EFTA00731381.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 IN RE: ROTHSTEIN ROSENFELDT ADLER, P.A., Debtor. CASE NO.09-34791-BKC-RBR MOTION TO CLARIFY FILED BY OTHER PROFESSIONAL ROBERT B. CARNEY (1013) October 13, 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 Boulevard, Fort Lauderdale, Broward County, Florida on October 13, 2010, commencing at or about 9:30 a.m., and the following proceedings were had: Reported By: Bonnie Tannenbaum OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731381 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: ROBERT B. CARNEY, SPECIAL MASTER BERGER SINGERMAN, by CHARLES H. LICHTMAN, ESQUIRE On behalf of Herbert Stettin, Chapter 11 Trustee CONRAD & SCHERER, by JAMES D. SILVER, ESQUIRE On behalf of Razorback Funding FARMER, JAFFE, WEISSING, EDWARDS, FISTOS & LEHRMAN, P.L., by GARY M. FARMER, JR., ESQUIRE BRAD EDWARDS, ESQUIRE On behalf of the Former RRA Clients FOWLER WHITE BURNETT, P.A., by CHRISTOPHER E. KNIGHT, ESQUIRE JOSEPH L. ACKERMAN, JR., ESQUIRE On behalf of Jeffrey Epstein OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731382 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 3 THE COURT: All right. Feltman versus Venture is going to take some time, so I'll start with Rothstein Rosenfeldt. MR. LICHTMAN: Good morning, Judge. Chuck Lichtman, Berger Singerman, for the trustee. MR. SILVER: Good morning, Your Honor. Jim Silver of Conrad & Scherer on behalf of Razorback Funding and other victim creditors. MR. KNIGHT: Good morning, Your Honor. Christopher Knight and Joe Ackerman on behalf of Jeffrey Epstein. MR. CARNEY: Good morning, Your Honor. Robert Carney. I'm the special master that's been appointed in this case. MR. FARMER: Good morning, Your Honor. Gary Farmer and Brad Edwards. We are the attorneys for the former RRA clients who have objected to the discovery request. THE COURT: All right. I have showing on my calendar the motion to clarify, Docket Entry 1013, by Mr. Carney, joinder by 1038 and 1039. All right. MR. CARNEY: Yes, Your Honor, if I may be heard? THE COURT: Yes, please. MR. CARNEY: Let me begin to place this in OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731383 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 4 context with just a little background about how we got here. This action is a civil action. It's pending in Circuit Court up in Palm Beach County. Jeffrey Epstein has sued Mr. Rothstein, individually, and Mr. Edwards, individually, regarding -- the genesis of which was a civil suit that Mr. Edwards had filed against Mr. Epstein, which has since settled. That civil suit was brought by Mr. Edwards to the Rothstein firm. It was the linchpin of the settlements that Mr. Rothstein was attempting to sell as part of his Ponzi Scheme. So that's a little bit of the background. Fowler White, who is representing the plaintiff, Mr. Epstein, in this case, has made a discovery request seeking documents pertinent to those civil lawsuits. The trustee in this case -- because the documents are held by the trustee now, and so Mr. Stettin was concerned that there may be some privilege issues on those documents, and as a result, Mr. Lichtman and the attorneys came forward before this Court and requested that there be a master appointed to help resolve this issue, and ultimately, I became involved in the case. Mr. Farmer is representing the child in OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731384 1 2 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 5 this case, who is the one who would be asserting the privilege. Mr. Edwards, as I understand it, is representing himself. Actually, Jack Scarola is his attorney. I've had a chance to review the documents. I've printed them out and reviewed them. Just to place things in its context, the stack of documents are divided into two separate stacks. One relates to e-mails from and to Mr. Edwards, and the second are e-mails from and to Mr. Rothstein dealing with that particular case. Just in terms of sheer volume, we're probably talking 5,000 or more pages. THE COURT: Each or combined? MR. CARNEY: Combined, probably at least 5,000 pages. Now, the problem that I'm seeing is this, the order directs that I prepare a privilege log. And the initial difficulty that I am seeing right now, it's implicit in the order for me to prepare the privilege log, is that Mr. Farmer and Mr. Edwards cannot prepare the privilege log. It's implicit in the order, because none of the documents upon which they could prepare the privilege log are given to them, they're given to me, as I have the disk, I have the documents, and they don't. And the OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731385 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 6 order is that they don't get the documents. And so they're left unable to prepare the privilege log. The problem that I'm seeing here is we have the child, for example, that Mr. Farmer is representing, it's her privilege, and she is denied the opportunity to actually assert the privilege. And I'm seeing legally some appellate issues with that one. Actually, I think we may end up being in a reversible situation in the State Court on that, if it goes before Appellate Court scrutiny. So I'm concerned at this point legally telling Mr. Edwards and telling Mr. Farmer that they can't prepare the privilege log, and they can't see the documents upon which they would be preparing the privilege log, that the privilege is simply being -- the privilege log is being prepared by me. So, I think that's our first legal issue. There's a practical problem to it, and the practical problem is this, I have no idea what Mr. Farmer is going to assert. He may assert the privilege, or he may not, I don't know. I'm not privy to his trial tactics, and I certainly would suspect he's not willing to tell me what his trial tactics are in the case. So I'm left to simply guess whether he is OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731386 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 7 going to assert a privilege, and if so, what privilege he's going to assert. If I'm going to do that, I'm certainly going to err on the side of caution, which means that I'm going to assert a privilege on virtually everything within those documents. The reason for that is that if I make a mistake, or I overlook something, the obvious effect of it is going to be, if I'm not asserting a privilege on the document, the document's going to be released, and it will be released to the plaintiff. At that point, the cat is out of the bag. Now we have a problem, because they haven't had the opportunity to assert the privilege, the plaintiff now has seen the document, and there we are. So I'm seeing some practical problems with me asserting it. The additional practical problem is that it lands everything in the lap of the Court. My function as a special master should be to relieve the Court from these duties. This is a case that this Court really has no dog in the fight. This is a pluralistic Court action. So my job should be to relieve this Court from the mundane duties of resolving all these issues, but by having me prepare the privilege log, OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731387 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 8 and the order pretty much ends there, it places all of this in the Court's lap to then sort it out. Now, if the order is expanded to say, conduct a hearing on it, I think we have a more uncomfortable problem, because at that point, then, I will have been somewhat in the shoes of the defense in asserting the privilege, and then turn around and rule on the privilege that I've just asserted, which I think may make the plaintiff's attorneys a little uncomfortable, and perhaps rightfully so. THE COURT: Your recommendation is to have Farmer and Edwards on behalf of their respective parties -- MR. CARNEY: Yes, sir. THE COURT: -- review the documents, indicate whether or not to you there is a privilege to be asserted? MR. CARNEY: I have a disk the trustee has a disk, I've got a disk. What my suggestion is is we simply copy that disk and give it to Mr. Farmer, and give it to Mr. Edwards. There's no issue involved anymore on the integrity of the disk, because I have a copy of it, and the trustee has a copy. So we have, again, no issues on the OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731388 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 integrity of the disk, and let them assert their privilege. If they want to assert it, they can assert it. If they don't, it's their choice. We eliminate whatever appellate issues there may be by denying them the right to assert their own privileges. Secondly, I think the order needs to be amended at this point. It takes me out of the equation of asserting the privilege, as I shouldn't be the one asserting it. THE COURT: They assert it, you hear it, and you report back to me. MR. CARNEY: Exactly, as I then make recommendations to you, and once I make the recommendations to you, you can decide at that point whether you want to -- if there's an objection filed to any of the recommendations that I made, you can decide whether you want to entertain the objections, or whether you want to pass the objections -- I haven't researched this issue, but perhaps pass the objections back to Circuit Court in Palm Beach, and let the Circuit Judge up in Palm Beach resolve them. But that's my recommendation that I think will eliminate both legal and practical problems to the order as it's written. OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731389 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 THE COURT: All right. Thank you, Mr. Carney. MR. KNIGHT: Your Honor, Christopher Knight on behalf of Jeffrey Epstein. First, I'd like to thank the Court, and thank Special Master Carney for the time that he's put into this matter to date. I understand Judge Carney's concerns, however I want to point out the following to the Court, which I think will be helpful in crafting a solution here. He mentioned the child, who actually was arguably an adult, arguably a late teen that was involved in a case that is now settled, which is the subject matter of obviously the comments that were brought to this Court by Mr. Scherer at the time of the last hearing of, was Mr. Edwards part of the fraud which led to the dollars being put into the Rothstein firm or the Rothstein investments, which is all part of this entire ball of yarn that this Court is having to deal with. We are here because in our case, our plaintiff's case that we're bringing on behalf of Mr. Epstein versus Mr. Edwards, we cannot move forward with our case without the various documents that are in the trustee's hands. And I say that the OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731390 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 I documents -- we've heard about the disk. That is the disk that Mr. Lichtman has, which now Mr. Carney has. I do not know whether or not that covers the ten boxes which Mr. Scherer came before this Court and said his clients, the ones that were in the room, the ones that arguably would waive the privilege, saw ten boxes of documents. We still don't know if those are there, and so eventually we have to find out where those are so that those can get before Judge Carney. However, the privilege, if there is any privilege, which we will argue before Judge Carney is waived, that would only apply to this LM case. And it should not be broader than that. There should be plenty of documents right now that can be released that will need no privilege log whatsoever by review of Judge Carney. What we do not want is Mr. Farmer and Mr. Edwards becoming the gatekeeper for their own firm, which is exactly why I think in Paragraph 2 of your order, which I believe was Docket Entry 888, that you had said exclusively that Judge Carney would be able to review these documents. I do understand, as I mentioned earlier, Judge Carney's dilemma here in that he certainly cannot sit in the exact same shoes as Edwards to -- OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731391 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 or excuse me, as LM to assert a privilege, if one's there, but I bring back to the Court's attention that that case is settled and resolved, and is only a portion of these entire e-mails. Delay is a major problem for my client. There is a pending motion for summary judgment, there's a pending trial date, and the Edwards group has fought any attempt on our end to push those trial dates back while we wait to get these e-mails or other documents, which we believe will show further involvement than just Mr. Rothstein sitting in a room over at his old firm and showing this to investors. We believe that these e-mails will eventually show that other people knew what was going on, and that may or may not have -- play out -- it may or may not be relevant to our case but, certainly, we should have the opportunity to look at those documents. The other issue is, at the Rothstein firm, the e-mails we have learned through the various documents from this Court and various hearings, many of them are tied up in Qtask. We believe that many of the documents we would be seeking eventually would be in Qtask. I bring all of that to your attention, Your OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731392 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 13 Honor, because it goes beyond just the issues that Special Master Carney has brought before you. We understand that Special Master Carney wants to protect himself relative to these issues, and that is certainly understandable. We believe if there is going to be any viewing by the Farmer or Edwards group, it would be independent to Judge Carney. He should still look at all the documents, but certainly many of the documents would have nothing to do with the underlying LM case, and should be released now. THE COURT: But whoever is going to look at them is going to want Farmer and Edwards to have a privilege log as to what they're claiming privileged. They may only claim 1,000 of the 5,000 documents as privileged. That saves me or Judge Carney from looking at 4,000 documents. MR. KNIGHT: And that's where we understand and agree with Judge Carney. We want Judge Carney to be able to independently look at all of those documents, and not have Farmer and Edwards there with him, be able to independently -- so he can look at them himself so he can decide whether or not this may even come into the purview of privileged, especially when many of these documents were shown to people which would have waived the privilege, and I think OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731393 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 14 those are decisions that only Judge Carney can make once he has the rest of this information in front of him. THE COURT: We're taking an extra step from the Special Master's recommendation and report. We could have -- I could have Farmer and Edwards, for their respective clients, review the disk, prepare a privilege log, and then either I, through the recommendations of the Special Master, or Judge Carney could then take the log and make a determination as to what is privileged and what is not. MR. KNIGHT: And I believe that is workable, although, as we argued before Judge Carney, he met with each side separately, and then together, we don't know what to argue until we see a privilege log which would have to be constructed by Judge Carney, because it would give you an entire list, as opposed to something that would be limited by what Mr. Farmer and Mr. Edwards, Mr. Edwards being the defendant in this case, would -- THE COURT: Well, no, we would have Special Master Carney's report to me as to what the claim of privilege was, and what documents were subject to that. OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731394 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 IS MR. KNIGHT: And, Your Honor, as long as we had also Judge Carney's list or logs so that we know that all the documents are included, and also know that the ten boxes, once located, need to go before Carney, and anything before Qtask -- THE COURT: Let me ask while we're there, ten boxes, what ten boxes? MR. KNIGHT: At the time of -- THE COURT: No, no, let me ask MR. KNIGHT: I'm sorry, I thought you were -- THE COURT: I'm asking somebody. I'm the only one that doesn't know. MR. FARMER: Thank you, Your Honor. May it please the Court, those ten boxes are litigation files -- COURT REPORTER: Judge, can I ask his name? THE COURT: This is Mr. Farmer. MR. FARMER: I'm Gary Farmer, I'm sorry. These are our litigation files, Your Honor, and the factual scenario is a bit broader than Judge Carney advised the Court. There were nine lawsuits handled by Mr. Edwards against Mr. Epstein that were settled by Mr. Epstein. There is another lawsuit that is pending. Those ten boxes comprise Brad Edwards' work OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 3584875 EFTA00731395 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 16 product in the nine cases that settled, and contain information that is, one, protected by the attorney/client privilege owned by each of those clients; and, two, contains his mental thoughts, impressions, and strategies for those cases which resulted in those nine settlements. So those privileges live on. And to give a party who is suing Mr. Edwards and his client access to Mr. Edwards' underlying files and related cases would be a clear and blatant breach of the work product privilege. In addition, Your Honor, we have an added twist here in that Mr. Epstein has consistently and adamantly invoked his Fifth Amendment privilege against self incrimination when questioned, both in the underlying cases filed against him by his minor pedifile victims, and the young woman in question, LM, was not an adult, she was 13 years old when Mr. Epstein committed sexual assault on her. He has taken the Fifth Amendment in that case, he's taken the Fifth Amendment in the very case in which he has now issued this subpoena. And so Judge Crow is wrestling with the issue of the sword and the shield doctrine. Does Mr. Epstein get access to any of this information, OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731396 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 17 given the fact that one cannot invoke the Fifth Amendment privilege against self incrimination when one is suing on those very facts? So there is a very twisted and sorted history here, Your Honor, but the bottom line is -- and, oh, by the way, Mr. Epstein also pled guilty to criminal charges related to the sexual assault. So a convicted criminal who's invoked his Fifth Amendment privilege against self incrimination in this purported lawsuit against my partner, now seeks records which he claims are going to show that these cases are fabricated. If they were fabricated, then he needs to be sanctioned for invoking his Fifth Amendment right against self incrimination because he had no basis to do so. But I think the real truth here, Your Honor, is that nothing was fabricated. One doesn't plead guilty to criminal charges, spend a year incarcerated, be on probation, invoke the Fifth Amendment and settle nine lawsuits, if everything is fabricated. But I bring all of this to the Court's attention, because as Judge Carney indicated in his presentation, I respectfully submit, Your Honor, that we are wasting your time, and you don't really have OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731397 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 18 the full breath of information and facts necessary to ultimately rule on these privileges, because this Fifth Amendment invocation is going to be an issue, these prior convictions are all going to be an issue. It may be that Judge Crow determines, because Mr. Epstein refuses to answer any questions about his allegations in his complaint, that his case will be dismissed or eliminated via summary judgment. And so as Judge Carney alluded to, Your Honor, I would respectfully submit that we should stop bothering Your Honor, stop wasting trust assets that should go to the ultimate benefit of the creditors once the Court determines how that's going to play out, but stop wasting this Court's time, stop wasting the very limited assets, and allow Judge Crow, who's going to be in the best position from a factual standpoint, to consider the privileges asserted, whether -- despite maybe if a privilege wasn't asserted, whether they get any of this information, given their admission to this conduct via the guilty plea, given the Fifth Amendment, et cetera. But if Your Honor is going to keep the matter here, we certainly agree with Judge Carney in that it's very clear, Your Honor, due process OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731398 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 Pagc 19 requires that the party who possesses the privilege, both the client who possesses the attorney/client privilege and the lawyers who possess the work product privileges, they have a due process right to review the documents and assert the privileges that they feel appropriate. It then falls on some judge somewhere to call balls and strikes on those asserted privileges, but it would be absolute error to not allow the parties who own the privileges from reviewing these documents. And there's no preservation or gatekeeper issue here, because they've been well preserved. They're on the original RRA server, there are copies of disks everywhere, so it's not as though giving a copy of a disk to myself and my partner, Mr. Edwards, would lead to some preservation problem. They've got copies of everything that we would be looking at. THE COURT: Thank you. MR. KNIGHT: Your Honor, briefly, if I can? THE COURT: Go ahead. MR. KNIGHT: I guess we now know where the ten boxes are. If that's true, they should be handed over to the trustee who said they didn't have them before, because obviously they should be before the OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731399 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 trustee. I don't know if those ten boxes are going to have anything to do with these nine other lawsuits, but at the time of the last hearing, nobody knew where those ten boxes were. THE COURT: Well, my recollection -- Mr. Lichtman, correct me if I'm wrong, is the trustee turned over the respective lawyer's files to the respective lawyers of the former Rothstein firm. MR. LICHTMAN: Correct. I think the phraseology might be better stated that when the firm dissolved and lawyers that were responsible for cases had files in their custody, in order to properly manage those files, they took the files, and we said, you should have them. MR. FARMER: Actually, Judge Streitfeld, who presided over the initial receivership, issued an order providing for -- THE COURT: That's what I thought. MR. LICHTMAN: Yes. THE COURT: I thought there was an order in place somewhere. MR. LICHTMAN: Yeah. THE COURT: So then you don't have the ten boxes of files? MR. LICHTMAN: I've never seen them. I OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731400 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 don't, no. THE COURT: No, they're in the custody of Farmer and Edwards. MR. FARMER: Yes, sir. MR. KNIGHT: Then, Your Honor, we need those to get back to the trustee so they can come under this privilege log. This is not a matter before Judge Crow, it's over here because Mr. Lichtman has custody of these e-mails. These e-mails, no matter what Mr. Farmer wants to throw out about our client, which were allegations which were disputed on many of it, this deals with our ability to get documents -- THE COURT: Well, he didn't take the Fifth Amendment? MR. KNIGHT: He took the Fifth Amendment relative to some of the criminal charges that were brought against him. THE COURT: And he didn't plead guilty? I thought he did. MR. KNIGHT: He pled guilty to a charge. When he threw out the 13-year old girl, I think that is only for fluff in this courtroom. MR. FARMER: No, it's to rebut your assertion that she was an adult. OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731401 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 MR. KNIGHT: She's an adult now. I said -- we also argued that she wasn't an adult at that time. He entered into a plea. Clients enter into a plea. It does not take away his rights to come before this Court and understand why his case was promoted at the Rothstein firm to bring other investors in to cause other people to come out of the woodwork to claim they were also victims of his. We need to find out why. That's why Judge Carney has been appointed. Judge Carney has come up with a solution which is workable. All we're asking the Court is to not allow the Farmer firm to become the gatekeeper, allow Judge Carney to continue to be the gatekeeper, and have it limited to the objections which were raised earlier, and the privileges asserted earlier. THE COURT: I will tell you now, I will deal with the disk problem here. The, quote, "ten boxes" in the possession of Mr. Farmer and Mr. Edwards can be dealt with at the State Court level. MR. KNIGHT: Okay. And -- THE COURT: Now, turning to the disk issue, let me hear from Mr. Silver and Mr. Lichtman. MR. LICHTMAN: You go first. MR. SILVER: Your Honor, first of all, we OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731402 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 23 issued a subpoena under Rule 2004 last night to the trustee, service of which was accepted by Mr. Lichtman. So now we're clearly before this Court. We believe it relates to acts, conduct and property of this estate, these facts. In fact, in Paragraph 90 of our complaint in the State Court action before Judge Streitfeld, we've stated, in terms of some of our clients being lured into the fraud through false facts relating -- or false allegations relating to Jeffrey Epstein, we alleged representatives of D3 were offering -- THE COURT: I haven't read your subpoena, but I take it you're seeking access to the same disk that Messrs. Knight and -- MR. SILVER: That's correct, Your Honor, so I think the whole sword, shield and Fifth Amendment is, at this point, a moot point, because we have a legitimate discovery request under Bankruptcy Rule 2004. In terms of the cost and expense to this estate, Your Honor, in the State Court action, we represent over $160,000,000 of the victims. So while we appreciate Mr. Farmer trying to look after our financial interests, we think we can do so ourselves. In addition, in your ruling, you indicated OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731403 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 24 that the costs and expenses of this matter would be paid for by Mr. Epstein, not by the bankruptcy estate, so I think that's a red-herring issue, Judge. Also, I pulled the transcript from the last hearing, and I believe Your Honor contemplated the very issues raised in the motion for clarification and dealt with them. At Page 35 of the transcript, beginning at Line 24, the Court: "Well, no, if I appoint a special master, you will have an input into that. 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." Then at Page 36, beginning at Line 24, "The Special Master will meet with both sides, Epstein and Edwards, and then with a trustee, and will prepare a privilege log, the release of which will be noticed for hearing in front of me." Your Honor also indicated that the special master would review the actual documents. So reading the transcript, I believe the procedure Your Honor contemplated was that the Farmer Jaffe firm would have input before any of these documents were OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731404 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 Pagc 25 released, the special master would, in effect, be reviewing them, in camera, as an adjunct of this Court, which is appropriate and a long-standing procedure, and that the Farmer Jaffe firm would have input if they believed that certain of the documents were privileged, to assert that. The special master would then make a recommendation to this Court, and this Court would make the final decision. So I think the due process rights, and the ability of the Farmer Jaffe firm on behalf of their client to make objection on the basis of privilege still exists, and is still protected by this Court. I am concerned, Your Honor, though, with timing. We have a motion for protective order that was filed by the Farmer Jaffe firm, I believe it's set for a week from today, where, if I read it correctly, they're saying essentially every document is privileged. So to have a procedure that first gives it to the Farmer Jaffe firm, only to come back several weeks later saying everything is privileged, we're going to end up at square one again with a special master who is going to need to go through these documents in camera, and make a recommendation to this Court, and all that will have been accomplished is delay, additional delay, and I don't OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 3584875 EFTA00731405 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 think that's appropriate, Your Honor. THE COURT: Well, that may or may not be so, because Farmer and Edwards don't want delay, according to them. MR. SILVER: I hope that's correct, Your Honor. THE COURT: Because if they cause the delay, then it becomes their problem. MR. SILVER: Understood, Your Honor. We also will be seeking to subpoena, under Rule 2004, the Farmer Jaffe firm for the 13 -- it's actually 13 rather, than 10 boxes, that were used to lure some of our clients into this by coming up with false allegations against Mr. Epstein. THE COURT: But are you going to issue the subpoena in your State Court proceeding, or are you going to attempt to use Rule 2004 in the federal proceeding -- I'm sorry, the federal bankruptcy proceeding, not the federal criminal proceeding, or forfeiture proceeding? MR. SILVER: Your Honor, the latter, Rule 2004 under the bankruptcy case, as it relates to acts, conduct, and property of this estate, because it's intertwined with the entire Ponzi Scheme, and we have a right to investigate that as a significant OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731406 1 2 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 27 creditor in this estate. Thank you very much, Your Honor. MR. LICHTMAN: Good morning, Judge. THE COURT: It was. MR. LICHTMAN: Maybe we'll go back and have a glass of Alka-Seltzer together. Let me first point out that the scope of the subpoena served upon the trustee goes well beyond e-mails. I'm going to not read to you very much, but as an example, the duces tecum portion of the subpoena, Paragraph 1 alone already starts off with Paragraph 1(b) soliciting or receiving money in return for settlement funds allegedly paid or to be paid by Jeffrey Epstein; (d), communication between third party investors or potential investors and the plaintiffs or their attorneys; Subsection 3, all e-mails, data, correspondence, memo or similar documents between Brad Edwards, Scott Rothstein, William Berger and Russell Adler and/or any attorney or representative of RRA and any investor or third party, and so on. I think you get the point there. We came before you last time because we sort of looked at the situation as not having a need to get into the middle of this fight between Epstein and the Farmer firm in terms of what the exorbitant OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731407 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 costs would have been for us to comply with the subpoena in terms of preparing the privilege log. I think the Court will remember, and I think that inherently the order effectively was put in place so that Judge Carney was going to serve as the pro tempt gatekeeper for the trustee. And that's really what his role was. This situation now is complicated a little bit more by the subpoena, the Rule 2004 Subpoena, that we received from Mr. Scherer. I am aware, without waiving work product or a common interest agreement with the committee, that they are looking at some of the things that are actually covered by the subpoena, so it ought not be a surprise that the subpoena by the Scherer firm was issued. And we point out that the initial claims were against Scott Rothstein and Mr. Edwards, as well, which is, I think, really Mr. Knight's point as to that it's not right for the Farmer firm to serve as the gatekeeper under those circumstances. THE COURT: Tell me, does this also this information also roll over into the insurance litigation? MR. LICHTMAN: I don't think so. THE COURT: Well, if -- OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 3584875 EFTA00731408 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 MR. LICHTMAN: I haven't seen it come up in that context. THE COURT: I've not seen it come up, but those still are in the early stages wherein there are claims against the malpractice policies, as well as the D&Os. MR. LICHTMAN: I'm not sure I've seen anybody try to put it into that pot yet. THE COURT: All right. All right. MR. LICHTMAN: To be sure, I think that Judge Carney is right, that Mr. Farmer has a privilege, but it's a limited one. I think it pertains as to matters that are particularly unique to him, and Mr. Edwards, and to the LM client. Of course, we also have that same situation, because we were the law firm of record at the time that all this came about. And then there's this issue of the ten boxes of documents that we haven't had. I think that this is a somewhat relevant issue. I don't know how we ferret it out today, to tell you the truth. I honestly -- I'm not trying to cast dispersions on what Mr. Farmer said, but having litigated for many, many years, I find it doubtful that there are ten boxes of work product. I think that there's ten OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731409 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 30 boxes of work that was compiled in the course of litigation, that does not mean it is work product. Work product has a very narrow definition. THE COURT: Yeah, but you don't have custody of those -- MR. LICHTMAN: I don't. THE COURT: -- so it's not your problem. They can litigate that in State Court. MR. LICHTMAN: Right. So I think that where we come out on this is that -- oh, I need to also own up to something. I don't know if this is the case, or not, but when I heard Judge Carney mention two disks, and everybody is using the word e-mail, it dawned on me for the first time two minutes ago, no more than that, that there was another server at RRA, and I'm not exactly sure how it all worked, but I think that we may have electronic copies of those ten boxes of documents. That is because at some point the Rothstein firm went to a process where every document that came into the office was scanned into a system. In fact, a lot of documents were then destroyed that we found some boxes where they were stored on a daily basis, and then we had learned after the fact many boxes were destroyed. OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731410 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 I'll be candid with the Court, I'm not sure that we searched that server and, obviously, I feel compelled as soon as I leave here to pick up the phone and call our ESI people and say, did we look at that server also, were there documents on that case, because then obviously we have a situation with those ten boxes. It could be that my people looked at it and they didn't find anything. It could be that we have a whole mass of documents that are sitting on that server, as well, and I apologize for it not dawning on me until I just heard Judge Carney's remarks solely about e-mails. So I have to look at that issue. I think that the way we come out is that I think your order was basically right the first time around. I so think that Mr. Farmer has a right to look at the documents. I do think that Judge Carney was appointed to protect the estate and the trustee and, frankly, I heard everybody say stuff that I thought was basically right. I thought Mr. Silver was right, too. So I'm glad I get to punt mostly on this one. THE COURT: All right. I'm ready to rule. OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731411 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 Pagc 32 MR. FARMER: Judge, one minute, if -- THE COURT: Go ahead. MR. FARMER: I just want to clarify, too. The motion for protective order that was referred to that we filed as to all documents, of course we've objected to everything, because until we see them, Judge, we don't know what is objectionable, and what is not. And so I just want the Court to know that that's why it was painted with a broad brush. I also want to point out, Your Honor, there is no adversarial proceeding pending against Edwards, LM, or any of the people associated with the Epstein litigation. I think that's important, because if the trustee believed that -- THE COURT: There's no litigation pending. MR. FARMER: That we -- Edwards and LM have not been sued -- I mean, Lichtman's been sued, Adler. People have been brought in by the trustee because they've found evidence that they believe constitutes some wrongful conduct, whether it's participation in a Ponzi Scheme, or the other allegations I've read in the papers, money laundering, I don't know. I just know that they're going after lawyers where they have found evidence that those lawyers have done something wrong, or -- OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731412 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 Pagc 33 THE COURT: That is the trustee bringing litigation in the bankruptcy case. MR. FARMER: Yes, sir. And what's important is there's no such claim being brought surrounding the Epstein cases. The trustee has the documents, has been able to look through files and records. If they believed that there were any -- this is an ultimate fishing expedition by a man whose been found guilty, pled guilty to these charges -- THE COURT: You're repeating yourself. MR. FARMER: Yes, sir. And finally, Judge Carney is not protecting anyone in this case. That's not his role. And the trustee merely stands in the shoes of Mr. Edwards, and myself, and the former lawyers there. And so, again, it's not the purpose of Judge Carney to protect a trustee, Judge Carney, frankly, is relieving either you, or Judge Crow, of the laborious task of going through thousands of pages of documents under which a privilege has been asserted. And so his role is not to protect the trustee, it's to call balls and strikes on the privilege once it's been asserted by the party who owns the privilege. Thank you, Your Honor, for indulging me OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731413 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 Pagc 34 that last minute. MR. LICHTMAN: Judge, that's where Mr. Farmer is wrong on two counts. First, I've made it clear, we've not looked through the documents, and I think that's why the creditors' committee or Mr. Scherer, in his capacity of representing the Razorback people, have issued the 2004 subpoena, number one. Number two, to be clear, we wanted Judge Carney in place for the specific reason, because the trustee did not want to spend the time and the money to go through what was, we believed, thousands, and thousands, and thousands of documents where there's no benefit -- THE COURT: Which I've now been told there are 5,000. MR. LICHTMAN: 5,000, yeah, and now I have this concern as to -- and I don't know, again, whether it's more, or whether we've produced everything, but it was, indeed, so we wouldn't have to go through that task, and Mr. Epstein said he would pay for the Judge's work. MR. ACKERMAN: Your Honor, may I have just a brief response? THE COURT: Very brief. OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731414 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 Pagc 35 MR. ACKERMAN: Very brief. THE COURT: Give the court reporter your name. MR. ACKERMAN: Joseph Ackerman for Jeffrey Epstein. The Court will recall when we were here last time, Mr. Scherer stood up and said his clients were shown the files for LM as part of a Ponzi Scheme. Now our client may have taken the Fifth Amendment in this civil case, but that doesn't mean we cannot rely on third-party evidence for which we have a good faith basis to believe that the use of these lawsuits against him were abused through the court system by this Ponzi Scheme. And that's to address one of Mr. Farmer's ongoing thing about the Fifth Amendment. We have outside third parties that are saying that these files were used for a crime, and that needs to be remembered. I think they've forgotten it. Secondly, I would ask the Court to take into consideration that at least until Mr. Lichtman determines that these other ten boxes, as we've referred to them, are on the server, that if they are, those should be part of Judge Carney's marching orders, as well, together with Qtask. We've sort of been focusing on the 5,000, but the 5,000 on the OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 3584875 EFTA00731415 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 disk. And, finally, when we were here last time, the only objection on grounds of work product and attorney/client privilege raised by the Farmer firm was on LM, and now they're attempting to expand that, which is why we believe Judge Carney should be doing this separately in camera, with an opportunity to argue later. Thank you. MR. CARNEY: Your Honor, may I speak for just one second? I -- THE COURT: You're the only one that can speak, everybody else sit down. MR. CARNEY: If I can offer just one suggestion that I think really may help out on this. If the files are given over to the Farmer firm, anything that they're not objecting to, we turn over. That eliminates that issue. THE COURT: Well, Mr. Lichtman doesn't know what we have, we being you and him. MR. CARNEY: Except Mr. Lichtman also has the disk. THE COURT: He has the disk. MR. CARNEY: He's got the disk, and I've got the disk. THE COURT: But I'm going to deal with the OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731416 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 Pagc 37 disk. MR. CARNEY: And by turning it over, if they don't specifically raise an objection -- THE COURT: That's what I'm going to do. MR. CARNEY: -- then we simply give it. THE COURT: We're going to proceed as follows: In reference to Docket Entry 1013, which is the motion to clarify order appointing special master filed by Mr. Carney, that motion will be granted, the two suggestions recommended in that motion will be granted. Mr. Lichtman, you'll see to the order, you'll work with Mr. Carney on the order for its terms. Then when we get to a position where Mr. Carney can report back to the Court, then we'll deal with it. MR. LICHTMAN: And I'll represent to the Court, Your Honor, that as soon as I get back to the office, I will also make an assessment as to whether or not this other server was searched so I can let everybody know. THE COURT: All right. Put in after you let the lawyers know, put in a call to my law clerk, and just give her a heads up. MR. LICHTMAN: Okay. OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731417 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 Pagc 38 THE COURT: All right. Thank you. That concludes on the Rothstein case. (Thereupon, the hearing was concluded.) OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731418 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, BONNIE TANNENBAUM, 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 18th day of October, 2010. BONNIE TANNENBAUM Court Reporter and Notary Public in and for the State of Florida at Large Commission Number: DD 968452 Expires: June 22, 2014 OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731419