944 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 22, 1998 11 - - - - - - - - - - - - - - X 9:30 o'clock a.m. 12 BEFORE: 13 HONORABLE ARTHUR D. SPATT, U.S.D.J. and a jury 14 APPEARANCES: 15 For the Government: ZACHARY W. CARTER 16 United States Attorney One Pierrepont Plaza 17 Brooklyn, New York 11201 By: RONALD G. WHITE, ESQ. 18 CECIL SCOTT, ESQ. Assistant U.S. Attorneys 19 For the Defendants: NORMAN
TRABULUS, ESQ. 20 For Bruce W. Gordon 170 Old Country Road, Suite 600 21 Mineola, New York 11501 22 EDWARD P. JENKS, ESQ. For Who's Who Worldwide 23 Registry, Inc. and Sterling Who's, Who, Inc. 24 332 Willis Avenue Mineola, New York 11501 25 (cont'd)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 945 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 946 1 M O R N I N G S E S S I O N 2 3 THE CLERK: Jury entering. 4 (Whereupon, the jury at this time entered the 5 courtroom.) 6 THE COURT: Good morning. 7 Good morning, members of the jury. 8 Please be seated. 9 I want to thank you again. You are ahead of me. 10 That's difficult to do. Your punctuality is remarkable, 11 wonderful. Thank you very much. 12 Where is the witness? 13 14 D O U G L A S S. S K A L K A , 15 called as a witness, having been previously 16 duly sworn, was examined and testified as 17 follows: 18 19 THE COURT: Mr. Skalka, you are still under 20 oath. You understand that? 21 THE WITNESS: Yes, I do, your Honor. 22 THE COURT: You may proceed. 23 MR. TRABULUS: Thank you, your Honor. 24 25
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1 CROSS-EXAMINATION (cont'd) 2 BY MR. TRABULUS: 3 Q Good morning, Mr. Skalka, I think when we left off. 4 JUROR NO. 6: There is a switch underneath. 5 Q Good morning, Mr. Skalka. 6 A Good morning. 7 Q I think when we left off I was talking to you about 8 Chapter 11 Trustees, and the fact that typically Chapter 9 11 debtors don't want to have them. 10 Now, is it true that a Chapter 11 Trustee 11 typically gets paid a fee? 12 A A Chapter 11 Trustee is entitled to, yes, subjects to 13 court approval. 14 Q And in most instances a Chapter 11 Trustee is an 15 attorney, in many instances? 16 A In many, and not all. 17 Q In this particular case, the case of Who's Who, a 18 Chapter 11 Trustee was eventually appointed, was he not? 19 A Yes. 20 Q His name was Mr. Mendelsohn? 21 A Yes. 22 Q And is it fair to say that the fee that a Chapter 11 23 Trustee receives comes out of the debtor's property? 24 A Yes. In a bankruptcy case it is called the debtor's 25 estate.
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1 Q If you don't mind, I would like to use the word 2 "property." 3 So, if a debtor is trying to continue his 4 operations, the bankruptcy trustee would represent an 5 additional potential drain on his income; would that not 6 be correct? 7 A No. Because usually the trustee would replace 8 certain members of existing management, therefore the 9 savings by replacing management is offset by the trustee's 10 fee, usually it ends up in being a wash. 11 Q You are saying in most cases the trustee's fee would 12 equal that of existing management? 13 A In most cases, they don't want to increase the 14 administration cost of the estate and want to see it act 15 as a wash. 16 Q In this particular case do you know what fee has been 17 applied for by the trustee to date? 18 A I know what the trustee's counsel has sought as far 19 as fees. I do not believe the trustee has received any 20 fees. 21 Q So, the trustee not only asks for fees, but the 22 trustee hires an attorney in many instances? 23 A In many instances, yes. 24 Q In this particular case the trustee did hire an 25 attorney, correct, with court approval?
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1 A Yes. 2 Q And the attorney has put in a fee application at this 3 point; is that correct? 4 A That's correct. 5 Q And is that fee application in excess of $300,000? 6 A To the best of my knowledge, yes. 7 Q Do you know whether or not any of that has been paid? 8 A I do not. 9 Q Now, have you had any discussions, either formally, 10 or informally with the trustee concerning what his 11 anticipated fees are? 12 A I have not, no. 13 Q Are you familiar with what those anticipated fees are 14 from some other source? 15 A I am familiar with the bankruptcy code which would
16 permit him to ask for it. 17 Q What would it permit him to ask for at this stage? 18 A It is a graduated schedule in the bankruptcy codes, 19 but roughly five percent of what he recovers he can ask 20 for. 21 Q Now, are you saying in the event he recovers nothing 22 he will not get paid anything? 23 A That's correct. 24 Q Okay. 25 Is it fair to say that the attorney for the
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1 trustee has done most of the work in this case for the 2 trustee? 3 A I am not sure the trustee would say that. But he has 4 been very active in court, yes. 5 Q And that is reflected in the request for in excess of 6 $300,000; is that correct? 7 A Yes. 8 Q And that is just an interim request; is that right? 9 A As far as I know, yes. 10 Q And when
we say interim request, it is not a final 11 bill? 12 A No. They are still doing work on the case, but I 13 suspect they will have final bills. 14 Q It is anticipated they will be billing even more than 15 that? 16 A That's right. 17 Q Now, of course the trustee -- if the trustee were not 18 appointed, there would be no attorney for the trustee and 19 that type of bill would be avoided; is that right? 20 A I think that that type of bill is inevitable. The 21 trustee's attorney replaced the debtor's attorney who is 22 in effect taking the place of the debtor's attorney, and I 23 believe these fees would have been incurred either by the 24 trustee or the debtor's attorney at some point. 25 Q Now, a trustee can also under certain circumstances
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 951 Skalka-cross/Trabulus
1 with court
approval cause an accountant to be hired to 2 review the financial affairs of the debtor; is that 3 correct? 4 A Yes, that's correct. 5 Q Did that happen in this case? 6 A Yes. 7 Q And that accountant also incurs fees; is that 8 correct? 9 A Yes. 10 Q Do you know what the fees of that accountant have 11 been to date? 12 A I know that they have filed one interim fee 13 application. 14 Q And for how much is that? 15 A My recollection is that it is close to $100,000. 16 Q And in that case -- withdrawn. 17 That is also an additional fee that is incurred 18 as a result of a trustee being appointed? 19 MR. NEVILLE: I didn't hear the witness' last 20 answer? 21 THE WITNESS: I am sorry. I believe 22 approximately $100,000. 23 Q What was the name of that accounting firm? 24 A Kahn Consulting. 25 THE COURT
: Kahn?
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1 THE WITNESS: Kahn, again, K A H N. 2 Q Now, there was also a gentleman by the name of Kahn 3 who was an attorney for the creditor's committee in this 4 case. You mentioned him yesterday? 5 A Yes. 6 Q Any relationship between Kahn Consulting and the 7 attorney for the creditor's committee? 8 A Not that I am aware of. 9 Q Kahn Consulting were not the only accountants 10 involved in this bankruptcy, were they? 11 A No. 12 Q In fact, Reffsin & Company were also involved? 13 A Yes. 14 Q And those are the accountants we would assume would 15 ordinarily be involved with the Chapter 11 if no trustee 16 were appointed, is that correct, they had been working on 17 it? 18 A Yes, correct, they had been the accountants for the 19
debtor. 20 Q They also put in a fee application for 37,000, 21 something like that? 22 A Something like that, yes. 23 Q We have an additional $100,000 that in this 24 particular case was attributable to the accountants for 25 the trustee; is that correct?
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1 A Yes. 2 Q Now, you mentioned that if a trustee were appointed, 3 the existing management would be out; is that fair today? 4 A It is fair to say some members of the existing 5 management. 6 Q Some members? 7 A Would have been replaced, yes. 8 Q And is it fair to say that one reason that a Chapter 9 11 debtor might not want to have a trustee appointed, is 10 that the existing management might want to continue in the 11 operation of the business? 12 A Yes. 13 Q And, of course, there might be their own self 14 interest involved, they might want to continue to work? 15 A Yes. 16 Q And it also could be good for the business? 17 A It could be. 18 Q Certainly, the people who operate the business know 19 the business best, do they not? 20 A They know the business, yes. 21 Q And in this particular case, do you know whether 22 Mr. Mendelsohn, the trustee had ever been involved in the 23 operations of any publishing businesses? 24 A I don't know. 25 Q Do you know if he was involved in any type of
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1 membership organization? 2 A I do not know. 3 Q Now, in some businesses, personal relationships 4 between management and other people could be quite 5 important to the success of the business; is that correct? 6 A Yes.
7 Q Do you know whether Mr. Mendelsohn had any personal 8 relationships with any of the people with whom Who's Who 9 did business? 10 A No. 11 Q You don't know? 12 A I don't know. 13 Q So, these are all reasons why somebody, a Chapter 11 14 debtor, might not want to have a trustee appointed. Is 15 that fair to say? 16 A Yes. 17 Q In this particular case, at a certain point in time 18 Mr. Mendelsohn did become the trustee? 19 A Yes. 20 Q And do you know when he became the trustee, if he 21 wanted to continue the operations of Who's Who as a 22 membership organization? 23 A I know that he investigated whether it made sense to 24 investigate whether to continue the operations of the 25 company.
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1 MR. TRABULUS: Move to strike. 2 THE COURT: You are moving to strike the answer? 3 MR. TRABULUS: Yes. 4 THE COURT: The motion is granted. 5 Please listen to the questions and answer 6 responsibly. Just answer what the questioner asks you. 7 If you can't answer it yes or no, say so. But no 8 explanations. 9 THE WITNESS: Yes. 10 Q Mr. Skalka, the question is: Did Mr. Mendelsohn ever 11 operate Who's Who as a Who's Who business? 12 A No. 13 Q Is it fair to say from the moment Mr. Mendelsohn was 14 appointed bankruptcy trustee, Who's Who, the debtor, did 15 not operate as a Who's Who business? 16 A That's correct. 17 Q I believe that Ms. Scott asked you yesterday some 18 questions concerning what can happen in a Chapter 11 19 proceeding. And I think you indicated that one result can 20 be a plan; is that correct? 21 A That's correct. 22 Q And a plan is something which you indicated the 23 creditors get to vote on; is that right? 24 A That's correct. 25 Q And if the plan is ultimately approved, and if the
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1 plan is confirmed, the company can come out of bankruptcy 2 and continue in operation; is that correct? 3 A That's correct. 4 Q Now, aside from that happening, what are the other 5 things that can happen in a Chapter 11 if a plan isn't 6 confirmed? 7 A If the plan is not confirmed the case can be either 8 dismissed, and the bankruptcy is no longer in place. Or 9 the case can be converted to a Chapter 7 proceeding where 10 the company would be liquidated. 11 Q Now, in the situation where the debts exceeded the 12 assets of the company and is unable to pay them timely, is 13 it unusual for a Chapter
11 proceeding to simply be 14 dismissed if there was no confirmation of a plan? 15 A It would not be. Either it would be dismissed or 16 converted. 17 Q Is it more typical that there would be a conversion 18 to a Chapter 7? 19 A I would say that in my experience, in those types of 20 scenarios, probably a little more likely that it would be 21 converted than dismissed. 22 Q Now, if we can differentiate among those cases -- 23 distinguish between those Chapter 11 cases where there is 24 a trustee appointed and those in which there is not a 25 trustee, is it fair to say in those cases where a trustee
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1 is appointed, there is a greater likelihood that there is 2 going to be Chapter 11 conversion in your experience? 3 A Not in my experience. 4 Q Not necessarily? 5 A No. 6 Q In any way in this particular case there was a 7 Chapter 11 conversion? 8 A Yes. 9 Q And Who's Who's assets were sold off or in the 10 process of being liquidated; is that correct? 11 A Yes. 12 Q To pay the creditors? 13 A Yes. 14 Q Now, you mentioned the creditors can vote on a plan? 15 A Yes. 16 Q Correct? 17 A Yes. 18 Q And there were some plans proposed in this particular 19 case; is that right? 20 A Yes. 21 Q And when the creditors vote, do they all have an 22 equal vote irrespective of the size of their claim? 23 A The creditors vote by class. There are certain 24 creditors who have priorities, if you have a higher 25 priority, if you have a lien or security interest you are
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1 in one class, if no liens you are in another class, if you 2 have a priority claim, you are in another tax, taxing 3 authorities, unpaid wages, and so forth, are priority 4 creditor, each class gets to vote. 5 Q Talk about the class that Reed Elsevir was in, that's 6 an unsecured creditor? 7 A That's Reed's position, there was some back and forth 8 in the case as to whether we were to be treated as an 9 unsecured creditor, separate classes as a disputed 10 creditor. At one point in the case there was discussion 11 as to whether or not Reed was a secured creditor. 12 THE COURT: You are going to have to slow down, 13 Mr. Skalka. You are getting these answers out so quickly, 14 and in very technical terms, and in a subject that the 15 jury may not know about. So you better slow down. 16 Q Mr. Skalka, I am going to back up and I will try to 17 go step by step so we can
try to make this as clear as 18 possible. 19 Mr. Skalka, you indicated that the creditors who 20 vote are classified in different classes? 21 A Yes. 22 Q Is that correct? 23 A Yes. 24 Q Now, without going into what all the different 25 classes were, in the case of Who's Who's bankruptcy, how
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1 many different classes were there? 2 A As you mentioned there were two plans actually 3 filed. In the first plan, I believe the Who's Who had 4 approximately five classes of creditors, and in the next 5 plan they had six classes of creditors. 6 Q Now, within each class -- withdrawn. 7 Each class votes separately; is that correct? 8 A Yes. 9 Q And within each class, do all the creditors vote 10 equally, or do they vote in proportion to the size of
11 their claim? 12 A In order for a class to be deemed to have approved a 13 plan, you need to have two-thirds in amounts of more than 14 50 percent -- in amount of claims, and 50 percent in 15 number of claims, to approve the plan. 16 Q Within each class? 17 A Yes. 18 Q Now, is it not correct that Reed's claim -- 19 withdrawn. 20 If you add all the claims together across all 21 classes, what percentage of an amount was Reed's claim? 22 A If allowed, Reed's claim was by far the largest 23 claim, I would say approximately 80 percent. 24 Q It was more than two-thirds? 25 A Yes.
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1 Q So, if Reed's claim was allowed, it had the power to 2 block any plan; is that correct? 3 A That was frankly Reed's position, yes. 4 Q If it was allowed? 5 A Yes. 6 Q And during the course of the bankruptcy proceeding, 7 the issue as to whether Reed's claim was going to be 8 allowed or not, primarily depended upon the results of an 9 appeal of the judgment that had been rendered for 1.6 10 million dollars? 11 A That's correct. 12 Q And so, it took a while for that appeal to be 13 decided; is that correct? 14 A Yes. 15 Q And during that time period, that was the question as 16 to whether or not the claim were to be allowed; is that 17 correct? 18 A Yes. 19 Q You mentioned there were two claims -- plans filed, 20 the original plan and the amended plan; is that correct? 21 A That's my recollection. 22 Q You testified yesterday that the amended plan 23 provided for a six year pay out of Reed; is that correct? 24 A Approximately. 25 Q Approximately six?
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1 A Not just Reed, but all of the creditors, yes. 2 Q And you are certain of that; is that correct? 3 A That's to the best of my recollection, yes. 4 Q Before coming here today, did you -- withdrawn. 5 Did you maintain a file on this? 6 A My office maintained a file, yes. 7 Q Your office maintains a file. 8 I assume it is a pretty voluminous file? 9 A Yes. My office maintains the file from June of 1995 10 when I joined the firm. It is fairly voluminous just over 11 that two and a half year period. 12 Q Just over that time period? 13 A Yes. 14 Q Do you have copies of any of the file maintained by 15 Whitman Breed and Abbott? 16 A No, I just have the pleadings filed prior to June of 17 1995. 18 Q When you worked at Whitman Breed and Abbott, you were
19 familiar with their file, were you not? 20 A To the bankruptcy part of the file, yes. 21 Q Only the bankruptcy parts of the file? 22 A Yes. I was not involved in the trademark litigation 23 or the appeal. 24 Q Let's talk about the bankruptcy parts of the file 25 that Whitman maintained. Was that also voluminous?
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1 A Yes, that's fair to say. 2 Q Are you familiar with the file in the bankruptcy 3 court in this case? 4 A Yes. 5 Q And that's fairly voluminous as well; is that 6 correct? 7 A Yes, I would say so. 8 Q In fact, it occupies more than the documents on any 9 of those two carts over there; is that correct? It has to 10 be wheeled around; is that correct? 11 A I would assume so, yes. 12 Q Now, before coming and testifying here, have you 13 reviewed any of the files that we have just been talking 14 about, your office's file, or the Whitman Breed Abbott 15 file, or the bankruptcy court file? 16 A I did not look at the Whitman file. I did not look 17 at the bankruptcy court file. I reviewed parts of my 18 file. 19 Q Had you ever given parts of your file over to the 20 U.S. Attorney's Office? 21 A No. 22 Q Do you know whether Whitman ever gave parts of its 23 file over to the U.S. Attorney's Office? 24 A I do not know. 25 Q When you were there, were you familiar with any
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1 copies of documents being given over to the government, 2 whether the U.S. Attorney's Office, or postal inspectors 3 or IRS agents? 4 A No. 5 Q Would you be familiar with any part of the file 6 pertaining to the trademark litigation having been given 7 over to governments? Do you know that? 8 A No. 9 Q Would you have had occasion in the work you did to 10 look over the trademark litigation file? 11 A Parts of it. 12 Q You certainly had to familiarize -- withdrawn. 13 You had to familiarize yourself with the nature 14 of the claim; is that correct? 15 A Again, parts of it. 16 Q Well, did you have to familiarize yourself with the 17 type of claim that led to the judgment that Reed got 18 against Who's Who? 19 A In general terms, yes. 20 Q Certainly, because there are some kinds of claims 21 which don't get discharged in bankruptcy? 22 A Yes, certainly to that aspect I had to look at it. 23 Q So, you had to look at what the nature of the claims 24 were? 25 A Yes.
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1 Q Now, I think you testified yesterday that Reed did 2 not regard itself as a competitor of Who's Who; is that 3 correct? 4 A That's correct, to the best of my knowledge. 5 Q Now, were you aware that one of the claims that was 6 asserted against Who's Who by Reed, which led to the 7 judgment, or included it -- in it, in any event, was an 8 unfair competition claim? 9 A I was not aware. 10 Q You were not aware? 11 A No. 12 Q As you stand here today, do you dispute that? 13 A No. 14 MR. TRABULUS: Excuse me, your Honor. Bear with 15 me. 16 THE COURT: Surely. 17 Hold it a minute. 18 (Whereupon, at this time there was a pause in the 19 proceedings.) 20 THE COURT: You may proceed, Mr. Trabulus. 21 MR. TRABULUS: Thank you, your Honor. 22 Your Honor, I just want to show Mr. White 23 something. 24 THE COURT: Surely. 25 (Mr. Trabulus confers with Mr. White.)
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1 Q Mr. Skalka, I will show you what is just marked as 2 Gordon E for Identification. I will not put it in 3 evidence, but I want to see if it refreshes your memory. 4 I want to show you first this, and I will direct 5 your attention to that. 6 Now, Mr. Skalka, I am also going to show you 7 this, and I will direct your attention to that. 8 Now, Mr. Skalka, I have just shown you -- 9 withdrawn. 10 Do you recognize the documents I have just shown 11 you? 12 A I recognize what they are. 13 Q Do you recognize them as being the original complaint 14 filed by Reed against Who's Who, and then something called 15 an amended complaint; is that correct? 16 A Yes. 17 Q And seeing that, did it refresh your recollection 18 that both of them included unfair competition claims 19 against Who's Who? 20 A They did. I don't recall actually reviewing those 21 documents. 22 THE COURT: So you never had a recollection one 23 way or another? 24 THE WITNESS: That's correct, I recall reviewing 25 the judgment, but not the complaints.
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1 THE COURT: Do you have an independent 2 recollection that there was an unfair competition claim? 3 THE WITNESS: No, I do not, your Honor. 4 Q Tell me, you are not in a position to say then as to 5 whether or not there was an unfair competition claim? 6 A That's fair to say. 7 Q So, it is your understanding, sir, still that Reed 8 did not view itself or view Who's Who as a competitor of 9 it? 10 A I can tell you in the bankruptcy aspect of the case, 11 and I still am representing Reed, Reed did not consider 12 Who's Who to be a competitor. Their products were 13 marketed for a different market and for a different 14 purpose. 15 Q Now, you were aware, were you not, that there was a 16 trademark infringement aspect to the claim that Reed had 17 against Who's Who, did you not? 18 A Yes, I was. 19 Q Were you not? 20 A Yes, I was. 21 Q And you were aware, were you not, that the term Who's 22 Who itself is not trademarked? 23 A Yes. 24 Q So anybody can use the term Who's Who? 25 A Right, yes.
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1 Q And the claim was that the names of some of the 2 publications that are Who's Who -- that our Who's
Who here 3 published, were similar to some trademark names that Reed 4 had; is that correct? 5 A Yes. 6 Q One was Who's Who in America? 7 A Yes. 8 Q And one of them was Who's Who in the World? 9 A That's correct. 10 Q And were you aware that there was a claim that in 11 some respect the marketing of some publications of Who's 12 Who we are talking about here would have an adverse impact 13 on Reed's business in marketing those publications; is 14 that right? 15 A Yes. 16 Q And that would take away from that business? 17 A Yes, and was confusion. 18 Q And cause confusion? 19 A That was my understanding. 20 Q Did you not interpret that to mean that Reed regarded 21 Who's Who as a competitor? 22 A Again, that was not my understanding. 23 Q Before you came to testify here today, did you have a 24 conversation -- withdrawn. 25 Before you came to testify yesterday, when was
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1 the last time that you had spoken to someone in the U.S. 2 Attorney's Office? 3 A I believe I testified that -- I was actually here on 4 Tuesday, oh I saw Ms. Scott on Tuesday. I believe I 5 talked to her on Monday when she told me I probably would 6 be testifying on Tuesday. 7 Q And when was the last time before that? 8 A Approximately two weeks ago, when Ms. Scott again 9 told me that the trial would be starting, and when I 10 approximately would be called to testify. 11 Q Now, before you -- now, besides speaking to 12 Ms. Scott, did you speak to Mr. White in the past couple 13 of weeks? 14 A No. 15 Q Did you speak to any agent for the federal 16 government, whether it be Mr. Pagano, Mr. Jordan or 17 anybody else? 18 A No. 19 Q Now, in speaking to Ms. White, was there any 20 discussion -- to Ms. White, was there any discussion with 21 respect to Reed contending that Who's Who was a 22 competitor -- 23 A You are talking about Ms. Scott? 24 Q Yes, I meant Ms. Scott, when you spoke to her, did 25 she tell you any of the defendants maintained that?
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1 A That Reed thought that Who's Who was a competitor? 2 Q Yes, and that's why they wanted to put Who's Who out 3 of business? 4 A Not that they were a competitor, but there was some 5 discussion about Reed wanting to put Who's Who out of 6 business. 7 Q She told you something that the defendants were 8 maintaining in their opening statement; is that correct? 9 A Yes.
10 Q Did you thereafter have any discussions with your 11 client Reed concerning the trial? 12 A No. 13 Q Have you spoken to your client Reed about the fact 14 that you are testifying here? 15 A I correspond with -- corresponded with him several 16 months ago, when I was first contacted that I might be 17 testifying. 18 Q When you corresponded, did you write a letter? 19 A Yes. 20 Q Did you write it to an official of Reed or an 21 attorney who works for Reed? 22 A An official. 23 Q Have you spoken to anybody since that letter? 24 A No. 25 Q Have you discussed with them -- withdrawn.
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1 Have you either discussed with them or put into 2 that letter that you expected to be paid when you came 3 here to testify? 4 A No. 5
Q Have you been paid in the past when you appeared in 6 court on matters that Reed itself wasn't a party to, paid 7 by Reed? 8 A I believe this is the first time I have done this. 9 Q Are you saying, sir, this is the first time, very 10 first time you appeared as a representative of Reed in a 11 courtroom, where Reed itself was not a party to the 12 proceeding going on in court? 13 A Other than sitting in on one or two days of a 14 previous criminal proceeding back in 1995. 15 Q Criminal proceedings in 1995? There were no criminal 16 proceedings in 1995. 17 A My recollection -- 18 MR. WHITE: Objection to Mr. Trabulus' statement. 19 THE COURT: Sustained. 20 Q You sat in -- you didn't actually sit in, you 21 actually spoke to the Court; is that right? 22 A At what time? 23 Q In 1995? 24 A I don't recall. It is possible. I don't recall. I
25 remember appearing as some probable cause hearings,
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1 sitting in on one or two of those days. I don't recall if 2 I actually addressed the Court. 3 Q Let me see if I can refresh your memory a little bit. 4 When you came to that hearing, it was in this 5 building, was it not? 6 A I believe so. 7 Q And it wasn't in front of the judge who is here now, 8 but in front of another judge; is that correct? 9 A Yes. 10 Q And the judge was a woman; is that correct? 11 A I believe so. 12 Q A woman whose name is Judge Seybert; is that correct? 13 A That's correct. 14 Q Now, you came to court that day, and who requested 15 that you come to court? 16 A My client. 17 Q And did your client tell you how they knew about the 18 Court proceeding?
19 A I don't recall. 20 Q Did you know about the Court proceeding before your 21 client requested that they come? 22 A I believe so. 23 Q You were at Whitman? 24 A I believe so, yes. 25 Q Do you know how Whitman found out about it?
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1 A No. I may have found out about it myself from the 2 debtor's counsel, or one of the other parties to the 3 bankruptcy proceeding. 4 Q Now, when you came to court that day, was it your 5 understanding that it related to the results of a search 6 and seizure that had occurred at the facilities of Who's 7 Who; is that correct? 8 A Yes. 9 Q What you appeared at was a civil action in which 10 Who's Who was trying to get, among other things, its 11 property back, and its funds unfrozen? 12 A I am not a
criminal attorney. My understanding is 13 that it was a probable cause hearing in connection with 14 the seizure and also the arrest that had taken place. 15 Q Well, did you understand that it was a probable cause 16 hearing in terms of whether or not -- withdrawn. 17 Did you understand in one of the issues coming up 18 was whether or not Who's Who could get some money released 19 so it could continue in business? 20 A Yes. 21 Q Is that correct? 22 A That was my understanding. 23 Q And when you went there did you have a 24 conversation -- withdrawn. 25 Did you understand that Who's Who's attorney at
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 973 Skalka-cross/Trabulus
1 that hearing were saying we need the money so we could 2 continue in business, and among other things, pay our 3 creditors? That's basically the position
-- one of the 4 things being said there; is that correct? 5 A One of the positions. 6 Q In fact, one of the things being said is that there 7 is a plan, which has been filed, which would provide for 8 100 percent payment; is that correct? 9 A That plan was on file at that time, yes. 10 Q And was that brought -- do you recall that being 11 brought to the attention of the Court? 12 A I don't have a specific recollection of that, no. 13 Q Do you recall addressing that issue yourself? 14 A No, I don't. 15 Q Now, Reed as a creditor -- withdrawn. 16 Before going to the hearing did you talk to Reed 17 and ask them whether or not they wanted the money 18 unfrozen? 19 A I don't know if I asked that specific question, but 20 we probably had questions concerning whether the money was 21 going to be unfrozen and what our position was. 22 Q Well, what w
as your position to be after that 23 discussion? 24 A We were concerned that this -- 25 MR. TRABULUS: Move to strike.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 974 Skalka-cross/Trabulus
1 Q What was your position, do you want that money 2 unfrozen or not? 3 THE COURT: I don't know. It might have been a 4 responsive answer. You asked, what was your position, it 5 doesn't call for a yes or no answer, does it? 6 MR. TRABULUS: It doesn't call for an answer that 7 says we were concerned, your Honor. 8 THE COURT: I think it may. Let me hear your 9 answer. 10 He slipped up this time. He didn't ask for a 11 question calling for a yes or no answer. It happens 12 occasionally. And that's fine because in 13 cross-examination that's what lawyers generally do. They 14 want to pinpoint the particular area. They don't want
15 wide generalized answers, but now, what was your purpose? 16 Go ahead. 17 THE WITNESS: We were concerned if the money was 18 released, the money would be dissipated and lost and not 19 recovered for the creditors. 20 At roughly the same time I had filed another 21 motion for the appointment of a trustee in the bankruptcy 22 court, because if the money was to be released, we wanted 23 it to be to a trustee who could again propose a plan, and 24 recover those loans which were still not recovered on 25 behalf of the creditors.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 975 Skalka-cross/Trabulus
1 Q That was your third motion for a trustee being 2 appointed; is that correct? 3 A Frankly, at that time I don't know if it was the 4 second or third. But I think there were eventually three. 5 Q Let's get back to the position, did Reed basically 6 tell you we don't want the money unfrozen? 7 A We don't want it unfrozen and given back to the 8 debtor at that time. 9 Q Did Reed tell you that they didn't care whether or 10 not the debtor resumed operations? 11 A No. 12 Q Did Reed tell you they didn't want the debtor to 13 resume operations? 14 A No. 15 Q Did Reed tell you they wanted a trustee to operate 16 Who's Who for you -- for itself? 17 A That's my recollection. 18 Q And the idea was that -- well, was there any 19 discussion with Reed whether or not the interruption in 20 Who's Who's business before the trustee motion was 21 decided, even if a trustee was going to be appointed, 22 whether or not it might hurt Who's Who's ability to keep 23 operating? 24 A Yes. 25 Q Was it discussed that it might hurt its ability to
HARRY RAPAPORT, CSR,
CP, CM OFFICIAL COURT REPORTER 976 Skalka-cross/Trabulus
1 keep operating? 2 A Yes. 3 Q And even if the trustee were appointed, with the 4 funds being frozen, and no operations for a period of 5 weeks or months that Who's Who might not be able to 6 operate; is that correct? 7 A Yes. 8 Q But the attorneys for Who's Who who were there were 9 arguing that Who's Who should be given enough money to 10 operate, to keep in contact with its members; is that 11 correct? 12 A That's correct. 13 Q Now, at this proceeding that you were present at, you 14 were not the only creditor who came to this proceeding, to 15 this hearing; is that correct? 16 A I believe I was the only one there representing a 17 particular creditor. I believe Mr. Kahn was there on 18 behalf of the creditor's committee. 19 Q That's correct; is that correct?
20 A That is my recollection. 21 Q And he, did he not, spoke about the fact that there 22 was a plan, a 100 percent plan filed; did he not? 23 A He might have. I don't recall exactly what he said. 24 Q Do you recall Mr. Kahn saying the following -- 25 MR. TRABULUS: Your Honor, this is being offered
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 977 Skalka-cross/Trabulus
1 only because it preceded what Mr. Skalka himself said in 2 response. 3 MR. WHITE: Excuse me, can Mr. Trabulus identify 4 what he is reading from? 5 MR. TRABULUS: Yes, a transcript, April 19th, 6 1995, of a hearing before Judge Seybert, in a civil 7 action, 95-1418. 8 MR. WHITE: My objection, your Honor, is to 9 Mr. Trabulus reading it outloud. If he wants Mr. Skalka 10 to review it and ask questions about it, fine. 11 THE COURT: Sustained. 1
2 Q Mr. Skalka, I would like you to take a look -- I have 13 not marked this as an exhibit, but I have identified what 14 it is, but look at page 40, 41, through 42. 15 THE COURT: While he is doing that, let me 16 explain what a document that is offered to a witness to 17 refresh the witness' recollection means. That document is 18 not in evidence, so you will not consider it as part of 19 the evidence in the case. But there are occasions where 20 the lawyer wants to refresh the recollection of a 21 witness. He can do it, or she can do it with anything. 22 They can show the witness a document, they can show them a 23 pineapple. They can show them tickets to the new hit show 24 Ragtime, anything that might refresh their recollection. 25 If they show a document that is not in evidence a
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 978 Skalka-cross/Trabulus
1 very interesting procedure occurs. 2 They can read the document and say this refreshes 3 my recollection, but they can't read from the document. 4 They have to lift their head up and say I now remember, 5 and proceed to tell us what they remember. But that 6 document, those kind of documents are not in evidence, and 7 you will not see them. 8 MR. WHITE: May I have a moment to get my copy of 9 the document from my file? 10 THE COURT: Go ahead. You are free to walk 11 around any time you want, Mr. White. 12 MR. WHITE: I didn't want to interrupt, your 13 Honor. 14 (Whereupon, at this time there was a pause in the 15 proceedings.) 16 MR. WHITE: Your Honor, may I speak to 17 Mr. Trabulus? I don't know if I have the right thing in 18 front of me. 19 THE COURT: Sure. 20 (Mr. White confers with Mr. Trabulus.) 21 THE COURT:
Have you completed looking at the 22 document? 23 THE WITNESS: Yes, I have, your Honor. 24 THE COURT: What is the question? 25 MR. TRABULUS: Your Honor, as a courtesy to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 979 Skalka-cross/Trabulus
1 Mr. White, he didn't have the right document. I was going 2 to wait until he found it. 3 THE COURT: All right. 4 MR. WHITE: I have it now, your Honor. I am 5 sorry. 6 THE COURT: All right. 7 Q Mr. Skalka, if you want to look at it again, please 8 tell me, all right? 9 Does that refresh your recollection that on that 10 day you didn't merely attend in court, but you actually 11 spoke and addressed the Court? 12 A Yes. 13 Q And you spoke to the Court after Mr. Kahn, the 14 attorney for the creditor's committee spoke; is that 15 right? 16 A Yes.
17 Q And what Mr. Kahn had said to the Court at that point 18 in substance was that the debtor, meaning Who's Who 19 Worldwide, had submitted a hundred percent plan which was 20 payable to some of the creditors over a one-year period, 21 and to Reed over a three-year period, assuming that Reed's 22 judgment was affirmed by the Court of Appeals; is that 23 correct? 24 A That's what he said. 25 Q And Mr. Kahn, he didn't represent Who's Who, did he?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 980 Skalka-cross/Trabulus
1 A No. 2 Q He represented people to whom Who's Who owed money; 3 is that right? 4 A He represented the creditor's committee. 5 Q The creditor's committee included companies, 6 individuals, whatever, I think you read the names of some 7 of those yesterday when Ms. Scott questioned you about a 8 schedule of c
reditors, and those are the people or 9 entities to whom Who's Who owed money; is that right? 10 A Yes. The people I read yesterday were people who 11 were owed money. I didn't read the names of the people on 12 the creditor's committee. 13 Q Okay. 14 And the creditor's committee was supposed to 15 represent the interest of creditors; is that correct? 16 A Yes. 17 Q Indeed, Reed itself had a representative on the 18 creditor's committee; is that correct? 19 A Yes. 20 Q And basically, Mr. Kahn was telling the Court that it 21 would be to the advantage of the creditors if Who's Who 22 were given some money to operate; is that not correct? 23 A That was his position. 24 Q That was his position? 25 It wasn't somebody speaking for Who's Who, but
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 981 Skalka-cross/Trabulus
1 for companies Who's Who owed money; is that correct? 2 A He was speaking on behalf of the committee, yes. 3 Q And after Mr. Kahn spoke, did you not address the 4 Court as follows, page 41, beginning at line 13: 5 Mr. Skalka -- it is just indicating you are the 6 one speaking -- since Reed's name has been bandied about 7 here, Reed is of the largest defendant here. 8 Was that probably a mistake in the 9 transcription? 10 A Probably the largest creditor. 11 Q Reed had not agreed to any plan of reorganization. 12 The debtor's plan as far as Reed is concerned is dead on 13 arrival. Reed has applied for appointment of a trustee. 14 That is on for a hearing next Wednesday before Judge 15 Eisenberg. We believe there is grounds -- 16 THE COURT: You started out very nicely when you 17 were reading. I don't know if that was to emphasize 18 particular sentences
or not. But then when you got to 19 another portion you started speeding up again. I just 20 lost it. 21 MR. TRABULUS: I will repeat that portion. 22 THE COURT: Okay. 23 MR. TRABULUS: Thank you, your Honor. 24 THE COURT: You did very well the first two or 25 three sentences, for whatever reason.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 982 Skalka-cross/Trabulus
1 MR. TRABULUS: I am learning, your Honor. 2 Reed has applied for appointment of a trustee. 3 That is on for a hearing next Wednesday in front of Judge 4 Eisenberg. We believe there is grounds for whether or not 5 this Court grants Mr. Gordon's relief or not. 6 The plan that Mr. Kahn makes reference to 7 provides for an ongoing payment over a four or 5-month 8 period, and we don't know what will happen with this 9 business past today, your Honor. 10 And
then you said representations have been made 11 that bank accounts were seized, and also representations 12 were made that certain bank accounts were not seized as 13 has been admitted here between 650 and $300,000 of the 14 debtor's funds should be available to the debtor. As of 15 the end of February operating statements who were -- 16 THE COURT: You are working up a head of steam, 17 as you go on you get stronger all the time. 18 MR. TRABULUS: As of the end of February -- 19 THE COURT: Do we need all of this, 20 Mr. Trabulus? 21 MR. TRABULUS: No. 22 THE COURT: Strike out the end of February, will 23 you? 24 Q Basically you told the Court that the reorganization 25 plan was dead on arrival; is that right?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 983 Skalka-cross/Trabulus
1 A That's what you read out of the transcript. Yes. 2 Q And that plan was not like the plan you testified to 3 yesterday, the first plan. That was not something which 4 only provided payments at the end of the ten year period; 5 is that correct? 6 A No. But the plan I was talking about and the plan 7 Mr. Kahn was talking about were two different plans, 8 Mr. Kahn testified before Judge Seybert about the one-year 9 pay out and three-year pay out with Reed, it is something 10 he negotiated with Who's Who's bankruptcy attorneys, and 11 it never got on file with the bankruptcy court. I was 12 referring to the plan on file with respect to a four or 13 five-year pay out. Which is four or five years post 14 confirmation, which ultimately would have been six years, 15 six years from that time, from 1995. 16 Q And that involved an ongoing payment to Reed? 17 A Yes. 18 Q And other -- 19 A To all creditors. 20 Q To all creditors. 21 And there was also a plan that was being spoken 22 about which would have provided a three-year pay out to 23 Reed and a one-year pay out to other creditors; is that 24 right? 25 A Again, that's the plan to my recollection was never
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 984 Skalka-cross/Trabulus
1 filed. It was being negotiated at that time between 2 Mr. Kahn and Mr. Ackerman, the attorney for the debtor at 3 that time. 4 Q Did you get involved in those negotiations at all? 5 A Parts of it, yes. 6 Q And was that the plan that you said was dead on 7 arrival? 8 A No. I was referring to the one presently on file, 9 the one referring to the pay outs. That's the one I had 10 actually seen and I know my client did not approve. 11 Q Are you saying the plan under negotiations at that
12 point was something that Reed was looking to enter into, 13 the one with the one in three provision? 14 A Again, I don't believe I ever saw a written document 15 providing for those terms. I believe it was still in the 16 negotiation phase between Mr. Kahn and Mr. Ackerman. 17 Q And in opposing the release of funds, you did not 18 tell the Court that there was another plan that was under 19 negotiation which might have been acceptable to Reed, did 20 you? The only thing you said about a plan is that it was 21 dead on arrival; is that right? 22 A The one I knew about we had already rejected, and 23 there was no other one being proposed to Reed that we 24 would accept, because all plans also provided for 25 continuing litigation with Reed, and our claim was being
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 985 Skalka-cross/Trabulus
1 disputed. And, frankly, my client objected to that. 2 Q Your client objected to a plan which would have paid 3 it in full over a three-year period if its judgment was 4 affirmed by the Appellate Court? 5 A Again, that was never presented to my recollection. 6 That was never presented. It was never filed. It was 7 never actually presented to my client. 8 Q But when you spoke to the judge, Judge Seybert at 9 that point in time, Mr. Kahn had just informed the Court 10 about that plan that was under negotiation; is that 11 correct? 12 A He had, but I believe all those negotiations took 13 place prior to March 30th, 1995. At this point the 14 business was not operating for a few months, April. All 15 the suggestions that had been discussed and bandied about 16 with regard to plans were frankly now not worth anything. 17 We didn't know if this was able to be coming forward. 18 MR. TRABULUS: Move to strike everything after he 19 had. 20 THE COURT: Motion granted. Strike it out. The 21 jury is instructed to disregard it. 22 Listen to the questions, Mr. Skalka. 23 THE WITNESS: I am sorry. 24 THE COURT: If you can't answer yes or no, say 25 you can't answer yes or no. That shifts the burden back
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 986 Skalka-cross/Trabulus
1 to Mr. Trabulus, who knows he might say, say anything you 2 want. I doubt it, but he might. 3 MR. TRABULUS: You are right, your Honor, I 4 won't. 5 Q Mr. Skalka, I think you testified yesterday that you 6 didn't get involved in the bankruptcy until six weeks or 7 so after the filing; is that right? 8 A Yes. 9 Q And were there other people in your firm who were 10 involved before you got involved? 11 A
Other bankruptcy attorneys? 12 Q Yes. 13 A I believe there was one other bankruptcy attorney 14 involved. 15 Q In fact, your firm was involved in the bankruptcy 16 from at least, almost the very date of the filing; is that 17 correct? 18 A I believe that's correct. 19 Q One of the very first things your firm did two days 20 after the bankruptcy petition was filed, was to make a 21 motion to get relieved from the automatic stay you talked 22 about yesterday; is that correct? 23 A Yes. 24 Q And you wanted, or your firm wanted to be able to 25 proceed against Who's Who to attempt to collect the 1.6
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 987 Skalka-cross/Trabulus
1 million dollar judgment; is that right? 2 A I do not believe that that was the basis for the 3 motion. 4 Q Let me go back. 5 Actually at the time that the bankruptcy petition 6 had been filed, the judgment hadn't been filed yet; is 7 that correct? 8 A That's my recollection, yes. 9 Q In fact, there had been a decision, but the piece of 10 paper which is called a judgment, and which is the basis 11 for going to the sheriff or the marshals, or whatever, and 12 get them to collect the money, that hadn't been prepared 13 and filed in court yet; is that right? 14 A I believe that's correct. 15 Q Is it your testimony that the only basis for the 16 motion was to get permission to do that? Or did you also, 17 having done that, just want to proceed to collect? 18 A No. I believe we knew we couldn't collect the 19 judgment because the -- because of the bankruptcy filing. 20 But we wanted the judgment entered, because the Judge who 21 entered the decision was about to retire. And for a 22 mechanical standpoint we wanted to at least have it 23 entered and let the bankruptcy case go on. There was also 24 part of the judgment we wanted kept in place besides the 25 money judgment. The other orders of the Court we wanted
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 988 Skalka-cross/Trabulus
1 kept in place. 2 Q And you succeeded in doing that and you were able to 3 get a judgment filed; is that correct? 4 A To the best of my recollection, yes. 5 Q Now, you mentioned yesterday one of the things that a 6 bankruptcy company can do is accept or reject leases; is 7 that correct? 8 A Yes. 9 Q And you said you had some concern -- withdrawn. 10 For example, if a company has a ten-year lease, 11 or a five-year lease, going into the future, that might be 12 something that a company could reject; is that right? 13 A That's correct.
14 Q And sometimes companies that are in reorganization, 15 that have multiple facilities under separate leases, might 16 consolidate their operations at a particular facility; is 17 that correct? 18 A Yes. 19 Q They might want to reject the lease on one and accept 20 the lease on another? 21 A Yes. 22 Q And so they would not be burdened with a lease 23 payment for a facility they would not be using any more; 24 is that right? 25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 989 Skalka-cross/Trabulus
1 Q Now, in this particular instance, how many leases 2 were you aware of that Who's Who had? 3 A At the beginning of the case it was a bit unclear, 4 just looking at the petition, or the schedules, which is 5 only information we had. 6 Q Do you have that in front of you? 7 A No.
8 MR. TRABULUS: I believe that's Exhibit 610. 9 Q Would you go to rider, to schedule G? 10 A I am already there. 11 Q You are ahead of me. 12 I will hold off a moment to let the jurors find 13 it. 14 I am talking about a lease -- a rider to leased 15 property, there were four of them? 16 A Yes, according to this, there are four. 17 Q There was one on a facility in Lake Success; is that 18 correct? 19 A Two of them are in Lake Success. 20 Q Two on Lake Success? 21 A Yes. 22 Q And one in Manhattan, and then the one on the 23 apartment in Manhattan? 24 A That's correct. 25 Q Now, did you understand upon reading that that at
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 990 Skalka-cross/Trabulus
1 least some of those were places at which Who's Who 2 conducted its business? 3 A Yes.
4 Q Were you aware that business was conducted both in 5 Manhattan and in Lake Success? 6 A Not for the debtor which is Who's Who Worldwide 7 Registry. 8 Q Were you aware that the debtor, Who's Who Worldwide 9 Registry had entered into a lease for facilities at 750 10 Lexington Avenue, which another company, Sterling, 11 utilized; is that correct? 12 A Subsequent to my first seeing this, I was informed of 13 that, yes. 14 Q And how long into the case was it that you learned? 15 A Not long. If I was brought in in April or early May 16 of '94, I would say within a month or two after that. 17 Q Now, were there any discussions that you were aware 18 of about the possibility of Who's Who consolidating its 19 operations at one of the two locations, either in Lake 20 Success, or in Manhattan? 21 A There were no discussions like that prior to the 22 government's actions in March of 1995. 23 Q Did it occur to you as part of a plan of 24 reorganization that it might enable Reed Elsevir to be 25 paid, early on and consolidate its operations?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 991 Skalka-cross/Trabulus
1 A Yes. 2 Q Did it occur to you that it might involve a change of 3 business that may take some time? 4 A Yes. But it was not something the debtor would 5 consider early on in the case. Those discussions did not 6 go anywhere. 7 Q Did the debtor seek to extend the time that it had in 8 which to decide as to whether or not to accept or reject 9 the leases? 10 A Yes, they filed a motion fairly on in the -- fairly 11 early on in the case. 12 Q And a reason for that motion was to see as time went 13 on what course of operation would make the most sense in 14 reorganization; is that correct? That's the position they 15 took? 16 A Yes. 17 Q For business reasons they couldn't decide at that 18 point which one to accept or reject; is that right? 19 A Yes. 20 The other thing, sometimes even if you want to 21 keep that space, you may want to renegotiate your lease 22 term so you may want to reject the lease and try to get a 23 better lease term. That might be one of the reasons. 24 Q One of the landlords opposed the motion for an 25 extension?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 992 Skalka-cross/Trabulus
1 A Yes. 2 Q And they wanted to know where they stood right off, 3 so that is not a surprise; is that correct? 4 A Yes, I believe so, and that's one of the reasons I 5 found out that the lease was under the name of Sterling 6 Who's Who, so we don't have a direct lease relationship 7 with the debtor, so the debtor does have the time or the 8 right to reject that lease. 9 Q Is it not correct that Reed opposed the motion with 10 respect to the time to oppose or reject all the leases? 11 A To the best of my recollection, yes. 12 Q And not withstanding that Who's Who was maintaining 13 that for business reasons at that point it couldn't decide 14 which is the way it would make more sense for a 15 reorganization? 16 A I think the main reason -- 17 Q Yes or no? 18 A Would you restate the question? 19 Q I will withdraw it. 20 Did you discuss with Reed as to whether to oppose 21 that motion? 22 A Yes. 23 Q Didn't Reed tell you we are not interested in having 24 them extend the leases, we want them out of business so we 25 can get paid, did they tell you that?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 993 Skalka-cross/Trabulus
1 A No. 2 Q They didn't? 3 A No. 4 Q They never told you they wanted them out of business? 5 A Not in those words, no. 6 Q In what words did they say it? 7 A They wanted this company to not infringe upon Reed's 8 trademarks. They wanted this company to operate lawfully. 9 Q Did they tell you that once the name -- let's talk 10 about a trademark infringement, that related to a couple 11 of different names that appeared on the books; is that 12 correct? Who's Who Worldwide Registry, Inc.? Excuse me, 13 Who's Who Worldwide, that's one of the name, they say the 14 Worldwide infringed on Who's Who in the World; is that 15 right? 16 A That's correct. 17 Q Is it not correct that Who's Who changed the title of 18 that book after the judgment in favor of Reed? 19 A I believe they did at
least for one addition that I 20 was aware of that went out after the filing of the 21 bankruptcy. 22 Q Well, the filing of the bankruptcy came very shortly 23 on the heels of the judgment; is that right? 24 A That's correct. 25 Q And so, they couldn't go back in time and change what
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 994 Skalka-cross/Trabulus
1 they have already done? 2 A Yes, a lot of those things. I don't know anything 3 about after that one edition. 4 Q There was another name of another book, that was also 5 changed; is that right? 6 A I have some recollection of that, yes. 7 Q That happened very soon after the bankruptcy was 8 filed; is that correct? 9 A Yes. 10 Q And did that happen before or after Reed opposed the 11 extension or rejection of the lease? 12 A I don't recall. 13 Q
You don't recall one way or another? 14 A No. 15 Q Isn't it correct that once the names were changed 16 there was no longer any issue that Who's Who was going to 17 be infringing any trademark that Reed had; is that right? 18 A That's not correct. 19 Q That's not correct. 20 There was something else -- are you saying that 21 there was something that the judge, some trademark 22 infringement that was determined to have occurred by the 23 judge in the Reed Elsevir case that they didn't correct, 24 yes or no? 25 A This is one of those questions I can't answer yes or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 995 Skalka-cross/Trabulus
1 no. 2 Q Well, was there some respect in which you believed 3 that Who's Who Worldwide was continuing to infringe a 4 trademark in a respect in which the judge had said would 5 constitute a trademark infringement? 6 A Reed believed that the debtor continued to infringe 7 upon the trademark after the filing of bankruptcy, yes. 8 Q And what were the respects in which Reed told you 9 that they believed that the debtor -- that they believed 10 that Who's Who was continuing to do it? 11 A I was not directly involved with the trademark 12 litigation. I do know that Reed filed motions contending 13 that the debtor continued to infringe upon the trademark 14 after the filing in the form of solicitation, I believe 15 that was being made to its members. 16 Q Okay, leaving that aside. 17 As long as -- withdrawn. 18 So, is it your testimony that Reed said to you if 19 Who's Who does exactly what we think it should, we would 20 have no problem with it, they can keep on going? 21 A Yes. 22 Q That's your testimony? 23 A Yes. 24 Q Who
did you speak to there? 25 A My contact was someone in the -- one of the in-house
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 996 Skalka-cross/Trabulus
1 attorneys at Reed. 2 Q Ever speak to Sandra Barnes? 3 A I have spoken to her, but she was not my contact. 4 Q Can you tell the jury who Sandra Barnes is? 5 A An official at Reed, I believe Reference Publishing 6 in New Jersey, who was one of the parties responsible for 7 policing or watching over these trademarks for Reed. And 8 I believe she testified in the trademark litigation. 9 Q B A R N E S; is that right? 10 A I believe so. 11 Q And let me ask you, how many different publications 12 did Reed publish that had the word "Who's Who" in the 13 name, do you know? 14 A I do not know. 15 Q Was it more than five? 16 A I don't know. 17 Q Are you familiar with the names of any of them? 18 A Some of them, Who's Who in America, Who's Who in the 19 World. 20 Q Who's Who in the East? 21 A I wasn't aware of that. 22 Q Who's Who in the West? 23 A It could be. 24 Q Do you know whether or not Reed used mailing lists to 25 solicit for the people for Who's Who, for their Who's Who?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 997 Skalka-cross/Trabulus
1 A Excuse me? 2 Q For their Who's Who? 3 A I believe for some of the publications they do use 4 mailing lists. 5 Q Do you know whether Reed, when it solicits people for 6 some of the publications they use mailing lists and sends 7 letters saying they were nominated for the use in that 8 publication? 9 A I don't know. 10 Q You don't know whether they use the word 11 "nominated"? 12 A I don't know.
13 Q Yesterday Ms. Scott asked you what the results were 14 of the litigation filed by Reed; do you recall that? 15 A Yes. 16 Q I believe she asked you whether it was filed in 1992? 17 A Yes. 18 Q And then she asked you about the results? 19 A That's correct. 20 Q And you testified that in 1994 there was a judgment, 21 correct? 22 A That's correct. 23 Q Now, a fair amount happened in-between that, between 24 the filing of the lawsuit and the judgment; is that 25 correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 998 Skalka-cross/Trabulus
1 A I believe so, but again, I was not involved with that 2 litigation. 3 Q Are you aware that in 1992 Reed sought to obtain a 4 preliminary non-injunction -- 5 MR. WHITE: Objection. 6 THE COURT: Sustained. 7 Q You testified yesterday concerning loans that were 8 shown on the schedule; is that correct? 9 A That's correct. 10 Q And did you yourself get involved in examining any of 11 the underlying documentation in relation to those loans? 12 A Yes, I did. 13 Q And the loans were -- the bulk of them were to 14 Mr. Gordon, were they not? 15 A Actually, the two largest loans were to other 16 entities, no. 17 Q I am sorry, I am painting with too broad a brush. 18 Let's take a look at the schedule. 19 (Whereupon, at this time there was a pause in the 20 proceedings.) 21 MR. TRABULUS: Bear with me a minute, your 22 Honor? 23 THE COURT: Yes. 24 (A further pause in the proceedings.) 25 Q Is it not correct that there were loans to officers
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 999 Skalka-cross/Trabulus
1 and stockholders for approximately $482,000?
I don't have 2 the page in front of me. I am still looking for it. 3 A Perhaps I can help you. The second page of schedule 4 B. 5 Q B as in boy? 6 A B as in boy, entitled personal property, the second 7 page of that entitled question 18. 8 Q Excuse me, $462,000, loans receivable from officers 9 and employees. I will ask you specifically about those 10 loans. 11 Did you have occasion to look at the underlying 12 accounts relating to those loans? 13 A We had occasion to ask questions about those loans. 14 I don't recall seeing any documentation relating to it. 15 Q When you asked questions, there was no -- there was 16 no secret made of the fact that the bulk of them went to 17 Mr. Gordon; is that correct? 18 A If that's correct. I believe there is a rider in 19 here that sets out, breaks these loans down and gives 20 dates as to when these loans were taken out. 21 Q Please find the rider. 22 A Rider to statement of financial affairs, question 23 number 21. 24 The question is entitled withdrawal from a 25 partnership or distribution by a corporation. It is an
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1000 Skalka-cross/Trabulus
1 annexed rider. It is a one-page rider. 2 Q Okay. 3 A It has Mr. Gordon's name on the top, and it has 4 loans, and I believe that's the breakdown of the loans 5 provided to Reed. 6 Q Okay. 7 In the course of you performing work on the 8 bankruptcy, did you ever make any inquiry as to whether 9 there were any additional amounts that had been paid back? 10 A Paid back from Mr. Gordon to the company? 11 Q Yes, or on his behalf to the company? 12 A We were given the explanation that was I believe 13 introduced as an exhibit yesterday by the company's 14 attorneys that Mr. Gordon had a claim back from the 15 company for far more than he had loaned. 16 Q Did you ever inquire as to whether or not the total 17 amount of the loan that had been made to Mr. Gordon, 18 perhaps in past times, had been reduced in any respects? 19 A I am not sure I understand your question. 20 Q Let me ask you this: Did you make any inquiry as to 21 whether or not Mr. Gordon had ever paid back any loan to 22 the corporation in part? 23 A I don't specifically recall that, no. 24 Q You don't recall as to whether or not any payments 25 were made to Mr. Gordon along the way to pay back any of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1001 Skalka-cross/Trabulus
1 the loans? 2 A I don't know. 3 Q The breakdown you see here was reflecting the amount 4 of loans that were outstanding at the time of the filing; 5 is that correct? 6 A That's my understanding, yes. 7 Q If there were any earlier loans that had been paid 8 back, that would not be listed here; is that correct? 9 A Yes. 10 Q And this is not supposed to be a complete list of all 11 the loans ever made to Mr. Gordon, assuming some may have 12 been paid back or credits paid against them? 13 A That's correct. 14 Q Is that correct? 15 Going back to the business of Reed as to whether 16 or not it is a competitor, do you understand does Reed 17 have -- did Reed have a membership organization? 18 A That's not my understanding. 19 Q Reed basically sold directories that listed people in 20 them; is that correct? 21 A That's correct. 22 Q The directories they sold would contain a compilation 23 of people with some biographical information; is that 2
4 correct? 25 A To the best of my understanding.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1002 Skalka-cross/Trabulus
1 My representation of Reed was pretty much limited 2 to the bankruptcy aspects here. I don't represent Reed 3 other than for this bankruptcy case. 4 Q I will ask you questions and you will answer to the 5 extent you are able to. 6 A Yes. 7 Q We understand what you just said. 8 Now, as you understand it, Reed's business was 9 selling Who's Who -- when I say Reed's business, Reed is a 10 very big business; is that right? 11 A Yes, this is a one part of it. 12 Q This is a small part of it; is that correct? 13 A Yes. 14 Q Comparative small part? 15 A I don't know how small it is, but it is one part. 16 Q Reed is actually a group of companies? 17 A Yes, my understanding. 18 Q One umbrella is on top in England? 19 A Yes. 20 Q Another one in the Netherlands; is that correct? 21 A Yes. 22 Q And the one in the Netherlands is the one that sued 23 Who's Who; is that correct? 24 A I believe that's the one who owned one or more of the 25 trademarks.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1003 Skalka-cross/Trabulus
1 Q And then there is a United States subsidiary owned by 2 the foreign companies; is that right? 3 A Yes. 4 Q Is that was also suing; is that right? 5 A I believe so. 6 Q And the part that is in the Who's Who business, 7 that's all we are talking about now, they sell these books 8 to libraries among other places; is that correct? 9 A They consider them primarily reference publications. 10 Q They also make a business of selling it to people? 11 A Yes. 12 Q And in fact, that's a major source of their business, 13 the income of that operation? 14 A Yes, but I don't know exactly how it breaks down. 15 Q Do you know if some of the Reed publications de-list 16 people who are listed in them if they don't buy the book 17 within a year or two? 18 A I do not know. 19 Q Now, I think you testified yesterday that in October 20 of 1994 there was some kind of hearing on whether or not a 21 trustee should be appointed; is that correct? 22 A Yes. 23 Q And you testified that the Court decided not to 24 appoint the trustee at that point in time? 25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1004 Skalka-cross/Trabulus
1 Q And we have seen a lot of transcripts in court today 2 and yesterday. 3 Do you know whether any transcript was ever 4 prepared of that hearing?
5 A I do not recall if one was or not. 6 Q Have you ever seen or reviewed one? 7 A Not that I recall. I may have but I don't recall as 8 I sit here now. 9 Q You testified yesterday that there were certain 10 things of that hearing that you couldn't recall; is that 11 correct? 12 A Yes. 13 Q In fact, you testified you couldn't recall whether or 14 not the logs were put in evidence there? 15 A That's correct. 16 Q Put in evidence in the sense that we are putting 17 documents in evidence here? 18 A That's correct. 19 Q And the bankruptcy court operates a little 20 differently than this Court; is that correct? They don't 21 have a court reporter with a stenography device generally? 22 A They do. 23 Q They did at that time? 24 A Yes. 25 Q Sometimes they also do things by electronic -- by
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1005 Skalka-cross/Trabulus
1 audio recording and then have it typed up? 2 A That's right. I believe there was a stenographer 3 there. 4 Q And you don't know as to whether there was a 5 transcript ever prepared to show whether the logs were put 6 in evidence or as to whether anything was said about them? 7 A I don't. As I said, I don't have my file for the 8 period I was still with Whitman Breed Abbott and Morgan. 9 Q I see. Have you been asked to look at that? 10 A No. 11 Q Now, after that motion was denied, did there come a 12 point in time after that when Reed once again brought a 13 motion for the appointment of a trustee? 14 A Yes. 15 Q And was the next motion also denied? 16 A My recollection was that the Court refused to act on 17 it at that time. I don't believe an actual denial was 18 entered.
19 MR. TRABULUS: Bear with me a moment. 20 (Whereupon, at this time there was a pause in the 21 proceedings.) 22 Q Do you recall when that was? 23 A I believe the motion was filed in early April of 24 1995, and the hearing I know was held almost 25 immediately -- the motion was filed on an emergency
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1006 Skalka-cross/Trabulus
1 basis. And I believe the hearing was still pending or 2 being continued at the time the hearing in front of Judge 3 Seybert that was being referred to by Mr. Kahn and 4 myself. And I believe an ultimate hearing on the motion 5 was held in May or June. My recollection -- 6 MR. TRABULUS: Your Honor, move to strike 7 anything after April of 1995. I asked him simply when it 8 was, and he is giving me a history about everything. 9 THE COURT: Motion granted. Strike the
answer. 10 The jury is to disregard it. 11 Do you want to ask the question again? 12 MR. TRABULUS: Your Honor, I will ask another 13 question, but I just need to refer to a document regarding 14 that. 15 (Whereupon, at this time there was a pause in the 16 proceedings.) 17 Q Let me get to another area. 18 At a certain point in time in the first motion 19 that Reed made to have a trustee appointed, Who's Who 20 sought to change attorneys; is that correct? 21 A Yes, after the motion was filed and before the 22 hearing took place the company changed its attorneys. 23 Q And there was a -- the original attorneys was the law 24 firm that had Mr. Flaum in it; is that correct? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1007 Skalka-cross/Trabulus
1 Q And the new attorney was going to be Mr. Ackerman; is
2 that correct? 3 A Yes. 4 Q And he was with the law firm of Rivkin, Radler, and I 5 will not go through the rest of the names. 6 A That's correct. 7 Q A highly respected law firm; is that correct? 8 A Yes. And so is Mr. Flaum. 9 Q I was not being critical of Mr. Flaum. 10 What I wanted to get to is Reed opposed the 11 motion; is that correct? 12 A What do you mean -- 13 Q To have new counsel. 14 A I don't believe so. I believe the creditor's 15 committee raised the objection. I don't know it was 16 raised by Reed. 17 Q Did Reed agree with the creditor's committee raising 18 the objection? 19 A Reed as a member of the committee raised its concern, 20 and the committee as a whole decided to raise that 21 objection. 22 Q Now, is it not correct that in December of 1994, a 23 couple of months after the motion to appoint a trustee was 24 denied, Reed made a second motion to appoint a trustee? 25 A I don't recall a motion being filed in December of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1008 Skalka-cross/Trabulus
1 1994. 2 Q Well, I haven't marked this as an exhibit, but I will 3 show it to you and see if it refreshes your recollection. 4 Do you recognize this as being the docket sheet 5 from the bankruptcy court relating to the Who's Who 6 bankruptcy? 7 (Handed to the witness.) 8 A Yes, this appears to be a copy of the docket. 9 Q Can you explain to the jury what a docket sheet is? 10 Is it a record kept by the Court indicating the various 11 documents that are filed in the court and describing the 12 events that actually occur in the Court on particular days 13 when things are happening in that case? 14 A There is usually a short summary of what happens in 15 connection with each document filed. It is listed here I 16 believe in chronological order. 17 Q So, I am going to direct your attention to this 18 portion, page 12 of the docket sheet. 19 Does that refresh your recollection that Reed 20 made a motion in December of 1994 to appoint a Chapter 11 21 Trustee? 22 A This was a motion that was not filed -- it was filed 23 by my firm, but not by me. 24 Q So, you may not have been involved in the filing of 25 it, but Reed made the motion; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1009 Skalka-cross/Trabulus
1 A Yes. 2 Q And that's why it didn't occur to you right away, 3 because you were not involved in the filing of it? 4 A Yes. And it was in connection with another matter 5 that I was not involved in. 6 Q How many people in your firm were working on the 7 bankruptcy? 8 A I was the only one working on the bankruptcy. 9 Mr. Bailey, I believe had an associate helping him on the 10 trademark side of it. 11 Q Even though he was on the trademark side, he or 12 someone else at the firm worked on the filing of this 13 motion for the appointment of a trustee which is part of 14 the bankruptcy? 15 A That's correct, because -- 16 Q You don't have to say why. 17 A Yes. 18 Q Now, is it not correct that that motion was denied on 19 February 22nd, 1995? 20 A The portion as to the appointment of a trustee was 21 denied, yes. 22 Q That's the only portion I am talking about. 23 So, that was the second Reed motion that was 24 denied for the appointment of a trustee; is that right? 25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1010 Skalka-cross/Trabulus
1 Q Now, that was on February 22nd, 1995? 2 A Yes. 3 Q And you are familiar with the execution of a search 4 warrant and seizure on the premises of Who's Who; is that 5 correct? 6 A Yes. 7 Q And that was on March 30th, 1995? 8 A Yes. 9 Q And are you aware that people from Whitman were in 10 communication with the government agents and the U.S. 11 Attorney's office concerning this, that application? 12 A What application? 13 Q For a search warrant and seizure. 14 A I was not aware of any contact prior to March 30th, 15 1995. 16 Q Are you aware that Mr. Bailey had met with an 17 Inspector Biegelman? 18 A No. 19 Q Mr. Bailey never mentioned that to you? 20 A No. 21 Q He would have no reason no mention it to you? 22 A No. Because it would not have directly affected me 23 or
the bankruptcy side of the case. 24 Q And so the search warrant was executed after two 25 applications for a trustee which had been denied; is that
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1011 Skalka-cross/Trabulus
1 correct? 2 A Yes. 3 Q And then after that another application for a trustee 4 was made by Reed; is that correct? 5 A That's correct. 6 Q And that one was eventually granted; is that right? 7 A That's my recollection. 8 MR. TRABULUS: Your Honor, one of the other 9 attorneys is requesting a break. 10 THE COURT: Very well. It is time for it. 11 Members of the jury, we will take a ten-minute 12 recess. 13 Please do not discuss the case and keep an open 14 mind. Please recess the jury. 15 MR. WHITE: Your Honor, I have an application 16 that I think we should discuss at the break. 17
(Whereupon, at this time the jury leaves the 18 courtroom.) 19 THE COURT: You can step down, Mr. Skalka. 20 MR. TRABULUS: Should this be out of the hearing 21 of the witness? 22 MR. WHITE: I will wait. 23 (The witness exits the courtroom.) 24 MR. WHITE: If my colleagues need to take a break 25 and come back early, I can do that.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1012 Skalka-cross/Trabulus
1 THE COURT: What do you want? 2 MR. WHITE: The government's application is to be 3 permitted on redirect to bring out the fact that 4 Magistrate Jordan imposed an injunction on Who's Who that 5 they were violating, and for several reasons. 6 Mr. Trabulus has opened the door wide open on 7 that. 8 THE COURT: An injunction that was violated? 9 MR. WHITE: In addition to the monetary judgment 10 Judge Jordan granted injunctive relief, and told them 11 specific things that Who's Who was not to do. 12 Mr. Trabulus, as he is entitled to do, was 13 cross-examining this witness for hours regarding his 14 alleged bias and the bias imputed to him because he 15 represents Reed. He repeatedly suggested that Reed had an 16 ulterior motive, a motive to destroy Mr. Gordon and his 17 business. And has been suggesting that you kept filing 18 for the motion of a trustee. 19 Mr. Trabulus made a specific point to try to show 20 that they had no real basis for doing that. For example, 21 he selectively asked, well, Magistrate Jordan gave certain 22 instructions to Who's Who regarding what they were to do 23 to comply with the trademark part of his order. And 24 Mr. Trabulus specifically said, and they did exactly what 25 they were supposed to, they complied 100 percent, clearly
HARRY
RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1013 Skalka-cross/Trabulus
1 leaving the impression that Reed had no basis for seeking 2 the appointment of a trustee or trying to enforce their 3 judgment. 4 Mr. Skalka answered specifically that that was 5 not true, that Reed was seeking to enforce, quote, other 6 orders of the Court. 7 Secondly, Mr. Trabulus again suggested that there 8 was no real reason why they should be seeking to enforce 9 their judgment or get the appointment of a trustee. 10 Mr. Skalka -- 11 THE COURT: Get to the point. I know of all of 12 that. What is the point? 13 MR. WHITE: On redirect the government should be 14 able to ask Mr. Skalka, well, what was Reed's basis for 15 trying to enforce the judgment? What was Reed's basis for 16 trying to seek the appointment of a trustee. 17 THE COURT: Go ahead. 18 MR. WHITE: And he should be able to answer that 19 Magistrate Jordan enjoined them from using other 20 misleading sales practices, which Reed thought that 21 Mr. Gordon was continued to engage in. 22 THE COURT: Ask the question. 23 MR. WHITE: Okay, I will. 24 MR. TRABULUS: Your Honor, I would object. And I 25 want to be heard on this briefly.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1014 Skalka-cross/Trabulus
1 I asked the witness concerning infringement, and 2 the witness at one point -- and I went through the book. 3 The witness said I went through solicitation, and I 4 dropped it. 5 THE COURT: Objection overruled. You can bring 6 out that there was an injunction granted by Judge Jordan. 7 MR. WHITE: Thank you, your Honor. 8 THE COURT: We will take a ten-minute recess from 9 now. 10 MR. JENKS: Thank you, your
Honor. 11 12 (Whereupon, a recess is taken.) 13 14 THE CLERK: Jury entering. 15 (Whereupon, the jury at this time entered the 16 courtroom.) 17 THE COURT: Please be seated, members of the 18 jury. 19 You may proceed, Mr. Trabulus. 20 MR. TRABULUS: Thank you. 21 22 23 24 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1015 Skalka-cross/Trabulus
1 CROSS-EXAMINATION (cont'd) 2 BY MR. TRABULUS: 3 Q Mr. Skalka, I would like to ask you a little about 4 your relationship with Mr. Bailey at Whitman, while you 5 were both there and working for Reed? 6 MR. WHITE: Objection. 7 THE COURT: Sustained. 8 Q How frequently were you in communication with 9 Mr. Bailey? 10 MR. WHITE: Objection. 11 THE COURT: Sustained. Desist. 12 MR. TRABULUS: I
am sorry, I thought it was to 13 form. I didn't realize it was to the entire line of 14 questioning. 15 THE COURT: Yes, it is. 16 Q Mr. Skalka, on the occasion you came to court for the 17 hearing before Judge Seybert, did you meet with any of the 18 other attorneys who were present in court that day? 19 A I am sure I spoke with attorney Kahn, and I believe 20 attorney Ackerman was there for part of the proceedings. 21 And I probably at least introduced myself to attorney 22 Shevitz, who was there on behalf of Mr. Gordon and Who's 23 Who Worldwide, and I am pretty sure I introduced myself to 24 the U.S. Attorneys. 25 Q Had you ever spoken to any of the U.S. Attorneys
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1016 Skalka-cross/Trabulus
1 before? 2 A Not prior to those hearings. 3 Q And after that did you speak to any --
after that 4 occasion did you meet with any of the U.S. Attorneys 5 before the last couple of weeks? 6 A Yes. 7 Q And on how many occasions? 8 A I believe one. 9 Q And when was that? 10 A I believe in the fall of 1995. 11 Q Do you know whether any of the U.S. Attorneys took 12 notes at that meeting? 13 A I do not. 14 Q Okay. 15 With whom did you meet? 16 A Mr. White. 17 Q Was there an agent there as well? 18 A I don't believe so. 19 Q Did you show Mr. White any documents at that point? 20 A I don't believe so. It was more of a question and 21 answer session. 22 Q Did you ever testify before the grand jury? 23 A No. 24 Q Now, I think we talked about a couple of motions for 25 an appointment of a trustee that were made and denied. I
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 10
17 Skalka-cross/Trabulus
1 think we talked about the search warrant being executed on 2 March 30th, 1995. 3 Is it not correct that just a few days later on 4 April 3rd, 1995 read once again moved to get a trustee 5 appointed? 6 A That is correct. 7 Q And at that point in time Reed was aware of the fact 8 a search warrant was executed? 9 A Yes. 10 Q And did you hear that from Reed or did you hear it 11 independently? 12 A I believe I heard it independently. 13 Q From -- 14 A I believe someone involved in the bankruptcy 15 proceedings, whether the company's attorneys, Mr. Kahn, 16 someone had advised me that this had happened. 17 Q With the Court's permission, I would like to ask, did 18 you have any discussions with Mr. Bailey concerning that 19 at that point in time? 20 A Concerning the filing for a motion for a trustee?
21 Q Concerning the fact that there was a raid or a search 22 warrant executed? 23 MR. WHITE: Objection. 24 THE COURT: Sustained. 25 Q Now, in connection with the hearing that was set down
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1018 Skalka-cross/Trabulus
1 on that motion, did you cause a witness to be subpoenaed? 2 MR. WHITE: Objection. 3 THE COURT: Mr. Reporter, can I hear that 4 question. 5 (Whereupon, the court reporter reads the 6 requested material.) 7 THE COURT: Sustained. 8 Q Let me ask you, did you get from the government the 9 names of any witnesses to call? 10 MR. WHITE: Objection. 11 THE COURT: Sustained. 12 MR. TRABULUS: Your Honor, just bear with me a 13 moment? 14 THE COURT: Yes. 15 Q Let's just turn to the creditors listed on the 16 petition, so the jury under
stands who these companies 17 were. 18 I am referring to the listing of creditors which 19 appears after schedule G -- excuse me, after schedule H. 20 There is current monthly income expenses and then the 21 listing of creditors. 22 Mr. Skalka, are you familiar with some of these 23 creditor's claims were for? 24 A Yes. 25 Q The first one is ADP, and that's a payroll service?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1019 Skalka-cross/Trabulus
1 A Yes. 2 Q And some money was owed to them for that? 3 A Yes. 4 Q And Arco Envelope Corp., A R C O, that's for 5 envelopes; is that right? 6 A I believe so. 7 Q These are things that you understood done in the 8 course of Who's Who business? 9 A Yes. 10 Q And Darby and Darby, a law firm that represented 11 Who's Who in the trademark litigation? 12 A Yes. 13 Q Eastern Mailing Process. That was a company that 14 mailed things for Who's Who? 15 A I believe so. 16 Q Engraving Unlimited, Inc., that's a company that made 17 plaques which were given to members; is that right? 18 A Yes. 19 Q Is it your understanding that Reed also when it has 20 someone in one of its Who's Who publications would sell 21 them a plaque -- strike also. 22 Does Reed sell plaques, do you know? 23 A No. 24 Q Filter Fresh, we will not bother with. There are a 25 couple of small claims.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1020 Skalka-cross/Trabulus
1 Number eight, from graphics, F R O M, and it may 2 be F R O M A, our F R O M E. It is a little hard to read 3 it. 4 THE COURT: When you read these names, 5 Mr. Trabulus, which are unknown to us and certainly the
6 reporter, would you please spell them? I don't have to 7 stop and ask you each time to do that. 8 MR. TRABULUS: I will do that. 9 THE COURT: All right. 10 Q Either F R O M A, our F R O M E, graphics. 11 Do you know if that was a software company? 12 A I do not know. 13 Q And the IRS is the Internal Revenue Service? 14 A Yes. 15 Q And do you know IRS is the Internal Revenue Service? 16 A Yes. 17 Q And do you know if those were monthly claims that had 18 to be paid at the end of the month or something like that? 19 A I believe they were withholding 941 type claims. 20 Q Okay. 21 Relating to the payroll? 22 A Yes. 23 Q Similarly, the Tax Commission? 24 A Yes. 25 Q Sales tax, related to sales tax on sales that had to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1021 Skalka-cross/Trabulus
1 be remitted? 2 A Yes. 3 Q Mr. Pierce, another lawyer who had represented Who's 4 Who in the litigation relating to the trademark? 5 A Yes. 6 Q Phoenix Home Life Mutual, a payment on health 7 benefits for the employees? 8 A It looks like an insurance benefit. I am not exactly 9 sure what it was for. 10 Q The next page we see Reed. 11 United Book Press that was for printing up books? 12 A My understanding, yes. 13 Q And most of these were things were things -- 14 withdrawn. . 15 MR. TRABULUS: Your Honor, I have no further 16 questions. 17 THE COURT: Anyone else? 18 MR. SCHOER: I have a few questions. 19 20 CROSS-EXAMINATION 21 BY MR. SCHOER: 22 Q Good morning, sir. 23 A Good morning. 24 Q You indicate that one of the documents you looked at 25 when you first familiarized yourself with this matter for
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1022 Skalka-cross/Schoer
1 the bankruptcy proceeding was the judgment of a 2 magistrate; is that correct? 3 A Yes. 4 Q And would you -- did you also look at the findings of 5 fact and conclusions of law decision and order? 6 A My recollection is that it was a fairly lengthy 7 decision. I don't think I focussed on a lot of the 8 findings other than, frankly, the dollar amount in the 9 actual court order. 10 Q Well, did you review the actual decision and order? 11 A Yes. 12 Q I will show you a copy of that, and I will ask you to 13 read the first sentence. 14 (Handed to the witness.) 15 A The first sentence reads: In this action -- 16 THE COURT: No, to yourself. 17 Q Just read it to yourself, I am sorry. 18 A I'm sorry. 19 Q Does that refresh your recollection that part of the 20 trademark proceeding is a claim by Reed of unfair 21 competition? 22 A Yes. 23 Q And at the time that the bankruptcy proceeding was 24 going on and the trademark lawsuit was going on, do you 25 know whether Reed published a CD-ROM?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1023 Skalka-cross/Schoer
1 A I do not know. 2 Q Do you know whether Reed had a membership 3 organization at that time? 4 A I do not know for sure. 5 Q Well, Reed was a publisher; isn't that correct? 6 A Yes. 7 Q In fact, I think you told us that Reed published all 8 different kinds of books, children's books, directories; 9 is that correct? 10 A That's correct. 11 Q And is it fair to say that Reed encompassed about ten 12 different companies? 13 A I don't know exactly how many companies it 14 encompassed. I know they are involved in publishing lots 15 of different types of publications. 16 Q Did you ever hear of a company called Bowker, 17 B O W K E R? 18 A No. 19 Q Martindale Hubble? 20 A Yes. 21 Q That's part of Reed, right? 22 A Reed published Martindale Hubble. 23 Q Marqui? 24 A Marqui Who's Who. 25 Q Marqui Who's Who is many, many different books; is
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1024 Skalka-cross/Schoer
1 that correct? 2 A I believe so, yes. 3 Q And do you know whether a unit of Reed Elsevir 4 publishes a directory called books in print? 5 A I do not know. 6 Q Do you know whether or not since January of 1996 Reed 7 Elsevir had started a membership Who's Who organization? 8 A I do not know. 9 Q Do you know whether or not since January of 1996 Reed 10 Elsevir has taken self nominations for people who want to 11 be in a Who's Who membership organization? 12 A I do not know. 13 Q You indicated that the name Who's Who itself is not 14 trademarked; is that correct? 15 A Yes. 16 Q And is it fair to say that there are hundreds of 17 Who's Who publications? 18 A I don't know about hundreds, but I know that there 19 are numerous. 20 Q At any time while you were working for Whitman Ransom 21 or any of its successors, do you see any correspondence 22 from Sandra Barnes indicating that it was time to have the 23 postal authorities confiscate the mail of Who's Who 24 Worldwide? 25 A No.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1025 Skalka-cross/Schoer
1 Q Did you ever see any memorandum from someone at Reed 2 saying that Who's Who was a thorn in Reed's side? 3 A No. 4 MR. SCHOER: No further questions. 5 THE COURT: Anybody else? 6 MR. NELSON: May I briefly, your Honor? 7 THE COURT: Yes. 8 9 CROSS-EXAMINATION 10 BY MR. NELSON: 11 Q Good morning, sir. 12 My name is Alan Nelson. And I represent Frank 13 Osman. 14 Sir, I believe you testified during the course of 15 the cross-examination by Mr. Trabulus that a second 16 petition for the appointment of a bankruptcy trustee was 17 denied by the Court on February 22nd, 1995; is that 18 correct? 19 A Yes. 20 Q Now, the petition itself, the application in support 21 of that motion was prepared and filed at a prior period of 22 time; is that correct? 23 A Prior to February -- 24 Q Yes, is that correct? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1026 Skalka-cross/Nelson
1 Q And you recall it having been filed on December 22nd, 2 1994? 3 A After looking at the docket that Mr. Trabulus 4 provided me, yes. 5 Q And would it be fair to say that you assisted, in 6 fact, prepared those documents in support for the 7 application of the appointment of a trustee? 8 A No. I think I testified specifically I did not draft 9 those documents. 10 Q They were prepared by members of the law firm? 11 A My farmer law firm, Whitman Breed and Abbott, yes. 12 Q And you were the supervising partner of the 13 associates preparing those documents? 14 A No. 15 Q Who prepared that? 16 A That particular motion and documents would have been 17 prepared by Mr. Bailey and/or his associates. 18 Q So the documents in support of the memorandum and 19 motion submitted to the Court in December of 1994, upon 20 which the motion was denied on February 22nd, 1995, were 21 prepared by associates who were working with Thomas 22 Bailey; is that correct? 23 A I would say it was either Mr. Bailey himself or one 24 of his associates. 25 Q So, it was either Mr. Bailey himself, or associates
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1027 Skalka-cross/Nelson
1 working with Mr. Bailey; is that correct? 2 A That's correct. 3 Q Did you have any discussions with Mr. Bailey with 4 respect to the preparation of those documents? 5 A I don't believe so. 6 Q Did Mr. Bailey discuss with you whether he, in the 7 course of the preparation of those documents in December 8 of 1994, had met with postal inspectors and 9 representatives of the United States Attorneys office in 10 December of 1994? 11 A No, he did not. 12 Q Did you ever discuss with Mr.
Bailey that he met -- 13 withdrawn. 14 Did you ever discuss with Mr. Bailey subsequent 15 to that day the fact that he met with Inspector Biegelman 16 and an Assistant United States Attorney in December of 17 1994 with respect to Who's Who Worldwide? 18 A No, did not. 19 Q I think you indicated that there came a point in time 20 in April of 1995 where a hearing was conducted with 21 respect to the appointment of a trustee; is that correct? 22 A Yes. 23 Q And during the course of that hearing on behalf of 24 Reed, were you the attorney who called witnesses on behalf 25 of the creditor?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1028 Skalka-cross/Nelson
1 MR. WHITE: Objection. 2 THE COURT: Sustained. 3 Q Did you call any hearings during the course of that 4 hearing? 5 MR. WHITE: Objection. 6 THE
COURT: Sustained. 7 MR. NELSON: That's all I have. 8 THE COURT: Anything else? 9 MR. GEDULDIG: One or two, yes. 10 11 CROSS-EXAMINATION 12 BY MR. GEDULDIG: 13 Q Mr. Skalka, let me first ask you if you ever met 14 Postal Inspector Biegelman? 15 A Yes, I have. 16 Q On how many occasions have you met him? 17 A Once that I can recall. 18 Q Can you tell us approximately when that was? 19 A Approximately April 19th, 1995, when I appeared 20 before Judge Seybert. He was in court that day. 21 Q You met him in court? 22 A Yes, or out in the hallway. 23 Q Did you have any conversation with him regarding this 24 case? 25 MR. WHITE: Objection.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1029 Skalka-cross/Geduldig
1 THE COURT: Just yes or no. 2 THE WITNESS: Yes. 3 Q Can you tell us what was said between the two of 4 you? 5 MR. WHITE: Objection. 6 MR. TRABULUS: Objection, your Honor. 7 MR. GEDULDIG: I will withdraw the question. 8 Everybody is objecting. 9 Q You testified on direct examination about some logs 10 which were prepared as a result of the directive from the 11 Court; is that right? 12 A Yes. 13 Q And those logs pertained to two pieces of property, 14 the condo on Long Island, and the penthouse in New York 15 City; is that correct? 16 A That's correct. 17 Q Let me hand this up to you if I can. It is Exhibit 18 640, which I believe is the exhibit for those logs. 19 (Handed to the witness.) 20 Can you tell us what the purpose of the logs were 21 or are? 22 MR. TRABULUS: Objection, your Honor. 23 THE COURT: Overruled. 24 A The purpose was to advise Reed and the creditor's 25 committee, as to how the, both the condominium and
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1030 Skalka-cross/Geduldig
1 penthouse were being used in this time period. 2 Q When you say how they were being used, what do you 3 mean by that? 4 A Reed's position was that these properties did not 5 have an apparent business purpose, and that the creditors 6 of Who's Who Worldwide should not bear the expense or 7 exposure for these properties. 8 The company had argued that these properties did 9 have a business purpose, they were necessary for the 10 company's business, and this was as a result of our 11 discussions. 12 The company agreed to maintain these logs to 13 prove to the creditors that these properties were being 14 used for business purses. 15 Q So, there are entry dates and for each entry date 16 there is supposed to be a
business function relating to 17 that date; is that correct? 18 A Some description of what was going on there. 19 Q Okay. 20 I am going to ask you to turn to the log that 21 pertains to the condominium on Long Island, on Hummingbird 22 Road. And I will ask you to specifically look for the 23 entry for December 12th, 1994. 24 Would you tell us what is written for that 25 entry.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1031 Skalka-cross/Geduldig
1 A Under the column marked guests three names, Debra B, 2 Susan K, and Tracey Colletti, C O L E T T I. 3 Under the column marked occasion, there is a 4 description that reads planning, reception, Russian 5 members. 6 MR. GEDULDIG: No other questions, thank you. 7 8 CROSS-EXAMINATION 9 BY MR. WALLENSTEIN: 10 Q Good morning, Mr. Skalka. 11 A Good morning. 12 Q I am John Wallenstein, and I represent Martin 13 Reffsin. 14 When for the first time did you meet Mr. Reffsin? 15 A I believe in May of 1994. 16 Q And that is in connection with his appearance in the 17 bankruptcy court? 18 A Yes. 19 Q And you had some discussions with Mr. Reffsin at that 20 time? 21 A I don't know if I had direct discussions with him, 22 but as part of discussions with a lot of different 23 parties, he was there and he may have answered some 24 questions. 25 Q On how many occasions did you speak to Mr. Reffsin HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1032 Skalka-cross/Wallenstein
1 over the course of the bankruptcy proceeding or from then 2 to now? 3 A I would say several dozen. 4 Q And did you have discussions with him or did you hear 5 him state in any kind of context that he was, of course, 6 the accountant for the company? 7 A Yes. 8 Q And did he provide information with respect to the 9 company's funds? 10 A He provided them to me as counsel for Reed, and to 11 the bankruptcy court, yes. 12 Q And, in fact, the numbers, and the calculations that 13 he provided were checked by the attorney -- excuse me, by 14 the accountants for Reed and for the creditor's committee; 15 is that correct? 16 A They were reviewed by them, yes. 17 Q And did either the accountants for the creditor's 18 committee and for your client ever indicate that 19 Mr. Reffsin's calculations or projections were incorrect 20 or improper? 21 A They may have disputed his projections. But they 22 didn't find that they were -- there was a dispute of an 23 interpretation in them, and the projections. But they 24 didn't find anything improper. 25 Q And the dispute over the projections -- projections
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1033 Skalka-cross/Wallenstein
1 by their very nature is we think this is what will happen 2 next year; is that correct? 3 A Yes. 4 Q And, therefore, they are subjective to some degree? 5 A To some degree, yes. 6 Q And they are essentially an interpretation based upon 7 current numbers, and a projection of what we think is 8 going to be tomorrow's numbers? 9 A Yes. 10 Q And, in fact, do you know what the difference was 11 between -- withdrawn. 12 Do you know what the difference of opinion was 13 between Mr. Reffsin and the creditor's committee's 14 accounts? 15 A Generally, yes. 16 Q What were they? 17 A Generally we thought Mr. Reffsin's numbers on behalf 18 of the company was a bit
too optimistic as to what the 19 company's revenues would be, and we thought that some of 20 the company's expenses would be too high. 21 Q That's the actual number of expenses or the 22 projected? 23 A The projected. 24 Q His projected expenses were based upon current 25 expenses; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1034 Skalka-cross/Wallenstein
1 A To an extent. As I testified yesterday, some of the 2 expenses anticipated certain raises for people, and other 3 increased expenses related to the business. 4 Q Well, would it be fair to say that rather than his 5 projections were incorrect that you would have liked to 6 see the expenses less so you would have able to see more 7 money for the payment of the creditors? 8 A Generally, you say. 9 Q It is not a difference of opinion as to what the
10 expenses would be, it is more your wishful thinking versus 11 his? 12 A It was a dispute between the parties. We felt the 13 company's expenses were up too high, and he had 14 projections based on what his client told him, I assume. 15 Q We are not talking about numbers that got pulled out 16 of thin air, we are talking about expenses based on 17 reality, projections based on reality, what accountants 18 do, right? 19 A Yes. 20 Q And he testified at a number of proceedings in the 21 bankruptcy court; is that correct? 22 A Yes. 23 Q It was not formal questions and answers, he was 24 there, placed under oath and provided information to 25 counsel and the creditors and the Court; is that right?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1035 Skalka-cross/Wallenstein
1 A Yes. It was formal testimony. 2 Q Was t
here anything that he said that was untruthful 3 and improper? 4 A Not that I can recall or know about. 5 Q All right. 6 Had something struck you that way, you would have 7 certainly said something to somebody? 8 A Yes. 9 Q You never did? 10 A No. I am sure I cross-examined him and I may have 11 disputed his projections, but I don't recall making any 12 other issue other than that. 13 Q All right. 14 One of the things Mr. Reffsin provided to the 15 bankruptcy court was that schedule of loans that the 16 company made to Bruce Gordon; is that correct? 17 A I was not aware of that. 18 Q Let me rephrase that question. 19 One of the things provided to the bankruptcy 20 court was the rider to schedule F which provided the 21 schedule of loans of the company to Bruce Gordon? 22 A Yes. 23 Q And that's the rider to the statement of
financial 24 affairs connected to the bankruptcy petition, which is 25 Exhibit 610, I believe?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1036 Skalka-cross/Wallenstein
1 A That's correct. 2 Q Those were numbers that the company had indicated 3 were loans previously made to Mr. Gordon; is that correct? 4 A That's correct. 5 Q And they were characterized as such on the company's 6 books; is that correct? 7 A I don't know if they were on the company's books, but 8 they were characterized in the petition submitted to the 9 Court. 10 Q Did you ever review the company's books? 11 A I didn't, no. 12 Q Did your accountants or the creditor's committee's 13 accountants? 14 A Yes. 15 Q Did they find any discrepancy with respect to that? 16 A Those loans? 17 Q Yes. 18 A Not that I am aware of.
19 Q Would it be fair to say that it is not unusual for a 20 company of the size and structure of Who's Who Worldwide 21 to make loans to its officers? 22 A I have seen it before. 23 Q Roughly how many occasions have you seen it before? 24 A I have been involved in bankruptcy cases involving 25 companies of various different sizes. A company this size
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1037 Skalka-cross/Wallenstein
1 at the time, maybe roughly a quarter to a half of the 2 cases had some loans to officers reflected in 3 shareholders -- or shareholders reflected in the petition. 4 Q As far as you know, was there anything improper as to 5 that? 6 A Not on the face of it, no. 7 Q Now, when there is a loan on the books to an officer, 8 is it fair to say that there are a number of ways to 9 change that characterization?
10 Let me withdraw the question and try to make it 11 clearer. I see the puzzled look on your face. As I am 12 asking you, I am asking what does it mean. 13 You can pay back the loan and that removes it 14 from the loan column; is that right? 15 A Yes. 16 Q Or you can call it something else? You can call it 17 an advance, or call it income to that particular officer, 18 and it then becomes an expense of the corporation; is that 19 correct? 20 A Correct. It would no longer be an asset of the 21 corporation either. 22 Q In fact, a loan to an officer is carried on the books 23 of the corporation as an asset because it is money due to 24 the corporation; is that correct? 25 A And that is why it is shown as an asset on the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1038 Skalka-cross/Wallenstein
1 bankruptcy schedules.
2 Q And once it becomes converted to income, whether it
3 be called an advance or current salary, whatever you call 4 it, once you remove it from the loan column and call it 5 income to that officer, it then becomes an expense to the 6 corporation; is that right? 7 A I believe so. 8 I am not an accountant, but I believe so. 9 Q You do take it out of the asset column? It is 10 certainly no longer an asset once it is changed; as a 11 result? 12 A You could do that, right. 13 Q In the context of the bankruptcy, once the petition 14 is filed, and Who's Who was in the jurisdiction of the 15 bankruptcy courts proceeding, in order to convert to an 16 asset, specifically a loan to an officer, to something 17 else, be its expense or capital, whatever you want to call 18 it, it would require the permission of the bankruptcy 19 court? 20 A It is not requiring the permission of the bankruptcy 21 court. It would require the permission of the majority of 22 the creditors, and the creditors would have a problem with 23 a company doing that. 24 Q It is correct to say that a corporate asset could be 25 converted if it was in the ordinary course of business,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1039 Skalka-cross/Wallenstein
1 but if it was outside that, it would require either 2 approval of the Court or consent of the creditors? 3 A That's correct. 4 Q A transfer I am talking about a loan to an expense, 5 would be outside the normal course of business, and would 6 therefore require approval -- 7 A From an asset to a loan? 8 Q Yes. 9 A Yes. 10 Q Now, there are two general categories of bankruptcy 11 filings; is that correct? Voluntary and involuntary? 12 A Yes. 13 Q And this particular Chapter 11 that Who's Who filed 14 was a voluntary proceeding; is that correct? 15 A Yes. 16 Q Can you explain to us the difference between a 17 voluntary and involuntary proceeding? 18 A Yes. Simply a voluntary proceeding is one in which 19 the debtor of the bankrupt company voluntarily files. 20 They file the petition, and file it with the Court seeking 21 relief. An involuntary proceeding is one in which 22 creditors of a company get together, usually three or 23 more, and file a petition with the Court, with the 24 bankruptcy courts, and ask that a particular company be 25 forced into bankruptcy.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1040 Skalka-cross/Wallenstein
1 Q In this case Who's Who went to the bankruptcy court 2 and said, help us, Judge, we need protection from all 3 these creditors, particularly Reed, which says we owe it 4 1.7 million dollars; is that right? 5 A That's correct. 6 Q And in order to put the company into involuntary 7 bankruptcy would one single creditor be able to do that? 8 A Only if the company had less than 12 creditors. 9 Q Was there -- withdrawn. 10 Do you know if there were any discussions at Reed 11 Elsevir between Reed and other creditors to put Who's Who 12 in involuntary bankruptcy at a time? 13 A I don't know that. 14 Q You were not privy to any such discussion? 15 A No. 16 Q Have you seen anything in the files of either Whitman 17 et al or your current firm to indicate that such 18 discussions ever took place? 19 A Not that I recall. 20 Q You yourself never had such a discussion with anyone 21 from Reed or any other law firms? 22 A No. By the time I got involved they were already in
23 bankruptcy. 24 Q You were not involved prior to the voluntary filing; 25 is that right?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1041 Skalka-cross/Wallenstein
1 A That is correct. 2 Q Let me call your attention to Exhibit 640, I 3 believe. I think you have it there. That's the fax from 4 Neil Ackerman with the logs? 5 A Yes, I do have it. 6 Q The fax cover indicates that the fax was sent to 7 Mr. Ackerman on December 23rd, to Mr. Bailey, your 8 partner? 9 A My former partner, yes. 10 Q Your partner at the time? 11 A Yes. 12 Q And to Mr. Kahn, who was the attorney for the 13 creditor's committee? 14 A Yes, that's correct. 15 Q And to you? 16 A That's correct. 17 Q On the bottom of the second page it says, and in the 18 body of the memo Mr. Ackerman prepared, cc Bruce Gordon
19 president, and Martin Reffsin C.P.A.; is that correct? 20 A Yes. 21 Q Do you know if Mr. Ackerman ever sent that fax to 22 Mr. Reffsin? 23 A I don't know. 24 Q Is there anything on this fax to indicate that it was 25 ever received by Mr. Reffsin or he ever saw it?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1042 Skalka-cross/Wallenstein
1 A No. 2 Q Do you know from any source as to whether or not 3 Mr. Reffsin ever received this fax? 4 A No. 5 Q Mr. Reffsin, as far as you know, was an independent 6 certified public accountant with his own office; is that 7 right? 8 A Yes. 9 Q And Who's Who was one of his clients? 10 A Yes. 11 Q Do you know -- do you know, as far as you know, he 12 did not maintain an office within the facility of Who's 13 Who; is that right? 14 A When I was
involved in the case, yes, that's true. 15 Q Now, with respect to Exhibit 641, and that's the 16 letter from Neil Ackerman at Rivkin Radler, addressed to 17 you, Tom Bailey, and William Kahn, September 8th, 1994. 18 That was a letter that was prepared by Mr. Ackerman; is 19 that correct? 20 A Yes. 21 Q Is it fair to say that at that point in time 22 Mr. Ackerman was a bit behind in providing information? 23 A Yes. 24 Q And that this letter was intended to remedy that 25 situation?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1043 Skalka-cross/Wallenstein
1 A That's correct. 2 Q Do you know when he wrote it? 3 A No, I do not. 4 Q In fact, he indicated on a footnote on page 1, he 5 couldn't get around to writing it until just then because 6 of the holiday, Labor Day, the Jewish holidays and so 7 forth?
8 A That's correct. 9 Q And do you know whether he spoke to Mr. Reffsin prior 10 to writing this letter? 11 A I do not. 12 Q Particularly on the second full paragraph on page 3 13 of that letter, and I don't know if you have it, and there 14 is a reference, and let me read the reference there. 15 Is Mr. Reffsin, the debtor's accountant, is in 16 the process of attempting to calculate this amount, 17 referring to the amount that Mr. Gordon was alleged owed. 18 A I recall that. 19 Q His determination and all calculations in respect 20 thereof will be made available to the committee counsel 21 after it was completed. Do you recall reading that? 22 A Yes. 23 Q And do you recall as a fact at the time Mr. Reffsin24 was doing that, or Mr. Ackerman was simply buying time? 25 A I do not know.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1044 Skalka-cross/Wallenstein
1 Q Do you know whether or not Mr. Ackerman had requested 2 that Mr. Reffsin do that prior to Mr. Ackerman's writing 3 of the letter? 4 A I do not know. 5 Q At some point the creditor's committee, through 6 Mr. Kahn hired a form of accountants, Goldstein, Golub, 7 G O L U B, and Kessler, K E S S L E R. 8 A That's right. 9 Q And is it a fair statement that they, Goldstein et 10 al, confirmed the dates of the loans to Mr. Gordon from 11 the books of the company by virtue of their having 12 computerized every check of Who's Who Worldwide and the 13 other entities and analyzed the expenses? 14 A I don't recall receiving a specific report from the 15 Goldstein firm, specifically on that subject, no. It 16 doesn't mean they didn't do it. I don't recall getting 17 it. 18 Q Would it have been something they
should have done? 19 A It was within the framework of their retention. As 20 to whether they actually got to it or not, I don't know, I 21 do not know. 22 Q In the course of the discussions to resolve the 23 bankruptcy and to settle the bankruptcy proceeding, 24 Mr. Reffsin prepared certain projections you referred to 25 earlier, correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1045 Skalka-cross/Wallenstein
1 A Yes, he did. 2 Q Part of those projections were for the plan which 3 involved a 100 cents on the dollar repayment; is that 4 correct? 5 A Yes. 6 Q He also prepared some numbers in connection with 7 proposed, a proposed settlement, where it was proposed 8 that Reed would receive 1.2 million to settle their 1.7 9 million dollars claim; is that correct? 10 A There were settlement discussions along those lines. 11 I don't recall specific documents prepared by 12 Mr. Reffsin. He could have done that. But it would have 13 presented to me through Mr. Ackerman. So I don't recall 14 them specifically being prepared by Mr. Reffsin. 15 Q In any event, Reed rejected that offer? 16 A It was not so simple as saying 1.2 from 1.7. There 17 were parts of the proposal that Reed was willing to accept 18 and parts rejected, and the settlement was never 19 consummated. 20 Q I take it that that is a yes? 21 A Yes. 22 Q Now, let me draw your attention to the logs discussed 23 here, I don't know if you still have them here? 24 A I do. 25 Q At whose request were those logs prepared?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1046 Skalka-cross/Wallenstein
1 A If I testified that they were discussed at a 2 courthouse meeting August 9th
of 1994, I know that was 3 something that was requested by either -- I just can't 4 remember specifically who. It was either by myself, 5 Mr. Bailey, or Mr. Kahn, or a combination thereof. 6 Q That's a formal request on the record you mean? 7 A No, it was something discussed and negotiated in one 8 of the witness rooms of the bankruptcy court while we were 9 trying to resolve the series of motions scheduled to be 10 heard on August 9th. As part of those discussions we 11 proposed -- the company prepared these logs to see if 12 these properties were being used for a business purpose. 13 Q And that was because you felt that the properties did 14 not have a business purpose? 15 A That's right. 16 Q Is that was whose idea -- withdrawn. 17 From where did the initial suggestion come that 18 these properties were not being used for legitimate 19 business purposes?
20 A I think it was something that had been -- we were 21 concerned about from when I first saw the bankruptcy 22 petition, and I saw that there was a lease for a penthouse 23 apartment, and I suddenly found out that there was money 24 that a debtor had spent to buy a condominium. All those 25 things didn't seem to fit within the framework of a
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1047 Skalka-cross/Wallenstein
1 company that was in the business of selling memberships. 2 Q Did you discuss that with anyone from Reed before you 3 proposed the creation of the logs? 4 A That issue, of whether these properties have a 5 business purpose? 6 Q Right. 7 A Yes. 8 Q Who from Reed did you discuss it with? 9 A My contact at that time was an in-house attorney at 10 Reed named Mark Seeley. 11 THE COURT: Mark? 12
THE WITNESS: Seeley, S E E L E Y. So I was 13 probably discussing it with him. 14 Q So, would it be fair to say then that the purpose of 15 the logs was to establish the business purposes of the 16 properties owned or leased by Who's Who Worldwide because 17 Reed Elsevir didn't like the way that Who's Who was 18 running the business? 19 A That was one of the factors, yes. 20 Q So, Reed decided that Who's Who couldn't have these 21 properties for whatever -- it wasn't appropriate for Who's 22 Who to have these particular properties in the context of 23 their membership business, because that was not the way 24 that Reed would run their business; isn't that right? 25 A My focus was to try to collect on this 1.7 million
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1048 Skalka-cross/Wallenstein
1 dollars judgment. This condominium represented
2 essentially a million dollar asset, and if there was no 3 business to be sold, or if it could be sold it would bring 4 one million dollars into the creditors. So it was not 5 that it could be sold, but it was an asset there that 6 could be an asset for the creditors. 7 Q In fact, that property was an asset? 8 A Title of the property was in the name of Publishing 9 Ventures, Inc. So it wasn't an asset in the bankruptcy 10 estate. 11 Q So, do you recall at some point in the negotiations 12 of the creditor's committee, part of one of the deals that 13 was presented or one of the offers presented was in order 14 to protect the interest of the debtor, that they take a 15 mortgage from Publishing Ventures on that particular piece 16 of property? 17 A Yes. 18 Q And that would have protected Who's Who with respect 19 to that particular asset; isn't that correct? 20 A Yes. 21 Q And in fact, that property, even if it wasn't sold 22 could be rented for a fairly high rental, and that rent 23 could then become used for the creditors; is that true? 24 A My understanding, yes. 25 Q At the point in time, I believe you said August of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1049 Skalka-cross/Wallenstein
1 1994, there was a request that the logs be provided, 2 everyone understood that no logs had been kept up to that 3 point in time; is that correct? 4 A I believe so, yes. 5 Q And this was something that was going to be done in 6 the future? 7 A Yes. 8 Q Mr. Gordon was present and told of that particular 9 directive? 10 A He was in the room while all this was being 11 negotiated. 12 Q Was Mr. Reffsin present? 13 A I believe so. 14 Q Any details
given at that time as to how the logs 15 were prepared, to be prepared and any information kept on 16 it? 17 A At that meeting in general terms they were discussed 18 that they were to be kept at the property and on a daily 19 basis. 20 In a written stipulation that came out of that 21 meeting it is set forth in much greater detail. 22 Q It was to be presented to the Court back in 23 September? 24 A It was presented back in September, yes. 25 MR. WALLENSTEIN: No questions. Thank you,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1050 Skalka-cross/Wallenstein
1 Mr. Skalka. 2 MR. NEVILLE: I have a couple of questions, your 3 Honor. 4 THE COURT: Yes, Mr. Neville. 5 6 CROSS-EXAMINATION 7 BY MR. NEVILLE: 8 Q Sir, my name is Jim Neville, and I represent Scott 9 Michaelson. 10 Yesterday
you were testifying about your hourly 11 rate; is that correct? 12 A Yes. 13 Q And you said your hourly rate was $225 per hour? 14 A Yes. 15 Q Does that include the travel time for you to come to 16 court here in the morning and go home at night? 17 A It does not. 18 Q So, your testimony is only the time that you are 19 actually on the witness stand testifying is when you 20 charge Reed Elsevir for your services; is that a fact? 21 A That's what -- that's a fact, yes. 22 Q And during the 20 minute break or so we took you are 23 not being paid for that time? 24 A You know, I have not discussed this with my client, 25 but I have been here since Tuesday. I don't think the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1051 Skalka-cross/Neville
1 client -- I am not going to submit a bill for the time 2 waiting to be called as a witness. The time I am actually 3 on the stand or between breaks, I might bill. I have not 4 discussed it with the client. 5 Q You said that your contact at Reed at the time of 6 this petition earlier on was Mark Seeley; is that right? 7 A Yes. 8 Q Who is your contact at Reed now? 9 A Henry Horbaczdwski. 10 THE COURT: How do you spell that? 11 THE WITNESS: H O R B A C Z D W S K I. 12 Q Where is he? 13 A His office is outside of Boston. 14 Q Have you ever had any contacts with anybody a part of 15 Reed Elsevir in Europe? 16 A No. 17 Q No contacts whatsoever? 18 A No. 19 Q And with who would you say you spent the most time, a 20 person from Reed Elsevir in discussing this entire case? 21 A Mark Seeley. 22 Q Is it fair to say that you and Mark Seeley had worked 23 intimately, very closely, hand in hand, in this case?
24 A Until September or October of 1995, when he was 25 transferred, frankly overseas.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1052 Skalka-cross/Neville
1 Q Where did he get transferred to? 2 A I don't know. He was transferred out of Reed's 3 offices in Boston where Mr. Horbaczdwski was, and 4 Mr. Horbaczdwski became my contact. 5 Q He still works for Reed, as far as you know? 6 A I don't know. 7 Q You say transferred. What does that mean, 8 transferred? 9 A My understanding is he got a promotion within Reed, 10 which involved him moving, at least for a short period of 11 time, overseas, and I have not been in contact with him. 12 Q After you testified yesterday at the end of court, 13 did you memorialize what had happened in court? 14 A No. 15 Q Are you going to make any notes to submit to your 16
client, Reed Elsevir to tell them what you feel happened 17 in court, and what went on? 18 A I didn't plan on it, no. 19 Q Are you going to call anybody, Mark Seeley, or 20 anybody else, and explain to them what happened at the 21 trial, and explain your testimony? 22 A I had no anticipation of talking to Mr. Seeley, I 23 didn't talk to him in two years. 24 Q Someone at Reed? 25 A I suspect I will talk to someone at Reed, yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1053 Skalka-cross/Neville
1 Q Who do you suspect you will talk to at Reed? 2 A Mr. Horbaczdwski. 3 Q And you will talk to Mr. Horbaczdwski and what 4 happened with respect to your statuses in this case? 5 A I can only talk about what I observed. I will not be 6 here for the rest of the case. 7 Q You are here, are you not, sir, as an objective, 8 unbiased witness; is that right? 9 MR. WHITE: Objection, objection. 10 THE COURT: Sustained. 11 Q Sir, you are here promoting the interests of your 12 client; isn't that a fact? 13 A My client has asked me to cooperate with the 14 government, and asked me -- and I am here at their 15 request. 16 Q Let me ask you this: When you were at Whitman Breed 17 Abbott and Morgan, you did the bankruptcy work for Reed 18 while you were there; is that right? 19 A Yes. 20 Q And then you left Whitman Breed Abbott and Morgan and 21 went to this other firm in Connecticut; is that right? 22 A Yes. 23 Q Now, is it fair for me to say that you in the 24 vernacular took this business with you to your new firm? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1054 Skalka-cross/Neville
1 Q And Reed is a good client, isn't it? 2 A On this particular matter, yes. I have gotten -- I 3 have done no other work for them. 4 Q In fact, one of the reasons why this Connecticut firm 5 hired you, or made you a partner is because you were 6 bringing in some good business, right? 7 A I had some business. 8 Q And Reed Elsevir was part of that good business you 9 brought into that firm; is that right? 10 A They didn't know that at the time. 11 Q They, meaning who? 12 A My partner, in my new firm. 13 Q They didn't want to know how much business you were 14 bringing in? 15 A They did, but they didn't know that Reed Elsevir 16 would come as a client. When you leave a law firm, you 17 don't know which clients would follow you and who would 18 not. 19 I worked in the field. This new firm in 20 Connecticut is a smaller firm, and it was a field they 21 wanted to expand in.
I had experience. I live in 22 Connecticut. It was a natural thing. 23 Q Did you desire that Reed Elsevir would come with you 24 as a client to your new firm? 25 MR. WHITE: Objection.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1055 Skalka-cross/Neville
1 THE COURT: Sustained. 2 Mr. Neville, let's get to a substance relevant in 3 the case. 4 JUROR NO. 4: Yes. 5 Q Sir, it is a fact, is it not, that you are here to 6 testify in the context of telling the truth, but to 7 promote the interests of your client Reed Elsevir? 8 MR. WHITE: Objection. 9 THE COURT: Sustained. 10 MR. NEVILLE: No further questions. 11 THE COURT: Anything else? 12 Mr. White? 13 MS. SCOTT: There is redirect, your Honor. 14 15 REDIRECT EXAMINATION 16 BY MS. SCOTT: 17 Q Mr. Skalka, back in the beginning of the
18 cross-examination, do you remember that Mr. Jenks asked 19 you as to whether Reed Elsevir was paying you to appear 20 here in court? 21 A Yes. 22 Q And you remember that Mr. Neville just asked you 23 whether you are being paid? 24 A Yes. 25 Q You told them, yes, Reed was paying you $225 per
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1056 Skalka-redirect/Scott
1 hour; is that right? 2 A That's correct. 3 Q When Who's Who Worldwide was filing for bankruptcy, 4 they were represented by a bankruptcy attorney? 5 A Yes. 6 Q How much was that attorney paid for his services to 7 Who's Who Worldwide? 8 A He was given a $45,000 retainer, and indicated he 9 would be billing his work at $300 an hour. 10 Q Now, Reed Elsevir is paying you for the time that you 11 spend on their matters; is that correct?
12 A That's correct. 13 Q And as a part of that, they are paying you for the 14 time you actually spend in court on this case? 15 A That's correct. 16 Q They are not paying you for your testimony; isn't 17 that right? 18 A That's correct. 19 Q So, for instance, they didn't tell you what to say on 20 the witness stand? 21 MR. GEDULDIG: Objection to the form of the 22 question, Judge. 23 THE COURT: Overruled. 24 A That's correct. 25 Q Now, before yesterday you didn't have any discussions
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1057 Skalka-redirect/Scott
1 with anybody at Reed Elsevir about what your testimony 2 would be in this case; is that correct? 3 A That's correct. 4 Q Do you remember yesterday Mr. Jenks asked you about 5 when Reed requested the bankruptcy court to appoint a 6 Chapter 11 Trustee? 7 A Yes. 8 Q And he asked you about the motion that Reed filed in 9 which Reed made this request for the Chapter 11 Trustee; 10 is that correct? 11 A That's correct. 12 Q And he also asked you about Who's Who Worldwide's 13 opposition to this request for a trustee? 14 A Yes. 15 Q And he asked you specifically whether it was 16 unethical for Who's Who Worldwide to oppose the motion for 17 the appointment of the trustee? 18 A Yes, he did. 19 Q And you said that there was nothing improper for 20 opposing a request for a trustee; is that right? 21 A That's correct. 22 Q In fact, Who's Who Worldwide did oppose the motion 23 for a trustee? 24 A Yes. 25 Q Now, you testified that Who's Who Worldwide submitted
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1058 Skalka-redirect/Scott
1 an affidavit that was written by Bruce Gordon in support 2 of its position that no trustee should be appointed. 3 A That's correct. 4 Q So, Who's Who Worldwide gave this affidavit of Bruce 5 Gordon to the bankruptcy court to try to persuade the 6 bankruptcy judge not to appoint a trustee; isn't that 7 right? 8 A Yes. 9 Q And you read aloud some statements that Bruce Gordon 10 made about affidavits; is that correct? 11 A Yes. 12 Q Is it proper for Who's Who Worldwide to give an 13 affidavit to a bankruptcy court that contained false 14 statements? 15 MR. WALLENSTEIN: Objection. 16 MR. TRABULUS: Objection. 17 THE COURT: Sustained. 18 Q Now, do you remember that Mr. Jenks asked you about 19 the 1.6 million dollar judgment that Reed Elsevir won in a 20 trademark infringement case against Who's Who Worldwide? 21 A Yes, I do.
22 Q And do you remember that the Court -- that you stated 23 that the Court ordered Who's Who Worldwide to pay 1.6 24 million dollars to Reed Elsevir in this case? 25 A Yes, I do.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1059 Skalka-redirect/Scott
1 Q And you also testified that Who's Who Worldwide 2 appealed this 1.6 million dollar judgment? 3 A That's correct. 4 Q And that meant that Who's Who Worldwide was fighting 5 the judgment, they didn't agree that they should have to 6 pay that judgment to Reed Elsevir? 7 A That's correct. 8 Q Now, you also testified that they appealed this 9 judgment right around the time that they also filed for 10 bankruptcy? I am talking again about Who's Who 11 Worldwide. 12 A That's correct. 13 Q Now, what did the Court of Appeals do with the Who's 14 Who Worldwide appeal?
15 A They unanimously affirmed the judgment in favor of 16 Reed. 17 Q And that means that the appeals court determined that 18 this 1.6 million dollar judgment was proper; is that 19 correct? 20 A That's correct. 21 THE COURT: I think this is a good time to take a 22 recess. 23 MS. SCOTT: Thank you, yes. 24 THE COURT: Members of the jury, we will recess 25 for lunch.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1060 Skalka-redirect/Scott
1 Please do not discuss the case either among 2 yourselves or anyone else. Keep an open mind. Come to no 3 conclusions. We will recess until 1:30. 4 Have a nice lunch. 5 (Luncheon Recess.) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
23 24 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1061 Skalka-redirect/Scott
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 of the jury.) 5 THE COURT: Mr. Skalka. 6 7 D O U G L A S S K A L K A , 8 called as a witness, having been previously 9 duly sworn, was examined and testified as 10 follows: 11 12 (Whereupon, the jury at this time entered the 13 courtroom.) 14 THE COURT: Please be seated, members of the 15 jury. 16 You may proceed, Ms. Scott. 17 MS. SCOTT: Thank you, your Honor. 18 19 REDIRECT EXAMINATION (cont'd) 20 BY MS. SCOTT: 21 Q Mr. Skalka, you have been asked a lot of questions 22 about why Reed sought a trustee for Who's Who Worldwide. 23 Did Reed Elsevir do this because they wanted to 24 put Who's Who Worldwide out of business? 25 A No.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1062 Skalka-redirect/Scott
1 MR. TRABULUS: Objection, your Honor, to form. 2 MR. JENKS: How would -- sorry, your Honor. 3 THE COURT: I don't know if he is able to answer 4 that. You can question him on whether there were any -- 5 he was advised to do that or instructed to do it. But he 6 is not Reed Elsevir; is that the correct pronunciation? 7 THE WITNESS: It is Elsevir. 8 THE COURT: Elsevir? 9 THE WITNESS: Yes. 10 THE COURT: He is only an attorney -- not only. 11 Having a status as being an attorney for a company is very 12 good. But he doesn't necessarily speak for Reed Elsevir 13 unless he is so instructed; is that correct? 14 THE WITNESS: That's correct, your Honor. 15 Q Did Reed Elsevir inform you of the
reason why they 16 wanted a trustee for Who's Who? 17 A Yes. 18 Q And was that reason that they wanted to put Who's Who 19 Worldwide on -- 20 MR. GEDULDIG: Objection. 21 MR. JENKS: Objection. 22 MR. TRABULUS: Objection. 23 THE COURT: Are we regressing as we go along? 24 Are we interrupting a lawyer in the middle of the 25 question?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1063 Skalka-redirect/Scott
1 MR. GEDULDIG: It sounded the way -- that she was 2 testifying, your Honor. 3 THE COURT: That may be. The jury knows that an 4 unanswered question by a lawyer is not evidence. They pay 5 no attention to it. 6 Please, there are reasons you should not 7 interrupt a reason. If you do it again I will tell you 8 the reason. 9 MR. GEDULDIG: I will try not to. 10 THE COURT: Then we will not know the reason. 11 Q What was the reason that Reed Elsevir gave you why 12 they wished for the appointment of a trustee for Who's Who 13 Worldwide? 14 A They believed that a trustee could operate the 15 business in a lawful manner and collect all the loan 16 receivables that had been reflected on the company's 17 bankruptcy petition in a quicker and more efficient manner 18 than the existing management of the company. 19 Q Now, if Who's Who Worldwide went out of business, 20 would Reed have been able to collect its judgment of 1.6 21 million? 22 A Unlikely. 23 Q And why is that? 24 A Because it was more likely, every plan or proposal 25 being made to pay back Reed or any other creditor was
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1064 Skalka-redirect/Scott
1 based on the ongoing cash flow of the company, as well as
2 getting back some of the loans made to affiliates of Who's 3 Who Worldwide. So without these companies operating, none 4 of the money would have been paid back to the creditors. 5 It was Reed's concern and I believe the concern 6 of the creditor's also, without an ongoing business there 7 would not be a fund of money available to pay back the 8 creditors. 9 Q What was it that Who's Who Worldwide was doing that 10 made -- withdrawn. 11 Why was it on several occasions that Reed tried 12 to get a trustee appointed to oversee Who's Who Worldwide 13 operation? 14 A One, we didn't think the company through existing 15 management was doing enough to collect the loans made to 16 affiliated companies or to Mr. Gordon. 17 The other reason is we were concerned that the 18 company was not complying with the terms of the trademark 19 judgment that had been awarded to Reed prior to the 20 bankruptcy filing, which required Who's Who Worldwide 21 Registry to operate in a certain manner, and not to 22 infringe upon Reed's trademarks. 23 Q Okay, we will come back to both those things. First 24 I want to ask you, what kind of a trustee did Reed Elsevir 25 seek?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1065 Skalka-redirect/Scott
1 A As I said earlier, a Chapter 11 or operating trustee, 2 someone who continued to operate the business. 3 Q Someone who continued to operate the business instead 4 of closing it down and seizing its assets; is that right? 5 A That's right. 6 Q What is the other type of trustee that Reed could 7 have asked for? 8 A A Chapter 7 trustee. 9 Q What would that kind of trustee have done? 10 A It would have shut the business down. 11 Q Why is it that Reed sought the appointment of a 12 Chapter 11 Trustee as opposed to a Chapter 7 trustee? 13 A A Chapter 11 Trustee could continue to operate the 14 business, generate cash flow, and hopefully to repay the 15 creditors and help collect the loans that were made to 16 Mr. Gordon and his affiliated companies. 17 Q Now, when the trustee was appointed, you were asked 18 some questions about how that trustee got paid once that 19 person was appointed. And you testified, I believe, that 20 the fee application that that trustee made was for 21 $300,000; is that correct? 22 A Actually for his attorneys. 23 Q His attorneys. 24 Now, do you recollect what Who's Who Worldwide 25 reorganization said about what if Mr. Gordon would have
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1066 Skalka-redirect/Scott
1 been paid if he had been left in charge of the company 2 instead to the company being taken over by the trustee? 3 A The last plan that had been filed by Who's Who 4 Worldwide provided for an initial salary of $150,000 a 5 year to Mr. Gordon, and it was to increase at increments 6 of $25,000 per year for I believe for the next five years 7 is what the projections showed that accompanied the plan, 8 so he would have been making $275,000 five years after the 9 bankruptcy. 10 MS. SCOTT: May I have a moment, your Honor? 11 THE COURT: Yes. 12 (Whereupon, at this time there was a pause in the 13 proceedings.) 14 Q Mr. Skalka, I am showing you 15 Government's Exhibit 420-E, which is in evidence, a 16 schedule to Mr. Gordon's offering compromise to the IRS; 17 and it sets forth projected salaries for Mr. Gordon for 18 several years. 19 If you take a look at the columns, 1995 and 1996, 20 can you tell us what that schedule says about what 21 Mr. Gordon was to be paid during those two years? 22 A It says for 1995 he was to be paid $150,000. For 23 1996 he was to be paid $175,000. 24 Q And what is that total for those two years? 25 A $325,000.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1067 Skalka-redirect/Scott
1 Q Now, when the bankruptcy court determines that a 2 trustee is necessary and appoints one, who actually 3 decides who that trustee would be? 4 A The appointment is actually made by an official in 5 the United States Trustee's Office, which I mentioned is 6 an administrative arm of the Court. 7 Q Would Reed Elsevir have been able to hand pick a 8 trustee to oversee Who's Who Worldwide? 9 A No. 10 Q So any trustee appointed would have been independent 11 of both the creditors and Who's Who Worldwide; is
that 12 correct? 13 A Yes. 14 Q And that is to insure the trustee's impartiality; is 15 that correct? 16 A Yes. 17 Q And in making a decision about who the trustee would 18 be, would the U.S. Trustee's Office consider how well the 19 person who is being considered knows the business of Who's 20 Who Worldwide? 21 MR. TRABULUS: Objection. 22 THE COURT: Sustained. 23 Q What considerations would go into the selection of a 24 trustee? 25 MR. TRABULUS: Objection.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1068 Skalka-redirect/Scott
1 MR. JENKS: Objection. 2 THE COURT: Sustained. 3 Q Now, Mr. Trabulus asked you about the time when a 4 trustee was actually appointed, and that that person's 5 name was Mendelsohn; is that correct? 6 A That's correct. 7 Q And Mr. Trabulus suggested to you that from the point 8 when Mr. Mendelsohn was appointed on, Who's Who Worldwide 9 stopped operating as a business; is that correct? 10 MR. NELSON: Objection. 11 THE COURT: Can I hear the question, please. 12 (Whereupon, the court reporter reads the 13 requested material.) 14 THE COURT: What is the nature of the objection? 15 MR. NELSON: To form, your Honor. 16 THE COURT: Overruled. 17 A That's correct. 18 Q Now, when was Mr. Mendelsohn appointed? 19 A I believe in September or early October of 1995. 20 Q And when was that in relation to when the appeals 21 court affirmed the 1.6 million dollar judgment against 22 Who's Who? 23 A Within a few weeks thereafter. 24 Q So, in other words, the appeals court agreed then 25 that the 1.6 million dollar judgment was proper; is that
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1069 Skalka-redirect/Scott
1 correct? 2 MR. NEVILLE: Objection. 3 MR. TRABULUS: Objection. Asked and answered. 4 MR. WALLENSTEIN: Objection. 5 THE COURT: I think counsel is just bringing that 6 out for the edification of the jury, and I will overrule 7 the objection. 8 Well, as to form -- the judgments of the lower 9 court was affirmed; is that correct? 10 THE WITNESS: Yes. 11 THE COURT: And that means the judgment of the 12 lower court stands? 13 THE WITNESS: That's correct. 14 THE COURT: Okay. 15 MS. SCOTT: Thank you, your Honor. 16 Q Now, what did Mr. Gordon say after that -- after the 17 appeals court affirmed the judgment? What did Mr. Gordon 18 any about whether the company could run? 19 A My recollection is that he did not testify at the 20 hearing to appoint a trustee shortly thereafter. 21 Q Had Mr.
Gordon made any statements that you can 22 recall either in affirmance or after the judgment as to 23 whether the company would be able to run if that judgment 24 was affirmed? 25 A He made statements prior to the appeals court
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1070 Skalka-redirect/Scott
1 affirming the decision, indicating that he thought the 2 company could still operate. But by late September 1995, 3 which was after the appeals court had affirmed the 4 decision, his position was that Who's Who Worldwide would 5 no longer be in a position to continue to operate. 6 Q Because of this judgment; is that correct? 7 A That and the fact that it had not operated in almost 8 six months. 9 Q So, according to Bruce Gordon's own words, Who's Who 10 Worldwide ability to function as a business had nothing to 11 do with the appointment of a trustee; is that correct? 12 MR. TRABULUS: Objection. 13 THE COURT: Sustained as to form. Please do not 14 lead the witness. 15 Q Now, Mr. Trabulus asked you several questions about 16 actions that Reed Elsevir took at the beginning of the 17 bankruptcy proceeding, and you testified that at that time 18 Reed Elsevir wanted to enter the judgment, the judgment 19 for 1.6 million dollars; is that correct? 20 A That's correct. 21 Q Now, what would -- withdrawn. 22 Mr. Trabulus asked you what Reed's reasons were 23 for wanting to have the judgment of 1.6 million dollars 24 entered against the company. 25 MR. TRABULUS: Objection, your Honor.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1071 Skalka-redirect/Scott
1 THE COURT: Sustained. 2 Q Do you remember Mr. Trabulus asking you that question 3 as to what Reed Elsevir's reasons were for wanting to have 4 the judgment entered? 5 A Yes. 6 Q Do you remember that you mentioned other orders of 7 the Court? 8 A Yes. 9 Q Do you remember that you testified that these were 10 other orders that Reed Elsevir wanted Who's Who to comply 11 with? 12 A Yes. 13 Q What were those other orders of the Court? 14 A The Court in the trademark case had in addition to 15 awarding Reed a little over 1.6 million dollars in 16 damages, issued several orders to, you may want to call it 17 an injunction, to prevent Who's Who Worldwide Registry 18 from operating its business in a certain fashion, in order 19 to protect Reed's trademarks, and the judgment was pretty 20 specific as to how Who's Who Worldwide Registry was to 21 operate from that point forward. 22 Q Now, what is injunctive relief? 23 MR. TRABULUS: Objection, your Honor. 24 THE COURT: Overruled. 25 A It is a court order directing the party to whom the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1072 Skalka-redirect/Scott
1 order is directed to of certain actions that it can or 2 cannot take. 3 Q Now, what specifically did this order require Who's 4 Who Worldwide to do? 5 MR. SCHOER: Objection. 6 THE COURT: Sustained. 7 Do you have the order? 8 MS. SCOTT: Yes. 9 THE COURT: Is it in evidence? 10 MS. SCOTT: I will offer it. 11 MR. TRABULUS: Objection, your Honor. 12 May we approach? 13 THE COURT: Come up. 14 15 (Whereupon, at this time the following took place 16 at the sidebar.) 17 THE COURT: Because of the number of lawyers, 18 when you object, please stand up so we can see who it is 19 who is objecting. I was always taught that lawyers should 20 stand up, in any event. But I guess that's old 21 fashioned. 22 MR. SCHOER: It is not a sign of disrespect. 23 Just sometimes it is hard to get up quick enough to stop 24 the answer. 25 THE COURT: Okay.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1073 Skalka-redirect/Scott
1 What is the objection to the judgment? 2 MR. TRABULUS: Your Honor, I don't think there is 3 any relevance, and there is a prejudicial effect with 4 respect to this particular paragraph. And the particular 5 paragraph -- 6 THE COURT: Which one? I don't think I have a 7 copy of that, do I? 8 MR. WHITE: Your Honor, Exhibit 299. 9 THE COURT: What part of the judgment are you 10 objecting to? 11 MR. TRABULUS: There is only one part, your 12 Honor, and I don't think I opened the door to that. It is 13 on page 6, and it is the decretal paragraph continuing -- 14 beginning page 6, continuing to page 7. I think the 15 prejudice there is great, because implicit in that is a 16 finding that any description that -- of Who's Who is 17 leading, traditional authoritative, a reference book, 18 having reference value being worldwide in scope, or any 19 reference to the nomination of members is false or 20 fraudulent, and we are getting into issues that the jury 21 will have to decide. So I think the prejudice outweighs 22 any probative value that this has. He also explained that 23 Reed had other reasons besides trying to shut down Who's 24 Who Worldwide, and that there were provisions of the order 25 that was not being complied with.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1074 Skalka-redirect/Scott
1 Basically after I elicited it on direct, I 2 dropped
that aspect of it, that Reed was trying to shut 3 down Who's Who. I think the prejudicial effect of 4 including those things risks taking the issue of the case 5 from the jury, inviting them to simply follow what this 6 would tell them what Judge Jordan had decided. Now we 7 have evidence that there is an appellate affirmance of 8 that which makes it even more prejudicial. 9 THE COURT: Well, with respect to the mail fraud 10 part of this, when do you say the dates are that it was 11 operative? 12 MR. WHITE: The indictment charges from 1989 13 through March 30th of 1995. So this judgment was in 14 effect for the last 12 plus months of that activity. And 15 your Honor will remember that pretrial we discussed as to 16 whether this would be admitted. Your Honor said you would 17 reserve judgment on that. 18 At that time our argument was that it was 19 relevant to
Mr. Gordon and the corporations, because they 20 were on notice, they were told, they didn't have to accept 21 it, but were told that at least one person, a respected 22 person, a federal judge considered the representations 23 false and misleading. 24 Now it is different. Mr. Trabulus opened the 25 door. He stood here for two hours trying to suggest that
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1075 Skalka-redirect/Scott
1 Reed had absolutely no reason to be seeking the 2 appointment of a trustee other than destroying 3 Mr. Gordon's business. 4 He can't say I purposely let this part out. It 5 is entirely relevant to understanding why Reed was 6 pursuing this. Because they saw a latent violation of an 7 order they got from Magistrate Jordan. 8 Your Honor, I didn't make Mr. Trabulus asking 9 those questions. He opened the door
to this. He can't 10 pick and choose. He can't say, Mr. Skalka, you tried to 11 enforce this part of the order and this part of the order 12 and not that part of the order. 13 THE COURT: Counsel, we have to have quiet here. 14 It will appear to me that the first part of this 15 decretal paragraph on page 6 is admissible because it is 16 not prejudicial to the defendants in this case, because it 17 says that Who's Who shouldn't be associated with the 18 plaintiffs. That's all that part says. 19 MR. TRABULUS: I have no problem with that. I 20 didn't mean to infer that, your Honor. 21 THE COURT: The part that really is at issue is 22 on page 7, where it says that the defendant was further 23 enjoined and restrained from describing verbally in 24 writing or electronically the selection of members as a 25 nomination, or stating in writing, verbally or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1076 Skalka-redirect/Scott
1 electronically that there is no cost or obligation to be 2 listed in Who's Who Worldwide's publications, or that 3 memberships in defendant's organizations are limited or 4 otherwise closed. 5 MR. TRABULUS: The preceding sentence contains 6 prejudicial matter that it can't be described as leading, 7 authoritative or having reference value. That is also 8 prejudicial, your Honor. 9 THE COURT: It -- 10 MR. TRABULUS: It doesn't have to do with the 11 trademark issue. 12 MR. WHITE: That's just the point, your Honor. 13 Mr. Trabulus asked Mr. Skalka whether or not Who's Who 14 complied with the trademark part of the order. And what 15 you just read saying it was not prejudicial, was just a 16 trademark. 17 Than Magistrate Jordan makes a finding with 18 respect to Reed Elsevir's false advertising claim. And 19 that's where Mr. Trabulus is giving the jury an incomplete 20 understanding of it. That's the reason and the other 21 orders of the Court that Mr. Skalka is referring to. 22 THE COURT: I don't know whether it is misleading 23 or not. 24 First of all, this document is admissible, since 25 it is a public record. It is a judgment of the Court.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1077 Skalka-redirect/Scott
1 The only reason -- it is certainly relevant because it 2 pertains to the issues in this case. In particular the 3 last part with respect to the fraud involved alleged by 4 the government. 5 And since the judgment itself was dated sometime 6 in March -- March 31st, 1994, and according to Mr. White, 7 the indictment period is beyond that, to 1995 -- 8 MR. WHITE: March 30,
1995. 9 THE COURT: So this is evidence, if this is 10 continued to be done is evidence of intent, or whatever it 11 is evidence of, on the part of the corporations and 12 Mr. Gordon. 13 MR. JENKS: Judge, can I put in my two cents with 14 respect to this. 15 THE COURT: You can. 16 I will not make any decision on this now in any 17 event, because I have to think about it. 18 Do you object to any other part of this 19 judgment? 20 MR. TRABULUS: Do I object? Let me just look at 21 it. 22 MR. JENKS: Edward Jenks for the corporations, 23 your Honor. 24 If you let it in, Judge, you certainly have to 25 give a limiting instruction.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1078 Skalka-redirect/Scott
1 I submit respectfully you should not let it in. 2 It usurps the jury here. You have a United States
3 Magistrate Judge saying that they believed that the 4 corporation engaged in certain fraudulent acts, which is 5 the very issue that this jury has to find with respect to 6 the mail fraud statutes. 7 MR. SCHOER: Judge, we raised this issue pretrial 8 in the letter in motion, in the motion in limine I wrote. 9 And your Honor I believe indicated you had serious 10 problems in letting this in because of the prejudice that 11 would arise because it is in fact a different burden of 12 proof, and that this is a finding by a Court. 13 In addition, part of the argument that was raised 14 is if you let this in we would probably be entitled under 15 similar arguments to introduce your decision, when you 16 found there was no fraud. 17 MR. WHITE: There is a distinction, your Honor. 18 Your distinction is long after the indictment period. 19 This happened a year before.
So there is a notice of it. 20 It is not a tit for tat, let's put in favorable decisions. 21 Mr. Gordon and the corporations knew of this, and 22 notwithstanding that, they engaged in these practices. 23 And that's relevant to intent. 24 THE COURT: The problem here, your statement, 25 Mr. Schoer, is not entirely accurate. This document
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1079 Skalka-redirect/Scott
1 doesn't say that it is a fraudulent practice at all. All 2 it says is that the defendant was enjoined from doing it, 3 that's all. 4 Now, that is evidence to the corporation, that 5 they shouldn't have done it, notice to the corporation. 6 It doesn't mean it is fraudulent. 7 There is nothing here that says you are guilty of 8 fraudulent practice. 9 MR. JENKS: You can draw the inference from that 10 decision that the Court felt that there were fraudulent 11 practices used. That's why they were enjoined. 12 MR. TRABULUS: You can draw the inference that 13 the Court has found that Who's Who Worldwide was not 14 traditional, was not authoritative, was not a reference 15 book, did not have reference value, was not worldwide, and 16 what happened is that it was not a nomination. In a sense 17 the Court is saying this is not so. And that basically 18 takes the critical issue from the jury. It is extremely 19 prejudicial. 20 MR. WHITE: The fact that Magistrate Jordan said 21 it is false, doesn't mean fraudulent. So this doesn't 22 remove anything from the province of the jury. 23 THE COURT: I will not remove this particular 24 part from the judgment. What else do you have? 25 MR. TRABULUS: That decretal paragraph is the
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1 only one I object to, and it is the decretal paragraph 2 again in the middle of page 6, to the middle of page 7. 3 THE COURT: I will reserve decision on that. 4 MR. WHITE: That's the only part we want to 5 offer. 6 THE COURT: I will not rule on it then. 7 You are not offering the other part? 8 MR. WHITE: I think that's the order to which 9 Mr. Skalka was referring, your Honor. 10 MR. SCHOER: Just for the record, if your Honor 11 does elect to introduce this, and on behalf of the other 12 defendants, not the corporation, and not Mr. Gordon, 13 obviously we believe it is extremely prejudicial to the 14 remaining defendants. 15 First we would ask for a severance with respect 16 to the trial because of that. And if your Honor is not 17 inclined to do that, we would ask for a very specific 18 limiting instruction as to the purpose of the introduction 19 of this evidence, and that it is only introduced against 20 the corporation and Mr. Gordon. 21 THE COURT: Since I have not made the ruling, I 22 will not make a comment on that. 23 You feel if I do let it in, you want a limiting 24 charge, make up a curative charge just in the event I will 25 let it in. I will not grant a severance. Tell me the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1081 Skalka-redirect/Scott
1 kind of instruction you want, other than it pertains to 2 the date of the judgment and thereafter. 3 MR. LEE: Your Honor, Winston Lee for Ms. Weitz, 4 if your Honor does admit it for whatever purpose you deem 5 proper, I would ask the Court instruct the jury pretty 6 much in line with the content -- the substance of the 7 conversation here at the bench, namely, that it is not to
8 be used by the jury as proof of fraud. 9 THE COURT: Write it out as tough as you can and 10 I will look at it. You give it to me in writing. However 11 I have not decided yet as to whether to let it in. 12 MR. TRABULUS: In connection with some of the 13 points Mr. White made, there are some counts of the 14 indictment with respect through the date of the indictment 15 to date. 16 MR. WHITE: The tax count. 17 THE COURT: Okay. 18 MR. NELSON: On behalf of Frank Osman, with 19 respect to the decretal paragraph, your Honor, I will 20 submit a proposed instruction. But I would like to raise 21 as well that Mr. Osman was not an employee of the 22 corporation at the time the judgment was entered. He did 23 not become an employee until close to a year after the 24 judgment was entered. In fact, he was not an employee of 25 the corporation at the time the lawsuit was initiated.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1082 Skalka-redirect/Scott
1 THE COURT: If I let it in, you prepare a 2 curative charge you wish I give for Mr. Osman. 3 MR. NELSON: Thank you. 4 MR. TRABULUS: If your Honor does let it in, 5 would you direct that Mr. Skalka appear for additional 6 examination, because I have not been able to examine him 7 on that. 8 MR. WHITE: I am not sure Mr. Skalka can speak to 9 the substance of this, but he is the bankruptcy attorney 10 trying to enforce it as it affects his client on the 11 subsequent bankruptcy proceeding. 12 MR. TRABULUS: The government is contending my 13 questioning of Mr. Skalka buttresses the fact that it 14 should be admissible. I believe my questioning did not 15 open any doors which were not previously opened. 16 MR. WHITE: You opened the door.
17 THE COURT: The answer is you can, yes, when 18 Mr. Skalka's testimony concludes, you will remind me, and 19 I will call him over and tell him he is subject to recall, 20 and I will direct him to return. 21 MR. WHITE: Assuming we don't want to put any 22 other portions in of this judgment, can we ask Mr. Skalka 23 about what the other orders were? 24 THE COURT: What other orders? 25 MR. WHITE: Mr. Skalka said one of the reasons
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1083 Skalka-redirect/Scott
1 for applying for the trustee is they were seeking 2 compliance with other orders -- 3 THE COURT: What other orders? 4 MR. WHITE: This order. 5 THE COURT: The one I am looking at now? 6 MR. WHITE: Yes. 7 THE COURT: No, you can bring out there was an 8 injunction for Who's Who from doing certain things. And 9 that's it. 10 MR. WHITE: I want to make sure I don't say the 11 forbidden things. 12 THE COURT: At that point I will take over the 13 questioning. 14 MR. WHITE: That's where we are. 15 THE COURT: Now? 16 MS. SCOTT: Yes. 17 THE COURT: Okay. 18 19 (Whereupon, at this time the following takes 20 place in open court.) 21 THE COURT: Mr. Skalka, in addition, the judgment 22 obtained by Reed against Who's Who Worldwide, included a 23 judgment for money damages, right. 24 THE WITNESS: That's correct. 25 THE COURT: And it also included a statement by
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1084 Skalka-redirect/Scott
1 the Court that Who's Who Worldwide should not do certain 2 things in the practice of its business; is that correct? 3 THE WITNESS: That's correct. 4 THE COURT: And both of those things went into 5 your decision and Reed's decision to ask for a trustee; is 6 that correct? 7 THE WITNESS: Yes. 8 THE COURT: All right. 9 MS. SCOTT: Thank you, your Honor. 10 Q Do you remember when Mr. Skalka was asking you about 11 whether Reed Elsevir considered Who's Who Worldwide to be 12 a competitor? 13 A Yes, I do. 14 Q Do you remember when Mr. Trabulus asked you about the 15 fact that one of Reed Elsevir's claims against Who's Who 16 Worldwide was for unfair competition? 17 A That's correct. 18 Q And what other claims did Reed Elsevir raise against 19 Who's Who Worldwide? 20 A In the trademark action you are asking me? 21 Q Yes, that's correct. 22 A They brought a number of claims under federal 23 trademark law for I believe false advertising, and other 24 related actions based on confusion between Reed's 25 trademarks, and the names being used by Who's Who
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1085 Skalka-redirect/Scott
1 Worldwide. 2 Q I am showing you the same Exhibit E that Mr. Trabulus 3 showed you, and I am directing your attention to page A 4 368 of that exhibit? 5 MR. TRABULUS: Which exhibit is that? 6 MS. SCOTT: Gordon-E. 7 Q Now, can you review there the claim for false 8 advertising? 9 A Yes. 10 Q Please tell the jury what that claim was. 11 MR. JENKS: Objection. 12 MR. TRABULUS: Objection. 13 THE COURT: Yes, sustained. 14 Q You mentioned a moment ago that one of the concerns 15 that Reed Elsevir communicated to you about Who's Who 16 Worldwide was their transfers of money out of the company; 17 is that right? 18 A That is correct. 19 Q And where were these transfers of money going?
20 A We discovered shortly after the bankruptcy filing 21 that loans were made to related entities of Who's Who 22 Worldwide including Publishing Ventures, Inc., Sterling 23 Who's Who, and the loans to Mr. Gordon. 24 Q Now, what were the problems with those transfers of 25 money going to entities like Publishing Ventures, and
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1086 Skalka-redirect/Scott
1 Sterling Who's Who? 2 A Well, for example, in Sterling Who's Who, I recall 3 that there was a fairly large sum of money transferred to 4 Sterling Who's Who shortly after the bankruptcy filing, I 5 mean within thirty days. And I remember sums of money in 6 the range of five to eight hundred thousand dollars being 7 transferred back and forth between the two entities, so at 8 the time of the bankruptcy filing over a million dollars 9 had been loaned from Who's Who Worldwide to Sterling Who's 10 Who. Sterling Who's Who had just started up as a business 11 in 1993, shortly before the bankruptcy of Who's Who 12 Worldwide. So it was Reed's concern, and I believe the 13 concern of some of the other members of the creditor's 14 committee that it would be difficult to get that money 15 back, unless someone moved quickly to get it back, because 16 no one knew if Sterling Who's Who would be a successful 17 business operation or not. And we didn't know what the 18 loan repayments were, at least in the earlier part of the 19 case. 20 In connection with Publishing Ventures, Inc., 21 that was an entity from what I know did not actually 22 operate a business. All it did was own a piece of real 23 estate, the property at 200 Hummingbird Road -- 24 THE COURT: You have to slow down. 25 THE WITNESS: I am sorry.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1087 Skalka-redirect/Scott
1 THE COURT: You left me behind about two minutes 2 ago. 3 THE WITNESS: As to Publishing Ventures, Inc., 4 that was an entity that to the best of my knowledge simply 5 did not operate a business, but simply owned a piece of 6 real estate, the property at 200 Hummingbird Road in 7 Manhasset, and that property did not have any liens on it 8 at that time, meaning there was no mortgages or any other 9 tax liens or anything on that property. And PVI -- 10 Publishing Ventures, Inc. -- did not have any income of 11 its own. All it did was own the real estate. So it had 12 no source of repayment to Who's Who Worldwide Registry 13 other than selling the condo or renting the condo to 14 generate some income. 15 So, we were concerned how that 1.1 million 16 dollars that belonged to Publishing Ventures, Inc., would 17 eventually be paid to Who's Who Worldwide. 18 Q Those transfers of money to Sterling Who's Who and 19 Publishing Ventures, Inc., would those amounts of money 20 that had been transferred out, would they have been 21 accessible to the creditors to repay the debts? 22 MR. LEE: Objection, your Honor. 23 THE COURT: On what ground? 24 MR. LEE: I believe it calls for conjecture on 25 the part of this witness, your Honor.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1088 Skalka-redirect/Scott
1 THE COURT: No. It is his opinion. He did the 2 work and he knows the case. 3 Overruled. 4 A The bankruptcy and the creditor laws would have 5 enabled the debtor, Who's Who Worldwide Registry, or even 6 maybe some -- what Reed argued -- even some creditors to 7 go ahead and try to collect those monies from those 8 entities. 9 Q Now, going back to the judgment against Who's Who 10 Worldwide for 1.6 million, when was that judgment 11 written? When was that judgment issued by the judge? 12 THE COURT: You have the date. What is the date 13 on it? 14 Q Is the date March 8th, 1994? 15 A I believe that's when the decision was rendered, yes. 16 THE COURT: Decision rendered or judgment 17 entered. 18 THE WITNESS: She asked for the decision 19 entered. The judgment was entered a couple of weeks after 20 that. 21 Q When did Who's Who Worldwide file for bankruptcy? 22 A My recollection is they filed the day after the 23 judgment was actually entered on March 22nd. 24 MS. SCOTT: May I have a moment to confer with 25 Mr. Trabulus?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1089 Skalka-redirect/Scott
1
THE COURT: Sure. 2 MR. TRABULUS: With me? 3 (Ms. Scott confers with Mr. Trabulus.) 4 MR. WHITE: 780-C, 779-C, and 776-C, are bank 5 statements that Mr. Trabulus and the government agreed are 6 incorporated into the business records of Who's Who 7 Worldwide. 8 MR. TRABULUS: Admissible as bank records. 9 MR. JENKS: You are not offering them against the 10 corporations? Because I didn't stipulate to them as 11 business records. 12 MS. SCOTT: Not offered against the corporations. 13 THE COURT: Against Bruce Gordon? 14 MS. SCOTT: Yes. 15 THE COURT: What are the numbers? 16 MR. WHITE: 780-C is a bank record of Sterling 17 Who's Who, Inc. 779-C is a bank record of Who's Who 18 Worldwide Registry, Inc. and 776-C is a bank record of 19 Who's Who Worldwide Registry, Inc. 20 THE COURT: Government's Exhibit 780-C, 779-C and 21 776-C, in evidence. 22 (Government's Exhibit 780-C received in 23 evidence.) 24 (Government's Exhibit 779-C received in 25 evidence.)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1090 Skalka-redirect/Scott
1 (Government's Exhibit 776-C received in 2 evidence.) 3 Q I am showing you Government's Exhibits 780-C, 779-C, 4 and 776-C. 5 If you look at 776-C -- 780-C, would you look at 6 whose name is on there, on this bank record? 7 A Sterling Who's Who. 8 Q Would you read the transaction that takes place on 9 March 11th, 1984. 10 A This indicates that there was a wire transfer deposit 11 of $500,000 paid -- another deposit of $1,809 and 33, as 12 an electronic transfer, and the other one for $550,000. 13 Q These are deposits into the bank account of Sterling 14 Who's Who? 15 A Yes. 16 Q Take a look at 779-C,
the second page. Can you tell 17 the jury about the transaction recorded there as taking 18 place on March 11th, 1994. Before you do that, what is 19 this document? 20 A A copy of the bank statement for the bank account of 21 Who's Who Worldwide Registry, Inc. at National Westminster 22 Bank. 23 Q Can you tell the jury of the transaction that takes 24 place on March 11th, 1994. 25 A There is a deduction from the account in the amount
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1091 Skalka-redirect/Scott
1 of $550,000. There is an additional deduction in the 2 account of $25. Those are the only deductions shown on 3 March 11th. 4 Q Taking a look at 776-C, what is that document? 5 A A copy of the business checking account for Who's Who 6 Worldwide Registry, Inc. at EAB Bank for the period of I 7 believe March 1994.
8 Q And can you tell the jury about a transaction that is 9 recorded there as taking place on March 11th, 1994. 10 A Indicating a withdrawal in the amount of $500,000 11 from the account. It also indicates for the order of 12 Sterling Who's Who. 13 MS. SCOTT: Your Honor, I request permission to 14 publish these documents to the jury. 15 THE COURT: Yes. 16 (Whereupon, the exhibit/exhibits were published 17 to the jury.) 18 Q Do you remember Mr. Jenks asking you about Who's Who 19 Worldwide's offer to pay back 100 percent of -- back to 20 the creditors? 21 A Yes. 22 Q Do you remember why Reed Elsevir opposed this? 23 A Yes. 24 Q And you responded that among other things this offer 25 provided for payment in ten years; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1092 Skalka-redirect/Scott
1 A The initial plan that had been filed called for a 2 ten-year repayment, yes. 3 Q At the same time you testified it provided the annual 4 salary increases to Bruce Gordon for $25,000; is that 5 correct? 6 A Yes. 7 Q Were there other creditors other than Reed Elsevir 8 who could have approved or disapproved this offer? 9 A Yes. 10 Q And these other creditors were also asked to evaluate 11 this offer? 12 A Yes. 13 Q And was Reed Elsevir the only creditor who opposed 14 the plan? 15 A No. 16 Q Now, who were the other creditors who opposed it? 17 A The ones that I was aware of were the other members 18 of the creditors' committee, being Darby and Darby, and 19 Mr. Phil Pierce the former attorneys for Who's Who 20 Worldwide Registry. 21 Q And what kind of work had these attorneys done for 22 Who's Who Worldwide Registry?
23 A They both represented Who's Who Worldwide Registry in 24 the trademark litigation with Reed. 25 Q And by the time of the bankruptcy, these attorneys
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1093 Skalka-redirect/Scott
1 had not been paid for their work on the trademark case? 2 A That's correct. 3 Q So, they were creditors of Who's Who Worldwide just 4 like Reed Elsevir; is that correct? 5 A That is correct. 6 Q Now, do you remember that Mr. Trabulus asked you 7 about a proceeding in 1995 before Judge Seybert? 8 A Yes. 9 Q And you testified that that proceeding was to 10 determine probable cause to seize Who's Who Worldwide's 11 assets; is that correct? 12 A Yes. 13 MR. TRABULUS: Objection, your Honor. 14 THE COURT: What grounds? 15 MR. TRABULUS: That was not the testimony. 16 THE COURT: Overruled. 17 Q Do you remember you stated at that hearing the issue 18 was whether Who's Who Worldwide Registry's assets should 19 be frozen or released to Who's Who Worldwide; is that 20 correct? 21 A It was one of the issues. There were numerous bank 22 accounts from numerous entities seized, and Who's Who was 23 just one of them. 24 Q Now, what specifically were the concerns that you had 25 about what would happen to any money that got released?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1094 Skalka-redirect/Scott
1 A The seizures and the arrests were fairly well 2 publicized, and the company had pretty much stopped 3 operating. As a result numerous employees had either quit 4 or left. And Reed's concern frankly was at that point 5 there wasn't much of a business, viable business left. 6 And that if money was released, that it would simply be 7 spent on expenses and not to salvage the business and pay 8 back its creditors. There was no business plan at that 9 point. We didn't know if this company could ever operate 10 again. 11 Q Now, you mentioned that at approximately this time 12 Reed Elsevir made yet another motion for a trustee; is 13 that correct? 14 A That's correct. 15 Q And the purpose of this is so the creditors can get 16 paid back any money that might be released from the 17 seizure? 18 A Yes. That and we wanted to protect any money to be 19 released from the seizure. Obviously we felt that the 20 business had been affected by the seizure in the arrests, 21 and the arrest of management. And we wanted to even more 22 at this time expedite the collection of some of these 23 outstanding loans. 24 Q You wanted any money released from the seizures to go 25 to
Who's Who Worldwide; is that correct? As opposed to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1095 Skalka-redirect/Scott
1 going in the pockets of Bruce Gordon? 2 MR. TRABULUS: Objection, your Honor. 3 THE COURT: Yes. Sustained. 4 Q Now, are you aware of any money that was not seized 5 by the government at that time? 6 A Yes. 7 Q Do you know approximately how much money that was? 8 A In reviewing my testimony earlier this morning, I 9 believed at the time I thought it was up to $300,000 that 10 may have been left available to Who's Who Worldwide. 11 Q Do you know of any money released from the seizure 12 after this proceeding in front of Judge Seybert? 13 A Yes. 14 Eventually I believe, virtually all the money 15 that was seized was released. 16 Q Do you know approximately how much money that was? 17 A No, I do
not. 18 Q Did Reed Elsevir or any of other creditors receive 19 any of this money? 20 A No. 21 Q I am talking now about the money that either was not 22 seized or that was released from the seizure? 23 A No. 24 Q So, none of the creditors received any payment on 25 their debts from this amount of money?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1096 Skalka-redirect/Scott
1 A No. That's correct. 2 Q Now, do you remember Mr. Wallenstein asking you 3 whether it was typical of the companies of the size and 4 structure of Who's Who Worldwide to make loans to their 5 officers? 6 A Yes. 7 Q And do you remember you testified that you had seen 8 it before on occasion? 9 A Yes. 10 Q And you also testified, if you remember, that on its 11 face it is not an improper thing for a company to do? 12
A That's correct. 13 Q Now, in this particular case, however, did you have 14 concerns regarding the loans going out to officers of 15 Who's Who Worldwide? 16 A Yes. 17 MR. TRABULUS: Objection, your Honor. 18 THE COURT: Sustained. 19 Strike out the answer. 20 Q Turning your attention to the logs, do you remember 21 Mr. Trabulus asking you about the first two motions made 22 with respect to the appointment of a trustee? 23 A Yes. 24 Q Do you remember the bankruptcy denied those motions? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1097 Skalka-redirect/Scott
1 Q When was the denial of the first motion of a trustee? 2 A I believe October 1994. 3 Q Was this after the logs were submitted to the 4 bankruptcy court? 5 A After the logs were produced to myself and the 6 creditor's committee.
7 Q So, in other words, the motion to appoint a trustee 8 was denied after these logs, which claimed to substantiate 9 usage -- 10 MR. TRABULUS: Objection, your Honor. 11 MR. WALLENSTEIN: Objection. 12 MR. TRABULUS: I am sorry, too early. 13 THE COURT: There are two reasons I don't want 14 people to interrupt. 15 One, it is not courteous. 16 Two, I have asked you not to do it. 17 Three, and I will add another reason, when you 18 interrupt and the lawyer is questioning, the court 19 reporter doesn't know who to take. 20 I will give you one exception to that rule. 21 If it is so prejudicial that you think the mere 22 uttering of the question would be so prejudicial that you 23 cannot restrain yourself, I will let you do it. But I 24 have not heard anything like that so far. 25 Go ahead.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1098 Skalka-redirect/Scott
1 Q Now, Mr. Skalka, these logs, were the logs that 2 claimed to substantiate business use of the two 3 properties; is that correct? 4 A Yes. 5 Q And so, the motion to appoint a trustee was denied 6 after these logs were submitted to the bankruptcy court; 7 isn't that correct? 8 A I don't recall whether they were actually submitted 9 to the Court. They were submitted to myself and to 10 creditor's committee counsel. 11 Q Now, Mr. Wallenstein also asked you, if you remember, 12 about Reed's purpose in requesting these logs; is that 13 correct? 14 A Yes. 15 Q Do you remember Mr. Wallenstein asking you that Reed 16 wanted the logs to be kept because Reed was dissatisfied 17 with the way Who's Who Worldwide ran its business? 18 MR. WALLENSTEIN: Objection. 19 THE COURT: Sustained.
20 MS. SCOTT: Is that to form, your Honor, or 21 substance? 22 THE COURT: Substance. We have gone over these 23 things several times. Let's move along. 24 Q Mr. Skalka, did the bankruptcy court order these logs 25 to be kept?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1099 Skalka-redirect/Scott
1 A Yes. 2 Q And turning your attention now to Mr. Kahn, who is 3 Mr. Kahn? 4 A He represented the creditor's committee. 5 Q And what was his position on whether the logs should 6 be kept? 7 MR. WALLENSTEIN: Objection. 8 THE COURT: Sustained. 9 Let's move along. We know who Mr. Kahn is. 10 Several times we heard about Mr. Kahn. The jury knows 11 him. They practically know him as a friend already. 12 Let's move along. Don't repeat these things. They 13 remember these things. 14 MS. SCOTT: All right.
15 Q Mr. Scott, you testified about settlement 16 negotiations that Reed entered into with Who's Who 17 Worldwide. 18 A Yes. 19 Q And was one of these -- was one of the possible 20 agreements that Reed Elsevir would be repaid 1.2 million 21 dollars in full satisfaction of its judgment? 22 A That was part of one settlement discussion, yes. 23 Q According to the terms -- well, withdrawn. 24 Had that agreement been fulfilled, would Who's 25 Who Worldwide have been able to continue in its business?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1100 Skalka-redirect/Scott
1 MR. WALLENSTEIN: Objection. 2 THE COURT: Sustained. 3 Q In that proposal was Reed Elsevir willing to settle 4 for less than the full 1.6 million dollars of the 5 judgment? 6 A Yes. 7 Q Was one of the terms of that proposal that Who's Who
8 Worldwide would be able to continue in business after that 9 amount was paid? 10 A Yes. 11 MS. SCOTT: Thank you. 12 No further questions. 13 THE COURT: Anything else? 14 MR. TRABULUS: Yes, your Honor. 15 MR. JENKS: I have nothing. 16 MR. TRABULUS: Your Honor, can I have a moment to 17 organize a couple of things? 18 THE COURT: Surely. 19 (Whereupon, at this time there was a pause in the 20 proceedings.) 21 22 23 24 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1101 Skalka-recross/Trabulus
1 RECROSS-EXAMINATION 2 BY MR. TRABULUS: 3 Q Mr. Skalka, you were shown some bank statements and 4 were asked about a transaction in which monies were paid 5 by Who's Who to Sterling; is that correct? 6 A They were transferred -- 7 Q Transferred from Who's Who Worldwide to Sterling. 8 Now, during the course of the bankruptcy 9 proceeding, did you learn that Sterling was a successful 10 business that was making money? 11 A We learned that they were a business that was 12 operating. Reed was never able to get access to the 13 financial records for Sterling, so we never made a 14 determination as to whether they were making money or 15 losing money. 16 Q Now, did you discover that the -- withdrawn. 17 The money loaned from Who's Who Worldwide to 18 Sterling, that was disclosed, was it not? 19 A Yes. 20 Q There was no secret made about that? 21 A I testified that it was disclosed on the petition. 22 It took some time to get actual documents to support those 23 loans. 24 Q Is it fair to say -- eventually you did get the 25 documents; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT
REPORTER 1102 Skalka-recross/Trabulus
1 A Yes. 2 Q And the money loaned to Sterling was actually there, 3 correct? You had no reason to believe that it disappeared 4 once it was there? 5 A I never saw anything from Sterling. The money was 6 transferred to Sterling. What happened to it after that, 7 I don't know. 8 Q You saw the bank records, and you have no reason to 9 believe that the money was suddenly dissipated or taken 10 out of Sterling, do you? 11 A I have no reason to believe that, no. 12 Q I think you testified concerning an affidavit that 13 was submitted and signed by Mr. Gordon in connection with 14 the bankruptcy; is that correct? 15 A Yes. 16 Q In your experience as an attorney, when affidavits 17 are submitted by non-attorneys involved in litigation, is 18 it fair to say that typically it is an attorney who
19 actually prepares the affidavit? 20 A It is fairly common, yes. 21 Q And in fact would it be unusual for someone who is 22 represented by an attorney, or whose corporation is 23 represented by an attorney to compose an affidavit by 24 himself without the attorney doing the editing? 25 A It is unusual to compose an entire affidavit, but I
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1103 Skalka-recross/Trabulus
1 have seen them draft parts of it. 2 Q It is understood that the attorney would speak to the 3 client and get input from the client with respect to what 4 goes in the affidavit; is that correct? 5 A Yes. 6 Q I am not suggesting the attorney would make something 7 up out of whole cloth. I am not saying anything is 8 improper there. But from time to time do attorneys 9 sometimes make mistakes and sometimes there are errors
10 with respect to what goes into an affidavit? 11 A There are errors that have been made, but attorneys 12 also have certain sanctions imposed upon them in filing. 13 Q And some clients in reviewing affidavits sometimes 14 have failed to pick up on some errors; is that correct? 15 A Yes. 16 Q And in this particular instance, in this particular 17 case, are you suggesting that Mr. Gordon didn't reveal 18 that he was actually residing at 200 Hummingbird? Was 19 that revealed in the bankruptcy or not? 20 A Frankly his testimony with respect to where he 21 resided would change throughout the bankruptcy proceeding. 22 Q Do you have 733 there -- excuse me, 799 there? 23 A I don't believe so. 24 MR. TRABULUS: May I have it, please? 25 (Counsel confer.)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1104 Skalka-recross/Trabulus
1 Q While that is being looked for, once you became 2 involved in the bankruptcy proceeding, did you review what 3 was being done in the bankruptcy proceeding before your 4 firm became involved in it? 5 A The bankruptcy proceeding, yes. 6 Q Did you come to learn during the course of the 7 bankruptcy proceeding that Mr. Gordon was paying rent out 8 of his own personal monies to PVI, the corporation that 9 owned the condominium? 10 A I came to learn that he made some payments for rents, 11 and other payments were being accrued on the company's 12 bank statements -- financial records. 13 Q Did you eventually learn all the payments were 14 made -- leaving aside there may have been some back 15 payments due at a time. Did you know the payments were 16 made? 17 A I don't know that. 18 Q Did you learn that the rents started out at $2,000 a 19 month and then went up to 2,500? 20 A Yes. 21 Q Do you recall those numbers? 22 A Yes. 23 Q And this is money Mr. Gordon was paying out of his 24 own pocket to PVI; is that correct? 25 A Again, I didn't see any bank records for PVI. So I
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1105 Skalka-recross/Trabulus
1 couldn't tell you that. 2 Q And PVI was a company who owed money to Who's Who? 3 A Yes. 4 Q And any money paid by Mr. Gordon to PVI would be 5 available to pay Who's Who and then available to pay the 6 creditors; is that correct? 7 A Theoretically, although PVI defaulted on its note and 8 as far as I know never paid anything to Who's Who 9 Worldwide. 10 Q Now, I will show you 799 in evidence. 11 (Handed to the witness.) 12 Q 799 is extracts from a deposition given by Mr. Gordon 13 on April 14th,
1994 in the bankruptcy proceeding; is that 14 correct?
15 A Yes. 16 Q Less than a month after the bankruptcy was filed; is 17 that correct? 18 A That's correct. 19 Q And you have attended depositions, have you not? 20 A Yes. 21 Q Typically at the very beginning of the deposition the 22 court reporter who takes it, asks the witness, in 23 connection with swearing the witness in, where they live; 24 is that correct? 25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1106 Skalka-recross/Trabulus
1 Q And just to make it clear to the jury what a 2 deposition is, it is very much like a proceeding in court 3 with a court reporter, but it is generally done in a 4 lawyer's office; is that correct? 5 A Fair to say, without a judge being present. 6 Q Without a judge being present, one would hope not.
7 On this particular one, on page 3, Mr. Gordon's 8 address, it says residing at 200 Hummingbird Road, 9 Manhasset, New York; is that right? 10 A Yes. 11 Q And Mr. Gordon at that deposition wasn't making a 12 secret of the fact that he was living there; is that 13 correct? 14 A That's correct. 15 Q He didn't make any secret in the bankruptcy that he 16 was paying rent on at least a portion of it; is that 17 correct? 18 A In the beginning of the case my recollection was that 19 he was not paying rents. At some point he did agree to 20 make payments. 21 Q Is there anything improper with a corporation renting 22 property it owns to an officer or director within itself? 23 A No. 24 Q Now, you mentioned before that PVI was a company that 25 had no business other than owning real estate?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1107 Skalka-recross/Trabulus
1 A Yes. As far as I know, yes. 2 Q In your experience, is it uncommon for there to be a 3 group of corporations that have the same ownership, and 4 one of the corporations owns the real estate used by the 5 other corporations? Is that uncommon? 6 A No. 7 Q In fact, it is quite common, is it not? 8 A Common in a commercial context. I have never seen a 9 company before own commercial real estate. 10 Q In a commercial context, it is common because it is 11 certainly tax advantages to construct it that way? 12 A I am not an accountant. It is my understanding. 13 Q When we say tax advantage, we are talking about 14 something entirely legal, not talking about something 15 hanky panky, fair enough? 16 A Fair enough. 17 MR. WHITE: Objection, your Honor. This is 18 completely beyond the scope of cross-examination. 19 THE COURT: Your objection is a little late. 20 MR. WHITE: We can cut it off now. 21 THE COURT: I don't hear a question before us 22 now, do I? 23 MR. WHITE: I am objecting to the whole line of 24 questioning. 25 THE COURT: Not afterwards, before.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1108 Skalka-recross/Trabulus
1 MR. WHITE: I will let Mr. Trabulus ask the 2 question. 3 THE COURT: From now on you have to get up in 4 time. It is good to jump up every once in a while. It is 5 good exercise. It keeps the circulation moving. 6 The only ones who can't get up is the jury. They 7 have to stay there. 8 MR. TRABULUS: Bear with me a moment, your 9 Honor? 10 THE COURT: Yes. 11 (Whereupon, at this time there was a pause in the 12 proceedings.) 13 Q I think you indicated that none of the creditors have 14 been paid; is that correct? 15 A That's correct. 16 Q And the trustee's attorneys have been paid; is that 17 correct? 18 A I believe they got some payments. 19 Q Now, Mr. Wallenstein asked you some questions 20 concerning the accounting that was performed by 21 Mr. Reffsin? 22 A Yes. 23 Q And I think that it is fair to say from your answers, 24 that everything that was disclosed by Mr. Reffsin that was 25 filed, every financial statement, or record of transaction
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1109 Skalka-recross/Trabulus
1 was as far as you know accurate? 2 A As far as I know, yes. 3 Q And it is also your understanding, is it not, that 4 that information that Mr. Reffsin was filing was coming 5 from the corporation, and from Mr. Gordon, from Who's Who; 6 is
that correct? 7 A As far as I know, yes. 8 Q And Reed's disagreement with what was going on was 9 not with the numbers, but with whether or not certain 10 things that were being disclosed were business justified; 11 is that fair to say? 12 A In connection with the projections and how we would 13 get paid back? 14 Q Leaving aside the projections, we understand there 15 was an -- a disagreement with what would happen in the 16 future, and Reed from what you told us regarding the 17 projections felt it was a little too optimistic. But 18 let's talk about the documents in the files and what 19 happened in the past and the existing disagreements with 20 the company, the disagreements were whether some of this 21 was justified and business related? 22 A That's correct. 23 Q And not the actual numbers itself? 24 A No, that's correct. 25 Q And there
was no claim there was any hidden payments
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1110 Skalka-recross/Trabulus
1 or money under the table going somewhere; is that correct? 2 A That's correct. 3 Q Everything was -- withdrawn. 4 Now, with regard to the loans to Mr. Gordon, I 5 think Mr. Wallenstein asked you, and you acknowledged that 6 these were shown as an asset on the books of the 7 corporation, Who's Who Worldwide; is that correct? 8 A Yes. 9 Q And if these loans, the monies that were represented 10 by these loans, if they had been paid in salary to 11 Mr. Gordon, the corporation would have been entitled to 12 take a tax deduction for that, would it not? 13 MR. WHITE: Objection. We are now beyond the 14 scope of redirect. 15 THE COURT: Overruled. 16 A I believe so. 17 Q Now, in looking over any of the books and records of 18 the corporation, or any of the materials you learned in 19 the entire course of the bankruptcy proceeding, did you 20 find that the corporation had taken any kind of tax 21 deduction in respects to any of the monies that were shown 22 as loans to Mr. Gordon? 23 A I didn't, but we had -- Reed had its own accountants, 24 and the committee had their own accountants to do that 25 type of analysis, so it was not within the scope of my
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1111 Skalka-recross/Trabulus
1 services or duties. 2 Q If they had taken a tax deduction in relation to a 3 loan to Mr. Gordon, it would have been improper? It is 4 not a legitimate tax deduction for a corporation to take a 5 deduction for a loan it makes to somebody; is that right? 6 A As far as I know. I am not an accountant. 7 THE COURT:
You are picking up speed again, 8 Mr. Trabulus. You are getting renewed strength at various 9 times. 10 MR. TRABULUS: At the risk of worsening, I will 11 do this, and I think it may actually slow me down. 12 THE COURT: Good. Do you want to start that over 13 again? 14 MR. TRABULUS: I will indeed. 15 Q Mr. Skalka, did any of the accountants or the people 16 you indicated have the responsibility for looking into 17 that, did any of them report to you that the company had 18 done anything improper in claiming tax reductions in 19 respect of monies that were loaned to Mr. Gordon? 20 A Not that I can recall. 21 Q That means that the company paid taxes on that money 22 as it received it; is that correct? 23 A Paid money on the revenues? 24 Q Insofar as the monies loaned to Mr. Gordon reflected 25 the proceeds of its revenues, and there was no tax
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1112 Skalka-recross/Trabulus
1 deduction taken in regard to that, the company paid taxes 2 on it; is that correct? 3 A As far as I know. 4 Q Do you know what the corporate tax rate was? 5 A No, I do not. 6 Q Do you know if it was higher or lower or the same as 7 the rate at which Mr. Gordon would have had to pay taxes 8 if he had taken it? 9 A I don't know. 10 Q If it had been treated as income. 11 A I do not know that. 12 Q This was not a situation in which those monies which 13 were shown as loans were improperly reflected on the books 14 of the corporation as business expenses, was it? 15 A Not as far as I know. 16 Q Now, as far as I was asking you before with respect 17 to the affidavit. 18 The affidavit we were talking about before, the 19 one by Mr. Gordon that was referred to in your testimony, 20 that is dated August 5th, 1994? 21 A I believe so. 22 Q Do you have the exhibit in front of you there? 23 A Actually I am checking it, and I don't recall so. 24 Q I am looking for it, too. 25 At that time Mr. Gordon was represented by
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1113 Skalka-recross/Trabulus
1 Mr. Flaum; is that correct? 2 A That's correct. 3 Q Very soon after that Mr. Flaum was out of the picture 4 and Mr. Ackerman was coming in; is that correct? 5 A Yes. 6 Q In fact, you were asked some questions about a 7 document, about a letter written by Mr. Ackerman dated 8 September 8th, 1994; is that correct? 9 A That's correct. 10 Q That letter provided answers to questions that the 11 creditors were looking for; is that correct? 12 A Yes. 13
Q That letter was written by Mr. Ackerman, and I think 14 Mr. Wallenstein asked you, in considerable haste; is that 15 correct? 16 A According to the terms of the letter, yes. 17 Q In fact, Mr. Ackerman had not even formally applied 18 to be the attorney for Who's Who as of that point in time; 19 is that correct? Everything was happening quickly? 20 A I don't recall the exact dates as to when he filed 21 his retention application. 22 Q If I may, I am going to show you the docket sheet we 23 looked at before. 24 (Handed to the witness.) 25 Q Does that refresh your recollection?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1114 Skalka-recross/Trabulus
1 A Yes, it does. 2 Q And the letter we talked about was written on 3 September 8th, and the application to the attorney was 4 actually filed on September 9th; is that correct? 5 A That's correct. 6 Q In your experience when someone is newly into a case 7 and rushing to do something that they should have done, 8 which is maybe a little overdue, sometimes they can have a 9 misunderstanding or make a mistake? 10 A It can happen. 11 Q Sure. 12 I think you mentioned in response to a question 13 by Ms. White (sic) that the creditor's committee opposed 14 the first plan of reorganization that was submitted on 15 behalf of Who's Who; is that right? 16 A That's correct. 17 Q And later on there was another one; is that right? 18 We talked about that before? 19 A Yes. 20 Q And without spending a lot of time about Mr. Kahn, he 21 on behalf of the creditor's committee was urging in favor 22 of that plan or something similar, was he not? 23 A In April of 1994, approximately four months after 24 that plan was filed --
25 Q '95?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1115 Skalka-recross/Trabulus
1 A I am sorry, '95. He was urging the adoption of a 2 modification of that plan. When the plan was originally 3 filed the committee as a whole had problems with its. 4 Q He was urging the adoption of the modification; is 5 that correct? 6 A Yes. 7 Q And all the other creditors besides Reed were in 8 agreements with him? 9 A The other two members of the committee, yes. 10 Q But Reed was not? 11 A That's correct. 12 Q Mr. Wallenstein asked you whether or not you had a 13 reason to believe or know as to whether his client was 14 receiving the fax copy of the log shown to you? 15 Mr. Reffsin was one of the cc's there; is that correct? 16 A Yes. 17 Q And Mr. Gordon was another cc; correct? 18 A Yes. 19 Q And
is it fair to say you had no other reason to 20 believe Mr. Gordon received it or did not receive it than 21 you do with respect to Mr. Reffsin? 22 A Yes. 23 MR. TRABULUS: Bear with me a moment, your 24 Honor. 25 THE COURT: Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1116 Skalka-recross/Trabulus
1 MR. TRABULUS: I am close to done. 2 (Whereupon, at this time there was a pause in the 3 proceedings.) 4 Q Do you recall at one point during the bankruptcy 5 proceeding Who's Who agreed not to make any loans or 6 transfers to any affiliated entities? 7 A Yes. It was part of the stipulation that I testified 8 to. 9 Q When was that? 10 A The stipulation that had been agreed to on August 11 9th, 1994. 12 Q And following August 9th, 1994, were you aware of any 13 transfers that Who's Who was making to
any affiliated 14 entities? 15 A Not loans, no. 16 Q It was paying its employees? 17 A Yes, I believe there was some shared expenses between 18 entities, but not any loans. 19 Q And so, after that stipulation was entered into -- 20 withdrawn. 21 That stipulation was entered into September 9th, 22 1994? 23 A That's when all the parties signed the stipulation, 24 yes. 25 Q And it was your testimony that in April of 1995, it
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1117 Skalka-recross/Trabulus
1 was a concern that if monies were unfrozen and returned to 2 Who's Who they might be loaned or dissipated to affiliated 3 entities, even it hadn't happened since September? 4 A Well, just spent, because the company had no ongoing 5 operations to speak of at that time. And we were 6 concerned as to what would happen with the money. 7 Q When you say the company had no ongoing operations at 8 that time, it had operations up to the point of the raid; 9 is that right? 10 A Yes. 11 Q Do you know if it personally resumed operations 12 afterward? 13 A I know it resumed limited operations. 14 Q Do you know if they had employees coming in and 15 volunteering to work at no salary? 16 A That's my understanding, yes. 17 Q To get it going? 18 A Yes. 19 Q But, at that point in time, Reed did not want monies 20 released to Who's Who so it could continue its operations; 21 is that correct? 22 A That's correct. 23 MR. TRABULUS: No further questions. 24 THE COURT: Anything else? 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1118 Skalka-recross/Wallenstein
1 RECROSS-EXAMINATION 2 BY MR. WALLENSTEIN:
3 Q Just a couple of questions, Mr. Skalka. 4 You indicated that the trustee's attorneys had a 5 fee application for some $300,000 in which you believe 6 they were partially paid? 7 A Yes. 8 Q The trustee himself was also entitled to a fee 9 separate and apart paid to his attorneys; is that correct? 10 A Yes. 11 Q Do you know how much his fee application was and 12 whether he was paid? 13 A I have not seen an application on his part. 14 Typically the trustee does not seek compensation until the 15 end of the case he is still operating or still serving as 16 a trustee. 17 Q All right. 18 Now, it is fair to say that Reed disputed Who's 19 Who Worldwide's treatment of certain payments as business 20 expenses; is that correct? 21 A Yes. 22 Q And that relates to the leases and rental of certain 23 property and other things as well?
24 A Yes. 25 Q Correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1119 Skalka-recross/Wallenstein
1 A Yes. 2 Q Would it be a fair statement whether in general, and 3 in this case specifically, that the determination of what 4 constitutes a business expense depends on what the 5 business of a particular entity is, and a management 6 decision as opposed to an accounting decision? 7 A That's fair to say. 8 MR. WALLENSTEIN: Thank you. 9 No further questions. 10 THE COURT: Anything else? Ms. Scott, anything? 11 MS. SCOTT: Yes, your Honor. 12 13 FURTHER REDIRECT EXAMINATION 14 BY MS. SCOTT: 15 Q Mr. Skalka, do you remember Mr. Trabulus asking you 16 about the preparation of affidavits? 17 A Yes. 18 Q Do you remember him asking you about whether it is 19 typical for an attorney to
prepare an affidavit for a 20 person? 21 A Yes. 22 Q Now, isn't it also typical, Mr. Skalka, that for a 23 person whose name appears at the bottom of the affidavit, 24 the person who is actually making the sworn statement, to 25 read it over before he signing it and make sure it is
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1120 Skalka-redirect/Scott
1 accurate? 2 A Yes. It is my practice to always advise people 3 signing an affidavit to read the document very carefully 4 before they sign it. 5 Q Now, do you remember Mr. Trabulus asking you about 6 the payments of money to Sterling Who's Who from Who's Who 7 Worldwide? 8 A Yes. 9 Q And do you remember he suggested to you that there 10 was no reason to think that money was being dissipated or 11 taken out of Sterling Who's Who once it was transferred 12
there from Who's Who Worldwide? 13 A Yes. 14 Q I am going to show you Government's Exhibit 688. 15 MS. SCOTT: One minute, I need to speak to 16 Mr. Trabulus? 17 THE COURT: Yes. 18 (Ms. Scott confers with Mr. Trabulus.) 19 Q While Mr. Trabulus is looking at that, I will show 20 you, Mr. Skalka again, 780-C. 21 Now, Mr. Skalka, this is the bank record for 22 Sterling Who's Who for March of '94; is that correct? 23 MR. JENKS: Objection to this, Judge. It has 24 been gone over on direct. It has been gone over on 25 cross-examination. She is going over it again. It is the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1121 Skalka-redirect/Scott
1 same testimony. 2 THE COURT: No. Mr. Trabulus raised this again 3 with respect to the money sent by Who's Who Worldwide to 4 Sterling. It was raised recently. Overruled.
5 A Yes, it is. 6 Q This bank record is the record for Sterling Who's Who 7 for March; is that correct? 8 A Yes. 9 Q Take a look at the entry for March 17th, 1994. Does 10 it show there a check that was written on the account of 11 Sterling Who's Who to another entity? 12 A It shows a check. It doesn't show what entity. A 13 check being withdrawn out of the account, or it looks like 14 $450,000. 15 MS. SCOTT: Thank you, your Honor. 16 I would ask permission to pass this around to the 17 jury again. 18 THE COURT: Yes. 19 (Whereupon, the exhibit/exhibits were published 20 to the jury.) 21 THE COURT: How much more do you have, 22 Ms. Scott? 23 MS. SCOTT: Just about five more minutes, your 24 Honor. 25 THE COURT: Are you offering these documents?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1122 Skalka-redirect/Scott
1 MS. SCOTT: Yes. 2 MR. TRABULUS: Your Honor, I have no objection as 3 long as they are fastened. That's the only problem I 4 have. 5 THE COURT: They can be stapled together. 6 It is Government's Exhibit 688 in evidence. 7 MS. SCOTT: Yes, your Honor. 8 We can take a five-minute break, if your Honor 9 wishes, so we can straighten documents out as Mr. Trabulus 10 suggested. 11 THE COURT: We will take more than five minutes. 12 It takes more than five minutes to walk in and out of the 13 room. We will take at least a ten-minute break. 14 Please do not discuss the case and please recess 15 yourselves. 16 (Whereupon, at this time the jury leaves the 17 courtroom.) 18 THE COURT: Can I have your attention for a 19 minute, please? 20 Mr. Skalka, you may have to return for some 21 testimony depending on
a ruling I may make. So you must 22 be available. 23 Are you going a away in the next week or two? 24 THE WITNESS: No, I will be available. 25 THE COURT: We will let you know.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1123 Skalka-redirect/Scott
1 THE WITNESS: Yes. 2 THE COURT: You are not through now. 3 THE WITNESS: No. If there is a discussion, I 4 will step out. 5 MR. TRABULUS: Your Honor, I wanted to bring 6 something to the attention of the Court. 7 Mr. White maintained that a subsequent decision 8 of your Honor -- 9 THE COURT: All the lawyers are not here, so we 10 better wait then. We will do it after court today. 11 12 (Whereupon, a recess is taken.) 13 14 THE CLERK: Jury entering. 15 (Whereupon, the jury at this time entered the 16 courtroom.) 17 THE COURT: Please be
seated, members of the 18 jury. 19 You may proceed. 20 MS. SCOTT: Your Honor, we have two exhibits 21 here, Government's Exhibit 692 and 688, and the parties 22 have stipulated that these represent business records of 23 Sterling Who's Who and Registry Publishing. 24 THE COURT: 692 and 688? 25 MS. SCOTT: Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1124 Skalka-redirect/Scott
1 THE COURT: Any objection? 2 MR. TRABULUS: I have no objection to it going in 3 as bank records. 4 THE COURT: Whose records? 5 MS. SCOTT: Sterling Who's Who, Inc., and 6 Registry Publishing, Inc. 7 MR. JENKS: Your Honor, Ms. Scott is not 8 introducing the recordings against -- against Sterling 9 Who's Who, Registry Publishing is a different company on 10 trial here. 11 MS. SCOTT: That's correct. 12 THE COURT: G
overnment's Exhibit 692 and 688 in 13 evidence. 14 (Government's Exhibit 692 received in evidence.) 15 (Government's Exhibit 688 received in evidence.) 16 Q We were, Mr. Skalka, on the subject that you had no 17 reason to believe that money transferred into Sterling 18 Who's Who he was going to be taken out or dissipated. 19 MR. TRABULUS: Objection to form, your Honor. 20 THE COURT: Yes, sustained. 21 Q Taking a look at Government's Exhibit 780-C, can you 22 please tell the jury what that document is. 23 A It is a copy of the bank statement for Sterling Who's 24 Who, Inc. from Marine Midland Bank for March of 1994. 25 Q And what does that document show as a transaction on
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1125 Skalka-redirect/Scott
1 March 17th, 1994? 2 A It shows a withdrawal in the amount of $450,000. 3 Q Now, I am showing you Government's Exhibit 692. 4 Can you tell the jury what those documents are. 5 (Handed to the witness.) 6 A One document is a copy of a check written on the 7 account of Sterling Who's Who, Inc. at Marine Midland 8 Bank, in the amount of $450,000. It is dated March 16th, 9 1994. It is made payable to Registry Publishing, Inc. 10 The other documents is a copy of a deposit slip 11 for National Westminster Bank, for an accounts in the name 12 of Registry Publishing, Inc., and it is dated March 17th, 13 1994. There is a reference there to three separate 14 deposits on that date, one in the amount of $45,000. One 15 in the amount of $450,000. One in the amount of $13,000. 16 Q And just for the sake of clarity, I am going to pull 17 out the check on Sterling Who's Who's account for 18 $450,000, and ask you to look at the two attached 19 documents.
20 (Handed to the witness.) 21 Q Do those checks represent the smaller amounts that 22 appear on this deposit slip? 23 A They do. The top check is for $45,000, made out to 24 Registry Publishing. It is also reflected on the deposit 25 slip. And the bottom check, or the third check, is made
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1126 Skalka-redirect/Scott
1 out to Registry Publishing in the amount of $13,000. 2 Again, that is reflected on the deposit slip. 3 Q And, finally, I am showing you 4 Government's Exhibit 688, which is also in evidence. 5 (Handed to the witness.) 6 Q Now, is that a statement, set of statements or 7 Registry Publishing, a set of bank statements for Registry 8 Publishing? 9 A Yes, it is. 10 MS. SCOTT: Your Honor, I request permission to 11 publish these documents to the jury. 12 THE COU
RT: You may. 13 (Whereupon, the exhibit/exhibits were published 14 to the jury.) 15 Q Now, Mr. Skalka, do you remember Mr. Trabulus 16 suggesting to you that you had no reason to be concerned 17 about transfers of monies out of Sterling Who's Who? 18 A Yes. 19 Q And these documents show, do they not, that six days 20 after a million dollars was deposited into Sterling Who's 21 Who, 450,000 of those dollars were transferred out of 22 Sterling Who's Who; is that correct? 23 A That's correct. 24 Q Now, a moment -- a little earlier today, Mr. Skalka, 25 you testified about the date that the judgment of 1.6
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1127 Skalka-redirect/Scott
1 million dollars was entered, and that was in the trademark 2 infringement case. 3 A That's correct. 4 Q Have you had a chance to refresh your
recollection 5 about when that judgment was entered? 6 A Yes. During the break I reviewed one of the exhibits 7 that was in front of me, which has a copy of virtually all 8 of the pleadings and related documents in the trademark 9 litigation. And I noted the judgment was actually entered 10 on March 31st, 1994, not March 21st. 11 So, I was off by ten days when I spoke before. 12 MS. SCOTT: Thank you. I have no further 13 questions. 14 MR. TRABULUS: Yes, your Honor, I do, relating to 15 the exhibits that the jury is looking at now. 16 17 FURTHER RECROSS-EXAMINATION 18 BY MR. TRABULUS: 19 Q Any of the exhibits we just marked in front of you at 20 this point? 21 A No, they are before the jury. 22 THE COURT: You can recover them. 23 MR. TRABULUS: The jury wants to see them. 24 THE COURT: You are going to use them now? 25 MR. T
RABULUS: Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1128 Skalka-recross/Trabulus
1 THE COURT: I will ask the jury for them, not 2 you. 3 MR. TRABULUS: I don't want to be in a position 4 of taking something back. 5 THE COURT: Absolutely not. I am taking it. I 6 am immune, you know. 7 Q Mr. Skalka, the government just introduced in 8 evidence a bank statement from Registry Publishing company 9 account? 10 A Yes. 11 Q And some checks from Registry Publishing -- excuse 12 me, from Sterling to Registry Publishing; is that correct? 13 A Yes. 14 Q And you don't know if this is the only bank account 15 that Registry Publishing has, do you? 16 A No, I do not. 17 Q Okay. 18 Now, the fact of these transfers, the fact that 19 they were made was not in any way concealed, was it? 20 A Reed and
the creditor's committee sought to obtain 21 money from Sterling from the beginning and couldn't get 22 them. So I would say the bank records for Sterling were 23 concealed from Reed. 24 Q You say they were concealed, but the fact that 25 Sterling existed was not concealed, was it?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1129 Skalka-recross/Trabulus
1 A That's right. 2 Q And there were checks from Who's Who to Sterling, was 3 there not? 4 A Yes. 5 Q And they were deposited in Sterling's accounts? 6 A We had access to Who's Who's records, not Sterling's 7 records. 8 Q And those checks which would be obtained from Who's 9 Who's record, would show the Sterling accounts they were 10 in? 11 A Yes. 12 Q From that you could get the Sterling records? 13 A We never got them. 14 Q You never got them,
but there was no secret as to 15 which accounts the money went into? 16 A I believe we knew there was Sterling accounts and the 17 money that went in there, yes. 18 Q Isn't it fair to say through endorsements on checks 19 you can trace checks and obtain bank records? 20 A Yes. 21 Q And these are basically checks for which there are 22 records; is that correct? 23 A Yes. 24 MR. TRABULUS: Can I have Government's Exhibit 's 25 696, please, 690. These are all for identification at
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1130 Skalka-recross/Trabulus
1 this point, I believe. 2 I will start with 696 and 695. 3 (Counsel confer.) 4 Q Now, Mr. Skalka, the government introduced in 5 evidence Exhibit 688. 6 A Yes. 7 Q And that reflects, does it not deposit from Sterling 8 into Registry Publishing's account; is that correct, at 9 National Westminster Bank? That's what you asked -- were 10 asked about before? 11 A Yes. 12 Q I will not review the transactions in detail. 13 It shows a balance of over $500,000 at a certain 14 period of time, I am sorry, deposits of over $500,000? 15 A Yes, it does. 16 Q And it shows over the course of time some checks or 17 deductions, and at the end of the statement it shows a 18 very small balance; is that correct? 19 A Yes. 20 Q Is it fair to say, just looking at that one might 21 thing that the money that came from Sterling went into 22 Registry and somehow disappeared; is that correct? 23 A That the money was spent or taken out of account, 24 yes. 25 MR. TRABULUS: Now, I would offer
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1131 Skalka-recross/Trabulus
1 Government's
Exhibit 695 is it 696 as business records, 2 bank records. 3 MS. SCOTT: No objection. 4 THE COURT: You are using the numbers 696 and 5 695? 6 MR. TRABULUS: The same exhibits they used, it 7 makes sense. 8 THE COURT: We will call it 9 Government's Exhibits. 10 MR. TRABULUS: Yes. 11 THE COURT: Any objection? 12 MS. SCOTT: No objection. 13 THE COURT: Government's Exhibit 695 and 696 in 14 evidence. 15 (Government's Exhibit 695 received in evidence.) 16 (Government's Exhibit 696 received in evidence.) 17 Q Now, Government's Exhibit 695, that's a check under 18 the Registry Publishing account, to the National 19 Westminster accounts for $150,000; is that right? 20 A Yes, it is. 21 Q And that is dated March 29th, 1994? 22 A Yes. 23 Q And this check, 696, is a check drawn on that same 24 National Westminster Bank account for the sum of $360,000; 25 is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1132 Skalka-recross/Trabulus
1 A Yes. 2 Q And that's dated April 4th, 1994? 3 A Yes. 4 Q And the payee, the person -- the entity to receive 5 the money on these checks in both instances is also 6 Registry Publishing, Inc.? 7 A Yes, it is. 8 Q And if you look at the back, you will see 9 endorsements of Registry Publishing, Inc., for deposit 10 only; is that correct? 11 A That's correct. 12 Q On one of those two, without going through the 13 account, account number 2601001833; is that correct? 14 A That's correct. 15 MR. TRABULUS: Can I have 698, please? 16 (Whereupon, at this time there was a pause in the 17 proceedings.) 18 MR. TRABULUS: I would offer 698 as a bank record 19 of Republic Bank for Savings. 20 THE COURT: Any objection? 21 MR. WHITE: As Republic Bank for Savings, 22 account -- record of Registry Publishing. 23 MR. TRABULUS: Yes. 24 MR. WHITE: No objection. 25 THE COURT: Government's Exhibit 698 in
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1133 Skalka-recross/Trabulus
1 evidence. 2 (Government's Exhibit 698 received in evidence.) 3 Q 698 bears the same account number we just read off 4 the endorsement on that check, does it not, 2601001833? 5 A Yes, it does. 6 Q So, this check for $150,000 we were just looking at, 7 it simply represents a transfer from Registry Publishing 8 from their National Westminster Bank account, to another 9 account at Republic Bank for savings? 10 A It appears that. 11 Q The government showed you a statement suggesting a 12 withdrawal, without suggesting where it was going, and 13 suggesting the money was being dissipated; is that 14 correct? 15 A I think they were showing what the records were 16 showing. I wasn't suggesting what they tried to show. I 17 will leave that up to them. 18 Q I just want to address one other point. 19 I think you indicated in early April, there were 20 transfers to Registry, affiliated companies -- excuse me, 21 transfer to Sterling and then Registry Publishing? 22 A I think March. 23 Q And one for April? 24 A These are checks for Registry Publishing, the other 25 involved a transfer from Sterling to Registry.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1134 Skalka-recross/Trabulus
1 Q Did you learn during the course of the bankruptcy 2 proceeding that Registry Publishing was an affiliated 3 company of Who's Who and Sterling, and so forth? 4 A Yes. 5 Q And that it was designed to be the operating company 6 for the California operation, which Who's Who was planning 7 to open? 8 A I did not know that. 9 Q Okay. 10 Again, after, by agreement in September of 1994 11 there were to be no more transfers from Who's Who to any 12 affiliated companies; is that correct? 13 A That's correct. 14 Q And I think you testified that there were aside from 15 some shared expenses where affiliated companies were both 16 sharing expenses in common for services that may have been 17 performed for both, you were not aware of any such 18 transfers after that date; is that correct? 19 A That's correct. 20 MR. TRABULUS: No further questions. 21 THE COURT: Anything else? 22 MS. SCOTT: Yes. Just briefly, your Honor. 23 24 25
HARRY RAPAPORT, CSR, CP, CM OFFIC
IAL COURT REPORTER 1135 Skalka-redirect/Scott
1 FURTHER REDIRECT EXAMINATION (Cont'd) 2 BY MS. SCOTT: 3 Q Now, Mr. Skalka, all these checks you have seen over 4 the past half an hour or so, did you have access to any of 5 those during the bankruptcy proceedings? 6 MR. TRABULUS: Objection, your Honor. 7 THE COURT: Overruled. 8 A No. 9 Q I am showing you Government's Exhibit 712. 10 MS. SCOTT: The parties have stipulated that this 11 is a business record of Registry Publishing. 12 THE COURT: Any objection? 13 MR. TRABULUS: No, your Honor. I have seen it. 14 THE COURT: Government's Exhibit 712 in 15 evidence. 16 (Government's Exhibit 712 received in evidence.) 17 Q Mr. Skalka, can you tell the jury what that is? 18 A It is a check drawn on a Registry Publishing bank 19 account at Marine Midland Bank. It is dated October 13th, 20 1994. And it is in the amount of $27,315.83. It is made 21 payable to American Express. It is signed by Mr. Gordon. 22 MS. SCOTT: A moment, your 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 1136 Skalka-redirect/Scott
1 MS. SCOTT: No further questions. 2 THE COURT: Anyone else? 3 MR. TRABULUS: No further questions. 4 THE COURT: Congratulations. You are on your way 5 to Connecticut. 6 THE WITNESS: Thank you, your Honor. Just in 7 time for my shower. 8 THE COURT: Call your next witness, please. 9 MR. TRABULUS: Did you want to address the matter 10 about continued availability? 11 THE COURT: I addressed it already. 12 MR. TRABULUS: All right. 13 (Whereupon, at this time the witness left the 1
4 witness stand.) 15 MR. WHITE: Your Honor the government calls 16 Ronald Bassiur, B A S S I U R. 17 THE COURT: Raise your right hand, please. 18 19 R O N A L D B A S S I U R , 20 called as a witness, having been first 21 duly sworn, was examined and testified 22 as follows: 23 24 THE COURT: Please be seated. State your full 25 name and state your last name.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1137 1 THE WITNESS: Who name is Ronald Bassiur, 2 B A S S I U R. 3 THE COURT: You may proceed. 4 5 DIRECT EXAMINATION 6 BY MR. WHITE: 7 Q Mr. Bassiur, can you tell us what you do for a 8 living? 9 A I am a periodontist. 10 Q That's a type of dentist; is that correct? 11 A A type of dentist. 12 Q Can you tell us where you practice? 13 A 15 Bond Street in
Great Neck. 14 Q Do you know a man named Bruce Gordon? 15 A Yes, I do. 16 Q How do you know Mr. Gordon? 17 A Mr. Gordon has been a patient in my office. 18 Q Do you see Mr. Gordon in the courtroom today? 19 A Yes. 20 MR. TRABULUS: We concede the identification. 21 THE COURT: Stipulating the identification. 22 Q Dr. Bassiur, let me show you Government's Exhibit 619 23 and 620. 24 (Handed to the witness.) 25 Q Take a look at the front and back of each of those
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1138 Bassiur-direct/White
1 items? 2 THE COURT: Is that in evidence? ? 3 MR. WHITE: Sorry, your Honor, it is for 4 identification. 5 THE COURT: Did you say they were checks, 6 Mr. White? 7 MR. WHITE: Yes, your Honor. 8 THE COURT: How many checks? 9 MR. WHITE: I think about a half
a dozen. 10 Q Dr. Bassiur, are those checks made out to you? 11 A Yes, they are. 12 Q Are they endorsed in the back by your office? 13 A Yes. 14 Q What were those checks for? 15 A Dental services. 16 Q From whom? 17 A Mr. Gordon. 18 MR. WHITE: The government offers 619 and 620. 19 MR. TRABULUS: No objection. 20 THE COURT: I thought they were in already, I am 21 sorry. 22 Government's Exhibit 619 and 620 in evidence. 23 (Government's Exhibit 619 received in evidence.) 24 (Government's Exhibit 620 received in evidence.) 25 Q Dr. Bassiur, can you tell us for each of the exhibit
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1139 Bassiur-direct/White
1 what years those sets of checks cover. 2 A Government's Exhibit 619 it was for 1991 and Exhibit 3 620 was for -- three checks for 1992. 4 MR.
WHITE: Thank you. 5 No further questions. 6 THE COURT: Cross-examination. 7 MR. TRABULUS: None. 8 THE COURT: You are excused, Dr. Bassiur. 9 (Whereupon, at this time the witness left the 10 witness stand.) 11 THE COURT: Please call your next witness. 12 MR. TRABULUS: Your Honor, if I can just retrieve 13 an exhibit of mine up there. 14 THE COURT: Go ahead. 15 (Whereupon, at this time the witness left the 16 witness stand.) 17 MR. WHITE: Which one do you need? This one? 18 MR. TRABULUS: The ones that are mine. The rest 19 are yours. 20 I don't know if the jury wants to see the ones we 21 took from them. 22 THE COURT: The jury will only see what you or 23 the government wants them to see at this point. They will 24 see everything as soon as they start deliberating. We 25 will have to bring a truck in there.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1140 1 JUROR NO. 4: We need a bigger room. 2 MS. SCOTT: The government calls Suzanne Konopka. 3 THE COURT: Raise your right hand. 4 5 S U Z A N N E K O N O P K A - C H O A T E , 6 called as a witness, having been first 7 duly sworn, was examined and testified 8 as follows: 9 10 THE COURT: Please be seated. 11 State your full name and spell your last name. 12 THE WITNESS: My name is Suzanne Konopka-Choate. 13 That would be K O N O P K A-C H O A T E. First name, 14 S U Z A N N E. 15 THE COURT: You may proceed. 16 17 DIRECT EXAMINATION 18 BY MS. SCOTT: 19 Q Good afternoon, Ms. Konopka. 20 Tell us where you live now. 21 A Excuse me. 35-10 150th Street, Apartment 61, 22 Flushing. 23 Q Are you married? 24 A Yes, I am. 25
Q Do you have any children?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1141 Konopka-Choate-direct/Scott
1 A One stepson and one child on the way. 2 Q What do you do for a living? 3 A A market coordinating for Pitney Bowes Management 4 Services in New York. 5 Q Did you ever work in Who's Who Worldwide Registry? 6 A Yes, I did. 7 Q When did you begin working there? 8 A Fall of 1993. 9 Q How long did you work there? 10 A About a year and a half. 11 Q Why did you leave? 12 A There were the government people coming in, and then 13 shortly thereafter there was really no business. 14 Q Now, what was your position at Who's Who Worldwide 15 Registry? 16 A I was a senior editor of Tribute Magazine. 17 Q Who was your immediate supervise? 18 A Debra Benjamin. 19 Q What were your responsibilities?
20 A Interviewing, writing, editing, coordinating, 21 advertising for the magazine. 22 Q Now, who was in charge of Who's Who Worldwide 23 Registry while you were there? 24 A Bruce Gordon. 25 Q And who made the every day decisions for the company
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1142 Konopka-Choate-direct/Scott
1 while you were there? 2 A Bruce Gordon. 3 Q Were you aware of who owned the company? 4 A Probably not at that time. 5 Q The entire time you were working there? 6 A The entire time I worked there. 7 THE COURT: You are going to have to relax and 8 let a few seconds in-between the question, for the answer, 9 okay? 10 THE WITNESS: I will try. 11 THE COURT: You are not nervous, are you? 12 THE WITNESS: Not at all. 13 THE COURT: Okay. 14 Relax, will you? 15 Go ahead.
16 Q Now, to your knowledge where did Mr. Gordon live 17 while you were working at Who's Who Worldwide? 18 A Manhasset. 19 Q And what kind of residence did he have in Manhasset? 20 A I had never been there. I don't know. 21 Q How do you know he had lived there? 22 A Sometimes he would send the computer person to his 23 house for various reasons, and I was friendly with that 24 person. 25 Q Did you ever hear anything about a penthouse in
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1143 Konopka-Choate-direct/Scott
1 Manhattan? 2 A Yes, I did. 3 Q And what did you hear about that? 4 A Around the time our -- sometime after Sterling had 5 begun to get underway there was discussion about the 6 penthouse. 7 Q Who was living there? 8 A I guess Bruce part time. 9 Q And how did you know that? 10 A I don't know if I knew it from Bruce. There was 11 probably a lot of hearsay in the office. 12 Q What, if anything, did you hear about decoration at 13 the penthouse? 14 A I knew that Debra Benjamin, who was my boss was doing 15 a lot of shopping for the decoration, furniture, etcetera. 16 Q Now, did you ever visit the condominium in Manhasset? 17 A No, I didn't. 18 Q I am showing you Government's Exhibit 640 in 19 evidence. 20 (Handed to the witness.) 21 MS. SCOTT: This is a document we previously 22 passed out to the jury. 23 Turning to the first page, the top says 200 24 Hummingbird Lane. 25 A Uh-huh.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1144 Konopka-Choate-direct/Scott
1 Q The third page of that document? 2 A Yes. 3 Q Do you see an entry there for August 9th? 4 A Yes, I do. 5 Q Can you read that entry aloud? 6 A It says Suzanne -- 7 THE COURT: You have to go slow. Take it easy 8 and read slowly so we all have to hear, and this good 9 court reporter has to take down every word 10 Ms. Konopka-Choate. So take it easy, will you. 11 THE WITNESS: Suzanne Konopka and Tracey Colletti 12 for the occasion of discussing public relations events. 13 Q Did you ever go to a meeting at the condominium in 14 Manhasset to discuss public relations events? 15 A No, I did not. 16 Q Now, on the second page of that log, do you see an 17 entry there for September 12th, 1994? 18 A Yes, I do. 19 Q And can you read that aloud, please. 20 A Debra B, Susan K and Tracey Colletti planning 21 reception, Russian members. 22 Q Did you ever attend such a meeting in Manhasset? 23 A No, I did not. 24 Q Did your job at Who's Who involve dealing with
25 Russian members?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1145 Konopka-Choate-direct/Scott
1 A Yes, I did, it did. 2 Q What did you do with respect to that? 3 A Some of our more prominent Russian members were 4 featured in the magazine, so there would have been 5 interviews and perhaps a reception at Sterling. 6 Q Now, turning to page 3 of that log for 200 7 Hummingbird Lane do you see an entry there for December 8 19th, 1994? 9 A Yes. 10 Q Can you read it aloud, please? 11 A Suzanne K., Tracey Colletti, Debra Benjamin for the 12 occasion of reviewing members. 13 Q Did you ever attend that meeting at the Manhasset 14 residence? 15 A No, I did not. 16 Q What was your involvement with membership of Who's 17 Who Worldwide? 18 A Well, the magazine was a benefit for the members, so 19 there was some involvement in member events. But before 20 that possibly writing about them, interviewing them, 21 getting their input for the magazine. A lot of our 22 magazine was contributed by the members, so we would have 23 to edit it, etcetera, to make it presentable for print. 24 Q You mentioned that the penthouse was a part-time home 25 for Mr. Gordon to your knowledge.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1146 Konopka-Choate-direct/Scott
1 Did you ever visit the penthouse? 2 A Yes, I did. 3 Q Where was it? 4 A Umm, I think, umm, about Third Avenue and 54th 5 Street, but I could be way off. 6 Q How many times did you visit it? 7 A Three. 8 Q And would you please describe for the jury the first 9 time you visited the penthouse? 10 A The first time was Saturday evening. I think it was 11 summer, or late summer. It would have had to have been 12 1994. 13 Q And aside -- who was present at this gathering? 14 A The editorial staff, which would have been Debra, ^^ 15 Maggie, Tracey and myself, Maria Gaspar and her husband 16 and son, Gary Kohler and his wife, K O H L E R, who was 17 the information technology person IT. 18 Q Was Mr. Gordon present? 19 A Yes, he was. 20 Q Any members present at this gathering? 21 A No, they weren't. 22 Q How is it that you remember that evening? 23 A I became sick and went to the hospital after dinner, 24 during dinner. 25 Q What were you told was the purpose of the meeting?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1147 Konopka-Choate-direct/Scott
1 A I wasn't told there was a purpose. It was 2 mandatory. I was resistant because it was a Saturday 3 evening and I didn't want to necessarily spend it at 4 work. And I don't know that there was an intended 5 purpose, other than to -- I don't know. In my own mind it 6 was to justify the use of the penthouse. 7 MR. TRABULUS: Objection. 8 THE COURT: Sustained. Strike out the last 9 answer. The jury is to disregard it. 10 MS. SCOTT: May I have a moment, your Honor? 11 THE COURT: Yes. 12 (Whereupon, at this time there was a pause in the 13 proceedings.) 14 Q Ms. Konopka, prior to the gathers in the summer of 15 1994, was there any kind of office policy at Who's Who 16 Worldwide as to whether employees were permitted to 17 socialize with each other? 18 A Yes, there was. It was clearly -- Bruce's policy, 19 that there was no fraternization between editorial, sales 20 staff and administration. 21 Q And what would happen if he or anybody else in charge 22 of the company had learned that such socializing had gone 23 on? 24 A He would scream mercilessly. I don't know if there 25 would be any repercussions. There would be a lot of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1148 Konopka-Choate-direct/Scott
1 screaming. You would fall out of favor with Bruce. 2 MR. JENKS: Objection. 3 Q On this summer night in 1994 who was present with you 4 at the penthouse? 5 A Sales group leaders. As I stated the IT person, 6 information technologies, Kohler, Maria Gaspar, who was 7 the accountant or comptroller. 8 THE COURT: Is this the second visit or first 9 one? 10 MS. SCOTT: First visit. 11 Q Ms. Konopka, were these the people who had originally 12 not been permitted to -- you had originally not been 13 permitted to socialize with? 14 A Yes, that's correct. 15 Q I am turning your attention to the next two times you 16 visited the penthouse. Do you remember what those two 17 events were? 18 A Those were member net working parties. 19 Q And do you remember approximately when they occurred? 20 A One was in the winter, and I can't recall the 21 second. And I only know it was the winter because I had a 22 long sleeved dress. 23 Q Were they close together in time? 24 A I think a few months apart. 25 Q What was -- withdrawn.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1149 Konopka-Choate-direct/Scott
1 How many members were invited to these two 2 gatherings? 3 A Invited, I would have to say between 40 and 50. 4 Accepted, I would say maybe 20, 25. 5 Q You say 40 members or so were invited to each of 6 these parties? 7 A That's correct. 8 Q How do you know the number of people who were 9 invited? 10 A I was one-fourth or one third of the people who 11 prepared the invitations. 12 Q In other words, you prepared one-quarter of the 13 invitations? 14 A That's correct. 15 Q How is it that you remember the number of members who 16 attended these two parties? 17 A Probably because I probably also typed the lists. I 18 just -- I remember an approximate amount. 19 Q Looking again at Government's Exhibit 640, and would 20 you turn to the first of three pages that lists 250 East 21 54th at the top. 22 I believe the second page to the log for 250 East 23 54th Street, there is an entry for September 1st, 1994? 24 A Yes. 25 Q Read it please?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1150 Konopka-Choate-direct/Scott
1 A Suzanne K., Margaret Swendseid, S W E N D S E I D. 2 Q What does it say you were t
here to do? 3 A Review Publishings. 4 Q Did you actually attend that meeting? 5 A No, I did not. 6 Q Turning to the entry for September 6th, 1994, can you 7 read that aloud, please. 8 A Tracey Colletti, Suzanne and Debra Benjamin, review 9 mailings and analyze. 10 Q Did you attend this meeting? 11 A No, I did not. 12 Q Did your job entail anything to do with mailings? 13 A Limited, limited things. 14 Q Aside from the three parties you already told the 15 jury about, did you ever attend other meetings or 16 gatherings at the penthouse? 17 A No, I did not. 18 MS. SCOTT: May I have one minute, your Honor? 19 THE COURT: Yes. 20 (Whereupon, at this time there was a pause in the 21 proceedings.) 22 Q Now, Ms. Konopka, as you read to the jury, the 23 references are to Suzanne K. 24 A Yes. 25 Q Are you the only person whose name is Suzanne who
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1151 Konopka-Choate-direct/Scott
1 worked at the company, who had the last name beginning 2 with the letter K? 3 A That's correct. 4 MS. SCOTT: I have no further questions. 5 THE COURT: Cross-examination. 6 7 CROSS-EXAMINATION 8 BY MR. TRABULUS: 9 Q Good afternoon, Ms. Konopka-Choate. 10 My name is Norman Trabulus. I am Bruce Gordon's 11 lawyer. Relax. I am not going to ask you any questions 12 to make it look like you are not telling the truth about 13 not attending the meetings in the logs, because we are 14 accepting that. We are going to ask you other things you 15 have done when you worked at Who's Who. 16 I think you mentioned that you had some dealings 17 with the Russian members. 18 A That's correct. 19 Q Do you k
now how many Russian members there were over 20 time? 21 A I have no idea. 22 Q Did you arrange for a reception for the Russian 23 members? 24 A No, I did not. 25 Q Were you aware of any receptions for the Russian
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1152 Konopka-Choate-cross/Trabulus
1 members? 2 A I was aware that one Russian member, I think he was 3 the president of Kalmekya, K A L M E K I A, or M Y K I A, 4 I don't know. I was aware that he came in, and there was 5 something at Sterling for him. But I do not know to what 6 extent that was. 7 Q When you say it was at Sterling, was it the business 8 office or the penthouse, do you recall? 9 A I believe it was the business offices. 10 Q Were you actually present at this reception? 11 A No. I do not believe I was. 12 Q Is it possible it was at the
penthouse? 13 A I think there are photographs somewhere with Mister, 14 whatever his name was, standing in front of the Sterling 15 Who's Who sign out front, which would mean it was at the 16 office. 17 Q Is it possible that the president of Kalmekya both 18 visited the office and also went to a reception at the 19 penthouse? 20 A That's possible. 21 Q Kalmekya is a republic within Russia; is it not? 22 A Yes, it is on the Mongolian border. 23 Q Was there other Russian members of whom you were 24 aware? 25 A Yes, there were.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1153 Konopka-Choate-cross/Trabulus
1 Q Do you recall what some of their positions were? 2 A There was another Russian member by the made of 3 Adolphas Slevicius. 4 THE COURT: Please spell that. 5 THE WITNESS: S L E V I C I U S, A D O L F A
S, 6 P H A S, maybe. 7 Q What was his position, if you recall? 8 A He was the president of Lithuania. 9 Q Maybe the prime minister? 10 A President. 11 Q President, okay. 12 He was also a member of either Who's Who or 13 Sterling? 14 A That's correct. 15 Q Now, you work for Pitney Bowes now; is that correct? 16 A That's correct. 17 Q And you are in -- forgive me, it is late in the day, 18 marketing? 19 A Yes. 20 Q And are there other divisions of Pitney Bowes located 21 in the same physical facility you work in? 22 A Yes. 23 Q What are some of the other divisions? 24 A Up until a few weeks ago there was purchasing, 25 northeast regional sales, national sales, some corporate.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1154 Konopka-Choate-cross/Trabulus
1 Q Now, at Pitney Bowes,
did you typically -- would you 2 have occasion to fraternize with people in the other 3 divisions? 4 A Yes, I would. 5 Q Okay. 6 And did you have occasion to -- withdrawn. 7 Did your business involve you with the other 8 divisions? 9 A In a limited fashion, yes. 10 Q And would that be the occasion for the 11 fraternization? 12 A In most cases, yes. 13 Q Were there parts of Pitney Bowes that were located in 14 the same facility that you wouldn't have business dealings 15 with? 16 A Yes. 17 Q And would you fraternize with the people in those 18 divisions? 19 A No, I wouldn't. 20 Q You mentioned the reception at the penthouse you went 21 to, late summer, I think you said, of 1994? 22 A Yes. 23 Q And there were people who were there from different 24 parts of Who's Who? 25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1155 Konopka-Choate-cross/Trabulus
1 Q And had there been some friction among some of the 2 higher people at Who's Who before that? 3 A I would not have been aware of it if there was. 4 Q Was there any friction among some of the people who 5 had been present at this? 6 A I wouldn't have been aware of this. 7 Q This was something you were required to did as part 8 of your business? 9 A That's correct. 10 Q You may not have wanted to go there. 11 Was this a social gathering where people were 12 talking to each other, one another? 13 A Yes, there was. 14 Q Let me ask you, after the government agents came, did 15 you return to work at Who's Who for a period of time? 16 A Yes, I did. 17 Q Was there a period of time you worked there without 18 salary? 19 A Yes, there
was. 20 Q Were you there when the government agents executed 21 the search warrant? 22 A Yes, I was. 23 Q Did they interview you? 24 A Yes. 25 Q Did they discourage you from coming back and working
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1156 Konopka-Choate-cross/Trabulus
1 there? 2 A No. As I recall, the person who interviewed me said 3 he wasn't sure that there would be much there. 4 Q Did he suggest to you that you might not be able to 5 get paid if you came back? 6 A No, I don't think he did. 7 Q Now, did you actually do some of the editorial 8 work -- withdrawn. 9 As a senior editor, would you go through again 10 your functions on Tribute? 11 A Interviewing members, writing profiles, writing 12 articles, coordinating, advertising, editing, contributing 13 articles, anything from free press to color checks for the 14 magazines. 15 Q Do you know if you worked on the very first issue of 16 Tribute, or if it was already published when you came? 17 A It was already published. 18 Q Do you know what issue was the first one you worked 19 on? 20 A It was a black and pink cover, but I don't remember 21 the date. 22 Q I am going to show you Gordon-G for Identification. 23 (Handed to the witness.) 24 Q Do you recognize Gordon-G for Identification? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1157 Konopka-Choate-cross/Trabulus
1 Q Was this the first one you worked on? 2 A I think so, yes. 3 MR. TRABULUS: I would offer Gordon G in 4 evidence. 5 THE COURT: Any objection? 6 MS. SCOTT: No objection. 7 THE COURT: Defendant's Exhibit G for George, in 8 evidence. 9 (Defendant's Exhibit G received in evidence.) 10 Q Now, I would like you to go through it, and starting 11 with page 1, and just turn the pages and find the first 12 thing that you had any input into? 13 A The choice of color. 14 Q Okay, on the cover? 15 A Not the cover. 16 The page layout of the contents page, myself and 17 Tracey Colletti did all the typesetting for this issue. 18 Q You are listed as senior editors and production 19 layout? 20 A Yes. 21 Q You and Ms. Colletti? 22 A Right. 23 Q And did you have any involvement in obtaining any of 24 the advertisement for it? 25 A I probably didn't at this time, no.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1158 Konopka-Choate-cross/Trabulus
1 Q Okay. 2 So, if there is an advertisement from Izod, 3 I Z O D, there, and you had nothing to do with that? 4 A No, I did not. 5 Q Let's look at page 2. 6 There is something there which is addressed, dear 7 member. And it indicates it is written by Bruce Gordon, 8 with interviewing Bruce Gordon, did you have anything to 9 do with that? 10 A No, I did not. 11 Q Okay. 12 Let's go to page 4. 13 There is some letters there. 14 These were letters received from members? 15 A That's correct. 16 Q Did you have anything to do in selecting which 17 letters were going to be included in this? 18 A Yes, I did. 19 Q Now, how many letters are included in this? 20 A Four. 21 Q Do you remember how many letters you had to pick 22 from? 23 A I have no idea. 24 Q It was certainly more than two; is that correct? 25 A I am sure.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1159 Konopka-Choate-cross/Trabulus
1 Q And this is like a letter to the editor's section? 2 A Yes. 3 Q Under a letter to the editor there is actually a 4 correction listed, where a profile of a particular member 5 listed the number of employees of his company at 200,000, 6 and it was corrected to 2,000? 7 A Yes. 8 Q Is that correct? 9 A Yes. 10 Q And did you have anything to do with that correction? 11 A Other than laying it out, probably not. 12 Q But is it fair to say that the information in Tribute 13 was sought to be made as accurate as possible? 14 A That's correct. 15 Q Now, on the next page, page five, there is spotlight 16 on various members. 17 A Yes. 18 Q Was this something where members themselves would 19 submit information concerning themselves in the hopes of 20 being in the spotlight? 21 A No. It was something, I think that we
may be 22 contacted the members and asked to do a small interviews a 23 short interview. 24 Q This would be a smaller type interview than the 25 profiles that were more in depth; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1160 Konopka-Choate-cross/Trabulus
1 A Yes. 2 Q And how would you pick the members to contact? 3 A I don't recall offhand how we picked them at that 4 time. It was before the CD-ROM. And maybe we had a 5 listing, I don't know. 6 Q When you say before the CD-ROM, did there come a time 7 that there was a CD-ROM? 8 A Yes, there was. 9 Q Would that make it easier for you to select members? 10 A Yes. 11 Q And would you explain to the jury how the CD-ROM made 12 it easier? 13 A Being electronic, and having the ability to utilize 14 the CD-ROM, it is very simple to put it into your computer 15 and install it, and look through the complete listing. It 16 is literally at your fingertips. It is something we 17 utilized a lot. 18 Q Now, when you say the complete listing, this would be 19 the listing of all the members? 20 A That's correct. 21 Q Now, at the time that you left, do you know how many 22 members that was? 23 A Maybe 100,000, something like that. 24 Q It could have been a little less? 25 A 80 to 100.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1161 Konopka-Choate-cross/Trabulus
1 Q And the CD-ROM had information on each one of these 2 members; is that right? 3 A Yes, it did. 4 Q The CD-ROM was a single disk that would go into a 5 computer? 6 A That's right. 7 Q It looks like the kind you would put into a CD-ROM 8 player that plays music? 9 A A CD.
10 Q When you put that in could you in your computer 11 indicate what category or type of member you were looking 12 for? Is my question good? 13 A I don't remember the parameter, the search parameters 14 of that particular CD-ROM. 15 Q Could you put in all people who were president, who 16 had president in their title? 17 A Yes, you could. 18 Q Could you put in all people in a certain zip code? 19 A Yes, you could. 20 Q If you wanted to, could you find all the people who 21 had a certain zip codes and were either presidents or vice 22 presidents of companies? 23 A I think you could, yes. 24 Q Could you try to find all the people in the 25 pharmaceutical, use the words "pharmaceutical" or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1162 Konopka-Choate-cross/Trabulus
1 something along those lines? 2 A Yes,
you could. 3 Q If you wanted to spotlight on a particular industry 4 or particular person who had a certain kinds of position 5 within that, you could using the CD-ROM find those really 6 at your fingertips? 7 A Yes, you could. 8 Q Now, Ms. Konopka -- excuse me, Mrs. Konopka-Choate, I 9 am sorry, I saw some documents from before you were 10 married and I think of you that way. 11 There were times before the CD-ROM which there 12 would be a desire to locate members meeting a certain 13 characteristic with; is that fair to say? 14 A Yes, it is. 15 Q Was there a computer system within the business that 16 would enable people to do that? 17 A Probably in administration. 18 Q Were you aware of instances in which members before 19 the CD-ROM would call up and ask Who's Who to put them in 20 touch with other members who were in a certain geographic
21 location or had a certain type of business? 22 A I think there were some such instances, yes. 23 Q And Who's Who would do that for those members; is 24 that correct? 25 A Yes, I think we attempted to do that.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1163 Konopka-Choate-cross/Trabulus
1 Q And that was -- of course, it was kind of cumbersome, 2 when you had to make a phone call and print out a list and 3 the send it to them, but it was done? 4 A Yes. 5 Q And the CD-ROM made it easier, of course, members 6 could do it themselves? 7 A That's correct. 8 Q And that was to assist the members in networking with 9 each other; is that correct? 10 A I wasn't around for the intent, so I don't know. 11 Q Okay. 12 Are you familiar with the term networking? 13 A Yes. 14 Q And that's basically people in business
getting in 15 touch with other people in business? 16 A Yes. 17 Q With a view to having business relations? 18 A Yes. 19 Q And did this facilitate networking? 20 A Yes, it did. 21 Q Okay. 22 Let's go to the next page, page 7, member news. 23 Did you have some involvement in that? 24 A No, other than typesetting. 25 Q Do you know who did?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1164 Konopka-Choate-cross/Trabulus
1 A Debra Benjamin. 2 Q Tell us in a general way what the member news section 3 was supposed to be. 4 A News about the membership benefits for the members. 5 Q Now, this particular instance there was an article 6 called Moscow on the Hudson? An entry called Moscow on 7 the Hudson, correct? 8 A Uh-huh. 9 Q And that related to putting members in touch with 10 people who would be involved in business operations in 11 Russia or Lithuania, a link to that, in case members were 12 interested in business relations there? 13 A I am just trying to read it. I don't remember. 14 Q Sure. 15 (Whereupon, at this time there was a pause in the 16 proceedings.) 17 A It could be either an announcement of new members, or 18 it could be a very weak link to -- it is not a direct 19 link, I don't think. I don't think that was the intent of 20 it. It reads like an announcement, with some background 21 information Itar-Tass, I T A R-T A S S. 22 Q The first sentence is three new representatives have 23 joined WWEC to help members with business operations in 24 the Republic of Russia and Lithuania. 25 Let me ask you, WWEC, what does that stand for?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1165 Konopka-Choate-cross/Trabulus
1 A Who's Who Executive Club. 2 Q And was that an umbrella company that serviced both 3 Who's Who and Sterling? 4 A Yes, it was. 5 Q And they put out the CD-ROM? 6 A I don't know who put out the CD-ROM. 7 Q The CD-ROM included both members of Who's Who and 8 Sterling? 9 A And Sterling, yes. 10 Q And the first entry on that page refers to Hilton 11 Head, Hilton Head for network tee, T E E, and tennis 12 weekend? 13 A Yes. 14 Q Now, were you familiar with a, with a plan to sponsor 15 a weekend at Hilton Head for members? 16 A Yes, there was such a plan. 17 Q Were you involved in trying to implement that plan? 18 A No, I was not. 19 Q Do you know who was? 20 A Maggie Swendseid. 21 Q And is it fair to say that not enough members signed 22 up for it? 23 A Yes, I believe that was the truth. 24 Q
So, it was not -- there were certainly efforts made 25 to have this during the time that -- up until that point;
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1166 Konopka-Choate-cross/Trabulus
1 is that correct? 2 A Yes, that's correct. 3 Q Are you aware of any plans to sponsor a seminar in 4 Vietnam and Hong Kong? 5 A Yes, it was a similar thing. I don't think the 6 members responded.
7 Q In that case are you aware that the seminar was to be 8 in conjunction with a group of lawyers that were going to 9 Vietnam and Hong Kong? 10 A I am not aware of the specifics. I only know that I 11 was told we had worked on that at one point, and it did 12 not happen. 13 Q Okay. 14 But there was definitely an intent to have it? 15 A Yes, that's correct. 16 Q Now, it may not be in this particular magazine that 17 we have in front of us, but were there nomination ballots 18 contained within some issues of Tribute? 19 A Yes, there were. 20 Q And can you explain to the members of the jury what a 21 nomination ballot was? 22 A It was a -- it was about half a page in size. I 23 think it was in the back of one of the issues, and 24 designed for members to identify other potential members 25 for Who's Who inclusion.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1167 Konopka-Choate-cross/Trabulus
1 Q I will show you what is received as Gordon D in 2 evidence, and I will direct you to page 63. 3 Is that one of the nomination ballots? 4 (Handed to the witness.) 5 A Yes, it is. 6 MR. TRABULUS: Just so the jury can see -- 7 Q Is this what you are referring to? 8 A Yes, I am. 9 Q Did Who's Who and Sterling have at the time -- 10 withdrawn. 11 At the time you began working with them, did 12 Who's Who and Sterling have a procedure whereby members 13 could nominate other members? 14 A I believe they did, yes. 15 Q Are you aware of instances in which that happened? 16 A Not specifically, no. 17 Q Would you have -- would it be in your position to 18 become aware of nomination ballots? 19 A No, I would not have been. 20 Q Whether or not it happened is something you wouldn't 21 have known; is that correct? 22 A That's correct. 23 Q Certainly when the nomination ballot -- withdrawn. 24 Tribute Magazine was mailed to each and every 25 member of Who's Who and each and every member of Sterling;
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1168 Konopka-Choate-cross/Trabulus
1 is that correct? At least it was supposed to be? 2 A That's correct.
3 Q And each of these 80 or 100 thousand people, assuming 4 they got it and the address was right, they would receive 5 that? 6 A Yes. 7 Q And it would be up to them if they wanted to nominate 8 a member, another prospective member or two? 9 A That's correct. 10 Q Tribute Magazine came out every quarter; is that 11 correct? 12 A Yes. It was a quarterly magazine. 13 Q Who were some of the people you interviewed, 14 interviewed for profiles? 15 A Gary Reinel, R E I N E L, from Nautilus, he was vice 16 president for Nautilus at the time, although he changed 17 his position since then. 18 Q He was a member? 19 A Yes. 20 Q Who else? 21 A It has been a long time. 22 Q Would it help you to see some more copies of Tribute? 23 A Adolph Slezivicius. 24 Maggie Swendseid and I through our task 25 interviewed Mr. Slezivicius for inclusion in our
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1169 Konopka-Choate-cross/Trabulus
1 publication. 2 Q And who was he? 3 A The president of Lithuania. 4 Q And he joined? 5 A Yes, he joined. 6 Q Okay. 7 A C. Winston Taylor, the president of Campbell Soup. 8 Q He was also a member? 9 A Yes. 10 Q I will show you more Tributes, Gordon C for 11 Identification, which indicates volume four, with a 1994 12 date. Gordon F for Identification, volume three, also 13 with a 1994 date. 14 Would you take a look at those? 15 A Yes. 16 THE COURT: Are you offering them in evidence? 17 MR. TRABULUS: I will once she looks at them. 18 A You want me to continue with the list -- 19 Q I want you to look at them and tell me if you are 20 familiar with Tributes you worked on? 21 A Yes.
22 MR. TRABULUS: I offer them in evidence. 23 THE COURT: Any objection? 24 MR. WHITE: I didn't get the letter designation. 25 MR. TRABULUS: C, which is volume three, and F
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1170 Konopka-Choate-cross/Trabulus
1 which is volume four. 2 THE COURT: C for Charley and F for Fox, in 3 evidence. 4 (Defendant's Exhibit C received in evidence.) 5 (Defendant's Exhibit F received in evidence.) 6 Q I want to ask you now, you have before you now in 7 evidence, C, D, G and F, and not necessarily in the same 8 order. We have volume two, volume three, volume four and 9 volume five. 10 Were those all the volumes of Tribute that you 11 worked on? 12 A Yes, that's correct. 13 MR. TRABULUS: Excuse me, your Honor. 14 THE COURT: Yes. 15 (Whereupon, at this time there was a pause
in the 16 proceedings.) 17 Q Okay. 18 I would like you to look at the first one we were 19 looking at, and then we can pass it around to the jury 20 shortly. But I want you to look at that and tell me if 21 there were any other people in there you recall 22 interviewing? 23 A I interviewed only for this particular issue Don 24 Fitzpatrick, the proprietor of the Fitzpatrick Manhattan 25 Hotel in New York.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1171 Konopka-Choate-cross/Trabulus
1 Q How about on page 16, Mr. Bast, the president elect 2 of the council of Better Business Bureaus, did you 3 interview him? 4 A I did not. 5 Q When he asks, he was a member, though? 6 A Yes. 7 Q Look through and tell us any other things -- 8 A This is a an issue I worked on typesetting. 9 Q You were new to the comp
any? 10 A Yes, I was new to the company. 11 Q Look at page 20, and there are several articles of 12 different Far East countries? 13 A Yes. 14 Q Did you work on that at all? 15 A Yes, I actually did. I worked on Vietnam, Taiwan and 16 Hong Kong. 17 Q And these were all articles with a view to informing 18 members with possible business opportunities for doing 19 trade with these countries? 20 A That's correct. 21 MR. TRABULUS: Your Honor, with the Court's 22 permission, I would like to publish this one to the jury. 23 THE COURT: Yes. 24 (Whereupon, the exhibit/exhibits were published 25 to the jury.)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1172 Konopka-Choate-cross/Trabulus
1 Q We will go to the next one, which is F. 2 Again, look through that, and starting from the 3 front, tell me which portions you worked on. 4 A Can I do page numbers? It is easier. 5 Q Sure. 6 A Page 11, 17, 18, 19, 22. 7 Q You are faster than I am. Start with page 11. 8 That was the prime minister -- a profile about 9 the prime minister of the republic of Lithuania? 10 A That's correct. 11 Q You worked on that and you interviewed him? 12 A Yes, through Itar-Tass. 13 Q Did you interview him by telephone or person? 14 A Through fax, through Itar-Tass, he only speaks 15 Lithuanian. 16 Q They translated it? 17 A Yes, they translated for us. 18 Q In general when you performed interviews was it by 19 telephone? 20 A Yes. 21 Q Would you sometimes make tape recordings with the 22 permission of the person on the other end? 23 A All the time. 24 Q It would assist you in writing the article? 25 A Yes.
HARRY RAPAPORT, CSR,
CP, CM OFFICIAL COURT REPORTER 1173 Konopka-Choate-cross/Trabulus
1 Q Served like notes? 2 A Yes. 3 Q Now, I guess it would be page 5, opposite page 4, 4 there is no page number. 5 There is an ad there for the Hilton Head 6 weekend. 7 A That's correct. 8 Q And this ad contained a registration form; is that 9 correct? 10 A Yes. 11 Q And this went out to all the members who got Tribute? 12 A Yes. 13 Q How many there were at that time? 14 A Yes. 15 Q And it was inviting them to come to this Hilton Head 16 thing that was planned but didn't work out, it turned out 17 down the road to not work out? 18 A That's correct. 19 Q I would like to turn to page 6 and ask you about some 20 of the benefits that were offered to members that are 21 shown on this page. 22 There is something here about Med Jet assistance, 23 M E D, capital M E D, capital J E T, and then the word 24 assistance. 25 Were you familiar with that?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1174 Konopka-Choate-cross/Trabulus
1 A Yes, I was. 2 Q Can you explain to the jury what that was? 3 A That was insurance that covered, I guess all members 4 who participated in it for flying out of the country, if 5 in fact they got hurt or were hospitalized overseas, they 6 could be flown back to the United States complete with 7 medical care for a limited amount of money, which happened 8 to actually be a lot cheaper than the going rate of 9 flying. You know, it was a true membership -- 10 Q Benefit? 11 A Benefit. 12 Q By being in Who's Who and you were a business person 13 and traveled a lot, you could get that insurance at a 14 greatly reduced --
15 A I don't know what it went for on the open market. 16 Q But it was available? 17 A Yes. 18 Q And it was your understanding that Who's Who obtained 19 what amounted to group discounts for its members on 20 certain types of benefits? 21 A Yes, that was true. 22 Q And another one would be auto insurance? 23 A Yes. 24 Q And that's the next one listed. 25 And also a group discount on international
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1175 Konopka-Choate-cross/Trabulus
1 telephone calls? 2 A That's correct. 3 Q Through a company called Telecom International? 4 A That is correct. 5 Q There is an ad for a trans-national calling card, I 6 guess page 9. 7 A Yes. 8 Q And that was another benefit that was offered to 9 members, members could get a discount in long distance 10 calls within the United States? 11 A That's correct. 12 Q And that was a real benefit offered for members? 13 A Yes, it was. 14 Q And on the next page, there is an ad for saving up to 15 40 percent on Airborne Express? 16 A That's correct. 17 Q Airborne Express is like FEDEX, overnight delivery 18 service? 19 A Yes. 20 Q It is used by businesses? 21 A Yes, it is. 22 Q You are aware that large businesses who use Airborne 23 Express a lot can get discounts? 24 A Volume discounts. 25 Q Small businesses could not do that?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1176 Konopka-Choate-cross/Trabulus
1 A Right. 2 Q If they were members of Who's Who because Who's Who 3 is a large group, they were able to get a discount like a 4 large company? 5 A Yes. It was purchasing power through us. 6 MR. TRABULUS: Excuse me a moment. 7 (Whereupon, at this time there was a pause in the 8 proceedings.) 9 Q I don't remember the page numbers you gave us before, 10 look through, 16 was one of them? 11 A 17. 12 Q 17. I knew it was somewhere around there. 13 Was this gentleman, Dr. Goldratt, 14 G O L D R A T T, someone you interviewed? 15 A Yes, it is. 16 Q And he was the author of a book? 17 A Yes, he was. Several, actually. 18 Q And he had a business which related to business 19 management; is that fair to say? 20 A That's correct. 21 Q And this was something of interest to people who 22 owned or managed businesses; is that correct? 23 A Yes, I believe so. 24 Q And that's one of the reasons he was selected to be 25 profiled?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1177 Konopka-Choate-cross/Trabulus
1 A Yes. 2 Q And what was the next one you were involved in 3 interviewing? 4 A Steven Aiello, A I E L L O, and he was the president 5 of Cohn & Wolfe, C O H N, ampersand, W O L F E. 6 Q And that was a major public relations agency? 7 A That's correct. 8 Q Next, continue. 9 A Sandra, S U N D R A, Escott, E S C O T T, hyphen, 10 R U S S E L L. She was the state Senator of Alabama, and 11 the national sales director of Prime-America Financial 12 Services. 13 Q These people were members of Who's Who? 14 A Yes. 15 Q And any others in this magazine? 16 A Daniel Gaynor, the vice president of Springmaid, S P 17 R I N G M A I D. 18 Q That's a fabric manufacturer, distributor? 19 A Sheets, and you know, that kinds of stuff. 20 Q Anyone else? 21 A No. 22 Q Were you involved in obtaining any of the advertising 23 in this particular -- 24 A Yes, I was. 25 Q Which one?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1178 Konopka-Choate-cross/Trabulus
1 A The long distance, page 9 from Transnational 2 Communications, the advantage calling card, the Airborne 3 Express that came from the same company. 4 Q Opposite page 26 -- excuse me, page 27, there is an 5 ad for a credit card? 6 A That came from a separate company. 7 Q I was going to ask you, that credit card has a Who's 8 Who Executive Club logo on it? 9 A Yes. 10 Q Was that a benefit offered to members? 11 A Yes, it was. I am sure if the member had the credit 12 background. 13 Q And the terms that are listed in the advertisement 14 for that credit card, that was a Mastercard? Those were 15 accurate, were they not? 16 A Yes, it was, is. 17 Q Now, there is an ad for the American Cancer Society 18 opposite page 40? 19 A I was not involved in that, except for -- once the 20 ads came in, they all came to my office, four color ads 21 are cumbersome. 22 Q Were you aware in the case of the American Cancer 23 Society, they were not charged for the ad? 24 A Yes, that's correct. 25 Q There was a member high up in the American Cancer
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1179 Konopka-Choate-cross/Trabulus
1 Society; is that correct? 2 A Yes, Stanley Shmishkiss. 3 THE COURT: Spell that. 4 Q Maybe you ought to try spelling that. 5 A Sure; S H M I S H K I S S. 6 Q And what was his position? 7 A Founder and chairman emeritus of the American Cancer 8 Society Foundation. 9 Q On the last page there was an ad for Cadillac. Did 10 you have anything to do with getting that ad in? 11 A Yes. These ads, some of these ads existed before I 12 got there. And once I took them over, so to speak. So 13 they were handed from Maggie Swendseid to me. 14 Q And would you deal with the client? 15 A Yes, I do, and advertising agencies, and various 16 people. 17 MR. TRABULUS: I will publish Gordon F to the 18 jury. 19 THE COURT: Very well. 20 Did you pick up the other one? 21 MR. TRABULUS: I think people are still looking 22 at them. 23 THE COURT: Take your time. That's all right. 24 (Whereupon, the exhibit/exhibits were published 25 to the jury.)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1180 Konopka-Choate-cross/Trabulus
1 Q I would like you briefly, without going through too 2 much detail, I would like you to look through the other 3 copies of Tribute and tell me whether or not they refresh 4 your memory as to other people you may have interviewed, 5 and other things you did with regard to the magazine? 6 A For this issue, volume four, 1994, which is Gordon-C, 7 this was actually sent to our members in a poli-bag with 8 an advertising supplement from Guerlin, which I was 9 completely responsible for getting those -- that paid 10 advertising, in addition to interviewing the vice 11 president of marketing for Guerlin, G U E R L I N. 12 Q Was somebody in the Guerlin organization a member of 13 Who's Who? 14 A Yes, she was. 15 Q And who was that? 16 A Karen Flite, F L I T E, vice president of marketing. 17 Q I will mark this Gordon CA for Identification. 18 Is that the supplement enclosed in the polygraph 19 with the magazine? 20 A Yes, it is. 21 MR. TRABULUS: I offer it for identification. 22 THE COURT: Any objection?
23 MR. WHITE: Can I see it? 24 MR. TRABULUS: I don't know if Mr. White has seen 25 that recently.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1181 Konopka-Choate-cross/Trabulus
1 (Whereupon, at this time there was a pause in the 2 proceedings.) 3 MR. WHITE: No objection. 4 THE COURT: Defendant's Exhibit CA, Charley Able 5 in evidence. 6 (Government's Exhibit CA received in evidence.) 7 Q Would you review that to refresh your recollection as 8 to some of the things you did? 9 A Yes. Frederick Kovac, the vice president of Goodyear 10 Tire and Rubber. Christian -- 11 THE COURT: Would you please spell every name. 12 THE WITNESS: Yes. Frederick J. Kovac, 13 K O V A C. 14 THE COURT: He is the president of who? 15 THE WITNESS: Vice president of Goodyear Tire and 16 Rubber. 17 Chris Bement, B E M E N T, the chairman of the 18 Stonehenge Group, S T O N E H E N G E. 19 Rod MacKenzie, M A C K E N Z I E, the chairman 20 and founder of Gynopharma, Inc., G Y N O P H A R M A. 21 Joseph Porfeli, president and CEO of EIS 22 International. 23 THE COURT: How do you spell that name? 24 THE WITNESS: P O R F E L I. 25 Q These were all members of either Who's Who or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1182 Konopka-Choate-cross/Trabulus
1 Sterling or both? 2 A That's correct. 3 Q Have you finished? I don't want to interrupt you. 4 A In this issue there was a readership study that -- 5 Q Can you explain that? 6 A Yes, it is something that a lot of new magazine and 7 some old magazines do so they could grasp the market share 8 that they have. 9 In other words, guess the age, the economic 10 background and the makeup, the education, etcetera of 11 their readers, so they know who to target for certain 12 articles. 13 Q Okay. 14 A This was something we received a lot of. We received 15 a lot of these back. 16 Q Okay. 17 To what use were they put? 18 A Well, we could sort of grasp the age group and areas 19 of business that members worked in, so it was easier then 20 to determine what future articles we would have. 21 Q In other words, it was done so that the articles that 22 were in the magazine were more responsive, or make it as 23 responsive as possible to the needs of the membership? 24 A That's correct. 25 Q There is an article here, page 44, on a primary on
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1183 Konopka-Choate-cross/Trabulus
1 venture capital. Were you familiar with that article? 2 A Only loosely.
3 Q Venture capital is -- withdrawn. 4 Was this to assist members who might have had 5 small businesses and possibly getting other people to 6 invest in those businesses so they could make it larger? 7 Is that the general idea? 8 A No, I don't know if it was the general idea. 9 Q It explains how venture capital -- 10 A Right. 11 Q Venture capitalist is work? 12 A Right. 13 MR. TRABULUS: Your Honor, I am publishing this 14 one. 15 THE COURT: Yes. 16 (Whereupon, the exhibit/exhibits were published 17 to the jury.) 18 Q That was Gordon-C? 19 A That's correct. 20 Q And turning to the last one you worked on, which 21 would be Gordon-D -- by the way, at the time of the raid 22 was there another one in the works? 23 A Another magazine? 24 Q Another Tribute? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1184 Konopka-Choate-cross/Trabulus
1 Q It never got published? 2 A No. 3 Q The raid prevented that? 4 A That's correct. 5 Q Do you recall what some of the articles that were 6 going to be published in the one that never got published 7 were? 8 A I remember I was interviewing somebody for 9 West. 9 That's all I can remember. 10 Q Okay. 11 Now, just look through this and tell me what you 12 were involved in? 13 A Gary Reinel, R E I N E L, Winston Taylor, 14 T A Y L O R, Doug Fore, F O R E. 15 Q These were all members? 16 A Yes. In addition I was able to get the list of the 17 Senators and Congress men from the 104th Congress. This 18 magazine was coming out around the time that the 104th 19 Congress was coming into session. It was a lot of work. 20 Q When you got the list, for what purpose was the list? 21 A A general information list. Your Honor, Senators had 22 changed. 23 Q It was published in the magazine? 24 A Yes. 25 Q So members would know the names of those people in
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1185 Konopka-Choate-cross/Trabulus
1 case they wanted to write to them or something of the 2 sort? 3 A That's correct. 4 Q Now, there is a picture on page 7, and it is a 5 picture of Mr. Gordon with the director general of the 6 Itar-Tass News Agency? 7 A Yes. 8 Q And Itar-Tass is a news agency in Russia, maybe like 9 Associated Press here? 10 A Yes, and they have, of course, offices here. 11 Q And there was a business relationship established 12 between Who's Who and Itar-Tass? 13 A That's correct. 14 Q And that was with a view both towards gaining more 15 members in Russia and also facilitating networking of 16 members with Russia? 17 A That's correct. 18 Q Were there other countries that you were aware of 19 that Who's Who was in the process -- Who's Who and/or 20 Sterling were in the process of trying to develop 21 relationships with so that the members could benefit from 22 that? 23 A Well, Lithuania at this time was not part of Russia, 24 I would say Lithuania and Kalmekya was another country. 25 Q And were you familiar with China?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1186 Konopka-Choate-cross/Trabulus
1 A Loosely, but I don't recall. 2 Q You don't know the details of that? 3 A No. 4 Q You were not involved in that? 5 A No, I was not. 6 Q Other countries in the Far East? 7 A I am sorry, I would have no knowledge of that. 8 Q Okay? 9 MR. JENKS: Norman, the back row. 10 THE COURT: Notwithstanding the signals from the 11 rear, you have to start with number one. 12 MR. TRABULUS: All right. 13 I wanted to spread -- 14 THE COURT: If Denver wins the Super Bowl, we 15 will change it. 16 Q You testified concerning a networking party. Do you 17 remember some of the members who were there? 18 A There was a member who was a vice president for 19 Cosmair, which is the parent company of Loreal cosmetics. 20 Q Was there a vice president of HBO there that you 21 recall? 22 A Yes, there was. 23 Q And the president of 9 West? 24 A That's correct. 25 Q 9 West is a large shoe manufacturing company?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1187 Konopka-Choate-cross/Trabulus
1 A That's correct. 2 Q Some representatives again of Itar-Tass? 3 A Yes, that's true. 4 Q How many people while you were there worked on 5 Tribute Magazine? 6 A Four at a time. There was some turnover, so I would 7 say alter maybe 6 or 7. 8 Q And is it fair to say that you worked pretty much 9 full time on Tribute while you were there? 10 A Yes, I did. 11 Q And the other people that were there on any given 12 time, also worked on Tribute, did they work full time or 13 part time? 14 A Everybody was employed full time. 15 Q I mean were there people who divided responsibilities 16 between working on Tribute and other things? 17 A Debra Benjamin would have been one of those people. 18 Q Other people would have been working on Tribute full 19 time? 20 A Basically. There were also some public relations 21 responsibilities that fell in our job description. 22 Q Did you have any job responsibilities relating to 2
3 public relations? 24 A Some limited, yes. 25 Q You would prepare press releases for members?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1188 Konopka-Choate-cross/Trabulus
1 A Yes. 2 Q And members were charged for that? 3 A In some cases, yes. 4 Q Other cases it was done for nothing? 5 A It was part of their membership package. 6 Q What were they generally charged? 7 A Anywhere from 250 for a simple bio, to 2,000 for a 8 complete package, including publications, having them 9 published in a local magazine or business -- 10 Q Are you familiar with what it cost -- withdrawn. 11 Were those reduced rates, below market rates? 12 A Yes. They were either reduced or equal to market 13 rates. 14 Q In some instances it was free, or included with 15 membership? 16 A Yes. 17 Q They were services for members in businesses who 18 wanted press releases concerning business or personal 19 affairs? 20 A Yes, that's correct. 21 THE COURT: Mr. Trabulus, how much longer do you 22 have? 23 MR. TRABULUS: Your Honor, I am practically 24 done. In fact, I can -- 25 THE COURT: All right.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1189 Konopka-Choate-cross/Trabulus
1 Do you have any redirect? 2 MR. WHITE: I will have a brief redirect, your 3 Honor. 4 MR. JENKS: We have some questions, your Honor. 5 THE COURT: You have some more questions? 6 MR. TRABULUS: In fact, I will say no further 7 questions at this point for me. 8 THE COURT: How long do you feel it is going to 9 be? I don't want to preclude you at all. 10 MR. JENKS: I think I will be 15, 20 minutes, 11 your Honor. 12 THE COURT: Then we are going
to recess. 13 MR. WHITE: Your Honor, I know Ms. Konopka-Choate 14 was here yesterday and all day today. I don't know if 15 that enters into the Court's decision. 16 THE COURT: Do you think you will be finished in 17 a half an hour? 18 MR. JENKS: I don't believe they think so. 19 THE COURT: I am sorry. 20 I will speak to you in a few minutes. 21 Members of the jury, we are going to recess until 22 January 26th, my goodness, time is passing. 23 We are not going to work on Friday, as I told 24 you. 25 Have a seat, Mr. Trabulus.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1190 Konopka-Choate-cross/Trabulus
1 MR. TRABULUS: Sorry. 2 THE COURT: You are making me nervous. 3 We are not going to work this Friday. I told you 4 next Friday we are working from 1:30 to 5:30. 5 Meanwhile you will have a day off tomorrow, and 6 my recommendation is those who are gainfully employed, go 7 to work. Otherwise do anything you want. There is tax 8 free sales at Roosevelt Field. Very good. I am not at 9 all interested in Roosevelt Field, but it is nearby. 10 Please don't discuss the case either among 11 yourselves or with anyone else. Keep an open mind, come 12 to no conclusions. Don't look up anything. Don't become 13 experts in journalism or salesmanship, or anything else. 14 Just enjoy your three days off. And we will meet at 9:30 15 on Monday, January 26th. 16 Have a nice weekend. 17 (Whereupon, at this time the jury leaves the 18 courtroom.) 19 THE COURT: Ms. Konopka-Choate, I am sorry to 20 tell you you will have to return on Monday. Be here 21 before 9:30. We will put you on and we should be able to 22 get you out an hour or so. I could not keep the jurors. 23 They come from all over, from Staten Island to Montauk. 24 They are very, very conscientious. I will not keep them 25 late. I would appreciate it if you come in and be here
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1191 Konopka-Choate-cross/Trabulus
1 before 9:30, and we will start right at 9:30. 2 The delay is all my fault, and not the lawyers. 3 So, if you want to blame someone, blame me. It doesn't 4 matter. I am appointed for life. You can't even vote 5 against me. You could at one time, but not now. 6 You can step down, and you are excused. 7 Is the witness excused until Monday morning? 8 MR. WHITE: Yes, your Honor. 9 THE COURT: Okay. 10 Thank you very much. 11 MR. WHITE: She can go, but I want to make it 12 a -- make a point with respect to this witness. 13 I anticipated obviously there would be 14 substantial cross-
examination of her. I didn't know 15 Mr. Trabulus was going to go page by page through the 16 magazines. 17 The main reason I didn't know that is because 18 Mr. Trabulus, and none of the defendants have bothered to 19 give the government copies of any documents that they 20 intend to introduce, despite repeated requests in writing 21 with respect to discovery issues. 22 THE COURT: Does Ms. Konopka-Choate have to hear 23 this? 24 MR. WHITE: No, I am saying she may leave. 25 THE COURT: You may leave, see you Monday.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1192 1 (Whereupon, at this time the witness left the 2 witness stand.) 3 MR. WHITE: None of this is a surprise. If the 4 government tried to pull this kind of stunt there would be 5 an uproar. They know obviously they would use these 6 documents. I have received not a single page of Rule 16 7 discovery. Yet they told your Honor they plan a two-week 8 defense case. Now perhaps they can give me the documents 9 they intend to use. 10 MR. TRABULUS: Your Honor, it is my understanding 11 Rule 16 doesn't apply with respect to cross-examination. 12 Particularly with respect to Tribute -- 13 THE COURT: I will not spend a lot of time 14 refuting that argument. Number one, I didn't think the 15 cross-examination was excessive, lengthy at all. I 16 thought it was very fair. It went in and went out. I 17 don't think that he spent an inordinate amount of time. 18 Secondly, don't equate your discovery obligations 19 with the defendants. While we have a limited reciprocal 20 discovery, it is nothing like the government has. I 21 didn't think it was long at all. I was prepared to go 22 through every page of every one of these magazines. We 23 were spared that. You should be happy, elated. 24 MR. WHITE: Your Honor, I don't care. 25 THE COURT: You are not going to be very happy
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1193 1 when I go with the next ruling though, so go and get this 2 out of your system now. 3 MR. WHITE: Okay. 4 THE COURT: You are through with this one? 5 MR. WHITE: Yes. 6 THE COURT: Let's go to this now. 7 Have a seat. 8 The offer of the judgment in evidence, 9 Government's Exhibit 299, and in particular pages 6 -- 10 well, you have no objection to 6, do you? 11 MR. TRABULUS: Well, your Honor, I don't have it 12 in front of me. If I recall the part I objected to began 13 in the middle of page 6 and extended to page 7, the entire 14 decretal paragraph. 15 Q This paragraph in this judgment says the following: 16
Ordered, adjudged and decreed that the defendant Who's Who 17 Worldwide be and the same hereby is permanently restrained 18 and enjoined from making false and/or misleading 19 representations concerning its origin, nature, character, 20 attributes, quality, value, distinction, or membership, 21 particularly where such false or misleading 22 representations would tend to lead the general public to 23 believe that Who's Who Worldwide Registry, Inc. -- pardon 24 me -- is in any way associated or affiliated with 25 plaintiffs or their affiliates or divisions, including,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1194 1 without limitation, soliciting or offering for sale, or 2 selling to the general public, or to particularly 3 identified individuals, either verbally or in writing or 4 electronically, through advertising or promotion, or by
5 describing, characterizing, portraying, depicting, 6 representing or illustrating in connection with any book, 7 product or service sold or offered for sale by Who's Who 8 Worldwide, that -- now we are getting to the point -- that 9 Who's Who Worldwide is, inside quote, leading, inside 10 quote, traditional, inside quote, authoritative, inside 11 quote, a reference book, or having, inside quote, 12 reference value, or inside quote, worldwide in scope, 13 context or content. 14 The defendant is further enjoined and restrained 15 from describing verbally in writing or electronically the 16 selection of members as a quote, nomination, end quote, 17 and from stating verbally in writing or electronically 18 that, quote, there is no cost or obligation, end quote, to 19 be listed in Who's Who Worldwide's publication; or that 20 memberships in defendant's organization are limited or
21 otherwise, quote, unquote. 22 The only thing saving this from being totally 23 misleading, confusing to anybody reading it, is that it 24 may say you can't do it to confuse someone -- I will tell 25 you the truth, I have difficulty following what it says
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1195 1 myself. But, in any event, the government wants to put it 2 in for two reasons. 3 One, because Mr. Trabulus in cross-examination 4 went into details about the trustee, the reasons why they 5 opposed the trustee, the judgment, the money owed, the 6 appeal, and all kinds of things. So, it is commonly known 7 in the vernacular as opening the door. 8 Secondly, because from the time of this judgment, 9 March the 31st, 1994, it is notice, warning, not to do it, 10 as to certain things which may be similar to the 11 fraudulent -- alleged fraudulent misrepresentations in the 12 indictment. 13 As far as opening the door, I do not believe the 14 door opened that wide to let this in. I don't think that 15 anything prejudicial to the government occurred -- would 16 occur as a result of my keeping this out, with so far as 17 the cross-examination is concerned. It isn't classic 18 opening the door where it would be unfair to the 19 government, absolutely not, in my view. 20 Secondly, as far as the value to the government's 21 case, in proving beyond a reasonable doubt that the 22 defendant made fraudulent misrepresentations by mail, 23 which is a criminal offense, and they had intended to 24 defraud people out of money by making certain 25 representations, such as nomination, for example, we are
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1196 1 talking about apples and oranges here. 2 If the defendant violated this order, there would 3 be no crime involved. 4 If the defendant violated this order there would 5 be an order of contempt, a civil contempt. Nothing to do 6 with this case. 7 Now, the government says that it is notice to 8 them. 9 It is notice of nothing involving fraudulent 10 misrepresentations. You got to prove that these 11 representations rose to the level of a criminal, 12 intentional, fraudulent misrepresentations. 13 So, these statements don't involve that. All 14 they say at most, is don't do it. 15 Don't do what? Commit crimes? If you violate 16 this, go to court and get a contempt order. 17 That's the second thing. 18 The third thing is that the probative value of 19 this document, although relevant, maybe could be excluded 20 if its probative value is substantially outweighed by, 1, 21 the danger of unfair prejudice; 2, confusion of the 22 issues; 3, misleading the jury. 23 Now, I am reading the first three phrases in 24 Rule 403. And I very rarely use 403. 25 But we know, if we look at the very authoritative
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1197 1 text, Weisenberger on Federal Evidence, unfair prejudice 2 is that quality of evidence that might result in an 3 improper or irrational basis for a jury decision. 4 I will not give you the cases. There are a load 5 of them. 6 It is evidence that arouses the jury's 7 sympathies, emotions, and exclusion under 403, based on 8 confusion, is very important also. 9 My goodness, I have trouble making head or tails 10 out of this judgment. Can you imagine what a jury who 11 would say that some judge said they can't do this, and not
12 only that, it was affirmed by a Circuit Court. 13 What does it mean? It means they can't do it. 14 But it doesn't mean that there is contempt involved. 15 So, they would be confused, just as I am confused 16 in reading the thing. But their confusion might go even 17 more than that. They might think that this is already 18 decided by a judge and an Appellate Court. 19 Also, 403 is applicable if the jury is likely to 20 ascribe -- this is all from the text -- is likely to 21 ascribe excessive, unwarranted weight to the evidence. If 22 so, the offered proof is a candidate for exclusion under 23 403. 24 So, for two reasons, I am excluding it. 25 One, I don't think it is probative. I don't
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1198 1 think it is probative of the main issue in this case, was 2 there fraudulent intent. It is
probative if they were 3 warned not to do it, but they were warned not to do it 4 because it infringed, not because it was fraudulent, and 5 the jury would be very confused because it is a 6 sophisticated difference. 7 For that reason and under 403 I am sustaining the 8 objection. 9 MR. WHITE: May I address a couple of the points 10 you just made, your Honor? 11 THE COURT: Sure. 12 MR. WHITE: On the last point your Honor made, it 13 is not correct that this judgment could just be telling 14 them, don't do this because it infringes a trademark. 15 That is not what this is. That's what the first part is. 16 Magistrate Jordan in the finding he made, made 17 separate findings about the trademark cause of action, as 18 well as the false advertising claim that Reed had. 19 And the second part of this judgment goes to the 20 false advertising part.
21 THE COURT: Where does it say it is fraudulent? 22 And even if it did, how could I let it in, because it is a 23 different burden of proof? 24 MR. WHITE: Your Honor, it doesn't say it is 25 fraudulent. It says that it is false and misleading.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1199 1 And not the judgment you have before you, but the 2 findings and the decision -- 3 THE COURT: You want to put the findings in 4 also? 5 MR. WHITE: We didn't come to that point this 6 morning, because we were only talking about the judgment. 7 THE COURT: I don't know what the findings are, 8 neither would the jury, unless they are in evidence. 9 MR. WHITE: My original application, not this 10 morning, but pretrial, was to put it on. 11 I understand your Honor is saying this does not 12 amount to a finding of fraud. We don't contend that it 13 was. In fact, the government's position is that you 14 instruct the jury if you let it in, that it is not. 15 But your Honor seems to say that it doesn't prove 16 the crime. But it doesn't have to prove the crime in and 17 of itself. 18 If someone, like a judge, tells a defendant, this 19 is false and misleading, and don't do it, and he does it 20 anyway, your Honor, it certainly goes to his intent. 21 Does it prove it beyond a reasonable doubt? No. 22 But it is relevant to intent. I thought your Honor said 23 as much at the bench this morning. 24 THE COURT: It is relevant to intent, except 25 reading this document over the way I did, it is very
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1200 1 confusion -- confusing, even as to that. 2 MR. WHITE: All right, your Honor. 3 Let me suggest this then: The findings of fact 4 are much more explicit. Magistrate Jordan said, the 5 defendants do the following thing. I find it is so false, 6 so misleading as to be false in fact, for words to that 7 effect. It doesn't have the legalese as in the judgment. 8 If the finding is confusing, we can redact the 9 excess legalese in here, so it is not confusing. 10 The combination of redacting it and giving the 11 instruction -- 12 THE COURT: How we will try a criminal case by 13 findings of fact found by a preponderance of the evidence, 14 which means that it is more likely so than not so, and 15 which means if the scale tips one percent, that's a 16 finding. You are going to give that to the jury in this 17 kind of a sensitive case? I don't think so. You prove it 18 independently of that. 19 MR. WHITE: Okay. If that's your Honor's 20 ruling. But you said that the defendants should bring in 21 anything at all bearing on their intent. And Mr. Trabulus 22 already asked questions of Mr. Skalka today, as to whether 23 Reed and Who's Who used mailing lists, it's Who's Who, and 24 whether they told people they were nominated as far as I 25 said at the conference pretrial, if Mr. Gordon wants to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1201 1 say that I know Reed used mailing lists and told people 2 they were nominated and, therefore, told people, I told 3 people he are okay, if that's what he wants to say, that 4 certainly opens the door to this again. Because he is 5 told in no uncertain terms by Magistrate Jordan that it is 6 not the case. So what is good for the goose is good for 7 the gander. 8 THE COURT: Not so. They can get that evidence 9 independently without a finding from a court. They can 10 ask
the witnesses. I will let them do it. Doesn't Reed 11 do the same thing? I will let them do it. They don't 12 need a finding of fact to do that. 13 MR. WHITE: I agree, your Honor. And the reason 14 they would ask that is as it goes to Mr. Gordon's intent, 15 and his knowledge, correct? 16 Therefore, this goes to his intent and knowledge 17 just as much. 18 THE COURT: It goes to other things. It goes to 19 the fact. It -- it goes to other things. It goes to the 20 fact that -- and it escapes me now, but whether you get 21 what you ask for or pay for; whether these members got 22 what they paid for. If they got what they paid for 23 according to this case which escapes me now, and you know 24 it cold. 25 MR. WHITE: The Regent Office Supply?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1202 1 THE COURT: Yes, the Regent Office Supply. 2 That's the one which was not -- which was ignored, I guess 3 or said -- I will have to read the Second Circuit opinion 4 again. 5 But, yet, they can prove that they can use any 6 defense to show that what they did was not fraudulent, 7 that what they did was salesmanship, and that the 8 customers got what they paid for. They can do that. 9 That's what a defense is. 10 MR. WHITE: Your Honor, I don't disagree. 11 They can't be citing things that bore on 12 Mr. Gordon's intent, without the government citing things 13 bearing on his intent to a contrary manner. 14 THE COURT: You made your statement and I will 15 stick to the ruling. 16 See you Monday morning at 9:30. 17 MR. NELSON: Your Honor, can we be apprised of 18 the government's witnesses on Monday? 19 THE COURT: I would like that, yes. 20 MR. WHITE: I guess the rest of the
21 Ms. Konopka -- 22 THE COURT: Which somehow, Mr. White, every time 23 a witness comes back after a weekend, we make them come 24 back, but in five minutes it is over. 25 MR. WHITE: That's what I was worried about.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1203 1 THE COURT: I will have to have an investigation 2 on that some day as to why that happens; why when I ask 3 now, it is going to take a half an hour, an hour, two 4 hours. And then the witness comes in and then the witness 5 is off. 6 MR. WALLENSTEIN: Because of the Super Bowl, we 7 can't prepare a cross-examination Sunday night. 8 THE COURT: That's right. 9 Who else? 10 MR. WHITE: Ms. Gaspar who will take the rest of 11 the day, I would say. 12 THE COURT: She is an employee? 13 MR. WHITE: Yes. 14 THE COURT: See you on Monday.
15 (Case on trial adjourned until 9:30 a.m., Monday, 16 January 26, 1998.) 17 18 19 20 21 22 23 24 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 1204 1 I-N-D-E-X 2 W-I-T-N-E-S-S-E-S 3 PAGE LINE 4 D O U G L A S S. S K A L K A.......... 946 14 CROSS-EXAMINATION (cont'd)........................ 947 1 5 CROSS-EXAMINATION................................ 1021 20 CROSS-EXAMINATION................................ 1025 9 6 CROSS-EXAMINATION................................ 1028 11 CROSS-EXAMINATION................................ 1031 8 7 CROSS-EXAMINATION................................ 1050 6 REDIRECT EXAMINATION............................. 1055 15 8 RECROSS-EXAMINATION.............................. 1101 1 RECROSS-EXAMINATION.............................. 1118 1 9 FURTHER REDIRECT EXAMINATION..................... 1119 13 FURTHER RECROSS-EXAMINATION...................... 1127 17 10 FURTHER REDIRECT EXAMINATION. . . . .............1135 1 11 R O N A L D B A S S I U R.................... 1136 19 DIRECT EXAMINATION............................... 1137 5 12 S U Z A N N E K O N O P K A - C H O A T E. . 1140 5 13 DIRECT EXAMINATION............................... 1140 17 CROSS-EXAMINATION................................ 1151 7 14 15 E-X-H-I-B-I-T-S 16 Government's Exhibit 780-C received in evidence.. 1089 22 17 Government's Exhibit 779-C received in evidence.. 1089 24 Government's Exhibit 776-C received in evidence.. 1090 1 18 Government's Exhibit 692 received in evidence.... 1124 14 Government's Exhibit 688 received in evidence.... 1124 15 19 Government's Exhibit 695 received in evidence.... 1131 15 Government's Exhibit 696 received in evidence.... 1131 16 20 Government's Exhibit 698 received in evidence.... 1133 2 Government's Exhibit 712 received in evidence.... 1135 16 21 Government's Exhibit 619 received in evidence.... 1138 23 Government's Exhibit 620 received in evidence.... 1138 24 22 Government's Exhibit CA received in evidence..... 1181 6 Defendant's Exhibit G received in evidence....... 1157 9 23 Defendant's Exhibit C received in evidence....... 1170 4 Defendant's Exhibit F received in evidence....... 1170 5 24 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
