EFTA00724547.pdf

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page I UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA CASE NO.: 09-34791-BKC-RBR In Re: ROTHSTEIN ROSENFELDT ADLER, P.A., Debtor. MOTION TO COMPEL PRODUCTION OF DOCUMENTS FROM TRUSTEE PURSUANT TO DOCUMENT PRODUCTION PROTOCOL ESTABLISHED BY DE#672 (807); AMENDED MOTION FOR PROTECTIVE ORDER (819) August 4, 2010 The above-entitled cause came on for hearing before the HONORABLE RAYMOND B. RAY, one of the Judges of the UNITED STATES BANKRUPTCY COURT, in and for the SOUTHERN DISTRICT OF FLORIDA, at 299 East Broward Blvd., Fort Lauderdale, Broward County, Florida, on Tuesday, August 4, 2010, commencing at or about 9:30 a.m., and the following proceedings were had: Reported By: OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724547 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 2 APPEARANCES: BERGER SINGERMAN, by CHARLES H. LICHTMAN, ESQUIRE on behalf of the Trustee CONRAD & SCHERER, by WILLIAM R. SCHERER, ESQUIRE on behalf of victims FOWLER WHITE BURNETT, by RONALD G. NEIWIRTH, ESQUIRE LILLY ANN SANCHEZ, ATTORNEY-AT-LAW CHRISTOPHER E. KNIGHT, ESQUIRE JOSEPH L. ACKERMAN, ESQUIRE on behalf of Jeffrey Epstein FARMER JAFFE WEISSING EDWARDS FISTOS & LEHRMAN, by GARY FARMER, ESQUIRE BRAD EDWARDS, ESQUIRE on behalf of LM, Brad Edwards and Farmer Jaffe Weissing Edwards Fistos & Lehrman OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724548 \O 曲 闼 O 玉 (J1 '. 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MR. SCHERER: Yes, sir, your Honor. I'm William Scherer and I'm here on behalf of a number of victims in the State Court action, as well as the chairman of the creditors' committee in the bankruptcy. THE COURT: All right. That leaves us with Docket Entry 807 and 819. 807 is Jeffrey Epstein's motion. MR. NEIWIRTH: Thank you, your Honor, and again, good morning. We represent Jeffrey Epstein. He has a civil claim pending in State Court in Palm Beach County. He had served a subpoena on Mr. Stettin requesting documents from the RRA estate. That was back in April. While this was still in process, in May, under Docket Entry 672, your Honor entered an order standardizing procedures for obtaining discovery from Mr. Stettin and the RRA estate, and at least on the face of it, it takes jurisdiction over all discovery efforts against the trustee. That left us in a quandary. We had a subpoena pending in State Court. We had correspondence from Berger Singerman on behalf of the trustee that they had OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724550 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 5 identified information and they were processing it, including vetting for attorney/client privilege issues, but then in the meantime came your Honor's order on May 18th, so we had to go back and reinvent the wheel and go through the necessary hoops in order to comply with that. In the meantime, as we sit here now, we still have no production. We have a trial date coming up in October, and we have a motion for protective order coming from a party who's already settled out, the LM party. They no longer have anything directly to do with this. Further, we are advised by the creditors' committee that in addition to what was proffered to us, that at some point in time there had been something like ten boxes of records pertaining to these particular issues and someone on behalf of the victims had been given, or several someones, had been given access to those ten boxes and had viewed them, which would vitiate any attorney/client privilege in any event. So what we are trying to do is fashion a mechanism so we can comply with your order, Docket 672, about standardized means of getting OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724551 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 6 production from the trustee, allow for the appropriate vetting of the materials for attorney/client privilege, and we must bear in mind that this is one objector, there's a lot more documents than that. To the best of our knowledge, the documents that pertain to the LM party, who is settled anyway, may be 15 percent of those which are responsive to the inquiry that we made of the trustee, but in any event, someone has to vet them for attorney/client privilege and do a privilege log. Now, Mr. Farmer's office on behalf of LM wants to do that. We don't think that's appropriate. We think the privilege at this point, since the case is settled, lies with RRA and, therefore, the trustee, rather than Mr. Farmer and his client, because as to them the case is over. Furthermore, we don't think there is any privilege because the boxes have been vetted before and we'll hear more about that from Mr. Scherer, I assume, because he was the one that was aware of that. And last, but not least, your Honor has OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724552 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 7 taken jurisdiction over these discovery matters and attempted to standardize discovery efforts for the trustee. There's a lot of people that want things from the trustee. The trustee is overseeing an estate which involved somewhere in excess of 70 lawyers and lots of cases and lots of problems, and literally millions of documents, and we have absolutely no problem with the standardized order, but that means that somehow or other we have to be able to deal with it in a standardized manner, instead of Mr. Farmer's suggestion, which is go back to State Court and deal with it over there. THE COURT: What is the status of the State Court proceeding? MR. NEIWIRTH: May I defer to my partner, who is more familiar with that? MR. KNIGHT: Your Honor, Christopher Knight, if I may? While we were waiting for the documents from the Stettin office, we obviously wanted to go down two tracks because we had an October trial date. The status of it is we could not come to an agreement with the other side. Mr. Ackerman was at the last hearing, in which the OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724553 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 8 judge said, one, I need a representative of the trustee here and two, shouldn't this be back before you, Judge Ray. THE COURT: You can't proceed against Rothstein in the State Court, they're here. MR. KNIGHT: And that is the same thing I think Judge Crow recognized, and that's why we're back here, and that's why we had to file the motion. MR. ACKERMAN: The claim against Rothstein is against him individually, and it's against Brad Edwards individually, and it was against one of the claimants, LM individually. THE COURT: So it's not against the debtor estate. MR. ACKERMAN: That's correct. MR. KNIGHT: Just to go a little further on what Mr. Neiwirth was saying. Out of these documents we've been asking for for a long time, very few of them would even have privilege on their face because they have nothing to do with the clients that were represented, what's been called as LM. If there's going to be a log, if there's any need, which I don't think there is because I think privilege has been waived, it needs to be a log put together by the trustee, OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724554 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 9 not anybody else that has some sort of interest in it. If there's a problem with payment for those, et cetera, our client has already offered to the trustee, to Mr. Lichtman, we will pay for it, whether it's a special master or whether it's a contract attorney, if they need to do that, but I don't think we even need to reach that. I think these documents are long overdue. They have been produced to others, they have been used in depositions for others, they are out there, and I think the privilege issue is just being used as a smoke screen to keep our client from being able to get the documents he needs to be able to prove his case. Thank you. MR. ACKERMAN: Your Honor, one other matter. Judge Crow expressed a concern about entering any order against the trustee or his counsel without them being present. Initially we had filed a motion to compel in the State Court, but we didn't realize at the time or it was unclear, because we had just taken over the case from another law firm, that the Court had entered its order. OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724555 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 10 There was some discussion prior to the hearing and when we went to the hearing, it was clear that there was no agreement that had existed and Judge Crow said, I'm not entering an order, I'm not doing anything on this motion until the bankruptcy trustee is represented. He was concerned because this Court's order had set up the standardized procedure for dealing with these arguments and had reserved jurisdiction relating to any subpoena or request for documents from the trustee, so that's why we're here now. THE COURT: All right. MR. KNIGHT: Your Honor, just one other point. We tried to work, and we've been working with Mr. Lichtman, tried to work out a protective order between the trustee and Epstein regarding the subpoena. Mr. Lichtman and Ms. Sanchez agreed to language on it. I have a copy of it. Mr. Farmer, with his motion for protective order, would not agree to that, but if the Court would like to have a copy of what the draft was, I will approach your clerk, but if you do not want that, I also --- THE COURT: Well, let me hear from OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724556 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 11 everybody first. MR. KNIGHT: Okay. MR. FARMER: Thank you, your Honor, may it please the Court. Again, Gary Farmer on behalf of the interested party, LM, also on behalf of Brad Edwards and I'm sorry, your Honor, Mr. Edwards is here with me. I neglected to introduce him to the Court earlier. MR. EDWARDS: Good morning, your Honor. MR. FARMER: There has been a lot of discussion here about your Honor's standardized production order and I think that you need to understand that this particular matter, which is before you today, is anything but standard or common to the matters before this Court. You need to understand the nature of the case. Jeffrey Epstein is an admitted convicted pedophile. He sexually assaulted dozens and dozens of young girls under the age of 15. He pled guilty to this and he has settled every civil lawsuit filed against him on this issue. Despite all of this, Mr. Epstein has seen fit to file a lawsuit against LM, who is one of the plaintiffs against him; against OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724557 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 12 Brad Edwards, LM's attorney; and against Mr. Rothstein. Now, Edwards, myself, and all the members of our firm were RRA attorneys when Mr. Rothstein took his ill-fated trip to Morocco and did the things which are now so well known, but the fact of the matter is that this discovery request is a blatant attempt to obtain clearly privileged documents related to the representation of LM and many other victims, by the way. And if I can show your Honor a copy of the subpoena itself, I don't think that the breadth of the subpoena has been adequately represented to the Court. If you peruse this, you will see they are asking for communications with private investigators, they're asking for contingency fee contracts, they're asking for every communication between any member of the firm, and they throw Rothstein in just to make it sexy, about these cases. Now, your Honor, clearly communication about the representation of a client falls under not only the work product, but if the client is involved in the communication, also the OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724558 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 13 attorney/client privilege. Now, most of this stuff we've already responded and said none, none, none, but for many of these items, we have asserted the privilege and we continue to assert the privilege. Now, the only reason the trustee is here --- THE COURT: Wait, there's been a privilege asserted in the State Court proceeding? MR. FARMER: Yes, sir. THE COURT: And there is a privilege log and the judge has made a ruling? MR. FARMER: No. The dispute now really is over who's going to file the privilege log and respectfully, Judge, what we suggest is that the trustee has been thrust into this matter simply because the trustee stands in the shoes of all the former attorneys at RRA, and the trustee is likewise bound by the privileges that attach to the cases and to the lawyers that were at the firm. The trustee has repeatedly acknowledged the fact that it is bound by those privileges and, of course, as your Honor knows, the privilege belongs to the client, not to any lawyer or any law firm. OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724559 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 14 So the trustee is really kind of stuck in the middle here. You've got the pedophile who wants documents related to the cases he's already settled and pled guilty for. Those documents, the electronic documents, at least, the e-mails, electronically stored information is how it's referred to in the discovery request, your Honor, are not in our possession, they are in the possession of the trustee because the trustee took the computer system. So the trustee doesn't want to incur the cost and expense of filing a privilege log and, frankly, I don't know that the trustee has a full appreciation of the nature and specific facts of the cases that would enable it to conduct a complete privilege log. So my suggestion, your Honor, and it's been rejected -- I believe it's acceptable to the trustee, but it's been rejected by Mr. Epstein's counsel, is the trustee be removed from this equation. There's no need that we come back before you. This case, this Epstein case, is not a matter which would involve bankruptcy estate assets going to Mr. Epstein. Unlike OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724560 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 15 Mr. Scherer's clients, who have claims before this Court, and hopefully they will get some form of relief from the Bankruptcy Court, Epstein is not seeking any bankruptcy assets. He's suing Brad Edwards and LM personally, and Scott Rothstein, and it's not an estate claim, it's against Scott Rothstein personally. So my suggestion, your Honor, is that you instruct the trustee to turn this electronic documentation information over to us. We will file the appropriate privilege log with the Circuit Court judge who is presiding over the case, who is most familiar with the case, who will be considering the upcoming motion for summary judgment, and possibly trying the case, and that way your Honor is not burdened with this matter, the trustee does not incur fees and expenses of having to go through all of these documents, prepare a privilege log and our clients and Mr. Edwards -- Mr. Edwards is also a party of that lawsuit. He enjoys his own privilege, your Honor, over and above, or in addition to, I should say, the privilege possessed by our former clients and, of course, I know counsel knows that the privilege extends OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724561 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 16 beyond the litigation. So although Mr. Epstein paid a ton of money for this claim that is supposedly frivolous, it has been settled, but the privilege still extends and it remains in place. So we simply want to make sure that our investigative materials, our reports, other documentation relating to the claims we have and have had against Jeffrey Epstein are not put into the hands of Jeffrey Epstein's attorneys. Now, we just want the chance to review these documents and prepare the privilege log and the trustee is kind of stuck in the middle here, Judge. Remove the trustee from the equation, let us get the documents, we'll file the privilege log, and then Mr. Epstein and us can go before Judge Crow. He can review the privilege log, review the documents in camera. All that is going to be pretty time consuming, but he's much more suited, a better suited judge because he's more familiar with the facts to engage in that inquiry. THE COURT: Thank you. MR. FARMER: Thank you, your Honor. THE COURT: Mr. Lichtman, Mr. Scherer, your OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724562 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 go first. Page 17 input, please. MR. LICHTMAN: I'm going to let Mr. Scherer MR. SCHERER: I think he wants me to go THE COURT: All right. first. MR. SCHERER: Your Honor, in November we filed a lawsuit in State Court and we alleged that as a part of Mr. Rothstein and the firm, and the firm's employees, and maybe some of the firm's attorneys, conspired to use the Epstein/LM litigation in order to lure $13.5 million worth of my victims, my clients, into making investments in these phoney settlements. And as we alleged in that State Court proceeding, and we've sharpened the allegations as we've amended a few times, we allege that sometime in late October, that my clients were invited into the Rothstein firm with Mr. Rothstein, and he explained that he had a litigation going in State Court with Mr. Edwards representing LM, a victim of Mr. Epstein, and these are kind of sensational allegations and it's been printed widely. And my clients, a number of them and OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724563 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 18 their lawyer, went into the Rothstein conference room and Mr. Rothstein brought down -- summoned the investigators, two of them, two or three of them, to bring down the Epstein file. And the lawyer that my clients brought from a national firm, went through the LM boxes, ten of them that the investigators brought down, and concluded that the Epstein case was a real case. And what Mr. Rothstein did with that real case, of course, is he told everybody that not only did he have the LM client of Mr. Edwards, that there were a number of other young ladies, that was widely published in the newspaper, that the firm was representing and that wanted to settle with Mr. Epstein on a confidential basis. So he used the real case in order to defraud my clients into investing into these phoney settlements and paid 13 and a half million dollars. I believe that Mr. Rothstein and others in the firm also told that story to a lot of other people, and let a lot of other people examine those ten boxes of the real case. In addition, as we have alleged, that Mr. Edwards and the firm put sensational OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724564 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 19 allegations in the LM case that they knew were not true, in order to entice my clients into believing that Bill Clinton was on the airplane with Mr. Epstein and these young woman and other personages, I can't remember who they are, and all sorts of other allegations that really were not even related to the LM case. And to the extent that any lawyers from the RRA firm, former lawyers, made a ton of money or however Mr. Farmer talked about it, we're interested in that ton of money because if they were involved in this scheme, this fraud, there's a crime fraud exception, and in addition, I want to see the ten boxes that they brought down. The trustee does not have those ten boxes. Those ten boxes were taken by Mr. Edwards when he left the law firm, I presume. So we want the ten boxes, we want all the communications and we want to look through everything on behalf of my State Court case, but also on behalf of the creditors' committee because the creditors' committee is looking to see if anybody else in the firm, other than Rothstein, was involved in this massive fraud that used the Epstein case. The model of using an existing case and OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724565 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 20 then spinning off a fraud from it is the same that was perpetrated on the Morse -- in the Morse situation, as has been alleged and widely produced. I can't conceive that Mr. Edwards and the predecessor law firm would have any standing to prepare privilege logs or anything else, given what I just told the Court. That would be like having the fox guard the hen house. That Epstein case is settled, and to the extent it's the ten boxes of stuff that we looked through, and I'll have to get the boxes to see if the attorney who looked through them, and how much time he spent looking through them THE COURT: Where are the ten boxes? MR. SCHERER: That's a good question. The trustee does not have the ten boxes. I presume the ten boxes are residing with the lawyers who took the case, Mr. Edwards and the successor law firm. The trustee does not have them. And then in addition, there's about 6,000 e-mails that the trustee has, and I bet you when we look at Qtask, there's going to be a boatload more. My clients were also advised during OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724566 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 21 their due diligence, short due diligence to settle these cases with these young ladies -- these putative young ladies who had to get the money and leave town because of whatever the stories were, that there were other members of the firm that told my clients that they, indeed, had even identified more of these victims that Mr. Rothstein didn't even know about at that time. So we know it wasn't just Mr. Rothstein spinning the tale, there were a lot of people in the firm. We've alleged almost all of this in our State Court action that we filed in November, up to where we are right now, but, your Honor, I think your Honor is going to have to deal with these issues in this court and I would urge you to have the trustee get involved and let the trustee do its job with respect to whether there are privileges that need to be protected, work product or attorney/client privileges, given what's going on, and I believe the trustee will be investigating whether the trustee wants to bring any claims on behalf of the estate by virtue of what I've just laid out for you. Thank you. OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724567 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 22 THE COURT: So your lawsuit in State Court names these people as defendants? MR. SCHERER: It names Rothstein. It does not name Mr. Edwards. It just names Rothstein, not the firm, and lays out the facts and says other people in the firm. We did not name them because we want to see the documents and see whether they had involvement. But the facts that I have alleged for you, your Honor, is pretty much what I've alleged in my first through third amended complaint in State Court. THE COURT: So, in essence, your position in this matter would be to support the motion to compel and deny the motion for protective order? MR. SCHERER: Yes, sir, notwithstanding that Mr. Epstein is a convicted pedophile. I want to put that on the record. You know, he's served his time and whatever, but I support the same position that he -- that he has asked the Court, and that is to have the trustee deal with this, get these documents and deal with it with you, rather than allow the successor law firm to have them. I don't know where they had the right OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724568 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 23 to take those ten boxes to start with. THE COURT: All right. Mr. Lichtman. MR. LICHTMAN: Good morning, Judge. I'm going to try to walk you through sort of chronologically the trustee's perspective of what has happened here. I think that what I've heard from all the parties are comments that are correct, and not necessarily correct, and I'm not suggesting falsehoods. We just have kind of a different perspective of some things and there are some points that ought to be corrected. Mr. Stettin received a subpoena in a Palm Beach State Court action for production of documents, and as we had done in virtually every subpoena, we went to our forensic accountants, the Berkowitz Dick Pollack & Brant firm, and said, okay, we need to produce e-mails and we need to also then, with the staff that we have at Berger Singerman and elsewhere, and look to see if there are any hard documents that we can find, notwithstanding what we'll call the issues as to the RRA hard drive that contain client files. We quickly realized that this is a claim different than all of the other subpoenas. The subpoenas that we had been receiving from OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724569 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 24 virtually every other party in the case were requests for production of documents related to claims that those moving parties or requesting parties would have as it pertains to them trying to recover some aspect of money as pertained to the Ponzi scheme. Okay. Like Mr. Scherer, who said I need a bunch of documents, can you help us? So we would enter into, on a one by one basis, a protective order that was very, very tightly negotiated. There is no standard form protective order in this case, contrary to what everybody has told you. We have a form that we use, and everybody that has come to us, we said, we need to have a protective order in place --- THE COURT: We have Docket Entry 672, which apparently is the document production protocol. MR. LICHTMAN: We have that, yes, but then we also, as an example, Document 685, have a protective order that was entered with Mr. Scherer's clients. We have, as an example, Document 715 that pertains to MS Capital, and on and on. So, in any event, what we realized is the case with respect to the Epstein vs. Scott Rothstein, Bradley Edwards case, is this is OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724570 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 25 different. This is not an asset either to the RRA estate, nor is it really an asset to any potential creditor of the RRA estate that is investigating claims that can bring a recovery that can help in terms of the overall dollars into either RRA or to a particular creditor on their individual lawsuits. The Epstein case, rather, is a lawsuit between a third party that was being sued by the Rothstein firm against Rothstein lawyers, and we had a different privilege issue than we had focused on with all these other document productions. So we get the 6,000 e-mails, and on the eve of one of my colleagues getting ready to enter into -- either enter into one of these protective orders or say, here, take them, like we've done with everybody else, we looked up and Mr. Stettin and I said, time out. We have a legitimate privilege issue here. And I want to be clear, we don't want to come anywhere close to stepping in the mess of waiving attorney/client privilege, unless and until the Court tells us to, and I want to also be clear, we wish we weren't here. We would OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724571 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 26 prefer not to have a fight on any of this stuff and on one hand, we don't care who does the privilege log and who gets the documents, and on the other hand, because of some things that Mr. Scherer just commented on, that I learned literally today, and because of the common interest agreement that everybody knows we have with Mr. Scherer and the committee, in some respects, I don't think it prudent for me to discuss why I would want to look at some of those documents. But be that as it may, we found that there were 6,000 e-mails and this was the one time that rather than go through the usual protocol of preparing the stipulated protective order that is effectively a mirror image of that which is provided by Federal Rule of Evidence 502, we said there is a need for a real privilege log here. There are 6,000 e-mails, give or take, and we quickly assessed that the time to review 6,000 e-mails, this could not be done by a paralegal, it would have to be done by a lawyer. THE COURT: Does this include Qtask or is this in addition to? OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724572 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 27 MR. LICHTMAN: Qtask is not part of this equation as of right now. Now, it may be, and we're still trying to get that. I'm just talking about internal e-mails where we would put in a name search, give it to the Berkowitz firm and say, run an e-mail search on the following names. And when we realized the volume of work, and you can imagine, you know, like from a ream of paper, 500 sheets of paper, and you multiply that out and you get to 12 reams of that paper, it takes up a lot of paper, it takes up a tremendous amount of time. This is not an asset of the estate that we can, if we have to, warrant doing the work, the hard work, as we've done on many of the other claims, some of which already are before you for settlement purposes. This is a liability to the estate and an expensive one. So we really didn't want to go through the undertaking of having to protect the privilege, though we would, and candidly, Epstein's counsel has said we'll pay you to do it, but then there's also the manpower issue because we are pressed very hard to get certain adversaries moving as quickly as we can and we're fighting a lot of battles on a lot of different OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724573 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 28 grounds, we still really don't want to do that, and also because we don't know the Epstein case well enough to be able to assess what is privileged, what is not, and preparing a privilege log the proper way is really a time consuming mess. So I teed it up for both sides and said, here's what I'm willing to do. Putting aside the issue as to really whether or not the Court does have jurisdiction on a State Court subpoena, which ultimately I leave to you, we said, we're still willing to enter into a modified version of the protective order that we gave to you, which effectively provides the additional language of no claims can be brought against Mr. Stettin or the estate if we produce these documents. We don't really have a bone to pick in this mess, we just want to make sure that we follow all of the ethical boundaries required by Florida law, by rules of professional conduct. We don't wish to necessarily waive somebody else's privilege. We don't think that's necessarily prudent, but we really don't want to have a fight in this battle, and we wanted the OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724574 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 29 Court to approve -- whatever it is you want us to do, to tell you the truth, we're happy to do. We just want to make sure that Mr. Stettin is personally insulated and that the estate is insulated in whatever it is THE COURT: All I see is MR. LICHTMAN: -- you direct. THE COURT: -- the potential of a claim against Stettin and the estate for breach of the attorney/client privilege. MR. LICHTMAN: correct. THE COURT: So the basis MR. LICHTMAN: And hence the dilemma. THE COURT: -- for the claim is there. MR. LICHTMAN: Yeah, right, hence the dilemma. Now we come to the issue of hard documents because the e-mails are one thing, and I had a number of conversations candidly with Ms. Sanchez, where I think that we had told her originally we had heard there were, as an example, some loan files or transaction files related to Ponzi deals related to Mr. Epstein, because I remember myself even hearing that going back many, many, many months ago. OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724575 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 30 Suffice it to say, that I have conducted a very thorough discussion, without waiving our internal privileges or work product, and we can't find those, and it appears as if they really did not exist, that what had occurred is that somehow Epstein was listed on a sheet for a potential deal that never closed. In terms of the ten boxes of documents, one of the functions the trustee served early on in the case was to facilitate transfers of files -- THE COURT: I remember that. MR. LICHTMAN: -- from two attorneys that were handling cases. All right. I had a general understanding that most of the files were picked up by the Farmer firm because they were continuing on with that litigation, and that would have made some sense, but then we had also heard that there were some boxes that were left behind. I believe there are two boxes, I'm not positive of that, two boxes I think that we may still have, and I'm pretty sure we've sent e-mails a couple of times to the Farmer firm saying, come get your documents. Now, why would we do that? A, because OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724576 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 31 they had been counsel for LM and others in litigation respecting Epstein, and that we assumed that they would have been files they would want; and B, because at the time that this matter on the subpoena came before the State Court judge, we stood outside the courtroom and here's what happened. I was effectively going to tell the State Court judge basically the same story I've told you in complete detail and say, we don't really care. We just want to make sure Mr. Stettin is protected and the estate is protected. And we had reached an agreement that day, which was we were going to turn over the boxes to Mr. Farmer's firm and we were going to give e-mails to them, and they were going to do the privilege log because that would save us a ton of time, important time, and as important, a lot of money to the estate, and we did not wish to burden the creditors of the estate with legal fees for putting together the privilege log, so it was agreed that we would do that. I, personally, reiterated the terms to all the lawyers that were standing outside the courtroom, as to what was to be reflected in a OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724577 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 32 written order because I didn't want to leave it to chance as to what was agreed on. Suffice it to say, when the lawyers for Mr. Epstein and the lawyers for Mr. Edwards went back to try to reduce to writing that which was in part agreed upon outside the courtroom, they were unable to do so, and that teed up the filing of the motion before you to compel us to produce the e-mails and the documents. I wish to reiterate, I think that Mr. Scherer has shared something with me that we need to investigate and will, and I was unaware of that literally until I rode up the elevator with him this morning. And I don't wish to spend more time on it than that right now, but I take him at his word because an awful lot of what I've seen him work on so far has borne fruit. I don't care what you want us to do. All I want to know is that at the end I can walk out of court with an order that protects the estate and protects Mr. Stettin. So I have told you the story and leave it to you to fashion what remedy you think appropriate. If I can answer any questions, I'm happy to. OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724578 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 33 THE COURT: Well, the trustee knows what the trustee has, obviously. MR. LICHTMAN: Yes. THE COURT: So the trustee is capable of preparing a log of what he has. MR. LICHTMAN: Meaning we have the following data. THE COURT: Yes. MR. LICHTMAN: Yes, we can do that. THE COURT: Then the parties can then argue whether or not that is subject to privilege. The plaintiff can still get from Mr. Farmer and his clients in the State Court discovery. The discovery being sought here is from the trustee MR. LICHTMAN: Correct. THE COURT: -- and would be subject to the trustee's responsibility for the privilege log because of his potential liability. MR. LICHTMAN: Yes, and I think you understand, though, why if we can somehow deflect that responsibility, because of the extreme amount of cost and time to do that, we would be happy to do that because, you know, otherwise, we submit fee petitions that show a tremendous amount of time on something that doesn't produce an asset to the OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724579 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 34 estate, just a liability. THE COURT: Right. This is not an asset of the estate. MR. LICHTMAN: No, it's just a liability. THE COURT: But could be a substantial liability. MR. LICHTMAN: Hence the dilemma. THE COURT: Well, I can appoint a special master to do it at the expense of the movant and not release the information until the special master reports back to me and I authorize the release. What I propose to do by my authorizing the release -- I'm sorry, Stettin, as trustee, to release the information, I would, therefore, be protecting the estate from any claims for the release of that information. MR. LICHTMAN: We would be happy to do that, your Honor, and I note, I don't wish to speak for the Epstein lawyers, they actually offered to pay time for us doing that, and I said, well, you know, that's part of the equation, the other part is --- THE COURT: No, no, no, I can appoint a special master. MR. LICHTMAN: Yes. THE COURT: All right. Mr. Farmer. OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724580 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 35 MR. FARMER: Yes, your Honor. Just very briefly. I thank you for the opportunity to address the Court again. I just wanted to clear something up, your Honor. Understand that when this all happened, there were six of us now who are partners, who had dozens and dozens of on-going cases. THE COURT: I remember we held hearings and I authorized the trustee -- MR. FARMER: And you authorized, yes. THE COURT: -- to deliver the information so the lawyers could continue to represent the clients. MR. FARMER: It just seemed to be maybe suggested here today that something untoward occurred as far as the removal of these boxes. These were litigation files, pleadings, investigative reports, all of these things. So we needed to get on with those cases, but I think you've heard now from the trustee that this is not an asset and it is an expense. I still think that we are the party who should prepare this privilege log. We are most familiar --- THE COURT: Well, no, if I appoint a special master, you will have an input into that OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724581 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 36 special master and you'll have an opportunity to be heard before me before I authorize the release of the information, because ultimately the order that's going to authorize the release of the information is going to provide protection to the trustee and the estate. MR. FARMER: And, thank you, Judge, I just wanted to make sure, and I was going to request, that we have an opportunity to review whatever the master does and if we think they've missed a privilege or are wrong in an assertion, that we have an opportunity to address that. THE COURT: There is going to be a hearing before the information gets released. MR. FARMER: Understood. Thank you, your Honor. THE COURT: All right. Mr. Lichtman MR. LICHTMAN: Yes. THE COURT: -- I want you to prepare the order. I'm going to continue the hearing on the two motions, Docket Entry 807 and 819, and I'm going to have you draft an order appointing a special master, the expense of which will be borne by the Epstein movants. The special master will meet with both sides, Epstein and Edwards, and then with the OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724582 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 37 trustee, and will prepare a privilege log, the release of which will be noticed for hearing in front of me. MR. LICHTMAN: Do I pick the special master or do you? THE COURT: You can -- if you all can -- I hate to use the word agree, but if you all can agree, that's fine. If you can't agree, give me three names to choose from. MR. LICHTMAN: Okay. THE COURT: You're going to have to check with this, quote, "special master" to make sure they have the time to review the privilege log. MR. LICHTMAN: The documents. THE COURT: And it has to be somebody that doesn't have a conflict of interest. MR. LICHTMAN: Right. Okay. THE COURT: All right. Run the order by Mr. Neiwirth and Mr. Farmer. MR. LICHTMAN: Thank you. MR. FARMER: Thank you, your Honor. MR. NEIWIRTH: Your Honor, may it please the Court? THE COURT: Yes. MR. NEIWIRTH: Can we say something about OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724583 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 38 the time frame because as we sit here right now we still have a trial coming in October. THE COURT: Well, I understand that, but I probably have between five and 6,000 active cases right now and within the Rothstein case, I don't even know how many adversaries and contested matters are pending. I'll get to it as soon as I can. But you can proceed to obtain the information from Edwards and LM in the State Court proceeding. All I'm governing is what the trustee is going to release from the debtor estate. order. Honor. All right. Mr. Lichtman, see to the MR. EDWARDS: Thank you, your Honor. MR. FARMER: Thank you for your time, your MR. NEIWIRTH: Thank you, Judge. (Thereupon, the hearing was concluded.) OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724584 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 39 CERTIFICATION STATE OF FLORIDA: COUNTY OF DADE: I, , Shorthand Reporter and Notary Public in and for the State of Florida at Large, do hereby certify that the foregoing proceedings were taken before me at the date and place as stated in the caption hereto on Page 1; that the foregoing computer-aided transcription is a true record of my stenographic notes taken at said proceedings. WITNESS my hand this 5th day of August, 2010. Margaret Franzen Court Reporter and Notary Public in and for the State of Florida at Large My Commission Expires: April 14, 2014 OUELLETTE & MA LDIN OURT REPORTERS, INC. EFTA00724585