Dirtiest Trials of the Twentieth Century
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1 M O R N I N G S E S S I O N
2
3 (The following takes place in the absence of the
4 jury.)
5 THE COURT: Mr. Trabulus, you wanted to speak to
6 me?
7 MR. TRABULUS: Very briefly, your Honor.
8 THE COURT: Mr. Trabulus, before you give me your
9 brief dissertation, I don't like to keep the jury
10 waiting. Have I gotten that impression across?
11 MR. TRABULUS: Yes.
12 THE COURT:
There are 18 citizens who are giving
13 up of their time. I don't like to keep them waiting. If
14 you have anything you want to tell me, do it before 9:30.
15 MR. TRABULUS: Your Honor, at --
16 THE COURT: Excuse me.
17 At any time you want to talk to me, I will be
18 glad to talk to you, 9:00, 8:00, 7:00 in the morning, not
19 at 9:30. Go ahead at this time because I am giving you
20 notice.
21 Mr. Neville, be on time.
22 Where is Mr. Neville? Is he here?
23 MR. DUNN: Yes.
24 THE COURT: I guess I didn't make an impression
25 with the other ten-defendant case I told you about.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
244
1 Go ahead.
2 MR. TRABULUS: Your Honor, the government now
3 furnished to me the document on which I based the
4 objection that your Honor ruled on yesterday. That
5 objection is wi
thdrawn.
6 Also, I have not had a chance to make multiple
7 copies of it, I will not have multiple copies for the
8 jury. That's all I wanted to say.
9 THE COURT: From now on I will be glad to talk to
10 you at any time. I don't want to tell you 6:00 o'clock in
11 the morning. I can talk to you at that time also. But
12 7:00 o'clock, 8:00 o'clock, 9:00 o'clock, but not 9:30.
13 Bring in the jury, please.
14 Mr. Neville, be on time from now on.
15 MR. NEVILLE: Yes, your Honor. I am sorry.
16 MR. WHITE: Your Honor, I wanted to tell you that
17 we tabbed the portions in the books with respect to
18 exhibits we expect to use today. With the Court's
19 permission, over the weekend we will take it back and have
20 it completely tabbed.
21 THE COURT: Good.
22 MR. WHITE: We aim to please, your Honor.
23 THE COURT: So do I.
24 Where is this book you
tabbed?
25 MR. WHITE: I put them on the top of the boxes
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 there.
2 THE COURT: This one, you mean?
3 MR. WHITE: Yes, the exhibits we expect to use
4 today are here.
5 THE COURT: Very good.
6 MR. WHITE: These are ones, we just added, and
7 that may be referred to today.
8 THE COURT: It would be helpful if you can give
9 copies of the exhibits to the court reporter who could
10 follow better if he had copies of the exhibits. It would
11 help him. I am sure you want to do that.
12 THE CLERK: Jury entering. Please rise.
13 (Whereupon, the jury at this time entered the
14 courtroom.)
15 THE COURT: Good morning members of the punctual,
16 responsible, dedicated jury. Please be seated.
17 Thank you very much. I appreciate it that you
18 all got here on t
ime. I had to take something up with the
19 lawyers, or we would have had you in at 9:30 sharp.
20 Where is the witness?
21 MR. WHITE: Right here, your Honor.
22
23
24
25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
246
1 F R A N K G A G L I A R D I ,
2 called as a witness, having been previously
3 duly sworn, was examined and testified as
4 follows:
5
6 THE COURT: You are previously sworn and you are
7 still under oath, Mr. Gagliardi.
8 You may proceed.
9 MR. WHITE: Thank you, your Honor.
10
11 DIRECT EXAMINATION (cont'd)
12 BY MR. WHITE:
13 Q Mr. Gagliardi, when we broke yesterday you told us
14 that you were assigned in 1993 to evaluate an offer in
15 compromise that was submitted by Mr. Gordon to the IRS; is
16 that correct?
17 A That's correct.
18 Q Let me show you Government's Exhibit 420, which I
19 believe you identified yesterday as that offer in
20 compromise; is that correct?
21 A That's correct.
22 MR. WHITE: With the Court's permission, I have
23 copies of this multi-page document to hand out to the jury
24 so they can follow along the testimony.
25 THE COURT: Very well.
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Gagliardi-direct/White
1 We always start on this side. Let's get the
2 protocol right.
3 MR. WHITE: This side.
4 THE COURT: Since I am old fashioned, start on
5 this side, start with juror number one and his group, and
6 then juror number seven and his group. Then we get to the
7 two gentlemen in the front. That's the way it is going to
8 be done.
9 MR. WHITE: That's fine, your Honor.
10 THE COURT: All uniform, protocol.
11 Go ahead.
12 (Whereupon, the exhibit/exhibits were published
13 to the jury.)
14 Q Mr. Gagliardi, if you can turn to the attachment of
15 this document, which is marked Exhibit 420-C. Do you have
16 that?
17 A Yes, I do.
18 Q Can you tell us what that is?
19 A It is Form 2848, power of attorney form, for
20 Mr. Bruce Gordon.
21 Q Can you tell us what a power of attorney form is?
22 A A power of attorney allows a representative on behalf
23 of the taxpayer to deal with the Internal Revenue Service,
24 an attorney or accountant or enrolled agent.
25 Q For what taxpayer is this Form 420-C?
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Gagliardi-direct/White
1 A Mr. Gordon.
2 Q Can you tell us who it is he is appointing to be his
3 representative in this case?
4 A It says Martin Reffsin.
5 Q And where is that?
6 A Section 2.
7 Q If you can look at page 2 of that document, and the
8 boxes at the bottom, can you tell us what it says there?
9 A It says delegation (sic), insert the letter A to H,
10 and then it says B, certified public accountant, and to
11 show the jurisdiction shown below.
12 Q What is the jurisdiction?
13 A New York.
14 Q Can you read the signature -- is there a signature?
15 A Yes.
16 Q Can you read it?
17 A It appears to be Martin Reffsin, December 17, 1992.
18 Q If you look over to the top page of the document,
19 now.
20 Whose letterhead is it written on, that letter?
21 A M. Reffsin and Company, certified public accountants.
22 Q Could you read the first sentence --
23 A The first sentence?
24 Q Of the body of the letter.
25 A The above referenced taxpayer has been assessed
H
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1 Section 6672 penalties, income tax plus interest and
2 penalties and also promote penalties under Section 6700
3 and 6701.
4 Q Tell us what Section 6672 penalties are?
5 MR. TRABULUS: Objection.
6 THE COURT: What ground?
7 MR. TRABULUS: May we approach?
8 THE COURT: Relevancy?
9 MR. TRABULUS: Yes, and prejudicial grounds.
10 THE COURT: Sustained.
11 This is all before this case?
12 MR. WHITE: What gives rise to the tax liability.
13 THE COURT: We will not get into it in great
14 detail.
15 Move along.
16 Q Could you read aloud to us the second paragraph of
17 the letter?
18 THE COURT: When you read, slow down,
19 Mr. Gagliardi.
20 THE WITNESS: I am sorry.
21 THE COURT: Everybody has a tendency to read
22 faster than
they speak. They speak fast enough, when they
23 read they really speed it up, so slow down.
24 THE WITNESS: Yes, your Honor.
25 Taxpayer is presently trying to clean up his life
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Gagliardi-direct/White
1 and move forward. He is 60 years of age and he will never
2 be able to pay substantial sums of taxes, penalties and
3 interest owed to the government. In addition, he is
4 liable for substantial amounts to other parties which he
5 will not be able to pay. We have prepared a projection of
6 income for the next five years, and even if he increases
7 his earnings substantially over the next five years, he
8 won't come close to earning enough to pay all his
9 obligations.
10 Q If you can skip down to the fourth paragraph and read
11 that allowed to us.
12 A In view of the circumstances d
iscussed above, and the
13 fact that the taxpayer is over 60 years of age, he wishes
14 to file the attached offer in compromise. He has talked
15 to various relatives, and because of his age and desire to
16 clean up his situation, they have agreed to lend him some
17 money. The offer is presented -- the offer presented is
18 based on the sum of money which he feels he can borrow.
19 He has no other assets.
20 Q And could you read the top of the next page as well?
21 A I, Bruce Gordon, do hereby declare the above to be
22 true and correct to the best of my knowledge. Bruce
23 Gordon signature.
24 Q Now, if you turn to the next page, which is
25 Exhibit 420A, can you tell us what that form is?
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Gagliardi-direct/White
1 A Form 656, offer in compromise, and it says Bruce
2 Gordon, 10 Bl
uff Road, Glen Cove, New York, 11542.
3 Q Tell us in summary what is offered with respect to
4 this document?
5 A In summary he offered $150,000 to compromise the
6 total tax liability.
7 Q And on this form is there a signature line for the
8 taxpayer?
9 A Yes, there is.
10 Q And where is that?
11 A On the bottom right.
12 Q Is it signed and dated?
13 A Yes, it is.
14 Q What is the date?
15 A August 9, 1993.
16 Q Can you read what it says above the taxpayer
17 signature.
18 A It says: Under penalties of perjury, I declare that
19 I have examined this offer, including accompanying
20 schedules and statements, and to the best of my knowledge
21 and belief, it is true, correct and complete.
22 Q If you take a look at 420-D, and it is a few pages
23 beyond that?
24 A D as in David?
25 Q Yes.
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Gagliardi-direct/White
1 A Okay.
2 Q Now, what is that, 420-D?
3 A Form 433-A, collection and information statement for
4 individuals.
5 Q What does it say in box one?
6 A Bruce Gordon, 10 Bluff Road, Glen Cove, New York,
7 11768.
8 Q Look at box five, what does it say?
9 A Taxpayers employer, business name and address.
10 Q What is listed?
11 A Who's Who Worldwide Registry, Inc., 1983 Marcus
12 Avenue, Lake Success, New York, 11042.
13 Q In box F, what are the choices the box can check?
14 A As wage earner, sole proprietor or partner.
15 Q And what is checked?
16 A Wage earner.
17 Q And at the bottom of the page in box 12(b), what does
18 that ask for?
19 A Adjusted gross income.
20 Q What is listed by Mr. Gordon?
21 A 51,876 for the year 1991.
22 Q If you turn to the next page, question 14 at the top,
23 what does that ask for?
24 A Bank charge cards, credit unions, savings and loans,
25 I am sorry if I am going too fast, and lines of credit.
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Gagliardi-direct/White
1 Q Is there an American Express Gold Card listed there?
2 A No, there is not.
3 Q What is listed there?
4 A The word "none" is written there.
5 Q Look down at question 18. What kind of information
6 is in that box?
7 A Securities, stocks, bonds, mutual funds, money market
8 funds, government securities, etcetera.
9 Q Now, are there any shares of Who's Who Worldwide
10 Registry listed there?
11 A No.
12 Q Any shares of any company listed there?
13 A No.
14 Q What is listed there?
15 A It says none.
16 Q Turn to the next
page, page 3, where it says assets
17 and liability analysis, do you see that?
18 A Yes.
19 Q Can you tell us what assets Mr. Gordon lists?
20 A $500 in cash.
21 Q Any other assets?
22 A None.
23 Q Look at box number 28, where it says other
24 liabilities, including judgments, notes and other charge
25 accounts, any liabilities listed?
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Gagliardi-direct/White
1 A Yes, there are.
2 Q Among the ones listed, are any loans to Mr. Gordon
3 from Who's Who Worldwide Registry or any other companies,
4 or loans listed?
5 A No, it doesn't appear to be.
6 Q Turn to the next page, page 4, where it says monthly
7 income and expense analysis, does Mr. Gordon list his
8 monthly expenses?
9 A Yes, he does.
10 Q Tell us what he lists?
11 A He lists rent of
$2,000, utilities of $250,
12 transportation, 150, insurance 50 for home. Court ordered
13 payments, it says not able to pay. And $70 in other
14 expenses.
15 Q At the bottom, can you read the box that says
16 certification -- I am sorry, in the middle, the box that
17 says certification.
18 A It says: Under penalties of perjury, I declare that
19 to the best of my knowledge and belief this statement of
20 assets, liabilities and other information is true, correct
21 and complete.
22 Q What is the date of the signature there?
23 A July 8th, '93.
24 Q If you can turn to the next page of the document,
25 420-E.
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Gagliardi-direct/White
1 Can you tell us what that is?
2 A It is a five-year projection of income -- actual,
3 actual expenses and income, 1991 through 1996.
4 Q Now, can you tell us what it says Mr. Gordon's annual
5 salary was in '91 and '92?
6 A On the very top left, $50,000 in actual annual salary
7 in 1991 and '92.
8 Q What does it project his annual salary would be in
9 the following years?
10 A 1993, 100,000; 1994, 125 -- 125,000. 1993, 100,000,
11 1994, 125,000, 1995, 150,000, 1976, 175,000.
12 Q If you can look down at the column on the far left
13 side, does it list Mr. Gordon's expenses and debts for
14 those years also?
15 A Yes, it did.
16 Q Can you list what expenses and other debts he has.
17 A It lists rent. Do you want the amounts?
18 Q No, just categories.
19 A Rent, groceries, electric and gas, telephone,
20 insurance, which is broken into home, life,
21 hospitalization and other; travel expense, gas and
22 maintenance; other expenses, cleaning, taxes, in
23 parenthesi
s, withholding; payments to wife by court order;
24 outstanding judgments, required payments pursuant to
25 agreement with Justice Department.
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Gagliardi-direct/White
1 Q Is there a net cash flow listed for Mr. Gordon?
2 A Yes, there is.
3 Q Can you tell us what is a net cash flow?
4 A A net cash flow for purposes of statement like this
5 indicates how much a taxpayer has after paying all of his
6 expenses.
7 Q Tell us what is listed there for 1991?
8 A It shows that Mr. Gordon had a net deficit of 11,356.
9 Q What does it mean that he had a net deficit?
10 A Paying out more than he earned. I am sorry, 366.
11 Q What is the annual cash flow or deficit projected for
12 1992.
13 A It shows deficit of 15,864.
14 Q And tell us what is projected for the years '93
15 throu
gh '96?
16 THE COURT: What is the difference? Why is that
17 important?
18 MR. WHITE: Okay.
19 THE COURT: Let's move along, Mr. White.
20 Q Take a look at the same document, 420-E, does it
21 indicate on the schedule that Mr. Gordon is required to
22 repay loans from Who's Who Worldwide?
23 A No, it is not listed.
24 Q Does it indicate anywhere that any of his expenses
25 are being paid by Who's Who Worldwide?
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Gagliardi-direct/White
1 A No.
2 Q Now, if you could turn to 420-H -- I am sorry, 420-G,
3 like in George.
4 Do you have it now?
5 A Yes, I do.
6 Q Tell us what that is?
7 A It is on a Who's Who Worldwide stationery, and it is
8 compensation agreement between Bruce Gordon and the
9 shareholders of Who's Who Worldwide Registry, Inc.
1
0 Q And at the bottom, can you read what the date of it
11 is?
12 A It says agreed to by the undersigned on this 26th day
13 of January, 1993. But the 3 is either crossed out, or it
14 was written over.
15 Q Now, if you can turn to the page, the next attachment
16 is 420-H; is that correct?
17 A Yes.
18 Q What is that?
19 A An agreement, United States Department of Justice,
20 Tax Division, collateral agreement on future income.
21 Q Can you read the first paragraph for us -- I am
22 sorry, the paragraph that begins, the purpose of.
23 A Okay.
24 The purpose of this collateral agreement,
25 hereinafter referred to as this agreement, is to provide
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Gagliardi-direct/White
1 additional consideration for acceptance of the offer in
2 compromise described above. It is unde
rstood and
3 agreed -- you want me to go on?
4 Q Read the paragraph numbered one.
5 A That the taxpayer will pay out of annual income for
6 the years 1991 to 2000 inclusive, nothing on the first
7 $25,000 of annual income; 10 percent of annual income more
8 than 25,000, and not more than 35,000;
9 20 percent of annual income more than 35,000, not
10 more than 50,000.
11 D is 50 percent of annual income more than
12 $50,000.
13 Q Turn the page and look at paragraph three.
14 Without reading it, would you just review it and
15 tell us in substance what that says.
16 (Whereupon, at this time there was a pause in the
17 proceedings.)
18 A In brief, the taxpayer owns a closely held business
19 that the income from that business would be included for
20 the terms of this collateral agreement.
21 Q Okay.
22 Now, after you were assigned to
evaluate this
23 offer in compromise, tell us what you did.
24 A Okay.
25 I spoke to the power of attorney, Mr. Reffsin.
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Gagliardi-direct/White
1 We discussed the offer in compromise. And I indicated
2 that I would write to request a revised collection
3 statement and then additional information.
4 Q Let me show you Government's Exhibit 421. Do you
5 recognize that?
6 A Yes, I do.
7 Q Can you tell us what that is?
8 A It is a letter I prepared and sent to Mr. Gordon, in
9 care of Mr. Reffsin.
10 MR. WHITE: Your Honor, the government offers
11 421.
12 THE COURT: Any objection?
13 MR. TRABULUS: No, your Honor, there is no
14 objection.
15 My copy is barely readable. I don't know if the
16 other copies are more readable.
17 MR. WHITE: I have
an enlargement.
18 THE COURT: All right, Government's Exhibit 421
19 in evidence.
20 (Government's Exhibit 421 received in evidence.)
21 Q Mr. Gagliardi, let me show you 421-A, is that simply
22 an enlargement of 421?
23 A Yes, it is.
24 MR. WHITE: We offer 421-A, your Honor.
25 THE COURT: Any objection?
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1 MR. TRABULUS: No objection.
2 THE COURT: Government's Exhibit 421-A in
3 evidence.
4 (Government's Exhibit 421-A received in
5 evidence.)
6 Q Would you read the first three paragraphs of the
7 letter before us?
8 A I am writing in regard to the offer in compromise
9 which you submitted on August 9, 1993. Your offer has
10 been reviewed by IRS counsel, and they have determined
11 that it is processable, and if it is accessib
le it could
12 compromise your entire tax liability. If a recommendation
13 of acceptance is made by myself, the offer is subject to
14 review by Brooklyn district counsel and would require
15 coordination with the Department of Justice regarding your
16 previously accepted offer and settlement. I will,
17 therefore, require additional verification of your income
18 and expenses, assets and liabilities to make a
19 determination regarding the viability of your offer in
20 compromise. I have prepared a list of documents for
21 financial verification required to allow analysis of the
22 offer. The records should be provided by January 3rd,
23 1994. If you have any questions regarding the
24 documentation I can be reached at the number above, Monday
25 to Friday, 9:00 a.m. to 1:00 p.m.
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ct/White
1 Q Now, the numbered paragraphs that follow, what are
2 those?
3 A The information requested in addition to verify the
4 offer in compromise.
5 Q The specific categories of information you asked for?
6 A That's correct.
7 Q Now, if you look down in the margin next to each of
8 the numbered paragraphs, there are handwritten notations.
9 Are those yours?
10 A No, they are not.
11 Q Were they on the letter when you sent them?
12 A No, they were not.
13 Q Now, what do you ask for in item number one?
14 A An updated and fully documented form 433-A,
15 collections information statement for individuals.
16 Q What do you ask for in item number three?
17 A Original cancelled checks and bank statements for all
18 accounts which you are a signator for months of April,
19 May, June, July, August, September and October, 1993.
20 Q
And what did you ask for in item --
21 THE COURT: Do we have to go through all of this,
22 Mr. White? What is the purpose of that?
23 For example, this case will be shortened
24 considerably if you do not have these witnesses read every
25 item. The first part could have been summarized easily,
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1 we will accept your offer and compromise if you verify
2 certain things. That's all it says. Why do we need to
3 take up all this time?
4 MR. WHITE: Your Honor, on these particular
5 responses and these particular requests, Mr. Gagliardi
6 will also specify about the specific responses to each of
7 these requests.
8 THE COURT: Is that material to any of the issues
9 in the case?
10 MR. WHITE: It is directly material, your Honor.
11 THE COURT: All right.
12 From now on, try to prevent the reading from the
13 documents, unless it is absolutely necessary.
14 MR. WHITE: I will, your Honor.
15 I will finish with the items.
16 Q Number six, what do you ask for in six?
17 A Verification, full monthly payments, if not paid for
18 by your personal check.
19 Q Item nine?
20 A Copies of all motor vehicle registrations, title
21 certificates and leasing agreements for vehicles you own
22 or operate.
23 Q Did you receive any response from Mr. Reffsin for
24 this letter?
25 A Yes, I did.
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1 Q And when was that?
2 A Mr. Reffsin called in January, late January, 1994,
3 and we met at my office.
4 Q Let me show you Government's Exhibit 423.
5 (Handed to the witness.)
6 Q Can you tell us wh
at that is?
7 A They are copies of the information provided by
8 Mr. Reffsin in January of 1994.
9 Q Does that include 423 and attachments, A through L?
10 A Yes, it does.
11 Q In addition to that information did you receive
12 anything else from Mr. Reffsin?
13 A Yes. I received the cancelled checks and statements,
14 but I copied the pertinent information and returned the
15 originals.
16 Q And are the ones you copied included in 423?
17 A Yes.
18 MR. WHITE: The government offers 423.
19 THE COURT: Any objection?
20 MR. TRABULUS: No objection.
21 THE COURT: Government's Exhibit 423 in
22 evidence.
23 (Government's Exhibit 423 received in evidence.)
24 MR. WHITE: Inclusive of the attachments, 423-A
25 through L.
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1 T
HE COURT: Any objection?
2 MR. TRABULUS: I wasn't objecting to any of them.
3 THE COURT: 423-A for Abel through L for Lion, in
4 evidence.
5 (Government's Exhibits 423-A through 423-L
6 received in evidence.)
7 MR. WHITE: Your Honor, again I have copies to
8 provide to the jury to follow along.
9 THE COURT: Good thinking, Mr. White.
10 MR. WHITE: I will do it in the proper order.
11 THE COURT: Now you are getting to it.
12 MR. WHITE: I learn quickly, your Honor.
13 THE COURT: You do.
14 (Whereupon, the exhibit/exhibits were published
15 to the jury.)
16 Q Let's review the information you received from
17 Mr. Reffsin.
18 Now, the top document marked 423 what is it?
19 A Revised collection statements from individuals, form
20 433-A.
21 Q Let me ask you about a couple of quick areas about
22 that, if you look at the top of pag
e 2, question 14, for
23 bank charge cards, are any listed?
24 A No.
25 Q If you look for 18, securities, anything listed?
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1 A Nothing at all.
2 Q For question 16 above that, real property, anything
3 listed?
4 A No.
5 Q On page 3, what assets are listed by Mr. Gordon?
6 A The only asset is $1,000 in cash.
7 Q In box 28 under other liabilities, are there loans to
8 Mr. Gordon for any corporations listed there?
9 A No.
10 Q On the next page under living expenses. At the
11 bottom under other expenses, what is written there?
12 A Box 51?
13 Q Yes.
14 A Other expenses, specify, nothing.
15 Q Were bank statements among the documents you received
16 from Mr. Reffsin?
17 A Yes.
18 Q Can you tell us what statements
you received from
19 Mr. Reffsin?
20 A I will look at the attachments.
21 423-F is National Westminster Bank, statements
22 for the month of May 18th through June 16th, 1993.
23 Q Without reading each one, can you page through it and
24 tell us what you got?
25 A May 18th, through October 16th, through November
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1 16th, 1993.
2 Q Looking at one in particular, 423-H, and that's the
3 statement for July 17th through August 17th, 1993.
4 A Yes.
5 Q Any deposits to Mr. Gordon's account to that
6 statement?
7 A There are two items listed as credit memos.
8 Q And what are the amounts?
9 A August 2nd, listed at $10,000, and the word "loan" is
10 written in. On August 3rd, 1993, credit memo, $5,000.
11 Q Now, if you could turn ahead to the st
atement that is
12 marked 423-K. Any deposits to Mr. Gordon's account that
13 month?
14 A Yes, three.
15 Q Tell us what they are?
16 A October 21st, $5,000, credit memo. October 25th,
17 $613.52, deposit. And on November 2nd, $5,000, credit
18 memo.
19 Q Mr. Gagliardi, if you take a look at Exhibit 421,
20 your letter to Mr. Reffsin, and if you could compare that
21 with 423, which are the documents you received from him.
22 A Okay.
23 Q Going through the letter. Item number one, you asked
24 for a 433-A. Did you get that?
25 A Yes, I did.
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1 Q Item number two, you asked for tax returns, did you
2 get those?
3 A 1991, 1992 -- yes, we did.
4 Q The checks and bank statements, did you receive
5 those?
6 A Yes.
7
Q Item four, copies of all savings bank statements,
8 passbooks, and certificates of deposits, savings bonds,
9 stock certificates, etcetera. Did you receive any of
10 those?
11 A No. We received none.
12 Q Five is current wage or commission, income
13 statements. Did you receive any of those?
14 A Yes, the W-2 statement for 1993.
15 Q Number six, verification of all monthly payments, if
16 not paid by your personal check. Did you receive any of
17 those?
18 A No.
19 Q Seven, copies of utility bills, did you receive any
20 of those?
21 A No.
22 Q Eight, insurance policy numbers and verifications,
23 did you receive any of those?
24 A Received insurance information for homeowners
25 insurance.
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1 Q Number nine, copies of all m
otor vehicle
2 registrations, title certificates, and/or leasing
3 agreements for vehicles you own or operate. Did you
4 receive any of those?
5 A No.
6 Q Ten, dental or medical bills, did you receive any of
7 those?
8 A No.
9 Q And 11, any additional documentation which supports
10 the income and expenses claimed on your Form 433. Did you
11 receive any of those?
12 A No.
13 Q Now, Mr. Gagliardi, after you reviewed the materials
14 in Exhibit 423, what did you do?
15 A I prepared a spread sheet for certain information,
16 and I contacted Mr. Reffsin again to request additional
17 verification and information.
18 Q Let me show you Exhibit 424.
19 (Handed to the witness.)
20 Q Do you know what that is?
21 A A letter I wrote to Mr. Reffsin on February 17th,
22 1994.
23 MR. WHITE: Your Honor, the government offers
24 424.
25 THE COURT: Any objection?
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1 MR. TRABULUS: No objection.
2 THE COURT: Government's Exhibit 424 in
3 evidence.
4 (Government's Exhibit 424 received in evidence.)
5 Q Mr. Gagliardi, if you take a look at 424-A and see if
6 it is simply an enlargement of 424?
7 A Yes, it is.
8 MR. WHITE: We offer it in evidence.
9 THE COURT: Any objection?
10 MR. TRABULUS: No.
11 THE COURT: Government's Exhibit 424-A, for Abel,
12 in evidence.
13 (Government's Exhibit 424-A received in
14 evidence.)
15 Q Mr. Gagliardi, without reading it, can you tell us
16 what you asked for in that letter.
17 A Okay.
18 In a nutshell I requested additional information
19 as to the questionable items I found when I reviewed the
20 information that had arrived.
21 Q And what specific questionable items did you find?
22 A Unusual deposits out of his bank account, and the
23 service contract with Who's Who, there was that question
24 with a date that I could not determine when it began.
25 There were questions about the taxpayer's taxes, and the
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1 agreement with the Department of Justice.
2 Q Let me first direct your attention to the bank
3 deposits. Specifically what bank deposits were you asking
4 him about?
5 A The $15,000 in July and $10,613.52 in October.
6 Q What was your question with respect to the
7 compensation agreement?
8 A I wanted to fix the term. I needed to make certain
9 when it began. I wanted to -- I wanted either an
10 explanation for the date or --
11 Q Now
, Mr. Gagliardi, did you receive a response from
12 Mr. Reffsin regarding your request?
13 A Yes, I did.
14 Q Let me show you Exhibit 425.
15 (Handed to the witness.)
16 Q Do you recognize that?
17 A Yes, I do.
18 Q What is it?
19 A A letter from Mr. Reffsin whereby he transmitted the
20 information that I requested, and the attachments.
21 MR. WHITE: Your Honor, the government offers
22 425.
23 THE COURT: Any objection?
24 MR. TRABULUS: No.
25 THE COURT: Government's Exhibit 425 in
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1 evidence.
2 (Government's Exhibit 425 received in evidence.)
3 MR. WHITE: With the Court's permission we will
4 hand out copies again to the jury?
5 THE COURT: Very well.
6 (Whereupon, the exhibit/exhibits were published
7 to t
he jury.)
8 THE COURT: Is this an undated letter,
9 Mr. Gagliardi?
10 THE WITNESS: Yes.
11 MS. SCOTT: Your Honor, I will place a sticker on
12 the last enlargement, 423-A.
13 THE COURT: Very good.
14 Now, does that include the attachments also to
15 425.
16 MR. WHITE: Yes, your Honor.
17 THE COURT: Any objection to the attachments?
18 MR. TRABULUS: No, your Honor.
19 THE COURT: They are 425-A, for Abel to, is it D
20 for Dog?
21 MR. WHITE: Yes, through D for Dog.
22 THE COURT: Those are in evidence as well.
23 MR. WHITE: Thank you.
24 (Government's Exhibits 425-A through 425-D
25 received in evidence.)
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1 Q Now, Mr. Gagliardi, in substance, can you tell us
2 what Mr. Reffsin told you in this letter regarding those
3 deposits that you requested or questioned?
4 A He indicated that they were loans to the taxpayer.
5 We had spoken about this previously. I don't know if you
6 went to bring that up.
7 Q Okay.
8 Tell us what you discussed with Mr. Reffsin prior
9 to this letter.
10 A Okay.
11 I questioned the items when we spoke on the
12 phone. I raised the issues. He gave an explanation. And
13 I told him I would want the information, and he provided
14 that to me.
15 Q And in this letter what did he tell you about those
16 bank deposits?
17 A That Mr. Gordon received loans from Joyce Grossman
18 for $15,000, and Madeline Middlemark for $10,000.
19 Q Did he explain the purposes of these loans?
20 A Yes.
21 Q Can you explain for each one what the purpose was?
22 A He indicated Mr. Gordon's son had passed away, and he
23 borrowed money to pay
for funeral expenses.
24 Q From which one of those people?
25 A In the bottom paragraph, he borrowed money from Joyce
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1 Grossman.
2 Q So, the money for the son's funeral was borrowed from
3 Joyce Grossman?
4 A Yes.
5 Q And does it indicate what the loan from Madeline
6 Middlemark was for?
7 A Yes, it does. It indicates back alimony for payment
8 to Mr. Gordon's ex-spouse.
9 Q Was any documentation of these loans provided to you?
10 A Yes.
11 Q What was provided to you?
12 A Attachments 425-A and 425-B are promissory notes for
13 $15,000 from Joyce Grossman, and $10,000 from Madeline
14 Middlemark.
15 Q Look at 425-A, if you would.
16 That indicates that it is a note from Bruce
17 Gordon to repay Joyce Grossman; is that corre
ct?
18 A Yes.
19 Q Can you tell us what the date of the promissory note
20 is?
21 A It says July 25th, 1993.
22 Q And that's the note or the loan that Mr. Reffsin told
23 you what to pay for his son's funeral expenses?
24 A Yes.
25 Q You can take a look at Government's Exhibit 499-1-A.
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1 MR. WHITE: Your Honor, I will offer it now. It
2 is a certified copy --
3 THE COURT: What is the number?
4 MR. WHITE: 499-1-A.
5 THE COURT: It is Exhibit 499 --
6 MR. WHITE: 499-1-A.
7 THE COURT: Any objection?
8 MR. TRABULUS: Your Honor, I have to find it.
9 THE COURT: So do I.
10 MR. TRABULUS: Your Honor, I know what it is, I
11 have soon it before, I will not object to it.
12 THE COURT: Very well.
13 Government's Exhibit
499-1-A, which is a
14 certificate of death?
15 MR. WHITE: Correct.
16 THE COURT: In evidence.
17 (Government's Exhibit 499-1-A received in
18 evidence.)
19 Q If you can take a look at that Exhibit, it is a death
20 certificate from the Florida Department of Health and
21 Rehabilitative Services; is that correct?
22 A It appears to be.
23 Q Would you read the decedent's name in the top box,
24 number one?
25 A Todd Gordon.
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1 Q If you look down to box 17, where it lists father,
2 what does it say?
3 A Bruce Gordon.
4 Q Look back down on box number three, where it says
5 date of death, what is the date?
6 A It says July 28th, 1993.
7 Q And compare that to the date of the promissory note,
8 please, 425-A?
9 A J
uly 25th, 1993.
10 Q So, Mr. Gordon's son died three days after he
11 supposedly borrowed the money for the funeral?
12 MR. JENKS: Objection.
13 THE COURT: What ground?
14 Please rise when you make an objection.
15 MR. JENKS: I am sorry, your Honor. Objection.
16 THE COURT: What ground?
17 MR. JENKS: On the grounds of the phrasing of
18 that objection.
19 THE COURT: Overruled.
20 Did you hear the question?
21 THE WITNESS: Yes, I did, sir.
22 Q What is the answer?
23 A It appears that the promissory note is three days
24 prior to the date of death.
25 Q Now, if you can look at 425-C.
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1 Is that the verification you requested with
2 respect to the compensation agreement?
3 A It is what I received, yes, from Mr. Reffsin.
4 MR. JENKS: Objection. Mr. White continually
5 keeps feeding the witness answers instead of asking him
6 questions.
7 I will ask you to instruct him not to lead the
8 witness.
9 THE COURT: Well, I don't know about
10 continuously, because no one has made an objection about
11 it before, including you.
12 Let me hear the last question, Mr. Reporter,
13 please.
14 MR. WHITE: I will rephrase it, if you like.
15 THE COURT: I don't know whether you have to or
16 not. Let's see if it is a leading question.
17 (Whereupon, the court reporter reads the
18 requested material.)
19 THE COURT: What is leading about that?
20 MR. JENKS: He can simply ask him what the
21 document is, your Honor. For ten or fifteen questions he
22 has been summarizing what is in the document and calling
23 for a yes or no answer.
24 THE COURT: Happily so.
25 MR. JENKS: I will object, your Honor.
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1 THE COURT: It would be leading if -- read it
2 again to me, I want to make a point so the lawyers know
3 what I think a leading question is. Go ahead,
4 Mr. Reporter.
5 (Whereupon, the court reporter reads the
6 requested material.)
7 THE COURT: That is not technically a leading
8 question. It would be leading if it said: That's the
9 verification you received; isn't that right?
10 Very slightly different.
11 Objection overruled.
12 I have to break this up every once in a while,
13 members of the jury. If we get a whole hour's worth of
14 this stuff, I am not going to let it go. I will even tell
15 some stories or something every once in a while. I can't
16 tell jokes. I was never able to do that, but stories
I
17 can tell.
18 Go ahead.
19 Q Now, Mr. Gagliardi, after you received this response
20 from Mr. Reffsin, did you have any additional contact with
21 him regarding this offer?
22 A I kept the chronology of the actions I took on the
23 case. To tell you the truth, as to what action I took
24 next it would be difficult to place. If I can see my
25 notes I could tell you.
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1 Q Do you recall the specific dates?
2 A Not after this time, no.
3 Q All right.
4 Let me show you Exhibit 3500-8-A, which I believe
5 are your notes. And you can see if that refreshes your
6 recollection.
7 (Handed to the witness.)
8 A I told Mr. Reffsin that I would have to review the
9 information and make a determination on the offer in
10 compromise.
11 Q Now, did you ever ask him for any additional
12 information?
13 A Yes, I did.
14 Q What did you ask him for?
15 A The taxpayer was required to make a filing with the
16 Department of Justice on an annual basis as part of that
17 agreement, a previous agreement. And he had yet to do
18 so. And I brought that issue up.
19 Q Now, did you ask him for any additional projections
20 of income?
21 A Yes, I -- the offer examination required that we
22 bring it out five years after the recommendation was
23 made. And this thing was dragging on a little longer than
24 expected, and I needed an additional year's projection.
25 Q Take a look at Exhibit 426.
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1 (Handed to the witness.)
2 What is that?
3 Q What is that?
4 A A letter from
Mr. Reffsin and attachment. To
5 summarize it, it is the extension --
6 THE COURT: No. Just tell us what it is. It is
7 a letter and dated May 13th, 1994.
8 THE WITNESS: Sorry.
9 Q Mr. Gagliardi, did you receive this letter?
10 A Yes, I did.
11 MR. WHITE: Your Honor, the government offers
12 426.
13 THE COURT: Any objection?
14 MR. TRABULUS: No, your Honor.
15 THE COURT: Government's Exhibit 426 in evidence.
16 (Government's Exhibit 426 received in evidence.)
17 Q Mr. Gagliardi, would you look at 426-A, and tell me
18 if it is simply an enlargement of 426?
19 A Yes, it is.
20 MR. WHITE: Your Honor, we offer 426-A.
21 THE COURT: Any objection?
22 MR. TRABULUS: No.
23 THE COURT: 426-A, Government's Exhibit in
24 evidence.
25 (Government's Exhibit 426-A received in
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1 evidence.)
2 Q If you can summarize it for us what is it Mr. Reffsin
3 told you with respect to the additional year's projection
4 of income?
5 A Basically the taxpayer's employer filed for Chapter
6 11 protection, and it was impossible to provide an extra
7 year's projection.
8 Q And why was it impossible?
9 A Because it was not certain as to whether or not his
10 employment would be continued.
11 Q Now, you indicated before in addition to that you
12 asked Mr. Reffsin with respect to information about the
13 collateral agreement.
14 A Yes, I did.
15 Q Did you receive a response from Mr. Reffsin with
16 respect to that issue?
17 A I just want to make sure I properly state it.
18 No, I received the verification, for 1992. I
19 can't find it in my notes right now.
20 Q Okay.
21 Let me show you Exhibit 427.
22 (Handed to the witness.)
23 Q Tell me if you recognize that.
24 A Yes, I do.
25 Q And what is that?
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1 A It is a letter from M. Reffsin & Company signed by
2 Mr. Reffsin explaining the taxpayer's liability for the
3 future income and collateral agreement with the Department
4 of Justice.
5 MR. WHITE: The government, your Honor, would
6 offer Exhibit 427.
7 THE COURT: Any objection?
8 MR. TRABULUS: No.
9 THE COURT: Government's Exhibit 427, in
10 evidence.
11 Q Now, Mr. Gagliardi, again, look at 427-A, and tell me
12 if it is simply an enlargement of 427.
13 MR. WHITE: Your Honor, we offer 427-A.
14 MR. TRABULUS: No objection.
15 THE COURT: Government's Exhibit 427-A in
16 evi
dence.
17 Q Now, Mr. Gagliardi, can you explain for us more
18 specifically what information you asked Mr. Reffsin for
19 that this letter responds to?
20 A All right.
21 The taxpayer had previously made that agreement
22 with the Department of Justice, and it was separate and
23 distinct from the offer in compromise. He had to file
24 that with his tax return annually. And it was not
25 provided -- that information was not provided along with
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1 the offer in compromise. But it was -- I am sorry.
2 THE COURT: Mr. Gagliardi, what is this agreement
3 with the Department of Justice? What is that about? Does
4 it have anything to do with your offer in compromise?
5 THE WITNESS: With the offer in compromise -- not
6 particularly with the offer in compromise.
7 THE COURT: Well, did you know what that was, the
8 Department of Justice collateral agreement?
9 THE WITNESS: Only to the extent that the
10 taxpayer had provided copies with the information that was
11 submitted with the offer.
12 THE COURT: So, you didn't know what it was?
13 THE WITNESS: No. I didn't have a copy of the
14 agreement, no.
15 THE COURT: You still don't know what it is?
16 THE WITNESS: I have a basic idea what it is.
17 But I don't have specific knowledge.
18 MR. WHITE: Your Honor, I think I can clarify a
19 question.
20 Q Prior to receiving the offer in compromise, did you
21 have a copy of the collateral agreement?
22 A Prior to receiving the offer in compromise? No.
23 Q With the offer in compromise did you receive a copy
24 of the collateral agreement?
25 A Yes, I did.
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1 Q Was the sum -- were the sums owed by Mr. Gordon under
2 the collateral agreement, part of the liability that he
3 was trying to compromise?
4 A It indicated all taxes. I believe if you look at the
5 offer in compromise, I believe --
6 MR. NEVILLE: Objection to what he believes, your
7 Honor.
8 THE COURT: When you say you believe, you mean
9 you understand that to be so with reasonable certainty, or
10 are you just guessing?
11 THE WITNESS: My recollection is that it was
12 included. Without looking at the document, I don't want
13 to make the guess, your Honor.
14 THE COURT: You don't know at this point?
15 THE WITNESS: No. I don't know at this point.
16 Q Look at Government's Exhibit 420-H, that you have in
17 front of you.
18 A If you give me a minute.
19 Q H should be the last
attachment to that.
20 A Okay.
21 Q Now, is that the collateral agreement?
22 A Yes, it is.
23 Q Did you receive it as part of the offer in
24 compromise?
25 A Yes, I did.
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1 Q That collateral agreement covers how much in
2 penalties?
3 A 254,781, plus interest.
4 THE COURT: I still don't understand.
5 What does the collateral agreement have to do
6 with what you were doing with respect to the offer in
7 compromise? Is it the same tax liability? Is it a
8 previous tax liability or what?
9 A It's -- it's the same tax liability.
10 THE COURT: It is the second agreement covering
11 the second tax liability?
12 THE WITNESS: The offer in compromise?
13 THE COURT: You were involved in an offer in
14 compromise.
15
THE WITNESS: Yes.
16 THE COURT: There was some three and a half
17 million dollars in taxes, penalty and interest due; is
18 that correct?
19 THE WITNESS: Correct.
20 THE COURT: There was an offer in compromise to
21 settle the whole shooting match for 150,000?
22 THE WITNESS: Rate.
23 THE COURT: You were asking for all these
24 documents to verify that the taxpayer couldn't pay more
25 than that, correct?
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1 THE WITNESS: Correct.
2 THE COURT: That's what you were doing?
3 THE WITNESS: Yes.
4 THE COURT: What does the collateral agreement
5 cover, the same three and a half million dollars?
6 THE WITNESS: The taxpayer previously agreed to
7 make these payments with the Department of Justice, the
8 information. If the offer was accepted
it had to go back
9 to Justice to be approved.
10 THE COURT: The collateral agreement covered then
11 with the Department of Justice was also involving taxes,
12 past due taxes?
13 THE WITNESS: The penalty portions of those
14 taxes.
15 THE COURT: Just the penalty portions, but the
16 same taxes that you were concerned with?
17 THE WITNESS: Well, the liability was part of the
18 offer, the taxes to be settled, yes.
19 THE COURT: So, he had already made an agreement
20 with the Department of Justice to pay, you say, the
21 penalties part; is that right?
22 THE WITNESS: Right.
23 THE COURT: And this offer in compromise was an
24 additional payment to be made?
25 THE WITNESS: Okay.
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1 The offer in compromise offered this amount to
2 pay the -- to wipe out the rest of the -- the entire tax
3 liability.
4 THE COURT: Including the collateral --
5 THE WITNESS: Including -- I am sorry.
6 THE COURT: If the offer in compromise went
7 through, it would wipe out the collateral agreement?
8 THE WITNESS: With the approval of the Department
9 of Justice.
10 THE COURT: Yes.
11 THE WITNESS: Yes.
12 Q The $240,000 in penalties that the collateral
13 covered, was that a portion of the total three and a half
14 million liability that Mr. Gordon wanted to compromise?
15 A Yes.
16 Q So, if the offer were accepted, that debt would be
17 extinguished along with the debt for 150,000?
18 A That's correct.
19 Q Now, to go back to the collateral agreement question,
20 what specifically were you asking Mr. Reffsin about, to
21 which this letter responds?
22 THE COURT: What is this l
etter?
23 MR. WHITE: 427.
24 A The question I raised was whether Mr. Gordon met the
25 terms of the collateral agreement with the Department of
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1 Justice. This is the explanation provided by Mr. Reffsin.
2 Q What made you think he had not met the terms of the
3 agreement?
4 MR. TRABULUS: Objection to form, your Honor.
5 THE COURT: Overruled.
6 A No information was provided with the offer package to
7 indicate any payments were made.
8 Q Now, does Mr. Reffsin provide you with any
9 information regarding payments for 1993 by Mr. Gordon
10 under that agreement?
11 A Yes. He did.
12 Q What did he tell you in that letter, 427?
13 A In a nutshell, that the taxpayer had made a partial
14 payment for the amount required for 1993, and that he was
15 unable to pay the balance.
16 THE COURT: He paid $5,500?
17 THE WITNESS: Yes, sir.
18 THE COURT: Of the 14,000 --
19 A Yes, sir.
20 Q And a little over $8,000 is what he was unable to
21 pay; is that correct?
22 A Yes, sir.
23 Q Now, if you could just read for us the two sentences
24 in the third paragraph allowed?
25 A The third paragraph?
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1 Q Yes.
2 A He is going to have to borrow the money he has
3 offered in the offer in compromise submitted. Where shall
4 he borrow this money? Perhaps he should cease eating.
5 THE COURT: E A T I N G, which we will do at
6 12:30 today. And I can't wait already.
7 Q Now, let me show you Exhibit 428. And would you take
8 a look at that.
9 (Handed to the witness.)
10 Q Would
you tell us what Exhibit 428 is?
11 A Form 656, offer in compromise, marked at the top,
12 amended offer, October 20th, 1994. And it has an
13 attachment.
14 MR. WHITE: Your Honor, the government offers
15 428.
16 THE COURT: Any objection?
17 MR. TRABULUS: No, your Honor.
18 THE COURT: Government's Exhibit 428, in
19 evidence.
20 (Government's Exhibit 428 received in evidence.)
21 Q Now, what is an amendment to an offer in compromise?
22 A A taxpayer -- an offer in compromise is basically a
23 negotiation. A taxpayer can offer an additional sum,
24 include additional periods, or change the terms of the
25 payment of the offer.
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1 Q Okay.
2 In what respects does this amended offer in
3 compromise amend the original one?
4 A The
attachment is basically similar to the original
5 offer, except for paragraph C of the attachment, which
6 indicates that there is current -- you want me to read it
7 or no?
8 Q Tell us in substance how it is different.
9 A It is basically to include the unpaid portion of the
10 agreement with the Department of Justice.
11 Q And the unpaid portion relates to that $8,000 that
12 you mentioned before?
13 A Yes.
14 Q Now, aside from reviewing the information submitted
15 to you by Mr. Gordon and Mr. Reffsin, can you tell us what
16 else you did to investigate this offer in compromise?
17 A I researched routine databases that we have, the
18 motor vehicles, real property information, records of the
19 state and the county, currency and banking records which
20 lists disbursements over $10,000 by a taxpayer. And I
21 made a visit to the taxpayer's address to dete
rmine what
22 kind of lifestyle he was living.
23 Q Now, let's take it one by one.
24 First of all, you mentioned a database with
25 respect to currency transactions?
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1 A Yes.
2 Q Tell us what that is and why you checked it?
3 A It indicates any cash transaction that is made either
4 in a deposit or withdrawal from a bank over $10,000. I
5 researched that and didn't find any for Mr. Gordon.
6 Q Did you say you reviewed real estate records as well?
7 A Yes, we did.
8 Q Why did you do that?
9 A To determine if there are any real estate holdings
10 not reported on the collection statements, and on Nassau
11 County and Suffolk records, which were researched, and
12 there were none found in Mr. Gordon's name.
13 Q Did you review motor vehicle regis
trations?
14 A Yes, we did. And, likewise, there were none found.
15 Q You mentioned also about investigating Mr. Gordon's
16 life style. Tell us what you did.
17 A I visited the address listed on the offer in
18 compromise. I found no one at home. I made note of the
19 area, the type of neighborhood it was, the value of the
20 property. I researched that particular property to see if
21 he was in the chain of title. I didn't find anything for
22 Mr. Gordon.
23 Q Okay.
24 If you can look back to Exhibit 420.
25 A Give me a clue?
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1 Q Which is the offer in compromise, the original one.
2 A Okay.
3 A lot of papers here.
4 Q Look at 420-A, the offer in compromise form.
5 A Yes.
6 Q The address listed is 10 Bluff Road in Glen Cove?
7 A Correct.
8 Q What address did you go and observe?
9 A That address.
10 Q And from looking at your notes, can you tell us when
11 you did that?
12 A December, 1993. And I believe I made another visit
13 later on, but I can't fix the date.
14 Q If I can address your attention to July of '94 in
15 your notes.
16 A Yes, I did, on July 29th, 1994, I also visited.
17 Q Let me address your attention to early April, 1995.
18 Did you learn anything in connection with this offer in
19 compromise at that time?
20 A Yes, I did.
21 Q Can you tell us what you learned?
22 A There was a newspaper published -- report regarding
23 Mr. Gordon and Who's Who Worldwide Registry, indicated
24 that he had an ownership role in the company, and that he
25 had been arrested, I believe.
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1 Q And as a result of that, what did you do?
2 A I contacted Mr. Reffsin.
3 Q And what happened?
4 A Mr. Reffsin indicated that it was an error, it would
5 be resolved, and he would get back to me shortly, and all
6 should be fine.
7 MR. TRABULUS: Your Honor, may we have a limiting
8 instruction concerning the significance of the information
9 in the newspaper article that he had, as to it being
10 admissible for his state of mind and only that?
11 THE COURT: Yes.
12 The newspaper article that the witness said that
13 he is not admissible, you are to pay no attention to the
14 fact of whatever was in that newspaper article. The only
15 reason it is allowed in is what effect it had on this
16 witness.
17 As far as whether it was true or not, that is
18 absolutely not admissible. You are to pay no attention to
19 that.
20 Q Now, Mr. Gagliardi, was there a reason why this
21 newspaper article of Mr. Gordon's ownership was
22 significant to you?
23 A Yes.
24 Up to this point in time, and as far as I know,
25 Mr. Gordon had no ownership, stock ownership, or no other
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1 role other than an employee for the corporation. It
2 raised that issue and it had to be cleared up.
3 Q From where did you obtain that impression that he had
4 no ownership interest?
5 A On every collection statement filed, it indicated he
6 was an employee, and had no ownership role.
7 Q Now, did you subsequently have any additional
8 conversation with Mr. Reffsin about this situation?
9 A Yes, we waited at least about six weeks for
10 Mr. Reffsin -- to see if the situation had resolved. I
11 contacted him again, and he indicated he could not -- and
12 I indicated he could not hold this open forever, and if
13 the taxpayer would withdraw the offer -- if the taxpayer
14 would not withdraw the offer, we have to reject it.
15 Q Okay.
16 Let me show you Exhibit 429.
17 (Handed to the witness.)
18 Q Do you recognize that?
19 A Yes, I do.
20 Q What is that?
21 A A letter dated May 10th, 1995, where Mr. Reffsin -- I
22 am sorry, from Mr. Reffsin, withdrawing the offer in
23 compromise.
24 Q To you?
25 A Yes.
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1 MR. WHITE: Your Honor, the government offers
2 Exhibit 429.
3 THE COURT: Any objection?
4 MR. TRABULUS: No, your Honor.
5 MR. WALLENSTEIN: No, your Honor.
6 THE COURT: Government's Exhibit 429 in
7 evidence.
8 (Government's Exhibit 429 received in evidence.)
9 THE COURT: What is the date on that?
10 THE WITNESS: May 10, 1995.
11 Q If you can just read the first paragraph for us.
12 A Pursuant to our telephone discussion of the other
13 day, I elect to withdraw Mr. Gordon's request for an offer
14 in compromise in view of his current legal problems -- in
15 view of the current legal problems that Mr. Gordon is
16 involved in.
17 He would prefer to re-submit when the problems
18 are resolved.
19 And it is signed by Mr. Reffsin.
20 MR. WHITE: Your Honor, may I have one moment,
21 please?
22 THE COURT: Surely.
23 (Whereupon, at this time there was a pause in the
24 proceedings.)
25 MR. WHITE: Your Honor, I have no further
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1 questions.
2 THE COURT: Cross-examination -- maybe we ought
3 to take our recess first and then start the
4 cross-examination.
5 All right. Members of the jury, we will take a
6 ten-minute recess. Please do not discuss the case. Keep
7 an open mind.
8 Madam courtroom deputy, would you please recess
9 the jury.
10 (Whereupon, at this time the jury leaves the
11 courtroom.)
12
13 (Whereupon, a recess is taken.)
14
15 THE CLERK: Jury entering.
16 (Whereupon, the jury at this time entered the
17 courtroom.)
18 THE COURT: Please be seated, members of the
19 jury.
20 You may proceed, Mr. Trabulus.
21 MR. TRABULUS: Thank you, your Honor.
22
23 CROSS-EXAMINATION
24 BY MR. TRABULUS:
25 Q Good morning, Mr. Gagliardi.
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1 A Good morning.
2 Q I am Mr. Gordon's attorney.
3 Before you came to court yesterday, had you ever
4 seen Mr. Gordon before?
5 A To the best of my recollection, no.
6 Q And did you ever speak to Mr. Gordon?
7 A No, I don't believe so.
8 Q So, is it fair to say that your entire involvement
9 with Mr. Gordon was through Mr. Reffsin?
10 A Yes, it would be.
11 Q Now, I believe you were shown Exhibit 499-1-A, which
12 showed the date of death of Mr. Gordon's son as being July
13 28th, 1993; is that correct?
14 A I believe so.
15 Q Of course, you were shown a note that had an earlier
16 date; is that correct?
17 A Yes.
18 Q Now, the inquiry that you made which resulted in you
19 being given the note was prompted by some entries on bank
20 statements; is that correct?
21 A Yes.
22
Q And I would ask you now to turn to Exhibit 423-H.
23 A I have it.
24 Q Mr. Gagliardi, some of the entries which prompted
25 your inquiry appear on this 423-H; is that correct?
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1 A Yes.
2 Q And those are the two additions, one for 10,000 and
3 one for 15,000; is that correct?
4 A Yes.
5 Q And one has the word "loan" written next to it?
6 A Yes.
7 Q They are both shown as credit memos; is that correct?
8 A Yes.
9 Q One is dated August 2nd, and the other is August 3rd;
10 is that correct?
11 A Yes.
12 Q And that's a few days after the July 28th date of the
13 debt; is that right?
14 A Yes, sir.
15 Q Now, it is not unheard of for people who receive
16 money as a loan to give a promissory note for that
17 afterwards;
is that correct?
18 A I have no particular knowledge of it.
19 Q Would it seem -- if there was an emergency situation
20 and someone got some money, they might not give a
21 promissory note for it right at that point; is that
22 correct?
23 A If you want to make that supposition. I can't.
24 Q Isn't it correct that they then prepared a promissory
25 note afterward, and in the course of dating it, they might
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1 not remember the actual date they got the money; is that
2 correct?
3 A I am rather careful in dating documents. I would
4 imagine that Mr. Gordon would be the same.
5 Q Well, when someone is upset because a close relative,
6 such as a child, had died, perhaps they might not be as
7 careful; would you agree?
8 A You can make that supposition. Ho
wever, this is
9 information he is providing to the Internal Revenue
10 Service.
11 Q In any event, there is no dispute that the money, the
12 money itself was given to -- put into Mr. Gordon's account
13 after the date that the son had died; is that correct?
14 A That is correct.
15 Q Now, Mr. Gagliardi, when you first got involved with
16 Mr. Gordon's case, information case, that was prompted by
17 the receipt of the offer in compromise; is that correct?
18 A I had previously been assigned a review of
19 Mr. Gordon's account on another matter.
20 Q Now, in connection with your assignment relating to
21 the offer in compromise, you had access to documents
22 relating to Mr. Gordon's tax filings, filings that had
23 been made before the offer in compromise itself was
24 proposed; is that correct?
25 A Do you want to restate that?
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1 Q I am sorry. I will restate it.
2 When you got involved -- at the time you received
3 the offer in compromise, did you have the prior collection
4 information statements, the forms 433-A, that had been
5 filed by or on behalf of Mr. Gordon?
6 A When I received the offer in compromise, I received a
7 package of information with that collection statement that
8 was dated, I believe it was July of '93, or September of
9 '93. I don't have it -- without looking at it I can't
10 give you the exact date.
11 Q Did you have any earlier collection information
12 statements that had been filed by Mr. Gordon?
13 A Did I -- no. I did not have any collection
14 information statements prior to receiving the offer in
15 compromise.
16 Q After receiving the offer in compromise, did there
17 come a point in time when you acquired earlier collection
18 information statements that had been filed by Mr. Gordon
19 before the offer in compromise?
20 A I don't recall so. The original -- the file with the
21 offer is dated, I think, July of '93. I don't believe
22 there was another offer -- another collection statement.
23 Q No other collection statement?
24 A I don't have any knowledge of it.
25 Q So, it is your understanding that the very first
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1 collection information statement that was ever filed by
2 Mr. Gordon was the July 8th, 1993, collection information
3 statement?
4 A When I received the offer in compromise, that's the
5 first collection statement that I had.
6 Q In the course of doing your investigation, I think
7 you mentioned that
you did some investigation, you went to
8 a condominium, you checked property records, currency and
9 banking records.
10 In the course of that investigation did you seek
11 to ascertain whether or not Mr. Gordon had previously,
12 before July 8th, 1993, filed any collection information
13 statements?
14 A I didn't have access to any other information, and I
15 don't believe I ever requested any prior filings.
16 Q When you say you didn't have any access to other
17 information, could you have access to information, had you
18 requested it?
19 A Do you want to be specific?
20 Q Yes.
21 For example, if you had wanted to see other
22 collection information statements that had been filed by
23 Mr. Gordon earlier than the July 8th, 1993 collection
24 information statement, could you have made a request and
25 gained access to it?
HARRY
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1 A It's a possibility. However, it is sometimes
2 difficult to retrieve records on previous cases.
3 Q Did you ever ask Mr. Reffsin whether Mr. Gordon had
4 previously filed any earlier collection information
5 statements?
6 A I don't believe so.
7 Q And you say it would be difficult -- it could
8 sometimes be an effort to retrieve files within the IRS to
9 get earlier collection information statements; is that
10 correct?
11 A That's correct.
12 Q Would that be more difficult than going out and
13 visiting a condominium? Would that take more of your
14 time, to make a request for a prior document?
15 A Well, we could make a request for a prior document.
16 However, this is a current offer in compromise I was
17 reviewing. There was really no reason to see prior
18 records.
19 Q Did you tell Mr. Reffsin that you were unaware of any
20 prior records, and wouldn't be considering them?
21 A It never became an issue.
22 Q So, he -- withdrawn.
23 Now, I would like to direct your attention to
24 Exhibit -- bear with me a moment. It is one of the
25 420's -- I am sorry, it is 423.
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1 Do you have that in front of you?
2 A Yes, I do.
3 Q Now, that's a collection information statement, is it
4 not?
5 A Yes, it is.
6 Q And you testified concerning it.
7 I would like you to turn to page 3.
8 A Page 3.
9 Q Under item 27 that you have been asked some questions
10 about by Mr. White --
11 A Uh-huh.
12 Q -- is it not true that there is a listed liability of
13 $30,000 for charge ac
counts?
14 A Yes, there are.
15 Q Did you pursue that with any follow-up inquiry
16 concerning what those charge accounts were?
17 A No, I didn't.
18 Q Okay.
19 Now, let's go to the -- that was a collection
20 information statement that was filed in connection with --
21 following the offer in compromise; is that correct?
22 A This is I believe the amended statement.
23 Q This is the one you asked for?
24 A Yes.
25 Q As part of your desire to get additional information?
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1 A That's right. Uh-huh.
2 Q Now, let's go back to the collection information you
3 received in connection with the offer in compromise, and I
4 believe that was Exhibit 420-D?
5 A I have it.
6 Q That's the one dated July 8th, 1993; is that right?
7 A Yes,
it is.
8 Q And that offer in compromise -- excuse me, that
9 collection information statement on page 3 also indicates
10 a liability for charge accounts, $32,000; is that correct?
11 A Yes, it does.
12 Q Did you pursue that to inquire as to the nature or
13 existence of that charge account?
14 A No, I didn't.
15 Q Is it fair to say that in these collection
16 information statements that were given to you in
17 connection with the offer in compromise, there was
18 disclosure of the fact that there were charge account
19 liabilities relating to Mr. Gordon?
20 A Charge account liabilities, yes.
21 Q Now, I would like to refer you to the collateral
22 agreement. And I think that is 420-H.
23 A I have it.
24 MR. TRABULUS: I will just give the jury a chance
25 to find their copy.
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1 (Whereupon, at this time there was a pause in the
2 proceedings.)
3 Q Now, Mr. Gagliardi, you were asked to read the -- I
4 think the second paragraph.
5 A Uh-huh.
6 Q Take a look at the first paragraph. And without
7 asking you to read it, is it fair to say that it refers to
8 an offer dated August 29th, 1991, as amended on September
9 19th, 1991?
10 A You want my understanding?
11 Q Yes.
12 A My understanding is that it was an offer in
13 settlement with the Department of Judges.
14 Q And the collateral agreement itself was dated was
15 dated October -- excuse me, November 20th, 1991; is that
16 correct?
17 A That's correct.
18 Q And it was prepared well, well -- well, years in
19 advance, years before the offer in compromise that you
20 have been testifying about was submitted to you;
is that
21 correct? Or submitted to the IRS?
22 A That's correct.
23 Q So, just for clarification where this document, that
24 is, 420-H refers to an offer in compromise, it is not
25 talking about something that happened years later? It is
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1 talking about the offer of settlement?
2 A It is talking about the offer in settlement, yes.
3 Q Are you familiar with the offer in settlement? Have
4 you ever seen it, the offer referred to with respect to
5 that?
6 A As to this case?
7 Q This particular case, yes, have you seen the offer
8 dated August 1991, or any document reflecting an amendment
9 on September 19th, 1991?
10 A I have seen the correspondence from the Department of
11 Justice to the taxpayer's attorneys.
12 Q Fair enough.
13
A And vice versa.
14 Q Let me go back and I think you told Mr. White, or you
15 summarized for Mr. White a provision of this collateral
16 agreement, in which you said that it includes for purposes
17 of this agreement in Mr. Gordon's income, not just his own
18 income, but income of corporations that he owned, closely
19 held corporations that he owned; is that correct?
20 A That's correct.
21 Q But does it not also include income of corporations
22 that he controls, as opposed to owned?
23 A Allow me to read it?
24 Q Please do. Look at paragraph 3: I will read the
25 first clause to you.
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1 That in the event closely held corporations are
2 directly or indirectly controlled or owned by the taxpayer
3 during the existence of this agreement, and then it
4 proceeds.
5 A Uh-huh.
6 Q Yes?
7 A Yes.
8 Q And so, for purposes of this collateral agreement, it
9 doesn't make any difference as to whether the corporation
10 is owned or controlled? It operates the same way; is that
11 right?
12 A That appears to be the intent.
13 Q Now, let's turn to the shareholder -- the
14 compensation agreement, which was disclosed to you by
15 Mr. Reffsin; is that correct? It was disclosed to you by
16 him; is that right?
17 A Right.
18 Q And the compensation agreement was -- and you will
19 forgive me, but it is 420-G.
20 (Whereupon, at this time there was a pause in the
21 proceedings.)
22 MR. TRABULUS: I am making sure the jurors all
23 have it.
24 (Whereupon, at this time there was a pause in the
25 proceedings.)
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1 Q This compensation agreement indicates, does it not,
2 that Mr. Gordon was the president of Who's Who Worldwide,
3 Inc.; is that correct?
4 A President and chief executive officer.
5 Q That's my next question, Mr. Gagliardi.
6 A I am sorry.
7 Q Chief executive officer as well.
8 And it indicates he is responsible for running
9 the day to day operations of Who's Who Worldwide, Inc.; is
10 that right?
11 A Yes, it does.
12 Q And that would certainly indicate to you, did it not,
13 that he controlled Who's Who Worldwide; is that correct?
14 A It indicated he was the managing officer.
15 Q Would being the president and chief executive officer
16 of a company indicate to you that a person was in control
17 of it, directly or indirectly?
18 A You want my understanding?
19 Q Well, what was your understa
nding at the time when
20 you read that? Did it occur to you that he might be in
21 control of it?
22 A At the time it appeared to me that he was a contract
23 employee.
24 Q Did you understand that regardless of whether he was
25 a contract employee or not that he might be in control of
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1 it? Did that even occur to you?
2 A I can't say if I can recollect whether or not.
3 Q Certainly, Mr. Reffsin on Mr. Gordon's behalf did not
4 conceal from you that Mr. Gordon was the president, chief
5 executive officer and responsible for the day to day
6 operations of Who's Who Worldwide, did he? He didn't
7 conceal that at all?
8 A No, he did not.
9 Q Now, it also indicated that he was to be a director
10 of Who's Who Worldwide; is that correct?
11 A Y
es.
12 Q And corporations are generally controlled, if by
13 nobody else, by their directors; is that correct? Did you
14 understand that?
15 A I understand that.
16 Q Did you inquire as to whether there were any other
17 directors or anybody else who might be in control?
18 A No, I didn't, because --
19 Q So, as far as -- as far as you knew -- the only
20 director of Who's Who Worldwide that you were aware of,
21 was Mr. Gordon; is that correct?
22 A My understanding of the agreement --
23 Q Please tell me if that's correct?
24 MR. WHITE: Objection. Let the witness finish
25 the answer.
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1 THE COURT: He can't finish the answer. The
2 answer was not responsive. If he did I would strike the
3 answer if a motion was made that it was not respons
ive.
4 As I told the first witness produced, as I will
5 tell each one, on cross-examination you will be asked
6 questions that pinpoint certain things. A cross-examiner
7 has a right to do that.
8 So, almost every question calls for a yes or no.
9 If you can't say yes or no, say so.
10 THE WITNESS: I am sorry, your Honor.
11 THE COURT: That shifts the burden back to
12 Mr. Trabulus to decide what to do. You can say I can't
13 answer the question yes or no. No explanation, if you
14 don't remember or don't know, say so. That's the way it
15 is done.
16 THE WITNESS: All right.
17 Can you repeat the question?
18 Q Is it correct that the only director of Who's Who
19 Worldwide of whom you were aware at the time was
20 Mr. Gordon?
21 A That's correct.
22 MR. TRABULUS: Your Honor, I am going to ask,
23 with your Honor's permission, if th
e government has any
24 additional copies of the documents he just provided to me
25 this morning, the October 15th, 1991 -- the
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1 correspondence, I believe, that the witness has testified
2 to.
3 Do you have any additional copies?
4 MR. WHITE: I have three extra copies, will that
5 help?
6 MR. TRABULUS: Perhaps.
7 MR. WHITE: That's the whole set.
8 (Documents handed to Mr. Trabulus.)
9 MR. TRABULUS: Thank you.
10 Your Honor, I would like to show the witness -- I
11 have given Mr. Reffsin a copy, and there are copies for
12 other counsel, if they want them.
13 (Handed to the witness.)
14 Q Mr. Gagliardi, I am showing you what is marked as
15 Gordon A, and I didn't have the right kind of stickers, so
16 I penned it in the upper right
-hand corner.
17 Is this one of the correspondence relating to the
18 collateral agreement that you were familiar with?
19 A I never received this agreement. So if you give me
20 an opportunity to review it?
21 Q Sure.
22 (Whereupon, at this time there was a pause in the
23 proceedings.)
24 A It appears to be.
25 MR. TRABULUS: Your Honor, I would offer
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1 Gordon A.
2 THE COURT: Any objection?
3 MR. WHITE: Your Honor, may I have a brief voir
4 dire of the witness?
5 THE COURT: Surely.
6 You will hear this from time to time, that the
7 lawyer not doing the cross-examination, or the examination
8 is going to ask for voir dire, which are two French words
9 meaning to see or to say. It is like when they voir dired
10 the jury. An
d these questions are designed to bring out
11 whether the document is admissible or not. It is not for
12 any other purpose. It is as to whether the document is
13 admissible.
14 Go ahead.
15
16 VOIR DIRE EXAMINATION
17 BY MR. WHITE:
18 Q Mr. Gagliardi, at any time while you were considering
19 Mr. Gordon's offer in compromise, did you see this
20 document?
21 A No, I did not.
22 Q When was the first time you saw this document?
23 A When I was shown it by you.
24 Q And when was that?
25 A This morning.
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1 MR. WHITE: No further questions, your Honor.
2 I object to the offer.
3 THE COURT: Can I see the document?
4 MR. TRABULUS: Certainly, your Honor.
5 THE COURT: No, give it to me. He is the
6 reporter. I am
the judge.
7 MR. TRABULUS: I know. I was going --
8 THE COURT: We want to get our in-title work
9 straightened out here.
10 It is all right, because Mr. Gordon follows what
11 they do in the state court. In the state court the
12 lawyers always hand the exhibits to somebody else, not the
13 judge. Why that is, I don't know. But we stopped that
14 here. I am the one who has to look at it.
15 What happens is they give the exhibit to the
16 reporter and then he hands it to me. But we don't do that
17 here.
18 (Handed to the Court.)
19 THE COURT: Sustained.
20 This is hearsay, is it not?
21 MR. TRABULUS: No. If we can approach, I will
22 explain the basis for the offer or the relevance of it.
23 THE COURT: The relevance I am not getting to. I
24 am getting to the fact that it is the letterhead of a law
25 firm.
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1 MR. TRABULUS: Your Honor, the collateral
2 agreement refers to this letter. It then refers to a
3 subsequent letter which amends it.
4 THE COURT: Show me where in the collateral
5 agreement it refers to this letter.
6 MR. TRABULUS: Sure.
7 Your Honor, that's 420-H, and it refers in the
8 first paragraph of 420-H, it refers to an offer dated
9 August 29th, 1991. And that's this letter. Indeed it is
10 really almost -- I guess the classic word for it would be
11 res gestae. It is like an offer and acceptance. It is
12 not offered for the truth. It is just for what the
13 history proposals are.
14 THE COURT: Notwithstanding your knowledge of
15 Latin, Mr. Trabulus, we don't use those terms any more.
16 As a matter of fact, the United States Supreme Court has
17 disapproved o
f the use of Latin words. We are an English
18 speaking nation, not Latin or any other language.
19 MR. TRABULUS: Mea culpa.
20 THE COURT: Very good, Mr. Trabulus.
21 First of all, we don't know that this is the
22 document. How are you going to show that.
23 MR. TRABULUS: Let me show with a few other
24 questions with your Honor's permission?
25 THE COURT: Go ahead.
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1
2 CROSS-EXAMINATION (cont'd)
3 BY MR. TRABULUS:
4 Q Mr. Gagliardi, do you recognize the received stamp
5 that appears on that?
6 A Received August 30th, 1991, Internal Revenue Service.
7 Q Does that stamp, is it in the ordinary course of the
8 Internal Revenue Service's business, is it placed upon
9 documents as it is received?
10 A Yes, it is. Tax returns, etcetera.
11 Q Is it your understanding that this is the offer dated
12 August 29th, 1991, that is referred to in the collateral
13 agreement?
14 A That's my understanding. But I can't state that
15 fact.
16 Q Well --
17 MR. TRABULUS: Your Honor, this document was
18 originally first given to me by the government.
19 Q Mr. Trabulus, assuming it is the offer dated August
20 29th, 1991, which is set forth in
21 Government's Exhibit 420-H, the collateral agreement, what
22 relevancy does that have? Does this collateral agreement
23 confirm this offer?
24 A This collateral agreement modifies this offer.
25 What happens is that the offer -- the offer of
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1 August 29th just talks about Mr. Gordon's income, without
2 mentioning picking up any other income of
any corporations
3 he is related to.
4 The Justice Department comes back suggesting that
5 he was well aware that he controlled, and had ownership
6 agreements in corporations. They are the ones who
7 insisted on that change.
8 THE COURT: I don't see anything in this
9 document, Defendant's Exhibit Gordon A for Identification,
10 that says anything about an ownership interests.
11 MR. TRABULUS: This is a document from
12 Mr. Gordon's then attorney. It is the proposal by his
13 then attorney. They were in communications and talked
14 about discussions over the --
15 THE COURT: What does it have to do with anything
16 involving this case now? Why is it important?
17 THE COURT: You want me to explain it at this
18 point?
19 MR. TRABULUS: You want me to explain it at this
20 point?
21 THE COURT: Yes, explain it.
22 MR. TRABULUS: It appe
ars that the government
23 contends that there was concealment from the IRS that
24 Mr. Gordon had an interest in --
25 THE COURT: This document shows that he revealed
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1 the interest?
2 MR. TRABULUS: This document --
3 THE COURT: This document is
4 Defendant's Exhibit Gordon A, for Abel, for
5 Identification.
6 MR. TRABULUS: Gordon A read in conjunction with
7 420-H, and also in conjunction with another document given
8 to me today memorializing the September 19th, and they
9 were then negotiations. And Mr. Gordon's then attorney
10 said we will enter into an arrangement --
11 MR. WHITE: I sort of object to Mr. Trabulus
12 portraying all the history admissible in his best light,
13 just talking off the top of his head about this.
14 THE COUR
T: It is not evidence. The jury knows
15 that whatever the lawyers say is not evidence. But
16 instead of having 14 sidebars per hour, let's cut them
17 down.
18 MR. WHITE: That's fine with me, your Honor.
19 THE COURT: I see nothing in this agreement that
20 says that. Sustained.
21 Q I would like to show you Gordon B.
22 (Handed to the witness.)
23 Mr. Gagliardi, do you recognize Gordon B?
24 A No, I don't.
25 Q Do you recognize what it is?
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1 A Yes.
2 Q What is it?
3 A Form 433-A, collection information statement for
4 individuals.
5 Q Does it indicate that it was prepared for Bruce
6 Gordon?
7 A Yes, it does.
8 THE COURT: What is the date on it?
9 MR. TRABULUS: The date on it is 12/21, and on
10 this co
py it is a little cut off. I believe it is '91. I
11 think it is actually '91.
12 At the top it indicates as per 8/91, suggesting
13 it is '91. The copy I was given, your Honor, produced by
14 the government is itself somewhat cut off.
15 THE COURT: Okay.
16 Let's move along. It is a cut off 1991; is that
17 right? It is not to say an abbreviated 1991, just a cut
18 off 1991.
19 MR. TRABULUS: Your Honor, I would offer it in
20 evidence.
21 THE COURT: Any objection?
22 MR. WHITE: Voir dire, your Honor?
23 THE COURT: Go ahead.
24
25
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1 VOIR DIRE EXAMINATION
2 BY MR. WHITE:
3 Q Mr. Gagliardi, you said you recognize this as form
4 433-A?
5 A That's correct.
6 Q Have you ever seen this particular document before
?
7 A No, sir.
8 MR. WHITE: Objection, your Honor.
9 THE COURT: Can I see it, please?
10 (Handed to the Court.)
11 THE COURT: Is this Form 433-A an official form
12 of the United States Government?
13 THE WITNESS: It is, sir.
14 THE COURT: Is it a form made by the United
15 States Government in the regular course of its business?
16 THE WITNESS: Yes, it is.
17 THE COURT: Was it the business of the United
18 States Government to make forms such as this?
19 THE WITNESS: Yes, sir, it is.
20 THE COURT: Without stating to me what it is,
21 point out the relevancy of this. What is it in this
22 document that is relevant?
23 MR. TRABULUS: Your Honor, box 7, and it has two
24 entries. The second one is of particular relevance in
25 terms of the issues we have been talking about.
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1 The last page, it is a little hard to read, but
2 under the heading income, the column gross, what is under
3 that is also relevant.
4 I have to point something out, your Honor. The
5 indictment alleges filing three false collection
6 information statements. This is a fourth one. It doesn't
7 allege that it is false, and it was filed in the midst of
8 the other three, and there are --
9 THE COURT: All I wanted to know is what you said
10 is relevant.
11 You are objecting to this document on what
12 ground, Mr. White?
13 MR. WHITE: Your Honor, I don't believe, or I
14 don't know if this document was ever filed with the
15 Internal Revenue Service. For all I know it may have come
16 from Mr. Gordon's files and it was never filed.
17 THE COURT: Good point.
18 Is there any way to know by looking at Gordo
n
19 Exhibit B for Identification, as to whether it was filed
20 or received by anyone in the government?
21 Before we get to that, who drew up this
22 document?
23 THE WITNESS: It is published by the federal
24 government, the Internal Revenue Service.
25 THE COURT: I mean the form is. But someone then
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1 fills it out?
2 THE WITNESS: Yes, the taxpayer or
3 representative.
4 THE COURT: The taxpayer fills it out, and then
5 delivers it, or sends it to the government?
6 THE WITNESS: Yes, sir.
7 THE COURT: Is there anything on this document
8 that would show that this was received by the government?
9 Do you have a copy in front of you?
10 THE WITNESS: No, you have the copy.
11 THE COURT: Do you want to show it?
12 MR. TRABULUS
: Yes, sir.
13 THE COURT: This is the copy he had -- excuse me
14 a minute.
15 MR. TRABULUS: Surely.
16 (Whereupon, at this time there was a pause in the
17 proceedings.)
18 THE COURT: Do you went to show it to him?
19 MR. TRABULUS: Yes.
20 (Handed to the witness.)
21 THE COURT: Is your name Gagliardi, or Galiardi?
22 THE WITNESS: Whatever you wish.
23 THE COURT: There was a prominent Judge, Joseph
24 Galiardi, administrative judge of the Ninth District. We
25 went to meetings together when I was the administrative
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1 judge. He pronounced it with a silent G. You don't care
2 which way you hear it?
3 THE WITNESS: No, sir.
4 THE COURT: All right.
5 (Whereupon, at this time there was a pause in the
6 proceedings.)
7 TH
E WITNESS: There was no way to tell if it was
8 ever received by the Internal Revenue Service.
9
10 CROSS-EXAMINATION (cont'd)
11 BY MR. TRABULUS:
12 Q Mr. Gagliardi, is there a document to indicate what
13 filings, or what dates filings were made by Mr. Gordon of
14 collection information statements? Is there a document
15 like a log or something like that that the IRS maintains?
16 A As an IRS officer, we keep notes of what we receive.
17 I kept such a log. But I never received such a statement.
18 Q Understood. But is there some record within the
19 Internal Revenue Service whereby someone familiar with
20 Internal Revenue Service procedures, would be able to,
21 even if they had not themselves received it, would be able
22 to determine if a collection statement dated 12/21/91 was
23 received?
24 A No, sir. There are not -- on most documents, such as
25 tax returns, etcetera, there are document locator
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1 numbers. But this information is for the collection of a
2 tax liability, and it is retained only in those case
3 files, and then when the case is closed it is shipped out.
4 Q Shipped out to where?
5 A Storage, and finally the federal records center.
6 Q Do you have any familiarity with how the collection
7 information statements which the government has introduced
8 in evidence in this case with respect to Mr. Gordon, how
9 they were obtained?
10 A How they were obtained?
11 It is my understanding that they were maintained
12 by the offer in compromise. There is an offer in
13 compromise unit in the Internal Revenue Service. I
14 believe that that is where they came from. I don't have
15 specific kn
owledge.
16 Q Now, you --
17 THE COURT: Excuse me one moment, Mr. Trabulus.
18 MR. TRABULUS: Sure.
19 THE COURT: When a document like this,
20 Defendant's Exhibit B for Identification, where is it sent
21 to? What part of the government would receive this
22 document?
23 THE WITNESS: It would be received in the
24 collection of an income tax liability verification, by the
25 Internal Revenue Service collections division. And that's
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1 only an intent. It is not filed as a tax return.
2 THE COURT: But it is received by some agency in
3 the government?
4 THE WITNESS: It is received by the Internal
5 Revenue Service collections division.
6 THE COURT: Is there a custom and usage that a
7 document like that received would be stamped in any way?
8 THE WITNESS: No, sir, it is not the custom.
9 THE COURT: They don't stamp "received"?
10 THE WITNESS: No, sir.
11 MR. TRABULUS: Your Honor, this document was
12 provided by the government.
13 MR. WHITE: The government provided the defense
14 with all the documents, no matter where they got them
15 from.
16 THE COURT: In order for you to introduce this
17 document, because there is a difference in the
18 admissibility standard with respect to the government
19 introducing this, you understand that, Mr. Trabulus, such
20 as 801(d)(2). And you introducing it.
21 MR. TRABULUS: Your Honor, I think 801(d)(2)
22 doesn't come into issue here, because regardless of truth
23 or falsehood of a document, the content of it has to be
24 looked at in connection with other documents. It is to be
25 considered for issues -- other documents have to be read
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1 in light of it.
2 Your Honor, I think we should approach on this.
3 THE COURT: No reason to approach. There is no
4 proof as of now that the government received it.
5 For example, you are trying to prove that the
6 government knew that he was, whatever it says in that
7 document; is that correct?
8 MR. TRABULUS: That's correct, your Honor.
9 THE COURT: But if they didn't get it, that's not
10 proof of that.
11 MR. TRABULUS: That's true.
12 THE COURT: Okay. That's why I am keeping it
13 out.
14 Q Now, Mr. Gagliardi, with regard to Exhibit 426, that
15 was a letter, was it not, in which Mr. Reffsin disclosed
16 the fact that his employer, Mr. Gordon's employer, had
17 been bankrupt -- excuse me, filed for bankruptcy; is that
18 correct?
19 A That's correct.
20 Q And Mr. Reffsin certainly made no secret of that, did
21 he?
22 A No, he didn't.
23 Q And where he indicated that the bankruptcy could
24 affect future income projections, did you understand that
25 to mean because of the bankruptcy of the employer there
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1 might be less money available for Mr. Gordon?
2 A My understanding of it?
3 Q Yes.
4 A My understanding --
5 THE COURT: It calls for a yes or no answer. Did
6 you understand by looking at that letter that Mr. Gordon
7 would have less money to pay the government?
8 THE WITNESS: Yes, your Honor.
9 Q Now, in the course of your investigation that you
10 indicated you did, going to different places, did you ever
11 go and take a look at the bankruptcy filings?
12 A No.
13 Q Is those -- withdrawn.
14 Where was your office located?
15 A In Garden City.
16 Q And was it your understanding that the bankruptcy
17 filings -- the bankruptcies files were located in Westbury
18 at the time?
19 A My understanding, yes.
20 Q To do that would simply have been to go from Garden
21 City to Westbury to look at the files in the bankruptcy
22 court; is that correct?
23 A If a need arose.
24 Q Did you ever advise Mr. Reffsin as to whether you
25 would or would not be doing that?
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1 A No, sir.
2 Q Did you ever, going back to -- going back to the
3 compensation agreement, 420-G, that provided, did it not
4 that Mr. Gordon's compensation would have a component that
5 would be based upon cash flow of Who's Wh
o Worldwide; is
6 that correct?
7 A Basically.
8 Q And in the course of your investigation or analysis
9 as to whether to accept the offer in compromise, did you
10 ever check the corporate tax returns of Who's Who
11 Worldwide?
12 A No, sir.
13 Q Did you ever ask for them?
14 A No, sir.
15 Q Did it occur to you that information in them might
16 bear upon were Mr. Gordon's compensation would be or
17 should have been?
18 A The only answer I can give is I had no reason to
19 obtain those tax returns, based on the information
20 provided.
21 Q Did you ever request them of Mr. Reffsin?
22 A No, sir.
23 Q Did you ever tell Mr. Reffsin that you didn't have a
24 set of them yourself?
25 A It never became an issue with Mr. Reffsin.
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bulus
1 Q You never even discussed the corporate tax returns
2 with Mr. Reffsin; is that fair to say?
3 A Never discussed them.
4 Q Mr. Gagliardi, at the time when you were reviewing
5 the collateral agreement, 420-H, the one we talked about
6 control ownership, did you in reviewing it believe --
7 withdrawn.
8 At the time you reviewed it, you understood that
9 it contained a definition of income which was different
10 than Mr. Gordon's taxable income as it would be normally
11 defined? Did you understand that?
12 A I know I made a notation in my chronology of exactly
13 what my understanding was. If you want me to refresh my
14 memory, I will.
15 Q Was that understanding that the difference between
16 what that agreement provided and what might ordinarily be
17 understood to be his taxable income, is that the agreement
18 looked at Mr. Gordon's
adjusted gross income?
19 A Yes.
20 Q And you made no note of any understanding that it
21 picked up any income of any corporation that Mr. Gordon
22 might have had a connection with; is that correct?
23 A I don't understand the question.
24 Q You indicate a moment or two ago that you made a note
25 at the time concerning your understanding. And I was
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1 going to ask you whether in that note, besides referring
2 to the fact that the agreement, as you understood it at
3 the time looked to Mr. Gordon's adjusted gross income, did
4 you note any other differences between that -- between --
5 withdrawn. I am sorry.
6 In your note did you make any note -- you made a
7 note of the fact that it picked up his adjusted gross
8 income; is that right?
9 A If you
allow me to look at my notes --
10 Q You can certainly look at your note.
11 I think what you are referring to there is
12 Exhibit 3500-8-A; is that correct?
13 A Yes.
14 Q Now, without telling -- just tell me whether looking
15 at that note, as to whether you have refreshed your
16 recollection as to what you put in at the time; and look
17 at the third page.
18 MR. WHITE: Can I ask Mr. Trabulus what date he
19 is looking at?
20 MR. TRABULUS: The third page, the entry is under
21 10/11/94. And I am just trying to -- the handwriting is a
22 little small.
23 THE WITNESS: Sorry.
24 MR. TRABULUS: You should see mine. Maybe I am
25 on the wrong page.
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1 (Whereupon, at this time there was a pause in the
2 proceedings.)
3 MR. TRA
BULUS: I think it is on the third page,
4 entry for 10/11/94.
5 Q Take a look at the ninth line down, maybe the eighth
6 or the ninth line down.
7 (Whereupon, at this time there was a pause in the
8 proceedings.)
9 Q Do you see what I am referring to?
10 A Not particularly, no.
11 Q Are you able to read that portion?
12 A I am able to read it. 10/11/94 --
13 Q Don't read it outloud.
14 The sentence, the collateral required, that
15 sentence, the eighth line down, or seventh line down, the
16 eighth line. Just read that.
17 Does it refresh your recollection that at that
18 time the collateral agreement required payment based upon
19 adjusted gross income, rather than taxable income, and
20 requires 50 percent of income over $50,000 after federal
21 taxes are paid? Was that your understanding in a nutshell
22 of what the collateral agreement r
equired at the time?
23 Yes or no, sir.
24 A Yes.
25 Q And you made no notation about it, including income
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Gagliardi-cross/Trabulus
1 of any corporations; is that correct?
2 A I made no notation, no.
3 MR. TRABULUS: Your Honor, I will just be a
4 moment longer.
5 THE COURT: Yes.
6 (Whereupon, at this time there was a pause in the
7 proceedings.)
8 Q Let me ask you, how much period of time elapsed
9 between the time that the collateral agreement was first
10 submitted, and the time that you made a recommendation
11 with respect to it?
12 A It was two separate issues, the collateral
13 agreement --
14 Q I am sorry, I misspoke.
15 How much time went by between the time the offer
16 in compromise was submitted, and the time that you made a
17
recommendation with respect to it?
18 A Almost a year.
19 Q Now, during that time did you make any tentative
20 counter proposals to Mr. Reffsin suggesting a larger
21 amount of money?
22 A No, sir.
23 Q Would it be typical in discussions concerning an
24 offer in compromise for there to be give and take between
25 the two sides, an offer, a counter-offer, and discussions
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1 to reach some kind of understanding in-between?
2 A If there are assets being evaluated, yes.
3 MR. TRABULUS: No further questions, your Honor.
4 THE COURT: Mr. Wallenstein.
5 MR. WALLENSTEIN: Thank you, your Honor.
6
7 CROSS-EXAMINATION
8 BY MR. WALLENSTEIN:
9 Q Good morning, Mr. Gagliardi. Good afternoon.
10 A Almost.
11 Q Close.
12 My name is
John Wallenstein and I represent
13 Martin Reffsin.
14 If I understand this correctly, you first learned
15 of this when the offer in compromise was referred to you;
16 is that correct?
17 A I learned of this meeting, the tax situation?
18 Q Well, this particular tax situation. When you
19 undertook your duties in connection with collecting
20 liabilities from Mr. Gordon, the first time that that
21 occurred was in November of '93; is that correct?
22 A As to the offer in compromise?
23 Q Right.
24 A Yes.
25 Q And between then and sometime in 1995, you were the
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Gagliardi-cross/Wallenstein
1 revenue officer who was in charge of this particular
2 investigation; is that correct?
3 A That's correct.
4 Q And in connection with that, you obtained substantial
5 d
ocumentation from Mr. Reffsin on Mr. Gordon's behalf?
6 A That's correct.
7 Q And you also conducted field investigations of your
8 own, you went to DMV, you went to Nassau County, and went
9 out to look at the condo and all those things; is that
10 correct?
11 A Correct.
12 Q At no time did you ask for and obtain corporate tax
13 returns from Who's Who Worldwide; is that correct?
14 A Correct.
15 Q You never asked Mr. Reffsin for them, and you never
16 requisitioned them, or whatever else you have to do to get
17 them from the IRS itself; is that correct?
18 A I would not be permitted to, no.
19 Q You had no authority to obtain those corporate tax
20 returns?
21 A Not for his employer.
22 Q Did you ever ask Mr. Reffsin or Mr. Gordon for
23 authority?
24 A It never became an issue. My understanding is he was
25 an employee.
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1 Q And you had the collateral agreement from day one?
2 That was part of the offer in compromise submitted in July
3 of 1993?
4 A Correct.
5 Q Correct?
6 A Yes.
7 Q Now, would you take a look, please at the power of
8 attorney, and that is 420-C.
9 A I have it.
10 Q You have it?
11 A Yes.
12 Q That power of attorney is signed by Mr. Gordon and
13 gives Mr. Reffsin authority to act in his behalf; is that
14 correct?
15 A Yes.
16 Q Are there limitations on what Mr. Reffsin can do
17 acting under that power of attorney?
18 A They are specified in the power of attorney.
19 Q He can't get any money if the IRS -- that he could,
20 but he couldn't have if he had?
21 Now, does the fact that Mr. Gordon signed a power
22 of attorney giving Mr. Reffsin power to act on his behalf
23 preclude Mr. Gordon from acting personally?
24 A No, it doesn't.
25 Q Okay.
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1 Now, in fact, he can revoke the power of attorney
2 at any time; is that correct?
3 A Yes, he could.
4 Q In effect then, would it be fair to say that this
5 power of attorney permits Mr. Reffsin to act as
6 Mr. Gordon's agent?
7 A It would be fair to say.
8 Q Did you at some point receive, either 1991, or 1992
9 1040s for Mr. Gordon?
10 A It is my recollection.
11 Q Were they part of the initial offer in compromise, do
12 you know? Or part of the documents received later?
13 A Part of the documentation. I am not sure of the time
14 frame without looking.
15 Q Do you recall having re
ceived schedules and
16 attachments attached to either or both of the '91 or '92
17 personal returns?
18 A I don't believe so, no.
19 Q Would you look, please, at Exhibit 420-F.
20 Would you tell me what that is?
21 A Form 1040 of 1990.
22 Q Are you looking at the same documents I am looking
23 at?
24 A Plaintiff's Exhibit F, clients copy, U.S. individual
25 income tax return, 1990.
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1 Q Take a look about six pages into that, and there is
2 another document marked 420-F.
3 A F-1, okay.
4 Q I think the 1990 return should be an E, but the
5 bottom line of the E seems to have merged with the black
6 line there.
7 A Okay.
8 Q I made the same mistake. I am looking at the '91
9 return.
10 A I have that.
11 Q T
here are attachments with that; is that correct?
12 Schedules, statement of income, and so on.
13 A The only attachment is a statement of income.
14 Q Is there a second page to that that is not here?
15 A Second page to --
16 Q To that statement of income.
17 A I have no knowledge of that. This is the information
18 as received.
19 Q Under paragraph 2, under 2E, there is a reference to
20 a note A; is that correct?
21 A Where is that?
22 Q On that statement of income, the fourth page of
23 420-F?
24 A 420-F, I have one, two, three pages. I don't have a
25 fourth page.
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1 Q I am looking at a document headed statement of annual
2 income for the year 1991, Bruce Gordon.
3 A I am sorry. Okay, yes.
4 Q You got it?
5 A I though
t it was other document.
6 Q Item 2E, it makes reference to a note A. But there
7 is no note A on this page; is that correct?
8 A Not that I see.
9 Q And would that lead you to believe that there was in
10 fact a second page or even a third page?
11 A It would be a fair assumption.
12 Q Do you recall ever seeing a second page that
13 indicated that Mr. Gordon had a 75 percent ownership
14 interest in Who's Who Worldwide?
15 A No, sir.
16 Q Let me direct your attention now to Exhibit 425.
17 An undated letter from you to Mr. Reffsin; is
18 that correct?
19 A You have to give me a moment.
20 Q You should have had a book where they are all
21 marked.
22 A 420 --
23 Q 425.
24 A 425.
25 (Whereupon, at this time there was a pause in the
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Gagliardi-cro
ss/Wallenstein
1 proceedings.)
2 THE COURT: Do you want to show him your copy to
3 save time?
4 THE WITNESS: I am sorry, it is turned in.
5 Q Now, you received that from Mr. Reffsin; is that
6 right?
7 A Yes.
8 Q That's the transmittal letter for the copies of the
9 promissory note?
10 A Correct.
11 Q Would it be fair to say when you got those promissory
12 notes, the one for $15,000 from Joyce Grossman, and
13 $10,000 to Madeline Middlemark, you examined those
14 documents and relied upon them in determining the
15 taxpayer's assets?
16 A That's correct.
17 Q And on their face they appear to be general
18 promissory notes of debts totalling $25,000; is that
19 right?
20 A Yes.
21 Q Did you do any investigation with respect to those
22 notes?
23 A No, sir.
24 Q Did you call Joyce Grossman to
ask if she really
25 loaned the $15,000?
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1 A No, sir.
2 Q Or Ms. Middlemark and ask if she loaned the 10,000?
3 A No, sir.
4 Q And you took them and felt that it looks right to me?
5 A Yes.
6 Q Is that correct?
7 A Correct.
8 Q And the same would apply to the third page of that
9 Exhibit 425C, the letter from Maria Gaspar, G A S P A R;
10 is that correct?
11 A Right.
12 Q And the same it would apply to 425-D, the letter from
13 Who's Who Worldwide; is that correct?
14 A Correct.
15 Q The 433-A collection statements, which are part of
16 Exhibit 420, I believe, specifically, 420-D.
17 You have that?
18 A Yes.
19 Q And that document is signed by Mr. Gordon and not
20 Mr. Reffsin; is that correct?
21 A Yes, sir.
22 Q And if you lack at 420-A, please, the offer in
23 compromise, that document also bears Mr. Gordon's
24 signature and not Mr. Reffsin's; is that correct?
25 A Correct.
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1 Q In fact, the transmittal letter on Exhibit 420
2 itself, dated July 27th, 1993, on the letterhead of
3 M. Reffsin & Company, that's a two-page document which is
4 also signed by Bruce Gordon and not by Martin Reffsin; is
5 that correct?
6 A Correct.
7 Q In fact, in connection with the offer in compromise
8 other than letters, there are no documents signed by
9 Mr. Reffsin; is that correct?
10 A That's correct.
11 Q And those letters advanced -- those letters referred
12 to Mr. Gordon's position with respect to certain matters
13 that you had requeste
d; is that correct?
14 A Correct.
15 Q And the financial letters you had requested and
16 received in connection with this offer in compromise were
17 Mr. Gordon's records and not Mr. Reffsin's; is that
18 correct?
19 A Correct.
20 MR. WALLENSTEIN: No further questions.
21 Thank you.
22 THE COURT: Anything else, Mr. White?
23 MR. WHITE: Yes, your Honor. There is an issue I
24 think I need to discuss with Mr. Wallenstein and
25 Mr. Trabulus, perhaps over lunch with respect to
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1 documents.
2 THE COURT: With respect to this witness?
3 MR. WHITE: Yes.
4 THE COURT: Anything else to question him on
5 besides that?
6 MR. WHITE: Yes. Shall I proceed with that?
7 THE COURT: Well, let's go.
8
9 REDIRECT EXAMINATI
ON
10 BY MR. WHITE:
11 Q Now, Mr. Gagliardi, do you recall Mr. Trabulus asked
12 you regarding whether or not you attempted to get 433-A
13 forms prepared by Mr. Gordon prior to the submission of
14 the offer in compromise?
15 A Yes, I do.
16 Q Did you try to get them?
17 A No, I didn't try.
18 Q Why not?
19 A It wasn't really pertinent. We were investigating
20 his current assets and income.
21 Q Now, do you have Exhibit 423 in front of you?
22 A Yes, I do.
23 Q Is it 423, if you look on, that's the December 1993
24 collection information statement; is that correct?
25 A That's correct.
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1 Q And look on page 3 of that.
2 Do you see on box 28, there is a liability listed
3 for $30,000, charge accounts?
4 A Yes, I do
.
5 Q And Mr. Trabulus asked you if you pursued what those
6 charge accounts were. Do you recall that?
7 A Yes, I recall it.
8 Q What is your understanding of what that term that
9 references charge accounts refer to?
10 MR. TRABULUS: Objection, your Honor.
11 THE COURT: Overruled.
12 A A past debt.
13 Q A past debt?
14 A Yes.
15 Q And why did you assume it was a past debt?
16 A Because there was no information regarding any
17 current charge cards or revolving credit.
18 Q And if you take a look at Government's Exhibit 421-A,
19 which is your letter to Mr. Reffsin from November '93.
20 A Right.
21 Q And Mr. Reffsin responded to that in early '94; is
22 that correct?
23 A Yes, sir.
24 Q And did you ask him for verification of all monthly
25 payments if not paid by your personal check?
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1 A Yes, I did.
2 Q Did you get any?
3 A No, sir.
4 Q And did you ask for his checks for April through
5 October of '93?
6 A Yes, I did.
7 Q Did you review them?
8 A Yes, I did.
9 Q Were there any credit card payments included there?
10 A No, sir.
11 Q Okay.
12 If you look at 420-D, like in David; that's the
13 July of 1993 collection information statement; is that
14 correct?
15 A Yes.
16 Q And that also has a reference to a $32,000 charge
17 account liability; is that right?
18 A Yes, sir.
19 Q And what did you understand that referred to?
20 A My understanding of all of those items were that they
21 were monies that he owed previously.
22 MR. WHITE: Your Honor, would you bear with us
23 one minute? I need an enlargement.
24 THE COURT: Surely.
25 (Whereupon, at this time there was a pause in the
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1 proceedings.)
2 MR. WHITE: I am sorry, your Honor, we have so
3 many charts.
4 THE COURT: That's all right.
5 (Whereupon, at this time there was a pause in the
6 proceedings.)
7 Q Now, Mr. Gagliardi, the two collection information
8 statements we just referred to, Exhibits 423 and 423-D,
9 were submitted in 1993 to you; is that correct?
10 A Yes.
11 Q And both of those submitted -- both of those
12 indicated that the liabilities were for, quote, charge
13 account, unquote; is that correct?
14 A Correct.
15 Q Let me show you what is already in evidence as
16 Government's Exhibit 404-A.
17 That's a prior collection information statement
18 fro
m September of 1991; is that right?
19 A Yes, sir.
20 Q And if you can step down here, Mr. Gagliardi, and if
21 you could look on box 35, where it says "other
22 liabilities" and could you read what line C says.
23 A It says shopper's charge, $32,000, ex-wife as
24 charges.
25 Q Ex-wife's charges?
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1 A Yes, sir.
2 Q You can be seated again.
3 Now, if you turn to --
4 THE COURT: Have you concluded your thought on
5 that?
6 MR. WHITE: Yes.
7 THE COURT: All right.
8 We are going to take a recess now.
9 You may step down.
10 Members of the jury, we will recess for lunch.
11 Please do not discuss the case either among yourselves or
12 anyone else. Keep an open mind. Come to no conclusions.
13 We will recess until 1:30.
14 Have a nice lunch.
15 (Whereupon, at this time the jury leaves the
16 courtroom.)
17 (Luncheon Recess.)
18
19
20
21
22
23
24
25
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1 A F T E R N O O N S E S S I O N
2
3 (Whereupon, the following takes place in the
4 absence of the jury.)
5 THE COURT: Which of the defendants are not
6 here?
7 MR. SCHOER: Everybody is in the building. I
8 will go look for them by the telephones.
9 THE COURT: We have been looking for them and
10 they are not around.
11 Bring the jury in.
12 Are the defendants themselves all present?
13 MR. SCHOER: Yes.
14 THE COURT: Which lawyers are not present.
15 THE DEFENDANT RUBIN: Mr. Dunn is with the
16 investigators.
17 THE COURT: Where is the Mr. Neville?
18 (Mr. Neville enters the courtroom.)
19 THE COURT: I guess I have not made an impression
20 at all.
21 (Whereupon, at this time there was a pause in the
22 proceedings.)
23 THE COURT: You say the other attorneys are in
24 the building?
25 MR. SCHOER: Yes.
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1 THE COURT: Where are they?
2 MR. SCHOER: Upstairs using the phones probably.
3 THE CLERK: Jury entering.
4 (Whereupon, the jury at this time entered the
5 courtroom.)
6 THE COURT: Please be seated, members of the
7 jury.
8 (Whereupon Mr. Lee enters the courtroom.)
9 THE COURT: I neglected to tell you to bring your
10 notes in with you during the lunch hour also. Just put
11 them face down wherever you put them, face down on th
e
12 table.
13 (Whereupon, at this time there was a pause in the
14 proceedings.)
15 THE COURT: Are we all here?
16 (Whereupon, at this time there was a pause in the
17 proceedings.)
18 THE COURT: So I hear rumors it is going to
19 snow.
20 ALTERNATE JUROR NO. 1: It is snowing.
21 THE COURT: It is snowing now?
22 JUROR NO. 4: Up to the third floor.
23 THE COURT: There is only one comedian here.
24 (Whereupon Mr. Dunn entered the courtroom.)
25 THE COURT: There is no snow.
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1 JUROR NO. 8: Yes, there is.
2 THE COURT: There might have been. But right now
3 it is not snowing.
4 You may proceed.
5 MR. WHITE: Thank you, your Honor.
6
7 REDIRECT EXAMINATION (cont'd)
8 BY MR. WHITE:
9 Q Mr. Gaglia
rdi, if you can turn back to the collateral
10 agreement, which is Exhibit 420-H. Do you have it before
11 you?
12 A Yes.
13 Q Look on the second page, the one speaking with
14 respect to closely held corporations that are directly or
15 indirectly controlled or owned by the taxpayer; do you
16 recall that?
17 A Yes.
18 Q In the event there is such a corporation that is
19 owned or controlled by the taxpayer, what does that mean
20 under this paragraph? What are the consequences of that?
21 A My understanding is that the taxpayer should become
22 involved in the company in the future, it would become, a
23 certain portion of the income would be relevant to the
24 collateral agreement.
25 Q A certain portion's of whose income?
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1 A The corpora
tion's income.
2 Q Look at paragraph three and tell us what portion of
3 the corporation's income would be subject to the
4 agreement?
5 A In excess of $10,000.
6 Q So, any corporate income in excess of $10,000?
7 A Right.
8 Q Now, Mr. Trabulus asked you questions regarding
9 Mr. Gordon's position at the company; do you recall that?
10 A Yes.
11 Q And what was your understanding of whether or not
12 someone who was the president of a corporation, but still
13 an employee -- still just an employee, would control the
14 corporation within the meaning of this section?
15 A As to this section, unless there was some other
16 control demonstrated, that it wouldn't apply.
17 Q And why is that?
18 A You can be an officer of the corporation and not have
19 an ownership role.
20 Q And if someone were president but just an employee,
21 would h
e have any right to the corporate annual income
22 over $10,000?
23 MR. TRABULUS: Objection, your Honor.
24 THE COURT: Sustained.
25 Q What is your understanding of whether or not an
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1 employee with no ownership interest would be able to
2 subject his corporation's income to this agreement?
3 MR. TRABULUS: Objection.
4 THE COURT: Sustained.
5 Q Mr. Gagliardi, tell us what you understood regarding
6 whether or not Mr. Gordon's position as president meant
7 that he controlled the corporation?
8 MR. TRABULUS: Objection, your Honor.
9 THE COURT: What do you mean by his
10 understanding, Mr. White? He either said it or he didn't
11 say it. He put it down or didn't put it down. Or he
12 never said anything about it. What do you mean by
13 understa
nding?
14 MR. WHITE: What I meant is Mr. Gordon's 433
15 indicated he was the president. I want to find out if
16 Mr. Gagliardi interpreted that that therefore he came
17 under this section or he did not.
18 THE COURT: Sustained.
19 MR. WHITE: Okay.
20 Q Now, do you recall on cross-examination you were
21 asked whether or not you went to the bankruptcy court in
22 Westbury to review the files?
23 A Yes.
24 Q Did you do that?
25 A No, I did not.
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1 Q Why not?
2 A The information as presented in the offer in
3 compromise indicated that Mr. Gordon was a contract
4 employee, and, therefore, I saw no necessity to obtain
5 additional information regarding his employer.
6 Q And if you look back one document on Exhibit 420-G,
7 that
's the compensation agreement, do you recall being
8 asked questions that this agreement makes it clear that
9 part of Mr. Gordon's compensation is based on the
10 performance of the company?
11 A Yes.
12 Q Do you recall being asked questions on whether or not
13 you obtained the corporate returns?
14 A I recall.
15 Q Did you obtain the corporate returns?
16 A I did not.
17 Q And why not?
18 A The specific reason, if this -- if Mr. Gordon were
19 simply an employee, there are disclosure problems with
20 obtaining information on his employer. It didn't apply.
21 I simply could not obtain that information.
22 Q Did you have any other source aside from the
23 corporate returns to learn of Mr. Gordon's compensation
24 and income?
25 A Other than the income reporting documents, no.
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1 Q But you did have those 433's; is that correct?
2 A Correct.
3 MR. WHITE: At this time I would like to offer a
4 document that the parties have stipulated the
5 admissibility of.
6 THE COURT: Very well.
7 MR. WHITE: Exhibits 409-A, and the parties agree
8 that it is a business record of M. Reffsin & Company,
9 accounting firm.
10 THE COURT: 409-A for Abel?
11 MR. WHITE: Yes, and I have a copy for the Court
12 which I will hand directly to your Honor.
13 THE COURT: Government's Exhibit 409-A for Abel
14 in evidence.
15 (Government's Exhibit 409-A received in
16