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8003
1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
2 - - - - - - - - - - - - - - X
3 UNITED STATES OF AMERICA, : CR 96 1016(S-1)
4 v. : U.S. Courthouse
5 Uniondale, New York BRUCE W. GORDON, WHO'S WHO
6 WORLD WIDE REGISTRY, INC., :
STERLING WHO'S WHO, INC.,
7 TARA GARBOSKI, ORAL FRANK OSMAN, LAURA WEITZ, ANNETTE
8 HALEY, SCOTT MIChaveLSON, : STEVE RUBIN, and MARTIN
9 REFFSIN, :
TRANSCRIPT OF TRIAL
10 Defendants. :March 17, 1998
11 - - - - - - - - - - - - - - X 9:30 o'clock a.m.

12

13 BEFORE:

14 HONORABLE ARTHUR D. SPATT, U.S.D.J.

15

16 APPEARANCES:
17 For the Government: ZACHARY W. CARTER United States Attorney

18 One Pierrepont Plaza Brooklyn, New York 11201
19 By: RONALD G. WHITE
CECIL SCOTT
20 Assistant U.S. Attorneys

21 For the Defendants: NORMAN TRABULUS, ESQ.
22 For Bruce W. Gordon
170 Old Country Road, Suite 600
23 Mineola, New York 11501
24 EDWARD P. JENKS, ESQ.
For Who's Who, Sterling
25 332 Willis Avenue
Mineola, New York 11501

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8004

1
GARY SCHOER, ESQ.
2 For Tara Garboski
6800 Jericho Turnpike
3 Syosset, New York 11791

4 ALAN M. NELSON, ESQ.
For Oral Frank Osman
5 3000 Marcus Avenue
Lake Success, New York 11042
6
WINSTON LEE, ESQ.
7 For Laura Weitz
319 Broadway
8 New York, New York 10007

9 MARTIN GEDULDIG, ESQ.
For Annette Haley
10 400 South Oyster Bay Road
Hicksville, New York 11801
11
JAMES C. NEVILLE, ESQ.
12 For Scott Michavelson
225 Broadway
13 New York, New York 10007

14 THOMAS F.X. DUNN,
For Steve Rubin
15 150 Nassau Street
New York, New York 10038
16
JOHN S. WALLENSTEIN, ESQ.
17 For Mart in Reffsin 215 Hilton Avenue
18 Hempstead, New York 11551

19
Court Reporter: Owen M. Wicker, RPR
20 United States District Court
Two Uniondale Avenue
21 Uniondale, New York 11553
(516) 292-6963
22

23 Proceedings recorded by mechanical stenography, transcript
produced by computer-assisted transcription.
24
25 (Case called.)

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8005

1 THE COURT: Where is Mr. Lee? Will somebody get

2 him, please?

3 Mr. Trabulus, you want to see me.

4 MR. TRABULUS: Your Honor, all I want to do is

5 I'm handing up defendant Gordon's request to charge. I've

6 given a copy to all counsel.

7 THE COURT: Hand it up.

8 MR. SCHOER: Judge, I will have a request to

9 charge. I have an original and courtesy copy to the

10 Court.

11 MR. TRABULUS: And does Your Honor want a

12 courtesy copy?

13 THE COURT: Sure.

14 MR. TRABULUS: I'll get one for you.

15 THE COURT: Hand it up.

16 Thank you.

17 Are we ready to proceed?

18 Let's bring in the jury.

19 (Jury enters.)

20 THE COURT: Good morning, members of the jury.

21 Please be seated.

22 Thank you again for your diligence in staying

23 with it. This period of time and having the nice
24 disposition that you appear to have, or is it because the
25 trial is coming to an end. I don't know what it is, but

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8006
Reffsin-direct/Wallenstein

1 you seem to be in good form for which I'm happy to see.

2 You may proceed.

3 MR. WALLENSTEIN: Thank you, Your Honor.

4 M A R T I N R E F F S I N , having been previously

5 sworn by the Clerk of the Court, was examined and

6 testified as follows:

7 DIRECT EXAMINA TION

8 BY MR. WALLENSTEIN:

9 Q Mr. Reffsin, we've heard a significant amount of

10 testimony in this trial with respect to the loans that

11 Bruce Gordon took from Who's Who Worldwide. And you were

12 present when Mr. Rosenblatt testified with respect to the

13 treatment of those loans as loans rather than income?

14 A Yes. Yes, I was.

15 Q Can you explain why you treated them as loans and

16 under what circumstances you would have treated them as

17 income?

18 A Well, obviously Mr. Gordon did not say they were

19 income. Mr. Gordon said they were loans. To the extent

20 that he could prove to me they were loans, they would

21 remain loans. I explained to Mr. Gordon that in order for

22 them to be deemed loans he would have to meet certain

23 requirements such as repayment.
24 Q And did you see evidence of repayment?
25 A Yes. In January of 1993 he repaid $235,000.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8007
Reffsin-direct/Wallenstein

1 Q And would it be a fair statement that it was the

2 intention of Mr. Gordon based on what he told you that the

3 loans would in fact be repaid over time?

4 A Yes. We had several discussions during the course of

5 time in which he guaranteed me that the loans would be

6 repaid.

7 Q Now, you prepared the 433 A collection information

8 statements?

9 A Yes.

10 Q At what point in time?

11 A Around May. That's when they were physically

12 prepared.

13 Q Of what year?

14 A 1993.

15 Q And would it be a fair statement at the time you

16 prepared them you did not have the benefit of what we now

17 have which is almost five years of hindsight?

18 A That's correct.

19 Q So the bankruptcy had not yet occurred?

20 A That's correct.

21 Q And based upon information that you had from

22 Mr. Gordon and other sources, what was your expectation

23 with respect to 1994?
24 A 1994 was the year that Mr. Gordon agreed and I had
25 indicated that he would have to repay all the loans.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8008
Reffsin-direct/Wallenstein

1 Q That was your understanding in 1993?

2 A That's correct.

3 Q And did something occur that prevented that from

4 happening in 1994?

5 A Yes, the bankruptcy.

6 Q And that was in March of 1994?

7 A That's correct.

8 Q And with respect to the tax returns that were filed

9 on Mr. Gordon's behalf, would it be a fair statement you

10 treated the loans as loans and not income on those

11 returns?

12 A Yes, I did.

13 Q And that's for the reasons you've already stated; is

14 that correct?

15 A Yes.

16 Q Did you at any time enter into any agreement with

17 Mr. Gordon with respect to -- withdrawn.

18 Did you at any time have an agreement with

19 Mr. Gordon to in any way impede the Internal Revenue

20 Service?

21 A Absolutely not.

22 Q Was it your intention to file his returns and prepare

23 his financial returns in accord with your interpretation
24 of accountable principles?
25 A Yes, it was.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8009
Reffsin-cross/White

1 Q And in accord with your interpretation of the

2 Internal Revenue Code?

3 A Not the Internal Revenue Code. The needs of the

4 offer and compromise agent.

5 Q Did you prepare the documents and act on Mr. Gordon's

6 behalf in accord with your understanding of IRS procedures

7 and the law?

8 A Yes, I did.

9 MR . WALLENSTEIN: I have no further questions.

10 CROSS-EXAMINATION.

11 BY MR. WHITE:

12 Q Mr. Reffsin, let me see if I understand your

13 testimony. Is it your testimony that if any inaccurate

14 information was provided to the IRS, it wasn't done

15 knowingly by you?

16 A Inaccurate?

17 Q Yes.

18 A There was no inaccurate information prepared provided

19 to the IRS.

20 Q Well, you've heard testimony -- well --

21 THE COURT: Just hold it a minute, Mr. White.

22 You may proceed.

23 BY MR. WHITE:
24 Q Mr. Reffsin, let me show you Government's Exhibit 425
25 in evidence. That's a document that the jury has in their

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8010
Reffsin-cross/White

1 books.

2 Now, that's a letter you sent to Frank Gagliardi

3 of the IRS; is that right?

4 A Yes, it is.

5 Q And that was in response to Mr. Gagliardi's letter

6 where he said he noticed unusual deposits in Mr. Gordon's

7 personal bank account, do you recall that?

8 A Yes, I do.

9 Q One of the things you attached to this letter which

10 is noted in paragraph 1 is a copy of a note that

11 Mr. Gordon signed to Joyce Grossman for $15,000, right?

12 A Yes.

13 Q If you turn the page to 425A, if you take it out of

14 the plastic, 425A is a copy of that note, right?

15 A Yes, it is.

16 Q And you've been present in court and heard testimony

17 that Mr. Gordon's son wasn't even dead on the date that

18 promissory note was executed, right?

19 A This was not presented by me. This was presented by

20 Mr. Gordon.

21 Q Mr. Reffsin, look at 425.

22 Who signed that letter?

23 A I did.
24 Q And it says, it's addressed to Mr. Gagliardi and it
25 says "pursu ant to your request I have attached the

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8011
Reffsin-cross/White

1 following information for your file."

2 Do you see that?

3 A Yes.

4 Q So you got that from Mr. Gordon, right?

5 A Yes.

6 Q And, so, you understand, do you not -- withdrawn.

7 You recall that Mrs. Grossman testified she never

8 made this loan and never even saw this note. Do you

9 remember that testimony?

10 A Yes, I do.

11 Q So I want to make sure I understand your testimony.

12 Mr. Gordon gave you that and if this is inaccurate, you

13 are saying you didn't know?

14 A That's correct.

15 Q So if this is completely bogus, Mr. Gordon lied to

16 you; is that your testimony?

17 A That's correct.

18 Q Look at 425B.

19 Mr. Gordon gave you that too, right?

20 A Yes, he did.

21 Q And if this is bogus then Mr. Gordon lied to you; is

22 that correct?

23 A That's correct.
24 Q Now, you indicated also to the IRS that -- well, you
25 -- let me rephrase my question.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8012
Reffsin-cross/White

1 Is it fair to say that the documents you

2 submitted in connection with the offer and compromise

3 indicated that Mr. Gordon had no ownership interest in

4 Who's Who Worldwide?

5 A Yes.

6 Q And you've heard the Grossmans' testimony at this

7 trial that they did not own 100 percent, they owned merely

8 25 percent. Do you recall that?

9 A Yes, I do.

10 Q So, again, that information is inaccurate, right?

11 A Yes, at this point I know it is inaccurate. Yes.

12 Q And, again, it's your testimony that if that

13 information is inaccurate it is because Mr. Gordon told

14 y ou inaccurate information; is that right?

15 A That's correct.

16 Q Now, you also indicated that you were aware of the

17 condominium at Hummingbird Road; is that correct?

18 A Yes.

19 Q And you were aware, were you not, that Mr. Gordon was

20 living there?

21 A I was aware he used it, yes.

22 Q And you were aware, were you not, that Mr. Gordon

23 claimed that it was for business purposes and not
24 personal, right?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8013
Reffsin-cross/White

1 Q And isn't it correct that you told Inspector

2 Biegelman and Agent Jordan that you thought that that

3 claim was "bullshit"?

4 A No, I didn't say that quite like that.

5 Q You didn't say that?

6 A I said it may be bullshit, but I couldn't make that

7 determination at that time.

8 Q But you thought it might be bullshit?

9 A Yes, he's telling me something. I have to believe

10 what he's telling me at the time he tells it to me.

11 Q But at the time you were talking to them, you didn't

12 believe it. You were thinking it was bullshit, right?

13 MR. WALLENSTEIN: Objection.

14 THE COURT: Overruled.

15 A Well, it's difficult to say because of everything

16 that happened between the time he purchased the

17 condominium and the time we had the discussion. Things

18 changed. And it's possible his position changed in terms

19 of the condominium.

20 Q Tell us what made you think that maybe it was

21 bullshit?

22 MR. WALLENSTEIN: Objection.

23 THE COURT: Overruled.
24 BY MR. WHITE:
25 Q What did you base that on?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8014
Reffsin-cross/White

1 A I didn't say. I said it may have been bullsh it, only

2 time would tell me whether it was or not. The fact of the

3 occurrences that happened in 1993 and the fact that he

4 didn't open up the California office when he said he was

5 going to open up the California office. The fact that he

6 got involved in a legal battle with Reed Elsevier and

7 started to incur all of those expenses and the fact of the

8 bankruptcy, the time-frame was such that it was difficult

9 to know whether he was bullshiting at the time or not

10 bullshiting because how do you bring it into proper

11 perspective?

12 Q Well, you also testified that Mr. Gordon told you

13 that the 235,000 from Dr. Grossman in January of 1993 was

14 a loan to Mr. Gordon from Dr. Grossman; is that right?

15 A That's correct.

16 Q And he told you that -- Mr. Gordon was then applying

17 that to reduce his loan balance; is that correct?

18 A Yes, that's correct.

19 Q And you did that?

20 A Yes.

21 Q You've also been here for Dr. Grossman's testimony,

22 have you not, where he said he only gave that money back

23 because Mr. Gordon said he needed it for business purposes
24 to print the registry. You heard that, right?
25 A Yes, I heard.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8015
Reffsin-cross/White

1 MR. TRABULUS: Objection.

2 THE COURT: Overruled.

3 BY MR. WHITE:

4 Q So once again, is that an example of some situation

5 where Mr. Gordon gave you misleading information?

6 A Yes.

7 Q Mr. Reffsin, is it fair to say that you feel used by

8 Mr. Gordon?

9 A To a certain extent, yes.

10 Q Is it fair to say that you think his lies got you

11 into the trouble you are in now?

12 A Yes, I believe that.

13 Q You think that because he lied to you an d you passed

14 that on to the IRS, you're in trouble now; is that

15 correct?

16 A That's correct.

17 MR. WALLENSTEIN: Objection.

18 THE COURT: Sustained. Strike out the answer.

19 The jury is instructed to disregard it.

20 BY MR. WHITE:

21 Q Now, I want to ask you about how you learned about

22 the ownership of the company.

23 You testified yesterday that in February or March
24 of 1992 you had a telephone conversation with Richard
25 Grossman; is that right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8016
Reffsin-cross/White

1 A Yes.

2 Q And the occasion for that conversation was that a

3 portion of what the Grossmans owned of Who's Who Worldwide

4 was being shifted into Dr. Grossman's pension plan; is

5 that right?

6 A Yes.

7 Q And you saw, you said, some sort of a fax that

8 indicated tha t fact to you that they only owned 20 or 25

9 percent. You weren't clear; is that right?

10 A Yes.

11 Q Do I have all of that right?

12 A Yes.

13 Q And is it correct that you said that was the first

14 time you realized that the Grossmans owned 25 percent?

15 A Yes.

16 Q And am I correct that prior to that you thought

17 Mr. Gordon owned 100?

18 A Yes.

19 Q And after you saw this, you came to the conclusion

20 that the Grossmans owned 25 and Mr. Gordon owned 75; is

21 that correct?

22 A That's correct.

23 Q Now, Mr. Reffsin, again, you said this conversation
24 took place in February or March of 1992?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8017
Reffsin-cross/White

1 Q And, again, you're confident that the contention in

2 which in took place was the shifting of a portion of the

3 Grossmans interest into Dr. Grossman's pension plan; is

4 that right?

5 A That and the calculation of the interest on the note.

6 Q Take a look at Government's Exhibit 581 which is in

7 evidence.

8 Now, that is an assignment agreement which is

9 shifting a portion of the Grossmans interest into

10 Dr. Grossman's pension plan?

11 A Yes.

12 Q And do you recall Dr. Grossman testified the only

13 change in the apportionment of the ownership that ever

14 took place?

15 A That's correct.

16 Q Why don't you read for us what the date is on the

17 first line.

18 A Agreement dated as of September 4, 1990.

19 Q And were you here for Dr. Grossman's testimony when

20 he said that that's around when he signed it?

21 A I don't specifically recall that.

22 Q It says as of September 1990; is that right?

23 A That's correct.
24 Q So that wou ld be almost 18 months before you say that
25 this conversation with him took place, right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8018
Reffsin-cross/White

1 A Yes.

2 Q And in connection with this trial, you've had

3 occasion to review the exhibits that have been admitted in

4 evidence, right?

5 A Yes.

6 Q Even prepared a chart based on a number of them,

7 right?

8 A Yes.

9 Q Take a look at Exhibit 415 which is Who's Who

10 Worldwide's 1990 corporate tax return. If you can take

11 that out of the plastic and look at it.

12 Mr. Reffsin, that's signed by you as the

13 preparer, right?

14 A That's correct.

15 Q And that was signed by you and Mr. Gordon in

16 September of 1991, correct?

17 A That's correct.

18 Q And if you turn to the second page, does it indicate

19 what ownership interest Mr . Gordon has in the company?

20 A Yes. 100 percent.

21 Q So in September of 1991 you indicated that he owned

22 100 percent?

23 A That's what I believed at that time, yes.
24 Q Now, look at Exhibit 416 in evidence which is Who's
25 Who Worldwide's 1991 corporate return.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8019
Reffsin-cross/White

1 Now, again, you prepared it, correct?

2 A My firm prepared it, yes.

3 Q Your firm prepared it.

4 A Right.

5 Q And what is the date -- look at the received stamp.

6 Does it indicate that it was received in June of 1992?

7 A Yes, it does.

8 Q And look on page 2. What percentage does it indicate

9 Mr. Gordon owned of the company?

10 A 75 percent.

11 Q So in June -- let me get this right. In September of

12 1991 you told the IRS on this form that he owned 100

13 percent?

14 A Correct.

15 Q In June of 1992 you told them he owned 75 percent,

16 right?

17 A Yes.

18 Q So isn't it true that he knew you had to come up with

19 an explanation between those two dates as to why you

20 changed the percentage?

21 MR. WALLENSTEIN: Objection.

22 THE COURT: Sustained as to form.

23 I don't understand that. Explanation to who?
24 BY MR. WHITE:
25 Q In your testimony didn't you anticipate that you

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8020
Reffsin-cross/White

1 would be asked why you changed the ownership from 100

2 percent to 75 percent?

3 MR. WALLENSTEIN: Objection.

4 THE COURT: Sustained.

5 BY MR. WHITE:

6 Q Is it not correct that the time when you say you had

7 this conversation with Dr. Grossman fits very nicely

8 between those two dates that those returns were filed ?

9 MR. WALLENSTEIN: Objection.

10 THE COURT: Sustained.

11 BY MR. WHITE:

12 Q It's between those two dates that the returns were

13 filed, right?

14 A Yes.

15 Q And is it fair to say that if you had said that you

16 had this conversation with Dr. Grossman prior to September

17 of 1991, it would be inconsistent with that return?

18 MR. WALLENSTEIN: Objection.

19 THE COURT: Overruled.

20 A I don't understand the question.

21 Q Well, in September of 1991 on the 1990 return, you

22 told the government that Gordon owned 100 percent, right?

23 A Yes.
24 Q So if you said that you had learned about
25 Dr. Grossman's 25 percent interest prior to that, it would

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8021
Reffsin-cross/White

1 be inconsistent with what you put on this return, right?

2 MR. WALLENSTEIN: Object ion.

3 THE COURT: Overruled.

4 A Yes.

5 Q And if you said that you had had this conversation

6 after June of 1992, it would be inconsistent with the next

7 corporate return you filed, right?

8 A I guess so.

9 Q Let's go to the next stage of this ownership issue.

10 You said that eventually you came to believe that

11 the Grossmans owned 100 percent instead of just 25, right?

12 A Yes.

13 Q And you said it was in late 1992 that you had a

14 "combination discussion with Mr. Gordon." Is that right?

15 A Yes.

16 Q And the combination was about the loan and exchange

17 account on one hand and also Mr. Gordon told you that he

18 didn't own 75 percent, that the Grossmans owned it all,

19 right?

20 A He referred to that, yes.

21 Q And you said you demanded that Mr. Gordon show you

22 stock certificates to prove it; is that right?

2 3 A At some point, yes, I did.
24 Q Well, you indicated, did you not, that shortly
25 thereafter he showed you the stock certificate?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8022
Reffsin-cross/White

1 A Yes, sometime in March he said he found them.

2 Q Sometime then in early 1993 he shows you stock

3 certificates, right?

4 A That's correct.

5 Q And you said yesterday that the stock certificates

6 were signed by the Grossmans when you saw them, right?

7 A They appeared to be in order, yes.

8 Q Now, take a look at Exhibits 585 and 586 in evidence

9 which are the Who's Who Worldwide stock certificates.

10 Those are the certificates that you saw, right?

11 A (Perusing.) Yes.

12 Q And they appear to be the same, right, in the same

13 state as when you saw them?

14 A Yes.

15 Q They were signed by the Grossmans?

16 A Yes.

17 Q They were signed by Mr. Gordon?

18 A Yes.

19 Q They had the name of the shareholders filled in,

20 right?

21 A Yes.

22 Q They had the names -- they had the amount of shares

23 listed, right?
24 A Yes.
25 Q So those documents are what you saw in early 1993

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8023
Reffsin-cross/White

1 that satisfied you that they owned 100 percent, right?

2 A Yes.

3 Q Now, Mr. Reffsin, let me she you Government's Exhibit

4 584 in evidence.

5 Now, that is called a Waiver of Special Notice of

6 the Who's Who Worldwide Board of Directors, right?

7 A Yes.

8 Q You were here when Ms. Dietrich, the scientist from

9 the IRS lab testified probably a month and-a-half ago now?

10 A Yes.

11 Q And do you recall Ms. Dietrich testifying that based

12 on the indent ations on the document, that this Exhibit 584

13 was on top of 585, one of the stock certificates when it

14 was signed by Richard Grossman?

15 A Yes, I recall her testimony.

16 Q And she said 584 was on top of 585 when it was signed

17 by Richard Grossman, right?

18 A Yes.

19 Q Now --

20 MR. WHITE: Just one moment, Your Honor. I'm

21 trying to find the documents.

22 BY MR. WHITE:

23 Q Now, Mr. Reffsin, let me show you Government's
24 Exhibit 671 in evidence which is a fax from Steven Adler,
25 attorney at law to you on March 30, 1994.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8024
Reffsin-cross/White

1 If you page through that can you tell us if you

2 see the unsigned version of this Waiver of Notice, Exhibit

3 584?

4 A Yes, I do.

5 Q You do.

6 And Mr. Adler prepared those documents at your

7 request, right?

8 A At Mr. Gordon's request.

9 Q Via you, though, right?

10 A I was there, yes.

11 Q Okay.

12 And what -- if you look at the cover sheet what

13 Mr. Adler is faxing you there are drafts, right? He wants

14 your approval or comments, right?

15 A (Perusing.) No, they are not. They are revisions.

16 Q Okay. They are revisions. Yes.

17 A Yes.

18 Q So Mr. Adler hadn't even finalized these documents in

19 March of 1994; isn't that right?

20 A That's correct.

21 Q Now, somehow that finished document supposedly was

22 signed on top of a stock certificate that you saw back in

23 early 1993, is that what you're saying?
24 A I saw a stock certificate --
25 MR. WALLENSTEIN: Objection.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8025
Reffsin-cross/White

1 THE COURT: Overruled.

2 A I saw a stock certificate in mid '93.

3 Q But answer my question. Your testimony is that that

4 document which wasn't even finished in March of '94 was

5 signed on top of a stock certificate that you say you saw

6 signed by Dr. Grossman back in early '93?

7 MR. WALLENSTEIN: Objection.

8 THE COURT: Sustained.

9 BY MR. WHITE:

10 Q I want to ask you about the loans that Mr. Gordon

11 took from Who's Who Worldwide.

12 You said yesterday that you had a conversation

13 with him in December of '92 where you told him that the

14 loan accounts were getting much too high and they would

15 have to be repaid; is that right?

16 A That's correct.

17 Q And you said yesterday that Mr. Gordon insisted that

18 he would repay them, right?

19 A That's correct.

20 Q And you said yesterday and you repeated this morning

21 that you and he agreed that he would pay it back sometime

22 in 1994; is that right?

23 A No. I said that if it wasn't repaid by the end of
24 '94, we would have to recognize it as income.
25 Q Now, isn't it true, Mr. Reffsin, that you told a

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8026
Reffsin-cross/White

1 number of different versions of this story at different

2 times to agents?

3 MR. WALLENSTEIN: Objection.

4 THE COURT: Overruled.

5 A It is true that I've seen twists of the versions that

6 I've said with specific agents, not that I've said

7 anything different.

8 Q So you've been entirely consistent throughout, of

9 course?

10 A Of course.

11 Q Of course.

12 MR. WALLENSTEIN: Objection.

13 THE COURT: Please do not make those comments,

14 Mr. White. Sustained.

15 I'm instructing the jury that remarks that are

16 not in the form of quest ions, they are uncalled for, and

17 you should disregard them.

18 BY MR. WHITE:

19 Q Now, you recall that you were interviewed by

20 Inspector Biegelman and Agent Jordan in May of 1995 at

21 your office, right?

22 A I don't recall that interview, but yes, they said

23 they interviewed me.
24 Q Do you recall Agent Jordan's testimony that it took
25 about an hour, right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8027
Reffsin-cross/White

1 A Yes, I don't recall.

2 Q That May 17th meeting?

3 A I don't disagree that it happened, I don't recall it.

4 Q I want to make sure I understand.

5 You sat down with two federal agents for an hour

6 and discussed the criminal investigation of one of your

7 clients and you don't remember it?

8 A I don't remember the specifics of that discussion,

9 that's correct.

10 Q A re you saying that you don't remember the specifics

11 of what was discussed or you don't even recall the

12 meeting?

13 A I don't remember the specifics as to what was

14 discussed.

15 Q Now, in that meeting you told them that you had

16 concerns about whether or not these loans were really

17 income, right?

18 A Well, I always have those concerns whenever a client

19 takes loans.

20 Q My question is, Mr. Reffsin, did you tell them in

21 that interview that you had concerns whether or not these

22 loans were income?

23 A I'm sure I did.
24 Q And you told them that you discussed it with
25 Mr. Gordon?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8028
Reffsin-cross/White

1 A Yes, it would be negligent if I didn't.

2 Q And at the time in that interview you told them that

3 Mr. Gordon's response was that he said he would deal with

4 it at that time when it became a problem. Do you remember

5 that?

6 A He said he would deal with them --

7 Q My question is, what you said to the agents in May of

8 1995. Isn't it true you said to them that in this

9 discussion when you raised the issue about the loan,

10 Mr. Gordon's response was that he would deal with it at

11 that time?

12 Yes or no?

13 A I don't remember that specifically.

14 Q Isn't it true that in that interview when you

15 recounted this conversation that you had with Mr. Gordon

16 about the loan, you never said anything about Mr. Gordon

17 saying he was going to repay it?

18 MR. WALLENSTEIN: Objection.

19 THE COURT: Overruled.

20 A I don't remember the details so I don't remember

21 whether I said anything.

22 Q So you wouldn't remember whether or not Mr. Gordon,

23 whether or not you told them -- let me rephrase the
24 question.
25 Now, in addition to that you met with agents

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8029
Reffsin-cross/White

1 again at the U.S. Attorney's Office in January of 1997; is

2 that right?

3 A Yes.

4 Q You came to the U.S. Attorney's Office in Brooklyn,

5 right?

6 A Yes.

7 Q And you came there with your attorney, right?

8 A That's correct.

9 Q It wasn't Mr. Wallenstein, but another attorney,

10 correct?

11 A Yes.

12 Q And at that meeting I was present, right?

13 A Yes.

14 Q And Agent Jordan was present?

15 A Yes.

16 Q And Inspector Pagano was present?

17 A Yes.

18 Q And we sat in a conference room and you answered the

19 government's questions, right?

20 A That's correct.

21 Q And do you recall the specifics of that meeting ?

22 A Most of them, yes.

23 Q Now, do you recall --
24 MR. TRABULUS: Objection, Your Honor. May we
25 approach?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8030
Reffsin-cross/White

1 THE COURT: Yes, come up.

2 (Side bar.)

3 MR. TRABULUS: Your Honor, the difficulty I had

4 is that Mr. White elicited that he was present at the

5 meeting and now by asking questions about it of the sort I

6 was making him essentially an unsworn witness. Frankly,

7 it just came up quickly. I'm still thinking about what

8 the proper remedy is, but it puts us in a very difficult

9 situation.

10 THE COURT: I think you're right. I thought

11 about the same thing. What were you intending to bring

12 out about this, Mr. White?

13 MR. WHITE: Your Honor, he has made a number --

14 he made in that proffer session a number of extremely

15 contradictory statements to his trial testimony.

16 THE COURT: Isn't the proffer statement normally

17 confidential and not to be revealed?

18 MR. WHITE: No, the terms of the proffer are that

19 it explicitly says it can be used if the defendant is

20 prosecuted and he testifies that it can be used for

21 cross-examination.

22 MR. WALLENSTEIN: I certainly concede that's the

23 case, but I think Mr. Trabulus is correct that Mr. White
24 has subjected himself to the trial --
25 THE COURT: Mr. White, as being one of the

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8031
Reffsin-cross/White

1 participants in the meeting, you'll put yourself into the

2 position of cross-examining him with the raising of your

3 voice and everything. That will give the jury the idea

4 that you were there and you disagreed with them. You're

5 calling him a li ar.

6 MR. WHITE: Your Honor, that can be frequently

7 defendants' proffers come up with both witnesses and

8 defendants where the Assistant is present. That in and of

9 itself, the fact of the Assistant's presence in the

10 meeting doesn't necessarily mean it is a topic that is off

11 bounds.

12 THE COURT: I never heard of that before. I

13 never had a case where the prosecuting attorney himself is

14 questioning a witness, a defendant, about a meeting that

15 the prosecutor, that that prosecutor had with the

16 defendant. I don't recall ever having anything like that,

17 Mr. White. You must be in a different kind of world than

18 I am. I don't recall anything like that ever happening.

19 I'm not going to permit it to him.

20 MR. WHITE: Your Honor, there's --

21 THE COURT: You will not be an unsworn witness.

22 MR. WHITE: Your Honor --

23 THE COURT: I think Mr. Trabulus is correct.
24 MR. WHITE: Your Honor, let me just address this
25 for a minute here.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8032
Reffsin-cross/White

1 Mr. Reffsin's statements in the proffer are so

2 contradictory to what he testified at the trial yesterday

3 that it would completely -- it would make a complete

4 mockery of the fact-finding process to exclude his

5 testimony for some reason. I think if Your Honor thinks

6 there is a problem, a strong charge to the jury, and I

7 will not repeat it again obviously, I only did that so the

8 participants would be -- the setting would be described,

9 that -- I don't know how to fashion it, but something

10 along the lines that I'm not indicating in some way what I

11 think or whatever because if he does not agree, Your

12 Honor, that what I ask him about he said at the proffer ,

13 Agent Jordan is prepared to testify in rebuttal. So

14 there's no real harm in doing that.

15 THE COURT: There is harm in it because you are

16 now cross-examining him and by the tone of the

17 cross-examination you indicate your disbelief of what he

18 said because you were there. So I'm not going to permit

19 it. I don't care what he said, how harmful it is to the

20 government's case. You are directed not to go into that

21 meeting.

22 MR. WHITE: Your Honor, are you saying that a

23 simple slip of the tongue has now rendered highly
24 probative evidence inadmissible?
25 THE COURT: When you say "slip of the tongue,"

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8033
Reffsin-cross/White

1 whose tongue slipped?

2 MR. WHITE: Mine is what you're telling me.

3 THE COURT: By saying the truth that you were

4 there at time.

5 MR. WHITE: Right.

6 THE COURT: How could you avowed that? It's not

7 a slip of the tongue. I don't think -- I don't agree with

8 you at all and I am directing you to refrain from going

9 into that. If you want to put rebuttal testimony in that

10 you think is admissible, put it in, but you will not

11 cross-examine him on a meeting that you conducted with

12 him. I don't like it.

13 MR. WHITE: Your Honor, are you saying that

14 cross-examination shouldn't be permitted because I was at

15 the meeting or because testimony was elicited that I was

16 at the meeting.

17 THE COURT: Yes, because you were at the meeting

18 and you become in the nature of, I fear, an unsworn

19 witness.

20 MR. WHITE: Your Honor, that would make no sense

21 because then the Assistant who handles the case, the

22 defendant proffers and then he's prosecuted, he knows he

23 can testify and he can be cross-examined by an Assistant
24 who doesn't know about the case?
25 THE COURT: Mr. White, I've said it three times,

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8034
Reffsin-cross/White

1 you understood it, you agree with it and you questioned

2 it. Anything else you want? But you are directed from

3 you or anyone else cross-examining him on the basis of you

4 being at that meeting. I'm directing you to stay away

5 from it.

6 MS. SCOTT: I'm attempting to find a case that

7 attempts to go into this.

8 THE COURT: Go ahead, find a case.

9 MR. WHITE: Your Honor, can we do this, can we

10 bifurcate things so that Ms. Scott at a later point asks

11 questions about the proffer.

12 MR. TRABULUS: I would object to that.

13 MR. WALLENSTEIN: So would I.

14 MR. TRABULUS: On top of the fact that he was

15 present at that proffer that is before the jury and it

16 will always be before the jury, there is no way to take

17 that away from the jury.

18 THE COURT: How can he avoid saying that he was

19 there? He couldn't tell a mistruth about it.

20 MR. TRABULUS: Well, he could have simply said,

21 Your Honor, did you attend a meeting and were the agents

22 present and question them there and the agents could have

23 rebutted it or it would have been up for us to bring in
24 whether or not Mr. White was there and the jury would
25 never have heard about it. The fact that the jury heard

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8035
Reffsin-cross/White

1 about it and his being there, I'm not concerned about

2 that.

3 MR. TRABULUS: I'm concerned about what

4 Ms. Scott --

5 THE COURT: Well, my intellect tells me when I'm

6 in doubt I do without. And I'm in doubt.

7 If you have a case that says this, fine. I don't

8 think you will find one.

9 MR. WHITE: Your Honor, may I ask in light of

10 this, I will have to reorder my cross-examination.

11 THE COURT: Happens all the time. Happened to me

12 for 25 years. I managed to survivor.

13 MR. WHITE: Can we take our ten-minute break

14 early?

15 THE COURT: Fine. Do you want to take it now?

16 MR. WHITE: Yes.

17 MR. WALLENSTEIN: Your Honor, Mr. White has a

18 tendency to ask Mr. Reffsin questions that are prefaced

19 that "you were here for the testimony of Thursday and so

20 you heard this witness say." And that language coupled

21 with to some degree his tone implicates Mr. Reffsin's

22 constitutional right to be present and indicates to the

23 jury, I think, that Mr. White's feeling that Mr. Reffsin's
24 testimony is to be tailored t o meet previous witnesses and
25 I would direct him to refrain from prefacing questions in

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8036
Reffsin-cross/White

1 that fashion.

2 MR. WHITE: Your Honor, the fact that I'm

3 pointing it out because it is different from Mr. Reffsin's

4 testimony.

5 MR. WALLENSTEIN: I agree it is different but --

6 THE COURT: Once taking a stand, the prosecutor

7 has a right to say did you hear certain testimony? I

8 think he has a right and I'm overruling your objection and

9 I'm denying your request.

10 We'll take a ten-minute recess.

11 (End side bar.)

12 THE COURT: Members of the jury, we'll take an

13 early ten-minute recess.

14 Please don't discuss the case. Keep an open

15 mind.

16 (Jury exits.)

17 (Recess taken.)

18 (Jury enters.)

19 THE COURT: Please be seat ed, members of the

20 jury.

21 You may proceed, Mr. White.

22 BY MR. WHITE:

23 Q Now, Mr. Reffsin, you said here yesterday that in
24 December of 1992 you told Mr. Gordon that there has to be
25 repayments, right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8037
Reffsin-cross/White

1 A Yes.

2 Q And he, I think the word you used this morning he

3 guaranteed you there would be repayments, right?

4 A He said there would be repayments.

5 Q And you learned of such a repayment in January of

6 '93, that money from Dr. Grossman?

7 A Actually subsequent to that, when the bank

8 reconciliations were done.

9 Q So it happened in January of '93 and you learned

10 about it later?

11 A Right.

12 Q Let me go back to the May of 1995 interview with

13 Inspector Biegelman and Agent Jordan.

14 Do you recall tellin g them at that time of your

15 conversation with Mr. Gordon and telling them that there

16 had been little or no repayments of that loan by

17 Mr. Gordon?

18 A I honestly don't remember.

19 Q And do you know a man named Michavel Hynes?

20 A Yes, I do.

21 Q Michavel Hynes did per diem accounting work?

22 A Yes.

23 Q And among the things he did was work on the Who's Who
24 Worldwide books?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8038
Reffsin-cross/White

1 Q Do you recall telling the agents that day that

2 Mr. Hynes actually did an analysis of the loan account and

3 he had concerns whether it would be income also?

4 A Yes, he would.

5 Q And in fact, you referred the agents to Mr. Hynes.

6 You gave him his address, right?

7 A Well, they requested it, so I gave it to them.

8 Q Is it fair to say t hat over the course of the period

9 from say 1991 through 1994, that you repeatedly told

10 Mr. Gordon that you were concerned that the loans could be

11 income?

12 A Yes.

13 Q And when you say repeatedly, would that be maybe a

14 half dozen times or more?

15 A Certainly year end, and maybe one other time, because

16 the year end he made the determinations as to what the

17 loan balances would be.

18 Q Is it fair to say that you were doubting whether or

19 not he was really going to repay these?

20 MR. WALLENSTEIN: Objection.

21 THE COURT: Sustained as to form.

22 BY MR. WHITE:

23 Q Did you believe that he was going to repay these
24 loans?
25 MR. WALLENSTEIN: Objection.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8039
Reffsin-cross/White

1 THE COURT: Overruled.

2 A If he told me so, I believed him.

3 Q If he told you so once, why didn't you just believe

4 him? Why did you go back and continue to ask him?

5 A There is no set time period in terms of repayments of

6 loans. I mean, a year or so to repay $200,000 worth of

7 loans is not a significant amount of time.

8 Q Well, you said that Mr. Gordon and you or Mr. Gordon

9 told you he would pay it back or you would have to call it

10 income by 1994; is that right?

11 A Right.

12 Q And if I understood your testimony yesterday

13 correctly, you said that what had intervened was the

14 bankruptcy, right?

15 A That's correct.

16 Q Now, is it not correct -- let me back up.

17 You explained to Mr. Wallenstein something about

18 how something couldn't be done during the bankruptcy

19 proceeding so he could pay back the loan, right?

20 A Right. You couldn't just transfer assets out of the

21 estate i nto the expense account without the approval of

22 the bankruptcy court or at least the creditor's committee.

23 Q Isn't it true, though, that Mr. Gordon could have
24 gotten money from another source to repay that loan to
25 Who's Who Worldwide?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8040
Reffsin-cross/White

1 MR. WALLENSTEIN: Objection.

2 THE COURT: Sustained.

3 BY MR. WHITE:

4 Q Well, if Mr. Gordon had say asked Dr. Grossman for

5 money again, he could have used that to repay the loan to

6 Who's Who Worldwide?

7 MR. WALLENSTEIN: Objection.

8 MR. TRABULUS: Objection.

9 THE COURT: Sustained.

10 BY MR. WHITE:

11 Q Well, a loan can be paid back -- let me back up.

12 You were looking at the repayment of the loan not

13 where he got the money from, correct?

14 A That's correct.

15 Q So if he got it fr om another source and repaid it,

16 that would be fine with you, that would be a repayment,

17 correct?

18 A Correct.

19 Q Now, isn't it correct that Mr. Gordon borrowed money

20 from other entities in 1994?

21 A Other entities in 1994?

22 Q Yes.

23 A I know there were monies taken out, but I'm not
24 familiar exactly with what was taken out. We did not look
25 at the books and records of the other entities for 1994.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8041
Reffsin-cross/White

1 Q Take a look at what is in evidence as Government's

2 Exhibit 734. It's a check from Who's Who Executive Club

3 to American Express dated August 16, 1994, and it's for

4 the total of $47,000, $47,487.83.

5 Do you see that check, Mr. Reffsin?

6 A Yes, I do.

7 Q And tell us what the check number is?

8 A 1025.

9 Q Now, tak e a look at Exhibit 732 in evidence which are

10 the check stubs for Who's Who Executive Club, and if you

11 could look at what the stub says for check number 1025.

12 A American Express, BG, personal loan.

13 Q Now, is it fair to say that if BG could borrow

14 $47,000 from Executive Club he could have borrowed that to

15 pay Who's Who Worldwide?

16 A I would say so, yes.

17 Q And in addition, he could have borrowed it to pay the

18 IRS, right?

19 A Yes.

20 Q So notwithstanding the fact that Who's Who was in

21 bankruptcy, that didn't prevent any repayments by

22 Mr. Gordon of the loan to Who's Who Worldwide; is that

23 correct?
24 A No, he could have repaid it at any time.
25 Q And he could have done it out of other sources; is

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8042
Reffsin-cross/White

1 that correct?

2 A That's correct.

3 Q By the way, do you know what that $47,000 payment to

4 American Express was for?

5 A No, I don't. I think it was brought out that it was

6 some sort of a trip that he took.

7 Q Now, you can put that aside.

8 Now, Mr. Reffsin, you are a Certified Public

9 Accountant; is that right?

10 A Yes, I am.

11 Q And you have been since 1971?

12 A That's correct.

13 Q And just so I'm clear, if you look at Exhibit 651

14 which is in evidence that is a certificate of the fact

15 that you are a CPA; is that correct?

16 A That's correct.

17 Q And is it fair to say, Mr. Reffsin, that you are an

18 expert in taxation?

19 A I've tried to be, yes.

20 Q And you've worked in the tax department of several

21 major corporations, correct?

22 A Accounting firms, yes.

23 Q I'm sorry, accounting firms.
24 A Yes.

25 Q For example, you said yesterday in response to

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8043
Reffsin-cross/White

1 Mr. Wallenstein's question that you worked at Touche Ross,

2 correct?

3 A I spent two years at Touche Ross in the tax

4 department, yes.

5 Q And you also worked for Arthur Young?

6 A That's correct.

7 Q And at Arthur Young you were the equivalent of a

8 partner?

9 A Just below a partner, a principal.

10 Q And those are one of the big six, big eight, big ten

11 accounting firms?

12 A At that time big eight.

13 Q Those were like the eight most prominent, most

14 prestigious accounting firms in the world, right?

15 A Yes.

16 Q And then you started your own firm, correct?

17 A Yes.

18 Q And is it fair to say that again your expertise was

19 in tax matters?

20 A That's corre ct.

21 Q And you worked in that capacity, did you not, on the

22 tax shelter investments that Mr. Gordon promoted that you

23 described for Mr. Wallenstein yesterday?
24 A No, I just did the accounting for it. I didn't do
25 the tax work on it.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8044
Reffsin-cross/White

1 Q But you were the accountant for those companies,

2 right?

3 A Yes.

4 Q Some of those were corporations and some of them were

5 partnerships, right?

6 A The shelters were all partnerships. There were

7 corporations involved.

8 Q Is there such a thing known involved in partnerships

9 such as tax matters partner?

10 A Yes.

11 Q What is that?

12 A The partner that the IRS would look to for

13 information with respect to that particular entity.

14 Q Among the partnerships involved in the tax shel ters,

15 who was the tax partner?

16 A Generally it was the general partner.

17 Q That was Mr. Gordon?

18 A Not at all times, sometimes it was a corporation.

19 Q Was Mr. Gordon a tax matters partner in any of these

20 partnerships?

21 A He may have been. I don't remember.

22 THE COURT: Could you hold it a minute, please.

23 (An unrelated matter was taken by the Court.)
24 THE COURT: You may proceed.
25 MR. WHITE: Thank you, Your Honor.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8045
Reffsin-cross/White

1 ; BY MR. WHITE:

2 Q Mr. Reffsin, you in the course of your accounting

3 career, you lecture to or have lectured to the American

4 Institute of CPA, right?

5 A I have lectured for the Foundation of Accounting

6 Education to CPAs, yes.

7 Q So in other words, you are teaching other CPAs about

8 tax matte rs, right?

9 A Yes.

10 Q Now, let me direct your attention -- let me back up.

11 When is it that you -- withdraw the question.

12 You worked with Mr. Gordon on these tax shelter

13 investments, right?

14 A I did the accounting for them, yes.

15 Q And then there was a period of time in which you were

16 not doing any work for him, right?

17 A That's correct.

18 Q I want to make sure. I want to get it right.

19 When is it that you got reacquainted with him and

20 start doing work with them?

21 A 1990.

22 Q Let's focus on 1990 and also the period '90 and '91.

23 You testified yesterday you became aware that he
24 had this 3 and-a-half million liability to the IRS, right?
25 A Yes, but not until a little bit later. I knew he had

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8046
Reffsin-cross/White

1 a liability, I di dn't know how much it was.

2 Q When did you become aware of the rough numbers of the

3 liability?

4 A End of '92, early '93.

5 Q Prior to that, did you at least know it was a

6 substantial amount?

7 A Oh, yes.

8 Q And did you know it was over $1,000,000?

9 A Well, the taxes weren't over $1,000,000. I knew the

10 combination of the penalties and interest were over

11 $1,000,000.

12 Q So you knew the necessity figure owed, so to speak,

13 was over $1,000,000?

14 A Yes.

15 Q And you knew that even before the end of 1992?

16 A Yes.

17 Q And do you have experience in dealing with the IRS in

18 connection with collection matters?

19 A Yes, on occasion.

20 Q And did you have such experience prior to the time

21 you submitted this offer and compromise in July of '93 for

22 Mr. Gordon?

23 A The only experience I had was wit h respect to that --
24 with Ms. Peters. You are talking about with respect to
25 Mr. Gordon only?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8047
Reffsin-cross/White

1 Q Any other time.

2 A Yes.

3 Q And is it fair to say you knew, just as a general

4 principle, that the more a taxpayer earns the more the IRS

5 will expect him to pay back of his back tax obligations?

6 A I think that's logical.

7 Q Right.

8 Is the converse also true, that the less the

9 taxpayer is earning, the poorer they are, the more debts

10 they have, the less the IRS will expect them to pay back?

11 A Absolutely.

12 Q So is it not correct that someone in that situation,

13 whether or not they act upon it, has an interest, a

14 motive, to either conceal or reduce their income?

15 A That depends on the individual.

16 Q Right.

17 So me people may do that and some people may not,

18 right?

19 A That's correct.

20 Q But it would be in their financial interest to do so

21 if there weren't any other consequences, right?

22 A I guess so, yes.

23 Q Now, let's look at the time period in 1992, 1993, in
24 that area. You're aware of the fact that Mr. Gordon is
25 taking a salary from Who's Who Worldwide, correct?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8048
Reffsin-cross/White

1 A Yes.

2 Q And you are also aware of the fact that the company

3 is paying personal expenses of his, correct?

4 A Yes.

5 Q You are aware, are you not, for example, that before

6 they bought, before PVI bought the condo, they were paying

7 the rent, right?

8 A That was going through his personal account, yes.

9 Q When you say his personal account, it was being put

10 into his loan accounts at Who's Who Worldwide?

11 A Yes.

12 Q And Who's Who Worldwide was the one writing the check

13 out?

14 A Yes.

15 Q And you also knew that the company was paying his

16 American Express monthly bills, that portion of it which

17 were personal?

18 A Oh, yes.

19 Q And you knew also that they were paying his

20 utilities, his cable TV bill; is that right?

21 A Yes. On occasion the company would issue checks for

22 those kinds of things.

23 Q Did you know that or were you aware that the company
24 was paying checks for Mr. Gordon's dental bills?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8049
Reffsin-cross/White

1 Q Were you aware that the company was issuing checks

2 for Mr. Gordon's child support payments?

3 A That I wasn't aware of.

4 Q Now, you were aware, were you not, tha t from 1990

5 through 1995 the company was leasing a -- at one time or

6 another, a car for Mr. Gordon?

7 A Yes.

8 Q And at first it was a BMW, right?

9 A Yes.

10 Q And then it was a Lexus, right?

11 A Yes.

12 Q And then it was a Mercedes Benz, right?

13 A I think there was a transfer or change, yes.

14 Q And in late '92, early '93, the condominium, monies

15 transferred from Who's Who Worldwide to Publishing

16 Ventures for the purpose of buying the condominium, right?

17 A Late '92 it started, right.

18 Q And then money is continued to be transferred from

19 Worldwide to PVI for the renovation of the furnishing of

20 that condo, right?

21 A Yes.

22 Q And you knew all of that, right?

23 A Yes.
24 Q And you indicated before that you suspected that
25 Mr. Gordon was using -- was staying at the condominium and

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8050
Reffsin-cross/White

1 leased periodically?

2 A It was not suspect. He said he would be using it on

3 occasion to work and stay there which is why we started

4 the rental payments.

5 Q So is it fair to say -- let me back up.

6 Aside from Mr. Gordon's salary, did he have any

7 other substantial money coming into him personally?

8 A Not that I'm aware of.

9 Q So is it fair to say that Mr. Gordon's whole

10 financial life was structured, whether or not it was

11 intended this way, it was structured so that nothing was

12 in his name?

13 MR. TRABULUS: Objection, Your Honor.

14 THE COURT: Overruled.

15 A Well, I know nothing was in his name.

16 Q That's all I'm asking.

17 A Right.

18 Q For example, most people, if they own a car, it's in

19 their own name, right?

20 MR. TRABULUS: Objection, Your Honor.

21 THE COURT: Overruled.

22 A Not necessarily. There are business people who will

23 have cars in the name of the business.
24 Q Right. Not necessarily, but the vast majority of
25 people if they are driving in a car that they own, it's in

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 their name, right?

2 A I guess so.

3 Q And is it fair to say that may be not in 100 percent

4 of the cases but most people pay their own personal bills

5 like their utilities and their cable bill and their rent?

6 A I would say a majority of them do, yes.

7 Q Mr. Reffsin, does it ever strike you at this point

8 between 1990 and 1993, as a CPA, as a tax expert, does it

9 strike you as odd that Mr. Gordon, given his IRS

10 situation, has everything structured so that nothing is in

11 his na me?

12 MR. WALLENSTEIN: Objection.

13 THE COURT: Sustained.

14 BY MR. WHITE:

15 Q Well, when you come on the scene in 1990 and then

16 you're doing the books for the next few years, as you said

17 you notice that all this stuff was not in his name, right?

18 A Ultimately, yes.

19 Q And you also know that, as you said before, someone

20 in his position has a motive to conceal income, correct?

21 A They might.

22 Q And does it ever occur to you that maybe that is what

23 is happening here?
24 MR. WALLENSTEIN: Objection.
25 THE COURT: Overruled.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 A What occurs to me isn't really --

2 Q Wait. Answer the question yes or no first.

3 A Does it occur to me that he might?

4 Q Did that thought ever occur to you?

5 A Possibly.

6 Q Possi bly. You are not sure? Is your answer that you

7 are not sure that it ever occurred or not?

8 A There are many reason for people to keep their

9 entity --

10 Q My question is, did you have that thought or did you

11 not have that thought?

12 A I did have the thought.

13 Q You did have the thought?

14 A Yes.

15 Q Okay.

16 I want to ask you about the logs that Maria

17 Gaspar created and that were submitted to the bankruptcy

18 court that you are familiar with, obviously.

19 A Now I am.

20 Q Right.

21 Now, you were interviewed by federal agents in

22 January of 1996 in your office, right?

23 A Yes.
24 Q That's the one you said you did recall that meeting?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Q Isn't it correct that you were asked about those logs

2 at that meeting?

3 A Yes.

4 Q And isn't it correct that you told them initially

5 that you had never seen those logs?

6 A I told them I had nothing to do with those logs.

7 Q Answer the question. Isn't it true that you told

8 them that you had never seen those logs?

9 A I can't answer that with a yes or no.

10 Q Did you tell the agents at that meeting that you

11 didn't know anything about them or even if they were

12 prepared at all?

13 A I never said that if they were even prepared at all.

14 Q Did you tell them you never knew who actually

15 prepared them?

16 A That's correct.

17 Q Did you tell them that you had never discussed those

18 logs with Mr. Gordon or anyone else?

19 A I believe I initially did, but then I realized I did

20 have a meeting with them on the logs.

21 Q So your recollection is that you changed your version

22 in that interview; is that correct?

23 MR. WALLENSTEIN: Objection.
24 THE COURT: Sustained as to form.
25 BY MR. WHITE:

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Q It is your recollection that you told them something

2 different later in the interview from what you said

3 initially?

4 A It is my recollection that I recollected it.

5 Q Now, did you say that, yesterday, that Mr. Gordon

6 told you that he didn't want to keep those logs?

7 A Yes, that's correct.

8 Q You said after you walked out of the bankruptcy court

9 proceeding where the Bankruptcy Judge ordered Who's Who to

10 keep them, that's when he told you in your car, right?

11 A Yes, he didn't -- he said that he didn't want Reed

12 Elsevier knowing any of his business.

13 Q And the words you used yesterday was that he was

14 sc reaming that?

15 A Yes.

16 Q And you said that he was ranting and raving about

17 that?

18 A Yes, he was.

19 Q He didn't want to give those logs over to Reed

20 Elsevier, did he?

21 A No.

22 Q And he made that perfectly clear to you, right?

23 A Yes.
24 Q And then you said yesterday Mr. Ackerman called you
25 and said hey, where are those logs, right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 A That's correct.

2 Q And Mr. Ackerman indicated to you that he had been

3 asking Mr. Gordon for them and Mr. Ackerman hadn't gotten

4 them, right?

5 A That's correct.

6 Q Now, you said earlier today that you thought that

7 maybe Mr. Gordon's claim about using the business, the

8 condo for business, was bullshit, right? You said you

9 thought maybe that was the case?

1 0 A I said I couldn't make that determination initially.

11 I said it might have been, but you go by what the client

12 tells you at the time.

13 Q Am I correct that at the time you at least had a

14 doubt about whether or not they were really, it was really

15 being used for business?

16 MR. TRABULUS: Objection. What time?

17 MR. WHITE: The time of this conversation in

18 August of 1994 in the car.

19 A In August of '94? Again, I explained before with the

20 sequences of events that occurred, I gave him the benefit

21 of the doubt.

22 Q You gave him the benefit of the doubt, but you had a

23 doubt, right?
24 A Always had a doubt.
25 Q And you said you always had a doubt. You mean you

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 always had a doubt from the moment the condominium, you

2 found out that he was using the condominium to live there?

3 A No. The doubt occurred really after things started

4 to happen in 1993.

5 Q What things started to happen?

6 A The case, the distractions, the noncreation of the

7 California office which was supposed to happen. I mean,

8 these things didn't happen.

9 Q Let me make sure I understand this.

10 Mr. Gordon told you that the condominium was

11 going to be used in part for people who were from the soon

12 to be established California office, correct?

13 A Yes, he was going to have training sessions, people

14 flown in and so forth, yes.

15 Q And then when no such office materialized, you

16 started to have doubts?

17 A I really couldn't concern myself at that point

18 because there -- it was an asset of the corporation.

19 Whether he used it for business or didn't use it for

20 business was not my conce rn.

21 Q But if he was living there and he wasn't paying a

22 fair market rent, then the remaining portion of the fair

23 market rent would be income to him, right?
24 MR. TRABULUS: Objection. Foundation.
25 THE COURT: Overruled.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 A It's a difficult question to answer because if a

2 person buys, if a corporation buys something with the

3 intent to use it for a specific purpose and because of

4 some reason down the road an officer or someone in the

5 corporation ends up using it for personal use, that

6 doesn't negate the fact that it is a corporate asset.

7 Whether he should be paying rent or what rent he should be

8 paying, is subject -- you have to determine that.

9 Q Right.

10 But you were also doing his personal returns,

11 right?

12 A Yes.

13 Q So if there was some additional income over and above

14 his salary that he was getting, you would have wanted to

15 know about that, right?

16 A Well, it was my impression that the amount of money

17 he was paying as rent was basically covering the use of

18 the apartment.

19 Q Is it your testimony that you believed that the

20 information that was going to be put in the logs was going

21 to be accurate?

22 A Yes.

23 Q And notwithstanding that you saw that Mr. Gordon
24 didn't want to give the logs to Reed and notwithstanding
25 the fact that you thought maybe it wasn't being really

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 used for business, you thought that the information that

2 was going to go into those logs was accurate?

3 A Absolutely.

4 Q Now, Mr. Reffsin, is it fair to say that during the

5 time period from 1991 through 1995 that you didn't want to

6 lose Mr. Gordon as a client?

7 A No accountant wants to lose a client.

8 Q But during that particular time period, wasn't it

9 especially important to you to retain Mr. Gordon as a

10 client?

11 A It's especially important for me to retain every

12 client I have.

13 Q Well, during that time weren't you personally

14 experiencing financial difficulty?

15 A Early '90, '91, '92, but things sort of smoothed over

16 by then.

17 Q In fact, in May 1991, you personally filed

18 bankruptcy, didn't you?

19 A That's correct.

20 Q And isn't it true, didn't you?

21 A That's correct.

22 Q And isn't it true that you filed a bankruptcy

23 petition that indicated that you were over $2,000,000 in
24 debt?
25 A That's correct.

OWEN M. WICKER, RPR OFFICIAL C OURT REPORTER
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Reffsin-cross/White

1 Q And isn't it also true that on that bankruptcy

2 petition in May of 1991, you indicated that your income,

3 your regular monthly income from your business was about

4 $9,500 a month?

5 A That's about right.

6 Q And Mr. Gordon's firm was paying you 2 or 3 or $5,000

7 a month over this period for your firm's accounting work,

8 right?

9 A It was more like 2,000 in the earlier years.

10 Q I'm sorry. I interrupted.

11 A It was more like 2,000, roughly 2,000 a month.

12 Q In the beginning and then it got higher?

13 A When the bankruptcy took place I spent a lot more

14 time. Of course I didn't get paid but that's another

15 matter.

16 Q Now, Mr. Reffsin, let me show you Exhibit 420 which

17 is the offer and compromise you submitted in the summer of

18 1993. Let's look at the last paragraph.

19 First of all, you indicated to Mr. Wallenstein

20 yesterday I think was a mixture of your words and

21 Mr. Gordon's words?

22 A Yes. I wouldn't submit anything without reviewing it

23 with the client.
24 Q Is it fair to say on page 2, Mr. Gordon says "I,
25 Mr. Bruce Gordon, do hereby state the above to be the best

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 of my knowledge"?

2 A Yes.

3 Q Notwithstanding though on the first page Mr. Gordon

4 is referred to in the third person, correct?

5 A Yeah. This was prepared based on discussions with

6 Mr. Gordon. I prepared it.

7 Q Right, you prepared it. And it refers to Mr. Gordon

8 in one place as taxpayer and in other places as "he."

9 A Yes.

10 Q And let's look at the last paragraph.

11 It says "in view of the circumstances discussed

12 above and the fact that the taxpayer is over 60 years of

13 age, he wishes to file the attached offer and compromise.

14 He has talked to various relatives and because of his age

15 and desire to clean up his situation, they have agreed to

16 lend him some money. The offer presented is based on the

17 sum of money which he feels he can borrow. He has no

18 other assets."

19 Now, you said yesterday, I believe, in response

20 to Mr. Wallenstein's questions that that information that

21 you put in this last paragraph was told to you by

22 Mr. Gordon; is that right?

23 A That's correct.
24 Q Now, the second to last sentence says "the offer
25 presented is based on the sum of money which he feels he

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 can borrow."

2 Now, did you mean by that sentence to indicate

3 that the 150,000 that was being offered was the maximum

4 that Mr. Gordon could raise from his relatives?

5 A That really doesn't say that. It's an offer. The

6 $150,000 was never anticipated as being the final offer or

7 the final compromise.

8 Q Now, it's correct, is it not, that in addition to

9 borrowing from his relatives, you knew that Mr. Gordon at

10 that time also had the capacity to borrow large sums from

11 his corporation.

12 A That's correct. I don't know how large it was, but

13 he had the capacity to borrow.

14 Q Well, he had the capacity to borrow hundreds of

15 thousands of dollars, right?

16 A Talking prospectively now, we are not talking about

17 the past. At that time I didn't know what he would have

18 available to him. You usually don't.

19 Q You knew, did you not, that if Mr. Gordon were

20 borrowing money from his corporation to, fo r example, buy

21 Armani suits, he could also borrow money to pay back the

22 IRS?

23 A No, I wouldn't know that. I don't know what his
24 understanding was with the stockholders.
25 Q Did you ever have any reason whatsoever to think that

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 the stockholders were placing any limits on Mr. Gordon's

2 taking of loans from the company?

3 A I had no reason to know either way.

4 Q Right.

5 In fact, you've never met Dr. or Mrs. Grossman

6 face to face, have you?

7 A No.

8 Q Until this trial.

9 A That's correct.

10 Q And you had no reason to think one way or the other

11 about what the stockholders thought of Mr. Gordon's loan?

12 A Yes.

13 Q Assuming that the Grossmans were the stockholders.

14 A Right.

15 Q But at the same time you saw that this wasn't a lump

16 sum loan that was being made to Mr. Gordon, it was an

17 ongoing payment of his personal expenses, right?

18 A Well, at some point it had stopped.

19 Q Right.

20 But the pattern was such that it was a routine

21 matter, the monthly bills of Mr. Gordon were getting paid?

22 A Well, bills were getting paid up to that point, yes.

23 Q Look at the second paragraph.
24 It says "taxpayer is presently trying to clean up
25 his life and move forward. He is 60 years of age and he

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 will never be able to pay the substantial sums of taxes,

2 penalties and interests owed to the government. In

3 addition, he's liable for substantial amounts to other

4 parties which he will not be able to pay. We have

5 prepared a projection of income for the next five y ears

6 and even if he increases his earnings substantially over

7 the next five years, he wouldn't come close to earning

8 enough to pay all of his obligations."

9 Now, let me ask you about that paragraph.

10 That paragraph, let me make sure I understand it,

11 is indicating that in addition to the tax liability he

12 owes, Mr. Gordon has lots of other debts, right?

13 A He did have some other debts.

14 Q And those debts are actually listed on the 433 that

15 you attached?

16 A That's correct.

17 Q When you say "even if he increases his earnings, he

18 won't come close to earning enough to pay all of his

19 obligations --"

20 A Right.

21 Q -- You're saying all of those other obligations, not

22 even counting the IRS, he will barely be able to pay

23 those?
24 A I didn't say that. I said all of his obligations.
25 Q Okay.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 So even if you include the IRS, he won't be able

2 to pay all the obligations. Didn't like that way at

3 least?

4 A 3 and-a-half million, no.

5 Q Now, you said before that you had agreed with

6 Mr. Gordon that if he didn't repay the loans by 1994, you

7 would categorize them at that point as income; is that

8 correct?

9 A I didn't agree. I told him that's what I would do.

10 Q But did I explain it correctly?

11 A Yes.

12 Q And give us a rough idea in July of 1993 when you

13 submitted this offer and compromise what Mr. Gordon owed

14 his company?

15 A I don't know. I mean, I believe -- I had believed at

16 the time when he did this that his loan was very low

17 because he had paid back the $235,000. I wasn't aware of

18 this continued increase in the lo an account in 1993.

19 Q Okay.

20 And, again --

21 A I should say to the extent of his continued

22 increase. I knew he was increasing, but I didn't know it

23 was that much.
24 Q So is that another example of where you believed
25 Mr. Gordon deceived you?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 A Yes.

2 Q Did Mr. Gordon tell you affirmatively that "I'm going

3 to cut back. I'm not going to take as many loans"?

4 A Mr. Gordon never told me anything. He did what he

5 wanted to do. It was understood based on the discussions

6 that the loans were high at the time. He said he was

7 going to pay them back. It was never the intent for them

8 to get higher.

9 Q In 1994 you were expecting that Mr. Gordon -- you had

10 instructed Mr. Gordon to repay those by 1994 or you were

11 going to tak e certain action and call them income, right?

12 A Yes, on the basis of those facts I wouldn't feel they

13 would be loans.

14 Q If Mr. Gordon were to repay those loans, he would

15 have had to have that money coming in, right?

16 A From somewhere.

17 Q Either from Who's Who or somewhere else?

18 A That's correct.

19 Q Take a look at Exhibit 420-E which is the projection

20 you prepared in connection with the offer and compromise.

21 Now, there's no projections of large amounts of

22 income that are due to Mr. Gordon between 1992 and 1994,

23 are there?
24 A No. Those projections were based on the facts and
25 circumstances that existed at the time the projections

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 were done.

2 Q Is it correct, though, that you didn't feel any need

3 to tell the IRS, w ell, look, I expect that he is going to

4 get a substantial amount of income and he will use that to

5 pay back his loans to Worldwide?

6 A Well, at the time I did these I didn't think they

7 were very big loans. He just made a $235,000 payment.

8 Q Actually let me ask you about that.

9 You knew the year end 1992 figures, right?

10 A Umm-hmm.

11 Q And your testimony is that when you are submitting

12 this in July of 1993, you don't know what is taking place

13 in the first seven months of 1993?

14 A And his cash flow determination based on income would

15 be based on whatever income information I had at the time

16 which was the '92 income.

17 Q I just want to make sure I have this right.

18 A Yes.

19 Q That for the time period January of 1993 to July of

20 1993, you don't know what's going out. You don't know

21 what he's spending, correct?

22 A I don't have a fixed, you know, fix on it.

23 Q Right.
24 But your testimony is that you do happen to know
25 that this repayment was made, correct?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 A Yes.

2 Q So in other words, for 1993 the only thing you know

3 is about what's reducing the account, you don't know what

4 activity is causing it to go up, if at all?

5 A No. The reason I became aware of it was that the

6 credit was put to the Grossmans' loan and exchange account

7 so I was aware there were some heavy credits coming in.

8 Q But when you were reviewing those books to see that

9 you didn't see Gordon's loan account going up?

10 A Yeah, it was going up at the time but it wasn't

11 anywhere near an amount of money that would require me to

12 substantially increase the projections and, again, he said

13 he was going to pay back those loans. I don't know where

14 he was going to get it from.

15 Q Well, I guess my question is regardless of the

16 source, if he was going to get enough money to pay it

17 back, and you believed that --

18 A Right.

19 Q -- Why isn't it on this projection, 420-E?

20 A Because it is not a priority lien. The IRS would not

21 look at those loans as a priority to their position. Only

22 necessary living expenses and those payments that would be

23 required to be made would be considered in determining how
24 much cash flow he had which is why the DOJ items were on
25 there.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 Q So you are saying that you consciously decided not to

2 put that expected income and those Who's Who Worldwide

3 loans on this projection because you didn't think you had

4 to, is that your testimony?

5 MR. WALLENSTEIN: Objection.

6 THE COURT: Overruled.

7 A I didn't consciously do anything. I just didn't

8 consider them.

9 Q Is it that you didn't think about them or you thought

10 about them and said no, I don't have to put them on there?

11 A I didn't think about them because all I did was try

12 to project the income based upon what the corporation

13 would earn in the future.

14 Q Talking about the IRS and what has priority over

15 it --

16 A Right.

17 Q -- Do you as a tax expert, did you believe that if

18 the IRS was told that Mr. Gordon was going to get a

19 substantial sum of money and rather than apply that to his

20 IRS debt, he was going to apply it to a debt to a company

21 that he owned, that that wouldn't make any difference to

22 them?

23 A It wouldn't.
24 Q It would not make a difference?
25 A No, because the net effect would be zero.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 Q So if the IRS were told Mr. Gordon will get a

2 substantial sum of money and rather than pay you, IRS,

3 he's going to pay back his own company, your testimony is

4 that that would not have mattered in your judgment to the

5 IRS at all?

6 Yes or no?

7 A My testimony is that that was not considered in that

8 light. That's my testimony. The income --

9 Q Considered by whom, you?

10 A That's correct.

11 Q Okay.

12 MR. WALLENSTEIN: Judge, I ask the witness be

13 permitted to complete his answer. He obviously had not

14 finished it.

15 THE COURT: Well, the answer called for a yes or

16 no and he exceeded that without objection by counsel but

17 I'll not let him go further than that.

18 BY MR. WHITE:

19 Q Now, regardless -- let me back up this January 1993

20 repayment from Dr. Grossman that you were aware of,

21 correct?

22 A Umm-hmm. Yes.

23 Q You testified Mr. Gordon told you that that was a
24 loan to him from Dr. Grossman, right?
25 A Well, I knew it came from Dr. Grossman, yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 Q And that loan is not listed on this projection

2 either, is it?

3 A That's correct, it's not.

4 Q So that was another debt, personal debt of Mr. Gordon

5 that's not listed on this form?

6 A That was Mr. Gordon's preference.

7 Q You discussed that with him?

8 A Yes.

9 Q And Mr. Gordon specifically instructed you not to

10 include that; is that correct?

11 A That's correct.

12 Q And he had told you earlier that Dr. Gr ossman had

13 loaned him that money, right?

14 A I was not aware of the true relationship between

15 Mr. Grossman and Mr. Gordon. Whatever he said to do with

16 respect to that, I saw no documentation that indicated

17 that it was a valid loan or anything.

18 Q Okay.

19 And is it fair to say that you questioned whether

20 it was a valid loan?

21 A No, I questioned for purposes of the projection as to

22 whether there was something that should be considered as a

23 required payment.
24 Q And did you have a conversation with Mr. Gordon where
25 you indicated that it should be disclosed?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 A No, it wasn't that kind of conversation. Do you want

2 to disclose the fact that you owe your brother-in-law

3 money? And he said no.

4 Q Now, you said yesterday that when you submitted this

5 offer you expected the IRS to ask about Who's Who

6 Worldwide, right?

7 A Without question.

8 Q Now, it's fair to say though that the 433's that were

9 -- the 433 form given to the IRS did not indicate that

10 Mr. Gordon was the owner, correct?

11 A That's correct.

12 Q And if this projection had your best estimate of

13 Mr. Gordon's projected income --

14 A At that time, yes.

15 Q -- At that time, why would they need to see Who's Who

16 Worldwide's documents?

17 A The reason they would need to see it was because my

18 best estimate may not be correct. Again, it's an

19 estimate. They may say, well, what happens if you earn

20 $1,000,000 in 1993 or $2,000,000 in 1994, and of course I

21 couldn't tell them that. The logical sequence of events

22 here was to look at the corporate activity and make a deal

23 which was dependent upon his ability to withdraw money
24 from Who's Who Worldwide since that was the only source of
25 income, and Mr. Gagliardi was aware of that.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 Q Look at 420-D, as in David, that's the 433 form.

2 A 420-D.

3 What is 423?

4 Q That's the 433 A form.

5 A There's no number on it.

6 Q There should be a sticker on the lower right-hand

7 side.

8 A Yes.

9 Q Let's start at the top, box 1.

10 A Umm-hmm.

11 Q You got that address, 10 Bluff Road from Mr. Gordon,

12 right?

13 A Yes.

14 Q But you indicated that it was in early 1993 that you

15 had a discussion with Mr. Gordon and you told him you

16 would have to pay rent if he was using the condo, right?

17 A He said he would be using it on occasion.

18 Q But he was using it s ufficiently, a sufficient amount

19 of time you thought he needed to be paying rent?

20 A Yes, some portion of it.

21 Q And that discussion took place before July of 1993

22 when you submitted this form, right?

23 A Probably just before it, yes.
24 Q And this form, aside from Mr. Gordon's signature,
25 that's your handwriting, correct?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 A Yes.

2 Q You prepared this?

3 A That's correct.

4 Q Now, under box 18 where it says "securities," on page

5 2, you wrote "none," is that correct?

6 A That's correct.

7 Q That was based on your understanding that Mr. Gordon

8 owned none of the company; is that correct?

9 A That's correct.

10 Q And that's because of what Mr. Gordon told you; is

11 that correct?

12 A That's correct.

13 Q Now, i f you look at box 14 which asks for "bank

14 charge cards" and other things, do you see that?

15 A Umm-hmm.

16 Q "None" is listed there; is that correct?

17 A That's correct.

18 Q On the next page where it says "other liabilities,"

19 box 28?

20 A Right.

21 Q The description under "other liabilities" says,

22 "including, other charge accounts," correct?

23 A Yes.
24 Q At the time you prepared this in July of '93, you
25 knew that Mr. Gordon was possessing and using an American

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 Express gold card, correct?

2 A Ms. Sautter's, yes.

3 Q You knew though that Mr. Gordon had a card in his own

4 name, right?

5 A I don't know. I have never seen the card. All I

6 know is that he was using Ms. Sautter's card.

7 Q Did you ever see the American Ex press statements

8 themselves?

9 A I don't recall. I don't remember seeing his name on

10 it.

11 Q Let's start with this. Did you ever see the

12 statements themselves?

13 A No, I think I saw one in the course of the years.

14 Most of those were reviewed either by Liz Sautter or for

15 people who worked for me.

16 Q Is it your understanding throughout this time period

17 you knew the company was paying American Express bills and

18 you thought there was just one card, Liz Sautter's, and

19 Mr. Gordon was using that card?

20 A That's what he told me. When he couldn't get credit,

21 he was using Liz Sautter's card.

22 Q Did you understand that to mean that he was literally

23 going to Liz and saying, let me have the card, I got to go
24 make a purchase?
25 A No, I know that I can have a secondary signature on

OWEN M. WICKER, RPR OFFI CIAL COURT REPORTER
8075
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1 the card.

2 Q It was your understanding Mr. Gordon is walking

3 around with a plastic card in his wallet --

4 A Right.

5 Q That he could use to charge.

6 A That's correct.

7 Q And you didn't believe that that needed to be

8 included on this form?

9 A No, I did not.

10 Q And at the time you filled out this form you knew, it

11 was fair to say, there were substantial amounts being

12 charged by Mr. Gordon on that card?

13 A Occasionally there were substantial amounts.

14 Q In box 28 where it says "other liabilities," again

15 the loans from Who's Who Worldwide are not listed,

16 correct?

17 A That's correct.

18 Q Now, there's other loans listed there, correct?

19 A Yes.

20 Q You understood that a taxpayer's liabilities needed

21 to be listed there, correct?

22 A Yes.

23 Q And --
24 A Tax liabilities.
25 Q Well, one of them is for charge accounts, right, for

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 $32,000. That's not a tax liability, is it?

2 A No, that's correct.

3 Q So notwithstanding the fact that you listed six other

4 liabilities of Mr. Gordon's there, you did not list the

5 loans from Who's Who Worldwide?

6 A That's correct.

7 Q And on the next page "necessary living expenses." I

8 want to ask you about this.

9 Is it your testimony that what the taxpayer is

10 supposed to fill in on this form is not his actual

11 expenses, but only that portion of his actual expenses

12 that are really necessary?

13 A That is correct. His necessary living expenses.

14 Q Now, let me give you the example I asked Mr. Rizino

15 yesterday. If y ou have somebody, a single person, no

16 family, no children, no dependents living in a $20,000 a

17 month mansion, when he fills out that form, what is he

18 supposed to put on that line for rent?

19 A That's an unreasonable question.

20 Q Well, what if I'm that guy and I have this in front

21 of me and you're my accountant, what did you tell me to

22 put down?

23 A What you need to spend -- you want me to answer that
24 question for $20,000?
25 Q I should put 20,000.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 A Do you want me to answer the question?

2 Q Yes, I do.

3 A Okay. I would put $20,000 because there was some

4 lease in the contract that provides him to pay it.

5 Q What if I'm that guy and I say the lease is up next

6 month, you could move, but I think it is necessary for me

7 to stay there because I entertain a lot and I want to

8 impress my clients?

9 A If he was going to put $40,000 of income down on the

10 other side, I would have no problem putting down the

11 $20,000.

12 Q So you put your real income -- I'm sorry. You put

13 your actual expenses if you are showing enough income on

14 the other side that you could pay for it, right?

15 A I would put contractual expenses if you could pay for

16 it. I would not put unreasonable expenses, even if he was

17 making $50,000 a month in income. They wouldn't allow it.

18 Q You have the form, the instructions to this form,

19 right?

20 A That's correct.

21 Q It says "list --" in substance, it says "list your

22 actual --" hold on. It is Defendant's Exhibit ED.

23 It says "enter your monthly rent payment."
24 (Handing.)
25 A That's correct.

OWEN M. WICKER, RPR OFFIC IAL COURT REPORTER
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1 Q So you believe that the taxpayer is supposed to put

2 not his actual expenses but only what he thinks is

3 necessary, correct?

4 A That's correct.

5 Q So if a taxpayer in that hypothetical I used said,

6 well, really it's only reasonable, it's only necessary for

7 me to live in a $2,000 a month apartment but I really like

8 living in the $20,000 a month one, so I'll put $2,000 a

9 month on the form, are you with me?

10 A I'm with you.

11 Q Is it your testimony that the IRS, that's what they

12 want? They don't want to know that you are squandering

13 another $18,000 a month?

14 A That's not the purpose of the information. It's not

15 to know whether you are squandering, it's the purpose to

16 know what you need to live on.

17 Q This form is called a collection information

18 statemen t?

19 A Absolutely correct.

20 Q It's used when the IRS is trying to collect money

21 from somebody who owes them back taxes; is that correct?

22 A That's correct.

23 Q Are you saying that if a taxpayer is squandering
24 $18,000 a month on unnecessary luxuries, the IRS doesn't
25 want to know anything about it?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 A No, they have no desire to know.

2 Q They have no desire whatsoever?

3 A And in fact, they will cross it out and put their own

4 numbers in.

5 Q They would cross it out and put their own numbers

6 when they calculate how much they want you to pay, right?

7 A But the payment would be dependent upon the income.

8 The income is what is critical, not the expenses.

9 Q Now, your friend, Mr. Rizino, who was here yesterday,

10 was your partner?

11 A Yes.

12 Q He's been an accountant for 20 years?

13 A Yes.

14 Q You respect his opinion?

15 A In certain issues, yes.

16 Q You heard him say yes he should put down the 20,000?

17 A He's never filed a 433 in his life nor has he been in

18 a collection proceeding in his life.

19 Q You are saying that he's wrong?

20 A Yes.

21 Q And you have more experience and you're right?

22 A Of course. I've never been questioned.

23 Q Let's look at Government's Exhibit 425 which you
24 should have in front of you.
25 A In that same packet?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Q No, let me find it for you.

2 MR. WALLENSTEIN: Sorry, Mr. White. What exhibit

3 did you say?

4 MR. WHITE: 425.

5 MR. WALLENSTEIN: All right.

6 BY MR. WHITE:

7 Q Now, that's a letter we looked at briefly earlier

8 this morning where you are responding to Mr. Gagliardi's

9 letter, correct?

10 A Umm-hmm.

11 Q And that's the one where you are forwarding to him

12 this note from Joyce Grossman, right?

13 A Yes.

14 Q Now, when you got -- what prompted this was

15 Mr. Gagliardi wrote you a letter which said that in

16 reviewing Mr. Gordon's personal bank account statements,

17 he noticed some unusual deposits, is that fair?

18 A No, that's not what is part of this.

19 Q Well, Mr. Reffsin, let me show you Government's

20 Exhibit 424. That's a February 1994 letter from

21 Mr. Gagliardi to Mr. Gordon, care of you, correct?

22 A Umm-hmm.

23 Q That is correct?
24 A Yes, I'm sorry.
25 Q And the second paragraph says "my review of your

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 checking records discovered several unexplained items,

2 including abnormal deposits totaling $15,000 in July of

3 1993 and $10,613.52 in October of '93. Please explain the

4 source of these funds."

5 Do you see that?

6 A Yes.

7 Q Now, you received that letter from Mr. Gagliardi,

8 correct?

9 A Yes.

10 Q And after that did you have a conversation with

11 Mr. Gordon about the source of those funds that

12 Mr. Gagliardi asked you about?

13 A I'm confused. Are we talking about the answer for

14 the income for 1993 or are we talking about this?

15 Q Let's do it in order. Let's start at 424,

16 Gagliardi's letter to you.

17 A Okay.

18 Q To Mr. Gordon, care of you.

19 A Right.

20 Q He says what I just read, that there are unexplained

21 items, including abnormal deposits total totaling $15,000

22 in July of '93?

23 A Yes.
24 Q Following that, did you have a conversation with
25 Mr. Gordon about those alleged abnormal deposits?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 A Yes, I did.

2 Q Tell us what happened.

3 A I asked him what they were for and he went back and

4 he checked and I got the notes and he told me what they

5 were for.

6 Q Okay.

7 And he gave you copies of these promissory notes?

8 A That's correct.

9 Q And tell us in as much detail as you can what you

10 recall he told you about these deposits and the notes?

11 A As I recall, one of them he said was attributable to

12 the expenses incurred on the death of the son, and the

13 other one was with respect to some medical expenses that

14 he had to pay on behalf of his wife. I don't necessarily

15 remember the order.

16 Q Did you a sk Mr. Gordon for notes to document these

17 loans?

18 A No, I did not.

19 Q So did he volunteer them to you?

20 A Yes.

21 Q So, in other words, he came back and said -- let me

22 back up.

23 You had this conversation and he said, well, I
24 got to check, and he had a subsequent conversation with
25 you, right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 A I don't really understand the question.

2 Q When you asked him about these deposits --

3 A Right.

4 Q -- In that conversation he didn't whip out these

5 notes?

6 A No.

7 Q They came later?

8 A Yes. He said he didn't remember. He had to check.

9 Q So then there is some gap in time and you have

10 another conversation?

11 A That's correct.

12 Q And he volunteers to you "I borrowed this money from

13 my sister Joyce, and here's the note that documents that

14 loan," correct?

15 A That's correct.

16 Q And he also indicated "I borrowed the money from my

17 wife's medical expenses from Madeleine Middlemark and

18 here's the note that documents that," right?

19 A Yes.

20 Q Mr. Reffsin, let me show you Exhibits 764 and 765

21 which are already in evidence.

22 Those are wire transfers from Who's Who Worldwide

23 to Bruce Gordon, correct?
24 A Yes.
25 Q And those are already in evidence, right? You've

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 heard the testimony about them?

2 A Yes.

3 Q Is it fair to say that now in retrospect, you know

4 that that money did not come from Joyce Grossman?

5 MR. TRABULUS: Objection, Your Honor.

6 THE COURT: Overruled.

7 A It appears that way, yes .

8 Q And from the review of the general ledger, ledgers

9 from which you prepared your chart, you also know, do you

10 not, that those monies, those transfers were booked in the

11 Who's Who Worldwide books as loans to Mr. Gordon?

12 A Yes, I did go back and check this after to see if

13 they were there.

14 Q And they were, weren't they?

15 A Yes, they were.

16 Q Okay.

17 Now, is it fair to say that you believe that's

18 another example of where Mr. Gordon deceived you?

19 A Yes.

20 MR. TRABULUS: Objection.

21 THE COURT: Overruled.

22 BY MR. WHITE:

23 Q Now, if you put those wire transfers aside.
24 Let's go back to Exhibit 425.
25 Number 3, paragraph numbered 3 on your letter,

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 talks about what you've enclosed and it says "a letter

2 from the comptroller of Who's Who Worldwide Registry,

3 Inc., verifying the compensation agreement with Mr. Gordon

4 began January 1993. She verified this with the

5 shareholders of the corporation."

6 Now, the comptroller that you are referring to

7 there in that paragraph 3 is Maria Gaspar, correct?

8 A Yes.

9 Q Is it correct that Mr. Gordon told you that she had

10 verified that agreement with the shareholders?

11 A That's correct.

12 Q Maria Gaspar didn't tell you that?

13 A No, I didn't speak to her about that aspect of it.

14 Q Is it fair to say that you made this representation

15 in this letter that the shareholders had verified it based

16 on what Mr. Gordon had told you?

17 A Yes.

18 Q And is it your testimony that if that were untrue,

19 you didn't know it?

20 A That's correct.

21 Q Is it fair to say that you regard thi s as another

22 instance where Mr. Gordon deceived you?

23 A Not a significant deceit, but yes.
24 Q If you look at the paragraph after the numbered ones,
25 is it fair to say that you provided Mr. Gagliardi with the

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8086
Reffsin-cross/White

1 explanation that Mr. Gordon provided you?

2 A Yes, that's word-for-word, Mr. Gordon.

3 Q That's word-for-word from him?

4 A Umm-hmm. Well, basically word-for-word. I might

5 have put improper English language.

6 Q Okay.

7 But the substance is correct?

8 A Yes.

9 Q You can put those letters aside for a minute,

10 Mr. Reffsin.

11 You have substantial experience as an accountant

12 in bankruptcy matters, is that fair to say?

13 A Yes.

14 Q And you are aware, are you not, that when a

15 corporation is in bankruptcy the lawye rs who do work for

16 the debtor have to submit fee applications to the Court?

17 A Yes.

18 Q So, in other words, if a lawyer represents a debtor

19 corporation, the debtor corporation can't just send the

20 corporation a bill and the corporation writes out a check

21 to him, right?

22 A Right.

23 Q The bankruptcy court has to get that bill first and
24 approve it, right?
25 A That's correct, generally.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 Q I'm sorry?

2 A Generally.

3 Q Generally. Okay.

4 And the bankruptcy court has to determine, has to

5 look at what was done and whether the fees are reasonable,

6 right?

7 A Yes.

8 Q And the descriptions of the legal work that is

9 performed has to be fairly detailed so that the bankruptcy

10 court can make that judgment, ri ght?

11 A I believe so, yes.

12 Q And you've seen in evidence, have you not, the bills

13 from Mr. Ackerman's firm. They go on for pages and pages,

14 right?

15 A Yes.

16 Q Now, at the time Who's Who Worldwide filed bankruptcy

17 in March of '94, you were aware of all the things that we

18 just talked about, right?

19 A Yes.

20 Q You already knew that, right?

21 A Yes.

22 Q And at the time of that filing and thereafter, Who's

23 Who Worldwide had a bankruptcy attorney, correct?
24 A Yes.
25 Q It was Neil Flaum?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8088
Reffsin-cross/White

1 A Initially.

2 Q F-L-A-U-M, correct?

3 A Yes.

4 Q And it was sometime later in the summer when

5 Mr. Ackerman took over for Mr. Flaum; is that correct?

6 A That's correct.

7 Q And is it fair to say M r. Flaum is an experienced

8 bankruptcy attorney?

9 A Yes.

10 Q And Mr. Flaum's firm was a prominent one, right?

11 A He was well-known in the bankruptcy area, yes.

12 Q And he was a well-respected attorney, is that fair to

13 say?

14 A Yes.

15 Q His firm was a well-respected firm?

16 A He was well respected. I don't know about his firm.

17 Q Well, let's limit it to him.

18 A Okay.

19 Q Now, right around the time of the bankruptcy

20 Mr. Gordon told you, I think you said yesterday, he wanted

21 to clean up some things about the documentation of the

22 corporate ownership; is that right?

23 A When we had met with Mr. Adler, yes.
24 Q And you had recommended Mr. Adler to Mr. Gordon,
25 right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8089
Reffsin-cross/White

1 A That's correct.

2 Q And Mr. Adle r who testified here, he operates his law

3 office from his home in Manhattan; is that right?

4 A Yes.

5 Q And he's a solo practitioner; is that correct?

6 A Yes.

7 Q He's all by himself in his apartment, right?

8 A I don't know now but he was at that time.

9 Q I'm sorry.

10 Now, it was Mr. Adler who prepared the documents

11 that are in evidence, that said that the Grossmans owned

12 100 percent; is that correct?

13 A That's correct.

14 Q And it was Mr. Adler who prepared that letter where

15 it was allegedly from Joyce Grossman, right?

16 A Yes.

17 Q Where she says "I owned 75 percent and I'm

18 authorizing Bruce Gordon to tell other people that he owns

19 my shares," right?

20 A That's correct.

21 Q Now, Mr. Adler was performing work for Who's Who

22 Worldwide, right?

23 A Right.
24 Q He was drafting up these do cuments to memorialize the
25 founding of Who's Who Worldwide, right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8090
Reffsin-cross/White

1 A Right.

2 Q And but ultimately you paid Mr. Adler for his legal

3 work, right?

4 A Absolutely correct.

5 Q Now, isn't it true that the reason you and Mr. Gordon

6 went to Mr. Adler and you paid him with your own personal

7 money is because you knew that if Mr. Flaum did it, it

8 would be reported to the bankruptcy court and they would

9 see what documents he was creating?

10 A Absolutely not.

11 Q That never entered your mind?

12 A Never entered my mind.

13 Q Do you make it a practice to pay the legal fees of

14 your accounting clients?

15 A I make it a practice when I have concern about

16 whether they get paid and I make sure they get paid if

17 they are doing a favor, a nd if I get them involved, I make

18 sure they get paid. I try to make sure they get paid.

19 Q Well, you paid Mr. Adler $1,500; is that correct?

20 A That's correct.

21 Q Are you saying that Who's Who Worldwide couldn't pay

22 him, that's why you paid him?

23 A No. I'm saying Mr. Gordon might not have to pay
24 him. Mr. Gordon didn't like to pay legal fees or
25 accounting fees.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8091
Reffsin-cross/White

1 Q But is it fair to say though that Mr. Adler's $1,500

2 is a drop in the bucket compared to Mr. Flaum and

3 Mr. Ackerman?

4 A My accounting fees compared to what Mr. Gordon took

5 out is a drop in the bucket but I used to have to fight

6 with him to get paid also.

7 Q Now, Mr. Reffsin, when Publishing Ventures -- I'm

8 sorry.

9 When Publishing Ventures was buying the

10 condominium at Hummingbird Road in late '92 and early '93,

11 they got that money from Who's Who Worldwide; is that

12 correct?

13 A That's correct.

14 Q And it was at the time considered to be a loan,

15 right?

16 A Yes.

17 Q Who's Who Worldwide was loaning it to PVI?

18 A Umm-hmm. I meant yes.

19 Q Ostensibly Publishing Ventures was supposed to pay it

20 back at some point?

21 A At some point, yes.

22 Q And there was not any note prepared at that time, was

23 there, a written promissory note?
24 A Initially, no.
25 Q Okay.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 Now, at the time of the purchase, at the time of

2 the loan, no promissory note was created?

3 A No, that's correct.

4 Q Now, taking a look at Exhibit 671 in evidence, again,

5 that's the fax that M r. Adler sent to you on March 30,

6 1994.

7 If you look at the top document under the fax

8 cover sheet Mr. Adler is drafting up that promissory note,

9 right?

10 A He's drafting a revision, yes.

11 Q And so there was no signed official note prior to

12 this time, right?

13 A There was an understanding prior to this time.

14 Q There was an understanding, it was not a written

15 promissory note?

16 A That's correct. A formal written promissory note,

17 that's correct.

18 Q On March 30, 1994 when Mr. Adler faxes you that,

19 that's just a revision, right?

20 A That's correct.

21 Q And it is not yet finalized, correct?

22 A It hasn't been signed, yes.

23 Q Right.
24 And so whenever it was finalized it was after
25 March 30, 1994, right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8093
Reffsin-cross/Whi te

1 A Yes, it would have to be.

2 Q And so far as you know from the time this loan was

3 made in late 1992 or early 1993, up until early 1994 when

4 you asked, when you and Mr. Gordon asked Mr. Adler to

5 prepare such a note, there was no such note in existence?

6 A There was an understanding.

7 Q There was an understanding, but no written note in

8 existence, correct?

9 A There was a written note but it was a very simple

10 note. The information that was gotten for this note was

11 taken from a piece of paper. But it was very simple.

12 Q Well, have you ever -- you've been asked about this

13 note numerous times by federal agents in the past, haven't

14 you?

15 A Yes.

16 Q Have you ever indicated before that there was some

17 sort of a handwritten preliminary note?

18 A Well, I had prepared some -- just preliminary scratch

19 notes ba sed on discussions I had with Mr. Gordon, but

20 there was no note. There was nothing signed.

21 Q So you had notes about what your understanding was?

22 A Yes.

23 Q But there was never any written promissory note?
24 A No, there was not.
25 Q Take a look at Exhibit 816 which is in evidence.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8094
Reffsin-cross/White

1 Now, that is a copy of a deposition that you

2 gave, right?

3 A Umm-hmm.

4 Q And you gave that deposition on May 4, 1994, right?

5 A Right.

6 Q And that deposition was in connection with the Who's

7 Who bankruptcy proceeding, correct?

8 A Yes.

9 Q And if you look on pages 67 and 68, could you, just

10 to yourself, review your testimony on those two pages.

11 A (Perusing.) Yes.

12 Q On those two pages, am I correct, that you are being

13 asked abo ut the Hummingbird Road condominium?

14 A Yes.

15 Q Let me read from page 68.

16 "Question: And the purchase price of the condo

17 is presumably approximately $1,000,000?

18 "Answer: No. There was -- I believe the

19 original purchase price was substantially less than that,

20 but there was a major renovation made to it.

21 "Question: Is there a note that represents or

22 reflects this investment?

23 "Answer: Yes.
24 "Question: When was it converted from an
25 investment to a note?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 "Answer: I believe the note was created early

2 '93, if I recall the date.

3 "Question: Sometime?

4 "Answer: Sometime around the time that the

5 property was acquired."

6 Do you see that testimony that you gave?

7 A Yes, I do.

8 Q In fact, you kne w that not more than five weeks, six

9 weeks before this Mr. Adler was creating that note, you

10 knew that, right?

11 A The revised note, yes.

12 Q Didn't you just testify that there was no note

13 created in early '93?

14 A No signed note, that's correct. The terms were

15 determined at that point, but there were no signed notes.

16 Q Did you interpret this question as asking you if

17 there was an understanding or whether there was a written

18 note?

19 A I'm not sure what I interpreted at the time. I may

20 have even said the wrong date. I don't know.

21 Q But it refers to a note, does it not?

22 A Yes, it does.

23 Q It doesn't just talk about a loan, it talks about a
24 note?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8096
Reffsin-cross/White

1 Q And a note connotes, means, something written, rig ht?

2 A That's correct.

3 Q All right. Now, let me go back or move on to a

4 different subject.

5 We talked about early 1993 Dr. Grossman returned

6 certain money to Who's Who Worldwide.

7 A Yes.

8 Q I want to talk about the money going out.

9 In December of '92 Who's Who Worldwide sent

10 Dr. and Mrs. Grossman, a gross salary of $400,000, right?

11 A Yes.

12 Q Now, $400,000 was more than Mr. Gordon ever earned up

13 to his point for Who's Who Worldwide; is that right?

14 A A little bit more, yes.

15 Q Mr. Gordon was in day-to-day charge of the company,

16 right?

17 A Yes.

18 Q Dr. Grossman lived out in California, right?

19 A Yes.

20 Q How did it come about that -- who made the decision

21 that Dr. Grossman was going to get $400,000 in salary at

22 the end of '92?

23 A Mr. Gordon.
24 Q Tell us how that ca me about.
25 A How the $400,000 came about?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 Q Tell us -- how did you first hear that Dr. Grossman

2 was to get any salary in '92?

3 A We had a little discussion about the Grossmans

4 getting salary. I had no idea about what the amount was

5 going to be, but I thought he had some arrangement with

6 the Grossmans.

7 In early or mid, early December I got a call from

8 Liz Sautter and Liz Sautter said they were issuing a check

9 to the Grossmans, should they withhold California

10 withholding taxes? And she told me that she was issuing,

11 you know, the salary, $400,000.

12 Q I'll let you finish, but I want to ask you a question

13 about it.

14 A Yes.

15 Q If I understand you correctly, you are not consulted

16 in advance about that?

17 A No.

18 Q Liz Sautter called you up and said, hey, Liz Sautter

19 wants me to send the Grossmans $400,000, all I want to

20 know if I should withhold California taxes?

21 A Yes.

22 Q Continue the story.

23 A Then I ultimately had a discussion with Mr. Gordon to
24 find out what he was doing and he said he was sending them
25 a salary and they had agreed -- he had agreed with them to

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/White

1 that amount and I said fine. I said if you owe it to

2 them, pay it to them. And it's a good time to do it

3 because the corporation is making money and you'll get a

4 tax benefit for it.

5 Q And did you question him at all about the amount?

6 A No, not really. I knew the Grossmans had put up

7 their credit for the merchant account, at that point I

8 knew they were involved with stockholde rs. It was a

9 little high but if you allocate it over three or four

10 years of activity it is not a great deal of money for

11 stockholders to obtain.

12 Q So the money goes out in December of 1992, right?

13 A Right.

14 Q And you subsequently learn that it comes back, the

15 net after taxes comes back in January of '93, right?

16 A That's correct.

17 Q And then that is used to reduce Mr. Gordon's loan

18 account; is that correct?

19 A That's correct.

20 Q Now, given all the circumstances, namely that 400,000

21 is a lot of money, that Dr. Grossman wasn't a day-to-day

22 participant in the company and the fact that it goes out

23 and comes back very quickly, did that ever raise any
24 question in your mind as an accountant?
25 MR. TRABULUS: Objection, Your Honor, to form.

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1 THE COURT: Overruled.

2 A Well, it raised a question that obviously

3 Mr. Grossman even loaned him the $235,000.

4 Q Well, did it ever occur to you that in fact this was

5 a device by which Mr. Gordon could on paper make it look

6 like he was reducing his loan account?

7 A Does it look that way? Yes, but I was not privy to

8 the discusses that he had between Mr. Grossman at the time

9 and whatever decisions they made they made. It's not my

10 position to determine whether something is right or wrong

11 in a case like that.

12 Q But is it fair to say from what you said it looked

13 that way and you had certain suspicions but they were

14 allayed by Mr. Gordon?

15 A Yes. Obviously I asked Mr. Gordon what that money

16 was, and he said it was a loan.

17 Q Now, Mr. Gordon also made a repayment of

18 approximately $20,000 right aro und the time of the

19 bankruptcy filing; isn't that right?

20 A Yes.

21 Q And how did you learn about that one?

22 A Only through the bank reconciliations.

23 Q You only knew about it after the fact.
24 A That's correct.
25 Q And have you since looked at the bank records or the

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1 trial exhibits here to learn that that $20,000 in fact

2 just came from another corporation and went to Mr. Gordon

3 and then went to Who's Who Worldwide?

4 A I did not look at Sterling or any of the other -- I

5 mean, I learned from the discussions you had here, but I

6 didn't look at those exhibits because I didn't do any work

7 on those exhibits or very little work.

8 Q Okay.

9 So, in other words, the first time you learned

10 that this alleged repayment was in fact money h e had

11 obtained from another one of his corporations was from the

12 testimony at trial?

13 A That's correct.

14 THE COURT: Incidentally, members of the jury,

15 we'll work a little later before we go to lunch because I

16 have a Judge's meeting. I didn't know if I mentioned that

17 and the lunch hour will extend until 2:15, whenever we

18 break.

19 BY MR. WHITE:

20 Q Now, Mr. Reffsin, let me ask you about the time

21 period around the bankruptcy filing. That's March of

22 1994, correct?

23 A Right.
24 Q And were you aware that in the time period
25 immediately preceding the bankruptcy petition, large

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1 amounts of money were transferred out of Who's Who

2 Worldwide to other companies that Mr. Gordon controlled?

3 A I know there were transfers to Sterling during the

4 January-February period in 1994. Ms. Gaspar had indicated

5 to me there were some transfers made to some other

6 entities, but that he had returned those transfers, some

7 of them.

8 Q In other words, that money went out to other

9 corporations but some of it came back to Who's Who

10 eventually?

11 A That's correct.

12 Q Did you ever learn that that money that went out to

13 other corporations was then being used for Mr. Gordon's

14 benefit?

15 A No, we never did any work with the other companies.

16 Q Did you not do the books for Sterling Who's Who also?

17 A We got involved initially. The books were maintained

18 at the time by Maria Gaspar. We were involved with

19 Sterling up through the end of 1993, and from that point

20 on Maria Gaspar who was maintaining the books, and all we

21 saw basically whatever the creditors saw, the trial

22 balances.

23 Q Now, do you know or did you have any discussions with
24 Mr. Gordon where you indicated to him that Who's Who
25 Worldwide could not continue after the bankruptcy to pay

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1 his American Express bills?

2 A Oh, yeah. It was specifically told that there can be

3 no personal loans at all in the debtor.

4 Q Told by whom?

5 A By me.

6 Q To Mr. Gordon?

7 A That's correct.

8 Q And what, if anything, did Mr. Gordon say in

9 response?

10 A He didn't say anything. He accepted it.

11 Q Was it your understanding or did you have a

12 discussion with him about how his future American Express

13 bills would be paid?

14 A I was under the impression there weren't going to be

15 any future American Express bills at that po int; that he

16 was going to live his salary which was at that time

17 supposed to be $150,000.

18 Q So is it fair to say that if he had other

19 corporations pay his American Express bills, that was or

20 would be a surprise to you?

21 A It was. I didn't expect it to have that.

22 Q Let me show you a chart that is already in evidence.

23 Now, Mr. Reffsin, if you wouldn't mind stepping
24 down for a minute. Take a look at this chart.
25 Now, we'll talk about the left side of it for now

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1 so I'll stand in front of the right side.

2 MR. TRABULUS: What exhibit number is that?

3 MR. WHITE: I'm sorry. Exhibit 837.

4 THE COURT: You are standing in front of the

5 jurors probably, so just be on the side.

6 THE WITNESS: I'm sorry. Shall I stand over

7 there mayb e?

8 MR. WHITE: If you can see it from there.

9 BY MR. WHITE:

10 Q Now, do you see on the left the shaded box that

11 represents Who's Who Worldwide bank accounts?

12 A Yes, sir.

13 Q And do you see the funds going out in February and

14 March to other companies including Sterling Who's Who?

15 A Yes.

16 Q So I understand, you were aware of those transfers

17 out of Who's Who Worldwide at that time?

18 A Yes.

19 Q You were aware of those transfers?

20 A Yes.

21 Q And as you see some comes back from Sterling Who's

22 Who, that is where you were referring to as Maria Gaspar

23 told you some came back?
24 A That's correct.
25 Q Now, beyond when the money gets transferred out of

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1 Who's Who Worldwide, in other words, everything from here

2 over to the right --

3 A Umm-hmm.

4 Q -- Is it fair to say you are not aware of this other

5 stuff?

6 A No, we didn't do anything in Sterling Who's Who

7 because from our point of view it didn't even start up

8 until something like June or July of '94 so we didn't get

9 that involved.

10 Q So you were -- were you aware that money went from

11 Who's Who to Sterling and then Sterling was paying

12 Mr. Gordon's American Express and car lease?

13 A I wasn't aware of that.

14 Q Were you aware that money went out to a variety of

15 Registry Publishing accounts which then paid Mr. Gordon's

16 American Express bill?

17 A No, I was not aware -- Maria had indicated he had set

18 up some Registry Publishing accounts but I thought they

19 had to do with the Sterling operation.

20 Q And were you aware that money eventually found its

21 way to W ho's Who Executive Club where they paid his

22 American Express bill?

23 A No, that I was not aware of. The monies that went to
24 Who's Who Executive Club was supposed to cover the cost of
25 the printing of the Tribute magazine.

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1 Q You may sit back down again.

2 Now, tell us when, if at all, you found out about

3 these other transfers and these other corporations?

4 A Maria had indicated that they had set up some other

5 accounts but Mr. Gordon was always setting up other

6 accounts, so from an accounting viewpoint we incorporated

7 them. For example, if Who's Who Worldwide had two bank

8 accounts we just incorporated two bank accounts. We were

9 not aware of the fact that he was taking out monies for

10 personal use. It was my understanding those monies were

11 being used to fund Sterling Who's Who's operations. And,

12 in fact, the autos, there were auto payments being made by

13 Who's Who Worldwide during the bankruptcy.

14 Q So I'm clear, you are saying that it was your

15 understanding that the money that gets transferred from

16 Worldwide to Sterling, was not to be used for Mr. Gordon's

17 personal expenses?

18 A No, they were to fund Sterling's operations because

19 he had 50, 60 employees and he was just starting up.

20 Theoretically, that was the understanding, he needed money

21 to carry the operation until it started to pay for itself.

22 Q Did you have specific discussions where he told you

23 that he wasn't going to have Sterling or any of his other
24 corporations continue to pay his American Express bills?
25 A I don't think I specifically discussed that. I just

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER

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1 assumed it.

2 Q You indicated before, though, that he told you that

3 he was going to live on his salary, though?

4 A Yes, that's why we had the $150,000 salary created by

5 the Court. It was acceptable as an acceptable salary.

6 Q Now, in March of '94, when all of these transfers

7 start, your offer and compromise is still pending with the

8 IRS and Mr. Gagliardi, right?

9 A It was pending but we really didn't do much towards

10 it at that time.

11 Q Right.

12 As you indicated before, Mr. Gordon could have

13 borrowed money from a number of sources to pay back the

14 IRS, right?

15 A He could always borrow money to pay back the IRS.

16 Q Looking at this chart, though, is it clear to you

17 that the money that Registry Publishing and Who's Who

18 Executive Club and Sterling gave to Mr. Gordon or loaned

1 9 to Mr. Gordon, all that could have been used to pay the

20 IRS?

21 A Sure.

22 Q And if you take a quick look at the money that goes

23 to Mr. Gordon, it's over $200,000, isn't it?
24 A Yes. I saw the numbers. I was somewhat shocked.
25 Q And $200,000 is more than the whole offer that was

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1 made to the IRS, right?

2 A No, not really. We also offered to the DOJ at the

3 time. It was really $400,000.

4 Q Eventually the offer and compromise was going to

5 include that DOJ penalty, right?

6 A That's what it ended up turning out to be.

7 Q That's what it ended up being?

8 A That's correct.

9 Q And ultimately those two liabilities together were

10 going to be settled for the 150 that you offered?

11 A That's correct.

12 Q Eat 150 was only goin g to be paid over three

13 years, right?

14 A I believe it was six -- I think it was a year

15 and-a-half.

16 Q I'm sorry, I misspoke. You're right.

17 It was 50,000 six months later and 85 six months

18 or a year later?

19 A That's correct.

20 Q So in the space of -- by the end of '94, Mr. Gordon

21 clearly had assets of over $200,000 in a lump sum that he

22 could have applied to his IRS debt?

23 A That was obvious, yes.
24 Q Now, you weren't aware of those transfers but you
25 were aware of the existence of Registry Publishing, right?

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1 A Yes.

2 Q And you were aware of the existence of Who's Who

3 Executive Club?

4 A Yes.

5 Q And did you know about all the different bank

6 accounts that Registry Publishing had?

7 A No, I di d not. I didn't get involved in that.

8 Q Is it fair to say -- well, have you reviewed or are

9 there any other books and records of Registry Publishing?

10 A I don't know. Maria Gaspar kept those and it may be

11 in the papers that were taken by the marshals at that

12 time. I know Mr. Gordon says he's sitting with hundreds

13 of boxes of information. Because we're missing work

14 papers also that were maintained in Who's Who Worldwide

15 when they took them.

16 Q Okay. Now -- I'm sorry, I lost my train of thought.

17 Now, did you have any discussions with Mr. Gordon

18 around the time of the bankruptcy, either shortly before,

19 shortly after, about what being in bankruptcy would mean

20 to Who's Who Worldwide?

21 A Yes.

22 Q Did you explain to him that it would involve

23 extensive disclosure of the company's finances?
24 A Absolutely.
25 Q When d id you have these discussions?

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1 A The issue of bankruptcy only came up when he lost the

2 case to to Reed Elsevier sometime in the middle of

3 February and he was trying to obtain bonding to fund the

4 judgment, and he said he couldn't get bonding because they

5 required 100 percent collateral.

6 That's when I suggested that maybe bankruptcy was

7 the right tool. I explained to him once you go into

8 bankruptcy you are under the scrutiny of the court.

9 Everything you do is watched. And so was I.

10 Q So that was prior to the time of the bankruptcy

11 filing, right?

12 A Oh, yeah, that was around February.

13 Q That was in February of '94, correct?

14 A That's correct.

15 Q And so with the -- was it after he lost the Reed

16 Elsevier lawsuit?

17 A It w as right after he lost it. That's what spurred

18 the thought of bankruptcy.

19 Q So after Mr. Gordon loses that case, after you tell

20 him that financial disclosure is something that will

21 happen as a result of a bankruptcy filing, then all these

22 transfers to other corporations take place, right,

23 according to this chart?
24 A You are talking about in March?
25 Q Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 A Yes.

2 Q So, in other words, all of this money after these

3 discussions you had with him gets transferred out of Who's

4 Who, Sterling, and then from Sterling onto other

5 corporations and then they pay Mr. Gordon's personal

6 expenses?

7 A Well, there were no transfers subsequent to the

8 bankruptcy filing. From what I understand is that the

9 transfers that he made, and he and Maria, it wasn't

10 involved. Some transfers were made like the 17th or the

11 18th of March, but it was my understanding those were the

12 transfers that came back. Everything that he transferred

13 on the 17th or 18th of March were put back into Who's Who

14 Worldwide.

15 Q Okay.

16 So aside from the stuff that gets put back, your

17 understanding between the time of roughly when the

18 judgment against them came down and the bankruptcy filing

19 is when those transfers took place?

20 A When the in and out took place, yes.

21 MR. WHITE: Your Honor, before I gauge what topic

22 to move on to, can you tell me how late we're going to

23 go?
24 THE COURT: About another 10 minutes.
25 MR. WHITE: Another 10 minutes. Okay.

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1 BY MR. WHITE:

2 Q No w, you indicated that the original offer was just

3 for that back tax liability and the separate was the

4 $254,000 in promoter penalties, right?

5 A Unusually I didn't think that the promoter penalties

6 were compromisable. So we didn't anticipate it. It

7 wasn't until I had a discussion with Mr. Gagliardi where

8 he said he would talk to the Department of Justice and see

9 if he could do something with it.

10 Q And eventually the answer was that it was

11 compromisable, right?

12 A Yes.

13 Q And the way -- it was the collateral agreement that

14 governed whether or not -- I'm sorry. It was the

15 collateral agreement that governed how much of those

16 penalties and on what schedule they were to be paid back?

17 A That's correct.

18 Q By the way, you reviewed the collateral agreement,

19 right?

20 A Yes.

21 Q And is it fair to say that if M r. Gordon owned or

22 controlled 75 percent of any corporation, that

23 corporation's income would be subject to that agreement?
24 A Ridiculously, yes.
25 Q In other words, the Justice Department drove a hard

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1 bargain, right?

2 A Ridiculously hard.

3 Q And that's the way you read that agreement, right?

4 A That's correct.

5 Q Is it fair to say it's pretty apparent from the

6 agreement that that's what its terms are?

7 A Yes, it says directly or indirectly controlled.

8 Q Throughout this period as you've testified you said

9 you didn't know that Mr. Gordon owned 75 percent of the

10 company, right?

11 A No. Which period?

12 Q You're right, I'm sorry.

13 After, at some point you came to learn that the

14 Grossmans owned 100 percent?

15 A That's correct, in 1993.

16 Q Thereafter it was your understanding Mr. Gordon owned

17 nothing?

18 A That's correct.

19 Q If, in fact, that was incorrect, then payments, and

20 he did own 75 percent, then payments would have been made

21 under that collateral agreement; is that correct?

22 A Yes, that's correct.

23 Q And the way that was done is each year when
24 Mr. Gordon filed his normal tax return, he would also
25 calculate in addition to that year's taxes what he owed

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1 under this collateral agreement, right?

2 A Yes.

3 Q And, in fact, in one year, I think it was 1991, when

4 you thought he initially owned 75 percent, you did that

5 calculation for him, right?

6 A That's correct.

7 Q And you included a portion of the corporate income to

8 satisfy that collateral agreement, right?

9 A Yes.

10 Q Now. In later years when Mr. -- When you are

11 preparing Mr. Gordon's tax returns, you are calculating

12 what he owes under that collateral agreement just based on

13 his personal income; is that right?

14 A That's correct.

15 Q Now, take a look at Government's Exhibit 427 which is

16 in evidence, and I'm going to put on the easel for the

17 jury 427-A which is an enlargement of that letter.

18 Let's look at the first paragraph of this

19 letter. It's a letter from you to Mr. Gagliardi, right?

20 A Yes.

21 Q September of 1994?

22 A Yes.

23 Q And it says, "Dear Sir, you requested information on
24 the status of the payments by Mr. Bruce Gordon of his
25 obligation to the Department of Justice for his liability

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 for the year 1993." Right?

2 A Yes.

3 Q "The total amount due for 1993 is $14,025, and he has

4 paid to date $5,500," right?

5 A Yes.

6 Q Now, what that means is, if I understand it, is in

7 1994 when you were filing Mr. Gordon's 1993 return, you

8 were calculating what he owed under this agreement?

9 A Right.

10 Q And you calculated that it was the 4,025?

11 A Yes.

12 Q And when the tax return was filed, Mr. Gordon

13 couldn't pay the whole 14,000?

14 A That's what he claimed.

15 Q That's what he claimed to you?

16 A Yes.

17 Q And he paid 5,500, though, right?

18 A He had paid a portion of it.

19 Q And this presented a problem in connection with the

20 offer and compromise, did it not?

21 A Not really. I mean, at time we did the offer and

22 compromise, he didn't file his 1993 return, we knew h e had

23 to do with it.
24 Q I'm sorry, my question wasn't clear. One of the
25 conditions of the IRS accepting an offer and compromise is

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1 that the taxpayer is current with all his tax filings; is

2 that correct?

3 A That's correct.

4 Q And in this case since Mr. Gordon owed this and

5 hadn't paid it, that was going to be a rich hitch, an

6 obstacle?

7 A It could be.

8 Q And so this letter, correct me if I'm wrong, was

9 proposing to Mr. Gagliardi, well, can we include the

10 promoter penalties and this approximately $8,000 that he

11 owes for 1993 in the big package and include that as part

12 of the compromise?

13 A Well, this was to promote a penalty. It was for the

14 calculation of that year. At the time I was assuming that

15 Mr. Gordon was living on the salary that he was supposed

16 to be taken out of Who's Who Worldwide, this was in '94,

17 he didn't have the money.

18 Q So for the 1993 part of that agreement what he owes

19 is $8,000?

20 A That's correct.

21 Q Now, it says in the middle of the second paragraph --

22 THE COURT: Well, I think we ought to take a

23 break at this point.
24 MR. WHITE: All right.
25 THE COURT: Do you want to remove that easel.

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1 MR. WHITE: I'm sorry.

2 THE COURT: Members of the jury,, we'll recess

3 until 2:15. You will have a long lengthy delightful lunch

4 hour. As I said before, you don't have to eat for the

5 entire period of time. If it's nice outside take a walk

6 or do something.

7 In any event, don't discuss the case. Keep an

8 open min d.

9 We'll recess until 2:15. Have a nice lunch.

10 (Jury exits.)

11 THE COURT: I see Ms. Scott is poised with a

12 case. Do you have a case for me?

13 MS. SCOTT: Yes, Your Honor.

14 THE COURT: How did I know you had a case?

15 MS. SCOTT: United States v. Dennis.

16 THE COURT: What is the citation?

17 MS. SCOTT: 843 F.2d 652, and the page is 656.

18 THE COURT: What does it say?

19 MS. SCOTT: It says that cross-examination is

20 permissible on the subject of a proffer session between

21 the witness and the lawyer if the lawyer was accompanied

22 by a third person who would serve as another witness to

23 the conversation. That frees up the lawyer from being an
24 unsworn witness.
25 Now, the difference between this case and our

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1 case is that the lawyer in this case was a defense

2 attorney and he was cross-examining a government witness.

3 But the principal as stated clearly here that

4 cross-examination is permissible under certain

5 circumstances because if there was a third-party present

6 who would act as a witness if that person was called to

7 testify.

8 MR. TRABULUS: Your Honor, if that case was

9 revealed to the jury that the person who was doing the

10 cross-examination was present at the meeting? Because

11 that was the basis on which I objected, that by revealing

12 to the jury that Mr. White was present at the meeting, he

13 through his questions became an unsworn witness and I

14 think that may not be what is in that case.

15 MR. WHITE: Just so the record is clear, I didn't

16 go any further than that. So there can't be any prejudice

17 because I didn't ask any questions of Mr. Reffsin what

18 took place at that meeting.

19 MR. WALLENSTEIN: And Judge Spatt ruled that you

20 can't.

21 MR. WHITE: I want to make sure there was no

22 prejudice up to that point, that's clear.

23 MR. TRABULUS: The record will speak for itself
24 but the point is that is why I stood up.
25 THE COURT: Do you know the answer to that

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1 question.

2 MS. SCOTT: I do not. I'll look it up.

3 MR. WHITE: Your Honor, my recollection is there

4 is a case of relatively recent vintage involving a case

5 from the Southern District that went to the Second Circuit

6 where the prosecutor at the trial for perjury was the

7 prosecutor who had questioned that witness in the grand

8 jury about his perjurious testimony and that was ruled to

9 be okay but we'll try to find that.

10 MR. TRABULUS: There's a little difference there

11 because there was a record what was said and there is a

12 difference because there were no notes and there is just

13 the memory of the prosecutor.

14 THE COURT: I'll take a look at it and you may

15 bring other cases to my attention.

16 MS. SCOTT: Your Honor, may I hand you this

17 case?

18 THE COURT: Yes, sure.

19 (Luncheon recess taken.)

20

21

22

23
24
25

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1 A F T E R N O O N S E S S I O N.

2 (Jury enters.)

3 THE COURT: Please be seated, members of the

4 jury.

5 You may proceed.

6 MR. WHITE: Thank you, Your Honor.

7 CROSS-EXAMINATION

8 BY MR. WHITE: (Continued.)

9 Q Now, Mr. Reffsin, I want to clarify something that

10 you said before before we get back to this document.

11 When you submitted the offer and compromise in

12 July of 1993, you did not know the extent to which

13 Mr. Gordon's loan balance was increasing between January

14 and July of '93; is that right?

15 A That's correct.

16 Q You did, however, know of the reduction which was due

17 to the Dr. Grossman return of the $235,000?

18 A Yes, I did.

19 Q Subsequently, however, while the offer and compromise

20 was pending, you learned of the year end 1993 figure,

21 correct?

22 A Yes.

23 Q And you had in 1992, in late 1992, told Mr. Gordon
24 that you wanted to see some repayments, right?
25 A Right.

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1 Q And shortly after that you hear about the

2 Dr. Grossman repayment.

3 Now, look at your -- I want to show y ou

4 Defendant's Exhibit EA which is the chart that you

5 yourself prepared of the loan account (handing.)

6 Under your chart at the end of 1992, how much did

7 Mr. Gordon owe Who's Who Worldwide?

8 A $485,000.

9 Q Now, by the end of 1993, how much did he owe Who's

10 Who Worldwide?

11 A $418,000.

12 Q And that includes a reduction of that $235,000

13 reduction?

14 A Yes, it does.

15 Q So the loan account went down about $70,000, right?

16 A That's correct.

17 Q And it means that Mr. Gordon had spent -- let me back

18 up.

19 Since you knew about the $235,000 reduction, you

20 knew that he had spent more than 150,000 in 1993, correct?

21 A Yes, based on the final balances. Yes.

22 Q And so is it fair to say that you knew that he was

23 not cutting down on his expenses at this point and he was
24 not reducing to any significa nt degree his loan balance.
25 A Well, he reduced it but he was not stopping the

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1 continuation of the payments on behalf of himself.

2 Q Okay.

3 And so you knew that in September of 1994, when

4 you wrote this letter on September 24, 1997, you knew all

5 that.

6 A Yes.

7 Q Let's look at -- we looked at the first paragraph.

8 Now, the second paragraph starting with the word

9 "taking," "taking into consideration the location he must

10 live and work it is understandable why he has difficulty

11 in paying the additional amount. However, he is trying to

12 pay it out and he is diligently making payments, as you

13 can see, by the attached copies of the money orders that

14 he has sent out."

15 Do you see that?

16 A Yes.

17 Q And the next paragrap h says, "he is going to have to

18 borrow the money he has offered in the offer and

19 compromise submitted. Where shall he borrow this money?

20 Perhaps he should cease eating."

21 Now, you were aware, were you not, that he could

22 borrow that money from Who's Who Worldwide?

23 A Not at that time.
24 Q You're correct. He could borrow it from other
25 corporations that he had.

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1 A If it was available to him, yes.

2 Q Is it fair to say you appreciated, you knew what sort

3 of life-style Mr. Gordon was living at this point, right?

4 A I knew how he was living up to the point of

5 bankruptcy, yes.

6 THE COURT: One moment.

7 You may proceed.

8 MR. WHITE: Thank you.

9 BY MR. WHITE:

10 Q You knew, for example, that Mr. Gordon was splitting

11 his time, spending some time at the condominium and the

12 rest at the penthouse living there?

13 A I knew he was spending time there, yes.

14 Q And you knew he was driving a nice car at that time,

15 right?

16 A Well, the corporation was still paying for it.

17 Q Right.

18 Did you notice any appreciable change in his

19 life-style after the bankruptcy?

20 A Well, the matter of fact is that the 150,000 a year

21 that the bankruptcy court agreed that was sufficient. He

22 was a single man, he could live a very nice life-style on

23 $150,000 a year, he wasn't exactly in poverty.
24 Q From the beginning of '94 to September of '94, did
25 you see any books and records of the corporations to

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1 indicate how much Mr. Gordon was spending in '94?

2 A I really didn't s pend any time on the other

3 companies. My primary involvement was Who's Who Worldwide

4 in trying to save Who's Who Worldwide. I did very little

5 work. Some of my people might have done some bank recs

6 here but I did not look at the '94 records, at least not

7 at initial stages.

8 Q You really didn't think that Mr. Gordon having to pay

9 this extra $8,000 would make him cease eating; is that

10 right?

11 A No, that was a little bit of, you know, a

12 dramatization.

13 Q It was a dramatization?

14 A Yes.

15 Q He might have to cease eating at four star

16 restaurants but not altogether?

17 A Yes.

18 Q And you knew he frequented four star restaurants?

19 A Yes.

20 Q Is it fair to say that Mr. Gordon, the $8,000 we are

21 talking about that he can't pay here, you know from

22 reviewing his American Express records he might drop that

23 on suits and clothes in one sitting, right?
24 A Well, I had thought that based on the salary
25 arrangement that he had, he was living not a low

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1 life-style but a reasonable life-style and he wasn't

2 spending that kind of -- and I know people who make

3 $150,000 a year don't by $7,000 suits.

4 Q Especially if they owe the IRS 3 and-a-half million,

5 right?

6 A Well, I'm not sure if that enters into the case

7 sometimes.

8 Q Well, take a look at Government's Exhibit 475 -- I'm

9 sorry, 474 and 475 in evidence. If you look at -- those

10 are American Express statements for July and August of

11 1994, correct?

12 A Yes.

13 Q And if you look to the second part of those

14 statements where Mr. Gordon's charges are listed as

15 opposed to Liz S autter's --

16 A The second part is Mr. Gordon's, okay. Yes.

17 Q And look at Mr. Gordon's part for each of those

18 months.

19 A (Perusing.) Yes. I see it.

20 Q That reflects a trip to France and Italy in July and

21 August of '94, right?

22 A Right.

23 Q And did you make a rough calculation, is it fair to
24 say it is around $50,000 that the trip and the other
25 expenses in France and Italy cost?

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1 A 47 and change, yes.

2 Q So that trip is maybe about six or eight weeks before

3 this letter that you wrote where you suggest that he might

4 have to stop eating, right?

5 A Yes.

6 Q And if you look on Exhibit 475 under the charges for

7 Mr. Gordon, do you see a charge that says NRSC? I think

8 it's on the top of the second page.

9 A Yes .

10 Q Do you recall Mr. Garabedian from American Express

11 testifying that that was the National Republican

12 Senatorial Committee?

13 A Yes.

14 Q And it says donation there?

15 A Yes.

16 Q And how much did Mr. Gordon donate?

17 A $2,000.

18 Q And so he has enough money to live on that he's given

19 other money away that he doesn't have to, right?

20 A Obviously.

21 Q Actually before we move on, let me ask you another

22 question.

23 Going back to 427, this letter, it attaches
24 copies of money orders; is that right?
25 A Yes.

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1 Q And the money orders are to the IRS, right?

2 A Yes, I believe so.

3 Q And they are each for $100, right? Actually I take

4 that back, some of them are for $500?

5 A Yes.

6 Q Yo u were aware, were you not, that Mr. Gordon was

7 making $100 a month payments under the installment

8 agreement?

9 A I became aware of that.

10 Q When did you become aware of that?

11 A Sometime in 1992.

12 Q And did you also become aware from reviewing the

13 general ledgers and other books that that was being put

14 into Mr. Gordon's loan account?

15 A Yes.

16 Q And correct me if I'm wrong, the way it worked was

17 that the company would write a $100 check, it would get

18 cashed, turned into a money order and that money order

19 would be sent to the IRS?

20 A That's correct.

21 Q Now, you have experience, extensive experience

22 dealing with the IRS as an accountant, right?

23 A Yes.
24 Q You are aware that the IRS accepts personal checks,
25 corporate checks?

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1 A Anything.

2 Q They'll take it however you want to send it, right?

3 A Right.

4 Q So far as you could tell was there any reason why you

5 would make that extra step and instead of just sending the

6 $100 check to the IRS they would go and get money orders

7 for it?

8 A Well, I've done it in the past on occasion, only

9 because sometimes when the taxpayer owes money to the

10 government the government is beating down his door. Very

11 frequently the taxpayers will have signatory authority on

12 accounts but it really is not their accounts. So what I

13 had suggested in those instances they use money orders

14 because I've had situations were the IRS has come in and

15 levied accounts that were not attributable to the taxpayer

16 involved. Then you have to go through the process of

17 getting them released.

18 Q And is what you're saying, though, that by doing

19 that, by sending them a corporate check, a light bulb

20 might go off in the IRS's head and say, wait a minute,

21 this guy controls the other account?

22 A Right, and they might levy that account, that's

23 correct.
24 Q You mentioned Michavel Hynes as someone who did
25 accounting work for your firm?

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1 A Yes.

2 Q And Mr. Hynes had a daughter named Liz?

3 A Yes.

4 Q And she was an accounting student and she worked at

5 times for your firm; is that correct?

6 A Well, she was a computer buff. Mr. Hynes had very

7 little computer knowledge and he used her to do certain

8 accounting functions that he couldn't do or wouldn't do.

9 Q Do you recollect whether or not Ms. Hynes worked for

10 your firm in the summer of 1991?

11 A It's very possible, yes.

12 Q Let me show you what is in evidence as Government's

13 Exhibit 797.

14 Now, that is dated June 13, 1991, right?

15 A Yes.

16 Q And it's a letter, I'm sorry, a handwritten page

17 addressed to someone named Liz.

18 A Right.

19 Q And it's signed by someone named Liz H., right?

20 A Yes. Well, I don't see the signature.

21 Q I'm sorry, it's a legal-sized page if you pull it out

22 of the plastic.

23 A (Perusing.) Yes.
24 Q And it says, "Liz, these are Mr. Gordon's tax returns
25 for 1990. Since he has no personal checking accounts, I

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1 suggest you get money orders to pay the tax. Sending a

2 Who's Who check isn't a good idea."

3 Do you see that? Do you see that, Mr. Reffsin?

4 A Yes.

5 Q And then it lists what it is that Mr. Gordon has to

6 pay, right?

7 A Umm-hmm. Yes.

8 Q And Liz H. says in the note, "I'll call you on Monday

9 and give you the information of who to get money orders

10 made payable to and where to send the returns. Hope you

11 had a good weekend."

12 Now, from reviewing that, is it a fair conclusion

13 that that's a note from Liz Hynes when she was working at

14 your firm to Liz Sautter forwarding to Mr. Gordon for his

15 signature the returns that your firm prepared for him?

16 A Yes.

17 Q Now, do you know where Ms. Hynes got the idea that

18 sending a Who's Who check isn't a good idea?

19 MR. WALLENSTEIN: Objection.

20 THE COURT: May I hear that again, please?

21 MR. WHITE: I'll rephrase it.

22 BY MR. WHITE:

23 Q Did you ever tell Ms. Hynes that sending a Who's Who
24 check isn't a good idea?
25 A I don't believe so.

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1 Q Well, Mr. Reffsin, was there anyone else at your firm

2 in the summer of 1991 who might have given instructions

3 like that to Ms. Hynes other than you?

4 MR. WALLENSTEIN: Objection.

5 THE COURT: Overruled.

6 A Mike might have, her father.

7 Q Her father?

8 A Mike Hynes.

9 Q Mr. Reffsin, let me show you Government's Exhibit 421

10 in evidence. And I'll put 421-A, the enlargement up on

11 the easel.

12 I'm sorry, Mr. Reffsin. Do you need something

13 else?

14 A Yes. What is 421-A?

15 Q 421-A is simply the enlargement of 421.

16 A I'm sorry.

17 Q 421 is a November of 1993 letter that Mr. Gagliardi

18 sent to you, correct?

19 A Umm-hmm, yes.

20 Q And that's the one where he asked for a whole

21 category of additional documentation, right?

22 A Right.

23 Q And you went over with Mr. Wallenstein some of the --
24 how you arrived at some of the responses that were made.
25 A Yes.

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1 Q And I want to ask you about those.

2 With respect to paragraph 3, you said original

3 cancelled checks -- I'm sorry, let me start with

4 paragraph 6.

5 "Verification of all monthly payments, if not

6 paid by your personal check."

7 Now, is it correct that you were aware that the

8 company was paying Mr. Gordon's monthly American Express

9 bill?

10 A Yes.

11 Q At this time?

12 A Yes.

13 Q Now, after -- and you sat down and discussed this

14 letter with Mr. Gagliardi, correct?

15 A Yes.

16 Q And after that, is it not correct that you had a

17 conversation with Mr. Gordon where you told him to go

18 through the Who's Who checks and to find the checks that

19 were responsive to that request?

20 A I believe I had a conversation with Liz in

21 Mr. Gordon's office, if there were any checks that were

22 paying personal expenses.

23 Q And was Mr. Gordon present for that?
24 A I believe so. I don't remember.
25 Q Then after that is it correct that Mr. Gordon, you

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1 had another conversation with Mr. Gordon about those

2 checks?

3 A About the checks from Who's Who Worldwide?

4 Q Yes.

5 A I don't believe I had another conversation with him.

6 I don't know what you are referring to.

7 Q Did you have a conversation where Mr. Gordon said

8 that he only wanted to give the IRS what was in his

9 pe rsonal checking account and that he would not give the

10 IRS the Who's Who information?

11 A Well, he said that but I still, if Mr. Gagliardi

12 specifically requested those accounts, I would have gotten

13 it to him.

14 Q Okay.

15 But I'm not talking about paragraph 3 now, I'm

16 talking about paragraph 6 which is verification of monthly

17 payments if not paid by your personal check.

18 A (Perusing.) Yes.

19 Q Is it correct that you recognized that Who's Who

20 checks that paid Mr. Gordon's American Express bill were

21 responsive to that, but Mr. Gordon refused to let you

22 produce them to the IRS?

23 A Yes, but I consoled myself in the fact that the
24 American Express checks were not necessary expenses which
25 is what we were attempting to verify.

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1 Q If you can look at paragraph 9, it asks for in

2 essence car leases that Mr. Gordon -- would it not call

3 for car leases for cars that Mr. Gordon operated?

4 A It says you own or operate, yes.

5 Q Is it correct after you discussed this with

6 Mr. Gagliardi, you talked to Mr. Gordon because you knew

7 that Who's Who was leasing him a car that he was using?

8 A Yes.

9 Q And Mr. Gordon told you that he was only an employee

10 of Who's Who Worldwide and he didn't want you to give the

11 IRS that information?

12 A This was a company car and it was only used for

13 business purposes.

14 Q And he told you that?

15 A Yes.

16 Q And is it fair to say that you explained to him that

17 it also related to cars that he operated since you knew

18 that they leased him a car?

19 A Yes.

20 Q So you made it clear to him that that should be

21 produced, right?

22 A Yes.

23 Q But he refused to provide that information about the
24 cars to you to give to the IRS; is that right?
25 A That's correct.

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1 Q So is it fair to say that at least with respect to

2 paragraphs 6 and 9, that there was some information that

3 you believed was responsive but Mr. Gordon refused to let

4 you produce it?

5 A Well, I would say with respect to paragraph 9.

6 Paragraph 6 I don't think we went into in great detail

7 because I had Liz Sautter go through the personal checks

8 that were issued to Mr. Gordon during that period, all the

9 checks, and there were no necessary living expenses except

10 two medical checks that were made out to two doctors, but

11 again the form specifically says not to pick up any

12 nonrecurring med ical expenses. So those were the only

13 items that would be of a nature that would be includable

14 on the 433 A.

15 Q Now, Mr. Reffsin, this letter, though, is a request

16 from Mr. Gagliardi, in addition to a 433, right?

17 A Well, I believe this letter is a letter requesting

18 verification of what is on the 433.

19 Q Well, no one asks you to give him a 433, right?

20 A Yes.

21 Q So all the information that should be on there will

22 be on that form?

23 A That's correct.
24 Q Now, he's asking you for additional stuff as well,
25 right?

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1 A Yes. To the extent it is applicable.

2 Q Right.

3 And number 6 asks for those other monthly

4 payments not paid by his check. It doesn't say for

5 monthly payments for necessary expenses, does it?

6 A Well, the presumption is that that's what he's

7 looking to verify because when I spoke to him on the

8 phone, I asked him, do you want all of the corporate

9 accounts? And Mr. Gagliardi said, I want to verify his

10 necessary business expenses. The corporate accounts at

11 the time had no necessary business expenses involved

12 except for those two medical payments. To me the American

13 Express checks were not necessary living expenses. He

14 made that decision as to, you know, not to submit all the

15 checking accounts.

16 Q Now, is it fair to say that you did not submit

17 anything in response to paragraph 9 because Mr. Gordon

18 refused to provide you with that information?

19 A Yes.

20 Q And you went -- but you didn't advise Mr. Gagliardi

21 of that fact?

22 A No.

23 Q And is it fair to say you did that because you didn't
24 want to lose Mr. Gordon as a client?
25 A No. I did it because it wasn't a material fact in

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1 the overall income and expense analysis.

2 Q And it never entered into your mind in that

3 calculation that if you disclosed that stuff to

4 Mr. Gagliardi he would learn, number one, that Mr. Gordon

5 was driving a Mercedes, and number two, that Who's Who

6 Worldwide was paying for it. That never entered into your

7 mind?

8 A Well, he had the compensation agreement which said

9 that he controlled the day-to-day activity of the

10 corporation. He could have anything he wants. Most

11 officers do have cars available to them at the corporate

12 level. It's not unusual.

13 Q Now, Mr. Reffsin, do you know a man named Harold

14 Riegel?

15 THE COURT: How do you spell that?

16 MR. WHITE: R-I-E-G-E-L.

17 A Yes.

18 Q You met Mr. Riegel around the late '80s?

19 A Yes.

20 Q Mr. Riegel sold his company to an accounting client

21 of yours; is that correct?

22 A That's correct.

23 Q And that's how you met Mr. Riegel?
24 A That's correct.
25 Q And subsequently you became friendly with Mr. Riegel;

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1 is that correct?

2 A That's correct.

3 Q And Mr. Riegel and you agreed to operate a company

4 together, right?

5 A Mr. Riegel and I agreed to do various things

6 together.

7 Q And one of them was a company called Stegar Services,

8 right?

9 A Stegar Services was the company set up to deal with

10 any companies that Mr. Riegel and I would do together.

11 Q Is it fair to say that Stegar Services was sort of a

12 venture capital, it would lend money to investors to do

13 various things?

14 A No, it was a company that was set up to get into

15 various business ventures.

16 Q Okay.

17 And is it correct that Mr. Riegel is the one who

18 funded the company and put up all the money?

19 A A good portion of it, yes.

20 Q And you were an officer of that corporation, weren't

21 you?

22 A I set up that corporation. That corporation was set

23 up before Mr. Riegel got involved with me. We used it.
24 Q Once it was in operation, Mr. Riegel provided the
25 vast majority of the funding for the company?

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1 A Yes.

2 Q And you were, is it fair to say, in charge of the

3 day-to-day operations?

4 A I went out and determined whether there were any

5 ventures that we want ed to got involved in, presented to

6 him and to the extent we wanted to got involved, we would.

7 Q And you were the only signatory on the corporate bank

8 account; is that right?

9 A No, I think Mr. Riegel was also a signatory on it.

10 Q You were a signatory on the corporate bank account;

11 is that correct?

12 A That's correct.

13 Q Now, isn't it correct that you wrote Stegar Services

14 checks for your personal expenses?

15 A It's true that I requested Mr. Riegel to lend me some

16 dollars when I was having some difficult to pay expenses,

17 yes.

18 Q You wrote Stegar Services checks that went for you

19 and your family benefit, right?

20 A After I requested, asked him to do it.

21 Q The answer is yes?

22 A Yes.

23 Q For example, you paid your mortgage from Stegar
24 Services, right?
25 A I didn't pay my mortgage. I paid certai n contractor

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1 costs because I had gotten myself involved in a new house.

2 Q And you paid, you purchased some bonds for your --

3 that you put in your wife and your daughter's names?

4 A That is questionable. That's not true. But I used

5 my own money to purchase my daughter's bonds.

6 Q But you did use, you did write Stegar Services checks

7 for personal items of yours?

8 A With his approval, yes.

9 Q Now, is it fair to say that Mr. Riegel says he didn't

10 give you his approval?

11 MR. WALLENSTEIN: Objection.

12 THE COURT: Sustained.

13 BY MR. WHITE:

14 Q Well, isn't it true that Mr. Riegel never gave you

15 his approval to write those checks for your personal

16 expenses?

17 MR. WALLENSTEIN: Objection.

18 THE COURT: Overruled.

19 A That is not correct.

20 Q And in fact, Mr. Riegel sued you for fraud, didn't

21 he?

22 A He did that under the bankruptcy proceeding, yes.

23 Q Right.
24 And he did that when you were in bankruptcy,
25 correct?

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1 A That's the only way he could verify the loan, yes.

2 Q And was it your understanding that Mr. Riegel because

3 you were in bankruptcy would only have seen money as a

4 result of this suit if he could prove that you had

5 intentionally defraud him?

6 MR. WALLENSTEIN: Objection.

7 THE COURT: Overruled.

8 A That is correct.

9 Q So, in other words, you knew that in order to

10 prevail, Mr. Riegel would have to show that you

11 intentionally defrauded him?

12 A That's correct.

13 Q And notwithstanding that, you settled that laws uit

14 with Mr. Riegel, right?

15 A That's because there was no fraud intended.

16 Q And you settled it by agreeing to pay him $115,000,

17 right?

18 A That's correct. Which I didn't have to do, by the

19 way.

20 Q That's right, you didn't have to because in all

21 likelihood if you hadn't committed fraud he couldn't

22 collect it under the bankruptcy --

23 A Absolutely correct and --
24 MR. WALLENSTEIN: Objection.
25 THE COURT: Sustained. The jury is instructed to

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1 disregard it.

2 BY MR. WHITE:

3 Q And you entered into a payment and installment

4 agreement to pay Mr. Riegel back; isn't that right?

5 A That's correct.

6 Q And you at some point decided to stop paying

7 Mr. Riegel, right?

8 A Yeah, when I got involved with you guys.

9 Q So Mr. Riegel is still waiting for the lions share of

10 his 115,000?

11 A And to the best of my ability he will get it.

12 Q Mr. Reffsin, I just want to go back to this letter

13 from Mr. Gagliardi in paragraph 6. I want to make sure I

14 understand your testimony.

15 You said you spoke to Liz Sautter perhaps in

16 Mr. Gordon's presence and told her to go through and pick

17 out the checks that were responsive; is that right?

18 A That's correct.

19 Q And --

20 A If there were any.

21 Q If there were any.

22 A Right.

23 Q And Mr. Gordon said he wanted to give the IRS only
24 what was in his personal checking account; is that right?
25 A Well, he said that but I wasn't paying any attention

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1 to it.

2 Q So it's your testimony that the reason paragraph 6

3 was not disclosed -- I'm sorry, checks responsive to

4 paragraph 6 -- I'm sorry, let me start again.

5 It's your testimony that the reason the American

6 Express checks were not produced in response to paragraph

7 6, is not because Mr. Gordon refused to give it to you but

8 because you yourself made a judgment that they weren't

9 really called for?

10 A It was a combination of the two. He didn't want to

11 give it and it wasn't responsive to the needs of the agent

12 at the time.

13 Q Okay.

14 Now, I just want to ask you generally about these

15 433 forms that we've seen, the one that we've seen in July

16 of '93 and December of '93?

17 A Umm-hmm.

18 Q We've talked about them a lot and we all agree they

19 don't list Mr. Gordon's loans from Who's Who Worldwide,

20 right?

21 A Right.

22 Q They don't list his American Express cards, correct?

23 A Right.
24 Q They do not list his actual expenses?
25 A Why would they?

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1 Q The answer is no?

2 A No.

3 Q I understand your explanation. They do not list his

4 actual expenses. It also does not list his ownership

5 interest, if he has any, in Who's Who Worldwide or other

6 corporations, correct?

7 A It does not list it, yes.

8 Q Now, each of those, if they had been disclosed to the

9 IRS, would have indicated to them something about

10 Mr. Gordon's life-style or the fact that he was able to

11 take loans from Who's Who Worldwide, right?

12 MR. WALLENSTEIN: Objection.

13 MR. TRABULUS: Objection to form.

14 THE COURT: Overruled.

15 A I don't know what it would have indicated to them.

16 Q Well, l et me just briefly discuss each of them.

17 If he listed his ownership interest in Who's Who

18 Worldwide, at a minimum that would have triggered that he

19 owed money under the collateral agreement, correct?

20 A That he owed money under the collateral agreement?

21 If he indicated -- his ownership that he owed money under

22 the collateral agreement?

23 Q My question is confusing. I'll start again.
24 If he had disclosed on the forms that he had an
25 ownership interest in Who's Who Worldwide, at a minimum

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1 that would have made the company's income subject to that

2 collateral agreement.

3 A Company's income was subject to the collateral

4 agreement, even if he didn't own it.

5 Q If he controlled it, right?

6 A Well, if he controlled it and pursuant to the

7 compensation agreement ultimately it had to be put on his

8 tax return.

9 Q Okay.

10 Now, the American Express card, if that had been

11 disclosed, is it fair to say the IRS might have asked

12 about what sort of expenses were being incurred with the

13 card and how they were being paid?

14 MR. WALLENSTEIN: Objection.

15 THE COURT: Overruled.

16 A No, I don't believe that question would be asked at

17 all. There would be no reason for it.

18 Q Okay.

19 The loans, if the loans had been disclosed, the

20 IRS would have realized that in addition to his salary

21 Mr. Gordon was receiving substantial amounts of money in

22 addition, correct?

23 A He had received substantial amounts of money, yes.
24 Q And finally, the expenses. If his actual expenses
25 had been listed, is it fair to say that the IRS might have

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1 asked how he was paying for them?

2 A How he was paying for them?

3 Q Right.

4 A They might or might not have.

5 Q For example, you know that 433 form, the last column

6 in the expense column is "other expenses," right?

7 A Other expenses, okay.

8 Q And it asks Mr. Gordon had listed, for example, all

9 the other expenses that he had, actual expenses, the

10 Armani suits and the four star restaurants, you find it

11 conceivable that they might have asked?

12 A I wouldn't have been stupid enough to list that, it's

13 not an ordinary living expense, the IRS would laugh at

14 me. I wouldn't do it for any client. That's not a

15 necessary expense by any definition.

16 Q Had you listed those actual expenses they would have

17 been much higher than the income listed on the other side

18 of th e form?

19 A Would have been much higher than the income listed on

20 the other side of the form? Obviously.

21 Q So it's your testimony that you would not have put

22 down his actual expenses because that is not what the IRS

23 wanted?
24 A No, they wanted to know what is available to pay the
25 obligation. They don't want to know about unreasonable or

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1 unnecessary expenses.

2 Q But isn't one way to find out what is available to

3 see what he is spending money on that is not really

4 necessary, that he could then devote that money to paying

5 back the IRS?

6 A Because a man spent a million yesterday doesn't mean

7 he will spend that tomorrow. He spent what he had then,

8 it doesn't mean that he will do it going forward. Those

9 expenses represent necessary liv ing expenses. That's all

10 they are supposed to be. It's my definition. You are not

11 even supposed to put medical expenses if they are not

12 recurring. He incurred medical expenses too. They tell

13 you not to put it down.

14 MR. WHITE: Your Honor, I have no further

15 questions.

16 THE COURT: Anything else?

17 MR. TRABULUS: Oh, yes.

18 THE COURT: You may proceed.

19 (Continued.)

20

21

22

23
24
25

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/Trabulus

1 CROSS-EXAMINATION

2 BY MR. TRABULUS:

3 Q Good afternoon, Mr. Reffsin.

4 Mr. Reffsin, how long do you know Mr. Gordon?

5 A Since 1980.

6 Q And you know Mr. Gordon as being a businessman,

7 right?

8 A Yes.

9 Q Primarily a marketing person and a salesperson?

10 A Yes.

11 Q And are you aware, sir, that he doesn't have any

12 accounting background?

13 A Yes, I am.

14 Q And he has a certain amount of college at night

15 school but basically has a high school education?

16 A Yes. I mean, I don't know that, but I'll accept it.

17 Q Now, he himself has never worked as an accountant, as

18 far as you know; is that correct?

19 A As far as I know.

20 Q And he hired you to do accounting work because he

21 needed an accountant to do that, right?

22 A That's usually the case, yes.

23 Q Let me go to what Mr. White was asking you about,
24 Stegar Corporation, was it a corporation or a partnership?
25 A A corporation.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8148
Reffsin-cross/Trabulus

1 Q I think you indicated with the permission of the

2 other principal of the company, you had utilized corporate

3 funds to pay some personal expenses?

4 A That's correct.

5 Q Now, when you did that, was that reflected as a loan

6 to you?

7 A Yes, it was.

8 Q So the Stegar Corporation did not take a tax

9 deduction for the monies that it was utilizing to pay your

10 personal expenses?

11 A No, not at all.

12 Q And that was a loan, sir, which you intended to repay

13 at the time; is that correct?

14 A That's correct.

15 Q And your own financial difficulties involving a

16 bankruptcy intervened and prevented you from doing that;

17 is that correct?

18 A Well, initially, yes, it did.

19 Q Initially.

20 A Yes.

21 Q And certainly there was nothing -- what year --

22 withdrawn.

23 What year was it that you took these loans from
24 Stegar Corporation?
25 A 1989, 1990.

OWEN M. WICKER, RPR OFFICIAL COURT REPORT ER
8149
Reffsin-cross/Trabulus

1 Q 1989 or 1990?

2 A I take that back. It was 1988.

3 Q '88?

4 A Right.

5 Q And that's before any of the loans were made to

6 Mr. Gordon here; is that correct?

7 A Oh, yes.

8 Q And these were indeed legitimate loans in the sense

9 you had intended to pay them back; is that correct?

10 A Oh, absolutely. Still do.

11 Q Now, when you took these loans to pay your expenses,

12 did you yourself report the amount of those loans to you

13 as being income in the year that you borrowed the money?

14 A No, I did not.

15 Q And that was I assumed because you believed sincerely

16 that that was not income, correct?

17 A Yes.

18 Q And the basis for that in your mind, sir, was that

19 you intended to pay the money back?

20 A Absolutely.

21 Q Which made it a loan, right?

22 A Righ t.

23 Q During the period of 1988, 1989 and 1990, with the
24 exception of a break at some point, you did work for
25 Mr. Gordon, correct, and his companies? Certainly in

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8150
Reffsin-cross/Trabulus

1 1990.

2 A 1990, yes.

3 Q And at that point the loan arrangement that you had

4 with Stegar Corporation was fresh in your mind, sir?

5 A Yes.

6 Q Do you recall if you yourself ever told Mr. Gordon

7 that it was okay if you were to take a loan from a

8 corporation so long as -- withdrawn.

9 During your dealings with Mr. Gordon, you told

10 him, did you not that, it was all right to take a loan

11 from a corporation for personal expenses, correct?

12 A I told him it was all right for a loan, as long as it

13 was a loan for whatever reason.

14 Q In other words, the fact that a loan wa s for personal

15 expenses, there was nothing wrong with that; is that

16 correct?

17 A No, absolutely not.

18 Q And of course the corporation, if it loaned money to

19 somebody who was connected to it, could not take a tax

20 deduction on its own income taxes; is that correct?

21 A That's correct.

22 Q And of course as we had seen before none of the

23 monies that were loaned to Mr. Gordon were reflected as a
24 deduction in any corporate tax return; is that correct?
25 A That's correct.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8151
Reffsin-cross/Trabulus

1 Q So basically what Mr. Gordon, the treatment, the tax

2 treatment of the loans to Mr. Gordon was basically the

3 same as you yourself had done for yourself with the Stegar

4 Corporation, right?

5 A Yes.

6 Q Now, you prepared the 433 A forms that went with the

7 office and compromise, correct, the original offer?

8 A I wrote them up.

9 Q You wrote them up yourself; is that correct?

10 A That's correct.

11 Q And you made the decisions as to what would and would

12 not be shown; is that correct?

13 A Initially, yes.

14 Q You indicated, for example, that you made the

15 decision not to show the American Express charge, the

16 American Express charges that --

17 A The charge card.

18 Q The charge card, correct?

19 A That's correct.

20 Q Do you have the exhibit in front of you there, sir?

21 A Right here.

22 Q I think that is 420-D.

23 A Yes.
24 Q Now, you also made the decision, did you not, that
25 the loans to Mr. Gordon from Who's Who Worldwide would not

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8152
Reffsin-cross/Trabulus

1 need to be shown on this; i s that correct?

2 A All I did with the loans was copy the loans that were

3 initially reflected on the 433 As that were presented with

4 a little modifications for the charge accounts.

5 Q Mr. Reffsin, why don't I ask you at the time you

6 prepared, wrote out this 433 A, you were aware, sir, that

7 there were loans to Mr. Gordon from Who's Who Worldwide?

8 A I was aware there was loan activity, yes.

9 Q Well, you were aware, were you not, that there was a

10 loan balance at the end -- this is dated July 1990 --

11 A 1993.

12 Q 1993, correct?

13 A Yes.

14 Q And you were aware, sir, that there was a loan

15 balance at the end of 1992; is that correct?

16 A Yes.

17 Q It had been reduced, it had been reduced by the

18 payment from the Grossmans, correct?

19 A Yes.

20 Q And you had been aware there had been a loan balance?

21 A That's co rrect.

22 Q And I think you indicated earlier on you had not

23 known whether or not the loans had been increasing,
24 whether or not the balance had been increasing since that
25 reduction; is that correct?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8153
Reffsin-cross/Trabulus

1 A At that time, yes.

2 Q And you also indicated, did you not, that you really

3 had not checked that in any way, shape or form?

4 A That's correct, I did not.

5 Q So you felt comfortable in not disclosing any loan on

6 this 433 A without having to check; is that correct?

7 A That's correct.

8 Q You certainly, nobody had told you at that point in

9 time, sir, that the loan balance had been reduced to zero;

10 is that correct?

11 A That's correct.

12 Q So in preparing the 433 A you made the determination,

13 did you not, that it was not necessary to disclose the

14 loan to Mr. Gordon on this form; is that correct?

15 A That's correct.

16 Q And you did that on the basis that you regarded it as

17 not being material; is that right?

18 A That's correct.

19 Q And not being material, meaning that it wouldn't have

20 affected the IRS agent who was going to be reviewing the

21 form 433 A and the office and compromise application, it

22 wouldn't involve the decision whether or not it would be

23 granted?
24 A Yes.
25 Q Basically it would show that there was a greater

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8154
Reffsin-cross/Trabulus

1 liable on the part of Mr. Gordon and even a lesser ability

2 to pay?

3 A Yes.

4 THE COURT: You have to slow down, Mr. Trabulus.

5 MR. TRABULUS: Thank you. I'm sorry.

6 BY MR. TRABULUS:

7 Q Basically, if I understand you correctly, your

8 judgment was that if that had been disclosed on this form,

9 it would have made Mr. Gordon appear even less able to pay

10 than what was disclosed?

11 A That's correct.

12 Q And, therefore, by not disclosing it you in no way,

13 shape or form were keeping from the IRS something which

14 would tend to show that Mr. Gordon could pay more than

15 they would have otherwise thought; is that correct?

16 A Absolutely, yes.

17 Q Is it fair to say that in your experience in dealing

18 with Mr. Gordon, he was kind of a busy businessman type?

19 A Always.

20 Q Always preoccupied with his own business?

21 A Yes.

22 Q It would be fair to stay in your judgment he would be

23 the kind of person who would sign a tax return without
24 even reading it?
25 A On occasion, yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER

8155
Reffsin-cross/Trabulus

1 Q Well, would you say that it would be his style to

2 rely on you in preparing a tax return without even reading

3 it?

4 A A tax return, yes.

5 Q And this particular form, Form 433 A, which is

6 Exhibit 420-D, it does have a listing, does it not, on

7 item 20-AC for charge accounts?

8 A Yes, it does.

9 Q You know that charge account listing of $32,000 was

10 not the American Express account; is that correct?

11 A When I did this form I didn't isolate as to what it

12 was.

13 Q You were asked by Mr. White that you made a decision

14 not to include the American Express charge on this; is

15 that correct?

16 A No, he was asking about the asset on section three.

17 Q I'm sorry. I thought -- I'm not trying to confuse

18 you, Mr. Reffsin.

19 I thought that you had told Mr. White that you

20 had dec ided there was no need to disclose the charge

21 account; is that correct?

22 A No, I told Mr. White that as far as I was concerned

23 those charge accounts were charge accounts.
24 Q Okay.
25 So, in any event, the -- there is a listing for

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8156
Reffsin-cross/Trabulus

1 charge account under item 20-A; is that correct?

2 A Yes.

3 Q And do you know if Mr. Gordon did look at this,

4 whether he would have realized whether or not the American

5 Express, that was or was not the American Express

6 account? Would you know one way or the other, sir?

7 MR. WALLENSTEIN: Objection.

8 THE COURT: Sustained.

9 BY MR. TRABULUS:

10 Q Did you discuss with Mr. Gordon whether or not that

11 was the American Express account or some other charge

12 account?

13 A I don't recall.

14 Q Mr. Reffsin, again, did you say that you had decided

15 that it was your view that the Liz Sautter charge account,

16 Mr. Gordon's card on that, should not or did not need to

17 be disclosed as such on this form?

18 A On the front, on the second page, yes.

19 Q On the second page, okay.

20 A Yes.

21 Q And was that -- what was the basis for that, sir?

22 A Because it was her card.

23 Q Okay.
24 And that was your decision, sir?
25 A Yes. As far as I was concerned that was not an asset

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8157
Reffsin-cross/Trabulus

1 available to him or it could be available to him but --

2 Q Do you recall whether you discussed that with

3 Mr. Gordon?

4 A I believe I did discuss the American Express credit

5 card.

6 Q And you told him that in your view it didn't need to

7 be disclosed?

8 A Yes, I felt it wasn't necessary. It wasn't

9 appropriate.

10 Q Now, did you discuss with Mr. Gordon whether or not

11 on this form the loans from Who's Who Worldwide had to be

12 disclosed? Do you recall that?

13 A Did I discuss the Who's Who Worldwide loans? I don't

14 believe -- I'm not sure. I don't remember.

15 Q Now, you yourself had concluded they did not need to

16 be disclosed?

17 A Yes, I felt it was just a waste.

18 Q And if you did have occasion to talk to Mr. Gordon

19 about that, certainly you would have told Mr. Gordon what

20 you just told us now, correct, that there was no need to

21 disclose it?

22 MR. WALLENSTEIN: Objection.

23 THE COURT: Sustained.
24 BY MR. TRABULUS:
25 Q If you spoke to Mr. Gordon about it, is there any

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8158
Reffsin-cross/Trabulus

1 reason at the time why you would have told him anything

2 different?

3 MR. WALLENSTEIN: Objection.

4 THE COURT: Sustained.

5 BY MR. TRABULUS:

6 Q Would you have had a reason to tell him it did have

7 to be disclosed?

8 MR. WALLENSTEIN: Objection.

9 THE COURT: Sustained.

10 Q Now, Mr. Reffsin, you testified that when there were

11 -- there were loans made from Who's Who Worldwide to

12 Sterling; is that correct?

13 A That's correct.

14 Q And money was loaned from Who's Who Worldwide to

15 Sterling well before the bankruptcy, is that not true?

16 A I believe they started sometime in July, June or July

17 of '93.

18 Q Mr. Reffsin, is it not fair to say, sir, that at that

19 point in time not only was it before the bankruptcy but it

20 was also before the judgment in favor of Reed Elsevier

21 which precipitated the bankrupt cy?

22 A I'm not quite sure of the timing with respect to the

23 judgment. The judgment, I believe, I believe it was
24 before, yes.
25 Q And up until that judgment, is it not correct, sir,

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8159
Reffsin-cross/Trabulus

1 that Mr. Gordon had expressed to you his belief that Reed

2 Elsevier did not or would not prevail?

3 A Yes, that was his belief.

4 Q In fact, he was to say the least surprised when the

5 decision came down in favor of Reed Elsevier?

6 A No question.

7 Q And the bankruptcy filing was put together in great

8 haste; is that correct?

9 A That's correct, yes, it was.

10 Q And the transfers that had begun to Sterling and

11 other entities, they had begun before there was any

12 contemplation or expectation of any kind of bankruptcy,

13 right?

14 A Yes.

15 Q Now, you told us that Mr. Gordon -- withdrawn.

16 You told Mr. White that you had not been aware

17 that Mr. Gordon was taking loans from Sterling; isn't that

18 correct?

19 A At that time, yes.

20 Q You had not been aware at that time, right?

21 A Yes.

22 Q And I think at one point you told Mr. White that in

23 that respect you felt that Mr. Gordon had deceived you; is
24 that correct? Do you recall saying that?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8160
Reffsin-cross/Trabulus

1 Q But then you also told Mr. White that you hadn't

2 really discussed the subject matter with Mr. Gordon; is

3 that correct?

4 A There was no reason to at the time.

5 Q It isn't that he told you that he wasn't taking the

6 loans; is that correct?

7 A No, that's correct.

8 Q And is it fair to say, Mr. Reffsin, tha t Mr. Gordon

9 might have concluded from the fact that you had seen no

10 need to disclose the loans on the 433 A statement that

11 such loans were irrelevant and there would be no need for

12 him to tell you about them?

13 MR. WALLENSTEIN: Objection.

14 THE COURT: Sustained.

15 BY MR. TRABULUS:

16 Q Now, you were asked some questions by Mr. White about

17 the letter that Mr. Gagliardi had written and your

18 response to it. When I say "the letter," I'm talking

19 about the one that is 421, and I think there's another

20 copy of it, 422.

21 You were asked about paragraphs 6 and 9.

22 A Right.

23 Q Now, if -- let's just go through it.
24 Let's go to item 3. That's the one that asks for
25 original cancelled checks and bank statements for all the

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8161
Reffsin-cross/Trabulus

1 accounts which you are signatory for April, May, etcetera,

2 right?

3 A Umm-hmm.

4 Q And you said that you had a discussion with

5 Mr. Gordon in which Mr. Gordon said that he just wanted to

6 give his own personal checking and not just from Who's Who

7 Worldwide?

8 A Originally, yes.

9 Q Originally.

10 And that was his desire, which he expressed to

11 you, correct?

12 A Umm-hmm.

13 Q And you were his accountant and he was looking to you

14 to do that, if it was possible, is that fair to say?

15 A If it was possible, yes.

16 Q And you told -- and you've told us in your judgment

17 that was okay because it wasn't material, it was okay to

18 do that?

19 A No, I didn't say that.

20 Q You were the one, sir, who forwarded over the

21 response to this letter, did you not?

22 A Are you referring to item 3 or are you referring to

23 item 6?
24 Q I'm referring to a letter -- bear with me a moment,
25 Mr. Reffsin.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8162
Reffsin-cross/Trabulus

1 You responded to this letter from Mr. Gagliardi,

2 did you not?

3 A To this letter (indicating)?

4 Q Yes, the letter which is 421.

5 A Yes.

6 Q And it also appears as 422.

7 A Yes.

8 Q How did you respond to it, sir?

9 A Item-by-item to the extent appropriate.

10 Q You sent the materials over to Mr. Gagliardi?

11 A Yes.

12 Q And you understood when you sent those materials over

13 to Mr. Gagliardi, that that would be understood by

14 Mr. Gagliardi to be a response, both to your letter,

15 excuse me, both to his letter to you and his conversation;

16 isn't that correct?

17 A That's correct.

18 Q And you've explained to us two b ases for not giving

19 over the additional checks that did not come from

20 Mr. Gordon's own account, one of which was that

21 Mr. Gagliardi told you that it wasn't necessary; and two,

22 it wasn't the determination that it wouldn't be material;

23 is that correct?
24 A There were no personal necessary living expenses,
25 yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8163
Reffsin-cross/Trabulus

1 Q So you had formed your own determination that it was

2 okay to respond to Mr. Gagliardi the way Mr. Gordon wanted

3 you to respond, is that fair to say, sir?

4 A Yes, I would say that is fair.

5 Q And is it not fair to say just as you've told us

6 that, you told Mr. Gordon that, that it was okay to do

7 that?

8 A I don't know if I told him it was okay. That's what

9 we did.

10 Q Certainly there would have been no reason for you to

11 tell Mr. Gordon that it was not okay if indeed as you say

12 you had determined that it was.

13 A Yes.

14 Q So if you did, certainly he would have been entitled

15 to rely on you on that?

16 A No question.

17 Q He didn't hide from you the fact that there were

18 checks that were played out -- withdrawn. He didn't hide

19 from you the fact that there were Who's Who Worldwide

20 checks. He didn't hide those checks from you?

21 A Absolutely not.

22 Q He disclosed that to you?

23 A Yes, he did.
24 Q Now, with regard to the automobiles, at any given
25 time there were two cars which were being paid for by

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8164
Reffsin-cross/Trabulus

1 Mr. Gordon?

2 A Yes.

3 Q And with regard to that the corporation took a tax

4 deduction?

5 A Yes.

6 Q I n your judgment that was appropriate?

7 A Yes.

8 Q With regard to the other car -- withdrawn.

9 You can't take the tax deduction for two cars for

10 a corporation for one person; is that correct?

11 A It would be a little illogical.

12 Q And you advised Mr. Gordon that with regard to the

13 second car the corporation could not take a tax deduction;

14 is that correct?

15 A That's correct.

16 Q And the amount of the payments on that was reflected

17 as a loan?

18 A That's correct.

19 Q And in accordance with what you said was all right?

20 A That's right.

21 MR. TRABULUS: Bear with me. I'm just checking

22 my notes.

23 BY MR. TRABULUS:
24 Q With regard to the cars, it was your testimony that
25 Mr. Gordon did not want the information on either of them

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8165
Reffsin-c ross/Trabulus

1 disclosed, sir. Was that your testimony? I just want to

2 make sure I understood it.

3 A He didn't want any of the information with respect to

4 the cars disclosed, yes.

5 Q Now, Mr. Gordon was not in contact with

6 Mr. Gagliardi, was he?

7 A No, he was not.

8 Q You were the one in contact with Mr. Gagliardi?

9 A Yes, I was.

10 Q So any communication with Mr. Gagliardi concerning

11 Mr. Gordon's taxes, would come through you; is that

12 correct?

13 A That's correct.

14 Q And you would be responsible for that, would you not?

15 A Yes.

16 Q Now, is it fair to say, sir, that you deemed it in

17 your own judgment appropriate not to disclose to

18 Mr. Gagliardi the information concerning the cars?

19 A No, I didn't say that.

20 Q Well, when you disclosed the information to

21 Mr. Gagliardi that you did discl ose but didn't include

22 anything relating to the cars, did you feel that you were

23 misleading Mr. Gagliardi?
24 A No.
25 Q You felt that it was all right to do that?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8166
Reffsin-cross/Trabulus

1 A No, I felt it was an immaterial item.

2 Q So, when you felt it was an immaterial item, you felt

3 because it was immaterial, you could fail to disclose it

4 without doing anything improper; is that correct?

5 A Yes.

6 Q And would that be something that you communicated to

7 Mr. Gordon?

8 A I believe I did, yes.

9 Q So when Mr. Gordon asked if he could not disclose the

10 cars to Mr. Gagliardi, you told him it's okay, we don't

11 have to disclose them. Is that fair to say?

12 A I agreed with him, yes.

13 Q Well, is it fair to say that just as you've told us

14 today that it is because it wasn't material it didn't have

15 to be done, you told Mr. Gordon that because it was not

16 material, maybe you didn't use that word, but you at least

17 told him it didn't have to be done. Is that fair to say?

18 MR. TRABULUS: Your Honor, might we take a break

19 at this point or is it a little too early?

20 THE COURT: Well, I was going to go to a quarter

21 to 4.

22 MR. TRABULUS: I can go.

23 BY MR. TRABULUS:
24 Q Now, Mr. White asked you about the payment of
25 Mr. Gordon's taxes through money orders. Do you recall

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8167
Reffsin-cross/Trabulus

1 that?

2 A Yes.

3 Q And I think you indicated that in the past with some

4 clients where the IRS was kind of at their back, you would

5 indicate to them that they would do that rather than pay

6 by a check on an accou nt over which they had signatory

7 authority; is that correct?

8 A No. What I said where there was an account, even

9 though they had signatory authority which had nothing to

10 do with that, that it was better that they paid by money

11 order because they can come in and levy that account and

12 they would have no real right to do that.

13 Q In other words, I assume that in telling those

14 clients that, you believe giving them that advice was

15 entirely proper and by doing that would be entirely

16 proper?

17 A Sometimes the IRS is a little rambunctious in seizing

18 assets.

19 Q You were aware, sir, that Mr. Gordon used money

20 orders to pay tax obligations?

21 A Yes, I was.

22 Q And is it possible that that advice to do so came

23 from your office?
24 A No, he was using money orders before I even got
25 involved with him.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8168
Reffsin-cross/Trabulus

1 Q You saw nothing wrong with that?

2 A No.

3 Q In other words, he may have been doing it before you

4 got involved but if he hadn't you may have advised him.

5 Is that fair to say?

6 MR. WALLENSTEIN: Read that back, please.

7 (Record read.)

8 MR. TRABULUS: Withdrawn.

9 BY MR. TRABULUS:

10 Q You never advised him that it was improper to do it?

11 A That's correct.

12 Q And you didn't regard it as improper?

13 A No.

14 Q Mr. Reffsin, I just want to take a look at 475. Is

15 that still here? I was referring to the wrong exhibit.

16 474.

17 You were shown both 474 and4 75 by Mr. White. I

18 think on 474 you were directed to charges on Mr. Gordon's

19 card on Liz Sautter's account of about $48,000 to a trip

20 to Paris and so forth.

21 A That's correct.

22 Q Do you see that the single largest item, over

23 $21,000, is something from Galarie?
24 A (Perusing.) Bill as Galarie Sordello, Paris. Paris
25 8, France.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8169
Reffsin-cross/Trabulus

1 Q Do you know whether that was artwork or sculpture?

2 A No, I do not.

3 Q Did Mr. Gordon tell you that some of the other

4 charges there were items that were sold by the bankruptcy

5 trustee for Who's Who Worldwide?

6 A Yes, he did mention that.

7 Q That wasn't his own property?

8 A Apparently not.

9 Q Were there other instances in which things that were

10 charged to the loan account turned out not to be for

11 personal expenses for Mr. Gordon but business expenses?

12 Do you recall any?

13 A You mean in the earlier periods?

14 Q Yes.

15 A Yeah, de finitely.

16 Q Do you recall, for example, a trip that Mr. Gordon

17 and some other people from his company took to California

18 that had erroneously been treated as a loan to him but in

19 fact was a business expense?

20 A Yes, but that was corrected.

21 Q Sure enough.

22 A Yes.

23 Q In fact, you were partially responsible. You were
24 one of the people responsible for correcting it?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Q That was a business trip to California with a view to

2 setting up a branch, a related company; is that correct?

3 A That's correct.

4 Q And do you know whether Registry Publishing was to be

5 the company that was going to be used for that?

6 A Mr. Gordon had indicated that Registry Publishing

7 might be the company.

8 Q Mr. Gordon, it's fair to say, would create some

9 dormant companies to save the names that he wanted to

10 save?

11 A Yes, he had a half dozen companies.

12 Q And he would then utilize them for business purposes;

13 is that right?

14 A Well, the intent was he wanted to save the names.

15 Q So Sterling would be one of those?

16 A It might have been originally, but ultimately it

17 became an entity, an active entity.

18 Q That's what I meant to say.

19 A Yes.

20 Q And as far as you know Sterling was quite successful,

21 was it not?

22 A It started to be very successful in '94.

23 Q Up until --
24 A Up until the time it was closed down.
25 Q Now, Mr. White asked you some questions about the

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1 collateral agreement.

2 A Yes.

3 Q Do you recall that?

4 A Yes.

5 Q And in his questions he suggested to you that if

6 Mr. Gordon -- withdrawn.

7 I think you explained to Mr. White that it made

8 no difference under the collateral agreement whether or

9 not Mr. Gordon owned as opposed to controlled Who's Who

10 Worldwide for a corporation.

11 A No, that wasn't my intention if I did that.

12 Q Under the collateral agreement if Mr. Gordon

13 controlled the company, if he controlled the company, is

14 it fair to say, directly or indirectly, is it fair to say

15 its income was to be taken into account in computing his

16 payment obligation?

17 A The fact that you control a company doesn't

18 necessarily mean the income should be attributed to you.

19 Q Well, do you have the collateral agreement in front

20 of you?

21 A It's part of the offer and compromise?

22 Q Right.

23 A (Perusing.)

24 Q Mr. Reffsin, there are two copies of the same thing.
25 Tell me what exhibit you are looking at, is that 420?

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1 A 420-H.

2 Q Look at the second page, paragraph 3. Would you read

3 that to yourself, sir.

4 A Yes. (Perusing.)

5 Q Mr. Reffsin, having read it, do you understand that

6 it includes corporate income in the taxpayer's income,

7 taxpayer being Mr. Gordon --

8 A Umm-hmm.

9 Q -- If the corporation is directly or indirectly

10 controlled or owned by the taxpayer.

11 A I know what it said. I had a great deal of problems

12 with the wording.

13 Q It was unclear to you?

14 A Yes.

15 Q And I think Mr. White asked you on questioning you if

16 you understood the collateral agreement and you said you

17 did. Is that fair to say?

18 A I understood it. I understood there were problems

19 with it as well.

20 Q When you say "problems," there were parts which you

21 regarded as ambiguous or difficult to interpret how to

22 apply?

23 A Yes.
24 Q Did you ever discuss with Mr. Gordon -- withdrawn.
25 I think you indicated the collateral agreement

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1 was entered into by some attorneys on behalf of

2 Mr. Gordon?

3 A That's correct.

4 Q Did you ever after that discuss with Mr. Gordon

5 whether he understood it?

6 A Yes, I did discuss it with him.

7 Q Did he express to you that he had difficulty in

8 understanding it?

9 A He expressed he had difficulty and expressed that he

10 had no choice but to sign it.

11 Q But he really didn't understand it and he was given

12 no choice but to sign it?

13 A That's what he said, yes.

14 Q Is it fair to say if you had difficulty interpreting

15 it how it would be applied under particular circumstances,

16 Mr. Gordon would have certainly as much difficulty?

17 MR. WALLENSTEIN: Objection.

18 THE COURT: Overruled.

19 A I would believe so, yes.

20 Q Probably more because he's not an accountant?

21 A Yes, that's correct.

22 THE COURT: Is this a good time to take a break?

23 MR. TRABULUS: Sure.
24 THE COURT: Members of the jury, we'll take a
25 ten-minute recess.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Please do not discuss the case. Keep an open

2 mind.

3 (Jury exits.)

4 (Recess taken.)

5 (Jury enters.)

6 THE COURT: Please be seated, members of the

7 jury.

8 You may proceed.

9 MR. TRABULUS: Thank you, Your Honor.

10 BY MR. TRABULUS:

11 Q Now, Mr. Reffsin, I think Mr. White asked you at some

12 point whether or not Mr. Gordon -- withdrawn.

13 Mr. White asked you about the borrowing from

14 Dr. Grossman and how it was used to pay down his own loan

15 obligation to Who's Who Worldwide, right?

16 A Yes.

17 Q And then Mr. White asked you at a later point in

18 time, could not Mr. Gordon have gone to Dr. Grossman or

19 somebody else and borrowed more money to pay down, further

20 pay down his obligation to Who's Who Worldwide. Do you

21 recall that?

22 A I recall he said could he have gone elsewhere.

23 Q And I think he mentioned Dr. Grossman or another
24 representative. Do you recall at that point in time after
25 the initial borrowing from Dr. Grossman whether

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Dr. Grossman was willing to make any further loan from

2 Mr. Gordon?

3 A I have no idea.

4 Q Do you know of any individual specifically to make a

5 loan to Mr. Gordon?

6 A Specifically, no.

7 Q I think Mr. White asked you could Mr. Gordon have

8 gone to one of the other companies and borrowed from it,

9 and used that to repay Who's Who Worldwide; is that

10 correct?

11 A He did say that, yes.

12 Q And if that had been done to any great extent, would

13 that not have basically the same issue would have arisen,

14 whether or not -- how he would repay that company?

15 A Absolutely.

16 Q And the same IRS -- withdrawn.

17 Just as the argument is being made now that this

18 was not a loan but income, the IRS would have failed to

19 make that argument too; is that correct?

20 A That's correct.

21 Q Y ou indicated earlier that you had expressed concern

22 to Mr. Gordon that payments had to be made on this

23 otherwise the IRS might challenge it; is that correct?
24 A That is a standard way they deal with corporate
25 loans.

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1 Q In expressing that advice you weren't expressing

2 doubt it was a loan?

3 A It was just procedural.

4 Q Even if it intended to be a loan and intended to be a

5 loan, the IRS would come and challenge?

6 A My criteria is you have to make payments.

7 Q And after that he did make a payment?

8 A There was a payment.

9 Q Now, Mr. White asked you whether or not considering

10 all the factors, and I think all the circumstances, excuse

11 me, and he listed certain things, whether or not you had

12 some kind of suspicion at the time whether t he repayment

13 from Dr. Grossman, excuse me, the loan from Dr. Grossman

14 would have been some kind of -- might have designed to

15 make it look like a repayment, something like that. Do

16 you recall that?

17 A Yes.

18 Q And when Mr. White asked you that he didn't include

19 in the circumstances that Dr. Grossman himself said that

20 he understood that it was a loan, did he?

21 A No, he did not.

22 Q And he didn't include in the circumstances that

23 Dr. Grossman himself said that when he had first received
24 the money from Who's Who Worldwide there were no springs
25 attached?

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1 A He did say that, yes.

2 Q And Mr. Grossman, Dr. Grossman said that?

3 A Right.

4 Q Mr. Gordon didn't say that?

5 A No.

6 Q The fact that there were n o strings attached, that

7 meant Dr. Grossman didn't have to loan the money later on

8 when Mr. Gordon asked for it?

9 A I couldn't interpret what Dr. Grossman meant one way

10 or the other.

11 Q Does that give you some comfort that this was not

12 designed as some kind of a subterfuge.

13 A Yes, definitely.

14 Q That he got the money, didn't understand he would

15 have to do anything with it and later on he was asked and

16 agreed on his own to make a loan?

17 A He said it was a loan.

18 Q He didn't say to whom. He just said it was a loan,

19 whether it was to Who's Who Worldwide or Mr. Gordon in

20 term of his testimony.

21 A I don't remember that.

22 Q Do you know whether or not some of the money that was

23 returned to Who's Who Worldwide in repayment, partial
24 repayment of Mr. Gordon's loan, do you know whether or not
25 some of it wa s applied towards publishing the registry?

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1 A There were no segregation of funds. All funds were

2 commingled.

3 Q Publishing the registry was a fairly expensive

4 proposition?

5 A Yes.

6 Q And that would be done around January, was it not?

7 A It was done several times a year.

8 Q Do you recall as you sit there now and if you want to

9 look at the document, do you recall what it would cost to

10 publish the registry each year approximately?

11 A I recall way back when seeing a bill for 65, 75,000

12 attributable to publishing.

13 Q That would be the entire amount?

14 A That would be the layouts and so forth.

15 Q The actual publishing of the entire thing, issuing

16 the books, that would be far in excess?

17 A Yes, I don't remember how much.

18 Q Near a million?

19 A I don't really recall.

20 Q Do you recall what it cost to publish Tribute

21 magazine?

22 A No, I don't.

23 Q We'll get to that.
24 Now, Mr. White asked you some questions about
25 transfers being made before bankruptcy. Do you recall

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1 that?

2 A Yes.

3 Q And that before bankruptcy as the bankruptcy was

4 being filed you explained to Mr. Gordon that when you were

5 in a bankruptcy situation, everything the corporation did

6 had to be disclosed, right?

7 A That's correct.

8 Q And is it fair to say that all the transfers were

9 disclosed in the bankruptcy?

10 A All of the transfers?

11 Q Yes.

12 A Yes, absolutely.

13 Q So the transfers -- so the fact that there were

14 transfers was not h idden in the bankruptcy; is that

15 correct?

16 A Not to Who's Who Worldwide transfers, no.

17 Q And those were the transfers that Mr. White was

18 asking you about, isn't that true?

19 A Yes.

20 Q And the loans were disclosed in the bankruptcy, were

21 they not?

22 A Absolutely.

23 Q And in speaking to Mr. Gagliardi and in writing to
24 Mr. Gagliardi, you advised him of the Who's Who Worldwide
25 bankruptcy, did you not?

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1 A Absolutely.

2 Q And in your experience as an accountant dealing with

3 the IRS on collection matters, did you know whether or not

4 they on occasion would check the files in the bankruptcy

5 court? Have you had any experience with that?

6 A No, I did not. Not in that capacity.

7 Q But certainly you didn't do anything to dissuade him

8 from checking those files, did you?

9 A Absolutely not.

10 Q Did Mr. Gagliardi ever ask you for any copies of the

11 bankruptcy documents?

12 A I think he asked me for the first page. When I spoke

13 to him he asked me for the first page of the petition.

14 Q Did you give it to him?

15 A I believe I did.

16 Q And if he had asked you for any more, would you have

17 given it to him?

18 A The whole petition.

19 Q It was a public record?

20 A Right.

21 Q Did he ever ask you for any of the corporate tax

22 returns of Who's Who Worldwide?

23 A No.
24 Q But if he had done so you certainly would have done
25 that, correct?

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1 A Absolutely.

2 Q Did he ever ask you to secure permission from Who's

3 Who Worldwi de to examine its tax returns?

4 A No.

5 Q Now, I think you indicated that Mr. Gordon was a

6 little bit tight fisted with paying attorneys and

7 accountants. Is that fair to say?

8 A Absolutely.

9 Q But he did pay you, did he not, for your work?

10 A When I screamed and yelled enough, yes.

11 Q You got paid, right?

12 A Eventually, yes, sir.

13 Q And the work that you haven't been paid for is

14 something that has to come through the bankruptcy

15 proceeding?

16 A Yes.

17 Q It's not something within Mr. Gordon's control?

18 A No.

19 Q Take a look, please, at Exhibit 420-E.

20 A 420-E.

21 Q Mr. White asked you about this amount?

22 A Yes.

23 Q And these were projections prepared by your office?
24 A Yes.
25 Q And you submitted them along with the offer and

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1 compromise; is that correct?

2 A Yes.

3 Q Now, Mr. White asked you if the loan obligation from

4 Mr. Gordon to Dr. Grossman appeared on this and I think

5 you indicated that it did not?

6 A That's correct.

7 Q And you said that was by Mr. Gordon's preference,

8 right?

9 A Yes.

10 Q And then Mr. White asked you a little more

11 specifically as to what the conversation in that regard

12 was and I think you said you asked Mr. Gordon do you want

13 to disclose the loan from your brother-in-law or not and

14 he said no; is that correct?

15 A Yes, that's correct.

16 Q So you gave him the choice. Is that fair to say?

17 A That's correct.

18 Q And by doing that you indicated to him that it was

19 optional, did you not?

20 A Yes.

21 Q So in saying that he did not want to, is it f air to

22 say that he understood from you that he did not have to?

23 MR. WALLENSTEIN: Objection.
24 THE COURT: Overruled.
25 A He understood that in terms of required payments that

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1 the loan would not be necessarily required to be paid

2 right away.

3 Q No, the question, Mr. Reffsin --

4 A Sorry.

5 Q That's okay.

6 A Okay.

7 Q The question was, did Mr. Gordon understand from the

8 way you put the question to him that it wasn't necessary

9 to disclose the loan from Dr. Grossman to him?

10 A On this document?

11 Q On this document.

12 A On this, that's correct.

13 Q Now, going back to that loan, you reflected the loan

14 from Dr. Grossman to Mr. Gordon as being a repayment of

15 Mr. Gordon's -- withdrawn.

16 The corporate b ooks reflected that the money that

17 Dr. Grossman paid for Who's Who Worldwide was a partial

18 repayment or paying down Mr. Gordon's loan balance to

19 Who's Who Worldwide, right?

20 A Right.

21 Q And you regarded that as appropriate; is that

22 correct?

23 A Yes.
24 Q And at the time you regarded it as appropriate, you
25 were aware that in December of 1992, $400,000 had been

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1 paid to Dr. Grossman?

2 A Yes.

3 Q And you were aware that taxes, income taxes were paid

4 on that by Dr. Grossman?

5 A Yes.

6 Q And you were aware then that not that long afterwards

7 an amount came back to Who's Who Worldwide which basically

8 represented that amount of $400,000 net of all the taxes,

9 are you aware of that?

10 A I'm aware an amount came back. I'm not aware

11 specifically what it was.

12 Q But in any event, in regarding that as all right, you

13 were aware that Dr. Grossman had received some money

14 before and shortly afterwards returned it to the

15 corporation?

16 A Yes.

17 Q And that did not, in your mind, prevent it from being

18 a valid repayment of a loan?

19 A No.

20 Q When Mr. Gordon explained, told you about it or the

21 company told you about it, you didn't say there was

22 anything wrong with that; is that correct?

23 A No.
24 Q Now, going back to your own borrowing from Stegar,
25 when you did it, did you regard that as tax planning for

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1 yourself when you did it?

2 A No.

3 Q In other words, the fact that you borrowed from

4 Stegar rather than took a payment to yourself as

5 compensation from Stegar -- withdrawn.

6 Did you have a choice of taking a payment for

7 yourself as compensation from Stegar as opposed to

8 borrowing?

9 A No.

10 Q Now, do you recall telling Mr. Gordon that he could

11 take loans from the corporation so long as he intended to

12 repay them and not have to pay taxes on that?

13 A Did I tell him he could take loans?

14 Q I shouldn't say that.

15 Did you explain to Mr. Gordon at the outset, at

16 the outset of Who's Who Worldwide, that he would have the

17 option of borrowing money from Who's Who Worldwide and if

18 he did so he would not have to pay taxes on that at the

19 time he received it?

20 A No, I never said that to Mr. Gordon.

21 Q Well, would that be accurate as you understand it if

22 it is a valid borrowing from a company you don't need to

23 pay taxes on it at the point in time?
24 A If it is intended to be a loan, it's a loan.
25 Q That's all I'm suggesting.

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1 A Yes.

2 Q And I assume you discussed that with Mr. Gordon at

3 some point in time relating to the loan. I mean, that's

4 what you yourself had done with Stegar, right?

5 A I mean, if he took a loan and intended to pay it

6 back, it's a loan. If he took a loan without intending to

7 pay it back, it's not a loan.

8 Q Do you recall for the first time you discussed that

9 with Mr. Gordon? Was that pretty early on?

10 A Late '91 into '92.

11 Q And that would be in connection with closing the

12 books in '91?

13 A Yes.

14 Q Let me go back. I just want to ask you a little bit

15 about the tax shelters that you had been the accountant on

16 in which some of the problems resulted.

17 Isn't it a fact that the IRS didn't totally

18 disallow those tax shelters?

19 A Yes, I think there was one that was not disallowed.

20 Q Do you recall that they allowed 50 percent of the

21 deductions that were claimed?

22 A I recall that with respect to some of the investors,

23 they were permitting to take a 50 percent deduction -- I
24 take that back. They were permitting them to take the
25 cash deduction.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Q Without going into details, I mean, it wasn't found

2 to be totally wrong, right?

3 A The concept was a reasonably decent concept.

4 Q Was it put together -- withdrawn.

5 Were those tax shelter deals put together by some

6 attorneys, basically designed by the attorneys?

7 A Yes, that's correct.

8 Q That was the law firm you mentioned before, I think

9 the last name was Hindy?

10 A Adler, Greenberg, Hindy, yes.

11 Q Was that Adler any relation to --

12 A No.

13 Q Different Adler altogether?

14 A Different Adler altogether.

15 Q But apparently the opinion he gave turned out to be

16 wrong; is that correct?

17 A Yes.

18 Q And as a result Mr. Gordon suffered those

19 consequences?

20 A That's correct.

21 Q Now, I think Mr. White asked you whether at some

22 point in time you had used the word "bullshit" in January

23 of 1996 in speaking to the IRS agents. Do you recall
24 that?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Q And I think you indicated at that point in time it

2 might have been. You couldn't tell?

3 A There was no reason to assume one way or the other.

4 Q Do I understand what would have enabled you to tell

5 one way or the other, is what would have happened if there

6 had not been a bankruptcy and then Who's Who Worldwide

7 being shut down?

8 A Yes.

9 Q And can you just explain that to the jury?

10 A Well, the purpose, I understood the purpose of

11 acquiring the condo was to use it for business purposes,

12 one of the businesses. When he was going to set up the

13 California operation he was going to bring people in to

14 train and spend some time there. That never happened.

15 In addition, late in 1993 he got heavily involved

16 in this lawsuit with Reed Elsevier which essential became,

17 went from nothing in his mind to a $1,700,000 lawsuit and

18 then within months we're talking about bankruptcy. So

19 many things happened during a short period of time, to

20 change whatever intentions he may have had.

21 Q Let me see if we can be more specific.

22 The original intention was to utilize that condo

23 for training people who had come in from out of town such
24 as California?
25 A That was one of the uses, yes.

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1 Q And once there was a judgment in a bankruptcy it

2 wasn't possible to expand to California.

3 A That's correct.

4 Q But they still had the condo; is that correct?

5 A Yes.

6 Q The condo had been bought before that?

7 A They owned it.

8 Q In light of the bankruptcy and the judgment, there

9 was no way to tell what would have happened had the plans

10 not gone awry because of the bankruptcy and the judgment,

11 right?

12 A No.

13 Q That applies also to paying back the loans?

14 A That's correct.

15 Q In other words, Mr. Gordon always maintained that he

16 intended to pay them back?

17 A That's what he said.

18 Q And you had expected that Who's Who -- withdrawn.

19 Who's Who Worldwide was doing better and doing

20 better and better, is that fair to say?

21 A It would appear to be doing that, yes.

22 Q At a certain period of time it might have generated

23 enough income for him to in one fell swoop -- withdrawn.
24 Let me backtrack.
25 If he had taken, repaid the loans by kind of

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1 cancelling them out and treating it as income at a certain

2 point in time, that wouldn't have -- that would have had

3 the result of increasing his taxable income for that year,

4 right?

5 A That's correct.

6 Q And is it fair to say that it was expected that at a

7 c ertain point in time if Who's Who Worldwide kept on doing

8 better and better, it would be a point in which there

9 would be enough money for him to do that and pay the taxes

10 for that -- during that year?

11 A Based on the loans that existed at that time, yes.

12 Q And did you regard that as a reasonable expectation

13 in light of the way Who's Who Worldwide was doing?

14 A I was shocked at the growth with respect to Who's Who

15 Worldwide.

16 Q You mean how much it was growing?

17 A How much it was growing, yeah.

18 Q So is it fair to say it seemed reasonable to you if

19 it kept on growing that way he would be able to pay it

20 back and meet the additional tax obligation?

21 A Assuming it didn't get out of hand, yes.

22 Q Okay.

23 And part of the preventing it from getting out of
24 hand was repaying it through the loan from the Grossmans;
25 is that correct?

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1 A No, that's the way he did it so far or at that time.

2 Q Certainly when he told you that this -- when you

3 discussed with him that that was the plan, you didn't tell

4 him that this was wrong, did you?

5 A What was the plan?

6 Q The expectation to pay it back at some point in the

7 future as Who's Who Worldwide did better and better.

8 A I told him it would have to be paid.

9 Q But you didn't tell him that his expectations in that

10 regard seemed to be pie in the sky, did you?

11 A No, I would never.

12 Q You indicated also that the initial offer and

13 compromise of $150,000 was contemplated really to be part

14 of a package where there also would be the additional

15 $254,000 to the Department of Justice?

16 A Initially, yes.

1 7 Q When you first did that, you were in effect offering

18 $400,000, right?

19 A That's correct.

20 Q And you expected, based on your own prior experience,

21 that the IRS would not take your initial offer but want

22 more, correct?

23 A That's correct.
24 Q And you discussed that with Mr. Gordon?
25 A Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Q As part of all of this, did Mr. Gordon express to you

2 the view that as Who's Who Worldwide did better and better

3 he would be able at some point in one fell swoop to pay

4 the tax, to pay this amount that would be compromised,

5 perhaps greater than $400,000, pay back the loan and pay

6 an additional tax obligation he incurred by reason of the

7 fact that the loan was being repaid?

8 A Well, the compromise would have to be paid, whatever

9 it was.

10 Q And also pay back the loan?

11 A Yes.

12 Q And at the same time as paying back the loan, he

13 might incur additional taxes because paying back the loan

14 would involve income to him?

15 A Yes.

16 Q And all of it, he expressed to you the hope he could

17 do that all at once Who's Who got to a certain point.

18 A I would like to change that. I mean, the pay back of

19 the loan could be either through income or through

20 payments from elsewhere.

21 Q But one of the things that was contemplated was there

22 might be a cancellation. Indebtedness, his indebtedness

23 to Who's Who Worldwide which would be treated as salary to
24 him?
25 A That was the last alternative.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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1 Q And it was his hope this could be accomplished if

2 Who's W ho was successful enough?

3 A I would presume so, yes.

4 Q What prevents us from ever knowing whether that

5 happened was the bankruptcy and ultimately the fact that

6 Who's Who Worldwide and Sterling had shut down?

7 A Yes.

8 Q Now, I think Mr. White showed you Exhibit 415.

9 Do you have it there?

10 A It may be here.

11 Q Do you have it? The corporate tax return?

12 A (Perusing.) Here it is.

13 Q Okay.

14 Mr. White showed you 415. That's a Who's Who

15 Worldwide corporate tax return for 1990; is that correct?

16 A That's correct.

17 Q And I think he pointed out to you that Mr. Gordon is

18 shown as owning 100 percent of the stock; is that correct?

19 A Yes.

20 Q Now, if Mr. Gordon owned less than 100 percent or

21 owed none of it, would there be any possible benefit to

22 Mr. Gordon to list his ownership as being 100 percent?

23 A At this point, no.
24 Q Yes?
25 A No.

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1 Q I mean, for example, if he owned 75 percent, would

2 there be any benefit in showing 100 percent instead of 75?

3 A A benefit of showing 100 percent?

4 Q Yes, to him.

5 A No.

6 Q I think you mentioned that Mr. Gordon -- withdrawn.

7 You mentioned that Mr. Gordon liked to have

8 different companies that he would have dormant and kind of

9 save them so he would use the name?

10 A He incorporated several, yes.

11 Q Did he also like to have bank accounts in different

12 places, with different banks?

13 A Yes.

14 Q And from your business experience, what can be some

15 of the reasons why a business person might like to have

16 relations with more than one bank?

17 A Well, that's the thi ng, to have relations with more

18 than one bank for future borrowings, financial situations

19 that may arise.

20 Q And, for example, if you had a corporation and you

21 had -- that corporation had accounts with several

22 different banks and then you formed a related corporation

23 and you only established a bank account for that related
24 corporation with one of the banks and other banks got wind
25 of the fact that you only had one account, could that

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
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Reffsin-cross/Trabulus

1 affect your relationship?

2 A If you were doing any other financing with them it

3 might.

4 Q So if you had relationships with several different

5 banks you would -- you might have a reason to have bank

6 accounts for all of your corporations with all of the

7 banks. Is that fair to say?

8 A That's correc t.

9 Q Perfectly legitimate business reasons?

10 A Yes.

11 Q Were you aware during your examination of the books

12 and records -- withdrawn.

13 In doing your work on Who's Who Worldwide, I will

14 not call it an examination, did you become aware whether

15 or not Who's Who Worldwide made refunds?

16 A I recalled there were refund checks, yes.

17 Q And did you ever happen to see, did you ever take a

18 look at any of the bank statements that reflected deposits

19 from NABANCO?

20 A You mean the merchant companies.

21 Q Did you ever look at those?

22 A No, not myself. No.

23 MR. TRABULUS: Bear with me, Your Honor. I'm
24 trying to figure out the numbering sequence.
25 THE COURT: Yes.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8196
Reffsin-cross/Trabulus

1 BY MR. TRABULUS:

2 Q While they are looking for that, do you ever recall

3 having a conversation with Dr. Grossman that you expected

4 with the California office Who's Who Worldwide and related

5 companies to do $50,000,000 a year in Gross?

6 A With Dr. Grossman?

7 Q Do you recall that?

8 A No, I don't.

9 Q Do you recall having that conversation with somebody

10 expecting that point that if they opened the California

11 office they would be doing about 50,000,000?

12 A Well, Mr. Gordon said he expected the companies to do

13 $50,000,000 a year.

14 Q Showing you 796-C which is in evidence.

15 Mr. Reffsin, do you know what that is?

16 A It's an accounts payable analysis report.

17 Q Do you know who prepared that?

18 A That time I would have to say Ms. Gaspar.

19 Q That came from Who's Who's records; isn't that right?

20 A Yes.

21 Q Now, it's a long exhibit and thumb through it and you

22 will come to a place that is called "A/P purchase analysis

23 report." It's about an eighth of an inch, dated 1/1/94
24 through 3/31/94.
25 A The whole thing is an A/P analysis report.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8197
Reffsin-cross/Trabulus

1 Q Do you know what, I'll come up there and show you the

2 whole thing to save some time.

3 Here we are. On the page in the upper left-hand

4 corner it says 4/19/94, 3:21 p.m.

5 A Yes.

6 Q And at bottom of that page there is a list, is there

7 not, of notes and dollar entries?

8 A Account 4560, cancellations or refunds.

9 Q What does that reflect?

10 A These would be refunds that were due to people.

11 Q And were they refunds that were made?

12 A Well --

13 Q It would be payables?

14 A Payables, amounts due.

15 Q Okay.

16 At this point was it your understanding from what

17 you could see when amounts were due were they paid on

18 these refunds, the people?

19 A Well, this wouldn't show the payment, just shows the

20 balance due.

21 Q And so Who's Who would reflect the balances due on

22 their books for refunds; is that correct?

23 A Apparently Ms. Gaspar was reflecting them, yes.
24 Q And you understood that refunds were actually made;
25 is that correct?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8198
Reffsin-cross/Trabulus

1 A Yes.

2 Q Some of the amounts that were here would be amounts

3 for $197, $97, $277?

4 A Yes.

5 Q 97.50?

6 A The two $97's is a duplicate payment.

7 Q Two payments.

8 And the $97.50 would be somebody who was billed

9 for a directory or a CD ROM possibly?

10 A Possibly.

11 Q Mr. Reffsin, I'll show you 776-G i n evidence and that

12 is a Who's Who Worldwide Registry, Inc., business checking

13 account statement, right?

14 A Yes.

15 Q For their account at European American Bank?

16 A Yes.

17 Q Is that one of the banks at which their credit card

18 payments by customers or members were directly deposited?

19 A NABANCO would make the deposits here.

20 Q They are substantial for deposit, 13,000 and change,

21 16,000 and change?

22 A Yes.

23 Q But there are also chargebacks, $297?
24 A Yes.
25 Q $197?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8199
Reffsin-cross/Trabulus

1 A Yes.

2 Q Several of them like that?

3 A Right.

4 Q And those would reflect refund, would they not?

5 A They would reflect cancellation of charges.

6 Q Which could either be a refund or somebody decided

7 not to go through th e purchase?

8 A That's correct.

9 Q Now, Sterling, the lease for the Sterling office

10 facility was a ten year lease; is that correct?

11 A I believe it was, yes.

12 Q Would it refresh your recollection if I showed you

13 testimony that you gave once before about that?

14 A I believe it would.

15 Q And in the course of your work, the work that you did

16 in the bankruptcy, you became familiar with the terms of

17 the Sterling lease; is that correct?

18 A Yes, because Who's Who guaranteed it.

19 Q The combined companies Who's Who Worldwide and

20 Sterling, were you aware that they paid payroll taxes of

21 about $70,000 a week?

22 A I wouldn't be surprised.

23 Q Now, you mentioned before that the address that
24 appeared on one of Mr. Gordon's tax returns of 10 Bluff
25 Road, you got that from Mr. Gordon?

OWEN M. WICKER, RPR OFFICIA L COURT REPORTER
8200
Reffsin-cross/Trabulus

1 A Yes.

2 Q Would that have been something that you got from

3 Mr. Gordon through a W-2 that he had given in a prior

4 year?

5 A I believe I asked Mr. Gordon what address to use.

6 Q Mr. Gordon could have used -- withdrawn.

7 It's fair to say that Mr. Gordon eventually, I

8 mean, there are tax returns filed by Mr. Gordon which

9 showed 2 Hummingbird Lane as his address; is that correct?

10 A Later, yes.

11 Q And there are W-2s that showed that?

12 A I believe so, yes.

13 Q And there was a year in which Mr. Gordon filed a tax

14 return which showed as an address 1983 Marcus Avenue, his

15 business address, that's correct?

16 A Yes.

17 Q And there was nothing improper about that; is that

18 correct?

19 A No, nothing unusual.

20 Q If Mr. Gordon wanted to deliberately con ceal where he

21 was living and not disclose that on a tax return, he could

22 have just as easily given 1983 Marcus Avenue, his business

23 address, right?
24 A He could have.
25 Q And it would have been very simple, right?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8201
Reffsin-cross/Trabulus

1 A Yes.

2 Q There's no need, there would have been no need to

3 give an incorrect address; is that correct?

4 A No, it's just a mailing address.

5 MR. TRABULUS: Bear with me a moment, Your

6 Honor.

7 THE COURT: Yes.

8 BY MR. TRABULUS:

9 Q Mr. Reffsin, I would like to go back to those

10 instructions how to prepare collection information

11 statement. They are Exhibit ED.

12 A That is the 433 A.

13 Q The instructions for the 433 A, yes.

14 A Bear with me.

15 Q Sure.

16 A Okay, got them.

17 Q Now, we've talked about this before and with other

18 witnesses too, but let's just go through it. Basically it

19 gives a general instruction for what to put under

20 necessary living expenses; is that right?

21 A Yes.

22 Q That's the first two lines that are after that,

23 right?
24 A Are you talking about the first sentence?
25 Q Yes, expenses must be reasonable for the size of your

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8202
Reffsin-cross/Trabulus

1 family, geographic location and unique circumstances?

2 A Right.

3 Q Now, the IRS doesn't have the power to tell people

4 how much money they can spend, does it?

5 A No.

6 Q So they can't tell people that their actual expenses

7 have to be reasonable. They can't do that, right?

8 A I don't understand the question.

9 Q In other words, you understand that to mea n that the

10 expenses that you list have to be reasonable. Is that

11 fair to say?

12 A Necessary.

13 Q Necessary. Reasonable to be necessary.

14 A Yes.

15 Q After that there are some specific ones where they

16 give specific instructions, right?

17 A Yes. Right.

18 Q In the case of rent, they tell you to list your

19 monthly rent payment?

20 A Yes.

21 Q So that might be interpreted a little bit differently

22 than just what is necessary. In case of rent they really

23 want to know what you are actually paying?
24 A Yes.
25 Q And unless they give you a specific instruction there

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8203
Reffsin-cross/Trabulus

1 how to deal with that, you would understand it to be what

2 is actually necessary?

3 A That's correct.

4 Q And that catch all at the end where i t says "other

5 expenses," there's no specific instruction on that. They

6 don't tell you to put your actual other expenses; is that

7 correct?

8 A No, necessary other expenses other than what is

9 listed.

10 Q Do you as an accountant regard these instructions as

11 particularly clear? I have to ask you that.

12 A No.

13 Q Now, Mr. White asked you some questions --

14 withdrawn.

15 MR. TRABULUS: Do you have Exhibit 417?

16 MR. WHITE: What is that?

17 MR. TRABULUS: 1992 Who's Who Worldwide tax

18 return.

19 BY MR. TRABULUS:

20 Q Mr. Reffsin, I'm showing you 417 in evidence. That

21 is the U.S. corporate tax return for Who's Who Worldwide

22 Registry, Inc., for the year 1992, is it not?

23 A Yes, it is.
24 Q And you signed it as preparer; is that correct?
25 A That's correct.

OWEN M. WICKER, RPR OFFICIAL CO URT REPORTER
8204
Reffsin-cross/Trabulus

1 Q Now, on the second page -- I'm sorry, you signed it

2 as preparer on March 12, 1993; isn't that correct?

3 A Yes.

4 Q And on the second page -- and this doesn't bear

5 Mr. Gordon's signature, right?

6 A No, this one does not.

7 Q If you look further in there they sent him a form for

8 him to sign because he didn't sign that. Do you see that

9 in there?

10 A Yes, it's in the back.

11 Q Okay.

12 And then he signed it once he got that form. He

13 signed the form, right?

14 A Umm-hmm.

15 Q And this shows that Bruce Gordon doesn't owe anything

16 of Who's Who Worldwide?

17 A Yes.

18 Q Mr. White asked you about the facts from Mr. Adler of

19 the documents that were relating to share ownership by the

20 Grossmans?

21 A Yes.

22 Q And that was faxed to you in March of 1994?

23 A That's correct.
24 Q And this was filed more than a year before that; is
25 that correct?

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8205
Reffsin-cross/Trabulus

1 A That's correct.

2 Q So it wasn't just sometime in March of 1994. All of

3 a sudden the idea comes up that Mr. Gordon doesn't own

4 Who's Who Worldwide?

5 A Absolutely not.

6 MR. TRABULUS: Bear with me a moment, Your Honor.

7 THE COURT: Yes.

8 MR. TRABULUS: Actually, would this be an

9 appropriate time to break? I will have more.

10 THE COURT: I want you to continue until

11 5 o'clock. Not 4:59, but 5 o'clock.

12 BY MR. TRABULUS:

13 Q Mr. Reffsin, I will show you my copy of Exhibit 660,

14 the general ledger for December 31, 1993.

15 Can you look through this and see if that

16 refreshes your recollection as to what it co st to print

17 the registry?

18 A (Perusing.) When you say "the registry," the

19 registry itself?

20 Q The book.

21 A Okay. Well, the registry, Global Leaders, account

22 5250, which shows $222,000.

23 Q In that year?
24 A And then there is some printing and binding which
25 shows another $114,000. From here you can't tell

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8206
Reffsin-cross/Trabulus

1 specifically.

2 Q That would have been in 1993? That would have been

3 expenses incurred in 1993?

4 A Yes.

5 Q And in 1994 the membership was larger?

6 A For Who's Who Worldwide?

7 Q Yes.

8 A I would have to imagine it would be, yes.

9 Q So there would have been even more expended on it?

10 A Yes.

11 Q You were shown a chart 837. Do you recall seeing

12 this?

13 A Yes.

14 Q A nd you were shown about various transfers that were

15 on this?

16 A Yes.

17 Q As far as you know, sir, all of those transfers were

18 by check, were they not?

19 A I wouldn't -- only the Who's Who Worldwide transfer

20 would I be able --

21 Q I should rephrase the question.

22 All of the transfers which you have knowledge of

23 that were on that were by check, were they not?
24 A Yes.
25 Q And you certainly have no reason to believe that any

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8207
Reffsin-cross/Trabulus

1 of the others were not by check?

2 A No.

3 Q And transfers by check are traceable, are they not?

4 A Yes.

5 Q Traceable through bank records?

6 A Yes.

7 Q Does the bank take pictures of the check when it is

8 deposited?

9 A Yes.

10 Q The check is drawn on a bank account and that bank

11 makes a picture of the check when it comes back, right?

12 A Yes. You would also have the cancelled check.

13 Q Well, the cancelled check itself would go back to the

14 person who wrote the check or the company that wrote the

15 check.

16 A Right.

17 Q But what I'm getting at it is traceable without

18 looking to the company -- you don't have to look to the

19 record of the writer of the check to trace it, you can

20 look at bank records, right?

21 A Yes.

22 Q Now, Mr. White asked you whether Mr. Gordon had

23 structured things so that nothing was in his name; is that
24 correct?
25 A Yes, he did.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8208
Reffsin-cross/Trabulus

1 Q And the 1991 tax return for Who's Who Worldwide was

2 signed by Mr. Gordon, was it not?

3 A Yes.

4 Q That's Exhibit 416 in evidence. I will show you my

5 copy of it.

6 Your firm prepared it?

7 A Yes.

8 Q And you signed it June 18, 1992?

9 A Right.

10 Q And Mr. Gordon's signature appears June 22, 1992,

11 right?

12 A Yes.

13 Q And that discloses a 75 percent ownership by

14 Mr. Gordon in Who's Who Worldwide, right?

15 A Yes.

16 Q At that point in time Mr. Gordon owed considerable

17 monies to the IRS, did he not?

18 A Same amount.

19 Q So certainly there he's owing money to the IRS and

20 he's not hiding, at least if he owned 75 percent he's not

21 hiding that, is he? It's on the form. He signed it.

22 A The form reflects it, yes.

23 THE COURT: All right. We'll take a recess at
24 this time.
25 Come up, Counsel.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8209
Reffsin-cross/Trabulus

1 MR. TRABUL US: Sure.

2 (Side bar.)

3 THE COURT: How much longer do you have?

4 MR. TRABULUS: It's hard to say, Judge, but not

5 more than a half-hour, maybe 45 minutes at most.

6 THE COURT: And then you have some recross?

7 MR. SCHOER: Fifteen, 20 minutes.

8 THE COURT: Anybody else?

9 MR. WALLENSTEIN: My redirect is only about a

10 half-hour, depends what comes out.

11 MR. WHITE: I'm sure I will have some based on

12 the redirect and recross.

13 THE COURT: That takes care of essentially the

14 good part of the morning.

15 Is this lady here, Sandra Barnes?

16 MR. NELSON: She is here. She will be back

17 tomorrow morning.

18 THE COURT: You will have to take some testimony

19 in camera, so why don't we have her back at 9:15

20 tomorrow. We can question her about that tomorrow. Has

21 she already been told to call her back?

22 MR. NEVILLE : I will have to tell Mr. Bailey to

23 tell her to come back. They were coming from the south of
24 Newark.
25 THE COURT: Leave it alone, we'll take it

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8210
Reffsin-cross/Trabulus

1 sometime in the morning.

2 What else do we have?

3 MR. TRABULUS: At this point will have nothing

4 further except for the stipulation that Mr. White and I

5 had agreed to which will be read into the record and there

6 is a transcript. I will offer that in evidence. It's

7 relatively short.

8 MR. WHITE: I just have to look at it again.

9 MR. TRABULUS: It's about four pages.

10 THE COURT: I will make a ruling. I can make the

11 ruling right after the jury leaves on that Dennis case.

12 MS. SCOTT: Okay, yes.

13 MR. WHITE: Your Honor, I'm not sure a ruling is

14 required because I didn't go back and men tion the proffer

15 at all after that.

16 THE COURT: So you will not go into that?

17 MR. WHITE: Yes, I've refrained from doing it.

18 It's my intention even on recross not to get into it.

19 THE COURT: Then I don't have to make any

20 ruling. You wouldn't have succeeded. I found a case I

21 liked better.

22 MS. SCOTT: Which one?

23 THE COURT: I'll tell you.
24 MS. SCOTT: I'm very curious.
25 THE COURT: I'll tell you as soon as we get rid

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8211
Reffsin-cross/Trabulus

1 of the jury, not get rid of, as soon as we excuse the jury

2 for the day.

3 MR. WALLENSTEIN: Excuse the jury.

4 THE COURT: Very good. So it looks like we'll

5 finish the testimony tomorrow.

6 MR. NELSON: Unless there is a rebuttal case from

7 the government.

8 MR. TRABULUS: I'm suspecting a rebut tal case

9 from them.

10 THE COURT: Are you expecting to put a rebuttal

11 case?

12 MR. WHITE: I think I'll know tomorrow morning.

13 THE COURT: We'll see then.

14 (End side bar.)

15 THE COURT: Members of the jury, we'll recess

16 until 9:30.

17 You can step down, Mr. Reffsin.

18 I can't give you anymore enlightenment as to when

19 the trial will end. My estimate that you will get the

20 case sometime next week is still a good estimate. When it

21 will be, I can't tell you. If we conclude the testimony

22 tomorrow, I told you that we'll have summations on Monday

23 and you'll get the case on Tuesday, probably. If we don't
24 complete the testimony tomorrow, then it will be extended
25 another day at least on that schedule. I'll know more

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8212
Reffsin-cross/Trabulus

1 a bout it tomorrow.

2 In the meantime, we're nearing the end of the

3 case. Do not discuss the case. Keep an open mind. Come

4 to no conclusions.

5 Enjoy the evening. We'll recess until 9:30.

6 Have a nice evening.

7 (Jury exits.)

8 THE COURT: The name of the case that I liked and

9 you looked at all of your cases and I would attempt to

10 distinguish is United States v. Trabuc. It's not a

11 circuit court, it's a district court case. It's cited at

12 1989 WL 38119, Southern District of New York, and it says

13 "it is apparent that the prosecutor by asking questions

14 concerning which he had personal knowledge assumed the

15 role of an unsworn witness at trial."

16 Now, listen to this part.

17 "Indeed there were times when the context as

18 well as the tone and manner of the cross-examination took

19 on the appearance of an altercation."

20 T his is tailor made because I mentioned Mr. White

21 who raises his voice occasionally might do it.

22 MR. WHITE: Not to the level of an altercation

23 though, Your Honor.
24 THE COURT: No. Continuing. "This was improper
25 and placed the defendant at a great disadvantage because

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8213

1 as an unsworn witness the prosecutor was not subject to

2 cross-examination or impeachment." See United States v.

3 Cummingham, 672 F.2d 1064 which doesn't add much. "But

4 this further supports our view that the defendant did not

5 receive a fair trial," they say. That language I think is

6 appropriate.

7 However, since you are not going to go into it,

8 it becomes moot.

9 MR. WHITE: Your Honor --

10 MR. WALLENSTEIN: Your Honor, could you spell the

11 name of that defendant again.

12 THE COURT: T-r-a-b-u-c, and it is reported in

13 some kind of hieroglyphics. I can't read it, 1989 WL

14 381119.

15 MR. WALLENSTEIN: Westlaw.

16 Well, I don't pay attention to those kind of

17 citations.

18 MR. WHITE: Your Honor, I just want to say --

19 THE COURT: Done by a judge that I happened to

20 try a case. Well, it was involved in a criminal trial

21 many years ago which I lost, Judge Palmieri in the

22 Southern District.

23 MR. WHITE: Your Honor, as I said I don't intend
24 to go into that on cross-examination so that we avoid
25 this.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8214

1 THE COURT: Okay.

2 MR. WHITE: Where I could potentially become a

3 witness. However, I'll try to decide tonight based on the

4 testimony so far whether we will present a rebuttal case

5 in which an agent would testify that the sta tements made

6 by Mr. Reffsin at that meeting, and I think that presents

7 no problem as Your Honor indicated before.

8 THE COURT: If you do and if we go into Thursday,

9 we'll not be able to complete the charge until Monday and

10 the summations will be Tuesday and Wednesday, which will

11 be one day later each time.

12 MR. LEE: Your Honor, could Mr. White indicate

13 whether he has any other rebuttal witness in mind because

14 I'm sure my colleagues will want to prepare for it. If it

15 is, I assume it will go on tomorrow, other than the agent

16 he alluded to.

17 MR. WHITE: Your Honor, you told me there were no

18 ground rules for the defendant. I don't know who they are

19 calling.

20 THE COURT: I'm asking you to tell us although

21 there are no ground rules. I'm making ground rules for

22 you, though.

23 MR. WHITE: And I will not know until t hey finish
24 the defense case.
25 THE COURT: Who says that the scales tip equally

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8215

1 in this regard.

2 MR. WHITE: I'm saying I don't know until I hear

3 the defendants' case.

4 THE COURT: Doesn't know, Mr. Lee.

5 MR. LEE: Based on what we represented to him as

6 the defense.

7 THE COURT: What do you want me to do, twist his

8 arm, Mr. Lee?

9 MR. LEE: Only if Your Honor feels we should.

10 THE COURT: He says he doesn't know, I take him

11 at his word.

12 MR. LEE: That's good enough for me.

13 MR. TRABULUS: Your Honor, I would respectfully

14 and I think I'm speaking on behalf of other counsel, ask

15 Your Honor to consider the possibility of summations

16 occupying more than one day, because we have nine defense

17 counsel plus the government which typica lly gets a

18 rebuttal summation, if you divide up the time.

19 THE COURT: More than one day?

20 MR. TRABULUS: Look at the number of counsel. I

21 mean, I'm mentioning it --

22 THE COURT: Do you want to put this jury

23 completely to sleep or only partially? Which do you want
24 to do?
25 MR. TRABULUS: Well, I understand. I understand

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8216

1 what Your Honor is saying and I agree that that is a risk,

2 but I think also we have a lot of detail and a lot of

3 history in the case and I don't think there will be as

4 much duplication among defense counsel as you might think

5 because I think counsel for the salespeople will be

6 focusing on the particular tapes relating to them and what

7 they say and how they will demonstrate good faith and, of

8 course, I will be uniquely talking about pe rjury and money

9 laundering because nobody else is charged with that as

10 well as the other count.

11 THE COURT: I'll take it into consideration. If

12 I think it is the right thing to do we'll do it over two

13 days.

14 MR. TRABULUS: Thank you, Your Honor.

15 THE COURT: With no assurance that that will

16 happen, Mr. Trabulus.

17 All right. 9:30 tomorrow morning.

18 (Proceedings adjourned.)

19

20

21 INDEX

22

23
M A R T I N R E F F S I N......................... 8006
24 DIRECT EXAMINATION................................... 8006
CROSS-EXAMINATION.................................... 8009
25 CROSS-EXAMINATION.................................... 8119
CROSS-EXAMINATION.................................... 8147

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER

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This site is concerned with The Illicit Smashing of Who's Who Worldwide Excecutive Club, and the double scandal of government and judical corruption in one of the Unholy Federal Trials and the concomitant news media blackout regarding this astonishing story.

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The Illicit Smashing of Who's Who Worldwide Excecutive Club
How Thomas FX Dunn proved himself the worst attorney in America

Unholy Federal Trials - The Illicit Smashing of Who's Who Worldwide Excecutive Club

Unholy Federal Trials - The Illicit Smashing of Who's Who Worldwide Excecutive Club

The Illicit Smashing of Who's Who Worldwide Excecutive ClubHow Thomas FX Dunn proved himself the worst attorney in America

Unholy Federal Trials - The Illicit Smashing of Who's Who Worldwide Excecutive Club

The Illicit Smashing of Who's Who Worldwide Excecutive Club
How Thomas FX Dunn proved himself the worst attorney in America