8217 3 THE COURT: Mr. Dunn,from now on, I don't care 4 where you get from, please start two hours earlier than 5 when you are starting. Get here on time. 6 I think I mentioned I give to the jury all the 7 exhibits when they start deliberating. I also give them a 8 list of exhibits. I assume that all sides of worked on 9 and are working on a list of exhibits so I don't have to 10 wait and the jury doesn't have to wait. I will expect a 11 list from the government and a list from the defense, a 12 consolidated list at the time they go out, so we can 13 photostat it and make it a Court Exhibit. In a case like 14 this with so many exhibits they should have that. 15 THE CLERK: Jury entering. 16 (Whereupon, the jury at this time entered the 17 courtroom.) 18 THE CLERK: Good morning, members of the jury. 19 Have a seat. 20 Again, I think you are doing very well as far as 21 getting here on time. I am sorry to have delayed you. 22 One of the reasons was that I had another matter where a 23 lawyer came in from California to appear this morning. 24 And since he came in from California, I had to talked to 25 him a little more than I generally allow the lawyers to HARRY RAPAPORT, CSR, CP,
CM OFFICIAL COURT REPORTER 8220 1 talk. It is a civil case, an antitrust case, very 2 interesting. It has nothing whatsoever to do with you, 3 but it is very interesting to me. And that's one of the 4 reasons for the delay. 5 You may proceed. 6 7 M A R T I N R E F F S I N , 8 called as a witness, having been previously 9 duly sworn, was examined and testified as 10 follows: 11 12 MR. TRABULUS: I have no other questions. 13 MR. SCHOER: I have some questions, your Honor. 14 15 CROSS-EXAMINATION 16 BY MR. SCHOER: 17 Q Good morning, Mr. Reffsin. 18 A Good morning. 19 Q Mr. Reffsin, I am going to hand you some of the 20 government exhibits. 21 THE COURT: Before you do that, can I call 22 counsel up for a minute, please. 23 24 25 HARRY RAPAPORT, CSR, CP,
CM OFFICIAL COURT REPORTER 8221 Reffsin-cross/Schoer
1 (Whereupon, at this time the following took place 2 at the sidebar.) 3 THE COURT: I got a telephone call from Sandra 4 Barnes. How she got my telephone number I shall never 5 know. I think Ms. Scott probably told her. 6 She says she is a witness for Trabulus. 7 Are you Mr. Trabulus? 8 MR. TRABULUS: Indeed I served a subpoena, but I 9 am not calling her. 10 THE COURT: She says she will be about a half an 11 hour late. That's the message I got. 12 MR. TRABULUS: Thank you, your Honor. 13 14 (Whereupon, at this time the following takes 15 place in open court.) 16 (Whereupon, at this time there was a pause in the 17 proceedings.) 18 MR. SCHOER: I apologize. 19 THE COURT: It is all right. 20 MR. SCHOER: And I apologize to Mr. White for 21 spilling water al
l over him. 22 THE COURT: I thought you were having a 23 conversation about exhibits. 24 MR. SCHOER: We were doing both. 25 THE COURT: I am glad to see only water was HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8222 Reffsin-cross/Schoer
1 spilled. 2 Q Mr. Reffsin, I will ask you some questions about 3 those exhibits. They are not particularly in order. And 4 you may have to leaf through them. 5 Would you look at Exhibit 652, please. 6 A Got it. 7 Q Can you tell the jury what that exhibit is? 8 A This is a general ledger summary. 9 Q Okay. 10 You prepared that -- does it have a date on it? 11 A March 2nd, 1991. 12 Q And what period of time does it cover? 13 A Current fiscal period, 12 -- from fiscal periods from 14 one to 12, meaning January to December. 15 Q 1990? 16 A 1990, yes. 17 Q And when you look at that -- let me ask you this: 18 You created that general ledger with the records of Who's 19 Who Worldwide; is that correct? 20 A My firm did, yes. 21 Q And what you did, I assume, is you looked at the 22 checkbook -- basically you looked at the checkbook to see 23 what monies were deposited into the accounts of Who's Who 24 Worldwide, and what monies were written out of the 25 accounts; is that correct? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8223 Reffsin-cross/Schoer
1 A Well, I looked at the checkbook to see what monies 2 were expended. And the deposits generally came from the 3 bank statements. 4 Q And that's how you generated this document; is that 5 fair to say? 6 A Yes. 7 Q This ledger? 8 A Yes. 9 Q Any other documents you look at in order to generate 10 this gener
al ledger? 11 A Yes, maybe payroll journals, and maybe other 12 documents which have an effect on the general ledger. 13 Q Okay. 14 In 1990 was Who's Who Worldwide doing their own 15 pay role, do you remember? 16 A No, they were not. 17 Q Did they have an outside service that did the 18 payroll? 19 A No, I had someone in my office doing it. 20 Q And in 1990 your office was doing the actual payroll 21 for Who's Who Worldwide; is that right? 22 A That's correct. 23 Q And later on in years there came a time in which 24 there was another service that did the payroll for Who's 25 Who Worldwide? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8224 Reffsin-cross/Schoer
1 A Yes, that's correct. 2 Q And that was ADP? 3 A There was one before that for a short period and 4 ultimately it became ADP, yes. 5 Q And ADP does the payroll, and they take care of all 6 the records with respect to payroll; is that correct? 7 A Yes. They file W-2s and do everything. 8 Q All right. 9 Looking at Exhibit 652, in that exhibit, in that 10 general ledger, there is a list in account -- mine is cut 11 off, but there is a list in an account called net payroll, 12 which I believe is on page 16? 13 A If I may? 14 Page 16 did you say? 15 Q Yes, toward the bottom of the page where it says net 16 payroll. 17 (Whereupon, at this time there was a pause in the 18 proceedings.) 19 A Yes. 20 Q It is the payroll of Who's Who Worldwide and it has a 21 list of the all the people who received payroll checks; is 22 that right? 23 A That's correct. 24 Q And that was on a weekly basis once the payroll 25 started to be paid; is that correct? HARRY
RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8225 Reffsin-cross/Schoer
1 A Yes. 2 Q And when you say net payroll, the number that is 3 listed there is the actual amount of the check that the 4 employee received? 5 A That's correct. 6 Q Without -- after taxes had been taken from their 7 gross salary; is that correct? 8 A Yes. 9 Q Can you tell us when salaries were first paid by 10 Who's Who Worldwide in 1990? 11 A It looks like August 2nd was the first salary -- I am 12 sorry, it is May 11th. I am sorry. 13 Q That salary was to Elizabeth Sautter; is that 14 correct? 15 A Yes, that's correct. 16 Q And looking at that document, can you tell us -- do 17 you know when Who's Who Worldwide started its operation? 18 A Sometime in 1990. 19 Q Okay. 20 Is it fair to say it was sometime in May of 1990? 21 A Yes. 22 Q Now, can you look on the following pages and tell us 23 when for the first time Tara Garboski received any sort of 24 salary from Who's Who Worldwide? 25 A July 13th, 1990 is the first I see. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8226 Reffsin-cross/Schoer
1 Q She didn't start working there for several months 2 after business started operation; is that correct? 3 A Based on the paychecks, yes. 4 Q And there were other employees who were paid weeks 5 before she started to work; isn't that correct? 6 A Yes. 7 Q And looking through that year, isn't it fair to say 8 that she received -- let me ask you this: These salaries 9 as far as you know did they include commissions this net 10 payroll? 11 A At the time, I don't know. 12 Q If you look at these numbers they are not consistent 13 week to week? Is that fai
r to say? For each employee. 14 A No. 15 Q For example, on July 13th Tara received $315.90; is 16 that correct? 17 A Yes. 18 Q My copy is hard to read. 19 A Yes, that's what it says. 20 Q And then on July 20th, which is a week later she also 21 received $315.90; is that correct? 22 A Yes. 23 Q And if you go down to August, and it looks like 24 August 3rd, several weeks later she received $397.85; is 25 that correct? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8227 Reffsin-cross/Schoer
1 A Yes. 2 Q So that reflects -- if you go to August 10th, the 3 next week she received $440.45? 4 A Yes, that's correct. 5 Q So, does that indicate to you that that number 6 includes the commissions as well, since it was fluctuating 7 on a weekly basis for Tara and obviously for other 8 individuals as you
look -- 9 A It indicates there is additional compensation, yes. 10 Q All right. 11 Now, is it fair to say that all of Tara's 12 compensation for the year is contained on that document, 13 her compensation from Who's Who Worldwide, as you go along 14 and you look through pages 16 through 24? 15 A The net payments, yes, it would be all, yes. 16 Q All right. 17 And just looking at it, they cover anywhere from 18 $288 a week, or $285 a week, up to $565 a week; is that 19 fair to? 20 A Yes, sir, I see the 440. 21 Q I believe on December 27th is the last payment of -- 22 on September 2nd there is 565 or 568, my copy is hard to 23 read. 24 A Yes. $565.54 on September 7th. 25 Q If you look at the last one at the very end, on HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8228 Reffsin-cross/Schoer
1 December 27th s
he received $288.70. 2 A December 7, 462.65. 3 Q The 27th. 4 A Yes, 288.70. $288.70. 5 Q Now, if you look at Exhibit 655, that is a journal 6 for July 31, 1991, covering the period up to July 31, 7 1991; is that correct? 8 A Yes, the general ledger journal. 9 Q The same thing that we have been talking about; is 10 that right, sir? 11 A Yes. 12 Q Is there a general ledger journal for the period in 13 1991 that ends in December of 1991, from January to 14 December of 1991? 15 A There was. 16 Q That is not one of the exhibits that you have there; 17 is that correct? 18 A No. 19 Q Go to the ones to your right there. 20 A There is a trial balance work sheet. 21 Q Which is which exhibit? 22 A This is the -- when the accountants come in and a 23 general ledger is prepared, from that general ledger they 24 prepare
a summary, which is called a trial balance. And 25 the accountant would put that trial balance on a work HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8229 Reffsin-cross/Schoer
1 sheet. And any adjustments that are required for purposes 2 of the tax return, or in cases of financial reporting, 3 they would put the adjustments on this work sheet and 4 extend them out and get a final trial balance. 5 Q What exhibit are you looking at, what number? 6 A Exhibit 656. 7 Q And that Exhibit 656 goes to the end of 1991; is that 8 correct? 9 A Yes. 10 Q And we don't have the underlying general ledger that 11 that is adjusting; is that fair to say? 12 A Yes. 13 Q Now, if you look at the 655, which was the general 14 ledger as of July 31, 1991, that, too, lists the salaries 15 that each of the employees received, again, in the net
16 payroll; is that fair to say? 17 A Yes. 18 Q And that's on pages 13 through 22 on the 655; is that 19 correct? 20 A Yes. 21 Q Again, if the jury wants they can look at that 22 exhibit and determine at least for the half a year to 23 determine what Tara earned as part of -- as her net salary 24 for working for Who's Who; is that correct? 25 A Actually seven months. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8230 Reffsin-cross/Schoer
1 Q Seven months? 2 A Yes. 3 Q Now, if we look to Exhibit 658-B -- 4 A Is that in the folder? 5 Q I am really not sure. 6 A There it is. 7 Q 658-B, maybe you can hold it up to the jury so they 8 can see it. 9 (The witness complies.) 10 Q They are oversized sheets of paper. And it is a 11 computer printout; is that right? 12 A That's right. 13 Q Looking at that document, the accounting system, if I 14 can call it an accounting system, changed, so that there 15 is no list specifically for individual payroll. 16 Can you look through that to make sure. 17 A The codes changed. There is a loans and exchange, 18 payroll. It is effectively the same thing. 19 Q There is a total and not broken down for each 20 individual employee; is that correct? 21 A In most cases, yes. 22 Q When we look at that document we can't tell how much 23 a particular employee earned in 1993; is that correct? 24 A No, they are -- 25 Q 1992, I am sorry. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8231 Reffsin-cross/Schoer
1 A You have to go to the underlying work sheets. 2 Q And we don't have those underlying work sheets here? 3 A I don't know. 4 Q Can you look through to see. 5 A We don't have them right here, no. 6 Q Okay. 7 We can -- in that document is there a breakdown 8 as to the salaries of the group leaders as opposed to the 9 other salaried employees? 10 I believe it is on page 23? 11 A Page 22, 7110. Selling expenses, payroll group 12 leaders. 13 Q And it continues on to page 23; is that correct? 14 A Yes, that's correct. 15 Q And that shows the salaries for all of the group 16 leaders that were employed at Who's Who Worldwide through 17 the year 1992; is that correct? 18 A That's correct. 19 Q And that shows a number of -- $180,000? 20 A Yes, $180,308. 21 Q And you heard testimony that there was always at 22 least three, and most of the time four group leaders that 23 were employed at Who's Who Worldwide? 24 A Yes, I believe so. 25 Q Now, going to Exhibit 660, that's the general ledger
HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8232 Reffsin-cross/Schoer
1 for the year 1993; is that correct? 2 A That's correct. 3 Q And that, too, like the year, 1992, only has -- it 4 doesn't have each individual employee listed as to what 5 they earn, but has a breakdown with respect to group 6 leaders again; is that correct? I believe it is on page 7 19. 8 A Yes, that's correct. 9 Q And that shows that the group leaders in total were 10 paid the sum of $226,885.31 in salaries; is that correct? 11 A Yes. 12 Q In 1994 the company was in bankruptcy; is that 13 correct? 14 A That's correct. 15 Q And for 1994 the only record that you have before you 16 that has been introduced into evidence is Exhibit 662. 17 Can you tell us what that exhibit is, 662? 18 A This is a trial balance for the period ending
19 September 30th, 1994. 20 Q And does that cover the entire year of 1994 up to 21 September 30th, or -- 22 A This is the DIP account, which would only go from 23 March 31st, 1994 to September 30th, 1994. 24 Q So, on that account, again, there is only a gross 25 number for all the group leaders; is that correct? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8233 Reffsin-cross/Schoer
1 A Yes. The payroll exchange account would have been 2 wiped out or cleared out. 3 Q And that's approximately -- well, that was 4 $47,974.82; isn't that correct? 5 A What are you referring to? 6 Q Payroll group leaders, account 5,000 on that trial 7 balance? 8 A Yes. At that point they were paid $47,977.82. 9 Q And just so I am clear, that is for a six-month 10 period? 11 A Approximately, yes. 12 Q All right. 13 And t
hat's the only record we really have with 14 respect to what this company was doing in 1994? Is that 15 fair to say? That you have before you. 16 A Before me, yes. 17 Q Now, I am going to show you this document. 18 MR. SCHOER: Judge, I am sorry. 19 Who has the exhibit stickers? 20 (Mr. Schoer confers with Mr. Neville.) 21 Q I will show you what I marked as Exhibit BF. 22 Let me show it to Mr. White first. 23 (Document handed to Mr. White.) 24 (Counsel confer.) 25 MR. SCHOER: I am sorry, this is EF, Edward Fox. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8234 Reffsin-cross/Schoer
1 (Handed to the witness.) 2 Q Can you tell us what that is? 3 A This is a 1995 W-2 and earning summary. 4 Q And that is a document, that W-2, that was prepared 5 on behalf of Who's Who Worldwide? 6 A Yes, that's correct.
7 Q And it is the kind of record that Who's Who Worldwide 8 would prepare for its employees; is that correct? 9 A Yes, that's correct. 10 Q And they would -- by law they have to give that to 11 their employees, is that correct, with respect to showing 12 what the employees earned so that an employee can file an 13 income tax return; is that right? 14 A That's correct. 15 MR. SCHOER: Your Honor, at this time I would 16 offer Defendant's Exhibit EF. 17 THE COURT: Any objection? 18 MR. WHITE: No objection, your Honor. 19 THE COURT: Defendant's Exhibit EF, Easy Fox, in 20 evidence. 21 (Defendant's Exhibit EF received in evidence.) 22 Q Can you tell us whose W-2 that is? 23 A Tara Garboski. 24 Q And that's for the year 1995; is that correct? 25 A That's correct. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8235 R
effsin-cross/Schoer
1 Q And you heard testimony that Who's Who Worldwide -- 2 withdrawn. 3 Do you know when Who's Who Worldwide stopped 4 operations? 5 A I am not quite sure when it stopped. 6 Q All right. 7 Well, you heard testimony that Tara Garboski was 8 arrested on March 30th; is that correct? 9 A Yes. 10 Q And that's when she stopped working for Who's Who 11 Worldwide; is that correct? As far as you know, 12 Mr. Reffsin. 13 A As far as I know. 14 Q And March 30th would be 13 weeks into the year? 15 A Yes. 16 Q Is that correct? 17 A Yes. 18 Q The end of the first quarter? 19 A Roughly. 20 Q And that document indicates how much she earned in 21 1995? 22 A Yes. 23 Q From Who's Who Worldwide? 24 A Yes. 25 Q How much is that? HARRY RAPAPORT, CSR, CP, CM OFFICIAL C
OURT REPORTER 8236 Reffsin-cross/Schoer
1 A $15,600. 2 Q So that was $1,200 a week? 3 A Yes. 4 Q You heard testimony that Elizabeth Sautter earned 5 $1,500 per week; isn't that correct? Do you remember 6 that? 7 A Yes. I believe she earned about $60,000 a year. 8 Q All right. 9 In addition -- I am sorry. I withdraw that 10 question. 11 You heard testimony that Debra Benjamin earned 12 $1,500 a week; is that correct? 13 A Yes. 14 Q I confused the two names, and I apologize. 15 A Yes. 16 Q All right. 17 In addition, both Elizabeth Sautter and Debra 18 Benjamin received -- well, withdrawn. 19 In addition, both Elizabeth Sautter and Debra 20 Benjamin had cars that the company paid for; is that 21 correct? 22 A Yes. 23 Q And those are reflected on the books and records that 24 you k
ept as the accountant for Who's Who Worldwide; isn't 25 that right? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8237 Reffsin-cross/Schoer
1 A Yes. 2 Q All right. 3 In addition, not only did they have cars, but 4 those two people received payments for travel; isn't that 5 so? 6 A As I can remember, yes, there were some reimbursed 7 expenses. 8 Q All right. 9 For example, if you look at the general ledger 10 for December 31, 1993, which is Exhibit 660, at page 34, 11 there is an account, 7246 which shows travel; isn't that 12 so? 13 A Yes. 14 Q And under that account there is the car, cars that 15 were being leased; some of them; isn't that correct, sir? 16 A Yes, I see payments to car leasing companies, yes. 17 Q And there is limo service, a couple of those; isn't 18 that right, Mr. Reffsin?
19 A I can't tell which would be limo service. 20 Q A & B Limo is a limo service I assume? 21 A Yes, I missed that. 22 Q All right. 23 There are some gas charges in that account; isn't 24 that right? 25 A Yes. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8238 Reffsin-cross/Schoer
1 Q All right. 2 There are a lot of checks to Elizabeth Sautter 3 for travel? 4 A Yes. 5 Q And to Debra Benjamin for travel; isn't that right? 6 A Yes. 7 Q And no checks to Tara Garboski for travel; isn't that 8 right? 9 A None that can be specifically identified, no. 10 Q Now, I am going to ask you to look at that exhibit 11 that you have in front of you, December 31, 1993. 12 A Yes. 13 Q What exhibit number is that again? 14 A 660. 15 Q 660? 16 A Yes. 17 Q Okay. 18 I am
going to use your -- first I am going to ask 19 you some questions about some of the accounts that are 20 there. 21 A Yes. 22 Q I am going to ask you some questions about some 23 accounts, and I will write them on this chart so we can 24 all get an idea. 25 We are going to talk about 1993. We are going to HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8239 Reffsin-cross/Schoer
1 talk about the expenses, some of the expenses of Who's Who 2 Worldwide. 3 A Yes. 4 Q I am going to ask you to look at account 1,500. And 5 I will ask you what that account is? 6 A That's an account which contains payments for fixed 7 assets. 8 Q Can you tell the jury what fixed assets are? 9 A It would be payment for office equipment, desks, 10 furniture, telephones, anything that had a value that 11 would be appropriately spread o
ver a period of time rather 12 than just being an expenditure which was incurred. 13 Q All right. 14 The number that is there are those expenditures 15 made in the year 1993, or other expenditures which were 16 carried over from other years as well? 17 A That's a carry-over account. 18 Q All right. 19 In that account, how much was the expenditures 20 for fixed assets? You can round off the number, 21 Mr. Reffsin. 22 A It looks like there were some dispositions in fixed 23 assets as well. So the net effect is a reduction. These 24 entries would be effectively -- yes, that's the opening. 25 Q What were the fixed assets at the end of 1993? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8240 Reffsin-cross/Schoer
1 A $438,881.97. 2 Q I am going to round it off. 3 Then there is an account 1520 which is called 4 s
oftware. 5 A Yes. 6 Q Do you know what that was? 7 A Yes. That was the cost of the setting up the 8 computer program that was used by Who's Who Worldwide. 9 Q And do you know what the cost of that was? 10 A $110,499. 11 Q I am going to ask you to look at account 5200. 12 Tell us what that account is? 13 A That account represents costs incurred in 1993 14 attributable to the Registry called the Platinum 15 Registry. 16 Q Okay. 17 How much is that? 18 A That's $1,500. 19 Q Then there is an account 5210, which is for the 20 printing and binding; is that correct? 21 A That's correct. 22 Q And how much is that? 23 A $114,392. 24 Q So that's for the printing and binding of the 25 registry; is that correct? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8241 Reffsin-cross/Schoer
1 A Yes. 2 Q And then there is an account 5230 called fulfillment 3 that also relates to the registry? 4 A Yes, it does. 5 Q How much is that? 6 A $3,243, rounded off to the nearest dollar. 7 Q Three two four three? 8 A Yes. 9 Q Is that right? 10 A Right. 11 Q And then there is also an account, 5240, which 12 relates to the registry and called the miscellaneous 13 account; is that right? 14 A Right. 15 Q And that is $6,250; is that right? 16 A Correct. 17 Q All right. 18 And then there is an account 5250 which relates 19 to the Global Registry; is that right? 20 A That's correct. 21 Q All right. 22 That's a different book; is that right? 23 A Yes. 24 Q And that's because the books were printed at the end 25 of the year and some of the costs would be paid the HARRY RAPAPORT, CSR
, CP, CM OFFICIAL COURT REPORTER 8242 Reffsin-cross/Schoer
1 following year, the early months of the following year. 2 And some costs for the new registry would be at the end of 3 the months at the end of the year; is that fair to say? 4 A That is correct. 5 Q And how much where was the cost of the Global 6 Registry? 7 A $222,007. 8 Q All right. 9 Then account 5251 is the cost of publishing and 10 printing the Tribute Magazine; is that right? 11 A Yes. 12 Q And that's one issue of the Tribute Magazine; is that 13 right? 14 A Yes. 15 Q And how much was spent to print one issue of the 16 Tribute Magazine? 17 A $25,916. 18 Q And we are not even talking about the cost of 19 preparing it, the salaries, the postage, all that? That's 20 just the cost of printing; is that right? 21 A That's correct. 22
Q And in addition, members received wall plaques; is 23 that right? 24 A Yes. 25 Q And that's account 5400? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8243 Reffsin-cross/Schoer
1 A That's correct. 2 Q And how much was spent in wall plaques in the year 3 1993? 4 A $829,751. 5 Q And then there is an account 5410, miscellaneous 6 gifts? 7 A That's correct. 8 Q And those are things that were given to members; is 9 that right? 10 A That is correct. 11 Q And how much was that? 12 A $45,868. 13 Q And then there is an account 5420, and that's leather 14 goods, right? 15 A Right. 16 Q And those are leather goods, again given to members 17 for certain things that they did? 18 A That's the purpose. 19 Q How much is that? 20 A $11,581. 21 Q And then there is acc
ount 5425, which is the CD-ROM. 22 How much was spent on the CD-ROM in 1993? 23 A $53,384. 24 Q Then there is an account 5428, which are auto 25 emblems; is that right? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8244 Reffsin-cross/Schoer
1 A Yes. 2 Q And that's again something given to members as part 3 of their membership; is that right? 4 A What I understand. 5 Q How much was spent on that? 6 A $6,273. 7 Q Now, I would ask you to look at accounts 7110, 7111, 8 7211 and 7212. 9 Those are payroll accounting; is that right? 10 A That's correct. 11 Q And 7110, we talked about, the group leaders; is that 12 right? 13 A Yes. 14 Q And 7111 is the general sales staff? 15 A Yes. 16 Q And 7211 is the administration? 17 A I believe so, but let me concur with that. Office, 18 y
es. 19 Q And 7212 is the computer? 20 A Yes. 21 Q And that's payroll? 22 A Right. 23 Q Can you tell us what the total of those four accounts 24 are? 25 I left the calculator up there if you want to use HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8245 Reffsin-cross/Schoer
1 it. 2 A It doesn't seem to work. 3 Q That's your calculator. 4 A Okay, I got it. 5 Again, I am rounding it to the nearest dollar. 6 Q Uh-huh. 7 A $2,066,777. 8 Q Look at accounts 7140 and 7141. And that's for 9 printing and brochures. 10 A 7140 is $127,258. And 7141 is $6,485.67. 11 Q 6,485? 12 A If you are looking for cost of the registry, you left 13 out paper. 14 Q Okay. 15 Let's go back up to the paper, and that's account 16 5450? 17 A Right. $16,032. 18 Q Now I would l
ike you to look at account 7240. 19 A Rent. 20 Q Rent, right? 21 A Right. 22 Q All right. 23 That's the rent for the Lake Success property; is 24 that right? 25 A Yes. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8246 Reffsin-cross/Schoer
1 Q And what was the rent in 1993 for the Lake Success 2 property? 3 A $283,592. 4 Q And then look at account 7250? 5 A Equipment rental. 6 Q How much where was the equipment rental? 7 A $15,071. 8 Q And then finally, account 7263. 9 A Computer. 10 Q That's for a computer, right? 11 A No. That's the payroll service generally. 12 Q All right. We won't even count that. We will take 13 that off. 14 Mr. Reffsin, you are the accountant. Can you add 15 those numbers for me, please? 16 THE COURT: Have you done it yourself? 1
7 MR. SCHOER: We just took some off and changed 18 some. 19 THE COURT: I suspect that you have done this 20 previously. You might not have. 21 MR. SCHOER: I did, Judge, but my numbers are not 22 exactly these numbers. 23 THE COURT: What did you add to your numbers? 24 MR. SCHOER: I don't know that I added anything. 25 I may have rounded them differently. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8247 Reffsin-cross/Schoer
1 THE COURT: We certainly will not sit here while 2 Mr. Reffsin adds up all the figures. You tell us what the 3 round ballpark figure is. 4 MR. SCHOER: Four and a half million dollars. 5 THE COURT: That's round. 6 Q This was a company that was spending money, right? 7 A Absolutely. 8 Q And the people who were working in this place in 1993 9 saw a thriving business that was spending, without cos
ts 10 of attorneys and accountants and things like that, just 11 things that were visible to them, four and a half million 12 dollars, right? 13 A Right. 14 Q Okay. 15 Is it fair to say in 1994 it was similar? 16 A Well, because of the break it may have been a little 17 more. 18 MR. JENKS: Gary. 19 (Mr. Jenks confers with Mr. Trabulus and 20 Mr. Schoer.) 21 MR. SCHOER: Judge, I would like to mark this, my 22 artwork here, as Exhibit EG, Edward Gary. That's for me, 23 Gary. That's for me. And I would offer that in evidence. 24 THE COURT: Any objection? 25 MR. WHITE: I am sorry, your Honor, no. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8248 Reffsin-cross/Schoer
1 THE COURT: Defendant's Exhibit EG, Easy George, 2 in evidence. 3 (Defendant's Exhibit EG received in evidence.) 4 Q And, Mr.
Reffsin, there is one other area I would 5 like to go into with these records that you can help us 6 with. 7 Looking at Exhibit 662, which was that trial 8 balance? 9 A I have it. 10 Q In September of 1994. 11 A Yes. 12 Q That trial balance shows total sales for that period 13 of time; isn't that correct? 14 A That's correct. 15 Q And what were the total sales for that period of 16 time? 17 A $3,241,659. 18 Q And that's in account number 4,000; is that right? 19 A Yes. 20 Q In account number 4290 it shows refunds and returns; 21 isn't that right? 22 A That's correct. 23 Q And how much were the refunds and returns during that 24 period of time? 25 A $56,036. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8249 Reffsin-cross/Schoer
1 Q Is it fair to say that the percentage o
f refunds and 2 returns to the total sales was 1.1 percent? 3 A That looks about right. 4 Q So, 1.1 percent of three million dollars worth of 5 sales are people who were dissatisfied, who asked for 6 refunds and returns, or cancellations; is that right, 7 Mr. Reffsin? 8 A That's what it shows, yes. 9 Q And if you look at Exhibit 658-B, which is the 10 general ledger for December 31, 1992. 11 A Yes. 12 Q That's a big one. 13 A Yes. I have it. 14 Q If you look at account 4510 which is on page 17. 15 A I have it. 16 Q Okay. 17 That account shows sales, right? 18 A Right. 19 Q Okay. 20 And it shows refunds? 21 A Yes. 22 Q Right? 23 A Yes. 24 Q All right. 25 And it lists people that received refunds, refund HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8250 Reffs
in-cross/Schoer
1 checks, right? 2 A That is correct. 3 Q And it also shows in the debit column -- let me take 4 it a step back. The debit column would be the refunds 5 that people received, or cancellations; isn't that right? 6 A Mostly. There are some other things in there. 7 Q And the credit column would be the sales, the total 8 sales; is that right? 9 A That's correct. 10 Q Now, in addition to listing people who received 11 refunds of $97, and $297, there are some entries with 12 respect to charge backs? 13 A Yes. 14 Q Right? 15 A Yes. 16 Q And those are charge backs from the credit card 17 companies? 18 A Yes. 19 Q Right? 20 A Yes. 21 Q All right. 22 And those are people who said, after they made 23 their charge, after it was in their account, after Who's 24 Who Worldwide was paid, they
may have complained to their 25 credit card companies and requested a refund, really of HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8251 Reffsin-cross/Schoer
1 their credit card; isn't that correct? 2 A That's correct. 3 Q And the credit card company would charge Who's Who 4 Worldwide back for those people who were dissatisfied? 5 A Yes. 6 Q Is that right? 7 A Yes. 8 Q Okay. 9 And there are some numbers in the debits in that 10 account, 4510 which don't belong in that account, or 11 double entries, or things like that, right? 12 A There are some corrections. I believe there were New 13 York State sales tax where we didn't specifically 14 segregate them -- no, I believe we did segregate sales 15 taxes. 16 There may be some bank debits. 17 Q Is it fair to say that when you analyzed the numbers 18
with respect to that account, that again in 1992 the 19 returns and cancellations and exchanges came to 20 approximately 1.1 percent of the total sales; is that 21 right? 22 A I couldn't verify that without doing the calculation, 23 sir. 24 Q Okay. 25 In 1993, again we have a similar account; isn't HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8252 Reffsin-cross/Schoer
1 that correct, and that's Exhibit 660. 2 A Uh-huh. 3 Q The one we were looking at before? 4 A Right. 5 Q And it is the account 4510 which starts on page 13, 6 right? 7 A Yes. 8 Q Again, there is the New York State Tax Department 9 payment there not belonging in that account. And there 10 are numbers to correct, it says "to correct," sir, and 11 they don't belong with respect to refunds to members; is 12 that right? 13 A R
ight. 14 Q And is it fair to say that with respect to 1993, 15 again the total number of people who asked for refunds, or 16 received cancellations was approximately 1.1 -- well, one 17 percent of the total sales? 18 A Gain, I wouldn't be able to verify that without 19 making a calculation. 20 Q Okay. 21 (Mr. Schoer confers with Mr. Trabulus.) 22 Q Mr. Trabulus indicated to me that this number up here 23 is a little unclear. This number was taken off -- 24 A 662. 25 Q This is Exhibit 662, and that covers the period -- HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8253 Reffsin-cross/Schoer
1 A March 31st to September 30th. 2 Q September 30th of 1994? 3 A Right. 4 Q Is that clear now? 5 MR. SCHOER: Judge, I would like to mark this 6 second little chart as Defendant's Exhibit E as in Edward 7 H.
8 THE COURT: Any objection? 9 MR. WHITE: No, your Honor. 10 THE COURT: Defendant's Exhibit EH, Easy How, in 11 evidence. 12 (Defendant's Exhibit EH received in evidence.) 13 MR. SCHOER: I have no further questions. Thank 14 you. Thank you, Mr. Reffsin. 15 THE COURT: Anybody else? 16 MR. WALLENSTEIN: I have some redirect, your 17 Honor. 18 THE COURT: All right. 19 20 REDIRECT EXAMINATION 21 BY MR. WALLENSTEIN: 22 Q Good morning, Mr. Reffsin. 23 A Good morning. 24 Q Just a couple of matters that came up during your 25 examination by Mr. White and Mr. Trabulus that I would HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8254 Reffsin-redirect/Wallenstein
1 like to clarify. 2 With respect to Mr. Rigal, you testified 3 yesterday that despite the fact that you filed bankruptcy, 4 tha
t you intend to pay Mr. Rigal the monies that you owe 5 him; is that correct? 6 A That is correct. 7 Q Is it a fair statement that at the time of the 8 adversary proceeding within the bankruptcy proceeding that 9 Mr. Rigal had brought, that you were aware that your debt 10 to him was in fact going to be discharged by the 11 bankruptcy court? 12 A That was our feeling, yes. 13 Q And that was based upon a discussion with your 14 attorney, Mr. Flaum? 15 A That's correct. 16 Q And you understood that that was because there was no 17 fraud involved; is that correct? 18 A That is correct. 19 Q And despite knowing that you would not have to pay 20 him anything, you chose to pay him; is that correct? 21 A That is correct. 22 Q And why was that? 23 A Because I felt I had a moral obligation to do that. 24 He did lend me the money, and I wante
d to repay him. 25 Q You did in fact pay part of that after the bankruptcy HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8255 Reffsin-redirect/Wallenstein
1 proceeding? 2 A Yes, I was making payments to him. 3 Q And you intend to continue to do that? 4 A Hopefully, yes. 5 Q Okay. 6 Now, on another area, you were asked some 7 questions yesterday by both Mr. White and Mr. Trabulus, I 8 believe, with respect to the stock certificates that you 9 saw in 1993. 10 A Right. 11 Q In early 1993, the beginning of 1993, what was your 12 understanding with respect to the ownership of Who's Who 13 Worldwide? 14 A 25 percent was owned by the Grossmans, whether 15 directly or indirectly, and 75 percent was owned by 16 Mr. Gordon. 17 Q And some point in early 1993, or sometime in the 18 first quarter of the year y
ou saw proof of that from 19 Mr. Gordon; is that correct? 20 A Proof that Mr. Gordon owned the 75 percent? 21 Q Of the ownership of the corporation? 22 A I saw proof that Mr. Gordon didn't own 75 percent. 23 Q How did that come about? 24 A We had a discussion and he indicated he didn't own 75 25 percent. Actually we had an earlier discussion. The HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8256 Reffsin-redirect/Wallenstein
1 discussions were in 1992, late '92. And he said he was 2 going to -- I said I would like to see the stock 3 certificates to show that you owned it. And he showed it 4 to me in March. 5 Q He showed you the stock certificate demonstrating the 6 75 percent ownership by the Grossmans? 7 A That's correct. 8 Q And that was in March of 1993? 9 A That's correct. 10 Q Would it be a fair statement that
you don't know 11 whether in fact that the stock certificate you saw then is 12 the same that is in evidence here at trial? 13 A Not specifically, no. 14 Q But you were satisfied at the time that it was a 15 genuine certificate and indicated 75 percent ownership to 16 the Grossmans? 17 A That's correct. 18 Q Now, Mr. Trabulus asked you yesterday about 19 Mr. Gordon's execution of tax returns without reading 20 them; do you recall that series of questions? 21 A Yes. 22 Q He asked you if you would say it would be 23 Mr. Gordon's style to rely on you in preparing the return 24 without reading it, and you indicated he would; is that 25 right? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8257 Reffsin-redirect/Wallenstein
1 A I indicated he might, yes. 2 Q Is it fair to say that before you prepare a tax 3 retu
rn for Mr. Gordon, you had a lengthy discussion with 4 him with regard to the necessary back up? 5 A Generally, yes. 6 Q And would it be fair to say that when you asked him 7 with respect to documents to support the numbers that went 8 into the returns and schedules, that he would provide 9 those documents to you? 10 A That's correct. 11 Q And is it fair to say that if you needed explanation 12 of them, he would provide the explanation? 13 A Yes. 14 Q And is it then fair to say that if he signed the 15 return without reading it, it was simply that you had 16 prepared the return and come up with the numbers 17 physically on the paper based on all the information that 18 he and you had already discussed and that had been 19 provided? 20 A That is correct. 21 Q And when you prepared his returns, would it be fair 22 to say that your practice was
to prepare the return and 23 then mail it to Mr. Gordon for execution and filing? 24 A Sometimes I mailed it, and sometimes I delivered it. 25 Q But either way, you would see that it got into his HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8258 Reffsin-redirect/Wallenstein
1 hands and then it became his responsibility at that point; 2 is that correct? 3 A That's correct. 4 Q So, it would also be fair to say that you don't know 5 whether he read them or not? He may have and he may not 6 have? 7 A That's correct. 8 Q Now, you were ask questions yesterday by Mr. White 9 with respect to Mr. Gordon's ability to borrow funds to 10 repay the IRS; do you remember that series of questions? 11 A Some, yes. 12 Q You were asked, and you agreed that Mr. Gordon in 13 fact had ability to borrow funds to repay the Internal 14 R
evenue Service, or to repay Who's Who, or to obtain money 15 from any number of sources; is that correct? 16 A Yes. It is general ability. 17 Q He could have done what he wanted with the money he 18 could have obtained; is that correct? 19 A I would assume so, yes. 20 Q Was there anything you could have done about that? 21 A Nothing. 22 Q Did you have any input in all the time we have been 23 discussing in the past two and a half months here, did you 24 have any input in fact as to any of Mr. Gordon's spending? 25 A On the contrary. He would not discuss it at all. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8259 Reffsin-redirect/Wallenstein
1 Q Is it fair to say that Mr. Gordon did what Mr. Gordon 2 wanted to do when Mr. Gordon wanted to do it and left it 3 to you to try to clean up the mess afterward? 4 A That's right --
5 MR. TRABULUS: Objection. 6 THE COURT: Sustained as to form. Strike out the 7 answer. 8 Q Is it a fair statement that you gave Mr. Gordon 9 advice from time to time? 10 A If he requested it, yes. 11 Q Is it a fair statement that you can give Mr. Gordon 12 or any other client all the advice you want, but you can't 13 make them take it? 14 A That's correct. 15 Q Now, one other question. 16 Mr. White asked you yesterday as to whether you 17 would agree that Mr. Gordon had a financial motive to 18 avoid payments to the Internal Revenue Service, and you 19 indicated you agreed with that statement? 20 A A financial motive, yes. 21 Q He owed the IRS three and a half million dollars? 22 A Yes. 23 Q Did you owe the IRS any money? 24 A At that time? 25 Q Yes. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8260 Reffsin-redirect/Wallenstein
1 A I don't think so, no. 2 Q Certainly not as a result of Mr. Gordon's activities; 3 is that right? 4 A No. 5 Q And if Mr. Gordon had succeeded in defrauding the 6 Internal Revenue Service would you have achieved any 7 benefit from that? 8 MR. TRABULUS: Objection. 9 THE COURT: Sustained. 10 MR. WALLENSTEIN: I have nothing further. 11 THE COURT: All right. 12 We will take a ten-minute recess. Please do not 13 discuss the case. And keep an open mind. 14 (Whereupon, at this time the jury leaves the 15 courtroom.) 16 17 (Whereupon, a recess is taken.) 18 19 THE CLERK: Jury enter entering. 20 (Whereupon, the jury at this time entered the 21 courtroom.) 22 THE COURT: Please be seated, members of the 23 jury. 24 Anybody wish to inquire? 25 MR. WHITE: Y
es, your Honor. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8261 Reffsin-recross/White
1 2 RECROSS-EXAMINATION 3 BY MR. WHITE: 4 Q Mr. Reffsin, correct me if I am wrong, but you said 5 yesterday that you believe with respect to certain things 6 you were deceived by Mr. Gordon; is that correct? 7 A Yes. 8 Q Now, I was listening to you this morning when 9 Mr. Schoer was questioning you. And you know an awful lot 10 about the finances of Who's Who Worldwide, don't you? 11 A I read them off the general ledger. 12 Q And you were involved in compiling those general 13 ledges, right? 14 A Not in detail. 15 Q You know the accounts, right? You know the expenses? 16 A I read them. 17 Q Mr. Schoer left one out and you suggested, and said 18 you forgot paper. Do you remember that? 19 A It was just below the
one he gave me. 20 Q I want to ask you something I am not clear about from 21 Mr. Trabulus' cross-examination yesterday. 22 First of all, yesterday when I was asking you 23 questions I asked you about what a taxpayer was supposed 24 to put on the 433 about his expenses. Do you remember 25 that? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8262 Reffsin-recross/White
1 A Yes. 2 Q And I gave you the example of someone who lived in a 3 $20,000 mansion, but really only a $2,000 rent was 4 reasonable or necessary. 5 A Right. 6 Q And I asked you what that person should put. And I 7 believe you said he should put 2,000; is that right? 8 A No. I said if he was subject to a contract of some 9 sort you would have to put what you were subject to. 10 Q Exactly. 11 Remember, I changed the hypothetical and said, 12 no,
the guy said, my lease is ending next month, and I 13 don't have to take this apartment again, but I want to 14 although it is unnecessary? Remember? And you said you 15 should put what is necessary; is that correct? 16 A That's correct. 17 Q Then Mr. Trabulus showed you the instructions to the 18 433; is that right? 19 A Yes. 20 Q And he was asking you about what you are supposed to 21 put for rent. Do you remember that? 22 A Vaguely, yes. 23 Q And let me read to you from the transcript, and page 24 8202. 25 Question: In the case of rent they tell you to HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8263 Reffsin-recross/White
1 list your monthly rent payment? 2 Answer: Yes. 3 Question: So that might be interpreted a little 4 differently than just what is necessary. In case of rent 5 they really want to k
now what you are actually paying? 6 Answer: Yes. 7 You said that yesterday to Mr. Trabulus, right? 8 A If I said that I meant based on any outstanding 9 contractual arrangement. That was intended. 10 Q Now, Mr. Trabulus also asked you about the time 11 period when you hoped that Mr. Gordon would be able to 12 repay his loan to Who's Who Worldwide, right? 13 A Right. 14 Q And he used a phrase that you agreed with, that 15 Mr. Gordon was hoping to pay back Who's Who Worldwide and 16 the IRS in one fell swoop. Do you remember that? 17 A I remember that, yes. 18 Q And is it correct that that is what you and 19 Mr. Gordon expected? 20 A Not in one fell swoop, but expected to pay it back, 21 yes. 22 Q So, is it fair to say that Mr. Gordon expected income 23 in the future which he would use to apply to both of those 24 obligations? 25 A I
can't say what Mr. Gordon expected. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8264 Reffsin-recross/White
1 Q Let me ask you, what did you expect? Did you expect 2 he was going to have income that he would use to pay both 3 those obligations? 4 A I didn't care as long as he would pay it. 5 Q How was he going to pay it if he didn't have income? 6 A Let him borrow it from somebody else if he can. 7 Q I am unclear. 8 Did Mr. Gordon tell you that I am owed 9 substantial amounts by Who's Who Worldwide, and some day I 10 would in effect take those and give it back and cancel out 11 my loan? 12 A That's what he said. 13 Q And are you saying that you didn't think that was the 14 case? 15 A I didn't know. I had not made the calculations as to 16 what Who's Who Worldwide owed him in terms -- 17 Q Well, didn't you indicate
if that did not take place 18 by 1994, you were on your own going to declare the amount 19 of his loan balance income to him? 20 A That's correct. I did say that. 21 Q Is it fair to say you expected whatever was going to 22 happen, one way or another, it was going to happen by 23 1994? 24 A That is correct. 25 Q Now, you recall in September of 1994 meeting with HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8265 Reffsin-recross/White
1 Mr. Gordon and Neil Ackerman in Mr. Ackerman's office? 2 A Yes, I recall we had a meeting there, yes. 3 Q And you had seen the evidence, the letter in evidence 4 that Mr. Ackerman prepared, where he summarized the status 5 of Mr. Gordon's loans? 6 A Yes, I have seen that. 7 MR. WALLENSTEIN: Objection, your Honor. It is 8 beyond the scope of redirect. And there was no other 9 cross wi
th respect to that area. 10 THE COURT: I don't know what Mr. White is going 11 to ask. He is asking some preliminary questions. We will 12 see. 13 MR. WHITE: Your Honor, it is responsive to the 14 area of loans that Mr. Trabulus raised. 15 Q Is it not correct that Mr. Ackerman says in that 16 letter that Mr. Gordon is due a substantial sum of money 17 from Who's Who Worldwide, even more than what he owes 18 Who's Who Worldwide? 19 A That's what it says. 20 Q And you were present at the meeting with 21 Mr. Ackerman. 22 Is that what you and Mr. Gordon told Mr. Ackerman 23 the day before he wrote the letter? 24 MR. WALLENSTEIN: Objection. 25 THE COURT: What grounds? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8266 Reffsin-recross/White
1 MR. WALLENSTEIN: Beyond the scope. 2 THE COURT: Sustained. 3
Q Well, at the time that it was written was that letter 4 inaccurate? 5 MR. WALLENSTEIN: Objection. 6 THE COURT: Sustained. 7 MR. WHITE: Your Honor, would you like me to 8 explain why it is relevant? 9 THE COURT: Yes. Explain. 10 MR. TRABULUS: I think this explanation should be 11 at the bench. 12 THE COURT: No. 13 MR. TRABULUS: Otherwise we will have a 14 summation. 15 THE COURT: All right, come up. 16 17 (Whereupon, at this time the following took place 18 at the sidebar.) 19 THE COURT: Before we go further, someone took a 20 stapler from me yesterday and never returned it? Do you 21 know who it is? 22 The stapler is not for your use. It is mine. 23 Does anybody have a stapler they took from me? 24 MR. NEVILLE: I have one, but you can use it. 25 THE COURT: How about you? HARRY RAPAPORT, CSR, CP
, CM OFFICIAL COURT REPORTER 8267 Reffsin-recross/White
1 MR. WHITE: I believe that's it. 2 THE COURT: I was about to start an 3 investigation. 4 Now, why is this relevant? 5 MR. WHITE: Mr. Trabulus raised the issue that 6 Mr. Reffsin and Mr. Gordon expected that in one fell swoop 7 that Mr. Gordon would receive this large amount of income 8 that would cancel out, that he can use to apply to both 9 the IRS debt and the Who's Who Worldwide debt, which is a 10 half a million dollars or more. 11 What I am trying to explore with Mr. Reffsin is 12 why -- I am sorry, in Mr. Ackerman's letter it says that 13 Mr. Gordon is going to get not just that money, but even 14 more. And Mr. Reffsin is supposed to be calculating how 15 much more. 16 What I am trying to lead to is why wasn't that 17 disclosed to the IRS. 18 Mr. Reffsin said that if
you were going to make 19 other money like that, so long as that loan didn't have 20 priority, the IRS didn't care. 21 Do you see what I mean? 22 THE COURT: Did you ask those questions, 23 Mr. Trabulus? 24 MR. TRABULUS: Your Honor, the questions I asked 25 were related to expectations as it existed at a time prior HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8268 Reffsin-recross/White
1 to the bankruptcy. 2 Mr. White is now talking about something that 3 happened well into the bankruptcy. 4 THE COURT: You didn't inquire as to that? 5 MR. TRABULUS: Not with regard to September of 6 1994. 7 MR. WHITE: Your Honor, he raised that in one 8 fell swoop Mr. Gordon was going to get all this money. I 9 am trying to figure out if that is what Mr. Reffsin 10 thought, why isn't it disclosed at certain points? 11 I don
't think the cross-examination of defense 12 counsel was quite as limited as this. A lot went by on 13 cross-examination when they were cross-examining 14 government witnesses which is pretty far afield. 15 THE COURT: This is not cross-examination. 16 MR. WHITE: It is, your Honor. 17 THE COURT: It is further cross-examination. It 18 is different. 19 MR. WALLENSTEIN: Your Honor, even if Mr. White 20 is correct that what Mr. Trabulus raised relates to that 21 issue -- I don't think it does, but even if he is right -- 22 this particular cross-examination doesn't implicate 23 Mr. Trabulus' questions. It implicates Mr. Reffsin's 24 credibility with respect to what Mr. Ackerman said to what 25 Mr. Reffsin thought. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8269 Reffsin-recross/White
1 MR. WHITE: Reffsin only said it in response to
2 Mr. Trabulus' questions. 3 THE COURT: Since Mr. White says -- an officer of 4 the Court -- that it was raised in cross-examination, 5 although I don't remember, by Mr. Trabulus, I will allow 6 it. 7 MR. TRABULUS: What I raised as I recall, is 8 sometime prior to the filing of the bankruptcy and prior 9 to the Reed judgment, which is early 1993 or very early 10 1994, at the latest, was there expectation that at some 11 point Who's Who Worldwide would do so well that he would 12 be able to repay his obligations to the company -- I think 13 he -- well, as well as -- I didn't say all of the tax 14 obligations. It was one of these long questions, some of 15 or all of, and that there would be a time -- 16 MR. WALLENSTEIN: If they can point to the part 17 of the transcript where this issue is raised, fine. We 18 have the transcripts. 19 MR. WHITE: I directed
your attention to the 20 parts where he said you can pay it off in one fell swoop. 21 THE COURT: Overruled. I will allow it. 22 23 24 25 HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8270 Reffsin-recross/White
1 (Whereupon, at this time the following takes 2 place in open court.) 3 Q Now, Mr. Reffsin, if Mr. Gordon were to receive 4 sufficient income so that he could in one fell swoop pay 5 off the Who's Who Worldwide loan, just those for a moment, 6 not adding any IRS, he would be getting significant 7 income; is that right? 8 A It was in the future, yes, possibly. 9 Q Yes, in the future. 10 Is it correct that monies sufficient to pay Who's 11 Who Worldwide and his other obligations are not reflected 12 as income on the projection that you prepared in 13 connection with the offer and compromise?
14 A The projection was prepared based on what existed at 15 the time it was prepared, and not upon what Mr. Gordon 16 felt was going to happen. He looked at those projections. 17 Q You submitted the offer in compromise in July of 18 1993; is that right? 19 A Yes. 20 Q And you said that one way or another these loans were 21 going to be either paid off or income by the end of '94, 22 right? 23 A That is correct. 24 Q And so, it was not more than 15 months, 16 months, 25 until one way or another that this was going to be taken HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8271 Reffsin-recross/White
1 care of; is that right? 2 A That's correct. 3 Q And the projection that you gave doesn't project that 4 he is going to get that income, right? Just yes or no. 5 A No. It does not reflect it. 6 Q Okay.
7 Now, Mr. Reffsin, take a look at 8 Defendant's Exhibit EC, Easy Charley. 9 (Handed to the witness.) 10 MR. WHITE: Your Honor, I think the jury has 11 this, what Mr. Wallenstein handed out the other day. 12 Q Those are the instructions to completing the offer 13 and compromise; is that right? 14 A Yes. 15 Q You recognized this and introduced this yesterday; is 16 that correct? 17 A Yes, that's correct. 18 Q Do you recall yesterday I was asking you questions 19 about if the IRS cared whether or not you were squandering 20 money on unneeded expenses; do you remember that? 21 A Yes. 22 Q And you said that they don't care if you are 23 squandering, they just want to know what your necessary 24 expenses are; is that right? 25 A That's right. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8272 Reffsin-recross/White 1 Q Now, if you can look at these instructions which you 2 introduced, under where it says questions IRS will 3 consider -- 4 A Right. 5 Q It says, follow along while I read: The IRS goal is 6 a compromise that is in the best interest of both the 7 government and the taxpayer. It is your responsibility to 8 show us why it would be in the government's best interest 9 to accept your proposal. When we consider your offer we 10 must ask the following questions: 11 Number 2, among the questions they must consider 12 is: Could we collect more from your assets and future 13 income than you offered? If the answer is "yes" you must 14 offer a larger amount or we will reject your offer. 15 That is listed there, right, Mr. Reffsin? 16 A That's right. 17 Q Look at number 3, another thing the IRS would 18 consider. 19 Would we be better off waiting -
- the "we" is the 20 IRS they are referring to, right? 21 A Yes. 22 Q All right. 23 3, would we be better off waiting until a future 24 date because the evidence shows that collection in the 25 future would result in more money than you now offer? If HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8273 Reffsin-recross/White
1 the answer is "yes", you must offer a larger amount or we 2 will rejects your offer. 3 Do you see that? 4 A Yes. 5 Q So, if someone were squandering money, if someone 6 were expecting to get a substantial amount of money, that 7 would affect the IRS's consideration of whether or not to 8 accept the offer; is that right? 9 A That's correct. 10 MR. WALLENSTEIN: Objection. 11 THE COURT: Overruled. 12 A Prospectively. 13 Q Yesterday Mr. Trabulus asked you about the net effect
14 of not disclosing the loans on the 430's; do you remember 15 that? 16 A Yes. 17 Q He said that the net effect is that it would show 18 Mr. Gordon in worse financial shape than he already was; 19 is that correct? 20 A Correct. 21 Q And for example, if the loan from Dr. Grossman to 22 Mr. Gordon were disclosed it would show Mr. Gordon even 23 further in debt, right? 24 A Right. 25 Q And if the loan from Who's Who Worldwide to HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8274 Reffsin-recross/White
1 Mr. Gordon were disclosed, it would show him even deeper 2 in debt; is that right? 3 A That's correct. 4 Q And didn't you say yesterday though that you expected 5 the IRS to want more than the 150,000 you offered? 6 A Right. 7 Q So you anticipated that they would say 150 is not 8 enough, we want m
ore, right? 9 A No, I anticipated that they would look at the 10 corporation. 11 Q But ultimately say that 150 is not enough, we want 12 more, right? 13 A That is correct. 14 Q So, wouldn't it have been in Mr. Gordon's self 15 interest to list those debts? 16 A In his self-interest? 17 Q Yes. 18 A Yes. 19 Q Because that way the IRS only thinks he is -- using a 20 number for an example -- if they only think he's a million 21 dollars in debt, perhaps it is only a million and a half, 22 right? 23 A Yes. 24 Q It would be in the taxpayer's favor when the IRS 25 says, hey, we want more, and you would say this guy owes a HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8275 Reffsin-recross/White
1 million and a half and not just a million; is that right? 2 A The IRS would look at it that he is unable to pay
in 3 the future -- pay less in the future. 4 Q Right. 5 Now you were asked about the $400,000 payment to 6 Dr. Grossman by Mr. Trabulus; do you remember that? 7 A Right. 8 Q At that time the company was doing well enough that 9 it could pay Dr. Grossman 400,000; is that what you said 10 yesterday? 11 A That was Mr. Gordon's opinion, yes. 12 Q Now, who that $400,000 goes out to in salary, that 13 doesn't affect the corporation's financial picture any, 14 does it? 15 MR. TRABULUS: Objection to form only, your 16 Honor. 17 MR. WHITE: Let me rephrase that. 18 Q If a corporation issues a $400,000 salary check, 19 either to employee A or employee B, it really doesn't 20 matter whose name is on the check, right? 21 A From the corporation's point of view? 22 Q Yes. 23 A Possibly not. I don't know. 24 Q Now, so would it no
t have been possible if Mr. Gordon 25 would need to reduce his loan account and to have money HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8276 Reffsin-recross/White
1 for the printing of his books, to take $400,000 in income 2 himself, and then return to it the corporation to reduce 3 his loan balance and use it to print the books? 4 A I don't know what would be possible with respect to 5 Mr. Gordon and what he had to answer to with respect to 6 the Grossmans. 7 Q Had Mr. Gordon done so it would have appeared as an 8 additional $400,000 in income to him, right? 9 A Hypothetically? 10 Q Yes. 11 A Hypothetically, yes, another $400,000 in income. 12 Q Do you know approximately what Mr. Gordon was making 13 in 1991 -- 1992? 14 A He was drawing about 50,000. 15 Q And, so, if he had taken that his income would show 16
as 450 and not just 50, right? 17 A That's correct. 18 Q And when you filled out that projection where you had 19 the 1991 actual figures, it would show that he was making 20 450, not 50, right? 21 A I guess so. 22 Q Now, Mr. Trabulus asked you about your expectations 23 about the payment of the loans prior to the bankruptcy 24 proceeding. Do you remember that? 25 A Right. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8277 Reffsin-recross/White
1 Q And Mr. Trabulus asked you if it was fair that the 2 bankruptcy had sort of intervened and had changed 3 circumstances; is that right? 4 A Yes. 5 Q Now, it changed circumstances in your mind; is that 6 correct? 7 A As with respect to the debtor, it changed the 8 circumstances with respect to those particular loans. 9 Q I want to make sure I understand what you a
re 10 saying. Are you saying that since Who's Who's existence 11 or profitability was in danger, Mr. Gordon himself may not 12 be getting that much income from Who's Who and, therefore, 13 would not be able to pay back the loans; is that what you 14 are saying? 15 A No. I don't understand your question. 16 Q I am sorry. 17 Are you saying that since Who's Who was not in 18 bankruptcy and its existence was threatened, Mr. Gordon's 19 livelihood was in doubt to some degree? 20 A Absolutely. 21 Q If his source of income, the company he ran, if its 22 existence was in doubt, then his abilities to repay the 23 loan would certainly be in doubt? Is that what you are 24 saying? 25 A Yes, that's correct. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8278 Reffsin-recross/White
1 Q And that's your perception and it was your pe
rception 2 prior -- once the bankruptcy was filed; is that right? 3 A Once the bankruptcy was filed you don't know what is 4 going to happen. 5 Q Now, do you know whether or not that was also 6 Mr. Gordon's perception? Did you have any discussions 7 with him about it? 8 MR. TRABULUS: Objection to form, your Honor. 9 THE COURT: The latter part is permissible. 10 Overruled. 11 Q Did you have any discussion with him about that? 12 A About what? 13 Q About, hey, look, Bruce, the -- since the corporation 14 is in bankruptcy, you don't know if you are going to be 15 having a paycheck. You got to buckle down and don't spend 16 so much? 17 A I told him he was restricted from taking any 18 additional loans, yes. 19 Q Did you have any conversation with him whereby you 20 told him you got to stop spending so much? 21 A No. It is not the kind o
f a thing an accountant 22 would say to his client. I just said that he had to stop 23 and couldn't take any more loans. 24 Q Now, isn't it correct in the letter that Mr. Ackerman 25 wrote, that's in September of 1994, six months after the HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8279 Reffsin-recross/White
1 bankruptcy, right? 2 A Yes. 3 Q And in that letter Mr. Ackerman says not that 4 Mr. Gordon's income may not be enough to pay his loans, he 5 says that he is owed all that much and more? 6 A That's what he says. 7 Q He also says that you are calculating how much more? 8 A That's what he said. 9 Q Now, did you ever prepare such a calculation? 10 A No. 11 Q Is what Mr. Ackerman said in that letter accurate? 12 A No. 13 Q You were at a meeting with him the day before, right? 14 A Yes. And that never c
ame up. 15 Q But, so, even as late as September of 1994, 16 Mr. Ackerman, after meeting with you and Mr. Gordon got 17 the impression -- I am sorry, Mr. Ackerman after meeting 18 with you and Mr. Gordon wrote a letter where he said that 19 Mr. Gordon is supposed to get this money and more, he 20 wasn't worried about it. And that's what he said, right? 21 A Basically that's what he said in the letter, yes. 22 Q Let me show you -- on that point I want to show you 23 something and ask some questions. 24 If you step down, let me show you 824, a summary 25 of Mr. Gordon's supplemental American Express account. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8280 Reffsin-recross/White
1 Now, the bankruptcy proceeding was -- let me back 2 up. 3 The offer in compromise was in July of 1993; is 4 that right, the offer in compromise? 5
A Yes, the offer in compromise. 6 Q And that would be right here, July of 1993? 7 A Uh-huh. 8 Q And the bankruptcy proceeding was in March of 1994; 9 is that right? 10 A That's correct. 11 Q Now, if you look at the totals that were spent by 12 Mr. Gordon on the American Express card in 1994, after 13 March, does that look like someone who is worried about 14 where his next pay check is coming from? 15 A It certainly does not. 16 Q And the totals for 1994 is $183,000; is that right? 17 A Yes. 18 Q And that's the highest of any of the years before; is 19 that right? 20 A Obviously. 21 Q In fact, it is more than what he spent in 1992 or 22 1993 combined; is that right? 23 A Yes. 24 Q Okay. 25 You can sit back down. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8281 Reffsin-recross/White
1 (The witness resumes the witness stand.) 2 Q I am sorry, I will ask you to stand up again. 3 A I can use the exercise. 4 Q Look at 887, the chart of transfers we looked at 5 yesterday. 6 Now, all of this takes place from February 7 through December of 1994; is that right? 8 MR. TRABULUS: Objection to form. 9 Q Does the chart indicate that this took place between 10 February and December of 1994? 11 A Yes. 12 Q And I think we added up or made a rough approximation 13 of all these sums to Mr. Gordon in that time period and it 14 is over $200,000; is that right? 15 A That's right. 16 Q And on the same subject, Mr. Trabulus asked you about 17 these transfers, and whether they were disclosed to the 18 bankruptcy court, right? 19 A The transfers from Who's Who Worldwide were fully 20 discussed, yes. 21 Q And that's what you answere
d to Mr. Trabulus' 22 question? 23 A Yes. 24 Q And my question to you is: By that you meant the 25 transfers to Worldwide or to Sterling, or the first stop HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8282 Reffsin-recross/White
1 here; is that right? 2 A Yes. 3 Q In other words, the transfer from Worldwide to its 4 first destination was disclosed to the bankruptcy court? 5 A Yes. 6 Q If it went from Worldwide to the other accounts, the 7 rest of it was not disclosed? 8 A Not to the bankruptcy court. 9 MR. TRABULUS: Objection. 10 THE COURT: Overruled. 11 MR. TRABULUS: I didn't hear the answer. 12 THE WITNESS: Not to the bankruptcy courts. 13 Q What got disclosed was up here from Sterling to 14 the -- through the rest of the chart, it wasn't disclosed? 15 A Yes. 16 Q Thank you. You may now
sit down. 17 (The witness resumes the witness stand.) 18 Q In reference to that chart yesterday Mr. Trabulus 19 asked you about whether in your experience it was common 20 to have multiple bank accounts at multiple different 21 banks; is that right? 22 A Yes. 23 Q And you indicated there were perfectly legitimate 24 reasons for doing that; is that right? 25 A Yes. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8283 Reffsin-recross/White
1 Q In your experiences as an accountant would you say 2 that there were also in some cases illegitimate reasons 3 for doing that? 4 MR. WALLENSTEIN: Objection to form. 5 THE COURT: Why do you object to the form? The 6 word "illegitimate?" 7 MR. WALLENSTEIN: The implication is in his 8 experience he has handled those transactions -- 9 MR. WHITE: I didn't mean to --
10 THE COURT: I didn't think of that. I will 11 sustain that. 12 MR. WHITE: Neither did I. 13 Q Mr. Reffsin, I am not suggesting you were involved in 14 any such transaction. But in your experience as an 15 accountant are you at least aware of the possibility that 16 people have multiple bank accounts at multiple banks to 17 make it more confusing to find where their money is? 18 A It makes it more difficult, definitely. 19 Q And you were here, were you not, when Mr. Ackerman 20 testified that Mr. Gordon -- when Ackerman asked him about 21 transactions among companies, told him that it had 22 something to do with his personal IRS situation? Do you 23 remember when he said that? 24 A I remember when he said that, yes. 25 Q I want to clarify something you said about the HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8284 Reffsin-recross/Wh
ite
1 condominium at Hummingbird Road. 2 I was asking you questions yesterday and you said 3 what you meant when you spoke to the agents about the 4 condominium is that you thought that Mr. Gordon's 5 explanation might be bullshit. Do you remember that? 6 A I said I couldn't make that determination at the 7 time. He gave me an explanation and I accepted it. 8 Q I want to focus for a minute on what you told the 9 agents on that day. 10 A Right. 11 Q If you remember, I asked you, didn't you tell them 12 that you thought Mr. Gordon's explanation was bullshit? 13 And I believe your response was, well, I told them that I 14 thought it might be. Is that fair? 15 A That's fair. 16 Q In response to one of Mr. Trabulus' questions though 17 you indicated that you really had no reason to presume one 18 way or the other about whether the condo was used for
19 business purposes; is that right? 20 A That's right. 21 Q Now, Mr. Trabulus asked you questions about 22 Mr. Gordon, his education and his background. Do you 23 remember that? 24 A Yes. 25 Q Now, would you say from your experience in dealing HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8285 Reffsin-recross/White
1 with Mr. Gordon that he is a sophisticated businessman? 2 A He is sophisticated, yes. How good a businessman he 3 is is another story. 4 Q Okay. 5 But he has been in business a long time, right? 6 A Yes. 7 Q He has run big companies, right? 8 A Yes. 9 Q He was running this business making millions of 10 dollars here, Who's Who Worldwide, right? 11 A Yes. 12 Q You never had any doubt that he was in control of the 13 day to day operations there? 14 A No question.
15 Q And he was sophisticated enough to be dealing with 16 these tax shelters that you described from back in the 17 80's, right? 18 A Yes. 19 Q And those kind of tax shelters attracted, is it fair 20 to say, fairly sophisticated investors? 21 A Oh, yes. 22 Q And to promote them you have to deal with those 23 people, and you have to be fairly sophisticated yourself; 24 is that right? 25 A Yes. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8286 Reffsin-recross/White
1 Q And that's what Mr. Gordon was doing, he was the 2 promoter of those shelters; is that right? 3 A Yes. 4 Q If you take a look at Government's Exhibit 577 in 5 evidence. 6 That's a letter from Mr. Gordon to Dr. and Mrs. 7 Gordon in May of 1990; is that right? 8 (Handed to the witness.) 9 A Right. 10 Q Did you have anyth
ing to do with the preparation of 11 this letter? 12 A Nothing at all. 13 Q Next, this was -- correct me if I am wrong, but this 14 was before you even got back together with Mr. Gordon; is 15 that right? 16 A That's right. 17 Q You didn't get back together with him until 1991? 18 A No, I got back in '90, late '90, July, August. 19 Q In any event, it was after this letter? 20 A Yes. 21 Q Now, is it fair to say that what this letter 22 indicates, or what it says is that they are talking about 23 how the Grossmans' investment should be structured? 24 MR. TRABULUS: Objection, beyond the scope. 25 MR. WHITE: It has to do with Mr. Gordon's HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8287 Reffsin-recross/White
1 financial sophistication. 2 THE COURT: Overruled. 3 A Yes, it does mention restructuring.
4 Q In essence what it says that the Grossmans are 5 getting 125 percent. And the question is should this be 6 called a loan or should it be called an investment, right? 7 A Yes. 8 Q And the letter makes a distinction. It says in 9 essence, well, Dr. and Mrs. Grossman, if you call it a 10 loan you get repaid your money, but it is not income? 11 A Right. 12 Q It says, however, if you call it an investment, the 13 money you get back would be income, it would be some kind 14 of a dividend to a shareholder; is that right? 15 A That is correct. 16 Q And is it a fair reading of this letter that the 17 person who is writing it, namely, Mr. Gordon, knows the 18 essential financial principle, that if you call something 19 a loan it is not income? 20 A I would say so, yes. 21 Q Now, Mr. Trabulus asked you about the collateral 22 agreement? 23 A Right.
24 Q And about the phrase that says whether Mr. Gordon -- 25 let me rephrase the question. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8288 Reffsin-recross/White
1 It says that the income of any corporation that 2 he owns or controls is subject to the collateral 3 agreement, right? 4 A Yes. 5 Q And Mr. Trabulus asked you, well, if Mr. Gordon just 6 controlled, but didn't own, did that mean that the 7 corporation's income was subject to the collateral 8 agreement? 9 A That was the issue I had on the collateral 10 agreement. Because "control" as they defined it may not 11 necessarily be "control" as part of the compensation 12 agreements. If they control, they mean indirect 13 ownership. There are various rules with respect to 14 control. It was unclear. 15 Q Let me pick up on something you just said. 16
You understood what they were talking about was 17 that "control" meant indirect ownership? 18 A That's what I thought they meant, yes. 19 Q Is an example of what you are saying that if 20 something were in the name of a -- of somebody's wife, 21 but, in fact, that person ran the business, you would say 22 that they indirectly owned the business? 23 MR. TRABULUS: Objection, your Honor. 24 THE COURT: Overruled. 25 A Generally that would be an understanding, yes. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8289 Reffsin-recross/White
1 Q And you said yesterday in response to Mr. Trabulus' 2 questions that just because somebody controlled the 3 corporation, doesn't mean that its income is attributable 4 to them; is that right? 5 MR. TRABULUS: Objection. 6 A That's correct. 7 Q For example, if someone were just an employee, al
beit 8 one that controls the company, that doesn't mean that he 9 has any right to the corporation's income, right? 10 A Only to the extent of any agreement with the 11 shareholders. 12 Q For example, if you say that the president of IBM 13 controls the company, he certainly doesn't have any right 14 to the income that IBM earns, right? 15 A Not generally, no. 16 Q Unless there is some agreement? 17 A Right. 18 Q And if the president of IBM signed the same 19 collateral agreement, you couldn't say that IBM's income 20 could be used to satisfy his obligation just because he 21 controls the company, right? 22 A That's right. 23 MR. TRABULUS: Objection. 24 THE COURT: Sustained. 25 Strike out the answer. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8290 Reffsin-recross/White
1 MR. WHITE: Your Honor,
can I have one moment? 2 THE COURT: Yes. 3 (Whereupon, at this time there was a pause in the 4 proceedings.) 5 MR. WHITE: Your Honor, I have no further 6 questions. 7 8 FURTHER RECROSS-EXAMINATION 9 BY MR. TRABULUS: 10 Q Mr. Reffsin, you were just asked some questions about 11 the collateral agreement? 12 A Right. 13 Q Just briefly on that, is it not true that it provided 14 that corporate income was to be treated as Mr. Gordon's 15 income for purposes of collateral agreement -- corporate 16 income, if Mr. Gordon directly or indirectly controlled or 17 owned the company? 18 A Yes, that's what it said. 19 Q So by putting in the word "controlled" it indicated 20 it would pick up some income it might not pick up if it 21 simply said owned; is that correct? 22 A Directly, yes. 23 Q And directly or indirectly -- by putt
ing it in 24 indirectly it would pick up income that it might not if it 25 just said directly; is that right? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8291 Reffsin-recross/Trabulus
1 A Yes. 2 Q And on its face that collateral agreement was 3 designed to pick up income of the corporation and 4 attribute it to Mr. Gordon? 5 A Ridiculously so. 6 Q To the extent that it can pick up income in the 7 company's hands, although not in Mr. Gordon's hands? 8 A If you read it literally, yes. 9 Q If you read it literally you could have a situation 10 where Mr. Gordon could have to pay more in a given year 11 under that agreement than he actually received out of the 12 company; isn't that right? 13 A Yes, that's correct. 14 Q Can I see Exhibit 577, the one you were just shown. 15 A Right. 16 (Document handed to Mr.
Trabulus.) 17 Q Now, Mr. White -- excuse me. 18 (Whereupon, at this time there was a pause in the 19 proceedings.) 20 Q Mr. White asked you about this letter and said that 21 it was talking about whether the investment should be 22 called an investment or a loan; is that right? 23 A That is correct. 24 Q In fact, there is nothing in the letter about calling 25 it one thing or the other, right? It doesn't say calling HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8292 Reffsin-recross/Trabulus
1 it? 2 A No. It says "structured." 3 Q And it suggests they speak to their accountant? 4 A Yes. 5 Q It doesn't say we are calling it something? It says 6 there is one or two ways it could be done? 7 A Yes. 8 Q The way you understand it, that would be perfectly 9 legitimate; is that right? 10 A Yes. 1
1 Q And now, you were asked some questions by Mr. White 12 as to whether there might be illegitimate reasons to have 13 multiple accounts; do you recall that? 14 A Yes. 15 Q Could there be some occasion where there is an 16 illegitimate reason to have just a single account? 17 A I guess. 18 Q Couldn't there be a situation in which somebody 19 commingles into a single account thinks they are supposed 20 to keep segregated? 21 A Yes. 22 Q That could be illegitimate? 23 A It could be in certain circumstances. 24 Q Is it fair to say virtually any business practice 25 could be put to a legitimate or illegitimate purpose; is HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8293 Reffsin-recross/Trabulus
1 that right? 2 A It depends on how you define "illegitimate." 3 Q Now, you were asked -- you were shown that long
4 chart, 837, and you were asked whether in the bankruptcy 5 anything beyond the transfers from Who's Who Worldwide 6 were disclosed. Do you recall Mr. White asked you that? 7 A Yes. 8 Q And is it fair to say that the transfers from Who's 9 Who Worldwide to another entity were disclosed; is that 10 correct? 11 A That is correct. 12 Q And that's what was required to be disclosed to the 13 bankruptcy; is that correct? 14 A Yes. 15 Q Is it fair to say as you understand it everything 16 that was required to be disclosed in the bankruptcy was 17 disclosed? 18 A With respect to Who's Who Worldwide, yes. 19 Q I want to make sure that I understand. You are not 20 saying that there was something that was required to be 21 disclosed requiring or concerning something else was not 22 disclosed? 23 A No. 24 Q Basically all you are saying is all
that was required 25 to be disclosed was Who's Who Worldwide? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8294 Reffsin-recross/Trabulus
1 A Yes. 2 Q And that's the entity bankrupt? 3 A Yes. 4 Q Not Sterling? 5 A Right. 6 Q Not PVI? 7 A No. 8 Q Not Sterling -- 9 THE COURT: You have to go slower, Mr. Trabulus. 10 MR. TRABULUS: I will slow down. 11 Q Do you know as to whether additional transfers or 12 transactions may have been disclosed in the bankruptcy 13 proceeding subsequently to the filing of the petition, in 14 other words, in the exchange of the information between 15 the lawyers? 16 A Subsequent transfers? 17 Q I will withdraw the question. I misspoke. 18 Some of the other transactions shown there beyond 19 the transfer to -- from Who's Who Worldwide, do you know 20 whe
ther or not some of those may also have been disclosed 21 later on during to interrupt proceeding as the lawyers 22 were, you know, in discovery? 23 A Do I know that for a fact? No. 24 Q All right. 25 Were you here when Mr. Ackerman or Mr. Skalka HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8295 Reffsin-recross/Trabulus
1 indicated eventually information was obtained concerning 2 that? 3 A Yes. 4 Q And as far as you know all the information that was 5 given concerning that was accurate, correct? 6 A As far as I know. 7 Q And that was given pursuant to what was required in 8 the bankruptcy proceeding, right? 9 A Right. 10 Q And we heard stipulations entered into, and we heard 11 evidence of stipulations entered into concerning what 12 information would or would not be disclosed, right? 13 A Correct. 14 Q Now, Mr. White asked you some questions concerning -- 15 he -- well -- withdrawn. 16 You told Mr. White in connection with the 17 bankruptcy you told Mr. Gordon that he now could no longer 18 take loans; is that correct? 19 A That's right. 20 Q When you said that you were telling Mr. Gordon he 21 could no longer take loans from Who's Who Worldwide, 22 right? 23 A Yes. 24 Q Because it was Who's Who Worldwide which was in the 25 bankruptcy, right? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8296 Reffsin-recross/Trabulus
1 A That's correct. 2 Q And the restrictions only pertain to Who's Who 3 Worldwide; is that correct? 4 A Yes. 5 Q And you didn't tell him that you couldn't take loans 6 from Sterling or other entities; is that correct? 7 A No, I didn't discuss. 8 Q In fact, there was nothin
g to prevent him from doing 9 that because they weren't in bankruptcy; is that right? 10 A I guess. 11 Q So, if Mr. Gordon and you or anybody was talking 12 about any other possible sources of monies that he might 13 have, the fact that he might not take loans from Who's Who 14 Worldwide didn't mean that he might not get access to 15 monies from other companies; is that right? 16 A I believe it was brought out before, yes. 17 Q And in fact Sterling was doing quite well, was it 18 not? 19 A I didn't do the numbers, but it appeared to have 20 substantial sales. 21 Q Incidentally the restriction of taking loans from 22 Who's Who Worldwide once it was in bankruptcy, that didn't 23 reflect that there was anything improper in taking loans 24 as such, right? 25 A No. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8297 Reffsin-r
ecross/Trabulus
1 Q Just that once something is in bankruptcy there are 2 more stringent requirements what it can or cannot do, 3 particularly with respect to people who are insiders to 4 the company; is that right? 5 A That is correct. 6 Q Now, you were asked by Mr. White of a financial 7 motive on the part of Mr. Gordon not to pay taxes; is that 8 correct? 9 A Yes. 10 Q Everybody who pays taxes or who has a potential 11 liability has a financial motive either not to pay or to 12 reduce that liability; is that right? 13 A Yes. 14 Q And everybody who owes taxes or has a potential tax 15 liability has a financial incentive to attempt to reduce 16 it as much as possible within lawful means, right? 17 A Definitely. 18 Q And your job as an accountant was to advise 19 Mr. Gordon of how to reduce his liability and payment 20 obligati
ons within lawful means; is that correct? 21 A That's correct. 22 Q Now, you were asked some questions by Mr. Wallenstein 23 when he was questioning you again about learning that 75 24 percent was in the Grossmans -- 75 percent of Who's Who 25 Worldwide was in the Grossmans, 1993? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8298 Reffsin-recross/Trabulus
1 A Yes. 2 Q I want to make it clear. The remaining 25 percent as 3 you understood it at that time was in their trust; is that 4 right? 5 A Yes. 6 Q It wasn't a situation at that time where you thought 7 Mr. Gordon owned 25 percent; is that right? 8 A No. 9 THE COURT: How much more do you have, 10 Mr. Trabulus? 11 MR. TRABULUS: Well, maybe five minutes or so. 12 It is not one or two questions, but it is not a lot. 13 THE COURT: Does any other person want
to examine 14 after that? 15 MR. WALLENSTEIN: I will have two questions, 16 Judge. 17 THE COURT: All right. 18 Come up, counsel. 19 20 (Whereupon, at this time the following took place 21 at the sidebar.) 22 MR. WALLENSTEIN: Depending on what Norman does, 23 I may have more than two. 24 THE COURT: I am not precluding you. 25 Do you wish to put -- is this going to be the end HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8299 Reffsin-recross/Trabulus
1 of Mr. Reffsin's testimony within the short time? 2 MR. TRABULUS: I think so. 3 MR. WALLENSTEIN: We will probably finish the 4 whole thing in 15 minutes. 5 THE COURT: Do you intend to put Ms. Barnes on 6 after that? 7 MR. NEVILLE: Yes. 8 THE COURT: And we have to listen to her in 9 camera, do we not? 10 MR. NEVILLE: Yes.
11 THE COURT: I will have the jury come back about 12 20 minutes later so we can do that, and then we will take 13 Mr. Reffsin. Following that Ms. Barnes. 14 MR. NEVILLE: Fine. 15 THE COURT: Okay? 16 MR. WALLENSTEIN: Okay. 17 18 (Whereupon, at this time the following takes 19 place in open court.) 20 THE COURT: We will recess now until ten minutes 21 to 2:00 instead of 1:30, ten minutes to 2:00. I have to 22 take care of some things at 1:30. 23 Lunch will be from now to ten minutes to 2:00. 24 Please do not discuss the case, and keep an open mind. We 25 will recess until 1:50. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8300 Reffsin-recross/Trabulus
1 Have a nice lunch. 2 (Whereupon, at this time the jury left the 3 courtroom.) 4 (Luncheon Recess.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8301 Reffsin-recross/Trabulus
1 A F T E R N O O N S E S S I O N 2 3 (The following takes place in the absence of the 4 jury.) 5 (Also appearing for the witness Sandra Barnes is 6 Thomas G. Bailey, Jr.) 7 THE COURT: We are now in camera and in the 8 absence of the jury. 9 Do we have a witness? 10 MR. NEVILLE: Yes, your Honor. 11 The defense calls Ms. Sandra Barnes. 12 THE CLERK: Please raise your right hand. 13 14 S A N D R A S. B A R N E S , 15 called as a witness, having been first 16 duly sworn, was examined and testified 17 as follows: 18 19 THE CLERK: Ple
ase state your name and spell your 20 last name slowly for the record. 21 THE WITNESS: Sandra S. Barnes, B A R N E S, 22 first name, S A N D R A. 23 THE COURT: Have a seat, please. 24 Let's get to the point I am interested in. 25 HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8302 Barnes-voir dire/Neville (Jury Absent)
1 VOIR DIRE EXAMINATION 2 BY MR. NEVILLE: 3 Q Good afternoon, Ms. Barnes. 4 A Good afternoon. 5 Q My name is Jim Neville. 6 What is your position at Reed Publishing? 7 A I am vice president for fulfillment at LEXIS NEXIS in 8 Dayton, Ohio. 9 THE COURT: LEXIS NEXIS? 10 THE WITNESS: L E X I S, N E X I S. 11 THE COURT: In Dayton, Ohio? 12 THE WITNESS: Yes. 13 Q Was there a time that you were the publisher of 14 Marquis Who's Who? 15 A Yes, sir. 16 Q You are no
longer that? 17 A No. 18 Q And how long have you -- well, withdrawn. 19 The position you have now is still under the Reed 20 umbrella, correct? You are still a Reed employee? 21 A Yes. 22 Q And how long have you worked for Reed? 23 A Since October of 1991. 24 Q Now, you have worked for the same organization that 25 has been owned by various entities for some 25 years? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8303 Barnes-voir dire/Neville (Jury Absent)
1 A Yes. 2 Q And you first went to work for the Who's Who entity, 3 I believe it was owned at that time by IT&T in 1972? 4 A Yes, that's correct. 5 THE COURT: You have been with them since 1972? 6 THE WITNESS: I was with them before that, since 7 1964. 8 THE COURT: With Who's Who also? 9 THE WITNESS: No. 10 THE COURT: Your relationship with Who
's Who 11 started in 1972? 12 THE WITNESS: 1972. 13 Q I would like to relate back to the time you were the 14 publisher for Marquis Who's Who. 15 A All right. 16 Q At the time you were the publisher for Marquis 17 Who's Who, what were your duties? 18 A The publisher role under Reed was very similar to the 19 marketing role -- to the presidential role that I had 20 before that. I was responsible to assure that all the 21 publications got out as scheduled, and just to make sure 22 that we met the budgets. Under Reed the marketing was 23 done in another area. The editorial was done in another 24 area. The publisher was just responsible for assuring the 25 publications got out. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8304 Barnes-voir dire/Neville (Jury Absent)
1 Q As publisher for Marquis Who's Who in assuring that 2 the publication got out, did you also have participation 3 with those other officers or divisions within Reed who did 4 concern themselves with marketing? 5 A Yes, and I also attended all the trade shows; was 6 involved in the public relations piece of the Marquis 7 Who's Who, working with the libraries. 8 Q Now, the flagship, if you will, publication is Who's 9 Who in America? 10 A Yes, that's correct. 11 Q And branching from that flagship, if you will, is 12 various other some number of publications? 13 A Actually, I think we have at least between 18 and 20 14 titles. I haven't been involved recently. 15 Q Is Who's Who in Finance and Industry an example? 16 A Yes. 17 Q Who's Who in the World? 18 A Yes. 19 Q Who's Who in American Women? 20 A That's correct. 21 Q Who's Who in the East? 22 A Yes. 23 Q Who's Who in the W
est? 24 A Yes. 25 Q Who's Who in the Mid-west? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8305 Barnes-voir dire/Neville (Jury Absent)
1 A Yes. 2 THE COURT: You have to slow down a little. I am 3 not getting it, all of these titles is Who's Who. 4 THE WITNESS: All Marquis publications, yes. 5 THE COURT: They all say Who's Who? 6 THE WITNESS: All say Who's Who except for the 7 official directory of the American Board of Medical 8 Specialists. 9 THE COURT: All do say Who's Who? 10 THE WITNESS: That's right. 11 Q Can you describe for us how the -- again I am 12 focussing you to when you were the publisher, and it may 13 be somewhat different now, but as an aside, when were you 14 publisher? Up to what year of Marquis Who's Who? 15 A Unofficially I was still involved in 1997, the early 16 part of 1997.
17 THE COURT: From what year? 18 THE WITNESS: From 1991. I think I was made 19 publisher in 1992. We were acquired in October of 1991. 20 I was still the president for approximately a year until 21 we moved the business from Illinois to New Jersey. 22 Q During the years, in other words, '93, '92, '94, you 23 were still the publisher of Marquis Who's Who? 24 A I was still the publisher, yes. 25 Q Is Who's Who in America the flagship publication as I HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8306 Barnes-voir dire/Neville (Jury Absent)
1 described it earlier? Is that the most highly respected 2 biographical reference directory available? 3 A I believe it is. It has been published since 1898. 4 The reviews have always been that it is the preeminent 5 publication. 6 Q We didn't name the remaining Who's Who publications, 7 you sai
d there are up to 18 or so; is that correct? 8 A Correct. 9 Q Can you describe for us the market that there is for 10 these publications reference and listee? 11 A There are two major markets. The first one is the 12 reference market which includes public library, special 13 libraries, corporate libraries, governments libraries, 14 university libraries. The second is the listee, and 15 that's the people who are listed in the publications. 16 Q Are the listees, individuals who have met the 17 standards to be included within the publication? 18 A Yes, they are. 19 Q As a listee, someone is able, if they wish, to 20 purchase a book with their name in it? 21 A Yes. After selection they are offered an opportunity 22 to purchase. 23 Q Does the market -- withdrawn. 24 The breakdown between listee and reference 25 market, was about 50/50 when you were publis
her? HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8307 Barnes-voir dire/Neville (Jury Absent)
1 THE WITNESS: Yes. 2 THE COURT: What does that mean? 3 THE WITNESS: 50 percent of the revenue was from 4 the reference or library market, and 50 percent was from 5 the listee. 6 THE COURT: Mr. Neville, I would like you to 7 get -- I don't want to go through her whole testimony. I 8 want to get to the point that I am having this in camera 9 session for, which is the custom and usage in the 10 industry, or knowledge on the parts of other people. 11 That's what I want to get to. 12 MR. NEVILLE: Yes. 13 THE COURT: This is very good, but please, let's 14 get to it. 15 MR. NEVILLE: Very well. 16 Q Can you describe, Ms. Barnes, how Marquis Who's Who 17 and all the various publications acquire names of 18 individuals wh
o could possibly be included in the 19 directories or in the registries, or whatever the term 20 is? 21 A Yes. 22 For Who's Who in America we have a research staff 23 that goes through newspapers, journals, other 24 publications. There is a set of standards for America 25 that I don't know how many pages, it is several hundred HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8308 Barnes-voir dire/Neville (Jury Absent)
1 pages that the people have to meet certain criteria. 2 Those people are identified. They are handpicked. They 3 are sent solicitations. If they don't respond to those we 4 actually call the offices and try to get biographical data 5 on them. 6 If we can prepare the data from any other source, 7 we prepare the data, send it out, ask them to verify it 8 and return to it us. 9 For the other publications we do the
very same 10 thing with the must-name standard, the high profile people 11 who must go into the directories. They are all 12 researched, hand picked. And to get other names to fill 13 up the directory, we use high profile, association and 14 other types of lists. We always let people know that we 15 do do that. 16 THE COURT: Excuse me a moment. 17 You say for other names you use high profile 18 what? 19 THE WITNESS: Association lists and other lists. 20 THE COURT: And you say that you tell the persons 21 that their names come from a mailing list? 22 THE WITNESS: For many years, I don't know what 23 we do now, but for many years we had a brochure that 24 indicates and in the front of the book is also the 25 practice that we get the names from many different HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8309 Barnes-voir dire/Nevil
le (Jury Absent)
1 sources, including research and association lists, alumni 2 lists and other journal activities. I am not sure of the 3 exact wording. But we do let them know. 4 Q Did Marquis Who's Who -- withdrawn. 5 Who's Who in America does not use mailing lists; 6 is that correct? 7 A Who's Who in America does not use mailing lists to 8 the listee market, but it does use mailing lists to the 9 reference market. In other words, if we want to mail to 10 American libraries, we would use a list. 11 THE COURT: Do you use mailing lists to get the 12 names of the listees? 13 THE WITNESS: No, not for Who's Who in America. 14 THE COURT: Okay. 15 Q But for the other 17 or so Who's Who, some of which 16 we have mentioned, Who's Who in the East, for example, 17 Who's Who in the Mid-west, as another example, you do use 18 mailing lists, or Marquis Who'
s Who uses mailing lists? 19 A We use it in conjunction with other forms of getting 20 the names, yes. 21 Q Marquis Who's Who, in order to acquire these lists, 22 at least for the time you were publisher, and maybe they 23 still do, rented lists from list brokers? 24 A That's the only way you can get the list, yes. We 25 also used internal lists. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8310 Barnes-voir dire/Neville (Jury Absent)
1 Q Some of the lists that Marquis Who's Who rented were 2 lists of subscribers to the Wall Street Journal, for 3 example? 4 A We probably did use Wall Street as a test. I am not 5 so sure that we used that frequently. I don't recall. 6 Q Do you recall a company in Katonah, New York, 7 K A T O N A H? 8 A I didn't do list selections. No, I never heard of 9 that. 10 Q Did you as publish
er of Marquis Who's Who in or 11 around 1990, 1991, or for whatever position you had in 12 1990, I believe you said you became publisher in '91, or 13 maybe you said '90? 14 A '91, '92. I was president before that. 15 Q President? 16 A The same thing, yes. 17 Q Did you ever sign off on any purchase orders for the 18 McMillan directory division? 19 A Yes. The chief executive in charge had to sign off 20 on all purchase orders. 21 Q And do you recall whether in March of 1990, whether 22 you signed off on a purchase order where McMillan 23 Directory Division purchased 7,500 quantity, I take it, 24 that would be the number of names, of the Diner's Club 25 charge card holders, business address, key 903 in the HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8311 Barnes-voir dire/Neville (Jury Absent)
1 amount of $644.50? 2
A In my years as an executive I signed hundreds of 3 thousands of purchase orders. If you have my signature I 4 am sure I did it. 5 Q 9,333 names from the American City Business Journal? 6 A If my name is on there, I did it. 7 Q Wall Street Journal, active subscribers, 19,002, Wall 8 Street Journal active subscribers? 9 A If they are all in the same purchase order I signed 10 it. 11 Q Do you ever recall signing a purchase order for INC 12 magazine subscribers, a list of INC magazine subscribers? 13 A Again, if you have a purchase order with my name on 14 it. I don't recall. 15 THE COURT: Mr. Neville, I don't want to go 16 through all the type of mailing lists. 17 MR. NEVILLE: I am not going through them all. I 18 wanted to make my point. 19 THE COURT: You went through enough. The witness 20 testified as far as Who's Who in America the staff gets
21 the names through newspapers, standards of various kind. 22 They have criteria. They are hand picked. And they are 23 not from mailing lists. 24 Is that correct? 25 THE WITNESS: Absolutely correct. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8312 Barnes-voir dire/Neville (Jury Absent)
1 THE COURT: The other 17 or so Who's Who, mailing 2 lists are used, selective mailing lists are used. 3 THE WITNESS: That's correct. 4 THE COURT: Now, next. 5 Q In terms of the entire market in this country for 6 Who's Who type of publications, what would you say -- I 7 realize you can't give us an exact number -- but can you 8 tell us generally what percentage of the entire market 9 does Marquis Who's Who or the Reed umbrella, all these 10 different Who's Who publications, what percentage of the 11 entire market does Reed and its publicati
ons occupy? 12 MR. WHITE: Objection. Can we establish first 13 what the market is before we talk about the share? 14 Mr. Neville's question was all over the place. 15 THE COURT: He is talking about Who's Who. 16 MR. WHITE: I think there is a difference -- 17 THE WITNESS: There are two markets. 18 THE COURT: We are not talking about the 19 libraries, references. We are talking about the listees. 20 Are there books that have the names of people? 21 THE WITNESS: As far as I know, I don't know what 22 the market is for the listees. When I do any market 23 studies they were always for the reference market. 24 Q Let me -- 25 THE COURT: I didn't hear that. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8313 Barnes-voir dire/Neville (Jury Absent)
1 THE WITNESS: For the reference market always, 2 the library market. That was our key
focus on all our 3 books. 4 MR. WHITE: Your Honor, I am sorry, but my point 5 was not whether it was listee or library, but whether it 6 is Who's Who publications, or reference publications or 7 biographical reference publications, I want to make sure 8 we are talking about the right market before we get the 9 market share. 10 Q I am referring to the market of, for example, the 11 listees that would be in Who's Who in the East for 12 example, what share of the market -- withdrawn. 13 There are other Who's Who publications that are 14 not owned by Reed Elsevier; is that right? 15 A There are other publications that have the name Who's 16 Who in them. But I don't consider that they are reference 17 publications. So I am having a hard time following where 18 you are going. 19 Q As far as you consider, are there other people out 20 there competing for th
e listee dollar with Reed Elsevier, 21 yes or no? 22 A I am sure there are. I am not aware of any currently 23 that are in the same market that we are. Mr. Gordon was. 24 Q Aren't there certain smaller niche, if you will, 25 Who's Who directories that compete with Reed Publications HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8314 Barnes-voir dire/Neville (Jury Absent)
1 to a small extent for a small percentage? 2 A I am not sure if the other directories sell to 3 listees, I have no idea. 4 I know as an example, Gale has a publication, 5 Mr. Black America. 6 THE COURT: How do you spell Gale? 7 THE WITNESS: G A L E. 8 That's Who's Who in Black America. Whether they 9 sell to listees, I don't know. I don't know what the 10 practice is. 11 THE COURT: Does Marquis Who's Who have a 12 registry or a book that has the na
mes of the persons in 13 it? 14 THE WITNESS: Do we have -- I am sorry? 15 THE COURT: Who's Who Worldwide -- Who's Who in 16 America, is that a book with names in it? 17 THE WITNESS: Who's Who in America is a book with 18 100,000 names in it. 19 THE COURT: Do we have one of the books that are 20 in evidence here? 21 MR. JENKS: Right here. 22 THE COURT: I am talking about a book similar to 23 this book. 24 Would you show it to the witness, please. 25 (Handed to the witness.) HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8315 Barnes-voir dire/Neville (Jury Absent)
1 THE COURT: I don't mean exactly the same, but 2 similar. Have you seen the books before? 3 THE WITNESS: I have seen Who's Who Worldwide, 4 yes. 5 THE COURT: Do you have books that are like that 6 and they contain names like that.
7 THE WITNESS: Our book contains names like this. 8 THE COURT: That's what I wanted to know. 9 The question that Mr. Neville was asking you was 10 what share of the market do you and your companies, all of 11 them, the 17 Who's Who, what percentage of the market in 12 your opinion do you have? Half of the market, 25 percent 13 of the market, 95 percent of the market? 14 THE WITNESS: We have never undertaken any 15 studies like that because our primary focus has been in 16 the reference market. And I can tell you the reference 17 market. But I can't tell you the listee market. We start 18 out with a reference product. 19 THE COURT: What percentage of the reference 20 market? 21 THE WITNESS: Of the libraries, the large 22 libraries with budgets of a 100,000 or over, we have 23 approximately 97 percent penetration. Which means every 24 large library, public lib
rary, university library would 25 have a copy of Who's Who in America or one of the Marquis HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8316 Barnes-voir dire/Neville (Jury Absent)
1 Who's Who publications. 2 THE COURT: And what about the other market with 3 the listees? 4 THE WITNESS: The other publications? 5 THE COURT: All the Who's Who publications which 6 are not reference publications. You said there were two 7 types. 8 THE WITNESS: No. I didn't say that. I said 9 every Who's Who publication has standards, and a large 10 percentage of the names are researched just like Who's Who 11 in America. There are names in there that come from other 12 sources, but they all pass standards. 13 THE COURT: I understand. 14 What percentage of the market do -- you said that 15 Who's Who -- rather, your company has 97 percent
16 penetration in the libraries for references? 17 THE WITNESS: Yes. 18 THE COURT: What about outside the libraries? 19 THE WITNESS: We have never undertaken a study. 20 I can't answer that. 21 Q As an example, have you heard of a publication called 22 Who's Who of Intellectual Property Attorneys? 23 A I heard of it. I don't know where it is sold. I 24 don't know anything about it. I heard of it. 25 Q You testified in the past about that publication, HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8317 Barnes-voir dire/Neville (Jury Absent)
1 haven't you? 2 A I don't recall, I don't recall. 3 Q Doesn't Who's Who in Intellectual Property Attorneys, 4 compete with Who's Who in American Law which is a Marquis 5 publication? 6 A I thought it was a book of 100 names. I don't know. 7 Q Well, you mentioned earlier Who's Who among
Black 8 Americans; is that right? 9 A Yes. 10 Q And that's not a Marquis Who's Who publication? 11 A No, it is not a Marquis publication. 12 Q Is that a competitor of a Marquis publication? 13 A We never singled out ethnicity as a quality. I am 14 sure people are listed in there, in publications. But I 15 don't really consider it a competitive market. It is 16 competitive in the reference market, absolutely. 17 Q Referring to the listee market? 18 A We don't distinguish if someone is black, Asian. We 19 don't ask that. 20 Q There could be an overlap? In other words, the 21 people in Marquis Who's Who in the East, which obviously 22 could include black Americans? 23 A It could. 24 Q And that publication, which is Who's Who in the East, 25 which is a Marquis publication, could be in competition HARRY RAPAPORT, CSR, CP, CM OFFICIAL CO
URT REPORTER 8318 Barnes-voir dire/Neville (Jury Absent)
1 with Who's Who among Black Americans? 2 A It could. 3 Q How about international Who's Who? Did you ever hear 4 of that? 5 A Which one? 6 Q It primarily covers foreign dignitaries. 7 A There is a title International Who's Who, which is a 8 publication that is put out in Cambridge, England. There 9 are a couple of scam operations in the United States 10 called International. And I don't know much about that. 11 Q Who decides if they are a scam? You? 12 A There are ones that rip-off somebody else's name. 13 And they are not sold in the libraries. 14 Q The words Who's Who alone are generic? Is that 15 right? No one owns the copyright to use the words "Who's 16 Who?" 17 A The words "Who's Who" alone, it depends on where it 18 is, I believe that the words "Who's Who" alone may b
e 19 heard by A & C Black in London. 20 THE COURT: Mr. Neville, let's get to the point. 21 MR. NEVILLE: I want to establish there is a 22 competitive market. 23 THE COURT: I don't want to establish anything 24 more. I want to get to the point. 25 This woman has been in the business for 26 HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8319 Barnes-voir dire/Neville (Jury Absent)
1 years. She is obviously a very experienced person in this 2 industry. Let's ask her about it. Do you want to ask her 3 or do you want me to ask her? 4 MR. NEVILLE: I will ask her. 5 Q The general custom in your trade of these listee 6 journals or books other than Who's Who in America, which 7 we have already established does not use mailing lists, 8 the other publications that we have referred to, Who's Who 9 in the East, Who's Who in the West, Who'
s Who in the 10 Southwest, all those, there is a general custom and 11 practice in Marquis Who's Who publications and how the 12 names are acquired and how the books are put together 13 among other sources, lists are used to acquire names? 14 A I answered that, yes. 15 Q And that is a very accepted, general practice among 16 all those publications other than Who's Who in America? 17 A Marquis Who's Who -- I don't know what the other 18 biographical directories do, but Marquis Who's Who yes, we 19 use mailing lists as one of the sources to compile names. 20 We get the name. It is screened and reviewed. 21 Q We just wanted to know if you use the names. 22 A We don't necessarily use the names once we get them. 23 Q But you have lists which you cull names from; is that 24 correct? 25 A Yes. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8320 Barnes-voir dire/Neville (Jury Absent)
1 Q And you have mass mailings you send -- 2 THE COURT: You have to wait until the question 3 is finished before you answer. 4 THE WITNESS: Okay. 5 THE COURT: Go ahead, Mr. Neville. 6 Q Marquis Who's Who culls names from mailing lists, 7 yes? 8 A Yes. 9 Q And those names are sent out in mass mailings to 10 prospective listees, correct? 11 A Correct. 12 Q And that practice, or that custom of using all kinds 13 of different lists -- highly selective, of course, but 14 nonetheless lists -- is a general custom and practice 15 among all the publications of Marquis Who's Who except 16 Who's Who in America? 17 A And one other, the physician directory. 18 Q But at least 16 out of 18 publications, there is the 19 general custom? 20 A Yes. 21 Q Repetitive and ongoing and accepted o
f using rented 22 lists, mailing lists from list brokers in order to acquire 23 names of possible new listees for those publications? 24 A That's correct. 25 Q You said the Reed publication in the reference market HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8321 Barnes-voir dire/Neville (Jury Absent)
1 has 97 percent penetration you said? 2 A Yes. 3 Q That means -- 4 A Market share, whatever. 5 Q Okay. 6 You worked in this business for 25 years, since 7 1992? 8 A Right. 9 Q So, you are very familiar with all of the -- many of 10 the Who's Who publications that have come out over the 11 years? 12 A Yes. 13 Q You in fact had a practice of keeping a file on what 14 you call third party infringers? 15 A When I became president, yes. 16 Q And you actually would police and count articles or 17 letters, etcetera, that would come in from other Who's Who 18 publications and watch them to see what they were doing? 19 A That's correct. 20 Q And your project manager kept files at your direction 21 of potential third party infringers? 22 A That's correct. 23 THE COURT: I think Mr. Neville shortened your 24 tour. You are 26 years with the company, right? 25 THE WITNESS: Actually I have -- HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8322 Barnes-voir dire/Neville (Jury Absent)
1 THE COURT: More than that, but with the Who's 2 Who connection. 3 THE WITNESS: Yes. 4 Q Reed Elsevier sued Who's Who Worldwide in a trademark 5 infringement lawsuit; is that correct? 6 A Yes. We were awarded 1.6 million. 7 Q Congratulations. 8 A We never got anything though. 9 THE COURT: Mr. Neville, this is not her direct
10 testimony in front of a jury. Don't get into anything not 11 important to this issue. Neville I am sorry. 12 THE COURT: Are you through with that subject, 13 the accepted general practice? 14 MR. NEVILLE: I was getting to the market share 15 and asking her to compare the market share that Who's Who 16 Worldwide had versus Marquis Who's Who so we could get an 17 idea how prominent Marquis Who's Who, to show whatever 18 they did is the custom in the trade. 19 THE COURT: Ask the witness directly. 20 You said it was the accepted general practice of 21 the Who's Who publications in your company other than 22 Who's Who in America and this other -- 23 THE WITNESS: The medical directory. 24 THE COURT: The medical directory? 25 THE WITNESS: Yes. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8323 Barnes-voir dire/Neville (Jury Absent)
1 THE COURT: To use the selective mailing list; is 2 that correct? 3 THE WITNESS: That's correct. 4 THE COURT: In your opinion, was it the general 5 accepted practice in the industry as a whole to use 6 mailing lists? 7 THE WITNESS: I am not sure what the industry as 8 a whole does. All I know is what we do, and know what 9 people who are in the marketplace that cause confusion 10 that our listees come to us. I don't know what the 11 general population publishers do. 12 THE COURT: You say you attend trade shows, or 13 what do they call it? 14 THE WITNESS: We attend the library trade shows. 15 We look at the publications and look at the brochures. 16 But we never talk about how they do their business. Those 17 typically are trade secrets, and people don't share that. 18 Q Your company -- 19 THE COURT: Excuse me. 20 MR. NEVILLE: Sor
ry, your Honor. 21 THE COURT: They meaning the use of mailing 22 lists? 23 THE WITNESS: We do talk about how we put the 24 publications together. We talk about our market, what the 25 publications are, who they serve. We talk to librarians HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8324 Barnes-voir dire/Neville (Jury Absent)
1 and ask them what they want. 2 THE COURT: When you say the use of mailing lists 3 are accepted general practice in the Who's Who 4 publications -- 5 THE WITNESS: I said Marquis Who's Who. 6 THE COURT: In Marquis Who's Who which are 16 or 7 17 publications; is that correct. 8 THE WITNESS: That's correct. 9 THE COURT: Do you have an opinion as to whether 10 this use of mailing lists by your publication is known 11 outside of the employees of Marquis Who's Who? 12 THE WITNESS: We do put it in
a brochure, so 13 people getting the mailings, if they read all the creative 14 information that is sent along in the mailings, they will 15 read that we do get names from other sources, including 16 journals, alumni lists, we mention lists. 17 THE COURT: You mention lists in the brochure? 18 THE WITNESS: Yes, we do, or we did. 19 THE COURT: Who do you send the brochures to? 20 THE WITNESS: To potential listees. 21 Q What year would that have been that the brochure 22 included the word "lists"? 23 A Many of them from the time that I have been involved 24 with the company, up through the last time I looked at 25 something. HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8325 Barnes-voir dire/Neville (Jury Absent)
1 There are different brochures that carry the 2 information. 3 Q You agree that if someone is looking to compete
with 4 a Marquis Who's Who publication wouldn't necessarily be 5 doing something wrong? 6 A Ask that's again? 7 Q It is not illegal to compete with your company, is 8 it? 9 A It is not illegal, as long as you don't come in and 10 represent yourself as my company. 11 Q You as president were monitoring the industry and 12 looking for competitors whom you felt were causing 13 confusion? 14 THE COURT: I don't think we have to get into 15 that, because that is not the subject of this in camera 16 interrogation of the witness. 17 Do you wish to add anything else as far as the 18 custom and practice, custom and usage, or any knowledge on 19 the part of people that this company uses mailing lists? 20 Anything else on that subject? 21 MR. NEVILLE: I have nothing further. 22 THE COURT: Do you wish to ask any questions, 23 anybody else? 24 MR. TRABULUS: Your Honor, I would like to, 25 without necessarily indicating I would call her as a HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER 8326 Barnes-voir dire/Neville (Jury Absent)
1 witness. I think the record is incomplete and I would 2 like to attempt to clarify it. 3 THE COURT: The record on the issue I am 4 interested in? 5 MR. TRABULUS: Yes, the use of mailing lists and 6 other things relating to it. I will be pretty limited on 7 that, okay? 8 9 VOIR DIRE EXAMINATION 10 BY MR. TRABULUS: 11 Q Ms. Barnes, my name is Norman Trabulus, and I am 12 Bruce Gordon's lawyer -- 13 THE COURT: First of all, Norman Trabulus, Bruce 14 Gordon's lawyer, slow down. 15 MR. TRABULUS: I will. 16 Q While you were the publisher or president of Who's 17 Who publications, was it the practice of those 1
8 publications to send letters to people who were being 19 considered for inclusion in the directories that utilize 20 mailing lists? 21 A Absolutely. 22 Q And those letters would be gotten from the mailing 23 lists -- excuse me, withdrawn. 24 Those letters would be sent to people on the 25 mailing list; is that correct? HARRY RAPAPORT, CSR