Dirtiest Trials of the Twentieth Century - Jan 14 Transcript
3 (Whereupon, the following takes place in the
4 absence of the jury.)
5 THE COURT: What happened to my bench. Did you
6 do anything, Mr. White, here? It is like Goldilocks and
7 the Three Bears.
8 MR. WHITE: Your Honor, I hope I am not the big
9 bad wolf in that story.
10 THE COURT: You might very well be.
11 Let's put the appearances on the record right
12 now.
13 MS. SCOTT: Ceci Scott for the United States.
14 THE COURT: I can't hear you. First rule, talk
15 up. You want everybody to hear what you are saying,
16 right?
17 MS. SCOTT: Right.
18 THE COURT: That's the first rule. The second
19 rule is to talk slowly so the jury will hear the things
20 that you have been studying for the past six months or
21 more, which you expect them to digest in a space of a
22 split second.
23 In order to do that you have to speak slowly and
24 loudly.
25 Do you see the way I speak? Or do you hear the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 way I speak?
2 Do the same thing, please.
3 MS. SCOTT: Ceci Scott for the United States.
4 MR. WHITE: Ronald White for the United States.
5 MR. TRABULUS: Norman Trabulus for Bruce Gordon.
6 MR. JENKS: Edward Jenks for Who's Who Worldwide
7 Registry, Inc. and Sterling Who's Who.
8 MR. SCHOER: Gary Schoer for Tara Garboski. Good
9 morning.
10 MR. NELSON: Alan Nelson for Oral Frank Osman.
11 MR. LEE: Winston Lee for Laura Weitz. Good
12 morning, your Honor.
13 MR. DUNN: Thomas Dunn for MrShortcut,.
14 MR. NEVILLE: James Neville for Scott
15 Michaelson.
16 Also with me is a student, Jonathan Schechter,
17 S C H E C H T E R. And I was wondering if I could get
18 some guidance from the Court whether or not he could sit
19 up at the table with me.
20 THE COURT: It depends what law school he is in.
21 MR. NEVILLE: He is not in law school. He is a
22 college student.
23 THE COURT: What college does he go to?
24 MR. NEVILLE: The University of Vermont.
25 THE COURT: Okay.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 MR. NEVILLE: Thank you.
2 MR. GEDULDIG: Martin Geduldig for Annette Haley.
3 THE COURT: You are farther away, you have to
4 talk louder, Mr. Geduldig.
5 MR. GEDULDIG: Martin Geduldig for Annette Haley.
6 THE COURT: Good.
7 MR. WALLENSTEIN: John Wallenstein for Martin
8 Reffsin.
9 THE COURT: Let us discuss some of these
10 procedures.
11 First of all, when witnesses are sworn, please
12 remain seated. Do not stir around going over papers and
13 so forth, or discussing things with your colleagues. I
14 consider the administration of the oath to be a solemn
15 moment.
16 Secondly, we have a custom in the Eastern
17 District of New York to rise when the jury enters the
18 courtroom, and that's everybody, and rise when they leave
19 the courtroom. Please adhere to our custom.
20 I don't have to tell experienced lawyers to rise
21 when they make objections. There are several reasons for
22 that. You know the reasons.
23 Also, when you make objections, I don't want any
24 speeches. Just say object, and nothing else. If I want
25 to know what the reason is, I will ask you. Generally I
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1 will know what the reason is. Unless it is something that
2 is so vital and critical that you have to make a
3 statement, ask me permission to make a statement.
4 Otherwise no statements.
5 The jury room is through this left front door.
6 The men's bathroom is right opposite the jury room. Do
7 not use the men's bathroom on this floor. Use the
8 bathroom on the second floor.
9 Don't talk to the jurors. That is in any way.
10 Do not say hello, you look great today, or it is going to
11 snow tomorrow, what do you think? Don't say anything to
12 them. I will tell them that I have instructed you not to
13 talk to them so they don't think you are rude.
14 We are going to move this case along as rapidly
15 as we can, always consistent with due process
16 considerations. So, if you have requests to charge, if
17 you want to submit them, do it as soon as possible.
18 Because the case probably is not going to take as long as
19 you think it is going to take.
20 The government is going to start, I assume with
21 their case. Have enough witnesses available at all times
22 to go to 5:00 o'clock. I don't want to hear that you sent
23 three witnesses home because it is 2:00 o'clock and you
24 thought that we wouldn't need them. Probably these
25 witnesses will have never testified before, and will never
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 again. So, if they spend an extra day, so be it, rather
2 than all of us waiting and losing time. So have enough
3 witnesses available.
4 Please try to pre-mark the exhibits consistent
5 with the requirements of law. Exchange them with counsel
6 before you use them. Because there is nothing that is
7 more irritating to a jury, to have counsel, especially
8 this number, presented with a 38-page document and right
9 in front of the jury all of them reading this document for
10 the first time. That is to be avoided if possible.
11 Because I have hundreds of other cases, civil and
12 criminal, we will not be sitting generally on Fridays
13 where I take care of sentencings, motions, and all kinds
14 of other things.
15 I will let you know each week. But this Friday
16 we will not sit. Generally we won't, except if I need the
17 time.
18 As far as the preliminary instructions that I am
19 going to give the jurors, I am going to say very little
20 about the case.
21 Do you want me to introduce the individual
22 defendants? Anybody object to that? I generally do that.
23 MR. TRABULUS: No objection.
24 THE COURT: Okay.
25 Are all the defendants going to make opening
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1 statements? I tell the jury you don't have to, but are
2 you going to make opening statements? Everybody going to
3 make one?
4 MR. SCHOER: Yes.
5 MR. JENKS: Yes.
6 MR. NELSON: Yes.
7 THE COURT: Anybody not going to make an opening
8 statement?
9 (No response.)
10 THE COURT: Here is what I will tell the jury
11 about the case.
12 In this case the indictment charges that
13 Bruce W. Gordon, Who's Who Worldwide Registry, Inc. and
14 the rest of the defendants, were involved in a conspiracy
15 to commit mail fraud in connection with the Who's Who
16 directories, and all these defendants committed the
17 directories in connection with the Who's Who directories.
18 Bruce Gordon is also charged with giving perjurious
19 testimony at another trial, a civil trial, obstruction of
20 justice, filing false tax returns, filing false collection
21 information statements and money laundering.
22 In addition, Bruce Gordon and Martin Reffsin are
23 each charged with obstruction of justice, conspiracy to
24 impair, impede and defeat the Internal Revenue Service,
25 and evasion of payment of income taxes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 Finally, Martin Reffsin is charged with the
2 assisting in the filing of false income tax returns.
3 Of course, I tell them before that that the
4 indictment is simply a description of the charges made by
5 the government. It is not evidence of anything.
6 I tell the jurors that I encourage them to take
7 notes if they so request. My courtroom deputy will give
8 them a pad and a pen. And I give them some instructions
9 about taking notes.
10 Who is sitting at the counsel table with you,
11 Mr. White?
12 MR. WHITE: The agents, you mean?
13 THE COURT: Yes.
14 I don't know who they are. They could be the
15 next draft choice for the New York Jets in 1998. I don't
16 know who they are.
17 MR. WHITE: They wish, your Honor.
18 Joseph Jordan, Special Agent with the Internal
19 Revenue Service, and Alphonse Pagano, a postal inspector.
20 THE COURT: Joseph Jordan and --
21 MR. WHITE: That's IRS, and Alphonse Pagano,
22 P A G A N O, a U.S. postal inspector.
23 THE COURT: That's about it.
24 Anything anybody wants to talk to me, talk about
25 to me at this point?
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1 MR. JENKS: I do, your Honor.
2 Your Honor, at the time of the raids in March of
3 1995, on the two corporations, the government had made two
4 videotapes at 750 Lexington Avenue, at Sterling Who's Who,
5 and 1983 Marcus Avenue, your Honor.
6 I asked Mr. White to consent to allow me to play
7 during the opening statement five minutes from each of
8 these videos, so I could demonstrate and show to the jury
9 the actual corporations themselves, the working
10 environment of where these people were and what these
11 corporations were, so the jury doesn't start off with the
12 impression that they were in some kind of back room behind
13 some bar someplace selling these services.
14 There
is no question that these videotapes could
15 be admitted during trial through one of the agents if they
16 testified.
17 THE COURT: Are you representing that you will
18 admit them during the trial?
19 MR. JENKS: I would, your Honor.
20 I asked your courtroom deputy to provide me with
21 a television and VCR. Mr. Trabulus has the tapes here
22 with him. Mr. White has said he would object to playing
23 them in the opening since they are not in evidence.
24 THE COURT: How could they be in evidence at the
25 time of the opening statement?
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1 MR. JENKS: Absolutely, your Honor.
2 THE COURT: You are representing to me you will
3 offer this and show this in court during the trial?
4 MR. JENKS: I will offer it through Inspector
5 Biegelman and Inspector Pagano.
6 THE COURT
: Yes or no?
7 MR. JENKS: Yes.
8 THE COURT: What is the objection?
9 MR. WHITE: Your Honor, if he is trying to show
10 they have nice offices --
11 THE COURT: Do they have nice offices?
12 MR. WHITE: Yes, pretty nice, I admit.
13 THE COURT: Let him show it then.
14 Mr. White, we are in the 20th century. Tomorrow
15 they are going to show judges how to use these computers.
16 I am not going to show up there, but most of them are
17 going to be there.
18 MR. WHITE: My concern is what snippets Mr. Jenks
19 is going to pay.
20 MR. WHITE: Also there is audio. There are
21 agents conducting a search and talking about things. If
22 he wants to show that there are nice offices, maybe it can
23 be played without the audio. I don't know what is on the
24 audio on the particular parts they want to play.
25 MR. TRABULUS: The audio here represents and
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1 identifies rooms by letter or number, or say it appears to
2 be a storage room or cafeteria.
3 MR. JENKS: Your Honor, excuse me, Mr. Trabulus.
4 I don't need to play the audio.
5 THE COURT: Where is this machine that plays this
6 thing?
7 MR. JENKS: I mentioned it to the courtroom
8 deputy. She indicated she would -- you have the tapes?
9 MR. TRABULUS: The tapes are in my car, I can get
10 it right now.
11 THE COURT: We are not going out to your car to
12 see them, right? So let's get them.
13 MR. TRABULUS: Okay.
14 THE COURT: I will not let this jury wait. You
15 better get it now, because I will not have them wait.
16 MR. TRABULUS: I have a matter to bring up as
17 well.
18 MR. TRABULUS: Get the tapes first. Let's get
19 the tapes.
20 MR. TRABULUS: You want me to get the tapes?
21 THE COURT: What is your application?
22 MR. TRABULUS: My application is by way of motion
23 in limine. There are two matters I had not previously
24 brought to the Court's attention.
25 The first one which is pretty simple, there may
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1 be an attempt by the government to introduce evidence that
2 a couple of the witnesses, whose names are the Grossmans,
3 are relatives of Mr. Gordon. In the course of settling an
4 proceeding in bankruptcy entered into an agreement they
5 were to pay a considerable amount of money to the
6 bankruptcy trustee.
7 I would ask the government be precluded from
8 introducing evidence of it and mentioning it in opening.
9 THE COURT: First of all, do you wish to do
10 that?
11 MR. WHITE: Certainly not in the opening.
12 THE COURT: All right.
13 MR. TRABULUS: The next point relates to evidence
14 that the government may seek to introduce that various
15 members would not have pumped the registries or
16 memberships, had they been told of certain things, such
17 as, for example, that mailing lists were used.
18 Now, the danger here, your Honor, is that the
19 issue of whether an individual would have purchased, or
20 would not have purchased may be confused in the jury's
21 mind with the question of materiality, which is an
22 objective test relating to the nature of the statement or
23 misstatement that is made.
24 We could have a situation, your Honor, where the
25 jurors could think if this particular person would or
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1 would not have purchased, had they been told this,
2 automatically that that is material. It is really not
3 relevant as to whether they would or would not have,
4 particularly their opinion today as to what they might
5 have done years before.
6 So, I would ask that that type of questioning not
7 just with relation to if they had been told by mailing
8 list, but anything the government claims they should have
9 been told or weren't told, that that should be precluded,
10 and the government be precluded from referring to any such
11 testimony in opening statement.
12 THE COURT: Namely that the subscribers were told
13 that they were not told that they were gotten off lists,
14 mailing listing?
15 MR. TRABULUS: No, that's not it.
16 Obviously they could introduce evidence as to
17 what the subscribers or purchasers were told or what they
18 weren't told. Clearly they can do that. But their
19 opinion today as to what they would have done if they had
20 been told something different, and to what they wouldn't
21 have done if they were told something different or more,
22 that risks confusing the jury on the issue of materiality,
23 and it also is calling for an opinion today as to what
24 someone might have done years before. The prejudice is
25 too great to put that in.
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1 MR. WHITE: Your Honor, Mr. Trabulus is about 100
2 percent wrong.
3 THE COURT: He is, so I am denying his
4 application.
5 MR. WHITE: All right.
6 THE COURT: Mr. Trabulus, would you go get that
7 tape?
8 MR. TRABULUS: Yes.
9 THE COURT: Would you consent to have someone
10 cover for you while you are gone?
11 MR. TRABULUS: Yes, Mr. Jenks can cover for me.
12 THE COURT: Very good.
13 Is that all right with you, Mr. Gordon?
14 THE DEFENDANT GORDON: That's wonderful, your
15 Honor.
16 THE COURT: Okay.
17 MR. DUNN: Thomas Dunn for your
18 Honor.
19 Your Honor, my client has a spinal degenerative
20 condition. And during jury selection Magistrate Judge
21 Pohorelsky was kind enough to let him stand up and move
22 around from time to time. And also there times when he
23 really gets bad, it gets bad and he may have to walk out
24 of the courtroom.
25 THE COURT: Who is your client?
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1 MR. DUNN: MrShortcut,. During jury selection he
2 agreed to waive his appearance when he had to leave the
3 courtroom. He also wishes to waive his appearance if his
4 condition is so bad that he has to leave the courtroom.
5 I am asking the Court if from time to time he can
6 stand up during testimony?
7 THE COURT: The answer is yes.
8 MR. DUNN: Also if he is permitted if it is
9 really bad, if he can leave the courtroom?
10 THE COURT: Yes. As long as he understands he
11 has an absolute right, constitutional right to be present
12 at all times during this trial. And that his absence from
13 the trial is not good. People shouldn't leave.
14 Defendants should not leave criminal trials, because
15 jurors get funny ideas about that.
16 If he understands the danger in doing it, but has
17 to do it because of a condition, I will certainly permit
18 him to do it.
19 MR. DUNN: He understands, that, your Honor.
20 THE COURT: Okay.
21 MR. SCHOER: Judge, what is your practice with
22 respect to the order in which counsel has to cross-examine
23 witnesses.
24 THE COURT: Let's do it in the regular order you
25 are sitting in now. There is no set rules for that.
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1 Let's do it right down the line, starting with
2 Mr. Trabulus, Mr. Jenks, and then you right down the
3 line.
4 MR. SCHOER: I know we have had certain
5 discussions.
6 THE COURT: You want to do it another way?
7 MR. SCHOER: With respect to opening statements
8 we will do it that way. But with respect to
9 cross-examination of particular witnesses, we may decide
10 to go out of order.
11 THE COURT: Whatever you decide to do is all
12 right. You just govern your ownselves on cross. I will
13 not say Mr. So and So next. You take care of that. But
14 in the opening we will do it in the way in which you are
15 sitting, all right?
16 MR. SCHOER: Fine.
17 THE COURT: Mr. Geduldig wants to say something.
18 How are you doing?
19 MR. GEDULDIG: Your Honor, my client has
20 diabetes, it may be if we have a particularly long session
21 in court she may have to leave.
22 THE COURT: Who is your client?
23 MR. GEDULDIG: Annette Haley. She shares little
24 round pretzels.
25 THE COURT: Does she share it with everybody?
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1 MR. GEDULDIG: She is willing to do it. I don't
2 want the Court to feel she is eating in court.
3 THE COURT: I am glad you told me. I will not
4 permit that. Just as the judge in Queens wouldn't permit
5 a lawyer to come in with a T-shirt, was it?
6 MR. GEDULDIG: Yes.
7 THE COURT: My goodness, what have we come to?
8 Then they brought an action, a habeas case or a federal
9 case.
10 The jury is all here. Let's get going.
11 MR. WHITE: I wanted to make
one thing clear,
12 your Honor.
13 Mr. Rosenblatt, a revenue agent from the IRS is
14 going to testify for the government as both a summary
15 witness in the tax case and an expert witness in the tax
16 case. He is going to be here during the openings and the
17 tax part of the case. I wanted to make that clear that he
18 is here when the other witnesses testify.
19 THE COURT: Very well.
20 All right? Anything else? You got the tape?
21 MR. JENKS: We have them. I don't know if
22 Mr. White wants to look at them.
23 THE COURT: No. You show it.
24 MR. JENKS: Once is enough.
25 THE COURT: You will show the visual and not the
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1 audio portion.
2 MR. JENKS: We will figure a way how to turn off
3 the audio.
4 THE COURT: I don't know how to do that.
5 MR.
JENKS: I need a second.
6 (Whereupon, at this time there was a pause in the
7 proceedings.)
8 MR. WALLENSTEIN: I have an application while we
9 are waiting, your Honor.
10 THE COURT: Yes.
11 MR. WALLENSTEIN: With respect to logistics,
12 Judge, the witness rooms are directly outside the
13 courtroom. The government obviously has one. We have
14 been trying to use the other. We seem to have conflict
15 with other trials in the building. We have a great number
16 of materials with us, and I ask that we have use of that
17 room, and have the marshals lock it up if possible.
18 THE COURT: I have to look as to who is using it,
19 I can't usurp it.
20 MR. WALLENSTEIN: Some witnesses from another
21 trial are using it for a lunchroom, I understand.
22 THE COURT: You can tell them that I am giving
23 the room to you.
24 Tell Mr. Pauley, who I understand is using it, if
25 he has any complaints to see me.
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1 MR. WALLENSTEIN: Fine.
2 MR. SCHOER: Just to clarify, Judge, Monday is a
3 holiday and we are not working on Monday. It is Martin
4 Luther King's Day.
5 THE COURT: Yes. There will be no court.
6 (Whereupon, the jury at this time entered the
7 courtroom.)
8 THE COURT: Members of the jury, please remain
9 standing. Everybody else, please be seated.
10 Will the jurors please raise their right hands.
11 I am about to administer the oath.
12 (A jury of 12 plus six alternates, previously
13 empaneled, are duly sworn by the Court.)
14 THE COURT: Good morning, members of the jury.
15 I like that response. That's good.
16 My name is Arthur Spatt. You have not met me
17 before because Magistrate Judge Pohorelsky has had the
18 privilege of presiding over this case in the selection of
19 the jury.
20 I am the United States District Judge who will be
21 trying this case. I want to thank you for your patience,
22 dedication, and your sense of responsibility in all of you
23 wanting to sit on this jury, or at least agreeing to sit
24 on this jury.
25 I also want to thank you for your punctuality. I
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1 understand you were all here on time, all 18 of you and
2 that's wonderful since we take people from the entire
3 district, the tip of Staten Island, right near New Jersey,
4 all the way out to Montauk Point. And you were all on
5 time, and I want to thank you for that.
6 Now that you have been sworn, and before we begin
7 the trial, I would like to tell you about what will be
8 happening. I want to describe how the trial will be
9 conducted and explain what we will be doing, you, the
10 lawyers for all sides, and myself as the judge.
11 At the end of the trial I will give you more
12 detailed guidance on how you are about to go about
13 reaching your decisions. But now I simply want to explain
14 how the trial will proceed and your duties during the
15 trial.
16 This criminal case has been brought by the United
17 States Government. I will sometimes refer to the
18 government as the prosecution.
19 The government is represented at this trial, and
20 I want to introduce the lawyers to you, and you have met
21 them already, I assume, by Assistant United States
22 Attorneys, Ronald G. White.
23 Mr. White, do you want to get up and say hello to
24 the jurors?
25 MR. WHITE: Good morning.
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1 THE COURT: And Cici Scott.
2 MS. SCOTT: Good morning.
3 THE COURT: With them at counsel table is Joseph
4 Jordan of the Internal Revenue Service and Inspector
5 Alphonse Pagano of the United States Postal Service.
6 Now, may I introduce the defendants and their
7 attorneys?
8 First Bruce W. Gordon.
9 THE DEFENDANT GORDON: Good morning.
10 THE COURT: Represented by Norman Trabulus,
11 Esquire.
12 MR. TRABULUS: Good morning.
13 THE COURT: Then two corporations, Who's Who
14 Worldwide Registry, Inc., and Sterling Who's Who both
15 represented by Edward P. Jenks, Esquire.
16 MR. JENKS: Good morning.
17 THE COURT: Next, Tara Garboski, also known as
18 Tara Green.
19 THE DEFENDANT GARBOSKI: Good morning.
20 THE COURT: Represented by Gary Schoer, Esquire.
21 MR. SCHOER: Good day.
22
THE COURT: Very good, Mr. Schoer.
23 Next defendant is Oral Frank Osman.
24 THE DEFENDANT OSMAN: Hello and good morning.
25 THE COURT: Also known as Frank Martin,
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1 represented by Alan M. Nelson.
2 MR. NELSON: Good morning.
3 THE COURT: Of the firm of Garber, Klein and
4 Nelson.
5 Laura Weitz, also known as Laura Winters, by
6 Winston Lee, Esquire.
7 MR. LEE: Good morning, everyone.
8 THE COURT: Annette Haley, represented by Martin
9 Geduldig, Esquire.
10 MR. GEDULDIG: Good morning.
11 THE COURT: Scott Michaelson, represented by
12 James C. Neville, Esquire.
13 MR. NEVILLE: Hello.
14 THE COURT: also known as Steve
15 Walden.
16 Mr. Rubin, by the way has somewhat of a condition
17 in which he will stand up from time to time be
cause he has
18 to, and will sometimes walk out. Is that correct?
19 His lawyer is Thomas F.X. Dunn, Esquire.
20 That's correct, Mr. Dunn?
21 MR. DUNN: It is, yes.
22 Good morning.
23 THE COURT: Last is Martin Reffsin.
24 MR. REFFSIN: Good morning, ladies and
25 gentlemen.
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1 THE COURT: Represented by John S. Wallenstein,
2 Esquire.
3 MR. WALLENSTEIN: Good morning.
4 THE COURT: Members of the jury, the defendants
5 have been charged by the government with violation of
6 federal laws. The charges against the defendants are
7 contained in the indictment.
8 The indictment is simply the description of the
9 charges made by the government against the defendants. It
10 is an accusation. It is not evidence of anything.
11 I will now briefly summarize the charges in the
12 indictment.
13 In this case the indictment charges that Bruce
14 Gordon, Who's Who Worldwide Registry, Inc., Sterling Who's
15 Who, Inc., Tara Garboski, also known as Tara Green, Oral
16 Frank Osman, also known as Frank Martin, Laura Weitz, also
17 known as Laura Winters, Annette Haley, Scott Michaelson
18 and also known as Steve Walden, were involved
19 in a conspiracy to commit mail fraud in connection with
20 the Who's Who directories.
21 And all these defendants, the indictment charges,
22 committed mail fraud, in connection with the Who's Who
23 directories.
24 Bruce Gordon is also charged with giving
25 perjurious testimony at another trial, a civil trial. He
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 is charged with obstruction of justice, filing false tax
2 returns, filing false collection information statements
3 and money laundering.
4 In addition, Bruce Gordon and Martin Reffsin are
5 each charged with obstruction of justice, conspiracy to
6 impair, impede and defeat the Internal Revenue Service,
7 and evasion of payment of income tax.
8 Finally, Martin Reffsin is charged with assisting
9 in the filing of false income tax returns.
10 The defendants all pleaded not guilty to the
11 charges and deny committing these offenses.
12 The defendants are presumed to be innocent and
13 may not be found guilty by you unless all 12 of you
14 unanimously find that the government has proved their
15 guilt beyond a reasonable doubt.
16 The defendants are being tried together because
17 the government has charged that they worked together to
18 commit some of these crimes. However, you will have to
19 give separate consideration to the case against each
20 defendant, and as to each count. Each defendant is
21 entitled to your separate consideration as to each count.
22 It will be your duty to find from the evidence
23 what the facts are. You and you alone are the judges of
24 the facts. You will then have to apply to those facts the
25 law as the Court will give it to you. You must follow
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 that law whether you agree with it or not.
2 Nothing I may say or do during the course of the
3 trial is intended to indicate, nor should be taken by you
4 as indicating, what the facts are, or what your verdict
5 should be.
6 In order to decide the facts in this case, it is
7 important that you listen carefully to the witnesses as
8 they testify, and that you form no final judgment with
9 respect to the outcome of the case until you are in that
10 jury room deliberating. So that it is important that you
11 keep an open mind throughout the entire trial.
12 The evidence from which you will find the facts
13 will consist of the testimony of the witnesses, documents
14 and other things received in evidence as exhibits, and any
15 facts the lawyers agree or stipulate to, or that the Court
16 may instruct you to find.
17 Certain things are not evidence and must not be
18 considered by you as evidence. I will list them for you
19 now.
20 The statements, arguments, opening statements,
21 summations and unanswered questions by lawyers are not
22 evidence.
23 Objections to the questions are not evidence.
24 The lawyers have an obligation to their client to make an
25 objection when they believe that testimony or evidence
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
27
1 being offered is improper under the Rules of Evidence.
2 You should not be influenced by the objection or by the
3 Court's ruling on it.
4 If the objection is sustained, ignore the
5 question. If it is overruled, treat the answer like any
6 other. If you are instructed that some item of evidence
7 is received for a limited purpose only you must follow
8 that instruction.
9 Testimony that the Court has excluded or
10 disregard is not evidence and must not be considered, even
11 though you have heard it.
12 Anything that you may have seen or heard outside
13 the courtroom is not evidence and must be disregarded.
14 You are to decide the case solely on the evidence
15 presented here in this courtroom.
16 There are two kinds of evidence, direct evidence
17 and circumstantial evidence. Direct evidence is direct
18 proof of a fact, such as the testimony of an eyewitness.
19 Circumstantial evidence is proof of a fact from which you
20 may infer or conclude that other facts exist.
21 I will give you further instructions on these as
22 well as other matters during and at the end of the trial.
23 But have in mind that you may consider both kinds of
24 evidence, direct evidence, and circumstantial evidence.
25 It will be up to you to decide which witnesses to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
28
1 believe, which witnesses not to believe, and how much of
2 any witness' testimony to accept or reject. I will give
3 you some guidelines for determining the credibility of
4 witnesses during and at the end of the trial.
5 As you know this is a criminal case. There are
6 three basic rules about a criminal case that you must
7 always keep in mind.
8 First, each defendant is presumed innocent until
9 proven guilty.
10 The indictments against the defendants is only an
11 accusation, nothing more. It is not proof of guilt or
12 anything else.
13 Second, the burden of proof is on the government
14 until the very end of the case. The defendants have no
15 burden to prove their innocence, or to present any
16 evidence, or to testify. Since the defendants have the
17 right to remain silent, the law prohibits you from
18 considering that a defendant may not have testified in
19 reaching or arriving upon your verdict.
20 Third, the government must prove the defendants'
21 guilt beyond a reasonable doubt. I will give you further
22 instructions on this point later. But bear in mind that
23 in this respect, a criminal case is different from that of
24 a civil case.
25 With regard to the trial procedure, the first
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
29
1 step in the trial will be the opening statements, which
2 will proceed immediately after I give my instructions to
3 you.
4 The government in its opening statement will tell
5 you about the evidence that it intends to put before you,
6 so you will have an idea of what the government's case is
7 going to be.
8 Just as the indictment is not evidence, neither
9 is the opening statement evidence. Its purpose is only to
10 help you understand what the evidence will be and what the
11 government will try to prove.
12 After the government's opening statement the
13 defendants' attorneys may or may not make an opening
14 statement.
15 At this point in the trial no evidence has been
16 offered.
17 I must caution you that however helpful these
18 opening statements may be so you can better follow the
19 testimony as it is presented, they are not a substitute
20 for the evidence. The evidence upon which you will base
21 your decisions will come to you from the witnesses who
22 take the stand and testify under oath and are subject to
23 cross-examination, and such documents and exhibits that
24 are introduced during the trial.
25 Next, the government will offer evidence that it
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
30
1 says will support the charges against the defendants. The
2 government's evidence in this case will consist of the
3 testimony of witnesses, as well as documents and exhibits.
4 After the government's evidence, the defendants'
5 attorneys may present evidence in the defendants' behalf,
6 but they are not required to do so.
7 I remind you that the defendants are presumed
8 innocent, and the government must prove the guilt of the
9 defendants beyond a reasonable doubt. The defendants do
10 not have to prove their innocence.
11 After you have heard all the evidence in the
12 case, the government and the defense will each be given
13 time for their final arguments.
14 I just told you that the opening statements by
15 the lawyers are not evidence. The same applies to the
16 closing arguments, or summations. They are not evidence
17 either.
18 In their closing arguments, the lawyers for the
19 government and the defendants will give you their view of
20 the evidence to attempt to help you understand the
21 evidence that was presented.
22 The final part of the trial occurs when I
23 instruct you about the rules of law which you are to use
24 in reaching your verdict.
25 After hearing my instructions you will leave the
HARRY RAPAPORT, CSR,
CP, CM OFFICIAL COURT REPORTER
31
1 courtroom together to make your decisions. Your
2 deliberations will be secret. You will never have to
3 explain your verdict to anyone.
4 Now a few words about your conduct as jurors.
5 First, I instruct you that during the trial you
6 are not to discuss this case with anyone, or permit anyone
7 to discuss it with you. Until you retire to the jury room
8 to deliberate to consider your verdict you are simply not
9 to talk about the case with anyone.
10 Let me explain that during the entire course of
11 the trial you should not talk with any of the witnesses,
12 or with the defendants, or with any of the lawyers in the
13 case. Please do not talk to them about any subject at
14 all. In addition, during the entire course of the trial
15 you should not talk about the trial with anyone else. Not
16 your family, not
your friends, not the people you work
17 with, not with anyone.
18 If you pass any of the lawyers in the hallway,
19 and he is not giving you a rousing good morning, he is not
20 being impolite. He is following my instructions. I have
21 instructed the lawyers not to talk to you at all, even to
22 pass the time of day. In no other way can the complete
23 impartiality of the jury be observed.
24 Also, you should not discuss this case among
25 yourselves until I have instructed you on the law and you
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
32
1 have gone to the jury room to make your decisions at the
2 end of the trial.
3 It is important that you wait until all the
4 evidence is received, and you have heard my instructions
5 on the rules of law before you deliberate among
6 yourselves.
7 Let me add that during the course of the trial
8 you will receive all the evidence you properly may
9 consider to decide this case. Because of this you should
10 not attempt to gather any information on your own which
11 you think might be helpful. Do not engage in outside
12 reading on this case. Do not attempt to visit any places
13 mentioned in the case. And do not in any other way try to
14 learn about the case outside the courtroom.
15 I repeat, do not read or listen to anything
16 touching on this case in any way. If anyone should try to
17 talk to you about this case please advise my courtroom
18 deputy clerk immediately of such an occurrence, but talk
19 to no one else about it. Don't discuss such a situation
20 with your fellow jurors. Say nothing to them.
21 In sum, do not permit any third person to discuss
22 the case in your presence. And if anyone does so despite
23 you telling the person not to, report that fact to the
24 Court deputy clerk as soon as you are able to.
25 You should not, however, discuss with your fellow
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
33
1 jurors either that fact or any other fact you feel
2 necessary to bring to the attention of the Court. Report
3 such to the Court deputy clerk only, and do not discuss
4 such a situation with the other members of the jury.
5 Do not form any opinion in this case until the
6 conclusion of the trial. Keep an open mind until you
7 start your deliberations at the end of the case.
8 In sum, the only time you are entitled to discuss
9 this case is when it is submitted to you for final
10 deliberations, and that is only after all the witnesses
11 are heard, after the lawyers have given their summations,
12 and after the Court's instructions to you as to the law.
13 It is only after the case is submitted to you for
14 deliberation, and you go into that jury room to begin your
15 deliberations, that you have the right to discuss and
16 consider the evidence and make your factual
17 determinations.
18 These instructions continue throughout the entire
19 trial, whether or not I repeat them to you.
20 Please remember that.
21 Also, during the course of the trial I may ask a
22 question of a witness. If I do, that does not indicate
23 that I have any opinion about the facts in this case. My
24 questioning is just to attempt to clarify a point or to
25 expedite the trial.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
34
1 Now, during the trial, those of you who wish to
2 take notes may do so. While I fully encourage the taking
3 notes -- I point out to you that the good court reporter
4 takes down everything, every word that is said in the
5 courtroom, and will read back to you during your
6 deliberations any portion of the transcript you may ask
7 for. In taking notes I also advise you to be careful,
8 since taking notes presents the further problem that doing
9 so may divert your attention from some important testimony
10 given while you are taking the notes. But if you want to
11 take notes, fine. You will see that I copiously take
12 notes myself.
13 For those who do take notes during the trial, I
14 point out to you and your fellow jurors that your notes
15 are simply an aid to the memory of the particular juror
16 who takes the notes. Therefore, you are instructed that
17 the notes are only a tool to aid your own individual
18 memory. And you should never compare your notes with
19 other jurors in determining the content of any testimony
20 or in evaluating the importance of any evidence.
21 Further, those jurors who do not take notes
22 should rely on their independent recollection of the
23 evidence and not be influenced by the fact that another
24 juror has taken notes.
25 Your notes are not evidence. They are for your
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
35
1 use only, and are by no means a complete outline of the
2 proceedings, and may not even be a list of the highlights
3 of the trial.
4 Finally, let me clarify something you may wonder
5 about later. During the course of the trial I may have to
6 interrupt the proceedings to confer with the attorneys
7 about the rules of law which should apply here. Sometimes
8 we will talk at the bench sidebar. I don't know if you
9 saw that during jury selection. You probably did, when
10 the lawyers congregate -- with these number of lawyers, it
11 is a real congregation -- at the extreme right part of the
12 bench. And I will talk to them. And then we put on this
13 gizmo. The definition of a gizmo is something that has no
14 other name. It is a nautical term, gizmo, G I Z M O. We
15 put that on, and that makes some noise.
16 Did they do that during jury selection?
17 (The jury answers in the affirmative.)
18 THE COURT: I assume they did.
19 Sometimes I have to speak to the lawyers at
20 length about the rules of evidence. The law with regard
21 to the rules of evidence are not for your consideration.
22 I have to talk to them privately. Sometimes in order to
23 do it better we may ask you to step outside of the
24 courtroom so we can talk. We will try to do that as
25 little as possible. We went to move things along. I will
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
36
1 try to avoid such interruptions as much as possible. But
2 please be patient even if the trial seems to be moving
3 slowly, because these conferences often saves time for all
4 of us.
5 I try to avoid keeping juries waiting. Contrary
6 to reports you may have read in the paper, or heard from
7 other jurors, we are very much concerned about your
8 convenience and your time.
9 If I have to keep you waiting, and I will have to
10 on certain occasions, I will let you know in advance.
11 I will also try to keep you advised of my
12 schedule and when this case will be in recess.
13 Since I have many other cases pending, which may
14 take some of my time, I will try to keep you apprised so
15 you can make your own plans.
16 For example, we will not be working this Friday.
17 I take all the other matters that I have generally on
18 Fridays, and put it on that day. So, sometimes we may
19 work on Fridays, rarely. But I will keep you advised
20 about that. Not this Friday.
21 Of course, Monday is a holiday, so you will have
22 four days off, in which you can go to work on Friday,
23 Saturday and Sunday, if you want to. I am big on going to
24 work, but that's up to you. Some of you may be retired or
25 not working. But those who may be working, go to work,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
37
1 because we will not be working this Friday, at least not
2 on this case.
3 Normally if we are on trial all day, and we start
4 at 9:30 in the morning generally, we will take one recess
5 mid-morning, about 11:00 o'clock. And then at 12:30 we
6 take lunch. I am a big advocate of eating lunch. I
7 understand some people don't eat lunch at all. I cannot
8 understand that, but whether they do or not, we are taking
9 an hour off for lunch, between 12:30 and 1:30 generally.
10 All these things are dependent, of course, upon juror
11 availability.
12 We will return at 1:30 and work to 5:00. If at
13 5:00 o'clock we have a witness on who is leaving for the
14 Arctic Circle the next morning, never to return to the
15 United States, we are going to finish that witness,
16 although it is going to take more than 5:00 o'clock. So
17 we have to be flexible about these things.
18 In the afternoon we will have one recess about
19 3:00 o'clock.
20 I want to make sure you are all comfortable,
21 alert and listening carefully to all the evidence at all
22 times.
23 Remember, your main job during this trial is to
24 listen carefully to all of the testimony and the
25 presentation of the evidence.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
38
1 Members of the jury, please give your attention
2 to the opening statement of the government, represented by
3 Assistant United States Attorney Ronald G. White.
4 Mr. White.
5 MR. WHITE: Your Honor, Ms. Scott will be
6 delivering the government's opening statement.
7 THE COURT: Very well.
8 MS. SCOTT: With the Court's permission, we would
9 like to set up the podium.
10 THE COURT: Good. I like podiums, set it up.
11 You will notice, members of the jury, that we
12 don't have a lot of help in the courtroom.
13 Those of you who may have sat on juries in the
14 state court, we had a lot of help in the courtroom, that's
15 where I came from. We didn't need it. But here we do
16 everything ourselves, you will see.
17 I wanted to mention one other thing about the
18 notes. Everyday you will give the notes to the jury clerk
19 and we will secure them every night so no one has access
20 to your notes.
21 Sorry for interrupting you, you may proceed.
22 MS. SCOTT: Thank you, your Honor.
23 Goods morning, again, ladies and gentlemen.
24 My name is Ceci Scott, and I am an Assistant
25 United States Attorney in this district. As you know
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
39
Opening - Scott
1 Ronald White is also an Assistant United States Attorney
2 in this district. He is the man sitting to the left of
3 where I was sitting.
4 To the right is Joseph Jordan of the Internal
5 Revenue Service and next to him is Postal Inspector
6 Alphonse Pagano of the United States Postal Inspection
7 Service.
8 Inspector Pagano and Agent Jordan were
9 responsible for the gathering of the evidence and
10 preparation of the case, together we represent the United
11 States of America in this criminal action.
12 This case is about an immense multimillion dollar
13 fraud on the government. It is about a business that
14 regularly misrepresented its products to its customers in
15 order to entice them to buy these products.
16 You will hear a great deal of evidence --
17 THE COURT: Excuse me, you need a glass of
18 water?
19 A JUROR: Yes. Thank you.
20 MS. SCOTT: You will hear a great deal of
21 evidence about this business, about how it was run, how it
22 trained its employees, how it kept its records. And you
23 will hear quite a bit of evidence about what happened to
24 the money that was made by this business.
25 As evidence comes in bit by bit, you will see
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
40
Opening - Scott
1 that what this case is really about is two very simple
2 things.
3 Lying and cheating.
4 This lying and cheating that was done happened in
5 two ways. There were the customers of the business who
6 were lied to and cheated into paying over their money for
7 products which were not as they had been represented to
8 be. And there was lying and cheating to the IRS. The IRS
9 was lied to and cheated out of money that it was owed.
10 And you will hear, ladies and gentlemen, that at
11 the center of these two schemes was one man, the defendant
12 Bruce Gordon, the man who ran the business that made
13 millions of dollars off of its unsuspecting customers, and
14 the man who lied to the IRS in order to avoid payment of
15 taxes on his enormous income.
16 Now, you will hear that this business actually
17 consisted of two companies, one is called Who's Who
18 World
wide Registry, Inc, and the other is Sterling Who's
19 Who, Inc., and we will refer to them as Who's Who
20 Worldwide and Sterling Who's Who.
21 Who's Who Worldwide began in 1989, and Sterling
22 Who's Who began in 1994, both companies ran until March of
23 1995 when the defendants in this case were all arrested.
24 You will hear throughout this case that at Bruce
25 Gordon's direction employees of these two companies lied
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
41
Opening - Scott
1 to their customers in order to trick them into buying
2 these company's products.
3 Now, among the employees of the companies, were
4 the six defendants who were also introduced to you, Tara
5 Garboski, the blond woman almost to the end on the
6 left-hand side, Oral Frank Osman, all the way at the end,
7 the man with the white hair.
8 In the middle
is Laura Weitz, the woman wearing
9 the leather jacket.
10 All way in the corner with the black hair is
11 MrShortcut,. About three people down from him is Scott
12 Michaelson wearing a green jacket.
13 Right next to him is Annette Haley, the woman
14 with the black hair and black top.
15 All six of these defendants were employees of
16 Who's Who Worldwide between 1989 and 1995, some of them
17 working at different times.
18 Tara Garboski and Frank Osman were managers of
19 the company, they supervised the telemarketing people, and
20 at certain points were telemarketing salespeople
21 themselves.
22 Annette Haley, Scott Michaelson, MrShortcut, and
23 Laura Weitz were all telemarketing salespeople at Who's
24 Who Worldwide.
25 All six of these defendants were involved in the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
42
Opening - Scott
1 systematic lying and cheating that was going on at that
2 company.
3 Now, the defendants lied to achieve one purpose,
4 and that was to make easy money off of these customers who
5 believed they were paying their money to get one thing
6 when in fact they were getting something quite different.
7 You will also hear about what Bruce Gordon did
8 with this money once it was swindled from the companies,
9 because Bruce Gordon owns the corporations, and controlled
10 this money, he took a lot of it out. But he did
11 everything he could to make sure that the IRS didn't find
12 out that he had control of this money, because he already
13 owed the IRS a substantial debt of three million dollars.
14 This was an amount in back taxes and interest and
15 penalties.
16 Because Bruce Gordon did not want to pay this
17 back debt he concealed the extent of the income he was
18 getting from these companies from the IRS, hoping that
19 would prevent him from having to pay the debt back.
20 Now, in a nutshell what Bruce Gordon did with the
21 assistance of his accountant, Martin Reffsin, who is the
22 second man from the right in the back row. What Bruce
23 Gordon and Martin Reffsin did was to tell the IRS that
24 Bruce Gordon barely had enough money to make ends meet.
25 That his financial circumstances were so difficult that he
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
43
Opening - Scott
1 couldn't possibly pay back this debt of three million
2 dollars.
3 But you will hear in reality Bruce Gordon was
4 living the high life, complete with Armani suits, a
5 Mercedes Benz and swanky European vacations as you
6 probably gathered from the proceeding so far and the
7 information you have received from the judge, the products
8 that these companies were selling to the public were
9 memberships in the Who's Who directories. Customers were
10 invited to pay hundreds of dollars to be listed in the
11 Who's Who directories for different periods of time, three
12 years, five years, a lifetime. The longer a person was
13 listed in the directories, the more money they would have
14 to pay for the membership.
15 You will hear that although these directories
16 were published each year, the companies fundamentally
17 misrepresented to the customers the single most important
18 thing to customers, and that was how they and the other
19 members had been selected for membership.
20 Because since inclusion in these directories was
21 represented to be a recognition of individual
22 accomplishment, the honor of being selected was the
23 primary reason why customers bought these memberships.
24 And the whole reason customers thought these memberships
25 were valuable is because they thought they were
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
44
Opening - Scott
1 individually selected for a great honor based on their
2 personal achievements. They were told their success made
3 them eligible to join an exclusive club of likely
4 professional and accomplished people. They were told few
5 were selected for membership, in other words, the process
6 was extremely selective. Each person was told that he or
7 she was specially nominated for membership by another
8 member, and this was based on this person's high level of
9 achievements.
10 These comments made the customer feel very good.
11 They felt somebody feels I am special, I must be special.
12 Because they were made to feel so good, thousands of
13 customers were made to feel so good by these defendants,
14 they would plop down $100 membership at a time for
15 membership in the directories.
16 You will hear in the vast majority of cases the
17 person was not nominated or recommended by another
18 member. They were not offered membership based on
19 anything special they had accomplished, and not on the
20 basis of anything about them personally. Because with
21 very few exceptions the names were obtained not by
22 nomination from other members, but from vast mailing
23 lists.
24 Bruce Gordon and the other defendants were not
25 concerned with whether the people buying the memberships
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
45
Opening - Scott
1 had accomplished anything noteworthy or outstanding in
2 their fields. They were not concerned if these people had
3 done anything special to set them apart from other people.
4 The only reason why these people were chosen in
5 the vast majority of cases is because they were just one
6 of 100 heads of thousands of names on mailing lists that
7 Bruce Gordon purchased for these companies to use.
8 The most important criterion that a person had to
9 satisfy in order to become a member is they had to be
10 willing to pay the membership fee. And you will hear that
11 almost all of those who were willing to pay this
12 membership fee were accepted for membership.
13 Now, the scheme would work in this way: The
14 process of finding an unsuspecting person to buy a
15 membership in these directories would begin with a
16 solicitation letter. And these solicitation letters were
17 sent to tens and even hundreds of thousands of people who
18 came off of these mass mailing lists. The letter would
19 congratulate each recipient informing him that he had been
20 nominated for inclusion in a Who's Who listing of
21 prominent leaders. Sometimes the letter would go on to
22 say that the person was accepted or confirmed by a
23 selection committee which had different names at different
24 times. Sometimes this selection committee was referred to
25 as the Board of Governors. Sometimes it was referred to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
46
Opening - Scott
1 as the Board of Review.
2 But you will hear in most cases no one had really
3 nominated this customer, and no selection committees had
4 considered the application for membership. In fact, you
5 will learn that the selection committee which was
6 sometimes called the Board of Review, sometimes called the
7 Board of Governors, never even existed.
8 Now, enclosed with the solicitation letter was a
9 postcard. The person who received the letter was invited
10 to fill out the postcard with their personal information
11 if they were interested in purchasing a membership, and to
12 send the postcard back to the customer that had sent the
13 letter to them, whether it was Sterling Who's Who or Who's
14 Who Worldwide. When the company received this postcard a
15 telemarketer was assigned to the case, and would pick up
16 the postcard and call the customer on the telephone.
17 Now, when the telemarketer called the person, the
18 telemarketer would again congratulate the person on having
19 obtained the coveted distinction, and you will hear the
20 words "coveted" used again and again in these letters.
21 You will find again that the telemarketer when
22 they had this conversation with the customers, were
23 reading from scripts called sales pitches that had been
24 written by Bruce Gordon.
25 You will hear that the telemarketers described
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47
Opening - Scott
1 the selection process to the customer, and that they would
2 describe the benefits of membership if they joined, and
3 that they would attempt to make a sale in these
4 conversations over the telephone.
5 In these conversations the telemarketer would
6 expand on the misrepresentations that had originally been
7 made in the letters. They would tell people they were
8 nominated by an existing member. They would tell people
9 even among nominees, only a small percentage would be
10 accepted for membership, so they would tell the customer
11 they were lucky to be invited since membership was
12 limited, and it was available only through attrition, that
13 is slots became available only when a member died or
14 retired. This was another one of the things that the
15 telemarketers would say.
16 They would also tell people that memberships were
17 available only one to two times per year and that there
18 was a waiting list to get in.
19 But you will hear, ladies and gentlemen, in the
20 vast majority of cases none of this was ever true. The
21 salespeople were on commission, and they had to meet sales
22 quotas. That is, they had to sell a certain number of
23 memberships per week, and therefore, their own interest
24 was in getting as many sales as possible.
25 Now, Bruce Gordon and the defendants were
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
48
Opening - Scott
1 desperate to conceal the facts that their customers had
2 come from mailing lists. And where the customers were
3 savvy enough to ask, did I come from a mailing lists, the
4 response they got was always emphatically, no, no,
5 absolutely not. No, no, no. We don't do that kind of
6 thing.
7 The telemarketers would say those things because
8 they knew if they told customers that their names were
9 taken from mailing lists, these customers would not buy
10 such expensive memberships that did not reflect on them
11 personally.
12 You will hear from customers that will come in
13 here and testify that had they known their names were
14 taken from mailing lists they never would purchase such
15 memberships.
16 You will hear, ladies and gentlemen, that there
17 came a time when companies encouraged their members to
18 nominate other people, this began in late 1993, early
19 1994, near the period we were concerned with. What
20 happened is the company developed nomination ballots to
21 send out to new members, these ballots allowed new members
22 to nominate two new people for membership.
23 You will hear some people filled out the ballots
24 and nominated people for membership, and some former
25 employee witnesses will come in and testify to you that in
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
49
Opening - Scott
1 fact some new members were selected this way by this
2 nomination process.
3 They will also tell you that this rarely, if ever
4 happened before 1994. And that even after 1994, the vast
5 majority of new members were obtained from mailing lists.
6 Now, members who bought these -- people who
7 bought these memberships obtained several things. They
8 were given a wall plaque which commemorated their becoming
9 members of this organization.
10 Later on as the companies developed, you will
11 hear that they
developed other benefits to offer to their
12 memberships. They began to offer a magazine called
13 Tribute, which contained articles about certain other
14 members.
15 They issued a CD-ROM which contained all the
16 listings in the directories.
17 They, of course, listed their members in their
18 directories.
19 They also offered various discounts on certain
20 services to their members.
21 They also offered the opportunity to get a credit
22 cards with a Who's Who logo on it among other things.
23 Again, what the evidence in this case will show
24 you is that the most important reason why people were
25 willing to pay 200, 300, 400 dollars for these memberships
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1 and they believed they were being selected for their
2 outstanding personal attributes. They believed they were
3 selected because somebody really believed they were
4 impressive. And they believed that in receiving these
5 offers they had passed an arduous selection process which
6 weeded most other people out. That's what they were told.
7 You will hear that in the vast majority of cases
8 that these were all lies.
9 Now, some of the customers will also tell you
10 about other statement that was important to their decision
11 to buy these memberships. They were told that the
12 companies sponsored conferences and seminars for their
13 members in such places as Vietnam, Hong Kong, and another
14 one is said to have occurred in Hilton Head, South
15 Carolina.
16 Customers were told that these conferences
17 offered them incomparable opportunities to network with
18 outstanding members and to develop new business
19 opportunities.
20 These conferences were tempting to a large number
21 of customers, particularly the ones who hoped to branch
22 out their businesses or to find new careers in doing
23 something else.
24 Ladies and gentlemen, you will hear that none of
25 these conferences ever took place. You will hear that
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1 when employees of Who's Who Worldwide attempted to set up
2 conferences in Vietnam and Hong Kong in 1993, and in
3 Hilton Head, South Carolina in 1994, they couldn't
4 generate enough interest in their memberships to actually
5 have these conferences and make them worthwhile, so the
6 ideas were dropped.
7 Nevertheless, some of the employees and
8 defendants told customers that there had been successful
9 conferences in all of these places. And they told the
10 customers that they had been
well attended, and that
11 people had been very happy with what had happened at these
12 conferences. You will even hear that Bruce Gordon went so
13 far to lie under oath on this subject.
14 By way of background, Who's Who Worldwide was
15 sued by another company called Marqui Who's Who, which is
16 the company that issues Who's Who in America. Marqui
17 Who's Who sued Who's Who Worldwide for trademark
18 infringement. There was a trial on the case. And Bruce
19 Gordon testified at that trial. And you will hear that he
20 was so anxious to conceal the fact that his customer had
21 never sponsored conferences, that he lied on the witness
22 stand and said they had. He even went so far as to say
23 that not only the conference took place in Hong Kong and
24 Vietnam in 1993, but that he remembered the plane taking
25 off to go to the location.
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1 And for that statement that was made under oath,
2 Bruce Gordon is charged with one count of perjury, that
3 is, intentionally telling a falsehood while on the witness
4 stand.
5 Now, turning to how the government is going to
6 prove this case against the defendants.
7 The government will prove these charges in three
8 ways. The government will prove that the defendants made
9 the representations, that the representations were fast,
10 and that Bruce Gordon was involved in these
11 representations, as well as the other defendants, and here
12 is how we will prove it, ladies and gentlemen.
13 The customers who dealt with the defendants will
14 come into this courtroom and testify before you. They
15 will testify as to what they were told by the salespeople,
16 and they will testify before you
about what they saw in
17 the letters and what they were told over the telephone.
18 You will also have an opportunity to hear each of
19 the defendants in action, because we will play for you
20 tapes of things they said during the period we are
21 concerned with. So you will hear all the
22 misrepresentations coming straight from their own mouths,
23 these tapes were made by government informants who called
24 into the companies posing as customers who wanted to buy
25 memberships. Some of the tapes were made by government
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1 informants who actually got jobs in these companies and
2 would come to work wearing tape recorders which were
3 played during the day. And other tapes were made by
4 government informants who assumed other roles and had
5 taped conversations with the defendants.
6 Finally, ladies and gentlemen, we will take you
7 behind the scenes by bringing into this courtroom people
8 who were actually there, who worked in these companies and
9 saw how things were done over the years.
10 You will see the mailing lists, the solicitation
11 letters, the pitch sheets used by each of the employees.
12 Now, I want to tell you a little about some of
13 the former employees who will come in here and testify
14 before you. Some of them have pled guilty in connection
15 with their fraudulent activities at Who's Who Worldwide
16 and Sterling Who's Who. They have signed contractual
17 agreements with the government. These are agreements to
18 cooperate with the government. And by cooperate they
19 agreed to tell the government everything they know about
20 the crimes and they agreed to testify as needed.
21 In exchange for these promises the government
22 agrees to advise the judge of their cooperation. And
23 having done so, the judge can then, if he deems it
24 appropriate, give these people lighter sentences for their
25 criminal conduct.
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1 So I will tell you right up front, ladies and
2 gentlemen, these people are here for one reason. They are
3 here because they hope to receive lighter sentences in
4 exchange for their cooperation.
5 So, at the end of this case Judge Spatt will tell
6 you to examine their testimony extremely carefully, to
7 examine it closely in light of all the other evidence.
8 We ask you, too, ladies and gentlemen, to not
9 wait until the end of the case, but scrutinize their
10 testimony extremely carefully while they are testifying.
11 Ask yourselves, is this testimony consistent with the
12 other testimony of the other witnesses in the case? Is it
13 consistent with the documentary evidence, the pitch
14 sheets, the solicitation letters? And also, is it
15 consistent with the tape recordings you will hear of each
16 of the defendants?
17 You will find, ladies and gentlemen, that their
18 testimony is entirely corroborated by the other evidence
19 in the case.
20 Now, turning back to the two companies, Sterling
21 Who's Who and Who's Who Worldwide, these two companies
22 made millions of dollars off their hoodwinked customers
23 and the money poured in. But the lying and cheating did
24 not stop there. Because Bruce Gordon and Martin Reffsin25 continued to lie and cheat about matters and the money
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1 coming into the company.
2 In addition to the ordinary salary that Bruce
3 Gordon took for his leadership role in these companies, he
4 also took enormous amounts from the companies, which were
5 not officially recorded. And he used these extra funds
6 that he skimmed off of the companies to pay for his
7 personal expenses.
8 Now, Bruce Gordon wanted to keep all this money
9 for himself. He didn't even want to part with any of the
10 money he owed to the IRS. So he concealed the money from
11 the IRS, and he lied about it to the IRS. He told the IRS
12 that he did not own these two companies, even though he
13 did. And he told the IRS that he could barely make ends
14 meet.
15 During this period when he was telling the IRS
16 that he was practically in the poor house, Bruce Gordon
17 was living like a king. He was living, as if he could
18 have appeared on Lifestyles of the Rich and Famous. He
19 was wearing expensive clothing from Armani, buying jewelry
20 from Tiffany's, and lived in a penthouse apartment on the
21 eastside of Manhattan and expensive condominium in
22 Manhasset, vacationing in Palm Beach, drove a Mercedes and
23 Lexus, he took a vacation in 1993 to Europe that cost no
24 less than $50,000. This lavage spending period lasted for
25 four years. During those four years Bruce Gordon was
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1 heavily in debt to the IRS. By 1990 Bruce Gordon owed the
2 IRS more than three million dollars in back taxes,
3 interest and penalties.
4 Because he did not want the IRS to collect on
5 this debt, he did everything he could to conceal from them
6 the amount of money he was taking from the companies.
7 Now, as part of his effort to hide his holdings
8 he signed two agreements with the IRS. The first one of
9 these was signed in September of 1991. That agreement is
10 called the installment agreement. And in that agreement
11 Bruce Gordon agreed to pay back the three million dollars
12 in installments of $100 per month.
13 The reason why the IRS was willing to agree to
14 allow Bruce Gordon to pay these tiny amounts in
15 satisfaction of such a huge debt is because Bruce Gordon
16 had told the IRS he could not make ends meet otherwise.
17 Also in the installment agreement is a provision
18 that the amount he would have to pay to satisfy his tax
19 obligation might change if his income changed.
20 Bruce Gordon signed another agreement with the
21 government in November of 1991, which is called a
22 collateral agreement. And this agreement was related to
23 penalties that were a portion of this three million
24 dollars debt that he owed. And this agreement provided
25 that the more he made, the more income he made, the more
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1 he would have to pay to satisfy the debt.
2 It also provided that the amount that he would
3 have to pay could be determined not only on the basis of
4 his personal income, but also on the basis of any income
5 of companies he owned.
6 So, right from the get go Bruce Gordon had a
7 motive to conceal his control of the companies, the fact
8 that he owned them and the fact that he controlled money
9 that was coming out of them.
10 So, to prevent the IRS from discovering his
11 wealth, Bruce Gordon with the assistance of Martin
12 Reffsin, set up his finances so he held very little of
13 this money in his own name. So, for instance, instead of
14 paying his own expenses with
his own checks, he had Who's
15 Who Worldwide and the other companies he controlled pay
16 for his personal expenses. They paid for his cars, they
17 paid his credit card bills, his medical bills, dental
18 bills. They paid for his clothing and paid for his two
19 residences.
20 Because he knew that if he was paid directly by
21 the companies this money, and if he then used the money
22 himself to pay for these expenses, he knew that the money
23 would then show up as income to him, and then the IRS
24 would be able to go after him for more money to pay the
25 debt that he owed.
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1 So, the companies paid for everything in Bruce
2 Gordon's life. They paid for two homes.
3 The first home, of course, was the lavish
4 penthouse which cost $8,000 a month to rent, with even
5 more to furnish with more money provided by the companies.
6 There was also a $6,000 condominium in an
7 exclusive neighborhood in Manhasset. If that was not
8 enough, the companies paid an additional $500,000 to
9 furnish the condominium and renovate it.
10 For all these misrepresentations and attempts to
11 conceal the income he received from the companies, with
12 the help of Martin Reffsin, Bruce Gordon and Martin
13 Reffsin are charged with conspiring to prevent the IRS
14 from getting money due to them. And that's the money that
15 Bruce Gordon controlled and was using and should have paid
16 off the debts.
17 You will hear, ladies and gentlemen, this is
18 exactly what Bruce Gordon and Martin Reffsin were doing.
19 Martin Reffsin was acting both as Bruce Gordon's personal
20 accountant, and as the accountant for the companies, for
21 Who's Who Worldwide.
22 You will hear, ladies and gentlemen, that Martin
23 Reffsin's participation in this conspiracy was knowing and
24 intentional. You will hear that in statements that will
25 hear he made referring to the law and in testimony, where
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1 he said that he knew of the huge payments that were being
2 made to Bruce Gordon by the companies.
3 But he did not do anything to reveal this
4 information in documents that he submitted to the IRS on
5 behalf of Bruce Gordon.
6 So, while Bruce Gordon was pouring the company's
7 money into lavish vacations, finest restaurants and all
8 sorts of luxuries, you will hear he tried to obtain a
9 release from the IRS. He tried to get the IRS to release
10 him from the three million dollar debt he owed.
11 In 1993 he made an offer in compromise to the
12 IRS. An offer in compromise is an agreement to pay a lump
13 sum in satisfaction of a debt that is already owed.
14 Generally that lump sum is substantially less than the
15 debt.
16 Bruce Gordon offered to pay a lump sum of
17 $150,000 to the IRS, in exchange for a release from his 3
18 million dollar obligation. And this offer was based on
19 his representations to the IRS that he could not possibly
20 pay back this three million dollars.
21 Now, Martin Reffsin, acting on behalf of Bruce
22 Gordon, submitted the offer in compromise to the IRS,
23 knowing that Bruce Gordon's finances were simply not as
24 they were representing to the IRS. He submitted the offer
25 in compromise knowing the finances of Bruce Gordon were
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1 not as they were represented
to the IRS. And Martin
2 Reffsin attached offerings to the papers, with respect to
3 Bruce Gordon's income and finances.
4 The false information was set forth in what are
5 called collection information forms. These are IRS
6 forms. They are also called 433-A forms. The purpose of
7 these forms is to allow the IRS to figure out how much a
8 person has that will enable them to pay back a debt or pay
9 some other amount that they owe to the IRS. So the forms
10 ask for information about a person's income, about their
11 assets and about the expenses they have each year.
12 It is important to the IRS that these forms be
13 filled out truthfully so the IRS can accurately assess
14 what a person, how much a person can pay to satisfy a
15 debt.
16 Now, you will hear that Bruce Gordon and Martin
17 Reffsin submitted these forms containing false information
18 about
Bruce Gordon's holdings and income. They didn't
19 disclose what they knew about his actual income and
20 expenses. They didn't disclose what they knew about the
21 charges he was making on his American Express card, about
22 the fact that the company was paying his American Express
23 charges, the companies were, and about the fact that he
24 actually owned these companies.
25 The reason not to discuss these hundreds of
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1 thousands of dollars of annual expenses is if the IRS
2 found out about them, they would want to know where the
3 money was coming from to pay for these expenses.
4 If they disclosed the charges on the American
5 Express bill, the IRS would have been able to see that
6 Bruce Gordon charged $400,000 worth of expenses over four
7 and a half years. Further, they
knew if they revealed
8 that Bruce Gordon owned these companies, then under the
9 collateral agreement, his income to the companies he owned
10 would be used to figure out how much he could pay toward
11 the satisfaction of this three million dollar debt.
12 Over the period of 1990 to 1995, Bruce Gordon
13 received more than a million dollars from the companies
14 which he hid from the IRS with Martin Reffsin's help so as
15 to not to pay the debt.
16 Bruce Gordon and Martin Reffsin in addition
17 falsified tax returns so these tax returns would not
18 reflect the money that Bruce Gordon was obtaining from the
19 companies.
20 In addition, Bruce Gordon with the assistance of
21 Martin Reffsin labeled the money that the companies were
22 paying for his expense as loans to him. And obviously
23 this made no sense, since he owned the company, then these
24 so called loans were actually loans that he was giving to
25 himself.
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1 Because all these false statements were made to
2 hide this income, this income and assets on the tax
3 returns and the 433 As, Bruce Gordon and Martin Reffsin
4 are charged with filing and assisting in the filing of
5 false tax returns. And Bruce Gordon is charged with
6 filing false disclosure statements, the 433-A forms.
7 You will hear of another series of transactions
8 in which Bruce Gordon was involved, where these
9 transactions were structured also to escape the IRS's
10 notice. And these were the transactions that made the
11 purchase of the condominium possible. I am talking now
12 about the $600,000 condominium in Manhasset. Who's Who
13 Worldwide provided the $600,000 to pay for the
14 condominium, but it did not pay the money directly to pay
15 for the condominium. Instead Who's Who Worldwide paid the
16 money into a shell corporation, a dummy corporation, which
17 went by the name of Publishing Ventures, Inc., or PVI.
18 PVI was a business that existed only on paper. The
19 purpose of PVI was solely to hold this condominium
20 property.
21 PVI was the entity that ultimately paid for the
22 condominium. And the purpose of that, again, ladies and
23 gentlemen, was so that the IRS could not see that Bruce
24 Gordon was the true owner of that condominium. And
25 because Bruce Gordon structured transactions to conceal
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1 this ownership in the condominium and prevent the IRS from
2 ascertaining his true income, he is charged with one count
3 of money laundering.
4 So, shortly after this offer in compromise was
5 made to the IRS, Who's Who Worldwide filed for
6 bankruptcy. This changed the picture quite a bit. In
7 fact, this threw a monkey wrench into the efforts of Bruce
8 Gordon to keep this big secret from the IRS. Because when
9 a company files for bankruptcy there can't be any
10 secrets. The books of a company have to be open and
11 examined. They have to be available for the inspection of
12 not only the bankruptcy court but the credits of the
13 company, in other words, the people the company owes money
14 to.
15 You will hear when a company files for bankruptcy
16 what it gets is protection. It is protected from the
17 people who it owes money to. Those people are prevented
18 during the course of the bankruptcy proceeding from
19 collecting the money that is owed to them from the
20 company. And the bankruptcy
proceeding gives this
21 protection to the bankrupt company for a period of time
22 that would allow this bankrupt company hopefully to figure
23 out a way to pay off its debts, in a way that it can
24 manage.
25 Now, in exchange for this protection, however,
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1 the company must reveal its books and records, its
2 finances to the bankruptcy courts and to its creditors.
3 And this you will hear, ladies and gentlemen, is exactly
4 what Bruce Gordon did not want. He didn't want people
5 look? The records of Who's Who Worldwide because if it
6 was revealed that he owns the companies, and that he owned
7 Who's Who Worldwide and that company had been paying his
8 expenses, then the IRS would know how much money he had
9 access to. So Bruce Gordon was in a double bind. He
10 wanted to continue the payment of his personal expenses
11 and his ownership a secret. But he also wanted the
12 bankruptcy protection for Who's Who Worldwide which was
13 now facing its own very substantial debts.
14 So, what did Bruce Gordon did? He lied again.
15 He lied about two things.
16 First, he lied and said he did not own the two
17 companies, he did not own Who's Who Worldwide. And he
18 told the bankruptcy courts that the two homes, the
19 penthouse and the condominium, were solely for business
20 purposes, that that was their only use. They were not
21 used for his residences.
22 Now, the first lie, which was that Bruce Gordon
23 did not own Who's Who Worldwide. The truth was that Bruce
24 Gordon owned 75 percent of Who's Who Worldwide. The other
25 25 percent was owned by Bruce Gordon's sister and
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1 brother-in-law who loaned him money to start up the
2 company a while back. But his brother-in-law and sister
3 were only passive investors. They did not have anything
4 to do with the operation of the company from day to day.
5 Now, you will hear before Who's Who filed for
6 bankruptcy, Bruce Gordon had actually admitted this
7 ownership arrangement. He admitted he owned 75 percent of
8 the company, and his relatives owned 25 percent of it. He
9 admitted this in testimony in a court.
10 But once the bankruptcy case was filed, Bruce
11 Gordon changed his tune and he began to say he had no
12 ownership interest whatsoever in these companies.
13 He claimed that his brother-in-law and
14 sister-in-law owned all of Who's Who Worldwide. And he
15 testified at the bankruptcy proceedings about this saying
16 he was only a hired h
and at a company owned by his brother
17 and sister-in-law.
18 He also put this false information in the
19 bankruptcy petition, which is the document that you file
20 with the bankruptcy court when you first claim bankruptcy
21 protection, when you first start your bankruptcy action.
22 Finally, Bruce Gordon and Martin Reffsin drew up
23 false, back-dated documents, which pretended to reflect
24 that Bruce Gordon sister and brother-in-law were the real
25 owners of the company, Who's Who Worldwide.
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1 Now, the second lie, the lie about how they used
2 the condominium and the penthouse solely for business
3 purposes.
4 Who's Who Worldwide's creditors, the people that
5 Who's Who Worldwide owed money to, had an interest in
6 knowing what these properties were used for. When they
7 looked at the company's books they could see a lot of the
8 company's money was tied up in the two properties. So
9 this is money that could have been used to pay the debts
10 that were owed to them.
11 So, they wanted to know how the companies were
12 used, because it may affect getting repaid the debt owed
13 to them.
14 So, the creditors inquired what the two
15 properties were used for. And Bruce Gordon responded that
16 it was solely for business purposes. That these
17 properties were used by members of Who's Who Worldwide and
18 Sterling Who's Who, who would come into town from time to
19 time and needed a place to stay. He said these two
20 properties were used for business meetings of the two
21 companies, when in fact they were his personal residences.
22 As proof that he was really using the property
23 for the purposes he claimed, the bankruptcy court ordered
24 Bruce Gordon to keep logs of his usage of the two
25 properties. The bankruptcy court asked him to keep the
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1 logs for the period covering the months of August 1994
2 through September 1994. And you will hear that Bruce
3 Gordon submitted false logs to the bankruptcy court,
4 documented events that happened at the two properties,
5 although the events had never happened. This was so it
6 would appear that the properties were used for business
7 purposes and not as Bruce Gordon's residences.
8 You will hear that Bruce Gordon and Martin
9 Reffsin ordered a Who's Who Worldwide employee to create
10 these false logs and to write information on these logs
11 that was not true about events that had supposedly
12 occurred at these two properties.
13
She was instructed to record non-existing events
14 and to write down the names of the people who had
15 supposedly attended these events at the two properties,
16 when those people in fact had never been there.
17 You will hear from employees whose names appear
18 on the logs as having attended these events. You will
19 hear they did not attend the events on the dates expressed
20 on the logs. You will hear from some of the employees
21 they never had been to the condominium or penthouse at
22 all.
23 Now, the employee who was ordered to create the
24 logs will also come into court and testify before you.
25 She will tell you she filled out the false information on
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1 the logs at the orders of Bruce Gordon and Martin Reffsin.
2 Now, these lies, ladies and gentlemen, achieved
3 two purposes. First, to obstruct the bankruptcy court and
4 the creditors from discovering the two financial pictures
5 of the company Who's Who Worldwide who had filed for
6 bankruptcy protection; and, two, to allow Bruce Gordon to
7 continue with his big secrets he was trying to keep from
8 the IRS. Because he could not allow the IRS to know that
9 he really owned these properties. And he couldn't -- and
10 that he really owned the companies, and that he lived in
11 these two homes.
12 And for these lies and misrepresentations in
13 connection with the bankruptcy case, Bruce Gordon and
14 Martin Reffsin are charged with a count of obstruction of
15 justice. And Bruce Gordon is charged with another count
16 of obstruction of justice alone without Martin Reffsin.
17 Now, what will be the evidence to support these
18 claims. The government will present to you the 433-
A
19 forms that Bruce Gordon submitted to the IRS, which
20 purported to set forth all his income and expenses for the
21 period we are talking about. And you will see that the
22 433-A forms say nothing about the enormous expenditures
23 that Bruce Gordon was making in stores and for the
24 condominium and the penthouse, and they say nothing about
25 the money he was taking from the companies.
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1 Now, you will also see what the bankruptcy courts
2 and the IRS were never able to see. The entire truth
3 about his financial picture.
4 You will see statements from American Express
5 documents the jewelry he bought, clothing he bought and
6 all the associated luxuries he had access to. You will
7 see the company checks made out to cover the expenses, the
8 American Express
bill, the dental bill, his rents for the
9 penthouse. You will also see the false documents he
10 submitted to the bankruptcy court to try to prove that his
11 sister and brother-in-law were true owners of the
12 company. You will see phony stock certificates purporting
13 to show that the sister and brother-in-law actually owned
14 the companies. You will also see the phony logs which
15 purport to document the business purpose usages of the
16 condominium and the penthouse.
17 You will also hear about Bruce Gordon's false
18 testimony to the bankruptcy court.
19 Finally, you will hear in great detail, ladies
20 and gentlemen about the luxuries he was spending money on,
21 the lavish improvements to the condominium and the
22 penthouse. You will see receipts for his purchases from
23 Armani, turn no, sir, polo, Ralph Lauren, Bergdorf
24 Goodman, Tiffany. You will hear about the BMW and the
25 Lexus and the Mercedes Benz he was driving.
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1 Ladies and gentlemen, this trial will paint a
2 portrait of a man who was willing to lie to courts and
3 federal agencies, and his own customers, and anybody he
4 had to lie to in order to line his own pockets.
5 In this trial you will get an inside look as to
6 what customers of Who's Who Worldwide and the bankruptcy
7 court and the IRS never got to see. And that is the web
8 of deceit that was woven by Bruce Gordon and the other
9 defendants who assisted him in these endeavors.
10 At the end of the presentation of the evidence we
11 will have an opportunity to speak to you again. At that
12 time we will ask you for the only verdict which is
13 consistent with the evidence that you will hear; in fact,
14 the only verdict that makes any sense in light of all this
15 evidence you will hear throughout the course of this
16 trial. And that is a verdict of guilty on all counts.
17 Thank you for your attention.
18 THE COURT: Members of the jury, we are going to
19 take a ten-minute recess.
20 Please do not discuss the case. Keep an open
21 mind. You have heard no evidence as of now. The
22 statements by counsel are not evidence, as I told you.
23 We will take a ten-minute recess.
24 Please remember how you are seated so that when
25 you come back you will line up in that way so you do not
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1 climb over each other. That would not be nice.
2 We will take a recess.
3 Madam deputy, please recess the jury.
4 (Whereupon, at this time the jury leaves the
5 courtroom.)
6
7 (Whereupon, a recess is taken.)
8
9 (Whereupon, the jury at this time entered the
10 courtroom.)
11 THE COURT: Please be seated, members of the
12 jury.
13 Do you wish to make an opening statements,
14 Mr. Trabulus?
15 MR. TRABULUS: Yes, I do, your Honor.
16 THE COURT: You may proceed.
17 MR. TRABULUS: Thank you, your Honor.
18 May it please, the Court, your Honor.
19 Members of the jury:
20 We have met. I am Norman Trabulus. I am
21 Mr. Gordon's lawyer.
22 At the end of this case I am going to return and
23 speak with you. I am going to ask you to return a verdict
24 of not guilty on each one of the charges against him. And
25 the reason for that is very simple. There was no crime
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1 here.
2 You
are going to hear about some crimes that were
3 committed by prosecution witnesses who were then enlisted
4 by the government to infiltrate legitimate businesses,
5 publishing businesses, businesses engaged in publishing
6 magazines, or a magazine. And you will have an
7 opportunity to look at that magazine; business engaged in
8 publishing books, legitimate books, books which were
9 delivered as promised.
10 You are going to see that this prosecution is
11 wrong, simply wrong, and that it represents a terrible
12 mistake, and that the prosecution is attempting to cover
13 itself to get you in your verdict, by a guilty verdict, to
14 in a sense ratify the mistake they made, put your seal of
15 approval on it.
16 When I say it is a mistake, it is not just an
17 inadvertent mistake. You are going to see that this
18 prosecution was assisted and it wouldn't be surprising
if
19 it was instigated by a major competitor of the businesses
20 of which Mr. Gordon was a president. That major
21 competitor has been referred to by the prosecution as
22 Marqui Who's Who. It is also known as Reed Elsevier
23 corporation. And they brought a lawsuit at one point,
24 where they say Mr. Gordon committed perjury, and he
25 didn't. We will get to that later.
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1 You will see that their goal was to put this
2 upstart competitor, companies that Mr. Gordon ran, out of
3 business. And they succeeded.
4 The true victims of all of this are not the
5 people who purchased memberships, or the people who bought
6 the books. In a sense they were victims, but victims of
7 the fact that the businesses were closed down, not victims
8 of what Mr. Gordon did. These are businesses employed
9 about 140 people, gone, lost their jobs, members. People
10 has not just had bought the books, but members, members of
11 an organization who had continued obligations to them,
12 provided them with benefits, were put out of business.
13 And those people could not get what they had been
14 promised, and what Mr. Gordon and his companies were
15 trying their best to provide.
16 Now, you have heard a lot of detail from
17 Ms. Scott, lots of detail. And in the course of this our
18 preliminary talk, our first talk, I am not going to
19 address everything she said.
20 At the end of the case, after you heard the
21 evidence and you are in a much better position to evaluate
22 what we are saying I will come back and speak to you in
23 considerable greater detail than I am now.
24 What I want you at this point to do is not to
25 assume that
because there is something that I don't
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1 specifically mention or specifically talk about that
2 Ms. Scott talked about, that I am accepting it, or I am
3 saying that it is right, or I am saying that you should
4 accept it.
5 Now, also, there are other lawyers here, and, of
6 course, I have not heard what they are going to say. And
7 you should not assume that I am going to accept that
8 either, or agree with them.
9 Now, in an opening statement it is kind of
10 traditional for attorneys who appear on behalf of clients
11 who are charged with crimes to ask the jury to be fear; to
12 maintain in their mind the instructions that the judge,
13 Judge Spatt has given you concerning presumption of
14 innocence and so forth. I will not even do that. You
15 have already in
your questionnaires and in the jury
16 selection said that you are going to do that. And we take
17 you at your word. And that's why you were selected to be
18 on this jury, why we selected you. And that selection, by
19 the way, is a more important selection than any selection
20 to be in any Who's Who anywhere.
21 What I will ask you to do as you hear the case as
22 presented by the prosecution, is to keep an eye and ear
23 out for the things they didn't tell you, things that you
24 hear along the way, things that we on this side of the
25 table, the attorneys for the defense, manage to uncover
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1 for you. We may not uncover everything, but we will
2 certainly uncover some. Think about those things. They,
3 the prosecution have the burden of proof, and we don't.
4 I want you to keep in mind when there is
5 something they haven't told you, something which takes
6 away from what they are telling you, why they didn't tell
7 you, and what else that might be there that they have not
8 told you.
9 Now in jury selection, we heard a lot about the
10 word "telemarketing." It almost became a taboo word, the
11 more we talked about it it was almost to the point that a
12 buzzer went off.
13 I think we are all sophisticated to know that, of
14 course, there is telemarketing abuse. We hear about
15 companies that advertise that they will provide people
16 with all kinds of circumstances, they will consolidate,
17 send in money for a loan, you send in the money and you
18 never hear about it again. Good-bye. Fly by night
19 companies. Companies that used to sell land underwater in
20 Florida. Something we all know about, and we know that we
21 get calls from banks, telephone companies. Certainly
22 legitimate businesses. They may call us at odd times and
23 irritate us when they call us when we are eating dinner or
24 putting our kids to bed.
25 We also know the person solicited in
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1 telemarketing, or spoken to in telemarketing are generally
2 asked to buy something sight on seen, when you get into
3 something sight on seen, no matter how good it is, you
4 will have many people afterward who are unsatisfied or
5 have remorse, buyer's remorse, it is the nature of the
6 thing, telemarketing. That's just the way it works.
7 Now, in fact, this is not -- the businesses here,
8 and I think Ms. Scott made it clear that this is not the
9 kind of telemarketing that you may have encountered where
10 somebody calls you up
at 9:00 o'clock at night and says,
11 hey, would you like a chimney swept or buy a burglar's
12 alarm system, something like that.
13 Nobody was called who didn't want to be called.
14 What happened was that letters were sent out
15 advising people that they had been selected, nominated for
16 inclusion. And if they were interested to return a card.
17 Of course, on the card would be a phone number.
18 And those people who returned the call -- returned the
19 card would be called.
20 Now, the government's biggest complaint, it
21 seems, is that some of these people, or many of them, may
22 have been led to believe that the process by which they
23 were selected was more hand picked than it really was.
24 Sort of like, if you were told that you went to the store
25 and you bought something, you know, grapes picked by hand,
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1 and it turned out to be picked by the machine. And you
2 will say it is the mailing list for the machine, the
3 computer.
4 In fact, there was solicitation, and it was not
5 mass mailing lists. You will see that mailing lists were
6 the source, the source of many of the people who were
7 solicited. We are not talking about mailing lists that
8 result for example, when people take the coupon off the
9 back of the cereal box, and sends it in. These were
10 special mailing lists. These were mailing lists involving
11 people who were doctors, lawyers, executives, business
12 owners.
13 Even within that they would not take a whole
14 mailing list. These mailing lists are on computer. When
15 you buy them, you can request only president, only
16 executives, whatever. And you will hear that that is the
17
type of thing that they did.
18 And what people got is what they were told they
19 were going to get, which was membership in a registry, or
20 an organization which was largely business people.
21 Oh, there are some people in here, no doubt about
22 it, there are some people in here who probably would not
23 fit the qualifications. We don't have an airtight --
24 every organization -- it is going to happen in every type
25 of situation. But you will find the vast majority in here
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1 are either owners of businesses, chief executive officers,
2 CEOs, chief financial officers, people in that type of a
3 position. And that's the kind of thing that people were
4 told, and that's what they got.
5 This is what they want to make a crime out of,
6 that people may not have been told that mailing lists had
7 ultimately been the source.
8 You are going to hear them tell you that they
9 tried to perform a test to show that people who were not
10 qualified got in. And you are going to hear that they
11 took people who were convicted of crimes, and had them try
12 to call up and pose, deceive the salespeople, and pose as
13 people who had received cards.
14 Now, the test that they performed to try to show
15 that anybody could get in, which is what they are trying
16 to do, was a false test. The deception here was by them.
17 What they did was, they had people call up and
18 tell the salespeople that they had received a card. So
19 the salespeople were misled into thinking that these
20 people had already been selected. And then the
21 salespeople went through the sales presentation, and they
22 may have told people that you are accepted. But they
23 didn't go the last mile, the prosecution. They didn't see
24 whether the people really would have been accepted, except
25 for the one who was an accountant, somebody clearly
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1 qualified in this book.
2 When I say accountant, not really an accountant.
3 It was someone posing as an accountant.
4 They wouldn't go the last step to see whether or
5 not, even after having spoken to the salespeople, and
6 being told, okay, you are in, that they really would have
7 been accepted.
8 You will hear even from the people the
9 prosecution brings that there was another step. There was
10 an initial step by which people were selected for being
11 solicited. The cards that came back were gone through by
12 supervisory personnel.
13 The salespeople themselves were told not
to call
14 every card.
15 You are going to hear a tape. You will hear
16 tapes of Mr. Gordon. You were told by Ms. Scott that you
17 will hear tapes of all the defendants. And you will hear
18 a tape of Mr. Gordon. I defy you to find him lying.
19 When you hear his voice, you will hear he is a
20 little gruff, a man in charge. And you will hear him
21 telling the salespeople, you lie, you are out of here.
22 You will hear him telling them, you don't call every
23 card. I don't want you to call every card. I don't want
24 the manager of K Mart.
25 By the way, you may find managers of K Mart in
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1 here.
2 I want the regional manager.
3 You heard about the CD-ROM. You will hear him
4 telling them I want the information as accurate as
5 possible, valid
as possible; how to categorize the
6 information so what the members got when they got the
7 CD-ROM would be accurate and useful for them.
8 You see, this was not a fly by night operation.
9 It was not take the money and run. It was not anything
10 like that. They had a ten year lease on their property in
11 New York. They had a five or ten year lease, I forget, on
12 their facilities here. They were looking to develop a
13 business, an ongoing business, with the people who are
14 becoming members.
15 When you do that -- they were looking to get dues
16 from them in the future, and the business was essentially
17 forced out of business before they could do that. They
18 were looking to sell things again and get it for mutual
19 benefit, for their benefit, because it is part of their
20 business to increase the income, and the benefit of the
21 members. Because the members were constantly being given
22 further benefits.
23 This was not something where they just published
24 a book, and all you got was a book, and put it on your
25 shelf and you can show your friends. It was much more
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1 than that.
2 Mr. Gordon's companies redefined the concept of a
3 Who's Who.
4 By the way, step back a moment. I think in jury
5 selection we heard about different Who's Who. And I want
6 you to understand that nobody has a monopoly on the word
7 or the term "Who's Who." That's something anybody can
8 publish. Any one of us can publish a Who's Who. There
9 may be trademarks for particular ones, like Who's Who in
10 America. Or particular ones published by various
11 publishers. But the idea of Who's Who is for anyone. It
12 started in Engl
and, at the turn of the century. They
13 copied, took from the ideas, the different companies.
14 Mr. Gordon redefined it, not copied it. He
15 wanted to start a membership organization, an organization
16 of people who are in business, people in business who
17 could benefit by communicating with each other, by
18 networking; networking in terms of contacting other people
19 who are also members, just like people who are in business
20 who might be in a rotary club or Kiwannis Club, or
21 something like that, and utilized that social relationship
22 to make other business contacts.
23 This could be nationwide or worldwide, because
24 there were members abroad, Russia, China and trying to
25 expand into that area. Of course, the initial contact
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1 would have to be by telephone or writing. But the CD-ROM,
2 the CD-ROM which was being distributed, was a means for
3 networking.
4 With that, for example, let's say you were in
5 pharmaceuticals, you could plug into that CD-ROM on the
6 computer the words "pharmaceuticals," I am not a computer
7 expert and tell you how it might be done, but you may find
8 other people like yourself, or potential customers, or
9 people with whom you could strike up a conversation with
10 for your business. Things that would be useful in
11 establishing that.
12 There was absolutely no intent upon the part of
13 Mr. Gordon or his companies to defraud anybody. He was
14 trying to build a business that benefited.
15 They published this, I will show you this,
16 articles by members, about members. You will have a
17 chance to look through it. You had advertisers, Cadillac,
18 Seagram's.
19 I will not go through the thing. But the point
20 of the matter is that these were recognized by well known
21 companies, articles which would be a value of people in
22 business, like negotiating a commercial lease. They were
23 not looking to take people's money and satisfying them.
24 They wouldn't be doing it for that. The whole purpose of
25 this was to develop a base of a membership of people who
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1 were happy, people who themselves were in business. And
2 people could appear in these articles, write the articles,
3 it was an excellent idea. And it was one, by the way,
4 which surely frightened the competitor, because the
5 competitor was not doing that.
6 The competitor, who was Reed Elsevier and Marqui,
7 started a lawsuit. The lawsuit, you heard, had to do with
8 trademark infringement.
9 What happened, at a certain point of time there
10 was a judgment against one of the companies, Who's Who
11 Worldwide, a judgment for about 1.6 million dollars.
12 Now, that amount of money is a lot of money. And
13 although the company was successful and it was earning
14 money, that judgment of 1.6 million dollars, and also
15 something in connection with the trademark, which was the
16 requirement that the cover in the book which was already
17 printed be redone, which cost money, seriously caused
18 financial problems for the company. So the company went
19 into Chapter 11 voluntarily.
20 You heard Ms. Scott say that when you go into
21 Chapter 11 you have to disclose stuff and Mr. Gordon
22 didn't want to do it.
23 Well, you will hear about the disclosures that
24 were made there, and you will hear that those companies
25 went into Chapter 11 totally voluntarily. And all the
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1 things they are complaining about were disclosed. And we
2 will get into that in a second.
3 They went into Chapter 11. And they proposed --
4 what happens in Chapter 11, this is one respect that I
5 agree with Ms. Scott, the company tries to get protected.
6 Instead of getting eaten up by competitors that there is
7 nothing left, it tries to work out a plan where people get
8 paid back. Sometimes they get paid back 20 cents on the
9 dollar, sometimes 10 cents on the dollar, sometimes the
10 pay back is 70 cents on the dollar. Sometimes there is no
11 pay back. There is a liquidation, the company is sold
12 off, cut into pieces. And the company gets sold off.
13 This company proposed to pay back 100 cents on
14 the dollar. They needed
time because they were a
15 successful business. They were growing. People liked
16 what they were getting, they were upgrading. You will
17 hear about upgrading.
18 Which meant when you became a member, you became
19 a member for five years, ten years. It is like when you
20 get an ad, ten days only, or a special coming up later
21 on. But these were marketing things. People were offered
22 different types of memberships, people would buy them,
23 like what they saw, and they would buy three years,
24 upgrade to five years, five years upgrade to ten, ten
25 years upgrade to life membership.
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1 In any event, these companies were successful,
2 and the plan that was proposed was 100 cents on the
3 dollar. And the competitor, Reed Elsevier, the principle
4 competitor, he opposed it.
5 Their real motives, their real motives, and they
6 succeeded, Reed Elsevier, and this is the upshot of it,
7 was to put the companies out of business, to put the 140
8 people working for him out of business, and essentially
9 work on what amounted to be a fraud on the members. They
10 are the ones who did it. Because the members now are
11 members in a defunct organization. Not because of his
12 doing, or anybody's doing over there, but because other
13 people did it.
14 Now, Ms. Scott had talked about things as if they
15 were non-existing. She talked about the conferences and
16 said they never happened. She implied they were false
17 things told to people.
18 You will see an ad for one of these here before
19 it happened. Why would somebody advertise something if it
20 wasn't going to happen? In a continuing magazine that
21 happened afterwards. That's the one in North Carolina.
22 What happened is you needed 50 people or so in order to do
23 it, and not enough people signed up. They had intended to
24 do it. And after, after it turned out that there were not
25 enough people who signed up for it, the salespeople were
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1 told, don't tell people that it happened. Some of them
2 did, some of them didn't. The fact that some did, some
3 didn't, certainly doesn't come from him, their boss, that
4 it didn't. Some said the right thing, we just couldn't
5 get it together.
6 The one in Vietnam, and so forth, Ms. Scott said
7 he remembered the plane taking off as if he proved, they
8 proved it didn't take off.
9 Well, the conference did happen. It was with a
10 group of lawyers, a package deal. Listen to the proof, as
11 to whether or not the conference didn't happen, and
12 whether or not a plane didn't take off and whether or not
13 members didn't have the opportunity to go, as to whether
14 they signed up for it. Let them prove that the testimony
15 they will say is false, whether it is false. Because it
16 is not. The answers to the questions he gave was true.
17 He didn't ask whether any members went. The conference
18 sponsored was real. And you will hear that even from one
19 of their own witnesses, that the conference was real.
20 You know, the nature, the nature of
21 telemarketing, the nature of a business where salespeople
22 talk to people on the phone, and I will not really call it
23 telemarketing it, because it is not a classic marketing
24 business. But the nature is that salespeople who are paid
25 on excision largely, although they have a base salary,
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1 they are going to have a temptation, they are going to
2 have a temptation to somehow step over the line in one way
3 or another. And that's they did.
4 You will hear that Mr. Gordon was well aware of
5 that risk and did his best to see to it that he didn't
6 happen -- that it didn't happen. He will tell them to
7 stick to the sales presentation, sometimes called a pitch.
8 You will hear that he said to them -- you will
9 hear tapes of this -- I want to know what you are saying.
10 IBM wants to know what its salespeople are saying, they
11 want to know when they sell a computer they are not
12 promising a Cadillac along with it.
13 You will hear a lot of the things the government
14 is complaining about are things that happened when people
15 deviated from what they were told to say.
16 Part of their argument about Mr. Gordon, it is
17 like -- you will hear them say that he was encouraging
18 them to speed by mentioning the speed limit. When he said
19 not to go over 55, they will twist it to something to the
20 effect they should have gone over 55. The exact opposite.
21 You will hear his voice. He didn't know he was
22 being recorded, the people sent in by the government, they
23 recorded it. They were supposed to record what is most
24 favorable to the government's case, and this is what they
25 came up with. Things to show he was honorable. Perhaps
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1 he is a stubborn man and did things that he thought was
2 right. And you will see that by what he said, there was
3 no intent to defraud anybody.
4 The end result is that the members, about 74,000
5 of them, ultimately lost the benefit of their membership,
6 when as a result of a variety of things here, businesses
7 were forced out of business, and not for not trying.
8 Now, you heard Ms. Scott talk about tax fraud.
9 And you heard her talk about obstruction of justice.
10 Now, one of the things that you are going to bear
11 in mind that I would like you to consider in this is what
12 was disclosed. She said that he didn't disclose his
13 control of companies.
14 You know, she talked about collection information
15 statements. And there are allegations in the indictment
16 about them. There is one that is not referred to in the
17 indictment, and I would hope they are going to introduce
18 it to you, because in that one, it says he is the
19 president of the company. And under salary it says he
20 takes as needed. Basically he is free to take. There was
21 no
loan conceded.
22 She says there is a place for the loan -- well,
23 it is printed on the tax form, loans. It is so common
24 place and customary that the government even preprints it
25 on the corporate tax returns.
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1 You have to understand some of the things that
2 are going on here. They were loans. Because they were
3 loans to Mr. Gordon the corporation which would have
4 gotten a tax deduction if it had paid him a salary itself
5 paid taxes on the money at a higher rate than Mr. Gordon
6 would. There is no allegation that the corporation's tax
7 returns were fraudulent, or the corporation committed a
8 tax fraud.
9 You will see that these corporations generated,
10 not just in terms of their own taxes, but in terms of the
11 employees that they employ, who paid
taxes on their own
12 income, millions of dollars in tax revenue, which the
13 government, complains that Mr. Gordon has been trying to
14 avoid a tax obligation he had before, and he did have a
15 tax obligation before, they prevented that revenue from
16 being paid. And that business, had it allowed to
17 continue, would have been the vehicle for Mr. Gordon
18 eventually to pay his tax obligations in full.
19 Now, the government may say to you that these
20 loans were not loans, and there is going to be discussion
21 of that.
22 I think what you have to bear in mind is that the
23 loans were disclosed. There was disclosure. The
24 information was informed about the bankruptcy. The
25 bankruptcy documentation fully discloses the loans. There
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1 was never any attempt to conceal them.
2 Some people say they were not loans, that it was
3 really salary. Other people may say that there were.
4 There may be a civil case here. Maybe he owes
5 more penalties from what he original owned. By the way
6 the penalty, the interest and penalty had nothing to do
7 with a fraud. It had to do with tax shelters that he
8 operated, and eventually ruled he was not entitled to tax
9 shelter status. And basically he wound up owing money
10 because of that.
11 What you have here is whether or not -- the issue
12 is not whether he owed additional taxes, or whether the
13 tax claimed was valid. The issue here is as to whether he
14 willfully, willfully violated the law.
15 He didn't. He was working. There was an
16 accountant there, Mr. Reffsin. And the fact that it was
17 disclosed in various places and there may have been
18 ineptness here, but it shows that these were positions
19 they were taking, they were willing to defend or
20 disclose. And it may have been right or wrong. But it
21 was regarded as tax planning, not tax evasion or fraud.
22 You will hear that people in business are allowed
23 to arrange their affairs, in such a way to minimize tax
24 obligations. That's one of the main things accountants
25 exist for.
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1 So while there may have been some tax owing
2 because of certain things that happened here, but maybe
3 ultimately if the tax court were to rule on it saying this
4 deduction is not valid. And that's not a crime. It
5 happens all the time, people make tax claims all the time
6 that turn out not to be allowed.
7 We heard of -- we heard claims of obstruction of
8 justice. There was no obstruction of justice by
9 Mr. Gordon.
10 There were loans that were submitted that were
11 false by an employee. There were loans that were false by
12 an employee.
13 You know, if he wanted to have meetings to
14 justify a use of a building or a condominium, or
15 penthouse, he controlled the company. It would have been
16 so easy for him to tell the employees, come to this place.
17 You will hear at the penthouse there were
18 meetings at times.
19 He stayed there when he was in the city. It
20 wasn't his personal residence. It was used as part of a
21 network. They were planning to have people in from
22 different companies to come in there. Cocktail parties.
23 It was something that had a business purpose, which was
24 going to be developed something more in the future.
25 Would have been easy if he was involved in that
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1 to simply create the meetings. The log could show the
2 meetings, and people can say they were there.
3 He didn't know what was going into that.
4 Somebody was doing something on their own trying to help
5 him. And he certainly didn't.
6 You will hear that person testify, and listen
7 carefully to the questions he is asked -- she is asked and
8 some of the reasons she has to say something different now
9 than what she said before.
10 Everything tax regard -- this is not a case
11 involving cash under the table, not something that
12 happened of that sort at all. I didn't hear exactly what
13 Ms. Scott said. But the monies loaned to Mr. Gordon that
14 he used, there was no secret that he was using it, he
15 thought it was okay. And that's not fraud, if you think
16 it is okay.
17 You will hear at the end of the case when the
18 judge instructs you, you will learn more about it.
19 Oh, yes, she said the condominium in Manhasset
20 was his personal residence and concealed it. He paid rent
21 on it. There was both an office there and residence. He
22 paid rent on the office part. Nothing wrong with that.
23 And it was disclosed. There was no concealment.
24 This whole thing about money laundering is
25 ridiculous. You would think it is a drug case where money
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1 comes in from drugs and being concealed as an illegitimate
2 business.
3 There is no proof as to where the money came
4 from, the fact that it was loaned to the company through
5 PVI, or that he was living there. He even filed tax
6 returns listing it as his home address. What kind of
7 concealment is that, he was pay