Dirtiest Trials of the Twentieth Century
944
946
1 M O R N I N G S E S S I O N
2
3 THE CLERK: Jury entering.
4 (Whereupon, the jury at this time entered the
5 courtroom.)
6 THE COURT: Good morning.
7 Good morning, members of the jury.
8 Please be seated.
9 I want to thank you again. You are ahead of me.
10 That's difficult to do. Your punctuality is remarkable,
11 wonderful. Thank you very much.
12 Where is the witness?
13
14 D O U G L A S S. S K A L K A ,
15 called as a witness, having been previously
16 duly sworn, was examined and testified as
17 follows:
18
19 THE COURT: Mr. Skalka, you are still under
20 oath. You understand that?
21 THE WITNESS: Yes, I do, your Honor.
22 THE COURT: You may proceed.
23 MR. TRABULUS: Thank you, your Honor.
24
25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 CROSS-EXAMINATION (cont'd)
2 BY MR. TRABULUS:
3 Q Good morning, Mr. Skalka, I think when we left off.
4 JUROR NO. 6: There is a switch underneath.
5 Q Good morning, Mr. Skalka.
6 A Good morning.
7 Q I think when we left off I was talking to you about
8 Chapter 11 Trustees, and the fact that typically Chapter
9 11 debtors don't want to have them.
10 Now, is it true that a Chapter 11 Trustee
11 typically gets paid a fee?
12 A A Chapter 11 Trustee is entitled to, yes, subjects to
13 court approval.
14 Q And in most instances a Chapter 11 Trustee is an
15 attorney, in many instances?
16 A In many, and not all.
17 Q In this particular case, the case of Who's Who, a
18 Chapter 11 Trustee was eventually appointed, was he not?
19 A Yes.
20 Q His name was Mr. Mendelsohn?
21 A Yes.
22 Q And is it fair to say that the fee that a Chapter 11
23 Trustee receives comes out of the debtor's property?
24 A Yes. In a bankruptcy case it is called the debtor's
25 estate.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Q If you don't mind, I would like to use the word
2 "property."
3 So, if a debtor is trying to continue his
4 operations, the bankruptcy trustee would represent an
5 additional potential drain on his income; would that not
6 be correct?
7 A No. Because usually the trustee would replace
8 certain members of existing management, therefore the
9 savings by replacing management is offset by the trustee's
10 fee, usually it ends up in being a wash.
11 Q You are saying in most cases the trustee's fee would
12 equal that of existing management?
13 A In most cases, they don't want to increase the
14 administration cost of the estate and want to see it act
15 as a wash.
16 Q In this particular case do you know what fee has been
17 applied for by the trustee to date?
18 A I know what the trustee's counsel has sought as far
19 as fees. I do not believe the trustee has received any
20 fees.
21 Q So, the trustee not only asks for fees, but the
22 trustee hires an attorney in many instances?
23 A In many instances, yes.
24 Q In this particular case the trustee did hire an
25 attorney, correct, with court approval?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 A Yes.
2 Q And the attorney has put in a fee application at this
3 point; is that correct?
4 A That's correct.
5 Q And is that fee application in excess of $300,000?
6 A To the best of my knowledge, yes.
7 Q Do you know whether or not any of that has been paid?
8 A I do not.
9 Q Now, have you had any discussions, either formally,
10 or informally with the trustee concerning what his
11 anticipated fees are?
12 A I have not, no.
13 Q Are you familiar with what those anticipated fees are
14 from some other source?
15 A I am familiar with the bankruptcy code which would
16 permit him to ask for it.
17 Q What would it permit him to ask for at this stage?
18 A It is a graduated schedule in the bankruptcy codes,
19 but roughly five percent of what he recovers he can ask
20 for.
21 Q Now, are you saying in the event he recovers nothing
22 he will not get paid anything?
23 A That's correct.
24 Q Okay.
25 Is it fair to say that the attorney for the
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Skalka-cross/Trabulus
1 trustee has done most of the work in this case for the
2 trustee?
3 A I am not sure the trustee would say that. But he has
4 been very active in court, yes.
5 Q And that is reflected in the request for in excess of
6 $300,000; is that correct?
7 A Yes.
8 Q And that is just an interim request; is that right?
9 A As far as I know, yes.
10 Q And when
we say interim request, it is not a final
11 bill?
12 A No. They are still doing work on the case, but I
13 suspect they will have final bills.
14 Q It is anticipated they will be billing even more than
15 that?
16 A That's right.
17 Q Now, of course the trustee -- if the trustee were not
18 appointed, there would be no attorney for the trustee and
19 that type of bill would be avoided; is that right?
20 A I think that that type of bill is inevitable. The
21 trustee's attorney replaced the debtor's attorney who is
22 in effect taking the place of the debtor's attorney, and I
23 believe these fees would have been incurred either by the
24 trustee or the debtor's attorney at some point.
25 Q Now, a trustee can also under certain circumstances
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 with court
approval cause an accountant to be hired to
2 review the financial affairs of the debtor; is that
3 correct?
4 A Yes, that's correct.
5 Q Did that happen in this case?
6 A Yes.
7 Q And that accountant also incurs fees; is that
8 correct?
9 A Yes.
10 Q Do you know what the fees of that accountant have
11 been to date?
12 A I know that they have filed one interim fee
13 application.
14 Q And for how much is that?
15 A My recollection is that it is close to $100,000.
16 Q And in that case -- withdrawn.
17 That is also an additional fee that is incurred
18 as a result of a trustee being appointed?
19 MR. NEVILLE: I didn't hear the witness' last
20 answer?
21 THE WITNESS: I am sorry. I believe
22 approximately $100,000.
23 Q What was the name of that accounting firm?
24 A Kahn Consulting.
25 THE COURT
: Kahn?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 THE WITNESS: Kahn, again, K A H N.
2 Q Now, there was also a gentleman by the name of Kahn
3 who was an attorney for the creditor's committee in this
4 case. You mentioned him yesterday?
5 A Yes.
6 Q Any relationship between Kahn Consulting and the
7 attorney for the creditor's committee?
8 A Not that I am aware of.
9 Q Kahn Consulting were not the only accountants
10 involved in this bankruptcy, were they?
11 A No.
12 Q In fact, Reffsin & Company were also involved?
13 A Yes.
14 Q And those are the accountants we would assume would
15 ordinarily be involved with the Chapter 11 if no trustee
16 were appointed, is that correct, they had been working on
17 it?
18 A Yes, correct, they had been the accountants for the
19
debtor.
20 Q They also put in a fee application for 37,000,
21 something like that?
22 A Something like that, yes.
23 Q We have an additional $100,000 that in this
24 particular case was attributable to the accountants for
25 the trustee; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 A Yes.
2 Q Now, you mentioned that if a trustee were appointed,
3 the existing management would be out; is that fair today?
4 A It is fair to say some members of the existing
5 management.
6 Q Some members?
7 A Would have been replaced, yes.
8 Q And is it fair to say that one reason that a Chapter
9 11 debtor might not want to have a trustee appointed, is
10 that the existing management might want to continue in the
11 operation of the business?
12 A Yes.
13 Q And, of course, there might be their own self
14 interest involved, they might want to continue to work?
15 A Yes.
16 Q And it also could be good for the business?
17 A It could be.
18 Q Certainly, the people who operate the business know
19 the business best, do they not?
20 A They know the business, yes.
21 Q And in this particular case, do you know whether
22 Mr. Mendelsohn, the trustee had ever been involved in the
23 operations of any publishing businesses?
24 A I don't know.
25 Q Do you know if he was involved in any type of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 membership organization?
2 A I do not know.
3 Q Now, in some businesses, personal relationships
4 between management and other people could be quite
5 important to the success of the business; is that correct?
6 A Yes.
7 Q Do you know whether Mr. Mendelsohn had any personal
8 relationships with any of the people with whom Who's Who
9 did business?
10 A No.
11 Q You don't know?
12 A I don't know.
13 Q So, these are all reasons why somebody, a Chapter 11
14 debtor, might not want to have a trustee appointed. Is
15 that fair to say?
16 A Yes.
17 Q In this particular case, at a certain point in time
18 Mr. Mendelsohn did become the trustee?
19 A Yes.
20 Q And do you know when he became the trustee, if he
21 wanted to continue the operations of Who's Who as a
22 membership organization?
23 A I know that he investigated whether it made sense to
24 investigate whether to continue the operations of the
25 company.
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Skalka-cross/Trabulus
1 MR. TRABULUS: Move to strike.
2 THE COURT: You are moving to strike the answer?
3 MR. TRABULUS: Yes.
4 THE COURT: The motion is granted.
5 Please listen to the questions and answer
6 responsibly. Just answer what the questioner asks you.
7 If you can't answer it yes or no, say so. But no
8 explanations.
9 THE WITNESS: Yes.
10 Q Mr. Skalka, the question is: Did Mr. Mendelsohn ever
11 operate Who's Who as a Who's Who business?
12 A No.
13 Q Is it fair to say from the moment Mr. Mendelsohn was
14 appointed bankruptcy trustee, Who's Who, the debtor, did
15 not operate as a Who's Who business?
16 A That's correct.
17 Q I believe that Ms. Scott asked you yesterday some
18 questions concerning what can happen in a Chapter 11
19 proceeding. And I think you indicated that one result can
20 be a plan; is that correct?
21 A That's correct.
22 Q And a plan is something which you indicated the
23 creditors get to vote on; is that right?
24 A That's correct.
25 Q And if the plan is ultimately approved, and if the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 plan is confirmed, the company can come out of bankruptcy
2 and continue in operation; is that correct?
3 A That's correct.
4 Q Now, aside from that happening, what are the other
5 things that can happen in a Chapter 11 if a plan isn't
6 confirmed?
7 A If the plan is not confirmed the case can be either
8 dismissed, and the bankruptcy is no longer in place. Or
9 the case can be converted to a Chapter 7 proceeding where
10 the company would be liquidated.
11 Q Now, in the situation where the debts exceeded the
12 assets of the company and is unable to pay them timely, is
13 it unusual for a Chapter
11 proceeding to simply be
14 dismissed if there was no confirmation of a plan?
15 A It would not be. Either it would be dismissed or
16 converted.
17 Q Is it more typical that there would be a conversion
18 to a Chapter 7?
19 A I would say that in my experience, in those types of
20 scenarios, probably a little more likely that it would be
21 converted than dismissed.
22 Q Now, if we can differentiate among those cases --
23 distinguish between those Chapter 11 cases where there is
24 a trustee appointed and those in which there is not a
25 trustee, is it fair to say in those cases where a trustee
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 is appointed, there is a greater likelihood that there is
2 going to be Chapter 11 conversion in your experience?
3 A Not in my experience.
4 Q Not necessarily?
5 A No.
6 Q In any way in this particular case there was a
7 Chapter 11 conversion?
8 A Yes.
9 Q And Who's Who's assets were sold off or in the
10 process of being liquidated; is that correct?
11 A Yes.
12 Q To pay the creditors?
13 A Yes.
14 Q Now, you mentioned the creditors can vote on a plan?
15 A Yes.
16 Q Correct?
17 A Yes.
18 Q And there were some plans proposed in this particular
19 case; is that right?
20 A Yes.
21 Q And when the creditors vote, do they all have an
22 equal vote irrespective of the size of their claim?
23 A The creditors vote by class. There are certain
24 creditors who have priorities, if you have a higher
25 priority, if you have a lien or security interest you are
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 in one class, if no liens you are in another class, if you
2 have a priority claim, you are in another tax, taxing
3 authorities, unpaid wages, and so forth, are priority
4 creditor, each class gets to vote.
5 Q Talk about the class that Reed Elsevir was in, that's
6 an unsecured creditor?
7 A That's Reed's position, there was some back and forth
8 in the case as to whether we were to be treated as an
9 unsecured creditor, separate classes as a disputed
10 creditor. At one point in the case there was discussion
11 as to whether or not Reed was a secured creditor.
12 THE COURT: You are going to have to slow down,
13 Mr. Skalka. You are getting these answers out so quickly,
14 and in very technical terms, and in a subject that the
15 jury may not know about. So you better slow down.
16 Q Mr. Skalka, I am going to back up and I will try to
17 go step by step so we can
try to make this as clear as
18 possible.
19 Mr. Skalka, you indicated that the creditors who
20 vote are classified in different classes?
21 A Yes.
22 Q Is that correct?
23 A Yes.
24 Q Now, without going into what all the different
25 classes were, in the case of Who's Who's bankruptcy, how
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 many different classes were there?
2 A As you mentioned there were two plans actually
3 filed. In the first plan, I believe the Who's Who had
4 approximately five classes of creditors, and in the next
5 plan they had six classes of creditors.
6 Q Now, within each class -- withdrawn.
7 Each class votes separately; is that correct?
8 A Yes.
9 Q And within each class, do all the creditors vote
10 equally, or do they vote in proportion to the size of
11 their claim?
12 A In order for a class to be deemed to have approved a
13 plan, you need to have two-thirds in amounts of more than
14 50 percent -- in amount of claims, and 50 percent in
15 number of claims, to approve the plan.
16 Q Within each class?
17 A Yes.
18 Q Now, is it not correct that Reed's claim --
19 withdrawn.
20 If you add all the claims together across all
21 classes, what percentage of an amount was Reed's claim?
22 A If allowed, Reed's claim was by far the largest
23 claim, I would say approximately 80 percent.
24 Q It was more than two-thirds?
25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Q So, if Reed's claim was allowed, it had the power to
2 block any plan; is that correct?
3 A That was frankly Reed's position, yes.
4 Q If it was allowed?
5 A Yes.
6 Q And during the course of the bankruptcy proceeding,
7 the issue as to whether Reed's claim was going to be
8 allowed or not, primarily depended upon the results of an
9 appeal of the judgment that had been rendered for 1.6
10 million dollars?
11 A That's correct.
12 Q And so, it took a while for that appeal to be
13 decided; is that correct?
14 A Yes.
15 Q And during that time period, that was the question as
16 to whether or not the claim were to be allowed; is that
17 correct?
18 A Yes.
19 Q You mentioned there were two claims -- plans filed,
20 the original plan and the amended plan; is that correct?
21 A That's my recollection.
22 Q You testified yesterday that the amended plan
23 provided for a six year pay out of Reed; is that correct?
24 A Approximately.
25 Q Approximately six?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 A Not just Reed, but all of the creditors, yes.
2 Q And you are certain of that; is that correct?
3 A That's to the best of my recollection, yes.
4 Q Before coming here today, did you -- withdrawn.
5 Did you maintain a file on this?
6 A My office maintained a file, yes.
7 Q Your office maintains a file.
8 I assume it is a pretty voluminous file?
9 A Yes. My office maintains the file from June of 1995
10 when I joined the firm. It is fairly voluminous just over
11 that two and a half year period.
12 Q Just over that time period?
13 A Yes.
14 Q Do you have copies of any of the file maintained by
15 Whitman Breed and Abbott?
16 A No, I just have the pleadings filed prior to June of
17 1995.
18 Q When you worked at Whitman Breed and Abbott, you were
19 familiar with their file, were you not?
20 A To the bankruptcy part of the file, yes.
21 Q Only the bankruptcy parts of the file?
22 A Yes. I was not involved in the trademark litigation
23 or the appeal.
24 Q Let's talk about the bankruptcy parts of the file
25 that Whitman maintained. Was that also voluminous?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 A Yes, that's fair to say.
2 Q Are you familiar with the file in the bankruptcy
3 court in this case?
4 A Yes.
5 Q And that's fairly voluminous as well; is that
6 correct?
7 A Yes, I would say so.
8 Q In fact, it occupies more than the documents on any
9 of those two carts over there; is that correct? It has to
10 be wheeled around; is that correct?
11 A I would assume so, yes.
12 Q Now, before coming and testifying here, have you
13 reviewed any of the files that we have just been talking
14 about, your office's file, or the Whitman Breed Abbott
15 file, or the bankruptcy court file?
16 A I did not look at the Whitman file. I did not look
17 at the bankruptcy court file. I reviewed parts of my
18 file.
19 Q Had you ever given parts of your file over to the
20 U.S. Attorney's Office?
21 A No.
22 Q Do you know whether Whitman ever gave parts of its
23 file over to the U.S. Attorney's Office?
24 A I do not know.
25 Q When you were there, were you familiar with any
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 copies of documents being given over to the government,
2 whether the U.S. Attorney's Office, or postal inspectors
3 or IRS agents?
4 A No.
5 Q Would you be familiar with any part of the file
6 pertaining to the trademark litigation having been given
7 over to governments? Do you know that?
8 A No.
9 Q Would you have had occasion in the work you did to
10 look over the trademark litigation file?
11 A Parts of it.
12 Q You certainly had to familiarize -- withdrawn.
13 You had to familiarize yourself with the nature
14 of the claim; is that correct?
15 A Again, parts of it.
16 Q Well, did you have to familiarize yourself with the
17 type of claim that led to the judgment that Reed got
18 against Who's Who?
19 A In general terms, yes.
20 Q Certainly, because there are some kinds of claims
21 which don't get discharged in bankruptcy?
22 A Yes, certainly to that aspect I had to look at it.
23 Q So, you had to look at what the nature of the claims
24 were?
25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Q Now, I think you testified yesterday that Reed did
2 not regard itself as a competitor of Who's Who; is that
3 correct?
4 A That's correct, to the best of my knowledge.
5 Q Now, were you aware that one of the claims that was
6 asserted against Who's Who by Reed, which led to the
7 judgment, or included it -- in it, in any event, was an
8 unfair competition claim?
9 A I was not aware.
10 Q You were not aware?
11 A No.
12 Q As you stand here today, do you dispute that?
13 A No.
14 MR. TRABULUS: Excuse me, your Honor. Bear with
15 me.
16 THE COURT: Surely.
17 Hold it a minute.
18 (Whereupon, at this time there was a pause in the
19 proceedings.)
20 THE COURT: You may proceed, Mr. Trabulus.
21 MR. TRABULUS: Thank you, your Honor.
22 Your Honor, I just want to show Mr. White
23 something.
24 THE COURT: Surely.
25 (Mr. Trabulus confers with Mr. White.)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Q Mr. Skalka, I will show you what is just marked as
2 Gordon E for Identification. I will not put it in
3 evidence, but I want to see if it refreshes your memory.
4 I want to show you first this, and I will direct
5 your attention to that.
6 Now, Mr. Skalka, I am also going to show you
7 this, and I will direct your attention to that.
8 Now, Mr. Skalka, I have just shown you --
9 withdrawn.
10 Do you recognize the documents I have just shown
11 you?
12 A I recognize what they are.
13 Q Do you recognize them as being the original complaint
14 filed by Reed against Who's Who, and then something called
15 an amended complaint; is that correct?
16 A Yes.
17 Q And seeing that, did it refresh your recollection
18 that both of them included unfair competition claims
19 against Who's Who?
20 A They did. I don't recall actually reviewing those
21 documents.
22 THE COURT: So you never had a recollection one
23 way or another?
24 THE WITNESS: That's correct, I recall reviewing
25 the judgment, but not the complaints.
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1 THE COURT: Do you have an independent
2 recollection that there was an unfair competition claim?
3 THE WITNESS: No, I do not, your Honor.
4 Q Tell me, you are not in a position to say then as to
5 whether or not there was an unfair competition claim?
6 A That's fair to say.
7 Q So, it is your understanding, sir, still that Reed
8 did not view itself or view Who's Who as a competitor of
9 it?
10 A I can tell you in the bankruptcy aspect of the case,
11 and I still am representing Reed, Reed did not consider
12 Who's Who to be a competitor. Their products were
13 marketed for a different market and for a different
14 purpose.
15 Q Now, you were aware, were you not, that there was a
16 trademark infringement aspect to the claim that Reed had
17 against Who's Who, did you not?
18 A Yes, I was.
19 Q Were you not?
20 A Yes, I was.
21 Q And you were aware, were you not, that the term Who's
22 Who itself is not trademarked?
23 A Yes.
24 Q So anybody can use the term Who's Who?
25 A Right, yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Q And the claim was that the names of some of the
2 publications that are Who's Who -- that our Who's
Who here
3 published, were similar to some trademark names that Reed
4 had; is that correct?
5 A Yes.
6 Q One was Who's Who in America?
7 A Yes.
8 Q And one of them was Who's Who in the World?
9 A That's correct.
10 Q And were you aware that there was a claim that in
11 some respect the marketing of some publications of Who's
12 Who we are talking about here would have an adverse impact
13 on Reed's business in marketing those publications; is
14 that right?
15 A Yes.
16 Q And that would take away from that business?
17 A Yes, and was confusion.
18 Q And cause confusion?
19 A That was my understanding.
20 Q Did you not interpret that to mean that Reed regarded
21 Who's Who as a competitor?
22 A Again, that was not my understanding.
23 Q Before you came to testify here today, did you have a
24 conversation -- withdrawn.
25 Before you came to testify yesterday, when was
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1 the last time that you had spoken to someone in the U.S.
2 Attorney's Office?
3 A I believe I testified that -- I was actually here on
4 Tuesday, oh I saw Ms. Scott on Tuesday. I believe I
5 talked to her on Monday when she told me I probably would
6 be testifying on Tuesday.
7 Q And when was the last time before that?
8 A Approximately two weeks ago, when Ms. Scott again
9 told me that the trial would be starting, and when I
10 approximately would be called to testify.
11 Q Now, before you -- now, besides speaking to
12 Ms. Scott, did you speak to Mr. White in the past couple
13 of weeks?
14 A No.
15 Q Did you speak to any agent for the federal
16 government, whether it be Mr. Pagano, Mr. Jordan or
17 anybody else?
18 A No.
19 Q Now, in speaking to Ms. White, was there any
20 discussion -- to Ms. White, was there any discussion with
21 respect to Reed contending that Who's Who was a
22 competitor --
23 A You are talking about Ms. Scott?
24 Q Yes, I meant Ms. Scott, when you spoke to her, did
25 she tell you any of the defendants maintained that?
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1 A That Reed thought that Who's Who was a competitor?
2 Q Yes, and that's why they wanted to put Who's Who out
3 of business?
4 A Not that they were a competitor, but there was some
5 discussion about Reed wanting to put Who's Who out of
6 business.
7 Q She told you something that the defendants were
8 maintaining in their opening statement; is that correct?
9 A Yes.
10 Q Did you thereafter have any discussions with your
11 client Reed concerning the trial?
12 A No.
13 Q Have you spoken to your client Reed about the fact
14 that you are testifying here?
15 A I correspond with -- corresponded with him several
16 months ago, when I was first contacted that I might be
17 testifying.
18 Q When you corresponded, did you write a letter?
19 A Yes.
20 Q Did you write it to an official of Reed or an
21 attorney who works for Reed?
22 A An official.
23 Q Have you spoken to anybody since that letter?
24 A No.
25 Q Have you discussed with them -- withdrawn.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Have you either discussed with them or put into
2 that letter that you expected to be paid when you came
3 here to testify?
4 A No.
5
Q Have you been paid in the past when you appeared in
6 court on matters that Reed itself wasn't a party to, paid
7 by Reed?
8 A I believe this is the first time I have done this.
9 Q Are you saying, sir, this is the first time, very
10 first time you appeared as a representative of Reed in a
11 courtroom, where Reed itself was not a party to the
12 proceeding going on in court?
13 A Other than sitting in on one or two days of a
14 previous criminal proceeding back in 1995.
15 Q Criminal proceedings in 1995? There were no criminal
16 proceedings in 1995.
17 A My recollection --
18 MR. WHITE: Objection to Mr. Trabulus' statement.
19 THE COURT: Sustained.
20 Q You sat in -- you didn't actually sit in, you
21 actually spoke to the Court; is that right?
22 A At what time?
23 Q In 1995?
24 A I don't recall. It is possible. I don't recall. I
25 remember appearing as some probable cause hearings,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 sitting in on one or two of those days. I don't recall if
2 I actually addressed the Court.
3 Q Let me see if I can refresh your memory a little bit.
4 When you came to that hearing, it was in this
5 building, was it not?
6 A I believe so.
7 Q And it wasn't in front of the judge who is here now,
8 but in front of another judge; is that correct?
9 A Yes.
10 Q And the judge was a woman; is that correct?
11 A I believe so.
12 Q A woman whose name is Judge Seybert; is that correct?
13 A That's correct.
14 Q Now, you came to court that day, and who requested
15 that you come to court?
16 A My client.
17 Q And did your client tell you how they knew about the
18 Court proceeding?
19 A I don't recall.
20 Q Did you know about the Court proceeding before your
21 client requested that they come?
22 A I believe so.
23 Q You were at Whitman?
24 A I believe so, yes.
25 Q Do you know how Whitman found out about it?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 A No. I may have found out about it myself from the
2 debtor's counsel, or one of the other parties to the
3 bankruptcy proceeding.
4 Q Now, when you came to court that day, was it your
5 understanding that it related to the results of a search
6 and seizure that had occurred at the facilities of Who's
7 Who; is that correct?
8 A Yes.
9 Q What you appeared at was a civil action in which
10 Who's Who was trying to get, among other things, its
11 property back, and its funds unfrozen?
12 A I am not a
criminal attorney. My understanding is
13 that it was a probable cause hearing in connection with
14 the seizure and also the arrest that had taken place.
15 Q Well, did you understand that it was a probable cause
16 hearing in terms of whether or not -- withdrawn.
17 Did you understand in one of the issues coming up
18 was whether or not Who's Who could get some money released
19 so it could continue in business?
20 A Yes.
21 Q Is that correct?
22 A That was my understanding.
23 Q And when you went there did you have a
24 conversation -- withdrawn.
25 Did you understand that Who's Who's attorney at
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 that hearing were saying we need the money so we could
2 continue in business, and among other things, pay our
3 creditors? That's basically the position
-- one of the
4 things being said there; is that correct?
5 A One of the positions.
6 Q In fact, one of the things being said is that there
7 is a plan, which has been filed, which would provide for
8 100 percent payment; is that correct?
9 A That plan was on file at that time, yes.
10 Q And was that brought -- do you recall that being
11 brought to the attention of the Court?
12 A I don't have a specific recollection of that, no.
13 Q Do you recall addressing that issue yourself?
14 A No, I don't.
15 Q Now, Reed as a creditor -- withdrawn.
16 Before going to the hearing did you talk to Reed
17 and ask them whether or not they wanted the money
18 unfrozen?
19 A I don't know if I asked that specific question, but
20 we probably had questions concerning whether the money was
21 going to be unfrozen and what our position was.
22 Q Well, what w
as your position to be after that
23 discussion?
24 A We were concerned that this --
25 MR. TRABULUS: Move to strike.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
974
Skalka-cross/Trabulus
1 Q What was your position, do you want that money
2 unfrozen or not?
3 THE COURT: I don't know. It might have been a
4 responsive answer. You asked, what was your position, it
5 doesn't call for a yes or no answer, does it?
6 MR. TRABULUS: It doesn't call for an answer that
7 says we were concerned, your Honor.
8 THE COURT: I think it may. Let me hear your
9 answer.
10 He slipped up this time. He didn't ask for a
11 question calling for a yes or no answer. It happens
12 occasionally. And that's fine because in
13 cross-examination that's what lawyers generally do. They
14 want to pinpoint the particular area. They don't want
15 wide generalized answers, but now, what was your purpose?
16 Go ahead.
17 THE WITNESS: We were concerned if the money was
18 released, the money would be dissipated and lost and not
19 recovered for the creditors.
20 At roughly the same time I had filed another
21 motion for the appointment of a trustee in the bankruptcy
22 court, because if the money was to be released, we wanted
23 it to be to a trustee who could again propose a plan, and
24 recover those loans which were still not recovered on
25 behalf of the creditors.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
975
Skalka-cross/Trabulus
1 Q That was your third motion for a trustee being
2 appointed; is that correct?
3 A Frankly, at that time I don't know if it was the
4 second or third. But I think there were eventually three.
5 Q Let's get back to the position, did Reed basically
6 tell you we don't want the money unfrozen?
7 A We don't want it unfrozen and given back to the
8 debtor at that time.
9 Q Did Reed tell you that they didn't care whether or
10 not the debtor resumed operations?
11 A No.
12 Q Did Reed tell you they didn't want the debtor to
13 resume operations?
14 A No.
15 Q Did Reed tell you they wanted a trustee to operate
16 Who's Who for you -- for itself?
17 A That's my recollection.
18 Q And the idea was that -- well, was there any
19 discussion with Reed whether or not the interruption in
20 Who's Who's business before the trustee motion was
21 decided, even if a trustee was going to be appointed,
22 whether or not it might hurt Who's Who's ability to keep
23 operating?
24 A Yes.
25 Q Was it discussed that it might hurt its ability to
HARRY RAPAPORT, CSR,
CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 keep operating?
2 A Yes.
3 Q And even if the trustee were appointed, with the
4 funds being frozen, and no operations for a period of
5 weeks or months that Who's Who might not be able to
6 operate; is that correct?
7 A Yes.
8 Q But the attorneys for Who's Who who were there were
9 arguing that Who's Who should be given enough money to
10 operate, to keep in contact with its members; is that
11 correct?
12 A That's correct.
13 Q Now, at this proceeding that you were present at, you
14 were not the only creditor who came to this proceeding, to
15 this hearing; is that correct?
16 A I believe I was the only one there representing a
17 particular creditor. I believe Mr. Kahn was there on
18 behalf of the creditor's committee.
19 Q That's correct; is that correct?
20 A That is my recollection.
21 Q And he, did he not, spoke about the fact that there
22 was a plan, a 100 percent plan filed; did he not?
23 A He might have. I don't recall exactly what he said.
24 Q Do you recall Mr. Kahn saying the following --
25 MR. TRABULUS: Your Honor, this is being offered
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
977
Skalka-cross/Trabulus
1 only because it preceded what Mr. Skalka himself said in
2 response.
3 MR. WHITE: Excuse me, can Mr. Trabulus identify
4 what he is reading from?
5 MR. TRABULUS: Yes, a transcript, April 19th,
6 1995, of a hearing before Judge Seybert, in a civil
7 action, 95-1418.
8 MR. WHITE: My objection, your Honor, is to
9 Mr. Trabulus reading it outloud. If he wants Mr. Skalka
10 to review it and ask questions about it, fine.
11 THE COURT: Sustained.
1
2 Q Mr. Skalka, I would like you to take a look -- I have
13 not marked this as an exhibit, but I have identified what
14 it is, but look at page 40, 41, through 42.
15 THE COURT: While he is doing that, let me
16 explain what a document that is offered to a witness to
17 refresh the witness' recollection means. That document is
18 not in evidence, so you will not consider it as part of
19 the evidence in the case. But there are occasions where
20 the lawyer wants to refresh the recollection of a
21 witness. He can do it, or she can do it with anything.
22 They can show the witness a document, they can show them a
23 pineapple. They can show them tickets to the new hit show
24 Ragtime, anything that might refresh their recollection.
25 If they show a document that is not in evidence a
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 very interesting procedure occurs.
2 They can read the document and say this refreshes
3 my recollection, but they can't read from the document.
4 They have to lift their head up and say I now remember,
5 and proceed to tell us what they remember. But that
6 document, those kind of documents are not in evidence, and
7 you will not see them.
8 MR. WHITE: May I have a moment to get my copy of
9 the document from my file?
10 THE COURT: Go ahead. You are free to walk
11 around any time you want, Mr. White.
12 MR. WHITE: I didn't want to interrupt, your
13 Honor.
14 (Whereupon, at this time there was a pause in the
15 proceedings.)
16 MR. WHITE: Your Honor, may I speak to
17 Mr. Trabulus? I don't know if I have the right thing in
18 front of me.
19 THE COURT: Sure.
20 (Mr. White confers with Mr. Trabulus.)
21 THE COURT:
Have you completed looking at the
22 document?
23 THE WITNESS: Yes, I have, your Honor.
24 THE COURT: What is the question?
25 MR. TRABULUS: Your Honor, as a courtesy to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Mr. White, he didn't have the right document. I was going
2 to wait until he found it.
3 THE COURT: All right.
4 MR. WHITE: I have it now, your Honor. I am
5 sorry.
6 THE COURT: All right.
7 Q Mr. Skalka, if you want to look at it again, please
8 tell me, all right?
9 Does that refresh your recollection that on that
10 day you didn't merely attend in court, but you actually
11 spoke and addressed the Court?
12 A Yes.
13 Q And you spoke to the Court after Mr. Kahn, the
14 attorney for the creditor's committee spoke; is that
15 right?
16 A Yes.
17 Q And what Mr. Kahn had said to the Court at that point
18 in substance was that the debtor, meaning Who's Who
19 Worldwide, had submitted a hundred percent plan which was
20 payable to some of the creditors over a one-year period,
21 and to Reed over a three-year period, assuming that Reed's
22 judgment was affirmed by the Court of Appeals; is that
23 correct?
24 A That's what he said.
25 Q And Mr. Kahn, he didn't represent Who's Who, did he?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 A No.
2 Q He represented people to whom Who's Who owed money;
3 is that right?
4 A He represented the creditor's committee.
5 Q The creditor's committee included companies,
6 individuals, whatever, I think you read the names of some
7 of those yesterday when Ms. Scott questioned you about a
8 schedule of c
reditors, and those are the people or
9 entities to whom Who's Who owed money; is that right?
10 A Yes. The people I read yesterday were people who
11 were owed money. I didn't read the names of the people on
12 the creditor's committee.
13 Q Okay.
14 And the creditor's committee was supposed to
15 represent the interest of creditors; is that correct?
16 A Yes.
17 Q Indeed, Reed itself had a representative on the
18 creditor's committee; is that correct?
19 A Yes.
20 Q And basically, Mr. Kahn was telling the Court that it
21 would be to the advantage of the creditors if Who's Who
22 were given some money to operate; is that not correct?
23 A That was his position.
24 Q That was his position?
25 It wasn't somebody speaking for Who's Who, but
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 for companies Who's Who owed money; is that correct?
2 A He was speaking on behalf of the committee, yes.
3 Q And after Mr. Kahn spoke, did you not address the
4 Court as follows, page 41, beginning at line 13:
5 Mr. Skalka -- it is just indicating you are the
6 one speaking -- since Reed's name has been bandied about
7 here, Reed is of the largest defendant here.
8 Was that probably a mistake in the
9 transcription?
10 A Probably the largest creditor.
11 Q Reed had not agreed to any plan of reorganization.
12 The debtor's plan as far as Reed is concerned is dead on
13 arrival. Reed has applied for appointment of a trustee.
14 That is on for a hearing next Wednesday before Judge
15 Eisenberg. We believe there is grounds --
16 THE COURT: You started out very nicely when you
17 were reading. I don't know if that was to emphasize
18 particular sentences
or not. But then when you got to
19 another portion you started speeding up again. I just
20 lost it.
21 MR. TRABULUS: I will repeat that portion.
22 THE COURT: Okay.
23 MR. TRABULUS: Thank you, your Honor.
24 THE COURT: You did very well the first two or
25 three sentences, for whatever reason.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 MR. TRABULUS: I am learning, your Honor.
2 Reed has applied for appointment of a trustee.
3 That is on for a hearing next Wednesday in front of Judge
4 Eisenberg. We believe there is grounds for whether or not
5 this Court grants Mr. Gordon's relief or not.
6 The plan that Mr. Kahn makes reference to
7 provides for an ongoing payment over a four or 5-month
8 period, and we don't know what will happen with this
9 business past today, your Honor.
10 And
then you said representations have been made
11 that bank accounts were seized, and also representations
12 were made that certain bank accounts were not seized as
13 has been admitted here between 650 and $300,000 of the
14 debtor's funds should be available to the debtor. As of
15 the end of February operating statements who were --
16 THE COURT: You are working up a head of steam,
17 as you go on you get stronger all the time.
18 MR. TRABULUS: As of the end of February --
19 THE COURT: Do we need all of this,
20 Mr. Trabulus?
21 MR. TRABULUS: No.
22 THE COURT: Strike out the end of February, will
23 you?
24 Q Basically you told the Court that the reorganization
25 plan was dead on arrival; is that right?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 A That's what you read out of the transcript. Yes.
2 Q And that plan was not like the plan you testified to
3 yesterday, the first plan. That was not something which
4 only provided payments at the end of the ten year period;
5 is that correct?
6 A No. But the plan I was talking about and the plan
7 Mr. Kahn was talking about were two different plans,
8 Mr. Kahn testified before Judge Seybert about the one-year
9 pay out and three-year pay out with Reed, it is something
10 he negotiated with Who's Who's bankruptcy attorneys, and
11 it never got on file with the bankruptcy court. I was
12 referring to the plan on file with respect to a four or
13 five-year pay out. Which is four or five years post
14 confirmation, which ultimately would have been six years,
15 six years from that time, from 1995.
16 Q And that involved an ongoing payment to Reed?
17 A Yes.
18 Q And other --
19 A To all creditors.
20 Q To all creditors.
21 And there was also a plan that was being spoken
22 about which would have provided a three-year pay out to
23 Reed and a one-year pay out to other creditors; is that
24 right?
25 A Again, that's the plan to my recollection was never
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 filed. It was being negotiated at that time between
2 Mr. Kahn and Mr. Ackerman, the attorney for the debtor at
3 that time.
4 Q Did you get involved in those negotiations at all?
5 A Parts of it, yes.
6 Q And was that the plan that you said was dead on
7 arrival?
8 A No. I was referring to the one presently on file,
9 the one referring to the pay outs. That's the one I had
10 actually seen and I know my client did not approve.
11 Q Are you saying the plan under negotiations at that
12 point was something that Reed was looking to enter into,
13 the one with the one in three provision?
14 A Again, I don't believe I ever saw a written document
15 providing for those terms. I believe it was still in the
16 negotiation phase between Mr. Kahn and Mr. Ackerman.
17 Q And in opposing the release of funds, you did not
18 tell the Court that there was another plan that was under
19 negotiation which might have been acceptable to Reed, did
20 you? The only thing you said about a plan is that it was
21 dead on arrival; is that right?
22 A The one I knew about we had already rejected, and
23 there was no other one being proposed to Reed that we
24 would accept, because all plans also provided for
25 continuing litigation with Reed, and our claim was being
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 disputed. And, frankly, my client objected to that.
2 Q Your client objected to a plan which would have paid
3 it in full over a three-year period if its judgment was
4 affirmed by the Appellate Court?
5 A Again, that was never presented to my recollection.
6 That was never presented. It was never filed. It was
7 never actually presented to my client.
8 Q But when you spoke to the judge, Judge Seybert at
9 that point in time, Mr. Kahn had just informed the Court
10 about that plan that was under negotiation; is that
11 correct?
12 A He had, but I believe all those negotiations took
13 place prior to March 30th, 1995. At this point the
14 business was not operating for a few months, April. All
15 the suggestions that had been discussed and bandied about
16 with regard to plans were frankly now not worth anything.
17 We didn't know if this was able to be coming forward.
18 MR. TRABULUS: Move to strike everything after he
19 had.
20 THE COURT: Motion granted. Strike it out. The
21 jury is instructed to disregard it.
22 Listen to the questions, Mr. Skalka.
23 THE WITNESS: I am sorry.
24 THE COURT: If you can't answer yes or no, say
25 you can't answer yes or no. That shifts the burden back
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 to Mr. Trabulus, who knows he might say, say anything you
2 want. I doubt it, but he might.
3 MR. TRABULUS: You are right, your Honor, I
4 won't.
5 Q Mr. Skalka, I think you testified yesterday that you
6 didn't get involved in the bankruptcy until six weeks or
7 so after the filing; is that right?
8 A Yes.
9 Q And were there other people in your firm who were
10 involved before you got involved?
11 A
Other bankruptcy attorneys?
12 Q Yes.
13 A I believe there was one other bankruptcy attorney
14 involved.
15 Q In fact, your firm was involved in the bankruptcy
16 from at least, almost the very date of the filing; is that
17 correct?
18 A I believe that's correct.
19 Q One of the very first things your firm did two days
20 after the bankruptcy petition was filed, was to make a
21 motion to get relieved from the automatic stay you talked
22 about yesterday; is that correct?
23 A Yes.
24 Q And you wanted, or your firm wanted to be able to
25 proceed against Who's Who to attempt to collect the 1.6
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 million dollar judgment; is that right?
2 A I do not believe that that was the basis for the
3 motion.
4 Q Let me go back.
5 Actually at the time that the bankruptcy petition
6 had been filed, the judgment hadn't been filed yet; is
7 that correct?
8 A That's my recollection, yes.
9 Q In fact, there had been a decision, but the piece of
10 paper which is called a judgment, and which is the basis
11 for going to the sheriff or the marshals, or whatever, and
12 get them to collect the money, that hadn't been prepared
13 and filed in court yet; is that right?
14 A I believe that's correct.
15 Q Is it your testimony that the only basis for the
16 motion was to get permission to do that? Or did you also,
17 having done that, just want to proceed to collect?
18 A No. I believe we knew we couldn't collect the
19 judgment because the -- because of the bankruptcy filing.
20 But we wanted the judgment entered, because the Judge who
21 entered the decision was about to retire. And for a
22 mechanical standpoint we wanted to at least have it
23 entered and let the bankruptcy case go on. There was also
24 part of the judgment we wanted kept in place besides the
25 money judgment. The other orders of the Court we wanted
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 kept in place.
2 Q And you succeeded in doing that and you were able to
3 get a judgment filed; is that correct?
4 A To the best of my recollection, yes.
5 Q Now, you mentioned yesterday one of the things that a
6 bankruptcy company can do is accept or reject leases; is
7 that correct?
8 A Yes.
9 Q And you said you had some concern -- withdrawn.
10 For example, if a company has a ten-year lease,
11 or a five-year lease, going into the future, that might be
12 something that a company could reject; is that right?
13 A That's correct.
14 Q And sometimes companies that are in reorganization,
15 that have multiple facilities under separate leases, might
16 consolidate their operations at a particular facility; is
17 that correct?
18 A Yes.
19 Q They might want to reject the lease on one and accept
20 the lease on another?
21 A Yes.
22 Q And so they would not be burdened with a lease
23 payment for a facility they would not be using any more;
24 is that right?
25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Q Now, in this particular instance, how many leases
2 were you aware of that Who's Who had?
3 A At the beginning of the case it was a bit unclear,
4 just looking at the petition, or the schedules, which is
5 only information we had.
6 Q Do you have that in front of you?
7 A No.
8 MR. TRABULUS: I believe that's Exhibit 610.
9 Q Would you go to rider, to schedule G?
10 A I am already there.
11 Q You are ahead of me.
12 I will hold off a moment to let the jurors find
13 it.
14 I am talking about a lease -- a rider to leased
15 property, there were four of them?
16 A Yes, according to this, there are four.
17 Q There was one on a facility in Lake Success; is that
18 correct?
19 A Two of them are in Lake Success.
20 Q Two on Lake Success?
21 A Yes.
22 Q And one in Manhattan, and then the one on the
23 apartment in Manhattan?
24 A That's correct.
25 Q Now, did you understand upon reading that that at
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 least some of those were places at which Who's Who
2 conducted its business?
3 A Yes.
4 Q Were you aware that business was conducted both in
5 Manhattan and in Lake Success?
6 A Not for the debtor which is Who's Who Worldwide
7 Registry.
8 Q Were you aware that the debtor, Who's Who Worldwide
9 Registry had entered into a lease for facilities at 750
10 Lexington Avenue, which another company, Sterling,
11 utilized; is that correct?
12 A Subsequent to my first seeing this, I was informed of
13 that, yes.
14 Q And how long into the case was it that you learned?
15 A Not long. If I was brought in in April or early May
16 of '94, I would say within a month or two after that.
17 Q Now, were there any discussions that you were aware
18 of about the possibility of Who's Who consolidating its
19 operations at one of the two locations, either in Lake
20 Success, or in Manhattan?
21 A There were no discussions like that prior to the
22 government's actions in March of 1995.
23 Q Did it occur to you as part of a plan of
24 reorganization that it might enable Reed Elsevir to be
25 paid, early on and consolidate its operations?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 A Yes.
2 Q Did it occur to you that it might involve a change of
3 business that may take some time?
4 A Yes. But it was not something the debtor would
5 consider early on in the case. Those discussions did not
6 go anywhere.
7 Q Did the debtor seek to extend the time that it had in
8 which to decide as to whether or not to accept or reject
9 the leases?
10 A Yes, they filed a motion fairly on in the -- fairly
11 early on in the case.
12 Q And a reason for that motion was to see as time went
13 on what course of operation would make the most sense in
14 reorganization; is that correct? That's the position they
15 took?
16 A Yes.
17 Q For business reasons they couldn't decide at that
18 point which one to accept or reject; is that right?
19 A Yes.
20 The other thing, sometimes even if you want to
21 keep that space, you may want to renegotiate your lease
22 term so you may want to reject the lease and try to get a
23 better lease term. That might be one of the reasons.
24 Q One of the landlords opposed the motion for an
25 extension?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 A Yes.
2 Q And they wanted to know where they stood right off,
3 so that is not a surprise; is that correct?
4 A Yes, I believe so, and that's one of the reasons I
5 found out that the lease was under the name of Sterling
6 Who's Who, so we don't have a direct lease relationship
7 with the debtor, so the debtor does have the time or the
8 right to reject that lease.
9 Q Is it not correct that Reed opposed the motion with
10 respect to the time to oppose or reject all the leases?
11 A To the best of my recollection, yes.
12 Q And not withstanding that Who's Who was maintaining
13 that for business reasons at that point it couldn't decide
14 which is the way it would make more sense for a
15 reorganization?
16 A I think the main reason --
17 Q Yes or no?
18 A Would you restate the question?
19 Q I will withdraw it.
20 Did you discuss with Reed as to whether to oppose
21 that motion?
22 A Yes.
23 Q Didn't Reed tell you we are not interested in having
24 them extend the leases, we want them out of business so we
25 can get paid, did they tell you that?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 A No.
2 Q They didn't?
3 A No.
4 Q They never told you they wanted them out of business?
5 A Not in those words, no.
6 Q In what words did they say it?
7 A They wanted this company to not infringe upon Reed's
8 trademarks. They wanted this company to operate lawfully.
9 Q Did they tell you that once the name -- let's talk
10 about a trademark infringement, that related to a couple
11 of different names that appeared on the books; is that
12 correct? Who's Who Worldwide Registry, Inc.? Excuse me,
13 Who's Who Worldwide, that's one of the name, they say the
14 Worldwide infringed on Who's Who in the World; is that
15 right?
16 A That's correct.
17 Q Is it not correct that Who's Who changed the title of
18 that book after the judgment in favor of Reed?
19 A I believe they did at
least for one addition that I
20 was aware of that went out after the filing of the
21 bankruptcy.
22 Q Well, the filing of the bankruptcy came very shortly
23 on the heels of the judgment; is that right?
24 A That's correct.
25 Q And so, they couldn't go back in time and change what
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
994
Skalka-cross/Trabulus
1 they have already done?
2 A Yes, a lot of those things. I don't know anything
3 about after that one edition.
4 Q There was another name of another book, that was also
5 changed; is that right?
6 A I have some recollection of that, yes.
7 Q That happened very soon after the bankruptcy was
8 filed; is that correct?
9 A Yes.
10 Q And did that happen before or after Reed opposed the
11 extension or rejection of the lease?
12 A I don't recall.
13 Q
You don't recall one way or another?
14 A No.
15 Q Isn't it correct that once the names were changed
16 there was no longer any issue that Who's Who was going to
17 be infringing any trademark that Reed had; is that right?
18 A That's not correct.
19 Q That's not correct.
20 There was something else -- are you saying that
21 there was something that the judge, some trademark
22 infringement that was determined to have occurred by the
23 judge in the Reed Elsevir case that they didn't correct,
24 yes or no?
25 A This is one of those questions I can't answer yes or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
995
Skalka-cross/Trabulus
1 no.
2 Q Well, was there some respect in which you believed
3 that Who's Who Worldwide was continuing to infringe a
4 trademark in a respect in which the judge had said would
5 constitute a trademark infringement?
6 A Reed believed that the debtor continued to infringe
7 upon the trademark after the filing of bankruptcy, yes.
8 Q And what were the respects in which Reed told you
9 that they believed that the debtor -- that they believed
10 that Who's Who was continuing to do it?
11 A I was not directly involved with the trademark
12 litigation. I do know that Reed filed motions contending
13 that the debtor continued to infringe upon the trademark
14 after the filing in the form of solicitation, I believe
15 that was being made to its members.
16 Q Okay, leaving that aside.
17 As long as -- withdrawn.
18 So, is it your testimony that Reed said to you if
19 Who's Who does exactly what we think it should, we would
20 have no problem with it, they can keep on going?
21 A Yes.
22 Q That's your testimony?
23 A Yes.
24 Q Who
did you speak to there?
25 A My contact was someone in the -- one of the in-house
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 attorneys at Reed.
2 Q Ever speak to Sandra Barnes?
3 A I have spoken to her, but she was not my contact.
4 Q Can you tell the jury who Sandra Barnes is?
5 A An official at Reed, I believe Reference Publishing
6 in New Jersey, who was one of the parties responsible for
7 policing or watching over these trademarks for Reed. And
8 I believe she testified in the trademark litigation.
9 Q B A R N E S; is that right?
10 A I believe so.
11 Q And let me ask you, how many different publications
12 did Reed publish that had the word "Who's Who" in the
13 name, do you know?
14 A I do not know.
15 Q Was it more than five?
16 A I don't know.
17 Q Are you familiar with the names of any of them?
18 A Some of them, Who's Who in America, Who's Who in the
19 World.
20 Q Who's Who in the East?
21 A I wasn't aware of that.
22 Q Who's Who in the West?
23 A It could be.
24 Q Do you know whether or not Reed used mailing lists to
25 solicit for the people for Who's Who, for their Who's Who?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 A Excuse me?
2 Q For their Who's Who?
3 A I believe for some of the publications they do use
4 mailing lists.
5 Q Do you know whether Reed, when it solicits people for
6 some of the publications they use mailing lists and sends
7 letters saying they were nominated for the use in that
8 publication?
9 A I don't know.
10 Q You don't know whether they use the word
11 "nominated"?
12 A I don't know.
13 Q Yesterday Ms. Scott asked you what the results were
14 of the litigation filed by Reed; do you recall that?
15 A Yes.
16 Q I believe she asked you whether it was filed in 1992?
17 A Yes.
18 Q And then she asked you about the results?
19 A That's correct.
20 Q And you testified that in 1994 there was a judgment,
21 correct?
22 A That's correct.
23 Q Now, a fair amount happened in-between that, between
24 the filing of the lawsuit and the judgment; is that
25 correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 A I believe so, but again, I was not involved with that
2 litigation.
3 Q Are you aware that in 1992 Reed sought to obtain a
4 preliminary non-injunction --
5 MR. WHITE: Objection.
6 THE COURT: Sustained.
7 Q You testified yesterday concerning loans that were
8 shown on the schedule; is that correct?
9 A That's correct.
10 Q And did you yourself get involved in examining any of
11 the underlying documentation in relation to those loans?
12 A Yes, I did.
13 Q And the loans were -- the bulk of them were to
14 Mr. Gordon, were they not?
15 A Actually, the two largest loans were to other
16 entities, no.
17 Q I am sorry, I am painting with too broad a brush.
18 Let's take a look at the schedule.
19 (Whereupon, at this time there was a pause in the
20 proceedings.)
21 MR. TRABULUS: Bear with me a minute, your
22 Honor?
23 THE COURT: Yes.
24 (A further pause in the proceedings.)
25 Q Is it not correct that there were loans to officers
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
999
Skalka-cross/Trabulus
1 and stockholders for approximately $482,000?
I don't have
2 the page in front of me. I am still looking for it.
3 A Perhaps I can help you. The second page of schedule
4 B.
5 Q B as in boy?
6 A B as in boy, entitled personal property, the second
7 page of that entitled question 18.
8 Q Excuse me, $462,000, loans receivable from officers
9 and employees. I will ask you specifically about those
10 loans.
11 Did you have occasion to look at the underlying
12 accounts relating to those loans?
13 A We had occasion to ask questions about those loans.
14 I don't recall seeing any documentation relating to it.
15 Q When you asked questions, there was no -- there was
16 no secret made of the fact that the bulk of them went to
17 Mr. Gordon; is that correct?
18 A If that's correct. I believe there is a rider in
19 here that sets out, breaks these loans down and gives
20 dates as to when these loans were taken out.
21 Q Please find the rider.
22 A Rider to statement of financial affairs, question
23 number 21.
24 The question is entitled withdrawal from a
25 partnership or distribution by a corporation. It is an
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1000
Skalka-cross/Trabulus
1 annexed rider. It is a one-page rider.
2 Q Okay.
3 A It has Mr. Gordon's name on the top, and it has
4 loans, and I believe that's the breakdown of the loans
5 provided to Reed.
6 Q Okay.
7 In the course of you performing work on the
8 bankruptcy, did you ever make any inquiry as to whether
9 there were any additional amounts that had been paid back?
10 A Paid back from Mr. Gordon to the company?
11 Q Yes, or on his behalf to the company?
12 A We were given the explanation that was I believe
13 introduced as an exhibit yesterday by the company's
14 attorneys that Mr. Gordon had a claim back from the
15 company for far more than he had loaned.
16 Q Did you ever inquire as to whether or not the total
17 amount of the loan that had been made to Mr. Gordon,
18 perhaps in past times, had been reduced in any respects?
19 A I am not sure I understand your question.
20 Q Let me ask you this: Did you make any inquiry as to
21 whether or not Mr. Gordon had ever paid back any loan to
22 the corporation in part?
23 A I don't specifically recall that, no.
24 Q You don't recall as to whether or not any payments
25 were made to Mr. Gordon along the way to pay back any of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1001
Skalka-cross/Trabulus
1 the loans?
2 A I don't know.
3 Q The breakdown you see here was reflecting the amount
4 of loans that were outstanding at the time of the filing;
5 is that correct?
6 A That's my understanding, yes.
7 Q If there were any earlier loans that had been paid
8 back, that would not be listed here; is that correct?
9 A Yes.
10 Q And this is not supposed to be a complete list of all
11 the loans ever made to Mr. Gordon, assuming some may have
12 been paid back or credits paid against them?
13 A That's correct.
14 Q Is that correct?
15 Going back to the business of Reed as to whether
16 or not it is a competitor, do you understand does Reed
17 have -- did Reed have a membership organization?
18 A That's not my understanding.
19 Q Reed basically sold directories that listed people in
20 them; is that correct?
21 A That's correct.
22 Q The directories they sold would contain a compilation
23 of people with some biographical information; is that
2
4 correct?
25 A To the best of my understanding.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1002
Skalka-cross/Trabulus
1 My representation of Reed was pretty much limited
2 to the bankruptcy aspects here. I don't represent Reed
3 other than for this bankruptcy case.
4 Q I will ask you questions and you will answer to the
5 extent you are able to.
6 A Yes.
7 Q We understand what you just said.
8 Now, as you understand it, Reed's business was
9 selling Who's Who -- when I say Reed's business, Reed is a
10 very big business; is that right?
11 A Yes, this is a one part of it.
12 Q This is a small part of it; is that correct?
13 A Yes.
14 Q Comparative small part?
15 A I don't know how small it is, but it is one part.
16 Q Reed is actually a group of companies?
17 A Yes, my understanding.
18 Q One umbrella is on top in England?
19 A Yes.
20 Q Another one in the Netherlands; is that correct?
21 A Yes.
22 Q And the one in the Netherlands is the one that sued
23 Who's Who; is that correct?
24 A I believe that's the one who owned one or more of the
25 trademarks.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Q And then there is a United States subsidiary owned by
2 the foreign companies; is that right?
3 A Yes.
4 Q Is that was also suing; is that right?
5 A I believe so.
6 Q And the part that is in the Who's Who business,
7 that's all we are talking about now, they sell these books
8 to libraries among other places; is that correct?
9 A They consider them primarily reference publications.
10 Q They also make a business of selling it to people?
11 A Yes.
12 Q And in fact, that's a major source of their business,
13 the income of that operation?
14 A Yes, but I don't know exactly how it breaks down.
15 Q Do you know if some of the Reed publications de-list
16 people who are listed in them if they don't buy the book
17 within a year or two?
18 A I do not know.
19 Q Now, I think you testified yesterday that in October
20 of 1994 there was some kind of hearing on whether or not a
21 trustee should be appointed; is that correct?
22 A Yes.
23 Q And you testified that the Court decided not to
24 appoint the trustee at that point in time?
25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Q And we have seen a lot of transcripts in court today
2 and yesterday.
3 Do you know whether any transcript was ever
4 prepared of that hearing?
5 A I do not recall if one was or not.
6 Q Have you ever seen or reviewed one?
7 A Not that I recall. I may have but I don't recall as
8 I sit here now.
9 Q You testified yesterday that there were certain
10 things of that hearing that you couldn't recall; is that
11 correct?
12 A Yes.
13 Q In fact, you testified you couldn't recall whether or
14 not the logs were put in evidence there?
15 A That's correct.
16 Q Put in evidence in the sense that we are putting
17 documents in evidence here?
18 A That's correct.
19 Q And the bankruptcy court operates a little
20 differently than this Court; is that correct? They don't
21 have a court reporter with a stenography device generally?
22 A They do.
23 Q They did at that time?
24 A Yes.
25 Q Sometimes they also do things by electronic -- by
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1005
Skalka-cross/Trabulus
1 audio recording and then have it typed up?
2 A That's right. I believe there was a stenographer
3 there.
4 Q And you don't know as to whether there was a
5 transcript ever prepared to show whether the logs were put
6 in evidence or as to whether anything was said about them?
7 A I don't. As I said, I don't have my file for the
8 period I was still with Whitman Breed Abbott and Morgan.
9 Q I see. Have you been asked to look at that?
10 A No.
11 Q Now, after that motion was denied, did there come a
12 point in time after that when Reed once again brought a
13 motion for the appointment of a trustee?
14 A Yes.
15 Q And was the next motion also denied?
16 A My recollection was that the Court refused to act on
17 it at that time. I don't believe an actual denial was
18 entered.
19 MR. TRABULUS: Bear with me a moment.
20 (Whereupon, at this time there was a pause in the
21 proceedings.)
22 Q Do you recall when that was?
23 A I believe the motion was filed in early April of
24 1995, and the hearing I know was held almost
25 immediately -- the motion was filed on an emergency
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1006
Skalka-cross/Trabulus
1 basis. And I believe the hearing was still pending or
2 being continued at the time the hearing in front of Judge
3 Seybert that was being referred to by Mr. Kahn and
4 myself. And I believe an ultimate hearing on the motion
5 was held in May or June. My recollection --
6 MR. TRABULUS: Your Honor, move to strike
7 anything after April of 1995. I asked him simply when it
8 was, and he is giving me a history about everything.
9 THE COURT: Motion granted. Strike the
answer.
10 The jury is to disregard it.
11 Do you want to ask the question again?
12 MR. TRABULUS: Your Honor, I will ask another
13 question, but I just need to refer to a document regarding
14 that.
15 (Whereupon, at this time there was a pause in the
16 proceedings.)
17 Q Let me get to another area.
18 At a certain point in time in the first motion
19 that Reed made to have a trustee appointed, Who's Who
20 sought to change attorneys; is that correct?
21 A Yes, after the motion was filed and before the
22 hearing took place the company changed its attorneys.
23 Q And there was a -- the original attorneys was the law
24 firm that had Mr. Flaum in it; is that correct?
25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 Q And the new attorney was going to be Mr. Ackerman; is
2 that correct?
3 A Yes.
4 Q And he was with the law firm of Rivkin, Radler, and I
5 will not go through the rest of the names.
6 A That's correct.
7 Q A highly respected law firm; is that correct?
8 A Yes. And so is Mr. Flaum.
9 Q I was not being critical of Mr. Flaum.
10 What I wanted to get to is Reed opposed the
11 motion; is that correct?
12 A What do you mean --
13 Q To have new counsel.
14 A I don't believe so. I believe the creditor's
15 committee raised the objection. I don't know it was
16 raised by Reed.
17 Q Did Reed agree with the creditor's committee raising
18 the objection?
19 A Reed as a member of the committee raised its concern,
20 and the committee as a whole decided to raise that
21 objection.
22 Q Now, is it not correct that in December of 1994, a
23 couple of months after the motion to appoint a trustee was
24 denied, Reed made a second motion to appoint a trustee?
25 A I don't recall a motion being filed in December of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 1994.
2 Q Well, I haven't marked this as an exhibit, but I will
3 show it to you and see if it refreshes your recollection.
4 Do you recognize this as being the docket sheet
5 from the bankruptcy court relating to the Who's Who
6 bankruptcy?
7 (Handed to the witness.)
8 A Yes, this appears to be a copy of the docket.
9 Q Can you explain to the jury what a docket sheet is?
10 Is it a record kept by the Court indicating the various
11 documents that are filed in the court and describing the
12 events that actually occur in the Court on particular days
13 when things are happening in that case?
14 A There is usually a short summary of what happens in
15 connection with each document filed. It is listed here I
16 believe in chronological order.
17 Q So, I am going to direct your attention to this
18 portion, page 12 of the docket sheet.
19 Does that refresh your recollection that Reed
20 made a motion in December of 1994 to appoint a Chapter 11
21 Trustee?
22 A This was a motion that was not filed -- it was filed
23 by my firm, but not by me.
24 Q So, you may not have been involved in the filing of
25 it, but Reed made the motion; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 A Yes.
2 Q And that's why it didn't occur to you right away,
3 because you were not involved in the filing of it?
4 A Yes. And it was in connection with another matter
5 that I was not involved in.
6 Q How many people in your firm were working on the
7 bankruptcy?
8 A I was the only one working on the bankruptcy.
9 Mr. Bailey, I believe had an associate helping him on the
10 trademark side of it.
11 Q Even though he was on the trademark side, he or
12 someone else at the firm worked on the filing of this
13 motion for the appointment of a trustee which is part of
14 the bankruptcy?
15 A That's correct, because --
16 Q You don't have to say why.
17 A Yes.
18 Q Now, is it not correct that that motion was denied on
19 February 22nd, 1995?
20 A The portion as to the appointment of a trustee was
21 denied, yes.
22 Q That's the only portion I am talking about.
23 So, that was the second Reed motion that was
24 denied for the appointment of a trustee; is that right?
25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1010
Skalka-cross/Trabulus
1 Q Now, that was on February 22nd, 1995?
2 A Yes.
3 Q And you are familiar with the execution of a search
4 warrant and seizure on the premises of Who's Who; is that
5 correct?
6 A Yes.
7 Q And that was on March 30th, 1995?
8 A Yes.
9 Q And are you aware that people from Whitman were in
10 communication with the government agents and the U.S.
11 Attorney's office concerning this, that application?
12 A What application?
13 Q For a search warrant and seizure.
14 A I was not aware of any contact prior to March 30th,
15 1995.
16 Q Are you aware that Mr. Bailey had met with an
17 Inspector Biegelman?
18 A No.
19 Q Mr. Bailey never mentioned that to you?
20 A No.
21 Q He would have no reason no mention it to you?
22 A No. Because it would not have directly affected me
23 or
the bankruptcy side of the case.
24 Q And so the search warrant was executed after two
25 applications for a trustee which had been denied; is that
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1011
Skalka-cross/Trabulus
1 correct?
2 A Yes.
3 Q And then after that another application for a trustee
4 was made by Reed; is that correct?
5 A That's correct.
6 Q And that one was eventually granted; is that right?
7 A That's my recollection.
8 MR. TRABULUS: Your Honor, one of the other
9 attorneys is requesting a break.
10 THE COURT: Very well. It is time for it.
11 Members of the jury, we will take a ten-minute
12 recess.
13 Please do not discuss the case and keep an open
14 mind. Please recess the jury.
15 MR. WHITE: Your Honor, I have an application
16 that I think we should discuss at the break.
17
(Whereupon, at this time the jury leaves the
18 courtroom.)
19 THE COURT: You can step down, Mr. Skalka.
20 MR. TRABULUS: Should this be out of the hearing
21 of the witness?
22 MR. WHITE: I will wait.
23 (The witness exits the courtroom.)
24 MR. WHITE: If my colleagues need to take a break
25 and come back early, I can do that.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 THE COURT: What do you want?
2 MR. WHITE: The government's application is to be
3 permitted on redirect to bring out the fact that
4 Magistrate Jordan imposed an injunction on Who's Who that
5 they were violating, and for several reasons.
6 Mr. Trabulus has opened the door wide open on
7 that.
8 THE COURT: An injunction that was violated?
9 MR. WHITE: In addition to the monetary judgment
10 Judge Jordan granted injunctive relief, and told them
11 specific things that Who's Who was not to do.
12 Mr. Trabulus, as he is entitled to do, was
13 cross-examining this witness for hours regarding his
14 alleged bias and the bias imputed to him because he
15 represents Reed. He repeatedly suggested that Reed had an
16 ulterior motive, a motive to destroy Mr. Gordon and his
17 business. And has been suggesting that you kept filing
18 for the motion of a trustee.
19 Mr. Trabulus made a specific point to try to show
20 that they had no real basis for doing that. For example,
21 he selectively asked, well, Magistrate Jordan gave certain
22 instructions to Who's Who regarding what they were to do
23 to comply with the trademark part of his order. And
24 Mr. Trabulus specifically said, and they did exactly what
25 they were supposed to, they complied 100 percent, clearly
HARRY
RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1013
Skalka-cross/Trabulus
1 leaving the impression that Reed had no basis for seeking
2 the appointment of a trustee or trying to enforce their
3 judgment.
4 Mr. Skalka answered specifically that that was
5 not true, that Reed was seeking to enforce, quote, other
6 orders of the Court.
7 Secondly, Mr. Trabulus again suggested that there
8 was no real reason why they should be seeking to enforce
9 their judgment or get the appointment of a trustee.
10 Mr. Skalka --
11 THE COURT: Get to the point. I know of all of
12 that. What is the point?
13 MR. WHITE: On redirect the government should be
14 able to ask Mr. Skalka, well, what was Reed's basis for
15 trying to enforce the judgment? What was Reed's basis for
16 trying to seek the appointment of a trustee.
17 THE COURT: Go ahead.
18 MR. WHITE: And he should be able to answer that
19 Magistrate Jordan enjoined them from using other
20 misleading sales practices, which Reed thought that
21 Mr. Gordon was continued to engage in.
22 THE COURT: Ask the question.
23 MR. WHITE: Okay, I will.
24 MR. TRABULUS: Your Honor, I would object. And I
25 want to be heard on this briefly.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 I asked the witness concerning infringement, and
2 the witness at one point -- and I went through the book.
3 The witness said I went through solicitation, and I
4 dropped it.
5 THE COURT: Objection overruled. You can bring
6 out that there was an injunction granted by Judge Jordan.
7 MR. WHITE: Thank you, your Honor.
8 THE COURT: We will take a ten-minute recess from
9 now.
10 MR. JENKS: Thank you, your
Honor.
11
12 (Whereupon, a recess is taken.)
13
14 THE CLERK: Jury entering.
15 (Whereupon, the jury at this time entered the
16 courtroom.)
17 THE COURT: Please be seated, members of the
18 jury.
19 You may proceed, Mr. Trabulus.
20 MR. TRABULUS: Thank you.
21
22
23
24
25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 CROSS-EXAMINATION (cont'd)
2 BY MR. TRABULUS:
3 Q Mr. Skalka, I would like to ask you a little about
4 your relationship with Mr. Bailey at Whitman, while you
5 were both there and working for Reed?
6 MR. WHITE: Objection.
7 THE COURT: Sustained.
8 Q How frequently were you in communication with
9 Mr. Bailey?
10 MR. WHITE: Objection.
11 THE COURT: Sustained. Desist.
12 MR. TRABULUS: I
am sorry, I thought it was to
13 form. I didn't realize it was to the entire line of
14 questioning.
15 THE COURT: Yes, it is.
16 Q Mr. Skalka, on the occasion you came to court for the
17 hearing before Judge Seybert, did you meet with any of the
18 other attorneys who were present in court that day?
19 A I am sure I spoke with attorney Kahn, and I believe
20 attorney Ackerman was there for part of the proceedings.
21 And I probably at least introduced myself to attorney
22 Shevitz, who was there on behalf of Mr. Gordon and Who's
23 Who Worldwide, and I am pretty sure I introduced myself to
24 the U.S. Attorneys.
25 Q Had you ever spoken to any of the U.S. Attorneys
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 before?
2 A Not prior to those hearings.
3 Q And after that did you speak to any --
after that
4 occasion did you meet with any of the U.S. Attorneys
5 before the last couple of weeks?
6 A Yes.
7 Q And on how many occasions?
8 A I believe one.
9 Q And when was that?
10 A I believe in the fall of 1995.
11 Q Do you know whether any of the U.S. Attorneys took
12 notes at that meeting?
13 A I do not.
14 Q Okay.
15 With whom did you meet?
16 A Mr. White.
17 Q Was there an agent there as well?
18 A I don't believe so.
19 Q Did you show Mr. White any documents at that point?
20 A I don't believe so. It was more of a question and
21 answer session.
22 Q Did you ever testify before the grand jury?
23 A No.
24 Q Now, I think we talked about a couple of motions for
25 an appointment of a trustee that were made and denied. I
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
10
17
Skalka-cross/Trabulus
1 think we talked about the search warrant being executed on
2 March 30th, 1995.
3 Is it not correct that just a few days later on
4 April 3rd, 1995 read once again moved to get a trustee
5 appointed?
6 A That is correct.
7 Q And at that point in time Reed was aware of the fact
8 a search warrant was executed?
9 A Yes.
10 Q And did you hear that from Reed or did you hear it
11 independently?
12 A I believe I heard it independently.
13 Q From --
14 A I believe someone involved in the bankruptcy
15 proceedings, whether the company's attorneys, Mr. Kahn,
16 someone had advised me that this had happened.
17 Q With the Court's permission, I would like to ask, did
18 you have any discussions with Mr. Bailey concerning that
19 at that point in time?
20 A Concerning the filing for a motion for a trustee?
21 Q Concerning the fact that there was a raid or a search
22 warrant executed?
23 MR. WHITE: Objection.
24 THE COURT: Sustained.
25 Q Now, in connection with the hearing that was set down
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Trabulus
1 on that motion, did you cause a witness to be subpoenaed?
2 MR. WHITE: Objection.
3 THE COURT: Mr. Reporter, can I hear that
4 question.
5 (Whereupon, the court reporter reads the
6 requested material.)
7 THE COURT: Sustained.
8 Q Let me ask you, did you get from the government the
9 names of any witnesses to call?
10 MR. WHITE: Objection.
11 THE COURT: Sustained.
12 MR. TRABULUS: Your Honor, just bear with me a
13 moment?
14 THE COURT: Yes.
15 Q Let's just turn to the creditors listed on the
16 petition, so the jury under
stands who these companies
17 were.
18 I am referring to the listing of creditors which
19 appears after schedule G -- excuse me, after schedule H.
20 There is current monthly income expenses and then the
21 listing of creditors.
22 Mr. Skalka, are you familiar with some of these
23 creditor's claims were for?
24 A Yes.
25 Q The first one is ADP, and that's a payroll service?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1019
Skalka-cross/Trabulus
1 A Yes.
2 Q And some money was owed to them for that?
3 A Yes.
4 Q And Arco Envelope Corp., A R C O, that's for
5 envelopes; is that right?
6 A I believe so.
7 Q These are things that you understood done in the
8 course of Who's Who business?
9 A Yes.
10 Q And Darby and Darby, a law firm that represented
11 Who's Who in the trademark litigation?
12 A Yes.
13 Q Eastern Mailing Process. That was a company that
14 mailed things for Who's Who?
15 A I believe so.
16 Q Engraving Unlimited, Inc., that's a company that made
17 plaques which were given to members; is that right?
18 A Yes.
19 Q Is it your understanding that Reed also when it has
20 someone in one of its Who's Who publications would sell
21 them a plaque -- strike also.
22 Does Reed sell plaques, do you know?
23 A No.
24 Q Filter Fresh, we will not bother with. There are a
25 couple of small claims.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1020
Skalka-cross/Trabulus
1 Number eight, from graphics, F R O M, and it may
2 be F R O M A, our F R O M E. It is a little hard to read
3 it.
4 THE COURT: When you read these names,
5 Mr. Trabulus, which are unknown to us and certainly the
6 reporter, would you please spell them? I don't have to
7 stop and ask you each time to do that.
8 MR. TRABULUS: I will do that.
9 THE COURT: All right.
10 Q Either F R O M A, our F R O M E, graphics.
11 Do you know if that was a software company?
12 A I do not know.
13 Q And the IRS is the Internal Revenue Service?
14 A Yes.
15 Q And do you know IRS is the Internal Revenue Service?
16 A Yes.
17 Q And do you know if those were monthly claims that had
18 to be paid at the end of the month or something like that?
19 A I believe they were withholding 941 type claims.
20 Q Okay.
21 Relating to the payroll?
22 A Yes.
23 Q Similarly, the Tax Commission?
24 A Yes.
25 Q Sales tax, related to sales tax on sales that had to
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1021
Skalka-cross/Trabulus
1 be remitted?
2 A Yes.
3 Q Mr. Pierce, another lawyer who had represented Who's
4 Who in the litigation relating to the trademark?
5 A Yes.
6 Q Phoenix Home Life Mutual, a payment on health
7 benefits for the employees?
8 A It looks like an insurance benefit. I am not exactly
9 sure what it was for.
10 Q The next page we see Reed.
11 United Book Press that was for printing up books?
12 A My understanding, yes.
13 Q And most of these were things were things --
14 withdrawn. .
15 MR. TRABULUS: Your Honor, I have no further
16 questions.
17 THE COURT: Anyone else?
18 MR. SCHOER: I have a few questions.
19
20 CROSS-EXAMINATION
21 BY MR. SCHOER:
22 Q Good morning, sir.
23 A Good morning.
24 Q You indicate that one of the documents you looked at
25 when you first familiarized yourself with this matter for
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1022
Skalka-cross/Schoer
1 the bankruptcy proceeding was the judgment of a
2 magistrate; is that correct?
3 A Yes.
4 Q And would you -- did you also look at the findings of
5 fact and conclusions of law decision and order?
6 A My recollection is that it was a fairly lengthy
7 decision. I don't think I focussed on a lot of the
8 findings other than, frankly, the dollar amount in the
9 actual court order.
10 Q Well, did you review the actual decision and order?
11 A Yes.
12 Q I will show you a copy of that, and I will ask you to
13 read the first sentence.
14 (Handed to the witness.)
15 A The first sentence reads: In this action --
16 THE COURT: No, to yourself.
17 Q Just read it to yourself, I am sorry.
18 A I'm sorry.
19 Q Does that refresh your recollection that part of the
20 trademark proceeding is a claim by Reed of unfair
21 competition?
22 A Yes.
23 Q And at the time that the bankruptcy proceeding was
24 going on and the trademark lawsuit was going on, do you
25 know whether Reed published a CD-ROM?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1023
Skalka-cross/Schoer
1 A I do not know.
2 Q Do you know whether Reed had a membership
3 organization at that time?
4 A I do not know for sure.
5 Q Well, Reed was a publisher; isn't that correct?
6 A Yes.
7 Q In fact, I think you told us that Reed published all
8 different kinds of books, children's books, directories;
9 is that correct?
10 A That's correct.
11 Q And is it fair to say that Reed encompassed about ten
12 different companies?
13 A I don't know exactly how many companies it
14 encompassed. I know they are involved in publishing lots
15 of different types of publications.
16 Q Did you ever hear of a company called Bowker,
17 B O W K E R?
18 A No.
19 Q Martindale Hubble?
20 A Yes.
21 Q That's part of Reed, right?
22 A Reed published Martindale Hubble.
23 Q Marqui?
24 A Marqui Who's Who.
25 Q Marqui Who's Who is many, many different books; is
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1024
Skalka-cross/Schoer
1 that correct?
2 A I believe so, yes.
3 Q And do you know whether a unit of Reed Elsevir
4 publishes a directory called books in print?
5 A I do not know.
6 Q Do you know whether or not since January of 1996 Reed
7 Elsevir had started a membership Who's Who organization?
8 A I do not know.
9 Q Do you know whether or not since January of 1996 Reed
10 Elsevir has taken self nominations for people who want to
11 be in a Who's Who membership organization?
12 A I do not know.
13 Q You indicated that the name Who's Who itself is not
14 trademarked; is that correct?
15 A Yes.
16 Q And is it fair to say that there are hundreds of
17 Who's Who publications?
18 A I don't know about hundreds, but I know that there
19 are numerous.
20 Q At any time while you were working for Whitman Ransom
21 or any of its successors, do you see any correspondence
22 from Sandra Barnes indicating that it was time to have the
23 postal authorities confiscate the mail of Who's Who
24 Worldwide?
25 A No.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1025
Skalka-cross/Schoer
1 Q Did you ever see any memorandum from someone at Reed
2 saying that Who's Who was a thorn in Reed's side?
3 A No.
4 MR. SCHOER: No further questions.
5 THE COURT: Anybody else?
6 MR. NELSON: May I briefly, your Honor?
7 THE COURT: Yes.
8
9 CROSS-EXAMINATION
10 BY MR. NELSON:
11 Q Good morning, sir.
12 My name is Alan Nelson. And I represent Frank
13 Osman.
14 Sir, I believe you testified during the course of
15 the cross-examination by Mr. Trabulus that a second
16 petition for the appointment of a bankruptcy trustee was
17 denied by the Court on February 22nd, 1995; is that
18 correct?
19 A Yes.
20 Q Now, the petition itself, the application in support
21 of that motion was prepared and filed at a prior period of
22 time; is that correct?
23 A Prior to February --
24 Q Yes, is that correct?
25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1026
Skalka-cross/Nelson
1 Q And you recall it having been filed on December 22nd,
2 1994?
3 A After looking at the docket that Mr. Trabulus
4 provided me, yes.
5 Q And would it be fair to say that you assisted, in
6 fact, prepared those documents in support for the
7 application of the appointment of a trustee?
8 A No. I think I testified specifically I did not draft
9 those documents.
10 Q They were prepared by members of the law firm?
11 A My farmer law firm, Whitman Breed and Abbott, yes.
12 Q And you were the supervising partner of the
13 associates preparing those documents?
14 A No.
15 Q Who prepared that?
16 A That particular motion and documents would have been
17 prepared by Mr. Bailey and/or his associates.
18 Q So the documents in support of the memorandum and
19 motion submitted to the Court in December of 1994, upon
20 which the motion was denied on February 22nd, 1995, were
21 prepared by associates who were working with Thomas
22 Bailey; is that correct?
23 A I would say it was either Mr. Bailey himself or one
24 of his associates.
25 Q So, it was either Mr. Bailey himself, or associates
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1027
Skalka-cross/Nelson
1 working with Mr. Bailey; is that correct?
2 A That's correct.
3 Q Did you have any discussions with Mr. Bailey with
4 respect to the preparation of those documents?
5 A I don't believe so.
6 Q Did Mr. Bailey discuss with you whether he, in the
7 course of the preparation of those documents in December
8 of 1994, had met with postal inspectors and
9 representatives of the United States Attorneys office in
10 December of 1994?
11 A No, he did not.
12 Q Did you ever discuss with Mr.
Bailey that he met --
13 withdrawn.
14 Did you ever discuss with Mr. Bailey subsequent
15 to that day the fact that he met with Inspector Biegelman
16 and an Assistant United States Attorney in December of
17 1994 with respect to Who's Who Worldwide?
18 A No, did not.
19 Q I think you indicated that there came a point in time
20 in April of 1995 where a hearing was conducted with
21 respect to the appointment of a trustee; is that correct?
22 A Yes.
23 Q And during the course of that hearing on behalf of
24 Reed, were you the attorney who called witnesses on behalf
25 of the creditor?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1028
Skalka-cross/Nelson
1 MR. WHITE: Objection.
2 THE COURT: Sustained.
3 Q Did you call any hearings during the course of that
4 hearing?
5 MR. WHITE: Objection.
6 THE
COURT: Sustained.
7 MR. NELSON: That's all I have.
8 THE COURT: Anything else?
9 MR. GEDULDIG: One or two, yes.
10
11 CROSS-EXAMINATION
12 BY MR. GEDULDIG:
13 Q Mr. Skalka, let me first ask you if you ever met
14 Postal Inspector Biegelman?
15 A Yes, I have.
16 Q On how many occasions have you met him?
17 A Once that I can recall.
18 Q Can you tell us approximately when that was?
19 A Approximately April 19th, 1995, when I appeared
20 before Judge Seybert. He was in court that day.
21 Q You met him in court?
22 A Yes, or out in the hallway.
23 Q Did you have any conversation with him regarding this
24 case?
25 MR. WHITE: Objection.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1029
Skalka-cross/Geduldig
1 THE COURT: Just yes or no.
2 THE WITNESS: Yes.
3 Q Can you tell us what was said between the two of
4 you?
5 MR. WHITE: Objection.
6 MR. TRABULUS: Objection, your Honor.
7 MR. GEDULDIG: I will withdraw the question.
8 Everybody is objecting.
9 Q You testified on direct examination about some logs
10 which were prepared as a result of the directive from the
11 Court; is that right?
12 A Yes.
13 Q And those logs pertained to two pieces of property,
14 the condo on Long Island, and the penthouse in New York
15 City; is that correct?
16 A That's correct.
17 Q Let me hand this up to you if I can. It is Exhibit
18 640, which I believe is the exhibit for those logs.
19 (Handed to the witness.)
20 Can you tell us what the purpose of the logs were
21 or are?
22 MR. TRABULUS: Objection, your Honor.
23 THE COURT: Overruled.
24 A The purpose was to advise Reed and the creditor's
25 committee, as to how the, both the condominium and
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1030
Skalka-cross/Geduldig
1 penthouse were being used in this time period.
2 Q When you say how they were being used, what do you
3 mean by that?
4 A Reed's position was that these properties did not
5 have an apparent business purpose, and that the creditors
6 of Who's Who Worldwide should not bear the expense or
7 exposure for these properties.
8 The company had argued that these properties did
9 have a business purpose, they were necessary for the
10 company's business, and this was as a result of our
11 discussions.
12 The company agreed to maintain these logs to
13 prove to the creditors that these properties were being
14 used for business purses.
15 Q So, there are entry dates and for each entry date
16 there is supposed to be a
business function relating to
17 that date; is that correct?
18 A Some description of what was going on there.
19 Q Okay.
20 I am going to ask you to turn to the log that
21 pertains to the condominium on Long Island, on Hummingbird
22 Road. And I will ask you to specifically look for the
23 entry for December 12th, 1994.
24 Would you tell us what is written for that
25 entry.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1031
Skalka-cross/Geduldig
1 A Under the column marked guests three names, Debra B,
2 Susan K, and Tracey Colletti, C O L E T T I.
3 Under the column marked occasion, there is a
4 description that reads planning, reception, Russian
5 members.
6 MR. GEDULDIG: No other questions, thank you.
7
8 CROSS-EXAMINATION
9 BY MR. WALLENSTEIN:
10 Q Good morning, Mr. Skalka.
11 A Good morning.
12 Q I am John Wallenstein, and I represent Martin
13 Reffsin.
14 When for the first time did you meet Mr. Reffsin?
15 A I believe in May of 1994.
16 Q And that is in connection with his appearance in the
17 bankruptcy court?
18 A Yes.
19 Q And you had some discussions with Mr. Reffsin at that
20 time?
21 A I don't know if I had direct discussions with him,
22 but as part of discussions with a lot of different
23 parties, he was there and he may have answered some
24 questions.
25 Q On how many occasions did you speak to Mr. Reffsin
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1032
Skalka-cross/Wallenstein
1 over the course of the bankruptcy proceeding or from then
2 to now?
3 A I would say several dozen.
4 Q And did you have discussions with him or did you hear
5 him state in any kind of context that he was, of course,
6 the accountant for the company?
7 A Yes.
8 Q And did he provide information with respect to the
9 company's funds?
10 A He provided them to me as counsel for Reed, and to
11 the bankruptcy court, yes.
12 Q And, in fact, the numbers, and the calculations that
13 he provided were checked by the attorney -- excuse me, by
14 the accountants for Reed and for the creditor's committee;
15 is that correct?
16 A They were reviewed by them, yes.
17 Q And did either the accountants for the creditor's
18 committee and for your client ever indicate that
19 Mr. Reffsin's calculations or projections were incorrect
20 or improper?
21 A They may have disputed his projections. But they
22 didn't find that they were -- there was a dispute of an
23 interpretation in them, and the projections. But they
24 didn't find anything improper.
25 Q And the dispute over the projections -- projections
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1033
Skalka-cross/Wallenstein
1 by their very nature is we think this is what will happen
2 next year; is that correct?
3 A Yes.
4 Q And, therefore, they are subjective to some degree?
5 A To some degree, yes.
6 Q And they are essentially an interpretation based upon
7 current numbers, and a projection of what we think is
8 going to be tomorrow's numbers?
9 A Yes.
10 Q And, in fact, do you know what the difference was
11 between -- withdrawn.
12 Do you know what the difference of opinion was
13 between Mr. Reffsin and the creditor's committee's
14 accounts?
15 A Generally, yes.
16 Q What were they?
17 A Generally we thought Mr. Reffsin's numbers on behalf
18 of the company was a bit
too optimistic as to what the
19 company's revenues would be, and we thought that some of
20 the company's expenses would be too high.
21 Q That's the actual number of expenses or the
22 projected?
23 A The projected.
24 Q His projected expenses were based upon current
25 expenses; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1034
Skalka-cross/Wallenstein
1 A To an extent. As I testified yesterday, some of the
2 expenses anticipated certain raises for people, and other
3 increased expenses related to the business.
4 Q Well, would it be fair to say that rather than his
5 projections were incorrect that you would have liked to
6 see the expenses less so you would have able to see more
7 money for the payment of the creditors?
8 A Generally, you say.
9 Q It is not a difference of opinion as to what the
10 expenses would be, it is more your wishful thinking versus
11 his?
12 A It was a dispute between the parties. We felt the
13 company's expenses were up too high, and he had
14 projections based on what his client told him, I assume.
15 Q We are not talking about numbers that got pulled out
16 of thin air, we are talking about expenses based on
17 reality, projections based on reality, what accountants
18 do, right?
19 A Yes.
20 Q And he testified at a number of proceedings in the
21 bankruptcy court; is that correct?
22 A Yes.
23 Q It was not formal questions and answers, he was
24 there, placed under oath and provided information to
25 counsel and the creditors and the Court; is that right?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1035
Skalka-cross/Wallenstein
1 A Yes. It was formal testimony.
2 Q Was t
here anything that he said that was untruthful
3 and improper?
4 A Not that I can recall or know about.
5 Q All right.
6 Had something struck you that way, you would have
7 certainly said something to somebody?
8 A Yes.
9 Q You never did?
10 A No. I am sure I cross-examined him and I may have
11 disputed his projections, but I don't recall making any
12 other issue other than that.
13 Q All right.
14 One of the things Mr. Reffsin provided to the
15 bankruptcy court was that schedule of loans that the
16 company made to Bruce Gordon; is that correct?
17 A I was not aware of that.
18 Q Let me rephrase that question.
19 One of the things provided to the bankruptcy
20 court was the rider to schedule F which provided the
21 schedule of loans of the company to Bruce Gordon?
22 A Yes.
23 Q And that's the rider to the statement of
financial
24 affairs connected to the bankruptcy petition, which is
25 Exhibit 610, I believe?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1036
Skalka-cross/Wallenstein
1 A That's correct.
2 Q Those were numbers that the company had indicated
3 were loans previously made to Mr. Gordon; is that correct?
4 A That's correct.
5 Q And they were characterized as such on the company's
6 books; is that correct?
7 A I don't know if they were on the company's books, but
8 they were characterized in the petition submitted to the
9 Court.
10 Q Did you ever review the company's books?
11 A I didn't, no.
12 Q Did your accountants or the creditor's committee's
13 accountants?
14 A Yes.
15 Q Did they find any discrepancy with respect to that?
16 A Those loans?
17 Q Yes.
18 A Not that I am aware of.
19 Q Would it be fair to say that it is not unusual for a
20 company of the size and structure of Who's Who Worldwide
21 to make loans to its officers?
22 A I have seen it before.
23 Q Roughly how many occasions have you seen it before?
24 A I have been involved in bankruptcy cases involving
25 companies of various different sizes. A company this size
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1037
Skalka-cross/Wallenstein
1 at the time, maybe roughly a quarter to a half of the
2 cases had some loans to officers reflected in
3 shareholders -- or shareholders reflected in the petition.
4 Q As far as you know, was there anything improper as to
5 that?
6 A Not on the face of it, no.
7 Q Now, when there is a loan on the books to an officer,
8 is it fair to say that there are a number of ways to
9 change that characterization?
10 Let me withdraw the question and try to make it
11 clearer. I see the puzzled look on your face. As I am
12 asking you, I am asking what does it mean.
13 You can pay back the loan and that removes it
14 from the loan column; is that right?
15 A Yes.
16 Q Or you can call it something else? You can call it
17 an advance, or call it income to that particular officer,
18 and it then becomes an expense of the corporation; is that
19 correct?
20 A Correct. It would no longer be an asset of the
21 corporation either.
22 Q In fact, a loan to an officer is carried on the books
23 of the corporation as an asset because it is money due to
24 the corporation; is that correct?
25 A And that is why it is shown as an asset on the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1038
Skalka-cross/Wallenstein
1 bankruptcy schedules.
2 Q And once it becomes converted to income, whether it
3 be called an advance or current salary, whatever you call
4 it, once you remove it from the loan column and call it
5 income to that officer, it then becomes an expense to the
6 corporation; is that right?
7 A I believe so.
8 I am not an accountant, but I believe so.
9 Q You do take it out of the asset column? It is
10 certainly no longer an asset once it is changed; as a
11 result?
12 A You could do that, right.
13 Q In the context of the bankruptcy, once the petition
14 is filed, and Who's Who was in the jurisdiction of the
15 bankruptcy courts proceeding, in order to convert to an
16 asset, specifically a loan to an officer, to something
17 else, be its expense or capital, whatever you want to call
18 it, it would require the permission of the bankruptcy
19 court?
20 A It is not requiring the permission of the bankruptcy
21 court. It would require the permission of the majority of
22 the creditors, and the creditors would have a problem with
23 a company doing that.
24 Q It is correct to say that a corporate asset could be
25 converted if it was in the ordinary course of business,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1039
Skalka-cross/Wallenstein
1 but if it was outside that, it would require either
2 approval of the Court or consent of the creditors?
3 A That's correct.
4 Q A transfer I am talking about a loan to an expense,
5 would be outside the normal course of business, and would
6 therefore require approval --
7 A From an asset to a loan?
8 Q Yes.
9 A Yes.
10 Q Now, there are two general categories of bankruptcy
11 filings; is that correct? Voluntary and involuntary?
12 A Yes.
13 Q And this particular Chapter 11 that Who's Who filed
14 was a voluntary proceeding; is that correct?
15 A Yes.
16 Q Can you explain to us the difference between a
17 voluntary and involuntary proceeding?
18 A Yes. Simply a voluntary proceeding is one in which
19 the debtor of the bankrupt company voluntarily files.
20 They file the petition, and file it with the Court seeking
21 relief. An involuntary proceeding is one in which
22 creditors of a company get together, usually three or
23 more, and file a petition with the Court, with the
24 bankruptcy courts, and ask that a particular company be
25 forced into bankruptcy.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1040
Skalka-cross/Wallenstein
1 Q In this case Who's Who went to the bankruptcy court
2 and said, help us, Judge, we need protection from all
3 these creditors, particularly Reed, which says we owe it
4 1.7 million dollars; is that right?
5 A That's correct.
6 Q And in order to put the company into involuntary
7 bankruptcy would one single creditor be able to do that?
8 A Only if the company had less than 12 creditors.
9 Q Was there -- withdrawn.
10 Do you know if there were any discussions at Reed
11 Elsevir between Reed and other creditors to put Who's Who
12 in involuntary bankruptcy at a time?
13 A I don't know that.
14 Q You were not privy to any such discussion?
15 A No.
16 Q Have you seen anything in the files of either Whitman
17 et al or your current firm to indicate that such
18 discussions ever took place?
19 A Not that I recall.
20 Q You yourself never had such a discussion with anyone
21 from Reed or any other law firms?
22 A No. By the time I got involved they were already in
23 bankruptcy.
24 Q You were not involved prior to the voluntary filing;
25 is that right?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1041
Skalka-cross/Wallenstein
1 A That is correct.
2 Q Let me call your attention to Exhibit 640, I
3 believe. I think you have it there. That's the fax from
4 Neil Ackerman with the logs?
5 A Yes, I do have it.
6 Q The fax cover indicates that the fax was sent to
7 Mr. Ackerman on December 23rd, to Mr. Bailey, your
8 partner?
9 A My former partner, yes.
10 Q Your partner at the time?
11 A Yes.
12 Q And to Mr. Kahn, who was the attorney for the
13 creditor's committee?
14 A Yes, that's correct.
15 Q And to you?
16 A That's correct.
17 Q On the bottom of the second page it says, and in the
18 body of the memo Mr. Ackerman prepared, cc Bruce Gordon
19 president, and Martin Reffsin C.P.A.; is that correct?
20 A Yes.
21 Q Do you know if Mr. Ackerman ever sent that fax to
22 Mr. Reffsin?
23 A I don't know.
24 Q Is there anything on this fax to indicate that it was
25 ever received by Mr. Reffsin or he ever saw it?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1042
Skalka-cross/Wallenstein
1 A No.
2 Q Do you know from any source as to whether or not
3 Mr. Reffsin ever received this fax?
4 A No.
5 Q Mr. Reffsin, as far as you know, was an independent
6 certified public accountant with his own office; is that
7 right?
8 A Yes.
9 Q And Who's Who was one of his clients?
10 A Yes.
11 Q Do you know -- do you know, as far as you know, he
12 did not maintain an office within the facility of Who's
13 Who; is that right?
14 A When I was
involved in the case, yes, that's true.
15 Q Now, with respect to Exhibit 641, and that's the
16 letter from Neil Ackerman at Rivkin Radler, addressed to
17 you, Tom Bailey, and William Kahn, September 8th, 1994.
18 That was a letter that was prepared by Mr. Ackerman; is
19 that correct?
20 A Yes.
21 Q Is it fair to say that at that point in time
22 Mr. Ackerman was a bit behind in providing information?
23 A Yes.
24 Q And that this letter was intended to remedy that
25 situation?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
1043
Skalka-cross/Wallenstein
1 A That's correct.
2 Q Do you know when he wrote it?
3 A No, I do not.
4 Q In fact, he indicated on a footnote on page 1, he
5 couldn't get around to writing it until just then because
6 of the holiday, Labor Day, the Jewish holidays and so
7 forth?
8 A That's correct.
9 Q And do you know whether he spoke to Mr. Reffsin prior
10 to writing this letter?
11 A I do not.
12 Q Particularly on the second full paragraph on page 3
13 of that letter, and I don't know if you have it, and there
14 is a reference, and let me read the reference there.
15 Is Mr. Reffsin, the debtor's accountant, is in
16 the process of attempting to calculate this amount,
17 referring to the amount that Mr. Gordon was alleged owed.
18 A I recall that.
19 Q His determination and all calculations in respect
20 thereof will be made available to the committee counsel
21 after it was completed. Do you recall reading that?
22 A Yes.
23 Q And do you recall as a fact at the time Mr. Reffsin24 was doing that, or Mr. Ackerman was simply buying time?
25 A I do not know.
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Skalka-cross/Wallenstein
1 Q Do you know whether or not Mr. Ackerman had requested
2 that Mr. Reffsin do that prior to Mr. Ackerman's writing
3 of the letter?
4 A I do not know.
5 Q At some point the creditor's committee, through
6 Mr. Kahn hired a form of accountants, Goldstein, Golub,
7 G O L U B, and Kessler, K E S S L E R.
8 A That's right.
9 Q And is it a fair statement that they, Goldstein et
10 al, confirmed the dates of the loans to Mr. Gordon from
11 the books of the company by virtue of their having
12 computerized every check of Who's Who Worldwide and the
13 other entities and analyzed the expenses?
14 A I don't recall receiving a specific report from the
15 Goldstein firm, specifically on that subject, no. It
16 doesn't mean they didn't do it. I don't recall getting
17 it.
18 Q Would it have been something they
should have done?
19 A It was within the framework of their retention. As
20 to whether they actually got to it or not, I don't know, I
21 do not know.
22 Q In the course of the discussions to resolve the
23 bankruptcy and to settle the bankruptcy proceeding,
24 Mr. Reffsin prepared certain projections you referred to
25 earlier, correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Wallenstein
1 A Yes, he did.
2 Q Part of those projections were for the plan which
3 involved a 100 cents on the dollar repayment; is that
4 correct?
5 A Yes.
6 Q He also prepared some numbers in connection with
7 proposed, a proposed settlement, where it was proposed
8 that Reed would receive 1.2 million to settle their 1.7
9 million dollars claim; is that correct?
10 A There were settlement discussions along those lines.
11 I don't recall specific documents prepared by
12 Mr. Reffsin. He could have done that. But it would have
13 presented to me through Mr. Ackerman. So I don't recall
14 them specifically being prepared by Mr. Reffsin.
15 Q In any event, Reed rejected that offer?
16 A It was not so simple as saying 1.2 from 1.7. There
17 were parts of the proposal that Reed was willing to accept
18 and parts rejected, and the settlement was never
19 consummated.
20 Q I take it that that is a yes?
21 A Yes.
22 Q Now, let me draw your attention to the logs discussed
23 here, I don't know if you still have them here?
24 A I do.
25 Q At whose request were those logs prepared?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Wallenstein
1 A If I testified that they were discussed at a
2 courthouse meeting August 9th
of 1994, I know that was
3 something that was requested by either -- I just can't
4 remember specifically who. It was either by myself,
5 Mr. Bailey, or Mr. Kahn, or a combination thereof.
6 Q That's a formal request on the record you mean?
7 A No, it was something discussed and negotiated in one
8 of the witness rooms of the bankruptcy court while we were
9 trying to resolve the series of motions scheduled to be
10 heard on August 9th. As part of those discussions we
11 proposed -- the company prepared these logs to see if
12 these properties were being used for a business purpose.
13 Q And that was because you felt that the properties did
14 not have a business purpose?
15 A That's right.
16 Q Is that was whose idea -- withdrawn.
17 From where did the initial suggestion come that
18 these properties were not being used for legitimate
19 business purposes?
20 A I think it was something that had been -- we were
21 concerned about from when I first saw the bankruptcy
22 petition, and I saw that there was a lease for a penthouse
23 apartment, and I suddenly found out that there was money
24 that a debtor had spent to buy a condominium. All those
25 things didn't seem to fit within the framework of a
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Wallenstein
1 company that was in the business of selling memberships.
2 Q Did you discuss that with anyone from Reed before you
3 proposed the creation of the logs?
4 A That issue, of whether these properties have a
5 business purpose?
6 Q Right.
7 A Yes.
8 Q Who from Reed did you discuss it with?
9 A My contact at that time was an in-house attorney at
10 Reed named Mark Seeley.
11 THE COURT: Mark?
12
THE WITNESS: Seeley, S E E L E Y. So I was
13 probably discussing it with him.
14 Q So, would it be fair to say then that the purpose of
15 the logs was to establish the business purposes of the
16 properties owned or leased by Who's Who Worldwide because
17 Reed Elsevir didn't like the way that Who's Who was
18 running the business?
19 A That was one of the factors, yes.
20 Q So, Reed decided that Who's Who couldn't have these
21 properties for whatever -- it wasn't appropriate for Who's
22 Who to have these particular properties in the context of
23 their membership business, because that was not the way
24 that Reed would run their business; isn't that right?
25 A My focus was to try to collect on this 1.7 million
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Wallenstein
1 dollars judgment. This condominium represented
2 essentially a million dollar asset, and if there was no
3 business to be sold, or if it could be sold it would bring
4 one million dollars into the creditors. So it was not
5 that it could be sold, but it was an asset there that
6 could be an asset for the creditors.
7 Q In fact, that property was an asset?
8 A Title of the property was in the name of Publishing
9 Ventures, Inc. So it wasn't an asset in the bankruptcy
10 estate.
11 Q So, do you recall at some point in the negotiations
12 of the creditor's committee, part of one of the deals that
13 was presented or one of the offers presented was in order
14 to protect the interest of the debtor, that they take a
15 mortgage from Publishing Ventures on that particular piece
16 of property?
17 A Yes.
18 Q And that would have protected Who's Who with respect
19 to that particular asset; isn't that correct?
20 A Yes.
21 Q And in fact, that property, even if it wasn't sold
22 could be rented for a fairly high rental, and that rent
23 could then become used for the creditors; is that true?
24 A My understanding, yes.
25 Q At the point in time, I believe you said August of
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Wallenstein
1 1994, there was a request that the logs be provided,
2 everyone understood that no logs had been kept up to that
3 point in time; is that correct?
4 A I believe so, yes.
5 Q And this was something that was going to be done in
6 the future?
7 A Yes.
8 Q Mr. Gordon was present and told of that particular
9 directive?
10 A He was in the room while all this was being
11 negotiated.
12 Q Was Mr. Reffsin present?
13 A I believe so.
14 Q Any details
given at that time as to how the logs
15 were prepared, to be prepared and any information kept on
16 it?
17 A At that meeting in general terms they were discussed
18 that they were to be kept at the property and on a daily
19 basis.
20 In a written stipulation that came out of that
21 meeting it is set forth in much greater detail.
22 Q It was to be presented to the Court back in
23 September?
24 A It was presented back in September, yes.
25 MR. WALLENSTEIN: No questions. Thank you,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Wallenstein
1 Mr. Skalka.
2 MR. NEVILLE: I have a couple of questions, your
3 Honor.
4 THE COURT: Yes, Mr. Neville.
5
6 CROSS-EXAMINATION
7 BY MR. NEVILLE:
8 Q Sir, my name is Jim Neville, and I represent Scott
9 Michaelson.
10 Yesterday
you were testifying about your hourly
11 rate; is that correct?
12 A Yes.
13 Q And you said your hourly rate was $225 per hour?
14 A Yes.
15 Q Does that include the travel time for you to come to
16 court here in the morning and go home at night?
17 A It does not.
18 Q So, your testimony is only the time that you are
19 actually on the witness stand testifying is when you
20 charge Reed Elsevir for your services; is that a fact?
21 A That's what -- that's a fact, yes.
22 Q And during the 20 minute break or so we took you are
23 not being paid for that time?
24 A You know, I have not discussed this with my client,
25 but I have been here since Tuesday. I don't think the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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Skalka-cross/Neville
1 client -- I am not going to submit a bill for the time
2 waiting to be called as a witness. The time I am actually
3 on the stand or between breaks, I might bill. I have not
4 discussed it with the client.
5 Q You said that your contact at Reed at the time of
6 this petition earlier on was Mark Seeley; is that right?
7 A Yes.
8 Q Who is your contact at Reed now?
9 A Henry Horbaczdwski.
10 THE COURT: How do you spell that?
11 THE WITNESS: H O R B A C Z D W S K I.
12 Q Where is he?
13 A His office is outside of Boston.
14 Q Have you ever had any contacts with anybody a part of
15 Reed Elsevir in Europe?
16 A No.
17 Q No contacts whatsoever?
18 A No.
19 Q And with who would you say you spent the most time, a
20 person from Reed Elsevir in discussing this entire case?
21 A Mark Seeley.
22 Q Is it fair to say that you and Mark Seeley had worked
23 intimately, very closely, hand in hand, in this case?
24 A Until September or October of 1995, when he was
25 transferred, frankly overseas.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
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1 Q Where did he get transferred to?
2 A I don't know. He was transferred out of Reed's
3 offices in Boston where Mr. Horbaczdwski was, and
4 Mr. Horbaczdwski became my contact.
5 Q He still works for Reed, as far as you know?
6 A I don't know.
7 Q You say transferred. What does that mean,
8 transferred?
9 A My understanding is he got a promotion within Reed,
10 which involved him moving, at least for a short period of
11 ti