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6842
1 UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
2 - - - - - - - - - - - - - - X
3 UNITED STATES OF AMERICA, : CR 96 1016(S-1)
4 v. : U.S. Courthouse
5 Uniondale, New York BRUCE W. GORDON, WHO'S WHO
6 WORLD WIDE REGISTRY, INC., : STERLING WHO'S WHO, INC.,
7 TARA GARBOSKI, ORAL FRANK : OSMAN, LAURA WEITZ, ANNETTE
8 HALEY, SCOTT MICHAELSON, : STEVE RUBIN, and MARTIN
9 REFFSIN, :    TRANSCRIPT OF TRIAL
10 Defendants. :March 5, 1998
11 - - - - - - - - - - - - - - X 9:20 o'clock a.m.
12
13 BEFORE:
14 HONORABLE ARTHUR D. SPATT, U.S.D.J.
15
16 APPEARANCES:
17 For the Government: ZACHARY W. CARTER United States Attorney
18 One Pierrepont Plaza Brooklyn, New York 11201
19 By: RONALD G. WHITE
CECIL SCOTT
20 Assistant U.S. Attorneys
21 For the Defendants: NORMAN TRABULUS, ESQ.
22 For Bruce W. Gordon
170 Old Country Road, Suite 600
23 Mineola, New York 11501
24 EDWARD P. JENKS, ESQ.
For Who's Who, Sterling
25 332 Willis Avenue
Mineola, New York 11501

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6843
1
GARY SCHOER, ESQ.
2 For Tara Garboski
6800 Jericho Turnpike
3 Syosset, New York 11791
4 ALAN M. NELSON, ESQ.
For Oral Frank Osman
5 3000 Marcus Avenue
Lake Success, New York 11042
6
WINSTON LEE, ESQ.
7 For Laura Weitz
319 Broadway
8 New York, New York 10007
9 MARTIN GEDULDIG, ESQ.
For Annette Haley
10 400 South Oyster Bay Road
Hicksville, New York 11801
11
JAMES C. NEVILLE, ESQ.
12 For Scott Michaelson
225 Broadway
13 New York, New York 10007
14 THOMAS F.X. DUNN,
For Steve Rubin
15 150 Nassau Street
New York, New York 10038
16
JOHN S. WALLENSTEIN, ESQ.
17 For Martin Reffsin 215 Hilton Avenue
18 Hempstead, New York 11551
19
Court Reporter: Owen M. Wicker, RPR
20 United States District Court
Two Uniondale Avenue
21 Uniondale, New York 11553
(516) 292-6963
22
23 Proceedings recorded by mechanical stenography, transcript
produced by computer-assisted transcription.
24
25
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6844
1 (Case called.)
2 THE COURT: Mr. Dunn, your client is not present.
3 MR. DUNN: That's correct, Your Honor, but I
4 believe we can go forward at least with the oral argument,
5 anything before 9:30.
6 THE COURT: I wanted to take up two things. One,
7 the outstanding records that Mr. Schoer was supposed to
8 examine. Do you have any objection to going ahead with
9 that?
10 MR. DUNN: No, Your Honor.
11 THE COURT: Would your client have any
12 objection?
13 MR. DUNN: No.
14 THE COURT: We'll repeat it when he gets in.
15 MR. DUNN: That's all right.
16 MR. SCHOER: Judge, I have no further objections
17 other than the ones that were expressed last night.
18 THE COURT: Well, then, that's the ruling.
19 I'll wait until Mr. Rubin gets here because I
20 wanted to talk to you about this Judgment of Conviction of
21 Ihlenfeldt.
22 MR. DUNN: Your Honor, you can go forward with
23 that also because I really have no more questions to ask.
24 THE COURT: I think we better wait.
25 MS. SCOTT: Your Honor, just for clarity sake, I
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6845
1 just wanted to make clear that Your Honor has just ruled
2 that list of exhibits is admissible, except those ones
3 Your Honor specifically excluded.
4 THE COURT: The checks and everything like that.

5 MS. SCOTT: We have not provided you about law
6 about the commercial paper. We will try to do it over the
7 weekend. We haven't had a chance last night.
8 THE COURT: Try.
9 MS. SCOTT: Also, Government's Exhibit 15-D which
10 is one of the exhibits I offered in this group had been
11 admitted earlier. It's an order form but I had misnamed
12 it, either Government's Exhibit 15-B or 15-C. So just for
13 the sake of clarity.
14 THE COURT: Mr. Dunn, do you want to go into this
15 without your client?
16 MR. DUNN: That's fine. Mr. Rubin is coming in
17 now.
18 MR. TRABULUS: Your Honor, the 17-D subpoena Your
19 Honor signed is an order on the second page and unless it
20 is not signed the marshal will not serve it.
21 THE COURT: I'm sorry, I didn't see it on the
22 second page.
23 MR. TRABULUS: That's all right. It's on the
24 top.

25 MR. NEVILLE: Your Honor, might I ask a quick
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6846
1 question regarding my client's request to absent himself
2 this Monday from the trial. Would Your Honor consider
3 instructing the jury in some form or fashion?
4 THE COURT: Sure, if you want me to. You compose
5 an instruction and I will give it to the jury. Make it
6 very beneficial to you.
7 MR. NEVILLE: Thank you very much, Your Honor.
8 THE COURT: I see Mr. Rubin is here.
9 MR. DUNN: Yes, Your Honor.
10 THE COURT: Did you tell Mr. Rubin about what has
11 gone on up to now, that Mr. Schoer had no objection to the
12 other document?
13 MR. DUNN: Yes, Your Honor.
14 THE COURT: And is he satisfied with us having
15 proceeded with that in his absence?
16 MR. DUNN: Yes, Your Honor.
17 THE COURT: With regard to the Judgment of
18 Conviction of Rolf Eric Ihlenfeldt, he's the witness on
19 the stand, the Judgment of Conviction which is dated
20 August 23, 1996, provides for 13 months incarceration and
21 says the following, including the following. He's put on
22 supervised release for three years and "the defendant is
23 to pay to the United States Attorney's Office, 225 Cadman
24 Plaza East, Brooklyn, New York, 11201, the sum of $10,000
25 in monthly installments of 10 percent of his gross monthly
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6847
1 income during the three years he is on supervised
2 release. The U.S. Attorney's Office shall make a pro rata
3 distribution to the victims, if found."
4 And under a separate sheet in the judgment
5 entitled "restitution," it says the same thing. So
6 apparently from that I deduct that instead of paying it in
7 m onthly installments he paid it in one time. He said he
8 borrowed it or his father-in-law gave it to him.
9 MR. JENKS: I'll move on, Your Honor. It speaks
10 for itself.
11 THE COURT: Right.
12 All right. Let's bring in the jury.
13 MS. SCOTT: Your Honor, I just want to clarify
14 about Government's Exhibit 15-D. That's an order form. I
15 had previously asked for it to be admitted but I had given
16 it the wrong exhibit number. I think I called it 15-B or
17 15-C and that I did with Wendi Springer. So it was
18 previously admitted into evidence under the wrong name and
19 I want to clarify for the record that the office form is
20 actually 15-D, as in Daniel.
21 Thank you.
22 THE COURT: Very well.
23 There's a request by a jury to leave at 4 o'clock
24 on March 18th. What a pessimistic approach that is. But
25 of course this juror is a shop steward and has a meeting
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6848
1 and I'll let the juror leave at 4 o'clock at March 18th.
2 THE COURT: Where is the witness?
3 MS. SCOTT: Right here.
4 (Jury enters.)
5 THE COURT: Good morning, members of the jury.
6 Please be seated.
7 Again, I must compliment you. You are getting
8 better as time goes on. I timed your arrival, at least
9 when I heard about it, at 9:18 this morning. That's a new
10 world record. We have now exceeded the Olympic record and
11 now you're on the World record.
12 Also, I have a request from a juror and I
13 hesitate to say that we look so far ahead but perhaps it
14 is wise that the jury leave at 4 o'clock on Wednesday,
15 March 18th. I will excuse the jury on Wednesday, March
16 18th, at 4 o'clock.
17 You may proceed.
18 (Continued.)
1 9
20
21
22
23
24
25
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6849
Ihlenfeldt-cross/Jenks

1 R O L F I H L E N F E L D T , having been previously
2 sworn by the Clerk of the Court, was examined and
3 testified as follows:
4 CROSS-EXAMINATION.
5 BY MR. JENKS:
6 Q Mr. Ihlenfeldt, yesterday when Ms. Scott questioned
7 you on direct examination she had asked you a question
8 about your application about your current employer. Do
9 you recall that?
10 A Yes.
11 Q And you had indicated there was an optional section
12 on that application as to whether or not you would inform
13 the employer of your prior criminal history?
14 A Yes.
15 Q And you chose not to exercise that option and write
16 it down; am I correct?
17 A Correct.
18 Q Did the employer question you ab out leaving that
19 section blank?
20 A No.
21 Q Now, you are on supervised release as of August 23,
22 1996; am I right?
23 A I'm not sure of the exact day. I think it would have
24 been August 28th.
25 Q The day you were sentenced before Judge Spatt,
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6850
Ihlenfeldt-cross/Jenks

1 correct?
2 A Oh, was I on supervised release?
3 Q Yes. Were you placed on supervised release for three
4 years before Judge Spatt?
5 A Yes.
6 Q The day is not important.
7 In August of 1996 you were placed on supervised
8 release, correct?
9 A Uhm, I don't know if that is the day. I was
10 sentenced that day.
11 Q After you completed your sentence, your term of
12 supervised release began, right?
13 A Yes.
14 Q So it actually began once you were done, finished

15 with the halfway house in June of 1997?
16 A Yes.
17 Q And your supervised release ends in the year 2000?
18 A Yes.
19 Q So we clear this up, the restitution that you were
20 ordered to pay by Judge Spatt was $10,000, correct?
21 A Yes.
22 Q And you paid that in a lump sum from your
23 father-in-law after you were released from the halfway
24 house?
25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6851
Ihlenfeldt-cross/Jenks

1 Q And you had no other financial obligations from the
2 Court to pay any further restitution; am I right?
3 A No.
4 Q All right.
5 Now, the supervised release you report in
6 Hempstead, you said?
7 A Yes.
8 Q That's where the supervised release probation
9 officers are located, correct?
10 A Yes.
11 Q On Clinton Street in Hempstead?
12 A Yes .
13 Q Now, is it not a term and condition of your
14 supervised release that you notify your employer of the
15 fact that you're on supervised release?
16 A No.
17 Q Did you have to make any special arrangements with
18 your supervised release officer not to notify your
19 employer?
20 A No.
21 Q Did you read the terms and conditions of your
22 supervised release?
23 A Uhm, I believe I did.
24 Q Is there a term and condition which says that you
25 have to notify your employer of your status while on
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6852
Ihlenfeldt-cross/Jenks

1 supervised release?
2 A I don't believe so.
3 Q Okay.
4 Now, when Mr. Schoer was questioning you
5 yesterday, you said it took you approximately three weeks
6 while you were at Pacific Consultants to learn the entire
7 scam o f Pacific Consultants. About three weeks?
8 A About three weeks to understand the business, yes.
9 Q To understand the business.
10 And while you were at Costa Consultants it said
11 it took you approximately three weeks or so that these
12 people were not going to get loans; am I right?
13 A It took about three weeks before we started getting
14 denials from the first lender and we had hoped to still
15 get loans from other lenders, but we knew at that point
16 that the first lender denied every loan application we put
17 in.
18 Q It took you about three weeks to learn that from
19 Mr. Donahue?
20 A Yes.
21 Q Did you personally ever deal with Mr. Donahue or John
22 Beatrice?
23 A I may have had conversations with him. But John
24 Beatrice actually submitted the applications and paid the
25 fee.
OWEN M. WICKER, RPR OFFICIAL COURT R EPORTER
6853
Ihlenfeldt-cross/Jenks

1 Q He was the -- Beatrice was the contact with Donahue,
2 correct?
3 A Yes.
4 Q Do you know for a fact whether or not Beatrice paid
5 money to Donahue to issue rejection letters or denial
6 letters?
7 A I would say that --
8 Q Well, do you know for a fact, I asked you. Yes or
9 no?
10 A I can't answer that with a yes or no.
11 THE COURT: Hold it a minute, Mr. Jenks.
12 BY MR. JENKS:
13 Q Do you know for a fact whether or not Beatrice paid
14 money to Donahue to issue rejection letters?
15 A I don't know for a fact.
16 Q All right.
17 At these other places it took you like three or
18 four weeks, three weeks at Pacific Consultants to learn
19 the scam of the business and at Costa Consultants three
20 weeks to realize that a person wasn't going to get a
21 legitimate lo an?
22 A From the first lender, yes.
23 Q From the first lender, okay.
24 But when you went to Sterling Who's Who, you were
25 there about what, a week, week and-a-half?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6854
Ihlenfeldt-cross/Jenks

1 A Yes.
2 Q How many full days did you work there?
3 A I'm not really sure.
4 Q About a week and-a-half?
5 A About a week and-a-half.
6 Q So seven or eight days, business days?
7 A Yes.
8 Q And yet in those seven or eight business days you
9 were able to determine that it was a script of lies and it
10 had no value to the customer. In seven or eight days you
11 were able to figure that out about this company?
12 A Based on my experience in the fact.
13 Q But in seven or eight dates you were able to figure
14 it out at this place.
15 You didn't develop a script at S terling Who's
16 Who, did you?
17 A No.
18 Q You didn't develop the registry, did you?
19 A No.
20 Q You didn't develop the benefits package to the
21 members of the CD ROM?
22 A No.
23 Q You didn't develop anything at Sterling Who's Who?
24 A No.
25 Q You weren't privy to any inside information from the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6855
Ihlenfeldt-cross/Jenks

1 front office from people like Debra Benjamin or Liz
2 Sautter, were you?
3 A No.
4 Q But yet it's your testimony it took you three weeks
5 at Pacific Consultants to figure out there was a scam
6 going on, but at Sterling Who's Who it took you just a
7 week and-a-half, correct?
8 A Based on my past experience, yes.
9 Q You also said you didn't want to sell any memberships
10 to anyone while you were at Sterling Who's Who, correct?
11 A Right.
12 Q And was that the instruction of Inspector Biegelman
13 not to sell any memberships?
14 A I don't believe it was.
15 Q Are you saying when you went in there Biegelman said
16 if you have to sell a membership to a customer, sell a
17 membership, even though you were undercover and
18 investigating the organization?
19 A I don't recall those statements being made.
20 Q Were you prohibited by Biegelman from selling
21 memberships?
22 A I don't recall being prohibited.
23 Q Now, you said you didn't want to take peoples' credit
24 card numbers, correct?
25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6856
Ihlenfeldt-cross/Jenks

1 Q Although you had the opportunity to take several
2 credit card numbers, right?
3 A I believe I had the opportunity to take two.
4 Q At least two or more?
5 A I would think two.
6 Q How many customers did you speak to then?
7 A Maybe 20 or 30.
8 Q 20 or 30 calls a day?
9 A Yes. I make that many calls. I left a lot of
10 messages, so I don't know exactly the number of people I
11 actually spoke to.
12 Q So all total maybe you spoke to 100, 150 people while
13 you were there?
14 A Yes.
15 Q And you didn't sell one membership, correct?
16 A No.
17 Q And then they fired you?
18 A Yes.
19 Q Because you weren't producing any sales?
20 A That was the reason they gave me, yes.
21 Q Were there people that were qualified that you spoke
22 to to become members of the Registry?
23 A I don't know.
24 Q Now, you didn't sell any memberships but you thought
25 it was okay to take some cards and printed materials from
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER

6857
Ihlenfeldt-cross/Trabulus

1 Sterling Who's Who?
2 A I can't answer that with a yes or no.
3 Q Well, those terms, those cards and those materials,
4 they didn't belong to you, did they?
5 A No.
6 Q They belonged to the corporation?
7 A Yes.
8 Q Did you tell Inspector Biegelman that you were going
9 to take those materials prior to taking them?
10 A I don't recall if I did or not.
11 Q But you did take them, correct?
12 A Yes.
13 Q All right.
14 MR. JENKS: I have nothing further, Your Honor.
15 CROSS-EXAMINATION
16 BY MR. TRABULUS:
17 Q Mr. Ihlenfeldt, Ms. Scott asked you whether or not it
18 made any difference, your criminal record, as to what was
19 on the tapes?
20 A Yes.
21 Q And I think the tapes are the tapes, whatever your
22 criminal record?
23 A Yes.
24 Q Did you have an y discussions with Inspector Biegelman
25 as to why it was -- withdrawn.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6858
Ihlenfeldt-cross/Trabulus

1 How much time did you spend making the telephone
2 calls into Who's Who Worldwide and Sterling posing as a
3 customer? How many hours do you think that would be?
4 A Total, maybe five or six hours. Total.
5 Q Did you have any discussions with Inspector Biegelman
6 as to why he wanted you to do that as opposed to having a
7 postal inspector do it?
8 MS. SCOTT: Objection.
9 THE COURT: Overruled.
10 A No.
11 Q Did you ever ask him why he would want to have a
12 felon convicted of telemarketing fraud testifying about
13 that rather than a law enforcement official?
14 A No.
15 Q Did he ever indicate to you that he wanted to have
16 somebody up there who was guilty of telemarketi ng fraud to
17 create an aura in this case? Did he ever say anything
18 like that to you?
19 A No.
20 Q Now, yesterday you told Ms. Scott that you agreed to
21 pay $300,000 as restitution. Do you recall saying that?
22 A Yes.
23 Q And in fact, the specific question to you was, page
24 6,800, line 16.
25 "Question: What amount did you agree to pay as
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6859
Ihlenfeldt-cross/Trabulus

1 restitution of your crimes?
2 "Answer: $300,000."
3 Now, after that, of course, you were sentenced
4 and the Judge for reasons that we didn't go into, may have
5 decided that you only, as part of your sentence, are going
6 to be required to pay $10,000 restitution; is that
7 correct?
8 A Yes.
9 Q But do you regard yourself as still having an
10 outstanding agreement to which you wer e a party to pay the
11 remaining $290,000?
12 A No.
13 Q So you didn't agree to pay $300,000 at all, right?
14 A That's what the statement says.
15 Q Well, you say there was an agreement between you and
16 the government that you would pay 300,000 in restitution?
17 A That's what the statement says.
18 Q Didn't that just say that you might get up to
19 300,000, not that you necessarily would be obligated to
20 pay it?
21 A I don't know.
22 Q Can I have the statement you were referring to? I
23 think that is 24-B.
24 (Handing.) Is this where you agree to pay
25 restitution?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6860
Ihlenfeldt-cross/Trabulus

1 I'm showing you 3500 24-D. Do you recognize that
2 as your cooperation agreement?
3 A Yes.
4 Q And is there anything in there were it says that you

5 agree to pay 315, I'll point you to a reference where it
6 says 315,000.
7 You are not agreeing to pay that, right?
8 A I don't know.
9 Q Take a look.
10 Well, do you have any kind of written agreement
11 with the government that you will be paying the remaining
12 $290,000?
13 A No.
14 Q Has anyone from the government ever told you that you
15 are disobeying any agreement they had with you if you are
16 not paying more than the 10,000?
17 A No.
18 Q So there really was no agreement to pay 300,000, is
19 that correct, it was just a possibility to you that held
20 out to you that you might pay that, right?
21 A I'm not sure.
22 Q Now, I think you testified yesterday that your
23 company, Costa Consultants, paid Mr. Donahue a piece of
24 each of the $249 you took in, right?
25 A It wasn't my company. It was a company that I


OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6861
Ihlenfeldt-cross/Trabulus

1 managed.
2 Q The company that you managed, right, the one that was
3 Beatrices' company but you managed?
4 A Yes.
5 Q I stand corrected.
6 You paid a piece of each of the $249 to
7 Mr. Donahue until he was out of the picture and someone
8 else came in?
9 A Yes.
10 Q Do you know how big that piece was?
11 A I believe it was somewhere in the range of $9 per
12 application.
13 Q $9.
14 And that was the fee -- the $9 was for him to
15 process a loan application; is that correct?
16 A Yes.
17 Q He was going to have to get a TRW report or something
18 like that?
19 A I don't know how he would process loans.
20 Q He would independently verify the information to see
21 whether or not he wanted to loan the money to these

22 persons?
23 A I don't know how he would process the loans.
24 Q This was all going to be for $9?
25 A That's what he was going to charge.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6862
Ihlenfeldt-cross/Trabulus

1 Q Was this a man who worked for minimum wage?
2 A I don't know.
3 Q Isn't it a fact, sir, you were paying him $9 so that
4 there would be a letter down the road that would say
5 "denied" as a cover?
6 A No.
7 Q Are you saying, sir, that you were the victim of
8 Mr. Donahue's fraud on you?
9 A I would think that the company was.
10 Q In fact -- I'm sorry, excuse me.
11 Not your company, the one you managed, the one
12 that you took three weeks to find out was a fraud, you
13 were saying that company, its service, was a victim of
14 this Mr. Donahue, right?
15 A Could you repeat the question?

16 Q You are saying that the company that you managed,
17 Costa Consultants was a victim of Mr. Donahue, correct?
18 A Uhm, Mr. Donahue promised to provide loans and did
19 not, so I would assume that, yes, we were taken by
20 Mr. Donahue.
21 Q As part of your cooperation you were hoping to do,
22 give the government as much substantial assistance as
23 possible because the more you gave the more it might inure
24 to your benefit?
25 A That was the verbiage in the cooperation agreement
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6863
Ihlenfeldt-cross/Trabulus

1 that I was to give substantial information.
2 Q Did you understand the more assistance that you gave,
3 the better it would be for you, right?
4 A Yes.
5 Q And did you offer to the government to provide
6 substantial assistance in a prosecution of Mr. Donahue for
7 defrauding Costa Consultants?
8 A No.
9 Q Did they suggest to you that you do so?
10 A No.
11 Q Now, let me see if I understand this correctly
12 because I'm a little confused here.
13 Is it your testimony that up until the point that
14 you learned that Costa Consultants was defrauded by
15 Mr. Donahue who took this $9 for each loan deliberation,
16 up until that point in time you really thought there was
17 absolutely nothing wrong at all with what Costa
18 Consultants was doing?
19 A Yes, I did think there was something wrong with it.
20 Q And what was that, sir?
21 A The fact that we were telling people that we were
22 going to a credit manager to approve their loan or get
23 them pre-approved and they were not.
24 Q That was the whole thing. That was the only thing
25 that was wrong, right?
OWEN M. WICKER, RPR OFFICIAL COURT R EPORTER
6864
Ihlenfeldt-cross/Trabulus

1 A Yes.
2 Q You were just putting a little window dressing what
3 otherwise was a totally legitimate business operation,
4 right, and that's what you thought was wrong?
5 A We had hoped --
6 Q Yes, sir?
7 A I can't answer with a yes or no.
8 Q Isn't it a fact, sir, at the very most you were
9 promising people loans; is that correct?
10 A Yes.
11 Q And you were taking their money, you've conceived
12 that?
13 A Yes, the company was receiving money.
14 Q And at the very most you had a wing and a prayer that
15 they would get a loan, at the most?
16 A In hindsight, yes.
17 Q And that's what was wrong with it, right?
18 A Yes.
19 Q And you knew that and you even started Costa
20 Consultants with Mr. Beatrice, correct?
21 A No.
22 Q You didn't know that.

23 Isn't it true that you knew when you started the
24 business that it was not legitimate?
25 A No.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6865
Ihlenfeldt-cross/Trabulus

1 Q That's not true?
2 A I don't believe so.
3 Q Okay.
4 Well, do you recall being asked these questions
5 and giving these answers in front of Judge Spatt back on
6 March 11, 1994, in the testimony that you gave in the
7 hearing for this gentleman by the name of Brian Studley.
8 MR. TRABULUS: And we're beginning with page 50,
9 line 23.
10 "Question: Was John Beatrice an individual who
11 worked for Pacific Consultants?
12 "Answer: Yes.
13 "Question: And the two of you started this
14 business?
15 "Answer: Yes."
16 MS. SCOTT: What page?
17 MR. TRABULUS: 50, referring to Costa.
18 "Answer: Yes.
19 "Question: A nd this business was, you knew when
20 you started this business that it was not legitimate; is
21 that correct?
22 "Answer: Yes."
23 Do you recall being asked those questions and
24 giving those answers, sir?
25 A I don't recall those questions.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6866
Ihlenfeldt-cross/Trabulus

1 Q But just yesterday you were put through those same
2 questions, among others. Do you recall that?
3 A I recall some questions yesterday.
4 Q Do you recall yesterday that Mr. Schoer read to you
5 the same portion of that transcript and then read a little
6 more when Mr. White asked him to do so and then you said
7 you recalled it?
8 A Yes. If you read the following question I suppose it
9 would clarify things.
10 Q Do you need to read the following question to recall
11 it?
12 A Excuse me?

13 Q Do you need to hear the following question in order
14 to recall it?
15 A I don't know what you mean.
16 Q Now, when you -- let me say this. You gave
17 Mr. Biegelman some cards; is that correct?
18 A Yes.
19 Q And did he specifically ask you to give him those
20 cards?
21 A I don't recall if he did or didn't.
22 Q Those cards, those were cards of your choosing; is
23 that correct -- I'll withdraw the question.
24 Were they just cards given to you to call?
25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6867
Ihlenfeldt-cross/Trabulus

1 Q Were they only NG cards, do you know?
2 A I believe so.
3 Q Now, did you believe those cards had any value to the
4 business?
5 A Uhm, I did not believe that they had any value to the
6 business.
7 Q So you understood that those cards were not being

8 used for the prospect of actually getting any money for
9 income for the business, but just for practice, is that
10 fair to say, for training purposes?
11 A I don't know.
12 Q Well, if they were going to have the potential for
13 getting new members, they would have value to the
14 business?
15 A As a salesperson I wouldn't think they do. Because
16 of NG written on it the numerous amount of times.
17 Q Fair enough.
18 Also, of course, those cards didn't come directly
19 from Sterling to the government, did they? They came
20 through you, is that fair to say?
21 A Yes.
22 Q And you had an opportunity to write whatever you
23 wanted on them, is that fair to say?
24 A Yes.
25 Q And you -- while you were at Sterling you had a body
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6868
Ihlenfeldt-cross/Trabulus

1 wire, right?
2 A Yes.
3 Q And you were recording what you were doing?
4 A Yes.
5 Q Do you know if you recorded yourself when you said
6 you left messages for this person who put in that bad
7 taste card?
8 A I don't know if I did or didn't.
9 Q Do you know whether you recorded yourself when you
10 turned down these people who were going to give you credit
11 cards? Do you know that?
12 A I don't know if I did or didn't.
13 Q Now, I think you told Ms. Scott and you confirmed to
14 Mrs. Jenks -- Mr. Jenks --
15 MR. TRABULUS: Mr. Jenks, unusual slip. I'm sure
16 you won't be offended.
17 MR. JENKS: It's all right. No offense taken,
18 Mr. Trabulus.
19 BY MR. TRABULUS:
20 Q You told Mr. Jenks he had concluded after the week
21 and-a-half you were there there was a script of lies and
22 it had no value, is that right, at Sterli ng?
23 A I can't answer that with a yes or no.
24 Q Well, I think you used the word, you told Ms. Scott
25 yesterday that you didn't want to sell something to people
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6869
Ihlenfeldt-cross/Trabulus

1 that had no value using a script of lies, is that a
2 summary of something that you told to Ms. Scott?
3 A Probably a summary.
4 Q Something like that.
5 And I think you mentioned, you learned, it took
6 you about a week and-a-half to figure that out or during
7 that week and-a-half you were able to figure that out,
8 right?
9 A Yes, based on my experience.
10 Q And your experience included the previous work that
11 you had had at the company you yourself managed where it
12 took you three weeks to figure that out, right?
13 A Yes.
14 Q In terms of this script of yours, one of the t hings
15 you mentioned in the script was the CD ROM?
16 A One of the things were in the script.
17 Q One of the things you would talk to customers about?
18 A Yes.
19 Q You had never seen the CD ROM?
20 A No.
21 Q Never had tried to?
22 A No.
23 Q You had no reason to believe it didn't exist; is that
24 correct?
25 A Correct.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6870
Ihlenfeldt-cross/Trabulus

1 Q Had you ever seen the Tribute magazine?
2 A Yes, I did.
3 Q And did you have any reason to believe anything in it
4 was not true?
5 A No.
6 Q You saw various advertisements in Tribute magazine
7 for different member benefits; is that correct?
8 A I'm not that familiar with the content.
9 Q Well, I don't want to go through the whole thing
10 again because we've heard them so many times t hat you're
11 probably sick of it.
12 There was a discount to Airborne Express?
13 A I recall that being in the script.
14 Q Do you have any reason it wasn't granted, given to
15 members?
16 A No.
17 Q Do you have any reason to believe it was of no value?
18 A No.
19 Q How about the other discounts, phone discounts,
20 automobile insurance discounts, I'll not list them all.
21 Do you have any reason to believe that any of the
22 things that were being offered were in fact provided?
23 A No.
24 Q Do you have any reason to believe that they weren't
25 of value?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6871
Ihlenfeldt-cross/Trabulus

1 A No.
2 Q You had seen the directory, right?
3 A Uhm, I think I did see a directory.
4 Q So you knew people were given a directory; is that
5 right?
6 A No.
7 Q You didn't know that?
8 A I didn't know that.
9 Q But you have no reason to believe that they weren't
10 given a directory, did you?
11 A No.
12 Q Now, this is something that you came up on your own
13 decision that this was of no value, right? That was --
14 Mr. Biegelman didn't tell you that, did he?
15 Yes or no, sir? Did Biegelman tell you that this
16 was of no value?
17 A I don't recall him saying that.
18 Q So as best you can recall, this was your own
19 conclusion; is that correct?
20 A I can't answer that with a yes or no.
21 Q And you made a decision, you were telling people
22 about benefits and so forth and these were things that as
23 far as you knew you had no reason to believe weren't being
24 given or weren't of value and you took it upon yourself to
25 make a decision that they shouldn't get them; is that


OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6872
Ihlenfeldt-cross/Trabulus

1 correct?
2 A I can't answer that with a yes or no.
3 Q Now, when you first went to work at Sterling in an
4 undercover capacity, did you discuss with Mr. Biegelman
5 how long you would be working there?
6 A No.
7 Q And did he tell you that he only wanted you to work
8 there a week or a week and-a-half?
9 A No.
10 Q To the contrary he wanted you to work there as long
11 as possible and get as much as possible; is that fair to
12 say?
13 A I don't recall those conversations taking place.
14 Q Did he tell you he wanted you in there, in and out of
15 there quickly?
16 A I don't recall that being in the conversation we have
17 had.
18 Q Now, you knew when you were there, based on your
19 experience, I assume, if you didn't make sales you weren 't
20 going to last; is that fair to say?
21 A Yes.
22 Q And you, of course, when you were working there, you
23 had to work full-time there, right?
24 A Yes.
25 Q And that wasn't like when you were making the phone
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6873
Ihlenfeldt-cross/Trabulus

1 calls later on which you could do from the place you had
2 employment; is that correct?
3 A Yes.
4 Q When you were making the phone calls you were at the
5 same time pulling in a salary, right?
6 A Yes.
7 Q And the fact that you were making the phone calls
8 didn't take away from your salary, right?
9 A Yes.
10 Q When you went to Sterling, sir, every day you spent
11 there was a day you weren't earning any money, right?
12 A Yes.
13 Q You needed money, right?
14 A Yes.
15 Q Isn't it a fact, sir, th at Inspector Biegelman told
16 you that basically what you were to do was to follow the
17 script that was being given to you, follow the
18 instructions of your supervisors and if a customer wanted
19 a purchase, make the purchase. Let them purchase it.
20 Isn't that true, sir?
21 A I don't recall that being the conditions of my
22 cooperation.
23 Q Now, you say, you took $249 repeatedly from people
24 giving them absolutely nothing, right? This was when you
25 were working at Pacific and Costa.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6874
Ihlenfeldt-cross/Trabulus

1 A Yes, the company did.
2 Q Well, you knew about it and you were managing one of
3 the companies, right?
4 A Yes.
5 Q In fact, you said yesterday, I think, that at Pacific
6 you were hoping to work there for years, right?
7 You wanted to make a career o ut of doing that,
8 right?
9 A No.
10 Q Well, didn't you testify in response to one of the
11 cross-examination questions of one of the lawyers here
12 while you were at Pacific, I think it was Mr. Geduldig, he
13 asked you if he thought you would be expecting to stay
14 there long, and you said, no, I was hoping to be there for
15 years.
16 A With regards to setting up the business.
17 Q This was at Pacific, you wanted a career out of it?
18 A No.
19 Q You wanted a career out of the other one; is that
20 your testimony?
21 A In regards to setting up the business, it was set up
22 not necessarily with a short term projection in mind.
23 Q Anyway, when you were at Pacific, whether you wanted
24 to make a career out of it or not, you didn't have any
25 hesitation in taking $290 when you were going to get $40
OWEN M. WICKER, RPR OFFIC IAL COURT REPORTER
6875
Ihlenfeldt-cross/Trabulus

1 out of it from people who were in desperate financial
2 condition; is that correct?
3 A No.
4 Q It's not correct. When you were --
5 A I had hesitancy.
6 Q But you did it for the $40 a pop?
7 A Yes.
8 Q Those were the people who were probably the most
9 vulnerable set of people you could take $249 from, people
10 in desperate condition?
11 A Desperate need of money I would think.
12 Q When you were working at Sterling, sir, you had a
13 pang of consciousness?
14 A I can't answer that yes or no.
15 Q Now that you weren't getting any money out of doing
16 it, sir -- by the way, the people who you spoke to who
17 were prospective members of Sterling, they weren't in
18 desperate financial condition, were they?
19 A I wouldn't know.
20 Q Isn't it fair to say on the whole they tended to be
21 people who had pretty -- at least middle or upper level
22 management positions? Owners of businesses and so forth?
23 A I would say on the whole, yes.
24 Q And none of them on the phone, I mean, certainly if
25 anyone on the phone said, hey, I'm having financial
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6876
Ihlenfeldt-cross/Trabulus

1 difficulties, they would hang up. So the people who were
2 talking to you apparently had money?
3 A Apparently.
4 Q Certainly the people who wanted to pay, they had
5 money. They had money because they had money to spend on
6 this, right?
7 A Apparently.
8 Q This wasn't a necessity. I mean, this wasn't like
9 food or clothing, right?
10 A Right.
11 Q But you had a pang of conscience when you weren't
12 getting any money out of it and you decided you weren't

13 going to give them what they wanted even though you had
14 absolutely no basis of any of the things they earned.
15 You had a pang of conscience, sir, right? You
16 had a pang of conscience, sir, when you weren't going to
17 get any money out of it?
18 A I can't answer that with a yes or no.
19 Q And you decided that those people weren't going to
20 get what they were asking for, right?
21 A I can't answer that with a yes or no.
22 Q And, sir, you didn't want to continue working there
23 because you wanted to be out of there so that you could be
24 working a job, right? You didn't want to be kept on at
25 Sterling?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6877
Ihlenfeldt-cross/Trabulus

1 A I can't answer that with a yes or no.
2 Q You purposely screwed up that portion of your
3 cooperation so you could get out of there and ge t work and
4 earn some money, right?
5 A No.
6 Q You purposely didn't make sales so you could be
7 fired?
8 A No.
9 THE COURT: You are getting very rapid again,
10 Mr. Trabulus. I'm having trouble following you and the
11 jury may have the same trouble and I know the reporter is
12 having trouble. So slow down, please.
13 BY MR. TRABULUS:
14 Q You were perfectly happy to continue cooperating,
15 sir, when you were making phone calls and it didn't cost
16 you a dime, right?
17 A I was not happy.
18 MR. TRABULUS: I have no further questions.
19 THE COURT: Anything else?
20 MR. GEDULDIG: May I have just like one question,
21 please?
22 THE COURT: Yes.
23 (Continued.)
24
25
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6878
Ihlenfeldt-cross/Geduldig

1 CROSS-EXAMINATION

2 BY MR. GEDULDIG:
3 Q Mr. Ihlenfeldt, yesterday I had asked you some
4 questions regarding the mail lists. Do you recall that?
5 A Vaguely, sir.
6 Q And there was a series of questions regarding the
7 training you received while you were at Sterling?
8 A Yes.
9 Q And I asked you if you were told specifically by the
10 people that were training you that mailing lists were not
11 used at Sterling. Do you recall that?
12 A Yes, I recall.
13 Q And yesterday I think you responded by nodding your
14 head and as a result it doesn't show up in the transcript
15 of yesterday's testimony. But am I correct in saying that
16 you were told specifically while you were training at
17 Sterling that mailing lists were not used?
18 A Yes.
19 MR. GEDULDIG: That's it, Judge.
20 THE COURT: Anything else?
21 MR. NEVILLE: Yes, Your Honor.
22 (Contin ued.)
23
24
25
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6879
Ihlenfeldt-cross/Neville

1 CROSS-EXAMINATION
2 BY MR. NEVILLE:
3 Q Good morning, Mr. Ihlenfeldt. My name is Jim
4 Neville. I represent Scott Michaelson.
5 You said you worked at Sterling for six or seven,
6 eight working days, something like that?
7 A Yes.
8 Q And the supervisors that worked with you were Tom
9 Randall, Robert Lamb and Michael Powers?
10 A Yes.
11 Q Did you hear that tape the other day where somebody
12 said to you that you're a nice guy but you think too
13 much? We don't care.
14 A Yes.
15 Q Whose voice was that?
16 A Tom Randall.
17 Q Was he the one that interviewed you for the job there
18 at Sterling?
19 A No.
20 Q He's the one that trained you?
21 A Yes.
22 Q And d o you remember what he looks like?
23 A Yes.
24 Q Is he here in this courtroom?
25 A I don't see him.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6880
Ihlenfeldt-cross/Neville

1 Q Robert Lamb. Do you remember what he looks like?
2 A Yes.
3 Q Is he in this courtroom?
4 A I don't see him here.
5 Q Michael Powers. Do you remember what he looks like?
6 A Yes.
7 Q And do you see him here in this courtroom?
8 A No.
9 Q Tom Randall was the one that said to you, you think
10 too much, these American Mastercards, ha, ha, ha. He's
11 the one that said that, wasn't he?
12 A Yes.
13 Q The only personal physical contact you would have
14 with Who's Who Worldwide's offices was when you went in
15 for an interview with Tara Green, Tara Garboski, right?
16 A Yes.
17 Q And in that interview was where Tara Garbo ski was
18 telling you about telling the truth and following the
19 pitch, right?
20 A I can't answer that with a yes or no.
21 Q Do you remember the taped transcript? Do you
22 remember the taped transcript that Mr. Schoer went over
23 with you?
24 A I remember it vaguely. I don't remember the part. I
25 remember the part sticking to the script. I don't
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6881
Ihlenfeldt-cross/Neville

1 remember the part where it was her saying that you had to
2 tell the truth.
3 Q I misspoke. I apologize.
4 She didn't tell you to tell the truth. What she
5 said was "it's more cost effective but by following the
6 script, first of all, you won't confuse them. You will
7 not lie to them. You will not stretch the truth, and
8 you'll close because it's all mapped out for you."
9 (Indicating) Is she , Tara Garboski, who is
10 sitting in this courtroom -- that's not Tom Randall that
11 said that to you? Do you remember that?
12 A I don't recall the conversation exactly, but if it's
13 on the tape, then it's on the tape.
14 Q And you're the same guy who knew after a few days at
15 Who's Who Worldwide or at Sterling, wherever you worked,
16 that you knew that the pitch was a bunch of lies and
17 that's why you didn't want to take credit card numbers,
18 right?
19 A Based on my experience, portions of the scripts I
20 knew weren't true or I assumed weren't true.
21 Q Based on what Marty Biegelman said to you, that's
22 what it was, right?
23 A I can't answer that with a yes or no.
24 Q You said that you took out of Sterling about 30
25 cards?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6882
Ihlenfeldt-cross/Neville

1 A I believe that's the amount.
2 Q Do you know that each one of those cards costs about
3 $30? Do you know that?
4 A No.
5 Q Do you have any idea that those cards represented a
6 big investment?
7 A No.
8 Q Do you realize that what you did when you walked out
9 of that office in Manhattan, not the little boiler room
10 basement operation that you were doing, but that
11 impressive office in Manhattan, that you stole about $900
12 worth of property of that company? Do you realize that?
13 MS. SCOTT: Objection.
14 THE COURT: Sustained.
15 BY MR. NEVILLE:
16 Q Do you know that those cards were worth about $900
17 bucks?
18 A No.
19 Q That's like seeing a pile of nine $100 bills and
20 putting them in your pocket and walking out. That's no
21 different.
22 A Is that a question?
23 Q Right.
24 A No.
25 Q It's not the same.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6883
Ihlenfeldt-cross/Neville

1 A No, it's not the same.
2 Q So if you steal my car as opposed to stealing money
3 out of my bank account, you are not stealing?
4 MS. SCOTT: Objection.
5 THE COURT: You have to be quick.
6 MS. SCOTT: Objection.
7 THE COURT: Sustained.
8 See, if you stand up while the questioner -- it
9 will not distract him because he can't see you, so if you
10 stand up before the question, this is a technique I
11 learned a long time ago, get ready. You see as soon as
12 the question ends, you're in there.
13 BY MR. NEVILLE:
14 Q All I know, it's not a crime when you stole those
15 cards because you did it at the behest of the United
16 States Government, right?
17 MS. SCOTT: Objection.
18 THE COURT: Sustained.
19 Well, I advised Ms. Scott what to do but she
20 didn't take my advise. It's okay, she has a right not
21 to.
22 BY MR. NEVILLE:
23 Q You say you walked out with one of the pitch sheets
24 too, right?
25 A I believe I did.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6884
Ihlenfeldt-cross/Neville

1 Q Do you have that with you?
2 A No.
3 Q Do you know where that is?
4 A No.
5 Q Do you have any idea what was on that?
6 A I'm familiar with the script for the associate
7 membership.
8 Q Do you have any idea that those pitches changed
9 sometimes from day-to-day or hour-to-hour? Do you have
10 any idea?
11 A I wouldn't know but it wouldn't surprise me at all.
12 Q Is there something wrong with that?
13 A I don't understand your question.
14 Q You're trying to leave this jury with the impression
15 ch anging a pitch in a company that is selling over the
16 telephone somehow is a crime?
17 MS. SCOTT: Objection.
18 THE COURT: Sustained.
19 BY MR. NEVILLE:
20 Q Sir, do you remember if Marty Biegelman is the one
21 that told you to take those cards and that pitch sheet?
22 A I don't recall if he did or didn't.
23 Q You didn't even listen to any of these tapes until
24 just around when this trial started, right, where you're
25 talking on them?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6885
Ihlenfeldt-cross/Neville

1 A I believe I listened to the tapes, the body wire
2 tapes, not long after I made them.
3 Q How about the tapes where you called in as a
4 prospective customer of Who's Who Worldwide?
5 A I might have listened to them until about two months
6 ago or a little bit less than that.
7 Q You said that Marty Biegel man did tell you what to
8 ask in those conversations, right, when you called in?
9 A He gave me some questions he wanted me to ask.
10 Q About nominations?
11 A Yes.
12 Q Mailing lists?
13 A Yes.
14 Q How long you've been in business?
15 A Yes.
16 Q Do you know that there was a man here that testified
17 that was doing the same thing for Marty Biegelman who said
18 Marty Biegelman said not to ask him any particular
19 questions? Do you know that?
20 MS. SCOTT: Objection.
21 THE COURT: Sustained.
22 BY MR. NEVILLE:
23 Q Steve Watstein, do you know him?
24 A No.
25 Q Do you remember the conversation with Scott
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6886
Ihlenfeldt-cross/Neville

1 Michaelson where you asked him about one of those
2 membership seminars and he told you there had been one

3 planned at Hilton Head but it never went off? Do you
4 remember that?
5 A I remember a conversation about that.
6 Q You just remember a conversation, but whether or not
7 Scott said that Hilton Head went off doesn't matter, does
8 it?
9 MS. SCOTT: Objection.
10 THE COURT: Sustained.
11 BY MR. NEVILLE:
12 Q The only experience you had was at Sterling, right,
13 working?
14 A No.
15 Q Did you ever work at Who's Who Worldwide as a
16 salesperson?
17 A The only -- you asked me if I had any experience
18 working.
19 Q Yes or no?
20 A I have plenty of experience working.
21 Q In the contention of this case as compared to
22 Sterling Who's Who and Who's Who Worldwide, which place
23 did you work in?
24 A Sterling Who's Who.
25 Q Sterling and Who's Who?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER

6887
Ihlenfeldt-cross/Neville

1 A Sterling Who's Who.
2 Q So you didn't work at Who's Who Worldwide?
3 A No.
4 Q You didn't work at Marcus Avenue in Lake Success, New
5 York?
6 A No.
7 Q And the only time you went out there was when you had
8 an interview with Tara Garboski who told you that you
9 shouldn't lie, right?
10 A Yes.
11 Q And the work you did at Sterling and at this Sterling
12 place with Tom Randall was a place where he laughed about
13 the credit card. And he isn't in this courtroom, is he?
14 THE COURT: Sustained. We've had that several
15 times.
16 MR. NEVILLE: Well, I think it is important, Your
17 Honor.
18 THE COURT: Yes, well, you've had it already and
19 within the last 15 minutes, I might add.
20 MR. NEVILLE: I'll finish up. This will be the
21 end, Your Honor.
22 THE COURT: I'm not precluding you. I just don't
23 want you to be repetitious.
24 MR. NEVILLE: I understand, Your Honor. Thank
25 you.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6888
Ihlenfeldt-cross/Neville

1 BY MR. NEVILLE:
2 Q You said within just a few days of working at
3 Sterling, that you didn't want to make those sales on the
4 phone because based on your experience you didn't want to
5 trick those people, right?
6 A I don't believe I mentioned tricking people.
7 Q Have you ever heard of a man named Mr. Saffer?
8 A Yes.
9 Q Do you know he testified at this trial?
10 A Yes.
11 Q Do you know that he was a salesperson at Who's Who
12 Worldwide for years and years?
13 A I didn't know that.
14 Q Did you know that he worked at Who's Who Worldwide
15 almost from its very inception back in the late '80s or
16 ea rly '90s at Port Washington?
17 A No.
18 Q Do you know that he probably made many scores of
19 thousands of more telephone calls than you ever did at
20 Sterling?
21 A No.
22 Q Do you know that Mr. Saffer who came in here and
23 testified that said for years and years as he was
24 following that script, he didn't think he was doing
25 anything wrong, and you figured this out in a couple
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6889
Ihlenfeldt-redirect/Scott

1 days?
2 MS. SCOTT: Objection.
3 THE COURT: Sustained.
4 MR. NEVILLE: Thank you. I have no further
5 questions.
6 THE COURT: Anything else?
7 MS. SCOTT: Yes, Your Honor. May I have a
8 moment?
9 THE COURT: Surely.
10 (Counsel confer.)
11 MS. SCOTT: Thank you, Your Honor.
12 REDIRECT EXAMINATION
13 BY MS. SCOTT:

14 Q You were just asked about Alan Saffer.
15 A Yes.
16 Q And whether you knew anything about him.
17 A Yes.
18 Q Before you came to court here -- withdrawn.
19 Did you meet Alan Saffer back in the witness room
20 when you came to court here?
21 A Yes.
22 Q Before that time had you ever met him before?
23 A No.
24 Q Had you ever seen him before?
25 A No.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6890
Ihlenfeldt-redirect/Scott

1 Q Had you ever heard anything about him before that
2 time?
3 A He was one of the names that Marty Biegelman gave me
4 to ask for on the phone.
5 Q And beyond that and beyond the conversation that you
6 had with him over the phone, did you ever have any other
7 knowledge about Mr. Saffer?
8 A No.
9 Q Now, you've been asked a lot of questions about how
10 lon g it took you to figure out that there was a scam going
11 on at Sterling Who's Who. Do you remember those
12 questions?
13 A Yes.
14 Q And you answered today that based on your experience
15 you were able to figure out within about a week to a
16 little bit more that there was a scam going on there,
17 correct?
18 A Yes.
19 Q And can you tell us what you meant by that?
20 A Well, at that point not only was I involved in three
21 scams but I had worked as an informant on two other ones
22 and some of the statements in the script were inconsistent
23 with what I assumed was the nature of the sales process
24 and that was that people were denying --
25 MR. GEDULDIG: Judge, I object to what he
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6891
Ihlenfeldt-redirect/Scott

1 assumed. It's just speculation on his part.
2 THE COURT : Well, it's true that this was brought
3 out on cross-examination and you would normally have a
4 right to go into it, but in the exercise of my discretion
5 I'll sustain the objection.
6 BY MS. SCOTT:
7 Q Now, you've been asked a lot of questions about when
8 it was that you figured out that Costa Consultants, the
9 company you started with John Beatrice, was actually a
10 scam. Do you remember all of those questions on
11 cross-examination?
12 A Yes.
13 Q Do you remember that you testified that it took you
14 approximately three weeks to determine that there really
15 were not going to be any loans provided to people who
16 applied to Costa Consultants?
17 A Yes.
18 Q Now, by the way, you've never disputed that you did
19 eventually learn that no loans were going to be provided,
20 correct?
21 A Right.
22 Q And you've never dispu ted that, you continued to tell
23 people loans would be available, even though you knew they
24 weren't?
25 A Yes, we did.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6892
Ihlenfeldt-redirect/Scott

1 Q And that's why you pled guilty; isn't that right?
2 A Correct.
3 Q But what the defense has been focusing on was these
4 first two weeks when you were working at Costa
5 Consultants, correct?
6 A Yes.
7 Q Do you remember that the defense has read to you some
8 of your testimony from a prior hearing in the past couple
9 days?
10 A Yes.
11 Q And do you remember that they read you that testimony
12 twice?
13 A Yes.
14 Q And do you remember that on both occasions they
15 stopped just short of reading to you the part where you've
16 testified consistently with what you've been testifying to
17 here t oday?
18 MR. TRABULUS: Objection, Your Honor.
19 THE COURT: Sustained.
20 If you think that the testimony, the portion of
21 the testimony of the witness was not complete, you can
22 read any other portion you want to read.
23 MS. SCOTT: Yes. I would like to do that, Your
24 Honor.
25 THE COURT: Go ahead.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6893
Ihlenfeldt-redirect/Scott

1 BY MS. SCOTT:
2 Q The part that has not been read to you today is this
3 part. Page 51 of Government's Exhibit 3500-24-W.
4 "Question: And you knew that people were not
5 going to get loans, correct?
6 "Answer: Well, we hoped, we hoped that we can
7 run the business in a sense different than Howard had run
8 it to where we could find legitimate lenders and have some
9 longevity to this business rather than to run it for a
10 couple mon ths and close it down."
11 Do you remember giving that question in response
12 to that -- I'm sorry, do you remember giving that answer
13 in response to that question?
14 A Yes.
15 Q Now, you've been asked a lot of questions about the
16 lead cards that you took out of Sterling Who's Who,
17 correct?
18 A Yes.
19 Q And you've been asked in particular about that card,
20 the pope card. Do you remember that?
21 A Yes.
22 Q Mr. Neville said when he was cross-examining you a
23 moment ago, that these cards were worth approximately
24 $900. Do you remember him saying that?
25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6894
Ihlenfeldt-recross/Geduldig

1 Q Do you remember when Mr. Trabulus, when he
2 cross-examined you before, said that these cards were just
3 about worthless? Do you remember him saying that?

4 MR. TRABULUS: Objection, Your Honor.
5 THE COURT: Sustained.
6 MS. SCOTT: Thank you, Mr. Ihlenfeldt. I have no
7 further questions.
8 THE COURT: Anything else?
9 MR. GEDULDIG: I have a couple.
10 RECROSS EXAMINATION
11 BY MR. GEDULDIG:
12 Q Mr. Ihlenfeldt, Ms. Scott just asked you if Alan
13 Saffer was one of the names that you had gotten from
14 Mr. Biegelman. Do you remember that?
15 A Yes.
16 Q And did you get any of these names from Mr. Biegelman
17 as well? Did you get the name Michael Maxes as an
18 individual that you should try to call at Who's Who
19 Worldwide?
20 A Yes.
21 Q Did you get the name of Marty Gross or Marty Graham
22 to call as an individual at Who's Who Worldwide?
23 A I don't recall.
24 Q Did you get the name Sue Mantell as an individual for
25 you to call at Who's Who Worldwide?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6895
Ihlenfeldt-recross/Geduldig

1 A I believe so, but I don't recall.
2 Q Did you get the name Angela Palmer as an individual
3 to call at Who's Who Worldwide?
4 A I don't recall.
5 Q Did you get the name Carl Roper as an individual to
6 call at Who's Who Worldwide?
7 A I don't recall.
8 Q Did you get the name Marilyn Pierce as an individual
9 to call at Who's Who Worldwide?
10 A I believe so, but I can't be sure.
11 Q Did you get the name Todd -- I'm sorry, Madeline
12 Bailey as an individual to call at Who's Who Worldwide?
13 A I believe so, but I don't recall.
14 Q Did you get the name Michele Kelly as an individual
15 to call at Who's Who Worldwide?
16 A I believe so, but I don't recall.
17 Q Did you get the name Joe Parks as an individual to
18 call at Who's Who Worldwide ?
19 A I don't recall.
20 Q Did you get the name Roseanne Munch or Roseanne
21 Patton as an individual to call at Who's Who Worldwide?
22 A I believe so, but I don't recall as a fact.
23 Q Did you get the name Tina Walsh as an individual to
24 call at Who's Who Worldwide?
25 A I believe so. I don't recall as a fact.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6896
Ihlenfeldt-recross/Geduldig

1 Q Did you get the name Kenneth McCarthy as an
2 individual to call at Who's Who Worldwide?
3 A I believe so, but I don't recall as a fact.
4 Q Did you get the name Al Jenson as an individual to
5 call at Who's Who Worldwide?
6 A I don't recall.
7 Q Did you ever have a written list of the people from
8 Mr. Biegelman of the individuals you should try to call at
9 Who's Who Worldwide?
10 A I wrote the lists myself. He provided me name s and I
11 wrote the list myself, so he didn't provide the list.
12 Q But he gave you these names?
13 A Yes.
14 Q Did he give them to you right off the top of his head
15 or was he reading them as well?
16 A I don't know.
17 Q Do you know if you were able to contact all of the
18 people that were on that list?
19 A I don't believe so, but I can't recall for a fact if
20 I did or didn't.
21 Q You certainly called more than four salespeople;
22 isn't that fair to say?
23 A Yes.
24 Q And you spoke to more than four salespeople?
25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6897
Ihlenfeldt-recross/Geduldig

1 Q And you recorded conversations with more than four
2 salespeople?
3 A Yes.
4 MR. GEDULDIG: I have no further questions.
5 THE COURT: Anything else?
6 MS. SCOTT: Nothing furth er.
7 THE COURT: You may step down.
8 Please call your next witness.
9 MR. WHITE: Your Honor, we have a series of tapes
10 that we'll play now.
11 Your Honor, the first one is Exhibit 13-01. The
12 transcript is 13-01-B, for Baker. The date is August 15,
13 1994.
14 It's a call to Who's Who Worldwide, and the
15 salesperson is Madeline Bailey.
16 (Audiotape played.)
17 (Start and stop.)
18 MR. WHITE: The next one is 13-02. The
19 transcript is 13-02-A, for Able. The date is August 22,
20 1994.
21 The call is to Who's Who Worldwide, and the
22 salesperson is Jill Barnes.
23 (Audiotape played.)
24 (Start and stop.)
25 MR. WHITE: The next one is 13-03. The date is
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6898
1 August 24, 1994.
2 The call is to Who's Who Worldwide, and the
3 salesperson is Alan Davidson.
4 MR. TRABULUS: 13-03-A or B?
5 MR. WHITE: I'm sorry, 13-03-B, for Baker.
6 (Audiotape played.)
7 (Start and stop.)
8 MR. WHITE: The next one is 13-04. The
9 transcript is 13-04-B, for Baker. The date is August 29,
10 1994.
11 The call is to Who's Who Worldwide, and the
12 salesperson is Ed Schaeffer.
13 (Audiotape played.)
14 (Start and stop).
15 MR. WHITE: The next one is 13-05. The
16 transcript is 13-05-C, for Charlie. The date is September
17 6, 1994.
18 The call is to Who's Who Worldwide and Roseanne
19 Patton.
20 (Audiotape played.)
21 (Start and stop.)
22 MR. WHITE: The next one is 13-07. The
23 transcript is 13-07-C, for Charlie. The date is August --
24 I'm sorry, October 24, 1994.
25 It's a call to Sterling Who's Who and Scott
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6899
1 Matthews.
2 (Audiotape played.)
3 (Start and stop.)
4 MR. WHITE: The next one is 13-09. The
5 transcript is 13-09-B, for Baker. The date is October 27,
6 1994.
7 The call is to Sterling Who's Who and Andrea
8 Franklin.
9 (Audiotape played.)
10 (Start and stop.)
11 MR. WHITE: The next one is 13-10. The
12 transcript is 13-10-A, for Able. The date is October 28,
13 1994.
14 The call is to Who's Who Worldwide and Linda May,
15 M-A-Y.
16 (Audiotape played.)
17 (Start and stop.)
18 MR. WHITE: The next is Exhibit 13-11. The
19 transcript is 13-11-A, for Able. The date is October 28,
20 1994.
21 It's a call to Sterling Who's Who and Anthony
22 Myers, M-Y-E-R-S.
23 (Audiotape played.)
24 (Start and stop.)
25 MR. WHITE: They next one is 13-12. The


OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6900
1 transcript is 13-12-C, for Charlie. The date is October
2 28, 1994.
3 It's a call to Sterling Who's Who and Robert
4 Stanley.
5 (Audiotape played.)
6 (Start and stop.)
7 MR. WHITE: Next, this is Exhibit 13-16. The
8 transcript is 13-16-B, for Baker. The date is November 2,
9 1994.
10 The call is from Sterling Who's Who and Anthony
11 Myer.
12 (Audiotape played.)
13 (Start and stop.)
14 MR. WHITE: The next is Exhibit 13-17. The
15 transcript is 13-17-B, for Baker. The date is November 3,
16 1994.
17 The call is to Who's Who Worldwide and Roseann
18 Patton.
19 (Audiotape played.)
20 (Start and stop.)
21 MR. WHITE: The next one is 13-19. The
22 transcript is 13-19-A, for Able. The date is November 4,
23 1994.
24 The c all is to Who's Who Worldwide and Brian
25 Sherman.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6901
1 (Audiotape played.)
2 (Start and stop.)
3 MR. WHITE: Next is 13-21. The transcript is
4 13-21-B, for Baker. The date is November 7, 1994.
5 The call is to Sterling Who's Who and Sam
6 Christopher.
7 (Audiotape played.)
8 (Start and stop.)
9 MR. WHITE: Next is Exhibit 13-29. The
10 transcript is 13-29-A, for Able. The date is December 12,
11 1994.
12 The call is to Sterling Who's Who and Mark
13 Johnson.
14 (Audiotape played.)
15 (Start sand stop.)
16 MR. WHITE: Next is 13-31. The transcript is
17 13-31-C, for Charlie. The date is December 14, 1994.
18 The call is to Sterling Who's Who and to Scott
19 Matthews.
20 (Audiotape played.)
21 (Start and stop.)
22 MR. WHITE : Next is 13-34. The transcript is
23 13-34-A, for Able. The date is December 19, 1994.
24 The call is to Who's Who Worldwide and Jill
25 Barnes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6902
1 (Audiotape played.)
2 (Start and stop.)
3 MR. WHITE: The next one is 13-36. 13-36-A, for
4 Able, is the transcript. December 30, 1994.
5 The call is to Who's Who Worldwide and John
6 Stevens, S-T-E-V-E-N-S.
7 (Audiotape played.)
8 (Start and stop.)
9 MR. WHITE: The next is 13-37. The transcript is
10 13-37-A, for Able. The date is December 21, 1994.
11 The call is to Who's Who Worldwide and Alan
12 Saffer.
13 (Audiotape played.)
14 (Start and stop.)
15 MR. WHITE: The next is 13-40. The transcript is
16 13-40-C, for Charlie. The date is December 28, 1994. The
17 call is to Who's Who Worldwide and Mari lyn Pierce.
18 (Audiotape played.)
19 (Start and stop.)
20 MR. WHITE: The next is 13-42. The transcript is
21 13-42-B, for baker. The date is January 3, 1995.
22 This is a call to Sterling Who's Who and Barbara
23 McCabe, M-C-C-A-B-E.
24 (Audiotape played.)
25 (Start and stop.)
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6903
1 MR. WHITE: Next is 13-44. The transcript is
2 13-44-A, for Able. The date is January 23, 1995.
3 The call is to Sterling and to Mark Johnson.
4 (Audiotape played.)
5 (Start and stop.)
6 MR. WHITE: And next is 13-63. The transcript is
7 13-63-C, for Charlie. The date is December 22, 1994.
8 It's a call to Sterling Who's Who and to Kathy
9 Brady, B-R-A-D-Y.
10 (Audiotape played.)
11 (Start and stop.)
12 MR. WHITE: Your Honor, that's it for the tapes
13 right now.
14 THE COURT: All right. We'll take a ten-minute
15 recess.
16 Please don't discuss the case. Keep an open
17 mind.
18 Please recess yourselves.
19 (Jury exits.)
20 (Recess taken.)
21 THE COURT: I want to advise counsel that I have
22 an Order to Show Cause that I had made returnable at
23 5 o'clock this afternoon, because it is a reasonable hour
24 to make that. Wouldn't you say that, Mr. Neville?
25 MR. NEVILLE: Absolutely.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6904
1 THE COURT: And this is to quash a subpoena in
2 this case. The person who is subpoenaed, according to the
3 information I have, and I haven't got the papers, is
4 Sandra Barnes of Marquis Who's Who who lives in Arizona
5 and who was subpoenaed by the defendant Gordon.
6 I signed the subpoena according to this report to
7 appear o n March 9th. Her attorney, Robert Restrum,
8 R-E-S-T-R-U-M, will be here at 5 o'clock today. So I
9 suggest you stay and wait for Mr. Restrum.
10 Okay.
11 Is that all right with you, Mr. Neville?
12 MR. NEVILLE: That's perfectly fine with me.
13 MR. WHITE: We'll not have to wear bunny suits.
14 MR. JENKS: I'm willing to start at 6 o'clock, if
15 you are, Judge.
16 THE COURT: I'm glad to hear that, Mr. Jenks.
17 MR. NEVILLE: Before the break when Mr. White
18 played that series of segments of tapes, it was brought to
19 my attention and I think it is an important point. First
20 of all, none of the people that were speaking to
21 Mr. Watstein are in this room. But there is, there are
22 two if not three conversations with somebody by the name
23 of Scott Matthews.
24 THE COURT: It's not your client.
25 MR. NEVILLE: I know, but --
OW EN M. WICKER, RPR OFFICIAL COURT REPORTER
6905
1 THE COURT: You want me --
2 MR. NEVILLE: But on the transcripts it just says
3 Scott and I think that is confusing.
4 THE COURT: I'll tell them. All right.
5 (Jury enters.)
6 THE COURT: Members of the jury, there is a
7 tape-recording played involving a Sterling Who's Who
8 conversation with a Scott Matthews. That is not the Scott
9 Michaelson that is a defendant in this case. I assume you
10 know that but I'm telling that to you anyway.
11 All right. You may proceed.
12 MR. WHITE: Your Honor, the government calls
13 Elliot Zerring.
14 (Continued.)
15
16
17
18
19
20
21
22
23
24
25
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6906
Zerring-direct/White

1 E L L I O T Z E R R I N G , having been first duly
2 sworn by the Clerk of the Court, was examined and
3 testified as follows:
4 THE WITNESS: Elliot Zerring, Z-E-R-R-I-N-G.
5 DIRECT EXAMINATION
6 BY MR. WHITE: /(.
7 Q Mr. Zerring, can you tell us how old you are?
8 A 50 years old.
9 Q Where do you live?
10 A Florida.
11 Q Are you married?
12 A Yes, I am.
13 Q Do you have any children?
14 A Yes, I do.
15 Q How many?
16 A Two.
17 Q Can you tell us how far you went in school?
18 A Graduated high school.
19 Q Now, are you currently employed?
20 A No, I'm not.
21 Q Now, can you tell us for most of your adult life,
22 what kind of work did you do?
23 A I was a public insurance adjuster.
24 Q And can you describe what a public insurance adjuster
25 does?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER

6907
Zerring-direct/White

1 A Yes. A public insurance adjuster is one who
2 presents, prepares and adjusts insurance claims on behalf
3 of a policyholder.
4 Q When you say he prepares, presents and adjusts a
5 claim, tell us specifically what he does?
6 A Well, as an example, if we were representing a
7 homeowner, someone who sustained a water damage or a fire
8 loss to their home, we would be called in to represent the
9 policyholder's interest. At that time we would go through
10 the process of preparing that claim with the policyholder
11 and present it ultimately to the insurance adjusters or
12 the insurance company's representatives in its entirety.
13 THE COURT: So in other words, you didn't work
14 for the insurance company. You worked for the person
15 making the claim?
16 THE WITNESS: That's correct, Your Honor.
17 THE COURT: All right.

18 BY MR. WHITE:
19 Q You represent the interests of the policyholder
20 against his insurance company?
21 A That's correct.
22 Q Now, can you describe for us how it is that a public
23 adjuster gets paid?
24 A Well, we receive at the outset, we are retained by a
25 contractual agreement for a fee of approximately 10 to 12
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6908
Zerring-direct/White

1 percent normally and at the end of that claim, when that
2 claim is adjusted, we at that point would receive our fee.
3 Q And it's 10 to 12 percent of what?
4 A 10 to 12 percent of the amount collected for the
5 policyholder.
6 THE COURT: Is that what is called a contingent
7 fee?
8 THE WITNESS: Yes, Your Honor.
9 THE COURT: Suppose there is nothing collected.
10 What happens?
11 THE WITNESS: We get zero.

12 BY MR. WHITE:
13 Q Now, are public insurance adjusters licensed by
14 anyone?
15 A Yes, they are.
16 Q By whom?
17 A We are licensed by the State of New York.
18 Q Can you tell us how long you were a public insurance
19 adjuster?
20 A From approximately 1965, 1966.
21 Q Until when?
22 A Until 1992, 1993 I was licensed.
23 Q Now, have you ever heard of a business called
24 Interstate Adjusters?
25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6909
Zerring-direct/White

1 Q And what was Interstate Adjusters?
2 A That was my company in which I had a 50 percent
3 interest in that company ownership.
4 Q When did you begin operations for that company?
5 A Approximately 1978.
6 Q Now, were you ever involved in submitting fraudulent
7 claims to insurance companies?
8 A Yes, I was.

9 Q Can you tell us approximately how many?
10 A Well, we handled many, many claims. Fraudulent
11 claims. I would say over my years working as a public
12 insurance adjuster, there were probably hundreds.
13 Q Can you describe for us how the typical fraudulent
14 insurance claim you were involved in would work?
15 A Once retained by the policyholder, we would then go
16 through the process of putting the claim together such as
17 if I may use as an example, if there was a homeowner who
18 suffered a fire, a water damage in their home, we would
19 then put together building estimates, inflate building
20 estimates for the structure or any improvements and
21 betterments in their home as well as prepare inventories
22 of the contents of that home such as clothing, furniture
23 and what have you, and inflate the value, meaning for
24 arguments sake, 200 garments, we would s ay 5 or 600
25 garments, if it was $20 or $30, we would say $50 or $60.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6910
Zerring-direct/White

1 The same way it would work with the structure of
2 the building or the betterments to the building such as
3 roof damage or damage to the instruction to the interior
4 structure, wall panelling, carpeting and so on.
5 Q Would you create any phony documents in support of
6 these inflated loss figures?
7 A Well, what we would do is if the actual damage to
8 someone's home, again, to the structure, let's say
9 hypothetical the actual damage was $5,000 or $10,000, we
10 would have estimates, written estimates for greater
11 numbers, maybe 20, 30, 40, $50,000. We're talking now,
12 you know, specifically in homeowners.
13 We also handled commercial losses which are much
14 larger losses.
15 Q Can you describe what you mean by a commercial loss?
16 A Someone who owned their own business, a manufacturer,
17 retail, store owner.
18 Q Would you take any steps to bribe insurance company
19 personnel in connection with these claims?
20 A Yes, we would.
21 Q Tell us what you would do.
22 A Well, during my long years in the -- the extensive
23 years in the business, I became friendly with the
24 representatives of the insurance company, their adjusters
25 would be assigned by the insurance companies, as well as
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6911
Zerring-direct/White

1 their experts such as builders, accountants, salvage
2 people who -- to explain what a salvage person is, someone
3 who determines what the values of certain items are such
4 as hard goods, garments, and so forth and so on.
5 Q And you were saying from your experience in the field
6 knowing these people, what would you do?
7 A Yes. I would, over the years, I was able to bribe
8 them and pay them money in order for them to go along with
9 the inflation of the claim and thus settle the loss for a
10 much greater amount than was actually sustained by the
11 policyholder. Thus, allowing me to earn a greater fee.
12 Q Now, where would you get the money that you would use
13 to pay these bribes to experts and insurance adjusters?
14 A What I would do is, after processing the claim or
15 during the course of processing the claim I would go to
16 the person who retained me which is the policyholder and I
17 would tell him that, for example, his actual loss was
18 $50,000. I told him that I could probably get him
19 somewhere like 100, $150,000, and that I would need, and
20 this is just an example, that I would need $25,000 in cash

21 to make payoffs for all of these people I just described
22 in order for them to sign off on the claim in order for us
23 to effectuate that settlement of 150, $200,000.
24 Q Now, in the case of these fraudulent insurance
25 claims, how would you and your adjusting firm get paid?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6912
Zerring-direct/White

1 A Basically two ways. We would get paid by check, and
2 we would also get paid by U.S. currency in cash in order
3 that we may pay off the adjusters and accountants and
4 their experts.
5 Q Now, let's take those two ways separately.
6 The check that you would get, what would that
7 represent?
8 A That would represent our fee in which we would take
9 that fee and deposit it into our business, our corporate
10 business in which I owned 50 percent of.
11 Q Is that the 10 to 12 percent fe e you described
12 before?
13 A That's correct.
14 Q And what is the cash you said you would get? How
15 much of that would stay with you and your firm?
16 A Well, whatever cash we would receive, myself
17 included, would make the payoffs to those people that I
18 bribed and the balance of that cash I would retain in my
19 office. And we had our own pool where each of the
20 adjusters in my office would get a percentage of the
21 amount of cash that we retained and spread it around in
22 that fashion.
23 Q Were you involved in a fraudulent claim by a company
24 called Rafella Sports?
25 A Yes, I was.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6913
Zerring-direct/White

1 Q Can you tell us how that claim first began?
2 A Well, it started -- I was originally contacted by an
3 insurance broker who I did business with, you k now, some
4 years ago, and he asked me to come to his home one
5 evening. He advised me at that time that he was
6 recommending a new account, quite a large account, Rafella
7 Sportswear in the garment business and asked me my opinion
8 who I should write the insurance with. I gave him my
9 opinion.
10 He asked me at that time was National Union or
11 American International Group a good insurance company and
12 would they give me good service and I told them absolutely
13 correct.
14 Q You say American Insurance Group?
15 A American International Group.
16 Q Is that known by the initials AIG?
17 A That's correct. I believe they are the parent.
18 Q Now, what happened next in connection with this
19 claim?
20 A At sometime after having meetings with him and being
21 called to his home, he then advised me that he retained a
22 client and secur ed the insurance for the Rafella people
23 and he had asked me at this point he would like me to meet
24 with his policyholder which I consented to do.
25 Q And what happened at that meeting?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6914
Zerring-direct/White

1 A At that meeting the policyholder, I met him in a
2 restaurant in midtown, New York, and at that meeting the
3 policyholder asked me if I'm familiar with the policy that
4 was written and I told him I was. He asked me do I know
5 the people, if I had some type of a claim or what have
6 you, would you be able to get me good service,
7 satisfactory service. I told him I would.
8 Q Did you understand that he was asking you to
9 participate in a fraudulent insurance claim?
10 A Well, I felt that that's what it was leading up to,
11 yes.
12 Q Did there come a point when you learned o f a loss
13 sustained by Rafella Sportswear?
14 A Yes, I did.
15 Q When was that?
16 A That was in September of 1989.
17 Q And what happened after that? I'm sorry, let me ask
18 a different question.
19 What sort of loss did Rafella Sportswear sustain?
20 A They sustained a water damage actually from their
21 sprinkler system.
22 Q Where did they sustain the damage?
23 A The damage was sustained in a large warehouse
24 facility in Bayonne, New Jersey.
25 Q Tell us what sort of business Rafella Sportswear was?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6915
Zerring-direct/White

1 A Basically importer, manufacturers of ladies
2 sportswear. Actually they were specifically in the
3 coordinate business.
4 Q You mentioned water damage.
5 Can you explain a little more precisely what sort
6 of damage they sust ained.
7 A Yes. There was water as a result of sprinkler heads
8 that discharged in their warehouse.
9 Q Now, did you then participate in a scheme to inflate
10 their insurance claim?
11 A Yes, I did.
12 Q How did you do that?
13 A Well, first, initially the loss was reported to my
14 office by their insurance broker. I received a call that
15 morning in my office in Long Island at the time and I was
16 notified that there was an insurance claim. And the
17 insurance broker who called that claim into me advised me
18 that I would be receiving a call from the policyholder
19 which I did shortly after that.
20 And he called me, I believe it was from his car
21 and advised me that he sustained a water damage loss at
22 his premises, at Bayonne, New Jersey, and asked me if I
23 would meet him at the loss premises, which I did.
24 Q What happened there?

25 A I drove out to the premises and we walked around and
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6916
Zerring-direct/White

1 he showed me the facility and what I viewed when I got
2 there was that there were sprinkler heads that had
3 discharged. Some of the sprinkler heads were on the
4 floor, there was some water on the floor and he started to
5 ask me questions and discuss the loss, what could I do for
6 him? How well could I do for him? So forth and so on,
7 and I told him at that point I really continue tell until
8 we got an adjuster assigned to the case from the insurance
9 company and I would call my office.
10 I had somebody in my office that handled that
11 function that was familiar with the insurance companies
12 and how they assigned losses and we ultimately, he
13 ultimately -- we were able to handpick the adjusters who
14 wanted to represent -- who were going to represent the
15 insurance company.
16 Q Why was it important to handpick those adjusters?
17 A Well, we wanted to have somebody, that, number one,
18 we had a prior relationship with, people that we paid off
19 in the past so we would be able to inflate the claim and
20 ultimately get a large settlement as possible.
21 Q How large did you inflate the claim that was
22 submitted?
23 A As I walked through the warehouse and viewed the
24 fact, I was told that a few sprinkler heads had
25 discharged. I was also told at that point that there were
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6917
Zerring-direct/White

1 many other sprinkler heads what he called or they called
2 leaky heads, they didn't actually discharge but just
3 leaking.
4 Q Can you explain what you mean by sprinkler heads in a

5 warehouse?
6 A A sprinkler system is basically there for if in the
7 event of a fire to basically limit the spread of that
8 fire, to contain it in the area where it started. And
9 that's what the function of a sprinkler system does.
10 Q What was the ostensible explanation as to why these
11 sprinkler heads had gone off in this warehouse?
12 A They said it was as a result of a freeze up.
13 Q Was there water damage below the water heads?
14 A Yes.
15 Q You were walking through the warehouse, continue.
16 A We were walking through the warehouse and I was
17 advised at that time there were three, four, five, six
18 sprinkler heads that actually discharged. Some of the
19 heads as I said were on the floor. I was told there were
20 other heads that were leaking that actually didn't
21 discharge and spray the water out.
22 So I suggested to the owner at th e time who I was
23 with that he call the plumber in, call the plumber back
24 and have him replace all of those leaky heads which may
25 have been another 20 or 30 heads, and the thing and the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6918
Zerring-direct/White

1 reason for this, this would give me a wider range of area
2 in order to make a larger claim because at that point the
3 insurance company's people were not there and they would
4 not have any idea of the scope of damage, you know. And
5 since this was a 50, 60,000, approximately, square foot
6 warehouse we then had a larger area to work with and a
7 larger area to inflate this claim.
8 THE COURT: How far would fixing leaky sprinkler
9 heads enlarge the claim?
10 THE WITNESS: Because the actual damage sustained
11 from the actual heads that went off were basically in a
12 square foot area. By replacing sprinkler heads at the
13 other portions of the aisles of the warehouse would
14 basically, to the insurance company's representative,
15 believe there were damages there that would not --
16 THE COURT: The replacement would be to pretend
17 they were leaking or discharged?
18 THE WITNESS: That's correct.
19 BY MR. WHITE:
20 Q In a normal circumstance when a sprinkler system goes
21 off, the heads need to be replaced because they have
22 discharged?
23 A Yes.
24 Q If an insurance adjuster came in and saw this, they
25 saw new heads?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6919
Zerring-direct/White

1 A Yes.
2 Q So you wanted to replace more?
3 A Yes.
4 Q And therefore the merchandise underneath them would
5 also theoretically potentially have been damaged?
6 A That's correct. They would be part of my claim.
7 Q Now, was a claim submitted to AIG regarding this
8 loss?
9 A Yes, it was.
10 Q And can you give us -- what else besides inflating
11 the inventory did you do in connection with that claim?
12 A Well, the process of preparing the claim was as
13 follows: We had several meetings, because it was quite a
14 large claim, we had several meetings with the insurance
15 company's representatives.
16 The first meeting which occurred that afternoon
17 was with an adjuster and because of the size of the claim
18 the way it was reported, he called in another adjuster to
19 co-adjust with him as well as the fact that I heard that
20 one of the adjusters, one of the senior guys was going to
21 be retiring. That's the fellow that was initially called
22 in. And I had told my -- one of my employees, my adjuster
23 when I heard that to see if he could assign another
24 adjuster in the case in the event that he was leaving to
25 co-adjust this with him, so that we had all the right
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6920
Zerring-direct/White

1 people in place to handle this loss.
2 Q Did you bribe any insurance company representatives
3 in connection with this claim?
4 A Yes, I did.
5 Q Who?
6 A Jeff Fougere.
7 Q And who is he?
8 A He was a general adjuster representing the National
9 Union Insurance Company which is part of the AIG Group.
10 Q How much did you pay that insurance company adjuster?
11 A Oh, somewhere around 75 to $100,000 in United States
12 currency.
13 Q Now, can you give us an estimate of the actual
14 damages that were sustained by Rafella Sportswear?
15 A In my opinion, when I first viewed the premises and
16 walked ar ound with the owner, it was my opinion that there
17 could have been probably or approximately $2,000,000 in
18 damages, could have been a little more, a little less,
19 that was just an eyeball.
20 Q Is that physical damage?
21 A That's physical damage. Meaning that was the actual
22 damage sustained to the garments itself.
23 Q Did the policy cover any other sorts of damages?
24 A Yes, it did. It covered something called, which was
25 provided in the insurance policy, consequential loss
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6921
Zerring-direct/White

1 coverage.
2 Q And can you tell us just in summary in laymans terms
3 what that means?
4 A Yes. That's a coverage that provides for a loss of
5 value to the undamaged portion of the property of the
6 garments, such if there was a lady's suit and the physical
7 damage hit the jacket, the pants were not damaged, but it
8 would have an effect on the loss of value.
9 There would be a loss of value if sold to a
10 department store what have you, as well as broken sizes,
11 lots and colors, meaning if sizes 2 and 4 were damaged,
12 that the rest of the lot or the rest of that range of
13 merchandise would lose value.
14 Q Now, adding in both of those kinds of damages, can
15 you give us a rough idea what the approximate losses
16 sustained by Rafella was?
17 A The consequential loss area wasn't really my forte.
18 I had an in-house CPA that handled that area and he worked
19 on that portion of the claim, but I would say my best
20 guess that as a result the consequential could have been a
21 couple million, possibly.
22 Q So that would make the total damage at 5 or
23 6,000,000, approximately?
24 A At most.
25 Q Can you tell u s how much the insurance company
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6922
Zerring-direct/White

1 eventually paid on this claim to Rafella?
2 A In excess of $19,000,000.
3 Q And can you tell us how much did your firm Interstate
4 Adjusters get from that claim?
5 A We received a fee of probably close to $3,000,000.
6 Q And what was your share of that $3,000,000?
7 A Well, I was a 50 percent owner of the company, so
8 that money went into the corporation into our company
9 account.
10 Q And did you receive any cash as a result of your
11 participation in the Rafella claim?
12 A Yes. Over a period of time we told the insured or
13 the policyholder we needed cash and over a period of time
14 he gave us, and we asked him, about a half million in
15 cash.
16 Q After you paid bribes to various people, how much did
17 you r firm pertain in cash?
18 A We retained approximately $300,000 for myself and my
19 company.
20 Q Were you involved in a fraudulent claim involving a
21 policyholder named Criterion Bead?
22 A Yes, I was.
23 Q What was Criterion Bead?
24 A They were an importer of novelty merchandise from
25 overseas, the Far East, I guess.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6923
Zerring-direct/White

1 Q Approximately when did they sustain a loss?
2 A I believe it was around April of 1991.
3 Q And where did they sustain this loss?
4 A At their warehouse facility in Woodside, Queens.
5 Q What sort of loss did they sustain?
6 A Well, the proximate cause of loss was fire, meaning
7 that the loss resulted as a fire. The fire started
8 outside their building on some wood pallets and
9 communicated into the building, thus causing spr inkler
10 heads to discharge.
11 Q And did they have an insurance policy covering that
12 kind of loss?
13 A Yes, they did.
14 Q With what insurance company?
15 A With the Chubb Insurance Group, Chubb Insurance
16 Company.
17 Q That's C-H-U-B-B, right?
18 A Yes.
19 Q Were you retained as a public adjuster for Criterion
20 Bead?
21 A Yes, I was.
22 Q Did you inflate that claim?
23 A Grossly inflated.
24 Q Tell us again in summary how you did that.
25 A Well, as I stated, the fire occurred adjacent to the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6924
Zerring-direct/White

1 building, I guess the heat and the fire communicated into
2 the building causing a couple sprinkler heads to activate,
3 discharge, maybe one, two, or three, approximately. What
4 we did was ultimately we did a physical inve ntory of the
5 entire premises and stated that there was smoke throughout
6 the premises.
7 Q When there was not?
8 A When there was not.
9 Q Did you bribe any insurance company representatives
10 in connection with this claim?
11 A Well, in this particular case my partner was friendly
12 and bribed the adjuster who was representing the Chubb
13 people.
14 Q Can you give us, again, a rough estimate what the
15 actual damages sustained by Criterion Bead was?
16 A My best guess was, 100, $200,000.
17 Q Can you tell us approximately the insurance company
18 paid in this claim to Criterion Bead?
19 A In excess of $16,000,000.
20 Q What was your adjusting firm's share of that payout?
21 A The nature of the business was such where since they
22 were importers they really did not have any cash. So all
23 of my entire fee was by check. I would say r oughly we
24 received a fee, I would approximate, somewhere between 3
25 and $400,000 or upwards.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6925
Zerring-direct/White

1 Q Mr. Zerring, did there come a time when federal
2 agents executed a search warrant at the offices of your
3 adjusting firm?
4 A Yes.
5 Q Can you tell us when that was?
6 A December 9, 1992.
7 Q And were you arrested at that time?
8 A No, I was not.
9 Q Now, after that search warrant, did you obtain an
10 attorney?
11 A Yes, I did.
12 Q Now, after you obtained an attorney, what did you do?
13 A I met with my attorney and shortly after that
14 approximately December 29, 1992, we voluntarily went into
15 the U.S. Attorney's Office and at that point we did what
16 we called a proffer. We started to give over all of the
17 information, all of the wrongdoings --
18 THE COURT: Do you want to pull the mike closer
19 to you, please.
20 THE WITNESS: Yes.
21 A We proffered, December 29, 1992, shortly after the
22 holidays, we came in voluntarily to meet with the U.S.
23 Attorney's Office. We met with two U.S. Assistant
24 Attorneys and an agent of the FBI, Inspector Biegelman,
25 and my attorney was present and we at the time started
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6926
Zerring-direct/White

1 what they call a proffer. We started to give information,
2 all the information of all the wrongdoings and all the
3 fraudulent schemes and what have you over to the
4 government.
5 Q Now, did you agree to cooperate with the government?
6 A Yes, I did.
7 Q And did you eventually sign a cooperation agreement?
8 A Yes, I did.
9 Q And when was that?
10 A That was approximately April of 1993.
11 Q Now, did you eventually plead guilty?
12 A Yes, I did.
13 Q When was that?
14 A That was in August of 1993.
15 Q Can you tell us what you pled guilty to?
16 A Yes. I pled guilty to two counts of mail fraud and
17 one count of income tax evasion.
18 Q And what do the two counts of mail fraud or what did
19 the two counts of mail fraud you pled guilty to relate to?
20 A One was the Rafella Sportswear claim and one was the
21 Criterion Bead claim.
22 Q And can you tell us what the tax charge you pled
23 guilty to related to?
24 A To the Rafella Sportswear claim.
25 Q Now, are you testifying here today as part of your
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6927
Zerring-direct/White

1 agreement with the government?
2 A Yes, I am.
3 Q Tell us what your understanding is o f what you have
4 to do under that agreement?
5 A To tell the truth. To be truthful with the
6 government. To tell the truth. To give full cooperation
7 to them. To go undercover, if need be. To be debriefed,
8 to work with the Internal Revenue Service, to pay back all
9 the taxes during the period of 1990, December 1990 that I
10 understated.
11 Q What's your understanding of what the government has
12 agreed to do if you fully cooperate?
13 A Well, if I fully cooperate and I give substantial
14 assistance, what have you, they can then at that point
15 depart from the original guidelines, I guess, and
16 recommend or write what they call a 5K letter to the
17 Judge.
18 Q And if the government writes its 5K letter, what is
19 your understanding what the Judge can do?
20 A Well, he could depart from the original guidelines.
21 Q Now, have you been sen tenced yet?
22 A No, I have not.
23 Q Can you tell us what's your understanding of what the
24 maximum sentence you could face is?
25 A Five years per count, $250,000 fine per count, court
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6928
Zerring-direct/White

1 costs, restitution.
2 Q In terms of the jail sentence, could your sentences
3 be consecutive? What's the total amount of time you could
4 face?
5 A Fifteen years.
6 Q Now, have you repaid the IRS the taxes that you
7 evaded?
8 A Yes, I have.
9 Q Have you received any promises from the government
10 about what sentence you will receive?
11 A None whatsoever.
12 Q Have you received any promises from anyone about what
13 sentence you will receive?
14 A No.
15 Q Can you tell us who will ultimately determines what
16 your sentence will be?

17 A The Honorable Judge Wexler.
18 Q And let me draw your attention to late 1994.
19 At that time were you cooperating with the
20 government?
21 A Yes, I was.
22 Q And did you assist postal inspectors in connection
23 with an investigation of Who's Who Worldwide around that
24 time?
25 A Yes, I did.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6929
Zerring-direct/White

1 Q Can you tell us what you were asked to do at that
2 time?
3 A Yes. I was asked to, from a local newspaper, I was
4 asked to call and set up an interview with the Who's Who
5 Worldwide people, which I did. And I set up an
6 appointment. At that time I spoke to one of the people
7 from Who's Who and they advised me -- they asked me what I
8 did. They basically said to me that you need about one
9 year experience and I told them that I had no exper ience
10 in that field and I advised them that I was in the
11 insurance field and I was basically in sales and they said
12 that would be fine.
13 Q And what sort of position were you applying for
14 there?
15 A For a sales position in telemarketing.
16 Q Who asked you, who from the postal inspectors asked
17 you to do this?
18 A Inspector Biegelman.
19 Q Did you receive any instructions from the postal
20 inspectors regarding what you were to do once you got a
21 job there?
22 A Yeah. Basically to be wearing a concealed
23 tape-recorder and I should tape, do my tape-recordings
24 throughout the day, the full day while working there. And
25 also to follow whatever, while working there, what was the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6930
Zerring-direct/White

1 norm in their day-to-day operation. Reading the scr ipts,
2 including whatever was the norm in their business.
3 Q Did you eventually go to work there?
4 A Yes, I did.
5 Q When was that?
6 A Well, I first had -- I first had an interview
7 approximately on November 28, 1994, with Ed Schaeffer. I
8 met with him for a short time, approximately 20 minutes,
9 and he gave me an overview of what the business was
10 about. He also gave me some materials to take home to
11 review and said to me that I could start on December 6th,
12 which I did.
13 Q And what office did you work in?
14 A The Lake Success office.
15 Q Now, did you record what took place while you worked
16 there?
17 A Yes, I did.
18 Q And what did you do with the tapes that you made?
19 A I turned them over to Inspector Biegelman.
20 Q If you could briefly take a look at Exhibits 13-87
21 through 14-03 (handing.)
22 A 13-87, to where? I'm sorry.
23 Q To the end of the book. Please page through it, if
24 you could.
25 A Okay. (Perusing.)
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6931
Zerring-direct/White

1 Q Mr. Zerring, let me stop you there.
2 In addition to paging through them there, have
3 you had an opportunity to review those transcripts and the
4 corresponding tape-recordings prior to the trial?
5 A Yes.
6 Q And the ones you've looked through, are those a
7 portion of the tape-recordings you've made while you were
8 employed at Who's Who Worldwide?
9 A Just a portion of them, yes.
10 Q While you were at Who's Who Worldwide, were you given
11 a name to use on the phone with customers?
12 A Yes, I was.
13 Q What was that?
14 A Elliot Zale, Z-A-L-E.
15 Q Who gave you that name?
16 A I believe it was one of the managers, Ed Schaeffer,
17 Tara Green or Frank Martin. I believe one of them.
18 Q How long did you work at Who's Who Worldwide?
19 A From, I started working there, as I said, December
20 6th, and I was terminated I believe it was February 15th.
21 Q Of what year?
22 A 1995.
23 Q So approximately how many weeks did you work there?
24 A I think it was roughly 10 to 12 weeks.
25 Q And what were the circumstances of your termination?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6932
Zerring-direct/White

1 A Lack of production.
2 Q Did you receive paychecks from Who's Who Worldwide
3 while you were employed there?
4 A I believe I did receive some paychecks.
5 Q Did you cash these paychecks?
6 A No, I did not.
7 Q What did you do with them?
8 A I turned them over to Inspector Biegelman.
9 MR. WHITE: Your Honor, if I c ould just have a
10 moment?
11 THE COURT: Yes.
12 (Counsel confer.)
13 BY MR. WHITE:
14 Q Now, Mr. Zerring, in your guilty plea have you taken
15 any steps to assist the insurance companies that you
16 defrauded in recovering the monies that they paid out?
17 A Yes, I have.
18 Q And could you tell us, please, what you've done?
19 A I've testified on their behalf, on behalf of the
20 insurance companies to recover those monies.
21 Q In what sort of proceedings have you testified?
22 A I testified under oath, you know, before the
23 insurance companies and the insurance companies'
24 representatives.
25 Q Was that in a deposition?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6933
Zerring-cross/Nelson

1 A That was in a deposition, yes.
2 Q Who was that lawsuit against?
3 A That lawsuit was against Rafella S portswear.
4 MR. WHITE: Your Honor, I have no further
5 questions.
6 THE COURT: Cross-examination.
7 CROSS-EXAMINATION
8 BY MR. NELSON: /(.
9 Q Good afternoon, Mr. Zerring.
10 Let me ask you something. Have you spent a
11 single minute in jail?
12 A No, sir.
13 Q You pled guilty to three felony charges, right?
14 A Correct.
15 Q That was in 1993; is that right?
16 A Yes.
17 Q And in the past five years after ripping off all of
18 these companies for millions of dollars, you still haven't
19 spent a single minute in jail; is that right?
20 A Yes.
21 Q Now, two of the charges involved mail fraud; is that
22 correct?
23 A Yes.
24 Q One of the charges was filing false income tax
25 returns, correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6934
Zerring-cross/Nelson

1 A Yes.
2 Q Now, when you pled guilty it was on August 26, 1993,
3 right?
4 A August of 1993.
5 Q Am I correct that the first felony charge of mail
6 fraud concerns your participation in a scheme whereby
7 water damage to Rafella Sportswear was overstated it as a
8 subsidiary of the AIG Insurance Company?
9 A Yes.
10 Q And you were employed at that time as a public
11 adjuster working for the various different claimants, but
12 you would submit the claims to the insurance carriers; is
13 that correct?
14 A Yes.
15 Q And I believe you said after an inspection of the
16 premises and your bribery of a number of different
17 individuals, the total claim for water damage to those
18 premises amounted to 19.5 million; is that correct?
19 A Approximately, that's correct.
20 Q And the total damage was approximately $4,000,000, at
21 best?

22 A Approximately.
23 Q And AIG issued a check in excess of 10.5 million
24 promised upon this fraudulently overstated claim; is that
25 correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6935
Zerring-cross/Nelson

1 A Partially.
2 Q Now, this crime was committed by you in 1990; is that
3 right? Rafella Sportswear.
4 A When the loss occurred.
5 Q The loss occurred in 1990; is that right?
6 A Somewhere around '89, '90, correct.
7 Q The second felony of mail fraud, that relates to your
8 participation in 1991 in this claim against Chubb
9 Insurance Company; is that correct?
10 A Yes.
11 Q And in that one you assisted in the filing of a claim
12 where you falsely overstated water damage to Criterion
13 Bead & Novelty Company?
14 A That's correct.
15 Q And that claim was for $16,000,000, right?
16 A Yes.
17 Q And the loss was about $400,000; is that right?
18 A I don't know if it was that much.
19 Q Two or 300,000, actually?
20 A Yes.
21 Q Now, your third felony charge concerns your filing of
22 a false income tax return for 1990; is that right?
23 A Yes.
24 Q Now, am I correct that in 1978, you and an individual
25 by the name of Robert Greenberg, established and became
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6936
Zerring-cross/Nelson

1 equal partners in a company called Interstate Adjusting
2 Corporation?
3 A That's correct.
4 Q You were both 50/50 partners in that company; is that
5 right?
6 A Yes.
7 Q And as you explained, when Mr. White was questioning
8 you, you would review losses caused as a result of fire or
9 water damage or other kind of occurrence for presentation
10 of claims to i nsurance companies, right?
11 A Yes.
12 Q And the insurance companies relied upon you to
13 accurately apprise them of the claims of damages for
14 losses?
15 A Could you repeat that, please?
16 Q The insurance companies were relying upon you to
17 provide accurate information for them to evaluate the
18 claims for payment of insurance; is that right?
19 A I guess the policyholders were relying on me to
20 present proper claims.
21 Q Let's take them one at a time.
22 You worked for the policyholder, right?
23 A Yes.
24 Q The policyholders weren't relying upon you to provide
25 accurate claims, they were hiring you for your connections
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6937
Zerring-cross/Nelson

1 with the insurance companies so you could rip off the
2 insurance companies, right?
3 A Some were and some w ere not.
4 Q A great number of people came to you between 1978 and
5 1992 when you were finally caught for the specific purpose
6 of your connections with insurance carriers so that they
7 could acquire money for losses that grossly overstated the
8 amount of loss they had acquired; is that right?
9 A Some yes; some not.
10 Q Let's go to the other side of the coin.
11 You were licensed by the State of New York; is
12 that right?
13 A Yes.
14 Q And the State of New York, when they gave you that
15 license, expected that you were going to be providing
16 accurate and truthful information to the insurance
17 companies; is that right?
18 A Yes.
19 Q And the insurance companies were relying upon you as
20 a licensed public adjuster to provide accurate and
21 truthful information to them for the purpose of processing
22 of these claims; is that ri ght?
23 A Yes.
24 Q Now, obviously you violated the trust of the State of
25 New York in your license and all of the insurance
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6938
Zerring-cross/Nelson

1 companies you ripped off; is that right?
2 A Yes.
3 Q Am I correct you actually never assisted any of your
4 clients in staging any claims? You didn't burn down
5 buildings yourself. You are not an arsonist, right?
6 A That's correct.
7 Q You were, however, aware as it relates to Rafella
8 Sportswear, your first felon conviction of mail fraud,
9 that the insured parties, your clients, the owners of the
10 premises, were going to stage a claim. Were going to
11 cause intentional damage to that premises before it ever
12 took place; isn't that right?
13 A Yes and no.
14 Q Yes and no.
15 You testified before a federal g rand jury, did
16 you not?
17 A Yes.
18 Q I would like to direct your attention to 3500-23-LLL,
19 pages 26 and 27.
20 Do you recall having given this testimony on July
21 13, 1993 under questioning by an Assistant United States
22 Attorney by the name of Mark Kirsch, K-I-R-S-C-H, starting
23 on line 13.
24 "Question: So, again, what did you understand
25 all this was leading up to?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6939
Zerring-cross/Nelson

1 "Answer: To me it was leading up to that there
2 was going to be, it seemed certain, there was going to be
3 a loss occurring.
4 "Question: After that, at your home, will you
5 describe yourself as comfortable or uncomfortable?
6 "Answer: I was very uncomfortable because of my
7 20 some-odd years in the business. It is uncomfortable
8 for me to have knowledge pri or to an actual loss
9 occurring.
10 "Question: It is uncomfortable for you to have
11 knowledge or for other people to know you have knowledge?
12 "Answer: Both.
13 "Question: Now, the loss of Rafella was reported
14 to you on or about December 21, 1989; is that correct?
15 "Answer: Yes."
16 Do you recall being asked those questions and
17 giving those answers in relation to the loss at Rafella
18 Sportswear before a federal grand jury on July 13, 1993?
19 A Yes.
20 Q So am I correct, sir, that in fact you were well
21 aware before the loss actually occurred that in fact your
22 clients, the owners of those premises were going to stage
23 a loss before it took place?
24 A It seemed that way to me.
25 Q But you swore under oath before a federal grand jury
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6940
Zerring-cross/Nelson

1 that you knew it in advance; is that right?
2 A I believe that I said that it seemed like it was
3 leading up to that.
4 Q Gee, maybe I should read it through again. "To me it
5 was leading up to that. It seemed certain there was going
6 to be a loss occurring."
7 Do you recall giving that testimony?
8 A Yes.
9 Q That means that there was going to be a loss, and you
10 knew there was going to be a loss before it happened;
11 isn't that right, sir?
12 A Yes, that's what it seemed like to me, correct.
13 Q And you agreed to participate in later filing a claim
14 for them knowing that they had intentionally caused the
15 damage at Rafella Sportswear; isn't that right?
16 A Yes, I did file the claim later.
17 Q And that was with knowledge that it seemed certain
18 that before the loss occurred that they were going to be
19 filing this clai m; is that right?
20 A It seemed that way.
21 Q Now, am I correct you were involved in inflating many
22 claims for damage, in addition to the two that you pled
23 guilty to; is that right?
24 A Yes.
25 Q Am I correct that what you would do is you would take
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6941
Zerring-cross/Nelson

1 back money, in other words, give bribes to various
2 different insurance brokers -- excuse me, claims
3 adjusters, that you had created a relationship with over
4 the years that you had been a public adjuster; is that
5 right?
6 A Yes.
7 Q And what you would do is over the course of time, you
8 found people who were weak and susceptible and were
9 prepared to pay cash under the table in order to allow you
10 for them to be paying clients for grossly inflated claims;
11 is that right?
12 A I don't understand that question.
13 Q Let's break them down one part at a time.
14 You received a contingency fee for the work you
15 did?
16 A Yes.
17 Q The more you did, the more of a claim you got?
18 A Yes.
19 Q Over the course of claim, you, when you first started
20 in business as a licensed adjuster, licensed and bonded in
21 the state of New York, you were honest and scrupulous in
22 your business; is that right?
23 A Yes.
24 Q During the course of time you eventually started
25 forming a relationship with various different employees of
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6942
Zerring-cross/Nelson

1 insurance companies, right?
2 A Yes, but I have to retract a prior statement when you
3 mentioned when I started going into business. Prior to
4 going into business I was employed by someone else and I

5 was at that time fraudulently putting together as well.
6 Q So before 1978, somebody else had taught you the
7 business; is that right?
8 A Basically.
9 Q They had taught you how to rip off insurance
10 companies going back to before '78?
11 A Yes.
12 Q They started to introduce you to different insurance
13 company employees who were prepared to take money under
14 the table to look the other way when grossly inflated
15 claims were presented; is that right?
16 A Yes.
17 Q And so when you went into business, you were going
18 into business initially under the intention of defrauding
19 insurance companies; is that right?
20 A Not in its entirety, but yes, true.
21 Q From 1978 up to the execution of a search warrant in
22 1992, you were regularly and actively in the business of
23 defrauding insurance companies; is that right?
24 A Ye s and no.
25 Q Well, some claims were honest, some weren't, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6943
Zerring-cross/Nelson

1 A That's exactly what I'm saying.
2 Q Rafella Sportswear, that is one of the many that
3 wasn't; is that right?
4 A Yes.
5 Q Now, you indicated that the way things were is that
6 since you were on a contingency, the client would receive
7 a greater sum of money for the grossly -- for an inflated
8 claim and likewise you would receive a percentage of that
9 inflated claim, right?
10 A Can you repeat that back to me?
11 Q Right.
12 You were on a contingency basis?
13 A Yes.
14 Q And on a contingency basis if a $9,000,000 loss
15 actually became $19,000,000, if you were receiving 10
16 percent, obviously you received a much greater commission
17 on it; is that right?
18 A Yes.
19 Q And the greater the inflation of the claim the
20 greater the commission you would receive; is that right?
21 A Yes.
22 Q And am I correct that you were in a pool with a
23 number of other people who inflated these claims as well?
24 A Yes.
25 Q And there were a number of different public adjusters
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6944
Zerring-cross/Nelson

1 who you worked with and who worked with these crooked
2 insurance employees in order to create this pool where
3 various different clients would come to all of you and all
4 of this kickback money would wind up going into a large
5 pool; is that right?
6 A More or less, yes.
7 Q Am I correct that what the pool reflected is the
8 money which was the difference between the actual loss and
9 the amount that was paid, less any bribes?
10 A I don't understand that.
11 Q But what the pool consisted of was the difference
12 between the amount of commission you received for the
13 grossly inflated claim, less what the actual loss would
14 be; is that correct?
15 A No, I don't believe that you have that right.
16 Q Okay. Let's break it down then.
17 Let's say that you have a $10,000,000 loss,
18 okay.
19 A Okay.
20 Q The true loss is $1,000,000, okay.
21 A Yes.
22 Q Your commission for that would be $1,000,000 if it
23 was 10 percent, correct?
24 A Yes.
25 Q And the $1,000,000 would go into a pool. Is that the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6945
Zerring-cross/Nelson

1 way it worked?
2 A No.
3 Q What amount would go into the pool?
4 A The amount, in addition to the fee you just stated,
5 we would ask or tell the policyholder we n eeded X-amount
6 in order to receive that $1,000,000 and that amount of
7 money that we received in cash, part of that would go off
8 to pay the people and the balance that didn't go off to
9 pay the people would be retained in my own office which
10 was part of our pool.
11 Q So would your pool consist of less than a million or
12 more than a million?
13 A I don't understand the question.
14 Q You are getting 1,000,000 commission?
15 A The figure is $1,000,000.
16 Q Right.
17 And it should be a $100,000 fee, right?
18 A Right.
19 Q So you are getting $900,000 in unlawful money from
20 ripping off the insurance company, right?
21 A Yes.
22 Q Okay.
23 In addition to that you are receiving other
24 monies as well, is that what you are telling me?
25 A That's what I'm saying.
OWEN M. WICKER, RPR OFFICIAL COURT REPORT ER
6946
Zerring-cross/Nelson

1 Q Was that other money you receive on top of the 900
2 grand that you are getting?
3 A That's the money I stated is cash to use to bribe
4 people to pay them off in order to be able to get that
5 $10,000,000 loss paid for, or $1,000,000 loss.
6 Q So you wouldn't reach into your own pocket to pay off
7 the bribe, you had your client pay the bribe so it
8 wouldn't interfere with the amount of money in your pool,
9 right?
10 A I can't answer that question yes or no.
11 Q Now, am I correct that between 1990 and 1992, you
12 received 30 percent of this total pool? That was your
13 percentage of the pool?
14 A I believe that's approximately correct.
15 Q And between 1988 and 1990, you received 32 and-a-half
16 percent of the pooling?
17 A Yes.
18 Q Now, the total pool or the total amount that went

19 into there each year, as best as you could recall, is how
20 much money between those years?
21 A Well --
22 Q I'll withdraw the question.
23 Am I correct that your share of the pool in 1991
24 and 1992 was computed by the government after your proffer
25 sessions with them to come out to about $37,500 per year?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6947
Zerring-cross/Nelson

1 A I believe what you are talking about is something
2 that occurred over a five or six-year period on average.
3 Q Right.
4 A Okay.
5 Q Do you recall that it was computed as about $37,500
6 per year in 1991 and 1992?
7 A No, it was more. One of those years was more.
8 Q We'll get to that year in a moment, the Rafella
9 Sportswear.
10 In '91 and '92, was it about 37,500?
11 A That was probably an average, yes.
12 Q In 1989, was it about 40,000?
13 A Again, it was an approximate average.
14 Q And in '86-'87, a little bit earlier on, it was about
15 30,000 per year; is that right?
16 A Without seeing the paperwork, you know, just
17 estimating what I said, you know, that was an average.
18 Q In 1990, am I correct, and that's the Rafella
19 Sportswear year --
20 A Right.
21 Q -- Your share was considerably greater; isn't that
22 right?
23 A Yes.
24 Q In that year, am I correct, it includes the Rafella
25 Sportswear loss where you were aware that the insurance
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6948
Zerring-cross/Nelson

1 company, that the insured was going to stage the loss
2 before it occurred, right?
3 A What is the question?
4 Q The question is that the year you received a greater
5 sum of money, 1990, that's the year of the Raf ella
6 Sportswear loss; is that right?
7 A Yes.
8 Q And the Rafella Sportswear loss, that's the one where
9 you previously told us you were aware that the client was
10 going to stage the loss before it took place; is that
11 right?
12 A That's what I said before.
13 Q And your share that you received in 1990 from the
14 pool, was $90,000 in cash; is that right?
15 A Approximately, right.
16 Q And in fact, almost all of the money that you
17 received throughout this period of time from the pool was
18 in cash; isn't that right?
19 A Repeat that, please?
20 Q Almost all of the money that you received out of the
21 pool was in cash; isn't that right?
22 A Yes.
23 Q And so you received in cash from say 1986 up to 1992
24 3 or 400,000 in cash; isn't that right?
25 A How do you compute that?
OWEN M. WICKER, RPR OFFICIA L COURT REPORTER
6949
Zerring-cross/Nelson

1 Q Let's go through it one year at a time.
2 THE COURT: I'll tell you we'll go through it
3 after lunch.
4 MR. NELSON: Okay.
5 THE COURT: Members of the jury, let's take a
6 recess now.
7 Don't discuss the case. Keep an open mind.
8 We'll recess until 1:30.
9 (Luncheon recess taken.)
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
6950
Zerring-cross/Nelson

1 A F T E R N O O N S E S S I O N.
2 MR. WHITE: Your Honor, we have a customer who is
3 here to testify today. She wasn't here and ready to go
4 previously.
5 THE COURT: Where is she from?
6 MR. WHITE: Your Honor, she is from the Bronx,

7 but I just wondered if we could reach an appropriate time
8 today.
9 THE COURT: Well, put her on now.
10 MR. WHITE: That's okay wit