CONFIDENTIAL 1 1 ** CONFIDENTIAL ** 2 UNITED STATES DISTRICT COURT 3 SOUTHERN DISTRICT OF NEW YORK 4 5 -----------------------X 6 IN RE OPTIMAL U.S. : CASE NO.: 10-cv-4095(SAS) 7 LITIGATION : 8 -----------------------X 9 10 11 12 13 14 DEPOSITION OF BERNARD L. MADOFF 15 (Taken by the Plaintiffs) 16 Butner, North Carolina 17 August 7, 2012 18 7:51 a.m. 19 20 21 22 23 24 Reported by: Lisa A. DeGroat, RPR Notary Public 25 VERITEXT REPORTING COMPANY (212) 279-9424 www.veritext.com (212) 490-3430 CONFIDENTIAL 2 4 1 A P P E A R A N C E S 1 S T I P U L A T I O N S 2 Before testimony was taken, it was stipulated 2 For the Plaintiffs: by and between counsel representing the respective 3 JAVIER BLEICHMAR, Esq. 3 parties as follows: ALAN I. ELLMAN, Esq. 4 1. That any defect in the notice of the taking of this deposition, either as to time or 4 Labaton Sucharow, L.L.P. 5 place, or otherwise as required by statute is 140 Broadway expressly waived, and this deposition shall have the 6 same effect as if formal notice in all respects as 5 New York, New York 10005 required by statute had been given and served upon (212) 907-0887 7 the counsel in the manner prescribed by law. 6 [email protected] 8 2. That this deposition shall be taken for the purpose of discovery or for use as evidence in 7 9 the above-entitled action, or for both purposes. 8 For the Defendants: 10 3. That this deposition is deemed opened and 9 SHAWN PATRICK REGAN, Esq. all formalities and requirements with respect to the 11 opening of the same, expressly including notice of GUSTAVO J. MEMBIELA, Esq. the opening of this deposition, are hereby waived, 10 Hunton & Williams, L.L.P. 12 and this deposition shall have the same effect as if all formalities in respect to the opening of the 200 Park Avenue 13 same had been complied with in detail. 11 New York, New York 10166 14 4. That the undersigned, Lisa A. DeGroat, (212) 309-1046 Registered Professional Reporter and Notary Public, 15 is duly qualified and constituted to take this 12 [email protected] deposition. 13 16 5. Objections to questions, except as to the 14 17 form thereof, and motions to strike answers need not 15 be made during the taking of this deposition, but 16 18 before any judge or any court of competent jurisdiction for the purpose of ruling thereon, or 17 19 at any other hearing or trial of said case at which 18 DEPOSITION OF BERNARD L. MADOFF, taken by said deposition might be used, except that an 19 the Plaintiffs, at the Federal Correctional 20 objection as to the form of a question must be made at the time such a question is asked or objection is 20 Institution - Butner Medium I, Old N.C. Highway 75, 21 waived as to the form of the question. 21 Butner, North Carolina, on the 7th day of August, 22 6. That the signature of the witness to the deposition is hereby reserved. 22 2012, at 7:51 a.m., before Lisa A. DeGroat, 23 23 Registered Professional Reporter and Notary Public 7. That the Federal Rules of Civil Procedure 24 of the State of North Carolina. 24 shall control concerning the use of the deposition in court. 25 25 3 5 1 C O N T E N T S 1 P R O C E E D I N G S 2 2 Whereupon, 3 The Witness: Bernard L. Madoff Examination 3 BERNARD L. MADOFF, 4 By Mr. Bleichmar . 5 4 having been duly sworn, 5 5 was examined and testified as follows: 6 6 DIRECT EXAMINATION BY COUNSEL FOR PLAINTIFFS 7 I N D E X O F T H E E X H I B I T 7 BY MR. BLEICHMAR: 8 8 Q. All right. Good morning, Mr. Madoff. 9 Plaintiffs' Identified Marked 9 Could you, please, state your name for the 10 Exhibit 1 Picture of the board of directors 10 record? of Banco Santander, 1 pg. 166 166 11 A. Bernard Madoff. 11 12 MR. BLEICHMAR: And, because there's been 12 13 no introductions by the usual videographer, I 13 14 will lay out on the record, my name is Javier 14 15 Bleichmar. With me is Alan Ellman, from Labaton 15 16 Sucharow. 16 17 We represent the plaintiffs in the -- in 17 18 18 re: Optimal Securities litigation in the United 19 19 States Federal District Court, in the Southern 20 20 District of Manhattan. 21 21 And, Mr. Regan, if you'd like to 22 22 introduce -- 23 23 MR. REGAN: Sure. 24 24 MR. BLEICHMAR: -- counsel for the 25 25 defendants. 2 (Pages 2 to 5) VERITEXT REPORTING COMPANY (212) 279-9424 www.veritext.com (212) 490-3430 CONFIDENTIAL 6 8 1 MR. REGAN: Shawn Regan, Hunton & Williams. 1 object to my questions. They're preserving their 2 We represent the defendants in this lawsuit. 2 objections. You may still answer the questions, but 3 With me is Gus Membiela, also from Hunton & 3 we need to provide defense counsel an opportunity to 4 Williams. Gus is in our Miami office. I'm in 4 object. 5 our New York office. And I think that's it. 5 One last thing. You're not represented by 6 Before we go any further, I should just 6 counsel here; correct? 7 say, we want to designate the transcript as 7 A. No. 8 confidential, subject to review. Designated as 8 Q. And you understand that I am not your 9 confidential in its entirety at this point, 9 counsel; correct? 10 subject to further review. 10 A. Correct. 11 MR. BLEICHMAR: Right. I mean, we 11 Q. Let me ask you first a few background 12 obviously object to the designation, but the 12 questions about your -- your business. 13 procedures are set -- 13 A. Uh-huh. 14 MR. REGAN: Right. 14 Q. Your former business was called Bernard L. 15 MR. BLEICHMAR: -- in the protective order. 15 Madoff Investment Securities; correct? 16 MR. REGAN: Right. 16 A. That's right. 17 BY MR. BLEICHMAR: 17 Q. And can you describe generally what -- and, 18 Q. Mr. Madoff, have you been deposed before? 18 actually, let me step back. 19 A. Yes. 19 Can we refer to that as BMIS for short? 20 Q. And when were you deposed approximately? 20 A. Yeah. 21 A. Oh, years ago. 21 Q. And can you describe briefly what BMIS did? 22 Q. Were you deposed as a -- as a party to a 22 A. Well, we originally started out as a 23 lawsuit or -- 23 market making firm and a proprietary trading 24 A. No. As a witness. 24 firm in 1960. And there was a small division 25 Q. You were a third-party witness? 25 that was a money management firm that was headed 7 9 1 A. Expert witness. Right. 1 up by myself, my sons and my brother, ran the 2 Q. An expert witness? 2 market making and proprietary side of the 3 A. Yeah. 3 business. 4 Q. And was this a civil litigation? 4 We then became a registered investment 5 A. Yes. 5 advisor in 2006, and that business was basically 6 Q. And what capacity of expert witness were 6 separate from the market making proprietary 7 you? 7 business. Although, it was under the same 8 A. Trader. As an expert trader. 8 heading and under the same umbrella. 9 Q. So you're a little bit familiar with -- 9 Q. When you referred to the market making 10 with the mechanics of a deposition; correct? 10 business, for purposes of the jury, that is not 11 A. Yes. 11 familiar with these trading terms, can you just 12 Q. I'm going to ask you to make sure that all 12 describe what market making entails? 13 of your responses are verbal. Otherwise, the court 13 A. Market making is basically a wholesale 14 reporter cannot transcribe them. 14 operation that is similar to a specialist 15 Also, please make sure you let me finish my 15 operation on the floor of an exchange. 16 question before you begin your answer. That way the 16 We actually were the largest competitor 17 court reporter doesn't have to step on itself. 17 of the New York Stock Exchange, and we 18 Do you understand? 18 transacted about 400,000 transactions a day. We 19 A. Yeah. 19 represented close to ten percent of all of the 20 Q. If you -- if you need a break, please, let 20 trading in U.S. equities. 21 us know. 21 What a market maker does is stand -- is 22 A. Uh-huh. 22 registered with the SEC and the NASD, now called 23 Q. We can take a break whenever it's 23 FINRA, as a market maker. He then is 24 convenient for you. 24 responsible for maintaining an orderly liquid 25 At some point in time defense counsel may 25 market in a list of securities that he registers 3 (Pages 6 to 9) VERITEXT REPORTING COMPANY (212) 279-9424 www.veritext.com (212) 490-3430 CONFIDENTIAL 10 12 1 for. 1 advisors, as opposed to just a broker-dealer. 2 We traded the complete 500 S&P 2 The main reason that was was because 3 securities, as well as about 200 NASDAQ 3 investment -- once you register as an investment 4 securities as well.