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November 1, 2018 Stacey A. Bell direct dial: 212.589.4632 [email protected]

VIA ECF

Honorable Stuart M. Bernstein United States Bankruptcy Court Southern District of New York One Bowling Green, Room 723 New York, New York 10004-1408

Re: Securities Investor Protection Corporation v. Bernard L. Madoff Investment Securities LLC, Adv. Pro. No. 08-01789 (SMB)

Dear Judge Bernstein:

We are counsel to Irving H. Picard, trustee (the “Trustee”) for the substantively consolidated liquidation of Bernard L. Madoff Investment Securities LLC and the chapter 7 estate of Bernard L. Madoff under the Securities Investor Protection Act, 15 U.S.C. § 78aaa et seq. We write in response to the Court’s November 1, 2018 request to the Trustee for copies of the deposition transcripts of Bernard L. Madoff in connection with the Trustee’s Motion for Limited Additional Discovery Based on Prior Orders Authorizing Deposition of Bernard L. Madoff filed Sept. 21, 2018. See ECF No. 18015.

To that end, we are filing herewith the following transcripts:

 Exhibit A: Transcript of Deposition of Bernard L. Madoff dated April 26, 2017  Exhibit B: Transcript of Deposition of Bernard L. Madoff dated April 27, 2017  Exhibit C: Transcript of Deposition of Bernard L. Madoff dated November 8, 2017  Exhibit D: Transcript of Deposition of Bernard L. Madoff dated November 9, 2017

The deposition transcript of Bernard L. Madoff dated December 20, 2016 was previously filed on June 26, 2017. See ECF No. 16237, Ex. I.

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The deposition transcripts of Bernard L. Madoff referenced herein are no longer confidential pursuant to the orders authorizing the deposition of Bernard L. Madoff. See ECF Nos. 14213, 14905, 16625.

Respectfully submitted,

/s/ Stacey A. Bell

Stacey A. Bell Partner

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CONFIDENTIAL 1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK 2 3 In re: ) 4 ) SECURITIES INVESTOR ) 5 PROTECTION CORPORATION, ) ) 6 Plaintiff-Applicant, ) ) 7 vs. ) 08-01789 (SMB) ) 8 BERNARD L. MADOFF ) INVESTMENT SECURITIES, LLC, ) 9 ) Defendant. ) 10 ) ) 11 In re: ) ) 12 BERNARD L. MADOFF, ) ) 13 Debtor. ) ) 14 15 16 Videotaped Deposition of BERNARD L. 17 MADOFF, VOLUME I, taken on behalf of the Customers, 18 before K. Denise Neal, Registered Professional 19 Reporter and Notary Public, at the Federal 20 Correctional Institution, 3000 Old Highway 75, 21 Butner, North Carolina, on the 26th day of April, 22 2017, commencing at 9:07 a.m. 23 24 * * * * * 25

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1 APPEARANCES OF COUNSEL: 2 On Behalf of the Customers: 3 HELEN DAVIS CHAITMAN, Esq. 4 Chaitman, LLP 5 465 Park Avenue 6 New York, New York 10022 7 (908) 303-4568 8 [email protected] 9 10 On Behalf of the Trustee: 11 DAVID J. SHEEHAN, Esq. 12 AMANDA E. FEIN, Esq. 13 Baker Hostetler 14 45 Rockefeller Plaza 15 New York, New York 10111-0100 16 (212) 589-4621 17 [email protected] 18 19 On Behalf of the Deponent: 20 PETER A. GOLDMAN, Esq. 21 12 Fairlawn Parkway 22 Rye Brook, New York 10573 23 (914) 935-6857 24 [email protected] 25

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1 APPEARANCES OF COUNSEL: 2 Videographer: 3 Ken Morrison, CLVS 4 5 * * * * * 6 7 CONTENTS 8 THE WITNESS: BERNARD L. MADOFF EXAMINATION 9 BY MS. CHAITMAN 6 10 BY MR. SHEEHAN 132 11 12 * * * * * 13 14 INDEX OF EXHIBITS 15 FOR THE CUSTOMERS: PAGE 16 Exhibit Number 15, Copies of Bloomberg 38 17 trade tickets 18 Exhibit Number 16, JPMorgan Chase 52 19 statement - 2-2001 20 Exhibit Number 17, 703 account statement 58 21 - 6-2001 22 Exhibit Number 18, JPMorgan Chase 60 23 statement - 10-2002 24 Exhibit Number 19, JPMorgan Chase 61 25 statement - 12-2003

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1 INDEX OF EXHIBITS (Continued) 2 FOR THE CUSTOMERS: PAGE 3 Exhibit Number 20, JPMorgan Chase 61 4 statement - 12-2004 5 Exhibit Number 21, JPMorgan Chase 62 6 statement 7 Exhibit Number 22, Bear Stearns statement 64 8 - 8-1-05 9 Exhibit Number 23, Documents - composite 67 10 Exhibit Number 24, Morgan Stanley statement 70 11 Exhibit Number 25, JPMorgan Chase position 72 12 summary 13 Exhibit Number 26, Fidelity statement - 73 14 1-31-99 15 Exhibit Number 27, Clothmasters statement 74 16 - 8-31-91 17 Exhibit Number 28, Account Canada document 75 18 Exhibit Number 29, Appendix to Dubinsky 92 19 report 20 Exhibit Number 30, Copies of correspondence 94 21 Exhibit Number 31, Bill Feingold expert 109 22 report 23 24 * * * * * 25

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1 THE VIDEOGRAPHER: My name is Ken Morrison 2 representing Veritext Legal Solutions. The date 3 today is April 26th, 2017 and the time is 9:07 a.m. 4 This is the deposition being held at Butner Federal 5 Correctional Facility located at 3000 Old 75 6 Highway, Butner, North Carolina 27509 and is taken 7 by counsel for the Plaintiffs in the case of 8 Securities Investor Protection Corporation, 9 Plaintiff-Applicant, versus Bernard L. Madoff 10 Investment Securities, LLC, Defendant. 11 This case is being held in the United 12 States Bankruptcy Court, Southern District of New 13 York, Case Number Adversary Proceeding 08-01789 14 (SMB). The name of the witness is Bernard L. 15 Madoff. At this time would the attorneys present in 16 the room identify themselves and the parties you 17 represent and then our court reporter, Denise Neal, 18 representing Veritext Legal Solutions, will swear in 19 the witness and we can proceed. 20 MS. CHAITMAN: Helen Davis Chaitman on 21 behalf of a great number of claw-back Defendants. 22 And, in fact, I'm taking the deposition. It's not 23 the Trustee who's taking it. 24 MR. SHEEHAN: Right. 25 MR. GOLDMAN: Peter A. Goldman. I

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1 represent Bernard Madoff. 2 MR. SHEEHAN: David J. Sheehan with Baker 3 Hostetler, counsel to the Trustee. 4 MS. FEIN: Amanda Fein, Baker Hostetler, 5 for the Trustee. 6 (The witness was duly sworn by the court 7 reporter.) 8 MR. GOLDMAN: Keep your voice up. 9 BERNARD L. MADOFF, 10 having been first duly sworn, was examined and 11 testified as follows: 12 EXAMINATION 13 BY MS. CHAITMAN: 14 Q. Good morning, Mr. Madoff. 15 A. Good morning. 16 Q. Irving Picard has argued to Judge Bernstein 17 that you're not a credible witness and I want to ask 18 you a few questions about that. At the time you 19 confessed on December 11th, 2008 had you been 20 indicted? 21 A. No. 22 Q. At the time you confessed was there a 23 criminal investigation against you? 24 A. No. 25 Q. At the time you confessed was there an SEC

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1 investigation against you? 2 A. No. 3 Q. At the time you confessed was there any 4 limitation on your ability to transfer funds? 5 A. No. 6 Q. At the time you confessed was there any 7 limitation on your ability to travel abroad? 8 A. No. 9 Q. So is it fair to say that you had the 10 option of taking a couple of hundred million dollars 11 and moving with your wife to Switzerland and living 12 out your life in Switzerland the way Mark Rich did? 13 A. I'm -- 14 MR. SHEEHAN: Objection to form. Let's 15 get this geared up because I don't want to 16 interrupt. I apologize. So I'm just going to say 17 objection. When I say that, it means as to form. 18 That's it. 19 MS. CHAITMAN: Okay. 20 MR. SHEEHAN: But just to preserve. 21 MS. CHAITMAN: Sure, sure. 22 MR. SHEEHAN: Okay. All right. I'll shut 23 up. 24 MS. CHAITMAN: I'm going to rephrase the 25 question because I was rudely interrupted.

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1 (Laughter on the record.) 2 MR. SHEEHAN: I apologize for that. I 3 apologize. Go right ahead. Go ahead. 4 MS. CHAITMAN: I'm kidding. 5 Q. (By Ms. Chaitman) Okay. At the time you 6 confessed you knew who Mark Rich was; didn't you? 7 A. Yes. 8 Q. And did you understand that Mark Rich had 9 escaped prosecution by moving to Switzerland? 10 A. Yes. 11 Q. And did you recognize that you could have 12 done the same thing, just moved to Switzerland with 13 Ruth with a couple of hundred million dollars and 14 lived out your life? 15 A. Yes. 16 Q. Now, at the time you confessed the global 17 economy had collapsed. Do you recall that? 18 A. Yes. 19 Q. Bear Stearns had collapsed in March 2008; 20 isn't that true? 21 A. Correct. 22 Q. And Lehman filed in bankruptcy in 23 October 2008? 24 A. Correct. 25 Q. And the stock market lost half its value

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1 when Lehman filed in bankruptcy; isn't that true? 2 A. Just about, yes. 3 Q. And you had a lot of wealthy people who 4 owed you about $10 billion; isn't that true? 5 A. Correct. 6 Q. So instead of confessing to a crime which 7 would inevitably result in your spending the rest of 8 your life in prison, why didn't you move to 9 Switzerland or try to work out a negotiated 10 liquidation of your business? 11 A. Well, first of all, I knew that I was 12 guilty. I felt responsible. Secondly, I had made a 13 decision that the best thing that I could do for the 14 -- you know, to make restitution to my clients was 15 to try and convince certain people that were 16 responsible for creating my problem to threaten them 17 with turning them in with their complicit behavior 18 if they did not return the money that they owed me. 19 Q. Okay. And I just want to caution you. 20 We're going to speak a little bit about the four 21 families, but I don't want you to mention the names 22 of any of the people. 23 A. Okay. 24 Q. Now, when you met with the U.S. Attorney's 25 Office in December 2008, did you tell them the

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1 complete truth about what happened? 2 A. Yes. 3 Q. Since that time have you ever been 4 dishonest when you testified about what happened? 5 A. No. 6 Q. Now, as I just mentioned, you've testified 7 previously about the four families who had been your 8 clients from the 1960s on. And, again, I don't want 9 you to mention the names of any of those four 10 families, but I just want to ask you a question. 11 Was there a period prior to 1990 when Annette 12 Bongiorno backdated trades from members of the four 13 families? 14 A. Yes. 15 Q. Was that done without the knowledge of the 16 members of the four families? 17 A. No. They were aware of it. They had 18 instructed her to do it. 19 Q. They instructed her to backdate trades? 20 A. Yes. 21 MS. CHAITMAN: Okay. 22 MR. SHEEHAN: Excuse me. What time period 23 was that? 24 MS. CHAITMAN: Before the 1990s. 25 MR. SHEEHAN: Okay.

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1 Q. (By Ms. Chaitman) Now, to your knowledge 2 has the Trustee settled with each of these four 3 families? 4 A. I believe so. 5 Q. Okay. You testified the last time you were 6 deposed by me that the fraud did not begin until you 7 began doing the split strike conversion strategy in 8 1992? 9 A. Correct. 10 Q. Now, was it, as Judge Bernstein used the 11 expression, a light switch? When you started doing 12 a split strike, did you stop buying any securities 13 for the split strike customers? 14 A. No. I had started -- I had started buying 15 -- doing the strategy for probably through 1993; but 16 as more money came in, that's when my problem began 17 because I couldn't put it all to work in the 18 strategy. And I had committed that I would keep all 19 the money working. 20 Q. Okay. I just want to say one thing. I 21 have seen statements as early as July 1991 which 22 seem to be in split strike. Are you saying that it 23 wasn't -- I'd like you to give me your best 24 recollection of when you stopped buying securities 25 for the split strike customers.

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1 A. Sometime post-'92. As I started, you know, 2 I was still buying it in '92 and also through most 3 of '93. After that, that's when I stopped buying 4 securities for split strike. 5 Q. Okay. Now, you continued to have some 6 customers who were in convertible arbitrage? 7 A. Correct. 8 Q. Did you continue so long as people were in 9 convertible arbitrage, did you actually buy those 10 securities? 11 A. Yes. 12 Q. Okay. So it was only in the split strike 13 that you stopped buying the securities? 14 A. Correct. 15 Q. Okay. Do you derive any kind of benefit 16 from your testimony as to when the fraud started? 17 A. No. 18 Q. Does it benefit anyone in your family? 19 A. No. 20 Q. If the Trustee claims you're lying as to 21 when the fraud started, is there any conceivable 22 benefit that you enjoy by virtue of that testimony? 23 A. No. 24 Q. Does this testimony benefit any of your 25 family members?

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1 A. No. 2 Q. Now, you testified that at some point in 3 1992 you leased the 17th floor of the Lipstick 4 Building? 5 A. Yes. 6 Q. And you bought a separate computer system 7 for the people you moved to the 17th floor; is that 8 right? 9 A. Correct. 10 Q. And that was called the IBM AS/400? 11 A. Yes. 12 Q. Now, was the IBM AS/400 on the 17th floor 13 linked to outside sources, like other investment 14 firms or DTC? 15 A. No. 16 Q. Now, the computers that were used on the 17 18th and the 19th floors by the traders -- 18 A. Right. 19 Q. -- were those Bloomberg terminals? 20 A. Well, we have Bloomberg terminals all over 21 the firm, yes. 22 Q. Okay. Were the Bloomberg terminals linked 23 to outside sources? 24 A. Yes. 25 Q. What outside sources were they linked to?

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1 A. I can't probably tell you all of them, but 2 they -- Bloomberg generally is linked to -- 3 basically, Bloomberg terminal gets information from 4 other information providers. They're also -- I'm 5 not sure, but they're also linked to probably the 6 depositories as well. They're not linked to other 7 brokerage firms. 8 Q. Okay. Now, when you testified that Annette 9 Bongiorno prior to 1990 had backdated trades for the 10 four families, were those carried out on the AS/400? 11 A. Yes. 12 Q. Okay. But before -- before you bought the 13 AS/400 in 1992, what kind of computer was she using 14 that she would backdate trades? 15 A. We had other small like, you know, 16 computers, what you would call them, just like, you 17 know, what you would use at home, you know, word 18 processors and, you know, NASDAQ terminals and 19 things of that sort. 20 Q. They were not linked to outside sources? 21 A. No. They were not linked, right. 22 Q. Now, was it -- you testified last time, and 23 correct me if my recollection is incorrect, but I 24 think what you testified last time is that it was 25 not illegal for you to sell short?

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1 A. Correct. 2 Q. And that was because -- can you explain? 3 A. It's an obligation if you're -- if 4 you're -- first of all, any brokerage firm can sell 5 short, you know, just as any client can sell short. 6 That's a typical way of doing business, you know. 7 So you as a client could instruct your broker to -- 8 to execute a short sale. 9 Brokerage firms more routinely go short 10 stock to complete their customer orders at times if 11 they don't have them in their inventory. If you're 12 a market making firm like I was, you're obligated to 13 honor your market, which requires you to go short, 14 you know, at times. 15 So going short is a regular, every day 16 business. A firm like ours, you know, regular 17 trading inventory typically would have hundreds of 18 millions of dollars, probably $500 million short all 19 the time. 20 Q. Okay. But a naked short is where you're 21 selling short but you don't own the security; right? 22 A. The definition of a short sale is naked. 23 It means that you're selling something that you 24 don't own at the current time. 25 Q. Okay. And as a market maker did you have

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1 an unlimited right to sell naked shorts? 2 A. Correct. 3 Q. So was it illegal for you to send a 4 statement say beginning in '94 or whenever you 5 stopped buying the securities shown on the split 6 strike, was it illegal for you to send a statement 7 to a split strike customer that indicated that the 8 customer owned certain Fortune 100 company stocks 9 when you hadn't purchased them? 10 A. No. It was not illegal. 11 Q. Okay. So if it was not illegal for you to 12 sell unlimited naked shorts, what was illegal about 13 the split strike activity? 14 A. Well, what was illegal and what we did was 15 not reflect our short positions to the clients on 16 our audited financials. 17 Q. Because you had a debt to each client to 18 whom you sold naked shorts -- 19 A. Correct. 20 Q. -- in the amount -- the present value of 21 those securities; is that correct? 22 A. Correct. 23 Q. And that was a fraud on anyone to whom you 24 gave your financial statements; is that right? 25 A. Well, depends upon how you define fraud.

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1 It was a bookkeeping violation. I don't think 2 anybody initially would consider it a fraud. You 3 know, that's -- well, I just don't know. I would 4 say that it clearly was an SEC violation. 5 Q. And is it fair to say that the SEC reviewed 6 the financial information that you submitted in your 7 focus reports on a monthly basis? 8 A. Regularly, yes. 9 Q. And if you showed a massive debt to your 10 customers, your investment advisory customers, what 11 would they have done? 12 A. It would have been a violation. You 13 probably would have been suspended. 14 Q. You would have been suspended as a broker? 15 A. Correct. 16 Q. Okay. So in your view was the crime simply 17 that you didn't properly disclose the debt to your 18 customers on your financial statements? 19 A. Correct. 20 Q. Now, you've testified this morning that you 21 think either at the end of '93 or early '94 you 22 stopped buying securities for your customers, and I 23 just want to get a better understanding of why that 24 occurred at that time. You had -- I think you said 25 you made a commitment to your clients to put them in

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1 this strategy? 2 A. Correct. 3 Q. And what happened at the end of '93 or 4 early '94 that you could no longer do that? 5 A. The markets had gone into a -- into a slump 6 because of a number of things, you know, starting 7 with the Mideast Crisis at that time. So there was 8 a lack of liquidity. This particular strategy that 9 we used, the split strike strategy, requires certain 10 market conditions to be able to execute it properly. 11 And we didn't have those conditions. 12 So because I had committed when I took in 13 the money from the clients, primarily they were 14 hedge funds, I had made a commitment to keep the 15 money working constantly. Because I couldn't do 16 that, I started to short the securities, which was 17 as I said, not a violation at the time I was 18 shorting the stock. It only became a violation when 19 I filed my financial reports. 20 I thought that would just be a temporary 21 situation for the market to, you know, recover and 22 improve and then I would have started doing the 23 strategy. In the interim the money that the 24 customers came in, I basically kept it located in 25 Treasury bills.

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1 Q. Okay. So you took the money -- 2 A. Which is part of the strategy as well. 3 Q. Right. So you basically took the money 4 that went into the 703 account? 5 A. Correct. 6 Q. Which was the investment advisory 7 customers' money? 8 A. Correct. 9 Q. And you purchased Treasury bills with that? 10 A. Correct. 11 Q. And in the early '90s the Treasury bills 12 were bearing an interest rate of about six percent; 13 isn't that true? 14 A. No. They probably were -- you know, they 15 were short-term T bills, so they were probably, you 16 know, closer to three to four percent. 17 Q. Okay. And that three to four percent was 18 money that was earned by the customers -- 19 A. Correct. 20 Q. -- whose money you were using? 21 A. Correct. 22 Q. And, in fact, the statements reflected the 23 ownership of those Treasury securities? 24 A. Correct. And they -- well, they also, you 25 know, reflected the ownership of the securities that

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1 I wasn't buying. 2 Q. Right. Now, in late 1993 or early 1994 was 3 your business, you were operating at that point as a 4 sole proprietorship; is that right? 5 A. Yes. 6 Q. Was your business insolvent? 7 A. No. 8 Q. At what point in time did you become 9 insolvent? And when I say you, I mean your sole 10 proprietorship or the limited liability company. 11 A. I would say probably in the early 2000s, 12 maybe somewhere between let's say '98 and 2002. 13 Q. Okay. And what -- 14 MR. SHEEHAN: Can I just -- before you get 15 an answer, two things. One is I don't know what 16 insolvency means. 17 MS. CHAITMAN: Oh, okay. 18 MR. SHEEHAN: I'm going to ask to define 19 that. 20 MS. CHAITMAN: Okay. 21 MR. SHEEHAN: And I'm not going to 22 interrupt you again because I'm just going to have a 23 continuing objection to leading questions, which is 24 you're testifying more than he is, but I don't care 25 about that. Just objecting. All right.

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1 Q. (By Ms. Chaitman) Okay, okay. When you 2 say that your business became insolvent at some 3 point between '98 and what did you say? 2000 -- 4 A. 2002. 5 Q. Okay. What are the events that you're 6 thinking about that -- 7 A. Well, because I was also returning -- there 8 were client -- part of the strategy was to return 9 profits that were earned to clients. So in order to 10 do that, I was returning money from the 703 account 11 to clients and, therefore, I wasn't able to buy 12 either the securities or the treasuries. So there 13 was a deficit. 14 So because that wasn't reflecting the 15 liabilities and I didn't have assets to back them up 16 at some point, I would say that would be -- the firm 17 would be insolvent. 18 Q. Okay. So would it be fair to say that the 19 insolvency arose from the differential between what 20 the investment advisory customers' money was earning 21 in Treasury bills versus the return you were paying 22 them? 23 A. Correct. 24 Q. Did your formation of the limited liability 25 company in -- it became effective January 2001, did

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1 that relate in any way to your feeling that your 2 firm had become insolvent? 3 A. I realize that that -- yeah, that there 4 were problems brewing, yes, I would say. 5 Q. Well, what motivated you to form a limited 6 liability company since you had been operating as a 7 sole proprietorship since 1960? 8 A. Well, I was always -- I had always been 9 advised to incorporate since I started my firm. I 10 never felt the need to do that because I was not 11 worried about, you know, ever being in a situation 12 that, you know, I would have any exposure. The firm 13 was always successful and, you know, it just never 14 really entered my mind. 15 So I just didn't do it, but then because 16 of what was going on with the stock market, the 17 market had -- had crashed in 2000 because of the -- 18 there was the bubble of the technology stocks, so 19 everybody became very nervous about the market in 20 general. 21 So there was a rush to incorporate or go 22 into an LLC type of mode. And the regulators had 23 also sort of started recommending to the industry 24 that everybody should basically do that. 25 Q. Now, Mr. Madoff, according to Mr. Dubinsky

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1 the three areas of your firm functioned as totally 2 separate legal entities, that is, market making, 3 proprietary trading and investment advisory. Is 4 that correct that each of these groups functioned as 5 a separate legal entity? 6 A. No. 7 Q. Were the expenses for -- the operating 8 expenses for each group paid solely out of the 9 revenues generated by that group? 10 A. They were -- all the expenses were paid 11 through a -- through the firm, but the money came 12 out of an expense account that was held at Bank of 13 New York. 14 Q. So there was one Bank of New York account 15 which covered all of the say overhead expenses? 16 A. All the operations of the firm. There was 17 a JP Morgan account. We referred to it as a 703 18 account. And that was exclusively used for client 19 monies in and client monies out -- 20 Q. Okay. And -- 21 A. -- for the investment advisory side. 22 Q. Okay. So all of the rent, personnel 23 expenses, general overhead was paid out of the Bank 24 of New York account? 25 A. Everything. Salaries, everything.

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1 Q. For all of the employees at first the sole 2 proprietorship? 3 A. Right, right. 4 Q. And then all of the employees at the LLC? 5 A. Yes. It never changed, right. 6 Q. Okay. And is it fair to say that at times 7 money went from the 703 account to the Bank of New 8 York account? 9 A. Yes. There were some instances that -- 10 that I used that, but the issue is because all of 11 these clients had margin accounts because they were 12 short securities, whether it be convertible 13 securities or whether it be the split strike trades, 14 their -- the assets of the client is fungible with 15 the firm because the long positions, whether it be 16 Treasury bonds or whatever, is the collateral for 17 the exposure on the short side of the firm. 18 So there were sometimes where relatively 19 small amounts of money, I think, in the late '90s 20 went from the 703 account into the Bank of New York 21 account to cover -- what was not, I don't think, 22 understood in the Dubinsky report among a lot of 23 other things was that customers have short 24 positions. They're mark to market from the clearing 25 corporation every day and short position being the

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1 difference in the market. As the stock market goes 2 up, the short position goes up. The customer gets a 3 call which is called a margin call. 4 So typically the money would come from the 5 customer account to meet those margin calls. So we 6 had -- we had margin calls that we had to make to 7 the clearing corporation, which all that which was 8 done through the Bank of New York account. 9 So by taking the money from the client 10 account, putting it into the Bank of New York 11 account, that allowed us to meet the margin calls of 12 the clearing corporation. That is typical of the 13 industry. 14 Q. Okay. Now, I want to ask you something 15 else since you've mentioned the margin. If you -- 16 if someone had a margin loan and you bought stock 17 for them -- 18 A. Right. 19 Q. -- would that stock be segregated in a 20 clearing or custody account for that customer? 21 A. No. 22 Q. Why is that? 23 A. Because margin, the whole concept of a 24 margin account is the firm is allowed to use those 25 securities to borrow money to cover, you know, what

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1 the customer is requesting to be able to purchase 2 securities. The brokerage firm also has to deliver 3 securities if the firm that he sold it to for the 4 customer who needs delivery. 5 So he has to go out and borrow securities. 6 And to borrow the securities to make the delivery, 7 he has to -- he has to borrow them from another 8 brokerage firm. He has to pay them for those 9 securities. So the only -- the only securities that 10 are segregated for a customer are what's called 11 fully paid for securities where there is no 12 liability or debt involved in the firm. 13 Q. Okay. Now, you've explained that the fraud 14 was in the split strike, but if you had an 15 investment advisory customer who instructed you to 16 buy a specific position for them and you gave them a 17 margin loan to do that, did you actually execute 18 those sales? 19 A. We always execute the sales. Whatever was 20 reflected on the customer statement, we executed. 21 We executed the sales to the customer. You know, we 22 wouldn't have executed them in the market unless we 23 were doing a strategy, unless we were also buying 24 securities. 25 Q. Okay. But where a customer made a specific

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1 instruction to you to buy a specific stock, are you 2 saying that you always executed those instructions? 3 A. The customer didn't usually give us 4 instructions. These accounts are handled basically 5 as sort of discretionary accounts. So once the 6 customer opened the account to go into this 7 particular strategy, the firm had the -- had the, 8 you know, allowance to be able to execute the 9 strategy whenever he saw fit. 10 Q. No, but I'm thinking of customers who were 11 not in split strike, investment advisory customers 12 who had you as their investment advisor but they 13 instructed you as to what stocks to buy and sell. 14 A. We didn't -- we basically did not do that 15 kind of business. 16 Q. Now, in the government's deferred 17 prosecution agreement with JPMorgan Chase, the 18 government and the bank stipulated that during the 19 period from 2003 to 2008 you maintained on deposit 20 at JPMorgan Chase three to six billion dollars. Is 21 that correct? 22 A. Yes. 23 Q. Did that amount -- was that only between 24 2003 or 2008 or had you done that earlier than 2003? 25 A. Well, there were certain -- we started

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1 buying treasuries when we start the split strike 2 conversions. So that would have been, you know, in 3 the '90s. 4 Q. Okay. And to the best of your recollection 5 at any given time how much investment advisory 6 customers' money was held in U.S. treasuries? 7 A. Well, I would say basically the maximum 8 that we had was between five firms we had about 9 two-and-a-half billion dollars between Morgan 10 Stanley, Lehman Brothers, Bear Stearns and Fidelity. 11 Was that five firms? Four firms. And JP Morgan. 12 Q. Okay. 13 A. So I would say probably the maximum was 14 probably about $6 billion held in treasuries. 15 Q. Okay, okay. Did it fluctuate or did you 16 instruct your staff to maintain that amount? 17 A. No. It pretty much fluctuated depending 18 upon the monies that came in and the monies that -- 19 monies that came out. 20 Q. What percentage of the investment advisory 21 customers' money was put in Treasury securities, if 22 you can estimate that? 23 A. Well, I mean, the most we had -- I mean, 24 the customer statements depending, you know, at the 25 end was 60 some odd billion dollars.

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1 Q. Not what the statements showed, but what 2 you actually did. 3 A. What we actually did? 4 Q. Yeah. How -- 5 A. I don't understand your question. 6 Q. Let me step back a minute. Were the people 7 on the 17th, were any of the people on the 17th 8 floor authorized to buy Treasury securities? 9 A. Yes. 10 Q. Who was authorized to buy Treasury 11 securities? 12 A. Frank DiPascali, Eric Lipkin and a fellow 13 by the name of Robert Romer. 14 Q. And they were -- what money were they 15 authorized to use to buy the Treasury securities? 16 A. Whatever -- they followed the instructions 17 of basically Frank DiPascali, who was the manager of 18 that department. And the money, the money to buy 19 the securities always came from customer money 20 except for a small amount of treasuries or financial 21 instruments that came from the operating operations 22 of the market making proprietary trading side. 23 Q. Okay. So the money came from the 703 24 account, is that what you're saying, except for 25 the --

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1 A. For the most part, yes. 2 Q. Except for the money that came from the BNY 3 account? 4 A. Right. 5 Q. Okay. Now, did you ever have a lock-in 6 period like hedge funds would have which would 7 prevent a customer from immediately demanding a 8 redemption on their money? 9 A. No. 10 Q. Was there any period of time from the end 11 of 1993 to 2008 when you were unable to honor a 12 customer redemption? 13 A. No. 14 Q. Was there anytime between 1993 and 2008 15 when you felt that you couldn't redeem a customer's 16 account unless you brought in new investment 17 advisory customers? 18 A. No. Well, I would say during -- in 2008 19 probably that half the market was -- was collapsing. 20 There would have been -- had customers requested 21 money, I wouldn't have been able to do it, but no 22 one had ever requested it. 23 Q. Okay. So, well, you did have significant 24 redemptions in 2008? 25 A. Yes, at the very end in December.

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1 Q. Okay. And prior to December 2008 -- 2 A. But there was always -- there was -- you 3 know, I never got an official request for redemption 4 that I didn't have money to cover it to my 5 recollection other than maybe the last week in 6 December. 7 Q. Okay. 8 A. The last, you know, week that I was in 9 business. 10 Q. Okay. So in the entire period when you 11 were not buying the split strike securities starting 12 say late 1993 or early 1994, had you ever received a 13 redemption request where you thought oh, my God, 14 I've got to bring in a new customer to have the 15 money to pay this? 16 A. No. 17 Q. Did you actively solicit new investment 18 advisory customers? 19 A. No. 20 Q. Why not? 21 A. Because the firm was in a position that we 22 were always turning away investors. We never -- 23 never solicited, you know, new monies coming in. As 24 a matter of fact, we tried to return monies at times 25 but met resistance with clients.

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1 Q. We talked last time about the fact that you 2 maintained clearing accounts with various banks? 3 A. Correct. 4 Q. And can you just review the banks with 5 which you had clearing accounts? 6 A. Well, first of all, the firm itself was a 7 self-clearing firm, which meant we had the ability 8 to clear transactions. That was starting with the 9 firm in 1960 through the very end, but most firms 10 also had clearing arrangements with a number of 11 banks to be able to service different types of the 12 operations of the firm. 13 So the firm at one point had clearance 14 facilities with -- initially with Meadowbrook 15 National Bank, then, you know, also Commercial Bank 16 of North America. There was then Irving Trust 17 Company, Bank of New York, Bankers Trust, 18 Manufacturers Hanover, Chase Manhattan Bank, Marine 19 Midland Bank, Chemical Bank, JP Morgan Bank, 20 Continental Illinois Bank. I think that pretty much 21 covers it. 22 Q. M&T? 23 A. M&T, yes. M&T Bank. 24 Q. Now, what services did these banks provide 25 to you?

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1 A. Both loans, brokered and unbrokered loans, 2 conversion, instructions to convert securities, 3 drafts for election, you know, checking accounts, 4 typical usually broker day loans, things -- you 5 know, whatever, complete clearance facilities. 6 Q. Did they have custodial accounts where you 7 maintained securities for customers? 8 A. Not that I'm aware of, no. 9 Q. Did you have custodial accounts with anyone 10 where securities were maintained for customers? 11 A. Well, the -- we had securities at 12 depositories, but they were not basically segregated 13 for customers. That was the practice, quite 14 frankly, that most brokerage firms never did any 15 longer when securities -- as the industry progressed 16 and you didn't have full physical securities in your 17 own vaults. 18 We always had some securities in our vault 19 we had, but those are from many, many years ago. 20 They were a relatively small amount of securities 21 that we were holding or that we bought, you know; 22 but for the most part all the securities were 23 commingled, which was typical for a firm that 24 operated the way we did where you had customers that 25 were short securities.

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1 Whether or not we executed the transaction 2 or not, they had opened up, you know, accounts, what 3 would be deemed as a margin account, and that 4 automatically allows you to commingle the 5 securities. 6 Q. Okay. So you did have -- you did have 7 physical possession of the securities with the 8 margin accounts? 9 A. When we were buying them, yes. 10 Q. Okay. Now, you referenced the change from 11 physical securities to electronic securities. Can 12 you pinpoint when that occurred? 13 A. I don't remember any longer. I would say 14 sometime during the '90s. 15 Q. Would it help if I told you that the 16 Securities Investor Protection Act was enacted in 17 1970? 18 A. No. 19 Q. Okay. Now, when you were doing the 20 convertible arbitrage, did you ever use a strategy 21 called legging in? 22 A. Always. 23 Q. Okay. And can you explain what legging in 24 means? 25 A. Legging in means that when you're doing a

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1 strategy, whether it be for convertible securities 2 or for the split strike, you go in and you don't buy 3 everything typically in one day. 4 You start -- when the firm makes a decision 5 to effect a strategy, whether it be convertible 6 bonds or whether it be a basket strategy and a split 7 strike where you're buying, you know, a portfolio of 8 securities, the skill of the strategy is to being 9 able to judge the market. 10 So you -- if when you're going out and 11 buying securities, you would start buying it let's 12 say on a Monday, Tuesday, Wednesday, Thursday. 13 Typically you would buy it over a four-day period 14 was basically what our practice is. And you would 15 have different prices during the four-day period. 16 And all of our strategies use what's 17 defined as an average price transaction, which means 18 we would then take the average price that we bought 19 stock during that four-day period and that would be 20 the -- you know, we'd figure what the average was 21 that we paid and then we would -- we would send the 22 customer a confirmation on the last day. 23 So let's say on a Thursday, we started on 24 Monday. And if you start -- to make a simple 25 example, let's say you did it over four days and you

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1 paid -- you started buying stock at 50 and you wound 2 up buying it at, you know, up to 51 and you had an 3 average of 50-and-a-half, you would -- you would 4 place five-and-a-half. 5 Q. Was that unique to you or was this 6 something -- 7 A. No. That's typical for any firm that is 8 investing in a strategy and treating -- you know, 9 that's treatable to customers the same in a 10 particular strategy. 11 Q. Now, you testified last time that Mr. 12 Dubinsky apparently lacked an understanding of that 13 strategy? 14 A. Well, he -- he must have. He must have not 15 understood the strategy because his report failed to 16 -- failed to state that. So, for example, where 17 Dubinsky, when he was trying to analyze the prices 18 that a customer paid in relationship to the market, 19 he would look on whatever the trade date was on the 20 confirmation. 21 And the trade date on the confirmation, for 22 example, would be -- an example I use would be the 23 trade date would be Thursday's trade date. If the 24 stock had traded at 51 and on that day if that was 25 the higher, the lower the stock and the average was

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1 50-and-a-half for the customer, there would be a 2 difference. So it wouldn't match up. Now, the 3 customer, the customer confirmation always stated -- 4 there was a legend on it that said that the 5 transactions effected for the customer was an 6 average price transaction. 7 So right away that would -- that would 8 illustrate that he wasn't accounting for the -- for 9 the fact that the transaction was an average price 10 transaction. 11 The same thing would happen when you -- the 12 same error he made when he accounted for volume 13 because he would just look at the volume that 14 occurred on the one day, on the date of the trade 15 date, as opposed to the volume that happened on the 16 four days. So, obviously, he's looking at the 17 volume on one day when you should be looking at the 18 volume on four days. 19 Q. Now, Mr. Madoff, Mr. Dubinsky testified at 20 the Bonventry trial that the Trustee paid him over 21 $30 million to do his report. Did he at any time 22 ever seek to talk to you? 23 A. No. 24 Q. To your knowledge did he or anyone on his 25 behalf ever seek to meet with you to discuss how you

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1 operated the business? 2 A. No. 3 Q. Did anyone working with the Trustee ever 4 ask you any questions about how your convertible 5 arbitrage trades were done? 6 A. No. 7 Q. Did anyone working with the Trustee ever 8 question you about any activity of the firm that 9 predated 1992? 10 A. No. 11 Q. Now, you mentioned with respect to the 12 purchase of Treasury securities with the investment 13 advisory customers' money that the purchases were 14 done through Bear Stearns, Morgan Stanley, Fidelity, 15 Lehman Brothers and JPMorgan Chase? 16 A. Right. 17 Q. Were there also purchases done directly by 18 Frank DiPascali, Eric Lipkin and Robert Romer? 19 A. Correct. 20 MS. CHAITMAN: I'm going to mark as 21 Exhibit 15, which is the next number from our last 22 deposition, a compilation of trade tickets. I have 23 two if you each want one. 24 (Customers Exhibit 15 was marked for 25 identification.)

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1 MS. FEIN: Thank you. 2 MR. SHEEHAN: Thank you. 3 Q. (By Ms. Chaitman) Mr. Madoff, do you 4 recognize what these documents are? 5 A. Yes. They're -- they're a copy of the 6 Bloomberg terminal execution, meaning a trade that 7 was executed through a Bloomberg terminal. 8 Q. Okay. Now, could this be a phony document? 9 A. No. 10 Q. Why is that? 11 A. Because we've got the ability to -- to 12 create something like this. 13 Q. Is that because it's a Bloomberg terminal? 14 A. Yes. 15 Q. So if we look at the first one, this was 16 the trader was Eric Lipkin; right? 17 A. Uh-huh. 18 Q. The date was September 26, 2002; right? 19 A. Uh-huh. 20 Q. And the -- it was the purchase of a 21 Treasury bill with a cost of $998,461.94; is that 22 right? 23 A. Yes. 24 Q. And this would have been purchased with 25 money from the 703 account?

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1 A. Yes. 2 Q. And it would have been held for the benefit 3 of the investment advisory customers? 4 A. It would have been -- it would have been 5 held at the firm for the benefit of the firm. We 6 didn't segregate, you know, these securities. 7 Q. But if the money that was used to purchase 8 this -- 9 A. Uh-huh. 10 Q. -- came from the 703 account, would this 11 show up, for example, on your focus reports? 12 A. This particular -- I don't know. I mean, 13 the only trades that -- if it went through the 14 Bloomberg terminal, typically that would show up -- 15 I don't know if it would show up on the focus 16 report. 17 It depends upon whether the trade was 18 bought for -- there were some trades that were 19 bought -- well, not if it was bought by the people 20 that you mentioned. They only have the authority to 21 execute trades for client accounts, not for the 22 firm's account. 23 Q. Okay. So I'm confused. 24 A. These securities would be held either at -- 25 typically it would be held at DTC or the Bank of New

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1 York. 2 Q. Okay. 3 A. I mean, I can't tell from that. It depends 4 upon where the trade would settle. Any of these 5 Bloomberg trades that went through the Bloomberg 6 terminal, it would actually be a money settlement 7 for the transaction. Otherwise, you couldn't -- you 8 couldn't do it. 9 Q. Okay. And that would be done through some 10 ins -- 11 A. It would be done through some -- typically 12 through Bank of New York. 13 Q. Okay. 14 A. It could also have been done through JP 15 Morgan as well in delivery. 16 Q. Okay, okay. You didn't have the ability 17 yourself to clear Treasury security purchases? 18 A. Correct. We didn't have the authority to 19 execute and clear. 20 Q. Treasury security purchases? 21 A. Right. 22 MS. CHAITMAN: Okay. 23 MR. SHEEHAN: Helen, just for the record, 24 this seems to be -- you did call it a compilation, 25 but since there were different productions, one is

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1 AMF, another one is MAD Trustee, are you going to 2 for the record tell us how this was put together or 3 is that going to happen through your testimony? 4 MS. CHAITMAN: It's not, but I don't think 5 that we have to take up his time to do that. 6 MR. SHEEHAN: Okay. We can do it later. 7 MS. CHAITMAN: Yeah, sure. 8 MR. SHEEHAN: All right. Just take care 9 of it. 10 MS. CHAITMAN: They were all produced by 11 the Trustee. 12 MR. SHEEHAN: Okay. 13 Q. (By Ms. Chaitman) If you -- these are not 14 in continuous order. They didn't come from one 15 place, but I'm showing you one that was done where 16 the trader is Erin Reardon. 17 A. Ellen Reardon? 18 Q. Erin Reardon. 19 A. Erin, yes. 20 MR. SHEEHAN: What's the Bates number on 21 that? 22 MS. CHAITMAN: It's MAD TEE 00118284. 23 MR. SHEEHAN: Okay. 24 Q. (By Ms. Chaitman) Did she work under Frank 25 DiPascali?

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1 A. Yes. 2 Q. And then two pages on there is one executed 3 by Robert Romer? 4 A. Yes, same. 5 Q. He worked for Frank DiPascali? 6 A. Yes. 7 Q. Now, I'm skipping to a page which is 8 Public-USAO 0960973. Can you identify why that 9 format is different? Is that a different kind of 10 transaction? 11 A. I don't know what this is. I mean, I'm not 12 that familiar with it. It looks like a ticket for 13 -- for a treasury, trading of a treasury, but it's 14 actually from the Bloomberg terminals on here. So 15 it must be -- 16 Q. Okay. A different format? 17 A. -- a different format, right. 18 Q. Okay. And then on the next page, which is 19 Public-USAO 0961013, it indicates that the trader is 20 Frank? 21 A. Right. 22 Q. Is that Frank DiPascali? 23 A. Yes. 24 Q. And was it Frank's responsibility to 25 maintain the portfolio Treasury securities for the

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1 703 account customers? 2 A. Yes. 3 Q. Is it fair to say that he would direct the 4 work of Eric Lipkin and Robert Romer? 5 A. Yes. 6 Q. And they reported to Frank? 7 A. Yes. 8 Q. Now, what was your purpose in instructing 9 Frank to maintain a portfolio of Treasury securities 10 up to $6 billion using the 703 account money? 11 A. We had to put the money somewhere, so if we 12 were -- if it wasn't -- we would never keep the 13 money in cash. So if we weren't buying the 14 securities, we would put it into -- we would put it 15 into treasuries. 16 Q. Okay. And did you have some thought that 17 the three to six billion -- that was at JPMorgan 18 Chase. That the up to six billion in Treasury 19 securities was intended to protect any of your 20 customers? 21 A. Well, if it was -- it was customer money, 22 you know, yes. 23 Q. Okay. And in your mind over the years did 24 you have customers, investment advisory customers 25 that you wanted to protect more than others?

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1 A. No. 2 Q. Were you concerned about protecting the 3 European investors? 4 A. No. 5 Q. Why is that? 6 A. Well, because I was aware of the fact that, 7 first of all, they really weren't my customers. 8 They were customers of hedge funds. I was aware of 9 the fact that the -- that most of the hedge funds, 10 if not all of them, had structured product 11 arrangements with banks that they were guaranteed, 12 their principal was guaranteed and they were sharing 13 in the profits of the transaction. 14 So it was as far as -- I mean, basically, 15 they were all my customers. So I was obligated from 16 a legal standpoint whether -- you know, whether I 17 wanted to or not; but I would say that the -- I 18 looked at the individual clients which would -- who 19 had direct accounts with me differently than I did 20 with the hedge funds, particularly because the hedge 21 fund money that was pouring in was the thing that 22 caused me the problem. 23 Q. What about the feeder funds? Are you 24 putting them in the category of the hedge funds? 25 A. The who?

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1 Q. The feeder funds? 2 A. Those are the hedge funds. 3 Q. Those are the hedge funds. Okay. So were 4 you buying the Treasury securities then to protect 5 the private customers as opposed to the hedge funds? 6 A. I didn't look at it, you know. I didn't 7 isolate it one over the other because I knew I was 8 basically obligated for -- you know, for all of it. 9 Q. Okay. Now, you said that you purchased 10 Treasury securities with the 703 account money 11 through the five institutions that you named? 12 A. Right. 13 Q. Bear Stearns, Fidelity, Lehman Brothers, 14 JPMorgan Chase and Morgan Stanley -- 15 A. Right. 16 Q. -- is that right? 17 A. Yes. 18 Q. Okay. It was only those five firms? 19 A. Yes. 20 Q. Okay. And did you maintain a consistent 21 portfolio of Treasury securities at each of those 22 institutions? 23 A. They were rarely sold unless they matured 24 and then we repurchased, you know, different, you 25 know, Treasury bills. Yes, I mean, for the most

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1 part the monies in those accounts built and became, 2 you know, more and more up to the maximum, which 3 was, I think, $500 million pretty much in each 4 account. 5 Q. So you maintained 500 million of Treasury 6 securities at each of those five firms? 7 A. Pretty much, yes. 8 Q. Okay. And then in addition you had the 9 portfolio that was purchased directly -- 10 A. Correct. 11 Q. -- by the 17th floor people? 12 A. Right. 13 Q. Now, the market making and proprietary 14 trading people were buying and selling securities; 15 right? 16 A. Yes. 17 Q. And what kind of records were kept of the 18 securities that were held by the firm as of say 19 month end of each month? Was there a record kept of 20 an inventory of securities that were owned by the 21 firm as of the end of each month? 22 A. That the firm was long you're talking 23 about? 24 Q. Yes. 25 A. Yeah. That was -- you know, you were

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1 required to -- you had trading ledgers that 2 reflected what was long by the market makers or the 3 proprietary traders in the firm's investment 4 account. There were trading ledgers and then there 5 were -- there's what's called a securities record, 6 stock record. 7 Q. Is it called a trade blotter? 8 A. There's trade blotters, yes. 9 Q. Is that the same thing? 10 A. Same thing. 11 Q. Okay. So if I -- if I -- 12 A. Trade blotters basically reflect also 13 monies -- monies in and monies out for the payment 14 of the securities. The trading ledgers just shows 15 the inventory long and short, and same for the stock 16 record. Stock record would reflect where the 17 securities are held. 18 Q. Okay. So I just want to get the terms. 19 There are trade blotters? 20 A. Trading ledgers. 21 Q. And it's called a trading ledger? 22 A. Correct. 23 Q. Okay. 24 A. You know, which would -- trading ledgers 25 would be for the market making, proprietary trading

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1 and the investment account, investment ledger. 2 Q. Okay. 3 A. And then there's what's known as a stock 4 record, which breaks down by each security. 5 Q. So each of those reports was done as of 6 month end? 7 A. Daily. 8 Q. They were done daily? 9 A. The reports were effected daily. 10 Q. Okay. And did you -- through 11 December 11th, 2008 did you maintain those records? 12 A. Yes. 13 Q. So they should have been there for the 14 Trustee when he took over? 15 A. They would be, yeah. 16 Q. Okay. And were they all electronic records 17 or were they paper records? 18 A. No. They were -- well, they were all done 19 through computers. 20 Q. Okay. Who was responsible within the firm 21 for generating these reports? 22 A. Well, depends upon, you know, where they 23 were executed. Basically, Dan Bonventry was the 24 operations director, so he had the final 25 responsibility. The records themselves were

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1 generated by the systems people. And depending upon 2 whether it was generated by the Stratus system, 3 which handled basically all the -- all the market 4 making, proprietary trading side of the firm, or 5 whether it was done by the investment advisory side, 6 that would have been through the AS/400. 7 Q. Okay. But the investment advisory side 8 would show -- would it show securities that actually 9 hadn't been purchased? In other words, the split 10 strike securities that weren't purchased, would 11 they -- would that be listed on that report? 12 A. That's correct. 13 Q. Okay. So that's the trading ledger? 14 A. Right. 15 Q. Okay. So -- 16 A. It would be -- it would be the customer 17 ledger. There's a customer ledger. 18 Q. There's a customer ledger. So if I wanted 19 to get an accurate picture of what securities the 20 firm actually held as of any given day, what would 21 be the best document to look at? 22 A. You would have to look at the -- the 23 trading ledgers. 24 Q. The trading ledgers. Okay. Now, at 25 JPMorgan Chase did you have an account or accounts

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1 other than the 703 account? 2 A. Yeah. They had what they called a 3 controlled disbursements account, which most 4 brokerage firms maintain, so that the money was only 5 transferred -- it was part of the 703 account, but 6 it was so that they didn't take the money out of the 7 account until the checks would hit from the checks 8 that you issued it to. So it was like a flow of 9 funds account. 10 Q. Was there a 509 account? Do you remember 11 that? 12 A. I don't remember the number. 13 Q. You don't remember. Okay. 14 A. I mean, it was related to the 703 account. 15 MS. CHAITMAN: Okay. 16 MR. GOLDMAN: I'm going to direct this to 17 the reporter. Do you need a break? Okay. 18 MR. SHEEHAN: I could use a bio break in 19 about five minutes. 20 THE WITNESS: A what break? 21 MR. SHEEHAN: Bio break. 22 THE WITNESS: Bio break? 23 MR. SHEEHAN: Men's room. 24 THE WITNESS: Oh, okay. 25 MS. CHAITMAN: I'm going to mark as

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1 Exhibit 16 a JPMorgan Chase account statement for 2 the 703 account dated February 2001. 3 MR. GOLDMAN: I want to clear something up 4 just so we know where they are. 5 MS. CHAITMAN: Yeah. 6 MR. GOLDMAN: The trading ledgers or 7 customer accounts that we were talking about that 8 you were just being asked about -- 9 THE WITNESS: I don't understand the 10 question. 11 MR. GOLDMAN: I just want to ask you some 12 questions about where you could look at the end of 13 the month to see what was held by the company. 14 THE WITNESS: Right. 15 MR. GOLDMAN: Okay. Were those 16 electronically maintained? 17 THE WITNESS: Yes. 18 MR. GOLDMAN: Okay. 19 MR. SHEEHAN: That's all right. 20 (Customers Exhibit Number 16 was marked 21 for identification.) 22 Q. (By Ms. Chaitman) Bernie, do you recognize 23 this as a 703 account statement? 24 A. Yes. 25 Q. And if you'd turn to page four of

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1 thirty-two? 2 A. Four of thirty-two? 3 MS. CHAITMAN: Yeah. 4 MS. FEIN: Is that the last Bates? It's 5 777; is that right? 6 MS. CHAITMAN: Yes. 7 THE WITNESS: Uh-huh. 8 Q. (By Ms. Chaitman) If you look at the entry 9 on the 1st of February for $55 million and it says 10 debit memorandum, reference purchase of ticket 11 number. Do you see that? It's down here, 55 12 million? 13 A. Yeah, okay. Uh-huh. 14 Q. Do you know what that is? 15 A. It's a debit, so I'm assuming it's -- I'm 16 assuming it's a check. 17 Q. Were you investing through JPMorgan Chase 18 funds that you had on account? 19 A. Purchase of -- I'm not sure what the 20 question is. 21 Q. Were you -- that $55 million, were you 22 instructing Chase to invest that money in some 23 interest earning security? 24 A. Oh, they -- we must have, but they -- I 25 don't know if that was a sweep account. It was 55

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1 million. What did they purchase? I can't tell from 2 here. 3 Q. Well, you would have to look at the ticket, 4 001478. 5 A. Well, basically they wouldn't purchase 6 anything unless we instructed them to do it, but 7 they had -- all banks have what they call a sweep 8 account, you know, where they swept the money that 9 was cash that was in an account, they put it into a 10 financial instrument so that it was an interest 11 bearing account. 12 Q. Okay. And would you tell them what to 13 invest in it? 14 A. No. They would do that themselves. 15 Q. Okay. If you'd just look up a little bit, 16 there's a $13 million entry on February 1st? 17 A. Right. 18 Q. And it says -- 19 A. Nassau. 20 Q. -- Nassau deposit taken? 21 A. Right. 22 Q. Attention, Tony Tiletnick? 23 A. Right. 24 Q. And it says to establish your deposit for 25 purchase or sale of Chemical commercial paper?

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1 A. Commercial paper, right. 2 Q. Right. Do you see that? 3 A. Yes. 4 Q. Who was Tony Tiletnick? 5 A. He was the -- around the cashiering 6 department. 7 Q. Was he responsible for dealing with 8 JPMorgan Chase? 9 A. Yes, uh-huh. 10 Q. Was he responsible to make sure that the 11 money was invested so that it was earning money? 12 A. Yes. 13 Q. Okay. So was it your general practice to 14 make sure that the money in the 703 account was 15 always invested in securities so that it was earning 16 money? 17 A. Yes. We would never keep it just in cash. 18 That's what that -- that's why I'm referring to a 19 sweep account. They would sweep their money into an 20 interest bearing account. 21 Q. Okay. But if it's Chemical commercial 22 paper -- 23 A. Right. 24 Q. -- was that -- would that have had to be a 25 specific instruction?

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1 A. No. They would have -- they would do that. 2 You know, well, I mean, Tony would tell them -- you 3 know, Tony knew that they were investing it, but 4 they were -- he, obviously, would have had a 5 conversation with someone at the bank because at one 6 point we told them not to use -- that we didn't want 7 money going into Nassau because it was a -- it 8 wasn't -- there was concern that, you know, 9 commercial paper that was not, you know, in the U.S. 10 was more at risk. Turned out never to be a problem, 11 but it was an issue at one point. 12 Q. So where -- if I look at page nine of 13 thirty-two, let me show you which one that is. 14 There's a hundred million dollar debit memorandum on 15 February 5th. Do you see that? 16 A. Uh-huh. 17 Q. It's Bates number 1458787. 18 A. Right, uh-huh. 19 MS. FEIN: Thanks. 20 MR. SHEEHAN: Yeah. 21 Q. (By Ms. Chaitman) So do you know what that 22 would have been purchasing? 23 A. It would have -- if it's not a -- it, 24 obviously, must have been a financial instrument. 25 Whether it would be a CD or whether it be a

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1 Treasury, I can't tell. 2 Q. Okay. Did Tony Tiletnick consult with you 3 on a daily basis -- 4 A. No. 5 Q. -- or did he have authority to make these 6 decisions? 7 A. No. He had authority to do it himself. 8 Q. And in essence what were his instructions? 9 A. He was in charge of paying securities, you 10 know, and settling up with the clearing houses. 11 Q. But in terms of the investment of deposits 12 that were in the 703 account? 13 A. He would put whatever money that wasn't 14 being -- he typically wouldn't buy treasuries 15 himself. He was not someone that would normally buy 16 treasuries. He would basically be involved with 17 purchasing financial instruments like CDs or 18 treasuries for the sweep account. They weren't 19 typically large amounts. I mean by large amounts, 20 they weren't billions of dollars. 21 MS. CHAITMAN: Okay. All right. You want 22 to take a break? 23 MR. SHEEHAN: Sure. 24 THE VIDEOGRAPHER: Going off the record. 25 This ends disc number one. The time is 10:20 a.m.

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1 (A recess was taken and Customers Exhibit 2 Number 17 was marked for identification.) 3 THE VIDEOGRAPHER: Back on the record. 4 This begins disc number two. The time is 10:35 a.m. 5 Q. (By Ms. Chaitman) Okay. I've marked as 6 Exhibit 17 a June 2001 statement for the 703 7 account. 8 THE VIDEOGRAPHER: Ms. Chaitman, your 9 microphone. 10 MS. CHAITMAN: It's on. 11 THE VIDEOGRAPHER: Okay. Raise it up 12 higher. It's being covered. 13 Q. (By Ms. Chaitman) And I'm going to just 14 take a look at page seven of forty-four. Mr. 15 Madoff -- 16 MR. SHEEHAN: What's the Bates number? 17 MS. CHAITMAN: The Bates number is -- it 18 ends -- 19 MR. SHEEHAN: Oh, we have it, seven of 20 forty-four. I'm sorry. 21 MS. CHAITMAN: Sorry. 22 MR. SHEEHAN: Okay. Go ahead. 23 Q. (By Ms. Chaitman) If you look at -- 24 there's on June 4th at the bottom of the page, 25 there's a $50 million debit?

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1 A. Uh-huh. 2 Q. And it says purchase of slash sale of 3 JPMorgan Chase. Is that commercial paper? 4 A. Yes. 5 Q. And then reference purchase of Chemical 6 commercial paper? 7 A. Uh-huh. 8 Q. Okay. And then above that there's a 9 $35 million debit memorandum for purchase of ticket 10 and then it's redacted? 11 A. Uh-huh. 12 Q. Okay. And then above that it's 13 12-and-a-half million and it says Nassau deposit 14 taken account? 15 A. Right. 16 Q. Can you describe what these are? 17 A. Those are just financial instruments that 18 are invested so that the money is not just sitting 19 there not earning any interest overnight. 20 Q. Okay, okay. And, again, was Tony Tiletnick 21 authorized to do this on a daily basis? 22 A. Yes. 23 Q. Okay. And is it fair to say that the goal 24 was to earn money on the investment advisory 25 customers' money?

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1 A. Yes. 2 (Customers Exhibit Number 18 was marked 3 for identification.) 4 Q. (By Ms. Chaitman) I'm marking as 5 Exhibit 18 a 703 account statement for October 2002. 6 And Mr. Madoff, I'm going to open this to Bates 7 number 576, which is page eight of fifty-five. Mr. 8 Madoff, we're looking at a statement for 9 October 2002. 10 And if we look at the entry on 11 October 1st, there's a $279 million entry for -- 12 it's a debit for the purchase of slash sale of JP 13 Morgan commercial paper -- 14 A. Right. 15 Q. -- is that right? 16 A. Uh-huh. 17 Q. And, again, was this done on -- by Tony 18 Tiletnick under your instructions? 19 A. Correct, yes, yes. 20 Q. Okay. Now, were there times of the year 21 when you tended to have more cash to invest than 22 others or was this a general? 23 A. No, no. It was just -- was just a normal 24 flow of funds. 25 (Customers Exhibit Number 19 was marked

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1 for identification.) 2 Q. (By Ms. Chaitman) Okay. We'll go through 3 a few more of these just because they cover 4 different periods. This is -- will be Exhibit 19 5 and this covers the period of November -- of 6 December 2003. And if you could look at page 41 of 7 65? Let me open it up for you. 8 A. Uh-huh. 9 Q. There are two entries for December 22nd 10 where $50 million -- 11 A. Right. 12 Q. -- is being invested; is that right? 13 A. Yes. 14 MS. CHAITMAN: Okay. I'm going to mark as 15 Exhibit 20 the statement for December 2004. 16 (Customers Exhibit Number 20 was marked 17 for identification.) 18 MS. FEIN: Thanks. 19 Q. (By Ms. Chaitman) Some of them I have -- I 20 don't know why some of them I have four and some of 21 them I don't, but if you look at page 35 of 63, 22 which bears Bates stamp number 1486? Now, this is 23 -- this is December of 2004 and do you see that 24 there's a $30 million -- 25 A. Right.

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1 Q. -- Nassau deposit ticket? 2 A. Uh-huh. 3 Q. And then there's a $90 million purchase? 4 A. Right. 5 Q. Is it fair to say that those are again -- 6 A. Uh-huh. 7 Q. -- investments? 8 A. Yes. 9 Q. So that the investment advisory customers 10 were earning money on their money? 11 A. Uh-huh. 12 Q. And can you explain what the Nassau deposit 13 is? 14 A. It's a CD, commercial paper of the -- I 15 don't know how to describe it to you, but it's no 16 different than JP Morgan. It's their branch in 17 Nassau. 18 MS. CHAITMAN: Okay, okay. I've just got 19 two more of these. I'm marking as Exhibit 21 a 20 June 2007 statement from JPMorgan Chase. 21 (Customers Exhibit Number 21 was marked 22 for identification.) 23 MS. FEIN: Thank you. 24 Q. (By Ms. Chaitman) And if you look on page 25 16 of 66 which bears Bates numbers 3654, this has an

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1 entry for 50 million on June 6th, which is AIP 2 overnight investment? 3 A. Uh-huh. 4 Q. Purchase of JPMorgan Chase commercial 5 paper? 6 A. Right, uh-huh. 7 Q. And then the next one is 150 million and 8 that's -- can you explain what that is? It seems to 9 have an interest rate of 5.1407 percent; is that 10 right? 11 A. Yes. 12 Q. Can you tell what that is? 13 A. You know, I don't know. I mean, it must be 14 some sort of commercial paper of JP Morgan. 15 Q. Okay. And then the next entry on June 6th 16 is 600 million and that's invested in short-term 17 derivatives; is that right? 18 A. Where is that? Six hundred million? 19 Q. Six hundred million is -- it's June 6th. 20 A. It says JP Morgan short-term derivatives. 21 I don't know what that is. It must be a -- you 22 know, it must be some sort of commercial paper that 23 is a financial instrument. 24 Q. Okay. And, again, is it fair to say that 25 even in 2007 it was Tony Tiletnick who had handled

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1 these investments? 2 A. I don't -- he died at one point. It might 3 have been his brother, Walter Tiletnick, took over 4 his job at one point. I think in 2007 he was 5 already -- he had already died. 6 MS. CHAITMAN: Okay, okay. 7 MR. GOLDMAN: I didn't know whether you 8 could hear with the microphone. 9 THE WITNESS: Uh-huh. 10 MS. CHAITMAN: I'm going to mark as 11 Exhibit 22 a Bear Stearns statement dated April -- 12 dated August 1, 2005. 13 MR. SHEEHAN: Twenty-three? 14 MS. FEIN: Twenty-two. 15 MR. SHEEHAN: Twenty-two. My fault. 16 (Customers Exhibit Number 22 was marked 17 for identification.) 18 Q. (By Ms. Chaitman) Twenty-two. Can you 19 identify this document, Mr. Madoff? 20 A. It's Bear Stearns' account statement. 21 Q. Did you -- what was the time period that 22 you transacted business with Bear Stearns? 23 A. I transacted business with Bear Stearns, 24 you know, from the time I started my firm over the 25 years. So it was probably the 1960s on, you know,

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1 through 2008. 2 Q. What kind of business did you do with Bear 3 Stearns? 4 A. My market makers and proprietary traders 5 traded with them, you know, on a regular basis. We 6 executed trades for their customers for -- you know, 7 we were a wholesaler, a market maker. So we did 8 business with, you know, hundreds of brokerage 9 firms, Bear Stearns being one of them. 10 Q. Is it fair to say that you did billions of 11 dollars a year in business with Bear Stearns? 12 A. With Bear Stearns, yes, certainly. I mean, 13 I think we probably traded a trillion dollars a year 14 in general with Wall Street. 15 Q. With everyone? 16 A. Yes. 17 Q. Now, did you have more than one account at 18 Bear Stearns? 19 A. No. We only had one -- well, I guess my 20 wife had an account at Bear Stearns, you know, just 21 a brokerage account for herself; but the firm, you 22 know, only had -- they had Treasury -- an account 23 where we bought Treasury bonds and then we had -- we 24 executed trades on the exchanges through Bear 25 Stearns because they were the clearing broker for

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1 Cohmad Securities, which is a firm that we owned. 2 We were the owners of that. 3 Q. For Cohmad? 4 A. For Cohmad. 5 Q. Okay, okay. So is this a statement for the 6 securities account because on the second page it 7 lists different securities? 8 A. Yeah, yes. It must have been -- yeah. 9 This is the securities. 10 Q. Now, why would -- I mean, these seem to 11 indicate that the transactions were sold, bought, 12 received, delivered? 13 A. Uh-huh. 14 Q. Why would you have used Bear Stearns to buy 15 securities instead of buying them yourself? 16 A. Because we're not a member of the New York 17 Stock Exchange. Bear Stearns was. So if we bought 18 an executed trade on the floor of the exchange and 19 we weren't a market maker in that security, we would 20 go through Bear Stearns. It could have been 21 probably for like proprietary traders. 22 Q. Okay. Now, you've testified that you had 23 two accounts at Bear Stearns. One was to hold the 24 Treasury securities that were purchased and one was 25 trading?

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1 A. It would have been for proprietary and 2 market making trading activity. 3 Q. Okay, okay. So if I wanted to get the 4 evidence of the Treasury securities that were 5 purchased with the 703 account money, I would have 6 to get the statements relating to the Treasury 7 securities? 8 A. Correct. 9 Q. Okay. And did you maintain those records? 10 A. Yeah. They would have been at the firm, 11 yeah. 12 (Customers Exhibit Number 23 was marked 13 for identification.) 14 Q. (By Ms. Chaitman) Okay. I'm going to mark 15 as Exhibit 23 a document which was produced by the 16 Trustee. Now, this document consists of a number of 17 different pages. And if you would, Mr. Madoff, I'd 18 like you to explain to me to the best of your 19 ability what each of these pages represents. 20 A. Well, the first page is -- is an account 21 for Cohmad Securities, which is an account -- which 22 is a firm that we used to execute certain trades for 23 Bear Stearns. If it was a -- if it was what's 24 called a dot trade, a trade that they had a dot 25 machine that went directly down the floor to Bear

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1 Stearns, that would be a firm that -- that would be 2 part of our market making or proprietary trading 3 business. 4 Q. Okay. And the second page? 5 A. The same. 6 Q. Okay. So this is the -- the second page, 7 which is Bates numbered ending in 14, says buy SEG? 8 A. Uh-huh. 9 Q. That's a stock; right? 10 A. Right. 11 Q. Okay. And then on the sell line it says 12 hold PR something, OUS. Do you know what that is? 13 A. No. 14 Q. Okay. So is this a document that would 15 have been generated by Bear Stearns or -- 16 A. Yes. This is. 17 Q. Okay, okay. If you look at page 16, which 18 -- do you recognize the handwriting on this page? 19 A. No. 20 Q. This is dated November 11th, '94 and the 21 handwritten note says open account for Madoff. Do 22 you see that? Here. Open account? 23 A. Oh, handwritten, yeah. 24 Q. Do you know what that is? 25 A. No. This looks like Miller, you know,

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1 Tabak and Hirsch. It probably is probably an option 2 account. 3 Q. Were they clients of yours? 4 A. No. They must have been -- this isn't Bear 5 Stearns. This is the -- they're another 6 broker-dealer -- 7 Q. Okay. 8 A. -- that we must have done. It's an option 9 account -- 10 Q. Okay. 11 A. -- that was part of our hedging, probably 12 our proprietary trading department. 13 Q. If you look at the third to the last page 14 of this collection of documents -- 15 A. Uh-huh. 16 Q. -- this is dated January 30th, 1985 and it 17 seems to -- it says please install a restricted 18 centrex line to existing Turret equipment at Bernard 19 Madoff. Do you have any idea what that was about? 20 A. No. It's the communications department. 21 So it must be, you know, one of numerous, you know, 22 systems lines that we had to -- you know, we had 23 hundreds of these types of lines to different 24 brokerage firms so that we could route orders 25 directly through them for our market making and

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1 proprietary trading. 2 (Customers Exhibit Number 24 was marked 3 for identification.) 4 Q. (By Ms. Chaitman) Okay. I'm going to mark 5 as Exhibit 24 a statement of account, and I'm 6 wondering if you can identify that. It bears a 7 Bates number MS 236. Is this a Morgan Stanley 8 statement? You can -- 9 A. I'm trying. Everything seems to be 10 redacted. I don't know. 11 Q. Right. I believe that the MS means it was 12 produced to the Trustee by Morgan Stanley. 13 A. Okay. It probably is because it's Treasury 14 bills. 15 MR. GOLDMAN: I think it is because if you 16 look on the last page, they have a note about 17 retirement accounts and review with your Morgan 18 Stanley financial advisor. It's unlikely one bank 19 is soliciting for another bank, so I think you can 20 conclude it's a Morgan Stanley statement. 21 THE WITNESS: Uh-huh. 22 Q. (By Ms. Chaitman) So am I correct that 23 this is showing that you had one-and-a-half million 24 dollars in income from this account as of March 8th, 25 2003? Am I reading that correctly?

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1 A. What page are you on? 2 Q. On the first page. 3 A. On the first page? 4 Q. It looks like -- it looks like Morgan 5 Stanley is holding Treasury bills; right? 6 A. Uh-huh, right. 7 Q. Okay. And then it has a liquid asset fund 8 of about 9.7 billion. Do you see that? 9 A. Nine point seven billion? No. 10 Q. No, million. Excuse me. 11 A. Nine million, right. 12 Q. Excuse me, excuse me. Yes, of course. 13 A. Yeah. Right. A million five hundred 14 thousand dollars was the yearly income. 15 Q. Okay. To the best of your recollection did 16 you have more than one account at Morgan Stanley? 17 A. Not for treasuries. We would have had only 18 one account. 19 Q. One account for treasuries? 20 A. Right. 21 Q. But you would have had accounts for 22 something -- 23 A. Well, we also executed trades for Morgan 24 Stanley. 25 (Customer Exhibit Number 25 was marked for

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1 identification.) 2 Q. (By Ms. Chaitman) Okay. I'm going to mark 3 as Exhibit 25 a document which is a JPMorgan Chase 4 position summary. So Mr. Madoff, did you have a 5 separate account at JPMorgan Chase which held the 6 Treasury bills for the -- 7 A. Yes. 8 Q. -- 703 account customers? 9 A. Uh-huh. 10 Q. Can you identify this document? Is it in a 11 form that you've seen before? 12 A. I don't know what -- I mean, I typically 13 wouldn't look at these statements, so looks to me 14 just like a -- you know, a typical Treasury bond 15 account where we bought treasuries. It lists all 16 the activity as of April 2008. 17 Q. Okay. So if you had at JPMorgan Chase, you 18 had about 2.8 billion, right, in Treasury 19 securities? 20 A. Let me see. Yes. 21 Q. And then you maintained about 500 million 22 at each of those other four institutions? 23 A. Right. 24 Q. So that would have been 2.8 and then it 25 would have been 4.8; right?

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1 A. Right. 2 Q. And then you had Treasury securities that 3 were purchased directly by -- 4 A. Right. 5 Q. -- Frank DiPascali? 6 A. Right. It would be at DTC. Those would 7 have been -- no. Those would have been by -- those 8 would have been bought by Frank. 9 (Customers Exhibit Number 26 was marked 10 for identification.) 11 Q. (By Ms. Chaitman) Okay. I'm going to mark 12 as Exhibit 26 what I believe is a Fidelity 13 statement. Can you identify this? 14 A. Uh-huh. 15 Q. Is it a Fidelity statement? 16 A. Yes. 17 Q. So they use the trade name Premium 18 Services? 19 A. Uh-huh. 20 Q. And this statement is dated January 31, 21 1999. So what does the statement show that Fidelity 22 was holding in U.S. Treasury securities? 23 A. Looks like 205 million. 24 Q. Okay. And these were bearing interest of 25 5.25 percent and 5.375 percent?

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1 A. Right, uh-huh. 2 Q. And was this purchased with money from the 3 703 account? 4 A. Yes. 5 (Customers Exhibit Number 27 was marked 6 for identification.) 7 Q. (By Ms. Chaitman) I've marked as 8 Exhibit 27 an August 31, 1991 statement of 9 Clothmasters, Inc. Mr. Madoff, was Clothmasters an 10 investment advisory customer? 11 A. I would assume so, yes. 12 Q. Okay. And this statement is dated August 13 31, 1991. Can you tell what trading strategy this 14 statement reflects? 15 MR. GOLDMAN: I'm going to step out for a 16 second. 17 MS. CHAITMAN: Sure. 18 THE WITNESS: This looks like a -- it 19 looks like a split strike trade via equity. It 20 looks like a basket of securities that were part of 21 the split strike transaction. 22 Q. (By Ms. Chaitman) Okay. And as of 23 August 31, 1991 were you actually purchasing the 24 securities? 25 A. Yes.

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1 (Customers Exhibit Number 28 was marked 2 for identification.) 3 Q. (By Ms. Chaitman) I'm marking as 4 Exhibit 28 a document which is called Account 5 Canada. Can you tell me what this is? 6 A. Looks like it says Canadian dollars, so 7 this must have been part of our proprietary trading, 8 I think. I doubt whether this is -- I doubt whether 9 this is a customer. 10 Q. So this is a record of investments that the 11 firm made in Canadian dollars? 12 A. Right. 13 Q. Is this a report that was regularly 14 prepared by your firm? 15 A. I don't know what this is. I mean, you 16 know, I'm not familiar with this, so, you know -- 17 Q. Okay. I don't want you to guess if -- 18 A. No. I don't know. 19 MS. CHAITMAN: Okay. 20 MR. GOLDMAN: Do you need to eat? 21 THE WITNESS: Yeah. Whenever you're -- 22 MR. GOLDMAN: They have your food outside. 23 THE WITNESS: Huh? 24 MR. GOLDMAN: I checked. They have your 25 food outside.

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1 THE WITNESS: All right. I'm okay for 2 now. 3 MS. CHAITMAN: Do you want to? Do you 4 want to? 5 THE WITNESS: No. It's all right. 6 MS. CHAITMAN: You sure? 7 MR. SHEEHAN: Whenever you're ready, just 8 tell us. 9 THE WITNESS: Okay. 10 MR. SHEEHAN: We're not going anywhere. 11 THE WITNESS: I don't know how long she's 12 going to be with this. What are you doing? 13 MS. CHAITMAN: Well, I -- 14 MR. SHEEHAN: I think we're looking at all 15 day. 16 CHAITMAN: No, but if you want -- do you 17 want to take a break? Is this when you normally eat 18 lunch? Why don't we -- 19 MR. SHEEHAN: Why don't we just do it? 20 MS. CHAITMAN: Yeah. 21 THE WITNESS: Okay. 22 THE VIDEOGRAPHER: Going off the record. 23 The time is 11:09 a.m. 24 (A luncheon recess was taken.) 25 THE VIDEOGRAPHER: Back on the record.

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1 The time is 11:29 a.m. 2 Q. (By Ms. Chaitman) Just to review, Mr. 3 Madoff, if I wanted to get a full picture of the 4 Treasury securities that were purchased with money 5 from the 703 account as of any point in time from 6 say 1994 on when you say that the split strike, 7 that's when you stopped writing securities for the 8 customers, I would have to get the statements from 9 Bear Stearns; right? 10 A. (Witness nods head.) 11 Q. The statements from Morgan Stanley? 12 A. Right. 13 Q. The statements from Fidelity? 14 A. Right. 15 Q. The statements from Lehman Brothers? 16 A. Right. 17 Q. And I would have to get the JPMorgan Chase 18 statements like the one we looked at, which was the 19 account that held the Treasury securities? 20 A. Correct. 21 Q. Okay. And if I wanted to get a complete 22 picture of the securities that your firm held that 23 were long positions that you actually held, I would 24 have to look at the DTC records? 25 A. Correct.

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1 Q. I'd have to look at -- were there other 2 places that you held securities? Would I have to 3 look at, say, your account at Bear Stearns? 4 A. You would have to look at the banks if 5 there were -- if there were bank loans. 6 Q. Because if you borrowed from a bank, you 7 would have pledged the securities to the bank? 8 A. Right. Typically they would be held at 9 DTC, but they would be in the bank's account at DTC. 10 They would be journaled over to the bank. So you'd 11 have to look at the DTC -- you'd have look at the -- 12 you would have to get that from the bank themselves 13 because DTC would not give them to you. 14 Q. What banks did you borrow money from where 15 you pledged the securities to the banks? 16 A. It could be JP Morgan. It could be Bank of 17 New York, you know, depending on what period; but if 18 you were looking at 2008 or 2000s, it would be 19 typically Bank of New York, M&T, it could be JP 20 Morgan. I think that's -- those are the banks that 21 we used at that time. 22 Q. And if it's earlier? 23 A. You'd have to look at any one of the -- you 24 probably couldn't get them, you know, but it would 25 be the banks that I mentioned to you.

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1 Q. All the clearing accounts? 2 A. Right, right. 3 Q. So if I wanted -- let's say I'm talking 4 about 2003. 5 A. Right. 6 Q. I would have -- in order to determine what 7 securities were held by your firm, I would have to 8 look at the DTC records for each of the banks that 9 you listed before? 10 A. Right. 11 Q. Plus your own DTC -- 12 A. Right. 13 Q. -- correct? And would that give me a 14 complete picture of all the securities you owned as 15 of a given point in time? 16 A. Uh-huh. 17 Q. Yes? 18 A. Yes. 19 Q. Now, again, I don't want you to mention any 20 individual names, but you testified previously that 21 the four families entered into hold harmless 22 agreements with you? 23 A. Right. 24 Q. Do you recall who was involved in drafting 25 those hold harmless agreements?

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1 A. One of the partners at Price Waterhouse. 2 Q. Do you remember who? 3 A. Ed Kostin, Edward Kostin. 4 MR. GOLDMAN: Could you spell the name? 5 THE WITNESS: K-o-s-t-i-n. He's deceased 6 now. 7 Q. (By Ms. Chaitman) And, again, I don't want 8 you to mention any names, but were the hold harmless 9 agreements signed by members of all the four 10 families? 11 A. Yes. 12 Q. And what was the total amount of the debt 13 that the hold harmless agreements obligated the four 14 families together to pay you? 15 A. Well, it varied depending upon the 16 fluctuation of the -- of the securities because the 17 hold harmless agreements basically stated that they 18 were holding me harmless for any loss involved in 19 the naked part of their securities because of the 20 short positions that had been maintained. So it 21 could have -- probably was a maximum of probably I 22 would say at one point probably $9 million -- 23 $9 billion. 24 Q. Okay. As of December 11th, 2008 do you 25 have any sense of how much it was?

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1 A. As of when? 2 Q. December 11th, 2008. 3 A. I couldn't give you an exact figure. You 4 know, the -- 5 Q. Don't mention any names. 6 A. Not counting the 6 billion, there was one 7 debit balance of 6.3 billion. 8 Q. Okay. So one person had a -- was that a 9 margin loan? 10 A. Yes. 11 Q. So ones customer had a margin loan of six 12 billion? 13 A. Right, right. 14 Q. And then -- 15 A. Then I would say the others were probably 16 -- there was probably an additional $5 billion in 17 exposure that they caused me. 18 Q. Okay. So it was approximately $11 billion 19 at the time you confessed? 20 A. Approximately, yes. 21 Q. Okay. Now, Mr. Madoff, you've testified 22 that the investment advisory fraud did not begin 23 until either late 1993 or early 1994. Are you aware 24 that David Kugel testified that the fraud began in 25 the 1970s?

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1 A. Yes. 2 Q. Mr. Kugel testified at the Bonventry trial 3 that in the 1970s he gave Annette Bongiorno 4 arbitrage trades for the accounts of Stanley, Chase 5 and for Avellino and Bienes. Were you defrauding 6 Chase and Avellino and Bienes in the 1970s? 7 A. No. 8 Q. Did you read Mr. Kugel's testimony? 9 A. Yes. 10 Q. Do you think it's accurate? 11 A. No. 12 Q. Can you explain why? 13 A. First of all, I think that -- 14 THE VIDEOGRAPHER: Microphone, microphone, 15 microphone. 16 MS. CHAITMAN: You took care of the 17 microphone. 18 MR. GOLDMAN: Want me to remove the 19 microphone? Sorry. 20 MS. CHAITMAN: I'm sorry, Mr. Madoff. 21 THE WITNESS: I guess the best way to 22 describe -- from what I've been able to piece 23 together from the -- what I've read from the 24 testimony and what I've been told and what I've seen 25 is that this so-called smoking gun I would refer to

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1 it is that David Kugel, who is one of my convertible 2 bond traders, used to -- at our -- at my request 3 used to generate a convertible bond formula that he 4 would give to either Annette Bongiorno or Jodi, all 5 right, that would lay out what the proper conversion 6 ratio was on a particular convertible security. 7 In other words, it was a formula that he 8 would write on a scrap of paper that would say MCI 9 convertible bond would be bought 100 bonds, you 10 would short let's say a thousand shares of stock at 11 a certain price. And they would take that formula 12 and they would use that when they were going to now 13 generate a trade for a client. 14 All right. Now, that was so that they -- 15 because they were not traders, they were not 16 familiar with what the proper conversion ratios 17 were. All right. So typically what would happen, 18 the step used to be if Annette would come to them 19 with a convertible bond and say okay, I have a 20 million dollars worth of convertible bonds, that 21 typically would be a million because we traded in 22 much larger numbers. 23 So she would say there's $10 million 24 available to be invested in convertible securities. 25 What securities would you recommend that would put

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1 for the customers in? All right. So he would pick 2 out a security that we were trading and he would 3 give him the correct formula. Once they got that 4 formula, that scrap of paper, the next step would be 5 to go and search our trading records, which would be 6 what the market maker or the firm's investment 7 account bought and sold over a period of let's say 8 for four days. 9 And then they would -- he would by running 10 a run of what we bought and sold, then Annette or 11 Jodi, not David, you know, Annette or Jodi would 12 look through the trading records and pick out a 13 certain number of shares in stock and they would 14 come up with an average price and the appropriate 15 number of shares. 16 All right. So this David Kugel had no 17 access to any of those records. He wouldn't be able 18 to do that. He was just giving them -- he was just 19 giving them what the correct formula would be. 20 So by -- for some reason the Trustee, all 21 right, because he had this piece of paper which they 22 showed me when they first came down here years ago 23 and asked me what it was, I told them it was a 24 formula, exactly what I just said. They determined 25 from that that David was generating the trade and

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1 that we weren't actually buying. He was just making 2 up the trade, which I laughed at at the time because 3 it didn't make any sense, you know, for him to do 4 that. He couldn't possibly generate the trade 5 because he had no access to the records to pick that 6 out. He was just looking at one trade. 7 That is why -- and that was why Dubinsky, 8 you know, you know, did not have the -- couldn't 9 match up the number of shares or the price properly. 10 So David's testimony -- and I don't know why he 11 would even say that. I don't think that he would -- 12 if he believed that he was actually generating a 13 trade, I can't believe that he would even think that 14 he was generating a trade because he knows that. 15 I mean, it just didn't make any sense. So 16 either he was -- either the Trustee or whoever it 17 was that was determining that, you know, just didn't 18 understand it, which is probably the most likely 19 situation or they were just trying to create a 20 situation. Just doesn't make any sense. 21 And anybody that if you call anybody in 22 for the industry, another person that ran a trading 23 desk that was familiar with how you did these types 24 of transactions would tell you the same thing. I 25 mean, it made absolutely no sense.

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1 Q. (By Ms. Chaitman) Now, when you confessed 2 you weren't in the process of negotiating a plea 3 agreement; right? 4 A. No, no. 5 Q. When David Kugel gave his testimony -- 6 A. Uh-huh. 7 Q. -- he had negotiated a plea agreement; 8 right? 9 A. From what I understand, yes. 10 Q. So he had to give the prosecutor something 11 that the prosecutor wanted; right? 12 A. I don't know. It looks like it. I mean, I 13 just -- you know, I don't think David Kugel was a -- 14 you know, a devious type of person. David Kugel was 15 not a good communicator. I mean, he was known in 16 the firm as having a very hard time telling anybody 17 anything. Nobody ever wanted to speak to David 18 Kugel. He was a very nice guy and he was actually a 19 talented trader himself, but he could not 20 communicate with anybody. 21 I mean, and so that's the only thing I can 22 think of is he didn't understand the question, he 23 got nervous. I just don't know, but it made 24 absolutely -- it made absolutely no sense, his 25 testimony.

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1 And another example of this was there was 2 a testimony by Irwin Lipkin, all right, about -- you 3 know, first of all, you have to understand that the 4 only one that ever saw a completed focus report in 5 our firm or that ever signed a completed focus 6 report was me. Nobody -- nobody in our firm knew 7 what the actual P&L was. The traders -- and this is 8 not by accident. 9 In other words, the securities industry 10 has very strict requirements so that there's no 11 conflict of interest between market makers, the 12 trading department and so on. You're required to 13 keep your records separate. 14 The trade -- the market makers are not 15 allowed to see another market maker's, you know, 16 trading positions or P&L. As a matter of fact, you 17 have to have supervisors that are different. For 18 example, my brother -- my one son was in charge of 19 the market making department. The other son was in 20 charge of the proprietary trading department. They 21 had to be separate. 22 And you couldn't have a system -- the 23 traders are not allowed to see what this other 24 trader has a position of because of what they call 25 Chinese walls between your market making, your

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1 client business and your proprietary trading 2 department. The -- now, when do our -- when a firm 3 like ours that is a market maker and is doing an 4 arbitrage business, whether it be split strike or 5 whether it be convertible bonds and is trading 6 baskets and options and all sorts of hedging 7 strategy, which is what our firm specialized in, 8 when you do -- when you prepare your financial 9 reports, your focus reports at the end of any month, 10 you are allowed to net all of your positions. 11 So, for example, if you have -- in our 12 firm we could have ten traders trading the same 13 security. So some traders would have long positions 14 in IBM. Some would be short positions in IBM. Some 15 would have option positions on in IBM. What you 16 have to do at the end of every month is you net all 17 the positions, the option positions, to come up with 18 a net exposure or net position. 19 So you could have, for example, one trader 20 may be long a thousand shares. Another trader is 21 long -- is short 500 shares of stock so that the net 22 would be 500 shares. All right. The person that 23 instructs -- there's one person that instructs, you 24 know, how you do all of this. Now, Irwin Lipkin 25 even before he retired was very -- was not the most

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1 efficient person. Irwin Lipkin started with me when 2 he first came out of the Army, but as the firm grew, 3 as the firm became more and more sophisticated and 4 was trading in the old strategies, it was beyond 5 Irwin Lipkin's grasp, which was fine because he was 6 a bookkeeper. 7 He only had to know specific things. At 8 the end of each month when you had to net all these 9 different positions, Irwin Lipkin didn't do that. 10 So what would happen is if Irwin Lipkin and the 11 records that he was looking at showed a thousand 12 shares of stock but didn't -- he wouldn't know what 13 the rest of the firm's were. So somebody had to net 14 all of this out. 15 And it was a very complicated procedure 16 and each firm depending upon the type of business 17 you had had certain what they called no action 18 letters from the SEC, which told you how you could 19 -- you know, how you could handle each security. 20 And as a matter of fact, because I was the 21 chairman of the trading committee for the industry, 22 I had to work with the SEC when we formulated all of 23 these different regulations and rules. So I was 24 aware of the fact that the typical accountant or 25 lawyer, for example, would not be familiar with any

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1 of that. So I was not the least bit surprised that, 2 for example, Dubinsky's errors that he had because 3 he, obviously, was not that familiar with how -- you 4 know, how you did this. Now, it doesn't mean you 5 couldn't find out. 6 If you went -- if you got someone that 7 really was familiar with all of these things, they 8 would be able to understand that; but if you ask the 9 typical accountant because, look, I worked with 10 every major accounting firm in the country, you 11 know, over the years. So I was familiar with what 12 they did, what they understood and what they -- it's 13 not surprising. It's a typical problem in the 14 industry. 15 So David Kugel's testimony as far as I'm 16 concerned as with Annette and as with any of these 17 people in my firm, whether it be Enriqua Pitz or 18 anyone else because I read all of their depositions. 19 And, you know, none of that was really valid because 20 they were looking at only what their specific job 21 was. They didn't know what the rest -- they weren't 22 familiar with the whole picture of the firm. 23 The only ones that would know that would 24 be Dan Bonventry in my firm, who was the director of 25 all operations, or myself. It wouldn't have been

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1 David Kugel. It wouldn't have been Enriqua Pitz and 2 so on. 3 Q. Did you believe that the focus reports were 4 accurate prior to 1994 when you stopped buying the 5 split strike securities? 6 A. Yes. And you see, you're using the '94, 7 '93, '92, so I want to make sure there. I said that 8 the fraud began in '92 because that was when we 9 weren't completing all of the transactions in this 10 split strike. All right. There was some -- there 11 were some transactions in the split strike done, you 12 know, through 1993. 13 All right. But I'm not comfortable saying 14 that everything was done -- was done -- I'm 15 comfortable saying that everything was done 16 correctly, you know, prior to '92. 17 Other than the fact there was some back 18 trading of -- of customer transactions for the 19 accounts, for the four large accounts that started 20 like in 1990, that was -- because of what happened 21 was after the crash in 1987, the four big clients, 22 you know, forced me to liquidate some of their 23 positions. And that's when the hold harmless 24 agreements started. 25 Q. Okay. But --

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1 A. Focus reports were accurate because that 2 wouldn't have affected the focus reports anyhow. 3 The focus reports were accurate through 1992 for 4 sure. 5 Q. Through 1992? 6 A. Yes. 7 Q. Okay. So I know it's a long time ago and I 8 don't want you to say anything unless it's your best 9 recollection, but you testified earlier today that 10 you were doing the split strike trades until late 11 1993 or early 1994? 12 A. Right. 13 Q. But are you unsure of it? I mean, do 14 you -- 15 A. No. I was -- I didn't do it for all of the 16 clients, you know. That's what I said. There were 17 some clients that I did do the trades through 1993 18 for. 19 Q. Is there any way that we could determine 20 now which clients you did the trades for and which 21 ones you didn't? 22 A. No. I couldn't remember that for sure. 23 (Customers Exhibit Number 29 was marked 24 for identification.) 25 Q. (By Ms. Chaitman) Okay. I'm up to

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1 Exhibit 29. I'm handing you what I've marked as 2 Exhibit 29, which is an appendix to Mr. Dubinsky's 3 report in which he lists the documents that he 4 considered. Have you seen this document before? 5 A. No. 6 Q. Now, you've testified that Mr. Dubinsky did 7 not interview you and no one on his behalf 8 interviewed you; is that right? 9 A. Yes. 10 Q. Okay. And if you look at page eight of 11 this document, it lists a number of people who have 12 been -- whose deposition transcripts Mr. Dubinsky 13 said that he read. Can you look through this list 14 and tell me if any of these people -- it begins on 15 the bottom of page eight -- 16 A. Uh-huh. 17 Q. -- and then it goes on to page nine. Can 18 you look at these names and tell me if any of these 19 people would have known how you executed the 20 convertible arbitrage trades in the 1980s? 21 A. You're looking at the depositions you're 22 saying? 23 Q. Yeah. The names of the people. Do you 24 recognize any of these people as people who had 25 knowledge about convertible arbitrage trading from

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1 the 1980s? 2 A. None. 3 (Customers Exhibit Number 30 was marked 4 for identification.) 5 Q. (By Ms. Chaitman) Okay. Now, I'd like to 6 mark as Exhibit 30 an August 20th, 2010 letter that 7 was written by Scott Garrett to Stephen Harbeck and 8 then a September 7th, 2010 letter from Mr. Harbeck 9 to Scott Garrett, which is the response. I'll just 10 have to find the one that I marked up. Just give me 11 one second. I should have one more of these. Let 12 me just see. 13 MS. FEIN: That's all right. We'll share. 14 MR. SHEEHAN: It's all right. Go ahead. 15 MR. GOLDMAN: This may be the marked up 16 one. 17 MS. CHAITMAN: Oh, yeah. Thank you. 18 Q. (By Ms. Chaitman) Have you seen this 19 document before? 20 A. No. 21 Q. If you'd be good enough to turn to page 18? 22 And the numbers are on the top of the left-hand side 23 of the page. The numbers are right up there. 24 A. Uh-huh. 25 Q. SIPC is telling Scott Garrett that you had

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1 all together -- you had the 703 account, you had two 2 custody accounts at JPMorgan Chase and you had an 3 additional 127 accounts. Do you see that? 4 A. Right. 5 Q. Does that sound accurate to you? 6 A. A hundred and twenty-seven accounts why? 7 Q. Held by -- I'm reading from the top of the 8 page. It says in addition to the Madoff 703 account 9 and the two BLMIS custody accounts held at JPMorgan 10 Chase as discussed in response to section two, 11 question 1(a) above, an additional 127 accounts held 12 by Madoff, BLMIS or other Madoff-related entities 13 have been identified to date as a result of the 14 investigation. 15 A. Well, I'm not sure which accounts he's 16 referring to when he says 127 accounts. What is 17 that? Customer accounts or what is it? 18 Q. Accounts in the name of your firm, either 19 you or in the name of either you or BLMI. 20 MR. SHEEHAN: Helen, it might be a good 21 idea if Mr. Madoff read question to question that's 22 being answered here, the page before. 23 MS. CHAITMAN: Sure. 24 MR. SHEEHAN: It might be a little bit 25 helpful.

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1 MS. CHAITMAN: Sure. 2 THE WITNESS: I'm still confused as to 3 what the question is. I don't know. Maybe it's 4 just me right now, but I don't -- when he's talking 5 about how many accounts, he's talking about -- what 6 is he talking about? Customer accounts or accounts 7 we had at other brokerage firms or what? 8 Q. (By Ms. Chaitman) Well, the question was, 9 and I'm reading from the bottom of page 17, if for 10 the same period, which is -- 11 A. Right. 12 Q. -- December 1998 through December 2008, 13 Madoff, BLMIS or other Madoff controlled businesses 14 had other accounts at U.S. or foreign banks or other 15 financial institutions provide annual balance data 16 for these accounts? 17 A. Okay. Well, again, if he's talking about 18 accounts that we had, you know, if he's talking 19 about that we had -- for example, if the Union Bank 20 in Switzerland handled an account for a hedge fund, 21 they may have had ten hedge fund accounts because 22 they have been the custodian for those accounts. As 23 far as we're concerned, we never had an account with 24 these entities. So again, it depends on how you 25 define we have an account.

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1 We trade for -- we had -- we were hooked 2 into hundreds of other broker-dealers, whether it be 3 Charles Schwab or Merrill Lynch or Fidelity. You 4 know, we didn't have a -- we don't consider that we 5 had an account there. We did business with them, so 6 we had transactions that went through that. We were 7 executing Charles Schwab's customers' accounts but, 8 you know, Charles Schwab was our customer, not a 9 customer of Charles Schwab. 10 Q. Okay. 11 A. So I don't know -- 12 Q. Is it fair to say that you don't believe 13 that you, Madoff or BLMIS maintained 127 different 14 accounts? 15 A. No, no. Again, it depends on how you 16 define an account. I mean, we had hundreds, you 17 know, of accounts. We had much more than 127 18 accounts depending upon what your definition of an 19 account is. We did 10 percent of all the trading in 20 the United States. 21 So, you know, we had -- we transacted five 22 or six hundred thousand transactions every day, you 23 know; but as I say, if you were a customer of 24 Fidelity or Charles Schwab, you had an account 25 there. All right. You weren't my customer.

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1 Fidelity or Schwab was my customer. Now, they did 2 business with us, Fidelity. We don't consider that 3 we had an account with them. 4 Q. Right. 5 A. Because when we executed transactions for 6 them, those transactions went through the clearing 7 corporation. They were settled every day. We 8 didn't keep money at Fidelity. They didn't keep 9 money at our account. Those all went through the 10 clearing accounts. 11 Now, they would say that they -- they could 12 say they have an account with us because they did 13 business with us. So they would have a -- they 14 would show that -- what business they did with 15 Madoff on a particular day the same way that if you 16 were a customer of ours, Sean Jones, it would say 17 you have an account with us; but that's not what a 18 firm -- 19 Q. Right. 20 A. So I don't know exactly how they're 21 defining an account. 22 Q. Okay. If you look at the back of the 23 document and you go in one, two, three, four, five 24 -- let's see. From the back of the document six 25 pages, you see you get to this from the back of the

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1 document. You've got it. 2 MR. SHEEHAN: Okay. 3 Q. (By Ms. Chaitman) You're in the wrong 4 document. 5 A. Oh, I'm in the wrong -- 6 Q. That will make it even harder. 7 A. No wonder why you people charge $700 an 8 hour. 9 Q. Okay. Sorry to confuse you. 10 A. Uh-huh, right. 11 Q. So these are -- this lists three Bank of 12 New York accounts; right? 13 A. Right. 14 Q. One was for you and Ruth and then one was 15 just for you and one was for BLMIS; right? 16 A. Right. 17 Q. And then there's a Bankers Trust account in 18 your name? 19 A. Uh-huh. 20 Q. Was that used for the firm? 21 A. Yes. 22 Q. Okay. And there was a Barclays account? 23 A. Right. 24 Q. There were two -- actually, three Barclays 25 accounts; right?

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1 A. Uh-huh. 2 Q. One Bear Stearns account? 3 A. Right. 4 Q. One Fidelity account? 5 A. Uh-huh. 6 Q. One M&T account? 7 A. Right. 8 Q. And one Morgan Stanley account? 9 A. Right. 10 Q. Okay. Now, this is captioned Madoff 11 related accounts, year-end balances and annual 12 earnings accounts with transfers to and from the 13 Madoff 703 account. Do you see that in the upper 14 left-hand corner? 15 A. Uh-huh. 16 Q. So these were -- is it fair to say that 17 these were all accounts which received transfers 18 from the 703 account? 19 A. If that's what it says, yeah. 20 Q. Well, do you recall -- I mean, you've 21 testified that Treasury securities were purchased 22 with 703 account money by Fidelity, Bear Stearns, 23 Morgan Stanley and Lehman; right? 24 A. Uh-huh. 25 Q. And Barclays is Lehman?

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1 A. No. Barclays is Barclays. 2 Q. Well, if you look at the entry for 3 Barclays, underneath it says Lehman? 4 MR. SHEEHAN: Could Lehman -- I'll stop. 5 THE WITNESS: Okay. I mean, Barclays we 6 use -- Madoff Securities in London cleared their 7 transactions through Barclays. 8 MS. CHAITMAN: Okay. 9 THE WITNESS: So but I don't know what 10 Lehman did with Barclays. They may have used 11 Barclays as well. 12 Q. (By Ms. Chaitman) Okay. When money was 13 transferred from the 703 account to MSIL in 14 London -- 15 A. Uh-huh. 16 Q. -- was that money used to purchase 17 securities? 18 A. It was used to purchase usually treasuries. 19 Q. From -- by MSIL? 20 A. Right. 21 Q. Okay. And were those treasuries also held 22 for the benefit of the investment advisory 23 customers? 24 A. Probably. 25 Q. Do you remember approximately how much MSI

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1 held in Treasury securities? 2 A. No. 3 Q. And for us to determine that, we'd have to 4 get the Barclays Bank statements, is that -- for the 5 Treasury account? 6 A. Correct. 7 Q. If you look on the next page, which is page 8 19 -- let me help you. Under paragraph two, what 9 appears in bold is the question that was asked by -- 10 A. Right. 11 Q. -- Congressman Garrett. It said during the 12 period 1992-2008 when Madoff was actively pursuing 13 his Ponzi fraud, he was engaged in market making and 14 proprietary trading. For each of these years 15 provide data on trading volumes and the annual gross 16 and net revenues from this trading activity. 17 And then the answer is a table, which SIPC 18 says the table below includes annual revenue, net 19 income and trading volumes as reported in the focus 20 reports filed by Madoff with regulatory authorities. 21 Madoff focus reports were available back to 1983. 22 A. Uh-huh. 23 Q. Was this information on the focus reports 24 accurate after 1992? 25 A. I assume so. The revenue, yeah.

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1 Q. So, for example, where it says average 2 monthly reported trade ticket executions, do those 3 numbers look accurate to you? 4 A. It would be under focus reports, yes. 5 Q. Okay. And would the focus reports 6 accurately reflect the monthly trade ticket 7 executions? 8 A. Uh-huh. 9 Q. And what -- if you can answer this, what 10 was the average volume of each trade ticket? I 11 mean, I assume you wouldn't do a trade for three 12 shares of IBM? 13 A. No. These would be -- this is not -- I'm 14 assuming these are not customer transactions. These 15 are -- on the focus reports these were just 16 reflecting the market making proprietary trading 17 business. 18 Q. What you were doing for your own account? 19 A. Right. 20 Q. Right. 21 A. Yeah. So -- 22 Q. Do these numbers look accurate to you? 23 A. I would -- I would assume so. If we run 24 the focus reports, the focus reports were accurate 25 all the time.

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1 Q. So what would -- if there's a -- if you can 2 quantify this. If you can't, just say you can't, 3 but what would be the average number of shares that 4 you would do on one ticket? 5 A. On a ticket? 6 Q. Yeah. 7 A. It varies. I just -- no way to be able to 8 tell you that. I know how many trades they were 9 doing. They were doing, you know, anywhere from a 10 low of 250,000 transactions a day to 600,000 11 transactions a day. I mean, you know, how the 12 shares were, you know, I don't -- you know, I don't 13 know. I didn't pay attention to that. 14 Q. Okay. 15 A. Why is it relevant? 16 Q. I'm just trying to get a sense of the 17 volume. In other words, let's say if we take in 18 1983 you did a reported -- average monthly reported 19 trade tick at executions was 8,135. 20 A. Well, let me put it to you this way. The 21 industry kept records, transactions of how many 22 transactions we did because they were reported, you 23 know, to -- you know, to the NASD. I mean, it was 24 reported all over the industry basically. These 25 were not numbers that we generated. That went

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1 through the systems, the clearance and settlement 2 systems and the reporting, trade reporting systems 3 that we did anywhere from typically of a low of five 4 to ten percent of the actual number of transactions 5 were executed in the United States. That's not 6 something that I made up. 7 That was something that's been reported 8 all over the -- all over the industry. It's been 9 reported by the NASD and the SEC. I mean, by 10 anybody's scope it was a huge amount of business. 11 As a matter of fact, when we -- when we 12 developed this Primex trading system and my partners 13 were Goldman Sachs, Merrill Lynch, Lehman Brothers 14 and Citicorp, the five -- all five firms that were 15 the partners in Primex handled 50 percent of all the 16 trading in the United States. Again, this is not 17 numbers that we generated. This is what the 18 industry reported. 19 Q. Okay. But if I had been your customer, 20 would you have taken an order from me to buy five 21 shares of IBM? 22 A. No. 23 Q. So what was the low -- 24 A. We didn't -- if a customer called us up to 25 buy stock for them, we never took an order. In

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1 other words, you couldn't as a customer, our firm 2 policy was to not handle a typical retail order for 3 a client. We either -- you either had to be a 4 broker-dealer or a bank to be a client of Madoff or 5 if you were a customer, you had to have -- when you 6 opened an account, you had to have a minimum of 7 500,000, which is at the very earliest $500,000 in 8 the account. Typically it was then 2 million. That 9 was if you were an individual client. 10 So but if you called us up and you said 11 you want to buy 20 shares of IBM or you want to buy 12 a thousand shares of IBM, we would not do that 13 order. If it wasn't -- the only customer business 14 that we did was where we managed the entire account 15 and we made the decisions. 16 Q. Okay. Now, if you'd look on page 23 at the 17 bottom of the page, the question was how many 18 accounts under consideration for avoidance action 19 were established with Madoff prior to the inception 20 of the Ponzi scheme? 21 In making the net investment method 22 determination net equity from these accounts, has 23 the Trustee used any of the pre-Ponzi disbursements? 24 If so, provide details, et cetera. And the response 25 says based on the Trustee's investigation and upon

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1 review of the earliest records available to him, the 2 Trustee has found no evidence indicating that the 3 BLMIS investment advisory business has been operated 4 as anything but a Ponzi scheme. 5 A. Right. 6 Q. Now, did anyone on behalf of the Trustee 7 ever talk to you about the trades that you did in 8 the 1980s? 9 A. No. 10 Q. Did the Trustee ever disclose to you that 11 he, in fact, had some trading records from the 12 1980s? 13 A. No. 14 Q. Now, when SIPC is using here the phrase 15 Ponzi scheme, if you accept for a moment that a 16 Ponzi scheme is a nonexistent business in which 17 people invest where the sole source of paying 18 returns on their investments is investments from new 19 investors -- 20 A. Uh-huh. 21 Q. -- on that definition was the split strike 22 ever a Ponzi scheme? In other words, did you ever 23 need new cash from new customers in order to redeem 24 other customers? 25 A. No.

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1 Q. Did you ever need new cash from new 2 customers to pay the earnings that were reported on 3 the statements? 4 A. No. Let me make a statement that I have 5 never to my recollection ever had a conversation 6 with a Trustee, ever. The Trustee never met with 7 me, never spoke to me, never asked me anything from 8 the date of my arrest until currently. I've had 9 meetings with the attorneys when the attorneys came 10 down here after, you know, I don't know whether that 11 was 2010 or some year in that, but there was 12 nothing; but the Trustee, the only time I ever saw 13 the Trustee was at my proffer meeting with the SEC. 14 Q. In December 2008? 15 A. December of 2008. And as far as I recall, 16 he never asked me anything and I never said anything 17 to him. 18 Q. Okay. But did anyone from the Trustee's 19 law firm -- 20 A. No. The law firm, yes. They came down at 21 one period of time. David Sheehan could -- was 22 present. 23 Q. Okay. But did they ever ask you whether 24 you actually executed the trades that were done in 25 the convertible arbitrage strategy?

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1 A. I don't think they ever asked me that. The 2 only conversation I had with them about trade at all 3 was the David Kugel scrap of paper that I mentioned 4 before. 5 Q. Okay, okay. Did they ever ask you exactly 6 when the -- when you stopped buying the securities 7 for the split strike? 8 A. No. 9 Q. Did they ever ask you whether you needed 10 the money from new investors in order to pay old 11 investors? 12 A. No. 13 (Customers Exhibit Number 31 was marked 14 for identification.) 15 MS. CHAITMAN: I'm up to Exhibit 31, and 16 this is the expert report of Bill Feingold. That's 17 okay. 18 MR. GOLDMAN: I'll take it easy. 19 Q. (By Ms. Chaitman) Okay. Have you seen 20 this document before? 21 A. Yes. 22 Q. Okay. Do you know Bill Feingold? 23 A. No. 24 Q. Did you ever hear about him? 25 A. No.

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1 Q. I'd like to go through the substantive 2 portion of this report and I'd like you to give me 3 your insights on it; okay? 4 A. Uh-huh. 5 Q. So if you'd be good enough to turn to page 6 two? 7 A. Uh-huh. 8 Q. And if you could just read paragraph 12 and 9 then if you have any comments on that, I'd like you 10 to tell me what they are. 11 A. Yes. 12 Q. Okay. Can you tell me what they are? 13 A. What? What did you ask me? 14 Q. Did you have any comments on this? Do 15 you -- do you -- 16 A. Yeah. I think, you know, he pointed out, 17 you know, the fallacy of what Dubinsky used, made 18 statements about volume and so on. He's 19 criticizing -- I think there were 41 points that he 20 made that Dubinsky was incorrect in his analysis, 21 which was basically very similar to all my comments 22 when I analyzed the Dubinsky report. 23 Q. Okay. In paragraph 13 he says that most 24 trading and bonds, unlike stocks, takes place in the 25 over-the-counter market and that's something you had

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1 testified to; right? 2 A. Right. 3 Q. And then he quotes the SIFMA website for 4 the statement, quote, the OTC market is much larger 5 than the exchange markets and the vast majority of 6 bond transactions, even those involving exchange 7 listed issues, take place in this market? 8 A. Correct. I think this is -- he's 9 reflecting very similar to the last time we had a 10 deposition and I produced a very large book that was 11 written. I gave -- you took as evidence -- 12 Q. Yes. 13 A. -- that stated all of this. 14 Q. Right. 15 A. That was in complete contrast to Dubinsky's 16 report. 17 Q. Right. And if Dubinsky had spoken to 18 anyone who did trading and convertible bonds in the 19 1980s, would they have found this information out? 20 A. Yes. 21 Q. In paragraph 14 Feingold says in an OTC 22 market investors do not trade directly with each 23 other but with many individual dealers who 24 continuously make markets, paren, buy and sell. As 25 such, OTC markets are much less centralized and data

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1 are less readily available. Is that accurate? 2 A. That's correct. 3 Q. If you'd just take a look at paragraph 15 4 and if you'd just take a moment to read that and 5 then I'd like your comments on it. 6 A. Right. He's basically saying that, you 7 know, that -- that convertible bonds and bonds in 8 general do not trade for the most part on the floor 9 of an exchange. They trade over the counter between 10 dealers. Madoff is one of the largest convertible 11 bond dealers in the country. We made more markets 12 in convertible bonds than any other firm. He 13 doesn't state that, but that was common knowledge. 14 And he's saying that you couldn't get 15 accurate information, you know, until 2002 because 16 that was when TRACE came in. And even when TRACE 17 came in, there was question as to whether or not the 18 correct volume was reported even then. Bond dealers 19 in general do not like to report their transactions 20 or their volume because they consider it proprietary 21 information. 22 The SEC would like -- look, the SEC would 23 like everything to be transparent. That's been a -- 24 in the 50 years I've been in this industry, that has 25 been a debate that went on and still has not been

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1 resolved. And to a certain extent, you know, they 2 blame me for a lot of -- a lot of this because of 3 the fact that we were the ones that pioneered the 4 form of electronic trading. 5 Right now all of these problems that you 6 have with this what they call that book that came 7 out, Flash Boys, all the trading is done in dark 8 pools and not -- when I came into this industry, 9 98 percent of the business in securities was traded 10 on the floor of an exchange and listed securities. 11 The SEC was unhappy with that and I was 12 given the responsibility for developing a more 13 competitive marketplace. And that's how we started 14 this electronic trading and that's how I developed 15 NASDAQ originally. The volume on the -- on New York 16 Stock Exchange's list of securities today is only 17 about 30 percent on the floor of the exchange and 18 70 percent if it is done over the counter. 19 So and that's a constant problem. The 20 whole marketplace has changed and will probably 21 never go back to the way it was. And nobody wants 22 to -- the goal of the industry is to have less 23 transparency because people always -- always want to 24 trade against somebody else. They're all competing 25 with each other.

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1 So the idea is to conceal what you're 2 doing, what you're buying, what you're selling. And 3 because of what the SEC would like to do, they'll 4 never change that. Business is done more in Europe 5 now than ever before and it's -- that's where the 6 industry is. 7 Q. In paragraph 19 Mr. Feingold says, thus, 8 when Mr. Dubinsky cites data from the New York Stock 9 Exchange to support his arguments about bond volume, 10 he is treating approximately one percent of the 11 activity as indicative of the entire market. 12 A. Really? 13 Q. Is that -- 14 A. Yes. 15 Q. In fact, I think that the book that you 16 brought to the last deposition -- 17 A. Right, right. 18 Q. -- said that one percent of the convertible 19 bond trading was done on the New York Stock 20 Exchange? 21 A. Right. 22 Q. And if Mr. Dubinsky or someone working for 23 him had spoken to anyone who did convertible bond 24 trading in the 1980s, would they have learned that? 25 A. Look, without trying to be cruel, the

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1 Dubinsky report is an embarrassment. I mean, I just 2 -- that's the only way to describe it. Quite 3 frankly, I don't understand it because if you look 4 at his background, you know, as an accountant and 5 his so-called fraud order, I don't understand how -- 6 to me it's a mystery and would be for anybody a 7 mystery that would read that report would be 8 stunned, you know, at his -- at the report. 9 I don't understand it. I mean, Feingold's 10 background is certainly equal, if not better, than 11 Dubinsky's and it's certainly more current. So but, 12 quite frankly, you could find anybody that was 13 familiar with the marketplaces that would be able to 14 write the same kind of report that Feingold wrote 15 that was critical of Dubinsky's report. 16 He does state in the report if you read 17 through the Dubinsky report, he does make comments 18 that he doesn't have -- he doesn't have access to 19 certain information. He can't find it, but that 20 didn't prevent him from still coming -- drawing 21 conclusions. 22 So if you're going to -- if you're going 23 to say, well, I only looked at the New York Stock 24 Exchange volume, you know, and, therefore, I'm 25 determined that Madoff could not have bought

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1 securities because he -- you know, it didn't match 2 the volume of the New York Stock Exchange when 3 everybody knows that you don't -- you can't just 4 look at the New York Stock Exchange volume. 5 I mean, how could you write a report that 6 said that? What he should have said is I do not 7 have access to the information to make a 8 determination of whether these transactions took 9 place or not. That's what -- that's what -- you 10 know, that's what I would have done or anybody would 11 have done. 12 Q. In paragraph 27 Mr. Feingold writes in 13 paragraph 99 Mr. Dubinsky inaccurately describes the 14 process by which convertible securities become 15 common shares. He writes that, quote, many 16 convertible securities have the option for the 17 company to call the security at a predetermined date 18 or at the company's discretion, that is, the company 19 has the right to convert the convertible securities 20 into common shares. 21 In instances where the bond or preferred 22 equity is called, the shares are converted on the 23 record date at a determined amount, end quote. In 24 fact, except for a specific subcategory known as 25 quote, mandatory, end quote, convertible securities,

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1 the securities are convertible at the investor's 2 discretion, not the issuing company's. When a 3 company calls a security, the investor is then given 4 a period typically between 20 and 120 days in which 5 to decide whether to convert the security into 6 common shares or to accept the cash call price 7 stipulated in the company's call notice. Do you 8 agree with Mr. Feingold on that? 9 A. Yes. 10 Q. Now, in paragraph 30 Mr. Feingold writes 11 footnote one of two of Mr. Dubinsky's report 12 contends that a significant percentage of the short 13 positions reported by Madoff customers exceed the 14 amount of short interest in those stocks as reported 15 at month end by the stock exchange. I found this 16 very dubious. 17 Going through the list I noticed that 18 Pfizer, one of the world's largest drug companies, 19 had short interests according to Mr. Dubinsky's 20 table of 826,162 shares at the end of March 1992. 21 Pfizer's closing price that month was $69.50 per 22 share according to Yahoo Finance. 23 Average daily trading volume in Pfizer was 24 10.74 million shares. If Mr. Dubinsky's data are 25 correct, the short interest in Pfizer then

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1 constituted less than eight percent of an average 2 day's volume. 3 A. I don't know what you -- I don't know what 4 you're asking me. I mean, as I say, I'm at a loss 5 to explain this whole Dubinsky report. I know, it's 6 -- if it wasn't such a -- if his accusations weren't 7 so serious, it would almost be comical. 8 Q. Well, is it difficult to find out what the 9 average daily volume in Pfizer was? 10 A. Yes, I mean, because volumes were reported. 11 The over the -- he's looking at volume that was 12 reported on the exchange when over-the-counter 13 dealers don't report the volume. I mean, you know, 14 so you can't -- it's like adding apples and oranges. 15 You can't -- you can't -- you can't find the 16 information. 17 Again, as I said before, the business of 18 an exchange is to try and let people know exactly 19 what has happened. That's what they advertise. You 20 know, an exchange wants to make everything public 21 because in theory, you know, the SEC would love, you 22 know, the public to understand everything that goes 23 on, how many shares trade, where they trade, at what 24 price they trade. Institutions who do the majority 25 of the business want to do just the opposite.

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1 They do not want to let, you know, 2 everybody know what they're doing because it's no 3 different than like insider trading. You know, the 4 idea is you're in an industry where everybody is 5 competing against each other, including -- including 6 the public customers. You have to understand that 7 the person who buys stock thinks he knows something 8 that the person who's selling it doesn't understand. 9 It's not a zero sum gain. Someone is 10 going to be a winner, someone is going to be a 11 loser. And it's the same. So information is the 12 key. People are trying to get less information out 13 as possible, you know, but that's the way the 14 industry is done now. The markets are not -- 15 they're much less transparent today than they were 16 20 years ago, you know. 17 So you can't -- it's not an accident that 18 people can't -- that Dubinsky can't find this 19 information that he's trying to do because it's not 20 available. I mean, quite frankly, I think that what 21 happened was in fairness -- fairness to me, not the 22 Trustee -- the Trustee drew conclusions from day one 23 of what he thought he wanted to -- he wanted the 24 outcome to be. He wanted the outcome to be that I 25 was a fraud from the very beginning, that I never

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1 did any transactions. He made statements like 2 because he couldn't find confirmations, therefore, 3 from other broker-dealers. Therefore, the 4 transaction never took place. 5 All right. Him not understanding that the 6 industry stopped producing confirmations to 7 noncustomers. So when I bought stock from -- you 8 know, in the open market from Merrill Lynch, we 9 didn't send confirmations to each other. The 10 industry discontinued that. 11 Picard drew a conclusion because he 12 couldn't produce a confirmation. Therefore, the 13 trade never took place. He totally ignored the fact 14 that, number one, confirmations weren't even 15 generated any longer, which is something that is 16 very obvious to anybody in the industry. Also, he 17 totally eliminated the fact that nobody keeps 18 records past six years any longer. 19 They're destroyed, you know. So he -- you 20 know, but he had a conclusion that he drew from day 21 one very similar to what the U.S. Attorney did when 22 he asked me do I ever short stocks and I said yes, 23 of course, I short stocks. You know, he said did 24 you ever sell to a customer that didn't know? Of 25 course, I did.

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1 You know, and I had to explain to the U.S. 2 Attorney that that's what the business of market 3 makers are doing, you know; but so he wanted to 4 determine, well, since I always shorted stock back 5 in 1962, that I might have never bought stock. I 6 mean, you know, I don't -- I think that what 7 happened was Dubinsky was -- you know, the Trustee 8 must have told Dubinsky this is what my conclusion 9 was. This is what my theory is. 10 And Dubinsky, whether he did it in a 11 devious way or not, I don't think so. I just think 12 that he just did the best he could. He wanted to 13 get information, so he took whatever information was 14 available. The fact that the information didn't 15 exist didn't mean that, you know -- that, you know, 16 the conclusion they drew, it didn't make any sense. 17 I don't know what else to say. 18 Q. Okay. Now, Mr. Dubinsky opined that you 19 were insolvent as far back as 1983. 20 A. I saw that. 21 Q. Do you agree with him? 22 A. No. I can tell you he stated how he came 23 to that conclusion, you know. He just took whatever 24 the -- you know, whatever -- he made the conclusion 25 that I never did any transactions in '83. So,

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1 therefore, he said since the customer showed that, 2 you know, balances in the account from transactions, 3 he figured, okay, that was a liability that Madoff 4 had. He totally eliminated the fact that I was 5 doing business, you know, back in 1983 and so on. 6 So, therefore, I had the assets to cover that. 7 So he said, well, he knew what the 8 liabilities were because it was a customer 9 statement. He had no way of knowing what the assets 10 that I had were because he didn't have any records 11 going back then. I mean, who would possibly make a 12 statement like that? I mean, the biggest mistake I 13 made was not going to trial. 14 Had I gone to trial rather than just 15 saying okay, I'm going to eliminate the government 16 spending millions of dollars and years in a trial 17 with me, I'm just going to admit that I was guilty 18 because I was from 1992 on, which was bad enough. 19 You know, they for some reason, the Trustee wanted 20 to determine that I was guilty from 1963. 21 All right. Had I gone to trial, I would 22 have called in any number of expert witnesses like 23 this Feingold or anything else and the judge would 24 have totally laughed the Trustee out of court. Why 25 he even bothered writing -- 90 percent of his report

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1 deals with after 1992. I already admitted that I 2 didn't do the transactions after '92. So why spend 3 all that time on that, you know? What he did prior 4 to that made absolutely no sense anyhow. 5 Q. Now, did Dubinsky acknowledge that you held 6 securities at Lehman, Bear Stearns, Morgan 7 Stanley -- 8 A. No. 9 Q. -- Fidelity and JPMC? 10 A. No, no. That's not true. He did state 11 that I had an account at Morgan Stanley, yeah. He 12 stated that. He didn't give any details on it but, 13 I mean, it was he had a copy of the Morgan Stanley 14 report in his information here. So, therefore, he 15 had to know that I had securities over there. He 16 did state that I had securities at those -- at other 17 firms, yeah. He did state that. 18 Q. But did he acknowledge that you had 19 purchased those securities -- 20 A. No. 21 Q. -- with 703 account money? 22 A. No. 23 Q. Now, Mr. Dubinsky also opined that your 24 firm was insolvent from 2002 on. Do you agree that 25 you were insolvent as of 2002?

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1 A. In 2002 I did not have -- if he's -- I 2 would say yes, I was insolvent because I did not 3 have enough assets to cover the liabilities that I 4 had with the customers in 2002. 5 Q. If you had -- if everyone had demanded 6 payment at one time? 7 A. Yes. You have to assume that if I show the 8 customers had a liability on that, whether they 9 asked me for it or not, I was insolvent. You have 10 to make the assumption that if you owe the money 11 out, whether you have the ability -- if you don't 12 have the ability to pay if called, you're insolvent. 13 Q. Okay. Now, as of 2002 if the four families 14 had paid you the money they owed you, would you 15 still have been insolvent? 16 A. In 2002? Yes, because the fund business 17 was -- I wouldn't have been able to cover all my 18 direct accounts, you know, other than the funds 19 because the customers only had a liability of $5 20 billion whereas the funds had $14 billion. 21 So, you know, I wouldn't have enough money 22 to cover, you know, $19 billion; but I certainly 23 wouldn't have had enough money to cover all my 24 individual clients but, quite frankly, it doesn't 25 make a difference. They're both the same.

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1 Q. Looking at paragraph 39 of Mr. Feingold's 2 report, he says an active trader would likely have 3 held many convertible arbitrage positions for 4 substantially less than the period until the next, 5 paren, usually, end paren, semi-annual coupon was 6 paid. Most likely, bonds were either converted or 7 sold into the open market. 8 Again, an investor who sells a corporate 9 bond receives accrued interest from the buyer 10 instead of collecting on the coupon date from the 11 issuer and the interest is built into the total cash 12 inflow. 13 A. Right. 14 Q. Do you agree with that? 15 A. Yes. 16 Q. Is that the -- is that the strategy that 17 you used? 18 A. Yeah. It's what anybody would use at 19 TRACE. It's not unique to Madoff. It's, you 20 know -- it's, you know, standard operating 21 procedure. 22 MS. CHAITMAN: Okay. All right. We have 23 to take a break because they have to change the 24 disc. 25 THE VIDEOGRAPHER: Going off the record.

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1 The time is 12:46 p.m. 2 (A recess was taken.) 3 THE VIDEOGRAPHER: Back on the record. 4 This begins disc number three. The time is 5 1:00 o'clock p.m. 6 Q. (By Ms. Chaitman) Mr. Madoff, I just have 7 one other area that I want to cover with you and 8 that is Mr. Dubinsky's conclusion that the 9 proprietary trading aspect of your business never 10 made money. 11 A. Yeah. I'm sort of at a loss for that 12 because when I read that in his report, his own 13 information was, and I don't -- do you have his 14 report? 15 Q. I do. 16 A. And as I say, I'm overly sensitive to 17 anybody criticizing the side of the firm that my 18 sons ran, which was the proprietary and market 19 making side. So where is the section -- 20 MS. CHAITMAN: I think it's at the very 21 end. 22 MR. SHEEHAN: I think there is an index. 23 THE WITNESS: Don't try to be -- don't try 24 to be accurate. I'm not used to that. 25 MR. SHEEHAN: All right.

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1 THE WITNESS: Oh, here it is. 2 MR. GOLDMAN: Bernie, tell us what page 3 you're on. I'm sorry. 4 MS. CHAITMAN: Just tell us, yeah. 5 THE WITNESS: Page 116. He correctly 6 states that the firm from 2000 to 2008 showed 7 revenue of a billion three hundred thousand dollars 8 in proprietary trading, but of that -- during that 9 period it was 714, $715 million worth of income that 10 came in from the 703, from the customer account. 11 So if you eliminate that, the proprietary 12 trading only had legitimate profits of $573 million, 13 you know, after you eliminated the money that came 14 from the customer accounts into the proprietary 15 trading. So it still showed the firm made 572 16 million, $573 million of profit. 17 Stating that, how does he determine that 18 proprietary trading was not profitable? I don't 19 understand it. It's like saying one and one equals 20 three. 21 Q. (By Ms. Chaitman) Do you agree that 716 -- 22 $714 million was transferred from the 703 account to 23 the proprietary trading? 24 A. I agree with that. That really, you know, 25 if you want to eliminate all the customer money that

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1 was -- that was funneled into the firm, you know, 2 was from customers, was not from proprietary 3 trading, I would say that would be correct; but that 4 in itself is not really correct because what he has 5 no way of knowing is he -- is that the big four 6 accounts that owed me all this money, for example, 7 with one account that had a six point some odd 8 billion dollar out, you know, debit balance, when 9 those accounts put me in a short -- what's called a 10 naked short position, which is what created my 11 problem why I had to start the fraud in '92, all 12 right, those short positions were mark to market, 13 got mark to market at the clearing house every day, 14 which typically happened. 15 So I was called for money to cover those, 16 that deficit all the time. That was money that I 17 was taking, so I did that by -- you know, part of it 18 by transferring the money from the customer 703 19 account to be able to meet those margin calls, which 20 was -- which I would have done normally had I been 21 showing all the figures correctly. 22 So, you know, realistically, what I did 23 was I penalized my proprietary traders' income, you 24 know, but my proprietary traders as far as they're 25 concerned, they made a million -- a billion two.

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1 And when I paid -- when I paid my -- the 2 percentage of their -- when I paid their bonuses 3 based upon their profits, I paid it on a billion 4 three because proprietary traders, I had no reason 5 to penalize my proprietary traders because of the 6 problem that I put myself in with those big four 7 clients. You understand what I'm saying? 8 Q. I just want to clarify something. Staying 9 on that page, the 714 -- 10 A. Million dollars. 11 Q. -- million that Dubinsky found went from 12 the 703 account, now, the proprietary trading didn't 13 have their own bank account; right? 14 A. No. 15 Q. It went into the BNY account? 16 A. Right. 17 Q. Okay. So you agree that 714 million from 18 the 703 account went into the BNY account? 19 A. Right. 20 Q. And as I understand your testimony, what 21 you're saying is that some portion of that money was 22 used by you to meet the margin calls -- 23 A. Right. 24 Q. -- on the portfolio that you assumed from 25 the four families?

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1 A. Correct. 2 Q. That was subject to the hold harmless? 3 A. Right. Which normally I would have done 4 had I shown that that was going on, but I didn't. 5 So Dubinsky is not -- Dubinsky is correct. That 6 money did come from the 703 account, but what he 7 doesn't have anything to do with, which he doesn't 8 know about, was the whole problem that I had 9 occurred -- you know, that created that problem. 10 Q. But if the money went from the 703 account 11 to the BNY account, then wasn't it commingled with 12 all the money in the BNY account? 13 A. Yeah. 14 Q. So what is the basis of saying that any of 15 it went to proprietary trading? 16 A. Because the problem, the margin calls that 17 I got was because of customer account. In other 18 words -- 19 Q. But was that charged to the proprietary 20 trading business? 21 A. No. It was. It wasn't on the focus report 22 because it shouldn't have been. In other words, had 23 I shown all of this stuff properly, that's what the 24 SEC would have said yeah, of course, you can take 25 them. That money in the 703 account is actually

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1 part of that money is due me, was due Madoff. Not 2 all of it, but part of it was. In other words, the 3 monies that the four clients owed me, you know, from 4 the hold harmless agreements, that money, part of 5 that, the 703 account was their monies. 6 So I was not wrong. Under normal 7 circumstances I would have taken that money. The 8 reason why I paid my traders, my proprietary traders 9 on the billion three, because that's what they made. 10 The proprietary traders made a billion three. They 11 didn't only make 573 million. They made a billion 12 three. 13 And if my -- if I didn't pay my traders 14 properly, they would have said -- they get 15 25 percent of their trade. They would have said to 16 me, listen, because you made this ridiculous 17 agreement with your four big clients and they cost 18 you all that money, don't penalize us. That's your 19 problem, which would have been true. 20 MS. CHAITMAN: Okay. I have no further 21 questions. Thank you, Mr. Madoff. 22 MR. SHEEHAN: You're done? 23 MS. CHAITMAN: Yeah. I'm done. You want 24 to change seats or -- 25 MR. SHEEHAN: No. I'm fine. I do need to

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1 get an outline out, but it will take just a second. 2 EXAMINATION 3 BY MR. SHEEHAN: 4 Q. Mr. Madoff, before we get started, I just 5 want to ask you a question that wasn't quite asked 6 the way I wanted it to be. That is, are you on any 7 medications that would impair your ability to 8 testify here today? 9 A. No, no. 10 Q. Okay. That's not particularized towards 11 you. It's asked at every deposition. 12 A. Yeah. No. I understand. 13 Q. Because people do take medications that 14 sometimes doesn't render -- 15 A. No. I'm on lots of medication, but nothing 16 that would impair my -- 17 Q. Okay. All right. Just so you and I agree 18 on that. Okay. Let me sort of go back over some of 19 the testimony -- 20 A. Right. 21 Q. -- this afternoon before we get into some 22 other stuff I want to talk about. On November 30, 23 2008 your customer statements showed you to be owed 24 your customers $64.6 billion, thereabouts; right? 25 A. Right.

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1 Q. And when the Trustee looked at all of your 2 bank accounts and stock they had available at that 3 point, you had a little over 300 million left? 4 A. Right. 5 Q. So in the course of -- you're kind of 6 short, yeah, like 64.3 billion dollars; right? 7 A. Right. 8 Q. Are you saying that that disappeared over 9 -- that you actually could have covered everybody 10 prior to 2002? 11 A. No, no. 12 Q. Okay. So what you did do, though, is that 13 in 2008 according to our calculations you actually 14 paid redemptions of close to $12 billion? 15 A. Uh-huh. 16 Q. About 11.7, I think, is what it was? 17 A. Right. 18 Q. Does that sound accurate to you? 19 A. I guess so, yeah. 20 Q. So there was a lot of money going out 21 during 2008; right? 22 A. Right. 23 Q. But it wasn't anywhere near $64 billion -- 24 A. No. 25 Q. -- that you said you were long?

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1 A. No. 2 Q. And is it your testimony that that $64 3 billion shortfall occurred from 1992 through 2008? 4 A. Yeah. 5 Q. All right. Do you know what at the end of 6 1992 you showed on your books and records assuming 7 all trading is as you say it was, what was on your 8 books and records then as what you were -- you 9 yourself were long? 10 A. Well, first of all, you have to understand 11 that the -- there was -- the losses that I incurred 12 from the short positions of the big four accounts, 13 all right, that occurred from the 1987 through 1992 14 when the market had recovered from the crash in 15 1987. That was -- that was substantial. That could 16 have been, you know, as I said, I don't know how 17 many billions of dollars it was at the time; but you 18 have to take that into consideration, you know. 19 Q. Right. 20 A. So, you know, the $64 billion, don't 21 forget, is -- the reason that number got so large 22 was that I was generating falsely like 12 percent 23 return on all the -- on the principal money that was 24 invested. Let's say the total of almost 25 $19 billion, you know, at 12 percent return from

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1 nineteen ninety -- from 1992 through 2008. That's 2 where the $64 billion came in. 3 Q. Okay. 4 A. It was the profits that were being 5 generated, the false profits that were being 6 generated. 7 Q. I understand that, but let's go back to the 8 beginning. 9 A. Uh-huh. 10 Q. I think sometimes chronologically it helps 11 when we talk about this stuff. 12 A. Right. 13 Q. So you started the business in 1960; right? 14 A. '60, right. 15 Q. That's when you first registered. And did 16 you start out as a market maker -- 17 A. Yes. 18 Q. -- or as a retail business? 19 A. Well, I started, I did a retail business 20 for the first three years until 1963. Then I became 21 a market maker. After the market I had the 1962 new 22 issue break, which was during the Cuban Missile 23 Crisis and so on. When I had my first bad 24 experience where I lost about $30,000 for some 25 family accounts --

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1 Q. Right. 2 A. -- then I had to borrow $30,000 worth of 3 bonds from my father-in-law to be able to make my 4 clients whole because I felt responsible for the 5 losses that they incurred. That's why in like 1963 6 I decided I didn't really want to be in the retail 7 business. I wanted to be a market maker. So I 8 start making markets from 1963 on. 9 Q. When did -- did there come a time when you 10 went back into retail business? 11 A. No. 12 Q. When did you start what we call the 13 investment advisory business? 14 A. Probably '70s. 15 Q. And you would not characterize that as a 16 customer oriented business? 17 A. Not really. I knew, yes, it would be. 18 Q. Right. 19 A. It would be, but it was never -- I never 20 had a business where a customer would call me up and 21 say I want to buy stock or what should I buy. In 22 other words, when I started my business it was 23 always sort of like a discretionary-type business 24 where people would give me -- you know, basically it 25 was family and friends who would give me a certain

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1 amount of money. And I would invest, started doing 2 convertible bond arbitrage. I never did retail 3 business, like if you called me up and said I want 4 to buy IBM. 5 Q. Right. 6 A. It was always a hedge type of trading that 7 I started doing. 8 Q. So in the early '70s you started into the 9 IA business? Let's just call it that. 10 A. From starting with the big four accounts 11 plus some family and friends. 12 Q. Okay. So the big four accounts started 13 with you in the early '70s? 14 A. Yes. 15 Q. Now, the strategy -- 16 A. Some of them. 17 Q. Okay. We'll get into that later if it's 18 important. 19 A. Right. 20 Q. But what were the strategies you initially 21 engaged in? You mentioned convertible arbitrage. 22 Were you doing that right away? 23 A. Yes. That was right. 24 Q. Okay. Were you doing other investment 25 strategies at the same time?

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1 A. No. 2 Q. Okay. I'm going to ask you some 3 definitions just for -- 4 A. Uh-huh. 5 Q. -- you know, the record. What's a discount 6 arb? 7 A. A discount arb is when -- well, a discount 8 convertible it would be. 9 Q. Yeah. A discount convertible. 10 A. Yeah. A discount convertible is a 11 convertible is selling at a discount to what it's 12 worth, the stock. In other words, if a bond is 13 convertible into stock let's say at $10 a share and 14 you're able to buy there would be a hundred -- the 15 bond would be trading at a hundred and the stock 16 would be trading at let's say ten. All right. 17 That's what they call on the money. 18 Q. Right. 19 A. If the convertible bond, if you could buy 20 the convertible bond below par, below 100, let's say 21 you bought it at 98 and sold the stock at 10, you're 22 doing a discount arbitrage because you can make -- 23 you're making two points on it. So you would buy 24 the bond, short the stock at 10 and you lock in a 25 bona fide profit of two points.

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1 Q. In terms of convertible securities, there 2 are different kinds of those; are there not? 3 A. Well, for the most part they're all the 4 same. 5 Q. Well, they may have the same features, but 6 some are -- 7 A. Some are trade in premiums. 8 Q. Yeah, but what I meant by that is this. 9 Some are bonds. Some are warrants. Some are 10 rights. Some are preferred securities? 11 A. Yeah. Well, they're not bonds, though. 12 Arbitrage securities could be convertible bonds, 13 convertible preferreds, units, warrants, rights. 14 Q. All right. 15 A. That's all hedge type of trading. 16 Q. Right. And did you in your convertible 17 arbitrage strategy use all of those types? 18 A. All of those, yes. 19 Q. You used all of those? 20 A. Right. 21 Q. And do you know whether bonds were a 22 minority or a majority of the trades you engaged in? 23 A. They were -- well, depending upon when it 24 was, particularly bonds would be the majority of it. 25 Q. Okay. What does that mean, when it was?

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1 A. I mean, when I -- when I was doing it, 2 there was always more volume in convertible bonds 3 than there would be let's say in warrants, units or 4 rights; but depending upon when it was, depending 5 on, you know, for example, when AT&T split up and -- 6 and, you know, and became all the baby Bells that 7 they traded, we made a market. 8 We were the primary market maker. As a 9 matter of fact, I have a copy in my records here of 10 an ad that we ran in the Wall Street Journal that 11 said that we made markets, you know, to banks, 12 brokers and institutions in all of the convertible 13 securities. We did a very big business -- 14 Q. Right. 15 A. -- trading all the various AT&T break-up 16 issues. 17 Q. In the normal course in the '70s, let's 18 give it a time frame, are discount arbitrage 19 opportunities plentiful? 20 A. Yes. There were convertible bonds traded 21 -- first of all, you have to understand that most 22 convertible arbitrage trading did not go through the 23 conversion process, which he even -- Dubinsky even 24 states that in his report. In other words -- 25 Q. You mean you didn't go through the -- I'm

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1 sorry to interrupt you, but just to clarify, you 2 didn't go through the conversion process or the 3 industry? 4 A. The industry. In other words, typically 5 most convertible bonds should always trade at a 6 premium. In other words, when a bond trades at a 7 discount, it's sort of a freak. 8 Q. That was my question. Thank you. 9 A. Yeah, yes. 10 Q. Okay. 11 A. So that, you know, obviously, if you can 12 buy a convertible bond at a discount, you would 13 typically buy it and convert it because you have a 14 guaranteed profit and you lock it up. All right. 15 But most convertible bonds create premiums because 16 nobody in their right mind should -- you know, 17 should ever, you know, buy a -- should buy common 18 stock if you could buy a convertible bond at a 19 discount. 20 Q. Right. 21 A. All right. So typically, in other words, 22 look, to give you an example, when I hired David 23 Kugel when he -- David Kugel used to work for a firm 24 of mine, for a friend of mine whose name was Mike 25 Lieberbaum, all right, who had a firm called

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1 Lieberbaum & Company. When I first went into 2 business we were friends. We went to high school 3 together, college together, and his father had a 4 business, Lieberbaum & Company. And David Kugel 5 happened to work for him as a convertible bond 6 trader, you know. 7 So what happened was, but that firm went 8 out of business. They decided to liquidate the firm 9 and they all retired, you know. David Kugel was 10 working for that firm and looking for a job. Now, I 11 was trading convertible securities at that time, so 12 Lieberbaum said to me can you do me a favor and hire 13 David Kugel? 14 Q. Right. 15 A. And I said I don't really want to hire 16 David Kugel. I'm not looking for another trader. 17 And, quite frankly, David Kugel was sort of a pain 18 in the ass. You know, nice guy, but he was very 19 difficult to deal with because you couldn't have a 20 conversation with him that made any sort of sense; 21 but -- and we used to kid about that, you know. 22 This friend said look -- he was my good 23 friend, went to school. He said look, I'm trying to 24 find this guy a job. You know, I feel bad we're 25 closing the firm. Why don't you hire him? So I

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1 said I don't really want to hire him, Michael. So 2 he said -- you know, so I said look, he had a Friden 3 -- you probably are -- how old are you? 4 Q. Seventy-three. 5 A. All right. So you remember what Friden 6 calculators were? 7 Q. Sure. 8 A. The old with the hand crank? This is 9 before computers. Okay. Mike Lieberbaum's firm, he 10 had a Friden calculator, which was expensive. And I 11 was, you know, relatively young in the business. So 12 I said I want -- if you're liquidating the firm, I'd 13 like your Friden calculator because we used to use 14 it to figure out all the convertibles, you know, you 15 know. 16 So he said I'll tell you what. Take David 17 Kugel and I'll give you the Friden calculator. So 18 we always used to tease David Kugel and say the only 19 reason that we hired you is for the Friden 20 calculator. He used to be very sensitive to that, 21 but that was really a true story. 22 Now, I came up with a concept of -- I said 23 to David, I said this is your job. I said I want 24 you to track every convertible security that exists, 25 okay, and I want you to track and see what the

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1 historical prices of the convertibles. Most 2 convertibles, we trade at premiums. So we used to 3 have a -- and we used to have to do all this by 4 hand, you know, before computers with this Friden 5 calculator. We would track every convertible bond 6 and see when it was trading at a discount or when it 7 was trading at a premium. 8 So historically if you knew that a 9 particular convertible security traded let's say 10 typically at a three point premium but now all of a 11 sudden it went to a ten point premium, all right, 12 you would know that that premium is too high. It 13 should go back to historically to a three point 14 premium. 15 So we would go ahead and we would set up 16 the trade. We'd buy the convertible, short the 17 stock, all right, and then wait, hold them open, 18 which immediately had a loss. So you're setting up 19 a trade where you had a loss, but historically the 20 bond would close up and go back to a three point 21 premium. 22 You would then unwind the transaction, all 23 right, and you'd make a three point profit. It's 24 called Chinese arbitrage. Don't ask me why it was 25 called that. It was just ass backwards. So for

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1 some reason that was what the industry -- so most 2 convertible trading went on at premiums, you know, 3 where you set it up. You had a loss, but you knew 4 what your loss was. 5 It was no more than three points. And 6 David Kugel used to have a huge spreadsheet 7 literally like this long that had tracked all the 8 convertibles. And we would just -- and that's what 9 we would do. So we would do business with our 10 customers, you know, doing this kind of trading. 11 I was doing it for the big four clients 12 and, quite frankly, it was like bending down and 13 picking up money. All right. Now, most people on 14 Wall Street didn't want to trade convertibles like 15 that because your profit was limited, you know. You 16 know, your loss was limited, but your profit was 17 limited. 18 Q. How scalable was that kind of trading? 19 A. It was -- well, it was -- everything was 20 relative. You know, when I first started in the 21 business my -- you know, what I considered to be a 22 great profit was different than let's say Goldman 23 Sachs did. All right. So in that -- when I went 24 into business all the convertible securities were 25 handled by a handful of European arbitrageurs.

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1 The whole business was handled by Goldman 2 Sachs, Rouss & Company. There were maybe ten 3 foreign convertible firms. The joke in the industry 4 was that when you called up and asked a convertible 5 bond market maker what the price was, he would say 6 what do you want to do? You know, that was what -- 7 they all had this heavy Jewish accent, but these 8 guys were all money arbitrageurs in Europe. 9 Q. Right. 10 A. You know, and when they came to this 11 industry, they started trading the convertible 12 securities. All right. So after I got my brains 13 beat in, which to me, $30,000 loss in 1963 was a 14 lot, I said listen, I can't possibly -- you know, 15 can't stay in this business like this because my 16 father-in-law is not going to keep on lending me 17 money to bail myself out. 18 So I said I can't do retail business. As a 19 matter of fact, the SEC said to me, Bernie, when 20 they examined my firm, the first examination and 21 they saw that I paid back the customers $30,000 22 because they lost money, they said, you know, you 23 really can't keep doing this because how many times 24 are you going to do this? He said if you're going 25 to be responsible for your clients, you know, that's

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1 not a business you want. So I said you know what? 2 I looked around for what I could do that had limited 3 risk. And convertible securities to me, I decided 4 that that was a business I wanted to be in. 5 So but the problem was it was controlled, 6 that business, by Goldman Sachs, by all these 7 handful of firms, by Bear Stearns and so on. So at 8 that time I went and I had -- I went to see Gus 9 Levy, who was the chairman of Goldman Sachs, you 10 know, and I went to Bear Stearns, Cy Lewis, who was 11 the chairman of that, and I said to them, you know, 12 I did things that probably people today would think 13 were stupid. 14 I had them -- I went up there and I said -- 15 made an appointment with them and I said listen, I 16 would like to trade convertible securities. And 17 they said Bernie, you know, this is not a business 18 for you. This is our business. You can't go into 19 this business. And I told them the story and they 20 -- I know it's hard for you to appreciate this now, 21 but I was appealing to them in those days. 22 And I said look, give me a break. Let me 23 make something. I told them my tale of woe and they 24 said okay. Look, you know what? If you want to 25 trade, if you want to trade convertible bonds, he

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1 says I'll tell you what we'll do. We'll give you 2 the odd lot pieces. We don't want to trade -- we 3 don't want to buy ten convertible bonds and eight 4 convertible bonds. We only want to buy 100 bonds 5 and so on. So if you want the small ones, if you're 6 willing to do the small pieces, you trade them. 7 We'll send the customers to you. 8 And I said that's fine with me because 9 whatever I made was good business for me. So I 10 started doing that and I developed this relationship 11 with these European arbitrageurs and they started 12 sending me the odd lot business. And then, of 13 course, kept on doing -- you know, I grew the 14 business and that's how I got started in the 15 business. 16 Q. I'll give you a break in a minute here. 17 When you give an answer like that, and I'm not going 18 to interrupt you because -- but it takes the court 19 reporter a while to recover from that. 20 A. Oh, I didn't realize you were still doing 21 it. 22 Q. She's constantly -- 23 A. I didn't realize. I didn't realize this 24 was on the record. 25 Q. Yeah. This is on the record.

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1 A. I thought it was just curiosity. I'm 2 sorry. 3 Q. No, no, no. Everything is on the record. 4 Okay. Let's go back, though, just to the -- so 5 we're back in 1970. You told us how this all got 6 started, and the majority of your business at that 7 point was premium arbitrage? 8 A. Both. Whenever I -- 9 Q. Both. You were doing discounts, but you 10 called discounts freaks just a moment ago; right? 11 A. Right. 12 Q. So when you spotted a discount opportunity 13 by watching it as you did, did you not immediately, 14 simultaneously, isn't that, you know, buy the stock 15 or short the stock, I should say? 16 A. Well, you always sort of did what's called 17 legging. In other words, when you -- you would buy 18 even -- you would always buy the -- if you thought 19 the bond was -- the mark was going to go up and you 20 thought the bond was going to appreciate, the stock 21 was going to appreciate because you know how to do 22 it, you would buy the bond first and then you'd sell 23 the stock later. You'd sell the stock on the way 24 up. You know, depending upon which way you thought 25 the market was going to go, that's how you determine

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1 which piece to buy first. 2 Q. But -- 3 A. You couldn't normally -- 4 Q. I'm sorry. 5 A. You couldn't normally go in and buy the 6 bond and short the stock and lock in the profit 7 immediately. You had to take some degree of risk 8 while you're setting it up. 9 Q. Isn't the classic definition of a discount 10 arbitrage simultaneous buying and selling? 11 A. No. 12 Q. No? 13 A. I mean, no. That's not the way it 14 realistically works. There's always -- I mean, if 15 you could do it that way, that would be fine, but 16 you're totally limiting your -- 17 Q. Profit. 18 A. You're not only limiting your profit. 19 You're limiting your ability to do it because you -- 20 you have to be able to judge the market as well. 21 It's not just a simple of just going in and having a 22 guaranteed locked-in profit because the arbitrageurs 23 would close that up immediately. In other words, 24 you're competing against these guys. Obviously, if 25 you can do a trade and have a guaranteed immediate

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1 profit, that's the most -- that's the most ideal 2 situation; but so you can do that, but even if you 3 could do that, if you really want to be a good 4 trader, you would buy it at a discount, you know. 5 You start -- you buy the bond when it's a 6 discount, but if historically it would always go to 7 a premium, you wait, what's called lifting a leg, in 8 other words, so you have a risk involved and then 9 you'll unwind the transaction. 10 MR. SHEEHAN: I want to get to that later. 11 I agree with that. 12 MS. CHAITMAN: I'm sorry to hear that. 13 MR. SHEEHAN: No. I agree with what he 14 just said. 15 Q. (By Mr. Sheehan) If you hang onto it, that 16 can happen, but isn't -- well, I won't say isn't. 17 What's a fractional share? 18 A. A fractional share is less than 100 shares. 19 Q. When does that occur in an arbitrage 20 situation? 21 A. Not very often. 22 Q. When you convert the bond, preferred, 23 whatever you're converting, does it not always have 24 a fractional share? 25 A. Sometimes yes and sometimes no.

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1 Q. Do you credit a fractional share or what do 2 you do with it? 3 A. Yeah. I mean, if, in fact -- if, in fact, 4 a customer -- depends upon if you're talking about 5 doing it for a customer or doing it for the firm? 6 Q. I'm talking about a customer here. Okay. 7 You're now selling this arbitrage strategy to a 8 customer. You go in. You buy the arb. I'm calling 9 it an arb. 10 A. Right. 11 Q. And then you short the stock and you do it 12 simultaneously. And when you do that, you get a 13 fractional share? 14 A. Yeah. Typically if customers do a 15 fractional share, you would give them the fractional 16 share. 17 Q. Do you give them the stock or cash? 18 A. You could do either, both. 19 Q. There are actually fractional shares that 20 trade on the exchange? 21 A. You make a fractional share. Typically you 22 would give them a cash credit for the fractional 23 share. 24 Q. Typical, right? 25 A. Yeah.

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1 Q. But more likely cash a fractional share? 2 A. Yeah. 3 Q. Okay. When does that fractional share 4 occur? 5 A. I don't know when. I'm not sure. 6 Q. Let me rephrase it. Does the fractional 7 share not only occur when you sell the convertible 8 security? 9 MS. CHAITMAN: Objection to form. 10 THE WITNESS: Does the fractional share 11 ever occur? 12 Q. (By Mr. Sheehan) No. I said does the 13 fractional share only occur after you sell the 14 convertible security? 15 A. I'm not sure. I don't know the answer to 16 that. 17 Q. Well, if you don't sell the convertible 18 security, there can't be a fractional share; can 19 there? 20 A. If you don't sell the security? 21 Q. Yeah. So I'm not selling the convertible 22 security. Can there be a fractional share? 23 A. Probably not. 24 Q. Okay. That was my point. Let me see. So 25 let's go back to 1970. Again, you know, you were

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1 doing -- let me ask you, where were you doing the -- 2 and what I mean by this is market making or IA. 3 Where were you initially doing the convertible 4 arbitrage strategy. 5 A. Where? 6 Q. Yeah. Either market making -- where did it 7 start, market making or IA? 8 MS. CHAITMAN: Objection to form. 9 THE WITNESS: Objection to form? 10 MR. SHEEHAN: Yeah. She can do that, too. 11 She can do that. 12 THE WITNESS: Oh. It was one firm. You 13 know, it was all done -- you know, at that time I 14 was the only one doing it. It was I was the only 15 trader when I first started, so it was me. It 16 wasn't -- I didn't have -- David Kugel came in. You 17 know, I don't remember when he came in, in '70 18 something or other, but the whole firm was me. I 19 was doing it. 20 Q. (By Mr. Sheehan) I know it's one firm, but 21 my point is you had the market making, which is you 22 as a wholesale market maker; right? 23 A. Right. 24 Q. Over here you've got your IA business, 25 which is your discretionary trading?

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1 A. It was -- but it was all done by me as one 2 firm. It was always one firm. It may have been -- 3 you know, it was only later on when we had like 4 different departments because the rules required you 5 to have sort of different departments with different 6 compliance procedures and so on and different 7 supervisors, but when I started it was me. 8 Q. Okay. Just trying to figure out how this 9 worked. Okay. So you used the market making 10 inventory. I think this is your testimony. Tell me 11 if I'm wrong. You used a market making inventory 12 and used that inventory of stock in connection with 13 the convertible arbitrage strategy in the IA 14 business? 15 A. Correct. 16 Q. Okay. So the initial purchase would take 17 place in the IA business -- I mean, the market 18 making business? 19 A. Yeah, but if I was doing -- it was sort of 20 one and the same. In other words, I was making a 21 market around the customer security that I had. 22 Q. Right. 23 A. It depends upon sometimes if I -- sometimes 24 I would just do the business for the market making 25 for the profit and sometimes I would get a customer

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1 order and I would do it for the customer. 2 Q. Right. 3 A. It depends upon -- you know, it was sort of 4 all mixed in together, but it depends upon what was 5 available. 6 Q. Well, when you're buying the stock in the 7 market making business and, as you say, you're a 8 market maker. You have to buy the stock. I 9 understand how market making works. 10 A. Well, the firm had a limited amount of 11 capital. 12 Q. Right. 13 A. So I could only -- you know, once I used up 14 the capital of the firm, all right, obviously, let's 15 say my capital could have been $20,000 in the firm's 16 capital. So I could only -- I could only -- once I 17 finished buying -- I used that $20,000 up, you know, 18 if Carl -- let's say if one of my clients gave me 19 $100,000 to trade with, obviously, I would use that 20 hundred thousand dollars for the client to do 21 business. 22 I might do also 20,000 for the firm's 23 capital, but it was -- you know, I'm -- obviously, I 24 was limited to what I can do for the firm. 25 Q. So Shapiro, just use him. I know we're not

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1 supposed to name names -- 2 A. That's all right. 3 Q. -- but that doesn't apply to me. It only 4 applies to you. 5 MS. CHAITMAN: Thank you. 6 Q. (By Mr. Sheehan) So anyway -- because I'm 7 not suing the Picowers, so there you go. 8 A. Doesn't matter. 9 Q. Can yell at me if she wants. All right. I 10 don't know how we're supposed to comply with this. 11 So Carl Shapiro comes to you, gives you a hundred 12 grand, invest it at your discretion -- 13 A. Right. 14 Q. -- right? How do you deal with that? So 15 how would you take that hundred grand and put it 16 into a convertible arbitrage strategy? 17 MS. CHAITMAN: Objection to form. 18 THE WITNESS: I would buy whatever was 19 available, you know, for 50,000 or 100,000, whatever 20 was available. 21 Q. (By Mr. Sheehan) Of what? 22 A. In whatever security that I was trading 23 when that was available. 24 Q. Available in what sense? As a preferred or 25 as a discounted arbitrage?

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1 A. It could be any one of them. There was 2 no -- it was up to me. It was usually -- sometimes 3 it would be at a discount since it would be at a 4 premium, sometimes doing a unit, a warrant or a 5 right. It could be anything. 6 Q. Would you take that hundred grand and buy 7 that security we just talked about from your market 8 making account? 9 A. Well, it depends. You know, if it was -- 10 if it was the market making -- if it was trading 11 with the firm's capital, you know, it would be for 12 the market making account. 13 Q. Right. 14 A. If I was working a customer order, you 15 know, or with the customer's money, it would go into 16 his account. 17 Q. Okay. Were you clearing those trades prior 18 to DTCC yourself? 19 A. Clearing them myself, yeah. 20 Q. And how would you do that? 21 A. Those days the bonds would come in over the 22 window. It was a physical delivery. 23 Q. Right. 24 A. You would pay for it. And then if it was 25 convertible, typically we would use -- we would have

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1 the bank convert the security. We would never 2 convert the security ourselves physically because 3 the convertible -- the clearing agent, the 4 convertible agent may have been in Chicago. So we 5 weren't going to get our trade until the Chicago. 6 Q. Right. 7 A. So we would use one of the banks. We would 8 take the convertible security, send it over to the 9 bank, give them instructions to convert. 10 Q. All right. At the beginning then you have 11 a fairly active box? 12 A. Everything is relative. What do you 13 consider active? 14 Q. Well, with no DTCC and you're 15 self-clearing -- 16 A. No. 17 Q. -- so you had physical possession of all 18 your securities? 19 A. That's correct, right. 20 Q. Right. So and you used the banks just to 21 -- you know, to exchange as you say when you were 22 buying and selling? 23 A. Right. 24 Q. All right. You didn't use banks as 25 depositories?

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1 A. No. Well, if you were going to convert the 2 security and use the bank to do that, you would send 3 the security over to the bank and let them -- 4 Q. Convert? 5 A. They would hold it. They would actually 6 convert it. What the bank did depends upon what the 7 bank's position was. The bank may have -- the banks 8 may have been handling other customer accounts also, 9 so they could actually borrow the securities, 10 deliver you the securities. 11 There's all sorts of various, you know, 12 mechanisms of how they would handle it; but in the 13 pure sense the bank would then take the security and 14 deliver it, you know, to whatever method they use to 15 Chicago or whatever it is. 16 Q. Yeah. 17 A. You know, they would what they call draft a 18 collection. And then they would do the conversion, 19 get the stock and they would deliver you the stock 20 and then you would deliver the stock out. 21 Q. To cover your short? 22 A. Well, it wouldn't be covering -- yeah. It 23 would be your fail to deliver. 24 Q. Right. 25 A. Right.

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1 Q. Okay. So how many customers did you -- in 2 the IA, I'm calling it IA, in the IA business did 3 you have to start? 4 A. Probably, you know, let's say 25. 5 Q. Okay. By 1980 how big was the IA and how 6 many customers did you have then? 7 A. Well, I had, you know, the four big clients 8 for sure. I had European clients in France. I was 9 dealing business with the Rothchilds with, you know, 10 a number of French big clients. And then I had my 11 father-in-law had sent up this account, Avellino & 12 Alpern, which was a limited partnership where they 13 had their clients. 14 And they could have had typically probably 15 50 or 60 of their clients in his limited partnership 16 that I traded for that limited partnership. 17 Q. Avellino & Alpern. Alpern is your 18 father-in-law? 19 A. Yeah. 20 Q. Whose first name is Sam? 21 A. Saul. 22 Q. Saul, okay. And he had an account? 23 A. Yes. 24 Q. All right. Avellino, did he have an 25 account?

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1 A. Well, they had -- he didn't have an 2 individual account himself. I don't recall that he 3 did. They had it -- they just had this limited 4 partnership account and he was part of it. 5 Q. What was the nature of the limited 6 partnership, if you know? 7 A. They had -- they had this -- they had a 8 bunch of their accounts. They were all sort of, you 9 know, somewhat wealthy individuals that they did the 10 accounting work for. So they -- they formed a 11 limited partnership. It was sort of like an 12 investment club where they -- let's say they had 13 $100 million. It's a round number. 14 Q. Right. 15 A. That might have had, you know, fifty 16 clients. They couldn't have more than 100 clients 17 because the regulations were that in order for you 18 to not be an investment company, you had to have 19 less than 100 clients, which they clearly had -- you 20 know, that was never a problem for them. So let's 21 say they had 50 or 60 different clients in there. I 22 would -- I opened up an account. 23 I had an Alpern and Avellino or Avellino 24 and Alpern, whatever it was. That was the account. 25 I would then treat that as one account, as a limited

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1 partnership account. I would buy, you know, various 2 convertible bonds for them. I would then, you know, 3 send them the confirmation on the transaction. They 4 would get the -- they would then split that up. 5 If they had 25 or 50 accounts, they would 6 based upon the amount of money that each client had, 7 that would be what percentage each client had of 8 that -- of the limited partnership. And they would 9 -- they would actually report the individual 10 transactions. And each client would file his own on 11 his tax return, which Avellino and Alpern would 12 handle for them, being their accountant. 13 Q. Right. 14 A. They would show short-term capital gains, 15 you know, on each -- on the transaction. 16 Q. So from the beginning were you aware that 17 there were all these people behind Avellino and -- 18 A. Oh, yeah, yeah, yeah. I knew them all. 19 Q. Okay. 20 A. That was before Mike Bienes got involved 21 and my father-in-law retired. And then they went to 22 that. That's how their problem started. They 23 made -- he made a decision on his own without even 24 telling me, you know, that they were issuing notes. 25 They decided they would just pay them interest and

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1 they would, you know, take all the actual 2 transactions themselves. 3 Q. Let's talk about those notes. Would those 4 notes guarantee interest to your knowledge? 5 A. The first time I found out about that was 6 in 1992 when the SEC, you know, told me that they 7 had all of these, that they had a number of -- as 8 far as I knew, they had like I don't remember 9 whether it was three accounts or four accounts. All 10 different Avellino and Alpern accounts, but they had 11 like maybe three limited partnership accounts, but I 12 wasn't aware of the fact that they were actually 13 issuing notes -- 14 Q. Right. 15 A. -- you know, to them because I had already 16 told them that you can only have 100 clients in a 17 limited partnership. Otherwise, you would have to 18 register as a -- as an investment company. They 19 claim that they thought that they were okay because 20 they were -- although they think they had like maybe 21 300 accounts as it turned out what the SEC said, but 22 they were a lot of family accounts. 23 So they said they were counting each family 24 as one account, even though there could be a 25 son-in-law, a son and so on and so forth. The SEC

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1 basically's position was that they said look, as a 2 matter of fact, when they called me up to tell me, 3 they said -- you know, they asked me, you know, I 4 got a phone call from the SEC to say, you know, you 5 have this account, you know, these accounts, these 6 accountants, you know, and they have too much money. 7 They have too much money, too many clients on there. 8 It's an investment company. 9 And I said -- and I told them how I was 10 handling it and they said yeah, okay, that's fine, 11 but these guys are paying notes. You know, it's 12 different. So I said, well -- you know, I was upset 13 with them. I said what the hell? They never told 14 me. So when I called them up I said listen, I'm 15 closing these accounts. I'm sending back the money. 16 The SEC said to me at the time, you know, 17 you don't have to do that. He said, you know, you 18 can just tell them to register, but I said no. I 19 don't want to do that. So, you know, I sent them 20 back all their money, closed their accounts. As a 21 matter of fact, the SEC when they -- as soon as this 22 happened the SEC came up for the whole examination. 23 They sent up the group chief from New York. 24 They looked at the accounts. They saw that all the 25 money was there. They saw that I was actually

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1 buying the securities because they were able to -- 2 they looked at the -- at my stock record. They 3 looked at DTC. They saw that I had the securities 4 and so on. And, you know, I said I'm closing the 5 accounts, and I did. And I returned all the money. 6 And then I took in the accounts. 7 My father-in-law called me up and he said 8 look, you know, these people are all crazy. They're 9 sending -- they're hysterical. You know, they're 10 relying upon the money to live on, these clients. 11 And they said they didn't do anything wrong. This 12 was all Mike Bienes's stupid -- so I said okay, 13 fine. I'll open up individual accounts, you know, 14 but I only want like $500,000. I don't want an 15 account for 50,000 or 75,000. 16 So I said the account -- each account 17 could be 500,000 was the minimum. I said if they 18 want to take a five -- if they want to form a family 19 partnership, that's fine, but it can only be their 20 family. I don't want anybody -- I don't want to 21 have more limited partnerships. So they said fine 22 and that was what we did. And they opened up a 23 whole bunch of accounts, you know, like a few 24 hundred accounts. 25 Q. The three partnerships of Avellino and

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1 Bienes before the SEC, were you guaranteeing a 2 return to them? 3 A. No, no, no. 4 Q. Were you trying to predetermine the amount 5 that you would give them? 6 A. No. They had -- I told them what the 7 expected return was. In other words, look, when you 8 did arbitrage, anybody did arbitrage, there was a -- 9 you had a what you would consider to be what would 10 be the reasonable rate of return for doing 11 arbitrage. It's no different than if you do a 12 covered option right, which was like the split 13 strike conversion was. 14 Q. Right. 15 A. You know, you're not going to do it for -- 16 you know, typically you would do it for double the 17 long bond rate. So if long bonds and Treasury bonds 18 were playing let's say five percent, you would 19 expect to make like 10 percent return; but, you 20 know, it depends. 21 In 1980, for example, interest rates were 22 12 percent. So, you know, unless you could do it 23 for 25, 30 percent return, you wouldn't do the 24 trade. 25 Q. Weren't you asking David Kugel to actually

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1 look at convertible arb, arbitrage opportunities, to 2 guarantee an outcome? 3 A. Not -- there wasn't such a thing as a 4 guarantee of return. It's what you expected to 5 make, called an expect return. 6 Q. Didn't David Kugel actually look 7 historically backwards to take trades that had 8 already happened -- 9 A. No, no. 10 Q. -- and manufacture those into guaranteed 11 results? 12 A. No. 13 Q. Why would he have testified to that? 14 A. I have no idea. I told you that. 15 Q. Why whatever the Trustee said or did 16 influence David Kugel's testimony? 17 A. I don't know what happened between the 18 Trustee and David Kugel. You know, as I said, it 19 was -- you know, I was -- my clients all knew, you 20 know, there was no secret as to what our strategy 21 was or what it was. It was a very common strategy. 22 It wasn't rocket scientists. 23 So people knew that if you're going to do 24 hedge type of trading, whether it be any one of the 25 different kinds of arbitrage or hedge trading, what

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1 your return would be. You wouldn't do it if you 2 didn't make at least double the bond rate. It 3 wouldn't pay to do it. So clearly David Kugel knew. 4 All my traders know we're not going to tie up the 5 firm's capital for ourselves or for a client unless 6 we can -- we have a good reason to believe at least 7 our goal was to make double the long bond rate. 8 So depending upon whether the bond rate 9 was -- let's say in 1980, for example, unless I 10 thought I could make, you know, 25 or 30 percent 11 return, you know, I wouldn't -- wouldn't do the 12 trade. If the interest rates were five percent, 13 then ten percent looked attractive to do it. 14 So if I -- David Kugel or any of my traders 15 knew, you know, don't tie up the firm's capital, 16 don't do a trade for making two or three percent, 17 might as well put your money in bonds. 18 Q. Right. 19 A. So, you know, David Kugel knew even if he's 20 trading for his own account, if David Kugel or any 21 of the traders came to me and said, well, okay, I'm 22 tieing up the firm's capital and I'm making five 23 percent return, I'd say what are you? Crazy? I 24 mean, you know, we didn't do that. As a matter of 25 fact, we used to send our client, we had what they

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1 call a portfolio evaluation report where we would -- 2 a customer -- would send them when we were doing 3 arbitrage what the expected return was, what their 4 actual return or how much was their over and under. 5 You must have seen that these reports, they were 6 part of our records that were generated. 7 You saw that we said expected return, over 8 and under return and so on and so forth. And 9 depending upon the strategy and what you wanted to 10 do, that's what you made. So all of our -- when 11 people came to do arbitrage for us, it was always 12 from day one that the return was going to be -- that 13 the goal was to make double the long bond rate. 14 Q. How could you guarantee that? 15 A. We didn't guarantee it. It's what we 16 expected. We didn't guarantee anybody. 17 Q. Did you ever not do it? 18 A. Of course. What do you mean did we ever 19 not do it? 20 Q. Did you ever not do what you expected? 21 A. Sure, at times. 22 Q. So if we go through your records, you will 23 have losing periods of time? 24 A. Look, let me -- I see where you're going. 25 Let me -- let me tell you something. Let me give

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1 you an example; okay? 2 Q. Yeah. 3 A. When -- 4 MR. SHEEHAN: Are you okay? 5 MS. CHAITMAN: Yeah. 6 MR. SHEEHAN: All right. 7 THE WITNESS: When we were doing -- 8 because nothing I'm telling you is not something 9 that was widely known and was given to reporters, to 10 people that wrote the books and so on. Nothing in 11 Madoff is really a mystery. All right. When we did 12 -- the only mystery was that we weren't actually 13 doing the trades, but our strategy was always very 14 clear. 15 So I'm going to tell you an example, give 16 you an example of one. The chairman of UBS, Union 17 Bank of Switzerland, one of the world's great Nazis 18 if you ever met him -- 19 MR. SHEEHAN: I did. 20 THE WITNESS: -- came up to my office. 21 All right. And because when we were doing the split 22 strike trades, all right, everyone said, well, 23 listen, you know, Madoff is making double -- he's 24 making -- you know, you know, he's making like a 25 12 percent return, which in those days, you know,

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1 was a very good return. And the guy never has -- he 2 very rarely has a losing quarter, okay, which was 3 true. He very rarely had a losing quarter. 4 And he would say, well, how the hell do 5 you always -- you know, how does that happen? I 6 said wait a minute. You understand that -- you 7 understand how the transaction works. And now 8 literally the Chairman of Union Bank of Switzerland 9 in my office and chairman of almost most of these 10 banks along with the guys that ran their trading 11 desk because when they were doing the due diligence, 12 everyone wanted it figured out. Madoff can't be 13 this smart, so what is the strategy, you know? 14 Explain it to me. 15 So I'd say okay, fine. And I would, you 16 know, show them what the strategy was, very vanilla 17 covered right with a quick wrapper. So that was 18 something that we sort of started, but everyone 19 understood what it was. They said -- I said and, 20 all right, so you understand that your loss is going 21 to be limited because the put is going to kick in. 22 So your loss is limited basically to one 23 or two percent on each trade and your profit is 24 typically, let's say, three percent. So you have a 25 two-to-one sort of ratio, all right, but you

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1 definitely from the day we start the trade, you 2 definitely can lose. If the market goes against us 3 and we're guessing wrong, we're going to lose one or 4 two percent. If we're right, we're going to make 5 three percent. 6 You're never going to make really more 7 than that because then you're going to be called 8 away. Then that was the strategy. So let's say one 9 percent loss, three percent, and everyone understood 10 that. We said okay. Now, typically the strategy is 11 like a three-month strategy because of the 90-day 12 options and so on and so forth. 13 We said so if you look at, you know, over 14 the course of a year, maybe we'll have three or four 15 losing quarters and the rest of it, you know, we 16 have gains, which everybody said, well, that's still 17 pretty good, you know. And we said you understand 18 the reason why you don't -- that the whole -- the 19 key to the strategy is that you're never forced to 20 liquidate the strategy even -- you're going to be 21 wrong. 22 We're going to set it up and we think the 23 market is going to go up. We may be wrong. You 24 know, two days after we set the strategy up, the 25 market may go against us and we may have a loss, but

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1 we don't have to sell it out because we have the 2 put. Until the put expires we can keep the trade 3 open, waiting for the market to reverse and go up. 4 If the market goes up, then we're fine and we're 5 going to make a profit. 6 If the market doesn't go up and continues 7 to go down, we're going to have a loss; but the big 8 key is you're not forced to sell prematurely unless 9 it happens within three months. 10 Q. Can I ask you a question? 11 A. Yeah. 12 Q. Didn't all your puts expire? 13 A. Huh? 14 Q. Didn't all your puts expire? 15 A. Eventually. Eventually they expired. 16 Q. Because you never lost? 17 A. No. What do you mean never? Wait a 18 minute, wait a minute. Let me finish. 19 Q. Then you never lose? 20 A. Yes, of course, we lost. 21 Q. But you -- all your puts expired. Saul 22 Katz said to me that he asked you one time why are 23 we buying puts, because we never lose. Do you 24 remember that? 25 A. Oh, a lot of my traders would say let's not

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1 buy the puts because why are we going to pay the 2 premium on the puts? 3 Q. Yeah. 4 A. And I would say because that the key to the 5 strategy is to be able to limit your loss. 6 Q. Right. 7 A. You know, you're not forced to sell. 8 Q. So we're on the split strike now, and I 9 want to go back to convertible arb, but just one 10 thing. Isn't split strike strategy, which is 11 common, it's not unknown, a conservative strategy? 12 A. Yes. 13 Q. Right. And you don't expect big returns 14 from that; do you? 15 A. No. 16 Q. Because you capture -- 17 A. Right. 18 Q. Yeah, okay. 19 A. So let me finish -- 20 Q. Sure. 21 A. -- the story; okay? 22 Q. Didn't mean to cut you off. 23 A. When they said -- you know, I said did you 24 ever look at the strategy, you know, on a day-to-day 25 basis and see what happened? So the guy said, well,

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1 no. I'm only looking at it, you know, over the 2 course of a year or the course of months. And I 3 noticed that over the course of a year we had three 4 losing quarters, we had one losing quarter or we had 5 one losing month. 6 MR. SHEEHAN: Bless you. 7 THE WITNESS: Really, we had very few 8 losing quarters, but we did have losing months I 9 said if we close the trade out. So I said let me 10 show you -- let me show you a chart that shows you 11 what the strategy did on a daily basis. And they 12 would look and they would see that they had the 13 strategy set up for 90 days, but it could be ten 14 days where we actually had a loss had we closed it 15 out. 16 So if I was forced to close it out because 17 the option was going to expire, the put was going to 18 expire or not, I said there are lots of -- I said if 19 you look at the trade, you would see that this -- 20 you would see it looks like this. Okay. Now, we 21 would only close it out hopefully when we had it 22 here, but if we closed it out when we were not here, 23 we'd have a loss. 24 Q. Right. 25 A. So then he said ah. So there are loss --

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1 there would be loss trades. If they called me up 2 and said to me I want my money back, close out the 3 strategy, which no one -- very rarely did anyone do 4 that except in 2008 when people were getting margin 5 calls all over the place; but before that nobody 6 ever called up and said sell it out because I would 7 then say to them, listen, if you force me to sell it 8 out, I'll sell it out. I'm sending your money back. 9 Don't come back. Okay. 10 Q. I want to go back to the -- but I want 11 to -- 12 A. And let me just tell you one other thing. 13 Q. Sure. 14 A. You've heard of Jim Simons; right? 15 Q. Of course. 16 A. Okay. Now, I handled Jim's private 17 account, his foundation account. 18 Q. Yeah. 19 A. Now, when Jim Simons, who's probably one of 20 the smartest traders on Wall Street today, all 21 right, you know, called me up and he said to me, 22 look, he said, Bernie, he said you know what? He 23 said I'd like you to handle all of Renaissance 24 business as a dealer. Your market -- I want your 25 market makers to trade because we're sending our

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1 business down on the floor of the exchange of the 2 two Bear Stearns and, you know, they're clipping us 3 left and right on commissions and so on. So Madoff 4 has the fastest execution in the industry. I'm 5 going to let you do our business. 6 So I said really, Jim, I don't want your 7 business because your traders are too good. So I 8 don't really want Renaissance business. So he said 9 come on, come on. We'll give you the good business. 10 I said don't tell me you'll give me the good 11 business. You aren't giving me all your business 12 and I don't want my traders competing against yours 13 because we're going to lose money. 14 So he convinced me. He said look, just 15 take it, you know, but also I also want you do my -- 16 handle my foundation personal account. So he set up 17 an account, I don't remember, that was two million, 18 ten million. I don't remember it anymore. You 19 know, it wasn't a big account, but let's say I think 20 it was in the neighborhood of 10 or $20 million. 21 So he understood as every one of my 22 clients understood the transaction. They saw it 23 because they got the confirmations. They saw what 24 was buying and selling. They had the ability to see 25 whether or not the trades could be done or couldn't

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1 be done, and they -- so they saw the trade and the 2 trade made sense. If you'll remember going back 3 when you came down to visit me, I said to you when 4 you told me we're going to sue all these funds and 5 this, I said do yourself a favor. 6 If you think -- if you're going to believe 7 Harry Markopolos, who's one of the big idiots in our 8 industry, the great whistleblower, and believe him 9 that this strategy did not make any sense and if 10 you're going to say the reason your funds should 11 close out, you know, should have noticed a red flag, 12 don't say the strategy didn't make sense because I'm 13 telling you we had virtually every important trader 14 on Wall Street and the chairman of every firm had a 15 client -- had accounts with Madoff. 16 They knew the transaction made sense to do 17 it. They knew what my advantage was of being a 18 market maker and doing all this volume. 19 Q. But they also knew you weren't doing split 20 strike; isn't that true? 21 A. No. 22 Q. Didn't they all know you weren't doing 23 split strike? 24 A. No, no. 25 Q. They knew you were telling them that?

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1 A. No. And if you believe that anybody 2 thought that I would -- why would anybody give me 3 money thinking that I was committing a fraud? 4 Q. Why did Jim Simon take his money out? 5 A. Because I'll tell you why Jim Simons -- 6 because Jim -- 7 Q. You know, he's testified so I have sworn 8 testimony of why he did, so let's hear what you 9 think. 10 A. Yeah. I know why. I'll tell you why he's 11 closing money out. Because he had -- he got wind 12 that the SEC was investigating me because they were 13 investigating him. What happened was the SEC was 14 investigating all of the hedge funds, had nothing to 15 do with Madoff. All right. 16 And the -- and Jim Simons, you know, was 17 getting -- had an inquiry about his firm. All 18 right. And one of the things was Madoff, was doing 19 business with Madoff. So Jim Simons knew that the 20 SEC was questioning me and, therefore, he wanted to 21 close out the transactions. 22 He had no idea that I wasn't doing the 23 trades because -- and none of them did. I don't 24 care what anybody says now. Well, I always knew. 25 Believe me, none of these guys would have done --

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1 they're not crazy. Why would they want to be giving 2 money to a firm that was committing a fraud? They 3 didn't know. Now, there were some firms that didn't 4 care whether I shorted the stock to them. 5 As a matter of fact, as I -- as I told 6 people, all right, I got a call from Switzerland 7 once. This was -- I don't remember what year it 8 was. 9 Q. I think we're drifting from Jim Simons, but 10 you're going to connect that up or -- 11 A. No, no. 12 Q. Okay. 13 A. This was from -- I get a call from 14 Switzerland from one of the hedge fund managers in 15 Switzerland and he says hey, Bernie, you know what? 16 He said there's a rumor going around Switzerland 17 that the reason that you are -- you're able to do 18 these trades so successfully, which I never 19 considered being so successful, was that you're 20 front running -- you're front running all your -- 21 your market making orders, which, by the way, that's 22 what Markopolos told the SEC. 23 You know, because, obviously, you know, 24 if, in fact, I was front running the orders, you 25 know, that would be a great thing. It would have

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1 been, unfortunately, illegal and very easy to check 2 whether anybody is front running. And believe me, I 3 know that because I know what the rules are in the 4 industry. And when Markopolos went to the SEC and 5 said you're front running, the SEC said Bernie 6 wouldn't be front running. 7 So when they -- when they looked at it and 8 they looked at all the information, they said no, 9 no, this guy is not front running. And the reason I 10 wasn't front running, because I wasn't doing the 11 orders. So, of course, I wasn't front running 12 because I wasn't actually doing the trades. So the 13 SEC looked at that. They didn't know who was doing 14 the trades, but they knew I wasn't front running. 15 Now, let me finish. Switzerland thought I was front 16 running. 17 Q. I've been very good here. 18 A. You know what they said, front running? 19 They said if you're front running, that's great 20 because front running isn't illegal in Switzerland. 21 We don't care if you're front running. If the SEC 22 closes you down for an SEC violation, so you'll give 23 us our money back. We're happy. That's not our 24 problem. 25 Q. I'm aware of that.

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1 A. And I said I'm not front running. I wasn't 2 front running because I wasn't doing the trades. 3 Q. Right. And the reason you were always 4 successful is you were using yesterday's newspapers; 5 correct? You weren't actually trading, so you made 6 those trades based on yesterday's newspapers? 7 A. When I wasn't doing the trades, yes. 8 Q. Yes. 9 A. Yeah. That's no secret. I said that. 10 Q. So, therefore, no one, including Jamie 11 Simon, could replicate that; could he? 12 A. He could have if he was a market maker, 13 yeah. 14 Q. How could he do it without yesterday's 15 newspaper? 16 A. Let me ask you, don't you think that 17 they -- that they knew that I -- don't you think 18 that they originally thought that I was doing the 19 trades? Do you really believe that anybody gave me 20 money and knew that I was committing a fraud? 21 Q. People do it every day, Bernie. 22 A. Not these guys. 23 Q. All right. People do it every day. 24 A. Not these guys. Don't believe that, David. 25 MS. CHAITMAN: Is that what Simons

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1 testified to? 2 MR. SHEEHAN: Simons testified he couldn't 3 replicate what you were doing and got out. 4 THE WITNESS: Yeah. 5 MR. SHEEHAN: That's what he said. 6 THE WITNESS: Yeah, but do you know why he 7 couldn't? Because he wasn't a market making firm. 8 He wasn't doing the volumes that we were doing. 9 That's why he couldn't do it. 10 Q. (By Mr. Sheehan) I mean, yours was all 11 fictitious? 12 A. Wait a minute. It was fictitious because 13 -- all right. Let me -- 14 Q. It never happened. 15 A. Since you want to know this. 16 Q. No, no. Let's go back. We've got all day 17 tomorrow to talk about this. 18 A. Okay. 19 Q. I want to get back to the early '80s. All 20 right? 21 A. But let me just finish. Let me explain 22 something to you. 23 Q. All right. Go right ahead. I won't cut 24 you off. 25 A. Okay.

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1 Q. I won't cut you off. 2 A. The people always wanted to know how much 3 volume I was doing. Okay. That was the big secret. 4 How much money is Bernie Madoff doing? Okay. And 5 typically they thought that I was doing $20 million, 6 $20 billion. 7 Q. Billion, yeah. 8 A. That was the -- that was the consensus. I 9 was doing 20 billion; okay? 10 Q. Yeah. 11 A. So it was about 20 billion because that -- 12 because when I filed an ADV report, the most I 13 showed was 16 billion. 14 Q. Right. 15 A. All right. But so they thought that it was 16 20 billion, but let's say it was when they finally 17 got the ADV report in 2006, it showed 16 billion. 18 So everybody said, well, 16 billion, that's a lot of 19 money; but this is -- how does Bernie Madoff do the 20 trades? 21 Okay. Number one, typically he never had 22 more than 50 percent of the money invested. 23 Fifty percent was in T bills, 50 percent was in the 24 marketplace. Sometimes it was 100 percent, but it 25 most of the time was not 100 percent, but let's

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1 assume it takes 16 billion. Let's assume I invested 2 16 billion at the most, which is what they thought. 3 Okay. The $16 billion was invested over a period of 4 four days, you know. So, you know, it's 4 billion a 5 day, all right, at most, was 4 billion or 2 billion 6 depending upon how you want to look at it. 7 Q. Without an ounce of volatility? 8 A. Huh? 9 Q. No volatility? 10 A. Four billion dollars, for me to invest $4 11 billion when you're doing 10 percent of the volume 12 of the business is nothing. So the people that -- 13 believe me, everything that you're saying, when guys 14 first came in, everybody figured, well, this guy 15 must have -- must be doing something wrong because 16 how could he possibly be making this profit? All 17 right. So then I -- but I heard that all from day 18 one when I was doing the trades, you know. 19 Q. In the '80s? 20 A. No. I wasn't doing this in the '80s. 21 Q. You said you were doing the trades? 22 A. You're doing convertible bonds. 23 Q. Right. 24 A. I wasn't doing split strike. 25 Q. Right.

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1 A. I'm talking about when I was doing 2 convertible bond trades, I wasn't doing it for 3 funds. I was doing it for -- just for my clients, 4 and that was no big deal for me to do that. I mean, 5 you're not -- now, you can sit here and say that I 6 never did the convertible bond trades because 7 that -- I wasn't doing the convertible bonds trades 8 to be a problem at all. 9 I mean, I was the largest convertible bond 10 trader in Wall Street at that time. Nobody thinks 11 that I was -- I wasn't managing that much money in 12 convertible bond trades even with the four big 13 clients because I wasn't doing convertible bonds for 14 them in 1980. 15 Q. When did the big four start the margin 16 accounts? 17 A. What happened was I was doing the big four 18 accounts when I started doing business for them. 19 I've been doing -- it started in the '70s. Someone 20 like Levy came in in the '90s and so on, and so but 21 let's assume I started doing it let's say in the 22 '80s when I was doing it. All right. And everybody 23 was doing convertible bond trades. And in those 24 days they were making, you know, 25, 35 percent. It 25 was no big deal to do that.

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1 Q. All through the '80s, I just want to be 2 clear, the big four did convertible bond? They 3 didn't do different strategies besides that? 4 A. No. Because what happened was -- 5 Q. Okay. 6 A. -- you know, you know, in 1980, before that 7 up to 1980 I was doing convertible bonds with them. 8 All right. The four big accounts were doing 9 convertible bonds. And what happened was in 1980 10 they came to me. They were doing straddles. 11 Everybody that was doing short-term trading in Wall 12 Street was hedging their trades using commodity 13 straddles. 14 Q. Right. 15 A. You remember, you know what commodity 16 straddles, silver straddles? 17 Q. Yeah, of course. 18 A. Okay. So they were doing silver straddles 19 through Bear Stearns and through E. F. Hutton and so 20 on. 21 Q. The big four? 22 A. Big four. All right. They were hedging 23 because the arbitrage was all short-term capital 24 gains. So they were making short-term capital gains 25 making, you know, nice returns; but they -- you

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1 know, tax rates, you know, were 80-some odd percent, 2 you know. So they -- they were using the silver 3 straddles to hedge themselves. And that was fine 4 until the IRS started challenging the silver 5 straddles saying that there was no risk. These were 6 sham transactions and so on. 7 Q. Right. 8 A. And they were doing them through -- we 9 didn't do that business, but I was doing it for 10 these clients. I had recommended them to Bear 11 Stearns and Carl Shapiro had a son-in-law at E. F. 12 Hutton, so they were doing the straddles. 13 So in 1980 they came to me and they said 14 look, you know, Bernie, isn't there anything we can 15 make long-term capital gains, you know, because the 16 short-term, the arbitrage, the profits are great, 17 but the tax rates are killing us. And now we can't 18 use the straddles because the IRS is challenging the 19 commodity straddles for us. 20 So what can you do to generate long-term 21 gains? So I said wait a minute. Look, forget about 22 the real estate shelters because that was being 23 charged -- that was being -- that was being 24 threatened. Picower was doing the leasing things. 25 He had his leasing companies, cockamamie thing that

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1 he was doing. You know, everybody had their -- you 2 know, was doing something. All right. So they came 3 to me. Can you do -- what can you do to generate 4 long-term gains? I said the only thing you can do 5 for long-term gains is actually to put on long-term 6 positions, not do the arbitrage. 7 You can just -- you've got to buy 8 portfolio of stocks, but in order for that to work, 9 the market has to go up. And I can't tell you 10 whether the market is going to go up, you know, 11 from, you know, 1980. 12 Q. Right. 13 A. I said so you want to -- you know, that's 14 the only thing that's available. I don't want to do 15 any real estate tax shelters. I don't want you to 16 do any silver straddles anymore. You know, this is 17 the only game in town if you want to do that; but, 18 you know, I don't know if the market is going to go 19 up. I said I can put together a portfolio of 20 stocks, a diversified portfolio. I happened to like 21 the market, you know, in 1980, but there's no 22 guarantee. 23 And, you know, so I don't know what to 24 tell you. So they said, well, can't you hedge it? 25 You're supposed to be the great hedger. Can't you

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1 hedge it? I said yeah. You can hedge it. There 2 are certain ways you can do it. You can go short 3 against the box. You know, you can do, you know, 4 pairs trading; but, again, you have to hold them for 5 a one-year period. That was the holding period. 6 So I, you know, explained to them all this 7 stuff and I said and there's no guarantee. You want 8 to do it, but, you know, it's better than nothing if 9 you want to do it. So they said fine. Let's do 10 that, you know. So I said so all right. Now, 11 coincidentally at the same time they were doing 12 that, I was doing a hedging strategy for a group of 13 European investors. 14 Q. I remember you telling this already. 15 A. Yeah. So they as it turned out, it would 16 have been -- they would have been a great 17 counterparty for these other traders because they 18 were doing the hedging strategy. As I explained to 19 you, they had to be in -- they had to be in U.S. 20 securities in order to hedge the French franc and so 21 on and so forth. So, you know, I said to them okay, 22 look, this is the deal. 23 I can set up portfolios or strategies for 24 you guys for the big four. I said I have 25 counterparties that supply the liquidity to you on

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1 the other side, put you guys together. The only 2 problem is you have to all understand that you can't 3 unwind these strategies prematurely because these 4 guys, you know, you're going to screw them up. So 5 if you're going to unwind, you both have to be 6 agreed to unwind at the same time. 7 So Shapiro and the rest of these guys, you 8 know, Picower, said okay, fine. It's a risk, but 9 it's better than what we were doing anyhow. We have 10 no other choice, so let's do it. So I put the 11 portfolio on for the four big clients, which is not 12 difficult to do. 13 Q. When did you do that? 14 A. 1980 I started doing that with them. 15 Q. Okay. 16 A. I put the portfolio on for them. You know, 17 the portfolio and the French guys were doing it. 18 Their side was great. It was fine. And the market, 19 of course, started to march up from 1980 to 1987. 20 Everything was going along fine. And, of course, my 21 four big clients, being the greedy people that they 22 were, never wanted to close out the transaction. 23 They wanted to keep rolling it, which is 24 very typical because everybody -- nobody wanted to 25 close out the money. They just -- let's roll it,

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1 you know, just keep rolling it and because why 2 should I pay the tax? Why do I have to pay the tax 3 money? The rate was still, you know, even on those 4 long-term gains were better than short-term gains. 5 They didn't even want to pay that, so but 6 the market accommodated everybody. So from 1980 to 7 1987 everybody was making a lot of money doing this 8 strategy and everything was fine. Comes the crash 9 in 1987. The shit hit the fan or forget about 10 repeating that, you know, and these -- my four big 11 clients said holy cow. We've now, you know, had 12 seven years of long-term gains. 13 You know, we're going to get killed. 14 We're going to give all that up with the market 15 going down. I said relax. Don't worry about it. 16 The market eventually will turn, I said, and you 17 guys made a commitment to us. We have this 18 commitment to, you know, to the French people. And 19 I'm not going to unwind. I can't unwind them, you 20 know. 21 So these guys -- that's when they started 22 to hold on. They said close out the -- sell the 23 longs, don't worry about the shorts. The market is 24 going to go -- continue to go down. We're not 25 worried about it. We'll hold you harmless for any

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1 losses. 2 MR. SHEEHAN: Okay. You want to take two 3 minutes? I thought you would. 4 THE COURT REPORTER: Yes. 5 MR. SHEEHAN: All right. I know we have 6 to leave soon, but I -- 7 MS. CHAITMAN: Yeah. No. Whatever you 8 want, yeah. 9 MR. SHEEHAN: I don't want this young lady 10 to have her hands fall off because when you get on a 11 roll, Bernie. 12 THE VIDEOGRAPHER: Going off the record. 13 The time is 2:14 p.m. 14 (A recess was taken.) 15 THE VIDEOGRAPHER: Back on the record. 16 This beginning disc number four. The time is 17 2:25 p.m. 18 Q. (By Mr. Sheehan) Do you recall when you 19 started using DTC? 20 A. No. 21 Q. Would it help if I called it NSCC instead? 22 A. What year? Certainly before DTC because, 23 you know, I don't remember the year. It's in the 24 report somewhere. 25 Q. Right. Early '80s? That work for you?

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1 A. Yes, yeah. 2 Q. Early '80s. We'll work with that. 3 A. Yeah, because I was -- I was chairman of 4 NSCC 1984 through 1987, so -- 5 Q. Right. At that point you're still 6 obviously -- were your stocks then on deposit at 7 NSCC? 8 A. No. NSCC didn't hold. They weren't a 9 depository. 10 Q. Okay. What function did they perform? 11 A. Just the clearing and settlement, the 12 settlement, money settlement, the netting. So 13 securities weren't delivered there. 14 Q. Uh-huh, okay. So were you still holding 15 your securities physically at that point? 16 A. Yeah. We were holding them physically or 17 down at the banks. 18 Q. Uh-huh, okay. Where were you located in 19 the early '80s? 20 A. 110 Wall Street probably. We moved up in 21 sometime in the mid-'80s, I think, to 110 Wall -- I 22 mean, to 885 3rd. 23 Q. Okay. I wanted to clarify something else, 24 too. You talked earlier about DTCC; right? You had 25 a -- the account there was 646?

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1 A. Yes. 2 Q. Did you have any other account? 3 A. No. 4 Q. Okay. You talked about all your stocks 5 would be there except for bank loans. Do you 6 remember that? 7 A. Right. 8 Q. All right. Would not the fact that there 9 was a bank loan with regard to certain stocks also 10 show in your account? 11 A. There would be a what? 12 Q. If you had a stock loan? 13 A. Right. 14 Q. All right. To the bank and the bank, 15 therefore, had your stocks pledged -- 16 A. At DTC. 17 Q. Yeah, DTC. It would also show in your 18 account that you had so pledged those stocks; would 19 it not? 20 A. Yes, probably. 21 Q. Okay. Could you pledge customer stocks? 22 A. Could we? 23 Q. Could you? 24 A. Yeah. 25 Q. You could use that for stock loan purposes?

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1 A. Yes. 2 Q. Okay. 3 A. Either at -- it depends upon whether we did 4 it at DTC or we did it at our banks, at one of the 5 banks. 6 Q. Okay. So let's go back to the 1980s and 7 the long strategy that you started -- 8 A. Right. 9 Q. -- for the big four. The big four at the 10 same time, were they still doing convertible arb -- 11 A. No. 12 Q. -- at that point? 13 A. They were -- some of -- I think Stanley 14 Chase was doing it for some of his accounts. He was 15 doing -- he was still doing convertible bonds. Oh, 16 in 1980 you're talking about? 17 Q. In the '80s when you started the long 18 strategy. 19 A. In the '80s. He may have been doing it. 20 They may have been doing it for some of their 21 accounts, some of their family accounts, you know, 22 the kids' accounts and so on. 23 Q. Yeah. Would you say the majority of your 24 convertible arbitrage strategy in the '80s was 25 premium trading?

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1 A. I don't know. Probably, probably. 2 Q. Okay. And how many customers? You know, 3 let's count Avellino and Bienes as one. 4 A. Right. 5 Q. And then you've got the big four. That's 6 five. How many more customers did you have up to 7 1987? I know that's hard, but just your best 8 thought on that. 9 A. My brain is a little fried to begin with -- 10 Q. Yeah. 11 A. -- so but I don't know. Probably I would 12 say no more than 50, I would say. I'm guessing. 13 Q. Okay. So in 1987 there's a crash and 14 you've testified to this. I'm not going to repeat 15 it. You may, but I'm not going to; but seriously, 16 why did you feel compelled to cover those shorts? 17 A. Which shorts? 18 Q. Well, when you were saying you would cover 19 the short positions of the big four and they 20 indemnified you, they were big boys. Why wouldn't 21 you just say to them hey, you're in the game? 22 A. Do you know how many times I ask myself 23 that now? 24 Q. Yeah. 25 A. I mean, look, I'm not proud that I did what

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1 I did, you know. I spent a lot of hours with a 2 psychologist here trying to analyze why I did what I 3 did or I -- I had a -- a very special relationship 4 with the big four clients, all right, particularly, 5 you know, with Carl Shapiro and Norman Levy and Stan 6 Chase. 7 Picower was a little bit different, but 8 look, one of my problems was I always wanted to 9 please everybody. You know, that was my thing 10 forgetting about whether it was my -- you know, 11 whether, you know -- 12 Q. But this was a billion dollars, a billion 13 dollars that you were going to go at risk for? 14 A. Well, I was -- I had very special 15 relationships with the people in France. I had a 16 special relationship with Shapiro, and I had given 17 my word. You know, something about the securities 18 business, you know, the -- we -- everybody did 19 business on trust. 20 I know it sounds strange coming from me, 21 all right, but when I went into business the first 22 thing I learned from both Cy Lewis and Gus Levy is 23 they said to me, Bernie, whatever you do, you know, 24 in this business, never break your word because 25 there was no such thing as written contracts in the

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1 securities industry. When everybody called you up 2 and said I want to sell -- when Merrill Lynch called 3 you and said I'm selling you a thousand shares of 4 IBM or a thousand shares of Intel, there was no 5 contract. 6 You did the trade over the phone. You 7 waited until you got your confirmation, which may 8 have been, you know, two days later or it may have 9 been five days later, and you waited and you assumed 10 that they were going to deliver on time. And if 11 they didn't, you were screwed. There was no written 12 contract. 13 And in 50 years that I was in business, I 14 never, ever had anyone not honor their contract. 15 You never thought about it. It was something that, 16 you know, if you're in this industry, your word was 17 your bond literally and that was it. You trusted 18 everybody. And that's the way the industry operated 19 and for the most part still operates that way today 20 but not as much. 21 All right. So when I started doing 22 business with all my clients, I was a little guy 23 with nothing. No one had any reason -- and Carl 24 Shapiro always tells this story famously. When he 25 gave me $100,000, people thought he was crazy. Why

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1 would anybody give me? I was this little kid from 2 Brooklyn, didn't go to Harvard or so on. Why would 3 anybody trust me to give me business, you know, turn 4 their money over to me on a discretionary basis 5 basically and, you know, and go with it? 6 All right. They did. And because they 7 showed -- he showed faith in me and guys like Levy 8 and so on did, all right, I felt obligated to keep 9 my word. And it was the same thing when I did 10 business in Europe, you know. People showed a lot 11 of faith in me. Now, I made them a lot of money. 12 They weren't doing it, you know, as a philanthropy, 13 but there was a special relationship I had with 14 them. 15 And all of these clients, I was like a son 16 to them and they were like surrogate fathers to me. 17 All right. So when the crash came in '87 -- and 18 also I had went from nothing. You know, I started 19 my business with literally $500, you know. You 20 know, all of a sudden, you know, by '87 I was a rich 21 guy. 22 At least I thought I was very successful 23 and everybody in the industry thought I was like, 24 you know, this terrific, terrific success story, 25 which I was. All right. So when the crash came in

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1 '87 and these guys panicked on me, which is not a 2 surprise in hindsight because the one thing every 3 one of them was, which is everybody in the industry 4 is, they're greedy. All right. So they all 5 panicked. They didn't want to give up their returns 6 and I made the mistake. What I should have said to 7 them was look, this is the agreements you have. 8 Now, could I have sued them? There was no 9 -- there was no written contract, all right, when we 10 made these agreements to, you know, to not unwind, 11 you know, prematurely. This was all, you know, 12 arm's length agreements. These were not -- there 13 were no contracts in that. So I didn't have the 14 right to litigate with Carl Shapiro and Jeff Picower 15 and say listen, you can't sell. 16 You know, if they wanted to sell 17 regardless of whether they were short, I could have 18 said no, you've got to sell. I could have said 19 cover your shorts, too, in other words, but I 20 didn't. All right. 21 Q. That was my question. Why didn't you tell 22 them cover your own shorts? 23 A. Because they said to me -- after we argued 24 and argued for days, everybody says don't panic. 25 Now, you have to understand also that everybody that

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1 was trading convertible bonds through me when the 2 crash came in '87, they had a windfall because every 3 convertible bond went to premiums. So the guys that 4 were doing convertible bonds, they thought I was a 5 goddamned codified genius because the market 6 crashed, but all convertible bonds, you know, which 7 you would expect them to do, went to premiums. 8 These guys weren't doing convertible bonds 9 except for some of their accounts, as I said, so 10 they didn't -- you know, everybody said -- I said 11 now, look, don't panic. The market will go up. We 12 knew Reliant went down because of the United 13 Airlines bust and the merger and so on. You know, 14 they didn't want to. They just said look, let's 15 sell and get out of it. 16 All right. I didn't -- I couldn't force 17 them to cover the shorts because I had the 18 Europeans, the French guys on the other side of the 19 trades. I couldn't close them out prematurely. So 20 that's why I didn't unwind. 21 So and then they said to me, look, as much 22 as I -- all I can use is moral-suasion. And they 23 didn't want to screw me either generally because, 24 number one, we had a close, family-type 25 relationship. And also I made them a lot of money.

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1 They didn't want to kill the goose that laid the 2 golden egg. And they were so sure that the market 3 was -- the shorts were not going to be a problem. 4 So they said fine. We'll hold you harmless. Close 5 out, sell the longs out so we get the advantage of 6 the long-term gains. 7 Let's not worry about the shorts. We'll 8 take responsibility of the shorts because I said all 9 right, the market eventually is recovered. You're 10 going to lose money on the shorts. They said we're 11 not worried about it. That's why. In hindsight now 12 it looks like a stupid thing to do and it was. 13 Q. You know, we've looked everywhere. Ellen 14 has actually asked us for the hold harmless 15 agreements. We can't find them. Would Price 16 Waterhouse Cooper as you mentioned have yours? The 17 likelihood, it's a long time ago so when it 18 happened. 19 A. No. I mean, you know, Ed Kostin, 20 unfortunately, has been dead a long time by now. He 21 did it. I don't know. You know, look, I mean, if 22 you looked for the trust agreements, you would see 23 that I was the -- I was the Trustee and the executor 24 of all of their trust agreements. Now, they've 25 probably changed it by now.

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1 Q. Right. 2 A. But they -- look, there was meetings with, 3 for example, I don't know whether -- Paul 4 Konigsberg, did he ever go to jail or did he not go 5 to jail? 6 MR. GOLDMAN: He's in jail. 7 THE WITNESS: He did not go to jail? 8 MR. GOLDMAN: Konigsberg went to jail. 9 MR. SHEEHAN: No. He walked. 10 MR. GOLDMAN: Not Konigsberg. I'm 11 thinking of someone else. Okay. 12 THE WITNESS: Okay. 13 MR. SHEEHAN: He should have gone to jail. 14 THE WITNESS: Huh? Look, well, I don't 15 think anybody should go to jail, but -- 16 MR. SHEEHAN: But anyway -- 17 THE WITNESS: -- look, these people, there 18 were meetings held, you know, where the family 19 because, look, when these guys made these agreements 20 with me, all right, I said look, these guys were 21 old. They were -- you know, Carl Shapiro thought he 22 was going to die. He's still alive as far as I 23 know. 24 MR. SHEEHAN: He is. 25 THE WITNESS: Carl, he must be 104, for

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1 crying out loud, but when he was 60 some odd years 2 old he called me up hysterical when he had his first 3 Bell's palsy attack to Boston and said look, I'm 4 going to die and so on and so forth. 5 And that's when I made Paul Konigsberg his 6 accountant because, you know, at that time Coopers 7 and -- PaineWebber, who is Coopers and Lybrand 8 really, was his accounting firm; but he wanted, you 9 know, a closer relationship with Paul Konigsberg, 10 who became his accountant. 11 Q. (By Mr. Sheehan) Who's he? I'm sorry. 12 A. Carl Shapiro. 13 Q. Oh, I'm sorry. 14 A. All right. So all of these guys, most of 15 them except for Picower, but Picower was unhealthy 16 to begin with. He'd had three heart attacks and 17 he'd had, you know -- what does he have? I forgot 18 what the disease is, you shake all the time. 19 MR. GOLDMAN: Parkinson's. 20 THE WITNESS: Parkinson's, right. I said 21 look, you know, we have these agreements. I said I 22 want the family to make -- I want to make sure your 23 children know this. They weren't really children. 24 They weren't much younger than -- you know, younger 25 than me, so I said -- but everybody knew of these

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1 agreements, these arrangements that they were 2 responsible for any losses. And we had meetings and 3 everyone knew that. So I wasn't even worried about 4 having, you know, written agreements. We had them, 5 but when I said to them, look, you know what? When 6 you die, I said I want -- who's -- you know, you 7 tell me I'm still handling your investments. 8 So they -- Levy, for example, took JP 9 Morgan off -- it wasn't JP Morgan. It was Chemical 10 at the time. Took Chemical and its Trustee and 11 executor of his estate off and he made me that. I 12 was going to get to handle all and their kids had to 13 sign agreements that I was the one that was going to 14 handle, you know, all of their monies and I had no 15 responsibility. So this was -- you know, that's 16 what the agreements were. They all knew what was 17 going on. 18 Q. We're going to end with this today, all 19 right, and we'll start tomorrow morning. 20 A. Uh-huh. 21 Q. Early in December you had a meeting in your 22 office. The big four was there. Fred was there. 23 Other people were there. What was the purpose of 24 that meeting? 25 MS. CHAITMAN: Early December of what

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1 year? 2 MR. SHEEHAN: '08. 3 THE WITNESS: Oh, that was the foundation 4 -- that was for the charitable thing that we had. I 5 was -- we had -- I was raising the money for cancer 6 then, you know, and Andy had been diagnosed -- 7 MR. SHEEHAN: Right. 8 THE WITNESS: -- with cancer. And I 9 forgot the name of our -- the Madoff foundation we 10 had. And I -- they were on the board. It was a 11 board meeting. 12 Q. (By Mr. Sheehan) Did you not discuss the 13 status of BLMIS that day? 14 A. No, no. 15 Q. You'd just paid out $11 billion. Two days 16 later you're going to get turned into the FBI, and 17 you didn't mention anything? 18 A. Paying out $11 billion? 19 Q. Pardon? 20 A. What do you mean paying out 11 billion? 21 Q. You had just paid out over the past year 22 $11 billion in redemptions? 23 A. Oh, yeah. 24 Q. Here's the big four, Fred and other people 25 as you're sitting here?

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1 A. No. The only one that was there was Fred. 2 Shapiro wasn't there. One of his -- Bob Jaffey was 3 there. I don't think Jeff Picower was there. I 4 don't know if his wife was there. I don't think 5 Picower was there. Either he may have been in 6 Florida. No. We didn't -- I mean, I knew that I 7 was in trouble, but no one else did, including my 8 wife. 9 MR. SHEEHAN: Okay. 10 MS. CHAITMAN: When you say Fred, are you 11 referring to Fred Wilpon? 12 THE WITNESS: Yeah. He was on the board. 13 He was on the board, my board. 14 MR. SHEEHAN: Okay. Let's end it there. 15 THE VIDEOGRAPHER: Okay. This concludes 16 the deposition. Going off the record at 2:42 p.m. 17 (The deposition was adjourned at 2:42 18 p.m.) 19 * * * * * 20 21 22 23 24 25

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1 C E R T I F I C A T E 2 NORTH CAROLINA: 3 GUILFORD COUNTY: 4 I hereby certify that the foregoing 5 deposition was reported, as stated in the caption, 6 and the questions and answers thereto were reduced 7 to the written page under my direction; that the 8 foregoing pages 1 through 209 represent a true and 9 correct transcript of the evidence given. I further 10 certify that I am not in any way financially 11 interested in the result of said case. 12 I have no written contract to provide 13 reporting services with any party to the case, any 14 counsel in the case, or any reporter or reporting 15 agency from whom a referral might have been made to 16 cover this deposition. I will charge my usual and 17 customary rates to all parties in the case. 18 This, the 10th day of May, 2017. 19 20 21 <%Signature%> 22 23 K. Denise Neal, RPR Registered Professional Reporter 24 Notary Public No. 200517500101 25

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& 116 127:5 1960s 10:8 64:25 92:17 & 142:1,4 146:2 11:09 76:23 1962 121:5 135:21 1994 20:2 31:12 161:11,17 11:29 77:1 1963 122:20 77:6 81:23 91:4 11th 6:19 49:11 135:20 136:5,8 92:11 0 68:20 80:24 81:2 146:13 1998 96:12 00118284 42:22 12 2:21 59:13 1970 34:17 149:5 1999 73:21 001478 54:4 110:8 133:14 153:25 19th 13:17 08 208:2 134:22,25 167:22 1970s 81:25 82:3,6 1:00 126:5 08-01789 1:7 5:13 171:25 1980 161:5 167:21 1st 53:9 54:16 0960973 43:8 12-2003 3:25 169:9 187:14 60:11 0961013 43:19 12-2004 4:4 188:6,7,9 189:13 2 1 120 117:4 190:11,21 192:14 2 106:8 186:5 127 95:3,11,16 192:19 193:6 1 64:12 95:11 2-2001 3:19 97:13,17 197:16 210:8 2.8 72:18,24 12:46 126:1 1980s 93:20 94:1 1-31-99 4:14 20 4:3 61:15,16 13 54:16 110:23 107:8,12 111:19 10 9:4 83:23 97:19 106:11 117:4 132 3:10 114:24 197:6 138:13,21,24 119:16 178:20 14 68:7 111:21 1983 102:21 167:19 178:20 185:5,6,9,11,16 124:20 104:18 121:19 186:11 20,000 156:15,17 1458787 56:17 122:5 10-2002 3:23 156:22 1486 61:22 1984 195:4 10.74 117:24 2000 21:3 22:17 15 3:16 38:21,24 1985 69:16 100 16:8 83:9 127:6 112:3 1987 91:21 134:13 138:20 148:4 2000s 20:11 78:18 150 63:7 134:15 192:19 151:18 162:13,16 2001 21:25 52:2 16 3:18 52:1,20 193:7,9 195:4 162:19 164:16 58:6 62:25 68:17 198:7,13 185:24,25 2002 20:12 21:4 185:13,17,18 1990 10:11 14:9 100,000 156:19 39:18 60:5,9 186:1,2,3 91:20 157:19 200:25 112:15 123:24,25 17 3:20 58:2,6 1990s 10:24 10022 2:6 124:1,4,13,16 96:9 1991 11:21 74:8,13 10111-0100 2:15 133:10 17th 13:3,7,12 74:23 104 205:25 2003 27:19,24,24 29:7,7 47:11 1992 11:8 13:3 10573 2:22 61:6 70:25 79:4 18 3:22 60:2,5 14:13 38:9 92:3,5 109 4:21 2004 61:15,23 94:21 102:24 117:20 10:20 57:25 2005 64:12 18th 13:17 122:18 123:1 10:35 58:4 200517500101 19 3:24 60:25 61:4 134:3,6,13 135:1 10th 210:18 210:24 102:8 114:7 164:6 11 81:18 208:15,18 2006 185:17 124:22 134:25 1992-2008 102:12 208:20,22 2007 62:20 63:25 1960 22:7 32:9 1993 11:15 20:2 11.7 133:16 64:4 135:13 30:11,14 31:12 110 195:20,21 2008 6:19 8:19,23 81:23 91:12 92:11 9:25 27:19,24 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 213 of 254

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30:11,14,18,24 3 198:12 200:13 69.50 117:21 31:1 49:11 65:1 30 4:20 37:21 50,000 157:19 6th 63:1,15,19 72:16 78:18 80:24 61:24 94:3,6 166:15 7 81:2 96:12 108:14 500 15:18 47:3,5 113:17 117:10 70 4:10 113:18 108:15 127:6 72:21 88:21,22 132:22 167:23 154:17 132:23 133:13,21 201:19 169:10 700 99:7 134:3 135:1 177:4 500,000 106:7,7 30,000 135:24 703 3:20 19:4 2010 94:6,8 108:11 166:14,17 136:2 146:13,21 21:10 23:17 24:7 2017 1:22 5:3 509 51:10 300 133:3 164:21 24:20 29:23 39:25 210:18 51 36:2,24 3000 1:20 5:5 40:10 44:1,10 205 73:23 52 3:18 303-4568 2:7 46:10 51:1,5,14 209 210:8 55 53:9,11,21,25 30th 69:16 52:2,23 55:14 20th 94:6 572 127:15 31 4:21 73:20 74:8 57:12 58:6 60:5 21 4:5 62:19,21 573 127:12,16 74:13,23 109:13 67:5 72:8 74:3 212 2:16 131:11 109:15 77:5 95:1,8 22 4:7 64:11,16 576 60:7 35 59:9 61:21 100:13,18,22 22nd 61:9 58 3:20 187:24 101:13 123:21 23 4:9 67:12,15 589-4621 2:16 3654 62:25 127:10,22 128:18 106:16 5th 56:15 38 3:16 129:12,18 130:6 236 70:7 39 125:1 6 130:10,25 131:5 24 4:10 70:2,5 3rd 195:22 6 3:9 28:14 44:10 70s 136:14 137:8 25 4:11 71:25 72:3 4 81:6 137:13 140:17 131:15 161:4 6-2001 3:21 187:19 163:5 167:23 4 186:4,5,10 6.3 81:7 714 127:9,22 129:9 169:10 187:24 4.8 72:25 60 3:22 28:25 129:17 250,000 104:10 400 13:10,12 14:10 135:14 161:15 715 127:9 26 4:13 39:18 73:9 14:13 50:6 162:21 206:1 716 127:21 73:12 41 61:6 110:19 600 63:16 72 4:11 26th 1:21 5:3 45 2:14 600,000 104:10 73 4:13 27 4:15 74:5,8 465 2:5 61 3:24 4:3 74 4:15 116:12 4th 58:24 62 4:5 75 1:20 4:17 5:5 27509 5:6 5 63 61:21 75,000 166:15 279 60:11 5 81:16 124:19 64 4:7 133:23 777 53:5 28 4:17 75:1,4 5.1407 63:9 134:2,20 135:2 7th 94:8 29 4:18 92:23 93:1 5.25 73:25 64.3 133:6 93:2 8 5.375 73:25 64.6 132:24 2:14 194:13 8,135 104:19 50 36:1,3 37:1 646 195:25 2:25 194:17 8-1-05 4:8 58:25 61:10 63:1 65 61:7 8-31-91 4:16 105:15 112:24 66 62:25 80 189:1 161:15 162:21 67 4:9 163:5 185:22,23

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[80s - actual] Page 3

80s 184:19 186:19 150:19 178:24 71:16,18,19 72:5,8 95:16,17,18 96:5,6 186:20 187:22 able 18:10 21:11 72:15 74:3 75:4 96:6,14,16,18,21 188:1 194:25 26:1 27:8 30:21 77:5,19 78:3,9 96:22 97:7,14,17 195:2,19,21 32:11 35:9 82:22 84:7 95:1,8 96:20 97:18 98:10 99:12 197:17,19,24 84:17 90:8 104:7 96:23,25 97:5,16 99:25 100:11,12 826,162 117:20 115:13 124:17 97:19,24 98:3,9,12 100:17 106:18,22 83 121:25 128:19 136:3 98:17,21 99:17,22 124:18 127:14 87 201:17,20 202:1 138:14 150:20 100:2,4,6,8,13,18 128:6,9 133:2 203:2 166:1 175:5 100:22 101:13 134:12 135:25 885 195:22 181:17 102:5 103:18 137:10,12 160:8 8th 70:24 abroad 7:7 106:6,8,14 122:2 162:8 163:5 164:9 9 absolutely 85:25 123:11,21 127:10 164:9,10,11,21,22 86:24,24 123:4 127:22 128:7,19 165:5,15,20,24 9 80:22,23 accent 146:7 129:12,13,15,18 166:5,6,13,23,24 9.7 71:8 accept 107:15 129:18 130:6,10 179:15 187:16,18 90 62:3 122:25 117:6 130:11,12,17,25 188:8 197:14,21 173:11 176:13 access 84:17 85:5 131:5 158:8,12,16 197:21,22 203:9 908 2:7 115:18 116:7 161:11,22,25 accrued 125:9 90s 19:11 24:19 accident 87:8 162:2,4,22,24,25 accurate 50:19 28:3 34:14 187:20 119:17 163:1 164:24 82:10 91:4 92:1,3 914 2:23 accommodated 165:5 166:15,16 95:5 102:24 103:3 92 4:18 12:1,2 193:6 166:16 169:20 103:22,24 112:1 91:7,8,16 123:2 account 3:20 4:17 177:17,17 178:16 112:15 126:24 128:11 19:4 21:10 23:12 178:17,19 195:25 133:18 93 12:3 17:21 18:3 23:14,17,18,24 196:2,10,18 accurately 103:6 91:7 24:7,8,20,21 25:5 accountant 89:24 accusations 118:6 935-6857 2:23 25:8,10,11,20,24 90:9 115:4 163:12 acknowledge 94 4:20 16:4 17:21 27:6 29:24 30:3 206:6,10 123:5,18 18:4 68:20 91:6 30:16 34:3 39:25 accountants 165:6 act 34:16 98 20:12 21:3 40:10,22 44:1,10 accounted 37:12 action 89:17 113:9 138:21 46:10 47:4 48:4 accounting 37:8 106:18 99 116:13 49:1 50:25 51:1,3 90:10 162:10 active 125:2 998,461.94 39:21 51:5,7,9,10,14 206:8 159:11,13 9:07 1:22 5:3 52:1,2,23 53:18,25 accounts 24:11 actively 31:17 a 54:8,9,11 55:14,19 27:4,5 32:2,5 33:3 102:12 a.m. 1:22 5:3 55:20 57:12,18 33:6,9 34:2,8 activity 16:13 38:8 57:25 58:4 76:23 58:7 59:14 60:5 40:21 45:19 47:1 67:2 72:16 102:16 77:1 64:20 65:17,20,21 50:25 52:7 66:23 114:11 ability 7:4,7 32:7 65:22 66:6 67:5 70:17 71:21 79:1 actual 87:7 105:4 39:11 41:16 67:19 67:20,21 68:21,22 82:4 91:19,19 164:1 170:4 124:11,12 132:7 69:2,9 70:5,24 95:2,3,6,9,11,15

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[ad - asked] Page 4

ad 140:10 agreements 79:22 annual 96:15 appropriate 84:14 adding 118:14 79:25 80:9,13,17 100:11 102:15,18 approximately addition 47:8 95:8 91:24 131:4 202:7 125:5 81:18,20 101:25 additional 81:16 202:10,12 204:15 answer 20:15 114:10 95:3,11 204:22,24 205:19 102:17 103:9 april 1:21 5:3 adjourned 209:17 206:21 207:1,4,13 148:17 153:15 64:11 72:16 admit 122:17 207:16 answered 95:22 arb 138:6,7 152:8 admitted 123:1 ah 176:25 answers 210:6 152:9 168:1 175:9 adv 185:12,17 ahead 8:3,3 58:22 anybody 17:2 197:10 advantage 179:17 94:14 144:15 85:21,21 86:16,20 arbitrage 12:6,9 204:5 184:23 115:6,12 116:10 34:20 38:5 82:4 adversary 5:13 aip 63:1 120:16 125:18 88:4 93:20,25 advertise 118:19 airlines 203:13 126:17 166:20 108:25 125:3 advised 22:9 alive 205:22 167:8 170:16 137:2,21 138:22 advisor 27:12 allowance 27:8 180:1,2,24 182:2 139:12,17 140:18 70:18 allowed 25:11,24 183:19 201:1,3 140:22 144:24 advisory 17:10 87:15,23 88:10 205:15 149:7 150:10 19:6 21:20 23:3 allows 34:4 anybody's 105:10 151:19 152:7 23:21 26:15 27:11 alpern 161:12,17 anymore 178:18 154:4 155:13 28:5,20 30:17 161:17 162:23,24 190:16 157:16,25 167:8,8 31:18 38:13 40:3 163:11 164:10 anytime 30:14 167:11 168:1,25 44:24 50:5,7 amanda 2:12 6:4 anyway 157:6 170:3,11 188:23 59:24 62:9 74:10 america 32:16 205:16 189:16 190:6 81:22 101:22 amf 42:1 apologize 7:16 8:2 197:24 107:3 136:13 amount 16:20 8:3 arbitrageurs afein 2:17 27:23 28:16 29:20 apparently 36:12 145:25 146:8 afternoon 132:21 33:20 80:12 appealing 147:21 148:11 150:22 agency 210:15 105:10 116:23 appearances 2:1 area 126:7 agent 159:3,4 117:14 137:1 3:1 areas 23:1 ago 33:19 84:22 156:10 163:6 appears 102:9 argued 6:16 92:7 119:16 167:4 appendix 4:18 202:23,24 149:10 204:17 amounts 24:19 93:2 arguments 114:9 agree 117:8 57:19,19 apples 118:14 arm's 202:12 121:21 123:24 analysis 110:20 applicant 1:6 5:9 army 89:2 125:14 127:21,24 analyze 36:17 applies 157:4 arose 21:19 129:17 132:17 199:2 apply 157:3 arrangements 151:11,13 analyzed 110:22 appointment 32:10 45:11 207:1 agreed 192:6 andy 208:6 147:15 arrest 108:8 agreement 27:17 annette 10:11 14:8 appreciate 147:20 asked 52:8 84:23 86:3,7 131:17 82:3 83:4,18 149:20,21 102:9 108:7,16 84:10,11 90:16 109:1 120:22

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[asked - bears] Page 5

124:9 132:5,11 available 83:24 background 115:4 barclays 99:22,24 146:4 165:3 102:21 107:1 115:10 100:25 101:1,1,3,5 174:22 204:14 112:1 119:20 backwards 144:25 101:7,10,11 102:4 asking 118:4 121:14 133:2 168:7 based 106:25 167:25 156:5 157:19,20 bad 122:18 135:23 129:3 163:6 183:6 aspect 126:9 157:23,24 190:14 142:24 basically 14:3 ass 142:18 144:25 avellino 82:5,6 bail 146:17 18:24 19:3 22:24 asset 71:7 161:11,17,24 baker 2:13 6:2,4 27:4,14 28:7 assets 21:15 24:14 162:23,23 163:11 bakerlaw.com 29:17 33:12 35:14 122:6,9 124:3 163:17 164:10 2:17 45:14 46:8 48:12 assume 74:11 166:25 198:3 balance 81:7 49:23 50:3 54:5 102:25 103:11,23 avenue 2:5 96:15 128:8 57:16 80:17 124:7 186:1,1 average 35:17,18 balances 100:11 104:24 110:21 187:21 35:20 36:3,25 122:2 112:6 136:24 assumed 129:24 37:6,9 84:14 bank 23:12,14,23 172:22 201:5 200:9 103:1,10 104:3,18 24:7,20 25:8,10 basically's 165:1 assuming 53:15,16 117:23 118:1,9 27:18 32:15,15,17 basis 17:7 57:3 103:14 134:6 avoidance 106:18 32:18,19,19,19,20 59:21 65:5 130:14 assumption aware 10:17 33:8 32:23 40:25 41:12 175:25 176:11 124:10 45:6,8 81:23 56:5 70:18,19 201:4 at&t 140:5,15 89:24 163:16 78:5,6,7,10,12,16 basket 35:6 74:20 attack 206:3 164:12 182:25 78:19 96:19 99:11 baskets 88:6 attacks 206:16 b 102:4 106:4 bates 42:20 53:4 attention 54:22 129:13 133:2 56:17 58:16,17 baby 140:6 104:13 159:1,9 160:2,3,6 60:6 61:22 62:25 back 5:21 21:15 attorney 120:21 160:7,13 171:17 68:7 70:7 29:6 58:3 76:25 121:2 172:8 196:5,9,14 bear 4:7 8:19 91:17 98:22,24,25 attorney's 9:24 196:14 28:10 38:14 46:13 102:21 113:21 attorneys 5:15 bank's 78:9 160:7 64:11,20,22,23 121:4,19 122:5,11 108:9,9 bankers 32:17 65:2,9,11,12,18,20 126:3 132:18 attractive 169:13 99:17 65:24 66:14,17,20 135:7 136:10 audited 16:16 bankruptcy 1:1 66:23 67:23,25 144:13,20 146:21 august 64:12 74:8 5:12 8:22 9:1 68:15 69:4 77:9 149:4,5 153:25 74:12,23 94:6 banks 32:2,4,11 78:3 100:2,22 165:15,20 175:9 authorities 102:20 32:24 45:11 54:7 123:6 147:7,10 177:2,8,9,10 179:2 authority 40:20 78:4,14,15,20,25 178:2 188:19 182:23 184:16,19 41:18 57:5,7 79:8 96:14 140:11 189:10 194:15 197:6 authorized 29:8 159:7,20,24 160:7 bearing 19:12 backdate 10:19 29:10,15 59:21 172:10 195:17 54:11 55:20 73:24 14:14 automatically 197:4,5 bears 61:22 62:25 backdated 10:12 34:4 70:6 14:9 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 217 of 254

[beat - bought] Page 6

beat 146:13 better 17:23 billions 57:20 187:12,23 188:2 began 11:7,16 115:10 191:8 65:10 134:17 200:17 203:3 81:24 91:8 192:9 193:4 bills 18:25 19:9,11 bonds 24:16 35:6 beginning 16:4 beyond 89:4 19:15 21:21 46:25 65:23 83:9,20 119:25 135:8 bienes 82:5,6 70:14 71:5 72:6 88:5 110:24 159:10 163:16 163:20 167:1 185:23 111:18 112:7,7,12 194:16 198:3 bio 51:18,21,22 125:6 136:3 139:9 begins 58:4 93:14 bienes's 166:12 bit 9:20 54:15 90:1 139:11,12,21,24 126:4 big 91:21 128:5 95:24 199:7 140:2,20 141:5,15 behalf 1:17 2:2,10 129:6 131:17 blame 113:2 147:25 148:3,4,4 2:19 5:21 37:25 134:12 137:10,12 bless 176:6 158:21 163:2 93:7 107:6 140:13 145:11 blmi 95:19 167:17,17 169:17 behavior 9:17 161:5,7,10 174:7 blmis 95:9,12 186:22 187:7,13 believe 11:4 70:11 175:13 178:19 96:13 97:13 99:15 188:7,9 197:15 73:12 85:13 91:3 179:7 185:3 187:4 107:3 208:13 203:1,4,6,8 97:12 169:6 179:6 187:12,15,17,25 bloomberg 3:16 bongiorno 10:12 179:8 180:1,25 188:2,8,21,22 13:19,20,22 14:2,3 14:9 82:3 83:4 182:2 183:19,24 191:24 192:11,21 39:6,7,13 40:14 bonuses 129:2 186:13 193:10 197:9,9 41:5,5 43:14 bonventry 37:20 believed 85:12 198:5,19,20 199:4 blotter 48:7 49:23 82:2 90:24 bell's 206:3 207:22 208:24 blotters 48:8,12,19 book 111:10 113:6 bells 140:6 biggest 122:12 bny 30:2 129:15 114:15 bending 145:12 bill 4:21 39:21 129:18 130:11,12 bookkeeper 89:6 benefit 12:15,18 109:16,22 board 208:10,11 bookkeeping 17:1 12:22,24 40:2,5 billion 9:4 27:20 209:12,13,13 books 134:6,8 101:22 28:9,14,25 44:10 bob 209:2 171:10 bernard 1:8,12,16 44:17,18 71:8,9 bold 102:9 borrow 25:25 26:5 3:8 5:9,14 6:1,9 72:18 80:23 81:6 bona 138:25 26:6,7 78:14 69:18 81:7,12,16,18 bond 72:14 83:2,3 136:2 160:9 bernie 52:22 127:2 124:20,20,22 83:9,19 111:6 borrowed 78:6 146:19 147:17 127:7 128:8,25 112:11,18 114:9 boston 206:3 177:22 181:15 129:3 131:9,10,11 114:19,23 116:21 bothered 122:25 182:5 183:21 132:24 133:6,14 125:9 137:2 bottom 58:24 185:4,19 189:14 133:23 134:3,20 138:12,15,19,20 93:15 96:9 106:17 194:11 199:23 134:25 135:2 138:24 141:6,12 bought 13:6 14:12 bernstein 6:16 185:6,7,9,11,13,16 141:18 142:5 25:16 33:21 35:18 11:10 185:17,18 186:1,2 144:5,20 146:5 40:18,19,19 65:23 best 9:13 11:23 186:3,4,5,5,10,11 149:19,20,22 66:11,17 72:15 28:4 50:21 67:18 199:12,12 208:15 150:6 151:5,22 73:8 83:9 84:7,10 71:15 82:21 92:8 208:18,20,22 167:17 169:2,7,8 115:25 120:7 121:12 198:7 170:13 187:2,6,9 121:5 138:21

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[box - cash] Page 7

box 159:11 191:3 68:3 88:1,4 89:16 149:14,17,18,22 124:12 128:9,15 boys 113:7 198:20 97:5 98:2,13,14 150:1,5 151:4,5 137:3 141:25 brain 198:9 103:17 105:10 152:8 156:8 144:24,25 146:4 brains 146:12 106:13 107:3,16 157:18 158:6 149:10,16 151:7 branch 62:16 113:9 114:4 163:1 175:1 190:7 165:2,14 166:7 break 51:17,18,20 118:17,25 121:2 buyer 125:9 168:5 173:7 177:1 51:21,22 57:22 122:5 124:16 buying 11:12,14 177:6,21 194:21 76:17 125:23 126:9 130:20 11:24 12:2,3,13 200:1,2 206:2 135:22 140:15 135:13,18,19 16:5 17:22 20:1 calling 152:8 147:22 148:16 136:7,10,13,16,20 26:23 28:1 31:11 161:2 199:24 136:22,23 137:3,9 34:9 35:7,11,11 calls 25:5,6,11 breaks 49:4 140:13 142:2,4,8 36:1,2 44:13 46:4 117:3 128:19 brewing 22:4 143:11 145:9,21 47:14 66:15 85:1 129:22 130:16 bring 31:14 145:24 146:1,15 91:4 109:6 114:2 177:5 broker 15:7 17:14 146:18 147:1,4,6 150:10 156:6,17 canada 4:17 75:5 33:4 65:25 69:6 147:17,18,19 159:22 166:1 canadian 75:6,11 97:2 106:4 120:3 148:9,12,14,15 174:23 178:24 cancer 208:5,8 brokerage 14:7 149:6 154:24 buys 119:7 capital 156:11,14 15:4,9 26:2,8 155:14,17,18,24 c 156:15,16,23 33:14 51:4 65:8 156:7,21 161:2,9 158:11 163:14 c 210:1,1 65:21 69:24 96:7 177:24 178:1,5,7,8 169:5,15,22 calculations brokered 33:1 178:9,11,11 188:23,24 189:15 133:13 brokers 140:12 180:19 186:12 caption 210:5 calculator 143:10 brook 2:22 187:18 189:9 captioned 100:10 143:13,17,20 brooklyn 201:2 199:18,19,21,24 capture 175:16 144:5 brother 64:3 200:13,22 201:3 care 20:24 42:8 calculators 143:6 87:18 201:10,19 82:16 180:24 call 14:16 25:3,3 brothers 28:10 businesses 96:13 181:4 182:21 41:24 54:7 85:21 38:15 46:13 77:15 bust 203:13 carl 156:18 157:11 87:24 113:6 105:13 butner 1:21 5:4,6 189:11 199:5 116:17 117:6,7 brought 30:16 buy 12:9 21:11 200:23 202:14 136:12,20 137:9 114:16 26:16 27:1,13 205:21,25 206:12 138:17 160:17 bubble 22:18 29:8,10,15,18 35:2 carolina 1:21 5:6 165:4 170:1 181:6 building 13:4 35:13 57:14,15 210:2 181:13 built 47:1 125:11 66:14 68:7 105:20 carried 14:10 called 13:10 25:3 bunch 162:8 105:25 106:11,11 case 5:7,11,13 26:10 34:21 48:5 166:23 111:24 136:21,21 210:11,13,14,17 48:7,21 51:2 business 9:10 15:6 137:4 138:14,19 cash 44:13 54:9 67:24 75:4 82:25 15:16 20:3,6 21:2 138:23 141:12,13 55:17 60:21 89:17 105:24 27:15 31:9 38:1 141:17,17,18 107:23 108:1 106:10 115:5 64:22,23 65:2,8,11 144:16 148:3,4 117:6 125:11 116:22 122:22 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 219 of 254

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152:17,22 153:1 76:3,6,13,16,20 check 53:16 182:1 clearly 17:4 cashiering 55:5 77:2 80:7 82:16 checked 75:24 162:19 169:3 category 45:24 82:20 86:1 92:25 checking 33:3 client 15:5,7 16:17 caused 45:22 94:5,17,18 95:23 checks 51:7,7 21:8 23:18,19 81:17 96:1,8 99:3 101:8 chemical 32:19 24:14 25:9 40:21 caution 9:19 101:12 109:15,19 54:25 55:21 59:5 83:13 88:1 106:3 cd 56:25 62:14 125:22 126:6,20 207:9,10 106:4,9 156:20 cds 57:17 127:4,21 131:20 chicago 159:4,5 163:6,7,10 169:5 centralized 111:25 131:23 151:12 160:15 169:25 179:15 centrex 69:18 153:9 154:8 157:5 chief 165:23 clients 9:14 10:8 certain 9:15 16:8 157:17 171:5 children 206:23 16:15 17:25 18:13 18:9 27:25 67:22 183:25 194:7 206:23 21:9,11 24:11 83:11 84:13 89:17 207:25 209:10 chinese 87:25 31:25 45:18 69:3 113:1 115:19 chaitmanllp.com 144:24 91:21 92:16,17,20 136:25 191:2 2:8 choice 192:10 124:24 129:7 196:9 challenging 189:4 chronologically 131:3,17 136:4 certainly 65:12 189:18 135:10 145:11 146:25 115:10,11 124:22 change 34:10 circumstances 156:18 161:7,8,10 194:22 114:4 125:23 131:7 161:13,15 162:16 certify 210:4,10 131:24 cites 114:8 162:16,19,21 cetera 106:24 changed 24:5 citicorp 105:14 164:16 165:7 chairman 89:21 113:20 204:25 claim 164:19 166:10 168:19 147:9,11 171:16 characterize claims 12:20 178:22 187:3,13 172:8,9 179:14 136:15 clarify 129:8 189:10 192:11,21 195:3 charge 57:9 87:18 141:1 195:23 193:11 199:4 chaitman 2:3,4 3:9 87:20 99:7 210:16 classic 150:9 200:22 201:15 5:20,20 6:13 7:19 charged 130:19 claw 5:21 clipping 178:2 7:21,24 8:4,5 189:23 clear 32:8 41:17 close 133:14 10:21,24 11:1 charitable 208:4 41:19 52:3 171:14 144:20 150:23 20:17,20 21:1 charles 97:3,7,8,9 188:2 176:9,16,21 177:2 38:20 39:3 41:22 97:24 clearance 32:13 179:11 180:21 42:4,7,10,13,22,24 chart 176:10 33:5 105:1 192:22,25 193:22 51:15,25 52:5,22 chase 3:18,22,24 cleared 101:6 203:19,24 204:4 53:3,6,8 56:21 4:3,5,11 27:17,20 clearing 24:24 closed 165:20 57:21 58:5,8,10,13 32:18 38:15 44:18 25:7,12,20 32:2,5 176:14,22 58:17,21,23 60:4 46:14 50:25 52:1 32:7,10 57:10 closer 19:16 206:9 61:2,14,19 62:18 53:17,22 55:8 65:25 79:1 98:6 closes 182:22 62:24 64:6,10,18 59:3 62:20 63:4 98:10 128:13 closing 117:21 67:14 70:4,22 72:3,5,17 77:17 158:17,19 159:3 142:25 165:15 72:2 73:11 74:7 82:4,6 95:2,10 159:15 195:11 166:4 180:11 74:17,22 75:3,19 197:14 199:6

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clothmasters 4:15 commissions complete 10:1 confirmations 74:9,9 178:3 15:10 33:5 77:21 120:2,6,9,14 club 162:12 commitment 79:14 111:15 178:23 clvs 3:3 17:25 18:14 completed 87:4,5 conflict 87:11 cockamamie 193:17,18 completing 91:9 confuse 99:9 189:25 committed 11:18 compliance 155:6 confused 40:23 codified 203:5 18:12 complicated 89:15 96:2 cohmad 66:1,3,4 committee 89:21 complicit 9:17 congressman 67:21 committing 180:3 comply 157:10 102:11 coincidentally 181:2 183:20 composite 4:9 connect 181:10 191:11 commodity 188:12 computer 13:6 connection 155:12 collapsed 8:17,19 188:15 189:19 14:13 consensus 185:8 collapsing 30:19 common 112:13 computers 13:16 conservative collateral 24:16 116:15,20 117:6 14:16 49:19 143:9 175:11 collecting 125:10 141:17 168:21 144:4 consider 17:2 97:4 collection 69:14 175:11 conceal 114:1 98:2 112:20 160:18 communicate conceivable 12:21 159:13 167:9 college 142:3 86:20 concept 25:23 consideration come 25:4 42:14 communications 143:22 106:18 134:18 83:18 84:14 88:17 69:20 concern 56:8 considered 93:4 130:6 136:9 communicator concerned 45:2 145:21 181:19 158:21 177:9 86:15 90:16 96:23 consistent 46:20 178:9,9 companies 117:18 128:25 consists 67:16 comes 157:11 189:25 conclude 70:20 constant 113:19 193:8 company 16:8 concludes 209:15 constantly 18:15 comfortable 91:13 20:10 21:25 22:6 conclusion 120:11 148:22 91:15 32:17 52:13 120:20 121:8,16 constituted 118:1 comical 118:7 116:17,18 117:3 121:23,24 126:8 consult 57:2 coming 31:23 142:1,4 146:2 conclusions contends 117:12 115:20 199:20 162:18 164:18 115:21 119:22 contents 3:7 commencing 1:22 165:8 conditions 18:10 continental 32:20 comments 110:9 company's 116:18 18:11 continue 12:8 110:14,21 112:5 117:2,7 confessed 6:19,22 193:24 115:17 compelled 198:16 6:25 7:3,6 8:6,16 continued 4:1 12:5 commercial 32:15 competing 113:24 81:19 86:1 continues 174:6 54:25 55:1,21 119:5 150:24 confessing 9:6 continuing 20:23 56:9 59:3,6 60:13 178:12 confidential 1:1 continuous 42:14 62:14 63:4,14,22 competitive confirmation continuously commingle 34:4 113:13 35:22 36:20,21 111:24 commingled 33:23 compilation 38:22 37:3 120:12 163:3 contract 200:5,12 130:11 41:24 200:7 200:14 202:9

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210:12 155:13 157:16 correctional 1:20 202:19,22 203:17 contracts 199:25 158:25 159:3,4,8 5:5 210:16 202:13 163:2 168:1 175:9 correctly 70:25 covered 23:15 contrast 111:15 186:22 187:2,6,7,9 91:16 127:5 58:12 133:9 controlled 51:3 187:12,13,23 128:21 167:12 172:17 96:13 147:5 188:2,7,9 197:10 correspondence covering 160:22 conversation 56:5 197:15,24 203:1,3 4:20 covers 32:21 61:5 108:5 109:2 203:4,6,8 cost 39:21 131:17 cow 193:11 142:20 convertibles counsel 2:1 3:1 5:7 crank 143:8 conversion 11:7 143:14 144:1,2 6:3 210:14 crash 91:21 33:2 83:5,16 145:8,14 count 198:3 134:14 193:8 140:23 141:2 converting 151:23 counter 110:25 198:13 201:17,25 160:18 167:13 convince 9:15 112:9 113:18 203:2 conversions 28:2 convinced 178:14 118:12 crashed 22:17 convert 33:2 cooper 204:16 counterparties 203:6 116:19 117:5 coopers 206:6,7 191:25 crazy 166:8 141:13 151:22 copies 3:16 4:20 counterparty 169:23 181:1 159:1,2,9 160:1,4 copy 39:5 123:13 191:17 200:25 160:6 140:9 counting 81:6 create 39:12 85:19 converted 116:22 corner 100:14 164:23 141:15 125:6 corporate 125:8 country 90:10 created 128:10 convertible 12:6,9 corporation 1:5 112:11 130:9 24:12 34:20 35:1 5:8 24:25 25:7,12 county 210:3 creating 9:16 35:5 38:4 83:1,3,6 98:7 couple 7:10 8:13 credible 6:17 83:9,19,20,24 88:5 correct 8:21,24 coupon 125:5,10 credit 152:1,22 93:20,25 108:25 9:5 11:9 12:7,14 course 71:12 crime 9:6 17:16 111:18 112:7,10 13:9 14:23 15:1 120:23,25 130:24 criminal 6:23 112:12 114:18,23 16:2,19,21,22 133:5 140:17 crisis 18:7 135:23 116:14,16,19,25 17:15,19 18:2 148:13 170:18 critical 115:15 117:1 125:3 137:2 19:5,8,10,19,21,24 173:14 174:20 criticizing 110:19 137:21 138:8,9,10 21:23 23:4 27:21 176:2,2,3 177:15 126:17 138:11,13,19,20 32:3 38:19 41:18 182:11 188:17 cruel 114:25 139:1,12,13,16 47:10 48:22 50:12 192:19,20 crying 206:1 140:2,12,20,22 60:19 67:8 70:22 court 1:1 5:12,17 cuban 135:22 141:5,12,15,18 77:20,25 79:13 6:6 122:24 148:18 curiosity 149:1 142:5,11 143:24 84:3,19 102:6 194:4 current 15:24 144:5,9,16 145:2 111:8 112:2,18 cover 24:21 25:25 115:11 145:24 146:3,4,11 117:25 128:3,4 31:4 61:3 122:6 currently 108:8 147:3,16,25 148:3 130:1,5 155:15 124:3,17,22,23 custodial 33:6,9 148:4 153:7,14,17 159:19 183:5 126:7 128:15 custodian 96:22 153:21 154:3 210:9 160:21 198:16,18

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custody 25:20 62:21 64:16 65:6 168:18 169:3,14 debt 16:17 17:9,17 95:2,9 67:12 70:2 72:8 169:19,20 183:24 26:12 80:12 customary 210:17 73:9 74:5 75:1 david's 85:10 debtor 1:13 customer 15:10 77:8 84:1 92:23 davis 2:3 5:20 deceased 80:5 16:7,8 25:2,5,20 94:3 97:7 101:23 day 1:21 15:15 december 6:19 26:1,4,10,15,20,21 107:23,24 108:2 24:25 33:4 35:3 9:25 30:25 31:1,6 26:25 27:3,6 109:13 117:13 35:13,15,19,22 49:11 61:6,9,15,23 28:24 29:19 30:7 119:6 124:4,8,19 36:24 37:14,17 80:24 81:2 96:12 30:12 31:14 35:22 128:2 132:24 50:20 76:15 97:22 96:12 108:14,15 36:18 37:1,3,3,5 145:10 146:21 98:7,15 104:10,11 207:21,25 44:21 50:16,17,18 148:7 152:14 119:22 120:20 decide 117:5 52:7 71:25 74:10 161:1,6 198:2,6 128:13 170:12 decided 136:6 75:9 81:11 91:18 cut 175:22 184:23 173:1,11 175:24 142:8 147:3 95:17 96:6 97:8,9 185:1 175:24 183:21,23 163:25 97:23,25 98:1,16 cy 147:10 199:22 184:16 186:5,17 decision 9:13 35:4 103:14 105:19,24 d 208:13 210:18 163:23 106:1,5,13 120:24 day's 118:2 decisions 57:6 daily 49:7,8,9 57:3 122:1,8 127:10,14 days 35:25 37:16 106:15 59:21 117:23 127:25 128:18 37:18 84:8 117:4 deemed 34:3 118:9 176:11 130:17 132:23 147:21 158:21 defendant 1:9 dan 49:23 90:24 136:16,20 152:4,5 171:25 173:24 5:10 dark 113:7 152:6,8 155:21,25 176:13,14 186:4 defendants 5:21 data 96:15 102:15 156:1 158:14 187:24 200:8,9 deferred 27:16 111:25 114:8 160:8 170:2 202:24 208:15 deficit 21:13 117:24 196:21 dead 204:20 128:16 date 5:2 36:19,21 customer's 30:15 deal 142:19 define 16:25 20:18 36:23,23 37:14,15 158:15 157:14 187:4,25 96:25 97:16 39:18 95:13 108:8 customers 1:17 191:22 defined 35:17 116:17,23 125:10 2:2 3:15 4:2 11:13 dealer 69:6 106:4 defining 98:21 dated 52:2 64:11 11:25 12:6 17:10 177:24 definitely 173:1,2 64:12 68:20 69:16 17:10,18,22 18:24 dealers 97:2 definition 15:22 73:20 74:12 19:7,18 21:20 111:23 112:10,11 97:18 107:21 david 2:11 6:2 24:23 27:10,11 112:18 118:13 150:9 81:24 83:1 84:11 28:6,21 30:17,20 120:3 definitions 138:3 84:16,25 86:5,13 31:18 33:7,10,13 dealing 55:7 161:9 defrauding 82:5 86:14,17 90:15 33:24 36:9 38:13 deals 123:1 degree 150:7 91:1 108:21 109:3 38:24 40:3 44:1 debate 112:25 deliver 26:2 141:22,23 142:4,9 44:20,24,24 45:7,8 debit 53:10,15 160:10,14,19,20 142:13,16,17 45:15 46:5 52:20 56:14 58:25 59:9 160:23 200:10 143:16,18,23 58:1 59:25 60:2 60:12 81:7 128:8 delivered 66:12 145:6 154:16 60:25 61:16 62:9 195:13 167:25 168:6,16 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 223 of 254

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delivery 26:4,6 derivatives 63:17 199:7 discuss 37:25 41:15 158:22 63:20 differential 21:19 208:12 demanded 124:5 derive 12:15 differently 45:19 discussed 95:10 demanding 30:7 describe 59:16 difficult 118:8 disease 206:18 denise 1:18 5:17 62:15 82:22 115:2 142:19 192:12 dishonest 10:4 210:23 describes 116:13 diligence 172:11 district 1:1 5:12 department 29:18 desk 85:23 172:11 dipascali 29:12,17 diversified 190:20 55:6 69:12,20 destroyed 120:19 38:18 42:25 43:5 document 4:17 87:12,19,20 88:2 details 106:24 43:22 73:5 39:8 50:21 64:19 departments 123:12 direct 44:3 45:19 67:15,16 68:14 155:4,5 determination 51:16 124:18 72:3,10 75:4 93:4 depending 28:17 106:22 116:8 direction 210:7 93:11 94:19 98:23 28:24 50:1 78:17 determine 79:6 directly 38:17 98:24 99:1,4 80:15 89:16 97:18 92:19 102:3 121:4 47:9 67:25 69:25 109:20 139:23 140:4,4 122:20 127:17 73:3 111:22 documents 4:9 149:24 169:8 149:25 director 49:24 39:4 69:14 93:3 170:9 186:6 determined 84:24 90:24 doing 11:7,11,15 depends 16:25 115:25 116:23 disappeared 133:8 15:6 18:22 26:23 40:17 41:3 49:22 determining 85:17 disbursements 34:19,25 76:12 96:24 97:15 152:4 developed 105:12 51:3 106:23 88:3 92:10 103:18 155:23 156:3,4 113:14 148:10 disc 57:25 58:4 104:9,9 114:2 158:9 160:6 developing 113:12 125:24 126:4 119:2 121:3 122:5 167:20 197:3 devious 86:14 194:16 137:1,7,22,24 deponent 2:19 121:11 disclose 17:17 138:22 140:1 deposed 11:6 diagnosed 208:6 107:10 145:10,11 146:23 deposit 27:19 die 205:22 206:4 discontinued 148:10,13,20 54:20,24 59:13 207:6 120:10 149:9 152:5,5 62:1,12 195:6 died 64:2,5 discount 138:5,7,7 154:1,1,3,14,19 deposition 1:16 difference 25:1 138:9,10,11,22 155:19 158:4 5:4,22 38:22 37:2 124:25 140:18 141:7,12 167:10 170:2 93:12 111:10 different 32:11 141:19 144:6 171:7,13,21 114:16 132:11 35:15 41:25 43:9 149:12 150:9 172:11 179:18,19 209:16,17 210:5 43:9,16,17 46:24 151:4,6 158:3 179:22 180:18,22 210:16 61:4 62:16 66:7 discounted 157:25 182:10,12,13 depositions 90:18 67:17 69:23 87:17 discounts 149:9,10 183:2,7,18 184:3,8 93:21 89:9,23 97:13 discretion 116:18 184:8 185:3,4,5,9 depositories 14:6 119:3 139:2 117:2 157:12 186:11,15,18,20 33:12 159:25 145:22 155:4,5,5,6 discretionary 27:5 186:21,22,24 depository 195:9 162:21 164:10 136:23 154:25 187:1,2,3,7,13,17 deposits 57:11 165:12 167:11 201:4 187:18,19,21,22 168:25 188:3 187:23 188:7,8,10

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188:11,18 189:8,9 110:22 111:17 edward 80:3 entity 23:5 189:12,24 190:1,2 114:8,22 115:1,17 effect 35:5 entries 61:9 191:11,12,18 116:13 118:5 effected 37:5 49:9 entry 53:8 54:16 192:9,14,17 193:7 119:18 121:7,8,10 effective 21:25 60:10,11 63:1,15 197:10,14,15,15 121:18 123:5,23 efficient 89:1 101:2 197:19,20 200:21 129:11 130:5,5 egg 204:2 equal 115:10 201:12 203:4,8 140:23 eight 60:7 93:10 equals 127:19 dollar 56:14 128:8 dubinsky's 90:2 93:15 118:1 148:3 equipment 69:18 dollars 7:10 8:13 93:2 111:15 either 17:21 21:12 equity 74:19 15:18 27:20 28:9 115:11,15 117:11 40:24 81:23 83:4 106:22 116:22 28:25 57:20 65:11 117:19,24 126:8 85:16,16 95:18,19 eric 29:12 38:18 65:13 70:24 71:14 dubious 117:16 106:3,3 125:6 39:16 44:4 75:6,11 83:20 due 131:1,1 152:18 154:6 erin 42:16,18,19 122:16 127:7 172:11 197:3 203:23 error 37:12 129:10 133:6 duly 6:6,10 209:5 errors 90:2 134:17 156:20 e election 33:3 escaped 8:9 186:10 199:12,13 electronic 34:11 esq 2:3,11,12,20 e 2:12 188:19 dot 67:24,24 49:16 113:4,14 essence 57:8 189:11 210:1,1 double 167:16 electronically establish 54:24 earlier 27:24 169:2,7 170:13 52:16 established 106:19 78:22 92:9 195:24 171:23 eliminate 122:15 estate 189:22 earliest 106:7 doubt 75:8,8 127:11,25 190:15 207:11 107:1 draft 160:17 eliminated 120:17 estimate 28:22 early 11:21 17:21 drafting 79:24 122:4 127:13 et 106:24 18:4 19:11 20:2 drafts 33:3 ellen 42:17 204:13 europe 114:4 20:11 31:12 81:23 drawing 115:20 embarrassment 146:8 201:10 92:11 137:8,13 drew 119:22 115:1 european 45:3 184:19 194:25 120:11,20 121:16 employees 24:1,4 145:25 148:11 195:2,19 207:21 drifting 181:9 enacted 34:16 161:8 191:13 207:25 drug 117:18 ends 57:25 58:18 europeans 203:18 earn 59:24 dtc 13:14 40:25 engaged 102:13 evaluation 170:1 earned 19:18 21:9 73:6 77:24 78:9,9 137:21 139:22 events 21:5 earning 21:20 78:11,13 79:8,11 enjoy 12:22 eventually 174:15 53:23 55:11,15 166:3 194:19,22 enriqua 90:17 174:15 193:16 59:19 62:10 196:16,17 197:4 91:1 204:9 earnings 100:12 dtcc 158:18 entered 22:14 everybody 22:19 108:2 159:14 195:24 79:21 22:24 116:3 119:2 easy 109:18 182:1 dubinsky 4:18 entire 31:10 119:4 133:9 eat 75:20 76:17 22:25 24:22 36:12 106:14 114:11 173:16 185:18 economy 8:17 36:17 37:19 85:7 entities 23:2 95:12 186:14 187:22 ed 80:3 204:19 93:6,12 110:17,20 96:24 188:11 190:1

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192:24 193:6,7 40:21 41:19 67:22 expensive 143:10 97:12 100:16 199:9,18 200:1,18 executed 26:20,21 experience 135:24 fairlawn 2:21 201:23 202:3,24 26:22 27:2 34:1 expert 4:21 109:16 fairly 159:11 202:25 203:10 39:7 43:2 49:23 122:22 fairness 119:21,21 206:25 65:6,24 66:18 expire 174:12,14 faith 201:7,11 evidence 67:4 71:23 93:19 98:5 176:17,18 fall 194:10 107:2 111:11 105:5 108:24 expired 174:15,21 fallacy 110:17 210:9 executing 97:7 expires 174:2 false 135:5 exact 81:3 execution 39:6 explain 15:2 34:23 falsely 134:22 exactly 84:24 178:4 62:12 63:8 67:18 familiar 43:12 98:20 109:5 executions 103:2,7 82:12 118:5 121:1 75:16 83:16 85:23 118:18 104:19 172:14 184:21 89:25 90:3,7,11,22 examination 3:8 executor 204:23 explained 26:13 115:13 6:12 132:2 146:20 207:11 191:6,18 families 9:21 10:7 165:22 exhibit 3:16,18,20 exposure 22:12 10:10,13,16 11:3 examined 6:10 3:22,24 4:3,5,7,9 24:17 81:17 88:18 14:10 79:21 80:10 146:20 4:10,11,13,15,17 expression 11:11 80:14 124:13 example 35:25 4:18,20,21 38:21 extent 113:1 129:25 36:16,22,22 40:11 38:24 52:1,20 f family 12:18,25 87:1,18 88:11,19 58:1,6 60:2,5,25 135:25 136:25 f 188:19 189:11 89:25 90:2 96:19 61:4,15,16 62:19 137:11 164:22,23 210:1 103:1 128:6 140:5 62:21 64:11,16 166:18,20 197:21 facilities 32:14 141:22 167:21 67:12,15 70:2,5 203:24 205:18 33:5 169:9 171:1,15,16 71:25 72:3 73:9 206:22 facility 5:5 205:3 207:8 73:12 74:5,8 75:1 famously 200:24 fact 5:22 19:22 exceed 117:13 75:4 92:23 93:1,2 fan 193:9 31:24 32:1 37:9 exchange 66:17,18 94:3,6 109:13,15 far 45:14 90:15 45:6,9 87:16 111:5,6 112:9 exhibits 3:14 4:1 96:23 108:15 89:20,24 91:17 113:10,17 114:9 exist 121:15 121:19 128:24 105:11 107:11 114:20 115:24 existing 69:18 164:8 205:22 113:3 114:15 116:2,4 117:15 exists 143:24 fastest 178:4 116:24 120:13,17 118:12,18,20 expect 167:19 father 136:3 142:3 121:14 122:4 152:20 159:21 168:5 175:13 146:16 161:11,18 140:9 146:19 178:1 203:7 163:21 166:7 152:3,3 164:12 exchange's 113:16 expected 167:7 fathers 201:16 165:2,21 169:25 exchanges 65:24 168:4 170:3,7,16 fault 64:15 181:5,24 196:8 exclusively 23:18 170:20 favor 142:12 fail 160:23 excuse 10:22 expense 23:12 179:5 failed 36:15,16 71:10,12,12 expenses 23:7,8,10 fbi 208:16 fair 7:9 17:5 21:18 execute 15:8 18:10 23:15,23 features 139:5 24:6 44:3 59:23 26:17,19 27:8 62:5 63:24 65:10 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 226 of 254

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151:6 152:8 175:1 176:17,17 191:16 192:18 h 153:25 157:7 178:5,13 179:2,4,6 greedy 192:21 half 8:25 28:9 158:15 170:22 179:10 181:10,16 202:4 30:19 36:3,4 37:1 173:23,25 174:3,6 190:10,18 192:4,5 grew 89:2 148:13 59:13 70:23 174:7 175:9 192:20 193:13,14 gross 102:15 hand 94:22 100:14 177:10 184:16,23 193:15,19,24 group 23:8,9 143:8 144:4 190:9,10,18 191:2 194:12 198:14,15 165:23 191:12 handful 145:25 193:24,24 197:6 199:13 200:10 groups 23:4 147:7 199:13 201:2,5 204:3,10 205:22 guarantee 164:4 handing 93:1 203:11 205:4,4,7 206:4 207:12,13 168:2,4 170:14,15 handle 89:19 205:15 207:17,18 208:16 170:16 190:22 106:2 160:12 goal 59:23 113:22 209:16 191:7 163:12 177:23 169:7 170:13 golden 204:2 guaranteed 45:11 178:16 207:12,14 god 31:13 goldman 2:20 5:25 45:12 141:14 handled 27:4 50:3 goddamned 203:5 5:25 6:8 51:16 150:22,25 168:10 63:25 96:20 goes 25:1,2 93:17 52:3,6,11,15,18 guaranteeing 105:15 145:25 118:22 173:2 64:7 70:15 74:15 167:1 146:1 177:16 174:4 75:20,22,24 80:4 guess 65:19 75:17 handling 160:8 going 7:16,24 9:20 82:18 94:15 82:21 133:19 165:10 207:7 15:15 20:18,21,22 105:13 109:18 guessing 173:3 hands 194:10 22:16 35:10 38:20 127:2 145:22 198:12 handwriting 42:1,3 51:16,25 146:1 147:6,9 guilford 210:3 68:18 56:7 57:24 58:13 205:6,8,10 206:19 guilty 9:12 122:17 handwritten 60:6 61:14 64:10 good 6:14,15 122:20 68:21,23 67:14 70:4 72:2 86:15 94:21 95:20 gun 82:25 hang 151:15 73:11 74:15 76:10 110:5 142:22 gus 147:8 199:22 hanover 32:18 76:12,22 83:12 148:9 151:3 169:6 guy 86:18 142:18 happen 37:11 42:3 115:22,22 117:17 172:1 173:17 142:24 172:1 83:17 89:10 119:10,10 122:11 178:7,9,10 182:17 175:25 182:9 151:16 172:5 122:13,15,17 goose 204:1 186:14 200:22 happened 10:1,4 125:25 130:4 government 27:18 201:21 18:3 37:15 91:20 133:20 138:2 122:15 guys 146:8 150:24 118:19 119:21 146:16,24,24 government's 165:11 172:10 121:7 128:14 148:17 149:19,20 27:16 180:25 183:22,24 142:5,7 165:22 149:21,25 150:21 grand 157:12,15 186:13 191:24 168:8,17 175:25 159:5 160:1 158:6 192:1,4,7,17 180:13 184:14 167:15 168:23 grasp 89:5 193:17,21 201:7 187:17 188:4,9 169:4 170:12,24 great 5:21 145:22 202:1 203:3,8,18 190:20 204:18 171:15 172:20,21 171:17 179:8 205:19,20 206:14 happens 174:9 173:3,4,6,7,20,22 181:25 182:19 happy 182:23 173:23 174:5,7 189:16 190:25

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issuing 117:2 june 58:6,24 62:20 183:17,20 203:12 115:4,8,24 116:1 163:24 164:13 63:1,15,19 206:25 207:3,16 116:10 118:3,3,5 j k 209:6 118:13,18,20,21 know 9:14 12:1 118:22 119:1,2,3 j 2:11 6:2 k 1:18 80:5 210:23 14:15,17,17,18 119:13,16 120:8 jaffey 209:2 katz 174:22 15:5,6,14,16 17:3 120:19,20,23,24 jail 205:4,5,6,7,8 keep 6:8 11:18 17:3 18:6,21 121:1,3,6,7,15,15 205:13,15 18:14 44:12 55:17 19:14,16,25 20:15 121:17,23,24 jamie 183:10 87:13 98:8,8 22:11,12,13 25:25 122:2,5,19 123:3 january 21:25 146:16,23 174:2 26:21 27:8 28:2 123:15 124:18,21 69:16 73:20 192:23 193:1 28:24 31:3,8,23 124:22 125:20,20 jeff 202:14 209:3 201:8 32:15 33:3,5,21 127:13,24 128:1,8 jewish 146:7 keeps 120:17 34:2 35:7,20 36:2 128:17,22,24 jim 177:14,19 ken 3:3 5:1 36:8 40:6,12,15 130:8,9 131:3 178:6 180:4,5,6,16 kept 18:24 47:17 43:11 44:22 45:16 134:5,16,16,18,20 180:19 181:9 47:19 104:21 46:6,8,24,25 47:2 134:25 136:24 jim's 177:16 148:13 47:25 48:24 49:22 138:5 139:21 job 64:4 90:20 key 119:12 173:19 52:4 53:14,25 140:5,6,11 141:11 142:10,24 143:23 174:8 175:4 54:8 56:2,3,8,9,21 141:16,17 142:6,9 jodi 83:4 84:11,11 kick 172:21 57:10 61:20 62:15 142:18,21,24 joke 146:3 kid 142:21 201:1 63:13,13,21,22 143:2,11,14,15 jones 98:16 kidding 8:4 64:7,24,25 65:5,6 144:4,12 145:2,10 journal 140:10 kids 197:22 65:8,20,22 68:12 145:15,16,20,21 journaled 78:10 207:12 68:24,25 69:21,21 146:6,10,14,22,25 jp 23:17 28:11 kill 204:1 69:22 70:10 72:12 147:1,10,11,17,20 32:19 41:14 60:12 killed 193:13 72:14 75:15,16,16 147:24 148:13 62:16 63:14,20 killing 189:17 75:18 76:11 78:17 149:14,21,24 78:16,19 207:8,9 kind 12:15 14:13 78:24 81:4 84:11 151:4 153:5,15,25 jpmc 123:9 27:15 43:9 47:17 85:3,8,8,10,17 154:13,13,17,20 jpmorgan 3:18,22 65:2 115:14 133:5 86:12,13,14,23 155:3 156:3,13,17 3:24 4:3,5,11 145:10,18 87:3,15 88:24 156:23,25 157:10 27:17,20 38:15 kinds 139:2 89:7,12,19 90:4,11 157:19 158:9,11 44:17 46:14 50:25 168:25 90:19,21,23 91:12 158:15 159:21 52:1 53:17 55:8 knew 8:6 9:11 91:16,22 92:7,16 160:11,14,17 59:3 62:20 63:4 46:7 56:3 87:6 96:3,18 97:4,8,11 161:4,7,9 162:6,9 72:3,5,17 77:17 122:7 136:17 97:17,21,23 98:20 162:15,20 163:1,2 95:2,9 144:8 145:3 101:9 104:8,9,11 163:15,24 164:1,6 judge 6:16 11:10 163:18 164:8 104:12,12,13,23 164:15 165:3,3,4,5 35:9 122:23 168:19,23 169:3 104:23 108:10,10 165:6,11,12,16,17 150:20 169:15,19 179:16 109:22 110:16,17 165:19 166:4,8,9 july 11:21 179:17,19,25 112:7,15 113:1 166:13,23 167:15 180:19,24 182:14 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 232 of 254

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167:16,20,22 knowing 122:9 laughed 85:2 207:8 168:17,18,19,20 128:5 122:24 lewis 147:10 169:4,10,11,15,19 knowledge 10:15 laughter 8:1 199:22 169:24 171:23,24 11:1 37:24 93:25 law 108:19,20 liabilities 21:15 171:24,25 172:5 112:13 164:4 136:3 146:16 122:8 124:3 172:13,16 173:13 known 49:3 86:15 161:11,18 163:21 liability 20:10 173:15,17,24 93:19 116:24 164:25 166:7 21:24 22:6 26:12 175:7,23,24 176:1 171:9 189:11 122:3 124:8,19 177:21,22 178:2 knows 85:14 116:3 lawyer 89:25 lieberbaum 178:15,19 179:11 119:7 lay 83:5 141:25 142:1,4,12 179:22 180:7,10 konigsberg 205:4 leading 20:23 lieberbaum's 180:16 181:3,15 205:8,10 206:5,9 learned 114:24 143:9 181:23,23,25 kostin 80:3,3 199:22 life 7:12 8:14 9:8 182:3,3,13,18 204:19 leased 13:3 lifting 151:7 184:6,15 185:2 kugel 81:24 82:2 leasing 189:24,25 light 11:11 186:4,4,18 187:24 83:1 84:16 86:5 leave 194:6 likelihood 204:17 188:6,6,15,25 86:13,14,18 91:1 ledger 48:21 49:1 limit 175:5 189:1,1,2,14,15 109:3 141:23,23 50:13,17,17,18 limitation 7:4,7 190:1,2,10,11,13 142:4,9,13,16,17 ledgers 48:1,4,14 limited 20:10 190:16,18,18,21 143:17,18 145:6 48:20,24 50:23,24 21:24 22:5 145:15 190:23,23 191:3,3 154:16 167:25 52:6 145:16,17 147:2 191:6,8,10,21 168:6,18 169:3,14 left 94:22 100:14 156:10,24 161:12 192:4,8,16 193:1,3 169:19,20 133:3 178:3 161:15,16 162:3,5 193:10,11,13,18 kugel's 82:8 90:15 leg 151:7 162:11,25 163:8 193:20 194:5,23 168:16 legal 5:2,18 23:2,5 164:11,17 166:21 197:21 198:1,2,7 l 45:16 172:21,22 198:11,22 199:1,5 legend 37:4 limiting 150:16,18 l 1:8,12,16 3:8 5:9 199:9,10,11,17,18 legging 34:21,23 150:19 5:14 6:9 199:20,23 200:8 34:25 149:17 line 68:11 69:18 lack 18:8 200:16 201:3,5,10 legitimate 127:12 lines 69:22,23 lacked 36:12 201:12,18,19,20 lehman 8:22 9:1 linked 13:13,22,25 lady 194:9 201:20,24 202:10 28:10 38:15 46:13 14:2,5,6,20,21 laid 204:1 202:11,11,16 77:15 100:23,25 lipkin 29:12 38:18 large 57:19,19 203:6,10,13 101:3,4,10 105:13 39:16 44:4 87:2 91:19 111:10 204:13,19,21,21 123:6 88:24 89:1,9,10 134:21 205:3,18,21,23 lending 146:16 lipkin's 89:5 larger 83:22 111:4 206:6,9,17,21,23 length 202:12 lipstick 13:3 largest 112:10 206:24 207:4,5,6 letter 94:6,8 liquid 71:7 117:18 187:9 207:14,15 208:6 letters 89:18 liquidate 91:22 late 20:2 24:19 209:4 levy 147:9 187:20 142:8 173:20 31:12 81:23 92:10 199:5,22 201:7

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liquidating 143:12 76:11 77:23 88:13 looked 45:18 203:25 liquidation 9:10 88:20,21 92:7 77:18 115:23 lots 132:15 176:18 liquidity 18:8 133:25 134:9 133:1 147:2 loud 206:1 191:25 145:7 167:17,17 165:24 166:2,3 love 118:21 list 93:13 113:16 169:7 170:13 169:13 182:7,8,13 low 104:10 105:3 117:17 189:15,20 190:4,5 204:13,22 105:23 listed 50:11 79:9 190:5 193:4,12 looking 37:16,17 lower 36:25 111:7 113:10 197:7,17 204:6,17 60:8 76:14 78:18 lunch 76:18 listen 131:16 204:20 85:6 89:11 90:20 luncheon 76:24 146:14 147:15 longer 18:4 33:15 93:21 118:11 lybrand 206:7 165:14 171:23 34:13 120:15,18 125:1 142:10,16 lying 12:20 177:7 202:15 longs 193:23 204:5 176:1 lynch 97:3 105:13 lists 66:7 72:15 look 36:19 37:13 looks 43:12 68:25 120:8 200:2 93:3,11 99:11 39:15 46:6 50:21 71:4,4 72:13 m literally 145:7 50:22 52:12 53:8 73:23 74:18,19,20 m&t 32:22,23,23 172:8 200:17 54:3,15 56:12 75:6 86:12 176:20 78:19 100:6 201:19 58:14,23 60:10 204:12 machine 67:25 litigate 202:14 61:6,21 62:24 lose 173:2,3 mad 42:1,22 little 9:20 54:15 68:17 69:13 70:16 174:19,23 178:13 madoff 1:8,12,17 95:24 133:3 198:9 72:13 77:24 78:1 204:10 3:8 5:9,15 6:1,9 199:7 200:22 78:3,4,11,11,23 loser 119:11 6:14 22:25 37:19 201:1 79:8 84:12 90:9 losing 170:23 39:3 58:15 60:6,8 live 166:10 93:10,13,18 98:22 172:2,3 173:15 64:19 67:17 68:21 lived 8:14 101:2 102:7 103:3 176:4,4,5,8,8 69:19 72:4 74:9 living 7:11 103:22 106:16 loss 80:18 118:4 77:3 81:21 82:20 llc 1:8 5:10 22:22 112:3,22 114:25 126:11 144:18,19 95:8,12,12,21 24:4 115:3 116:4 145:3,4,16 146:13 96:13,13 97:13 llp 2:4 141:22 142:22,23 172:20,22 173:9 98:15 100:10,13 loan 25:16 26:17 143:2 147:22,24 173:25 174:7 101:6 102:12,20 81:9,11 196:9,12 165:1 166:8 167:7 175:5 176:14,23 102:21 106:4,19 196:25 168:1,6 170:24 176:25 177:1 112:10 115:25 loans 33:1,1,4 78:5 173:13 175:24 losses 134:11 117:13 122:3 196:5 176:12,19 177:22 136:5 194:1 207:2 125:19 126:6 located 5:5 18:24 178:14 186:6 lost 8:25 135:24 131:1,21 132:4 195:18 189:14,21 191:22 146:22 174:16,20 171:11,23 172:12 lock 30:5 138:24 198:25 199:8 lot 9:3 24:22 113:2 178:3 179:15 141:14 150:6 202:7 203:11,14 113:2 133:20 180:15,18,19 locked 150:22 203:21 204:21 146:14 148:2,12 185:4,19 208:9 london 101:6,14 205:2,14,17,19,20 164:22 174:25 maintain 28:16 long 12:8 24:15 206:3,21 207:5 185:18 193:7 43:25 44:9 46:20 47:22 48:2,15 199:1 201:10,11 49:11 51:4 67:9 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 234 of 254

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maintained 27:19 manufacture 126:18 128:12,13 mci 83:8 32:2 33:7,10 47:5 168:10 134:14 135:16,21 meadowbrook 52:16 72:21 80:20 manufacturers 135:21 136:7 32:14 97:13 32:18 140:7,8 146:5 mean 20:9 28:23 major 90:10 march 8:19 70:24 149:25 150:20 28:23 40:12 41:3 majority 111:5 117:20 192:19 154:2,6,7,21,22 43:11 45:14 46:25 118:24 139:22,24 margin 24:11 25:3 155:9,11,17,21,24 51:14 56:2 57:19 149:6 197:23 25:5,6,11,15,16,23 156:7,8,9 158:7,10 63:13 65:12 66:10 maker 15:25 65:7 25:24 26:17 34:3 158:12 173:2,23 72:12 75:15 85:15 66:19 84:6 88:3 34:8 81:9,11 173:25 174:3,4,6 85:25 86:12,15,21 135:16,21 136:7 128:19 129:22 177:24,25 179:18 90:4 92:13 97:16 140:8 146:5 130:16 177:4 181:21 183:12 100:20 101:5 154:22 156:8 187:15 184:7 190:9,10,18 103:11 104:11,23 179:18 183:12 marine 32:18 190:21 192:18 105:9 115:1,9 maker's 87:15 mark 7:12 8:6,8 193:6,14,16,23 116:5 118:4,10,13 makers 48:2 65:4 24:24 38:20 51:25 203:5,11 204:2,9 119:20 121:6,15 87:11,14 121:3 61:14 64:10 67:14 marketplace 122:11,12 123:13 177:25 70:4 72:2 73:11 113:13,20 185:24 139:25 140:1,25 making 15:12 23:2 94:6 128:12,13 marketplaces 150:13,14 152:3 29:22 47:13 48:25 149:19 115:13 154:2 155:17 50:4 67:2 68:2 marked 38:24 markets 18:5 169:24 170:18 69:25 85:1 87:19 52:20 58:2,5 60:2 111:5,24,25 174:17 175:22 87:25 102:13 60:25 61:16 62:21 112:11 119:14 184:10 187:4,9 103:16 106:21 64:16 67:12 70:2 136:8 140:11 195:22 198:25 126:19 136:8 71:25 73:9 74:5,7 marking 60:4 204:19,21 208:20 138:23 154:2,6,7 75:1 92:23 93:1 62:19 75:3 209:6 154:21 155:9,11 94:3,10,15 109:13 markopolos 179:7 meaning 39:6 155:18,20,24 market 8:25 15:12 181:22 182:4 means 7:17 15:23 156:7,9 158:8,10 15:13,25 18:10,21 massive 17:9 20:16 34:24,25 158:12 169:16,22 22:16,17,19 23:2 match 37:2 85:9 35:17 70:11 171:23,24,24 24:24 25:1,1 116:1 meant 32:7 139:8 181:21 184:7 26:22 29:22 30:19 matter 31:24 mechanisms 186:16 187:24 35:9 36:18 47:13 87:16 89:20 160:12 188:24,25 193:7 48:2,25 50:3 65:4 105:11 140:9 medication 132:15 managed 106:14 65:7 66:19 67:2 146:19 157:8 medications 132:7 manager 29:17 68:2 69:25 84:6 165:2,21 169:24 132:13 managers 181:14 87:11,14,15,19,25 181:5 meet 25:5,11 managing 187:11 88:3 102:13 matured 46:23 37:25 128:19 mandatory 116:25 103:16 110:25 maximum 28:7,13 129:22 manhattan 32:18 111:4,7,22 114:11 47:2 80:21 meeting 108:13 120:8 121:2 125:7 207:21,24 208:11

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meetings 108:9 71:11,13 72:21 41:6 44:10,11,13 monthly 17:7 205:2,18 207:2 73:23 80:22 83:20 44:21 45:21 46:10 103:2,6 104:18 member 66:16 83:21,23 106:8 51:4,6 53:22 54:8 months 174:9 members 10:12,16 117:24 127:9,12 55:11,11,14,16,19 176:2,8 12:25 80:9 127:16,16,22 56:7 57:13 59:18 moral 203:22 memorandum 128:25 129:10,11 59:24,25 62:10,10 morgan 4:10 53:10 56:14 59:9 129:17 131:11 67:5 74:2 77:4 23:17 28:9,11 men's 51:23 133:3 162:13 78:14 98:8,9 32:19 38:14 41:15 mention 9:21 10:9 178:17,18,20 100:22 101:12,16 46:14 60:13 62:16 79:19 80:8 81:5 185:5 109:10 123:21 63:14,20 70:7,12 208:17 millions 15:18 124:10,14,21,23 70:17,20 71:4,16 mentioned 10:6 122:16 126:10 127:13,25 71:23 77:11 78:16 25:15 38:11 40:20 mind 22:14 44:23 128:6,15,16,18 78:20 100:8,23 78:25 109:3 141:16 129:21 130:6,10 123:6,11,13 207:9 137:21 204:16 mine 141:24,24 130:12,25 131:1,4 207:9 merger 203:13 minimum 106:6 131:7,18 133:20 morning 6:14,15 merrill 97:3 166:17 134:23 137:1 17:20 207:19 105:13 120:8 minority 139:22 138:17 145:13 morrison 3:3 5:1 200:2 minute 29:6 146:8,17,22 motivated 22:5 met 9:24 31:25 148:16 172:6 158:15 163:6 move 9:8 108:6 171:18 174:18,18 184:12 165:6,7,15,20,25 moved 8:12 13:7 method 106:21 189:21 166:5,10 169:17 195:20 160:14 minutes 51:19 177:2,8 178:13 moving 7:11 8:9 michael 143:1 194:3 180:3,4,11 181:2 msi 101:25 microphone 58:9 missile 135:22 182:23 183:20 msil 101:13,19 64:8 82:14,14,15 mistake 122:12 185:4,19,22 mystery 115:6,7 82:17,19 202:6 187:11 192:25 171:11,12 mid 195:21 mixed 156:4 193:3,7 195:12 n mideast 18:7 mode 22:22 201:4,11 203:25 n 80:5 midland 32:19 moment 107:15 204:10 208:5 naked 15:20,22 mike 141:24 143:9 112:4 149:10 monies 23:19,19 16:1,12,18 80:19 163:20 166:12 monday 35:12,24 28:18,18,19 31:23 128:10 miller 68:25 money 9:18 11:16 31:24 47:1 48:13 name 5:1,14 29:13 million 7:10 8:13 11:19 18:13,15,23 48:13,13 131:3,5 73:17 80:4 95:18 15:18 37:21 47:3 19:1,3,7,18,20 207:14 95:19 99:18 47:5 53:9,12,21 21:10,20 23:11 month 47:19,19,21 141:24 157:1 54:1,16 56:14 24:7,19 25:4,9,25 49:6 52:13 88:9 161:20 208:9 58:25 59:9,13 28:6,21 29:14,18 88:16 89:8 117:15 named 46:11 60:11 61:10,24 29:18,19,23 30:2,8 117:21 173:11 names 9:21 10:9 62:3 63:1,7,16,18 30:21 31:4,15 176:5 79:20 80:8 81:5 63:19 70:23 71:10 38:13 39:25 40:7 93:18,23 157:1 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 236 of 254

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nasd 104:23 105:9 174:16,17,19,23 notary 1:19 o nasdaq 14:18 181:18 184:14 210:24 o 80:5 113:15 185:21 187:6 note 68:21 70:16 o'clock 126:5 nassau 54:19,20 192:22 199:24 notes 163:24 164:3 objecting 20:25 56:7 59:13 62:1 200:14,15 164:4,13 165:11 objection 7:14,17 62:12,17 new 1:1 2:6,6,15 notice 117:7 20:23 153:9 154:8 national 32:15 2:15,22 5:12 noticed 117:17 154:9 157:17 nature 162:5 23:13,14,24 24:7 176:3 179:11 obligated 15:12 nazis 171:17 24:20 25:8,10 november 61:5 45:15 46:8 80:13 neal 1:18 5:17 30:16 31:14,17,23 68:20 132:22 201:8 210:23 32:17 40:25 41:12 nscc 194:21 195:4 obligation 15:3 near 133:23 66:16 78:17,19 195:7,8 obvious 120:16 need 22:10 51:17 99:12 107:18,23 number 3:16,18 obviously 37:16 75:20 107:23 107:23 108:1,1 3:20,22,24 4:3,5,7 56:4,24 90:3 108:1 131:25 109:10 113:15 4:9,10,11,13,15,17 141:11 150:24 needed 109:9 114:8,19 115:23 4:18,20,21 5:13,21 156:14,19,23 needs 26:4 116:2,4 135:21 18:6 32:10 38:21 181:23 195:6 negotiated 9:9 165:23 42:20 51:12 52:20 occur 151:19 86:7 newspaper 183:15 53:11 56:17 57:25 153:4,7,11,13 negotiating 86:2 newspapers 183:4 58:2,4,16,17 60:2 occurred 17:24 neighborhood 183:6 60:7,25 61:16,22 34:12 37:14 130:9 178:20 nice 86:18 142:18 62:21 64:16 67:12 134:3,13 nervous 22:19 188:25 67:16 70:2,7 october 8:23 60:5 86:23 nine 56:12 71:9,11 71:25 73:9 74:5 60:9,11 net 88:10,16,18,18 93:17 75:1 84:13,15 odd 28:25 128:7 88:21 89:8,13 nineteen 135:1 85:9 92:23 93:11 148:2,12 189:1 102:16,18 106:21 ninety 135:1 94:3 104:3 105:4 206:1 106:22 nods 77:10 109:13 120:14 office 9:25 171:20 netting 195:12 noncustomers 122:22 126:4 172:9 207:22 never 22:10,13 120:7 134:21 161:10 official 31:3 24:5 31:3,22,23 nonexistent 162:13 164:7 oh 20:17 31:13 33:14 44:12 55:17 107:16 185:21 194:16 51:24 53:24 58:19 56:10 96:23 normal 60:23 203:24 68:23 94:17 99:5 105:25 108:5,6,7,7 131:6 140:17 numbered 68:7 127:1 148:20 108:16,16 113:21 normally 57:15 numbers 62:25 154:12 163:18 114:4 119:25 76:17 128:20 83:22 94:22,23 174:25 197:15 120:4,13 121:5,25 130:3 150:3,5 103:3,22 104:25 206:13 208:3,23 126:9 136:19,19 norman 199:5 105:17 okay 7:19,22 8:5 137:2 159:1 north 1:21 5:6 numerous 69:21 9:19,23 10:21,25 162:20 165:13 32:16 210:2 11:5,20 12:5,12,15 172:1 173:6,19 13:22 14:8,12 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 237 of 254

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15:20,25 16:11 110:3,12,23 operated 33:24 outcome 119:24 17:16 19:1,17 121:18 122:3,15 38:1 107:3 200:18 119:24 168:2 20:13,17,20 21:1,1 124:13 125:22 operates 200:19 outline 132:1 21:5,18 23:20,22 129:17 131:20 operating 20:3 outside 13:13,23 24:6 25:14 26:13 132:10,17,18 22:6 23:7 29:21 13:25 14:20 75:22 26:25 28:4,12,15 133:12 135:3 125:20 75:25 28:15 29:23 30:5 137:12,17,24 operations 23:16 overhead 23:15,23 30:23 31:1,7,10 138:2 139:25 29:21 32:12 49:24 overly 126:16 34:6,10,19,23 39:8 141:10 143:9,25 90:25 overnight 59:19 40:23 41:2,9,13,16 147:24 149:4 opined 121:18 63:2 41:16,22 42:6,12 152:6 153:3,24 123:23 owe 124:10 42:23 43:16,18 155:8,9,16 158:17 opportunities owed 9:4,18 44:16,23 46:3,9,18 161:1,5,22 163:19 140:19 168:1 124:14 128:6 46:20 47:8 48:11 164:19 165:10 opportunity 131:3 132:23 48:18,23 49:2,10 166:12 169:21 149:12 owned 16:8 47:20 49:16,20 50:7,13 171:1,4 172:2,15 opposed 37:15 66:1 79:14 50:15,24 51:13,15 173:10 175:18,21 46:5 owners 66:2 51:17,24 52:15,18 176:20 177:9,16 opposite 118:25 ownership 19:23 53:13 54:12,15 181:12 184:18,25 option 7:10 69:1,8 19:25 55:13,21 57:2,21 185:3,4,9,21 186:3 88:15,17 116:16 p 58:5,11,22 59:8,12 188:5,18 191:21 167:12 176:17 p&l 87:7,16 59:20,20,23 60:20 192:8,15 194:2 options 88:6 p.m. 126:1,5 61:2,14 62:18,18 195:10,14,18,23 173:12 194:13,17 209:16 63:15,24 64:6,6 196:4,21 197:2,6 oranges 118:14 209:18 66:5,5,22 67:3,3,9 198:2,13 205:11 order 21:9 42:14 page 3:15 4:2 43:7 67:14 68:4,6,11,14 205:12 209:9,14 79:6 105:20,25 43:18 52:25 56:12 68:17,17 69:7,10 209:15 106:2,13 107:23 58:14,24 60:7 70:4,13 71:7,15 old 1:20 5:5 89:4 109:10 115:5 61:6,21 62:24 72:2,17 73:11,24 109:10 143:3,8 156:1 158:14 66:6 67:20 68:4,6 74:12,22 75:17,19 205:21 206:2 162:17 190:8 68:17,18 69:13 76:1,9,21 77:21 once 27:5 84:3 191:20 70:16 71:1,2,3 80:24 81:8,18,21 156:13,16 181:7 orders 15:10 93:10,15,17 94:21 83:19 91:25 92:7 ones 81:11 90:23 69:24 181:21,24 94:23 95:8,22 92:25 93:10 94:5 92:21 113:3 148:5 182:11 96:9 102:7,7 96:17 97:10 98:22 open 60:6 61:7 oriented 136:16 106:16,17 110:5 99:2,9,22 100:10 68:21,22 120:8 originally 113:15 127:2,5 129:9 101:5,8,12,21 125:7 144:17 183:18 210:7 103:5 104:14 166:13 174:3 otc 111:4,21,25 pages 43:2 67:17 105:19 106:16 opened 27:6 34:2 ounce 186:7 67:19 98:25 210:8 108:18,23 109:5,5 106:6 162:22 ous 68:12 pagoldman 2:24 109:17,19,22 166:22

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paid 23:8,10,23 particular 18:8 119:12,18 132:13 person 81:8 85:22 26:11 35:21 36:1 27:7 36:10 40:12 136:24 145:13 86:14 88:22,23 36:18 37:20 83:6 98:15 144:9 147:12 163:17 89:1 119:7,8 124:14 125:6 particularized 166:8 168:23 personal 178:16 129:1,1,2,3 131:8 132:10 170:11 171:10 personnel 23:22 133:14 146:21 particularly 45:20 177:4 181:6 peter 2:20 5:25 208:15,21 139:24 199:4 183:21,23 185:2 pfizer 117:18,23 pain 142:17 parties 5:16 186:12 192:21 117:25 118:9 painewebber 210:17 193:18 199:15 pfizer's 117:21 206:7 partners 80:1 200:25 201:10 philanthropy pairs 191:4 105:12,15 205:17 207:23 201:12 palsy 206:3 partnership 208:24 phone 165:4 200:6 panic 202:24 161:12,15,16 percent 19:12,16 phony 39:8 203:11 162:4,6,11 163:1,8 19:17 63:9 73:25 phrase 107:14 panicked 202:1,5 164:11,17 166:19 73:25 97:19 105:4 physical 33:16 paper 49:17 54:25 partnerships 105:15 113:9,17 34:7,11 158:22 55:1,22 56:9 59:3 166:21,25 113:18 114:10,18 159:17 59:6 60:13 62:14 party 210:13 118:1 122:25 physically 159:2 63:5,14,22 83:8 paul 205:3 206:5,9 131:15 134:22,25 195:15,16 84:4,21 109:3 pay 26:8 31:15 167:18,19,22,23 picard 6:16 par 138:20 80:14 104:13 169:10,12,13,16 120:11 paragraph 102:8 108:2 109:10 169:23 171:25 pick 84:1,12 85:5 110:8,23 111:21 124:12 131:13 172:23,24 173:4,5 picking 145:13 112:3 114:7 158:24 163:25 173:9,9 185:22,23 picower 189:24 116:12,13 117:10 169:3 175:1 193:2 185:23,24,25 192:8 199:7 125:1 193:2,5 186:11 187:24 202:14 206:15,15 pardon 208:19 paying 21:21 57:9 189:1 209:3,5 paren 111:24 107:17 165:11 percentage 28:20 picowers 157:7 125:5,5 208:18,20 117:12 129:2 picture 50:19 77:3 park 2:5 payment 48:13 163:7 77:22 79:14 90:22 parkinson's 124:6 perform 195:10 piece 82:22 84:21 206:19,20 penalize 129:5 period 10:11,22 150:1 parkway 2:21 131:18 27:19 30:6,10 pieces 148:2,6 part 19:2 21:8 penalized 128:23 31:10 35:13,15,19 pinpoint 34:12 30:1 33:22 47:1 people 9:3,15,22 61:5 64:21 78:17 pioneered 113:3 51:5 68:2 69:11 12:8 13:7 29:6,7 84:7 96:10 102:12 pitz 90:17 91:1 74:20 75:7 80:19 40:19 47:11,14 108:21 117:4 place 36:4 42:15 112:8 128:17 50:1 90:17 93:11 125:4 127:9 186:3 110:24 111:7 131:1,2,4 139:3 93:14,19,23,24,24 191:5,5 116:9 120:4,13 162:4 170:6 99:7 107:17 periods 61:4 155:17 177:5 200:19 113:23 118:18 170:23

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places 78:2 160:7 165:1 prepare 88:8 153:23 161:4,14 plaintiff 1:6 5:9 positions 16:15 prepared 75:14 177:19 195:20 plaintiffs 5:7 24:15,24 77:23 present 5:15 16:20 196:20 198:1,1,11 playing 167:18 80:20 87:16 88:10 108:22 204:25 plaza 2:14 88:13,14,15,17,17 preserve 7:20 problem 9:16 plea 86:2,7 89:9 91:23 117:13 pretty 28:17 32:20 11:16 45:22 56:10 please 69:17 199:9 125:3 128:12 47:3,7 173:17 90:13 113:19 pledge 196:21 134:12 190:6 prevent 30:7 128:11 129:6 pledged 78:7,15 198:19 115:20 130:8,9,16 131:19 196:15,18 possession 34:7 previously 10:7 147:5 162:20 plentiful 140:19 159:17 79:20 163:22 182:24 plus 79:11 137:11 possible 119:13 price 35:17,18 187:8 192:2 204:3 point 13:2 20:3,8 possibly 85:4 37:6,9 80:1 83:11 problems 22:4 21:3,16 32:13 122:11 146:14 84:14 85:9 117:6 113:5 199:8 56:6,11 64:2,4 186:16 117:21 118:24 procedure 89:15 71:9 77:5 79:15 post 12:1 146:5 204:15 125:21 80:22 128:7 133:3 pouring 45:21 prices 35:15 36:17 procedures 155:6 144:10,11,13,20 pr 68:12 144:1 proceed 5:19 144:23 149:7 practice 33:13 primarily 18:13 proceeding 5:13 153:24 154:21 35:14 55:13 primary 140:8 process 86:2 195:5,15 197:12 pre 106:23 primex 105:12,15 116:14 140:23 pointed 110:16 predated 38:9 principal 45:12 141:2 points 110:19 predetermine 134:23 processors 14:18 138:23,25 145:5 167:4 prior 10:11 14:9 produce 120:12 policy 106:2 predetermined 31:1 91:4,16 produced 42:10 ponzi 102:13 116:17 106:19 123:3 67:15 70:12 106:20,23 107:4 preferred 116:21 133:10 158:17 111:10 107:15,16,22 139:10 151:22 prison 9:8 producing 120:6 pools 113:8 157:24 private 46:5 product 45:10 portfolio 35:7 preferreds 139:13 177:16 productions 41:25 43:25 44:9 46:21 prematurely probably 11:15 professional 1:18 47:9 129:24 170:1 174:8 192:3 14:1,5 15:18 210:23 190:8,19,20 202:11 203:19 17:13 19:14,15 proffer 108:13 192:11,16,17 premium 73:17 20:11 28:13,14 profit 127:16 portfolios 191:23 141:6 144:7,10,11 30:19 64:25 65:13 138:25 141:14 portion 110:2 144:12,14,21 66:21 69:1,1,11 144:23 145:15,16 129:21 149:7 151:7 158:4 70:13 78:24 80:21 145:22 150:6,17 position 4:11 175:2 197:25 80:21,22 81:15,16 150:18,22 151:1 24:25 25:2 26:16 premiums 139:7 85:18 101:24 155:25 172:23 31:21 72:4 87:24 141:15 144:2 113:20 136:14 174:5 186:16 88:18 128:10 145:2 203:3,7 143:3 147:12

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profitable 127:18 purchase 26:1 question 7:25 126:12 profits 21:9 45:13 38:12 39:20 40:7 10:10 29:5 38:8 readily 112:1 127:12 129:3 53:10,19 54:1,5,25 52:10 53:20 86:22 reading 70:25 135:4,5 189:16 59:2,5,9 60:12 95:11,21,21 96:3,8 95:7 96:9 progressed 33:15 62:3 63:4 101:16 102:9 106:17 ready 76:7 proper 83:5,16 101:18 155:16 112:17 132:5 real 189:22 190:15 properly 17:17 purchased 16:9 141:8 174:10 realistically 18:10 85:9 130:23 19:9 39:24 46:9 202:21 128:22 150:14 131:14 47:9 50:9,10 questioning realize 22:3 proprietary 23:3 66:24 67:5 73:3 180:20 148:20,23,23 29:22 47:13 48:3 74:2 77:4 100:21 questions 6:18 really 22:14 45:7 48:25 50:4 65:4 123:19 20:23 38:4 52:12 90:7,19 114:12 66:21 67:1 68:2 purchases 38:13 131:21 210:6 127:24 128:4 69:12 70:1 75:7 38:17 41:17,20 quick 172:17 136:6,17 142:15 87:20 88:1 102:14 purchasing 56:22 quite 33:13 115:2 143:1,21 146:23 103:16 112:20 57:17 74:23 115:12 119:20 151:3 171:11 126:9,18 127:8,11 pure 160:13 124:24 132:5 173:6 176:7 178:6 127:14,18,23 purpose 44:8 142:17 145:12 178:8 183:19 128:2,23,24 129:4 207:23 quote 111:4 206:8,23 129:5,12 130:15 purposes 196:25 116:15,23,25,25 reardon 42:16,17 130:19 131:8,10 pursuing 102:12 quotes 111:3 42:18 proprietorship put 11:17 17:25 r reason 84:20 20:4,10 22:7 24:2 28:21 42:2 44:11 122:19 129:4 r 210:1 prosecution 8:9 44:14,14 54:9 131:8 134:21 raise 58:11 27:17 57:13 83:25 143:19 145:1 raising 208:5 prosecutor 86:10 104:20 128:9 169:6 173:18 ran 85:22 126:18 86:11 129:6 157:15 179:10 181:17 140:10 172:10 protect 44:19,25 169:17 172:21 182:9 183:3 rarely 46:23 172:2 46:4 174:2,2 176:17 200:23 172:3 177:3 protecting 45:2 190:5,19 192:1,10 reasonable 167:10 rate 19:12 63:9 protection 1:5 5:8 192:16 recall 8:17 79:24 167:10,17 169:2,7 34:16 puts 174:12,14,21 100:20 108:15 169:8 170:13 proud 198:25 174:23 175:1,2 162:2 194:18 193:3 provide 32:24 putting 25:10 received 31:12 rates 167:21 96:15 102:15 45:24 66:12 100:17 169:12 189:1,17 106:24 210:12 receives 125:9 q 210:17 providers 14:4 recess 58:1 76:24 quantify 104:2 ratio 83:6 172:25 psychologist 199:2 126:2 194:14 quarter 172:2,3 ratios 83:16 public 1:19 43:8 recognize 8:11 176:4 read 82:8,23 90:18 43:19 118:20,22 39:4 52:22 68:18 quarters 173:15 93:13 95:21 110:8 119:6 210:24 93:24 176:4,8 112:4 115:7,16 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 241 of 254

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recollection 11:24 reduced 210:6 relative 145:20 185:12,17 194:24 14:23 28:4 31:5 refer 82:25 159:12 reported 44:6 71:15 92:9 108:5 reference 53:10 relatively 24:18 102:19 103:2 recommend 83:25 59:5 33:20 143:11 104:18,18,22,24 recommended referenced 34:10 relax 193:15 105:7,9,18 108:2 189:10 referral 210:15 relevant 104:15 112:18 117:13,14 recommending referred 23:17 reliant 203:12 118:10,12 210:5 22:23 referring 55:18 relying 166:10 reporter 1:19 5:17 record 8:1 41:23 95:16 209:11 remember 34:13 6:7 51:17 148:19 42:2 47:19 48:5,6 reflect 16:15 48:12 51:10,12,13 80:2 194:4 210:14,23 48:16,16 49:4 48:16 103:6 92:22 101:25 reporters 171:9 57:24 58:3 75:10 reflected 19:22,25 143:5 154:17 reporting 105:2,2 76:22,25 116:23 26:20 48:2 164:8 174:24 210:13,14 125:25 126:3 reflecting 21:14 178:17,18 179:2 reports 17:7 18:19 138:5 148:24,25 103:16 111:9 181:7 188:15 40:11 49:5,9,21 149:3 166:2 reflects 74:14 191:14 194:23 88:9,9 91:3 92:1,2 194:12,15 209:16 regard 196:9 196:6 92:3 102:20,21,23 records 47:17 regardless 202:17 remove 82:18 103:4,5,15,24,24 49:11,16,17,25 register 164:18 renaissance 170:5 67:9 77:24 79:8 165:18 177:23 178:8 represent 5:17 6:1 84:5,12,17 85:5 registered 1:18 render 132:14 210:8 87:13 89:11 135:15 210:23 rent 23:22 representing 5:2 104:21 107:1,11 regular 15:15,16 repeat 198:14 5:18 120:18 122:10 65:5 repeating 193:10 represents 67:19 134:6,8 140:9 regularly 17:8 rephrase 7:24 repurchased 170:6,22 75:13 153:6 46:24 recover 18:21 regulations 89:23 replicate 183:11 request 31:3,13 148:19 162:17 184:3 83:2 recovered 134:14 regulators 22:22 report 4:19,22 requested 30:20 204:9 regulatory 102:20 24:22 36:15 37:21 30:22 red 179:11 relate 22:1 40:16 50:11 75:13 requesting 26:1 redacted 59:10 related 51:14 87:4,6 93:3 required 48:1 70:10 95:12 100:11 109:16 110:2,22 87:12 155:4 redeem 30:15 relating 67:6 111:16 112:19 requirements 107:23 relationship 36:18 115:1,7,8,14,15,16 87:10 redemption 30:8 148:10 199:3,16 115:17 116:5 requires 15:13 30:12 31:3,13 201:13 203:25 117:11 118:5,13 18:9 redemptions 206:9 122:25 123:14 resistance 31:25 30:24 133:14 relationships 125:2 126:12,14 resolved 113:1 208:22 199:15 130:21 140:24 respect 38:11 163:9 170:1

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response 94:9 revenues 23:9 101:20 102:10 186:17,23,25 95:10 106:24 102:16 103:19,20 107:5 187:22 188:8,14 responsibility reverse 174:3 111:1,2,14,17 188:22 189:7 43:24 49:25 review 32:4 70:17 112:6 113:5 190:2,12 191:10 113:12 204:8 77:2 107:1 114:17,17,21 194:5,25 195:5,24 207:15 reviewed 17:5 116:19 120:5 196:7,8,13,14 responsible 9:12 rich 7:12 8:6,8 122:21 125:13,22 197:8 198:4 199:4 9:16 49:20 55:7 201:20 126:25 128:12 199:21 200:21 55:10 136:4 ridiculous 131:16 129:13,16,19,23 201:6,8,17,25 146:25 207:2 right 5:24 7:22 8:3 130:3 132:17,20 202:4,9,14,20 rest 9:7 89:13 13:8,18 14:21 132:24,25 133:4,6 203:16 204:9 90:21 173:15 15:21 16:1,24 133:7,17,21,22 205:1,20 206:14 192:7 19:3 20:2,4,25 134:5,13,19 206:20 207:19 restitution 9:14 24:3,3,5 25:18 135:12,13,14 208:7 restricted 69:17 30:4 37:7 38:16 136:1,18 137:5,19 rights 139:10,13 result 9:7 95:13 39:16,18,22 41:21 137:22,23 138:16 140:4 210:11 42:8 43:17,21 138:18 139:14,16 risk 56:10 147:3 results 168:11 46:12,15,16 47:12 139:20 140:14 150:7 151:8 189:5 retail 106:2 47:15 50:14 52:14 141:14,16,20,21 192:8 199:13 135:18,19 136:6 52:19 53:5 54:17 141:25 142:14 robert 29:13 38:18 136:10 137:2 54:21,23 55:1,2,23 143:5 144:11,17 43:3 44:4 146:18 56:18 57:21 59:15 144:23 145:13,23 rockefeller 2:14 retired 88:25 60:14,15 61:11,12 146:9,12 149:10 rocket 168:22 142:9 163:21 61:25 62:4 63:6 149:11 152:10,24 roll 192:25 194:11 retirement 70:17 63:10,17 68:9,10 154:22,23 155:22 rolling 192:23 return 9:18 21:8 70:11 71:5,6,11,13 156:2,12,14 157:2 193:1 21:21 31:24 71:20 72:18,23,25 157:9,13,14 158:5 romer 29:13 38:18 134:23,25 163:11 73:1,4,6 74:1 158:13,23 159:6 43:3 44:4 167:2,7,10,19,23 75:12 76:1,5 77:9 159:10,19,20,23 room 5:16 51:23 168:4,5 169:1,11 77:12,14,16 78:8 159:24 160:24,25 rothchilds 161:9 169:23 170:3,4,7,8 79:2,2,5,10,12,23 161:24 162:14 round 162:13 170:12 171:25 81:13,13 83:5,14 163:13 164:14 rouss 146:2 172:1 83:17 84:1,16,21 167:12,14 169:18 route 69:24 returned 166:5 86:3,8,11 87:2 171:6,11,21,22 routinely 15:9 returning 21:7,10 88:22 91:10,13 172:17,20,25 rpr 210:23 returns 107:18 92:12 93:8 94:13 173:4 175:6,13,17 rudely 7:25 175:13 188:25 94:14,23 95:4 176:24 177:14,21 rules 89:23 155:4 202:5 96:4,11 97:25 178:3 180:15,18 182:3 revenue 102:18,25 98:4,19 99:10,12 181:6 183:3,23 rumor 181:16 127:7 99:13,15,16,23,25 184:13,20,23,23 run 84:10 103:23 100:3,7,9,23 185:14,15 186:5

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running 84:9 180:24 181:15 17:22 18:16 19:23 153:8,14,18,20,22 181:20,20,24 202:24 19:25 21:12 24:12 155:21 157:22 182:2,5,6,9,10,11 scalable 145:18 24:13 25:25 26:2 158:7 159:1,2,8 182:14,16,18,19 scheme 106:20 26:3,5,6,9,9,11,24 160:2,3,13 182:20,21 183:1,2 107:4,15,16,22 28:21 29:8,11,15 see 52:13 53:11 rush 22:21 school 142:2,23 29:19 31:11 33:2 55:2 56:15 61:23 ruth 8:13 99:14 schwab 97:3,8,9 33:7,10,11,15,16 68:22 71:8 72:20 rye 2:22 97:24 98:1 33:18,20,22,25 87:15,23 91:6 s schwab's 97:7 34:5,7,11,11,16 94:12 95:3 98:24 scientists 168:22 35:1,8,11 38:12 98:25 100:13 s 80:5 scope 105:10 40:6,24 43:25 143:25 144:6 sachs 105:13 scott 94:7,9,25 44:9,14,19 46:4,10 147:8 153:24 145:23 146:2 scrap 83:8 84:4 46:21 47:6,14,18 170:24 175:25 147:6,9 109:3 47:20 48:5,14,17 176:12,19,20 salaries 23:25 screw 192:4 50:8,10,19 55:15 178:24 204:22 sale 15:8,22 54:25 203:23 57:9 66:1,6,7,9,15 seek 37:22,25 59:2 60:12 screwed 200:11 66:24 67:4,7,21 seen 11:21 72:11 sales 26:18,19,21 sean 98:16 72:19 73:2,22 82:24 93:4 94:18 sam 161:20 search 84:5 74:20,24 77:4,7,19 109:19 170:5 saul 161:21,22 seats 131:24 77:22 78:2,7,15 seg 68:7 174:21 sec 6:25 17:4,5 79:7,14 80:16,19 segregate 40:6 saw 27:9 87:4 89:18,22 105:9 83:24,25 87:9 segregated 25:19 108:12 121:20 108:13 112:22,22 91:5 100:21 101:6 26:10 33:12 146:21 165:24,25 113:11 114:3 101:17 102:1 self 32:7 159:15 166:3 170:7 118:21 130:24 109:6 113:9,10,16 sell 14:25 15:4,5 178:22,23 179:1 146:19 164:6,21 116:1,14,16,19,25 16:1,12 27:13 saying 11:22 27:2 164:25 165:4,16 117:1 123:6,15,16 68:11 111:24 29:24 91:13,15 165:21,22 167:1 123:19 139:1,10 120:24 149:22,23 93:22 112:6,14 180:12,13,20 139:12 140:13 153:7,13,17,20 122:15 127:19 181:22 182:4,5,13 142:11 145:24 174:1,8 175:7 129:7,21 130:14 182:21,22 146:12 147:3,16 177:6,7,8 193:22 133:8 186:13 second 66:6 68:4,6 159:18 160:9,10 200:2 202:15,16 189:5 198:18 74:16 94:11 132:1 166:1,3 191:20 202:18 203:15 says 53:9 54:18,24 secondly 9:12 195:13,15 199:17 204:5 59:2,13 63:20 secret 168:20 200:1 selling 15:21,23 68:7,11,21 69:17 183:9 185:3 security 15:21 47:14 114:2 119:8 75:6 95:8,16 section 95:10 41:17,20 49:4 138:11 150:10 100:19 101:3 126:19 53:23 66:19 83:6 152:7 153:21 102:18 103:1 securities 1:4,8 5:8 84:2 88:13 89:19 159:22 178:24 106:25 110:23 5:10 11:12,24 116:17 117:3,5 200:3 111:21 114:7 12:4,10,13 16:5,21 143:24 144:9 125:2 148:1 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 244 of 254

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sells 125:8 seven 58:14,19 153:12 154:10,20 163:14 172:16 semi 125:5 71:9 95:6 193:12 157:6,21 171:4,6 176:10,10 196:10 send 16:3,6 35:21 seventy 143:4 171:19 176:6 196:17 120:9 148:7 159:8 shake 206:18 184:2,5,10 194:2,5 showed 17:9 29:1 160:2 163:3 sham 189:6 194:9,18 205:9,13 84:22 89:11 122:1 169:25 170:2 shapiro 156:25 205:16,24 206:11 127:6,15 132:23 sending 148:12 157:11 189:11 208:2,7,12 209:9 134:6 185:13,17 165:15 166:9 192:7 199:5,16 209:14 201:7,7,10 177:8,25 200:24 202:14 shelters 189:22 showing 42:15 sense 80:25 85:3 205:21 206:12 190:15 70:23 128:21 85:15,20,25 86:24 209:2 shit 193:9 shown 16:5 130:4 104:16 121:16 share 94:13 short 14:25 15:5,5 130:23 123:4 142:20 117:22 138:13 15:8,9,13,15,18,20 shows 48:14 157:24 160:13 151:17,18,24 15:21,22 16:15 176:10 179:2,9,12,16 152:1,13,15,16,21 18:16 19:15 24:12 shut 7:22 sensitive 126:16 152:23 153:1,3,7 24:17,23,25 25:2 side 23:21 24:17 143:20 153:10,13,18,22 33:25 48:15 63:16 29:22 50:4,5,7 sent 161:11 165:19 shares 83:10 84:13 63:20 80:20 83:10 94:22 126:17,19 165:23 84:15 85:9 88:20 88:14,21 117:12 192:1,18 203:18 separate 13:6 23:2 88:21,22 89:12 117:14,19,25 sifma 111:3 23:5 72:5 87:13 103:12 104:3,12 120:22,23 128:9 sign 207:13 87:21 105:21 106:11,12 128:10,12 133:6 signature 210:21 september 39:18 116:15,20,22 134:12 138:24 signed 80:9 87:5 94:8 117:6,20,24 144:16 149:15 significant 30:23 serious 118:7 118:23 151:18 150:6 152:11 117:12 seriously 198:15 152:19 200:3,4 160:21 163:14 silver 188:16,18 service 32:11 sharing 45:12 188:11,23,24 189:2,4 190:16 services 32:24 sheehan 2:11 3:10 189:16 191:2 similar 110:21 73:18 210:13 5:24 6:2,2 7:14,20 193:4 198:19 111:9 120:21 set 144:15 145:3 7:22 8:2 10:22,25 202:17 simon 180:4 173:22,24 176:13 20:14,18,21 39:2 shorted 121:4 183:11 178:16 191:23 41:23 42:6,8,12,20 181:4 simons 177:14,19 setting 144:18 42:23 51:18,21,23 shortfall 134:3 180:5,16,19 181:9 150:8 52:19 56:20 57:23 shorting 18:18 183:25 184:2 settle 41:4 58:16,19,22 64:13 shorts 16:1,12,18 simple 35:24 settled 11:2 98:7 64:15 76:7,10,14 193:23 198:16,17 150:21 settlement 41:6 76:19 94:14 95:20 202:19,22 203:17 simply 17:16 105:1 195:11,12 95:24 99:2 101:4 204:3,7,8,10 simultaneous 195:12 108:21 126:22,25 show 40:11,14,15 150:10 settling 57:10 131:22,25 132:3 50:8,8 56:13 simultaneously 151:10,13,15 73:21 98:14 124:7 149:14 152:12

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sipc 94:25 102:17 sons 126:18 77:6 88:4 91:5,10 154:15 155:7 107:14 soon 165:21 194:6 91:11 92:10 163:22 172:18 sit 187:5 sophisticated 89:3 107:21 109:7 187:18,19,21 sitting 59:18 sorry 58:20,21 140:5 163:4 189:4 192:14,19 208:25 82:19,20 99:9 167:12 171:21 193:21 194:19 situation 18:21 127:3 141:1 149:2 175:8,10 179:19 197:7,17 200:21 22:11 85:19,20 150:4 151:12 179:23 186:24 201:18 151:2,20 206:11,13 spoke 108:7 starting 18:6 six 19:12 27:20 sort 14:19 22:23 spoken 111:17 31:11 32:8 137:10 44:17,18 63:18,19 27:5 63:14,22 114:23 state 36:16 112:13 81:11 97:22 98:24 126:11 132:18 spotted 149:12 115:16 123:10,16 120:18 128:7 136:23 141:7 spreadsheet 145:6 123:17 skill 35:8 142:17,20 149:16 staff 28:16 stated 37:3 80:17 skipping 43:7 155:5,19 156:3 stamp 61:22 111:13 121:22 slash 59:2 60:12 162:8,11 172:18 stan 199:5 123:12 210:5 slump 18:5 172:25 standard 125:20 statement 3:19,20 small 14:15 24:19 sorts 88:6 160:11 standpoint 45:16 3:23,25 4:4,6,7,10 29:20 33:20 148:5 sound 95:5 133:18 stanley 4:10 28:10 4:13,15 16:4,6 148:6 sounds 199:20 38:14 46:14 70:7 26:20 52:1,23 smart 172:13 source 107:17 70:12,18,20 71:5 58:6 60:5,8 61:15 smartest 177:20 sources 13:13,23 71:16,24 77:11 62:20 64:11,20 smb 1:7 5:14 13:25 14:20 82:4 100:8,23 66:5 70:5,8,20 smoking 82:25 southern 1:1 5:12 123:7,11,13 73:13,15,20,21 sold 16:18 26:3 speak 9:20 86:17 197:13 74:8,12,14 108:4 46:23 66:11 84:7 special 199:3,14 start 28:1 35:4,11 111:4 122:9,12 84:10 125:7 199:16 201:13 35:24 128:11 statements 11:21 138:21 specialized 88:7 135:16 136:8,12 16:24 17:18 19:22 sole 20:4,9 22:7 specific 26:16,25 151:5 154:7 161:3 28:24 29:1 67:6 24:1 107:17 27:1 55:25 89:7 173:1 187:15 72:13 77:8,11,13 solely 23:8 90:20 116:24 207:19 77:15,18 102:4 solicit 31:17 spell 80:4 started 11:11,14 108:3 110:18 solicited 31:23 spend 123:2 11:14 12:1,16,21 120:1 132:23 soliciting 70:19 spending 9:7 18:16,22 22:9,23 states 1:1 5:12 solutions 5:2,18 122:16 27:25 35:23 36:1 97:20 105:5,16 somebody 89:13 spent 199:1 64:24 89:1 91:19 127:6 140:24 113:24 split 11:7,12,13,22 91:24 113:13 stating 127:17 somewhat 162:9 11:25 12:4,12 132:4 135:13,19 status 208:13 son 87:18,19 16:5,7,13 18:9 136:22 137:1,7,8 stay 146:15 164:25,25 189:11 24:13 26:14 27:11 137:12 145:20 staying 129:8 201:15 28:1 31:11 35:2,6 146:11 148:10,11 stearns 4:7 8:19 50:9 74:19,21 148:14 149:6 28:10 38:14 46:13

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64:11,20,22,23 stop 11:12 101:4 187:10 188:12 sued 202:8 65:3,9,11,12,18,20 stopped 11:24 195:20 suing 157:7 65:25 66:14,17,20 12:3,13 16:5 strict 87:10 sum 119:9 66:23 67:23 68:1 17:22 77:7 91:4 strike 11:7,12,13 summary 4:12 68:15 69:5 77:9 109:6 120:6 11:22,25 12:4,12 72:4 78:3 100:2,22 story 143:21 16:6,7,13 18:9 supervisors 87:17 123:6 147:7,10 147:19 175:21 24:13 26:14 27:11 155:7 178:2 188:19 200:24 201:24 28:1 31:11 35:2,7 supply 191:25 189:11 straddles 188:10 50:10 74:19,21 support 114:9 step 29:6 74:15 188:13,16,16,18 77:6 88:4 91:5,10 supposed 157:1,10 83:18 84:4 189:3,5,12,18,19 91:11 92:10 190:25 stephen 94:7 190:16 107:21 109:7 sure 7:21,21 14:5 stipulated 27:18 strange 199:20 167:13 171:22 42:7 53:19 55:10 117:7 strategies 35:16 175:8,10 179:20 55:14 57:23 74:17 stock 8:25 15:10 89:4 137:20,25 179:23 186:24 76:6 91:7 92:4,22 18:18 22:16 25:1 188:3 191:23 structured 45:10 95:15,23 96:1 25:16,19 27:1 192:3 stuff 130:23 143:7 153:5,15 35:19 36:1,24,25 strategy 11:7,15 132:22 135:11 161:8 170:21 48:6,15,16 49:3 11:18 18:1,8,9,23 191:7 175:20 177:13 66:17 68:9 83:10 19:2 21:8 26:23 stunned 115:8 204:2 206:22 84:13 88:21 89:12 27:7,9 34:20 35:1 stupid 147:13 surprise 202:2 105:25 113:16 35:5,6,8 36:8,10 166:12 204:12 surprised 90:1 114:8,19 115:23 36:13,15 74:13 suasion 203:22 surprising 90:13 116:2,4 117:15 88:7 108:25 subcategory surrogate 201:16 119:7 120:7 121:4 125:16 137:15 116:24 suspended 17:13 121:5 133:2 139:17 152:7 subject 130:2 17:14 136:21 138:12,13 154:4 155:13 submitted 17:6 swear 5:18 138:15,21,24 157:16 168:20,21 substantial 134:15 sweep 53:25 54:7 141:18 144:17 170:9 171:13 substantially 55:19,19 57:18 149:14,15,20,23 172:13,16 173:8 125:4 swept 54:8 149:23 150:6 173:10,11,19,20 substantive 110:1 switch 11:11 152:11,17 155:12 173:24 175:5,10 success 201:24 switzerland 7:11 156:6,8 160:19,19 175:11,24 176:11 successful 22:13 7:12 8:9,12 9:9 160:20 166:2 176:13 177:3 181:19 183:4 96:20 171:17 181:4 196:12,25 179:9,12 191:12 201:22 172:8 181:6,14,15 stocks 16:8 22:18 191:18 193:8 successfully 181:16 182:15,20 27:13 110:24 197:7,18,24 181:18 sworn 6:6,10 117:14 120:22,23 stratus 50:2 sudden 144:11 180:7 190:8,20 195:6 street 65:14 201:20 system 13:6 50:2 196:4,9,15,18,21 140:10 145:14 sue 179:4 87:22 105:12 177:20 179:14

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88:12 89:4,21 164:2 180:21 tried 31:24 turning 9:17 31:22 91:18 93:25 97:19 189:6 trillion 65:13 turret 69:18 102:14,15,16,19 transcript 210:9 trouble 209:7 twenty 64:13,14 103:16 105:12,16 transcripts 93:12 true 8:20 9:1,4 64:15,18 95:6 107:11 110:24 transfer 7:4 19:13 123:10 two 20:15 28:9 111:18 113:4,7,14 transferred 51:5 131:19 143:21 38:23 43:2 53:1,2 114:19,24 117:23 101:13 127:22 172:3 179:20 56:13 58:4 61:9 119:3 126:9 127:8 transferring 210:8 62:19 64:14,15,18 127:12,15,18,23 128:18 trust 32:16,17 66:23 95:1,9,10 128:3 129:12 transfers 100:12 99:17 199:19 98:23 99:24 102:8 130:15,20 134:7 100:17 201:3 204:22,24 110:6 117:11 137:6 138:15,16 transparency trusted 200:17 128:25 138:23,25 139:15 140:15,22 113:23 trustee 2:10 5:23 169:16 172:23,25 142:11 144:6,7 transparent 6:3,5 11:2 12:20 173:4,24 178:2,17 145:2,10,18 112:23 119:15 37:20 38:3,7 42:1 194:2 200:8 146:11 154:25 travel 7:7 42:11 49:14 67:16 208:15 157:22 158:10 treasuries 21:12 70:12 84:20 85:16 type 22:22 86:14 168:24,25 169:20 28:1,6,14 29:20 106:23 107:2,6,10 89:16 136:23 172:10 183:5 44:15 57:14,16,18 108:6,6,12,13 137:6 139:15 188:11 191:4 71:17,19 72:15 119:22,22 121:7 168:24 203:24 197:25 203:1 101:18,21 122:19,24 133:1 types 32:11 69:23 transacted 64:22 treasury 18:25 168:15,18 204:23 85:23 139:17 64:23 97:21 19:9,11,23 21:21 207:10 typical 15:6 25:12 transaction 34:1 24:16 28:21 29:8 trustee's 106:25 33:4,23 36:7 35:17 37:6,9,10 29:10,15 38:12 108:18 72:14 89:24 90:9 41:7 43:10 45:13 39:21 41:17,20 truth 10:1 90:13 106:2 74:21 120:4 43:13,13,25 44:9 try 9:9,15 118:18 152:24 192:24 144:22 151:9 44:18 46:4,10,21 126:23,23 typically 15:17 163:3,15 172:7 46:25 47:5 57:1 trying 36:17 70:9 25:4 35:3,13 178:22 179:16 65:22,23 66:24 85:19 104:16 40:14,25 41:11 192:22 67:4,6 70:13 71:5 114:25 119:12,19 57:14,19 72:12 transactions 32:8 72:6,14,18 73:2,22 142:23 155:8 78:8,19 83:17,21 37:5 66:11 85:24 77:4,19 100:21 167:4 199:2 105:3 106:8 117:4 91:9,11,18 97:6,22 102:1,5 167:17 tuesday 35:12 128:14 141:4,13 98:5,6 101:7 treat 162:25 turn 52:25 94:21 141:21 144:10 103:14 104:10,11 treatable 36:9 110:5 193:16 152:14,21 158:25 104:21,22 105:4 treating 36:8 201:3 161:14 167:16 111:6 112:19 114:10 turned 56:10 172:24 173:10 116:8 120:1 trial 37:20 82:2 164:21 191:15 185:5,21 121:25 122:2 122:13,14,16,21 208:16 123:2 163:10

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u unfortunately varied 80:15 w u.s. 9:24 28:6 56:9 182:1 204:20 varies 104:7 wait 144:17 151:7 73:22 96:14 unhappy 113:11 various 32:2 172:6 174:17,18 120:21 121:1 unhealthy 206:15 140:15 160:11 184:12 189:21 191:19 union 96:19 163:1 waited 200:7,9 ubs 171:16 171:16 172:8 vast 111:5 waiting 174:3 uh 39:17,19 40:9 unique 36:5 vault 33:18 walked 205:9 53:7,13 55:9 125:19 vaults 33:17 wall 65:14 140:10 56:16,18 59:1,7,11 unit 158:4 veritext 5:2,18 145:14 177:20 60:16 61:8 62:2,6 united 1:1 5:11 versus 5:9 21:21 179:14 187:10 62:11 63:3,6 64:9 97:20 105:5,16 videographer 3:2 188:11 195:20,21 66:13 68:8 69:15 203:12 5:1 57:24 58:3,8 walls 87:25 70:21 71:6 72:9 units 139:13 140:3 58:11 76:22,25 walter 64:3 73:14,19 74:1 unknown 175:11 82:14 125:25 want 6:17 7:15 79:16 86:6 93:16 unlimited 16:1,12 126:3 194:12,15 9:19,21 10:8,10 94:24 99:10,19 unsure 92:13 209:15 11:20 17:23 25:14 100:1,5,15,24 unwind 144:22 videotaped 1:16 38:23 48:18 52:3 101:15 102:22 151:9 192:3,5,6 view 17:16 52:11 56:6 57:21 103:8 107:20 193:19,19 202:10 violation 17:1,4,12 75:17 76:3,4,16,17 110:4,7 133:15 203:20 18:17,18 182:22 79:19 80:7 82:18 135:9 138:4 upper 100:13 virtually 179:13 91:7 92:8 106:11 195:14,18 207:20 upset 165:12 virtue 12:22 106:11 113:23 unable 30:11 usao 43:8,19 visit 179:3 118:25 119:1 unbrokered 33:1 use 14:17 25:24 voice 6:8 126:7 127:25 underneath 101:3 29:15 34:20 35:16 volatility 186:7,9 129:8 131:23 understand 8:8 36:22 51:18 56:6 volume 1:17 37:12 132:5,22 136:6,21 29:5 52:9 85:18 73:17 83:12 101:6 37:13,15,17,18 137:3 142:15 86:9,22 87:3 90:8 125:18 139:17 103:10 104:17 143:1,12,23,25 115:3,5,9 118:22 143:13 156:19,25 110:18 112:18,20 145:14 146:6 119:6,8 127:19 158:25 159:7,24 113:15 114:9 147:1,24,25 148:2 129:7,20 132:12 160:2,14 189:18 115:24 116:2,4 148:3,4,5 151:3,10 134:10 135:7 196:25 203:22 117:23 118:2,9,11 165:19 166:14,14 140:21 156:9 usual 210:16 118:13 140:2 166:18,18,20,20 172:6,7,20 173:17 usually 27:3 33:4 179:18 185:3 175:9 177:2,10,10 192:2 202:25 101:18 125:5 186:11 177:24 178:6,8,12 understanding 158:2 volumes 102:15,19 178:15 181:1 17:23 36:12 120:5 v 118:10 184:8 184:15,19 186:6 vs 1:7 understood 24:22 valid 90:19 188:1 190:13,14 36:15 90:12 value 8:25 16:20 190:15,17 191:7,9 172:19 173:9 vanilla 172:16 193:5 194:2,8,9 178:21,22 200:2 202:5 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 251 of 254

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203:14,23 204:1 went 19:4 24:7,20 witnesses 122:22 write 83:8 115:14 206:22,22 207:6 40:13 41:5 67:25 woe 147:23 116:5 wanted 44:25 90:6 97:6 98:6,9 wonder 99:7 writes 116:12,15 45:17 50:18 67:3 104:25 112:25 wondering 70:6 117:10 77:3,21 79:3 129:11,15,18 word 14:17 199:17 writing 77:7 86:11,17 119:23 130:10,15 136:10 199:24 200:16 122:25 119:23,24 121:3 142:1,2,7,23 201:9 written 94:7 121:12 122:19 144:11 145:2,23 words 50:9 83:7 111:11 199:25 132:6 136:7 147:4 147:8,8,10,14 87:9 104:17 106:1 200:11 202:9 170:9 172:12 163:21 182:4 107:22 130:18,22 207:4 210:7,12 180:20 185:2 199:21 201:18 131:2 136:22 wrong 99:3,5 192:22,23,24 203:3,7,12 205:8 138:12 140:24 131:6 155:11 195:23 199:8 whistleblower 141:4,6,21 149:17 166:11 173:3,21 202:16 206:8 179:8 150:23 151:8 173:23 186:15 wants 113:21 wholesale 154:22 155:20 167:7 wrote 115:14 118:20 157:9 wholesaler 65:7 202:19 171:10 warrant 158:4 widely 171:9 work 9:9 11:17 y warrants 139:9,13 wife 7:11 65:20 42:24 44:4 89:22 yahoo 117:22 140:3 209:4,8 141:23 142:5 yeah 22:3 29:4 watching 149:13 willing 148:6 162:10 190:8 42:7 47:25 49:15 waterhouse 80:1 wilpon 209:11 194:25 195:2 51:2 52:5 53:3,13 204:16 wind 180:11 worked 43:5 90:9 56:20 66:8,8 way 7:12 15:6 windfall 203:2 155:9 67:10,11 68:23 22:1 33:24 82:21 window 158:22 working 11:19 71:13 75:21 76:20 92:19 98:15 104:7 winner 119:10 18:15 38:3,7 93:23 94:17 104:20 113:21 witness 3:8 5:14 114:22 142:10 100:19 102:25 115:2 119:13 5:19 6:6,17 51:20 158:14 103:21 104:6 121:11 122:9 51:22,24 52:9,14 works 150:14 110:16 123:11,17 128:5 132:6 52:17 53:7 64:9 156:9 172:7 125:18 126:11 149:23,24 150:13 70:21 74:18 75:21 world's 117:18 127:4 130:13,24 150:15 181:21 75:23 76:1,5,9,11 171:17 131:23 132:12 200:18,19 210:10 76:21 77:10 80:5 worried 22:11 133:6,19 134:4 ways 191:2 82:21 96:2 101:5 193:25 204:11 138:9,10 139:8,11 we've 39:11 101:9 126:23 207:3 141:9 148:25 184:16 193:11 127:1,5 153:10 worry 193:15,23 152:3,14,25 153:2 204:13 154:9,12 157:18 204:7 153:21 154:6,10 wealthy 9:3 162:9 171:7,20 176:7 worth 83:20 127:9 155:19 158:19 website 111:3 184:4,6 205:7,12 136:2 138:12 160:16,22 161:19 wednesday 35:12 205:14,17,25 wound 36:1 163:18,18,18 week 31:5,8 206:20 208:3,8 wrapper 172:17 165:10 171:2,5 209:12 174:11 175:3,18 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 252 of 254

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177:18 180:10 183:9,13 184:4,6 185:7,10 188:17 191:1,15 194:7,8 195:1,3,16 196:17 196:24 197:23 198:10,24 208:23 209:12 year 60:20 65:11 65:13 100:11 108:11 173:14 176:2,3 181:7 191:5 194:22,23 208:1,21 yearly 71:14 years 33:19 44:23 64:25 84:22 90:11 102:14 112:24 119:16 120:18 122:16 135:20 193:12 200:13 206:1 yell 157:9 yesterday's 183:4 183:6,14 york 1:1 2:6,6,15 2:15,22 5:13 23:13,14,24 24:8 24:20 25:8,10 32:17 41:1,12 66:16 78:17,19 99:12 113:15 114:8,19 115:23 116:2,4 165:23 young 143:11 194:9 younger 206:24,24 z zero 119:9

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Federal Rules of Civil Procedure

Rule 30

(e) Review By the Witness; Changes.

(1) Review; Statement of Changes. On request by the

deponent or a party before the deposition is

completed, the deponent must be allowed 30 days

after being notified by the officer that the

transcript or recording is available in which:

(A) to review the transcript or recording; and

(B) if there are changes in form or substance, to

sign a statement listing the changes and the

reasons for making them.

(2) Changes Indicated in the Officer's Certificate.

The officer must note in the certificate prescribed

by Rule 30(f)(1) whether a review was requested

and, if so, must attach any changes the deponent

makes during the 30-day period.

DISCLAIMER: THE FOREGOING FEDERAL PROCEDURE RULES

ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY.

THE ABOVE RULES ARE CURRENT AS OF SEPTEMBER 1,

2016. PLEASE REFER TO THE APPLICABLE FEDERAL RULES

OF CIVIL PROCEDURE FOR UP-TO-DATE INFORMATION. 08-01789-smb Doc 18151-1 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit A Pg 254 of 254 VERITEXT LEGAL SOLUTIONS COMPANY CERTIFICATE AND DISCLOSURE STATEMENT

Veritext Legal Solutions represents that the foregoing transcript is a true, correct and complete transcript of the colloquies, questions and answers as submitted by the court reporter. Veritext Legal Solutions further represents that the attached exhibits, if any, are true, correct and complete documents as submitted by the court reporter and/or attorneys in relation to this deposition and that the documents were processed in accordance with our litigation support and production standards.

Veritext Legal Solutions is committed to maintaining the confidentiality of client and witness information, in accordance with the regulations promulgated under the Health Insurance Portability and Accountability Act (HIPAA), as amended with respect to protected health information and the Gramm-Leach-Bliley Act, as amended, with respect to Personally Identifiable Information (PII). Physical transcripts and exhibits are managed under strict facility and personnel access controls. Electronic files of documents are stored in encrypted form and are transmitted in an encrypted fashion to authenticated parties who are permitted to access the material. Our data is hosted in a Tier 4 SSAE 16 certified facility.

Veritext Legal Solutions complies with all federal and State regulations with respect to the provision of court reporting services, and maintains its neutrality and independence regardless of relationship or the financial outcome of any litigation. Veritext requires adherence to the foregoing professional and ethical standards from all of its subcontractors in their independent contractor agreements.

Inquiries about Veritext Legal Solutions' confidentiality and security policies and practices should be directed to Veritext's Client Services Associates indicated on the cover of this document or at www.veritext.com. 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 1 of 212

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1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK 2 3 In re: ) 4 ) SECURITIES INVESTOR ) 5 PROTECTION CORPORATION, ) ) 6 Plaintiff-Applicant, ) ) 7 vs. ) 08-01789 (SMB) ) 8 BERNARD L. MADOFF ) INVESTMENT SECURITIES, LLC, ) 9 ) Defendant. ) 10 ) ) 11 In Re: ) ) 12 BERNARD L. MADOFF, ) ) 13 Debtor. ) ) 14 15 16 Videotaped Deposition of BERNARD L. 17 MADOFF, VOLUME II, taken on behalf of the Customers, 18 before K. Denise Neal, Registered Professional 19 Reporter and Notary Public, at the Federal 20 Correctional Institution, 3000 Old Highway 75, 21 Butner, North Carolina, on the 27th day of April, 22 2017, commencing at 9:11 a.m. 23 24 25 * * * * *

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1 APPEARANCES OF COUNSEL: 2 On Behalf of the Customers: 3 HELEN DAVIS CHAITMAN, Esq. 4 Chaitman, LLP 5 465 Park Avenue 6 New York, New York 10022 7 (908) 303-4568 8 [email protected] 9 10 On Behalf of the Trustee: 11 DAVID J. SHEEHAN, Esq. 12 AMANDA E. FEIN, Esq. 13 Baker Hostetler 14 45 Rockefeller Plaza 15 New York, New York 10111-0100 16 (212) 589-4621 17 [email protected] 18 19 On Behalf of the Deponent: 20 PETER A. GOLDMAN, Esq. 21 12 Fairlawn Parkway 22 Rye Brook, New York 10573 23 (914) 935-6857 24 [email protected] 25

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1 APPEARANCES OF COUNSEL: 2 Videographer: 3 Ken Morrison, CLVS 4 5 * * * * * 6 7 CONTENTS 8 THE WITNESS: BERNARD L. MADOFF EXAMINATION 9 BY MR. SHEEHAN 216 10 BY MS. CHAITMAN 368 11 BY MR. SHEEHAN 381 12 13 * * * * * 14 15 INDEX OF EXHIBITS 16 FOR THE TRUSTEE: PAGE 17 Exhibit 1, Customer statements 230 18 Exhibit 2, Customer statements 234 19 Exhibit 3, Copies of Rolodex cards 261 20 Exhibit 4, Customer statement - 8-7-84 299 21 Exhibit 5, Customer statement 305 22 Exhibit 6, Customer statements 310 23 Exhibit 7, Focus reports - 1984 333 24 25

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1 INDEX OF EXHIBITS (Continued) 2 FOR THE TRUSTEE: PAGE 3 Exhibit 8, MC Disbursements notes 341 4 Exhibit 9, MC Disbursements account 348 5 statements 6 7 * * * * * 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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1 THE VIDEOGRAPHER: This is Volume II of 2 the deposition of Bernard L. Madoff. My name is Ken 3 Morrison representing Veritext Legal Solutions. The 4 date today is April 27th, 2017 and the time is 5 9:11 a.m. This deposition is being held at Butner 6 Federal Correctional Facility located at 3000 Old 75 7 Highway, Butner, North Carolina 27509 and is being 8 taken by counsel for the Customers and Trustees. 9 The caption of this case is Securities 10 Investor Protection Corporation, Plaintiff-Applicant 11 versus Bernard L. Madoff Investment Securities, LLC, 12 Defendant. This case is being held in the United 13 States Bankruptcy Court, Southern District of New 14 York, Number 08-01789 (SMB). 15 At this time would attorneys please 16 identify themselves and whom they represent and the 17 witness is still under oath. 18 MS. CHAITMAN: Helen Davis Chaitman on 19 behalf of numerous former customers. 20 MR. GOLDMAN: Peter A. Goldman on behalf 21 of Bernard Madoff. 22 MR. SHEEHAN: David Sheehan, Baker 23 Hostetler, for the Trustee. 24 MS. FEIN: Amanda Fein, Baker Hostetler, 25 for the Trustee.

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1 BERNARD L. MADOFF, 2 having been previously sworn, was further examined 3 and testified as follows: 4 FURTHER EXAMINATION 5 BY MR. SHEEHAN: 6 Q. Good morning, Mr. Madoff. How are you 7 today? 8 A. I'm good. 9 Q. Good. I want to just put something on the 10 record because Helen was so strict with it yesterday 11 and I agree with it, that the judge entered an order 12 we're not supposed to mention certain people's 13 names, and we were pretty good about that yesterday. 14 I intend to follow it here today. 15 A. Uh-huh. 16 Q. In fact, I may show you some documents that 17 I've redacted, but we're not going to get into the 18 person involved -- 19 A. Okay. 20 Q. -- because I expect just as you did 21 yesterday, Helen, I want to strictly adhere to that 22 order. All right. So just want to put that on the 23 record, and you'll see the documents when we get 24 there. Just to put things in a little context, I'm 25 about to show you some statements, but before I do

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1 that -- in fact, some that you've seen before from 2 Mr. Blecker; but before we do that I want to go back 3 to a little bit of where we were yesterday because I 4 had the chance to review yesterday's transcript and 5 just to clarify a few things about the convertible 6 arbitrage strategy. 7 A. Uh-huh. 8 Q. All right. One of the things that would be 9 helpful is this -- is that it may be better with my 10 putting it would have been, when would you receive 11 cash in lieu of fractional shares? 12 A. Actually, you know, I can't really tell you 13 because I didn't handle the operations side of the 14 business. So, you know, I don't know when that was 15 -- when that was done. 16 Q. But would it be fair to say that there is 17 no fractional share until you sell the convertible 18 security? 19 A. Well, it depends upon -- you know, it 20 depends upon whether it's actually converted, 21 whether -- whether it's just unwound or whether it's 22 swapped. In other words, the strategies don't 23 necessarily involve physically converting it where 24 you would get a fractional share. There were times 25 that the strategy is unwound where you're just

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1 closing out the long and short position for the 2 customer either through the open market or you swap 3 it with another dealer and just swap -- swap the 4 position. So it's only if you were actually 5 converting it would you get the fractional share. 6 Q. Okay. Thank you. The strategy of a 7 discount convertible -- 8 A. Uh-huh. 9 Q. -- is that scalable? And what I mean by 10 scalable is that you can take it from like ten 11 customers and then expand it to a thousand? 12 MS. CHAITMAN: Objection to form. 13 THE WITNESS: When you say scale it, you 14 mean -- I'm not sure what I understand what you're 15 talking about. 16 Q. (By Mr. Sheehan) Okay. Well, let's try 17 the reverse and under Helen's objection over there. 18 How would you define scalable? 19 A. Well, you're not scaling. If you're -- if 20 you're going to -- whatever you're buying, that's 21 the most that you can actually break up. So if you 22 bought 100 bonds, you may break that up for 23 argument's sake into five customers. You're not 24 scaling it. You're not -- you're not increasing, 25 you know, the trade other than what you actually

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1 bought. 2 Q. What I was focusing on was your comment 3 yesterday when you referred to discount convertibles 4 as freaks. Are there enough of those, I guess, is 5 what I'm asking? Are there enough of those that you 6 could expand and sell a lot of those? 7 MS. CHAITMAN: Objection to form. 8 THE WITNESS: Well, clearly as I said 9 yesterday, the most -- most convertibles should be 10 trading at a premium because in theory you would not 11 -- you would not buy -- if you're a client, you had 12 a choice of buying the -- you know, the convertible 13 bond or buying the stock, if you can buy the 14 convertible bond at a discount, then you would 15 always want to buy the -- even if you weren't going 16 to sell the stock. 17 In other words, if you had a choice, do I 18 want -- I like this company. Do I want to buy, you 19 know, the stock or do I want to buy -- and it could 20 also had a convertible bond also and you could buy 21 the convertible bond, which would theoretically give 22 you the right to exchange that for stock, it would 23 be foolish, you know, to not buy the bond because 24 the bond gives you the protection of the coupon. So 25 but there are times like anything else that bonds,

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1 you know, do trade at discounts, you know. It 2 depends upon people, you know, you know, they make 3 that decision up; but, I mean, the fact is that 4 convertible bonds sometimes trade at discounts, 5 sometimes trade at premiums, but clearly more of 6 them would trade at premiums than at discounts. It 7 also, by the way, depends upon whether you leg into 8 a trade. 9 In other words, it's a fallacy to think 10 that you're buying the convertible bond, you know, 11 at 10:00 o'clock in the morning and you're selling 12 the stock at 10:00 o'clock in the morning. It's not 13 a simultaneous transaction. Most trading that's 14 done in convertible securities I explained yesterday 15 is legging into it. 16 You're making a decision as to what the 17 market is going to do at the time. That's why it's 18 imperative that you have volatility. So and 19 depending upon whether you think the market is going 20 up or the market is going down, that's -- you would 21 start one leg versus the other leg. 22 Q. Following up on legging in, was it your 23 normal practice to buy the convertible security on 24 one day and not buy the short on the same day? 25 A. Not sell the short you mean?

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1 Q. Not sell the short. Not sell the short on 2 the same day? 3 MS. CHAITMAN: Objection to form. 4 THE WITNESS: Sometimes yes, sometimes no. 5 It depends upon what was available. 6 Q. (By Mr. Sheehan) If you bought the -- or 7 sold the short the next day or day after -- 8 A. Uh-huh. 9 Q. -- would that increase your risk? 10 MS. CHAITMAN: Objection to form. 11 THE WITNESS: Would it increase your risk? 12 Yes, of course. 13 Q. (By Mr. Sheehan) And why would that be? 14 A. Because you -- if the market collapsed, you 15 know, and the bond would go down, you wouldn't have 16 anything on the short side of the market to hedge 17 yourself with. 18 Q. All right. Okay. I believe that on 19 December 20th you used this term, but what's the 20 term VWAP stand for? 21 A. VWAP is volume-weighted average price. 22 That's when a firm puts in a lot -- basically, it 23 would be an institutional order where they decide 24 they want to buy 100,000 shares or sell 100,000 25 shares.

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1 They give their order to a broker, you 2 know, and say I want a volume-weighted average 3 price. And the brokers, the fellow on the floor, 4 typically the floor broker would -- would sell that 5 out at his discretion over the course of the day. 6 And they -- they're competing against what 7 the volume-weighted average price, you know, of that 8 security sold during the day. We didn't do any 9 volume. We didn't do any VWAP orders basically. 10 Q. Okay. I wrote this down so I'd get it 11 right, so here it comes. Would it be your 12 expectation that prices you were able to get on 13 purchases of the convertible and sales of the common 14 would be more favorable, less favorable or 15 approximately equal to VWAP in those securities? 16 MS. CHAITMAN: Objection to form. 17 THE WITNESS: To VWAP? 18 Q. (By Mr. Sheehan) Yeah. To VWAP. 19 A. We didn't -- our general rule was we never 20 did handle VWAP orders. 21 Q. All right. Did you ever apply a VWAP 22 analysis to your trading? 23 A. No. Other -- I mean, the funds would -- 24 might do that or some of our wholesale customers 25 would do that. We developed a system called time

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1 slicing, which was -- had never been done before. 2 We built a system that we would -- someone would 3 give us a -- this was not part of basically an 4 arbitrage strategy. 5 There would be someone like Fidelity would 6 give us an order to sell 100,000 shares of stock. 7 And what we would do is we built a system, my sons 8 built a system where the order would be 100,000 9 shares would go into our technology platform and it 10 would -- they would say to us we want to sell this 11 hundred thousand shares over a period of 12 three-minute intervals. 13 It would go into the system. We would 14 program the order into the system and every three 15 minutes part of that order would come down into our 16 system and be -- go against our market makers' 17 quotes. And the average -- and the same strategy as 18 a VWAP, only it turns out that the -- instead of the 19 floor broker controlling the order, when to execute 20 the order, it would be the client who put the order 21 in like Fidelity were doing it. 22 It became very popular to do that because 23 it always for the general rule, you know, 24 outperformed the VWAP on the floor. And that was 25 the system that we had to get the approval of the

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1 SEC to build that system. 2 Q. Uh-huh, thank you. 3 A. It's called time slicing. 4 MR. SHEEHAN: Let's get out the first 5 exhibit. 6 MS. FEIN: This was marked in the last 7 deposition as 14. 8 MS. CHAITMAN: Thank you. 9 Q. (By Mr. Sheehan) Yeah. Mr. Madoff, you've 10 just been handed an exhibit that was previously 11 marked on December 20th, 2016 as Exhibit Number 14. 12 It purports to be a 6-30-86 statement for an Arthur 13 Blecker? 14 A. Right. 15 Q. Okay. Just take your time and look at that 16 and then we're going to ask you a few questions; 17 okay? Okay? 18 A. Okay. 19 Q. Okay. Directing your attention to the 20 first entry at 6-30, 610 long 1501, do you see that? 21 A. Yes. 22 Q. What do you understand that entry to be? 23 A. It looks like a purchase of -- on 6-03 of 24 1501 shares of Interco 46. 25 Q. Okay. What's right underneath it? It says

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1 preferred. What is that referring to? Do you see 2 that? 3 A. Preferred? 4 Q. Uh-huh. Preferred, sir. 5 A. Oh, that's just the -- it says preferred 6 convertible, preferred series D convertible. 7 Q. Right. So then go down to -- 8 A. That's the full name of -- of the -- 9 Q. Okay, fine. 10 A. Uh-huh. 11 Q. Then there's two further items down that 12 are both 6-5 -- 13 A. Right. 14 Q. -- to 6-12. Could you tell us what those 15 two entries are? 16 A. Those look like sales on the 12th at -- of 17 the common stock. 18 Q. Okay. Now, it appears there's several days 19 difference -- 20 A. Uh-huh. 21 Q. -- between the purchase of the convertible 22 security and the sale of the short? 23 A. Right. 24 Q. Is that something that would commonly 25 occur?

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1 A. Yes. 2 Q. And why is that? 3 A. That's part of the legging transaction. 4 Obviously, you know, we bought the bond and then we 5 anticipated the stock going higher. So we waited 6 two days to sell the stock. You're at risk during 7 those two days that it's open -- 8 Q. Okay. 9 A. -- but that's what we just discussed; 10 right? 11 Q. Right, okay. If you go on down, there's 12 another entry on 6-12 to 6-25. Do you see that, 13 Interco, Inc.? 14 A. Uh-huh. 15 Q. And it says fractional shares? 16 A. Right. 17 Q. Do you see that? 18 A. Yes. 19 Q. And it has a credit for it looks like 20 $14.18? 21 A. Right. 22 Q. Do you see that? 23 A. Uh-huh. 24 Q. When do fractional shares occur? 25 A. Well, I would assume it is -- I assume that

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1 it would come when it was converted. 2 Q. I see. But if you go down to the bottom -- 3 A. Uh-huh. 4 Q. -- and the positions, isn't the preferred 5 still being held by you? 6 A. It's hard for me to read this thing. 7 It's -- 8 Q. It's the same entry? 9 A. Yeah, yeah. 10 Q. All right. 11 A. Yes. 12 Q. Okay. So how could you have an entry for 13 fractional shares if you haven't sold it? 14 A. If we haven't sold it? 15 Q. Yeah, or you haven't converted it. I'm 16 sorry. You haven't converted the convertible 17 security. How could you have a fractional share? 18 A. I can't give you the answer to that because 19 I don't know what the procedure was. That's an 20 operations department procedure of what -- of how 21 they handled the fractional shares. 22 Q. One last question or maybe a couple more 23 questions. See at the beginning of the debit column 24 the price is 277 and change? See that? 25 A. Uh-huh.

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1 Q. And then down at the bottom it's still 2 showing it at 277 at the end of the -- 3 A. The last positions are mark to market. At 4 the end, those positions at the bottom are the 5 current market price at that time. It wouldn't 6 necessarily reflect what the market was at the time 7 this trades. In other words, they're now -- it's 8 showing that this is a -- that this is a long 9 position and a short position at what the market 10 price was at the end of the -- at the end of the 11 month. 12 Q. Isn't it unusual that the trade and the -- 13 A. No. 14 Q. -- mark to market be the same? 15 A. No. 16 Q. No? 17 A. It depends upon what the market is. If the 18 stock didn't change, you know, I mean, you're 19 talking about, you know, what the price of the stock 20 is at the end of the month as opposed to, you know, 21 when it was purchased, you know, on 6-5. So you're 22 talking about, you know, the three-week period of 23 time. 24 Q. Who operationally would have handled this 25 trade?

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1 A. The operation department? 2 Q. Yeah. 3 A. Well, depends upon when it was done. If it 4 was done in 1986, it would typically be probably 5 Annette's department. One of the -- I don't know 6 who would -- physically would have been doing it. 7 Q. Okay. Annette or someone working for her? 8 A. Someone, you know, on that -- you know, in 9 that area. 10 MR. SHEEHAN: Okay. Let's go -- I don't 11 know that we've marked the next one. Have we? So 12 let's mark it now. What's that? 13 MS. FEIN: Should we do it as Trustee 1 or 14 do I -- 15 MR. SHEEHAN: Yeah. We're going to do 16 Trustee 1. Okay, Ellen? We're going to go Trustee 17 1. 18 MS. CHAITMAN: Yeah. That's fine. 19 Whatever you want to do. 20 MS. FEIN: Just two pages. 21 MR. SHEEHAN: That's fine. Why don't we 22 do this? Why don't you mark them all together? 23 MS. FEIN: Yeah. 24 THE WITNESS: Is it warm in here now? 25 Much warmer than today -- yesterday.

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1 MS. FEIN: Yesterday was freezing. 2 THE WITNESS: I put on this shirt 3 underneath it because I was so cold yesterday. 4 MR. SHEEHAN: Mark all of these. That's 5 Trustee 1. This is going to be Trustee 2. 6 MS. FEIN: That will be Trustee 1. 7 MR. SHEEHAN: How should we mark this? 8 MS. FEIN: Trustee 1. 9 (Trustee Exhibit Number 1 was marked for 10 identification.) 11 Q. (By Mr. Sheehan) Okay, yeah. All right. 12 We're good. I apologize. Take a look at Trustee 1. 13 This actually consists of two pages. Do you see 14 that? 15 A. Uh-huh. 16 Q. Okay. Looking at the first page, could you 17 -- have you had a chance to look at it? 18 A. Yeah. 19 Q. Okay. If you look down at the -- this is 20 now for the following month. It's July 31, the end 21 of the month '86. Do you see that? 22 A. Right. 23 Q. All right. It's again Mr. Blecker's 24 account? 25 A. Uh-huh.

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1 Q. And what is it showing as the end positions 2 there? 3 A. Right. 4 Q. What are they showing? 5 A. It's showing him long Interco convertible 6 preferred and short the common stock. 7 Q. So what does that mean to you? 8 A. What does it mean to me? 9 Q. Yeah. 10 A. He's still -- he still owns this -- the 11 bond and he sold short the stock. 12 Q. And that is -- so he -- 13 A. The position is still open, in other words. 14 Q. Still open from early June? 15 A. From when it was -- yes. 16 Q. All right. Do you see under the debit 17 column again the amount of 277,309.75? 18 A. Uh-huh, right. 19 Q. Is that not supposed to be mark to market 20 there? 21 A. It would be the market, I'm assuming, you 22 know. 23 Q. So the market never changed from that 24 price? 25 A. It's possible.

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1 Q. Okay. Let's go to the second page if we 2 could. Oh, what's that? It's a double-sided page 3 on mine. 4 MR. GOLDMAN: For you. 5 MR. SHEEHAN: Yeah. Not for you, though. 6 Q. (By Mr. Sheehan) Okay. So let's take a 7 look at that. Could you take a look at the top and 8 tell us what you understand this statement to be? 9 A. It shows the same types of securities, 10 Interco preferred, convertible preferred, and then 11 there's receive and delivery of the positions. 12 Q. Uh-huh, okay. Did a conversion take place 13 here? 14 A. I have no idea. It was either converted or 15 it was -- it was unwound or swapped. I can't see 16 whether it was -- if it was unwound, it would have 17 been -- it would have been actual prices that would 18 appear. I mean, I'm having a hard time reading this 19 thing. 20 Q. Yes. 21 A. But it would either be unwound or could 22 have been -- it could have been swapped. They could 23 have exchanged the positions to close them out 24 without going into the open market. We can swap 25 them with another dealer or we can swap them with a

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1 bank and so on. 2 Q. Can you explain on the first statement that 3 we looked at that was -- it was number 14. It 4 showed that there was a -- the fractional shares are 5 shown there? 6 A. Right. 7 Q. Can you explain why those appeared six 8 weeks before? 9 A. I told you I'm not sure how they handled 10 the fractional -- the fractional shares. They 11 might -- for all I know is they might because 12 they're planning to convert it and they know they're 13 going to get a fractional share, they credit the 14 account with the fractional share. 15 I'm not familiar with the operations side 16 of the business, so I don't know how they physically 17 handle that. And also how they might have handled 18 it in 1986 might be different than how they handled 19 it, you know, at a later date because there were 20 different operations people and we had different 21 systems. 22 Q. I guess the question I have is how would 23 you get the price and the fractional share six weeks 24 before you converted it? 25 A. It depends upon whether -- I don't know how

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1 they handled the fractional shares. So they might 2 be getting -- they value the fractional share and 3 what the price was at that time or, you know, I 4 don't know how they determined that. 5 Q. Okay. The next document, this is a 6 different, TRW? 7 MS. FEIN: Uh-huh. 8 MR. SHEEHAN: Okay. We're going to skip 9 it, try to get Pete out of here early. 10 MS. CHAITMAN: We're skipping 9-30-86? Is 11 that what you're doing? 12 MR. SHEEHAN: Yeah. 13 MS. CHAITMAN: Okay. 14 MR. SHEEHAN: All right. We don't need -- 15 MS. CHAITMAN: There was a reference on 16 the record that this was a two-page document, but 17 it's much longer. 18 MR. SHEEHAN: Yeah, yeah. And I 19 apologize. 20 MS. CHAITMAN: No. Okay. I just wanted 21 to -- 22 MR. SHEEHAN: It is indeed five pages. 23 MS. CHAITMAN: Okay. 24 MR. SHEEHAN: Okay. Sorry about that. 25 (Trustee Exhibit Number 2 was marked for

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1 identification.) 2 MR. SHEEHAN: Put on the record what we're 3 doing; okay? 4 MS. FEIN: I'm marking as Exhibit 2 a 5 couple of consecutive customer statements, six 6 pages, the first page MF 00367785. 7 Q. (By Mr. Sheehan) I'll let you know for the 8 record that this is actually a six-page document. 9 A. Uh-huh. 10 Q. And take your time looking. You can look 11 at the first page, all the pages now, and just let 12 me know when you're ready; okay? 13 A. Okay. All right. 14 Q. So directing your attention to -- or 15 perhaps we should identify it first. This purports 16 to be a June 30, 1983 customer statement of Leonard 17 Alpern? 18 A. Uh-huh. 19 Q. And I'm directing your attention to the 20 entry 6-7, 6-14, Bancorp Hawaii, Inc. Do you see 21 that? 22 A. Yeah. 23 Q. What do you understand that entry to 24 represent? 25 A. You're talking about the journal, where it

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1 says journal? 2 Q. No. It's -- 3 A. You're talking about above that, the 6-7? 4 Q. 6-7, 6-14. 5 A. Okay. It looks to me like the purchase of 6 a convertible bond. 7 Q. Well, before that, though -- 8 A. Oh. 9 Q. -- the 220, the short position? 10 A. Okay, yeah. 11 Q. What's that? 12 A. Looks like a sale of 220 shares of Bancorp 13 common at 27. 14 Q. And then on that same day just below that, 15 another short. What's that? 16 A. Same thing, stock at different price for a 17 larger amount of stock, 4,331 shares at 27. 18 Q. And then on 6-8 -- 19 A. Uh-huh. 20 Q. -- there's a purchase there -- 21 A. Right. 22 Q. -- of a long position. What's that? 23 A. That's the purchase of the -- of the 24 convertible. 25 Q. Is that consistent with the convertible

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1 arbitrage strategy to sell the short before you buy 2 the convertible security? 3 A. Yeah. As I said, it depends upon what 4 direction you think the market is going to go. 5 Sometimes we would sell the stock before we bought 6 the bond, you know, and sometimes we'd buy the bond 7 first. That's a common practice in convertible 8 bonds, verbal trading. 9 Q. So when you buy and sell the short first, 10 you're at risk; are you not? 11 A. Yes. 12 MR. SHEEHAN: Okay. 13 MS. CHAITMAN: Objection to form. I think 14 you meant buy the -- didn't you mean -- 15 MR. SHEEHAN: No. You sell the short. 16 MS. CHAITMAN: Oh, okay. 17 THE WITNESS: These are not ever 18 considered riskless trades, by the way, these types 19 of trading. The client is well aware of the fact, 20 you know, how the strategy works. That's legging. 21 That's the reason you can do these trades for the 22 most part successfully. 23 It is not -- you know, it is -- it would 24 be very, very difficult to have a simultaneous 25 transaction in a convertible security and generate

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1 the kind of returns that we're anticipating, that 2 the strategy is designed for. So that's where the 3 skill of trading comes in and everybody that -- that 4 was sophisticated enough, theoretically every client 5 should have been, you know, the strategy was aware 6 of the fact. That's why the strategy made sense. 7 Q. (By Mr. Sheehan) Isn't the -- I'll put 8 this the correct way. If you sell -- buy the 9 convertible security and it's at discount and you 10 sell the stock short the same day, all right? 11 A. Right. 12 Q. Isn't that a risk-free transaction? 13 A. No, because depends upon what time, if you 14 may have bought the bond at 10:00 o'clock in the 15 morning and sold the stock at 2:30 in the afternoon. 16 Q. What if you did it simultaneously? 17 A. If you did it simultaneously -- 18 Q. Yes. 19 A. -- it wouldn't be a risk providing you 20 bought it at a discount. 21 Q. Right, okay. Why wouldn't you always do 22 that then? 23 A. Because it might have -- the market 24 wouldn't allow you to do that. It wasn't available. 25 Q. All right. One thing I noticed is that

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1 going back again to the sales of the shorts, do you 2 see the two entries? 3 A. Uh-huh. 4 Q. There are two different prices. Do you see 5 that? 6 A. Yeah. 7 Q. Why didn't you average them? 8 A. Because this -- this transaction, you know, 9 again, depending upon whether this order was part of 10 a larger -- of a larger order or not. I can't tell, 11 in other words. This might have been a stand-alone 12 order. In other words, there may have not been 13 other customers involved in this transaction or we 14 may have been -- you know, may have been able to buy 15 it all at the same price. 16 Q. As I understand, your criticism of Mr. 17 Dubinsky is that he didn't understand you were 18 average pricing; is that correct? 19 A. It depends upon whether you're talking 20 about the split strike or whether you're talking 21 about the convertibles and it depends upon when you 22 were doing and what individual order. 23 Q. Let's take that piece at a time. Why would 24 it be different between split strike and convertible 25 arbitrage?

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1 A. Because of the size of the -- the size of 2 the orders, the size of the order that we were 3 executing, the number of clients involved in the 4 transaction. 5 Q. So the larger the order, what would happen? 6 A. The more you would spread it out over a 7 period of days and buy it -- or even if you did it 8 in the same day, you're buying it, you know, from 9 different brokers at different prices. You go into 10 the market to buy a thousand shares. You may be 11 able to go -- to buy all at the same price or you 12 may have to buy it at different prices from the same 13 broker or from different brokers. 14 Q. All right. And if you were doing the 15 convertible arbitrage strategy? 16 A. Do the same thing. 17 Q. Same thing. Okay. Since we're going to 18 end up going through all these, I'm just going to 19 direct your attention to the bottom of the page 20 again. 21 A. Uh-huh. 22 Q. And it shows the end positions. Do you see 23 that? 24 A. Right. 25 Q. Could you tell me what the two end

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1 positions are? 2 A. It looks like you're long -- you're talking 3 about the Hawaii? 4 Q. Right. 5 A. You're long the Hawaii convertible 6 preferred and you're still showing an open short 7 position of Hawaii common stock. 8 Q. And look at the price there at the end of 9 the positions. 10 A. Uh-huh. 11 Q. Is it your testimony that's mark to market 12 there? 13 A. I would assume it's mark to market. 14 Q. Okay. Now, what -- and you can look at all 15 these, so and I'm just representing for the record I 16 always say the documents speak for themselves, that 17 if we were to go through each of these, as I 18 understand it what we would see is that the -- well, 19 maybe I shouldn't try to do that, try to speed 20 things up and I shouldn't. Let's go to the next 21 page if I could. All right? And this is a 22 statement from 7-29-83. Do you see that? 23 A. Yes. 24 Q. And again, the end positions are what? 25 A. Hawaii. You're short Hawaii common stock

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1 and you're long convertible bonds, uh-huh. 2 Q. Okay. So that means that you're still 3 holding them since the 6-30, the 6-7 and 6-8 4 transactions? 5 A. Correct. 6 Q. Okay. And again, the price there under the 7 close-out is a mark to market price? 8 A. I'm assuming that they're mark to market 9 prices. You know, I'm not sure going back into '83 10 how they handled the -- whether they actually mark 11 to market at that stage or they just carried it 12 forward at the same price that it was bought at. I 13 don't know. 14 Q. Aren't you supposed to tell the customer 15 what their market value is? 16 A. No. 17 Q. And their positions? 18 A. No. You're not -- you're not obligated to 19 tell them. You're obligated to tell them -- you 20 know, obviously, what you wouldn't be able to do was 21 put a price on it that was totally unrelated to the 22 market, that would be unrealistic to the market 23 price; but typically our systems, you know, I'm 24 assuming that they were the same in '83 or, you 25 know, as they were, you know, at a later date. They

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1 get mark to market by the system. 2 Q. Okay. 3 A. So that's why, you know, typically I've had 4 no reason to believe that it wasn't handled that way 5 in '83, but I can't tell you for sure. 6 Q. Again, would that be Annette or one of her 7 people doing this operational work? 8 A. It would be the -- it depends upon whether 9 the system did this or they did it manually. 10 Q. Okay. But would Annette Bongiorno be 11 responsible for the operational -- 12 A. Someone in the -- well, someone in that 13 department. Back in '83, you know, there were 14 different people. It could have been Dan Bonventry, 15 you know. I don't know. 16 Q. Right. Let's go to the next statement. 17 This is August 31, '83 and there are three entries 18 there on August 8th. Do you see them? 19 A. And by the way, let me just correct 20 something so you know. Annette Bongiorno is 21 basically a bookkeeper. She's not really what we 22 would deem to be a senior operations person, 23 particularly in 1983. She's more of a bookkeeper 24 clerk. She's not a systems person or she's not a 25 cashier, an operations person.

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1 Q. Let me clarify that then because when I 2 asked you earlier who would be responsible, you told 3 me Annette. Is there someone else who would have 4 been responsible? 5 A. She's responsible for the client. She 6 handles the client business. She doesn't -- like 7 she's not in the back office type of an operations 8 that receive or deliver or even the mark to the 9 market. That's not something that she would handle. 10 Q. In this '83/'84 time frame -- 11 A. At any time. 12 Q. I understand that, but my question was 13 going to be in that time frame who would have been 14 that back office person? 15 A. I don't remember. It could have been Dan 16 Bonventry. It could have been, you know, Irwin 17 Lipkin. It could have been, you know, Sylvia 18 Hendel. 19 Q. All right. Let's turn as I was just going 20 to to August 31, 1983. Again, this purports to be a 21 statement for Leonard Alpern of that date. If you 22 would look at the entries for August 8th and tell me 23 what they represent to you? 24 A. August 8th? 25 Q. Yep.

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1 A. Oh, it looks like the -- a purchase -- 2 well, these are receiving -- this is a transaction 3 of warrants, forum group warrants. And these are 4 just receive and deliver of positions of forum 5 warrants. 6 Q. Yeah. Do you see what the entry there is 7 on 8-8 with regard to the preferred security? 8 A. On 8-8? 9 Q. 8-8. 10 A. Yes. 11 Q. There's an entry where it is you're 12 selling. Do you see that? 13 A. Monsanto? 14 Q. No. The Bancorp Hawaii preferred? 15 A. This looks like a receive and deliver. 16 Q. Right. 17 A. Uh-huh. That's not a buying or a sell. 18 That's a receiving. 19 Q. So you delivered in the convertible 20 securities? 21 A. That's the accountant was -- right. 22 Q. Does that mean you converted it? 23 A. It could have been converted, it could have 24 been swapped. 25 Q. What's a swap?

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1 A. A swap is when you go in and you exchange 2 the position with -- for the customer with another 3 -- with another client or another -- a bank or 4 another dealer. 5 In other words, you had someone on the 6 other side of the transaction that -- if I have -- 7 if a client is long on bond and short common stock 8 and you -- the trader is -- I determine that I want 9 to close out that transaction and rather than go out 10 and physically convert it into the other, I just 11 want to go ahead and go into the marketplace or go 12 into another dealer and say look, I'm willing to 13 convert -- I'm willing to exchange my bonds for 14 stock and so on and so forth. You wouldn't want it 15 that way. 16 Q. Okay. Let's go back to the 6-30-83 17 statement here of Mr. Alpern. So it's two back, I 18 think. June 30. And there's an entry there on 19 June 8th that's showing fractional shares being 20 credited to the account. Do you see that? 21 A. 6-30? Oh, the statement. Okay. Yeah, 22 right, uh-huh. 23 Q. The statement is 6-30, but the entry is 24 6-8? 25 A. Right, yeah.

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1 MR. SHEEHAN: I'm sorry. 2 MS. CHAITMAN: Which line are you looking 3 at? 4 MR. SHEEHAN: I apologize. It's 6-15. 5 THE WITNESS: Okay. 6 MR. SHEEHAN: I'm looking at the wrong 7 line. I apologize. 8 MS. CHAITMAN: Okay. 6-15, okay. 9 Q. (By Mr. Sheehan) Yeah. 6-15, do you see 10 fractional shares? 11 A. Uh-huh. 12 Q. See that? Would that indicate to you that 13 it had been converted? 14 A. I'm responding the same way I said before. 15 I don't know whether it was converted or whether -- 16 I don't know how they handled the fractional shares. 17 Q. And do you have an explanation of why you 18 would have fractional shares showing on 6-15 when, 19 in fact, the preferred wasn't delivered until 8-8? 20 A. I can't respond to that. I don't know how 21 they handled that. I'm not an operations person. 22 MR. SHEEHAN: Okay. All right. 23 (Discussion off the record.) 24 MR. GOLDMAN: I can see. 25 Q. (By Mr. Sheehan) Yesterday Ms. Chaitman

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1 asked you about a meeting with the attorney's office 2 shortly after your arrest. Do you remember that? 3 A. Yes, yeah. Oh, yeah. Okay. 4 Q. Okay. Well, let me put it in context. I'm 5 going to represent to you that that meeting took 6 place on December 16th, 2008. 7 A. You're talking about down here? 8 Q. No, no. I'm talking about -- 9 A. Oh. 10 Q. -- 2008, December 16th, days after your 11 turning yourself in as -- 12 A. Right. 13 Q. Did you meet with -- do you recall meeting 14 with the U.S. Attorney and other representatives of 15 the SEC, et cetera? 16 A. Up in my house, in my apartment? 17 Q. No. I'm not sure the location. I wasn't 18 there. 19 A. Yes. It was in my apartment. 20 MR. SHEEHAN: Okay. 21 MR. GOLDMAN: Wait. Don't -- I don't 22 know, but are you confusing the FBI with the U.S. 23 Attorney's office? 24 THE WITNESS: No. There was a meeting 25 that was held that had a lot of people. They had

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1 the FBI was up there. Marc Litt was on a conference 2 call, who was the prosecutor. There was a whole 3 bunch of people. There must have been 20 people up 4 in my apartment. 5 Q. (By Mr. Sheehan) That's the meeting I'm 6 referring to. I didn't know it was in your 7 apartment. I forgot you weren't incarcerated. You 8 were -- 9 A. The only Trustee I remember being there was 10 the Trustee, I think, from London or from -- I don't 11 know if it was -- it wasn't Picard. 12 Q. No. He was not there. 13 A. No. 14 Q. Do you mean Mr. Akers? 15 A. I don't remember his name, but I remember 16 he was the Trustee from Price Waterhouse, I think. 17 Q. Okay. All right. And what was the purpose 18 of that meeting? 19 A. I don't really -- I don't know. 20 Q. Do you recall before the meeting signing 21 what's called a proffer statement? 22 A. Yes. That was at the -- that wasn't -- the 23 proffer meeting was, you know, before that. 24 Q. Right. What did you understand the proffer 25 statement to be?

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1 A. That basically to just, you know, explain 2 to them what happened, how the fraud began and 3 started and so on. It was -- 4 Q. Right. And were you aware that someone -- 5 that the FBI was taking notes of that meeting? 6 A. I was aware that they were there. I don't 7 remember whether they were taking notes or not. 8 Q. Are you aware of the fact that they reduced 9 those notes to what they call a 302 statement? 10 A. No. 11 Q. Okay. 12 A. I don't know what that is. 13 Q. All right. 14 A. I think the FBI was standing at my piano. 15 They didn't seem to be taking notes because I 16 remember they were looking through the pictures of 17 my family at the piano. They didn't seem to have 18 much of an interest in what was going on. I don't 19 know why they were even there, quite frankly. 20 Q. Okay. And I think Ms. Chaitman already 21 asked you this, but when you spoke to that group 22 that day did you tell them the truth? 23 A. Uh-huh, yes. 24 Q. Okay. Let's -- I want to go back to 25 operations. We'll go back to 302 later, but the

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1 operations of the business. And just to get some 2 clarity on that, and I want to start with house 3 five. All right. We call it house five. Did you 4 call it house five? 5 A. It sounds familiar, but yeah. That's not 6 my area. 7 Q. Okay. We understood that you called the 8 market making and proprietary operation house five. 9 A. That's what the operations department 10 called it, I guess. 11 Q. Okay, fine. It's not a term that's 12 unfamiliar to you; is it? 13 A. Slightly. I'm not sure. 14 Q. Okay. Well, then let's just call it market 15 making. 16 A. Uh-huh. 17 Q. When I say that, I mean both market making 18 and proprietary unless you tell me I'm wrong. 19 A. No. It sounds about right. 20 Q. Okay. And what I need to know is I'm going 21 to ask you some names and if you could just tell me 22 as you understood it, and I'm focusing on the '80s 23 now because we already talked about post-'92, 24 focusing on the '80s, what the work assigned to them 25 was, what they were required to do, et cetera, what

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1 their jobs were. All right? And the first one is 2 Marty Joel. 3 A. He was a trader. 4 Q. Okay. In the market making? 5 A. Correct. 6 Q. Okay. David Kugel, I think we've heard 7 about him? 8 A. Same. 9 Q. Okay. Did he ever provide any assistance 10 in the investment advisory side? 11 A. Other than -- other than giving Annette's 12 department the correct formula to use when you were 13 handling a trade for a client. 14 Q. Okay. Andrew Madoff? 15 A. I think he started after '87; didn't he? 16 Q. Yeah. He was later. 17 A. He would have been proprietary trading and 18 market making at that time. 19 Q. What about Mark? 20 A. The same. 21 Q. What about Peter? 22 A. Peter was at one point a market maker, 23 involved in market making. I'm not sure of the -- 24 I'm not sure of the dates. And then he also was a 25 compliance, handled the compliance for the firm and

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1 systems. He did a lot of things, my brother. 2 Q. Okay. Now, how were the market make -- the 3 traders in market making, how were they compensated? 4 A. They get -- typically got a percentage, 5 25 percent of their net trading profit. 6 Q. And how was that calculated? 7 A. By whatever, you know, the back office 8 would come up with a figure of what the net profit 9 was based upon after deducting trading expenses. 10 Q. Okay. So let's say I did -- I'm going to 11 give you a hypothetical. You can correct it if I 12 say something wrong, but the trader does a trade for 13 50,000 shares of General Electric and he generates a 14 profit of $25,000. All right? 15 A. Uh-huh. 16 Q. And then you take that 50,000 shares and 17 you move it over to the IA business as taking 18 inventory from market making; right? 19 A. Uh-huh. 20 Q. You said that's what you would do. How 21 does he get compensated at that point? 22 A. He doesn't -- the market making doesn't -- 23 isn't compensated for anything dealing with a 24 client. The market makers get compensated on 25 basically what their profit was when they bought and

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1 sold the stock, you know, from other dealers. The 2 market makers did not handle the customer 3 transaction. They weren't selling it. So the 4 market makers typically only dealt with other 5 broker-dealers. 6 Q. Okay. Did the traders have limits on the 7 amount of capital they could invest? 8 A. Yes, uh-huh. 9 Q. Would they be different for each trader? 10 A. Yes. 11 Q. Do you remember what David Kugel's was? 12 A. You know, I don't remember. Depends upon 13 the time frame, you know, we've been talking about. 14 They vary. 15 Q. I want to go back to Marty Joel for one 16 question. 17 A. Uh-huh. 18 Q. Did he do convertible arbitrage? 19 A. Yes. 20 Q. He did. Let's go to house 17, right, which 21 is the investment advisories? 22 A. Right. 23 Q. Okay. And if you can give me sort of the 24 employment history background of the following 25 people, what their jobs were, et cetera, which may

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1 have changed over time. 2 A. Right. 3 Q. And if you could tell me that, that would 4 be good, too. 5 A. Uh-huh. 6 Q. Frank DiPascali? 7 A. What time frame are you talking? 8 Q. Let me start with when Frank started and 9 how his roles changed over time. 10 A. He started basically as a clerk. 11 Q. When was that? 12 A. I don't remember when he started, quite 13 frankly. 14 Q. Approximately. In the '70s, '80s? 15 A. Probably, I guess, in the '80s. 16 Q. Okay, fine. 17 A. I don't know. 18 Q. Okay. So he started as a clerk and then 19 what? 20 A. He started as a -- well, he started as an 21 assistant trader or clerk. He was, quite frankly, 22 never particularly -- he wasn't particularly 23 talented as a trader. He also had a problem with 24 attendance. He -- for some reason Frank had a 25 difficult time making the opening.

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1 Q. Right. 2 A. So he -- he worked as a desk assistant, 3 which is basically a clerk for one of the other 4 market makers. That's how they get experience and 5 they learn. And depending upon what -- what the 6 trader that they're assisting thinks of his ability, 7 they then move up to being -- get a list of stocks, 8 you know, on their own as a market maker. 9 He never really had that. He was never -- 10 he was never -- we never felt he was capable of 11 being a risk, what we call a risk trader, market 12 maker. 13 Q. So did he ever become a trader in your 14 market making operation? 15 A. No. 16 Q. So what he did do was -- I don't want to 17 put words in your mouth. He assisted? Would it be 18 fair to say he assisted the traders? 19 A. Yeah, yeah. He did. He assisted any 20 number of different traders, which was common. We 21 would move him around from different traders to 22 learn different aspects of the market making 23 business. 24 Q. Did there come a time where he did more 25 than being an assistant to a trader?

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1 A. On the trading desk? 2 Q. No, outside. Did he move on? 3 A. He did move on. He moved on to handling 4 the clients, handling the actual, you know, breaking 5 up the strategies for the clients. 6 Q. Okay. Would he work on the convertible 7 arbitrage strategy? 8 A. Yes. At times, yep. 9 Q. Okay. And then did he work on the split 10 strike conversion strategy? 11 A. Yes. 12 Q. When did he -- as best you can recall, when 13 did he make that move to the customer side? 14 A. He was doing it in probably the maybe late 15 '80s to early '90s. 16 Q. Okay. What role did -- if any, did Frank 17 DiPascali play in turning to a split strike 18 conversion strategy? 19 A. He would have played a major role at that 20 stage, you know. 21 Q. What did he do? 22 A. He supervised all the other people. He 23 took instructions from me as to when we were going 24 to go into the market. And he was -- he was very 25 talented when it came to helping to build the system

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1 that tracked the various baskets of securities and 2 so on. He did pretty much everything. 3 Q. Okay. So let's turn to Annette Bongiorno, 4 sort of the same thing. When did she start and what 5 was her employment history? 6 A. She started basically almost as a 7 receptionist when the firm had very few employees. 8 She was a bookkeeper, receptionist. People did 9 multiple jobs, you know. 10 Q. And did there come a time when she passed 11 beyond being just a receptionist and did other 12 things? 13 A. Yeah. I mean, you know, she learned -- 14 because she came to work for us, you know, right out 15 of school. So she didn't know anything about 16 bookkeeping really or, you know, the stock market 17 and so on. So it was just a gradual process. 18 Q. Did she work on the market making side? 19 A. No. 20 Q. Did she always work on the customer side? 21 A. Yes. 22 Q. What -- when she went past being the 23 receptionist, what have you, what was her next role? 24 A. She -- I would say she moved from starting 25 to being sort of a combination secretary,

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1 bookkeeper, you know. She did a lot of -- you know, 2 we didn't have a lot of people working for us. And 3 then she -- you know, she handled the customers. 4 She spoke to them on the telephone. They got 5 instructions. She answered questions about their 6 accounts and so on and so forth. 7 Q. Did Annette Bonjourno work on the split 8 strike conversion strategy? 9 A. For the most part she didn't have a major 10 role in that, no. 11 Q. What were the customers she was talking to 12 and working with? 13 A. She handled the big four clients was her 14 particular role. And also she ran a whole 15 department of other bookkeepers, you know, that 16 handled -- that were involved in doing the 17 processing of the split strike trades. 18 Q. Okay. Just a couple more. Jodi Crupi? 19 A. Jodi Crupi worked as an assistant to Frank 20 DiPascali and basically in the split strike, in the 21 convertibles. Primarily it was on the -- she was on 22 the 17th floor and she handled the checkbook, checks 23 in, checks out for clients and so on. 24 Q. Okay. And then, lastly, Joanne Sala? 25 A. Joanne Sala was in Annette's department,

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1 basically was a bookkeeper. 2 Q. Okay. She reported to Annette? 3 A. Yes. 4 Q. Okay. Who -- I think you've already 5 answered this, but I want to just be sure. The 6 financial reporting -- 7 A. Uh-huh. 8 Q. -- that was required of you as you ran it 9 individually or later as an LLC, who was responsible 10 for that financial reporting? 11 A. Financial reporting where? You're talking 12 about the focus reports? 13 Q. Like focus reports or any other SEC 14 inquiries or things like that. 15 A. Basically, that would have been -- well, 16 certainly me always from day one -- 17 Q. Right. 18 A. -- you know, was the one that signed the 19 focus reports and reviewed the focus reports. It 20 would have been Irwin Lipkin, who was the -- 21 considered to be the cashier originally. Then there 22 was a girl named Sylvia Hendel, who happened to have 23 been killed by a bus leaving the office one day. 24 That was in the '90s. She was the -- she had the 25 job that Enriqua Pitz took over.

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1 Q. Okay. 2 A. So she compiled the focus reports at one 3 point. She worked with Irwin Lipkin. 4 MR. SHEEHAN: Okay. Let's take a break 5 right here; okay? 6 MS. CHAITMAN: Sure. 7 THE VIDEOGRAPHER: Going off the record. 8 The time is 10:11 a.m. 9 (A recess was taken and Trustee's Exhibit 10 Number 3 was marked for identification.) 11 THE VIDEOGRAPHER: Back on the record. 12 The time is 10:25 a.m. 13 Q. (By Mr. Sheehan) Mr. Madoff, you're about 14 to be handed Exhibit Number -- the Trustee's Exhibit 15 Number 3. 16 A. Uh-huh. 17 Q. And for the record, I will identify this as 18 a document that is copies of a Rolodex set of cards. 19 And the reason you have all, but we're not going to 20 ask you about all these pages here, we're going to 21 ask you about the first couple, but is that this is 22 a complete set of what was in that Rolodex. All 23 right. So we wanted to give you that. 24 A. Uh-huh. 25 MS. CHAITMAN: Whose Rolodex was it?

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1 MR. SHEEHAN: It's Mr. Kugel's. 2 MS. CHAITMAN: David Kugel's. All right. 3 Q. (By Mr. Sheehan) So turning to the second 4 page, and these are double-sided so it's on the 5 left-hand side. 6 A. Uh-huh. 7 Q. Take a -- I'm going to actually only ask 8 you about the left and the right-hand side, those 9 two cards at this point. And take your time. Take 10 a look at it first. So my first question -- 11 A. Uh-huh. 12 Q. -- is do you recognize the handwriting? 13 A. It's certainly not David Kugel's. 14 Q. Okay. 15 A. No. 16 Q. Do you know who it is? 17 A. No. 18 Q. Is any of this handwriting yours? 19 A. No. 20 Q. Okay. So it says on this, it starts -- and 21 I'm just going to read it. Obviously, the card 22 speaks for itself, but it says prices and then one 23 that's circled. It says look on calendar for work 24 to be done Tuesday through Monday. Do you see that? 25 A. Uh-huh.

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1 Q. And then it says two, go back two Fridays. 2 A. Uh-huh. 3 Q. And three, that will give you your date to 4 start to present for instances 6-5 through 6-11? 5 A. Uh-huh. 6 Q. Start at 5-25-84 -- 7 A. Uh-huh. 8 Q. -- through present? 9 A. Uh-huh. 10 Q. Now, what, if anything, does that mean to 11 you? 12 A. I'm assuming that they're giving whoever is 13 setting up the transaction instructions as to when 14 to look through the trading ledgers to see when we 15 -- what stock we bought or bonds we bought. 16 MS. CHAITMAN: David, if I can just 17 interrupt, whose handwriting is this? Do you know? 18 MR. SHEEHAN: Not -- I don't know. 19 MS. CHAITMAN: But you said it was David 20 Kugel's -- 21 MR. SHEEHAN: It's his Rolodexes. He's 22 identified them in the past. I don't know whose 23 handwriting. 24 THE WITNESS: He would not have this. 25 This is not -- this would have nothing to do with

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1 David Kugel. This is something that is -- would be 2 in Annette's department because David Kugel doesn't 3 even have a Rolodex. This would not be up in his -- 4 you know, on his desk. 5 These were instructions to whoever is 6 actually going to put the trades through and it's 7 telling them to search through the firm's trading 8 ledgers and investment ledgers. It's looking 9 through the inventory to pick out, you know, what 10 prices or what stocks to use. 11 Q. (By Mr. Sheehan) Mr. Kugel has testified 12 that he would go back two weeks to find trades that 13 gave a predicted outcome? 14 A. Yeah. He could be looking at, you know, at 15 his market making trades in which, you know, what 16 bonds we bought, which then would go into the firm's 17 trading ledger. 18 So if, in fact, Annette would call him or 19 whoever called and say look, David, we have money in 20 that we need a million dollars' worth of 21 transactions for a convertible security, he would 22 look into his -- you know, his market making, you 23 know, trading which he had -- he had sheets as to 24 what he bought and sold and look at what -- what 25 stocks, what strategy was available, you know, for

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1 that. So that's what they're asking him to do. 2 They're asking him to pick out a convertible that -- 3 that he was able to set up, long the bonds and short 4 the stock at a particular price. That was his -- 5 that was his job. That's where he made money. 6 Q. The testimony that he's given is that this 7 was done to give a predetermined profit to somebody? 8 A. No. Look, I tried to explain that to you 9 yesterday. That's not the way the trades are done. 10 Let me explain it to you. The market maker is 11 making -- that trades convertible bonds or whether 12 he trades stock, it doesn't matter. He's trading 13 convertible bonds. 14 The convertible bonds trader, whether it be 15 Marty Joel, whether it be David Kugel, whether it be 16 Mark Feldman or any other number of convertible 17 traders, their job is making a market and trading in 18 that convertible security, at which point they are 19 -- they're quoting to the -- out to the immediate 20 world what they want to buy bonds and short stock. 21 And they may turn around and set up the 22 trade. They'll buy bonds on Monday and sell stock 23 Monday afternoon or maybe they'll sell it Tuesday or 24 Wednesday and they have a -- they have a position, a 25 market making position being long on bonds and short

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1 of stock. And they may have a -- as I said, they 2 may be planning to do this eventually to convert or 3 they may want to turn around and just unwind the 4 transaction, having nothing to do with the client. 5 You know, everything that the market makers buy and 6 sell doesn't typically go to a client. 7 It goes to the firm's account, and he 8 doesn't care whether we sell it to a client or not. 9 His profit and loss is based upon what he's able to 10 buy that stock. Then, you know, then that stock 11 goes into the firm's trading inventory. All right. 12 And at that stage of the game it's the firm's 13 inventory. 14 If, in fact, we have a customer that we 15 wanted to set up a trade for, what typically we do 16 is Annette or whoever would contact David and say 17 listen, we have money that we want to set up for a 18 client in a convertible bond. Did you have any 19 trades that you -- that looked like that would be a 20 good trade for a customer, you know? 21 He would -- you know, he would say yes. 22 Okay. I did trades in Bancorp or whatever it is and 23 he'd say just, you know, if you're going to set up a 24 trade in Bancorp, you have to buy the bonds, you 25 know, X number of bonds, short X number of stock.

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1 They then would go and turn around, the next step 2 would be the person let's say on the 17th floor or 3 wherever they were located would then search through 4 the firm's ledgers and inventory or blotters, you 5 know, discount, and pick out those securities. And 6 then we're doing that. 7 All right. Now, that's -- then it becomes 8 a client trade. The market maker doesn't get 9 involved in that unless we're taking it out of his 10 inventory. And you then -- and the reason why the 11 market maker doesn't get any compensation on that, 12 because that's -- the firm is now charging the 13 customer a mark-up, which is a little -- can be 14 considered a commission equivalent. 15 And that's what the investment advisory 16 side is making their profit. The market maker 17 doesn't participate in that. 18 Q. Wasn't a mark-up just four cents a share? 19 A. It varied. It depends upon -- the 20 convertible bond market was different than the split 21 strike was -- used to be three cents, four cents, 22 three cents, then it went down to two cents; but the 23 convertible bond market could be a maximum of five 24 percent, which was what the NASD was. This was 25 years ago, but then we typically would be less than

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1 it would typically be, a couple of percent. 2 Q. So when the traders trade with -- you know, 3 looking back to find a trade that's going to give a 4 profit to your customer -- 5 A. Uh-huh. 6 Q. -- and you move that out of inventory, the 7 trader loses his income off of that? 8 A. No. He doesn't lose his income. He loses 9 that position. 10 Q. And does he get paid for the profit that 11 he's generated? 12 A. Yeah. Of course, he gets trade for the -- 13 Q. I thought you said a moment ago he didn't? 14 A. He gets trade for his profit, what he's 15 buying and selling, you know. Once -- if the -- 16 depends upon whether it remains in the trader's 17 inventory or whether it's moved out of the trader's 18 inventory. 19 Q. That's my point. If it goes into the 20 customer account -- 21 A. Right. 22 Q. -- you give the profit to the customer; 23 right? 24 A. We give the profit of the trade to the 25 customer, yeah.

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1 Q. Right. So how do you compensate the 2 trader? 3 A. He doesn't get compensated. His 4 compensation comes from his trading with our 5 customers. Most of his market maker's trades, you 6 know, have nothing to do with clients. It goes in 7 and out, you know, bought and sold and never even 8 appears in the customer transaction. 9 Q. But if you're using your inventory, if the 10 customer inventory is, in fact, market making 11 positions -- 12 A. Right. 13 Q. -- are you paying twice on the profit? 14 A. No. He's -- once it's in his -- if it's in 15 the inventory and is not in a customer -- it's not 16 been used for a customer, then if the trader gets 17 mark to market, you know, and that profit or loss is 18 the trader's. Once it goes out of, once it's taken 19 out of our inventory -- 20 Q. Right. 21 A. -- or out of the trader's inventory, he's 22 finished with it. That's it. 23 Q. Does the customer then get the same profit? 24 A. The customer gets the profit based upon 25 whether the -- you know, what happened with the

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1 transaction, whether it was unwound, whether it was 2 converted and so on. They're two separate trades. 3 Q. Well, you mean you can actually realize 4 profit before the conversion or before the 5 unwinding? 6 A. No, not until the customer's trade is 7 closed out. Look, let me give you an example. 8 Let's assume -- let's assume you're forgetting about 9 a convertible trade or bond. Let's look at common 10 stock. Bear Stearns or Merrill Lynch, you know, has 11 a market making department. All right. The market 12 makers are trading the stock for the firm's account 13 and they're making profit or loss, you know, on 14 their -- whatever they're trading. All right. 15 Q. Yeah. 16 A. They then -- they then, you know, take 17 from -- the market makers shows the position of long 18 a thousand shares of stock at ten. If that -- if 19 that now goes -- you know, the salesman is looking 20 to buy stock for one of his clients at ten. 21 Q. Right. 22 A. He goes in and he's going to buy it from 23 the firm's inventory at ten and charge the customer 24 a commission. Once the stock is taken out of the 25 firm's inventory for the market maker, he's out of

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1 the picture anymore depending -- you know, because 2 the stock is now sold to a client. So the client's 3 -- if the client bought the stock at ten, the market 4 maker may have bought stock at ten and he -- you 5 know, and then turned around, stock went up to 6 eleven. 7 And, you know, that's his profit, from ten 8 to eleven. Now the customer comes into the 9 transaction to buy the stock at eleven, you know, 10 and the stock may go up to twelve. That's the 11 customer's, you know, profit or the commission 12 involved, has nothing to do with the trader. 13 Q. I understand that, but what I was saying, 14 when you're dealing with a convertible arbitrage 15 strategy doesn't a profit always occur when you 16 either unwind it or you convert it? 17 A. Yes, yeah. 18 Q. And doesn't that always happen in the 19 customer account if you take it out of inventory and 20 put it in the customer's account to give them that 21 profit? 22 A. That's right. 23 Q. Okay. So then whatever profit was there is 24 lost to the trader because now you've taken it out 25 and given it to the customer?

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1 A. Yeah, but he -- it's -- I'm not sure I 2 understand what you're trying to get at. 3 Q. Well, he can't make a profit in the market 4 making operation until he either unwinds it or he 5 converts it; right? 6 A. If -- 7 Q. You're saying that you look back and you 8 see that sitting there and you realize I'm going to 9 take that out of there and give it to a customer and 10 give them that profit. 11 A. Uh-huh. 12 Q. And you do; right? That's your market 13 making or your convertible arbitrage strategy? 14 A. For the customer, right. 15 Q. Right. But if you take it out of the 16 inventory of the market maker, he can't get any 17 profit because -- 18 A. No. He doesn't. His profit was made on 19 transactions that had nothing to do with the 20 customer, just buying and selling the stock, you 21 know. 22 Q. All right. I think we've gone over it 23 enough. Let me ask you this. When you were doing 24 the split strike conversion strategy, you know, in 25 the '90s and not buying stock --

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1 A. Uh-huh. 2 Q. -- how would you arrive at the prices that 3 you would put into the basket? 4 A. Based upon, you know, what the stock was 5 selling at at that price. 6 Q. Would you not look back and figure out what 7 the stock was so you would always sell -- sell high 8 and buy low? 9 A. No. In other words, the -- that was all 10 done by a system that we had dynamic systems. We 11 had ticker feeds that came into the firm. And the 12 split strike, there was a program built that would 13 monitor the stocks that were in the basket, you 14 know. So that was all done automatically. It 15 wasn't that we went back and, you know -- 16 Q. You didn't do it with hindsight? 17 A. No. 18 Q. You didn't use yesterday's newspapers? 19 A. No. 20 Q. All right. If I told you that VWAP for you 21 is at 80 percent, you know, profit -- 22 A. Uh-huh. 23 Q. -- what would your comment be on that? 24 MS. CHAITMAN: Objection to form. 25 THE WITNESS: I'm not sure I understand

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1 what you're asking me. 2 Q. Okay. In other words -- 3 A. VWAP is -- 4 Q. -- if you're doing VWAP, what's good VWAP, 5 a good percentage? 6 A. VWAP refers to what was bought and sold. 7 It has nothing to do with what a profit is. VWAP is 8 measured based upon what -- what actually took place 9 on the floor of an exchange if, in fact, you were 10 executing the order. It's not -- it would have 11 nothing to do with split strike. 12 Q. Doesn't it have to do with best price? 13 A. It has to do with what you would have been 14 -- what you would have been able to execute an order 15 at -- 16 Q. Right. 17 A. -- on the floor. In other words, what 18 actually took place on the floor. 19 Q. And price is part of that analysis? 20 A. Yeah, of course. 21 Q. Right. And when you were selling in the 22 split strike, you said you never did a VWAP 23 analysis? 24 A. No. 25 Q. All right. If you did one, would you be

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1 surprised to know that you always sold -- 80 percent 2 of the time you sold high? 3 MS. CHAITMAN: You sold what? 4 MR. SHEEHAN: High. 5 THE WITNESS: First of all, let me explain 6 something to you. 7 MS. CHAITMAN: Objection to form. 8 THE WITNESS: The VWAP, the VWAP is trades 9 that took place on the floor of the exchange, has 10 nothing to do with what took place over the counter. 11 MR. SHEEHAN: Right. 12 THE WITNESS: So it wouldn't equate to us 13 because VWAP, a VWAP is measured on floor 14 executions. Our executions were -- our executions 15 if we were executing would have been over the 16 counter. It wouldn't matter. 17 Q. (By Mr. Sheehan) You mean all the stocks 18 that you had in your split strike baskets were 19 over-the-counter trades? 20 A. Yes. 21 Q. The stocks themselves? 22 A. Yeah. 23 Q. Not the calls and puts? 24 A. No. The stocks themselves. We were the 25 largest third market maker in the country.

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1 Q. So -- 2 A. Madoff was known as the largest third 3 market dealer in the country. You know, all of our 4 transactions that we did with hundreds of our 5 brokerage firms -- 6 Q. Yeah, but -- 7 A. -- and listed securities was done over the 8 counter. They weren't stock exchange. They weren't 9 even reported to the stock exchange. 10 Q. You never put any of your split strike 11 trades to your market making? 12 A. No. We didn't do the trades. The clients 13 thought we were doing the trades over the counter. 14 They never assumed that we were doing them on the 15 floor of an exchange because our business was 16 over-the-counter dealing. 17 Q. So when you traded 200 million shares of 18 Microsoft, you did that OTC? 19 A. Yes. Well, first of all, Microsoft isn't 20 listed on the exchange anyway. Let's say -- let's 21 say IBM -- 22 Q. Right. 23 A. -- which is a listed security. We were not 24 -- our trades weren't done on the floor of the 25 exchange. With Merrill Lynch when Merrill Lynch

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1 bought stock from us, they were buying that -- that 2 was an over-the-counter transaction even though it 3 was a listed security. 4 Q. When you say listed, you're limiting 5 activity to -- 6 A. Listed on the -- 7 Q. New York Stock Exchange. 8 A. It's eligible to list on the -- it's a 9 stock that is listed over -- look, today, for 10 example, 70 percent of the New York Stock Exchange's 11 listed securities are transacted over the counter. 12 They're not -- they're transacted through the black 13 -- the dark pools. They're transferred -- they're 14 executed through dealers like Madoff. 15 Only 30 percent of them actually take place 16 on the floor. So when you look at a VWAP order, 17 that's a VWAP is reflecting to trades that took 18 place on the floor of the exchange. They're not 19 taking -- they have nothing to do with an 20 over-the-counter transaction even though it's a 21 listed security. 22 Q. Okay. All right. 23 A. You know, I want to interject something. 24 Q. You go right ahead. I love when witnesses 25 volunteer.

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1 A. You asked me about David Kugel and how 2 could he have said certain things. 3 Q. Right. 4 A. I'm not sure -- if you were asking these 5 questions of David Kugel right now, he would 6 probably be as confused as let's say he would be 7 going through exactly what you're doing by saying, 8 well, did you -- how did you set this transaction 9 up? 10 And David Kugel would say to you, well, I 11 go back and I look at my transactions of what I did, 12 you know, in this particular security, you know, 13 four or five days ago because I know that that 14 security is in the inventory. All right. So that 15 was -- there were bonds bought and stocks bought 16 because he bought and sold them. So now -- and he 17 may have bought them for his market making account. 18 He may have bought it for the firm's 19 investment account. And he'd say yeah, that's a 20 transaction you should do. All right. That -- he 21 gives that information to now the operations 22 department, let's say Annette's department. They 23 then go and they look through. If you -- if for 24 some reason you interpreted what David said is that 25 he actually set up the transaction, that he went

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1 back and looked at prices, it was not what you -- he 2 wasn't selling, going to use the prices that I 3 bought in stock for. He would be looking -- looking 4 for the firm's -- now that's in the firm's 5 inventory. It's different. There's a market making 6 inventory and then there's the firm's inventory. 7 Q. I understand, but just to stick with that 8 for a minute. All right? 9 A. Okay. 10 Q. So David executes a split -- not a split 11 strike. A convertible arbitrage strategy? 12 A. Uh-huh. 13 Q. Let's say he even does it on the same day. 14 All right. So he's got profit built in risk-free. 15 It's two weeks later. That trade actually happened. 16 A. Right. 17 Q. Right. And when he puts into the -- you 18 put into the customer statement is that exact trade, 19 but there's no profit because there was no trade? 20 MS. CHAITMAN: Objection to form. 21 THE WITNESS: I don't know what you mean. 22 Q. (By Mr. Sheehan) No. In other words, 23 you're taking history, all right, the trade that 24 David just did and which he made a profit and now 25 you're taking that and putting it into the customer

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1 account -- 2 A. No. I'm not. 3 Q. -- as though there's a real trade when 4 there really wasn't a real trade? 5 A. I'm not -- I'm not putting it into the 6 customer account, you know. 7 Q. Well -- 8 A. Putting it into the customer account from 9 the firm's trading account or inventory, not from 10 David's account. 11 Q. But we were looking this morning at Mr. 12 Blecker -- 13 A. Right. 14 Q. -- and there is no fractional share until 15 you actually convert, and yet you're showing a 16 fractional share six weeks early. How could you do 17 that unless you were backdating the trade? 18 A. It's -- look, I told you that I'm not sure 19 how they -- look, if I am selling stock from the 20 firm's -- if I set up a trade for Blecker, all 21 right, and the firm came -- and it came out of the 22 firm's inventory -- 23 Q. Right. 24 A. -- it has nothing to do with David Kugel 25 let's assume, the market maker. It's not in the

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1 firm's inventory. All right. That stock got into 2 the inventory from the market making, but now it's 3 in the firm's inventory. And the firm -- we decided 4 to keep -- I decided to keep that stock in the 5 inventory. Now, anything that happens in that stock 6 moving up and down is the profit to the firm. It 7 has nothing to do with David Kugel. He sold it, his 8 position that he sold to the firm. 9 Now the firm has that. It's not David's 10 any longer. All right. Now, that inventory is in 11 the firm's account. Now I'm turning around and 12 selling that, you know, at the time that the prices 13 that I bought it at to the client. That's an actual 14 transaction from -- you know, from the firm's 15 inventory to the client's inventory. 16 If, in fact, you know, I set it up with the 17 -- with the intention of actually converting the 18 security, all right, but, you know, I don't know how 19 they -- if, in fact, they were going to convert the 20 security, I don't know -- and they decide that if 21 they actually were going to convert it, the client 22 would be entitled to a fractional share. 23 They're going to give the fractional share. 24 When they actually converted it, they would have 25 gotten the equivalent of the fractional share. If

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1 for some reason they never converted it, the 2 customer would have gotten the fractional share 3 anyhow or the monies for the fractional share. 4 That's coming out of the firm's profit and loss. 5 It's the firm's responsibility. 6 Q. But if it's not converted, there is no 7 fractional share; is there? 8 A. Yeah, but let's say that the firm sold it 9 to the client. All right. As far as the client is 10 concerned, he'd be entitled to the fractional share. 11 If I decided to swap it and not convert it, all 12 right, I'm now buying the customer's position back 13 from the customer. And, you know, the fact that the 14 customer got the -- the customer is -- you know, is 15 getting the profit as if it was actually converted. 16 Q. Well, I want to go back to something you 17 said earlier. You were saying that say David does 18 the trade, the convertible arbitrage. 19 A. Uh-huh. 20 Q. He then you say sells it to the firm, so 21 the firm owns it; is that correct? 22 A. That's right. 23 Q. What does he sell it for? 24 A. What does he -- 25 Q. Well, it still hasn't been converted or

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1 unwound, so you don't know what the profit is. So 2 what are you paying him for that? 3 A. I'm trying to explain something to you. 4 The firm has positions, you know, in convertible 5 securities in the firm's trading account, investment 6 account. And then David has his market making 7 account. 8 Q. Right. 9 A. It has nothing to do with the client. He's 10 not buying -- it's not his stock that is going to 11 the client until this -- until the firm takes the 12 stock from David. Then the firm -- it's like two 13 separate transactions. It's not -- it's not David. 14 David has a market making account and he buys and 15 sells in that and he may buy on a Monday and sell it 16 out on Tuesday. 17 And while it's in his account, the profit 18 and loss is David's. All right. If I now am taking 19 that stock from David into the firm's account, then 20 the profit and loss is mine and it has nothing to do 21 with David. 22 Q. That's okay, but it's a stock. I'm not 23 talking about -- 24 A. Or convertible bond. It doesn't matter. 25 Q. But you don't know what the profit is until

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1 you convert or unwind? 2 A. What profit are you talking about? 3 Q. The profit on the convertible arbitrage 4 strategy. 5 A. For the customer? 6 Q. Yeah. 7 A. It's whatever -- then it's not the firm's 8 account. It's the customer's account. Whatever 9 we've set it up for the customer, that's his. If we 10 converts it, then he's -- the price has already been 11 -- the profit has already been determined based upon 12 what he bought and sold at. All right. 13 If, in fact, I now unwind it for the 14 customer, if I swap it out and I take it back, you 15 know, from the customer and it goes back into the 16 firm's account, then the customer -- you know, then 17 it's the firm's position. In other words, you seem 18 to -- you seem to not be grasping that the -- the 19 fact that, you know, these are separate 20 transactions, you know. If, in fact, I -- let's 21 assume that I wanted to just short the transaction 22 to a customer. 23 Q. Right. 24 A. All right. And I made a decision that -- 25 well, let's look at it this way. Let's assume the

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1 customer calls me up and says I want to buy -- I 2 want to buy this convertible bond. I want to do an 3 arbitrage. Let's say the customer is making a 4 decision. He says, you know, you know, I want to -- 5 I want to, you know, do arbitrage in Bancorp 6 convertible bonds. 7 You know, I want you to go ahead and buy 8 the Bancorp and sell the common stock and do the 9 arbitrage. Okay. And I turn around and I say all 10 right, you know what? I'll sell you that 11 transaction. You know, I'm going to short it to you 12 let's assume. 13 I'm going to short you the -- I'm going to 14 short you -- rather than me go out into the open 15 market and buy it, there's nothing to prevent me, 16 you know, from selling it to the customer. I'm 17 selling the convertible bond and I'm buying the 18 stock from the customer. The customer is shorting 19 me the stock and I'm buying the bond. 20 Q. Right. 21 A. Okay. Now, as far as the customer is 22 concerned if he gives me instructions to convert it, 23 you know, then we would physically have to -- you 24 know, we would have to physically convert the stock. 25 Now, if, in fact, I'm shorted to him, you know,

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1 obviously, I can't to convert it because I shorted 2 the position to him; but if the customer says, well, 3 listen, I want to close out the transaction. So I 4 said okay, I'll buy you -- I'll unwind this 5 transaction for you. I'll buy your convertible bond 6 and I'll sell you the stock that you were short. 7 And had we converted, I'm giving you a 8 fractional share. I would owe you a fractional 9 share. So I'm crediting the account with the 10 transaction. Now, in that type of transaction the 11 transaction never actually took place on a -- you 12 know, it took place because as a market maker and 13 dealer, I shorted the transaction to the customer. 14 As far as the customer is concerned, he 15 makes the profit. He's that. If, in fact, I lost 16 money, that's his -- that's my problem. He doesn't 17 care about it. 18 So, you know, every transaction if you call 19 up your brokerage firm at Merrill Lynch and you say 20 I want to buy IBM, all right, and Merrill Lynch 21 turns around and, you know, puts that order and puts 22 it on the floor of the -- the floor of the exchange, 23 the floor broker goes down into the specialist and 24 says to the specialist I want to buy IBM. And IBM 25 is trading -- you know, I look in the machine, it's

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1 trading at, you know, 95. And the specialist, he 2 doesn't have an inventory or he thinks that stock is 3 overpriced at 95. So who shorted to the floor 4 broker at Merrill Lynch? Merrill Lynch's floor 5 broker reports to you. You just bought IBM and long 6 it. 7 Q. Right. 8 A. Okay. The transaction never took -- never 9 took place. It took place because the specialist 10 shorted it to you, you know. As far as you're 11 concerned, Merrill Lynch treated you as an agency. 12 Merrill Lynch charges you a commission. All right. 13 And anything that happens that you can sell that 14 stock tomorrow or in two days, the specialist, 15 that's his problem. He's short the stock to you. 16 Q. Yeah. It's his -- 17 A. No different than like if I -- 18 Q. Okay. 19 A. If you ask the average client that I told 20 you yesterday, you know, when you put an order in 21 that you buy IBM or Microsoft, that customer I 22 guarantee you, you ask him what happens in that 23 transaction. He will tell you, well, I bought 24 shares in IBM. And IBM, he thinks that IBM got that 25 money.

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1 I guarantee you that's -- because I know 2 that because there have been surveys taken. 3 Customer thinks that when he buys IBM, that IBM, he 4 bought the shares from IBM. 5 Q. Right. 6 A. That's what he thinks. 7 Q. I understand. 8 A. Okay. He didn't buy it from IBM. 9 Q. I know that. 10 A. Okay. I know you know it, but I'm telling 11 you the -- what I'm trying to tell you, what I think 12 you're having a hard time grasping is whether or 13 not, look, you think that if, in fact, for some 14 reason if I wanted to short all of these 15 transactions to these customers -- 16 Q. Yeah. 17 A. -- you would think that these transactions 18 never took place. That's not true. They took 19 place. Now, we don't short. We'd short some stocks 20 to customers clearly, but whether it be convertible 21 bonds or arbitrage. 22 Q. Right. 23 A. Sometimes we short them, which is perfectly 24 normal, and sometimes we buy them. The transaction 25 as far as the customer is concerned, he has a real

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1 transaction. 2 Q. Yep. I understand. 3 A. Okay. 4 Q. Let's turn to the Madoff exemption. 5 A. What? 6 Q. The Madoff exemption. 7 A. Okay. 8 Q. Are you familiar with that term? 9 A. Yes. 10 Q. What is the Madoff exemption? 11 A. The Madoff exemption is that market makers 12 are allowed to short stock. 13 Q. Can they short stock in market making 14 transactions? 15 A. Anywhere they want. 16 Q. So they can also -- does a market maker 17 normally deal with customers? 18 A. Sure. 19 Q. All right. Aren't they -- they're 20 operating then as what, broker-dealer? 21 A. Uh-huh. 22 Q. You're not a market maker in that capacity? 23 A. All market -- the definition of a market 24 maker is someone that -- that puts out a two-sided 25 quote in a security and publishes his bids and

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1 offers in a vending service. And he's obligated to 2 honor his quote. He stands ready to buy or sell. 3 MR. SHEEHAN: All right. Okay. 4 MR. GOLDMAN: We can take a -- what to 5 take a -- 6 MR. SHEEHAN: We'll do it now; all right? 7 Yeah. Only because I may be able to eliminate some 8 stuff, which would be a good thing because we've 9 covered a lot of territory. 10 THE VIDEOGRAPHER: Going off the record. 11 The time is 10:58 a.m. 12 (A recess was taken.) 13 THE VIDEOGRAPHER: Back on the record. 14 This begins disc Number 2. The time is 11:14 a.m. 15 Q. (By Mr. Sheehan) Mr. Madoff, while we were 16 off the record you indicated you wanted to explain 17 something to me? 18 A. Yeah. 19 Q. Go right ahead. 20 A. I just want to explain that when we are 21 doing a transaction for -- an arbitrage transaction 22 for a customer in a convertible and we set the 23 transaction up for the customer as if it was going 24 to be converted, all right, I'm not sure how they -- 25 as I say, I don't know how they handled the

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1 fractional shares during certain times periods; but 2 they may -- they may determine that the customer is 3 going to get that fractional share if, in fact, the 4 transaction was converted. 5 All right. So they may -- they may credit 6 the customer with a fractional share knowing that 7 they're going to convert it or that's what the plan 8 is to convert. If for some reason at a later date 9 they decided not to convert it, they swapped out the 10 transaction, the customer really should get the 11 fractional share because the fact that we decided to 12 not convert it but we decided to unwind the 13 transaction or swap the transaction, the customer if 14 we didn't credit the customer with the fractional 15 share, we'd be disadvantaging the customer. Now, so 16 they may determine to do the fractional share before 17 the transaction is actually converted because it may 18 not be converted, but they would -- they typically 19 would do that or they could wait. 20 If we wanted to we could theoretically if 21 we unwound the transaction and not convert the 22 transaction, we wouldn't have to give the customer 23 the fractional shares. So but that's the firm's 24 decision to make when they do it. I don't know how 25 they particularly handle that because that's not my

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1 area, but it doesn't mean any -- the fact that -- 2 the fact that we credited a customer with a 3 fractional share but physically never converted it 4 does not -- does not demonstrate anything other than 5 the fact that the transaction was not converted. It 6 was -- you know, or that it could have been -- it 7 could have been converted. 8 We could have credited them before the 9 conversion actually took place. The firm would have 10 gotten -- would have gotten the fractional share 11 that would have been covering the course that he did 12 it. It doesn't -- you seem to be going down a path 13 with this fractional share as if it has some sort of 14 significance, but it doesn't. 15 Q. Well, just to follow up on that -- 16 A. Okay. 17 Q. -- if the fractional share is credited on 18 the day the preferred is purchased -- 19 A. Correct. 20 Q. It was the preferred in the example. 21 A. Whatever. 22 Q. All right. It's computed on that day; 23 correct? 24 A. Uh-huh. 25 Q. So now it's sold six weeks later; right?

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1 A. (Witness nods head.) 2 Q. You're supposed to mark that to market? 3 A. What? The fractional share? 4 Q. Yeah. Aren't you? 5 A. No. It's a cash transaction. 6 Q. Okay. 7 A. And he doesn't have to. He doesn't have -- 8 Q. Wait a second. I'm sorry. You're right, 9 you're right. But you would mark the short sale to 10 market? 11 A. The short position is marked to market, 12 right. 13 Q. Okay. How would you know what the 14 fractional share is six weeks later? 15 A. The fractional share is determined as if, 16 in fact, it was converted. It has nothing to do 17 with -- you're not getting -- actually, you're not 18 getting actually shares. You determine what -- what 19 the fractional share would be entitled to based upon 20 what it was -- what it was sold at the date that it 21 was sold. 22 Q. I guess my question is why would you give 23 them a fractional share on the day you buy the 24 preferred, right, when you may on one? 25 A. You're not getting -- you're not actually

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1 getting shares. You're getting -- 2 Q. Cash? 3 A. You're getting cash for it. 4 Q. Right. 5 A. Based upon what you would have gotten had 6 you converted it. 7 Q. I mean, you didn't convert it. Why would 8 you give it to them? 9 A. Because if, in fact, we had converted it, 10 the customer would be entitled to it. So, you know, 11 I don't know how to explain it to you. 12 Q. Isn't it also possible that you were 13 backdating that trade and you knew what the 14 fractional share was when you put in the entry for 15 the purchase of the convertible arb? 16 A. No. It's not -- when you say backdating 17 it, they're establishing the price based upon what 18 the stock was selling for at the time that they did 19 the transaction. You know, if, in fact -- if 20 they're giving the fractional share before the stock 21 went to conversion, they have to determine what the 22 price that -- what the price the customer would be 23 entitled to. They're using -- I'm assuming they're 24 using it, the price that they set the transaction up 25 at.

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1 Q. Can you tell me why you only had paper 2 customer statements and electronic access? 3 A. When? 4 Q. Forever. 5 A. What do you mean? Like, well -- 6 Q. Did your customers ever have electronic 7 access to their accounts? 8 A. No, no. 9 Q. Isn't that because you were backdating? 10 A. First of all, you're talking about this 11 period, '83. There was no electronic access. 12 Q. Well, in 2008 there wasn't either. Doesn't 13 mean you weren't backdating in 1984. What I'm 14 saying is you used paper statements for a reason; 15 didn't you? 16 A. What do you mean paper statements? 17 Q. Because you could -- you could create fake 18 trades over a period of days? 19 A. Wait. What? I'm not sure. 20 Q. It's not that confusing. 21 A. What? 22 Q. It's pretty simple. In other words, you 23 wouldn't give anybody electronic access because you 24 wouldn't control -- 25 A. You couldn't get electronic access until

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1 certain dates. 2 Q. I understand that. 3 A. Right. 4 Q. But even before that you just continued 5 what you had been doing before, that is, those 6 trades were trades that had already happened and you 7 put them as phony trades into the customer accounts 8 days later, right, and then used other people's 9 money? 10 A. I'm not sure what -- 11 MR. GOLDMAN: I'm going to object to this. 12 Ask him a question, don't make a statement. Ask him 13 a question. 14 THE WITNESS: Right. 15 MR. SHEEHAN: You can object all you want 16 and I'm going to ask my question. 17 MR. GOLDMAN: Well, you didn't ask a 18 question. That was the problem. 19 MR. SHEEHAN: No. Peter -- 20 MR. GOLDMAN: Yeah. 21 MR. SHEEHAN: -- try to relax. All right. 22 I'm going to ask it the way I want to. The judge 23 can rule on what he's saying. 24 THE WITNESS: Okay. 25 MR. SHEEHAN: All right. I'm asking you a

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1 question. 2 THE WITNESS: Uh-huh. 3 Q. (By Mr. Sheehan) All right. Isn't it true 4 that you backdated these trades? 5 MS. CHAITMAN: Objection to form. 6 THE WITNESS: Which trades are you 7 referring to? 8 MR. SHEEHAN: There's no objection to 9 form. 10 THE WITNESS: Which trades are you 11 referring to? 12 Q. (By Mr. Sheehan) You backdated trades? In 13 1984 you were backdating those trades? 14 A. No, no. 15 Q. Those convertible arbs never happened? 16 A. That's not true. 17 Q. All right. And that's why your statements 18 show transactions that couldn't have happened until 19 six weeks later, you're showing them on the day of 20 the trade; isn't that true? 21 A. No. 22 Q. Do you know that there's hundreds of these? 23 This isn't an operational flaw. Do you know that? 24 A. I'm not saying it's an operational flaw. 25 Q. You're saying you did that as a matter of

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1 course? 2 A. What I'm telling you is I'm not familiar 3 with what their procedure was with fractional shares 4 of how many -- 5 Q. You ran the company. You didn't know? 6 A. I don't know. I'm not part of the 7 operations department. 8 Q. Didn't you tell us that nobody dealt with 9 customers those years except you? 10 A. Nobody did what? 11 Q. Nobody dealt with the customers except you 12 in those years, '80s? 13 A. I dealt with the customers when we -- 14 when -- I spoke to the customers. I didn't 15 physically handle the bookkeeping transaction for 16 the customers ever. 17 Q. You wouldn't look at the customer 18 statements? 19 A. The customer statements after -- no. I 20 mean, I looked at customer statements after they 21 were generated. 22 Q. But would you talk to the customer about 23 them? 24 A. I first for the most part never spoke to 25 the customers.

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1 Q. Uh-huh. 2 A. I mean, very -- you know, customers would 3 never call me up and ask me to, you know, discuss 4 their statement with them because I -- you know, I 5 never looked at their customer statements. The 6 statements were generated by the operations 7 department. It was not something that I would -- 8 that I would discuss with the customer, you know, 9 nor did I -- nor did I generate anything. 10 Q. Right, okay. Let's move on. 11 A. Okay. 12 Q. Let me show you -- what is it? Four? 13 MS. FEIN: Four. 14 (Trustee's Exhibit Number 4 was marked for 15 identification.) 16 Q. (By Mr. Sheehan) Exhibit 4. Before I get 17 it wrong, I think it -- how many pages is it? Four? 18 MS. FEIN: We'll just do the two, two 19 pages. 20 MR. SHEEHAN: Okay. All right. Fine. 21 But they're front and back. 22 MS. FEIN: Yeah. And your copy there, and 23 it's the first two. I can take the rest out. 24 MR. GOLDMAN: What do you want us to hold? 25 MR. SHEEHAN: Just the first two are the

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1 ones we're doing. 2 MR. GOLDMAN: Do you want the others back? 3 MR. SHEEHAN: No, no. Keep everything. 4 You can keep everything. We don't want anything 5 back. Before we talk about these, you can look at 6 them, Mr. Madoff. I don't mean to interrupt you. 7 THE WITNESS: Uh-huh. 8 Q. (By Mr. Sheehan) Do you remember you were 9 -- you showed us Mr. Blecker's at your deposition -- 10 I'm sorry. Let me rephrase that. Back on 11 December 20th you showed us Mr. Blecker's 2005 12 statement. Do you remember that? 13 A. Uh-huh. 14 Q. And on the back of it it had language with 15 regards to average pricing. Do you remember that 16 testimony? 17 A. I'm not sure I understand your question 18 again. 19 Q. Well, in other words, on the back of Mr. 20 Blecker's 9-2005 statement there was language from 21 your company that said that you would -- you could 22 engage in average pricing with regard to the 23 transactions? 24 A. On the Blecker statement I never saw the -- 25 what the language was.

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1 MR. SHEEHAN: Okay. Then let's show it to 2 you. What's that? So here we go, Peter. I'm 3 sorry. 4 MR. GOLDMAN: That's all right. 5 MR. SHEEHAN: You've already got those 6 two. 7 Q. (By Mr. Sheehan) All right. So we've now 8 handed you what was marked as Exhibit Number 8 on 9 December 20th, 2016. Bless you. And I refer you to 10 the second page. And it's the second paragraph and 11 I believe it is the second sentence starting with 12 the word unless. Do you see that? 13 A. What are we looking at? The Blecker 14 statement? 15 MR. SHEEHAN: Yes. 16 MR. GOLDMAN: I think it's mixed up. 17 Which one is the Blecker statement? 18 MS. CHAITMAN: It doesn't appear to be the 19 Blecker statement. 20 Q. (By Mr. Sheehan) Okay. If you're 21 looking -- you should be looking at this that's got 22 a redaction on the front of it. 23 A. Okay. 24 Q. And it has an exhibit sticker on it. You 25 see that --

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1 A. Uh-huh. 2 Q. -- over here? Yeah. 3 A. Yeah. 4 Q. Okay. So if you turn to the second page of 5 that, Mr. Madoff -- 6 A. Uh-huh. 7 Q. -- you'll see that this was actually on the 8 back of that. 9 A. Okay. I got it, yeah. 10 Q. Okay. And if you look at that and you go 11 to this second paragraph where it starts off 12 customer equity transaction -- 13 A. Correct. 14 Q. -- do you see that? Okay. It says on the 15 second sentence, and I'll just read it into the 16 record, quote, unless stated otherwise on the front 17 of this confirmation, comma, the trade price of your 18 transaction is an average price and includes a 19 commission equivalent of .4 cents per share, period. 20 A. Right. 21 Q. Do you see that? 22 A. Uh-huh. 23 Q. Okay. That's what I was referring to. 24 A. Oh, okay. 25 Q. Do you remember testifying to that back on

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1 December 20th? 2 A. Right. 3 Q. Okay. So with that background I wanted to 4 direct your attention to what has now been marked as 5 Exhibit 4, which I believe is right in front of you. 6 A. Uh-huh. 7 Q. Take a look at those statements and tell me 8 if there's any language on those that talks about 9 average pricing; all right? Not that one, the two 10 in front of you. 11 A. Oh, oh. 12 Q. Yeah. Just go to the -- 13 A. Okay. I see it. 14 Q. See that? 15 A. Uh-huh. 16 Q. All right. 17 A. There is no average. There's no -- there 18 is no language about average price nor is there 19 language of what the commission equivalent is 20 because that language was changed based upon rules 21 that the industry has stated you now had to -- you 22 now had to put that language on the confirmation. 23 Q. Were you, in fact, doing average pricing in 24 -- in front of you is a good one. August 7, '84, 25 which is the date on Exhibit 4.

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1 A. I'm assuming that it was an average price. 2 Again, it depends upon how many -- how many shares 3 we were buying and selling at that -- it could have 4 been average price. It could not have been average 5 price. 6 Q. Did you advise your customers other than -- 7 yeah. Did you -- I mean, did you advise your 8 customers in 1984 that you were using average 9 pricing? 10 A. If, in fact, we were using an average 11 price, no. You know, we wouldn't necessarily 12 because it wasn't required to -- they changed the 13 language. The SEC changed the language that had to 14 be on confirmations regarding, you know, average 15 price or commission equivalent and so on. In other 16 words, they changed the language that you had to do 17 it. 18 So there are -- if there was no language 19 about average price on there, it wasn't required to 20 put on there. The same thing that they changed the 21 language about putting whether a commission 22 equivalent. They never used to have -- use the term 23 commission equivalent for a mark-up. 24 They would just -- in other words, they 25 allowed you to put language on the -- they told you

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1 to put language on the confirmation that said you 2 were not charging a commission or not charging a 3 mark-up, which you aren't charging a commission 4 equivalent, which was a mark-up. 5 Q. Okay. 6 A. They just changed the requirements. That's 7 why there's no language that -- you know, on the 8 earlier transaction. Was no requirement I should 9 say. 10 MR. SHEEHAN: Okay. Thanks. Are we -- 11 okay. Whoops. It's knocking over. Got too many 12 statements. 13 MS. FEIN: Yes. 14 MR. GOLDMAN: Too small a desk. 15 MR. SHEEHAN: That's for sure. 16 (Trustee's Exhibit Number 5 was marked for 17 identification.) 18 Q. (By Mr. Sheehan) Okay. Now, Ms. Fein is 19 now handing you exhibit -- what's been marked 20 exhibit -- Trustee's Exhibit 5. Take your time, 21 take a look at that. 22 A. Uh-huh. 23 MS. FEIN: I'm sorry. 24 MR. GOLDMAN: That's all right. No one is 25 going anywhere.

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1 THE WITNESS: Okay. 2 Q. (By Mr. Sheehan) Just starting right on 3 the first page of that, see in the upper left-hand 4 it says originator number? Do you see that? 5 A. Right. 6 Q. And it says 0646? 7 A. Uh-huh. 8 Q. What does that represent, if you know? 9 A. That's our clearinghouse number. 10 Q. And you previously answered that's the only 11 number you've had? 12 A. Yes. 13 Q. Okay, okay. Just this is more for 14 informational purposes. Where is that? It's here 15 somewhere. Oh, there it is. 16 MS. FEIN: Yes. 17 Q. (By Mr. Sheehan) Again, recalling your 18 earlier testimony, Mr. Madoff, do you remember at 19 one point suggesting that a convertible security 20 could be flat? 21 A. Could be flat? 22 Q. Flat. 23 A. No. 24 Q. Meaning that -- well -- 25 A. Oh, trading without interest you're talking

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1 about? 2 Q. Thank you. 3 A. Right. 4 Q. All right. That's what I meant. 5 A. Uh-huh. 6 Q. Take a look at page -- we are trying to -- 7 MS. FEIN: It ends in 651. It's the 8 second to last page, I think. 9 Q. (By Mr. Sheehan) Yeah. It's the second to 10 last page. It looks like this right here. Do you 11 see that? It's a Trans World Airlines. What does 12 that entry mean to you? 13 A. Trans World Airlines subordinated 14 convertible directions. Is that what you're looking 15 at? 16 Q. Yes. 17 A. What's your question? What does it mean to 18 me? 19 Q. Yeah. Well, look below that and it says 20 interest. Do you see that? 21 A. Uh-huh. 22 Q. Just an entry. Does this mean that this 23 was not a flat trade? 24 A. I assuming it's accrued interest. Bonds 25 trade, you know, that's -- you know, that's the

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1 interest that the bond had paid and you have to 2 credit the customer with that. 3 MR. SHEEHAN: Okay. That's all I had. 4 THE WITNESS: Uh-huh. 5 MR. SHEEHAN: What? What more do you 6 want. 7 (Discussion off the record.) 8 Q. (By Mr. Sheehan) Not going back there. 9 I've done enough on fractional shares. 10 A. Fractional shares. 11 Q. I don't think anybody could handle another 12 fractional share. 13 A. Right. 14 Q. Slowly I turn. Anyhow, all right. We made 15 progress on that break, eliminated a lot here. So 16 let's turn to a different topic, margin accounts. 17 We've been talking about those, but could you tell 18 me your understanding of what a margin account 19 means? 20 A. What is a margin account? 21 Q. What is a margin account? 22 A. A margin account is if a customer is 23 buying -- you know, is borrowing money from the 24 brokerage firm to buy stock. So he has a margin 25 account, you know. If, in fact, the customer wants

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1 to buy a thousand dollars worth of stock and only 2 has $500, he'd borrow the other $500 from the 3 brokerage firm. 4 Q. Okay. 5 A. That's one type of margin. Then there's 6 the type of margin if the customer wants to -- wants 7 to -- is pledging with the brokerage firm securities 8 to cover his -- his short exposure on the stock. 9 Q. Are there government regulations with 10 regard to margin accounts? 11 A. Based upon how much -- how many -- how much 12 credit you can give the customer based upon let's 13 say 50 percent margin. 14 Q. Okay. Does the term regulation T mean 15 anything to you? 16 A. Regulation T means what -- typically what a 17 customer has to pay for the stock within a certain 18 amount of days after he buys it. 19 Q. Buys it on margin? 20 A. Hmm? 21 Q. Buys it on margin? 22 A. Whether margin or cash, doesn't matter. 23 Q. Okay. 24 A. When a customer has to pay for the stock 25 that he bought, how many days.

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1 Q. The 50 percent margin you talked about a 2 moment ago, does that derive from reg T? 3 A. Does it what? 4 Q. Derive from regulation T? 5 A. I'm not sure. You know -- 6 (Trustee's Exhibit Number 6 was marked for 7 identification.) 8 Q. (By Mr. Sheehan) Okay. That's fine. I'm 9 going to show you a series of customer statements. 10 A. Uh-huh. 11 Q. We've redacted the name of the individual 12 because it's one of the big four. 13 A. Uh-huh. 14 Q. Doesn't matter who his name is. I just 15 want to ask you about the entries on it with regard 16 to the margins; okay? And it is marked as 17 Exhibit 6. Is that all of the pages? 18 MS. FEIN: Uh-huh. 19 MR. SHEEHAN: Okay. 20 THE WITNESS: Is this for a '93 21 transaction? 22 MR. SHEEHAN: It's actually an '83. 23 THE WITNESS: '83, yeah. I see. 24 Q. (By Mr. Sheehan) If you turn the page, the 25 copies are better, but these are all in 1983; all

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1 right? 2 A. Oh, okay. Uh-huh. 3 Q. Pardon? 4 A. Yeah. 5 Q. And '80 -- it actually ends, I think the 6 last one is -- 7 A. Some are '93, some are '83. 8 MR. GOLDMAN: Going to have to get halfway 9 before you get to '84. 10 THE WITNESS: The top page is '83 and then 11 it's '93 and then there's '83. 12 Q. (By Mr. Sheehan) I think the '90s are 13 where the account gets closed out, but I think this 14 is the history of the account from the beginning to 15 the end; right? 16 A. Uh-huh. 17 Q. So take a moment to look and I'm going to 18 be asking you principally about the margins here -- 19 A. Right. 20 Q. -- but some other questions as well. 21 A. Uh-huh. 22 Q. So just to get us grounded, let's look at 23 the first page of this exhibit. And just so we all 24 know about what that first page is, it is the Bates 25 number ends in it's MF 248. And directing your

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1 attention to the August 23 entry, what do you see 2 that to be? 3 A. A check you mean? 4 Q. Yes. 5 A. Looks like the customer sent in a check for 6 $1,500,000. 7 Q. Okay. And then what's the next entry? 8 A. The purchase of American Telephone. 9 Q. Yes. 10 A. Uh-huh. 11 Q. Just short of a million five; right? 12 A. Right, uh-huh. 13 Q. And that's the end position as well? 14 A. Right. 15 Q. Okay. So then turning to the next month, 16 next month is -- we were in August. Now we're in 17 September of '83? 18 A. Uh-huh. 19 MS. CHAITMAN: I just want to say this 20 looks like it's 8-31-93. You're saying you're sure 21 it's 8-31-83? 22 MR. SHEEHAN: Yes. It is. 23 MS. FEIN: And you can tell based on the 24 statements following it as well, but it's true that 25 the first page is less clear.

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1 MS. CHAITMAN: Because the Bates number 2 isn't consecutive. 3 MS. FEIN: No. They're not. They're not 4 kept that way every time, so -- 5 MR. SHEEHAN: I haven't misrepresented 6 anything in a week, so pretty safe that this is '83. 7 All right? 8 MS. CHAITMAN: Okay. I was just -- 9 Q. (By Mr. Sheehan) All right. So next page 10 is September 30, '83. And we see there what's the 11 first entry there on September 29th? 12 A. Check for $250,000 debit, needs to be sent 13 a check for $250,000. 14 Q. Did any other transaction take place that 15 month? 16 A. Doesn't look like it. 17 Q. And did you charge him interest for that? 18 A. Seems to be an interest, yeah, $154. 19 Q. Okay. 20 A. It says margin interest. 21 Q. Thank you. Okay. Now, let's go to the 22 next one, which is October 31, '83. 23 A. Uh-huh. 24 Q. And you're charging interest again on the 25 250; are you not?

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1 A. Right. 2 Q. Okay. Let's go to the -- actually, we can 3 skip a page or two. These are all consecutive 4 months. We're now in December 30th, '83. Do you 5 see that up in the upper left-hand corner, December 6 '83? 7 MS. FEIN: Bates ending in 301. 8 MR. SHEEHAN: Yeah. It's one, two, three, 9 four, five. It's the sixth page in. 10 THE WITNESS: Okay, right. 11 Q. (By Mr. Sheehan) And there's several 12 entries there? 13 A. Uh-huh. 14 Q. Is there another check issued to this 15 customer? 16 A. Uh-huh. 17 Q. How much? 18 A. Capital -- it says CW, $250,000. 19 Q. Yes. 20 A. Right. 21 Q. What does CW stand for? 22 A. Capital withdrawal. 23 Q. Now, with respect to these two borrowings 24 against the margin account, has any stock been 25 purchased with that money?

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1 A. I don't know. I'll have to look at the 2 account. Are there transactions here? 3 Q. Yes, because at the very beginning the 4 first one we looked at -- 5 A. Uh-huh. 6 Q. -- the customer deposited a million five 7 and then you -- and then the next or actually before 8 that, I guess that was the payment for it, but 9 before that on 8-19 you had purchased looks like 645 10 shares of AT&T for an aggregate price of 1,499,840. 11 Do you see that on the first page? 12 A. Uh-huh, uh-huh. 13 Q. All right. And then but then there are two 14 borrowings against the margin account aggregating 15 $500,000 but no apparent stock being purchased. Do 16 you see that? 17 A. Okay. So -- 18 Q. All right. I'm just saying that you agree 19 that that's what's there? 20 A. Not -- I can't say I agree with it. I'm 21 not sure what the question is. 22 Q. Well, my question was was any of that 23 $500,000 used -- the statement seems to suggest that 24 the million five that was deposited was used to 25 purchase the stock; correct?

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1 A. Right. 2 Q. And, therefore, and then after that 3 $500,000 was borrowed but not used to purchase any 4 stock. So in effect it was borrowed against the 5 existing position? 6 A. Okay. 7 Q. All right? 8 A. Uh-huh. 9 Q. That's what it appears? 10 A. Okay. 11 Q. All right, fine. So we then go through and 12 we pick up in January of '84, which we can pass 13 over. Then we have February of '84. And you're 14 going to see something that you actually referred to 15 yesterday? 16 MS. FEIN: Yeah, on page eight. 17 MR. SHEEHAN: Page eight. 18 MS. FEIN: Ending in 461 for the Bates. 19 MR. SHEEHAN: It's got a lot of entries. 20 THE WITNESS: Page eight. I don't -- 21 MS. FEIN: 461 and it's February '84. 22 THE WITNESS: Okay. 23 Q. (By Mr. Sheehan) So do you see all those 24 entries there? 25 A. Uh-huh.

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1 Q. Do they mean anything to you? What I mean 2 by that, what was happening? 3 A. This is showing what it was long -- what he 4 was long in the account. 5 Q. Doesn't this reflect the break-up of AT&T? 6 A. I have no idea. I don't -- you know. 7 Q. Because originally you had a large 8 position, about a million five, in AT&T? 9 A. Uh-huh. 10 Q. And it appears that now it's been broken up 11 into different entities? 12 A. Right. This was when they were -- this was 13 when they broke up the AT&T into the baby Bells, I'm 14 assuming. 15 Q. Right. 16 A. Right. 17 Q. Okay. And then if you carry it over to the 18 next page -- 19 A. Uh-huh. 20 Q. All right. Which is the second page of the 21 2-29 statement, you see the end positions; all 22 right? 23 A. Uh-huh. 24 Q. Okay. Then go to the March 31st, which is 25 the next one.

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1 A. Uh-huh. 2 Q. And what you see there is what on 3-13? 3 A. Margin interest you're talking about? 4 Q. It's actually above that, the IBM 5 purchase -- 6 A. Okay. 7 Q. -- or short, actually. 8 A. Right. 9 Q. No, no. It was a purchase? 10 A. No. It's purchase. 11 Q. It's purchase. 12 A. Uh-huh. 13 Q. Yep. 14 A. Right. 15 Q. And then below that margin interest again 16 being charged? 17 A. Uh-huh. 18 Q. So take a look at the end positions here. 19 A. Uh-huh. 20 Q. How much is the debit at that point? 21 A. You're talking about the 2 million? 22 Q. Two million one hundred and ten thousand, 23 yeah. 24 A. Right, uh-huh. 25 Q. Is that the amount that -- is that the

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1 amount owed to you? 2 A. Two million one ten? 3 Q. Yeah. 4 A. That looks like it's the value of the -- of 5 the positions that are above it. 6 Q. Okay. All right. What does the million 7 seventy-one thousand represent? 8 A. It must be the value of the short 9 positions. 10 Q. Okay, okay. Let's look at April 30, '84. 11 A. Uh-huh. 12 Q. We've got you here charging margin 13 interest? 14 A. Uh-huh. 15 Q. And there's another check issue, is there 16 not, for 250? 17 A. Uh-huh. 18 MR. SHEEHAN: One second, please. 19 (Discussion off the record.) 20 Q. (By Mr. Sheehan) So let's go down to the 21 end positions again -- 22 A. Uh-huh. 23 Q. -- on this one. It's April 30. Let me see 24 this. So the long positions are two million one 25 ten?

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1 A. Right. 2 Q. And when he said the column isn't short its 3 difference, isn't the one million three thirty-six 4 what is actually owed to you? 5 A. No. That would be the value of the short 6 positions, mark to market on the short positions. 7 Q. Where are you accounting for the margin 8 count here? 9 A. What do you mean where am I? 10 Q. Well, in other words, he's continuing to 11 borrow money? 12 A. Right. 13 Q. Where do you show that on the statement? 14 A. You're talking about the margin interest? 15 Q. No. I'm talking about the margin, the 16 amount he borrowed, the 250, the other 250s, et 17 cetera. Where is that on the statement? 18 A. It's the statement is being debited. 19 Q. That's what I'm saying. Isn't the amount 20 he borrowed, the 1,000,000 -- see it here, new 21 balance? 22 A. Uh-huh. 23 Q. Let's go back up. Maybe it's easier this 24 way. See the check and then the amount? 25 A. For $250,000?

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1 Q. Yeah. 2 A. Right. 3 Q. See, let's start at the very, very top. It 4 says debit; right? 5 A. Uh-huh. 6 Q. Balance forward, a million seventy-one. He 7 borrows another 250, the interest, and that all adds 8 up to 1,336,234? 9 A. That's his new balance, right. 10 Q. Right. And that's the margin count, is it 11 not, that he's borrowed? 12 A. That's the total debit. 13 Q. Yep. 14 A. Uh-huh. 15 Q. Okay. So let's just keep moving along 16 and -- 17 MR. GOLDMAN: You sort of lost me. Can I 18 ask him? 19 MR. SHEEHAN: Yeah, sure. 20 MR. GOLDMAN: If you look at the opening 21 balance on the 4-30 statement, it says opening 22 balance of a million seventy-one balance forward. 23 MR. SHEEHAN: Right. 24 MR. GOLDMAN: Where does that -- is that 25 reflected in the 3-31 closing? Oh, I see it. Okay.

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1 Now I see it. 2 MR. SHEEHAN: You got it? 3 THE WITNESS: Yeah, okay. 4 Q. (By Mr. Sheehan) So let's jump forward to 5 July 31, 1984. It's Bates number 84. Do you see 6 it, Mr. Madoff? 7 MS. CHAITMAN: May be that next one. 8 Q. (By Mr. Sheehan) 7-31-84. Okay. Again, 9 let's start with the debit. And you can see the 10 carry forward of the million three twenty-nine? 11 A. Uh-huh. 12 Q. Which has gone up a little bit because of 13 interest. Now there's another borrowing of 250, 14 interest charged. Now the total borrowings are one 15 million five ninety-eight. Do you see that? 16 A. Right. That's his debit balance. 17 Q. Now, at this point that borrowing is more 18 than 50 percent. Remember you mentioned 50 percent 19 earlier? 20 A. Uh-huh. 21 Q. Now it's more than 50 percent of the value 22 of the stock he holds. 23 A. Uh-huh. 24 Q. What are you supposed to do? 25 A. Well, first of all, these accounts are

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1 probably cross -- if these are the big four 2 accounts, they were cross-margined, so you'd have to 3 look at all of his accounts. Here they'd 4 cross-margin accounts, which means he's borrowing -- 5 you know, you'd have to compile all of his accounts, 6 his family accounts, because they -- they're handled 7 as a joint account. 8 Q. There were a lot of accounts. I didn't 9 bring them all here. 10 A. Yeah. 11 Q. Just for purposes of our discussion, assume 12 the cross-margin would be more than 50 percent. 13 What should you do at that point? 14 MS. CHAITMAN: Objection to form. 15 THE WITNESS: I'm confused as to what the 16 question is. 17 Q. (By Mr. Sheehan) Well, let me put it a 18 different way. If the debit balance exceeds 19 50 percent, isn't a broker at that point supposed to 20 call upon the customer to deposit more cash? 21 A. Typically you would call them for 22 additional cash, yeah. 23 Q. Right, okay. 24 A. And, again, it depends upon -- the 25 50 percent margin depends upon whether or not he

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1 has -- the account is hedged and he has -- you'd 2 have to look at -- you can't just look at one 3 account. You have to look at of all the accounts. 4 They'd have to look at the type of positions he has 5 and whether there were -- there were arbitrage 6 positions set up upon it. You can't just look at 7 one isolated account. 8 Q. Okay. So now let's go to October 31, 1984. 9 If we could -- yeah, October. 10 MS. CHAITMAN: Okay. 11 THE WITNESS: Uh-huh. 12 Q. (By Mr. Sheehan) Do you see starting again 13 with debit, it's now a million five ninety-eight? 14 Customer borrows other 450. There's an interest 15 charge of $22,000. The entire debit is now over two 16 million dollars. Do you see that? 17 A. Uh-huh. 18 Q. Which is almost 100 percent of that 19 balance? 20 A. Uh-huh. 21 Q. So your testimony is that you would have to 22 look at the cross-margin here? 23 A. Yeah. You have to look at, you know -- at 24 -- if, for example, if he has -- you know, you can't 25 just look at this account. He may be overmargined

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1 in this account, but if he has other securities in 2 another account, you know, you'd have to, you know, 3 equate that to that as well. 4 Q. All right. So let's go to 12-31-84. 5 Again, on the debit side what we see is two million 6 fifty-nine; right? 7 A. Uh-huh. 8 Q. Another $750,000 is borrowed, interest is 9 charged, and there's now a new balance of two 10 million eight twenty-five. Do you see that? 11 A. Okay. I'm assuming that you're correct. 12 I'm not following it, but go ahead. 13 Q. Okay. It's -- well, why don't we get you 14 to the right page? 15 MS. CHAITMAN: Hold on, hold on. 16 THE WITNESS: I'm assuming that the 17 statements are correct. 18 Q. (By Mr. Sheehan) All right, fine. I'm not 19 actually testing that. I just wanted to ask you a 20 few questions and, unfortunately, sometimes you have 21 to lay a foundation. So here you go. 22 A. Okay. 23 Q. So if you look at the end positions here, 24 now the stock position is two million one ten. And 25 you've got a margin that far exceeds that at two

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1 million eight twenty-five. Do you see that? 2 A. Uh-huh. 3 Q. Are you saying that even with a pre -- 4 because of cross-margin, you would allow this kind 5 of borrowing to take place against two million 6 dollars? 7 A. I'm assuming -- again, saying this is not 8 my area, but I'm assuming that if, in fact, you 9 know, that he had enough -- enough equity in the 10 account to cover whatever he was borrowing. 11 Q. Right. 12 A. But you'd have to look at, you know, all of 13 the accounts of the family if, in fact -- you know, 14 because that's how they were cross-margined. So you 15 can't look at one account. You'd have to -- you 16 know, so for me to look at this would be meaningless 17 to me. You'd have to take a picture of all of -- of 18 all the accounts that he had. 19 We generally would not -- would not be 20 lending the -- buying more securities than the 21 customer had enough equity to cover his marginal 22 requirements. 23 Q. Right. 24 A. But he had other accounts that he just had 25 -- he could have had just long positions in there

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1 that, you know, there were no borrowing against, but 2 that's the purpose of a cross-margin agreement. 3 Q. Right. Let's go to 13185, which I think is 4 the next page if you would. See it up in the 5 left-hand corner? I think it's 13185. 6 MS. CHAITMAN: It's the next page, yes. 7 THE WITNESS: Okay. 8 Q. (By Mr. Sheehan) See the balance carried 9 forward of two million eight twenty-five is a debit? 10 A. Right. 11 Q. Again, a January margin interest payment -- 12 charge? 13 A. Uh-huh. 14 Q. But the new balance is two three 15 forty-nine? 16 A. Uh-huh. 17 Q. Could you look down the statement -- 18 A. Uh-huh. 19 Q. -- and can you see what transpired this 20 month that caused a reduction in the debit? 21 A. Right. 22 Q. What is it? 23 A. You're talking about what the market value 24 of the positions he has, the two million one ten? 25 Q. Yes.

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1 A. Okay. 2 Q. So how does the debit go from two eight two 3 five to two three four nine; right? 4 A. Which was that went down because of the -- 5 well, first of all, there was a short. There was a 6 sale and then there was also margin interest. I'm 7 assuming the -- I'm assuming the debits and credits 8 were correct because that's generated by the 9 computer, so -- 10 Q. But the end position seems to be the same, 11 two million one ten? 12 A. Yes. 13 Q. Yet there's been a reduction? 14 A. There's been a market value of those listed 15 positions. 16 Q. Right. But how did we go down to two three 17 four nine? Do you see an entry that would explain 18 that? 19 A. That's the value of the short position. 20 Q. Okay. Well, I think we've salvaged as to 21 debit. Let me take you up to the top here. Do you 22 see where -- we had debit. Now look at credit. Do 23 you see that? 24 A. The what? 25 Q. There's a credit there of $500,000. Do you

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1 see it? 2 A. Yes. That means that -- 3 Q. Does that represent payment by the 4 customer? 5 A. Yes. It means caption addition. It means 6 a check -- 7 Q. That would reduce the -- 8 A. A check must have come in, right. 9 MR. SHEEHAN: All right. Thanks. 10 MR. GOLDMAN: That was an easy one. 11 MR. SHEEHAN: Yeah. Let's see. I got it. 12 MR. GOLDMAN: Wait a minute. I have a 13 question for you, though. 14 MR. SHEEHAN: Yeah, sure. 15 MR. GOLDMAN: The document starts off up 16 where it says redacted -- 17 MR. SHEEHAN: Right. 18 MR. GOLDMAN: -- and it says right next to 19 it, it might new be an internal control from the 20 Trustee, but it says 9525. 21 MS. FEIN: Which page are you on? 22 MR. SHEEHAN: The Social Security number, 23 we always redact part of that. 24 MR. GOLDMAN: The 9525? 25 MR. SHEEHAN: Yeah. I'm pretty sure

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1 that's what that is. 2 MR. GOLDMAN: But if you go ahead a couple 3 of pages, it changes. 4 MR. SHEEHAN: Oh, yeah? 5 MR. GOLDMAN: Go to -- 6 MR. SHEEHAN: Maybe I'm wrong then. I 7 don't really know, but -- 8 MR. GOLDMAN: Go to December and it 9 becomes 5965. 10 MR. SHEEHAN: Yeah. I see that. Yeah. I 11 see that. 12 MR. GOLDMAN: Yeah. 13 MR. SHEEHAN: Okay. 14 MR. GOLDMAN: But is the account number 15 the number at the very top? 16 MR. SHEEHAN: Yes. The account number 17 never changes. 18 MR. GOLDMAN: Yeah. Well, that was the 19 inconsistency I saw, so I didn't know why. 20 MR. SHEEHAN: Okay. Well, that's worth 21 noting and we'll certainly look into it, but these 22 are all from the same account. 23 MR. GOLDMAN: Okay. 24 MR. SHEEHAN: So -- 25 THE WITNESS: Cold again.

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1 MR. GOLDMAN: Are you cold? 2 MR. SHEEHAN: No, no. I want to ask him a 3 couple of questions. 4 MS. FEIN: Yeah, okay. 5 Q. (By Mr. Sheehan) Now, Mr. Madoff, in 1984 6 did you file focus reports? 7 A. We always filed focus reports, yes. 8 Q. Okay. And I believe your testimony was, 9 and correct me if I'm wrong, prior to 1992 your 10 focus reports were always accurate? 11 A. No. 12 Q. No. So correct me. What was -- what was 13 not accurate prior to 1992? 14 A. The -- when the -- 15 Q. Let me restate the question. I may have 16 gone too fast. 17 A. Yeah. 18 Q. Okay. And we can look it up, but I'm 19 pretty sure your testimony was that prior to 1992 20 all of your focus reports were accurate. Is that 21 true? 22 A. Okay. 23 Q. Is that true? 24 A. No. 25 Q. And what about your focus reports prior to

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1 1992 would not have been true? 2 A. The customer debit -- the customer debit 3 balances and credit balances. 4 Q. I'm sorry. Why was that? 5 A. Because we weren't reflecting the -- the 6 customer margin accounts. 7 Q. Okay. Why weren't you reflecting the 8 customer margin accounts? 9 A. Because we weren't. It wasn't correct. I 10 said the fraud started -- when I refer to the fraud 11 starting in '92 -- 12 Q. Right. 13 A. -- I was referring to the -- to the split 14 strike conversion trades. 15 Q. Right. 16 A. Uh-huh. 17 Q. Okay. But why were you not accurately 18 reporting the margin account activity prior to 1992? 19 A. Because I wasn't. 20 Q. Was there a reason why you didn't do it? 21 A. We didn't want to show the -- the debit 22 balances. Well, first of all, I'm not 100 percent 23 sure because you were allowed to net the -- the 24 debit and credit balances from all of the customer 25 accounts. Depends upon what the short position is,

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1 so I can't really answer you that, that question. 2 Q. Okay. Well, let's take a look at the focus 3 report; okay? 4 A. Uh-huh. 5 Q. I think we have them from the year '84? 6 '84. 7 MS. FEIN: It will be seven? 8 MR. SHEEHAN: Seven. 9 (Trustee's Exhibit Number 7 was marked for 10 identification.) 11 MR. SHEEHAN: You marked that up for me. 12 Yeah. I guess I should. All right. Thank you. 13 MS. FEIN: Always. 14 MR. SHEEHAN: Yes. 15 Q. (By Mr. Sheehan) All right. You've been 16 handed Exhibit 7? 17 MS. FEIN: Uh-huh. 18 Q. (By Mr. Sheehan) Exhibit 7, which is the 19 focus reports which we compiled that are the four 20 quarterly reports for 1984. 21 A. Uh-huh. 22 Q. And I believe the one at the beginning, I 23 think they're in reverse order, this is the one at 24 the beginning. The dates on it if you look at it 25 says for the period beginning 10-1-84 to 12-31-84.

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1 Do you see that? So just sticking with that first 2 quarterly report, if you would, turn to -- see, take 3 a look at the page 2 of 29. It's actually -- just 4 turn the page. 5 A. Right. 6 Q. Down at the very bottom it says number 7 four, receivables from customers? 8 A. Uh-huh. 9 Q. What is your understanding of what that 10 would be? 11 A. It would be what the customers owe us. 12 Q. Okay. And then underneath it says 13 securities accounts, one, cash and fully secured 14 accounts. Do you see that? 15 A. Uh-huh. 16 Q. What do you understand that to be? 17 A. What it says. 18 Q. Okay. And do you see what the entry is for 19 that? 20 A. Uh-huh. 21 Q. Zero? 22 A. Uh-huh. 23 Q. Is that correct? 24 A. I don't know. I mean, again, I'd have to 25 see. I'd have to see what the total debits and

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1 credits were of all the customer accounts and how 2 they were netted out. 3 Q. So it's your understanding it's a 4 compilation of all of the margin accounts that you 5 had? 6 A. Right, based upon what the net and short 7 positions were of the customer. 8 Q. Okay. So it could all net out to zero? 9 A. That I can't tell you because that's not 10 something that I -- 11 Q. All right, all right. Let's go to page 12 ten. All right. And it's page 10 of 29 and it's 13 three up from the bottom. It's number five. Do you 14 see that? 15 A. Uh-huh. 16 Q. It says margin interest. Are you there 17 with me? 18 A. Right. 19 Q. And what is the entry for that? 20 A. Zero. 21 Q. That's not true; is it? 22 A. Oh, I -- wait a minute. Which item are you 23 talking about? 24 Q. Talking under revenue, it says number five, 25 margin interest, and the entry is zero?

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1 A. Right. That's what I just said, right. 2 Q. And we just looked at one account where the 3 margin interest was substantial? 4 A. Uh-huh. 5 Q. So that entry is incorrect; right? 6 A. Again, I don't know how they calculate 7 that. It's not something that I did. 8 Q. All right. If we go through all of these, 9 I represent to you that they all are zero -- 10 A. Right. 11 Q. -- for both of those entries that we just 12 reviewed. 13 A. Uh-huh. 14 Q. Okay. And is your answer is you just don't 15 know why it's zero? 16 A. I don't fill out this report, so I don't 17 know. 18 Q. Do you ever remember instructing people to 19 not enter the margin interest? 20 A. That's -- no. I don't remember that. 21 Q. Did they ever actually pay you the margin 22 interest? 23 A. If the money came out of the account, they 24 must have. 25 Q. So what do you mean by that? Maybe I'm not

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1 understanding you. 2 A. I mean, if the margin interest came out of 3 the account, you know, it would have been deducted 4 from the monies they sent in. 5 So, I mean, if there are entries in the 6 account, you know, margin interest and there were 7 checks coming into the account, obviously, it would 8 have been -- it would have reduced, you know, would 9 have reduced the balance in their account. If 10 somebody sent me in $500,000 and we charged them 11 interest of $100,000 -- 12 Q. Got it. 13 A. -- their balance would have gone down by 14 100 -- you know, by the $100,000. 15 Q. So who would have filled out this report, 16 the focus report, that is? 17 A. During what year? Is this in the '80s? 18 Q. Yeah. 19 A. It would have been filled out by Sylvia 20 Hendel -- 21 Q. Okay. 22 A. -- or Irwin Lipkin. Either one of them. 23 Q. All right. Give me a moment. If we go 24 back to Exhibit 6 -- 25 MS. FEIN: Okay.

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1 (Discussion off the record.) 2 MR. SHEEHAN: You're going to have to give 3 me '84. 4 MS. FEIN: Okay. 5 MR. SHEEHAN: Okay. 6 MS. CHAITMAN: You're looking at 12-31-84? 7 MR. SHEEHAN: Yeah. 8 MS. CHAITMAN: From Exhibit 6? 9 MR. SHEEHAN: Yeah. 10 Q. (By Mr. Sheehan) So looking back at 11 Exhibit 6, looking at December 31st, 1984 -- 12 MS. CHAITMAN: I'm just getting that. 13 MR. SHEEHAN: Okay, sure. Maybe you can 14 help Mr. Madoff. 15 MS. CHAITMAN: I am. 16 THE WITNESS: Uh-huh, okay. 17 Q. (By Mr. Sheehan) So the ending balance of 18 that end of year was two million eighty twenty-five. 19 Do you see that? 20 A. Right, uh-huh. 21 Q. And there does not appear to be any 22 payments made that year in the 12 months preceding 23 it? 24 A. Right. 25 Q. So wouldn't there have been interest at the

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1 end of '84 that should have been reported for this 2 account? 3 A. You'd have -- you'd have to look at all of 4 the accounts. You know, they're netted, so I 5 can't -- you don't treat just one account. You'd 6 have to look at the other accounts. He may have had 7 an offsetting balance in those other accounts and 8 they're netted. 9 (Discussion off the record.) 10 MR. SHEEHAN: Okay. That's fine. Hang on 11 one second. Just hang onto it. 12 MS. FEIN: Uh-huh. 13 Q. (By Mr. Sheehan) New topic. Maurice 14 Cohn -- 15 A. Uh-huh. 16 Q. -- who is he or who was he? 17 A. He was a friend of mine, also owned Cohmad 18 Securities. 19 Q. Were you 50/50 owners of Cohmad Securities? 20 A. No. We had, I think, 24 percent of Cohmad. 21 My brother had -- I had 15, my brother had nine, 22 something of that sort. 23 Q. All right. And what was Cohmad Securities? 24 A. It was another broker-dealer. 25 Q. And where did it -- where was it located?

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1 A. They were located in my office. 2 Q. Okay. 3 A. We sublet them space. 4 Q. Was it a separate independent brokerage? 5 A. Yes, uh-huh. 6 Q. Okay. 7 A. Through Bear Stearns. 8 Q. Okay. Did Mr. Maurice Cohn have an account 9 at PLMIS? 10 A. Yes. 11 Q. What was the nature of that account? 12 A. He had a split strike, you know, account 13 and I'm not sure he had a convertible account as 14 well. I don't think so. I'm not sure. 15 MR. SHEEHAN: Okay. All right. Why don't 16 we mark this? 17 MS. FEIN: Okay. 18 MR. SHEEHAN: And let's do these first; 19 all right? 20 MS. FEIN: Uh-huh. 21 MR. SHEEHAN: Okay. 22 MR. GOLDMAN: Is this 7 or is this 8? 23 MS. FEIN: This is Trustee's 8. 24 MS. CHAITMAN: Thank you. 25 MR. SHEEHAN: Yeah. Mine is.

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1 MS. FEIN: It's in there. 2 MR. SHEEHAN: It's in there. It's 13A, 3 can't miss it. All right. Have to swing this down. 4 Sorry about that. 5 (Discussion off the record and Trustee's 6 Exhibit Number 8 was marked for identification.) 7 Q. (By Mr. Sheehan) Mr. Madoff, I've shown 8 you what has been now marked as Exhibit 8. It's a 9 series of notes that it actually came out of a 10 folder and the folder was called MC disbursements. 11 A. Uh-huh. 12 Q. If you look at the first page, they 13 actually made a photocopy of the folder where it 14 says that on it and it's IM 001, MC disbursements. 15 Do you see that? 16 A. Uh-huh. 17 Q. And the pages that follow were in that 18 folder; okay? 19 A. Right. 20 Q. So take a -- take a look through it because 21 I'm going to ask you about each of these pages. 22 A. Uh-huh, okay. 23 Q. Okay. Let's go to the first page. And as 24 always, I'm going to read it into the record as best 25 I can. Bernie said no --

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1 MR. GOLDMAN: Forms. 2 MR. SHEEHAN: What? 3 MS. CHAITMAN: Forms. 4 Q. (By Mr. Sheehan) Forms. Hey, good. 5 Bernie said no forms for a new account or a trade 6 authorization or tax ID are needed for this account. 7 A. Uh-huh. 8 Q. Do you recognize that handwriting? 9 A. No. 10 Q. Do you remember telling anyone that with 11 regard to Mr. Cohn's accounts? 12 A. If it says Bernie said, I must have said 13 something. 14 Q. Okay. Let's go to the next page. It's a 15 form. Do you recognize the form? 16 A. This one? 17 Q. Yeah. 18 A. No, but I'm assuming that -- 19 MS. CHAITMAN: Don't assume, Bernie. If 20 you know, you should say. 21 THE WITNESS: No. 22 MR. SHEEHAN: If you don't know, don't 23 know. 24 THE WITNESS: I don't. 25 Q. (By Mr. Sheehan) It's entitled, it

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1 purports to be a document entitled name slash ADDR 2 file maintenance. Does ADDR mean anything to you? 3 A. ADDR? 4 Q. Yeah. 5 A. I don't know. 6 Q. Okay. So you go through this and it speaks 7 for itself, but it indicates that there's this MC 8 disbursements? 9 A. Uh-huh. 10 Q. That gives an account number of 1MOO130. 11 Do you see that up top? 12 A. Uh-huh. 13 Q. All right. And it says at the bottom, 14 again, the handwriting, I'd ask you to -- it's no 15 account papers or margin as per BLM. 16 A. Uh-huh. 17 Q. Do you see that down at the bottom? 18 A. Right. 19 Q. Do you recognize that handwriting? 20 A. No. 21 Q. Okay. Let's go to the next entry here. 22 And this purports to be it looks like note paper 23 from Cohmad Securities and it has underneath that 24 Maurice J. Cohn? 25 A. Uh-huh.

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1 Q. Do you recognize that handwriting? 2 A. No. 3 Q. Now, it seems to be -- do you see the word 4 Sonny -- 5 A. Uh-huh. 6 Q. -- down there? 7 A. Uh-huh. 8 Q. Does that -- 9 A. Sonny Cohn. 10 Q. Was that Maurice's nickname? 11 A. Yes. 12 Q. Okay. So, again, it speaks for itself, but 13 it reads Jodi, dash, revised, underlined twice, 14 please issue a check payable to Maurice Cohn in the 15 amount of $872,730, not $889,000, debit MC 16 disbursements and gives the account number. And 17 then it's got what looks to be initials to the left. 18 Do you see those to the left of Sonny? 19 A. Yeah. 20 Q. Do you recognize those? 21 A. Is that an initial or is it a number? It 22 says what looks like -- 23 Q. Are we looking at the same one? 24 MS. FEIN: It's this one. 25 THE WITNESS: Oh, this?

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1 Q. (By Mr. Sheehan) Yeah. Where it says 2 Sonny, it looks like a J. Could that be Jodi 3 Crupi's initial? 4 A. I have no idea. 5 Q. No idea. And then it says you have my 6 deposit check? 7 A. Uh-huh. 8 Q. What, if anything, does this mean to you? 9 A. I'm not familiar with it, with any of this. 10 Q. All right. When there were deposits and 11 withdrawals out of Sonny Cohn's account, would you 12 be involved? 13 A. No. I mean, this looks like somebody said 14 disbursements. It looks to me like it's just a 15 bookkeeping procedure that they have for monies in 16 the account. 17 Q. Let's go to the next page. 18 MR. GOLDMAN: I said unless they want to 19 be on the transcript, they should tone it down. 20 Q. (By Mr. Sheehan) So the next page, which 21 is actually for Bates stamp purposes, it's AMF 105. 22 Again, it appears to be -- you know, it purports to 23 be a note pad from Cohmad Securities, Maurice Cohn, 24 dated 6-30-98. And again, it speaks for itself, but 25 I'll read it. Dear Jodi, dash -- Jodi, by the way,

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1 is spelled J-o-d-i -- please issue a check in the 2 amount of $500,000 payable to Maurice J. Cohn. As 3 discussed, debit MC disbursements. Also, please 4 deposit this check at Chase Bank. A deposit slip is 5 enclosed. Thanks, Sonny. Do you recognize this to 6 be Mr. Cohn's handwriting? 7 A. Which page are you on now? 8 Q. It's dated out in the corner 6-30-98. 9 A. Okay. What was your question? 10 Q. I said do you recognize this to be Sonny 11 Cohn's handwriting? 12 A. You know, not really, but I'm assuming it's 13 on Cohmad Securities' note pad. So Maurice Cohn, 14 looks like his personal pad. 15 Q. It says copy to BLM. That's your initials; 16 right? 17 A. Okay, yeah. 18 Q. All right. Do you ever recall -- do you 19 recall ever seeing these kind of notes coming to 20 you? 21 A. I assume so. 22 Q. And then it says this should be done on or 23 about July 2? 24 A. Yeah. 25 Q. Does July 2 have any significance to you?

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1 A. No. 2 Q. Okay. Let's go to the next page. 3 Actually, let me look at these. Maybe we're just 4 repeating ourselves. Okay. The next two are 5 similar notes. I'm going to pass over those for the 6 record. They're AMF 106 and AMF 107. I can ask 7 about them later, but for our purposes they're the 8 same. Then we get to the last page of this exhibit. 9 Let me just ask you a question about that. 10 And it's again a note purports to be from 11 Maurice Cohn dated 1-9-96. It says Dear Jodi, as 12 discussed, deposit my check before January 16 so I 13 can share my winnings with Uncle Sam. Thanks, 14 Sonny. And then below that it says please mail the 15 deposit slip receipt to me and gives his name and 16 address. Do you see that? 17 A. Uh-huh. 18 Q. Do you recall discussing with -- well, let 19 me rephrase this. Do you have any understanding why 20 he referred to the deposit as winnings? 21 A. It says winnings with Uncle Sam. 22 Q. Yeah. Share my winnings. Why would he 23 call winnings -- 24 A. Looks like he's referring to Uncle Sam, 25 what his profits were with the government, with

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1 Uncle Sam, the taxes on it. 2 MR. SHEEHAN: Okay. Let's get out the 3 statements. This is eight? 4 MS. FEIN: It's nine. 5 (Trustee's Exhibit Number 9 was marked for 6 identification.) 7 Q. (By Mr. Sheehan) Nine. Let's take a break 8 after this; okay? All right. Take a break after we 9 go through this one. 10 A. Okay. 11 Q. Or you need one now? It doesn't matter. 12 A. No. I'm fine. 13 Q. You're okay? All right. Oh, it's in my 14 book; right? 15 MS. FEIN: Yes. This is another 16 compilation of statements. Because some of them are 17 harder to read, so we pulled several months. So 18 they're all for the same account, but the time 19 period varies. 20 Q. (By Mr. Sheehan) Yeah. The first page is 21 very blurry, but I think they gets succeedingly 22 better as we go through them, but this is what the 23 documents purport to be are account statements for 24 MC Disbursements, care of Maurice Cohn and it gives 25 his address as 121 Wall Street. I'm not going to

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1 date on the first one. As a matter of fact, I'm 2 thinking we should just skip it. It's here for 3 record purposes. What it shows is three checks. Do 4 you see that? 5 A. Uh-huh. 6 Q. The first page? I'll ask you about this. 7 And each of them says after the check, it says CW 8 under all three. What is that? 9 A. Capital withdrawal. 10 Q. And can you make out the total? 11 A. $55,000. 12 Q. Yes, okay. 13 A. Uh-huh. 14 Q. All right. Now, there's no other entry on 15 here. No stock? 16 A. Uh-huh. 17 Q. No transactions? 18 A. Right. 19 Q. Just cash out? 20 A. Right. 21 Q. What do you understand this transaction to 22 be? 23 A. It looks like just like a bookkeeping 24 account. It doesn't look like it's a transaction 25 account.

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1 Q. Okay. 2 A. Because I don't see any transactions on 3 here. 4 Q. Were you paying Sonny Cohn for any 5 services -- 6 A. Yes. 7 Q. -- he was providing? 8 A. Uh-huh. 9 Q. What were those services? 10 A. He was -- well, Cohmad Securities was 11 executing our business on the floor, what's called 12 dot business because they had dot machines through 13 Bear Stearns, which we were not a member of the 14 exchange, you know, so we didn't have those 15 machines. 16 So they executed business for us, you know, 17 for my market makers from the dot business. Plus, 18 Sonny Cohn also brought business into the firm as 19 well and he also performed other services for the 20 firm. 21 Q. Just for the record, what's a dot business? 22 A. Dot business is brokerage business that 23 when we put an order on the floor of the exchange, 24 it goes down to the specialist post on the exchange. 25 Q. Okay. Just staying with the first page,

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1 Mr. Madoff -- 2 A. Uh-huh. 3 Q. -- could this be a payment to Mr. Cohn for 4 those services? 5 A. It could be. 6 Q. All right. Would it be your practice to 7 use a customer account to make payments like that? 8 A. I'm not sure. 9 Q. Well, in other words, rather than write him 10 a -- you know, just a check or something else, you 11 used a customer account and put the money through 12 the customer account? 13 MS. CHAITMAN: I'm objecting to form. 14 THE WITNESS: No. 15 MS. CHAITMAN: I don't see any evidence 16 that this is a customer account. 17 THE WITNESS: Yeah. This looks like a 18 journal, a type of journal account. 19 Q. (By Mr. Sheehan) Well, I think the number 20 at the top, 1-01329-30, is a customer account 21 number. 22 A. It's just referring -- yeah, but that's 23 referring to his -- his customer account number; but 24 if there's no transactions on there, this looks like 25 a journal account.

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1 Q. What's a journal account? 2 A. When -- you know, when money is flowing 3 through the account, either we're receiving in 4 checks or sending out checks. It says MC 5 Disbursements, so that means that we're paying him 6 money. 7 Q. Right. 8 A. They're just using -- those books are like 9 a bookkeeping account. If there's no transactions 10 on it, it's not really an account where we're buying 11 and selling securities for them. 12 Q. So if you're just disbursing money to them, 13 why would you use a customer account for that? 14 MS. CHAITMAN: Objection to form. 15 THE WITNESS: I have no idea. 16 MR. SHEEHAN: Okay. 17 THE WITNESS: I mean, that's not something 18 that I'm familiar with. 19 Q. (By Mr. Sheehan) Okay. Because it does 20 say -- you see on this, it also says or when I asked 21 you, look down -- actually, we can stick with the 22 first page. It's so blurry, but we can read it. 23 See where it says on the left-hand side under the 24 name and address? 25 A. Uh-huh.

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1 Q. You see the words long and short? 2 A. Right. 3 Q. Don't those always appear on a customer 4 statement? 5 A. Yeah. Well, they're using a format of the 6 customer account it looks like, but it's not -- 7 Q. Right. 8 A. But there's no transactions on there, so -- 9 Q. All right. So let's -- let's go in four 10 pages to April 30, 1989. And what it's showing is 11 the balance forward showing it as a debit of 12 $734,000. Do you see that? 13 A. Yes. 14 Q. And the initial, then there's three checks? 15 A. Uh-huh. 16 Q. Which brings the total up to $892,000? 17 A. Right. 18 Q. What was the purpose of keeping this debit 19 balance running? 20 A. Obviously, it looks like from the checks 21 that were issued to him. 22 Q. Right. Again, there's no transactions 23 here; are there? 24 A. No. 25 Q. Now, we go to the next page if you would,

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1 which is 6-30-89. The balance is then brought up to 2 $900,000, two more checks and it's now a million 3 225. Do you see that? 4 A. Uh-huh. 5 Q. And, again, no transactions; right? 6 A. Right. 7 Q. So we're not going to keep doing this. All 8 right. Let's go to the one -- next one is 4-30-95, 9 the one that looks like this, Mr. Madoff. 10 A. Uh-huh. 11 MS. FEIN: I have it over here. 12 Q. (By Mr. Sheehan) All right. So this shows 13 that the new balance as of April 30, '95 is six 14 million -- or 16 million. I'm sorry. $16,754,000. 15 Do you see that? 16 A. Yeah. 17 Q. What was -- what were you paying Mr. Cohn 18 $16 million for? 19 A. $16 million for? 20 Q. Yeah. It says your cash adds up to new 21 balance of $16,754,393. There's not a single 22 transaction and the only thing is checks going out 23 to him totaling that amount of money. So what were 24 you giving him $16 million for? 25 A. Well, first of all, Maurice Cohn was

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1 getting a -- a payment for the accounts that he 2 refers -- like all his salesmen, Cohmad was 3 referring clients to us that we were doing -- when 4 was this? In '95 that we were doing, you know, 5 arbitrage transactions. They were referring clients 6 to us and he was getting a fee, a percentage. 7 I don't remember exactly what the fee was, 8 whether it was, you know, two percent or whatever it 9 is of all of their customer, you know, balances in 10 their account. So I don't know. Sixteen million 11 seems like a large amount, but I don't know; but 12 that could have been, you know, based upon all of -- 13 you know, all of their customers for -- he had a 14 whole bunch of salesmen at Cohmad. 15 Q. I'm not so sure I understood that, so let 16 me ask you a question. 17 A. In other words, Cohmad referred clients to 18 us and they got a -- he got a fee based upon the 19 balances just like the woman by the name of Sonya 20 Cohn. He had salesmen that got -- that referred 21 hedge fund business to us and so on and he got a 22 percentage, a referral fee for that. 23 Q. Based on the balance? 24 A. The amount of monies that the clients had 25 sent in in their accounts to manage.

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1 Q. If the -- 2 A. It was a referral fee. 3 Q. I understand. 4 A. Uh-huh. 5 Q. If the clients took the money out, would 6 the amount that you paid him go down? 7 A. Would have been -- would have been debited, 8 yeah. Would have been deducted. 9 MR. SHEEHAN: Okay. Take a break here. 10 THE VIDEOGRAPHER: Going off the record. 11 The time is 12:33 p.m. 12 (A recess was taken.) 13 THE VIDEOGRAPHER: Back on the record. 14 This begins disc number three. The time is 15 12:50 p.m. 16 Q. (By Mr. Sheehan) Mr. Madoff, do you 17 remember earlier today I was asking you about what I 18 characterized as a 302 statement? Do you remember 19 that? 20 A. Yes. 21 Q. Okay. These are statements that are 22 prepared by the FBI following the interview such as 23 the one they had with you? 24 A. Uh-huh. 25 Q. I'm stating that not for the truth of it

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1 but just for context. 2 MR. GOLDMAN: I don't think it's the 302; 3 was it? 4 MR. SHEEHAN: They call it 302s. 5 MR. GOLDMAN: It was a 201. 6 MR. SHEEHAN: No. It's a 302. If 7 anything today that I'm pretty sure of. 8 MR. GOLDMAN: Okay. 9 MR. SHEEHAN: I'm not arguing with you, 10 Peter. 11 Q. (By Mr. Sheehan) So it's December 16th, 12 19 -- 2008? 13 A. Uh-huh. 14 Q. It's several days after the arrest, and 15 you're telling them as I understood what you said 16 earlier how the fraud came about; is that correct? 17 A. Correct. 18 Q. Right. Do you remember telling them that 19 it started in the 1960s? 20 A. No. 21 Q. Do you know that the 302 statement says 22 that not only once but three different times that 23 you said it started early? 24 MS. CHAITMAN: Do you have the 302 25 statement?

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1 MR. SHEEHAN: I can't get it. 2 THE WITNESS: I never would have said 3 that. 4 MR. SHEEHAN: I'm in the process of trying 5 -- let me explain this for the record. I'm sorry, 6 Mr. Madoff. I'll give you a chance. That is, that 7 we went down to look at it, Helen, and they let us 8 review it and then I asked for a copy and they 9 refused. What we've done is we've prepared what's 10 called a Touhy letter to request it and they have 11 that under consideration. The U.S. Attorney moves 12 at its own speed, so I don't have it. 13 I am attempting to get it. In the 14 meantime you can do what I did and that is ask to 15 see it, and they will accommodate you and let you 16 read it; but, unfortunately, they will not give us a 17 copy as yet. I don't see any reason why they 18 wouldn't because the case is essentially over from a 19 criminal perspective. 20 And 302s are, you know, given out as Brady 21 statements and everything else, so but I don't have 22 it here and I apologize for that, but I wish I did. 23 THE WITNESS: Let me clear something up. 24 During the proffer agreement, the proffer meeting, 25 they asked me to explain the history of the firm;

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1 okay? 2 MR. SHEEHAN: Right. 3 THE WITNESS: And at that point I said we 4 started in 1960. That was the only reference that 5 was ever made to 1960 was that their firm started in 6 1960, and that's when I started doing business. And 7 then I gave a history of the firm from 1960. And, 8 you know, I said I started, you know, with -- I sold 9 new issues to clients. And the new issue market 10 collapsed and didn't work out. 11 That's when I got into the fact that I had 12 to borrow $30,000 to make my customers whole, but 13 there was never any discussion of fraud starting in 14 1960 because it didn't. So I never would have made 15 that statement. The only referral to 1960 was when 16 the firm started. 17 Q. (By Mr. Sheehan) So when the FBI wrote 18 down that you told them the fraud started in the 19 '60s, they were wrong? 20 A. I said the firm started in the '60s, not 21 the fraud started in the '60s. 22 Q. Well, the FBI wrote down that the fraud 23 started -- 24 A. Well, I can't help what they wrote down, 25 but --

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1 Q. Well, they wrote down that you had borrowed 2 the $30,000 because your business had failed. 3 A. No. I didn't say the business had failed. 4 What I said to them was, and I remember this very 5 clearly because this was in the book and I told 6 Diana Henriques, what happened was the firm started 7 in 1960. Sometime in 1962, I believe it was, I -- I 8 sold two new issues to a handful of customers. They 9 were actually -- most of them were my relatives. 10 And that was then the new issue -- with 11 the Cuban Missile Crisis happened in '62, the new 12 issue market collapsed. Remember, the tape ran 13 until like 9:00 o'clock at night, you know, at that 14 time, the ticker tape. The new issue market 15 collapsed and the underwriters, the two underwriters 16 of the new issues that were supposedly in there 17 making a mark and supporting the issue, you know, 18 walked away. 19 So there was no liquidity in those stocks, 20 so the stocks -- these stocks came out at $2 a 21 share. They went down to one bid, two offer. That 22 was the quote. So the customers theoretically lost, 23 you know, 50 percent of their money. Then there was 24 -- the total investment that they had made was 25 $30,000. I felt, you know, guilty because of the

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1 fact that, you know, they bought the stock because I 2 told them to buy the stock. It was the first time I 3 ever did retail business with these clients. 4 The capital of the firm -- so I had to 5 come up with $30,000. I didn't have to. I chose to 6 give the customers -- buy the customers back their 7 stock at the offering price, $2 a share, which is 8 what it was initially sold to them at. That market 9 was one-two, which is a very wide spread; but that's 10 the way those stocks traded, you know, during that 11 period of time. 12 So because I decided I wanted to take the 13 customers out, buy their stock back at $2 a share, 14 it cost me $30,000. And that would have used up all 15 the capital of the firm, so I borrowed $30,000 from 16 my father-in-law to pay them back. That was the 17 whole issue with that. 18 That's when I said to you that when the 19 SEC came in to do an examination at a much later 20 date and they saw that I did that, that was when 21 they said to me -- as a matter of fact, the 22 examiners said Bernie, you know, you didn't have to 23 buy this stock back from the customers. 24 You never guaranteed them anything. And I 25 said I know. I told them exactly what I just said

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1 now and I felt guilty about it. And, you know, I 2 made a decision to do that. They said, well, you 3 know, if you're going to keep on doing this, you're 4 going to run out of money. You know, they sort of 5 like made a joke out of the whole thing, but there 6 was never -- that was the whole episode with the -- 7 with the $30. 8 And then Diana Henriques in her -- when 9 she wrote the book, which I was really annoyed at 10 her about and I spoke to her about that, she said, 11 well, I really mischaracterized it. You know, they 12 said that -- what did she say? That I did things 13 that I really didn't have to do or something of 14 that, which was true. I didn't have to do that, you 15 know. She thought it was like foolish of me to do 16 that. 17 Q. You started the retail business, again, in 18 the '60s; didn't you? 19 A. No. I mean, you know, after that issue 20 with the new issue business, I basically started 21 just doing arbitrage transactions. I had a couple 22 of -- a couple of customers that -- one was the name 23 of Steinberg. They were relatives of my -- clients 24 of my father-in-law. 25 Q. Didn't you lose the money again?

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1 A. No. 2 Q. Didn't you then start the Ponzi scheme in 3 the '60s? 4 A. No. 5 Q. Do you recall telling the FBI that it began 6 -- it really started in earnest in the '70s? 7 A. No. 8 Q. And that it grew much larger in the '80s? 9 A. No. 10 Q. So all those things they wrote down were 11 wrong? 12 A. I certainly never said that. 13 Q. So they're lying? 14 A. I won't say they're lying. Maybe they 15 misunderstood me. I don't know. 16 Q. They wrote it down, declarative statements, 17 started in the '60s, '70s and '80s. 18 A. No. 19 Q. So they made that up? 20 A. I'm not saying they made it up. I don't 21 know what they -- how they interpreted. You know, I 22 -- 23 Q. What's to interpret? You either started 24 the fraud or you didn't. 25 A. I didn't. So I don't know why they would

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1 say it. I may have been referring to what -- what 2 business I did, you know. They asked me when did I 3 start the arbitrage business and, you know, I told 4 them, you know, what I started doing, when I started 5 doing the market making business and so on. 6 Q. Mr. Madoff, December 16th you're talking to 7 the FBI and the U.S. Attorney? 8 A. Uh-huh. 9 Q. You told us earlier you were telling the 10 truth? 11 A. Right. 12 Q. Now is the time to tell us the truth. 13 Again, the fraud started in the '60s and '70s just 14 like you told the FBI? 15 A. I never told the FBI that. 16 Q. So they're lying? 17 A. Characterize it any way you want. I'm just 18 saying -- 19 Q. Well -- 20 A. -- I never said that to them. 21 Q. -- let me ask you something else. You lied 22 to Denny Chin; didn't you? 23 A. To Denny Chin, no. 24 Q. Yeah, the judge. When you allocuted, you 25 lied?

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1 A. Hmm? 2 Q. You lied to Judge Chin during your 3 allocution? 4 A. No, no. 5 Q. You told him nothing happened after 1992. 6 That's a lie? 7 A. I didn't tell him nothing happened after 8 '92. 9 Q. You said the fraud started at your 10 allocution, you said it started -- 11 A. At '92. 12 Q. Ms. Chaitman quotes it all the time. You 13 said it started in 1992? 14 A. Correct. 15 Q. You've testified here that it started 16 earlier than that with backdated trading and other 17 activities for the big four? 18 A. I said the Ponzi scheme, that's when it 19 started, in 1992. I never -- didn't say that there 20 were backdating of trades prior to that. I said 21 that. 22 Q. Didn't you want to give Judge Chin the 23 impression that you were clean as a whistle up until 24 1992? 25 A. No.

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1 Q. So you're swearing here today you never 2 lied to Judge Chin? 3 A. No. 4 Q. All right. Want to think about that? 5 A. Yeah. I'm telling you that. 6 Q. All right. 7 A. I'm telling you that they asked me when the 8 Ponzi scheme started, you know, and I said the Ponzi 9 scheme started in 1992. 10 Q. But -- 11 A. The backdating of trades never came up with 12 Denny Chin. 13 Q. Mr. Madoff, for the last 16 years of your 14 professional life by your own admission you lied for 15 a living; isn't that true? 16 A. For the last 16 years, yeah. 17 Q. Yeah. You lied for a living? 18 A. Yeah. 19 Q. Right. But now we're supposed to believe 20 that you're telling us the truth? 21 A. You're asking me now, I have nothing to 22 lose now. 23 Q. Aren't you trying to rehabilitate yourself? 24 A. No. 25 Q. You're trying to make everybody think that

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1 you were a good guy until '92 until the big four put 2 the screws to you? 3 A. That's correct. 4 Q. Yeah. But that wasn't true; was it? 5 A. No. It was true. 6 Q. You were phony in the '80s? 7 A. No. It's not true. 8 Q. So David Kugel, Annette Bongiorno, the FBI, 9 everybody is lying except you? 10 A. You make your own decision. I'm telling 11 you -- 12 Q. I have. 13 A. All right. So what can I tell you? 14 Q. All right. 15 A. We have a right to disagree. 16 Q. So someone who lies for a living for 17 16 years wants us to believe what he's saying, but 18 other people whose freedom was at risk just like 19 yours told the truth? 20 MS. CHAITMAN: Objection to form. 21 THE WITNESS: I can't respond to that. 22 MR. SHEEHAN: All right. I'm done. 23 MS. CHAITMAN: Mr. Madoff -- 24 MR. GOLDMAN: You were lying to us. You 25 said an hour.

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1 FURTHER EXAMINATION 2 BY MS. CHAITMAN: 3 Q. The U.S. Attorney accepted your plea that 4 the fraud began in 1992; is that right? 5 A. As far as I know. 6 Q. And can you tell us the circumstances of 7 the U.S. Attorney stating in your presence that he 8 had no evidence that the fraud began before 1992? 9 A. My attorneys came in to me and told me that 10 when they were trying to determine my forfeiture 11 over what the forfeiture settlement should be, how 12 much money they should leave my wife, my baby, 13 because it really involved my wife, they originally 14 came in and said they were going to -- they were, 15 you know, going to leaving her with $100,000 or 16 something of that sort. 17 And I said no. I said that's -- if you're 18 going to leave her $100,000, I'm going to go to 19 trial. You know, I'm not going to accept that. So 20 they then came back. Ike Sorkin came back and Peter 21 Chavkin into the room and said to me that now the 22 U.S. Attorney, you know, in New York interceded and 23 said that they have -- they have no evidence that 24 the fraud started prior to what I said in 1992, so 25 they were going to settle on $2,500,000. That was

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1 what the U.S. Attorney said. 2 Q. And the $2,500,000 represented what? 3 A. Represented my homes that were bought in 4 1980, 1983, and it was part of the assets of the 5 hundred million dollars worth of assets that Ruth 6 volunteered to turn over to the -- to the U.S. 7 Attorney. 8 Q. Okay. So just to be clear, am I correct in 9 saying that Ruth offered to turn over $100 million 10 in assets? 11 A. Right. 12 Q. But she wanted to keep two-and-a-half 13 million? 14 A. Well, she didn't pick the Number 15 2-and-a-half million dollars. She just said that, 16 you know, she wanted enough money to live on. And, 17 you know, and they asked me -- you know, they came 18 to tell me what was I willing to accept? And I said 19 I was certainly not willing to accept $100,000 of 20 $100 million of assets. 21 And they went back and forth and then they 22 came back in and said the U.S. Attorney said he has 23 no evidence that the fraud started earlier than what 24 I had said. So, therefore, he is -- they leave the 25 two-and-a-half million dollars.

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1 Q. Okay. And, in fact, you're aware that 2 Frank DiPascali pled after he was indicted, he pled 3 to -- 4 A. Right. From what I read, you know, in the 5 -- in the newspapers and what I was told was that he 6 -- he stated in front of the judge that the fraud 7 started in '92. 8 Q. Okay. 9 A. It started in the '90s, he said. And then 10 at a later date I guess as part of his plea 11 agreement he said, well, it may have started in the 12 late '80s, he wasn't sure, '92, you know, but that 13 was -- 14 Q. But he testified that it was with a split 15 strike? 16 A. Yes. 17 Q. Okay. Now, do you think that you -- do you 18 have any reason to believe that your prison sentence 19 would have been longer if you had told the U.S. 20 Attorney that you started the fraud earlier than 21 1992? 22 A. What is the question? 23 Q. Do you have any reason to believe that your 24 criminal sentence would have been longer if you had 25 told the judge, Judge Chin, in your plea that the

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1 fraud began earlier than 1992? 2 A. No. 3 Q. You understand, don't you, that SIPC saves 4 money by saying the fraud began in 1960? Do you 5 understand that? 6 A. No. I'm not really -- 7 Q. Well, do you understand that SIPC is 8 required to insure customer accounts up to $500,000 9 per account? 10 A. Yeah, uh-huh. 11 Q. And do you understand that in this case Mr. 12 Picard was successful in persuading the courts that 13 the customers should not be credited with any 14 appreciation because he claimed that from the 1960s 15 on you never purchased any securities? 16 A. Right. 17 Q. So SIPC has saved well over $1 billion by 18 virtue of the allegation that the fraud began in 19 1960. 20 A. Okay. 21 Q. Did you save any money by virtue of -- 22 A. No. 23 Q. -- claiming that the fraud began in 1992? 24 A. No. 25 Q. Now, Mr. Sheehan made the point that in the

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1 1980s you refused to give your customers electronic 2 access because you were not doing the trades 3 reflected on the convertible arbitrage customer 4 statements. Was electronic access available at all 5 in the industry in the 1980s? 6 A. No. 7 Q. If electronic assess had been available in 8 the 1980s, would it have been available to allow 9 customers to access the over-the-counter market? 10 A. No. 11 Q. In fact, to this day is there to your 12 knowledge any electronic access via retail customer 13 to the over-the-counter market? 14 A. First of all, let me explain to you what 15 electronic access is. Electronic access has nothing 16 to do with the market. Electronic access allows a 17 customer to get his confirmations and his statements 18 electronically through DTC. DTC put in a system 19 called the DTC ID system, which was basically 20 designed for institutions. 21 ID stands for institutional, you know, 22 something or other system. So rather than have the 23 customer get confirmations, you know, by sending out 24 a statement or a confirmation, you know, like we 25 would do, the customer could electronically get the

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1 information directly from DTC. The only ones that 2 really did that were the smaller hedge funds who 3 really didn't have operations departments and so on. 4 In order for them to save money, they allowed their 5 customers to get electronic access. 6 Quite frankly, you know, most firms would 7 not give anybody electronic access because you were 8 subjecting your computer systems to people to get in 9 there, you know, through fraud, like maybe cyber 10 things like people are having problems today with 11 their banking and so on. So, quite frankly, I would 12 never allow electronic access into my system because 13 our system has, you know, a huge amount of 14 proprietary information available. 15 And, quite frankly, even within DTC the 16 industry, you know, had problems with it because the 17 DTC, the same reason that an accounting firm that 18 wants to see what the firm has in their DTC 19 inventory, DTC would not give it to that. They have 20 to give it to a regulator, but they don't have to 21 give it to an accounting firm and they don't give it 22 to an accounting firm. 23 Q. Now, in the 1980s what was the volume of 24 convertible bond trading that you did through Bear 25 Stearns?

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1 A. I couldn't tell you, but it was 2 substantial. We did convertible -- we were one of 3 the largest market makers in convertible securities 4 in the country. So we were doing -- and, you know, 5 and again, convertible securities is not only 6 convertible bonds. You know, it's convertible 7 preferreds, units, warrants, rights. There's -- you 8 know, and we participated in all of -- all of that. 9 And as a matter of fact, we ran an ad in 10 the Wall Street Journal in 19 -- I guess it was 11 around '83 or '84, whatever the break-up was that we 12 made markets in all the telephone issues. And we 13 were one of the largest market makers doing the 14 arbitrage in the convertible securities. 15 Q. Now, Mr. Sheehan was questioning you -- 16 excuse me -- about Mr. Blecker's statements where it 17 appeared that fractional shares were credited to his 18 account before you actually purchased the 19 securities? 20 A. Uh-huh. 21 Q. Now, first I want to clarify something. 22 Mr. Sheehan was asking you using David Kugel as an 23 example whether David Kugel was deprived of 24 compensation on a convertible arbitrage transaction 25 that he might have done because you then took those

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1 securities and sold them to your investment advisory 2 customers. 3 Am I correct in saying that they were 4 completely separate transactions? In other words, 5 David Kugel was a trader. He would do a transaction 6 and he would generate potentially a profit or a 7 loss? 8 A. Correct. 9 Q. But he would acquire securities; is that 10 right? 11 A. Uh-huh. 12 Q. And then they became firm securities? 13 A. It depends. Sometimes they did. Well, 14 they were always firm securities because, you know, 15 they were firm securities while he was -- you know, 16 while he was a market maker also; but they may have 17 been in the market making, his market making account 18 as opposed to the firm's investment account or 19 trading inventory account. 20 Q. And then would you then turn around and 21 take some of those securities and sell them to the 22 investment advisory customers after David Kugel had 23 completed his transaction? 24 A. That's correct. 25 Q. So you're selling those securities or

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1 fractions of those securities to the investment 2 advisory customers. Was it a completely separate 3 transaction from anything David Kugel could have 4 done beforehand? 5 A. That's correct. 6 Q. Okay. Now, can you explain why a 7 fractional share -- and, of course, we don't have -- 8 if you could look at this first, this document? No. 9 This is not it. Hold on. I just want to find 10 the -- this is not -- hold on one second. I'm 11 showing you Exhibit 1, Trustee's Exhibit 1. If 12 you'd look on the second page of that? 13 A. Oh, before -- I want to -- I want to 14 address this FBI issue again. 15 Q. Go ahead. You can. 16 A. And I stated this before today. During the 17 proffer agreement when I was discussing how we did 18 our business and I was talking to you about what I 19 -- how I did customer business, they asked me did 20 you ever short stock to a customer? You know, and I 21 said, of course, I shorted stock to a customer at 22 times, you know. I said that was what market makers 23 did. You know, they short stock to the customer. 24 And they said you mean you sold stock to a 25 customer that you didn't own? And I said -- and I

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1 looked at, you know, the SEC who was sitting there 2 and everyone in the room and I said wait a minute. 3 I said are you asking me -- you know, you're acting 4 as if there's something wrong with me shorting stock 5 to a customer, selling stock to -- and now, of 6 course, the FBI has no clue with what the markets 7 work, you know. 8 So they made a big issue of you sold stock 9 to a customer that you didn't own. And as a matter 10 of fact, I turned to the SE -- two people from the 11 SEC there and I said listen, guys, help me out here. 12 I said for some reason you're acting surprised that 13 a market maker sold stock short, you know. And we 14 went through that whole routine. Now, whether for 15 some reason the SEC determined that by me selling 16 stock to a customer that I didn't own, that that was 17 a fraud. 18 Q. You mean the SEC or the FBI? 19 A. The FBI. But no one answered anything. I 20 said -- everyone like was -- the SEC was very 21 embarrassed because they were sitting there. They 22 never opened up their mouth during this whole 23 proffer agreement. And then I -- you know, I 24 conceded and started saying yes, market makers can 25 sell stock short to a customer and so on. So if the

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1 FBI who was not professional sitting in a room and 2 listening to this going back and forth because the 3 U.S. Attorney was the one -- Marc Litt was the one 4 that was saying you mean you sold stock to a 5 customer that you didn't own as if like this was 6 something wrong. 7 And I started to get annoyed at him 8 because they said -- you know, it was almost like 9 what is this? Like a joke? You all of a sudden 10 this is -- you have professionals in here, the SEC, 11 and you're acting -- you're acting as if there's 12 something wrong with that? I said that's what 13 market makers do. 14 Now, if the FBI interpreted that as being 15 a fraud because that's what the SEC -- that's what 16 the U.S. Attorney was sort of like insinuating. If 17 that's how they -- why they started writing this 18 down, I don't know, but clearly I never, you know, 19 made that statement. 20 Q. Okay. Turning to the third page of 21 Trustee's Exhibit 1 -- 22 A. And don't they record this conversation 23 there? Isn't that -- they don't record that? 24 MR. GOLDMAN: They take notes. Hopefully, 25 they take notes.

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1 Q. (By Ms. Chaitman) Turning to page three of 2 Trustee's Exhibit 1 -- 3 A. And by the way, Picard was at that meeting, 4 wasn't he, at the proffer agreement? 5 MR. SHEEHAN: No. He was not. 6 THE WITNESS: I'm pretty sure he was. No? 7 MR. SHEEHAN: Well, you would be wrong 8 about that, too, Bernie. 9 THE WITNESS: Oh, okay. Somebody was 10 there from the Trustee. 11 MR. SHEEHAN: George Stamboulidis. 12 THE WITNESS: Oh, okay. 13 Q. (By Ms. Chaitman) Again, my third try at 14 this. 15 A. Yes, right. 16 Q. Mr. Sheehan made a great deal about the 17 fact that on September 30th, 1986 on Mr. Blecker's 18 statement you reflected a journal entry of $55.13 19 for TRW, Inc. fractional shares. Do you see that? 20 A. Yes. 21 Q. Okay. And then Mr. Sheehan pointed out is 22 that it wasn't until the November 30th, '86 23 statement that you show a long position in TRW 24 shares, and it says received. Is it possible that 25 the fractional shares were actually acquired on

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1 September 30th but not received until November 7th? 2 That would be a month and seven days. 3 A. The -- again, I don't know how they handled 4 the fractional shares. The receive and deliver that 5 appears on a statement is -- is an entry that is 6 either -- that's the position is closed out. In 7 other words, it means that either the conversion was 8 completed and when it got entered into the customer 9 account. 10 The actual conversion might have been 11 completed, you know, a month after we did the 12 transaction; but, you know, it actually got 13 journaled into the customer account at a later date 14 when it gets moved into from the operations side, 15 you know. For example, if we -- if we sent it to a 16 bank to be converted, all right, they may -- they 17 may -- the conversion may have come through a month 18 after they put it into conversion. 19 They may have not sent it to us, you know, 20 until two weeks after that. That's a matter of, you 21 know, of the processing. So how the journal, you 22 know, gets or if, in fact, my office put through the 23 distribution of the fractional share into the 24 customer's account when the transaction was set up 25 because they did that because they know that that's

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1 what they're going to get on the date rather than 2 later on. I don't know what the process is, but it 3 doesn't mean anything. 4 MS. CHAITMAN: Okay. I have no other 5 questions. 6 MR. SHEEHAN: Just one or two more. 7 FURTHER EXAMINATION 8 BY MR. SHEEHAN: 9 Q. Ms. Chaitman just now asked you about the 10 U.S. Attorney, and the U.S. Attorney at your plea 11 said that the fraud started from 1992 forward. Do 12 you remember that question? 13 A. She asked me what? 14 Q. That the U.S. Attorney and you were on the 15 same page that the fraud started in '92 and went 16 forward. Do you remember that? 17 A. I just -- 18 Q. Well, the record speaks for itself. Do you 19 have any recollection of it? 20 A. The only thing I recollect was that Ike 21 Sorkin and Peter Chavkin came in. This was when I 22 was in the jail in New York and said to me that -- 23 they said that the U.S. Attorney said that he had no 24 evidence that the fraud started before I claimed 25 whatever the date was, and that's why he decided to

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1 make the settlement of two-and-a-half million 2 dollars. That's my recollection. 3 Q. Just to complete the record then, this is 4 your allocution that was actually marked as D 5 Exhibit two at your deposition on December 20, '16. 6 A. Uh-huh. 7 Q. And on page 31 it reads, this is the Court 8 speaking, does the government believe Mr. Madoff's 9 admission to cover the elements of the crime of each 10 count? Mr. Litt, who I think you previously 11 identified as the prosecutor, answered yes, your 12 Honor. 13 The government does not entirely agree with 14 all of the Defendant's description of his conduct. 15 However, the government does believe that his 16 allocution does cover each of the elements of the 17 charged defenses. The Court: Would you summarize 18 what the government's evidence would be if the 19 Defendant were to go to trial? 20 Mr. Litt: Yes. If this case proceeded to 21 trial the government would have proven through 22 testimony and evidence beyond a reasonable doubt all 23 the facts set forth in the criminal information. In 24 the summary the government would have proven, colon, 25 the Defendant operated a massive Ponzi scheme

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1 through his company, Bernard L. Madoff Investment 2 Securities, beginning at least as early as the 3 1980s. Over the decades working from his New York 4 City office Madoff solicited and caused others to 5 solicit prospective clients to open accounts with 6 his companies. 7 His clients included individuals, 8 charitable organizations, trusts, pension funds and 9 hedge funds, among others, and those clients were 10 also his victims. Let me stop reading there. I 11 think it speaks for itself. 12 A. Well, he's saying in the 1980s; right? 13 Q. Yes. 14 A. Not saying 1962. 15 Q. He said at least the 1980s, so -- 16 A. Okay. Well, that's the 1980s. Now, you 17 know -- 18 MR. GOLDMAN: Bernie, there's no question. 19 MR. SHEEHAN: No question. 20 THE WITNESS: Okay. 21 FURTHER EXAMINATION 22 BY MS. CHAITMAN: 23 Q. But Mr. Madoff, didn't the fraud, in fact, 24 start in the 1980s? 25 A. No.

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1 MS. CHAITMAN: Okay. I have no further 2 questions. 3 MR. SHEEHAN: I'm done. 4 MS. CHAITMAN: We're done. 5 MR. GOLDMAN: Okay. I've only got about 6 two hours worth, so -- 7 MR. SHEEHAN: That's one thing I know is 8 not true. A lot of things I don't know is true. 9 That I know is not true. 10 THE VIDEOGRAPHER: This concludes the 11 deposition. Going off the record at 1:24 p.m. 12 (Reading and signing of the deposition by 13 the witness was waived and the deposition was 14 concluded at 1:24 p.m.) 15 16 * * * * * 17 18 19 20 21 22 23 24 25

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1 C E R T I F I C A T E 2 NORTH CAROLINA: 3 GUILFORD COUNTY: 4 I hereby certify that the foregoing 5 deposition was reported, as stated in the caption, 6 and the questions and answers thereto were reduced 7 to the written page under my direction; that the 8 foregoing pages 211 through 384 represent a true and 9 correct transcript of the evidence given. I further 10 certify that I am not in any way financially 11 interested in the result of said case. 12 I have no written contract to provide 13 reporting services with any party to the case, any 14 counsel in the case, or any reporter or reporting 15 agency from whom a referral might have been made to 16 cover this deposition. I will charge my usual and 17 customary rates to all parties in the case. 18 This, the 10th day of May, 2017. 19 20 <%Signature%> 21 K. Denise Neal, RPR 22 Registered Professional Reporter Notary Public No. 200517500101 23 24 25

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0 11:14 290:14 304:8 322:5 324:8 22,000 324:15 001 341:14 12 212:21 338:22 331:5 333:20 220 236:9,12 00367785 235:6 12-31-84 325:4 338:11 225 354:3 0646 306:6 333:25 338:6 1986 229:4 233:18 23 312:1 08-01789 211:7 121 348:25 379:17 230 213:17 215:14 12:33 356:11 1989 353:10 234 213:18 12:50 356:15 1992 331:9,13,19 24 339:20 1 12th 225:16 332:1,18 365:5,13 248 311:25 1 213:17 229:13,16 13185 327:3,5 365:19,24 366:9 25 253:5 229:17 230:5,6,8,9 13a 341:2 368:4,8,24 370:21 25,000 253:14 230:12 371:17 14 224:7,11 233:3 371:1,23 381:11 250 313:25 319:16 376:11,11 378:21 14.18 226:20 1:24 384:11,14 320:16 321:7 379:2 15 339:21 1moo130 343:10 322:13 1,000,000 320:20 1501 224:20,24 2 250,000 313:12,13 1,336,234 321:8 154 313:18 314:18 320:25 2 213:18 230:5 1,499,840 315:10 16 347:12 354:14 250s 320:16 234:25 235:4 1,500,000 312:6 354:18,19,24 261 213:19 290:14 318:21 1-01329-30 351:20 366:13,16 367:17 27 236:13,17 334:3 346:23,25 1-9-96 347:11 382:5 27509 215:7 360:20 361:7,13 10 335:12 16,754,000 354:14 277 227:24 228:2 369:15 10-1-84 333:25 16,754,393 354:21 277,309.75 231:17 2,500,000 368:25 100 218:22 324:18 16th 248:6,10 27th 211:21 215:4 369:2 332:22 337:14 357:11 364:6 29 334:3 335:12 2-29 317:21 369:9,20 17 254:20 299 213:20 20 249:3 382:5 100,000 221:24,24 17th 259:22 267:2 29th 313:11 200 276:17 223:6,8 337:11,14 19 357:12 374:10 2:30 238:15 2005 300:11 368:15,18 369:19 1960 359:4,5,6,7 200517500101 3 10022 212:6 359:14,15 360:7 385:22 3 213:19 261:10,15 10111-0100 371:4,19 2008 248:6,10 3-13 318:2 212:15 1960s 357:19 295:12 357:12 3-31 321:25 105 345:21 371:14 201 357:5 30 235:16 246:18 10573 212:22 1962 360:7 383:14 2016 224:11 301:9 277:15 313:10 106 347:6 1980 369:4 2017 211:22 215:4 319:10,23 353:10 107 347:6 1980s 372:1,5,8 385:18 354:13 362:7 10:00 220:11,12 373:23 383:3,12 20th 221:19 30,000 359:12 238:14 383:15,16,24 224:11 300:11 360:2,25 361:5,14 10:11 261:8 1983 235:16 301:9 303:1 361:15 10:25 261:12 243:23 244:20 211 385:8 3000 211:20 215:6 10:58 290:11 310:25 369:4 212 212:16 301 314:7 10th 385:18 1984 213:23 216 213:9 302 250:9,25 295:13 297:13 356:18 357:2,6,21 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 178 of 212

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357:24 337:10 346:2 7-29-83 241:22 872,730 344:15 302s 357:4 358:20 371:8 7-31-84 322:8 889,000 344:15 303-4568 212:7 55,000 349:11 70 277:10 892,000 353:16 305 213:21 55.13 379:18 70s 255:14 363:6 8th 243:18 244:22 30th 314:4 379:17 589-4621 212:16 363:17 364:13 244:24 246:19 379:22 380:1 5965 330:9 734,000 353:12 9 31 230:20 243:17 75 211:20 215:6 6 9 214:4 348:5 244:20 313:22 750,000 325:8 6 213:22 310:6,17 9-2005 300:20 322:5 324:8 382:7 7th 380:1 337:24 338:8,11 9-30-86 234:10 310 213:22 6-03 224:23 8 900,000 354:2 31st 317:24 338:11 6-11 263:4 8 214:3 301:8 908 212:7 333 213:23 6-12 225:14 340:22,23 341:6,8 90s 257:15 260:24 341 214:3 226:12 8-19 315:9 272:25 311:12 348 214:4 6-14 235:20 236:4 8-31-83 312:21 370:9 368 213:10 6-15 247:4,8,9,18 8-31-93 312:20 914 212:23 381 213:11 6-25 226:12 8-7-84 213:20 92 251:23 332:11 384 385:8 6-30 224:20 242:3 8-8 245:7,8,9 365:8,11 367:1 4 246:21,23 247:19 370:7,12 381:15 4 213:20 299:14,16 6-30-83 246:16 80 273:21 275:1 93 310:20 311:7,11 302:19 303:5,25 6-30-86 224:12 311:5 935-6857 212:23 4,331 236:17 6-30-89 354:1 80s 251:22,24 95 287:1,3 354:13 4-30 321:21 6-30-98 345:24 255:14,15 257:15 355:4 4-30-95 354:8 346:8 298:12 337:17 9525 329:20,24 45 212:14 6-5 225:12 228:21 363:8,17 367:6 9:00 360:13 450 324:14 263:4 370:12 9:11 211:22 215:5 46 224:24 6-7 235:20 236:3,4 83 242:9,24 243:5 a 461 316:18,21 242:3 243:13,17 244:10 a.m. 211:22 215:5 465 212:5 6-8 236:18 242:3 295:11 310:22,23 261:8,12 290:11 246:24 311:7,10,11 5 290:14 60s 359:19,20,21 312:17 313:6,10 5 213:21 305:16,20 ability 256:6 362:18 363:3,17 313:22 314:4,6 5-25-84 263:6 able 222:12 364:13 374:11 50 309:13 310:1 239:14 240:11 610 224:20 84 244:10 303:24 322:18,18,21 242:20 265:3 62 360:11 311:9 316:12,13 323:12,19,25 266:9 274:14 645 315:9 316:21 319:10 360:23 290:7 651 307:7 322:5 333:5,6 50,000 253:13,16 accept 368:19 338:3 339:1 50/50 339:19 7 369:18,19 374:11 500 309:2,2 7 213:23 303:24 accepted 368:3 86 230:21 379:22 500,000 315:15,23 333:9,16,18 access 295:2,7,11 87 252:15 316:3 328:25 340:22 295:23,25 372:2,4

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372:9,12,15,15,16 323:6,8 324:3 agency 287:11 320:24 344:15 373:5,7,12 326:13,18,24 385:15 346:2 354:23 accommodate 332:6,8,25 334:13 aggregate 315:10 355:11,24 356:6 358:15 334:14 335:1,4 aggregating 373:13 account 214:4 339:4,6,7 342:11 315:14 analysis 222:22 230:24 233:14 355:1,25 371:8 ago 267:25 268:13 274:19,23 246:20 266:7 383:5 278:13 310:2 andrew 252:14 268:20 270:12 accrued 307:24 agree 216:11 annette 229:7 271:19,20 278:17 accurate 331:10 315:18,20 382:13 243:6,10,20 244:3 278:19 280:1,6,8,9 331:13,20 agreement 327:2 258:3 259:7 260:2 280:10 281:11 accurately 332:17 358:24 370:11 264:18 266:16 283:5,6,7,14,17,19 acquire 375:9 376:17 377:23 367:8 284:8,8,16 286:9 acquired 379:25 379:4 annette's 229:5 308:18,20,21,22 acting 377:3,12 ahead 246:11 252:11 259:25 308:25 311:13,14 378:11,11 277:24 285:7 264:2 278:22 314:24 315:2,14 activities 365:17 290:19 325:12 annoyed 362:9 317:4 323:7 324:1 activity 277:5 330:2 376:15 378:7 324:3,7,25 325:1,2 332:18 airlines 307:11,13 answer 227:18 326:10,15 330:14 actual 232:17 akers 249:14 333:1 336:14 330:16,22 332:18 257:4 281:13 allegation 371:18 answered 259:5 336:2,23 337:3,6,7 380:10 allocuted 364:24 260:5 306:10 337:9 339:2,5 ad 374:9 allocution 365:3 377:19 382:11 340:8,11,12,13 addition 329:5 365:10 382:4,16 answers 385:6 342:5,6 343:10,15 additional 323:22 allow 238:24 anticipated 226:5 344:16 345:11,16 addr 343:1,2,3 326:4 372:8 anticipating 238:1 348:18,23 349:24 address 347:16 373:12 anybody 295:23 349:25 351:7,11 348:25 352:24 allowed 289:12 308:11 373:7 351:12,16,18,20 376:14 304:25 332:23 anymore 271:1 351:23,25 352:1,3 adds 321:7 354:20 373:4 anyway 276:20 352:9,10,13 353:6 adhere 216:21 allows 372:16 apartment 248:16 355:10 371:9 admission 366:14 alpern 235:17 248:19 249:4,7 374:18 375:17,18 382:9 244:21 246:17 apologize 230:12 375:19 380:9,13 advise 304:6,7 amanda 212:12 234:19 247:4,7 380:24 advisories 254:21 215:24 358:22 accountant 245:21 advisory 252:10 american 312:8 apparent 315:15 accounting 320:7 267:15 375:1,22 amf 345:21 347:6 appear 232:18 373:17,21,22 376:2 347:6 301:18 338:21 accounts 259:6 afein 212:17 amount 231:17 353:3 295:7 296:7 afternoon 238:15 236:17 254:7 appearances 308:16 309:10 265:23 309:18 318:25 212:1 213:1 322:25 323:2,3,4,5 319:1 320:16,19

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[appeared - bank] Page 4

appeared 233:7 352:20 358:8,25 attorney 248:14 272:7 273:6,15 374:17 364:2 366:7 358:11 364:7 278:11 279:1 appears 225:18 369:17 376:19 368:3,7,22 369:1,7 282:12,16 284:14 269:8 316:9 381:9,13 369:22 370:20 284:15 290:13 317:10 345:22 asking 219:5 378:3,16 381:10 299:21 300:2,5,10 380:5 265:1,2 274:1 381:10,14,23 300:14,19 302:8 applicant 211:6 278:4 296:25 attorney's 248:1 302:25 308:8 215:10 311:18 356:17 248:23 320:23 337:24 apply 222:21 366:21 374:22 attorneys 215:15 338:10 356:13 appreciation 377:3 368:9 361:6,13,16,23 371:14 aspects 256:22 august 243:17,18 368:20,20 369:21 approval 223:25 assess 372:7 244:20,22,24 369:22 378:2 approximately assets 369:4,5,10 303:24 312:1,16 backdated 297:4 222:15 255:14 369:20 authorization 297:12 365:16 april 211:21 215:4 assigned 251:24 342:6 backdating 280:17 319:10,23 353:10 assistance 252:9 automatically 294:13,16 295:9 354:13 assistant 255:21 273:14 295:13 297:13 arb 294:15 256:2,25 259:19 available 221:5 365:20 366:11 arbitrage 217:6 assisted 256:17,18 238:24 264:25 background 223:4 237:1 256:19 372:4,7,8 373:14 254:24 303:3 239:25 240:15 assisting 256:6 avenue 212:5 baker 212:13 254:18 257:7 assume 226:25,25 average 221:21 215:22,24 271:14 272:13 241:13 270:8,8 222:2,7 223:17 bakerlaw.com 279:11 282:18 280:25 284:21,25 239:7,18 287:19 212:17 284:3 285:3,5,9 285:12 323:11 300:15,22 302:18 balance 320:21 288:21 290:21 342:19 346:21 303:9,17,18,23 321:6,9,21,22,22 324:5 355:5 assumed 276:14 304:1,4,4,8,10,14 322:16 323:18 362:21 364:3 assuming 231:21 304:19 324:19 325:9 372:3 374:14,24 242:8,24 263:12 aware 237:19 327:8,14 337:9,13 arbs 297:15 294:23 304:1 238:5 250:4,6,8 338:17 339:7 area 229:9 251:6 307:24 317:14 370:1 353:11,19 354:1 292:1 326:8 325:11,16 326:7,8 b 354:13,21 355:23 arguing 357:9 328:7,7 342:18 balances 332:3,3 baby 317:13 argument's 346:12 332:22,24 355:9 368:12 218:23 at&t 315:10 317:5 355:19 back 217:2 239:1 arrest 248:2 317:8,13 bancorp 235:20 242:9 243:13 357:14 attempting 358:13 236:12 245:14 244:7,14 246:16 arrive 273:2 attendance 255:24 266:22,24 285:5,8 246:17 250:24,25 arthur 224:12 attention 224:19 bank 233:1 246:3 253:7 254:15 asked 244:2 248:1 235:14,19 240:19 346:4 380:16 261:11 263:1 250:21 278:1 303:4 312:1 264:12 268:3 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 181 of 212

[banking - broker] Page 5

banking 373:11 366:19 367:17 226:4 231:11 borrowing 308:23 bankruptcy 211:1 370:18,23 382:8 236:6 237:6,6 322:13,17 323:4 215:13 382:15 238:14 246:7 326:5,10 327:1 based 253:9 266:9 bells 317:13 266:18 267:20,23 borrowings 269:24 273:4 bernard 211:8,12 270:9 283:24 314:23 315:14 274:8 284:11 211:16 213:8 285:2,17,19 286:5 322:14 293:19 294:5,17 215:2,11,21 216:1 308:1 373:24 borrows 321:7 303:20 309:11,12 383:1 bonds 218:22 324:14 312:23 335:6 bernie 341:25 219:25 220:4 bottom 227:2 355:12,18,23 342:5,12,19 237:8 242:1 228:1,4 240:19 basically 221:22 361:22 379:8 246:13 263:15 334:6 335:13 222:9 223:3 383:18 264:16 265:3,11 343:13,17 243:21 250:1 best 257:12 274:12 265:13,14,20,22 bought 218:22 253:25 255:10 341:24 265:25 266:24,25 219:1 221:6 226:4 256:3 258:6 better 217:9 278:15 285:6 237:5 238:14,20 259:20 260:1,15 310:25 348:22 288:21 307:24 242:12 253:25 362:20 372:19 beyond 258:11 374:6 263:15,15 264:16 basket 273:3,13 382:22 bongiorno 243:10 264:24 269:7 baskets 258:1 bid 360:21 243:20 258:3 271:3,4 274:6 275:18 bids 289:25 367:8 277:1 278:15,15 bates 311:24 313:1 big 259:13 310:12 bonjourno 259:7 278:16,17,18 314:7 316:18 323:1 365:17 bonventry 243:14 279:3 281:13 322:5 345:21 367:1 377:8 244:16 284:12 287:5,23 bear 270:10 340:7 billion 371:17 book 348:14 360:5 288:4 309:25 350:13 373:24 bit 217:3 322:12 362:9 361:1 369:3 began 250:2 363:5 black 277:12 bookkeeper brady 358:20 368:4,8 371:1,4,18 blecker 217:2 243:21,23 258:8 break 218:21,22 371:23 224:13 280:12,20 259:1 260:1 261:4 308:15 beginning 227:23 300:24 301:13,17 bookkeepers 317:5 348:7,8 311:14 315:3 301:19 259:15 356:9 374:11 333:22,24,25 blecker's 230:23 bookkeeping breaking 257:4 383:2 300:9,11,20 258:16 298:15 bring 323:9 begins 290:14 374:16 379:17 345:15 349:23 brings 353:16 356:14 bless 301:9 352:9 broke 317:13 behalf 211:17 blm 343:15 346:15 books 352:8 broken 317:10 212:2,10,19 blotters 267:4 borrow 309:2 broker 222:1,4 215:19,20 blurry 348:21 320:11 359:12 223:19 240:13 believe 221:18 352:22 borrowed 316:3,4 254:5 286:23 243:4 301:11 bond 219:13,14,20 320:16,20 321:11 287:4,5 289:20 303:5 331:8 219:21,23,24 325:8 360:1 323:19 339:24 333:22 360:7 220:10 221:15 361:15

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[brokerage - charitable] Page 6

brokerage 276:5 288:8,24 290:2 care 266:8 286:17 263:16,19 273:24 286:19 308:24 293:23 308:24 348:24 275:3,7 279:20 309:3,7 340:4 309:1 361:2,6,13 carolina 211:21 297:5 301:18 350:22 361:23 215:7 385:2 312:19 313:1,8 brokers 222:3 buying 218:20 carried 242:11 322:7 323:14 240:9,13 219:12,13 220:10 327:8 324:10 325:15 brook 212:22 240:8 245:17 carry 317:17 327:6 338:6,8,12 brother 253:1 268:15 272:20,25 322:10 338:15 340:24 339:21,21 277:1 282:12 case 215:9,12 342:3,19 351:13 brought 350:18 283:10 285:17,19 358:18 371:11 351:15 352:14 354:1 304:3 308:23 382:20 385:11,13 357:24 365:12 build 224:1 257:25 326:20 352:10 385:14,17 367:20,23 368:2 built 223:2,7,8 buys 283:14 288:3 cash 217:11 293:5 379:1,13 381:4,9 273:12 279:14 309:18,19,21 294:2,3 309:22 383:22 384:1,4 bunch 249:3 c 323:20,22 334:13 chaitmanllp.com 355:14 349:19 354:20 212:8 c 385:1,1 bus 260:23 cashier 243:25 chance 217:4 calculate 336:6 business 217:14 260:21 230:17 358:6 calculated 253:6 233:16 244:6 caused 327:20 change 227:24 calendar 262:23 251:1 253:17 383:4 228:18 call 249:2 250:9 256:23 276:15 cents 267:18,21,21 changed 231:23 251:3,4,14 256:11 350:11,12,16,17 267:22,22 302:19 255:1,9 303:20 264:18 286:18 350:18,21,22,22 certain 216:12 304:12,13,16,20 299:3 323:20,21 355:21 359:6 278:2 291:1 296:1 305:6 347:23 357:4 360:2,3 361:3 309:17 changes 330:3,17 called 222:25 362:17,20 364:2,3 certainly 260:16 characterize 224:3 249:21 364:5 376:18,19 262:13 330:21 364:17 251:7,10 264:19 butner 211:21 363:12 369:19 characterized 341:10 350:11 215:5,7 certify 385:4,10 356:18 358:10 372:19 buy 219:11,13,15 cetera 248:15 charge 270:23 calls 275:23 285:1 219:18,19,20,23 251:25 254:25 313:17 324:15 capable 256:10 220:23,24 221:24 320:17 327:12 385:16 capacity 289:22 237:1,6,9,14 238:8 chaitman 212:3,4 charged 318:16 capital 254:7 239:14 240:7,10 213:10 215:18,18 322:14 325:9 314:18,22 349:9 240:11,12 265:20 218:12 219:7 337:10 382:17 361:4,15 265:22 266:5,10 221:3,10 222:16 charges 287:12 caption 215:9 266:24 270:20,22 224:8 229:18 charging 267:12 329:5 385:5 271:9 273:8 234:10,13,15,20 305:2,2,3 313:24 card 262:21 283:15 285:1,2,7 234:23 237:13,16 319:12 cards 213:19 285:15 286:4,5,20 247:2,8,25 250:20 charitable 383:8 261:18 262:9 286:24 287:21 261:6,25 262:2

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[chase - consideration] Page 7

chase 346:4 client 219:11 collapsed 221:14 compensation chavkin 368:21 223:20 237:19 359:10 360:12,15 267:11 269:4 381:21 238:4 244:5,6 colon 382:24 374:24 check 312:3,5 246:3,7 252:13 column 227:23 competing 222:6 313:12,13 314:14 253:24 266:4,6,8 231:17 320:2 compilation 335:4 319:15 320:24 266:18 267:8 combination 348:16 329:6,8 344:14 271:2,3 281:13,21 258:25 compile 323:5 345:6 346:1,4 282:9,9 283:9,11 come 223:15 227:1 compiled 261:2 347:12 349:7 287:19 253:8 256:24 333:19 351:10 client's 271:2 258:10 329:8 complete 261:22 checkbook 259:22 281:15 361:5 380:17 382:3 checks 259:22,23 clients 240:3 257:4 comes 222:11 completed 375:23 337:7 349:3 352:4 257:5 259:13,23 238:3 269:4 271:8 380:8,11 352:4 353:14,20 269:6 270:20 coming 282:4 completely 375:4 354:2,22 276:12 355:3,5,17 337:7 346:19 376:2 chin 364:22,23 355:24 356:5 comma 302:17 compliance 365:2,22 366:2,12 359:9 361:3 commencing 252:25,25 370:25 362:23 383:5,7,9 211:22 computed 292:22 choice 219:12,17 close 232:23 242:7 comment 219:2 computer 328:9 chose 361:5 246:9 286:3 273:23 373:8 circled 262:23 closed 270:7 commission conceded 377:24 circumstances 311:13 380:6 267:14 270:24 concerned 282:10 368:6 closing 218:1 271:11 287:12 285:22 286:14 city 383:4 321:25 302:19 303:19 287:11 288:25 claimed 371:14 clue 377:6 304:15,21,23 concluded 384:14 381:24 clvs 213:3 305:2,3 concludes 384:10 claiming 371:23 cohmad 339:17,19 common 222:13 conduct 382:14 clarify 217:5 339:20,23 343:23 225:17 231:6 conference 249:1 244:1 374:21 345:23 346:13 236:13 237:7 confirmation clarity 251:2 350:10 355:2,14 241:7,25 246:7 302:17 303:22 clean 365:23 355:17 256:20 270:9 305:1 372:24 clear 312:25 cohn 339:14 340:8 285:8 confirmations 358:23 369:8 343:24 344:9,14 commonly 225:24 304:14 372:17,23 clearinghouse 345:23 346:2,13 companies 383:6 confused 278:6 306:9 347:11 348:24 company 219:18 323:15 clearly 219:8 350:4,18 351:3 298:5 300:21 confusing 248:22 220:5 288:20 354:17,25 355:20 383:1 295:20 360:5 378:18 cohn's 342:11 compensate 269:1 consecutive 235:5 clerk 243:24 345:11 346:6,11 compensated 313:2 314:3 255:10,18,21 cold 230:3 330:25 253:3,21,23,24 consideration 256:3 331:1 269:3 358:11

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[considered - customer] Page 8

considered 237:18 convertible 217:5 correct 238:8 courts 371:12 260:21 267:14 217:17 218:7 239:18 242:5 cover 309:8 consistent 236:25 219:12,14,20,21 243:19 252:5,12 326:10,21 382:9 consists 230:13 220:4,10,14,23 253:11 282:21 382:16 385:16 contact 266:16 222:13 225:6,6,21 292:19,23 302:13 covered 290:9 contents 213:7 227:16 231:5 315:25 325:11,17 covering 292:11 context 216:24 232:10 236:6,24 328:8 331:9,12 create 295:17 248:4 357:1 236:25 237:2,7,25 332:9 334:23 credit 226:19 continued 214:1 238:9 239:24 357:16,17 365:14 233:13 291:5,14 296:4 240:15 241:5 367:3 369:8 375:3 308:2 309:12 continuing 320:10 242:1 245:19 375:8,24 376:5 328:22,25 332:3 contract 385:12 254:18 257:6 385:9 332:24 control 295:24 264:21 265:2,11 correctional credited 246:20 329:19 265:13,14,16,18 211:20 215:6 292:2,8,17 371:13 controlling 223:19 266:18 267:20,23 cost 361:14 374:17 conversation 270:9 271:14 counsel 212:1 crediting 286:9 378:22 272:13 279:11 213:1 215:8 credits 328:7 conversion 232:12 282:18 283:4,24 385:14 335:1 257:10,18 259:8 284:3 285:2,6,17 count 320:8 crime 382:9 270:4 272:24 286:5 288:20 321:10 382:10 criminal 358:19 292:9 294:21 290:22 294:15 counter 275:10,16 370:24 382:23 332:14 380:7,10 297:15 306:19 275:19 276:8,13 crisis 360:11 380:17,18 307:14 340:13 276:16 277:2,11 criticism 239:16 convert 233:12 372:3 373:24 277:20 372:9,13 cross 323:1,2,4,12 246:10,13 266:2 374:2,3,5,6,6,14 country 275:25 324:22 326:4,14 271:16 280:15 374:24 276:3 374:4 327:2 281:19,21 282:11 convertibles 219:3 county 385:3 crupi 259:18,19 284:1 285:22,24 219:9 239:21 couple 227:22 crupi's 345:3 286:1 291:7,8,9,12 259:21 235:5 259:18 cuban 360:11 291:21 294:7 converting 217:23 261:21 268:1 current 228:5 converted 217:20 218:5 281:17 330:2 331:3 customary 385:17 227:1,15,16 converts 272:5 362:21,22 customer 213:17 232:14 233:24 284:10 coupon 219:24 213:18,20,21,22 245:22,23 247:13 copies 213:19 course 221:12 218:2 235:5,16 247:15 270:2 261:18 310:25 222:5 268:12 242:14 246:2 281:24 282:1,6,15 copy 299:22 274:20 292:11 254:2 257:13 282:25 286:7 346:15 358:8,17 298:1 376:7,21 258:20 266:14,20 290:24 291:4,17 corner 314:5 377:6 267:13 268:4,20 291:18 292:3,5,7 327:5 346:8 court 211:1 268:22,25 269:8 293:16 294:6,9 corporation 211:5 215:13 382:7,17 269:10,15,16,23 380:16 215:10 269:24 270:23

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[customer - delivery] Page 9

271:8,19,25 272:9 298:25 299:2 david's 280:10 debited 320:18 272:14,20 279:18 304:6,8 334:7,11 281:9 283:18 356:7 279:25 280:6,8 355:13 359:12 davis 212:3 215:18 debits 328:7 282:2,13,14,14 360:8,22 361:6,6 day 211:21 220:24 334:25 284:5,9,14,15,16 361:13,23 362:22 220:24 221:2,7,7 debtor 211:13 284:22 285:1,3,16 371:13 372:1,9 222:5,8 236:14 decades 383:3 285:18,18,21 373:5 375:2,22 238:10 240:8 december 221:19 286:2,13,14 376:2 250:22 260:16,23 224:11 248:6,10 287:21 288:3,25 cw 314:18,21 279:13 292:18,22 300:11 301:9 290:22,23 291:2,6 349:7 293:23 297:19 303:1 314:4,5 291:10,13,14,15 cyber 373:9 372:11 385:18 330:8 338:11 291:22 292:2 d days 225:18 226:6 357:11 364:6 294:10,22 295:2 226:7 240:7 382:5 d 225:6 346:1 296:7 298:17,19 248:10 278:13 decide 221:23 382:4 298:20,22 299:5,8 287:14 295:18 281:20 dan 243:14 244:15 302:12 308:2,22 296:8 309:18,25 decided 281:3,4 dark 277:13 308:25 309:6,12 357:14 380:2 282:11 291:9,11 dash 344:13 309:17,24 310:9 deal 289:17 291:12 361:12 345:25 312:5 314:15 379:16 381:25 date 215:4 233:19 315:6 323:20 dealer 218:3 decision 220:3,16 242:25 244:21 324:14 326:21 232:25 246:4,12 284:24 285:4 263:3 291:8 329:4 332:2,2,6,8 276:3 286:13 291:24 362:2 293:20 303:25 332:24 335:1,7 289:20 339:24 367:10 349:1 361:20 351:7,11,12,16,20 dealers 254:1,5 declarative 363:16 370:10 380:13 351:23 352:13 277:14 deducted 337:3 381:1,25 353:3,6 355:9 dealing 253:23 356:8 dated 345:24 371:8 372:3,12,17 271:14 276:16 deducting 253:9 346:8 347:11 372:23,25 376:19 dealt 254:4 298:8 deem 243:22 dates 252:24 296:1 376:20,21,23,25 298:11,13 defendant 211:9 333:24 377:5,9,16,25 dear 345:25 215:12 382:19,25 david 212:11 378:5 380:8,13 347:11 defendant's 215:22 252:6 customer's 270:6 debit 227:23 382:14 254:11 262:2,13 271:11,20 282:12 231:16 313:12 defenses 382:17 263:16,19 264:1,2 284:8 380:24 318:20 321:4,12 define 218:18 264:19 265:15 customers 211:17 322:9,16 323:18 definition 289:23 266:16 278:1,5,10 212:2 215:8,19 324:13,15 325:5 deliver 244:8 278:24 279:10,24 218:11,23 222:24 327:9,20 328:2,21 245:4,15 380:4 280:24 281:7 239:13 259:3,11 328:22 332:2,2,21 delivered 245:19 282:17 283:6,12 269:5 288:15,20 332:24 344:15 247:19 283:13,14,19,21 289:17 295:6 346:3 353:11,18 delivery 232:11 367:8 374:22,23 298:9,11,13,14,16 375:5,22 376:3 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 186 of 212

[demonstrate - eight] Page 10

demonstrate description 382:14 disagree 367:15 274:4 276:13,14 292:4 designed 238:2 disbursements 278:7 290:21 denise 211:18 372:20 214:3,4 341:10,14 296:5 300:1 385:21 desk 256:2 257:1 343:8 344:16 303:23 354:7 denny 364:22,23 264:4 305:14 345:14 346:3 355:3,4 359:6 366:12 determine 246:8 348:24 352:5 362:3,21 364:4,5 department 291:2,16 293:18 disbursing 352:12 372:2 374:4,13 227:20 229:1,5 294:21 368:10 disc 290:14 356:14 dollars 264:20 243:13 251:9 determined 234:4 discount 218:7 309:1 324:16 252:12 259:15,25 284:11 293:15 219:3,14 238:9,20 326:6 369:5,15,25 264:2 270:11 377:15 267:5 382:2 278:22,22 298:7 developed 222:25 discounts 220:1,4 dot 350:12,12,17 299:7 diana 360:6 362:8 220:6 350:21,22 departments difference 225:19 discretion 222:5 double 232:2 373:3 320:3 discuss 299:3,8 262:4 depending 220:19 different 233:18 discussed 226:9 doubt 382:22 239:9 256:5 271:1 233:20,20 234:6 346:3 347:12 dtc 372:18,18,19 depends 217:19,20 236:16 239:4,24 discussing 347:18 373:1,15,17,18,19 220:2,7 221:5 240:9,9,12,13 376:17 dubinsky 239:17 228:17 229:3 243:14 254:9 discussion 247:23 dynamic 273:10 233:25 237:3 256:20,21,22 308:7 319:19 e 238:13 239:19,21 267:20 279:5 323:11 338:1 e 212:12 385:1,1 243:8 254:12 287:17 308:16 339:9 341:5 earlier 244:2 267:19 268:16 317:11 323:18 359:13 282:17 305:8 304:2 323:24,25 357:22 distribution 306:18 322:19 332:25 375:13 difficult 237:24 380:23 356:17 357:16 deponent 212:19 255:25 district 211:1 364:9 365:16 deposit 323:20 dipascali 255:6 215:13 369:23 370:20 345:6 346:4,4 257:17 259:20 document 234:5 371:1 347:12,15,20 370:2 234:16 235:8 early 231:14 234:9 deposited 315:6 direct 240:19 261:18 329:15 257:15 280:16 315:24 303:4 343:1 376:8 357:23 383:2 deposition 211:16 directing 224:19 documents 216:16 earnest 363:6 215:2,5 224:7 235:14,19 311:25 216:23 241:16 easier 320:23 300:9 382:5 direction 237:4 348:23 easy 329:10 384:11,12,13 385:7 doing 223:21 effect 316:4 385:5,16 directions 307:14 229:6 234:11 eight 316:16,17,20 deposits 345:10 directly 373:1 235:3 239:22 322:15 324:13 deprived 374:23 disadvantaging 240:14 243:7 325:10 326:1 derive 310:2,4 291:15 257:14 259:16 327:9 328:2 348:3 267:6 272:23

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[eighty - fact] Page 11

eighty 338:18 244:22 310:15 368:1 381:7 333:9,16,18 either 218:2 314:12 316:19,24 383:21 337:24 338:8,11 232:14,21 271:16 336:11 337:5 examined 216:2 341:6,8 347:8 272:4 295:12 entry 224:20,22 examiners 361:22 348:5 376:11,11 337:22 352:3 226:12 227:8,12 example 270:7 378:21 379:2 363:23 380:6,7 235:20,23 245:6 277:10 292:20 382:5 electric 253:13 245:11 246:18,23 324:24 374:23 exhibits 213:15 electronic 295:2,6 294:14 307:12,22 380:15 214:1 295:11,23,25 312:1,7 313:11 exceeds 323:18 existing 316:5 372:1,4,7,12,15,15 328:17 334:18 325:25 expand 218:11 372:16 373:5,7,12 335:19,25 336:5 exchange 219:22 219:6 electronically 343:21 349:14 246:1,13 274:9 expect 216:20 372:18,25 379:18 380:5 275:9 276:8,9,15 expectation elements 382:9,16 episode 362:6 276:20,25 277:7 222:12 eleven 271:6,8,9 equal 222:15 277:18 286:22 expenses 253:9 eligible 277:8 equate 275:12 350:14,23,24 experience 256:4 eliminate 290:7 325:3 exchange's 277:10 explain 233:2,7 eliminated 308:15 equity 302:12 exchanged 232:23 250:1 265:8,10 ellen 229:16 326:9,21 excuse 374:16 275:5 283:3 embarrassed equivalent 267:14 execute 223:19 290:16,20 294:11 377:21 281:25 302:19 274:14 328:17 358:5,25 employees 258:7 303:19 304:15,22 executed 277:14 372:14 376:6 employment 304:23 305:4 350:16 explained 220:14 254:24 258:5 esq 212:3,11,12,20 executes 279:10 explanation enclosed 346:5 essentially 358:18 executing 240:3 247:17 ends 307:7 311:5 establishing 274:10 275:15 exposure 309:8 311:25 294:17 350:11 f engage 300:22 et 248:15 251:25 executions 275:14 f 385:1 enriqua 260:25 254:25 320:16 275:14,14 facility 215:6 enter 336:19 eventually 266:2 exemption 289:4,6 fact 216:16 217:1 entered 216:11 everybody 238:3 289:10,11 220:3 237:19 380:8 366:25 367:9 exhibit 213:17,18 238:6 247:19 entire 324:15 evidence 351:15 213:19,20,21,22 250:8 264:18 entirely 382:13 368:8,23 369:23 213:23 214:3,4 266:14 269:10 entities 317:11 381:24 382:18,22 224:5,10,11 230:9 274:9 281:16,19 entitled 281:22 385:9 234:25 235:4 282:13 284:13,19 282:10 293:19 exact 279:18 261:9,14,14 284:20 285:25 294:10,23 342:25 exactly 278:7 299:14,16 301:8 286:15 288:13 343:1 355:7 361:25 301:24 303:5,25 291:3,11 292:1,2,5 entries 225:15 examination 213:8 305:16,19,20,20 293:16 294:9,19 239:2 243:17 216:4 361:19 310:6,17 311:23 303:23 304:10 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 188 of 212

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308:25 326:8,13 229:13,20,23 280:21 281:3,6,8,9 314:9 315:6,24 349:1 359:11 230:1,6,8 234:7 282:8,20,21 283:4 317:8 322:15 361:1,21 370:1 235:4 299:13,18 283:11,12 286:19 324:13 325:10 372:11 374:9 299:22 305:13,18 292:9 308:24 326:1 327:9 328:3 377:10 379:17 305:23 306:16 309:3,7 350:18,20 335:13,24 338:18 380:22 383:23 307:7 310:18 358:25 359:5,7,16 flat 306:20,21,22 facts 382:23 312:23 313:3 359:20 360:6 307:23 failed 360:2,3 314:7 316:16,18 361:4,15 373:17 flaw 297:23,24 fair 217:16 256:18 316:21 329:21 373:18,21,22 floor 222:3,4 fairlawn 212:21 331:4 333:7,13,17 375:12,14,15 223:19,24 259:22 fake 295:17 337:25 338:4 firm's 264:7,16 267:2 274:9,17,18 fallacy 220:9 339:12 340:17,20 266:7,11,12 267:4 275:9,13 276:15 familiar 233:15 340:23 341:1 270:12,23,25 276:24 277:16,18 251:5 289:8 298:2 344:24 348:4,15 278:18 279:4,4,6 286:22,22,23 345:9 352:18 354:11 280:9,20,22 281:1 287:3,4 350:11,23 family 250:17 feldman 265:16 281:3,11,14 282:4 flowing 352:2 323:6 326:13 fellow 222:3 282:5 283:5,19 focus 213:23 far 282:9 285:21 felt 256:10 360:25 284:7,16,17 260:12,13,19,19 286:14 287:10 362:1 291:23 375:18 261:2 331:6,7,10 288:25 325:25 fidelity 223:5,21 firms 276:5 373:6 331:20,25 333:2 368:5 fifty 325:6 first 224:4,20 333:19 337:16 fast 331:16 figure 253:8 273:6 230:16 233:2 focusing 219:2 father 361:16 file 331:6 343:2 235:6,11,15 237:7 251:22,24 362:24 filed 331:7 237:9 252:1 folder 341:10,10 favorable 222:14 fill 336:16 261:21 262:10,10 341:13,18 222:14 filled 337:15,19 275:5 276:19 follow 216:14 fbi 248:22 249:1 financial 260:6,10 295:10 298:24 292:15 341:17 250:5,14 356:22 260:11 299:23,25 306:3 following 220:22 359:17,22 363:5 financially 385:10 311:23,24 312:25 230:20 254:24 364:7,14,15 367:8 find 264:12 268:3 313:11 315:4,11 312:24 325:12 376:14 377:6,18 376:9 322:25 328:5 356:22 377:19 378:1,14 fine 225:9 229:18 332:22 334:1 follows 216:3 february 316:13 229:21 251:11 340:18 341:12,23 foolish 219:23 316:21 255:16 299:20 348:20 349:1,6 362:15 federal 211:19 310:8 316:11 350:25 352:22 foregoing 385:4,8 215:6 325:18 339:10 354:25 361:2 forever 295:4 fee 355:6,7,18,22 348:12 372:14 374:21 forfeiture 368:10 356:2 finished 269:22 376:8 368:11 feeds 273:11 firm 221:22 five 218:23 234:22 forgetting 270:8 fein 212:12 215:24 252:25 258:7 251:3,3,4,8 267:23 forgot 249:7 215:24 224:6 267:12 273:11 278:13 312:11

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form 218:12 219:7 292:3,10,13,17 further 216:2,4 347:15 348:24 221:3,10 222:16 293:3,14,15,19,23 225:11 368:1 giving 252:11 237:13 273:24 294:14,20 298:3 381:7 383:21 263:12 286:7 275:7 279:20 308:9,10,12 384:1 385:9 294:20 354:24 297:5,9 323:14 374:17 376:7 g gmail.com 212:24 342:15,15 351:13 379:19,25 380:4 go 217:2 221:15 game 266:12 352:14 367:20 380:23 223:9,13,16 225:7 general 222:19 format 353:5 fractions 376:1 226:11 227:2 223:23 253:13 former 215:19 frame 244:10,13 229:10,16 232:1 generally 326:19 forms 342:1,3,4,5 254:13 255:7 237:4 240:9,11 generate 237:25 formula 252:12 frank 255:6,8,24 241:17,20 243:16 299:9 375:6 forth 246:14 259:6 257:16 259:19 246:1,9,11,11,11 generated 268:11 369:21 378:2 370:2 246:16 250:24,25 298:21 299:6 382:23 frankly 250:19 254:15,20 257:24 328:8 forty 327:15 255:13,21 373:6 263:1 264:12,16 generates 253:13 forum 245:3,4 373:11,15 266:6 267:1 george 379:11 forward 242:12 fraud 250:2 271:10 277:24 getting 234:2 321:6,22 322:4,10 332:10,10 357:16 278:11,23 282:16 282:15 293:17,18 327:9 353:11 359:13,18,21,22 285:7,14 290:19 293:25 294:1,1,3 381:11,16 363:24 364:13 301:2 302:10 338:12 355:1,6 foundation 325:21 365:9 368:4,8,24 303:12 313:21 girl 260:22 four 259:13 369:23 370:6,20 314:2 316:11 give 219:21 222:1 267:18,21 278:13 371:1,4,18,23 317:24 319:20 223:3,6 227:18 299:12,13,17 373:9 377:17 320:23 324:8 253:11 254:23 310:12 314:9 378:15 381:11,15 325:4,12,21 327:3 261:23 263:3 323:1 328:3,17 381:24 383:23 328:2,16 330:2,5,8 265:7 268:3,22,24 333:19 334:7 freaks 219:4 335:11 336:8 270:7 271:20 353:9 365:17 free 238:12 279:14 337:23 341:23 272:9,10 281:23 367:1 freedom 367:18 342:14 343:6,21 291:22 293:22 fractional 217:11 freezing 230:1 345:17 347:2 294:8 295:23 217:17,24 218:5 fridays 263:1 348:9,22 353:9,25 309:12 337:23 226:15,24 227:13 friend 339:17 354:8 356:6 338:2 358:6,16 227:17,21 233:4 front 299:21 368:18 376:15 361:6 365:22 233:10,10,13,14 301:22 302:16 382:19 372:1 373:7,19,20 233:23 234:1,2 303:5,10,24 370:6 goes 266:7,11 373:21,21 246:19 247:10,16 full 225:8 268:19 269:6,18 given 265:6 247:18 280:14,16 fully 334:13 270:19,22 284:15 271:25 358:20 281:22,23,25 fund 355:21 286:23 350:24 385:9 282:2,3,7,10 286:8 funds 222:23 going 216:17 gives 219:24 286:8 291:1,3,6,11 373:2 383:8,9 218:20 219:15 278:21 285:22 291:14,16,23 220:17,19,20 343:10 344:16 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 190 of 212

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224:16 226:5 378:24 383:18 halfway 311:8 hard 227:6 232:18 229:15,16 230:5 384:5 hand 262:5,8 288:12 232:24 233:13 good 216:6,8,9,13 306:3 314:5 327:5 harder 348:17 234:8 237:4 239:1 230:12 255:4 352:23 hawaii 235:20 240:17,18,18 266:20 274:4,5 handed 224:10 241:3,5,7,25,25 242:9 244:13,19 290:8 303:24 261:14 301:8 245:14 248:5 250:18 342:4 367:1 333:16 hchaitman 212:8 251:20 253:10 gotten 281:25 handful 360:8 head 293:1 257:23 261:7,19 282:2 292:10,10 handing 305:19 heard 252:6 261:20 262:7,21 294:5 handle 217:13 hedge 221:16 264:6 266:23 government 309:9 222:20 233:17 355:21 373:2 268:3 270:22 347:25 382:8,13 244:9 254:2 383:9 272:8 278:7 279:2 382:15,21,24 291:25 298:15 hedged 324:1 281:19,21,23 government's 308:11 held 215:5,12 283:10 285:11,13 382:18 handled 227:21 227:5 248:25 285:13 290:10,23 gradual 258:17 228:24 233:9,17 helen 212:3 291:3,7 292:12 grasping 284:18 233:18 234:1 215:18 216:10,21 296:11,16,22 288:12 242:10 243:4 358:7 305:25 308:8 great 379:16 247:16,21 252:25 helen's 218:17 310:9 311:8,17 grew 363:8 259:3,13,16,22 help 338:14 316:14 338:2 grounded 311:22 290:25 323:6 359:24 377:11 341:21,24 347:5 group 245:3 380:3 helpful 217:9 348:25 354:7,22 250:21 handles 244:6 helping 257:25 356:10 362:3,4 guarantee 287:22 handling 252:13 hendel 244:18 368:14,15,18,18 288:1 257:3,4 260:22 337:20 368:19,25 378:2 guaranteed handwriting henriques 360:6 381:1 384:11 361:24 262:12,18 263:17 362:8 goldman 212:20 guess 219:4 263:23 342:8 hey 342:4 215:20,20 232:4 233:22 251:10 343:14,19 344:1 high 273:7 275:2,4 247:24 248:21 255:15 293:22 346:6,11 higher 226:5 290:4 296:11,17 315:8 333:12 hang 339:10,11 highway 211:20 296:20 299:24 370:10 374:10 happen 240:5 215:7 300:2 301:4,16 guilford 385:3 271:18 hindsight 273:16 305:14,24 311:8 guilty 360:25 happened 250:2 history 254:24 321:17,20,24 362:1 260:22 269:25 258:5 279:23 329:10,12,15,18 guy 367:1 279:15 296:6 311:14 358:25 329:24 330:2,5,8 guys 377:11 297:15,18 360:6 359:7 330:12,14,18,23 h 360:11 365:5,7 hmm 309:20 365:1 331:1 340:22 happening 317:2 hold 299:24 half 369:12,15,25 342:1 345:18 happens 281:5 325:15,15 376:9 382:1 357:2,5,8 367:24 287:13,22 376:10

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holding 242:3 314:13,16 315:5 idea 232:14 317:6 information holds 322:22 315:12,12 316:8 345:4,5 352:15 278:21 373:1,14 homes 369:3 316:25 317:9,19 identification 382:23 honor 290:2 317:23 318:1,12 230:10 235:1 informational 382:12 318:17,19,24 261:10 299:15 306:14 hopefully 378:24 319:11,14,17,22 305:17 310:7 initial 344:21 hostetler 212:13 320:22 321:5,14 333:10 341:6 345:3 353:14 215:23,24 322:11,20,23 348:6 initially 361:8 hour 367:25 324:11,17,20 identified 263:22 initials 344:17 hours 384:6 325:7 326:2 382:11 346:15 house 248:16 327:13,16,18 identify 215:16 inquiries 260:14 251:2,3,4,8 254:20 332:16 333:4,17 235:15 261:17 insinuating 378:16 huge 373:13 333:21 334:8,15 ii 211:17 215:1 instances 263:4 huh 216:15 217:7 334:20,22 335:15 ike 368:20 381:20 institution 211:20 218:8 221:8 224:2 336:4,13 338:16 immediate 265:19 institutional 225:4,10,20 338:20 339:12,15 imperative 220:18 221:23 372:21 226:14,23 227:3 340:5,20 341:11 impression 365:23 institutions 372:20 227:25 230:15,25 341:16,22 342:7 incarcerated instructing 336:18 231:18 232:12 343:9,12,16,25 249:7 instructions 234:7 235:9,18 344:5,7 345:7 included 383:7 257:23 259:5 236:19 239:3 347:17 349:5,13 includes 302:18 263:13 264:5 240:21 241:10 349:16 350:8 income 268:7,8 285:22 242:1 245:17 351:2 352:25 inconsistency insure 371:8 246:22 247:11 353:15 354:4,10 330:19 intend 216:14 250:23 251:16 356:4,24 357:13 incorrect 336:5 intention 281:17 253:15,19 254:8 364:8 371:10 increase 221:9,11 interceded 368:22 254:17 255:5 374:20 375:11 increasing 218:24 interco 224:24 260:7 261:16,24 382:6 independent 340:4 226:13 231:5 262:6,11,25 263:2 hundred 223:11 index 213:15 232:10 263:5,7,9 268:5 318:22 369:5 214:1 interest 250:18 272:11 273:1,22 hundreds 276:4 indicate 247:12 306:25 307:20,24 279:12 282:19 297:22 indicated 290:16 308:1 313:17,18 289:21 292:24 hypothetical indicates 343:7 313:20,24 318:3 297:2 299:1 300:7 253:11 indicted 370:2 318:15 319:13 300:13 302:1,6,22 i individual 239:22 320:14 321:7 303:6,15 305:22 310:11 322:13,14 324:14 ia 253:17 306:7 307:5,21 individually 260:9 325:8 327:11 ibm 276:21 286:20 308:4 310:10,13 individuals 383:7 328:6 335:16,25 286:24,24 287:5 310:18 311:2,16 industry 303:21 336:3,19,22 337:2 287:21,24,24,24 311:21 312:10,12 372:5 373:16 337:6,11 338:25 288:3,3,4,8 318:4 312:18 313:23

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interested 385:11 isolated 324:7 july 230:20 322:5 254:1,12,13 interject 277:23 issue 319:15 346:23,25 255:17 256:8 internal 329:19 344:14 346:1 jump 322:4 257:4,20 258:9,13 interpret 363:23 359:9 360:10,12 june 231:14 258:14,15,16 interpreted 360:14,17 361:17 235:16 246:18,19 259:1,1,3,15 278:24 363:21 362:19,20 376:14 k 260:18 262:16 378:14 377:8 263:17,18,22 k 211:18 385:21 interrupt 263:17 issued 314:14 264:4,9,14,15,22 keep 281:4,4 300:3 300:6 353:21 264:23,25 266:5 300:4 321:15 intervals 223:12 issues 359:9 360:8 266:10,20,21,23 354:7 362:3 interview 356:22 360:16 374:12 266:25 267:5 369:12 inventory 253:18 item 335:22 268:2,15 269:6,7 keeping 353:18 264:9 266:11,13 items 225:11 269:17,25 270:10 ken 213:3 215:2 267:4,10 268:6,17 270:13,16,19 j kept 313:4 268:18 269:9,10 271:1,5,7,9,11 j 212:11 343:24 killed 260:23 269:15,19,21 272:21,24 273:4 345:2 346:1,2 kind 238:1 326:4 270:23,25 271:19 273:14,15,21 jail 381:22 346:19 272:16 278:14 275:1 276:3 january 316:12 knew 294:13 279:5,6,6 280:9,22 277:23 278:12,12 327:11 347:12 knocking 305:11 281:1,2,3,5,10,15 278:13 279:21 joanne 259:24,25 know 217:12,14 281:15 287:2 280:6 281:12,14 job 260:25 265:5 217:14,19 218:25 373:19 375:19 281:16,18,18,20 265:17 219:12,19,23 invest 254:7 282:13,14 283:1,4 jobs 252:1 254:25 220:1,1,2,2,10 investment 211:8 283:25 284:15,16 258:9 221:15 222:2,7 215:11 252:10 284:19,20 285:4,4 jodi 259:18,19 223:23 226:4 254:21 264:8 285:5,7,10,11,16 344:13 345:2,25 227:19 228:18,19 267:15 278:19 285:23,24,25 345:25 347:11 228:20,21,22 283:5 360:24 286:12,18,21,25 joel 252:2 254:15 229:5,8,8,11 375:1,18,22 376:1 287:1,10,20 288:1 265:15 231:22 233:11,12 383:1 288:9,10,10 joint 323:7 233:16,19,25 investor 211:4 290:25 291:24 joke 362:5 378:9 234:3,4 235:7,12 215:10 292:6 293:13 journal 235:25 237:6,20,23 238:5 involve 217:23 294:10,11,19 236:1 351:18,18 239:8,14 240:8 involved 216:18 297:22,23 298:5,6 351:25 352:1 242:9,13,20,23,25 239:13 240:3 299:2,3,4,8 304:11 374:10 379:18 242:25 243:3,13 252:23 259:16 304:14 305:7 380:21 243:15,15,20 267:9 271:12 306:8 307:25,25 journaled 380:13 244:16,17 247:15 345:12 368:13 308:23,25 310:5 judge 216:11 247:16,20 248:22 irwin 244:16 311:24 315:1 296:22 364:24 249:6,11,19,23 260:20 261:3 317:6 323:5 365:2,22 366:2 250:1,12,19 337:22 324:23,24 325:2,2 370:6,25,25 251:20 253:7 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 193 of 212

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326:9,12,13,16 kugel's 254:11 letter 358:10 287:5 317:3,4 327:1 330:7,19 262:1,2,13 263:20 lie 365:6 319:24 326:25 334:24 336:6,15 l lied 364:21,25 353:1 379:23 336:17 337:3,6,8 365:2 366:2,14,17 longer 234:17 l 211:8,12,16 337:14 339:4 lies 367:16 281:10 370:19,24 213:8 215:2,11 340:12 342:20,22 lieu 217:11 look 224:15 216:1 383:1 342:23 343:5 life 366:14 225:16 230:12,17 language 300:14 345:22 346:12 limiting 277:4 230:19 232:7,7 300:20,25 303:8 350:14,16 351:10 limits 254:6 235:10 241:8,14 303:18,19,20,22 352:2 355:4,8,9,10 line 247:2,7 244:22 246:12 304:13,13,16,18 355:11,12,13 lipkin 244:17 262:10,23 263:14 304:21,25 305:1,7 357:21 358:20 260:20 261:3 264:19,22,24 large 317:7 355:11 359:8,8 360:13,17 337:22 265:8 270:7,9 larger 236:17 360:23,25 361:1 liquidity 360:19 272:7 273:6 277:9 239:10,10 240:5 361:10,22,25 list 256:7 277:8 277:16 278:11,23 363:8 362:1,3,4,11,15,19 listed 276:7,20,23 280:18,19 284:25 largest 275:25 363:15,21,21,25 277:3,4,6,9,11,21 286:25 288:13 276:2 374:3,13 364:2,3,4 366:8 328:14 298:17 300:5 lastly 259:24 368:5,15,19,22 listen 266:17 302:10 303:7 late 257:14 370:12 369:16,17,17 286:3 377:11 305:21 307:6,19 law 361:16 362:24 370:4,12 372:21 listening 378:2 311:17,22 313:16 lay 325:21 372:23,24 373:6,9 litt 249:1 378:3 315:1 318:18 learn 256:5,22 373:13,16 374:4,6 382:10,20 319:10 321:20 learned 258:13 374:8 375:14,15 little 216:24 217:3 323:3 324:2,2,3,4 leave 368:12,18 376:20,22,23 267:13 322:12 324:6,22,23,25 369:24 377:1,3,7,13,23 live 369:16 325:23 326:12,15 leaving 260:23 378:8,18,18 380:3 living 366:15,17 326:16 327:17 368:15 380:11,12,15,19 367:16 328:22 330:21 ledger 264:17 380:21,22,25 llc 211:8 215:11 331:18 333:2,24 ledgers 263:14 381:2 383:17 260:9 334:3 339:3,6 264:8,8 267:4 384:7,8,9 llp 212:4 341:12,20 347:3 left 262:5,8 306:3 knowing 291:6 located 215:6 349:24 352:21 314:5 327:5 knowledge 372:12 267:3 339:25 358:7 376:8,12 344:17,18 352:23 known 276:2 340:1 looked 233:3 leg 220:7,21,21 kugel 252:6 264:1 location 248:17 266:19 279:1 legal 215:3 264:2,11 265:15 london 249:10 298:20 299:5 legging 220:15,22 278:1,5,10 280:24 long 218:1 224:20 315:4 336:2 377:1 226:3 237:20 281:7 367:8 228:8 231:5 looking 230:16 lending 326:20 374:22,23 375:5 236:22 241:2,5 235:10 247:2,6 leonard 235:16 375:22 376:3 242:1 246:7 265:3 250:16 264:8,14 244:21 265:25 270:17 268:3 270:19

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represented 369:2 230:11,22,23 305:24 306:2,5 256:11 279:14 369:3 231:3,16,18 233:6 307:3,4,10 308:13 367:18 representing 234:14 235:13 308:14 311:1,15 riskless 237:18 215:3 241:15 236:21 238:10,11 311:19 312:11,12 rockefeller 212:14 request 358:10 238:21,25 240:14 312:14 313:7,9 role 257:16,19 required 251:25 240:24 241:4,21 314:1,10,20 258:23 259:10,14 260:8 304:12,19 243:16 244:19 315:13,18 316:1,7 roles 255:9 371:8 245:16,21 246:22 316:11 317:12,15 rolodex 213:19 requirement 246:25 247:22 317:16,20,22 261:18,22,25 305:8 248:12 249:17,24 318:8,14,24 319:6 264:3 requirements 250:4,13 251:3,19 320:1,12 321:2,4,9 rolodexes 263:21 305:6 326:22 252:1 253:14,18 321:10,23 322:16 room 368:21 respect 314:23 254:20,22 255:2 323:23 325:4,6,14 377:2 378:1 respond 247:20 256:1 258:14 325:18 326:11,23 routine 377:14 367:21 260:17 261:5,23 327:3,10,21 328:3 rpr 385:21 responding 247:14 262:2,8 266:11 328:16 329:8,9,17 rule 222:19 223:23 responsibility 267:7 268:21,23 329:18 332:12,15 296:23 282:5 269:1,12,20 333:12,15 334:5 rules 303:20 responsible 270:11,14,21 335:6,11,11,12,18 run 362:4 243:11 244:2,4,5 271:22 272:5,12 336:1,1,5,8,10 running 353:19 260:9 272:14,15,22 337:23 338:20,24 ruth 369:5,9 rest 299:23 273:20 274:16,21 339:23 340:15,19 rye 212:22 restate 331:15 274:25 275:11 341:3,19 343:13 s result 385:11 276:22 277:22,24 343:18 345:10 safe 313:6 retail 361:3 278:3,5,14,20 346:16,18 348:8 sake 218:23 362:17 372:12 279:8,14,16,17,23 348:13,14 349:14 sala 259:24,25 returns 238:1 280:13,21,23 349:18,20 351:6 sale 225:22 236:12 revenue 335:24 281:1,10,18 282:9 352:7 353:2,7,9,17 293:9 328:6 reverse 218:17 282:12,22 283:8 353:22 354:5,6,8 sales 222:13 333:23 283:18 284:12,23 354:12 357:18 225:16 239:1 review 217:4 284:24 285:10,20 359:2 364:11 salesman 270:19 358:8 286:20 287:7,12 366:4,6,19 367:13 salesmen 355:2,14 reviewed 260:19 288:5,22 289:19 367:14,15,22 355:20 336:12 290:3,6,19,24 368:4 369:11 salvaged 328:20 revised 344:13 291:5 292:22,25 370:4 371:16 sam 347:13,21,24 right 216:22 217:8 293:8,9,12,24 375:10 379:15 348:1 219:22 221:18 294:4 296:3,8,14 380:16 383:12 save 371:21 373:4 222:11,21 224:14 296:21,25 297:3 rights 374:7 saved 371:17 224:25 225:7,13 297:17 299:10,20 risk 221:9,11 saves 371:3 225:23 226:10,11 301:4,7 302:20 226:6 237:10 saw 300:24 330:19 226:16,21 227:10 303:2,5,9,16 238:12,19 256:11 361:20 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 202 of 212

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set 261:18,22 293:18 294:1 338:17 339:10,13 shortly 248:2 265:3,21 266:15 298:3 304:2 308:9 340:15,18,21,25 shorts 239:1 266:17,23 278:8 308:10 315:10 341:2,7 342:2,4,22 show 216:16,25 278:25 280:20 374:17 379:19,24 342:25 345:1,20 297:18 299:12 281:16 284:9 379:25 380:4 348:2,7,20 351:19 301:1 310:9 290:22 294:24 sheehan 212:11 352:16,19 354:12 320:13 332:21 324:6 380:24 213:9,11 215:22 356:9,16 357:4,6,9 379:23 382:23 215:22 216:5 357:11 358:1,4 showed 233:4 setting 263:13 218:16 221:6,13 359:2,17 367:22 300:9,11 settle 368:25 222:18 224:4,9 371:25 374:15,22 showing 228:2,8 settlement 368:11 229:10,15,21 379:5,7,11,16,21 231:1,4,5 241:6 382:1 230:4,7,11 232:5,6 381:6,8 383:19 246:19 247:18 seven 333:7,8 234:8,12,14,18,22 384:3,7 280:15 297:19 380:2 234:24 235:2,7 sheets 264:23 317:3 353:10,11 seventy 319:7 237:12,15 238:7 shirt 230:2 376:11 321:6,22 247:1,4,6,9,22,25 short 218:1 220:24 shown 233:5 341:7 share 217:17,24 248:20 249:5 220:25 221:1,1,7 shows 232:9 218:5 227:17 261:4,13 262:1,3 221:16 225:22 240:22 270:17 233:13,14,23 263:18,21 264:11 228:9 231:6,11 349:3 354:12 234:2 267:18 275:4,11,17 236:9,15 237:1,9 side 217:13 221:16 280:14,16 281:22 279:22 290:3,6,15 237:15 238:10 233:15 246:6 281:23,25 282:2,3 296:15,19,21,25 241:6,25 246:7 252:10 257:13 282:7,10 286:8,9 297:3,8,12 299:16 265:3,20,25 258:18,20 262:5,8 291:3,6,11,15,16 299:20,25 300:3,8 266:25 284:21 267:16 325:5 292:3,10,13,17 301:1,5,7,15,20 285:11,13,14 352:23 380:14 293:3,14,15,19,23 305:10,15,18 286:6 287:15 sided 232:2 262:4 294:14,20 302:19 306:2,17 307:9 288:14,19,19,23 289:24 308:12 347:13,22 308:3,5,8 310:8,19 289:12,13 293:9 signature 385:20 360:21 361:7,13 310:22,24 311:12 293:11 309:8 signed 260:18 376:7 380:23 312:22 313:5,9 312:11 318:7 significance shares 217:11 314:8,11 316:17 319:8 320:2,5,6 292:14 346:25 221:24,25 223:6,9 316:19,23 319:18 328:5,19 332:25 signing 249:20 223:11 224:24 319:20 321:19,23 335:6 353:1 384:12 226:15,24 227:13 322:2,4,8 323:17 376:20,23 377:13 similar 347:5 227:21 233:4,10 324:12 325:18 377:25 simple 295:22 234:1 236:12,17 327:8 329:9,11,14 shorted 285:25 simultaneous 240:10 246:19 329:17,22,25 286:1,13 287:3,10 220:13 237:24 247:10,16,18 330:4,6,10,13,16 376:21 simultaneously 253:13,16 270:18 330:20,24 331:2,5 shorting 285:18 238:16,17 276:17 287:24 333:8,11,14,15,18 377:4 single 354:21 288:4 291:1,23 338:2,5,7,9,10,13

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sipc 371:3,7,17 somebody 265:7 259:20 267:20 381:15,24 sir 225:4 337:10 345:13 272:24 273:12 starting 258:24 sitting 272:8 377:1 379:9 274:11,22 275:18 301:11 306:2 377:21 378:1 sonny 344:4,9,18 276:10 279:10,10 324:12 332:11 six 233:7,23 235:5 345:2,11 346:5,10 332:13 340:12 359:13 235:8 280:16 347:14 350:4,18 370:14 starts 262:20 292:25 293:14 sons 223:7 spoke 250:21 302:11 329:15 297:19 320:3 sonya 355:19 259:4 298:14,24 stated 302:16 354:13 sophisticated 362:10 303:21 370:6 sixteen 355:10 238:4 spread 240:6 376:16 385:5 sixth 314:9 sorkin 368:20 361:9 statement 213:20 size 240:1,1,2 381:21 stage 242:11 213:21 224:12 skill 238:3 sorry 227:16 257:20 266:12 232:8 233:2 skip 234:8 314:3 234:24 247:1 stamboulidis 235:16 241:22 349:2 293:8 300:10 379:11 243:16 244:21 skipping 234:10 301:3 305:23 stamp 345:21 246:17,21,23 slash 343:1 332:4 341:4 stand 221:20 249:21,25 250:9 slicing 223:1 224:3 354:14 358:5 239:11 314:21 279:18 296:12 slightly 251:13 sort 254:23 258:4 standing 250:14 299:4 300:12,20 slip 346:4 347:15 258:25 292:13 stands 290:2 300:24 301:14,17 slowly 308:14 321:17 339:22 372:21 301:19 315:23 small 305:14 362:4 368:16 start 220:21 251:2 317:21 320:13,17 smaller 373:2 378:16 255:8 258:4 263:4 320:18 321:21 smb 211:7 215:14 sounds 251:5,19 263:6 321:3 322:9 327:17 353:4 social 329:22 southern 211:1 363:2 364:3 356:18 357:21,25 sold 221:7 222:8 215:13 383:24 359:15 372:24 227:13,14 231:11 space 340:3 started 250:3 378:19 379:18,23 238:15 254:1 speak 241:16 252:15 255:8,10 380:5 264:24 269:7 speaking 382:8 255:12,18,20,20 statements 213:17 271:2 274:6 275:1 speaks 262:22 258:6 332:10 213:18,22 214:5 275:2,3 278:16 343:6 344:12 357:19,23 359:4,5 216:25 235:5 281:7,8 282:8 345:24 381:18 359:6,8,16,18,20 295:2,14,16 284:12 292:25 383:11 359:21,23 360:6 297:17 298:18,19 293:20,21 359:8 specialist 286:23 362:17,20 363:6 298:20 299:5,6 360:8 361:8 375:1 286:24 287:1,9,14 363:17,23 364:4,4 303:7 305:12 376:24 377:8,13 350:24 364:13 365:9,10 310:9 312:24 378:4 speed 241:19 365:13,15,19 325:17 348:3,16 solicit 383:5 358:12 366:8,9 368:24 348:23 356:21 solicited 383:4 spelled 346:1 369:23 370:7,9,11 358:21 363:16 solutions 215:3 split 239:20,24 370:20 377:24 372:4,17 374:16 257:9,17 259:7,17 378:7,17 381:11

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states 211:1 361:1,2,7,13,23 succeedingly swapped 217:22 215:13 376:20,21,23,24 348:21 232:15,22 245:24 stating 356:25 377:4,5,8,13,16,25 successful 371:12 291:9 368:7 378:4 successfully swearing 366:1 staying 350:25 stocks 256:7 237:22 swing 341:3 stearns 270:10 264:10,25 273:13 sudden 378:9 sworn 216:2 340:7 350:13 275:17,21,24 suggest 315:23 sylvia 244:17 373:25 278:15 288:19 suggesting 306:19 260:22 337:19 steinberg 362:23 360:19,20,20 summarize 382:17 system 222:25 step 267:1 361:10 summary 382:24 223:2,7,8,13,14,16 stick 279:7 352:21 stop 383:10 supervised 257:22 223:25 224:1 sticker 301:24 strategies 217:22 supporting 360:17 243:1,9 257:25 sticking 334:1 257:5 supposed 216:12 273:10 372:18,19 stock 219:13,16,19 strategy 217:6,25 231:19 242:14 372:22 373:12,13 219:22 220:12 218:6 223:4,17 293:2 322:24 systems 233:21 223:6 225:17 237:1,20 238:2,5,6 323:19 366:19 242:23 243:24 226:5,6 228:18,19 240:15 257:7,10 supposedly 360:16 253:1 273:10 231:6,11 236:16 257:18 259:8 sure 218:14 233:9 373:8 236:17 237:5 264:25 271:15 242:9 243:5 t 238:10,15 241:7 272:13,24 279:11 248:17 251:13 t 309:14,16 310:2 241:25 246:7,14 284:4 252:23,24 260:5 310:4 385:1,1 254:1 258:16 street 348:25 261:6 272:1 take 218:10 263:15 265:4,12 374:10 273:25 278:4 224:15 230:12 265:20,22 266:1 strict 216:10 280:18 289:18 232:6,7,12 235:10 266:10,10,25 strictly 216:21 290:24 295:19 239:23 253:16 270:10,12,18,20 strike 239:20,24 296:10 300:17 261:4 262:7,9,9 270:24 271:2,3,4,5 257:10,17 259:8 305:15 310:5 270:16 271:19 271:9,10 272:20 259:17,20 267:21 312:20 315:21 272:9,15 277:15 272:25 273:4,7 272:24 273:12 321:19 329:14,25 284:14 290:4,5 276:8,9 277:1,7,9 274:11,22 275:18 331:19 332:23 299:23 303:7 277:10 279:3 276:10 279:11 338:13 340:13,14 305:20,21 307:6 280:19 281:1,4,5 332:14 340:12 351:8 355:15 311:17 313:14 283:10,12,19,22 370:15 357:7 370:12 318:18 326:5,17 285:8,18,19,24 stuff 290:8 379:6 328:21 333:2 286:6 287:2,14,15 subjecting 373:8 surprised 275:1 334:2 341:20,20 289:12,13 294:18 sublet 340:3 377:12 348:7,8 356:9 294:20 308:24 subordinated surveys 288:2 361:12 375:21 309:1,8,17,24 307:13 swap 218:2,3,3 378:24,25 314:24 315:15,25 substantial 336:3 232:24,25 245:25 taken 211:17 316:4 322:22 374:2 246:1 282:11 215:8 261:9 325:24 349:15 284:14 291:13 269:18 270:24 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 206 of 212

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tone 345:19 268:2 289:1 290:21,21 229:16,16 230:5,5 top 232:7 311:10 trades 228:7 290:23 291:4,10 230:6,8,9,12 321:3 328:21 237:18,21 259:17 291:13,13,17,21 234:25 249:9,10 330:15 343:11 264:6,12,15 265:9 291:22 292:5 249:16 329:20 351:20 265:11,12 266:19 293:5 294:19,24 379:10 topic 308:16 266:22 269:5 298:15 302:12,18 trustee's 261:9,14 339:13 270:2 275:8,19 305:8 310:21 299:14 305:16,20 total 321:12 276:11,12,13,24 313:14 349:21,24 310:6 333:9 322:14 334:25 277:17 295:18 354:22 374:24 340:23 341:5 349:10 353:16 296:6,6,7 297:4,6 375:5,23 376:3 348:5 376:11 360:24 297:10,12,13 380:12,24 378:21 379:2 totaling 354:23 332:14 365:20 transactions 242:4 trustees 215:8 totally 242:21 366:11 372:2 264:21 272:19 trusts 383:8 touhy 358:10 trading 219:10 276:4 278:11 truth 250:22 tracked 258:1 220:13 222:22 283:13 284:20 356:25 364:10,12 trade 218:25 237:8,19 238:3 288:15,17 289:14 366:20 367:19 220:1,4,5,6,8 252:17 253:5,9 297:18 300:23 trw 234:6 379:19 228:12,25 252:13 257:1 263:14 315:2 349:17 379:23 253:12 265:22 264:7,17,23 350:2 351:24 try 218:16 234:9 266:15,20,24 265:12,17 266:11 352:9 353:8,22 241:19,19 296:21 267:8 268:2,3,12 269:4 270:12,14 354:5 355:5 379:13 268:14,24 270:6,9 280:9 283:5 362:21 375:4 trying 272:2 283:3 279:15,18,19,23 286:25 287:1 transcript 217:4 288:11 307:6 280:3,4,17,20 306:25 365:16 345:19 385:9 358:4 366:23,25 282:18 294:13 373:24 375:19 transferred 368:10 297:20 302:17 trans 307:11,13 277:13 tuesday 262:24 307:23,25 342:5 transacted 277:11 transpired 327:19 265:23 283:16 traded 276:17 277:12 treat 339:5 turn 244:19 258:3 361:10 transaction treated 287:11 265:21 266:3 trader 246:8 252:3 220:13 226:3 trial 368:19 267:1 285:9 289:4 253:12 254:9 237:25 238:12 382:19,21 302:4 308:14,16 255:21,23 256:6 239:8,13 240:4 tried 265:8 310:24 334:2,4 256:11,13,25 245:2 246:6,9 true 288:18 297:3 369:6,9 375:20 265:14 268:7 254:3 263:13 297:16,20 312:24 turned 271:5 269:2,16 271:12 266:4 269:8 270:1 331:21,23 332:1 377:10 271:24 375:5 271:9 277:2,20 335:21 362:14 turning 248:11 trader's 268:16,17 278:8,20,25 366:15 367:4,5,7 257:17 262:3 269:18,21 281:14 284:21 384:8,8,9 385:8 281:11 312:15 traders 253:3 285:11 286:3,5,10 trustee 212:10 378:20 379:1 254:6 256:18,20 286:10,11,13,18 213:16 214:2 turns 223:18 256:21 265:17 287:8,23 288:24 215:23,25 229:13 286:21

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Federal Rules of Civil Procedure

Rule 30

(e) Review By the Witness; Changes.

(1) Review; Statement of Changes. On request by the

deponent or a party before the deposition is

completed, the deponent must be allowed 30 days

after being notified by the officer that the

transcript or recording is available in which:

(A) to review the transcript or recording; and

(B) if there are changes in form or substance, to

sign a statement listing the changes and the

reasons for making them.

(2) Changes Indicated in the Officer's Certificate.

The officer must note in the certificate prescribed

by Rule 30(f)(1) whether a review was requested

and, if so, must attach any changes the deponent

makes during the 30-day period.

DISCLAIMER: THE FOREGOING FEDERAL PROCEDURE RULES

ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY.

THE ABOVE RULES ARE CURRENT AS OF SEPTEMBER 1,

2016. PLEASE REFER TO THE APPLICABLE FEDERAL RULES

OF CIVIL PROCEDURE FOR UP-TO-DATE INFORMATION. 08-01789-smb Doc 18151-2 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit B Pg 212 of 212 VERITEXT LEGAL SOLUTIONS COMPANY CERTIFICATE AND DISCLOSURE STATEMENT

Veritext Legal Solutions represents that the foregoing transcript is a true, correct and complete transcript of the colloquies, questions and answers as submitted by the court reporter. Veritext Legal Solutions further represents that the attached exhibits, if any, are true, correct and complete documents as submitted by the court reporter and/or attorneys in relation to this deposition and that the documents were processed in accordance with our litigation support and production standards.

Veritext Legal Solutions is committed to maintaining the confidentiality of client and witness information, in accordance with the regulations promulgated under the Health Insurance Portability and Accountability Act (HIPAA), as amended with respect to protected health information and the Gramm-Leach-Bliley Act, as amended, with respect to Personally Identifiable Information (PII). Physical transcripts and exhibits are managed under strict facility and personnel access controls. Electronic files of documents are stored in encrypted form and are transmitted in an encrypted fashion to authenticated parties who are permitted to access the material. Our data is hosted in a Tier 4 SSAE 16 certified facility.

Veritext Legal Solutions complies with all federal and State regulations with respect to the provision of court reporting services, and maintains its neutrality and independence regardless of relationship or the financial outcome of any litigation. Veritext requires adherence to the foregoing professional and ethical standards from all of its subcontractors in their independent contractor agreements.

Inquiries about Veritext Legal Solutions' confidentiality and security policies and practices should be directed to Veritext's Client Services Associates indicated on the cover of this document or at www.veritext.com. 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 1 of 132

Exhibit C 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 2 of 132

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1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK 2 3 In re: ) 4 ) SECURITIES INVESTOR ) 5 PROTECTION CORPORATION, ) ) 6 Plaintiff-Applicant, ) ) 7 vs. ) 08-01789 (SMB) ) 8 BERNARD L. MADOFF ) INVESTMENT SECURITIES, LLC, ) 9 ) Defendant. ) 10 ) ) 11 In re: ) ) 12 BERNARD L. MADOFF, ) ) 13 Debtor. ) ) 14 15 CONFIDENTIAL 16 Videotaped Deposition of BERNARD L. 17 MADOFF, VOLUME III, taken on behalf of the 18 Customers, before K. Denise Neal, Registered 19 Professional Reporter and Notary Public, at the 20 Federal Correctional Institution, 3000 Old Highway 21 75, Butner, North Carolina, on the 8th day of 22 November, 2017, commencing at 9:00 a.m. 23 24 25 * * * * *

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1 APPEARANCES OF COUNSEL: 2 3 On Behalf of the Customers: 4 HELEN DAVIS CHAITMAN, Esq. 5 Chaitman, LLP 6 465 Park Avenue 7 New York, New York 10022 8 (908) 303-4568 9 [email protected] 10 11 On Behalf of Sage Associates, Sage Realty, 12 Malcolm Sage, Martin Sage and Ann Passer Sage 13 ANDREW B. KRATENSTEIN, Esq. 14 McDermott Will & Emery, LLP 15 340 Madison Avenue 16 New York, New York 10173-1922 17 (212) 547-5695 18 [email protected] 19 20 21 22 23 24 25

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1 APPEARANCES OF COUNSEL: 2 3 On Behalf of the Trustee: 4 AMANDA E. FEIN, Esq. 5 STACY DASARO, Esq. 6 Baker Hostetler 7 45 Rockefeller Plaza 8 New York, New York 10111-0100 9 (212) 589-4621 10 [email protected] 11 12 On Behalf of the Deponent: 13 PETER A. GOLDMAN, Esq. 14 12 Fairlawn Parkway 15 Rye Brook, New York 10573 16 (914) 935-6857 17 [email protected] 18 19 Videographer: 20 Bob Collier, CLVS 21 22 * * * * * 23 24 25

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1 CONTENTS 2 THE WITNESS: BERNARD L. MADOFF EXAMINATION 3 BY MR. KRATENSTEIN 395 4 5 * * * * * 6 7 INDEX OF EXHIBITS 8 FOR THE CUSTOMERS: PAGE 9 Exhibit Number 32, Client activity 403 10 document 11 Exhibit Number 33, House 17 cash and 405 12 securities for settlement - 12-13-79 13 Exhibit Number 34, Maurice Sage Trust 412 14 account statement - 3-31-80 15 Exhibit Number 35, House 5 cash and 408 16 securities for settlement - 5-16-96 17 Exhibit Number 36, Maurice Sage Trust 414 18 account statement - 6-30-81 19 Exhibit Number 37, Maurice Sage Trust 416 20 account statement - 12-31-81 21 Exhibit Number 38, Month-end statement 417 22 - 1-31-83 23 Exhibit Number 39, Ledger - 1-31-83 419 24 Exhibit Number 40, Maurice Sage Trust 420 25 statement - 6-30-86

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1 INDEX OF EXHIBITS (Continued) 2 FOR THE CUSTOMERS: PAGE 3 Exhibit Number 41, Sage Realty statement 422 4 - 5-31-94 5 Exhibit Number 42, Sage Realty statement 423 6 - 12-31-96 7 Exhibit Number 43, Sage Realty statement 424 8 - 1-31-97 9 Exhibit Number 44, Sage Realty statement 428 10 - 7-31-94 11 Exhibit Number 45, House 17 stock 429 12 record summary 13 Exhibit Number 46, National Westminster 433 14 Bank activity report - 5-31-85 15 Exhibit Number 47, Letter from Maurice 436 16 Sage 17 Exhibit Number 48, Sage Associates 440 18 statement - 11-30-01 19 Exhibit Number 49, Sage Associates 441 20 statement - 11-30-01 21 Exhibit Number 50, Sage Associates 442 22 statement 23 Exhibit Number 51, Confirmation of 442 24 transaction 25

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1 INDEX OF EXHIBITS (Continued) 2 FOR THE CUSTOMERS: PAGE 3 Exhibit Number 52, Confirmation of 442 4 transaction 5 Exhibit Number 53, Memorandum of 442 6 transaction and confirmation 7 Exhibit Number 53A, Credit memorandum 487 8 Exhibit Number 54, Memorandum of 444 9 transaction and confirmation 10 Exhibit Number 55, Memorandum of 447 11 transaction and confirmation 12 Exhibit Number 56, Memorandum of 448 13 transaction and confirmation 14 Exhibit Number 57, Sage Associates II 449 15 statement 16 Exhibit Number 58, Sage Associates II 450 17 statement 18 Exhibit Number 59, Sage Associates II 451 19 memorandum of transaction and confirms 20 Exhibit Number 60, Sage Associates II 451 21 memorandum of transaction and confirms 22 Exhibit Number 61, Letter 452 23 Exhibit Number 62, Sage Associates 456 24 statement 25

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1 INDEX OF EXHIBITS (Continued) 2 FOR THE CUSTOMERS: PAGE 3 Exhibit Number 63, Sage Associates 458 4 statement 5 Exhibit Number 64, Exhibit inadvertently --- 6 skipped 7 Exhibit Number 65, Maurice S. Sage 458 8 Foundation statement 9 Exhibit Number 66, Memorandum of 459 10 transaction and confirmation 11 Exhibit Number 67, Memorandum of 459 12 transaction and confirmation 13 Exhibit Number 68, Memorandum of 459 14 transaction and confirmation 15 Exhibit Number 69, Letter from Malcolm 459 16 Sage 17 Exhibit Number 70, Sage Associates 462 18 statement - 1-31-03 19 Exhibit Number 71, Confirmations 463 20 Exhibit Number 72, Confirmations 463 21 Exhibit Number 73, Letter from Malcolm 464 22 Sage 23 Exhibit Number 74, Sage Associates 467 24 statement - 12-31-03 25

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1 INDEX OF EXHIBITS (Continued) 2 FOR THE CUSTOMERS: PAGE 3 Exhibit Number 75, Sage Associates 468 4 statement - 12-31-03 5 Exhibit Number 76, Confirmations 469 6 Exhibit Number 77, Confirmations 469 7 Exhibit Number 78, Confirmations 469 8 Exhibit Number 79, Confirmations 469 9 Exhibit Number 80, Sage Associates II 469 10 Statement - 12-31-03 11 Exhibit Number 81, Sage Associates II 469 12 Statement - 12-31-03 13 Exhibit Number 82, Confirmation 470 14 Exhibit Number 83, Memorandum of check 471 15 Exhibit Number 84, Handwritten note 471 16 Exhibit Number 85, Letter from Malcolm 474 17 Sage 18 Exhibit Number 86, Sage Associates 475 19 Statement - 4-30-06 20 Exhibit Number 87, Confirmations 475 21 Exhibit Number 88, Letter from Malcolm 476 22 Sage 23 24 25

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1 THE VIDEOGRAPHER: We are now on the 2 record. Please note that the microphones are 3 sensitive and may pick up whispering and private 4 conversations. Please turn off all cell phones or 5 place them away from the microphones as they can 6 interfere with the deposition audio. Recording will 7 continue until all parties agree to go off the 8 record. My name is Bob Collier representing 9 Veritext Legal Solutions. 10 Today's date is November 8th, 2017 and the 11 time is approximately 9:00 a.m. This video 12 deposition is being held at Butner Federal 13 Correction Facility located at 3000 Old 75 Highway, 14 Butner, North Carolina and is being taken by counsel 15 for the Plaintiff-Applicant. The caption of this 16 case is Securities Investor Protection Corporation, 17 Plaintiff-Applicant v. Bernard L. Madoff Investment 18 Securities, LLC, Defendant. 19 This case is being held in the United 20 States Bankruptcy Court, Southern District of New 21 York, Case Number 08-01789 (SMB). The name of the 22 witness is Bernard L. Madoff. At this time the 23 attorneys present in the room and everyone attending 24 remotely will identify themselves and the parties 25 they represent. Our court reporter is Denise Neal

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1 representing Veritext Legal Solutions. 2 MR. KRATENSTEIN: Good morning. Andrew 3 Kratenstein from McDermott Will & Emery, LLP 4 representing Malcolm Sage individually as well as 5 the representative of his mother Lillian's estate, 6 Martin Sage, Ann Passer Sage, Sage Associates and 7 Sage Realty. 8 MS. CHAITMAN: Helen Davis Chaitman on 9 behalf of a number of different Defendants. 10 MR. GOLDMAN: Peter Goldman on behalf of 11 Bernard L. Madoff. 12 MS. DASARO: Stacy Dasaro on behalf of the 13 Trustee. 14 MS. FEIN: Amanda Fein, Baker Hostetler, 15 on behalf of the Trustee. 16 THE VIDEOGRAPHER: Will the court 17 reporter, Denise Neal, please swear in the witness 18 and we can proceed. 19 BERNARD L. MADOFF, 20 having been first duly sworn, was examined and 21 testified as follows: 22 EXAMINATION 23 BY MR. KRATENSTEIN: 24 Q. Good morning, Mr. Madoff. 25 A. Morning.

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1 Q. Are you on any medication or is there any 2 other reason that you cannot give truthful testimony 3 today? 4 A. I'm on medication, but it won't interfere 5 with my testimony. 6 Q. You believe you can give full and complete 7 truthful testimony? 8 A. I do. 9 Q. Thank you. As I mentioned at the outset, I 10 represent the Sages, Martin Sage, Malcolm Sage, Ann 11 Passer Sage, as well as two entities with which 12 they're affiliated, Sage Associates and Sage Realty. 13 Do you recall the Sage family? 14 A. Yes. 15 Q. The Sage family were customers of yours? 16 A. Yes. 17 Q. How did they come to be your customers? 18 A. You know, through my father-in-law. 19 Q. Do you recall somebody named Maurice Sage? 20 A. Excuse me? 21 Q. Maurice Sage, do you remember him? 22 A. Yes, uh-huh. 23 Q. Who was he? 24 A. He was the father of the three children. 25 Q. Martin, Malcolm and Ann?

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1 A. Right. 2 Q. And was Mr. Maurice Sage a customer of 3 yours? 4 A. Yes. 5 Q. How did he come to be your customer? 6 A. The same way, through my father-in-law. 7 Q. Could you describe how that happened? 8 A. I had a lot of my father-in-law's clients. 9 He was their accountant. 10 Q. And just for the record, your 11 father-in-law's name was? 12 A. Paul Alpern. 13 Q. When did as best you can recall Maurice 14 Sage become a customer of yours? 15 A. Probably in the '60s. 16 Q. And do you recall Maurice Sage passing 17 away? 18 A. Yes. 19 Q. What do you recall of that? 20 A. I think he had a heart attack while giving 21 a speech at a charitable dinner. 22 Q. Do you recall when that was approximately? 23 A. No. 24 Q. And would 1976 sound about right? 25 A. Yes.

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1 Q. And is it correct that after he died his 2 wife, Lillian, and his children, Malcolm, Martin and 3 Ann, were customers of yours through various 4 accounts that they held with your firm? 5 A. Yes. 6 Q. Do you recall that one of those accounts 7 was called Sage Associates? 8 A. Correct. 9 Q. Another account was called Sage Realty? 10 A. Correct. 11 Q. Do you recall that they had various other 12 accounts such as Maurice Sage Trust, Sage Associates 13 II, MMRN and the Maurice Sage Foundation? 14 A. Yes. 15 Q. You've previously testified that your fraud 16 started in 1992; correct? 17 A. Correct. 18 Q. The Sages became your customers well before 19 your fraud started; correct? 20 A. Correct. 21 Q. Any trading you would have done in their 22 accounts before at least 1992 would have been real 23 trades that were actually executed? 24 A. Correct. 25 MS. FEIN: Objection to form.

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1 Q. (By Mr. Kratenstein) You've also testified 2 previously that all of your convertible bond 3 arbitrage trading was real; is that correct? 4 A. Correct. 5 Q. So any convertible bond arbitrage trading 6 you did in any of the Sages' accounts at any time 7 including the Sage Realty account would have been 8 real trades that were actually executed by your 9 firm? 10 A. Correct. 11 MS. FEIN: Objection to form. 12 Q. (By Mr. Kratenstein) Is it correct that 13 your fraud was limited to what is known as the split 14 strike trading? 15 A. Correct. 16 Q. Do you recall having meetings with the 17 Sages at your offices? 18 A. Yes. 19 Q. What do you recall of your meetings with 20 the Sages? 21 A. I don't recall the dates, but it was in the 22 latter years, probably in 2000, something like that. 23 Q. Was this when you were in the Lipstick 24 Building? 25 A. Yes.

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1 Q. Do you recall any of the substance of those 2 meetings? 3 A. They wanted to change their style of 4 trading where they were going to direct the trades. 5 Q. What do you mean by direct the trades? 6 A. In other words, they would give 7 instructions to me what they wanted to buy and what 8 they wanted -- and when they wanted to sell it and 9 so on. 10 Q. Was that atypical? 11 A. Yes. 12 Q. How so? 13 A. That was the general rule was we handled 14 all of the decision making for the clients, limited, 15 limited decision making. Basically, there's a 16 definition of discretionary accounts in the 17 securities industry where discretion is limited -- 18 discretion is limited to time and price of a 19 security. 20 That's not considered discretion. It's 21 only when you give them -- when you make the 22 decision to what security to buy and sell that it 23 becomes a full discretionary account. That's an SEC 24 regulation. 25 Q. And so could you just expand on that and

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1 explain how the Sages were different than your 2 discretionary customers? 3 A. Well, they basically didn't have a 4 particular strategy that was one of our specialties, 5 which would have been convertible securities trading 6 or split strike conversion, which happened in the 7 later years. 8 Q. And so they directed you on to whether to 9 buy or sell specific securities? 10 A. Yes. 11 Q. That was unusual? 12 A. Yes. 13 Q. Most of your customers were by that time in 14 split strike? 15 A. Yes. 16 Q. Did the -- do you recall anything else of 17 your meetings with them? 18 A. What was the question? 19 Q. Do you recall anything else of your 20 meetings with the Sages? 21 A. Not particularly, no. 22 Q. Would you meet with all three Sages, in 23 other words, Malcolm, Martin and Ann? 24 A. Yes. 25 Q. And would one of them do talking more than

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1 the other two? 2 A. Basically, Malcolm Sage. 3 Q. Okay. Did the Sages deal with anybody else 4 at your firm such as Annette Bongiorno? 5 A. Probably, yes. 6 Q. Why do you say probably yes? 7 A. Because she was on a different floor, so 8 I'm not aware of when the conversation took place; 9 but she was the head bookkeeper, so normally she 10 would follow the instructions of what the client 11 gave her on certain -- in certain instances. 12 Q. Would you recognize Ms. Bongiorno's 13 handwriting? 14 A. Not really. 15 Q. Well, we may see it later and we'll see if 16 you can recognize her handwriting. I take it you'd 17 have occasion to see her handwriting at work 18 sometimes; is that correct? 19 A. Yes. 20 Q. What was Ms. Bongiorno's exact role with 21 respect to the Sage accounts? 22 A. She primarily handled all of the retail 23 clients' accounts. 24 Q. And that would include the Sages? 25 A. Yes.

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1 Q. And how do you define the retail clients? 2 A. Not an institution. 3 Q. Not an institution? 4 A. Right. 5 Q. Okay. To your knowledge did she maintain a 6 file for each customer's account? 7 A. Yes. 8 Q. To your knowledge would she maintain client 9 correspondence in those files? 10 A. Yes. 11 (Exhibit Number 32 was marked for 12 identification.) 13 Q. (By Mr. Kratenstein) We talked about one 14 of the accounts earlier, one that's called the 15 Maurice Sage Trust. I'm going to show you a 16 document that we've marked as Exhibit 32. Put that 17 in front of you. Mr. Madoff, do you recognize this 18 document? 19 A. Yes. 20 Q. What is it? 21 A. It's clients account document listing the 22 activity in the account. 23 Q. Do you see at the top it's dated 24 December 31, 1979? 25 A. Uh-huh, yes.

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1 Q. You see it's for the Maurice Sage Trust 2 account? 3 A. Yes. 4 Q. Were documents like these be generated on 5 or around the date indicated in the top left corner? 6 A. Yes. 7 Q. And was it ordinary practice of your 8 business to generate accounts like -- I'm sorry -- 9 statements like this? 10 A. Correct. 11 Q. Do you know where statements like this 12 would be stored after they were generated? 13 A. Usually, you know, in the bookkeeping 14 department. 15 Q. And so documents of this type would be 16 maintained under your firm's custody and control? 17 A. Yes. 18 Q. Looking now at the specific activity in the 19 account, do you see in the middle of the page that 20 there are several securities that are marked as 21 having been received, Dr. Pepper, Asarco, Alcan, 22 American Telephone & Telegraph, Skyline, Kaiser? 23 A. Yes. 24 Q. RCA, Central Penn, Reynolds and more 25 Skyline? Do you see that?

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1 A. Uh-huh. 2 Q. So when it says RECD, what does that mean? 3 A. Means the security was received into the 4 account. 5 Q. Does that mean that the client would have 6 physically delivered a security to you? 7 A. Usually, unless it was received from a bank 8 or another brokerage firm. 9 Q. And then do you see above those entries 10 there are various credits also for those various 11 securities? 12 A. Those are sales transactions. 13 Q. And then the proceeds of the sales are 14 shown on the account? 15 A. Correct. 16 Q. Would these have been real receipts of the 17 securities, receipts of real securities? 18 A. Yes. 19 Q. Would the sales have been real sales of 20 those securities? 21 A. Yes. 22 MS. FEIN: Objection. 23 (Exhibit Number 33 was marked for 24 identification.) 25 Q. (By Mr. Kratenstein) Let's go to -- you

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1 can put that document aside. I'm going to show you 2 another document which we've marked as Exhibit 3 Number 33. 4 MS. FEIN: Thanks. We can take just one. 5 Q. (By Mr. Kratenstein) Okay. Mr. Madoff, do 6 you recognize what we've marked as Exhibit 33? 7 A. Yes. 8 Q. What is it? 9 A. It shows movement of monies into an 10 account. 11 Q. You see on the top it's called house number 12 17 cash and securities for settlement? 13 A. Uh-huh. 14 Q. Dated December 13th, 1979? 15 A. Yes. 16 Q. Do you see that? 17 A. Uh-huh. 18 Q. What is a cash and securities for 19 settlement statement? 20 A. It just shows the movement of securities. 21 Q. From where to where? 22 A. From other brokerage firms, from the client 23 themself, come from a number of sources. 24 Q. And would reports like this have been 25 generated in the ordinary course of your firm's

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1 business? 2 A. Correct. 3 Q. And would a report like this have been 4 printed out on or around the date indicated at the 5 top, in this case, December 13th, 1979? 6 A. Correct. 7 Q. And was it a regular part of your firm's 8 business to keep and maintain records of this type? 9 A. Yes. 10 Q. Do you know where records like this would 11 have been maintained? 12 A. Where they would have been? 13 Q. Yeah, yes. 14 A. The same place. They were on the firm's 15 premises. 16 Q. Thank you. Do you know how often reports 17 such as this, these cash and securities for 18 settlement reports, would be run by your firm? 19 A. Probably either the end of the week, the 20 end of the month or end of the quarter. I'm not 21 sure. 22 Q. Okay. This one is a house 17 cash and 23 securities for settlement report. Do you see that? 24 A. Yes. 25 Q. Were similar reports run for house five, in

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1 other words, are there house five cash and 2 securities for settlement reports? 3 A. That would represent typically market 4 making or proprietary trading, not for clients, 5 which are the firm's principal account. 6 Q. So is the answer to my question yes, that 7 there would be cash and securities for settlement 8 statements for house five? 9 A. Yes. 10 Q. I'm going to mark -- 11 A. I'm assuming. 12 Q. Well, I'll show you one. Here's Exhibit -- 13 that's 33. Wait a minute. 34. You know what? 14 This will be 35. I'm going to come back to 34. 15 MS. FEIN: Okay. 16 MR. KRATENSTEIN: Sorry. 17 (Exhibit Number 35 was marked for 18 identification.) 19 MS. FEIN: Thank you. 20 MS. CHAITMAN: Thank you. 21 Q. (By Mr. Kratenstein) Do you see that what 22 we've marked as Exhibit 35 is a house five cash and 23 securities for settlement statement dated in this 24 case May 16th, 1996? Do you see that? 25 A. Yes.

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1 Q. And so is this the equivalent, I appreciate 2 it's for a different date, but it's the equivalent 3 of the type of report we see in Exhibit 33 for house 4 17, cash and securities for settlement? 5 A. I'm assuming so. 6 Q. Okay. And do you know how often these 7 house five cash and securities for settlement 8 statements would be run? 9 A. No. I'm not. 10 Q. They would be run periodically, though? 11 A. Yes. 12 Q. This is a house five statement. So would 13 the transactions on the house five statement be real 14 transactions? 15 A. Yes. 16 Q. And for house 17 at a time like Exhibit 33, 17 which is December 13th, 1979, would those all be 18 real transactions? 19 MS. FEIN: Objection to form. 20 THE WITNESS: Yes. 21 Q. (By Mr. Kratenstein) Sorry. Your answer 22 was? 23 A. Yes. 24 Q. Thank you. To your knowledge did your firm 25 ever stop running cash and securities for settlement

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1 reports for either house 5 or house 17 during the 2 course of your business? 3 A. I assume not. 4 Q. Turning back to Exhibit Number 33, if you 5 turn -- there are Bates numbers in that corner. If 6 you turn to the one that ends in 9381, look at that 7 corner. Would you like me to do it for you? Here, 8 turn it for you. 9 MS. CHAITMAN: What page was that? 10 MR. KRATENSTEIN: 9381. 11 MS. CHAITMAN: Okay. 12 Q. (By Mr. Kratenstein) If you look at the 13 bottom of page 9381, do you see the transactions 14 that we saw in Exhibit Number -- in the prior 15 exhibit, Exhibit Number 32 and 33, which were the 16 delivery of the various securities into the Maurice 17 Sage Trust account and then the sales of those 18 securities? 19 A. Yes. 20 Q. And those were at the bottom of the page 21 there? 22 A. Uh-huh. 23 Q. Sorry. That's a yes? 24 A. Yes. 25 Q. And they show up on the cash and securities

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1 for settlement statements dated December 13th, 1979; 2 correct? 3 A. Yes. 4 Q. And these are all real positions? 5 A. Yes. 6 Q. And the sales were real? 7 A. Yes. 8 Q. If you turn in a few more pages and I'll 9 just take it and turn to the page, to page 00709388, 10 looking at that page, Mr. Madoff, do you see there's 11 an entry there for National Bank of America, 160 12 Broadway at the bottom of the page? 13 MS. FEIN: Objection to form. 14 Q. (By Mr. Kratenstein) Under National Bank 15 of America? 16 A. Yes. 17 Q. And do you see under National Bank of 18 America it indicates sales of the securities we were 19 just talking about starting with Asarco? Do you see 20 that? 21 A. Yes. 22 MS. FEIN: Objection to form. 23 Q. (By Mr. Kratenstein) Do you understand 24 what these entries mean? 25 A. It means these are just sale transactions.

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1 Whose account is this for? Oh, this is a cash to 2 securities account. It would be transactions that 3 were made through National Bank of North America. 4 Q. Does that mean that these securities were 5 sold to National Bank of North America? 6 A. Probably correct, either sold through them 7 as an agent for other brokerage. I'm not sure. 8 Q. Okay. Would these have been real sales? 9 A. Yes. 10 MS. FEIN: Objection to form. 11 MR. KRATENSTEIN: I'm going to take these 12 documents and put them aside. 13 MS. FEIN: Andrew, just the name here, I 14 think you were using National Bank of America. 15 THE WITNESS: It's National Bank of North 16 America. 17 MR. KRATENSTEIN: I thought I said 18 National Bank of North America, but if I didn't, I 19 stand corrected. Thank you. 20 (Exhibit Number 34 was marked for 21 identification.) 22 MS. CHAITMAN: Is this 34? 23 MR. KRATENSTEIN: Yeah. This is 34. I 24 apologize. We're going out of order. This is 25 Exhibit Number 34.

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1 Q. (By Mr. Kratenstein) Mr. Madoff, do you 2 recognize this document? 3 A. Yes. 4 Q. What is it? 5 A. It's the Maurice Sage Trust account. 6 Q. And this is dated March 31, 1980; correct? 7 A. Uh-huh. 8 Q. Sorry. That's a yes? 9 A. Yes. 10 Q. And, again, like the other Maurice Sage 11 Trust document that we saw, account document, this 12 would have been generated in the ordinary course of 13 your firm's business? 14 A. Correct. 15 Q. And do you see that it shows in the middle 16 of the page the receipt of an RCA Corp convertible 17 bond and then two American Telephone & Telegraph? 18 A. Right. 19 Q. Two American Telephone & Telegraph 20 securities? 21 A. Correct. 22 Q. And would those have been receipts -- is 23 that what received means, received the securities? 24 A. Right, yes. 25 Q. Would these have been real transactions?

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1 A. Yes. 2 MR. KRATENSTEIN: You can put that 3 document aside. 4 (Exhibit Number 36 was marked for 5 identification.) 6 Q. (By Mr. Kratenstein) I'm showing you 7 what's been marked as Exhibit Number 36. Let me see 8 this for a second. That's the first page. Just a 9 second. Do you have two pages? 10 MS. FEIN: We have one. 11 MR. KRATENSTEIN: There's the next one. 12 MS. FEIN: Thank you. 13 Q. (By Mr. Kratenstein) I'm showing you 14 what's been marked as Exhibit Number 36. 15 MS. CHAITMAN: Thank you. 16 Q. (By Mr. Kratenstein) And do you see that, 17 Mr. Madoff, this is another Maurice Sage Trust 18 statement, this one from June 30th, 1981? 19 A. Correct. 20 Q. And like the other Maurice Sage Trust 21 account documents, this would have been generated in 22 the ordinary course of your firm's business? 23 A. Yes. 24 Q. You see it shows the sale of in the middle 25 of the page American Telephone & Telegraph?

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1 A. Yes. 2 Q. Would that have been a real transaction? 3 A. Yes. 4 MS. FEIN: Objection to form. 5 Q. (By Mr. Kratenstein) Sorry. I'll ask it 6 again. Would that have been a real transaction? 7 MS. FEIN: Objection to form. 8 THE WITNESS: Yes. 9 MS. FEIN: I'm just objecting to your use 10 of the term real. 11 MR. KRATENSTEIN: Real. 12 MS. FEIN: We didn't define real, but 13 you've been using it frequently. 14 Q. (By Mr. Kratenstein) When I say -- when I 15 say a real transaction, what do you understand me to 16 be meaning? 17 A. Let's assume a legitimate transaction where 18 we actually buy or sell the securities. 19 MR. GOLDMAN: That actually took place? 20 THE WITNESS: Hmm? 21 MR. GOLDMAN: That actually took place? 22 THE WITNESS: Yes. 23 Q. (By Mr. Kratenstein) So when we say real, 24 and you understand for all the prior questions I 25 asked you about real transactions --

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1 A. Correct. 2 Q. -- we were talking about an actual purchase 3 or sale of a security or delivery of a security that 4 actually took place? 5 A. Can't you just make the assumption if I 6 state that all the transactions prior to 1992 were 7 real transactions or are we going to go through this 8 whole charade of back and forth? 9 (Exhibit Number 37 was marked for 10 identification.) 11 Q. (By Mr. Kratenstein) Well, I do want to 12 get into -- and I don't mean to go through a 13 charade. I just want to get through the documents 14 quickly, which I will quickly. I'm almost done with 15 these -- 16 A. Okay. 17 Q. -- and then we'll be done. There are just 18 some specific ones I need to make sure of. I'm 19 marking Exhibit 37. Actually, there's a two-page 20 document. This is part of this exhibit. Didn't get 21 stapled for some reason. Here's this one. Just a 22 couple more of these and then we'll be done. You 23 see this is a December 31, 1981 Maurice Sage Trust 24 statement? 25 A. Yes.

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1 Q. And this would have been generated in the 2 ordinary course of your firm's business? 3 A. Yes. 4 Q. And do you see that in the middle of the 5 page there's another sale of an American Telephone & 6 Telegraph security? 7 A. Yes. 8 Q. And that would have been a real transaction 9 that actually occurred? 10 A. Yes. 11 (Exhibit Number 38 was marked for 12 identification.) 13 MR. KRATENSTEIN: Thank you. You can put 14 that document aside. There's Exhibit 38. 15 MS. FEIN: Thanks. 16 Q. (By Mr. Kratenstein) Mr. Madoff, this 17 document is a little bit different than the ones I 18 was just showing you. Do you see at the top it's 19 dated January 31, 1983, National Bank of North 20 America? 21 A. Correct. 22 Q. What is this document, if you know? 23 A. It's a month-end statement for activity 24 that happened during the month and at the end of the 25 month shows what the account was, long or short.

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1 Q. Would these -- it says at the top National 2 Bank of North America. Does that mean that these 3 were securities held at the National Bank of North 4 America by your firm? 5 A. Probably, yes. Could have been held in a 6 depository. 7 Q. Why does it say National Bank of North 8 America? 9 A. That's who had the -- that's whose account 10 it was. 11 Q. And you would hold securities at National 12 Bank of North America; is that correct? 13 A. Sometimes, yes. 14 Q. I'm going to turn you to a specific page, 15 0964437. Do you see towards the bottom of that page 16 -- 964437 everybody. Tell me when you're there. 17 MS. DASARO: Got it. Thank you. 18 Q. (By Mr. Kratenstein) If you look at the 19 bottom of the page four entries up there's that RCA 20 convertible bond we talked about earlier. Do you 21 see that? 22 A. Yes. 23 Q. And it's listed as being at the National 24 Bank of North America. Do you see that? 25 A. Yes.

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1 Q. So does that mean that that bond was held 2 at the National Bank of North America? 3 MS. FEIN: Objection to form. 4 THE WITNESS: It depends upon -- yes, but 5 depending upon what role they were acting as. They 6 could have -- they could have cleared their 7 transactions through somewhere else, through another 8 depository. I have no way of knowing that. 9 Q. (By Mr. Kratenstein) Okay. But you are I 10 take it based on your prior testimony confident that 11 this is a real bond that was held somewhere? 12 A. Correct. 13 MR. KRATENSTEIN: Thank you. You can put 14 that document aside. 15 (Exhibit Number 39 was marked for 16 identification.) 17 Q. (By Mr. Kratenstein) This is Exhibit 39. 18 You see, Mr. Madoff, this is another National Bank 19 of North America ledger? 20 A. Correct. 21 Q. This one dated January 31, 1983? 22 A. Correct. 23 Q. Okay. And this one shows -- this is a 24 document that also would have been generated in the 25 ordinary course of your firm's business?

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1 A. Correct. 2 Q. It shows various instruments on this 3 document. Do you see that? 4 A. Yes. 5 Q. Including various bonds, et cetera. Do you 6 see that? 7 A. Correct. 8 Q. And would these have all, again, been 9 actual real positions? 10 A. Correct. 11 Q. You held securities at other banks as well; 12 is that right? 13 A. Correct. 14 Q. They included Chase Manhattan, Continental, 15 Commercial Bank of North America, Meadowbrook, 16 Marine Midland, Barclays, Bear Stearns, National 17 Westminster Bank and Bankers Trust; is that correct? 18 MS. FEIN: Objection to form. 19 THE WITNESS: Correct, plus other 20 brokerage firms. 21 MR. KRATENSTEIN: Thank you. You can put 22 that document aside. 23 (Exhibit Number 40 was marked for 24 identification.) 25 Q. (By Mr. Kratenstein) There's Exhibit 40.

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1 Mr. Madoff, do you see that this is a June 30, 1986 2 account statement for the Maurice Sage Trust? 3 A. Yes. 4 Q. Another statement that would have been 5 generated in the ordinary course of your firm's 6 business? 7 A. Yes. 8 Q. Do you see that it shows that RCA bond we 9 talked about earlier being sold on or around 10 June 19th, 1986, top entry? 11 A. Yes. 12 Q. And, again, that was a real sale? 13 A. Yes. 14 Q. Actual transaction; correct? 15 A. Yes. 16 Q. Thank you. You can put that document 17 aside. I'm going to switch topics. In addition to 18 convertible bond arbitrage trading, did your firm do 19 trading or other types of arbitrage trading? 20 A. Yes. 21 Q. Did that include -- have you heard of the 22 term corporate events arbitrage? 23 A. Yes. 24 Q. What is that? 25 A. It's when -- it could be a stock split, it

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1 could be a special dividend payment, could be any 2 number of events that happened in a particular 3 company. 4 Q. You described when you talked about the 5 convertible bond arbitrage trading you did something 6 called legging in? 7 A. Correct. 8 Q. Which I believe you described as 9 accumulating a position over time and then averaging 10 a price; is that right? 11 MS. FEIN: Objection to form. 12 THE WITNESS: That's correct. 13 Q. (By Mr. Kratenstein) That's correct; 14 right? 15 A. Yes. 16 Q. When you did these other corporate events 17 arbitrage, would you also leg in? 18 A. Yes. 19 (Exhibit Number 41 was marked for 20 identification.) 21 Q. (By Mr. Kratenstein) I'm showing you 22 Exhibit 41. Mr. Madoff, do you see that this is a 23 statement from Sage Realty dated May 31, 1994? 24 A. Yes. 25 Q. And do you see in the middle of the

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1 statement there are transactions involving General 2 Electric Company including a stock split? 3 A. Correct, yes. 4 Q. Could you describe what that transaction 5 is? 6 A. It's the company splits their stock two for 7 one or any number of variables. 8 Q. And in this case it appears that you are 9 buying General Electric stock, 2,099 shares, on or 10 around May 6th, 1994; is that correct? 11 A. Correct. 12 Q. And that's before a two-to-one stock split? 13 A. Correct. 14 Q. And then there's a sale of 4,198 shares in 15 two pieces on or around May 23rd; is that correct? 16 A. Correct. 17 Q. And is this an example of the stock split 18 arbitrage that you were discussing earlier? 19 A. Correct. 20 Q. Would this have been an actual transaction? 21 A. Yes. 22 MR. KRATENSTEIN: You can put that 23 document aside. 24 (Exhibit Number 42 was marked for 25 identification.)

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1 Q. (By Mr. Kratenstein) I'm showing you 2 Exhibit 42. If you turn to the second page of the 3 document there, let me see that. Do you see on the 4 first page of this document, which is a Sage Realty 5 statement from December 31, 1996, do you see that? 6 A. Yes. 7 Q. And do you see that there's a purchase on 8 or around December 24th, 1996 of 47,814 shares of 9 AT&T? 10 A. Correct. 11 (Exhibit Number 43 was marked for 12 identification.) 13 Q. (By Mr. Kratenstein) Do you see that? 14 Now, let me show you another document. Just keep 15 that in mind. This is Exhibit 43. And do you see 16 that this is a Sage -- yep? Okay. I apologize. 17 MS. CHAITMAN: Thank you. 18 Q. (By Mr. Kratenstein) Do you see that this 19 is a Sage Realty statement dated January 31, 1997? 20 MS. FEIN: Objection. 21 THE WITNESS: Correct, '94. 22 MR. KRATENSTEIN: Sorry. We're right. We 23 may have the wrong -- hang on a second. Let me just 24 check this. 25 MS. FEIN: Yeah. Mine has '96.

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1 MR. KRATENSTEIN: Let me see. 2 MS. FEIN: Sorry. This one? Yeah, sorry. 3 '94, yeah. 4 MR. KRATENSTEIN: This is right, so you 5 have the right one. I apologize. That's the right 6 one. 7 MS. FEIN: Okay. 8 MS. CHAITMAN: Which is the right one? 9 MR. KRATENSTEIN: Which is the right one? 10 Hang on a second. You know what? Let me -- is that 11 not the NCR? Let me get the right one. 12 THE WITNESS: Do I have the right to ask a 13 question about these records? 14 MR. GOLDMAN: Why don't we -- you want to 15 do it now because we'll just take a short recess and 16 I'll talk to you for two minutes. 17 MR. KRATENSTEIN: Well, let me actually 18 remark this document. I just made a -- I have the 19 document there, so I'm going to give you the right 20 exhibit. I'm remarking 43. You can give me that 21 one back. 22 (Exhibit Number 43 was remarked for 23 identification.) 24 MS. FEIN: Why don't we do the Bates for 25 this one?

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1 MR. KRATENSTEIN: This one is -- yeah, 2 sure. This one is Sage 0009352 through 53. 3 MS. FEIN: Okay. Thank you. 4 Q. (By Mr. Kratenstein) And do you see -- 5 MS. CHAITMAN: Now I need one, too. 6 Sorry. 7 MR. KRATENSTEIN: That's fine. 8 MS. CHAITMAN: Thank you. 9 Q. (By Mr. Kratenstein) Sorry about that. 10 And do you see here this is now a January 31, 1997 11 Sage Realty statement? Do you see that? 12 A. Yes. 13 Q. And you see now this is the year -- so in 14 the first document we saw, Exhibit 42, that was at 15 the end of the year 1996 and this is in the new 16 year, 1997. Do you see that? 17 A. Yes. 18 Q. And at the top there's a transaction. It 19 says NCR Corp spin-off from AT&T Corp. And then 20 there are various AT&T and NCR transactions. Do you 21 see that? 22 A. Yes. 23 Q. Can you describe what this transaction is? 24 A. It looks like a distribution of -- AT&T 25 went through a whole series of divestitures of their

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1 other companies, which was referred to as baby 2 bells. I'm not sure what period that they took 3 place, but we were a major market maker in AT&T 4 forever over the 50 years that I was in business. 5 So there were lots of events regarding AT&T and I'm 6 assuming this is one of them. 7 Q. Okay. And this trade if we look at 8 Exhibits 42 and 43, this trade involves if I'm not 9 mistaken buying AT&T before the spin-off and then 10 after the spin-off selling AT&T as well as newly 11 received NCR shares? 12 A. Correct. 13 Q. Because AT&T had spun off NCR? 14 A. Correct. 15 Q. And what's the idea behind that? That the 16 spin-off creates greater value? 17 A. Yes. 18 Q. Was this an actual transaction, a real 19 transaction? 20 A. Yes. 21 Q. You can put that document aside. By this, 22 I mean, the transactions we see on 42 and 43, real 23 transactions? 24 A. Yes. 25 MR. KRATENSTEIN: Thank you. One more,

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1 please. And this is the one I just showed you a 2 minute ago. That's going to be 44 now. 3 MS. CHAITMAN: I have that one. 4 MR. KRATENSTEIN: You have that one? 5 MS. CHAITMAN: Yeah. You gave it to me 6 before. 7 MR. KRATENSTEIN: Thanks, yes. 8 (Exhibit Number 44 was marked for 9 identification.) 10 Q. (By Mr. Kratenstein) Mr. Madoff, do you 11 see that this is a Sage Realty statement dated 12 July 31, 1994? 13 A. Yes. 14 Q. And do you see that there are various 15 transactions on this statement involving UAL? 16 A. Yes. 17 Q. Can you tell from looking at this what this 18 transaction entails? 19 A. Similar to the other transaction, looks 20 like a spin-off of some sort. 21 Q. Is it fair to say that this is a trade to 22 buy UAL before the -- a recapitalization and then 23 selling the stock after receiving a cash 24 distribution? 25 MS. FEIN: Objection.

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1 THE WITNESS: Possibly. 2 Q. (By Mr. Kratenstein) Your answer was? 3 A. Possibly. 4 Q. Thank you. Would this transaction have 5 been an actual real transaction as reflected on this 6 statement? 7 A. Correct. 8 Q. In terms of your corporate event arbitrage 9 trading, would you sometimes take market risk over a 10 period of time of weeks? 11 A. Correct. 12 Q. You can put that aside. Do you want to 13 take a break now? We're changing topics. 14 MR. GOLDMAN: Yeah. You wanted to ask me 15 a question, so let's go in the other room. You can 16 ask me what you want to ask me and then we'll see. 17 THE VIDEOGRAPHER: Going off the record. 18 The time is 9:40. 19 (A recess was taken.) 20 THE VIDEOGRAPHER: Back on the record. 21 The time is 9:51. 22 (Exhibit Number 45 was marked for 23 identification.) 24 Q. (By Mr. Kratenstein) Mr. Madoff, we talked 25 about the fact that the Sages had an account called

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1 Sage Associates, so I'm going to ask a few questions 2 about that account now. I'm going to start with 3 another document we're going to mark as Exhibit 4 Number 45. I'm going to focus my questions on the 5 first page and then the page that is Bates labeled 6 MF 0091185. So I'm just going to -- I'll hand out 7 copies to everyone else. 8 A. Your records. 9 MR. KRATENSTEIN: Yeah. There you go. 10 MS. CHAITMAN: I'm sorry. Take note of 11 that Bates number. Was that 185? 12 Q. (By Mr. Kratenstein) 941185. I'm going to 13 start on the first page and then I'll flip it for 14 you. So if you don't mind, I'll just keep my finger 15 there so we can get to the page, which will help us 16 move through this relatively quickly. Mr. Madoff, 17 you see that this is a document called house 17 18 stock record summary through 5-31-85? 19 A. Yes. 20 Q. Do you recognize this type of document? 21 A. Yes. 22 Q. What is it? 23 A. It's usually a month-end report that lists 24 the securities in each account. 25 Q. And these reports would be generated in the

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1 ordinary course of your firm business? 2 A. Correct. 3 Q. And would they be generated on or around 4 the date indicated at the top, May 31, 1985 in this 5 case? 6 A. Correct. 7 Q. And were these reports like this kept on 8 your firm's premises? 9 A. Yes. 10 Q. And created in the ordinary course of 11 business? 12 A. Yes. 13 Q. Okay. Now I'm going to turn to the page I 14 indicated, which is again MF 00941185. And are you 15 there, counsel? 16 MS. CHAITMAN: Yeah. 17 Q. (By Mr. Kratenstein) Okay. I'm going to 18 draw your attention to -- it's actually this page 19 right here. See the bottom of the page, towards the 20 bottom there's a Walt Disney Productions entry. Do 21 you see that? 22 MS. FEIN: Is this the page ending in 184, 23 Andrew? 24 MR. KRATENSTEIN: 85. 25 MS. FEIN: It's 85?

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1 MR. KRATENSTEIN: Yes. 2 MS. FEIN: Okay. 3 Q. (By Mr. Kratenstein) Do you see Walt 4 Disney Productions right here? 5 A. Yes. 6 Q. Okay. So and do you see under Walt Disney 7 Productions there are various customer accounts 8 listed including Sage Associates and Maurice Sage 9 Trust? 10 A. Yes, yes. 11 Q. And do you see according to this report 12 there are 9,000 shares of Walt Disney in Sage 13 Associates and 5,000 in Maurice Sage Trust? 14 A. Correct. 15 Q. And according to this report, when you add 16 up all of the customer's holdings, so in addition to 17 Sage Associates and Maurice Sage Trust, there are 18 entries for Appleby and then other customers. Do 19 you see that? 20 A. Yes. 21 Q. And they add up to 34,780 shares. Do you 22 see that? 23 A. Correct. 24 Q. That's of Disney stock; correct? 25 A. Yes.

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1 Q. And then there's an entry at the bottom 2 next to that 34,780 shares for the National 3 Westminster Bank USA. Do you see that? 4 A. Correct. 5 Q. What does that mean, that all the stock is 6 listed next to that bank? 7 A. That the securities are held at that bank 8 or one of their clearing agents. 9 Q. And this is a 1985 report. So I take it 10 from your prior testimony that these are actual 11 securities that were actually held at the National 12 Westminster Bank? 13 A. Correct. 14 MR. KRATENSTEIN: I'm going to move this 15 document and mark as Exhibit 46 another document. 16 (Exhibit Number 46 was marked for 17 identification.) 18 Q. (By Mr. Kratenstein) Mr. Madoff, do you 19 see that what we've marked as Exhibit Number 46 is a 20 report that at the top says 5-31-85, so May 31, 21 1985, National Westminster Bank USA? Do you see 22 that? 23 A. Yes. 24 Q. And do you recognize this type of document? 25 A. Yes.

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1 Q. What is it? 2 A. It's activity in the account of National 3 Westminster Bank. 4 Q. And, again, is this a document that would 5 have been created in the ordinary course of your 6 firm's business? 7 A. Yes. 8 Q. And would have been kept at your firm's 9 premises? 10 A. Yes. 11 Q. That would have been generated on or around 12 May 31, 1985? 13 A. Correct. 14 Q. And would have been maintained in the 15 ordinary course of your firm's business; is that 16 correct? 17 A. Correct. 18 Q. And if you turn -- and I'll do this -- to 19 page 965279, if you look in the middle of the page 20 -- is everybody with me? 21 MS. DASARO: Yeah. 22 Q. (By Mr. Kratenstein) At 965279 do you see 23 that there are 34,780 shares of Walt Disney stock 24 listed as being held at the National Westminster 25 Bank?

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1 A. Correct. 2 Q. And that matches up with the previous 3 record that we just saw? 4 A. Correct. 5 Q. And these are actual securities held at the 6 National Westminster Bank? 7 A. Correct. 8 MR. KRATENSTEIN: Thank you. 9 MS. CHAITMAN: Oh, I see. Right here? 10 MR. KRATENSTEIN: Yes. Top entry in the 11 middle. 12 MS. CHAITMAN: Thank you. 13 MR. KRATENSTEIN: Okay. I want to make a 14 suggestion. I want to take a short break and just 15 sticker a whole bunch of exhibits instead of doing 16 it on the record and then that way it will be a lot 17 faster when we're on the record. 18 MS. CHAITMAN: Why don't you let me do it 19 for you? 20 MR. KRATENSTEIN: I think because I know 21 where I want to go. 22 MS. CHAITMAN: Oh, okay. 23 MR. KRATENSTEIN: It will take five 24 minutes. Let's just do that. 25 MS. DASARO: Okay.

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1 MR. KRATENSTEIN: Let's take a quick 2 break. I don't want to waste your time on the 3 record. You can get up and stretch. 4 THE VIDEOGRAPHER: Going off the record. 5 The time is 9:57. 6 (A recess was taken and Exhibit Number 47 7 was marked for identification.) 8 THE VIDEOGRAPHER: Back on the record. 9 The time is 10:13. 10 Q. (By Mr. Kratenstein) Welcome back, Mr. 11 Madoff. You had talked earlier about the Sages 12 directing you to do trades in their accounts. I 13 want to show you a few documents on that topic. I'm 14 showing you Exhibit Number 47. Mr. Madoff, do you 15 see that this is a letter from Malcolm Sage to you? 16 A. Yes. 17 Q. It's on the letterhead of Sage Associates 18 and Sage Associates II? 19 A. Yes. 20 Q. Those were each Sage accounts? 21 A. Yes. 22 Q. And do you have any reason to believe that 23 you did not receive this letter? 24 A. No. 25 Q. This letter would have been kept by your

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1 firm? 2 A. Correct. 3 Q. Probably by Annette Bongiorno? 4 A. Correct. 5 Q. By the way, was Ms. Bongiorno, do you 6 recall if she was left handed? 7 A. I believe so. 8 Q. So when she made a check mark, it would be 9 a left-handed check mark? 10 A. Yes. 11 Q. Do you see that the letter begins Dear 12 Bernie, after discussions with Paul we have come up 13 with the following plan with regards to the Sage 14 Associates IS-004 and Sage Associates II IS-005 15 accounts. Do you see that? 16 A. Yes. 17 Q. First of all, do you know who Mr. Sage is 18 referring to when he says Paul? 19 A. I would assume it's his accountant. 20 Q. And who is he? 21 A. I believe it's Paul Koenigsberg. 22 Q. And he says we have come up with the 23 following plan. Do you know what -- have an 24 understanding of what he means when he says the 25 following plan?

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1 A. I assume his tax plan. 2 Q. And do you see the backwards lefty checks 3 on this letter? 4 A. Correct. 5 Q. Do you believe those to be Ms. Bongiorno's? 6 A. Correct. 7 Q. And do you see in the letter Mr. Sage is 8 directing you to take various actions with respect 9 to securities in the Sage Associates and Sage 10 Associates II accounts? 11 A. Correct. 12 Q. For example, in the first entry with 13 respect to Abercrombie & Fitch he says please 14 deliver the short position in the seven account to 15 the three account to close out this position. Do 16 you see that? 17 A. Correct. 18 Q. And do you recall that Mr. Sage or the 19 Sages rather had subaccounts within Sage Associates 20 for long positions, short against the box positions 21 and naked short positions? 22 A. Correct. 23 Q. Does it make sense to you that three would 24 have been the long position account? 25 A. Correct.

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1 Q. And seven the short against the box 2 position account? 3 A. Correct. 4 Q. Eight, the naked short position account? 5 A. Yes. 6 Q. What is a short against the box? 7 A. Short against the box is when you're 8 selling -- you're selling stock that you are also 9 long in another account. You're long and short the 10 same security. 11 Q. Does it mean you're actually holding the 12 security when you go short or no? 13 A. Yes. 14 Q. And what's -- 15 A. Well, I have to correct that. If it's the 16 short against the box account, you would be long 17 security as well. You could -- if it was what's 18 called a naked short, you're not long in the 19 corresponding security. 20 Q. And do you see that there are obviously 21 various transactions here for -- instructions for 22 Abercrombie, Dow, International Paper, Oracle and 23 Qualcomm? Do you see that? 24 A. Correct. 25 Q. And then he asks you at the end in .1(f) to

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1 please realize the approximately $600,000 of gain in 2 the eight account; correct? 3 A. Correct. 4 Q. Which would be the naked short account? 5 A. Yes. 6 Q. And then there are instructions for Gateway 7 and Coca-Cola in Sage Associates II. Do you see 8 that? 9 A. Yes. 10 Q. And at the end he says after these steps 11 have been taken, we would like to withdraw the sum 12 of $6 million from Sage Associates. Do you see 13 that? 14 A. Correct. 15 Q. And then he asks you if you have any 16 questions, to call him or Paul; right? 17 A. Correct. 18 Q. Would you have followed these instructions? 19 A. Yes. 20 Q. How do you know that? 21 A. Just clients telling us to. We have no 22 choice. 23 (Exhibit Number 48 was marked for 24 identification.) 25 Q. (By Mr. Kratenstein) I'm going to show you

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1 what we've marked as Exhibit Number 48, and you can 2 compare that with this. If you look at this 3 document, you see that this is the Sage Associates 4 statement from November 30th, 2001? 5 A. Yes. 6 Q. And can you see on this statement the 7 transactions that Mr. Sage directed you to do in his 8 letter that we marked as Exhibit 47? 9 A. Correct. 10 Q. And you would have performed those 11 transactions? 12 A. Yes. 13 Q. Would they have been real transactions? 14 A. Yes. 15 Q. You can put that document aside. And by 16 the way, just note before actually putting it aside 17 that this is the Sage Associates subaccount numbered 18 seven. Do you see that? 19 A. Correct. 20 (Exhibit Number 49 was marked for 21 identification.) 22 Q. (By Mr. Kratenstein) Okay. And then now 23 I'm going to give you Exhibit Number 49, which is 24 Sage Associates subaccount three from the same date. 25 Do you see that?

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1 A. Yes. 2 Q. And, again, because there were -- he was 3 asking you to transfer between the seven and three 4 accounts. Do you see the flip side on this? 5 A. Yes. 6 Q. Thank you. And then you recall at the end 7 of the letter he asked you to realize -- he asked 8 you to recognize a $600,000 gain. Do you recall 9 that? 10 A. Correct. 11 (Exhibit Number 50 was marked for 12 identification.) 13 MR. KRATENSTEIN: Here's Exhibit 50. 14 There's an extra copy. 15 MS. FEIN: Okay. 16 Q. (By Mr. Kratenstein) And do you see the 17 $600,000 being recognized -- 18 A. Yes. 19 Q. -- in Exhibit 50? 20 A. Yes. 21 (Exhibit Numbers 51, 52 and 53 were marked 22 for identification.) 23 Q. (By Mr. Kratenstein) Thank you. I'm going 24 to hand you a group of documents, which I'll 25 represent to you are the confirms reflecting all

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1 these transactions. And I'm just going to ask you 2 when you have these in front of you are these 3 documents the confirms that reflect the transactions 4 that we just saw in the statements. 5 Okay. So I'm just going to put them in 6 front of you and I'm going to ask you to confirm 7 that that's what they at least appear to you to be. 8 So here's Exhibit -- and just wait until I give you 9 them all. Here's Exhibit 51. This is Exhibit 52. 10 MR. GOLDMAN: Are those exhibits multiple 11 pages, just so the record is clear? 12 MS. CHAITMAN: We didn't get 50. 13 MR. KRATENSTEIN: 50 was a one page. 14 MS. CHAITMAN: Yeah, but I don't have 51. 15 Did you get two copies of 51? 16 MS. FEIN: No. 17 THE WITNESS: Helen, move your soda 18 because he's about to knock it over. 19 MS. CHAITMAN: Oh, thank you. 20 THE WITNESS: I don't want to have to go 21 through this again. 22 Q. (By Mr. Kratenstein) Here's 53. Just take 23 a look at it while I'm handing them out and see if 24 you can flip through and just make sure you agree 25 whether these are the confirms showing the trades

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1 that we saw in the last document? 2 MS. CHAITMAN: Can you -- 3 Q. (By Mr. Kratenstein) Do you 4 understand what -- what is Exhibit -- what is that, 5 Mr. Madoff? Exhibit 53, what is that? 6 A. This is just a memo of transferring monies. 7 Q. Is it a -- what is known as a trade 8 confirm? 9 A. No. 10 Q. Okay. It's a memo. So what does that 11 mean? 12 A. It's a memo. It's a making note of a 13 particular money transaction or receiving the 14 movement of securities. Confirmation is what 15 appears behind it. 16 Q. You see what's behind -- I see. So -- 17 A. Confirmation is an actual purchase and sale 18 of a transaction. 19 Q. Okay. I see. And so when you see -- these 20 are memos you're saying, Exhibit 53, for example? 21 A. Yes. 22 (Exhibit Number 54 was marked for 23 identification.) 24 Q. (By Mr. Kratenstein) Okay. And here's 25 Exhibit 54.

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1 MR. GOLDMAN: Are you looking at 2 Exhibit 53? 3 THE WITNESS: Fifty-three and four. 4 MR. GOLDMAN: Okay. Under 53, the top 5 page is the memorandum, I think, you suggested for 6 the transfer of money. Is there anything else 7 attached to that? Fifty-three, look at 53. 8 THE WITNESS: Yeah. I have 53. 9 MR. GOLDMAN: Okay. What's underneath it? 10 THE WITNESS: Yeah, the confirmation. 11 Q. (By Mr. Kratenstein) Is that the confirm? 12 A. Confirmation. 13 Q. So that's the confirm, the second page of 14 53? 15 A. Right. 16 MR. KRATENSTEIN: Thank you. 17 MS. FEIN: Sorry. Just to clarify, that 18 second page isn't the same as the first page. The 19 transaction isn't the same. My understanding that 20 the memo -- or the difference between the memo and 21 the confirm I understand, but the transaction is a 22 different dollar amount. 23 MR. KRATENSTEIN: Well, there are actually 24 several. If you look, there are multiple 25 transactions.

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1 MS. FEIN: Okay. So -- 2 MR. KRATENSTEIN: So they add up, I 3 believe, but you can see. You can look. There are 4 multiple. It's multiple transactions. You want a 5 minute? 6 MS. FEIN: I can't see the math. It looks 7 like the last page, the last page ending in 4294 8 corresponds to the memo page that's the page ending 9 in 290, but the two pages in between appear to be 10 different. 11 MR. KRATENSTEIN: Let's see. Which number 12 is that? What's the first page number? 13 THE WITNESS: 4290. 14 MR. KRATENSTEIN: Okay. And then there's 15 another, 4291, and then there are 4292, 93, 94. 16 MS. FEIN: Yeah. And, actually, my copy 17 doesn't have 4291. It just goes from 4290 to 4292, 18 but 4292 and 4293 appear to be different 19 transactions. 20 MR. KRATENSTEIN: Let me take a look at 21 it. Fifty-three this is? Here. Well, here's 4-2. 22 This is Exhibit 16. We'll get it worked out at a 23 break. Let me do it at a break. I don't want to 24 take up the time now, but thank you. 25 MS. FEIN: I understand.

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1 MR. GOLDMAN: I only did that so the 2 record was clear. As I said, there are multiple 3 pages in each exhibit. 4 MR. KRATENSTEIN: Right. 5 MR. GOLDMAN: Once you go through it -- 6 MS. CHAITMAN: What is the exhibit number 7 that you're talking about? 8 MR. KRATENSTEIN: Fifty-three. 9 MS. FEIN: Fifty-three. My concern was 10 the same. It was just about getting the record 11 clear. So if we clear it up on a break, we can do 12 it that way. 13 Q. (By Mr. Kratenstein) Yeah, sure. And then 14 Exhibit 54 you have in front of you? 15 A. Yes. 16 Q. Does that show in addition to a memo 17 confirms behind? 18 A. Yes. 19 (Exhibit Number 55 was marked for 20 identification.) 21 Q. (By Mr. Kratenstein) Okay. That's this 22 one. And now I'm going to give you 55, which again 23 is a memo followed by the confirms? 24 A. Yes. 25 MS. FEIN: Thank you.

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1 THE WITNESS: No. Wait a minute. I don't 2 see a confirmation. I see just memos. 3 Q. (By Mr. Kratenstein) Just memos for 55? 4 A. Right. 5 MR. KRATENSTEIN: Okay. 6 MS. CHAITMAN: How about the last page? 7 Is that a confirm? 8 MR. GOLDMAN: Yeah. 9 THE WITNESS: No. These are just -- 10 MR. GOLDMAN: Go to the last page. 11 MR. KRATENSTEIN: The last page, 224. 12 THE WITNESS: Yes. 13 Q. (By Mr. Kratenstein) That's a confirm? 14 A. Yes. 15 (Exhibit Number 56 was marked for 16 identification.) 17 Q. (By Mr. Kratenstein) 224 is a confirm. 18 Thank you. Okay. And then the last one for this 19 set is number 56, which is the $600,000 we saw 20 earlier. 21 MR. GOLDMAN: You okay? You look like you 22 had a -- 23 MS. FEIN: Well, Exhibit 55 on my copy is 24 missing a page but it may be the one that's missing 25 a page, so --

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1 MR. KRATENSTEIN: Let me look. Which page 2 is missing? 3 MS. FEIN: For me it's missing what would 4 be 4223. It goes from 4222 to 4224. 5 MR. KRATENSTEIN: This has -- it does. So 6 mine is marked the same way. It's marked the same 7 way. 8 MS. FEIN: Understood. 9 Q. (By Mr. Kratenstein) Okay. All right. So 10 is it fair to say that the documents that we have 11 now marked as Exhibits 51 to 55 reflect the 12 transactions that we saw in the letter that we 13 marked as Exhibit 47? 14 MS. FEIN: Objection to form. 15 THE WITNESS: Correct. 16 (Exhibit Number 57 was marked for 17 identification.) 18 Q. (By Mr. Kratenstein) Thank you. Now I'm 19 going to mark Sage Associates two statements 20 quickly. That was for Sage Associates. Those were 21 the Sage Associates trades. Now, two Sage 22 Associates II transactions that were shown in the 23 letter which is Exhibit 47, I'm just going to show 24 you the statements now. That's Exhibit 57. Put 25 these here. Keep this letter here. Exhibit 57.

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1 MS. FEIN: Thank you. 2 Q. (By Mr. Kratenstein) And if you see at the 3 end of the letter, he talks about the Gateway 4 delivery of short positions and closing out 5 Coca-Cola. And if you look at Exhibit Number 20, do 6 you see the Gateway and Coca-Cola transactions 7 reflected on this statement? 8 A. Yes. 9 (Exhibit Number 58 was marked for 10 identification.) 11 Q. (By Mr. Kratenstein) And then looking at 12 Exhibit Number 58 -- 13 MS. CHAITMAN: Did you mean to say 14 Exhibit 20? 15 MS. FEIN: Did you mean Exhibit 57? 16 MR. KRATENSTEIN: I said 57. What did I 17 say? 18 MS. CHAITMAN: 20. 19 MS. FEIN: 20. 20 Q. (By Mr. Kratenstein) So do you see on 21 Exhibit 57, sorry, the Sage Associates II, the Sage 22 Associates II transactions for Gateway and Coca-Cola 23 reflected on Exhibit 47? 24 A. Yes. 25 Q. And now Exhibit 58.

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1 MS. CHAITMAN: What you're saying is 2 Exhibit 57 shows the transactions that Malcolm 3 instructed? 4 MR. KRATENSTEIN: Correct. 5 MS. CHAITMAN: Okay. 6 Q. (By Mr. Kratenstein) Do you agree with 7 that, Mr. Madoff? 8 A. Yes. 9 Q. Thank you. And Exhibit 58, which is the 10 other side of the Sage Associates II transaction, do 11 you see again the Gateway transfer to that account 12 as directed by Mr. Sage -- 13 A. Yes. 14 Q. -- in his letter? 15 A. Uh-huh. 16 Q. Correct? 17 A. Yes. 18 MS. FEIN: Objection to form. 19 (Exhibit Numbers 59 and 60 were marked for 20 identification.) 21 Q. (By Mr. Kratenstein) Thank you. And here 22 are memos and confirms, Exhibit 59. This is going 23 to be the same set of questions, whether the 24 confirms also reflect this time Sage Associates II 25 activity we see in the letter that was marked as

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1 Exhibit 47? 2 MS. FEIN: Objection to form. 3 THE WITNESS: Yes. 4 MR. KRATENSTEIN: Thank you. Do you have 5 this one, Amanda? 6 MS. FEIN: I do. Thank you. 7 MS. CHAITMAN: What number is this? 8 MS. FEIN: 60. Andrew, was your question 9 with respect to Exhibits 59 and 60? 10 Q. (By Mr. Kratenstein) Yeah. I'm asking 11 whether on 59 and 60 they reflect the -- so it will 12 be 59 you see, Mr. Madoff, reflects the Gateway 13 transaction that is shown in Exhibit 47 at the 14 bottom under Sage Associates II; correct? 15 A. Yes, correct. 16 Q. And Exhibit 60 shows the Coca-Cola 17 transaction -- 18 A. Correct. 19 Q. -- and to be in Exhibit 47; correct? 20 A. Correct. 21 (Exhibit Number 61 was marked for 22 identification.) 23 Q. (By Mr. Kratenstein) Thank you. I'm going 24 to show you another letter. This is Exhibit 25 Number 61. Mr. Madoff, do you see that this is a

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1 letter from Mr. Sage to you on the letterhead of 2 Sage Associates and the Maurice S. Sage Foundation? 3 A. Yes. 4 Q. Do you have any reason to believe that you 5 did not receive this letter? 6 A. No. 7 Q. Do you believe the handwriting on this 8 letter to be Annette Bongiorno's? 9 A. Yes. 10 Q. Do you see that in this letter Mr. Sage 11 writes, although it's addressed to you, he writes 12 Dear Annette. Do you see that? 13 A. Correct. 14 Q. And that's Ms. Bongiorno? 15 A. Yes. 16 Q. He writes after discussions with Paul we 17 have come up with the following plan with regard to 18 the Sage Associates IS-0004 and Maurice S. Sage 19 Foundation, Inc. IS-0197 accounts. Do you see that? 20 A. Yes. 21 Q. And, again, do you have any understanding 22 of what plan Mr. Sage was talking about? 23 A. It's a tax plan. 24 Q. And do you have any understanding of what 25 he was trying to accomplish tax-wise?

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1 A. Yes. 2 Q. What was that? 3 A. To realize certain gains, gains and losses 4 based upon making a sale of security. 5 Q. Okay. And do you see that he for Sage 6 Associates directs you with respect to Emulex stock 7 to please deliver the short position -- 8 A. Right. 9 Q. -- in the seven account to the three 10 account to close out this position; correct? 11 MS. FEIN: Objection to form. 12 THE WITNESS: Correct. 13 MR. KRATENSTEIN: Sorry. What's the basis 14 for the objection? 15 MS. FEIN: You said he directs you, but 16 the letter is not only addressed to him. It also 17 has attention Annette Bongiorno right under the 18 addressee line. 19 Q. (By Mr. Kratenstein) Okay. Do you see Mr. 20 Sage directing Ms. Bongiorno, who worked for you; 21 correct? 22 A. Correct. 23 Q. To please deliver the short position in the 24 seven account to the three account to close out this 25 position in Emulex. Do you see that?

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1 A. Yes. 2 Q. The amount to be delivered is the entire 3 amount held, 220,000 shares; correct? 4 A. Correct. 5 Q. With respect to Broadcom, Mr. Sage writes 6 please deliver 15,000 shares in the seven account to 7 the three account. This will leave the remaining 8 40,000 shares in the three and seven accounts. Do 9 you see that? 10 A. Correct. 11 Q. And then with respect to the Maurice S. 12 Sage Foundation, Inc. account he says we would like 13 to withdraw the sum of $25,000. This will not 14 require the sale of any stock because this sum is 15 available in money market funds. Do you see that? 16 A. Yes. 17 Q. And do you see that in the handwriting for 18 Ms. Bongiorno the date is 12-24-02? Do you see 19 that? 20 A. Yes. 21 Q. And then he asks at the end, Mr. Sage asks 22 if you have any questions, please call him. Do you 23 see that? 24 A. Yes. 25 Q. Would you have followed these instructions?

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1 A. Yes. 2 Q. And that's the same reason as before, 3 because you have to follow the instructions of your 4 customers; correct? 5 A. Correct. 6 MS. FEIN: Objection to form. 7 (Exhibit Number 62 was marked for 8 identification.) 9 Q. (By Mr. Kratenstein) All right. Just 10 going to show you a few documents concerning whether 11 you did follow those instructions. We'll start with 12 Exhibit 62. 13 MS. FEIN: Andrew, can you just clarify 14 when you're saying you followed the instructions in 15 your questioning? 16 Q. (By Mr. Kratenstein) What did you 17 understand what I meant you follow the instructions? 18 A. What does it mean? 19 Q. Yeah. 20 A. It means I did what the client asked me to 21 do. 22 Q. And would you sometimes if a client asked 23 you to do something, would you -- who would you have 24 do it? 25 A. Usually, you know, Annette.

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1 Q. In this case it would be Annette because 2 she was working with you? 3 A. Right. 4 Q. Do you know if she would have come to you 5 -- do you know if you would have seen this letter 6 that we marked as Exhibit 61? 7 A. I either would have seen it or been told 8 about it. 9 Q. By Annette? 10 A. By Annette. 11 Q. Would that be true of all written 12 instructions from clients? 13 A. I assume so. 14 MS. FEIN: Objection to form. 15 Q. (By Mr. Kratenstein) And why do you assume 16 so? 17 A. Depends upon the -- could have been one of 18 her assistants, you know, calling me if she was not 19 available. 20 Q. But is your point that if a client gave you 21 instructions, you'd want to know about it? 22 MS. FEIN: Objection to form. 23 THE WITNESS: Correct. 24 Q. (By Mr. Kratenstein) So we've marked 25 Exhibit 62. And if you look at Exhibit 62, we

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1 talked about Emulex and Broadcom in the letter. And 2 do you see movements of Emulex and Broadcom as 3 directed in the letter reflected in this statement 4 that we marked as Exhibit 62? 5 A. Yes. 6 (Exhibit Number 63 was marked for 7 identification.) 8 Q. (By Mr. Kratenstein) Same for Exhibit 63? 9 A. Yes. 10 Q. Same question. Do you see the movements in 11 the Sage Associates account being directed by Mr. 12 Sage in his letter that we've marked as Exhibit 61 13 actually on the statements being executed? 14 A. Yes. 15 (Exhibit Number 65 was marked for 16 identification.) 17 Q. (By Mr. Kratenstein) And then with respect 18 there was a direction on the Maurice Sage 19 Foundation, so I'm going to show you Exhibit 65. 20 MS. CHAITMAN: Did we have Exhibit 64? 21 MS. DASARO: I think, yeah. 22 MS. FEIN: I think this should be 64. 23 MR. KRATENSTEIN: It should be. We might 24 have a miss. So if we have a miss, I apologize. 25 I'm not sure what happened there. Let's just call

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1 this Exhibit 65 and we'll come back and if we missed 2 64, we'll just have this gap. 3 Q. (By Mr. Kratenstein) Do you see that there 4 in the Sage -- in Exhibit 61 he's asking to withdraw 5 $25,000 and do you see that in Exhibit Number 65, 6 the $25,000 withdrawal? 7 A. Yes. 8 (Exhibit Numbers 66, 67 and 68 were marked 9 for identification.) 10 Q. (By Mr. Kratenstein) Finally, the memos 11 and/or confirms. I'm showing you Exhibit 66, 12 Exhibit 67 and Exhibit 68. And, again, Mr. Madoff, 13 do Exhibits 66 through 68 reflect the execution of 14 the instructions that were contained in the letter 15 that we marked as Exhibit 61? 16 A. Yes. 17 (Exhibit Number 69 was marked for 18 identification.) 19 Q. (By Mr. Kratenstein) Thank you. I'm 20 showing you Exhibit Number 69. Mr. Madoff, do you 21 see that this is a letter from Maurice Sage to 22 Annette Bongiorno and you on the letterhead of Sage 23 Associates and Sage Associates II? 24 MS. FEIN: Objection to form. 25 THE WITNESS: Yeah. From Malcolm Sage.

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1 Q. (By Mr. Kratenstein) From Malcolm Sage, 2 yes. 3 A. Right, yes. 4 Q. Do you have any reason to believe that you 5 did not receive this letter? 6 A. No. 7 Q. Would it have been maintained by your firm 8 after it was received? 9 A. Yes. 10 Q. Mr. Sage writes Dear Annette, just wanted 11 to touch base with you regarding certain stocks in 12 Sage Associates IS-004 and Sage Associates II 13 IS-005. To the best of my understanding the only 14 stocks which were held short against the box and not 15 grandfathered, and the word grandfathered is in 16 quotes, with respect to the constructive sales rules 17 are Broadcom, and then he puts in parentheses Sage 18 Associates, and RJR, and then he puts in parentheses 19 Sage Associates and Sage Associates II. 20 Let me just stop there for a second. We 21 talked about what a short against the box is. Do 22 you have an understanding of what Mr. Sage meant 23 when he referred to grandfathered? 24 A. Not really. 25 Q. Okay. Therefore -- then he goes on in his

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1 sentence and says, therefore, I assume that these 2 positions will be bought into prior to January 30 so 3 as to avoid a constructive sale. Do you see that? 4 A. Yes. 5 Q. Do you understand him to be instructing you 6 to buy into Broadcom and RJR? 7 MS. FEIN: Objection to form. 8 THE WITNESS: Yes. 9 MR. KRATENSTEIN: What's the basis for the 10 objection? 11 MS. FEIN: This letter is addressed to 12 Annette, the letterhead is Annette and it's also 13 Dear Annette and you're saying instructing you, 14 directing you. I just -- I have an objection to 15 that in the past and in the future. 16 MR. KRATENSTEIN: I will fix. Thank you. 17 Q. (By Mr. Kratenstein) Do you see that the 18 letter is addressed both to you and Ms. Bongiorno, 19 Mr. Madoff? 20 MS. FEIN: Objection. I don't -- the firm 21 name is listed here underneath Annette's name. I 22 don't see that this letter is addressed to both Mr. 23 Madoff and Annette. 24 Q. (By Mr. Kratenstein) I see. Okay. So Mr. 25 Madoff, going back to prior testimony, is this the

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1 type of letter that you would have expected Ms. 2 Bongiorno to show you? 3 A. Yes. 4 Q. And do you have any reason to believe that 5 she did not show it to you? 6 A. Either showed me or told me on the phone. 7 Q. Okay. And when this letter says I assume, 8 Mr. Sage writes I assume that these positions will 9 be bought into prior to January 30 so as to avoid a 10 constructive sale, do you understand Mr. Sage to be 11 directing your firm to follow those instructions? 12 A. Correct. 13 (Discussion off the record.) 14 Q. (By Mr. Kratenstein) And do you have any 15 recollection of the tax law being changed with 16 respect to short against the box transactions and 17 certain of those transactions being grandfathered? 18 A. Yes, yes. 19 Q. What do you recall of that? 20 A. I recall that it happened. I can't tell 21 you the details. 22 (Exhibit Number 70 was marked for 23 identification.) 24 Q. (By Mr. Kratenstein) Okay. And now we're 25 just going to go through the same drill and I'm

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1 going to ask you through statements whether any of 2 these transactions being directed in Exhibit 70 show 3 -- 69 rather show up on the Sage Associates 4 statements as Exhibit 70? 5 MS. FEIN: Objection to form. Thank you. 6 Q. (By Mr. Kratenstein) And do you see that 7 this is a January 31, 2003 Sage Associates 8 statement? 9 A. Yes. 10 Q. And do you see in the middle it shows 11 buying into RJR and Broadcom? 12 A. Yes. 13 Q. And is that as instructed in Exhibit 69? 14 A. Yes. 15 MR. KRATENSTEIN: You can put that 16 document aside and now we'll just do the memos or 17 confirms quickly, Exhibit 71. Make sure this is 18 right. Thanks. 19 (Exhibit Numbers 71 and 72 were marked for 20 identification.) 21 Q. (By Mr. Kratenstein) Exhibit 71, and here 22 is Exhibit 72. And if you look at Exhibit 71 and 23 72, what are they? 24 A. Confirmations. 25 Q. Of what?

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1 A. Sage Associates, R. J. Reynolds and 2 Broadcom. 3 Q. And those are the transactions reflected in 4 Exhibit 69 -- 5 A. Correct. 6 Q. -- being executed by your firm? 7 A. Yes. 8 (Exhibit Number 73 was marked for 9 identification.) 10 Q. (By Mr. Kratenstein) One more to go. 11 Here's Exhibit 73. Are you okay, Mr. Madoff? You 12 need a break? 13 A. No. I'm fine. 14 Q. Okay. We're almost there. I'm showing you 15 Exhibit 73, Mr. Madoff, which do you see that it's a 16 letter to Bernard L. Madoff Investment Securities, 17 attention, Annette Bongiorno, from Malcolm Sage? 18 A. Yes. 19 Q. It's on the letterhead of Sage 20 Associates -- 21 A. Uh-huh. 22 Q. -- and Sage Associates II and the Maurice 23 S. Sage Foundation? 24 A. Yes. 25 Q. Do you have any reason to believe you would

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1 not have been made aware of this letter by Ms. 2 Bongiorno? 3 A. No. 4 Q. In other words, she would have made you 5 aware of it; correct? 6 A. Yes. 7 Q. And do you have any reason to believe that 8 Ms. Bongiorno did not receive this letter? 9 A. No. 10 Q. Do you see the handwriting on the letter? 11 A. Yes. 12 Q. Is that Ms. Bongiorno's? 13 A. Definitely. 14 Q. How do you recognize it? 15 A. I recognize the handwriting now that I'm 16 looking at it. 17 Q. Okay. The letter says -- and I'm sorry. 18 You recognize it from having worked with her; 19 correct? 20 A. Yes. 21 Q. And Mr. Sage writes after discussions with 22 Paul, we have come up with the following plan with 23 regards to Sage -- the Sage Associates IS-004, Sage 24 Associates II IS-005 and Maurice S. Sage Foundation, 25 Inc. IS-197 accounts. Do you see that?

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1 A. Yes. 2 Q. And, again, do you have any understanding 3 of what this plan was? 4 A. It's just a tax plan realizing gains when 5 you have a short against the box transaction. 6 Q. Do you understand what Ms. Bongiorno's 7 notes mean on this left-hand margin? 8 A. By looking at -- by her saying $3 million 9 gain, it's realizing only part of the transaction. 10 Q. What do you mean by that? 11 A. In other words, she must have more shares 12 than she wants to sell. 13 Q. Okay. And then it says in a box no 14 long-term. Do you see that? 15 A. Yes. 16 Q. Do you have an understanding -- 17 A. She doesn't want -- 18 Q. Let me finish. Do you have an 19 understanding of what that means? 20 A. Not to receive -- doesn't -- do not take a 21 long-term gain. 22 Q. That would be for a tax reason? 23 A. Yes. 24 Q. Under Sage Associates there are four 25 transactions being directed. Do you see that?

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1 A. Yes. 2 Q. And under Sage Associates II there's one 3 transaction? 4 A. Yes. 5 Q. Under Maurice S. Sage Foundation there's 6 one transaction; correct? 7 A. Yes. 8 Q. Would these transactions have been 9 executed? 10 A. Yes. 11 Q. And that's because your firm would follow 12 your client's instructions; correct? 13 A. Correct. 14 (Exhibit Number 74 was marked for 15 identification.) 16 Q. (By Mr. Kratenstein) Let's just again go 17 through the quick drill of confirming whether these 18 show up on the statements and in the memos and 19 confirms, so I'm going to put this letter here. I'm 20 going to show you Exhibit 74, which is the 21 December 31, 2013 Sage Associates statement -- 22 sorry -- 2003 Sage Associates statement. Do you see 23 that? 24 A. Yes. 25 Q. And do you see the transfer of the Amgen

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1 and Symantec as directed -- 2 A. Yes. 3 Q. -- in Exhibit 73? 4 A. Yes. 5 (Exhibit Number 75 was marked for 6 identification.) 7 Q. (By Mr. Kratenstein) And I'm going to show 8 you Exhibit 75. And in Exhibit 75, do you see that 9 that is a December 31, 2003 Sage Associates 10 statement? 11 A. Yes. 12 Q. And do you see there the transactions that 13 had been directed by Mr. Sage with respect to 14 National Semiconductor, RJR, Amgen and Symantec? 15 A. Yes. 16 MS. FEIN: We didn't receive that. 17 MR. KRATENSTEIN: Oh, you didn't get that 18 one? I'll just make sure I have the right one. 19 Yes. 20 MS. FEIN: Thank you. Yes. 21 MS. CHAITMAN: That's Exhibit 74? 22 MS. FEIN: This is Exhibit 75; right? 23 MR. KRATENSTEIN: It's Exhibit 75. 24 MS. CHAITMAN: I'll ask do you have 25 another one?

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1 MR. KRATENSTEIN: Yes. 2 MS. CHAITMAN: Thanks. 3 (Exhibit Numbers 76, 77, 78 and 79 were 4 marked for identification.) 5 Q. (By Mr. Kratenstein) And now let's just do 6 the memos and confirms quickly and we're almost 7 done. Here's Exhibit 76, Exhibit 77 -- 8 MS. FEIN: Thank you. 9 Q. (By Mr. Kratenstein) -- and 78 and 79. 10 Mr. Madoff, have you had an opportunity to look at 11 what we've marked as Exhibits 70 -- what is it? 76, 12 77, 78 and 79? 13 A. Yes. 14 Q. And can you tell me what those documents 15 are? 16 A. Confirmations. 17 Q. Do they reflect the instructions with 18 respect to the -- the execution of the instructions 19 with respect to the Sage Associates account that are 20 contained in the letter that we marked as Exhibit 21 Number 73? 22 A. Yes. 23 (Exhibit Numbers 80 and 81 were marked for 24 identification.) 25 Q. (By Mr. Kratenstein) Thank you. And there

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1 were in that letter instructions for Sage Associates 2 II, so let's just look at those statements quickly. 3 This is Exhibit Number 80 and Exhibit 81. 4 And just to refresh your recollection, with 5 respect to Sage Associates II in the letter 6 Exhibit 73, there's an instruction with respect to 7 Symantec for Sage Associates II. And I'm going to 8 ask if you see on Exhibits 80 and 81 the execution 9 of that instruction? 10 A. Yes. 11 Q. And Exhibit -- just so the record is clear, 12 Exhibit 80 is a Sage Associates II statement from 13 December 31, 2003. That's for the sub three 14 account. And the next exhibit, 81, is a Sage 15 Associates II statement, also December 31, 2003, for 16 the seven subaccount of Sage Associates II; correct? 17 A. Yes. 18 (Exhibit Number 82 was marked for 19 identification.) 20 Q. (By Mr. Kratenstein) Thank you. Finally, 21 the confirm. This is Exhibit 82. Is that a -- what 22 is Exhibit 82? 23 A. It's a memo. 24 Q. It's a memo? Does it -- 25 A. Showing movement of monies.

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1 Q. Does the second page show the Symantec 2 move? 3 A. Yes. 4 Q. Thank you. And, finally, at the end of the 5 letter, Exhibit 73, you'll see that there's a 6 request to withdraw the sum of $16,000. Do you see 7 that? 8 A. Yes. 9 (Exhibit Number 83 was marked for 10 identification.) 11 Q. (By Mr. Kratenstein) I'm just showing you 12 Exhibit Number 83. Do you recognize Exhibit 83? 13 A. Yes. 14 Q. What is it? 15 A. A check, memo for a check. 16 Q. For how much? 17 A. Sixteen thousand dollars. 18 Q. To the Maurice S. Sage Foundation? 19 A. Yes. 20 Q. That shows the execution of the instruction 21 at the end of Exhibit 73, the letter? 22 A. Correct. 23 (Exhibit Number 84 was marked for 24 identification.) 25 Q. Thank you. We'll put that aside. I'm

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1 showing you Exhibit 84. Do you recognize 2 Exhibit 84, Mr. Madoff? 3 A. Yes. 4 Q. What is it? 5 A. It's a note from Annette. 6 Q. And you recognize her handwriting? 7 A. Yes. 8 Q. Would this document have been prepared -- 9 well, strike that. Are you familiar with year-end 10 note documents prepared by Ms. Bongiorno? 11 A. Yes. 12 Q. How are you familiar with them? 13 A. I've seen it before. 14 Q. She prepared them in the ordinary course of 15 her business? 16 A. Yes. 17 Q. And it was a regular part of her 18 responsibilities to create notes like this? 19 A. Yes. 20 Q. And these documents would have been kept, a 21 document like this one would have been kept under 22 your firm's custody or control? 23 A. Yes. 24 Q. Do you see that there are notes here for 25 the Sage group?

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1 A. Yes. 2 Q. And do you understand that to be referring 3 to the Sage family accounts we've been talking 4 about? 5 A. Yes. 6 Q. And do you have an understanding of what 7 the notes on the first page if you look at them 8 mean? 9 A. I can't even read it. 10 Q. Okay. Well, do you see the second sentence 11 says -- tell me if you disagree with this -- could 12 have gone SAB in eBay but cust did not want it? 13 A. Correct. 14 MS. FEIN: Objection to form. 15 Q. (By Mr. Kratenstein) Correct? 16 A. Could have brought short against the box on 17 eBay, but customer did not want it. 18 Q. Do you understand that a member of the Sage 19 family was instructing your firm not to go short 20 against the box on eBay? 21 A. Yes. 22 Q. Would your firm have followed that 23 instruction? 24 A. Yes. 25 (Exhibit Number 85 was marked for

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1 identification.) 2 Q. (By Mr. Kratenstein) You can put that 3 document aside. Exhibit 85. Mr. Madoff, do you see 4 that this is a letter from Malcolm Sage to you? 5 A. Yes. 6 Q. Any reason to believe that you did not 7 receive this letter? 8 A. No. 9 Q. He writes Dear Bernie, it was nice to see 10 you at Ruth -- it was nice to see you and Ruth at 11 Paul's party. Do you see that? 12 A. Yes. 13 Q. And I'll skip some of the rest and I'll go 14 to the second paragraph. In the second sentence he 15 says, quote, when we spoke last year we decided that 16 it would be best to transition away from the managed 17 portfolio accounts. 18 And then he goes on to say a sentence later 19 or two sentences later since then our main holding, 20 eBay, has dropped significantly. As that holding is 21 a long-term one, I was hoping that you had shorted 22 it against the box a while back. If you have a 23 chance, can you confirm that? Do you see that? 24 A. Yes. 25 Q. And do you have any recollection as to

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1 whether you had, in fact, shorted against the box as 2 Mr. Sage had hoped? 3 A. When was this letter written? I don't 4 know. 5 (Exhibit Number 86 was marked for 6 identification.) 7 Q. (By Mr. Kratenstein) Well, let me see if I 8 can refresh your recollection. He didn't date his 9 letters for whatever reason, so we have to match 10 them up against statements and/or confirms and 11 memos. So I'm going to show you Exhibit 86. And do 12 you see that this is a Sage Associates account 13 statement for April 30, 2006? 14 A. Yes. 15 Q. And do you see that there are various short 16 against the box positions for eBay? 17 A. I see sales transactions on eBay, right. 18 (Exhibit Number 87 was marked for 19 identification.) 20 Q. (By Mr. Kratenstein) Sorry. Sales 21 transactions, correct. And then if we look at 22 Exhibit 48 -- I'm sorry -- Exhibit 87. I apologize. 23 These are memos from this time period. If you look, 24 April 2006, memos and/or confirms. If you'll just 25 take a look at those and tell me what you see in

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1 Exhibit 87? What are those? 2 A. I'm looking now. These are all 3 confirmations. 4 Q. And do you see that they say short against 5 the box? 6 A. Yes. 7 Q. So those would have been short against the 8 box transactions? 9 A. Correct. 10 Q. Presumably as requested in the letter that 11 we marked as Exhibit 85? 12 A. Yes. 13 (Exhibit Number 88 was marked for 14 identification.) 15 Q. (By Mr. Kratenstein) Thank you. Last 16 letter, last one. This is Exhibit 88. Mr. Madoff, 17 do you see that Exhibit 88 is a letter from Malcolm 18 Sage to you? 19 A. Yes. 20 Q. And it's got handwriting on it? 21 A. Yes. 22 Q. Whose handwriting? 23 A. Annette's. 24 Q. And, again, you recognize that from your 25 time working with her?

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1 A. Yes. 2 Q. Do you have any reason to believe that you 3 did not receive this letter? 4 A. No. 5 Q. Do you see that Mr. Sage is writing to you, 6 Mr. Madoff, about sale of certain Sage Associates' 7 positions? 8 A. Yes. 9 Q. And he says Martin and I recently met with 10 Paul. Let me stop there. Do you understand Martin 11 to be Malcolm's brother, Martin Sage? 12 A. Yes. 13 Q. Martin and I recently met with Paul in 14 regard to selling our positions in the Sage 15 Associates accounts and to transfer the proceeds 16 into index option accounts. Do you see that? 17 A. Right, yes. 18 Q. And do you have an understanding of what he 19 meant by index option accounts? 20 A. That's a split strike transaction. 21 Q. So prior to this date in Sage Associates it 22 was directed trading and he's now talking about 23 moving to split strike? 24 MS. FEIN: Objection. 25 THE WITNESS: Right.

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1 Q. (By Mr. Kratenstein) Your answer was? 2 A. Correct. 3 Q. Thank you. And if you look on the second 4 page, you can see at the bottom that Ms. Bongiorno's 5 notes have dates in them, one being 8-23-06. Do you 6 see that at the bottom? 7 A. Yes. 8 Q. So do you believe that these notes were 9 created on or around August 23rd, 2006? 10 A. Yes. 11 Q. And Mr. Sage talks about -- he says, quote, 12 he referring presumably to Paul; correct? 13 A. Right. 14 Q. Had some ideas from a tax standpoint and 15 suggested that he with us meet with you at your 16 availability to finalize the transfer and the timing 17 thereof. Do you see that? 18 A. Yes. 19 Q. Do you recall whether you, in fact, met? 20 A. No. 21 Q. You may have, you just don't recall? 22 A. Correct. 23 Q. Then Mr. Sage writes the only concern he 24 had of any immediacy was that we not buy back into 25 the eBay short position because that would trigger a

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1 short-term recognition as opposed to, quote, 2 delivering, unquote, the stock. Do you see that? 3 A. Yes. 4 Q. Do you have an understanding of what Mr. 5 Sage was talking about there? 6 A. Yes. He wanted us to deliver the 7 securities as opposed to -- I'm not sure whether he 8 was talking about delivering the securities from one 9 account to the other account, you know, to trigger a 10 particular gain or whether he was talking about 11 delivering the securities out, period, out of the 12 firm. 13 Q. Okay. But he is telling you that he 14 doesn't want you to buy back into the eBay short; 15 correct? 16 A. Right. 17 Q. And that's an instruction from him? 18 A. Yes. 19 Q. You would have followed that instruction? 20 A. Yes. 21 MS. FEIN: Objection. 22 Q. (By Mr. Kratenstein) Would you have 23 followed that instruction? 24 A. Yes. 25 Q. In the notes at the bottom Ms. Bongiorno --

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1 well, first, notes at the top Ms. Bongiorno writes 2 ask Bernie about this. Do you see that? 3 A. Yes. 4 Q. Do you recall being asked about this? 5 A. Do I recall? No. I can't -- 6 Q. Right. 7 A. I can't say that I do. 8 Q. Right. It's too long ago? 9 A. Yes. 10 Q. Okay. You may have been asked about it, 11 but you just can't remember? 12 A. That's correct. 13 Q. At the bottom she writes don't do anything. 14 We cannot -- the next word may be trim or tran. Do 15 you have any idea? 16 A. Must be transfer. 17 Q. Transfer everything and leave open short 18 eBay. Do you see that? 19 A. Yes. 20 Q. Do you have an understanding of what she's 21 saying there? 22 A. She's telling us to leave the positions as 23 they appear, as they are. 24 Q. Okay. And then on the next page she writes 25 about several calls she had with Malcolm Sage. Do

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1 you see that? 2 A. Yes. 3 Q. So she writes first I called Malcolm Sage 4 end of June to say the accounts were as close to 5 even and should we do the transfers, exclamation 6 point. Do you see that? 7 A. Yes. 8 Q. He said he would talk to Paul, call back. 9 Do you see that? 10 A. Yes. 11 Q. So is it fair to say that Ms. Bongiorno was 12 seeking instruction from Mr. Sage? 13 A. Yes. 14 Q. Next note, called again end of July. He 15 said he didn't get a chance to get to talk to Paul 16 and he will call me back. Do you see that? 17 A. Yes. 18 Q. And, again, do you understand Ms. Bongiorno 19 to be seeking instructions from Mr. Sage? 20 A. Yes. 21 Q. Last note, called again 8-23-06. He said 22 the or he, it's hard to tell, promises to call me 23 back by Tuesday, August 29, 8-29, exclamation point. 24 Do you see that? 25 A. Yes.

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1 Q. And, again, fair to say that Ms. Bongiorno 2 was looking for direction from Mr. Sage? 3 A. Correct. 4 Q. Okay. We have talked about the Sage 5 Associates account and the fact that it was not a 6 split strike account; correct? 7 A. Correct. 8 Q. And we can pull out the year-end account 9 statements if you like, but we've marked a couple of 10 them. We marked the December 31, '02 and we marked 11 other year-end statements for Sage Associates during 12 the course of this deposition, but at the end of the 13 year in a split strike account what would -- what 14 types of securities would be in the account? 15 A. Typically, a basket of S&P 100 securities 16 and index options hedging that account. 17 Q. But at the end of the year didn't you go to 18 treasuries and cash in most accounts? 19 A. At the end of the year? 20 Q. Yes. 21 A. What period are you talking about? 22 Q. Well, was there ever a period when in split 23 strike accounts you would at the end of the year at 24 least on the statements show that you had liquidated 25 the portfolio of securities in that account and

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1 moved it into treasuries and cash? 2 A. What period are you talking about because 3 we weren't -- I didn't actually do the split strike 4 trade -- 5 Q. Correct. 6 A. -- at a certain period of time post-1992. 7 Q. I'm talking about post-1992. 8 A. Well, then we wouldn't have gone into the 9 -- we never would have done the transaction. 10 Q. Right. 11 A. So the monies could have been in 12 treasuries, you know, but it wouldn't be fair to say 13 that we were actually executing the split strike 14 trade post-1992. 15 Q. Right. But on a customer statement 16 post-1992 at the end of the year what would you 17 show? 18 A. It would appear. It would appear in 19 treasuries. 20 Q. And in the Sage Associates year-end 21 statements would you show treasuries or would you 22 show actual positions? 23 MS. FEIN: Objection. 24 THE WITNESS: If it was in a split strike 25 strategy, we would not show the positions typically.

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1 We would just show treasuries, which is a position. 2 Q. (By Mr. Kratenstein) Right. And if it was 3 not in split strike, what would you show? The 4 actual securities that were there? 5 A. Yes. 6 Q. And so, for example -- let me pull out the 7 document. Hang on. 8 MS. CHAITMAN: Is that Exhibit 80? 9 Q. (By Mr. Kratenstein) Here's Exhibit 63, 10 which we've already marked. So here's Exhibit 63. 11 See, it's a Sage Associates account statement for 12 12-31-02? 13 A. Correct. 14 Q. And this is for the sub three account? 15 A. Yes. 16 Q. And you're showing actual securities in the 17 account at the end of the year, not treasuries and 18 cash? 19 A. Correct. 20 Q. And that shows it's not split strike; 21 right? 22 A. Correct. 23 Q. Your split strike accounts, they would 24 generate on paper steady returns; correct? 25 A. Depends upon what period you're talking

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1 about. 2 Q. Post-1992? 3 A. Yes. 4 Q. Of 10 to 20 percent; correct? 5 A. No. 6 Q. What was the general -- 7 A. Talking about an annualized return? 8 Q. Annualized? 9 A. Yes. 10 Q. So 10 to 20 percent annually? 11 A. Correct. 12 Q. For an account like the Sage Associates 13 account which was not split strike and which was 14 showing actual securities, what kind of returns 15 would that type of account show? 16 A. I have no idea. It depends. 17 Q. It would depend on the type of securities 18 in the account; right? 19 A. That's right. 20 Q. It wouldn't be a steady return? 21 A. No. Could be, but depends upon there were 22 never really steady returns. That's been mentioned 23 before. There was some -- there was some -- you 24 know, depends upon the strategy and depends upon the 25 period of time. It could have been -- if you're

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1 talking about at the end of the month or the end of 2 the quarter, the returns could be all over the 3 place. 4 Q. So in Sage Associates in 2002, for 5 example -- 6 A. Yes. 7 Q. -- if Malcolm Sage was directing you to buy 8 and sell securities in Sage Associates; correct? 9 A. Yes. 10 Q. And you were holding those securities; 11 correct? 12 A. Yes. 13 Q. The Sage Associates accounts certainly in 14 2002 and any other year in which that type of 15 trading was being done would reflect the return of 16 the transactions that were executed in the account; 17 correct? 18 A. Correct. 19 Q. And that may not be a steady return? It 20 would follow the market for those securities; 21 correct? 22 MS. FEIN: Objection. 23 THE WITNESS: Correct. 24 Q. (By Mr. Kratenstein) Correct? 25 A. Yes.

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1 MR. KRATENSTEIN: Thank you very much, Mr. 2 Madoff. I have no further questions at this time. 3 Why don't we take a break? 4 MR. GOLDMAN: Your food from the wherever 5 they make it is here. 6 THE VIDEOGRAPHER: Going off the record. 7 The time is 11:09. 8 (A recess was taken and Exhibit 53A was 9 marked for identification.) 10 THE VIDEOGRAPHER: Back on the record. 11 The time is 11:58. 12 Q. (By Mr. Kratenstein) Mr. Madoff, it was 13 pointed out during your examination that we had an 14 error in one of our exhibits, so I just want to 15 correct the error. 16 I put in front of you, back in front of you 17 Exhibit 47, which was the -- a letter from Malcolm 18 Sage to Bernard L. Madoff Investment Securities. 19 And it says Dear Bernie -- we marked it as 20 Exhibit 47. One of the transactions in that letter 21 under 1(c) involved movement of International Paper 22 moving the short position from the Sage Associates 23 seven account to the three account. Do you see 24 that? 25 A. Yes.

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1 Q. And I had showed you as Exhibit 53 memos 2 and/or confirms relating to that and it was pointed 3 out that we had some mispagination. So I'm showing 4 you Exhibit 53A, which bears production numbers Sage 5 0004290 to 91. Do you see that? 6 A. Uh-huh. 7 Q. And can you tell me what that is? 8 A. It's a credit memo. 9 Q. And that shows the transfer of the 10 international paper short position from the seven 11 account to the three account -- 12 A. Right. 13 Q. -- as reflected -- 14 A. Right. 15 Q. -- as instructed rather in Exhibit 47? 16 A. Correct. 17 Q. And you would have these memos instead of 18 confirms because it's an internal transfer? 19 A. That's correct. 20 Q. If you were doing a -- you'd have a confirm 21 when you were actually buying or selling? 22 A. Right. 23 MR. KRATENSTEIN: Thank you very much. 24 That concludes my direct examination. Thank you. 25 MS. FEIN: I understand from you, Helen,

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1 that you're not planning to do an examination today. 2 We are waiting until the direct examination of Mr. 3 Madoff is finished to start our cross-examination. 4 That's what was contemplated by the order that was 5 entered by this Court September 11th, 2017 regarding 6 Mr. Madoff's second day deposition. 7 To the extent for whatever reason that we 8 don't have time to finish our cross-examination 9 tomorrow, we will object to the use of the testimony 10 and move to strike the direct testimony. Thanks. 11 MR. KRATENSTEIN: Before you go off, I 12 want to make sure I understand that. If you don't 13 have time to finish your cross tomorrow, you reserve 14 the right to strike everything we did today? 15 MS. FEIN: What I should say is to the 16 extent we're not permitted equal time to finish 17 tomorrow, so if for some reason Mr. Madoff is 18 unavailable tomorrow or there's some reason where we 19 don't have sufficient time in one day; not that we 20 would need -- be seeking future days after that, but 21 as long as we are provided what the order 22 contemplated, which is one day of direct testimony 23 and we shouldn't need more than that and that's what 24 we've agreed to, then that's all that we would need. 25 MR. KRATENSTEIN: Okay. Well, I think I

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1 understand your position, but we reserve all 2 rights -- 3 MS. FEIN: Certainly. 4 MR. KRATENSTEIN: -- and cross these 5 bridges if and when we get to them. 6 MS. FEIN: Certainly. Thank you. 7 MR. KRATENSTEIN: Thanks. 8 THE VIDEOGRAPHER: We're off the record in 9 the November 8th, 2017 deposition of Bernard L. 10 Madoff, Volume III. The number of discs used was 11 one. The time is 12:02. 12 (Reading and signing of the deposition by 13 the witness was reserved and the deposition was 14 adjourned at 12:02 p.m.) 15 16 * * * * * 17 18 19 20 21 22 23 24 25

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1 C E R T I F I C A T E 2 NORTH CAROLINA: 3 GUILFORD COUNTY: 4 I hereby certify that the foregoing 5 deposition was reported, as stated in the caption, 6 and the questions and answers thereto were reduced 7 to the written page under my direction; that the 8 foregoing pages 386 through 493 represent a true and 9 correct transcript of the evidence given. I further 10 certify that I am not in any way financially 11 interested in the result of said case. 12 I have no written contract to provide 13 reporting services with any party to the case, any 14 counsel in the case, or any reporter or reporting 15 agency from whom a referral might have been made to 16 cover this deposition. I will charge my usual and 17 customary rates to all parties in the case. 18 This, the 21st day of November, 2017. 19 20 <%Signature%> 21 22 K. Denise Neal, RPR Registered Professional Reporter 23 Notary Public No. 200517500101 24 25

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1 E R R A T A S H E E T 2 3 Pursuant to Rule 30(7)(e) of the Federal Rules 4 of Civil Procedure, any changes in form or substance 5 which you desire to make to your deposition 6 testimony shall be entered upon the deposition with 7 a statement of the reasons given for making them. 8 9 To assist you in making any such corrections, 10 please use the form below. If supplemental or 11 additional pages are necessary, please furnish same 12 and attach them to this errata sheet. 13 * * * * * 14 I, the undersigned, BERNARD L. MADOFF, do hereby 15 certify that I have read the foregoing deposition 16 and that to the best of my knowledge said deposition 17 is true and accurate (with the exception of the 18 following corrections listed below). 19 20 21 22 23 24 25

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1 Page Line should read: 2 Reason for change: 3 4 Page Line should read: 5 Reason for change: 6 7 Page Line should read: 8 Reason for change: 9 10 Page Line should read: 11 Reason for change: 12 13 Page Line should read: 14 Reason for change: 15 16 Page Line should read: 17 Reason for change: 18 19 Page Line should read: 20 Reason for change: 21 Signature: 22 Sworn to and Subscribed before me 23 , Notary Public. 24 This day of , 2017. 25 My Commission Expires:

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& 12 388:14 1996 408:24 424:5 3000 386:20 & 387:14 395:3 12-13-79 389:12 424:8 426:15 394:13 404:22 413:17,19 12-24-02 455:18 1997 424:19 303-4568 387:8 414:25 417:5 12-31-02 484:12 426:10,16 30th 414:18 441:4 438:13 12-31-03 392:24 19th 421:10 31 403:24 413:6 393:4,10,12 416:23 417:19 0 2 12-31-81 389:20 419:21 422:23 2,099 423:9 0004 453:18 12-31-96 390:6 424:5,19 426:10 20 450:5,14,18,19 0004290 488:5 12:02 490:11,14 428:12 431:4 485:4,10 0009352 426:2 13th 406:14 407:5 433:20 434:12 2000 399:22 004 437:14 460:12 409:17 411:1 463:7 467:21 2001 441:4 465:23 15,000 455:6 468:9 470:13,15 2002 486:4,14 005 437:14 460:13 16 446:22 482:10 2003 463:7 467:22 465:24 16,000 471:6 32 389:9 403:11,16 468:9 470:13,15 00709388 411:9 160 411:11 410:15 200517500101 0091185 430:6 16th 408:24 33 389:11 405:23 491:23 00941185 431:14 17 389:11 390:11 406:3,6 408:13 2006 475:13,24 0197 453:19 406:12 407:22 409:3,16 410:4,15 478:9 02 482:10 409:4,16 410:1 34 389:13 408:13 2013 467:21 08-01789 386:7 430:17 408:14 412:20,22 2017 386:22 394:21 184 431:22 412:23,25 394:10 489:5 0964437 418:15 185 430:11 34,780 432:21 490:9 491:18 1 197 465:25 433:2 434:23 493:24 1976 397:24 340 387:15 1 439:25 487:21 212 387:17 388:9 1979 403:24 35 389:15 408:14 1-31-03 392:18 21st 491:18 406:14 407:5 408:17,22 1-31-83 389:22,23 220,000 455:3 409:17 411:1 36 389:17 414:4,7 1-31-97 390:8 224 448:11,17 1980 413:6 414:14 10 485:4,10 23rd 423:15 478:9 1981 414:18 37 389:19 416:9,19 100 482:15 24th 424:8 416:23 38 389:21 417:11 10022 387:7 25,000 455:13 1983 417:19 417:14 10111-0100 388:8 459:5,6 419:21 386 491:8 10173-1922 29 481:23 1985 431:4 433:9 39 389:23 419:15 387:16 290 446:9 433:21 434:12 419:17 10573 388:15 3 10:13 436:9 1986 421:1,10 395 389:3 11-30-01 390:18 1992 398:16,22 3 466:8 4 416:6 483:6,7,14 3-31-80 389:14 390:20 4,198 423:14 483:16 485:2 30 421:1 461:2 11:09 487:7 4-2 446:21 1994 422:23 462:9 475:13 11:58 487:11 4-30-06 393:19 423:10 428:12 492:3 11th 489:5 40 389:24 420:23 420:25 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 111 of 132

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40,000 455:8 449 391:14 5-31-85 390:14 600,000 440:1 403 389:9 45 388:7 390:11 430:18 433:20 442:8,17 448:19 405 389:11 429:22 430:4 5-31-94 390:4 60s 397:15 408 389:15 450 391:16 50 390:21 427:4 61 391:22 452:21 41 390:3 422:19,22 451 391:18,20 442:11,13,19 452:25 457:6 412 389:13 452 391:22 443:12,13 458:12 459:4,15 414 389:17 456 391:23 51 390:23 442:21 62 391:23 456:7,12 416 389:19 458 392:3,7 443:9,14,15 457:25,25 458:4 417 389:21 459 392:9,11,13,15 449:11 63 392:3 458:6,8 419 389:23 46 390:13 433:15 52 391:3 442:21 484:9,10 42 390:5 423:24 433:16,19 443:9 64 392:5 458:20,22 424:2 426:14 462 392:17 53 391:5 426:2 459:2 427:8,22 463 392:19,20 442:21 443:22 65 392:7 458:15,19 420 389:24 464 392:21 444:5,20 445:2,4,7 459:1,5 422 390:3 465 387:6 445:8,14 488:1 66 392:9 459:8,11 4222 449:4 467 392:23 53a 391:7 487:8 459:13 4223 449:4 468 393:3 488:4 67 392:11 459:8,12 4224 449:4 469 393:5,6,7,8,9 54 391:8 444:22,25 68 392:13 459:8,12 423 390:5 393:11 447:14 459:13 424 390:7 47 390:15 436:6,14 547-5695 387:17 69 392:15 459:17 428 390:9 441:8 449:13,23 55 391:10 447:19 459:20 463:3,13 429 390:11 450:23 452:1,13 447:22 448:3,23 464:4 4290 446:13,17 452:19 487:17,20 449:11 6th 423:10 4291 446:15,17 488:15 56 391:12 448:15 7 4292 446:15,17,18 47,814 424:8 448:19 7 492:3 4293 446:18 470 393:13 57 391:14 449:16 7-31-94 390:10 4294 446:7 471 393:14,15 449:24,25 450:15 70 392:17 462:22 43 390:7 424:11,15 474 393:16 450:16,21 451:2 463:2,4 469:11 425:20,22 427:8 475 393:18,20 58 391:16 450:9,12 71 392:19 463:17 427:22 476 393:21 450:25 451:9 463:19,21,22 433 390:13 48 390:17 440:23 589-4621 388:9 72 392:20 463:19 436 390:15 441:1 475:22 59 391:18 451:19 463:22,23 44 390:9 428:2,8 487 391:7 451:22 452:9,11 73 392:21 464:8,11 440 390:17 49 390:19 441:20 452:12 464:15 468:3 441 390:19 441:23 6 469:21 470:6 442 390:21,23 493 491:8 6 440:12 471:5,21 391:3,5 5 6-30-81 389:18 74 392:23 467:14 444 391:8 5 389:15 410:1 6-30-86 389:25 467:20 468:21 447 391:10 5,000 432:13 60 391:20 451:19 75 386:21 393:3 448 391:12 5-16-96 389:16 452:8,9,11,16 394:13 468:5,8,8 468:22,23 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 112 of 132

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76 393:5 469:3,7 9381 410:6,10,13 488:11 afein 388:10 469:11 94 424:21 425:3 accountant 397:9 affiliated 396:12 77 393:6 469:3,7 446:15 437:19 agency 491:15 469:12 941185 430:12 accounts 398:4,6 agent 412:7 78 393:7 469:3,9 96 424:25 398:12,22 399:6 agents 433:8 469:12 964437 418:16 400:16 402:21,23 ago 428:2 480:8 79 393:8 469:3,9 965279 434:19,22 403:14 404:8 agree 394:7 469:12 9:00 386:22 432:7 436:12,20 443:24 451:6 8 394:11 437:15 438:10 agreed 489:24 9:40 429:18 442:4 453:19 akratenstein 8-23-06 478:5 9:51 429:21 455:8 465:25 387:18 481:21 9:57 436:5 473:3 474:17 alcan 404:21 8-29 481:23 477:15,16,19 alpern 397:12 80 393:9 469:23 a 481:4 482:18,23 amanda 388:4 470:3,8,12 484:8 a.m. 386:22 484:23 486:13 395:14 452:5 81 393:11 469:23 394:11 accumulating america 411:11,15 470:3,8,14 abercrombie 422:9 411:18 412:3,5,14 82 393:13 470:18 438:13 439:22 accurate 492:17 412:16,18 417:20 470:21,22 accomplish 453:25 acting 419:5 418:2,4,8,12,24 83 393:14 471:9,12 account 389:14,18 actions 438:8 419:2,19 420:15 471:12 389:20 398:9 activity 389:9 american 404:22 84 393:15 471:23 399:7 400:23 390:14 403:22 413:17,19 414:25 472:1,2 403:6,21,22 404:2 404:18 417:23 417:5 85 393:16 431:24 404:19 405:4,14 434:2 451:25 amgen 467:25 431:25 473:25 406:10 408:5 actual 416:2 420:9 468:14 474:3 476:11 410:17 412:1,2 421:14 423:20 amount 445:22 86 393:18 475:5,11 413:5,11 414:21 427:18 429:5 455:2,3 87 393:20 475:18 417:25 418:9 433:10 435:5 andrew 387:13 475:22 476:1 421:2 429:25 444:17 483:22 395:2 412:13 88 393:21 476:13 430:2,24 434:2 484:4,16 485:14 431:23 452:8 476:16,17 438:14,15,24 add 432:15,21 456:13 8th 386:21 394:10 439:2,4,9,16 440:2 446:2 ann 387:12 395:6 490:9 440:4 451:11 addition 421:17 396:10,25 398:3 454:9,10,24,24 9 432:16 447:16 401:23 455:6,7,12 458:11 9,000 432:12 additional 492:11 annette 402:4 469:19 470:14 908 387:8 addressed 453:11 437:3 453:8,12 475:12 479:9,9 91 488:5 454:16 461:11,18 454:17 456:25 482:5,6,8,13,14,16 914 388:16 461:22 457:1,9,10 459:22 482:25 484:11,14 93 446:15 addressee 454:18 460:10 461:12,12 484:17 485:12,13 935-6857 388:16 adjourned 490:14 461:13,23 464:17 485:15,18 486:16 472:5 487:23,23 488:11 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 113 of 132

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annette's 461:21 asked 415:25 461:1 462:7,8 bakerlaw.com 476:23 442:7,7 456:20,22 assuming 408:11 388:10 annualized 485:7 480:4,10 409:5 427:6 bank 390:14 405:7 485:8 asking 442:3 assumption 416:5 411:11,14,17 annually 485:10 452:10 459:4 at&t 424:9 426:19 412:3,5,14,15,18 answer 408:6 asks 439:25 426:20,24 427:3,5 417:19 418:2,3,7 409:21 429:2 440:15 455:21,21 427:9,10,13 418:12,24 419:2 478:1 assist 492:9 attach 492:12 419:18 420:15,17 answers 491:6 assistants 457:18 attached 445:7 433:3,6,7,12,21 anybody 402:3 associates 387:11 attack 397:20 434:3,25 435:6 apologize 412:24 390:17,19,21 attending 394:23 bankers 420:17 424:16 425:5 391:14,16,18,20 attention 431:18 bankruptcy 386:1 458:24 475:22 391:23 392:3,17 454:17 464:17 394:20 appear 443:7 392:23 393:3,9,11 attorneys 394:23 banks 420:11 446:9,18 480:23 393:18 395:6 atypical 400:10 barclays 420:16 483:18,18 396:12 398:7,12 audio 394:6 base 460:11 appearances 430:1 432:8,13,17 august 478:9 based 419:10 387:1 388:1 436:17,18 437:14 481:23 454:4 appears 423:8 437:14 438:9,10 availability basically 400:15 444:15 438:19 440:7,12 478:16 401:3 402:2 appleby 432:18 441:3,17,24 available 455:15 basis 454:13 461:9 applicant 386:6 449:19,20,21,22 457:19 basket 482:15 394:15,17 450:21,22 451:10 avenue 387:6,15 bates 410:5 425:24 appreciate 409:1 451:24 452:14 averaging 422:9 430:5,11 approximately 453:2,18 454:6 avoid 461:3 462:9 bear 420:16 394:11 397:22 458:11 459:23,23 aware 402:8 465:1 bears 488:4 440:1 460:12,12,18,19 465:5 begins 437:11 april 475:13,24 460:19 463:3,7 b behalf 386:17 arbitrage 399:3,5 464:1,20,22 387:3,11 388:3,12 b 387:13 421:18,19,22 465:23,24 466:24 395:9,10,12,15 baby 427:1 422:5,17 423:18 467:2,21,22 468:9 believe 396:6 back 408:14 410:4 429:8 469:19 470:1,5,7 422:8 436:22 416:8 425:21 asarco 404:21 470:12,15,16 437:7,21 438:5 429:20 436:8,10 411:19 475:12 477:6,15 446:3 453:4,7 459:1 461:25 aside 406:1 412:12 477:21 482:5,11 460:4 462:4 474:22 478:24 414:3 417:14 483:20 484:11 464:25 465:7 479:14 481:8,16 419:14 420:22 485:12 486:4,8,13 474:6 477:2 478:8 481:23 487:10,16 421:17 423:23 487:22 bells 427:2 backwards 438:2 427:21 429:12 assume 410:3 bernard 386:8,12 baker 388:6 441:15,16 463:16 415:17 437:19 386:16 389:2 395:14 471:25 474:3 438:1 457:13,15 394:17,22 395:11

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clients 397:8 474:23 488:20 conversion 401:6 440:17 441:9,19 400:14 402:23 confirmation convertible 399:2 442:10 449:15 403:1,21 408:4 390:23 391:3,6,9 399:5 401:5 451:4,16 452:14 440:21 457:12 391:11,13 392:10 413:16 418:20 452:15,18,19,20 close 438:15 392:12,14 393:13 421:18 422:5 453:13 454:10,12 454:10,24 481:4 444:14,17 445:10 copies 430:7 454:21,22 455:3,4 closing 450:4 445:12 448:2 443:15 455:10 456:4,5 clvs 388:20 confirmations copy 442:14 457:23 462:12 coca 440:7 450:5,6 392:19,20 393:5,6 446:16 448:23 464:5 465:5,19 450:22 452:16 393:7,8,20 463:24 corner 404:5 467:6,12,13 cola 440:7 450:5,6 469:16 476:3 410:5,7 470:16 471:22 450:22 452:16 confirming 467:17 corp 413:16 473:13,15 475:21 collier 388:20 confirms 391:19 426:19,19 476:9 478:2,12,22 394:8 391:21 442:25 corporate 421:22 479:15 480:12 come 396:17 397:5 443:3,25 447:17 422:16 429:8 482:3,6,7 483:5 406:23 408:14 447:23 451:22,24 corporation 386:5 484:13,19,22,24 437:12,22 453:17 459:11 463:17 394:16 485:4,11 486:8,11 457:4 459:1 467:19 469:6 correct 398:1,8,10 486:17,18,21,23 465:22 475:10,24 488:2 398:16,17,19,20 486:24 487:15 commencing 488:18 398:24 399:3,4,10 488:16,19 491:9 386:22 considered 400:20 399:12,15 402:18 corrected 412:19 commercial constructive 404:10 405:15 correction 394:13 420:15 460:16 461:3 407:2,6 411:2 correctional commission 462:10 412:6 413:6,14,21 386:20 493:25 contained 459:14 414:19 416:1 corrections 492:9 companies 427:1 469:20 417:21 418:12 492:18 company 422:3 contemplated 419:12,20,22 correspondence 423:2,6 489:4,22 420:1,7,10,13,17 403:9 compare 441:2 contents 389:1 420:19 421:14 corresponding complete 396:6 continental 420:14 422:7,12,13 423:3 439:19 concern 447:9 continue 394:7 423:10,11,13,15 corresponds 446:8 478:23 continued 390:1 423:16,19 424:10 counsel 387:1 concerning 456:10 391:1 392:1 393:1 424:21 427:12,14 388:1 394:14 concludes 488:24 contract 491:12 429:7,11 431:2,6 431:15 491:14 confident 419:10 control 404:16 432:14,23,24 county 491:3 confidential 472:22 433:4,13 434:13 couple 416:22 386:15 conversation 434:16,17 435:1,4 482:9 confirm 443:6 402:8 435:7 437:2,4 course 406:25 444:8 445:11,13 conversations 438:4,6,11,17,22 410:2 413:12 445:21 448:7,13 394:4 438:25 439:3,15 414:22 417:2 448:17 470:21 439:24 440:2,3,14 419:25 421:5

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431:1,10 434:5,15 417:19 419:21 denise 386:18 486:7 472:14 482:12 422:23 424:19 394:25 395:17 direction 458:18 court 386:1 428:11 491:22 482:2 491:7 394:20,25 395:16 dates 399:21 478:5 department directs 454:6,15 489:5 davis 387:4 395:8 404:14 disagree 473:11 cover 491:16 day 386:21 489:6 depend 485:17 discretion 400:17 create 472:18 489:19,22 491:18 depending 419:5 400:18,20 created 431:10 493:24 depends 419:4 discretionary 434:5 478:9 days 489:20 457:17 484:25 400:16,23 401:2 creates 427:16 deal 402:3 485:16,21,24,24 discs 490:10 credit 391:7 488:8 dear 437:11 deponent 388:12 discussing 423:18 credits 405:10 453:12 460:10 deposition 386:16 discussion 462:13 cross 489:3,8,13 461:13 474:9 394:6,12 482:12 discussions 437:12 490:4 487:19 489:6 490:9,12,13 453:16 465:21 cust 473:12 debtor 386:13 491:5,16 492:5,6 disney 431:20 custody 404:16 december 403:24 492:15,16 432:4,6,12,24 472:22 406:14 407:5 depository 418:6 434:23 customary 491:17 409:17 411:1 419:8 distribution customer 397:2,5 416:23 424:5,8 describe 397:7 426:24 428:24 397:14 432:7 467:21 468:9 423:4 426:23 district 386:1 473:17 483:15 470:13,15 482:10 described 422:4,8 394:20 customer's 403:6 decided 474:15 desire 492:5 divestitures 432:16 decision 400:14,15 details 462:21 426:25 customers 386:18 400:22 died 398:1 dividend 422:1 387:3 389:8 390:2 defendant 386:9 difference 445:20 document 389:10 391:2 392:2 393:2 394:18 different 395:9 403:16,18,21 396:15,17 398:3 defendants 395:9 401:1 402:7 409:2 406:1,2 413:2,11 398:18 401:2,13 define 403:1 417:17 445:22 413:11 414:3 432:18 456:4 415:12 446:10,18 416:20 417:14,17 d definitely 465:13 dinner 397:21 417:22 419:14,24 definition 400:16 direct 400:4,5 420:3,22 421:16 dasaro 388:5 deliver 438:14 488:24 489:2,10 423:23 424:3,4,14 395:12,12 418:17 454:7,23 455:6 489:22 425:18,19 426:14 434:21 435:25 479:6 directed 401:8 427:21 430:3,17 458:21 delivered 405:6 441:7 451:12 430:20 433:15,15 date 394:10 404:5 455:2 458:3,11 463:2 433:24 434:4 407:4 409:2 431:4 delivering 479:2,8 466:25 468:1,13 441:3,15 444:1 441:24 455:18 479:11 477:22 463:16 472:8,21 475:8 477:21 delivery 410:16 directing 436:12 474:3 484:7 dated 403:23 416:3 450:4 438:8 454:20 documents 404:4 406:14 408:23 461:14 462:11 404:15 412:12 411:1 413:6 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 117 of 132

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414:21 416:13 entire 455:2 execution 459:13 450:21,23,25 436:13 442:24 entities 396:11 469:18 470:8 451:2,9,19,22 443:3 449:10 entries 405:9 471:20 452:1,13,16,19,21 456:10 469:14 411:24 418:19 exhibit 389:9,11 452:24 456:7,12 472:10,20 432:18 389:13,15,17,19 457:6,25,25 458:4 doing 435:15 entry 411:11 389:21,23,24 458:6,8,12,15,19 488:20 421:10 431:20 390:3,5,7,9,11,13 458:20 459:1,4,5,8 dollar 445:22 433:1 435:10 390:15,17,19,21 459:11,12,12,15 dollars 471:17 438:12 390:23 391:3,5,7,8 459:17,20 462:22 dow 439:22 equal 489:16 391:10,12,14,16 463:2,4,13,17,19 dr 404:21 equivalent 409:1,2 391:18,20,22,23 463:21,22,22 draw 431:18 errata 492:12 392:3,5,5,7,9,11 464:4,8,11,15 drill 462:25 error 487:14,15 392:13,15,17,19 467:14,20 468:3,5 467:17 esq 387:4,13 388:4 392:20,21,23 468:8,8,21,22,23 dropped 474:20 388:5,13 393:3,5,6,7,8,9,11 469:3,7,7,20,23 duly 395:20 estate 395:5 393:13,14,15,16 470:3,3,6,11,12,14 e et 420:5 393:18,20,21 470:18,21,22 event 429:8 403:11,16 405:23 471:5,9,12,12,21 e 388:4 491:1,1 events 421:22 406:2,6 408:12,17 471:23 472:1,2 492:1,1,1,3 422:2,16 427:5 408:22 409:3,16 473:25 474:3 earlier 403:14 everybody 418:16 410:4,14,15,15 475:5,11,18,22,22 418:20 421:9 434:20 412:20,25 414:4,7 476:1,11,13,16,17 423:18 436:11 evidence 491:9 414:14 416:9,19 484:8,9,10 487:8 448:20 exact 402:20 416:20 417:11,14 487:17,20 488:1,4 ebay 473:12,17,20 examination 389:2 419:15,17 420:23 488:15 474:20 475:16,17 395:22 487:13 420:25 422:19,22 exhibits 389:7 478:25 479:14 488:24 489:1,2,3,8 423:24 424:2,11 390:1 391:1 392:1 480:18 examined 395:20 424:15 425:20,22 393:1 427:8 eight 439:4 440:2 example 423:17 426:14 428:8 435:15 443:10 either 407:19 438:12 444:20 429:22 430:3 449:11 452:9 410:1 412:6 457:7 484:6 486:5 433:15,16,19 459:13 469:11 462:6 exception 492:17 436:6,14 440:23 470:8 487:14 electric 423:2,9 exclamation 481:5 441:1,8,20,23 expand 400:25 emery 387:14 481:23 442:11,13,19,21 expected 462:1 395:3 excuse 396:20 443:8,9,9 444:4,5 expires 493:25 emulex 454:6,25 executed 398:23 444:20,22,25 explain 401:1 458:1,2 399:8 458:13 445:2 446:22 extent 489:7,16 ends 410:6 464:6 467:9 447:3,6,14,19 extra 442:14 entails 428:18 486:16 448:15,23 449:13 entered 489:5 executing 483:13 449:16,23,24,25 492:6 450:5,9,12,14,15

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f 469:8 473:14 fitch 438:13 467:5 471:18 f 439:25 491:1 477:24 479:21 five 407:25 408:1 four 418:19 445:3 facility 394:13 483:23 486:22 408:8,22 409:7,12 466:24 fact 429:25 475:1 488:25 489:15 409:13 435:23 fraud 398:15,19 478:19 482:5 490:3,6 fix 461:16 399:13 fair 428:21 449:10 fifty 445:3,7 flip 430:13 442:4 frequently 415:13 481:11 482:1 446:21 447:8,9 443:24 front 403:17 443:2 483:12 file 403:6 floor 402:7 443:6 447:14 fairlawn 388:14 files 403:9 focus 430:4 487:16,16 familiar 472:9,12 finalize 478:16 follow 402:10 full 396:6 400:23 family 396:13,15 finally 459:10 456:3,11,17 funds 455:15 473:3,19 470:20 471:4 462:11 467:11 furnish 492:11 faster 435:17 financially 491:10 486:20 further 487:2 father 396:18,24 fine 426:7 464:13 followed 440:18 491:9 397:6,8,11 finger 430:14 447:23 455:25 future 461:15 federal 386:20 finish 466:18 456:14 473:22 489:20 394:12 492:3 489:8,13,16 479:19,23 g finished 489:3 following 437:13 fein 388:4 395:14 gain 440:1 442:8 firm 398:4 399:9 437:23,25 453:17 395:14 398:25 466:9,21 479:10 402:4 405:8 465:22 492:18 399:11 405:22 gains 454:3,3 407:18 409:24 follows 395:21 406:4 408:15,19 466:4 418:4 421:18 food 487:4 409:19 411:13,22 gap 459:2 431:1 437:1 460:7 foregoing 491:4,8 412:10,13 414:10 gateway 440:6 461:20 462:11 492:15 414:12 415:4,7,9 450:3,6,22 451:11 464:6 467:11 forever 427:4 415:12 417:15 452:12 473:19,22 479:12 form 398:25 419:3 420:18 general 400:13 firm's 404:16 399:11 409:19 422:11 424:20,25 423:1,9 485:6 406:25 407:7,14 411:13,22 412:10 425:2,7,24 426:3 generate 404:8 408:5 413:13 415:4,7 419:3 428:25 431:22,25 484:24 414:22 417:2 420:18 422:11 432:2 442:15 generated 404:4 419:25 421:5 449:14 451:18 443:16 445:17 404:12 406:25 431:8 434:6,8,15 452:2 454:11 446:1,6,16,25 413:12 414:21 472:22 456:6 457:14,22 447:9,25 448:23 417:1 419:24 firms 406:22 459:24 461:7 449:3,8,14 450:1 421:5 430:25 420:20 463:5 473:14 450:15,19 451:18 431:3 434:11 first 395:20 414:8 492:4,10 452:2,6,8 454:11 getting 447:10 424:4 426:14 forth 416:8 454:15 456:6,13 give 396:2,6 400:6 430:5,13 437:17 foundation 392:8 457:14,22 458:22 400:21 425:19,20 438:12 445:18 398:13 453:2,19 459:24 461:7,11 441:23 443:8 446:12 473:7 455:12 458:19 461:20 463:5 447:22 468:16,20,22 480:1 481:3 464:23 465:24 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 119 of 132

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given 491:9 492:7 grandfathered helen 387:4 395:8 448:16 449:17 giving 397:20 460:15,15,23 443:17 488:25 450:10 451:20 gmail.com 388:17 462:17 help 430:15 452:22 456:8 go 394:7 405:25 greater 427:16 highway 386:20 458:7,16 459:9,18 416:7,12 429:15 group 442:24 394:13 462:23 463:20 430:9 435:21 472:25 hmm 415:20 464:9 467:15 439:12 443:20 guilford 491:3 hold 418:11 468:6 469:4,24 447:5 448:10 h holding 439:11 470:19 471:10,24 462:25 464:10 474:19,20 486:10 474:1 475:6,19 h 492:1 467:16 473:19 holdings 432:16 476:14 487:9 hand 430:6 442:24 474:13 482:17 hoped 475:2 identify 394:24 466:7 489:11 hoping 474:21 ii 391:14,16,18,20 handed 437:6,9 goes 446:17 449:4 hostetler 388:6 393:9,11 398:13 handing 443:23 460:25 474:18 395:14 436:18 437:14 handled 400:13 going 400:4 house 389:11,15 438:10 440:7 402:22 403:15 406:1 390:11 406:11 449:22 450:21,22 handwriting 408:10,14 412:11 407:22,25 408:1,8 451:10,24 452:14 402:13,16,17 412:24 416:7 408:22 409:3,7,12 459:23 460:12,19 453:7 455:17 418:14 421:17 409:13,16 410:1,1 464:22 465:24 465:10,15 472:6 425:19 428:2 430:17 467:2 470:2,5,7,12 476:20,22 429:17 430:1,2,3,4 huh 396:22 403:25 470:15,16 handwritten 430:6,12 431:13 405:1 406:13,17 iii 386:17 490:10 393:15 431:17 433:14 410:22 413:7 immediacy 478:24 hang 424:23 436:4 440:25 451:15 464:21 inadvertently 425:10 484:7 441:23 442:23 488:6 392:5 happened 397:7 443:1,5,6 447:22 include 402:24 401:6 417:24 i 449:19,23 451:22 421:21 422:2 458:25 idea 427:15 452:23 456:10 included 420:14 462:20 480:15 485:16 458:19 461:25 including 399:7 hard 481:22 ideas 478:14 462:25 463:1 420:5 423:2 432:8 hchaitman 387:9 identification 467:19,20 468:7 index 389:7 390:1 head 402:9 403:12 405:24 470:7 475:11 391:1 392:1 393:1 heard 421:21 408:18 412:21 487:6 477:16,19 482:16 heart 397:20 414:5 416:10 goldman 388:13 indicated 404:5 hedging 482:16 417:12 419:16 395:10,10 415:19 407:4 431:4,14 held 394:12,19 420:24 422:20 415:21 425:14 indicates 411:18 398:4 418:3,5 423:25 424:12 429:14 443:10 individually 395:4 419:1,11 420:11 425:23 428:9 445:1,4,9 447:1,5 industry 400:17 433:7,11 434:24 429:23 433:17 448:8,10,21 487:4 instances 402:11 435:5 455:3 436:7 440:24 good 395:2,24 institution 386:20 460:14 441:21 442:12,22 403:2,3 444:23 447:20 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 120 of 132

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instructed 451:3 june 414:18 421:1 418:18 419:9,13 l 463:13 488:15 421:10 481:4 419:17 420:21,25 l 386:8,12,16 instructing 461:5 k 422:13,21 423:22 389:2 394:17,22 461:13 473:19 424:1,13,18,22 k 386:18 491:22 395:11,19 464:16 instruction 470:6 425:1,4,9,17 426:1 kaiser 404:22 487:18 490:9 470:9 471:20 426:4,7,9 427:25 keep 407:8 424:14 492:14 473:23 479:17,19 428:4,7,10 429:2 430:14 449:25 labeled 430:5 479:23 481:12 429:24 430:9,12 kept 431:7 434:8 law 396:18 397:6 instructions 400:7 431:17,24 432:1,3 436:25 472:20,21 462:15 402:10 439:21 433:14,18 434:22 kind 485:14 law's 397:8,11 440:6,18 455:25 435:8,10,13,20,23 knock 443:18 leave 455:7 480:17 456:3,11,14,17 436:1,10 440:25 know 396:18 480:22 457:12,21 459:14 441:22 442:13,16 404:11,13 407:10 ledger 389:23 462:11 467:12 442:23 443:13,22 407:16 408:13 419:19 469:17,18 470:1 444:3,24 445:11 409:6 417:22 left 404:5 437:6,9 481:19 445:16,23 446:2 425:10 435:20 466:7 instruments 420:2 446:11,14,20 437:17,23 440:20 lefty 438:2 interested 491:11 447:4,8,13,21 456:25 457:4,5,18 leg 422:17 interfere 394:6 448:3,5,11,13,17 457:21 475:4 legal 394:9 395:1 396:4 449:1,5,9,18 450:2 479:9 483:12 legging 422:6 internal 488:18 450:11,16,20 485:24 legitimate 415:17 international 451:4,6,21 452:4 knowing 419:8 letter 390:15 439:22 487:21 452:10,23 454:13 knowledge 403:5 391:22 392:15,21 488:10 454:19 456:9,16 403:8 409:24 393:16,21 436:15 investment 386:8 457:15,24 458:8 492:16 436:23,25 437:11 394:17 464:16 458:17,23 459:3 known 399:13 438:3,7 441:8 487:18 459:10,19 460:1 444:7 442:7 449:12,23 investor 386:4 461:9,16,17,24 koenigsberg 449:25 450:3 394:16 462:14,24 463:6 437:21 451:14,25 452:24 involved 487:21 463:15,21 464:10 kratenstein 453:1,5,8,10 involves 427:8 467:16 468:7,17 387:13 389:3 454:16 457:5 involving 423:1 468:23 469:1,5,9 395:2,3,23 399:1 458:1,3,12 459:14 428:15 469:25 470:20 399:12 403:13 459:21 460:5 471:11 473:15 j 405:25 406:5 461:11,18,22 474:2 475:7,20 j 464:1 408:16,21 409:21 462:1,7 464:16 476:15 478:1 january 417:19 410:10,12 411:14 465:1,8,10,17 479:22 484:2,9 419:21 424:19 411:23 412:11,17 467:19 469:20 486:24 487:1,12 426:10 461:2 412:23 413:1 470:1,5 471:5,21 488:23 489:11,25 462:9 463:7 414:2,6,11,13,16 474:4,7 475:3 490:4,7 july 428:12 481:14 415:5,11,14,23 476:10,16,17 416:11 417:13,16 477:3 487:17,20 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 121 of 132

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letterhead 436:17 465:16 466:8 malcolm 387:12 469:4,11,20,23 453:1 459:22 476:2 482:2 392:15,21 393:16 470:18 471:9,23 461:12 464:19 looks 426:24 393:21 395:4 473:25 475:5,18 letters 475:9 428:19 446:6 396:10,25 398:2 476:11,13 482:9 lillian 398:2 losses 454:3 401:23 402:2 482:10,10 484:10 lillian's 395:5 lot 397:8 435:16 436:15 451:2 487:9,19 limited 399:13 lots 427:5 459:25 460:1 market 408:3 400:14,15,17,18 m 464:17 474:4 427:3 429:9 line 454:18 493:1 476:17 480:25 455:15 486:20 madison 387:15 493:4,7,10,13,16 481:3 486:7 marking 416:19 madoff 386:8,12 493:19 487:17 martin 387:12 386:17 389:2 lipstick 399:23 malcolm's 477:11 395:6 396:10,25 394:17,22 395:11 liquidated 482:24 managed 474:16 398:2 401:23 395:19,24 403:17 listed 418:23 manhattan 420:14 477:9,10,11,13 406:5 411:10 432:8 433:6 march 413:6 match 475:9 413:1 414:17 434:24 461:21 margin 466:7 matches 435:2 417:16 419:18 492:18 marine 420:16 math 446:6 421:1 422:22 listing 403:21 mark 408:10 maurice 389:13,17 428:10 429:24 lists 430:23 430:3 433:15 389:19,24 390:15 430:16 433:18 little 417:17 437:8,9 449:19 392:7 396:19,21 436:11,14 444:5 llc 386:8 394:18 marked 403:11,16 397:2,13,16 451:7 452:12,25 llp 387:5,14 395:3 404:20 405:23 398:12,13 403:15 459:12,20 461:19 located 394:13 406:2,6 408:17,22 404:1 410:16 461:23,25 464:11 long 417:25 412:20 414:4,7,14 413:5,10 414:17 464:15,16 469:10 438:20,24 439:9,9 416:9 417:11 414:20 416:23 472:2 474:3 439:16,18 466:14 419:15 420:23 421:2 432:8,13,17 476:16 477:6 466:21 474:21 422:19 423:24 453:2,18 455:11 487:2,12,18 489:3 480:8 489:21 424:11 428:8 458:18 459:21 489:17 490:10 look 410:6,12 429:22 433:16,19 464:22 465:24 492:14 418:18 427:7 436:7 440:23 467:5 471:18 madoff's 489:6 434:19 441:2 441:1,8,20 442:11 mcdermott 387:14 main 474:19 443:23 445:7,24 442:21 444:22 395:3 maintain 403:5,8 446:3,20 448:21 447:19 448:15 meadowbrook 407:8 449:1 450:5 449:6,6,11,13,16 420:15 maintained 457:25 463:22 450:9 451:19,25 mean 400:5 405:2 404:16 407:11 469:10 470:2 452:21 456:7 405:5 411:24 434:14 460:7 473:7 475:21,23 457:6,24 458:4,6 412:4 416:12 major 427:3 475:25 478:3 458:12,15 459:8 418:2 419:1 maker 427:3 looking 404:18 459:15,17 462:22 427:22 433:5 making 400:14,15 411:10 428:17 463:19 464:8 439:11 444:11 408:4 444:12 445:1 450:11 467:14 468:5 450:13,15 456:18 454:4 492:7,9 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 122 of 132

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466:7,10 473:8 417:4 422:25 moving 477:23 north 386:21 meaning 415:16 434:19 435:11 487:22 394:14 412:3,5,15 means 405:3 463:10 multiple 443:10 412:18 417:19 411:25 413:23 midland 420:16 445:24 446:4,4 418:2,3,7,12,24 437:24 456:20 million 440:12 447:2 419:2,19 420:15 466:19 466:8 mwe.com 387:18 491:2 meant 456:17 mind 424:15 n notary 386:19 460:22 477:19 430:14 491:23 493:23 naked 438:21 medication 396:1 mine 424:25 449:6 note 393:15 394:2 439:4,18 440:4 396:4 minute 408:13 430:10 441:16 name 394:8,21 meet 401:22 428:2 446:5 448:1 444:12 472:5,10 397:11 412:13 478:15 minutes 425:16 481:14,21 461:21,21 meetings 399:16 435:24 notes 466:7 472:18 named 396:19 399:19 400:2 mispagination 472:24 473:7 national 390:13 401:17,20 488:3 478:5,8 479:25 411:11,14,17 member 473:18 missed 459:1 480:1 412:3,5,14,15,18 memo 444:6,10,12 missing 448:24,24 november 386:22 417:19 418:1,3,7 445:20,20 446:8 449:2,3 394:10 441:4 418:11,23 419:2 447:16,23 470:23 mistaken 427:9 490:9 491:18 419:18 420:16 470:24 471:15 mmrn 398:13 number 389:9,11 433:2,11,21 434:2 488:8 money 444:13 389:13,15,17,19 434:24 435:6 memorandum 445:6 455:15 389:21,23,24 468:14 391:5,7,8,10,12,19 monies 406:9 390:3,5,7,9,11,13 ncr 425:11 426:19 391:21 392:9,11 444:6 470:25 390:15,17,19,21 426:20 427:11,13 392:13 393:14 483:11 390:23 391:3,5,7,8 neal 386:18 445:5 month 389:21 391:10,12,14,16 394:25 395:17 memos 444:20 407:20 417:23,24 391:18,20,22,23 491:22 448:2,3 451:22 417:25 430:23 392:3,5,7,9,11,13 necessary 492:11 459:10 463:16 486:1 392:15,17,19,20 need 416:18 426:5 467:18 469:6 morning 395:2,24 392:21,23 393:3,5 464:12 489:20,23 475:11,23,24 395:25 393:6,7,8,9,11,13 489:24 488:1,17 mother 395:5 393:14,15,16,18 never 483:9 mentioned 396:9 move 430:16 393:20,21 394:21 485:22 485:22 433:14 443:17 395:9 403:11 new 386:1 387:7,7 met 477:9,13 471:2 489:10 405:23 406:3,11 387:16,16 388:8,8 478:19 moved 483:1 406:23 408:17 388:15 394:20 mf 430:6 431:14 movement 406:9 410:4,14,15 426:15 microphones 406:20 444:14 412:20,25 414:4,7 newly 427:10 394:2,5 470:25 487:21 414:14 416:9 nice 474:9,10 middle 404:19 movements 458:2 417:11 419:15 normally 402:9 413:15 414:24 458:10 420:23 422:2,19

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423:7,24 424:11 obviously 439:20 ordinary 404:7 part 407:7 416:20 425:22 428:8 occasion 402:17 406:25 413:12 466:9 472:17 429:22 430:4,11 occurred 417:9 414:22 417:2 particular 401:4 433:16,19 436:6 offices 399:17 419:25 421:5 422:2 444:13 436:14 440:23 oh 412:1 435:9,22 431:1,10 434:5,15 479:10 441:1,20,23 443:19 468:17 472:14 particularly 442:11 444:22 okay 402:3 403:5 outset 396:9 401:21 446:11,12 447:6 406:5 407:22 p parties 394:7,24 447:19 448:15,19 408:15 409:6 491:17 p.m. 490:14 449:16 450:5,9,12 410:11 412:8 party 474:11 page 389:8 390:2 452:7,21,25 456:7 416:16 419:9,23 491:13 391:2 392:2 393:2 458:6,15 459:5,17 424:16 425:7 passer 387:12 404:19 410:9,13 459:20 462:22 426:3 427:7 395:6 396:11 410:20 411:9,9,10 464:8 467:14 431:13,17 432:2,6 passing 397:16 411:12 413:16 468:5 469:21 435:13,22,25 paul 397:12 414:8,25 416:19 470:3,18 471:9,12 441:22 442:15 437:12,18,21 417:5 418:14,15 471:23 473:25 443:5 444:10,19 440:16 453:16 418:19 424:2,4 475:5,18 476:13 444:24 445:4,9 465:22 477:10,13 430:5,5,13,15 490:10 446:1,14 447:21 478:12 481:8,15 431:13,18,19,22 numbered 441:17 448:5,18,21 449:9 paul's 474:11 434:19,19 443:13 numbers 410:5 451:5 454:5,19 payment 422:1 445:5,13,18,18 442:21 451:19 460:25 461:24 penn 404:24 446:7,7,8,8,12 459:8 463:19 462:7,24 464:11 pepper 404:21 448:6,10,11,24,25 469:3,23 488:4 464:14 465:17 percent 485:4,10 449:1 471:1 473:7 466:13 473:10 performed 441:10 o 478:4 480:24 479:13 480:10,24 period 427:2 object 489:9 491:7 493:1,4,7,10 482:4 489:25 429:10 475:23 objecting 415:9 493:13,16,19 old 386:20 394:13 479:11 482:21,22 objection 398:25 pages 411:8 414:9 once 447:5 483:2,6 484:25 399:11 405:22 443:11 446:9 ones 416:18 485:25 409:19 411:13,22 447:3 491:8 417:17 periodically 412:10 415:4,7 492:11 open 480:17 409:10 419:3 420:18 pagoldman 388:17 opportunity permitted 489:16 422:11 424:20 paper 439:22 469:10 peter 388:13 428:25 449:14 484:24 487:21 opposed 479:1,7 395:10 451:18 452:2 488:10 option 477:16,19 phone 462:6 454:11,14 456:6 paragraph 474:14 options 482:16 phones 394:4 457:14,22 459:24 parentheses oracle 439:22 physically 405:6 461:7,10,14,20 460:17,18 order 412:24 pick 394:3 463:5 473:14 park 387:6 489:4,21 pieces 423:15 477:24 479:21 parkway 388:14 483:23 486:22 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 124 of 132

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place 394:5 402:8 prepared 472:8,10 pull 482:8 484:6 r 407:14 415:19,21 472:14 purchase 416:2 r 464:1 491:1 416:4 427:3 486:3 present 394:23 424:7 444:17 492:1,1 plaintiff 386:6 presumably pursuant 492:3 rates 491:17 394:15,17 476:10 478:12 put 403:16 406:1 rca 404:24 413:16 plan 437:13,23,25 previous 435:2 412:12 414:2 418:19 421:8 438:1 453:17,22 previously 398:15 417:13 419:13 read 473:9 492:15 453:23 465:22 399:2 420:21 421:16 493:1,4,7,10,13,16 466:3,4 price 400:18 423:22 427:21 493:19 planning 489:1 422:10 429:12 441:15 reading 490:12 plaza 388:7 primarily 402:22 443:5 449:24 real 398:22 399:3 please 394:2,4 principal 408:5 463:15 467:19 399:8 405:16,17 395:17 428:1 printed 407:4 471:25 474:2 405:19 409:13,18 438:13 440:1 prior 410:14 487:16 411:4,6 412:8 454:7,23 455:6,22 415:24 416:6 puts 460:17,18 413:25 415:2,6,10 492:10,11 419:10 433:10 putting 441:16 415:11,12,15,23 plus 420:19 461:2,25 462:9 q 415:25 416:7 point 457:20 481:6 477:21 qualcomm 439:23 417:8 419:11 481:23 private 394:3 quarter 407:20 420:9 421:12 pointed 487:13 probably 397:15 486:2 427:18,22 429:5 488:2 399:22 402:5,6 question 401:18 441:13 portfolio 474:17 407:19 412:6 408:6 425:13 realize 440:1 482:25 418:5 437:3 429:15 452:8 442:7 454:3 position 422:9 procedure 492:4 458:10 realizing 466:4,9 438:14,15,24 proceed 395:18 questioning really 402:14 439:2,4 454:7,10 proceeds 405:13 456:15 460:24 485:22 454:23,25 478:25 477:15 questions 415:24 realty 387:11 484:1 487:22 production 488:4 430:1,4 440:16 390:3,5,7,9 395:7 488:10 490:1 productions 451:23 455:22 396:12 398:9 positions 411:4 431:20 432:4,7 487:2 491:6 399:7 422:23 420:9 438:20,20 professional quick 436:1 424:4,19 426:11 438:21 450:4 386:19 491:22 467:17 428:11 461:2 462:8 promises 481:22 quickly 416:14,14 reason 396:2 475:16 477:7,14 proprietary 408:4 430:16 449:20 416:21 436:22 480:22 483:22,25 protection 386:5 463:17 469:6 453:4 456:2 460:4 possibly 429:1,3 394:16 470:2 462:4 464:25 post 483:6,7,14,16 provide 491:12 quote 474:15 465:7 466:22 485:2 provided 489:21 478:11 479:1 474:6 475:9 477:2 practice 404:7 public 386:19 quotes 460:16 489:7,17,18 493:2 premises 407:15 491:23 493:23 493:5,8,11,14,17 431:8 434:9 493:20 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 125 of 132

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reasons 492:7 429:17,20 430:18 remark 425:18 rest 474:13 recall 396:13,19 435:3,16,17 436:3 remarked 425:22 result 491:11 397:13,16,19,22 436:4,8 443:11 remarking 425:20 retail 402:22 398:6,11 399:16 447:2,10 462:13 remember 396:21 403:1 399:19,21 400:1 470:11 487:6,10 480:11 return 485:7,20 401:16,19 437:6 490:8 remotely 394:24 486:15,19 438:18 442:6,8 recording 394:6 report 390:14 returns 484:24 462:19,20 478:19 records 407:8,10 407:3,23 409:3 485:14,22 486:2 478:21 480:4,5 425:13 430:8 430:23 432:11,15 reynolds 404:24 recapitalization reduced 491:6 433:9,20 464:1 428:22 referral 491:15 reported 491:5 right 397:1,24 recd 405:2 referred 427:1 reporter 386:19 403:4 413:18,24 receipt 413:16 460:23 394:25 395:17 420:12 422:10,14 receipts 405:16,17 referring 437:18 491:14,22 424:22 425:4,5,5,8 413:22 473:2 478:12 reporting 491:13 425:9,11,12,19 receive 436:23 reflect 443:3 491:14 431:19 432:4 453:5 460:5 465:8 449:11 451:24 reports 406:24 435:9 440:16 466:20 468:16 452:11 459:13 407:16,18,25 445:15 447:4 474:7 477:3 469:17 486:15 408:2 410:1 448:4 449:9 454:8 received 404:21 reflected 429:5 430:25 431:7 454:17 456:9 405:3,7 413:23,23 450:7,23 458:3 represent 394:25 457:3 460:3 427:11 460:8 464:3 488:13 396:10 408:3 463:18 468:18,22 receiving 428:23 reflecting 442:25 442:25 491:8 475:17 477:17,25 444:13 reflects 452:12 representative 478:13 479:16 recess 425:15 refresh 470:4 395:5 480:6,8 483:10,15 429:19 436:6 475:8 representing 484:2,21 485:18 487:8 regard 453:17 394:8 395:1,4 485:19 488:12,14 recognition 479:1 477:14 request 471:6 488:22 489:14 recognize 402:12 regarding 427:5 requested 476:10 rights 490:2 402:16 403:17 460:11 489:5 require 455:14 risk 429:9 406:6 413:2 regards 437:13 reserve 489:13 rjr 460:18 461:6 430:20 433:24 465:23 490:1 463:11 468:14 442:8 465:14,15 registered 386:18 reserved 490:13 rockefeller 388:7 465:18 471:12 491:22 respect 402:21 role 402:20 419:5 472:1,6 476:24 regular 407:7 438:8,13 452:9 room 394:23 recognized 442:17 472:17 454:6 455:5,11 429:15 recollection regulation 400:24 458:17 460:16 rpr 491:22 462:15 470:4 relating 488:2 462:16 468:13 rule 400:13 492:3 474:25 475:8 relatively 430:16 469:18,19 470:5,6 rules 460:16 492:3 record 390:12 remaining 455:7 responsibilities run 407:18,25 394:2,8 397:10 472:18 409:8,10

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Federal Rules of Civil Procedure

Rule 30

(e) Review By the Witness; Changes.

(1) Review; Statement of Changes. On request by the

deponent or a party before the deposition is

completed, the deponent must be allowed 30 days

after being notified by the officer that the

transcript or recording is available in which:

(A) to review the transcript or recording; and

(B) if there are changes in form or substance, to

sign a statement listing the changes and the

reasons for making them.

(2) Changes Indicated in the Officer's Certificate.

The officer must note in the certificate prescribed

by Rule 30(f)(1) whether a review was requested

and, if so, must attach any changes the deponent

makes during the 30-day period.

DISCLAIMER: THE FOREGOING FEDERAL PROCEDURE RULES

ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY.

THE ABOVE RULES ARE CURRENT AS OF SEPTEMBER 1,

2016. PLEASE REFER TO THE APPLICABLE FEDERAL RULES

OF CIVIL PROCEDURE FOR UP-TO-DATE INFORMATION. 08-01789-smb Doc 18151-3 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit C Pg 132 of 132 VERITEXT LEGAL SOLUTIONS COMPANY CERTIFICATE AND DISCLOSURE STATEMENT

Veritext Legal Solutions represents that the foregoing transcript is a true, correct and complete transcript of the colloquies, questions and answers as submitted by the court reporter. Veritext Legal Solutions further represents that the attached exhibits, if any, are true, correct and complete documents as submitted by the court reporter and/or attorneys in relation to this deposition and that the documents were processed in accordance with our litigation support and production standards.

Veritext Legal Solutions is committed to maintaining the confidentiality of client and witness information, in accordance with the regulations promulgated under the Health Insurance Portability and Accountability Act (HIPAA), as amended with respect to protected health information and the Gramm-Leach-Bliley Act, as amended, with respect to Personally Identifiable Information (PII). Physical transcripts and exhibits are managed under strict facility and personnel access controls. Electronic files of documents are stored in encrypted form and are transmitted in an encrypted fashion to authenticated parties who are permitted to access the material. Our data is hosted in a Tier 4 SSAE 16 certified facility.

Veritext Legal Solutions complies with all federal and State regulations with respect to the provision of court reporting services, and maintains its neutrality and independence regardless of relationship or the financial outcome of any litigation. Veritext requires adherence to the foregoing professional and ethical standards from all of its subcontractors in their independent contractor agreements.

Inquiries about Veritext Legal Solutions' confidentiality and security policies and practices should be directed to Veritext's Client Services Associates indicated on the cover of this document or at www.veritext.com. 08-01789-smb Doc 18151-4 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit D Pg 1 of 231

Exhibit D 08-01789-smb Doc 18151-4 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit D Pg 2 of 231 CONFIDENTIAL

Page 494

1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK 2 3 In re: ) 4 ) SECURITIES INVESTOR ) 5 PROTECTION CORPORATION, ) ) 6 Plaintiff-Applicant, ) ) 7 vs. ) 08-01789 (SMB) ) 8 BERNARD L. MADOFF ) INVESTMENT SECURITIES, LLC, ) 9 ) Defendant. ) 10 ) ) 11 In re: ) ) 12 BERNARD L. MADOFF, ) ) 13 Debtor. ) ) 14 15 CONFIDENTIAL 16 Videotaped Deposition of BERNARD L. 17 MADOFF, VOLUME IV, taken on behalf of the Customers, 18 before K. Denise Neal, Registered Professional 19 Reporter and Notary Public, at the Federal 20 Correctional Institution, 3000 Old Highway 75, 21 Butner, North Carolina, on the 9th day of November, 22 2017, commencing at 8:43 a.m. 23 24 25 * * * * *

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1 APPEARANCES OF COUNSEL: 2 3 On Behalf of the Customers: 4 HELEN DAVIS CHAITMAN, Esq. 5 Chaitman, LLP 6 465 Park Avenue 7 New York, New York 10022 8 (908) 303-4568 9 [email protected] 10 11 On Behalf of Sage Associates, Sage Realty, 12 Malcolm Sage, Martin Sage and Ann Passer Sage 13 ANDREW B. KRATENSTEIN, Esq. 14 McDermott Will & Emery, LLP 15 340 Madison Avenue 16 New York, New York 10173-1922 17 (212) 547-5695 18 [email protected] 19 20 21 22 23 24 25

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1 APPEARANCES OF COUNSEL: 2 3 On Behalf of the Trustee: 4 AMANDA E. FEIN, Esq. 5 STACY DASARO, Esq. 6 Baker Hostetler 7 45 Rockefeller Plaza 8 New York, New York 10111-0100 9 (212) 589-4621 10 [email protected] 11 12 On Behalf of the Deponent: 13 PETER A. GOLDMAN, Esq. 14 12 Fairlawn Parkway 15 Rye Brook, New York 10573 16 (914) 935-6857 17 [email protected] 18 19 Videographer: 20 Bob Collier, CLVS 21 22 * * * * * 23 24 25

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1 CONTENTS 2 THE WITNESS: BERNARD L. MADOFF EXAMINATION 3 BY MS. CHAITMAN 499 4 BY MS. FEIN 520 5 BY MR. GOLDMAN 579 6 BY MS. FEIN 582 7 BY MS. CHAITMAN 667 8 BY MR. KRATENSTEIN 678 9 10 * * * * * 11 12 INDEX OF EXHIBITS 13 FOR THE CUSTOMERS: PAGE 14 Exhibit Number 89, Schwab blotters - 502 15 12-5-86 16 Exhibit Number 90, Securities transaction 504 17 report 18 Exhibit Number 91, NSCC trade reporting 505 19 blotter - 12-11-86 20 21 FOR THE TRUSTEE: 22 Exhibit Number 10, Customer statement - 524 23 12-31-07 24 Exhibit Number 11, House 5 daily stock 535 25 Record activity - 7-16-87

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1 INDEX OF EXHIBITS (Continued) 2 FOR THE TRUSTEE: PAGE 3 Exhibit Number 12, House 17 stock record 558 4 summary through 12-31-07 5 Exhibit Number 13, Stock record summary - 566 6 8-31-01 7 Exhibit Number 14, House 17 stock record 569 8 summary - 3-31-94 9 Exhibit Number 15, House 17 stock record 571 10 summary - 7-16-87 11 Exhibit Number 16, Confirmation - 11-11-83 600 12 Exhibit Number 17, House 17 stock record 603 13 summary - 11-10-83 14 Exhibit Number 18, Cash and securities 611 15 blotter 16 Exhibit Number 19, Cash and securities 611 17 blotter 18 Exhibit Number 20, Proffer meeting 626 19 document - 12-16-08 20 Exhibit Number 21, Report - 12-8-08 644 21 22 23 24 25

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1 THE VIDEOGRAPHER: We're now on the 2 record. Please note that the microphones are 3 sensitive and may pick up whispering and private 4 conversations. Recording will continue until all 5 the parties agree to go off the record. My name is 6 Bob Collier representing Veritext Legal Solutions. 7 Today's date is November 9th, 2017 and the time is 8 approximately 8:43. 9 This deposition is being held at Butner 10 Federal Correction Facility located at 3000 Old 75 11 Highway, Butner, North Carolina and is being taken 12 by counsel for the Plaintiff-Applicant. The caption 13 of this case is Securities Investor Protection 14 Corporation, Plaintiff-Applicant v. Bernard L. 15 Madoff Investment Securities, LLC, Defendant. 16 This case is being held in the United 17 States Bankruptcy Court, Southern District of New 18 York, Case Number 0801789 (SMB). The name of the 19 witness is Bernard L. Madoff. At this time the 20 attorneys present in the room will identify 21 themselves and the parties they represent. 22 MS. CHAITMAN: Helen Davis Chaitman on 23 behalf of numerous Defendants. 24 MR. KRATENSTEIN: Andrew Kratenstein of 25 McDermott Will & Emery, LLP on behalf of the Sage

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1 Defendants. 2 MS. DASARO: Stacy Dasaro, Baker 3 Hostetler, on behalf of the Trustee. 4 MS. FEIN: Amanda Fein, Baker Hostetler, 5 on behalf of the Trustee. 6 MR. GOLDMAN: Peter Goldman on behalf of 7 the witness, Mr. Madoff. 8 THE VIDEOGRAPHER: Our court reporter, 9 Denise Neal, representing Veritext Legal Solutions, 10 will swear in the witness and we can proceed. 11 BERNARD L. MADOFF, 12 having been first duly sworn, was examined and 13 testified as follows: 14 EXAMINATION 15 BY MS. CHAITMAN: 16 Q. Good morning, Mr. Madoff. Yesterday you 17 identified a document which was marked as 18 Exhibit 38, which appears to be a January 31, 1983 19 statement bearing the name National Westminster 20 Bank? 21 A. Uh-huh. 22 Q. And it shows -- 23 MR. GOLDMAN: You've got to answer yes or 24 no, Bernie. 25 THE WITNESS: Says National Bank of North

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1 America. 2 Q. (By Ms. Chaitman) Excuse me. National 3 Bank of North America. Thank you. And was this 4 generated by your firm or was it generated by 5 National Bank of North America? 6 A. I believe it was generated by my firm. 7 Q. Did you receive on a monthly basis from 8 National Bank of North America statements showing 9 the securities transactions conducted in that month 10 for your firm? 11 A. I don't recall whether we received one. I 12 don't know. I mean, you know, you're talking about 13 1983. I don't know what the policy was. Typically 14 we would receive statements from the banks at the 15 end of a month. 16 Q. Okay, okay. And, for example, here is 17 Exhibit 46, which is another statement that was 18 generated by your firm as well; right? 19 A. Yes. 20 Q. And do you know how the information was 21 obtained that was incorporated into these 22 statements? 23 A. Well, these statements were generated by 24 us. They're showing the transactions according to 25 our records as they're done.

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1 Q. Okay, okay. 2 A. They're not the bank's records. So these 3 are just, you know, the transactions as they 4 appeared in this account. 5 Q. Okay. And you testified yesterday that 6 these all reflect accurate transactions that were 7 fulfilled -- 8 A. That's correct. 9 Q. -- is that correct? 10 A. Yes. 11 Q. Okay. And I'm showing you again 12 Exhibit 39, which is a January 31, 1983 statement of 13 transactions with National Bank of North America. 14 A. Yes. 15 Q. And is that an accurate reflection of the 16 transactions that were done in that prior month for 17 National Bank of North America? 18 A. Correct. 19 Q. Okay. Now, let me show you what I'm going 20 to mark as Exhibit 89. These are it says Schwab 21 blotters for 12-5-86 and it says house five. 22 MS. FEIN: Thank you. 23 MR. KRATENSTEIN: Thank you. 24 Q. (By Ms. Chaitman) Can you tell me what 25 this document is?

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1 A. It looks like the activity that took place 2 in the Charles Schwab & Company. 3 Q. Okay. And, again, would these be actual 4 transactions that were conducted by your firm? 5 A. They would be. 6 Q. Okay. And would you have received in the 7 ordinary course of business some documentation from 8 Schwab evidencing these same transactions? 9 MS. FEIN: Objection. 10 THE WITNESS: It depends upon what period 11 of time. I mean, people stopped using 12 confirmations. Broker-to-broker confirmations were 13 eliminated after a certain period of time. I don't 14 know when that was. Before that period we received 15 confirmations on every trade every day. 16 After that there were no confirmations 17 because the trades went to the clearing corporation 18 and those trades were all netted, which is a 19 practice so that the transaction that you did with 20 Schwab doesn't -- would not be what you would 21 receive from the clearing corporation because they 22 net all the -- from market makers like Madoff what 23 happens is they take all of the transactions, all 24 the transactions that you had in a particular 25 security, so if we had every trade that we did with

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1 say in General Motors for any of the thousands of 2 brokers that exist that buys and sells, if you sold, 3 for example, 2 million -- if you brought 2 million 4 shares from assorted brokers and then you sold 5 1,500,000 shares, they would send you what they call 6 a balance order at the end of the day that said you 7 bought or sold 500 shares, which is the net amount. 8 And they would give you the dollar amount 9 of the net practice. And -- and the person 10 guaranteeing the trade became the clearing 11 corporation. 12 Q. (By Ms. Chaitman) Was there a system in 13 place at your firm to verify the information you 14 received on a daily basis from the clearing 15 corporation? 16 A. Yes, you know, there was. I can't tell you 17 exactly what it was because I'm not part of the back 18 office operation. 19 Q. Okay. But there was such a system in 20 place? 21 A. Yes. 22 (Exhibit Number 90 was marked for 23 identification.) 24 Q. (By Ms. Chaitman) I'm going to show you 25 what I've marked as Exhibit 90, and I apologize. I

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1 only have one copy of this, but I'll show it to 2 everybody after you identify it. Can you tell me 3 what this is? 4 A. It reflects the securities we bought for 5 Vanguard and Wells Fargo. 6 Q. During this -- the period indicated? 7 A. During that period of time, right. 8 Q. Okay. And is this a report that was also 9 generated by your firm? 10 A. Correct. 11 Q. Okay. And were these transactions actual 12 transactions? 13 A. Yes. They were. 14 (Exhibit Number 91 was marked for 15 identification.) 16 Q. (By Ms. Chaitman) Okay. I'd like to show 17 you what I've marked as Exhibit 91. Can you tell me 18 what this document is? 19 A. It looks like a trade reporting blotter 20 under National Securities Clearing Corporation. 21 Q. Okay. Now, is the National Securities 22 Clearing Corporation generally referred to as NSCC? 23 A. Correct. 24 Q. And was NSCC the precursor to DTC, the 25 Depository Trust Company?

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1 A. Yes, then they merged. 2 Q. Okay. So what does this document reflect? 3 It reflects trade date December 11th, 1986. Can you 4 tell me what this document shows? 5 A. It would show the transactions that we did 6 with other brokerage firms in the street but not 7 reflect any customer transactions. 8 Q. Okay. And is there an indication on this 9 document as to which brokerage firms were on the 10 other side of these transactions? 11 A. I don't believe so. 12 Q. The member number ID of 0158, was that your 13 member number? 14 A. No. Oh, yes. 15 Q. The first column on the left? 16 A. No. That's -- ours was 646. This member 17 ID would be -- refer to another brokerage firm. 18 Q. So this document -- which I don't represent 19 is complete. I just printed out a portion of it. 20 The column on the left represents another brokerage 21 firm and this lists all the transactions done on 22 December 11th, 1986 by your firm with 0158? 23 A. Let me just look at this. Yes. 24 MS. FEIN: It looks like there -- on 25 future pages there might be others.

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1 MS. CHAITMAN: Right, right. I just 2 wanted to clarify this. 3 MS. FEIN: Understood. 4 MS. CHAITMAN: Yeah. I didn't print out 5 complete. 6 THE WITNESS: These are the transactions 7 of the market making or proprietary trading side of 8 the firm. 9 Q. (By Ms. Chaitman) Okay. As a matter of 10 fact, Mr. Kratenstein just pointed out to me if you 11 look on page two there are other numbers in the 12 left-hand column. Do you see that? 13 A. Yes. You mean other ID numbers? 14 Q. Yes. 15 A. Yes. 16 Q. So that means -- I didn't notice that, so 17 this lists transactions with all the other firms and 18 they're identified by their code number? 19 A. That is correct. 20 Q. And were these all legitimate transactions? 21 A. Yes. 22 Q. And they were all executed? 23 A. Yes. 24 Q. Now, would -- as of December 11th, 1986 25 would this kind of report reflect 100 percent of the

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1 trading activities of your firm or were there 2 other -- 3 A. No. 4 Q. Okay. So what other categories of 5 activities were there that are not reflected on a 6 report like this? 7 A. If we were trading with a client, you know, 8 out of our own inventory principal, it would not be 9 reflected on this -- on this report. 10 Q. Anything else? 11 A. I don't believe so. 12 Q. If you were doing convertible bond trading, 13 would that show up on this report -- 14 MS. FEIN: Objection. 15 Q. (By Ms. Chaitman) -- or would that be on a 16 different report? 17 A. I do not believe it would be on this 18 report. 19 Q. Do you recall that your firm generated 20 reports which -- in the 1980s which showed all of 21 the convertible bond purchases and sale on a daily 22 basis? 23 A. It would reflect, be reflected in a 24 customer's account if -- and it would be reflected 25 in the firm's account, in the firm's trading --

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1 you'd have to look at the trading ledger for the 2 firm. It depends upon also whether we did it as 3 principal or whether we did it as agent. Most of 4 our trades were done as principal. We're selling 5 out of our own inventory account to the customer. 6 I don't know exactly where that would 7 appear, but it would not appear -- these are what's 8 called street side transactions, as I said, mostly 9 from a market making proprietary trading side of the 10 firm, broker-to-broker trades. 11 Q. Okay. You had testified previously that 12 with respect to the convertible bond trading, 13 99 percent of it in the 1980s was done in the 14 over-the-counter market? 15 MS. FEIN: Objection. 16 Q. (By Ms. Chaitman) Do you recall that? 17 A. Depends upon the bond. The bonds, 18 convertible bonds traded -- most convertible bonds 19 traded in the over-the-counter market. Some of them 20 were traded on an exchange, but the great majority 21 of them would trade over the counter. 22 Q. Okay. Now, if I wanted to find a record on 23 any specific date in the 1980s of the volume and 24 specific transactions that you did in the 25 over-the-counter market, what document would I look

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1 for? 2 A. You'd have to look at the firm trading 3 account records and blotters, but I don't -- and if 4 you're talking about period in the '80s, I doubt 5 whether or not you would be able to find them 6 because the record retention period was six years in 7 the industry. So there would be no reason the firm 8 would keep those. 9 Q. Now, Mr. Madoff, I believe you're aware 10 that there were microfilm records that the Trustee 11 found? 12 A. Yes. 13 Q. Do you recall how it came about that some 14 of your records were microfilmed? 15 A. It depends upon what the policy of the firm 16 was at that -- during that period of time. I mean, 17 there was a -- there was a lot of confusion within 18 the industry as to whether you had to microfilm 19 records or whether you would put them -- send the 20 records to a place like Stone Mountain, which was an 21 off premises places. 22 Everybody had a different policy, so -- and 23 I'm not particularly aware of what our firm's policy 24 was. It's not something I would be involved in. 25 Q. Okay. Was the decision to microfilm

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1 records your decision or did someone else in your 2 firm make that decision? 3 A. It wasn't my decision, no. 4 Q. It was not? 5 A. No. 6 Q. Okay. So is it fair to say that you didn't 7 instruct your staff as to what should be microfilmed 8 and what should not be microfilmed? 9 A. No. 10 Q. Did you ever seek to verify that documents 11 were being microfilmed? 12 A. Probably not. It's not an area that I 13 would be involved in. That would be something that 14 somebody in the systems department would make those 15 decisions or someone in the operations department. 16 Q. Okay. Can you think of anyone in 17 particular who would have been responsible for that? 18 A. It varied, you know, over the years. No. 19 Q. Okay. There was a person named Asha, 20 A-s-h-a. Do you recall that name? 21 A. No. 22 Q. Okay. Do you know you've testified 23 previously that the -- all of the trading that you 24 did except for the split strike was actual trading? 25 MS. FEIN: Objection to form.

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1 MS. CHAITMAN: I'm just trying to lay the 2 background. 3 THE WITNESS: Yes. 4 Q. (By Ms. Chaitman) You testified to that 5 yesterday. Okay. 6 A. Up to a certain period of time. There were 7 actual trades done in split strike prior to 1990, 8 some period in the '90s. 9 Q. Okay, okay, okay. So just to clarify, when 10 you started the split strike for some period of time 11 you actually did the trades? 12 A. Correct. 13 Q. And at some point which you haven't been 14 able to specify you stopped doing the trades? 15 A. Correct. 16 Q. Okay. Now, I want to ask you something 17 about that, Mr. Madoff. Is it your understanding 18 from your experience in the securities business that 19 it was illegal for you to send a customer statement 20 to a customer which said in essence I've purchased 21 five shares of IBM for you when, in fact, you hadn't 22 actually made that purchase? 23 A. Was it what? 24 Q. Was there anything improper or illegal 25 about your in a sense selling a short, a naked short

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1 to a client? 2 MS. FEIN: Objection. 3 THE WITNESS: No. 4 Q. (By Ms. Chaitman) Can you explain to me 5 why that was not illegal? 6 A. Short selling is a very common practice and 7 a significant part of the stock market, whether it 8 be an over-the-counter transaction or whether it be 9 an exchange-traded transaction. 10 That is -- as a matter of fact, there are 11 -- you can look at any one of the financial records 12 that are produced, you know, by the media and get 13 what the open short positions are in every 14 particular security. So the concept of selling 15 short has been in existence since the securities 16 started trading in the market maker. 17 Q. And the fact that you did that, that you 18 may have done naked short selling -- 19 A. Right. 20 Q. -- was that illegal or improper? 21 A. No. 22 Q. Okay. So is it fair to say that because 23 you were a market maker, you had not only the right 24 but also the obligation -- 25 A. That is correct.

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1 MS. FEIN: Objection. 2 Q. (By Ms. Chaitman) -- to sell? 3 A. The rule was that if you were a registered 4 market maker, you were required to post on a regular 5 and continuous basis a two-sided market, meaning 6 what you're willing to buy and what you're willing 7 to sell. And in order to -- in order to continue to 8 be a registered market maker, you had to honor that 9 quote. Otherwise, it would be a violation of the 10 SEC. 11 Q. Okay. But you say it's not a violation of 12 any SEC rule to indicate on a customer statement 13 that the customer owns certain securities when you 14 hadn't actually purchased them? 15 A. Of course. 16 Q. It's not -- that's not improper? 17 A. No. 18 Q. Okay. So what was improper, if anything, 19 about the fact that with respect to the split 20 strike, at a certain point in time you stopped 21 buying the securities shown on the statements? 22 MS. FEIN: Objection. 23 THE WITNESS: What was improper was when 24 we reported our -- when we gave the SEC our 25 financial statements, you would have to show what

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1 your -- you wouldn't -- you wouldn't show whether 2 you were long or short for any particular customer. 3 That policy was changed many, many years ago, but 4 you had to reflect the liability of what was 5 involved in your total short positions. 6 Q. (By Ms. Chaitman) Okay. So just to be 7 clear, if you sent customer A a statement which 8 showed that he had a portfolio worth a million 9 dollars in various Fortune 100 company stocks and 10 you did not own those stocks at that time, you would 11 have had to reflect on your FOCUS report to the SEC 12 that you owed that customer a million dollars worth 13 of stocks? 14 MS. FEIN: Objection. Helen, we covered 15 this on the first day of Mr. Madoff's testimony back 16 in April. 17 MS. CHAITMAN: Okay. 18 MS. FEIN: So I just want to put on the 19 record that this is day one testimony. 20 MS. CHAITMAN: Okay. 21 THE WITNESS: You would -- if the firm was 22 short to a customer, you would reflect on -- you 23 would reflect -- that would reflect what your open 24 position was that's a short position; but if you had 25 an arbitrage transaction in that particular

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1 security, you would net the long positions versus 2 the short position of the firm, both the market 3 making, proprietary and the customer transaction. 4 Plus, you would have to take options into 5 consideration. You'd have to -- there were certain 6 exemptions and instructions of how you treated your 7 capital. 8 Q. (By Ms. Chaitman) Okay. But, in fact, you 9 never disclosed to the SEC that you had naked short 10 positions. Is that fair to say? 11 A. During the period where we didn't sell the 12 stock, that is correct. 13 Q. Where you didn't buy the stock you mean? 14 A. Didn't buy the stock. 15 Q. Okay, okay. And in your mind is that what 16 was illegal about what you did? 17 A. Correct. 18 Q. Okay. Now, in all the years you were in 19 business prior to the global economic collapse in 20 2008, did you ever find yourself unable to satisfy a 21 customer demand for a withdrawal from a -- 22 MS. FEIN: Objection. This is not only -- 23 it's outside the scope of the day two deposition. 24 We didn't enter the order today, but this was all -- 25 these were things that were covered on the day one

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1 deposition. 2 MS. CHAITMAN: Okay. You've made your 3 record. 4 THE WITNESS: No. 5 Q. (By Ms. Chaitman) So you're sure that 6 there was never a time from 1992 when you started 7 the split strike until 2008 when you were unable to 8 satisfy a customer demand for a redemption? 9 A. That's correct. 10 Q. Did you ever need to take in a new 11 customer's money in order to pay money to an 12 existing customer? 13 A. No. 14 Q. In the entire time you were in business? 15 A. Up until the collapse of the financial 16 market. 17 Q. Okay. Now, did you make margin loans to 18 some customers? 19 A. Yes. 20 Q. And were those margin loans in your view 21 debts from the customers to you? 22 A. Of course, yes. 23 Q. And why is that? Tell us what a margin 24 loan is. 25 A. Margin loan is regulations set by the

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1 Federal Reserve. If a customer wants to buy -- 2 wants to buy securities, he is allowed to pledge, 3 you know, other securities in his account, you know, 4 to purchase it. So the margin rates varied. I 5 believe in the period of time that you're talking 6 about it would be 50 percent, but again, it depends 7 upon the securities, whether they were bond, whether 8 they were -- you know, the type of bond, whether or 9 not they had options involved with it. 10 It was a complicated practice, but 11 basically it was the customer's ability to borrow to 12 be able to purchase more securities without posting 13 cash for that particular transaction. So he was -- 14 it's similar to when you have a house and you take a 15 mortgage loan out to buy the house or to expand the 16 house. Well, use it for whatever you want. Those 17 regulations are set by the Federal Reserve Board. 18 Q. Okay. And would you have made a margin 19 loan to someone who didn't own any securities? 20 A. No. 21 Q. So is it fair to say that almost by 22 definition if you made a margin loan to a customer, 23 that customer had real securities in his account? 24 MS. FEIN: Objection. 25 THE WITNESS: Yes.

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1 Q. (By Ms. Chaitman) And do you recall that 2 you made substantial margin loans to the Sages? 3 A. That I can't recall. 4 Q. Okay. But it would be reflected on their 5 statements; wouldn't it? 6 A. You could figure it out from the statement, 7 yes. You'd see by whether it had a debit balance in 8 their account -- 9 Q. Okay. 10 A. -- past the settlement date of the 11 transaction. 12 Q. Okay. And was it your practice to insist 13 that margin loans be repaid by customers? 14 A. Yes. 15 MS. CHAITMAN: I have nothing further. 16 Thank you very much, Mr. Madoff. 17 MS. FEIN: Okay. We can get started if 18 that's okay with you. Would you prefer that we take 19 a break now? 20 THE WITNESS: No, no. I'm fine. 21 MS. FEIN: Okay. 22 MR. GOLDMAN: You want something to drink? 23 THE WITNESS: Anything, water or Pepsi is 24 fine. 25 MR. GOLDMAN: You want water or Pepsi?

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1 THE WITNESS: Pepsi. 2 MS. CHAITMAN: Do you need a dollar? 3 MR. GOLDMAN: No. 4 EXAMINATION 5 BY MS. FEIN: 6 Q. Good morning, Mr. Madoff. 7 A. Good morning. 8 Q. When -- I want to define a couple of terms 9 up front so when we talk about them later, you know 10 what I'm referring to; but if I ask a question about 11 the IA business or house 17, would you agree that 12 that's referring to your investment advisory 13 business? 14 A. Yes. 15 Q. And if I ask a question about market making 16 or proprietary trading or house five, I might use 17 those terms somewhat interchangeably. I might use 18 house five to refer to the market marking and 19 proprietary trading business, but do you agree that 20 we can use those terms? 21 A. Yes. 22 Q. And yesterday I believe Mr. Kratenstein 23 asked for clarification about what -- at my request, 24 so thank you, about what a real trade was and you 25 had -- and we have that term defined. We can use

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1 that term today as well? 2 A. Yes. 3 Q. For the period of time where your 4 customers' statements showed trades that where the 5 underlying securities weren't purchased, what term 6 would you refer to those as? 7 A. Basically, short. 8 Q. Okay. Would you agree that can we say that 9 the statements at least were fake statements? They 10 showed transactions that didn't occur? 11 A. Well, depends upon -- I have to think 12 about, you know, how you would define that. In 13 other words, because selling short is -- is not 14 considered a legitimate trade or a trade that was 15 not real, in other words, let me just for the record 16 make sure that you understand that when a brokerage 17 firm sells short, all right, that is no different 18 than a broker selling stock long as to whether or 19 not it's legal. 20 In other words, that is -- it's a valid 21 transaction. I noticed in the GA -- in the expert 22 witness, I guess it would have been referred to as 23 the Dubinsky report and in the Trustee's reports 24 that I have seen, they consistently refer to short 25 sales as fake or illegitimate transactions.

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1 Anybody in the industry would not 2 understand using that terminology because if you 3 sell -- if you make a short sale through a brokerage 4 firm, the brokerage firm is under the same 5 obligation to deliver those securities to you if you 6 request them as long and you have -- and you have 7 the same obligation to pay for those securities. 8 There is no difference between whether the 9 transaction was actually purchased or not. If the 10 broker said that he sold you the stock, whether he's 11 long or short does not affect his obligation, does 12 not alter his obligation to honor that transaction 13 upon your request. 14 So you can't say -- otherwise, if you ever 15 had -- went into court with that and said this is a 16 fake transaction, this is a real transaction, they 17 would not know what you're talking about. 18 Q. I understand. We spoke yesterday a bit and 19 we're going to talk about it today as well that 20 there are amounts listed on customer statements 21 where you hadn't purchased the amounts that are 22 listed -- 23 A. Correct. 24 Q. -- correct? So and that would be I believe 25 it's your testimony after 1992 that you would have

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1 customer statements that showed transactions that 2 didn't have the underlying securities purchased by 3 your firm; correct? 4 A. We would show short positions on a customer 5 statement at any time, you know, that it took place, 6 even if it was before 1992 because that's a -- 7 there's no brokerage firm that does a market making 8 or proprietary trading. Well, there's no -- let me 9 clarify that. 10 There is not a brokerage firm in existence 11 probably that sells stock short to a customer from 12 his principal account if he's, in fact, maintaining 13 a market making or proprietary trading account. So 14 I know -- I'm not sure if I'm confusing you or not, 15 but it is a perfectly legal -- a short sale or a 16 naked short sale, which by definition is the same 17 thing, is a perfectly legal transaction. 18 So I could sell stock short. As a matter 19 of fact, and I probably shouldn't go into all this. 20 I don't know, but during my proffer agreement, my 21 proffer session, the prosecutor in the presence of 22 the SEC and the Trustee asked me to explain my 23 market making business or my business in general. 24 And during that period of time he asked me whether 25 or not we ever sold stock to a customer short.

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1 And I said, of course, there was periods of 2 time where we sold stock short to a customer. And 3 he didn't seem to understand that. As a matter of 4 fact, I had turned to the SEC people that were there 5 and my own lawyer and said please explain to him, 6 you know, how the market making worked, that they 7 were sort of shocked. 8 I can understand the prosecutor not 9 understanding that, certainly not a prosecutor that 10 was handling a securities case. So I don't know 11 whether he was going through some exercise or not, 12 but that's how -- they seemed to be focusing in on 13 whether or not we ever sold short. I said if you're 14 a market maker, you had to sell short at times. I 15 don't know if I've clarified that or not. 16 (Trustee's Exhibit Number 10 was marked 17 for identification.) 18 Q. (By Ms. Fein) I'll try -- I'm going to try 19 a different way. So I'm handing you what's been 20 marked as Trustee's Exhibit 10. And -- 21 MS. CHAITMAN: Thank you. 22 Q. (By Ms. Fein) -- this appears to be a 23 customer statement. Would you agree? 24 A. Yes. 25 Q. And it appears to be dated December 31st,

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1 2007. Do you see that? 2 A. Yes. 3 Q. This customer statement -- if you turn to 4 the third page of the document, the Bates number is 5 960. Do you see that page? 6 A. Yes. 7 Q. This customer statement shows the purchase 8 of U.S. treasuries on December 31st. Do you see 9 that transaction? 10 A. Yes. 11 Q. You previously testified that the 12 individual transactions shown on customer statements 13 like these weren't always -- I understand your 14 position with respect to shorts, but if we went to 15 where you held Treasury bills for this period or 16 went to where you held the securities for the period 17 shown on these statements, we wouldn't necessarily 18 be able to find those securities at the DTC. 19 We wouldn't necessarily be able to find 20 those treasuries held at a depository or a 21 third-party firm; correct? 22 MS. CHAITMAN: Objection to form. 23 THE WITNESS: If I said on treasuries, we 24 never went short treasuries. So if, in fact, you 25 went to locate them, you would find them.

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1 Q. (By Ms. Fein) So for the treasuries shown 2 on your customer statements, you've told us in the 3 past that you did not have -- the amount of 4 treasuries you said you purchased was between 5 two-and-a-half and $6 billion. Do you remember 6 that? 7 A. Depends upon the period of time. 8 Q. Right. You said over any period of time, 9 two-and-a-half to $6 billion was the amount of 10 treasuries that you would have had on hand. Do you 11 remember that? 12 MS. CHAITMAN: I think you're misstating 13 his testimony, but it stands. Bernie, you testify 14 as to what you believe -- 15 MS. FEIN: What you understood. 16 MS. CHAITMAN: -- not what -- 17 THE WITNESS: During this period of time 18 if we said that we had -- if a Treasury transaction 19 was in a client's account, that transaction was -- 20 that transaction was actually bought or it was held, 21 the equivalent amount, at a third-party depository, 22 which would be DTC or another brokerage firm like a 23 Morgan Stanley or a Fidelity and so on. 24 Q. (By Ms. Fein) So the same -- you're saying 25 that this same -- the same Treasury bill, the same

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1 due date, the same CUSIP number, the same amount, 2 that that information would appear on a third-party 3 financial statement or a DTC record? 4 A. Right, correct. 5 Q. So for the period of time that this 6 Exhibit 10 refers to -- 7 A. Uh-huh. 8 Q. -- December 2007, your customer statements 9 showed $56 billion in treasuries aggregated? 10 A. 56 billion dollars? 11 Q. Yes, your customer statements. 12 A. During what period of time? 13 Q. December 2007 when this statement -- 14 A. Oh, this is 2007. 15 Q. Yes. 16 A. I thought you were looking at an '87 date. 17 Q. I see. Okay. So is your testimony 18 somewhat different since this is a 2007 statement? 19 A. Yes, yes, right. 20 Q. Okay. So in the 2007 time frame would you 21 say -- I mean, did you have $56 billion of 22 treasuries in 2007? 23 A. No. 24 Q. And the treasuries that would be shown on 25 your individual statements that aggregate to the 56

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1 billion, those amounts wouldn't be something that 2 your firm held; correct? 3 A. Not in 2007, no. 4 Q. Understood. 5 A. I've taught you -- we were on the last 6 date, which was '87. 7 Q. Got it. I'm glad you clarified so we're on 8 the same page. 9 A. All right. 10 Q. Let's see. I wanted to ask -- we've 11 discussed a bit about clearing firms in the past 12 couple of days. The BLMIS back office had the 13 capability to receive and deliver securities; right? 14 A. Yes. 15 Q. And is that -- and you refer to BLMIS as a 16 self-clearing firm for that reason? 17 A. Correct. 18 Q. If you were a firm that did not have that 19 back office capability, would you rely on a 20 third-party clearing firm to clear your 21 transactions? 22 MS. CHAITMAN: Objection to form. 23 THE WITNESS: Yes. Would I or would 24 someone in general? 25 MS. FEIN: Thank you. I'm going to

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1 rephrase the question. 2 THE WITNESS: Yes. 3 Q. (By Ms. Fein) Thank you. Would a firm 4 that had -- did not have the back office capability 5 to receive and deliver securities need to rely on a 6 third-party clearing firm like Merrill Lynch or Bear 7 Stearns? 8 A. Correct. 9 Q. For this firm that uses a third-party 10 clearing firm, there were brokerage firms that acted 11 this way; right? 12 A. Correct. 13 Q. And would that brokerage firm basically use 14 Bear Stearns or Merrill Lynch as a back office to 15 receive and deliver the securities? 16 A. Correct. 17 MS. CHAITMAN: Objection to form. 18 Q. (By Ms. Fein) If the trades were cleared 19 through a third-party clearing firm, would that firm 20 issue statements to -- to the statements of the 21 holders of those underlying securities? 22 MS. CHAITMAN: Objection to form. I don't 23 know what time period you're questioning him about. 24 He's testified that the practice has varied through 25 the decades. Can you just give him a time period?

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1 Q. (By Ms. Fein) Understood, yes. Did the 2 practice of back office operations of receiving and 3 delivering securities change over time? 4 A. Yes. 5 Q. Was one part of that change that DTC and 6 other depositories were available after a certain 7 period? 8 A. Correct. 9 Q. Would you say that would -- the time period 10 where depositories were available was sometime in 11 the '70s or '80s? 12 A. No. 13 Q. What time frame do you recall? 14 A. Well, I don't -- well, there was -- there 15 were always clearing firms like a Bear Stearns that 16 would -- that would operate during the period of 17 time you're talking about, but DTC came into 18 existence later. So did National Securities 19 Clearing Corporation come into existence later. It 20 would be sometime probably in the '80s. 21 Q. Okay. I believe we looked at a document 22 with Ms. Chaitman from 1986 that had National 23 Securities Clearing Corp on it. Is that date -- 24 A. Then that would probably be, you know, when 25 National Securities Clearing Corporation existed was

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1 in operations. 2 Q. Do you recall was the DTC also in operation 3 around that time? 4 A. It came in after. I don't know exactly 5 what the date was, but National Securities Clearing 6 Corporation was not a depository. 7 Q. Understood. 8 A. It just cleared the transactions. 9 Q. Okay. So the difference between -- so DTC 10 would -- was a depository in that it held the 11 securities? 12 A. Yes. 13 MS. CHAITMAN: It helped them? 14 MS. FEIN: Held. 15 THE WITNESS: It depends upon the 16 security, whether it was a bond or not, and also it 17 depends upon you if you had a clearing arrangement 18 with a bank or another brokerage firm, even after 19 the clearing corporation or DTC came into existence 20 you might use any one of the other clearing firms. 21 Q. (By Ms. Fein) Understood. But BLMIS 22 didn't need to use -- strike that. Typically 23 because BLMIS was a self-clearing firm for every day 24 transactions, it wouldn't rely on a third-party 25 clearing firm; correct?

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1 MS. CHAITMAN: Objection to form. 2 THE WITNESS: No. That's not correct. 3 Q. (By Ms. Chaitman) Okay. Please tell me. 4 A. In other words, it depends upon -- we had 5 arrangements as most brokerage firms would have 6 arrangements, particularly market making firms, with 7 all sorts of clearing firms, whether it be a Bear 8 Stearns, a Goldman Sachs or whether it be a bank, 9 any number of banks that clear or they would clear 10 themselves. 11 And depending upon the type of transaction 12 that they were doing, for example, if it was a 13 Treasury bill transaction, only certain brokerage 14 firms are registered to deal in treasuries. 15 So you would have to use like a Bank of New 16 York, for example, one or a Goldman Sachs and so on. 17 So there is no general rule as to -- and it also 18 depends upon how you were dealing with that other 19 firm and what you in general do business with that 20 other firm. I don't know if I'm confusing a little, 21 but it varies. 22 Q. If you -- you held securities at DTC; 23 correct? 24 A. Some securities, yes. 25 Q. If -- and what was the difference between

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1 why you would hold a security at DTC or elsewhere 2 other than the fact that DTC didn't clear a certain 3 security or couldn't hold a certain security for 4 you, like treasuries? 5 A. It depends upon who the securities -- who 6 the contra-side of the securities we bought or sold, 7 depending upon what brokerage firm we were dealing 8 with. It depends upon the type of security and that 9 we were dealing with it, what we planned to do with 10 the security, in other words, whether we would be a 11 long-term holder of the security, whether there was 12 a customer involved in the transaction. 13 There's any number of reasons why we would 14 do a -- the same reason -- there was different 15 reasons why we buy and sell through different 16 brokerage firms and, for example, also depends upon 17 where that firm is located. 18 So, for example, if we're dealing with a 19 firm in Chicago, we would use a different clearing 20 facility, whether it be a bank or a firm that's 21 located in Chicago because -- and then, again, it 22 depends upon the period of time whether people are 23 using physical securities or they were not using 24 physical securities. In other words, there were -- 25 you know, some customers wanted to take possession

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1 of securities. The industry, you know, is trying to 2 eliminate the movement of securities back and forth. 3 And it depends upon how the security was being paid 4 and whether this contra-party had the ability to 5 pay. 6 Some, for example, customer transactions, 7 they would want you to deliver the securities to 8 them or to a clearing agent against payment. Other 9 customers had the money in their account. So 10 there's any number of -- look, I was the chairman of 11 a clearing corporation, you know, and was the 12 founder of a clearing corporation, so I'm maybe more 13 familiar with this than the average person is. 14 I hope I'm not confusing you, but there's 15 any number of reasons why a transaction gets cleared 16 in one form or another. 17 Q. Okay. 18 A. If it makes you feel any better, Dubinsky 19 has no clue either. 20 Q. Thank you. We're trying to figure it out. 21 I'm trying to figure it out. 22 A. It's difficult. I understand. I'm not -- 23 Q. Thank you. I want to look at some 24 documents with you that maybe will help. I think we 25 want to make sure we're getting it right. I do.

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1 A. That's fine. 2 Q. So let me show you a document. You've said 3 in the past you kept stock records; correct? 4 A. Correct. 5 Q. And the stock records would show where the 6 securities were held; correct? 7 A. Correct. 8 Q. We're going to take a look at one now. The 9 stock records would also show your inventory for 10 your long and short positions; right? 11 A. Correct. 12 (Trustee's Exhibit Number 11 was marked 13 for identification.) 14 MR. KRATENSTEIN: This is 11? 15 Q. (By Ms. Fein) So what you're looking at is 16 Trustee 11. And I want to go through some of these 17 column headings with you. 18 A. Uh-huh. 19 Q. Are you familiar with this document? 20 A. Yes. 21 Q. Is this the type of document that you would 22 have prepared around the date listed, which is 23 July 16th, 1987? 24 A. Yes. 25 Q. Would this have been prepared in your

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1 ordinary course of business? 2 A. Would this what? 3 Q. Have been prepared in your ordinary course 4 of business? 5 A. Yes. 6 Q. The title reads house five daily stock 7 record activity -- 8 A. Correct. 9 Q. -- for -- thank you -- July 16th, 1987? 10 A. Yes. 11 Q. If you look at the columns below -- 12 MS. CHAITMAN: I'm sorry. Where does it 13 say that? 14 MS. FEIN: The first line on the top. 15 MS. CHAITMAN: Oh, I see. Okay. 16 Q. (By Ms. Fein) Do you see the first column 17 on the left, last act, is that last activity? 18 A. Yes. 19 Q. The column directly right next to that, 20 safekeeping? 21 A. Safekeeping, right. 22 Q. And what's under that, STRT? Do you know 23 what that refers to? 24 A. No. 25 Q. Okay. The next one, safekeeping owner?

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1 A. Correct. 2 Q. The next column, transfer STRT. Start 3 maybe, do you think? 4 A. I don't know whether that's start or 5 street. I don't know whether -- 6 Q. Okay. And then looks like transfer owner 7 in the next line? 8 A. Correct. 9 Q. Okay. If you go over a couple of columns 10 do you see securities/account name -- 11 A. Yes. 12 Q. -- in the middle of the page? 13 A. Uh-huh. 14 Q. Okay. And then next to that what I think 15 is previous balance? 16 A. Correct. 17 Q. Current long/short? 18 A. Correct. 19 Q. New balance and account number, do you see 20 that? 21 A. Yes. 22 Q. So looking at this first transaction, the 23 security name is AMR Corp? 24 A. Uh-huh. 25 Q. And the trader says Peter, dash, trading?

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1 A. Correct. 2 Q. In the previous balance column do you see 3 an amount, 2,307 L? 4 A. Okay. 5 Q. Do you think that would be 2,307 long? 6 A. Correct. 7 Q. And then if you keep going across it looks 8 like there was some activity on this date. Do you 9 agree? 10 A. Yes. 11 Q. In the long and short position? 12 A. Uh-huh. 13 Q. And the new balance -- 14 A. Yes. 15 Q. -- is 3,157 long. Do you see that? 16 A. Yep. 17 Q. So looking at this trade, can we just go 18 underneath where it says AMR Corp and Peter trading? 19 The next line, Prudential Bach Sec, Inc.? 20 A. Correct. 21 Q. Do you know what that refers to? 22 A. Prudential Bache Securities. That's 23 another brokerage firm. 24 Q. Okay. And do you see below that SIAC? 25 A. Correct.

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1 Q. What does that refer to on this report? 2 A. Securities Industry Automation Corp. 3 That's -- they keep the clearing records. It's an 4 automated system. 5 Q. Okay. So at this -- for this date, 6 July 1987, this automated records system was in 7 place based on this report; right? 8 A. Correct. 9 Q. And the line below that looks like DTC? 10 A. Yes. 11 Q. Do you see in the previous balance column 12 the 2,307 long, if you go down to DTC it has 2,307 13 S. Would that be 2,307 short? I can show you. 14 A. Okay, yes. 15 Q. Do you agree that's the -- that appears to 16 be the same holding in that 2,307 long is your 17 firm's balance and the DTC is holding that security. 18 That's what's reflected in 2,307 short? 19 A. Yes. 20 Q. Okay. And then the new balance column, I 21 think you'll see the same thing somewhat. It 22 appears there's a total of 3,357 long at the end of 23 the day? 24 A. Uh-huh. 25 Q. And DTC is holding 3,357 short. Do you see

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1 that? 2 A. Yep. 3 Q. So if on this date, July 16th, 1987, you 4 had -- does this show that your firm would have an 5 inventory of 3,357 shares of AMR Corp? 6 A. I'm a little bit confused myself with this 7 because this is not a record that, you know, I would 8 work with typically. I don't know whether this is a 9 complete record. This is -- it seems to be 10 reflecting the market making department, their 11 trades. So does this show -- this looks like the 12 market -- all the market making trades. 13 Q. Okay. 14 A. Because I did -- these people, Peter, 15 Martin Joel, Mark, those -- it's identifying trading 16 that took place in the market making. I don't see 17 any customer transactions on here. 18 Q. Okay. The customer transactions, your 19 testimony is the customer transactions would come 20 out of your inventory; right? 21 A. Yeah, but this is -- not out of the -- I 22 don't see the investment. That would be the 23 investment account, not the market making account. 24 This house five account is the market making 25 account. So we also have a -- you know, an

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1 inventory here. These are not inventory 2 transactions. These are the market making, the 3 market makers' transactions. 4 Q. Okay. You told us the stock records would 5 show the inventory of long and short positions for a 6 certain time; right? 7 A. Of market makers. 8 Q. So let's go back then. Because of the 9 inventory documents that you kept, why don't you 10 talk about the other documents that would show your 11 trading inventory? 12 A. Well, you should be able to -- if you -- 13 you should be able to find an account that showed 14 the inventory in the trading account, you know, in 15 the market making account, in -- not market -- the 16 investment account. Do you have records that show 17 whether the investment account was long or short? 18 Q. I'm not sure what you're referring to when 19 you say investment account. Can you give me more 20 information about it? 21 A. For example, that would be the firm itself. 22 There's not a market maker assigned to that account. 23 Q. Okay. So for -- 24 A. And there are other -- there are individual 25 trading accounts. This is -- from looking at this

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1 record here, it's showing particularly market 2 makers. You see it's identified. I don't see a 3 record that shows what the investment account is. 4 You'd also have to look at -- you'd also have to 5 have something that would reflect option trading and 6 convertible bond trading if, in fact, there was a 7 convertible bond transaction. 8 Q. Do you see the entry for America West 9 Airlines about one, two, three, four, five down? 10 A. Yes. That's a bond, right. 11 Q. Okay. A convertible bond; right? 12 A. Right. 13 Q. And the traders listed here would be 14 trading in your house five business; right? 15 A. Correct. 16 Q. It doesn't -- this report doesn't show the 17 activity of a single trader. It shows multiple 18 traders; right? 19 A. If there was a -- if there were multiple 20 traders, it's in here. And then this AMR shows -- 21 where is it again? Peter. 22 Q. Okay. 23 A. That would be my brother. 24 Q. Okay. And then if you look to the aluminum 25 company transaction, which is four down?

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1 A. Martin Joel, right. 2 Q. That's another trader in your firm? 3 A. Yes, uh-huh. 4 Q. And the one below that, Mark, dash, 5 trading, would that be another trader in your firm? 6 A. Yes. 7 Q. And you see a few lines down closer to the 8 end of the page David, dash, trading? 9 A. Correct. 10 Q. And Margaret, dash, trading? 11 A. Correct. Those are all market makers. 12 Q. Okay. And did those traders also trade for 13 your proprietary account as well? 14 A. Sometimes. Sometimes I would trade for the 15 investment account. 16 Q. Okay. So this report shows your -- it 17 shows more than one trader trading on the same day 18 in a variety of securities; right? 19 A. Correct. 20 Q. And it shows that there's a previous 21 balance in the security and a new balance. So it is 22 showing that there are some held positions. It's 23 not just reflecting the daily activity. It's 24 reflecting the activity before that date as well and 25 then it has a previous balance column?

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1 A. In that, for that particular trader. It's 2 not showing the global position for the firm. 3 Q. Well, the trader that's listed as the last 4 activity trader, the trader on this day -- 5 A. Correct. 6 Q. -- it doesn't mean -- you wouldn't say that 7 this report means that the trader listed as the only 8 trader in that security; right? 9 MS. CHAITMAN: Objection to form. 10 THE WITNESS: In other words, we had in 11 some securities there could be multiple traders, you 12 know, trading it. So and those, those names would 13 be there also. For example, you would see Martin 14 Joel and there could be Peter and so on. 15 Here, for example, you see if you go down 16 to American Express, you see Peter for trading and 17 then there's Prudential Bache. You know, that's 18 another -- another street side transaction. I don't 19 know -- I don't know how to explain. 20 Q. (By Ms. Chaitman) No, no. I think here's 21 where we're misunderstanding each other. 22 A. Right, okay. 23 Q. There's a previous balance column that's 24 here, which means that there's a held position 25 before this daily activity starts; right?

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1 A. In that particular trading trader's 2 account. 3 Q. But these -- these aren't listed by trader. 4 They're listed by security; right? 5 A. I know, but if I did -- for example, if I 6 traded in Allied for the firm's investment account 7 for not a market maker's account, you know, that 8 would not be reflected here. This is looking at -- 9 at what the trades were before and after in a 10 particular trader's account. 11 If there is no -- so if you look at any one 12 of these transactions, you know, you would have to 13 also find a stock record that reflected the -- that 14 reflected these other traders' securities or the 15 firm's investment account. 16 Q. Okay. So my understanding was because if 17 you look next to Peter's name, there's a date? 18 A. Right. 19 Q. And the date is July 16th, 1987? 20 A. Right. That would be the last activity 21 that that trader traded the security. 22 Q. But why would it be any different? Why 23 couldn't it be that other traders had traded that 24 same security on a prior date? This is just showing 25 that that's the last trader that traded in it;

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1 right? 2 A. I'm not really sure. I don't know. I 3 don't know what you're trying to -- I don't know 4 what you're trying to identify. 5 Q. Okay. Well, I'm trying to identify where 6 your securities are held and this report shows -- 7 A. That I understand, but -- 8 Q. Okay. 9 A. -- I don't know, you know, if you -- I 10 don't know if these are all the records that reflect 11 what you're trying to do. In other words, you'd 12 have to -- do you have -- have you been able to find 13 records for the investment account, you know, and 14 other stock record? 15 This is not necessarily just all the -- 16 just all the trading that took place in the firm 17 itself. I don't see where you would be able to 18 identify that. 19 Q. Okay. Well, that's why we're asking you. 20 A. I don't know. 21 Q. Because this is a stock record and you told 22 us that stock records showed where securities were 23 held, we thought that the stock records that we had 24 would show where those securities were held, but -- 25 A. If you have all the stock records.

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1 Q. Okay. But, I mean, you're referring to 2 something different, which is something for an 3 investment account. I'm not sure I understand what 4 that document would look like. 5 A. It would look -- it would be the same as 6 this. 7 Q. So even though this shows your market 8 making activity, you're saying that there's another 9 document that would show something else? Are you 10 saying that -- what would be on that document? 11 Would it have trader names? 12 A. It would say investment account and it 13 might have my name on it or someone else's name on 14 it, probably -- I did most of the trading for the 15 investment account. 16 Q. Okay. 17 A. It could have my brother's name on it. 18 Q. Okay. But this has your brother's name on 19 it; right? 20 A. In his capacity as a market maker. He 21 traded as a market maker and he also traded for the 22 firm's investment account. 23 Q. Is that the same as proprietary trading? 24 A. Correct. 25 Q. Okay. So it's your position that you'd

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1 have a different house five report for market making 2 activity than you would for other legitimate 3 activity that was also going on at your firm on the 4 same day, same time? 5 A. House five typically refers to the market 6 making activity. I don't know what the -- I don't 7 really know the answer to that, how you would 8 identify that. 9 Q. Well, when we spoke earlier today -- 10 A. Understand that I'm not from the back 11 office, so I don't -- I understand the global 12 concept of what we do; but as far as working records 13 or how our firm kept certain records, that's not 14 something -- I'm not a -- wasn't a clerk. 15 Q. Okay. So you agree that this report shows 16 that positions were held at DTC; right? 17 A. It shows the position that -- it shows what 18 is held at -- if it says -- if it says that it was 19 held at DTC, then the security was held at DTC for 20 this particular transaction, this particular 21 account. If we had a trading inventory in the same 22 -- if we had a position in the same security, it 23 might be held through another broker. It might be 24 held at Morgan Stanley. It might be held through 25 one of our clearing banks.

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1 In other words, I could -- I do a trade, 2 the firm could do a transaction in AMR and we could 3 have it in three different locations depending upon 4 who we bought the security, bought and sold the 5 security for and whether the trade was cleared 6 in-house or whether it was cleared through another 7 -- through another -- another brokerage firm. And, 8 you know, you can't -- there's no general rule. 9 Q. So you're saying there isn't a document 10 that would show -- 11 A. Yeah. There are documents that would show 12 that but, you know, it wouldn't necessarily -- for 13 example, if we had it at another brokerage firm, you 14 know, there would be a document that would show 15 that, you know, it's at that particular firm. You 16 have to -- you'd have to -- you'd have to present to 17 me -- and I can't tell you what all these records -- 18 whether you have a complete set of records there. 19 Q. So will you turn ahead to page ending in 20 950? It's the same document. It's about -- I'm 21 sorry. Ending in 954, so it's four pages in. 22 MR. KRATENSTEIN: I just realized 23 something. 24 MS. CHAITMAN: It has 950 on every page. 25 MR. KRATENSTEIN: All of our copies appear

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1 to have 950. 2 MS. FEIN: You know, there are two numbers 3 listed. 4 MR. KRATENSTEIN: Oh, you're looking at 5 the top number. 6 MS. FEIN: So I'm referring to the number 7 that's changing, yes. 8 MR. KRATENSTEIN: So what number are you 9 on? 10 MS. CHAITMAN: 954. 11 MS. FEIN: 954. 12 MR. KRATENSTEIN: Thank you. Sorry. 13 THE WITNESS: What am I looking at now? 14 Q. (By Ms. Fein) So there's a transaction for 15 Continental Investment it looks like Corp Mass in 16 the middle of the page? 17 A. What page am I on? 18 Q. 954. I'll show you. Do you see that? 19 A. Yes. 20 Q. This has it looks like 100 long is the 21 balance, the new balance, and on the other side of 22 the transaction it doesn't say DTC. It says 23 Shearson Lehman Brothers, Inc. Do you see that? 24 A. Correct. 25 Q. Would that be another place that you held

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1 securities at this time? 2 A. Could be. 3 Q. Okay. So this report doesn't just show DTC 4 activity. It shows other places where securities 5 are held beyond DTC; right? 6 A. I can't tell from this. 7 Q. Well, is this transaction, this Lehman 8 Brothers transaction showing that Lehman Brothers is 9 holding the 100 shares for you? 10 A. I'm not sure whether this is -- whether 11 Lehman -- this looks like we bought the stock from 12 Lehman, the other side. 13 Q. So the counterparty? 14 A. Would be the counterparty, I believe. 15 That's what it looks like to me. 16 Q. Okay. So this report has some -- will show 17 some counterparties as well then? 18 A. Yes. 19 Q. Okay. 20 A. Is this '87 or '07? 21 Q. '87. This is '87. 22 A. Okay, okay. 23 Q. Would your answer change for '07? 24 A. No. 25 Q. Okay. Will you go ahead forward two more

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1 pages, actually, it's four more ending at 958? 2 A. Uh-huh. 3 Q. Do you see in the middle of the page MCI 4 Communications Corp? Is that a bond trade that you 5 see? 6 A. I'm looking at the wrong page. 7 Q. Oh. 8 A. Yes. A bond trade. 9 Q. Okay. So this report shows market making 10 -- actually, let me back up. Initially we defined 11 house five as encompassing the market making and 12 proprietary trading businesses of your firm; right? 13 A. I believe that's correct, yes. 14 Q. Okay. This report shows some transactions 15 in securities and some transactions in bonds. Do 16 you agree? 17 A. Yes. Well, I see here MCI sub convert, 18 yes, correct. 19 Q. And this trade actually has SIAC? 20 A. Yes. 21 Q. Does this appear to have SIAC on the other 22 side? 23 A. Uh-huh. 24 Q. Could you -- can you explain trading? Did 25 SIAC just keep track of the trades or were they a

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1 counterparty to trades as well? 2 A. No. They weren't a counterparty of the 3 trade. I can't -- I can't answer that question 4 because I'm not sure myself. 5 Q. Okay. 6 A. SIAC you understand doesn't hold 7 securities. 8 Q. Understood. 9 A. Okay. 10 Q. If you look down a few more lines to Medco 11 Research, Inc -- 12 A. Right. 13 Q. -- WTSX 11-7-08, that would be a warrants 14 trade? 15 A. Yes. 16 Q. And so tell me about the type of trading 17 that you were doing at this time period. 18 A. In '07? 19 Q. In 1987. 20 A. '87? 21 MR. GOLDMAN: You mean money market or the 22 IA, I mean, in the market? Pardon me. Which? 23 Q. (By Ms. Fein) In the house five 24 business -- 25 MR. GOLDMAN: Oh, all right.

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1 Q. (By Ms. Fein) -- what trading were you 2 doing in 1987? 3 A. Sort of beats me. I don't know. I did a 4 little bit of everything. I wasn't -- I really -- 5 I'm not sure that I considered myself a market maker 6 at that time. I traded for the firm's investment 7 account. 8 Q. Okay. 9 A. And I also traded for customer accounts as 10 well. 11 Q. When you say you traded for customer 12 accounts, is that what you referred to when we were 13 talking about the inventory where you would move 14 trades from inventory into customer accounts or are 15 you talking about something different? 16 A. No. Well, it could be a journal. If we 17 had securities in an investment account and we had 18 any number of investment accounts depending upon 19 what the firm, whether we considered it a long-term 20 transaction or it was just, you know, part of a -- 21 of trading for a client, there are various forms of 22 trading that we did for the investment account, you 23 know. So I don't know how to -- I'm not sure what 24 you're trying -- maybe if I knew what you were 25 trying to find out, I'd make it -- might be able to

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1 help you with that -- 2 Q. Okay. 3 A. -- but I don't know. 4 Q. Well, when you -- so you're saying you 5 weren't doing much market making during this time 6 frame, but you were trading -- you were doing some 7 proprietary trading it sounds like? 8 A. Correct. 9 Q. Okay. Will you turn to the next page? It 10 ends in 959. It's here. Do you see the County of 11 Nassau on Series A transaction listed? 12 A. Uh-huh. 13 Q. And then under there it says Bernard, dash, 14 trading? 15 A. Correct. 16 Q. Would this be a trade -- this means that 17 there's a -- would that be your trade that's 18 showing? 19 A. It might be, yes. Well, if it says me, I 20 mean, it meant that I did that, that I did that 21 particular transaction. 22 Q. So this report does show trades that you 23 were doing in addition to your other traders? 24 A. Correct. 25 Q. I guess I'm trying to understand why you

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1 would say that this wouldn't represent the trades in 2 your firm. It has the trades that you were doing. 3 It has the trades your other traders were doing. It 4 shows who the counterparties are. It shows where 5 the securities are held. 6 I understand if you're saying it's not 7 100 percent comprehensive, but I'm trying to figure 8 out what this report shows and what it doesn't show. 9 Do you understand that? 10 MR. KRATENSTEIN: Object to the form of 11 the question. 12 THE WITNESS: I'm not sure I understand 13 it. I'm saying that I don't know if you'll -- if 14 these are the only records that reflect that. I 15 can't answer your question. 16 Q. (By Ms. Fein) Okay. Got it. But it does 17 reflect trades that you were doing -- 18 A. Some of the trades. 19 Q. -- in July '87? 20 A. Yes. 21 Q. Okay. 22 A. Are we back -- oh, yeah. These are '87 23 you're talking about? 24 Q. Yeah. 25 A. Okay.

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1 Q. And it shows a counterparty or would you 2 agree this report shows where the securities are 3 held that are listed here? 4 A. Yes. 5 Q. Okay. Do you see any other counterparties 6 listed on this page other than the ones we've 7 reviewed so far? 8 A. I see Smith Barney. 9 Q. Okay. 10 A. I also see SIAC. 11 Q. Uh-huh. 12 A. Now, I don't know whether SIAC is 13 representing -- represents other traders or whether 14 that's sort of a netting process. I don't know. 15 That was done in '87. 16 Q. Okay, yeah. Do you see in the second entry 17 the Microsoft Corp? It says Peter, trading, and 18 then Goldman Sachs underneath it? 19 A. Correct. 20 Q. Would that be another counterparty? 21 A. Yes. 22 Q. And do you see across from the names of the 23 counterparties they have different account numbers 24 as well? So DTC appears to have the number 9993115? 25 A. Uh-huh.

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1 Q. Okay, okay. We can put this document aside 2 for now. 3 A. Thank you. 4 (Trustee's Exhibit Number 12 was marked 5 for identification.) 6 Q. (By Ms. Fein) We've spent enough time with 7 it; right? So I'm going to show you what's being 8 marked as Trustee Exhibit 12. Oh, yeah. You have 9 to share a copy. These are big. 10 MS. CHAITMAN: Okay. 11 Q. (By Ms. Fein) Okay. Mr. Madoff, do you 12 see the date at the top of the page? 13 A. '07. 14 Q. Uh-huh. 15 A. Yes. 16 Q. Yeah. This is December 31st, 2007; is that 17 right? 18 A. Right. 19 Q. Is the title house 17 stock record summary 20 through 12-31-07? 21 A. Yes. 22 Q. And do you see the handwriting on the same 23 line run -- it looks like one and then illegible 24 '08? 25 A. Right.

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1 Q. So would this document have been prepared 2 in late 2007 or early 2008? 3 A. Yes. I assume, right. 4 Q. Okay. This report is another stock record, 5 correct, and it shows some of the same columns that 6 we were looking at on the last stock record. Do you 7 see at the top of the page? 8 A. Yes. 9 Q. Do you recognize from this page there are 10 some IA customer names on here? 11 A. Uh-huh, yes. 12 Q. And do you recognize that there are 13 customer accounts listed on the right-hand side of 14 the page? 15 A. Yes. 16 Q. This report would have been generated by 17 your house 17 staff most likely; right? 18 A. Correct. 19 Q. And the computer system you were using on 20 the house 17 side was an AS/400? 21 A. Correct. 22 Q. Would this report have been generated by 23 the AS/400 system? 24 A. I believe so. 25 Q. That's the same system that generated the

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1 customer statements and trade confirmations; right? 2 A. I don't know. I don't know what generated 3 the -- what system generated the trade, market 4 making. 5 Q. I'm sorry. I was referring to IA customer 6 trade confirmations and customer statements. 7 A. Yeah. That would be -- that would be the 8 AS/400. 9 Q. Okay. Do you know who would be reviewing a 10 report like this? 11 A. No. I assume someone in Annette's 12 department. 13 Q. Do you see underneath the security listed 14 there are customer names and then an entry below 15 that that says clearing banks? 16 A. Correct. 17 Q. Do you agree that number for account number 18 29000030 is not a customer account number; right? 19 The customer numbers typically have letters? 20 A. No. That looks like -- that looks like the 21 number they use for the clearing banks. 22 Q. Okay. The amount next to the clearing bank 23 number looks like 199066; right? 24 A. Correct. 25 Q. And I can represent to you that the four

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1 amounts in the long position equal the same as 2 what's shown here in the short position? 3 A. That's correct. 4 Q. We looked at a customer statement from 5 December 2007 and we talked about at this time in 6 December 2007 the customer statements showed 7 activity where the underlying securities hadn't been 8 purchased; right? 9 A. Correct. 10 MS. CHAITMAN: Objection. I do not 11 believe that the -- the split strike statements for 12 December ever showed securities. 13 MS. FEIN: Excuse me? So you mean because 14 I should have said treasuries instead of securities? 15 MS. CHAITMAN: Yeah, yeah. 16 MS. FEIN: So there were securities shown 17 as sold and then there were treasuries shown as 18 purchased on the December statement that we 19 reviewed. 20 MS. CHAITMAN: Okay, okay. 21 Q. Okay. And I can be clearer. So the 22 customer statements in December 2007 would have 23 shown -- would have shown treasuries that hadn't 24 been purchased; right? 25 MS. CHAITMAN: Objection to form. He's

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1 already testified that they have been. 2 MS. FEIN: No. That's not correct, not in 3 2007. He said in 1987 that was true and in 2007 it 4 was not true. 5 MS. CHAITMAN: No. He said that he had -- 6 MS. FEIN: The record can speak for 7 itself. It's okay. The record can speak for 8 itself. 9 MS. CHAITMAN: Okay. You're 10 misrepresenting what he said. 11 MS. FEIN: Okay. I'm going to continue -- 12 MS. CHAITMAN: He said he didn't buy 64 13 billion, but he didn't say he didn't maintain the 14 portfolio. It's very different. 15 MS. FEIN: We can have this conversation 16 offline. 17 MS. CHAITMAN: Okay, okay. 18 MS. FEIN: I'm talking about what is 19 represented on the customer statements and the 20 aggregate. We talked about the number that was 21 represented on the customer statements, not the fact 22 that there were treasuries purchased at that time. 23 Okay. 24 MS. CHAITMAN: Okay. 25 Q. (By Ms. Fein) Okay. The term clearing

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1 bank here is used where you would typically have a 2 counterparty listed for where the securities were 3 held; right? 4 MR. KRATENSTEIN: Object to form. 5 THE WITNESS: It's the balancing number, 6 yes. 7 Q. (By Ms. Fein) Okay. And what do you mean 8 by the balancing number? 9 A. In other words, it typically would balance. 10 In other words, you would always have the -- if it 11 didn't balance, it would be -- it would be a broken 12 trade. Typically your long -- your long side would 13 always equal, always be represented on the short 14 position, should be the same. 15 Q. Okay. 16 A. When they use the term clearing banks, 17 that's not one single bank. It's just, you know, 18 any number of clearing banks that the transactions 19 were custodied at. And these -- I don't know why 20 you're looking -- I mean, I've already stated that 21 before that during this period in, you know, 2000s 22 or certainly post-'90s in general, that there were 23 times that I wasn't purchasing the securities. 24 Q. Okay. So when clearing banks is used here, 25 it's not --

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1 A. It doesn't -- 2 Q. -- it doesn't mean the same thing as it 3 would if it showed DTC? 4 A. No. It wouldn't -- that would -- that was 5 a fraud period, in other words. So there's nothing 6 -- I can -- I'm perfectly willing, I've already 7 stated that anything post-'92 period is not going to 8 be accurate in my records. 9 Q. Okay. So the term clearing banks here is 10 used as a place holder for the other side of the 11 transaction; right? 12 A. Correct. 13 Q. Okay. I don't know. We've been going a 14 while. Would you like to take a break or do you 15 want to keep going? 16 A. I'm fine. 17 MS. FEIN: Okay. 18 MR. KRATENSTEIN: Are you done with this 19 one? 20 MS. FEIN: I think -- oh, you know what? 21 I have one more. I have one more thing I want to 22 look at. Thank you. Sorry. Can you turn -- I can 23 help you turn to the page, but the page is 498. Let 24 me help you figure it out. There you go. 25 Q. (By Ms. Fein) Do you see the transaction

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1 for the Treasury bill listed on this page due 2 1-3-2008? 3 A. Uh-huh. 4 Q. And at the bottom of that entry there's the 5 term clearing banks again? 6 A. Correct. 7 Q. And in this context it's being used as a 8 place holder or filler -- 9 A. Right. 10 Q. -- counterparty for the trade; right? 11 A. Uh-huh. 12 Q. Okay. So this trade is not -- is one that 13 didn't happen in the market; right? 14 A. Correct. 15 Q. And would that be true for the entries that 16 show this clearing banks on this report in 2007, 17 would that be true for those trades? 18 A. Correct. 19 MS. FEIN: We'll try to go quickly. There 20 are a couple more reports of this size. So we're 21 going to mark one more, but we're done with this 22 one. 23 MR. KRATENSTEIN: I know all about trying 24 to go quickly through reports. 25 MS. FEIN: I'm not going to match your

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1 speed. I promise. 2 MS. DASARO: This is a full one. 3 MS. FEIN: Okay. So we have excerpts of 4 this one -- 5 MR. KRATENSTEIN: Okay. 6 MS. FEIN: -- because it's very large. 7 MR. KRATENSTEIN: Thank you. 8 MS. CHAITMAN: So what number is this? 9 MS. FEIN: This is Number 13. 10 (Trustee's Exhibit Number 13 was marked 11 for identification.) 12 MR. GOLDMAN: Do you have the date because 13 this is sort of marked out. I just want to make 14 sure. It looks like 8-31-0 -- 15 MS. FEIN: '01. 16 MR. GOLDMAN: '01? 17 MS. FEIN: Yes. It is, I know. It's 18 easier on some pages to read than others. 19 MS. CHAITMAN: I'd just like to make a 20 statement for the record. Amanda, you objected to 21 some of the areas of our questioning on the basis 22 that it was not a part of the day two subjects. 23 And, in fact, I had covered the T-bill issue in the 24 day one topics and you had an opportunity to fully 25 cross-examine Mr. Madoff on them, so --

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1 MS. FEIN: Understood. These reports are 2 really part of the microfilm report 3 cross-examination because that's one of the day two 4 topics, but I understand your position. 5 MS. CHAITMAN: Right. And, in fact, if 6 you had produced these documents in a timely manner 7 to us, we could have questioned him about them, but 8 you certainly could have. 9 MS. FEIN: I should clarify. These 10 documents are in the data room. The reports that 11 we're going through are all in the data room. 12 MS. CHAITMAN: Right. So then you had the 13 ability to question him about them during the day 14 one depositions. 15 MS. FEIN: And this is part of the day two 16 topics with respect to the microfilm reports that 17 I'm questioning him on. That's -- that's why 18 they're part of these topics. 19 MS. CHAITMAN: If this was in the data 20 room, wasn't it available to you when you were 21 questioning him? 22 MS. FEIN: This is in response to your 23 questioning. This is my cross-examination. 24 MS. CHAITMAN: Okay. And I think it's not 25 within the scope of the day two.

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1 MS. FEIN: Understood. 2 Q. (By Ms. Fein) Okay. So, Mr. Madoff, this 3 report is entitled abbreviated stock record summary 4 through 8-31-01. Do you see that at the top of the 5 page? I'm sorry. Let me get it ready for you. 6 This report that I'm holding, abbreviated stock 7 record summary through 8-31-01? 8 A. Uh-huh. 9 Q. And on the left it says distribution, 10 Annette. Do you believe that's referring to Annette 11 Bongiorno? 12 A. I assume so because I don't think we have 13 another person named Annette. 14 Q. And this is 2001. If you look at the first 15 transaction -- 16 A. Right. 17 Q. -- do you see Daimler Chrysler AG listed as 18 the security? 19 A. Correct. 20 Q. And at the bottom do you see customer names 21 listed after that? 22 A. Yes. 23 Q. And customer account numbers listed to the 24 left -- I'm sorry -- to the right of that; right? 25 A. Yes.

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1 Q. At the bottom of this entry do you see 2 clearing banks listed on the other side? 3 A. Yes. 4 Q. And would that be used as a place holder 5 counterparty because there wasn't a counterparty to 6 this trade? 7 A. That's correct. 8 Q. Do you agree that this report shows IA 9 customer holdings? 10 A. Right. 11 MS. FEIN: Okay. We can be finished with 12 that document. 13 (Trustee's Exhibit Number 14 was marked 14 for identification.) 15 Q. (By Ms. Chaitman) Yes. We're all set with 16 that. This is Trustee Exhibit 14. 17 MR. KRATENSTEIN: Excuse me. 18 Q. (By Ms. Chaitman) Is the title of this 19 document house 17 stock record summary through 20 3-31-94? 21 A. Yes. 22 Q. Does it appear similar to the other stock 23 record summaries we reviewed previously? 24 A. Uh-huh. 25 Q. It has the same column headings; right?

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1 A. Right. 2 Q. The first security that's listed under 3 security account name, ATD, Ltd. Do you see that? 4 A. Yes. 5 Q. And then do you see customer names listed 6 underneath the security. 7 A. Yes. 8 Q. And customer account numbers that are 9 listed on the right-hand side; right? 10 A. Yes. 11 Q. So would this be referring to customer 12 positions in -- in 1994 when this report was put 13 together? 14 A. Correct. 15 Q. And do you see the clearing bank's entry at 16 the end of the -- at the end of the ADT security 17 list? 18 A. Uh-huh, yes. 19 Q. And the account number 29000030, do you see 20 that? 21 A. Yes. 22 Q. Would this also be a place holder 23 counterparty? 24 A. Yes. 25 MS. FEIN: So I think we're done with that

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1 one. 2 (Discussion off the record.) 3 MS. FEIN: Okay. I'm going to mark this 4 Exhibit 15. 5 MS. CHAITMAN: Will you be sending us a 6 complete set of these exhibits? 7 MS. FEIN: That's no problem. 8 MS. CHAITMAN: Okay. 9 MS. FEIN: Sorry it's so large. It's just 10 -- whoops. 11 Q. (By Ms. Fein) Okay. Do you see in the 12 middle of the page the title of this report? 13 A. Yes. 14 Q. Is it house 17 stock record summary through 15 7-16-87? 16 A. Yes. 17 Q. Do you see the first trade listed under the 18 title AGS Computers, Inc. sub deb conv? 19 A. Correct. 20 Q. Is that a convertible arb trade? 21 A. Yes. 22 Q. And do you see IA customers listed 23 underneath that? 24 A. Uh-huh. 25 Q. Okay. Do you see at the end of that same

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1 set the term clearing banks used? 2 A. I don't see. Oh, yes. 3 Q. Okay. Would that be used as a filler 4 counterparty in this report? 5 A. Yes. 6 Q. And if you turn ahead to page ending -- I 7 think it's two pages ahead ending in 064. Sorry 8 about this. Do you see a transaction in -- oh, you 9 know what? The pages for this one so that it would 10 print out so we could read it, it's three pages per 11 on your copy. His copy has a page -- 12 MR. KRATENSTEIN: Okay. Could you just 13 show us where to go? 14 MS. FEIN: No problem. 15 MR. KRATENSTEIN: Thank you. 16 MS. CHAITMAN: So what is the date of this 17 document? 18 MR. KRATENSTEIN: 7-16-87. 19 MS. CHAITMAN: 7-16-87. 20 MS. FEIN: This is the -- 21 MR. KRATENSTEIN: Thank you very much. 22 Q. (By Ms. Fein) Do you see the AMR Corp 23 transaction listed at the bottom of the page? 24 A. Uh-huh. 25 Q. Okay. And do you see clearing banks listed

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1 at the end of that transaction or at the bottom of 2 the -- I'm sorry. Let me back up. Is there a list 3 of IA customers underneath the AMR Corp listing 4 security? 5 A. Yes. 6 Q. And do you see there on the right-hand 7 column there are IA account numbers listed? 8 A. Correct. 9 Q. Do you see the clearing banks entry at the 10 bottom of the AMR Corp transaction or the long 11 positions? 12 A. Correct. 13 Q. And do you see the account number 2900030? 14 A. Yes. 15 Q. Would this be a filler counterparty that 16 was used on your reports? 17 A. When you say filler counterparty, why -- 18 what are you referring to? 19 Q. Well, what we were referring to on the 20 earlier reports is that those trades didn't occur, 21 but you needed to have another side to the 22 transaction; right? 23 A. If, in fact -- if, in fact, it was during a 24 period that we were not doing the transaction, the 25 actual transaction.

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1 Q. Okay. 2 A. You're talking about a period now in 1987 3 that we did the transactions. 4 Q. Okay. 5 A. So that would be -- when you say a filler, 6 I'm assuming you're assuming that the trade wasn't 7 done. 8 Q. Okay. 9 A. That doesn't mean that every time we used 10 clearing banks that there wasn't an actual trade 11 being done. 12 Q. Okay. 13 A. What I had said originally, I was 14 explaining to you, it would be a balancing number. 15 It should always -- it would always balance. If 16 didn't balance, there would be a break in the 17 transaction. That's -- so if that didn't balance, 18 it didn't match the number of shares bought, it 19 would alert the -- whoever was running the records 20 that there's an error, you know, that we're missing 21 something there. 22 Q. Okay. 23 A. You also have to understand that when 24 you're talking about treasuries, for example, there 25 were treasuries that were bought under the firm's

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1 name, you know, at a place like Morgan Stanley or 2 Fidelity and so on that would not be reflected 3 necessarily on my books and records. 4 Q. You mean in the 1987 time frame? 5 A. Not in the 1987. In the later period. 6 Q. Okay. What do you mean they wouldn't be 7 reflected on your books and records? 8 A. In other words, I'm not sure how they 9 handled -- even in the '87 period, I'm not sure, you 10 know, how those treasuries were handled, you know, 11 whether they were bought. Depends upon how they 12 were purchased. You'd have to ask -- during '87 13 wouldn't be Frank DiPascali because he wasn't 14 handling that. You'd have to speak to someone else 15 who would know that. I don't know how they handled 16 that transaction. 17 Q. Would Annette maybe know? 18 A. Probably not, not during that period. 19 Q. Okay. So this is a trade in AMR Corp 20 that's listed? 21 A. Uh-huh. 22 Q. AMR Corp was -- the DTC held AMR Corp 23 securities in 1987 because we saw that on the 24 earlier report we reviewed; right? 25 A. Correct.

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1 MR. KRATENSTEIN: Object to the form. 2 Q. (By Ms. Fein) But it's your testimony that 3 these shares weren't -- is it your testimony that 4 these shares were not held at DTC even though DTC 5 could hold the securities? 6 A. I don't see the DTC. 7 Q. Right. 8 A. No. I don't see DTC. 9 Q. It just says clearing banks; right? 10 A. Clearing banks, right. 11 Q. And it's -- 12 A. So that could be any number of five 13 different clearing banks we had and, you know, 14 probably eight different clearing banks that were 15 used to -- as a depository to clear the transaction. 16 Q. Wouldn't you need to know who was on -- who 17 was holding the securities for your transactions? 18 Why would it show up as clearing banks? 19 A. It would. There would be a subsidiary 20 ledger that would show that. 21 Q. Okay. 22 A. The stock record only shows -- just like at 23 DTC, you know, it's just one entity. There were 24 subsidiary ledgers that would show where the 25 securities were held.

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1 Q. But these securities listed here wouldn't 2 be held at DTC or else you would show DTC on the 3 other side; right? So it has to be held at another 4 clearing firm? 5 A. That's correct. 6 Q. Okay. I'm just going to go back to show 7 you something on Exhibit 11. All right. So the 8 first transaction in AMR Corp, the balance held at 9 DTC as shown on this report for July 16th, 1987 is 10 3,357; correct? 11 A. Uh-huh. 12 Q. If you look at the short position shown on 13 the AMR Corp trade here for the same date, 14 July 16th, 1987, how many shares does it say are 15 held at the clearing banks? 16 A. It looks like -- 17 MS. CHAITMAN: When you say here, what 18 document are you asking to look at? 19 MS. FEIN: Sorry. So now we're looking 20 at -- 21 MS. CHAITMAN: Exhibit 15? 22 MS. FEIN: -- Exhibit 15, page ending in 23 064. 24 THE WITNESS: Is that 290,000 or -- 25 MS. FEIN: I think it's -- let me just

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1 make sure. 2 MS. CHAITMAN: So I can't read this. 3 Trustee Exhibit 11 is house five? Is that what it 4 says at the top? 5 MR. KRATENSTEIN: Yes. 6 MS. FEIN: It does. 7 MS. CHAITMAN: And Trustee Exhibit 15 is 8 house five also? 9 MS. FEIN: House 17. 10 MS. CHAITMAN: House 17, okay. 11 Q. (By Ms. Fein) So just to be clear, we're 12 looking at the AMC security at the bottom of that 13 transaction. It says clearing banks. The account 14 number listed is 29,000, three zero, and then 15 there's a short position listed. What short are 16 they showing? 17 A. 332, right, 785. 18 Q. Yes. So for the same date that you had a 19 little over 3,000 shares held at DTC as shown on 20 your house five stock record summary -- 21 A. Correct. 22 Q. -- this shows over 330,000 shares in the 23 same security; right? 24 A. In the 17 -- in the 17 account. 25 Q. Right. On the house 17 side?

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1 A. Right, right. 2 MS. FEIN: Okay. Now is a good time to 3 take a break if that's okay with everyone. 4 EXAMINATION 5 BY MR. GOLDMAN: 6 Q. I have two questions. They're quick 7 questions. I don't know if the answers are long, 8 but Ms. Chaitman asked you earlier on about 9 confirmations on transactions. 10 A. Yeah. What? Oh, I didn't know you were 11 talking to me. 12 Q. Ms. Chaitman asked you some questions about 13 confirmations, whether you got confirmations. 14 Sometimes you did get confirmations, sometimes you 15 didn't -- 16 A. Yes. 17 Q. -- at the time you were looking through all 18 the transactions that occurred? 19 A. Correct. 20 Q. Was there a procedure or protocol in place 21 to authenticate that the transactions actually 22 occurred? This is prior to '92. Did you get 23 something back from whoever you contracted to have 24 the transaction performed? 25 A. If it was -- if it was a -- if the

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1 transaction was handled through NSCC, if it was part 2 of the C&S netting practice. I'm not sure that I 3 understand the question. 4 Q. Okay. How did -- how were you assured that 5 the order, whether it was a purchase or a sale, 6 actually occurred if you have it listed on your 7 account that's your own internal records? How were 8 you assured that the transaction actually occurred? 9 A. That was handled, would have been handled 10 by the what we call the P&S department, the purchase 11 and sales department. And they would typically 12 either get a confirmation or if it went through the 13 clearing house, you know, and, again, depending upon 14 if that was during the netting period or not, you 15 would get what they call a balance order from the 16 clearing corporation. 17 It also -- also depends upon whether or not 18 we had an automatic interface with the firm that was 19 on the other side of the transaction. 20 Q. But there was some procedure or protocol in 21 place? 22 A. Oh, yeah. Of course, yes. 23 Q. And the second question I have, did you 24 send your clients, customers, clients quarterly or 25 monthly financial statements?

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1 A. They had -- 2 Q. Statements of transactions? 3 A. Some clients got them quarterly and some 4 clients got them monthly. 5 Q. Okay. 6 A. Depends upon whether they requested them, 7 when they requested them. 8 Q. And if there were short transactions that 9 occurred for that particular client or customer, was 10 it indicated on the statement that it was a short 11 transaction? 12 A. No. 13 Q. Nothing. Just -- 14 A. No brokers indicated to the customer 15 because the customer didn't care whether it was a 16 short transaction or it was a long transaction. 17 They didn't care whether the broker was short or 18 whether he was long. They looked -- the ownership 19 rights were the same. In other words, you were 20 entitled to the dividend. You were entitled to a 21 stock split or any action, corporate action. 22 MR. GOLDMAN: Okay. Thanks. 23 MR. KRATENSTEIN: Take a break? 24 MS. DASARO: Yes, thanks. 25 THE VIDEOGRAPHER: Going off the record.

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1 The time is 10:32. 2 (A recess was taken.) 3 THE VIDEOGRAPHER: Back on the record. 4 This begins tape number two in the deposition of 5 Bernard L. Madoff in Butner, North Carolina on 6 November 9th, 2017. The time is 11:07. 7 FURTHER EXAMINATION 8 BY MS. FEIN: 9 Q. Mr. Madoff, do you remember yesterday Mr. 10 Kratenstein asked you about a list of banks where 11 you performed clearing functions? 12 A. Correct. 13 Q. You provided us a list when we met with you 14 in April and I can show it to you -- 15 A. Uh-huh. 16 Q. -- if you want to see it, if it helps 17 refresh your recollection about what those firms 18 are. 19 A. Right. 20 Q. This just the testimony from April 26, 21 2017. 22 A. Uh-huh. 23 Q. Do you see around line ten there's a list 24 that includes Meadowbrook National Bank, Commercial 25 Bank of North America, Irving Trust Company, Bank of

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1 New York, Bankers Trust, Manufacturers Hanover, 2 Chase Manhattan, Marine Midland, Chemical Bank, 3 JPMorgan Bank, Continental Illinois Bank and M&T 4 Bank? 5 A. Yeah. 6 Q. Do you recall any firms -- scratch that. 7 Do you see right below that in the testimony -- 8 well, actually, here. You listed what services 9 those banks provided to you on the next page. And 10 then you were asked do they have custodial accounts 11 where you maintain securities for customers. 12 Did this list of banks we just went 13 through, did any of those have custodial accounts 14 where securities were maintained for customers? 15 A. Okay. What is the question? 16 Q. The list of banks that we just reviewed -- 17 A. Right. 18 Q. -- did any of those banks have custodial 19 accounts where you maintained securities for 20 customers? 21 A. When you say did they have accounts they 22 maintained for customers, they would have -- no. 23 The answer would be that they would have usually one 24 account for the firm. They wouldn't -- they 25 wouldn't have -- they wouldn't identify them by

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1 customers. That was the same practice with DTC. In 2 other words, there was -- I don't know what the 3 terminology would be because my brain isn't working, 4 but they would have one account. They wouldn't 5 break it out by clients. 6 Q. This question was and my question to you, 7 did you have custodial accounts where you maintained 8 securities for customers? 9 A. Yes. 10 Q. Okay. When you were asked -- so this 11 deposition took place on April 26, 2017. You 12 remember you were under oath for that deposition; 13 right? 14 A. Correct. 15 Q. And the answer to the question you provided 16 then -- 17 MR. GOLDMAN: Why don't you read it? 18 MS. FEIN: Sure. 19 MR. GOLDMAN: Thanks. 20 MS. FEIN: Yeah. 21 MR. KRATENSTEIN: Tell us where you are. 22 I have it here, so -- 23 MS. FEIN: Okay, sure. I'm on page 33. 24 MR. KRATENSTEIN: Yes. 25 MS. FEIN: And the line is line six.

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1 MR. KRATENSTEIN: Thank you. 2 Q. (By Ms. Fein) This right here. You were 3 asked by Ms. Chaitman about this list of banks. Did 4 they have custodial accounts where you maintained 5 securities for customers. Your answer, not that I'm 6 aware of, no. So I guess I'm trying to understand 7 why your answer is different today? 8 A. I'm not sure that it's different. When you 9 say do I own -- when you're asking was I own -- 10 maintain a custodial account for a customer, it 11 would be -- the answer would be yes. It depends 12 upon the period you're talking about. The stock 13 records would show -- the stock record would show 14 the customers that we had securities for. That's on 15 the stock record. 16 That's the only record that we would 17 maintain of that. And I would assume that the 18 question you were asking when you say did we have -- 19 did the banks have custodial, the answer would be, 20 you know, they wouldn't know who our customers were. 21 They would just have -- they would just -- the firm 22 is the customer. 23 We don't tell the bank that these 24 securities -- that these securities that we're 25 clearing through you are for John Jones. No one

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1 does that. We don't identify that. And they don't 2 -- for example, they don't -- they don't have a 3 record of who the clients were. It's the same thing 4 with DTC. 5 Q. I understand that. 6 A. Oh, okay. 7 Q. I do understand that. 8 A. That's the question. I'm not sure what 9 your question was. 10 Q. Okay. Well, my question is you -- 11 A. I don't think it's -- what I'm saying, I 12 don't know that my response to Helen Chaitman is 13 different than what I had made then. At least I 14 don't see the difference. 15 Q. Well, this refers to accounts you would 16 have, your firm would have -- 17 A. Right. 18 Q. -- where you maintain securities for 19 customers. 20 A. Right. 21 Q. Not that they would be segregated 22 necessarily. 23 A. Oh. 24 Q. Just that you maintain the securities for 25 customers.

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1 A. Right. 2 Q. And when you were asked in April the answer 3 to that question was no, but it sounds like today 4 your answer is different? 5 MR. KRATENSTEIN: I object to the form of 6 the question. 7 MS. CHAITMAN: Yeah. I think what he was 8 saying was I think the way the first -- the way my 9 question was worded, he thought does he maintain at 10 an institution account for Mrs. Jones and Mrs. Brown 11 and -- 12 MS. FEIN: Okay. Your interpretation 13 notwithstanding -- 14 MR. KRATENSTEIN: Just for the record, 15 you're interpreting his testimony, too, so -- 16 MS. FEIN: I was just trying to read it 17 and then understand what it said. 18 Q. (By Ms. Fein) Okay. So is your testimony 19 today that the banks that we listed -- actually, let 20 me go back. That set of banks that we went over 21 didn't include NatWest; right? 22 A. What do you mean didn't include it? 23 Q. So you listed 11 banks during your 24 testimony that day. NatWest wasn't one of them; 25 right? And the list is here.

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1 A. Because it would have been NatWest took 2 over -- as I said, I believe I said in the other 3 testimony earlier, these banks merged with each 4 other. So, for example, Meadowbrook National Bank 5 became NatWest at one point in time, you know. 6 Q. Okay. So -- 7 A. NatWest would have been one of them. 8 Again, this was -- I said pretty much covers it. I 9 was giving a list of the banks that I had remembered 10 that I was familiar with, but Meadowbrook National 11 was merged with NatWest the same way that Chase 12 Manhattan and Manufacturers became Chase Manhattan 13 and then Chase Manhattan became JP Morgan. 14 Q. Okay. I had thought National Bank of North 15 America had merged with NatWest. Does that ring a 16 bell for you? 17 A. No. Nat -- oh, I don't know. I don't 18 remember. 19 Q. Okay, okay. Understood. 20 A. I mean, my question was answered just that 21 I had other facilities, clearing facilities through 22 banks and brokerage firms. I didn't list them all. 23 It was just that -- just saying that besides being a 24 self-clearing firm, I also had arrangements and did, 25 in fact, clear certain transactions through other

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1 entities. 2 Q. So if you were clearing transactions 3 through those other entities, you wouldn't be 4 relying on your back office for the purposes of 5 delivery of the securities or -- 6 A. Well, the back office would eventually -- 7 they would start with us, you know. Like we bought 8 the stock, but we would give instructions to the 9 counterparty, deliver the securities to this broker 10 or this bank and so on and so on. It depends upon 11 the transaction. 12 I mean, we were the one that would actually 13 buy the securities, but then again there were times 14 that we would call them depending upon what it was. 15 Like if it was a Treasury instrument, we would 16 typically just call JPMorgan or Bank of New York and 17 they would actually buy the transaction. 18 Q. And did you say where would you be keeping 19 track of -- 20 A. We would have an internal record of that 21 somewhere at the firm. 22 Q. Okay. 23 A. Whether -- and, again, it depends upon at 24 what stage it was and what our ordination was and 25 what the bank's -- we had direct interfaces with

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1 some of these banks and brokerage firms the same way 2 that we had -- that we had direct interfaces with 3 NCC and DTC and so on and so forth. 4 Q. Okay. So your -- for the period of time 5 let's say the 1980s -- 6 A. Uh-huh. 7 Q. -- it's your testimony those transactions 8 were taking place in the market; right? 9 A. Yeah. 10 Q. They were taking place within your house 11 five business; is that right? 12 A. It depends upon who would -- who we were 13 acting for. If it was -- and whether it was just a 14 transaction coming out of the inventory account of 15 the firm, you know, out of the -- and we had any 16 number -- we had different trading accounts 17 depending upon the strategy and who was handling it. 18 So there was internal records somewhere in the firm. 19 I mean, obviously, you know, we had to have 20 some record, you know, and to be able to track it. 21 And then there was the stock record which showed 22 the -- usually the global picture but, again, you 23 can have any number of stock records. 24 Q. Okay. The trades shown on your convertible 25 arb customer statements in the '80s --

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1 A. Right. 2 Q. -- would have -- so tell me, you're saying 3 there's more than one place that those trades could 4 have originated? 5 A. Correct. 6 Q. Is there more than one place that those 7 trades would have been cleared through? 8 A. Yes. Again, depends upon whether the 9 entity or the bank was also a market maker in the 10 security depending upon where they were located and 11 so on. So, in other words, the bank -- these banks 12 and other brokerage firms like a Bear Stearns or a 13 low roads, they're also, you know, competitors of 14 ours. In other words, they're also doing the same 15 thing that we're doing. 16 And there are any number of ways that you 17 do a -- that you can buy or sell transactions. You 18 can actually go out into the market -- into the 19 street to buy the security. 20 We might do a swap with a particular firm, 21 which is -- I don't want to bore you with all the 22 details, but the same way that when you're doing a 23 convertible transaction trade, you can rather than 24 put the bond into conversion to convert it into 25 stock, which would eventually have to go to -- if

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1 you did that, you would have to put it through 2 whoever the -- whoever was the conversion agent, you 3 know, for that particular security. You could also 4 go to -- we would -- we could go to another broker, 5 another market maker and swap, in other words, swap 6 our bond for stock, you know, that it was 7 convertible into because then they may be doing the 8 opposite side of the transaction that we do. 9 These are things that in the Dubinsky 10 report he seemed to be totally unaware of. Like he 11 made statements, well, I contacted the conversion 12 agent of the particular security that we -- the bond 13 and they didn't have any agreement in place with 14 Madoff as if that was the only way that you could 15 exchange. 16 The idea is when you're doing a convertible 17 trade if you do it depending upon, again, what the 18 strategy you're using, if it's strictly to buy the 19 bond for the client and then sell the common stock, 20 you know, short, you know, against that, and then 21 you're going to -- you either convert it physically 22 by sending it to the conversion agent or you can, in 23 fact, go ahead and exchange with another market 24 maker in that particular bond and say okay, look, I 25 want to -- I'll exchange my bond.

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1 He may want the bond and he's willing to 2 give me stock for it and then you do a stock swap. 3 And when I say short, you know, you're talking about 4 it's like a short exempt transaction. In other 5 words, I'm selling stock, you know, that -- which is 6 short, which I don't have the stock at the time but 7 I have a bond at the time. 8 Q. So are you saying that where your various 9 bonds and securities cleared would be dependent on 10 the type of bond or security in part, right, because 11 some places wouldn't clear certain -- 12 A. Right. 13 Q. -- certain bonds or certain securities? 14 A. Well, any bank would -- any bank would 15 clear any transaction that you do, but depending 16 upon what you want to do. If I was looking to 17 convert the bond into common stock, which means I'm 18 going to exchange the bond position, then the bank 19 itself might have -- you know, if they're a market 20 maker they might be willing to say okay, look, 21 Madoff wants to convert -- he wants to exchange the 22 bond for stock. 23 You know, we'll give him the stock -- 24 they'll give me the stock from their inventory to 25 satisfy what I'm asking him to do and take the bond

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1 into their inventory. Did I lose you or not? 2 MS. FEIN: Okay. No. So we looked at an 3 exhibit yesterday, maybe also today. Maybe it's in 4 this other pile. 5 MR. KRATENSTEIN: What number are you 6 looking for? 7 MS. FEIN: I'm looking for 39. It's in 8 that other pile. I wanted to look at one document 9 that we looked at yesterday, but I don't see it. 10 Thank you. 11 MR. KRATENSTEIN: You want 39? 12 MS. FEIN: Yeah. Didn't see it there. 13 (Discussion off the record.) 14 Q. (By Ms. Fein) So looking at this 15 Exhibit 39 that we reviewed yesterday, thank you, do 16 you see -- this looks like a customer statement, 17 right, for the most part other than the client? 18 A. Right. 19 Q. This format I should say. 20 A. Uh-huh. 21 Q. Do you see where it says balance forward, 22 $75,892,366.08? There's a debit balance listed? 23 A. Right. 24 Q. Do you know why there would be a debit 25 balance on this report?

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1 MS. CHAITMAN: I'm sorry. Show me where 2 you are. 3 MS. FEIN: Just the first line of Exhibit 4 39, yeah. 5 MS. CHAITMAN: The debit, I see. 6 MS. FEIN: Yeah. 7 THE WITNESS: It might be, I'm assuming it 8 arose from activity that occurred in that account. 9 Q. (By Ms. Fein) Okay. That would mean that 10 the bank had owed you 75 million and change; right? 11 A. Based upon deliveries, what was taking 12 place in the account. See, this -- these securities 13 would have been -- these received and delivered 14 would have monies attached to it and all, which 15 doesn't show on the statement but it would be on 16 another, another statement depending on what was -- 17 what was flowing through. Obviously, it represents, 18 you know, the debits and credits that were involved 19 in these transactions. 20 MS. FEIN: Okay. 21 MR. KRATENSTEIN: I mean, if you look at 22 later -- if I could, if you look at later pages 23 there are debit and credit numbers listed on some of 24 the pages. 25 MS. FEIN: I do see that, yes.

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1 MR. KRATENSTEIN: Okay. 2 MS. FEIN: Thank you. 3 Q. (By Ms. Fein) At the end of the report if 4 you look at the page ending in 69, do you see where 5 security positions is listed? 6 A. Uh-huh. 7 Q. And then there are a number of positions 8 that follow from that? 9 A. Correct. 10 Q. A couple of pages later, it's the last page 11 of the document, it says end of positions? 12 A. Right. 13 Q. And there's a long and a short and a 14 difference? 15 A. Uh-huh. 16 Q. Would this list of security positions be 17 the securities that were listed in this account at 18 the time? 19 MS. CHAIRMAN: Objection to form. 20 THE WITNESS: I'm not sure I understand. 21 Q. (By Ms. Fein) Well, my question is -- 22 A. Yeah. I see this. 23 Q. -- typically at the bottom of your customer 24 statements and similar statements you would have 25 security positions and then you would have the

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1 securities or other bonds that would be -- 2 A. Right. 3 Q. -- listed in your account. Does that 4 appear to be true here as well? 5 A. I'm not sure whether this represents market 6 value of the securities or whether it represents a 7 customer statement. Our customer statements 8 reflected balances from the buying and the selling 9 and then there's a market value of the securities in 10 the account if you looked on the statement. I don't 11 know what -- I don't know what this represents. 12 Q. Okay. Because there's like -- there are 13 two different balances listed, so I was trying to 14 figure out why they were different. If you look at 15 new balance, which is at the end of this activity, 16 you see $78,544,284.62? 17 A. Uh-huh. 18 Q. And then -- 19 MS. CHAITMAN: I'm sorry. Which page is 20 that? 21 MS. FEIN: Oh, on page 869. 22 MS. CHAITMAN: 869. 23 Q. (By Ms. Fein) Right before you get to the 24 security positions listed. And then at the end of 25 the report, the end of positions, those figures are

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1 different, right, on the last page for the security 2 positions? 3 A. It would -- it would seem to me that this 4 is -- one of them is representing, this typically 5 would be representing what the market, the current 6 market of these positions were. 7 Q. Okay. That's your understanding of why 8 they're different? 9 A. I'm assuming. Typically on a customer 10 statement you would have the opening balance, like 11 you would have the opening balance and closing 12 balance is for the actual money flows out of the 13 account. And then at the end of -- the end of the 14 statement it shows what the open and long and short 15 positions are and what the current market value of 16 those are on a mark-to-market basis. 17 Q. Okay. 18 A. I mean, you can figure it out by adding up 19 what -- by just doing the math and adding up if it 20 tells you, for example, if it's showing you -- 21 whether or not it's showing you, you know, prices of 22 the securities. 23 Q. Uh-huh. 24 A. At least that's the way the customer 25 statement normally occurs.

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1 Q. Okay. 2 A. I'm not familiar with what -- necessarily 3 how the clearing accounts are handled on our books 4 and records. 5 Q. Okay. But these security positions that 6 are listed here, you see there are some long 7 positions and some short positions listed starting 8 on page 869 and then through the next couple of 9 pages? 10 A. Right. 11 Q. Would that mean that National Bank of North 12 America owned those -- owned -- the long positions 13 would be securities owned by National Bank of North 14 America? 15 A. No, not owned. Being cleared through 16 there. 17 Q. So this document -- 18 A. It's not National Bank of North America. 19 That's a client of ours. You know, we're not buying 20 and selling the stock for National Bank of North 21 America. 22 Q. Okay. 23 A. We're buying it for customers, transactions 24 being cleared through that account. 25 Q. Okay. So this is -- you're saying this

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1 document shows the clearing that -- 2 A. It's showing the activity that flowed 3 through that account. 4 Q. Okay. So they were not an IA customer of 5 yours; right? 6 A. No. 7 MS. FEIN: Okay. 8 MR. KRATENSTEIN: Thank you very much. 9 (Trustee's Exhibit Number 16 was marked 10 for identification.) 11 Q. (By Ms. Fein) I'm marking as Exhibit 16 a 12 document I'm about to hand to you that's being 13 marked as Exhibit 16. Do you recognize what kind of 14 document this is? 15 A. It's a customer confirmation. 16 Q. Do you see, can you read the trade date 17 there? 18 A. 1983, 11-11-83. 19 Q. And the settlement date looks like 20 11-18-83; is that right? 21 A. Uh-huh, yes. 22 Q. Under the security description would you 23 agree that it's showing a preferred -- preferred 24 convertible security? 25 A. Right, yes.

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1 Q. And for the capacity code, do you see the 2 number two? 3 A. Yes. 4 Q. And that -- those are trades where you're 5 acting as principal; right? 6 A. Correct, yes. 7 MR. KRATENSTEIN: In other words, that's 8 what the capacity code means, two equals principal? 9 MS. FEIN: That's right. 10 THE WITNESS: You have to look at the back 11 of the confirmation to see that. 12 Q. (By Ms. Fein) The customer listed is 13 George Scheer Special. Do you see that information? 14 A. Yes. 15 Q. And where it says we sold, does it mean 16 that your -- 17 A. Sold is from our principal account. 18 Q. Okay. So where -- can you explain to me 19 kind of how this trade would end up in your 20 principal account before it got to the customer 21 statement? 22 A. We are selling the stock. Typically on an 23 agency transaction it would say -- it would refer to 24 what the customer bought and sold. This would have 25 confused Dubinsky.

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1 Q. I'm not confused about that point. Let me 2 back up. 3 A. Okay. 4 Q. My only question is would this -- where 5 would this trade have originated on the market? 6 A. Well, to begin -- 7 Q. Like who would have been the trader in your 8 business or elsewhere? 9 A. I don't know who the trader could have 10 been. Typically it depends upon the transaction. 11 The transaction could have been we a had bought the 12 stock first, you know. We could have had it in 13 inventory, which would have appeared in one of the 14 firm's trading accounts or in our investment 15 account. And then we would sell it from a trading 16 account or investment account to the client as 17 principal. 18 Q. Okay. 19 A. That's -- it could be any number of -- or 20 we can go out and buy it into this -- buy it from 21 the street, you know, and then it flows from Goldman 22 Sachs, who's a market maker, you know, selling it to 23 us. And I could originate the trade, according if 24 Goldman Sachs's market making department, and buy 25 the stock.

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1 So it goes from step one, from Goldman, 2 who's selling it as principal to Madoff, who's 3 buying it as principal, and Madoff in turn is 4 selling it from my principal account to the customer 5 account. 6 (Trustee's Exhibit Number 17 was marked 7 for identification.) 8 Q. (By Ms. Fein) Okay. I'm going to mark or 9 I'm going to show you what's been marked as 10 Trustee's 17. 11 MS. DASARO: I just want to make sure. 12 MR. KRATENSTEIN: Thank you. 13 MS. CHAITMAN: Thank you. 14 Q. (By Ms. Fein) Is this another one of the 15 stock record documents that your firm maintained? 16 A. Yes. 17 Q. And would this be for house 17, your IA 18 customers? 19 A. I can't read the -- 20 Q. Look at the -- 21 MS. CHAITMAN: Page 63, 11-30-63? Is that 22 the date? 23 MS. FEIN: No. If you look at the -- it's 24 '83, yes. 25 THE WITNESS: This is house 17. This is

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1 house 17, so -- 2 Q. (By Ms. Fein) Okay. Here, just to be 3 clear, will you read the title of the document 4 starting with the house 17? 5 A. Stock record summary through 11-10-83. 6 Q. Okay. 7 A. Or 11-30-83. I can't read it. 8 Q. Okay. Yeah. I think it's 11-30. 9 A. Yeah, 11-30-83. 10 Q. Okay. For your IA customers were these 11 typically run at month end? 12 A. Yes. 13 Q. These type of reports? 14 A. I'm assuming if it says through 11-30-83, 15 that would be the month end. 16 Q. For this report; right? 17 A. For this report. 18 Q. I'm asking you if you know more generally 19 if for house 17 these reports were typically run at 20 the end of the month? 21 A. I assume so, but I can't be sure. 22 Q. Okay. I'm going to show you a different 23 page, page 750. And if you look toward the bottom 24 of the page -- 25 A. Uh-huh.

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1 Q. -- do you see a transaction in -- I'm 2 sorry -- in the middle of the page in International 3 Harvester? 4 A. Yes. 5 Q. Okay. I'd like you to look again on this 6 page. 7 A. Uh-huh. 8 Q. The International Harvester transaction. 9 A. Right. 10 MS. CHAITMAN: Is this 750? 11 MS. FEIN: This is 750, yes. 12 MS. CHAITMAN: Okay. 13 Q. (By Ms. Fein) Preferred series A 14 convertible, $3? 15 A. Uh-huh. 16 Q. Do you see that transaction? 17 A. Right. 18 Q. If you look about six lines up from the 19 bottom, there is the customer that we looked at, 20 George Scheer Special. Do you see that? 21 A. Right. 22 Q. Actually, look down here. I know it's 23 listed a couple of different places, but I'm 24 referring to the one right down at the bottom. 25 A. I see. Okay.

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1 Q. Six lines up. Okay. Do you see the amount 2 for this looks like 13,388 -- 3 A. Right. 4 Q. -- long? 5 A. Uh-huh. 6 Q. And the trade date is 11-18-83? 7 A. Uh-huh. 8 Q. If you look at what's been marked as 9 Exhibit 16, would you agree that this trade shown on 10 the first page of Exhibit 16 is also 13,388 shares 11 for George Scheer Special? 12 A. Right. 13 Q. The security description is the same; 14 right? 15 A. Uh-huh. 16 Q. Okay. So do you think this is -- do you 17 think that the amount shown on Exhibit 17, the 18 transaction shown on Exhibit 17 for George Scheer is 19 the same as the one shown on Exhibit 16? 20 A. I want to make sure I can find it. 21 Q. Sure. 22 A. 13,388. The shares seems to be the same. 23 Q. And this -- 24 A. And the monies. 25 Q. -- date listed looks like November 18th,

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1 1983 -- 2 A. Right, okay. 3 Q. -- is the settlement date. So does this 4 transaction appear to match the -- the transaction 5 in Exhibit 16 appear to march the report in 6 Exhibit 17? 7 A. The shares match. I don't see monies. 8 Q. Right, no. I don't think that they put it 9 on this report. 10 A. Okay, right, right. 11 Q. Okay. If you go to the next page of 12 Exhibit 17, this is the end of that same 13 transaction. Do you see who's on -- who's listed at 14 the bottom of the page? 15 A. Correct. 16 Q. What entity is listed? 17 A. National Westminster Bank. Is that what 18 it's saying? 19 Q. Yes. What's your understanding of how 20 National Westminster Bank was related to this trade? 21 A. I'm assuming the trade must have cleared 22 through the bank. 23 Q. Okay. Do you see the account number? 24 There's two entries and two account numbers for 25 National Westminster Bank that are listed at the

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1 bottom of the transaction? 2 A. Right. 3 Q. The account number for the first reads 4 299000010 and the second, 6000020. Do you see that? 5 A. Uh-huh. 6 Q. Do you know why there would be two entries 7 here for National Westminster Bank? 8 A. I don't have a clue. 9 Q. Okay. 10 A. They must have two different types of trade 11 clearing accounts that can handle it. 12 Q. Okay. So we know how we had discussed 13 whether this would be a month-end report. The 14 transaction that we're looking at is dated 15 November 18th and this report is dated 16 November 30th. 17 And there are many other transactions 18 listed on here, but do you think that that would 19 mean it would encompass at least more than just the 20 day, November 30th? At least it has other days of 21 the month that are also listed here? 22 MS. CHAITMAN: Objection. 23 Q. (By Ms. Chaitman) Other transactions? 24 A. I'm not sure. 25 Q. Okay. That's fine. I don't know if you

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1 thought it was most certainly a month-end report 2 based on that, but the transactions listed on this 3 stock record summary, if you look at other 4 transactions on the page, they also have National 5 Westminster Bank USA -- 6 A. Uh-huh. 7 Q. -- listed underneath each security. 8 A. Okay. 9 Q. Would it be typical that all the 10 transactions would have the same clearing bank for 11 all the transactions that would be listed on a 12 single for every customer account? 13 A. Could be. It depends upon -- you know, the 14 answer is I have no idea why we would choose one 15 bank or the other. Again, it depends upon, you 16 know, any number of things. I don't know. It's not 17 something that I would be familiar with. 18 Q. Right. We went over a number of banks 19 earlier, though, and this report only lists one. So 20 I was just trying to understand why it might be that 21 there's only one listed? 22 A. That could be -- I don't know. I mean, it 23 could be typically, you know, why they use one 24 particular bank or clearing agent or broker depends 25 upon the fee structure, depends upon whether they

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1 were a market maker also in that, depends upon -- I 2 don't know the answer to that question. 3 Q. Okay. That's fine. The transaction we 4 were looking at in Exhibit 16 was a transaction you 5 did as principal; right? 6 A. Mostly all of ours were principal, right. 7 Q. So if National Westminster was shown as the 8 clearing firm -- 9 A. Right. 10 Q. -- would that mean National Westminster -- 11 it wouldn't mean National Westminster was the 12 counterparty to the transaction; right? 13 A. No. 14 Q. Okay. 15 A. I mean, it theoretically could be, but I 16 don't know. Again, they may have been a market 17 maker. They may have been a -- I don't know the 18 answer to that. 19 Q. You were a self-clearing firm; right? 20 A. Correct. 21 Q. So I guess I'm trying to understand why all 22 the transactions that are shown on the report would 23 have not cleared through you or wouldn't have 24 gone -- 25 A. Because they're not going to -- because

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1 they're not going to -- we don't convert ourselves. 2 In other words, we don't handle the conversion of 3 the security. We don't handle the delivering the 4 bond to the clearing agent to actually exchange it 5 for stock. In other words, that -- we don't have an 6 arrangement with -- with the conversion agent to 7 actually do that. 8 MS. FEIN: Okay, okay. We can move on. 9 I'm going to show you two documents, Trustee's 18, 10 Trustee's 19. 11 (Trustee's Exhibit Numbers 18 and 19 were 12 marked for identification.) 13 MR. KRATENSTEIN: Just want to make sure I 14 get these right. So which is 18? Ends in 393? 15 MS. FEIN: That's correct, yes. 16 MR. KRATENSTEIN: Eighteen is 393? 17 MS. FEIN: That's right. Here, let me get 18 this out of your way. 19 Q. (By Ms. Fein) Do you recognize? 20 A. Not really. It says -- it says cash and 21 securities blotter. Is that what -- 22 Q. Uh-huh. 23 A. Right. 24 Q. Are you looking at Exhibit 18 then? 25 A. Yes.

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1 Q. Okay. Both documents show roll number and 2 then contents and then documents at the top of the 3 page. Do you see that? 4 A. Uh-huh. 5 Q. Okay. If you look at Exhibit 19, do you 6 see -- can you turn the -- look at the second page 7 of it ending in 396. Can you read the note at the 8 bottom of the page, the handwritten note? 9 A. Do not microfilm trading blotters? 10 Q. Yeah. And the line right above it. 11 A. As per BLM. 12 Q. Okay. Do you -- does BLM refer to you? 13 A. I would assume so. 14 Q. Do you know whose handwriting this is? 15 A. No. 16 Q. If you go back to Exhibit 18, other page -- 17 A. Uh-huh. 18 Q. -- do you see at the bottom of the page 19 where it says shred the Xs only -- 20 A. Okay. 21 Q. -- the handwritten note? Do you know whose 22 handwriting that is? 23 A. No. 24 Q. Do you know why you would shred cash and 25 securities blotters during this time period?

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1 MR. KRATENSTEIN: Object to form. 2 THE WITNESS: No. 3 MS. FEIN: Okay. 4 THE WITNESS: I don't even know what they 5 were used for. 6 Q. (By Ms. Fein) Okay. I'm going to ask a 7 couple of questions about the Sage accounts. Paul 8 Koenigsberg was an accountant; right? 9 A. Yes. 10 Q. And he -- we looked at some letters where 11 it appeared that he did work for the Sages; right? 12 A. I'm assuming he did. I said I don't know 13 whether Paul -- 14 Q. Right. 15 A. Was Paul Koenigsberg or could have been 16 Paul somebody else. 17 Q. Okay. Was Paul Koenigsberg an accountant 18 for other BLMIS customers? 19 A. Yes. 20 Q. Was he an accountant for Carl Shapiro? 21 A. Yes. 22 Q. Was he an accountant for Norman Levy? 23 A. At one -- he was an accountant for them, 24 for Norman Levy in the later years. 25 Q. Okay.

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1 A. And same thing with -- who's the other one 2 you asked? 3 Q. Carl Shapiro. 4 A. Carl Shapiro, Norman Levy, yes. Their 5 accountants had died, so they switched over. And 6 then in -- Shapiro moved from Price Waterhouse to -- 7 because the partner that handled Price Waterhouse 8 moved to London. So he took Paul Koenigsberg on as 9 an accountant. And Levy's accountant died and he 10 moved over to Paul Koenigsberg. 11 Q. Did Carl Shapiro and Norman Levy have short 12 against the box accounts with you? 13 A. Yes. 14 Q. Did Annette handle some of the 15 correspondence and other activity related to those 16 accounts? 17 A. Yes. 18 Q. Were Carl Shapiro and Norman Levy two of 19 the customers you identified as having backdated 20 transactions in their accounts before 1992? 21 A. Well, let me make sure you understand 22 backdating accounts because backdating accounts 23 occur in a number of ways. One of them was -- well, 24 there's a -- backdating accounts can refer to an as 25 of transaction. As a market making firm, it's a

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1 very common occurrence to have to adjust both a 2 price and a date on a confirmation based upon 3 typically an error that is being made by the market 4 making firm or the originating firm, meaning like 5 Schwab. Schwab gives us an order to buy and sell 6 stock from a particular customer. 7 And either Schwab makes an error or his 8 customer makes an error as to doing the trade on the 9 wrong day or the wrong time or the price. And then 10 there's usually a discussion that takes place 11 between both parties. And then a decision is made 12 to put the trade back to a certain date and that's 13 what it refers to as an as of transaction. 14 So you're adjusting it and the error might 15 be -- might be the market maker or it might be the 16 originating broker who gave us the order. That's 17 one. Then there is the backdating trade where there 18 is a dispute between the customer and myself. 19 And then, of course, there's the totally 20 illegal transaction of backdating a transaction, 21 which is what -- what the -- I don't know whether it 22 was Dubinsky or Picard that happened, but I had 23 explained backdating trades to -- in the past. And 24 I don't know. You'd have to -- it depends upon 25 which transaction.

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1 Q. Okay. 2 A. But a backdating trade in itself doesn't on 3 the face of it because you are backdating a trade by 4 adjusting a price or the date, but it doesn't 5 necessarily on the face mean it's an illegal trade. 6 Q. No, and I didn't ask that. 7 A. Okay. 8 Q. I was actually just asking about if Carl 9 Shapiro and Norman Levy were two of the customers 10 that had those transactions? 11 A. Yes, yes. 12 MS. FEIN: Okay. That was my question. 13 MR. KRATENSTEIN: I'm going to object to 14 the form of that question. 15 Q. (By Ms. Fein) Okay. You testified about a 16 meeting with members of the Sage family yesterday? 17 A. Yes. 18 Q. How many meetings do you remember with 19 them? 20 A. A number of meetings, you know. As to how 21 many, I don't know. It depends upon -- you know, I 22 remember, you know, the meeting where they wanted to 23 change the strategy, where they wanted to make the 24 decisions themselves. That happened. That was one 25 meeting I remember because it was a meeting that

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1 there was a lot of discussions whether it was the 2 right thing to do, but they wanted to do it -- 3 Q. Okay. 4 A. -- because of tax break. And then there 5 were other meetings that they came up just because 6 they were in the area. And the family was -- I 7 mean, I was friendly with the mother and the family, 8 so they felt free to come up. And also they said 9 that they came up to visit with Annette depending 10 upon -- they were not necessarily unique. And then 11 they would come and visit me to say hello. 12 Q. Okay. And did you have a good sense of 13 when that meeting took place, the one you testified 14 about directed trading? 15 A. I was trying to think of that, you know, 16 myself. I don't remember. There was -- there were 17 meetings and I know as recently as the 2000s. 18 And then there certainly must have been 19 meetings prior to that depending upon -- you can see 20 yourself depending upon when it started, 21 transactions changed when it went from a convertible 22 bond arbitrage account to a split strike account and 23 then to an account where they were just doing tax 24 planning and changed the style of trade they wanted 25 to do.

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1 Q. Okay. But I guess you're saying then 2 before that meeting you wouldn't have taken trade 3 direction from the Sages; right? 4 MR. KRATENSTEIN: Object to form. Go 5 ahead. 6 THE WITNESS: Depends upon whether the 7 father was alive and he was running the account with 8 me or -- I mean, they were accountants, the family, 9 for a very long period of time. 10 Q. (By Ms. Chaitman) Okay. But it wasn't 11 your typical practice to take trade direction; 12 right? 13 A. That's correct. 14 Q. Okay. That was my -- what I was trying to 15 get at. Okay. I'd like you to take a look at a 16 document we reviewed yesterday, Exhibit 85. 17 MR. KRATENSTEIN: Hang on a minute. 18 MS. FEIN: Oh, sure. 19 MR. KRATENSTEIN: Okay. Go ahead. 20 Q. (By Ms. Fein) In the second paragraph we 21 went over some language yesterday and I'd like to 22 ask you about one sentence, but let's look a little 23 earlier. Do you see this sentence says as of the 24 last statements we received in March the accounts 25 were a little off of the usual benchmark?

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1 A. Correct. 2 Q. Can you read the next two sentences after 3 that? 4 A. I can't find them. 5 Q. Oh, so the next one would be since then our 6 main holding, eBay, has dropped significantly. 7 A. Right, okay. I see it. 8 Q. And then the next, as that holding is a 9 long-term one, I was hoping you had shorted it 10 against the box a while back. Do you see that? 11 A. Yes, uh-huh. 12 Q. That statement is in the past tense; right? 13 A. I was hoping you had shorted it against the 14 box, okay. 15 Q. It's referring to something that would have 16 happened before you got this letter; right? 17 MR. KRATENSTEIN: Objection to the form of 18 the question. 19 THE WITNESS: Yes. I think what they're 20 referring to is sometimes even if I had felt that 21 they should have been sold regardless of what they 22 had -- they were doing tax planning, obviously, 23 shorting against the box to adjust whether they were 24 going to get long-term gain, short-term gains and so 25 on and depending upon when you closed out the

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1 transaction, in other words, covered the short, that 2 would trigger a tax event. So if, in fact -- again, 3 I'm assuming because this -- you know, if, in fact, 4 they originally wanted to keep the trade open but 5 then there was a market event that happened, you 6 know, then I felt that it wasn't -- it didn't make 7 any sense to worry about the tax treatment because 8 if they -- if I didn't go short against the box, the 9 stock was going to go down, I would pay no attention 10 to it. 11 Q. Right. 12 A. Technically a client could call me up and 13 say to me, which did happen at the time, well, you 14 shouldn't have -- you should have followed my 15 instructions even though you would have lost money 16 for me to do that. That's not an unusual situation. 17 So I don't remember what happened here, but that's 18 probably what happened. 19 Q. Okay. All right. So we can look at 20 Exhibit 69. 21 A. Uh-huh. 22 Q. This is another of the letters we reviewed 23 yesterday; right? 24 A. Right. 25 Q. Do you see -- it's a long sentence, but the

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1 last sentence of the first paragraph, with respect 2 to other positions in these accounts please note 3 that Pharmacia will become long-term this January. 4 Do you see that sentence? 5 A. Yes. 6 Q. And then do you see just under that unless 7 you deem that these stocks must be shorted prior to 8 these dates due to various considerations, it would 9 be to our tax benefit that these positions not be 10 shorted? 11 A. Right. 12 Q. That's not a direction to you about what to 13 do with the trade; right? 14 MR. KRATENSTEIN: Object to form. 15 Q. (By Ms. Fein) In other words, this is left 16 in your discretion; correct? 17 MR. KRATENSTEIN: Object to the form. 18 THE WITNESS: I assume that's what they're 19 saying, right. 20 Q. (By Ms. Fein) Okay. I just want to look 21 at two of the documents we went through. These 22 exhibits, Exhibits 70 and 72, were looked at in 23 connection with this same letter. And on Exhibit 70 24 do you see an R. J. Reynolds Tobacco HLDS? 25 A. Right.

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1 Q. Okay. And what date is that transaction? 2 A. January 13th. 3 Q. And it's 9,000 shares purchased? 4 A. Yes. 5 MR. KRATENSTEIN: What year was that? 6 THE WITNESS: '03. 7 Q. (By Ms. Fein) Okay. And do you see the 8 account number listed, 1S004-7? 9 A. Yes. 10 Q. Okay. And you were shown the trade 11 confirmation in Exhibit 72 in connection with this 12 customer statement? 13 A. Right, uh-huh. 14 Q. What's the date of the trade indicated on 15 this confirmation on the first page? 16 A. 12-12-03. 17 Q. And what's the date indicated on the second 18 page of the confirmation? 19 A. 8-28-03. 20 Q. Okay. Can you see either of those trades 21 on the customer statement that we reviewed in 22 Exhibit 70, any of the -- either of those trade 23 dates? 24 A. I see that Reynolds has a trade date of 25 January 13th.

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1 Q. Okay. So no? 2 A. And what's the other one? Broadcom? 3 Q. Yeah. No. We're just looking at the RJR 4 Reynolds trade. 5 A. Okay. 6 Q. If you look on the trade confirmation, 7 Exhibit 72, do you see the account number is 8 1S0004-3? 9 A. On this, yes. 10 Q. So this is a different account? 11 A. Uh-huh. 12 Q. These confirmations pertain to a different 13 account and a different time frame; right? 14 A. Right. 15 Q. They're not the ones that are shown on the 16 statement in Exhibit 70; right? And take your time. 17 A. Okay. 18 Q. Do you agree? 19 A. The statement is -- it says -- I'm not -- 20 you lost me. 21 Q. So the statement is for accounts ending in 22 dash seven; right? 23 A. Right. 24 Q. But the confirmations are for an account 25 ending in dash three; right?

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1 A. Correct. 2 Q. And the trade date shown on Exhibit 72 is 3 December 12th, 2003? 4 A. Uh-huh. 5 Q. And August 28th, 2003? 6 A. Uh-huh. 7 Q. But the customer statement that was shown 8 is for January 2003; right? 9 A. Right. 10 Q. Okay. So these transactions don't match 11 the statement in the confirm; right? 12 A. You know, to tell you the truth, you've 13 sort of lost me on this whole thing. 14 Q. Okay. 15 A. I'm assuming if you told me they don't 16 match, they don't match. 17 Q. Well, the dates are different and the trade 18 -- the number of the trade is different and the 19 accounts are different right? 20 A. Okay. All right. 21 Q. Okay. Well, I'm asking you. 22 A. Ask me what? 23 Q. I'm asking you do you agree that the trade 24 dates are different? 25 A. Yes, yes.

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1 Q. The amounts are different? 2 A. Yes. 3 Q. And the accounts are different? 4 A. Yes. 5 Q. Okay. You mentioned earlier today meeting, 6 a proffer meeting with the United States Attorney's 7 Office. Do you remember that reference? 8 A. Yes. 9 Q. Okay. Do you recall when that meeting took 10 place? 11 A. There were two meetings with the U.S. 12 Attorney. One was the proffer agreement, which was, 13 I think, I believe the first meeting. That took 14 place down at the U.S. Attorney's office, which was 15 made shortly after my arrest. Then there was a 16 second meeting that took place in my apartment where 17 the U.S. Attorney was not present. 18 He was on a speakerphone. And that 19 included a whole length of proffer agreement 20 meeting. There were all sorts of people there in my 21 apartment. 22 Q. Do you remember did the meeting take place 23 in a conference room in the United States Attorney's 24 office, the December meeting? 25 A. Yes, yes.

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1 Q. Do you remember how long it was? 2 A. A long time. Started in the morning and 3 went through lunch. 4 Q. Okay. I'm going to mark -- I'm going to 5 show you what's been marked as Exhibit -- 6 MR. KRATENSTEIN: What number? 7 MS. FEIN: 20. 8 MS. CHAITMAN: Do you have a copy for 9 Peter? 10 MS. FEIN: Yeah. 11 (Trustee's Exhibit Number 20 was marked 12 for identification.) 13 Q. (By Ms. Chaitman) If you look at the 14 bottom of the first page there's a date listed, 15 investigation on 12-16-2008, the bottom of the first 16 page? 17 A. Yes. 18 Q. Does that sound about right when the 19 meeting took place that you remember? 20 A. Yes. 21 Q. Okay. So this would be the same week, a 22 few days after you confessed; right? 23 A. Correct. 24 Q. We're just going to take a look at a couple 25 of individual statements here.

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1 MS. CHAITMAN: I just want to put on the 2 record that I object to any questioning about this 3 document because, number one, it's obviously 4 inadmissible for good reasons. Number two, it's 5 redacted more than it's not redacted and it's 6 impossible to know what -- obviously, we have no 7 idea what's said in the redacted sections. 8 And I think for you to ask Mr. Madoff 9 about something that hasn't been redacted, assuming 10 this is even a legitimate document -- for example, 11 I'm sure that you're going to ask him about what 12 hasn't been redacted on page three, but it may be 13 that in the blacked out part underneath it, it 14 contradicts what's said and what's there. 15 MS. FEIN: Understood. If we had the 16 full, unredacted document, that would be our 17 preference as well. 18 MS. CHAITMAN: Right, but I think any 19 questioning about this document is a waste of time 20 because it's -- 21 MS. FEIN: I understand your objection. 22 MS. CHAITMAN: Okay. 23 Q. (By Ms. Fein) If you turn to page seven of 24 the document, the pages are marked at the top. 25 A. Okay.

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1 Q. Do you see the first sentence? 2 A. When Madoff began a retail business in 19 3 -- yes. 4 Q. Uh-huh. Do you agree with that statement? 5 A. Yes. 6 MS. FEIN: Okay. 7 MR. GOLDMAN: Read that question back? 8 Q. (By Ms. Fein) Sure. The first statement, 9 Madoff began a retail business in about 1960. He 10 had about a dozen clients, all of whom were family 11 and friends. Do you agree with the statement? 12 MR. GOLDMAN: Well, I'm going to object to 13 it. It says it morphed into a fraud. 14 MS. FEIN: I didn't -- I didn't ask about 15 that sentence. 16 MR. KRATENSTEIN: First sentence, just 17 first sentence. 18 MR. GOLDMAN: Oh, I'm sorry. 19 MS. FEIN: I only asked about the first 20 sentence. Sorry. 21 MR. KRATENSTEIN: Do you want to reask the 22 question if he agrees with that sentence, the first 23 sentence? 24 Q. (By Ms. Fein) Sure. Mr. Madoff, do you 25 agree to the first sentence on page seven, that that

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1 is an accurate reflection of your business? 2 A. Madoff began a retail business in about 3 1960. 4 Q. Yes. 5 A. He had about a dozen clients, all of whom 6 were family and friends, yes. 7 Q. Do you recall making that statement at your 8 proffer meeting? 9 A. Yes. 10 Q. The next sentence after that, can you read 11 that? 12 MR. GOLDMAN: That's what I'm going to 13 object to. You know, this is a memorialization of 14 what someone thinks they heard. We don't know who 15 wrote it; okay? There are certain characterizations 16 in here such as that which are his conclusions or 17 her conclusions, whoever wrote it. And I think it's 18 unfair to ask him. 19 If there's something in here that you want 20 to ask him whether he actually said something, I 21 don't have an objection to that. And if you could 22 point to where he said it in the report, that's 23 fine; but I'm going to object to these 24 characterizations and then asking him whether those 25 are correct or not.

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1 MS. FEIN: I understand. 2 MR. GOLDMAN: Okay. 3 MS. FEIN: I understand. I'm going to ask 4 about the statements that are here. 5 MR. GOLDMAN: Okay. 6 Q. (By Ms. Fein) And I just want to really 7 know if you recall making the statements at the 8 meeting? 9 MR. GOLDMAN: I want to make sure, though, 10 when you ask him did he make the statement and if 11 he -- I don't want -- what I object to is the 12 characterization that he's made the statement. I 13 haven't seen quotation marks anywhere in here that 14 Mr. Madoff said this. 15 MS. FEIN: Right. 16 MR. GOLDMAN: If you can point to that and 17 ask him, that's fine, but the other -- asking him 18 about someone else's conclusions I just think is 19 inappropriate. 20 MS. FEIN: Okay. Well, if I -- I don't 21 plan to ask -- 22 MR. GOLDMAN: And he'll answer 23 accordingly. Okay. 24 MS. FEIN: -- much more about that. It's 25 about whether he recalls making the statements that

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1 are here. 2 MR. GOLDMAN: Okay. 3 Q. (By Ms. Fein) So if you want to read the 4 text on page seven. You don't have to read it out 5 loud. You can read it to yourself, but I did want 6 to ask. So the statement the retail business 7 morphed into a fraud as time went by, do you recall 8 making that statement at the proffer meeting? 9 A. You're asking if I said in 1962 all the 10 clients lost virtually their entire investment? 11 Q. No. The sentence before that, the retail 12 business morphed into a fraud as time went by. 13 MR. GOLDMAN: Do you recall saying that? 14 THE WITNESS: I don't remember saying 15 that. 16 MR. FEIN: Okay. 17 MR. GOLDMAN: Okay. Let's go on. 18 Q. (By Ms. Fein) Do you -- if you look down a 19 bit on the page, so it refers to in 1962 Madoff's 20 retail business was wiped out in the new issue 21 collapse. And the following sentence, all his 22 clients lost virtually their entire investment, 23 which amounted to a total of $30,000. Madoff felt 24 he had to pay them back, so he borrowed $30,000 from 25 his father-in-law to do so. Do you recall making

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1 that statement? 2 A. Yes. 3 Q. His father-in-law was not pleased by this 4 development. Madoff was able to pay all these 5 clients back and start the market making business. 6 Do you recall making that statement? 7 A. Yes. 8 Q. At about this time he took in new retail 9 clients. These clients were also family and 10 friends. Do you recall making that statement? 11 A. Yes. 12 Q. He began to falsely report returns of 13 30 percent, 40 percent annual to these customers. 14 Do you recall making that statement? 15 A. Wait a minute. After this time he took in 16 new retail clients. He had to falsely -- no. I did 17 not say he had to falsely report returns of 30 to 18 40 percent. Definitely didn't ever say that. 19 Q. Okay. If you look at page four of the 20 document, go back a couple of pages, my next 21 questions are on page four. 22 A. Okay. I'm still looking at that last 23 question -- 24 Q. Sure. 25 A. -- because I can't imagine having said

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1 that. 2 Q. Okay. 3 A. Where are we now? 4 Q. Page four. 5 A. So I have to go back? 6 Q. Yes. 7 A. Okay. 8 Q. I think it's one more back. It's on the 9 back, yep. There. The first sentence that is 10 unredacted, the fraud entailed Madoff taking in 11 funds from investors, holding those funds and paying 12 them out to investors seeking redemptions. Do you 13 recall making that statement? 14 MS. CHAITMAN: I would suggest that you 15 read through the whole unredacted portion, Bernie, 16 before you respond. 17 THE WITNESS: The fraud entailed Madoff 18 taking in funds from investors, holding those funds 19 and paying them out to investors seeking 20 redemptions, essentially a Ponzi scheme. 21 MR. GOLDMAN: See, the other part of the 22 problem with that is that we don't have any dates. 23 THE WITNESS: Yeah. 24 MR. GOLDMAN: I don't know when the dates 25 are.

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1 MS. FEIN: I'm just asking if he remembers 2 making the statements. I can't make any. I was not 3 involved in -- I was not -- yeah. 4 MR. GOLDMAN: So I just think it's unfair 5 ask him that question. 6 MS. FEIN: I'm asking if he recalls the 7 statements that are here and that's really it. 8 MR. GOLDMAN: Okay, all right. 9 THE WITNESS: Let's put it this way. 10 Depending upon what period of time they were talking 11 about, I could have made that statement because I'd 12 made that statement a number of times since then; 13 but I certainly was not talking about it, you know, 14 in the early periods of time because I was very 15 clear and forthright in everything I said at the 16 proffer agreement and at the other meeting. 17 And nothing has changed in my story. So I 18 -- just the same reason I would not have mentioned 19 anything about the 30 or 40 percent, I certainly 20 could have said that, for example, in 1980s my 21 clients were making 30 or 40 percent because that 22 was what was common at that time when interest rates 23 were 12 percent at that period of time. 24 So I can tell you that referring to this 25 proffer agreement, it was an absurdity. The

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1 questions that were asked by me, by people who I 2 knew knew the answer, you know, and, you know, it 3 was obvious that that they were trying to paint a 4 picture that was not the case. And I'm still pissed 5 off by it, quite frankly. 6 Q. I'm going to ask you about a couple more 7 questions. 8 MR. GOLDMAN: Okay. Ask the question. 9 Q. (By Ms. Fein) So the next sentence, you 10 just read the first two sentences. The next 11 sentence, customers received both monthly account 12 statements and trade confirmations reflecting trades 13 that never took place. Do you recall making that 14 statement at the proffer meeting? 15 A. No. 16 Q. Madoff began engaging in fraud in earnest 17 in the 1970s. The 1980s saw a large expansion in 18 the retail, i.e., fraudulent portion of the 19 business. Do you recall making that statement at 20 the meeting? 21 A. Let me go back and read it. I certainly 22 never said that fraud took place in the '70s because 23 it did not. In the 1980s there was a large 24 expansion in the retail business and in the, i.e., 25 parentheses, fraudulent. I assume that's not my

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1 statement. That's the interpretation statement 2 because why would they -- the fact that if I 3 understand English properly, when someone says with 4 parentheses, i.e., fraudulent, that's someone's 5 interpretation of what he claims I said was 6 fraudulent. 7 Q. Okay. 8 A. Which -- so I never said it was fraudulent. 9 Q. I'm just asking about your recollection. 10 Okay. 11 A. My recollection was I explained what was 12 happening in the business, but as far as the dates 13 are concerned, you know, I do not recall ever saying 14 that. 15 Q. Okay. The next sentence, as there was no 16 actual trading, nothing cleared through DTCC or any 17 clearing firm and the only records of the purported 18 trades are the paper confirmations. Do you recall 19 saying that at the proffer meeting? 20 A. No. I do not. 21 Q. If you turn back one page to page three, 22 the second paragraph on page three begins when 23 Madoff first began the retail business. Do you see 24 that sentence? 25 A. Uh-huh.

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1 Q. Okay. The statement when Madoff first 2 began the retail business he did initially engage in 3 some actual trades. Soon, however, he began to 4 engage in fraud as to the entire retail business. 5 Do you recall making that statement? 6 A. No. Again, I assume if I'm reading this 7 correctly, this is somebody interpreting what I 8 said. 9 Q. Understood. Do you recall saying this at 10 the proffer meeting, though? I'm not saying that 11 it's verbatim. I'm asking if you recall discussing 12 this? 13 A. I remember discussing the fact the business 14 was small and also that I started -- I started a 15 retail business, discussing trade position, yes. 16 Was paying ridiculously high returns, no. I never 17 said that because they were not -- 18 Q. I'm only talking about the second 19 paragraph. I'm not asking about the first 20 paragraph. 21 A. Okay. When Madoff first began the retail 22 business, he initially engaged in some actual 23 trades. Again, that's someone interpreting what I 24 said. Began to engage in the fraud, no. Virtually 25 the entire life of the retail business was simply

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1 not trade. No, I don't recall saying this. 2 Q. Okay. And you were just reading the last 3 sentence on page three that's unredacted, for 4 virtually the entire life of the retail business? 5 Is that what you were referring to? 6 A. Not during -- not during an earlier period. 7 I was referring -- if I was saying that, I was 8 referring to post-'92 period. 9 Q. When you say if I was saying that, you mean 10 if you said -- 11 A. What I'm saying is that I never would have 12 said, you know, anything other than what I always 13 had said, that the fraud began in, you know, in the 14 post-'90 period. So I don't know -- and I have a 15 pretty good memory, so I do not remember saying 16 anything like that. 17 MR. GOLDMAN: Amanda, this is a 18 memorialization of the proffer on the 16th? Is that 19 what it is? 20 MS. FEIN: Yes. 21 MR. GOLDMAN: Okay. 22 Q. (By Ms. Fein) You mentioned that it made 23 you angry to think about this meeting somewhat; 24 right? 25 A. Excuse me?

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1 Q. You mentioned that it made you kind of 2 angry to think about this meeting; right? 3 MR. KRATENSTEIN: Object to form. 4 THE WITNESS: I'm angry because there were 5 interpretations here of what I said that were -- 6 were not true. I was very clear about what I said 7 and I was very forthright what I said. I would have 8 no reason to change that after the fact. 9 And the -- the way this -- what happened 10 at this meeting was a lot of the -- a lot of this 11 was someone asking me questions like saying so this 12 is what happened? And I had to go -- had to answer 13 back and say no, this is -- that is not what 14 happened. And they were asking me questions which 15 to me sounded totally ridiculous. 16 And as a matter of fact, I do remember 17 specifically turning to the two SEC people were 18 there who were very well aware of me and my business 19 and I looked at them and said help me out here. I 20 mean, do you really expect me to answer these 21 questions, explain what is a short sale, what does a 22 market maker do? 23 And it was like, you know, a smoking gun 24 type of thing. And yeah, I was pissed off at it 25 because I knew, you know, that it made no sense.

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1 And they were embarrassed when I turned and asked 2 them. I mean, for someone who was a senior person 3 at the SEC to sit there, you know, looking very 4 quiet and sheepish when Marc Litt, who knows nothing 5 at all, who is the prosecutor, about the securities 6 business or at least claimed not to know, you know, 7 asked me what is a short sale, what does a market 8 maker do? You know, so you sold stock to a customer 9 that you didn't own? 10 Q. (By Ms. Fein) So the SEC -- you're saying 11 and the SEC people in the room knew you. They knew 12 of your reputation? 13 A. Of course. There was no one in the 14 industry that didn't know me, you know, at that 15 time. You know, so -- 16 Q. Yeah. Well, you had a very good reputation 17 in the industry; right? 18 A. Before I -- before this fiasco, yes, but it 19 was in every aspect of the industry. So it was -- 20 it just -- it infuriated me when David went through 21 this theater the other day. So did the SEC lie? 22 Did the FBI lie he said? I said I didn't say that 23 they lied. I said they misinterpreted, you know, 24 what I said or maybe they just don't understand 25 anything.

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1 Q. Well, the statements, I won't represent 2 everything that we looked at, but you'll agree that 3 some of the statements we looked at didn't say 4 anything about market making certainly or short 5 sales; right? 6 MR. GOLDMAN: We don't know that because 7 so much is redacted. 8 MS. FEIN: I'm saying just the statements 9 that we looked at. 10 MS. CHAITMAN: But it's a meaningless 11 question due to the fact that 90 percent of it is 12 redacted. 13 MS. FEIN: If you want to object to the 14 question, you can object to the question. 15 MR. KRATENSTEIN: Objection. 16 THE WITNESS: Yes. I mean, to me this 17 document is nothing. You know, it's just -- look, 18 I've always felt that this -- you know, this whole 19 thing, the GAO report -- not the GAO report. I had 20 no problem with the GAO report. I had a problem 21 with Dubinsky's report and Picard. 22 Picard has made a whole series of 23 statements which the GAO report, his own report 24 proved totally, you know, false, like the firm used 25 it as a piggy bank, that I never made any money, the

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1 firm was never profitable, you know. And he totally 2 ignored his own expert witness, you know, Lubbe and 3 Lozard. You know, I read -- talk about getting 4 pissed off, that's how you get pissed off, making 5 statements, you know, that were totally untrue 6 that -- but look, I don't want to abuse you for 7 that, but this -- there are things here that make no 8 sense at all. 9 And I have no reason -- I have no -- you 10 know, I have no ax to grind. It's not like, you 11 know, I'm not admitted of a fraud. I admitted to a 12 fraud. I said that. So, you know, there's no 13 reason for me to say things that were not the case 14 because I've already been sentenced, totally 15 unfairly because they're trying to make me the 16 poster boy of Wall Street, which everyone is aware 17 of; but the -- you know, there are certain -- well, 18 it's not important. 19 So yes, I am pissed off because they did 20 enough -- I admitted to doing enough things that 21 were totally embarrassing and wrong that I regret, 22 obviously, but there gets to be a point where enough 23 is enough because it's an insult to my intelligence, 24 you know, for someone who's supposed to be an expert 25 witness, you know, to not -- you know, to make

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1 statements that it looked -- on the face of it look 2 ridiculous. And there were other expert witnesses 3 of reports I've read who said that themselves that 4 the Dubinsky report is preposterous or that the -- 5 Picard has made statements that are totally 6 ridiculous. 7 I can't believe that he has -- that he had 8 the nerve to even say these things and then hold 9 himself out as, you know, being a legitimate and 10 honest, you know, person. I mean, for this whole 11 idea with the short sale fiasco I've spoken to 12 numerous attorneys that -- you know, SEC attorneys 13 that have said what? 14 Is he saying that a short sale is a 15 fictitious transaction? It's not an honest 16 transaction? You know, I'm considering starting a 17 class action. And there are people that can turn 18 around and say look, you know what? 19 Anybody that lost money in a short sale in 20 the market, had nothing to do with me, if they lost 21 money in a short sale based upon his expert, you 22 know, witnesses and himself say, well, that's not a 23 legitimate transaction. So, therefore, I'll sue 24 Charles Schwab because, you know, it's so -- I've 25 had people tell me, well known attorneys much major

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1 and much bigger than your firm who've said now, 2 Bernie, nobody could say, he couldn't possibly say 3 that. He couldn't possibly be basing his case that 4 a fraud -- you know, that a short sale is a 5 fictitious transaction and a fraud. 6 He may get a bankruptcy judge who probably 7 knows less than him make that statement, you know, 8 or not do anything about it; but the people that say 9 they don't understand how anybody could do that 10 because it makes them look like a fool. And I know 11 he's not, so I don't understand why he would, you 12 know, try and ruin his reputation, which is what 13 he's doing, by submitting a report like that. Well, 14 anyway, I've said my peace. 15 MS. FEIN: Okay. 16 MR. GOLDMAN: Do you have another question 17 for him? 18 MS. FEIN: I do. 19 THE WITNESS: Peter, can you get me a 20 water or soda? I'm losing my voice here. 21 MR. GOLDMAN: Yeah, yeah. I'd get you a 22 scotch, but I don't think -- 23 THE WITNESS: I don't drink, so we'll go 24 with -- I'm considering it. 25 (Trustee's Exhibit Number 21 was marked

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1 for identification.) 2 MR. KRATENSTEIN: 21? 3 Q. (By Ms. Fein) Yeah. This has been marked 4 as Exhibit 21. You can look through the document, 5 but I have a couple of questions on this first page 6 before -- this first page that you're looking at 7 now, so you just tell me when you're ready. 8 A. Okay. 9 Q. So this appears to be -- the first page 10 appears to be a form with handwritten notes and the 11 date appears to be 12-8-08. Do you see that? 12 A. Thank you. Yes. 13 Q. Do you recognize this form? 14 A. Yes. 15 Q. What was it called? 16 A. I don't know what it was -- I don't know 17 that it had any name. 18 Q. You didn't have something that you would 19 call it? 20 A. No. 21 Q. Okay. Who worked on it? 22 A. This looks like Jodi Crupi. 23 Q. And when you say -- are you referring to 24 the handwriting? 25 A. Yes. I know she kept this kind of report.

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1 Q. Okay. Was this report kept regularly by 2 Jodi? 3 A. Yes. 4 Q. Was it kept on a daily basis? 5 A. I believe so. 6 Q. Was it kept by your firm in the ordinary 7 course of business? 8 A. Not on the market making or proprietary 9 side, no. 10 Q. For the IA business was this kept, was 11 this -- 12 A. Yes. 13 Q. -- report kept in the ordinary course of 14 your business? 15 A. Yes. 16 Q. What was the form used for? 17 A. Adjusted for, you know, what was -- what 18 was requested to be sent out in the way of checks 19 that were requested by clients and what checks had 20 come in. So she -- she or other people that worked 21 in this or that department could keep track of 22 monies in and monies out. 23 Q. Does the first -- underneath the date 24 there's a figure, 297,903, balance forward. Do you 25 see that?

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1 A. Yes. 2 Q. Does that refer to a positive cash amount? 3 A. I assume it would refer to a cash balance 4 in the 703 account, bank account. 5 Q. Okay. 6 A. Which was a Morgan -- JPMorgan account. 7 Q. Okay. And next to wiring out at like the 8 bottom half of the page it appears that there's a 9 large amount of money that's being wired out on this 10 date? 11 A. By the way, I want to correct my statement 12 about starting a class action because I -- 13 Q. You don't plan on doing that? 14 A. I would love to, but it's a little bit 15 preposterous. So let's say just so that I can get 16 out of here early, not this meeting, although I 17 wouldn't mind that either, but I don't want Picard 18 to get nervous, which I'm sure he wouldn't anyhow. 19 Q. Do you see that there are substantial sums 20 in the wiring out -- 21 A. Correct. 22 Q. -- category? Okay. Would you have seen 23 this document at or around the time that it's dated, 24 12-8-08? 25 A. I typically saw this regularly.

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1 Q. Okay. And would this document give you 2 information about customer withdrawals and deposits? 3 A. Yes. 4 Q. And would it give you information about the 5 financial health of the firm with respect to the 6 customer side? 7 A. Would it give me -- 8 MS. CHAITMAN: Objection to form. 9 THE WITNESS: It would give me a picture 10 of what was about to happen with monies in and out 11 of the firm, but it was never really a concern 12 because the firm -- this side of the firm always 13 had -- you know, it was liquid enough to handle 14 whatever withdrawals were coming out. 15 Q. (By Ms. Fein) But at this time, so 16 December 8th, 2008, that wouldn't be the case; 17 right? 18 A. No. 19 Q. Okay. So would this document be an 20 indication for you that you knew that perhaps you 21 wouldn't have a lot of funds left in the 703 22 account? 23 A. At this period of time there was no one on 24 Wall Street that didn't know what was going to 25 happen to Wall Street unless they weren't breathing.

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1 Probably Dubinsky had no clue. 2 Q. I'm talking with respect to your firm, 3 though, not with respect to Wall Street but just 4 with respect to your firm at that time? 5 A. Yes. It was very obvious to us there was a 6 crisis coming. 7 Q. Okay. So there are handwritten notes on 8 the pages that follow this first page of the 9 document. If you just look at that first -- the 10 page ending in 589, do you recognize that 11 handwriting? 12 A. No. This actually looks like my 13 handwriting. 14 Q. Okay. 15 A. That right there? 16 Q. Yeah, yeah. 17 A. Yeah. 18 Q. Okay. And then if you go forward another 19 page there's also handwriting. It appears the 20 handwriting on this document in general, so you can 21 look at it. 22 A. I want to look at these notes for a second. 23 Q. Sure. 24 A. Okay. 25 Q. Okay. On the page ending in 591, is that

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1 also your handwriting, 591? 2 A. Oh, yes. 3 Q. And if you flip ahead to page 593, it looks 4 like every other page is blank. So I'm only 5 referring to the ones that have handwriting on them. 6 Does that also look like your handwriting? 7 A. Yes. 8 Q. Okay. Would you agree your handwriting is 9 also on page 595? 10 A. Yes. 11 Q. Would you agree your handwriting is on 597? 12 A. Uh-huh, yes. 13 Q. And would you agree your handwriting is on 14 599? 15 A. Yes. 16 Q. Okay. And if you'd just look through the 17 remaining pages, if you can just confirm that's your 18 handwriting, too? If you see any that's not yours, 19 let me know. 20 A. You know, I have a question. 21 Q. Uh-huh. 22 A. Oh, these are not -- I don't understand how 23 -- it looks like there's two -- two pages made to 24 look just like one. For example, on the first 25 page --

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1 Q. Oh, that's just the copying. That's just 2 the copying, yeah. 3 A. Okay. So in other words -- okay. It has 4 nothing to do with the -- 5 Q. The original. 6 A. -- the original, the first page. 7 Q. That's right. 8 A. All right. 9 Q. Oh, this is a single document in terms of 10 this was found in one place, but I -- 11 A. But this is -- this report -- 12 Q. Right. 13 A. -- would normally not have this on the 14 other side. 15 Q. Understood, right. That's just an issue of 16 the copying. That's just an issue of -- 17 A. Oh, okay. All right, okay. 18 MS. FEIN: Right, right. I can't speak to 19 that process. 20 MR. KRATENSTEIN: Just for the record, you 21 took a single-sided document and made it 22 double-sided? That's what happened? In other 23 words, the documents were found single-sided in a 24 row and then for the purposes of this deposition 25 you've double-sided them?

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1 MS. FEIN: That's my understanding. I 2 would say that the Bates are consecutive. 3 MR. KRATENSTEIN: Okay. 4 MS. FEIN: So when we printed it, it was 5 printed double-sided. I can't make representations 6 about what the original looked like because we're 7 looking at the copy from the files. 8 MR. KRATENSTEIN: Okay. 9 THE WITNESS: In other words, they're not 10 -- the dates are not related to each other 11 because -- 12 Q. (By Ms. Fein) You don't believe that the 13 dates are related to one another? 14 A. This in itself was -- 15 MR. GOLDMAN: Say page one of the 16 document. 17 THE WITNESS: This page of the copy, 18 Jodi's handwriting, had nothing to do with the 19 other. In other words, what Andrew is saying is 20 true. They probably took -- it would probably be 21 like taking this document and putting it, you know, 22 on the other side of this document and making it 23 appear as if they're the same document and they're 24 not. 25 Q. (By Ms. Fein) I know we certainly didn't

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1 doctor the document. This was -- my understanding 2 is this was found together. The fact that it's 3 double-sided as opposed to single-sided is, you 4 know, an oversight; but -- and I apologize that it's 5 double-sided, but I'm saying that this was found as 6 a single document. 7 A. Yeah, but they could have been ten days 8 apart or two weeks apart. 9 Q. Well, I wanted to ask you. That was my 10 question for you. 11 A. I'm assuming because Jodi would not -- none 12 of this has anything to do -- stuff that's in my 13 handwriting has nothing to do with Jodi with what 14 was on this page. She would keep this page. All 15 right. And there would be another one for another 16 day for that page. This here looks like you can 17 tell from the lines this was on a legal pad. 18 It was my notes for myself, all right, as 19 to any number of things, but it's not related to 20 this document. They may have found this document in 21 Jodi's office and this could have been in my 22 briefcase. 23 Q. This document was found together. I don't 24 want to quibble with you about that. I do -- you 25 should look at the last page of the document. On

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1 the last page of the document also is another -- 2 it's a printout. It's not handwritten notes. So I 3 understand not all the pages are handwritten that 4 you're seeing here. I wanted to ask you about the 5 notes and if they were your handwriting? 6 A. I will acknowledge that the notes are in my 7 handwriting -- 8 Q. Okay. 9 A. -- but there's nothing in my handwriting 10 has nothing to do with that original Jodi's document 11 because, in other words -- 12 Q. You don't think they were close in time. 13 Is that what you're saying? 14 A. No. This would -- they were probably not 15 close in time. They may be a couple of dates in 16 time. Obviously, it would -- it would have nothing 17 to do with Jodi, you know. 18 Q. I understand that, I understand that. 19 A. Okay. 20 Q. The handwritten notes you're saying are not 21 -- you don't -- it wouldn't have involved Jodi's 22 process at all -- 23 A. That's correct. 24 Q. -- because it's your notes. I understand 25 that, yes.

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1 MR. KRATENSTEIN: Just so we're all clear, 2 Jodi's notes on the first page and then on the pages 3 thereafter, it's Mr. Madoff's handwritten notes. 4 THE WITNESS: Right. 5 Q. (By Ms. Fein) Do you have a recollection 6 of making any of the notes that are here? 7 A. Yes. It's my handwriting, so -- 8 Q. Do you recall -- do you recall making these 9 notes? Do you recall going through the exercise of 10 making these notes in 2008? 11 A. Yes, yes. 12 Q. What do you recall about it? 13 A. These are notes -- well, that at the end I 14 was considering sending out monies, paying bonuses 15 to people, sending out checks to -- I was planning 16 to send out checks because I knew the firm was -- we 17 were going out of business. And I had written the 18 checks and, as a matter of fact, I put them in my 19 drawer. 20 It was actually, I think, I wrote these 21 notes, you know, prior to me making the decision 22 that the firm was -- well, it was in conjunction was 23 going out of business. I wanted to sort of -- I 24 owed traders money for what was due to them, so on 25 and so forth. So I wrote out checks, put them in my

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1 drawer and called my lawyer because I was planning 2 at that time to turn myself in. And he said don't 3 send the checks out. So I left them in the drawer 4 and then they never did go out. That's what I 5 recall. 6 Q. So do you think you could have looked at 7 the amounts listed on the first page of the document 8 in 588 so that you knew how much money you had for 9 writing the checks? 10 A. Yes. That's certainly possible. 11 Q. So the handwritten notes were made around 12 the same time, you wouldn't say necessarily on the 13 same day, but around the same time as December 8th, 14 2008? 15 A. Right, yes, uh-huh. Or sometime 16 afterwards, you know. 17 Q. After you would have seen the report -- 18 A. Yes. 19 Q. -- from Jodi? 20 A. Well, no. It could have been made prior. 21 I just don't know. I mean, my head was sort of up 22 my wherever at that time, but I don't -- obviously, 23 I can see from the notes here that it was what I had 24 planned to do was paying out traders and so on; but 25 then there were things on here, on notes that would

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1 have nothing to do that would have had to be done. 2 It was things to myself trying to figure out where I 3 stood afterwards. 4 Q. Okay. 5 A. If you look at -- see, it says I can't make 6 -- I wrote can't make traders 100 percent whole. I 7 was referring to the fact that I didn't have enough 8 money to cover, you know, what I owed the traders in 9 their compensation. 10 Q. Is that employees or traders? 11 A. Employees, and employees also had accounts 12 with me. So I was -- you know, I couldn't -- 13 couldn't cover everything that was in their account. 14 Q. And you're referring to page Bates ending 15 in 599; right? 16 A. Yes, correct. 17 Q. Okay. On page ending 597, one page before 18 the one you're looking at, I think, can you find the 19 one ending in 597 for me? 20 A. Which one? 21 Q. 597. I think it's the other way. 22 A. Yes. 23 Q. The first line looks like 1960, dash, 24 present. And then I can't -- I'm not sure. Average 25 or --

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1 A. Looks like average, 39 million. 2 Q. Okay. Do you know what that would be 3 referring to? 4 A. I think it refers to what the profit of the 5 firm was over a certain period of time from 1960 to 6 present. 7 Q. Okay. And do you see down -- there are 8 calculations on the right side. One says equal 39 9 mill per year and then to the left of that, 1909 10 divided by 49 years? 11 A. Yeah. I'm trying to figure out what 12 they're referring to. 13 Q. But you agree that the calculation, it does 14 say 49 years; right? 15 A. Doesn't it say 39 years? It says 1960 to 16 present average equals 39 million. 17 Q. Uh-huh. And then look at underneath where 18 you have 691, 1218 over 1909. Do you see that? 19 A. Right. 20 Q. Divided, and that looks like 49 equals 39 21 mill per year. Do you see that? 22 A. Right. 23 Q. Okay. And below that it looks like it says 24 without draw. Do you see that, without draw? 25 A. I think it refers to the profit of the

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1 firm. 2 Q. Okay. But does draw refer to amounts taken 3 out by your employees? 4 A. Draw was money that -- no. It was either I 5 had a draw account, which is typical that I drew 6 money out. I didn't have a -- it was like a salary 7 that I would draw out of the firm. And I'm not real 8 sure what this is referring to, my draw or the 9 traders' draw or a combination thereof. 10 Q. Okay. Do you see where the line under 11 draw, it looks like it says draw five mill per -- do 12 you see that? It looks like the last line next to 13 the calculation ending in 2154? 14 A. Right. 15 Q. Was the 5 million draw something that you 16 received? 17 A. I don't know. It could be. It could have 18 been my draw. I know I didn't draw 5 million a 19 year, so it could have been my draw. It could have 20 been mine plus other people's draw. I'm not sure. 21 Q. Okay. 1962 to December 2008 is about -- is 22 49 years; right? 23 A. Uh-huh, right, yeah. The 1909 divided by 24 49 is -- it looks -- to me it would look like how 25 much the firm, you know, grew over a 49-year period,

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1 39-year period, something like that. 2 Q. Okay. Forty-nine years is about how long 3 your business was going on; right? 4 A. Correct. 5 Q. Okay. And there were references to your 6 firm starting in 1960 in the proffer agreement that 7 we looked at or the proffer statement? 8 A. Yeah. It looked to me like I was trying to 9 calculate how much the firm made or how much they 10 showed on their focus reports. I don't recall. 11 Q. Okay. But the calculations taking place 12 over 49 years; right? 13 A. Right, which was the life of the firm. 14 Q. Uh-huh. So these notes were written in 15 December 2008; right? 16 A. I can't -- I can't be sure. I can't say 17 for certain what period. There's so many different 18 notes and -- 19 Q. Okay. 20 A. -- some of them are related, some of them 21 are not related to each other. 22 Q. Okay. But would this have been part of the 23 same exercise we were talking about, thinking about 24 writing out checks and what you were going to do 25 about the end of the firm?

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1 MS. CHAITMAN: Objection to form. 2 THE WITNESS: Well, I certainly know -- I 3 certainly know that there are notes here that refer 4 to how much employees would do from their trading 5 profits, their draws, things of that sort. 6 MS. FEIN: Uh-huh. 7 THE WITNESS: That -- you know, there were 8 certain things that I was trying to analyze how much 9 the firm had made, how much -- things of that sort. 10 Q. (By Ms. Fein) Okay. So you think the firm 11 -- so you think the firm on average made 39 million 12 a year for the 49 years it was in business? 13 A. Again, I don't know whether that was 14 including money that was taken out in compensation 15 by my -- you know, by me alone, by my family or by 16 the employees. I can't really -- I can't really 17 tell from looking at it just like this. It was -- 18 I'm just analyzing various things. 19 And most of it deals with monies with the 20 checks that I was planning to send out, which I 21 would have determined by looking at how much money 22 people had in their accounts. 23 Q. Okay. And it looks like it refers to what 24 -- so these would have been notes -- let me ask. 25 Were these notes you made to yourself?

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1 A. Notes I was writing to myself, yeah. 2 Q. Yes, okay. Was anyone else present when 3 you were making them that you recall? 4 A. No. 5 Q. Okay. Do you recall where you were when 6 you made them? 7 A. No. It could have been in my office. It 8 could have been when I was home. I don't know. 9 Q. But did you share them with anyone else 10 after you made them? 11 A. No. I would have had to get the 12 information from Annette as to how much money people 13 had in their accounts because I had to get them from 14 because that's not something that I ever had off the 15 top of my head. 16 Q. Okay. Mr. Madoff, did you have any 17 meetings to prepare for this deposition? 18 A. Meetings? 19 Q. Uh-huh. 20 A. No. You mean -- 21 Q. Did you meet with Mr. Goldman to prepare 22 for your deposition today? 23 A. No. Oh, today he came -- I met with him 24 the day before yesterday, but it wasn't necessarily 25 in relation to that. He came down here earlier.

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1 Q. So you've not had any -- you're saying you 2 have not had meetings to prepare for your 3 deposition? 4 A. Peter Goldman came down. We discussed this 5 -- you know, my situation in general, I mean, from 6 how I was feeling. 7 MS. CHAITMAN: You don't have to talk 8 about anything confidential that you -- 9 THE WITNESS: No, no. 10 MR. GOLDMAN: Yeah. We had a meeting. 11 THE WITNESS: Well, you can find out who 12 was here to visit me. That's all. 13 Q. (By Ms. Fein) Okay. Did you meet with Ms. 14 Chaitman or Mr. Kratenstein to prepare for your 15 deposition? 16 A. Mister who? 17 Q. Mr. Kratenstein. 18 A. They were down here yesterday. Not 19 yesterday, the day before yesterday. Is this the 20 second day or the third day? Yesterday. 21 Q. How long did you meet with them? 22 A. An hour or two. 23 Q. What did you guys discuss? 24 MR. KRATENSTEIN: I'm going to object. 25 Hang on. I'm going to object. What we discussed

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1 with Mr. Madoff is our work product because we're 2 allowed to talk to people. So I consider that our 3 work product. So my view is any discussions we had 4 with Mr. Madoff are work product that go to our 5 mental impressions. So I object to that question. 6 I'll leave it to Mr. Goldman as to whether he's 7 going to instruct not to answer. 8 I'll allow you to talk about the -- I 9 don't have an objection to subject matter or asking 10 him of any documents we used to refresh recollection 11 or anything like that, but I do have an objection to 12 discussions, substance of discussions. 13 MS. FEIN: So are you directing him not to 14 answer on the basis of your work product? 15 MR. KRATENSTEIN: It's our work product, 16 our mental impressions and our discussions with him 17 that reveal as mental impressions our work product. 18 And I would ask that an instruction be given that he 19 should not disclose that information. 20 MS. FEIN: Any information related to your 21 work product; right? 22 MR. KRATENSTEIN: Yes, yes. 23 MS. FEIN: Understood. 24 MR. GOLDMAN: Ask the question and then 25 we'll -- if I have an objection, then we'll -- I'll

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1 decide which direction I'll go. 2 Q. (By Ms. Fein) I think I asked how long you 3 met with Ms. Chaitman and Mr. Kratenstein, if you 4 recall. 5 A. I guess it would be probably a couple of 6 hours. 7 Q. Were you shown any documents during the 8 meeting? 9 A. I asked what the meeting was going to be 10 about. 11 MR. GOLDMAN: Bernie, just try and answer 12 the question. She asked you if you saw any 13 documents. So it's either -- 14 THE WITNESS: I guess I saw documents, 15 yes. 16 Q. (By Ms. Fein) Do you -- were they any of 17 the documents that we reviewed today or yesterday? 18 A. To tell you the truth, I don't even know 19 what I saw. I saw documents. I don't know whether 20 they were the same as the ones that you had or not. 21 I don't know. 22 MS. FEIN: Okay. We would ask to see any 23 documents that you showed Mr. Madoff during the 24 course of your meeting with him. 25 Q. (By Ms. Fein) Did you have any -- any

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1 other preparation for your deposition with Ms. 2 Chaitman or Mr. Kratenstein before this week? 3 A. I'd never met Mr. Kratenstein until that 4 original meeting. 5 Q. Okay. Did you discuss the Sages at your 6 meeting? 7 A. Did I discuss the Sages? I discussed what 8 my relationship -- he asked what my relationship was 9 with the Sages and who I met with, so I told him. 10 Q. And were you shown any documents to refresh 11 your recollection about the Sages or any meetings 12 you had with them? 13 A. I was familiar with -- with the Sages. 14 They knew I was familiar with the Sages. I'm not 15 sure I understand what you're asking me. 16 Q. The question was have you looked at any 17 documents? 18 A. Yes. I looked at documents. I saw -- you 19 know, I saw confirmations, you know, and statements 20 of trades, not all, certainly not as much as I've 21 seen today. 22 MS. FEIN: Understood. All right. I 23 think we're all set. Thank you, Mr. Madoff. 24 THE WITNESS: Okay. 25 MS. CHAITMAN: I just have a few questions

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1 and then -- 2 MR. KRATENSTEIN: And I have a couple. 3 FURTHER EXAMINATION 4 BY MS. CHAITMAN: 5 Q. Okay. Mr. Madoff, how were the traders 6 compensated at your firm? 7 A. They got -- they basically got a percentage 8 of their market making profits, proprietary trading 9 profits. 10 Q. What was the percentage? Did it vary per 11 person? 12 A. Typically it was 20 percent of their net 13 trading profits. That was after commissions and 14 expenses related to their trading. 15 Q. The commissions would have been payable to 16 whom? 17 A. To their -- which -- 18 Q. When you say after, typically 20 percent of 19 their net? 20 A. Oh, depends upon where the transaction was 21 executed. If it was -- if the transaction was 22 cleared, there would be -- that would be deducted. 23 If there was interest, it would be charged to their 24 account depending upon whether we had bank loans 25 out, things like that. They were -- if the -- if it

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1 was a transaction that was laid off on the floor of 2 an exchange, there would be commissions -- there 3 would be commissions paid on that so they would -- 4 that would be deducted. Their 20 percent was a net 5 net. 6 Q. So it was 20 percent of the profits they 7 generated. Is that a fair -- 8 A. That's correct. 9 Q. Okay. If you could just take a look? You 10 can look at my copy of Trustee's Exhibit 19. This 11 is -- just take a look at this. It's 19 and -- 12 MS. FEIN: Marked copy. 13 Q. (By Ms. Chaitman) 19 and 18, yeah. Do you 14 recognize the handwriting on Exhibit 18 where it 15 says hold? 16 A. It looks like it's the same as -- like it's 17 Annette or it could be Jodi. You know, I can't 18 really tell from that. 19 Q. Okay. 20 A. Yeah. Looks like two different 21 handwriting. One is printed and one is like script. 22 Q. Right. And one is asking you -- one is 23 asking you about documents in 1979 to '81 and the 24 other is asking you about documents in 1982. Do you 25 see that?

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1 A. Yes. 2 Q. Okay. Do you remember what your desires 3 were with respect to what documents would be 4 shredded and what documents would be held? 5 A. Not really. 6 Q. Were you trying to conceal evidence of a 7 crime? 8 A. Well, let's put it this way. There was no 9 crime prior to '90 -- to the '90s. So that's easy 10 for me to answer. 11 Q. Okay. So what -- do you remember why you 12 would have said to hold certain documents and shred 13 others? 14 A. You know, we had no general policy with 15 retaining -- as I've said numerous times, the 16 retention period for documents on Wall Street is six 17 years. That's an industry requirement. So you're 18 not required to hold documents more than six years 19 and most firms shred immediately after that because 20 they just don't want to store the documents. 21 As far as the -- but as I've said numerous 22 times, we held customer-related documents relating 23 to cost basis for customers, tax basis for customers 24 because that -- we would constantly be asked to -- 25 for information from the clients' accountants, you

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1 know, or a tax lawyer, which could happen at any 2 given time. 3 MS. CHAITMAN: Do you have to stop? 4 THE VIDEOGRAPHER: Yes. I do. 5 MS. CHAITMAN: Okay. 6 THE VIDEOGRAPHER: This marks the end of 7 disc number two in the deposition of Bernard L. 8 Madoff. Going off the record. The time is 13:08. 9 (A recess was taken.) 10 THE VIDEOGRAPHER: Back on the record. 11 This begins disc number three in the deposition of 12 Bernard L. Madoff in Butner, North Carolina on 13 November 9th, 2017. The time is 13:12. 14 Q. (By Ms. Chaitman) So Mr. Madoff, if you 15 look at Exhibit 19 -- 16 A. Yes. 17 Q. Okay. You apparently gave instructions to 18 shred the C&S statements. Do you see that? 19 A. Number one, I don't know that I gave that 20 -- I don't believe that I gave anybody instructions 21 as to what to shred, what not to shred. I mean, 22 it's not -- I would have no interaction with these 23 people. So somebody in Annette's office like either 24 Annette or some other employee, some of the other 25 people would tell people what to shred, what not to

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1 shred. My instructions were to shred anything that 2 we did not need to have in the future, so -- 3 Q. Right. Okay. So consistent with that 4 where it says hold at the second half of the first 5 page of Trustee's Exhibit 19, there are several 6 items which are hold and they're all EOM customer 7 ledgers. 8 A. Yes. 9 Q. Is that consistent with the strategy you've 10 described? 11 A. It would -- holding a customer ledger would 12 be because a customer ledger would typically have 13 all the pricing information, the information we 14 would need to supply to their accountants. 15 Q. Okay. 16 A. So there was no reason to hold. 17 Q. Okay. 18 A. The other things here are -- involve 19 brokerage firms that we bought and sold stock to. 20 So there's no reason for that because once the trade 21 settles, there's no reason to have anything related 22 to the counterparties. 23 Q. Okay. Similarly, if you look at Trustee's 24 Exhibit 18, are the documents that you -- that have 25 the X next to them, which the handwriting which is

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1 unidentified says shred the Xs only, were those 2 specific to customers or were they general? 3 A. They would need -- we wouldn't have any 4 reason to have them because once the trade settles, 5 it settles. So there's no reason to hold anything. 6 Q. Okay, okay. Now -- 7 MR. KRATENSTEIN: Go ahead. 8 Q. (By Ms. Chaitman) Now, Amanda asked you 9 several questions about the T-bills that you held? 10 A. Right. 11 Q. And you had previously testified that you 12 maintained a portfolio of about $6 billion of 13 T-bills? 14 A. Correct. 15 Q. And did you buy those with money invested 16 through the investment advisory business? 17 A. Correct. 18 Q. So it was -- those T-bills were purchased 19 with house 17 customer money? 20 A. Yes. 21 Q. Okay. And you've previously described how 22 those were maintained at -- 23 A. Morgan Stanley, Fidelity. 24 Q. -- Bear Stearns, Morgan Stanley, Fidelity, 25 Lehman and JPMorgan Chase --

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1 A. Correct. 2 Q. -- right? Okay. And was it your intention 3 to keep that money for the benefit of the investment 4 advisory customers? 5 A. That was the only reason. It was money 6 that, you know, we would have needed to settle with 7 clients if they asked us for money from their 8 account. 9 Q. Okay. And, in fact, do you recall 10 testifying that you kept those T-bills to maturity? 11 A. I don't remember, you know. They were 12 basically short-term instruments, so we would 13 normally keep them until we needed the money to pay 14 out or whether they expired. 15 Q. Okay, okay. Now, so is it fair to say that 16 if an investment advisory customer wanted to close 17 out his or her account and you had to come up with 18 $5 million in cash, that if you didn't have 19 $5 million sitting in a bank account, you would have 20 liquidated one of the T-bills to pay it? 21 MS. FEIN: Objection. 22 Q. (By Ms. Chaitman) Pardon? 23 A. Yes. 24 MS. CHAITMAN: Okay. What's your 25 objection?

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1 MS. FEIN: That was -- it was testifying. 2 It was your testimony, not Mr. Madoff's. 3 Q. (By Ms. Chaitman) Mr. Madoff, would you be 4 good enough to cure Amanda's objection and could you 5 say that in your own words? I don't want to put 6 words in your mouth. 7 A. My plan was that if I needed money to 8 settle a customer's account, I would typically 9 either take the money out of the 703 bank account, 10 which is typically where we kept all clients' 11 monies, or if there wasn't immediate cash available, 12 which there was most of the time, I would then 13 liquidate T-bills. 14 Q. Okay. And, again, those T-bills were 15 purchased with money -- 16 A. It was always purchased with money from the 17 703 account. 18 Q. Okay. And that was the investment advisory 19 customers' money? 20 A. Correct. 21 Q. Now, you were talking about the ledgers. 22 Amanda was showing you some ledgers and I believe 23 you testified that there was subsidiary ledgers for 24 each institution that you did business with? 25 A. There were -- there were either ledgers or

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1 documents. You know, there were statements. So 2 that's what -- I'm not -- I don't recall what -- and 3 it changed all the time, you know, how -- what the 4 practice was of firms sending out statements 5 because, again, it depended upon what stage the 6 clearing cycles were in, in other words, whether -- 7 how the DTC worked, how NSCC worked and whether we 8 had automated interfaces with firms. 9 We had 500 interfaces with -- not 500. We 10 had over 100 interfaces with 500 different brokerage 11 firms. Everything was done, you know, on computer. 12 So there was no -- there was no exchanging of 13 confirmations. There was no cash in settlement, 14 things of that sort. 15 And the firm themselves, the operations 16 department had their own policies of how they -- 17 what records they have, which I, quite frankly, am 18 not even familiar with. I have no idea with some of 19 these C&S, cash and securities settlements. I don't 20 know what they relate to. 21 Q. Okay. But with the 10 or 11 banks that 22 you've named that you had custodial relationships 23 with, is it fair to say that you would have had 24 records showing what securities were held at each 25 institution?

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1 A. As a general rule, yes, but I don't know. 2 Again, it depends upon the time frame involved 3 because all of that changed over the years depending 4 upon what the various interfaces of automation was 5 available to firms. 6 Q. Right, right. So if you could do it 7 through the internet, you wouldn't need to have the 8 paper copies; is that right? 9 A. Correct. 10 Q. Okay. I understand that. 11 A. You know, I want to go on the record of 12 stating, by the way, relating to that, when this 13 thing -- when I first got arrested I requested, you 14 know, all the records that were available to the 15 firm. I requested it to my attorneys, who then 16 requested the Trustee send me all the documents that 17 they had. 18 And my purpose was that I was -- if I 19 wanted -- I would need to go to trial to demonstrate 20 when the crime started and what was involved and 21 what was -- how much was made and lost. And the 22 only thing that they -- and they never produced 23 anything. I shouldn't say never. All they produced 24 was a box exactly this size that was delivered up to 25 me while I was in -- you know, in jail. And I

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1 complained. 2 I said how am I going to -- how am I going 3 to piece everything together? How am I going to 4 demonstrate what really -- what really occurred 5 financially and so on? I said, well, that's all 6 that they were able to produce to me. 7 Q. Ike Sorkin? 8 A. Ike Sorkin. And they produced records that 9 went back no longer than 1998. And that was even -- 10 you know, they said we don't have any bank records. 11 We don't have this and that. They complained. They 12 complained to the judge, I guess, prior to my 13 sentencing. It was one of my court appearances. 14 And Chin insisted, got agitated and insisted to the 15 prosecutor, said instruct -- you know, give them the 16 records. 17 And they said, well, we can't find any. 18 The records were very sloppy. You know, you would 19 have the impression that we didn't have any records 20 and that the records were scraps of paper. And this 21 -- you know, so when I was sentenced, you know, I 22 couldn't -- as a matter of fact, I was asked do you 23 want to appeal when I had this 150-year sentence. 24 I said how am I going to appeal? I said I 25 don't have any records. I said where in the hell

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1 are the records? And I said I've got warehouses 2 full of records. I said, you know, how can they not 3 produce the records? He said Bernie, what do you 4 want me to tell you? So you can imagine my anger 5 when I was notified by you that there were 32 6 million pages of goddamn documents. I'm looking at 7 these documents now and all of a sudden miraculously 8 these documents appear. 9 Now, you can't possibly tell me that you 10 didn't know, not you individually, that the Trustee, 11 you know, did not know that these documents existed 12 because I have -- I was paying rent on something 13 like eight warehouses to say nothing of the whole 14 basement of the Lipstick Building where I knew there 15 were records, you know. 16 And I'm not talking about necessarily, you 17 know, what I'm seeing here. So how does that 18 happen? I mean, you know, I don't understand it. 19 MS. CHAITMAN: You know what, Bernie? I 20 asked the same question. Okay. I have no further 21 questions and I'm going to turn to Andrew. 22 MR. KRATENSTEIN: I will be, I hope, 23 brief. 24 FURTHER EXAMINATION 25 BY MR. KRATENSTEIN:

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1 Q. So Ms. Fein showed you a document, Mr. 2 Madoff, that she marked as Exhibit Number 11, which 3 was a house number five daily stock record activity 4 for July 16th, 1987. And she asked you some 5 questions about a County of Nassau, it's third from 6 the bottom, a County of Nassau bond. Is that a 7 municipal bond, the County of Nassau bond? 8 A. Yes. 9 Q. Okay. And did your firm do -- trade in 10 municipal bonds? 11 A. No. 12 Q. Did you have municipal bonds in your 13 custody, your firm's custody? 14 A. Yes. 15 Q. Okay. So what was your -- what did your 16 firm do with respect to municipal bonds? Can you 17 describe? 18 A. The clients used them as either margin or 19 with instructions to sell them to go into -- rather 20 than sending in cash to a strategy, they sent them 21 bonds to either be liquidated or to use as 22 collateral for a margin account. 23 Q. I'm going to show you Exhibit 38, which we 24 showed you yesterday. And just take a look at that 25 page. I've opened it to page MF 00964437, which you

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1 might recall yesterday towards the bottom of that 2 page I showed you the RCA Corp convertible 3 debenture. And there are a whole bunch of positions 4 around that. Do you see that? 5 A. Where am I looking? Here? 6 Q. So bottom, if you look -- we talked about 7 this yesterday, but there are -- fourth up from the 8 bottom do you see the RCA Corp bond? 9 A. Yes. 10 Q. And then all around that do you see 11 municipal bonds like for Puerto Rico, Pennsylvania, 12 Oregon? 13 A. Right, uh-huh. 14 Q. Do you see that? 15 A. Yes. 16 Q. And they all have different maturities, 17 different yield dates -- 18 A. Right. 19 Q. -- right? So what are these? 20 A. They're municipal bonds. 21 Q. And are these the types of bonds you were 22 just describing? 23 A. Yes. 24 Q. And are these all real securities that were 25 held at the National Bank of North America for your

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1 firm? 2 A. Yes. 3 MR. KRATENSTEIN: Thank you very much. 4 That's all I have. 5 MS. CHAITMAN: Okay. I'd just like to put 6 on the record the discussion that I had with Amanda 7 that we will be continuing your deposition so long 8 as your health continues once we get further 9 documents from the Trustee. We're negotiating to 10 get additional documents that we now know the 11 Trustee has. 12 MS. FEIN: We just want to put on the 13 record that we would reserve a right to 14 cross-examine on any documents that Ms. Chaitman 15 asks about. 16 MS. CHAITMAN: Of course, of course. 17 Okay. Thank you so much. Andrew and I are going to 18 run. 19 THE VIDEOGRAPHER: We are off the record 20 in the November 9th, 2017 deposition of Bernard L. 21 Madoff, Volume IV. The number of discs used was 22 three. The time is 13:26. 23 (Reading and signing of the deposition by 24 the witness was reserved and the deposition was 25 concluded at 1:26 p.m.)

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1 C E R T I F I C A T E 2 NORTH CAROLINA: 3 GUILFORD COUNTY: 4 I hereby certify that the foregoing 5 deposition was reported, as stated in the caption, 6 and the questions and answers thereto were reduced 7 to the written page under my direction; that the 8 foregoing pages 493 through 682 represent a true and 9 correct transcript of the evidence given. I further 10 certify that I am not in any way financially 11 interested in the result of said case. 12 I have no written contract to provide 13 reporting services with any party to the case, any 14 counsel in the case, or any reporter or reporting 15 agency from whom a referral might have been made to 16 cover this deposition. I will charge my usual and 17 customary rates to all parties in the case. 18 This, the 21st day of November, 2017. 19 20 <%Signature%> 21 22 K. Denise Neal, RPR Registered Professional Reporter 23 Notary Public No. 200517500101 24 25

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1 E R R A T A S H E E T 2 3 Pursuant to Rule 30(7)(e) of the Federal Rules 4 of Civil Procedure, any changes in form or substance 5 which you desire to make to your deposition 6 testimony shall be entered upon the deposition with 7 a statement of the reasons given for making them. 8 9 To assist you in making any such corrections, 10 please use the form below. If supplemental or 11 additional pages are necessary, please furnish same 12 and attach them to this errata sheet. 13 * * * * * 14 I, the undersigned, BERNARD L. MADOFF, do hereby 15 certify that I have read the foregoing deposition 16 and that to the best of my knowledge said deposition 17 is true and accurate (with the exception of the 18 following corrections listed below). 19 20 21 22 23 24 25

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1 Page Line should read: 2 Reason for change: 3 4 Page Line should read: 5 Reason for change: 6 7 Page Line should read: 8 Reason for change: 9 10 Page Line should read: 11 Reason for change: 12 13 Page Line should read: 14 Reason for change: 15 16 Page Line should read: 17 Reason for change: 18 19 Page Line should read: 20 Reason for change: 21 Signature: 22 Sworn to and Subscribed before me 23 , Notary Public. 24 This day of , 2017. 25 My Commission Expires:

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& 11-30 604:8 17 498:3,7,9,12,12 575:4,5,23 577:9 & 495:14 499:25 11-30-63 603:21 520:11 558:19 577:14 679:4 503:2 11-30-83 604:7,9 559:17,20 569:19 1990 512:7 604:14 571:14 578:9,10 199066 560:23 0 11-7-08 553:13 578:24,24,25 1992 517:6 522:25 00964437 679:25 11:07 582:6 603:6,10,17,25 523:6 614:20 01 566:15,16 11th 506:3,22 604:1,4,19 606:17 1994 570:12 0158 506:12,22 507:24 606:18 607:6,12 1998 677:9 03 622:6 12 496:14 498:3 672:19 1:26 681:25 064 572:7 577:23 558:4,8 634:23 18 498:14 611:9,11 1s0004-3 623:8 07 551:20,23 12-11-86 497:19 611:14,24 612:16 1s004-7 622:8 553:18 558:13 12-12-03 622:16 668:13,14 671:24 2 08 558:24 12-16-08 498:19 18th 606:25 2 504:3,3 08-01789 494:7 12-16-2008 626:15 608:15 2,307 538:3,5 0801789 499:18 12-31-07 497:23 19 498:16 611:10 539:12,12,13,16 1 498:4 558:20 611:11 612:5 539:18 12-5-86 497:15 628:2 668:10,11 1,500,000 504:5 20 498:18 626:7,11 502:21 668:13 670:15 1-3-2008 565:2 667:12,18 668:4,6 12-8-08 498:20 671:5 10 497:22 524:16 2000s 563:21 645:11 647:24 1909 658:9,18 524:20 527:6 617:17 1218 658:18 659:23 675:21 2001 568:14 12th 624:3 1960 628:9 629:3 100 507:25 515:9 2003 624:3,5,8 13 498:5 566:9,10 657:23 658:5,15 550:20 551:9 200517500101 13,388 606:2,10,22 660:6 556:7 657:6 682:23 13:08 670:8 1962 631:9,19 675:10 2007 525:1 527:8 13:12 670:13 659:21 10022 495:7 527:13,14,18,20 13:26 681:22 1970s 635:17 10111-0100 496:8 527:22 528:3 13th 622:2,25 1979 668:23 10173-1922 558:16 559:2 14 498:7 569:13,16 1980s 508:20 495:16 561:5,6,22 562:3,3 15 498:9 571:4 509:13,23 590:5 10573 496:15 565:16 577:21,22 578:7 634:20 635:17,23 10:32 582:1 2008 516:20 517:7 150 677:23 1982 668:24 11 497:24 535:12 559:2 648:16 16 498:11 600:9,11 1983 500:18 535:14,16 577:7 655:10 656:14 600:13 606:9,10 501:13 502:12 578:3 587:23 659:21 660:15 606:19 607:5 600:18 607:1 675:21 679:2 2017 494:22 499:7 610:4 1986 506:3,22 11-10-83 498:13 582:6,21 584:11 16th 535:23 536:9 507:24 530:22 604:5 670:13 681:20 540:3 545:19 1987 535:23 536:9 11-11-83 498:11 682:18 684:24 577:9,14 638:18 539:6 540:3 600:18 21 498:20 644:25 679:4 545:19 553:19 11-18-83 600:20 645:2,4 606:6 554:2 562:3 574:2

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212 495:17 496:9 393 611:14,16 591 649:25 650:1 78,544,284.62 2154 659:13 396 612:7 593 650:3 597:16 21st 682:18 4 595 650:9 785 578:17 26 582:20 584:11 597 650:11 657:17 40 632:13,18 8 28th 624:5 657:19,21 634:19,21 8-28-03 622:19 29,000 578:14 599 650:14 657:15 400 559:20,23 8-31-0 566:14 290,000 577:24 560:8 6 8-31-01 498:6 29000030 560:18 45 496:7 6 526:5,9 672:12 568:4,7 570:19 46 501:17 600 498:11 80s 510:4 530:11 2900030 573:13 465 495:6 6000020 608:4 530:20 590:25 297,903 646:24 49 658:10,14,20 603 498:12 81 668:23 299000010 608:4 659:22,24,25 611 498:14,16 83 603:24 3 660:12 661:12 626 498:18 85 618:16 3 605:14 493 682:8 63 603:21 869 597:21,22 3,000 578:19 498 564:23 64 562:12 599:8 3,157 538:15 499 497:3 644 498:20 87 527:16 528:6 3,357 539:22,25 5 646 506:16 551:20,21,21 540:5 577:10 667 497:7 553:20 556:19,22 5 497:24 659:15,18 3-31-94 498:8 678 497:8 557:15 575:9,12 673:18,19 569:20 682 682:8 89 497:14 502:20 50 518:6 30 632:13,17 69 596:4 620:20 8:43 494:22 499:8 500 504:7 675:9,9 634:19,21 683:3 691 658:18 8th 648:16 656:13 675:10 30,000 631:23,24 502 497:14 7 9 3000 494:20 504 497:16 7 683:3 9,000 622:3 499:10 505 497:18 7-16-87 497:25 90 497:16 504:22 303-4568 495:8 520 497:4 498:10 571:15 504:25 638:14 30th 608:16,20 524 497:22 572:18,19 641:11 669:9 31 500:18 502:12 535 497:24 70 621:22,23 908 495:8 31st 524:25 525:8 547-5695 495:17 622:22 623:16 90s 512:8 563:22 558:16 558 498:3 703 647:4 648:21 669:9 32 678:5 56 527:9,10,21,25 674:9,17 91 497:18 505:14 33 584:23 566 498:5 70s 530:11 635:22 505:17 330,000 578:22 569 498:7 72 621:22 622:11 914 496:16 332 578:17 571 498:9 623:7 624:2 92 564:7 579:22 340 495:15 579 497:5 75 494:20 499:10 638:8 38 500:18 679:23 582 497:6 595:10 935-6857 496:16 39 502:12 594:7,11 588 656:8 75,892,366.08 950 549:20,24 594:15 595:4 589 649:10 594:22 550:1 658:1,8,15,16,20 589-4621 496:9 750 604:23 605:10 954 549:21 550:10 660:1 661:11 605:11 550:11,18

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958 552:1 585:10 587:10 act 536:17 agent 509:3 534:8 959 555:10 590:14 595:8,12 acted 529:10 592:2,12,22 960 525:5 596:17 597:3,10 acting 590:13 609:24 611:4,6 99 509:13 598:13 599:24 601:5 aggregate 527:25 9993115 557:24 600:3 601:17,20 action 581:21,21 562:20 9th 494:21 499:7 602:15,16,16 643:17 647:12 aggregated 527:9 582:6 670:13 603:4,5 607:23,24 activities 508:1,5 agitated 677:14 681:20 608:3 609:12 activity 497:25 ago 515:3 a 617:22,22,23 503:1 536:7,17 agree 499:5 618:7 622:8 623:7 538:8 542:17 520:11,19 521:8 a.m. 494:22 623:10,13,24 543:23,24 544:4 524:23 538:9 abbreviated 568:3 635:11 647:4,4,6 544:25 545:20 539:15 548:15 568:6 648:22 657:13 547:8 548:2,3,6 552:16 557:2 ability 518:11 659:5 667:24 551:4 561:7 595:8 560:17 569:8 534:4 567:13 673:8,17,19 674:8 597:15 600:2 600:23 606:9 able 510:5 512:14 674:9,17 679:22 614:15 679:3 623:18 624:23 518:12 525:18,19 accountant 613:8 actual 503:3 628:4,11,25 641:2 541:12,13 546:12 613:17,20,22,23 505:11 511:24 650:8,11,13 546:17 554:25 614:9,9 512:7 573:25 658:13 590:20 632:4 accountants 614:5 574:10 598:12 agreement 523:20 677:6 618:8 669:25 636:16 637:3,22 592:13 625:12,19 absurdity 634:25 671:14 adding 598:18,19 634:16,25 660:6 abuse 642:6 accounts 541:25 addition 555:23 agrees 628:22 account 502:4 554:9,12,14,18 additional 681:10 ags 571:18 508:24,25 509:5 559:13 583:10,13 683:11 ahead 549:19 510:3 518:3,23 583:19,21 584:7 adjust 615:1 551:25 572:6,7 519:8 523:12,13 585:4 586:15 619:23 592:23 618:5,19 526:19 534:9 590:16 599:3 adjusted 646:17 650:3 672:7 537:10,19 540:23 602:14 608:11 adjusting 615:14 airlines 542:9 540:23,24,25 613:7 614:12,16 616:4 akratenstein 541:13,14,15,16 614:20,22,22,24 admitted 642:11 495:18 541:17,19,22 618:24 621:2 642:11,20 alert 574:19 542:3 543:13,15 623:21 624:19 adt 570:16 alive 618:7 545:2,6,7,10,15 625:3 657:11 advisory 520:12 allied 545:6 546:13 547:3,12 661:22 662:13 672:16 673:4,16 allow 664:8 547:15,22 548:21 accurate 502:6,15 674:18 allowed 518:2 554:7,17,22 564:8 629:1 afein 496:10 664:2 557:23 560:17,18 683:17 affect 522:11 alter 522:12 568:23 570:3,8,19 acknowledge ag 568:17 aluminum 542:24 573:7,13 578:13 654:6 agency 601:23 amanda 496:4 578:24 580:7 682:15 500:4 566:20 583:24 584:4 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-4 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit D Pg 196 of 231 CONFIDENTIAL [amanda - available] Page 4

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categories 508:4 562:5,9,12,17,24 chase 583:2 530:23,25 531:5 category 647:22 566:8,19 567:5,12 588:11,12,13 531:17,19,20,23 certain 503:13 567:19,24 569:15 672:25 531:25 532:7 512:6 514:13,20 569:18 571:5,8 checks 646:18,19 533:19 534:8,11 516:5 530:6 572:16,19 577:17 655:15,16,18,25 534:12 539:3 532:13 533:2,3 577:21 578:2,7,10 656:3,9 660:24 548:25 560:15,21 541:6 548:13 579:8,12 585:3 661:20 560:22 562:25 588:25 593:11,13 586:12 587:7 chemical 583:2 563:16,18,24 593:13 615:12 595:1,5 597:19,22 chicago 533:19,21 564:9 565:5,16 629:15 642:17 603:13,21 605:10 chin 677:14 569:2 570:15 658:5 660:17 605:12 608:22,23 choose 609:14 572:1,25 573:9 661:8 669:12 618:10 626:8,13 chrysler 568:17 574:10 576:9,10 certainly 524:9 627:1,18,22 civil 683:4 576:13,14,18 563:22 567:8 633:14 641:10 claimed 640:6 577:4,15 578:13 609:1 617:18 648:8 661:1 663:7 claims 636:5 580:13,16 582:11 634:13,19 635:21 663:14 665:3 clarification 585:25 588:21,24 641:4 652:25 666:2,25 667:4 520:23 589:2 599:3 600:1 656:10 661:2,3 668:13 670:3,5,14 clarified 524:15 608:11 609:10,24 666:20 672:8 673:22,24 528:7 610:8,19 611:4 certify 682:4,10 674:3 678:19 clarify 507:2 636:17 675:6 683:15 681:5,14,16 512:9 523:9 567:9 clerk 548:14 chairman 534:10 chaitmanllp.com class 643:17 client 508:7 513:1 596:19 495:9 647:12 554:21 581:9 chaitman 495:4,5 change 530:3,5 clear 515:7 528:20 592:19 594:17 497:3,7 499:22,22 551:23 595:10 532:9,9 533:2 599:19 602:16 500:15 501:2 616:23 639:8 576:15 578:11 620:12 502:24 504:12,24 684:2,5,8,11,14,17 588:25 593:11,15 client's 526:19 505:16 507:1,4,9 684:20 604:3 634:15 clients 580:24,24 508:15 509:16 changed 515:3 639:6 655:1 581:3,4 584:5 512:1,4 513:4 617:21,24 634:17 cleared 529:18 586:3 628:10 514:2 515:6,17,20 675:3 676:3 531:8 534:15 629:5 631:10,22 516:8 517:2,5 changes 683:4 549:5,6 591:7 632:5,9,9,16 519:1,15 520:2 changing 550:7 593:9 599:15,24 634:21 646:19 524:21 525:22 characterization 607:21 610:23 669:25 673:7 526:12,16 528:22 630:12 636:16 667:22 674:10 679:18 529:17,22 530:22 characterizations clearer 561:21 close 654:12,15 531:13 532:1,3 629:15,24 clearing 503:17,21 673:16 536:12,15 544:9 charge 682:16 504:10,14 505:20 closed 619:25 544:20 549:24 charged 667:23 505:22 528:11,16 closer 543:7 550:10 558:10 charles 503:2 528:20 529:6,10 closing 598:11 561:10,15,20,25 643:24 529:19 530:15,19

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maker 513:16,23 margaret 543:10 602:5,22,24 610:1 595:9,21 598:18 514:4,8 524:14 margin 517:17,20 610:16 614:25 599:11 601:15 541:22 547:20,21 517:23,25 518:4 615:3,15 620:5 608:19 609:22 554:5 591:9 592:5 518:18,22 519:2 632:5 639:22 610:10,11,15 592:24 593:20 519:13 679:18,22 640:7 641:4 616:5 617:7 618:8 602:22 610:1,17 marine 583:2 643:20 646:8 638:9 639:20 615:15 639:22 mark 502:20 667:8 640:2 641:16 640:8 540:15 543:4 marking 520:18 643:10 656:21 maker's 545:7 565:21 571:3 600:11 662:20 663:5 makers 503:22 598:16 603:8 marks 630:13 670:21 678:18 541:3,7 542:2 626:4 670:6 meaning 514:5 543:11 marked 500:17 martin 495:12 615:4 making 507:7 504:22,25 505:14 540:15 543:1 meaningless 509:9 516:3 505:17 524:16,20 544:13 641:10 520:15 523:7,13 535:12 558:4,8 mass 550:15 means 507:16 523:23 524:6 566:10,13 569:13 match 565:25 544:7,24 555:16 532:6 540:10,12 600:9,13 603:6,9 574:18 607:4,7 593:17 601:8 540:16,23,24 606:8 611:12 624:10,16,16 meant 555:20 541:2,15 547:8 626:5,11 627:24 math 598:19 medco 553:10 548:1,6 552:9,11 644:25 645:3 matter 507:9 media 513:12 555:5 560:4 668:12 679:2 513:10 523:18 meet 662:21 602:24 614:25 market 503:22 524:3 639:16 663:13,21 615:4 629:7 630:7 507:7 509:9,14,19 655:18 664:9 meeting 498:18 630:25 631:8,25 509:25 513:7,16 677:22 616:16,22,25,25 632:5,6,10,14 513:23 514:4,5,8 maturities 680:16 617:13 618:2 633:13 634:2,21 516:2 517:16 maturity 673:10 625:5,6,9,13,16,20 635:13,19 637:5 520:15,18 523:7 mcdermott 495:14 625:22,24 626:19 641:4 642:4 646:8 523:13,23 524:6 499:25 629:8 630:8 631:8 652:22 655:6,8,10 524:14 532:6 mci 552:3,17 634:16 635:14,20 655:21 662:3 540:10,12,12,16 meadowbrook 636:19 637:10 667:8 683:7,9 540:23,24 541:2,3 582:24 588:4,10 638:23 639:2,10 malcolm 495:12 541:7,15,15,22 mean 501:12 647:16 663:10 manhattan 583:2 542:1 543:11 503:11 507:13 665:8,9,24 666:4,6 588:12,12,13 545:7 547:7,20,21 510:16 516:13 meetings 616:18 manner 567:6 548:1,5 552:9,11 527:21 544:6 616:20 617:5,17 manufacturers 553:21,22 554:5 547:1 553:21,22 617:19 625:11 583:1 588:12 555:5 560:3 555:20 561:13 662:17,18 663:2 marc 640:4 565:13 590:8 563:7,20 564:2 666:11 march 607:5 591:9,18 592:5,23 574:9 575:4,6 member 506:12 618:24 593:19 597:5,9 587:22 588:20 506:13,16 598:5,6,15,16 589:12 590:19

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members 616:16 misinterpreted mother 617:7 608:7 609:4 610:7 memorialization 640:23 motors 504:1 610:10,11 680:25 629:13 638:18 misrepresenting mountain 510:20 natwest 587:21,24 memory 638:15 562:10 mouth 674:6 588:1,5,7,11,15 mental 664:5,16 missing 574:20 move 554:13 ncc 590:3 664:17 misstating 526:12 611:8 neal 494:18 500:9 mentioned 625:5 mister 663:16 moved 614:6,8,10 682:22 634:18 638:22 misunderstanding movement 534:2 necessarily 525:17 639:1 544:21 multiple 542:17 525:19 546:15 merged 506:1 money 517:11,11 542:19 544:11 549:12 575:3 588:3,11,15 534:9 553:21 municipal 679:7 586:22 599:2 merrill 529:6,14 598:12 620:15 679:10,12,16 616:5 617:10 met 582:13 662:23 641:25 643:19,21 680:11,20 656:12 662:24 665:3 666:3,9 647:9 655:24 mwe.com 495:18 678:16 mf 679:25 656:8 657:8 659:4 n necessary 683:11 microfilm 510:10 659:6 661:14,21 need 517:10 520:2 naked 512:25 510:18,25 567:2 662:12 672:15,19 529:5 531:22 513:18 516:9 567:16 612:9 673:3,5,7,13 674:7 576:16 671:2,14 523:16 microfilmed 674:9,15,16,19 672:3 676:7,19 name 499:5,18 510:14 511:7,8,11 monies 595:14 needed 573:21 500:19 511:20 microphones 606:24 607:7 673:6,13 674:7 537:10,23 545:17 499:2 646:22,22 648:10 negotiating 681:9 547:13,13,17,18 microsoft 557:17 655:14 661:19 nerve 643:8 570:3 575:1 middle 537:12 674:11 nervous 647:18 645:17 550:16 552:3 month 501:9,15 net 503:22 504:7,9 named 511:19 571:12 605:2 502:16 604:11,15 516:1 667:12,19 568:13 675:22 midland 583:2 604:20 608:13,21 668:4,5 names 544:12 mill 658:9,21 609:1 netted 503:18 547:11 557:22 659:11 monthly 501:7 netting 557:14 559:10 560:14 million 504:3,3 580:25 581:4 580:2,14 568:20 570:5 515:8,12 595:10 635:11 never 516:9 517:6 nassau 555:11 658:1,16 659:15 morgan 526:23 525:24 635:13,22 679:5,6,7 659:18 661:11 548:24 575:1 636:8 637:16 nat 588:17 673:18,19 678:6 588:13 647:6 638:11 641:25 national 500:19,25 mind 516:15 672:23,24 642:1 648:11 501:2,5,8 502:13 647:17 morning 500:16 656:4 666:3 502:17 505:20,21 mine 659:20 520:6,7 626:2 676:22,23 530:18,22,25 minute 618:17 morphed 628:13 new 494:1 495:7,7 531:5 582:24 632:15 631:7,12 495:16,16 496:8,8 588:4,10,14 miraculously mortgage 518:15 496:15 499:17 599:11,13,18,20 678:7 517:10 532:15 607:17,20,25 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-4 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit D Pg 214 of 231 CONFIDENTIAL [new - okay] Page 22

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Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-4 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit D Pg 223 of 231 CONFIDENTIAL [shows - statements] Page 31

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untrue 642:5 videotaped 494:16 655:23 673:16 609:5 610:7,10,11 unusual 620:16 view 517:20 664:3 676:19 whispering 499:3 usa 609:5 violation 514:9,11 wants 518:1,2 who've 644:1 use 518:16 520:16 virtually 631:10 593:21,21 whoops 571:10 520:17,20,25 631:22 637:24 warehouses 678:1 willing 514:6,6 529:13 531:20,22 638:4 678:13 564:6 593:1,20 532:15 533:19 visit 617:9,11 warrants 553:13 wiped 631:20 560:21 563:16 663:12 waste 627:19 wired 647:9 609:23 679:21 voice 644:20 water 519:23,25 wiring 647:7,20 683:10 volume 494:17 644:20 withdrawal uses 529:9 509:23 681:21 waterhouse 614:6 516:21 usual 618:25 vs 494:7 614:7 withdrawals 682:16 w way 524:19 529:11 648:2,14 usually 583:23 587:8,8 588:11 witness 497:2 wait 632:15 590:22 615:10 590:1 591:22 499:19 500:7,10 wall 642:16 592:14 598:24 500:25 503:10 v 648:24,25 649:3 611:18 634:9 507:6 512:3 513:3 v 499:14 669:16 639:9 646:18 514:23 515:21 valid 521:20 want 512:16 647:11 657:21 517:4 518:25 value 597:6,9 515:18 518:16 669:8 676:12 519:20,23 520:1 598:15 519:22,25 520:8 682:10 521:22 525:23 vanguard 505:5 534:7,23,25 ways 591:16 526:17 528:23 varied 511:18 535:16 564:15,21 614:23 529:2 531:15 518:4 529:24 566:13 582:16 we've 528:10 532:2 544:10 varies 532:21 591:21 592:25 557:6 558:6 550:13 556:12 variety 543:18 593:1,16 594:11 564:13 563:5 577:24 various 515:9 603:11 606:20 week 626:21 666:2 595:7 596:20 554:21 593:8 611:13 621:20 weeks 653:8 601:10 603:25 621:8 661:18 627:1 628:21 wells 505:5 613:2,4 618:6 676:4 629:19 630:6,9,11 went 503:17 619:19 621:18 vary 667:10 631:3,5 641:13 522:15 525:14,16 622:6 631:14 verbatim 637:11 642:6 647:11,17 525:24,25 580:12 633:17,23 634:9 verify 504:13 649:22 653:24 583:12 587:20 639:4 641:16 511:10 669:20 674:5 609:18 617:21 642:2,25 644:19 veritext 499:6 676:11 677:23 618:21 621:21 644:23 648:9 500:9 678:4 681:12 626:3 631:7,12 652:9,17 655:4 versus 516:1 wanted 507:2 640:20 677:9 661:2,7 663:9,11 videographer 509:22 528:10 west 542:8 665:14 666:24 496:19 499:1 533:25 594:8 westminster 681:24 500:8 581:25 616:22,23 617:2 500:19 607:17,20 witnesses 643:2,22 582:3 670:4,6,10 617:24 620:4 607:25 608:7 681:19 653:9 654:4 Veritext Legal Solutions 212-267-6868 www.veritext.com 516-608-2400 08-01789-smb Doc 18151-4 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit D Pg 229 of 231 CONFIDENTIAL [worded - zero] Page 37

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08-01789-smb Doc 18151-4 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit D Pg 230 of 231

Federal Rules of Civil Procedure

Rule 30

(e) Review By the Witness; Changes.

(1) Review; Statement of Changes. On request by the

deponent or a party before the deposition is

completed, the deponent must be allowed 30 days

after being notified by the officer that the

transcript or recording is available in which:

(A) to review the transcript or recording; and

(B) if there are changes in form or substance, to

sign a statement listing the changes and the

reasons for making them.

(2) Changes Indicated in the Officer's Certificate.

The officer must note in the certificate prescribed

by Rule 30(f)(1) whether a review was requested

and, if so, must attach any changes the deponent

makes during the 30-day period.

DISCLAIMER: THE FOREGOING FEDERAL PROCEDURE RULES

ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY.

THE ABOVE RULES ARE CURRENT AS OF SEPTEMBER 1,

2016. PLEASE REFER TO THE APPLICABLE FEDERAL RULES

OF CIVIL PROCEDURE FOR UP-TO-DATE INFORMATION. 08-01789-smb Doc 18151-4 Filed 11/01/18 Entered 11/01/18 18:04:08 Exhibit D Pg 231 of 231 VERITEXT LEGAL SOLUTIONS COMPANY CERTIFICATE AND DISCLOSURE STATEMENT

Veritext Legal Solutions represents that the foregoing transcript is a true, correct and complete transcript of the colloquies, questions and answers as submitted by the court reporter. Veritext Legal Solutions further represents that the attached exhibits, if any, are true, correct and complete documents as submitted by the court reporter and/or attorneys in relation to this deposition and that the documents were processed in accordance with our litigation support and production standards.

Veritext Legal Solutions is committed to maintaining the confidentiality of client and witness information, in accordance with the regulations promulgated under the Health Insurance Portability and Accountability Act (HIPAA), as amended with respect to protected health information and the Gramm-Leach-Bliley Act, as amended, with respect to Personally Identifiable Information (PII). Physical transcripts and exhibits are managed under strict facility and personnel access controls. Electronic files of documents are stored in encrypted form and are transmitted in an encrypted fashion to authenticated parties who are permitted to access the material. Our data is hosted in a Tier 4 SSAE 16 certified facility.

Veritext Legal Solutions complies with all federal and State regulations with respect to the provision of court reporting services, and maintains its neutrality and independence regardless of relationship or the financial outcome of any litigation. Veritext requires adherence to the foregoing professional and ethical standards from all of its subcontractors in their independent contractor agreements.

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