7753 1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK 2 - - - - - - - - - - - - - - X 3 UNITED STATES OF AMERICA, : CR 96 1016(S-1) 4 v. : U.S. Courthouse 5 Uniondale, New York BRUCE W. GORDON, WHO'S WHO 6 WORLD WIDE REGISTRY, INC., : STERLING WHO'S WHO, INC., 7 TARA GARBOSKI, ORAL FRANK OSMAN, LAURA WEITZ, ANNETTE 8 HALEY, SCOTT MICHAELSON, : and MARTIN 9 REFFSIN, : TRANSCRIPT OF TRIAL 10 Defendants. :March 16, 1998 11 - - - - - - - - - - - - - - X 9:35 o'clock a.m.
12 BEFORE:
13 HONORABLE ARTHUR D. SPATT, U.S.D.J. and a jury 14 APPEARANCES: 15 For the Government: ZACHARY W. CARTER 16 United States Attorney One Pierrepont Plaza 17 Brooklyn, New York 11201 By: RONALD G. WHITE, ESQ. 18 CECIL SCOTT, ESQ. Assistant U.S. Attorneys 19 For the Defendants: NORMAN
TRABULUS, ESQ. 20 For Bruce W. Gordon 170 Old Country Road, Suite 600 21 Mineola, New York 11501
22 EDWARD P. JENKS, ESQ. For Who's Who Worldwide 23 Registry, Inc. and Sterling Who's, Who, Inc. 24 332 Willis Avenue Mineola, New York 11501 25 (cont'd)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7754
1 APPEARANCES (cont'd):
2 GARY SCHOER, ESQ. For Tara Garboski 3 6800 Jericho Turnpike Syosset, New York 11791 4 ALAN M. NELSON, ESQ. 5 For Oral Frank Osman 3000 Marcus Avenue 6 Lake Success, New York 11042
7 WINSTON LEE, ESQ. For Laura Weitz 8 319 Broadway New York, New York 10007 9 MARTIN GEDULDIG, ESQ. 10 For Annette Haley 400 South Oyster Bay Road 11 Hicksville, New York 11801
12 JAMES C. NEVILLE, ESQ. For Scott Michaelson 13 225 Broadway New York, New York 10007 14 THOMAS F.X. DUNN, ESQ. 15 For Mr Shortcuts, 150 Nassau Street 16 New York, New York 10038
17 JOHN S. WALLENSTEIN, ESQ. For Martin Reffsin 18 215 Hilton Avenue Hempstead, New York 11551 19
20 Court Reporter: HARRY RAPAPORT, CSR United States District Court 21 Two Uniondale Avenue Uniondale, New York 11553 22 (516) 485-6558
23 Proceedings recorded by mechanical stenography, transcript 24 produced by Computer-Assisted Transcription 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7755
1 M O R N I N G S E S S I O N
2
3 (Whereupon, the following takes place in the
4 absence of the jury.)
5 THE COURT: Mr. Trabulus.
6 MR. TRABULUS: There is an evidentiary question
7 concerning the admissibility of former testimony given by
8 Elizabeth Sautter.
9 Let me lay out what I believe is agreed by the
10 government and Mr. Gordon on this, and then your Honor can
11 rule on the admissibility of this.
12 Your Honor, I think the government is prepared to
13 agree that Elizabeth Sautter is unavailable. I have
14 spoken to her attorney, Mr. White has spoken to her
15 attorney. I am told if she were called to testify she
16 would assert her Fifth Amendment right on any substantive
17 question relating to Who's Who Worldwide.
18 I understand she is the subject of a grand jury
19 investigation.
20 Mr. White agreed that we don't have to go through
21 the formality of serving her with a subpoena and having
22 her assert her Fifth Amendment rights.
23 April 15th, 1995, Ms. Sautter testified at the 24 probable cause hearing held before Judge Seybert in the 25 civil forfeiture case. She was called by the claimants.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7756
1 She was
examined by the attorney for Who's Who Worldwide,
2 Vivian Shevitz. And she was cross-examined by Assistant
3 United States Attorney Gary Brown.
4 There are certain portions of her testimony which
5 are contained -- which is contained in the entirety in
6 Defendant's Exhibit GE for Identification.
7 I have taken those portions of her testimony
8 which I seek to introduce and outlined them with yellow
9 highlighter. And I have also curled the corners of the
10 page so your Honor in reviewing it can turn to those pages
11 readily.
12 THE COURT: What is the objection to the prior
13 testimony? That it was not taken under the same facts and
14 conditions that would be at the trial, or that the
15 government didn't have a full and fair opportunity to
16 examine the witness or what?
17 MR. WHITE: Your Honor, the government's
18 objection is under the rules the gove
rnment did not
19 have -- because of the specific posture of this hearing,
20 it didn't have the opportunity -- it had the opportunity,
21 but not the similar motive to develop the testimony during
22 the cross-examination and for this reason:
23 Mr. Trabulus is not 100 percent right that it was 24 part of the probable cause hearing. What this was is 25 after the government had made their seizure, was
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7757
1 challenged by Mr. Gordon, it ended up in front of Judge
2 Seybert on this day.
3 On this day, April 19th, Judge Seybert said there
4 is no need for a probable cause hearing.
5 Ms. Shevitz, Mr. Gordon's then attorney indicated
6 to Judge Seybert that she wanted to make a record that the
7 business was in fact shut down. Because as she explains
8 in here that would have triggered in h
er view a specific
9 doctrine in forfeiture law if the government shuts someone
10 down, I think it is called the Statewide Auto Parts case.
11 She said to Judge Seybert I need this testimony to take
12 the appeal.
13 The testimony is with respect to what the current
14 state of the business is on April 19th, 1995.
15 The indictment in this case ends on March 30th,
16 1995. So the government has two -- your Honor, the
17 testimony that Ms. Sautter gives with respect to what she
18 is doing in April of 1995 is not relevant. There is a
19 small part of it where she indicates prior to the
20 government's seizure it was their policy to give refunds.
21 That's the part that the government didn't have a similar
22 motive to cross-examine her about. Because Judge Seybert
23 said this has to do with what the current state of the 24 business is and not what they used to do bef
ore. So we 25 have a dual objective parts of it are irrelevant. Other
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7758
1 parts while relevant, the government didn't have a similar
2 motive to cross-examine.
3 THE COURT: I wish someone told me about this. I
4 know there is one case a key case, the Napoli case, which
5 was known for another fact. The fact that the trial judge
6 allegedly went into the jury room and told the trial
7 jurors to speed up their deliberations. Instead of
8 reversing on that ground, and I don't want to say why,
9 they picture on this former testimony that I believe that
10 became an issue and they went to the Supreme Court on
11 similar motive. And I would have liked to have taken a
12 look at that case.
13 MR. WHITE: I would like to take a look at it,
14 too.
15 MR. TRABULUS: I mentioned to Mr.
White I would
16 be seeking to do this, although I didn't say I would try
17 to do it this morning.
18 Your Honor, I believe the government did have an
19 attack on what Ms. Sautter was saying at the time, the
20 effect of the search and seizure ton if business. In the
21 course of doing that she said the lack of funds prevented
22 her or prevented the business from making refunds.
23 THE COURT: I have to take a look at the 24 transcript and take a look at the law. I certainly can't 25 make a decision on it now.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7759
1 MR. TRABULUS: Certainly.
2 Also the issue to the shutting down of the
3 business is relevant. It bears on the fact that
4 Mr. Gordon was unable to repay the loans.
5 THE COURT: You are bringing this in to show that
6 they made refunds?
7 MR. TRABULUS: Ye
s, and the business was
8 effectively shut down, and members were turned off to the
9 business by the publicity that they indicated they
10 demanded refunds about hearing about the raid, yes.
11 THE COURT: As far as the business being shut
12 down, that would be cumulative. It wouldn't be
13 necessary. There is evidence that the business was shut
14 down. A number of witnesses, as far as I recall,
15 testified to that. Has been repetitive and not relevant
16 really, as to whether the business was shut down or not.
17 This is a criminal case involving mail fraud and other
18 matters. It is not a lawsuit for damages. So whether the
19 business was shut down or not wouldn't be relevant. Even
20 if it were there is enough evidence as to that already.
21 You want to bring in about the refunds. Anything
22 else you want to bring in?
23 MR. TRABULUS: The refund policy and al
so members 24 were disaffected as a result of the raid and as a result 25 of that started demanding refunds.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7760
1 THE COURT: That's not relevant to this case.
2 How is that relevant to a criminal prosecution for mail
3 fraud, which is really that part of the case you are
4 talking about now?
5 MR. TRABULUS: It is relevant in several
6 different respects, your Honor. It is relevant in
7 showing -- I mean, the government has claimed that one of
8 the reasons that the loans were not loans is that there
9 was very limited repayment. And had the business been
10 successful or had the business been allowed to continue
11 the evidence will come out, there is some testimony going
12 to be adduced in the next couple of days that it was
13 anticipated at a certain point in time the company woul
d
14 generate enough income to pay Mr. Gordon a sufficient
15 amount to enable him to both repay the loans and meet his
16 tax liabilities.
17 THE COURT: That's a point. The business being
18 shut down and losing customers as a result of the raid,
19 which you say is relevant on the issue of the loans, which
20 is some of the tax charges.
21 Can I see that?
22 MR. SCHOER: Judge, I think it is also relevant
23 with respect to testing the credibility of the member 24 witnesses. 25 MR. TRABULUS: Right.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7761
1 MR. SCHOER: Because an argument could be made by
2 the defense that the reason that people were dissatisfied
3 was because the business was closed down; the benefits
4 were no longer available; the government notified them
5 that there was this criminal proceeding pe
nding. And I
6 think all those items could be argued and this is relevant
7 with respect to that.
8 MR. TRABULUS: May I hand your Honor Exhibit GE
9 which contains the testimony --
10 THE COURT: Yes.
11 (Handed to the Court.)
12 THE COURT: What is the rule involved,
13 Mr. White?
14 MR. WHITE: 804(b)(1).
15 THE COURT: It is a question of whether you had a
16 similar motive to develop the testimony by direct or
17 cross-examination. I would have to take a look at this.
18 And I believe the case is called Napoli, which I believe
19 went to the United States Supreme Court on this very
20 point, similar motive. I will have to take a look at it.
21 Ready to proceed?
22 MR. WHITE: One other issue.
23 Mr. Wallenstein informed me this morning that 24 Mr. Reffsin may testify today. He was not among the six 25 people that I was told would tes
tify either Monday or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7762
1 Tuesday. He has got a bunch of complicated accounting
2 charts I had intended for the government's expert witness,
3 Mr. Rosenblatt to be here for this, your Honor, when and
4 if Mr. Reffsin testifies.
5 I would guess if we could at a minimum put him
6 off until tomorrow, or at least put off the government's
7 cross-examination of him until tomorrow.
8 I assumed he would not be up because they listed
9 six other people who would fill up Monday and Tuesday.
10 THE COURT: What are we going to have today?
11 MR. WALLENSTEIN: Judge, I am prepared to call
12 two witnesses in addition to Mr. Reffsin this morning.
13 They are both present and in the witness room now. One is
14 a character witness. I don't anticipate he will be very
15 long.
16 The second o
ne, your Honor, Mr. Razzino, I don't
17 think will be a terribly long witness. I would anticipate
18 an hour tops of Mr. Razzino all combined. My direct is
19 not very long. After that my only witness is
20 Mr. Reffsin. I have no problem with that if he is put
21 over until tomorrow.
22 THE COURT: Do you have a witness here also,
23 Mr. Trabulus? 24 MR. TRABULUS: Yes, I have Mr. Mendelsohn, the 25 trustee in bankruptcy, he is served a subpoena duces
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7763
1 tecum. I don't know how many things he has here, but I do
2 have a tape as well.
3 THE COURT: Any other witnesses here?
4 MR. TRABULUS: I have nobody else beside.
5 THE COURT: We will proceed with Mr. Reffsin 6 today then.
7 I would suggest that you have somebody from your
8 office call Mr. Rosenthal --
9 MR
. WHITE: Rosenblatt.
10 THE COURT: Call Mr. Rosenblatt and have him come
11 here right away. We will proceed with Mr. Reffsin. If we
12 can put your cross-examination over until tomorrow to a
13 reasonable hour, if it can be done I will do it.
14 Otherwise we will go ahead with that as well.
15 MR. NEVILLE: It will work out, Sandra Barnes is
16 coming in tomorrow to testify. She will be here at 1:00
17 o'clock, she is flying in from Arizona.
18 MR. WHITE: You are saying it is good to put the
19 cross-examination over until tomorrow?
20 MR. NEVILLE: I am trying to help out as usual,
21 yes.
22 MR. WHITE: I want to make sure I understand the
23 ground rules. 24 I assumed since he wasn't among the six people 25 listed as witnesses for Monday and Tuesday, he wouldn't be
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7764
1 testifying Monday or Tuesday.
2 Are the ground rules now that the defendants can
3 say they are going to testify, or don't have to say they
4 are going to testify the next day?
5 THE COURT: I don't know what you mean by ground
6 rules. What ground rules are you referring to? I have
7 never put down any rules for the defendants as far as when
8 they should testify.
9 MR. WHITE: I understand that.
10 THE COURT: Where did you get the ground rules
11 from? These are the White ground rules?
12 MR. WHITE: Your Honor, all I meant is that you
13 had asked the defendants at my request to advise the
14 government of the witnesses they would call Monday and
15 Tuesday to follow the procedure that the government
16 followed. All I want to know is your Honor exempting from
17 that request the defendants themselves as witnesses? You
18 see what I mean?
19 THE
COURT: I have no requests, and no
20 exemptions. I have no rules where the defendants are
21 concerned.
22 I request that if they want to they can tell us.
23 They are under no obligation to do so at any time. It is 24 different from your rules in which I asked you 25 specifically to do it.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7765
1 MR. WHITE: I understand that.
2 THE COURT: The difference is the burden of proof
3 in the case, and the fact that the defendants don't have
4 to do anything. They can rest right now and/or any other
5 time. They can change their mind and decide to rest at
6 1:00 o'clock this afternoon.
7 MR. WHITE: I understand that.
8 THE COURT: There are no rules for them.
9 If they want to, and it will accommodate you,
10 they can tell you. But they can change the order of
11 witnesses an
y time they want.
12 MR. WHITE: That's the answer to my question.
13 THE COURT: I don't know where you got the ground
14 rules from. I never made any ground rules.
15 MR. WHITE: I didn't mean that they were your
16 ground rules.
17 All I am saying is I assumed since he wasn't
18 among the six listed that he wasn't going to be called.
19 You are telling me that it is okay for them to say we are
20 going to call these six people and then call somebody
21 else. If that's okay, then fine. I will know that from
22 now on.
23 THE COURT: It is okay because I never said 24 otherwise. 25 MR. WHITE: I wanted to make sure.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7766
1 THE COURT: You just misunderstood it.
2 THE COURT: I thought you asked them who they
3 would call, that they would give a complete answer rather
4 than an incomplete one. If your Honor is saying it
5 doesn't make a difference then I have learned a lesson.
6 MR. WALLENSTEIN: Without belaboring the point,
7 your Honor, Mr. White and I have informally discussed the
8 fact that Mr. Reffsin is going to testify. Obviously he
9 has no obligation to do so. Therefore I did not list him
10 as a witness because he is the defendant.
11 On the other hand Mr. White knew full well he was
12 going to testify in this case.
13 THE COURT: We are wasting a lot of time with
14 idle chatter. Are you ready to go?
15 MR. WALLENSTEIN: I have the two witnesses I am
16 ready to call. In view of Mr. Mendelsohn's presence and
17 Mr. Trabulus' need to talk to him, I will go through my
18 two and perhaps we can take a break so Mr. Trabulus can
19 put Mr. Mendelsohn on. And Mr. Reffsin has to be here
20 anyway.
21 THE COURT: You u
nderstand the law on character
22 witnesses as far as cross-examination, Mr. White? You are
23 familiar with the most recent cases on character 24 witnesses? 25 MR. WHITE: I am, your Honor, there is Oshatz and
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7767
1 you can't ask guilt-assuming hypotheticals.
2 THE COURT: The two key cases are United States
3 against Russo, 110 F.3d 938, and more recently United
4 States against Tamblu, T A M B L U, 134 F.3d 490 decided
5 this year.
6 MR. WHITE: I am aware of the law on
7 cross-examination of characters judge.
8 THE COURT: Very well. Bring in the jury.
9 MR. WALLENSTEIN: I will get my first witness,
10 your Honor.
11 (Whereupon, the jury at this time entered the
12 courtroom.)
13 THE COURT: Good morning, members of the jury.
14 Please be seated.
15 A
gain, you have been diligent and patient. And I
16 assumed since there are no parking spaces, you must have
17 parked in Hofstra University, or in the coliseum across
18 the street. Or perhaps you parked in the Court in
19 Mineola. I don't know where you parked. My goodness, I
20 hear there were a lot of cars out there. But since you
21 get there very early you don't have to worry about that.
22 When I got there there were only two cars in the parking
23 lot, the whole parking lot. 24 I want to thank you again. It is nice to see you 25 after this respite.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7768
1 We are going to continue with the defendant's
2 case, but just one minute.
3 (Whereupon, at this time there was a pause in the
4 proceedings.)
5 THE COURT: You play proceed.
6 MR. WALLENSTEIN: Your Honor, the defense ca
lls
7 John Hall.
8 THE CLERK: Raise your right hand.
9
10 J O H N H. H A L L, J R, ,
11 called as a witness, having been first
12 duly sworn, was examined and testified
13 as follows:
14
15 THE CLERK: Please state your name and spell your
16 last name for the record slowly.
17 THE WITNESS: John H. Hall, Jr., H A L L.
18 THE COURT: Have a seat, Mr. Hall.
19
20 DIRECT EXAMINATION
21 BY MR. WALLENSTEIN:
22 Q Mr. Hall, good morning.
23 Can you tell us what you do for a living? 24 A I am an attorney. 25 Q Where is your practice?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7769 Hall-direct/Wallenstein
1 A In Garden City. I am with the law firm, Shaw,
2 Licitra, Eserino and Schwartz, E S E R I N O.
3 Q And what is your status in the firm?
4 A I am a member.
5 Q That means you are a partner in the firm?
6 A Yes.
7 Q And do you have a particular area of specialty that
8 you practice?
9 A Yes.
10 Q And what is that?
11 A Bankruptcy.
12 Q And for how long have you been practicing law?
13 A Since 1989.
14 Q For how long have you been practicing bankruptcy?
15 A Since 1990.
16 Q And would it be a fair statement that a good portion
17 of your practice is here in the Eastern District?
18 A Yes.
19 Q And are you acquainted with attorneys and accountants
20 who are regularly involved in bankruptcy proceedings in
21 this district?
22 A Yes.
23 Q And do you know Martin Reffsin? 24 A Yes. 25 Q Can you tell us how you know Marty?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7770 Hall-direct/Wallenstein
1 A I met Marty about 1991 when I joined th
is firm, in
2 September of 1990. Marty was the accountant for a client
3 of the firm who had a number of bankruptcy Chapter 11
4 petitions filed.
5 Q And did you have an opportunity to work with Marty in
6 the beginning of 1991?
7 A Yes, I did.
8 Q And can you tell us on approximately how many
9 occasions you had an opportunity to work with him in
10 connection with bankruptcy proceedings?
11 A With respect to the initial cases or over the full
12 period of time.
13 Q Over the full period of time, from then until now.
14 A Initially Marty was the primary accountant for a
15 client of ours. I think we had six chapter 11 proceedings
16 pending. I was involved with that client for a period of
17 about a little over three years. During that time frame I
18 believe I worked with Marty almost daily. The client was
19 a large real estate developer. There we
re many accounting
20 issues, and Marty was involved day to day with those
21 bankruptcy proceedings.
22 After that situation ended I retained Marty for
23 my clients, or recommended them to my clients on a number 24 of occasions over the years. 25 Q Can you tell us, having worked with Marty over the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7771 Hall-direct/Wallenstein
1 years, what your opinion is of him as an accountant?
2 A Marty is a very professional accountant. He is very
3 astute. He is the type of accountant who can become
4 involved in books and records that are not organized and
5 not sufficient, and get down to the meat of the issue very
6 quickly.
7 Q And is he familiar with the tax laws as they pertain
8 to his accounting practice to your knowledge?
9 A To the best of my knowledge his comments with respect
10 to tax situations has been very good. It has been very
11 professional.
12 Q Now, would it be a fair statement, Mr. Hall, that the
13 function of an accountant who is working for a particular
14 client is to advance that client's position?
15 A With respect to his relationship to the client,
16 actually he is working for the client, so he would be
17 supporting the client's efforts.
18 Q As is the attorney, correct?
19 A As is the attorney.
20 Q Is it a fair statement that the accountant is not in
21 those respects an advocate for the Internal Revenue
22 Service?
23 A No, he is not. 24 Q Now, are you also familiar having worked with Marty 25 over the years, are you also familiar with other people
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7772 Hall-direct/Wallenstein
1 who have known Marty professionally?
2
A Yes, I am.
3 Q And have you had occasion from time to time to
4 discuss Mr. Reffsin with other people, attorneys,
5 accountants or others?
6 A Yes, I have.
7 Q And can you tell us whether or not he has a
8 reputation for truthfulness and honesty?
9 A As I said, he has the reputation as an accountant who
10 can go into a witness, take a look at the economic
11 situation as it relates to that business and come forward
12 with a truthful statement of the economic and financial
13 affairs of that business.
14 Q Would it be a fair statement that he has a good
15 reputation in the professional community for honesty,
16 veracity and truthfulness?
17 A Of the best of my knowledge he has.
18 MR. WALLENSTEIN: Thank you. No further
19 questions.
20 Your witness, Mr. White.
21
22 CROSS-EXAMINATION
23 BY MS. SCOTT: 24 Q Good
morning, Mr. Hall. 25 Now, you have testified that Mr. Reffsin is very
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7773 Hall-cross/Scott
1 professional and astute when it comes to evaluating
2 people's tax matters?
3 A I said with respect to all accounting, not
4 specifically tax.
5 Q Is it fair to say that you trusted Mr. Reffsin to
6 catch any errors that might have been made in a person's
7 accounting?
8 A That's usually why I would retain him or suggest that
9 he be retained by my clients because of his truthfulness
10 and his ability to take a look at records and accounting
11 systems and come to the meat of the situation.
12 Q And it was your belief that Mr. Reffsin always had
13 the capacity to see a mistake or an inconsistency in
14 accounting information that he was considering; is that
15 correct?
16 MR
. WALLENSTEIN: Objection.
17 THE COURT: Overruled.
18 MR. WALLENSTEIN: Form of the question.
19 THE COURT: Overruled.
20 A Yes.
21 Q Now, you stated that Mr. Reffsin impressed you as
22 someone familiar with the tax laws; is that correct?
23 A Yes. 24 Q And he had full knowledge of the requirements of the 25 tax laws to?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7774 Hall-cross/Scott
1 A The extent I would expect of an accountant, yes. Not
2 an attorney.
3 Q You also said that the accountant is an advocate for
4 the client that the accountant is representing; is that
5 right?
6 A Yes. I said that an accountant who is working for a
7 client is looking after his client's best interests.
8 Q Is it fair to say that Mr. Reffsin was a -- that he
9 worked zealously to further his client's interests?
10 A Yes.
11 Q Now, although an accountant is supposed to further
12 his client's best interest, nevertheless an accountant
13 should also provide accurate information regarding a
14 client's finances; is that correct?
15 A Yes.
16 Q Particularly an accountant should always provide
17 accurate information about the client's finances to the
18 Internal Revenue Service; is that correct?
19 MR. WALLENSTEIN: Objection.
20 THE COURT: Overruled.
21 A I would believe -- I would state, yes, an accountant
22 in respect to the numbers and figures they are working
23 with, that he should provide accurate information. 24 Q So that even if the client were telling the 25 accountant to provide false information, the accountant
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7775 Hall-cross/Scott
1 should nevertheless provide accurate inform
ation; is that
2 correct?
3 A Yes.
4 Q That's the accountant's duty; is that right?
5 A That's the accountant's duty.
6 Q Now, is it also fair to say that if a client requests
7 the accountant to do something illegal on behalf of the
8 client, that the accountant should make a full disclosure
9 and proceed in a legal fashion; is that correct?
10 MR. WALLENSTEIN: Objection.
11 THE COURT: As to the form, sustained. I don't
12 know what full disclosure means.
13 MS. SCOTT: I will move on.
14 Q Mr. Hall, are you familiar with the charges in this
15 case?
16 A Vaguely.
17 Q But you are not aware of any of the facts underlying
18 any of the charges, are you?
19 A Not to any great extent.
20 Q You don't have any personal knowledge of the facts
21 underlying --
22 A No, I do not.
23 Q You are not familiar with the governme
nt's proof in 24 this case, are you? 25 A No, I am not.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7776 Hall-cross/Scott
1 Q You have not been present in the courtroom over any
2 of the past nine weeks in this courtroom; is that correct?
3 A That's correct.
4 Q And so, you have not heard any of the testimony or
5 proof that has come out over the past nine weeks in this
6 trial, have you?
7 A I have not heard anything.
8 Q By the way, you were never a bankruptcy judge; is
9 that right?
10 A That's right.
11 THE COURT: Bankruptcy judge you said?
12 MS. SCOTT: I was clarifying a factual matter.
13 THE COURT: Not to my knowledge, he wasn't.
14 THE WITNESS: No, I wasn't.
15 MS. SCOTT: That's all I have.
16 MR. WALLENSTEIN: Thank you very much.
17 THE COURT: You have been almost promoted.
18
THE WITNESS: Thank you, your Honor.
19 THE COURT: I think it is a promotion anyway.
20 (Whereupon, at this time the witness left the
21 witness stand.)
22 THE COURT: You may proceed.
23 MR. WALLENSTEIN: I have to get my next witness. 24 I have no men in suits to help me. 25 THE COURT: Touche, Mr. Wallenstein.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7777
1 Right, Mr. White?
2 MR. WHITE: I guess I have to agree, your Honor.
3 (Whereupon, at this time there was a pause in the
4 proceedings.)
5 MR. WALLENSTEIN: Your Honor, the defense calls
6 Vincent Razzino.
7 THE COURT: Raise your right hand. Do you want
8 to rise, please.
9
10 V I N C E N T R A Z Z I N O ,
11 called as a witness, having been first
12 duly sworn, was examined and testified
13 as follows:
14
15 THE
COURT: Please be seated. State your full
16 name and spell your last name.
17 THE WITNESS: Vincent Razzino, R A Z Z I N O.
18
19 DIRECT EXAMINATION
20 BY MR. WALLENSTEIN:
21 Q Good morning, Mr. Razzino.
22 A Good morning.
23 Q Tells what you do for a living? 24 A I am a certified public accountant. 25 Q What is your present status? What is your present
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7778 Razzino-direct/Wallenstein
1 firm?
2 A I am a partner with Reffsin and Razzino.
3 Q And your partner is Marty Reffsin, the defendant in
4 this case; is that right?
5 A That's correct.
6 Q Can you tell us how long you have been a certified
7 public accountant?
8 A Since 1978.
9 Q Where did you go to school?
10 A Bernard Baruch college, City University of New York.
11 Q And from 1978
until the present, can you give us
12 briefly your professional history.
13 A Yes.
14 When I graduated from college I went directly to
15 the accounting firm of Peat Marwick Mitchell, P E A T.
16 THE COURT: Peat what?
17 THE WITNESS: Peat Marwick Mitchell, where I
18 spent nine years with the firm.
19 Q Is that a large accounting firm?
20 A At that time it was one of the big eight accounting
21 firms.
22 Q Can you tell us what the big eight accounting firms
23 are? 24 A What they are? 25 Q In layman terms?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7779 Razzino-direct/Wallenstein
1 A I guess they are the premier accounting firms in the
2 world, the largest.
3 THE COURT: Didn't two of them just merge?
4 THE WITNESS: Yes.
5 THE COURT: To become the very largest?
6 THE WITNESS: They have
become the big four, I
7 believe, at this time.
8 THE COURT: The big four, all right.
9 Q How long were you then with the big eight firm of
10 Peat Marwick?
11 A I spent nine years with them.
12 Q When did you leave them?
13 A In November of 1985.
14 Q What did you do when you left them?
15 A I joined one of their clients as CFO, the chief
16 financial officer.
17 Q And how long were you a CFO for that firm?
18 A For that firm, four years.
19 Q And after that?
20 A I spent the next two years with two other firms, two
21 other privately held companies.
22 Q Can you tell us what those companies were?
23 A One was a plumbing distributor. The other was a 24 provider of examinations for executives. 25 Q And subsequent to that?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7780 Razzino-direct/Wallenstein
1 A Subsequent to that I went to practice for myself.
2 Q You are familiar with the law firm of Rivkin Radler
3 and Kremer?
4 A Yes, I am.
5 Q And did you ever work for that firm?
6 A Yes, I did. I was their chief financial officer for
7 four years.
8 Q Can you tell us when you met Mr. Reffsin?
9 A I was introduced to Mr. Reffsin by a mutual friend in
10 I would say early 1994.
11 THE COURT: Early 1994?
12 THE WITNESS: Yes.
13 Q Did you begin at that point in time to work with him
14 on occasion?
15 A On occasion, yes, on a per diem basis I worked with
16 him.
17 Q And at some point the two of you decided to form a
18 partnership; is that correct?
19 A Yes. In July of 1995.
20 Q You have been partners since that time?
21 A Yes.
22 Q Now, in 1994, prior to the formation of the
23 partnership, you had occ
asion to work with Mr. Reffsin on 24 a per diem basis; is that correct? 25 A Yes, I did.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7781 Razzino-direct/Wallenstein
1 Q Did you have any occasion to do any work for
2 Mr. Reffsin's company with respect to a client known as
3 Who's Who Worldwide Registry, Inc.?
4 A Yes, I did.
5 Q Can you tell us what work you were doing for Who's
6 Who and just in general the time frame that you were doing
7 it?
8 A In general the time frame was from August of '94
9 through March of '95.
10 Q Did you have occasion to visit the offices of Who's
11 Who in Lake Success?
12 A Yes.
13 Q On how many occasions?
14 A There were a total of nine occasions in 1994.
15 Q And can you give us the inside and outside dates of
16 those occasions?
17 A The early parts of the four d
ays of that was in
18 August of 1994, and the balance was in November or
19 December, I would say split evenly between November and
20 December of 1994.
21 Q Is it a fair statement that you are familiar with
22 that because you reviewed your time sheets with respect to
23 it? 24 A Yes. 25 Q And are you acquainted with Maria Gaspar?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7782 Razzino-direct/Wallenstein
1 A I worked with her at the time I was at Who's Who on
2 site.
3 Q And she was an employee of Who's Who, correct?
4 A That's correct.
5 Q And would it be fair to say that she was the -- she
6 held the position of controller or chief financial
7 officer?
8 A I believe so. That was her title.
9 Q And did you have occasion -- can you tell us what her
10 function was with respect to the books of Who's Who
at
11 that time?
12 A She handled the day to day bookkeeping tasks of the
13 corporation.
14 Q Can you tell us what those are?
15 A She would handle the incoming checks, write deposits,
16 prepare checks, filing, that kind of a thing.
17 Q And when you would interact with her at Who's Who,
18 what was the purpose of your review?
19 A We would prepare a report on the six month activity
20 of the corporation.
21 Q Can you explain in non-accounting terms for those of
22 us who can't understand accounting terms.
23 A We had to put in financial statement form the 24 activity of the corporation for the six months. So it 25 would be reporting on their revenues or disbursements or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7783 Razzino-direct/Wallenstein
1 expenses.
2 Q Did you do a thorough review of the books at that
3 time, or were you relying on something else in the
4 preparation of your report?
5 A Normally in the level of service we were providing
6 for them we would rely on the work prepared by the client.
7 Q In this case it would be Maria Gaspar?
8 A Yes.
9 Q Did you have occasion while you were at Who's Who to
10 have conversations with Maria Gaspar?
11 A Yes, sure.
12 Q Did you have occasions when you were functioning your
13 functions with respect to the Who's Who books to evaluate
14 her work as a bookkeeper or an accountant at some level?
15 A Certainly we would see the results of her work.
16 Q Can you give us your evaluation of her work as a
17 bookkeeper?
18 A I found a number of errors when we went through the
19 bank reconciliations.
20 Q Can you describe some of those errors that you found?
21 A There were a number of occasions where
entries were
22 made opposite -- in an opposite direction of the way they
23 should have been. 24 Q Can you explain what you mean by that and what the 25 significance of that is?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7784 Razzino-direct/Wallenstein
1 A Well, if I can put it in layman terms, a revenue item
2 might be classified as opposite or negative expense item,
3 and vice versa.
4 Q Would it be fair to say that she classified money
5 coming in as money going out?
6 A That's fair.
7 Q That's layman terms for what you just said?
8 A Yes. But it wasn't just relegated to revenue type
9 items. Also on the expense side.
10 Q What type of other items were involved?
11 A Well, we had -- I am trying to recollect now. There
12 were maybe return items recorded in the wrong way.
13 Q Returns of goods?
14 A
Yes, goods and services, yes.
15 Q And when you -- withdrawn.
16 Were these the type of errors that one would
17 expect of someone who claimed to be the equivalent of a
18 certified public accountant?
19 A No. I wouldn't expect those.
20 Q Would it be fair to say that these are the types of
21 errors that would not even be made by someone with a solid
22 bookkeeping background?
23 A I think the errors -- I don't think you would expect 24 them from a solid experienced bookkeeper. 25 Q Is it fair to say that the types of errors that you
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7785 Razzino-direct/Wallenstein
1 determined Maria Gaspar made in the books of Who's Who
2 were the types of mistakes that would be made by someone
3 who was not a competent bookkeeper? Would that be a fair
4 statement?
5 A Yes, I think so.
6 Q We are not talking about a mistake made in adding a
7 column of figures that anybody can make? We are talking
8 about fundamental errors in classifying entries in the
9 books; is that correct?
10 A That's correct.
11 Q Did you ever have occasion to point out to her the
12 errors she was making to in essence criticizing her work?
13 A Yes. I pointed out every case of that that I came
14 upon.
15 Q And what was her reaction, if you can recall?
16 A Well, I put it to her very cordially. I don't think
17 she had very much of a reaction. I told her she needed to
18 make correcting entries.
19 Q You pointed out to her the specific errors she made?
20 A Yes.
21 Q Now, she was aware at that time -- withdrawn.
22 This was in August of 1994; is that correct?
23 A Yes. 24 Q And she knew at that time that you were acting on 25 behalf of Mr. Reffsi
n; is that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7786 Razzino-direct/Wallenstein
1 A Yes.
2 Q By the way, in giving us your background earlier, are
3 you familiar with the subspecialty, if you will, of an
4 accountant in litigation support?
5 A Yes.
6 Q Could you describe that for the jury?
7 A Many times an attorney will ask for help in gathering
8 information about a case, where they have a little
9 experience in financial matters. So you go in and examine
10 books and records, accumulate information, and put it into
11 a form that the attorney can use the support -- to
12 support the client's case.
13 Q Is it fair to say that that function involves taking
14 raw data sometimes from an adversary and putting it into a
15 form to be used in the context of litigation?
16 A Yes.
17 Q And to explain i
t so that even attorneys can
18 understand it? Would that be a fair statement?
19 A As difficult as that could be, yes.
20 Q And have you had occasion to perform litigation
21 support for attorneys on occasion?
22 A On occasion I have, yes.
23 Q And do you still do that from time to time? 24 A From time to time. 25 Q Are you familiar with the loan and exchange accounts
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7787 Razzino-direct/Wallenstein
1 as used in the books of Who's Who Worldwide in 1994?
2 A I certainly was privy to the accounting entries that
3 went through the account, yes.
4 Q Can you describe what a loan and exchange account is,
5 what its use is and function is on the books of a
6 corporation?
7 A Many times there are activities, either receipts or
8 disbursements of a company that management has not decide
d
9 quite what they want to do with it, if it is in the nature
10 of a loan to an officer, or what might ultimately become
11 compensation to an officer or employee. It is almost a
12 suspense time account.
13 Q What do you mean by suspense account?
14 A It is a holding case where you put monies which were
15 perhaps disbursed which were in the loan of an individual,
16 and upon subsequent facts might turn out to be
17 compensation. But normally a loan account is set up for
18 loans.
19 Q Would it be a fair statement also that a loan and
20 exchange account when used as a suspense account is a
21 place to record entries that the bookkeeper is not
22 otherwise familiar with at the time the entries are made?
23 A Many times a bookkeeper may not know what to do with 24 a particular transaction and they might put it into a loan 25 account, particularly if it is o
n behalf of an officer or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7788 Razzino-direct/Wallenstein
1 owner of a company.
2 Q And can you tell us what your function was with
3 respect, or the firm's function was with respect to the
4 loan and exchange accounts of Who's Who when doing the end
5 of the year books?
6 A We are not performing an audit, so we didn't go into
7 the underlying transactions in terms of whether -- what
8 the nature of them -- they were in particular.
9 Normally the client would come to us and tell us
10 that it was in fact a loan, which would then give us the
11 ability to leave it in that account as it is stated.
12 Q If the client said it was income it would go into a
13 salary or 1099 type account?
14 A If the client said it was income it would be
15 classified as income.
16 Q Would it be fair
to say in those circumstances the
17 accountant relies on the client's interpretation of the
18 underlying purpose of the entry rather than doing an audit
19 to determine what they really are?
20 A That's correct. You would not audit the
21 transactions. We are not engaged to do that.
22 Q If the client says it is a loan, we will pay it back,
23 you call it a loan and have no reason to inquire further; 24 is that correct? 25 A That's correct.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7789 Razzino-direct/Wallenstein
1 Q And so, you said you were not performing an audit.
2 Can you tell the jury what an audit is and under what
3 circumstances you would perform an audit?
4 A Well, an audit -- an audit is the highest level of --
5 the highest level of service that an accountant can
6 provide to a client. It really is looking at not o
nly
7 superficially entries, or looking at activity through the
8 eyes of the ledger, but you also go underneath those
9 transactions, you look at paper, documents to support the
10 transactions.
11 You look at more detailed records and you have to
12 give an opinion as to whether the company was in effect
13 fairly stating, or accurately stating -- technically, it
14 is fairly stating -- the results of the activity of the
15 corporation.
16 Q Under what circumstances would you audit the
17 corporate books?
18 A Audits are requested in a variety of situations.
19 They are required by law in many instances. Publicly held
20 companies, for instance, must be audit. Privately held
21 companies many times are not audited. They are only
22 audited if requested to do so by third parties. For
23 example, banks might ask them to have their statements 24 audit
ed or other creditors. Otherwise they are not very 25 common in privately held companies.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7790 Razzino-direct/Wallenstein
1 Q And Who's Who Worldwide was a privately held company;
2 is that right?
3 A As far as I was aware, yes.
4 Q And were you in the offices of Reffsin and Razzino in
5 January of 1996 when the offices were visited by postal
6 inspectors or other authorities?
7 A I don't recall if it was January specifically, but I
8 was in the office on one occasion when I was visited by a
9 postal inspector.
10 Q Was Mr. Reffsin present at that time?
11 A No.
12 Q Can you describe what happened.
13 A Well, I got a knock on the door. I asked who it
14 was. He identified himself as a postal inspector. So I
15 opened the door. Three gentlemen came rushing in. They
16 as
ked me who I was, where Mr. Reffsin was, and my -- what
17 my relationship was with Mr. Reffsin.
18 Q Can you describe your attitude?
19 A I tell you when gentlemen of that credentials come
20 into your office it is quite intimidating. I was
21 intimidated.
22 Q Do you recall the names of any of the individuals?
23 A Only one in particular. 24 Q And that would be? 25 A Mr. Biegelman.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7791 Razzino-direct/Wallenstein
1 Q And can you tell us what Mr. Biegelman said to you
2 and what Mr. Biegelman's attitude towards you was at that
3 time?
4 A I was very uncomfortable. As I said, he was
5 intimidating. He was very aggressive, not a very nice
6 man. That's all I can say about that. It wasn't a
7 pleasant experience.
8 Q And it would be a fair statement that you had nothing
9 whatsoever to do with whatever it was that he was looking
10 for at that time, and he didn't even want to talk to you,
11 he wanted to talk to Mr. Reffsin; is that correct?
12 A That's correct. He asked what my relationship was
13 and my involvement with Who's Who. And that was that.
14 Q Okay.
15 Would it be a fair statement that you have from
16 time to time in the course of your practice had some
17 involved with authorities from the Internal Revenue
18 Service?
19 A Yes.
20 Q And you participated in audits and examinations of
21 books of clients with the IRS?
22 A Yes.
23 Q And were those situations as intimidating as 24 Mr. Biegelman's visit? 25 A No, not at all.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7792 Razzino-direct/Wallenstein
1 MR. WALLENSTEIN: Thank you.
2 Nothing further.
3 MR. WHITE: Your Honor, may I proceed?
4 THE COURT: Yes.
5
6 CROSS-EXAMINATION
7 BY MR. WHITE:
8 Q Mr. Razzino, my name is Ron White. I am one of the
9 prosecutors in this case.
10 We have never met before, have we?
11 A No.
12 Q I want to ask you about your work with Maria Gaspar.
13 Now, that was for a very short period of time,
14 wasn't it?
15 A Yes. About four days in August, about 40 hours worth
16 of time, as I recall.
17 Q Now, you indicated -- let me make sure I understand
18 the process by which the books of Who's Who were being
19 prepared insofar as you could tell.
20 You said that Maria Gaspar would do stuff like
21 prepare the checks and note bank deposits and things like
22 that; is that right?
23 A Yes. 24 Q And she would make some sort of preliminary 25 indication, would she not, as to what
account those
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7793 Razzino-cross/White
1 expenses should go in?
2 A Yes. She would code the transactions.
3 THE COURT: She would what?
4 THE WITNESS: Code them to a particular account.
5 THE COURT: C O D E?
6 THE WITNESS: C O D E.
7 Q Now, you reviewed Mr. Gordon's loan and exchange
8 account, did you not?
9 A Not for specifics, no, not the specifics.
10 Q Now, after Maria Gaspar would code the accounts, you
11 or someone else from Mr. Reffsin's firm would come into
12 Who's Who periodically and review that; is that right?
13 A Yes.
14 Q And when you were doing that was anyone else working
15 with you?
16 A Yes.
17 Q And who was that?
18 A We had a couple of junior accountants who worked with
19 us.
20 Q Do you remember their names?
2
1 A Yes. One was Lori.
22 Q Lori Shekailo?
23 THE COURT: Spell that? 24 S H E K A I L O; is that right? 25 THE WITNESS: I believe so. To be honest, I do
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7794 Razzino-cross/White
1 not remember.
2 Q Who else did you work with?
3 A Bill Clark.
4 Q Did you ever work with a man named Michael Hynes,
5 H Y N E S?
6 A No, not at Who's Who.
7 Q Do you know that he did like you, per diem work for
8 Mr. Reffsin's firm?
9 A I understand that.
10 Q Okay.
11 Now, when you or someone else from Mr. Reffsin's
12 firm would go into Who's Who to review the books, you
13 would decide what account things went into, right?
14 A No.
15 Q If Maria Gaspar had improperly coded something, you
16 would correct the error, right?
17 A After discussion with the pr
oper individual at the
18 client.
19 Q Okay.
20 Give us an example of what you are talking
21 about.
22 A Well, the example would be with the loan account as
23 mentioned before, if I were to challenge an entry there 24 and asked a question about it, depending on the answers 25 that you would get, you would gather up as many facts as
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7795 Razzino-cross/White
1 you could about the nature of the transaction and then
2 discuss the appropriate accounting with the client before
3 you booked an entry to correct.
4 Q So I am confused.
5 Did you or did you not work on Mr. Gordon's loan
6 account?
7 A No, not in the specific transactions, no.
8 Q Well, as part of the review of the books, did you
9 review Mr. Gordon's loan account among others?
10 A No, I didn't.
11 Q So, you never reviewed anything at all to do with
12 Mr. Gordon's loan account?
13 A That's correct.
14 Q So, the example you just gave before was an example
15 and did not happen?
16 A Yes. An example.
17 I will give you one that did happen on security
18 deposits for example.
19 Q I just wanted to make sure I understand.
20 Once you had asked the relevant questions of the
21 relevant people, you make a determination, correct, of
22 what account it should be in?
23 A Generally we make the -- we advise the client as to 24 what we think the entry should be, the proper entry. 25 Q Okay.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7796 Razzino-cross/White
1 A It is usual with the client's acquiescence.
2 Q I want to know exactly what you are doing.
3 When you are at Who's Who Worldwide, you got an
4
entry that you think Maria Gaspar got down wrong. You go
5 and ask the relevant people what the facts are. You find
6 that out. Then what do you personally actually do?
7 A I prepare an entry and go over it with the client
8 before it actually gets handed to them --
9 THE COURT: Go over with the client before it
10 what?
11 THE WITNESS: Before it actually gets posted to
12 the books and records.
13 Q You said you went over it with the client. Who would
14 you go over it with?
15 A The first person would be Maria Gaspar. Most of the
16 questions I had were with Maria Gaspar.
17 Q And so, would it be fair to say that you would show
18 or explain to Maria Gaspar how she made an error and how
19 it should be in a different account?
20 A Yes.
21 Q Now, by the time you end up leaving is it fair to say
22 that as far as you can tell, everything is in the ri
ght
23 account now? 24 MR. WALLENSTEIN: Objection to the form of the 25 question.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7797 Razzino-cross/White
1 THE COURT: Sustained as to form.
2 MR. WHITE: Let me ask it a different way.
3 Q Did you correct any errors that you saw?
4 A We addressed every error that we saw, yes.
5 Q As far as you knew when you were finished doing the
6 books, they were as accurate as they could be?
7 A Yes.
8 Q So, therefore, then, if Maria Gaspar made any
9 mistakes you or somebody else from Mr. Reffsin's firm, in
10 all likelihood ended up correcting it?
11 A To the extent that we identified them, yes.
12 Q Is it correct one of the ways you would correct
13 things is by making adjusted journal entries?
14 A Yes.
15 Q That's where if she has it in a wrong column you make
16 an adjustment entry saying this should come out of column
17 A and go into column B; is that right?
18 A Yes.
19 Q And so, at the end of the year, December 31st of each
20 year, when you look at the books and records of Who's Who,
21 insofar as you could -- as you were concerned, they were
22 as accurate as could be; is that right?
23 A As far as -- yes, exactly. 24 Q Now, do you have any idea who if anyone give Maria 25 Gaspar instructions how to record things that you thought
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7798 Razzino-cross/White
1 were in error?
2 A I am not sure I understand the question.
3 Q Let me break it down.
4 You are there at Who's Who and you find an error
5 in Maria Gaspar's posting of something to an account; is
6 that right?
7 A Yes.
8 Q Do you have any idea if she did it on her
own or
9 somebody told her to do it that way?
10 A No.
11 Q Okay.
12 A Normally --
13 Q That's okay.
14 For example, you have no idea if Mr. Reffsin gave
15 her instructions how to record certain expenses of the
16 business, do you?
17 A No.
18 Q You don't know if Mr. Gordon gave her instructions
19 how to record items in the books and records, do you know?
20 A No.
21 Q Do you know what if any instructions Mr. Reffsin gave
22 to Mr. Gordon -- let me back up.
23 Do you know what instructions if any, Mr. Reffsin24 gave to Maria Gaspar how to record the company's statement 25 of Mr. Gordon's American Express bill?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7799 Razzino-cross/White
1 A No, I wouldn't be privy to that.
2 Q Talk about the loan and exchange account.
3 As you said before you
didn't have anything to do
4 with Mr. Gordon's loan and exchange accounts?
5 A No. It was there. The work papers were prepared.
6 But that wasn't my area.
7 Q Now, do you recall at Who's Who there was more than
8 one loan and exchange account?
9 A I believe so. I believe there was more than one.
10 Q There was one that was called Mr. Gordon's loan and
11 exchange account, and there were a couple of others,
12 right?
13 A I don't recall a couple of others.
14 Q Let me show you Government's Exhibit 661 in
15 evidence. And that's the trial balance for Who's Who
16 Worldwide for the end of the year 1993; is that right?
17 (Handed to the witness.)
18 A Yes.
19 Q Do you see the account 1200 where it says loan and
20 exchange BG?
21 A Yes.
22 Q And underneath that there is a whole series loan and
23 exchange accounts; is that correct?
24 A I see two others. 25 Q Take a look now at Government's Exhibit 662 in
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7800 Razzino-cross/White
1 evidence, which is the trial balance as of September '94,
2 and underneath Mr. Gordon's loan account are there other
3 loan and exchange accounts?
4 A Yes. There are three others.
5 Q Okay.
6 Would it suggest to you as a C.P.A. for almost 20
7 years that if items were specifically placed in
8 Mr. Gordon's loan account as opposed to some of the other
9 loan accounts that they were somehow attributable to him
10 as opposed to just up in the air?
11 MR. TRABULUS: Objection to form, your Honor.
12 THE COURT: Sustained.
13 Q Would it suggest to you that things that were put in
14 his loan account were there because they were attributable
15 to him?
16 A On the surface
the answer to that would be yes. But
17 that, of course, was subject to the bookkeeper putting it
18 there.
19 Q If it ended up in the general ledger each year,
20 that's because you and other people of Mr. Reffsin's firm
21 reviewed it; is that right?
22 A I don't know if those particular trial balances you
23 showed me were before or after our review. 24 Q But ultimately when you have the year end books, they 25 are after you and others from Mr. Reffsin's firm had
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7801 Razzino-cross/White
1 reviewed it; is that right?
2 A Not necessarily so. The client prepares a trial
3 balance at the end of the year. That trial balance is
4 usually the starting point of our review. So those trial
5 balances you showed me could be at the beginning of our
6 review process and not at the end.
7
Q Then you go and make your adjusting journal entries
8 and ultimately you decide what things go in what accounts;
9 is that right?
10 A We would review certain key accounts. If there are
11 errors we would discuss it with the client. Appropriate
12 adjustments would be recommended and made.
13 Q You said in response to Mr. Wallenstein that the
14 client would tell you if it were a loan or tell you if it
15 was income or compensation to him; is that right?
16 A It is a normal procedure.
17 Q And let me ask you, if a client told you that this
18 was a loan, you would presumably record it on the books as
19 a loan; is that right?
20 A Yes.
21 Q Now, if a client were borrowing a lot of money and
22 was already in debt up to his eyeballs and wasn't paying
23 it back regularly, would you begin to question as to 24 whether or not it was really a loan, even though
he told 25 you it was?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7802 Razzino-cross/White
1 MR. WALLENSTEIN: Objection.
2 THE COURT: Overruled.
3 Q You can answer the question.
4 A Could you repeat the question, please?
5 Q If a client was borrowing a lot of money and already
6 had millions of dollars in debt and it wasn't paying back
7 those loans to the corporation in any substantial amount,
8 would you begin to question as to whether or not they were
9 really loans, even if he told you that they were?
10 MR. WALLENSTEIN: Objection.
11 THE COURT: When you say "question", what does
12 that mean? In his mind or by doing something?
13 MR. WHITE: My question is, how would he
14 categorize it, as a loan or income?
15 THE COURT: Did you hear the question?
16 THE WITNESS: I did, and I have a question back.
17 I don't understand.
18 THE COURT: Listen, if you don't understand say
19 so and the lawyer will rephrase it.
20 You don't understand that?
21 THE WITNESS: Is this a hypothetical question?
22 Q Yes.
23 A Normally when you say he is up to his neck or 24 whatever in debt, is that corporate debt? Is this 25 personal debt?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7803 Razzino-cross/White
1 Q Let me break down the question for you.
2 You have someone who is the principal of a
3 corporation, okay.
4 Are you with me so far?
5 A Yes.
6 Q And he is borrowing money from his corporations, not
7 on one lump sum, but a rolling basis to pay his personal
8 expenses. Okay?
9 A Yes.
10 Q He has his company paying his American Express bills,
11 his car leases, his rent, okay?
12 That same person, it
s principal has millions of
13 dollars of personal debt to the Internal Revenue Service
14 and to a whole bunch of other parties.
15 Now, in reviewing the books you don't see any
16 substantial repayments of those amounts, okay?
17 So, you go to the client and ask him about it,
18 and he says, no, they are loans.
19 Now, under those circumstances, notwithstanding
20 the fact that he says they are loans, are you going to
21 record them as loans, or are you going to think of it as
22 income?
23 MR. TRABULUS: Objection. 24 MR. WALLENSTEIN: Objection. 25 MR. WHITE: Your Honor, this is
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7804 Razzino-cross/White
1 cross-examination.
2 THE COURT: One of the items in the hypothetical
3 question, I don't know if there was any evidence that he
4 was substantially in debt other tha
n to the IRS. I don't
5 know where you got that from.
6 MR. WHITE: Your Honor, it is listed on the 433's
7 that Mr. Gordon submitted.
8 THE COURT: What is listed?
9 MR. WHITE: Numerous other debts of tens of
10 hundreds of thousands of dollars.
11 THE COURT: What is the nature of the objection?
12 MR. TRABULUS: Mine was to form, your Honor.
13 THE COURT: In what way?
14 MR. TRABULUS: Also, your Honor, it assumed there
15 was no substantial repayment. I don't think that has been
16 established.
17 THE COURT: That objection is overruled.
18 Did you object, Mr. Wallenstein?
19 MR. WALLENSTEIN: Yes. My objection is that
20 number one, the hypothetical assumes he knows about the
21 personal debt. Number two, the form of the ultimate
22 question was: Do you record it as a loan after the client
23 tells you, or do you think it is income? And I don'
t 24 think it matters what he thinks. That's the basis of my 25 objection.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7805 Razzino-cross/White
1 THE COURT: That's the question, do you think it
2 is income?
3 MR. WALLENSTEIN: Yes.
4 THE COURT: Sustained.
5 MR. WHITE: I will change it.
6 Q Do you record that as a loan or do you record that as
7 income?
8 THE COURT: Well --
9 MR. WHITE: Your Honor, this is
10 cross-examination. I didn't interrupt their
11 cross-examination of other witnesses.
12 THE COURT: I think you did from time to time.
13 MR. WHITE: Not for questions like this, your
14 Honor.
15 MR. TRABULUS: My objection is that it is a
16 limited alternative, your Honor.
17 THE COURT: Mr. White, not only do they have a
18 right to do that. But they have an obligation to do it.
19 They have to do it.
20 MR. WHITE: Your Honor, I am just asking for the
21 same latitude that they have.
22 THE COURT: Whether you like it or not, just as
23 you did. 24 Now what is the nature of the objection? 25 MR. TRABULUS: Limited alternatives that it all
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7806 Razzino-cross/White
1 has to be recorded one way or another way.
2 THE COURT: Overruled.
3 Q Clear now?
4 Let me ask you the question.
5 Under those circumstances that I outlined, would
6 you record that as a loan or as income or compensation?
7 A Normally the clients indication that it is a loan
8 would be enough for it to remain as a loan on the books
9 and records of the company. If it is a matter of intent
10 of the client to repay. If it is his intention to repay,
11 then that's the way it would b
e classified.
12 Q Okay.
13 Are there ever circumstances that the facts may
14 indicate to you something different than -- let me
15 rephrase the question.
16 Q Would there ever be a circumstance that even though
17 the client told you he intended to repay it, the facts
18 were such that you would conclude that it wasn't really a
19 loan.
20 MR. TRABULUS: Objection.
21 MR. WALLENSTEIN: Objection.
22 THE COURT: Sustained.
23 Q Is it your testimony that under those circumstances 24 that I described before, if notwithstanding those, the 25 client says, no, that's the loan, you would still record
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7807 Razzino-cross/White
1 it as a loan? I wanted to make sure I understood your
2 question right.
3 A In your hypothetical example, yes, it would be a
4 loan.
5
Q Now, let me ask you a question.
6 If the client has substantial loans from his
7 corporations and is expecting to earn substantial amounts
8 from his corporation in compensation, such that they might
9 eventually cancel each other out, is the amount that he
10 expects to earn as compensation, would that be income?
11 MR. TRABULUS: Objection, your Honor.
12 THE COURT: Sustained.
13 MR. WHITE: I am not sure I understand why, your
14 Honor.
15 THE COURT: I don't understand the question.
16 Do you, Mr. Razzino?
17 THE WITNESS: No, I don't.
18 THE COURT: I didn't know what that meant. In
19 plain English.
20 MR. WHITE: I am sorry. I will rephrase it.
21 Q Let me use some numbers to be clear.
22 An individual owes the corporation let's say half
23 a million dollars. He expects sometime in the future that 24 his company will pay him compensation,
salary of 25 approximately half a million dollars, okay?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7808 Razzino-cross/White
1 A Okay.
2 Q Now, his intent is that at that time when they pay
3 him the half a million dollars -- when it comes time for
4 him to take the half a million, they would just cancel
5 each other out. He says, don't pay me the half a million,
6 but my debt to the corporation is cancelled out. Okay?
7 You are with me?
8 A So far.
9 Q Okay.
10 Now, the half a million that he expects in
11 salary, would that be income?
12 MR. TRABULUS: Objection. At what point in
13 time? Then or when he gets it?
14 THE COURT: I am assuming technically the company
15 makes a check out for 500,000, or would have made a check
16 out to the employee for 500,000, less deductions, or not
17 less deductions
, and the employee either pays the 500,000
18 back to the company, or says don't pay me the 500,000. I
19 assume that I earned it, but I am turning it over to the
20 company. That would be income to the man?
21 THE WITNESS: Yes, income to the individual at
22 that point when he earned it.
23 Q When he earned it, okay. 24 Now, let's take, if prior to the time he expected 25 to earn this money, he prepared a projection of his
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7809 Razzino-cross/White
1 income. If at the time he is preparing the projection he
2 expects to earn this money in the future, that should be
3 listed on that projection, right?
4 MR. WALLENSTEIN: Objection.
5 THE COURT: I think that that is very vague,
6 Mr. White. Sustained.
7 Q Well, again, let's use specifics then.
8 Let's take the year 1993, okay?
9 A Yes.
10 Q Sometime in the next five years the individual
11 expects he will earn this money from his corporation,
12 okay?
13 If in 1993 he is preparing a projection of his
14 income, should he list those amounts that he expects to
15 make in the next five years as income?
16 MR. WALLENSTEIN: Judge --
17 THE COURT: Can I hear that again, please.
18 I now know why I didn't become an accountant
19 among other reasons.
20 (Whereupon, the court reporter reads the
21 requested material.)
22 THE COURT: Do you know what that question
23 means? 24 THE WITNESS: I am very confused by that 25 question, Judge.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7810 Razzino-cross/White
1 THE COURT: I thought it was only me. All right,
2 sustained.
3 MR. WHITE: Let me try it again and in a
4 differe
nt way.
5 THE COURT: What do you mean by projection? Is
6 that a document?
7 MR. WHITE: Yes, your Honor.
8 THE COURT: Is a document in accounting called a
9 projection?
10 MR. WHITE: I will show him one that Mr. Reffsin 11 prepared.
12 THE COURT: All right, that will help.
13 Do you know what a projection is?
14 THE WITNESS: I have a good idea what a
15 projection is, your Honor.
16 THE COURT: Something about the future, right?
17 THE WITNESS: Yes, your Honor, it is about the
18 future.
19 THE COURT: Mr. Razzino, I don't remember all the
20 exhibits. Mr. White has this comprehension, he
21 remembers -- he has to, and I don't. So there may very
22 well be that there were projections in evidence that I
23 forgot about it. 24 Q Mr. Razzino, let me show you Government's Exhibit -- 25 THE COURT: Excuse me. You remember everythin
g
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7811 Razzino-cross/White
1 also, members of the jury.
2 Q 420-E for Edward, which is in evidence.
3 Is that part of a projection that -- that is part
4 of a projection that Mr. Reffsin submitted as part of
5 Mr. Gordon's offer in compromise to the IRS in August of
6 1993.
7 A Okay.
8 Q Do you see that?
9 At the top it has years ranging from 1991 to
10 1996; is that right?
11 A Yes.
12 Q And it talks about gross income in the line for
13 salaries, right?
14 A Yes.
15 Q And it projects Mr. Gordon's salary and gross income
16 out through 1996; is that correct?
17 A It appears to be doing that, yes.
18 THE COURT: What was the number of that exhibit?
19 MR. WHITE: 420-E, for Edward.
20 Q Now, using a specific example, if Mr. Gordon were
21 expecting to earn substantial compensation, such that --
22 let me withdraw the question.
23 If Mr. Gordon were to earn substantial 24 compensation that he was going to use to pay back his 25 loans from his corporations sometime between '92 and 1996,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7812 Razzino-cross/White
1 should that have been listed on this projection?
2 MR. WALLENSTEIN: Objection.
3 THE COURT: Overruled.
4 A Did you say this was prepared in conjunction with a
5 433-A?
6 Q Submitted as part of an offer in compromise.
7 My question is: This projection projects what
8 his income is, correct, or will be, rather?
9 A I assume. I don't see the assumptions. But my
10 assumption would be reading this, yes, that is what he is
11 projecting his income to be.
12 Q And that's the assumption that an IRS officer may
13 have when reading it; is that right?
14 MR. WALLENSTEIN: Objection.
15 THE COURT: Overruled.
16 A If it was used in conjunction with an offer in
17 compromise, I would say, yes.
18 Q Now, again, if money was anticipated to be earned by
19 Mr. Gordon in the years that are covered by this
20 projection, that should be listed under his income there;
21 is that right?
22 A I would think so, yes.
23 Q And it should be listed there as income even if it 24 was his intent to use that to pay back his loans from the 25 company, right?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7813 Razzino-cross/White
1 A Yes, I would assume so.
2 Q Now, you indicated that -- let me withdraw the
3 question.
4 Now, are you familiar with forms 433-A?
5 A No, I have never done one myself. I have done a
6 433-B, but not
a 433-A.
7 Q Are you familiar with Mr. Reffsin's handwriting?
8 A I think I would know it if I saw it.
9 Q If you can take a look at Exhibit 420-D, and if you
10 can look at the information there, everything except the
11 Bruce Gordon signature on the last page, and tell us if
12 you recognize that handwriting?
13 A Not absolutely, but it resembles Mr. Reffsin's
14 handwriting. I couldn't be absolutely sure.
15 Q Okay.
16 Let me show you 423 in evidence, and look at the
17 433-A form on top of that packet, that exhibit, and tell
18 us if you can recognize the handwriting on that.
19 (Handed to the witness.)
20 A I would say my answer is the same. It resembles
21 Mr. Reffsin's handwriting. I have not seen Mr. Gordon's
22 handwriting, so I don't know if that was his.
23 Q Now, in your review of the books and records for that 24 brief period in Who's Wh
o Worldwide, did you observe, 25 reflecting in those books, the payment by the corporation
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7814 Razzino-cross/White
1 of personal expenses of Mr. Gordon?
2 A Did I personally?
3 Q Yes.
4 A No.
5 Q If payments were made on behalf of the principal of a
6 corporation, and were then booked into this loan account,
7 that would be -- there be -- let me withdraw the
8 question.
9 At the time you were preparing and working on the
10 Who's Who Worldwide books, were you aware of the size of
11 Mr. Gordon's loan account?
12 A Yes, I believe so.
13 Q Do you remember approximately what it was?
14 A Gee, I would have to reflect on that for a minute.
15 Q Take your time.
16 A I am really trying to recollect. I believe it was a
17 couple of hundred thousand.
18 Q Now,
do you -- did you ever express any concerns to
19 Mr. Reffsin or Mr. Gordon that those loans could be
20 income?
21 A Never had a discussion. It was not my area. I
22 wasn't working on is it loan area.
23 Q Do you know if anyone else who worked for 24 Mr. Reffsin, like Mr. Hynes, ever had a discussion with 25 Mr. Reffsin where he said that he was concerned that those
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7815 Razzino-cross/White
1 loans were really income?
2 MR. WALLENSTEIN: Objection.
3 THE COURT: Can I hear the question?
4 (Whereupon, the court reporter reads the
5 requested material.)
6 THE COURT: Sustained.
7 Q Did Mr. Reffsin indicate to you that he felt he had
8 concerns that those loans were really income?
9 A Mr. Reffsin never had any such conversations with me.
10 Q Mr. Razzino, if you can take a
look at
11 Government's Exhibit 421 in evidence, which is in the
12 jurors' books, a letter from Mr. Gagliardi of the Internal
13 Revenue Service to Mr. Reffsin.
14 (Handed to the witness.)
15 Q If you can take a moment and read that to yourself,
16 Mr. Razzino.
17 A Okay.
18 Q Take a look at paragraph 6 of that letter, the one
19 that is numbered 6.
20 Those are items that Mr. Gagliardi is requesting
21 that Mr. Reffsin produce; is that correct?
22 A Yes.
23 Q And number 6 says -- let me back up. 24 Number 3 says, original cancelled checks and bank 25 statements for all accounts for which you are a signator
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7816 Razzino-cross/White
1 for the months of April through October of 1993, correct?
2 A Correct.
3 Q Now, if Mr. Gordon were the signator, not just on his
4 own personal bank account, but on other bank accounts as
5 well, would that fit in that category of paragraph 3?
6 A Yes.
7 Q Look at number 6, which says: Verification of all
8 monthly payments, if not paid by your personal check.
9 Do you see that?
10 A Yes.
11 Q Now, if Who's Who Worldwide were paying Mr. Gordon's
12 personal monthly bills, like his rent, like his cable
13 bill, like his American Express bill, would that fit under
14 paragraph 6?
15 MR. TRABULUS: Objection, your Honor.
16 THE COURT: On what ground?
17 MR. TRABULUS: Well, your Honor, I think it
18 assumes something which has no support in the record,
19 particularly with regard to the rent.
20 THE COURT: Overruled.
21 Q You may answer.
22 A I would say, yes.
23 Q And look at paragraph 9 where it says, copies of all 24 motor vehicle registrations --
25 A Excuse me, paragraph 9?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7817 Razzino-cross/White
1 Q I am sorry, it is on page 2. You have to take it out
2 of the plastic.
3 A Yes.
4 Q Paragraph 9 says: Copies of all motor vehicle
5 registrations, title certificates, and/or leasing
6 agreements for vehicles you own or operate. Do you see
7 that?
8 A Yes.
9 Q Now, if Who's Who were leasing a BMW or a Mercedes
10 Benz that Mr. Gordon was operating, would that fit under
11 paragraph 9?
12 A It says vehicles you own or operate. I suppose if
13 you operate, the vehicle should be listed there.
14 Q Now, how long do you say you have known Mr. Reffsin?
15 A Early 1994, January or February.
16 Q Now, would it surprise you to know that in response
17 to this letter, none of the things you just said were
18
responsive were actually given to the IRS by Mr. Reffsin?
19 MR. WALLENSTEIN: Objection.
20 THE COURT: Sustained.
21 Q According to the answers you just gave, if you were
22 answering this letter you would have given those things,
23 wouldn't have you? 24 MR. WALLENSTEIN: Objection. 25 THE COURT: Sustained.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7818 Razzino-cross/White
1 MR. WHITE: Your Honor, can I have one moment?
2 THE COURT: Sure.
3 We will take a ten-minute recess at this time.
4 Members of the jury, please do not discuss the
5 case. Keep an open mind.
6 (Whereupon, at this time the jury left the
7 courtroom.)
8
9 (Whereupon, a recess is taken.)
10
11 (The following takes place in the absence of the
12 jury.)
13 THE COURT: One of the jurors -- one or more?
14 THE CLE
RK: One, your Honor.
15 THE COURT: Said that on Wednesday I had stated
16 something about telling them on Monday approximately how
17 long the trial would take. They wanted to know if I could
18 give them any approximate idea of how long the trial will
19 take.
20 Can I give them an approximate idea?
21 MR. WALLENSTEIN: Your Honor, once Mr. Reffsin 22 has testified I have concluded. I don't know about
23 anybody else. I expect he will take the rest of today. 24 MR. TRABULUS: Your Honor, I think the defense 25 case will probably be over sometime on Wednesday or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7819 Razzino-cross/White
1 Thursday from what I can tell from speaking to other
2 counsel. I am not calling Ms. Barnes, but other defense
3 counsel are. She is not showing up here until tomorrow
4 afternoon, I understand.
5 THE COURT: Assuming that the defense case ends
6 by Thursday at the -- giving it the later date. We then
7 have to have motions and we have to go over the charge.
8 MR. TRABULUS: There could be a rebuttal case,
9 your Honor.
10 THE COURT: That's true.
11 I can safely advise them that they will not get
12 the case until sometime the following week. The
13 summations will take at least an hour or two, right?
14 MR. WALLENSTEIN: Two is better.
15 THE COURT: I mean all of them I am talking
16 about.
17 Figuring I will have to spend a good part -- at
18 least a half a day, maybe a day, going over the charge,
19 and assuming the case or the testimony ends next week, we
20 will have to either do this on Friday, which I can't do, I
21 don't think. So I will have to do it on Monday. So the
22 summations will be on Tuesday, and they will get the case
23 on W
ednesday. 24 I will tell them that by the end of next week 25 they will have the case probably.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7820 Razzino-cross/White
1 Let's bring them in.
2 MR. WALLENSTEIN: Judge, are you restricting our
3 time on summations?
4 THE COURT: Of course.
5 MR. JENKS: Are you giving each lawyer a time
6 limit?
7 THE COURT: A time limit? Of course.
8 MR. SCHOER: What is that going to be?
9 THE COURT: The answer is yes. That's
10 responsive, isn't it?
11 MR. WALLENSTEIN: Can you tell us what the time
12 limit will be?
13 THE COURT: No, not now. We will talk about it.
14 I will listen to every reasonable request and then do what
15 I want to do. So you better think about the period of
16 time that you want. I am going to give you a good period
17 of time -- at least my v
iew of what a good period of time
18 is. Which may not coincide with yours. You will have
19 adequate time to sum up. With ten lawyers and a lot of
20 repetition more than an adequate amount of time to sum
21 up.
22 THE CLERK: Jury entering.
23 (Whereupon, the jury at this time entered the 24 courtroom.) 25 THE COURT: Please be seated, members of the
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7821 Razzino-cross/White
1 jury.
2 One of your members spoke to Mary Ellen Kirschner
3 and said that the judge stated on Wednesday that on Monday
4 he would tell us approximately how long the trial would
5 take.
6 Now, I don't remember my exact words on
7 Wednesday, and I will not read them back now, but I
8 believe I did mention that I will try to give you an
9 approximate idea, always approximate.
10 I do not kno
w how long the trial will take.
11 My approximate estimate is that you will get the
12 case sometime next week, not this week. And probably,
13 probably it will be the latter part of the week. But it
14 could be earlier, or even it could be later than that.
15 Now, that's about all I can tell you,
16 approximately the latter part of next week you will have
17 the case.
18 Now, that means that all the testimony will be
19 over. I will have to go over with the lawyers my charge
20 on the law, which is long. It will probably take a day
21 for me to talk to them about that, and for which you will
22 not be here while that goes on. So there will be a hiatus
23 while you will not be here. The summations will take at 24 least a day. And then I will instruct you on the law 25 which will take the good part of a day also.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REP
ORTER 7822 Razzino-cross/White
1 So, my best estimate is the latter part of next
2 week. It could be later.
3 You see, I always leave myself a little room.
4 All right, you may proceed.
5 MR. WHITE: Thank you.
6
7 CROSS-EXAMINATION (cont'd)
8 BY MR. WHITE:
9 Q Mr. Razzino, if you can turn to Exhibit 420-E, like
10 in Echo, which is the projection that we were looking at
11 before.
12 Do you see that?
13 A Yes.
14 Q Do you see the heading starting with expenses and
15 payments?
16 A Yes.
17 Q And after that there is a whole series of various
18 expenses and debts that are owed by Mr. Gordon. Do you
19 see that?
20 A I see a list of expenses, right.
21 Q Do you see after other expenses, after cleaning and
22 withholding taxes, are payments to wife by court order?
23 A Yes. 24 Q O
utstanding judgments is the next line? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7823 Razzino-cross/White
1 Q And then required payments pursuant to agreement with
2 Justice Department; do you see that?
3 A Yes.
4 Q Am I correct that there are no loans from Who's Who
5 Worldwide to Mr. Gordon listed on that projection form?
6 A No, I don't see that.
7 Q There are other debts and obligations listed there;
8 is that right?
9 A Yes.
10 Q Just not that one.
11 Now, if you could turn to the front page of that
12 packet you have, which is Exhibit 420.
13 Now, I want to -- if you can follow along with
14 the second paragraph while I read it aloud.
15 Taxpayer is presently trying to clean up his life
16 and move forward. He is 60 years of age and he will never
17 be able to pay the substantial sums o
f taxes, penalties
18 and interest owed to the government. In addition, he is
19 liable for substantial amounts to other parties which he
20 will not be able to pay. We have prepared a projection of
21 income for the next five years. And even if he increases
22 his earnings substantially over the next five years, he
23 won't come close to earning enough to pay all his 24 obligations. Do you see that? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7824 Razzino-cross/White
1 Q Now, that projection that says he won't come close to
2 earning enough to pay all his obligations is the
3 projection we just looked at, right?
4 A If you say so. I don't know.
5 MR. WALLENSTEIN: Objection to the form of that
6 question.
7 MR. WHITE: I will withdraw it.
8 Q The language in the letter that I just read talks
9 about a pr
ojection of income, and it says that he won't
10 come close to earning enough to pay all his obligations.
11 That's what it says there, right?
12 A All of his obligations, correct.
13 Q Okay.
14 The projection you looked at before, 420-E,
15 doesn't list an obligation to Who's Who Worldwide, does
16 it?
17 A I don't see it there.
18 Q So is it fair to say that this letter is indicating
19 Mr. Gordon can't even pay those obligations listed on the
20 projection, much less anything else?
21 MR. WALLENSTEIN: Objection.
22 THE COURT: Can I hear that question,
23 Mr. Reporter. 24 (Whereupon, the court reporter reads the 25 requested material.)
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7825 Razzino-cross/White
1 THE COURT: I am troubled by the "much less
2 anything else." Sustained as to form.
3 MR.
WHITE: Let me ask the question without that
4 part.
5 Q Is it fair to say that this letter says that
6 Mr. Gordon will be unable to pay any of the obligations
7 listed on that projection?
8 MR. WALLENSTEIN: Objection.
9 THE COURT: Overruled.
10 A In the short period of time you have given me to look
11 at this, in the outer years there are positive cash flows
12 indicated.
13 Q Let's look at that, okay.
14 For 1994 -- I am sorry, for 1995, the positive
15 cash flow is a grand total of $11,000; is that right?
16 A $11,572.
17 Q For 1996 the grand total of the positive cash flow is
18 under $10,000; is that right?
19 A 9,357.
20 Q So, is it fair to say that if that -- let me back
21 up.
22 The positive cash flow is what a taxpayer has
23 left over after he has taken his salary, paid his taxes, 24 other monthly expenses, that
is what he has got left over, 25 right?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7826 Razzino-cross/White
1 A Normally, yes, that's the way it is projected.
2 Q As an accountant, is that what you understand it
3 means by net cash flow?
4 A Net cash flow in this context tells me after his
5 salary and expenses listed that he will have money left
6 over.
7 Q Okay.
8 Now, and so that money left over, ten or eleven
9 thousand dollars in those two years is everything he has
10 got left over, right, according to this projection?
11 A It says --
12 MR. WALLENSTEIN: Objection.
13 THE COURT: Overruled.
14 A Based upon the projection here, given the income and
15 the expenses listed, that's what it indicates, right.
16 Q All right.
17 And that's -- okay.
18 If someone had additional expenses, additiona
l
19 debts that they had to pay, like a loan to Who's Who
20 Worldwide, it would have to come out of what is left here,
21 this net cash flow; is that right?
22 A If that was his only source of income, his salary, I
23 would say, yes. 24 Q Right, right. 25 You said that in late '94, when you were looking
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7827 Razzino-cross/White
1 at the Who's Who books, Mr. Gordon's loan account was a
2 couple of hundred thousand dollars; is that right?
3 A That's my recollection, yes.
4 Q Is it fair to say that 11,000 one year and 10,000
5 another year, that's not going to put a big dent in a
6 couple of hundred thousand dollar debt?
7 MR. WALLENSTEIN: Objection.
8 THE COURT: Sustained as to form.
9 Q You said a couple, is that two, three, four --
10 A A couple of meaning two.
11 Q Two, taking that figure.
12 If Mr. Gordon took every last dollar listed here,
13 11 thousand one year, and nine thousand approximately
14 another year, and paid every dollar of that, 20 some odd
15 thousand dollars back to Who's Who, it would still be 1
16 tenth of what he owed; is that right?
17 A At that point in time, yes.
18 Q So, is it fair to say that if these, if these
19 projected figures are accurate, and as you said, they are
20 the only income and expense that he has, that he would not
21 be able to repay loans of say, $200,000 to Who's Who
22 Worldwide?
23 MR. WALLENSTEIN: Objection. 24 THE COURT: Overruled. 25 THE WITNESS: If that's the only income and these
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7828 Razzino-cross/White
1 are the only expenses, yes, he could pay a portion, and
2 not all.
3 Q And the portion, based on your own knowledge would be
4 a small one, right, about ten percent of it?
5 A Based on this, yes.
6 Q If you turn to 420, the cover page, follow along as I
7 read the last paragraph on page one.
8 In few of the circumstances discussed above, and
9 the fact that the taxpayer is over 60 years of age, he
10 wishes to attach the -- file the attached offer and
11 compromise. He has talked to various relatives. And
12 because of his age and desire to clean up his situation,
13 they have agreed to lend him some money. The offer
14 presented is based on the sum of money which he feels he
15 can borrow. He has no other assets.
16 On page 2 you see it is signed under penalty of
17 perjury by Mr. Gordon; is that right?
18 A Right.
19 Q Now, if at the time, in August of 1993, when this
20 letter was being written -- I am sorry, when this o
ffer
21 and compromise was being submitted, Mr. Gordon had the
22 ability to take loans from Who's Who Worldwide, then he
23 could have borrowed from other sources, couldn't he? 24 A I presume so, assuming he had people he could borrow 25 money from, yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7829 Razzino-cross/White
1 Q Okay.
2 What I am saying is, the letter references
3 borrowing money from relatives; is that right?
4 A Right.
5 Q And if in addition to the relatives, if at this point
6 in time Mr. Gordon had the capacity, the ability, to get
7 loans from Who's Who Worldwide, he could have in theory
8 have borrowed from the company, right?
9 A I don't know the financial well-being of the company
10 at that time. I don't know if they could have afforded to
11 lend him any money.
12 Q Okay.
13 But
if he were able to take such loans, he could
14 take them for whatever reason he wanted; is that right?
15 MR. WALLENSTEIN: Objection.
16 THE COURT: Sustained.
17 Q If you assume for the moment that he had the capacity
18 to take those loans, they could be used, for example, to
19 pay the IRS, right?
20 MR. WALLENSTEIN: Objection.
21 THE COURT: Overruled.
22 A I would say yes, if he had the capacity.
23 Q If he had the capacity, he could borrow money to buy 24 Armani suits; is that right? 25 A I suppose if he could borrow money he could borrow it
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7830 Razzino-cross/White
1 for whatever purpose.
2 Q Once he has borrowed it, he could spend it for
3 however he wants you are saying; is that right?
4 A I would assume so, yes.
5 Q If he could borrow it to buy an Armani suit,
he could
6 borrow it to pay back the IRS, too, right?
7 A I suppose so.
8 Q And, so, when it says here the offer presented is
9 based on the sum of money that he feels he could borrow,
10 and it is talking about what he can borrow from his
11 relatives, it doesn't mention that he can also borrow it
12 from the company to pay back the IRS; is that right?
13 A It doesn't say that here.
14 Q Exactly. It doesn't say he could borrow it from the
15 company, does it?
16 A It says he has talked to relatives, various relatives
17 it says here.
18 Q If you can turn to 420-D, which is in that packet.
19 Now, that's the form 433 that we looked at
20 before.
21 A Yes.
22 Q Now, I want to ask you about several of the items on
23 this. 24 First of all where it says box number 1, 25 taxpayer's name and address. Do you see that?
H
ARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7831 Razzino-cross/White
1 A Yes.
2 Q And as an accountant, you are familiar with IRS
3 forms, correct?
4 A A great many of them, yes.
5 Q And is it fair to say that where it asks for your
6 name and address, you are supposed to put your current
7 address?
8 A You put an address where you could be reached.
9 Q Okay.
10 If you look at the last page of this form can you
11 tell us when it was signed by Mr. Gordon?
12 A July 8th, 1993.
13 Q And the address listed there is 10 Bluff Road in box
14 1; is that right?
15 A Yes.
16 Q Let me show you Government's Exhibit 618, which is in
17 evidence, a lease of a condominium unit for 10 Bluff Road
18 in Glen Cove, where Mr. Gordon is the tenant. And let me
19 ask you to take a look in this middle box and tell me when
20 it
says that that lease ends?
21 A It says term 18 months, beginning June 1, 1991, and
22 ending November 30th, 1992.
23 Q November of '92? 24 A Yes. 25 Q And that's about eight months prior to the form that
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7832 Razzino-cross/White
1 you just saw; is that correct?
2 A The original -- yes, it is 8 months, if there are no
3 extensions to the lease.
4 Q Let me show you Government's Exhibit 617, which is
5 evidence, a group of checks to the landlord of 10 Bluff
6 Road.
7 (Handed to the witness.)
8 Q Could you look at the last check in that package and
9 tell us the date on that.
10 A The last check I am looking at is number 1634, dated
11 November 25th, 1992, for $4,500.
12 Q So, the last rent check is November of 1992, some 8
13 months before this form is even fill
ed out; is that right?
14 A Yes.
15 Q Okay.
16 If you can turn to the next page of the 433 form,
17 and this is Exhibit 420-D --
18 A I am not with you.
19 Q I am sorry.
20 I will take it back out of your way.
21 Now, that page three of that form, look at box
22 18. It asks for securities, parenthesis, stocks, bonds,
23 mutual funds, money market funds, government market 24 securities, etcetera, close quote. 25 Do you see that?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7833 Razzino-cross/White
1 A Yes.
2 Q Now if somebody owned 75 percent of a company, should
3 that be listed in that box?
4 MR. WALLENSTEIN: Objection.
5 THE COURT: On what ground?
6 MR. WALLENSTEIN: The witness has not testified
7 that he is familiar with this form. He has in fact
8 testified that he has never filled o
ut one of these
9 forms. There is no indication that the instructions are
10 anywhere in evidence. We don't know what is supposed to
11 be in that box.
12 THE COURT: Mr. Razzino, looking at this form
13 which you say you have not seen before, and that you are
14 not familiar with, if you look at box 18 and the notation
15 for what box 18 is supposed to list, could you then answer
16 the question?
17 THE WITNESS: Based on my experience, not with
18 this form, but with others, this normally is referring to
19 investment securities.
20 THE COURT: Like in the stock market?
21 THE WITNESS: Stock market type investments.
22 Q Now, are you saying, Mr. Razzino, that to be listed
23 on that form you have to own shares in a publicly traded 24 company? 25 A I didn't say that. I said to me when I read
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
7834 Razzino-cross/White
1 securities, stocks, bonds, mutual funds, it normally
2 connotes to me investments in mutual funds, publicly
3 traded securities, or privately traded securities.
4 Q If someone invested money to start a company and
5 thereafter owned 75 percent of it, wouldn't that fall into
6 that category?
7 A It depends on what there is on the form. There is
8 normally another place to put it.
9 Q Okay.
10 Let's take a look at the other place. Look at
11 the next page; line 22, where it says securities, right?
12 A Is that the same securities we just referred to?
13 Q It says from line 18?
14 A A summary number, yes.
15 Q You are supposed to list your equity in the asset,
16 right?
17 A It has a column for equity in the asset, that's
18 right.
19 Q Now, if you owned -- so, should it -- if you owned 75
20 percent of a company that had some value -- let me
21 withdraw the question.
22 If you owned 75 percent of the shares of a
23 company, should it be listed in that box 18, line 22? 24 A It could be listed elsewhere. 25 Q Okay, but it should be listed, is that right, if it
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7835 Razzino-cross/White
1 is an asset?
2 A I think if you have a personal asset it should be
3 listed someplace, yes.
4 Q Look down on page 3, 28, there is another catch-all
5 category, right, other assets?
6 A Yes, correct.
7 Q Suppose the business were worth -- let's pick a
8 figure, a half a million dollars, and you owned 75 percent
9 of that business, that was the equity in the business, 75
10 percent of that figure, that should go somewhere, right?
11 A Yes.
12 Q Okay.
13 Box 28, it
says other liabilities there; is that
14 right?
15 A Yes.
16 Q Now, if you own -- if an individual owed his
17 corporation money, had a loan from them, and actually was
18 supposed to pay it back, that's a liability of his; is
19 that correct?
20 A Yes.
21 Q And liabilities should be listed in this form under
22 box 28; is that correct?
23 A That depends. 24 Q Okay. 25 A If in the assets that you referred to he has already
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7836 Razzino-cross/White
1 considered the loans, then you wouldn't want to double up.
2 Q Let me back up and see if I understand that.
3 If irrespective of how much the company is worth,
4 the individual owes that company money and has to pay it
5 back, then that should be listed as a liability; is that
6 right?
7 A If you want to gr
oss it up on both sides, the answer
8 is yes, you show the liability on one side, yes. And you
9 show the asset reduction on the other side, because the
10 loans would show up as an asset of the corporation. Do
11 you follow? The loan itself is an asset of the
12 corporation.
13 Q I do.
14 A Presumably he owns 75 percent of that given your
15 example.
16 Q Now, is it correct though that neither the ownership
17 of the corporation nor that -- nor any such liability is
18 reflected on this form?
19 A I don't see either, no.
20 Q If you did it the way you suggested to make it
21 balanced, they should both be listed; is that right?
22 A If you were going to gross them out, yes.
23 Q In fact, neither are listed, right? 24 A I don't see them here. 25 MR. WHITE: Your Honor, may I have just one
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT RE
PORTER 7837 Razzino-cross/White
1 moment?
2 THE COURT: Sure.
3 (Whereupon, at this time there was a pause in the
4 proceedings.)
5 Q Mr. Razzino, if you can turn to page 4 of that
6 document where it says necessary living expenses.
7 A Yes.
8 Q And let's look at line 42 that talks about rent. Do
9 you see that?
10 A Yes.
11 Q Now, is it your understanding that a taxpayer is to
12 provide his actual expense on this form?
13 A I never really studied the rules on this form. I
14 have never prepared one.
15 Q Okay.
16 Mr. Razzino, have you ever been involved in your
17 career as representing someone before the IRS?
18 A Yes.
19 Q And have you ever done that in connection with any
20 collection matter?
21 A No.
22 Q Have you ever done it in connection with any audit
23 type matter?
24 A Yes. 25 Q Now, in the audit matters when you represented
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7838 Razzino-cross/White
1 someone before the IRS did they actually fill out one of
2 those power of attorney and declaration of representative
3 forms?
4 A Yes.
5 Q And when you do that, is it fair to say that you are
6 fully empowered to act on behalf of the taxpayer in the
7 areas that he specified?
8 A In the areas that the client specifies, yes.
9 Q And he does that on a form, right? The client does
10 that on a form?
11 A Correct.
12 Q And if you take a look at 420-C, that's the form,
13 right?
14 A 420-C?
15 Q Yes, C. It should be before the thing that you are
16 looking at right now.
17 A Yes, that's the form.
18 Q Now, when someone represents a taxpayer to the IRS
19 they o
bviously represent the taxpayer's interest; is that
20 right?
21 A We are advocates for our clients.
22 Q Now, is it correct, though, that the representative,
23 of course, still has an obligation to provide the IRS with 24 accurate information when they ask for it? 25 A Absolutely.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7839 Razzino-cross/White
1 Q So, he can advocate based on the true facts, but he
2 can't give the IRS untrue facts; is that fair?
3 A That's fair.
4 Q So, he always has to operate within the constraints
5 of giving the IRS fair and accurate and complete
6 information; is that right?
7 A That's correct.
8 Q And once the IRS has the fair and accurate and
9 complete information, then they can negotiate, they can
10 dicker over how much the taxpayer owes or should pay; is
11 that right?
12 A Yes.
13 MR. WHITE: Your Honor. I have no further
14 questions.
15 THE COURT: Any redirect?
16 MR. TRABULUS: Your Honor, I have some questions
17 before redirect.
18 THE COURT: Yes, surely.
19 MR. TRABULUS: I would like to confer briefly
20 with Mr. Wallenstein.
21 (Mr. Trabulus confers with Mr. Wallenstein.)
22
23 24 25
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7840 Razzino-cross/Trabulus
1 CROSS-EXAMINATION
2 BY MR. TRABULUS:
3 Q Good morning, Mr. Razzino. We met briefly a few
4 weekends ago; is that right?
5 A Yes.
6 Q Even then we didn't discuss the facts of the case,
7 did we, you and I?
8 A That's correct.
9 Q Mr. Razzino, when you were dealing with Maria Gaspar
10 and advising her of some of the entries she had made were
11 erroneous, su
ch as registering an expense as earnings, and
12 vice versa, did she ever tell you that Mr. Gordon told her
13 to do that?
14 A No.
15 Q Now, did you yourself in the work you did have any
16 conversations directly with Mr. Gordon when you were at
17 Who's Who Worldwide concerning the accounting issues that
18 you were dealing with?
19 A No.
20 Q You were asked one question in particular in which
21 Mr. White asked you about what should have been done if
22 Who's Who Worldwide was paying Mr. Gordon's rent. And I
23 am going to show you portions of my copy of what is marked 24 as Exhibit 759 in evidence. 25 I am going to just show you a check number 115
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7841 Razzino-cross/Trabulus
1 for $2,000 payable to Publishing Ventures, Inc., April
2 1st, 1993.
3 On whose account is
that drawn?
4 A It is drawn on National Westminster Bank, Bruce
5 Gordon, personal account.
6 Q It is not drawn on the account of Who's Who
7 Worldwide?
8 A No.
9 Q Just taking another check, November 30th, 1993, to
10 Publishing Ventures, $2,000, the account is also that of
11 Bruce Gordon?
12 A Yes.
13 MR. TRABULUS: I have no further questions.
14
15 REDIRECT EXAMINATION
16 BY MR. WALLENSTEIN:
17 Q Mr. Razzino, Mr. White asked you some questions with
18 respect to the form 433-A, the collection information
19 statement which is in evidence here; is that correct?
20 A Yes.
21 Q And that would be Government's Exhibit 420-D.
22 A Yes.
23 Q Is that correct that IRS forms such as this come with 24 instructions to tell you, or the taxpayer, how to fill it 25 out or explain problem areas?
HARRY RAPAPO
RT, CSR, CP, CM OFFICIAL COURT REPORTER 7842 Razzino-redirect/Wallenstein
1 A That's fair to say. Mostly all come with some sort
2 of instructions.
3 Q Some sort of instructions, correct?
4 A Yes.
5 Q Would you take a look, please, at what has been
6 marked as Defendant's Exhibit ED, Echo Delta?
7 THE COURT: In evidence?
8 MR. WALLENSTEIN: No, identification.
9 (Handed to the witness.)
10 MR. WALLENSTEIN: I have a copy for the Court as
11 well.
12 (Handed to the Court.)
13 Q Have you seen that form before?
14 A Maybe in passing. I never had to refer to it.
15 Q Would you take a moment to look it over? And would
16 you tell me, does that appear to be an Internal Revenue
17 Service Form?
18 A Well, it does have the Department of Treasury,
19 Internal Revenue Service logo. It appears to be an IRS
20 form, yes.
21 Q You are familiar with IRS forms, and that's the way
22 they look, correct?
23 A Yes. 24 Q On the top it indicates that it is for Form 433-A; is 25 that correct?
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7843 Razzino-redirect/Wallenstein
1 A Correct.
2 Q And that's the form we are referring to,
3 Government's Exhibit 420-D?
4 A Yes, that's correct.
5 Q And would it be fair to characterize this Exhibit,
6 ED, as instructions for the preparation of Form 433-A?
7 A Yes, fair.
8 MR. WALLENSTEIN: I offer that in evidence.
9 THE COURT: Any objection?
10 MR. WHITE: May I have a moment to speak to
11 Mr. Wallenstein?
12 THE COURT: Sure.
13 (Mr. White confers with Mr. Wallenstein.)
14 MR. WHITE: Your Honor, I have no objection.
15 THE COURT: Defendant's Exhibit ED, Easy Dog, in
16 evid
ence.
17 (Defendant's Exhibit ED received in evidence.)
18 Q Now, Mr. White asked you questions -- I am referring
19 now to the 433-A.
20 In Section 1 it indicates the taxpayer's name and
21 address; is that correct?
22 A That is correct.
23 Q Would it be fair to say that that information should 24 be supplied either by the taxpayer to the IRS if filling 25 out the form, or by the taxpayer to the accountant or
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7844 Razzino-redirect/Wallenstein
1 whoever else is preparing the form for him; is that
2 correct?
3 A That is correct.
4 Q So, if Mr. Reffsin filled out this form, he got the
5 information from Mr. Gordon, or he should have, correct?
6 A Yes.
7 Q Now, taking a look at the instructions, and that's
8 Exhibit ED just admitted in evidence, and on the
9 right
-hand column of that form it indicates, Necessary
10 Living Expenses; is that correct?
11 A Yes, correct.
12 Q And would it be fair that that indicates those
13 expenses that are necessary, that is what you need, rather
14 than what you would like to spend?
15 A I think since it is titled Necessary Living Expenses,
16 it would be what you need.
17 Q In fact, would you take a look at that and read the
18 sentence directly under the word: Necessary Living
19 Expenses.
20 A It says expenses must be reasonable for the size of
21 your family, geographic location and unique circumstances.
22 Q Is that an indication that the IRS is looking for
23 what you really need rather than what you would like to 24 spend? 25 A It appears that that is what they are asking for,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7845 Razzino-redirect/Wal
lenstein
1 what you need, not what you would like.
2 Q Now, you testified in response to Mr. White's
3 questions that this particular 433-A, and I am referring
4 again to Government's Exhibit 420-D, does not indicate
5 that Mr. Gordon owns 75 percent of the corporation.
6 A That's correct. I don't see any reference to it.
7 Q No reference to it anywhere on the form, correct?
8 A Correct.
9 Q Do you know whether Mr. Gordon did own 75 percent of
10 the corporation?
11 A I don't know that.
12 Q Do you know whether Mr. Reffsin knew whether or not
13 Mr. Gordon owned 75 percent of the corporation at the time
14 that this form was prepared?
15 A I don't know.
16 Q Would it be a fair statement that if Mr. Gordon owned
17 any percentage or no percentage of the corporation, he
18 would be the one who would supply that information to
19 Mr. Reffs
in?
20 A That's correct.
21 Q So, if, for example, in early 1993, or in the Spring
22 of 1993 Mr. Reffsin had been shown stock certificates
23 signed by Richard Grossman and Joyce Grossman indicating 24 that they or their family trusts owned 100 percent of 25 Who's Who Worldwide, Mr. Reffsin would be entitled to rely
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7846 Razzino-redirect/Wallenstein
1 on that representation in indicating that Mr. Gordon did
2 not own any percentage; is that correct?
3 A That's correct.
4 Q Now would you take a look at that power of attorney.
5 I don't remember the exhibit number. Do you have it?
6 A Yes. It is Exhibit 420-C.
7 Q That's why I can't find it, it is right in front of
8 me.
9 That is, again, the standard IRS form; is that
10 correct?
11 A It is the standard power of attorne
y form, yes.
12 Q And Mr. White asked you whether or not it would be a
13 fair statement that by executing this power of attorney
14 Mr. Reffsin would be fully empowered to act on behalf of
15 Mr. Gordon? And you said that that would be a fair
16 statement; is that correct?
17 A Correct. Only for those matters which the client
18 gave him permission --
19 Q Which would be delineated in the form?
20 A Correct.
21 Q Would it also be a fair statement that while he is
22 fully empowered to act, he can only act on information
23 provided to him by the client? 24 A That's correct. 25 Q Now, you testified that it is the accountant's
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7847 Razzino-redirect/Wallenstein
1 function when advocating a position before the Internal
2 Revenue Service to advocate true facts and provide fair,
3 accurate and complete information; is that correct?
4 A Correct.
5 Q And would it also be a fair statement that the
6 information he gets come from the client?
7 A Yes.
8 Q So, if the client lies to the accountant, the
9 accountant may not have any way to know that; is that a
10 fair statement?
11 A That's a very fair statement.
12 Q Would it also be a fair statement that there are gray
13 areas in the tax code?
14 A That is also a fair statement.
15 Q An understatement in fact.
16 And would it be a fair statement that one of
17 those gray areas is whether certain dollar figures are
18 considered to be income or loans?
19 A I believe those are judgment calls made by the
20 client.
21 Q And in fact, whether or not a particular dollar
22 amount is income or a loan is a function of a variety of
23 factors, not just what do we ca
ll them; is that correct? 24 A Yes. 25 Q If a client says to you, I am going to pay it back,
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7848 Razzino-redirect/Wallenstein
1 even if it takes me the rest of the my life, then it is a
2 loan; is that a fair statement?
3 A A fair statement.
4 Q You can't say, well, it is income, so it is income?
5 A Yes -- if he says it is income and he is not going to
6 pay it back, it is income.
7 Q Is it a fair statement based on your experience with
8 the IRS that if a taxpayer says it is income, the IRS
9 considers it income, no further questions?
10 A On the subject of audit, that's true.
11 Q And if the taxpayer says it is a loan, the IRS
12 doesn't necessarily take their word for it?
13 A The same answer, subject to audit, yes.
14 Q There are factors that the IRS uses in determining as
15 to whether a particular dollar amount is income or a loan;
16 is that correct?
17 A I believe so, yes.
18 Q One of which is intent? If the taxpayer intends to
19 repay it, it is an indication that it is a loan; is that
20 correct?
21 A Usually they require a little bit more than just
22 intent.
23 Q All right. 24 But, intent is one of the factors that they use? 25 A Yes.
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 7849 Razzino-redirect/Wallenstein
1 Q Would it be a fair statement that in advocating a
2 client's position before the Internal Revenue Service, the
3 question of whether a particular amount is a loan or
4 income is one of those areas where the IRS and the client
5 may have diametrically opposed positions?
6 A In many cases that's true, yes.
7 Q And in that case the accountant can advocate
the
8 client's position based upon the numbers and argue a
9 particular position without giving inaccurate or
10 incomplete information?
11 A Absolutely, you can argue your client's case.
12 Q Even though the IRS disagrees with you?
13 A Yes.
14 Q And would it be a fair statement that sometimes a<