8003 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, : and MARTIN 9 REFFSIN, : TRANSCRIPT OF TRIAL 10 Defendants. :March 17, 1998 11 - - - - - - - - - - - - - - X 9:30 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 8004 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 MrShortcut, 15 150 Nassau Street New York, New York 10038 16 JOHN S. WALLENSTEIN, ESQ. 17 For Mart
in 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 (Case called.)
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8005 1 THE COURT: Where is Mr. Lee? Will somebody get 2 him, please?
3 Mr. Trabulus, you want to see me.
4 MR. TRABULUS: Your Honor, all I want to do is
5 I'm handing up defendant Gordon's request to charge. I've
6 given a copy to all counsel.
7 THE COURT: Hand it up.
8 MR. SCHOER: Judge, I will have a request to
9 charge. I have an original and courtesy copy to the 10 Court. 11 MR. TRABULUS: And does Your Honor want a 12 courtesy copy?
13 THE COURT: Sure. 14 MR. TRABULUS: I'll get one for you. 15 THE COURT: Hand it up. 16 Thank you. 17 Are we ready to proceed? 18 Let's bring in the jury. 19 (Jury enters.) 20 THE COURT: Good morning, members of the jury. 21 Please be seated. 22 Thank you again for your diligence in staying 23 with it. This period of time and having the nice 24 disposition that you appear to have, or is it because the 25 trial is coming to an end. I don't know what it is, but
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8006 Reffsin-direct/Wallenstein
1 you seem to be in good form for which I'm happy to see. 2 You may proceed.
3 MR. WALLENSTEIN: Thank you, Your Honor.
4 M A R T I N R E F F S I N , having been previously
5 sworn by the Clerk of the Court, was examined and
6 testified as follows:
7 DIRECT EXAMINA
TION
8 BY MR. WALLENSTEIN:
9 Q Mr. Reffsin, we've heard a significant amount of 10 testimony in this trial with respect to the loans that 11 Bruce Gordon took from Who's Who Worldwide. And you were 12 present when Mr. Rosenblatt testified with respect to the 13 treatment of those loans as loans rather than income? 14 A Yes. Yes, I was. 15 Q Can you explain why you treated them as loans and 16 under what circumstances you would have treated them as 17 income? 18 A Well, obviously Mr. Gordon did not say they were 19 income. Mr. Gordon said they were loans. To the extent 20 that he could prove to me they were loans, they would 21 remain loans. I explained to Mr. Gordon that in order for 22 them to be deemed loans he would have to meet certain 23 requirements such as repayment. 24 Q And did you see evidence of repayment? 25 A Yes. In January of 1993 he repaid $235,000.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8007 Reffsin-direct/Wallenstein
1 Q And would it be a fair statement that it was the 2 intention of Mr. Gordon based on what he told you that the
3 loans would in fact be repaid over time?
4 A Yes. We had several discussions during the course of
5 time in which he guaranteed me that the loans would be
6 repaid.
7 Q Now, you prepared the 433 A collection information
8 statements?
9 A Yes. 10 Q At what point in time? 11 A Around May. That's when they were physically 12 prepared. 13 Q Of what year? 14 A 1993. 15 Q And would it be a fair statement at the time you 16 prepared them you did not have the benefit of what we now 17 have which is almost five years of hindsight? 18 A That's correct. 19 Q So the bankruptcy had not yet occurred? 20
A That's correct. 21 Q And based upon information that you had from 22 Mr. Gordon and other sources, what was your expectation 23 with respect to 1994? 24 A 1994 was the year that Mr. Gordon agreed and I had 25 indicated that he would have to repay all the loans.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8008 Reffsin-direct/Wallenstein
1 Q That was your understanding in 1993? 2 A That's correct.
3 Q And did something occur that prevented that from
4 happening in 1994?
5 A Yes, the bankruptcy.
6 Q And that was in March of 1994?
7 A That's correct.
8 Q And with respect to the tax returns that were filed
9 on Mr. Gordon's behalf, would it be a fair statement you 10 treated the loans as loans and not income on those 11 returns? 12 A Yes, I did. 13 Q And that's for the reasons you've already stated; is 14
that correct? 15 A Yes. 16 Q Did you at any time enter into any agreement with 17 Mr. Gordon with respect to -- withdrawn. 18 Did you at any time have an agreement with 19 Mr. Gordon to in any way impede the Internal Revenue 20 Service? 21 A Absolutely not. 22 Q Was it your intention to file his returns and prepare 23 his financial returns in accord with your interpretation 24 of accountable principles? 25 A Yes, it was.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8009 Reffsin-cross/White
1 Q And in accord with your interpretation of the 2 Internal Revenue Code?
3 A Not the Internal Revenue Code. The needs of the
4 offer and compromise agent.
5 Q Did you prepare the documents and act on Mr. Gordon's
6 behalf in accord with your understanding of IRS procedures
7 and the law?
8 A Yes, I did.
9 MR
. WALLENSTEIN: I have no further questions. 10 CROSS-EXAMINATION. 11 BY MR. WHITE: 12 Q Mr. Reffsin, let me see if I understand your 13 testimony. Is it your testimony that if any inaccurate 14 information was provided to the IRS, it wasn't done 15 knowingly by you? 16 A Inaccurate? 17 Q Yes. 18 A There was no inaccurate information prepared provided 19 to the IRS. 20 Q Well, you've heard testimony -- well -- 21 THE COURT: Just hold it a minute, Mr. White. 22 You may proceed. 23 BY MR. WHITE: 24 Q Mr. Reffsin, let me show you Government's Exhibit 425 25 in evidence. That's a document that the jury has in their
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8010 Reffsin-cross/White
1 books. 2 Now, that's a letter you sent to Frank Gagliardi
3 of the IRS; is that right?
4 A Yes, it is.
5 Q
And that was in response to Mr. Gagliardi's letter
6 where he said he noticed unusual deposits in Mr. Gordon's
7 personal bank account, do you recall that?
8 A Yes, I do.
9 Q One of the things you attached to this letter which 10 is noted in paragraph 1 is a copy of a note that 11 Mr. Gordon signed to Joyce Grossman for $15,000, right? 12 A Yes. 13 Q If you turn the page to 425A, if you take it out of 14 the plastic, 425A is a copy of that note, right? 15 A Yes, it is. 16 Q And you've been present in court and heard testimony 17 that Mr. Gordon's son wasn't even dead on the date that 18 promissory note was executed, right? 19 A This was not presented by me. This was presented by 20 Mr. Gordon. 21 Q Mr. Reffsin, look at 425. 22 Who signed that letter? 23 A I did. 24 Q And it says, it's addressed to Mr. Gagliardi and it 25 says "pursu
ant to your request I have attached the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8011 Reffsin-cross/White
1 following information for your file." 2 Do you see that?
3 A Yes.
4 Q So you got that from Mr. Gordon, right?
5 A Yes.
6 Q And, so, you understand, do you not -- withdrawn.
7 You recall that Mrs. Grossman testified she never
8 made this loan and never even saw this note. Do you
9 remember that testimony? 10 A Yes, I do. 11 Q So I want to make sure I understand your testimony. 12 Mr. Gordon gave you that and if this is inaccurate, you 13 are saying you didn't know? 14 A That's correct. 15 Q So if this is completely bogus, Mr. Gordon lied to 16 you; is that your testimony? 17 A That's correct. 18 Q Look at 425B. 19 Mr. Gordon gave you that too, right? 20 A Yes, he did. 21 Q And
if this is bogus then Mr. Gordon lied to you; is 22 that correct? 23 A That's correct. 24 Q Now, you indicated also to the IRS that -- well, you 25 -- let me rephrase my question.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8012 Reffsin-cross/White
1 Is it fair to say that the documents you 2 submitted in connection with the offer and compromise
3 indicated that Mr. Gordon had no ownership interest in
4 Who's Who Worldwide?
5 A Yes.
6 Q And you've heard the Grossmans' testimony at this
7 trial that they did not own 100 percent, they owned merely
8 25 percent. Do you recall that?
9 A Yes, I do. 10 Q So, again, that information is inaccurate, right? 11 A Yes, at this point I know it is inaccurate. Yes. 12 Q And, again, it's your testimony that if that 13 information is inaccurate it is because Mr. Gordon told 14 y
ou inaccurate information; is that right? 15 A That's correct. 16 Q Now, you also indicated that you were aware of the 17 condominium at Hummingbird Road; is that correct? 18 A Yes. 19 Q And you were aware, were you not, that Mr. Gordon was 20 living there? 21 A I was aware he used it, yes. 22 Q And you were aware, were you not, that Mr. Gordon 23 claimed that it was for business purposes and not 24 personal, right? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8013 Reffsin-cross/White
1 Q And isn't it correct that you told Inspector 2 Biegelman and Agent Jordan that you thought that that
3 claim was "bullshit"?
4 A No, I didn't say that quite like that.
5 Q You didn't say that?
6 A I said it may be bullshit, but I couldn't make that
7 determination at that time.
8 Q But you thought it might be
bullshit?
9 A Yes, he's telling me something. I have to believe 10 what he's telling me at the time he tells it to me. 11 Q But at the time you were talking to them, you didn't 12 believe it. You were thinking it was bullshit, right? 13 MR. WALLENSTEIN: Objection. 14 THE COURT: Overruled. 15 A Well, it's difficult to say because of everything 16 that happened between the time he purchased the 17 condominium and the time we had the discussion. Things 18 changed. And it's possible his position changed in terms 19 of the condominium. 20 Q Tell us what made you think that maybe it was 21 bullshit? 22 MR. WALLENSTEIN: Objection. 23 THE COURT: Overruled. 24 BY MR. WHITE: 25 Q What did you base that on?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8014 Reffsin-cross/White
1 A I didn't say. I said it may have been bullsh
it, only 2 time would tell me whether it was or not. The fact of the
3 occurrences that happened in 1993 and the fact that he
4 didn't open up the California office when he said he was
5 going to open up the California office. The fact that he
6 got involved in a legal battle with Reed Elsevier and
7 started to incur all of those expenses and the fact of the
8 bankruptcy, the time-frame was such that it was difficult
9 to know whether he was bullshiting at the time or not 10 bullshiting because how do you bring it into proper 11 perspective? 12 Q Well, you also testified that Mr. Gordon told you 13 that the 235,000 from Dr. Grossman in January of 1993 was 14 a loan to Mr. Gordon from Dr. Grossman; is that right? 15 A That's correct. 16 Q And he told you that -- Mr. Gordon was then applying 17 that to reduce his loan balance; is that correct? 18 A Yes, that's
correct. 19 Q And you did that? 20 A Yes. 21 Q You've also been here for Dr. Grossman's testimony, 22 have you not, where he said he only gave that money back 23 because Mr. Gordon said he needed it for business purposes 24 to print the registry. You heard that, right? 25 A Yes, I heard.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8015 Reffsin-cross/White
1 MR. TRABULUS: Objection. 2 THE COURT: Overruled.
3 BY MR. WHITE:
4 Q So once again, is that an example of some situation
5 where Mr. Gordon gave you misleading information?
6 A Yes.
7 Q Mr. Reffsin, is it fair to say that you feel used by
8 Mr. Gordon?
9 A To a certain extent, yes. 10 Q Is it fair to say that you think his lies got you 11 into the trouble you are in now? 12 A Yes, I believe that. 13 Q You think that because he lied to you an
d you passed 14 that on to the IRS, you're in trouble now; is that 15 correct? 16 A That's correct. 17 MR. WALLENSTEIN: Objection. 18 THE COURT: Sustained. Strike out the answer. 19 The jury is instructed to disregard it. 20 BY MR. WHITE: 21 Q Now, I want to ask you about how you learned about 22 the ownership of the company. 23 You testified yesterday that in February or March 24 of 1992 you had a telephone conversation with Richard 25 Grossman; is that right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8016 Reffsin-cross/White
1 A Yes. 2 Q And the occasion for that conversation was that a
3 portion of what the Grossmans owned of Who's Who Worldwide
4 was being shifted into Dr. Grossman's pension plan; is
5 that right?
6 A Yes.
7 Q And you saw, you said, some sort of a fax that
8 indicated tha
t fact to you that they only owned 20 or 25
9 percent. You weren't clear; is that right? 10 A Yes. 11 Q Do I have all of that right? 12 A Yes. 13 Q And is it correct that you said that was the first 14 time you realized that the Grossmans owned 25 percent? 15 A Yes. 16 Q And am I correct that prior to that you thought 17 Mr. Gordon owned 100? 18 A Yes. 19 Q And after you saw this, you came to the conclusion 20 that the Grossmans owned 25 and Mr. Gordon owned 75; is 21 that correct? 22 A That's correct. 23 Q Now, Mr. Reffsin, again, you said this conversation 24 took place in February or March of 1992? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8017 Reffsin-cross/White
1 Q And, again, you're confident that the contention in 2 which in took place was the shifting of a portion of the
3
Grossmans interest into Dr. Grossman's pension plan; is
4 that right?
5 A That and the calculation of the interest on the note.
6 Q Take a look at Government's Exhibit 581 which is in
7 evidence.
8 Now, that is an assignment agreement which is
9 shifting a portion of the Grossmans interest into 10 Dr. Grossman's pension plan? 11 A Yes. 12 Q And do you recall Dr. Grossman testified the only 13 change in the apportionment of the ownership that ever 14 took place? 15 A That's correct. 16 Q Why don't you read for us what the date is on the 17 first line. 18 A Agreement dated as of September 4, 1990. 19 Q And were you here for Dr. Grossman's testimony when 20 he said that that's around when he signed it? 21 A I don't specifically recall that. 22 Q It says as of September 1990; is that right? 23 A That's correct. 24 Q So that wou
ld be almost 18 months before you say that 25 this conversation with him took place, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8018 Reffsin-cross/White
1 A Yes. 2 Q And in connection with this trial, you've had
3 occasion to review the exhibits that have been admitted in
4 evidence, right?
5 A Yes.
6 Q Even prepared a chart based on a number of them,
7 right?
8 A Yes.
9 Q Take a look at Exhibit 415 which is Who's Who 10 Worldwide's 1990 corporate tax return. If you can take 11 that out of the plastic and look at it. 12 Mr. Reffsin, that's signed by you as the 13 preparer, right? 14 A That's correct. 15 Q And that was signed by you and Mr. Gordon in 16 September of 1991, correct? 17 A That's correct. 18 Q And if you turn to the second page, does it indicate 19 what ownership interest Mr
. Gordon has in the company? 20 A Yes. 100 percent. 21 Q So in September of 1991 you indicated that he owned 22 100 percent? 23 A That's what I believed at that time, yes. 24 Q Now, look at Exhibit 416 in evidence which is Who's 25 Who Worldwide's 1991 corporate return.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8019 Reffsin-cross/White
1 Now, again, you prepared it, correct? 2 A My firm prepared it, yes.
3 Q Your firm prepared it.
4 A Right.
5 Q And what is the date -- look at the received stamp.
6 Does it indicate that it was received in June of 1992?
7 A Yes, it does.
8 Q And look on page 2. What percentage does it indicate
9 Mr. Gordon owned of the company? 10 A 75 percent. 11 Q So in June -- let me get this right. In September of 12 1991 you told the IRS on this form that he owned 100 13 percent?
14 A Correct. 15 Q In June of 1992 you told them he owned 75 percent, 16 right? 17 A Yes. 18 Q So isn't it true that he knew you had to come up with 19 an explanation between those two dates as to why you 20 changed the percentage? 21 MR. WALLENSTEIN: Objection. 22 THE COURT: Sustained as to form. 23 I don't understand that. Explanation to who? 24 BY MR. WHITE: 25 Q In your testimony didn't you anticipate that you
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8020 Reffsin-cross/White
1 would be asked why you changed the ownership from 100 2 percent to 75 percent?
3 MR. WALLENSTEIN: Objection.
4 THE COURT: Sustained.
5 BY MR. WHITE:
6 Q Is it not correct that the time when you say you had
7 this conversation with Dr. Grossman fits very nicely
8 between those two dates that those returns were filed
?
9 MR. WALLENSTEIN: Objection. 10 THE COURT: Sustained. 11 BY MR. WHITE: 12 Q It's between those two dates that the returns were 13 filed, right? 14 A Yes. 15 Q And is it fair to say that if you had said that you 16 had this conversation with Dr. Grossman prior to September 17 of 1991, it would be inconsistent with that return? 18 MR. WALLENSTEIN: Objection. 19 THE COURT: Overruled. 20 A I don't understand the question. 21 Q Well, in September of 1991 on the 1990 return, you 22 told the government that Gordon owned 100 percent, right? 23 A Yes. 24 Q So if you said that you had learned about 25 Dr. Grossman's 25 percent interest prior to that, it would
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8021 Reffsin-cross/White
1 be inconsistent with what you put on this return, right? 2 MR. WALLENSTEIN: Object
ion.
3 THE COURT: Overruled.
4 A Yes.
5 Q And if you said that you had had this conversation
6 after June of 1992, it would be inconsistent with the next
7 corporate return you filed, right?
8 A I guess so.
9 Q Let's go to the next stage of this ownership issue. 10 You said that eventually you came to believe that 11 the Grossmans owned 100 percent instead of just 25, right? 12 A Yes. 13 Q And you said it was in late 1992 that you had a 14 "combination discussion with Mr. Gordon." Is that right? 15 A Yes. 16 Q And the combination was about the loan and exchange 17 account on one hand and also Mr. Gordon told you that he 18 didn't own 75 percent, that the Grossmans owned it all, 19 right? 20 A He referred to that, yes. 21 Q And you said you demanded that Mr. Gordon show you 22 stock certificates to prove it; is that right? 2
3 A At some point, yes, I did. 24 Q Well, you indicated, did you not, that shortly 25 thereafter he showed you the stock certificate?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8022 Reffsin-cross/White
1 A Yes, sometime in March he said he found them. 2 Q Sometime then in early 1993 he shows you stock
3 certificates, right?
4 A That's correct.
5 Q And you said yesterday that the stock certificates
6 were signed by the Grossmans when you saw them, right?
7 A They appeared to be in order, yes.
8 Q Now, take a look at Exhibits 585 and 586 in evidence
9 which are the Who's Who Worldwide stock certificates. 10 Those are the certificates that you saw, right? 11 A (Perusing.) Yes. 12 Q And they appear to be the same, right, in the same 13 state as when you saw them? 14 A Yes. 15 Q They were signed by the Grossmans? 16
A Yes. 17 Q They were signed by Mr. Gordon? 18 A Yes. 19 Q They had the name of the shareholders filled in, 20 right? 21 A Yes. 22 Q They had the names -- they had the amount of shares 23 listed, right? 24 A Yes. 25 Q So those documents are what you saw in early 1993
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8023 Reffsin-cross/White
1 that satisfied you that they owned 100 percent, right? 2 A Yes.
3 Q Now, Mr. Reffsin, let me she you Government's Exhibit
4 584 in evidence.
5 Now, that is called a Waiver of Special Notice of
6 the Who's Who Worldwide Board of Directors, right?
7 A Yes.
8 Q You were here when Ms. Dietrich, the scientist from
9 the IRS lab testified probably a month and-a-half ago now? 10 A Yes. 11 Q And do you recall Ms. Dietrich testifying that based 12 on the indent
ations on the document, that this Exhibit 584 13 was on top of 585, one of the stock certificates when it 14 was signed by Richard Grossman? 15 A Yes, I recall her testimony. 16 Q And she said 584 was on top of 585 when it was signed 17 by Richard Grossman, right? 18 A Yes. 19 Q Now -- 20 MR. WHITE: Just one moment, Your Honor. I'm 21 trying to find the documents. 22 BY MR. WHITE: 23 Q Now, Mr. Reffsin, let me show you Government's 24 Exhibit 671 in evidence which is a fax from Steven Adler, 25 attorney at law to you on March 30, 1994.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8024 Reffsin-cross/White
1 If you page through that can you tell us if you 2 see the unsigned version of this Waiver of Notice, Exhibit
3 584?
4 A Yes, I do.
5 Q You do.
6 And Mr. Adler prepared those documents at your
7 request, right?
8 A At Mr. Gordon's request.
9 Q Via you, though, right? 10 A I was there, yes. 11 Q Okay. 12 And what -- if you look at the cover sheet what 13 Mr. Adler is faxing you there are drafts, right? He wants 14 your approval or comments, right? 15 A (Perusing.) No, they are not. They are revisions. 16 Q Okay. They are revisions. Yes. 17 A Yes. 18 Q So Mr. Adler hadn't even finalized these documents in 19 March of 1994; isn't that right? 20 A That's correct. 21 Q Now, somehow that finished document supposedly was 22 signed on top of a stock certificate that you saw back in 23 early 1993, is that what you're saying? 24 A I saw a stock certificate -- 25 MR. WALLENSTEIN: Objection.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8025 Reffsin-cross/White
1 THE COURT: Overruled. 2 A I saw a
stock certificate in mid '93.
3 Q But answer my question. Your testimony is that that
4 document which wasn't even finished in March of '94 was
5 signed on top of a stock certificate that you say you saw
6 signed by Dr. Grossman back in early '93?
7 MR. WALLENSTEIN: Objection.
8 THE COURT: Sustained.
9 BY MR. WHITE: 10 Q I want to ask you about the loans that Mr. Gordon 11 took from Who's Who Worldwide. 12 You said yesterday that you had a conversation 13 with him in December of '92 where you told him that the 14 loan accounts were getting much too high and they would 15 have to be repaid; is that right? 16 A That's correct. 17 Q And you said yesterday that Mr. Gordon insisted that 18 he would repay them, right? 19 A That's correct. 20 Q And you said yesterday and you repeated this morning 21 that you and he agreed that he would pay it back
sometime 22 in 1994; is that right? 23 A No. I said that if it wasn't repaid by the end of 24 '94, we would have to recognize it as income. 25 Q Now, isn't it true, Mr. Reffsin, that you told a
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8026 Reffsin-cross/White
1 number of different versions of this story at different 2 times to agents?
3 MR. WALLENSTEIN: Objection.
4 THE COURT: Overruled.
5 A It is true that I've seen twists of the versions that
6 I've said with specific agents, not that I've said
7 anything different.
8 Q So you've been entirely consistent throughout, of
9 course? 10 A Of course. 11 Q Of course. 12 MR. WALLENSTEIN: Objection. 13 THE COURT: Please do not make those comments, 14 Mr. White. Sustained. 15 I'm instructing the jury that remarks that are 16 not in the form of quest
ions, they are uncalled for, and 17 you should disregard them. 18 BY MR. WHITE: 19 Q Now, you recall that you were interviewed by 20 Inspector Biegelman and Agent Jordan in May of 1995 at 21 your office, right? 22 A I don't recall that interview, but yes, they said 23 they interviewed me. 24 Q Do you recall Agent Jordan's testimony that it took 25 about an hour, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8027 Reffsin-cross/White
1 A Yes, I don't recall. 2 Q That May 17th meeting?
3 A I don't disagree that it happened, I don't recall it.
4 Q I want to make sure I understand.
5 You sat down with two federal agents for an hour
6 and discussed the criminal investigation of one of your
7 clients and you don't remember it?
8 A I don't remember the specifics of that discussion,
9 that's correct. 10 Q A
re you saying that you don't remember the specifics 11 of what was discussed or you don't even recall the 12 meeting? 13 A I don't remember the specifics as to what was 14 discussed. 15 Q Now, in that meeting you told them that you had 16 concerns about whether or not these loans were really 17 income, right? 18 A Well, I always have those concerns whenever a client 19 takes loans. 20 Q My question is, Mr. Reffsin, did you tell them in 21 that interview that you had concerns whether or not these 22 loans were income? 23 A I'm sure I did. 24 Q And you told them that you discussed it with 25 Mr. Gordon?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8028 Reffsin-cross/White
1 A Yes, it would be negligent if I didn't. 2 Q And at the time in that interview you told them that
3 Mr. Gordon's response was that he said he
would deal with
4 it at that time when it became a problem. Do you remember
5 that?
6 A He said he would deal with them --
7 Q My question is, what you said to the agents in May of
8 1995. Isn't it true you said to them that in this
9 discussion when you raised the issue about the loan, 10 Mr. Gordon's response was that he would deal with it at 11 that time? 12 Yes or no? 13 A I don't remember that specifically. 14 Q Isn't it true that in that interview when you 15 recounted this conversation that you had with Mr. Gordon 16 about the loan, you never said anything about Mr. Gordon 17 saying he was going to repay it? 18 MR. WALLENSTEIN: Objection. 19 THE COURT: Overruled. 20 A I don't remember the details so I don't remember 21 whether I said anything. 22 Q So you wouldn't remember whether or not Mr. Gordon, 23 whether or not you told
them -- let me rephrase the 24 question. 25 Now, in addition to that you met with agents
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8029 Reffsin-cross/White
1 again at the U.S. Attorney's Office in January of 1997; is 2 that right?
3 A Yes.
4 Q You came to the U.S. Attorney's Office in Brooklyn,
5 right?
6 A Yes.
7 Q And you came there with your attorney, right?
8 A That's correct.
9 Q It wasn't Mr. Wallenstein, but another attorney, 10 correct? 11 A Yes. 12 Q And at that meeting I was present, right? 13 A Yes. 14 Q And Agent Jordan was present? 15 A Yes. 16 Q And Inspector Pagano was present? 17 A Yes. 18 Q And we sat in a conference room and you answered the 19 government's questions, right? 20 A That's correct. 21 Q And do you recall the specifics of that meeting
? 22 A Most of them, yes. 23 Q Now, do you recall -- 24 MR. TRABULUS: Objection, Your Honor. May we 25 approach?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8030 Reffsin-cross/White
1 THE COURT: Yes, come up. 2 (Side bar.)
3 MR. TRABULUS: Your Honor, the difficulty I had
4 is that Mr. White elicited that he was present at the
5 meeting and now by asking questions about it of the sort I
6 was making him essentially an unsworn witness. Frankly,
7 it just came up quickly. I'm still thinking about what
8 the proper remedy is, but it puts us in a very difficult
9 situation. 10 THE COURT: I think you're right. I thought 11 about the same thing. What were you intending to bring 12 out about this, Mr. White? 13 MR. WHITE: Your Honor, he has made a number -- 14 he made in that proffer session a number of extremely
15 contradictory statements to his trial testimony. 16 THE COURT: Isn't the proffer statement normally 17 confidential and not to be revealed? 18 MR. WHITE: No, the terms of the proffer are that 19 it explicitly says it can be used if the defendant is 20 prosecuted and he testifies that it can be used for 21 cross-examination. 22 MR. WALLENSTEIN: I certainly concede that's the 23 case, but I think Mr. Trabulus is correct that Mr. White 24 has subjected himself to the trial -- 25 THE COURT: Mr. White, as being one of the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8031 Reffsin-cross/White
1 participants in the meeting, you'll put yourself into the 2 position of cross-examining him with the raising of your
3 voice and everything. That will give the jury the idea
4 that you were there and you disagreed with them. You're
5 calling him a li
ar.
6 MR. WHITE: Your Honor, that can be frequently
7 defendants' proffers come up with both witnesses and
8 defendants where the Assistant is present. That in and of
9 itself, the fact of the Assistant's presence in the 10 meeting doesn't necessarily mean it is a topic that is off 11 bounds. 12 THE COURT: I never heard of that before. I 13 never had a case where the prosecuting attorney himself is 14 questioning a witness, a defendant, about a meeting that 15 the prosecutor, that that prosecutor had with the 16 defendant. I don't recall ever having anything like that, 17 Mr. White. You must be in a different kind of world than 18 I am. I don't recall anything like that ever happening. 19 I'm not going to permit it to him. 20 MR. WHITE: Your Honor, there's -- 21 THE COURT: You will not be an unsworn witness. 22 MR. WHITE: Your Honor -- 23 THE COURT:
I think Mr. Trabulus is correct. 24 MR. WHITE: Your Honor, let me just address this 25 for a minute here.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8032 Reffsin-cross/White
1 Mr. Reffsin's statements in the proffer are so 2 contradictory to what he testified at the trial yesterday
3 that it would completely -- it would make a complete
4 mockery of the fact-finding process to exclude his
5 testimony for some reason. I think if Your Honor thinks
6 there is a problem, a strong charge to the jury, and I
7 will not repeat it again obviously, I only did that so the
8 participants would be -- the setting would be described,
9 that -- I don't know how to fashion it, but something 10 along the lines that I'm not indicating in some way what I 11 think or whatever because if he does not agree, Your 12 Honor, that what I ask him about he said at the proffer
, 13 Agent Jordan is prepared to testify in rebuttal. So 14 there's no real harm in doing that. 15 THE COURT: There is harm in it because you are 16 now cross-examining him and by the tone of the 17 cross-examination you indicate your disbelief of what he 18 said because you were there. So I'm not going to permit 19 it. I don't care what he said, how harmful it is to the 20 government's case. You are directed not to go into that 21 meeting. 22 MR. WHITE: Your Honor, are you saying that a 23 simple slip of the tongue has now rendered highly 24 probative evidence inadmissible? 25 THE COURT: When you say "slip of the tongue,"
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8033 Reffsin-cross/White
1 whose tongue slipped? 2 MR. WHITE: Mine is what you're telling me.
3 THE COURT: By saying the truth that you were
4 there at time.
5 MR. WHITE: Right.
6 THE COURT: How could you avowed that? It's not
7 a slip of the tongue. I don't think -- I don't agree with
8 you at all and I am directing you to refrain from going
9 into that. If you want to put rebuttal testimony in that 10 you think is admissible, put it in, but you will not 11 cross-examine him on a meeting that you conducted with 12 him. I don't like it. 13 MR. WHITE: Your Honor, are you saying that 14 cross-examination shouldn't be permitted because I was at 15 the meeting or because testimony was elicited that I was 16 at the meeting. 17 THE COURT: Yes, because you were at the meeting 18 and you become in the nature of, I fear, an unsworn 19 witness. 20 MR. WHITE: Your Honor, that would make no sense 21 because then the Assistant who handles the case, the 22 defendant proffers and then he's prosecuted, he knows he
23 can testify and he can be cross-examined by an Assistant 24 who doesn't know about the case? 25 THE COURT: Mr. White, I've said it three times,
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8034 Reffsin-cross/White
1 you understood it, you agree with it and you questioned 2 it. Anything else you want? But you are directed from
3 you or anyone else cross-examining him on the basis of you
4 being at that meeting. I'm directing you to stay away
5 from it.
6 MS. SCOTT: I'm attempting to find a case that
7 attempts to go into this.
8 THE COURT: Go ahead, find a case.
9 MR. WHITE: Your Honor, can we do this, can we 10 bifurcate things so that Ms. Scott at a later point asks 11 questions about the proffer. 12 MR. TRABULUS: I would object to that. 13 MR. WALLENSTEIN: So would I. 14 MR. TRABULUS: On top of the fact that he was
15 present at that proffer that is before the jury and it 16 will always be before the jury, there is no way to take 17 that away from the jury. 18 THE COURT: How can he avoid saying that he was 19 there? He couldn't tell a mistruth about it. 20 MR. TRABULUS: Well, he could have simply said, 21 Your Honor, did you attend a meeting and were the agents 22 present and question them there and the agents could have 23 rebutted it or it would have been up for us to bring in 24 whether or not Mr. White was there and the jury would 25 never have heard about it. The fact that the jury heard
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8035 Reffsin-cross/White
1 about it and his being there, I'm not concerned about 2 that.
3 MR. TRABULUS: I'm concerned about what
4 Ms. Scott --
5 THE COURT: Well, my intellect tells me when I'm
6 in doubt
I do without. And I'm in doubt.
7 If you have a case that says this, fine. I don't
8 think you will find one.
9 MR. WHITE: Your Honor, may I ask in light of 10 this, I will have to reorder my cross-examination. 11 THE COURT: Happens all the time. Happened to me 12 for 25 years. I managed to survivor. 13 MR. WHITE: Can we take our ten-minute break 14 early? 15 THE COURT: Fine. Do you want to take it now? 16 MR. WHITE: Yes. 17 MR. WALLENSTEIN: Your Honor, Mr. White has a 18 tendency to ask Mr. Reffsin questions that are prefaced 19 that "you were here for the testimony of Thursday and so 20 you heard this witness say." And that language coupled 21 with to some degree his tone implicates Mr. Reffsin's 22 constitutional right to be present and indicates to the 23 jury, I think, that Mr. White's feeling that Mr. Reffsin's 24 testimony is to be tailored t
o meet previous witnesses and 25 I would direct him to refrain from prefacing questions in
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8036 Reffsin-cross/White
1 that fashion. 2 MR. WHITE: Your Honor, the fact that I'm
3 pointing it out because it is different from Mr. Reffsin's
4 testimony.
5 MR. WALLENSTEIN: I agree it is different but --
6 THE COURT: Once taking a stand, the prosecutor
7 has a right to say did you hear certain testimony? I
8 think he has a right and I'm overruling your objection and
9 I'm denying your request. 10 We'll take a ten-minute recess. 11 (End side bar.) 12 THE COURT: Members of the jury, we'll take an 13 early ten-minute recess. 14 Please don't discuss the case. Keep an open 15 mind. 16 (Jury exits.) 17 (Recess taken.) 18 (Jury enters.) 19 THE COURT: Please be seat
ed, members of the 20 jury. 21 You may proceed, Mr. White. 22 BY MR. WHITE: 23 Q Now, Mr. Reffsin, you said here yesterday that in 24 December of 1992 you told Mr. Gordon that there has to be 25 repayments, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8037 Reffsin-cross/White
1 A Yes. 2 Q And he, I think the word you used this morning he
3 guaranteed you there would be repayments, right?
4 A He said there would be repayments.
5 Q And you learned of such a repayment in January of
6 '93, that money from Dr. Grossman?
7 A Actually subsequent to that, when the bank
8 reconciliations were done.
9 Q So it happened in January of '93 and you learned 10 about it later? 11 A Right. 12 Q Let me go back to the May of 1995 interview with 13 Inspector Biegelman and Agent Jordan. 14 Do you recall tellin
g them at that time of your 15 conversation with Mr. Gordon and telling them that there 16 had been little or no repayments of that loan by 17 Mr. Gordon? 18 A I honestly don't remember. 19 Q And do you know a man named Michael Hynes? 20 A Yes, I do. 21 Q Michael Hynes did per diem accounting work? 22 A Yes. 23 Q And among the things he did was work on the Who's Who 24 Worldwide books? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8038 Reffsin-cross/White
1 Q Do you recall telling the agents that day that 2 Mr. Hynes actually did an analysis of the loan account and
3 he had concerns whether it would be income also?
4 A Yes, he would.
5 Q And in fact, you referred the agents to Mr. Hynes.
6 You gave him his address, right?
7 A Well, they requested it, so I gave it to them.
8 Q Is it fair to say t
hat over the course of the period
9 from say 1991 through 1994, that you repeatedly told 10 Mr. Gordon that you were concerned that the loans could be 11 income? 12 A Yes. 13 Q And when you say repeatedly, would that be maybe a 14 half dozen times or more? 15 A Certainly year end, and maybe one other time, because 16 the year end he made the determinations as to what the 17 loan balances would be. 18 Q Is it fair to say that you were doubting whether or 19 not he was really going to repay these? 20 MR. WALLENSTEIN: Objection. 21 THE COURT: Sustained as to form. 22 BY MR. WHITE: 23 Q Did you believe that he was going to repay these 24 loans? 25 MR. WALLENSTEIN: Objection.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8039 Reffsin-cross/White
1 THE COURT: Overruled. 2 A If he told me so, I believed him.
3 Q If he told you so once, why didn't you just believe
4 him? Why did you go back and continue to ask him?
5 A There is no set time period in terms of repayments of
6 loans. I mean, a year or so to repay $200,000 worth of
7 loans is not a significant amount of time.
8 Q Well, you said that Mr. Gordon and you or Mr. Gordon
9 told you he would pay it back or you would have to call it 10 income by 1994; is that right? 11 A Right. 12 Q And if I understood your testimony yesterday 13 correctly, you said that what had intervened was the 14 bankruptcy, right? 15 A That's correct. 16 Q Now, is it not correct -- let me back up. 17 You explained to Mr. Wallenstein something about 18 how something couldn't be done during the bankruptcy 19 proceeding so he could pay back the loan, right? 20 A Right. You couldn't just transfer assets out of the 21 estate i
nto the expense account without the approval of 22 the bankruptcy court or at least the creditor's committee. 23 Q Isn't it true, though, that Mr. Gordon could have 24 gotten money from another source to repay that loan to 25 Who's Who Worldwide?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8040 Reffsin-cross/White
1 MR. WALLENSTEIN: Objection. 2 THE COURT: Sustained.
3 BY MR. WHITE:
4 Q Well, if Mr. Gordon had say asked Dr. Grossman for
5 money again, he could have used that to repay the loan to
6 Who's Who Worldwide?
7 MR. WALLENSTEIN: Objection.
8 MR. TRABULUS: Objection.
9 THE COURT: Sustained. 10 BY MR. WHITE: 11 Q Well, a loan can be paid back -- let me back up. 12 You were looking at the repayment of the loan not 13 where he got the money from, correct? 14 A That's correct. 15 Q So if he got it fr
om another source and repaid it, 16 that would be fine with you, that would be a repayment, 17 correct? 18 A Correct. 19 Q Now, isn't it correct that Mr. Gordon borrowed money 20 from other entities in 1994? 21 A Other entities in 1994? 22 Q Yes. 23 A I know there were monies taken out, but I'm not 24 familiar exactly with what was taken out. We did not look 25 at the books and records of the other entities for 1994.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8041 Reffsin-cross/White
1 Q Take a look at what is in evidence as Government's 2 Exhibit 734. It's a check from Who's Who Executive Club
3 to American Express dated August 16, 1994, and it's for
4 the total of $47,000, $47,487.83.
5 Do you see that check, Mr. Reffsin?
6 A Yes, I do.
7 Q And tell us what the check number is?
8 A 1025.
9 Q Now, tak
e a look at Exhibit 732 in evidence which are 10 the check stubs for Who's Who Executive Club, and if you 11 could look at what the stub says for check number 1025. 12 A American Express, BG, personal loan. 13 Q Now, is it fair to say that if BG could borrow 14 $47,000 from Executive Club he could have borrowed that to 15 pay Who's Who Worldwide? 16 A I would say so, yes. 17 Q And in addition, he could have borrowed it to pay the 18 IRS, right? 19 A Yes. 20 Q So notwithstanding the fact that Who's Who was in 21 bankruptcy, that didn't prevent any repayments by 22 Mr. Gordon of the loan to Who's Who Worldwide; is that 23 correct? 24 A No, he could have repaid it at any time. 25 Q And he could have done it out of other sources; is
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8042 Reffsin-cross/White
1 that correct?
2 A That's correct.
3 Q By the way, do you know what that $47,000 payment to
4 American Express was for?
5 A No, I don't. I think it was brought out that it was
6 some sort of a trip that he took.
7 Q Now, you can put that aside.
8 Now, Mr. Reffsin, you are a Certified Public
9 Accountant; is that right? 10 A Yes, I am. 11 Q And you have been since 1971? 12 A That's correct. 13 Q And just so I'm clear, if you look at Exhibit 651 14 which is in evidence that is a certificate of the fact 15 that you are a CPA; is that correct? 16 A That's correct. 17 Q And is it fair to say, Mr. Reffsin, that you are an 18 expert in taxation? 19 A I've tried to be, yes. 20 Q And you've worked in the tax department of several 21 major corporations, correct? 22 A Accounting firms, yes. 23 Q I'm sorry, accounting firms. 24 A Yes.
25 Q For example, you said yesterday in response to
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8043 Reffsin-cross/White
1 Mr. Wallenstein's question that you worked at Touche Ross, 2 correct?
3 A I spent two years at Touche Ross in the tax
4 department, yes.
5 Q And you also worked for Arthur Young?
6 A That's correct.
7 Q And at Arthur Young you were the equivalent of a
8 partner?
9 A Just below a partner, a principal. 10 Q And those are one of the big six, big eight, big ten 11 accounting firms? 12 A At that time big eight. 13 Q Those were like the eight most prominent, most 14 prestigious accounting firms in the world, right? 15 A Yes. 16 Q And then you started your own firm, correct? 17 A Yes. 18 Q And is it fair to say that again your expertise was 19 in tax matters? 20 A That's corre
ct. 21 Q And you worked in that capacity, did you not, on the 22 tax shelter investments that Mr. Gordon promoted that you 23 described for Mr. Wallenstein yesterday? 24 A No, I just did the accounting for it. I didn't do 25 the tax work on it.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8044 Reffsin-cross/White
1 Q But you were the accountant for those companies, 2 right?
3 A Yes.
4 Q Some of those were corporations and some of them were
5 partnerships, right?
6 A The shelters were all partnerships. There were
7 corporations involved.
8 Q Is there such a thing known involved in partnerships
9 such as tax matters partner? 10 A Yes. 11 Q What is that? 12 A The partner that the IRS would look to for 13 information with respect to that particular entity. 14 Q Among the partnerships involved in the tax shel
ters, 15 who was the tax partner? 16 A Generally it was the general partner. 17 Q That was Mr. Gordon? 18 A Not at all times, sometimes it was a corporation. 19 Q Was Mr. Gordon a tax matters partner in any of these 20 partnerships? 21 A He may have been. I don't remember. 22 THE COURT: Could you hold it a minute, please. 23 (An unrelated matter was taken by the Court.) 24 THE COURT: You may proceed. 25 MR. WHITE: Thank you, Your Honor.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8045 Reffsin-cross/White
1 ; BY MR. WHITE: 2 Q Mr. Reffsin, you in the course of your accounting
3 career, you lecture to or have lectured to the American
4 Institute of CPA, right?
5 A I have lectured for the Foundation of Accounting
6 Education to CPAs, yes.
7 Q So in other words, you are teaching other CPAs about
8 tax matte
rs, right?
9 A Yes. 10 Q Now, let me direct your attention -- let me back up. 11 When is it that you -- withdraw the question. 12 You worked with Mr. Gordon on these tax shelter 13 investments, right? 14 A I did the accounting for them, yes. 15 Q And then there was a period of time in which you were 16 not doing any work for him, right? 17 A That's correct. 18 Q I want to make sure. I want to get it right. 19 When is it that you got reacquainted with him and 20 start doing work with them? 21 A 1990. 22 Q Let's focus on 1990 and also the period '90 and '91. 23 You testified yesterday you became aware that he 24 had this 3 and-a-half million liability to the IRS, right? 25 A Yes, but not until a little bit later. I knew he had
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8046 Reffsin-cross/White
1 a liability, I di
dn't know how much it was. 2 Q When did you become aware of the rough numbers of the
3 liability?
4 A End of '92, early '93.
5 Q Prior to that, did you at least know it was a
6 substantial amount?
7 A Oh, yes.
8 Q And did you know it was over $1,000,000?
9 A Well, the taxes weren't over $1,000,000. I knew the 10 combination of the penalties and interest were over 11 $1,000,000. 12 Q So you knew the necessity figure owed, so to speak, 13 was over $1,000,000? 14 A Yes. 15 Q And you knew that even before the end of 1992? 16 A Yes. 17 Q And do you have experience in dealing with the IRS in 18 connection with collection matters? 19 A Yes, on occasion. 20 Q And did you have such experience prior to the time 21 you submitted this offer and compromise in July of '93 for 22 Mr. Gordon? 23 A The only experience I had was wit
h respect to that -- 24 with Ms. Peters. You are talking about with respect to 25 Mr. Gordon only?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8047 Reffsin-cross/White
1 Q Any other time. 2 A Yes.
3 Q And is it fair to say you knew, just as a general
4 principle, that the more a taxpayer earns the more the IRS
5 will expect him to pay back of his back tax obligations?
6 A I think that's logical.
7 Q Right.
8 Is the converse also true, that the less the
9 taxpayer is earning, the poorer they are, the more debts 10 they have, the less the IRS will expect them to pay back? 11 A Absolutely. 12 Q So is it not correct that someone in that situation, 13 whether or not they act upon it, has an interest, a 14 motive, to either conceal or reduce their income? 15 A That depends on the individual. 16 Q Right. 17 So
me people may do that and some people may not, 18 right? 19 A That's correct. 20 Q But it would be in their financial interest to do so 21 if there weren't any other consequences, right? 22 A I guess so, yes. 23 Q Now, let's look at the time period in 1992, 1993, in 24 that area. You're aware of the fact that Mr. Gordon is 25 taking a salary from Who's Who Worldwide, correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8048 Reffsin-cross/White
1 A Yes. 2 Q And you are also aware of the fact that the company
3 is paying personal expenses of his, correct?
4 A Yes.
5 Q You are aware, are you not, for example, that before
6 they bought, before PVI bought the condo, they were paying
7 the rent, right?
8 A That was going through his personal account, yes.
9 Q When you say his personal account, it was being put 10 into
his loan accounts at Who's Who Worldwide? 11 A Yes. 12 Q And Who's Who Worldwide was the one writing the check 13 out? 14 A Yes. 15 Q And you also knew that the company was paying his 16 American Express monthly bills, that portion of it which 17 were personal? 18 A Oh, yes. 19 Q And you knew also that they were paying his 20 utilities, his cable TV bill; is that right? 21 A Yes. On occasion the company would issue checks for 22 those kinds of things. 23 Q Did you know that or were you aware that the company 24 was paying checks for Mr. Gordon's dental bills? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8049 Reffsin-cross/White
1 Q Were you aware that the company was issuing checks 2 for Mr. Gordon's child support payments?
3 A That I wasn't aware of.
4 Q Now, you were aware, were you not, tha
t from 1990
5 through 1995 the company was leasing a -- at one time or
6 another, a car for Mr. Gordon?
7 A Yes.
8 Q And at first it was a BMW, right?
9 A Yes. 10 Q And then it was a Lexus, right? 11 A Yes. 12 Q And then it was a Mercedes Benz, right? 13 A I think there was a transfer or change, yes. 14 Q And in late '92, early '93, the condominium, monies 15 transferred from Who's Who Worldwide to Publishing 16 Ventures for the purpose of buying the condominium, right? 17 A Late '92 it started, right. 18 Q And then money is continued to be transferred from 19 Worldwide to PVI for the renovation of the furnishing of 20 that condo, right? 21 A Yes. 22 Q And you knew all of that, right? 23 A Yes. 24 Q And you indicated before that you suspected that 25 Mr. Gordon was using -- was staying at the condominium and
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8050 Reffsin-cross/White
1 leased periodically? 2 A It was not suspect. He said he would be using it on
3 occasion to work and stay there which is why we started
4 the rental payments.
5 Q So is it fair to say -- let me back up.
6 Aside from Mr. Gordon's salary, did he have any
7 other substantial money coming into him personally?
8 A Not that I'm aware of.
9 Q So is it fair to say that Mr. Gordon's whole 10 financial life was structured, whether or not it was 11 intended this way, it was structured so that nothing was 12 in his name? 13 MR. TRABULUS: Objection, Your Honor. 14 THE COURT: Overruled. 15 A Well, I know nothing was in his name. 16 Q That's all I'm asking. 17 A Right. 18 Q For example, most people, if they own a car, it's in 19 their own name, right? 20
MR. TRABULUS: Objection, Your Honor. 21 THE COURT: Overruled. 22 A Not necessarily. There are business people who will 23 have cars in the name of the business. 24 Q Right. Not necessarily, but the vast majority of 25 people if they are driving in a car that they own, it's in
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8051 Reffsin-cross/White
1 their name, right? 2 A I guess so.
3 Q And is it fair to say that may be not in 100 percent
4 of the cases but most people pay their own personal bills
5 like their utilities and their cable bill and their rent?
6 A I would say a majority of them do, yes.
7 Q Mr. Reffsin, does it ever strike you at this point
8 between 1990 and 1993, as a CPA, as a tax expert, does it
9 strike you as odd that Mr. Gordon, given his IRS 10 situation, has everything structured so that nothing is in 11 his na
me? 12 MR. WALLENSTEIN: Objection. 13 THE COURT: Sustained. 14 BY MR. WHITE: 15 Q Well, when you come on the scene in 1990 and then 16 you're doing the books for the next few years, as you said 17 you notice that all this stuff was not in his name, right? 18 A Ultimately, yes. 19 Q And you also know that, as you said before, someone 20 in his position has a motive to conceal income, correct? 21 A They might. 22 Q And does it ever occur to you that maybe that is what 23 is happening here? 24 MR. WALLENSTEIN: Objection. 25 THE COURT: Overruled.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8052 Reffsin-cross/White
1 A What occurs to me isn't really -- 2 Q Wait. Answer the question yes or no first.
3 A Does it occur to me that he might?
4 Q Did that thought ever occur to you?
5 A Possibly.
6 Q Possi
bly. You are not sure? Is your answer that you
7 are not sure that it ever occurred or not?
8 A There are many reason for people to keep their
9 entity -- 10 Q My question is, did you have that thought or did you 11 not have that thought? 12 A I did have the thought. 13 Q You did have the thought? 14 A Yes. 15 Q Okay. 16 I want to ask you about the logs that Maria 17 Gaspar created and that were submitted to the bankruptcy 18 court that you are familiar with, obviously. 19 A Now I am. 20 Q Right. 21 Now, you were interviewed by federal agents in 22 January of 1996 in your office, right? 23 A Yes. 24 Q That's the one you said you did recall that meeting? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8053 Reffsin-cross/White
1 Q Isn't it correct that you were asked about those logs
2 at that meeting?
3 A Yes.
4 Q And isn't it correct that you told them initially
5 that you had never seen those logs?
6 A I told them I had nothing to do with those logs.
7 Q Answer the question. Isn't it true that you told
8 them that you had never seen those logs?
9 A I can't answer that with a yes or no. 10 Q Did you tell the agents at that meeting that you 11 didn't know anything about them or even if they were 12 prepared at all? 13 A I never said that if they were even prepared at all. 14 Q Did you tell them you never knew who actually 15 prepared them? 16 A That's correct. 17 Q Did you tell them that you had never discussed those 18 logs with Mr. Gordon or anyone else? 19 A I believe I initially did, but then I realized I did 20 have a meeting with them on the logs. 21 Q So your recollection is that you changed your version
22 in that interview; is that correct? 23 MR. WALLENSTEIN: Objection. 24 THE COURT: Sustained as to form. 25 BY MR. WHITE:
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8054 Reffsin-cross/White
1 Q It is your recollection that you told them something 2 different later in the interview from what you said
3 initially?
4 A It is my recollection that I recollected it.
5 Q Now, did you say that, yesterday, that Mr. Gordon
6 told you that he didn't want to keep those logs?
7 A Yes, that's correct.
8 Q You said after you walked out of the bankruptcy court
9 proceeding where the Bankruptcy Judge ordered Who's Who to 10 keep them, that's when he told you in your car, right? 11 A Yes, he didn't -- he said that he didn't want Reed 12 Elsevier knowing any of his business. 13 Q And the words you used yesterday was that he was 14 sc
reaming that? 15 A Yes. 16 Q And you said that he was ranting and raving about 17 that? 18 A Yes, he was. 19 Q He didn't want to give those logs over to Reed 20 Elsevier, did he? 21 A No. 22 Q And he made that perfectly clear to you, right? 23 A Yes. 24 Q And then you said yesterday Mr. Ackerman called you 25 and said hey, where are those logs, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8055 Reffsin-cross/White
1 A That's correct. 2 Q And Mr. Ackerman indicated to you that he had been
3 asking Mr. Gordon for them and Mr. Ackerman hadn't gotten
4 them, right?
5 A That's correct.
6 Q Now, you said earlier today that you thought that
7 maybe Mr. Gordon's claim about using the business, the
8 condo for business, was bullshit, right? You said you
9 thought maybe that was the case? 1
0 A I said I couldn't make that determination initially. 11 I said it might have been, but you go by what the client 12 tells you at the time. 13 Q Am I correct that at the time you at least had a 14 doubt about whether or not they were really, it was really 15 being used for business? 16 MR. TRABULUS: Objection. What time? 17 MR. WHITE: The time of this conversation in 18 August of 1994 in the car. 19 A In August of '94? Again, I explained before with the 20 sequences of events that occurred, I gave him the benefit 21 of the doubt. 22 Q You gave him the benefit of the doubt, but you had a 23 doubt, right? 24 A Always had a doubt. 25 Q And you said you always had a doubt. You mean you
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8056 Reffsin-cross/White
1 always had a doubt from the moment the condominium, you 2 found out
that he was using the condominium to live there?
3 A No. The doubt occurred really after things started
4 to happen in 1993.
5 Q What things started to happen?
6 A The case, the distractions, the noncreation of the
7 California office which was supposed to happen. I mean,
8 these things didn't happen.
9 Q Let me make sure I understand this. 10 Mr. Gordon told you that the condominium was 11 going to be used in part for people who were from the soon 12 to be established California office, correct? 13 A Yes, he was going to have training sessions, people 14 flown in and so forth, yes. 15 Q And then when no such office materialized, you 16 started to have doubts? 17 A I really couldn't concern myself at that point 18 because there -- it was an asset of the corporation. 19 Whether he used it for business or didn't use it for 20 business was not my conce
rn. 21 Q But if he was living there and he wasn't paying a 22 fair market rent, then the remaining portion of the fair 23 market rent would be income to him, right? 24 MR. TRABULUS: Objection. Foundation. 25 THE COURT: Overruled.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8057 Reffsin-cross/White
1 A It's a difficult question to answer because if a 2 person buys, if a corporation buys something with the
3 intent to use it for a specific purpose and because of
4 some reason down the road an officer or someone in the
5 corporation ends up using it for personal use, that
6 doesn't negate the fact that it is a corporate asset.
7 Whether he should be paying rent or what rent he should be
8 paying, is subject -- you have to determine that.
9 Q Right. 10 But you were also doing his personal returns, 11 right? 12 A Yes.
13 Q So if there was some additional income over and above 14 his salary that he was getting, you would have wanted to 15 know about that, right? 16 A Well, it was my impression that the amount of money 17 he was paying as rent was basically covering the use of 18 the apartment. 19 Q Is it your testimony that you believed that the 20 information that was going to be put in the logs was going 21 to be accurate? 22 A Yes. 23 Q And notwithstanding that you saw that Mr. Gordon 24 didn't want to give the logs to Reed and notwithstanding 25 the fact that you thought maybe it wasn't being really
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8058 Reffsin-cross/White
1 used for business, you thought that the information that 2 was going to go into those logs was accurate?
3 A Absolutely.
4 Q Now, Mr. Reffsin, is it fair to say that during
the
5 time period from 1991 through 1995 that you didn't want to
6 lose Mr. Gordon as a client?
7 A No accountant wants to lose a client.
8 Q But during that particular time period, wasn't it
9 especially important to you to retain Mr. Gordon as a 10 client? 11 A It's especially important for me to retain every 12 client I have. 13 Q Well, during that time weren't you personally 14 experiencing financial difficulty? 15 A Early '90, '91, '92, but things sort of smoothed over 16 by then. 17 Q In fact, in May 1991, you personally filed 18 bankruptcy, didn't you? 19 A That's correct. 20 Q And isn't it true, didn't you? 21 A That's correct. 22 Q And isn't it true that you filed a bankruptcy 23 petition that indicated that you were over $2,000,000 in 24 debt? 25 A That's correct.
OWEN M. WICKER, RPR OFFICIAL C
OURT REPORTER 8059 Reffsin-cross/White
1 Q And isn't it also true that on that bankruptcy 2 petition in May of 1991, you indicated that your income,
3 your regular monthly income from your business was about
4 $9,500 a month?
5 A That's about right.
6 Q And Mr. Gordon's firm was paying you 2 or 3 or $5,000
7 a month over this period for your firm's accounting work,
8 right?
9 A It was more like 2,000 in the earlier years. 10 Q I'm sorry. I interrupted. 11 A It was more like 2,000, roughly 2,000 a month. 12 Q In the beginning and then it got higher? 13 A When the bankruptcy took place I spent a lot more 14 time. Of course I didn't get paid but that's another 15 matter. 16 Q Now, Mr. Reffsin, let me show you Exhibit 420 which 17 is the offer and compromise you submitted in the summer of 18 1993. Let's look at the last paragraph.
19 First of all, you indicated to Mr. Wallenstein 20 yesterday I think was a mixture of your words and 21 Mr. Gordon's words? 22 A Yes. I wouldn't submit anything without reviewing it 23 with the client. 24 Q Is it fair to say on page 2, Mr. Gordon says "I, 25 Mr. Bruce Gordon, do hereby state the above to be the best
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8060 Reffsin-cross/White
1 of my knowledge"? 2 A Yes.
3 Q Notwithstanding though on the first page Mr. Gordon
4 is referred to in the third person, correct?
5 A Yeah. This was prepared based on discussions with
6 Mr. Gordon. I prepared it.
7 Q Right, you prepared it. And it refers to Mr. Gordon
8 in one place as taxpayer and in other places as "he."
9 A Yes. 10 Q And let's look at the last paragraph. 11 It says "in view of the circumstances discussed
12 above and the fact that the taxpayer is over 60 years of 13 age, he wishes to file the attached offer and compromise. 14 He has talked to various relatives and because of his age 15 and desire to clean up his situation, they have agreed to 16 lend him some money. The offer presented is based on the 17 sum of money which he feels he can borrow. He has no 18 other assets." 19 Now, you said yesterday, I believe, in response 20 to Mr. Wallenstein's questions that that information that 21 you put in this last paragraph was told to you by 22 Mr. Gordon; is that right? 23 A That's correct. 24 Q Now, the second to last sentence says "the offer 25 presented is based on the sum of money which he feels he
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8061 Reffsin-cross/White
1 can borrow." 2 Now, did you mean by that sentence to indicate
3 that the 150,000 that was being offered was the maximum
4 that Mr. Gordon could raise from his relatives?
5 A That really doesn't say that. It's an offer. The
6 $150,000 was never anticipated as being the final offer or
7 the final compromise.
8 Q Now, it's correct, is it not, that in addition to
9 borrowing from his relatives, you knew that Mr. Gordon at 10 that time also had the capacity to borrow large sums from 11 his corporation. 12 A That's correct. I don't know how large it was, but 13 he had the capacity to borrow. 14 Q Well, he had the capacity to borrow hundreds of 15 thousands of dollars, right? 16 A Talking prospectively now, we are not talking about 17 the past. At that time I didn't know what he would have 18 available to him. You usually don't. 19 Q You knew, did you not, that if Mr. Gordon were 20 borrowing money from his corporation to, fo
r example, buy 21 Armani suits, he could also borrow money to pay back the 22 IRS? 23 A No, I wouldn't know that. I don't know what his 24 understanding was with the stockholders. 25 Q Did you ever have any reason whatsoever to think that
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8062 Reffsin-cross/White
1 the stockholders were placing any limits on Mr. Gordon's 2 taking of loans from the company?
3 A I had no reason to know either way.
4 Q Right.
5 In fact, you've never met Dr. or Mrs. Grossman
6 face to face, have you?
7 A No.
8 Q Until this trial.
9 A That's correct. 10 Q And you had no reason to think one way or the other 11 about what the stockholders thought of Mr. Gordon's loan? 12 A Yes. 13 Q Assuming that the Grossmans were the stockholders. 14 A Right. 15 Q But at the same time you
saw that this wasn't a lump 16 sum loan that was being made to Mr. Gordon, it was an 17 ongoing payment of his personal expenses, right? 18 A Well, at some point it had stopped. 19 Q Right. 20 But the pattern was such that it was a routine 21 matter, the monthly bills of Mr. Gordon were getting paid? 22 A Well, bills were getting paid up to that point, yes. 23 Q Look at the second paragraph. 24 It says "taxpayer is presently trying to clean up 25 his life and move forward. He is 60 years of age and he
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8063 Reffsin-cross/White
1 will never be able to pay the substantial sums of taxes, 2 penalties and interests owed to the government. In
3 addition, he's liable for substantial amounts to other
4 parties which he will not be able to pay. We have
5 prepared a projection of income for the next five y
ears
6 and even if he increases his earnings substantially over
7 the next five years, he wouldn't come close to earning
8 enough to pay all of his obligations."
9 Now, let me ask you about that paragraph. 10 That paragraph, let me make sure I understand it, 11 is indicating that in addition to the tax liability he 12 owes, Mr. Gordon has lots of other debts, right? 13 A He did have some other debts. 14 Q And those debts are actually listed on the 433 that 15 you attached? 16 A That's correct. 17 Q When you say "even if he increases his earnings, he 18 won't come close to earning enough to pay all of his 19 obligations --" 20 A Right. 21 Q -- You're saying all of those other obligations, not 22 even counting the IRS, he will barely be able to pay 23 those? 24 A I didn't say that. I said all of his obligations. 25 Q Okay.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8064 Reffsin-cross/White
1 So even if you include the IRS, he won't be able 2 to pay all the obligations. Didn't like that way at
3 least?
4 A 3 and-a-half million, no.
5 Q Now, you said before that you had agreed with
6 Mr. Gordon that if he didn't repay the loans by 1994, you
7 would categorize them at that point as income; is that
8 correct?
9 A I didn't agree. I told him that's what I would do. 10 Q But did I explain it correctly? 11 A Yes. 12 Q And give us a rough idea in July of 1993 when you 13 submitted this offer and compromise what Mr. Gordon owed 14 his company? 15 A I don't know. I mean, I believe -- I had believed at 16 the time when he did this that his loan was very low 17 because he had paid back the $235,000. I wasn't aware of 18 this continued increase in the lo
an account in 1993. 19 Q Okay. 20 And, again -- 21 A I should say to the extent of his continued 22 increase. I knew he was increasing, but I didn't know it 23 was that much. 24 Q So is that another example of where you believed 25 Mr. Gordon deceived you?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8065 Reffsin-cross/White
1 A Yes. 2 Q Did Mr. Gordon tell you affirmatively that "I'm going
3 to cut back. I'm not going to take as many loans"?
4 A Mr. Gordon never told me anything. He did what he
5 wanted to do. It was understood based on the discussions
6 that the loans were high at the time. He said he was
7 going to pay them back. It was never the intent for them
8 to get higher.
9 Q In 1994 you were expecting that Mr. Gordon -- you had 10 instructed Mr. Gordon to repay those by 1994 or you were 11 going to tak
e certain action and call them income, right? 12 A Yes, on the basis of those facts I wouldn't feel they 13 would be loans. 14 Q If Mr. Gordon were to repay those loans, he would 15 have had to have that money coming in, right? 16 A From somewhere. 17 Q Either from Who's Who or somewhere else? 18 A That's correct. 19 Q Take a look at Exhibit 420-E which is the projection 20 you prepared in connection with the offer and compromise. 21 Now, there's no projections of large amounts of 22 income that are due to Mr. Gordon between 1992 and 1994, 23 are there? 24 A No. Those projections were based on the facts and 25 circumstances that existed at the time the projections
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8066 Reffsin-cross/White
1 were done. 2 Q Is it correct, though, that you didn't feel any need
3 to tell the IRS, w
ell, look, I expect that he is going to
4 get a substantial amount of income and he will use that to
5 pay back his loans to Worldwide?
6 A Well, at the time I did these I didn't think they
7 were very big loans. He just made a $235,000 payment.
8 Q Actually let me ask you about that.
9 You knew the year end 1992 figures, right? 10 A Umm-hmm. 11 Q And your testimony is that when you are submitting 12 this in July of 1993, you don't know what is taking place 13 in the first seven months of 1993? 14 A And his cash flow determination based on income would 15 be based on whatever income information I had at the time 16 which was the '92 income. 17 Q I just want to make sure I have this right. 18 A Yes. 19 Q That for the time period January of 1993 to July of 20 1993, you don't know what's going out. You don't know 21 what he's spending, correct?
22 A I don't have a fixed, you know, fix on it. 23 Q Right. 24 But your testimony is that you do happen to know 25 that this repayment was made, correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8067 Reffsin-cross/White
1 A Yes. 2 Q So in other words, for 1993 the only thing you know
3 is about what's reducing the account, you don't know what
4 activity is causing it to go up, if at all?
5 A No. The reason I became aware of it was that the
6 credit was put to the Grossmans' loan and exchange account
7 so I was aware there were some heavy credits coming in.
8 Q But when you were reviewing those books to see that
9 you didn't see Gordon's loan account going up? 10 A Yeah, it was going up at the time but it wasn't 11 anywhere near an amount of money that would require me to 12 substantially increase the projections and, again, he said
13 he was going to pay back those loans. I don't know where 14 he was going to get it from. 15 Q Well, I guess my question is regardless of the 16 source, if he was going to get enough money to pay it 17 back, and you believed that -- 18 A Right. 19 Q -- Why isn't it on this projection, 420-E? 20 A Because it is not a priority lien. The IRS would not 21 look at those loans as a priority to their position. Only 22 necessary living expenses and those payments that would be 23 required to be made would be considered in determining how 24 much cash flow he had which is why the DOJ items were on 25 there.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8068 Reffsin-cross/White
1 Q So you are saying that you consciously decided not to 2 put that expected income and those Who's Who Worldwide
3 loans on this projection because you didn't think
you had
4 to, is that your testimony?
5 MR. WALLENSTEIN: Objection.
6 THE COURT: Overruled.
7 A I didn't consciously do anything. I just didn't
8 consider them.
9 Q Is it that you didn't think about them or you thought 10 about them and said no, I don't have to put them on there? 11 A I didn't think about them because all I did was try 12 to project the income based upon what the corporation 13 would earn in the future. 14 Q Talking about the IRS and what has priority over 15 it -- 16 A Right. 17 Q -- Do you as a tax expert, did you believe that if 18 the IRS was told that Mr. Gordon was going to get a 19 substantial sum of money and rather than apply that to his 20 IRS debt, he was going to apply it to a debt to a company 21 that he owned, that that wouldn't make any difference to 22 them? 23 A It wouldn't. 24 Q It would
not make a difference? 25 A No, because the net effect would be zero.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8069 Reffsin-cross/White
1 Q So if the IRS were told Mr. Gordon will get a 2 substantial sum of money and rather than pay you, IRS,
3 he's going to pay back his own company, your testimony is
4 that that would not have mattered in your judgment to the
5 IRS at all?
6 Yes or no?
7 A My testimony is that that was not considered in that
8 light. That's my testimony. The income --
9 Q Considered by whom, you? 10 A That's correct. 11 Q Okay. 12 MR. WALLENSTEIN: Judge, I ask the witness be 13 permitted to complete his answer. He obviously had not 14 finished it. 15 THE COURT: Well, the answer called for a yes or 16 no and he exceeded that without objection by counsel but 17 I'll not let him go further than
that. 18 BY MR. WHITE: 19 Q Now, regardless -- let me back up this January 1993 20 repayment from Dr. Grossman that you were aware of, 21 correct? 22 A Umm-hmm. Yes. 23 Q You testified Mr. Gordon told you that that was a 24 loan to him from Dr. Grossman, right? 25 A Well, I knew it came from Dr. Grossman, yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8070 Reffsin-cross/White
1 Q And that loan is not listed on this projection 2 either, is it?
3 A That's correct, it's not.
4 Q So that was another debt, personal debt of Mr. Gordon
5 that's not listed on this form?
6 A That was Mr. Gordon's preference.
7 Q You discussed that with him?
8 A Yes.
9 Q And Mr. Gordon specifically instructed you not to 10 include that; is that correct? 11 A That's correct. 12 Q And he had told you earlier that Dr. Gr
ossman had 13 loaned him that money, right? 14 A I was not aware of the true relationship between 15 Mr. Grossman and Mr. Gordon. Whatever he said to do with 16 respect to that, I saw no documentation that indicated 17 that it was a valid loan or anything. 18 Q Okay. 19 And is it fair to say that you questioned whether 20 it was a valid loan? 21 A No, I questioned for purposes of the projection as to 22 whether there was something that should be considered as a 23 required payment. 24 Q And did you have a conversation with Mr. Gordon where 25 you indicated that it should be disclosed?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8071 Reffsin-cross/White
1 A No, it wasn't that kind of conversation. Do you want 2 to disclose the fact that you owe your brother-in-law
3 money? And he said no.
4 Q Now, you said yesterday that
when you submitted this
5 offer you expected the IRS to ask about Who's Who
6 Worldwide, right?
7 A Without question.
8 Q Now, it's fair to say though that the 433's that were
9 -- the 433 form given to the IRS did not indicate that 10 Mr. Gordon was the owner, correct? 11 A That's correct. 12 Q And if this projection had your best estimate of 13 Mr. Gordon's projected income -- 14 A At that time, yes. 15 Q -- At that time, why would they need to see Who's Who 16 Worldwide's documents? 17 A The reason they would need to see it was because my 18 best estimate may not be correct. Again, it's an 19 estimate. They may say, well, what happens if you earn 20 $1,000,000 in 1993 or $2,000,000 in 1994, and of course I 21 couldn't tell them that. The logical sequence of events 22 here was to look at the corporate activity and make a deal 23 which was
dependant upon his ability to withdraw money 24 from Who's Who Worldwide since that was the only source of 25 income, and Mr. Gagliardi was aware of that.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8072 Reffsin-cross/White
1 Q Look at 420-D, as in David, that's the 433 form. 2 A 420-D.
3 What is 423?
4 Q That's the 433 A form.
5 A There's no number on it.
6 Q There should be a sticker on the lower right-hand
7 side.
8 A Yes.
9 Q Let's start at the top, box 1. 10 A Umm-hmm. 11 Q You got that address, 10 Bluff Road from Mr. Gordon, 12 right? 13 A Yes. 14 Q But you indicated that it was in early 1993 that you 15 had a discussion with Mr. Gordon and you told him you 16 would have to pay rent if he was using the condo, right? 17 A He said he would be using it on occasion. 18 Q But he was using it s
ufficiently, a sufficient amount 19 of time you thought he needed to be paying rent? 20 A Yes, some portion of it. 21 Q And that discussion took place before July of 1993 22 when you submitted this form, right? 23 A Probably just before it, yes. 24 Q And this form, aside from Mr. Gordon's signature, 25 that's your handwriting, correct?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8073 Reffsin-cross/White
1 A Yes. 2 Q You prepared this?
3 A That's correct.
4 Q Now, under box 18 where it says "securities," on page
5 2, you wrote "none," is that correct?
6 A That's correct.
7 Q That was based on your understanding that Mr. Gordon
8 owned none of the company; is that correct?
9 A That's correct. 10 Q And that's because of what Mr. Gordon told you; is 11 that correct? 12 A That's correct. 13 Q Now, i
f you look at box 14 which asks for "bank 14 charge cards" and other things, do you see that? 15 A Umm-hmm. 16 Q "None" is listed there; is that correct? 17 A That's correct. 18 Q On the next page where it says "other liabilities," 19 box 28? 20 A Right. 21 Q The description under "other liabilities" says, 22 "including, other charge accounts," correct? 23 A Yes. 24 Q At the time you prepared this in July of '93, you 25 knew that Mr. Gordon was possessing and using an American
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8074 Reffsin-cross/White
1 Express gold card, correct? 2 A Ms. Sautter's, yes.
3 Q You knew though that Mr. Gordon had a card in his own
4 name, right?
5 A I don't know. I have never seen the card. All I
6 know is that he was using Ms. Sautter's card.
7 Q Did you ever see the American Ex
press statements
8 themselves?
9 A I don't recall. I don't remember seeing his name on 10 it. 11 Q Let's start with this. Did you ever see the 12 statements themselves? 13 A No, I think I saw one in the course of the years. 14 Most of those were reviewed either by Liz Sautter or for 15 people who worked for me. 16 Q Is it your understanding throughout this time period 17 you knew the company was paying American Express bills and 18 you thought there was just one card, Liz Sautter's, and 19 Mr. Gordon was using that card? 20 A That's what he told me. When he couldn't get credit, 21 he was using Liz Sautter's card. 22 Q Did you understand that to mean that he was literally 23 going to Liz and saying, let me have the card, I got to go 24 make a purchase? 25 A No, I know that I can have a secondary signature on
OWEN M. WICKER, RPR OFFI
CIAL COURT REPORTER 8075 Reffsin-cross/White
1 the card. 2 Q It was your understanding Mr. Gordon is walking
3 around with a plastic card in his wallet --
4 A Right.
5 Q That he could use to charge.
6 A That's correct.
7 Q And you didn't believe that that needed to be
8 included on this form?
9 A No, I did not. 10 Q And at the time you filled out this form you knew, it 11 was fair to say, there were substantial amounts being 12 charged by Mr. Gordon on that card? 13 A Occasionally there were substantial amounts. 14 Q In box 28 where it says "other liabilities," again 15 the loans from Who's Who Worldwide are not listed, 16 correct? 17 A That's correct. 18 Q Now, there's other loans listed there, correct? 19 A Yes. 20 Q You understood that a taxpayer's liabilities needed 21 to be listed there, correct?
22 A Yes. 23 Q And -- 24 A Tax liabilities. 25 Q Well, one of them is for charge accounts, right, for
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8076 Reffsin-cross/White
1 $32,000. That's not a tax liability, is it? 2 A No, that's correct.
3 Q So notwithstanding the fact that you listed six other
4 liabilities of Mr. Gordon's there, you did not list the
5 loans from Who's Who Worldwide?
6 A That's correct.
7 Q And on the next page "necessary living expenses." I
8 want to ask you about this.
9 Is it your testimony that what the taxpayer is 10 supposed to fill in on this form is not his actual 11 expenses, but only that portion of his actual expenses 12 that are really necessary? 13 A That is correct. His necessary living expenses. 14 Q Now, let me give you the example I asked Mr. Rizino 15 yesterday. If y
ou have somebody, a single person, no 16 family, no children, no dependents living in a $20,000 a 17 month mansion, when he fills out that form, what is he 18 supposed to put on that line for rent? 19 A That's an unreasonable question. 20 Q Well, what if I'm that guy and I have this in front 21 of me and you're my accountant, what did you tell me to 22 put down? 23 A What you need to spend -- you want me to answer that 24 question for $20,000? 25 Q I should put 20,000.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8077 Reffsin-cross/White
1 A Do you want me to answer the question? 2 Q Yes, I do.
3 A Okay. I would put $20,000 because there was some
4 lease in the contract that provides him to pay it.
5 Q What if I'm that guy and I say the lease is up next
6 month, you could move, but I think it is necessary for me
7 to stay
there because I entertain a lot and I want to
8 impress my clients?
9 A If he was going to put $40,000 of income down on the 10 other side, I would have no problem putting down the 11 $20,000. 12 Q So you put your real income -- I'm sorry. You put 13 your actual expenses if you are showing enough income on 14 the other side that you could pay for it, right? 15 A I would put contractual expenses if you could pay for 16 it. I would not put unreasonable expenses, even if he was 17 making $50,000 a month in income. They wouldn't allow it. 18 Q You have the form, the instructions to this form, 19 right? 20 A That's correct. 21 Q It says "list --" in substance, it says "list your 22 actual --" hold on. It is Defendant's Exhibit ED. 23 It says "enter your monthly rent payment." 24 (Handing.) 25 A That's correct.
OWEN M. WICKER, RPR OFFIC
IAL COURT REPORTER 8078 Reffsin-cross/White
1 Q So you believe that the taxpayer is supposed to put 2 not his actual expenses but only what he thinks is
3 necessary, correct?
4 A That's correct.
5 Q So if a taxpayer in that hypothetical I used said,
6 well, really it's only reasonable, it's only necessary for
7 me to live in a $2,000 a month apartment but I really like
8 living in the $20,000 a month one, so I'll put $2,000 a
9 month on the form, are you with me? 10 A I'm with you. 11 Q Is it your testimony that the IRS, that's what they 12 want? They don't want to know that you are squandering 13 another $18,000 a month? 14 A That's not the purpose of the information. It's not 15 to know whether you are squandering, it's the purpose to 16 know what you need to live on. 17 Q This form is called a collection information 18 statemen
t? 19 A Absolutely correct. 20 Q It's used when the IRS is trying to collect money 21 from somebody who owes them back taxes; is that correct? 22 A That's correct. 23 Q Are you saying that if a taxpayer is squandering 24 $18,000 a month on unnecessary luxuries, the IRS doesn't 25 want to know anything about it?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8079 Reffsin-cross/White
1 A No, they have no desire to know. 2 Q They have no desire whatsoever?
3 A And in fact, they will cross it out and put their own
4 numbers in.
5 Q They would cross it out and put their own numbers
6 when they calculate how much they want you to pay, right?
7 A But the payment would be dependent upon the income.
8 The income is what is critical, not the expenses.
9 Q Now, your friend, Mr. Rizino, who was here yesterday, 10 was your partner?
11 A Yes. 12 Q He's been an accountant for 20 years? 13 A Yes. 14 Q You respect his opinion? 15 A In certain issues, yes. 16 Q You heard him say yes he should put down the 20,000? 17 A He's never filed a 433 in his life nor has he been in 18 a collection proceeding in his life. 19 Q You are saying that he's wrong? 20 A Yes. 21 Q And you have more experience and you're right? 22 A Of course. I've never been questioned. 23 Q Let's look at Government's Exhibit 425 which you 24 should have in front of you. 25 A In that same packet?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8080 Reffsin-cross/White
1 Q No, let me find it for you. 2 MR. WALLENSTEIN: Sorry, Mr. White. What exhibit
3 did you say?
4 MR. WHITE: 425.
5 MR. WALLENSTEIN: All right.
6 BY MR. WHITE:
7 Q Now, that's a letter we
looked at briefly earlier
8 this morning where you are responding to Mr. Gagliardi's
9 letter, correct? 10 A Umm-hmm. 11 Q And that's the one where you are forwarding to him 12 this note from Joyce Grossman, right? 13 A Yes. 14 Q Now, when you got -- what prompted this was 15 Mr. Gagliardi wrote you a letter which said that in 16 reviewing Mr. Gordon's personal bank account statements, 17 he noticed some unusual deposits, is that fair? 18 A No, that's not what is part of this. 19 Q Well, Mr. Reffsin, let me show you Government's 20 Exhibit 424. That's a February 1994 letter from 21 Mr. Gagliardi to Mr. Gordon, care of you, correct? 22 A Umm-hmm. 23 Q That is correct? 24 A Yes, I'm sorry. 25 Q And the second paragraph says "my review of your
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8081 Reffsin-cross/White
1 checking records discovered several unexplained items, 2 including abnormal deposits totaling $15,000 in July of
3 1993 and $10,613.52 in October of '93. Please explain the
4 source of these funds."
5 Do you see that?
6 A Yes.
7 Q Now, you received that letter from Mr. Gagliardi,
8 correct?
9 A Yes. 10 Q And after that did you have a conversation with 11 Mr. Gordon about the source of those funds that 12 Mr. Gagliardi asked you about? 13 A I'm confused. Are we talking about the answer for 14 the income for 1993 or are we talking about this? 15 Q Let's do it in order. Let's start at 424, 16 Gagliardi's letter to you. 17 A Okay. 18 Q To Mr. Gordon, care of you. 19 A Right. 20 Q He says what I just read, that there are unexplained 21 items, including abnormal deposits total totaling $15,000 22 in July of '93?
23 A Yes. 24 Q Following that, did you have a conversation with 25 Mr. Gordon about those alleged abnormal deposits?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8082 Reffsin-cross/White
1 A Yes, I did. 2 Q Tell us what happened.
3 A I asked him what they were for and he went back and
4 he checked and I got the notes and he told me what they
5 were for.
6 Q Okay.
7 And he gave you copies of these promissory notes?
8 A That's correct.
9 Q And tell us in as much detail as you can what you 10 recall he told you about these deposits and the notes? 11 A As I recall, one of them he said was attributable to 12 the expenses incurred on the death of the son, and the 13 other one was with respect to some medical expenses that 14 he had to pay on behalf of his wife. I don't necessarily 15 remember the order. 16 Q Did you a
sk Mr. Gordon for notes to document these 17 loans? 18 A No, I did not. 19 Q So did he volunteer them to you? 20 A Yes. 21 Q So, in other words, he came back and said -- let me 22 back up. 23 You had this conversation and he said, well, I 24 got to check, and he had a subsequent conversation with 25 you, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8083 Reffsin-cross/White
1 A I don't really understand the question. 2 Q When you asked him about these deposits --
3 A Right.
4 Q -- In that conversation he didn't whip out these
5 notes?
6 A No.
7 Q They came later?
8 A Yes. He said he didn't remember. He had to check.
9 Q So then there is some gap in time and you have 10 another conversation? 11 A That's correct. 12 Q And he volunteers to you "I borrowed this money from 13
my sister Joyce, and here's the note that documents that 14 loan," correct? 15 A That's correct. 16 Q And he also indicated "I borrowed the money from my 17 wife's medical expenses from Madeleine Middlemark and 18 here's the note that documents that," right? 19 A Yes. 20 Q Mr. Reffsin, let me show you Exhibits 764 and 765 21 which are already in evidence. 22 Those are wire transfers from Who's Who Worldwide 23 to Bruce Gordon, correct? 24 A Yes. 25 Q And those are already in evidence, right? You've
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8084 Reffsin-cross/White
1 heard the testimony about them? 2 A Yes.
3 Q Is it fair to say that now in retrospect, you know
4 that that money did not come from Joyce Grossman?
5 MR. TRABULUS: Objection, Your Honor.
6 THE COURT: Overruled.
7 A It appears that way, yes
.
8 Q And from the review of the general ledger, ledgers
9 from which you prepared your chart, you also know, do you 10 not, that those monies, those transfers were booked in the 11 Who's Who Worldwide books as loans to Mr. Gordon? 12 A Yes, I did go back and check this after to see if 13 they were there. 14 Q And they were, weren't they? 15 A Yes, they were. 16 Q Okay. 17 Now, is it fair to say that you believe that's 18 another example of where Mr. Gordon deceived you? 19 A Yes. 20 MR. TRABULUS: Objection. 21 THE COURT: Overruled. 22 BY MR. WHITE: 23 Q Now, if you put those wire transfers aside. 24 Let's go back to Exhibit 425. 25 Number 3, paragraph numbered 3 on your letter,
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8085 Reffsin-cross/White
1 talks about what you've enclosed and it says "a letter
2 from the comptroller of Who's Who Worldwide Registry,
3 Inc., verifying the compensation agreement with Mr. Gordon
4 began January 1993. She verified this with the
5 shareholders of the corporation."
6 Now, the comptroller that you are referring to
7 there in that paragraph 3 is Maria Gaspar, correct?
8 A Yes.
9 Q Is it correct that Mr. Gordon told you that she had 10 verified that agreement with the shareholders? 11 A That's correct. 12 Q Maria Gaspar didn't tell you that? 13 A No, I didn't speak to her about that aspect of it. 14 Q Is it fair to say that you made this representation 15 in this letter that the shareholders had verified it based 16 on what Mr. Gordon had told you? 17 A Yes. 18 Q And is it your testimony that if that were untrue, 19 you didn't know it? 20 A That's correct. 21 Q Is it fair to say that you regard thi
s as another 22 instance where Mr. Gordon deceived you? 23 A Not a significant deceit, but yes. 24 Q If you look at the paragraph after the numbered ones, 25 is it fair to say that you provided Mr. Gagliardi with the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8086 Reffsin-cross/White
1 explanation that Mr. Gordon provided you? 2 A Yes, that's word-for-word, Mr. Gordon.
3 Q That's word-for-word from him?
4 A Umm-hmm. Well, basically word-for-word. I might
5 have put improper English language.
6 Q Okay.
7 But the substance is correct?
8 A Yes.
9 Q You can put those letters aside for a minute, 10 Mr. Reffsin. 11 You have substantial experience as an accountant 12 in bankruptcy matters, is that fair to say? 13 A Yes. 14 Q And you are aware, are you not, that when a 15 corporation is in bankruptcy the lawye
rs who do work for 16 the debtor have to submit fee applications to the Court? 17 A Yes. 18 Q So, in other words, if a lawyer represents a debtor 19 corporation, the debtor corporation can't just send the 20 corporation a bill and the corporation writes out a check 21 to him, right? 22 A Right. 23 Q The bankruptcy court has to get that bill first and 24 approve it, right? 25 A That's correct, generally.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8087 Reffsin-cross/White
1 Q I'm sorry? 2 A Generally.
3 Q Generally. Okay.
4 And the bankruptcy court has to determine, has to
5 look at what was done and whether the fees are reasonable,
6 right?
7 A Yes.
8 Q And the descriptions of the legal work that is
9 performed has to be fairly detailed so that the bankruptcy 10 court can make that judgment, ri
ght? 11 A I believe so, yes. 12 Q And you've seen in evidence, have you not, the bills 13 from Mr. Ackerman's firm. They go on for pages and pages, 14 right? 15 A Yes. 16 Q Now, at the time Who's Who Worldwide filed bankruptcy 17 in March of '94, you were aware of all the things that we 18 just talked about, right? 19 A Yes. 20 Q You already knew that, right? 21 A Yes. 22 Q And at the time of that filing and thereafter, Who's 23 Who Worldwide had a bankruptcy attorney, correct? 24 A Yes. 25 Q It was Neil Flaum?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8088 Reffsin-cross/White
1 A Initially. 2 Q F-L-A-U-M, correct?
3 A Yes.
4 Q And it was sometime later in the summer when
5 Mr. Ackerman took over for Mr. Flaum; is that correct?
6 A That's correct.
7 Q And is it fair to say M
r. Flaum is an experienced
8 bankruptcy attorney?
9 A Yes. 10 Q And Mr. Flaum's firm was a prominent one, right? 11 A He was well-known in the bankruptcy area, yes. 12 Q And he was a well-respected attorney, is that fair to 13 say? 14 A Yes. 15 Q His firm was a well-respected firm? 16 A He was well respected. I don't know about his firm. 17 Q Well, let's limit it to him. 18 A Okay. 19 Q Now, right around the time of the bankruptcy 20 Mr. Gordon told you, I think you said yesterday, he wanted 21 to clean up some things about the documentation of the 22 corporate ownership; is that right? 23 A When we had met with Mr. Adler, yes. 24 Q And you had recommended Mr. Adler to Mr. Gordon, 25 right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8089 Reffsin-cross/White
1 A That's correct. 2 Q And Mr. Adle
r who testified here, he operates his law
3 office from his home in Manhattan; is that right?
4 A Yes.
5 Q And he's a solo practitioner; is that correct?
6 A Yes.
7 Q He's all by himself in his apartment, right?
8 A I don't know now but he was at that time.
9 Q I'm sorry. 10 Now, it was Mr. Adler who prepared the documents 11 that are in evidence, that said that the Grossmans owned 12 100 percent; is that correct? 13 A That's correct. 14 Q And it was Mr. Adler who prepared that letter where 15 it was allegedly from Joyce Grossman, right? 16 A Yes. 17 Q Where she says "I owned 75 percent and I'm 18 authorizing Bruce Gordon to tell other people that he owns 19 my shares," right? 20 A That's correct. 21 Q Now, Mr. Adler was performing work for Who's Who 22 Worldwide, right? 23 A Right. 24 Q He was drafting up these do
cuments to memorialize the 25 founding of Who's Who Worldwide, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8090 Reffsin-cross/White
1 A Right. 2 Q And but ultimately you paid Mr. Adler for his legal
3 work, right?
4 A Absolutely correct.
5 Q Now, isn't it true that the reason you and Mr. Gordon
6 went to Mr. Adler and you paid him with your own personal
7 money is because you knew that if Mr. Flaum did it, it
8 would be reported to the bankruptcy court and they would
9 see what documents he was creating? 10 A Absolutely not. 11 Q That never entered your mind? 12 A Never entered my mind. 13 Q Do you make it a practice to pay the legal fees of 14 your accounting clients? 15 A I make it a practice when I have concern about 16 whether they get paid and I make sure they get paid if 17 they are doing a favor, a
nd if I get them involved, I make 18 sure they get paid. I try to make sure they get paid. 19 Q Well, you paid Mr. Adler $1,500; is that correct? 20 A That's correct. 21 Q Are you saying that Who's Who Worldwide couldn't pay 22 him, that's why you paid him? 23 A No. I'm saying Mr. Gordon might not have to pay 24 him. Mr. Gordon didn't like to pay legal fees or 25 accounting fees.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8091 Reffsin-cross/White
1 Q But is it fair to say though that Mr. Adler's $1,500 2 is a drop in the bucket compared to Mr. Flaum and
3 Mr. Ackerman?
4 A My accounting fees compared to what Mr. Gordon took
5 out is a drop in the bucket but I used to have to fight
6 with him to get paid also.
7 Q Now, Mr. Reffsin, when Publishing Ventures -- I'm
8 sorry.
9 When Publishing Ventures was buying the
10 condominium at Hummingbird Road in late '92 and early '93, 11 they got that money from Who's Who Worldwide; is that 12 correct? 13 A That's correct. 14 Q And it was at the time considered to be a loan, 15 right? 16 A Yes. 17 Q Who's Who Worldwide was loaning it to PVI? 18 A Umm-hmm. I meant yes. 19 Q Ostensibly Publishing Ventures was supposed to pay it 20 back at some point? 21 A At some point, yes. 22 Q And there was not any note prepared at that time, was 23 there, a written promissory note? 24 A Initially, no. 25 Q Okay.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8092 Reffsin-cross/White
1 Now, at the time of the purchase, at the time of 2 the loan, no promissory note was created?
3 A No, that's correct.
4 Q Now, taking a look at Exhibit 671 in evidence, again,
5 that's the fax that M
r. Adler sent to you on March 30,
6 1994.
7 If you look at the top document under the fax
8 cover sheet Mr. Adler is drafting up that promissory note,
9 right? 10 A He's drafting a revision, yes. 11 Q And so there was no signed official note prior to 12 this time, right? 13 A There was an understanding prior to this time. 14 Q There was an understanding, it was not a written 15 promissory note? 16 A That's correct. A formal written promissory note, 17 that's correct. 18 Q On March 30, 1994 when Mr. Adler faxes you that, 19 that's just a revision, right? 20 A That's correct. 21 Q And it is not yet finalized, correct? 22 A It hasn't been signed, yes. 23 Q Right. 24 And so whenever it was finalized it was after 25 March 30, 1994, right?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8093 Reffsin-cross/Whi
te
1 A Yes, it would have to be. 2 Q And so far as you know from the time this loan was
3 made in late 1992 or early 1993, up until early 1994 when
4 you asked, when you and Mr. Gordon asked Mr. Adler to
5 prepare such a note, there was no such note in existence?
6 A There was an understanding.
7 Q There was an understanding, but no written note in
8 existence, correct?
9 A There was a written note but it was a very simple 10 note. The information that was gotten for this note was 11 taken from a piece of paper. But it was very simple. 12 Q Well, have you ever -- you've been asked about this 13 note numerous times by federal agents in the past, haven't 14 you? 15 A Yes. 16 Q Have you ever indicated before that there was some 17 sort of a handwritten preliminary note? 18 A Well, I had prepared some -- just preliminary scratch 19 notes ba
sed on discussions I had with Mr. Gordon, but 20 there was no note. There was nothing signed. 21 Q So you had notes about what your understanding was? 22 A Yes. 23 Q But there was never any written promissory note? 24 A No, there was not. 25 Q Take a look at Exhibit 816 which is in evidence.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8094 Reffsin-cross/White
1 Now, that is a copy of a deposition that you 2 gave, right?
3 A Umm-hmm.
4 Q And you gave that deposition on May 4, 1994, right?
5 A Right.
6 Q And that deposition was in connection with the Who's
7 Who bankruptcy proceeding, correct?
8 A Yes.
9 Q And if you look on pages 67 and 68, could you, just 10 to yourself, review your testimony on those two pages. 11 A (Perusing.) Yes. 12 Q On those two pages, am I correct, that you are being 13 asked abo
ut the Hummingbird Road condominium? 14 A Yes. 15 Q Let me read from page 68. 16 "Question: And the purchase price of the condo 17 is presumably approximately $1,000,000? 18 "Answer: No. There was -- I believe the 19 original purchase price was substantially less than that, 20 but there was a major renovation made to it. 21 "Question: Is there a note that represents or 22 reflects this investment? 23 "Answer: Yes. 24 "Question: When was it converted from an 25 investment to a note?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8095 Reffsin-cross/White
1 "Answer: I believe the note was created early 2 '93, if I recall the date.
3 "Question: Sometime?
4 "Answer: Sometime around the time that the
5 property was acquired."
6 Do you see that testimony that you gave?
7 A Yes, I do.
8 Q In fact, you kne
w that not more than five weeks, six
9 weeks before this Mr. Adler was creating that note, you 10 knew that, right? 11 A The revised note, yes. 12 Q Didn't you just testify that there was no note 13 created in early '93? 14 A No signed note, that's correct. The terms were 15 determined at that point, but there were no signed notes. 16 Q Did you interpret this question as asking you if 17 there was an understanding or whether there was a written 18 note? 19 A I'm not sure what I interpreted at the time. I may 20 have even said the wrong date. I don't know. 21 Q But it refers to a note, does it not? 22 A Yes, it does. 23 Q It doesn't just talk about a loan, it talks about a 24 note? 25 A Yes.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8096 Reffsin-cross/White
1 Q And a note connotes, means, something written, rig
ht? 2 A That's correct.
3 Q All right. Now, let me go back or move on to a
4 different subject.
5 We talked about early 1993 Dr. Grossman returned
6 certain money to Who's Who Worldwide.
7 A Yes.
8 Q I want to talk about the money going out.
9 In December of '92 Who's Who Worldwide sent 10 Dr. and Mrs. Grossman, a gross salary of $400,000, right? 11 A Yes. 12 Q Now, $400,000 was more than Mr. Gordon ever earned up 13 to his point for Who's Who Worldwide; is that right? 14 A A little bit more, yes. 15 Q Mr. Gordon was in day-to-day charge of the company, 16 right? 17 A Yes. 18 Q Dr. Grossman lived out in California, right? 19 A Yes. 20 Q How did it come about that -- who made the decision 21 that Dr. Grossman was going to get $400,000 in salary at 22 the end of '92? 23 A Mr. Gordon. 24 Q Tell us how that ca
me about. 25 A How the $400,000 came about?
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8097 Reffsin-cross/White
1 Q Tell us -- how did you first hear that Dr. Grossman 2 was to get any salary in '92?
3 A We had a little discussion about the Grossmans
4 getting salary. I had no idea about what the amount was
5 going to be, but I thought he had some arrangement with
6 the Grossmans.
7 In early or mid, early December I got a call from
8 Liz Sautter and Liz Sautter said they were issuing a check
9 to the Grossmans, should they withhold California 10 withholding taxes? And she told me that she was issuing, 11 you know, the salary, $400,000. 12 Q I'll let you finish, but I want to ask you a question 13 about it. 14 A Yes. 15 Q If I understand you correctly, you are not consulted 16 in advance about that? 17 A No.
18 Q Liz Sautter called you up and said, hey, Liz Sautter 19 wants me to send the Grossmans $400,000, all I want to 20 know if I should withhold California taxes? 21 A Yes. 22 Q Continue the story. 23 A Then I ultimately had a discussion with Mr. Gordon to 24 find out what he was doing and he said he was sending them 25 a salary and they had agreed -- he had agreed with them to
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8098 Reffsin-cross/White
1 that amount and I said fine. I said if you owe it to 2 them, pay it to them. And it's a good time to do it
3 because the corporation is making money and you'll get a
4 tax benefit for it.
5 Q And did you question him at all about the amount?
6 A No, not really. I knew the Grossmans had put up
7 their credit for the merchant account, at that point I
8 knew they were involved with stockholde
rs. It was a
9 little high but if you allocate it over three or four 10 years of activity it is not a great deal of money for 11 stockholders to obtain. 12 Q So the money goes out in December of 1992, right? 13 A Right. 14 Q And you subsequently learn that it comes back, the 15 net after taxes comes back in January of '93, right? 16 A That's correct. 17 Q And then that is used to reduce Mr. Gordon's loan 18 account; is that correct? 19 A That's correct. 20 Q Now, given all the circumstances, namely that 400,000 21 is a lot of money, that Dr. Grossman wasn't a day-to-day 22 participant in the company and the fact that it goes out 23 and comes back very quickly, did that ever raise any 24 question in your mind as an accountant? 25 MR. TRABULUS: Objection, Your Honor, to form.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8099 Ref
fsin-cross/White
1 THE COURT: Overruled. 2 A Well, it raised a question that obviously
3 Mr. Grossman even loaned him the $235,000.
4 Q Well, did it ever occur to you that in fact this was
5 a device by which Mr. Gordon could on paper make it look
6 like he was reducing his loan account?
7 A Does it look that way? Yes, but I was not privy to
8 the discusses that he had between Mr. Grossman at the time
9 and whatever decisions they made they made. It's not my 10 position to determine whether something is right or wrong 11 in a case like that. 12 Q But is it fair to say from what you said it looked 13 that way and you had certain suspicions but they were 14 allayed by Mr. Gordon? 15 A Yes. Obviously I asked Mr. Gordon what that money 16 was, and he said it was a loan. 17 Q Now, Mr. Gordon also made a repayment of 18 approximately $20,000 right aro
und the time of the 19 bankruptcy filing; isn't that right? 20 A Yes. 21 Q And how did you learn about that one? 22 A Only through the bank reconciliations. 23 Q You only knew about it after the fact. 24 A That's correct. 25 Q And have you since looked at the bank records or the
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8100 Reffsin-cross/White
1 trial exhibits here to learn that that $20,000 in fact 2 just came from another corporation and went to Mr. Gordon
3 and then went to Who's Who Worldwide?
4 A I did not look at Sterling or any of the other -- I
5 mean, I learned from the discussions you had here, but I
6 didn't look at those exhibits because I didn't do any work
7 on those exhibits or very little work.
8 Q Okay.
9 So, in other words, the first time you learned 10 that this alleged repayment was in fact money h
e had 11 obtained from another one of his corporations was from the 12 testimony at trial? 13 A That's correct. 14 THE COURT: Incidentally, members of the jury, 15 we'll work a little later before we go to lunch because I 16 have a Judge's meeting. I didn't know if I mentioned that 17 and the lunch hour will extend until 2:15, whenever we 18 break. 19 BY MR. WHITE: 20 Q Now, Mr. Reffsin, let me ask you about the time 21 period around the bankruptcy filing. That's March of 22 1994, correct? 23 A Right. 24 Q And were you aware that in the time period 25 immediately preceding the bankruptcy petition, large
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8101 Reffsin-cross/White
1 amounts of money were transferred out of Who's Who 2 Worldwide to other companies that Mr. Gordon controlled?
3 A I know there were transfers
to Sterling during the
4 January-February period in 1994. Ms. Gaspar had indicated
5 to me there were some transfers made to some other
6 entities, but that he had returned those transfers, some
7 of them.
8 Q In other words, that money went out to other
9 corporations but some of it came back to Who's Who 10 eventually? 11 A That's correct. 12 Q Did you ever learn that that money that went out to 13 other corporations was then being used for Mr. Gordon's 14 benefit? 15 A No, we never did any work with the other companies. 16 Q Did you not do the books for Sterling Who's Who also? 17 A We got involved initially. The books were maintained 18 at the time by Maria Gaspar. We were involved with 19 Sterling up through the end of 1993, and from that point 20 on Maria Gaspar who was maintaining the books, and all we 21 saw basically whatever the creditors
saw, the trial 22 balances. 23 Q Now, do you know or did you have any discussions with 24 Mr. Gordon where you indicated to him that Who's Who 25 Worldwide could not continue after the bankruptcy to pay
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8102 Reffsin-cross/White
1 his American Express bills? 2 A Oh, yeah. It was specifically told that there can be
3 no personal loans at all in the debtor.
4 Q Told by whom?
5 A By me.
6 Q To Mr. Gordon?
7 A That's correct.
8 Q And what, if anything, did Mr. Gordon say in
9 response? 10 A He didn't say anything. He accepted it. 11 Q Was it your understanding or did you have a 12 discussion with him about how his future American Express 13 bills would be paid? 14 A I was under the impression there weren't going to be 15 any future American Express bills at that po
int; that he 16 was going to live his salary which was at that time 17 supposed to be $150,000. 18 Q So is it fair to say that if he had other 19 corporations pay his American Express bills, that was or 20 would be a surprise to you? 21 A It was. I didn't expect it to have that. 22 Q Let me show you a chart that is already in evidence. 23 Now, Mr. Reffsin, if you wouldn't mind stepping 24 down for a minute. Take a look at this chart. 25 Now, we'll talk about the left side of it for now
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8103 Reffsin-cross/White
1 so I'll stand in front of the right side. 2 MR. TRABULUS: What exhibit number is that?
3 MR. WHITE: I'm sorry. Exhibit 837.
4 THE COURT: You are standing in front of the
5 jurors probably, so just be on the side.
6 THE WITNESS: I'm sorry. Shall I stand over
7 there mayb
e?
8 MR. WHITE: If you can see it from there.
9 BY MR. WHITE: 10 Q Now, do you see on the left the shaded box that 11 represents Who's Who Worldwide bank accounts? 12 A Yes, sir. 13 Q And do you see the funds going out in February and 14 March to other companies including Sterling Who's Who? 15 A Yes. 16 Q So I understand, you were aware of those transfers 17 out of Who's Who Worldwide at that time? 18 A Yes. 19 Q You were aware of those transfers? 20 A Yes. 21 Q And as you see some comes back from Sterling Who's 22 Who, that is where you were referring to as Maria Gaspar 23 told you some came back? 24 A That's correct. 25 Q Now, beyond when the money gets transferred out of
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8104 Reffsin-cross/White
1 Who's Who Worldwide, in other words, everything from here
2 over to the right --
3 A Umm-hmm.
4 Q -- Is it fair to say you are not aware of this other
5 stuff?
6 A No, we didn't do anything in Sterling Who's Who
7 because from our point of view it didn't even start up
8 until something like June or July of '94 so we didn't get
9 that involved. 10 Q So you were -- were you aware that money went from 11 Who's Who to Sterling and then Sterling was paying 12 Mr. Gordon's American Express and car lease? 13 A I wasn't aware of that. 14 Q Were you aware that money went out to a variety of 15 Registry Publishing accounts which then paid Mr. Gordon's 16 American Express bill? 17 A No, I was not aware -- Maria had indicated he had set 18 up some Registry Publishing accounts but I thought they 19 had to do with the Sterling operation. 20 Q And were you aware that money eventually found its 21 way to W
ho's Who Executive Club where they paid his 22 American Express bill? 23 A No, that I was not aware of. The monies that went to 24 Who's Who Executive Club was supposed to cover the cost of 25 the printing of the Tribute magazine.
OWEN M. WICKER, RPR OFFICIAL COURT REPORTER 8105 Reffsin-cross/White
1 Q You may sit back down again. 2 Now, tell us when, if at all, you found out about
3 these other transfers and these other corporations?
4 A Maria had indicated that they had set up some other
5 accounts but Mr. Gordon was always setting up other
6 accounts, so from an accounting viewpoint we incorporated
7 them. For example, if Who's Who Worldwide had two bank
8 accounts we just incorporated two bank accounts. We were
9 not aware of the fact that he was taking out monies for 10 personal use. It was my understanding those monies were 11 being
used to fund Sterling Who's Who's operations. And, 12 in fact, the autos, there were auto payments being made by 13 Who's Who Worldwide during the bankruptcy. 14 Q So I'm clear, you are saying that it was your 15 understanding that the money that gets transferred from 16 Worldwide to Sterling, was not to be used for Mr. Gordon's 17 personal expenses? 18 A No, they were to fund Sterling's operations because 19 he had 50, 60 employees and he was just starting up