wi t h what a r easonabl e doubt i s, but each one of

10 you coul d have a di f f er ent r easonabl e doubt , whet her or not you

11 f eel t hat t he pr osecut i on hasn' t br ought enough evi dence bef or e

12 you, whet her or not t hey' r e aski ng you t o be specul at i ve,

13 whet her or not you t hi nk t hat some of t hei r wi t nesses wer en' t

14 cr edi bl e t hat you woul d r el y upon i n t he or di nar y cour se of

15 l i f e. Each one coul d have one r easonabl e doubt .

16 I f any of t he 12 of you have a r easonabl e doubt - - you

17 don' t have t o agr ee on t he same r easonabl e doubt - - you have t o

18 vot e not gui l t y, because our syst emaf t er Dr . Kar r on pl ed not

19 gui l t y, our syst empr esumes hi mi nnocent , and as you si t her e

20 now and as you ent er t he j ur y r oomyou have t o st ar t out sayi ng

21 I pr esume hi mi nnocent , I pr esume t hat he di d not i nt end t o

22 i nt ent i onal l y mi sappr opr i at e any f unds and he di d not i nt end t o

23 commi t a cr i me by spendi ng gr ant money on pur chases.

24 I n f act , when he spent money, he spent money wi t h t he

25 i nt ent t hat t he ATP pr oj ect t hat he was wor ki ng on woul d

( 212) 805- 0300

1280

1 succeed and he woul d be successf ul , because I t hi nk i t ' s f ai r

2 t o say t hat a sci ent i st l oves doi ng what t hey do and t hey l ove

3 sci ence.

4 The gover nment want s you t o pr esume Dr . Kar r on t o be

5 gui l t y. They show you a GPS syst em- - t hi s i s hi s pi ggy

6 bank - - he bought a GPS syst emso he coul d use i t i n hi s car

7 f or per sonal use. Di d anybody t est i f y t hat he used t he GPS

8 syst emt o dr i ve ar ound Manhat t an? Di d anybody br i ng any

9 evi dence t o you t hat he needed a GPS syst emf or hi s dai l y l i f e?

10 Wher e di d t hey f i nd t he GPS syst em? Not i n t he car .

11 They f ound i t i n t he apar t ment . What does t hat t el l you? He

12 uses i t when he goes on a t r i p. Wher e does he go on t r i ps? He

13 goes t o Washi ngt on D. C. on a gr ant .

14 Do t hey come and t hey t ake t he GPS syst emand check i t

15 out and see wher e t he l ast dest i nat i on i s? These GPS syst ems,

16 t hey' r e el ect r oni c, and you can f i nd out wher e he went i f he

17 set hi s cour se.

18 Have any of you ever gone t o Washi ngt on D. C. and got

19 l ost on t he bel t way and coul dn' t f i nd your way ar ound? No,

20 t hey want you t o specul at e and assume he used t he GPS syst em

21 f or an i mpr oper pur pose. They don' t want t o show you anyt hi ng.

22 They t al k about a camer a. A camer a. They have t he

23 ar r ogance t o suggest t o you t hat he used t he camer a f or hi s

24 per sonal use. Show us t he pi ct ur es. I t ' s a di gi t al camer a.

25 No, her e i s t he camer a, you don' t use a camer a. Why

( 212) 805- 0300

1281

1 don' t you use a camer a i f you ar e a sci ent i st ? Maybe somet hi ng

2 br eaks on t he machi ne, on one of t he comput er s, and you t ake a

3 di gi t al pi ct ur e of i t and you e- mai l i t out t o t he manuf act ur er

4 and he t el l s you how t o f i x i t . Or you t ake pi ct ur es of t he

5 peopl e wor ki ng i n t he l abs so t hat when you make

6 pr esent at i ons - - you know he went al l over maki ng pr esent at i ons

7 about t hi s ATP gr ant . Why can' t he use t he camer a? I f he was

8 a dent i st , he coul d have a camer a. No, he can' t have a camer a,

9 t hat ' s f or hi s per sonal use.

10 Di d t hey show you pi ct ur es of Dr . Kar r on on hi s bi ke

11 wi t h Wi ndy Far nswor t h r i di ng ar ound Manhat t an? No. No. But

12 t hey want you t o specul at e. They want t o suggest t o you t hat

13 ei t her i t ' s not i n t he budget , or i f i t ' s i n t he budget i t ' s

14 unr el at ed t o t he gr ant . Wher e di d t hey show you t hat anyt hi ng

15 was unr el at ed t o t he gr ant except f or specul at i on and smi l es?

16 You know, t hey t al k about t hese ATP r ul es as i f t hey

17 wer e t he Ten Commandment s. These ar e br oad r ul es. You don' t

18 go t o j ai l because you don' t f ol l ow some gr ant r ul es. What

19 ki nd of count r y woul d t hi s be i f t hose wer e t he r ul es? You

20 t hi nk t hey had a bi g si gn l i ke wher e t hey have t he no smoki ng

21 si gn and t hey have t he ci r cl e and t he t hi ng, vi ol at e any of

22 t hese r ul es you go di r ect l y t o j ai l ? Thi s i s a quest i on of

23 peopl e havi ng di sagr eement s on what i s al l owed and what i s not

24 al l owed. That ' s what i t i s.

25 And does Dr . Kar r on have t he r i ght t o di sagr ee wi t h

( 212) 805- 0300

1282

1 peopl e t hat wor k f or hi mor di sagr ee wi t h peopl e i n ATP? Does

2 he have a r i ght t o di sagr ee and say t hat I t hi nk t hat t hese

3 expenses ar e al l owabl e? Or i s he compel l ed t o be l i ke t he

4 pr osecut or , say t hese ar e t he r ul es, you br eak one r ul e you go

5 di r ect l y t o j ai l ?

6 Wher e does t he evi dence come f r om? They t al k about

7 Ri l ey' s wor k. Remember , Ri l ey' s wor k was cr eat ed af t er t hey

8 cl osed t he gr ant down. I cr oss exami ned her . When di d you

9 pr epar e t hi s; i t says 2008 on i t ? She says, no, no, no, I di d

10 i t bef or e; t hi s i s j ust a r edone.

11 So, af t er t hey cl osed t he gr ant down, t hey go and

12 l ook, how do we j ust i f y what we di d? And now we' r e goi ng t o

13 t ake ever y pi ece of paper you have, and we' r e goi ng t o show you

14 t hat you spent your money wr ong.

15 Wel l , i t r emi nds me of an ol d st or y i n j ol l y ol d

16 Engl and when t her e wer e l or ds and bar r ons and bi shops, and t hi s

17 bar on was r i di ng t hr ough t he f or est , and he not i ced t hat on a

18 number of t r ees t her e was an ar r ow, and t her e was a ci r cl e

19 dr awn ar ound t he ar r ow, a bul l s- eye, and he was r eal l y

20 i mpr essed. So he cal l ed hi s kni ght s i n, and he sai d I want you

21 t o f i nd t hat ar cher , I want t o make hi mt he kni ght of ar cher y

22 of my f i ef dom. And t hey went and t hey scour ed t he f or est and

23 t hey f ound t hi s f el l ow who was t he ar cher . The bar r on i nvi t ed

24 ever ybody i n t he ar ea t o come and see hi s new kni ght of ar cher y

25 per f or m. Ther e wer e hundr eds of peopl e, and t he ar cher , t hey

( 212) 805- 0300

1283

1 put out a t ar get , a hundr ed yar ds, 200 yar ds, t he ar cher f i r es,

2 mi sses t he t ar get by a mi l e. He t r i es agai n, mi sses agai n.

3 They now move t he t ar get i n, he st i l l can' t hi t t he t ar get .

4 Now, t he bar r on i s pr et t y embar r assed by t hi s showi ng,

5 so he says t o t he ar cher , bef or e I behead you t el l me t hat you

6 ar e not t he man who f i r ed t hose ar r ows t hat wer e i n t hose

7 t r ees. He sai d, I am, si r e. He sai d, wel l , how wer e you abl e

8 t o hi t al l of t hose bul l s- eyes? He says, si r , I st ood on t he

9 edge of t he f or est , I f i r ed my ar r ows i nt o t he ai r , and

10 wher ever t hey l anded I dr ew a ci r cl e ar ound i t .

11 And t hat ' s what t hey di d her e. They have no

12 bul l s- eyes. They don' t have one. They put an exhi bi t up

13 dur i ng summat i on; t hey don' t check anyt hi ng out . I t i s

14 absol ut el y amazi ng, t hey check not hi ng out . Dr . Kar r on at e at

15 I HOP. Wow, check your Amer i can Expr ess bi l l , see i f I HOP i s i n

16 Vi r gi ni a, r i ght near Washi ngt on D. C. , wher e he goes on busi ness

17 t o vi si t t he gr ant peopl e i n Mar yl and and Vi r gi ni a and

18 Washi ngt on D. C.

19 Ask your sel f - - and I say t o you t he ar r ows ar e t he

20 i nt ent her e - - whet her or not he i nt ended t o do anyt hi ng wr ong.

21 Ar e t hey ki ddi ng, you can' t go on a meal ? Do you t hi nk t hat

22 Ri l ey pai d f or her own l unch? The gover nment pai d f or her own

23 l unch when she went out wi t h Dr . Kar r on, Hayes and Benedi ct .

24 Who do you t hi nk pai d f or her l unch? She came i n f r omAt l ant a.

25 You don' t t hi nk she get s r ei mbur sed f or her l unch? You don' t

( 212) 805- 0300

1284

1 t hi nk peopl e have a r i ght i n busi ness i f t hey have a busi ness

2 l unch t o deduct i t ?

3 Ri l ey even deduct ed t he l unch she went t o. She

4 deduct ed t he cost of t he l unch she went t o wi t h Dr . Kar r on,

5 Benedi ct and Hayes. And she di sal l owed hi s l unch and ever y

6 ot her meal f or t hat mat t er .

7 I guess t he ol d Br ookl yn expr essi on " you t hr ow enough

8 agai nst t he wal l , somet hi ng i s goi ng t o st i ck" i s what t hi s

9 case i s al l about .

10 The pr osecut i on st ar t ed t hi s case i n 2003. When di d

11 t hey speak t o t he wi t nesses? Di d t he pr osecut or s i n t hi s case

12 speak t o one wi t ness bef or e Apr i l or May of 2008? I t ' s a

13 si mpl e case. We got t he GPS, we have di f f er ent t hi ngs, we' ve

14 got r oach ki l l er .

15 So, I submi t t o you r espect f ul l y t hat you can' t use

16 suspi ci on - - as t hey have - - or specul at i on t o convi ct

17 somebody. Dr . Kar r on di d not use t he NI ST ATP money as hi s own

18 pi ggy bank.

19 The quest i on i s even i f i t ' s nonal l owabl e, at t he end

20 of t he day does t hat equal cr i mi nal i t y?

21 Remember , t her e was a whol e audi t pr ocess, an ent i r e

22 audi t pr ocess wher e t hey had t hi s agr eement r esol ut i on t hat was

23 never af f or ded t o Dr . Kar r on. I n ot her wor ds, under t he syst em

24 i f af t er Ri l ey does her audi t , you t hen can appeal t he audi t t o

25 t he ATP NI ST peopl e t o see whet her or not t hey ar e goi ng t o

( 212) 805- 0300

1285

1 al l ow t hose expenses. They never had t hat pr ocess. So, you

2 don' t know as you si t t her e now - - and you can' t specul at e I

3 submi t t o you - - whet her or not ATP woul d have appr oved i t .

4 I t hi nk sadl y - - and I ' mgoi ng t o get i nt o t hi s wi t h

5 Benedi ct - - t hat t hey pr obabl y woul d have been f or ced not t o go

6 al ong wi t h i t f or r easons t hat I wi l l t al k about .

7 Al so, you know, i t ' s i nt er est i ng, t he gover nment sai d

8 i n t hei r openi ng on page 39, " Fi nal l y, you wi l l be seei ng a

9 number of document s t hat wi l l show you t he f r aud i n cl ear bl ack

10 and whi t e, and i n par t i cul ar you wi l l see an anal ysi s of t he

11 def endant ' s per sonal bank account and bank account s at CASI . "

12 Do you r emember when I cr oss- exami ned Ri l ey? She

13 never saw t he def endant ' s per sonal bank account , she never

14 l ooked at hi s per sonal bank account . She di dn' t gi ve a dar n

15 about hi s per sonal bank account because she was l ooki ng t o put

16 ci r cl es ar ound ar r ows. So, she has t hi s char t t hat t hey put up

17 on t he boar d, Gover nment Exhi bi t 115, and she has no

18 cont r i but i ons. And when does she f i nd any cont r i but i ons? I n

19 2004, af t er t he gr ant i s st opped and she i s l ooki ng over .

20 By t he way, Ms. Ri l ey f r omt he OI G, what cr edi t car ds

21 of Dr . Kar r on' s di d you happen t o l ook at ? Hi s Amer i can

22 Expr ess car d.

23 And of cour se you di sal l owed ever yt hi ng on hi s

24 Amer i can Expr ess car d t hat he used f or busi ness.

25 Basi cal l y.

( 212) 805- 0300

1286

1 What about hi s Mast er car d?

2 Wel l , I never l ooked at hi s Mast er car d. I never saw

3 hi s Mast er car d. I di dn' t ask f or hi s Mast er car d. I di dn' t

4 l ook f or hi s per sonal account s, I di dn' t l ook f or hi s

5 Mast er car d.

6 The def ense put i n t he Mast er car d, and when you l ook

7 at t he Mast er car d you ar e goi ng t o f i nd t hat on t he Mast er car d

8 st at ement i n Oct ober of 2001, Mar ch of 2003, you ar e goi ng t o

9 see Dat avi si on, t he same t hi ng you see on t he Amer i can Expr ess.

10 I n ot her wor ds, he i s spendi ng hi s own money on gr ant - r el at ed

11 i t ems wi t h hi s own cr edi t car d. That ' s what he' s doi ng. Al l

12 r i ght ? And you ar e goi ng t o see t hat i n a number of di f f er ent

13 ar eas. You ar e goi ng t o see t hat - - you wi l l see al l t he

14 r est aur ant s t hat he went t o and char ged t o hi s Mast er car d.

15 Does t hi s show you he i s a man t hat i s at t empt i ng t o keep hi s

16 busi ness expenses separ at e and apar t f r omhi s per sonal

17 expenses? Do t hey have expenses ever y day on hi s Amer i can

18 Expr ess t hat he was eat i ng out and char gi ng i t t o t he

19 gover nment ? No.

20 You know f r omt he evi dence t hat he has backup i n hi s

21 comput er s of ever y si ngl e t hi ng he ever spent . And we showed

22 you t he r ecei pt s j ust as an i l l ust r at i on of t he l unch t hat he

23 had wi t h Ri l ey. And he si gned i t , and he si gned i t , and

24 Benedi ct si gned i t , and i t ' s i n evi dence f or you. Because he

25 was at t empt i ng t o do ever yt hi ng honest . He di d ever yt hi ng he

( 212) 805- 0300

1287

1 coul d. But t hey dr aw t he ci r cl e, I HOP, St ar bucks. Wer e t hey

2 t her e when t hi ngs wer e di scussed? Di d t hey car e enough t o get

3 t he backup t o hi s expenses? No.

4 So we br ought you Ms. Far nswor t h. J ust t o show you an

5 i l l ust r at i on, i magi ne t hi s. I t hi nk t hi s i s 125. They see

6 somet hi ng. They f i nal l y di d some i nvest i gat i on. They saw - -

7 when t hey gr abbed ever yt hi ng i n Dr . Kar r on' s apar t ment , I t hi nk

8 i t was i n 2006 t he t est i mony i s, t hey cl eaned out hi s

9 apar t ment , t hey f ound t hi s. Wel l , i t must have been ever yt hi ng

10 he has. Ever yt hi ng he has, ever yt hi ng he owns must have been

11 bought wi t h ATP money, so we wi l l t ake ever yt hi ng i ncl udi ng t he

12 shoe r ack.

13 Then t hey f i nd i n t hei r ar r ow sear ch, wow, we f ound a

14 shoe r ack i n t hi s st at ement , and t hat must be t he shoe r ack. I

15 submi t t o you t hat i t ' s not t he shoe r ack, and you have mor e

16 t han a r easonabl e doubt about t hat . And I submi t t o you t hat

17 t he ot her t hi ng t hat was char ged was somet hi ng about t en,

18 somet hi ng wi t h a r ack. Do you know i f Mason used t hat as

19 mat er i al t o do const r uct i on t her e? Do you know what i t was

20 used f or ? They di dn' t f i nd i t t her e. Why di dn' t t hey f i nd t he

21 shoe r ack t hat t hey had on t he bi l l ? Because i t was used f or

22 somet hi ng gr ant r el at ed.

23 What i s wr ong wi t h havi ng f l ashl i ght s? You know t hese

24 comput er s, you hear d about t hem, t hey come out , t hey go behi nd.

25 Thi s i s i n 2001 and 2002. Comput er s ar e a l ot smal l er now.

( 212) 805- 0300

1288

1 And of cour se comput er s t hat Dr . Kar r on cr eat ed wer e bi g

2 t hi ngs, and so you have f l ashl i ght s. Al l of a sudden t hat ' s a

3 pr obl em.

4 Bi g scr een. Do you r emember t her e was al l t hat t al k

5 about Gover nment ' s 120- A? He has a bi g scr een i n t he r oom

6 t hat ' s used as t he CASI headquar t er s. I n t he pi ct ur e you wi l l

7 see a bi g scr een.

8 And a pr oj ect or . They have a pr oj ect or , you know,

9 l i ke t hi s. And t hey have a scr een l i ke t hat . And he pai d

10 gr ant money so t hat he can make pr esent at i ons t o peopl e of what

11 t hei r pr oj ect i s and what t hey' r e doi ng. And of cour se t he

12 pr osecut i on want s you t o bel i eve t hat t hat ' s not deduct i bl e,

13 t hat ' s not al l owabl e.

14 They al so suggest he had t oo many comput er s. Who ar e

15 t hey t o t el l Dr . Kar r on what he needs t o accompl i sh what t he

16 gover nment gave hi m$2 mi l l i on over t hr ee year s?

17 One t hi ng you know. Ther e wasn' t one ki ckback t hat

18 Dr . Kar r on got f r ombuyi ng anyt hi ng. He di dn' t sel l anyt hi ng

19 t hat he bought so t hat he coul d st i ck some money i n hi s pocket .

20 He had no i nt ent i on of doi ng anyt hi ng wr ong.

21 And do you know what t he bl ender was used f or ? And

22 l et ' s say i t wasn' t used f or gr ant pur poses, so he made a

23 mi st ake. I n t hei r wor l d you can' t make a mi st ake.

24 How about t he f act t hat Mason t est i f i ed he di d wor k i n

25 t he apar t ment , and t hey want you t o t hi nk t hat t hey i mpr oved

( 212) 805- 0300

1289

1 t he val ue of t hat apar t ment . That apar t ment shoul d have been

2 wor t h cl ose t o $700, 000. I t was sol d f or what , $510, 000,

3 because of al l t he changes t hat he made i n t he apar t ment . I f

4 one want ed t o buy i t and move i t , i t had t o be r i pped out

5 because i t wasn' t sui t abl e f or somebody t o l i ve i n.

6 And what di d Mason t el l you? Oh, I di d some wor k i n

7 t he ki t chen.

8 Oh, you di d wor k i n t he ki t chen? What di d you do i n

9 t he ki t chen?

10 I f i xed a cabi net .

11 Di d you get pai d f or t hat ?

12 Yes, I di d.

13 Wel l , I wi l l show you t hi s check, Mr . Mason. I s t hi s

14 t he check you got ? I s t hi s a CASI check?

15 No.

16 Thi s i s a per sonal check f r omDr . Kar r on, because i t ' s

17 a per sonal expense. So t he man wi t h t he pi ggy bank i s goi ng

18 i nt o hi s own pocket t o pay f or t hi ngs t hat he under st ands ar e

19 not al l owabl e under t he gr ant and ar e per sonal i n nat ur e.

20 That ' s what we have her e.

21 And who ar e we t al ki ng about ? We ar e t al ki ng about

22 Dr . Kar r on, a man who goes t o a meet i ng, an ATP meet i ng wher e

23 he i s event ual l y goi ng t o get a gr ant , and he st ands up and

24 says i s t her e anybody her e t hat can hel p me? Because I ambad

25 wi t h f i nances and I don' t know how t o do t hi s st uf f . You know?

( 212) 805- 0300

1290

1 Thi s i s t he guy t hat t hey' r e dr awi ng ci r cl es ar ound what he i s

2 doi ng.

3 And di d he dest r oy one r ecor d? One r ecor d? No. What

4 i s t hei r compl ai nt ? Spr i ngs t est i f i ed he went i nt o t he

5 comput er and he changed somet hi ng. What di d he change? He

6 changed whet her or not i t shoul d be al l owabl e or not . He

7 di dn' t change an i nvoi ce. He di dn' t change what was mar ked on

8 t he check.

9 Anybody except f or Ri l ey coul d l ook at t he checks.

10 I magi ne an audi t or never l ooked at t he checks, never di d a bank

11 r econci l i at i on t o deci de what he spent .

12 Ever y check you saw had a memo on i t . You hear d Dr .

13 Kar r on woul dn' t si gn a check unl ess he had backup t o i t , t her e

14 was an i nvoi ce. Al l of t hat was i n t he comput er . I s t hi s a

15 guy l ooki ng t o do somet hi ng wr ong?

16 They make t hi s br oad br ush, he changed somet hi ng

17 t her ef or e he must have changed i t t o do wr ong. No, i t ' s

18 ar guabl e. He doesn' t have t o agr ee wi t h hi s account ant . He

19 doesn' t have t o agr ee wi t h hi s busi ness manager . He doesn' t

20 even have t o agr ee wi t h t he gr ant peopl e. At t he end of t he

21 day, i f t hey t el l hi mi t ' s not al l owabl e, he has t o pay t he

22 money back. That ' s t he syst em. That ' s t he syst em.

23 Thi s man hi d not hi ng. How do you st eal when you don' t

24 hi de anyt hi ng and you make a not e of ever yt hi ng you do, and you

25 never ask anybody el se t o do anyt hi ng wr ong t o hi de anyt hi ng

( 212) 805- 0300

1291

1 because i t ' s al l out t her e? Ever y checki ng account he has a

2 di f f er ent col or check. He post ed t he r ecor ds or i gi nal l y. Then

3 he hi r ed peopl e t o do t hat , t o scan t he st uf f i n.

4 And i n t hei r openi ng t hey suggest ed t hat he di d

5 somet hi ng t hat was i mpr oper i n f i l i ng t he r ecor ds. And you

6 f ound out when I cr oss- exami ned Spr i ngs and i n one of hi s

7 e- mai l s about what ' s cal l ed an audi t t r ai l . You can go back

8 i nt o t he comput er i f you want t o pr ove gui l t beyond a

9 r easonabl e doubt and show what per son made what change, and

10 t hen ar gue f r omt hat t hat t hey had gui l t y knowl edge or a gui l t y

11 mi nd.

12 Don' t ar gue - - I have t oo much r espect f or your common

13 sense t o t hi nk you won' t cr edi t i t . The bot t oml i ne i s how can

14 you ar gue and have t est i mony he changed somet hi ng wi t hout

15 knowi ng what he changed? How coul d you say t hat ? Ther e i s no

16 evi dence at al l . The man had backup; he had audi t t r ai l s.

17 I submi t t o you t hat t he e- mai l s ar e t he DNA i n t hi s

18 case, and t hey wi l l pr ove, as I sai d i n my openi ng, t hat Dr .

19 Kar r on i s i nnocent .

20 The gover nment i s goi ng t o ar gue, and t hey have

21 ar gued, t hat wi t hout pr i or appr oval he mi sappl i ed t he f unds.

22 And I submi t t o you t hat t he evi dence i s ot her wi se.

23 The t hi r d el ement i s dur i ng a one- year per i od t he

24 def endant i nt ent i onal l y mi sappl i ed money. I submi t t o you he

25 had t he t aci t aut hor i t y f r omt he gr ant t o r evi se any expense

( 212) 805- 0300

1292

1 t hat he had, t hat t hi s gr ant per mi t s and i t ' s under st ood t hat

2 you coul d change t hi ngs as l ong as you ar e doi ng i t f or t he

3 pur pose of succeedi ng on t he pr oj ect .

4 I f you have a r easonabl e doubt whet her or not t hat was

5 i mpl i ed by ever ybody t hat Dr . Kar r on met , l ook at t hi s 10

6 per cent r ul e. He can move $80, 000 anypl ace he want s i n t hat

7 budget as l ong as he doesn' t go over t he $800, 000 f or t he year .

8 El ement f our pr ovi des t hat t he money was i nt ent i onal l y

9 mi sappl i ed. I submi t t o you t hat no money was i nt ent i onal l y

10 mi sappl i ed, because you knew and you hear d a l ot of t est i mony

11 about budget r evi si ons, budget amendment s and what have you.

12 And t he f act - - even i f t he f i ndi ngs on t he audi t wer e

13 accur at e - - whi ch I submi t t hey wer e not - - by Ri l ey, i t st i l l

14 woul d not become cr i mi nal because t her e was no i nt ent t o do

15 anyt hi ng wr ong i n mi sappl yi ng t he f unds.

16 Now, t hi s i s not I BM. They do not have an HR

17 depar t ment . Thi s i s a ma and pa sci ence company, and i t was

18 r un t hat way wi t h a l ot of i nef f i ci enci es i n t he f i nances but

19 not i n t he sci ence. And appar ent l y t he peopl e at ATP NI ST wer e

20 mor e i nt er est ed i n t he sci ence t han i n t he f i nances.

21 And I have been wonder i ng, wonder i ng f or a l ong t i me

22 now why ar e we al l her e, how di d t hi s case get so out of

23 cont r ol . Wel l , what you l ear ned at t hi s t r i al i s t hat ATP

24 doesn' t exi st anymor e. The pr oj ect t hat had $60 mi l l i on - -

25 whi ch t o you and I i s enough money f or me t o buy a coupl e of

( 212) 805- 0300

1293

1 l ot t o t i cket s ever y week i n t he hope of acqui r i ng i t - - i n t he

2 wor l d of gover nment t hi s i s not a l ot of money, i t ' s not a l ot

3 of money. But who get s t he $60 mi l l i on? Two t hi r ds of t he

4 gr ant s ar e gi ven t o peopl e l i ke Dr . Kar r on, who need st ar t - up

5 money. They don' t have money l i ke I BM got a gr ant f or $2

6 mi l l i on; t hey al so got a gr ant f or $50 mi l l i on, but put t hat on

7 t he si de.

8 And t her e i s somet hi ng t hat smel l s her e, i t r eal l y

9 smel l s bad. And I coul d be dead wr ong, and i f I am, and i f you

10 don' t f eel t hi s way, you r ej ect i t . I hope you wi l l cr edi t

11 some of t he ot her t hi ngs t hat I pr esent t o you.

12 The gover nment want ed t o get r i d of t hi s pr oj ect - -

13 I ' mnot t al ki ng about t he pr osecut or s her e. They get t he case

14 f r omot her agenci es - - t hey di dn' t l i ke t he i dea of $40 mi l l i on

15 goi ng t o l i t t l e guys. Why not gi ve i t al l t o t he I BMs and t he

16 Hal l i bur t ons of t hi s wor l d? Hey, we f ound Dan Kar r on. Who

17 bet t er t han t hi s guy, who i s a cook but he i s no cr ook? And

18 t hat ' s what happened her e. And now we l ook at hi mand we

19 specul at e what he di d.

20 And I submi t t o you t hat when you eval uat e al l of t he

21 evi dence, and you see hi s payr ol l checks whi ch I put i nt o

22 evi dence as P- 1 t hr ough P- 6, wher e hi s t ot al amount f or t he

23 year i s about $35, 000. Ask your sel f , he get s $175, 000, how

24 does he onl y have $35, 000? Because he t ook an advance of

25 75, 000 t o begi n wi t h t hat ' s not r ef l ect ed i n a check because he

( 212) 805- 0300

1294

1 di dn' t get a check f or t hat $75, 000, i t was a wi r e t r ansf er .

2 He wi r ed i t i nt o an account , i nt o hi s CASI account t he evi dence

3 i s, and so, t her ef or e, he got net $110, 000. And t hat ' s wher e

4 hi s money was. And he commi ngl ed, and t her e was no r ul es he

5 coul dn' t comi ngl e. He put t he NI ST money wi t h hi s own money,

6 wi t h hi s CASI money. Oh, CASI had no ot her busi ness, but t hey

7 got $110, 000 cash f or t hi s man. Can' t t hey spend i t any way

8 t hey want ?

9 And t hen, yeah, whenever t he bank bal ance - - i f you go

10 t hr ough al l t he bank bal ances you wi l l see t hat whenever t hey

11 get l ow, who comes up wi t h money? Dr . Kar r on. When t her e i s

12 no money at al l ar ound, whose cr edi t car d i s used? Dr . Kar r on.

13 Oh, he i s a bad guy. You know, we set up t hi s whol e syst em,

14 and we t ol d hi mhe can onl y si gn checks, he can' t spend any

15 money wi t hout appr oval . And we had t hi s PayPal syst emi n

16 ef f ect . And what does Dr . Kar r on do? And t hese ar e i n

17 Gover nment Exhi bi t 110, I bel i eve, t hey have t he PayPal

18 r ecor ds. Obvi ousl y up unt i l Mar ch 1, ' 03 Benedi ct i s not

19 t her e, so he has one, t wo, t hr ee, f our t r ansact i ons i n PayPal ,

20 t he l ar gest of whi ch i s $476. 55. He bought 12 i t ems of

21 somet hi ng t hat ' s i n PayPal , i n ot her wor ds $40 an i t em, he

22 spent $13. 20, $168. 16 and $283 f or ever y i t em, $168 i s f or 11

23 i t ems.

24 Do you t hi nk t hat t hi ngs wer e happeni ng at CASI

25 r el at ed t o t he pr oj ect t hat he needed t o do somet hi ng qui ck t o

( 212) 805- 0300

1295

1 get a coupl e of dol l ar s? Oh, he vi ol at ed, he doesn' t l i st en t o

2 anybody, he doesn' t do anyt hi ng, he i s ar r ogant .

3 I gr ew up i n Br onxvi l l e, Br ookl yn, and my dad wor ked

4 f or t he I RS, and he used t o say, son, don' t make a f eder al case

5 out of t hi s. You know, my f at her was a smar t man. I di dn' t

6 know what he was t al ki ng about , but I sur e have l ear ned.

7 Your j ob, your j ob i s t o eval uat e t he evi dence, t o

8 eval uat e t he wi t nesses who come bef or e you. And t he one t hi ng

9 t he def ense has - - t he onl y t hi ng t hey have - - i s t he r i ght of

10 cr oss- exami nat i on. I t ' s l i ke a pr od. Somebody says somet hi ng,

11 and you pr od t hema l i t t l e bi t t o see whet her or not what t hey

12 say makes sense, whet her or not t hey have backup f or i t ,

13 whet her or not i t ' s bel i evabl e beyond a r easonabl e doubt .

14 I don' t st and up her e and t el l you who l i ed about what

15 or sai d what . I l eave t hat t o your eval uat i on. Al l r i ght ?

16 You t ake t he di r ect , you t ake t he cr oss- exami nat i on. And t he

17 beaut i f ul t hi ng i n our syst emof j ust i ce i s t hat we have a

18 r i ght t o def end our cl i ent s vi gor ousl y i n t hi s gr eat count r y,

19 and I hope t o god t hat none of you ever need t hat ki nd of

20 vi gor ous def ense. And next t o Dr . Kar r on, t he per son I f eel

21 sor r i est f or i n t hi s whol e case i s Bob Benedi ct .

22 You have t o ask your sel f , how does t hat happen? How

23 does t hi s happen? Her e i s f r omal l you can see about t he man' s

24 backgr ound a t r ul y decent guy. He vol unt eer ed t o hel p Dr .

25 Kar r on f r omday one i n t hi s pr oj ect f or not hi ng. He came

( 212) 805- 0300

1296

1 onboar d f or $60 an hour , whi ch you can f i gur e out i s a hel l of

2 a l ot l ess t han Gur f ei n was get t i ng. Sur e.

3 And t hi s i s a l et t er , t hi s i s an e- mai l t hat ' s i n

4 evi dence as Def endant ' s U, and t hi s i s I submi t t o you par t of

5 t he DNA t hat I amt al ki ng about . And t hi s i s a l et t er , an

6 e- mai l he sends t o Dr . Kar r on on Apr i l 19, 2004, and t he gr ant

7 i s st opped si nce J une. He i s out of t he l oop si nce about

8 August or Sept ember or Oct ober , and you can j ust i magi ne how

9 t hi s t hi ng i s ki l l i ng hi m, what happened at CASI and t hat t he

10 gr ant was st opped. And he says, " RE: Speci f i c i nst ances of

11 Hope Snowden i gnor i ng r equest s, or not pr ovi di ng document at i on

12 f or under st andi ngs, J oan' s bungl i ng upset t i ng Hope; J oan maki ng

13 cer t ai n Hope acknowl edged al l er r or s as due t o Dr . K. " He goes

14 on. That was t he subj ect .

15 " As you know, one of my f i r st act s was t o assi st i n

16 t he submi ssi on of t he CASI r esponse t o t he mul t i page

17 quest i onnai r e t ossed at CASI . Thi s r esponse i ncl uded a budget

18 amendment al ong wi t h a r equest t o have me acknowl edged as your

19 admi ni st r at or .

20 " Hope i gnor ed bot h r equest s. We never r ecei ved any

21 acknowl edgment , ver bal or i n wr i t i ng, t hat our

22 r esponse/ amendment r equest woul d or woul d not be appr oved. As

23 such, I was never appr oved as t he admi ni st r at or and Hope woul d

24 not answer or r et ur n my cal l s. I was a " nonpar t i ci pant " and

25 t her ef or e someone t o be i gnor ed.

( 212) 805- 0300

1297

1 " The f act t hat I had ei ght year s exper i ence wi t h ATP

2 pr oj ect s, as an admi ni st r at or , wi t hout any audi t pr obl ems, and

3 a l i t any of ATP r ef er ences, whi ch Hope never bot her ed t o check,

4 di dn' t appear t o be vi ewed as a posi t i ve addi t i on t o t he

5 pr oj ect .

6 " The r ar e communi cat i ons we di d r ecei ve wer e addr essed

7 t o Dr . Kar r on or Pet er Ross, i gnor i ng t he f act t hat ATP was

8 i nf or med Pet er was no l onger i nvol ved.

9 " I t was VERY FRUSTRATI NG and appar ent l y i n di r ect

10 opposi t i on t o what woul d have been i n t he best i nt er est s of

11 bot h CASI and NI ST.

12 " Ms. Snowden appear ed t o be a bur eaucr at , t ot al l y

13 di si nt er est ed i n t he success of t he pr oj ect and onl y i nt er est ed

14 i n whet her CASI dot t ed al l t he I s and cr ossed al l t he Ts,

15 associ at ed wi t h her r i gi d under st andi ng of t he ATP and ot her

16 r el evant f eder al gui del i nes. She consi st ent l y i gnor ed CASI

17 at t empt s t o pr ovi de ser vi ce whi ch woul d hel p t he pr oj ect and

18 her i n t he meant i me. She bel i eved CASI was out of cont r ol f r om

19 t he begi nni ng and t he number of per sonal changes and amendment

20 r equest s pr oved her r i ght , i n her mi nd. Ther e was no wei ght

21 gi ven t o t he possi bi l i t y t hat changes wer e dr i ven by Dr . K' s

22 l ack of ATP exper i ence or assi st ance of f er ed t o hel p Dr . Kar r on

23 gr appl e wi t h t he ATP quagmi r e.

24 " ATP i s as r esponsi bl e f or t he st at e of t he CASI

25 pr oj ect as anyone.

( 212) 805- 0300

1298

1 " Sor r y, but t hat ' s t he best r ecol l ect i on I can

2 must er . "

3 How does t hi s man who wr ot e t hi s l et t er come her e and

4 t est i f y bef or e you t he way he di d? Ask your sel f t hat . How

5 does he come her e and i ni t i al l y say he knew not hi ng about Dr .

6 Kar r on advanci ng af t er t he gr ant was suspended i n J une, J une

7 27, ' 03, t hat he knew not hi ng about Dr . Kar r on advanci ng money?

8 How coul d he say t hat ? I showed hi man e- mai l wher e he sai d

9 t hat Dr . Kar r on had put $47, 000 i n, 47K and t hat t her e was 21K

10 i n cof undi ng. He deni ed t hat we ever had any equi pment i ssue

11 under cof undi ng. How does t hat happen t o a guy t hat you l ook

12 at , who i n Oct ober , who i n 2004, sai d j ust t he opposi t e of what

13 was goi ng on t han what he sai d on t he st and?

14 I r eal l y t hi nk at t he end of t he day Dr . Kar r on i s

15 goi ng t o get a cal l one day f r omBob Benedi ct apol ogi zi ng.

16 Her e i s a man who wor ked f or I BM f or over 20 year s. You hear d

17 f r omour char act er wi t ness, t hese peopl e get humongous

18 pensi ons. They got st ock pr obabl y when I BM was wor t h t en cent s

19 and pr obabl y t hei r shar es ar e pr obabl y wor t h a mi l l i on dol l ar s

20 a shar e t hat t hey have. How does a man l i ke t hi s t ur n agai nst

21 Dr . Kar r on t hi s way and get embr aced by t he pr osecut i on?

22 Wel l , you know, t hi s i s t he l ast t hi ng I wi l l say t o

23 you about my dad. I t ol d you he wor ked f or t he I RS. I once

24 got hi m, t hr ough a f r i end of mi ne who managed a For d

25 deal er shi p, a car . I got a cal l f r omt hi s f r i end of mi ne and

( 212) 805- 0300

1299

1 he i s al l upset . I sai d, what ' s t he mat t er ? He says, your

2 f at her . I sai d, what do you mean? He says, I got back f r om

3 l unch, a Mr . Rubi nst ei n f r omI RS cal l ed; I al most l ost my

4 l unch. I t was my f at her , he was havi ng pr obl ems wi t h t he br ake

5 l i ght .

6 Wel l , when t he pr osecut i on shows up at your door and

7 you ar e t he guy who submi t t ed document s, al l of a sudden you

8 get your sel f on t he t eam, and i t ' s t r agi c. He t el l s you - -

9 her e i s a r esponsi bl e busi nessman - - oh, I have a CASI e- mai l

10 but I never accessed i t , I never l ook at t he e- mai l s at CASI ,

11 you see, I have a di f f er ent e- mai l .

12 Wel l , when my wi f e and I ar e on vacat i on, she get s her

13 e- mai l s f r omt he house wher e we ar e. I mean who doesn' t l ook

14 at t hei r e- mai l s? Peopl e ar e anal about t hi s st uf f . You mean

15 you ar e t he manager , t he busi ness manager of CASI , and you ar e

16 not accessi ng your e- mai l s, t hat maybe you have e- mai l s i n your

17 ot her account wher ever you ar e? Pl ease, pl ease.

18 Now, t he j udge i s goi ng t o t el l you t hat wi t nesses ar e

19 avai l abl e t o bot h si des. And you can f i nd - - t he di f f er ence i s

20 t hat t he gover nment has t he power t o gi ve i mmuni t y t o peopl e,

21 t hey can make deal s wi t h peopl e, t hey can do a whol e l ot of

22 t hi ngs. And of cour se t hey have t he bur den of pr oof beyond a

23 r easonabl e doubt . So, you coul d say t hat i f t hey woul d have

24 cal l ed t hi s wi t ness, and i f we woul d have cr edi t ed t hi s

25 wi t ness, we woul d not have a r easonabl e doubt , because i n t hi s

( 212) 805- 0300

1300

1 case J oan Hayes, who we onl y hear d t he name but never saw, i s

2 not a per son whose t est i mony i s cumul at i ve.

3 The gover nment r el i ed on J oan Hayes t hr oughout t hi s

4 ent i r e case, and you never got an oppor t uni t y t o see her , and

5 we never got an oppor t uni t y t o ask her quest i ons.

6 You know i t ' s i nt er est i ng, Benedi ct and Hayes, makes

7 you t hi nk of Benedi ct Ar nol d, r i ght ? Her e i s t he per son who i s

8 your account ant , who i nappr opr i at el y becomes your audi t or

9 because peopl e t el l you you can' t wear t wo hat s.

10 Do you r emember Benedi ct ? I asked hi m, di d you ever

11 see Hayes' audi t ? Remember , she was supposed t o submi t t he

12 audi t . She got a 90- day ext ensi on i n Oct ober of 2002. You ar e

13 supposed t o submi t t he audi t . She got a 90- day ext ensi on unt i l

14 December 31, 2002 f or t he f i r st year , and i n August of 2003 Bob

15 Benedi ct hasn' t seen t he audi t and Dr . Kar r on hasn' t seen t he

16 audi t . Wow. You know who saw t he audi t ? Ri l ey, Hope Snowden.

17 They saw t he audi t . And t he t est i mony i s i n t he r ecor d, Ri l ey

18 saw t he audi t ed bef or e she went t o make t he per sonal vi si t , t he

19 si t e vi si t . Bef or e she cl osed t he pr oj ect down she used J oan

20 Hayes' number s.

21 Wher e ar e t hose number s? I asked Ri l ey, do you have

22 any number s? Do you have any audi t sheet s? Do you have any

23 gener al l edger s showi ng us how you base t hi s?

24 No. No, I used J oan Hayes' .

25 Wel l , wher e ar e t hey? What di d she gi ve you? What

( 212) 805- 0300

1301

1 was her mot i vat i on, Hayes' s mot i vat i on? She cl ear l y poi soned

2 ever ybody at ATP agai nst Dr . Kar r on.

3 Coul d you i magi ne, t hey have a man, Dr . Kar r on, who

4 t hey know i s not a busi ness manager , and he get s a guy l i ke

5 Benedi ct t o be hi s busi ness manager and t hey won' t appr ove hi m.

6 They l eave Dr . Kar r on wi t hout a busi ness manager f r omt he t i me

7 t hat Pet er Ross l eaves unt i l I t hi nk t he dat e on t he e- mai l was

8 i n ear l y Mar ch, t hat Benedi ct comes aboar d, and t hey won' t

9 appr ove hi m. Why won' t t hey appr ove hi m? Why won' t t hey

10 appr ove a r evi sed budget ? Why won' t t hey do anyt hi ng? Why ar e

11 t hey st onewal l i ng t hi s? Ask your sel f : Who came i n t he mi ddl e

12 of t he ni ght t o t al k t o t hem? Same peopl e t hat came and t ook

13 ever yt hi ng i ncl udi ng t he shoe r ack out of Dr . Kar r on' s house.

14 THE COURT: You' r e a l i t t l e over 45 mi nut es.

15 MR. RUBI NSTEI N: Hal f way t her e, J udge, but t hank you.

16 Who wr ot e t he books? Whose books wer e t hey t hat t hey

17 used? She and Fr ank Spr i ng cr eat ed what ever books t her e wer e.

18 What di d t hey submi t ?

19 THE DEFENDANT: Excuse me. I have t o go t o t he

20 bat hr oom. Do I have your per mi ssi on, si r ?

21 MR. RUBI NSTEI N: J udge, I wi l l keep goi ng.

22 THE COURT: Somebody was sayi ng somet hi ng.

23 MR. RUBI NSTEI N: Yes, Dr . Kar r on needs a per sonal

24 moment , but I wi l l keep goi ng.

25 THE COURT: Do you want t o br eak now?

( 212) 805- 0300

1302

1 MR. RUBI NSTEI N: Onl y i f t he j ur y does, J udge. I have

2 no pr obl emwi t h excusi ng hi mon t he r ecor d.

3 THE COURT: You sai d anot her 45 mi nut es.

4 I f he needs a br eak, l et ' s t ake a ver y shor t br eak.

5 The j ur y i s excused f or a shor t br eak.


7 MR. RUBI NSTEI N: We mi ght as wel l st ep out our sel ves,

8 i f you don' t mi nd, J udge.

9 THE COURT: Wel l , al l r i ght , but come r i ght back. I

10 have t o have some t i me f or t he char ge. Leave me a l i t t l e t i me,


12 ( Recess)

13 THE COURT: Al l r i ght . Let ' s br i ng t he j ur y i n.

14 I hope you won' t be t oo much l onger , Mr . Rubi nst ei n.

15 MR. RUBI NSTEI N: I ' mt r yi ng not t o.

16 THE COURT: Because I have a r ebut t al , t hen I have t o

17 have a l i t t l e r oomf or my char ge, and we' ve got t o have l unch.


19

20

21

22

23

24

25

( 212) 805- 0300

1303
86bzkar 3 Summat i on - Mr . Rubi nst ei n




4 Hayes i s - - a l et t er i n evi dence, gover nment exhi bi t

5 51. Thi s i s af t er she' s cooper at ed wi t h t he gover nment f r om

6 God knows when. I submi t t ed f i gur es t hat she cr eat ed t o get

7 t hi s gr ant suspended. 51, she wr i t es a l et t er , or Dr . Kar r on

8 wr i t es a l et t er t o Hayes, so she' s st i l l i n communi cat i on wi t h

9 Dr . Kar r on, even t hough you know f r ome- mai l s - -

10 MR. KWOK: Obj ect i on, not i n evi dence.

11 MR. RUBI NSTEI N: Oh, I ' msor r y. Okay.

12 THE COURT: Exhi bi t 51 i s not i n evi dence.

13 MR. RUBI NSTEI N: I t ' s i n t hei r book.

14 So I submi t t o you t hat , t hat you have a l ack of

15 evi dence j ust on t he absence of Hayes.

16 And you know f r omt he t est i mony t hat Benedi ct had no

17 i dea t hat Hayes had gi ven t he audi t r epor t t o Ri l ey pr i or t o

18 t he meet i ng. I magi ne, she went t o t he meet i ng i n J une and

19 was - - i n J une t hey had t he meet i ng. Ri l ey came t o t he si t e

20 vi si t and Benedi ct , Hayes and Dr . Kar r on wer e pr esent - - t hat ' s

21 t he l unch t hat i s i n evi dence. And she st ayed aboar d, because

22 she kept f eedi ng, f eedi ng number s t o Benedi ct , not t o Dr .

23 Kar r on. Dr . Kar r on' s a sci ent i st . You know, he di dn' t cr eat e

24 t hese number s. And we know t hat Benedi ct kept gi vi ng

25 number s - - I mean Hayes kept gi vi ng number s because we have

( 212) 805- 0300

1304

1 t hose amended f i nanci al st at us r epor t s t hat wer e f i l ed

2 August 13, 2003. And Benedi ct t el l s you wher e he got t hose

3 number s f r om. And you al so know t hat Benedi ct was pai d - - t hat

4 Dr . Kar r on pai d af t er t he gr ant was suspended - - he' s not

5 supposed t o, but he want s - - he want s t he pr oj ect t o wor k. So

6 he' s payi ng expenses. He put s - - you know about $47, 000 i n

7 cash t hat he r ef i nanced - - i t ' s i n t he e- mai l s - - he r ef i nanced

8 hi s apar t ment , put t he money i nt o t he gr ant t o keep t he gr ant

9 goi ng. I s t hat - - does t hat sound l i ke somebody who i s l ooki ng

10 t o i nt ent i onal l y mi sappr opr i at e f unds? Thi s i s a hi gh r i sk,

11 i nnovat i ve t echnol ogy t hat he' s wor ki ng on t hat r equi r es

12 changes as you go al ong. Ever ybody t el l s you. And mi st akes i n

13 sci ence, I submi t t o you, ar e mer el y exper i ment s t hat di dn' t

14 wor k out . Those ar e mi st akes. So you keep changi ng t hi ngs.

15 You need mor e wor ker s. So he get s vol unt eer s. You hear d about

16 al l t he peopl e t hat ar e i n t he apar t ment . He get s st udent s.

17 What ar e al l t hese peopl e doi ng t her e? They' r e al l wor ki ng on

18 a pr oj ect . Does anybody suggest t hat he' s not wor ki ng on a

19 pr oj ect ever y mi nut e t hat he has?

20 And you know t hat t he mant r a of ATP i s, i t ' s your

21 busi ness, your money, do what ever you want and we' l l back you

22 up because we' r e i nt er est ed i n sci ence her e. But t hen t he bean

23 count er s come i n and t hey st ar t dr awi ng ci r cl es ar ound ever y

24 number t o suggest you' r e doi ng somet hi ng wr ong. And t hat ' s

25 what we have her e. I magi ne l eavi ng t hi s company wi t hout a

( 212) 805- 0300

1305

1 busi ness manager .

2 Now, you know t hat t he gr ant i s a f ungi bl e t hi ng,

3 because exhi bi t s f our - - do we have t hat exhi bi t ? I t hi nk i t ' s

4 page 11. I t t el l s you you coul d seek a r evi si on at t he end of

5 t he year . Not t he end of t he year of t he gr ant , whi ch i s

6 Oct ober - - i n t hi s case Sept ember 30t h, 2002, but at t he end of

7 t he year . And al l of t hese r evi si ons t hat wer e submi t t ed by

8 Ross and what have you, r el at ed t o 2001. I n ot her wor ds,

9 you' r e al l owed t o go backwar ds. You don' t need appr oval

10 bef or e. You know, f or ever y r ul e t hat t hey have, i f you l ook

11 t hr ough t hese books, you' r e goi ng t o f i nd a r ul e t hat says t he

12 opposi t e. And t hey expect peopl e t o r ead a coupl e of hundr ed

13 pages of i nf or mat i on. Somebody' s gi vi ng you a check f or

14 $800, 000, you si gn on t he bot t oml i ne and you' r e not wor r yi ng

15 about t he det ai l s. You know you' r e not goi ng t o do anyt hi ng

16 wr ong. Do you r ead ever yt hi ng t hat t he cr edi t car d company

17 sends you? They send you t hese t hi ngs about changes i n your

18 cr edi t car d st uf f . Got t o make an admi ssi on, I don' t .

19 Do you have t hat ?

20 MR. Di CENZO: No.

21 MR. RUBI NSTEI N: Al l r i ght , we' l l f i nd i t and put i t

22 up l at er .

23 Now, so t hat ' s what Dr . Kar r on under st ood. He

24 under st ood t hat he coul d have t he gr ant changed and he coul d

25 have t he l i nes changed. And why woul dn' t he? Doesn' t i t make

( 212) 805- 0300

1306

1 a heck of a l ot of sense t o you peopl e? But no, t hey di sal l ow

2 Wi nt er ' s sal ar y. Wi nt er wor ked i n t he of f i ce. Not onl y

3 di sal l owed her sal ar y, t hey al so di sal l owed she got chi l d car e.

4 They di dn' t l i ke t hat . So you don' t have sal ar y, you' r e not

5 ent i t l ed t o f r i nge benef i t s, and al so you shoul dn' t have chi l d

6 car e anyhow. Who ar e t hey t o say what f r i nge benef i t s your

7 company shoul d gi ve you? Who ar e t hey? They t el l you, oh, you

8 shoul d have a - - somet hi ng i n pl ace. You need a wr i t t en

9 manual . Why do you need a wr i t t en manual f or ? Nobody' s goi ng

10 t o l ook at i t . Nobody' s goi ng l ook at i t . They don' t r evi ew

11 t he wr i t t en manual . You don' t have t o submi t i t . Nobody asked

12 f or t he manual . You' r e al l owed t o make f r i nge benef i t s.

13 But we do have a wr i t t en manual . And who cr eat ed i t ?

14 Bob Benedi ct . He cr eat ed i t . We put i t i n evi dence. And t he

15 gover nment get s up on r edi r ect and says, wel l , wasn' t t hat J ul y

16 2nd af t er t he gr ant was suspended? What do you t hi nk, he made

17 t hat document on J ul y 2nd; he st ar t wor ki ng on i t on J ul y 1st

18 and he st ayed up al l ni ght ? Come on. You have e- mai l s back i n

19 August of ' 02 r el at i ng t o t hi s l awyer Mi l l er , who i s appar ent l y

20 on t he boar d of CASI , aski ng about document i ng i t . But t he

21 r eal i t y i s i n t hi s gr ant , wher e not hi ng' s wr i t t en i n st one, i f

22 you do what ' s r easonabl e and you di d i t bef or e, you know you' r e

23 not goi ng t o have any t r oubl e.

24 But t hen you get an audi t or - - I mean I l eave t o i t

25 you. You j udge t he wi t nesses. Ri l ey. She di sal l ows par t of

( 212) 805- 0300

1307

1 Dr . Kar r on' s sal ar y. She di sal l ows i t . He di dn' t spend

2 100 per cent of t i me on t he gr ant . Wel l , what i f he spent 80

3 hour s a week? I f he spent an hour , t wo hour s on somet hi ng

4 el se, af t er war d, t hose 80 hour s, uh- uh. Let me ask you; ATP

5 appr oved $175, 000 f or Dr . Kar r on. Di d t hey expect hi mt o get a

6 $175, 000 i n sal ar y? Of cour se t hey di d. They di dn' t expect

7 t he bean count er t o come al ong and say you' r e not al l owed t o

8 t ake t he whol e 175. And t hat woul d' ve been r esol ved i n an

9 audi t r esol ut i on.

10 Then we t al ked about Mr . Gur f ei n. Gur f ei n got

11 $100, 000, net - - I ' msor r y, gr oss sal ar y. So, wel l , 25 per cent

12 of hi s t i me wasn' t spent on ATP, so we t ook of f 35 per cent . So

13 I showed her t he exhi bi t H. And di d she ever answer i t ? She

14 gave you doubl e t al k t hat you haven' t hear d si nce you hear d

15 comedi ans t hat coul d doubl e t al k.

16 The amended budget t hat ' s appr oved, whi ch i s par t

17 of - - whi ch i s t he def endant ' s H, i t shows Gur f ei n get s a

18 133, 333, he devot es 75 per cent of hi s t i me, and t hat equal s out

19 mat hemat i cal l y t o $100, 000. Wel l , no, i t ' s 75 per cent of a

20 hundr ed. Wel l , no no. She' s get t i ng 133. What ' s 75 per cent

21 of 133? They say number s don' t l i e.

22 You have wi t nesses l i ke Hope Snowden. She t el l s you

23 about she di scussed t he $75, 000 t hat Dr . Kar r on t ook as an

24 advance, wi t h Agent Gar r i son. And when I cr oss- exami ned her , I

25 showed you t hat t he f i r st t i me, and she conceded i t , t hat she

( 212) 805- 0300

1308

1 ever spoke t o anybody about t he $75, 000 advance, was on

2 Sept ember 8t h, 2003. And I conf r ont ed her wi t h Gover nment ' s

3 exhi bi t 3504A and she agr eed wi t h t hat . Al l r i ght . So

4 what ever r eason, she was st onewal l i ng Benedi ct and t he r evi si on

5 pr ovi si ons. Gover nment wor ker , and she' s t aki ng t he gover nment

6 l i ne. Al l r i ght .

7 Now, I asked her about t hese pr eaudi t , pr e- gr ant

8 cost s, and she sai d you do t hat at your own r i sk. So, does Dr .

9 Kar r on - - so can you get ATP t o agr ee t o l et you use your

10 pr eaudi t spendi ng - - pr e- gr ant spendi ng, t he money you spent

11 bef or e Oct ober 1st , 2001, and you can t ake t hat as an al l owabl e

12 expense; i s t hat somet hi ng you coul d consi der ?

13 Now, but she want s you t o t hi nk t hat she' s, she' s on

14 t op of what ' s goi ng on. Nobody car ed what was goi ng on, as

15 l ong as sci ence - - r emember t hey had vi si t s? They had si t e

16 vi si t s, and Li de t ol d you, yeah, t hey wer e pr ogr essi ng on t he

17 sci ence. That ' s what t hey car ed about at ATP. That ' s what

18 t hey shoul d have car ed about . They shoul d have car ed about

19 t hat .

20 Now, t he mant r a was, no good pr oj ect goes unf unded.

21 THE COURT: An hour and 15 mi nut es.

22 MR. RUBI NSTEI N: Par don, J udge? That ' s not so. We

23 st ar t ed at 45. I cannot possi bl y have t al ked a hal f an hour .

24 You' r e put t i ng i n t he r ecess on me, J udge. That ' s not - -

25 THE COURT: I am- -

( 212) 805- 0300

1309

1 MR. RUBI NSTEI N: That ' s not f ai r at al l . I di dn' t

2 want a r ecess.

3 THE COURT: No, I know. I haven' t st opped you yet .

4 I ' mj ust gi vi ng you a, j ust gi vi ng your t i me l i ne - -


6 THE COURT: - - so you know wher e you ar e.

7 MR. RUBI NSTEI N: J udge, you know I l ove you, but I got

8 t o go, I got t o go.

9 I n exhi bi t 10B i n evi dence, t hi s i s what i t says, t hi s

10 i s on t he budget t hat i s par t of what you submi t . They say:

11 We - - t hi s i s gover nment t al ki ng - - we r ecogni ze t hat

12 unexpect ed event s occur r ed f r equent l y i n R&D, r esear ch and

13 def endant pr oj ect s, and t hat budget s may be needed t o be

14 changed as t he pr oj ect pr oceeds. Okay. That ' s al l you have t o

15 know about t he budget . I t ' s not wr i t t en i n st one. I t ' s a

16 l i vi ng br eat hi ng t hi ng. And i f you l ook at Exhi bi t 4, page

17 11 - - i t ' s not i n your book - - i t says, you can r evi se t he

18 budget at t he end of t he year . And t hat ' s what he di d, and you

19 can gi ve 10 per cent anyway you want .

20 Now, t he smoki ng gun, r ent . The smoki ng gun i n t hi s

21 case. When was t he r ent pai d f or ? CASI col l ect ed r ent . Dr .

22 Kar r on col l ect ed r ent f r omCASI si nce 1995. Ther e' s no

23 evi dence t hat CASI was not payi ng r ent , and t hat Dr . Kar r on

24 wasn' t showi ng i t on hi s i ncome t ax r et ur ns f or t he whol e t i me

25 of t he gr ant .

( 212) 805- 0300

1310

1 You know t hat t her e was a per i od wher e he di dn' t have

2 wor k and t he r ent went unpai d so t hat he was owed t he r ent . I f

3 he owed a bank l oan and he t ook money and pai d of f a bank l oan

4 t hat he owed bef or e t he gr ant , what woul d t hey be sayi ng? So

5 we have t hi s i ssue of r ent . He f eel s, he f eel s t hat he shoul d

6 be abl e t o col l ect r ent f r omATP. Why? Hi s i s a uni que

7 si t uat i on. He onl y has one pr oj ect . They cal l ed di r ect and

8 i ndi r ect cost s. He says ever yt hi ng i s di r ect , because I have

9 onl y one pr oj ect . These ot her pl aces have mor e t han one

10 pr oj ect so t hey can' t say how much of t he r ent i s t he pr oj ect .

11 So l et ' s f ol l ow i t . And ever ybody i s t el l i ng hi m, ever ybody' s

12 sayi ng you can' t do i t , you can' t do i t . He keeps t r yi ng, he

13 keeps t r yi ng, he keeps t r yi ng.

14 Fi nal l y, near t he end of 2002 i t dawns on hi m, he' s

15 not get t i ng t he r ent . Now, a decent account ant t hen r eappl i es

16 al l what ever he spent f or t he r ent t hat t hey adj ust ed. That ' s

17 what t he account ant does, t hey go i nt o your cr edi t car d, your

18 t hi s, your t hat , t hey deci de what i s at t r i but abl e t o you and

19 what i sn' t , what i s per sonal .

20 He now has t hi s br i l l i ant i dea. He' s a br i ght guy; I

21 amgoi ng t o move out of t he apar t ment , I ' mgoi ng t o move t o

22 Connect i cut t o my f r i end Wi ndy' s house, I ' mgoi ng t o pay her

23 r ent and t hen I ' mnot usi ng t he apar t ment f or my house and I

24 coul d deduct i t . Gr eat i dea. So he goes, he makes a cont r act

25 wi t h Wi ndy. He gi ves her 2, 000 i n advance. He' s al l set t o do

( 212) 805- 0300

1311

1 i t , when t hey r eal i ze t hi s i s r i di cul ous. I ' mgoi ng t o be

2 goi ng up and back f r omConnect i cut . Pr obabl y r eal i ze, you

3 know, i f I use my GPS goi ng up and back f r omConnect i cut i t may

4 not be a busi ness expense, you know, i t may not be al l owabl e.

5 So he deci des not t o move i nt o Wi ndy' s. And what does he do?

6 What does he do, l adi es and gent l emen? He doesn' t t ake r ent

7 any mor e. Ther e ar e no checks f or r ent i n 2003, not i n t hi s

8 gr ant . So once i t f i nal l y went t hr ough hi s head t hat you can' t

9 do i t , i t ' s not al l owabl e, t hi s ar r ogant guy, accor di ng t o

10 t hem, l i st ens t o nobody, st opped t aki ng r ent .

11 Now, you' r e goi ng t o l ook at t he cr edi t car ds, you' r e

12 goi ng t o l ook at t he Mast er Car d. You' r e goi ng t o see how

13 of t en he had meal s, wher e t hey wer e, what pl aces. You know

14 t hat he t ook Li de and J ane Or t hwei n t o l unch at Benj ami n' s.

15 You see he goes t o Benj ami n' s ot her t i mes. You' l l see t hese

16 r est aur ant s and what have you. Al l r i ght .

17 You' r e goi ng t o consi der t he audi t , or t he l ack of

18 audi t . I submi t t o you t hat 110, Gover nment ' s 110 and 111,

19 whi ch wer e cr eat ed l ong af t er t he gr ant was suspended, af t er

20 t hey made t he f i nal r epor t , af t er t hey made t he f i nal r epor t i n

21 Mar ch of 2004, t hen she went and audi t ed i t . Then she cr eat ed

22 r ecor ds t o j ust i f y what she had done bef or e. Ther e was

23 pr obabl y about 45 checks i n t hi s whol e r econci l i at i on t hat t hey

24 never di d. So ask your sel f , ar e you goi ng t o r el y upon any of

25 t he number s t hat Ri l ey cr eat ed.

( 212) 805- 0300

1312

1 Now, I ' mgoi ng t o ski p a whol e bunch of st uf f . I ' m

2 goi ng t o go t o August 13, 2003. And August 13t h, 2003 - - oh,

3 by t he way, r ent and ut i l i t i es ar e not per mi t t ed. They' r e

4 i ndi r ect cost s. You know f r omt he t est i mony i n t hi s case t hat

5 CASI was appr oved t o t ake of f , t o deduct ut i l i t i es, a por t i on

6 of t he ut i l i t i es. Because you' l l see t he e- mai l s and you' l l

7 see t hat i n t he exhi bi t s t hey wer e al l owed t o t ake of f el ect r i c

8 $7600, r i ght . Why? Because i t ' s an i ndi r ect cost . Wel l , how

9 di d you get i t ? Because i t ' s negot i abl e. They submi t t ed t he

10 bi l l s showi ng t hat t he i ncr ease i n el ect r i ci t y, due t o t he

11 equi pment , showed a r i se t o t he ext ent t hat t hey f el t t he gr ant

12 peopl e f el t t hat Dr . Kar r on was ent i t l ed t o r ei mbur sement f or

13 on hi s. When you l ook at t he book and you' l l see t hat Oct ober

14 19t h, 2002 was t he l ast r ent payment made t o Dr . Kar r on, okay.

15 $2, 000. And onl y one r ent payment was out of NI ST. And I

16 submi t t o you t hat t hey had aut hor i zed f r i nge benef i t s. They

17 wer e aut hor i zed 110, 000. Who i s t he per son t hat i s per mi t t ed

18 t o t el l you, af t er you' ve been aut hor i zed t o spend 110, 000 and

19 you can' t spend 110, 000? Who? And t hey deduct your payr ol l

20 t ax - - t hey deduct ed your - - r educe your sal ar y so now you

21 coul dn' t t ake your payr ol l t axes. You got a sal ar y. So now

22 t hey come up wi t h a f i gur e of $547, 000 whi ch i s - - t hat ' s

23 cr i mi nal .

24 Now, I want t o get , because I - - di d anybody say t hat

25 t hese medi cal expenses wer en' t deduct i bl e? No. Thei r ar gument

( 212) 805- 0300

1313

1 i s wel l - - or wer en' t l egi t i mat e? No. Thei r ar gument i s t hat

2 t hey - - t her e was no pl an i n pl ace. And I submi t t o you t hey

3 di dn' t need a pl an. They had a pl an. That ' s t he way t hey di d

4 i t . That ' s t he way t hey al ways di d i t . And t hat even Benedi ct

5 sai d t hat you can use t he mat chi ng cost s, you coul d use your

6 own equi pment . And t her e' s no quest i on t hat Dr . Kar r on had

7 equi pment i n hi s pl ace when he st ar t ed t hi s gr ant .

8 But I want t o go, because I t ol d you, t o August 13t h

9 because I ' m- - of ' 03, and t hi s i s t he set t i ng. Bob Benedi ct ,

10 t hese ar e - - t her e ar e exhi bi t s i n evi dence Gover nment ' s 40

11 40A, 41, 41A, 42, 42A, 43, 43A. These ar e t he f i nanci al

12 r epor t s, quar t er l i es. Remember , t hey had t o submi t quar t er l y

13 r epor t s. And l ow and be hol d on August 13t h, 2003 af t er t he

14 gr ant i s suspended, Bob Benedi ct pr epar es t hese amended

15 f i nanci al r epor t s. Whose f i gur es does he use? Obvi ousl y J oan

16 Hayes. He suggest s t hat Dr . Kar r on saw t hese, appr oved t hem

17 and what have you. I ' mgoi ng t o pr ove t o you, beyond any

18 doubt , t hat t hat ' s not t r ue, j ust not t r ue. A, you' r e goi ng t o

19 see f r omt he Mast er Car d expense r ecor ds i n evi dence, as

20 def endant ' s ZZZ- 1 t hat - - wher e you' r e goi ng t o f i nd t hat al l

21 ki nds of medi cal benef i t s wer e pai d on behal f of Dr . Kar r on.

22 And you' r e al so goi ng t o f i nd t hat al l ki nds of equi pment ,

23 i ncl udi ng t o El l i ot t - - I ' msor r y - - El l i ot t Medi cal Gr oup,

24 you' r e goi ng t o see Dr . Br ant s, you' r e goi ng t o see Ki ps Bay

25 Opt i cal , al l of t hi s i s pai d on t he Mast er Car d. Shoul d he get

( 212) 805- 0300

1314

1 cr edi t f or t hat ? I submi t he shoul d under hi s medi cal benef i t s

2 pl an.

3 You' r e goi ng t o f i nd, when you l ook at t he Mast er Car d

4 bi l l , t hat on August 13t h, 2003, Dr . Kar r on was i n Canada.

5 You' r e goi ng t o see medi cal bi l l s pai d f or on August 13t h, 2003

6 t hat wer e i ncur r ed on t hat day t hat he was i n Canada, because

7 you gi ve a cr edi t car d, t hey put t he dat e, t hey put t he pl ace,

8 and so he' s i n Canada.

9 How do t hese, t hat he' s supposed t o be t hi s cr i mi nal ,

10 t hi s mast er mi nd cr i mi nal , f udgi ng and maki ng r ecor ds, and what

11 have you - - l et me show you - - gi ve me 48, and gi ve me - - I ' m

12 goi ng t o show you - - coul d you put t hi s up, pl ease? Thi s i s

13 48. Now, I submi t t o you, on t he bot t omof t hat i s a

14 si gnat ur e. That ' s not a handwr i t t en si gnat ur e when you t ake a

15 l ook at t he document . That ' s a pr i nt out si gnat ur e. I t ' s not

16 Dr . Kar r on' s. And you see on t he bot t omof t he exhi bi t - -

17 THE COURT: The bot t oml i ne?

18 MR. RUBI NSTEI N: Yeah, bot t oml i ne. You see i t says

19 " r evi sed" . See i t ' s dat ed. Can you see f r omwher e you ar e,

20 August 13t h, 2003? Whose i ni t i al s ar e next t o r evi sed? I

21 submi t t o you i f you t ake a l ook at exhi bi t 48 i n evi dence, Bob

22 Benedi ct si gnat ur e, t hat Benedi ct submi t t ed t hose f or ms, okay.

23 And i t makes sense. I t makes sense. You t hi nk t hat Dr . Kar r on

24 i s checki ng out t hese number s and doi ng t hose t hi ngs? I submi t

25 t o you t hat t hi s i s a case put t oget her wi t h no subst ance; t hat

( 212) 805- 0300

1315

1 Dr . Kar r on had absol ut e r i ght , not beyond a r easonabl e doubt ,

2 beyond any doubt , t o expect t hat t hese expenses t hat he was

3 char gi ng woul d be accept ed, because he was wor ki ng hi s but t of f

4 f or t hi s gr ant . He was t r yi ng t o succeed, because t hat ' s who

5 he i s. He was t r yi ng t o devel op somet hi ng. And I don' t want

6 sympat hy. I don' t want sympat hy t hat i t was a gr eat pr oj ect

7 and maybe we al l woul d' ve benef i t ed f r omi t . I don' t want

8 sympat hy f r omt hat . I want j ust i ce. I want j ust i ce. And I

9 want you t o l ook at t hi s case as a sci ent i st wor ki ng, and you

10 see t he hour s on t he e- mai l s, day or ni ght . I f you l ook at t he

11 cr edi t car d st at ement s and you see wher e he i s and di f f er ent

12 st at es and what have you, and say whet her or not t hi s was hi s

13 t hought . Hi s t hought was t o keep - - I submi t t o you we pr oved

14 t o you hi s t hought was t o keep t he t hi ng goi ng, t o keep i t

15 goi ng even af t er t hey t ol d hi mi t was suspended, t o keep i t

16 goi ng. Why di d he put money i n af t er i t was suspended? Ar e

17 t hey goi ng t o ar gue t o you t hat he di d t hat as a cover up; t hat

18 he t hought t hat i f he put money i n, t hat t hi s i s goi ng t o sol ve

19 hi s pr obl embecause he' s i nvol ved i n t hi s cr i mi nal i t y

20 bef or ehand? I s t hat what t hey' r e goi ng t o st and up her e? I

21 submi t I r el y upon you t o answer t hat ar gument f or me. He

22 bel i eved al l al ong t hat t hi s gr ant woul d be r est or ed, and

23 somehow i f he owed money, he woul d pay t he money back i f he was

24 mi st aken. He di dn' t have a pr obl emwi t h t hat at t he end of t he

25 day. He t hought he was r i ght . Maybe he was wr ong. So he put

( 212) 805- 0300

1316

1 money i n. He kept peopl e wor ki ng, and he spent money on t he

2 gr ant . And hi s pr obl emwas t hat he bel i eved t he peopl e ar ound

3 hi m. He bel i eved i n Hayes. He bel i eved t hat she was on hi s

4 si de, and t hat t he number s t hat he was get t i ng wer e cor r ect

5 number s.

6 Now, t he bot t oml i ne i s t he gr ant has never been

7 t er mi nat ed; r i ght ? They have no evi dence of t er mi nat i on.

8 Suspended. And t he J udge i s r i ght , I coul d t al k f or anot her

9 t wo hour s. And I pr obabl y, when I si t down or when I go t o

10 sl eep t oni ght and wake up, I coul d t hi nk of some of t he most

11 si gni f i cant t hi ngs I coul d t hi nk of t o shar e wi t h you peopl e.

12 But t he r eal i t y i s t hat you sat her e, pai d at t ent i on. You know

13 t he evi dence, you know your dut y. I have - - bei ng a cr i mi nal

14 def ense l awyer i s an awesome r esponsi bi l i t y. And you have - -

15 I ' ve done al l I coul d, okay. He came her e, he pl ed not gui l t y.

16 We' l l wai t her e f or you f ol ks t o come back and say he' s not

17 gui l t y. And I t hank you, and I coul d st i l l say good mor ni ng,

18 so have a good mor ni ng.

19 THE COURT: Thank you, Mr . Rubi nst ei n.


21 THE COURT: Al l r i ght . Ar e you r eady t o pr oceed, Mr .

22 Ever del l ?


24 Ladi es and gent l emen, ever y case i n f eder al cour t i s

25 i mpor t ant , but not ever y case i n f eder al cour t i s cl ose. Thi s

( 212) 805- 0300

1317
86bzkar 3 Rebut t al

1 i s not a cl ose case. The evi dence t hat you' ve hear d over t he

2 l ast week has been cl ear , t hat t he def endant mi sspent gr ant

3 money, and he spent t he money on t hi ngs t hat he knew, t hi ngs

4 t hat he was speci f i cal l y t ol d he coul dn' t spend t he money on.

5 And what ' s even mor e out r ageous i s t hat t he def endant spent

6 money t hat was supposed t o go f or sci ent i f i c r esear ch t o hel p

7 us al l , money t hat ot her sci ent i st s who di dn' t get t hi s gr ant

8 coul d have used t o make wonder f ul l i f e changi ng di scover i es.

9 So t he def endant di dn' t j ust cheat t he gover nment , he cheat ed

10 al l of us.

11 Now, t he def ense counsel i n hi s cl osi ng r emar ks t r i ed

12 t o t ake your eye of f t he bal l i n t hi s case. He t r i ed t o make

13 you f ocus on a number of t hi ngs t hat ar e not r eal l y at t he

14 hear t of t hi s case. He want s you t o specul at e about wi t nesses

15 you di dn' t even hear f r om. He want s you t o wonder about what ,

16 whet her t he def endant was i n Canada i n 2003, af t er t he gr ant

17 was even suspended. These ar e not t he t hi ngs t hat ar e at t he

18 hear t of t hi s case. So i n t he next f ew mi nut es I want t o t ake

19 a st ep back and I want t o f ocus br i ef l y agai n on how t he

20 evi dence shows t he def endant i nt ent i onal l y mi sspent t he gr ant

21 f unds, and t hen I ' mgoi ng t o f ocus a l i t t l e bi t about some of

22 t he ar gument s t he def ense counsel made i n hi s cl osi ng r emar ks,

23 and see why none of i t i s bor ne out by t he evi dence.

24 Now, f i r st , l et me j ust r ei t er at e one poi nt t o you,

25 l adi es and gent l emen. The gover nment bear s t he bur den of pr oof

( 212) 805- 0300

1318

1 at al l t i mes. The def endant doesn' t have t o say anyt hi ng or do

2 anyt hi ng t o pr ove hi s i nnocence. But you ar e ent i t l ed t o

3 exami ne t he case t hey put on and t he ar gument s def ense counsel

4 made, t o see whet her or not t hey make any sense.

5 So wi t h t hat , l et ' s f i r st t ake a st ep back and l ook at

6 j ust a f ew exampl es of t he evi dence bef or e you of t he

7 def endant ' s gui l t .

8 Let ' s t ake a l ook at r egs. Thi s i s a bi g i t emi n t he

9 case. Ther e can be no doubt t hat t he def endant was t ol d,

10 r epeat edl y, by sever al di f f er ent peopl e t hat no mat t er what t he

11 si t uat i on may be, you cannot use ATP f unds t o pay f or r ent .

12 The def endant hear d i t f r omHope Snowden, who t ol d hi mt hi s

13 r i ght af t er t he gr ant was awar ded. He hear d i t f r omB. J .

14 Li de, anot her of t he gr ant admi ni st r at or s. He hear d i t f r om

15 hi s own busi ness manager , Lee Gur f ei n, who hi msel f had hear d i t

16 f r omHope Snowden, i n a phone cal l r epeat edl y. He hear d i t

17 f r omFr ank Spr i ng, t he bookkeeper he hi r ed i n connect i on wi t h

18 t he f i r st year audi t , and he hear d i t f r omRober t Benedi ct , hi s

19 second year book manager , busi ness manager . I ndeed i t seems

20 l i ke t he onl y per son f or whomt hi s was not compl et el y evi dent

21 was t he def endant . And why i s t hat ? I t ' s not because t he r ul e

22 wasn' t cr yst al cl ear . I t was. I t was because t he def endant

23 si mpl y r ef used t o l i st en t o what he di dn' t want t o hear .

24 Remember what Rober t Benedi ct t ol d you about how - - r emember

25 what Rober t Benedi ct t ol d you about how t he def endant oper at ed.

( 212) 805- 0300

1319

1 He woul d go f r omper son t o per son aski ng t he same quest i on

2 agai n and agai n unt i l he got t he answer he l i ked. Wel l , i n

3 t hi s case t he def endant never got t he answer he want ed and he

4 went ahead and he di d i t anyway.

5 Remember what Lee Gur f ei n t ol d you, he t hought - - he

6 t ol d you t hat t he def endant t hought t hat ever yone at NI ST l oved

7 hi mand t hat he coul d do anyt hi ng he want ed wi t h t he money.

8 That ' s exact l y what happened her e. Thi s di d not happen because

9 t he def endant di dn' t under st and t he r ul es or make an honest

10 mi st ake. Thi s happened because t he def endant r ef used t o

11 under st and what al l par ent s t el l t her e f i ve- year - ol d ki ds when

12 t hey st omp t hei r f eet and hol d t hei r br eat h when t hey don' t get

13 what t hey want , and t hat means no means no.

14 And i n t he end t he evi dence cl ear l y showed t he

15 def endant i nt ent i onal l y mi sspent $60, 000 on r ent i n t he f i r st

16 year of t he gr ant al one.

17 Now, def ense counsel got up and he t al ked t o you about

18 r ent . What di d he say t o you about r ent ? He sai d t he

19 def endant f el t ent i t l ed t o i t . And t hat ' s exact l y t he pr obl em,

20 he f el t ent i t l ed t o i t . He was t ol d he coul dn' t do i t , and he

21 di d i t anyway. And he says, i t f i nal l y dawned on hi mi n 2002

22 t hat he coul dn' t use ATP f unds t o pay f or r ent ? I t f i nal l y

23 dawned on hi mi n 2002? That ' s not what t he evi dence showed.

24 He was t ol d i n 2001 r epeat edl y by many di f f er ent peopl e. How

25 coul d i t possi bl y f i nal l y dawn on hi mi n 2002 t hat you can' t

( 212) 805- 0300

1320

1 use t hese f unds t o pay f or r ent ? How i s t hat possi bl e? I t ' s

2 because he' s del i ber at el y i gnor i ng ever yt hi ng t hat peopl e ar e

3 t el l i ng hi m. Thi s i s del i ber at e i gnor ance on t he par t of t he

4 def endant . He does not deser ve some ki nd of speci al

5 congr at ul at i ons because he st opped payi ng r ent t o hi msel f i n

6 2003, af t er t he gr ant was suspended.

7 MR. RUBI NSTEI N: Obj ect i on. I t wasn' t af t er , i t was

8 bef or e.

9 THE COURT: Obj ect i on sust ai ned t o t hat .

10 MR. EVERDELL: And of cour se t her e wer e t he ut i l i t i es.

11 THE COURT: I t hi nk t he evi dence - - my r ecol l ect i on - -

12 t he j ur y' s r ecol l ect i on wi l l gover n i s t hat i t was i n December

13 of 2002 bef or e t he gr ant was suspended i n J une 2003.

14 MR. EVERDELL: And t her e wer e t he ut i l i t i es as wel l .

15 Agai n, t he def endant was t ol d r epeat edl y by mul t i pl e peopl e,

16 you can' t use ATP f unds t o pay f or ut i l i t i es. Agai n, he chose

17 not t o l i st en and he spent $16, 000 on ut i l i t i es i n year one

18 al one.

19 And, f i nal l y, t her e wer e sever al char ges t he def endant

20 i ncur r ed t hat wer e not onl y i n t he budget , not - - excuse me - -

21 not i n t he budget , but t hat no one coul d possi bl y t hi nk wer e

22 l egi t i mat e r esear ch expenses. Over $5, 000 i n t he f i r st year of

23 t he gr ant al one f or hi s cl eani ng l ady, Mar gar et Fer r and.

24 Def endant counsel di dn' t comment at al l on t hat i n hi s cl osi ng

25 st at ement s f or hi s cl eani ng l ady. The checks t hemsel ves on t he

( 212) 805- 0300

1321

1 memo l i ne say cl eani ng. How i s t hat possi bl e t hat anyone coul d

2 under st and t hat t hat ' s a gr ant r el at ed expense? The r ul es wer e

3 cl ear . You got - -

4 MR. RUBI NSTEI N: Obj ect i on, your Honor . Ther e' s

5 evi dence t hat she scanned, she di d ot her t hi ngs - - t hei r own

6 document s.

7 THE COURT: Obj ect i on over r ul ed. I t ' s ar gument .

8 MR. EVERDELL: And t her e ar e a hundr ed dol l ar s on

9 meal s and per sonal i t ems l i ke t he bl ender and t he dust bust er .

10 I mean t ake a l ook at t hese i t ems, l adi es and gent l emen. Ar e

11 t her e anyt hi ng - - does anyone bel i eve t hese ar e f or sci ent i f i c

12 pur poses?

13 We' ve t al ked a l ot about - - def ense counsel t al ked a

14 l ot about t he GPS t r acki ng devi ce, and wher e he went wi t h i t .

15 He may have gone t o D. C. , but t he i ssue i s not wher e he went

16 wi t h i t . The i ssue i s what money he used t o pay f or i t . Thi s

17 i s not an appr oved expense. And by t he way, i f you l ook at t he

18 l uggage t ag t hat i t ' s on i t , t hi s was used i n a f l i ght August

19 13t h, ' 05, wel l af t er t he gr ant was suspended. Thi s i s a

20 per sonal i t em. He' s not usi ng t hi s f or gr ant st uf f . We' r e not

21 sayi ng t hat you can' t have a di gi t al camer a. We' r e not sayi ng

22 you can' t have a GPS devi ce or a bl ender or dust bust er .

23 Si mpl y sayi ng t hat you can' t use gr ant f unds t o pay f or i t .

24 And t hat ' s evi dence, t hat i s evi dence and i t was evi dent t o t he

25 def endant . And t hese i t ems j ust go t o show t hat t he def endant

( 212) 805- 0300

1322

1 was r eckl ess wi t h t he t axpayer money and was usi ng i t t o pay

2 f or hi s dai l y per sonal expenses. Remember what Lee Ger f ei n

3 t ol d you. He t est i f i ed t hat dur i ng t he gr ant pr oposal wr i t i ng

4 pr ocess, he saw what he bel i eved t o be t he def endant l i vi ng of f

5 hi s cr edi t car ds because he had no ot her money. Wel l , once t he

6 ATP f unds became avai l abl e, t he def endant di d exact l y t he same

7 t hi ng wi t h t he ATP money, he cut hi msel f $75, 000 and used i t t o

8 pay hi s per sonal debt s.

9 And l et ' s not f or get t he evi dence cl ear l y showed t hat

10 al l t hese f unds wer e bei ng spent wi t h ATP f unds. CASI had no

11 ot her money. That ' s what t he bank st at ement s t hat Bel i nda

12 Ri l ey t al ked about show, and t hat ' s what bot h CASI busi ness

13 manager Lee Gur f ei n and Rober t Benedi ct t ol d you, t her e was no

14 ot her money.

15 So now t hat we have a cl ear pi ct ur e of what ' s at t he

16 hear t of t hi s case, l et me addr ess some of t he ar gument s

17 def ense counsel r ai sed i n hi s cl osi ng r emar ks. Now, f i r st one

18 of t he t hi ngs t hat he ment i oned, t hat he r ai sed was t hat t he

19 gover nment i s t r yi ng t o put t he def endant i n j ai l j ust because

20 he vi ol at ed some gr ant r ul es; how coul d he possi bl y mast er

21 hundr eds of pages of r ul es and t hi ck r egul at i ons; nobody coul d

22 possi bl y do t hat . Wel l , t hat ' s not what we' r e sayi ng. Of

23 cour se i t ' s not necessar y f or t he def endant t o have an

24 encycl opedi c knowl edge of t he Code of Feder al Regul at i ons and

25 t he ATP gr ant r ul es. That was Hope Snowden' s j ob. However , i t

( 212) 805- 0300

1323

1 was t he def endant ' s obl i gat i on t o l i st en t o what Hope Snowden

2 t ol d hi mand what ot her s t ol d hi mabout what he coul d and

3 coul dn' t do under t hose r egul at i on. And t hat ' s what he di dn' t

4 do.

5 The def endant chose t o di sr egar d t hat advi ce, and i n

6 f act not onl y di d he not l i st en t o Hope Snowden, but he di d not

7 l i st en t o t he peopl e t hat he speci f i cal l y hi r ed t o hel p hi mi n

8 t hese ar eas; hi s busi ness manager s, hi s bookkeeper s. That i s

9 not t r yi ng hi s best t o compl y. That i s not an i nnocent

10 mi sunder st andi ng. That i s consci ous f l out i ng of t he r ul es.

11 And i t doesn' t t ake a Ph. D. t o be abl e t o l i st en and under st and

12 what ever yone ar ound you i s t el l i ng you.

13 Now, he t hought I suppose, def ense counsel comment ed

14 t hat he t hought he was f r ee t o di sagr ee, he was f r ee t o

15 di sagr ee i f he want ed. Wel l , i f I ent r ust you wi t h my money

16 and I t el l you t hat you can' t spend i t i n cer t ai n ways, you

17 can' t do X and you can' t do Y, t hen you don' t have t he f r eedom

18 t o di sagr ee wi t h me. You have t o spend i t how I t el l you you

19 can spend i t . The di sagr eement i s not an i ssue. He was t ol d

20 what he coul d and coul dn' t do. J ust t ake a l ook at r ent ,

21 ut i l i t i es, and he di d i t anyway.

22 Def ense counsel al so comment ed t hat , wel l , t he

23 def endant was bad wi t h f i nances, r i ght . He' s an i ncompet ent

24 manager ; we can' t hol d hi mr esponsi bl e f or t hat , we cer t ai nl y

25 can' t send hi mt o j ai l f or t hat . Wel l , we agr ee t hat t he

( 212) 805- 0300

1324

1 def endant was an i ncompet ent manager , but t hat doesn' t get hi m

2 of f t he hook. You hear d t est i mony t hat he was a hands on

3 manager . He hi r ed peopl e t o r un t he f i nances and keep t he

4 books st r ai ght , but t hen woul dn' t l et t hemdo t hei r j obs. Now

5 i f you' r e a def endant , i f you' r e a def endant and you' r e such an

6 i ncompet ent manager , you' r e bad wi t h f i nances and al l you

7 r eal l y want t o f ocus on i s t he sci ence and not bot her wi t h al l

8 t he bor i ng busi ness st uf f , woul dn' t you hi r e peopl e t o do i t

9 f or you and t hen l et t hemdo what t hey needed t o do so t hat you

10 coul d get on wi t h your r esear ch? Of cour se you woul d. That ' s

11 not what he di d, t hough. He di dn' t . He want ed t o keep cont r ol

12 of t he books.

13 You hear d t est i mony t hat Lee Gur f ei n, f i r st year

14 busi ness manager , was st r i pped of hi s aut hor i t y t o si gn checks

15 by t he def endant . Why? Because t he def endant want ed t o keep

16 cont r ol of t he books and t he check wr i t i ng, because he want ed

17 t o spend t he money t he way he want ed t o spend t he money, and he

18 di dn' t want any i nt er f er ence wi t h t hat . That ' s not someone who

19 j ust want t o f ocus on t he sci ence and l eave al l t he busi ness

20 st uf f t o somebody el se. That ' s someone who want s t o be r i ght

21 i n t he mi ddl e of t hi ngs. And t her e' s a r eason why he di d, he

22 want ed t o keep cont r ol of t he money f or hi msel f . And when he

23 saw t hi ngs he di dn' t l i ke, he woul d muck ar ound i n t he books he

24 changed ent r i es and meddl e i n ar eas t hat peopl e knew bet t er

25 t han he di d. Why di d he do t hi s? Because he t hought he knew

( 212) 805- 0300

1325

1 bet t er , and he t hought he coul d do what he want ed and he

2 t hought he' d get away wi t h i t .

3 Def ense counsel al so sai d somet hi ng about how t her e

4 was t aci t aut hor i t y f r omgr ant t o r evi se any of t he cost s he

5 want ed at any t i me. Wel l , wher e i s t he evi dence of t hat ? Di d

6 you hear t hat f r omHope Snowden t hat he coul d j ust negot i at e

7 any t i me you want ? No. No. Ther e i s no evi dence of t hat .

8 You ar e al l owed t o amend your budget dur i ng t he gr ant year and

9 f or year s t hat happen or st i l l t o come. We hear d t hat , yes.

10 But you' r e not al l owed t o amend your budget f or year s t hat ar e

11 al r eady over . Hope Snowden t ol d you t hat , and so di d Rober t

12 Benedi ct . And i f you l ook at page 11 of Exhi bi t 4, t he def ense

13 counsel ment i oned, t hat ' s what t hey wer e t est i f yi ng about .

14 That year i s al r eady over . That money i s al r eady spent . You

15 can' t unr i ng t hat bel l .

16 And t her e ar e r ul es. I t ' s not al l one bi g

17 negot i at i on. You hear d f r omHope Snowden t hat she t ol d t he

18 def endant , t he budget i s t he Bi bl e; you got t o get ever yt hi ng

19 i n wr i t i ng, you got t o get i t appr oved i f you' r e goi ng t o make

20 si gni f i cant changes. That was cr yst al cl ear . I t ' s not al l one

21 wash, bi g negot i at i on. That ' s not how t hi s wor ks.

22 Now, af t er def ense counsel had comment ed about how

23 we' r e supposed t o i nt er pr et t he def endant ' s act i ons, he al so

24 t ook some shot s at t he wi t nesses. And he t ook a shot at NI ST

25 and t r i ed t o make i t seeml i ke i t ' s t hei r f aul t t hat t hi s al l

( 212) 805- 0300

1326

1 happened, r i ght . You r ecal l hi mt al ki ng about NI ST, and t hey

2 must have had somet hi ng agai nst t he def endant t hat t hey wer e

3 out t o get hi mand t hey want ed t o end t hi s pr oj ect . Wel l , what

4 evi dence i s t hat of t hat ? You hear d - -

5 MR. RUBI NSTEI N: I di dn' t say t hat . I di dn' t say i t

6 was NI ST.


8 MR. RUBI NSTEI N: Mi schar act er i zat i on.

9 THE COURT: Obj ect i on sust ai ned, Mr - -

10 MR. RUBI NSTEI N: Peopl e over t her e.

11 THE COURT: Obj ect i on over r ul ed, Mr . Rubi nst ei n. Thi s

12 i s ar gument , and t hey can r emember what you sai d.

13 MR. EVERDELL: Def ense counsel sai d t hey wer e pi cki ng

14 on hi s cl i ent , Dr . Kar r on. You saw exact l y why t hi s gr ant got

15 suspended. I t ' s because t hey saw so many di f f er ent number s

16 comi ng at t hemi n such qui ck successi on t hat t hey t hought

17 somet hi ng r eal l y bad was goi ng on t her e wi t h t hei r f unds, t hey

18 wer e get t i ng mi sspent , i n a r eal l y bad way. And t hat ' s why i t

19 woul d happen. They got t hese budget r evi si ons al l wi t hi n weeks

20 of each ot her . Al l t he number s wer e di f f er ent f or year one

21 even af t er year one was over . That r ai sed r ed f l ags, and

22 r i ght f ul l y so. That ' s what t he pr obl emwas. And t hen t hey

23 cal l ed i n t he audi t or s and t her e was a pr obl em, l ow and be

24 hol d. And t hat ' s why t he gr ant got suspended, i t ' s because he

25 was mi sspendi ng t he money. We wer en' t out t o get hi m. They

( 212) 805- 0300

1327

1 j ust want t o make sur e our t axpayer dol l ar s ar e bei ng spent f or

2 what i t ' s supposed t o be spent f or , f or r esear ch, and i t

3 wasn' t .

4 And t hey t r i ed, def ense counsel t r i ed t o t ake some

5 at t acks on t he wi t nesses, about Hope Snowden. Tr i ed t o make

6 her l ook l i ke she was j ust some bur eaucr at , r i gi d under st andi ng

7 of t he r ul es. And she was not out t o hel p hi m. Wel l , you met

8 Hope Snowden, al l r i ght . You r emember her t est i mony. Hope,

9 eval uat e f or your sel ves what ki nd of per son she i s. She t ol d

10 you t hat she was al ways wi l l i ng t o r ecei ve and answer quest i ons

11 and r ecei ve cal l s. And she di d t hat on numer ous occasi ons f or

12 t he def endant and f or Lee Gur f ei n.

13 Now t he f act she di dn' t al ways say yes t o t hemdoesn' t

14 make her a r i gi d bur eaucr at . I t makes her good at her j ob. I t

15 means t hat she' s t r yi ng t o make sur e t hat t he money i s spent

16 f or what i t ' s supposed t o be spent f or . Okay. And Hope

17 Snowden expl ai ned t o you, by t he way, why she coul dn' t t al k t o

18 Rober t Benedi ct or why Rober t Benedi ct wasn' t appr oved as t he

19 busi ness manage f or t he second year . I t ' s because he was

20 par t - - t hat l et t er aski ng f or hi s aut hor i zat i on t o be t he

21 busi ness manager , was par t of one of t hose many r equest ed

22 budget r evi si ons t hat never got appr oved because t he number s

23 wer e so messed up. So yes, you may have seen an e- mai l f r om

24 Bob Benedi ct wher e he may have expr essed f r ust r at i on by t he

25 f act t hat he wasn' t hear i ng f r omHope Snowden and t hat t hi ngs

( 212) 805- 0300

1328

1 wer en' t movi ng al ong, but Hope Snowden expl ai ned t o you why

2 t hat happened. I t ' s because she coul dn' t do anyt hi ng wi t hout

3 t he pr oper aut hor i zat i on. That ' s why he never got appr oved.

4 I t was par t of t he budget t hat never got appr oved. That ' s why

5 t hat al l happened.

6 Now, def endant al so t al ked t o you about J oan Hayes,

7 wher e was J oan Hayes. Wel l , t hat ' s - - he' s t r yi ng t o suggest

8 t he gover nment i s t r yi ng t o hi de somet hi ng f r omyou by not

9 cal l i ng J oan Hayes. Wel l , t hat ' s si mpl y not t he case. Ladi es

10 and gent l emen, you sat her e f or over a week, and pat i ent l y

11 at t ent at i vel y hear d t he t est i mony i n t hi s case. Di d you r eal l y

12 need t o hear f r omanot her audi t or ? You have t he anal ysi s done

13 by Bel i nda Ri l ey, and t hat anal ysi s does not r el y on CASI ' s

14 books and r ecor ds, whi ch wer e al ways i n f l ux. Her anal ysi s i s

15 based - - Bel i nda Ri l ey' s anal ysi s i s based on t he bank r ecor ds

16 and checks and Amer i can Expr ess car ds and i nvoi ces. Those ar e

17 al l f i xed. And her anal ysi s t r aces out t he expendi t ur es t o t he

18 l ast penny. And, by t he way, Bel i nda Ri l ey' s anal ysi s, when

19 t he def endant t r i ed t o poke some hol es i n i t , he t r i ed t o say

20 he di dn' t - - she di dn' t t ake i nt o account hi s per sonal bank

21 account . Wel l , hi s per sonal bank r ecor ds. Wel l , l ook at

22 Gover nment ' s Exhi bi t 111 when you go back t o t he j ur y r oom.

23 That ' s Bel i nda Ri l ey' s anal ysi s of hi s per sonal bank r ecor ds.

24 And t he Mast er Car d payment s t hat he t al ked about so much ar e

25 t her e, page 16 of 27. She t ook t hose i nt o account .

( 212) 805- 0300

1329

1 But i t doesn' t mat t er about t he per sonal st at ement s.

2 The per sonal st at ement s ar e not t he gr ant money. The gr ant

3 money, we hear d, was al l housed i n t he CASI account s. I t ' s

4 i r r el evant what happens wi t h t he per sonal bank r ecor ds and t he

5 Mast er Car d r ecor ds of t he def endant . We' r e t al ki ng her e about

6 what happened t o t he ATP money, t he gr ant money, t hat was i n

7 t he CASI account s. That ' s t he anal ysi s i n Gover nment ' s exhi bi t

8 110. That ' s what you need t o f ocus on. Feel f r ee t o check i t

9 your sel f .

10 Def ense counsel al so t r i ed t o ar gue t o you t hat t he

11 def endant shoul d be gi ven some cr edi t because he t r i ed t o pay

12 some money back, he t r i ed t o get t he gr ant r est ar t ed. Ladi es

13 and gent l emen, i f you mi sspend money and t hen deci de t o pay i t

14 back l at er , you st i l l mi sspent t he money. You can' t unr i ng

15 t hat bel l . I t doesn' t change t hat . Thi s was i nt ent i onal . He

16 knew what he was doi ng and he knew i t was wr ong. He di dn' t

17 bel i eve t he peopl e ar ound hi m. He di sr egar ded t hemat ever y

18 t ur n.

19 And def ense counsel ' s al so suggest ed t hat you shoul d

20 consi der t he f act t hat some of t he t hi ngs t hat he di d, l i ke

21 t he, quot e unquot e, i mpr ovement t o hi s apar t ment act ual l y

22 decr eased t he val ue of hi s apar t ment , r i ght , so t hat what he

23 di d f or t he company was not per sonal l y benef i t i ng hi m, r i ght .

24 But you' r e goi ng t o hear , when J udge Pat t er son i nst r uct s you on

25 t he l aw - - i t ' s f or hi mt o i nst r uct you on t he l aw, not me - -

( 212) 805- 0300

1330

1 but I ant i ci pat e t hat you' r e goi ng t o l ear n t hat whet her or not

2 t he mi sappl i ed money benef i t ed CASI i n any way i s i r r el evant .

3 The f act t hat cer t ai n expenses may or may not have benef i t ed

4 CASI does not gi ve t he def endant a f r ee pass under t he l aw.

5 Now make no mi st ake, l adi es and gent l emen, t hi s case

6 i s not about someone who t r i ed hi s best t o compl y wi t h t he

7 r ul es and i nnocent l y mi sunder st ood what was expect ed of hi m.

8 Thi s i s a case about someone who i s t ol d by sever al peopl e on

9 mul t i pl e occasi ons what he coul d and coul d not do wi t h t he

10 gr ant f unds, and who del i ber at el y i gnor ed what he di dn' t want

11 t o hear . Thi s i s a case about someone who i s so convi nced t hat

12 he coul d get hi s way because he was so l oved by t he peopl e at

13 NI ST, t hat he di dn' t have t o f ol l ow t he r ul es, and t hat he

14 coul d do what ever he want ed wi t h t he gr ant money. And as a

15 r esul t of hi s at t i t ude, t he def endant wi l l f ul l y di sr egar ded

16 ever yone ar ound hi mand mi sspent t he t axpayer s money cl ear l y on

17 unaut hor i zed expenses l i ke r ent and ut i l i t i es and per sonal

18 i t ems, cl eani ng l adi es, bl ender s, dust bust er s, ot her t hi ngs,

19 t hi ngs t hat coul dn' t possi bl y be r el at ed t o r esear ch, and al l

20 because he t hought t he r ul es di d not appl y t o hi m. Wel l , t he

21 def endant was wr ong. That ' s not how t hi s wor ks. He can' t do

22 what ever he want s, and i t ' s t i me t o hol d had hi maccount abl e.

23 When I gave t he openi ng st at ement a f ew days ago, I t ol d you

24 t hat i f you pay cl ose at t ent i on t o t he evi dence and f ol l ow t he

25 J udge' s i nst r uct i ons and use your common sense, you wi l l ar r i ve

( 212) 805- 0300

1331

1 at t he one ver di ct t hat wi l l be consi st ent wi t h t he l aw and t he

2 evi dence at t he end of t hi s case, and now al l t he evi dence i s

3 i n. The case now r est s i n your hands. And I submi t t o you

4 t hat t he gover nment has kept i t s pr omi se t o you and has pr oven

5 t hi s case, beyond a r easonabl e doubt , and t he onl y ver di ct t hat

6 i s now consi st ent wi t h t he l aw and t he evi dence i s a ver di ct of

7 gui l t y f or Dani el Kar r on. Thank you.

8 THE COURT: Wel l , i t ' s - - t hank you, Mr . Ever del l .

9 I t ' s now 12: 20 and l unch i s schedul ed f or 1: 00. I

10 t hi nk I can - - t he char ge i s not shor t , but i t ' l l pr obabl y r un

11 past 1: 00, because I don' t r ead a par t i cul ar l y f ast char ge. I

12 t hi nk t hat you want t o be abl e t o absor b what I say as I say

13 i t , and f or t hat r eason I r ead r el at i vel y sl owl y. But I ' l l t r y

14 and do t he best I can i f you' r e al l r eady t o go now. I f anyone

15 needs a br eak, l et me know. Al l r i ght ? Then, I ' l l pr oceed.

16 Member s of t he j ur y, we' r e now at t hat st age of t he

17 t r i al wher e you wi l l soon under t ake your f i nal f unct i on as

18 j ur or s. I know you wi l l t r y t he i ssues t hat have been

19 pr esent ed t o you accor di ng t o t he oat h whi ch you have t aken as

20 j ur or s, and whi ch you pr omi sed t hat you wi l l wel l and t r ul y t r y

21 t he i ssues i n t hi s case and r ender a t r ue ver di ct . I f you

22 f ol l ow t hat oat h and t r y t he i ssues wi t hout f ear or pr ej udi ce

23 or bi as or sympat hy, you wi l l ar r i ve at a t r ue and j ust

24 ver di ct .

25 The f act t hat t he pr osecut i on i s br ought i n t he name

( 212) 805- 0300

1332
86BZKAR3 Char ge

1 of t he Uni t ed St at es of Amer i ca ent i t l es t he gover nment t o know

2 gr eat er consi der at i on t han t hat accor ded t o any ot her par t y t o

3 a l i t i gat i on. By t he same t oken, i t i s ent i t l ed t o no l ess

4 consi der at i on. Al l par t i es, whet her gover nment or i ndi vi dual s,

5 st and as equal s at t he bar of j ust i ce.

6 You have now hear d al l t he evi dence i n t he case, as

7 wel l as t he f i nal ar gument s of t he l awyer s f or t he par t i es.

8 My dut y at t hi s poi nt i s t o i nst r uct you as t o t he

9 l aw. I t i s your dut y t o accept t hese i nst r uct i ons of l aw and

10 appl y t hemt o t he f act s as you wi l l det er mi ne t hem, j ust as i t

11 has been my dut y t o pr esi de over t he t r i al and deci de what

12 t est i mony and evi dence i s r el evant under t he l aw f or your

13 consi der at i on.

14 On t hese l egal mat t er s, you must t ake t he l aw as I

15 gi ve i t t o you. I f any at t or ney has st at ed a l egal pr i nci pl e

16 di f f er ent f r omany t hat I st at e t o you i n my i nst r uct i ons, i t

17 i s my i nst r uct i ons t hat you must f ol l ow.

18 You shoul d not si ngl e out any i nst r uct i on as al one

19 st at i ng t he l aw, but you shoul d consi der my i nst r uct i ons as a

20 whol e when you r et i r e t o del i ber at e i n t he j ur y r oom.

21 You shoul d not , any of you, be concer ned about t he

22 wi sdomof any r ul e t hat I st at e. Regar dl ess of any opi ni on

23 t hat you may have t o what t he l aw may be or ought t o be, i t

24 woul d vi ol at e your swor n dut y t o base a ver di ct upon any ot her

25 vi ew of t he l aw t han t hat whi ch I gi ve you.

( 212) 805- 0300

1333
86BZKAR3 Char ge

1 Now, af t er l i st eni ng t o my i nst r uct i ons about t he l aw,

2 you wi l l t hen det er mi ne how t hi s case shoul d be deci ded.

3 As I ' ve sai d, t he member s of t he j ur y ar e t he sol e and

4 excl usi ve j udges of t he f act s. You deci de based upon t he

5 wei ght of t he evi dence; you det er mi ne t he cr edi bi l i t y of t he

6 wi t nesses; you r esol ve such conf l i ct s as t her e may be i n t he

7 t est i mony, and you dr aw what ever r easonabl e i nf er ences you

8 deci de t o dr aw f r omt he f act s as you wi l l det er mi ne t hem.

9 I n det er mi ni ng t he f act s, you must r el y upon your own

10 r ecol l ect i on of t he evi dence. What t he l awyer s have sai d i n

11 t hei r openi ng st at ement s and i n t hei r cl osi ng ar gument s and

12 t hei r obj ect i ons or i n t hei r quest i ons i s not evi dence. I n

13 t hi s connect i on, you shoul d bear i n mi nd t hat a quest i on put t o

14 a wi t ness i s never evi dence. I t i s onl y t he answer whi ch i s

15 evi dence. Quest i ons ar e r el evant onl y t o t he ext ent t hat t hey

16 enabl e you t o under st and t he answer . Nor i s anyt hi ng I may

17 have sai d dur i ng t he t r i al or summat i ons, or may say dur i ng

18 t hese i nst r uct i ons wi t h r espect t o a f act mat t er t o be t aken i n

19 subst i t ut i on f or your own i ndependent r ecol l ect i on. What I say

20 i s not evi dence.

21 The evi dence bef or e you consi st s of t he answer s gi ven

22 by t he wi t nesses, t he swor n t est i mony t hat t hey gave f r omt he

23 st and, as you r ecal l i t , and t he exhi bi t s t hat wer e r ecei ved i n

24 evi dence.

25 You' ve hear d evi dence i n t he f or mof st i pul at i ons t hat

( 212) 805- 0300

1334
86BZKAR3 Char ge

1 cont ai n f act s t hat wer e agr eed t o be t r ue. You must accept t he

2 f act s i n t hose st i pul at i ons as t r ue.

3 The evi dence does not i ncl ude quest i ons. Onl y t he

4 answer s ar e evi dence. But you may not consi der any answer t hat

5 I di r ect ed you t o di sr egar d or t hat I di r ect ed st r uck f r omt he

6 r ecor d. Do not consi der such answer s.

7 Si nce you ar e t he sol e and excl usi ve j udges of t he

8 f act s, I have not meant and I do not mean by my wor ds or act s

9 t o i ndi cat e any opi ni on as t o t he f act s or what your ver di ct

10 shoul d be. The r ul i ngs t hat I have made dur i ng t he t r i al ar e

11 not any i ndi cat i on of my vi ews of what your deci si on shoul d be

12 as t o whet her or not t he gui l t of t he def endant has been pr oven

13 beyond a r easonabl e doubt .

14 I al so ask you t o dr aw no i nf er ence f r omt he f act t hat

15 upon occasi on I asked quest i ons of cer t ai n wi t nesses. These

16 quest i ons wer e onl y i nt ended f or cl ar i f i cat i on or t o expedi t e

17 mat t er s, and cer t ai nl y wer e not i nt ended t o suggest any

18 opi ni ons on my par t as t o t he ver di ct you shoul d r ender or

19 whet her any ot her wi t nesses may have been mor e cr edi bl e t han

20 any ot her wi t ness. You ar e expr essl y t o under st and t hat t he

21 Cour t has no opi ni on as t o t he ver di ct you shoul d r ender i n

22 t hi s case.

23 As t o t he f act s, l adi es and gent l emen, you ar e t he

24 excl usi ve j udges. You have t he r esponsi bi l i t y of r evi ewi ng t he

25 evi dence, of wei ghi ng t he cr edi bi l i t y of t he wi t nesses,

( 212) 805- 0300

1335
86BZKAR3 Char ge

1 separ at i ng t he i mpor t ant f r omt he uni mpor t ant , maki ng t he

2 f act ual det er mi nat i ons whi ch bear on t he gui l t or l ack of gui l t

3 of t he def endant . You ar e t o per f or mt he dut y of f i ndi ng t he

4 f act s wi t hout bi as or pr ej udi ce as t o any par t y.

5 I t i s t he dut y of t he at t or ney f or each si de of a case

6 t o obj ect when t he ot her si de of f er s t est i mony or ot her

7 evi dence whi ch t he at t or ney bel i eves i s not pr oper l y

8 admi ssi bl e. Counsel al so have t he r i ght and dut y t o ask t he

9 Cour t t o make r ul i ngs of l aw and r equest conf er ences i n t he

10 r obi ng r oomor at t he si debar out of t he hear i ng of t he j ur y.

11 Al l t hose quest i ons of l aw must be deci ded by me, t he

12 Cour t . You shoul d not show any pr ej udi ce agai nst any at t or ney

13 or hi s or her cl i ent because t he at t or ney obj ect ed t o t he

14 admi ssi bi l i t y of evi dence, asked f or a conf er ence out of t he

15 hear i ng of t he j ur y or asked t he Cour t f or a r ul i ng on t he l aw.


17

18

19

20

21

22

23

24

25

( 212) 805- 0300

1336
86B7KAR4 Char ge

1 THE COURT: As I have al r eady i ndi cat ed, my r ul i ngs on

2 t he admi ssi bi l i t y of evi dence do not i ndi cat e any opi ni on about

3 t he wei ght or ef f ect of such evi dence. You ar e t he sol e j udges

4 of t he cr edi bi l i t y of al l wi t nesses and t he wei ght and ef f ect

5 of al l t he evi dence.

6 Now, t her e ar e t wo t ypes of evi dence whi ch you may

7 pr oper l y use i n deci di ng whet her a def endant i s gui l t y or not

8 gui l t y.

9 One t ype of evi dence i s cal l ed di r ect evi dence.

10 Di r ect evi dence i s a wi t ness' s t est i mony as t o what he saw,

11 hear d or obser ved. I n ot her wor ds, when a wi t ness t est i f i es

12 about what i s known t o hi mof hi s own knowl edge by vi r t ue of

13 hi s own senses - - what he sees, f eel s, t ouches or hear s - - t hat

14 i s cal l ed di r ect evi dence.

15 Ci r cumst ant i al evi dence i s evi dence whi ch t ends t o

16 pr ove one f act by pr oof of ot her f act s. Ther e i s a si mpl e

17 exampl e of ci r cumst ant i al evi dence whi ch i s of t en used i n t hi s

18 cour t house.

19 Assume t hat a wi t ness t est i f i ed t hat when he came i nt o

20 t he cour t house t hi s mor ni ng, t he sun was shi ni ng and i t was a

21 ni ce day.

22 Assume he t est i f i ed t hat someone wal ked i nt o t he

23 cour t r oomwi t h an umbr el l a whi ch was dr i ppi ng wet , and t hat

24 somebody el se wal ked i n wi t h a r ai ncoat whi ch was al so dr i ppi ng

25 wet .

( 212) 805- 0300

1337
86B7KAR4 Char ge

1 Now, he does not t est i f y t hat he l ooked out of t he

2 cour t r oomand saw t hat i t was r ai ni ng. So t her e i s no di r ect

3 evi dence of t hat f act . But on t he combi nat i on of f act s whi ch I

4 have asked you t o assume, i t woul d be r easonabl e and l ogi cal - -

5 i f you f ound t he wi t ness' s t est i mony t o be cr edi bl e - - f or you

6 t o concl ude t hat bet ween t he t i me he t est i f i ed and t he t i me

7 t hose peopl e wal ked i n, i t had st ar t ed t o r ai n.

8 That i s al l t her e i s t o ci r cumst ant i al evi dence. You

9 i nf er on t he basi s of r eason and exper i ence and common sense

10 f r oman est abl i shed f act t he exi st ence or t he nonexi st ence of

11 some ot her f act .

12 Many f act s, such as a per son' s st at e of mi nd, can

13 r ar el y be pr oved by di r ect evi dence.

14 Ci r cumst ant i al evi dence i s of no l ess val ue t han

15 di r ect evi dence; i t i s a gener al r ul e t hat t he l aw makes no

16 di st i nct i on bet ween di r ect and ci r cumst ant i al evi dence, but

17 si mpl y r equi r es t hat bef or e convi ct i ng t he def endant , t he j ur y

18 must be sat i sf i ed t hat t he gover nment has pr oved t he

19 def endant ' s gui l t beyond a r easonabl e doubt af t er r evi ew of al l

20 of t he evi dence i n t he case, di r ect and ci r cumst ant i al .

21 Dur i ng t he t r i al you may have hear d t he at t or neys use

22 t he t er m" i nf er ence" and i n t hei r ar gument s t hey have asked you

23 t o i nf er , on t he basi s of your r eason, exper i ence and common

24 sense, f r omone or mor e est abl i shed f act s t he exi st ence of some

25 ot her f act .

( 212) 805- 0300

1338
86B7KAR4 Char ge

1 An i nf er ence i s not a suspi ci on or a guess. I t i s a

2 r easoned, l ogi cal deci si on t o concl ude t hat a di sput ed f act

3 exi st s on t he basi s of anot her f act t hat you know exi st s.

4 Ther e ar e t i mes when di f f er ent i nf er ences may be dr awn

5 f r omf act s whet her by di r ect or ci r cumst ant i al evi dence. The

6 gover nment may ask you t o dr aw one set of i nf er ences, whi l e t he

7 def ense may ask you t o dr aw anot her . I t i s f or you and you

8 al one t o deci de what i nf er ences you wi l l dr aw.

9 The pr ocess of dr awi ng i nf er ences f r omf act s i n

10 evi dence i s not a mat t er of guesswor k or specul at i on. An

11 i nf er ence i s a deduct i on or a concl usi on whi ch you, t he j ur y,

12 ar e per mi t t ed t o dr aw - - but not r equi r ed t o dr aw - - f r omt he

13 f act s whi ch you f i nd t o be pr oven by ei t her di r ect or

14 ci r cumst ant i al evi dence. I n dr awi ng an i nf er ence, you shoul d

15 exer ci se your common sense.

16 So whi l e you ar e consi der i ng t he evi dence pr esent ed t o

17 you, you ar e per mi t t ed t o dr aw, f r omt he f act s whi ch you f i nd

18 t o be pr oven, such r easonabl e i nf er ences as woul d be j ust i f i ed

19 i n t he l i ght of your exper i ence.

20 Her e, agai n, l et me r emi nd you t hat whet her based upon

21 di r ect or ci r cumst ant i al evi dence, or upon l ogi cal or

22 r easonabl e i nf er ences dr awn f r omsuch evi dence, you must be

23 sat i sf i ed of t he gui l t of t he def endant beyond a r easonabl e

24 doubt bef or e you may convi ct .

25 Now, how do you eval uat e t he cr edi bi l i t y or

( 212) 805- 0300

1339
86B7KAR4 Char ge

1 bel i evabi l i t y of t he wi t nesses? You have had an oppor t uni t y t o

2 obser ve al l of t he wi t nesses. I t i s now your j ob t o deci de how

3 bel i evabl e each wi t ness was i n hi s or her t est i mony. You ar e

4 t he sol e j udges of t he cr edi bi l i t y of each wi t ness and of t he

5 i mpor t ance of hi s or her t est i mony.

6 I t must be cl ear t o you by now t hat you ar e bei ng

7 cal l ed upon t o r esol ve var i ous f act ual i ssues under t he

8 i ndi ct ment , i n t he f ace of ver y di f f er ent pi ct ur es pai nt ed by

9 t he gover nment and t he def ense whi ch cannot be r econci l ed. You

10 wi l l now have t o deci de wher e t he t r ut h l i es, and an i mpor t ant

11 par t of t hat deci si on wi l l i nvol ve maki ng j udgment s about t he

12 t est i mony of t he wi t nesses you have l i st ened t o and obser ved.

13 I n maki ng t hose j udgment s, you shoul d car ef ul l y scr ut i ni ze al l

14 of t he t est i mony of each wi t ness, t he ci r cumst ances under whi ch

15 each wi t ness t est i f i ed, and any ot her mat t er i n evi dence whi ch

16 may hel p you t o deci de t he t r ut h and t he i mpor t ance of each

17 wi t ness' s t est i mony.

18 Your deci si on on whet her or not t o bel i eve a wi t ness

19 may depend on how t he wi t ness i mpr essed you. Was t he wi t ness

20 candi d, f r ank and f or t hr i ght ? Or , di d t he wi t ness seemas i f

21 he or she was hi di ng somet hi ng, or bei ng evasi ve or suspect i n

22 some way? How di d t he way t he wi t ness t est i f i ed on di r ect

23 exami nat i on compar e wi t h how t he wi t ness t est i f i ed on

24 cr oss- exami nat i on? Was t he wi t ness consi st ent i n hi s or her

25 t est i mony or di d he or she cont r adi ct hi msel f or her sel f ? Di d

( 212) 805- 0300

1340
86B7KAR4 Char ge

1 t he wi t ness appear t o know what he or she was t al ki ng about and

2 di d t he wi t ness st r i ke you as someone who was t r yi ng t o r epor t

3 hi s or her knowl edge accur at el y?

4 How much you choose t o bel i eve a wi t ness may be

5 i nf l uenced by t he wi t ness' s bi as. Does t he wi t ness have a

6 r el at i onshi p wi t h t he gover nment or t he def endant whi ch may

7 af f ect how he or she t est i f i ed? Does t he wi t ness have some

8 i ncent i ve, l oyal t y or mot i ve t hat mi ght cause hi mor her t o

9 shade t he t r ut h? Or does t he wi t ness have some bi as,

10 pr ej udi ce, or host i l i t y t hat may have caused t he wi t ness - -

11 consci ousl y or not - - t o gi ve you somet hi ng ot her t han a

12 compl et el y accur at e account of t he f act s he or she t est i f i ed

13 t o?

14 Even i f t he wi t ness was i mpar t i al , you shoul d consi der

15 whet her t he wi t ness had an oppor t uni t y t o obser ve t he f act s he

16 or she t est i f i ed about , and you shoul d al so consi der t he

17 wi t ness' s abi l i t y t o expr ess hi msel f or her sel f . Ask

18 your sel ves whet her t he wi t ness' s r ecol l ect i on of t he f act s

19 st ands up i n t he l i ght of al l ot her evi dence.

20 I n ot her wor ds, what you must t r y t o do i n deci di ng

21 cr edi bi l i t y i s t o si ze a per son up i n l i ght of hi s or her

22 demeanor , t he expl anat i ons gi ven, and i n l i ght of al l t he ot her

23 evi dence i n t he case, j ust as you woul d do i n any i mpor t ant

24 mat t er wher e you ar e t r yi ng t o deci de i f a per son i s t r ut hf ul ,

25 st r ai ght f or war d, and accur at e i n hi s or her r ecol l ect i on. I n

( 212) 805- 0300

1341
86B7KAR4 Char ge

1 deci di ng t he quest i on of cr edi bi l i t y, r emember t hat you shoul d

2 use your common sense, your good j udgment , and your exper i ence.

3 Now, i n eval uat i ng t he cr edi bi l i t y of t he wi t nesses,

4 you shoul d t ake i nt o account any evi dence t hat t he wi t ness who

5 t est i f i ed may benef i t i n some way f r omt he out come of t hi s

6 case. Such an i nt er est i n t he out come cr eat es a mot i ve t o

7 t est i f y f al sel y and may sway t he wi t ness t o t est i f y i n a way

8 t hat advances hi s or her own i nt er est s. Ther ef or e, i f you f i nd

9 t hat any wi t ness whose t est i mony you ar e consi der i ng may have

10 an i nt er est i n t he out come of t hi s t r i al , t hen you shoul d bear

11 t hat f act or i n mi nd when eval uat i ng t he cr edi bi l i t y of hi s or

12 her t est i mony and accept i t wi t h gr eat car e.

13 Can I speak t o counsel a mi nut e?


15

16

17

18

19

20

21

22

23

24

25

( 212) 805- 0300

1342
86B7KAR4 Char ge


2 THE COURT: I not i ced t hat t her e i s no exper t wi t ness

3 i nst r uct i on i n her e. I t occur r ed t o me t hat you bot h mi ght

4 want i t .

5 MR. KWOK: That ' s cor r ect . We do have exper t wi t ness.

6 The gover nment woul d r equest an i nst r uct i on.

7 MR. RUBI NSTEI N: I ' mnot r equest i ng an i nst r uct i on,

8 your Honor .

9 THE COURT: Do you obj ect ?

10 MR. RUBI NSTEI N: No, I t hi nk t hat woul d be

11 obst r uct i oni st .

12 THE COURT: I wi l l ask my cl er k t o j ust br i ng me down

13 one, an i nst r uct i on on exper t wi t nesses.


15

16

17

18

19

20

21

22

23

24

25

( 212) 805- 0300

1343
86B7KAR4 Char ge


2 THE COURT: I ' mgoi ng t o go r i ght ahead.

3 You have hear d t he t est i mony of gover nment empl oyees.

4 The f act t hat a wi t ness may be a gover nment empl oyee does not

5 mean t hat hi s or her t est i mony i s necessar i l y deser vi ng of mor e

6 consi der at i on or gr eat er wei ght t han t hat of an or di nar y

7 wi t ness. Al so i t does not mean t hat hi s or her t est i mony i s

8 necessar i l y deser vi ng of l ess consi der at i on or l ess wei ght t han

9 t hat of an or di nar y wi t ness.

10 I t i s your deci si on, af t er r evi ewi ng al l t he evi dence,

11 whet her t o accept t he t est i mony of t he gover nment empl oyee and

12 t o gi ve t hat t est i mony what ever wei ght , i f any, you f i nd i t

13 deser ves.

14 The def endant has pl eaded not gui l t y t o t he char ges i n

15 t he i ndi ct ment .

16 As a r esul t of t he def endant ' s pl eas of not gui l t y,

17 t he bur den i s on t he pr osecut i on t o pr ove t he def endant i s

18 gui l t y beyond a r easonabl e doubt . Thi s bur den never shi f t s t o

19 t he def endant f or t he si mpl e r eason t hat t he l aw never i mposes

20 upon t he def endant i n a cr i mi nal case t he bur den or dut y of

21 t est i f yi ng, or cal l i ng any wi t nesses or l ocat i ng or pr oduci ng

22 any evi dence.

23 The l aw pr esumes t he def endant t o be i nnocent of al l

24 of t he char ges agai nst hi m. I t her ef or e i nst r uct you t hat t he

25 def endant i s t o be pr esumed by you t o be i nnocent t hr oughout

( 212) 805- 0300

1344
86B7KAR4 Char ge

1 your del i ber at i ons unt i l such t i me, i f i t ever comes, t hat you

2 as a j ur y ar e sat i sf i ed t hat t he gover nment has pr oven hi m

3 gui l t y beyond a r easonabl e doubt .

4 The def endant began t he t r i al her e wi t h a cl ean sl at e.

5 Thi s pr esumpt i on of i nnocence al one i s suf f i ci ent t o acqui t t he

6 def endant unl ess you as j ur or s ar e unani mousl y convi nced beyond

7 a r easonabl e doubt of hi s gui l t , af t er a car ef ul and i mpar t i al

8 consi der at i on of al l of t he evi dence i n t hi s case. I f t he

9 gover nment f ai l s t o sust ai n i t s bur den, you must f i nd t he

10 def endant not gui l t y.

11 Thi s pr esumpt i on was wi t h t he def endant when t he t r i al

12 began and r emai ns wi t h hi meven now as I speak t o you and wi l l

13 cont i nue wi t h t he def endant i nt o your del i ber at i ons unl ess and

14 unt i l you ar e convi nced t hat t he gover nment has pr oven hi s

15 gui l t beyond a r easonabl e doubt .

16 The def endant , Dani el Kar r on, di d not t est i f y i n t hi s

17 case. Under our Const i t ut i on, a def endant has no obl i gat i on t o

18 t est i f y or t o pr esent any evi dence, because i t i s t he

19 gover nment ' s bur den t o pr ove t he def endant gui l t y beyond a

20 r easonabl e doubt . That bur den r emai ns wi t h t he gover nment

21 t hr oughout t he ent i r e t r i al and never shi f t s t o t he def endant .

22 The def endant i s never r equi r ed t o pr ove t hat he i s i nnocent .

23 You may not at t ach any si gni f i cance t o t he f act t hat

24 t he def endant di d not t est i f y. No adver se i nf er ence agai nst

25 hi mmay be dr awn by you because he di d not t ake t he wi t ness

( 212) 805- 0300

1345
86B7KAR4 Char ge

1 st and. You may not consi der t hi s agai nst t he def endant i n any

2 way i n your del i ber at i ons i n t he j ur y r oom.

3 Now, I have sai d t hat t he gover nment must pr ove t hat

4 t he def endant i s gui l t y beyond a r easonabl e doubt . The

5 quest i on nat ur al l y i s, " What i s a r easonabl e doubt ?" The wor ds

6 al most def i ne t hemsel ves. I t i s a doubt based upon r eason and

7 common sense. I t i s a doubt t hat a r easonabl e per son has af t er

8 car ef ul l y wei ghi ng of t he evi dence. I t i s a doubt whi ch woul d

9 cause a r easonabl e per son t o hesi t at e t o act i n a mat t er of

10 i mpor t ance i n hi s or her per sonal l i f e. Pr oof beyond a

11 r easonabl e doubt must , t her ef or e, be pr oof of such a convi nci ng

12 char act er t hat a r easonabl e per son woul d not hesi t at e t o r el y

13 and act upon i t i n t he most i mpor t ant of hi s own af f ai r s.

14 Reasonabl e doubt i s not a capr i ce or whi m; i t i s not

15 specul at i on or suspi ci on. I t i s not an excuse t o avoi d t he

16 per f or mance of an unpl easant dut y. And i t i s not sympat hy.

17 I n a cr i mi nal case, t he bur den i s at al l t i mes upon

18 t he gover nment t o pr ove gui l t beyond a r easonabl e doubt . The

19 l aw does not r equi r e t hat t he gover nment pr ove gui l t beyond al l

20 possi bl e doubt ; pr oof beyond a r easonabl e doubt i s suf f i ci ent

21 t o convi ct . Thi s bur den never shi f t s t o t he def endant , whi ch

22 means t hat i t i s al ways t he gover nment ' s bur den t o pr ove each

23 of t he el ement s of t he cr i mes char ged beyond a r easonabl e

24 doubt .

25 I f , af t er f ai r and i mpar t i al consi der at i on of al l of

( 212) 805- 0300

1346
86B7KAR4 Char ge

1 t he evi dence, you have a r easonabl e doubt , i t i s your dut y t o

2 acqui t t he def endant . On t he ot her hand, i f af t er f ai r and

3 i mpar t i al consi der at i on of al l t he evi dence, you ar e sat i sf i ed

4 of t he def endant ' s gui l t beyond a r easonabl e doubt , you shoul d

5 vot e t o convi ct .

6 Under your oat h as j ur or s you ar e not t o be swayed by

7 sympat hy. You ar e t o be gui ded sol el y by t he evi dence i n t hi s

8 case, and t he cr uci al , har dcor e quest i on t hat you must ask

9 your sel ves as you si f t t hr ough t he evi dence i s: Has t he

10 gover nment pr oven t he gui l t of t he def endant beyond a

11 r easonabl e doubt ?

12 I t i s f or you al one t o deci de whet her t he gover nment

13 has pr oven t hat t he def endant i s gui l t y of t he cr i me char ged

14 sol el y on t he basi s of t he evi dence and subj ect t o t he l aw as I

15 char ge you. I t must be cl ear t o you t hat once you l et f ear or

16 pr ej udi ce or bi as or sympat hy i nt er f er e wi t h your t hi nki ng,

17 t her e i s a r i sk t hat you wi l l not ar r i ve at a t r ue and j ust

18 ver di ct .

19 I f you have a r easonabl e doubt as t o t he def endant ' s

20 gui l t , you shoul d not hesi t at e f or any r eason t o f i nd a ver di ct

21 of acqui t t al . But on t he ot her hand, i f you shoul d f i nd t hat

22 t he gover nment has met i t s bur den of pr ovi ng t he def endant ' s

23 gui l t beyond a r easonabl e doubt , you shoul d not hesi t at e

24 because of sympat hy or any ot her r eason t o r ender a ver di ct of

25 gui l t y.

( 212) 805- 0300

1347
86B7KAR4 Char ge

1 The quest i on of possi bl e puni shment of t he def endant

2 i s of no concer n t o t he j ur y and shoul d not , i n any sense,

3 ent er i nt o or i nf l uence your del i ber at i ons. The dut y of

4 i mposi ng a sent ence on any convi ct ed def endant r est s

5 excl usi vel y upon t he cour t - - t hat i s, upon me. Your f unct i on

6 i s t o wei gh t he evi dence i n t he case and t o det er mi ne whet her

7 or not t he def endant i s gui l t y beyond a r easonabl e doubt ,

8 sol el y on t he basi s of such evi dence. Under your oat h as

9 j ur or s, you cannot al l ow a consi der at i on of t he puni shment

10 whi ch may be i mposed upon t he def endant , i f he i s convi ct ed, t o

11 i nf l uence your vot e i n any way, or i n any sense t o ent er i nt o

12 your del i ber at i ons.

13 Now, wi t h t hese pr el i mi nar y i nst r uct i ons i n mi nd, l et

14 us t ur n t o t he char ge agai nst t he def endant , as cont ai ned i n

15 t he i ndi ct ment . I r emi nd you t hat an i ndi ct ment i t sel f i s not

16 evi dence. I t mer el y descr i bes t he char ge made agai nst t he

17 def endant . I t i s an accusat i on. I t may not be consi der ed by

18 you as any evi dence or pr oof of t he gui l t of t he def endant .

19 Onl y t he evi dence or t he l ack of evi dence pr esent ed her e at

20 t r i al bef or e you i s r el evant t o t hat i ssue.

21 The def endant , Dani el Kar r on, i s f or mal l y char ged i n

22 an i ndi ct ment whi ch cont ai ns one count . Bef or e you begi n your

23 del i ber at i ons, you wi l l be pr ovi ded wi t h a copy of t he

24 i ndi ct ment cont ai ni ng t he char ge.

25 Count One of t he i ndi ct ment char ges t hat f r omat l east

( 212) 805- 0300

1348
86B7KAR4 Char ge

1 i n or about Oct ober 2001, up t hr ough and i ncl udi ng i n or about

2 J une 2003, Dani el B. Kar r on, t he pr esi dent and chi ef t echni cal

3 of f i cer of a company cal l ed Comput er Ai ded Sur ger y, I nc.

4 ( CASI ) , i nt ent i onal l y mi sappl i ed $5, 000 and mor e i n t he car e,

5 cust ody and cont r ol of CASI , whi l e i t was t he benef i ci ar y of a

6 f eder al gr ant of mor e t han $10, 000 a year f r omt he Nat i onal

7 I nst i t ut e of St andar ds and Technol ogy, a f eder al ent i t y.

8 The i ndi ct ment r eads as f ol l ows:

9 Count One. The gr and j ur y char ges:

10 1. Fr omat l east i n or about Oct ober , 2001, up

11 t hr ough and i ncl udi ng i n or about J une 2003, i n t he Sout her n

12 Di st r i ct of New Yor k and el sewher e, Dani el B. Kar r on, t he

13 def endant , bei ng an agent of an or gani zat i on, whi ch

14 or gani zat i on r ecei ved i n any one- year per i od benef i t s i n excess

15 of $10, 000 under a f eder al pr ogr ami nvol vi ng a gr ant , cont r act ,

16 subsi dy, l oan, guar ant ee, i nsur ance and ot her f or mof f eder al

17 assi st ance, unl awf ul l y, wi l l f ul l y and knowi ngl y di d embezzl e,

18 st eal , obt ai n by f r aud, and ot her wi se wi t hout aut hor i t y,

19 knowi ngl y conver t t o t he use of - - l et me j ust go back a l i t t l e

20 bi t - - obt ai ned by f r aud and ot her wi se wi t hout aut hor i t y

21 knowi ngl y conver t t o t he use of per sons ot her t han t he r i ght f ul

22 owner , and i nt ent i onal l y mi sappl i ed pr oper t y val ued at $5, 000

23 and mor e t hat was owned by and was under t he car e, cust ody and

24 cont r ol of such or gani zat i on, t o wi t , Kar r on, who was t he

25 pr esi dent and chi ef t echni cal of f i cer of Comput er Ai ded Sur ger y

( 212) 805- 0300

1349
86B7KAR4 Char ge

1 I nc. , ( CASI ) , knowi ngl y mi sappl i ed mor e t han $5, 000 of f unds

2 under t he car e, cust ody and cont r ol of CASI , whi ch r ecei ved

3 mor e t han $10, 000 i n f eder al f unds dur i ng a one- year per i od

4 f r omt he Advanced Technol ogy Pr ogr amadmi ni st er ed by t he

5 Nat i onal I nst i t ut e of St andar ds and Technol ogy.

6 And i t ci t es Ti t l e 18 Uni t ed St at es Code, Sect i on 666.

7 Ti t l e 18 Uni t ed St at es Code, Sect i on 666, r eads i n

8 per t i nant par t as f ol l ows: " Thef t or br i ber y concer ni ng

9 pr ogr ams r ecei vi ng f eder al f unds.

10 ( a) Whoever , i f ci r cumst ance descr i bed i n subsect i on

11 ( b) of t hi s sect i on exi st s - -

12 ( A) Embezzl es, st eal s, obt ai ns by f r aud, or ot her wi se

13 wi t hout aut hor i t y knowi ngl y conver t s t o t he use of any per son

14 ot her t han t he r i ght f ul owner or i nt ent i onal l y mi sappl i es,

15 pr oper t y t hat i s val ued at $5, 000 or mor e, and i s owned by, or

16 i s under t he car e, cust ody, or cont r ol of such or gani zat i on,

17 gover nment , or agency, i s gui l t y of a cr i me.

18 ( b) The ci r cumst ance r ef er r ed t o i n subsect i on ( a) of

19 t hi s sect i on i s t hat t he or gani zat i on, gover nment , or agency

20 r ecei ves, i n any one- year per i od, benef i t s i n excess of $10, 000

21 under a f eder al pr ogr ami nvol vi ng a gr ant , cont r act , subsi dy,

22 l oan, guar ant ee, i nsur ance, or ot her f or mof f eder al

23 assi st ance.

24 ( c) Thi s sect i on does not appl y t o bona f i de sal ar y,

25 wages, f ees, ot her ot her compensat i on pai d, or expenses pai d or

( 212) 805- 0300

1350
86B7KAR4 Char ge

1 r ei mbur sed, i n t he usual cour se of busi ness.

2 I n or der t o sust ai n i t s bur den of pr oof wi t h r espect

3 t o t he al l egat i on i n Count one, t he gover nment must pr ove

4 beyond a r easonabl e doubt t he f ol l owi ng f i ve el ement s:

5 Fi r st , at t he t i me al l eged i n t he i ndi ct ment , t he

6 def endant was an agent of Comput er Ai ded Sur ger y, I nc. , or

7 CASI ;

8 Second, i n a one- year per i od, CASI r ecei ved a f eder al

9 gr ant i n excess of $10, 000;

10 Thi r d, dur i ng t hat one- year per i od, t he def endant

11 wi t hout aut hor i t y i nt ent i onal l y mi sappl i ed t he gr ant money;

12 Four t h, t he mi sappl i ed gr ant money was under t he car e,

13 cust ody, or cont r ol of , CASI ;

14 Fi f t h, t he val ue of t he money i nt ent i onal l y mi sappl i ed

15 by def endant was at l east $5, 000.

16 Now, l et us separ at el y consi der t hese f i ve el ement s.

17 The f i r st el ement t he gover nment must pr ove beyond a

18 r easonabl e doubt i s t hat at t he t i me al l eged i n t he i ndi ct ment ,

19 t he def endant was an agent of CASI .

20 The t er m" agent " means a per son aut hor i zed t o act on

21 behal f of an or gani zat i on. Empl oyees, par t ner s, di r ect or s,

22 of f i cer s, manager s and r epr esent at i ves ar e al l agent s of an

23 or gani zat i on.

24 Second el ement t he gover nment must pr ove beyond a

25 r easonabl e doubt i s t hat i n a one- year per i od, CASI r ecei ved

( 212) 805- 0300

1351
86B7KAR4 Char ge

1 f eder al benef i t s i n excess of $10, 000.

2 To pr ove t hi s el ement , t he gover nment must est abl i sh

3 t hat CASI r ecei ved, dur i ng a one- year per i od, benef i t s i n

4 excess of $10, 000 under a f eder al pr ogr ami nvol vi ng a gr ant ,

5 cont r act , subsi dy, l oan, guar ant ee, i nsur ance, or some ot her

6 f or mof f eder al assi st ance.

7 The one- year per i od must begi n no mor e t han 12 mont hs

8 bef or e t he def endant commi t t ed t he act s char ged i n t he

9 i ndi ct ment and must end no mor e t han 12 mont hs af t er t hose

10 act s. You can choose any per i od of f eder al f undi ng you want as

11 l ong as you unani mousl y f i nd t hat t he act s of mi sappl i cat i on

12 char ged i n t he i ndi ct ment occur r ed i n t hat one- year per i od.

13 The t hi r d el ement t he gover nment must pr ove beyond a

14 r easonabl e doubt i s t hat t he def endant wi t hout aut hor i t y

15 i nt ent i onal l y mi sappl i ed money. To i nt ent i onal l y mi sappl y

16 money means t o use money under t he cont r ol of CASI knowi ng t hat

17 such use i s unaut hor i zed or unj ust i f i abl e or wr ongf ul .

18 I nt ent i onal mi sappl i cat i on i ncl udes t he wr ongf ul use of t he

19 money f or a pur pose t he def endant knew was unaut hor i zed, even

20 i f such use benef i t ed CASI i n some way.

21 I n t hi s case, t o i nt ent i onal l y mi sappl y money means t o

22 i nt ent i onal l y appl y t he gr ant money r ecei ved by CASI i n a

23 manner whi ch t he def endant knew was unaut hor i zed under t he

24 t er ms and condi t i ons of t he gr ant . Mi sappl i cat i on of money,

25 however , does not appl y t o bona f i de sal ar y, wages, f r i nge

( 212) 805- 0300

1352
86B7KAR4 Char ge

1 benef i t s, or ot her compensat i on pai d, or expenses pai d or

2 r ei mbur sed, i n t he usual cour se of busi ness.

3 As I sai d, t he gover nment must pr ove beyond a

4 r easonabl e doubt t hat t he def endant act ed i nt ent i onal l y i n

5 mi sappl yi ng gr ant money. To f i nd t hat t he def endant act ed

6 i nt ent i onal l y, you must be sat i sf i ed beyond a r easonabl e doubt

7 t hat t he def endant act ed del i ber at el y and pur posef ul l y. That

8 i s, t he def endant ' s mi sappl i cat i on must have been t he pr oduct

9 of t he def endant ' s consci ous obj ect i ve t o spend t he money f or

10 an unaut hor i zed pur pose, r at her t han t he pr oduct of a mi st ake

11 or acci dent or some ot her i nnocent r eason.

12 The f our t h el ement t hat t he gover nment must pr ove

13 beyond a r easonabl e doubt i s t hat t he gr ant money t hat was

14 i nt ent i onal l y mi sappl i ed was i n t he car e, cust ody, or cont r ol

15 of , CASI . Al t hough t he wor ds " car e, " " cust ody, " and " cont r ol "

16 have sl i ght l y di f f er ent meani ngs, f or t he pur poses of t hi s

17 el ement , t hey expr ess a si mi l ar i dea. Al l t hat i s necessar y i s

18 t hat CASI had cont r ol over and r esponsi bi l i t y f or t he gr ant

19 money.

20 The f i f t h and f i nal el ement t he gover nment must pr ove

21 beyond a r easonabl e doubt i s t hat t he val ue of t he

22 i nt ent i onal l y mi sappl i ed money was at l east $5, 000.

23 The wor d " val ue" means f ace, par or mar ket val ue, or

24 cost pr i ce, ei t her whol esal e or r et ai l , whi chever i s gr eat er .

25 " Mar ket val ue" means t he pr i ce a wi l l i ng buyer woul d pay a

( 212) 805- 0300

1353
86B7KAR4 Char ge

1 wi l l i ng sel l er at t he t i me t he pr oper t y was i nt ent i onal l y

2 mi sappl i ed.

3 You may aggr egat e or add up t he val ue of t he money

4 i nt ent i onal l y mi sappl i ed f r oma ser i es of act s by t he def endant

5 t o meet t hi s $5, 000 r equi r ement , so l ong as you f i nd t hat each

6 act of i nt ent i onal mi sappl i cat i on was par t of a si ngl e scheme

7 by t he def endant t o mi sappl y gr ant money under t he car e,

8 cust ody, and cont r ol of CASI .

9 The gover nment does not have t o pr ove t hat t he

10 par t i cul ar money mi sappl i ed by t he def endant was t he money

11 r ecei ved by CASI as a f eder al gr ant . I n ot her wor ds, i t i s not

12 necessar y f or t he gover nment t o show t hat t he i nt ent i onal l y

13 mi sappl i ed money was t r aceabl e t o t he act ual f eder al gr ant

14 r ecei ved by t he or gani zat i on. Thus, i f t he gover nment

15 est abl i shes t hat CASI r ecei ved mor e t han $10, 000 i n f eder al ai d

16 dur i ng a one- year per i od, and t hat , dur i ng t hat per i od, t he

17 def endant mi sappl i ed f unds val ued at mor e t han $5, 000 under t he

18 car e, cust ody, and cont r ol of CASI , t he gover nment wi l l have

19 sat i sf i ed i t s bur den wi t h r espect t o t hi s el ement . Money i s

20 f ungi bl e, and t he gover nment need not t r ace t he $5, 000 or mor e

21 al l eged t o be i nt ent i onal l y mi sappl i ed back t o t he f eder al

22 gr ant .

23 I n addi t i on t o t he el ement s of t he of f enses t hat I

24 have expl ai ned, you must consi der whet her any act i n

25 f ur t her ance of t he cr i me char ged i n t he i ndi ct ment occur r ed

( 212) 805- 0300

1354
86B7KAR4 Char ge

1 wi t hi n t he Sout her n Di st r i ct of New Yor k. As I have i nst r uct ed

2 you, t he Sout her n Di st r i ct of New Yor k i ncl udes Manhat t an and

3 t he Br onx.

4 I shoul d not e t hat on t hi s i ssue - - and t hi s i ssue

5 al one - - t he gover nment need not pr ove venue beyond a

6 r easonabl e doubt , but onl y by a mer e pr eponder ance of t he

7 evi dence. Thus, t he gover nment has sat i sf i ed i t s venue

8 obl i gat i ons i f you concl ude t hat i t i s mor e l i kel y t han not

9 t hat any act i n f ur t her ance of t he cr i me char ged occur r ed i n

10 t he Sout her n Di st r i ct of New Yor k.

11 You have hear d evi dence dur i ng t he t r i al t hat

12 wi t nesses have di scussed t he f act s of t he case and t hei r

13 t est i mony wi t h t he l awyer s bef or e t he wi t nesses appear ed i n

14 cour t .

15 Al t hough you may consi der t hat f act when you ar e

16 eval uat i ng a wi t ness' s cr edi bi l i t y, I shoul d t el l you t hat

17 t her e i s not hi ng ei t her unusual or i mpr oper about a wi t ness

18 meet i ng wi t h l awyer s bef or e t est i f yi ng so t hat t he wi t ness can

19 be awar e of t he subj ect s he or she wi l l be quest i oned about ,

20 f ocus on t hose subj ect s and have t he oppor t uni t y t o r evi ew

21 r el evant exhi bi t s bef or e bei ng quest i oned about t hem. Such

22 consul t at i on hel ps conser ve your t i me and t he cour t ' s t i me. I n

23 f act , i t woul d be unusual f or a l awyer t o cal l a wi t ness

24 wi t hout such consul t at i on.

25 Agai n, t he wei ght you gi ve t o t he f act or t he nat ur e

( 212) 805- 0300

1355
86B7KAR4 Char ge

1 of t he wi t ness' s pr epar at i on f or hi s or her t est i mony and what

2 i nf er ences you dr aw f r omsuch pr epar at i on ar e mat t er s

3 compl et el y wi t hi n your di scr et i on.

4 Now, you have hear d t est i mony f r omwhat we cal l exper t

5 wi t nesses. An exper t wi t ness i s a per son who by educat i on or

6 exper i ence has acqui r ed l ear ni ng or exper i ence i n a sci ence or

7 a speci al i zed ar ea of knowl edge. Such wi t nesses ar e per mi t t ed

8 t o gi ve t hei r opi ni ons as t o r el evant mat t er s i n whi ch t hey

9 pr of ess t o be exper t , and gi ve t hei r r easons f or t hei r

10 opi ni ons.

11 Exper t t est i mony i s pr esent ed t o you on t he t heor y

12 t hat someone who i s exper i enced i n t he f i el d can assi st you i n

13 under st andi ng t he evi dence or i n r eachi ng an i ndependent

14 deci si on on t he f act s.

15 Now, your r ol e i n j udgi ng t he cr edi bi l i t y appl i es t o

16 exper t s as wel l as t o ot her wi t nesses. You shoul d consi der t he

17 exper t ' s opi ni ons t hat wer e r ecei ved i n evi dence i n t hi s case

18 and gi ve t hemas much or as l i t t l e wei ght as you t hi nk t hey

19 deser ve.

20 I f you shoul d deci de t hat t he opi ni on of an exper t i s

21 not based on suf f i ci ent educat i on or exper i ence, or on

22 suf f i ci ent dat a, or i f you shoul d concl ude t hat t he

23 t r ust wor t hi ness or cr edi bi l i t y of an exper t i s quest i onabl e f or

24 any r eason, or i f t he opi ni on of t he exper t was out wei ghed i n

25 your j udgment by ot her evi dence i n t he case, t hen you mi ght

( 212) 805- 0300

1356
86B7KAR4 Char ge

1 di sr egar d t he opi ni on of t he exper t ent i r el y or i n par t .

2 On t he ot her hand, i f you f i nd t he opi ni on of t he

3 exper t was based on suf f i ci ent dat a, educat i on and exper i ence,

4 and ot her evi dence, and does not gi ve you r eason t o doubt hi s

5 concl usi ons, you woul d be j ust i f i ed i n pl aci ng gr eat r el i ance

6 on hi s t est i mony.

7 I f you concl ude t hat ot her per sons may have been

8 i nvol ved i n cr i mi nal act s char ged i n t he i ndi ct ment , you may

9 not dr aw any i nf er ence, f avor abl e or unf avor abl e, t owar d ei t her

10 t he gover nment or t he def endant f r omt he f act t hat t hose

11 per sons ar e not named as def endant s i n t hi s i ndi ct ment or ar e

12 not pr esent at t hi s t r i al .

13 I n addi t i on, you shoul d not specul at e as t o t he

14 r easons t hat i ndi vi dual s ot her t han t he def endant ar e not

15 def endant s i n t hi s t r i al . Those mat t er s ar e whol l y out si de

16 your concer n and have no bear i ng on your f unct i on as j ur or s i n

17 t hi s t r i al .

18 Bot h t he gover nment and t he def endant have t he same

19 power t o subpoena wi t nesses t o t est i f y on t hei r behal f . I f a

20 pot ent i al wi t ness coul d have been cal l ed by t he gover nment or

21 by t he def endant and nei t her par t y cal l ed t he wi t ness, t hen you

22 may dr aw t he concl usi on t hat t he t est i mony of t he absent

23 wi t ness mi ght have been unf avor abl e t o t he gover nment or t o t he

24 def endant or t o bot h par t i es.

25 On t he ot her hand, i t i s equal l y wi t hi n your pr ovi nce

( 212) 805- 0300

1357
86B7KAR4 Char ge

1 t o dr aw no i nf er ence at al l f r omt he f ai l ur e of a par t y t o cal l

2 a wi t ness.

3 You shoul d r emember t hat t her e i s no dut y on ei t her

4 si de t o cal l a wi t ness whose t est i mony woul d be mer el y

5 cumul at i ve of t est i mony al r eady i n evi dence, or who woul d

6 mer el y pr ovi de addi t i onal t est i mony t o f act s al r eady i n

7 evi dence.

8 You have hear d r ef er ence, i n t he t est i mony and i n t he

9 ar gument s of def ense counsel i n t hi s case, about t he f act t hat

10 cer t ai n i nvest i gat i ve t echni ques wer e not used by l aw

11 enf or cement aut hor i t i es. Ther e i s no l egal r equi r ement t hat

12 t he gover nment pr ove i t s case t hr ough any par t i cul ar means.

13 Whi l e you ar e t o car ef ul l y consi der t he evi dence pr esent ed by

14 t he gover nment , you ar e not t o specul at e as t o why t hey used

15 t he t echni ques t hey di d, or why t hey di d not use ot her

16 t echni ques. The gover nment i s not on t r i al , and l aw

17 enf or cement t echni ques ar e not your concer n.

18 Your concer n i s t o det er mi ne whet her or not , based on

19 t he evi dence or l ack of evi dence, t he gui l t of t he def endant

20 has been pr oven beyond a r easonabl e doubt .

21 Ther e i s t est i mony i n t hi s case of t he pr evi ous good

22 char act er of t he def endant . Thi s t est i mony i s not t o be t aken

23 by you as t he wi t nesses' opi ni on as t o whet her t he def endant i s

24 gui l t y or not gui l t y. That quest i on i s f or you al one t o

25 det er mi ne. I ndeed, some of t he char act er wi t nesses t est i f i ed

( 212) 805- 0300

1358
86B7KAR4 Char ge

1 t hat t hey had no di r ect , per sonal knowl edge of t he f act s and

2 ci r cumst ances whi ch wer e t he f ocus of t hi s case. You shoul d

3 consi der evi dence of good char act er t oget her wi t h al l ot her

4 f act s and al l t he ot her evi dence i n det er mi ni ng whet her t he

5 pr osecut i on has sust ai ned i t s bur den of pr ovi ng t he def endant ' s

6 gui l t beyond a r easonabl e doubt . Evi dence of good char act er

7 may i n i t sel f cr eat e a r easonabl e doubt wher e wi t hout such

8 evi dence no r easonabl e doubt exi st s. But i f , f r omal l t he

9 evi dence, you ar e sat i sf i ed beyond a r easonabl e doubt t hat t he

10 def endant i s gui l t y, a showi ng t hat t he def endant pr evi ousl y

11 enj oyed a r eput at i on of good char act er does not j ust i f y or

12 excuse t he of f ense, and you shoul d not acqui t t he def endant

13 mer el y because you bel i eve t hat he had been a per son of good

14 r eput e.

15 Some of t he exhi bi t s t hat wer e admi t t ed i nt o evi dence

16 wer e char t s. These char t s wer e i nt r oduced basi cal l y as

17 summar i es. They ar e not di r ect evi dence. They ar e summar i es

18 of t he evi dence, and ar e admi t t ed as ai ds t o you. They ar e not

19 i n and of t hemsel ves any evi dence. They ar e i nt ended onl y t o

20 be of assi st ance t o you i n consi der i ng t he evi dence dur i ng your

21 del i ber at i ons.

22 I n pr esent i ng t he evi dence whi ch you have hear d, i t i s

23 cl ear l y easi er and mor e conveni ent t o ut i l i ze summar y char t s

24 t han t o pl ace al l of t he r el evant document s i n f r ont of you.

25 I t i s up t o you t o deci de whet her t hose char t s f ai r l y and

( 212) 805- 0300

1359
86B7KAR4 Char ge

1 cor r ect l y pr esent t he i nf or mat i on i n t he t est i mony and t he

2 document s admi t t ed i n evi dence. The char t s ar e not t o be

3 consi der ed by you as di r ect pr oof of anyt hi ng. They ar e mer el y

4 gr aphi c demonst r at i ons of what t he under l yi ng t est i mony and

5 document s ar e.

6 To t he ext ent t hat t he char t s conf or mwi t h what you

7 det er mi ne t he under l yi ng evi dence t o be, you shoul d accept

8 t hem. But one way or t he ot her , r eal i ze t hat t he char t i s not

9 i n and of i t sel f di r ect evi dence. They ar e mer el y vi sual ai ds.

10 They ar e not hi ng mor e.

11 You ar e about t o go i nt o t he j ur y r oomand begi n your

12 del i ber at i ons. I f dur i ng t hose del i ber at i ons you want t o see

13 or hear any of t he exhi bi t s, t hey wi l l be sent t o you i n t he

14 j ur y r oomupon quest i on. I f you want any of t he t est i mony

15 r ead, t hat can al so be done. But pl ease r emember t hat i t i s

16 not al ways easy t o l ocat e what you want , so t r y and be as

17 speci f i c as you possi bl y can i n r equest i ng exhi bi t s or por t i ons

18 of t he t est i mony whi ch you may want .

19 Your r equest s f or exhi bi t s or t est i mony - - i n f act any

20 communi cat i on wi t h t he cour t - - shoul d be made t o me i n

21 wr i t i ng, si gned by your f or eper son, and gi ven t o one of t he

22 mar shal s. I wi l l r espond t o any quest i ons or r equest s you have

23 as pr ompt l y as possi bl e ei t her i n wr i t i ng or by havi ng you

24 r et ur n t o t he cour t r oomso I can speak t o you i n per son. I n

25 any event , do not , i n any not e or ot her wi se, t el l me or anyone

( 212) 805- 0300

1360
86B7KAR4 Char ge

1 el se how you or any gr oup of you have vot ed or pr opose t o vot e

2 on t he i ssue of t he def endant ' s gui l t unt i l af t er a unani mous

3 ver di ct i s r eached. I n ot her wor ds, do not t el l me or anyone

4 el se what your numer i cal di vi si on i s - - how many t hi nk one way

5 and how many t hi nk anot her - - i f you ar e di vi ded at any poi nt

6 on how t o deci de t he case because unt i l you have r eached a

7 ver di ct , you have no ver di ct .

8 I amsendi ng a copy of t he i ndi ct ment i nt o t he j ur y

9 r oomf or you t o have dur i ng your del i ber at i ons. You may use i t

10 t o r ead t he cr i me wi t h whi ch t he def endant i s char ged wi t h

11 commi t t i ng. You ar e r emi nded, however , t hat an i ndi ct ment i s

12 mer el y an accusat i on and i s not t o be used by you of any pr oof

13 of t he conduct char ged.

14 As al r eady expl ai ned i n t hese i nst r uct i ons, t he

15 gover nment , t o pr evai l on t he char ge i n t he i ndi ct ment must

16 pr ove t he essent i al el ement s of t hat count i n t he i ndi ct ment

17 beyond a r easonabl e doubt .

18 I f i t succeeds, your ver di ct shoul d be gui l t y as t o

19 t hat count ; i f i t f ai l s, i t shoul d be not gui l t y as t o t hat

20 count . To r epor t a ver di ct , your vot e must be unani mous.

21 Your f unct i on i s t o wei gh t he evi dence i n t he case and

22 det er mi ne whet her or not t he def endant i s gui l t y of t he count

23 i n t he i ndi ct ment sol el y on t he basi s of such evi dence.

24 Now, t o ai d you i n your del i ber at i ons, and so t hat a

25 pr oper r ecor d can be made of your ver di ct , t he cour t has

( 212) 805- 0300

1361
86B7KAR4 Char ge

1 pr epar ed a f or mof ver di ct . I amaski ng t hat t he ver di ct f or m

2 be si gned by t he f or eper son and f i l ed wi t h t he cour t . When you

3 have unani mousl y agr ee upon your ver di ct , t hen t he f or eper son

4 wi l l f i l l i t i n and si gn i t , and you t el l t he mar shal you have

5 r eached a ver di ct . Then you wi l l be asked t o come back i nt o

6 open cour t and t he cl er k wi l l ask whet her your ver di ct i s

7 unani mous.

8 I t ' s a si mpl e ver di ct f or m. Pl ease hand i t out . The

9 ver di ct f or mf or mr eads as f ol l ows: " Count 1: Wi t h r espect

10 t o Count One of t he i ndi ct ment , S2 07 Cr i m. 541 ( RPP) , how do

11 you f i nd t he def endant Dani el B. Kar r on?" And i t st at es

12 gui l t y, not gui l t y and a space f or each answer . That ' s i t .

13 J ust because of t he phr aseol ogy, t her e i s onl y one

14 count i n t he i ndi ct ment . Ther e i s no ot her char ge agai nst t he

15 def endant . So don' t dr aw t he concl usi on t her e must be ot her

16 char ges.

17 Now, each j ur or i s ent i t l ed t o hi s or her opi ni on;

18 each shoul d, however , exchange vi ews wi t h hi s or her f el l ow

19 j ur or s. That i s t he ver y pur pose of j ur y del i ber at i on - - t o

20 di scuss and consi der t he evi dence; t o consi der t he ar gument s of

21 f el l ow j ur or s; t o pr esent your i ndi vi dual vi ews; t o consul t

22 wi t h one anot her ; and t o r each an agr eement based sol el y and

23 ent i r el y on t he evi dence or t he l ack of evi dence - - i f you can

24 do sought wi t hout vi ol at i on t o your own i ndi vi dual j udgment .

25 Each of you must deci de t he case f or your sel f , af t er

( 212) 805- 0300

1362
86B7KAR4 Char ge

1 consi der at i on wi t h your f el l ow j ur or s of t he evi dence i n t he

2 case.

3 But you shoul d not hesi t at e t o change an opi ni on

4 whi ch, af t er di scussi on wi t h your f el l ow j ur or s, appear s

5 i ncor r ect .

6 However , i f , af t er car ef ul l y consi der i ng al l of t he

7 evi dence and t he ar gument s of your f el l ow j ur or s, you hol d a

8 consci ent i ous vi ew t hat di f f er s f r omt he ot her s, you ar e not t o

9 change your posi t i on si mpl y because you ar e out number ed. I f

10 t hey do not convi nce you t hat your posi t i on i s i ncor r ect , you

11 shal l adher e t o your posi t i on r egar dl ess of t he l at eness of t he

12 hour or any per sonal i nconveni ence i t may cause you.

13 Your f i nal vot e must r ef l ect your consci ent i ous bel i ef

14 as t o how t he i ssue shoul d be deci ded.

15 Now, I have vi r t ual l y f i ni shed wi t h my char ge and my

16 i nst r uct i ons t o you and I want t o t hank you f or your pat i ence

17 and at t ent i veness. I wi l l send a copy of t he char ge i n t o you

18 so t hat you can use i t dur i ng your del i ber at i on. Agai n, pl ease

19 r emember t hat no si ngl e par t of t hi s char ge i s t o be consi der ed

20 i n i sol at i on. You ar e not t o consi der any one aspect of t hi s

21 char ge out of cont ext . The ent i r e char ge i s t o be consi der ed

22 as an i nt egr at ed st at ement and t o be t aken t oget her .

23 Now, I say t hi s not because I t hi nk i t ' s necessar y but

24 i t i s t he t r adi t i on of t hi s cour t . I advi se t he j ur or s t o be

25 pol i t e and r espect f ul t o each ot her , as I amsur e you wi l l be

( 212) 805- 0300

1363
86B7KAR4 Char ge

1 i n t he cour se of your del i ber at i ons, so t hat each j ur or may

2 have hi s or her posi t i on made cl ear t o al l t he ot her s.

3 The f or eper son has no gr eat er aut hor i t y t han any ot her

4 j ur or but wi l l be r esponsi bl e f or si gni ng al l communi cat i ons t o

5 t he cour t and f or handi ng t hemt o t he mar shal dur i ng

6 del i ber at i ons. You shoul d el ect one per son t o act as

7 f or eper son at t he out set of your del i ber at i ons. I somet i mes

8 suggest t hat i t i s easi er t o el ect J ur or 1, t hat i s Ms. Young,

9 but somet i mes J ur or 1 doesn' t want t o act as f or eper son. So

10 you al l can el ect whomever you want . That i s your pr er ogat i ve.

11 The manner i n whi ch t he j ur y conduct s i t s del i ber at i ons, of

12 cour se, i s compl et el y wi t hi n your di scr et i on. You may f ol l ow

13 any pr ocedur e t hat you choose, pr ovi ded t hat each j ur or i s

14 pr esent ed wi t h ampl e oppor t uni t y t o expr ess hi s or her vi ew.

15 That way when you do r each a ver di ct you wi l l know t hat i t i s a

16 j ust one, made wi t h t he f ul l par t i ci pat i on of al l t he j ur or s

17 and t hat you have f ai t hf ul l y di schar ged your oat h. I r emi nd

18 you once agai n t hat your dut y i s t o act wi t hout f ear or f avor

19 and t hat you must deci de t he i ssues on t r i al based sol el y on

20 t he evi dence and my i nst r uct i ons on t he l aw.

21 Thank you ver y much. I j ust want a wor d wi t h counsel

22 t o see i f I mi sr ead any par t of t he char ge.


24

25

( 212) 805- 0300

1364
86B7KAR4 Char ge


2 THE COURT: Any obj ect i ons?

3 MR. RUBI NSTEI N: No, your Honor , not by t he def ense.


5 THE COURT: OK.


7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

( 212) 805- 0300

1365
86B7KAR4 Char ge


2 THE COURT: I t hi nk t he al t er nat es wi l l be comi ng back

3 i n. I wi l l excuse t hemon t he r ecor d. I don' t t hi nk t her e i s

4 any r ecor d t hat t he t wo al t er nat es have been excused, and I

5 t hi nk I have t o do i t .

6 MR. RUBI NSTEI N: Can we appr oach f or one moment ?

7 THE COURT: Sur e.


9 MR. RUBI NSTEI N: J udge, I know you usual l y di schar ge

10 al t er nat es j ur or s, but amI cor r ect t hat J ur or 8 i s supposed t o

11 l eave on Fr i day?

12 THE COURT: Not avai l abl e Monday.

13 MR. RUBI NSTEI N: Not avai l abl e Monday.

14 THE COURT: So, you have t wo and a hal f days.

15 MR. RUBI NSTEI N: I t hi nk we shoul d be al l r i ght . Al l

16 r i ght .

17 MR. KWOK: I t hi nk we shoul d be f i ne.

18 MR. RUBI NSTEI N: I f t hey pr omi se not t o r et r y t he

19 case.

20 THE COURT: OK. Al l r i ght .


22

23

24

25

( 212) 805- 0300

1366
86B7KAR4


2 THE COURT: Wel l , at t hi s t i me i t ' s my dut y t o excuse

3 al t er nat e j ur or s, I guess you wer e 3 and 4, Mr . Ri chbur g and

4 Ms. I ppol i t o. You may not r eal i ze t hat one of my dut i es i s t o

5 make - - wel l , I do t hi nk you r eal i ze because of t he comment I

6 made ear l i er i n t he t r i al about maki ng sur e t he j ur or s wer en' t

7 asl eep - - but one of my dut i es i s t o make sur e t hat j ur or s ar e

8 payi ng at t ent i on. And I have not i ced t hat bot h of wer e you

9 payi ng at t ent i on t hr oughout t he t r i al and wer e ver y at t ent i ve,

10 mor e t han j ust payi ng at t ent i on, and I r eal l y want t o t hank you

11 f or your ser vi ce.

12 I n ci vi l cases we al l ow al t er nat es t o si t on t he j ur y,

13 but i n cr i mi nal cases t her e i s a r equi r ement t hat t her e be 12

14 j ur or s and not mor e. So, at t hi s t i me I want t o excuse you and

15 t hank you f or your publ i c ser vi ce. I appr eci at e i t .

16 And what Mr . Rubi nst ei n sai d i n hi s summat i on about

17 publ i c ser vi ce of j ur or s i s I t hi nk ver y accur at e. I t hi nk he

18 may have pi cked t hat up f r omme i n a pr evi ous t r i al we had, but

19 i n any event I r eal l y r egar d i t as ver y hi gh publ i c ser vi ce,

20 and I wi l l gi ve t he j ur y a mor e f ul l expl anat i on of why I t hi nk

21 t hat when t he t r i al i s over .

22 So, Mr . Ri chbur g and Ms. I ppol i t o, ar e excused.

23 ( Al t er nat es excused)

24 Then I have t he dut y of aski ng Mr . Mont eguedo t o swear

25 i n t he mar shal now. I usual l y t el l t he j ur y t hat t hey shoul d

( 212) 805- 0300

1367
86B7KAR4

1 l i st en cl osel y t o t hi s, because you wi l l get a ki ck out of i t .

2 I t hi nk i t was wr i t t en wel l over a hundr ed year s ago, l et ' s

3 say, and some of t he l anguage i s a l i t t l e out of dat e.

4 ( Mar shal swor n)

5 THE COURT: Al l r i ght . The j ur y i s excused t o

6 commence your del i ber at i ons and t o have l unch. That ' s pr obabl y

7 number one, have l unch. I hope i t ' s t her e.

8 DEPUTY COURT CLERK: I t ' s downst ai r s. I have t o go

9 and get i t .

10 THE COURT: He has t o go and get i t .

11 ( J ur y r et i r es t o del i ber at e at 1: 22 p. m. )

12 THE COURT: I want t o t hank counsel f or t hei r

13 cour t eousness and pr of essi onal i smdur i ng t he t r i al . I

14 appr eci at e i t ver y much. Good l uck t o bot h si des, and I wi l l

15 be her e.





20

21

22

23

24

25

( 212) 805- 0300

1368
86B7KAR4

1 AFTERNOON SESSI ON

2 2: 25 p. m.


4 THE COURT: I under st and we have some sor t of di sput e.

5 As has been r el at ed t o me, t he def ense want s t he i ndi ct ment

6 sent i n t ot al wi t hout r edact i on, and t he gover nment want s i t

7 sent i n wi t h t he f or f ei t ur e al l egat i on r edact ed.


9 THE COURT: That ' s t he i ssue?


11 THE COURT: Obvi ousl y t hey' r e not supposed t o

12 det er mi ne t he f or f ei t ur e al l egat i ons, so I woul d say what about

13 my j ust sendi ng i t i n and t hen wi t h a not e sayi ng her e i s t he

14 i ndi ct ment , you wi l l not e t hat t her e ar e f or f ei t ur e al l egat i ons

15 but t hose al l egat i ons ar e not bef or e you and not mat t er s t hat

16 you have t o concer n your sel ves wi t h, somet hi ng l i ke t hat ? How

17 does t hat deal wi t h i t ?

18 MR. KWOK: I t hi nk an i nst r uct i on al ong t hose l i nes

19 woul d suf f i ce. Our onl y concer n i s t hat t her e i s a ment i on i n

20 par agr aph 2A of at l east $390, 000. They may get conf used as t o

21 wher e t hat number came f r om. And obvi ousl y t hey haven' t been

22 i nst r uct ed about any f or f ei t ur e al l egat i ons i n t he i ndi ct ment ,

23 so our onl y concer n i s t hat i t wi l l cause mor e conf usi on t han

24 necessar y, and so an i nst r uct i on al ong t hose l i nes - -

25 THE COURT: I can under st and why you f eel i t shoul d be

( 212) 805- 0300

1369
86B7KAR4

1 r edact ed, but t he def ense does not want t o r edact i t .

2 You don' t want i t r edact ed?

3 MR. RUBI NSTEI N: No, your Honor . I don' t have a

4 pr obl emwi t h your Honor ' s - -

5 THE COURT: Wel l , i t ' s i n t he i ndi ct ment , so l et me

6 f ashi on a not e.

7 " Her e i s a copy of t he i ndi ct ment . You wi l l not e i t

8 cont ai ns a f or f ei t ur e al l egat i on. Those al l egat i ons ar e

9 i r r el evant t o your deci si on" - -

10 MR. KWOK: - - " and you shoul d not consi der i t i n any

11 way i n your del i ber at i ons. "

12 THE COURT: I s t hat al l r i ght ?


14 MR. EVERDELL: Your Honor , al so I t hi nk i t may be even

15 cl ear er i f we say, " You wi l l not e t her e i s a f or f ei t ur e

16 al l egat i on on page 2 of t he i ndi ct ment . "

17 THE COURT: Wel l , I ' ve gone t oo f ar now.

18 Her e i s t he not e. I have i t i t mar ked as Cour t

19 Exhi bi t 1.

20 DEPUTY COURT CLERK: No, t hat ' s goi ng t o be Cour t

21 Exhi bi t 3.

22 THE COURT: Cour t Exhi bi t 3.

23 DEPUTY COURT CLERK: Cour t Exhi bi t one was t he

24 exhi bi t . Cour t Exhi bi t 2 was t he char ge. Thi s wi l l be 3. And

25 t he i ndi ct ment i s Cour t Exhi bi t 4.

( 212) 805- 0300

1370
86B7KAR4

1 THE COURT: Hand i t t o counsel bef or e we send i t i n.

2 MR. KWOK: That ' s sat i sf act or y t o t he gover nment

3 gover nment . Thank you, your Honor .

4 THE COURT: Al l r i ght , Mr . Rubi nst ei n?


6 THE COURT: OK.

7 Al l r i ght .

8 ( Ti me not ed 3: 25; j ur y not pr esent )

9 THE COURT: They want al l of Benedi ct ' s t est i mony?

10 And Exhi bi t 110, 111, 114 and 115.

11 MR. RUBI NSTEI N: Al l I woul d say i s t hose ar e al l

12 summar i es.

13 THE COURT: Wel l , t hey' r e t he audi t , ar en' t t hey? The

14 gover nment i sn' t her e. Oh, t hey ar e.

15 THE COURT: Have you seen t he not e?

16 MR. KWOK: We have, your Honor .

17 MR. EVERDELL: We' r e pul l i ng t he exhi bi t s now.

18 THE COURT: Maybe I bet t er r ead i t i nt o t he r ecor d.

19 Thi s i s Cour t Exhi bi t 5, r ecei ved f r omt he j ur y at

20 3: 12, and si gned by Ms. Young. I t says.

21 " 1. Bob Benedi ct ' s t est i mony.

22 " 2. Number 110.

23 " 3. Number 111.

24 " 4. 114

25 " 5. 115.

( 212) 805- 0300

1371
86B7KAR4

1 " 6. Or i gi nal budget .

2 " 7. Revi sed appr oved budget .

3 " 8. Nonappr oved subsequent budget r evi si ons. "

4 My r ecol l ect i on i s we onl y have some of t he budget

5 r evi si ons, not al l of t he budget r evi si ons. AmI wr ong?

6 MR. EVERDELL: No, I t hi nk we have t he r evi sed budget

7 submi ssi ons t hat wer e not appr oved. I t hi nk what your Honor

8 may be r ef er r i ng t o i s t he quar t er l y f i nanci al r epor t s.

9 THE COURT: Oh, t hat ' s r i ght .

10 MR. EVERDELL: But t he exhi bi t s, I t hi nk we have t he

11 exhi bi t s t hat t hey want .

12 THE COURT: Wel l , we have t o go t hr ough t he t est i mony

13 of Benedi ct .

14 MR. KWOK: How does your Honor l i ke t o pr oceed wi t h

15 t he t est i mony? Do we do a r ead- back?

16 THE COURT: Whenever you' ve got anyt hi ng r eady, l et ' s

17 send i t i n. I t ' s 3: 25. They' ve got t o be kept busy. We can' t

18 hol d back.

19 MR. RUBI NSTEI N: We have t o r edact i f t her e i s any

20 obj ect i ons.

21 THE COURT: I don' t r emember i f t her e i s much i n

22 Benedi ct ' s di r ect or cr oss t hat r equi r es r edact i on, but maybe

23 t her e i s.

24 MR. RUBI NSTEI N: I don' t ei t her , but maybe t her e i s.

25 THE COURT: You have t o cut out t he pages wher e t he

( 212) 805- 0300

1372
86B7KAR4

1 j ur y wasn' t pr esent . But as f ar as r edact i on goes, t her e wer e

2 ver y f ew obj ect i ons i n ei t her di r ect or cr oss, I bel i eve.

3 So, l et ' s di vi de i t up so we al l don' t l ook at t he

4 same copy. Do you want my copy?

5 DEPUTY COURT CLERK: Def ense counsel doesn' t have a

6 copy of t he copy of t he t r anscr i pt .

7 THE COURT: What I ' mt al ki ng about i s di vi di ng up t he

8 dut i es, so one of you goes t hr ough page so and so and t he ot her

9 goes t hr ough such and such.

10 MR. RUBI NSTEI N: I f t he cour t wi l l gi ve us t hei r

11 t r anscr i pt , I wi l l t el l t he gover nment what pages I have.

12 THE COURT: What about bef or e we get st ar t ed on t hat ,

13 what about t he ot her exhi bi t s, do we have t hose?

14 MR. KWOK: We do, your Honor .

15 MR. EVERDELL: Your Honor , how do we pr opose t o mar k

16 what t hey ar e f or t he j ur y? I ' mnot sur e t he j ur y i s goi ng t o

17 know t hat - -

18 THE COURT: I wi l l gi ve t hema not e.

19 MR. EVERDELL: We j ust want t o be abl e t o i dent i f y

20 whi ch number s.

21 THE COURT: I n r esponse t o your not e, I ' msendi ng you

22 i n gover nment ' s exhi bi t s, Bob Benedi ct ' s t est i mony, t he r evi sed

23 appr oved budget , and t hen I wi l l i dent i f y t hemby exhi bi t

24 number . So i t ' s cl ear , so you make a cl ear r ecor d of what i s

25 and i sn' t sent i n.

( 212) 805- 0300

1373
86B7KAR4

1 MR. EVERDELL: I j ust want t o be sur e t hey know whi ch

2 i s whi ch.

3 THE COURT: Have you got 110, 111, 114 and 115?

4 MR. EVERDELL: We have t hose, your Honor .

5 DEPUTY COURT CLERK: Do you want t o send t hose t hr ee

6 exhi bi t s i n, J udge?

7 THE COURT: I do. I want t he ot her ones t oo.

8 DEPUTY COURT CLERK: Ri ght . I j ust don' t know i f you

9 want t o send t hemal l t oget her or - -

10 THE COURT: As many as t hey have r eady.

11 DEPUTY COURT CLERK: 110, 111, 114 and 115, J udge, we

12 wi l l send t hose?

13 THE COURT: What about t he budget , do we have t hose?

14 MR. EVERDELL: Yeah, I ' mj ust mar ki ng t hem" or i gi nal

15 appr oved budget " f or Gover nment ' s 14 and " r evi sed appr oved

16 budget " f or 22, and " unappr oved budget " f or Gover nment ' s

17 Exhi bi t s 31, 32, 33, 34, 35 and 36. Or " unappr oved budget

18 r equest s" . And I wi l l put t he number s down, 31, 32 . . .

19 The unappr oved budget r equest s ar e 31 t hr ough 36. And

20 I amput t i ng st i cky not es on t hem.

21 Act ual l y i f you have a r ubber band we can r ubber band

22 t hemt oget her .

23 THE COURT: I s t her e one nonappr oved budget or t wo

24 nonappr oved budget ?

25 MR. EVERDELL: I t ' s si x.

( 212) 805- 0300

1374
86B7KAR4

1 THE COURT: Oh, I ' ve got i t .

2 MR. EVERDELL: So, I wi l l hand t hese up t o Rober t .

3 THE COURT: To t he j ur or s, I wi l l r ead t he not e I

4 pr opose t o send i n.

5 " I n r esponse t o your not e, her e ar e Exhi bi t s 110, 111,

6 114 and 115; or i gi nal budget , GX14; r evi sed budget appr oved,

7 GX22; Nonappr oved subsequent budget , GX31, 32, 33, 34, 35, 36.

8 " We ar e wor ki ng on Mr . Benedi ct ' s t est i mony. "

9 MR. KWOK: That ' s f i ne wi t h t he gover nment . I

10 act ual l y have t he l i nes r eady t o be r edact ed f or Mr . Benedi ct ' s

11 t est i mony, i f your Honor woul d l i ke t o - -

12 THE COURT: I t ' s al l r edact ed?

13 MR. KWOK: I t hi nk t her e ar e onl y t wo pl aces t hat need

14 r edact i on.

15 THE COURT: Wel l , why don' t we send t hi s i n. I don' t

16 know how l ong i t wi l l t ake t o get agr eement on t he r edact i ons.

17 And I wi l l send t hi s not e i n wi t h i t , i f t her e i s no obj ect i on

18 by counsel . I t ' s Cour t Exhi bi t 6.

19 MR. KWOK: That ' s f i ne. Thank you, your Honor .

20 THE COURT: Whi l e Mr . Mont eguedo i s doi ng t hat , l et ' s

21 see what we can do on Mr . Benedi ct ' s t est i mony.

22 MR. KWOK: Your Honor , I bel i eve Mr . Benedi ct ' s

23 t est i mony st ar t s at page 960 on t he t r anscr i pt .

24 THE COURT: Mr . Rubi nst ei n has my copy, so I ' mnot

25 sur e. Have we gi ven hi mt he pages of pr oposed del et i ons?

( 212) 805- 0300

1375
86B7KAR4


2 MR. RUBI NSTEI N: Yes, your Honor . I ' mwor ki ng on t he

3 cr oss.

4 THE COURT: Wer e you onl y doi ng di r ect ?

5 MR. KWOK: I was doi ng di r ect , but I act ual l y went

6 t hr ough t he whol e t hi ng.

7 THE COURT: Mr . Rubi nst ei n, I don' t know i f i t wi l l

8 hel p you, but Mr . Kwok has i ndi cat ed wher e he t hi nks t he

9 r edact i ons ar e. How ar e we comi ng?

10 MR. KWOK: Get t i ng t her e.

11 THE COURT: How many pages do we have t o r ead, or i s

12 i t bet t er t o r edact i t ?

13 MR. RUBI NSTEI N: No, I t hi nk i t ' s bet t er - - t her e ar e

14 not t hat many, but t her e ar e a l ot mor e t han t he gover nment

15 suggest s.

16 I ' mal most t her e. I j ust want t o show t he gover nment

17 some t hat ar e not maj or but t hat I . . .


19 MR. RUBI NSTEI N: They' r e not maj or , but l et me show

20 t he gover nment t he por t i ons t hat I t hi nk coul d be r edact ed.

21 We ar e i n agr eement .

22 THE COURT: Wel l , how ar e we goi ng t o make t he

23 r edact i on? Read i t ? How l ong i s i t ?

24 MR. KWOK: I t ' s qui t e l ong act ual l y. I t hi nk our

25 pr ef er ence i s t o t o send i n a copy and j ust r edact usi ng a

( 212) 805- 0300

1376
86B7KAR4

1 bl ack hi ghl i ght er of some sor t .

2 MR. RUBI NSTEI N: Most of t he r edact i ons, J udge, ar e

3 j ust a f ew l i nes, so I woul dn' t have a pr obl emwi t h t hat .

4 THE COURT: Then l et ' s do i t t hat way. Let ' s get i t

5 st ar t ed.

6 MR. RUBI NSTEI N: The onl y t hi ng I woul d suggest i s - -

7 THE COURT: Br i ng back a f i nal so Mr . Rubi nst ei n can

8 see t hem.

9 MR. KWOK: Cer t ai nl y.

10 THE COURT: So he can see t hat you made t hem

11 cor r ect l y.

12 Let ' s move, ot her wi se t hey may make a deci si on.

13 MR. EVERDELL: We' r e goi ng t o make a phot ocopy of your

14 Honor ' s bi gger ver si on so i t ' s easy t o r ead. We wi l l r edact i t

15 and br i ng i t back.

16 THE COURT: You ar e usi ng my copy?

17 MR. EVERDELL: Of t he t r anscr i pt .

18 THE COURT: Do you have t o make copi es?

19 MR. EVERDELL: We can make copi es or j ust i nst r uct t he

20 j ur y not t o peel of f t he whi t e t ape.

21 MR. RUBI NSTEI N: That ' s f i ne. I nst r uct t hemnot t o

22 peel of f t he whi t e t ape.

23 THE COURT: Can I have my not e back?

24 I have t he not e. Ar e you r eady? Counsel , ar e you

25 r eady?

( 212) 805- 0300

1377
86B7KAR4

1 MR. KWOK: OK. Your Honor , I t hi nk we have an

2 agr eement . The t r anscr i pt i s r edact ed wi t h t he appr oval of

3 Mr . Rubi nst ei n and t he gover nment , and I t hi nk we al so shoul d

4 send i n t he bl owups, because t hey ar e t he act ual exhi bi t s,

5 t hese bi g boar ds, Exhi bi t s 114 and 115.

6 THE COURT: I sent i n 114 and 115.

7 MR. KWOK: I under st and, but as I under st and i t t hese

8 ar e t he ones t hat ar e act ual l y mar ked.

9 THE COURT: Wel l , I gave what you gave me whi ch had

10 t hi ngs mar ked 114 and 115. I don' t know whet her Mr . Rubi nst ei n

11 consent s t o t hi s.

12 MR. RUBI NSTEI N: I f t hey have 114 and 115, I don' t

13 t hi nk t hey need t he bl owup ver si on.

14 THE COURT: I f we st ar t ed of f t hat way, I t hi nk t hey

15 woul d be ent i t l ed t o i t , but I don' t t hi nk we ought t o send

16 dupl i cat e exhi bi t s i n.

17 MR. KWOK: OK, t hat ' s f i ne. Can I hand up t he

18 r edact ed t r anscr i pt ?

19 THE COURT: Al l r i ght . Then I have dr af t ed a not e t o

20 t he j ur or s sayi ng, " Her e i s t he t est i mony of Mr . Benedi ct t hat

21 you r equest ed. " And I si gned t hat not e, and bel ow t hat I have

22 wr i t t en i n, " You ar e or der ed not t o r emove t he whi t e t ape. "

23 I s t hat what you want ?

24 MR. KWOK: I t hi nk t hat ' s f i ne. We al so, af t er we r an

25 out of t he whi t e t ape, we used a bl ack mar ker . I suppose i f

( 212) 805- 0300

1378
86B7KAR4

1 you hol d i t up, you can r eal l y see i t under t he l i ght , but I

2 don' t know whet her an addi t i onal i nst r uct i on i s necessar y t o

3 t hat ef f ect .

4 THE COURT: What does he want me t o say? " Or t he

5 bl ack l i ne" ? I can' t t el l t hemt o r emove t he bl ack l i nes.

6 MR. KWOK: " Or at t empt t o see t hr ough t he bl ack l i ne" .

7 MR. RUBI NSTEI N: I t hi nk t hey wi l l under st and i t ,

8 J udge. Ther e ar e no smoki ng guns t hat have been r edact ed; i t ' s

9 j ust obj ect i on sust ai ned.

10 THE COURT: I t ' s adequat e, " You ar e not t o r emove t he

11 whi t e t apes" ? I s t hat adequat e?

12 MR. KWOK: Fi ne.

13 THE COURT: Then t he not e i s Exhi bi t 7. The

14 t r anscr i pt wi l l be Cour t Exhi bi t 8.

15

16

17

18

19

20

21

22

23

24

25

( 212) 805- 0300
1
2
3
4
5
6
7
8
9
10
11
12
r
13
14
15
16
17
18
19
20
21
22
23
24
25
1379
86B7KAR4
(5:25; jury not present)
THE COURT: Mr. Monteguedo informs me that the
~ a r s h a l s have indicated that the jury has a verdict.
Bring the jury in.
(Jury present)
THE COURT: Please be seated. Ladies and gentlemen,
Mr. Monteguedo reports that the marshals have reported that you
have reached a verdict, and I will ask Mr. Monteguedo to take
the verdict.
DEPUTY COURT CLERK: Ladies and gentlemen of the jury,
please answer to your presence as your name is called.
(Jury roll called; jury present)
DEPUTY COURT CLERK: Foreperson please stand.
As to Count One, with respect to Count One of
indictment, S2 07 Crim. 541 (RPP) , how do you find the
defendant Daniel B. Karron. Did you answer guilty or not
guilty?
THE FOREPERSON: Guilty.
DEPUTY COURT CLERK: Thank you. Please be seated.
Ladies and gentlemen of the jury, please listen to
your verdict as it stands recorded. With respect to Count One
of indictment, S2 07 Crim. 541 (RPF) , how could you find the
defendant Daniel B Karron? You answeyed guilty.
(Jury polled; each juror answered in the affirmative)
(212) 805-0300
,..
1
')
~
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1380
86B7KAR4 Verdict
THE COURT: Well, ladies and gentlemen, I never
cOHuuent on a verdict, and I do like to comment, however, on
jury service. And as I told thp alternates, one of my duties
is Lc watch the jury, keep an eye on them, make sure that no
one is falling asleep. I had a few questions about Juror 3 at
one point, but I noticed that althougll she sat back in her
chair she kept her eyes open and was fully aware of what was
going on. But that's what my job is in part.
So one of the problems is, and one of the reasons I
don't comment upon verdicts is because I other duties that I
have to think about, whether under the law of evidence the
question is appropriate, and there are a number of rules in the
law of evidence that apply, how the questions is framed and
whether it's an appropriate question, whether it's relevant,
what have you. So I have other things to do besides listening
to the actual testimony and watching the jurors and what have
you.
But what I really want to mention is how important
jury service is in this country. In most countries in Europe
there are no juries. The only country that has juries is Great
Britain, Australia and some in Canada, and even there in most
cases they have done away with juries. It is an expenditure,
and it requires a lot more time to have a jury trial than it
does to have a nonjury trial.
In this country almost all the trials are jury trials.
(212) 805-0300
1
2
3
4
5
6
7
8
9
10
11
12
r
13
14
15
16
17
18
19
20
21
22
23
24
25
1381
86B7KAR4 Verdict
Now, why is that important? Well, some years ago, before
IIungary carne out from behind the iron curtain, I went with a
number of other judges and lawyers to Hungary, and we were
invited to discuss their new constitution, and I don't
know that we added much. I found in fact that the people in
Hungary that we were talking to were very people
and not only knew all about how our Constitution worked but
they also knew how all the other Constitutions in the world
worked. And there are a lot of Constitutions in the world
actually, and a lot of them have traditions that are very
similar to ours, and in fact Russia has a Constitution and it
provided for a lot of the things that are provided for in our
Constitution. The only problem was who decided whether those
rights applied. The state had the sole determination. There
was no right by the people to bring suits in the courts
challenging the state.
In any event, what I found was that there was great
dissatisfaction of the system of justice in Hungary, and the
reason was this: Judges decided everything. Judges were
trained at the university to become judges, and when they got
out of university they became junior judges, and then they
moved up and became more senior judges. It was a profession
just as if you were a doctor you became a judge. And you
became a judge if you were a member of the party.
And if you didn't, and if you weren't a member of the Communist
(212) 805-0300
r
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1382
86B7KAR4 Verdict
party, these people felt you didn't get a fair shake in court,
whether it be a civil or criminal case. And here in this
country it's true judges are appointed hy the President in the
case of judges, and they are elected to some posts in
the state courts, but they are also appointed judges in the
courts, and it's true that that means is a certain
amount of political input. And I happen to think that's
overstated. In other words, I don't think people do decide
certainly district court judges I am convinced don't decide
cases because they came from some political party. I mean we
are appointed by some president, one or another, but there are
stories in the paper and on television, on your talk shows,
wondering who appointed that judge, well, he is going to decide
such and such. Well, if we didn't have jurors, they would be
saying that about the cases that come up for trial, and what
confidence would the public have in the fairness of the
procedure? If they believe that politics decided the lawsuits
in the courts, they would, or that would be the talk.
So, what does the jury system do? Well, you saw
Mr. Monteguedo here pull the names out of the hat, call them.
No one knows anything about your political background. No one
can challenge that you are independent determiners of the
facts. And that's the great thing about jury seLvice, it's the
validation of our criminal justice system in ccuntry. It
doesn't mean you have to agree with every decision a jury
(212) 805-0300
1383
86B7KAR4 Verdict
1 reaches throughout the country. But remember when you are
2 criticizing theIll, if you do criticize them, that they heard the
3 evidence, you didn't. Nor did the reporters report all the
4 evidence. They b ~ ~ v the witnesses that testified, reporters
5 corne in and out of the courtroom and corne and go. They don't
6 hear everything. So, you don't always get -- it mcty be that
7 you don't always get a fair shake in the press.
8 I haven't tried a case with television, but I recently
9 had a case before me, still before me -- I haven't decided it
10 yet, but it had a lot of notoriety and you should read what the
11 papers in England said that I did and said and what have you.
12 You couldn't believe it. At least I couldn't believe it.
13 All I'm saying is you the jury are the great
14 validaters of our system of justice. That's what is so
15 important about jury service, because each one of you when you
16 serve are an independent person reviewing the facts and the
17 evidence. It's much better than having a judge be in that
18 position, because it makes it clear that things aren't decided
19 on politics.
20 So I want to thank you for your service, and I am
21 sorry to hold you to listen to me talk. And I guess I will
22 tell you the third great lie, and that is that your checks are
23 in the mail. So you are discharged with my thanks and the
24 thanks of the court.
25 (Jury excused)
(212) 805-0300
1384
86B7KAR4 Verdict
1 THE COURT: I guess I better look at a sentencing
2 date. I better wait for Mr. Monteguedo to tell
3 me. It takes more than 90 days, doesn't it?
4 MR. KWOK: I . ;;, not sure.
5 THE COURT: October 14th or 15th? I don't know what
6 the holidays are. Mr. Rubinstein?
7 MR. RUBINSTEIN: Neither do I, Judge. Any day is OK.
8 MR. KWOK: Same for the government.
9 THE COURT: Do any of you know about the religious
10 holidays on that period?
11 Apparently Yom Kippur is the 14th or the 15th of
12 October, so that may be a bad time.
13 Why don't I put it down for September 11th, and if
14 it's an inconvenient date, we will adjourn it to an appropriate
15 date.
16 MR. RUBINSTEIN: Thank you, your Honor.
17
19
MR. KWOK: Your Honor, the government does have an
20 application to make. We would move to modify the bail
21 conditions of the defendant.
22
THE COURT: Well, you will ha\.Te to remind me what they
23 are.
24 MR. KWOK:
I believe at the time the defendant was
25 first arraigned he was released on $50,000 personal
(212) 805-0300
1
2
3
4
5
6
7
8
9
10
11
12
r
13
14
15
16
17
18
19
20
21
22
23
24
25
1385
86B7KAR4 Verdict
recognizance bond, cosigned by two people that the government
approved, and he did surLender his passport, and he was ordered
to make no and his travel restrictions were
limited to the District o[ Columbia, Philadelphia, the District
of Connect.lcut and the Southern District of New York.
It's the government's position that the defendant
poses a flight risk. We understand the defendant was a
professor. He was unemployed for a number of years before he
got the grant. Now that he is convicted I don't believe that
any federal agency will award him a grant. He has recently
sold his condominium in New York. We are not aware of any
strong family ties the defendant has in New York, and as
defense counsel pointed out in his summation the defendant also
has ties in Canada. And so for all of those reasons I think
that --
THE COURT: Well, that was just a vacation, right?
Canada? He didn't have any ties in Canada, did he?
MR. RUBINSTEIN: It's where he had the operation, in
Canada.
THE COURT: Oh, I see. I didn't even know that the
operation --
MR. RUBINSTEIN: Well, I didn't think it was
appropriate to state that in summation.
THE COURT: I'm not suggesting. I just didn't -- I
thought Canada was a vacation.
(212) 805-0300
1386
II
86B7KAR4 Verdict
1 MR. RUBINSTEIN: He doesn't have any ties to Canada,
2 your Honor; it's just a lot cheaper in Canada than it is in the
3 United States.
4 THE COURT: What abouL postoperative care?
5 MR. RlJBINSTEIN: That was in 2003, your Honor.
6 THE COURT: That doesn't require him to go back for
7 medical reasons?
8 MR. RUBINSTEIN: No, your Honor. 2003.
9 THE COURT: OK. I just don't know anything about the
10 whole area ..
11 MR. KWOK: In any event, your Honor, for all of those
12 reasons, and because of our calculation --
13 THE COURT: You want to limit Canada? I don't think
14 Mr. Rubinstein -- Mr. Rubinstein says it doesn't matter,
15 Canada, right?
16 MR. RUBINSTEIN: Right.
17
THE COURT: So, what else am I supposed to restrict
18 it? What restrictions are you asking for?
19
MR. KWOK: I'm asking for a more stringent set of bail
20 conditions than were originally set forth.
21
THE COURT: Well, I'm asking you what ones you're
22 asking for.
23
MR. KWOK: I propose at the very least an electronic
24 monitor, strict regular pretrial supervision.
25
THE COURT: What kind of monitoring?
(212) 805-0300
1
2
3
4
5
6
7
8
9
10
11
12
r
13
14
15
16
17
18
19
20
21
22
23
24
25
1387
86B7KAR4 Verdict
MR. KWOK: Electronic monitoring.
THE COURT: Mr. Rubinstein?
MR. RUBINST=IN: Your Honor, we are talking about a
defenciant who has an aging, sick n l v ~ h e r who was in the hospital
as recently as a month ago on a respirator.
THE COURT: Where does she live?
MR. RUBINSTEIN: She lives in Long Beach, your Honor.
THE COURT: Long Beach, California?
MR. RUBINSTEIN: Long Beach, New York, your Honor.
And his brother was in court the other day. He has a brother.
He has a daughter who goes to school in upstate New York. And
he stayed for this trial. I don't see any reason that the
government should want to restrict him. He is not going
anywhere. He doesn't have a passport, and there is no place
for him to go. So, I would ask your Honor to continue him on
the bail conditions that have been previously set.
THE COURT: Well, he has a mother in Long Beach and a
brother in where?
MR. RUBINSTEIN: New Jersey.
THE COURT: New Jersey?
MR. RUBINSTEIN: Actually she has a home at the
moment. She is in a nursing home in Staten Island, his mother.
THE COURT: Is that the entire family?
MR. RUBINSTEIN: He has a sister in New Jersey.
THE COURT: Another sister in New Jersey?
(212) 805-0300
1388
86B7KAR4 verdict
1 MR. RUBINSTE1N: He has another brother in New Palls.
2 THE COURT: Well, t h e ~ e are some family ties,
3 Mr. Kwok. I can see why you would limit other areas, but
4 geographical limits, what reason would ~ } l e r e be, other than
5 the -- I don't even know what the sentence would be here.
6 MR. KWOK: I think based on the very rough
7 calculation, I think the defendant would be at offense level
8 20, a Criminal History Category I. Think he is facing a
9 guidelines range of somewhere in the 30s.
10 THE COURT: And what monetary -- what monetary -- is
11 it based on 2Bl.l?
12 MR. KWOK: It's based on 2Bl.l.
13 THE COURT: All right. What figure are you using for
14 loss?
15 MR. KWOK: I'm using the figure as presented to the
16 jury, about half a million dollars of loss.
17 THE COURT: Well, I don't think you will be able to
18 show that.
19 So. it's a base level of --
20 MR. KWOK: -- of six, your Honor.
21 THE COURT: -- of six. And do you have any reason to
22 believe -- what reason have you got to believe that he would
23 flee?
24 MR. KWOK: Well, because of the likely sentence that
25 he is facing, because of the lack of any real assets that the
(212) 805-0300
1389
86B7KAR4 verdict
1 defendant has at this time. He doesn't have a job as far as we
2 know, and he is not likely to be able to get an award of
3 another federal grant in l i g ~ ~ of his conviction.
4 THE COURT: But most people don't look for federal
5 grants. That's a small percentage of the opportunities that
6 would be available to him.
7 MR. RUBINSTEIN: He has been offered a position at
8 Rensselaer College, so I don't know if it's possible for him to
9 take it. So he is more than employable. He is a very
10 respected person.
11 THE COURT: Rensselaer Polytechnic Institute?
12 MR. RUBINSTEIN: Yes, your Honor.
13 THE COURT: Near Albany.
14 MR. KWOK: I was going to say, your Honor, I can't
15 speak for my colleagues in the civil division, but I think they
16 are contemplating filing a civil complaint to get treble
17 damages based on the amount we showed the government was at
18 loss for.
19 THE COURT: Treble damages under what statute?
20 MR. KWOK: I don't know.
21 THE COURT: It's not an antitrust case.
22 MR. KWOK: I don't know the name of the statute, but
23 if your Honor recalls, there was a civil assistant who appeared
24 before your Honor a while back while we had a status
25 conference.
(212) 805-0300
1390
86B7KAR4 Verdict
1 THE COURT: I don't n ~ c a l l that.
2 MR. KWOK: He might be able to --
3 THE COUR'r: That doesn't illean anything.
4 MR. KWOK: He might be able to --
5 THE COURT: I have had a lot of conferences.
6 MR. RUBINSTEIN: That makes two of us. I don't recall
7 it either. Maybe it's a senior thing.
8 MR. KWOK: In any event, my only point is that the
9 defendant, in addition to whatever custodial sentence your
10 Honor may impose, is also likely going to face a huge monetary
11 judgment.
12 THE COURT: Then what you have is a bankruptcy and he
13 starts over. They can do what they want.
14 I don't see the grounds for putting a monitor on him.
15 He has shown up here to court every time, a little late
16 sometimes, but he's been here at the trial.
17 I can understand why you don't want him to go to -- he
18 has surrendered his passport documents -- and you don't want
19 him to go to Canada. You can restrict that. But why shouldn't
20 he be able to go to New York, New Jersey and Connecticut?
21 MR. KWOK: I don't think he would be precluded
22 necessarily from going to those places if he is placed on
23 regular supervision. He just needs to be in touch with his
24 pretrial services officer as to his whereabouts.
25 THE COURT: I do think he ought to be under pretrial
(212) 805-0300
1391
86B7KAR4 Verdict
1 services supervision. I agree with that.
2 He hasn't been under pretrial services suvervision, I
3 gather.
4 MR. KWOK: I do not believe he was.
5 MR. RUBINSTEIN: No, your Remor.
6 THE COURT: Well, I think that he should be under
7 pretrial services supervision. And what are the regular terms
8 of pretrial services supervision?
9 MR. KWOK: I can't remember an exact time frame. As I
10 understand it, often times it's up to the discretion of the
11 pretrial services officer as to what he or she deems necessary.
12 But there is a regular reporting requirement.
13 THE COURT: Once a week? All right. So let them know
14 and advise the pretrial services officer of any travel he
15 intends to make so that the pretrial services office can be
16 MR. RUBINSTEIN: Excuse me?
17 THE COURT: If the pretrial officer has any concern
18 about travel, he can ask the clerk for my permission.
19
20
21
22
23 services?
24
25
MR. RUBINSTEIN: So, should he go tomorrow to pretrial
THE COURT: Yes, sir. All right.
(212) 805-0300
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
86B7KAR4 verdict
MR. EVERDELL: Thank you.
MR. RUBINSTEIN: Have a good day, sir.
THE COURT: Anything else?
MR. RUBINSTEIN: Good night, yOllr Honor.
THE COURT: All right. Good night.
* * *
(212) 805-0300
13

Case 1:07-cr-00541-RPP Document 56-7 Filed 07/21/2008 Page 1 of 33
JURY CHARGE
INTRODUCTION
MEMBERS OF THE ruRY, WE ARE NOW AT THAT STAGE OF THE TRIAL WHERE
YOU WILL SOON UNDERTAKE YOUR FINAL FUNCTION AS ruRORS. I KNOW YOU WILL
TRY THE ISSUES THAT HAVE BEEN PRESENTED TO YOU ACCORDING TO THE OATH
WHICH YOU HAVE TAKEN AS mRORS IN WHICH YOU PROMISED THAT YOU WILL
WELL AND TRULY TRY THE ISSUES IN THIS CASE AND RENDER A TRUE VERDICT. IF
YOU FOLLOW THAT OATH AND TRY THE ISSUES WITHOUT FEAR OR PREruDICE OR
BIAS OR SYMPATHY, YOU WILL ARRIVE AT A TRUE AND ruST VERDICT.
THE GOVERNMENT AS A PARTY
THE FACT THAT THE PROSECUTION IS BROUGHT IN THE NAME OF THE UNITED
STATES OF AMERICA ENTITLES THE GOVERNMENT TO NO GREATER CONSIDERATION
THAN THAT ACCORDED TO ANY OTHER PARTY TO A LITIGATION. BY THE SAME
TOKEN, IT IS ENTITLED TO NO LESS CONSIDERATION. ALL PARTIES, WHETHER
GOVERNMENT OR INDIVIDUALS, STAND AS EQUALS AT THE BAR OF ruSTICE.
ROLE OF THE COURT
YOU HAVE NOW HEARD ALL OF THE EVIDENCE IN THE CASE AS WELL AS THE
FINAL ARGUMENTS OF THE LA WYERS FOR THE PARTIES.
MY DUTY AT THIS POINT IS TO INSTRUCT YOU AS TO THE LAW. IT IS YOUR
DUTY TO ACCEPT THESE INSTRUCTIONS OF LAW AND APPLY THEM TO THE FACTS AS
YOU WILL DETERMINE THEM, JUST AS IT HAS BEEN MY DUTY TO PRESIDE OVER THE
TRIAL AND DECIDE WHAT TESTIMONY AND EVIDENCE IS RELEVANT UNDER THE LAW
FOR YOUR CONSIDERATION.
ON THESE LEGAL MATTERS, YOU MUST TAKE THE LAW AS I GIVE IT TO YOU. IF
ANY ATTORNEY HAS STATED A LEGAL PRINCIPLE DIFFERENT FROM ANY THAT I
STATE TO YOU IN MY INSTRUCTIONS, IT IS MY INSTRUCTIONS THAT YOU MUST
FOLLOW.
YOU SHOULD NOT SINGLE OUT ANY INSTRUCTION AS ALONE STATING THE
LAW, BUT YOU SHOULD CONSIDER MY INSTRUCTIONS AS A WHOLE WHEN YOU
RETIRE TO DELIBERATE IN THE JURY ROOM.
YOU SHOULD NOT, ANY OF YOU, BE CONCERNED ABOUT THE WISDOM OF ANY
RULE THAT I STATE. REGARDLESS OF ANY OPINION THAT YOU MA Y HAVE AS TO
WHAT THE LAW MAY BE -- OR OUGHT TO BE -- IT WOULD VIOLATE YOUR SWORN
DUTY TO BASE A VERDICT UPON ANY OTHER VIEW OF THE LAW THAN THAT WHICH I
GIVE YOU.
NOW, AFTER LISTENING TO MY INSTRUCTIONS ABOUT THE LAW, YOU WILL
THEN DETERMINE HOW THIS CASE SHOULD BE DECIDED.
2
ROLE OF THE JURY (EVIDENCE AND NON-EVIDENCE)
AS I HAVE SAID, THE MEMBERS OF THE JURY ARE THE SOLE AND EXCLUSIVE
JUDGES OF THE FACTS. YOU DECIDE BASED UPON THE WEIGHT OF THE EVIDENCE;
YOU DETERMINE THE CREDIBILITY OF THE WITNESSES; YOU RESOLVE SUCH
CONFLICTS AS THERE MAYBE IN THE TESTIMONY, AND YOU DRAW WHATEVER
REASONABLE INFERENCES YOU DECIDE TO DRAW FROM THE FACTS AS YOU WILL
DETERMINE THEM.
IN DETERMINING THE FACTS, YOU MUST RELY UPON YOUR OWN
RECOLLECTION OF THE EVIDENCE. WHAT THE LA WYERS HAVE SAID IN THEIR
OPENING STATEMENTS, IN THEIR CLOSING ARGUMENTS, IN THEIR OBJECTIONS, OR IN
THEIR QUESTIONS IS NOT EVIDENCE. IN THIS CONNECTION, YOU SHOULD BEAR IN
MIND THAT A QUESTION PUT TO A WITNESS IS NEVER EVIDENCE. IT IS ONLY THE
ANSWER WHICH IS EVIDENCE. QUESTIONS ARE RELEVANT ONLY TO THE EXTENT
THEY ENABLE YOU TO UNDERSTAND THE ANSWER. NOR IS ANYTHING I MA Y HAVE
SAID DURING THE TRIAL OR SUMMATIONS OR MAY SAY DURING THESE
INSTRUCTIONS WITH RESPECT TO A FACT MATTER TO BE TAKEN IN SUBSTITUTION
FOR YOUR OWN INDEPENDENT RECOLLECTION. WHAT I SAY IS NOT EVIDENCE.
THE EVIDENCE BEFORE YOU CONSISTS OF THE ANSWERS GIVEN BY THE
WITNESSES -- THE SWORN TESTIMONY THAT THEY GAVE FROM THE STAND, AS YOU
RECALL IT -- AND THE EXHIBITS THAT WERE RECEIVED IN EVIDENCE.
3
YOU HAVE HEARD EVIDENCE IN THE FORM OF STIPULATIONS THAT CONTAIN
FACTS THAT WERE AGREED TO BE TRUE. YOU MUST ACCEPT THE FACTS IN THOSE
STIPULATIONS AS TRUE.
THE EVIDENCE DOES NOT INCLUDE QUESTIONS. ONLY THE ANSWERS ARE
EVIDENCE. BUT YOU MAY NOT CONSIDER ANY ANSWER THAT I DIRECTED YOU TO
DISREGARD OR THAT I DIRECTED STRUCK FROM THE RECORD. DO NOT CONSIDER
SUCH ANSWERS.
SINCE YOU ARE THE SOLE AND EXCLUSIVE WDGES OF THE FACTS, I HAVE NOT
MEANT AND DO NOT MEAN BY MY WORDS OR ACTS TO INDICATE ANY OPINION AS
TO THE FACTS OR WHAT YOUR VERDICT SHOULD BE. THE RULINGS THAT I HAVE
MADE DURING THE TRIAL ARE NOT ANY INDICATION OF MY VIEWS OF WHAT YOUR
DECISION SHOULD BE AS TO WHETHER OR NOT THE GUlL T OF THE DEFENDANT HAS
BEEN PROVEN BEYOND A REASONABLE DOUBT.
I ALSO ASK YOU TO DRAW NO INFERENCE FROM THE FACT THAT UPON
OCCASION I ASKED QUESTIONS OF CERTAIN WITNESSES. THESE QUESTIONS WERE
ONLY INTENDED FOR CLARIFICATION OR TO EXPEDITE MATTERS AND CERTAINLY
WERE NOT INTENDED TO SUGGEST ANY OPINIONS ON MY PART AS TO THE VERDICT
YOU SHOULD RENDER OR WHETHER ANY OF THE WITNESSES MAY HAVE BEEN MORE
CREDIBLE THAN ANY OTHER WITNESS. YOU ARE EXPRESSLY TO UNDERSTAND THAT
THE COURT HAS NO OPINION AS TO THE VERDICT YOU SHOULD RENDER IN THIS
CASE.
AS TO THE FACTS, LADIES AND GENTLEMEN, YOU ARE THE EXCLUSIVE
mDGES. YOU HAVE THE RESPONSIBILITY OF REVIEWING THE EVIDENCE, WEIGHING
4
THE CREDIBILITY OF THE WITNESSES, SEPARATING THE IMPORTANT FROM THE
UNIMPORTANT, AND MAKING THE FACTUAL DETERMINATIONS WHICH BEAR ON THE
GUILT OR LACK OF GUILT OF THE DEFENDANT. YOU ARE TO PERFORM THE DUTY OF
FINDING THE FACTS WITHOUT BIAS OR PREJUDICE AS TO ANY PARTY.
COJ\'J)UCT OF COUNSEL
IT IS THE DUTY OF THE ATTORNEY FOR EACH SIDE OF A CASE TO OBJECT
WHEN THE OTHER SIDE OFFERS TESTIMONY OR OTHER EVIDENCE WHICH THE
ATTORNEY BELIEVES IS NOT PROPERLY ADMISSIBLE. COUNSEL ALSO HAVE THE
RIGHT AND DUTY TO ASK THE COURT TO MAKE RULINGS OF LAW AND TO REQUEST
CONFERENCES IN THE ROBING ROOM OR AT THE SIDE BAR, OUT OF THE HEARING OF
THE JURY. ALL THOSE QUESTIONS OF LAW MUST BE DECIDED BY ME, THE COURT.
YOU SHOULD NOT SHOW ANY PREJUDICE AGAINST ANY ATTORNEY OR HIS OR HER
CLIENT BECAUSE THE ATTORNEY OBJECTED TO THE ADMISSIBILITY OF EVIDENCE,
ASKED FOR A CONFERENCE OUT OF THE HEARING OF THE JURY, OR ASKED THE
COURT FOR A RULING ON THE LAW.
AS I ALREADY INDICATED, MY RULINGS ON THE ADMISSIBILITY OF EVIDENCE
DO NOT fl',1)ICATE ANY OPINION ABOUT THE WEIGHT OR EFFECT OF SUCH EVIDENCE.
YOU ARE THE SOLE JUDGES OF THE CREDIBILITY OF ALL WITNESSES AND THE
WEIGHT AND EFFECT OF ALL THE EVIDENCE.
DIRECT AND CIRCUMSTANTIAL EVIDENCE
NOW, THERE ARE TWO TYPES OF EVIDENCE WHICH YOU MAY PROPERLY USE
IN DECIDING WHETHER A DEFENDANT IS GUILTY OR NOT GUILTY.
5
ONE TYPE OF EVIDENCE IS CALLED DIRECT EVIDENCE. DIRECT EVIDENCE IS A
WITNESS' TESTIMONY AS TO WHAT HE SAW, HEARD, OR OBSERVED. IN OTHER
WORDS, WHEN A WITNESS TESTIFIES ABOUT WHAT IS KNOWN TO HIM OF HIS OWN
KNOWLEDGE BY VIRTUE OF HIS OWN SENSES --WHAT HE SEES, FEELS, TOUCHES OR
HEARS -- THAT IS CALLED DIRECT EVIDENCE.
CIRCUMSTANTIAL EVIDENCE IS EVIDENCE WHICH TENDS TO PROVE ONE FACT
BY PROOF OF OTHER FACTS. THERE IS A SIMPLE EXAMPLE OF CIRCUMSTANTIAL
EVIDENCE WHICH IS OFTEN USED IN THIS COURTHOUSE.
ASSUME THAT A WITNESS TESTIFIED THAT WHEN HE CAME INTO THE
COURTHOUSE THIS MORNING, THE SUN WAS SHINING AND IT WAS A NICE DAY.
ASSUME HE TESTIFIED THAT SOMEONE WALKED INTO THE COURTROOM WITH
AN UMBRELLA WHICH WAS DRIPPING WET, AND THAT SOMEBODY ELSE WALKED IN
WITH A RAINCOAT WHICH WAS ALSO DRIPPING WET.
NOW, HE DOES NOT TESTIFY THAT HE LOOKED OUT OF THE COURTROOM AND
SAW THAT IT WAS RAINING. SO THERE IS NO DIRECT EVIDENCE OF THAT FACT. BUT
ON THE COMB INA TION OF FACTS WHICH I HAVE ASKED YOU TO ASSUME, IT WOULD
BE REASONABLE AND LOGICAL - IF YOU FOUND THE WITNESS'S TESTIMONY TO BE
CREDIBLE - FOR YOU TO CONCLUDE THAT BETWEEN THE TIME HE TESTIFIED AND
THE TIME THOSE PEOPLE WALKED IN, IT HAD STARTED TO RAIN.
THAT IS ALL THERE IS TO CIRCUMSTANTIAL EVIDENCE. YOU INFER ON THE
BASIS OF REASON AND EXPERIENCE AND COMMON SENSE FROM AN ESTABLISHED
FACT THE EXISTENCE OR THE NONEXISTENCE OF SOME OTHER FACT.
6
MANY FACTS, SUCH AS A PERSON'S STATE OF MIND, CAN RARELY BE PROVED
BY DIRECT EVIDENCE.
CIRCUMSTANTIAL EVIDENCE IS OF NO LESS VALUE THAN DIRECT EVIDENCE; IT
IS A GENERAL RULE THAT THE LAW MAKES NO DISTINCTION BETWEEN DIRECT AND
CIRCUMSTANTIAL EVIDENCE, BUT SIMPLY REQUIRES THAT BEFORE CONVICTING THE
DEFENDANT, THE JURY MUST BE SATISFIED THAT THE GOVERNMENT HAS PROVED
THE DEFENDANT'S GUILT BEYOND A REASONABLE DOUBT AFTER REVIEW OF ALL OF
THE EVIDENCE IN THE CASE, DIRECT AND CIRCUMSTANTIAL.
DURING THE TRIAL YOU MAY HAVE HEARD THE ATTORNEYS USE THE TERM
"INFERENCE" AND IN THEIR ARGUMENTS THEY HAVE ASKED YOU TO INFER, ON THE
BASIS OF YOUR REASON, EXPERIENCE AND COMMON SENSE, FROM ONE OR MORE
ESTABLISHED FACTS THE EXISTENCE OF SOME OTHER FACT.
AN INFERENCE IS NOT A SUSPICION OR A GUESS. IT IS A REASONED, LOGICAL
DECISION TO CONCLUDE THAT A DISPUTED FACT EXISTS ON THE BASIS OF ANOTHER
FACT THAT YOU KNOW EXISTS.
THERE ARE TIMES WHEN DIFFERENT INFERENCES MAYBE DRAWN FROM
FACTS WHETHER BY DIRECT OR CIRCUMSTANTIAL EVIDENCE. THE GOVERNMENT
MAY ASK YOU TO DRAW ONE SET OF INFERENCES, WHILE THE DEFENSE MAY ASK
YOU TO DRAW ANOTHER. IT IS FOR YOU AND YOU ALONE TO DECIDE WHAT
INFERENCES YOU WILL DRAW.
THE PROCESS OF DRAWING INFERENCES FROM FACTS IN EVIDENCE IS NOT A
MATTER OF GUESSWORK OR SPECULATION. AN INFERENCE IS A DEDUCTION OR A
CONCLUSION WHICH YOU, THE JURY, ARE PERMITTED TO DRAW - BUT NOT
7
REQUIRED TO DRAW - FROM THE FACTS WHICH YOU FIND TO BE PROVEN BY EITHER
DIRECT OR CIRCUMSTANTIAL EVIDENCE. IN DRAWING AN INFERENCE, YOU SHOULD
EXERCISE YOUR COMMON SENSE.
SO WHILE YOU ARE CONSIDERING THE EVIDENCE PRESENTED TO YOU, YOU
ARE PERMITTED TO DRAW, FROM THE FACTS WHICH YOU FIND TO BE PROVEN, SUCH
REASONABLE INFERENCES AS WOULD BE JUSTIFIED IN THE LIGHT OF YOUR
EXPERIENCE.
HERE, AGAIN, LET ME REMIND YOU THAT WHETHER BASED UPON DIRECT OR
CIRCUMSTANTIAL EVIDENCE, OR UPON LOGICAL OR REASONABLE INFERENCES
DRAWN FROM SUCH EVIDENCE, YOU MUST BE SATISFIED OF THE GUILT OF THE
DEFENDANT BEYOND A REASONABLE DOUBT BEFORE YOU MAY CONVICT.
CREDIBILITY OF WITNESSES
NOW, HOW DO YOU EVALUATE THE CREDIBILITY OR BELIEVABILITY OF THE
WITNESSES? YOU HAVE HAD AN OPPORTUNITY TO OBSERVE ALL OF THE
WITNESSES. IT NOW IS YOUR JOB TO DECIDE HOW BELIEVABLE EACH WITNESS WAS
IN HIS OR HER TESTIMONY. YOU ARE THE SOLE JUDGES OF THE CREDIBILITY OF
EACH WITNESS AND OF THE IMPORTANCE OF HIS OR HER TESTIMONY.
IT MUST BE CLEAR TO YOU BY NOW THAT YOU ARE BEING CALLED UPON TO
RESOLVE VARIOUS FACTUAL ISSUES UNDER THE INDICTMENT, IN THE FACE OF VERY
DIFFERENT PICTURES PAINTED BY THE GOVERNMENT AND THE DEFENSE WHICH
CANNOT BE RECONCILED. YOU WILL NOW HA VB TO DECIDE WHERE THE TRUTH LIES,
AND AN IMPORTANT PART OF THAT DECISION WILL INVOLVE MAKING JUDGMENTS
8
ABOUT THE TESTIMONY OF THE WITNESSES YOU HAVE LISTENED TO AND
OBSERVED. IN MAKING THOSE JUDGMENTS, YOU SHOULD CAREFULLY SCRUTINIZE
ALL OF THE TESTIMONY OF EACH WITNESS, THE CIRCUMSTANCES UNDER WHICH
EACH WITNESS TESTIFIED, AND ANY OTHER MATTER IN EVIDENCE WHICH MAY HELP
YOU TO DECIDE THE TRUTH AND THE IMPORTANCE OF EACH WITNESS' TESTIMONY.
YOUR DECISION ON WHETHER OR NOT TO BELIEVE A WITNESS MAY DEPEND
ON HOW THE WITNESS IMPRESSED YOU. WAS THE WITNESS CANDID, FRANK AND
FORTHRIGHT? OR, DID THE WITNESS SEEM AS IF HE OR SHE WAS HIDING
SOMETHING, OR BEING EVASIVE OR SUSPECT IN SOME WAY? HOW DID THE WAY THE
WITNESS TESTIFIED ON DIRECT EXA\1INATION COMPARE WITH HOW THE WITNESS
TESTIFIED ON CROSS-EXAMINATION? WAS THE WITNESS CONSISTENT IN HIS OR HER
TESTIMONY OR DID HE OR SHE CONTRADICT HIMSELF OR HERSELF? DID THE
WITNESS APPEAR TO KNOW WHAT HE OR SHE WAS TALKING ABOUT AND DID THE
WITNESS STRIKE YOU AS SOMEONE WHO WAS TRYING TO REPORT HIS OR HER
KNOWLEDGE ACCURATELY?
HOW MUCH YOU CHOOSE TO BELIEVE A WITNESS MAY BE INFLUENCED BY THE
WITNESS' BIAS. DOES THE WITNESS HAVE A RELATIONSHIP WITH THE GOVERNMENT
OR THE DEFENDANT WHICH MAY AFFECT HOW HE OR,sHE TESTIFIED? DOES THE
WITNESS HAVE SOME INCENTIVE, LOYALTY OR MOTIVE THAT MIGHT CAUSE HIM OR
HER TO SHADE THE TRUTH? OR DOES THE WITNESS HAVE SOME BIAS, PREJUDICE, OR
HOSTILITY THAT MAY HAVE CAUSED THE WITNESS--CONSCIOUSL Y OR NOT--TO GIVE
YOU SOMETHING OTHER THAN A COMPLETELY ACCURATE ACCOUNT OF THE FACTS
HE OR SHE TESTIFIED TO?
9
EVEN IF THE WITNESS WAS IMPARTIAL, YOU SHOULD CONSIDER WHETHER THE
WITNESS HAD AN OPPORTUNITY TO OBSERVE THE FACTS HE OR SHE TESTIFIED
ABOUT AND YOU SHOULD ALSO CONSIDER THE WITNESS' ABILITY TO EXPRESS
HIMSELF OR HERSELF. ASK YOURSELVES WHETHER THE WITNESS' RECOLLECTION
OF THE FACTS STANDS UP IN THE LIGHT OF ALL OTHER EVIDENCE.
IN OTHER WORDS, WHAT YOU MUST TRY TO DO IN DECIDING CREDIBILITY IS
TO SIZE A PERSON UP IN LIGHT OF HIS OR HER DEMEANOR, THE EXPLANATIONS
GIVEN, AND IN LIGHT OF ALL THE OTHER EVIDENCE IN THE CASE, JUST AS YOU
WOULD DO IN ANY IMPORTANT MATTER WHERE YOU ARE TRYING TO DECIDE IF A
PERSON IS TRUTHFUL, STRAIGHTFORWARD, AND ACCURATE IN HIS OR HER
RECOLLECTION. IN DECIDING THE QUESTION OF CREDIBILITY, REMEMBER THAT
YOU SHOULD USE YOUR COMMON SENSE, YOUR GOOD JUDGMENT, AND YOUR
EXPERIENCE.
INTEREST IN OUTCOME
NOW, IN EVALUATING CREDIBILITY OF THE WITNESSES, YOU SHOULD TAKE
INTO ACCOUNT ANY EVIDENCE THAT THE WITNESS WHO TESTIFIED MAY BENEFIT IN
SOME WAY FROM THE OUTCOME OF THIS CASE. SUCH AN INTEREST IN THE
OUTCOME CREATES A MOTIVE TO TESTIFY FALSELY AND MAY SWAY THE WITNESS
TO TESTIFY IN A WAY THAT ADVANCES HIS OR HER OWN INTERESTS. THEREFORE, IF
YOU FIND THAT ANY WITNESS WHOSE TESTIMONY YOU ARE CONSIDERING MAY
HAVE AN INTEREST IN THE OUTCOME OF THIS TRIAL, THEN YOU SHOULD BEAR THAT
10
FACTOR IN MIND WHEN EVALUATING THE CREDIBILITY OF HIS OR HER TESTIM01'-<'Y
AND ACCEPT IT WITH GREAT CARE.
THIS IS NOT TO SUGGEST THAT EVERY WITNESS WHO HAS AN INTEREST IN THE
OUTCOME OF A CASE WILL TESTIFY FALSELY. IT IS FOR YOU TO DECIDE TO WHAT
EXTENT, IF AT ALL, THE WITNESS' INTEREST HAS AFFECTED OR COLORED HIS OR HER
TESTIMONY.
GOVERNMENT EMPLOYEE WITNESS
YOU HAVE HEARD THE TESTIMONY OF GOVERNMENT EMPLOYEES. THE FACT
THAT A WITNESS MAYBE A GOVERNMENT EMPLOYEE DOES NOT MEAN THAT HIS OR
HER TESTIMONY IS NECESSARILY DESERVING OF MORE CONSIDERATION OR
GREATER WEIGHT THAN THAT OF AN ORDINARY WITNESS. ALSO IT DOES NOT MEAN
THAT HIS OR HER TESTIMONY IS NECESSARILY DESERVING OF LESS CONSIDERATION
OR LESS WEIGHT THAN THAT OF AN ORDINARY WITNESS.
IT IS YOUR DECISION, AFTER REVIEWING ALL THE EVIDENCE, WHETHER TO
ACCEPT THE TESTIMONY OF THE GOVERNMENT EMPLOYEE AND TO GIVE THAT
TESTIMONY WHATEVER WEIGHT, IF ANY, YOU FIND IT DESERVES.
PRESUMPTION OF INNOCENCE AND BURDEN OF PROOF
THE DEFENDANT HAS PLEADED NOT GUILTY TO THE CHARGES IN THE
INDICTMENT.
AS A RESULT OF THE DEFENDANT'S PLEAS OF NOT GUILTY, THE BURDEN IS
ON THE PROSECUTION TO PROVE THE DEFENDANT IS GUILTY BEYOND A
11
REASONABLE DOUBT. THIS BURDEN NEVER SHIFTS TO THE DEFENDANT FOR
THE SIMPLE REASON THAT THE LAW NEVER IMPOSES UPON THE DEFENDANT IN
A CRIMINAL CASE THE BURDEN OR DUTY OF TESTIFYING, OR CALLING ANY
WITNESSES OR LOCATING OR PRODUCING ANY EVIDENCE.
THE LAW PRESUMES THE DEFENDANT TO BE INNOCENT OF ALL THE
CHARGES AGAINST HIM. I THEREFORE INSTRUCT YOU THAT THE DEFENDANT IS
TO BE PRESUMED BY YOU TO BE INNOCENT THROUGHOUT YOUR
DELIBERATIONS UNTIL SUCH TIME, IF IT EVER COMES, THAT YOU AS A JURY ARE
SATISFIED THAT THE GOVERNMENT HAS PROVEN HIM GUILTY BEYOND A
REASONABLE DOUBT.
THE DEFENDANT BEGAN THE TRIAL HERE WITH A CLEAN SLATE. THIS
PRESUMPTION OF INNOCENCE ALONE IS SUFFICIENT TO ACQUIT THE
DEFENDANT UNLESS YOU AS JURORS ARE UNANIMOUSLY CONVINCED BEYOND
A REASONABLE DOUBT OF HIS GUILT, AFTER A CAREFUL AND IMPARTIAL
CONSIDERATION OF ALL OF THE EVIDENCE IN THIS CASE. IF THE GOVERNMENT
FAILS TO SUSTAIN ITS BURDEN, YOU MUST FIND THE DEFENDANT NOT GUILTY.
THIS PRESUMPTION WAS WITH THE DEFENDANT WHEN THE TRIAL BEGAN
AND REMAINS WITH HIM EVEN NOW AS I SPEAK TO YOU AND WILL CONTINUE
WITH THE DEFENDANT INTO YOUR DELIBERATIONS UNLESS AND UNTIL YOU
ARE CONVINCED THAT THE GOVERNMENT HAS PROVEN HIS GUILT BEYOND A
REASONABLE DOUBT.
12
DEFENDANT'S RIGHT NOT TO TESTIFY
THE DEFE1'-ITIANT, DANIEL KARRON, DID NOT TESTIFY IN THIS CASE.
UNDER OUR CONSTITUTION, A DEFENDANT HAS NO OBLIGATION TO TESTIFY OR
TO PRESENT ANY EVIDENCE, BECAUSE IT IS THE GOVERNMENT'S BURDEN TO
PROVE THE DEFENDANT GUILTY BEYOND A REASONABLE DOUBT. THAT
BURDEN REMAINS WITH THE GOVERNMENT THROUGHOUT THE ENTIRE TRIAL
AND NEVER SHIFTS TO THE DEFENDANT. THE DEFENDANT IS NEVER REQUIRED
TO PROVE THAT HE IS INNOCENT.
YOU MAY NOT ATTACH ANY SIGNIFICANCE TO THE FACT THAT THE
DEFENDANT DID NOT TESTIFY. NO ADVERSE INFERENCE AGAINST HIM MAY BE
DRAWN BY YOU BECAUSE HE DID NOT TAKE THE WITNESS STAND. YOU MAY
NOT CONSIDER THIS AGAINST THE DEFEl'mANT IN ANY WAY IN YOUR
DELIBERATIONS IN THE JURY ROOM.
REASONABLE DOUBT
I HAVE SAID THAT THE GOVER,'JMENT MUST PROVE THAT THE
DEFENDANT IS GUILTY BEYOND A REASONABLE DOUBT. THE QUESTION
NATURALLY IS, "WHAT IS A REASONABLE DOUBT?" THE WORDS ALMOST
DEFINE THEMSELVES. IT IS A DOUBT BASED UPON REASON AND COMMON
SENSE. IT IS A DOUBT THAT A REASONABLE PERSON HAS AFTER CAREFULLY
WEIGHING ALL OF THE EVIDENCE. IT IS A DOUBT WHICH WOULD CAUSE A
REASONABLE PERSON TO HESITATE TO ACT IN A MATTER OF IMPORTANCE IN
HIS OR HER PERSONAL LIFE. PROOF BEYOND A REASONABLE DOUBT MUST,
13
THEREFORE, BE PROOF OF SUCH A CONVINCING CHARACTER THAT A
REASONABLE PERSON WOULD NOT HESITATE TO RELY AND ACT UPON IT IN THE
MOST IMPORTANT OF HIS OWN AFFAIRS. A REASONABLE DOUBT IS NOT A
CAPRICE OR WHIM; IT IS NOT A SPECULATION OR SUSPICION. IT IS NOT AN
EXCUSE TO A VOID THE PERFORMANCE OF AN UNPLEASANT DUTY. AND IT IS
NOT SYMPATHY.
IN A CRIMINAL CASE, THE BURDEN IS AT ALL TIMES UPON THE
GOVERNMENT TO PROVE GUILT BEYOND A REASONABLE DOUBT. THE LAW
DOES NOT REQUIRE THAT THE GOVERNMENT PROVE GUILT BEYOND ALL
POSSIBLE DOUBT; PROOF BEYOND A REASONABLE DOUBT IS SUFFICIENT TO
CONVICT. THIS BURDEN NEVER SHIFTS TO THE DEFENDANT, WHICH MEANS
THAT IT IS AL WAYS THE GOVERNMENT'S BURDEN TO PROVE EACH OF THE
ELEMENTS OF THE CRIMES CHARGED BEYOND A REASONABLE DOUBT.
IF, AFTER FAIR AND IMPARTIAL CONSIDERATION OF ALL OF THE
EVIDENCE, YOU HAVE A REASONABLE DOUBT, IT IS YOUR DUTY TO ACQUIT THE
DEFENDANT. ON THE OTHER HAND, IF AFTER FAIR AND IMPARTIAL
CONSIDERATION OF ALL THE EVIDENCE, YOU ARE SATISFIED OF THE
DEFENDANT'S GUILT BEYOND A REASONABLE DOUBT, YOU SHOULD VOTE TO
CONVICT.
SYMPATHY
UNDER YOUR OATH AS JURORS YOU ARE NOT TO BE SWAYED BY
SYMPATHY. YOU ARE TO BE GUIDED SOLELY BY THE EVIDENCE IN THIS CASE,
14
AND THE CRUCIAL, HARD-CORE QUESTION THAT YOU MUST ASK YOURSELVES
AS YOU SIFT THROUGH THE EVIDENCE IS: HAS THE GOVERNMENT PROVEN THE
GUILT OF THE DEFENDANT BEYOND A REASONABLE DOUBT?
IT IS FOR YOU ALONE TO DECIDE WHETHER THE GOVERNMENT HAS
PROVEN THAT THE DEFENDANT IS GUILTY OF THE CRIMES CHARGED SOLELY ON
THE BASIS OF THE EVIDENCE AND SUBJECT TO THE LAW AS I CHARGE YOU. IT
MUST BE CLEAR TO YOU THAT ONCE YOU LET FEAR OR PREJUDICE OR BIAS OR
SYMPATHY INTERFERE WITH YOUR THINKING, THERE IS A RISK THAT YOU WILL
NOT ARRIVE AT A TRUE AND JUST VERDICT.
IF YOU HAVE A REASONABLE DOUBT AS TO THE DEFENDANT'S GUILT, YOU
SHOULD NOT HESITATE FOR ANY REASON TO FIND A VERDICT OF ACQUITTAL.
BUT ON THE OTHER HAND, IF YOU SHOULD FIND THAT THE GOVERNMENT HAS
MET ITS BURDEN OF PROVING THE DEFENDANT'S GUILT BEYOND A
REASONABLE DOUBT, YOU SHOULD NOT HESITATE BECAUSE OF SYMPATHY OR
ANY OTHER REASON TO RENDER A VERDICT OF GUILTY.
PUNISHMENT
THE QUESTION OF POSSIBLE PUNISHMENT OF THE DEFENDANT IS OF NO
CONCERN TO THE JURY AND SHOULD NOT, IN Al\TY SENSE, ENTER INTO OR
INFLUENCE YOUR DELIBERATIONS. THE DUTY OF IMPOSING A SENTENCE ON
ANY CONVICTED DEFENDANT RESTS EXCLUSIVELY UPON THE COURT -- THAT IS,
UPON ME. YOUR FUNCTION IS TO WEIGH THE EVIDENCE IN THE CASE AND TO
DETERMINE WHETHER OR NOT THE DEFENDANT IS GUILTY BEYOND A
15
REASONABLE DOUBT, SOLELY ON THE BASIS OF SUCH EVIDENCE. UNDER YOUR
OATH AS mRORS, YOU CAl'I"NOT ALLOW A CONSIDERATION OF THE PUNISHMENT
WHICH MAY BE IMPOSED UPON THE DEFENDANT, IF HE IS CONVICTED, TO
INFLUENCE YOUR VOTE IN ANY WAY, OR, IN ANY SENSE, TO ENTER INTO YOUR
DELIBERATIONS.
Il'<'OICTMENT IS NOT EVIDENCE
NOW, WITH THESE PRELIMINARY INSTRUCTIONS IN MIND, LET US TURN TO
THE CHARGE AGAINST THE DEFENDANT, AS CONTAINED IN THE INDICTMENT. I
REMIND YOU THAT AN INDICTMENT ITSELF IS NOT EVIDENCE. IT MERELY
DESCRIBES THE CHARGE MADE AGAINST THE DEFENDANT. IT IS AN
ACCUSATION. IT MAY NOT BE CONSIDERED BY YOU AS ANY EVIDENCE OR
PROOF OF THE GUILT OF THE DEFENDANT. ONLY THE EVIDENCE OR THE LACK
OF EVIDENCE PRESENTED HERE AT TRIAL BEFORE YOU IS RELEVANT TO THAT
ISSUE.
THE INDICTMENT
THE DEFENDANT, DANIEL KARRON, IS FORMALLY CHARGED IN AN
INDICTMENT WHICH CONTAINS ONE COUNT. BEFORE YOU BEGIN YOUR
DELIBERATIONS, YOU WILL BE PROVIDED WITH A COPY OF THE INDICTMENT
CONTAINING THE CHARGE.
COUNT ONE OF THE INDICTMENT CHARGES THAT FROM AT LEAST IN OR
ABOUT OCTOBER 2001, UP THROUGH AND INCLUDING IN OR ABOUT ruNE 2003,
DANIEL B. KARRON, THE PRESIDENT AND CHIEF TECHNICAL OFFICER OF A
16
COMPANY CALLED COMPUTER AIDED SURGERY, INC. (CASI), INTENTIONALLY
MISAPPLIED $5,000 AND MORE IN THE CARE, CUSTODY Al\'D CONTROL OF CASI,
WHILE IT WAS THE BENEFICIARY OF A FEDERAL GRANT OF MORE THAN $10,000 A
YEAR FROM THE NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY, A
FEDERAL ENTITY.
COUNT ONE
THE INDICTMENT READS AS FOLLOWS:
[THE COURT WILL READ THE INDICTMENT}
TITLE 18, UNITED STATES CODE, SECTION 666,READS, INPERTINENTPART,AS
FOLLOWS:
666. Theft or bribery concerning programs receiving Federal funds
(a) Whoever, if the circumstance described in subsection (b) of this section exists-
(A) embezzles, steals, obtains by fraud, or otherwise without authority
knowingly converts to the use of any person other than the rightful owner or intentionally
misapplies, property that-
(i) is valued at $5,000 or more, and
(ii) is owned by, or is under the care, custody, or control of such
organization, government, or agency;
- is guilty of a crime.
(b) The circumstance referred to in subsection (a) of this section is that the
organization, government, or agency receives, in anyone year period, benefits in excess
of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee,
insurance, or other form of Federal assistance.
(c) This section does not apply to bona fide salary, wages, fees, or other
compensation paid, or expenses paid or reimbursed, in the usual course of business.
17
COUNT ONE: THEFT OR MISAPPLICATION CONCERNING PROGRAMS
RECEIVING FEDERAL FUNDS
GENERAL INSTRUCTIONS (18 U.S.C. 666)
IN ORDER TO SUSTAIN ITS BURDEN OF PROOF WITH RESPECT TO THE
ALLEGATION IN COUNT ONE, THE GOVERl"JMENT MUST PROVE BEYOND A
REASONABLE DOUBT THE FOLLOWING FIVE ELEMENTS:
FIRST, AT THE TIME ALLEGED IN THE INDICTMENT, THE DEFENDANT WAS
AN AGENT OF COMPUTER AIDED SURGERY, INC., OR CASI;
SECOND, IN A ONE-YEAR PERIOD, CASI RECEIVED A FEDERAL GRANT IN
EXCESS OF $10,000;
THIRD, DURING THAT ONE YEAR PERIOD, THE DEFENDANT WITHOUT
AUTHORITY INTENTIONALLY MISAPPLIED THE GRANT MONEY;
FOURTH, THE MISAPPLIED GRANT MONEY WAS UNDER THE CARE,
CUSTODY, OR CONTROL OF, CASI;
FIFTH, THE VALUE OF THE MONEY INTENTIONALLY MISAPPLIED BY THE
DEFENDANT WAS AT LEAST $5,000.
LET US NOW SEP ARA TEL Y CONSIDER THESE FIVE ELEMENTS.
FIRST ELEMENT: DEFENDANT WAS AN AGENT OF CASI
THE FIRST ELEMENT THE GOVERNMENT MUST PROVE BEYOND A
REASONABLE DOUBT IS THAT AT THE TIME ALLEGED IN THE INDICTMENT, THE
DEFENDANT WAS AN AGENT OF CAS!.
- 18 -
THE TERM "AGENT" MEANS A PERSON AUTHORIZED TO ACT ON BEHALF
OF AN ORGANIZATION. EMPLOYEES, PARTNERS, DIRECTORS, OFFICERS,
MANAGERS, AND REPRESENTATIVES ARE ALL AGENTS OF AN ORGANIZATION.
SECO]'l.'D ELEMENT: CASI RECEIVED FEDERAL FUNDS
THE SECOND ELEMENT THE GOVERNMENT MUST PROVE BEYOND A
REASONABLE DOUBT IS THAT IN A ONE-YEAR PERIOD, CASI RECEIVED FEDERAL
BENEFITS IN EXCESS OF $10,000.
TO PROVE THIS ELEMENT, THE GOVERNMENT MUST ESTABLISH THAT CASI
RECEIVED, DURING A ONE-YEAR PERIOD, BENEFITS IN EXCESS OF $10,000 Ul\TDER
A FEDERAL PROGRAM INVOLVING A GRANT, CONTRACT, SUBSIDY, LOAN,
GUARANTEE, INSURANCE, OR SOME OTHER FORM OF FEDERAL ASSISTANCE.
THE ONE-YEAR PERIOD MUST BEGIN NO MORE THAN 12 MONTHS BEFORE
THE DEFENDANT COMMITTED THE ACTS CHARGED IN THE INDICTMENT AND
MUST END NO MORE THAN 12 MONTHS AFTER THOSE ACTS. YOU CAN CHOOSE
ANY PERIOD OF FEDERAL FUNDING YOU WANT AS LONG AS YOU UNANIMOUSLY
FIND THAT THE ACTS OF MISAPPLICATION CHARGED IN THE INDICTMENT
OCCURRED IN THAT ONE YEAR PERIOD.
THIRD ELEMENT: INTENTIONAL MISAPPLICATION OF MONEY
THE THIRD ELEMENT THE GOVERNMENT MUST PROVE BEYOND A
REASONABLE DOUBT IS THAT THE DEFENDANT WITHOUT AUTHORITY
INTENTIONALLY MISAPPLIED MONEY. TO INTENTIONALLY MISAPPLY MONEY
- 19 -
MEANS TO USE MONEY UNDER THE CONTROL OF CASI KNOWING THAT SUCH
USE IS UNAUTHORIZED OR UNJUSTIFIABLE OR WRONGFUL. INTENTIONAL
MISAPPLICATION INCLUDES THE WRONGFUL USE OF THE MONEY FOR A
PURPOSE THE DEFENDANT KNEW WAS UNAUTHORIZED, EVEN IF SUCH USE
BENEFITED CASI IN SOME WAY.
IN THIS CASE, TO INTENTIONALL Y MISAPPLY MONEY MEANS TO
INTENTIONALLY APPLY THE GRANT MONEY RECEIVED BY CAS I IN A MANNER
WHICH THE DEFENDANT KNEW WAS UNAUTHORIZED UNDER THE TERMS AND
CONDITIONS OF THE GRANT. MISAPPLICATION OF MONEY, HOWEVER, DOES NOT
APPLY TO BONA FIDE SALARY, WAGES, FRINGE BENEFITS, OR OTHER
COMPENSATION PAID, OR EXPENSES PAID OR REIMBURSED, IN THE USUAL
COURSE OF BUSINESS.
AS I SAID, THE GOVERNMENT MUST PROVE BEYOND A REASONABLE
DOUBT THAT THE DEFENDANT ACTED INTENTIONALLY IN MISAPPLYING GRANT
MONEY. TO FIND THAT THE DEFENDANT ACTED INTENTIONALLY, YOU MUST BE
SATISFIED BEYOND A REASONABLE DOUBT THAT THE DEFENDANT ACTED
DELIBERATELY AND PURPOSEFULLY. THAT IS, THE DEFENDANT'S
MISAPPLICATION MUST HAVE BEEN THE PRODUCT OF THE DEFENDANT'S
CONSCIOUS OBJECTIVE TO SPEND THE MONEY FOR AN UNAUTHORIZED
PURPOSE, RATHER THAN THE PRODUCT OF A MISTAKE OR ACCIDENT OR SOME
OTHER INNOCENT REASON.
FOURTH ELEMENT: MISAPPLIED GRANT MONEY UNDER THE CONTROL OF
CASI
- 20-
THE FOURTH ELEMENT THE GOVERNMENT MUST PROVE BEYOND A
REASONABLE DOUBT IS THAT THE GRANT MONEY THAT WAS INTENTIONALLY
MISAPPLIED WAS IN THE CARE, CUSTODY, OR CONTROL OF, CASI. ALTHOUGH
THE WORDS "CARE," "CUSTODY," AND "CONTROL" HAVE SLIGHTLY DIFFERENT
MEANINGS, FOR THE PURPOSES OF THIS ELEMENT, THEY EXPRESS A SIMILAR
IDEA. ALL THAT IS NECESSARY IS THAT CASI HAD CONTROL OVER AND
RESPONSIBILITY FOR THE GRANT MONEY.
FIFTH ELEMENT: VALUE OF MISAPPLIED GRANT MONEY
THE FIFTH AND FINAL ELEMENT THE GOVERNMENT MUST PROVE BEYOl';l)
A REASONABLE DOUBT IS THAT THE VALUE OF THE INTENTIONALLY
MISAPPLIED MONEY WAS AT LEAST $5,000.
THE WORD "VALUE" MEANS FACE, PAR OR MARKET VALUE, OR COST
PRICE, EITHER WHOLESALE OR RETAIL, WHICHEVER IS GREATER. "MARKET
VALUE" MEANS THE PRICE A WILLING BUYER WOULD PAY A WILLING SELLER
AT THE TIME THE PROPERTY WAS INTENTIONALLY MISAPPLIED.
YOU MAY AGGREGATE OR ADD UP THE VALUE OF MONEY
INTENTIONALLY MISAPPLIED FROM A SERIES OF ACTS BY THE DEFENDANT TO
MEET THIS $5,000 REQUIREMENT, SO LONG AS YOU FIND THAT EACH ACT OF
INTENTIONAL MISAPPLICATION WAS PART OF A SINGLE SCHEME BY THE
DEFENDANT TO MISAPPLY GRANT MONEY LJNDER THE CARE, CUSTODY, AND
CONTROL OF CASI.
- 21 -
THE GOVERNMENT DOES NOT HAVE TO PROVE THAT THE PARTICULAR
MONEY MISAPPLIED BY THE DEFENDANT WAS THE MONEY RECEIVED BY CASI
AS A FEDERAL GRANT. IN OTHER WORDS, IT IS NOT NECESSARY FOR THE
GOVERNMENT TO SHOW THAT THE INTENTIONALLY MISAPPLIED MONEY WAS
TRACEABLE TO THE ACTUAL FEDERAL GRANT RECEIVED BY THE
ORGANIZATION. THUS, IF THE GOVERNMENT ESTABLISHES THAT CASI
RECEIVED MORE THAN $10,000 IN FEDERAL AID DURING A ONE-YEAR PERIOD,
AND THAT, DURING THAT PERIOD, THE DEFENDANT MISAPPLIED FUNDS VALUED
AT MORE THAN $5,000 UNDER THE CARE, CUSTODY, AND CONTROL OF CASI, THE
GOVERNMENT WILL HAVE SATISFIED ITS BURDEN WITH RESPECT TO THIS
ELEMENT. MONEY IS FUNGIBLE, AND THE GOVERNMENT NEED NOT TRACE THE
$5,000 OR MORE ALLEGED TO BE INTENTIONALLY MISAPPLIED BACK TO THE
FEDERAL GRANT.
VENUE
IN ADDITION TO THE ELEMENTS OF THE OFFENSES THAT I HAVE
EXPLAINED, YOU MUST CONSIDER WHETHER ANY ACT IN FURTHERANCE OF THE
CRIME CHARGED IN THE INDICTMENT OCCURRED WITHIN THE SOUTHERN
DISTRICT OF NEW YORK. AS I HAVE INSTRUCTED YOU, THE SOUTHERN DISTRICT
OF NEW YORK INCLUDES MANHATTAN AND THE BRONX.
I SHOULD NOTE THAT ON THIS ISSUE -- A1\TD THIS ISSUE ALONE -- THE
GOVERNMENT NEED NOT PROVE VENUE BEYOND A REASONABLE DOUBT, BUT
ONLY BY A MERE PREPONDERANCE OF THE EVIDENCE. THUS, THE
- 22-
GOVERNMENT HAS SATISFIED ITS VENUE OBLIGATIONS IF YOU CONCLUDE THAT
IT IS MORE LIKELY THAN NOT THAT ANY ACT IN FURTHERANCE OF THE CRIME
CHARGED OCCURRED IN THE SOUTHERN DISTRICT OF NEW YORK.
PREPARATION OF WITNESSES
YOU HAVE HEARD EVIDENCE DURING THE TRIAL THAT WITNESSES HAVE
DISCUSSED THE FACTS OF THE CASE AND THEIR TESTIMONY WITH THE
LA WYERS BEFORE THE WITNESSES APPEARED IN COURT.
ALTHOUGH YOU MAY CONSIDER THAT FACT WHEN YOU ARE
EVALUATING A WITNESS'S CREDIBILITY, I SHOULD TELL YOU THAT THERE IS
NOTHING EITHER UNUSUAL OR IMPROPER ABOUT A WITNESS MEETING WITH
LAWYERS BEFORE TESTIFYING SO THAT THE WITNESS CAN BE AWARE OF THE
SUBJECTS HE OR SHE WILL BE QUESTIONED ABOUT, FOCUS ON THOSE SUBJECTS
AND HAVE THE OPPORTUNITY TO REVIEW RELEVANT EXHIBITS BEFORE BEING
QUESTIONED ABOUT THEM. SUCH CONSULTATION HELPS CONSERVE YOUR
TIME AND THE COURT'S TIME. IN FACT, IT WOULD BE UNUSUAL FOR A LAWYER
TO CALL A WITNESS WITHOUT SUCH CONSULTATION.
AGAIN, THE WEIGHT YOU GIVE TO THE FACT OR THE NATURE OF THE
WITNESS'S PREPARATION FOR HIS OR HER TESTIMONY AND WHAT INFERENCES
YOU DRAW FROM SUCH PREPARATION ARE MATTERS COMPLETELY WITHIN
YOUR DISCRETION.
- 23 -
EXPERT TESTIMONY
YOU HAVE HEARD TESTIMONY FROM WHAT WE CALL AN EXPERT
WITNESS. AN EXPERT WITNESS IS A PERSON WHO BY EDUCATION OR
EXPERIENCE HAS ACQUIRED LEARNING OR EXPERIENCE IN A SCIENCE OR A
SPECIALIZED AREA OF K.!"\fOWLEDGE. SUCH WITNESSES ARE PERMITTED TO GIVE
THEIR OPINIONS AS TO RELEVANT MATTERS IN WHICH THEY PROFESS TO BE
EXPERT AND GIVE THEIR REASONS FOR THEIR OPINIONS. EXPERT TESTIMONY IS
PRESENTED TO YOU ON THE THEORY THAT SOMEONE WHO IS EXPERIENCED IN
THE FIELD CAN ASSIST YOU IN UNDERSTANDING THE EVIDENCE OR IN
REACHING AN INDEPENDENT DECISION ON THE FACTS.
NOW, YOUR ROLE IN JUDGING CREDIBILITY APPLIES TO EXPERTS AS WELL
AS TO OTHER WITNESSES. YOU SHOULD CONSIDER THE EXPERT OPINIONS THAT
WERE RECEIVED IN EVIDENCE IN THIS CASE AND GIVE THEM AS MUCH OR AS
LITTLE WEIGHT AS YOU THINK THEY DESERVE. IF YOU SHOULD DECIDE THAT
THE OPINION OF AN EXPERT WAS NOT BASED ON SUFFICIENT EDUCATION OR
EXPERIENCE OR ON SUFFICIENT DATA, OR IF YOU SHOULD CONCLUDE THAT THE
TRUSTWORTHINESS OR CREDIBILITY OF AN EXPERT IS QUESTIONABLE FOR ANY
REASON, OR IF THE OPINION OF THE EXPERT WAS OUTWEIGHED, IN YOUR
JUDGMENT, BY OTHER EVIDENCE IN THE CASE, THEN YOU MIGHT DISREGARD
THE OPINION OF THE EXPERT ENTIRELY OR IN PART.
ON THE OTHER HAND, IF YOU FIND THE OPINION OF AN EXPERT IS BASED
ON SUFFICIENT DATA, EDUCATION AND EXPERIENCE, AND THE OTHER
- 24-
EVIDENCE DOES NOT GIVE YOU REASON TO DOUBT HIS CONCLUSIONS, YOU
WOULD BE JUSTIFIED IN PLACING GREAT RELIANCE ON HIS TESTIMONY.
PERSONS NOT ON TRIAL
IF YOU CONCLUDE THAT OTHER PERSONS MAY HAVE BEEN INVOLVED IN
CRIMINAL ACTS CHARGED IN THE INDICTMENT, YOU MAY NOT DRAW ANY
INFERENCE, FAVORABLE OR UNFAVORABLE, TOWARD EITHER THE
GOVERNMENT OR THE DEFENDANT FROM THE FACT THAT THOSE PERSONS ARE
NOT NAMED AS DEFENDANTS IN THIS INDICTMENT OR ARE NOT PRESENT AT
THIS TRIAL.
IN ADDITION, YOU SHOULD NOT SPECULATE AS TO THE REASONS THAT
INDIVIDUALS OTHER THAN THE DEFENDANT ARE NOT DEFENDANTS IN THIS
TRIAL. THOSE MATTERS ARE WHOLLY OUTSIDE YOUR CONCERN AND HAVE NO
BEARING ON YOUR FUNCTION AS JURORS IN THIS TRIAL.
UNCALLED WITNESS - EQUALLY A V AILABLE TO BOTH SIDES
BOTH THE GOVERNMENT AND THE DEFENDANT HAVE THE SAME POWER
TO SUBPOENA WITNESSES TO TESTIFY ON THEIR BEHALF. IF A POTENTIAL
WITNESS COULD HAVE BEEN CALLED BY THE GOVERNMENT OR BY THE
DEFEl\1DANT AND NEITHER PARTY CALLED THE WITNESS, THEN YOU MAY DRAW
THE CONCLUSION THAT THE TESTIMONY OF THE ABSENT WITNESS MIGHT HAVE
25
BEEN UNFAVORABLE TO THE GOVERNMENT OR TO THE DEFENDANT OR TO
BOTH PARTIES.
ON THE OTHER HAND, IT IS EQUALLY WITHIN YOUR PROVINCE TO DRAW
NO INFERENCE AT ALL FROM THE FAILURE A PARTY TO CALL A WITNESS.
YOU SHOULD REMEMBER THAT THERE IS NO DUTY ON EITHER SIDE TO
CALL A WITNESS WHOSE TESTIMONY WOULD BE MERELY CUMULATIVE OF
TESTIMONY ALREADY IN EVIDENCE, OR WHO WOULD MERELY PROVIDE
ADDITIONAL TESTIMONY TO FACTS ALREADY IN EVIDENCE.
PARTICULAR INVESTIGATIVE TECHNIQUES NOT REOUIRED
YOU HAVE HEARD REFERENCE, IN THE TESTIMONY AND IN THE
ARGUMENTS OF DEFENSE COUNSEL IN THIS CASE, ABOUT THE FACT THAT
CERTAIN INVESTIGATIVE TECHNIQUES WERE NOT USED BY LAW ENFORCEMENT
AUTHORITIES. THERE IS NO LEGAL REQUIREMENT THAT THE GOVERNMENT
PROVE ITS CASE THROUGH ANY PARTICULAR MEANS. WHILE YOU ARE TO
CAREFULLY CONSIDER THE EVIDENCE PRESENTED BY THE GOVERNMENT, YOU
NEED NOT SPECULATE AS TO WHY THEY USED THE TECHNIQUES THEY DID, OR
WHY THEY DID NOT USE OTHER TECHNIQUES. THE GOVERNMENT IS NOT ON
TRIAL, AND LAW ENFORCEMENT TECHNIQUES ARE NOT YOUR CONCERN.
YOUR CONCERN IS TO DETERMINE WHETHER OR NOT, BASED ON THE
EVIDENCE OR LACK OF EVIDENCE, THE GUILT OF THE DEFENDANT HAS BEEN
PROVEN BEYOND A REASONABLE DOUBT.
26
EVIDENCE OF GOOD CHARACTER
THERE IS TESTIMONY IN THIS CASE OF THE PREVIOUS GOOD CHARACTER
OF THE DEFENDANT. THIS TESTIMONY IS NOT TO BE TAKEN BY YOU AS THE
WITNESSES' OPINION AS TO WHETHER THE DEFENDANT IS GUILTY OR NOT
GUILTY. THAT QUESTION IS FOR YOU ALONE TO DETERMINE. INDEED, SOME OF
THE CHARACTER WITNESSES TESTIFIED THAT THEY HAD NO DIRECT, PERSONAL
KNOWLEDGE OF THE FACTS AND CIRCUMSTANCES WHICH WERE THE FOCUS OF
THIS CASE. YOU SHOULD CONSIDER EVIDENCE OF GOOD CHARACTER
TOGETHER WITH ALL OTHER FACTS AND ALL THE OTHER EVIDENCE IN
DETERMINING WHETHER THE PROSECUTION HAS SUSTAINED ITS BURDEN OF
PROVING THE DEFENDANT'S GUILT BEYOND A REASONABLE DOUBT. EVIDENCE
OF GOOD CHARACTER MAY IN ITSELF CREATE A REASONABLE DOUBT WHERE
WITHOUT SUCH EVIDENCE NO REASONABLE DOUBT EXISTS. BUT IF, FROM ALL
THE EVIDENCE, YOU ARE SATISFIED BEYOND A REASONABLE DOUBT THAT THE
DEFENDANT IS GUILTY, A SHOWING THAT THE DEFENDANT PREVIOUSLY
ENJOYED A REPUTATION OF GOOD CHARACTER DOES NOT JUSTIFY OR EXCUSE
THE OFFENSE, AND YOU SHOULD NOT ACQUIT THE DEFENDANT MERELY
BECAUSE YOU BELIEVE THAT HE HAD BEEN A PERSON OF GOOD REPUTE.
CHARTS AND SUMMARIES
SOME OF THE EXHIBITS THAT WERE ADMITTED INTO EVIDENCE WERE
CHARTS. THESE CHARTS WERE INTRODUCED BASICALLY AS SUMMARIES. THEY
27
ARE NOT DIRECT EVIDENCE. THEY ARE SUMMARIES OF THE EVIDENCE, AND
ARE ADMITTED AS AIDS TO YOU. THEY ARE NOT IN AND OF THEMSELVES ANY
EVIDENCE. THEY ARE INTENDED ONLY TO BE OF ASSISTANCE TO YOU IN
CONSIDERING THE EVIDENCE DURING YOUR DELIBERATIONS.
IN PRESENTING THE EVIDENCE WHICH YOU HAVE HEARD, IT IS CLEARLY
EASIER AND MORE CONVENIENT TO UTILIZE SUMMARY CHARTS THAN TO PLACE
ALL OF THE RELEVANT DOCUMENTS IN FRONT OF YOU. IT IS UP TO YOU TO
DECIDE WHETHER THOSE CHARTS FAIRLY AND CORRECTLY PRESENT THE
INFORMATION IN THE TESTIMONY A:t\'D THE DOCUMENTS ADMITTED IN
EVIDENCE. THE CHARTS ARE NOT TO BE CONSIDERED BY YOU AS DIRECT PROOF
OF ANYTHING. THEY ARE MERELY GRAPHIC DEMONSTRATIONS OF WHAT THE
UNDERLYING TESTIMONY AND DOCUMENTS ARE.
TO THE EXTENT THAT THE CHARTS CONFORM WITH WHAT YOU
DETERMINE THE UNDERLYING EVIDENCE TO BE, YOU SHOULD ACCEPT THEM.
BUT ONE WAY OR THE OTHER, REALIZE THAT THE CHART IS NOT IN AND OF
ITSELF DIRECT EVIDENCE. THEY ARE MERELY VISUAL AIDS. THEY ARE
NOTHING MORE.
RIGHT TO SEE EXHIBITS AND HEAR TESTIMONY; COMMUNICATIONS WITH
COURT
YOU ARE ABOUT TO GO INTO THE JURY ROOM AND BEGIN YOUR
DELIBERATIONS. IF DURING THOSE DELIBERATIONS YOU WANT TO SEE OR
HEAR ANY OF THE EXHIBITS, THEY WILL BE SENT TO YOU IN THE JURY ROOM
28
UPON REQUEST. IF YOU WANT ANY OF THE TESTIMONY READ, THAT CAN ALSO
BE DONE. BUT PLEASE REMEMBER THAT IT IS NOT ALWAYS EASY TO LOCATE
WHAT YOU MIGHT WANT, SO TRY TO BE AS SPECIFIC AS YOU POSSIBLY CAN IN
REQUESTING EXHIBITS OR PORTIONS OF THE TESTIMONY WHICH YOU MAY
WANT.
YOUR REQUESTS FOR EXHIBITS OR TESTIMONY -- IN FACT ANY
COMMUNICATION WITH THE COURT -- SHOULD BE MADE TO ME IN WRITING,
SIGNED BY YOUR FOREPERSON, AND GIVEN TO ONE OF THE MARSHALS. I WILL
RESPOND TO ANY QUESTIONS OR REQUESTS YOU HAVE AS PROMPTLY AS
POSSIBLE EITHER IN WRITING OR BY HAVING YOU RETURN TO THE COURTROOM
SO I CAN SPEAK TO YOU IN PERSON. IN ANY EVENT, DO NOT, IN ANY NOTE OR
OTHERWISE, TELL ME OR ANYONE ELSE HOW YOU OR ANY GROUP OF YOU HAVE
VOTED OR PROPOSE TO VOTE ON THE ISSUE OF THE DEFENDANT'S GUILT UNTIL
AFTER A UNANIMOUS VERDICT IS REACHED. IN OTHER WORDS, DO NOT TELL
ME OR ANYONE ELSE WHAT YOUR NUMERICAL DIVISION IS -- HOW MANY THINK
ONE WAY AND HOW MANY THINK ANOTHER -- IF YOU ARE DIVIDED AT ANY
POINT ON HOW TO DECIDE THE CASE BECAUSE UNTIL YOU HAVE REACHED A
VERDICT, YOU HAVE NO VERDICT.
SUBMITTING THE INDICTMENT
I AM SENDING A COpy OF THE INDICTMENT INTO THE JURy ROOM FOR
YOU TO HAVE DURING YOUR DELIBERATIONS. YOU MAY USE IT TO READ THE
CRIME WITH WHICH THE DEFENDANT IS CHARGED WITH COMMITTING. YOU
29
ARE REMINDED, HOWEVER, THAT AN INDICTMENT IS MERELY AN ACCUSATION
AND IS NOT TO BE USED BY YOU AS ANY PROOF OF THE CONDUCT CHARGED.
DUTY TO CONSULT AND NEED FOR UNANIMITY
AS ALREADY EXPLAINED IN THESE INSTRUCTIONS, THE GOVERNMENT, TO
PREVAIL ON THE CHARGE IN THE INDICTMENT, MUST PROVE THE ESSENTIAL
ELEMENTS OF THAT COUNT IN THE INDICTMENT BEYOND A REASONABLE
DOUBT. IF IT SUCCEEDS, YOUR VERDICT SHOULD BE GUILTY AS TO THAT
COUNT; IF IT FAILS, IT SHOULD BE NOT GUILTY AS TO THAT COUNT. TO REPORT
A VERDICT, YOUR VOTE MUST BE UNANIMOUS.
YOUR FUNCTION IS TO WEIGH THE EVIDENCE IN THE CASE AND
DETERMINE WHETHER OR NOT THE DEFENDANT IS GUILTY OF THE COUNT IN
THE INDICTMENT, SOLELY UPON THE BASIS OF SUCH EVIDENCE.
VERDICT FORM
NOW, TO AID YOU IN YOUR DELIBERATIONS, AND SO THAT A PROPER
RECORD CAN BE MADE OF YOUR VERDICT, THE COURT HAS PREPARED A FORM
OF VERDICT. I AM ASKING THAT THE VERDICT FORM BE SIGNED BY THE
FOREPERSON AND BE FILED WITH THE COURT. WHEN YOU HAVE UNANIMOUSLY
AGREED ON YOUR VERDICT, THEN THE FOREPERSON WILL FILL IT IN AND SIGN
IT, AND YOU TELL THE MARSHAL YOU HAVE REACHED A VERDICT. THEN YOU
WILL BE ASKED TO COME BACK INTO OPEN COURT AND THE CLERK WILL ASK
WHETHER YOUR VERDICT IS UNANIMOUS.
30
[DISTRIBUTE AND READ VERDICT FORM]
NOW, EACH JUROR IS ENTITLED TO HIS OR HER OPINION; EACH SHOULD,
HOWEVER, EXCHANGE VIEWS WITH HIS OR HER FELLOW JURORS. THAT IS THE
VERY PURPOSE OF JURY DELIBERATION -- TO DISCUSS AND CONSIDER THE
EVIDENCE; TO CONSIDER THE ARGUMENTS OF FELLOW JURORS; TO PRESENT
YOUR INDIVIDUAL VIEWS; TO CONSULT WITH ONE ANOTHER; AI\TD TO REACH AN
AGREEMENT BASED SOLELY AND ENTIRELY ON THE EVIDENCE OR THE LACK OF
EVIDENCE -- IF YOU CAN DO SO WITHOUT VIOLATION TO YOUR OWN
INDIVIDUAL JUDGMENT.
EACH OF YOU MUST DECIDE THE CASE FOR YOURSELF, AFTER
CONSIDERATION WITH YOUR FELLOW JURORS OF THE EVIDENCE IN THE CASE.
BUT YOU SHOULD NOT HESITATE TO CHANGE Al'i OPINION WHICH, AFTER
DISCUSSION WITH YOUR FELLOW JURORS, APPEARS INCORRECT.
HOWEVER, IF, AFTER CAREFULLY CONSIDERING ALL THE EVIDENCE AND
THE ARGUMENTS OF YOUR FELLOW JURORS, YOU HOLD A CONSCIENTIOUS VIEW
THAT DIFFERS FROM THE OTHERS, YOU ARE NOT TO CHANGE YOUR POSITION
SIMPLY BECAUSE YOU ARE OUTNUMBERED. IF THEY DO NOT CONVINCE YOU
THAT YOUR POSITION IS INCORRECT, YOU SHALL ADHERE TO YOUR POSITION
REGARDLESS OF THE LATENESS OF THE HOUR OR ANY PERSONAL
INCONVENIENCE IT MAY CAUSE YOU.
31
YOUR FINAL VOTE MUST REFLECT YOUR CONSCIENTIOUS BELIEF AS TO
HOW THE ISSUES SHOULD BE DECIDED.
CONCLUSION -- CHARGE AS A WHOLE, DUTY TO CONSULT, SELECTION OF A
FOREPERSON
NOW, I HAVE VIRTUALLY FINISHED WITH THE CHARGE AND MY
INSTRUCTIONS TO YOU AND I WANT TO THA:t\JK YOU AGAIN FOR YOUR PATIENCE
AND ATTENTIVENESS. I WILL SEND A COPY OF THE CHARGE IN TO YOU SO THAT
YOU CAN USE IT DURING YOUR DELIBERATIONS. AGAIN, PLEASE REMEMBER
THAT NO SINGLE PART OF THIS CHARGE IS TO BE CONSIDERED IN ISOLATION.
YOU ARE NOT TO CONSIDER ANY ONE ASPECT OF THIS CHARGE OUT OF
CONTEXT. THE ENTIRE CHARGE IS TO BE CONSIDERED AS AN INTEGRATED
STATEMENT AND TO BE TAKEN TOGETHER.
NOW, I SAY THIS NOT BECAUSE I THINK IT IS NECESSARY BUT IT IS THE
TRADITION OF THIS COURT. I ADVISE THE JURORS TO BE POLITE AND
RESPECTFUL TO EACH OTHER AS I AM SURE YOU WILL BE IN THE COURSE OF
YOUR DELIBERATIONS SO THAT EACH JUROR MAY HAVE HIS OR HER POSITION
MADE CLEAR TO ALL THE OTHERS.
THE FOREPERSON HAS NO GREATER AUTHORITY THAN A1'<'Y OTHER JUROR
BUT WILL BE RESPONSIBLE FOR SIGNING ALL COMMUNICATIONS TO THE COURT
AND FOR HANDING THEM TO THE MARSHAL DURING DELIBERATIONS. YOU
SHOULD ELECT ONE PERSON TO ACT AS FOREPERSON AT THE OUTSET OF YOUR
DELIBERATIONS. I SOMETIMES SUGGEST THAT IT IS EASIER TO ELECT JUROR NO.
32
1 - THAT IS, MS. YOUNG, BUT SOMETIMES JUROR 1 DOESN'T WANT TO ACT AS
FOREPERSON, SO YOU ALL CAN ELECT WHOMEVER YOU WANT. THAT IS YOUR
PREROGATIVE. THE MAl'.'NER IN WHICH THE JURY CONDUCTS ITS
DELIBERATIONS, OF COURSE, IS COMPLETELY WITHIN YOUR DISCRETION. YOU
MAY FOLLOW ANY PROCEDURE THAT YOU CHOOSE, PROVIDED THAT EACH
JUROR IS PRESENTED WITH AMPLE OPPORTUNITY TO EXPRESS HIS OR HER VIEW.
THAT WAY WHEN YOU DO REACH A VERDICT YOU WILL KNOW THAT IT IS A
JUST ONE, MADE WITH THE FULL PARTICIPATION OF ALL THE JURORS AND THAT
YOU HAVE F AITHFULL Y DISCHARGED YOUR OATH. I REMIND YOU ONCE AGAIN
THAT YOUR DUTY IS TO ACT WITHOUT FEAR OR FAVOR AND THAT YOU MUST
DECIDE THE ISSUES ON TRIAL BASED SOLELY ON THE EVIDENCE AND MY
INSTRUCTIONS ON THE LAW.
THANK YOU.
NOW I WILL HAVE TO ASK YOU TO REMAIN SEATED WHILE I CONFER WITH
COUNSEL TO SEE IF I MISSED PART OF THE CHARGE.
[SWEAR THE MARSHAL.]
[JURY RETIRES]
33
8AKMKARS Sentence
1
2 ------------------------------x
4 v. 07 Cr. 541 (RPP)
5 DANIEL B. KARRON,
6 Defendant.
7 ------------------------------x
8 New York, N.Y.
October -20, 2008
9 2:30 p.m.
10
Before:
11
12
District Judge
13
14 APPEARANCES
STEVE KWOK
17 CHRISTIAN EVERDELL
18
RUBINSTEIN & COROZZO
19 Attorneys for Defendant
BY: RONALD RUBINSTEIN
20
21
22
ALSO PRESENT: KIRK YAMATANI
23 RACHEL ONDRIK
24
25
(212) 805-0300
2
8AKMKARS Sentence
1 (Case called)
2 MR. KWOK: Good afternoon, your Honor, Steve Kwok for
3 the government. With me at counsel table is Chris Everdell.
4
5
THE COURT: Good afternoon, Mr. Kwok and Mr. Everdell.
MR. RUBINSTEIN: Good afternoon, your Honor, Ron
6 Rubinstein for the defendant. I have to apologize. I thought
7 it was 2:30, the sentence. It must have been a senior moment.
8
9
10
11
12
13
14
15
'THE COURT: I have a presentence report. The latest
one is dated October 7, 2008. Has the defendant seen the
presentence reports, including the latest one, October 7, 2008?
THE COURT: He has read them?
THE COURT: Are there any changes to be made?
MR. RUBINSTEIN: No. Except for the objections we
16 have --
17 THE COURT: Except for the objections that you have in
18 your letter of October 13 and also in a letter received Friday,
19 October 17, 2008, those two letters to the Court?
20
21
MR. RUBINSTEIN: That's correct, your Honor.
THE COURT: The government sent us a letter dated
22 October 17 also. I have not received any response by the
23 government to your letter of October 17.
24 MR. KWOK: The government did not submit a response to
25 the latest letter.
(212) 805-0300
1
2
3
8AKMKARS
3
Sentence
THE COURT: You're willing to proceed on that basis?
MR. KWOK: The government is ready to proceed.
THE COURT: Then I guess the best way -- I don't know
4 how the parties think the best way to proceed, but it would
5 appear to me that the best way to proceed is by considering
6 Mr. Rubinstein's letter of October 17, which disputes the
7 computation of loss contained in the presentence report and in
8 the government's letter.
9 I might say that I've had some concerns about the loss
10 computation. It's not clear to me that a failure to get
11 approval of expenditures from the grant officer amounts to the
12 same as an intentional misapplication of funds. And to the
13 extent that we have here in this case, as I understand it, the
14 final budget as approved in December 2001, and subsequent to
15 the applications to amend the budget were not approved. So the
16 requisite documents that the Court has to examine of the budget
17 contained in -- is it Exhibit 12?
18 MR. KWOK: Your Honor, I think the last approved
19 budget is the budget attached to Government Exhibit 22. It's
20 the third page --
21 THE COURT: It's Exhibit 12. Just a second. Exhibit
22 12 is the original budget that Dr. Karron signed. Then there
23 is Exhibit 20. 21 was just an administrative contact change.
24 Exhibit 22 contains the final budget approved -- amended budget
25 approved by the agency.
(212) 805-0300
1
8AKMKARS Sentence
So I have difficulties. For instance, looking at
4
2 Exhibit 20 and 22 and the fringe benefits being allowed at 34
3 percent of salary, as I see it in the documents. I have
4 difficulty also with the tabulation contained in Government
5 Exhibit 114 and 115 because they are just rough calculations,
6 as I see it. I don't know who compiled them, but I gather it
7 was Ms. Riley, but we never went into the detail about, for
8 instance, the statement in the tabulation that Dr. Karron's
9 salary budgeted.at 175, various cash. He spent 200,486,
10 according to that tabulation. Those amounts, as I saw them,
11 err were salary. They involved loans made which someone, I
12 don't know whom, I presume Ms. Riley, determined the equivalent
13 of salary.
14 AsI alluded to earlier, the fringe benefits figure in
15 this tabulation -- I'm looking at 114 says that Dr. Karron
16 didn't spend $40,337 in fringe benefits, and yet in the same
17 tabulation it says that the fringe benefits were not allowed
18 and spent $4,081. That whole scenario .of fringe benefits is
19 somewhat illusive to me.
20 The testimony, as I recollect it, was CASI, the
21 corporation, did not have a formal benefit plan and they were
22 endeavoring to compile one during the time of the grant. And
23 instead what Dr. Karron did was to pay benefits just as he was
24 accustomed to paying them, for whatever medical expenses the
25 various employees had for their wives. I have some difficulty
(212) 805-0300
8AKMKARS Sentence
5
1 in, 1, finding that there was criminal intent with respect to
2 these expenditures, which are all on Government 114, and with
3 the manner in which those overexpenditures were computed. It
4 seems to me this is just a rough calculation and not something
5 that a Court could rely on in a criminal case. I'll hear from
6 you. That's my assessment of that proof.
7 MR. EVERDELL: Your Honor, I think; in fact, I know
8 114 and 115 are based on Ms. Riley's underlying analysis.
9
10
11
THE COURT: The spreadsheets.
MR. EVERDELL: Yes, the spreadsheets.
THE COURT: But it doesn't meet it because in her
12 spreadsheet she doesn't have any payment like $248,000 worth of
13 salary in year one.
14 MR. KWOK: Your Honor, she does. That number is the
15 net transfers.
16
17
THE COURT: I've looked at salary, I think.
MR. KWOK: Including the tax withholding, I believe is
18 the testimony that she testified to. When you take into
19 account all the money that Dr. Karron took out from CASI, minus
20 the amount that he paid back --
21 THE COURT: That isn't salary. We are talking about
22 salary. I don't see salary. There is nothing like salary in
23 those d o c ~ ~ e n t s that equals 248 -- $200,488.
24 MR. KWOK: Salary is just a heading. What she meant
25 by this is money that defendant took, pure money, not in terms
(212) 805-0300
8AKMKARS Sentence
6
1 of expenditure; cash that he took from CASI, whether in the
2 form of quote unquote loan or whether in terms --
3 THE COURT: Show me. She has no tabulation putting
4 114 into context with her 110, Exhibit 110.
5 MR. KWOK: If your Honor could look at Government
6 Exhibit 110.
7
8
9
10 it here.
11
12
THE COURT: I did look at Exhibit 110.
MR. ~ K W O K : Page 38.
THE COURT: I have it here. I don't know that I have
MR. KWOK: Page 38 of 44.
THE COURT: I guess we will have to get 110, because I
13 don't think I have it here, but I'm fully familiar with it. I
14 think it's in Mr. Rubinstein's submission, as a matter of fact.
15 MR. KWOK: That page shows money going to the
16 defendant and money coming from the defendant. So taking
17 THE COURT: What page are you referring to? Maybe
18 it's in Mr. Rubinstein
19
20
21
22
23
24
25
MR. KWOK: 38 of 44.
THE COURT: He has payroll. Looking at 13 of 44?
MR. KWOK: Page 38 of 44.
THE COURT: That's loan and loan repay. That's not
salary.
MR. KWOK: If you look at the memo line, it is salary.
Look at, for example, the third check, per check register,
(212) 805-0300
8AKMKARS
1 salary advance.
Sentence
7
2
3
THE COURT: That one she treated as a loan.
MR. KWOK: These are expressed in a spreadsheet as
4 loans, but they are all money going to the defendant.
5
6
THE COURT: I understand. It's just not salary.
MR. KWOK: You can give it whatever label you like,
7 but the bottom line is, the defendant took from the company
8 this much money which added to 188.
9
THE COURT: I don't doubt that's what your
10 are.
11 MR. KWOK: If I can just correct a misimpression,
12 Government Exhibit 114 is not a rough calculation. It's not a
13 guess. It's based entirely on Government Exhibit 110 which, In
14 turn, is based entirely on the bank records that she reviewed.
15
THE COURT: They are certainly not in those records, a
16 showing of $200,488 in salary.
17
18
MR. KWOK: If I can explain how she got that number.
THE COURT: It's denominated salary. It's a table
19 saying salary. I don't care how she got the number.
20 MR. KWOK: But that doesn't really affect the loss
21 amount. You can label it and give it whatever label you want.
22 But at the end of the day -- let me back up one step. The
23 grant says Dr. Karron can take from the grant for his own use,
24 whether we call it salary or compensation for efforts that he
25 put into the grant, $175,000. That's the amount -- the portion
(212) 805-0300
8AKMKARS Sentence
8
1 of the pie that he can get from the grant, $175,000.
2 THE COURT: He can get a salary of 175,000 is what it
3 says in the budget, plus 34 percent for fringe benefits.
4 MR. KWOK: If he took from the grant money in addition
to $175,000, putting aside fringe benefit for a second, any
6 amount above that is a disallowed amount, whether you call it
7 excess salary or call it a loan that never gets paid back. It
8 doesn't really matter. At the end of the day, the budget says
9 $175,000 and no more. If you take more than that, the first
10 dollar above $175,000 is disallowed. Whether you call that
11 excess salary or loan, it doesn't really matter.
12 THE COURT: I'm not dealing with ifs. I'm dealing
13 with what the record shows. This doesn't show what the records
14 show as far as salary goes.
15 MR. KWOK: It shows that, just for simplicity, she
16 doesn't want to create that many different categories. Salary,
17 loan.
18 THE COURT: She has got a salary category. She shows
19 it. Go on a couple of pages. Payroll, next page, $35,293.58.
20 MR. EVERDELL: Your Honor, also, to bear in mind with
21 this, these entries on the spreadsheet are based on how
22 Dr. Karron himself characterized things in the documents. So
23 we have checks here for pay periods that are quote unquote
24 payroll checks for salary. However, he called other things
25 loans or other things like that.
SOUTHERN.DISTRICT REPORTERS, P.C.
(212) 805-0300
9
8AKMKARS Sentence
1 Now, Lynn Riley, in doing this analysis, put those
2 together in the same category because as Mr. Kwok was saying,
3 it was money paid from CASI to Dr. Karron. If he is allowed a
4 payroll, a salary of $175,000, it doesn't necessarily matter
5 how the defendant himself characterizes those paYments to
6" himself. Whether he calls them payroll checks or whether he
7 calls them loans, it's still a paYment to him personally from
8 CASI funds. So her object, I think in doing it this way, was
9 to sweep together those things which were direct paYments from
10 the company to Dr. Karron.
11 THE COURT: I don't dispute that. But the tabulation
12 is not something that I can go along with. It is not salary.
13 MR. KWOK: We have no problem with that. If you want
14 to call it salary/loans or just simply money to Karron, excess
15 money to Karron, it doesn't really affect the loss amount
16 because at the end"of the day the loss amount is simply
17 arithmetic, what he took from CASI minus what he is supposed to
18 get under the grant, which is $175,000. We have no problem, if
19 it makes things clearer, instead of calling that salary, we
20 could call that, simply, excess money to Dr. Karron.
21 THE COURT: You see what he did was -- I think it is
22 borne out by the defendant's papers to some degree -- is he"
23 took a very low salary to pay back the loans. Is that a fair
24 statement?
25 MR. EVERDELL: Your Honor, that fact that you just
(212) 805-0300
8AKMKARS Sentence
10
1 said, the fact that he didn't take his full salary, is taken
2 into account
3 THE COURT: I didn't say that. I want to know whether
4 you're disputing what I just said.
5 MR. EVERDELL: \Nhat I agree with is that, yes, the
6 defendant did not take his full salary in the sense that when
7 you look at salary in checks, they are less than the $175,000
8 of quote unquote salary.
9
10
THE COURT: You saw there was less withholding, right?
MR. EVERDELL: But he paid himself in other ways in
11 things he do did not characterizing as salary.
12 THE COURT: Was there less withholding or not? You
13 better confer.
14 MR. EVERDELL: Your Honor, apparently what happened
15 was, he wasn't characterizing anything -- there was no
16 withholding until an accountant came in towards the end of year
17 one and said, you have to call these things payroll, you have
18 to take your salary and then you have to calculate withholding.
19 And that account went back retroactively and looked at these
20 payments and did the withholding retroactively with all these
21 payments to him which had not been characterized.
22 THE COURT: There are documents appended to the
23 defendant's papers which indicate that the withholding was
24 taken timely. That's not borne out by what you say, showing
25 Mr. Rubinstein's letter of Friday. Where did I put it? He has
(212) 805-0300
8AKMKARS Sentence
11
1 got documents showing money being withheld to calculate salary.
2
3
MP_. KWOK: Which page are you looking at, your Honor.
THE COURT: I'm trying to find the letter now.
4 Attached to it, if you look, it's about ten pages in. It shows
5 the salary, August 2, 2002, salary. It shows outstanding
6 salary of $61,918; federal withholding tax, minus 17,104;
7 social security deduction, 2,091; Medicare and employee 462.81.
8 New York withholding, New York City resident also:. It I S all in
9 there. He also has one for the pay period 7/01/2002.' Maybe
10 that's the same.
11
12
13 top.
14
MR. KWOK: Are you looking at this page?
THE COURT: Yes, I believe so. It has a check at the
MR. EVERDELL: Your Honor, I think this may actually
15 reflect what we are talking about. If you look at check No.
16 10401. Is that the page you're looking at?
17
18
THE COURT: Yes.
MR. EVERDELL: That looks like it was paid out on
19 August 2, 2002, which is towards the end of year one of the
20 grant. If you ,look at the spreadsheet that Ms. Riley created,
21 it shows that the first actual paid check that he got was in
22 May of 2002; again, sort of towards the end of year one of the
23 grant. This is, as we are getting towards the end of year one,
24 where Dr. Karron is being told that needs to pullout
25 withholding. I don't think this contradicts what we were
(212) 805-0300
8AKMKARS
1 saying before.
Sentence
12
2 THE COURT: It does contradict what was said. What
3 you said is not consistent with what you're saying now. That's
4 the trouble with these analyses. They are fine as far as they
5 go, but they do not tell the story.
6 Anyway, there are, similarly, prescriptions, first
7 item in Mr. Rubinstein's letter. I don't think that the item
8 is prescriptions. I think the item is other and it included
9 other matters such as bank processing, consultants, lawyers,
10 and bookkeeping.
11 MR. EVERDELL: Your Honor, if I can just step back for
12 one second and just talk about the general position of the
13 government on loss, which is that unless it's specifically
14 budgeted for -- that it has been preapproved in a budget or has
15 had subsequent approval authority from NIST, or whatever
16 expenditure it may be, that it's overbudget or an item in a
17 category that is not a budgeted category, that constitutes a
18 loss to the government. The reason why is --
19 THE COURT: It has to be -- it seems to me it has to
20 be a loss as to which there was criminal intent.
21
22
MR. EVERDELL: Your Honor, I think --
THE COURT: In order for there to bean intentional
23 misapplication of funds. You have to have criminal intent
24 here. The fact that the government lost money on the grant or
25 the money wasn't expended properly does not necessarily mean
(212) 805-0300
8AKMKARS Sentence
13
1 that there was criminal intent involved in all those
2 expenditures.
3 MR. E \ ~ R D E L L : Your Honor, according to the
~
4 guidelines, the guidelines commentary, when you're looking at
5 government benefits, you are supposed to look at what the
6 intended use for the money was. For loss amount you look at
7 whatever was diverted to in unintended use. It's the
8 government's position that with this money that was given out,
9 it came with a lot of very specific spending rules and those
10 rules were clear and set forth. So that is the intended use of
11 the money.
12 We handled this money such that you would spend it in
13 accordance with these rules and that included the budgetary
14 rules, the prior approval rules, all of the other spending
15 rules that came attached to the grant. So that when money is
16 diverted elsewhere, when it is not part of an approved category
17 or overbudgeted category, that's not an intended use of the
18 money. That is not an intended use of the money because,
19 otherwise, why not just give away the grant money with no rules
20 and say, okay, here is a block of money for you to use as you
21 see fit. We won't ask you how you're spending it. Come back
22 in a year or so and tell us the progress you've made on your
23 grant. I'm sure there are grants that probably do operate that
24 way, but that's not this one. This one wanted to keep a very
25 close leash on how this money was spent, they wanted to approve
(212) 805-0300
8AKMKARS Sentence
14
1 everything that was spent and see all of the expenditures
2 beforehand so that they were on board.
3
4
THE COURT; All the expenditures that were budgeted.
MR. EVERDELL: They wanted to see a b ~ d g e t first,. yes,
5 and anything that was not in that budget or over that budget,
6 with the exception of the 10 percent rule that we are all
7 familiar with, had to be approved. The reason why they do that
8 is because, as defense counsel said many times in his own
9 submissions, this is a type of grant where the government is
10 actually very involved. So they want to keep a tight leash on
11 how this money is spent.
12 Given that that is the posture of this grant, how the
13 money is supposed to be spent, that is the intended use of the
14 money, to be spent according to budgeted items or items that
15 have been preapproved by NIST. So it's the government's
16 position that when you go outside of those categories or go
17 over budget on one of the approved categories, that still
18 constitutes a loss to the government because they have not been
19 able to exercise the control that they meant to exercise with
20 instituting these grant rules and these spending rules.
21 THE COURT: Look. Let's go right to an item that
22 bothers me, fringe benefits. They were approved at 34 percent
23 of salary. No one said what constitutes a valid, as far as I
24 could find in the papers in the court, what was a valid fringe
25 benefit and what wasn't. How can I have any confidence that
(212) 805-0300
8AKMKARS Sentence
15
1 not approved fringe benefits of $4,000 is something that is a
2 willful disregard of the Lules?
3 MR. EVERDELL: Your Honor, there are a couple of
4 things with fringe benefits which is" I believe, how this was
5 calculated. We heard testimony that there was no plan in
6 place.
7 THE COURT: I heard that, but there was no plan in
8 place from the beginning. You only found that out at a certain
9 point. No one went and checked the group out or anything in
10 advance. It says fringe benefits. The testimony is, he had a
11 cafeteria plan or whatever it was.
12 MR. KWOK: Your Honor, if I may, I think the
13 testimony --
14 THE COURT: And anything and everything could be
15 expended in the way of fringe benefits to himself and members
16 of the family and for the employees. The government may come
17 back with, oh, it wasn't in the plan, so, therefore, it
18 shouldn't be allowed, but there is no warning to the person
19 there. I can't see the criminal intent there.
20 MR. KWOK: The defendant was certainly told
21 repeatedly --
22 THE COURT: The government may have lost the money,
23 but I can't see any criminal intent.
24 MR. KWOK: The intent is when he asked a question and
25 was told no and went ahead and did it anyway. It was in the
(212) 805-0300
8AKMKARS
1 documents--
Sentence
16
2 THE COURT: He didn'L ask any question about medical
3 benefits, as far as I know; from the record.
4 MR. KWOK: If I could just address your Honor's
5 question about amount. The amount reflected on this chart is
6 simply the amount over budget because he took more salary
7 because fringe benefits is a percentage of salary. So it's
8 calculated as a fixed percentage of salary. So because he took
9 more from CASI than the amount that he was allowed, namely,
10 $175,000, the amount we just allowed him is an amount of $4,000
11 or so. It is simply an amount over budget because he took more
12 in dollars
13 THE COURT: He underspent budget through those fringe
14 benefits by $4,000 it says right above it. Look at that. This
15 is a mess.
16 MR. EVERDELL: Your Honor, I think we can make this
17 much simpler. Let me see if I can. do this. Even if you look
18 at just the categories that were nonbudgeted categories, we are
19 not talking about fringe benefits anymore, we are not talking
20 about even equipment overexpenditures, we are not talking
21 anything that w a s a c ~ u a l l y a budgeted category that had been at
22 least somewhere approved by NIST before.
23 If we are talking about everything else, that is,
24 rent, utilities, cleaning, meals, capital improvements, or
25 these other expenses which were actually not listed in the
(212) 805-0300
8AKMKARS Sentence
17
1 category other under the budget, we are already talking about
2 for years one and two of the grant, we are already talking
3 about a loss amount, under my calculation, is over $172,000. I
4 think
5 THE COURT: What figures did you use in the first year
6 of the budget to get 172,000?
7 MR. EVERDELL: I just added up in years one and years
8 two, so this would be 114 and 15.
9
10
THE COURT: Which items are you adding up?
MR. EVERDELL: I'm adding up rent, which is $60,000 in
11 year one; I'm adding up utilities, which is 16,341 in year one.
12 I'm adding up capital improvements.
13
14
15
16
17
THE COURT: Rent. You're adding up after rent what?
MR. EVERDELL: Rent was first, 60,000.
THE COURT: Utilities.
MR. EVERDELL: Utilities was second.
THE COURT: There was some testimony on utilities. He
18 got an approval.
19 MR. EVERDELL: Your Honor, I don't think there was
20 ever testimony that he got a prior approval for utilities. In
21 fact, he was told repeatedly that utilities were not allowed.
22 THE COURT: The difference between the utilities for
23 the apartment before and after the upgrade for air conditioning
24 and for the machinery --
25 MR. EVERDELL: I think the only testimony we had on
(212) 805-0300
8AKMKARS Sentence
18
1 the record is that he tried to get an approval for the
2 utilities, but he never received one.
3 THE COURT: Mr. Rubinstein's quotes a utilities f i ~ ~ r e
4 using Mr. Benedict's testimony at 1057 .. I can't find it. Here
5 it is, 1057.
6 MR. EVERDELL: I'm looking at the page he cited. Here
7 it just says -- his question is, this is Mr. Rubinstein's
8 question, and he is questioning --
9 THE COURT: And the discussions were that if he could
10 indicate the fact that there was an increase, that they could
11 be classified as direct expenses, not indirect expenses.
12 MR. EVERDELL: It says the discussions were, right,
13 that if he could demonstrate the fact that there was an
14 increase, that they could be classified as direct expenses, not
15 indirect expenses. But there was never any approval of this.
16 So at this point none of the testimony here is talking about
17 any approval of any additional utilities, expenses, or anything
18 like that.
19 THE COURT: Sounds like approval, but not written
20 approval.
21 MR. EVERDELL: He is talking to Bob Benedict. Bob
22 Benedict, I think, is a witness here who is the finance
23 manager. We are not talking to the people at NIST, who
24 actually made the approval, such as Hope Snowden. If I recall
25 correctly, Hope Snowden's testimony about utilities was simply
(212) 805-0300
!, 8AKMKARS Sentence
19
1 that there were lots of conversations that she had with the
2 defendant himself and with others about whether or not grant
3 funds could be used for utilities, and she said no.
4
5
6
7
8 them --
9
T ~ E COURT: Where is this?
MR. EVERDELL: The cites to the record?
THE COURT: Yes.
MR. EVERDELL: Your Honor, I'm afraid I don't have
THE COURT: This does say the witness summarizes his
10 testimony at the end of the page. The incremental amount of
11 additional expense caused by the grant could be classified as
12 direct expense and not indirect expense. Direct expenses are
13 allowed, regardless of what they are. Indirect expenses are
14 not allowed.
15 MR. EVERDELL: I think that that quote just says right
16 there that they are talking about a possibility, but a
17 possibility that was never actually approved. And a
18 possibility 'that was never actually budgeted. So--
19 THE COURT: It suggests not approved in writing. I
20 have seen that. I agree wi.th that. But it sounds as if it was
21 approved orally.
22 MR. EVERDELL: I don't know if I read that as that.
23 Maybe it's Mr. Benedict's understanding of what he could
24 possibly get approved under the rules.
25 THE COURT: I think that's a little bit -- the point
(212) 805-0300
1
2
3
4
5
20
I 8AKMKARS Sentence
is that the criminal intent of the defendant is important here.
And if he was proceeding on that basis, that seems to me -- I
have reason to -- it seems to me that that amount is an amount
that should n o ~ be considered in the loss calculation.
MR. EVERDELL: Your Honor, I think I have to
6 respectfully disagree with that. My colleague, Mr. Kwok, has
7 pointed me to the part in the record. This is Hope Snowden's
8 testimony on page 256 of the record where she is talking about
9 her conversations with I believe it's Dr. Karron and
10 Mr. Gurfein about expenses. And the question was:
11 What questions did he ask you, if any, during those
12 conversations?
13 And the answer lS: Was he allowed to pay for rent and
14 utilities with the ATP federal-funded grant.
15 "Q. And rent for what, rent utilities for what?
16 "A. For the condo in which at this point, I guess, CASI, the
17 company, was being housed.
18 "Q. And whose condo was that?
19 "A. Dr. Karron'scondo.
20 "Q. What was your response to the question? Can rent and
21 utilities be paid for with ATP funds?
22 "A. No. They are unallowable costs."
23 THE COURT: I understood that testimony. That comes
24 well preceding Benedict's testimony, it comes well preceding
25 the work for the apartment for the air conditioning, and that's
(212) 805-0300
8AKMKARS Sentence
21
1 what caused the utilities to go up and that's after the time
2 that Snowden is talking about, as far as I can see.
3
4
5
MF, EVERDELL: Let's just do this then, your Honor.
THE COURT: I've got to be --
MR. EVERDELL: Let's do this. Let's set aside for the
6 moment the issue of whether that $4,595 should or should not be
7 included in the loss amount.
8
9 4,000.
10
11
THE COURT: According to Mr. Rubinstein, it's not
MR. EVERDELL: I was looking at page 2 of his letter.
THE COURT: 16,341, as I understand it. The utilities
12 prior were 4595, prior to the project.
13 MR. EVERDELL: I b e l i ~ v e that's 16,341 is what the
14 government is claiming is the utilities amount for year one.
15 THE COURT: Maybe you're right. That's the
16 government's claim, not 16,000. He claims
17 MR. EVERDELL: He claims that the loss is only 4,595,
18 which is the amount of the increase, he says.
19 THE COURT: That's the prior amount of utilities, not
20 the increase. The difference should be not a loss.
21 MR. EVERDELL: I apologize, your Honor. He's claiming
22 the difference between the two Sh01lld be not included in the
23 loss.
24 But setting that aside for the moment, again, if you
25 add up the categories again that were nonbudgeted expenses,
(212) 805-0300
8AKMKARS Sentence
22
1 even leaving that issue aside, I guess let's just say that that
2 is almost $12,000, not quite, of difference.
3 If you go to the next category, which is capital
4 improvement, in year on2 is 11,248. Again, this has no --
5 there is nowhere in the budget where this stuff is talked
6 about. There is no prior approval from NIST for this sort of
7 thing. Mr. Benedict is using the money, same which he does for
8 cleaning and meals,to do whatever he feels like he wants to do
9 with it, and he's spending it on outside budget categories.
10 THE COURT: Let's deal with capital improvements.
11 They claim that this should be more profited by the site
12 preparation.
13 MR. EVERDELL: But even site preparation isn't a
14 budgeted category.
15
16
THE COURT: I don't know that it is.
MR. EVERDELL: It's not, according to the exhibits.
17 Basically, what the defense counsel has tried to do in this
18 submission is take every possible expenditure that he can think
19 and try to claim that if it had some tangential or arguable
20 benefit to the research, then it can't be qualified as a loss.
21 That simply can't be workable, your Honor, because almost every
22 single expenditure has some benefit to the research. You just
23 can't work that standard. It's unworkable.
24 So what we decided and what our loss calculation and
25 theory is about is whether or not it's in budget because that
(212) 805-0300
8AKMKARS Sentence
23
1 is clearly what the intended use of the money was. We give you
2 this money so thatyou can spend it according to the rules, and
3 they were very clear about that. There was lots of testimony
4 about how the rules were supposed to be followed, how they
5 explained the rules to them, how they had to adhere to their
6 budget, and for good reason, and how they needed approvals for
7 things that were outside of the budget.
8 So while I understand that certain things that the
9 defendant is claiming may arguably have benefited the research
10 in some way, that's simply not the standard we can work with,
11 because then there would be no loss at all, it would seem like.
12 Even meals. People have to eat in order to conduct research,
13 but you can't spend federal grant money to do it. Yes, you
14 need to clean things in order to have your house cleaned, but
15 you can't spend federal grant money to do it. It has to be
16 budgeted if you're going to do it that way.
17 Things like site improvement, capital improvement,
18 whatever it is, things that may sound even arguably better than
19 meals and cleaning in terms of how it might affect the
20 research, it doesn't count because it's not budgeted. There is
21 a good reason for that. The government needed to understand
22 and approve all the expenditures related to the research,
23 whether it was because it was in a budget or because someone
24 came to them later and asked for approval for something that
25 was outside of the budget .
. SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
1
8AKMKARS Sentence
THE COURT: Let's not quite put it that way because
24
2 there is this 10 percent rule that they have got in there.
3 MR. EVERDELL: Yes, your Honor. If you look at 114
4 and 115, down at the bottom right-hand corner you see the pie
5 chart at the bottom right-hand corner which has I don't know
6 if you can see it.
7
8
9 inclined
THE COURT: I can see the pie chart.
MR. EVERDELL: The slice is the 10 percent. If you're
it's our argument that the '10 percent rule, the
10 money still has to go from somewhere. Even if you are going to
11 exclude the 10 percent from the calculation, it's still going
12 to rise far above the level that I think your Honor is
.13 considering.
14 Not only that, 10 percent can't be used for new
15 categories. I'm talking simply now about categories that are
16 not in the budget. The 10 ,percent rule only applies to
17 categories that are already in the budget, and you may
18 reallocate funds within those preapproved categories.
19 So with respect to the money I'm talking to. you about
20 now, the ones that are not budgeted categories at all, the 10
21 percent rule does not even apply to that. So even if you add
22 it up, all these out-of-budget, nonbudgeted categories, you
23 would still get to a loss amount, under my calculation, over
24 $172,000 in loss.
25 If your Honor subtracted the 12,000 or so from the
(212) 805-0300
8AKMKARS Sentence
25
1 utilities, we are still over the 120,000 threshold and
2 guidelines which makes it -- I believe, it's a level -- I want
3 to check -- it bumps it down two levels from the calculation
4 that's in the PSR. But it's still a total offense level of 18
5 as opposed to 20, using that calculation.
6
7
THE COURT: The PSR originally was more than 200,000.
MR. EVERDELL: Your Honor, we still think that the
8 calculation in 114 and 115 is entirely correct. Weactually
9 think that is the loss that the government suffered. In fact,
10 we are giving the defendant quite a bit of the benefit of the
11 doubt because we are saying that everything within the budgeted
12 category was a proper expense. It makes that assumption. And
13 everything -- all we are saying is everything outside of that,
14 either if it's a nonbudgeted category or something overspended
15 on a budgeted category, represents a loss to the government.
16 However, if your Honor is not inclined to accept that,
17 because of concerns you have about the calculations here, at
18 the very least, if you look simply at the nonbudgeted
19 categories, things that were not approved by NIST at all, which
20 are those things that I mentioned before -- rent, utilities,
21 capital improvement, cleaning, meals, and other -- then we have
22 a loss amount that is at a minimum just two levels less than
23 what's in the PSR.
24 THE COURT: You would agree that it should not be
25 entitled to subscriptions as other expenses.
(212) 805-0300
1
8AKMKARS Sentence
MR. EVERDELL: I apologize, your Honor. I
26
2 miscalculated. It's not two levels less. It's actually four
3 levels less. If you start with ~ base offense of 6 and the
4 loss amount is more than 120,000, that acds 10 and you get 16.
5 MR. RUBINSTEIN: Your Honor, I think that the initial
6 distinction is a question of what is allowable and what is
7 allowable. And I think --
8
9
10
11
THE COURT: What is what?
MR. RUBINSTEIN: Allowable; in other words
THE COURT: I know what allowable is.
MR. RUBINSTEIN: As opposed to what the budget says
12 that was allowed. I say to your Honor that this money was not
13 . given to buy equipment, just to buy equipment, to get
14 subcontractors, to have employees: This money was given for
15 research. That was the purpose of the money.
16 I think that the government is using the budget in a
17 way that it never was intended for the purposes of what a loss
18 should be. Let's assume that Dr. Karron's spent the whole
19 $800,000 on machinery. He wasn't budgeted for it, but he spent
20 $800,000 for machinery for the project. He didn't take a
21 salary, he didn't spend money on anything else and, 10 and
22 behold, the project ran the three years and he developed the
23 science that the money was given for. Under that theory he
24 could be prosecuted for $690,000 in misspent money.
25 The bottom line is, your Honor, the fact that they
(212) 805-0300
8AKMKARS Sentence
27
1 come up with a category and then they say, we have a category
2 here, capital improvements, the testimony is clear,
3 uncontroverted, that these weren't capital improvements. They
4 were site preparation and they devalued the apartment -- we had
5 an expert -- a one bedroom apartment in Kips Bay selling for
6 just over $500,000. Everyone who knows anything about the real
7 estate market in New York City. That figure was devalued
8 because it devalued, but they have a category. It's called
9 capital improvements and we don't have a category in the
10 budget. Therefore, not only whatever you spent, no matter what
11 else you want to call it, we called it capital improvements.
12 Did anybody call it capital improvements but the government?
13 Now they say, it's capital improvement, not in the budget,
14 therefore disallowed. I submit to your Honor, this is site
15 preparation. Any reasonable, logical person would conclude
16 THE COURT: The trouble- is, in his application for the
17 grant he said -- he gave the impression that they were up and
18 running.
19
20
21 cetera.
22
23
MR. RUBINSTEIN: They had equipment there.
THE COURT: As I understood it, active Web site, et
MR. RUBINSTEIN: They had a Web site.
THE COURT: And they had computer equipment.
24 MR. RUBINSTEIN: But they didn't have this kind of
25 computer equipment, Judge. We are going back --
(212) 805-0300
1
2
8AKMKARS
28
Sentence
THE COURT: You don't need site improvement.
MR. RUBINSTEIN: They needed it here. The contractor
3 testified what he did. He built things, he put up rackings for
4 them to convert the living room into a computer lab.
5 THE COURT: The material was -- everything was in
6 there. What he did was, as I understood it, was to improve the
7 usability of the space.
8
9
10 budget.
11
MR. RUBINSTEIN: Not for an apartment.
THE COURT: Not something that was called for in the
MR. RUBINSTEIN: It's not called for in the budget, I
12 agree with you. It may come under the categories of others.
13 It may come in here. But the question is --
14 THE COURT: Others is for audits. Other was the only
15 thing -- the budget under other was audits, is my recollection.
16 MR. RUBINSTEIN: There was a budgeted category called
17 audits, your Honor.
18 THE COURT: The only thing that was budgeted under
19 others was audits, $10,000.
20 _ MR. RUBINSTEIN: If you look at 115, you'll see that
21 In 115, next year, they disallowed the $10,000.
22 The bottom line is that the items that the prosecutors
23 talked about, capital improvements, I submit, were not capital
24 improvements. The meals, they have no breakdown of where the
25 meals were, who the meals were for. If you recall Riley's
(212) 805-0300
8AKMKARS Sentence
29
1 testimony, she went to lunch with Dr. Karron to talk about this
2 investigation with other people from CASI, and she disallowed
3 that lunch. Any business is going to charge a lunch like that.
4 Dr. Karron spent on his Master Card -- he had three credit
5 cards. The only card that he charged meals on that were
6 deducted were on the American Express CASI card. His own card
7 and the Master Card is in evidence. He never deducted.
8 To suggest that there is not a category of meals,
9 there is travel. There is travel does travel include meals
10 when you travel? That's why when we broke down, your Honor,
11 the subscription, we told you what those were. They had
12 nothing to do -- you sort of have the category, you were
13 thinking of some magazines like Sports Illustrated. This is
14 for research for access to research for the projects. So you
15 subscribe to a service to get your scientific data ..
16 THE COURT: The big item that Mr. Everdell was saying,
17 just, look, take the ones that aren't within the budget, the
18 nonbudgeted items, and add them up and giving you credit for
19 the utilitiesam?unt, so you have an $11,000 credit, as I
20 understand it. You still have 11,000 under utilities or maybe
21 12, 12,000.
22 MR. RUBINSTEIN: It would be almost 5,000 under
23 utilities--
24 THE COURT: You save that, so to the extent, instead
25 it would be 5,000. What about the other entry, the rent entry?
(212) 805-0300
1
8AKMKARS Sentence
MR. RUBINSTEIN: Clearly, he was not entitled to the
30
2 rent, your Honor, so that's $60,000.
3
4
5
6
7
THE COURT: Then you add the other two then --
MR. RUBINSTEIN: What do you add two with, Judge?
THE COURT: $43,000 spent.
MR. RUBINSTEIN: For subscriptions?
THE COURT: No. For bookkeeping, auto expense, blank
8 processing, consultants, lawyers, dues, prescriptions.
9
10
MR. RUBINSTEIN: That he's allowed. Subcontractors.
MR. EVERDELL: Your Honor, I think that the defense
11 counsel is saying it's allowed simply because it is listed
12 under the category other, but, as your Honor pointed out, in
13 the budget, the only thing that the company listed for its
14 other expenses was the audit.
15 THE COURT: You got this 80,000 figure that you can
16 move around. But that seems to me is already taken care of
17 when you look at the overdrawn equipment and the overdrawn
18 materials and supplies. That takes care of the 80,000 pretty
19 well.
20 MR. RUBINSTEIN: But those were budgeted items, your
21 Honor, that went back to the intent theory. If they were
22 budgeted items and he had no criminal intent he intended to
23 misappropriate. We concede that. He spent over the budget.
24 But did he criminally intend to misappropriate that amount?
25 THE COURT: He didn't spend much over the total amount
(212) 805-0300
8AKMKARS Sentence
31
1 because he took out the 836,5 plus $1300, apparently, the first
2 year. It's these expenditures in the other category that
3 MR. RUBINSTEIN: If you have 60,000 for the rent, you
4 have 11,000 for the -- you have 5,000 for the utilities.
5 That's 65,000 in the first year for the utilities. I submit
6 that the capital improvements are not -- are a legitimate
7 expense. The cleaning is questionable. Even though I think
8 that it's arguable on defendant's side, I won't contest the
9 cleaning.
10 THE COURT: It's an appropriate expense. He should
11 have gotten approval for it.
12 MR. RUBINSTEIN: That is the point. The point is, if
13 he didn't get approval, we know that the rent -- he was turned
14 down.and he still took the rent. We know that that is an
15 amount that he took that he wasn't entitled to.
16 But as to other items that were for the benefit of the
17 research, it doesn't seem that the guidelines, when you look at
18 the loss factors and how to consider loss and you consider
19 government benefits, I think even though they don't have the
20 specific illustration, the government can't cite one grant case
21 where there was a misappropriation.
22 The problem here is that, what was the government's
23 benefit? They gave money for a research project. It's
24 unquestionable that's all they did was research. The only
25 monies he put in his pocket were the rent monies.
(212) 805-0300
1
8AKMKARS
32
Sentence
THE COURT: The problem is that CASI, he did own CASI,
2 as I understood it, he and his family, I guess. You can
3 misapply money not just for your benefit, but you can misapply
4 money for the corporation's benefit.
5
6
MR. RUBINSTEIN: Right.
THE COURT: The trouble with capital improvements,
7 yes, it probably was not to his personal benefit because the
8 probably was worth more unimproved than it was
9 containing those improvements, but it would be beneficial to
10 CASI as a computer center, research computer center, to have
11 the improvements made. That's the problem. That would still
12 not be the research contemplated by the grant.
13 MR. RUBINSTEIN: I still don't see where they get
14 their figure that they are claiming --
15 THE COURT: I don't see the capital I
16 didn't realize the amount was $37,000.
17 MR. RUBINSTEIN: When the apartment was sold they had
18 to rip out all that stuff for the new owner.
19 THE COURT: That's what I was referring to earlier.
20 What kind of a figure do you come up with,
21 Mr. Rubinsteini
22 MR. RUBINSTEIN: In the first year, 60,000 for rent,
23 5,000 for utilities. I'm rounding off. 2,000 for meals and
24 67,000 in the first year. Questionable capital improvements or
25 site preparation, which would probably go under equipment. And
(212) 805-0300
8AKMKARS
1 the --
2
3
4
5
Sentence
MR. KWOK: Can we have the amount on that?
MR. RUBINSTEIN: For capital improvements?
MR. EVERDELL: The thing you just cited.
MR. RUBINSTEIN: I said 2,000 for meals, 5,000 for
33
6 utilities, 60,000 for rent. Second year, there is 2,000 for
7 rent, 5,000 for utilities. Meals, the second year, rounded off
8 to $1500. I'm sorry. Meals. $3,000. That would make it
9 $77,000 without capital improvements. If you gave the whole
10 capital improvements, which I don't see how you can do that for
11 the two years, you're talking about 20. We don't concede this.
12 We are talking about 31,000 over there.
13 So in a worst-case scenario it would be 108,000, but I
14 submit to your Honor that I don't see why capital improvements
15 should be considered as a nonbudgeted item when it clearly was
16 used in order to facilitate -- you couldn't put those big
17 computers in that apartment without site preparation. You
18 wouldn't do it without having the shades to keep the heat out,
19 without having extra wiring to get the electricity needed for
20 the place. These are things that are totally unrelated to what
21 anybody would consider a capital improvement.
22 THE COURT: Part of the problem here is that the site
23 was changed from NYU to apartment. With NYU you had free space
24 and a place for the computers. When that fell down, he
25 switched to the apartment. But the budget doesn't change in a
(212) 805-0300
8AKMKARS Sentence
34
1 material way, I believe, between the two budgets. I think it
2 should have.
3 MR. RUBINSTEIN: Judge, I just feel that looking at
4 Judge Rakoff's decision in Adelstein -- Adelson, rather, and In
5 other,decisions that I've seen, including Judge Block's
6 decision out of the Eastern District --
7
8
THE COURT: It's not in your memo.
MR. RUBINSTEIN: I know. Because I'll give you the
9 citations, your Honor. Judge Rakoff is 441 F.Supp.2d 506.
10 Judge Block's decision citing Judge Rakoff's decision is a
11 Westlaw citation of 354151 and a and they talk about --
12 those cases were primarily stock cases. They talk about that
13 the fraud guidelines -- because the numbers increase so much
14 that they give a distorted view of what a reasonable sentence
15 should be.
16 In both of those cases -- I'm not even up to that
17 point because first we have to have a guideline analysis before
18 we get to the questions of downward departure or 3553
19 considerations. I think what the Court is trying to decide now
20 in its analysis is, first, doing what the guideline calculation
21 is required to do, before you determine whether or not you want
22 to give a guidelines sentence or a nonguidelines sentence. I
23 think that for the purposes of a guideline analysis, I think
24 that a figure of between 70,000 and 120,000 for guideline
25 purposes, analysis purpose, that that would be an appropriate
(212) 805-0300
8AKMKARS Sentence
35
1 range, 70,000 to 120,000 without --
2 MR. KWOK: Your Honor, if I may, even taking just the
3 items Mr. Rubinstein talked about, the rent, utilities, meals.
4 Utilities, by the way, just the difference, not the whole
5 thing, we are up to $100,000 already. And then if you look at
6 Government Exhibit 115, year two, the category under other,
7 which includes all manners of things like bookkeeping, auto
8 expense, bank processing, consultants, lawyers, dues,
9 subscriptions, that alone is $31,000. If you add that category
10 alone to all the stuff that Mr. Rubinstein just conceded, we
11 are already over $120,000, which puts us at level 16.
12 MR. RUBINSTEIN: I didn't concede that. There is no
13 breakdown of what they are talking about. They give you
14 bookkeeping auto expenses, which I assume relate to travel,
15 bank processing consultants is budgeted for 250,000 rather,
16 he is budgeted for $110,000 in subcontractors, which I guess
17 are consultants. He spends only 6,000 of that, and they throw
18 in consultants, dues, subscriptions into a category. Then they
19 want to say, that's $31,000. I submit to your Honor, that
20 nobody from that chart or from the 110 backup could say how
21 they ever arrived at this number. Then they want to
22 arbitrarily plug it in and say, no, look at that, we have
23 arrived at the next level.
24 THE COURT: I'm looking where those figures must have
25 come from. I think if you look at 110, 111, we can probably
(212) 805-0300
8AKMKARS
1 determine --
Sentence
36
2 MR. KWOK: For example, your Honor, you can look at
3 G o v e r r ~ e n t Exhibit 110, page 17 of 37. That, for example,
4 lists all the gas paYments, all her expenses. That's where it
5 came from. That's just one example.
6 THE COURT: Mr. Spring is bookkeeper. That's what Kim
7 Jackson is for Sprint.
8
9
MR. KWOK: That's right.
THE COURT: The sole purpose, as I understood the
10 testimony, and I may be wrong, for Mr. Spring to be employed
11 was to get the books in order for the other. They had another
12 bookkeeper, as I understood it, but I may be wrong, who could
13 take entries for bookkeeping, but wasn't skilled enough for
14 interpreting what should be in the company's expenses and what
15 should be personal expenses, and what should be reasonable
16 expenses. Is that correct?
17 MR. EVERDELL: Your Honor, I think Mr. Spring, in
18 addition with helping with the 'audits,also stayed on to do
19 additional bookkeeping work for the company even after the
20 audit was over.
21
22
THE COURT: I thought it was all computerized.
MR. EVERDELL: I misspoke.
23 In addition to help preparing the books for the
24 upcoming audit, he also conducted some regular bookkeeping
25 Even so, you have $10,000 budgeted
8AKMKARS Sentence
37
1 for the audit and you went over that $10,000 by the amounts in
2 other, which includes the overage, includes some of the Frank
3 Springs expenses, but it also includes some things like auto
4 expenses.
5 THE COURT: But you are allowed the $80,000, but then
6 the $80,000 has been used up.
7 MR. EVERDELL: By equipment or any other number of
8 categories, yes, your Honor.
9 It's the government's position that at the very least
10 that this money should be counted as a loss. It's nonbudgeted
11 and it's completely absent from the budgets that were
12 submitted, and was money spent with ATP grant money.
13 Let's also not lose sight of the fact that it was very
14 clear from the budget rules or from the ATP rules that indirect
15 costs are not covered, and that was made very clear to the
16 defendant at all the premeetings before he started the grant.
17 Yes, certain things -- research can't happen without
18 lots of things being bought, lots of things being improved,' all
19 this stuff. But it doesn't mean that you can use ATP grant
20 funds to spend on that stuff. You have to follow the rules.
21 So these expenses I think, just looking at the
22 spreadsheet that Ms. Riley prepared, you can see how they are
23 itemized out here, at least the other category.
24 THE COURT: Is Peter Ross an employee or was he a
25 consultant?
(212) 805-0300
1
8AKMKARS
38
Sentence
MR. EVERDELL: Peter Ross, your Honor? I don't think
2 I know where you're looking, your Honor. I see.
3 Your Honor, I think that Dr. Karron chose to pay Peter
4 Ross as a consultant. Even so, what we are talking about here,
5 that's a $15 charge.
6
7
THE COURT: what charge?
MR. EVERDELL:I thought you were talking about the
8 Peter Ross parking charge.
9
10
11 charge.
12
THE COURT: Yes.
MR. EVERDELL: Reimbursement to Peter Ross is a $43
We are talking about very small numbers here. Under
13 the guidelines, as it says in the commentary, the Court need
14 only make a reasonable estimate of the loss. And I think when
15 you consider all these categories that we are talking about and
16 the fact that it is backed up on the paper here, that we are in
17 the range, at least, of 120,000, given what Mr. Rubinstein has
18 just told your Honor and the very small difference .that seems
19 to exist at this point.
20 The categories that are nonbudgeted categories should
21 be counted, and that bumps us into the $120,000 range without
22 much trouble at all. Given that your Honor doesn't have to
23 come to an exact dollar amount of loss, the minor
24 discrepancies, to the extent they even exist, shouldn't deter
25 your Honor from coming to that larger loss amount because I
(212) 805-0300
8AKMKARS Sentence
39
1 think the clear, logical way to read the evidence is that there
2 are lot of nonbudgeted categories and they are backed up by the
3 spreadsheet analysis, and that these should be considered as
4 loss to the government because they were not approved, as the
5 defendant knew he needed.
6
7
THE COURT: Brings me back to the question --
MR. RUBINSTEIN: The problem is, 'Judge, when you go to
8 the backup that they throw out there, 110, and you find that
9 the bank charges are under $336 --
10
11
THE COURT: What page are you on?
MR. RUBINSTEIN: We have a gas expense on page 17 of
12 37 of $1,189.68. We then have --
13
14
THE COURT: I missed the page.
MR. RUBINSTEIN: Page 17 of 37. We know that
15 Dr. Karron was traveling to Washington, D.C. and to New Jersey
16 as part of his work on this research, but let's take the whole
17 figure. Next they have let's assume she put in -- the
18 parking, $67, that's on 18 of 37. Then they have pank
19 processing on 18 of 37 of $336. If you add up lawyers they
20 have on 21 of 37 $1,173.75. And I submit that's questionable
21 because I think those lawyers were patent lawyers related to
22 securing intellectual property that they were allowed to do.
23 'Ehen it says dues and subscriptions under that. They have
24 $198.
25 I'm looking for the -- they have that bookkeeping
(212) 805-0300
8AKMKARS Sentence
40
1 figure out. I don't think it is appropriate, but they have a
2 bookkeeping I don't know who that included, but let's leave
3 the bookkeeping out of it. We are talking about under $3,000,
4 in my quick math, of expenses. And then they tell you that the
5 category calls for $31,000, but their thing is 31 thousand 8 or
6 625, depending on your eyesight. How that's broken down,
7 whether or not these are appropriate expenses, then they say,
8 let's plug In this additional $31,000. I submit to your Honor
9 that would be inappropriate.
10 MR. EVERDELL: Your Honor, let me address -- for
11 example, there is a specific issue with the lawyers. Pennie &
12 Edmonds, patent attorneys, it was my understanding that this
13 was incurred before the grant even started. And these charges
14 for lawyers are specifically prohibited by the grant rules.
15 Was Mr. Karron told this? No. Because he never
16 actually tried to budget it as an item. Had he tried to budget
17 it, he would have been told specifically that he couldn't use
18 grant money to do this.
19 Again, we are faced with this argument that if it
20 arguably somehow benefits the research, it should not be
21 covered at the loss. The government submits that that is
22 simply unworkable. What we have to work with is what was
23 budgeted and what was approved by NIST, and anything that
24 wasn't is a loss to the government.
25 Not only that, your Honor, we are talking at least --
(212) 805-0300
8AKMKARS Sentence
41
1 now we seem to be talking about the difference of maybe $10,000
2 between two thresholds in the guidelines. The defendant's
3 calculation that he gave you a few moments ago doesn't even
4 include the cleaning expenses, and that's several thousand
5 dollars two years in a row. And that I just don't see the
6 argument there. Again, the only argument could be, as he said
7 in his papers, was that you need to clean in order to make the
8 computers work. That simply doesn't hold water.
9 This is an indirect expense, something that is
10 disallowed by the grant and was never budgeted and never
11 approved. That is a loss to the government. It was money that
12 was spent in contravention of .clear rules that were set out
13 governing the grant fund.
14 So given the fact that we are literally arguing now
15 about a couple thousand dollars here and there, and I
16 believe -- we could sit here and tally up all of these
17 nonbudgeted expenses. I guarantee you, we would be over the
18 120,000 dollar mark without any trouble whatsoever.
19 THE COURT: What's the applicable note that we apply
20 here to losses?
21 MR. EVERDELL: Your Honor, there are a few. One is
22 the estimation of loss, which just says -- thac's 3A -- 3C,
23 which says that the Court need only make a reasonable estimate
24 of the loss, but also the special rules.
25 THE COURT: You're looking in the commentary.
(212) 805-0300
1
8AKMKARS Sentence
MR. EVERDELL: I'm looking at the commentaryI yes
l
42
2 your Honor.
3 Commentary 3
1
which is loss under subsection Bl and
4 then 3C
I
estimation of lossl said: The Court need only make a
5 reasonable estimate of the loss. And the Court's loss
6 determination is entitled to appropriate deference. And then
7 if you look at F
I
which are the special rules --
8 THE COURT: I just want to see one second because I
9 have trouble
l
I guess I in determining whether or not it should
10 be loss to the government or misappropriation.
11
12
MR. RUBINSTEIN: There is another basis
THE COURT: Intentional misappropriation by the
13 defendant. It seems to me it should be intentional
14 misappropriation by the defendant.
15 MR. EVERDELL: An intentional misappropriation
l
your
16 Honor I would include the fact that he was told that he needed
17 to submit all of these charges in his budget and get prior
18 approval for them.
19
20 lacking.
21
THE COURT: The fraud and deceit element is somewhat
MR. EVERDELL: Your Honor
l
as you
l
I thinkI pointed
22 out earlier
l
the case law shows that you can have a
23 misappropriations case even if the expenditures arguably
24 benefited the company. That's the Urlacher case.
25 THE COURT: Isn't this application to the benefit of
SOUTHERN DISTRICT REPORTERS I P.C.
(212) 805-0300
8AKMKARS Sentence
43
1 the defendant, or third party?
2
3
MR. E V ~ R D E L L : Or to the defendant.
THE COURT: That's under one of these guidelines.
4 Which lS it?
5 MR. RUBINSTEIN: No, it's not, Judge. That is for the
6 purposes of gUilt. We are talking now for guideline purposes
7 determining the loss, which I suggest is a different analysis.
8 I think your Honor" should be directed to 2B1.1, 3B, where it
9 says gain. This is an alternate method for the Court to use.
10 THE COURT: Let me find you, where you are. 3B. Now
11 you're going to the commentary.
12 MR. RUBINSTEIN: I'm in the commentary, Judge. 3B
13 says gain. The Court shall use the gain that resulted from the
14 offense as an alternative measure of loss only if there is a
15 loss, but it reasonably cannot be determined. And I submit to
16 your Honor that under these circumstances you cannot reasonably
17 determine what the loss is, so you should look at the gained
18 factor which in this case would result in looking at the rent,
19 the $62,000; the utilities; cleaning, if you want; meals, and
20 you would be just over $70,000. I think that is the
21 appropriate analysis here before you consider any credits or
22 offsets. But first we have to arrive at what is an appropriate
23 figure. Obviously, the guideline considers the fact of what
24 someone actually puts in their pocket for personal benefits.
25 MR. EVERDELL: Your Honor, I have not looked at the
(212) 805-0300
8AKMKARS Sentence
44
1 case law on this recently and it was not cited in any
2 submission by Mr. Rubinstein, but I think the loss can be
3 reasonably determined based on the numbers set forth by the
4 government. I don't think we need to rely on any alternative
5 method of loss because we can determine what the government
6 lost as a result of all of this.
7 I think, if I remember correctly, the cases where you
8 talked about alternative loss calculations is where the
9 victims -- there are so many victims and the calculation
10 involved things like stocks and how the value of stocks go up
11 and down and how that's very hard to estimate. Here we are
12 talking about hard numbers. We know what grant money went to
13 the defendant and we know what he spent it on. The question
14 for your Honor to consider is which of these expenditures are
15 you consider asa loss to the government and which are not.
16 THE COURT: Insofar as the misapplication involved
17 fraud, then I think you used loss. Insofar as the
18 misapplication is intentional -- this application seems to be a
19 different definition of intended. Then it seems to me to use
20 the gain to the defendant or a third party. But I can't see
21 where I am in the guideline notice. I don't see that it really
22 applies under the guideline notes. So what I just said isn't
23 supported by the guideline notes.
24
25 that.
MR. RUBINSTEIN: What's that, your Honor? I missed
(212) 805-0300
1
8AKMKARS Sentence
THE COURT: What I just said isn't supported by the
45
2 guideline notes, as I see it.
3
4
MR. RUBINSTEIN: What's that, your Honor?
THE COURT: I gather that you only apply gain to an
5 intended misapplication, you apply loss to a fraud case if it's
6 done by a fraud. Then you apply loss. My problem from the
7 beginning here has been that distinction. I am not sure you
8 apply loss here.
9 MR. EVERDELL: Your Honor, the commentary that the
10 government was following was actually -- in combination with a
11 reasonable estimate was the 3F special rules.
12
13
THE COURT: Let me look at the rules.
MR. EVERDELL: 3F2, government benefits, which is also
14 the section that was cited by the defendant in his letter,
15 which says: In a case involving government benefits, e.g.
16 grants
17 THE COURT: It says: Subject to the exclusion and
18 subdivision if the loss is the greater of actual loss and
19 intended loss. In a sense, the whole thing, the whole
20 agreement was a loss to the government.
21 MR. EVERDELL: Yes, your Honor. In fact, the
22 defendant never even did his cost share, as we know, and was
23 essentially not entitled to any of the grant money that he
24 spent.
25 THE COURT: There was his contribution later, wasn't
(212) 805-0300
8AKMKARS
there some money?
Sentence
46
MR. EVERDELL: I think after the grant was suspended
there was a contribution by the defendant.
THE COURT: That went to outstanding bills.
MR. RUBINSTEIN: That money was probably extended.
That's the whole purpose. It increases your budget.
MR. EVERDELL: Your Honor, the government told the
defendant that in order to comply with the cost share he had to
make payments to the government and that's the payment that was
made, but I believe this was after --
THE COURT: That's more than the cost share --
MR. EVERDELL: I'm sorry. He did not make that
payment.
THE COURT: The $70,000.
MR. EVERDELL: You are talking about the $70,000
loan --
THE COURT: There is some statement in these papers
that he gave 70,000 after the closing period.
MR. EVERDELL: That $70,000, which I believe
Mr. Rubinstein was saying was done between July 27 -- June 27
of 2003 and August of 2003 was after the suspension.
THE COURT: What was that used for?
MR. EVERDELL: One moment, your Honor.
Your Honor, I believe my understanding is there were
outstanding invoices at the time that the $70,000 was used to
(212) 805-0300
8AKMKARS Sentence
47
1 pay the outstanding invoices. It was not actually used to pay
2 the government any of the cost share amount. So that didn't
3 translate --
4 MR. RUBINSTEIN: You never pay the government the cost
5 share. You put the money in so you take the money out and
6 spend it. 'I'hat' s the concept. The money
7 THE COURT: It doesn't go to the government. It goes
8 to the budgeted items during the period of the grant. Before
9 it was suspended --
10 MR. EVERDELL: I think that is the point, your Honor.
11 It wasn't before the grant was suspended. The grant was
12 suspended on June 27, 2003.
13
14
THE COURT: To keep CASI going.
MR. EVERDELL: But under the guideline rules, if the
15 fraud, if the misappropriation is discovered by a government
16 agency, that is the point at which you start you cut off
17 people from getting credit from paYments they make later. And
18 as I think I outlined in the government's letter to the Court,
19 that date predates the suspension date because we had testimony
20 from Hope Snowden who testified that when she was getting
21 revised budget submissions at the end of 2002 and the beginning
22 of 2003, she noticed there were serious discrepancies in the
23 budget numbers and that raised red flags to her that there may
24 be some problem with the appropriation of these funds and that
25 led to them calling it off.
(212) 805-0300
1
2
II 8AKMKARS
Sentence
THE COURT: I think that's covered in my opinion.
MR. EVERDELL: That is the date of discovery and the
48
3 defendant is, in fact, not entitled to a credit for any funds
4 he m ~ y have given back at that point because the
5 misappropriation was discovered.
6 MR. RUBINSTEIN: That's not, your Honor -- I'll take a
7 look at your opinion. That's not the date of the discovery
8 from the standpoint that the defendant put monies back because
9 he thought that it was discovered he did something wrong. The
10 bottom line is, he didn't think he did anything wrong. That's
11 the whole concept of the discovery is that we don't want
12 somebody to run back and put money in after they find out that
13 their theft has been discovered.
14 This is a misappropriation case and he did not feel --
15 he was a he then that he had done anything wrong. And it's
16 his mental process, not their mental process, because the whole
17 concept is, hey, .if you get caught stealing, at that point,
18 when you give it back, it's not the same as if you did this
19 voluntarily because you realized you did something wrong and
20 you wanted to make amends before it was detected. Sol think
21 that they have the wrong person that has to be aware of when
22 there is something wrong here.
23 THE COURT: I see that this section, subsection of the
24 commentary, subsection II says, in a case involving government
25 benefits, entitlement program paYments, losses shall be
(212) 805-0300
8AKMKARS Sentence
49
1 considered to be something obtained from unintended recipients
2 or diverted to unintended uses. The problem I'm having is that
3 there is more than one statute -- the statute deals in terms of
4 fraud in one case and intentional misapplication in another.
5 And it does seem to me that benefits obtained by unintended
6 recipients deals with intentional misapplication of funds
7 diverted to unintended uses. The second part of this note to
8 the guidelines is more difficult to apply in intentional
9 misapplication of funds in terms of showing that it was an
10 intentional misapplication. All the evidence in the case kind
11 of shows that when confronted with misapplying the funds, he
12 would say things like, my mother has got the money or something
13 el$e, I'm working on it, they are going to come along, and the
14 ladies down there at the program love me and everything is
15 going to be all right. Never does he make a statement, at
16 least to these parties, the hell with rules, I'm taking the
17 money. They owe it to me for my research.
18 I find it difficult to apply the guidelines in this
19 case. Maybe the guidelines make it a situation that didn't
20 occur to the drafters of the guidelines. It's not the usual
21 case, as I understand it.
22 Are there other cases of this sort that either party
23 is relying on involving the intentional misapplication -- are
24 there other casesinvolving the intentional misapplication of
25 funds as opposed to fraud, embezzlement?
(212) 805-0300
1
8AKMKARS Sentence
MR. EVERDELL: I looked for some cases that talked
50
2 about loss amount in sentencing. I didn't find anything very
3 helpful in that regard. What I was going with was literally
4 what I got fr8ffi the guidelines.
5 But I still don't know why it's difficult to apply
6 diverted to unintended uses in this case, that prong of the
7 guidelines, special rules for government benefits, because that
8 seems to me to be the definition of misapplication. You're
9 taking funds and applying them for unintended uses, unintended
10 in this case by the people who gave out the grant money, NIST.
11 And unintended in the sense that they gave out the money with
12 lots of rules attached to it, that they made clear to the grant
13 recipients and those were the intended uses of money, that is,
14 expenditures that followed the grant spending rules. And
15 anything that did not follow the grant spending rules was an
16 unintended use of that grant money. I think that was made very
17 clear to the defendant in this case and, from the testimony, to
18 all grant recipients, that things like the kickoff meeting and
19 other things like that. I think that is actually the
20 appropriate part of the guidelines to be applying in this case,
21 that the money that was spent, contrary to grant spending
22 rules, was diverted for an unintended use and that that
23 constitutes a loss.
24 Now, your Honor raised some difficulties you had with
25 the calculations for certain things and whether overbudget
(212) 805-0300
8AKMKARS Sentence
51
1 expenses should count or should not. We have, at least, I
2 think, provided a more simplistic and one that benefits the
3 defendant way of thinking about this, which is just looking at
4 the unbudgeted categories. Those are clearly cases, money that
5 was spent contrary to the grant rules because there was
6 absolutely nothing in the budget that spoke to it. These are
7 monies that were expended without any reference to the grant
8 rules whatsoever.
9 Now, defendant can argue that these things arguably
10 benefited the research in some way. Perhaps they did, but
11 that's not the standard that we need to operate with because
12 that would sweep in every single expenditure. There would be
13 no loss in any of these types of cases if that's the way we
14 have to look at it. If you look at the unbudgeted categories
15 and you apply to unintended uses, being diverted contrary to
16 the grant rules, that provides a framework for the loss amount
17 that's appropriate in this case.
18 MR. RUBINSTEIN; Your Honor, I think that this case is
19 outside the heartland because I don't think anybody envisioned
20 a case where somebody got a grant, spent all their time and
21 energy on that grant, bought equipment in furtherance of the
22 grant. There is no suggestion here. As a matter of fact, Lide
23 even testified that Dr. Karron met all the benchmarks, and your
24 Honor said something that I have to take opposition to,
25 suggesting that nothing came of this research.
(212) 805-0300 .
1
8AKMKARS Sentence
THE COURT: No. Saying that the project wasn't
52
2 completed, so I suppose that they didn't get their money's
3 worth in that sense.
4 MR. No. Because the government gets
5 their money's worth since they didn't have a financial benefit,
6 no matter what, and that the whole concept was that if
7 something was developed, Dr. Karron and CASI would keep all the
8 profits for themselves. Society would benefit. They were
9 doing research on a cutting edge. We have to go back seven
10 years ago. Now it's commonplace. But they were dealing with
11 the concept of -- I hope I pronounce this right -- topological
12 imaging that they use today in many medical factions.
13 I submit to the Court and the government a paper that
14 was submitted for publication, citing work that was submitted
15 to a medical journal, citing this work because, in fact, that
16 was the whole purpose of this research. That's why the grant
17 was given, to develop this concept, at a time where they use
18 computers half the size of this room. Today they probably
19 could use a laptop and get the same information. I know I have
20 it here. Just a second, your Honor.
21 THE COURT: I'm not taking issue with that,
22 Mr. Rubinstein. I am not taking issue with that. It never
23 came to fruition with the commercialization of the process, as
24 far as I know.
25. MR. RUBINSTEIN: They are talking about the amount
(212) 805-0300
8AKMKARS Sentence
53
1 that Dr. Karron received and the figure that we started out
2 with from -- as to salary, it seemed to me that that figure, as
3 I cited in my submission of October 17, on page 3 first of
4 all, they have 129,850 in loans. This is at 110, Government
5 Exhibit 110, 38 through 40 of 44, the second portion of 110.
6 They show 129,850 loans to Dr. Karron. We dispute one, and I
7 have backup for it, a $750 check that was really for Scott Alba
8 that was advanced from defendant out of his own money. Then
9 December 30, '02, 15,000 check that's for reimbursement.
10 Doesn't say anywhere on that check where it says loan, we
11 reduced those numbers.
12
13
THE COURT: Why do you say that shouldn't. be
MR. RUBINSTEIN: Because that was a partial
14 reimbursement. There is nothing on that check --
15 THE COURT: If he writes a check and it says partial
16 reimbursement on it, isn't that reimbursement for loans taken?
17 MR. RUBINSTEIN: It's partial reimbursement because
18 the medical expenses that were on the credit cards --
19 THE COURT: What's partial reimbursement of expenses
20 taken? I don't know what you're talking about.
21 MR. RUBINSTEIN: Out-of-pocket expenses that he paid
22 on the MasterCard that's in evidence. They never give him
23 credit for the monies that we have the documentation that we
24 submitted to the Court, and I have additional documentation
25 showing -- not only showing that these bookkeeping entries gave
(212) 805-0300
8AKMKARS Sentence
54
.1 back 67 -- $75,000 that was given back by salary paychecks that
2 he never gets credit for. It seems to me when they came up
3 with the figure that they used for his salary, they included
4 the 60,000 of rent. I mean, they have never said --
5
6
THE COURT: I don't think it did.
MR. RUBINSTEIN: If you look at pages 38 through 40 of
7 Exhibit 110, the one that ends in 44 --
8
9
THE COURT: 1 and --
MR. RUBINSTEIN: The second half of 110 has 38 of 44.
10 The beginning part says
11
12
THE COURT: 38 of 44, yes.
MR. RUBINSTEIN: We have 38 of 44, 39 of 44, 40 of 44.
13 It starts out on the top of 38 saying, Dr. Karron's loans. I
14 have the check that I submitted as part of it on the $15,000
15 loan. It doesn't say anything about loan. Here she puts DPK
16 loan, but there is nothing on the check to indicate loan.
17 There are other checks that do say loan. So why --
18
19
20
21
THE COURT: Which one is that?
MR. RUBINSTEIN: Just above the line for loan repay.
THE COURT: I see it. I see that.
MR. RUBINSTEIN: This is 9/12/02, check 10451, it's
22 II written to Dr. Karron.
23
24
25
THE COURT: Can I see the check?
THE COURT: It's a check payable to Dr. Karron. It
SOUTHERN DISTRICT REPORTERS, p.. C.
(212) 805-0300
8AKMKARS Sentence
55
1 says something. It's deposited. It isn't salary. Why isn't
2 it a loan?
3 MR. RUBINSTEIN: Why is it a loan? It's a
4 reimbursement. It doesn't say a n ~ ~ h e r e what it is, but they
5 classified it as a loan.
6
7
THE COURT: I would, too, if I see it paid to him.
MR. RUBINSTEIN: They have other checks, your Honor,
8 where it says loan on it.
9
10
THE COURT: Where does it show as reimbursement?
MR. RUBINSTEIN: It doesn't show on that check. We
11 understand it's on the check stub.
12 THE COURT: Reimbursement for what? It's a round sum.
13 It sounds rather strange to be a reimbursement.
14 MR. RUBINSTEIN: This comes out of the Quick Books,
15 you will recall, your Honor, the computer-generated software
16 that they had, s6 it's in that software.
17
18
19
20
21 15,000
22
THE COURT: For 15,000 round dollars?
MR. RUBINSTEIN: You have to have an invoice
THE COURT: You never have a reimbursement like that.
MR. RUBINSTEIN: He had a number of items. He took
THE COURT: It just happens to add up to 15,000. It's
23 very strange. Let's see the backup.
24 l ~ . RUBINSTEIN: Your Honor, if you can give us a
25 short recess. Dr. Karron came with the computer. He forgot to
(212) 805-0300
8AKMKARS Sentence
56
1 bring the power supply. We could generate it right here. We
2 have it in the computer. If he can recess
3
4
THE COURT: Doesn't show rent, does it?
MR. RUBINSTEIN: Yes. He has everything in the
5 computer in the Quick Books that are in the computer. We don 't
6 need --
7 THE COURT: This doesn't show that the amounts taken
8 for rent were part of the salary computation.
9 MR. RUBINSTEIN: What I'm saying, Judge, I was trying
10 to add up the numbers to get to her number. And the only way I
11 could do that was by throwing in the 60,000 for salary so that
12 if, in fact, his salary is accurate, which he has --
13 THE COURT: I've got to get this sentence completed.
14 We can take a five-minute recess, if that's what you want.
15 Take a five-minute recess then, but I don't think it's going to
16 make much difference.
17
18
19
20
MR. RUBINSTEIN: All right, Judge.
(Recess)
THE COURT: Mr. Rubinstein.
MR. RUBINSTEIN: Your Honor, Dr. Karron purchased the
21 necessary part -- actually, I gave him my credit card -- and
22 the machine is booting up. We should have it momentarily.
23 MR. KWOK: Your Honor, while we are waiting, if the
24 Court pleases, we could go to talk about the 3553(a) factors,
25 which is another major factor.
(212) 805-0300
1
8AKMKARS
57
Sentence
THE COURT: I want to deal with the computation. Then
2 we can deal with the 3553(a) factors.
3 When will you be ready, Mr Rubinstein?
4 MR. RUBINSTEIN: Your Honor, do y o ~ have a computer
5 screen that we can plug into to show you that would be more
6 efficient to show you?
7
8
THE COURT: No, I don't have one here.
MR. KWOK: Your Honor, just to save time on this, I
9 think that what they are trying to print out is the Quick Books
10 ledger, which is not in evidence, which is not authenticated,
11 which is a document that witness after witness have
12 testified --
13
14 out.
15
THE COURT: I don't know what he's trying to print
MR. RUBINSTEIN: It doesn't have to be in evidence for
16 the purposes of sentencing, your Honor.
17
18
THE COURT: What are you trying to print out?
MR. RUBINSTEIN: We are trying to print out the backup
19 to that $15,000 check to show your Honor that, in fact, that is
20 not a loan; was, in fact, a reimbursement.
21 THE COURT: I am. not going to make the findings on
22 that issue. I am going to make the findings on the basis that
23 Mr. Everdell suggested. And taking the amounts in the other
24 categories that are not included in the budget and making the
25 adjustments he talked about, giving the defendant credit for
(212) 805-0300
8AKMKARS Sentence
58
1 the utilities and all. It seems to me that the amount of the
2 loss, pursuant to guideline 2Bl.1, is more than $120,000.
3 Isn't that your correct conclusion, Mr. Everdell?
4 MR. EVERDELL: Yes, your Honor, that's sorrect, more
5 than 120,000 adding ten points to a base offense of 6.
6 THE COURT: I think that's borne out by the figures
7 with adjustments that you pointed oUL, Mr. Rubinstein, as the
8 total loss to the -- which should be computed, intended loss
9 which should be included for guideline calculation purposes,
10 which makes a total lossof 16 levels.
11 MR. RUBINSTEIN: Your Honor, I think your Honor has to
12 consider the credits against whatever loss your Honor has--
13
14
15 the
THE COURT: I don't think there are any credits --
MR. RUBINSTEIN: Your Honor, I submit that under
that the amount of salary that they have calculated is
16 not supported by any documentation they submitted.
17 THE COURT: In that tabulation I agree with you, that
18 the entry includes salary and loans as they calculated it, but
19 it doesn't make much difference because the 80,000 odd dollars
20 that the defendant was entitled to redistribute are
21 incorporated in the equipment --
22
23 figures
24
25
MR. RUBINSTEIN: I submit, your Honor, under their
THE COURT: Other entries.
MR. RUBINSTEIN: I submit under their figures, Judge,
(212) 805-0300
8AKMKARS Sentence
59
1 that they have added back the $60,000 rent. If you take a
2 look
3
4
THE COURT: There is no showing of that.
MR. RUBINSTEIN: There is, Judge. They hav2 not shown
5 you at all where they get the figure that they have in 114.
6 And I submit the only backup is on page 38, 39, and 40 of
.7 Exhibit 110 of 44 pages. And the only thing they have there is
8 a loan which they claim is $129,000, repaYment is 37,000.
9 Taking their best figures --
10
11
THE COURT: You haven-' t gotten any salary --
MR. RUBINSTEIN: Salary of 37,000 -- of, rather,
12 35,000, and you have to add the $60,000.
13 THE COURT: I've got to take into account on the
14 salary the figures that apply to withholding taxes, et cetera.
15 MR. RUBINSTEIN: Yes. I don't disagree with that,
16 Judge, but I submit that they have a $129,000 in a loan and
17 they don't show the repaYment of the 67,000.
18
19
THE COURT: RepaYment is right below it.
MR. RUBINSTEIN: No. They don't include it there.
20 The two checks that I submitted to the Court that I have copies
21 of with the backup showing
22 THE COURT: Those checks are after the close of the
-
23 period and were for, as I understand it, expenses incurred
24 thereafter.
25
MR. RUBINSTEIN: No, your Honor. We are talking about
S O U T H E ~ DISTRICT REPORTERS, P.C.
(212) 805-0300
8AKMKARS Sentence
60
1 two separate things. We are talking about, one is the salary
2 that is submitted in our letter of the 17th where we provide to
3 the Court check of August 2, '02, a year before the grant was
4 suspended, actually ten months before the grant was s u s p e ~ d e d
5 where you have -- that's in evidence --
6
7
THE COURT: Where are you reading?
MR. RUBINSTEIN: I'm looking at our letter of October
8 17, your Honor. And I am showing you what was previously
9 marked as Defendant's p6 in evidence, which shows --
10 THE COURT: You'll have to show me and you'll have to
11 show Mr. Kwok.
12
13 to it.
14
15
16
MR. RUBINSTEIN: Mr. Kwok has the page. He has turned
THE COURT: $5,000 check?
THE COURT: That shows the defendant had taken $61,918
17 in salary just below it.
18
19
MR. RUBINSTEIN: Right. And that
THE COURT: 61,000 plus 129,000. If that's the
20 government's figure, adds to more than $200,000, right?
21
22
23
THE COURT: $187,000.
MR. RUBINSTEIN: The Court 1S commingling two
24 different concepts. One is they claim there is a loan
25 outstanding that they never gave him credit for anywhere of
(212) 805-0300
8AKMKARS Sentence
61
1 $75,000 that was taken in October of 2001. I think the date
2 was October 25 or 26 of 2001.
3
4
THE COURT: That's what the loan advances.
MR. RUBINSTEIN: It doesn't show the offset of that
5 loan. -What I'm showing your Honor is --
6 THE COURT: I know you had offsets for the loan. I
7 have given you credit for that and I have gone over your
8 figures in your letter and I've made calculations on the basis
9 of it. It shows me that there is still a net paYment due the
10 government on loans.
11 MR. RUBINSTEIN: But when you add that together with
12 the salary, it shows that Dr. Karron did not get his full
13 salary.
14
15
THE COURT: I agree he didn't.
MR. RUBINSTEIN: So he should have an offset under
16 guideline 2B1.1(3) (e) for credit against loss for services
17 rendered. He rendered the services, he was entitled to full
18 salary.
19
20
THE COURT: He got it in the form of loans.
MR. RUBINSTEIN: I submit, Judge, that it doesnit
21 compute -- that the loan calculation does not compute to what
22 they are saying and I submitted in my letter --
23
24 simple.
25
THE COURT: He got it in the form of loans. It's very
MR. RUBINSTEIN: Your Honor, in my letter I showed the
(212) 805-0300
1
II 8AKMKARS
Court --
62
Sentence
2
3 in loans
THE COURT: If you take the money from the corporation
4 MR. RUBINSTEIN: He took loans, but he paid it back
5 out of these salary
6
7
THE COURT: In part
MR. RUBINSTEIN: In part. So that left, your Honor, a
8 balance in a worst case -- in a best-case scenario for the
9 government of $24,765.81, and you have to add to that the
10 60,000 from the rent.
11
12
THE COURT: No, you don't. Add to it?
MR. RUBINSTEIN: They did, though. They have never
13 submitted how they arrived at their figure of the 200,488 in
14 the chart, 114.
15 THE COURT: All I have to do is use my best judgment
16 on the figures that are here. I exercised them arid I have read
17 your papers., and I've taken them under account and I have
18 somewhat struggled with them, I must admit that. I've
19 calculated his credits for salary not taken and offset that
20 against the loans. I still get the balance of loans due the
21 corporation from Dr. Karron of several thousand dollars.
22 Without taking into account in any way the rent he received of
23
24
25
$60,000.
MR. RUBINSTEIN:
see how that is possible.
(
In all due respect, Judge, I don't
Nobody has shown me to this point.
(212) 805-030Q.
8AKMKARS Sentence
63
1 The government hasn't proffered how they come to their figure.
2 I frankly don't comprehend it, but I think that even --
3 THE COURT: I think you've got to read salaries,
4 Dr. Karron's salaries, as salaries plus loans.
5
6
7
MR. RUBINSTEIN: I do, your Honor.
THE COURT: The loan entries.
MR. I ,do. I see an entry for $75,000 as
8 a loan and I don't see any salary -- I don't see the balance of
9 the two entries that I submitted to your Honor --
10 THE COURT: If he had taken the salary, you'd have a
11 worse situation because you then have the paYments due the
12 government for withholding that weren't made, social security
13 weren't made, the other paYments of taxes not made as a result
14 of taking less salary. The situation would be less if he had
15 taken all his salary. He would have a worse situation
16 confronting him.
17 MR. RUBINSTEIN: Do I understand that the Court 1S not
18 giving him credit for the $70,000 that he contributed in July
. 19 and August after the grant -- this is money that he took out of
20 a home equity loan, and I submitted the documentation to show
21 that.
22 THE COURT: I went into that earlier in front of you
23 with counsel and it was stated on the record, without any
24 exception taken, that those monies were for additional
25 expenditures that have been made between June 30 or June 23 and
(212) 805-0300
8AKMKARS Sentence
64
1 the date of payment of those amounts.
2 MR. RUBINSTEIN: But he should get credit for that.
3 These are expenses --
4 THE COURT: Depends on when the expenditures were made
5 and, as stated in open court and not objected to by you, these
6 were expenditures that occurred after the period of the audit.
7 MR. RUBINSTEIN: The audit, your Honor -- the audit
8 didn't occur
9 THE COURT: The audit didn't occur until later,
10 obviously, but books and records were reviewed as of the date
11 June 23, as I understand it, the date of suspension.
12 MR. RUBINSTEIN: He was unaware of that. As a matter
13 of fact, Judge, you may recall the testimony that he didn't
14 receive a copy of the audit until September, so he was totally
15 unaware of any discrepancies. He understood that the grant was
1 suspended because --
17 THE COURT: It doesn't matter whether he was aware of
18 it or not. It's irrelevant.
19 MR. RUBINSTEIN: I think, Judge, that the concept is,
20 when he's aware, because it's when he becomes aware whether or
21 not his intention in making compensation was motivated by a
22 guilty mind.
23 THE COURT: All I know -- I am going to take that into
24 account in connection with the 3553(a), but not taking the
25 guideline computation. I'm making the guideline computation as
(212) 805-0300
8AKMKARS Sentence
65
1 I've stated, and on that basis. And I'll hear from you further
2 on 3553(a).
3 MR. RUBINSTEIN: Yes, your Honor. I think that this
4 is a case that is very unusual in that Judge Rakoff used this
5 language in the case that I previously cited, and I have a copy
6 for the government and your Honor, Adelson. Unfortunately
'7
8
9 are --
10
THE COURT: You'll want your notes, won't you?
MR. RUBINSTEIN: Judge, Judge Rakoff said that there
THE COURT: It's a securities fraud case. What part
11 of the case do you want me to refer? I think I see a little
12 error in the opinion, but it's not -- the six or seven points
13 under the base level doesn't depend on the date of the offense.
14 It depends on the maximum penalty for the offense. Here the
15 maximum penalty was ten years, so only six points are allowed.
16 If it were 20 years, it would be seven points. It has nothing
1'7 to do with the date of the offense. It has something to do
18 with the maximum penalty on the offense.
19 Give me something else.
20
21
MR. RUBINSTEIN: I have the language.
THE COURT: Tell me what you're relying on, because
22 he's probably right.
23 MR. RUBINSTEIN: I'll try and find it as I'm reading
24 it here, but I have the quote. There may be cases in which the
25 offense level determined under the guidelines substantially
(212) 805-0300
8AKMKARS Sentence
66
1 overstates the seriousness of the offense.
2 THE COURT: You can get that in securities cases
3 because of the number the people who lose as a result of the
4 fraud committed by the officials of the company. The stock is
5 publicly traded and, therefore, you have a number of
6 transactions involved, so you get tremendous losses, as you do
7 in this case, Adelson case. This is a different case.
8 MR. RUBINSTEIN: He was referring to that, Judge, and
9 you're absolutely right --
10
11
THE COURT: I'm fully aware -- I understand that.
MR. RUBINSTEIN: In this case, your Honor, it is a
12 unique case and the government cannot point to one case like it
13 because there is no case like it. And I think that the
14 guidelines overstate the seriousness of what happened here.
15 There is no question that the United States Government
16 afforded Dr. Karron an opportunity to do research. They had no
17 vested interest financially in the product of his research.
18 Even though he has a business background that dates back over
19 20 years, he was ill-equipped to handle these funds. And if
20 you could see the way he withdrew money, just the dates when he
21 did it, whether you call it a loan or a salary, you see he
22 functioned as if whenever he needed money he would take it.
23 So he didn't take a salary until April or May of 2002,
24 eight months into the grant. He takes his first salary check.
25 Before that he's taking loans. At the end of the year he winds
(212) 805-0300
8AKMKARS Sentence
67
1 up that he owes all this money that he had taken as a loan back
2 in October 2001, so they take it as salary at that time.
3 All his efforts and all his energies were devoted to
4 this project, to do the research that the government wanted to
5 be performed .for everybody in society's benefit. That's why he
6 got this grant. And when they say credit against loss in
7 2B1.1(e), they are talking about monies returned, fair market
8 value for the property returned and the services rendered.
9 There is no way to quantify what the value of what Dr. Karron
10 created at that time in this tqpographical imaging that's used
11 today in all kinds of surgeries and what benefit it was to the
12 nation and to the world.
13 I think that that takes this case out of the heartland
14 because he, as you know from everything said, he didn't get
15 involved here to benefit himself financially. He took the rent
16 money. He shouldn't have taken it. He owed debts, so he paid
17 the debt with the rent money. That was wrong. That was wrong.
18 I think that this case goes outside the heartland,
19 that your Honor should consider 3553 Title 18, U.S.C., and
20 consider giving him a nonguideline sentence. And I think that
21 because you sat through a trial with Dr. Karron and.you know
22 ail the evidence and the background and the way he was advised
23 by people not to do this, not to do that, and he, like a bowl
24 in a China shop, insisted on doing it his way, that is why
25 there is really a legitimate likelihood that if he had followed
(212) 805-0300
8AKMKARS Sentence
68
1 protocol and followed procedure that he would not have been
2 sitting here as a defendant in a criminal case.
3 It seemed that although the budget, which he
4 submitted. Remember, he submitted a budget. He put down
5 110,000 for equipment. That was what's accepted. He put down
6 for subcontractors, he put down 250,000. He found that he
7 could get students for free. Is he entitled to an offset or
8 consideration for that because he didn't spend the government's
9 money on subcontractors and got free employees to do a job?
10 There is no suggestion here that the equipment he
11 purchased he used for other items other than this project. The
12 government, by law, owned this equipment. Yes, at the end of
13 the day it was possible for a grant recipient to get possession
14 and benefit from that equipment, but, in reality, he was using
15 government money to buy government equipment which the
16 government took back. They not only.took back their equipment,
17 they took back everything, piece of equipment that he ,had,
18 whether they had any right to it or not, and they kept it.
19 So that's where he found himself in this case. So I
20 think when you look at the way he managed his money, he saved
21 the government considerable money on subcontractors. He saved
22 them, according to the government's own f i ~ J r e s , in the first
23 year $174,000 just on subcontractors. He got the work done,
24 but he didn't have to spend the money because he did something
25 he wasn't supposed to do. He wasn't supposed to have employees
(212) 805-0300
8AKMKARS Sentence
69
1 without approval and we had testimony of that.
2 And in the second year they revised the budget and
3 110,000 for subcontractors and he used 6100. You know from the
4 testimony here that there were numbers of people working in
5 that apartment on these computers, on this project. And the
6 wasn't billed for it. Why? Because he was using
7 students. Does the government get a benefit of that? They do.
8 That is why, your Honor, the mathematical
9 considerations of a strict guideline calculation doesn't apply
10 in this case because Dr. Karron, with good intentions, and good
11 intentions meaning that he wanted the research to work, because
12 that's all he cared about. Those were the good intentions. He
13 might have used improper means, but the intentions were there.
14 And he created a product which people built upon and T
15 have a manuscript that was submitted to the Elsevier Editorial
16 Systems for computer medical imaging and graphics. This is a
17 draft manuscript that wa$ submitted, hasn't been published yet,
18 but it may well be published in the near future. It cites ATP,
19 it cites Dr. Karron, and it shows that the work that he did may
20 have a significant value. So it's hard to say what the value
21 was, but I don't think anybody in this room could say that he
22 didn't do the research that he was contracted to do.
23 I think your Honor has to consider the 3553 and ask
24 yourself whether or not his background, this offense, his
25 character, is such that should cause your Honor to impose a
(212) 805-0300
8AKMKARS
1 nonguideline sentence.
Sentence
70
2 I think the fact that you're dealing with a man who
3 frankly has a lot of issues. He's not a man anYmore. He's, in
4 fact, legally a woman. I spoke to the BOP. Rather, my office
5 did. And he is and as the probation report says, he will be
6 treated as a woman and, if confined, he will go to a women's
7 prison. We submitted letters from people who know him. He has
8 a generous good side to him. He has no criminality in his
9 past, and I think that he will have no criminality in his
10 fu.ture.
11 His mother is incapacitated. She is in a home. They
12 are hopeful. He is now living in that house in Long Beach.
13 Amongst the things he lost here, he lost his home. He is
14 hopeful -- and I spoke to his brother about this. I have a
15 letter from his brother that wasn't included in the original
16 submissions. I am not going to burden the Court with it. He
17 says when his mother needed assistance in the slightest way,
18 the defendant was the one who was there because he was the
19 closest to where his mother was situated in Staten Island, and
20 he's hoping to be able to take his mother home, and he's
21 learning to work a ventilator because she needs that in order
22 to breathe, and that is the hope, that he can stay in the home
23 there.
24 So I would ask your Honor to consider under, all these
25 circumstances, to fashion a sentence that doesn't have
(212) 805-0300
8AKMKARS Sentence
71
1 confinement in a federal institution, that has house arrest,
2 that he could function from the home that he's presently
3 residing in Long Beach; and when his mother gets out, he can
4 assist her there, and provide for restitution out of his future
5 earnings, if he's able to earn anything.
6 He has been severely compromised in his profession.
7 He has been turned down for positions because this case
8 received a lot of notoriety. They talk about general
9 deterrence. This case has sent a shock wave through the
10 scientific community as to how they ought to comport themselves
11 when dealing with federal grant and federal monies.
12 There is no question that he will never be eligible
13 I don't say never, but, in all probability, will not be
14 eligible to any federal funding so that he could go ahead with
15 his research, which is his life's work, is to do scientific
16 research. And the question is what sentence would be
17 appropriate under all these circumstances, and I don't see that
,
18 based upon his background and characteristics that confinement
19 is necessary here based on his history and character, and I
20 think that that sort of sentence will be as much as necessary
21 and not more than is necessary as the cases seem to say what
22 punishment should be.
23 Dr. Karron would like to address you, your Honor, and
24 I know you'll afford him that opportunity.
25 THE COURT: Does the government want to say something
(212) 805-0300
8AKMKARS
1 first?
2
Sentence
KWOK: Yes, we do.
72
3 Your Honor, we spent a good part of the afternoon
4 arguing about loss amount, and rightly so, because the numbers
5 can be a little bit confusing. But the defendant's conduct,
6 when distilled to essence, it is very clear what he did.
7 This is not the case about someone forgetting to cross the Ts
8 or dot the I's. This is not the a case about a technical
9 violation. If it were, the government wouldn't have been able
10 to show intent, and the jury wouldn't have been able to return
11 a guilty verdict. And the jury in this case convicted the
12 defendant because the intent was clearly shown at
13 trial.
14 The defendant was repeatedly told to stop. The
15 government wasn't in this to trip someone up. The trial
16 testimony established that the people who administered the
17 grant wanted to succeed. That's why they kept telling him and
18 kept working with him to explain the rules to him time and time
19 again ad nauseam. Everyone of those times he could have
20 gotten himself out of the hole that he was digging, everyone
21 of those times he could have stopped. And none of what he did,
22 none of that money that he would spent would have even been
23 reported to the Department of Commerce, the inspector general's
24 office, much less prosecuted by our office, and, ultimately,
25 the case brought before your Honor.
(212) 805-0300
1
8AKMKARS Sentence
Of course, the defendant never stopped. He kept
73
2 misusing the yrant money. And not only that, he tried to muck
3 around, as Frank Spring testified, with the company's books to
4 hide his tracks. And Mr. Rubinstein just now talked about him
5 spending less money than he's allotted in the category of
6 subcontracting. And the reason that's so is because he could
7 use students so there was more money left so he could pay
8 himself.
9 So everything ultimately comes back to how he could
10 use the grant to benefit himself or his company that he owns,
11 CASI, time and time again.
12 In his e-mails to his friends he didn't mince words
13 about what he was doing. He was, in fact, brazen and open
14 about what he was doing.
15 THE COURT: I don't think there is any evidence that
16 he used the students so he could pay more money to himself.
17 MR. KWOK: There is evidence in the record that
18 equipment under $5,000 he would be able to keep at the end of
19 the day.
20 THE COURT: It may be that it benefited him, but I am
21 not sure from the evidence that he actually intentionally said,
22 I am going to use students rather than subcontract so I could
23 get money for myself. I don't think the record establishes
24 that.
25 MR. KWOK: Let me go to the larger point. The larger
(212) 805-0300
8AKMKARS Sentence
74
1 point is, when no one was looking, when he thought no one was
2 listening, in his e-mail to his friends, he was open about what
3 he was doing. In the e-mail to his friend,he said he wanted
4 to make a lease with his friend living in Connecticut, so he
5 could "make like I only keep a folding bed on 33rd Street. And
6 if ATP buys into this idea, then I can charge my rent on the
7 apartment to the grant and pay my mortgage." He said in
8 another e-mail that if the ATP people didn't agree with him he
9 would turn the grant into enough of a train wreck so the
10 government would be forced to negotiate with him and, quote,
11 find a liveable solution for all.
12 Now, certainly in that e-mail, after his crime was
13 detected, at no time did he show any remorse. He didn't take
14 any responsibility for his actions. Instead, he tried to
15 engage in, essentially, financial black mail of the government
16 to strongarm the government to accept his fait accompli because
17 he has misspent so much of the government's money. And this
18 kind --
19 THE COURT: I saw that that was what he might think
20 about doing. I don't think there is any evidence in the record
21 that he strongarmed or attempted to strongarm the government is
22 such.
23 MR. KWOK: 1 would submit to the Court that's what it
24 means when he ,says, I would make the grant enough of a train
25 wreck so that they can find a livable solution for all.
(212) 805-0300
1
8AKMKARS Sentence.
THE COURT: That was one of two alternatives in that
75
2 e-mail that he mentioned, rather to pay more, I think more
3 money to cover the expenses or to make it a train wreck.
4 MR. KWOK: It's the government's view that those
5 e-mails, when you take them together, it shows the type of
6 brazenness, the type of arrogance that necessarily warrants
7 consideration under the 3553 factors because they go directly
8 to the seriousness of the offense.
9 Let me turli now to the defendant. Of course, none of
10 this conduct can be considered in a vacuum. It has to be
11 considered in the context of this defendant. And here, too,
12 the 3553 factors argue for a meaningful custodial guidelines
13 sentence.
14 This 1S not the case about someone who broke the law
15 because he was in dire straits where some sympathy might
16 appropriately be shown. This is not a food stamps case, this
17 is not a housing fraud Section 8 case where we also calculate
18 the loss under 2B1.1 where sometimes those mitigating
19 circumstances are present.
20 This is a defendant, who under the grant in year one
21 alone, is given an annual salary of $175,000, $175,000 in
22 taxpayer's money. That's a lot of money for a lot of people,
23 but not for this defendant because he kept misspending the
24 government's grant money to buy equipment that he knows he's
25 not supposed to buy.
(212) 805-0300
76
8AKMKARS Sentence
1 Of course, the defendant is a Ph.D. scientist from one
2 of the finest universities in the world. He did not have to
3 steal to put food on the table. He didn't have to steal to
1 " find a place to l i ~ e . But he did it anyway.
5 I think the defendant's characteristics under 3553
6 also argue for a custodial sentence within the guidelines.
7 Finally, your Honor, a guidelines sentence is
8 necessary in this case to serve the goal of the terms. Anyone
9 paying any attention to any public policy debate in the past
10 10, 20 years knows that one of the prime arguments opponents of
11 these government programs like to use is rampant, it is full of
12 fraud.
13 We know that's not true in this case because we have
14 ATP witnesses who testified that they keep a close eye on the
15 grant. In fact, they have these rules so that they can closely
16 monitor what the recipients are doing with government money.
17 But there is fraud and this is one such case. And it's the
18 government's view that when a clear-cut fraud case presents
19 itself, there has got to be a strong deterrence, as reflected
20 in a meaningful custodial sentence so that people who get this
21 money will know that you can't just walk away and apologize and
22 say, I shouldn't have done it.
23 Rather, as his business manager told him himself at
24 the time, you could go to jail for this, and that message
25 should be sent because it is the taxpayer's money, and for
(212) 805-0300
8AKMKARS Sentence
77
1 these programs to survive there must be a general deterrence
2 message that if you misspend the government money and you get
3 caught, you don't just get slapped on the wrist and let go.
4 For all of those reasons, because the defendant's
5 conduct is intentional and repeatedly so, because of the
6 characteristics of this defendant, and because of the need to
7 serve the goals of general deterrence, the government
8 respectfully urges the Court to impose a custodial sentence
9 within the guidelines range.
10 THE COURT: Dr. Karron, would you like to say
11 something at this time?
12
13
THE DEFENDANT: Yes, I would.
MR. RUBINSTEIN: Where should he make the statement
14 from, your Honor?
15 THE COURT: You can make it sitting there or standing,
16 whichever you wish or she wishes.
17
18
THE DEFENDANT: How much time do I have?
Your Honor, I'm deeply sorry for what I have done,
19 more sorry than I can convey with words. I have been doing
20 I wish to apologize to the Court and to ATP, to Mark Stanley,
21 who convinced me that I had a chance to win this grant, and to
22 people of the United States, who I feel like I'm working for
23 with this money.
24 I'm beginning to see that I violated their trust and
25 it disturbs me tremendously for anyone to even think that I
(.212) 805-0300
8AKMKARS Sentence
78
1 could do that. And if, in fact, I did, then I will take
2 whatever punishment is appropriate. I can only state that I
3 can perhaps explain myself a little bit better and maybe
4 p r e ~ e n t other people from making the same mistakes I've made
5 because I understand, from having lived through it, how the
6 PIs, who receive large grants, think differently than the
7 accountants and the grant managers that are responsible for the
8 money.
9 And I feel terrible that B.J. and Jane, I got them ln
10 trouble. I got myself in a lot more trouble. My past five
11 years have been hell. I thought T knew what I was doing and T
12 recognize now that I really didn't know what I was doing.
13 I've spoken to other PIs, principal investigators, and
14 I've seen them making the same mistakes, and I've tried to help
15 them. And I know when somebody gives you $2 million, it's
16 like, holy cow, the government of the United States believes ln
17 me, they trust me, and they believe in my research. That's an
18 intense thing.
19 I believed, and I'll admit that I was wrong, that I
20 could use my salary to pay for everything that the grant
21 that's indirect on the grant. I didn't know how to keep track
22 of it. I didn't know that I should have taken a paycheck,
23 deposited it into my personal account, and then write a check
24 back to CASI, and CASI should have written a check back to the
25 grant. Then there would be no confusion that I seem to have in
(212) 805-0300
8AKMKARS
1 my wake.
2
79
Sentence
Seven years ago I didn't know about accounting. I've
3 always done contracts. I've never done grants. DARPA would
4 give me money. They didn't care what I did with it, as long as
5 I could produce the research that I said I could do. I never
6 understood that a grant, you do whatever you can, but it's how
7 you spend the money that's most important. I didn't know how
8 to spend this money. I didn't think that I was throwing it
9 away. I didn't think I was unduly enriching myself until a
10 couple of years later I realized, I took too much money.
11 I didn't want to take money unless I absolutely needed
12 it. It was like running a little business. The owner doesn't
13 take the money unless you need it. I didn't want to take
14 salary. I just wanted to take $2,000 at a pop for rent. I
15 thought I could charge it against salary. And at the end of
16. the day, I overdid it.
17 In the second year I thought I had made amends, but
18 the budget was wedged. I never thought that I would be impaled
19 on my own budget. When I wrote the budget I just needed to
20 fill something in to get the grant out the door by the
21 deadline. I asked a couple of ATP people, what is a reasonable
22 salary? They said, don't worry. In fact, it says, don't
23 worry, so I didn't worry. I was just going to do the research
24 and that was' it. I took a big advance so I could eliminate all
25 my personal and financial problems. I didn't want to have to
(212) 805-0300
8AKMKARS Sentence
80
1 worry about the money. I wanted to focus on the research. And
2 trying to run this project has destroyed my life. We kept the
3 research going after the project was suspended because the
4 research is ~ i n e . The grant doesn't tell me how to live. The
5 grant tells me how to spend the government's money.
6 But, anyway -- I'm getting lost.
7 I'm bullheaded. I'm boneheaded. My exwife said I
8 couldn't tell my friends from my enemies. That's really been
9 true in this adventure. I'm a strange person. I let people
10 come and go. I don't know. Just do whatever you want.
11 I had some brilliant students working on this project
12 who should have been on the payroll. I didn't put them on the
13 payroll. One, because either I was advising them on their
14 Ph.D., or they were already on some other payroll. This whole
15 issue of like, you know, do I take people and pay them more for
16 the same hours? ATP also said, don't do certain things, what I
17 understood I could do. I didn't understand.
18 I'm boneheaded. I'm also too bright for my own good.
19 When people told me that I could -- when I started thinking
20 that I could use Morse Theory in digital data, in discrete
21 picture data, pixelated data, everybody said you can't do that,
22 it'doesn't work. Morse Theory only works for continuum
23 mechanics, not where you have imagery.
24 But Jim Cox and I talked about it. I think I see a
25 way to do it. Despite everybody telling me, no, no, no, that's
SOUTHERN DISTRICT REPORTERS, P.C;
(212) 805-0300
8AF-MYJ\RS Sentence
81
1 not how you do it; this is how you do it. We persisted, and
2 for ten years we came up with digital Morse Theory and now it's
3 becoming part of the accepted panoply of topological image
4 processing.
5 If I listened to everybody telling me, no, no, no, you
6 can't do it, you can't do it, fine, I'll do something else.
7 When somebody says, you can't do it, I start blowing steam out
8 my nose. There has got to be a way to do it.
9 We did get the power approved. I did have long
10 discussions with B.J. and Jane about how we can fix this, how
11 we can change this, what needs to be done. I made regular
12 visits to Washington. I tried to keep in touch with my program
13 managers. They came and visited regularly. We were making
14 good scientific progress. But my attitude was, the hell with
15 the financing, as long as I kept records. I have all of the
16 source records. And give it to the accountant and she will
17 figure it out.
18 And, you know, I never thought -- we didn't have a
19 year's worth of running actuals to calculate a good budget.
20 And towards the end the accountant was telling me, this is an
21 unliveable budget. You can't do this project with this budget.
22 You need to put a lot more money in. And without coinvestors
23 and cofunding, you're going to get in trouble.
24 I thought that I could keep overhead minimal, take as
25 little salary as I could, take rent instead of salary, which is
(212) 805-0300
8AKMKARS Sentence
82
1 a colossal mistake. It is more of a mistake than even this
2 Court will understand. I have to pay tax twice on the money.
3 This is the stupidest thing imaginable. It's like the absolute
4 worst thing I can do. It inflated my income. The W2s and the
5 1099s from the grant show that I made $250,000. That's too
6 much. Because I took the same money, gave it back to the
7 company, and paid it again. It was spectacularly dumb.
8 The worst thing is, worst thing is that my business
9 managers, I really wish that -- we needed to get a new budget.
10 We needed to get a new budget approved. I think we were almost
11 at that point and then I screwed up.
12 I'm responsible for everything I've done. I took
13 responsibility. I kept records at the time I was doing it. I
14 didn't think I was committing -- I was defrauding the
15 government. I thought as long as I was doing good work, the
16 research is moving ahead, we are presenting at conferences, I'm
17 flying allover the country presenting. We are attracting
18 students, we are attracting' attention. That's what was
19 important. In the past five years all -- I have bean counters
20 going over and over and over. I'm still stuck in 2001 and
21 2003.
22 My career is over. My colleagues don't return my
23 phone calls. I've alienated my wife and daughter. I've had a
24 sex change operation. I am now going to live as a woman.
25 I didn't think -- I wanted my staff to be happy and
(212) 805-0300
8AKMKARS Sentence
83
1 healthy. I wanted Nicky Winter; the bookkeeper, I wanted her
2 to fix her teeth. I wanted to fix my teeth. I didn't waut to
3 have I wanted around me to be happy. And I wanted
4 them to know that the were available. I didn't
5 overspend the fringes.
6 After the grant was suspended I got a job with a
7 colleague and I was much happier working for him than trying to
8 manage my own grant. If I get out from underneath this I would
9 like to advise Mark Stanley in the ATP program, now TIP
10 program, what to look out for in PIs when you give them a lot
11 of money. What are the common misunderstandings that a
12 scientist will have when you give him a lot of money. My
13 colleagues at City College said, we win grants, but we have
14 almost no sale. I wanted to make my little company unique. I
15 wanted to do things different. I wanted to do things nicer,
16 better. I didn't know what to do and I didn't know what I was
17 doing, and I ended up with a train wreck.
18 Lee Gurfein, my business manager, wanted to lock me up
19 in a room and just give me a computer and let me out for air
20 and exercise. He didn't make any coinvestment. My brother
21 didn't have any signing authority until we had a contract with
22 him and he gave me some money. I did everything he wanted. I
23 did everything my accountant wanted me to do.
24 I did everything that Bob Benedict wanted me to do.
25 If he told me not to do something, I wouldn't do it. When he
(212) 805-0300
8AKMKARS Sentence
84
1 told me to stop paying the rent, it was getting to be a real
2 problem, I stopped. I had to understand why. I didn't get it
3 right. I made a mistRke. I never thought it would be this big
4 of a mistake. If I have to g8 to prison for it, then I'll go
5 to prison for it. I made a mistake. I didn't think -- I
6 hope -- I feel terrible that people feel I violated their
7 trust, and I'll never be able to recover that.
8 I want to finish the Joe Morse Theory. It has nothing
9 to do with money anYmore. It's something that needs to be
10 done. It's why ATP gave me the money. The research was more
11 important than the money, but I didn't know how to handle the
12 money. I think if I got a job as a grants manager, because I
13 needed a job, having made every mistake twice, I would know how
14 to prevent it. I have been advising other colleagues, that
15 kind of attitude is going to get you in real big trouble. I
16 have told them that, and they usually get really mad at me.
17 Other ATP grants, when I talk with them, I said, be
18 really careful, donIt have a certain mind-set. You are not
19 your grant. The grant funds certain activities, but don't put
20 your ego, and get more than one grant and have more than one
21 sponsor.
22 I thought I could do everything myself. I do
23 everything so hard and so intensely and so monomaniacally, so
24 bipolar that I usually get myself in trouble. This is the
25 worst trouble I've ever got myself in. I don't know. Maybe
(212) 805-0300
8AKMKARS Sentence
85
1 I've learned something from it. I tell people I made every
2 mistake twice. It's like if anybody knows the lessons of
3 managing federal and public money, so that everybody can look
4 at it and say, yeah, there is no problem with that, I think I
5 know how to do it.
6 I could probably pass the CPA exam now. Do I feel
7 comfortable defending what I did, knowing what I did in 2001
8 with what I know now in 2008? Absolutely not. I made a mess.
9 It was a big mess. But it was fixable. And I wasn't able to
10 fix it. It was too much of a mess, and I just wanted to focus
lIon the research, and I decided to do good work and maybe
12 something good would come out of it.
13 If I need to go to jail, I'll go to jail. I would
14 like to finish what I started. I would like to help the ATP
15 program in the sense that I can probably smell fraud brewing in
16 the mind-sets of the PIs. Because I have a sense now of what
17 this entails, particularly in small startups, very small
18 startups. That's what ATP wanted to fund, and they should
19 continue to do it, but they need special supervision. When I
20 was doing SBIR grants, they have special supervision for SBIR
21 grants because the PIs don't always know what they are doing.
22 I don't have a home to go to. My mom is going to die
23 soon. I want to bring her home to die.
24
25
Am I wandering off too far?
THE COURT: I couldn't hear you.
(212) 805-0300
1
8AKMKARS Sentence
THE DEFENDANT: Am I wandering off too far or am I
86
2 becoming incomprehensible?
3 My mom is going to die soon. She is on a ventilator.
4 She is on a feeding tube. I'm only trying to bring her home,
5 with my family's consent, so that she is at least home, because
6 that's where she always wanted to be. After she passes on, we
7 are going to have to sell the house anyway because of the bills
8 from the nursing home. If I have to go to prison, I would like
9 to at least see her through.
10 I'm taking classes now on ventilator care, so at
11 least -- we have three shifts of nurses at the house running a
12 ventilator. I need to be able to cover them. My Ph.D. is
13 sufficiently medical, and I have enough insight on how to run a
14 ventilator that I need a lot of training so I don't screw up,
15 because I think I know what I'm doing, and Mondays are usually
16 my days to go get training.
17 I pre-separated from paying myself rent because I
18 thought I wanted to take rent as I needed it and not use
19 salary, and just use my salary line to pay utilities and
20 telephone and the legal cost, the bills to Pennie & Edmonds. I
21 tried to keep a green check and a burgundy check. Green checks
22 were nonprogram, burgundy was program.
23 But we didn't set up the account before we got the
24 first paYment from ATP. I took too much money at the
25 beginning, and I tried to put it back. The way I tried to put
(212) 805-0300
8AKMKARS Sentence
87
1 it back. Now I just did it all wrong. I thought it didn't
2 matter where I spent the money out of. I just give ATP a stack
3 of receipts.
4 I tried to keep good records. I got consumed with
5 recordkeeping. It's like I was telling it's like I got
6 buried in receipts that I lost and I never added them up. I
7 just took pictures of them and filed them under each day and
8 let the accountant deal with it. She got lost.
9 I think the best thing I can do for my country is
10 prevent me from happening again. I don't know that I will ever
11 personally handle big federal projects, but I think I can be of
12 value to the program, particularly since they are going to be
13 gun shy to giving money to small grant recipients. And I feel
14 terrible because Mark really believed in me, the program
15 director.
16 If there is something that can be done with me to help
17 the program, I would do it any way I can. I'm happy to lecture
18 and explain how to get yourself in trouble with more money than
19 you can deal with. I don't know whether that would help. I
20 didn't believe that I really misspent money until I finally had
21 to really, really study exactly what I did, like a third person
22 did it, and I admit I took too much money.
23 But I didn't not do research. I didn't advance the
24 state of the art. The big problem is that I spent so much time
25 being an amateur accountant that I couldn't be a professional
(212) 805-0300
8AKMKARS
1 scientist.
Sentence
88
2 If you can find it in your heart to -- I'm sorry. I'd
3 like this to be over and I would like to move on. If I can
4 help, I will. If making me an example by spending a few years
5 will prison to help, that's what I need to do. If making me an
6 example and I can prevent other people from getting the
7 boneheaded mind-set that I have, maybe my experience is more
8 valuable in some other setting.
9
I would like to finish the research. And the program
10 would actually -- they are horrified of what's happened, but I
11 think there is a reason why they never completely shut down the
12 grant. They just want me to clean up my act. If we could
13 finish the program with somebody else running it, that's fine,
14 too. My boss at A ~ P could administer it for me.
15 Having worked in a big federal defense contractor, I
16 see how they do it. If I had spent a couple of years working
17 in a large corporation, perhaps I would see how these are done.
18 I have never done that. I now know more about grants
19 management than I care to.
20 I don't know what else to say. I'm really sorry. I
21 didn't try to hide it from anybody. And people call up and
22 say, what's going on? I say, I have been convicted of stealing
23 from the grant. If that's what I did, then I did it, but I
24 never kept it a secret. I took pictures of everything I did.
25 I kept records to hang myself, because I never thought I would
(212) 805-0300
8AKMKARS Sentence
89
1 be hanging. I have never thought I would be impaled.
2 I'm redundant and I'm repetitive and I forget what I
3 say, and I'm a disaster. I really am. I will be late for my
4 own funeral. If I do something too fast, I always forget
5 something, screw something up.
6 I apologize to the Court for keeping you this late and
7 for everything else that I've done in the past.
8 Thank you, your Honor.
10 As I said, under the guidelines, the Court's findings
11 are that the base offense level for this violation for Title 18
12 Section 666 is found under 2Bl.l. The base offense level under
13 subsection (a) (2) of that guidelines is 6. Because more than
14 $120,000 was lost through inappropriate expenses, 10 points are
15 added. Making that decision the Court looked to guideline note
16 which applies to 2F. The guideline note that applies to grants
17 is federal grant under guideline commentary (f) (2) (ii). At
18 that guideline of 16, the guidelines calls for a sentence of 21
19 to 27 months in prison.
20 Turning to 18 3553(a) of Title 18, the Court, as the
21 Court must, consider any guidelines sentence as a result of the
22 Booker decision, the Court must take into account the history
23 and circumstances of the offense, history and characteristics
24 of the defendant. The defendant here has no prior record.
25 And addressing the Court he said that he's never
(212) 805-0300
8AKMKARS Sentence
90
1 before had the responsibility before of handling a federal
2 grallt and dealt with contracts in the past. Those are
3 contracts, I gather, to perform specific services for a fee,
4 which is a little different than a federal grant. Both of
5 those circumstances relate to the circumstances of the offense
6 and the history and characteristics of the defendant.
7 But the Court must also impose a sentence which is
8 sufficient but not greater than necessary to comply with the
9 purposes set forth in subparagraph 2 of 3553(a), and that is
10 the need for the sentence imposed to reflect the seriousness of
11 the offense, to promote respect for the law, and to provide a
12 just punishment for the offense; B, to afford adequate
13 deterrence to criminal conduct of other persons, and to protect
14 the public from further crimes of the defendant -- C, to
15 protect the public from further crimes of the defendant; and,
16 D, to provide the defendant with needed educational and
17 vocational training, medical care, or other correctional
18 treatment in the most effective manner.
19 I don't believe that it would be necessary to protect
20 the public from further crimes of the defendant that would
21 serve to ameliorate the penalty imposed under the guidelines.
22 I have some difficulty with this case because
23 delineating the intent of the defendant is difficult for me.
24 It is true that the loss is at least $120,000, but the
25 defendant's intent in causing that loss is something that the
(212) 805-0300
8AKJYIKARS Sentence
91
1 Court has been concerned about.
2 And, on the other hand, the Court has to consider a
3 sentence that affords adequate deterrence to criminal conduct
4 and the government gives these grants, they are placing a lot
5 of trust in the grantee. It's important that the grantee not
6 intentionally misapply the funds.
7 It's clear to me that there was an intentional
8 misapplication of the rent money. The defendant was told time
9 and time again not to use the rent funds for rent or for
10 utilities. That's what the record here substantiates. That's
11 a lesser sum than the sum found in the guidelines.
12 Under the circumstances, it seems to me as the first
13 offense that the Court should not impose a sentence that is
14 heavy as the guideline and, yet, impose a sentence that
15 provides deterrence to other people. I am going to vary the
16 sentence pursuant to Section 3553(a).
17 I am going to impose a sentence of 15 months under
18 zone C of the guidelines, one half of the term to be served in
19 prison and one half of home confinement, eight months'
20 imprisonment, and the remainder in home confinement.
21 The term of supervised release is three years,
22 restitution in the amount of $120,000. That's required, I
23 guess. And a special assessment of $100. I think I'm right on
24 the split sentence, that if it falls in the 12 category, I can
25 give the split sentence.
(212) 805-0300
1
2
8AKMKARS Sentence
MR. KWOK: Section 5C1.1, section D.
MR. EVERDELL: Yes, your Honor, I believe it is
92
3 correct. It has to be a one-for-one ratio.
4 THE COURT: One has to be imprisonment, the other has
5 to be home confinement.
6
7
MR. EVERDELL: That's correct.
THE COURT: That's to enable defendant to take care of
8 his mother as soon as possible.
9 Three years of supervised release. There will also be
10 a $100 assessment as provided by the law. The conditions of
11 supervised release are: The defendant shall not commit another
12 federal, state, or local crime; shall not illegally possess a
13 controlled substance; shall not possess a firearm or
14 destructive device. Mandatory drug testing is suspended due to
15 the Court's determination that defendant poses little risk of
16 future substance abuse. The defendant shall cooperate in the
17 collection of DNA as directed by the probation officer.
18 Standard conditions of supervision 1 through 13 will
19 also apply with the following special conditions: Defendant
20 shall provide the probation officer with access to any
21 requested financial information; defendant shall not incur new
22 credit charges or open additional lines of credit without
23 approval of the probation officer unless the defendant is in
24 compliance with the installment schedule, installment payment
25 schedule.
(212) 805-0300
93
8AKMKARS Sentence
1 Defendant is to report to the nearest probation office
2 within 72 hours of release from custody and be supervised in
3 the district of his residence. $100 will be due immediately.
4 That's the special assessment. The restitution shall be in the
5 amount of $120,000, payable to the clerk of the United States
6 District Court for disbursement to Julie Weiblinger, U.S.
7 Department of Commerce, National Institute of Standards and
8 Technology, Advanced Technology Program Receivables Group, 100
9 Bureau Drive, Mail Stop 1624, Gaithersburg, Maryland
10 20899-1624.
11 The restitution shall be paid in monthly installments
12 of 10 percent of gross monthly income over the period of
13 supervision to commence 30 days after the date of release from
14 custody, and the defendant shall notify the U.S. Attorney's
15 Office for this district within 30 days of any change of name
16 or residence address that occurs while any portion of the
17 restitution remains unpaid.
18 If the defendant is engaged in BOP non-UNICOR program,
19 the defendant shall pay $25 per quarter towards the
20 restitution. However, if the defendant participates ln the
21 BOP's UNICOR program as a grade 1 through 4,the defendant
22 shall pay 50 percent of her UNICOR earnings to any financial
23 penalties, consistent with Bureau of Prisons regulations of 28
24 CFI Section 45.11. The factors in 18 United States Code
25 Section 3664(f) (2) were considered ln formulating the payment
II
(212) 805-0300
8AKMKARS
1 schedule.
Sentence
94
2 There will be no fine ln this case ln view of the
3 restitution requirements.
4 I gather you want to have a voluntary surrender,
5 Mr. Rubinstein?
6 MR. RUBINSTEIN; Yes, your Honor. I was wondering, if
7 it's possible, I don't know how it works. Is it possible to do
8 the home confinement first and then the incarceration
9 afterwards? So this way if they can get his mother home,
10 because her life expectancy isn't that long.
11 THE COURT; It seems to me that it could. I don't see
12 anything under the section that says it couldn't. It certainly
13 surprises me.
14 MR. EVERDELL; I'm sorry to interrupt, your Honor. I
15 do have a different case with Judge Kaplan where he did allow
16 that very thing to happen. If that precedent counts for
17 anything, I believe there is a precedent in the Southern
18 District for doing this.
19 THE COURT; I am going to do it that way. So the home
20 confinement period wil.l start. You better see that the
21 defendant sees the probation officer in the next 24 hours, Mr.
22 Rubinstein.
23 MR. RUBINSTEIN: Absolutely. I will go there
24 tomorrow.
25 THE COURT; We will make arrangements for home
(212) 805-0300
8AKMKARS Sentence
95
1 confinement to start. If you have home confinement, there will
2 have to be a telephone wi t..hQl.lt call forwarding in the residence
3 in which the defendant would be located because they have to
4 know that he's not leaving the premises during the period of
5 home confinement. Home confinement is not to interfere with
6 religious services or emploYment, but it will require the
7 defendant to be home in the evening and nonworking hours part
8 of the day.
9
10
11
12
MR. RUBINSTEIN: And medical, your Honor?
THE COURT: What?
MR. RUBINSTEIN: And medical.
THE COURT: Of course, he can attend medical
13 appointments for himself and his mother.
14 There will be no call forwarding or call waiting or
15 modem attached to the telephones. It's clear that he is
16 serving his term of home confinement without any further
17 investigation by the probation office.
18 MR .. RUBINSTEIN: Your Honor, would your Honor
19 consider -- first, on the restitution, did your Honor say how
20 that's to be paid?
21
22
23
THE COURT: Yes, I did. 10 percent of gross pay.
MR. RUBINSTEIN: Is that without interest?
THE COURT: I leave that to the greater, higher
24 authorities. I believe that interest does run.
25 MR. RUBINSTEIN: Would your Honor
(212) 805-0300
1
8AKMKARS
96
Sentence
THE COURT: I believe interest runs. But it can start
2 after the period of incarceration.
3 MR. RUBINSTEIN: Your Honor, I believe that the
4 defendant wishes to appeal this matter. That's what I've been
5 informed. In view of that, I wonder if your Honor will
6 consider releasing him pending the appeal. He is going to be
7 on house arrest for seven and a half -- I'll reserve the right
8 to make that application.
9 THE COURT: He can appeal, butI don't see where you
10 can appeal, but is that beneficial to your situation for me to
11 suspend the imposition of sentence pending the appeal?
12 MR. RUBINSTEIN: I would like to serve the house
13 arrest portion while his mother is alive.
14 THE COURT: I can't break it up, I don't believe,
15 under the statute.
16 MR. RUBINSTEIN: I'll have to consider it, Judge. We
17 will go to probation tomorrow. As far as the house arrest, we
18 don't have a problem with s t a r t i n ~ that immediately.
19
20
21
22
THE COURT: Make an expedited appeal.
MR. RUBINSTEIN: File an expedited appeal?
23 Good night.
24
25
MR. KWOK: A few things, your Honor.
If the government could request the Court to give an
(212) 805-0300
8AKMKARS Sentence
97
1 oral pronouncement of his forfeiture order. There is a
2 forfeiture allegation in the indicLment.
3 THE COURT: Is forfeiture required here? I didn't see
4 t h ~ t in the presentence report.
5 MR. KWOK: It is not reflected in the presentence
6 report, but, as your Honor might recall, there was an order by
7 stipulation between the parties where we seized the proceeds
8 from the sale of defendant's apartment. And so if we could
9 forfeit that in partial satisfaction of the restitution
10 obligation.
11
12
THE COURT: You can submit a forfeiture order, yes.
MR. RUBINSTEIN: The marshals are holding those funds,
13 if that's what the government is talking about.
14 THE COURT: I have to make an order with respect to
15 it. The marshals already have it.
16 MR. KWOK: But the order the Court signed says that
17 the money will be held with the U.S. Marshals pending further
18 order of the Court. We will certainly submit an order to
19 release those funds.
20
21
22
THE COURT: So ordered.
MR. KWOK: Thank you.
Also, just one last matter. Because this is a second
23 superseding indictment, the government moves that the
24 underlying indictments be dismissed.
25 THE COURT: That's granted. I am sure there is no
(212) 805-0300
8AKMKARS
1 opposition to that.
Sentence
98
2 MR. RUBINSTEIN: No opposition,your Honor.
3 THE COURT: You have ten days to file a notice of
4 appeal, Dr. Karron. All you have to do is write a letter to
5 the Court, United States District Court, 500 Pearl Street, New
6 York, New York, and say, I wish to appeal and that will
7 preserve your appeal, but you have to do it within the ten-day
8 period because, otherwise, the Second Circuit will say you
9 waived your right to appeal by not filing that letter within
10 the ten-day period.
11
12
You understand me? You're nodding yes.
If you want to appeal, you just write the letter
13 within ten days and that preserves your right. If you don't
14 w r i t ~ it in the ten-day period, you lose your right to appeal.
15 If you don't have funds for an appeal, the Court of Appeals
16 will decide on it for you to handle your appeal free of charge.
17 MR. RUBINSTEIN: What they do, Judge, in reality, is,
18 they assign trial counsel free of charge. I had that
19 experience with Judge Kaplan, who was mentioned once today
20 already.
21 000
22
23
24
25
(212) 805-0300
8ARUKARS
2 ------------------------------x
3 UNITED STATES OF AMERICA
1
4 v. 07 CR 541 (RPP)
5 DANIEL B. KARRON,
6 Defendant.
7 - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - - - x
8 New York, N.Y.
October 27, 2008
9
10
11 Before:
12 HON. ROBERT P. PATTERSON
13 District Judge
14 APPEARANCES
BY; CHRIS EVERDELL
18
RUBINSTEIN & COROZZO,LLP
19 Attorneys for Defendant
BY; RONALD RUBINSTEIN
20
21
22
23
.24
25
(212) 805-0300
2
8ARUKARS
1
2
(Case called)
THE COURT: Under Rule 35 I sent out a memo to counsel
3 on Friday because I got word from the Department of Probation
4 that the Department of Probation would not honor the sentence
5 that I imposed in this case and would imprison Dr. Karron for
6 15 months and that you could not have a sentence that imposed
7 home confinement first. I had imposed home confinement first
8 so that Dr. Karron could take care of his mother during that
9 period, but the Bureau of Prisons won't observe it.
10 I am in a difficult position.
11 I would be glad to give you the memo from the Bureau
12 of Prisons from the probation department if you want to look at
13 it.
14 MR. RUBINSTEIN: Your Honor, that was going to be my
15 request, what is contained on page 2. In order to address the
16 Court's intention that Dr. Karron be allowed to care for his
17 elderly mother, to recommend that you set a voluntary surrender
18 date in the future and entertain requests according" to the
19 situation.
20 THE COURT: We did extend the voluntary surrender
21 date, did we not?
22 MR. RUBINSTEIN: No, we did not have any provision for
23 voluntary. What I would respectfully request for your Honor is
24 that we put it down for the first week in January and then see
25 what the situation is with his mother and then your Honor could
(212) 805-0300
3
8ARUKARS
1 make the determination about the voluntary surrender at that
2 time. I think that would be in accordance with the intent of
3 the Court that he be
4 THE COURT: You can file a notice of appeal for one
5 thing. Let's not overlook that. But I don't see how, having
6 imposed a sentence, I can change it. I don't know that I have
7 any power to do what you are suggesting, for one thing.
8 MR. RUBINSTEIN: You always have the power, your
9 Honor, as far as when the defendant can surrender.
10 THE COURT: That part, if I re-impose sentence, but
11 putting off sentence as you suggest -- or maybe I misunderstood
12 you -- judgment has been entered in this case. And when they
13 got the judgment, they replied to this memorandum saying that
14 the Bureau of Prisons wouldn't 'honor the judgment because of
15 their regulations.
16 MR. RUBINSTEIN: Maybe I misspoke. I am. in agreement
17 with the recommendation of the probation department. The Court
18 can set a voluntary surrender date in the future. And then at
19 that time you can entertain a request for an adjournment of
20 that surrender date.
21 THE COURT: I am perfectly willing to set a voluntary
22 surrender date in the future, but at this time it would be now
23 because I have to act within one week.
24 MR. RUBINSTEIN: I would ask your Honor, if your Honor
25 would entertain a voluntary surrender date at this time for the
(212) 805-0300
4
8ARUKARS
1 first week in January.
2
3
4
THE COURT: I have no problem with that.
Does the government have any problem with that?
MR. KWOK: If I understand Mr. Rubinstein correctly,
5 he is suggesting the setting of a voluntary surrender date
6 today with extensions from time to time.
7 THE COURT: As I understand it, he is saying I agree
8 that the sentence has to be modified as recommended by the
9 probation department, but I want to have his surrender date
10 stayed until the first week in January.
11 MR. KWOK: The government's position is that a
12 surrender date should be set a few weeks from now. As
13 Mr. Rubinstein is aware, essentially putting it off until later
14 and with indefinite extensions, depending on the
15 circumstances--
16 THE COURT: I am not going to do indefinite
17 extensions. If you file a notice of appeal, that is another
18 matter. Then you can ask for bond pending appeal. I cannot go
19 putting it off and off and off.
20 MR. KWOK: That is the government's concern because of
21 the uncertainty of the mother's health situation. We are
22 concerned that this would amount to, essentially, bail pending
23 appeal without making an application for bail pending appeal,
24 and we all know that the standard is extremely high.
25 The government would ask that a surrender date be set
{212} 805-0300
5
8ARUKARS
1 no later than a few weeks from now. And then if Mr. Rubinstein
2 wants to file a notice of appeal, he can ask the Circuit Court
3 for relief if he wants appeal or to have bail pending appeal.
4 MR. RUBINSTEIN: Your Honor, I don't think that meets
5 with what your Honor's initial intention was, and I think what
6 the probation department says spells it out exactly to
7 accomplish --
8
9
10
THE COURT: Give me back my memorandum.
MR. RUBINSTEIN: Page 2.
THE COURT: I have some other people waiting here and
11 I cannot deliberate on this forever here.
12 I see what you are pointing to, but I cannot keep
13 putting it off forever on that type of application, bail
14 pending appeal. I don't think that Dr. Karron is likely to
15 flee, but I am not going to do that, Mr. Rubinstein, the way
16 that you are suggesting. I will put it off for over the
17 holidays so that he can surrender after January 10th or if you
18 get bail pending appeal until January 10th.
19
20
MR. RUBINSTEIN: Would you entertain it now?
THE COURT: I would rather have it sometime later
21 because I have these people waiting.
22 MR. RUBINSTEIN: We will put it down for January 10th,
23 did your Honor say?
24 THE COURT: That will get us past the Christmas
25 holidays, and I will impose a split sentence of seven and a
(212) 805-0300
6
8ARUKARS
1 half months of imprisonment at the Bureau of Prisons. to be
2 followed by seven and a half months of home confinement and
3 supervised release so that he can take care of his mother. And
4 that term of supervised release would be three years, the first
5 seven and a half months being home confinement.
6 It will be the same conditions of supervised release
7 that I imposed on October
8 MR. RUBINSTEIN: 20th, your Honor.
9 THE COURT: 20th, and the same standard conditions
10 that I imposed on that date will also remain as part of this
11 judgment.
12 The special assessment of $100 will also apply, as
13 well as the restitution order of October 20 and the amount of
14 paYments to be made pursuant to the restitution order. In
15 other words, the monthly paYment, 10 percent of gross monthly
16 income, and the period of supervision to commence 30 days after
17 release from home confinement.
18 And the defendant shall notify the United States
19 Attorney of any change of address during the period of
20 supervision.
21 Special instructions with regard to the paYment of the
22 monetary penalties will apply.
23 Is there anything further?
24 MR. RUBINSTEIN: I take it that the sentence
25 technically and legally is imposed as of today, so the 10 days
(212) 805-0300
7
8ARUKARS
1 for filing a notice would start today and not
2 THE COURT: I guess it would be from the date of this
3 judgment or this sentence and that you have 10 days to
4 challenge the terms of the sentence.
5 MR. KWOK: Do I understand the January 10 date to be
6 the surrender and should defense counsel wish to make bail
7 pending appeal --
8 THE COURT: He would have to make it before January
9 10th so that he can get a decision from the court on the bail
10 pending appeal.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
o o 0
(212) 805-0300

USA V KARRON 07 CR 541 RPP Pre Trial Conf and Full Trial and Sentencing Transcript

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

USA V KARRON 07 CR 541 RPP Pre Trial Conf and Full Trial and Sentencing Transcript

Transféré par

Droits d'auteur :

Formats disponibles

The Silvif) J.

16 a handle on that problem of the unless I know what

Vous aimerez peut-être aussi