8003 1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK 2 - - - - - - - - - - - - - - X 3 UNITED STATES OF AMERICA, : CR 96 1016(S-1) 4 v. : U.S. Courthouse 5 Uniondale, New York BRUCE W. GORDON, WHO'S WHO 6 WORLD WIDE REGISTRY, INC., : STERLING WHO'S WHO, INC., 7 TARA GARBOSKI, ORAL FRANK OSMAN, LAURA WEITZ, ANNETTE 8 HALEY, SCOTT MICHAELSON, : STEVE RUBIN, and MARTIN 9 REFFSIN, : TRANSCRIPT OF TRIAL 10 Defendants. :March 17, 1998 11 - - - - - - - - - - - - - - X 9:30 o'clock a.m.
12
13 BEFORE:
14 HONORABLE ARTHUR D. SPATT, U.S.D.J.
15
16 APPEARANCES: 17 For the Government: ZACHARY W. CARTER United States Attorney
18 One Pierrepont Plaza Brooklyn, New York 11201 19 By: RONALD G. WHITE CECIL SCOTT 20 Assistant U.S. Attorneys
21 For the Defendants: NORMAN TRABULUS, ESQ. 22 For Bruce W. Gordon 170 Old Country Road, Suite 600 23 Mineola, New York 11501 24 EDWARD P. JENKS, ESQ. For Who's Who, Sterling 25 332 Willis Avenue Mineola, New York 11501
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8004
1 GARY SCHOER, ESQ. 2 For Tara Garboski 6800 Jericho Turnpike 3 Syosset, New York 11791
4 ALAN M. NELSON, ESQ. For Oral Frank Osman 5 3000 Marcus Avenue Lake Success, New York 11042 6 WINSTON LEE, ESQ. 7 For Laura Weitz 319 Broadway 8 New York, New York 10007
9 MARTIN GEDULDIG, ESQ. For Annette Haley 10 400 South Oyster Bay Road Hicksville, New York 11801 11 JAMES C. NEVILLE, ESQ. 12 For Scott Michaelson 225 Broadway 13 New York, New York 10007
14 THOMAS F.X. DUNN, For Steve Rubin 15 150 Nassau Street New York, New York 10038 16 JOHN S. WALLENSTEIN, ESQ. 17 For Mart
in Reffsin 215 Hilton Avenue 18 Hempstead, New York 11551
19 Court Reporter: Owen M. Wicker, RPR 20 United States District Court Two Uniondale Avenue 21 Uniondale, New York 11553 (516) 292-6963 22
23 Proceedings recorded by mechanical stenography, transcript produced by computer-assisted transcription. 24 25 (Case called.)
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8005
1 THE COURT: Where is Mr. Lee? Will somebody get
2 him, please?
3 Mr. Trabulus, you want to see me.
4 MR. TRABULUS: Your Honor, all I want to do is
5 I'm handing up defendant Gordon's request to charge. I've
6 given a copy to all counsel.
7 THE COURT: Hand it up.
8 MR. SCHOER: Judge, I will have a request to
9 charge. I have an original and courtesy copy to the
10 Court.
11 MR. TRABULUS: And does Your Honor want a
12 courtesy copy?
13 THE COURT: Sure.
14 MR. TRABULUS: I'll get one for you.
15 THE COURT: Hand it up.
16 Thank you.
17 Are we ready to proceed?
18 Let's bring in the jury.
19 (Jury enters.)
20 THE COURT: Good morning, members of the jury.
21 Please be seated.
22 Thank you again for your diligence in staying
23 with it. This period of time and having the nice 24 disposition that you appear to have, or is it because the 25 trial is coming to an end. I don't know what it is, but
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8006 Reffsin-direct/Wallenstein
1 you seem to be in good form for which I'm happy to see.
2 You may proceed.
3 MR. WALLENSTEIN: Thank you, Your Honor.
4 M A R T I N R E F F S I N , having been previously
5 sworn by the Clerk of the Court, was examined and
6 testified as follows:
7 DIRECT EXAMINA
TION
8 BY MR. WALLENSTEIN:
9 Q Mr. Reffsin, we've heard a significant amount of
10 testimony in this trial with respect to the loans that
11 Bruce Gordon took from Who's Who Worldwide. And you were
12 present when Mr. Rosenblatt testified with respect to the
13 treatment of those loans as loans rather than income?
14 A Yes. Yes, I was.
15 Q Can you explain why you treated them as loans and
16 under what circumstances you would have treated them as
17 income?
18 A Well, obviously Mr. Gordon did not say they were
19 income. Mr. Gordon said they were loans. To the extent
20 that he could prove to me they were loans, they would
21 remain loans. I explained to Mr. Gordon that in order for
22 them to be deemed loans he would have to meet certain
23 requirements such as repayment. 24 Q And did you see evidence of repayment? 25 A Yes. In January of 1993 he repaid $235,000.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8007 Reffsin-direct/Wallenstein
1 Q And would it be a fair statement that it was the
2 intention of Mr. Gordon based on what he told you that the
3 loans would in fact be repaid over time?
4 A Yes. We had several discussions during the course of
5 time in which he guaranteed me that the loans would be
6 repaid.
7 Q Now, you prepared the 433 A collection information
8 statements?
9 A Yes.
10 Q At what point in time?
11 A Around May. That's when they were physically
12 prepared.
13 Q Of what year?
14 A 1993.
15 Q And would it be a fair statement at the time you
16 prepared them you did not have the benefit of what we now
17 have which is almost five years of hindsight?
18 A That's correct.
19 Q So the bankruptcy had not yet occurred?
20
A That's correct.
21 Q And based upon information that you had from
22 Mr. Gordon and other sources, what was your expectation
23 with respect to 1994? 24 A 1994 was the year that Mr. Gordon agreed and I had 25 indicated that he would have to repay all the loans.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8008 Reffsin-direct/Wallenstein
1 Q That was your understanding in 1993?
2 A That's correct.
3 Q And did something occur that prevented that from
4 happening in 1994?
5 A Yes, the bankruptcy.
6 Q And that was in March of 1994?
7 A That's correct.
8 Q And with respect to the tax returns that were filed
9 on Mr. Gordon's behalf, would it be a fair statement you
10 treated the loans as loans and not income on those
11 returns?
12 A Yes, I did.
13 Q And that's for the reasons you've already stated; is
14
that correct?
15 A Yes.
16 Q Did you at any time enter into any agreement with
17 Mr. Gordon with respect to -- withdrawn.
18 Did you at any time have an agreement with
19 Mr. Gordon to in any way impede the Internal Revenue
20 Service?
21 A Absolutely not.
22 Q Was it your intention to file his returns and prepare
23 his financial returns in accord with your interpretation 24 of accountable principles? 25 A Yes, it was.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8009 Reffsin-cross/White
1 Q And in accord with your interpretation of the
2 Internal Revenue Code?
3 A Not the Internal Revenue Code. The needs of the
4 offer and compromise agent.
5 Q Did you prepare the documents and act on Mr. Gordon's
6 behalf in accord with your understanding of IRS procedures
7 and the law?
8 A Yes, I did.
9 MR
. WALLENSTEIN: I have no further questions.
10 CROSS-EXAMINATION.
11 BY MR. WHITE:
12 Q Mr. Reffsin, let me see if I understand your
13 testimony. Is it your testimony that if any inaccurate
14 information was provided to the IRS, it wasn't done
15 knowingly by you?
16 A Inaccurate?
17 Q Yes.
18 A There was no inaccurate information prepared provided
19 to the IRS.
20 Q Well, you've heard testimony -- well --
21 THE COURT: Just hold it a minute, Mr. White.
22 You may proceed.
23 BY MR. WHITE: 24 Q Mr. Reffsin, let me show you Government's Exhibit 425 25 in evidence. That's a document that the jury has in their
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8010 Reffsin-cross/White
1 books.
2 Now, that's a letter you sent to Frank Gagliardi
3 of the IRS; is that right?
4 A Yes, it is.
5 Q
And that was in response to Mr. Gagliardi's letter
6 where he said he noticed unusual deposits in Mr. Gordon's
7 personal bank account, do you recall that?
8 A Yes, I do.
9 Q One of the things you attached to this letter which
10 is noted in paragraph 1 is a copy of a note that
11 Mr. Gordon signed to Joyce Grossman for $15,000, right?
12 A Yes.
13 Q If you turn the page to 425A, if you take it out of
14 the plastic, 425A is a copy of that note, right?
15 A Yes, it is.
16 Q And you've been present in court and heard testimony
17 that Mr. Gordon's son wasn't even dead on the date that
18 promissory note was executed, right?
19 A This was not presented by me. This was presented by
20 Mr. Gordon.
21 Q Mr. Reffsin, look at 425.
22 Who signed that letter?
23 A I did. 24 Q And it says, it's addressed to Mr. Gagliardi and it 25 says "pursu
ant to your request I have attached the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8011 Reffsin-cross/White
1 following information for your file."
2 Do you see that?
3 A Yes.
4 Q So you got that from Mr. Gordon, right?
5 A Yes.
6 Q And, so, you understand, do you not -- withdrawn.
7 You recall that Mrs. Grossman testified she never
8 made this loan and never even saw this note. Do you
9 remember that testimony?
10 A Yes, I do.
11 Q So I want to make sure I understand your testimony.
12 Mr. Gordon gave you that and if this is inaccurate, you
13 are saying you didn't know?
14 A That's correct.
15 Q So if this is completely bogus, Mr. Gordon lied to
16 you; is that your testimony?
17 A That's correct.
18 Q Look at 425B.
19 Mr. Gordon gave you that too, right?
20 A Yes, he did.
21 Q And
if this is bogus then Mr. Gordon lied to you; is
22 that correct?
23 A That's correct. 24 Q Now, you indicated also to the IRS that -- well, you 25 -- let me rephrase my question.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8012 Reffsin-cross/White
1 Is it fair to say that the documents you
2 submitted in connection with the offer and compromise
3 indicated that Mr. Gordon had no ownership interest in
4 Who's Who Worldwide?
5 A Yes.
6 Q And you've heard the Grossmans' testimony at this
7 trial that they did not own 100 percent, they owned merely
8 25 percent. Do you recall that?
9 A Yes, I do.
10 Q So, again, that information is inaccurate, right?
11 A Yes, at this point I know it is inaccurate. Yes.
12 Q And, again, it's your testimony that if that
13 information is inaccurate it is because Mr. Gordon told
14 y
ou inaccurate information; is that right?
15 A That's correct.
16 Q Now, you also indicated that you were aware of the
17 condominium at Hummingbird Road; is that correct?
18 A Yes.
19 Q And you were aware, were you not, that Mr. Gordon was
20 living there?
21 A I was aware he used it, yes.
22 Q And you were aware, were you not, that Mr. Gordon
23 claimed that it was for business purposes and not 24 personal, right? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8013 Reffsin-cross/White
1 Q And isn't it correct that you told Inspector
2 Biegelman and Agent Jordan that you thought that that
3 claim was "bullshit"?
4 A No, I didn't say that quite like that.
5 Q You didn't say that?
6 A I said it may be bullshit, but I couldn't make that
7 determination at that time.
8 Q But you thought it might be
bullshit?
9 A Yes, he's telling me something. I have to believe
10 what he's telling me at the time he tells it to me.
11 Q But at the time you were talking to them, you didn't
12 believe it. You were thinking it was bullshit, right?
13 MR. WALLENSTEIN: Objection.
14 THE COURT: Overruled.
15 A Well, it's difficult to say because of everything
16 that happened between the time he purchased the
17 condominium and the time we had the discussion. Things
18 changed. And it's possible his position changed in terms
19 of the condominium.
20 Q Tell us what made you think that maybe it was
21 bullshit?
22 MR. WALLENSTEIN: Objection.
23 THE COURT: Overruled. 24 BY MR. WHITE: 25 Q What did you base that on?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8014 Reffsin-cross/White
1 A I didn't say. I said it may have been bullsh
it, only
2 time would tell me whether it was or not. The fact of the
3 occurrences that happened in 1993 and the fact that he
4 didn't open up the California office when he said he was
5 going to open up the California office. The fact that he
6 got involved in a legal battle with Reed Elsevier and
7 started to incur all of those expenses and the fact of the
8 bankruptcy, the time-frame was such that it was difficult
9 to know whether he was bullshiting at the time or not
10 bullshiting because how do you bring it into proper
11 perspective?
12 Q Well, you also testified that Mr. Gordon told you
13 that the 235,000 from Dr. Grossman in January of 1993 was
14 a loan to Mr. Gordon from Dr. Grossman; is that right?
15 A That's correct.
16 Q And he told you that -- Mr. Gordon was then applying
17 that to reduce his loan balance; is that correct?
18 A Yes, that's
correct.
19 Q And you did that?
20 A Yes.
21 Q You've also been here for Dr. Grossman's testimony,
22 have you not, where he said he only gave that money back
23 because Mr. Gordon said he needed it for business purposes 24 to print the registry. You heard that, right? 25 A Yes, I heard.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8015 Reffsin-cross/White
1 MR. TRABULUS: Objection.
2 THE COURT: Overruled.
3 BY MR. WHITE:
4 Q So once again, is that an example of some situation
5 where Mr. Gordon gave you misleading information?
6 A Yes.
7 Q Mr. Reffsin, is it fair to say that you feel used by
8 Mr. Gordon?
9 A To a certain extent, yes.
10 Q Is it fair to say that you think his lies got you
11 into the trouble you are in now?
12 A Yes, I believe that.
13 Q You think that because he lied to you an
d you passed
14 that on to the IRS, you're in trouble now; is that
15 correct?
16 A That's correct.
17 MR. WALLENSTEIN: Objection.
18 THE COURT: Sustained. Strike out the answer.
19 The jury is instructed to disregard it.
20 BY MR. WHITE:
21 Q Now, I want to ask you about how you learned about
22 the ownership of the company.
23 You testified yesterday that in February or March 24 of 1992 you had a telephone conversation with Richard 25 Grossman; is that right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8016 Reffsin-cross/White
1 A Yes.
2 Q And the occasion for that conversation was that a
3 portion of what the Grossmans owned of Who's Who Worldwide
4 was being shifted into Dr. Grossman's pension plan; is
5 that right?
6 A Yes.
7 Q And you saw, you said, some sort of a fax that
8 indicated tha
t fact to you that they only owned 20 or 25
9 percent. You weren't clear; is that right?
10 A Yes.
11 Q Do I have all of that right?
12 A Yes.
13 Q And is it correct that you said that was the first
14 time you realized that the Grossmans owned 25 percent?
15 A Yes.
16 Q And am I correct that prior to that you thought
17 Mr. Gordon owned 100?
18 A Yes.
19 Q And after you saw this, you came to the conclusion
20 that the Grossmans owned 25 and Mr. Gordon owned 75; is
21 that correct?
22 A That's correct.
23 Q Now, Mr. Reffsin, again, you said this conversation 24 took place in February or March of 1992? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8017 Reffsin-cross/White
1 Q And, again, you're confident that the contention in
2 which in took place was the shifting of a portion of the
3
Grossmans interest into Dr. Grossman's pension plan; is
4 that right?
5 A That and the calculation of the interest on the note.
6 Q Take a look at Government's Exhibit 581 which is in
7 evidence.
8 Now, that is an assignment agreement which is
9 shifting a portion of the Grossmans interest into
10 Dr. Grossman's pension plan?
11 A Yes.
12 Q And do you recall Dr. Grossman testified the only
13 change in the apportionment of the ownership that ever
14 took place?
15 A That's correct.
16 Q Why don't you read for us what the date is on the
17 first line.
18 A Agreement dated as of September 4, 1990.
19 Q And were you here for Dr. Grossman's testimony when
20 he said that that's around when he signed it?
21 A I don't specifically recall that.
22 Q It says as of September 1990; is that right?
23 A That's correct. 24 Q So that wou
ld be almost 18 months before you say that 25 this conversation with him took place, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8018 Reffsin-cross/White
1 A Yes.
2 Q And in connection with this trial, you've had
3 occasion to review the exhibits that have been admitted in
4 evidence, right?
5 A Yes.
6 Q Even prepared a chart based on a number of them,
7 right?
8 A Yes.
9 Q Take a look at Exhibit 415 which is Who's Who
10 Worldwide's 1990 corporate tax return. If you can take
11 that out of the plastic and look at it.
12 Mr. Reffsin, that's signed by you as the
13 preparer, right?
14 A That's correct.
15 Q And that was signed by you and Mr. Gordon in
16 September of 1991, correct?
17 A That's correct.
18 Q And if you turn to the second page, does it indicate
19 what ownership interest Mr
. Gordon has in the company?
20 A Yes. 100 percent.
21 Q So in September of 1991 you indicated that he owned
22 100 percent?
23 A That's what I believed at that time, yes. 24 Q Now, look at Exhibit 416 in evidence which is Who's 25 Who Worldwide's 1991 corporate return.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8019 Reffsin-cross/White
1 Now, again, you prepared it, correct?
2 A My firm prepared it, yes.
3 Q Your firm prepared it.
4 A Right.
5 Q And what is the date -- look at the received stamp.
6 Does it indicate that it was received in June of 1992?
7 A Yes, it does.
8 Q And look on page 2. What percentage does it indicate
9 Mr. Gordon owned of the company?
10 A 75 percent.
11 Q So in June -- let me get this right. In September of
12 1991 you told the IRS on this form that he owned 100
13 percent?
14 A Correct.
15 Q In June of 1992 you told them he owned 75 percent,
16 right?
17 A Yes.
18 Q So isn't it true that he knew you had to come up with
19 an explanation between those two dates as to why you
20 changed the percentage?
21 MR. WALLENSTEIN: Objection.
22 THE COURT: Sustained as to form.
23 I don't understand that. Explanation to who? 24 BY MR. WHITE: 25 Q In your testimony didn't you anticipate that you
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8020 Reffsin-cross/White
1 would be asked why you changed the ownership from 100
2 percent to 75 percent?
3 MR. WALLENSTEIN: Objection.
4 THE COURT: Sustained.
5 BY MR. WHITE:
6 Q Is it not correct that the time when you say you had
7 this conversation with Dr. Grossman fits very nicely
8 between those two dates that those returns were filed
?
9 MR. WALLENSTEIN: Objection.
10 THE COURT: Sustained.
11 BY MR. WHITE:
12 Q It's between those two dates that the returns were
13 filed, right?
14 A Yes.
15 Q And is it fair to say that if you had said that you
16 had this conversation with Dr. Grossman prior to September
17 of 1991, it would be inconsistent with that return?
18 MR. WALLENSTEIN: Objection.
19 THE COURT: Overruled.
20 A I don't understand the question.
21 Q Well, in September of 1991 on the 1990 return, you
22 told the government that Gordon owned 100 percent, right?
23 A Yes. 24 Q So if you said that you had learned about 25 Dr. Grossman's 25 percent interest prior to that, it would
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8021 Reffsin-cross/White
1 be inconsistent with what you put on this return, right?
2 MR. WALLENSTEIN: Object
ion.
3 THE COURT: Overruled.
4 A Yes.
5 Q And if you said that you had had this conversation
6 after June of 1992, it would be inconsistent with the next
7 corporate return you filed, right?
8 A I guess so.
9 Q Let's go to the next stage of this ownership issue.
10 You said that eventually you came to believe that
11 the Grossmans owned 100 percent instead of just 25, right?
12 A Yes.
13 Q And you said it was in late 1992 that you had a
14 "combination discussion with Mr. Gordon." Is that right?
15 A Yes.
16 Q And the combination was about the loan and exchange
17 account on one hand and also Mr. Gordon told you that he
18 didn't own 75 percent, that the Grossmans owned it all,
19 right?
20 A He referred to that, yes.
21 Q And you said you demanded that Mr. Gordon show you
22 stock certificates to prove it; is that right?
2
3 A At some point, yes, I did. 24 Q Well, you indicated, did you not, that shortly 25 thereafter he showed you the stock certificate?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8022 Reffsin-cross/White
1 A Yes, sometime in March he said he found them.
2 Q Sometime then in early 1993 he shows you stock
3 certificates, right?
4 A That's correct.
5 Q And you said yesterday that the stock certificates
6 were signed by the Grossmans when you saw them, right?
7 A They appeared to be in order, yes.
8 Q Now, take a look at Exhibits 585 and 586 in evidence
9 which are the Who's Who Worldwide stock certificates.
10 Those are the certificates that you saw, right?
11 A (Perusing.) Yes.
12 Q And they appear to be the same, right, in the same
13 state as when you saw them?
14 A Yes.
15 Q They were signed by the Grossmans?
16
A Yes.
17 Q They were signed by Mr. Gordon?
18 A Yes.
19 Q They had the name of the shareholders filled in,
20 right?
21 A Yes.
22 Q They had the names -- they had the amount of shares
23 listed, right? 24 A Yes. 25 Q So those documents are what you saw in early 1993
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8023 Reffsin-cross/White
1 that satisfied you that they owned 100 percent, right?
2 A Yes.
3 Q Now, Mr. Reffsin, let me she you Government's Exhibit
4 584 in evidence.
5 Now, that is called a Waiver of Special Notice of
6 the Who's Who Worldwide Board of Directors, right?
7 A Yes.
8 Q You were here when Ms. Dietrich, the scientist from
9 the IRS lab testified probably a month and-a-half ago now?
10 A Yes.
11 Q And do you recall Ms. Dietrich testifying that based
12 on the indent
ations on the document, that this Exhibit 584
13 was on top of 585, one of the stock certificates when it
14 was signed by Richard Grossman?
15 A Yes, I recall her testimony.
16 Q And she said 584 was on top of 585 when it was signed
17 by Richard Grossman, right?
18 A Yes.
19 Q Now --
20 MR. WHITE: Just one moment, Your Honor. I'm
21 trying to find the documents.
22 BY MR. WHITE:
23 Q Now, Mr. Reffsin, let me show you Government's 24 Exhibit 671 in evidence which is a fax from Steven Adler, 25 attorney at law to you on March 30, 1994.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8024 Reffsin-cross/White
1 If you page through that can you tell us if you
2 see the unsigned version of this Waiver of Notice, Exhibit
3 584?
4 A Yes, I do.
5 Q You do.
6 And Mr. Adler prepared those documents at your
7 request, right?
8 A At Mr. Gordon's request.
9 Q Via you, though, right?
10 A I was there, yes.
11 Q Okay.
12 And what -- if you look at the cover sheet what
13 Mr. Adler is faxing you there are drafts, right? He wants
14 your approval or comments, right?
15 A (Perusing.) No, they are not. They are revisions.
16 Q Okay. They are revisions. Yes.
17 A Yes.
18 Q So Mr. Adler hadn't even finalized these documents in
19 March of 1994; isn't that right?
20 A That's correct.
21 Q Now, somehow that finished document supposedly was
22 signed on top of a stock certificate that you saw back in
23 early 1993, is that what you're saying? 24 A I saw a stock certificate -- 25 MR. WALLENSTEIN: Objection.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8025 Reffsin-cross/White
1 THE COURT: Overruled.
2 A I saw a
stock certificate in mid '93.
3 Q But answer my question. Your testimony is that that
4 document which wasn't even finished in March of '94 was
5 signed on top of a stock certificate that you say you saw
6 signed by Dr. Grossman back in early '93?
7 MR. WALLENSTEIN: Objection.
8 THE COURT: Sustained.
9 BY MR. WHITE:
10 Q I want to ask you about the loans that Mr. Gordon
11 took from Who's Who Worldwide.
12 You said yesterday that you had a conversation
13 with him in December of '92 where you told him that the
14 loan accounts were getting much too high and they would
15 have to be repaid; is that right?
16 A That's correct.
17 Q And you said yesterday that Mr. Gordon insisted that
18 he would repay them, right?
19 A That's correct.
20 Q And you said yesterday and you repeated this morning
21 that you and he agreed that he would pay it back
sometime
22 in 1994; is that right?
23 A No. I said that if it wasn't repaid by the end of 24 '94, we would have to recognize it as income. 25 Q Now, isn't it true, Mr. Reffsin, that you told a
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8026 Reffsin-cross/White
1 number of different versions of this story at different
2 times to agents?
3 MR. WALLENSTEIN: Objection.
4 THE COURT: Overruled.
5 A It is true that I've seen twists of the versions that
6 I've said with specific agents, not that I've said
7 anything different.
8 Q So you've been entirely consistent throughout, of
9 course?
10 A Of course.
11 Q Of course.
12 MR. WALLENSTEIN: Objection.
13 THE COURT: Please do not make those comments,
14 Mr. White. Sustained.
15 I'm instructing the jury that remarks that are
16 not in the form of quest
ions, they are uncalled for, and
17 you should disregard them.
18 BY MR. WHITE:
19 Q Now, you recall that you were interviewed by
20 Inspector Biegelman and Agent Jordan in May of 1995 at
21 your office, right?
22 A I don't recall that interview, but yes, they said
23 they interviewed me. 24 Q Do you recall Agent Jordan's testimony that it took 25 about an hour, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8027 Reffsin-cross/White
1 A Yes, I don't recall.
2 Q That May 17th meeting?
3 A I don't disagree that it happened, I don't recall it.
4 Q I want to make sure I understand.
5 You sat down with two federal agents for an hour
6 and discussed the criminal investigation of one of your
7 clients and you don't remember it?
8 A I don't remember the specifics of that discussion,
9 that's correct.
10 Q A
re you saying that you don't remember the specifics
11 of what was discussed or you don't even recall the
12 meeting?
13 A I don't remember the specifics as to what was
14 discussed.
15 Q Now, in that meeting you told them that you had
16 concerns about whether or not these loans were really
17 income, right?
18 A Well, I always have those concerns whenever a client
19 takes loans.
20 Q My question is, Mr. Reffsin, did you tell them in
21 that interview that you had concerns whether or not these
22 loans were income?
23 A I'm sure I did. 24 Q And you told them that you discussed it with 25 Mr. Gordon?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8028 Reffsin-cross/White
1 A Yes, it would be negligent if I didn't.
2 Q And at the time in that interview you told them that
3 Mr. Gordon's response was that he said he
would deal with
4 it at that time when it became a problem. Do you remember
5 that?
6 A He said he would deal with them --
7 Q My question is, what you said to the agents in May of
8 1995. Isn't it true you said to them that in this
9 discussion when you raised the issue about the loan,
10 Mr. Gordon's response was that he would deal with it at
11 that time?
12 Yes or no?
13 A I don't remember that specifically.
14 Q Isn't it true that in that interview when you
15 recounted this conversation that you had with Mr. Gordon
16 about the loan, you never said anything about Mr. Gordon
17 saying he was going to repay it?
18 MR. WALLENSTEIN: Objection.
19 THE COURT: Overruled.
20 A I don't remember the details so I don't remember
21 whether I said anything.
22 Q So you wouldn't remember whether or not Mr. Gordon,
23 whether or not you told
them -- let me rephrase the 24 question. 25 Now, in addition to that you met with agents
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8029 Reffsin-cross/White
1 again at the U.S. Attorney's Office in January of 1997; is
2 that right?
3 A Yes.
4 Q You came to the U.S. Attorney's Office in Brooklyn,
5 right?
6 A Yes.
7 Q And you came there with your attorney, right?
8 A That's correct.
9 Q It wasn't Mr. Wallenstein, but another attorney,
10 correct?
11 A Yes.
12 Q And at that meeting I was present, right?
13 A Yes.
14 Q And Agent Jordan was present?
15 A Yes.
16 Q And Inspector Pagano was present?
17 A Yes.
18 Q And we sat in a conference room and you answered the
19 government's questions, right?
20 A That's correct.
21 Q And do you recall the specifics of that meeting
?
22 A Most of them, yes.
23 Q Now, do you recall -- 24 MR. TRABULUS: Objection, Your Honor. May we 25 approach?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8030 Reffsin-cross/White
1 THE COURT: Yes, come up.
2 (Side bar.)
3 MR. TRABULUS: Your Honor, the difficulty I had
4 is that Mr. White elicited that he was present at the
5 meeting and now by asking questions about it of the sort I
6 was making him essentially an unsworn witness. Frankly,
7 it just came up quickly. I'm still thinking about what
8 the proper remedy is, but it puts us in a very difficult
9 situation.
10 THE COURT: I think you're right. I thought
11 about the same thing. What were you intending to bring
12 out about this, Mr. White?
13 MR. WHITE: Your Honor, he has made a number --
14 he made in that proffer session a number of extremely
15 contradictory statements to his trial testimony.
16 THE COURT: Isn't the proffer statement normally
17 confidential and not to be revealed?
18 MR. WHITE: No, the terms of the proffer are that
19 it explicitly says it can be used if the defendant is
20 prosecuted and he testifies that it can be used for
21 cross-examination.
22 MR. WALLENSTEIN: I certainly concede that's the
23 case, but I think Mr. Trabulus is correct that Mr. White 24 has subjected himself to the trial -- 25 THE COURT: Mr. White, as being one of the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8031 Reffsin-cross/White
1 participants in the meeting, you'll put yourself into the
2 position of cross-examining him with the raising of your
3 voice and everything. That will give the jury the idea
4 that you were there and you disagreed with them. You're
5 calling him a li
ar.
6 MR. WHITE: Your Honor, that can be frequently
7 defendants' proffers come up with both witnesses and
8 defendants where the Assistant is present. That in and of
9 itself, the fact of the Assistant's presence in the
10 meeting doesn't necessarily mean it is a topic that is off
11 bounds.
12 THE COURT: I never heard of that before. I
13 never had a case where the prosecuting attorney himself is
14 questioning a witness, a defendant, about a meeting that
15 the prosecutor, that that prosecutor had with the
16 defendant. I don't recall ever having anything like that,
17 Mr. White. You must be in a different kind of world than
18 I am. I don't recall anything like that ever happening.
19 I'm not going to permit it to him.
20 MR. WHITE: Your Honor, there's --
21 THE COURT: You will not be an unsworn witness.
22 MR. WHITE: Your Honor --
23 THE COURT:
I think Mr. Trabulus is correct. 24 MR. WHITE: Your Honor, let me just address this 25 for a minute here.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8032 Reffsin-cross/White
1 Mr. Reffsin's statements in the proffer are so
2 contradictory to what he testified at the trial yesterday
3 that it would completely -- it would make a complete
4 mockery of the fact-finding process to exclude his
5 testimony for some reason. I think if Your Honor thinks
6 there is a problem, a strong charge to the jury, and I
7 will not repeat it again obviously, I only did that so the
8 participants would be -- the setting would be described,
9 that -- I don't know how to fashion it, but something
10 along the lines that I'm not indicating in some way what I
11 think or whatever because if he does not agree, Your
12 Honor, that what I ask him about he said at the proffer
,
13 Agent Jordan is prepared to testify in rebuttal. So
14 there's no real harm in doing that.
15 THE COURT: There is harm in it because you are
16 now cross-examining him and by the tone of the
17 cross-examination you indicate your disbelief of what he
18 said because you were there. So I'm not going to permit
19 it. I don't care what he said, how harmful it is to the
20 government's case. You are directed not to go into that
21 meeting.
22 MR. WHITE: Your Honor, are you saying that a
23 simple slip of the tongue has now rendered highly 24 probative evidence inadmissible? 25 THE COURT: When you say "slip of the tongue,"
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8033 Reffsin-cross/White
1 whose tongue slipped?
2 MR. WHITE: Mine is what you're telling me.
3 THE COURT: By saying the truth that you were
4 there at time.
5 MR. WHITE: Right.
6 THE COURT: How could you avowed that? It's not
7 a slip of the tongue. I don't think -- I don't agree with
8 you at all and I am directing you to refrain from going
9 into that. If you want to put rebuttal testimony in that
10 you think is admissible, put it in, but you will not
11 cross-examine him on a meeting that you conducted with
12 him. I don't like it.
13 MR. WHITE: Your Honor, are you saying that
14 cross-examination shouldn't be permitted because I was at
15 the meeting or because testimony was elicited that I was
16 at the meeting.
17 THE COURT: Yes, because you were at the meeting
18 and you become in the nature of, I fear, an unsworn
19 witness.
20 MR. WHITE: Your Honor, that would make no sense
21 because then the Assistant who handles the case, the
22 defendant proffers and then he's prosecuted, he knows he
23 can testify and he can be cross-examined by an Assistant 24 who doesn't know about the case? 25 THE COURT: Mr. White, I've said it three times,
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8034 Reffsin-cross/White
1 you understood it, you agree with it and you questioned
2 it. Anything else you want? But you are directed from
3 you or anyone else cross-examining him on the basis of you
4 being at that meeting. I'm directing you to stay away
5 from it.
6 MS. SCOTT: I'm attempting to find a case that
7 attempts to go into this.
8 THE COURT: Go ahead, find a case.
9 MR. WHITE: Your Honor, can we do this, can we
10 bifurcate things so that Ms. Scott at a later point asks
11 questions about the proffer.
12 MR. TRABULUS: I would object to that.
13 MR. WALLENSTEIN: So would I.
14 MR. TRABULUS: On top of the fact that he was
15 present at that proffer that is before the jury and it
16 will always be before the jury, there is no way to take
17 that away from the jury.
18 THE COURT: How can he avoid saying that he was
19 there? He couldn't tell a mistruth about it.
20 MR. TRABULUS: Well, he could have simply said,
21 Your Honor, did you attend a meeting and were the agents
22 present and question them there and the agents could have
23 rebutted it or it would have been up for us to bring in 24 whether or not Mr. White was there and the jury would 25 never have heard about it. The fact that the jury heard
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8035 Reffsin-cross/White
1 about it and his being there, I'm not concerned about
2 that.
3 MR. TRABULUS: I'm concerned about what
4 Ms. Scott --
5 THE COURT: Well, my intellect tells me when I'm
6 in doubt
I do without. And I'm in doubt.
7 If you have a case that says this, fine. I don't
8 think you will find one.
9 MR. WHITE: Your Honor, may I ask in light of
10 this, I will have to reorder my cross-examination.
11 THE COURT: Happens all the time. Happened to me
12 for 25 years. I managed to survivor.
13 MR. WHITE: Can we take our ten-minute break
14 early?
15 THE COURT: Fine. Do you want to take it now?
16 MR. WHITE: Yes.
17 MR. WALLENSTEIN: Your Honor, Mr. White has a
18 tendency to ask Mr. Reffsin questions that are prefaced
19 that "you were here for the testimony of Thursday and so
20 you heard this witness say." And that language coupled
21 with to some degree his tone implicates Mr. Reffsin's
22 constitutional right to be present and indicates to the
23 jury, I think, that Mr. White's feeling that Mr. Reffsin's 24 testimony is to be tailored t
o meet previous witnesses and 25 I would direct him to refrain from prefacing questions in
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8036 Reffsin-cross/White
1 that fashion.
2 MR. WHITE: Your Honor, the fact that I'm
3 pointing it out because it is different from Mr. Reffsin's
4 testimony.
5 MR. WALLENSTEIN: I agree it is different but --
6 THE COURT: Once taking a stand, the prosecutor
7 has a right to say did you hear certain testimony? I
8 think he has a right and I'm overruling your objection and
9 I'm denying your request.
10 We'll take a ten-minute recess.
11 (End side bar.)
12 THE COURT: Members of the jury, we'll take an
13 early ten-minute recess.
14 Please don't discuss the case. Keep an open
15 mind.
16 (Jury exits.)
17 (Recess taken.)
18 (Jury enters.)
19 THE COURT: Please be seat
ed, members of the
20 jury.
21 You may proceed, Mr. White.
22 BY MR. WHITE:
23 Q Now, Mr. Reffsin, you said here yesterday that in 24 December of 1992 you told Mr. Gordon that there has to be 25 repayments, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8037 Reffsin-cross/White
1 A Yes.
2 Q And he, I think the word you used this morning he
3 guaranteed you there would be repayments, right?
4 A He said there would be repayments.
5 Q And you learned of such a repayment in January of
6 '93, that money from Dr. Grossman?
7 A Actually subsequent to that, when the bank
8 reconciliations were done.
9 Q So it happened in January of '93 and you learned
10 about it later?
11 A Right.
12 Q Let me go back to the May of 1995 interview with
13 Inspector Biegelman and Agent Jordan.
14 Do you recall tellin
g them at that time of your
15 conversation with Mr. Gordon and telling them that there
16 had been little or no repayments of that loan by
17 Mr. Gordon?
18 A I honestly don't remember.
19 Q And do you know a man named Michael Hynes?
20 A Yes, I do.
21 Q Michael Hynes did per diem accounting work?
22 A Yes.
23 Q And among the things he did was work on the Who's Who 24 Worldwide books? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8038 Reffsin-cross/White
1 Q Do you recall telling the agents that day that
2 Mr. Hynes actually did an analysis of the loan account and
3 he had concerns whether it would be income also?
4 A Yes, he would.
5 Q And in fact, you referred the agents to Mr. Hynes.
6 You gave him his address, right?
7 A Well, they requested it, so I gave it to them.
8 Q Is it fair to say t
hat over the course of the period
9 from say 1991 through 1994, that you repeatedly told
10 Mr. Gordon that you were concerned that the loans could be
11 income?
12 A Yes.
13 Q And when you say repeatedly, would that be maybe a
14 half dozen times or more?
15 A Certainly year end, and maybe one other time, because
16 the year end he made the determinations as to what the
17 loan balances would be.
18 Q Is it fair to say that you were doubting whether or
19 not he was really going to repay these?
20 MR. WALLENSTEIN: Objection.
21 THE COURT: Sustained as to form.
22 BY MR. WHITE:
23 Q Did you believe that he was going to repay these 24 loans? 25 MR. WALLENSTEIN: Objection.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8039 Reffsin-cross/White
1 THE COURT: Overruled.
2 A If he told me so, I believed him.
3 Q If he told you so once, why didn't you just believe
4 him? Why did you go back and continue to ask him?
5 A There is no set time period in terms of repayments of
6 loans. I mean, a year or so to repay $200,000 worth of
7 loans is not a significant amount of time.
8 Q Well, you said that Mr. Gordon and you or Mr. Gordon
9 told you he would pay it back or you would have to call it
10 income by 1994; is that right?
11 A Right.
12 Q And if I understood your testimony yesterday
13 correctly, you said that what had intervened was the
14 bankruptcy, right?
15 A That's correct.
16 Q Now, is it not correct -- let me back up.
17 You explained to Mr. Wallenstein something about
18 how something couldn't be done during the bankruptcy
19 proceeding so he could pay back the loan, right?
20 A Right. You couldn't just transfer assets out of the
21 estate i
nto the expense account without the approval of
22 the bankruptcy court or at least the creditor's committee.
23 Q Isn't it true, though, that Mr. Gordon could have 24 gotten money from another source to repay that loan to 25 Who's Who Worldwide?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8040 Reffsin-cross/White
1 MR. WALLENSTEIN: Objection.
2 THE COURT: Sustained.
3 BY MR. WHITE:
4 Q Well, if Mr. Gordon had say asked Dr. Grossman for
5 money again, he could have used that to repay the loan to
6 Who's Who Worldwide?
7 MR. WALLENSTEIN: Objection.
8 MR. TRABULUS: Objection.
9 THE COURT: Sustained.
10 BY MR. WHITE:
11 Q Well, a loan can be paid back -- let me back up.
12 You were looking at the repayment of the loan not
13 where he got the money from, correct?
14 A That's correct.
15 Q So if he got it fr
om another source and repaid it,
16 that would be fine with you, that would be a repayment,
17 correct?
18 A Correct.
19 Q Now, isn't it correct that Mr. Gordon borrowed money
20 from other entities in 1994?
21 A Other entities in 1994?
22 Q Yes.
23 A I know there were monies taken out, but I'm not 24 familiar exactly with what was taken out. We did not look 25 at the books and records of the other entities for 1994.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8041 Reffsin-cross/White
1 Q Take a look at what is in evidence as Government's
2 Exhibit 734. It's a check from Who's Who Executive Club
3 to American Express dated August 16, 1994, and it's for
4 the total of $47,000, $47,487.83.
5 Do you see that check, Mr. Reffsin?
6 A Yes, I do.
7 Q And tell us what the check number is?
8 A 1025.
9 Q Now, tak
e a look at Exhibit 732 in evidence which are
10 the check stubs for Who's Who Executive Club, and if you
11 could look at what the stub says for check number 1025.
12 A American Express, BG, personal loan.
13 Q Now, is it fair to say that if BG could borrow
14 $47,000 from Executive Club he could have borrowed that to
15 pay Who's Who Worldwide?
16 A I would say so, yes.
17 Q And in addition, he could have borrowed it to pay the
18 IRS, right?
19 A Yes.
20 Q So notwithstanding the fact that Who's Who was in
21 bankruptcy, that didn't prevent any repayments by
22 Mr. Gordon of the loan to Who's Who Worldwide; is that
23 correct? 24 A No, he could have repaid it at any time. 25 Q And he could have done it out of other sources; is
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8042 Reffsin-cross/White
1 that correct?
2 A That's correct.
3 Q By the way, do you know what that $47,000 payment to
4 American Express was for?
5 A No, I don't. I think it was brought out that it was
6 some sort of a trip that he took.
7 Q Now, you can put that aside.
8 Now, Mr. Reffsin, you are a Certified Public
9 Accountant; is that right?
10 A Yes, I am.
11 Q And you have been since 1971?
12 A That's correct.
13 Q And just so I'm clear, if you look at Exhibit 651
14 which is in evidence that is a certificate of the fact
15 that you are a CPA; is that correct?
16 A That's correct.
17 Q And is it fair to say, Mr. Reffsin, that you are an
18 expert in taxation?
19 A I've tried to be, yes.
20 Q And you've worked in the tax department of several
21 major corporations, correct?
22 A Accounting firms, yes.
23 Q I'm sorry, accounting firms. 24 A Yes.
25 Q For example, you said yesterday in response to
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8043 Reffsin-cross/White
1 Mr. Wallenstein's question that you worked at Touche Ross,
2 correct?
3 A I spent two years at Touche Ross in the tax
4 department, yes.
5 Q And you also worked for Arthur Young?
6 A That's correct.
7 Q And at Arthur Young you were the equivalent of a
8 partner?
9 A Just below a partner, a principal.
10 Q And those are one of the big six, big eight, big ten
11 accounting firms?
12 A At that time big eight.
13 Q Those were like the eight most prominent, most
14 prestigious accounting firms in the world, right?
15 A Yes.
16 Q And then you started your own firm, correct?
17 A Yes.
18 Q And is it fair to say that again your expertise was
19 in tax matters?
20 A That's corre
ct.
21 Q And you worked in that capacity, did you not, on the
22 tax shelter investments that Mr. Gordon promoted that you
23 described for Mr. Wallenstein yesterday? 24 A No, I just did the accounting for it. I didn't do 25 the tax work on it.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8044 Reffsin-cross/White
1 Q But you were the accountant for those companies,
2 right?
3 A Yes.
4 Q Some of those were corporations and some of them were
5 partnerships, right?
6 A The shelters were all partnerships. There were
7 corporations involved.
8 Q Is there such a thing known involved in partnerships
9 such as tax matters partner?
10 A Yes.
11 Q What is that?
12 A The partner that the IRS would look to for
13 information with respect to that particular entity.
14 Q Among the partnerships involved in the tax shel
ters,
15 who was the tax partner?
16 A Generally it was the general partner.
17 Q That was Mr. Gordon?
18 A Not at all times, sometimes it was a corporation.
19 Q Was Mr. Gordon a tax matters partner in any of these
20 partnerships?
21 A He may have been. I don't remember.
22 THE COURT: Could you hold it a minute, please.
23 (An unrelated matter was taken by the Court.) 24 THE COURT: You may proceed. 25 MR. WHITE: Thank you, Your Honor.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8045 Reffsin-cross/White
1 ; BY MR. WHITE:
2 Q Mr. Reffsin, you in the course of your accounting
3 career, you lecture to or have lectured to the American
4 Institute of CPA, right?
5 A I have lectured for the Foundation of Accounting
6 Education to CPAs, yes.
7 Q So in other words, you are teaching other CPAs about
8 tax matte
rs, right?
9 A Yes.
10 Q Now, let me direct your attention -- let me back up.
11 When is it that you -- withdraw the question.
12 You worked with Mr. Gordon on these tax shelter
13 investments, right?
14 A I did the accounting for them, yes.
15 Q And then there was a period of time in which you were
16 not doing any work for him, right?
17 A That's correct.
18 Q I want to make sure. I want to get it right.
19 When is it that you got reacquainted with him and
20 start doing work with them?
21 A 1990.
22 Q Let's focus on 1990 and also the period '90 and '91.
23 You testified yesterday you became aware that he 24 had this 3 and-a-half million liability to the IRS, right? 25 A Yes, but not until a little bit later. I knew he had
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8046 Reffsin-cross/White
1 a liability, I di
dn't know how much it was.
2 Q When did you become aware of the rough numbers of the
3 liability?
4 A End of '92, early '93.
5 Q Prior to that, did you at least know it was a
6 substantial amount?
7 A Oh, yes.
8 Q And did you know it was over $1,000,000?
9 A Well, the taxes weren't over $1,000,000. I knew the
10 combination of the penalties and interest were over
11 $1,000,000.
12 Q So you knew the necessity figure owed, so to speak,
13 was over $1,000,000?
14 A Yes.
15 Q And you knew that even before the end of 1992?
16 A Yes.
17 Q And do you have experience in dealing with the IRS in
18 connection with collection matters?
19 A Yes, on occasion.
20 Q And did you have such experience prior to the time
21 you submitted this offer and compromise in July of '93 for
22 Mr. Gordon?
23 A The only experience I had was wit
h respect to that -- 24 with Ms. Peters. You are talking about with respect to 25 Mr. Gordon only?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8047 Reffsin-cross/White
1 Q Any other time.
2 A Yes.
3 Q And is it fair to say you knew, just as a general
4 principle, that the more a taxpayer earns the more the IRS
5 will expect him to pay back of his back tax obligations?
6 A I think that's logical.
7 Q Right.
8 Is the converse also true, that the less the
9 taxpayer is earning, the poorer they are, the more debts
10 they have, the less the IRS will expect them to pay back?
11 A Absolutely.
12 Q So is it not correct that someone in that situation,
13 whether or not they act upon it, has an interest, a
14 motive, to either conceal or reduce their income?
15 A That depends on the individual.
16 Q Right.
17 So
me people may do that and some people may not,
18 right?
19 A That's correct.
20 Q But it would be in their financial interest to do so
21 if there weren't any other consequences, right?
22 A I guess so, yes.
23 Q Now, let's look at the time period in 1992, 1993, in 24 that area. You're aware of the fact that Mr. Gordon is 25 taking a salary from Who's Who Worldwide, correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8048 Reffsin-cross/White
1 A Yes.
2 Q And you are also aware of the fact that the company
3 is paying personal expenses of his, correct?
4 A Yes.
5 Q You are aware, are you not, for example, that before
6 they bought, before PVI bought the condo, they were paying
7 the rent, right?
8 A That was going through his personal account, yes.
9 Q When you say his personal account, it was being put
10 into
his loan accounts at Who's Who Worldwide?
11 A Yes.
12 Q And Who's Who Worldwide was the one writing the check
13 out?
14 A Yes.
15 Q And you also knew that the company was paying his
16 American Express monthly bills, that portion of it which
17 were personal?
18 A Oh, yes.
19 Q And you knew also that they were paying his
20 utilities, his cable TV bill; is that right?
21 A Yes. On occasion the company would issue checks for
22 those kinds of things.
23 Q Did you know that or were you aware that the company 24 was paying checks for Mr. Gordon's dental bills? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8049 Reffsin-cross/White
1 Q Were you aware that the company was issuing checks
2 for Mr. Gordon's child support payments?
3 A That I wasn't aware of.
4 Q Now, you were aware, were you not, tha
t from 1990
5 through 1995 the company was leasing a -- at one time or
6 another, a car for Mr. Gordon?
7 A Yes.
8 Q And at first it was a BMW, right?
9 A Yes.
10 Q And then it was a Lexus, right?
11 A Yes.
12 Q And then it was a Mercedes Benz, right?
13 A I think there was a transfer or change, yes.
14 Q And in late '92, early '93, the condominium, monies
15 transferred from Who's Who Worldwide to Publishing
16 Ventures for the purpose of buying the condominium, right?
17 A Late '92 it started, right.
18 Q And then money is continued to be transferred from
19 Worldwide to PVI for the renovation of the furnishing of
20 that condo, right?
21 A Yes.
22 Q And you knew all of that, right?
23 A Yes. 24 Q And you indicated before that you suspected that 25 Mr. Gordon was using -- was staying at the condominium and
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8050 Reffsin-cross/White
1 leased periodically?
2 A It was not suspect. He said he would be using it on
3 occasion to work and stay there which is why we started
4 the rental payments.
5 Q So is it fair to say -- let me back up.
6 Aside from Mr. Gordon's salary, did he have any
7 other substantial money coming into him personally?
8 A Not that I'm aware of.
9 Q So is it fair to say that Mr. Gordon's whole
10 financial life was structured, whether or not it was
11 intended this way, it was structured so that nothing was
12 in his name?
13 MR. TRABULUS: Objection, Your Honor.
14 THE COURT: Overruled.
15 A Well, I know nothing was in his name.
16 Q That's all I'm asking.
17 A Right.
18 Q For example, most people, if they own a car, it's in
19 their own name, right?
20
MR. TRABULUS: Objection, Your Honor.
21 THE COURT: Overruled.
22 A Not necessarily. There are business people who will
23 have cars in the name of the business. 24 Q Right. Not necessarily, but the vast majority of 25 people if they are driving in a car that they own, it's in
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8051 Reffsin-cross/White
1 their name, right?
2 A I guess so.
3 Q And is it fair to say that may be not in 100 percent
4 of the cases but most people pay their own personal bills
5 like their utilities and their cable bill and their rent?
6 A I would say a majority of them do, yes.
7 Q Mr. Reffsin, does it ever strike you at this point
8 between 1990 and 1993, as a CPA, as a tax expert, does it
9 strike you as odd that Mr. Gordon, given his IRS
10 situation, has everything structured so that nothing is in
11 his na
me?
12 MR. WALLENSTEIN: Objection.
13 THE COURT: Sustained.
14 BY MR. WHITE:
15 Q Well, when you come on the scene in 1990 and then
16 you're doing the books for the next few years, as you said
17 you notice that all this stuff was not in his name, right?
18 A Ultimately, yes.
19 Q And you also know that, as you said before, someone
20 in his position has a motive to conceal income, correct?
21 A They might.
22 Q And does it ever occur to you that maybe that is what
23 is happening here? 24 MR. WALLENSTEIN: Objection. 25 THE COURT: Overruled.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8052 Reffsin-cross/White
1 A What occurs to me isn't really --
2 Q Wait. Answer the question yes or no first.
3 A Does it occur to me that he might?
4 Q Did that thought ever occur to you?
5 A Possibly.
6 Q Possi
bly. You are not sure? Is your answer that you
7 are not sure that it ever occurred or not?
8 A There are many reason for people to keep their
9 entity --
10 Q My question is, did you have that thought or did you
11 not have that thought?
12 A I did have the thought.
13 Q You did have the thought?
14 A Yes.
15 Q Okay.
16 I want to ask you about the logs that Maria
17 Gaspar created and that were submitted to the bankruptcy
18 court that you are familiar with, obviously.
19 A Now I am.
20 Q Right.
21 Now, you were interviewed by federal agents in
22 January of 1996 in your office, right?
23 A Yes. 24 Q That's the one you said you did recall that meeting? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8053 Reffsin-cross/White
1 Q Isn't it correct that you were asked about those logs
2 at that meeting?
3 A Yes.
4 Q And isn't it correct that you told them initially
5 that you had never seen those logs?
6 A I told them I had nothing to do with those logs.
7 Q Answer the question. Isn't it true that you told
8 them that you had never seen those logs?
9 A I can't answer that with a yes or no.
10 Q Did you tell the agents at that meeting that you
11 didn't know anything about them or even if they were
12 prepared at all?
13 A I never said that if they were even prepared at all.
14 Q Did you tell them you never knew who actually
15 prepared them?
16 A That's correct.
17 Q Did you tell them that you had never discussed those
18 logs with Mr. Gordon or anyone else?
19 A I believe I initially did, but then I realized I did
20 have a meeting with them on the logs.
21 Q So your recollection is that you changed your version
22 in that interview; is that correct?
23 MR. WALLENSTEIN: Objection. 24 THE COURT: Sustained as to form. 25 BY MR. WHITE:
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8054 Reffsin-cross/White
1 Q It is your recollection that you told them something
2 different later in the interview from what you said
3 initially?
4 A It is my recollection that I recollected it.
5 Q Now, did you say that, yesterday, that Mr. Gordon
6 told you that he didn't want to keep those logs?
7 A Yes, that's correct.
8 Q You said after you walked out of the bankruptcy court
9 proceeding where the Bankruptcy Judge ordered Who's Who to
10 keep them, that's when he told you in your car, right?
11 A Yes, he didn't -- he said that he didn't want Reed
12 Elsevier knowing any of his business.
13 Q And the words you used yesterday was that he was
14 sc
reaming that?
15 A Yes.
16 Q And you said that he was ranting and raving about
17 that?
18 A Yes, he was.
19 Q He didn't want to give those logs over to Reed
20 Elsevier, did he?
21 A No.
22 Q And he made that perfectly clear to you, right?
23 A Yes. 24 Q And then you said yesterday Mr. Ackerman called you 25 and said hey, where are those logs, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8055 Reffsin-cross/White
1 A That's correct.
2 Q And Mr. Ackerman indicated to you that he had been
3 asking Mr. Gordon for them and Mr. Ackerman hadn't gotten
4 them, right?
5 A That's correct.
6 Q Now, you said earlier today that you thought that
7 maybe Mr. Gordon's claim about using the business, the
8 condo for business, was bullshit, right? You said you
9 thought maybe that was the case?
1
0 A I said I couldn't make that determination initially.
11 I said it might have been, but you go by what the client
12 tells you at the time.
13 Q Am I correct that at the time you at least had a
14 doubt about whether or not they were really, it was really
15 being used for business?
16 MR. TRABULUS: Objection. What time?
17 MR. WHITE: The time of this conversation in
18 August of 1994 in the car.
19 A In August of '94? Again, I explained before with the
20 sequences of events that occurred, I gave him the benefit
21 of the doubt.
22 Q You gave him the benefit of the doubt, but you had a
23 doubt, right? 24 A Always had a doubt. 25 Q And you said you always had a doubt. You mean you
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8056 Reffsin-cross/White
1 always had a doubt from the moment the condominium, you
2 found out
that he was using the condominium to live there?
3 A No. The doubt occurred really after things started
4 to happen in 1993.
5 Q What things started to happen?
6 A The case, the distractions, the noncreation of the
7 California office which was supposed to happen. I mean,
8 these things didn't happen.
9 Q Let me make sure I understand this.
10 Mr. Gordon told you that the condominium was
11 going to be used in part for people who were from the soon
12 to be established California office, correct?
13 A Yes, he was going to have training sessions, people
14 flown in and so forth, yes.
15 Q And then when no such office materialized, you
16 started to have doubts?
17 A I really couldn't concern myself at that point
18 because there -- it was an asset of the corporation.
19 Whether he used it for business or didn't use it for
20 business was not my conce
rn.
21 Q But if he was living there and he wasn't paying a
22 fair market rent, then the remaining portion of the fair
23 market rent would be income to him, right? 24 MR. TRABULUS: Objection. Foundation. 25 THE COURT: Overruled.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8057 Reffsin-cross/White
1 A It's a difficult question to answer because if a
2 person buys, if a corporation buys something with the
3 intent to use it for a specific purpose and because of
4 some reason down the road an officer or someone in the
5 corporation ends up using it for personal use, that
6 doesn't negate the fact that it is a corporate asset.
7 Whether he should be paying rent or what rent he should be
8 paying, is subject -- you have to determine that.
9 Q Right.
10 But you were also doing his personal returns,
11 right?
12 A Yes.
13 Q So if there was some additional income over and above
14 his salary that he was getting, you would have wanted to
15 know about that, right?
16 A Well, it was my impression that the amount of money
17 he was paying as rent was basically covering the use of
18 the apartment.
19 Q Is it your testimony that you believed that the
20 information that was going to be put in the logs was going
21 to be accurate?
22 A Yes.
23 Q And notwithstanding that you saw that Mr. Gordon 24 didn't want to give the logs to Reed and notwithstanding 25 the fact that you thought maybe it wasn't being really
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8058 Reffsin-cross/White
1 used for business, you thought that the information that
2 was going to go into those logs was accurate?
3 A Absolutely.
4 Q Now, Mr. Reffsin, is it fair to say that during
the
5 time period from 1991 through 1995 that you didn't want to
6 lose Mr. Gordon as a client?
7 A No accountant wants to lose a client.
8 Q But during that particular time period, wasn't it
9 especially important to you to retain Mr. Gordon as a
10 client?
11 A It's especially important for me to retain every
12 client I have.
13 Q Well, during that time weren't you personally
14 experiencing financial difficulty?
15 A Early '90, '91, '92, but things sort of smoothed over
16 by then.
17 Q In fact, in May 1991, you personally filed
18 bankruptcy, didn't you?
19 A That's correct.
20 Q And isn't it true, didn't you?
21 A That's correct.
22 Q And isn't it true that you filed a bankruptcy
23 petition that indicated that you were over $2,000,000 in 24 debt? 25 A That's correct.
OWEN M. WICKER, RPR OFFICIAL C
OURT REPORTER 8059 Reffsin-cross/White
1 Q And isn't it also true that on that bankruptcy
2 petition in May of 1991, you indicated that your income,
3 your regular monthly income from your business was about
4 $9,500 a month?
5 A That's about right.
6 Q And Mr. Gordon's firm was paying you 2 or 3 or $5,000
7 a month over this period for your firm's accounting work,
8 right?
9 A It was more like 2,000 in the earlier years.
10 Q I'm sorry. I interrupted.
11 A It was more like 2,000, roughly 2,000 a month.
12 Q In the beginning and then it got higher?
13 A When the bankruptcy took place I spent a lot more
14 time. Of course I didn't get paid but that's another
15 matter.
16 Q Now, Mr. Reffsin, let me show you Exhibit 420 which
17 is the offer and compromise you submitted in the summer of
18 1993. Let's look at the last paragraph.
19 First of all, you indicated to Mr. Wallenstein
20 yesterday I think was a mixture of your words and
21 Mr. Gordon's words?
22 A Yes. I wouldn't submit anything without reviewing it
23 with the client. 24 Q Is it fair to say on page 2, Mr. Gordon says "I, 25 Mr. Bruce Gordon, do hereby state the above to be the best
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8060 Reffsin-cross/White
1 of my knowledge"?
2 A Yes.
3 Q Notwithstanding though on the first page Mr. Gordon
4 is referred to in the third person, correct?
5 A Yeah. This was prepared based on discussions with
6 Mr. Gordon. I prepared it.
7 Q Right, you prepared it. And it refers to Mr. Gordon
8 in one place as taxpayer and in other places as "he."
9 A Yes.
10 Q And let's look at the last paragraph.
11 It says "in view of the circumstances discussed
12 above and the fact that the taxpayer is over 60 years of
13 age, he wishes to file the attached offer and compromise.
14 He has talked to various relatives and because of his age
15 and desire to clean up his situation, they have agreed to
16 lend him some money. The offer presented is based on the
17 sum of money which he feels he can borrow. He has no
18 other assets."
19 Now, you said yesterday, I believe, in response
20 to Mr. Wallenstein's questions that that information that
21 you put in this last paragraph was told to you by
22 Mr. Gordon; is that right?
23 A That's correct. 24 Q Now, the second to last sentence says "the offer 25 presented is based on the sum of money which he feels he
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8061 Reffsin-cross/White
1 can borrow."
2 Now, did you mean by that sentence to indicate
3 that the 150,000 that was being offered was the maximum
4 that Mr. Gordon could raise from his relatives?
5 A That really doesn't say that. It's an offer. The
6 $150,000 was never anticipated as being the final offer or
7 the final compromise.
8 Q Now, it's correct, is it not, that in addition to
9 borrowing from his relatives, you knew that Mr. Gordon at
10 that time also had the capacity to borrow large sums from
11 his corporation.
12 A That's correct. I don't know how large it was, but
13 he had the capacity to borrow.
14 Q Well, he had the capacity to borrow hundreds of
15 thousands of dollars, right?
16 A Talking prospectively now, we are not talking about
17 the past. At that time I didn't know what he would have
18 available to him. You usually don't.
19 Q You knew, did you not, that if Mr. Gordon were
20 borrowing money from his corporation to, fo
r example, buy
21 Armani suits, he could also borrow money to pay back the
22 IRS?
23 A No, I wouldn't know that. I don't know what his 24 understanding was with the stockholders. 25 Q Did you ever have any reason whatsoever to think that
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8062 Reffsin-cross/White
1 the stockholders were placing any limits on Mr. Gordon's
2 taking of loans from the company?
3 A I had no reason to know either way.
4 Q Right.
5 In fact, you've never met Dr. or Mrs. Grossman
6 face to face, have you?
7 A No.
8 Q Until this trial.
9 A That's correct.
10 Q And you had no reason to think one way or the other
11 about what the stockholders thought of Mr. Gordon's loan?
12 A Yes.
13 Q Assuming that the Grossmans were the stockholders.
14 A Right.
15 Q But at the same time you
saw that this wasn't a lump
16 sum loan that was being made to Mr. Gordon, it was an
17 ongoing payment of his personal expenses, right?
18 A Well, at some point it had stopped.
19 Q Right.
20 But the pattern was such that it was a routine
21 matter, the monthly bills of Mr. Gordon were getting paid?
22 A Well, bills were getting paid up to that point, yes.
23 Q Look at the second paragraph. 24 It says "taxpayer is presently trying to clean up 25 his life and move forward. He is 60 years of age and he
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8063 Reffsin-cross/White
1 will never be able to pay the substantial sums of taxes,
2 penalties and interests owed to the government. In
3 addition, he's liable for substantial amounts to other
4 parties which he will not be able to pay. We have
5 prepared a projection of income for the next five y
ears
6 and even if he increases his earnings substantially over
7 the next five years, he wouldn't come close to earning
8 enough to pay all of his obligations."
9 Now, let me ask you about that paragraph.
10 That paragraph, let me make sure I understand it,
11 is indicating that in addition to the tax liability he
12 owes, Mr. Gordon has lots of other debts, right?
13 A He did have some other debts.
14 Q And those debts are actually listed on the 433 that
15 you attached?
16 A That's correct.
17 Q When you say "even if he increases his earnings, he
18 won't come close to earning enough to pay all of his
19 obligations --"
20 A Right.
21 Q -- You're saying all of those other obligations, not
22 even counting the IRS, he will barely be able to pay
23 those? 24 A I didn't say that. I said all of his obligations. 25 Q Okay.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8064 Reffsin-cross/White
1 So even if you include the IRS, he won't be able
2 to pay all the obligations. Didn't like that way at
3 least?
4 A 3 and-a-half million, no.
5 Q Now, you said before that you had agreed with
6 Mr. Gordon that if he didn't repay the loans by 1994, you
7 would categorize them at that point as income; is that
8 correct?
9 A I didn't agree. I told him that's what I would do.
10 Q But did I explain it correctly?
11 A Yes.
12 Q And give us a rough idea in July of 1993 when you
13 submitted this offer and compromise what Mr. Gordon owed
14 his company?
15 A I don't know. I mean, I believe -- I had believed at
16 the time when he did this that his loan was very low
17 because he had paid back the $235,000. I wasn't aware of
18 this continued increase in the lo
an account in 1993.
19 Q Okay.
20 And, again --
21 A I should say to the extent of his continued
22 increase. I knew he was increasing, but I didn't know it
23 was that much. 24 Q So is that another example of where you believed 25 Mr. Gordon deceived you?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8065 Reffsin-cross/White
1 A Yes.
2 Q Did Mr. Gordon tell you affirmatively that "I'm going
3 to cut back. I'm not going to take as many loans"?
4 A Mr. Gordon never told me anything. He did what he
5 wanted to do. It was understood based on the discussions
6 that the loans were high at the time. He said he was
7 going to pay them back. It was never the intent for them
8 to get higher.
9 Q In 1994 you were expecting that Mr. Gordon -- you had
10 instructed Mr. Gordon to repay those by 1994 or you were
11 going to tak
e certain action and call them income, right?
12 A Yes, on the basis of those facts I wouldn't feel they
13 would be loans.
14 Q If Mr. Gordon were to repay those loans, he would
15 have had to have that money coming in, right?
16 A From somewhere.
17 Q Either from Who's Who or somewhere else?
18 A That's correct.
19 Q Take a look at Exhibit 420-E which is the projection
20 you prepared in connection with the offer and compromise.
21 Now, there's no projections of large amounts of
22 income that are due to Mr. Gordon between 1992 and 1994,
23 are there? 24 A No. Those projections were based on the facts and 25 circumstances that existed at the time the projections
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8066 Reffsin-cross/White
1 were done.
2 Q Is it correct, though, that you didn't feel any need
3 to tell the IRS, w
ell, look, I expect that he is going to
4 get a substantial amount of income and he will use that to
5 pay back his loans to Worldwide?
6 A Well, at the time I did these I didn't think they
7 were very big loans. He just made a $235,000 payment.
8 Q Actually let me ask you about that.
9 You knew the year end 1992 figures, right?
10 A Umm-hmm.
11 Q And your testimony is that when you are submitting
12 this in July of 1993, you don't know what is taking place
13 in the first seven months of 1993?
14 A And his cash flow determination based on income would
15 be based on whatever income information I had at the time
16 which was the '92 income.
17 Q I just want to make sure I have this right.
18 A Yes.
19 Q That for the time period January of 1993 to July of
20 1993, you don't know what's going out. You don't know
21 what he's spending, correct?
22 A I don't have a fixed, you know, fix on it.
23 Q Right. 24 But your testimony is that you do happen to know 25 that this repayment was made, correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8067 Reffsin-cross/White
1 A Yes.
2 Q So in other words, for 1993 the only thing you know
3 is about what's reducing the account, you don't know what
4 activity is causing it to go up, if at all?
5 A No. The reason I became aware of it was that the
6 credit was put to the Grossmans' loan and exchange account
7 so I was aware there were some heavy credits coming in.
8 Q But when you were reviewing those books to see that
9 you didn't see Gordon's loan account going up?
10 A Yeah, it was going up at the time but it wasn't
11 anywhere near an amount of money that would require me to
12 substantially increase the projections and, again, he said
13 he was going to pay back those loans. I don't know where
14 he was going to get it from.
15 Q Well, I guess my question is regardless of the
16 source, if he was going to get enough money to pay it
17 back, and you believed that --
18 A Right.
19 Q -- Why isn't it on this projection, 420-E?
20 A Because it is not a priority lien. The IRS would not
21 look at those loans as a priority to their position. Only
22 necessary living expenses and those payments that would be
23 required to be made would be considered in determining how 24 much cash flow he had which is why the DOJ items were on 25 there.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8068 Reffsin-cross/White
1 Q So you are saying that you consciously decided not to
2 put that expected income and those Who's Who Worldwide
3 loans on this projection because you didn't think
you had
4 to, is that your testimony?
5 MR. WALLENSTEIN: Objection.
6 THE COURT: Overruled.
7 A I didn't consciously do anything. I just didn't
8 consider them.
9 Q Is it that you didn't think about them or you thought
10 about them and said no, I don't have to put them on there?
11 A I didn't think about them because all I did was try
12 to project the income based upon what the corporation
13 would earn in the future.
14 Q Talking about the IRS and what has priority over
15 it --
16 A Right.
17 Q -- Do you as a tax expert, did you believe that if
18 the IRS was told that Mr. Gordon was going to get a
19 substantial sum of money and rather than apply that to his
20 IRS debt, he was going to apply it to a debt to a company
21 that he owned, that that wouldn't make any difference to
22 them?
23 A It wouldn't. 24 Q It would
not make a difference? 25 A No, because the net effect would be zero.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8069 Reffsin-cross/White
1 Q So if the IRS were told Mr. Gordon will get a
2 substantial sum of money and rather than pay you, IRS,
3 he's going to pay back his own company, your testimony is
4 that that would not have mattered in your judgment to the
5 IRS at all?
6 Yes or no?
7 A My testimony is that that was not considered in that
8 light. That's my testimony. The income --
9 Q Considered by whom, you?
10 A That's correct.
11 Q Okay.
12 MR. WALLENSTEIN: Judge, I ask the witness be
13 permitted to complete his answer. He obviously had not
14 finished it.
15 THE COURT: Well, the answer called for a yes or
16 no and he exceeded that without objection by counsel but
17 I'll not let him go further than
that.
18 BY MR. WHITE:
19 Q Now, regardless -- let me back up this January 1993
20 repayment from Dr. Grossman that you were aware of,
21 correct?
22 A Umm-hmm. Yes.
23 Q You testified Mr. Gordon told you that that was a 24 loan to him from Dr. Grossman, right? 25 A Well, I knew it came from Dr. Grossman, yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8070 Reffsin-cross/White
1 Q And that loan is not listed on this projection
2 either, is it?
3 A That's correct, it's not.
4 Q So that was another debt, personal debt of Mr. Gordon
5 that's not listed on this form?
6 A That was Mr. Gordon's preference.
7 Q You discussed that with him?
8 A Yes.
9 Q And Mr. Gordon specifically instructed you not to
10 include that; is that correct?
11 A That's correct.
12 Q And he had told you earlier that Dr. Gr
ossman had
13 loaned him that money, right?
14 A I was not aware of the true relationship between
15 Mr. Grossman and Mr. Gordon. Whatever he said to do with
16 respect to that, I saw no documentation that indicated
17 that it was a valid loan or anything.
18 Q Okay.
19 And is it fair to say that you questioned whether
20 it was a valid loan?
21 A No, I questioned for purposes of the projection as to
22 whether there was something that should be considered as a
23 required payment. 24 Q And did you have a conversation with Mr. Gordon where 25 you indicated that it should be disclosed?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8071 Reffsin-cross/White
1 A No, it wasn't that kind of conversation. Do you want
2 to disclose the fact that you owe your brother-in-law
3 money? And he said no.
4 Q Now, you said yesterday that
when you submitted this
5 offer you expected the IRS to ask about Who's Who
6 Worldwide, right?
7 A Without question.
8 Q Now, it's fair to say though that the 433's that were
9 -- the 433 form given to the IRS did not indicate that
10 Mr. Gordon was the owner, correct?
11 A That's correct.
12 Q And if this projection had your best estimate of
13 Mr. Gordon's projected income --
14 A At that time, yes.
15 Q -- At that time, why would they need to see Who's Who
16 Worldwide's documents?
17 A The reason they would need to see it was because my
18 best estimate may not be correct. Again, it's an
19 estimate. They may say, well, what happens if you earn
20 $1,000,000 in 1993 or $2,000,000 in 1994, and of course I
21 couldn't tell them that. The logical sequence of events
22 here was to look at the corporate activity and make a deal
23 which was
dependant upon his ability to withdraw money 24 from Who's Who Worldwide since that was the only source of 25 income, and Mr. Gagliardi was aware of that.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8072 Reffsin-cross/White
1 Q Look at 420-D, as in David, that's the 433 form.
2 A 420-D.
3 What is 423?
4 Q That's the 433 A form.
5 A There's no number on it.
6 Q There should be a sticker on the lower right-hand
7 side.
8 A Yes.
9 Q Let's start at the top, box 1.
10 A Umm-hmm.
11 Q You got that address, 10 Bluff Road from Mr. Gordon,
12 right?
13 A Yes.
14 Q But you indicated that it was in early 1993 that you
15 had a discussion with Mr. Gordon and you told him you
16 would have to pay rent if he was using the condo, right?
17 A He said he would be using it on occasion.
18 Q But he was using it s
ufficiently, a sufficient amount
19 of time you thought he needed to be paying rent?
20 A Yes, some portion of it.
21 Q And that discussion took place before July of 1993
22 when you submitted this form, right?
23 A Probably just before it, yes. 24 Q And this form, aside from Mr. Gordon's signature, 25 that's your handwriting, correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8073 Reffsin-cross/White
1 A Yes.
2 Q You prepared this?
3 A That's correct.
4 Q Now, under box 18 where it says "securities," on page
5 2, you wrote "none," is that correct?
6 A That's correct.
7 Q That was based on your understanding that Mr. Gordon
8 owned none of the company; is that correct?
9 A That's correct.
10 Q And that's because of what Mr. Gordon told you; is
11 that correct?
12 A That's correct.
13 Q Now, i
f you look at box 14 which asks for "bank
14 charge cards" and other things, do you see that?
15 A Umm-hmm.
16 Q "None" is listed there; is that correct?
17 A That's correct.
18 Q On the next page where it says "other liabilities,"
19 box 28?
20 A Right.
21 Q The description under "other liabilities" says,
22 "including, other charge accounts," correct?
23 A Yes. 24 Q At the time you prepared this in July of '93, you 25 knew that Mr. Gordon was possessing and using an American
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8074 Reffsin-cross/White
1 Express gold card, correct?
2 A Ms. Sautter's, yes.
3 Q You knew though that Mr. Gordon had a card in his own
4 name, right?
5 A I don't know. I have never seen the card. All I
6 know is that he was using Ms. Sautter's card.
7 Q Did you ever see the American Ex
press statements
8 themselves?
9 A I don't recall. I don't remember seeing his name on
10 it.
11 Q Let's start with this. Did you ever see the
12 statements themselves?
13 A No, I think I saw one in the course of the years.
14 Most of those were reviewed either by Liz Sautter or for
15 people who worked for me.
16 Q Is it your understanding throughout this time period
17 you knew the company was paying American Express bills and
18 you thought there was just one card, Liz Sautter's, and
19 Mr. Gordon was using that card?
20 A That's what he told me. When he couldn't get credit,
21 he was using Liz Sautter's card.
22 Q Did you understand that to mean that he was literally
23 going to Liz and saying, let me have the card, I got to go 24 make a purchase? 25 A No, I know that I can have a secondary signature on
OWEN M. WICKER, RPR OFFI
CIAL COURT REPORTER 8075 Reffsin-cross/White
1 the card.
2 Q It was your understanding Mr. Gordon is walking
3 around with a plastic card in his wallet --
4 A Right.
5 Q That he could use to charge.
6 A That's correct.
7 Q And you didn't believe that that needed to be
8 included on this form?
9 A No, I did not.
10 Q And at the time you filled out this form you knew, it
11 was fair to say, there were substantial amounts being
12 charged by Mr. Gordon on that card?
13 A Occasionally there were substantial amounts.
14 Q In box 28 where it says "other liabilities," again
15 the loans from Who's Who Worldwide are not listed,
16 correct?
17 A That's correct.
18 Q Now, there's other loans listed there, correct?
19 A Yes.
20 Q You understood that a taxpayer's liabilities needed
21 to be listed there, correct?
22 A Yes.
23 Q And -- 24 A Tax liabilities. 25 Q Well, one of them is for charge accounts, right, for
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8076 Reffsin-cross/White
1 $32,000. That's not a tax liability, is it?
2 A No, that's correct.
3 Q So notwithstanding the fact that you listed six other
4 liabilities of Mr. Gordon's there, you did not list the
5 loans from Who's Who Worldwide?
6 A That's correct.
7 Q And on the next page "necessary living expenses." I
8 want to ask you about this.
9 Is it your testimony that what the taxpayer is
10 supposed to fill in on this form is not his actual
11 expenses, but only that portion of his actual expenses
12 that are really necessary?
13 A That is correct. His necessary living expenses.
14 Q Now, let me give you the example I asked Mr. Rizino
15 yesterday. If y
ou have somebody, a single person, no
16 family, no children, no dependents living in a $20,000 a
17 month mansion, when he fills out that form, what is he
18 supposed to put on that line for rent?
19 A That's an unreasonable question.
20 Q Well, what if I'm that guy and I have this in front
21 of me and you're my accountant, what did you tell me to
22 put down?
23 A What you need to spend -- you want me to answer that 24 question for $20,000? 25 Q I should put 20,000.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8077 Reffsin-cross/White
1 A Do you want me to answer the question?
2 Q Yes, I do.
3 A Okay. I would put $20,000 because there was some
4 lease in the contract that provides him to pay it.
5 Q What if I'm that guy and I say the lease is up next
6 month, you could move, but I think it is necessary for me
7 to stay
there because I entertain a lot and I want to
8 impress my clients?
9 A If he was going to put $40,000 of income down on the
10 other side, I would have no problem putting down the
11 $20,000.
12 Q So you put your real income -- I'm sorry. You put
13 your actual expenses if you are showing enough income on
14 the other side that you could pay for it, right?
15 A I would put contractual expenses if you could pay for
16 it. I would not put unreasonable expenses, even if he was
17 making $50,000 a month in income. They wouldn't allow it.
18 Q You have the form, the instructions to this form,
19 right?
20 A That's correct.
21 Q It says "list --" in substance, it says "list your
22 actual --" hold on. It is Defendant's Exhibit ED.
23 It says "enter your monthly rent payment." 24 (Handing.) 25 A That's correct.
OWEN M. WICKER, RPR OFFIC
IAL COURT REPORTER 8078 Reffsin-cross/White
1 Q So you believe that the taxpayer is supposed to put
2 not his actual expenses but only what he thinks is
3 necessary, correct?
4 A That's correct.
5 Q So if a taxpayer in that hypothetical I used said,
6 well, really it's only reasonable, it's only necessary for
7 me to live in a $2,000 a month apartment but I really like
8 living in the $20,000 a month one, so I'll put $2,000 a
9 month on the form, are you with me?
10 A I'm with you.
11 Q Is it your testimony that the IRS, that's what they
12 want? They don't want to know that you are squandering
13 another $18,000 a month?
14 A That's not the purpose of the information. It's not
15 to know whether you are squandering, it's the purpose to
16 know what you need to live on.
17 Q This form is called a collection information
18 statemen
t?
19 A Absolutely correct.
20 Q It's used when the IRS is trying to collect money
21 from somebody who owes them back taxes; is that correct?
22 A That's correct.
23 Q Are you saying that if a taxpayer is squandering 24 $18,000 a month on unnecessary luxuries, the IRS doesn't 25 want to know anything about it?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8079 Reffsin-cross/White
1 A No, they have no desire to know.
2 Q They have no desire whatsoever?
3 A And in fact, they will cross it out and put their own
4 numbers in.
5 Q They would cross it out and put their own numbers
6 when they calculate how much they want you to pay, right?
7 A But the payment would be dependent upon the income.
8 The income is what is critical, not the expenses.
9 Q Now, your friend, Mr. Rizino, who was here yesterday,
10 was your partner?
11 A Yes.
12 Q He's been an accountant for 20 years?
13 A Yes.
14 Q You respect his opinion?
15 A In certain issues, yes.
16 Q You heard him say yes he should put down the 20,000?
17 A He's never filed a 433 in his life nor has he been in
18 a collection proceeding in his life.
19 Q You are saying that he's wrong?
20 A Yes.
21 Q And you have more experience and you're right?
22 A Of course. I've never been questioned.
23 Q Let's look at Government's Exhibit 425 which you 24 should have in front of you. 25 A In that same packet?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8080 Reffsin-cross/White
1 Q No, let me find it for you.
2 MR. WALLENSTEIN: Sorry, Mr. White. What exhibit
3 did you say?
4 MR. WHITE: 425.
5 MR. WALLENSTEIN: All right.
6 BY MR. WHITE:
7 Q Now, that's a letter we
looked at briefly earlier
8 this morning where you are responding to Mr. Gagliardi's
9 letter, correct?
10 A Umm-hmm.
11 Q And that's the one where you are forwarding to him
12 this note from Joyce Grossman, right?
13 A Yes.
14 Q Now, when you got -- what prompted this was
15 Mr. Gagliardi wrote you a letter which said that in
16 reviewing Mr. Gordon's personal bank account statements,
17 he noticed some unusual deposits, is that fair?
18 A No, that's not what is part of this.
19 Q Well, Mr. Reffsin, let me show you Government's
20 Exhibit 424. That's a February 1994 letter from
21 Mr. Gagliardi to Mr. Gordon, care of you, correct?
22 A Umm-hmm.
23 Q That is correct? 24 A Yes, I'm sorry. 25 Q And the second paragraph says "my review of your
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8081 Reffsin-cross/White
1 checking records discovered several unexplained items,
2 including abnormal deposits totaling $15,000 in July of
3 1993 and $10,613.52 in October of '93. Please explain the
4 source of these funds."
5 Do you see that?
6 A Yes.
7 Q Now, you received that letter from Mr. Gagliardi,
8 correct?
9 A Yes.
10 Q And after that did you have a conversation with
11 Mr. Gordon about the source of those funds that
12 Mr. Gagliardi asked you about?
13 A I'm confused. Are we talking about the answer for
14 the income for 1993 or are we talking about this?
15 Q Let's do it in order. Let's start at 424,
16 Gagliardi's letter to you.
17 A Okay.
18 Q To Mr. Gordon, care of you.
19 A Right.
20 Q He says what I just read, that there are unexplained
21 items, including abnormal deposits total totaling $15,000
22 in July of '93?
23 A Yes. 24 Q Following that, did you have a conversation with 25 Mr. Gordon about those alleged abnormal deposits?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8082 Reffsin-cross/White
1 A Yes, I did.
2 Q Tell us what happened.
3 A I asked him what they were for and he went back and
4 he checked and I got the notes and he told me what they
5 were for.
6 Q Okay.
7 And he gave you copies of these promissory notes?
8 A That's correct.
9 Q And tell us in as much detail as you can what you
10 recall he told you about these deposits and the notes?
11 A As I recall, one of them he said was attributable to
12 the expenses incurred on the death of the son, and the
13 other one was with respect to some medical expenses that
14 he had to pay on behalf of his wife. I don't necessarily
15 remember the order.
16 Q Did you a
sk Mr. Gordon for notes to document these
17 loans?
18 A No, I did not.
19 Q So did he volunteer them to you?
20 A Yes.
21 Q So, in other words, he came back and said -- let me
22 back up.
23 You had this conversation and he said, well, I 24 got to check, and he had a subsequent conversation with 25 you, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8083 Reffsin-cross/White
1 A I don't really understand the question.
2 Q When you asked him about these deposits --
3 A Right.
4 Q -- In that conversation he didn't whip out these
5 notes?
6 A No.
7 Q They came later?
8 A Yes. He said he didn't remember. He had to check.
9 Q So then there is some gap in time and you have
10 another conversation?
11 A That's correct.
12 Q And he volunteers to you "I borrowed this money from
13
my sister Joyce, and here's the note that documents that
14 loan," correct?
15 A That's correct.
16 Q And he also indicated "I borrowed the money from my
17 wife's medical expenses from Madeleine Middlemark and
18 here's the note that documents that," right?
19 A Yes.
20 Q Mr. Reffsin, let me show you Exhibits 764 and 765
21 which are already in evidence.
22 Those are wire transfers from Who's Who Worldwide
23 to Bruce Gordon, correct? 24 A Yes. 25 Q And those are already in evidence, right? You've
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8084 Reffsin-cross/White
1 heard the testimony about them?
2 A Yes.
3 Q Is it fair to say that now in retrospect, you know
4 that that money did not come from Joyce Grossman?
5 MR. TRABULUS: Objection, Your Honor.
6 THE COURT: Overruled.
7 A It appears that way, yes
.
8 Q And from the review of the general ledger, ledgers
9 from which you prepared your chart, you also know, do you
10 not, that those monies, those transfers were booked in the
11 Who's Who Worldwide books as loans to Mr. Gordon?
12 A Yes, I did go back and check this after to see if
13 they were there.
14 Q And they were, weren't they?
15 A Yes, they were.
16 Q Okay.
17 Now, is it fair to say that you believe that's
18 another example of where Mr. Gordon deceived you?
19 A Yes.
20 MR. TRABULUS: Objection.
21 THE COURT: Overruled.
22 BY MR. WHITE:
23 Q Now, if you put those wire transfers aside. 24 Let's go back to Exhibit 425. 25 Number 3, paragraph numbered 3 on your letter,
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8085 Reffsin-cross/White
1 talks about what you've enclosed and it says "a letter
2 from the comptroller of Who's Who Worldwide Registry,
3 Inc., verifying the compensation agreement with Mr. Gordon
4 began January 1993. She verified this with the
5 shareholders of the corporation."
6 Now, the comptroller that you are referring to
7 there in that paragraph 3 is Maria Gaspar, correct?
8 A Yes.
9 Q Is it correct that Mr. Gordon told you that she had
10 verified that agreement with the shareholders?
11 A That's correct.
12 Q Maria Gaspar didn't tell you that?
13 A No, I didn't speak to her about that aspect of it.
14 Q Is it fair to say that you made this representation
15 in this letter that the shareholders had verified it based
16 on what Mr. Gordon had told you?
17 A Yes.
18 Q And is it your testimony that if that were untrue,
19 you didn't know it?
20 A That's correct.
21 Q Is it fair to say that you regard thi
s as another
22 instance where Mr. Gordon deceived you?
23 A Not a significant deceit, but yes. 24 Q If you look at the paragraph after the numbered ones, 25 is it fair to say that you provided Mr. Gagliardi with the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8086 Reffsin-cross/White
1 explanation that Mr. Gordon provided you?
2 A Yes, that's word-for-word, Mr. Gordon.
3 Q That's word-for-word from him?
4 A Umm-hmm. Well, basically word-for-word. I might
5 have put improper English language.
6 Q Okay.
7 But the substance is correct?
8 A Yes.
9 Q You can put those letters aside for a minute,
10 Mr. Reffsin.
11 You have substantial experience as an accountant
12 in bankruptcy matters, is that fair to say?
13 A Yes.
14 Q And you are aware, are you not, that when a
15 corporation is in bankruptcy the lawye
rs who do work for
16 the debtor have to submit fee applications to the Court?
17 A Yes.
18 Q So, in other words, if a lawyer represents a debtor
19 corporation, the debtor corporation can't just send the
20 corporation a bill and the corporation writes out a check
21 to him, right?
22 A Right.
23 Q The bankruptcy court has to get that bill first and 24 approve it, right? 25 A That's correct, generally.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8087 Reffsin-cross/White
1 Q I'm sorry?
2 A Generally.
3 Q Generally. Okay.
4 And the bankruptcy court has to determine, has to
5 look at what was done and whether the fees are reasonable,
6 right?
7 A Yes.
8 Q And the descriptions of the legal work that is
9 performed has to be fairly detailed so that the bankruptcy
10 court can make that judgment, ri
ght?
11 A I believe so, yes.
12 Q And you've seen in evidence, have you not, the bills
13 from Mr. Ackerman's firm. They go on for pages and pages,
14 right?
15 A Yes.
16 Q Now, at the time Who's Who Worldwide filed bankruptcy
17 in March of '94, you were aware of all the things that we
18 just talked about, right?
19 A Yes.
20 Q You already knew that, right?
21 A Yes.
22 Q And at the time of that filing and thereafter, Who's
23 Who Worldwide had a bankruptcy attorney, correct? 24 A Yes. 25 Q It was Neil Flaum?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8088 Reffsin-cross/White
1 A Initially.
2 Q F-L-A-U-M, correct?
3 A Yes.
4 Q And it was sometime later in the summer when
5 Mr. Ackerman took over for Mr. Flaum; is that correct?
6 A That's correct.
7 Q And is it fair to say M
r. Flaum is an experienced
8 bankruptcy attorney?
9 A Yes.
10 Q And Mr. Flaum's firm was a prominent one, right?
11 A He was well-known in the bankruptcy area, yes.
12 Q And he was a well-respected attorney, is that fair to
13 say?
14 A Yes.
15 Q His firm was a well-respected firm?
16 A He was well respected. I don't know about his firm.
17 Q Well, let's limit it to him.
18 A Okay.
19 Q Now, right around the time of the bankruptcy
20 Mr. Gordon told you, I think you said yesterday, he wanted
21 to clean up some things about the documentation of the
22 corporate ownership; is that right?
23 A When we had met with Mr. Adler, yes. 24 Q And you had recommended Mr. Adler to Mr. Gordon, 25 right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8089 Reffsin-cross/White
1 A That's correct.
2 Q And Mr. Adle
r who testified here, he operates his law
3 office from his home in Manhattan; is that right?
4 A Yes.
5 Q And he's a solo practitioner; is that correct?
6 A Yes.
7 Q He's all by himself in his apartment, right?
8 A I don't know now but he was at that time.
9 Q I'm sorry.
10 Now, it was Mr. Adler who prepared the documents
11 that are in evidence, that said that the Grossmans owned
12 100 percent; is that correct?
13 A That's correct.
14 Q And it was Mr. Adler who prepared that letter where
15 it was allegedly from Joyce Grossman, right?
16 A Yes.
17 Q Where she says "I owned 75 percent and I'm
18 authorizing Bruce Gordon to tell other people that he owns
19 my shares," right?
20 A That's correct.
21 Q Now, Mr. Adler was performing work for Who's Who
22 Worldwide, right?
23 A Right. 24 Q He was drafting up these do
cuments to memorialize the 25 founding of Who's Who Worldwide, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8090 Reffsin-cross/White
1 A Right.
2 Q And but ultimately you paid Mr. Adler for his legal
3 work, right?
4 A Absolutely correct.
5 Q Now, isn't it true that the reason you and Mr. Gordon
6 went to Mr. Adler and you paid him with your own personal
7 money is because you knew that if Mr. Flaum did it, it
8 would be reported to the bankruptcy court and they would
9 see what documents he was creating?
10 A Absolutely not.
11 Q That never entered your mind?
12 A Never entered my mind.
13 Q Do you make it a practice to pay the legal fees of
14 your accounting clients?
15 A I make it a practice when I have concern about
16 whether they get paid and I make sure they get paid if
17 they are doing a favor, a
nd if I get them involved, I make
18 sure they get paid. I try to make sure they get paid.
19 Q Well, you paid Mr. Adler $1,500; is that correct?
20 A That's correct.
21 Q Are you saying that Who's Who Worldwide couldn't pay
22 him, that's why you paid him?
23 A No. I'm saying Mr. Gordon might not have to pay 24 him. Mr. Gordon didn't like to pay legal fees or 25 accounting fees.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8091 Reffsin-cross/White
1 Q But is it fair to say though that Mr. Adler's $1,500
2 is a drop in the bucket compared to Mr. Flaum and
3 Mr. Ackerman?
4 A My accounting fees compared to what Mr. Gordon took
5 out is a drop in the bucket but I used to have to fight
6 with him to get paid also.
7 Q Now, Mr. Reffsin, when Publishing Ventures -- I'm
8 sorry.
9 When Publishing Ventures was buying the
10 condominium at Hummingbird Road in late '92 and early '93,
11 they got that money from Who's Who Worldwide; is that
12 correct?
13 A That's correct.
14 Q And it was at the time considered to be a loan,
15 right?
16 A Yes.
17 Q Who's Who Worldwide was loaning it to PVI?
18 A Umm-hmm. I meant yes.
19 Q Ostensibly Publishing Ventures was supposed to pay it
20 back at some point?
21 A At some point, yes.
22 Q And there was not any note prepared at that time, was
23 there, a written promissory note? 24 A Initially, no. 25 Q Okay.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8092 Reffsin-cross/White
1 Now, at the time of the purchase, at the time of
2 the loan, no promissory note was created?
3 A No, that's correct.
4 Q Now, taking a look at Exhibit 671 in evidence, again,
5 that's the fax that M
r. Adler sent to you on March 30,
6 1994.
7 If you look at the top document under the fax
8 cover sheet Mr. Adler is drafting up that promissory note,
9 right?
10 A He's drafting a revision, yes.
11 Q And so there was no signed official note prior to
12 this time, right?
13 A There was an understanding prior to this time.
14 Q There was an understanding, it was not a written
15 promissory note?
16 A That's correct. A formal written promissory note,
17 that's correct.
18 Q On March 30, 1994 when Mr. Adler faxes you that,
19 that's just a revision, right?
20 A That's correct.
21 Q And it is not yet finalized, correct?
22 A It hasn't been signed, yes.
23 Q Right. 24 And so whenever it was finalized it was after 25 March 30, 1994, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8093 Reffsin-cross/Whi
te
1 A Yes, it would have to be.
2 Q And so far as you know from the time this loan was
3 made in late 1992 or early 1993, up until early 1994 when
4 you asked, when you and Mr. Gordon asked Mr. Adler to
5 prepare such a note, there was no such note in existence?
6 A There was an understanding.
7 Q There was an understanding, but no written note in
8 existence, correct?
9 A There was a written note but it was a very simple
10 note. The information that was gotten for this note was
11 taken from a piece of paper. But it was very simple.
12 Q Well, have you ever -- you've been asked about this
13 note numerous times by federal agents in the past, haven't
14 you?
15 A Yes.
16 Q Have you ever indicated before that there was some
17 sort of a handwritten preliminary note?
18 A Well, I had prepared some -- just preliminary scratch
19 notes ba
sed on discussions I had with Mr. Gordon, but
20 there was no note. There was nothing signed.
21 Q So you had notes about what your understanding was?
22 A Yes.
23 Q But there was never any written promissory note? 24 A No, there was not. 25 Q Take a look at Exhibit 816 which is in evidence.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8094 Reffsin-cross/White
1 Now, that is a copy of a deposition that you
2 gave, right?
3 A Umm-hmm.
4 Q And you gave that deposition on May 4, 1994, right?
5 A Right.
6 Q And that deposition was in connection with the Who's
7 Who bankruptcy proceeding, correct?
8 A Yes.
9 Q And if you look on pages 67 and 68, could you, just
10 to yourself, review your testimony on those two pages.
11 A (Perusing.) Yes.
12 Q On those two pages, am I correct, that you are being
13 asked abo
ut the Hummingbird Road condominium?
14 A Yes.
15 Q Let me read from page 68.
16 "Question: And the purchase price of the condo
17 is presumably approximately $1,000,000?
18 "Answer: No. There was -- I believe the
19 original purchase price was substantially less than that,
20 but there was a major renovation made to it.
21 "Question: Is there a note that represents or
22 reflects this investment?
23 "Answer: Yes. 24 "Question: When was it converted from an 25 investment to a note?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8095 Reffsin-cross/White
1 "Answer: I believe the note was created early
2 '93, if I recall the date.
3 "Question: Sometime?
4 "Answer: Sometime around the time that the
5 property was acquired."
6 Do you see that testimony that you gave?
7 A Yes, I do.
8 Q In fact, you kne
w that not more than five weeks, six
9 weeks before this Mr. Adler was creating that note, you
10 knew that, right?
11 A The revised note, yes.
12 Q Didn't you just testify that there was no note
13 created in early '93?
14 A No signed note, that's correct. The terms were
15 determined at that point, but there were no signed notes.
16 Q Did you interpret this question as asking you if
17 there was an understanding or whether there was a written
18 note?
19 A I'm not sure what I interpreted at the time. I may
20 have even said the wrong date. I don't know.
21 Q But it refers to a note, does it not?
22 A Yes, it does.
23 Q It doesn't just talk about a loan, it talks about a 24 note? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8096 Reffsin-cross/White
1 Q And a note connotes, means, something written, rig
ht?
2 A That's correct.
3 Q All right. Now, let me go back or move on to a
4 different subject.
5 We talked about early 1993 Dr. Grossman returned
6 certain money to Who's Who Worldwide.
7 A Yes.
8 Q I want to talk about the money going out.
9 In December of '92 Who's Who Worldwide sent
10 Dr. and Mrs. Grossman, a gross salary of $400,000, right?
11 A Yes.
12 Q Now, $400,000 was more than Mr. Gordon ever earned up
13 to his point for Who's Who Worldwide; is that right?
14 A A little bit more, yes.
15 Q Mr. Gordon was in day-to-day charge of the company,
16 right?
17 A Yes.
18 Q Dr. Grossman lived out in California, right?
19 A Yes.
20 Q How did it come about that -- who made the decision
21 that Dr. Grossman was going to get $400,000 in salary at
22 the end of '92?
23 A Mr. Gordon. 24 Q Tell us how that ca
me about. 25 A How the $400,000 came about?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8097 Reffsin-cross/White
1 Q Tell us -- how did you first hear that Dr. Grossman
2 was to get any salary in '92?
3 A We had a little discussion about the Grossmans
4 getting salary. I had no idea about what the amount was
5 going to be, but I thought he had some arrangement with
6 the Grossmans.
7 In early or mid, early December I got a call from
8 Liz Sautter and Liz Sautter said they were issuing a check
9 to the Grossmans, should they withhold California
10 withholding taxes? And she told me that she was issuing,
11 you know, the salary, $400,000.
12 Q I'll let you finish, but I want to ask you a question
13 about it.
14 A Yes.
15 Q If I understand you correctly, you are not consulted
16 in advance about that?
17 A No.
18 Q Liz Sautter called you up and said, hey, Liz Sautter
19 wants me to send the Grossmans $400,000, all I want to
20 know if I should withhold California taxes?
21 A Yes.
22 Q Continue the story.
23 A Then I ultimately had a discussion with Mr. Gordon to 24 find out what he was doing and he said he was sending them 25 a salary and they had agreed -- he had agreed with them to
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8098 Reffsin-cross/White
1 that amount and I said fine. I said if you owe it to
2 them, pay it to them. And it's a good time to do it
3 because the corporation is making money and you'll get a
4 tax benefit for it.
5 Q And did you question him at all about the amount?
6 A No, not really. I knew the Grossmans had put up
7 their credit for the merchant account, at that point I
8 knew they were involved with stockholde
rs. It was a
9 little high but if you allocate it over three or four
10 years of activity it is not a great deal of money for
11 stockholders to obtain.
12 Q So the money goes out in December of 1992, right?
13 A Right.
14 Q And you subsequently learn that it comes back, the
15 net after taxes comes back in January of '93, right?
16 A That's correct.
17 Q And then that is used to reduce Mr. Gordon's loan
18 account; is that correct?
19 A That's correct.
20 Q Now, given all the circumstances, namely that 400,000
21 is a lot of money, that Dr. Grossman wasn't a day-to-day
22 participant in the company and the fact that it goes out
23 and comes back very quickly, did that ever raise any 24 question in your mind as an accountant? 25 MR. TRABULUS: Objection, Your Honor, to form.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8099 Ref
fsin-cross/White
1 THE COURT: Overruled.
2 A Well, it raised a question that obviously
3 Mr. Grossman even loaned him the $235,000.
4 Q Well, did it ever occur to you that in fact this was
5 a device by which Mr. Gordon could on paper make it look
6 like he was reducing his loan account?
7 A Does it look that way? Yes, but I was not privy to
8 the discusses that he had between Mr. Grossman at the time
9 and whatever decisions they made they made. It's not my
10 position to determine whether something is right or wrong
11 in a case like that.
12 Q But is it fair to say from what you said it looked
13 that way and you had certain suspicions but they were
14 allayed by Mr. Gordon?
15 A Yes. Obviously I asked Mr. Gordon what that money
16 was, and he said it was a loan.
17 Q Now, Mr. Gordon also made a repayment of
18 approximately $20,000 right aro
und the time of the
19 bankruptcy filing; isn't that right?
20 A Yes.
21 Q And how did you learn about that one?
22 A Only through the bank reconciliations.
23 Q You only knew about it after the fact. 24 A That's correct. 25 Q And have you since looked at the bank records or the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8100 Reffsin-cross/White
1 trial exhibits here to learn that that $20,000 in fact
2 just came from another corporation and went to Mr. Gordon
3 and then went to Who's Who Worldwide?
4 A I did not look at Sterling or any of the other -- I
5 mean, I learned from the discussions you had here, but I
6 didn't look at those exhibits because I didn't do any work
7 on those exhibits or very little work.
8 Q Okay.
9 So, in other words, the first time you learned
10 that this alleged repayment was in fact money h
e had
11 obtained from another one of his corporations was from the
12 testimony at trial?
13 A That's correct.
14 THE COURT: Incidentally, members of the jury,
15 we'll work a little later before we go to lunch because I
16 have a Judge's meeting. I didn't know if I mentioned that
17 and the lunch hour will extend until 2:15, whenever we
18 break.
19 BY MR. WHITE:
20 Q Now, Mr. Reffsin, let me ask you about the time
21 period around the bankruptcy filing. That's March of
22 1994, correct?
23 A Right. 24 Q And were you aware that in the time period 25 immediately preceding the bankruptcy petition, large
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8101 Reffsin-cross/White
1 amounts of money were transferred out of Who's Who
2 Worldwide to other companies that Mr. Gordon controlled?
3 A I know there were transfers
to Sterling during the
4 January-February period in 1994. Ms. Gaspar had indicated
5 to me there were some transfers made to some other
6 entities, but that he had returned those transfers, some
7 of them.
8 Q In other words, that money went out to other
9 corporations but some of it came back to Who's Who
10 eventually?
11 A That's correct.
12 Q Did you ever learn that that money that went out to
13 other corporations was then being used for Mr. Gordon's
14 benefit?
15 A No, we never did any work with the other companies.
16 Q Did you not do the books for Sterling Who's Who also?
17 A We got involved initially. The books were maintained
18 at the time by Maria Gaspar. We were involved with
19 Sterling up through the end of 1993, and from that point
20 on Maria Gaspar who was maintaining the books, and all we
21 saw basically whatever the creditors
saw, the trial
22 balances.
23 Q Now, do you know or did you have any discussions with 24 Mr. Gordon where you indicated to him that Who's Who 25 Worldwide could not continue after the bankruptcy to pay
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8102 Reffsin-cross/White
1 his American Express bills?
2 A Oh, yeah. It was specifically told that there can be
3 no personal loans at all in the debtor.
4 Q Told by whom?
5 A By me.
6 Q To Mr. Gordon?
7 A That's correct.
8 Q And what, if anything, did Mr. Gordon say in
9 response?
10 A He didn't say anything. He accepted it.
11 Q Was it your understanding or did you have a
12 discussion with him about how his future American Express
13 bills would be paid?
14 A I was under the impression there weren't going to be
15 any future American Express bills at that po
int; that he
16 was going to live his salary which was at that time
17 supposed to be $150,000.
18 Q So is it fair to say that if he had other
19 corporations pay his American Express bills, that was or
20 would be a surprise to you?
21 A It was. I didn't expect it to have that.
22 Q Let me show you a chart that is already in evidence.
23 Now, Mr. Reffsin, if you wouldn't mind stepping 24 down for a minute. Take a look at this chart. 25 Now, we'll talk about the left side of it for now
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8103 Reffsin-cross/White
1 so I'll stand in front of the right side.
2 MR. TRABULUS: What exhibit number is that?
3 MR. WHITE: I'm sorry. Exhibit 837.
4 THE COURT: You are standing in front of the
5 jurors probably, so just be on the side.
6 THE WITNESS: I'm sorry. Shall I stand over
7 there mayb
e?
8 MR. WHITE: If you can see it from there.
9 BY MR. WHITE:
10 Q Now, do you see on the left the shaded box that
11 represents Who's Who Worldwide bank accounts?
12 A Yes, sir.
13 Q And do you see the funds going out in February and
14 March to other companies including Sterling Who's Who?
15 A Yes.
16 Q So I understand, you were aware of those transfers
17 out of Who's Who Worldwide at that time?
18 A Yes.
19 Q You were aware of those transfers?
20 A Yes.
21 Q And as you see some comes back from Sterling Who's
22 Who, that is where you were referring to as Maria Gaspar
23 told you some came back? 24 A That's correct. 25 Q Now, beyond when the money gets transferred out of
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8104 Reffsin-cross/White
1 Who's Who Worldwide, in other words, everything from here
2 over to the right --
3 A Umm-hmm.
4 Q -- Is it fair to say you are not aware of this other
5 stuff?
6 A No, we didn't do anything in Sterling Who's Who
7 because from our point of view it didn't even start up
8 until something like June or July of '94 so we didn't get
9 that involved.
10 Q So you were -- were you aware that money went from
11 Who's Who to Sterling and then Sterling was paying
12 Mr. Gordon's American Express and car lease?
13 A I wasn't aware of that.
14 Q Were you aware that money went out to a variety of
15 Registry Publishing accounts which then paid Mr. Gordon's
16 American Express bill?
17 A No, I was not aware -- Maria had indicated he had set
18 up some Registry Publishing accounts but I thought they
19 had to do with the Sterling operation.
20 Q And were you aware that money eventually found its
21 way to W
ho's Who Executive Club where they paid his
22 American Express bill?
23 A No, that I was not aware of. The monies that went to 24 Who's Who Executive Club was supposed to cover the cost of 25 the printing of the Tribute magazine.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8105 Reffsin-cross/White
1 Q You may sit back down again.
2 Now, tell us when, if at all, you found out about
3 these other transfers and these other corporations?
4 A Maria had indicated that they had set up some other
5 accounts but Mr. Gordon was always setting up other
6 accounts, so from an accounting viewpoint we incorporated
7 them. For example, if Who's Who Worldwide had two bank
8 accounts we just incorporated two bank accounts. We were
9 not aware of the fact that he was taking out monies for
10 personal use. It was my understanding those monies were
11 being
used to fund Sterling Who's Who's operations. And,
12 in fact, the autos, there were auto payments being made by
13 Who's Who Worldwide during the bankruptcy.
14 Q So I'm clear, you are saying that it was your
15 understanding that the money that gets transferred from
16 Worldwide to Sterling, was not to be used for Mr. Gordon's
17 personal expenses?
18 A No, they were to fund Sterling's operations because
19 he had 50, 60 employees and he was just starting up.
20 Theoretically, that was the understanding, he needed money
21 to carry the operation until it started to pay for itself.
22 Q Did you have specific discussions where he told you
23 that he wasn't going to have Sterling or any of his other 24 corporations continue to pay his American Express bills? 25 A I don't think I specifically discussed that. I just
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8106 Reffsin-cross/White
1 assumed it.
2 Q You indicated before, though, that he told you that
3 he was going to live on his salary, though?
4 A Yes, that's why we had the $150,000 salary created by
5 the Court. It was acceptable as an acceptable salary.
6 Q Now, in March of '94, when all of these transfers
7 start, your offer and compromise is still pending with the
8 IRS and Mr. Gagliardi, right?
9 A It was pending but we really didn't do much towards
10 it at that time.
11 Q Right.
12 As you indicated before, Mr. Gordon could have
13 borrowed money from a number of sources to pay back the
14 IRS, right?
15 A He could always borrow money to pay back the IRS.
16 Q Looking at this chart, though, is it clear to you
17 that the money that Registry Publishing and Who's Who
18 Executive Club and Sterling gave to Mr. Gordon or loaned
1
9 to Mr. Gordon, all that could have been used to pay the
20 IRS?
21 A Sure.
22 Q And if you take a quick look at the money that goes
23 to Mr. Gordon, it's over $200,000, isn't it? 24 A Yes. I saw the numbers. I was somewhat shocked. 25 Q And $200,000 is more than the whole offer that was
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8107 Reffsin-cross/White
1 made to the IRS, right?
2 A No, not really. We also offered to the DOJ at the
3 time. It was really $400,000.
4 Q Eventually the offer and compromise was going to
5 include that DOJ penalty, right?
6 A That's what it ended up turning out to be.
7 Q That's what it ended up being?
8 A That's correct.
9 Q And ultimately those two liabilities together were
10 going to be settled for the 150 that you offered?
11 A That's correct.
12 Q Even that 150 was only goin
g to be paid over three
13 years, right?
14 A I believe it was six -- I think it was a year
15 and-a-half.
16 Q I'm sorry, I misspoke. You're right.
17 It was 50,000 six months later and 85 six months
18 or a year later?
19 A That's correct.
20 Q So in the space of -- by the end of '94, Mr. Gordon
21 clearly had assets of over $200,000 in a lump sum that he
22 could have applied to his IRS debt?
23 A That was obvious, yes. 24 Q Now, you weren't aware of those transfers but you 25 were aware of the existence of Registry Publishing, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8108 Reffsin-cross/White
1 A Yes.
2 Q And you were aware of the existence of Who's Who
3 Executive Club?
4 A Yes.
5 Q And did you know about all the different bank
6 accounts that Registry Publishing had?
7 A No, I di
d not. I didn't get involved in that.
8 Q Is it fair to say -- well, have you reviewed or are
9 there any other books and records of Registry Publishing?
10 A I don't know. Maria Gaspar kept those and it may be
11 in the papers that were taken by the marshals at that
12 time. I know Mr. Gordon says he's sitting with hundreds
13 of boxes of information. Because we're missing work
14 papers also that were maintained in Who's Who Worldwide
15 when they took them.
16 Q Okay. Now -- I'm sorry, I lost my train of thought.
17 Now, did you have any discussions with Mr. Gordon
18 around the time of the bankruptcy, either shortly before,
19 shortly after, about what being in bankruptcy would mean
20 to Who's Who Worldwide?
21 A Yes.
22 Q Did you explain to him that it would involve
23 extensive disclosure of the company's finances? 24 A Absolutely. 25 Q When d
id you have these discussions?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8109 Reffsin-cross/White
1 A The issue of bankruptcy only came up when he lost the
2 case to to Reed Elsevier sometime in the middle of
3 February and he was trying to obtain bonding to fund the
4 judgment, and he said he couldn't get bonding because they
5 required 100 percent collateral.
6 That's when I suggested that maybe bankruptcy was
7 the right tool. I explained to him once you go into
8 bankruptcy you are under the scrutiny of the court.
9 Everything you do is watched. And so was I.
10 Q So that was prior to the time of the bankruptcy
11 filing, right?
12 A Oh, yeah, that was around February.
13 Q That was in February of '94, correct?
14 A That's correct.
15 Q And so with the -- was it after he lost the Reed
16 Elsevier lawsuit?
17 A It w
as right after he lost it. That's what spurred
18 the thought of bankruptcy.
19 Q So after Mr. Gordon loses that case, after you tell
20 him that financial disclosure is something that will
21 happen as a result of a bankruptcy filing, then all these
22 transfers to other corporations take place, right,
23 according to this chart? 24 A You are talking about in March? 25 Q Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8110 Reffsin-cross/White
1 A Yes.
2 Q So, in other words, all of this money after these
3 discussions you had with him gets transferred out of Who's
4 Who, Sterling, and then from Sterling onto other
5 corporations and then they pay Mr. Gordon's personal
6 expenses?
7 A Well, there were no transfers subsequent to the
8 bankruptcy filing. From what I understand is that the
9 transfers that he made, and he
and Maria, it wasn't
10 involved. Some transfers were made like the 17th or the
11 18th of March, but it was my understanding those were the
12 transfers that came back. Everything that he transferred
13 on the 17th or 18th of March were put back into Who's Who
14 Worldwide.
15 Q Okay.
16 So aside from the stuff that gets put back, your
17 understanding between the time of roughly when the
18 judgment against them came down and the bankruptcy filing
19 is when those transfers took place?
20 A When the in and out took place, yes.
21 MR. WHITE: Your Honor, before I gauge what topic
22 to move on to, can you tell me how late we're going to
23 go? 24 THE COURT: About another 10 minutes. 25 MR. WHITE: Another 10 minutes. Okay.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8111 Reffsin-cross/White
1 BY MR. WHITE:
2 Q No
w, you indicated that the original offer was just
3 for that back tax liability and the separate was the
4 $254,000 in promoter penalties, right?
5 A Unusually I didn't think that the promoter penalties
6 were compromisable. So we didn't anticipate it. It
7 wasn't until I had a discussion with Mr. Gagliardi where
8 he said he would talk to the Department of Justice and see
9 if he could do something with it.
10 Q And eventually the answer was that it was
11 compromisable, right?
12 A Yes.
13 Q And the way -- it was the collateral agreement that
14 governed whether or not -- I'm sorry. It was the
15 collateral agreement that governed how much of those
16 penalties and on what schedule they were to be paid back?
17 A That's correct.
18 Q By the way, you reviewed the collateral agreement,
19 right?
20 A Yes.
21 Q And is it fair to say that if M
r. Gordon owned or
22 controlled 75 percent of any corporation, that
23 corporation's income would be subject to that agreement? 24 A Ridiculously, yes. 25 Q In other words, the Justice Department drove a hard
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8112 Reffsin-cross/White
1 bargain, right?
2 A Ridiculously hard.
3 Q And that's the way you read that agreement, right?
4 A That's correct.
5 Q Is it fair to say it's pretty apparent from the
6 agreement that that's what its terms are?
7 A Yes, it says directly or indirectly controlled.
8 Q Throughout this period as you've testified you said
9 you didn't know that Mr. Gordon owned 75 percent of the
10 company, right?
11 A No. Which period?
12 Q You're right, I'm sorry.
13 After, at some point you came to learn that the
14 Grossmans owned 100 percent?
15
A That's correct, in 1993.
16 Q Thereafter it was your understanding Mr. Gordon owned
17 nothing?
18 A That's correct.
19 Q If, in fact, that was incorrect, then payments, and
20 he did own 75 percent, then payments would have been made
21 under that collateral agreement; is that correct?
22 A Yes, that's correct.
23 Q And the way that was done is each year when 24 Mr. Gordon filed his normal tax return, he would also 25 calculate in addition to that year's taxes what he owed
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8113 Reffsin-cross/White
1 under this collateral agreement, right?
2 A Yes.
3 Q And, in fact, in one year, I think it was 1991, when
4 you thought he initially owned 75 percent, you did that
5 calculation for him, right?
6 A That's correct.
7 Q And you included a portion of the corporate income to
8 satisfy that collateral agreement, right?
9 A Yes.
10 Q Now. In later years when Mr. -- When you are
11 preparing Mr. Gordon's tax returns, you are calculating
12 what he owes under that collateral agreement just based on
13 his personal income; is that right?
14 A That's correct.
15 Q Now, take a look at Government's Exhibit 427 which is
16 in evidence, and I'm going to put on the easel for the
17 jury 427-A which is an enlargement of that letter.
18 Let's look at the first paragraph of this
19 letter. It's a letter from you to Mr. Gagliardi, right?
20 A Yes.
21 Q September of 1994?
22 A Yes.
23 Q And it says, "Dear Sir, you requested information on 24 the status of the payments by Mr. Bruce Gordon of his 25 obligation to the Department of Justice for his liability
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8114 Reffsin
-cross/White
1 for the year 1993." Right?
2 A Yes.
3 Q "The total amount due for 1993 is $14,025, and he has
4 paid to date $5,500," right?
5 A Yes.
6 Q Now, what that means is, if I understand it, is in
7 1994 when you were filing Mr. Gordon's 1993 return, you
8 were calculating what he owed under this agreement?
9 A Right.
10 Q And you calculated that it was the 4,025?
11 A Yes.
12 Q And when the tax return was filed, Mr. Gordon
13 couldn't pay the whole 14,000?
14 A That's what he claimed.
15 Q That's what he claimed to you?
16 A Yes.
17 Q And he paid 5,500, though, right?
18 A He had paid a portion of it.
19 Q And this presented a problem in connection with the
20 offer and compromise, did it not?
21 A Not really. I mean, at time we did the offer and
22 compromise, he didn't file his 1993 return, we knew h
e had
23 to do with it. 24 Q I'm sorry, my question wasn't clear. One of the 25 conditions of the IRS accepting an offer and compromise is
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8115 Reffsin-cross/White
1 that the taxpayer is current with all his tax filings; is
2 that correct?
3 A That's correct.
4 Q And in this case since Mr. Gordon owed this and
5 hadn't paid it, that was going to be a rich hitch, an
6 obstacle?
7 A It could be.
8 Q And so this letter, correct me if I'm wrong, was
9 proposing to Mr. Gagliardi, well, can we include the
10 promoter penalties and this approximately $8,000 that he
11 owes for 1993 in the big package and include that as part
12 of the compromise?
13 A Well, this was to promote a penalty. It was for the
14 calculation of that year. At the time I was assuming that
15 Mr. Gordon
was living on the salary that he was supposed
16 to be taken out of Who's Who Worldwide, this was in '94,
17 he didn't have the money.
18 Q So for the 1993 part of that agreement what he owes
19 is $8,000?
20 A That's correct.
21 Q Now, it says in the middle of the second paragraph --
22 THE COURT: Well, I think we ought to take a
23 break at this point. 24 MR. WHITE: All right. 25 THE COURT: Do you want to remove that easel.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8116 Reffsin-cross/White
1 MR. WHITE: I'm sorry.
2 THE COURT: Members of the jury,, we'll recess
3 until 2:15. You will have a long lengthy delightful lunch
4 hour. As I said before, you don't have to eat for the
5 entire period of time. If it's nice outside take a walk
6 or do something.
7 In any event, don't discuss the case. Keep an
8 open min
d.
9 We'll recess until 2:15. Have a nice lunch.
10 (Jury exits.)
11 THE COURT: I see Ms. Scott is poised with a
12 case. Do you have a case for me?
13 MS. SCOTT: Yes, Your Honor.
14 THE COURT: How did I know you had a case?
15 MS. SCOTT: United States v. Dennis.
16 THE COURT: What is the citation?
17 MS. SCOTT: 843 F.2d 652, and the page is 656.
18 THE COURT: What does it say?
19 MS. SCOTT: It says that cross-examination is
20 permissible on the subject of a proffer session between
21 the witness and the lawyer if the lawyer was accompanied
22 by a third person who would serve as another witness to
23 the conversation. That frees up the lawyer from being an 24 unsworn witness. 25 Now, the difference between this case and our
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8117 Reffsin-cross/White
1 case is that the
lawyer in this case was a defense
2 attorney and he was cross-examining a government witness.
3 But the principal as stated clearly here that
4 cross-examination is permissible under certain
5 circumstances because if there was a third-party present
6 who would act as a witness if that person was called to
7 testify.
8 MR. TRABULUS: Your Honor, if that case was
9 revealed to the jury that the person who was doing the
10 cross-examination was present at the meeting? Because
11 that was the basis on which I objected, that by revealing
12 to the jury that Mr. White was present at the meeting, he
13 through his questions became an unsworn witness and I
14 think that may not be what is in that case.
15 MR. WHITE: Just so the record is clear, I didn't
16 go any further than that. So there can't be any prejudice
17 because I didn't ask any questions of Mr. Reffsin what
18 took place at that meeting.
19 MR. WALLENSTEIN: And Judge Spatt ruled that you
20 can't.
21 MR. WHITE: I want to make sure there was no
22 prejudice up to that point, that's clear.
23 MR. TRABULUS: The record will speak for itself 24 but the point is that is why I stood up. 25 THE COURT: Do you know the answer to that
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8118 Reffsin-cross/White
1 question.
2 MS. SCOTT: I do not. I'll look it up.
3 MR. WHITE: Your Honor, my recollection is there
4 is a case of relatively recent vintage involving a case
5 from the Southern District that went to the Second Circuit
6 where the prosecutor at the trial for perjury was the
7 prosecutor who had questioned that witness in the grand
8 jury about his perjurious testimony and that was ruled to
9 be okay but we'll try to find that.
10
MR. TRABULUS: There's a little difference there
11 because there was a record what was said and there is a
12 difference because there were no notes and there is just
13 the memory of the prosecutor.
14 THE COURT: I'll take a look at it and you may
15 bring other cases to my attention.
16 MS. SCOTT: Your Honor, may I hand you this
17 case?
18 THE COURT: Yes, sure.
19 (Luncheon recess taken.)
20
21
22
23 24 25
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8119 Reffsin-cross/White
1 A F T E R N O O N S E S S I O N.
2 (Jury enters.)
3 THE COURT: Please be seated, members of the
4 jury.
5 You may proceed.
6 MR. WHITE: Thank you, Your Honor.
7 CROSS-EXAMINATION
8 BY MR. WHITE: (Continued.)
9 Q Now, Mr. Reffsin, I want to clarify something that
10 you said
before before we get back to this document.
11 When you submitted the offer and compromise in
12 July of 1993, you did not know the extent to which
13 Mr. Gordon's loan balance was increasing between January
14 and July of '93; is that right?
15 A That's correct.
16 Q You did, however, know of the reduction which was due
17 to the Dr. Grossman return of the $235,000?
18 A Yes, I did.
19 Q Subsequently, however, while the offer and compromise
20 was pending, you learned of the year end 1993 figure,
21 correct?
22 A Yes.
23 Q And you had in 1992, in late 1992, told Mr. Gordon 24 that you wanted to see some repayments, right? 25 A Right.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8120 Reffsin-cross/White
1 Q And shortly after that you hear about the
2 Dr. Grossman repayment.
3 Now, look at your -- I want to show y
ou
4 Defendant's Exhibit EA which is the chart that you
5 yourself prepared of the loan account (handing.)
6 Under your chart at the end of 1992, how much did
7 Mr. Gordon owe Who's Who Worldwide?
8 A $485,000.
9 Q Now, by the end of 1993, how much did he owe Who's
10 Who Worldwide?
11 A $418,000.
12 Q And that includes a reduction of that $235,000
13 reduction?
14 A Yes, it does.
15 Q So the loan account went down about $70,000, right?
16 A That's correct.
17 Q And it means that Mr. Gordon had spent -- let me back
18 up.
19 Since you knew about the $235,000 reduction, you
20 knew that he had spent more than 150,000 in 1993, correct?
21 A Yes, based on the final balances. Yes.
22 Q And so is it fair to say that you knew that he was
23 not cutting down on his expenses at this point and he was 24 not reducing to any significa
nt degree his loan balance. 25 A Well, he reduced it but he was not stopping the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8121 Reffsin-cross/White
1 continuation of the payments on behalf of himself.
2 Q Okay.
3 And so you knew that in September of 1994, when
4 you wrote this letter on September 24, 1997, you knew all
5 that.
6 A Yes.
7 Q Let's look at -- we looked at the first paragraph.
8 Now, the second paragraph starting with the word
9 "taking," "taking into consideration the location he must
10 live and work it is understandable why he has difficulty
11 in paying the additional amount. However, he is trying to
12 pay it out and he is diligently making payments, as you
13 can see, by the attached copies of the money orders that
14 he has sent out."
15 Do you see that?
16 A Yes.
17 Q And the next paragrap
h says, "he is going to have to
18 borrow the money he has offered in the offer and
19 compromise submitted. Where shall he borrow this money?
20 Perhaps he should cease eating."
21 Now, you were aware, were you not, that he could
22 borrow that money from Who's Who Worldwide?
23 A Not at that time. 24 Q You're correct. He could borrow it from other 25 corporations that he had.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8122 Reffsin-cross/White
1 A If it was available to him, yes.
2 Q Is it fair to say you appreciated, you knew what sort
3 of life-style Mr. Gordon was living at this point, right?
4 A I knew how he was living up to the point of
5 bankruptcy, yes.
6 THE COURT: One moment.
7 You may proceed.
8 MR. WHITE: Thank you.
9 BY MR. WHITE:
10 Q You knew, for example, that Mr. Gordon was splitting
11 his time, spending some time at the condominium and the
12 rest at the penthouse living there?
13 A I knew he was spending time there, yes.
14 Q And you knew he was driving a nice car at that time,
15 right?
16 A Well, the corporation was still paying for it.
17 Q Right.
18 Did you notice any appreciable change in his
19 life-style after the bankruptcy?
20 A Well, the matter of fact is that the 150,000 a year
21 that the bankruptcy court agreed that was sufficient. He
22 was a single man, he could live a very nice life-style on
23 $150,000 a year, he wasn't exactly in poverty. 24 Q From the beginning of '94 to September of '94, did 25 you see any books and records of the corporations to
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8123 Reffsin-cross/White
1 indicate how much Mr. Gordon was spending in '94?
2 A I really didn't s
pend any time on the other
3 companies. My primary involvement was Who's Who Worldwide
4 in trying to save Who's Who Worldwide. I did very little
5 work. Some of my people might have done some bank recs
6 here but I did not look at the '94 records, at least not
7 at initial stages.
8 Q You really didn't think that Mr. Gordon having to pay
9 this extra $8,000 would make him cease eating; is that
10 right?
11 A No, that was a little bit of, you know, a
12 dramatization.
13 Q It was a dramatization?
14 A Yes.
15 Q He might have to cease eating at four star
16 restaurants but not altogether?
17 A Yes.
18 Q And you knew he frequented four star restaurants?
19 A Yes.
20 Q Is it fair to say that Mr. Gordon, the $8,000 we are
21 talking about that he can't pay here, you know from
22 reviewing his American Express records he might drop that
23 on suits and clothes in one sitting, right? 24 A Well, I had thought that based on the salary 25 arrangement that he had, he was living not a low
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8124 Reffsin-cross/White
1 life-style but a reasonable life-style and he wasn't
2 spending that kind of -- and I know people who make
3 $150,000 a year don't by $7,000 suits.
4 Q Especially if they owe the IRS 3 and-a-half million,
5 right?
6 A Well, I'm not sure if that enters into the case
7 sometimes.
8 Q Well, take a look at Government's Exhibit 475 -- I'm
9 sorry, 474 and 475 in evidence. If you look at -- those
10 are American Express statements for July and August of
11 1994, correct?
12 A Yes.
13 Q And if you look to the second part of those
14 statements where Mr. Gordon's charges are listed as
15 opposed to Liz S
autter's --
16 A The second part is Mr. Gordon's, okay. Yes.
17 Q And look at Mr. Gordon's part for each of those
18 months.
19 A (Perusing.) Yes. I see it.
20 Q That reflects a trip to France and Italy in July and
21 August of '94, right?
22 A Right.
23 Q And did you make a rough calculation, is it fair to 24 say it is around $50,000 that the trip and the other 25 expenses in France and Italy cost?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8125 Reffsin-cross/White
1 A 47 and change, yes.
2 Q So that trip is maybe about six or eight weeks before
3 this letter that you wrote where you suggest that he might
4 have to stop eating, right?
5 A Yes.
6 Q And if you look on Exhibit 475 under the charges for
7 Mr. Gordon, do you see a charge that says NRSC? I think
8 it's on the top of the second page.
9 A Yes
.
10 Q Do you recall Mr. Garabedian from American Express
11 testifying that that was the National Republican
12 Senatorial Committee?
13 A Yes.
14 Q And it says donation there?
15 A Yes.
16 Q And how much did Mr. Gordon donate?
17 A $2,000.
18 Q And so he has enough money to live on that he's given
19 other money away that he doesn't have to, right?
20 A Obviously.
21 Q Actually before we move on, let me ask you another
22 question.
23 Going back to 427, this letter, it attaches 24 copies of money orders; is that right? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8126 Reffsin-cross/White
1 Q And the money orders are to the IRS, right?
2 A Yes, I believe so.
3 Q And they are each for $100, right? Actually I take
4 that back, some of them are for $500?
5 A Yes.
6 Q Yo
u were aware, were you not, that Mr. Gordon was
7 making $100 a month payments under the installment
8 agreement?
9 A I became aware of that.
10 Q When did you become aware of that?
11 A Sometime in 1992.
12 Q And did you also become aware from reviewing the
13 general ledgers and other books that that was being put
14 into Mr. Gordon's loan account?
15 A Yes.
16 Q And correct me if I'm wrong, the way it worked was
17 that the company would write a $100 check, it would get
18 cashed, turned into a money order and that money order
19 would be sent to the IRS?
20 A That's correct.
21 Q Now, you have experience, extensive experience
22 dealing with the IRS as an accountant, right?
23 A Yes. 24 Q You are aware that the IRS accepts personal checks, 25 corporate checks?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8127
Reffsin-cross/White
1 A Anything.
2 Q They'll take it however you want to send it, right?
3 A Right.
4 Q So far as you could tell was there any reason why you
5 would make that extra step and instead of just sending the
6 $100 check to the IRS they would go and get money orders
7 for it?
8 A Well, I've done it in the past on occasion, only
9 because sometimes when the taxpayer owes money to the
10 government the government is beating down his door. Very
11 frequently the taxpayers will have signatory authority on
12 accounts but it really is not their accounts. So what I
13 had suggested in those instances they use money orders
14 because I've had situations were the IRS has come in and
15 levied accounts that were not attributable to the taxpayer
16 involved. Then you have to go through the process of
17 getting them released.
18 Q And is
what you're saying, though, that by doing
19 that, by sending them a corporate check, a light bulb
20 might go off in the IRS's head and say, wait a minute,
21 this guy controls the other account?
22 A Right, and they might levy that account, that's
23 correct. 24 Q You mentioned Michael Hynes as someone who did 25 accounting work for your firm?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8128 Reffsin-cross/White
1 A Yes.
2 Q And Mr. Hynes had a daughter named Liz?
3 A Yes.
4 Q And she was an accounting student and she worked at
5 times for your firm; is that correct?
6 A Well, she was a computer buff. Mr. Hynes had very
7 little computer knowledge and he used her to do certain
8 accounting functions that he couldn't do or wouldn't do.
9 Q Do you recollect whether or not Ms. Hynes worked for
10 your firm in the summer of
1991?
11 A It's very possible, yes.
12 Q Let me show you what is in evidence as Government's
13 Exhibit 797.
14 Now, that is dated June 13, 1991, right?
15 A Yes.
16 Q And it's a letter, I'm sorry, a handwritten page
17 addressed to someone named Liz.
18 A Right.
19 Q And it's signed by someone named Liz H., right?
20 A Yes. Well, I don't see the signature.
21 Q I'm sorry, it's a legal-sized page if you pull it out
22 of the plastic.
23 A (Perusing.) Yes. 24 Q And it says, "Liz, these are Mr. Gordon's tax returns 25 for 1990. Since he has no personal checking accounts, I
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8129 Reffsin-cross/White
1 suggest you get money orders to pay the tax. Sending a
2 Who's Who check isn't a good idea."
3 Do you see that? Do you see that, Mr. Reffsin?
4 A Yes.
5 Q
And then it lists what it is that Mr. Gordon has to
6 pay, right?
7 A Umm-hmm. Yes.
8 Q And Liz H. says in the note, "I'll call you on Monday
9 and give you the information of who to get money orders
10 made payable to and where to send the returns. Hope you
11 had a good weekend."
12 Now, from reviewing that, is it a fair conclusion
13 that that's a note from Liz Hynes when she was working at
14 your firm to Liz Sautter forwarding to Mr. Gordon for his
15 signature the returns that your firm prepared for him?
16 A Yes.
17 Q Now, do you know where Ms. Hynes got the idea that
18 sending a Who's Who check isn't a good idea?
19 MR. WALLENSTEIN: Objection.
20 THE COURT: May I hear that again, please?
21 MR. WHITE: I'll rephrase it.
22 BY MR. WHITE:
23 Q Did you ever tell Ms. Hynes that sending a Who's Who 24 check isn't a good idea? 25
A I don't believe so.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8130 Reffsin-cross/White
1 Q Well, Mr. Reffsin, was there anyone else at your firm
2 in the summer of 1991 who might have given instructions
3 like that to Ms. Hynes other than you?
4 MR. WALLENSTEIN: Objection.
5 THE COURT: Overruled.
6 A Mike might have, her father.
7 Q Her father?
8 A Mike Hynes.
9 Q Mr. Reffsin, let me show you Government's Exhibit 421
10 in evidence. And I'll put 421-A, the enlargement up on
11 the easel.
12 I'm sorry, Mr. Reffsin. Do you need something
13 else?
14 A Yes. What is 421-A?
15 Q 421-A is simply the enlargement of 421.
16 A I'm sorry.
17 Q 421 is a November of 1993 letter that Mr. Gagliardi
18 sent to you, correct?
19 A Umm-hmm, yes.
20 Q And that's the one where he asked for a whole
21
category of additional documentation, right?
22 A Right.
23 Q And you went over with Mr. Wallenstein some of the -- 24 how you arrived at some of the responses that were made. 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8131 Reffsin-cross/White
1 Q And I want to ask you about those.
2 With respect to paragraph 3, you said original
3 cancelled checks -- I'm sorry, let me start with
4 paragraph 6.
5 "Verification of all monthly payments, if not
6 paid by your personal check."
7 Now, is it correct that you were aware that the
8 company was paying Mr. Gordon's monthly American Express
9 bill?
10 A Yes.
11 Q At this time?
12 A Yes.
13 Q Now, after -- and you sat down and discussed this
14 letter with Mr. Gagliardi, correct?
15 A Yes.
16 Q And after that, is it not correct that you had a
17 conversation with Mr. Gordon where you told him to go
18 through the Who's Who checks and to find the checks that
19 were responsive to that request?
20 A I believe I had a conversation with Liz in
21 Mr. Gordon's office, if there were any checks that were
22 paying personal expenses.
23 Q And was Mr. Gordon present for that? 24 A I believe so. I don't remember. 25 Q Then after that is it correct that Mr. Gordon, you
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8132 Reffsin-cross/White
1 had another conversation with Mr. Gordon about those
2 checks?
3 A About the checks from Who's Who Worldwide?
4 Q Yes.
5 A I don't believe I had another conversation with him.
6 I don't know what you are referring to.
7 Q Did you have a conversation where Mr. Gordon said
8 that he only wanted to give the IRS what was in his
9 pe
rsonal checking account and that he would not give the
10 IRS the Who's Who information?
11 A Well, he said that but I still, if Mr. Gagliardi
12 specifically requested those accounts, I would have gotten
13 it to him.
14 Q Okay.
15 But I'm not talking about paragraph 3 now, I'm
16 talking about paragraph 6 which is verification of monthly
17 payments if not paid by your personal check.
18 A (Perusing.) Yes.
19 Q Is it correct that you recognized that Who's Who
20 checks that paid Mr. Gordon's American Express bill were
21 responsive to that, but Mr. Gordon refused to let you
22 produce them to the IRS?
23 A Yes, but I consoled myself in the fact that the 24 American Express checks were not necessary expenses which 25 is what we were attempting to verify.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8133 Reffsin-cross/White
1 Q If you can look at paragraph 9, it asks for in
2 essence car leases that Mr. Gordon -- would it not call
3 for car leases for cars that Mr. Gordon operated?
4 A It says you own or operate, yes.
5 Q Is it correct after you discussed this with
6 Mr. Gagliardi, you talked to Mr. Gordon because you knew
7 that Who's Who was leasing him a car that he was using?
8 A Yes.
9 Q And Mr. Gordon told you that he was only an employee
10 of Who's Who Worldwide and he didn't want you to give the
11 IRS that information?
12 A This was a company car and it was only used for
13 business purposes.
14 Q And he told you that?
15 A Yes.
16 Q And is it fair to say that you explained to him that
17 it also related to cars that he operated since you knew
18 that they leased him a car?
19 A Yes.
20 Q So you made it clear to him that that should be
21
produced, right?
22 A Yes.
23 Q But he refused to provide that information about the 24 cars to you to give to the IRS; is that right? 25 A That's correct.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8134 Reffsin-cross/White
1 Q So is it fair to say that at least with respect to
2 paragraphs 6 and 9, that there was some information that
3 you believed was responsive but Mr. Gordon refused to let
4 you produce it?
5 A Well, I would say with respect to paragraph 9.
6 Paragraph 6 I don't think we went into in great detail
7 because I had Liz Sautter go through the personal checks
8 that were issued to Mr. Gordon during that period, all the
9 checks, and there were no necessary living expenses except
10 two medical checks that were made out to two doctors, but
11 again the form specifically says not to pick up any
12 nonrecurring med
ical expenses. So those were the only
13 items that would be of a nature that would be includable
14 on the 433 A.
15 Q Now, Mr. Reffsin, this letter, though, is a request
16 from Mr. Gagliardi, in addition to a 433, right?
17 A Well, I believe this letter is a letter requesting
18 verification of what is on the 433.
19 Q Well, no one asks you to give him a 433, right?
20 A Yes.
21 Q So all the information that should be on there will
22 be on that form?
23 A That's correct. 24 Q Now, he's asking you for additional stuff as well, 25 right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8135 Reffsin-cross/White
1 A Yes. To the extent it is applicable.
2 Q Right.
3 And number 6 asks for those other monthly
4 payments not paid by his check. It doesn't say for
5 monthly payments for necessary expenses, does it?
6 A Well, the presumption is that that's what he's
7 looking to verify because when I spoke to him on the
8 phone, I asked him, do you want all of the corporate
9 accounts? And Mr. Gagliardi said, I want to verify his
10 necessary business expenses. The corporate accounts at
11 the time had no necessary business expenses involved
12 except for those two medical payments. To me the American
13 Express checks were not necessary living expenses. He
14 made that decision as to, you know, not to submit all the
15 checking accounts.
16 Q Now, is it fair to say that you did not submit
17 anything in response to paragraph 9 because Mr. Gordon
18 refused to provide you with that information?
19 A Yes.
20 Q And you went -- but you didn't advise Mr. Gagliardi
21 of that fact?
22 A No.
23 Q And is it fair to say you did that because you didn't 24 want to lose
Mr. Gordon as a client? 25 A No. I did it because it wasn't a material fact in
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8136 Reffsin-cross/White
1 the overall income and expense analysis.
2 Q And it never entered into your mind in that
3 calculation that if you disclosed that stuff to
4 Mr. Gagliardi he would learn, number one, that Mr. Gordon
5 was driving a Mercedes, and number two, that Who's Who
6 Worldwide was paying for it. That never entered into your
7 mind?
8 A Well, he had the compensation agreement which said
9 that he controlled the day-to-day activity of the
10 corporation. He could have anything he wants. Most
11 officers do have cars available to them at the corporate
12 level. It's not unusual.
13 Q Now, Mr. Reffsin, do you know a man named Harold
14 Riegel?
15 THE COURT: How do you spell that?
16 MR.
WHITE: R-I-E-G-E-L.
17 A Yes.
18 Q You met Mr. Riegel around the late '80s?
19 A Yes.
20 Q Mr. Riegel sold his company to an accounting client
21 of yours; is that correct?
22 A That's correct.
23 Q And that's how you met Mr. Riegel? 24 A That's correct. 25 Q And subsequently you became friendly with Mr. Riegel;
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8137 Reffsin-cross/White
1 is that correct?
2 A That's correct.
3 Q And Mr. Riegel and you agreed to operate a company
4 together, right?
5 A Mr. Riegel and I agreed to do various things
6 together.
7 Q And one of them was a company called Stegar Services,
8 right?
9 A Stegar Services was the company set up to deal with
10 any companies that Mr. Riegel and I would do together.
11 Q Is it fair to say that Stegar Services was sort of a
12 venture capital, it would lend money to investors to do
13 various things?
14 A No, it was a company that was set up to get into
15 various business ventures.
16 Q Okay.
17 And is it correct that Mr. Riegel is the one who
18 funded the company and put up all the money?
19 A A good portion of it, yes.
20 Q And you were an officer of that corporation, weren't
21 you?
22 A I set up that corporation. That corporation was set
23 up before Mr. Riegel got involved with me. We used it. 24 Q Once it was in operation, Mr. Riegel provided the 25 vast majority of the funding for the company?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8138 Reffsin-cross/White
1 A Yes.
2 Q And you were, is it fair to say, in charge of the
3 day-to-day operations?
4 A I went out and determined whether there were any
5 ventures that we want
ed to got involved in, presented to
6 him and to the extent we wanted to got involved, we would.
7 Q And you were the only signatory on the corporate bank
8 account; is that right?
9 A No, I think Mr. Riegel was also a signatory on it.
10 Q You were a signatory on the corporate bank account;
11 is that correct?
12 A That's correct.
13 Q Now, isn't it correct that you wrote Stegar Services
14 checks for your personal expenses?
15 A It's true that I requested Mr. Riegel to lend me some
16 dollars when I was having some difficult to pay expenses,
17 yes.
18 Q You wrote Stegar Services checks that went for you
19 and your family benefit, right?
20 A After I requested, asked him to do it.
21 Q The answer is yes?
22 A Yes.
23 Q For example, you paid your mortgage from Stegar 24 Services, right? 25 A I didn't pay my mortgage. I paid certai
n contractor
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8139 Reffsin-cross/White
1 costs because I had gotten myself involved in a new house.
2 Q And you paid, you purchased some bonds for your --
3 that you put in your wife and your daughter's names?
4 A That is questionable. That's not true. But I used
5 my own money to purchase my daughter's bonds.
6 Q But you did use, you did write Stegar Services checks
7 for personal items of yours?
8 A With his approval, yes.
9 Q Now, is it fair to say that Mr. Riegel says he didn't
10 give you his approval?
11 MR. WALLENSTEIN: Objection.
12 THE COURT: Sustained.
13 BY MR. WHITE:
14 Q Well, isn't it true that Mr. Riegel never gave you
15 his approval to write those checks for your personal
16 expenses?
17 MR. WALLENSTEIN: Objection.
18 THE COURT: Overruled.
19 A
That is not correct.
20 Q And in fact, Mr. Riegel sued you for fraud, didn't
21 he?
22 A He did that under the bankruptcy proceeding, yes.
23 Q Right. 24 And he did that when you were in bankruptcy, 25 correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8140 Reffsin-cross/White
1 A That's the only way he could verify the loan, yes.
2 Q And was it your understanding that Mr. Riegel because
3 you were in bankruptcy would only have seen money as a
4 result of this suit if he could prove that you had
5 intentionally defraud him?
6 MR. WALLENSTEIN: Objection.
7 THE COURT: Overruled.
8 A That is correct.
9 Q So, in other words, you knew that in order to
10 prevail, Mr. Riegel would have to show that you
11 intentionally defrauded him?
12 A That's correct.
13 Q And notwithstanding that, you settled that laws
uit
14 with Mr. Riegel, right?
15 A That's because there was no fraud intended.
16 Q And you settled it by agreeing to pay him $115,000,
17 right?
18 A That's correct. Which I didn't have to do, by the
19 way.
20 Q That's right, you didn't have to because in all
21 likelihood if you hadn't committed fraud he couldn't
22 collect it under the bankruptcy --
23 A Absolutely correct and -- 24 MR. WALLENSTEIN: Objection. 25 THE COURT: Sustained. The jury is instructed to
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8141 Reffsin-cross/White
1 disregard it.
2 BY MR. WHITE:
3 Q And you entered into a payment and installment
4 agreement to pay Mr. Riegel back; isn't that right?
5 A That's correct.
6 Q And you at some point decided to stop paying
7 Mr. Riegel, right?
8 A Yeah, when I got involved with you
guys.
9 Q So Mr. Riegel is still waiting for the lions share of
10 his 115,000?
11 A And to the best of my ability he will get it.
12 Q Mr. Reffsin, I just want to go back to this letter
13 from Mr. Gagliardi in paragraph 6. I want to make sure I
14 understand your testimony.
15 You said you spoke to Liz Sautter perhaps in
16 Mr. Gordon's presence and told her to go through and pick
17 out the checks that were responsive; is that right?
18 A That's correct.
19 Q And --
20 A If there were any.
21 Q If there were any.
22 A Right.
23 Q And Mr. Gordon said he wanted to give the IRS only 24 what was in his personal checking account; is that right? 25 A Well, he said that but I wasn't paying any attention
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8142 Reffsin-cross/White
1 to it.
2 Q So it's your testimony
that the reason paragraph 6
3 was not disclosed -- I'm sorry, checks responsive to
4 paragraph 6 -- I'm sorry, let me start again.
5 It's your testimony that the reason the American
6 Express checks were not produced in response to paragraph
7 6, is not because Mr. Gordon refused to give it to you but
8 because you yourself made a judgment that they weren't
9 really called for?
10 A It was a combination of the two. He didn't want to
11 give it and it wasn't responsive to the needs of the agent
12 at the time.
13 Q Okay.
14 Now, I just want to ask you generally about these
15 433 forms that we've seen, the one that we've seen in July
16 of '93 and December of '93?
17 A Umm-hmm.
18 Q We've talked about them a lot and we all agree they
19 don't list Mr. Gordon's loans from Who's Who Worldwide,
20 right?
21 A Right.
22 Q They don't list
his American Express cards, correct?
23 A Right. 24 Q They do not list his actual expenses? 25 A Why would they?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8143 Reffsin-cross/White
1 Q The answer is no?
2 A No.
3 Q I understand your explanation. They do not list his
4 actual expenses. It also does not list his ownership
5 interest, if he has any, in Who's Who Worldwide or other
6 corporations, correct?
7 A It does not list it, yes.
8 Q Now, each of those, if they had been disclosed to the
9 IRS, would have indicated to them something about
10 Mr. Gordon's life-style or the fact that he was able to
11 take loans from Who's Who Worldwide, right?
12 MR. WALLENSTEIN: Objection.
13 MR. TRABULUS: Objection to form.
14 THE COURT: Overruled.
15 A I don't know what it would have indicated to them.
16 Q Well, l
et me just briefly discuss each of them.
17 If he listed his ownership interest in Who's Who
18 Worldwide, at a minimum that would have triggered that he
19 owed money under the collateral agreement, correct?
20 A That he owed money under the collateral agreement?
21 If he indicated -- his ownership that he owed money under
22 the collateral agreement?
23 Q My question is confusing. I'll start again. 24 If he had disclosed on the forms that he had an 25 ownership interest in Who's Who Worldwide, at a minimum
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8144 Reffsin-cross/White
1 that would have made the company's income subject to that
2 collateral agreement.
3 A Company's income was subject to the collateral
4 agreement, even if he didn't own it.
5 Q If he controlled it, right?
6 A Well, if he controlled it and pursuant to the
7
compensation agreement ultimately it had to be put on his
8 tax return.
9 Q Okay.
10 Now, the American Express card, if that had been
11 disclosed, is it fair to say the IRS might have asked
12 about what sort of expenses were being incurred with the
13 card and how they were being paid?
14 MR. WALLENSTEIN: Objection.
15 THE COURT: Overruled.
16 A No, I don't believe that question would be asked at
17 all. There would be no reason for it.
18 Q Okay.
19 The loans, if the loans had been disclosed, the
20 IRS would have realized that in addition to his salary
21 Mr. Gordon was receiving substantial amounts of money in
22 addition, correct?
23 A He had received substantial amounts of money, yes. 24 Q And finally, the expenses. If his actual expenses 25 had been listed, is it fair to say that the IRS might have
OWEN M. WICKER, RPR OFFIC
IAL COURT REPORTER 8145 Reffsin-cross/White
1 asked how he was paying for them?
2 A How he was paying for them?
3 Q Right.
4 A They might or might not have.
5 Q For example, you know that 433 form, the last column
6 in the expense column is "other expenses," right?
7 A Other expenses, okay.
8 Q And it asks Mr. Gordon had listed, for example, all
9 the other expenses that he had, actual expenses, the
10 Armani suits and the four star restaurants, you find it
11 conceivable that they might have asked?
12 A I wouldn't have been stupid enough to list that, it's
13 not an ordinary living expense, the IRS would laugh at
14 me. I wouldn't do it for any client. That's not a
15 necessary expense by any definition.
16 Q Had you listed those actual expenses they would have
17 been much higher than the income listed on the other side
18 of th
e form?
19 A Would have been much higher than the income listed on
20 the other side of the form? Obviously.
21 Q So it's your testimony that you would not have put
22 down his actual expenses because that is not what the IRS
23 wanted? 24 A No, they wanted to know what is available to pay the 25 obligation. They don't want to know about unreasonable or
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8146 Reffsin-cross/White
1 unnecessary expenses.
2 Q But isn't one way to find out what is available to
3 see what he is spending money on that is not really
4 necessary, that he could then devote that money to paying
5 back the IRS?
6 A Because a man spent a million yesterday doesn't mean
7 he will spend that tomorrow. He spent what he had then,
8 it doesn't mean that he will do it going forward. Those
9 expenses represent necessary liv
ing expenses. That's all
10 they are supposed to be. It's my definition. You are not
11 even supposed to put medical expenses if they are not
12 recurring. He incurred medical expenses too. They tell
13 you not to put it down.
14 MR. WHITE: Your Honor, I have no further
15 questions.
16 THE COURT: Anything else?
17 MR. TRABULUS: Oh, yes.
18 THE COURT: You may proceed.
19 (Continued.)
20
21
22
23 24 25
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8147 Reffsin-cross/Trabulus
1 CROSS-EXAMINATION
2 BY MR. TRABULUS:
3 Q Good afternoon, Mr. Reffsin.
4 Mr. Reffsin, how long do you know Mr. Gordon?
5 A Since 1980.
6 Q And you know Mr. Gordon as being a businessman,
7 right?
8 A Yes.
9 Q Primarily a marketing person and a salesperson?
10 A Yes.
11 Q And are you aware, sir, that he doesn't have any
12 accounting background?
13 A Yes, I am.
14 Q And he has a certain amount of college at night
15 school but basically has a high school education?
16 A Yes. I mean, I don't know that, but I'll accept it.
17 Q Now, he himself has never worked as an accountant, as
18 far as you know; is that correct?
19 A As far as I know.
20 Q And he hired you to do accounting work because he
21 needed an accountant to do that, right?
22 A That's usually the case, yes.
23 Q Let me go to what Mr. White was asking you about, 24 Stegar Corporation, was it a corporation or a partnership? 25 A A corporation.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8148 Reffsin-cross/Trabulus
1 Q I think you indicated with the permission of the
2 other principal of the company, you had utilized corporate
3 funds to pay some personal expenses?
4 A That's correct.
5 Q Now, when you did that, was that reflected as a loan
6 to you?
7 A Yes, it was.
8 Q So the Stegar Corporation did not take a tax
9 deduction for the monies that it was utilizing to pay your
10 personal expenses?
11 A No, not at all.
12 Q And that was a loan, sir, which you intended to repay
13 at the time; is that correct?
14 A That's correct.
15 Q And your own financial difficulties involving a
16 bankruptcy intervened and prevented you from doing that;
17 is that correct?
18 A Well, initially, yes, it did.
19 Q Initially.
20 A Yes.
21 Q And certainly there was nothing -- what year --
22 withdrawn.
23 What year was it that you took these loans from 24 Stegar Corporation? 25 A 1989, 1990.
OWEN M. WICKER, RPR OFFICIAL COURT REPORT
ER 8149 Reffsin-cross/Trabulus
1 Q 1989 or 1990?
2 A I take that back. It was 1988.
3 Q '88?
4 A Right.
5 Q And that's before any of the loans were made to
6 Mr. Gordon here; is that correct?
7 A Oh, yes.
8 Q And these were indeed legitimate loans in the sense
9 you had intended to pay them back; is that correct?
10 A Oh, absolutely. Still do.
11 Q Now, when you took these loans to pay your expenses,
12 did you yourself report the amount of those loans to you
13 as being income in the year that you borrowed the money?
14 A No, I did not.
15 Q And that was I assumed because you believed sincerely
16 that that was not income, correct?
17 A Yes.
18 Q And the basis for that in your mind, sir, was that
19 you intended to pay the money back?
20 A Absolutely.
21 Q Which made it a loan, right?
22 A Righ
t.
23 Q During the period of 1988, 1989 and 1990, with the 24 exception of a break at some point, you did work for 25 Mr. Gordon, correct, and his companies? Certainly in
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8150 Reffsin-cross/Trabulus
1 1990.
2 A 1990, yes.
3 Q And at that point the loan arrangement that you had
4 with Stegar Corporation was fresh in your mind, sir?
5 A Yes.
6 Q Do you recall if you yourself ever told Mr. Gordon
7 that it was okay if you were to take a loan from a
8 corporation so long as -- withdrawn.
9 During your dealings with Mr. Gordon, you told
10 him, did you not that, it was all right to take a loan
11 from a corporation for personal expenses, correct?
12 A I told him it was all right for a loan, as long as it
13 was a loan for whatever reason.
14 Q In other words, the fact that a loan wa
s for personal
15 expenses, there was nothing wrong with that; is that
16 correct?
17 A No, absolutely not.
18 Q And of course the corporation, if it loaned money to
19 somebody who was connected to it, could not take a tax
20 deduction on its own income taxes; is that correct?
21 A That's correct.
22 Q And of course as we had seen before none of the
23 monies that were loaned to Mr. Gordon were reflected as a 24 deduction in any corporate tax return; is that correct? 25 A That's correct.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8151 Reffsin-cross/Trabulus
1 Q So basically what Mr. Gordon, the treatment, the tax
2 treatment of the loans to Mr. Gordon was basically the
3 same as you yourself had done for yourself with the Stegar
4 Corporation, right?
5 A Yes.
6 Q Now, you prepared the 433 A forms that went with the
7 office and compromise, correct, the original offer?
8 A I wrote them up.
9 Q You wrote them up yourself; is that correct?
10 A That's correct.
11 Q And you made the decisions as to what would and would
12 not be shown; is that correct?
13 A Initially, yes.
14 Q You indicated, for example, that you made the
15 decision not to show the American Express charge, the
16 American Express charges that --
17 A The charge card.
18 Q The charge card, correct?
19 A That's correct.
20 Q Do you have the exhibit in front of you there, sir?
21 A Right here.
22 Q I think that is 420-D.
23 A Yes. 24 Q Now, you also made the decision, did you not, that 25 the loans to Mr. Gordon from Who's Who Worldwide would not
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8152 Reffsin-cross/Trabulus
1 need to be shown on this; i
s that correct?
2 A All I did with the loans was copy the loans that were
3 initially reflected on the 433 As that were presented with
4 a little modifications for the charge accounts.
5 Q Mr. Reffsin, why don't I ask you at the time you
6 prepared, wrote out this 433 A, you were aware, sir, that
7 there were loans to Mr. Gordon from Who's Who Worldwide?
8 A I was aware there was loan activity, yes.
9 Q Well, you were aware, were you not, that there was a
10 loan balance at the end -- this is dated July 1990 --
11 A 1993.
12 Q 1993, correct?
13 A Yes.
14 Q And you were aware, sir, that there was a loan
15 balance at the end of 1992; is that correct?
16 A Yes.
17 Q It had been reduced, it had been reduced by the
18 payment from the Grossmans, correct?
19 A Yes.
20 Q And you had been aware there had been a loan balance?
21 A That's co
rrect.
22 Q And I think you indicated earlier on you had not
23 known whether or not the loans had been increasing, 24 whether or not the balance had been increasing since that 25 reduction; is that correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8153 Reffsin-cross/Trabulus
1 A At that time, yes.
2 Q And you also indicated, did you not, that you really
3 had not checked that in any way, shape or form?
4 A That's correct, I did not.
5 Q So you felt comfortable in not disclosing any loan on
6 this 433 A without having to check; is that correct?
7 A That's correct.
8 Q You certainly, nobody had told you at that point in
9 time, sir, that the loan balance had been reduced to zero;
10 is that correct?
11 A That's correct.
12 Q So in preparing the 433 A you made the determination,
13 did you not, that it was not necessary
to disclose the
14 loan to Mr. Gordon on this form; is that correct?
15 A That's correct.
16 Q And you did that on the basis that you regarded it as
17 not being material; is that right?
18 A That's correct.
19 Q And not being material, meaning that it wouldn't have
20 affected the IRS agent who was going to be reviewing the
21 form 433 A and the office and compromise application, it
22 wouldn't involve the decision whether or not it would be
23 granted? 24 A Yes. 25 Q Basically it would show that there was a greater
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8154 Reffsin-cross/Trabulus
1 liable on the part of Mr. Gordon and even a lesser ability
2 to pay?
3 A Yes.
4 THE COURT: You have to slow down, Mr. Trabulus.
5 MR. TRABULUS: Thank you. I'm sorry.
6 BY MR. TRABULUS:
7 Q Basically, if I understand
you correctly, your
8 judgment was that if that had been disclosed on this form,
9 it would have made Mr. Gordon appear even less able to pay
10 than what was disclosed?
11 A That's correct.
12 Q And, therefore, by not disclosing it you in no way,
13 shape or form were keeping from the IRS something which
14 would tend to show that Mr. Gordon could pay more than
15 they would have otherwise thought; is that correct?
16 A Absolutely, yes.
17 Q Is it fair to say that in your experience in dealing
18 with Mr. Gordon, he was kind of a busy businessman type?
19 A Always.
20 Q Always preoccupied with his own business?
21 A Yes.
22 Q It would be fair to stay in your judgment he would be
23 the kind of person who would sign a tax return without 24 even reading it? 25 A On occasion, yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8155 Reffsin-cross/Trabulus
1 Q Well, would you say that it would be his style to
2 rely on you in preparing a tax return without even reading
3 it?
4 A A tax return, yes.
5 Q And this particular form, Form 433 A, which is
6 Exhibit 420-D, it does have a listing, does it not, on
7 item 20-AC for charge accounts?
8 A Yes, it does.
9 Q You know that charge account listing of $32,000 was
10 not the American Express account; is that correct?
11 A When I did this form I didn't isolate as to what it
12 was.
13 Q You were asked by Mr. White that you made a decision
14 not to include the American Express charge on this; is
15 that correct?
16 A No, he was asking about the asset on section three.
17 Q I'm sorry. I thought -- I'm not trying to confuse
18 you, Mr. Reffsin.
19 I thought that you had told Mr. White that you
20 had dec
ided there was no need to disclose the charge
21 account; is that correct?
22 A No, I told Mr. White that as far as I was concerned
23 those charge accounts were charge accounts. 24 Q Okay. 25 So, in any event, the -- there is a listing for
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8156 Reffsin-cross/Trabulus
1 charge account under item 20-A; is that correct?
2 A Yes.
3 Q And do you know if Mr. Gordon did look at this,
4 whether he would have realized whether or not the American
5 Express, that was or was not the American Express
6 account? Would you know one way or the other, sir?
7 MR. WALLENSTEIN: Objection.
8 THE COURT: Sustained.
9 BY MR. TRABULUS:
10 Q Did you discuss with Mr. Gordon whether or not that
11 was the American Express account or some other charge
12 account?
13 A I don't recall.
14
Q Mr. Reffsin, again, did you say that you had decided
15 that it was your view that the Liz Sautter charge account,
16 Mr. Gordon's card on that, should not or did not need to
17 be disclosed as such on this form?
18 A On the front, on the second page, yes.
19 Q On the second page, okay.
20 A Yes.
21 Q And was that -- what was the basis for that, sir?
22 A Because it was her card.
23 Q Okay. 24 And that was your decision, sir? 25 A Yes. As far as I was concerned that was not an asset
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8157 Reffsin-cross/Trabulus
1 available to him or it could be available to him but --
2 Q Do you recall whether you discussed that with
3 Mr. Gordon?
4 A I believe I did discuss the American Express credit
5 card.
6 Q And you told him that in your view it didn't need to
7 be disclosed?
8 A Yes, I felt it wasn't necessary. It wasn't
9 appropriate.
10 Q Now, did you discuss with Mr. Gordon whether or not
11 on this form the loans from Who's Who Worldwide had to be
12 disclosed? Do you recall that?
13 A Did I discuss the Who's Who Worldwide loans? I don't
14 believe -- I'm not sure. I don't remember.
15 Q Now, you yourself had concluded they did not need to
16 be disclosed?
17 A Yes, I felt it was just a waste.
18 Q And if you did have occasion to talk to Mr. Gordon
19 about that, certainly you would have told Mr. Gordon what
20 you just told us now, correct, that there was no need to
21 disclose it?
22 MR. WALLENSTEIN: Objection.
23 THE COURT: Sustained. 24 BY MR. TRABULUS: 25 Q If you spoke to Mr. Gordon about it, is there any
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8158 Reffsin-cross/Trabulus
1 reason at the time why you would have told him anything
2 different?
3 MR. WALLENSTEIN: Objection.
4 THE COURT: Sustained.
5 BY MR. TRABULUS:
6 Q Would you have had a reason to tell him it did have
7 to be disclosed?
8 MR. WALLENSTEIN: Objection.
9 THE COURT: Sustained.
10 Q Now, Mr. Reffsin, you testified that when there were
11 -- there were loans made from Who's Who Worldwide to
12 Sterling; is that correct?
13 A That's correct.
14 Q And money was loaned from Who's Who Worldwide to
15 Sterling well before the bankruptcy, is that not true?
16 A I believe they started sometime in July, June or July
17 of '93.
18 Q Mr. Reffsin, is it not fair to say, sir, that at that
19 point in time not only was it before the bankruptcy but it
20 was also before the judgment in favor of Reed Elsevier
21 which precipitated the bankrupt
cy?
22 A I'm not quite sure of the timing with respect to the
23 judgment. The judgment, I believe, I believe it was 24 before, yes. 25 Q And up until that judgment, is it not correct, sir,
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8159 Reffsin-cross/Trabulus
1 that Mr. Gordon had expressed to you his belief that Reed
2 Elsevier did not or would not prevail?
3 A Yes, that was his belief.
4 Q In fact, he was to say the least surprised when the
5 decision came down in favor of Reed Elsevier?
6 A No question.
7 Q And the bankruptcy filing was put together in great
8 haste; is that correct?
9 A That's correct, yes, it was.
10 Q And the transfers that had begun to Sterling and
11 other entities, they had begun before there was any
12 contemplation or expectation of any kind of bankruptcy,
13 right?
14 A Yes.
15 Q Now, you told us that Mr. Gordon -- withdrawn.
16 You told Mr. White that you had not been aware
17 that Mr. Gordon was taking loans from Sterling; isn't that
18 correct?
19 A At that time, yes.
20 Q You had not been aware at that time, right?
21 A Yes.
22 Q And I think at one point you told Mr. White that in
23 that respect you felt that Mr. Gordon had deceived you; is 24 that correct? Do you recall saying that? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8160 Reffsin-cross/Trabulus
1 Q But then you also told Mr. White that you hadn't
2 really discussed the subject matter with Mr. Gordon; is
3 that correct?
4 A There was no reason to at the time.
5 Q It isn't that he told you that he wasn't taking the
6 loans; is that correct?
7 A No, that's correct.
8 Q And is it fair to say, Mr. Reffsin, tha
t Mr. Gordon
9 might have concluded from the fact that you had seen no
10 need to disclose the loans on the 433 A statement that
11 such loans were irrelevant and there would be no need for
12 him to tell you about them?
13 MR. WALLENSTEIN: Objection.
14 THE COURT: Sustained.
15 BY MR. TRABULUS:
16 Q Now, you were asked some questions by Mr. White about
17 the letter that Mr. Gagliardi had written and your
18 response to it. When I say "the letter," I'm talking
19 about the one that is 421, and I think there's another
20 copy of it, 422.
21 You were asked about paragraphs 6 and 9.
22 A Right.
23 Q Now, if -- let's just go through it. 24 Let's go to item 3. That's the one that asks for 25 original cancelled checks and bank statements for all the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8161 Reffsin-cross/Trabulus
1 accounts which you are signatory for April, May, etcetera,
2 right?
3 A Umm-hmm.
4 Q And you said that you had a discussion with
5 Mr. Gordon in which Mr. Gordon said that he just wanted to
6 give his own personal checking and not just from Who's Who
7 Worldwide?
8 A Originally, yes.
9 Q Originally.
10 And that was his desire, which he expressed to
11 you, correct?
12 A Umm-hmm.
13 Q And you were his accountant and he was looking to you
14 to do that, if it was possible, is that fair to say?
15 A If it was possible, yes.
16 Q And you told -- and you've told us in your judgment
17 that was okay because it wasn't material, it was okay to
18 do that?
19 A No, I didn't say that.
20 Q You were the one, sir, who forwarded over the
21 response to this letter, did you not?
22 A Are you referring to item 3 or are you referring
to
23 item 6? 24 Q I'm referring to a letter -- bear with me a moment, 25 Mr. Reffsin.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8162 Reffsin-cross/Trabulus
1 You responded to this letter from Mr. Gagliardi,
2 did you not?
3 A To this letter (indicating)?
4 Q Yes, the letter which is 421.
5 A Yes.
6 Q And it also appears as 422.
7 A Yes.
8 Q How did you respond to it, sir?
9 A Item-by-item to the extent appropriate.
10 Q You sent the materials over to Mr. Gagliardi?
11 A Yes.
12 Q And you understood when you sent those materials over
13 to Mr. Gagliardi, that that would be understood by
14 Mr. Gagliardi to be a response, both to your letter,
15 excuse me, both to his letter to you and his conversation;
16 isn't that correct?
17 A That's correct.
18 Q And you've explained to us two b
ases for not giving
19 over the additional checks that did not come from
20 Mr. Gordon's own account, one of which was that
21 Mr. Gagliardi told you that it wasn't necessary; and two,
22 it wasn't the determination that it wouldn't be material;
23 is that correct? 24 A There were no personal necessary living expenses, 25 yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8163 Reffsin-cross/Trabulus
1 Q So you had formed your own determination that it was
2 okay to respond to Mr. Gagliardi the way Mr. Gordon wanted
3 you to respond, is that fair to say, sir?
4 A Yes, I would say that is fair.
5 Q And is it not fair to say just as you've told us
6 that, you told Mr. Gordon that, that it was okay to do
7 that?
8 A I don't know if I told him it was okay. That's what
9 we did.
10 Q Certainly there would have been no reason for
you to
11 tell Mr. Gordon that it was not okay if indeed as you say
12 you had determined that it was.
13 A Yes.
14 Q So if you did, certainly he would have been entitled
15 to rely on you on that?
16 A No question.
17 Q He didn't hide from you the fact that there were
18 checks that were played out -- withdrawn. He didn't hide
19 from you the fact that there were Who's Who Worldwide
20 checks. He didn't hide those checks from you?
21 A Absolutely not.
22 Q He disclosed that to you?
23 A Yes, he did. 24 Q Now, with regard to the automobiles, at any given 25 time there were two cars which were being paid for by
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8164 Reffsin-cross/Trabulus
1 Mr. Gordon?
2 A Yes.
3 Q And with regard to that the corporation took a tax
4 deduction?
5 A Yes.
6 Q I
n your judgment that was appropriate?
7 A Yes.
8 Q With regard to the other car -- withdrawn.
9 You can't take the tax deduction for two cars for
10 a corporation for one person; is that correct?
11 A It would be a little illogical.
12 Q And you advised Mr. Gordon that with regard to the
13 second car the corporation could not take a tax deduction;
14 is that correct?
15 A That's correct.
16 Q And the amount of the payments on that was reflected
17 as a loan?
18 A That's correct.
19 Q And in accordance with what you said was all right?
20 A That's right.
21 MR. TRABULUS: Bear with me. I'm just checking
22 my notes.
23 BY MR. TRABULUS: 24 Q With regard to the cars, it was your testimony that 25 Mr. Gordon did not want the information on either of them
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8165 Reffsin-c
ross/Trabulus
1 disclosed, sir. Was that your testimony? I just want to
2 make sure I understood it.
3 A He didn't want any of the information with respect to
4 the cars disclosed, yes.
5 Q Now, Mr. Gordon was not in contact with
6 Mr. Gagliardi, was he?
7 A No, he was not.
8 Q You were the one in contact with Mr. Gagliardi?
9 A Yes, I was.
10 Q So any communication with Mr. Gagliardi concerning
11 Mr. Gordon's taxes, would come through you; is that
12 correct?
13 A That's correct.
14 Q And you would be responsible for that, would you not?
15 A Yes.
16 Q Now, is it fair to say, sir, that you deemed it in
17 your own judgment appropriate not to disclose to
18 Mr. Gagliardi the information concerning the cars?
19 A No, I didn't say that.
20 Q Well, when you disclosed the information to
21 Mr. Gagliardi that you did discl
ose but didn't include
22 anything relating to the cars, did you feel that you were
23 misleading Mr. Gagliardi? 24 A No. 25 Q You felt that it was all right to do that?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8166 Reffsin-cross/Trabulus
1 A No, I felt it was an immaterial item.
2 Q So, when you felt it was an immaterial item, you felt
3 because it was immaterial, you could fail to disclose it
4 without doing anything improper; is that correct?
5 A Yes.
6 Q And would that be something that you communicated to
7 Mr. Gordon?
8 A I believe I did, yes.
9 Q So when Mr. Gordon asked if he could not disclose the
10 cars to Mr. Gagliardi, you told him it's okay, we don't
11 have to disclose them. Is that fair to say?
12 A I agreed with him, yes.
13 Q Well, is it fair to say that just as you've told us
14 today that
it is because it wasn't material it didn't have
15 to be done, you told Mr. Gordon that because it was not
16 material, maybe you didn't use that word, but you at least
17 told him it didn't have to be done. Is that fair to say?
18 MR. TRABULUS: Your Honor, might we take a break
19 at this point or is it a little too early?
20 THE COURT: Well, I was going to go to a quarter
21 to 4.
22 MR. TRABULUS: I can go.
23 BY MR. TRABULUS: 24 Q Now, Mr. White asked you about the payment of 25 Mr. Gordon's taxes through money orders. Do you recall
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8167 Reffsin-cross/Trabulus
1 that?
2 A Yes.
3 Q And I think you indicated that in the past with some
4 clients where the IRS was kind of at their back, you would
5 indicate to them that they would do that rather than pay
6 by a check on an accou
nt over which they had signatory
7 authority; is that correct?
8 A No. What I said where there was an account, even
9 though they had signatory authority which had nothing to
10 do with that, that it was better that they paid by money
11 order because they can come in and levy that account and
12 they would have no real right to do that.
13 Q In other words, I assume that in telling those
14 clients that, you believe giving them that advice was
15 entirely proper and by doing that would be entirely
16 proper?
17 A Sometimes the IRS is a little rambunctious in seizing
18 assets.
19 Q You were aware, sir, that Mr. Gordon used money
20 orders to pay tax obligations?
21 A Yes, I was.
22 Q And is it possible that that advice to do so came
23 from your office? 24 A No, he was using money orders before I even got 25 involved with him.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8168 Reffsin-cross/Trabulus
1 Q You saw nothing wrong with that?
2 A No.
3 Q In other words, he may have been doing it before you
4 got involved but if he hadn't you may have advised him.
5 Is that fair to say?
6 MR. WALLENSTEIN: Read that back, please.
7 (Record read.)
8 MR. TRABULUS: Withdrawn.
9 BY MR. TRABULUS:
10 Q You never advised him that it was improper to do it?
11 A That's correct.
12 Q And you didn't regard it as improper?
13 A No.
14 Q Mr. Reffsin, I just want to take a look at 475. Is
15 that still here? I was referring to the wrong exhibit.
16 474.
17 You were shown both 474 and4 75 by Mr. White. I
18 think on 474 you were directed to charges on Mr. Gordon's
19 card on Liz Sautter's account of about $48,000 to a trip
20 to Paris and so forth.
21 A That's correct.
22 Q Do you see that the single largest item, over
23 $21,000, is something from Galarie? 24 A (Perusing.) Bill as Galarie Sordello, Paris. Paris 25 8, France.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8169 Reffsin-cross/Trabulus
1 Q Do you know whether that was artwork or sculpture?
2 A No, I do not.
3 Q Did Mr. Gordon tell you that some of the other
4 charges there were items that were sold by the bankruptcy
5 trustee for Who's Who Worldwide?
6 A Yes, he did mention that.
7 Q That wasn't his own property?
8 A Apparently not.
9 Q Were there other instances in which things that were
10 charged to the loan account turned out not to be for
11 personal expenses for Mr. Gordon but business expenses?
12 Do you recall any?
13 A You mean in the earlier periods?
14 Q Yes.
15 A Yeah, de
finitely.
16 Q Do you recall, for example, a trip that Mr. Gordon
17 and some other people from his company took to California
18 that had erroneously been treated as a loan to him but in
19 fact was a business expense?
20 A Yes, but that was corrected.
21 Q Sure enough.
22 A Yes.
23 Q In fact, you were partially responsible. You were 24 one of the people responsible for correcting it? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8170 Reffsin-cross/Trabulus
1 Q That was a business trip to California with a view to
2 setting up a branch, a related company; is that correct?
3 A That's correct.
4 Q And do you know whether Registry Publishing was to be
5 the company that was going to be used for that?
6 A Mr. Gordon had indicated that Registry Publishing
7 might be the company.
8 Q Mr. Gordon, it's fair to
say, would create some
9 dormant companies to save the names that he wanted to
10 save?
11 A Yes, he had a half dozen companies.
12 Q And he would then utilize them for business purposes;
13 is that right?
14 A Well, the intent was he wanted to save the names.
15 Q So Sterling would be one of those?
16 A It might have been originally, but ultimately it
17 became an entity, an active entity.
18 Q That's what I meant to say.
19 A Yes.
20 Q And as far as you know Sterling was quite successful,
21 was it not?
22 A It started to be very successful in '94.
23 Q Up until -- 24 A Up until the time it was closed down. 25 Q Now, Mr. White asked you some questions about the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8171 Reffsin-cross/Trabulus
1 collateral agreement.
2 A Yes.
3 Q Do you recall that?
4 A Yes.
5 Q And in his questions he suggested to you that if
6 Mr. Gordon -- withdrawn.
7 I think you explained to Mr. White that it made
8 no difference under the collateral agreement whether or
9 not Mr. Gordon owned as opposed to controlled Who's Who
10 Worldwide for a corporation.
11 A No, that wasn't my intention if I did that.
12 Q Under the collateral agreement if Mr. Gordon
13 controlled the company, if he controlled the company, is
14 it fair to say, directly or indirectly, is it fair to say
15 its income was to be taken into account in computing his
16 payment obligation?
17 A The fact that you control a company doesn't
18 necessarily mean the income should be attributed to you.
19 Q Well, do you have the collateral agreement in front
20 of you?
21 A It's part of the offer and compromise?
22 Q Right.
23 A (Perusing.)
24 Q Mr. Reffsin, there are two copies of the same thing. 25 Tell me what exhibit you are looking at, is that 420?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8172 Reffsin-cross/Trabulus
1 A 420-H.
2 Q Look at the second page, paragraph 3. Would you read
3 that to yourself, sir.
4 A Yes. (Perusing.)
5 Q Mr. Reffsin, having read it, do you understand that
6 it includes corporate income in the taxpayer's income,
7 taxpayer being Mr. Gordon --
8 A Umm-hmm.
9 Q -- If the corporation is directly or indirectly
10 controlled or owned by the taxpayer.
11 A I know what it said. I had a great deal of problems
12 with the wording.
13 Q It was unclear to you?
14 A Yes.
15 Q And I think Mr. White asked you on questioning you if
16 you understood the collateral agreement and you said you
17 did. Is that fair to say?
18 A I understood it. I understood there were problems
19 with it as well.
20 Q When you say "problems," there were parts which you
21 regarded as ambiguous or difficult to interpret how to
22 apply?
23 A Yes. 24 Q Did you ever discuss with Mr. Gordon -- withdrawn. 25 I think you indicated the collateral agreement
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8173 Reffsin-cross/Trabulus
1 was entered into by some attorneys on behalf of
2 Mr. Gordon?
3 A That's correct.
4 Q Did you ever after that discuss with Mr. Gordon
5 whether he understood it?
6 A Yes, I did discuss it with him.
7 Q Did he express to you that he had difficulty in
8 understanding it?
9 A He expressed he had difficulty and expressed that he
10 had no choice but to sign it.
11 Q But he really didn't understand it and he was given
12 no
choice but to sign it?
13 A That's what he said, yes.
14 Q Is it fair to say if you had difficulty interpreting
15 it how it would be applied under particular circumstances,
16 Mr. Gordon would have certainly as much difficulty?
17 MR. WALLENSTEIN: Objection.
18 THE COURT: Overruled.
19 A I would believe so, yes.
20 Q Probably more because he's not an accountant?
21 A Yes, that's correct.
22 THE COURT: Is this a good time to take a break?
23 MR. TRABULUS: Sure. 24 THE COURT: Members of the jury, we'll take a 25 ten-minute recess.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8174 Reffsin-cross/Trabulus
1 Please do not discuss the case. Keep an open
2 mind.
3 (Jury exits.)
4 (Recess taken.)
5 (Jury enters.)
6 THE COURT: Please be seated, members of the
7 jury.
8 You may proceed.
9 MR. TRABULUS: Thank you, Your Honor.
10 BY MR. TRABULUS:
11 Q Now, Mr. Reffsin, I think Mr. White asked you at some
12 point whether or not Mr. Gordon -- withdrawn.
13 Mr. White asked you about the borrowing from
14 Dr. Grossman and how it was used to pay down his own loan
15 obligation to Who's Who Worldwide, right?
16 A Yes.
17 Q And then Mr. White asked you at a later point in
18 time, could not Mr. Gordon have gone to Dr. Grossman or
19 somebody else and borrowed more money to pay down, further
20 pay down his obligation to Who's Who Worldwide. Do you
21 recall that?
22 A I recall he said could he have gone elsewhere.
23 Q And I think he mentioned Dr. Grossman or another 24 representative. Do you recall at that point in time after 25 the initial borrowing from Dr. Grossman whether
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8175
Reffsin-cross/Trabulus
1 Dr. Grossman was willing to make any further loan from
2 Mr. Gordon?
3 A I have no idea.
4 Q Do you know of any individual specifically to make a
5 loan to Mr. Gordon?
6 A Specifically, no.
7 Q I think Mr. White asked you could Mr. Gordon have
8 gone to one of the other companies and borrowed from it,
9 and used that to repay Who's Who Worldwide; is that
10 correct?
11 A He did say that, yes.
12 Q And if that had been done to any great extent, would
13 that not have basically the same issue would have arisen,
14 whether or not -- how he would repay that company?
15 A Absolutely.
16 Q And the same IRS -- withdrawn.
17 Just as the argument is being made now that this
18 was not a loan but income, the IRS would have failed to
19 make that argument too; is that correct?
20 A That's correct.
21 Q Y
ou indicated earlier that you had expressed concern
22 to Mr. Gordon that payments had to be made on this
23 otherwise the IRS might challenge it; is that correct? 24 A That is a standard way they deal with corporate 25 loans.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8176 Reffsin-cross/Trabulus
1 Q In expressing that advice you weren't expressing
2 doubt it was a loan?
3 A It was just procedural.
4 Q Even if it intended to be a loan and intended to be a
5 loan, the IRS would come and challenge?
6 A My criteria is you have to make payments.
7 Q And after that he did make a payment?
8 A There was a payment.
9 Q Now, Mr. White asked you whether or not considering
10 all the factors, and I think all the circumstances, excuse
11 me, and he listed certain things, whether or not you had
12 some kind of suspicion at the time whether t
he repayment
13 from Dr. Grossman, excuse me, the loan from Dr. Grossman
14 would have been some kind of -- might have designed to
15 make it look like a repayment, something like that. Do
16 you recall that?
17 A Yes.
18 Q And when Mr. White asked you that he didn't include
19 in the circumstances that Dr. Grossman himself said that
20 he understood that it was a loan, did he?
21 A No, he did not.
22 Q And he didn't include in the circumstances that
23 Dr. Grossman himself said that when he had first received 24 the money from Who's Who Worldwide there were no springs 25 attached?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8177 Reffsin-cross/Trabulus
1 A He did say that, yes.
2 Q And Mr. Grossman, Dr. Grossman said that?
3 A Right.
4 Q Mr. Gordon didn't say that?
5 A No.
6 Q The fact that there were n
o strings attached, that
7 meant Dr. Grossman didn't have to loan the money later on
8 when Mr. Gordon asked for it?
9 A I couldn't interpret what Dr. Grossman meant one way
10 or the other.
11 Q Does that give you some comfort that this was not
12 designed as some kind of a subterfuge.
13 A Yes, definitely.
14 Q That he got the money, didn't understand he would
15 have to do anything with it and later on he was asked and
16 agreed on his own to make a loan?
17 A He said it was a loan.
18 Q He didn't say to whom. He just said it was a loan,
19 whether it was to Who's Who Worldwide or Mr. Gordon in
20 term of his testimony.
21 A I don't remember that.
22 Q Do you know whether or not some of the money that was
23 returned to Who's Who Worldwide in repayment, partial 24 repayment of Mr. Gordon's loan, do you know whether or not 25 some of it wa
s applied towards publishing the registry?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8178 Reffsin-cross/Trabulus
1 A There were no segregation of funds. All funds were
2 commingled.
3 Q Publishing the registry was a fairly expensive
4 proposition?
5 A Yes.
6 Q And that would be done around January, was it not?
7 A It was done several times a year.
8 Q Do you recall as you sit there now and if you want to
9 look at the document, do you recall what it would cost to
10 publish the registry each year approximately?
11 A I recall way back when seeing a bill for 65, 75,000
12 attributable to publishing.
13 Q That would be the entire amount?
14 A That would be the layouts and so forth.
15 Q The actual publishing of the entire thing, issuing
16 the books, that would be far in excess?
17 A Yes, I don't remember how much.
18 Q Near a million?
19 A I don't really recall.
20 Q Do you recall what it cost to publish Tribute
21 magazine?
22 A No, I don't.
23 Q We'll get to that. 24 Now, Mr. White asked you some questions about 25 transfers being made before bankruptcy. Do you recall
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8179 Reffsin-cross/Trabulus
1 that?
2 A Yes.
3 Q And that before bankruptcy as the bankruptcy was
4 being filed you explained to Mr. Gordon that when you were
5 in a bankruptcy situation, everything the corporation did
6 had to be disclosed, right?
7 A That's correct.
8 Q And is it fair to say that all the transfers were
9 disclosed in the bankruptcy?
10 A All of the transfers?
11 Q Yes.
12 A Yes, absolutely.
13 Q So the transfers -- so the fact that there were
14 transfers was not h
idden in the bankruptcy; is that
15 correct?
16 A Not to Who's Who Worldwide transfers, no.
17 Q And those were the transfers that Mr. White was
18 asking you about, isn't that true?
19 A Yes.
20 Q And the loans were disclosed in the bankruptcy, were
21 they not?
22 A Absolutely.
23 Q And in speaking to Mr. Gagliardi and in writing to 24 Mr. Gagliardi, you advised him of the Who's Who Worldwide 25 bankruptcy, did you not?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8180 Reffsin-cross/Trabulus
1 A Absolutely.
2 Q And in your experience as an accountant dealing with
3 the IRS on collection matters, did you know whether or not
4 they on occasion would check the files in the bankruptcy
5 court? Have you had any experience with that?
6 A No, I did not. Not in that capacity.
7 Q But certainly you didn't do anything to
dissuade him
8 from checking those files, did you?
9 A Absolutely not.
10 Q Did Mr. Gagliardi ever ask you for any copies of the
11 bankruptcy documents?
12 A I think he asked me for the first page. When I spoke
13 to him he asked me for the first page of the petition.
14 Q Did you give it to him?
15 A I believe I did.
16 Q And if he had asked you for any more, would you have
17 given it to him?
18 A The whole petition.
19 Q It was a public record?
20 A Right.
21 Q Did he ever ask you for any of the corporate tax
22 returns of Who's Who Worldwide?
23 A No. 24 Q But if he had done so you certainly would have done 25 that, correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8181 Reffsin-cross/Trabulus
1 A Absolutely.
2 Q Did he ever ask you to secure permission from Who's
3 Who Worldwi
de to examine its tax returns?
4 A No.
5 Q Now, I think you indicated that Mr. Gordon was a
6 little bit tight fisted with paying attorneys and
7 accountants. Is that fair to say?
8 A Absolutely.
9 Q But he did pay you, did he not, for your work?
10 A When I screamed and yelled enough, yes.
11 Q You got paid, right?
12 A Eventually, yes, sir.
13 Q And the work that you haven't been paid for is
14 something that has to come through the bankruptcy
15 proceeding?
16 A Yes.
17 Q It's not something within Mr. Gordon's control?
18 A No.
19 Q Take a look, please, at Exhibit 420-E.
20 A 420-E.
21 Q Mr. White asked you about this amount?
22 A Yes.
23 Q And these were projections prepared by your office? 24 A Yes. 25 Q And you submitted them along with the offer and
OWEN M. WICKER, RPR OFFICIAL COURT REPOR
TER 8182 Reffsin-cross/Trabulus
1 compromise; is that correct?
2 A Yes.
3 Q Now, Mr. White asked you if the loan obligation from
4 Mr. Gordon to Dr. Grossman appeared on this and I think
5 you indicated that it did not?
6 A That's correct.
7 Q And you said that was by Mr. Gordon's preference,
8 right?
9 A Yes.
10 Q And then Mr. White asked you a little more
11 specifically as to what the conversation in that regard
12 was and I think you said you asked Mr. Gordon do you want
13 to disclose the loan from your brother-in-law or not and
14 he said no; is that correct?
15 A Yes, that's correct.
16 Q So you gave him the choice. Is that fair to say?
17 A That's correct.
18 Q And by doing that you indicated to him that it was
19 optional, did you not?
20 A Yes.
21 Q So in saying that he did not want to, is it f
air to
22 say that he understood from you that he did not have to?
23 MR. WALLENSTEIN: Objection. 24 THE COURT: Overruled. 25 A He understood that in terms of required payments that
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8183 Reffsin-cross/Trabulus
1 the loan would not be necessarily required to be paid
2 right away.
3 Q No, the question, Mr. Reffsin --
4 A Sorry.
5 Q That's okay.
6 A Okay.
7 Q The question was, did Mr. Gordon understand from the
8 way you put the question to him that it wasn't necessary
9 to disclose the loan from Dr. Grossman to him?
10 A On this document?
11 Q On this document.
12 A On this, that's correct.
13 Q Now, going back to that loan, you reflected the loan
14 from Dr. Grossman to Mr. Gordon as being a repayment of
15 Mr. Gordon's -- withdrawn.
16 The corporate b
ooks reflected that the money that
17 Dr. Grossman paid for Who's Who Worldwide was a partial
18 repayment or paying down Mr. Gordon's loan balance to
19 Who's Who Worldwide, right?
20 A Right.
21 Q And you regarded that as appropriate; is that
22 correct?
23 A Yes. 24 Q And at the time you regarded it as appropriate, you 25 were aware that in December of 1992, $400,000 had been
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8184 Reffsin-cross/Trabulus
1 paid to Dr. Grossman?
2 A Yes.
3 Q And you were aware that taxes, income taxes were paid
4 on that by Dr. Grossman?
5 A Yes.
6 Q And you were aware then that not that long afterwards
7 an amount came back to Who's Who Worldwide which basically
8 represented that amount of $400,000 net of all the taxes,
9 are you aware of that?
10 A I'm aware an amount came
back. I'm not aware
11 specifically what it was.
12 Q But in any event, in regarding that as all right, you
13 were aware that Dr. Grossman had received some money
14 before and shortly afterwards returned it to the
15 corporation?
16 A Yes.
17 Q And that did not, in your mind, prevent it from being
18 a valid repayment of a loan?
19 A No.
20 Q When Mr. Gordon explained, told you about it or the
21 company told you about it, you didn't say there was
22 anything wrong with that; is that correct?
23 A No. 24 Q Now, going back to your own borrowing from Stegar, 25 when you did it, did you regard that as tax planning for
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8185 Reffsin-cross/Trabulus
1 yourself when you did it?
2 A No.
3 Q In other words, the fact that you borrowed from
4 Stegar rather than took a
payment to yourself as
5 compensation from Stegar -- withdrawn.
6 Did you have a choice of taking a payment for
7 yourself as compensation from Stegar as opposed to
8 borrowing?
9 A No.
10 Q Now, do you recall telling Mr. Gordon that he could
11 take loans from the corporation so long as he intended to
12 repay them and not have to pay taxes on that?
13 A Did I tell him he could take loans?
14 Q I shouldn't say that.
15 Did you explain to Mr. Gordon at the outset, at
16 the outset of Who's Who Worldwide, that he would have the
17 option of borrowing money from Who's Who Worldwide and if
18 he did so he would not have to pay taxes on that at the
19 time he received it?
20 A No, I never said that to Mr. Gordon.
21 Q Well, would that be accurate as you understand it if
22 it is a valid borrowing from a company you don't need to
23 pay taxes on
it at the point in time? 24 A If it is intended to be a loan, it's a loan. 25 Q That's all I'm suggesting.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8186 Reffsin-cross/Trabulus
1 A Yes.
2 Q And I assume you discussed that with Mr. Gordon at
3 some point in time relating to the loan. I mean, that's
4 what you yourself had done with Stegar, right?
5 A I mean, if he took a loan and intended to pay it
6 back, it's a loan. If he took a loan without intending to
7 pay it back, it's not a loan.
8 Q Do you recall for the first time you discussed that
9 with Mr. Gordon? Was that pretty early on?
10 A Late '91 into '92.
11 Q And that would be in connection with closing the
12 books in '91?
13 A Yes.
14 Q Let me go back. I just want to ask you a little bit
15 about the tax shelters that you had been the accountant on
16
in which some of the problems resulted.
17 Isn't it a fact that the IRS didn't totally
18 disallow those tax shelters?
19 A Yes, I think there was one that was not disallowed.
20 Q Do you recall that they allowed 50 percent of the
21 deductions that were claimed?
22 A I recall that with respect to some of the investors,
23 they were permitting to take a 50 percent deduction -- I 24 take that back. They were permitting them to take the 25 cash deduction.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8187 Reffsin-cross/Trabulus
1 Q Without going into details, I mean, it wasn't found
2 to be totally wrong, right?
3 A The concept was a reasonably decent concept.
4 Q Was it put together -- withdrawn.
5 Were those tax shelter deals put together by some
6 attorneys, basically designed by the attorneys?
7 A Yes, that's correct.
8
Q That was the law firm you mentioned before, I think
9 the last name was Hindy?
10 A Adler, Greenberg, Hindy, yes.
11 Q Was that Adler any relation to --
12 A No.
13 Q Different Adler altogether?
14 A Different Adler altogether.
15 Q But apparently the opinion he gave turned out to be
16 wrong; is that correct?
17 A Yes.
18 Q And as a result Mr. Gordon suffered those
19 consequences?
20 A That's correct.
21 Q Now, I think Mr. White asked you whether at some
22 point in time you had used the word "bullshit" in January
23 of 1996 in speaking to the IRS agents. Do you recall 24 that? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8188 Reffsin-cross/Trabulus
1 Q And I think you indicated at that point in time it
2 might have been. You couldn't tell?
3 A There was no reason to assume one way
or the other.
4 Q Do I understand what would have enabled you to tell
5 one way or the other, is what would have happened if there
6 had not been a bankruptcy and then Who's Who Worldwide
7 being shut down?
8 A Yes.
9 Q And can you just explain that to the jury?
10 A Well, the purpose, I understood the purpose of
11 acquiring the condo was to use it for business purposes,
12 one of the businesses. When he was going to set up the
13 California operation he was going to bring people in to
14 train and spend some time there. That never happened.
15 In addition, late in 1993 he got heavily involved
16 in this lawsuit with Reed Elsevier which essential became,
17 went from nothing in his mind to a $1,700,000 lawsuit and
18 then within months we're talking about bankruptcy. So
19 many things happened during a short period of time, to
20 change whatever intentions
he may have had.
21 Q Let me see if we can be more specific.
22 The original intention was to utilize that condo
23 for training people who had come in from out of town such 24 as California? 25 A That was one of the uses, yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8189 Reffsin-cross/Trabulus
1 Q And once there was a judgment in a bankruptcy it
2 wasn't possible to expand to California.
3 A That's correct.
4 Q But they still had the condo; is that correct?
5 A Yes.
6 Q The condo had been bought before that?
7 A They owned it.
8 Q In light of the bankruptcy and the judgment, there
9 was no way to tell what would have happened had the plans
10 not gone awry because of the bankruptcy and the judgment,
11 right?
12 A No.
13 Q That applies also to paying back the loans?
14 A That's correct.
15
Q In other words, Mr. Gordon always maintained that he
16 intended to pay them back?
17 A That's what he said.
18 Q And you had expected that Who's Who -- withdrawn.
19 Who's Who Worldwide was doing better and doing
20 better and better, is that fair to say?
21 A It would appear to be doing that, yes.
22 Q At a certain period of time it might have generated
23 enough income for him to in one fell swoop -- withdrawn. 24 Let me backtrack. 25 If he had taken, repaid the loans by kind of
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8190 Reffsin-cross/Trabulus
1 cancelling them out and treating it as income at a certain
2 point in time, that wouldn't have -- that would have had
3 the result of increasing his taxable income for that year,
4 right?
5 A That's correct.
6 Q And is it fair to say that it was expected that at a
7 c
ertain point in time if Who's Who Worldwide kept on doing
8 better and better, it would be a point in which there
9 would be enough money for him to do that and pay the taxes
10 for that -- during that year?
11 A Based on the loans that existed at that time, yes.
12 Q And did you regard that as a reasonable expectation
13 in light of the way Who's Who Worldwide was doing?
14 A I was shocked at the growth with respect to Who's Who
15 Worldwide.
16 Q You mean how much it was growing?
17 A How much it was growing, yeah.
18 Q So is it fair to say it seemed reasonable to you if
19 it kept on growing that way he would be able to pay it
20 back and meet the additional tax obligation?
21 A Assuming it didn't get out of hand, yes.
22 Q Okay.
23 And part of the preventing it from getting out of 24 hand was repaying it through the loan from the Grossmans; 25 is
that correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8191 Reffsin-cross/Trabulus
1 A No, that's the way he did it so far or at that time.
2 Q Certainly when he told you that this -- when you
3 discussed with him that that was the plan, you didn't tell
4 him that this was wrong, did you?
5 A What was the plan?
6 Q The expectation to pay it back at some point in the
7 future as Who's Who Worldwide did better and better.
8 A I told him it would have to be paid.
9 Q But you didn't tell him that his expectations in that
10 regard seemed to be pie in the sky, did you?
11 A No, I would never.
12 Q You indicated also that the initial offer and
13 compromise of $150,000 was contemplated really to be part
14 of a package where there also would be the additional
15 $254,000 to the Department of Justice?
16 A Initially, yes.
1
7 Q When you first did that, you were in effect offering
18 $400,000, right?
19 A That's correct.
20 Q And you expected, based on your own prior experience,
21 that the IRS would not take your initial offer but want
22 more, correct?
23 A That's correct. 24 Q And you discussed that with Mr. Gordon? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8192 Reffsin-cross/Trabulus
1 Q As part of all of this, did Mr. Gordon express to you
2 the view that as Who's Who Worldwide did better and better
3 he would be able at some point in one fell swoop to pay
4 the tax, to pay this amount that would be compromised,
5 perhaps greater than $400,000, pay back the loan and pay
6 an additional tax obligation he incurred by reason of the
7 fact that the loan was being repaid?
8 A Well, the compromise would have to be paid, whatever
9
it was.
10 Q And also pay back the loan?
11 A Yes.
12 Q And at the same time as paying back the loan, he
13 might incur additional taxes because paying back the loan
14 would involve income to him?
15 A Yes.
16 Q And all of it, he expressed to you the hope he could
17 do that all at once Who's Who got to a certain point.
18 A I would like to change that. I mean, the pay back of
19 the loan could be either through income or through
20 payments from elsewhere.
21 Q But one of the things that was contemplated was there
22 might be a cancellation. Indebtedness, his indebtedness
23 to Who's Who Worldwide which would be treated as salary to 24 him? 25 A That was the last alternative.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8193 Reffsin-cross/Trabulus
1 Q And it was his hope this could be accomplished if
2 Who's W
ho was successful enough?
3 A I would presume so, yes.
4 Q What prevents us from ever knowing whether that
5 happened was the bankruptcy and ultimately the fact that
6 Who's Who Worldwide and Sterling had shut down?
7 A Yes.
8 Q Now, I think Mr. White showed you Exhibit 415.
9 Do you have it there?
10 A It may be here.
11 Q Do you have it? The corporate tax return?
12 A (Perusing.) Here it is.
13 Q Okay.
14 Mr. White showed you 415. That's a Who's Who
15 Worldwide corporate tax return for 1990; is that correct?
16 A That's correct.
17 Q And I think he pointed out to you that Mr. Gordon is
18 shown as owning 100 percent of the stock; is that correct?
19 A Yes.
20 Q Now, if Mr. Gordon owned less than 100 percent or
21 owed none of it, would there be any possible benefit to
22 Mr. Gordon to list his ownership as being 100 percent?
23 A At this point, no. 24 Q Yes? 25 A No.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8194 Reffsin-cross/Trabulus
1 Q I mean, for example, if he owned 75 percent, would
2 there be any benefit in showing 100 percent instead of 75?
3 A A benefit of showing 100 percent?
4 Q Yes, to him.
5 A No.
6 Q I think you mentioned that Mr. Gordon -- withdrawn.
7 You mentioned that Mr. Gordon liked to have
8 different companies that he would have dormant and kind of
9 save them so he would use the name?
10 A He incorporated several, yes.
11 Q Did he also like to have bank accounts in different
12 places, with different banks?
13 A Yes.
14 Q And from your business experience, what can be some
15 of the reasons why a business person might like to have
16 relations with more than one bank?
17 A Well, that's the thi
ng, to have relations with more
18 than one bank for future borrowings, financial situations
19 that may arise.
20 Q And, for example, if you had a corporation and you
21 had -- that corporation had accounts with several
22 different banks and then you formed a related corporation
23 and you only established a bank account for that related 24 corporation with one of the banks and other banks got wind 25 of the fact that you only had one account, could that
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8195 Reffsin-cross/Trabulus
1 affect your relationship?
2 A If you were doing any other financing with them it
3 might.
4 Q So if you had relationships with several different
5 banks you would -- you might have a reason to have bank
6 accounts for all of your corporations with all of the
7 banks. Is that fair to say?
8 A That's correc
t.
9 Q Perfectly legitimate business reasons?
10 A Yes.
11 Q Were you aware during your examination of the books
12 and records -- withdrawn.
13 In doing your work on Who's Who Worldwide, I will
14 not call it an examination, did you become aware whether
15 or not Who's Who Worldwide made refunds?
16 A I recalled there were refund checks, yes.
17 Q And did you ever happen to see, did you ever take a
18 look at any of the bank statements that reflected deposits
19 from NABANCO?
20 A You mean the merchant companies.
21 Q Did you ever look at those?
22 A No, not myself. No.
23 MR. TRABULUS: Bear with me, Your Honor. I'm 24 trying to figure out the numbering sequence. 25 THE COURT: Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8196 Reffsin-cross/Trabulus
1 BY MR. TRABULUS:
2 Q While they are looking for
that, do you ever recall
3 having a conversation with Dr. Grossman that you expected
4 with the California office Who's Who Worldwide and related
5 companies to do $50,000,000 a year in Gross?
6 A With Dr. Grossman?
7 Q Do you recall that?
8 A No, I don't.
9 Q Do you recall having that conversation with somebody
10 expecting that point that if they opened the California
11 office they would be doing about 50,000,000?
12 A Well, Mr. Gordon said he expected the companies to do
13 $50,000,000 a year.
14 Q Showing you 796-C which is in evidence.
15 Mr. Reffsin, do you know what that is?
16 A It's an accounts payable analysis report.
17 Q Do you know who prepared that?
18 A That time I would have to say Ms. Gaspar.
19 Q That came from Who's Who's records; isn't that right?
20 A Yes.
21 Q Now, it's a long exhibit and thumb through it and you
22 will come to a place that is called "A/P purchase analysis
23 report." It's about an eighth of an inch, dated 1/1/94 24 through 3/31/94. 25 A The whole thing is an A/P analysis report.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8197 Reffsin-cross/Trabulus
1 Q Do you know what, I'll come up there and show you the
2 whole thing to save some time.
3 Here we are. On the page in the upper left-hand
4 corner it says 4/19/94, 3:21 p.m.
5 A Yes.
6 Q And at bottom of that page there is a list, is there
7 not, of notes and dollar entries?
8 A Account 4560, cancellations or refunds.
9 Q What does that reflect?
10 A These would be refunds that were due to people.
11 Q And were they refunds that were made?
12 A Well --
13 Q It would be payables?
14 A Payables, amounts due.
15 Q Okay.
16 At this point was it
your understanding from what
17 you could see when amounts were due were they paid on
18 these refunds, the people?
19 A Well, this wouldn't show the payment, just shows the
20 balance due.
21 Q And so Who's Who would reflect the balances due on
22 their books for refunds; is that correct?
23 A Apparently Ms. Gaspar was reflecting them, yes. 24 Q And you understood that refunds were actually made; 25 is that correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8198 Reffsin-cross/Trabulus
1 A Yes.
2 Q Some of the amounts that were here would be amounts
3 for $197, $97, $277?
4 A Yes.
5 Q 97.50?
6 A The two $97's is a duplicate payment.
7 Q Two payments.
8 And the $97.50 would be somebody who was billed
9 for a directory or a CD ROM possibly?
10 A Possibly.
11 Q Mr. Reffsin, I'll show you 776-G i
n evidence and that
12 is a Who's Who Worldwide Registry, Inc., business checking
13 account statement, right?
14 A Yes.
15 Q For their account at European American Bank?
16 A Yes.
17 Q Is that one of the banks at which their credit card
18 payments by customers or members were directly deposited?
19 A NABANCO would make the deposits here.
20 Q They are substantial for deposit, 13,000 and change,
21 16,000 and change?
22 A Yes.
23 Q But there are also chargebacks, $297? 24 A Yes. 25 Q $197?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8199 Reffsin-cross/Trabulus
1 A Yes.
2 Q Several of them like that?
3 A Right.
4 Q And those would reflect refund, would they not?
5 A They would reflect cancellation of charges.
6 Q Which could either be a refund or somebody decided
7 not to go through th
e purchase?
8 A That's correct.
9 Q Now, Sterling, the lease for the Sterling office
10 facility was a ten year lease; is that correct?
11 A I believe it was, yes.
12 Q Would it refresh your recollection if I showed you
13 testimony that you gave once before about that?
14 A I believe it would.
15 Q And in the course of your work, the work that you did
16 in the bankruptcy, you became familiar with the terms of
17 the Sterling lease; is that correct?
18 A Yes, because Who's Who guaranteed it.
19 Q The combined companies Who's Who Worldwide and
20 Sterling, were you aware that they paid payroll taxes of
21 about $70,000 a week?
22 A I wouldn't be surprised.
23 Q Now, you mentioned before that the address that 24 appeared on one of Mr. Gordon's tax returns of 10 Bluff 25 Road, you got that from Mr. Gordon?
OWEN M. WICKER, RPR OFFICIA
L COURT REPORTER 8200 Reffsin-cross/Trabulus
1 A Yes.
2 Q Would that have been something that you got from
3 Mr. Gordon through a W-2 that he had given in a prior
4 year?
5 A I believe I asked Mr. Gordon what address to use.
6 Q Mr. Gordon could have used -- withdrawn.
7 It's fair to say that Mr. Gordon eventually, I
8 mean, there are tax returns filed by Mr. Gordon which
9 showed 2 Hummingbird Lane as his address; is that correct?
10 A Later, yes.
11 Q And there are W-2s that showed that?
12 A I believe so, yes.
13 Q And there was a year in which Mr. Gordon filed a tax
14 return which showed as an address 1983 Marcus Avenue, his
15 business address, that's correct?
16 A Yes.
17 Q And there was nothing improper about that; is that
18 correct?
19 A No, nothing unusual.
20 Q If Mr. Gordon wanted to deliberately con
ceal where he
21 was living and not disclose that on a tax return, he could
22 have just as easily given 1983 Marcus Avenue, his business
23 address, right? 24 A He could have. 25 Q And it would have been very simple, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8201 Reffsin-cross/Trabulus
1 A Yes.
2 Q There's no need, there would have been no need to
3 give an incorrect address; is that correct?
4 A No, it's just a mailing address.
5 MR. TRABULUS: Bear with me a moment, Your
6 Honor.
7 THE COURT: Yes.
8 BY MR. TRABULUS:
9 Q Mr. Reffsin, I would like to go back to those
10 instructions how to prepare collection information
11 statement. They are Exhibit ED.
12 A That is the 433 A.
13 Q The instructions for the 433 A, yes.
14 A Bear with me.
15 Q Sure.
16 A Okay, got them.
17 Q Now, we've talked about this before and with other
18 witnesses too, but let's just go through it. Basically it
19 gives a general instruction for what to put under
20 necessary living expenses; is that right?
21 A Yes.
22 Q That's the first two lines that are after that,
23 right? 24 A Are you talking about the first sentence? 25 Q Yes, expenses must be reasonable for the size of your
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8202 Reffsin-cross/Trabulus
1 family, geographic location and unique circumstances?
2 A Right.
3 Q Now, the IRS doesn't have the power to tell people
4 how much money they can spend, does it?
5 A No.
6 Q So they can't tell people that their actual expenses
7 have to be reasonable. They can't do that, right?
8 A I don't understand the question.
9 Q In other words, you understand that to mea
n that the
10 expenses that you list have to be reasonable. Is that
11 fair to say?
12 A Necessary.
13 Q Necessary. Reasonable to be necessary.
14 A Yes.
15 Q After that there are some specific ones where they
16 give specific instructions, right?
17 A Yes. Right.
18 Q In the case of rent, they tell you to list your
19 monthly rent payment?
20 A Yes.
21 Q So that might be interpreted a little bit differently
22 than just what is necessary. In case of rent they really
23 want to know what you are actually paying? 24 A Yes. 25 Q And unless they give you a specific instruction there
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8203 Reffsin-cross/Trabulus
1 how to deal with that, you would understand it to be what
2 is actually necessary?
3 A That's correct.
4 Q And that catch all at the end where i
t says "other
5 expenses," there's no specific instruction on that. They
6 don't tell you to put your actual other expenses; is that
7 correct?
8 A No, necessary other expenses other than what is
9 listed.
10 Q Do you as an accountant regard these instructions as
11 particularly clear? I have to ask you that.
12 A No.
13 Q Now, Mr. White asked you some questions --
14 withdrawn.
15 MR. TRABULUS: Do you have Exhibit 417?
16 MR. WHITE: What is that?
17 MR. TRABULUS: 1992 Who's Who Worldwide tax
18 return.
19 BY MR. TRABULUS:
20 Q Mr. Reffsin, I'm showing you 417 in evidence. That
21 is the U.S. corporate tax return for Who's Who Worldwide
22 Registry, Inc., for the year 1992, is it not?
23 A Yes, it is. 24 Q And you signed it as preparer; is that correct? 25 A That's correct.
OWEN M. WICKER, RPR OFFICIAL CO
URT REPORTER 8204 Reffsin-cross/Trabulus
1 Q Now, on the second page -- I'm sorry, you signed it
2 as preparer on March 12, 1993; isn't that correct?
3 A Yes.
4 Q And on the second page -- and this doesn't bear
5 Mr. Gordon's signature, right?
6 A No, this one does not.
7 Q If you look further in there they sent him a form for
8 him to sign because he didn't sign that. Do you see that
9 in there?
10 A Yes, it's in the back.
11 Q Okay.
12 And then he signed it once he got that form. He
13 signed the form, right?
14 A Umm-hmm.
15 Q And this shows that Bruce Gordon doesn't owe anything
16 of Who's Who Worldwide?
17 A Yes.
18 Q Mr. White asked you about the facts from Mr. Adler of
19 the documents that were relating to share ownership by the
20 Grossmans?
21 A Yes.
22 Q And that was faxed to you in
March of 1994?
23 A That's correct. 24 Q And this was filed more than a year before that; is 25 that correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8205 Reffsin-cross/Trabulus
1 A That's correct.
2 Q So it wasn't just sometime in March of 1994. All of
3 a sudden the idea comes up that Mr. Gordon doesn't own
4 Who's Who Worldwide?
5 A Absolutely not.
6 MR. TRABULUS: Bear with me a moment, Your Honor.
7 THE COURT: Yes.
8 MR. TRABULUS: Actually, would this be an
9 appropriate time to break? I will have more.
10 THE COURT: I want you to continue until
11 5 o'clock. Not 4:59, but 5 o'clock.
12 BY MR. TRABULUS:
13 Q Mr. Reffsin, I will show you my copy of Exhibit 660,
14 the general ledger for December 31, 1993.
15 Can you look through this and see if that
16 refreshes your recollection as to what it co
st to print
17 the registry?
18 A (Perusing.) When you say "the registry," the
19 registry itself?
20 Q The book.
21 A Okay. Well, the registry, Global Leaders, account
22 5250, which shows $222,000.
23 Q In that year? 24 A And then there is some printing and binding which 25 shows another $114,000. From here you can't tell
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8206 Reffsin-cross/Trabulus
1 specifically.
2 Q That would have been in 1993? That would have been
3 expenses incurred in 1993?
4 A Yes.
5 Q And in 1994 the membership was larger?
6 A For Who's Who Worldwide?
7 Q Yes.
8 A I would have to imagine it would be, yes.
9 Q So there would have been even more expended on it?
10 A Yes.
11 Q You were shown a chart 837. Do you recall seeing
12 this?
13 A Yes.
14 Q A
nd you were shown about various transfers that were
15 on this?
16 A Yes.
17 Q As far as you know, sir, all of those transfers were
18 by check, were they not?
19 A I wouldn't -- only the Who's Who Worldwide transfer
20 would I be able --
21 Q I should rephrase the question.
22 All of the transfers which you have knowledge of
23 that were on that were by check, were they not? 24 A Yes. 25 Q And you certainly have no reason to believe that any
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8207 Reffsin-cross/Trabulus
1 of the others were not by check?
2 A No.
3 Q And transfers by check are traceable, are they not?
4 A Yes.
5 Q Traceable through bank records?
6 A Yes.
7 Q Does the bank take pictures of the check when it is
8 deposited?
9 A Yes.
10 Q The check is drawn on a bank account and
that bank
11 makes a picture of the check when it comes back, right?
12 A Yes. You would also have the cancelled check.
13 Q Well, the cancelled check itself would go back to the
14 person who wrote the check or the company that wrote the
15 check.
16 A Right.
17 Q But what I'm getting at it is traceable without
18 looking to the company -- you don't have to look to the
19 record of the writer of the check to trace it, you can
20 look at bank records, right?
21 A Yes.
22 Q Now, Mr. White asked you whether Mr. Gordon had
23 structured things so that nothing was in his name; is that 24 correct? 25 A Yes, he did.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8208 Reffsin-cross/Trabulus
1 Q And the 1991 tax return for Who's Who Worldwide was
2 signed by Mr. Gordon, was it not?
3 A Yes.
4 Q That's Exhibit 416
in evidence. I will show you my
5 copy of it.
6 Your firm prepared it?
7 A Yes.
8 Q And you signed it June 18, 1992?
9 A Right.
10 Q And Mr. Gordon's signature appears June 22, 1992,
11 right?
12 A Yes.
13 Q And that discloses a 75 percent ownership by
14 Mr. Gordon in Who's Who Worldwide, right?
15 A Yes.
16 Q At that point in time Mr. Gordon owed considerable
17 monies to the IRS, did he not?
18 A Same amount.
19 Q So certainly there he's owing money to the IRS and
20 he's not hiding, at least if he owned 75 percent he's not
21 hiding that, is he? It's on the form. He signed it.
22 A The form reflects it, yes.
23 THE COURT: All right. We'll take a recess at 24 this time. 25 Come up, Counsel.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8209 Reffsin-cross/Trabulus
1 MR. TRABUL
US: Sure.
2 (Side bar.)
3 THE COURT: How much longer do you have?
4 MR. TRABULUS: It's hard to say, Judge, but not
5 more than a half-hour, maybe 45 minutes at most.
6 THE COURT: And then you have some recross?
7 MR. SCHOER: Fifteen, 20 minutes.
8 THE COURT: Anybody else?
9 MR. WALLENSTEIN: My redirect is only about a
10 half-hour, depends what comes out.
11 MR. WHITE: I'm sure I will have some based on
12 the redirect and recross.
13 THE COURT: That takes care of essentially the
14 good part of the morning.
15 Is this lady here, Sandra Barnes?
16 MR. NELSON: She is here. She will be back
17 tomorrow morning.
18 THE COURT: You will have to take some testimony
19 in camera, so why don't we have her back at 9:15
20 tomorrow. We can question her about that tomorrow. Has
21 she already been told to call her back?
22 MR. NEVILLE
: I will have to tell Mr. Bailey to
23 tell her to come back. They were coming from the south of 24 Newark. 25 THE COURT: Leave it alone, we'll take it
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8210 Reffsin-cross/Trabulus
1 sometime in the morning.
2 What else do we have?
3 MR. TRABULUS: At this point will have nothing
4 further except for the stipulation that Mr. White and I
5 had agreed to which will be read into the record and there
6 is a transcript. I will offer that in evidence. It's
7 relatively short.
8 MR. WHITE: I just have to look at it again.
9 MR. TRABULUS: It's about four pages.
10 THE COURT: I will make a ruling. I can make the
11 ruling right after the jury leaves on that Dennis case.
12 MS. SCOTT: Okay, yes.
13 MR. WHITE: Your Honor, I'm not sure a ruling is
14 required because I didn't go back and men
tion the proffer
15 at all after that.
16 THE COURT: So you will not go into that?
17 MR. WHITE: Yes, I've refrained from doing it.
18 It's my intention even on recross not to get into it.
19 THE COURT: Then I don't have to make any
20 ruling. You wouldn't have succeeded. I found a case I
21 liked better.
22 MS. SCOTT: Which one?
23 THE COURT: I'll tell you. 24 MS. SCOTT: I'm very curious. 25 THE COURT: I'll tell you as soon as we get rid
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8211 Reffsin-cross/Trabulus
1 of the jury, not get rid of, as soon as we excuse the jury
2 for the day.
3 MR. WALLENSTEIN: Excuse the jury.
4 THE COURT: Very good. So it looks like we'll
5 finish the testimony tomorrow.
6 MR. NELSON: Unless there is a rebuttal case from
7 the government.
8 MR. TRABULUS: I'm suspecting a rebut
tal case
9 from them.
10 THE COURT: Are you expecting to put a rebuttal
11 case?
12 MR. WHITE: I think I'll know tomorrow morning.
13 THE COURT: We'll see then.
14 (End side bar.)
15 THE COURT: Members of the jury, we'll recess
16 until 9:30.
17 You can step down, Mr. Reffsin.
18 I can't give you anymore enlightenment as to when
19 the trial will end. My estimate that you will get the
20 case sometime next week is still a good estimate. When it
21 will be, I can't tell you. If we conclude the testimony
22 tomorrow, I told you that we'll have summations on Monday
23 and you'll get the case on Tuesday, probably. If we don't 24 complete the testimony tomorrow, then it will be extended 25 another day at least on that schedule. I'll know more
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8212 Reffsin-cross/Trabulus
1 a
bout it tomorrow.
2 In the meantime, we're nearing the end of the
3 case. Do not discuss the case. Keep an open mind. Come
4 to no conclusions.
5 Enjoy the evening. We'll recess until 9:30.
6 Have a nice evening.
7 (Jury exits.)
8 THE COURT: The name of the case that I liked and
9 you looked at all of your cases and I would attempt to
10 distinguish is United States v. Trabuc. It's not a
11 circuit court, it's a district court case. It's cited at
12 1989 WL 38119, Southern District of New York, and it says
13 "it is apparent that the prosecutor by asking questions
14 concerning which he had personal knowledge assumed the
15 role of an unsworn witness at trial."
16 Now, listen to this part.
17 "Indeed there were times when the context as
18 well as the tone and manner of the cross-examination took
19 on the appearance of an altercation."
20 T
his is tailor made because I mentioned Mr. White
21 who raises his voice occasionally might do it.
22 MR. WHITE: Not to the level of an altercation
23 though, Your Honor. 24 THE COURT: No. Continuing. "This was improper 25 and placed the defendant at a great disadvantage because
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8213
1 as an unsworn witness the prosecutor was not subject to
2 cross-examination or impeachment." See United States v.
3 Cummingham, 672 F.2d 1064 which doesn't add much. "But
4 this further supports our view that the defendant did not
5 receive a fair trial," they say. That language I think is
6 appropriate.
7 However, since you are not going to go into it,
8 it becomes moot.
9 MR. WHITE: Your Honor --
10 MR. WALLENSTEIN: Your Honor, could you spell the
11 name of that defendant again.
12 THE COURT:
T-r-a-b-u-c, and it is reported in
13 some kind of hieroglyphics. I can't read it, 1989 WL
14 381119.
15 MR. WALLENSTEIN: Westlaw.
16 Well, I don't pay attention to those kind of
17 citations.
18 MR. WHITE: Your Honor, I just want to say --
19 THE COURT: Done by a judge that I happened to
20 try a case. Well, it was involved in a criminal trial
21 many years ago which I lost, Judge Palmieri in the
22 Southern District.
23 MR. WHITE: Your Honor, as I said I don't intend 24 to go into that on cross-examination so that we avoid 25 this.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8214
1 THE COURT: Okay.
2 MR. WHITE: Where I could potentially become a
3 witness. However, I'll try to decide tonight based on the
4 testimony so far whether we will present a rebuttal case
5 in which an agent would testify that the sta
tements made
6 by Mr. Reffsin at that meeting, and I think that presents
7 no problem as Your Honor indicated before.
8 THE COURT: If you do and if we go into Thursday,
9 we'll not be able to complete the charge until Monday and
10 the summations will be Tuesday and Wednesday, which will
11 be one day later each time.
12 MR. LEE: Your Honor, could Mr. White indicate
13 whether he has any other rebuttal witness in mind because
14 I'm sure my colleagues will want to prepare for it. If it
15 is, I assume it will go on tomorrow, other than the agent
16 he alluded to.
17 MR. WHITE: Your Honor, you told me there were no
18 ground rules for the defendant. I don't know who they are
19 calling.
20 THE COURT: I'm asking you to tell us even though
21 there are no ground rules. I'm making ground rules for
22 you, though.
23 MR. WHITE: And I will not know until t
hey finish 24 the defense case. 25 THE COURT: Who says that the scales tip equally
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8215
1 in this regard.
2 MR. WHITE: I'm saying I don't know until I hear
3 the defendants' case.
4 THE COURT: Doesn't know, Mr. Lee.
5 MR. LEE: Based on what we represented to him as
6 the defense.
7 THE COURT: What do you want me to do, twist his
8 arm, Mr. Lee?
9 MR. LEE: Only if Your Honor feels we should.
10 THE COURT: He says he doesn't know, I take him
11 at his word.
12 MR. LEE: That's good enough for me.
13 MR. TRABULUS: Your Honor, I would respectfully
14 and I think I'm speaking on behalf of other counsel, ask
15 Your Honor to consider the possibility of summations
16 occupying more than one day, because we have nine defense
17 counsel plus the government which typica
lly gets a
18 rebuttal summation, if you divide up the time.
19 THE COURT: More than one day?
20 MR. TRABULUS: Look at the number of counsel. I
21 mean, I'm mentioning it --
22 THE COURT: Do you want to put this jury
23 completely to sleep or only partially? Which do you want 24 to do? 25 MR. TRABULUS: Well, I understand. I understand
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8216
1 what Your Honor is saying and I agree that that is a risk,
2 but I think also we have a lot of detail and a lot of
3 history in the case and I don't think there will be as
4 much duplication among defense counsel as you might think
5 because I think counsel for the salespeople will be
6 focusing on the particular tapes relating to them and what
7 they say and how they will demonstrate good faith and, of
8 course, I will be uniquely talking about pe
rjury and money
9 laundering because nobody else is charged with that as
10 well as the other count.
11 THE COURT: I'll take it into consideration. If
12 I think it is the right thing to do we'll do it over two
13 days.
14 MR. TRABULUS: Thank you, Your Honor.
15 THE COURT: With no assurance that that will
16 happen, Mr. Trabulus.
17 All right. 9:30 tomorrow morning.
18 (Proceedings adjourned.)
19
20
21 INDEX
22
23 M A R T I N R E F F S I N......................... 8006 24 DIRECT EXAMINATION................................... 8006 CROSS-EXAMINATION.................................... 8009 25 CROSS-EXAMINATION.................................... 8119 CROSS-EXAMINATION.................................... 8147
