1 SUPERIOR COURT OF NEW JERSEY CHANCERY DIVISION - MORRIS COUNTY. DOCKET NO. MRS-C-184-92 APPELLATE NO.

# : : : STENOGRAPHIC TRANSCRIPT : Plaintiffs : OF : -vs: DECISION : JOSEPH WILF AND THE : ESTATE OF HARRY WILF, ET : ALS. : : Defendants : _____________________________ PLACE: MORRIS COUNTY COURTHOUSE WASHINGTON AND COURT STREETS MORRISTOWN, NEW JERSEY 07963 August 5, 2013 JARWICK DEVELOPMENTS, INC., ADA REICHMANN AND JOSEF HALPERN

DATE: BEFORE:

HONORABLE DEANNE M. WILSON, J.S.C., P.J. TRANSCRIPT ORDERED BY: ANGELA SMEDLEY, ESQ. (Winston & Strawn, LLP) APPEARANCES: PRICE O. GIELEN, ESQUIRE (Neuberger, Quinn, Gielen, Rubin, Gibber, P.A.) Attorneys for Plaintiffs, Ada Reichmann And Jarwick Developments, Inc.

LAURIE A. ENGEMANN, CCR, CRCR OFFICIAL COURT REPORTER MORRIS COUNTY COURTHOUSE WASHINGTON AND COURT STREETS MORRISTOWN, NEW JERSEY 07963 LICENSE NUMBER 30X1001950

2 APPEARANCES CONTINUED:

A D ( A A

L A L t n

A V e t d

N M. LE ID ARRO bensfel orneys the Jo

B Y d f s

ENSFELD O, ESQU Sharon or Plai ef Halp

, IR & nt er

ES E S if n

QUIRE chwartz, P.C.) fs, Josef Halpern Irrevocable Trust

B S ( A R A

R H L t a n

U E a t c d

C P s o h

E P s r e P

A e n l e

H. RD r H eys Af rnw

SNYD GURY ochm for ford il A

ER, E AN, E an, L Defe able ssoci

S S . n H a

Q Q L d o t

U U . a u e

I I C n s s

R R ) t i

E E s, The Wilfs, ng, Halwil Associates

MICHAEL HIMMEL, ESQUIRE MICHAEL LONG, ESQUIRE (Lowenstein Sandler) Attorneys for Plaintiffs, And Jarwick Developments,

Ada Reichmann Inc.

I DECISION

X PAGE 3

3 Decision

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THE matter et al., could Price Ada of have docket MR. Gielen MR. Sandler behalf Alan for of MR. MR. Schwartz, Sharon, Josef on Reichmann.

COURT: number GIELEN: on behalf

Good --

morning. Jarwick Chancery morning,

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Jarwick

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Morris Good

appearances

counsel. your Honor. Inc. and Jarwick Developments of

HIMMEL: LONG:

Michael and Mike Long, Good

Himmel Jarwick.

Lowenstein Sandler on

Ada

Reichmann

Lowenstein and Ada morning, Borker, Joe

Jarwick

Developments now of with

Reichmann. your & and the Alan and Honor, Sharon

LEBENSFELD:

Lebensfeld, behalf MR.

Lebensfeld,

formerly,

Lebensfeld plaintiff David of the

Sussman and

Halpern also

Halpern on THE MR.

Irrevocable ARROYO: behalf COURT: GURYAN: on COURT: SNYDER:

Trust. Arroyo Trust. morning Wilf to you. Honor, your with plaintiff, Joe Halpern

Lebensfeld the Josef

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Irrevocable And good of Good Good

morning, the morning. Snyder,

Sheppard

Guryan THE MR.

behalf

defendants. also on behalf of

Bruce

the

Wilf

defendants. August 5, 2013

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4 Decision THE COURT: I see we have the plaintiffs here or their representatives and the defendants, their representatives. We don't have Jeff Barsky, the plaintiff's expert accountant here. I believe he is on vacation. We do have Mr. Hoberman here who is the defendant's expert accountant witness. Briefly I told you all this morning I was going to try to approach this in an organized manner so those of you who haven't been living with this case in the past, two, four, or 20 years, in the case of some, have a framework in which to put my findings of fact and conclusions of law as I go through them. So I'm going to start with just a very brief introduction, and then go into the facts and procedure a little more as I did on the motion to dismiss. Halwil, a partnership was formed in 1985, and the partners were J.H.W. which was an entity that was owned 50/50 by Joseph and Harry Wilf. Harry Wilf is now unfortunately deceased. His son Lenny is, Leonard, sorry, is a defendant. That reminded me, at the beginning of the case, we determined that we were going to use first names for all of the parties, because there were so many parties with the last name of Wilf, and it was very important to distinguish them one from the other. And there were at least two August 5, 2013 5 Decision Halperns more that were mentioned during the course of the case, and of course there were two Reichmanns, parties to the case but related, Mrs. Reichmann, at any rate, to Josef Halpern by blood. So I mean no disrespect or diminution to anyone's status by using a first name. Just an attempt to identify you. Joseph Wilf is the father of Zygi and Mark and the uncle of Lenny. Joseph Wilf is still with us, but I believe that his capacity to exercise his executive function is limited at this time, although he is still, Zygi testified he comes to work. They get him to work as much as they can shall we say. The individuals who were deposed pursuant to this action, this aspect of it, were Lenny, Mark, and Zygi for the defendants, the Reichmanns and Joseph Wilf (sic.) for the plaintiffs, in addition to many other witnesses and staff at Short Hills, the Wilf headquarters. MR. SNYDER: Judge, do you mean Josef Halpern? THE COURT: Did I leave out Josef Halpern? MR. SNYDER: No, you said Joseph Wilf for the plaintiff. THE COURT: Oh, Josef Halpern for the plaintiff. Joseph Wilf didn't testify at all. I had to make a ruling in that regard. I was satisfied that August 5, 2013

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6 Decision it would not have been an experience that would have benefited the case, and certainly would have been hazardous to Joseph Wilf's health. Joe Halpern was a 25 percent partner. And his brother Abe Halpern was also a 25 percent partner at that time in the enterprise that later came to be called Rachel Gardens. Halwil, the partnership bought part of the property on which the garden apartment complex, Rachel Gardens is now located. And in 1986 Lenny, Zygi, and Zygi's brother Sidney came into the partnership. Sidney has now passed on. So that J.H.W. had 25 percent, Lenny had twelve and a half percent, and Zygi and Sidney shared the other 25 percent -- shared the other half -- shared the other half of the 25 percent, the twelve and a half percent. Now, in 1988 Abe Halpern was excluded from the partnership, and the exact date of his exclusion, we may never really know. Abe testified that he didn't know that he had been excluded. And it did come to light later, however, that Abe had been excluded at the time that Pernwil was formed. And the formation of Pernwil was a formal index of Abe's exclusion because Abe was excluded from that partnership. Halwil assigned all of its assets that it had previously purchased, and the contract for sale of August 5, 2013 7 Decision the second piece of property that composed the land upon which Rachel Gardens is situated to Pernwil. The two pieces came together to form that single property. And those were the sole assets, the contract and the property, those were the sole assets of Halwil. These assets were transferred for no consideration from the Halwil partnership, which was owned 50 percent by the Wilfs, and 25 percent by Abe Halpern, 25 percent by Josef Halpern, to Pernwil, which was ostensibly owned 75 percent by the Wilfs and 25 percent by Joe Halpern. I must note at this time that I have wondered all of the way through this litigation but been afraid to ask for fear I would open up another piece of litigation as to how the exclusion of one partner devolves that partner's interest to one of the remaining partners without any consideration, but that is apparently what happened instead of a situation where a corporation would be redeeming shares from a shareholder and they would go to the corporation, Abe Halpern, Abe Halpern's partnership interest went over to the Wilfs, so it created a 75/25 split. Now, finally, Abe Halpern in 1989 determined that he had been excluded from the Halwil partnership and he was apparently having financial problems. And he assigned his interest in the Halwil partnership to August 5, 2013

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8 Decision Jarwick the plaintiff in this case. Jarwick is an entity that was formed by Ada Reichmann in order to hold Abe Halpern's interest in Rachel Gardens. And Jarwick, as I said is one of the plaintiffs in this case. Ada Reichmann, as an important fact is the sister of Joe Halpern, and Abe Halpern. And that is significant because otherwise the transfer would have had to have been approved by all of the other partners which it was not. The formal -- the negotiations and the written index, or a written indicia of this assignment occurred in August of 1989 in the form of two letters exchanged between Harry Wilf and Ralph Reichmann concerning the transfer and concerning the role of the Reichmanns in this entity. The formal assignment actually occurred in 1990, the formal, I mean the legal paper assignment. So, going back to the first index of the assignment to Jarwick in August of 1989 Joe Schochet, Rabbi Rottenberg who were both witnesses in this case met with Harry Wilf and Joseph Wilf was also present at this meeting in August of 1989 and Zygi was introduced and came through the meeting a couple of times, but was not really a fixture in the meeting. And I should also note at this period of time, I'm sorry if this is just a little disjointed there are just so many facts in August 5, 2013 9 Decision this case I'm trying to do a summary but I realize that sometimes you have to go back and put in pieces in order to have the summary make sense. At this period of time, Harry Wilf was apparently the guiding light of the Wilf organization. Zygi testified that his father Joseph was actually the partner who dealt with the projects, and the building of the projects and he had the knowledge of, would you call it sticks and bricks? Of the wood and the bricks that built the buildings, and Harry was more the overall negotiator of the business. I tried to contemplate what this would be like, and the most that I could, the closest I could think of was that Joseph was the body and that Harry was the soul of that enterprise, and they function together. They were brothers of course, very close brothers, they function together with their partners' desks facing each other, if not through the entirety of their governance of the Wilf enterprises, during most of it for sure. So, in August of '89 Joe Schochet and Michael Rottenberg met with Harry Wilf, Joseph Wilf was there, and Zygi just kind of went in and out. And during that period of time they agreed that Jarwick was taking over the interest of Abe Halpern, it was going to be admitted as a partner, and that it took over 25 percent of the partnership and agreed to put up August 5, 2013

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10 Decision additional capital as it became necessary. They also agreed that if it became necessary that the Wilfs would fund two-thirds of Josef Halpern's additional capital requirement, I have to go back to that, and that Jarwick would fund the other third. I forgot to mention, from the beginning Josef Halpern had no requirement to put up any additional capital beyond the $250,000 that he initially put up. And this was his agreement with Harry, and it is an agreement as well as the agreement with Jarwick that has come to be an issue, they have come to be issues in this litigation. But the initial agreement was that Joe Halpern would not put up any additional capital. He would be a 25 percent partner. The agreement between Jarwick and Harry and Joseph was, again, that Joe Halpern would not put up any additional capital, his, quote/unquote, share would be put up by Jarwick, and the other two-thirds would be put up by the Wilfs. And that was the agreement, and that was evidenced in a letter from Harry to Ralph Reichmann. It was dictated on the spot from the testimony, and was taken by Joe Schochet up to Toronto where the Reichmanns reside, and there was a return letter the next day whereby Harry (sic.) agreed to the terms of the partnership. MR. GIELEN: Your Honor, I think you meant August 5, 2013 11 Decision where Ralph agreed to the terms of the partnership. THE COURT: What did I say, Harry? MR. GIELEN: Yes. THE COURT: By the way, as I did on the motion to dismiss, I have invited counsel to interrupt if I miss speak, and that was an example, right there, where Mr. Gielen had prior permission to speak, because we have enough problems in this case without having miss speeches in the record by the judge. Now there was a visit in 1990 between Harry Wilf and a representative of Ralph Reichmann that would be heard in detail later. This visit occurred approximately three days before the closing on the initial construction financing of Rachel Gardens. And Joseph Wilf (sic.) testified that when asked, you know, where was the money going to come from? He said Harry said there was going to be a construction loan and that is where the money was going to come from. If there were short-term funding that was necessary, it would be taken care of as agreed upon between the party. MR. LEBENSFELD: Your Honor, I believe it was Abe Halpern who testified to that not Joseph Wilf. MR. GIELEN: Joseph Schochet. MR. LEBENSFELD: Right. I misspoke. THE COURT: I think I said, you know -August 5, 2013

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MR. GIELEN: that when asked -THE COURT: No. No. You are right. I believe it was Joe Schochet. MR. GURYAN: It was Schochet. THE COURT: All right. In February of 1991 after a long illness Harry Wilf passed on. And during this period of time between 1989, 1989 and 1991 there were certain communications that were attempted between Jarwick and the Wilfs, but there was never a response made. And in early 1992, I believe it was January of 1992, Joe Schochet met with, went down to New Jersey to Short Hills to find out what was going on, financial statements had been requested, none had been received, in fact, no communications had been received, or there were no communications received that were produced as evidence during the trial either testimonial or documentarily. So Joe Schochet went to Short Hills to find out what was going on. He initially met with Joseph Wilf who said he didn't have any response to his questions about his 25 percent partnership, but that he should speak to his son Zygi. And I think I forgot to mention Mark. Mark came into the enterprise at some time, he is, he was the younger of the two brothers, and as soon as he was finished with law school, he August 5, 2013 13 Decision joined the Wilf entities too, I will deal with that when I come to the specific dates in the specific findings of fact. And Joe Schochet did meet with Zygi and he wanted to know what was going on with Rachel Gardens. What had been happening and why hadn't he received any information. And he was greeted with what has become a rather famous quote during the course of this case. "The train has left the station." And by that, apparently, Zygi meant that the partnership was ongoing, the project was moving along, and Jarwick was not part of it. Now, the Reichmanns, at least Ralph Reichmann is a very sophisticated, very successful Canadian real estate developer and manager or at least he was been in the past. I don't know what his current status is, but at that time he was a real estate developer and manager or person of substance. He had made the determination that "the train has left the station" was not an appropriate response to an agreement that had been made between him and Harry Wilf. So, in September of 1992, to show you how old this case is, it was filed on September 11th, pardon me, 1992, and in 1992, nobody had any idea that September 11th had any meaning whatsoever. Now, this suit, the initial suit was brought August 5, 2013

12 Decision You said Joseph Wilf testified

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14 Decision by Jarwick alone. At that time Joe Halpern was the on-site partner at Rachel Gardens. Rachel Gardens was in the process of being built up as Joe Halpern kept saying, I was building at the time. I understood that that is builder's jargon for the fact I was in the midst of construction and the mad house that usually ensues with construction and in particularly with this case with municipal developments, et cetera. Joe Halpern was the on-site partner at the time. And that was his part of the deal. That is what he was going to do. And he had experience and a couple of Wilf projects before, neither one of them were garden apartment complexes, but they were extensive complexes that he had worked on, and this was apparently, Harry Wilf giving him, his chance. Giving Joe Halpern his chance to do a deal. And when the initial suit was brought it alleged diversion of business opportunity. It alleged that Jarwick is a 25 percent partner, and wished all of the emoluments attendant to that status including a declaration. It demanded specific performance that Jarwick be treated as partner in all respects. It demanded an accounting and that a receiver be appointed. I noted this during the motion to dismiss. I don't think the application for a receiver was ever August 5, 2013 15 Decision addressed, and probably the reason it wasn't addressed was because of the end game of Judge Stanton's opinion, but it does seem to me that some time in the first 8 or 9 years of litigation that somebody would have addressed the receiver issue, but as far as I know, nobody did. Seven years after the suit was filed there were various reasons for this, including personal problems of counsel who were involved, serious personal problems of counsel, who were involved, family problems, and the difficulties that were encountered during the course of discovery, it took seven years to bring the case to trial on liability. It began in October 1999. And dealt solely with the issue of whether or not Jarwick was a 25 percent partner. On January 11, 2000, Judge Stanton determined that Jarwick was a 25 percent partner. He determined that Harry and Ralph had formed a new and separate partnership, apart from Halwil or Pernwil, and that Jarwick had been improperly excluded from the partnership. And that the case needed to have a trial on damages. Judge Stanton encouraged the parties to resolve their differences and to negotiate between themselves a resolution of the case that would meet everyone's needs, requirements, and the needs of equity August 5, 2013

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16 Decision and justice. Just as I think I encouraged the parties at many points during this litigation to reach a businessman's, business person's conclusion to this case, but it obviously didn't happen. In June of 2002, I believe it was Bastille Day, June 14th, Judge Stanton determined in responding to a motion that there was to be a valuation of Jarwick's 25 percent partnership interest. And that the valuation date would be January 8, 2002, (sic.) for some reason I'm thinking it was January 1st. MR. LEBENSFELD: 1992 Judge. THE COURT: Was it January 1st? MR. GURYAN: It was actually January 8th, but everyone assumed it was January 1st. THE COURT: So they are both wrong. MR. GURYAN: They are both wrong. THE COURT: Thank you, Mr. Guryan. Somewhere between January 1st and January 8, 1992. MR. GURYAN: I think one of the appraisers used January 1st as the valuation date. THE COURT: I had always thought it was January 1st, but because January 8th was the date that Mr. Schochet was informed that the train had left the station, January 8th is nudging January 1st out of my mind, but it was I do believe January 1st. August 5, 2013 17 Decision And let's see, Judge Stanton then retired, a blissful state for any judge who has served on the bench for a long time and been in contact with this case for a long time. But he didn't conduct the valuation trial, and he didn't determine what the damages were going to be before he retired. He referred the case to Judge MacKenzie who was the predecessor, and my predecessor in this chancery position. And in March of 2004 after trying the case with experts on both sides on valuation, Judge MacKenzie made the determination that as of January of 1992 Jarwick's interest was worthless. Was worth nothing, and implicit in Judge Stanton's ruling as well as Judge MacKenzie's ruling was that Jarwick's partnership interest ceased at that time as of in 2002. MR. GIELEN: In 1992, your Honor. THE COURT: Judge Stanton, Judge Stanton's opinion was in 2002. And Judge MacKenzie's opinion was then I believe 2004. MR. GIELEN: Correct. MR. GURYAN: Correct. THE COURT: And implicit in those opinions was that Jarwick was not a partner after 1992, after January 1, 1992, those decisions by Judge Stanton having been made in June of 2002 and by Judge MacKenzie August 5, 2013

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18 Decision in March of 2004. Thank you. Judge Stanton's opinion that Jarwick was a partner was appealed, Judge Stanton's opinion on the valuation date was appealed. And two and a half years later the Appellate Division rendered its determination on December 15, 2006. And the Appellate Division determined that Ralph and Harry did not form a new partnership. That Jarwick was already a partner in the project. And the other Halwil partners had put all of Halwil's assets into Pernwil. And the Appellate Division cited to the old partnership act N.J.S.A. 42:1-22 opining that Jarwick had a right to a formal accounting and noting that an accounting was an equitable remedy. The court determined that the lucky and most fortunate trial court to whom this was being remanded was to take into consideration that due to, one, the considerable delays in bringing the case to litigation, due to the fact that -- due to the considerable delays the court was to consider the disproportionate number of hours and the amount of capital that had been put into the enterprise by the Wilfs on the one hand, and not put into the partnership by Jarwick on the other hand. And the court on remand was also to consider that the Reichmanns had committed to put up their share of capital and the one-third August 5, 2013 19 Decision share of Joe Halpern's, and that that was a valuable commitment. And that the fact that it was not called upon made it no less valuable. Now, I believe that is a pretty accurate -let me just read the last paragraph into the record, because I think it is important because it is really the genesis of this case and I want to make sure I haven't left out a word or changed a may to a shall or vice versa and would lead somebody to think that the Appellate Division had done other than what they had done. We note briefly -- this by the way is an unpublished opinion, and it can be found at 2006 West Law 368, 58, 81. We note briefly, says the Appellate Division, that an accounting is an equitable remedy. I'm leaving out the citations, because they do not help us in interpreting this paragraph. Therefore we are confident that the court on remand will take into consideration the many delays between bringing this claim to court and final judgment, and as a result, the disproportionate amount of capital and man hours put into this project by defendants. Similarly, we believe the court will not overlook the fact that Ralph committed himself on August 5, 2013

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20 Decision behalf of his wife and Jarwick to make capital contributions or to sign loan agreements as necessary to fund the project. The fact that the other partners never called upon him to fulfill that promise makes this promise no less valuable. His exposure was no more or less significant than that of defendants in obtaining outside financing for the project. The adjustment of debits and credits may be made accordingly. So there were various and sundry applications, post appeal applications to the Appellate Division. Just a moment let me catch up with myself here. There were various applications to the Appellate Division and I believe there was a petition for certification to the Supreme Court. And various other applications on the appellate level that followed the Appellate Division opinion. And the case, once again wound itself back down to the trial court. In October of 2009 an amended complaint was filed by Jarwick, and earlier the Wilfs had moved to join Joe Halpern as a necessary party in the litigation. And the resolution of that motion became unnecessary as Joe moved to intervene and he filed his complaint by consent. This is about the time I discovered what a Jarwick was and what a Wilf was. And August 5, 2013 21 Decision that it had a '92 docket number I found incredible. Now, I'm beginning to really understand having listened to the case for almost two years. Now the Jarwick amended complaint and Joe Halpern's complaint essentially pled the same causes of action, breach of fiduciary duty, breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, equitable fraud, fraud, conversion, civil conspiracy, various violations of the Uniform Partnership Act, and violations of RICO, Racketeering Influenced Corrupt Organizations Act, in New Jersey. New Jersey RICO. There were also some new defendants in the case, they have settled out, one of them Marvin Cohen was a witness and was on the stand for many days of the trial. He having been the accountant for many Wilf entities as well as Joe Halpern's personal accountant. So, in or around October 2009, I had I believe it was a telephone conference with parties, was my initial contact, and we began to set a schedule for discovery. I discovered that really discovery was far from complete because of the length of time that had passed since it had been in the trial court. And we, let's see, I think the trial started in October of 1999, and this is now October of 2009, when I first had August 5, 2013

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22 Decision contact with the parties. MR. LEBENSFELD: Your Honor, the first trial started I believe in September 1998. THE COURT: September 1998, I'm sorry, so it had been many years since discovery had been -- but discovery I believe was ongoing during the first trial. There was some discovery that took place during the valuation trial. I believe there was no discovery that took place while it was pending in the Appellate Division. And I don't think any discovery had taken place until my initial contact with counsel and we set a discovery schedule. You were just starting to do discovery. Okay. The accountants during this period of time had done some work on the financial papers that had been produced by the Wilfs and some of those reports were put before Judge MacKenzie on the valuation hearing for the purpose of normalizing expenses, in order to do a valuation. We also were doing discovery in the midst of the trial here. I believe there were documents that were asked and turned over, et cetera, even during the course of our trial. We had, just a moment, we had a number of pretrial motions for summary judgment on a number of the claims. Thousands of pages of briefs, well probably hundreds of August 5, 2013 23 Decision pages of briefs, thousands of pages of certifications, case law from every jurisdiction imaginable in addition to deposition excerpts. By this time we had not only one report from each accountant but multiple reports from each accountant as they received more documents and/or looked more closely at the documents that they had. And after struggling -- oh, during this period of time in the fall Josef Halpern had been terminated and then was brought back by court order to the partnership, been terminated by the Wilfs. We gathered the motions together, it took me what I would ordinarily consider an unacceptably long time to digest the motions. I believe I had whooping cough in the middle of it, having nothing to do with the motions just happened. And most of the motions to dismiss I denied, and in retrospect we always look at everything, Monday morning, everything is 20/20, right after the Sunday game. I think that the resolution of the motions today might be different than they were at that time. At that time I really did not understand what this case was about despite counsel's valiant attempts to give me a flavor of what was going on. Why didn't I understand it? Because you really had to be there in order to understand this case. And I did not realize how many tentacles this animal had until I August 5, 2013

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24 Decision tried to put it together for a final decision. And it was just unending. This morning driving into the courthouse I'm thinking, oh, what about this, what about that. I have finally come to peace with the fact that I simply cannot and no court can, and no court has to deal with every single fact that was put on the record by every single document, every single witness. I am a judge who grants summary judgment motions with probably more frequency than most, because I think that most cases, in my experience really don't have material disputed facts attended to them. This case is really not too much of an exception. There are not too many material disputed facts in this case. Particularly when you have accountants involved there tend to be a lot of disputed material facts because accountants know that judges don't understand accounting they can tell us just about anything that they want to and we have got to believe it. The two accountants in this case were truly exceptional. Both of them I can say were truly independent accountants with the result being that there were very few disputed material facts. Most of the dispute was over issues of law, which can and should be dealt with on summary judgment motions thus avoiding 210 days of trial, but when you have a case that can go on for 210 trial days, August 5, 2013 25 Decision there are so many facts that the judge, at least in this case is simply unable to get her arms around them in order to make the conclusions of law that would have been necessary to resolve claims. So, we started the trial -- just a moment, I want to make sure I haven't missed anything here. At this point, I think I should mention that while the defendants allege a number of affirmative defenses in their counterclaim, pardon me, in their answer to the initial complaint, the amended complaint and Joe Halpern's complaint, the overriding affirmative defense had to do with the statute of limitations, the common law claims, and particularly for the RICO claims. And we attempted to deal with that on the motion to dismiss, and the relief sought, initially was dissociation, the relief sought by the plaintiffs was dissociation. Unfortunately, Mr. Halpern, Joe Halpern became ill during the course of this litigation. Fortunately, he is here today through the courtesy of our sometimes running elevator, and the claim for dissociation has been changed to dissolution for reasons which we will discuss when we get to the remedy. Okay. Now, I don't want you to think I'm missing the various parts of the RICO and statute of August 5, 2013

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26 Decision limitations arguments, I'm going to get to them when I get into that part, but it was more than just a sentence or two for sure. All right. We began trial on May 9, 2011, and we completed closing arguments on March 6th of 2013. Except for counsel's well earned vacations, this court's vacation and to a lesser extent, giving me some time to digest the papers that were submitted on the motion to dismiss which were voluminous, we tried the case from day-to-day. And as we got toward the end, I believe we were even trying it four and a half days the one week when I had chancery motions and Friday afternoon and five days the other weeks to the extent we could because of the holy days, but I believe we did go through 3 Tisha B' Av. MR. SNYDER: I believe so, Judge. THE COURT: We did. There were over 207 trial days, and half of those days were days with accountants testifying which turns the trial into something other than a five-minute opinion. It also, in my mind makes it nearly impossible to do a written opinion, because the findings of fact necessitate referral to documents, financial statements, and in some cases even drawing diagrams of how you get from one financial statement to the next. I will say that August 5, 2013 27 Decision as far as I'm concerned it was challenging. I'm not prone to understatement, but I just made one. And I note that it was challenging to counsel. It is exhausting. I don't think any of us knew this before, but it is exhausting to go for 22 months on trial almost day-to-day. And the counsel that appear in front of me both in te front row and the next row back and Mr. Arroyo over there in the jury box, kept at it, I mean there was, I had told them they could have a day off if they wanted it, I understood. Nobody asked for one unless there was a medical emergency which of course I understood. So, it was just a remarkable, remarkable performance by counsel. And while I am in the process of complimenting counsel, I had asked after 207 trial days and approximately 25,000 pages of trial transcript, I had asked counsel to do as complete closing statements as they could, because I really needed a firm structure on which to place my findings of fact and conclusions of law, and they did. We had I believe 18 days of closing arguments. They were detailed, they were clear. It was obvious that all counsel had spent many, many days and probably many long nights over their closing arguments, and they were of great help to the court, and I appreciate it. And August 5, 2013

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28 Decision now, let me see here, if there is something I should be doing. Oh, yes, I want to quote a paragraph from I believe it is Mr. Guryan's closing argument, because it is a rather wonderful summary of where we are in this case. It was made I believe with regard to the statute of limitations argument, my picking it out of the 18 days of closing arguments has nothing to do with my ruling on the statute of limitations, but I do believe that this particular paragraph is a wonderful summary of where we are. The Halpern complaint and Jarwick's amended complaint were filed 24 years after the formation of Halwil, 21 years after the formation of Pernwil, 17 years after the filing of the original complaint, 14 years after Jarwick was furnished with Beck Weiss' accounting records, 12 years after Josef Halpern was first deposed and was furnished with the copy of the complaint, original complaint, ten years after the conclusion of the original liability trial, eight years after the second Morrison report was issued, three years after the Appellate Division issued its decision, two years after the Neuberger Quinn firm was substituted as counsel for Jarwick, and eight months after Jeffrey Barsky issued his first report dated January 30, 2009. August 5, 2013 29 Decision To my knowledge there has never been a case like this in New Jersey jurisprudence, I hope not in the jurisprudence of any other state. I believe that in Old England perhaps Jarndyce versus Jarndyce would top it. But we in the judiciary and this judge in particular try to move cases along. There is no reason in the world why a case should be tried 20 years after the initial complaint is filed. And although there were a number of contributory reasons, while judges and attorney complain about case management and rushing cases through, if you can avoid having something like this, it is worth rushing a few people through, because this, this would have been an entirely different case if I had been trying it in, or Judge Stanton had been trying the whole thing in 1996, 1998, even in 2000, if the entire case had been tried through by one judge at one time, it would have been a whole different set, clearly a whole different set of facts. And Mr. Barsky and Mr. Hoberman and myself would have had far fewer sleepless nights. So, I'm now going to, just a moment, I have one more thing to check, to make sure that I didn't -I'm now going to go back into chambers, and I'm going to get at least part of the summary of the, my resolution of the causes of action, which will be August 5, 2013

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30 Decision brief, because the main part of this case is damages. And instead of going through a thousand findings of fact, and then going through the causes of action, and then talking about damages, I'm having to repeat with regard to the causes of action everything I said about findings of fact and having to repeat everything I said about findings of fact again when damages are discussed, I have decided to go over the various tines of the causes of action alleged. Tell you very briefly how I have determined that those should be resolved. And then we will go into the various aspects of the claims for damages. What do I mean by that? Management fees, interest, excess payroll, going through those claims for damages, and making my factual findings pertinent to each one of those claims. And then I will, to the extent that I can, right now, I don't think I'm going to get to it today anyway or even tomorrow, in fact, I don't think we are going to get to it until the probably the end of next week, the damages calculation. It is, I am not sure that either one of the accountants' suggested, that any one of the accountants' suggested scenarios are going to work. I have gone over it and over it, and I still have to go over it again, that is why I'm sitting up here on the August 5, 2013 31 Decision bench instead of back there with an accountant's present value calculator in my briefcase, because I don't know how they work. And we have to be very, very, I feel we have to be very, very careful. So let's take a short break. And I will go through the causes of action, which I think I can get done before lunch. And then after lunch I will do management fees. And if I don't think I can get all of the way through management fees after the lunch. I will take one of the shorter ones, but off the record now. (An off-the-record discussion is held. (A recess is taken.) THE COURT: All right. The first cause of action alleged that I'm going to go into is for breach of fiduciary duty. And I am finding that the Wilfs breached their fiduciary duty to Josef Halpern and to Jarwick. N.J.S.A. tells us what fiduciary duties of a partner are, and they are a duty of loyalty to the partnership and the other partners to account to the partnership and hold as trustee for it any property, profit or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity. A partner's duty is to refrain from August 5, 2013

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32 Decision knowingly dealing with the partnership in the conduct or winding up of the partnership business on behalf of a party having an interest materially adverse to the partnership, and to refrain from actions intended to cause material injury to the partnership in the conduct of a partnership business before dissolution. A partner's duty of care to the partnership and the other partners in the conduct of and the winding up of the partnership is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of the law. And the Uniform Partnership Act goes on to tell us that a partner does not violate that duty or obligation under the act or under a partnership agreement simply because the partner's conduct furthers the partner's own interest. A partner may lend money to and transact other business with the partnership and as to each loan or transaction the rights and obligations of the partner, this is important, are quote, the same as those of a person who is not a partner subject to other applicable law. Now, why did I emphasize, "the same as those of a person who is not a partner"? Because if you are an outside vendor to a partnership, you want to sell them something, you want to perform a service, or you August 5, 2013 33 Decision want to loan them some money, you go to the partnership and you give them the deal. Here is what I will do for you. This is what you pay for it. Here is what I'm going to provide you for, provide you with, this is what you pay for. I would like to make you a loan these are the terms. And then what happens? Nothing unless the partnership agrees to pay that money for the service, to pay that money for the material, to repay that loan with that rate of interest. This provision of the partnership act does not mean that you can go to a partnership, perform some service and then say, by the way, I mowed your lawn and I want $20 for it. That is not what the rights and obligations of a person who is not a partner mean. I was reading to you out of N.J.S.A. 42:1A-23 provides that each partner and the partnership shall furnish to a partner, and to the legal representative of the deceased partner or a partner under legal disability, one, without demand. This duty of a partner are divided into two categories, without demand, and with demand. A partner in the partnership are obligated to provide without demand any information concerning the partnership's business and affairs reasonably required for the proper exercise of the partner's rights and duties under the partnership agreement or the act. That means very simply whether August 5, 2013

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34 Decision or not your partner asks what is going on, you have the obligation to tell them what is going on, as long as it is required. As long as that information is required for the proper exercise of the partner's rights and duties. And on demand, the second part, the partner in a partnership have the obligation to furnish any other information concerning the partnership's business and affairs except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances. There was no information that was demanded in this case that was unreasonable or improper under the circumstances I am finding. And the information that should have been provided without demand at the barest minimum, the barest naked minimum, annual financial statements that are true and accurate. And that reflect what is going on in the partnership. Now, I will get into this in detail when we talk about management fees and interest to related parties, et cetera, et cetera, but I do not believe, I could be mistaken, I have gone over it once, I just can't bear to go over it again, but I may find it as I go through my factual findings, my specific factual findings. I do not believe that I have seen one single financial August 5, 2013 35 Decision statement that reflected the true and accurate position of the partnership, Pernwil or Halwil in this case. And that is a serious breach of fiduciary duty. I'm also finding that the financial statements were not given after 1989 to Josef Halpern, and of course it is undisputed that they were never given to Ralph and Ada Reichmann. There is a dispute as to whether or not Joe Halpern received financial statements in the early '90s, because in a deposition, I believe, or it could have been at trial, as I indicated before, the testimony melds from one to the other because we have the depositions and videos. At one point Josef Halpern testified that he thought he got the financial statements early on. And it was suggested, well, did you get them in the early '90s? And he said, well, yeah, maybe I did. I thought he clearly didn't get them in the later '90s, that is not disputed. Why is it my finding that he did not receive financial statements in the early '90s? After his brother Abe Halpern was removed from Halwil, there would have been no point in giving financial statements to Josef Halpern, because Josef Halpern, commonsense tells you, the Wilfs are very high on intelligence, certainly, also commonsense, if you give a financial statement to Josef Halpern, the odds are it is some day going to August 5, 2013

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36 Decision find itself in the hands of his brother Abe Halpern, or later after that when Jarwick came into the relationship, into the hands of Ralph and Ada Reichmann. And the ousting of Ralph and Ada Reichmann, which occurred, according to Zygi's testimony prior to 1990 when the City financing was closing, would mean that there were going to be, certainly the 1989 financial statement wasn't going to be given to them, and the later ones a fortiori would not be given to them. Zygi testified clearly that prior to the closing on the City loan, which was to provide $36 million for the construction of Rachel Gardens, Zygi and his father decided, his father Joseph Wilf, decided that the Reichmann's had gotten too good a deal. And so they were just simply not going to honor it. Now, I found that testimony candid, credible, even though I wondered then, and I wonder to this day how a nephew who so honored his father, Harry Wilf, could possibly renege on a deal that Harry had initiated. I don't know why it happened. But these are words from the mouth of Zygmunt Wilf himself. Now given the fact that he made a determination long before the train left the station to Joel Schochet's ears he made the determination that Jarwick was not going to be included August 5, 2013 37 Decision in the Rachel Gardens project. He clearly didn't send him in a financial statement. And if he didn't send them to the Reichmann's, he clearly would not send them to Ada Reichmann's brother. It matters not to me that there was a large age disparity between Ada and her brother Joe. Excuse me. It is okay. I am not upset I just want to wait a minute until you finish so you can hear. If at any time anybody needs to take a break, let me know I can stop and start. And Mr. Lebensfeld would you keep track. Where was I. (The last paragraph was read back.) THE COURT: These ladies are disappearing animals, and I hope, gentlemen, after having had a court reporter live throughout this trial, you would become a proponent of why we should have them. If I had attempted to do this trial with a voice recording, we would probably still be here on opening statements. Frightening thought. It matters not to me that Ada and her brother Joe did not have a close relationship, that they lived a thousand miles apart, that there was an age disparity, and that they didn't talk about things. Commonsense tells you that if you don't want one sibling to have information, you are not going to give August 5, 2013

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38 Decision it to the other sibling, unless the other sibling is clearly in your camp. And we know, we have testified throughout nobody knew at any time whose camp Joe Halpern was in. Mr. Cole didn't know, so he didn't discuss anything from him. Zygi didn't know, he didn't discuss anything. The Reichmanns didn't know. Abe didn't know. So, it is easy to see why Zygi wouldn't know, and would keep the financial statements from him. Now Joe has testified, I'm going to have to use Joe Halpern, I realize we have got two Joes in this case also. Joe Halpern testified that he didn't know how to read a financial statement. Well, it doesn't make any difference, because he didn't get them. He may have gotten them 1988, but he didn't get them after Zygi and his father made the decision to oust the Jarwicks, and he didn't get it after the decision was made to oust Abe, and, in fact, the books were removed from Lake Hiawatha, which was the office where Abe and Joe were working to the Wilf organization. So the breach of fiduciary duty was done by the Wilfs at least with regard to financial statements. We will get into other inquiries that were made, other disclosures that should have been made as we deal with the particular item. I want to quote, just two short quotes from August 5, 2013 39 Decision a case, more will come later, that was cited at length, or referred to at length by the plaintiffs, called Silverstein v. Last, that appears at 156, New Jersey Super, 145. It is an Appellate Division case from 1978 that was authored by one of the most brilliant Appellate Division judges in New Jersey, Judge Sylvia Pressler, who is no longer with us. A fiduciary is not merely prohibited from making an inordinate profit from his fiduciary position, but from making any undisclosed profit at all. And I had the pleasure of working with Judge Pressler on the Supreme Court Civil Practice Committee, she had a way of condensing complex thoughts into a few words, and I think she did it in that sentence. As I said, I will make factual findings with regard to specific types of conduct as we go through them later. The next cause of action is for breach of contract. Now the parties in this case, Joe Halpern and Harry and Joseph Wilf had a handshake agreement initially, and Abe Halpern, had a handshake agreement where each Halpern was to receive 25 percent of the profits from the partnership, Abe Halpern was to, and they were to split two-thirds for the Wilf, one-third for Abe, any funding that became necessary from Josef August 5, 2013

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40 Decision Halpern, and of course they were each to provide their own share beyond what they were providing for Joe Halpern. A handshake agreement took place in 1984 was a valid contract. That contract was reflected a year later in written form in the Halwil agreement and those were two valid binding contracts. Parties voluntarily entered into them. There was consideration given. There was acceptance, and everybody was bound. Three years later the Pernwil agreement came into affect. The Halwil agreement and the Pernwil agreement both being drafted by the Wilf Law Firm and as the Appellate Division found and as Reg also, pardon me, Judge Stanton also found, Halwil transferred by virtue of the Pernwil agreement all of its assets to Pernwil. There was no consideration given. And of course Abe's interest was vitiated. And then we have the 1989 letter agreement between Jarwick and the Wilfs. And that was initiated by a handshake. Harry Wilf dictated the terms. Sent the terms to Ralph Reichmann. Ralph Reichmann responded by the return and that was a contract. That provided that Jarwick was to get 25 percent of the profits and Jarwick would provide any shortfall in funding. The Wilfs breached all of those agreements. At no time did Jarwick receive anything with respect to its 25 percent share, and I could not August 5, 2013 41 Decision find a year after 1990 in which, I believe 1990 was the last year or it could have been 1989 in which Joe Halpern received his 25 percent share. The clear terms of those valid contracts were broken. They were not honored. And that is breach of contract, Weichert Realtors versus Ryan at 128 New Jersey 427 at page 435 says that if the parties agree on the essential terms and manifest an intention to be bound by those terms they have created an enforceable contract. And here we have essential terms. The manifestation of an intention to be bound, and I might add that the Wilfs continued to manifest that intention to be bound long after their uncle and father Harry left this earth; but they didn't do it. They did not abide by the enforceable contract. Now, we have in New Jersey as many other states do a cause of action called breach of the covenant of good faith and fair dealing. I'm just going to go into this briefly, because a breach of the covenant of good faith and fair dealing is typically a cause of action that is espoused when what is done by the defendant does not really amount to a breach of contract. New Jersey holds that the covenant of good faith and fair dealing is inherent in every contract. And so though you may be abiding by the specific terms August 5, 2013

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42 Decision of the contract, if you do something that evinces bad faith, unfair dealing, we have a catch all for your conduct, and it is called breach of the covenant of good faith and fair dealing. And I will just read a brief paragraph. Ever party to a contract is bound by a duty of good faith and fair dealing in both the performance and enforcement of the contract. I'm omitting the interior citations. Proof of bad motive or intention is vital to an action for breach of the covenant. The party claiming a breach of the covenant of good faith and fair dealing must provide evidence sufficient to support a conclusion that the party alleged to have acted in bad faith has engaged in some conduct that denied the benefit of the bargain originally intended by the parties. As a general rule subterfuges and evasions in the performance of a contract violate the covenant of good faith and fair dealing even though the actor believes his conduct to be justified. In this particular case the bad faith and evil motive were demonstrated by the testimony of Zygi Wilf himself. His counsel argue that Zygi believed his conduct to be justified. I am finding that Zygi did not believe his conduct to be justified, but even if he did, he still August 5, 2013 43 Decision breached the covenant of good faith and fair dealing. How did he do that? Just briefly, because all of this comes down to a breach of contract, but one example, Zygi Wilf testified that after the Appellate Division, after Reg Stanton's decision that Jarwick was not going to be a partner after 1992 he did, he conducted business the way he always did. And he didn't think they were a partner, so he didn't give them anything. He didn't give them any information. He didn't give Joe Halpern any information either. And he, instead of taking funds out of the partnership as, just a moment, I'm just having a brief lapse, instead of taking funds above the rightful distribution out of the partnership as expenses, which is what he did after 1992 when suit was filed, up until the Appellate Division -- up until Reg Stanton's, Judge Stanton's decision that Jarwick was no longer a partner, instead of taking the expenses out at a time when he thought Jarwick may be a partner, so expenses would stay with him, he took out management fees. And this is just one example of how the litigation posture affected the way that funds in excess of rightful distributions were removed from this partnership. Most of them, I might add, at the end of the year or near end preparations for financial statements, leaving very little money in the August 5, 2013

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44 Decision partnership. That type of conduct is a breach of the covenant of good faith and fair dealing; and it is evidenced by deliberate and irresponsible attitude that your partner with whom you have a contract is not entitled to the benefit of their bargain and you are entitled to more. And the very changes that occurred during the course of this litigation, Jarwick is a partner, Jarwick may be a partner, Jarwick is not a partner, Jarwick is a partner, just the changes that took place in response to the changing posture is evidence of a cover up of removal of funds that should not be removed, and if they should be removed, you must ask yourself the question: Why wouldn't you just say they were removed? Why wouldn't it be placed in a financial statement that was distributed to everyone? Now, during the closing argument we heard a lot about a treasurer map. There is no treasurer map in this case. There is simply no treasurer map. I am a reasonably intelligent person. I have an undergraduate degree from Stanford University. I graduated from the top of my class from Seton Hall Law School. I practiced law for 18 years. I have been a judge for almost 17 years, complex commercial litigation. I have seen a lot of financial statements. I have gone to a lot of accountant seminars that are August 5, 2013 45 Decision given so judges know what they are doing with financial statements. I have never seen a forensic accounting such as I have seen in this case. Why did it take me over 100 days to do this opinion, I have to tell you, at least 75 of those days were spent in financial statements, general ledgers, adjusting journal entries, trial balances, I will show you as I go through my factual findings with regard to each portion of damages. I had to sit down, fortunately, I went to a school where children learned how to diagram sentences in order to identify certain parts of speech so I know how to diagram. Fortunately I did, because in many instances I just had to take a huge sheet, like this and diagram what happened to these monies. I don't know what the accounting fees, the expert fees were in this case, but at the beginning I do believe somebody made reference to Mr. Barsky's fee being a few hundred thousand short of a million dollars. By the time he finished testifying, more. I have no reason to believe Mr. Hoberman's fees were any different. Why could that possibly be? They didn't have as much trouble as I did to go through this. That is what they are, forensic accountants. But I have never seen -- once before in my life have I seen an accountants's bill of a million August 5, 2013

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46 Decision dollars. That was in a divorce case by two, by one of the most wealthy families, nobody in this courtroom, so don't get excited, one of the most wealthy real estate families in the country. And they had run up together a million dollars in accountant's fees. These things were not disclosed, period. And that is subterfuge and evasion in the performance of a contract, subterfuge in the obfuscation and reclassifications, and evasion in the continuing financial statements that failed to disclose realty. Now, unjust enrichment is also pled. I'm not going to go into that, because I don't think that it really applies to this case, so I'm just going to ignore it. What I think may apply on the obverse side is quantum meruit, which is not really pled as an affirmative defense, but I'm going to include it as an affirmative defense anyway because it is implied. I still have half of the causes of action to go, would you like to take a lunch break, would you like me to finish? MR. GIELEN: I think we'd prefer you to finish, your Honor. MR. LEBENSFELD: Yes, your Honor. THE COURT: Let me finish the plaintiff's causes of action, and then when I get back I will do August 5, 2013 47 Decision the defenses; is that a logical dividing point? MR. GURYAN: Yeah. THE COURT: Because at some point we have to eat. All right. Fraud, I'm quoting from the Gennari case at 138 New Jersey at 610, Supreme Court of New Jersey case, Is a material misrepresentation of a presently interesting or past fact a knowledge or belief by the defendant of its falsity with an intention that the other person rely on it, reasonable reliance thereon by the other person with resulting damages. Now, that particular rendition does not leave room for fraud being a present misrepresentation of a future fact. The case of Ocean Cape Hotel versus Maysfield , which appears at 63 New Jersey Super 369, Appellate Division 1960 says, A misrepresentation of a present state of mind with respect to a future matter may be concluded from the utter recklessness, and implausibility of the statement in light of subsequent acts and events from a showing that at the time of the making of the promise the promisors intention to perform was dependant upon contingencies known to the promisor and unknown to the promisee, or from circumstances indicating that the promisor must have known at the time of his promise that he could not or would not fulfill it. August 5, 2013

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48 Decision Now, ladies and gentlemen, from everything that all of the witnesses and all of the family on both sides of this case have said about Harry Wilf, I have to believe that he had every intention of fulfilling his promise at the time that it was made. But as that promise was carried down by the successors to Harry and to some extent Joseph those successors being Lenny, Zygi and Mark, the promises were not kept, and rather than coming out at the very beginning and saying deal is changed. They continued to make the promises to Josef Halpern, and of course a year and a half later, I believe it was a year and a half after Harry made the promise, then Zygi did say to Mr. Reichmann's representative, Ralph Reichmann's representative, "The train has left the station," the deal has changed. It is not in. This is not the type of a partnership under New Jersey law where you can do that. So the continuation of exclusion of Jarwick, even in the face of Judge Stanton's recognition that they were a partner prior, well, prior to his finding that they were not a partner as of 1992, and well after the Appellate Division's finding that they were a partner as of 1992, the Appellate Division's finding coming in December 2006. The Wilf's continued to run the partnership the way they always had, ignoring August 5, 2013 49 Decision Jarwick. Not giving Jarwick their due as a partner. And I am finding that based upon Zygi's testimony, and to some extent that of Mark and Lenny, the Wilfs always intended to run the partnership this way. Nobody seemed to find it surprising that much higher grossly disproportionate management fees were charged to Pernwil then any other partnership ever in the history of the Wilf's organization. Nobody seemed to find it was surprising that unreasonable interest was charged on related-party loans. Neither of these, interest on related-party loans or management fees having been mentioned at all in the formation of the partnership. The Wilfs didn't seem to find it strange that there was no standard for allocating salary of Short Hills personnel. And I will read transcripts that say, we didn't really have a standard. It is just the way. At the end of trying to describe how the Wilfs allocate or didn't allocate a certain expense would be just, well, that is the way we have always done business. And in one memorable passage, Zygi says, well, in our partnerships this is the way it works. If they thought we took too much, when we were the managing, essentially the managing partner, the de facto managing partner, then our other partners in that enterprise would just take more in the enterprises we shared with August 5, 2013

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50 Decision them where they were the de facto managing partner. But in this case Joe Halpern and Ralph Reichmann were not members of any other Wilf partnership. So that couldn't have been the way that anybody intended to balance things out in this partnership. This partnership was going to be there just for taking money out of, not for serving as a measuring stick as to how much their partners would take out of another partnership that they were managing for the Wilfs. So, we had quite a bit to talk about also on reliance in this case, that is why I addressed the breach of fiduciary duty first, because the existence of that fiduciary duty pervades all of these other causes of action. And there are many cases that say that when you have a fiduciary duty, reliance is not an element that you have to worry about in fraud, for instance, I don't believe that that is the extent of the law in New Jersey, but the existence of a fiduciary duty goes a long way to provide reasonableness to reliance that might otherwise not be reasonable. So I am finding that fraud was committed. Equitable fraud was also pled, but I'm not going to address it because it is simply fraud without the scienter, the knowledge element, and I have already addressed and found that there was knowledge. August 5, 2013 51 Decision Now, I'm going to hopefully quickly address conversion and civil conspiracy. And I'm not going to, obviously before lunch finish the predicate acts for RICO which are separate, which, I think I will address when I address RICO so it is all together unless somebody has a problem with that. Okay. Conversion is the exercise of any act of dominion in denial of another's title to chattels or inconsistent with such title, and the elements of common law conversion under New Jersey law are the existence of property and the right to immediate possession thereof belonging to the plaintiff and the wrongful interference with that right by the defendant. Well, the chattel that we are talking about here is money. The benefits that should be derived from a 25 percent partnership in Rachel Gardens, and the acts of the defendants clearly interfered with that right. My personal opinion is that once we get down to conversion and some other acts given that we have got breach of fiduciary duty, fraud, breach of contract, they need be addressed only in the context of RICO, which I will do, but not before lunch. And a civil conspiracy under the Banco Popular case, well there are a number of them, but I'm talking about the one at 184 New Jersey 161, 2005, August 5, 2013

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52 Decision civil conspiracy is a combination of two or more persons acting in concert to commit an unlawful act or to commit a lawful act by unlawful means. The principal element of which is an agreement between the parties, between the conspireing parties, to inflict a wrong against or injury upon another. And an overt act that results in damage. Now, I commented in my opinion on the motion to dismiss that being a chancery judge I see a lot of dysfunctional families. After 22 months of testimony in this case, I didn't see a dysfunctional family. And indeed the Wilfs may have first prize in the entire State of New Jersey for a family of wealth engaged in a family business, particularly a second generation where they still get along. And I hope that nothing I'm doing is going to cause that to change. The Wilfs, two brothers and a cousin do get along. They all three respected, Lenny's father Harry and they all three respect Zygi's and Mark's father Joseph. As I said before, I think they even like each other. And it is clear after listening to Lenny's deposition testimony, and Mark's and Zygi's trial testimony, as well as deposition testimony that they act in concert with each other, which, you know, in many respects is completely admirable. It is the only way a family can co-exist in August 5, 2013 53 Decision a business. And it is very, very unusual. And they trust each other. Zygi being the master chef is the one that, even though as Lenny said he goes to work every day, et cetera, et cetera, and Mark works every day in pursuit, all three of them in pursuit of various enterprises, both having to do with real estate and not having to do with real estate. And Zygi is the master chef the self-described master chef, and it was very difficult for the three of them to describe how they functioned because it is almost a magical and very gifted kind of interaction that they have, that I think is based on trust and affection. And I think it was Zygi who testified about, he thought about the Wilf organization 24 hours a day even in his sleep. As a little boy he grew up with his father talking about it to his uncle every time they were together constantly, constantly, constantly, constantly. So it is in their genes and it is in their blood. And they acted together by consent, but it was really a tacit consent, because as Zygi said, if he was going to run all of these projects, he didn't have time, I think he is right, to go into detail with every one of his partners, probably not even with his brother and his cousin, but at some point in time they would get together, they would express to each other what was August 5, 2013

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54 Decision going on in their particular aspect of the organization, and they would have consent. And unfortunately, for this otherwise salutary family and economic relationship, when the entity is engaging in improper conduct, the liability for the improper conduct spreads to all of those who consent to it under the civil conspiracy theory. And I will go into the individual responsibilities that each one of the defendants had or has when we get into individual elements of damages and probably sooner rather than later because as I think about it one of them relates to RICO as an enterprise. Okay. MR. LEBENSFELD: Yup. THE COURT: Let's go off the record for a minute. (An off-the-record discussion is held.) (Lunch recess was taken at 1:01 p.m.) THE COURT: Off the record. (An off-the-record discussion is held.) THE COURT: Okay. That was not all the findings that I have made with regard to the common law causes of action. I was just attempting to give you an example of why it was I was finding that the defendants were liable under those particular causes of action. Now, the next thing that I'm going to tackle August 5, 2013 55 Decision is RICO. And I'm not sure it is a good idea to try to do it at two o'clock in the afternoon after lunch for all of us, but I'm going to try it anyway, because it is just going to be a summary. RICO, Racketeering Influenced Corrupt Organizations Act, New Jersey civil RICO, was dealt with in detail and at length in the motion to dismiss. And although I have some additional arguments, comments and evidence to set forth in the context of an entire opinion, my opinion has not much altered from the motion to dismiss. But because of the breadth of RICO, because of the importance of RICO, I don't want to just dabble in it. I want to tell you what I'm doing and go on to the next cause. It is going to take a substantial amount of time. And my decision in this case, I can tell you and I will tell you when we get to the appropriate point, which is going to be soon, this afternoon, that it is not the same as it was last time, particularly with regard to the period between Judge Stanton's opinion in 2002 with regard to the valuation date, and the Appellate Division opinion in December of 2006 with regard to the claim of right defense. I was hoping you would know what I was talking about, Mr. Guryan. August 5, 2013

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56 Decision MR. GURYAN: I do. THE COURT: Okay. Because it was your argument. Okay. All right. The first issue under RICO, as it is in any matter, any cause of action, is standing. And the defendants made a valiant -- made a valiant attempt to argue that the plaintiffs had no standing under RICO for a number of reasons, the most notable of which was that their contention was that the expulsion of Jarwick was the alleged predicate act, and that that was not a predicate act under RICO. And for a number of other reasons, it was the subject of long and exhaustive argument. But I am finding that both plaintiffs, Joe Halpern and Jarwick, have standing under RICO for a number of different reasons, the most notable of which -- and I'm not going to go into the others right now -is that Jarwick and Joe Halpern were clearly the targets of the misappropriation of funds from the partnership. And while the Wilfs may not have looked upon this as harm, direct harm to Jarwick, because it is their contention that they were not a partner, they were a partner and -- but not for the entire period of time. And I will go into that when I talk about the claim of right. August 5, 2013 57 Decision So Jarwick and Joe Halpern did have standing under RICO to the claim for treble damages and counsel fees and cost of suit and investigation for the pertinent period of time, which I will go into in just a couple of minutes. I am finding that the second part of RICO, that a racketeering -- pattern of racketeering activity consisting of predicate acts -- and I'm going to deal with predicate acts first -- has been met. Theft by unlawful taking or disposition, which is set forth in N.J.S.A. 2C:20-3; theft by failure to make required disposition of property, sometimes called embezzlement, under N.J.S.A. 2C:20-9; misapplication of entrusted property under N.J.S.A. 2C:21-15; theft by deception -- theft by deception is set forth at 2C:20-4; falsifying or tampering with records, N.J.S.A. 2C:21-4; mail and wire fraud, which is set forth and included in our state RICO under the U.S. Code 18 U.S. C, sections 1341 and 1343. I believe that's it. Let me see. Those are all of the causes of actions which RICO was a predicate act. And I do find that the defendants have violated those strictures, and that those violations do constitute a pattern of racketeering activity within the ambit of N.J.S.A. 2C:41-1 D, that there was a conspiracy to violate RICO set forth under N.J.S.A, or spelled out under N.J.S.A. August 5, 2013

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58 Decision 2C:5-2, and that RICO damages are appropriate as set forth under N.J.S.A. 2C:41-4. Now -- oh, we forgot enterprise. Pernwil does fit within the statutory description of enterprise. And the items that you look at are how the participants associated with each other. I have -just a moment. And I have found the level of organization and cooperation and participation necessary to form an enterprise, and that that conduct was engaged in purposely, pursuant to N.J.S.A. 2C:2B.1, and knowingly, pursuant to N.J.S.A. 2C:2B.2. And these are just short statutes. I will read them so that people who are here who don't know what those are specifically referring to will. When you -- let me read you purposely and knowingly. A person acts purposely with respect to the nature of his conduct or as a result thereof, if it is his conscious object to engage in conduct of that nature or to cause such a result. A person acts purposely with respect to attendant circumstances if he is aware of the existence of such circumstances or he believes or hopes they exist. The defendants here were totally aware of the circumstances and they were totally aware of the object in which they hoped to and did engage. August 5, 2013 59 Decision Knowingly, under 2C:2B.2, a person acts knowingly with respect to the nature of his conduct or the attendant circumstances if he is aware that his conduct is of that nature, or that such circumstances exist, or if he is aware of a high probability of their existence. A person acts knowingly with respect to a result of his conduct if he is aware that it is practically certain that his conduct will cause such a result. There was a large argument in this case, a large issue with regard to the level of intent required for civil RICO in the State of New Jersey, and purposely and knowingly are the touchstones for the type of intent. And I have found, and I will go into this later, that the conduct engaged in by the defendants was engaged in purposely. They were aware of the circumstances and they were aware of the object that they sought to achieve. And knowingly, it almost goes without saying in this case, because when you misappropriate money you know that it is going to be misappropriated, and it was. The enterprise with which these participants have to engage is a requirement under RICO. And New Jersey RICO is different than federal RICO. It does not require organized criminal conduct, merely August 5, 2013

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60 Decision organized crime type of conduct, which could include any one of those acts that I just read to you that are predicate acts for civil RICO. And Ball II, our Supreme Court case, along with the Appellate Division case, the initial Ball case, State v. Ball, tells the trial court that you look at how the participants associated with each other, whether they had discrete roles; whether the conduct involved a level of planning, a high level of planning; how decisions were made, were they made in the manner that showed that people were acting in concert; was there a high level of coordination involved in the implementation of the organization; and you look at how frequently the group engaged in the particular incidents complained of. There was a high level of coordination with regard to Pernwil, Halwil, Rachel Gardens. Decisions, as I said, were made by consensus. And it appears to be a very well-oiled machine that, despite the presence of a low-income housing aspect to it and a lousy real estate market, it is continuing to make money and almost runs by itself, because it has been running under the direction of the Wilfs and their accountants, I might add. Their accountants are no longer parties to the case, but they were part of the enterprise, they August 5, 2013 61 Decision had to be in order to make it all work. Let's see. I haven't done pattern, have I, gentlemen? MR. LEBENSFELD: Yes, you did. MR. HIMMEL: Yes. THE COURT: I did pattern? MR. LONG: Your Honor, you indicated that you were making a finding of pattern but you didn't describe the elements or the definition, I don't believe, and the statutes, if that is what you mean. THE COURT: Thank you. I thought I remembered reading 41-1D but I didn't read the statute, which I do want to do, so that everybody understands what the New Jersey legislature considers to be a pattern of racketeering. It requires, one, engaging in at least two incidents of racketeering conduct, one of which shall have occurred after the effective date of this act, and the last of which shall have occurred within ten years after a prior incident of racketeering activity. And we have that in this case. Two, a showing that the incidents of racketeering activity embrace criminal conduct that has either the same or similar purposes, results, participants, or victims or methods of commission, or August 5, 2013

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62 Decision are otherwise interrelated by distinguishing characteristics, and not isolated incidents. And it was the defendant's position that the conduct complained of was merely an isolated incident. And I'm finding that that is not the case. It was a consistent, pervasive method of removing funds from this entity so that they would not reach the partners. The participants were the same, the defendants. And the victims were the same. And the victims in this case were not harmed in the same way that the partnership was harmed. The victims were harmed each in their own right, by virtue of being 25 percent shareholders who did not receive 25 percent of the profits of this entity. There was an issue of the statute of limitations argued, and it was the subject of a motion to dismiss. The plaintiffs argued for a five-year statute of limitations. The defendants argued for a four-year statute of limitations. As I did some of my own research in this area, I found it was kind of interesting, there is even an argument to be made, it was a six-year statute of limitations. In fact it was made and rejected by one of our courts, and I can't remember which case. It is in the folder and we will get to it when I elaborate on this. August 5, 2013 63 Decision The primary case argued was Judge Meehan's case, In Re: Integrity Insurance Liquidation, as he chose the four-year statute of limitations to apply to RICO. However, as I will go into, Judge Means had a choice between a two-year statute of limitations that was being argued by one side of his case, the defendant, and a four-year statute of limitations that was being argued by the plaintiff, and he chose the four-year statute of limitations, while noting in a footnote that New Jersey has a statute that calls for a five-year statute of limitations that may apply. But then he never did anything with it. For an issue I'm not spending much time on, I'm spending a lot of time on it. I believe that integrity insurance was cited once, that was in a case called Frasier versus Bovino, which was a case authored by a then judge in the Appellate Division, Judge Weffing, Dorthea Weffing. However, she noted the decision, did not rely on it, did not distinguish it, didn't do anything except really misquote the essence of the opinion. She said Judge Meehan was choosing between a four-year and a five-year opinion. That case is at 317 New Jersey Super. 23. I don't know whether I mentioned it. She said that Judge Meehan was deciding between a August 5, 2013

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64 Decision four-year and a five-year statute of limitations, and he was not. He clearly was not. The defense has argued, in the many, many years since Judge Meehan decided the case, our legislature has not seen fit to enact a specific statute of limitations for RICO. That could be for any number of reasons although, usually, when a legislature -- it is true, as counsel argued, when a legislature is not correct, a judicial opinion, it usually means that they agree with it. In this case however, this was a Law Division opinion. It was three and a half pages. I said it has only been cited once. And it was not dealing with the issue as to whether or not New Jersey's five-year statute covered this case. And as I said, there has been an argument made, which I will go into a little more later, that actually our civil statute of limitations should deal with it for six years, so that all of your civil actions are covered under the same statute of limitations. And further argument that I believe the criminal statute is six years and the argument is made, why should a prosecutor have six years to bring a RICO complaint and a private party only five, or four, or two, or whatever it is. Why should they have less. It would be much more consistent and logical if they were August 5, 2013 65 Decision both the same. So I am finding that the five-year statute of limitations applies for reasons and cases that we will go into a little more in-depth. Now, the defendants have argued that RICO does not apply. And by extension, nothing applies if -- because the defendants had an honest belief that what they were doing was correct and valid. And this is called the claim -- their claim of right theory. Now because I'm just doing a summary, I'm not going to go into all of the reasons why I do not find that the claim of right defense applies to any cause of action in this case, RICO or otherwise, with one similar type of argument, I think it does apply. And it is not exactly what the defendants argued, but I think it is a logical extension. The claim of right arises from -- just a moment. I want to read to you exactly what the claim of right comes from, but I don't seem to have the statutory reference up here. Just a moment. THE LAW CLERK: Do you want me to check. THE COURT: Look at 2C:20 -- just bring me the pocket part of the book. If you can wait for just a second because it is actually in the statute itself, the language. Okay. N.J.S.A. 2C:20-2 provides for the August 5, 2013

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66 Decision consolidation of theft defenses under the code of criminal justice in New Jersey. And section C says, it is an affirmative defense to prosecution for theft that the actor was unaware that the property or service was that of another; two, acted under an honest claim of right to the property or service involved, or that he had a right to acquire or dispose of it as he did; or -- and then there is a third aspect of it that does not apply. Some of our criminal codes have some of the most ridiculous -- D under that statute has theft from a spouse, defines what theft from a spouse is or is not. It is a very strange statute. Pursuant to this claim of right under 2C:20-2C, the defense has alleged that the Wilfs operated under a claim of right when they took management fees, interest on related-party loans, when they charged certain payroll charges to Pernwil, rent, et cetera, et cetera because, as was the testimony from the defendants, that was the way they conducted business. That was the way they ran their entities. Now I have declined to utilize claim of right as a defense to anything except perhaps the crime of theft itself. And I decline to apply it to that because of what the case law says with regard to what August 5, 2013 67 Decision it actually means. And that is found in State v. Mejia, M-E-J-I-A, at 141 New Jersey 475. However -well, Mejia says that that applies to theft of specific property. In this particular case, there was no specific property. There was no standard for the amount of money that was taken out at any particular time. In other words, there was not a particular pot of money that the defendants were removing at any given time. No specific property. They simply took what was there. However, in thinking about this defense, which was presented for the first time on closing arguments -- and that in itself creates a problem which we will go into later. That is one of the reasons, a very small reason, that I declined to apply the defense. But in thinking about this defense -- and forgive me, counsel, for the defense if you brought this up. If you did, I had forgotten it. But the basic idea behind a claim of right is that you felt that you were not doing anything wrong because you were justly entitled to do what you were doing. Now, it appeared to me that that argument applied with regard to Jarwick from the time of Judge Stanton's opinion, that the valuation date was January of 1992, up to the time of the Appellate Division. And August 5, 2013

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68 Decision this is as far as punitive or RICO damages would be concerned. If a court has told you that you can do something, it is very difficult for a subsequent court to come along and say you cannot do that which the other court has told you you can. Now what am I talking about, specifically? Between 1992 and -- let's see, Judge Stanton's opinion was January of 2002, I believe, on the valuation date. Between January of 2002 and December of 2006, when the Appellate Division reversed Judge Stanton, for all practical purposes, and for all purposes, the New Jersey judiciary had determined that Jarwick was not a partner. So for this court to say that the Wilfs had no claim of right to deny them the fruits of their partnership is not appropriate. Once the Appellate Division decided that they were a partner, the rules of the game changed. And before Judge Stanton determined that they were not a partner, in January of 2002 -somebody correct me if I'm wrong. I had the paper. Was it January or June? MR. GURYAN: I thought it was June. MR. GIELEN: I thought so also. THE COURT: June 14th. MR. GURYAN: Something like that. It was June. August 5, 2013 69 Decision THE COURT: Yeah. June 14th. In that period of time, there -- as far as a criminal act is concerned, the Wilfs had the right to believe that what they were doing was correct. And therefore, any punitive damages that might attach to that would not be appropriate. So that is what -- did you argue on -MR. SNYDER: I believe we did, Judge. THE COURT: It was so mixed up with everything that was going on with your assertion of claim of right at that time, I may have picked up the germ of that thought from you Mr. Snyder. But it is very difficult to say -- it does not apply to Josef Halpern, because Josef Halpern remained a partner, was a partner. I know it is Zygi Wilf's position that the Jarwick's were not a partner, never been a partner, et cetera. But when Judge Stanton said they were a partner, their partnership ceased as of June of 2002, from that point until the Appellate Division, the Wilfs had a right to not give them the emoluments of their partnership. Now it has not escaped me, lest anyone think that it has, that even after the Appellate Division reversed Judge Stanton and before Judge Stanton said that the Wilfs were not a partner after 2002, the Wilfs uniformly, pervasively and consistently have -- and up August 5, 2013

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70 Decision to this day, have denied giving Jarwick their due as partner, specifically performing their partnership agreement. All right. Now I have run out of folders. Now, I believe we are -- let me go see what my next pile of papers is. One second. I will let you know if you can take a break. (An off-the-record discussion is held.) THE COURT: Okay. Let's see, I do need one more thing. I will just be out here a moment. Nobody move. (An off-the-record discussion is held.) THE COURT: Now, with regard to the statute of limitations, there were a number of arguments over the multifarious exceptions to New Jersey's statute of limitations statutes. And on the motion to dismiss, after an exhaustive and exhausting discussion of equitable tolling, separate accrual, the discovery rule, storm warnings -- could those be the only ones -in addition to relation back, how would I forget that, I determined that with regard to the RICO statute of limitations, because of the time of disability -- and I'm not going to go into this in detail now, I will when I put the final, when I go into everything in detail. I'm trying to give everybody an idea before August 5, 2013 71 Decision they leave today where we are going. With regard to the RICO statute -- with regard to the RICO damages and punitive damages, neither of which were sought on the first complaint, on the initial complaint from Jarwick, both of which were sought on the amended complaint by Jarwick and the initial complaint of Joe Halpern, I determined that the only conduct that would be compensable would be the conduct that occurred after January 1st of 2000. And the primary reason for that, with regard to the enhanced damages -- I'm calling them enhanced damages, the RICO damages, punitive damages -- is that underpinning our statute of limitations is the concept that the defendant has to know that they are a defendant, and that somebody has a claim against them. Nobody had a claim against the Wilfs that sought damages under RICO or punitive damages until October of 2009. However, there was a period when the plaintiffs in this case knew that there was certainly a basis for alleging misappropriation of partnership funds. And that had to be taken into consideration under the -- under our rules that make up the discovery rule. The books and records of the partnership -- I'm just going to go over this very briefly. August 5, 2013

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72 Decision The books and records of the partnership are turned over to Jarwick in 1995. I believe Mr. Morrison was retained in 1997. The valuation hearing utilized expert reports from both sides before Judge MacKenzie. While this case was on appeal, nobody could do anything with their complaint that was extant in the court. So I pulled out equitably tolled the statute for that period of time, which brought the time period from which enhanced damages could be obtained, pulled it backwards to January 1st of 2000. That was a short period of time after Bill Morrison had filed his report. I know there is an argument that Mr. Halpern -- that Joe Halpern was not told -- and a very good argument, which I gave great consideration to, by the way -- was never told, for reasons which I will go into when we go into this in detail, by the Reichmanns, by the Wilfs, by Mr. Morrison, or Mr. Cohen, of these irregularities in the financial statements or off the financial statements. I'm not extending the statute -- I'm not tolling the statute of limitations for any longer period of time because Mr. Halpern had many, many years in which to react and conduct some type of an investigation, notwithstanding the fact that there was a fiduciary relationship here August 5, 2013 73 Decision and that the Wilfs had a duty to disclose. And just as one example, Mr. Halpern knew what rents were being charged for these apartments. He knew what was being collected. And he knew what he was getting. And he wasn't getting -- he clearly was not getting 25 percent of the profits that were being thrown off, the net profits that were being thrown off by this entity. And while I am -- I say this with reluctance because the Wilfs knew very clearly that they were the subject of a complaint that was filed in 1992. The complaint did not allege misappropriation. But the complaint sought an accounting. And they knew that they were going to have to provide an accounting. They have known that ever since they were served with this complaint, which I assume was shortly after September 11, 1992. And, under the separate accrual court rule and doctrine that we have in New Jersey, compensatory damages will go back to September 11, 1992, for both parties, but the enhanced damages for Jarwick will be relieved from the time of Judge Stanton's opinion on valuation until the Appellate Division opinion. And I will go into this in a more organized detail when we go into everything specific. MR. LEBENSFELD: Your Honor, as to Joe August 5, 2013

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74 Decision Halpern in terms of enhanced damages? THE COURT: September 1, 2000, the same date as before. If I wasn't clear, Mr. Lebensfeld, I'm sorry. MR. LEBENSFELD: No. No. THE COURT: Just a second, let me get my glass of water here. MR. LEBENSFELD: January 1st? MR. SNYDER: January 1st. THE COURT: Just a moment, I need something to drink. (An off-the-record discussion is held.) THE COURT: Mr. Lebensfeld, that is what I meant when I said I gave great consideration to the argument that you made in closing, that Josef Halpern probably did not get any financial statements. And it may very well be that until after the Appellate -- see this is why it is taking so long -- until after the Appellate Division, when the Reichmanns started to say, well, you know, what do you have, where are you going, what are you doing, this is what we've got, that is probably the time when Josef Halpern knew. But there is another tine to it; knew or should have known. And that should have known is a diminishing factor as the fiduciary relationship August 5, 2013 75 Decision between the person who was supposed to disclose and the person to whom things are supposed to be disclosed. But I do think that the period of time from which Mr. Halpern knew that there was something brewing, and all of the various storm warnings, which we are going to go into in elaborate detail at some point, and I think that probably around January 1st of 2000 is the time that Josef Halpern should have known, should have done something, in order to enforce his rights. My ruling on waiver -- oh, did I say that the common law causes of action are going back to the time of the filing of the complaint -MR. HIMMEL: You did, yes. THE COURT: -- under separate accrual? We will go into more of that later. Some of what I have to say in detail is a repeat from the motion to dismiss, and much of it is added on. And I can't really separate it at this point. I'm just going to have to go into it all at once. It will not sound unfamiliar to those of you who were here for the two days when I was putting that on the record. Now I have told you what the pertinent statute of limitations are. I have told you how the statute of limitations were tolled. And I will tell you -- I think I will have just enough time to tell you August 5, 2013

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76 Decision what elements I'm throwing into damages, after I tell you what kind of damages I am awarding. We are awarding, for that period of time, punitive damages, RICO damages, attorneys' fees, cost of investigation, cost of suit. And I don't know what I'm going to do with that, folks. I just really don't know. Attorneys' fees are -- they have always been a problem in this case. And the punitive damages will have to await the submissions that you have been preparing for me, right? You have been preparing them for me, right? MR. SNYDER: Yes. THE COURT: And also the attorneys' fees you have been working on. MR. HIMMEL: Yes. MR. LEBENSFELD: Yes. THE COURT: For those of you who are here who don't know what I'm talking about, I realized that we were going to have a very short time frame for me to rule on these post-judgment matters, so counsel were cooperative enough to agree to prepare those submissions ahead of time so I can get to them as quickly as possible. And as a matter of fact, I think this executive summary was suggested by Mr. Gielen so that the parties will have even more time to look at August 5, 2013 77 Decision what is happening, and do whatever they have to do in a post-judgment way. Now that is the monetary damage issue. Now that I have explained to you broadly, generally, what we will call a claim of right, but isn't really a claim of right, it is just commonsense, you see the problem I'm having with calculation of damages? So maybe Mr. Barsky and Mr. Hoberman can help us out on that. And the last issue is -- what is the last -oh, dissolution. As I said before, dissociation was -did I go into anything at all on punitive damages? MR. GIELEN: No, your Honor. THE COURT: I did say I was awarding punitive damages? MR. GIELEN: Yes. THE COURT: I am awarding punitive damages because what was done in this case does fit within the requirements of New Jersey's punitive damages act. It was done not with a reckless, but a willful disregard of the rights of the partners, Jarwick and Josef Halpern. And it was clearly not negligent. It was not even grossly negligent. It was grossly willful. And it was done repeatedly. And the outcome was foreordained when the act itself, or the acts August 5, 2013

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78 Decision themselves were committed. And if compensatory damages are to be the only damages awarded in this case, then there is absolutely no motivation for any managing partner to run a partnership equitably because, if somebody catches him or her, they will just bring them to court and then they will have to compensate with no -- no additional damage. So there is a deterrent of theft that is attendant to punitive damages. Now I'm fully aware of the fact I cannot award punitive damages and RICO damages for the same conduct. My law clerk has done a big write-up on it. I know that they have to be interrelated. I will do that, once I find out what exactly the damages are, the monetary damages. I wanted to add one thing to punitive damages. I know I have it out here on the bench. I'm not going to go into this in detail right now either, but will on another day. During the course of the trial, both in the sequence of questioning and at closing argument, plaintiff's counsel put together a case that I call, and they called, I believe, the Wilfs' reaction to litigation events. And I have alluded to it a couple of times today. And as best I could see, after I had gone over the entire case and looking at what was done and when it was done, August 5, 2013 79 Decision vis--vis the litigation events that happened to be occurring at the time, it could not be otherwise that the Wilfs' reaction to litigation events, as far as what they were taking and how they wanted to create some kind of a cover for it, had to be an indication of bad faith. If there is no bad faith, there is no reason to create any kind of a subterfuge for anything. And I will go into those litigation events and the conduct that followed each one when we deal with everything in detail later. Just a moment. There was something else. Because we have a lot of lay people here in the room I think, I don't know, maybe everybody back there is a lawyer, I don't know, bad faith to the ordinary person on the street has one meaning and bad faith to a lawyer or a judge has entirely a different meaning. And the reckless and willful disregard of the rights of another is what I'm talking about. I'm talking about the lawyer/judge's view of bad faith, as opposed to conduct that is taken in good faith; that is, with an honest belief that you have a right to do what you do, to do what you did and what you are doing, but it may well be that, under the law, you didn't have that right. There is a difference between the two. And in this case, there was extant that August 5, 2013

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80 Decision lawyer's bad faith, not the bad faith of the man on the street would understand it. There are a lot of words that are being used in this opinion that have a different connotation outside this courtroom, like racketeering influenced. Those are not my words. Those are the words of the New Jersey Act. That is one of the reasons why I described the predicate acts, so that those who do not understand what a predicate act is will not think it consists of murder and other acts, extortion and things like that. It is what it is. Okay. Now, we are going to have a very interesting week or week and a half ahead of us, at the end of which, because I have completed the opinion to myself, even though I haven't been able to get the whole thing on the record, to say the least today, there will be a dissolution of Pernwil. And I'm just briefly going to tell you why. Very, very briefly. These people can no longer live together. Even were Josef Halpern not ill, there is no way that they could go back and work together, not after what has happened in this case. And the plaintiffs are entitled to dissolution and to their share of the assets. Now, Rachel Gardens is a very economically August 5, 2013 81 Decision productive entity. And I have indicated several times during the course of this trial that I felt that the parties should come to some kind of an understanding as to how they could extricate themselves from each other without -- I was going to call it the golden cow -without killing the golden goose, or the goose that laid the golden egg, I guess is what we call it. So I am going to order dissolution. I am going to hold that for 30 days to allow the parties to try to come to some kind of a disentanglement that is not going to have a detrimental effect on the tenants at Rachel Gardens, that is not going to have the effect of ruining the income that is being spun off from Rachel Gardens. And of course, Josef Halpern's illness makes dissolution, as opposed to dissociation, the only alternative. And Jarwicks, of course, are far distant. And nobody -Zygi testified, and I believe the Reichmanns also testified, nobody intended that they were going to come down and run Rachel Gardens. They were the money people. So you have 30 days to try to come to an equitable resolution of this, short of dissolution which, in my experience as a judge, is a disastrous way to -MR. GURYAN: But you are not ordering August 5, 2013

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82 Decision dissolution now; you are going to go through the opinion and there will be an order entered? THE COURT: Of course I am. Of course I am. But it occurred to me that perhaps, while I'm still here sitting on the bench, the parties might want to come to their own resolution of this. And that is one of the reasons -- I think you were part of the phone call. Yes, you were part of the conference call. I think Mr. Snyder was not. MR. SNYDER: I was not. THE COURT: I was concerned about the timing of this opinion, that it was starting so late. Believe me, folks, I just couldn't do it any faster. I just couldn't get it out any faster. You estimated 100 days. I think in actual time that is what it took me, about 100 days. But I couldn't start it until I got a successor in here. I don't know how you figured that out. Probably the same way you figured out the timing of your arguments of direct and cross-examinations during the case. I don't know what that is. Now that having been said, I have to go into -- and I think I can do it if I stop, if I shut up right now, and start to tell you what is going into the damages so you can start thinking about it. I'm just August 5, 2013 83 Decision going to be going, management fee, they are in, they are out; theoretical fees, et cetera. There is not going to be any rationale. I will hardly have time to get through it. And then starting tomorrow morning, I will go through everything in more detail. And I'm sorry, there will be some repetition, but I wanted to get everything out here in the beginning. Don't take a break, please, because you won't get back in here. I'm going to get my next pile of folders. (An off-the-record discussion is held.) THE COURT: Okay. Now the reason -- in case you weren't able to extrapolate, the reason I want to go through what is going in and what is not going in, as far as redistribution of damages, is because there is this last paragraph at the Appellate Division opinion that I read, and my answers to many of those will be clearer when you see what I'm putting in and what I'm putting out. I first of all want to say, because I think it was Mr. Guryan who was concerned about this on his closing argument, that I was going to be laying damages for RICO or punitive damages onto the amounts that had already been distributed to Josef Halpern. Didn't you August 5, 2013

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84 Decision make that argument, those cannot be the subject of punitive damages or RICO damages because they were already distributed? MR. GURYAN: I think that was -- I don't remember if that was a specific argument, but I certainly made the argument with respect to Josef Halpern already receiving certain monies. THE COURT: Yeah. Well, I think, because I just recently reread this, your point was, because all of the distributions were going back into the pot -MR. GURYAN: Correct. THE COURT: -- the way the accountants have calculated damages, and there is no harm done if everything goes into the pot and there are no enhanced damages, because they come out 50/25/25, right? But they can't -- it can't be done that way for a calculation of punitive damages and RICO damages, because they don't come out 50/25/25, because of the time period for RICO and the exemption for Jarwick, the tolling part -- the nontolling, I should say, for Jarwick. You understand what I'm talking about, don't you, Mr. Hoberman? MR. HOBERMAN: Yes. THE COURT: I was going to say, if you say August 5, 2013 85 Decision no, I know I didn't get it right. MR. LEBENSFELD: Your Honor, Mr. Barsky's damage calculations as to Joe Halpern deducted the money he had been paid. THE COURT: His scenarios did. MR. LEBENSFELD: Right. THE COURT: I'm not sure that the core schedule did. MR. LEBENSFELD: It did, your Honor. THE COURT: It did? Okay. I wasn't sure. MR. LEBENSFELD: No, the core schedule is just -MR. GURYAN: Throwing everything back. THE COURT: Yes. MR. LEBENSFELD: But in his scenarios -THE COURT: I understand. But I want your respective accountants to go over them. Let's stop for a moment, because Mr. Hoberman is explaining to the Wilfs what I'm saying. So everybody gets it, we are not double dipping here. Okay. I hope I have included everything. If I haven't, I'm just going to slide under the bench and go away. The first element that I will be -- I guess I'm going to be addressing in detail RICO tomorrow, August 5, 2013

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86 Decision because that is what I started with after this. To some extent, the common law causes of action, but they are pretty plain vanilla. We will go into RICO, and then we will go into the various -- we will go into statute of limitations on RICO in specific, in detail. And then I will go over the various elements of damage alleged by the plaintiffs. And I believe that I am -I believe that they are all going to go back into the pot, with appropriate deductions to be made for distributions that have already been made to Josef Halpern, above and beyond his salary. Oh, that reminds me, there was also salary paid to the Wilfs. How did Mr. Barsky treat that? MR. LEBENSFELD: He treated that as being -MR. GIELEN: All of that money went back into the pot. MR. LEBENSFELD: Yeah. THE COURT: Okay. Because that is what I intended, as you will see tomorrow when we go over some of that. Okay. Now I'm not -- except to make one or two generally applicable statements, we have a partnership act. We have not one but two partnership agreements, both of them drafted by the Wilf law firm. Whether the Wilfs read them or understood them, I don't August 5, 2013 87 Decision have to deal with. Their law firm drafted them. The Wilfs are all three lawyers. They are all three -- I haven't heard Lenny Wilf testify in person, but I have seen him on depositions. He might be the smartest of the three. At least he sounds pretty good on video. But they are all three very intelligent, very well educated, very knowledgeable and very successful people. And they have to know what a contract is. They just have to know. And a handshake is great, it is fine, a lot of people operate for decades on handshakes. But when you have a written agreement, it is what you've got to live by, or you talk to the people who are other parties to the contract and you change some of its provisions. These agreements had no provisions for any of these payments. None. Theoretical fees, management fees, hypothetical fees, interest on related-party loans. I mean, I don't know where the language in the financial statements came from. Both accountants were asked by me repeatedly, as well as by counsel, but mostly by me, because this was the first time I had heard their testimony. And I would go, Mr. Barsky, is there an accounting reason for that. And he would go, no. I thought, well, Mr. Hoberman will come up with an August 5, 2013

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88 Decision accounting reason. But in most instances, Mr. Hoberman gave me the same answer. If there is no accounting reason and there is no legal reason, there is no reason, because nothing else matters here. Mr. Lebensfeld talked about being the moral and right thing to do, and that is admirable. But I am sworn to enforce the law under principles of equity. That is really all I can do. Most of the time they match up, thank goodness. So because there was no oral agreement, because there was no written agreement, because there is no statutory provision for any of these fees to be taken out in the amount that they were taken out or, in some -- in most instances, to be taken out at all, from Pernwil, is why they are being thrown back in for distribution. And there is one -- there is just -- let me make one comment when we get -- one other comment, I think, when we get to theoretical fees. All of the management fees are to be put back into the pot for 50/25/25 distribution. The theoretical fees and the hypothetical fees are fees that the Wilfs claim that they should be paid because they performed valuable services for the partnership. I have to assume that the Wilfs, or their organization, performed some services for the partnership. As far as August 5, 2013 89 Decision the onsite management, that was done by Joe Halpern and his staff. And there really is no dispute about that. And even -- I will go into this in detail. Even the Wilf organization employees, who work not only in Pernwil but at other entities, support that proposition. Now I considered some type of a hypothetical or a theoretical fee. However -- and this was really the last decision that I made in this case. It was the one that I labored over the longest -- I am deciding not to award hypothetical or theoretical fees for a couple of reasons. First of all, exactly what the Wilfs did was not quantified, except by the suggestion of a percentage of net profits, or a percentage of the rents, like a management fee. So I would say to myself, maybe they are entitled to a management fee. Then I think, what are you talking about, there is no agreement for management fees. This is an entity that is governed by an agreement. Not only was there no written agreement for management fees, management fees were never discussed. Just simply never discussed. So, while -- and I know that Zygi in particular is very proud of what he called the value that was created by the Wilfs with Pernwil Gardens, however, he himself August 5, 2013

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90 Decision said there wasn't too much else going on in the '80s in real estate, and so this was a great opportunity for the Wilfs as well as for the Halperns, and later for Jarwick. It is very, very difficult for a chancery judge to award fees to someone who has breached their fiduciary duty. It almost runs against the grain. And if you look at the Silverstein v. Last , I have already cited it once, it just has such fantastic language in it. In this instance, the managing partner knew what he was doing in managing the property, and the other partner was a -- had knowledge of title insurance, or something like that; whereas, the other one was an insurance broker, he actually ran the partnership. And there were numbers of breaches of fiduciary duty and breaches of contract and fraud, even though the damages -- I couldn't tell from the opinion. I actually went -- I couldn't find -- this was remanded. Silverstein v. Last was remanded. And I couldn't find an opinion following it up. So just as an aside, I looked to see who the attorneys were to see if they were still alive. But this was decided in 1978. And I noticed that one of them was an attorney that I knew. And he was Mr. Silverstein's attorney. So I called him, Mr. Criesman (phonetic), August 5, 2013 91 Decision and I said, whatever happened to that case. You know, is there a follow-up case, whatever. He goes, no. I said, well, why not. He said, well, this client had some mental lapses, blah, blah. He says, wait a minute, Judge, you should know what happened to this case. I said, why, it wasn't my case. I hadn't even graduated from law school in 1978. In fact, I was hardly born. And he said, well, Mr. Silverstein fired me after the Appellate Division decision and another attorney took it over. I said, well, it wasn't me. He said, no, but it was your husband. So I came home and I said, do you know this case. Oh, yes, yes. I remember that case. So it is just such a wonderfully small world, isn't it? And the panel on that case, I mentioned Judge Pressler, I've also got to mention Judge Conifer and Judge Michaels, were the three on the panel. And if you want a primer in fiduciary duty, that is about it. And that case determined, relying on a case called Rottenberg v. Franklin Washington Township Trust Company , that if you are a fiduciary -- and this is in the context of a trust but it was an actual partnership -- and you breach your fiduciary duty, you are not entitled to undisclosed commissions or bonuses. And this -- to award a hypothetical fee would in fact August 5, 2013

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92 Decision be awarding an undisclosed, unagreed to management fee. So I'm not awarding those fees, although I thought long and hard about it. And I mentioned before the quantum meruit argument that could have been raised. But quantum meruit is an equitable remedy that would be precluded by unclean hands. And unclean hands is not, as a lot of people think, coming into court having done something naughty someplace along the line, but it is having done something untoward or inequitable with regard to the conduct before which you are appearing before the court. And I am not allowing interest on related-party loans. There is no statute for it. There is nothing in the agreement. There is no loan document. There is simply nothing. In addition to the fact interest was taken on related-party loans that weren't really related-party loans. And I'm fully aware of the fact that, at some point in time early in the partnership, the Wilfs had to put money in because Jarwick wasn't built up, it wasn't throwing off any money. I'm not sure, because it didn't come out at trial, why they had to do that, because they had a $36 million loan. But it probably had something to do August 5, 2013 93 Decision with the environmental problems they were encountering along the way. I don't know why. But there was testimony that the Wilfs, on previous projects, had also made short-term loans of their own money for which they received no interest. And it might have even been different if the loans had been documented and set out in financial statements or, at the very minimum, discussed with their partners and everybody agreed, well, we will pay you a half percent above prime or whatever it was. I don't even know where that language came from in note four, in the various financial statements, but it certainly is not in any agreement. Now, the distributions, above and beyond the three point -- the three to one, have to be put back so they can be appropriately distributed according to the ownership percentages. I'm not sure how that is going to work out with the various -- but that is why we have CPAs, to figure that out. Because the damages are broken up. They are not just straight compensatory. They apply to one entity for one point and one for another. So, you know, the wonderful thing about CPAs is they don't write 200-page briefs. MR. LEBENSFELD: Your Honor, I apologize if I'm stepping over the bounds. I apologize. But I don't understand your last statement. I thought I August 5, 2013

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94 Decision heard you say you are awarding compensatories back to 1992. THE COURT: Correct. MR. LEBENSFELD: The numbers of excess three to one, the management fees and stuff, are only affected by -- do not affect -- are not affected by, as I understand, your statute of limitations ruling. And Mr. Barsky has already calculated those damages. THE COURT: Because there is no -- well -MR. LEBENSFELD: We are talking straight compensatory. THE COURT: Some of these distributions may have taken place as a RICO offense. Some of the distributions may have taken place -- in fact, I know some of them were during the RICO period. MR. GIELEN: I think what confused Mr. Lebensfeld was the reference to distributions over and above the three to one. I think what your Honor was saying is that all of the distributions would go back into the pot and then be divided per their ownership interest. No? THE COURT: Yes. But as far as either punitives or RICO, the RICO and punitive damage calculation will not be made on the amounts that were previously distributed appropriately. In other words, August 5, 2013 95 Decision certain -MR. LEBENSFELD: Okay. THE COURT: -- certain of the monies that the Wilfs got, they were entitled to. MR. LEBENSFELD: Absolutely. THE COURT: All of the money that Joe got, he was entitled to, I believe. MR. LEBENSFELD: Yes. MR. GURYAN: But there is also -THE COURT: We are not going to charge punitive or RICO damages on items that were appropriately distributed. MR. LEBENSFELD: Of course not. MR. GURYAN: And there are -- as I understand, there are timing issues with respect to the application of the statute of limitations with respect to RICO and also punitive damages, as well as the interrelationship between those two claims. THE COURT: Yes. MR. GURYAN: Okay. THE COURT: I knew that you understood it because you argued that on your final argument. Okay. So we've got that. MR. GIELEN: Sorry, your Honor, may I ask for another clarification? August 5, 2013

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96 Decision THE COURT: Sure. MR. GIELEN: The compensatory damages go back before 1992. The complaint was filed in 1992 seeking an accounting -THE COURT: Just a moment. Just hold on. Let me look at my sheet here. Yes, a small amount of them did go back to 1989, and actually, relatively speaking, there was a small amount of damages before 1992. But thank you for that. Save me a conference call. The excess payroll. All of the excess payroll has got to go back in. And it has to go back in because there is no commonsense rationale for it. There is no legal rationale. Some of these people did something for Pernwil. But in order to charge Pernwil for the labors of these people who gave services to Pernwil, Pernwil has to know what it is that they are paying and why, and what these people are supposed to be doing for them. That is what it means to have a contract and have the rights and obligations of a third-party. You don't just do payroll. I mean, ADP has got to have a contract with the firms that they do payroll for. And I'm not -- I've never run a business except for a law firm, so I'm not going to tell the Wilfs how to run their business. But when you do August 5, 2013 97 Decision things this way, you subject yourself to these kinds of rulings. Insurance. I just have to say a couple of things. I have a whole packet here, as you might imagine, of information on insurance and calculations. We spent at least four days on this, at least. And there -- I was totally confused for the first two as far as what was charged. I went over Zygi's testimony repeatedly, and I still couldn't make head nor tail of it. I couldn't tell what it was. What rate he was charging. He kept going back and forth between market rate, the Wilf rate, the one off rate. And by the end of the second day, I was beginning to think, I don't really care, this is such a small amount of money, I just don't really care. This is ridiculous. But I realized I couldn't -- that was not an appropriate judicial reaction to something I didn't understand. And then I believe somebody, I think it was Mr. Barsky, found in some of the papers that he had been given a receipt for insurance. And it was substantially less than what the Wilfs had been charging Pernwil for their insurance. And I guess we have, at long last, gotten to trueing up. Because it was Zygi's testimony that construction liability insurance was not charged in the August 5, 2013

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98 Decision beginning. Or it was charged, but Pernwil was not charged for it. So he was trueing up. In lieu of proof as to what would be a fair and reasonable rate to have charged Pernwil, I have no choice but to use the one invoice that was found that indicated that it could be obtained for -- that a one off policy could be obtained for substantially less than what the Wilf organization had been charging Pernwil. Now I mentioned true up. I guess it is appropriate that we are getting down to the end and true up comes up for the first time. Because it came up in this trial for the first time more than 20 years after the complaint was filed. And it was the Wilfs' position on depositions -- and I have the quotes, et cetera here, and I'm not going to go into them now because they are very lengthy -- that they had a fair and equitable way of charging expenses to their various projects. However, they couldn't tell on deposition what the standard was. And when they came to trial, it was not a fair and equitable way of allocating the expenses any longer. It was a true up to make up for past expenses. And this true up formula, if you can call it a formula, because it was never anything more than an arbitrary stab at -- actually it was more than August 5, 2013 99 Decision an arbitrary stab. It was an arbitrary grab at whatever was left in Pernwil, allegedly, to make up for fees that had not been charged to Pernwil in the past. And the proof for the validity or amount of those fees that allegedly should have been charged in the past was never forthcoming. And there was testimony, I believe -- I know, from Mark Wilf at trial, and I believe from Lenny Wilf at his deposition that, with regard to the insurance, they knew that what was being charged was way above market. But you know, that was what Zygi had done. So what it is, it is, I kept saying during the course of this trial. And I'm still saying it. We have the rent issue. And this is a relatively minor monetary issue. The Wilfs charged Pernwil two different kinds of rent. They charged -let's see, they charged Pernwil a monthly rental that was something like $3,000 a month. And then at the end of the year, there was a huge amount that was taken out in some years for rent. It could not be identified what the rent was for, because the majority of the operations at Pernwil took place in Mr. Halpern's offices on the site. Some of the rent checks were made out to Rock 54, which is a commercial building owned by the Wilfs in New York City. I know that the Wilfs have August 5, 2013

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100 Decision a large organization in Short Hills. I believe at least one floor, perhaps two, were occupied by the Wilf law firm, which doesn't have anything to do with Pernwil. But the rent has got to go back in, because there was no reasonable basis for the amount of rent that was charged. There was -- I will go into this in more detail tomorrow with quotes from depositions and trial. The balancing or true up argument, as I said, just doesn't work, because it is totally, totally arbitrary, and came up only after Jarwick had been ruled by the Appellate Division to be a partner. And then we have commissions. Some of the commissions were just receptacles for reclassification of management fees into commission pots. Others were end-of-the-month checks that were paid to some Wilf employees, most of which had nothing to do with Pernwil. There was also a FICA problem with these end-of-the-month checks, which is not within my bailiwick, but I believe they were reported on 1099s not W-2s. There was never an explanation for that. And I was unclear as to what these end-of-the-month checks were for. And they were certainly not made with any discussion, disclosure or agreement. Advertising. The Wilfs did advertising for August 5, 2013 101 Decision the vacancies at Rachel Gardens in addition to all of their other projects. And these ads were placed in advertising -- real estate advertising magazines, I will call them. And I was never able to make any kind of a finding as to what their reasonable advertising costs were. Jill Carl was the person who came as a witness, and she placed all of the Pernwil ads and all of the Garden Homes advertising ads in addition. And she had never seen or heard of some of the amounts of tens of thousands of dollars a month that were taken from Pernwil for advertising. Ms. Carl didn't come back to testify, but the expense of running the ads was relatively minor, and the Wilfs were charged -- the Wilfs were given a discount. They passed half of that discount on, I believe, to Pernwil, and they kept the rest for themselves, taking for themselves the half that Pernwil paid. So those should go back into the pot. I believe that the legal fees have been equalized -- nope, they haven't. I believe they were equalized as of 2010. MR. GIELEN: There are a couple of items that Mr. Barsky had omitted, and that is why they were added back later when it was presented to you in trial. THE COURT: But the bulk of the legal fees have already been equalized? August 5, 2013

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102 Decision MR. GIELEN: Yes, your Honor. THE COURT: The next category is Other and Computer. And this includes such things as rebates, Verizon, cable, repairs and maintenance, telephone charges for cell phones for people who didn't work for Pernwil. And I can go through the list of them when we get to that point. Pernwil was not part of the YARDI computer system, didn't want to be. Zygi knew they didn't want to be. They were charged for that and a number of other things having to do with computers. Pernwil was charged, in some years, for bonus payments to Fran Cohen, Jacob Beri, Shelly Beri and other employees. Repairs and maintenance were sometimes put into other, and sometimes repairs and maintenance was also a repository for reclassification of -- one that I remember, I think, was $100,000 in management fees. Auto expenses for Bill Little, Jonathan Goetz were also charged to Pernwil. And they did a small portion of their work for Pernwil. The Home Depot and G.E. rebates, which were taken because of the Wilfs' great buying power, they were taken by the Wilfs. Part of that buying power was because of Pernwil, because of what Pernwil bought. I don't know what the allocation was because nobody told August 5, 2013 103 Decision me. But those rebates that were taken with regard to items that went to Pernwil should go back into the pot. The last item, I believe, is Rachel Affordable. And this is what happened with Rachel Affordable. Rachel Affordable is a certain number of buildings within the Rachel Gardens complex called Rachel Affordable. It is low to moderate income housing under our Mount Laurel decision. And Pernwil loaned money -- I'm not going into this in detail right now, but just suffice it to say, for this moment, Pernwil loaned money to Rachel Affordable to build Rachel Affordable. My recollection was that loan was never repaid. It was reclassified as management fees or construction supervision, I believe. But I can get into that in detail. I certainly have not recited all of the management fee reclassifications or any other reclassification. I have to do this by reading my notes. Josef Halpern was told that he was a 25 percent partner in Rachel Gardens which, in his mind, included Rachel Affordable. And it was not until several years later that he found that Rachel Affordable was a separate entity. He asked Zygi about it. I cannot recall right now, but I will when I go through my notes in here and trial transcript, but my August 5, 2013

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104 Decision recollection was that Zygi did not remember his asking about Rachel Affordable. Joe's recollection is that Zygi said that his father and uncle needed the tax advantages of affordable housing and that Joe's income was not sufficient to avail himself of those. So they were going to take that tax benefit. It was Joe's position and his testimony that he was entitled to the profits, even though he was not going to be getting the tax benefits. He knew that Rachel Affordable was a separate entity, separate accounting, et cetera, but nobody told him that he was not going to be a recipient of 25 percent of the profits of Rachel Affordable. And as it turned out, Pernwil paid most of the expenses of Rachel Affordable. Pernwil paid for the construction of Rachel Affordable. And Joe Halpern thought that he was a 25 percent shareholder of Rachel Gardens which included Rachel Affordable. He rented out to his employees who qualified apartments in Rachel Affordable. He didn't have to ask anybody to do it. He did it. He got the approval of the township through for Rachel Affordable, and worked with the township as far as obtaining lists, et cetera, et cetera, when there was a vacancy in Rachel Affordable. So he should be entitled to 25 percent of the profits from Rachel Affordable. August 5, 2013 105 Decision I want to say a word about credibility. The model jury charges give instructions to juries on how to judge credibility. What did the witness say? What were the witness's gestures, tone of voice during the testimony? Did what the witness say make sense? Did it make sense in light of other things that you know made sense? And it tells the jury that if you don't believe the witness in one thing, you may chose to disbelieve them in everything. I've always thought that was a rather heavy handed jury charge. And I have done a lot of bench trials in my career, and I've never used that. If you don't believe one thing that they say, don't believe anything that they say. It is a little heavy handed. And I read very carefully, and went back and forth over Mr. Guryan's lengthy closing argument on Josef Halpern's credibility, and there were inconsistencies in Josef Halpern's testimony from his deposition. I believe he was deposed twice, two separate time periods, one in 1997 -MR. LEBENSFELD: Yes. THE COURT: -- and then later for this trial. And then he was on trial here testifying in two separate time frames. And there were inconsistencies in his testimony. There are a couple of reasons why I August 5, 2013

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106 Decision think those inconsistencies occurred. And let me see if I can explain this in the next five minutes. When we remember something, we remember it because we put it into a cubby hole in our brain, if you will excuse me in simplifying this wonderful thing the human brain. We put it into a cubby hole. For instance, I'm looking at Mr. Gielen. I know who he is, he is counsel for Jarwick. I know, I put that in here, yup, he was in my courtroom on that day. I'll remember that because that is a cubby hole that I can fit you into. But there are a lot of other people in my courtroom whose names I don't know, whose relationship to the party I don't know. I don't have a cubby hole to fit that into. I may forget tomorrow whether they were in my courtroom or not. It is the same memory process that goes on every day with things that we observe and hear and do. So as time goes on, the inability to do that increases because the places where you have put the information, if you did have a cubby hole into which to place, get dimmer and dimmer. Or if you didn't have a cubby hole to place it at all, it just goes out of your memory. Human beings are designed so they remember. So when we can't remember something, we strive to remember. And you have seen me up here striving to August 5, 2013 107 Decision remember things during the course of this day. And in addition to that, Mr. Halpern, I believe, is 67 years old. Close? MRS. HALPERN: Sixty-three. THE COURT: He is a baby compared to me. But as we get older, it is easier to forget, harder to remember. Mr. Halpern's native language is not English. And in addition to that -- and I don't mean this out of any disrespect, Mr. Halpern -- he has a slight speech impediment. And before he started trial, he had a stroke. I don't know when that occurred with regard to his deposition, but in reading his deposition testimony, he was having difficulty expressing himself in the English language. And there were many instances during trial when I would say, you know, Mr. Lebensfeld, I can't -- you know, I'm not getting it. And you would slow him down or cause him to repeat something, or whatever. Joe Halpern gave conflicting testimony as to when he remembered what, but none of those conflicts went to a instance where he was told about the misappropriations in this case and the date on which he was told them. They went to things like when did you talk to your sister about this litigation, when did you talk to your brother about this litigation. And I'm August 5, 2013

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108 Decision talking about the initial litigation. And I found Josef Halpern largely to be a credible witness. And where there were inconsistencies -- where there were inconsistencies, I found them one by one. And if you want me to, folks, I can go through all of them. But I don't think you are going to want me to. They were because he became extremely emotionally involved in the subject of the questioning, and started speaking very, very quickly. And this, in particular, occurred with an incident that happened in the early 2000s at Rachel Gardens with an unrelated piece of litigation. But I found those inconsistencies to be largely unrelated to anything pertaining to a statute of limitations issue in this case or a disclosure or an agreement. We will go over P-400. I'm sure we will go over it ad nauseam, starting tomorrow perhaps. But I discount those inconsistencies, although I agree that there were inconsistencies. But I believe that they were due to factors other than willful lying, or even accidental untruths. I found Mr. Halpern to be largely credible. That is not to say that I found the Wilfs to be incredible. Because I felt that the Wilfs were forthcoming in their testimony, they were candid. And as you will see when I read the trial transcripts and August 5, 2013 109 Decision deposition transcripts, most of my findings of fact are based on the Wilfs testimony. So, there is one more thing that I meant to address. There goes my memory. We will deal with it later, whenever that is. Okay. Thank you very much. I will see you all at ten o'clock tomorrow. Is there anything else that I have to address by way of a summary, so that whoever is going to be doing post-judgment, things can get going on them? MR. GURYAN: I think maybe we ought to review this tonight and if there are additional items, we can ask that they be covered tomorrow. THE COURT: Would you just give me a moment or so to answer your additional inquiry? That is why I was hoping you might tell me this afternoon, so I could be prepared for tomorrow. MR. GIELEN: I do have one thing, your Honor. If your Honor wants to, in order for Mr. Hoberman and Mr. Barsky to possibly begin to reconstruct an accounting based on the summary you provided to us, there is one issue that begins their accounting, which is how to treat the capital contributions. The dispute was between Mr. Barsky and Mr. Hoberman. Mr. Hoberman counted them as he had them August 5, 2013

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110 Decision paid back immediately from the first revenues. Mr. Barsky said they should only be paid back when there was a capital event such as a sale or major refinance. You can't calculate any of the interest unless they are given that ruling. THE COURT: Capital contributions are typically paid back at an event, a closing, a refinancing -MR. GIELEN: Or sale. MR. GURYAN: Or sale. THE COURT: -- and I believe that that was the difference between Mr. Barsky and Mr. Hoberman, primarily. Mr. Hoberman found, I believe, ultimately, that all of the Wilf loans were paid off as of 2000. MR. GIELEN: 2002, I believe. MR. GURYAN: 2002. MR. GIELEN: After adding in the theoretical fees. THE COURT: Yeah. But I have taken out the theoretical fees. Without the theoretical fees, I believe it was 2000. It may have been before. MR. GIELEN: It would be much earlier than that. THE COURT: Whatever it is, it is. But the capital contributions, were the capital August 5, 2013 111 Decision contributions -- oh, the capital contributions were already paid back when they did the refinancing. MR. SNYDER: No, they haven't. We are talking about specifically the capital contributions in connection with Rachel Affordable. MR. GIELEN: That is really what it boils down to. That is the only difference between the two sides in terms of their pro rata amounts. The capital was essentially equal until the establishment of Rachel Affordable. THE COURT: That happened pretty early. MR. GIELEN: That happened in 1992, '91. Yes, it happened early. But it was recorded as a capital contribution. We contended that that capital contribution should be repaid when there is a capital event, which is customary. Mr. Barsky, in his accounting, paid back all of the capital contributions, that revenues were in excess of expenses. MR. SNYDER: Mr. Hoberman did. MR. GIELEN: Mr. Hoberman. MR. SNYDER: Mr. Barsky did not. MR. GIELEN: Sorry. Mr. Barsky did not, correct. MR. GURYAN: Why don't we review that this evening. August 5, 2013

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112 Decision THE COURT: You know, I don't know why, but I haven't considered that, I don't think. But I didn't go through all of the Rachel Affordable things here. I was just summarizing everything. But I don't recall having considered it, except that I do recall believing that capital contributions are not repaid as loans when they -- right, when they can be repaid. Of course these weren't repaid then. But they are repaid at a capital event like a closing, a sale, a refinance. MR. GIELEN: Or a dissolution. THE COURT: Or a dissolution. But why don't you think about that. I will think about it. Maybe tomorrow you can show me where the testimony is on that. Or if you want to -- well, no, faxing it to me, e-mailing it tonight. Believe it or not, I don't take the trial transcripts home with me. MR. GIELEN: Okay. THE COURT: Okay. So I mean, if somebody would -- I mean, you have been appearing in front of me, at least by telephone, since October of 2009. What do you think the odds are that I'm going to shoot from the hip on that one? MR. GIELEN: I didn't expect you to. I just wanted to let you know that the accountants won't be able to -August 5, 2013 113 Decision MR. GURYAN: Discuss that. MR. GIELEN: -- work in corporation until that issue is resolved. THE COURT: Okay. I think they've got enough to do for right now. I mean, just explaining this to Jeff Barsky -MR. GIELEN: No, no, Mr. Barsky knows exactly what this issue is. THE COURT: I hope you are not e-mailing him. MR. GIELEN: We have been. THE COURT: In Alaska? MR. GIELEN: Yes. MR. GURYAN: We understand the issues. We will speak to Mr. Hoberman about it tonight. THE COURT: Okay. And if somebody could let me know where the trial testimony is -MR. GIELEN: I will. MR. SNYDER: We can do that, Judge. MR. GIELEN: If you guys can do Mr. Hoberman, I will do Mr. Barsky. MR. GURYAN: We can do that, sure. THE COURT: I do remember the issue. I don't remember deciding it. All right. Thank you, all. Off the record. August 5, 2013

114 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 ___________________________ LAURIE A. ENGEMANN, C.C.R. Official Court Reporter Morris County Courthouse _____________ Date I, LAURIE A. ENGEMANN, C.C.R., License Number XO1950, an Official Court Reporter in and for the State of New Jersey, do hereby certify the foregoing to be prepared in full compliance with the current Transcript Format for Judicial Proceedings and is a true and accurate compressed transcript to the best of my knowledge and ability. CERTIFICATION (Whereupon, the proceeding adjourns.) (An off-the-record discussion is held.)

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