> Page 1 Trial Opening 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. : January 14, 1998 11 - - - - - - - - - - - - - - X 9:00 o'clock a.m. 12 BEFORE: 13 HONORABLE ARTHUR D. SPATT, U.S.D.J. and a jury 14 15 APPEARANCES: 16 For the Government: ZACHARY W. CARTER United States Attorney
17 One Pierrepont Plaza Brooklyn, New York 11201 18 By: RONALD G. WHITE, ESQ. CECIL SCOTT, ESQ. 19 Assistant U.S. Attorneys 20 For the Defendants: NORMAN TRABULUS, ESQ. 21 For Bruce W. Gordon 170 Old Country Road, Suite 600 22 Mineola, New York 11501 23 EDWARD P. JENKS, ESQ. For Who's Who, Sterling 24 332 Willis Avenue Mineola, New York 11501 25 (cont'd)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
2 1 APPEARANCES (cont'd): 2 GARY SCHOER, ESQ. For Tara Garboski 3 6800 Jericho Turnpike Syosset, New York 11791 4 ALAN M. NELSON, ESQ. 5 For Oral Frank Osman 3000 Marcus Avenue 6 Lake Success, New York 11042 7 WINSTON LEE, ESQ. For Laura Weitz 8 319 Broadway New York, New York 10007 9 MARTIN GEDULDIG, ESQ. 10 For Annette Haley 400 South Oyster Bay Road 11 Hicksville, New York 11801 12 JAMES C. NEVILLE, ESQ. For Scott Michaelson 13 225 Broadway New York, New York 10007 14 THOMAS F.X. DUNN, ESQ. 15 For Steve Rubin 150 Nassau Street 16 New York, New York 10038 17 JOHN S. WALLENSTEIN, ESQ. For Martin Reffsin 18 215 Hilton Avenue Hempstead, New York 11551 19 20 Court Reporter: HARRY RAPAPORT, CSR United States District Court 21 Two Uniondale Avenue Uniondale, New York 11553 22 (516) 485-6558 23 Proceedings recorded by mechanical stenography, transcript 24 produced by Computer-Assisted Transcription 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
3 1 M O R N I N G S E S S I O N 2 3 (Whereupon, the following takes place in the 4 absence of the jury.) 5 THE COURT: What happened to my bench. Did you 6 do anything, Mr. White, here? It is like Goldilocks and 7 the Three Bears. 8 MR. WHITE: Your Honor, I hope I am not the big 9 bad wolf in that story. 10 THE COURT: You might very well be. 11 Let's put the appearances on the record right
12 now. 13 MS. SCOTT: Ceci Scott for the United States. 14 THE COURT: I can't hear you. First rule, talk 15 up. You want everybody to hear what you are saying, 16 right? 17 MS. SCOTT: Right. 18 THE COURT: That's the first rule. The second 19 rule is to talk slowly so the jury will hear the things 20 that you have been studying for the past six months or 21 more, which you expect them to digest in a space of a 22 split second. 23 In order to do that you have to speak slowly and 24 loudly. 25 Do you see the way I speak? Or do you hear the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
4 1 way I speak? 2 Do the same thing, please. 3 MS. SCOTT: Ceci Scott for the United States. 4 MR. WHITE: Ronald White for the United States. 5 MR. TRABULUS: Norman Trabulus for Bruce Gordon. 6 MR. JENKS: Edward Jenks for Who's Who Worldwide 7 Registry, Inc. and Sterling Who's Who. 8 MR. SCHOER: Gary Schoer for Tara Garboski. Good 9 morning. 10 MR. NELSON: Alan Nelson for Oral Frank Osman. 11 MR. LEE: Winston Lee for Laura Weitz. Good 12 morning, your Honor. 13 MR. DUNN: Thomas Dunn for Steve Rubin. 14 MR. NEVILLE: James Neville for Scott 15 Michaelson. 16 Also with me is a student, Jonathan Schechter, 17 S C H E C H T E R. And I was wondering if I could get 18 some guidance from the Court whether or not he could sit 19 up at the table with me. 20 THE COURT: It depends what law school he is in. 21 MR. NEVILLE: He is not in law school. He is a 22 college student. 23 THE COURT: What college does he go to? 24 MR. NEVILLE: The University of Vermont. 25 THE COURT: Okay.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
5 1 MR. NEVILLE: Thank you. 2 MR. GEDULDIG: Martin Geduldig for Annette Haley. 3 THE COURT: You are farther away, you have to 4 talk louder, Mr. Geduldig. 5 MR. GEDULDIG: Martin Geduldig for Annette Haley. 6 THE COURT: Good. 7 MR. WALLENSTEIN: John Wallenstein for Martin 8 Reffsin. 9 THE COURT: Let us discuss some of these 10 procedures. 11 First of all, when witnesses are sworn, please 12 remain seated. Do not stir around going over papers and 13 so forth, or discussing things with your colleagues. I 14 consider the administration of the oath to be a solemn 15 moment. 16 Secondly, we have a custom in the Eastern 17 District of New York to rise when the jury enters the 18 courtroom, and that's everybody, and rise when they leave 19 the courtroom. Please adhere to our custom. 20 I don't have to tell experienced lawyers to rise 21 when they make objections. There are several reasons for 22 that. You know the reasons. 23 Also, when you make objections, I don't want any 24 speeches. Just say object, and nothing else. If I want 25 to know what the reason is, I will ask you. Generally I
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
6 1 will know what the reason is. Unless it is something that 2 is so vital and critical that you have to make a 3 statement, ask me permission to make a statement. 4 Otherwise no statements. 5 The jury room is through this left front door. 6 The men's bathroom is right opposite the jury room. Do 7 not use the men's bathroom on this floor. Use the 8 bathroom on the second floor. 9 Don't talk to the jurors. That is in any way. 10 Do not say hello, you look great today, or it is going to 11 snow tomorrow, what do you think? Don't say anything to 12 them. I will tell them that I have instructed you not to 13 talk to them so they don't think you are rude. 14 We are going to move this case along as rapidly 15 as we can, always consistent with due process 16 considerations. So, if you have requests to charge, if 17 you want to submit them, do it as soon as possible. 18 Because the case probably is not going to take as long as 19 you think it is going to take. 20 The government is going to start, I assume with 21 their case. Have enough witnesses available at all times 22 to go to 5:00 o'clock. I don't want to hear that you sent 23 three witnesses home because it is 2:00 o'clock and you 24 thought that we wouldn't need them. Probably these 25 witnesses will have never testified before, and will never
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7 1 again. So, if they spend an extra day, so be it, rather 2 than all of us waiting and losing time. So have enough 3 witnesses available. 4 Please try to pre-mark the exhibits consistent 5 with the requirements of law. Exchange them with counsel 6 before you use them. Because there is nothing that is 7 more irritating to a jury, to have counsel, especially 8 this number, presented with a 38-page document and right 9 in front of the jury all of them reading this document for 10 the first time. That is to be avoided if possible. 11 Because I have hundreds of other cases, civil and 12 criminal, we will not be sitting generally on Fridays 13 where I take care of sentencings, motions, and all kinds 14 of other things. 15 I will let you know each week. But this Friday 16 we will not sit. Generally we won't, except if I need the 17 time. 18 As far as the preliminary instructions that I am 19 going to give the jurors, I am going to say very little 20 about the case. 21 Do you want me to introduce the individual 22 defendants? Anybody object to that? I generally do that. 23 MR. TRABULUS: No objection. 24 THE COURT: Okay. 25 Are all the defendants going to make opening
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8 1 statements? I tell the jury you don't have to, but are 2 you going to make opening statements? Everybody going to 3 make one? 4 MR. SCHOER: Yes. 5 MR. JENKS: Yes. 6 MR. NELSON: Yes. 7 THE COURT: Anybody not going to make an opening 8 statement? 9 (No response.) 10 THE COURT: Here is what I will tell the jury 11 about the case. 12 In this case the indictment charges that 13 Bruce W. Gordon, Who's Who Worldwide Registry, Inc. and 14 the rest of the defendants, were involved in a conspiracy 15 to commit mail fraud in connection with the Who's Who 16 directories, and all these defendants committed the 17 directories in connection with the Who's Who directories. 18 Bruce Gordon is also charged with giving perjurious 19 testimony at another trial, a civil trial, obstruction of 20 justice, filing false tax returns, filing false collection 21 information statements and money laundering. 22 In addition, Bruce Gordon and Martin Reffsin are 23 each charged with obstruction of justice, conspiracy to 24 impair, impede and defeat the Internal Revenue Service, 25 and evasion of payment of income taxes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
9 1 Finally, Martin Reffsin is charged with the 2 assisting in the filing of false income tax returns. 3 Of course, I tell them before that that the 4 indictment is simply a description of the charges made by 5 the government. It is not evidence of anything. 6 I tell the jurors that I encourage them to take 7 notes if they so request. My courtroom deputy will give 8 them a pad and a pen. And I give them some instructions 9 about taking notes. 10 Who is sitting at the counsel table with you, 11 Mr. White? 12 MR. WHITE: The agents, you mean? 13 THE COURT: Yes. 14 I don't know who they are. They could be the 15 next draft choice for the New York Jets in 1998. I don't 16 know who they are. 17 MR. WHITE: They wish, your Honor. 18 Joseph Jordan, Special Agent with the Internal 19 Revenue Service, and Alphonse Pagano, a postal inspector. 20 THE COURT: Joseph Jordan and -- 21 MR. WHITE: That's IRS, and Alphonse Pagano, 22 P A G A N O, a U.S. postal inspector. 23 THE COURT: That's about it. 24 Anything anybody wants to talk to me, talk about 25 to me at this point?
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10 1 MR. JENKS: I do, your Honor. 2 Your Honor, at the time of the raids in March of 3 1995, on the two corporations, the government had made two 4 videotapes at 750 Lexington Avenue, at Sterling Who's Who, 5 and 1983 Marcus Avenue, your Honor. 6 I asked Mr. White to consent to allow me to play 7 during the opening statement five minutes from each of 8 these videos, so I could demonstrate and show to the jury 9 the actual corporations themselves, the working 10 environment of where these people were and what these 11 corporations were, so the jury doesn't start off with the 12 impression that they were in some kind of back room behind 13 some bar someplace selling these services. 14 There
is no question that these videotapes could 15 be admitted during trial through one of the agents if they 16 testified. 17 THE COURT: Are you representing that you will 18 admit them during the trial? 19 MR. JENKS: I would, your Honor. 20 I asked your courtroom deputy to provide me with 21 a television and VCR. Mr. Trabulus has the tapes here 22 with him. Mr. White has said he would object to playing 23 them in the opening since they are not in evidence. 24 THE COURT: How could they be in evidence at the 25 time of the opening statement?
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11 1 MR. JENKS: Absolutely, your Honor. 2 THE COURT: You are representing to me you will 3 offer this and show this in court during the trial? 4 MR. JENKS: I will offer it through Inspector 5 Biegelman and Inspector Pagano. 6 THE COURT
: Yes or no? 7 MR. JENKS: Yes. 8 THE COURT: What is the objection? 9 MR. WHITE: Your Honor, if he is trying to show 10 they have nice offices -- 11 THE COURT: Do they have nice offices? 12 MR. WHITE: Yes, pretty nice, I admit. 13 THE COURT: Let him show it then. 14 Mr. White, we are in the 20th century. Tomorrow 15 they are going to show judges how to use these computers. 16 I am not going to show up there, but most of them are 17 going to be there. 18 MR. WHITE: My concern is what snippets Mr. Jenks 19 is going to pay. 20 MR. WHITE: Also there is audio. There are 21 agents conducting a search and talking about things. If 22 he wants to show that there are nice offices, maybe it can 23 be played without the audio. I don't know what is on the 24 audio on the particular parts they want to play. 25 MR. TRABULUS: The audio here represents and
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
12 1 identifies rooms by letter or number, or say it appears to 2 be a storage room or cafeteria. 3 MR. JENKS: Your Honor, excuse me, Mr. Trabulus. 4 I don't need to play the audio. 5 THE COURT: Where is this machine that plays this 6 thing? 7 MR. JENKS: I mentioned it to the courtroom 8 deputy. She indicated she would -- you have the tapes? 9 MR. TRABULUS: The tapes are in my car, I can get 10 it right now. 11 THE COURT: We are not going out to your car to 12 see them, right? So let's get them. 13 MR. TRABULUS: Okay. 14 THE COURT: I will not let this jury wait. You 15 better get it now, because I will not have them wait. 16 MR. TRABULUS: I have a matter to bring up as 17 well. 18 MR. TRABULUS: Get the tapes first. Let's get 19 the tapes. 20 MR. TRABULUS: You want me to get the tapes? 21 THE COURT: What is your application? 22 MR. TRABULUS: My application is by way of motion 23 in limine. There are two matters I had not previously 24 brought to the Court's attention. 25 The first one which is pretty simple, there may
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13 1 be an attempt by the government to introduce evidence that 2 a couple of the witnesses, whose names are the Grossmans, 3 are relatives of Mr. Gordon. In the course of settling an 4 proceeding in bankruptcy entered into an agreement they 5 were to pay a considerable amount of money to the 6 bankruptcy trustee. 7 I would ask the government be precluded from 8 introducing evidence of it and mentioning it in opening. 9 THE COURT: First of all, do you wish to do 10 that? 11 MR. WHITE: Certainly not in the opening. 12 THE COURT: All right. 13 MR. TRABULUS: The next point relates to evidence 14 that the government may seek to introduce that various 15 members would not have pumped the registries or 16 memberships, had they been told of certain things, such 17 as, for example, that mailing lists were used. 18 Now, the danger here, your Honor, is that the 19 issue of whether an individual would have purchased, or 20 would not have purchased may be confused in the jury's 21 mind with the question of materiality, which is an 22 objective test relating to the nature of the statement or 23 misstatement that is made. 24 We could have a situation, your Honor, where the 25 jurors could think if this particular person would or
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14 1 would not have purchased, had they been told this, 2 automatically that that is material. It is really not 3 relevant as to whether they would or would not have, 4 particularly their opinion today as to what they might 5 have done years before. 6 So, I would ask that that type of questioning not 7 just with relation to if they had been told by mailing 8 list, but anything the government claims they should have 9 been told or weren't told, that that should be precluded, 10 and the government be precluded from referring to any such 11 testimony in opening statement. 12 THE COURT: Namely that the subscribers were told 13 that they were not told that they were gotten off lists, 14 mailing listing? 15 MR. TRABULUS: No, that's not it. 16 Obviously they could introduce evidence as to 17 what the subscribers or purchasers were told or what they 18 weren't told. Clearly they can do that. But their 19 opinion today as to what they would have done if they had 20 been told something different, and to what they wouldn't 21 have done if they were told something different or more, 22 that risks confusing the jury on the issue of materiality, 23 and it also is calling for an opinion today as to what 24 someone might have done years before. The prejudice is 25 too great to put that in.
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15 1 MR. WHITE: Your Honor, Mr. Trabulus is about 100 2 percent wrong. 3 THE COURT: He is, so I am denying his 4 application. 5 MR. WHITE: All right. 6 THE COURT: Mr. Trabulus, would you go get that 7 tape? 8 MR. TRABULUS: Yes. 9 THE COURT: Would you consent to have someone 10 cover for you while you are gone? 11 MR. TRABULUS: Yes, Mr. Jenks can cover for me. 12 THE COURT: Very good. 13 Is that all right with you, Mr. Gordon? 14 THE DEFENDANT GORDON: That's wonderful, your 15 Honor. 16 THE COURT: Okay. 17 MR. DUNN: Thomas Dunn for Steve Rubin, your 18 Honor. 19 Your Honor, my client has a spinal degenerative 20 condition. And during jury selection Magistrate Judge 21 Pohorelsky was kind enough to let him stand up and move 22 around from time to time. And also there times when he 23 really gets bad, it gets bad and he may have to walk out 24 of the courtroom. 25 THE COURT: Who is your client?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
16 1 MR. DUNN: Steve Rubin. During jury selection he 2 agreed to waive his appearance when he had to leave the 3 courtroom. He also wishes to waive his appearance if his 4 condition is so bad that he has to leave the courtroom. 5 I am asking the Court if from time to time he can 6 stand up during testimony? 7 THE COURT: The answer is yes. 8 MR. DUNN: Also if he is permitted if it is 9 really bad, if he can leave the courtroom? 10 THE COURT: Yes. As long as he understands he 11 has an absolute right, constitutional right to be present 12 at all times during this trial. And that his absence from 13 the trial is not good. People shouldn't leave. 14 Defendants should not leave criminal trials, because 15 jurors get funny ideas about that. 16 If he understands the danger in doing it, but has 17 to do it because of a condition, I will certainly permit 18 him to do it. 19 MR. DUNN: He understands, that, your Honor. 20 THE COURT: Okay. 21 MR. SCHOER: Judge, what is your practice with 22 respect to the order in which counsel has to cross-examine 23 witnesses. 24 THE COURT: Let's do it in the regular order you
25 are sitting in now. There is no set rules for that.
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17 1 Let's do it right down the line, starting with 2 Mr. Trabulus, Mr. Jenks, and then you right down the 3 line. 4 MR. SCHOER: I know we have had certain 5 discussions. 6 THE COURT: You want to do it another way? 7 MR. SCHOER: With respect to opening statements 8 we will do it that way. But with respect to 9 cross-examination of particular witnesses, we may decide 10 to go out of order. 11 THE COURT: Whatever you decide to do is all 12 right. You just govern your ownselves on cross. I will 13 not say Mr. So and So next. You take care of that. But 14 in the opening we will do it in the way in which you are 15 sitting, all right? 16 MR. SCHOER: Fine. 17 THE COURT: Mr. Geduldig wants to say something. 18 How are you doing? 19 MR. GEDULDIG: Your Honor, my client has 20 diabetes, it may be if we have a particularly long session 21 in court she may have to leave. 22 THE COURT: Who is your client? 23 MR. GEDULDIG: Annette Haley. She shares little 24 round pretzels. 25 THE COURT: Does she share it with everybody?
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18 1 MR. GEDULDIG: She is willing to do it. I don't 2 want the Court to feel she is eating in court. 3 THE COURT: I am glad you told me. I will not 4 permit that. Just as the judge in Queens wouldn't permit 5 a lawyer to come in with a T-shirt, was it? 6 MR. GEDULDIG: Yes. 7 THE COURT: My goodness, what have we come to? 8 Then they brought an action, a habeas case or a federal 9 case. 10 The jury is all here. Let's get going. 11 MR. WHITE: I wanted to make
one thing clear, 12 your Honor. 13 Mr. Rosenblatt, a revenue agent from the IRS is 14 going to testify for the government as both a summary 15 witness in the tax case and an expert witness in the tax 16 case. He is going to be here during the openings and the 17 tax part of the case. I wanted to make that clear that he 18 is here when the other witnesses testify. 19 THE COURT: Very well. 20 All right? Anything else? You got the tape? 21 MR. JENKS: We have them. I don't know if 22 Mr. White wants to look at them. 23 THE COURT: No. You show it. 24 MR. JENKS: Once is enough. 25 THE COURT: You will show the visual and not the
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19 1 audio portion. 2 MR. JENKS: We will figure a way how to turn off 3 the audio. 4 THE COURT: I don't know how to do that. 5 MR.
JENKS: I need a second. 6 (Whereupon, at this time there was a pause in the
7 proceedings.) 8 MR. WALLENSTEIN: I have an application while we 9 are waiting, your Honor. 10 THE COURT: Yes. 11 MR. WALLENSTEIN: With respect to logistics, 12 Judge, the witness rooms are directly outside the 13 courtroom. The government obviously has one. We have 14 been trying to use the other. We seem to have conflict 15 with other trials in the building. We have a great number 16 of materials with us, and I ask that we have use of that 17 room, and have the marshals lock it up if possible. 18 THE COURT: I have to look as to who is using it, 19 I can't usurp it. 20 MR. WALLENSTEIN: Some witnesses from another 21 trial are using it for a lunchroom, I understand. 22 THE COURT: You can tell them that I am giving 23 the room to you. 24 Tell Mr. Pauley, who I understand is using it, if 25 he has any complaints to see me.
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20 1 MR. WALLENSTEIN: Fine. 2 MR. SCHOER: Just to clarify, Judge, Monday is a 3 holiday and we are not working on Monday. It is Martin 4 Luther King's Day. 5 THE COURT: Yes. There will be no court. 6 (Whereupon, the jury at this time entered the 7 courtroom.) 8 THE COURT: Members of the jury, please remain 9 standing. Everybody else, please be seated. 10 Will the jurors please raise their right hands. 11 I am about to administer the oath. 12 (A jury of 12 plus six alternates, previously 13 empaneled, are duly sworn by the Court.) 14 THE COURT: Good morning, members of the jury. 15 I like that response. That's good. 16 My name is Arthur Spatt. You have not met me 17 before because Magistrate Judge Pohorelsky has had the 18 privilege of presiding over this case in the selection of 19 the jury. 20 I am the United States District Judge who will be 21 trying this case. I want to thank you for your patience, 22 dedication, and your sense of responsibility in all of you 23 wanting to sit on this jury, or at least agreeing to sit 24 on this jury. 25 I also want to thank you for your punctuality. I
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21 1 understand you were all here on time, all 18 of you and 2 that's wonderful since we take people from the entire 3 district, the tip of Staten Island, right near New Jersey, 4 all the way out to Montauk Point. And you were all on 5 time, and I want to thank you for that. 6 Now that you have been sworn, and before we begin 7 the trial, I would like to tell you about what will be 8 happening. I want to describe how the trial will be 9 conducted and explain what we will be doing, you, the 10 lawyers for all sides, and myself as the judge. 11 At the end of the trial I will give you more 12 detailed guidance on how you are about to go about 13 reaching your decisions. But now I simply want to explain 14 how the trial will proceed and your duties during the 15 trial. 16 This criminal case has been brought by the United 17 States Government. I will sometimes refer to the 18 government as the prosecution. 19 The government is represented at this trial, and 20 I want to introduce the lawyers to you, and you have met 21 them already, I assume, by Assistant United States 22 Attorneys, Ronald G. White. 23 Mr. White, do you want to get up and say hello to 24 the jurors? 25 MR. WHITE: Good morning.
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22 1 THE COURT: And Cici Scott. 2 MS. SCOTT: Good morning. 3 THE COURT: With them at counsel table is Joseph 4 Jordan of the Internal Revenue Service and Inspector 5 Alphonse Pagano of the United States Postal Service. 6 Now, may I introduce the defendants and their 7 attorneys? 8 First Bruce W. Gordon. 9 THE DEFENDANT GORDON: Good morning. 10 THE COURT: Represented by Norman Trabulus, 11 Esquire. 12 MR. TRABULUS: Good morning. 13 THE COURT: Then two corporations, Who's Who 14 Worldwide Registry, Inc., and Sterling Who's Who both 15 represented by Edward P. Jenks, Esquire. 16 MR. JENKS: Good morning. 17 THE COURT: Next, Tara Garboski, also known as 18 Tara Green. 19 THE DEFENDANT GARBOSKI: Good morning. 20 THE COURT: Represented by Gary Schoer, Esquire. 21 MR. SCHOER: Good day. 22
THE COURT: Very good, Mr. Schoer. 23 Next defendant is Oral Frank Osman. 24 THE DEFENDANT OSMAN: Hello and good morning. 25 THE COURT: Also known as Frank Martin,
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23 1 represented by Alan M. Nelson. 2 MR. NELSON: Good morning. 3 THE COURT: Of the firm of Garber, Klein and 4 Nelson. 5 Laura Weitz, also known as Laura Winters, by 6 Winston Lee, Esquire. 7 MR. LEE: Good morning, everyone. 8 THE COURT: Annette Haley, represented by Martin 9 Geduldig, Esquire. 10 MR. GEDULDIG: Good morning. 11 THE COURT: Scott Michaelson, represented by 12 James C. Neville, Esquire. 13 MR. NEVILLE: Hello. 14 THE COURT: Steve Rubin, also known as Steve 15 Walden. 16 Mr. Rubin, by the way has somewhat of a condition 17 in which he will stand up from time to time be
cause he has 18 to, and will sometimes walk out. Is that correct? 19 His lawyer is Thomas F.X. Dunn, Esquire. 20 That's correct, Mr. Dunn? 21 MR. DUNN: It is, yes. 22 Good morning. 23 THE COURT: Last is Martin Reffsin. 24 MR. REFFSIN: Good morning, ladies and 25 gentlemen.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
24 1 THE COURT: Represented by John S. Wallenstein, 2 Esquire. 3 MR. WALLENSTEIN: Good morning. 4 THE COURT: Members of the jury, the defendants 5 have been charged by the government with violation of 6 federal laws. The charges against the defendants are 7 contained in the indictment. 8 The indictment is simply the description of the 9 charges made by the government against the defendants. It 10 is an accusation. It is not evidence of anything. 11 I will now briefly summarize the charges in the 12 indictment. 13 In this case the indictment charges that Bruce 14 Gordon, Who's Who Worldwide Registry, Inc., Sterling Who's 15 Who, Inc., Tara Garboski, also known as Tara Green, Oral 16 Frank Osman, also known as Frank Martin, Laura Weitz, also 17 known as Laura Winters, Annette Haley, Scott Michaelson 18 and Steve Rubin, also known as Steve Walden, were involved 19 in a conspiracy to commit mail fraud in connection with 20 the Who's Who directories. 21 And all these defendants, the indictment charges, 22 committed mail fraud, in connection with the Who's Who 23 directories. 24 Bruce Gordon is also charged with giving 25 perjurious testimony at another trial, a civil trial. He
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25 1 is charged with obstruction of justice, filing false tax 2 returns, filing false collection information statements 3 and money laundering. 4 In addition, Bruce Gordon and Martin Reffsin are 5 each charged with obstruction of justice, conspiracy to 6 impair, impede and defeat the Internal Revenue Service, 7 and evasion of payment of income tax. 8 Finally, Martin Reffsin is charged with assisting 9 in the filing of false income tax returns. 10 The defendants all pleaded not guilty to the 11 charges and deny committing these offenses. 12 The defendants are presumed to be innocent and 13 may not be found guilty by you unless all 12 of you 14 unanimously find that the government has proved their 15 guilt beyond a reasonable doubt. 16 The defendants are being tried together because 17 the government has charged that they worked together to 18 commit some of these crimes. However, you will have to 19 give separate consideration to the case against each 20 defendant, and as to each count. Each defendant is 21 entitled to your separate consideration as to each count. 22 It will be your duty to find from the evidence 23 what the facts are. You and you alone are the judges of 24 the facts. You will then have to apply to those facts the 25 law as the Court will give it to you. You must follow
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26 1 that law whether you agree with it or not. 2 Nothing I may say or do during the course of the 3 trial is intended to indicate, nor should be taken by you 4 as indicating, what the facts are, or what your verdict 5 should be. 6 In order to decide the facts in this case, it is 7 important that you listen carefully to the witnesses as 8 they testify, and that you form no final judgment with 9 respect to the outcome of the case until you are in that 10 jury room deliberating. So that it is important that you 11 keep an open mind throughout the entire trial. 12 The evidence from which you will find the facts 13 will consist of the testimony of the witnesses, documents 14 and other things received in evidence as exhibits, and any 15 facts the lawyers agree or stipulate to, or that the Court 16 may instruct you to find. 17 Certain things are not evidence and must not be 18 considered by you as evidence. I will list them for you 19 now. 20 The statements, arguments, opening statements, 21 summations and unanswered questions by lawyers are not 22 evidence. 23 Objections to the questions are not evidence. 24 The lawyers have an obligation to their client to make an 25 objection when they believe that testimony or evidence
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27
1 being offered is improper under the Rules of Evidence. 2 You should not be influenced by the objection or by the 3 Court's ruling on it. 4 If the objection is sustained, ignore the 5 question. If it is overruled, treat the answer like any 6 other. If you are instructed that some item of evidence 7 is received for a limited purpose only you must follow 8 that instruction. 9 Testimony that the Court has excluded or 10 disregard is not evidence and must not be considered, even 11 though you have heard it. 12 Anything that you may have seen or heard outside 13 the courtroom is not evidence and must be disregarded. 14 You are to decide the case solely on the evidence 15 presented here in this courtroom. 16 There are two kinds of evidence, direct evidence 17 and circumstantial evidence. Direct evidence is direct 18 proof of a fact, such as the testimony of an eyewitness. 19 Circumstantial evidence is proof of a fact from which you 20 may infer or conclude that other facts exist. 21 I will give you further instructions on these as 22 well as other matters during and at the end of the trial. 23 But have in mind that you may consider both kinds of 24 evidence, direct evidence, and circumstantial evidence. 25 It will be up to you to decide which witnesses to
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28 1 believe, which witnesses not to believe, and how much of 2 any witness' testimony to accept or reject. I will give 3 you some guidelines for determining the credibility of 4 witnesses during and at the end of the trial. 5 As you know this is a criminal case. There are 6 three basic rules about a criminal case that you must 7 always keep in mind. 8 First, each defendant is presumed innocent until 9 proven guilty. 10 The indictments against the defendants is only an 11 accusation, nothing more. It is not proof of guilt or 12 anything else. 13 Second, the burden of proof is on the government 14 until the very end of the case. The defendants have no 15 burden to prove their innocence, or to present any 16 evidence, or to testify. Since the defendants have the 17 right to remain silent, the law prohibits you from 18 considering that a defendant may not have testified in 19 reaching or arriving upon your verdict. 20 Third, the government must prove the defendants' 21 guilt beyond a reasonable doubt. I will give you further 22 instructions on this point later. But bear in mind that 23 in this respect, a criminal case is different from that of 24 a civil case. 25 With regard to the trial procedure, the first
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29 1 step in the trial will be the opening statements, which 2 will proceed immediately after I give my instructions to 3 you. 4 The government in its opening statement will tell 5 you about the evidence that it intends to put before you, 6 so you will have an idea of what the government's case is 7 going to be. 8 Just as the indictment is not evidence, neither 9 is the opening statement evidence. Its purpose is only to 10 help you understand what the evidence will be and what the 11 government will try to prove. 12 After the government's opening statement the 13 defendants' attorneys may or may not make an opening 14 statement. 15 At this point in the trial no evidence has been 16 offered. 17 I must caution you that however helpful these 18 opening statements may be so you can better follow the 19 testimony as it is presented, they are not a substitute 20 for the evidence. The evidence upon which you will base 21 your decisions will come to you from the witnesses who 22 take the stand and testify under oath and are subject to 23 cross-examination, and such documents and exhibits that 24 are introduced during the trial. 25 Next, the government will offer evidence that it
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
30 1 says will support the charges against the defendants. The 2 government's evidence in this case will consist of the 3 testimony of witnesses, as well as documents and exhibits. 4 After the government's evidence, the defendants' 5 attorneys may present evidence in the defendants' behalf, 6 but they are not required to do so. 7 I remind you that the defendants are presumed 8 innocent, and the government must prove the guilt of the 9 defendants beyond a reasonable doubt. The defendants do 10 not have to prove their innocence. 11 After you have heard all the evidence in the 12 case, the government and the defense will each be given 13 time for their final arguments. 14 I just told you that the opening statements by 15 the lawyers are not evidence. The same applies to the 16 closing arguments, or summations. They are not evidence 17 either. 18 In their closing arguments, the lawyers for the 19 government and the defendants will give you their view of 20 the evidence to attempt to help you understand the 21 evidence that was presented. 22 The final part of the trial occurs when I 23 instruct you about the rules of law which you are to use 24 in reaching your verdict. 25 After hearing my instructions you will leave the
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CP, CM OFFICIAL COURT REPORTER
31 1 courtroom together to make your decisions. Your 2 deliberations will be secret. You will never have to 3 explain your verdict to anyone. 4 Now a few words about your conduct as jurors. 5 First, I instruct you that during the trial you 6 are not to discuss this case with anyone, or permit anyone 7 to discuss it with you. Until you retire to the jury room 8 to deliberate to consider your verdict you are simply not 9 to talk about the case with anyone. 10 Let me explain that during the entire course of 11 the trial you should not talk with any of the witnesses, 12 or with the defendants, or with any of the lawyers in the 13 case. Please do not talk to them about any subject at 14 all. In addition, during the entire course of the trial 15 you should not talk about the trial with anyone else. Not 16 your family, not
your friends, not the people you work 17 with, not with anyone. 18 If you pass any of the lawyers in the hallway, 19 and he is not giving you a rousing good morning, he is not 20 being impolite. He is following my instructions. I have 21 instructed the lawyers not to talk to you at all, even to 22 pass the time of day. In no other way can the complete 23 impartiality of the jury be observed. 24 Also, you should not discuss this case among 25 yourselves until I have instructed you on the law and you
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32 1 have gone to the jury room to make your decisions at the 2 end of the trial. 3 It is important that you wait until all the 4 evidence is received, and you have heard my instructions 5 on the rules of law before you deliberate among 6 yourselves. 7 Let me add that during the course of the trial 8 you will receive all the evidence you properly may 9 consider to decide this case. Because of this you should 10 not attempt to gather any information on your own which 11 you think might be helpful. Do not engage in outside 12 reading on this case. Do not attempt to visit any places 13 mentioned in the case. And do not in any other way try to 14 learn about the case outside the courtroom. 15 I repeat, do not read or listen to anything 16 touching on this case in any way. If anyone should try to 17 talk to you about this case please advise my courtroom 18 deputy clerk immediately of such an occurrence, but talk 19 to no one else about it. Don't discuss such a situation 20 with your fellow jurors. Say nothing to them. 21 In sum, do not permit any third person to discuss 22 the case in your presence. And if anyone does so despite 23 you telling the person not to, report that fact to the 24 Court deputy clerk as soon as you are able to. 25 You should not, however, discuss with your fellow
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33 1 jurors either that fact or any other fact you feel 2 necessary to bring to the attention of the Court. Report 3 such to the Court deputy clerk only, and do not discuss 4 such a situation with the other members of the jury. 5 Do not form any opinion in this case until the 6 conclusion of the trial. Keep an open mind until you 7 start your deliberations at the end of the case. 8 In sum, the only time you are entitled to discuss 9 this case is when it is submitted to you for final 10 deliberations, and that is only after all the witnesses 11 are heard, after the lawyers have given their summations, 12 and after the Court's instructions to you as to the law. 13 It is only after the case is submitted to you for 14 deliberation, and you go into that jury room to begin your 15 deliberations, that you have the right to discuss and 16 consider the evidence and make your factual 17 determinations. 18 These instructions continue throughout the entire 19 trial, whether or not I repeat them to you. 20 Please remember that. 21 Also, during the course of the trial I may ask a 22 question of a witness. If I do, that does not indicate 23 that I have any opinion about the facts in this case. My 24 questioning is just to attempt to clarify a point or to 25 expedite the trial.
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34 1 Now, during the trial, those of you who wish to 2 take notes may do so. While I fully encourage the taking 3 notes -- I point out to you that the good court reporter
4 takes down everything, every word that is said in the 5 courtroom, and will read back to you during your 6 deliberations any portion of the transcript you may ask 7 for. In taking notes I also advise you to be careful, 8 since taking notes presents the further problem that doing 9 so may divert your attention from some important testimony 10 given while you are taking the notes. But if you want to 11 take notes, fine. You will see that I copiously take 12 notes myself. 13 For those who do take notes during the trial, I 14 point out to you and your fellow jurors that your notes 15 are simply an aid to the memory of the particular juror 16 who takes the notes. Therefore, you are instructed that 17 the notes are only a tool to aid your own individual 18 memory. And you should never compare your notes with 19 other jurors in determining the content of any testimony
20 or in evaluating the importance of any evidence. 21 Further, those jurors who do not take notes 22 should rely on their independent recollection of the 23 evidence and not be influenced by the fact that another 24 juror has taken notes. 25 Your notes are not evidence. They are for your
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35 1 use only, and are by no means a complete outline of the 2 proceedings, and may not even be a list of the highlights 3 of the trial. 4 Finally, let me clarify something you may wonder 5 about later. During the course of the trial I may have to 6 interrupt the proceedings to confer with the attorneys 7 about the rules of law which should apply here. Sometimes 8 we will talk at the bench sidebar. I don't know if you 9 saw that during jury selection. You probably did, when 10 the lawyers congregate -- with these number of lawyers, it 11 is a real congregation -- at the extreme right part of the 12 bench. And I will talk to them. And then we put on this 13 gizmo. The definition of a gizmo is something that has no 14 other name. It is a nautical term, gizmo, G I Z M O. We 15 put that on, and that makes some noise. 16 Did they do that during jury selection? 17 (The jury answers in the affirmative.) 18 THE COURT: I assume they did. 19 Sometimes I have to speak to the lawyers at 20 length about the rules of evidence. The law with regard 21 to the rules of evidence are not for your consideration. 22 I have to talk to them privately. Sometimes in order to 23 do it better we may ask you to step outside of the 24 courtroom so we can talk. We will try to do that as 25 little as possible. We went to move things along. I will
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
36 1 try to avoid such interruptions as much as possible. But 2 please be patient even if the trial seems to be moving 3 slowly, because these conferences often saves time for all 4 of us. 5 I try to avoid keeping juries waiting. Contrary 6 to reports you may have read in the paper, or heard from 7 other jurors, we are very much concerned about your 8 convenience and your time. 9 If I have to keep you waiting, and I will have to 10 on certain occasions, I will let you know in advance. 11 I will also try to keep you advised of my 12 schedule and when this case will be in recess. 13 Since I have many other cases pending, which may 14 take some of my time, I will try to keep you apprised so 15 you can make your own plans. 16 For example, we will not be working this Friday. 17 I take all the other matters that I have generally on 18 Fridays, and put it on that day. So, sometimes we may 19 work on Fridays, rarely. But I will keep you advised 20 about that. Not this Friday. 21 Of course, Monday is a holiday, so you will have 22 four days off, in which you can go to work on Friday, 23 Saturday and Sunday, if you want to. I am big on going to 24 work, but that's up to you. Some of you may be retired or 25 not working. But those who may be working, go to work,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
37 1 because we will not be working this Friday, at least not 2 on this case. 3 Normally if we are on trial all day, and we start 4 at 9:30 in the morning generally, we will take one recess 5 mid-morning, about 11:00 o'clock. And then at 12:30 we 6 take lunch. I am a big advocate of eating lunch. I 7 understand some people don't eat lunch at all. I cannot
8 understand that, but whether they do or not, we are taking 9 an hour off for lunch, between 12:30 and 1:30 generally. 10 All these things are dependent, of course, upon juror 11 availability. 12 We will return at 1:30 and work to 5:00. If at 13 5:00 o'clock we have a witness on who is leaving for the 14 Arctic Circle the next morning, never to return to the 15 United States, we are going to finish that witness, 16 although it is going to take more than 5:00 o'clock. So 17 we have to be flexible about these things. 18 In the afternoon we will have one recess about 19 3:00 o'clock. 20 I want to make sure you are all comfortable, 21 alert and listening carefully to all the evidence at all 22 times. 23 Remember, your main job during this trial is to 24 listen carefully to all of the testimony and the 25 presentation of the evidence.
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38 1 Members of the jury, please give your attention 2 to the opening statement of the government, represented by 3 Assistant United States Attorney Ronald G. White. 4 Mr. White. 5 MR. WHITE: Your Honor, Ms. Scott will be 6 delivering the government's opening statement. 7 THE COURT: Very well. 8 MS. SCOTT: With the Court's permission, we would 9 like to set up the podium. 10 THE COURT: Good. I like podiums, set it up. 11 You will notice, members of the jury, that we 12 don't have a lot of help in the courtroom. 13 Those of you who may have sat on juries in the 14 state court, we had a lot of help in the courtroom, that's 15 where I came from. We didn't need it. But here we do 16 everything ourselves, you will see. 17 I wanted to mention one other thing about the 18 notes. Everyday you will give the notes to the jury clerk 19 and we will secure them every night so no one has access 20 to your notes. 21 Sorry for interrupting you, you may proceed. 22 MS. SCOTT: Thank you, your Honor. 23 Goods morning, again, ladies and gentlemen. 24 My name is Ceci Scott, and I am an Assistant 25 United States Attorney in this district. As you know
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
39 Opening - Scott
1 Ronald White is also an Assistant United States Attorney 2 in this district. He is the man sitting to the left of 3 where I was sitting. 4 To the right is Joseph Jordan of the Internal 5 Revenue Service and next to him is Postal Inspector 6 Alphonse Pagano of the United States Postal Inspection 7 Service. 8 Inspector Pagano and Agent Jordan were 9 responsible for the gathering of the evidence and
10 preparation of the case, together we represent the United 11 States of America in this criminal action. 12 This case is about an immense multimillion dollar 13 fraud on the government. It is about a business that 14 regularly misrepresented its products to its customers in 15 order to entice them to buy these products. 16 You will hear a great deal of evidence -- 17 THE COURT: Excuse me, you need a glass of 18 water? 19 A JUROR: Yes. Thank you. 20 MS. SCOTT: You will hear a great deal of 21 evidence about this business, about how it was run, how it 22 trained its employees, how it kept its records. And you 23 will hear quite a bit of evidence about what happened to 24 the money that was made by this business. 25 As evidence comes in bit by bit, you will see
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
40 Opening - Scott
1 that what this case is really about is two very simple 2 things. 3 Lying and cheating. 4 This lying and cheating that was done happened in 5 two ways. There were the customers of the business who 6 were lied to and cheated into paying over their money for 7 products which were not as they had been represented to 8 be. And there was lying and cheating to the IRS. The IRS 9 was lied to and cheated out of money that it was owed. 10 And you will hear, ladies and gentlemen, that at 11 the center of these two schemes was one man, the defendant 12 Bruce Gordon, the man who ran the business that made 13 millions of dollars off of its unsuspecting customers, and 14 the man who lied to the IRS in order to avoid payment of 15 taxes on his enormous income. 16 Now, you will hear that this business actually 17 consisted of two companies, one is called Who's Who 18 World
wide Registry, Inc, and the other is Sterling Who's 19 Who, Inc., and we will refer to them as Who's Who 20 Worldwide and Sterling Who's Who. 21 Who's Who Worldwide began in 1989, and Sterling 22 Who's Who began in 1994, both companies ran until March of 23 1995 when the defendants in this case were all arrested. 24 You will hear throughout this case that at Bruce 25 Gordon's direction employees of these two companies lied
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41 Opening - Scott
1 to their customers in order to trick them into buying 2 these company's products. 3 Now, among the employees of the companies, were 4 the six defendants who were also introduced to you, Tara 5 Garboski, the blond woman almost to the end on the 6 left-hand side, Oral Frank Osman, all the way at the end, 7 the man with the white hair. 8 In the middle
is Laura Weitz, the woman wearing 9 the leather jacket. 10 All way in the corner with the black hair is 11 Steve Rubin. About three people down from him is Scott 12 Michaelson wearing a green jacket. 13 Right next to him is Annette Haley, the woman 14 with the black hair and black top. 15 All six of these defendants were employees of 16 Who's Who Worldwide between 1989 and 1995, some of them 17 working at different times. 18 Tara Garboski and Frank Osman were managers of 19 the company, they supervised the telemarketing people, and 20 at certain points were telemarketing salespeople 21 themselves. 22 Annette Haley, Scott Michaelson, Steve Rubin and 23 Laura Weitz were all telemarketing salespeople at Who's 24 Who Worldwide. 25 All six of these defendants were involved in the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
42
Opening - Scott
1 systematic lying and cheating that was going on at that 2 company. 3 Now, the defendants lied to achieve one purpose, 4 and that was to make easy money off of these customers who 5 believed they were paying their money to get one thing 6 when in fact they were getting something quite different. 7 You will also hear about what Bruce Gordon did 8 with this money once it was swindled from the companies, 9 because Bruce Gordon owns the corporations, and controlled 10 this money, he took a lot of it out. But he did 11 everything he could to make sure that the IRS didn't find 12 out that he had control of this money, because he already 13 owed the IRS a substantial debt of three million dollars. 14 This was an amount in back taxes and interest and 15 penalties. 16 Because Bruce Gordon did not want to pay this 17 back debt he concealed the extent of the income he was 18 getting from these companies from the IRS, hoping that 19 would prevent him from having to pay the debt back. 20 Now, in a nutshell what Bruce Gordon did with the 21 assistance of his accountant, Martin Reffsin, who is the 22 second man from the right in the back row. What Bruce 23 Gordon and Martin Reffsin did was to tell the IRS that 24 Bruce Gordon barely had enough money to make ends meet. 25 That his financial circumstances were so difficult that he
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
43 Opening - Scott
1 couldn't possibly pay back this debt of three million 2 dollars. 3 But you will hear in reality Bruce Gordon was 4 living the high life, complete with Armani suits, a 5 Mercedes Benz and swanky European vacations as you 6 probably gathered from the proceeding so far and the 7 information you have received from the judge, the products 8 that these companies were selling to the public were 9 memberships in the Who's Who directories. Customers were 10 invited to pay hundreds of dollars to be listed in the 11 Who's Who directories for different periods of time, three 12 years, five years, a lifetime. The longer a person was 13 listed in the directories, the more money they would have 14 to pay for the membership. 15 You will hear that although these directories 16 were published each year, the companies fundamentally 17 misrepresented to the customers the single most important 18 thing to customers, and that was how they and the other 19 members had been selected for membership. 20 Because since inclusion in these directories was 21 represented to be a recognition of individual 22 accomplishment, the honor of being selected was the 23 primary reason why customers bought these memberships. 24 And the whole reason customers thought these memberships 25 were valuable is because they thought they were
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44 Opening - Scott
1 individually selected for a great honor based on their 2 personal achievements. They were told their success made 3 them eligible to join an exclusive club of likely 4 professional and accomplished people. They were told few 5 were selected for membership, in other words, the process 6 was extremely selective. Each person was told that he or 7 she was specially nominated for membership by another 8 member, and this was based on this person's high level of 9 achievements. 10 These comments made the customer feel very good. 11 They felt somebody feels I am special, I must be special. 12 Because they were made to feel so good, thousands of 13 customers were made to feel so good by these defendants, 14 they would plop down $100 membership at a time for 15 membership in the directories. 16 You will hear in the vast majority of cases the 17 person was not nominated or recommended by another 18 member. They were not offered membership based on 19 anything special they had accomplished, and not on the 20 basis of anything about them personally. Because with 21 very few exceptions the names were obtained not by 22 nomination from other members, but from vast mailing 23 lists. 24 Bruce Gordon and the other defendants were not 25 concerned with whether the people buying the memberships
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45 Opening - Scott
1 had accomplished anything noteworthy or outstanding in 2 their fields. They were not concerned if these people had
3 done anything special to set them apart from other people. 4 The only reason why these people were chosen in 5 the vast majority of cases is because they were just one 6 of 100 heads of thousands of names on mailing lists that 7 Bruce Gordon purchased for these companies to use. 8 The most important criterion that a person had to 9 satisfy in order to become a member is they had to be 10 willing to pay the membership fee. And you will hear that 11 almost all of those who were willing to pay this 12 membership fee were accepted for membership. 13 Now, the scheme would work in this way: The 14 process of finding an unsuspecting person to buy a 15 membership in these directories would begin with a 16 solicitation letter. And these solicitation letters were 17 sent to tens and even hundreds of thousands of people who 18 came off of these mass mailing lists. The letter would 19 congratulate each recipient informing him that he had been 20 nominated for inclusion in a Who's Who listing of 21 prominent leaders. Sometimes the letter would go on to 22 say that the person was accepted or confirmed by a 23 selection committee which had different names at different 24 times. Sometimes this selection committee was referred to 25 as the Board of Governors. Sometimes it was referred to
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46 Opening - Scott
1 as the Board of Review. 2 But you will hear in most cases no one had really 3 nominated this customer, and no selection committees had 4 considered the application for membership. In fact, you 5 will learn that the selection committee which was 6 sometimes called the Board of Review, sometimes called the 7 Board of Governors, never even existed. 8 Now, enclosed with the solicitation letter was a 9 postcard. The person who received the letter was invited 10 to fill out the postcard with their personal information 11 if they were interested in purchasing a membership, and to 12 send the postcard back to the customer that had sent the 13 letter to them, whether it was Sterling Who's Who or Who's 14 Who Worldwide. When the company received this postcard a 15 telemarketer was assigned to the case, and would pick up 16 the postcard and call the customer on the telephone. 17 Now, when the telemarketer called the person, the 18 telemarketer would again congratulate the person on having 19 obtained the coveted distinction, and you will hear the 20 words "coveted" used again and again in these letters. 21 You will find again that the telemarketer when 22 they had this conversation with the customers, were 23 reading from scripts called sales pitches that had been 24 written by Bruce Gordon. 25 You will hear that the telemarketers described
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
47 Opening - Scott
1 the selection process to the customer, and that they would 2 describe the benefits of membership if they joined, and 3 that they would attempt to make a sale in these 4 conversations over the telephone. 5 In these conversations the telemarketer would 6 expand on the misrepresentations that had originally been 7 made in the letters. They would tell people they were 8 nominated by an existing member. They would tell people 9 even among nominees, only a small percentage would be 10 accepted for membership, so they would tell the customer 11 they were lucky to be invited since membership was 12 limited, and it was available only through attrition, that 13 is slots became available only when a member died or 14 retired. This was another one of the things that the 15 telemarketers would say. 16 They would also tell people that memberships were 17 available only one to two times per year and that there 18 was a waiting list to get in. 19 But you will hear, ladies and gentlemen, in the 20 vast majority of cases none of this was ever true. The 21 salespeople were on commission, and they had to meet sales 22 quotas. That is, they had to sell a certain number of 23 memberships per week, and therefore, their own interest 24 was in getting as many sales as possible. 25 Now, Bruce Gordon and the defendants were
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
48 Opening - Scott
1 desperate to conceal the facts that their customers had 2 come from mailing lists. And where the customers were 3 savvy enough to ask, did I come from a mailing lists, the 4 response they got was always emphatically, no, no,
5 absolutely not. No, no, no. We don't do that kind of 6 thing. 7 The telemarketers would say those things because 8 they knew if they told customers that their names were 9 taken from mailing lists, these customers would not buy 10 such expensive memberships that did not reflect on them 11 personally. 12 You will hear from customers that will come in 13 here and testify that had they known their names were 14 taken from mailing lists they never would purchase such 15 memberships. 16 You will hear, ladies and gentlemen, that there 17 came a time when companies encouraged their members to 18 nominate other people, this began in late 1993, early 19 1994, near the period we were concerned with. What 20 happened is the company developed nomination ballots to 21 send out to new members, these ballots allowed new members 22 to nominate two new people for membership. 23 You will hear some people filled out the ballots 24 and nominated people for membership, and some former 25 employee witnesses will come in and testify to you that in
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49 Opening - Scott
1 fact some new members were selected this way by this 2 nomination process. 3 They will also tell you that this rarely, if ever 4 happened before 1994. And that even after 1994, the vast 5 majority of new members were obtained from mailing lists. 6 Now, members who bought these -- people who 7 bought these memberships obtained several things. They 8 were given a wall plaque which commemorated their becoming 9 members of this organization. 10 Later on as the companies developed, you will 11 hear that they
developed other benefits to offer to their 12 memberships. They began to offer a magazine called 13 Tribute, which contained articles about certain other 14 members. 15 They issued a CD-ROM which contained all the 16 listings in the directories. 17 They, of course, listed their members in their 18 directories. 19 They also offered various discounts on certain 20 services to their members. 21 They also offered the opportunity to get a credit 22 cards with a Who's Who logo on it among other things. 23 Again, what the evidence in this case will show 24 you is that the most important reason why people were 25 willing to pay 200, 300, 400 dollars for these memberships
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50 Opening - Scott
1 and they believed they were being selected for their 2 outstanding personal attributes. They believed they were 3 selected because somebody really believed they were 4 impressive. And they believed that in receiving these 5 offers they had passed an arduous selection process which 6 weeded most other people out. That's what they were told. 7 You will hear that in the vast majority of cases 8 that these were all lies. 9 Now, some of the customers will also tell you 10 about other statement that was important to their decision 11 to buy these memberships. They were told that the 12 companies sponsored conferences and seminars for their 13 members in such places as Vietnam, Hong Kong, and another 14 one is said to have occurred in Hilton Head, South 15 Carolina. 16 Customers were told that these conferences 17 offered them incomparable opportunities to network with 18 outstanding members and to develop new business 19 opportunities. 20 These conferences were tempting to a large number 21 of customers, particularly the ones who hoped to branch 22 out their businesses or to find new careers in doing 23 something else. 24 Ladies and gentlemen, you will hear that none of 25 these conferences ever took place. You will hear that
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51 Opening - Scott
1 when employees of Who's Who Worldwide attempted to set up 2 conferences in Vietnam and Hong Kong in 1993, and in 3 Hilton Head, South Carolina in 1994, they couldn't 4 generate enough interest in their memberships to actually 5 have these conferences and make them worthwhile, so the 6 ideas were dropped. 7 Nevertheless, some of the employees and 8 defendants told customers that there had been successful 9 conferences in all of these places. And they told the 10 customers that they had been
well attended, and that 11 people had been very happy with what had happened at these 12 conferences. You will even hear that Bruce Gordon went so 13 far to lie under oath on this subject. 14 By way of background, Who's Who Worldwide was 15 sued by another company called Marqui Who's Who, which is 16 the company that issues Who's Who in America. Marqui 17 Who's Who sued Who's Who Worldwide for trademark 18 infringement. There was a trial on the case. And Bruce 19 Gordon testified at that trial. And you will hear that he 20 was so anxious to conceal the fact that his customer had 21 never sponsored conferences, that he lied on the witness 22 stand and said they had. He even went so far as to say 23 that not only the conference took place in Hong Kong and 24 Vietnam in 1993, but that he remembered the plane taking 25 off to go to the location.
HARRY RAPAPORT,
CSR, CP, CM OFFICIAL COURT REPORTER
52 Opening - Scott
1 And for that statement that was made under oath, 2 Bruce Gordon is charged with one count of perjury, that 3 is, intentionally telling a falsehood while on the witness 4 stand. 5 Now, turning to how the government is going to 6 prove this case against the defendants. 7 The government will prove these charges in three 8 ways. The government will prove that the defendants made 9 the representations, that the representations were fast, 10 and that Bruce Gordon was involved in these 11 representations, as well as the other defendants, and here 12 is how we will prove it, ladies and gentlemen. 13 The customers who dealt with the defendants will 14 come into this courtroom and testify before you. They 15 will testify as to what they were told by the salespeople, 16 and they will testify before you
about what they saw in 17 the letters and what they were told over the telephone. 18 You will also have an opportunity to hear each of 19 the defendants in action, because we will play for you 20 tapes of things they said during the period we are 21 concerned with. So you will hear all the 22 misrepresentations coming straight from their own mouths, 23 these tapes were made by government informants who called 24 into the companies posing as customers who wanted to buy 25 memberships. Some of the tapes were made by government
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
53 Opening - Scott
1 informants who actually got jobs in these companies and 2 would come to work wearing tape recorders which were 3 played during the day. And other tapes were made by 4 government informants who assumed other roles and had 5 taped conversations with the defendants. 6 Finally, ladies and gentlemen, we will take you 7 behind the scenes by bringing into this courtroom people 8 who were actually there, who worked in these companies and 9 saw how things were done over the years. 10 You will see the mailing lists, the solicitation 11 letters, the pitch sheets used by each of the employees. 12 Now, I want to tell you a little about some of 13 the former employees who will come in here and testify 14 before you. Some of them have pled guilty in connection 15 with their fraudulent activities at Who's Who Worldwide 16 and Sterling Who's Who. They have signed contractual 17 agreements with the government. These are agreements to 18 cooperate with the government. And by cooperate they 19 agreed to tell the government everything they know about 20 the crimes and they agreed to testify as needed. 21 In exchange for these promises the government 22 agrees to advise the judge of their cooperation. And 23 having done so, the judge can then, if he deems it 24 appropriate, give these people lighter sentences for their 25 criminal conduct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
54 Opening - Scott
1 So I will tell you right up front, ladies and 2 gentlemen, these people are here for one reason. They are 3 here because they hope to receive lighter sentences in 4 exchange for their cooperation. 5 So, at the end of this case Judge Spatt will tell 6 you to examine their testimony extremely carefully, to 7 examine it closely in light of all the other evidence. 8 We ask you, too, ladies and gentlemen, to not 9 wait until the end of the case, but scrutinize their 10 testimony extremely carefully while they are testifying. 11 Ask yourselves, is this testimony consistent with the 12 other testimony of the other witnesses in the case? Is it 13 consistent with the documentary evidence, the pitch 14 sheets, the solicitation letters? And also, is it 15 consistent with the tape recordings you will hear of each 16 of the defendants? 17 You will find, ladies and gentlemen, that their 18 testimony is entirely corroborated by the other evidence 19 in the case. 20 Now, turning back to the two companies, Sterling 21 Who's Who and Who's Who Worldwide, these two companies 22 made millions of dollars off their hoodwinked customers 23 and the money poured in. But the lying and cheating did 24 not stop there. Because Bruce Gordon and Martin Reffsin25 continued to lie and cheat about matters and the money
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
55 Opening - Scott
1 coming into the company. 2 In addition to the ordinary salary that Bruce 3 Gordon took for his leadership role in these companies, he 4 also took enormous amounts from the companies, which were 5 not officially recorded. And he used these extra funds 6 that he skimmed off of the companies to pay for his 7 personal expenses. 8 Now, Bruce Gordon wanted to keep all this money 9 for himself. He didn't even want to part with any of the 10 money he owed to the IRS. So he concealed the money from 11 the IRS, and he lied about it to the IRS. He told the IRS 12 that he did not own these two companies, even though he 13 did. And he told the IRS that he could barely make ends 14 meet. 15 During this period when he was telling the IRS 16 that he was practically in the poor house, Bruce Gordon 17 was living like a king. He was living, as if he could 18 have appeared on Lifestyles of the Rich and Famous. He
19 was wearing expensive clothing from Armani, buying jewelry 20 from Tiffany's, and lived in a penthouse apartment on the 21 eastside of Manhattan and expensive condominium in 22 Manhasset, vacationing in Palm Beach, drove a Mercedes and 23 Lexus, he took a vacation in 1993 to Europe that cost no 24 less than $50,000. This lavage spending period lasted for 25 four years. During those four years Bruce Gordon was
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
56 Opening - Scott
1 heavily in debt to the IRS. By 1990 Bruce Gordon owed the 2 IRS more than three million dollars in back taxes, 3 interest and penalties. 4 Because he did not want the IRS to collect on 5 this debt, he did everything he could to conceal from them 6 the amount of money he was taking from the companies. 7 Now, as part of his effort to hide his holdings 8 he signed two agreements with the IRS. The first one of 9 these was signed in September of 1991. That agreement is 10 called the installment agreement. And in that agreement 11 Bruce Gordon agreed to pay back the three million dollars 12 in installments of $100 per month. 13 The reason why the IRS was willing to agree to 14 allow Bruce Gordon to pay these tiny amounts in 15 satisfaction of such a huge debt is because Bruce Gordon 16 had told the IRS he could not make ends meet otherwise. 17 Also in the installment agreement is a provision 18 that the amount he would have to pay to satisfy his tax 19 obligation might change if his income changed. 20 Bruce Gordon signed another agreement with the 21 government in November of 1991, which is called a 22 collateral agreement. And this agreement was related to 23 penalties that were a portion of this three million 24 dollars debt that he owed. And this agreement provided 25 that the more he made, the more income he made, the more
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
57 Opening - Scott
1 he would have to pay to satisfy the debt. 2 It also provided that the amount that he would 3 have to pay could be determined not only on the basis of 4 his personal income, but also on the basis of any income 5 of companies he owned. 6 So, right from the get go Bruce Gordon had a 7 motive to conceal his control of the companies, the fact 8 that he owned them and the fact that he controlled money 9 that was coming out of them. 10 So, to prevent the IRS from discovering his 11 wealth, Bruce Gordon with the assistance of Martin 12 Reffsin, set up his finances so he held very little of 13 this money in his own name. So, for instance, instead of 14 paying his own expenses with
his own checks, he had Who's 15 Who Worldwide and the other companies he controlled pay 16 for his personal expenses. They paid for his cars, they 17 paid his credit card bills, his medical bills, dental 18 bills. They paid for his clothing and paid for his two 19 residences. 20 Because he knew that if he was paid directly by 21 the companies this money, and if he then used the money 22 himself to pay for these expenses, he knew that the money 23 would then show up as income to him, and then the IRS 24 would be able to go after him for more money to pay the 25 debt that he owed.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
58 Opening - Scott
1 So, the companies paid for everything in Bruce 2 Gordon's life. They paid for two homes. 3 The first home, of course, was the lavish 4 penthouse which cost $8,000 a month to rent, with even
5 more to furnish with more money provided by the companies. 6 There was also a $6,000 condominium in an 7 exclusive neighborhood in Manhasset. If that was not 8 enough, the companies paid an additional $500,000 to 9 furnish the condominium and renovate it. 10 For all these misrepresentations and attempts to 11 conceal the income he received from the companies, with 12 the help of Martin Reffsin, Bruce Gordon and Martin 13 Reffsin are charged with conspiring to prevent the IRS 14 from getting money due to them. And that's the money that 15 Bruce Gordon controlled and was using and should have paid 16 off the debts. 17 You will hear, ladies and gentlemen, this is 18 exactly what Bruce Gordon and Martin Reffsin were doing. 19 Martin Reffsin was acting both as Bruce Gordon's personal 20 accountant, and as the accountant for the companies, for 21 Who's Who Worldwide. 22 You will hear, ladies and gentlemen, that Martin 23 Reffsin's participation in this conspiracy was knowing and 24 intentional. You will hear that in statements that will 25 hear he made referring to the law and in testimony, where
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
59 Opening - Scott
1 he said that he knew of the huge payments that were being 2 made to Bruce Gordon by the companies. 3 But he did not do anything to reveal this 4 information in documents that he submitted to the IRS on 5 behalf of Bruce Gordon. 6 So, while Bruce Gordon was pouring the company's 7 money into lavish vacations, finest restaurants and all 8 sorts of luxuries, you will hear he tried to obtain a 9 release from the IRS. He tried to get the IRS to release 10 him from the three million dollar debt he owed. 11 In 1993 he made an offer in compromise to the 12 IRS. An offer in compromise is an agreement to pay a lump 13 sum in satisfaction of a debt that is already owed. 14 Generally that lump sum is substantially less than the 15 debt. 16 Bruce Gordon offered to pay a lump sum of 17 $150,000 to the IRS, in exchange for a release from his 3 18 million dollar obligation. And this offer was based on 19 his representations to the IRS that he could not possibly 20 pay back this three million dollars. 21 Now, Martin Reffsin, acting on behalf of Bruce 22 Gordon, submitted the offer in compromise to the IRS, 23 knowing that Bruce Gordon's finances were simply not as 24 they were representing to the IRS. He submitted the offer 25 in compromise knowing the finances of Bruce Gordon were
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
60 Opening - Scott
1 not as they were represented
to the IRS. And Martin 2 Reffsin attached offerings to the papers, with respect to 3 Bruce Gordon's income and finances. 4 The false information was set forth in what are 5 called collection information forms. These are IRS 6 forms. They are also called 433-A forms. The purpose of 7 these forms is to allow the IRS to figure out how much a 8 person has that will enable them to pay back a debt or pay 9 some other amount that they owe to the IRS. So the forms 10 ask for information about a person's income, about their 11 assets and about the expenses they have each year. 12 It is important to the IRS that these forms be 13 filled out truthfully so the IRS can accurately assess 14 what a person, how much a person can pay to satisfy a 15 debt. 16 Now, you will hear that Bruce Gordon and Martin 17 Reffsin submitted these forms containing false information 18 about
Bruce Gordon's holdings and income. They didn't 19 disclose what they knew about his actual income and 20 expenses. They didn't disclose what they knew about the 21 charges he was making on his American Express card, about 22 the fact that the company was paying his American Express 23 charges, the companies were, and about the fact that he 24 actually owned these companies. 25 The reason not to discuss these hundreds of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
61 Opening - Scott
1 thousands of dollars of annual expenses is if the IRS 2 found out about them, they would want to know where the 3 money was coming from to pay for these expenses. 4 If they disclosed the charges on the American 5 Express bill, the IRS would have been able to see that 6 Bruce Gordon charged $400,000 worth of expenses over four 7 and a half years. Further, they
knew if they revealed 8 that Bruce Gordon owned these companies, then under the 9 collateral agreement, his income to the companies he owned 10 would be used to figure out how much he could pay toward 11 the satisfaction of this three million dollar debt. 12 Over the period of 1990 to 1995, Bruce Gordon 13 received more than a million dollars from the companies 14 which he hid from the IRS with Martin Reffsin's help so as 15 to not to pay the debt. 16 Bruce Gordon and Martin Reffsin in addition 17 falsified tax returns so these tax returns would not 18 reflect the money that Bruce Gordon was obtaining from the 19 companies. 20 In addition, Bruce Gordon with the assistance of 21 Martin Reffsin labeled the money that the companies were 22 paying for his expense as loans to him. And obviously 23 this made no sense, since he owned the company, then these 24 so called loans were actually loans that he was giving to 25 himself.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
62 Opening - Scott
1 Because all these false statements were made to 2 hide this income, this income and assets on the tax 3 returns and the 433 As, Bruce Gordon and Martin Reffsin 4 are charged with filing and assisting in the filing of 5 false tax returns. And Bruce Gordon is charged with 6 filing false disclosure statements, the 433-A forms. 7 You will hear of another series of transactions 8 in which Bruce Gordon was involved, where these 9 transactions were structured also to escape the IRS's 10 notice. And these were the transactions that made the 11 purchase of the condominium possible. I am talking now 12 about the $600,000 condominium in Manhasset. Who's Who 13 Worldwide provided the $600,000 to pay for the 14 condominium, but it did not pay the money directly to pay 15 for the condominium. Instead Who's Who Worldwide paid the 16 money into a shell corporation, a dummy corporation, which 17 went by the name of Publishing Ventures, Inc., or PVI. 18 PVI was a business that existed only on paper. The 19 purpose of PVI was solely to hold this condominium 20 property. 21 PVI was the entity that ultimately paid for the 22 condominium. And the purpose of that, again, ladies and 23 gentlemen, was so that the IRS could not see that Bruce 24 Gordon was the true owner of that condominium. And 25 because Bruce Gordon structured transactions to conceal
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
63 Opening - Scott
1 this ownership in the condominium and prevent the IRS from 2 ascertaining his true income, he is charged with one count 3 of money laundering.
4 So, shortly after this offer in compromise was 5 made to the IRS, Who's Who Worldwide filed for 6 bankruptcy. This changed the picture quite a bit. In 7 fact, this threw a monkey wrench into the efforts of Bruce 8 Gordon to keep this big secret from the IRS. Because when 9 a company files for bankruptcy there can't be any 10 secrets. The books of a company have to be open and 11 examined. They have to be available for the inspection of 12 not only the bankruptcy court but the credits of the 13 company, in other words, the people the company owes money 14 to. 15 You will hear when a company files for bankruptcy 16 what it gets is protection. It is protected from the 17 people who it owes money to. Those people are prevented 18 during the course of the bankruptcy proceeding from 19 collecting the money that is owed to them from the 20 company. And the bankruptcy
proceeding gives this 21 protection to the bankrupt company for a period of time 22 that would allow this bankrupt company hopefully to figure 23 out a way to pay off its debts, in a way that it can 24 manage. 25 Now, in exchange for this protection, however,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
64 Opening - Scott
1 the company must reveal its books and records, its 2 finances to the bankruptcy courts and to its creditors. 3 And this you will hear, ladies and gentlemen, is exactly 4 what Bruce Gordon did not want. He didn't want people 5 look? The records of Who's Who Worldwide because if it 6 was revealed that he owns the companies, and that he owned 7 Who's Who Worldwide and that company had been paying his 8 expenses, then the IRS would know how much money he had 9 access to. So Bruce Gordon was in a double bind. He 10 wanted to continue the payment of his personal expenses 11 and his ownership a secret. But he also wanted the 12 bankruptcy protection for Who's Who Worldwide which was 13 now facing its own very substantial debts. 14 So, what did Bruce Gordon did? He lied again. 15 He lied about two things. 16 First, he lied and said he did not own the two 17 companies, he did not own Who's Who Worldwide. And he 18 told the bankruptcy courts that the two homes, the 19 penthouse and the condominium, were solely for business 20 purposes, that that was their only use. They were not 21 used for his residences. 22 Now, the first lie, which was that Bruce Gordon 23 did not own Who's Who Worldwide. The truth was that Bruce 24 Gordon owned 75 percent of Who's Who Worldwide. The other 25 25 percent was owned by Bruce Gordon's sister and
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
65 Opening - Scott
1 brother-in-law who loaned him money to start up the 2 company a while back. But his brother-in-law and sister 3 were only passive investors. They did not have anything 4 to do with the operation of the company from day to day. 5 Now, you will hear before Who's Who filed for 6 bankruptcy, Bruce Gordon had actually admitted this 7 ownership arrangement. He admitted he owned 75 percent of 8 the company, and his relatives owned 25 percent of it. He 9 admitted this in testimony in a court. 10 But once the bankruptcy case was filed, Bruce 11 Gordon changed his tune and he began to say he had no 12 ownership interest whatsoever in these companies. 13 He claimed that his brother-in-law and 14 sister-in-law owned all of Who's Who Worldwide. And he 15 testified at the bankruptcy proceedings about this saying 16 he was only a hired h
and at a company owned by his brother 17 and sister-in-law. 18 He also put this false information in the 19 bankruptcy petition, which is the document that you file 20 with the bankruptcy court when you first claim bankruptcy 21 protection, when you first start your bankruptcy action. 22 Finally, Bruce Gordon and Martin Reffsin drew up 23 false, back-dated documents, which pretended to reflect 24 that Bruce Gordon sister and brother-in-law were the real 25 owners of the company, Who's Who Worldwide.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
66 Opening - Scott
1 Now, the second lie, the lie about how they used 2 the condominium and the penthouse solely for business 3 purposes. 4 Who's Who Worldwide's creditors, the people that 5 Who's Who Worldwide owed money to, had an interest in 6 knowing what these properties were used for. When they 7 looked at the company's books they could see a lot of the 8 company's money was tied up in the two properties. So 9 this is money that could have been used to pay the debts 10 that were owed to them. 11 So, they wanted to know how the companies were 12 used, because it may affect getting repaid the debt owed 13 to them. 14 So, the creditors inquired what the two 15 properties were used for. And Bruce Gordon responded that 16 it was solely for business purposes. That these 17 properties were used by members of Who's Who Worldwide and 18 Sterling Who's Who, who would come into town from time to 19 time and needed a place to stay. He said these two 20 properties were used for business meetings of the two 21 companies, when in fact they were his personal residences. 22 As proof that he was really using the property 23 for the purposes he claimed, the bankruptcy court ordered 24 Bruce Gordon to keep logs of his usage of the two 25 properties. The bankruptcy court asked him to keep the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
67 Opening - Scott
1 logs for the period covering the months of August 1994 2 through September 1994. And you will hear that Bruce 3 Gordon submitted false logs to the bankruptcy court, 4 documented events that happened at the two properties, 5 although the events had never happened. This was so it 6 would appear that the properties were used for business 7 purposes and not as Bruce Gordon's residences. 8 You will hear that Bruce Gordon and Martin 9 Reffsin ordered a Who's Who Worldwide employee to create 10 these false logs and to write information on these logs 11 that was not true about events that had supposedly 12 occurred at these two properties. 13
She was instructed to record non-existing events 14 and to write down the names of the people who had 15 supposedly attended these events at the two properties, 16 when those people in fact had never been there. 17 You will hear from employees whose names appear 18 on the logs as having attended these events. You will 19 hear they did not attend the events on the dates expressed 20 on the logs. You will hear from some of the employees 21 they never had been to the condominium or penthouse at 22 all. 23 Now, the employee who was ordered to create the 24 logs will also come into court and testify before you. 25 She will tell you she filled out the false information on
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
68 Opening - Scott
1 the logs at the orders of Bruce Gordon and Martin Reffsin. 2 Now, these lies, ladies and gentlemen, achieved
3 two purposes. First, to obstruct the bankruptcy court and 4 the creditors from discovering the two financial pictures 5 of the company Who's Who Worldwide who had filed for 6 bankruptcy protection; and, two, to allow Bruce Gordon to 7 continue with his big secrets he was trying to keep from 8 the IRS. Because he could not allow the IRS to know that 9 he really owned these properties. And he couldn't -- and 10 that he really owned the companies, and that he lived in 11 these two homes. 12 And for these lies and misrepresentations in 13 connection with the bankruptcy case, Bruce Gordon and 14 Martin Reffsin are charged with a count of obstruction of 15 justice. And Bruce Gordon is charged with another count 16 of obstruction of justice alone without Martin Reffsin. 17 Now, what will be the evidence to support these 18 claims. The government will present to you the 433-
A 19 forms that Bruce Gordon submitted to the IRS, which 20 purported to set forth all his income and expenses for the 21 period we are talking about. And you will see that the 22 433-A forms say nothing about the enormous expenditures 23 that Bruce Gordon was making in stores and for the 24 condominium and the penthouse, and they say nothing about 25 the money he was taking from the companies.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
69 Opening - Scott
1 Now, you will also see what the bankruptcy courts 2 and the IRS were never able to see. The entire truth 3 about his financial picture. 4 You will see statements from American Express 5 documents the jewelry he bought, clothing he bought and 6 all the associated luxuries he had access to. You will 7 see the company checks made out to cover the expenses, the 8 American Express
bill, the dental bill, his rents for the 9 penthouse. You will also see the false documents he 10 submitted to the bankruptcy court to try to prove that his 11 sister and brother-in-law were true owners of the 12 company. You will see phony stock certificates purporting 13 to show that the sister and brother-in-law actually owned 14 the companies. You will also see the phony logs which 15 purport to document the business purpose usages of the 16 condominium and the penthouse. 17 You will also hear about Bruce Gordon's false 18 testimony to the bankruptcy court. 19 Finally, you will hear in great detail, ladies 20 and gentlemen about the luxuries he was spending money on, 21 the lavish improvements to the condominium and the 22 penthouse. You will see receipts for his purchases from 23 Armani, turn no, sir, polo, Ralph Lauren, Bergdorf 24 Goodman, Tiffany. You will hear about the BMW and the 25 Lexus and the Mercedes Benz he was driving.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
70 Opening - Scott
1 Ladies and gentlemen, this trial will paint a 2 portrait of a man who was willing to lie to courts and 3 federal agencies, and his own customers, and anybody he 4 had to lie to in order to line his own pockets. 5 In this trial you will get an inside look as to 6 what customers of Who's Who Worldwide and the bankruptcy 7 court and the IRS never got to see. And that is the web 8 of deceit that was woven by Bruce Gordon and the other 9 defendants who assisted him in these endeavors. 10 At the end of the presentation of the evidence we 11 will have an opportunity to speak to you again. At that 12 time we will ask you for the only verdict which is 13 consistent with the evidence that you will hear; in fact,
14 the only verdict that makes any sense in light of all this 15 evidence you will hear throughout the course of this 16 trial. And that is a verdict of guilty on all counts. 17 Thank you for your attention. 18 THE COURT: Members of the jury, we are going to 19 take a ten-minute recess. 20 Please do not discuss the case. Keep an open 21 mind. You have heard no evidence as of now. The 22 statements by counsel are not evidence, as I told you. 23 We will take a ten-minute recess. 24 Please remember how you are seated so that when 25 you come back you will line up in that way so you do not
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
71 Opening - Scott
1 climb over each other. That would not be nice. 2 We will take a recess. 3 Madam deputy, please recess the jury. 4 (Whereupon, at this time the jury leaves the 5 courtroom.) 6 7 (Whereupon, a recess is taken.) 8 9 (Whereupon, the jury at this time entered the 10 courtroom.) 11 THE COURT: Please be seated, members of the 12 jury. 13 Do you wish to make an opening statements, 14 Mr. Trabulus? 15 MR. TRABULUS: Yes, I do, your Honor. 16 THE COURT: You may proceed. 17 MR. TRABULUS: Thank you, your Honor. 18 May it please, the Court, your Honor. 19 Members of the jury: 20 We have met. I am Norman Trabulus. I am 21 Mr. Gordon's lawyer. 22 At the end of this case I am going to return and 23 speak with you. I am going to ask you to return a verdict 24 of not guilty on each one of the charges against him. And 25 the reason for that is very simple. There was no crime
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
72 Opening - Trabulus
1 here. 2 You
are going to hear about some crimes that were 3 committed by prosecution witnesses who were then enlisted 4 by the government to infiltrate legitimate businesses, 5 publishing businesses, businesses engaged in publishing 6 magazines, or a magazine. And you will have an 7 opportunity to look at that magazine; business engaged in 8 publishing books, legitimate books, books which were 9 delivered as promised. 10 You are going to see that this prosecution is 11 wrong, simply wrong, and that it represents a terrible 12 mistake, and that the prosecution is attempting to cover 13 itself to get you in your verdict, by a guilty verdict, to 14 in a sense ratify the mistake they made, put your seal of 15 approval on it. 16 When I say it is a mistake, it is not just an 17 inadvertent mistake. You are going to see that this 18 prosecution was assisted and it wouldn't be surprising
if 19 it was instigated by a major competitor of the businesses 20 of which Mr. Gordon was a president. That major 21 competitor has been referred to by the prosecution as 22 Marqui Who's Who. It is also known as Reed Elsevier 23 corporation. And they brought a lawsuit at one point, 24 where they say Mr. Gordon committed perjury, and he 25 didn't. We will get to that later.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
73 Opening - Trabulus
1 You will see that their goal was to put this 2 upstart competitor, companies that Mr. Gordon ran, out of 3 business. And they succeeded. 4 The true victims of all of this are not the 5 people who purchased memberships, or the people who bought 6 the books. In a sense they were victims, but victims of 7 the fact that the businesses were closed down, not victims 8 of what Mr. Gordon did. These are businesses employed 9 about 140 people, gone, lost their jobs, members. People 10 has not just had bought the books, but members, members of 11 an organization who had continued obligations to them, 12 provided them with benefits, were put out of business. 13 And those people could not get what they had been 14 promised, and what Mr. Gordon and his companies were 15 trying their best to provide. 16 Now, you have heard a lot of detail from 17 Ms. Scott, lots of detail. And in the course of this our 18 preliminary talk, our first talk, I am not going to 19 address everything she said. 20 At the end of the case, after you heard the 21 evidence and you are in a much better position to evaluate 22 what we are saying I will come back and speak to you in 23 considerable greater detail than I am now. 24 What I want you at this point to do is not to 25 assume that
because there is something that I don't
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
74 Opening - Trabulus
1 specifically mention or specifically talk about that 2 Ms. Scott talked about, that I am accepting it, or I am 3 saying that it is right, or I am saying that you should 4 accept it. 5 Now, also, there are other lawyers here, and, of 6 course, I have not heard what they are going to say. And 7 you should not assume that I am going to accept that 8 either, or agree with them. 9 Now, in an opening statement it is kind of 10 traditional for attorneys who appear on behalf of clients 11 who are charged with crimes to ask the jury to be fear; to 12 maintain in their mind the instructions that the judge, 13 Judge Spatt has given you concerning presumption of 14 innocence and so forth. I will not even do that. You 15 have already in
your questionnaires and in the jury 16 selection said that you are going to do that. And we take 17 you at your word. And that's why you were selected to be 18 on this jury, why we selected you. And that selection, by 19 the way, is a more important selection than any selection 20 to be in any Who's Who anywhere. 21 What I will ask you to do as you hear the case as 22 presented by the prosecution, is to keep an eye and ear 23 out for the things they didn't tell you, things that you 24 hear along the way, things that we on this side of the 25 table, the attorneys for the defense, manage to uncover
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
75 Opening - Trabulus
1 for you. We may not uncover everything, but we will 2 certainly uncover some. Think about those things. They, 3 the prosecution have the burden of proof, and we don't. 4 I want you to keep in mind when there is 5 something they haven't told you, something which takes 6 away from what they are telling you, why they didn't tell 7 you, and what else that might be there that they have not 8 told you. 9 Now in jury selection, we heard a lot about the 10 word "telemarketing." It almost became a taboo word, the 11 more we talked about it it was almost to the point that a 12 buzzer went off. 13 I think we are all sophisticated to know that, of 14 course, there is telemarketing abuse. We hear about 15 companies that advertise that they will provide people 16 with all kinds of circumstances, they will consolidate, 17 send in money for a loan, you send in the money and you 18 never hear about it again. Good-bye. Fly by night 19 companies. Companies that used to sell land underwater in 20 Florida. Something we all know about, and we know that we
21 get calls from banks, telephone companies. Certainly 22 legitimate businesses. They may call us at odd times and 23 irritate us when they call us when we are eating dinner or 24 putting our kids to bed. 25 We also know the person solicited in
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
76 Opening - Trabulus
1 telemarketing, or spoken to in telemarketing are generally 2 asked to buy something sight on seen, when you get into 3 something sight on seen, no matter how good it is, you 4 will have many people afterward who are unsatisfied or 5 have remorse, buyer's remorse, it is the nature of the 6 thing, telemarketing. That's just the way it works. 7 Now, in fact, this is not -- the businesses here, 8 and I think Ms. Scott made it clear that this is not the 9 kind of telemarketing that you may have encountered where 10 somebody calls you up
at 9:00 o'clock at night and says, 11 hey, would you like a chimney swept or buy a burglar's 12 alarm system, something like that. 13 Nobody was called who didn't want to be called. 14 What happened was that letters were sent out 15 advising people that they had been selected, nominated for 16 inclusion. And if they were interested to return a card. 17 Of course, on the card would be a phone number. 18 And those people who returned the call -- returned the 19 card would be called. 20 Now, the government's biggest complaint, it 21 seems, is that some of these people, or many of them, may 22 have been led to believe that the process by which they 23 were selected was more hand picked than it really was. 24 Sort of like, if you were told that you went to the store 25 and you bought something, you know, grapes picked by hand,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
77 Opening - Trabulus
1 and it turned out to be picked by the machine. And you 2 will say it is the mailing list for the machine, the 3 computer. 4 In fact, there was solicitation, and it was not 5 mass mailing lists. You will see that mailing lists were 6 the source, the source of many of the people who were 7 solicited. We are not talking about mailing lists that 8 result for example, when people take the coupon off the 9 back of the cereal box, and sends it in. These were 10 special mailing lists. These were mailing lists involving 11 people who were doctors, lawyers, executives, business 12 owners. 13 Even within that they would not take a whole 14 mailing list. These mailing lists are on computer. When 15 you buy them, you can request only president, only 16 executives, whatever. And you will hear that that is the 17
type of thing that they did. 18 And what people got is what they were told they 19 were going to get, which was membership in a registry, or 20 an organization which was largely business people. 21 Oh, there are some people in here, no doubt about 22 it, there are some people in here who probably would not 23 fit the qualifications. We don't have an airtight -- 24 every organization -- it is going to happen in every type 25 of situation. But you will find the vast majority in here
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
78 Opening - Trabulus
1 are either owners of businesses, chief executive officers, 2 CEOs, chief financial officers, people in that type of a 3 position. And that's the kind of thing that people were 4 told, and that's what they got. 5 This is what they want to make a crime out of, 6 that people may not have been told that mailing lists had 7 ultimately been the source. 8 You are going to hear them tell you that they 9 tried to perform a test to show that people who were not 10 qualified got in. And you are going to hear that they 11 took people who were convicted of crimes, and had them try 12 to call up and pose, deceive the salespeople, and pose as 13 people who had received cards. 14 Now, the test that they performed to try to show 15 that anybody could get in, which is what they are trying 16 to do, was a false test. The deception here was by them. 17 What they did was, they had people call up and 18 tell the salespeople that they had received a card. So 19 the salespeople were misled into thinking that these 20 people had already been selected. And then the 21 salespeople went through the sales presentation, and they 22 may have told people that you are accepted. But they
23 didn't go the last mile, the prosecution. They didn't see 24 whether the people really would have been accepted, except 25 for the one who was an accountant, somebody clearly
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
79 Opening - Trabulus
1 qualified in this book. 2 When I say accountant, not really an accountant. 3 It was someone posing as an accountant. 4 They wouldn't go the last step to see whether or 5 not, even after having spoken to the salespeople, and 6 being told, okay, you are in, that they really would have 7 been accepted. 8 You will hear even from the people the 9 prosecution brings that there was another step. There was 10 an initial step by which people were selected for being 11 solicited. The cards that came back were gone through by 12 supervisory personnel. 13 The salespeople themselves were told not
to call 14 every card. 15 You are going to hear a tape. You will hear 16 tapes of Mr. Gordon. You were told by Ms. Scott that you 17 will hear tapes of all the defendants. And you will hear 18 a tape of Mr. Gordon. I defy you to find him lying. 19 When you hear his voice, you will hear he is a 20 little gruff, a man in charge. And you will hear him 21 telling the salespeople, you lie, you are out of here. 22 You will hear him telling them, you don't call every 23 card. I don't want you to call every card. I don't want 24 the manager of K Mart. 25 By the way, you may find managers of K Mart in
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1 here. 2 I want the regional manager. 3 You heard about the CD-ROM. You will hear him 4 telling them I want the information as accurate as 5 possible, valid
as possible; how to categorize the 6 information so what the members got when they got the 7 CD-ROM would be accurate and useful for them. 8 You see, this was not a fly by night operation. 9 It was not take the money and run. It was not anything 10 like that. They had a ten year lease on their property in 11 New York. They had a five or ten year lease, I forget, on 12 their facilities here. They were looking to develop a 13 business, an ongoing business, with the people who are 14 becoming members. 15 When you do that -- they were looking to get dues 16 from them in the future, and the business was essentially 17 forced out of business before they could do that. They 18 were looking to sell things again and get it for mutual 19 benefit, for their benefit, because it is part of their 20 business to increase the income, and the benefit of the 21 members. Because the members were constantly being given 22 further benefits. 23 This was not something where they just published 24 a book, and all you got was a book, and put it on your 25 shelf and you can show your friends. It was much more
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1 than that. 2 Mr. Gordon's companies redefined the concept of a 3 Who's Who. 4 By the way, step back a moment. I think in jury 5 selection we heard about different Who's Who. And I want 6 you to understand that nobody has a monopoly on the word 7 or the term "Who's Who." That's something anybody can 8 publish. Any one of us can publish a Who's Who. There 9 may be trademarks for particular ones, like Who's Who in 10 America. Or particular ones published by various 11 publishers. But the idea of Who's Who is for anyone. It 12 started in Engl
and, at the turn of the century. They 13 copied, took from the ideas, the different companies. 14 Mr. Gordon redefined it, not copied it. He 15 wanted to start a membership organization, an organization 16 of people who are in business, people in business who 17 could benefit by communicating with each other, by 18 networking; networking in terms of contacting other people 19 who are also members, just like people who are in business 20 who might be in a rotary club or Kiwannis Club, or 21 something like that, and utilized that social relationship 22 to make other business contacts. 23 This could be nationwide or worldwide, because 24 there were members abroad, Russia, China and trying to 25 expand into that area. Of course, the initial contact
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1 would have to be by telephone or writing. But the CD-ROM, 2 the CD-ROM which was being distributed, was a means for 3 networking. 4 With that, for example, let's say you were in 5 pharmaceuticals, you could plug into that CD-ROM on the 6 computer the words "pharmaceuticals," I am not a computer 7 expert and tell you how it might be done, but you may find 8 other people like yourself, or potential customers, or 9 people with whom you could strike up a conversation with 10 for your business. Things that would be useful in 11 establishing that. 12 There was absolutely no intent upon the part of 13 Mr. Gordon or his companies to defraud anybody. He was 14 trying to build a business that benefited. 15 They published this, I will show you this, 16 articles by members, about members. You will have a 17 chance to look through it. You had advertisers, Cadillac, 18 Seagram's. 19 I will not go through the thing. But the point 20 of the matter is that these were recognized by well known 21 companies, articles which would be a value of people in 22 business, like negotiating a commercial lease. They were 23 not looking to take people's money and satisfying them. 24 They wouldn't be doing it for that. The whole purpose of 25 this was to develop a base of a membership of people who
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1 were happy, people who themselves were in business. And 2 people could appear in these articles, write the articles, 3 it was an excellent idea. And it was one, by the way, 4 which surely frightened the competitor, because the 5 competitor was not doing that. 6 The competitor, who was Reed Elsevier and Marqui, 7 started a lawsuit. The lawsuit, you heard, had to do with 8 trademark infringement. 9 What happened, at a certain point of time there 10 was a judgment against one of the companies, Who's Who 11 Worldwide, a judgment for about 1.6 million dollars. 12 Now, that amount of money is a lot of money. And 13 although the company was successful and it was earning 14 money, that judgment of 1.6 million dollars, and also 15 something in connection with the trademark, which was the 16 requirement that the cover in the book which was already 17 printed be redone, which cost money, seriously caused 18 financial problems for the company. So the company went 19 into Chapter 11 voluntarily. 20 You heard Ms. Scott say that when you go into 21 Chapter 11 you have to disclose stuff and Mr. Gordon 22 didn't want to do it. 23 Well, you will hear about the disclosures that 24 were made there, and you will hear that those companies 25 went into Chapter 11 totally voluntarily. And all the
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1 things they are complaining about were disclosed. And we 2 will get into that in a second. 3 They went into Chapter 11. And they proposed -- 4 what happens in Chapter 11, this is one respect that I 5 agree with Ms. Scott, the company tries to get protected. 6 Instead of getting eaten up by competitors that there is 7 nothing left, it tries to work out a plan where people get 8 paid back. Sometimes they get paid back 20 cents on the 9 dollar, sometimes 10 cents on the dollar, sometimes the 10 pay back is 70 cents on the dollar. Sometimes there is no 11 pay back. There is a liquidation, the company is sold 12 off, cut into pieces. And the company gets sold off. 13 This company proposed to pay back 100 cents on 14 the dollar. They needed
time because they were a 15 successful business. They were growing. People liked 16 what they were getting, they were upgrading. You will 17 hear about upgrading. 18 Which meant when you became a member, you became 19 a member for five years, ten years. It is like when you 20 get an ad, ten days only, or a special coming up later 21 on. But these were marketing things. People were offered 22 different types of memberships, people would buy them, 23 like what they saw, and they would buy three years, 24 upgrade to five years, five years upgrade to ten, ten 25 years upgrade to life membership.
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1 In any event, these companies were successful, 2 and the plan that was proposed was 100 cents on the 3 dollar. And the competitor, Reed Elsevier, the principle 4 competitor, he opposed it. 5 Their real motives, their real motives, and they 6 succeeded, Reed Elsevier, and this is the upshot of it, 7 was to put the companies out of business, to put the 140 8 people working for him out of business, and essentially 9 work on what amounted to be a fraud on the members. They 10 are the ones who did it. Because the members now are 11 members in a defunct organization. Not because of his 12 doing, or anybody's doing over there, but because other 13 people did it. 14 Now, Ms. Scott had talked about things as if they 15 were non-existing. She talked about the conferences and 16 said they never happened. She implied they were false 17 things told to people. 18 You will see an ad for one of these here before 19 it happened. Why would somebody advertise something if it 20 wasn't going to happen? In a continuing magazine that 21 happened afterwards. That's the one in North Carolina. 22 What happened is you needed 50 people or so in order to do 23 it, and not enough people signed up. They had intended to 24 do it. And after, after it turned out that there were not 25 enough people who signed up for it, the salespeople were
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1 told, don't tell people that it happened. Some of them 2 did, some of them didn't. The fact that some did, some 3 didn't, certainly doesn't come from him, their boss, that 4 it didn't. Some said the right thing, we just couldn't 5 get it together. 6 The one in Vietnam, and so forth, Ms. Scott said 7 he remembered the plane taking off as if he proved, they 8 proved it didn't take off. 9 Well, the conference did happen. It was with a 10 group of lawyers, a package deal. Listen to the proof, as
11 to whether or not the conference didn't happen, and 12 whether or not a plane didn't take off and whether or not 13 members didn't have the opportunity to go, as to whether 14 they signed up for it. Let them prove that the testimony 15 they will say is false, whether it is false. Because it 16 is not. The answers to the questions he gave was true. 17 He didn't ask whether any members went. The conference 18 sponsored was real. And you will hear that even from one 19 of their own witnesses, that the conference was real. 20 You know, the nature, the nature of 21 telemarketing, the nature of a business where salespeople 22 talk to people on the phone, and I will not really call it 23 telemarketing it, because it is not a classic marketing 24 business. But the nature is that salespeople who are paid 25 on excision largely, although they have a base salary,
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1 they are going to have a temptation, they are going to 2 have a temptation to somehow step over the line in one way 3 or another. And that's they did. 4 You will hear that Mr. Gordon was well aware of 5 that risk and did his best to see to it that he didn't 6 happen -- that it didn't happen. He will tell them to 7 stick to the sales presentation, sometimes called a pitch. 8 You will hear that he said to them -- you will 9 hear tapes of this -- I want to know what you are saying. 10 IBM wants to know what its salespeople are saying, they 11 want to know when they sell a computer they are not 12 promising a Cadillac along with it. 13 You will hear a lot of the things the government 14 is complaining about are things that happened when people 15 deviated from what they were told to say.
16 Part of their argument about Mr. Gordon, it is 17 like -- you will hear them say that he was encouraging 18 them to speed by mentioning the speed limit. When he said 19 not to go over 55, they will twist it to something to the 20 effect they should have gone over 55. The exact opposite. 21 You will hear his voice. He didn't know he was 22 being recorded, the people sent in by the government, they 23 recorded it. They were supposed to record what is most 24 favorable to the government's case, and this is what they 25 came up with. Things to show he was honorable. Perhaps
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1 he is a stubborn man and did things that he thought was 2 right. And you will see that by what he said, there was 3 no intent to defraud anybody. 4 The end result is that the members, about 74,000
5 of them, ultimately lost the benefit of their membership, 6 when as a result of a variety of things here, businesses 7 were forced out of business, and not for not trying. 8 Now, you heard Ms. Scott talk about tax fraud. 9 And you heard her talk about obstruction of justice. 10 Now, one of the things that you are going to bear 11 in mind that I would like you to consider in this is what 12 was disclosed. She said that he didn't disclose his 13 control of companies. 14 You know, she talked about collection information 15 statements. And there are allegations in the indictment 16 about them. There is one that is not referred to in the 17 indictment, and I would hope they are going to introduce 18 it to you, because in that one, it says he is the 19 president of the company. And under salary it says he 20 takes as needed. Basically he is free to take. There was 21 no
loan conceded. 22 She says there is a place for the loan -- well, 23 it is printed on the tax form, loans. It is so common 24 place and customary that the government even preprints it 25 on the corporate tax returns.
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1 You have to understand some of the things that 2 are going on here. They were loans. Because they were 3 loans to Mr. Gordon the corporation which would have 4 gotten a tax deduction if it had paid him a salary itself 5 paid taxes on the money at a higher rate than Mr. Gordon 6 would. There is no allegation that the corporation's tax 7 returns were fraudulent, or the corporation committed a 8 tax fraud. 9 You will see that these corporations generated, 10 not just in terms of their own taxes, but in terms of the 11 employees that they employ, who paid
taxes on their own 12 income, millions of dollars in tax revenue, which the
13 government, complains that Mr. Gordon has been trying to 14 avoid a tax obligation he had before, and he did have a 15 tax obligation before, they prevented that revenue from 16 being paid. And that business, had it allowed to 17 continue, would have been the vehicle for Mr. Gordon 18 eventually to pay his tax obligations in full. 19 Now, the government may say to you that these 20 loans were not loans, and there is going to be discussion 21 of that. 22 I think what you have to bear in mind is that the 23 loans were disclosed. There was disclosure. The 24 information was informed about the bankruptcy. The 25 bankruptcy documentation fully discloses the loans. There
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1 was never any attempt to conceal them. 2 Some people say they were not loans, that it was 3 really salary. Other people may say that there were. 4 There may be a civil case here. Maybe he owes 5 more penalties from what he original owned. By the way 6 the penalty, the interest and penalty had nothing to do 7 with a fraud. It had to do with tax shelters that he 8 operated, and eventually ruled he was not entitled to tax 9 shelter status. And basically he wound up owing money 10 because of that. 11 What you have here is whether or not -- the issue 12 is not whether he owed additional taxes, or whether the 13 tax claimed was valid. The issue here is as to whether he 14 willfully, willfully violated the law. 15 He didn't. He was working. There was an 16 accountant there, Mr. Reffsin. And the fact that it was 17 disclosed in various places and there may have been 18 ineptness here, but it shows that these were positions 19 they were taking, they were willing to defend or 20 disclose. And it may have been right or wrong. But it 21 was regarded as tax planning, not tax evasion or fraud. 22 You will hear that people in business are allowed 23 to arrange their affairs, in such a way to minimize tax 24 obligations. That's one of the main things accountants 25 exist for.
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1 So while there may have been some tax owing 2 because of certain things that happened here, but maybe 3 ultimately if the tax court were to rule on it saying this 4 deduction is not valid. And that's not a crime. It 5 happens all the time, people make tax claims all the time 6 that turn out not to be allowed. 7 We heard of -- we heard claims of obstruction of 8 justice. There was no obstruction of justice by 9 Mr. Gordon. 10 There were loans that were submitted that were 11 false by an employee. There were loans that were false by 12 an employee. 13 You know, if he wanted to have meetings to 14 justify a use of a building or a condominium, or 15 penthouse, he controlled the company. It would have been 16 so easy for him to tell the employees, come to this place. 17 You will hear at the penthouse there were 18 meetings at times. 19 He stayed there when he was in the city. It 20 wasn't his personal residence. It was used as part of a 21 network. They were planning to have people in from 22 different companies to come in there. Cocktail parties. 23 It was something that had a business purpose, which was 24 going to be developed something more in the future. 25 Would have been easy if he was involved in that
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1 to simply create the meetings. The log could show the 2 meetings, and people can say they were there. 3 He didn't know what was going into that. 4 Somebody was doing something on their own trying to help 5 him. And he certainly didn't. 6 You will hear that person testify, and listen 7 carefully to the questions he is asked -- she is asked and 8 some of the reasons she has to say something different now 9 than what she said before. 10 Everything tax regard -- this is not a case 11 involving cash under the table, not something that 12 happened of that sort at all. I didn't hear exactly what 13 Ms. Scott said. But the monies loaned to Mr. Gordon that 14 he used, there was no secret that he was using it, he 15 thought it was okay. And that's not fraud, if you think 16 it is okay.
17 You will hear at the end of the case when the 18 judge instructs you, you will learn more about it. 19 Oh, yes, she said the condominium in Manhasset 20 was his personal residence and concealed it. He paid rent 21 on it. There was both an office there and residence. He 22 paid rent on the office part. Nothing wrong with that. 23 And it was disclosed. There was no concealment. 24 This whole thing about money laundering is 25 ridiculous. You would think it is a drug case where money
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1 comes in from drugs and being concealed as an illegitimate 2 business. 3 There is no proof as to where the money came 4 from, the fact that it was loaned to the company through 5 PVI, or that he was living there. He even filed tax 6 returns listing it as his home address. What kind of
7 concealment is that, he was paying rents. 8 You have to consider that the taxes is a mere 9 civil issue. Taxes owing, penalty owing, it is things 10 that do not belong in a criminal court. 11 Again, at the end these businesses were put out 12 of business. 13 One of the things that hurt them was the fact 14 that there was a search warrant executed which the 15 government did. It was lawful. And got all their 16 records. When you get all your records taken it is kind 17 of difficult to conduct business. Of course there was 18 publicity, and people started to call up for refunds, 19 people who might have been perfectly satisfied before. 20 And this company had a policy of giving out refunds, and 21 that hurt. And there were a variety of things that 22 poisoned -- made it difficult to operate a business, may 23 have poisoned some people's minds against the company, and
24 ultimately it could not continue. And the victims again, 25 were not the people who originally bought. The people who
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1 original bought were not victimized by Mr. Gordon or his 2 companies. They are the victims of the same process which 3 led to this prosecution, a prosecution in which the 4 government for reasons I cannot fathom had let itself be 5 used by a large foreign owned company, a company making 6 millions of dollars that publishes Who's Whos, to put a 7 legitimate competitor out of business. 8 Thank you. 9 THE COURT: Mr. Jenks, do you wish to make an 10 opening statement? 11 MR. JENKS: Yes, your Honor. 12 THE COURT: You may proceed. 13 MR. JENKS: Judge Spatt, ladies and gentlemen of 14 the jury, Mr. White, Ms. Scott, counsel: 15 My name is Edward Jenks and I represent the two 16 corporations being charged here in this indictment. Who's 17 Who Worldwide Registry, Inc., and Sterling Who's Who. 18 Both corporations in this case have been eviscerated and 19 destroyed by the actions of the government. 20 Now that you have been selected and sworn as 21 trial jurors in the case, it is my privilege to make an 22 opening statement to you on behalf of the two 23 corporations. As you know from Judge Spatt, all the 24 defendants in the case are presumed innocent. The burden 25 of proof is on Mr. White and Ms. Scott to prove each of
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1 these defendants guilty beyond a reasonable doubt of each 2 and every element of the crimes charged in the indictment. 3 As you can see from listening to Ms. Scott and 4 Mr. Trabulus, an opening statement in a criminal case is 5 similar to that of the table of contents of a book. It is 6 a roadmap or a preview, if you will, of what each of the 7 parties and sides thinks the evidence will show or will 8 not show. 9 Clearly, as you can see from the openings 10 considered thus far, this is a complex case with complex 11 issues, which is very complicated to understand in a very 12 short period of time. As a result, I am going to give you 13 a brief overview of what I think you should keep your 14 eyeballs on and your ears listening to while the evidence 15 is presented, at least concerning the corporations. 16 I will tell you on behalf of all of the 17 defendants, if the case were as simple as Mr. White says 18 it is, none of these people would be here. They would 19 have pled guilty and they would have gotten out of here, 20 rolled over and played dead for the government. But the 21 case is not black and white. There are many, many gray 22 areas in this case concerning the allegations in this 23 indictment. 24 All of the defendants have come here to confront 25 their accusers and to have those people examined.
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1 You see, what Ms. Scott forgot to tell you in her 2 opening statement is that many of the government witnesses 3 that you will hear or see in this case are people who have 4 cut deals with the government, people who are cunning, 5 lying, manipulative felons, people who are scam artists, 6 people who at the very direction of the good and loyal and 7 honest government, had gone in there looking to drum up 8 criminal activity inside these corporations; people who 9 would be willing to sell their souls to the devil to stay
10 out of jail; people who were facing jail terms for actions 11 they had had done in other cases and other things. 12 Ladies and gentlemen, you will see that when 13 these people are put under the very microscope of 14 cross-examination by the defense lawyers in this case, 15 that these people had scammed the public. They scammed 16 the government who is in here and is going to swear for 17 them to you, like they know them since they were born, and 18 they are going to try to scare you to save themselves from 19 many jail sentences. 20 You will see there were many of these defendants, 21 and six of them who were employed at the behest of Martin 22 Biegelman, the private cop on behalf of Who's Who 23 Worldwide, Reed Elsevier who controls and owns Marqui 24 Publishing. 25 Let's talk about the two corporations I
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1 represent. I told you they are destroyed and they have no 2 money. 3 Why am I here? Why are they here? Why are they 4 in this indictment? 5 Who's Who Worldwide Registry, Inc. operated out 6 of Marcus Avenue, Lake Success. It was formed in 1989, it 7 was run on a daily basis and operated by the defendant 8 Bruce Gordon. 9 As Mr. Trabulus told you, it employed 140 people 10 at its peak along with Sterling Who's Who, which was 11 formed in early 1994. All 140 people as a result of the 12 actions of this government, our United States Government, 13 are all out of work. The companies are not up and not 14 running. 15 Not only are 140 people out of work as a result 16 of the geniusness of Mr. White and Ms. Scott and Inspector 17 Biegelman, but the government has lost literally millions 18 of dollars by
money spent through the use of the mails to 19 send out letters and packages and everything else that the 20 companies had distributed. But in addition, the 21 government lost millions of dollars in corporate taxes 22 which was paid consistently by Who's Who Worldwide and 23 Sterling Who's Who. 24 You will see that Mr. White has his teeth in this 25 thing like a tiger biting down on a steak when he is
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1 hungry. He won't let this thing go. 2 Ladies and gentlemen, Who's Who Worldwide and 3 Sterling Who's Who are not your typical telemarketing 4 companies. In fact they are publishing companies. 5 Membership organizations. These companies use 6 telemarketing to interview prospective members and sell 7 qualified individuals memberships. People that bought the 8 products of
these corporations got a book, a registry 9 book, which is here, which you can see, and which you can 10 look at during the course of the trial. They got a wall 11 plaque to put up in an office or business where they 12 worked to show people that they were members of a Who's 13 Who organization. 14 In addition, they got a camera ready logo, if 15 they so chose to put on a card, a business card, to 16 distribute to people showing they were members of Who's 17 Who. 18 In addition, they were able to use arguably, 19 these registries to engage in networking. Mr. Gordon's 20 company produced a CD-ROM which was available. They 21 provided Master Card service, discounted auto insurance, 22 med jet assistance, and a magazine that was published with 23 profiles of various members, as well as other valuable 24 services that people in the corporate world might be able 2
5 to use on a daily basis.
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1 This was not, and these were not companies that 2 would call you up and try to sell you an air conditioner 3 for $19.95, and then send you a paper fan in the mail. 4 This was not an organization, some fly by night 5 stockbrokerage with some young stockbroker calling you up, 6 promising to deliver you or double your money, if you 7 invested 10,000 today, by the end of the month you would 8 have 20,000. These were not companies preying on the 9 elderly and calling them up, and taking away their life 10 savings worth of books. 11 Rather, these were companies who employed people 12 who needed jobs and provided a service to members who 13 joined the organization. It is not typical telemarketing 14 in a sense that you consider telemarketing. 15 As Ms. Scott has explained and Mr. Trabulus 16 explained, there was no cold calling here such as you get 17 at night when you are at home, where you pick up the phone 18 at 8:00 o'clock and it is some guy from some Hawaiian 19 vacation package trying to sell you a $99 round trip 20 week-long ticket. 21 This was a company who legitimately used the 22 mail, sent out letters seeking and soliciting members to 23 become members in an organization, an organization 24 providing real leave services and different values to 25 different members.
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1 Speaking of values, you would have to determine 2 what the value was each of the members got when they 3 became a member of either Who's Who Worldwide or Sterling 4 Who's Who. 5 Now, ladies and gentlemen, I am going to show you
6 that these -- how these companies, what they look like on 7 television, and what they looked like on the day that the 8 government conducted the raids in March of 1995 and 9 arrested 29 employees of these companies, including 10 Mr. Gordon. 11 You will learn and you were told that not only 12 were there 140 employees, but there were also 75,000 13 members who in essence are victims by the actions of the 14 government. Many of these members bought lifelong 15 memberships and enjoyed the discounted credit card 16 service, a magazine and a registry. 17 I will play for you first a tape of Sterling 18 Who's Who, which as I told you was at 750 Lexington Avenue 19 in Manhattan, which was formed in March or around the 20 early part of 1994, and was a success -- not a successor 21 corporation, but a later corporation to the filing of 22 Who's Who Worldwide which was begun
in 1989. 23 Let's just take a look. And the reason I play 24 these tapes for you is not so you think or you conjure up 25 some sort of notion in your mind that this was some kind
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101 Opening - Jenks
1 of back room organization with a swinging lightbulb in a 2 basement somewhere were people were manning banks of 3 telephones trying to scam other people. But rather, it is 4 a legitimate place where people like ourselves go to 5 business between 9:00 and 5:00 in order to get a salary. 6 I want to dispel you of any notion that this was some 7 sleazy run back room organization. 8 I will play Sterling Who's Who, a videotape that 9 the government made in March, March 30th, 1995, when they 10 executed the arrest and the search warrants. 11 Can you all see? 12 (Video played.) 13 I will not comment on the tape, your Honor. This 14 is the Sterling Who's Who tape. 15 THE COURT: Let the record indicate that there is 16 no audio portion being played; is that correct? 17 MR. JENKS: Correct, your Honor. 18 THE COURT: If anybody can't see, they can 19 certainly move over so they can. 20 (Tape is continued.) 21 MR. JENKS: I am going to stop the tape now. And 22 I am going to play for you -- this tape was Sterling Who's 23 Who at 750 Lexington Avenue in Manhattan, and this tape 24 here will show you what Who's Who Worldwide looked like 25 and where they were in Lake Success on Marcus Avenue.
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1 (Tape is played.) 2 MR. JENKS: These tapes, ladies and gentlemen 3 were made by government agents on March 30, 1995, when 4 they effectively shut down the operations of both 5 corporations. 6 You heard Ms. Scott talk about the solicitation 7 process as well as Mr. Trabulus. I told you just before 8 we got to the tapes, that this was not a cold call 9 operation, that it was a thriving, growing, developing 10 business. But it had a thorn in its side. And the thorn 11 that it had in its side since 1989, when Gordon 12 established Who's Who Worldwide was a British Dutch 13 company, a five billion dollar company, by the name of 14 Reed Elsevier. 15 Reed Elsevier owned and controlled Marqui 16 Publishing. And as you have already heard, Marqui 17 Publishing was a competitor corporation, a gigantic 18 corporation, who published other Who's Who in America. 19 Because of the actions of Gordon for having the 20 temerity to compete in the American market with Who's Who, 21 Marqui began a lawsuit in 1992 in the federal court, what 22 they call a trademark infringement, an action to prevent 23 someone from infringing a mark. 24 In 1994 a judgment was awarded after a lengthy 25 civil trial on behalf of Reed Elsevier for 1.6 million
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1 dollars. That was the beginning of the end of the 2 corporations. As a result of that judgment Who's Who 3 Worldwide Registry filed for Chapter 11 protection, which, 4 as Mr. Trabulus explained to you, and that is they asked 5 to reorganize in a bankruptcy court, and to pay 100 cents 6 on a dollar to the creditor. 7 But, as Mr. Trabulus told you, that was not good 8 enough for Reed. Reed had already destroyed other 9 competitor Who's Whos, because they had the muscle. 10 Gordon fighting Reed was like David fighting Goliath. 11 They wouldn't consent. 12 As
a result Who's Who Worldwide ultimately 13 continued to do business, trying to take new members, and 14 trying to pay its bills while in Chapter 11 15 reorganization. 16 At or about the time of the civil judgment coming 17 down in March of 1994, Sterling Who's Who was opened as a 18 new corporation. 19 As you know, in March of 1995, a year later, you 20 have the search warrants and the arrest warrants of the 29 21 people at the companies. 22 So, how did the United States Government and 23 Mr. White get their nose into this thing? 24 Well, who else but Reed? Reed and the very 25 powerful Wall Street lawyers they had had instigated the
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104 Opening - Jenks
1 United States government and the Postal Service, and 2 Inspector Biegelman, and the United States Attorney's 3 Office to do
their dirty work for them. 4 In essence that we have hurt Gordon and his 5 companies financially, let's crush them like a bug 6 criminally, and Reed was able to sic the United States 7 Government on Gordon and his companies. And Inspector 8 Biegelman went out and recruited six informants I had 9 spoken about before, and had them call into the company to 10 try to create a criminal atmosphere, to record unknowing 11 salespeople and try to get them to talk about 12 criminality. He put informants in the company to stir the 13 pot with respect to criminality. 14 Of course, they spoke to people as Ms. Scott said 15 behind the scenes and scared the lights out of them, and 16 many of those people you know, or you will see were given 17 immunity by the United States Government, a free walk, and 18 not prosecuted for anything in exchange for their 19 testimony. 20 So,
for a year while in reorganization Who's Who 21 Worldwide continues to run and operate and solicit new 22 members along with Sterling Who's Who. By March of 1995 23 it all comes to a screeching halt. Everyone is arrested. 24 The companies are closed down. And by January 1996 the 25 Chapter 11 of Who's Who Worldwide Registry, Inc. becomes a
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105 Opening - Jenks
1 Chapter 7. The assets of the corporation are sold off. 2 The chairs, the artwork you saw, a trustee takes control 3 of and is sold off, and the company is virtually 4 destroyed. 5 Sterling Who's Who you will learn is a company 6 without assets, no money, and did not apply for Chapter 7, 7 Chapter 11 bankruptcy liquidation or protection, is still 8 out there, is technically a corporation, but does not 9 exist. 10 Ladies and gentle
men, I am here, and I have the 11 job in this case of basically defending the two 12 corporations from the conspiracy to commit mail fraud, and 13 in the colloquial sense, the substantive mail fraud counts 14 which compose the first 56 counts of the indictment. 15 The corporations are not charged in the perjury, 16 the obstruction, the tax counts or money laundering, the 17 corporations, as I stand here are finished. 18 Ladies and gentlemen, I will ask you to examine 19 what I contend on behalf of these corporations was a total 20 lack of intent to defraud anyone. The corporate entities 21 themselves did not defraud anyone. The corporations are 22 destroyed. They are not in existence. They are not 23 functioning. 24 Why we are here, you will have to ask Mr. White 25 at the end of the case.
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106 Opening - Jenks
1 I ask you to keep an open mind, to listen to all 2 the evidence, not to form any opinion until the witnesses 3 have been examined and then cross-examined, and wait until 4 the end of the case until you begin your deliberations to 5 decide where everyone stands in this case. 6 I have not told you everything I possibly could 7 in an opening statement. But I have given you a brief 8 overview as to what I think the evidence will or will not 9 show. And I thank you for your attention on behalf of the 10 two corporations. Thank you. 11 Thank you, your Honor. 12 THE COURT: Members of the jury, we are going to 13 recess until 1:30 for lunch. Please do not discuss the 14 case. Keep an open mind. You have not heard a word of 15 testimony, and have not received any evidence. Nothing 16 you have heard from anybody is evidence in the case as of 17
now. 18 We will recess until 1:30. 19 Have a nice lunch. 20 (Whereupon, at this time the jury leaves the 21 courtroom.) 22 (Luncheon Recess.) 23 24 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
107 1 A F T E R N O O N S E S S I O N 2 3 (Whereupon, the following takes place in the 4 absence the jury.) 5 MR. DUNN: We just brought a table from the back 6 over there sideways like this. We need a little room if 7 it is okay, I want to bring it to your attention. 8 THE COURT: Sure. 9 (Whereupon, the jury at this time entered the 10 courtroom.) 11 THE COURT: Please be seated, members of the 12 jury. 13 Mr. Schoer, do you wish to make an opening 14 statement? 15 MR. SCHOER: Yes, your Honor. 16 THE COURT: You may proceed. 17 MR. SCHOER: May it please the Court, members of 18 the prosecution team, members of the defense, Tara, ladies 19 and gentlemen of the jury: 20 Today you as jurors take on a duty and a 21 responsibility. You take on that duty that you swore to 22 this morning in your oath as jurors, the duty to uphold 23 the law, to try this case fairly and impartially, take on 24 the duty to presume Tara Garboski innocent. And you take 25 on the duty to hold the prosecution to their burden of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
108 Opening - Schoer
1 proof, proof beyond a reasonable doubt, and not one 2 scintilla less. 3 You take on a responsibility. You and you alone 4 hold the faith of Tara Garboski in your hands. You and 5 you alone must determine whether the prosecution has 6 proven each of the elements of the crimes charged against 7 her. 8 You have to use your common sense. You have to 9 judge the credibility of each witness that takes the 10 witness stand, determine whether they are telling you the 11 truth, the whole truth, nothing but the truth; determine 12 whether they are telling you a lie; determine whether they 13 are telling you a fish story; determine whether or not 14 they have a reason not to tell you the truth, the whole 15 truth and nothing but the truth. 16 You have to judge the evidence they will 17 present. You have to make sure that it is credible. And 18 you have to use your common sense and then apply the law. 19 That's the purpose of this trial and every trial. Did the 20 prosecution prove beyond a reasonable doubt based upon the 21 evidence, your common sense and the law, the elements of 22 the crimes. 23 I submit to you at the end of the case you are 24 going to find they haven't, they haven't with respect to 25 Tara Garboski.
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109 Opening - Schoer
1 The judge told you that you have to treat each of 2 the individuals on trial here separately. And keep that 3 in mind. It is a separate trial with respect to each of 4 the people who are charged. You have to separate in your 5 own mind the evidence that may be presented against one 6 person as opposed to the evidence that may be presented 7 against another person. 8 You don't have to bring, and the judge will tell 9 you this at the end of the trial. You don't have to bring 10 the same verdict with respect to any of the defendants. 11 You have to judge their evidence against each of the 12 defendants separately. 13 You have already heard that not all the counts 14 Tara is charged with. And much of the opening statements
15 you heard from the government, and even from my colleagues 16 so far, have nothing to do with any of the charges that 17 she is charged with. You are going to hear a lot of 18 evidence in this case. You are going to hear a lot of 19 things coming from prosecution witnesses. Many of those 20 things will have absolutely nothing to do, absolutely 21 nothing to do with Tara. Absolutely nothing to do with 22 Tara or any of the other workers, because that's what they 23 were, they were workers. They were employees. 24 Now, Mr. Trabulus and Mr. Jenks, they have told 25 you a lot about the facts that you are going to hear, a
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110 Opening - Schoer
1 lot about the fact that there was no crime here. And I 2 will not rehash that. But there are a couple of things 3 that you heard from the government, that you heard so far, 4 that we ought to talk about. 5 One is, you heard in the judge's instructions to 6 you, and when he introduced Tara, he said she is also 7 known as Tara Green. 8 You will hear from the trial that because these 9 employees were on the telephone at times when they were 10 salespeople, they used shortened names. They used names 11 that would be perhaps easier to understand from someone 12 who lived in Oklahoma or Montana. They were calling all 13 over the world. It is not an alias she was using to hide 14 behind. 15 She used the name Tara Green in business. People 16 shorten their names in business all the time. 17 Tara is sitting there. We are sitting in order 18 basically of the indictment. That's why we are sitting up 19 here in the front, at the front table. It doesn't mean 20 much of anything. 21 But you heard the government tell you that this 22 case involved millions and millions of dollars. 23 Well, Tara didn't make millions of dollars. She 24 didn't live a lavish life style. She didn't go on 25 expensive vacations. She didn't have a company car.
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111 Opening - Schoer
1 Some of the people you will hear here of the 2 people who got immunity, were so close and had decision 3 making powers in the company, that they were given company 4 cars as perks. Tara never had that. She was a salaried 5 employee. In the beginning she was this salesperson and 6 then became this manager, this supervisor. 7 You will hear what that meant. It meant she 8 handed out cars. It meant she watched the other people. 9 It meant she did some training. It didn't mean she did 10 any decision making. It didn't mean she had anything to 11 do with the concept, with the process, with determining 12 what the process was going to be. 13 She is an employee, and most of the time when she 14 had this supervisory position, she didn't make 15 commissions. She was earning less than the salespeople. 16 The prosecutor told you what she is going to 17 prove. But she didn't tell you that Tara didn't have any 18 decision-making power. She didn't tell you that Tara 19 never saw, never saw, in all the time she worked there, 20 never saw the solicitation letters, never saw the 21 mailings. And that's what she is charged with, mail 22 fraud. 23 She wasn't allowed to. This business was 24 departmentalized. Certain people did certain things, and 25 other people did other things, and they weren't allowed to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
112 Opening - Schoer
1 know what the other person was doing. They weren't 2 allowed to see what the other person was doing. Tara 3 wasn't allowed to touch a computer. 4 Although in the administration office they were 5 using computers all the time. And just as the business 6 was departmentalized, she believed that the selection 7 process was departmentalized, that there were certain 8 people who made determinations before the letters went out 9 as to whether people should be included, or possibly could 10 be included. 11 When the cards came back as was described to you, 12 there was a decision making process, a selection making 13 process. This is what she then believed. Cards were 14 handed to her. She gave it to salespeople. Salespeople 15 were supposed to call. 16 You will hear on the tapes, they are told, if the 17 people don't qualify, give me back the cards and I will 18 give you back another one.
19 Then she was told that there was a person in 20 administration after an order was written who would again 21 review the order, and if the person didn't fit into the 22 criteria for the book for belonging in this group, they 23 were supposed to yank those. And those people weren't 24 supposed to get in the back. There was a selective 25 process. That's what she believed. That's what she was
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
113 Opening - Schoer
1 told. 2 This case is not about lying and cheating. You 3 will not hear one bit of evidence that Tara Garboski ever 4 lied to any member of the public, ever said anything to 5 any member of the public that was not true. And you are 6 going to hear tapes, in fact, where she tells prospective 7 employees, we don't lie, we don't scam. We tell the truth 8 all the time. 9
You will hear tapes where she tells people in 10 training sessions, a person says, well, can I say this? 11 And she says, no. You can't say that. That's a lie. 12 And the person insists, why can't I say it? 13 No, you can't say it. It is a lie. That is what 14 you will hear on the tape. 15 She told everyone to tell the truth. And you 16 will hear over and over on the tape her favorite saying, 17 follow the script, follow the presentation verbatim, 18 verbatim, verbatim, verbatim. You are going to hear that 19 word. 20 She had no intent to deceive. That's what you 21 are going to learn when you hear all the evidence in this 22 case. The people who joined, who became members got what 23 they paid for. They got the book. They got the 24 magazine. They got the CD-ROM. They got planners. They 25 got the plaque. They got medallions to put on their car.
HA
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114 Opening - Schoer
1 They got discounted Airborne. They got discounted 2 telephone. 3 They got all these things that they were supposed 4 to have, they were told they would have. They got 5 networking, if they want and wanted to use it. It was 6 there. That's what Tara believed. She believed she was 7 selling a product that the people that were working with 8 her were selling a product. And they were selling a 9 product that had a benefit, a benefit to the people who 10 joined, because she was told -- she was told over and over 11 again, these people are happy. They are writing us 12 letters, they are very pleased with membership. Those are 13 the facts you are going to hear. Facts. 14 That word is used a lot in this very short little 15 statement. It is the facts, the credibility of the 16 witnesses, that are the keys to the task you will face. 17 Analyze the facts, Judge the credibility. 18 I submit to you that when I return to you at the 19 end of the case, there will be one and only one conclusion 20 you can reach, and that is that the prosecution has not 21 proven their case, not proven the charges against Tara 22 beyond a reasonable doubt. 23 Thank you. 24 THE COURT: Mr. Nelson, do you wish to make an 25 opening statement?
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115 Opening - Schoer
1 MR. NELSON: Yes, your Honor. 2 THE COURT: You may proceed. 3 MR. NELSON: Thank you. 4 May it please the Court, members of the 5 government team, defense counsel, Frank: 6 Good afternoon, ladies and gentlemen: 7 My name is Alan Nelson, I represent Oral Frank 8 Osman. With a name like Oral Frank Osman and you work in
9 the sales business and worked there for quite a number of 10 years, you can imagine you will think of changing your 11 name in a certain manner. And you will hear that my 12 client used the name Frank Martin for over 20 years. In 13 fact, you will hear a tape recording played during the 14 course of the trial by the government recorded in 1993, 15 well before this investigation supposedly began when he 16 was at a job interview where he uses the name Frank Martin 17 because that's the name he has gone by professionally for 18 years and years. He is not trying to deceive anybody or 19 hide anything. It is the name he utilized in his 20 professional capacity for close to 20 years. 21 Ladies and gentlemen, you heard from Assistant 22 United States Attorney Scott's allegations with respect to 23 a far reaching, broad spectrum of different criminal 24 charges. The charges against Frank Martin are rather 25 simple. He is charged with mail fraud. He is charged
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
116 Opening - Nelson
1 with agreeing with other people to participate in some 2 scheme to defraud the customers of Who's Who Worldwide. 3 By his plea of not guilty, he denies that. He adamantly 4 denies that. And that places the burden of proof on the 5 government to prove beyond a reasonable doubt that he 6 knowingly participated in a scheme designed to defraud the 7 customers of Who's Who Worldwide. 8 Specifically what the government claims as it 9 relates to Frank Martin is this: That he knew that the 10 company didn't use the type of selectivity and screening 11 that it claimed it did to customers, and that that 12 knowledge is the basis upon which he should be found 13 guilty of some criminal defense.
14 Well, he adamantly denies that he knowingly 15 participated in any scheme to defraud the customers of 16 Who's Who in any way, shape or form. And that puts the 17 burden of proof upon the government to prove that charge. 18 I ask you to look very closely at the evidence. 19 And I would like to analyze with you for a moment what it 20 is that Frank Martin did, who he worked for and when he 21 worked there. 22 You will hear that Mr. Martin worked at Who's Who 23 Worldwide during two distinctly different periods of 24 time. He worked there way back from November 1991 to 25 November 1992. He left the company at the end of November
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117 Opening - Nelson
1 1992. The company wasn't under investigation then. There 2 was nothing going on with respect to Who's Who Worldwide. 3 You will hear from
a witness here whose company 4 was under investigation, who pled guilty to a multimillion 5 dollar fraud, by the name of Steve West. His back is up 6 against the wall, and he is going to be one of the star 7 government witnesses here. 8 The postal inspectors decided because of what 9 West did, they would look into what every conceivable type 10 of operation of Who's Who in the New York City, 11 metropolitan area and see what if anything they can 12 develop with respect to those companies. 13 You will hear that Steve West, once he found out 14 he faced a mandatory lengthy jail term as did his wife for 15 the multimillion dollars fraud he perpetrated on the 16 government, came running to the government and said, I 17 will help you in any way I can to develop evidence against 18 any way I can to try to keep myself out of jail. 19 The government will play for you a tape
20 recording, not a tape recording of people who infiltrated 21 Who's Who Worldwide on the government's behalf; not a tape 22 recording of someone called to the company, but a tape 23 recording of Steven West inside of a hotel room over here 24 in Garden City where the government set him up in, in 25 1993, before there was any investigation of Who's Who
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118 Opening - Nelson
1 Worldwide, to try to see if they could get any evidence 2 about any Who's Who companies during the course of tape 3 recordings that he would make. 4 And Frank who left Who's Who Worldwide went for a 5 job interview at that point. The government will claim 6 that that recording or the contents of that recording 7 demonstrates his knowledge that there was fraudulent 8 activity taking place in Who's Who Worldwide. 9 I
want you to listen closely to the tape. Keep 10 in mind a couple of things when you do that. 11 First of all, Steven West at the time that that 12 recording was made, had entered into an agreement with the 13 government to plead guilty to five separate felony charges 14 of mail fraud and tax evasion, where he defrauded the 15 government and customers of his out of multimillion 16 dollars in funds. Also, he knew he faced a mandatory jail 17 term of somewhere in the area of 70 months in prison, as 18 did his wife. He knew the only way he could possibly 19 avoid jail was to develop evidence against other people. 20 Listen to the recording closely when it is played 21 by the government and think of a couple of things such as 22 this: Who is the person asking the questions? Who is 23 suggesting the responses of what you are looking for? 24 Who is looking to get the answers he despe
rately 25 needs to keep himself out of jail?
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119 Opening - Nelson
1 Keep those things in mind when you listen to the 2 recording. And then think about this: 3 The investigation will show and the trial will 4 demonstrate after the so-called devastating evidence has 5 developed, there is no investigation of Who's Who 6 Worldwide taking place. They didn't take the recording to 7 investigate that company. Nothing happened that week, 8 that month, that year. It wasn't until some 17 or 18 9 months later, and for the first time the government 10 decided to look into Who's Who Worldwide. You are going 11 to see around that time Steve West was about to be 12 sentenced, and contacted the agent who made him a 13 cooperating witness, and said, you know what, I heard 14 through the grapevine that Who's Who Worldwide, that 15 company that we were looking into seven months earlier, 16 they lost their civil suit. Maybe something is going on 17 there. Maybe I can tell the judge, let's see what we can 18 do and make more recordings. 19 The recordings you will hear that it is Steve 20 West pretending to be someone else. All of a sudden you 21 will find there is not one, two, three, four. There are 22 five more informants coming here. Pulled from 23 multimillion dollars frauds from every walk in life to 24 become witnesses for -- against Who's Who Worldwide by 25 Inspector Biegelman, 18 months after the recording of
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120 Opening - Nelson
1 Frank Martin. 2 If that recording is so important, what happened 3 during the 18 months, think about it when you evaluate the 4 evidence during the trial. 5 The government is also going to claim to you that 6 not only does that that recording demonstrate that Frank 7 knew that something was wrong with the company when he 8 left there; but he knew something was wrong within the 9 company when he came back to work within the company in 10 late November, 1994. 11 The evidence will show that in late November 1994 12 Frank Martin came back to Who's Who Worldwide. When he 13 was there in '92, he was there first as a sales agent and 14 then promoted to a manager; someone who helped supervise 15 people who were making calls, someone who helped train 16 them during the course of the calls. 17 When he returned to the company in November of 18 1994, he returns to the company as a group leader, one of 19 the people who manage the people who make telephone 20 calls. He monitors the calls they are training. He 21 insist on
training the people there, some of the people 22 there, and he monitors the calls taking place. There will 23 be tape recordings of him for that period of time. He 24 worked for the company less than five months when he 25 returned to the company.
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121 Opening - Nelson
1 The government will claim that this recording 2 made in 1993 shows that he knew that there was fraudulent 3 activity taking place in the company when he returns. 4 I want you to look very, very closely at the 5 operation of the company in 1994 when he returns there in 6 evaluating that claim. 7 You see, the government, in order to be able to 8 prove a charge of mail fraud must prove that not only were 9 there misrepresentations made by the company, but that 10 Frank Martin knew that there were misrepresentations made 11
at the time of his return. 12 I want you to compare what Frank says during the 13 course of his 1993 interview were potential difficulties 14 or problems with the company, with the operation of the 15 company in 1994. 16 Because what you will see is that this company in 17 1992 was a growing company. It was perfecting its ability 18 to service its clientele. There were various tangible 19 benefits that we trying to acquire that they hadn't yet 20 acquired. 21 When he came back to the company in 1994, those 22 benefits were in place. You will hear, folks that in 1994 23 when he returned to the company, the company promised 24 there would be a directory. A directory exists. 25 Various counsel showed it to you, and you will
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122 Opening - Nelson
1 see it during the testimony in the courtroom. It was 2 mailed to everybody. Everybody received a copy of the 3 directory if they paid for the directory. 4 You will hear that the people who joined received 5 artwork for their letterheads, and they received other 6 tangible benefits, such as reduced cards, a credit card 7 that they didn't have to pay any cost for with a logo on 8 it. These were all things that he now knew and was coming 9 back to the company and it existed, and it was in place. 10 You will hear that the company provided certain 11 intangible benefits, the most significant one is the 12 networking capabilities of being in the networking of this 13 nature. 14 He returned to the company, and in place at that 15 time was such an existing networking possibility. The 16 company provided to its members who chose to use it, an 17 interactive CD-ROM, which I am sure you will hear about 18 and see
during the course of the trial. 19 You will also hear that the company had offices 20 in Manhattan where it conducted meetings of members, where 21 members came to. 22 You will hear also a quarterly magazine called 23 Tribune which Mr. Trabulus showed you, was shown to all 24 the different members and provided four times a year to 25 all the members. It is something that Mr. Martin knew
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123 Opening - Nelson
1 when he came back to the company. 2 The tangible benefits were provided. The 3 networking possibilities were provided. He knew that when 4 he returned to the company. 5 Finally what you will hear about is what the 6 government really pins its case on was a claim that the 7 company was not as selective or exclusive in the provision 8 or the selectivity of the members as it claimed.
9 As I was saying to you before, what it is that 10 the government has to prove in order to convict Frank 11 Martin of any kind of offense is not that there was any 12 claim made that it wasn't as selective; but that he knew 13 it wasn't as selective as the company claimed beyond a 14 reasonable doubt. 15 When you look at the evidence you will see a 16 couple of interesting things. Not only did Frank Martin 17 not write the solicitation letters that were sent, he 18 never even saw them. 19 You will hear, ladies and gentlemen, that with 20 respect to the scripts that were utilized and projections 21 used by the telemarketers, he didn't draft them. No. 22 Frank Martin worked for the company as a trainer 23 of individuals and someone who monitored what took place. 24 When he returned to the company he was told of a number of 25 different things with respect to t
he selectivity of the
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124 Opening - Nelson
1 company. 2 First, you will hear evidence that there was 3 mailings made and mailing lists used for the specific 4 purpose of acquiring a list of people to whom to send the 5 solicitation letters. You will hear that the letters 6 themselves were acquired from a list that the company 7 asked to be very specific. They didn't want the entire 8 list. They wanted high powered executives, presidents, 9 vice president, CEOs and business owners. The evidence 10 will show it is not what they always received, but that is 11 what they sought. And Frank Martin was aware of that. 12 You will also find out that by the time 13 Mr. Martin returned to the company in November of 1994, 14 there was a second method in which people were enlisted to 15 become members of the company, and that's by nomination. 16 There were nomination ballots sent out and nomination 17 ballots in the Tribune Magazine, and in the application 18 itself. There were -- there is evidence that the members 19 brought in people through nomination. 20 In fact, a certain percentage of the members in 21 1994 when he returned were nominated by other members in 22 Who's Who Worldwide. 23 Finally, you will hear that the company 24 implemented and he was advised that they implemented, a 25 3-level system of screening ballots and make sure
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125 Opening - Nelson
1 selectivity. 2 When the ballots first came in, he was advised by 3 the front office to screen out people not considered 4 qualified by membership. You will hear recordings of this 5 at numerous times. 6 Also, the sales staff was advised, if you receive 7 a ballot for an individual who doesn't appear to be 8 qualified based on his or her position, return the ballot 9 to a manager and it will be redeemed by someone who is 10 qualified before you conduct such an interview. 11 Three, even before a qualifying interview was 12 conducted they were supposedly screened by the front 13 office a third time to ensure selectivity. 14 These were things that Mr. Martin was advised 15 when he came back to work at the company. 16 I ask you, ladies and gentlemen, to look closely 17 at the evidence presented during the course of the trial. 18 I want you to remember that there are eight 19 separate people here on trial, and the corporation who 20 Mr. Jenks represents. Evaluate the evidence of each of 21 those eight people. Look closely at what proof the 22 government has as to each person individually. Hold the 23 government to their burden of proof, proof beyond a 24 reasonable doubt. 25 I submit to you ladies and gentlemen, that when
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126 Opening - Nelson
1 you do so you will find that the government will fall 2 woefully short in demonstrating that Frank Martin knew in 3 any manner that the company was engaging in any fraudulent 4 activities. More significantly you will find that Who's 5 Who Worldwide, as presented by Mr. Jenks and Mr. Trabulus, 6 at no time had any intention to deceive or defraud any 7 customers, and Frank Martin never believed that for a 8 moment. 9 Thank you. 10 THE COURT: Mr. Lee, do you wish to make an 11 opening statement? 12 MR. LEE: Yes, your Honor. Thank you. 13 THE COURT: You may proceed. 14 MR. LEE: Good afternoon, everyone.
15 I beg your attention because I think I am very 16 privileged to speak to you at this magic hour, right after 17 lunch when the blood goes to the stomach and we are 18 digesting our food, and perhaps it is very hard to pay 19 attention. But I will ask you to try to pay attention to 20 what I have to say. 21 Now you have gotten a flavor, you got an idea of 22 this corporation and how it has been structured. 23 Right now I want you to focus on my client, 24 Ms. Laura Weitz. 25 Now, as with any corporation employing
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127 Opening - Lee
1 approximately 150 individuals, it was strictly 2 departmentalized. It was broken up into various 3 departments. 4 Ms. Weitz was a member of the sales staff. I 5 want you to focus on that and always keep that in mind 6 when you hear anything about Ms. Weitz in this case. And 7 when you try to, as I think a valid way to perform your 8 function in this case, when you put yourself in her 9 shoes. And when you try to hear or perceive this case the 10 way it would look while you were in her shoes, because at 11 the end I will ask you to do that. 12 Now, as part of the sales staff she certainly was 13 not at the upper end of the hierarchy of the corporation. 14 She was more toward the other end. She certainly had no 15 part in management or administration. She had nothing to 16 do whatsoever with setting corporate policy, deciding what 17 marketing procedures would be used by the corporation, how 18 the products and services of the corpse would be presented 19 and sold. That strictly had nothing to do with her job in 20 sales. I think it is obvious, but you will come to learn 21 that. 22 It had nothing to do with the
manner in which 23 products and services were presented to the public, price 24 settings, all these different things. 25 Now, basically her job description from her
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128 Opening - Lee
1 perspective was that everyday she would go to work, and 2 she would be provided by the corporation with the names of 3 people to call, to call to sell the products and services 4 being offered by her employer. 5 Now, these cards demonstrated to Laura Weitz, 6 that these people were interested enough and desirous 7 enough of the products and services of this corporation 8 that they sent back a card in response to the corporations 9 solicitation or advertisement, if you will. 10 Now, it was her job to speak to these people on 11 the phone, and to try to sell them the products, benefits 12 and services of the
corporation. There is no doubt about 13 that. 14 Now, if people are not familiar with how some of 15 these organizations may work, you will come to know in 16 this case that Ms. Weitz didn't even have much discretion 17 in how she performed her duties as a salesperson. She was 18 provided with a script. And she in essence was told what 19 to say, how to say it. And she relied on the script as an 20 employee is entitled to rely on what her boss provides her 21 to use in her job. And she performed her job as 22 sincerely, and as enthusiastically as she could. 23 As I said, in Laura Weitz' mind these potential 24 customers were responding to an advertisement, a 25 solicitation from the company, the corporation, expressing
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129 Opening - Lee
1 an interest in the products of the corporation.
2 One of these products, as you have heard is the 3 registry. 4 Now, in Laura Weitz's mind these people were 5 interested in obtaining a listing. They were interested 6 in their name being in the registry. They wanted to have 7 it to show the people, to point to. They wanted a plaque 8 to hang on the wall that they could display. That's what 9 they wanted. 10 In Laura Weitz' mind they believed that they 11 could put their membership in Who's Who Worldwide on their 12 resumes, their business cards, their letterhead. They 13 wanted this thing, which is fine, so they could mark it 14 themselves and impress people. We all know that. They 15 wanted to add to their credentials, which is certainly 16 smart if you want to go look for jobs. 17 That's exactly what they wanted. In Laura 18 Weitz's mind, that's exactly what she sold them on behalf 19 of her employer.
20 Another thing you heard and you will hear is 21 Laura Weitz was told that these people were interested in 22 purchasing a membership in a corporation, called Who's Who 23 Worldwide, so they can obtain a listing of people they can 24 contact and work with, which is called networking. 25 In Laura Weitz's mind as a salesperson
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
130 Opening - Lee
1 enthusiastically performing her job as a salesperson, 2 that's exactly what Who's Who Worldwide offered as one of 3 their products, a CD-ROM perfectly suited for what these 4 customers wanted, networking. 5 You can hear in some of the government's -- what 6 they will present to you as part of their case. Or if I 7 have to I will present it in a tape recording, and I will 8 play it if they don't play it. 9 You will hear Laura Weitz enthusiastically
10 describing to a person she thought was a customer, but 11 really a confidential informant posing as a customer 12 describing how value the CD-ROM was. 13 As someone said already the -- that if the 14 customer was interested in targeting a group of people, if 15 they were interested in searching a specific category, 16 such as a type of industry, a geographic location, or by 17 way of hobbies, that this is a valuable networking tool. 18 Isn't that why she was handing out the cards and 19 why she sold it to them? 20 She sold exactly what they wanted, what products 21 were being handed by the company. 22 If I were to try to sum up the case about 23 Ms. Weitz -- the government said it is about cheating and 24 lying. 25 If I could sum up the case, it is about the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
131 Opening - Lee
1 government's opinion, their opinion that these customers 2 didn't get what they wanted. They are dissatisfied 3 customers. That's what we have here. 4 There is no intent by Ms. Weitz to defraud and to 5 cheat and lie. This is a case for whatever motive we may 6 be able to uncover at this trial why the prosecution is 7 being brought. But there are people out there who are 8 dissatisfied or unhappy with the products they got from 9 Who's Who Worldwide. That's the world we are living in. 10 Don't we always know -- don't we all know people 11 who are complaining, who are griping? People who we all 12 say, I don't know how to make you happy? I just can't 13 keep you? I don't know how to satisfy you. 14 The government is going to march in customers who 15 will sit at that desk. And you know what they will do, 16 they will turn that desk into the Macy's refund/return
17 desk. They will tell you why we are so unhappy, because 18 we didn't get what we wanted. That's what this case is 19 going to be turned into. 20 Then, as part of their case the government has 21 decided to scare the living daylights out of former 22 employees who sat day by day side by side with my clients, 23 and they are going to say I lied, I did something wrong. 24 Perhaps after what is happening to the Laura -- 25 happening to Laura Weitz in this case, that's the most
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
132 Opening - Lee
1 saddest part of the case. 2 These people as sales people, selling what they 3 believed in as a good product, they have been so scared by 4 the government that they are not only betraying my client, 5 they betrayed themselves. 6 They didn't believe they were doing anything 7 wrong. Perhaps even now they didn't intend to cheat 8 people they will say. 9 But if they are being offered immunity and they 10 want to be safe, they don't have the guts to sit where 11 Ms. Weitz is sitting. 12 Ms. Weitz, Mr. Michaelson, I am sorry, but 13 numeral uno first. I have to take care of myself, my 14 family, that's what I have to do. The government is 15 pressuring me. That's what these witnesses will say. And 16 that's perhaps one of the saddest aspects of this case, 17 ladies and gentlemen. 18 Finally, I just ask you to just keep in mind when 19 you listen to the tape recordings that were made by my 20 client by a confidential informant, a person who was 21 instructed by government agents to call up people and 22 pretend to be prospective customer, a person's whose 23 intent was to just draw my client into doing something 24 that she didn't do anyway. I just want you to listen to 25 Laura Weitz' conversations, how enthusiastically it comes
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
133 Opening - Lee
1 through, how enthusiastic, and how much she believed in 2 her product, in the product. At the end that is how you 3 are going to determine it. You will find out that Laura 4 Weitz believes in what she does. She does today and 5 always had. 6 There was never any reason for her to believe she 7 was committing a crime or doing anything wrong. 8 I thank you very much. 9 THE COURT: Mr. Dunn, do you wish to make an 10 opening statement? 11 MR. DUNN: Yes, your Honor. 12 THE COURT: You may proceed. 13 MR. DUNN: Thank you, your Honor. 14 Good afternoon, ladies and gentlemen. 15 My name is Thomas Dunn, and I represent Steve 16 Rubin. 17 The first thing I would like to do is to thank 18 you for the attention you paid the last couple of days 19 during jury selection. It is a very tedious matter. You 20 were asked an awful lot of questions. The basic reason is 21 we are all looking for a fair and impartial jury. And you 22 established those two things that you are fair and 23 impartial. And I would like to thank you for that. 24 I would like to remind you, and I think it has 25 been touched on a little bit already, that these are
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
134 Opening - Dunn
1 separate trials. This might appear to be one trial, but 2 it is more like nine, ten, eleven trials here. And I only 3 represent one person, and I only care about one person in 4 this case. And when I get up and ask questions to 5 witnesses, it really only refers or deals with Mr. Rubin, 6 because that's my only concern.
And I would like to 7 remind you, and you have heard about burden of proof and 8 some of the elements of the law, but a defendant doesn't 9 have to do anything. I don't have to prove Mr. Rubin is 10 innocent. There is no burden of proof with me. The only 11 burden rests at that table with the prosecution. They 12 have to try to prove Mr. Rubin guilty beyond a reasonable 13 doubt, if they can. I don't have to do anything. I can 14 sit down, go to sleep. The judge may make comments from 15 time to time that I am sleeping. 16 THE COURT: No. I'd wake you up, just as I would 17 to a juror. 18 Do you believe this? One time a juror fell 19 asleep. I went over and woke up the juror. That will 20 never happen here though because this will be a very 21 interesting trial and you will be wide awake. 22 Sorry for interrupting. 23 MR. DUNN: It is all right, your Honor.
24 The bottom line is I don't have to do anything. 25 I don't have a burden of proof. Mr. Rubin doesn't have a
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
135 Opening - Dunn
1 burden of proof. 2 He told the government, look, I am not guilty, 3 try to prove me guilty beyond a reasonable doubt if you 4 can. That's why we are here because he says he is not 5 guilty. 6 Now, you heard one of the lawyers, I think it 7 might have been Mr. Trabulus, state that from time to time 8 salespeople may have deviated from the pitch that they 9 were given by Mr. Gordon. Mr. Rubin deviated from the 10 pitch. 11 Did he deceive anyone when he deviated from that 12 pitch? No. 13 Well, why did he deviate from the pitch? 14 Mr. Rubin, I think it will be established, was 15 one of the most enthusiastic and a person who believed 16
wholeheartedly as to what Who's Who was all about. And 17 that will be established, I submit to you, by some of the 18 tapes made by the CI's, the confidential informants in 19 this case. 20 Mr. Rubin when he deviated from the pitch was 21 trying to learn a lot about the people who were being 22 considered by Who's Who. He wanted to know why they were 23 successful. He wanted to know what made them tick. And 24 not only those, but he was wanting to see if these people 25 were qualified, but also he was learning from these
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
136 Opening - Dunn
1 people. He was speaking to a lot of interesting people, 2 CEOs, leaders of industry, and he was dealing with them 3 everyday. 4 He was very successful in his business at Who's 5 Who as a salesman. He was one of the most successful 6 salesmen there.
The reason he was successful is because 7 he believed in what he was doing. He was told certain 8 things about the company, and told certain things to be 9 looking for, and he believed it. 10 There is one tape, ladies and gentlemen, where 11 there is a new employee coming into the company. He is 12 not the confidential. But he happens to be talking to the 13 confidential informant. And he is being sarcastic, this 14 new employee. He is basically attacking Who's Who and 15 what it is all about. And he says basically this whole 16 thing is a scam. And one of the things that is 17 interesting, he makes reference to Steve Rubin. And what 18 does he say? He says, you know, I think this guy really 19 believes this stuff. 20 You know, he did believe the stuff. He didn't 21 mislead anybody. If other people misled them, it is not 22 his problem. It is not Steve Rubin's problem. He 23 believed. He turned people down. And he asked them 24 questions, because we believed it. 25 This person that was attacking the company, a new
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
137 Opening - Dunn
1 employee, that was being sarcastic, points out Steve Rubin 2 and basically says, do you believe this guy? I think he 3 really believes this stuff. 4 And how does he observe that? He is there a few 5 weeks, observes Steve Rubin at work, and he knows that 6 Steve Rubin believes what he is doing. 7 Steve Rubin can't help it if this other guy 8 doesn't believe something. It is not his problem. But 9 Steve Rubin believes what he is doing. He is working hard 10 at it. He is good at it. And now the government wants to 11 punish him for it. Because they conclude based on some 12 investigation with Reed Elsevier and Agent Biegelman, and 13 this company is misleading people. Maybe they can prove 14 it or maybe they can't. But I submit to you that the man 15 in the corner isn't guilty. He didn't do anything wrong, 16 mislead anybody. 17 He is here now, and he is saying not guilty. 18 That's what a jury is all about. That's why our 19 forefathers had juries. People got ripped out of their 20 houses during the time of the Revolution, that's why we 21 don't have it any more. 22 Put the government to their burden of proof. 23 That's what he will do in this case. We will put them to 24 their burden, because my client believed at what he was 25 doing and he worked hard at it, and he believed in it.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
138 Opening - Dunn
1 Is that guilty of something? Is that guilty of 2 something? 3 There is another interesting
tape they send a CI 4 in there. You will listen to him. This is a guy who is
5 totally unenthusiastic. He is calling a potential person 6 and asking questions. 7 You can clearly see in the case that the guy is 8 not enthusiastic at all. He just happens to be sitting 9 next to Steve Rubin. You get the impression he is really 10 aggravated, he didn't get this sale. And he turned to 11 Steve Rubin, I should have pushed him. I should have been 12 harder with him and really pushed him. 13 Does Steve say, yes, because sales are the all 14 important thing? 15 No. Steve says, no, don't do that. That's not 16 right. Don't push him. 17 Does that sound like the words of a deceitful 18 person? You will hear those words, you listen. You 19 decide. 20 If Mr. Rubin lied about anything, he may have 21 been asked questions about a potential customer, about how
22 long have you been with the company? Steve Rubin had been 23 there about a year, and he may have said, I have been here 24 three, four, six years, whatever it really it. And I 25 don't think it establishes anything. It sure as hell --
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
139 Opening - Dunn
1 excuse me. It sure doesn't prove guilt beyond a 2 reasonable doubt, that's for sure. 3 The credibility of Agent Biegelman, I submit to 4 you is going to be a major issue in this case. He claims 5 that my client made a statement to him. 6 My client spent an awful lot of time with Agent 7 Biegelman on the day of his arrest. He gets arrested 8 outside his house. Agent Biegelman takes him to Lake 9 Success, and they wait there a while and drive all the way 10 to Brooklyn to see a judge. 11 Basically what is going on during these car rides
12 is my client Mr. Rubin and Agent Biegelman are in a 13 dispute about whether Who's Who is a legitimate operation, 14 Agent Biegelman is insisting it is a scam, and my client 15 insists it is not. 16 Agent Biegelman is going to get up and say that 17 he claims my client lied about certain things when he was 18 at Who's Who. My client said no way. My client said when 19 he was at Who's Who he believed in what he was doing. 20 You will hear the tapes. You will hear a tape 21 from a confidential informant, Steve West and Mr. Rubin 22 answered the phone. 23 Listen to Mr. Rubin's voice, and see if you think 24 it is a person who really knows what he is doing -- 25 believes in what he is doing.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
140 Opening - Dunn
1 Remember, it is a salesman, a person not in 2 management decisions. He is basically told certain 3 things, and he followed it in a -- way, he believed what 4 he is doing. 5 I ask you to use your common sense, listen to the 6 witnesses, and you determine if the witnesses who were 7 members of Who's Who got what they want. 8 Ask yourself this question: Did this 9 organization actually deceive 72,000 people who were of a 10 higher -- who were high up in industry? Are the leaders 11 of this country, and of major businesses in the world, 12 people with big jobs that are successful in their everyday 13 lives, were they misled by Who's Who, or did they get what 14 they want? Are these the types of people who could be 15 easily deceived? Does that make any sense to you? 16 You know, ladies and gentlemen, you hear things 17 about presumption of innocence and burden of proof. I 18 just ask that you give it a lot of thought. These are 19 principles that we all have. 20 If we put a blanket over Mr. Rubin, and you 21 didn't see his face, and didn't see his hands, he could be 22 anybody. He could be me, he could be you, he could be 23 your spouse, he could be your child. But he would be 24 protected by the principles of law that make this country 25 great, and they are for all of us. I will ask you to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
141 Opening - Dunn
1 listen to the evidence, follow the law. And when I come 2 back to this case I will ask you to return a verdict of 3 guilty. 4 Thank you very much. 5 THE COURT: Mr. Neville, do you wish to make an 6 opening statement? 7 MR. NEVILLE: Yes, please. 8 THE COURT: You may proceed. 9 MR. NEVILLE: May it please the Court, good 10 afternoon, ladies and gentlemen. 11 I am Jim Neville. I represent Scott Michaelson. 12 Scott, please stand. 13 I know you have seen him and know who he is now. 14 Thank you. 15 Ladies and gentlemen, the first thing I will have 16 you do with me is have you take a little flight of fancy. 17 Picture a wonderful mile after mile beach in the Pacific 18 northwest. There are two people walking along that beach, 19 a husband and a wife. And there had been this tremendous 20 influx of starfish that had come on to the fish, thousands 21 and thousands of starfish. And these two people are 22 walking along, husband and wife, and looking at all the 23 starfish. The wife reaches down and gathers one of them 24 up and tosses it back into the water. 25 The husband says, dear, why in the world would
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
142 Opening - Neville
1 that ever make a difference? Why did you do that?
2 And the wife said, it made a difference to that 3 one starfish, didn't it? 4 This trial might be of a whole group of people. 5 But you have one person here, Scott Michaelson, whose fate 6 is in your hands, and about whom you will be deciding 7 whether the government has proven its case beyond a 8 reasonable doubt. 9 I submit to you, ladies and gentlemen, that the 10 evidence in the case is going to show a lot of things. 11 Scott Michaelson was a good salesperson. Scott 12 Michaelson is a good guy because you will hear him on 13 tapes, Scott Michaelson was a good worker. He followed 14 the pitches, the scripts. You will hear evidence that 15 there really were scripts like in a movie. 16 You think that Tom Cruise makes words up when he 17 talks in the movies? He memorizes lines from a script. 18 This is no difference. And lord help you if you didn't
19 follow that script. You would be out of a job. 20 Scott Michaelson worked at this case for about 21 three years, taking home 200, 250 bucks a week, 15, 12, 15 22 percent or so commission on each sale he made. 23 We are not talking about that Disney guy, Eisner, 24 who gets 15 percent of ten zillion dollars, we are talking 25 about 12, 15 percent of 200 bucks on a sale.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
143 Opening - Neville
1 Maybe there was some highfalutin Who's Who in 2 here, in these books. 3 You think that these people didn't look upon 4 these products as something they can look in, look at in 5 their everyday lives to try to get ahead in business? 6 Networking, schmoozing, deals on credit cards, renting 7 cards, telephone services for cheaper. 8 The government better invite me because I get a 9 lot of those fro
m my bar association. It is commercial. 10 It is making money. It is what has made America great. 11 Do you think that these people thought when they 12 got a call -- I know I never would have thought that -- 13 that based on my accomplishments someone was calling me? 14 I would have known it was a pitch. I would have known 15 that somebody was trying to sell something. And then if I 16 decided I would have bought it, if I thought it would be 17 in my interest. 18 The government would have you believe that these 19 salespeople should be St. Frances of Assisi, proclaiming 20 the truth upon the masses. 21 They have a job. They pick up the phone. Hard 22 work, by the way. They call people who have already shown 23 interest, who have already sent back cards. These aren't 24 cold calls. 25 Hello, Mr. Jones, you showed some interest, you
HARRY RAPAPORT, C
SR, CP, CM OFFICIAL COURT REPORTER
144 Opening - Neville
1 sent back this solicitation or ballot, or whatever it 2 was. 3 No question that Who's Who wants to take on an 4 aura of big stuff, important people, VIPs. And that's 5 exactly what the people knew they were getting. They 6 wanted to be in a book to be able to say that they were in 7 the book. 8 Scott Michaelson put in a long day, five days a 9 week, feeding his three kids, getting a commission on 10 sales. 11 Did he want to make sales? Sure. 12 Go out and indict all the salespeople in the 13 world then. Go out and indict everybody who is an 14 aggressive good salesperson. 15 And if you don't like telemarketers, okay. That 16 doesn't mean you should send Scott Michaelson to jail. 17 But you are going to see something very 18 interesting in this case, ladies and gentlemen. T
he 19 government wants you, as I said, to think of holding the 20 salespeople and Scott Michaelson to the standard of being 21 St. Frances of Asisi, when the government itself, 22 Inspector Biegelman, who is not here yet, he will be 23 here. And you will hear Inspector Biegelman calling 24 someone as if he is interested in membership, he is 25 misrepresenting himself, he is totally lying, he is
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
145 Opening - Neville
1 looking to trap, looking to snare Scott Michaelson. 2 When you listen to these tapes, ladies and 3 gentlemen, listen to them carefully. You will hear 4 Inspector Biegelman's tone. When he doesn't get the trap 5 closed down, he starts to get a little angry. He starts 6 to get a little impatient. He starts to say, I really 7 don't want to say anything here, but I really want to have
8 some answers. You can almost feel his prosecutorial 9 ambition burning up inside of him. 10 Now, I think it is important in life to have 11 postal inspectors, and good ones, and ones that are 12 vigorously doing their jobs. The way I am trying to 13 vigorously do my job, the way you are trying to vigorously 14 do your jobs, and the way Scott Michaelson vigorously did 15 his job. 16 When you cross the line as a government agent, a 17 government inspector, and you are looking to trap 18 somebody, and get them to say something because in your 19 mind you've decided that these people are bad, and it 20 becomes a personal obsession. 21 That's when the good people of the jury come in, 22 to see that Inspector Biegelman was overzealous, and 23 Inspector Biegelman lost sight of what he was doing and 24 let his personal ambitions get in the way. Inspector 25
Biegelman should look in the mirror and say I am the one
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
146 Opening - Neville
1 who is not St. Frances of Asisi, I should turn it down. 2 Don't stand on high and judge people when you yourself are 3 committing the very acts that you are saying Scott 4 Michaelson submitted. 5 Scott Michaelson didn't take an offer of a plea 6 of guilty, because if Scott Michaelson had pleaded guilty 7 to these charges, ladies and gentlemen, he would have 8 committed a crime. He would have committed the crime of 9 perjury. He would have lied to Judge Spatt. 10 How can he say he is guilty when he is not? How 11 can he say he is guilty when in his mind he was just doing 12 a good job? 13 You will hear evidence of sales meetings, tapes 14 of sales meeting. 15 They talk about the script. They talk about the
16 pitch. They talk about the technique. And all this stuff 17 may be interesting to you. Telemarketers may be annoying 18 to you. But that doesn't mean that Scott Michaelson 19 should go to jail for that. 20 Scott Michaelson is here for the next however 21 many weeks we are going to be here saying that he is not 22 guilty. He is missing work just like you are. But unlike 23 the government, for him there are certain principles. If 24 I didn't do something, how can I plead guilty, Jim, he 25 said to me?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
147 Opening - Neville
1 I thought one thing that Ms. Scott said was very 2 interesting in her opening statement. She talked about 3 the people who will come in here and made deals with the 4 government so they wouldn't have to go to jail. I commend 5 her about her candor and honesty. She sa
id nothing about 6 her coming in here to tell the truth. They are looking to 7 keep their behinds out of jail. I can't blame them, I 8 can't blame them, but I don't think Scott Michaelson 9 should be sacrificed for that purpose. 10 The government is painting with a broad brush. 11 Anybody who tread upon that premises somehow was 12 conspiring. A great word, isn't it? Conspiring. 13 Conspiring to what? To feed my three kids? 14 Conspiring to get to work on time? Conspiring to be a 15 good salesman? 16 Yeah, yeah, yeah. I am trying to sell you 17 something now, yes, I am. But so were they. But so were 18 they. 19 Ladies and gentlemen in closing, again I am 20 asking you to take a flight of fancy. I guess my mind is 21 at the beach today. 22 I am at the beach, Scott Michaelson is at the 23 beach. All of you are also there at the beach. And Scott
24 starts to go out and swim. He takes a swim and he goes 25 far out. And all of a sudden some sharks start circling
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
148 Opening - Neville
1 around him. And have been appointed. I have been 2 assigned to represent him. I dove into the water because 3 it is my job to try to save him from those sharks. And I 4 swim out there and I swim. I am getting tired, but oh, 5 lord, I get tired, I get tired. 6 Then I look back and I ask you all, please, throw 7 us a life preserver. Throw us a lifesaver, we need your 8 help from the sharks that are circling us. 9 That's what I am asking you to do, ladies and 10 gentlemen. Please, the sharks are not only the people 11 that are coming in here to save their behinds by saying 12 whatever the government needs to make their case, but 13 Inspector Biegelman. And when it comes, when he comes, I 14 will say it to him also. He is one of the sharks, too. 15 He is looking for his kill. He is on the hunt. 16 Throw us that life preserver. Save us, please. 17 Thank you. 18 THE COURT: Mr. Geduldig, do you wish to make an 19 opening statement? 20 MR. GEDULDIG: Yes, Judge. Thank you. 21 THE COURT: You may proceed. 22 MR. GEDULDIG: I am the eighth of nine lawyers -- 23 actually I am the ninth of ten lawyers you will hear 24 talk. No easy job for anybody. 25 There is not much I can say about this case that
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
149 Opening - Geduldig
1 you have not already heard from some of my co-counsel, and 2 also Ms. Scott. 3 I represent Annette Haley, the lady with the dark 4 hair. 5 Some of my co-counsel have gotten up and told you 6 what some of the principles of law are in this case. The 7 judge has given you some early instructions on what the 8 law is. You heard that the government has the burden of 9 proof, that he don't have to bring in witnesses, that we 10 don't have to establish anything. 11 The one overriding principle I want to remind you 12 of, as you sit here now, I stand here, my client remains 13 innocent. She remains that way unless the government can 14 prove her guilt beyond a reasonable doubt. 15 This is going to be a relatively long trial. If 16 you look behind the government table, you can see movable 17 book shelves, those black books there. That's the stuff 18 that they are going to work to bring into this case. It 19 is not just the top shelf. There is stuff below that 20 shelf. 21 You know there will be lots of stuff, testimony, 22 documents. We had a television in here before, and you
23 will look at television. It is going to be a production. 24 This case will not be over quickly. By any 25 standard, it is going to run a little more than most
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
150 Opening - Geduldig
1 trials do. It is going to involve a lot of issues. 2 As some of my co-counsel said, most of those 3 issues in my case, and I represent Ms. Haley, most of 4 those issues have nothing to do with her. 5 It can come to pass that I will literally, 6 literally, sit at that table for a week or two or more and 7 not ask a question. Because they will be saying nothing, 8 nothing about my client. 9 At the end, if you total up all the time they 10 spend to try to show how my client was involved in what 11 they claim was a conspiracy, it amounts to a thimbleful of 12 water in a glass. And it will amount to nothing. S7he is 13 guilty of nothing. 14 So, we will be sitting here for a while. 15 One of the things you are going to learn and you 16 have already heard about it, this is a company with a lot 17 of employees. 18 I think there were some comments that there were 19 140 employees working at the various Who's Who, Sterling, 20 and the other Who's Who. There are a lot of people. 21 Those people have different functions. There is 22 a chain of command. Just like you see in the Army or the 23 bee colony, there is the general, or the head bee, the 24 queen bee, the head of the company, and there are people 25 who are below them, and below them, and below them.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
151 Opening - Geduldig
1 I have never seen an army run by privates. The 2 bee colony is not run by fetchers, it is run by the queen 3 bee. 4 My client is the fetcher here, the private in the 5 Army. She did not set policy or give orders. 6 She will be a person, and you will hear that 7 there were meetings held and such. She did not hold 8 meetings and tell salespeople what they should say. She 9 did not sit down with anybody and work up what is referred 10 to as a sales pitch or a script. She didn't have any 11 input into that. She didn't make any suggestions as to 12 that. She was given a sales pitch. She was told to use 13 it as best she could. Don't stray from the pitch. And 14 she did it. She did what she was told. 15 You will hear that there were documents created 16 out of a whole cloth. There are documents and meetings 17 held regarding the new Russian members of the 18 organization. And you will hear testimony of the meetings 19 that they report in these documents never took place. 2
0 My client didn't prepare those documents. My 21 client didn't suggest those documents. But she becomes in 22 effect -- she is on the other end of it. She is told that 23 there are Russian members, that the Lithuanian prime 24 minister is a member of the organization, that there are 25 members in China, and she repeats it. It is all through
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
152 Opening - Geduldig
1 the organization this is what is going on, we have members 2 all over the world. 3 She doesn't sit in on meetings saying we have 4 seven members, no members, or five thousand members. She 5 is a salesperson who gets a sales pitch. She repeats the 6 sales pitch. 7 And if she is saying things that they are telling 8 to her which is not truthful, she is not knowingly doing 9 it. She can do it enthusiastically, and believe what she
10 is being told by her company is truthful. If the company 11 wants to say it is not, so be it. But they can't claim 12 that my client who is this private to -- who gets a sales 13 pitch to repeat on the telephone should know if the people 14 above her are being less than honest with her, and they 15 are in fact that way. And I don't know that they are that 16 way. 17 There was talk about in the openings, about a 18 seminar in Vietnam. There was testimony to a seminar in 19 Vietnam. That's what the government said in their 20 opening. But Mr. Gordon testified there was a seminar or 21 some meeting held in Vietnam. 22 He is the president of the company. If he says a 23 seminar is held in Vietnam. If he is prepared to go to 24 court and say it under oath, how does that make my client 25 complicit with what he is saying, I didn't go to Vietnam
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
153 Opening - Geduldig
1 for a meeting, nor did my client. Now they want to put -- 2 put it to her, what someone is saying, the head of the 3 company. 4 We have a postal investigation here. 5 Indict these people for doing the job? Indict 6 the privates for what everybody on top of her is doing. 7 My client was doing an honest job. It was 8 commented that she was a telemarketer. A lot of people 9 are not happy with telemarketers. It is not a job 10 enjoying a great amount of affection by people. But as 11 Mr. Neville said, it is not a reason to convict my 12 client. Because she does a job that maybe most of you 13 would not want to do. It is an honest job. And for that 14 she does not deserve to be convicted of a crime. 15 What the government has done here in a very real 16 sense is to claim what the defense has done or what the 17 corporation has done. They are trying to create an image 18 for you. 19 Ms. Scott's words were that this was an immense, 20 multimillion dollar conspiracy. And you have a conspiracy 21 of everyone sitting around a table working out how they 22 will milk money out of everybody. It wasn't that way at 23 all. 24 What do they do? They bring in everybody. If 25 you walked through the door to do a job that day you got
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
154 Opening - Geduldig
1 indicted. That's what happened to Annette Haley. She 2 reported to work. I think on one of the tapes one of the 3 salesman said, all I have to do is to show up on time and 4 make 60 calls a day. That was his job. That's the way he 5 described his function. I show up on time. I make 60 6 calls a day. If I do that I can go home and take my 7 paycheck with me. 8 The government wants you to believe that because 9 he did that, he is a criminal. 10 I can say these things because I represent a 11 worker here. It would be in my mind a miscarriage of 12 justice to convict people because of where they work, and 13 not because of what is in their mind or contentions, or 14 what they know. 15 My client did very little. She showed up on 16 time, made her 60 calls, she took her paycheck and she 17 went home. 18 I think I started out by saying that the 19 principle of law that I am most concerned that you 20 understand is that as we sit here now you know that my 21 client is innocent. She remains that way unless the 22 government can prove that she is guilty beyond a 23 reasonable doubt. If they fail to do that you as jurors 24 are compelled to vote for an acquittal, at least for my 2
5 client.
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155 Opening - Geduldig
1 I say to you after this case is over, after we 2 sit here for any number of weeks, and they bring in 3 hundreds, hundreds of documents and play the videotape and 4 listen to the tape recorded conversations on the audio 5 cassettes, and when you sit down and parse this case, and 6 try to figure out, and try to figure out what Annette 7 Haley did to make her guilty of being part of this 8 multifaceted, wide ranging events, multimillion dollars 9 conspiracy, you will come to conclusion, come to the 10 conclusion that she did nothing, she is not guilty, and 11 deserves to go home. 12 Thank you. 13 THE COURT: Mr. Wallenstein, do you wish to make 14 an opening statement? 15 MR. WALLENSTEIN: I do, your Honor. 16 THE COURT: You may proceed. 17
MR. WALLENSTEIN: Thank you. 18 I am last. I promise. 19 There are two cases here. For the last hour we 20 heard all about telemarketing. I am not going to talk 21 about any of that because my client, Martin Reffsin, is an 22 accountant. And he had nothing whatsoever to do with the 23 telemarketing aspect of this case, with the mail fraud 24 aspect of this case. 25 He is charged with conspiring with Bruce Gordon
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
156 Opening - Wallenstein
1 to defraud the Internal Revenue Service. He is charged 2 with conspiring to file false tax returns, and to help 3 Bruce Gordon evade his taxes. 4 Now, Ms. Scott spent a considerable amount of 5 time in her opening statement this morning talking about 6 Bruce Gordon's lifestyle, his cars, his condos, his 7 vacations. And all of that may be true. I don't
know. 8 It is up to the government to prove all of those items. 9 But that was not Martin Reffsin's lifestyle. Martin 10 Reffsin is an accountant. He has his own company, has 11 been in practice for 30 years, he has a wife and kids, and 12 he has clients, many clients. 13 Now, one of his clients happens to be Bruce 14 Gordon, and the companies that Bruce Gordon controls. 15 Now the conspiracy counts in this indictment that 16 talk about the tax conspiracies, talk about how Gordon and 17 Reffsin allegedly caused companies controlled by 18 Reffsin -- by Gordon, excuse me, to do certain things. 19 Martin Reffsin wasn't a shareholder, he wasn't a 20 director, he wasn't an officer, he wasn't even an employee 21 of either of these corporations, or any other entity 22 controlled by Bruce Gordon. He is an independent 23 contractor with his own practice, and Bruce Gordon and his 24 companies are but one of the many clients that he has. 25 So, he does what every accountant does when you
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157 Opening - Wallenstein
1 represent a business, be it big or be it small. 2 The accountant goes in and the accountant 3 prepares the books, and the accountant does the tax return 4 based on what the client tells him. 5 The client says, Marty, I made $100,000 last 6 year. 7 Can we deduct these things? 8 Whether we use H & R Block, or we have tax 9 computers or an accountant on retainer or whether we use 10 Peat Marwick or Arthur Anderson. We try to minimize our 11 income to the government. It is the American way. That's 12 what Martin Reffsin gets paid for. And that's what 13 thousands of accountants in this country get paid to do. 14 Now, what they do is they help clients legally 15 avoid their taxes. You can deduct that. You spent money 16 going to the doctor. You took a cab to the doctor's 17 office. You know you can deduct that ten bucks? 18 No, I didn't know that. 19 Put it down, because you can. 20 The IRS is going to say, yes, that's right. 21 And sometimes, sometimes minds differ. Sometimes 22 the accountant says, you know, this item is deductible, 23 and this is why. It is a legitimate expense, a legitimate 24 business expense, and we can deduct it from our taxes, and 25 this is why we can do it. And he goes through reasons for
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158 Opening - Wallenstein
1 it, and it is deducted. 2 You know what, six months, a year, two years 3 later, you get a letter. And the return address is 4 Internal Revenue Service. When you get that letter 5
everybody does the same thing, right? What is in here 6 (indicating)? 7 You open it up and it says you are being audited 8 because we don't agree with your tax return. It happens 9 everyday. It doesn't make you a criminal. It means 10 somebody had a difference of opinion. It means a tax 11 examiner or revenue agent someplace says I looked at this, 12 and I don't think it is right. I don't think you can 13 deduct it. I want to see the backup for it, whatever it 14 may be. Prove it, show me it is a legitimate expense. 15 You come in with a cigar box full of stuff and 16 say this is my receipts, sometimes you win and the IRS 17 says, you are right, no change. 18 Sometimes you even get money back. That's a real 19 win. Most of the time you have to pay a couple of bucks. 20 It is not that big of a deal. 21 This case is about a little more than that. But 22 it all
comes down to the same principle. Minds differ. 23 Why would Martin Reffsin be involved in a 24 conspiracy with Bruce Gordon to defraud the IRS? 25 The government doesn't have to prove motive.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
159 Opening - Wallenstein
1 That is not part of their case. But if they can't prove 2 motive it is something for you to consider when they 3 decide whether they can prove his guilt beyond a 4 reasonable doubt? That's what they have to do out of all 5 the elements they charge in this tax case. 6 Mr. Reffsin's job consists of going to the Who's 7 Who on a monthly basis, or sending one of his employees to 8 go in and balance the checkbook and do a bank 9 reconciliation. They do that every month, and then once a 10 year they do the corporate taxes, and that's not part of 11 the indictment. The IRS is satisfied
with that, they got 12 millions from Who's Who over the years. They were happy
13 with those tax returns. 14 They were unhappy with Bruce Gordon because he 15 owed the IRS three and a half million dollars, going back 16 to the 80's, and it had to do with tax shelters, not this 17 case, and Mr. Trabulus touched on it this morning. 18 He had a problem because he owed money to the IRS 19 and to the Department of Justice, and Mr. Reffsin had 20 nothing to do with any of that. 21 So, if you find that these returns were prepared 22 in a manner, and these expenses were taken in a manner so 23 as to defeat the IRS, so as to impede the IRS in the 24 collection of their legitimate tax returns, ask yourselves 25 whether Martin Reffsin for a couple of thousand a year in
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160 Opening - Wallenstein
1 f
ees from Bruce Gordon is going to put himself on the line 2 for that? 3 Bruce Gordon may have had a motive, but Martin 4 Reffsin didn't. And when you consider the tax, although 5 they appear together in the counts, they are not 6 together. As some of my colleagues said this morning, 7 each defendant is to be considered separately on each 8 count they are charged with. Martin Reffsin is not Bruce 9 Gordon, although they are charged together. They are 10 charged with obstructing justice. 11 The government says that Martin Reffsin ordered 12 someone to create these false business logs. 13 Well, Reffsin wasn't an officer of the 14 corporation or an employee of the corporation. He didn't 15 have authority to order anybody to do anything. He wasn't 16 a signatory on any of the checking accounts. He couldn't 17 have written off the personal expenses. They say he wrote
18 off hundreds of thousands of dollars for Bruce Gordon 19 benefit. Reffsin didn't sign any of those checks, ladies 20 and gentlemen. He had no power to sign any of those 21 checks. 22 The only thing Martin Reffsin can do with a 23 check, with a loan, with documents, with figures, is to 24 say, Bruce, this is income. You have to put it down as 25 income.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
161 Opening - Wallenstein
1 Bruce Gordon says, no. That's a loan. I took 2 that money out of the corporation, and I am going to pay 3 it back. It goes into the loans. Every dollar was 4 accounted for. In the bankruptcy proceedings all the 5 books were open. They had nothing to hide. 6 Were there dollars treated as loans that should 7 have been treated as income by Gordon? Well, the IRS says 8 so. Martin Reffsin may have a different o
pinion. And if 9 he relied on what his client told him in preparing the 10 returns, and he did his job honestly and correctly, he is 11 not guilty of a crime, no matter who else may be guilty of 12 anything. 13 It has been a long day. You have listened to a 14 lot of us. You will hear a lot more over these next many 15 weeks. I will come back at the end, as will everybody 16 else, and I mean the end because I am sitting in the last 17 seat there, and I am going to ask you to listen carefully 18 to all the evidence you will hear in this case, listen to 19 the witnesses. And, you know, when the government calls a 20 witness and they get finished with their direct 21 examination, you may be saying to yourself, I hear that. 22 I got that. 23 Don't do that. Wait. Because there are nine 24 people that have to cross-examine that witness before that 25 witness leaves
. And there are things that are going to
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162 Opening - Wallenstein
1 come out on cross-examination that will not come out on 2 direct examination. 3 So, on behalf of all of us, please keep an open 4 mind until after you heard the entire testimony of the 5 witness. Keep an open mind until after you have heard all 6 the evidence in the case. 7 When you have done that, I am confident you will 8 return the only possible verdict you can with respect to 9 Martin Reffsin, and that's not guilty. 10 Thank you very much. 11 THE COURT: Members of the jury, we have 12 concluded the opening statements. We will take a recess 13 and then start the presentation of the evidence. 14 We will take a ten-minute recess. 15 Please do not discuss the case. You have heard 16 no evidence as of now.
17 Please recess the jury. 18 (Whereupon, at this time the jury left the 19 courtroom.) 20 21 (Whereupon, a recess is taken.) 22 23 THE CLERK: Jury entering. 24 (Whereupon, the jury at this time entered the 25 courtroom.)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
163 1 THE COURT: Please be seated, members of the 2 jury. 3 You may commence the government's case. 4 MR. WHITE: Your Honor, the government calls 5 Robbie Peters. 6 THE CLERK: Raise your right hand. 7 8 R O B B I E P E T E R S , 9 called as a witness, having been first 10 duly sworn, was examined and testified 11 as follows: 12 13 THE CLERK: Be seated. 14 Please state your name and spell your last name 15 slowly for the record. 16 THE WITNESS: Robbie Peters, P E T E R S. First
17 name, R O B B I E. 18 THE COURT: Do you want to pull the microphone 19 closer to you, Ms. Peters. 20 You may proceed. 21 MR. WHITE: Thank you, your Honor. 22 23 DIRECT EXAMINATION 24 BY MR. WHITE: 25 Q Ms. Peters, can you tell us where you are employed?
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164 Peters-direct/White
1 A Internal Revenue Service. 2 Q What is your position there? 3 A Revenue officer. 4 Q How long have you been with the Internal Revenue 5 Service? 6 A 26 years. 7 Q Now, can you explain for us what a revenue officer 8 does. 9 A A revenue officer collects delinquent taxes and 10 delinquent returns. 11 Q Now, did you ever have any responsibility at the IRS 12 with respect to an individual named Bruce Gordon? 13 A Yes, I have. 14 Q And can you tell us
what responsibilities you had 15 with respect to Mr. Gordon? 16 A To collect delinquent taxes. 17 MR. GEDULDIG: Your Honor, perhaps she can pull 18 the microphone closer. 19 THE COURT: It may not be on, would you tap the 20 microphone, please. Would you flip it, please. 21 There it is. 22 Q Can you tell us when you were first assigned any 23 responsibilities with respect to Mr. Gordon? 24 A It was approximately in 1991. 25 Q And what was your assignment at that time?
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165 Peters-direct/White
1 A My assignment was to collect delinquent taxes owed. 2 Q And at the time you were assigned, approximately how 3 much money did Mr. Gordon owe the IRS in delinquent taxes? 4 A Approximately three and a half million. 5 Q Now, did that include any penalties and interest? 6 A Yes, it
did. 7 Q Now, are you familiar with a term called an IRS 8 transcript? 9 A Yes. 10 Q Can you tell us what an IRS transcript is? 11 A An IRS transcript lists all the transaction codes 12 involving when the return was filed, the amount of tax, 13 the amount of assessed interest and assessed penalties, 14 and whatever payments were made. 15 Q And can you describe briefly for us how such a 16 transcript is compiled. 17 A It is compiled through the service center, when the 18 return is -- when the taxpayer sends in the return and the 19 return is processed, all different transactions codes is 20 inputted through the computer. 21 Q Do the codes and -- reflect transactions and actions 22 by the taxpayer? 23 A Actions by the Internal Revenue Service. 24 Q Let me show you Government's Exhibit 400. 25 MR. WHITE: May I approach the witness?
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166 Peters-direct/White
1 THE COURT: Anybody may approach the witness at 2 any time without asking unless I say so. 3 MR. WHITE: Thank you. 4 (Counsel approaches the witness.) 5 Q Would you take a look, Ms. Peters at 6 Government's Exhibit 400. Can you tell us what that is? 7 A This is certificate of official record. This is 8 transcript of the taxpayer's outstanding liabilities, 9 Mr. Gordon's liabilities. 10 MR. WHITE: Your Honor, the government would 11 offer Government's Exhibit 400. 12 THE COURT: Has everybody got copies of that? 13 MR. WHITE: Yes, your Honor. It has been 14 provided. 15 THE COURT: Any objection? 16 MR. SCHOER: It is only Mr. Gordon. 17 MR. JENKS: It is only Mr. Gordon. 18 MR. TRABULUS: No, your Honor. 19 THE COURT: Government's Exhibit 400
in 20 evidence. 21 (Government's Exhibit 400 received in evidence.) 22 Q Ms. Peters, have you reviewed 23 Government's Exhibit 400 prior to today? 24 A Yes, I have. 25 THE COURT: Can you tell me where in the boxes
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167 Peters-direct/White
1 you have given me, where does it say where these exhibits 2 are? 3 MR. WHITE: Let me show you, your Honor. 4 (Whereupon, at this time there was a pause in the 5 proceedings.) 6 THE COURT: You may proceed. 7 MR. WHITE: Thank you. 8 Q Ms. Peters, I will show you 9 Government's Exhibit 823. 10 Can you tell us what that is? 11 (Handed to the witness.) 12 A This is Mr. Bruce Gordon's outstanding tax liability 13 as of September of 1991. It is income tax owed -- 14 Q Without reading it. 15 Now, have you
compared the figures on that 16 Exhibit 823 with the transcript, Exhibit 400? 17 A Yes, I have. 18 Q Are the numbers and figures set forth on Exhibit 823 19 accurate with respect to Mr. Gordon's liability to the IRS 20 as of September '91? 21 A Yes, they are. 22 MR. WHITE: Your Honor, the government would 23 offer Government's Exhibit 823. 24 THE COURT: Any objection? 25 MR. TRABULUS: No objection, your Honor.
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168 Peters-direct/White
1 THE COURT: Government's Exhibit 823 in 2 evidence. 3 (Government's Exhibit 823 received in evidence.) 4 Q Now, Ms. Peters, would you take a look at 5 Government's Exhibit 823-A, is that simply an enlargement 6 of 823? 7 A Yes. 8 MR. WHITE: Your Honor, we offer 823-A. 9 THE COURT: Any objection? 10 MR. TRABULUS:
No. 11 THE COURT: Government's Exhibit 823-A in 12 evidence. 13 (Government's Exhibit 823-A received in 14 evidence.) 15 MR. SCHOER: Your Honor, for the record, these 16 exhibits introduced at this point, they are all offered 17 only against Mr. Gordon; is that right? 18 MR. WHITE: Correct. 19 THE COURT: Yes. 20 MR. WHITE: May I display it to the jury? 21 THE COURT: Yes, if you want to show it to the 22 jury, put it up. 23 (Whereupon, the exhibit/exhibits were published 24 to the jury.) 25 Q Now, Ms. Peters, if I can ask you to step down next
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169 Peters-direct/White
1 to that chart, please. 2 If you could read for us the top line of the 3 chart. 4 A Bruce Gordon's outstanding -- 5 THE COURT: You have to talk, loud, very loud. 6 Preten
d you are speaking to an irate taxpayer. 7 THE WITNESS: Bruce Gordon's outstanding tax 8 liability. 9 Q And that's as of September, 1991? 10 A Yes. 11 Q And can you take us through each of the entries, the 12 one beginning with income tax, read that, please. 13 A Income tax owed, 1981 through 1986. $809,812.35. 14 Penalties on income tax owed, 1981 through 1986, 15 $666,216.85. Interest on income tax owed, 1981 through 16 1986, $1,808,240.13. 17 IRC, Section 6700 penalties, 1982 through 1987, 18 254,781. 19 Total owed by Bruce Gordon to the Internal 20 Revenue Service, income tax penalties and interest as of 21 September 1991, $3,539,050.33. 22 If you can sit back down, please, Ms. Peterson. 23 Now, the chart contained a reference to IRS 24 Section 6700 penalties. Can you tell us what that is? 25 A That's a promoters penalty stemming from ab
usive tax
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170 Peters-direct/White
1 shelter. 2 THE COURT: Abusive, A B U S I V E? 3 THE WITNESS: Yes. 4 THE COURT: Tax shelter? 5 A Yes. 6 Q Now, Ms. Peters, after you were assigned to collect 7 Mr. Gordon's delinquent taxes, what did you do? 8 A I researched for assets. And I had several telephone 9 conversations with Mr. Gordon. And I sent a form 433-A 10 for him to fill out listing his assets and his 11 liabilities, his income. 12 THE COURT: That's Form 433-A? 13 THE WITNESS: Yes, collection information 14 statement. 15 Q Now, Ms. Peters, with respect to your conversations 16 with Mr. Gordon, did Mr. Gordon say anything regarding his 17 employment status at that time? 18 A At that time he was working on commission. 19 THE COURT: When you say at that
time, what time 20 was that? 21 THE WITNESS: That was in 1991. 22 THE COURT: That's when you had the telephone 23 conversation -- you have to wait until I am through. 24 THE WITNESS: Okay. 25 THE COURT: You had telephone conversations with
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171 Peters-direct/White
1 Mr. Gordon in 1991? 2 THE WITNESS: Correct. 3 THE COURT: Okay. 4 What did he say about it? 5 What was the question, Mr. White? 6 MR. WHITE: Your question was fine, your Honor. 7 Q What did Mr. Gordon say with regard to his employment 8 status at that conversation? 9 A At that time he was working as a salesperson. And I 10 demanded full pay. He was unable to full pay. 11 Q Fully pay his liability to the IRS? 12 A Uh-huh, correct. 13 Q Now, did Mr. Gordon say anything regarding whether or
14 not he had an ownership interest in the business he 15 worked? 16 A No. 17 MR. TRABULUS: Objection to form, your Honor. 18 THE COURT: Sustained as to form. Strike out the 19 answer. 20 Don't lead the witness, please. 21 Q Did Mr. Gordon say anything else with regard to his 22 employment status? 23 A The only thing he said in reference to his employment 24 status was that he was working on commissions. 25 Q Now, did Mr. Gordon tell you anything else
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172 Peters-direct/White
1 regarding -- I am sorry, let me rephrase the question. 2 Did you ask Mr. Gordon anything else regarding 3 his financial situation? 4 A Yes. 5 During my investigation Mr. Gordon, once he 6 didn't have anywhere to stay, he was sleeping in his car. 7 I asked Mr. Gordon about it, and he
said, yes, 8 that was true. 9 Q Now, did you say anything to Mr. Gordon regarding the 10 payment of his tax liability? 11 A Yes, I did. 12 Based on my investigation, and the information he 13 presented he was unable to pay around $100 per month. 14 THE COURT: Unable to pay $100 a month? 15 THE WITNESS: I mean he was able to pay around 16 $100 per month. 17 Q Now, you mentioned before a form 433-A. Can you tell 18 us what that is? 19 A Form 433-A lists the taxpayer's employer, name, 20 Social Security number, banks, liabilities, assets, income 21 and expenses. 22 Q You say you gave a copy of such a form to Mr. Gordon? 23 A Yes, I did. 24 Q Did you receive a completed form? 25 A Yes, I did.
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173 Peters-direct/White
1 Q Let me show you Government's Exhibi
t 404. 2 THE COURT: Do they call that form something 3 else, Form 433-A? 4 THE WITNESS: Collection information statement 5 for individuals. 6 THE COURT: All right. 7 Q Now, do you recognize that form, Ms. Peters? 8 A Yes. 9 Q And what is it? 10 A It is a form 433-A, collection information statement 11 for individuals. 12 Q And do you recognize that particular 433-A? 13 A Yes. 14 Q And what is that? 15 A This is in reference to his information regarding his 16 assets and liabilities. 17 Q Whose assets and liabilities? 18 A Mr. Gordon, Bruce Gordon. 19 THE COURT: Is there a date on there? 20 THE WITNESS: Yes, there is. 21 He signed and dated this September 16th of '91. 22 MR. WHITE: Your Honor, the government offers 23 Exhibit 404? 24 THE COURT: Any objection? 25 MR. TRABULUS: No, your Honor.
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174 Peters-direct/White
1 THE COURT: Government's Exhibit 404 in 2 evidence. 3 (Government's Exhibit 404 received in evidence.) 4 Q Ms. Peters, if you look at 404-A and B, and tell me 5 if it is simply an enlargement of 404? 6 A Yes, it is. 7 MR. WHITE: Your Honor, the government offers 8 404-A and B. 9 THE COURT: Any objection? 10 MR. TRABULUS: I would like to see them, your 11 Honor. 12 THE COURT: Surely. 13 (Whereupon, at this time there was a pause in the 14 proceedings.) 15 MR. TRABULUS: No objection. 16 THE COURT: Government's Exhibits 404-A for Abel, 17 and 404-B for Baker, in evidence. 18 (Government's Exhibit 404-A received in 19 evidence.) 20 (Government's Exhibit 404-B received in 21 evidence.) 22 Q Now, Ms. Peters, if y
ou can step down, that's the 23 first two pages of the form; is that correct? 24 A Correct. 25 Q And if you could step over to the left of it.
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175 Peters-direct/White
1 Now, if you can tell us, what does it say in box 2 number one? 3 A Bruce Gordon 10 Bluff Road, Glen Cove, New York, zip 4 code 11768. 5 Q What does it ask for in box number five? 6 A Taxpayer's employer and business, name and address. 7 Q Can you tell us what is listed there? 8 A Who's Who Worldwide 99 Seaview Boulevard, for the 9 Washington, New York, zip code 11050. 10 Q And if you can look across the box F and tell us what 11 it says -- I am sorry, to box 9, and tell us what it says 12 there. 13 A Okay. 14 Check appropriate box. Wage earner. 15 Q What were the other boxes? 16 A You w
ant me to read the balance? 17 Q Yes, what are the other boxes? 18 A 5A, how long employed. 19 Q Ms. Peters, if you can look at box number 9 and tell 20 me what are the three options? 21 A Box number 9, check appropriate box. Wage earner was 22 checked. The next box, sole proprietor, and the next box, 23 partner. 24 Q And if you can look above that to box seven, what is 25 listed there?
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176 Peters-direct/White
1 A Occupation, sales manager. 2 Q Now, if you can look at the top of page 2, what is 3 question number 22 asking for? 4 A Bank charge cards, credit union -- credit -- credit 5 union, Savings and Loans, line of credit. And under that, 6 type of account of card. N/A. 7 Q Now, is there an American Express Gold card listed 8 there? 9 A No, it is not.
10 Q If you can take a look at the top of page 3 where it 11 says asset and liability analysis. 12 A Yes. 13 Q Look at line 29, what does it ask for? 14 A Stocks, bonds, investments,. 15 Q Are any shares of Who's Who Worldwide Registry listed 16 there? 17 A No. 18 Q Can you tell us what is listed there? 19 A Zero. 20 Q Can you tell us if there are any assets listed on the 21 form by Mr. Gordon? 22 A No. 23 Q If you can look at line 33, what is the heading on 24 that box? 25 A Other assets.
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177 Peters-direct/White
1 Q What is listed there? 2 A Blank, nothing. 3 Q Now, under line 35, are there other liabilities 4 listed there? 5 A Yes. 6 Q Are any loans to Mr. Gordon from Who's Who Worldwide 7 Registry listed there?
8 A No. 9 Q If you look to the top of the next page, page 4, 10 where it says monthly income and expense analysis. 11 A Yes. 12 Q Does Mr. Gordon list his monthly income? 13 A He lists his wages. 14 Q What does it say there? 15 A 3,500 per month. 16 Q And what does it say above that? 17 A It varies. That's his gross. 18 Q Does it indicate any other income to Mr. Gordon? 19 A Yes. His son contributes $1,500 to rent and 20 etcetera. 21 Q What does Mr. Gordon list as his total monthly 22 income? 23 A 5,000. 24 Q Now, does that indicate anywhere any payment by Who's 25 Who Worldwide of Mr. Gordon's personal bills?
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178 Peters-direct/White
1 A No. 2 Q Now, does Mr. Gordon list there his monthly expenses? 3 A Yes. 4 Q Could you tell us what
he lists? 5 A For rent, 2,000. And that's line 49. Line 50 6 grocery for three people, 600. Utilities, $340, 300 for 7 electric, and phone $40. Transportation, which is gas, he 8 has listed, is $70. 9 Insurance for the home he has $150. 10 For medical expenses, $50. 11 For court-ordered payments, not paying. 12 Other expenses, 175. 13 Total, $3,385. 14 Net difference, 1,615. 15 Q And what does it say after net difference there? 16 A Under penalties of perjury I declare that to the best 17 of my knowledge and belief this statement of assets, 18 liabilities and other information is true, correct and 19 complete. 20 Q What is the date that it is signed? 21 A September 16th, of '91. 22 Q Would you read what it says in the box that says 23 additional information or comments at the bottom. 24 A After taxes there is a substantial deficit.
25 Q You can be seated again.
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179 Peters-direct/White
1 Did you do anything based on the information 2 provided in this form 433-A? 3 A Yes. 4 I implement an installment agreement. 5 Q Can you tell us what an installment agreement is? 6 A An installment agreement is where the taxpayer pays a 7 certain amount a month based on his income and expenses. 8 Q And can you tell us what the amount was required to 9 be paid under that agreement? 10 A With Mr. Gordon I arrived at $100 per month based on 11 his working on commission, which fluctuated up and down. 12 Q Did you base that determination on anything else? 13 A Solely on his commissions. That was it. 14 Q Now, did you have any discussions with Mr. Gordon 15 regarding how much he could pay per month? 16 A Yes, I did.
17 Q Tell us what was said. 18 A We analyzed the information statement. And based on 19 the $100 per month, after he paid his taxes he really 20 didn't have anything left. That's why his sons had to 21 contribute so much per month to help him pay his rent. 22 Q Now, did you advise Mr. Gordon of the amount that you 23 were going to require him to pay? 24 A Yes, I did. 25 Q What, if any, reaction did Mr. Gordon have?
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180 Peters-direct/White
1 A None, really. He agreed. 2 Q Now, let me show you Government's Exhibit 402. 3 (Handed to the witness.) 4 Q Do you recognize what that is? 5 A Yes. 6 Q Could you tell us what that is? 7 A This is a form 433-D, installment agreement. 8 Q Between whom -- between what parties is that 9 agreement? 10 A With Mr. Gordon.
11 MR. WHITE: Your Honor, the government would 12 offer Exhibit 402. 13 THE COURT: Any objection? 14 MR. TRABULUS: No objection, your Honor. 15 THE COURT: Government's Exhibit 402 in 16 evidence. 17 (Government's Exhibit 402 received in evidence.) 18 Q Ms. Peters, is that document signed by Mr. Gordon? 19 A Yes, it is. 20 Q What is the date on it? 21 A September 21 -- September 21, '91 -- I am sorry, 22 September 24th, '91. 23 Q Now, could you tell us how long -- let me rephrase 24 the question. 25 When is that agreement signed relative to when
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181 Peters-direct/White
1 you receive that form 433-A? 2 A The form 433-A was signed September 16th of '91. And 3 the agreement was signed -- was dated and signed September 4 24th of '91. 5 Q Now, looking
back on the installment agreement. Near 6 the top, can you tell us what it says in the box where it 7 says amount of tax owed? 8 A Yes. $3,539,050.33, plus accruals. 9 Q Can you tell us what accruals refers to? 10 A Accruals is additional penalties and interest that 11 will accrue in the future. 12 Q Now, in the box, in the two boxes above that, does it 13 indicate what kind of taxes were owed? 14 A Yes. 15 Q And what does it say? 16 A For individual 1040 tax, which is income tax, 1981, 17 1982, 1983, 1984, 1985, 1986. And for penalties, promoter 18 penalties, which is 6700 stemming from the tax shelter, 19 1982, 1983, 1984, 1985, 1986s, 1987, which make up the 20 three million. 21 Q Now, if you could read the line that begins -- that 22 is below that that begins with the undersigned. 23 A The undersigned agrees that the federal tax shown 24
above plus any interest and penalties provided by law will 25 be paid as follows: $100 to be paid on September 25th,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
182 Peters-direct/White
1 '91, and $100 to be paid on the first of each month. 2 Thereafter, until the liability is paid in full. And also 3 agree that the above tax installment will be increased or 4 decreased as follows, which is blank. 5 Q Now, and under those blank boxes there is a series of 6 conditions; is that correct? 7 A Correct. 8 Q And could you read the first one for us. 9 A This agreement is based on your current financial 10 circumstances. And is subject to revision or 11 termination. If subsequent financial information is 12 required by Internal Revenue Service reflect a change in 13 your ability to pay. 14 Q Now, Ms. Peters, does your signature appear on this 15 document? 16 A Yes. 17 Q Can you tell us where? 18 A Under original name, title, and IRS assignment 19 number. 20 Q It says IDRS. 21 A IDRS. 22 THE COURT: IDRS, Ida, Dog, Roger, Sugar 23 assignment number. 24 Q Now, Ms. Peters, after you entered into this 25 agreement, did you take any further action with respect to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
183 Peters-direct/White
1 Mr. Gordon's case? 2 A No, I didn't. 3 Q Have you heard the term offer in compromise? 4 A Yes, I have. 5 Q Can you tell us what an offer in compromise is? 6 A It is where a taxpayer would offer the government a 7 certain amount of money, and then if the offer is 8 accepted, the balance will be forgiven. 9 Q Now, did you have any conversations with Mr. Gordon 10 regarding an offer in compromise? 11 A Yes, I did. 12 Q Tell us what was said. 13 A At the time when I was implementing the agreement, he 14 told me in the future he would be presenting an offer in 15 compromise. 16 MR. WHITE: Your Honor, may I just have one 17 moment? 18 THE COURT: Surely. 19 MR. WHITE: Thank you. 20 (Whereupon, at this time there was a pause in the 21 proceedings.) 22 Q Ms. Peters, let me go back to something you said 23 before. 24 You indicated you had a conversation with 25 Mr. Gordon about where he was living?
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184 Peters-direct/White
1 A Correct. 2 Q Can you tell us the circumstances under which you had 3 that conversation? 4 A Well, during my investigation, based on a prior 5 revenue officer's history, it was indicated in the history 6 that
he was living in his car because he didn't have 7 anywhere to live. 8 And I asked Mr. Gordon, and he said, yes, that 9 was true. 10 Q Now, based on your conversations with Mr. Gordon, did 11 you have any understanding regarding whether or not he had 12 an ownership interest in his business? 13 A No, I didn't. 14 Q No, you didn't have an understanding, or no -- 15 A No, I didn't have an understanding. He didn't inform 16 me that he had an interest in his business. 17 MR. WHITE: Your Honor, I have no further 18 questions. 19 THE COURT: All right. 20 Cross-examination. 21 MR. TRABULUS: Bear with me a moment, your 22 Honor? 23 THE COURT: Yes. 24 (Whereupon, at this time there was a pause in the 25 proceedings.)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
185 Peters-cross/Trabulus
1
2 CROSS-EXAMINATION 3 BY MR. TRABULUS: 4 Q Good afternoon, Ms. Peters. My name is Norman 5 Trabulus, and I am Mr. Gordon's lawyer. 6 Ms. Peters, did you review any documents before 7 coming to court to testify today? 8 A The transcripts, yes. 9 Q When you say the transcripts, which transcripts are 10 you referring to? 11 A The transcripts regarding his outstanding tax 12 liability. 13 Q You mentioned a transcript of an interview that he 14 had with some prior revenue officer. Did you review that? 15 A No, I didn't. 16 Q Does that still exist? 17 A It should. 18 Q Now, when was the last time you say you saw that? 19 A The last time I saw that? 20 Q Yes. 21 A That is when I had the case in 1991. 22 Q How many cases did you have in 1991? 23 A I think I probably had around 60 cases. 24 Q How many cases have you had since then? 25 A I can't tell you exactly how many cases I had.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
186 Peters-cross/Trabulus
1 My inventory now, I have to see around 60 2 taxpayers -- 50 taxpayers. 3 Q Now, most of the cases you have get resolved somehow 4 and you get a new case to replace it; is that correct? 5 A Yes. 6 Q Do you have any idea how many cases you have had now 7 since 1991? 8 A I can't tell you exactly how many cases I had. 9 Q Did you take any notes with your -- about your 10 conversations with Mr. Gordon at the time you had those 11 conversations other than that may be reflected on the 12 exhibits that have been produced? 13 A Yes, everything is reflected in my history. 14 Q Where is your history? 15 A When I close the case out -- when I close the case it 16 goes to the closed file.
17 MR. TRABULUS: Your Honor, I would ask for a copy 18 of the history. 19 THE COURT: Do you have a copy of the history? 20 Is it a written history? 21 THE WITNESS: Yes. 22 THE COURT: When you talk to a taxpayer like 23 Mr. Gordon you take notes? 24 THE WITNESS: Of course we do. We write 25 everything down.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
187 Peters-cross/Trabulus
1 THE COURT: That's what you mean by history? 2 MR. WHITE: Your Honor, can we discuss this at 3 the sidebar? 4 THE COURT: Pardon? 5 MR. WHITE: Can we discuss it at the sidebar? 6 THE COURT: All right, come up. 7 8 (Whereupon, at this time the following took place 9 at the sidebar.) 10 MR. WHITE: Your Honor, I do not believe -- I 11 know it does not exist, or we cannot locate it. 12 THE COURT: Say so. Why do you
need a sidebar? 13 Is this a mystery of some kind? You don't want the jury 14 to hear that? 15 MR. WHITE: No. But I am not sure that this 16 witness knows it one way or another. 17 THE COURT: You know it? 18 MR. WHITE: Yes. 19 THE COURT: I am asking you to give me the 20 history, you can say there is none or I can't find it. 21 Say so. We have to cut these sidebars down to a minimum. 22 MR. WHITE: All right, your Honor, I am sorry. 23 THE COURT: Move along. Talk. The jury can 24 understand that. 25 MR. WHITE: All right.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
188 Peters-cross/Trabulus
1 2 (Whereupon, at this time the following takes 3 place in open court.) 4 THE COURT: This history, did the government have 5 it? Did you look for it? Could you find it? 6 MR. WHITE: Your Honor, it has been the
subject 7 of an extensive search, and the IRS cannot locate it. 8 THE COURT: Very well. You may proceed. 9 Q Ms. Peters, has anybody asked you to look for it? 10 A No. It is -- we have -- 11 Q Yes or no, did anybody ask you to look for it? 12 A No. 13 Q Did anybody ask you for your assistance in looking 14 for it? 15 A No. 16 Q Now, Ms. Peters, where was it -- withdrawn. 17 How many times did you have a face to face 18 meeting with Mr. Gordon? 19 A At least once, when I implemented the agreement. 20 Q Was that at the office in Port Washington at 99 21 Seaview Boulevard? 22 A Yes, it was. 23 Q That was not, of course the place he was living; is 24 that correct? 25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
189 Peters-cross/Trabulus
1 Q So, you would have no way from meeting Mr. Gordon at 2 that point in time of telling whether or not he was living 3 in a car or living in a house; is that correct? 4 A That's correct. 5 Q That's correct, yes? 6 He would have -- 7 THE COURT: I didn't hear an answer. 8 MR. TRABULUS: I thought she said that's 9 correct. 10 Q Is that correct, you would have no way of knowing 11 from where he was, to know if he was living in a home or a 12 car? 13 A Just what he confirmed to me. He lived in a car 14 once. 15 Q He confirmed he lived in a car once? 16 A Yes, one time he was living in a car. He didn't have 17 any place to stay. 18 Q That was in your transcript? 19 A Yes. 20 Q That was something you last saw in 1991, was it? 21 A Yes. 22 Q And you had hundreds of cases since then; is that 23 correct? 24 A Yes. But I didn't forget that. 25 Q I see.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
190 Peters-cross/Trabulus
1 You didn't forget that somebody told you they had 2 been living in a car; is that correct? 3 A Not somebody. Mr. Gordon. 4 Q Now, Ms. Peters, when he told you he had been living 5 in a car, was that the same time that he filled out any of 6 the exhibits that we see there? 7 A At that time when he informed me of that, that is 8 when I visited his office to implement the agreement. He 9 had filled out -- 10 Q Ms. Peters, I asked you if it was the same time he 11 filled out any forms? 12 A No, he didn't -- 13 THE COURT: Ms. Peters, on cross-examination you 14 will be called -- I will tell every witness almost the 15 same thing, and you are just the first. 16 You will be asked questions on cross-examination 17 call for a yes or no answer. If you don't remember or 18 can't say, say so. Otherwise please try to answer yes or 19 no. 20 If you can't answer yes or no, say that. The 21 cross-examiner is allowed to hone in on the specific 22 subjects that he wants to ask you. 23 THE WITNESS: Okay. 24 THE COURT: Mr. White is listening to this. If 25 he thinks any answer is not complete, he will have another
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
191 Peters-cross/Trabulus
1 opportunity to talk to you. That's our procedure. 2 THE WITNESS: Okay. 3 THE COURT: You understand that? 4 THE WITNESS: Yes. 5 THE COURT: Okay. 6 Q Excuse me. 7 Now, Ms. Peters, when you came to implement the 8 agreement, as you put it at Seaview Boulevard, was that on 9 the same day that the installment agreement was actually 10 signed? 11 A Yes. 12 Q
And I think you said it was September 24th, 1991; is 13 that correct? 14 A September 24th, '91. 15 Q And are you saying that that's the first time -- 16 withdrawn. 17 Now, on September 24th, 1991, did he tell you he 18 was living someplace other than a car? 19 A Would you clarify that? 20 Q Yes. 21 On that day and time you saw him, did he tell you 22 he was living in a house? 23 A Yes. 24 Q And was that the first time you say you heard that he 25 said he was living at a house? Is that it?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
192 Peters-cross/Trabulus
1 A No. 2 Q So, you had heard that before; is that correct? 3 A No, that's -- rephrase that question. 4 Q Well, first I am going to ask you, September 24th, 5 1991, the date when the installment agreement was signed, 6 was that the first time that you heard that Mr. Gordon was 7 living in a house and not a car?
8 A Yes. 9 Q Now, when he signed the installment agreement, did 10 you already have that collection information statement 11 which was signed eight days before? 12 A No. 13 Q He gave it to you before? 14 A Yes. 15 Q Had you seen him before that day? 16 A No. 17 Q Had you mailed him anything before that? 18 A Yes. 19 Q You mailed him the collection information statement? 20 A Yes. 21 Q And when did you mail it to him? 22 A I can't give you the exact date I mailed it to him. 23 Q I see. 24 Was it around the same time you say you spoke to 25 him?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
193 Peters-cross/Trabulus
1 A I spoke to him numerous times. 2 Q At the time he did the collection information 3
statement, he indicated an address; is that correct? 4 A Yes. 5 Q 10 Bluff Road in Glen Cove? 6 A Yes. 7 Q And that was a house; is that correct? 8 A I can't tell you if it was a house. I never visited 9 him. 10 Q It wasn't a car, was it? 11 A It's an address. I can't tell you if it was a house 12 or not. 13 Q Did you discuss with him whether or not it was just a 14 spot on the ground where he parked his car? 15 A It could have been an apartment building. 16 Q That would not be a car, would it? 17 A No. 18 Q And there were utility -- utility bills listed on the 19 collection information statement; is that correct? 20 A Yes. 21 Q And you understood that those would be utilities for 22 a residence; is that correct? 23 A Correct. 24 Q There was rent shown? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
194 Peters-cross/Trabulus
1 Q Is that correct? 2 A Correct. 3 Q And he indicated $2,000 rent? 4 A Yes. 5 Q And there was monthly income and expenses shown; is 6 that correct? 7 A Yes. 8 Q And he showed monthly income totalling $5,000, 9 subject to variation; is that right? 10 A Correct. 11 Q Now, did you -- withdrawn. 12 There is no place -- this form -- sorry, 13 withdrawn. 14 This form has a column on the page before that -- 15 MR. TRABULUS: Your Honor, may I stand here as I 16 ask the question so the jury can see what I am referring 17 to? 18 THE COURT: Surely. 19 Q Now, this form doesn't ask the person who is signing 20 it whether they own any stocks, bonds or investments, does 21 it? 22 A You have to -- yes. 23 Q Well, doesn't it say equity in asset? 24
A Yes. 25 Q And if you own stocks or bonds or an ownership
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
195 Peters-cross/Trabulus
1 interest in something that has no value, what would be the 2 correct answer? Zero? 3 A If he owned stock, you are supposed to list them. 4 Q Does it say equity in asset or does it say name in 5 stock? 6 A It is listed on another page, that's correct. 7 Q Do you have any idea as to whether or not Mr. Gordon 8 owned any stock at that time? 9 A I had no idea. 10 Q Do you know if he owned any stock at that time, 11 whether there was any equity in it, whether it was worth 12 anything as opposed to any money that might be owed in 13 connection with it? 14 A I don't know -- I have no way of knowing. 15 Q You have no way of knowing whether that entry is 16 incorrect? 17 A I have no way of knowing. 18 Q You met Mr. Gordon at an office; is that correct? 19 A His office. 20 Q He made no secret of the fact that he was working in 21 an office? 22 A Oh, no. 23 Q Did that office appear to be the main office within 24 the facility that he was working? It was like the head 25 person's office?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
196 Peters-cross/Trabulus
1 A He was in the office. 2 Q Can you describe the office he was in? Do you 3 remember? 4 A Yes. I remember. He was there behind his desk. 5 Q Were there other people who seemed to be working for 6 him? 7 A I didn't see known else. 8 Q He was the only one in the office? 9 A In his office. 10 Q Was there a suite of offices that he was part of? 11 A I don't know. I went directly to his office. 12 Q Did somebody show you in? 13 A Yes. 14 Q And there was somebody who showed you in and brought 15 you to Mr. Gordon? 16 A Yes. 17 Q And there was certainly no secret of the company that 18 he was working for, Who's Who Worldwide; is that correct? 19 He put it on the form; is that correct? 20 A Yes. 21 Q Now, you say that Mr. Gordon told you at some point 22 in time he was going to be entering into an offer in 23 compromise; is that correct? 24 A Correct. 25 Q Of course, you understood that to mean that the offer
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
197 Peters-cross/Trabulus
1 in compromise would be involving a payment of considerably 2 more than just $100 a month; is that correct? 3 A That's correct. 4 Q Is it fair to say that part of your discussion with 5 Mr. Gordon is that he was expecting to have considerably
6 more money and pay more money in the future? 7 A That's what he informed me. 8 Q He made no secret of that; is that correct? 9 A No. 10 Q You have no reason to believe, you personally, based 11 on what you knew at the time, that the amount of income, 12 which he was reporting on a monthly basis subject to 13 variations was anything but accurate? 14 A Based on that form he was supposed to tell the 15 truth. He was supposed to put down correct information. 16 Q And as far as you knew at the time that was the 17 truth; is that correct? 18 A Correct. 19 Q Now, on the form he indicated that he used the 20 company car; is that correct? 21 A Correct. 22 Q He didn't make any secret of that; is that correct? 23 A No, he didn't. 24 Q Is that certainly indicated to you that he was 25 somebody who occupied some position relatively high up
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
198 Peters-cross/Trabulus
1 within the company, did it not? 2 A No. 3 Q It did not? 4 A No. 5 Q He said he was a sales manager; is that correct? 6 A Yes. 7 Q And did you ask him anything about the structure of 8 the company he worked for? 9 A No, I didn't. 10 Q Did you ask him anything about the ownership of the 11 company he worked for, yes or no? 12 A Yes. 13 Q Did you ask him who the owners were? 14 A I didn't ask him who the owners were. 15 Q Now, we don't have a big copy for the jury, I see, 16 but I would like to direct your attention to Exhibit 402; 17 is that correct? 18 Excuse me, do you have a copy of it there? 19 A Yes. 20 Q Now, there is a part of it, and with the Court's 21 permission, I will hold my copy in front of the jury so
22 they can see it. 23 THE COURT: Yes. 24 Q There is a box that says originators name, title and 25 IDRS assignment number. Below that it says R. Peters.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
199 Peters-cross/Trabulus
1 A Correct. 2 Q Is that something you wrote? 3 A Yes. 4 Q You just wrote your name; is that correct? 5 A Yes. 6 Q And you did not include your title, did you? 7 A No. 8 Q What is an IDRS number? 9 A That is a number assigned to each revenue officer. 10 Q You didn't write that either? 11 A No. 12 Q You decided this portion you didn't have to fill out 13 entirely; is that right? 14 A This part of this form was given to him at his place 15 of business. Before I had the form processed I fill out 16 everything. I have to fill out everything. 17 Q You are saying
you have to fill out everything. You 18 are saying it was his decision not to fill out your title? 19 A No. 20 Q That was your decision? 21 A Yes. 22 Q You did not fill it out? 23 A Right. 24 Q Before you gave it to him that part was already 25 there, you had signed it and not filled it out?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
200 Peters-cross/Trabulus
1 A He signed it and I signed my name, and that was it. 2 Q All right. 3 Now, I think we talked about the fact that the 4 form has a check mark on it, and I am referring, I 5 believe, to form 404. Yes, the first page of 404, it has 6 a check mark on it, appropriate box, and there are three 7 separate possibilities. 8 THE COURT: You will have to hold it a minute, 9 please. Something has come up that I need to take care 10 of. I will be right back.
11 MR. TRABULUS: Sure. 12 (Whereupon, at this time there was a pause in the 13 proceedings.) 14 THE COURT: Sorry about that, you may proceed. 15 Did I get you in the middle of a question, 16 Mr. Trabulus? 17 MR. TRABULUS: It is all right, I know exactly 18 where I was. 19 THE COURT: Good. I don't know. 20 MR. TRABULUS: By 5:00 o'clock, I probably 21 won't. 22 Q I would like you to look again at 404, Ms. Peters, 23 and I am going to direct your attention to box number 9 on 24 the first page of it. There are checks -- there are three 25 boxes, only three, wage earner, sole proprietor or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
201 Peters-cross/Trabulus
1 partner, correct? 2 A Yes. 3 Q And partner would be appropriate if the form of a 4 business somebody was in was a partnership and that person
5 was a partner; is that correct? 6 A Yes. 7 Q And a sole proprietor would be someone who operated 8 an unincorporated business; is that correct? 9 A Yes. 10 Q And anybody who worked for a corporation would be 11 properly listed as a wager; is that correct? 12 A Yes. 13 Q Anybody, so long as they received money from the 14 corporation in salary would be a wage earner; is that 15 correct? 16 A Correct. 17 Q And that could be somebody who was the president of 18 the corporation; is that correct, who got a salary? 19 A I am not 100 percent sure of that. 20 Q Okay. 21 But certainly, somebody who worked for a 22 corporation would not be a sole proprietor; is that 23 correct? 24 A Yes. 25 Q And they would not be a partner; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
202 Peters-cross/Trabulus
1 A Correct. 2 Q Okay. 3 Now, you did not perform any examination of the 4 books and records of Who's Who Worldwide, did you? 5 A No. 6 Q So, you would have no way of knowing or -- that 7 any -- as to whether any of the information that 8 Mr. Gordon -- that was placed on the second page of this 9 relating to what he got from Who's Who Worldwide was 10 correct or not; is that correct? 11 A That's correct. 12 Q Okay. 13 Now, when -- do you recall, Ms. Peters, when you 14 were first assigned the case of Mr. Gordon? 15 A It was sometime around in '91. 16 Q And the first documents that you got in the case, do 17 you recall what they were? 18 A It was a tremendous, a lot of investigation that had 19 been done on the case before I received -- 20 Q Would you answer my question, please. I didn't ask 21 you
about the investigation, I simply asked you, do you 22 remember the first documents you got in the case, what 23 they were? 24 A Transcripts, reference to New York State wages. 25 Q Did you have a conversation with Mr. Reffsin, his
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
203 Peters-cross/Trabulus
1 accountant, before you spoke to Mr. Gordon? 2 A No. 3 Q Do you recall Mr. Reffsin sending you several months 4 before September 1991 copies of Mr. Gordon's tax returns 5 for years -- the years 1990 and 1989? 6 A No. 7 Q Did you have copies of those tax returns in your 8 possession at the time that you first spoke to Mr. Gordon? 9 A It was copies of returns in the case file. 10 Q And would that include 1989 and 1990? 11 A I can't recall what years. 12 Q If you had the transcript that apparently nobody 13 asked you to find, would that have been able to help you? 14 A Of course. 15 Q Would it be unusual for you to have the 1989 and 1990 16 returns in your possession at the time you first spoke to 17 Mr. Gordon? 18 A I can't recall. 19 Q Well, let me ask you the question. 20 Would that be typical, that before you first 21 spoke to a taxpayer in respect to a tax liability that had 22 been owed from prior years, would it be unusual for you 23 first before doing that to have copies of the tax returns? 24 A No. 25 Q It would not be unusual?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
204 Peters-cross/Trabulus
1 A No. 2 Q In fact, it would be typical, would it not? 3 A No. Because I don't necessarily need the returns. 4 Q Well, let me ask you, I am going to show you what is 5 my copy of what the government has marked as Exhibit 407. 6 (Handed to the witness.) 7 Q Have you ever seen that before? 8 A I can't recall. 9 Q You can't recall one way or another? 10 A No. 11 Q And if you had the transcript of the work you did, 12 you would be able to recall; is that correct? 13 A Of the case file, yes. 14 Q Do you know if the case file is still in existence? 15 A I would not know. 16 Q Has anybody asked you about that? 17 A I was informed -- 18 Q I asked you did anybody ask you, not what you were 19 informed. Did anybody ask you if you knew whether the 20 case file was still in existence? 21 A No. 22 Q Has anybody asked you to try to find it? 23 A No. 24 Q Has anybody asked you to put in a request for it? 25 A No. That would not be my job.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
205 Peters-cross/Trabulus
1 Q
I will show you Exhibit 408, which the government 2 marked. It is not in evidence yet. 3 Have you ever seen that before? 4 A I can't recall. 5 Q Now, that would be a 1990 -- it would appear to be a 6 1990 tax return for Mr. Gordon, would it not? 7 A Yes. 8 Q And the other one, 407 would be a 1991 tax return -- 9 excuse me, 1989 tax return for Mr. Gordon? 10 A Yes. 11 Q And they both show residence addresses, do they not? 12 A Yes. 13 Q They both show the same residence address, do they 14 not? 15 A Yes. 16 Q Does that in any way refresh your recollection that 17 Mr. Gordon never told you he was not living in a car? 18 A That's not true. 19 Q Now, when Mr. Gordon spoke to you concerning the 20 offer in compromise that he said would be forthcoming, did 21 he indicate to you anything concerning the amounts that 22 would be in
it? 23 A No. 24 Q Did you discuss it with him? 25 A No.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
206 Peters-cross/Trabulus
1 Q Did he explain why it was that he thought he would be 2 having more money in the future? 3 A No, he did not. 4 Q Did he say to you that he expected his business would 5 be generating more income and he would have more money to 6 be paying? 7 A No. 8 Q But you understood he was telling you right then and 9 there, I am going to be making more money and I will be 10 paying more on this? 11 A No, he never said that. 12 THE COURT: Mr. Trabulus, you are going to have 13 to slow down. I am having trouble keeping up with you. 14 The jurors may have -- I am sure they don't have the same 15 trouble. I know I have the trouble. But the reporter may 16 also have difficulty. He is
an outstanding public 17 servant, but he -- 18 MR. TRABULUS: Your Honor, I will plead guilty to 19 being a repeat offender for speaking too fast. 20 THE COURT: That's all right. Just try to slow 21 it down, Mr. Trabulus. 22 Q Ms. Peters, was it your understanding when Mr. Gordon 23 said that he would be submitting an offer in compromise, 24 that the offer in compromise that he would be submitting 25 was going to be even less than $100 a month?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
207 Peters-cross/Trabulus
1 A No, that was not my understanding. 2 Q He was going to have more money? He told you that? 3 He expected it? 4 A He did not tell me. He told me he would be 5 presenting an offer in compromise in the future. 6 Q Had you previously ever spoken to any -- withdrawn. 7 Isn't it a fact that you have previously spoken
8 to a representative of Mr. Gordon, an accountant, even 9 though you may not remember his name? 10 A No, I did not, I did not. 11 Q You are certain of that? 12 A Yes. 13 Q You are certain of that, not having looked at any of 14 your records concerning this since 1991? 15 A I remember. 16 Q As certain as you are that he told you he was not 17 living in a car? 18 A Yes. 19 Q And when he first spoke to you, he said he was living 20 in a car? 21 A Right. At the time I visited he said he was not 22 living in a car. I would not give him credit for rent. 23 Q Now, Ms. Peters, are you suggesting that the only 24 reason he told you he was paying rent was to get some kind 25 of credit off of the $5,000 a month income he reported?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
208 Peters-cross/Trabulus
1 A
No. 2 Q He could have reported less than $5,000 a month, 3 could he not, and you have no way of knowing as to whether 4 that would be inaccurate; is that correct? 5 A That is correct. He was supposed to put the truth 6 down, correct information. 7 Q And when you visited him he could have been living in 8 a car and you would have had no way of knowing that, other 9 than him telling you he wasn't; is that correct? 10 A Correct. 11 MR. TRABULUS: No further questions. 12 THE COURT: Anything else, Mr. White? 13 MR. WHITE: Yes, your Honor. 14 THE COURT: I assume that no one else wants 15 cross-examination; is that correct? 16 MR. WALLENSTEIN: I have a couple of questions, 17 your Honor. 18 THE COURT: Go ahead. 19 20 CROSS-EXAMINATION 21 BY MR. WALLENSTEIN: 22 Q Ms. Peters, how long does the Internal Revenue 23 Service require a taxpayer to keep records? 24 A How long for the taxpayer to keep records? 25 Q Right.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
209 Peters-cross/Wallenstein
1 A At least -- I couldn't tell you that. I can't tell 2 you precise. 3 Q When you go back to the records, of, say, Mr. Gordon 4 here, for the collection information, how far back are you 5 looking? 6 A I look for current information. I am in collection. 7 So I look for assets. 8 Q Okay. 9 What about audits? How far back do they go? 10 A Audit? 11 Q Yes. 12 A I have nothing to do with examination. I cannot 13 answer for examination. 14 Q How long have you been with the IRS? 15 A 26 years. 16 Q Have you always been in the same position you are in 17 now? 18 A No. 19 Q What other positions have you held? 20
A I was a tax examiner and a revenue officer. 21 Q What does a tax examiner do? 22 A I was in the bankruptcy department at the time as a 23 tax examiner. 24 Q And what does that mean? 25 A That means I was working on bankruptcies, Chapter 11,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
210 Peters-cross/Wallenstein
1 Chapter 7, Chapter 13. 2 Q And what were your duties as a tax examiner in 3 connection with those bankruptcies? 4 A My duty was to file proof of claims. 5 Q To file proof of claims? 6 A Yes, and work with district counsel. 7 Q In other words, to try to collect taxes from people 8 entering bankruptcy? 9 A In Chapter 11 they have to enter into a plan, 10 reorganization. 11 Q Did you have anything to do with audits of taxpayers? 12 A Audit, no. That's examination. 13 Q The case file that you spoke of that contains your 14 notes that nobody seems to be able to find and no one 15 asked you about, how long are those case files normally 16 kept by the Internal Revenue Service? 17 A They are kept for years at the record center. No one 18 was supposed to ask me -- 19 Q Where are the records? 20 A In Bayonne. It is in New Jersey. 21 Q And when it leaves your desk do you indicate on it in 22 some manner that this should be retained in the record 23 center in Bayonne? 24 A No. It goes to my district office. And they send it 25 to the closed file. I have nothing to do with that.
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211 Peters-cross/Wallenstein
1 Q How long do they stay in the closed files in 2 Bayonne? Do you know? 3 A I don't know. 4 Q But years for certain; is that correct? 5 A Yes, of course, for years. 6 MR. WALLENSTEIN: Thank you. 7 I have no further questions. 8 THE COURT: Anything else? 9 Mr. White. 10 11 REDIRECT EXAMINATION 12 BY MR. WHITE: 13 Q Ms. Peters, when you close a file, can you tell us 14 what you do? 15 A When I close a file it is given to my manager for 16 approval. Then I give it to the secretary. The secretary 17 sends it to Brooklyn. And from there they send it to the 18 closed files. 19 Q Do you know what happens to it after that? 20 A I do not know. Once it leaves my hands, I have 21 nothing else to do with it. 22 Q If someone came to you and asked you to help them 23 retrieve a file that is sent to closed files, would you be 24 able to help them at all? 25 A No, I would not.
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212 Peters-redirect/White
1 Q Okay. 2 Now -- 3 MR. WHITE: Your Honor, may I ask questions from
4 here? 5 THE COURT: Yes. 6 Q Mr. Trabulus asked you about box nine, where the 7 choices are wage earner, sole proprietor and partner. Box 8 seven asks for what? 9 A Occupation. 10 Q Is president listed there? 11 A No. 12 Q Is CEO listed there? 13 A No. 14 Q What is listed there? 15 A Sales manager. 16 Q Now, box 58 asks for other expenses; is that right? 17 A Correct. 18 Q And above that the boxes ask for other more specific 19 expenses; is that right? 20 A Correct. 21 Q Now, if someone has -- if someone were charging say, 22 $8,000 a month in American Express charges, should that be 23 reflected on line 58? 24 A Yes. 25 Q What is listed there on line 58 for Mr. Gordon's
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
213 Peters-redirect/White
1 monthly living expenses, other than the ones listed above? 2 A Line 58? 3 Q I am sorry, line 58, yes. 4 A Other expenses, he just has $175. He didn't list 5 what it was for. 6 Q So, that's for monthly expenses; is that correct? 7 A Correct. 8 Q So, annual expenses would be 175 times 12? 9 A Correct. 10 Q Now, do you recall Mr. Trabulus asking you questions 11 regarding Mr. Gordon's tax returns for prior years? 12 A No. 13 Q Do you recall him asking you those questions? 14 A No. No one asked me any questions. 15 Q Let me rephrase the question. 16 Do you recall that Mr. Trabulus, Mr. Gordon's 17 attorney here, just showed you tax returns of Mr. Gordon? 18 A Correct, correct. 19 Q Now, had you seen those at the time you entered into 20 the installment agreement? 21 A I can't recall. 22 Q Now, as a revenue officer in your position, does it 23 make any difference to you, the taxpayer's returns for 24 prior years? 25 A No. As long as they are filed, I don't have to have
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
214 Peters-redirect/White
1 the paper copy. 2 Q So long as they are filed? 3 A Correct. 4 Q And your job is collection; is that right? 5 A Correct. 6 MR. WHITE: Your Honor, may I have one moment? 7 THE COURT: Yes. 8 (Whereupon, at this time there was a pause in the 9 proceedings.) 10 Q Ms. Peters, let's go back to this form 433. Number 11 35 lists other liabilities, correct? 12 A Correct. 13 Q Can you tell us how many separate liabilities are 14 listed here by Mr. Gordon? 15 A One, two, three, four, five, six. 16 Q Okay. 17 Now, A, says office lease; is that correct? 18 A Correct. 19 Q And if you read across, it says personal guaranty; is 20 that correct? 21 A Correct. 22 Q And can you tell us what line B says? 23 A Office lease. 24 Q Why don't you look at your copy in front of you. 25 What does line C say?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
215 Peters-redirect/White
1 A Shopper's charge. 2 Q And what is the figure for -- how much that liability 3 is? 4 A 32,000. 5 Q And if you go across, what is the description of 6 that? 7 A Ex-wife charges. 8 Q And line D, what does that say? 9 A Stephanie, I can't make it out exactly, but ex-wife. 10 Q What does it say that liability is? 11 A 35,000. 12 Q And what is the description of that? 13 A Judge's order. Judge F X Becker, Mineola. 14 THE COURT: And line F, can you read that for 15 us? 16 A Bank of New York, 275,000. Personal guaranty on 17 business loan, 1986. 18 Q Is the last line, line G? 19 A Alimony payment to Alissa Gordon, 65,000. 20 Q Now, are any loans to Mr. Gordon from Who's Who 21 Worldwide, or any other corporation, listed under box 35? 22 A No. 23 Q Looking at the top of patch two, box number 22. Is 24 there any American Express card listed there? 25 A No.
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216 Peters-redirect/White
1 Q All right. 2 Now, if you look back at box 35, under other 3 liabilities, can you read what is in parenthesis after 4 that? 5 A Box 35. 6 THE COURT: You read it, why don't you read it. 7 It is in evidence. 8 MR. WHITE: Okay. 9 It says other liabilities, parenthesis, include 10 judgments,
notes and other charge accounts, close quotes. 11 Q Now, was Mr. Gordon's net cash flow calculated by you 12 on the basis of this form? 13 A Can you clarify that? 14 Q Did you make any analysis of what sort of disposable 15 income Mr. Gordon had on the basis of this form? 16 A No. 17 Q Now, Ms. Peters, do you recall when you approximately 18 closed your file on Mr. Gordon? 19 A It was immediately after I ascertained the 20 installment agreement. It had to be somewhere in 21 September, around the last of the September. 22 Q Of what year? 23 A Of '91. 24 Q So that's over six years ago; is that correct? 25 A Correct.
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217 Peters-redirect/White
1 MR. WHITE: Your Honor, no further questions. 2 THE COURT: Anything else? 3 MR. TRABULUS: Yes, there is, your Honor.
4 5 RECROSS-EXAMINATION 6 BY MR. TRABULUS: 7 Q Ms. Peters, there are instructions, are there not for 8 filling out a form 433-A, such as Exhibit 404? 9 A At that time, no. 10 Q Were there any national standards at that time? 11 A No. 12 Q And there are today? 13 A Yes. 14 Q And are you familiar with whether or not Mr. Gordon 15 paid any money as part of any agreements to the Department 16 of Justice by way of paying taxes? Do you know one way or 17 another? 18 A No, only by what he lists. 19 Q I am not talking about on the return. I am talking 20 about going back to the transcript, I believe it was 21 Exhibit 800 -- no, 400 -- no, 800? 22 MR. JENKS: The transcript is 400. 23 Q Certificate of official record and naming the 24 transcript following it. 25 Do you know if that reflects any payments made to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
218 Peters-recross/Trabulus
1 the Department of Justice? 2 A I am not sure. 3 Q Could you look at it and tell me? Would it be there 4 were such payments reflected? 5 A If there were payments it would be reflected. 6 Q If there were payments not to the IRS itself, but the 7 tax division -- 8 A You mean if it was in reference to a year, for taxes 9 that were owed, it would reflect. 10 Q If there was payments to the Department of Justice 11 Tax Division pursuant to an agreement, would it be shown 12 on that record? 13 A Pursuant -- 14 Q To agreement. 15 A I don't know what type of agreement you are referring 16 to. 17 Q Any agreement to the Department of Justice. 18 A You have to clarify that, I don't know what type of 19 agreement you are speaking of. 20 Q Is there any type of agreement that someone could 21 enter into which would cause payments made under that 22 agreement to the Department of Justice to be included in 23 the transcript, Exhibit 400? 24 A I didn't -- I don't recall any. It is a 25 possibility. I don't recall any.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
219 Peters-recross/Trabulus
1 Q Okay. 2 So, you are not sure whether or not the 3 transcript would reflect that or could reflect that? 4 A I am not sure. The only thing I know is that the 5 transcripts reflect the amount that was owed at the time I 6 had the case. 7 Q Now, earlier you used the term abusive tax shelter? 8 A Correct. 9 Q Is that correct? 10 A Yes. 11 Q And that's actually a term defined by a law; is that 12 correct? 13 A Yes. 14 Q So the term "abusive" is just a legal
category of tax 15 shelters which are not allowed; is that correct? 16 A Correct. 17 Q Now, you have no reason to believe that Mr. Gordon 18 was not the sales manager of Who's Who Worldwide at that 19 point in time, do you? 20 A I have no reason, no. 21 Q And you indicated that he indicated on his form that 22 he was the guarantor of certain obligations; is that 23 correct? 24 A He listed it. 25 Q Is it fair to say that somebody whose position was
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
220 Peters-recross/Trabulus
1 only sales manager would not ordinarily be expected to be 2 a guarantor? 3 A Whatever he listed on that form. That is what I went 4 by. 5 MR. TRABULUS: No further questions. 6 THE COURT: Anything else? 7 MR. WHITE: I have one clarifying question. 8 9 FURTHER REDIRECT EX
AMINATION 10 BY MR. WHITE: 11 Q Ms. Peters, do you know whether or not the loan 12 guaranties listed on this form have anything at all to do 13 with Who's Who Worldwide? 14 A No, I don't. It doesn't. 15 Q You don't know one way or the other? 16 A No. 17 MR. WHITE: That's all. 18 THE COURT: Anything else? 19 MR. TRABULUS: Nothing, your Honor. 20 THE COURT: You may step down. 21 (Whereupon, at this time the witness left the 22 witness stand.) 23 THE COURT: Call your next witness. 24 MR. WHITE: The government calls Frank Gagliardi. 25 THE COURT: Do you want to step up.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
221 1 Raise your right hand. 2 3 F R A N K G A G L I A R D I , 4 called as a witness, having been first 5 duly sworn, was examined and testified 6 as follows:
7 8 THE COURT: Please be seated. State your full 9 name and spell your last name. 10 THE WITNESS: My name is Frank Gagliardi, 11 G A G L I A R D I. 12 THE COURT: You may proceed. 13 MR. WHITE: Thank you, your Honor. 14 15 DIRECT EXAMINATION 16 BY MR. WHITE: 17 Q Mr. Gagliardi, can you tell us how you are employed? 18 A As a revenue officer in the Internal Revenue Service. 19 Q And how long have you been an IRS revenue officer? 20 A Since 1974. 21 Q Where is your office? 22 A Garden City, New York. 23 Q Can you explain to us what a revenue officer does? 24 A We work with taxpayers in collecting delinquent taxes 25 from tax returns.
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222 Gagliardi-direct/White
1 Q Did you ever have any responsibility at the IRS with 2 respect to an individual named Bruce Gordon? 3 A Yes, I did. 4 Q Let me draw your attention to November of 1993. 5 Were you assigned any matter involving Mr. Gordon 6 at that time? 7 A Yes, I was. 8 Q Can you tell us what matter you were assigned to 9 handle? 10 A I was assigned an investigation of an offer in 11 compromise. 12 Q Can you describe for us particularly what an offer in 13 compromise is. 14 A An offer in compromise is a means for a taxpayer to 15 offer a lesser sum when it is determined that the IRS 16 can't collect the full tax liability, and the balance is 17 forgiven. 18 Q What were your responsibilities with respect to 19 Mr. Gordon's offer in compromise? 20 A It was to determine his assets and liabilities, and 21 income and expenses, and determine if the offer was the 22 best deal the government could get. 23 Q And at the time
you were assigned, approximately how 24 much money did Mr. Gordon owe the IRS? 25 A Approximately three and a half million, perhaps more.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
223 Gagliardi-direct/White
1 Q Mr. Gagliardi, let me show you 2 Government's Exhibit 420, and its attachments, 420-A 3 through G. 4 (Handed to the witness.) 5 Q Do you recognize what that is? 6 A Yes, I do. It is the offer in compromise and 7 attachments filed on behalf of Mr. Gordon. 8 MR. WHITE: Your Honor, the government offers 9 Exhibit 420 and its attachments, 420 A through G. 10 THE COURT: Any objection? 11 MR. TRABULUS: Your Honor, may we approach? 12 THE COURT: Come up. 13 As a matter of fact, we will recess for the day 14 so we can talk. 15 You may step down. You will be back at 9:30 16 tomorrow morning, or before,
before. 17 You may step down, and have a seat. 18 (Whereupon, at this time the witness left the 19 witness stand.) 20 THE COURT: Members of the jury, we will recess 21 until 9:30 tomorrow morning. In the meantime please do 22 not discuss this case either among yourself or anyone 23 else. And that includes the people at home who will be 24 curious perhaps as to what you do when you are away, and 25 ask you about the case. Please do not discuss it with
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
224 1 them. Discuss it with no one. 2 Keep an open mind. Come to no conclusions until 3 the entire case is in, until all the testimony is over, 4 all the presentation of the exhibits, which you will see, 5 the attorneys' summations and my instructions to you on 6 the law. 7 If you should happen to read any articles that 8
appear about this case, don't read it. If you see it says 9 this, don't read it. If I see it will appear in a certain 10 paper, I will tell you just not to read that paper from 11 now on. So far I don't believe that that will be so. 12 That is because you don't need anybody to tell 13 you what you see and hear yourself. You see it 14 first-hand, not what some reporter decides you should read 15 that might make good news reading. Not that I have 16 anything against the press. They are a necessary part of 17 our government, but not for you to read during this trial. 18 Also, I hear rumors on the radio that it may snow 19 tomorrow. I don't know whether that is so or not. I am 20 not too big on cancelling cases because of snow. As a 21 matter of fact, when I was administrative judge of the 22 courts in Nassau County, the state court system, and I had 23 to make a decision as to whether to close a lot of courts, 24 I would say when the snow gets to the ledge of my 25 chambers -- and I was on the third floor -- that's when we
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
225 1 closed the courts. 2 I don't want you to get into any accidents or 3 anything, so we will watch out for that. 4 We will adjourn and recess until 9:30. If you 5 perform your duties as you did today, all of you were in 6 by 9:30, all of you were in by 9:30, or virtually all of 7 you, which is for the first day a minor miracle. From now 8 on it is going to be custom and practice, hold at. You 9 will be here on time so we can get started. The earlier 10 we get started and the more time we put in the sooner we 11 will get through. 12 I am going to try to move this case along, but 13 always consistent with the right to be heard by 14
everybody. It is very important that everybody has a 15 right. The government has the burden of proof, so they 16 have the main right. But everybody else has rights also, 17 as far as rights to be heard. 18 So that is what we will do. Have a nice 19 evening. And we will see you at 9:30. 20 Put your juror number on the pads, and put the 21 pads face down. 22 (Whereupon, at this time the jury leaves the 23 courtroom.) 24 THE COURT: Yes, Mr. Trabulus. 25 MR. TRABULUS: Your Honor, this document refers
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
226 1 to an agreement -- 2 THE COURT: When you say this document? 3 MR. TRABULUS: The document, Exhibit 420, which 4 the government now offered in evidence, refers to another 5 document, another agreement with respect to Section 6700 6 and 6701 penalties. 7 The government marked a portion of that agreement 8 generally referred to as a collateral agreement, as 9 another exhibit. 10 Frankly, I did not know that the government was 11 going to be commencing with the tax case, so I don't have 12 that particular -- they didn't tell us who their first 13 witness would be, apparently because they didn't want us 14 to know they were going to be doing the tax case first. 15 But I know that that collateral agreement is in here. 16 The collateral agreement to which this document 17 refers, refers in itself to an offer in compromise. That 18 document has never been provided to me. That document, 19 the document which it refers to, I myself have made 20 efforts to find, and I have been unable to get a copy of 21 it. 22 Your Honor, what we have here is a document that 23 refers to another document, which in turn, I believe the 24 government is going to seek to introduce in an incomplete 25 fashion.
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227 1 Frankly, they are starting at one end and kind of 2 working their way backward, and I object to it. 3 Ultimately we will have a document referring to an 4 agreement, which I don't believe the government will be 5 able to prove unless they come up with the document 6 referred to in the collateral agreement. 7 THE COURT: That's an interesting point. 8 I will tell the government they have to do better 9 with the books they gave me. I cannot find the agreements 10 without thoroughly perusing them. There should be stubs 11 on each exhibit showing the number of the exhibit. And I 12 wish you will take care of that, Mr. White. I cannot go 13 through all these financial statements looking for the 14 number, which is inside.
That's not the way it should be 15 done. So I don't even know where this agreement is. I 16 can't find it. 17 MR. TRABULUS: I can tell you, your Honor, 18 because I just found it. It is designated 420 H. 19 THE COURT: That's fine, but I will not read 20 through these volumes to find 420 H. The government 21 should tab these exhibits. 22 MR. WHITE: I apologize, your Honor. 23 THE COURT: All right, you will learn how I would 24 like it to be done. 25 In addition, while we are on this subject, would
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
228 1 you like the jurors to see these things? Would you have 2 enlargements of these exhibits? 3 MR. WHITE: Not everyone, for example, this is a 4 multi-page that I will hand out to them to be able to 5 follow along. 6 THE COURT: If you will have a lot of exhibits to
7 go to the jury, my experience is they need looseleafs for 8 the exhibits, the pages will be loose and many, and it 9 will be all over the place and a mess. 10 MR. WHITE: You mean the enlargements, or the 11 smaller version? 12 THE COURT: If you want them to see two or three 13 documents, that's another matter. If you load them down 14 with hundreds of documents, you should put it in looseleaf 15 books for each juror, book one, book two, book three -- 16 MR. WHITE: I understand, but there are only two 17 or three that we will hand out. 18 THE COURT: All right. 19 You will have to tab mine. I will not spend my 20 time diverting my attention from the trial looking through 21 financial documents, to try to see, well, where is that 22 mysterious stub here? Well, it is inside. 23 MR. WHITE: I understand. 24 With respect to Mr. Trabulus' specific question,
25 I am not sure what he is talking about.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
229 1 THE COURT: I can't find the exhibit, so I don't 2 know either. 3 MR. WHITE: I can hand up a copy, your Honor. 4 THE COURT: Don't give it to him. He is not the 5 judge. I am. If you want him to interpret it, give it to 6 him. 7 What are you talking about, Mr. Trabulus? 8 MR. TRABULUS: I don't know what your Honor has 9 before you. 10 THE COURT: I have 420, the mysterious 420, the 11 elusive 420. 12 MR. TRABULUS: The third paragraph of 420 says: 13 He has entered into an agreement with the U.S. Department 14 of Justice with respect to the 6700 and 6701 penalties, 15 which makes no provision for the payment of anything else 16 until he has paid those sums due. 17 Now, your Honor, I believe part of the agreement
18 which is being referred to there has been designated by 19 the government as Exhibit 420 H. I have a copy in front 20 of me now -- 21 THE COURT: 420 H. Let me see where I can find 22 420 H. So far I have found a lot of income tax returns. 23 Where is it? 24 MR. WHITE: It is the last attachment. 25 THE COURT: The last attachment, okay.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
230 1 Which says collateral agreement? 2 MR. TRABULUS: Yes. That is the document. 3 Your Honor, if you look at the first two 4 paragraphs, the one that is double spaced, and the one 5 which is single spaced below it, you will see that this 6 agreement, or form of agreement is given as additional 7 consideration for a, quote, offer in compromise, which is 8 described as having been dated August 29th, and then 9 amended on September 19th, 1991.
10 THE COURT: Wait a minute now. 11 All right. 12 MR. TRABULUS: And other terms of this agreement 13 refer to the offer in compromise. They say that the 14 liability shall not be -- excuse me. There is a reference 15 to it in paragraph 5, which is on the third page, the last 16 paragraph. 17 So, this document must be interpreted with regard 18 to that offer in compromise. 19 Your Honor, as far as I can tell, no copy of that 20 offer in compromise is available. Certainly, it is not 21 provided to me by the government. So, what we are doing 22 here is introducing a document, 420, referring to another 23 agreement, which the government has not provided to me in 24 full. We have only a partial version of it. They are 25 going to seek to introduce that. I will be objecting to
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231
1 that on the ground that it is not complete and can't be 2 construed the way it is. 3 I have tried to get a copy of this by going back 4 to the law firm representing Mr. Gordon when this was 5 entered into. And they don't have a copy of it. And 6 that's Sherman and Sterling. . 7 MR. WHITE: Your Honor, Mr. Trabulus specifically 8 asked me for these two documents, the offer dated August 9 29th, 1991, as amended on September 19th, 1991. He asked 10 me for that specifically when we were conducting the 11 hearing before Magistrate Pohorelsky. I then provided him 12 with a letter from Sherman and Sterling, to the Department 13 of Justice, dated August 29th, 1991, which is the date to 14 which this refers. And as I told him, the amendment that 15 allegedly takes place on September 19th, 1991, was an oral 16 wall. 17 Now, I don't know if he recalls that or what.
18 But I specifically gave him that. He asked me for the 19 documents and I gave him that. I don't know what he is 20 talking about. 21 MR. TRABULUS: The document given to me dated 22 August 29, 1991, is a letter. It is not in the form of an 23 offer in compromise. 24 I find it inconceivable to believe that there was 25 a subsequent oral amendment of a written agreement which
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232 1 is obviously drafted by attorneys. Its terms differ from 2 this, the earlier version from what I was given. It seems 3 to be a proposal for an offer, your Honor. 4 In addition, your Honor, I remember it well, but 5 it appears to be to me entirely incomplete. The terms of 6 it are different. I have looked at the docket sheet for 7 the Court file. This document was entered into in 8 litigation in this court. I looked at the docket sheet 9 for the Court file. The Court file they are looking for. 10 It is in Bayonne. There were stipulations of 11 discontinuance, a couple of stipulations. They appear to 12 be inconsistent with what was provided in the August 29th 13 letter, and perhaps what is in there. I can't tell what 14 happened. It may exist somewhere, and it may be possible 15 to reconstruct it. It appears to the extent we are going 16 to be able to find out, it is in a court file, which is in 17 Bayonne, which was requisitioned, and it would take four 18 weeks. And frankly I didn't think the tax case would be 19 the first case they present. 20 THE COURT: You have to slow down, Mr. Trabulus. 21 You left me far behind. I can't keep up with you. That's 22 my limitations. I am sure that everybody else -- I am not 23 sure, but I feel some of the jurors may have some 24 t
rouble. They are probably ahead of me also, but I am 25 having trouble.
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233 1 MR. TRABULUS: I apologize. 2 THE COURT: What is the purpose of this offer, 3 420, to show that there was an offer in compromise? Is 4 that the purpose? 5 MR. WHITE: Yes, your Honor, as well as -- 6 THE COURT: What is the purpose? Tell me what 7 the purpose is. 8 MR. WHITE: The purpose is to reflect that 9 Mr. Gordon and Mr. Reffsin made the offer in compromise. 10 THE COURT: That's what I said, and you were just 11 hesitating. 12 MR. WHITE: I did, your Honor, because it also 13 reflects, since Mr. Trabulus' point seems to be maybe 14 there was not a bona fide agreement. 15 This is a signed agreement with Mr. Gordon and 16 the Department of Justice. He made payments with respect 17 to
it. And he is submitting it as a contract he has 18 entered, the liability for which he wants to compromise. 19 So I don't understand whether there is any question about 20 its authenticity. 21 THE COURT: I don't understand either. All I 22 want to know is why you are offering this in evidence, 23 that's all. 24 MR. WHITE: Your Honor was correct. I was 25 offering it to show the offer in compromise.
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234 1 THE COURT: There is in 420, there is a letter, a 2 complete letter. And apparently it is an offer to clean 3 up the situation, right? 4 MR. TRABULUS: Now doubt as to its authenticity, 5 your Honor. 6 THE COURT: It is signed by Bruce Gordon. That's 7 admissible. 8 420 A, see attached letter, I assume it is the 9 July 27th, 1993 letter, and that says: The total sum of
10 the offer is $150,000, $50,000 upon acceptance of this 11 offer, and the balance of $50,000 within six months, and 12 the balance of $50,000 within six months thereafter. 13 You say Sherman and Sterling drew this thing? 14 How poor language? 15 MR. TRABULUS: No, Sherman and Sterling did not 16 draft that. 17 THE COURT: I did not think so. 18 Why is this not admissible? I don't understand 19 this other -- this is like the quest for the pot of gold 20 beyond the moon. So there is something missing in here. 21 So what? It is an admission that your client offered 22 $150,000 to offer in compromise. That is what it is 23 intended to show. You don't deny that that is so; is that 24 correct? 25 MR. TRABULUS: We do not deny that it is so.
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235 1 THE COURT: Why is it not admissible? What could 2 change the $150,000 offer in compromise? 3 MR. TRABULUS: Your Honor, I have no problem with 4 it being admitted so long as -- because clearly it would 5 be admissible but for what I conceive to be the problem, 6 and that problem is that it refers to something else which 7 the government has not provided. 8 THE COURT: You tell the jury that it is a 9 mysterious thing to vitiate this whole agreement. I will 10 not keep it out because of that. 11 So, you want to put 420 in, 420 A -- what are the 12 rest of this now? 13 MR. WHITE: The attachments submitted as part of 14 the offer in compromise. 15 THE COURT: It is part of the offer in 16 compromise? 17 MR. WHITE: Yes, the whole package, your Honor. 18 THE COURT: Are you objecting other than for the 19 fact you couldn't trace it? And if you couldn't trace it, 20 no one could
find it. 21 Mr. Keen, tracer of lost souls couldn't find this 22 if you couldn't. Sherlock Holmes couldn't find it if you 23 couldn't find it, Mr. Trabulus. 24 MR. TRABULUS: If 420 H were the documents 25 annexed to it as such, then I assume it must come in. But
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236 1 I must demand of the government to produce the remaining 2 document. 3 THE COURT: Did you look for this, which I don't 4 know what it is or anything, I am mixed up on that, but 5 did you look to see this document that Mr. Trabulus is 6 referring to, if it is available? 7 MR. WHITE: Your Honor, it is. I gave him a 8 copy. He feels there may be something else and doesn't 9 leave it is the offer. 10 THE COURT: I will let him cross-examine as to 11 it. Meanwhile I will admit this document, this is 420, 12 and
420 Abel, to 420 G, like George? 13 MR. WHITE: H like Harry. 14 THE COURT: You didn't say H. 15 MR. WHITE: Your Honor, that's the document we 16 were just talking about, the last attachment. 17 THE COURT: It says the offer in compromise? 18 MR. TRABULUS: It is a 1991 document referring to 19 an offer in compromise that we don't have here. 20 MR. WALLENSTEIN: It is headed collateral 21 agreement, Department of Justice, Tax Division. 22 THE COURT: This is the one that has a missing 23 document? 24 MR. TRABULUS: Yes. 25 THE COURT: What are you offering this collateral
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
237 1 agreement for? 2 MR. WHITE: Your Honor, I am offering it for two 3 purposes. 4 A, one of the things submitted by Mr. Gordon in 5 support of the offer in compromise. 6 Secondly, I am
also offering it as an agreement 7 that Mr. Gordon entered into by submitting this offer in 8 compromise. One, it is signed by him. 9 THE COURT: I am allowing it, your objection is 10 overruled. 11 Government's Exhibit 420, 420 A, for Abel, 12 through 420 H for How, in evidence. 13 (Government's Exhibit 420 received in evidence.) 14 (Government's Exhibit 420 A through 420 H 15 received in evidence.) 16 THE COURT: Does that do it? 17 MR. WHITE: Yes. 18 THE COURT: You have to take the documents back 19 and tab them. 20 MR. WHITE: All right. 21 MR. TRABULUS: Your Honor, if the government can 22 inform us what witnesses they are calling tomorrow? 23 THE COURT: Yes. 24 MR. WHITE: Mr. Gagliardi will continue, I assume 25 for most of the day.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
238 1
THE COURT: Most of the day? What is he going to 2 say that will take most of the day? 3 MR. WHITE: Not on direct. I assume there will 4 be substantial cross-examination of him. 5 THE COURT: What is he going to say that will 6 take even part of the morning. 7 MR. WHITE: He will review all the documents 8 submitted by Mr. Gordon and Mr. Reffsin during the course 9 of the offer in compromise. 10 THE COURT: They are in evidence, right? 11 MR. WHITE: This is what starts it, Mr. Gagliardi 12 then makes a whole series of information and requests. 13 THE COURT: What is that going to prove? 14 MR. WHITE: Your Honor, that's the heart of the 15 case, because he asks specifically for certain things, 16 certain information, that Mr. Reffsin and Mr. Gordon give 17 him incomplete responses to. 18 THE COURT: All right. 19 We will recess until 9:30 tomorrow morning.
20 Please be on time, and be here before 9:30 tomorrow 21 morning. I don't want to wait. 22 MR. TRABULUS: Your Honor, are we going to get 23 daily copy as well as the government? In fact, the 24 government is getting instantaneous copy, and under CJA we 25 would want to be afforded the same opportunity.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
239 1 THE COURT: Are you entitled to it? Are you 2 entitled to it under CJA? I would give it to you. 3 MR. JENKS: It is under your discretion. 4 THE COURT: If it is under my discretion, you got 5 it. 6 I have to say -- I that, but you have to talk to 7 the reporter. He has to stay up to midnight. 8 MR. TRABULUS: With regard to the daily copy, all 9 counsel was given copies, but rather than utilizing a full 10 copy, we can all take the mini script. 11 THE COURT: Yes, I am directing you be given the 12 transcripts, or the least amount of daily copy that he can 13 get away with. He will have to be up until midnight. I 14 don't have to take this up now. You can take it up with 15 the court reporter after court is over. 16 (Case on trial adjourned until 9:30 o'clock a.m., 17 Thursday, January 15th, 1998.) 18 19 20 21 22 23 24 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
240 1 I-N-D-E-X 2 W-I-T-N-E-S-S-E-S 3 PAGE LINE 4 R O B B I E P E T E R S....................... 163 8 DIRECT EXAMINATION................................ 163 23 5 CROSS-EXAMINATION................................. 185 2 CROSS-EXAMINATION................................. 208 20 6 REDIRECT EXAMINATION.............................. 211 11 RECROSS-EXAMINATION............................... 2
17 5 7 FURTHER REDIRECT EXAMINATION...................... 220 9 8 F R A N K G A G L I A R D I................... 221 3 DIRECT EXAMINATION................................ 221 15 9 10 E-X-H-I-B-I-T-S 11 Government's Exhibit 400 received in evidence..... 166 21 12 Government's Exhibit 823 received in evidence..... 168 3 Government's Exhibit 823-A received in evidence... 168 13 13 Government's Exhibit 404 received in evidence..... 174 3 Government's Exhibit 404-A received in evidence... 174 18 14 Government's Exhibit 404-B received in evidence... 174 20 Government's Exhibit 402 received in evidence..... 180 17 15 Government's Exhibit 420 received in evidence..... 237 13 Government's Exhibit 420 A through 420 H 16 received in evidence.............................. 237 14 17 18 19 20 21 22 23 24 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
