FILED: NEW YORK COUNTY CLERK 11/14/ :38 PM INDEX NO /2016 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 11/14/2016

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1 FILED: NEW YORK COUNTY CLERK 11/14/ :38 PM INDEX NO /2016 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 11/14/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION EPIPHANY COMMUNITY NURSERY SCHOOL, vs. Plaintiff, HUGH W. LEVEY, CLAIRE GRUPPO, GRUPPO, LEVEY & CO., GRUPPO, LEVEY HOLDINGS INC., JANUARY MANAGEMENT, INC. FROG POND PARTNERS, L.P., and DAVIE KAPLAN CPA, P.C. AFFIDAVIT OF DAVID PITCHER IN SUPPORT OF DEFENDANT DAVIE KAPLAN, CPA, P.C.'S MOTION TO DISMISS Index No.: /2016 Defendants. STATE OF NEW YORK ) ) ss: COUNTY OF MONROE ) DAVID PITCHER, first being duly sworn, deposes and says as follows: 1. I am a certified public accountant and shareholder of Davie Kaplan, CPA, P.C. ("Davie Kaplan"), and I submit this affidavit in support of Davie Kaplan's motion to dismiss the claims asserted against it in the Complaint dated August 31, 2016 (the "Complaint"). 2. I have reviewed the Complaint and make this affidavit for the additional purposes of correcting and/or clarifying allegations therein. 3. This affidavit is based upon my personal knowledge except as otherwise expressly set forth herein. THE PRIOR MATRIMONIAL ACTION 4. Plaintiff Epiphany Community Nursery School ("Plaintiff' or "ECNS") is an organization formed as a tax-exempt, not-for-profit charitable corporation in the State of New York to operate a nursery school and kindergarten. It is my understanding that ECNS was founded by Wendy Levey, and that ECNS operates its nursery school and kindergarten program { :3 } 1 1 of 19

2 at 510 East 74th Street, New York, New York Upon information and belief, Wendy Levey and Hugh Levey were married in 1975 and, together, they have two children, Evan Levey and Mariel Levey. 6. Since approximately 1996 or 1997, Davie Kaplan has at various times performed tax work for entities in which either the defendant Hugh Levey, or the executive director of ECNS, Wendy Levey, or both, held ownership interests. 7. In 2013, Hugh Levey filed for a divorce from Wendy Levey. It is my understanding that the matrimonial proceeding continued until late October 2016, when a consensual resolution was reached on the eve of trial (the "Matrimonial Action"). 8. Prior to the resolution of the Matrimonial Action, Davie Kaplan received and responded to Wendy Levey's discovery demands. Additionally, as part of the discovery process for the Matrimonial Action, I met with the court appointed mediator, provided an affidavit and gave a deposition on February 29, It is my understanding that a trial in the Matrimonial Action had been scheduled to commence on or about October 27, I had been notified that I would be called by Hugh Levey as an expert witness at trial in the Matrimonial Action, had it gone to trial. ECNS ENGAGES DAVIE KAPLAN ONLY TO PERFORM AUDITING SERVICES 11. Pursuant to Internal Revenue Service ("IRS ") instructions, certain organizations exempt from income tax under 26 U.S.C. 501(a) must file a Form 990 tax returns in order to retain their tax exempt status. ECNS is such an organization required to file a Form Additionally, as a non-profit charitable corporation chartered by the State of New York, ECNS is required to file annually with the New York State Charities Bureau a Form { :3 } 2 2 of 19

3 CHAR500 (the "CHAR500"). Organizations required to file a CHAR500 must include with it a copy of their Form 990. Additionally, organizations with annual monetary support and revenue exceeding a monetary threshold must include with the annual CHAR500 an audit report. ECNS was such an organization required to file with its CHAR500 an accompanying audit report. 13. In September 2010, ECNS engaged Davie Kaplan to perform auditing services for its fiscal year ending June 30, 2010 (the "2010 Audit), pursuant to a written letter of engagement, dated September 8, 2010 (the "2010 Engagement Letter"). A true and correct copy of the 2010 Engagement Letter is annexed hereto as Exhibit A. 14. The Complaint alleges that Hugh Levey caused ECNS to engage the services of Davie Kaplan. In fact, it was Evan Levey that countersigned the 2010 Engagement Letter on behalf of ECNS. At the time, Evan Levey was an ECNS director, as was his mother (and the ECNS founder), Wendy Levey. 15. The Complaint suggests at various points that Davie Kaplan performed tax work on behalf ofecns. Such suggestions are incorrect. Davie Kaplan did not prepare ECNS's Form 990, CHAR500 filings, or any other tax filing. Rather, Mr. Bruce Lev of Bruce A. Lev, CPA PC, prepared ECNS's tax filings. Bruce Lev has no affiliation with Davie Kaplan. 16. The Complaint also alleges at various points that Davie Kaplan was the ECNS accountant. These allegations are also incorrect. Davie Kaplan was retained by ECNS only to perform auditing services. Davie Kaplan was not ECNS's accountant. Davie Kaplan did not keep ECNS's books and records. In fact, ECNS's CHAR500 for the fiscal year ending June 30, 2007, which is the last publicly available CHAR500 filed before Davie Kaplan was engaged, identifies Bruce Lev as the "Chief Financial Officer or Treasurer" of ECNS and ECNS's "Accountant." Additionally, the CHAR500s that ECNS filed during the fiscal years for which { :3 } 3 3 of 19

4 Davie Kaplan performed auditing services on behalf of ECNS (fiscal years 2010, 2011 and 2012), all identify Evan Levey as the ECNS "Chief Financial Officer or Treasurer." True and correct copies of excerpts of ECNS's CHAR500 for fiscal years 2007, 2010, 2011 and 2012 are annexed hereto as Exhibit B. During fiscal years 2010, 2011 and 2012, Evan Levey was also an ECNS director. 17. Davie Kaplan performed no work for ECNS prior to its engagement for the 2010 Audit. The only services that Davie Kaplan performed for ECNS were auditing services. DAVIE KAPLAN PERFORMED THE 2010 AUDIT 18. The 2010 Engagement Letter expressly sets forth the parties' agreement about the scope of work and the parties' respective obligations in connection with the 2010 Audit. Specifically, as stated in the 2010 Engagement Letter, the parties thereto agreed that Davie Kaplan would audit the statement of financial position of ECNS as of June 30, 2010, the related statement of activities, functional expenses and cash flows for the year then ended. 19. The Complaint alleges at various points that Davie Kaplan breached obligations to ECNS by failing to apply generally accepted accounting principles ("GAApl). These allegations are inaccurate. As stated in the 2010 Engagement Letter (and all other engagement letters between Davie Kaplan and ECNS), Davie Kaplan agreed to apply generally accepted auditing standards ("GAAS'') to determine whether ECNS's financial statements conformed with GAAP: Ex. A at 1 (emphasis added). The objective of our audit is the expression of an opinion about whether your financial statements are fairly presented, in all material respects, in conformity with [GAAPJ. Our audit will be conducted in accordance with [GAAS] and will include tests of your accounting records and other procedures we consider necessary to enable us to express such an opinion. { :3 } 4 4 of 19

5 20. At the outset of its work on the 2010 Audit, Davie Kaplan reviewed the Form 990 that ECNS filed for the fiscal year prior to Davie Kaplan's initial engagement, 2009 (the "2009 Form 990"). A true and correct copy of an excerpt of the 2009 Form 990 is annexed hereto as Exhibit C. The 2009 Form 990 was prepared by Bruce Lev, who also prepared the ECNS trial balance and New York State filings on behalf of ECNS for fiscal year The 2009 Form 990 identifies, in Section VI, C (Disclosure), Wendy Levey as "the person who possesses the books and records of the organization." Ex. Cat 6, C(20). 22. During the period in which Davie Kaplan was engaged by ECNS, Evan Levey and Leonard Frattellone were the individuals responsible for recording entries in, and maintaining, the ECNS books and records. As such, Evan Levey and Mr. Frattellone were the primary points of contact for Davie Kaplan during its engagements with ECNS. Evan Levey and Mr. Frattellone were the individuals to whom Davie Kaplan directed its requests for documents and information. Evan Levey and Mr. Frattellone were the individuals from whom Davie Kaplan received ECNS documents and information. 23. During the period in which Davie Kaplan performed audit services for ECNS, Evan Levey and Mr. Frattellone were employed and paid by Gruppo, Levey Holdings Inc. ("GLH"). ECNS did not employ personnel to perform accounting and other administrative services. Thus, as consideration for the accounting services and other services rendered to ECNS by Evan Levey and Mr. Frattellone while on the GLH payroll, ECNS made payments to GLH to cover a portion of their GLH compensation. 24. In connection with the 2010 Audit, Davie Kaplan requested, received and performed auditing procedures on the ECNS financial records. 25. During the course of performing the 2010 Audit, Davie Kaplan learned, among ( :3 } 5 5 of 19

6 other.things, that commencing on or after July 1,2007, ECNS made to Magic Management, LLC ("Magic") one or more loans (collectively, the "Magic Loans"). Magic is wholly owned by January Partners, LP ("January Partners"). On information and belief, Wendy Levey, Hugh Levey, Evan Levey and Mariel Levey are partners in January Partners. 26. As of June 30, 2009, when Davie Kaplan began its engagement for the 2010 Audit, the ENCS books and records reflected that the Magic Loans had an opening balance of $929,640. The Complaint alleges that unspecified loan balances were "reduced... to zero at the end of each year" (Complaint,-r 61), but fails to specify what "loans" are at issue. However, the Magic Loans were not written down to zero as of the end of ECNS's fiscal year 2010, i. e., June 30,2010. Rather, as of then, the Magic Loans had a balance of$1,049, On February 3, 2011, ECNS provided Davie Kaplan with a management representation letter concerning the 2010 Audit (the "2010 ECNS Representation Letter"). A true and correct copy of the 2010 ECNS Representation Letter is annexed hereto as Exhibit D. In the 2010 ECNS Representation Letter, ECNS stated, among other things: We confirm that we are responsible for the fair presentation in the financial statements of financial position, results of operations, and cash flows in coriformity with [GAAPj. We are also responsible for adopting sound accounting policies, establishing and maintaining effective internal control, and preventing and detecting fraud. 1) The financial statements referred to above are fairly presented in conformity with [GAAP] and include all assets and liabilities under the Organization's control. 2) We have made available to you alla) Financial records and related data. b) Minutes of meetings of stockholders, directors, and committees of directors, or summaries of actions of recent meetings for which minutes have not yet been prepared. { :3 } 6 6 of 19

7 4) There are no material transactions that have not been properly recorded in the accounting records underlying the financial statements. 5) We acknowledge our responsibility for the design and implementation of programs and controls to prevent and detect fraud. 9) The following, if any, have been properly recorded or disclosed in the financial statements: a) Related party transactions, including revenues, expenses, loans, transfers, leasing arrangements, and guarantees, and amounts receivable from or payable to related parties. 17) We are in agreement with the adjusting journal entries you have recommended, and they have been posted to the company's accounts. Ex. D (emphasis added). The 2010 ECNS Representation Letter was signed by Wendy Levey. 28. At the conclusion of the 2010 Audit, Davie Kaplan provided ECNS with an Independent Auditor's Report, dated February 3, 2011, as well as the financial statements and supplemental schedule (the "2010 Audit Report"). A true and correct copy of the 2010 Audit Report is annexed hereto as Exhibit E 29. Subsequently, Bruce Lev prepared ECNS's Form 990 for the fiscal year ending June 30, 2010 (the "2010 Form 990"). A true and correct copy of an excerpt of the 2010 Form 990 is annexed hereto as Exhibit F. ECNS also filed its CHAR500 for its fiscal year See Ex.B. 30. To my knowledge, Hugh Levey had no involvement with the preparation of maintenance of the ECNS books and records or financial statements. None of the information Davie Kaplan received and performed auditing procedures on in connection with the 20 I 0 Audit { :3 } 7 7 of 19

8 was provided to Davie Kaplan by Hugh Levey, and he was not involved with Davie Kaplan's work on the 2010 Audit. DAVIE KAPLAN PERFORMED THE 2011 AUDIT 31. Subsequently, ECNS engaged Davie Kaplan to perform an audit of the statement of financial position for ECNS as of June 30, 2011 (the "2011 Audit"). The scope of the 2011 Audit and the parties' respective obligations relating thereto is likewise set forth in a written engagement letter, dated December 12, 2011 (the "2011 Engagement Letter"), and countersigned by Evan Levey on behalf of ECNS. A true and correct copy of the 2011 Engagement Letter is annexed hereto as Exhibit G. 32. As with the 2010 Engagement Letter, the 2011 Engagement Letter set forth the scope of the services for Davie Kaplan to provide, including disclaimers and clarifications that Davie Kaplan would apply GAAS, examine documentary evidence on a test-basis and within its judgment, and that ECNS was responsible for, among other things, the accuracy and completeness of its financial records, and programs and controls to prevent and detect fraud. 33. Davie Kaplan worked with Evan Levey and Mr. Frattellone on the 2011 Audit, who provided Davie Kaplan with ECNS financial records. Hugh Levey had no involvement with Davie Kaplan's work on the 2011 Audit. 34. As of the end of ECNS's fiscal year 2011, i.e., June 30, 2011, the ECNS books and records reflected that the Magic Loans had a balance of$i,673, On May 1, 2012, ECNS provided Davie Kaplan with a management representation letter concerning the 2011 Audit (the "2011 ECNS Representation Letter"). A true and correct copy of the 2011 ECNS Representation Letter is annexed hereto as Exhibit H. Therein, ECNS again confirmed, among other things, that: ECNS was responsible for its financial statements; ECNS had provided Davie Kaplan with all relevant financial records and { :3 } 8 8 of 19

9 documents; no material transactions were improperly recorded; ECNS was responsible for controls to detect fraud; and ECNS agreed with adjustments Davie Kaplan recommended. 36. Additionally, in the 2011 ECNS Representation Letter, ECNS specifically confirmed that $1,673,901 balance for the Magic Loans was "fully collectible. II Ex. Hat At the conclusion of the 2011 Audit, Davie Kaplan provided ECNS with an Independent Auditor's Report, dated May 1, 2012, as well as the financial statements and supplemental schedule (the "2011 Audit Report"). A true and correct copy of the 2011 Audit Report is annexed hereto as Exhibit I. 38. Subsequently, Bruce Lev prepared ECNS's Form 990 for the fiscal year ending June 30, 2011, a true and correct copy of an excerpt of which is annexed hereto as Exhibit J. ECNS also filed its CHAR500 for its fiscal year See Ex. B. ECNS ENGAGES DAVIE KAPLAN TO PERFORM ITS FISCAL YEAR 2012 AUDIT 39. ECNS again engaged Davie Kaplan to perform an audit of the statement of financial position for ECNS as of June 30, 2012 (the "2012 Audit"), pursuant to a written engagement letter dated August 27, 2012 (the "2012 Engagement Letter"), countersigned by Evan Levey. A true and correct copy of the 2012 Engagement Letter is annexed hereto as Exhibit K. 40. As with the 2010 Audit and 2011 Audit, Davie Kaplan again worked with Mr. Evan Levey and Mr. Frattellone, who provided Davie Kaplan with ECNS financial records. Hugh Levey had no involvement with Davie Kaplan's work on the 2012 Audit. 41. In the course of performing the 2012 Audit, Davie Kaplan requested and reviewed documentation concerning the satisfaction of Magic' obligations to ECNS with respect to the Magic Loans. Specifically, Davie Kaplan was provided with and reviewed documentation ( :3 } 9 9 of 19

10 reflecting that, on or about June 29, 2012, Wendy Levey and Hugh Levey transferred to ECNS thirteen (13) pieces of artwork, valued in the aggregate amount of $1,370,000, in satisfaction of Magic's obligations to ECNS for the Magic Loans (the "June 2012 Transfer of Art"). 42. In a management representation letter dated April 4, 2013, ECNS again made certain representations to Davie Kaplan concerning the 2012 Audit (the "2012 ECNS Representation Letter"). A true and correct copy of the 2012 ECNS Representation Letter is annexed hereto as Exhibit L. Therein, ECNS again confirmed, among other things, that: ECNS was responsible for its financial statements; ECNS had provided Davie Kaplan with all relevant financial records and documents; no material transactions were improperly recorded; ECNS was responsible for controls to detect fraud; and ECNS agreed with adjustments Davie Kaplan recommended. With respect to the 2012 Transfer of Art in satisfaction of Magic's obligations to ECNS for the Magic Loans, ECNS confirmed in writing that "[ w]e believe the value of the pledged artwork to be accurate and have accepted the artwork to settle all remaining related obligations with the related party." Ex. L at 3, # At the conclusion of the 2012 Audit, Davie Kaplan provided ECNS with an Independent Auditor's Report, dated April 29, 2013, as well as the financial statements and supplemental schedule (the "2012 Audit Report"). A true and correct copy of the 2012 Audit Report is annexed hereto as Exhibit M. 44. Subsequently, Bruce Lev prepared ECNS's Form 990 for the fiscal year ending June 30,2012, a true and correct copy of an excerpt of which is annexed hereto as Exhibit N. ECNS also filed its CHAR500 for its fiscal year See Ex. B 45. The 2012 Audit was the last audit that Davie Kaplan completed for ECNS. { :3 } of 19

11 DAVIE KAPLAN WITHDREW FROM ITS ENGAGEMENT DUE TO IRREGULARITIES IN A LOAN THAT ECNS MADE TO WENDY LEVEY 46. ECNS engaged Davie Kaplan to perform an audit of the statement of financial position for ECNS as of June 30, 2013 (the "2013 Audit"). However, during the course of the 2013 Audit, Davie Kaplan encountered certain irregularities in the ECNS financial records that could not be reconciled. 47. Specifically, during the 2013 Audit, Davie Kaplan learned that Wendy Levey had caused ECNS to make to her a personal loan in the amount of $325,000. Davie Kaplan sought from ECNS documentation concerning that loan. 48. Subsequently, Wendy Levey provided me with her sworn affidavit, dated June 20, 2014, wherein she attested that the documents by which she had previously transferred artwork to ECNS as part of the June 2012 Transfer of Art had "inadvertently" omitted two pieces of artwork, valued at $325,000. A true and correct copy of Ms. Levey's June 12, 2014 affidavit is annexed hereto as Exhibit O. 49. In conversations with Evan Levey and Mr. Frattellone, they advised me that Wendy Levey intended to transfer these two "additional" pieces of artwork to ECNS to satisfy her obligations for her $325,000 loan. However, a question arose concerning whether Wendy Levey had title to those two pieces of artwork or was otherwise prohibited from transferring that artwork to ECNS as a consequence of the Matrimonial Action. 50. Because of the discrepancies surrounding Wendy Levey's contemplated transfer of artwork to ECNS, Davie Kaplan could not complete the 2013 Audit. In September 2014, Davie Kaplan withdrew from the engagement. Davie Kaplan did not issue a 2013 audit report. 51. By letter dated October 27, 2014, Wendy Levey advised me that ECNS had engaged the CPA firm Ives, Sultan & Spike CPAs, PLLC ("ISS"), to perform ECNS's 2013 ( :3 } of 19

12 Audit and 2014 audit (the "October 27 Letter"). In the October 27 Letter, Ms. Levey stated that ENCS had represented to ISS that there were no disputes with Davie Kaplan about accounting policies, accounting procedures or similarly significant matters. However, Ms. Levey failed to identify in her October 27 Letter any reference to the issues of the discrepancies pertaining to the two "additional" pieces of artwork she sought to transfer to satisfy her personal loan. A true and correct copy of which is annexed hereto as Exhibit P. 52. Thereafter, I was contacted by Mark Sultan of ISS, and as required by GAAS, I discussed with him the issue of the artwork and the discrepancy concerning the same. 53. It is my understanding that ISS also did not complete the 2013 Audit. 54. Without the benefit of an audit, ECNS filed its Form 990 for the fiscal year ending June 30, 2013 (the "2013 Form 990"). A true and correct copy of an excerpt of the 2013 Form 990 is annexed hereto as Exhibit Q. 55. Thereafter, ECNS submitted its CHAR500 for the fiscal year ended on June 30, In connection with that submission, Wendy Levey submitted a letter to the Charities Bureau, dated May 29, 2014, wherein she stated: "[t]he financial statement for [ECNS] will be sent under separate cover, once completed." A true and correct copy of an excerpt of ECNS's submission to the Charities Bureau is annexed hereto as Exhibit R. 56. It is my understanding that tax filings unaccompanied by underlying audits, if such audits are required, are incomplete and not considered to be properly filed. 57. It is my understanding that ECNS has not filed a Form 990 for the fiscal years ending June 30, 2014, or June 30, Pursuant to IRS instructions, a non-profit that fails to file a Form 990 for three or more consecutive years automatically loses its tax-exemption. { :3 } of 19

13 DAVIE KAPLAN SOUGHT AND OBTAINED DOCUMENTATION FROM ECNS IN CONNECTION WITH ITS AUDIT WORK 59. Throughout its Complaint, ECNS alleges Hugh Levey made fraudulent entries on ECNS's books and records, and that "rather than applying [GAAP], Davie Kaplan blindly and/or deliberately accepted [allegedly fraudulent entries] on ECNS's financial documents, without first obtaining sufficient backup documentation". See, e.g., Complaint ~ 71. Such allegations are completely incorrect. 60. As indicated above, Davie Kaplan's obligation was to apply GAAS to ensure that ECNS's statement of financial position conformed with GAAP. 61. Additionally, as indicated above, at all times during Davie Kaplan's respective engagements with ECNS, Evan Levey and Mr. Frattellone kept ECNS's books and records. All Form 990s that ECNS filed while Davie Kaplan was engaged identify Wendy Levey as the individual in possession of ECNS's financial records. All the CHAR500s that ECNS filed for the while Davie Kaplan was engaged identify Evan Levey as the ECNS "Chief Financial Officer or Treasurer." At all times during Davie Kaplan's respective engagements with ECNS, Evan Levey and Mr. Frattellone, or those acting on their behalf, were the individuals providing Davie Kaplan with ECNS financial records. 62. At no point during any of Davie Kaplan's engagements with ECNS did Hugh Levey provide Davie Kaplan with ECNS financial records. At no point did Hugh Levey participate in Davie Kaplan's work on the ECNS's audits. To my knowledge, Hugh Levey had no involvement whatsoever with ECNS's books and records or tax filings. 63. While the Complaint alleges that Davie Kaplan failed to seek supporting documentation for unspecified entries on ECNS's books and records, the respective engagement letters made clear that Davie Kaplan's examinations during the respective audits would be { :3 } of 19

14 conducted on only a "test-basis" as follows: Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts... An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to the tested. Ex. A at 1 (emphasis added); Ex. G at 1-2; Ex. K at 1-2. The engagement letters also included certain disclaimers and made clear that ECNS was responsible for the accuracy of its financial statements, including the following: Because an audit is designed to provide reasonable, but not absolute, assurance and because we will not perform a detailed examination of all transactions, there is a risk that a material misstatement may exist and not be detected by us.... An audit is not designed to provide assurance on internal control or to identify deficiencies in internal control..,. You are responsible for establishing and maintaining internal controls, including monitoring ongoing activities;for the selection and application of accounting principles; and for the fair presentation in the financial statements of financial position, results of operations, and cash flows in conformity with [GAAPj. You are also responsible for management decisions and functions; for designating an individual with suitable skill, knowledge, or experience to oversee the tax services and any other nonattest services we provide; and for evaluating the adequacy and results of those services and accepting responsibility for them. You are responsible for making all financial records and related information available to us and for the accuracy and completeness of that information.... You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the company involvement (a) management, (b) employees who have significant roles in internal control, and (c) others where the fraud could have a material effect on the financial statements. { :3 } of 19

15 Ex. A. at 2-3 (emphasis added); Ex. G at 2-3; Ex. K at 2-3. By countersigning the respective engagement letters, ECNS agreed to those terms. 64. Any suggestion that Davie Kaplan failed to seek backup documentation is demonstrably incorrect. At the outset of each audit, Davie Kaplan specifically requested that Mr. Frattellone make ECNS's financial records available ("Audit Request Letters"). True and correct copies of some of the Audit Request Letters are annexed hereto as Exhibit S. 65. ECNS further alleges that Davie Kaplan failed to seek documents reflecting a lease commission reflected on ECNS's books. However, by way of example only, in July 2013 and again December 2013, Davie Kaplan expressly sought such materials from Mr. Frattellone. A true and correct copy of such correspondence is annexed hereto as Exhibit T. ECNS provided Davie Kaplan with such materials. In particular, Mr. Frattellone provided Davie Kaplan with an invoice from GLH to Evan Levey at ECNS pertaining to the lease commission, a copy of which is annexed hereto as Exhibit U. 66. In addition to requesting, receiving and reviewing documentation, Davie Kaplan also performed walkthroughs at ECNS, conducted interviews and performed fraud inquiries. 67. ECNS's allegation that Davie Kaplan did not obtain sufficient financial records is further belied by the fact that, in each of the 2010 ECNS Representation Letter, the 2011 ECNS Representation Letter, and the 2012 ECNS Representation Letter, ECNS represented to Davie Kaplan that it had been provided with, among other things, "all... financial records and related data." See Ex. D at 1, Ex. Hat 1; Ex. L at 1. DAVIE KAPLAN IS UNAWARE OF ANY FRAUDULENT ENTRIES IN THE ECNS FINANCIAL RECORDS 68. The Complaint incorrectly alleges the Hugh Levey falsified ECNS's books and records and/or financial statements by recording fraudulent transfers as "loans" and reducing the ( :3 ) of 19

16 loan balances to zero at the end of each year by creating fictitious "consulting fees" and "lease commissions" that ECNS owed to Gruppo, Levy & Co. ("Gruppo Levey") or GLH, which were then used to offset the fraudulent transfers and wipe them off ECNS's book. Complaint ~ 61. The Complaint alleges that Davie Kaplan provided Hugh Levey with "assistance" in that regard. Id. The Complaint is incorrect. 69. As indicated above, the Complaint does not specifically identify which "loans" are at issue, or why it was inaccurate for them to be characterized as such. Nor does the Complaint specifically identify which entries reflect the alleged consulting fees or lease commissions, or where those entries appear. Because the Complaint fails to specify the alleged misconduct, the allegations are not susceptible to a meaningful response. 70. As indicated above, Hugh Levey did not maintain the ECNS financial records. Those records were maintained by Mr. Frattellone and Evan Levey. To the extent Hugh Levey made any entries on the ECNS books and records, Davie Kaplan had no knowledge of that fact. 71. During the course of its respective engagements, Davie Kaplan did from time to time recommend certain adjustments be made to the ECNS financial statements. None of those adjustments were fraudulent. All of them were approved by ECNS. To my knowledge, Hugh Levey had no knowledge of those adjusting entries. 72. With respect to the "consulting fees" in particular, the Complaint alleges that entries for "advertising and marketing," "computer consulting," "strategic planning/consulting," "accounting," and "human resources" presented a "glaring red flag" because they were stated in whole dollar amounts and repeated year-over-year. See Complaint. ~ 65. But there is nothing wrong with such amounts being stated in whole dollar amounts or being repeated as annual expenses incurred. ( :3 } of 19

17 73. The Complaint omits that ECNS did not employ personnel to perform those functions. Instead, those services were provided by GLH employees, including Evan Levey, Mr. Frattellone, and Sharie Javier. In consideration for those services, ECNS paid GLH funds to cover a portion of those individuals' GLH compensation. 74. The fact that ECNS outsourced those services is further demonstrated by the fact that ECNS continued to outsource those services after GHL stopped performing them. Specifically, when Evan Levey's relationship with Hugh Levey soured during the pendency of the Matrimonial Action, Evan Levey left the employ of GLH and started a competing company EHL & Company ("EHL"). It is my understanding that EHL now handles those consulting services for ECNS. 75. With respect to the "lease commission" ECNS paid to GLH, the Complaint alleges that it was another red flag because the entries reflected an "absurdly high" amount, GLH is not a real estate broker, and ECNS did not enter into any lease agreements in 2010 or Complaint ~ But the Complaint omits that another tenant in the building ECNS occupies undertook construction in the relevant time period. That construction caused disruption to ECNS and deteriorated the air quality in the building. Accordingly, ECNS sought to renegotiate its lease. GLH handled those renegotiations on ENCS's behalf. Accordingly, ECNS paid GLH a lease commission. Davie Kaplan performed a "Reasonableness Test" on the lease commission, for which it surveyed a real estate broker which verified that the commission amount was reasonable. Moreover, as indicated above, Mr. Frattellone provided Davie Kaplan with documentation to substantiate the lease commission. See Ex. U. Specifically, Mr. Frattellone provided Davie Kaplan with an invoice from GLH to Evan Levey, in his capacity as ECNS Chief { :3 } of 19

18 Operating Officer. 77. Davie Kaplan did not manipulate or falsify any of the ECNS financial records. To the extent they were manipulated or falsified by others, Davie Kaplan was unaware of that fact. DA VIE KAPLAN HAD NO KNOWLEDGE THAT HUGH LEVEY WAS AN ECNS DIRECTOR AND DID NOT ASSIST HIM WITH ANY BREACHES, FIDUCIARY OR OTHERWISE 78. The Complaint alleges that Davie Kaplan had knowledge of Hugh Levey's alleged misconduct but allowed it to continue andlor aided and abetted Hugh Levey in his commission of such misconduct. The allegation is completely incorrect. 79. To my knowledge, Hugh Levey had no involvement whatsoever with the making of entries on, or the keeping of, ECNS's financial records. At no point during Davie Kaplan's respective engagements did Hugh Levey provide Davie Kaplan with ECNS's financial records. At no point during Davie Kaplan's respective engagements, did Hugh Levey participate in Davie Kaplan's work on the respective audits. To the extent Hugh Levey engaged in any misconduct, fraudulent or otherwise, Davie Kaplan was unaware of it. 80. The Complaint alleges that Hugh Levey was an ECNS director, owing ECNS fiduciary duties, and that Davie Kaplan aided and abetted Hugh Levey's breach of those duties. This allegation is incorrect. To my knowledge, Hugh Levey was never an ECNS director. 81. A Form 990 requires the filing party to identify all officers, directors, trustees, key employees, and highest compensated employees. ECNS's 2009 Form 990, filed before Davie Kaplan's first engagement with ECNS began, reflects that Wendy Levey was the only officer or director of ECNS for the fiscal year ended June 30, Ex. Cat In fact, a review of all the Form 990s ECNS filed since 2000 reflects that Wendy { :3 } of 19

19 Levey was the only ECNS director until fiscal year The Form 990s ECNS filed for fiscal years 2010, 2011 and 2012 (when Davie Kaplan was engaged) identify only Wendy Levey and Evan Levey as ECNS directors. Ex. F at 7; Ex. J at 7; Ex. N at 7. At no point since 2000 has ECNS identified Hugh Levey as a director on ECNS's filed Form 990s. A Form 990 is signed under penalty of perjury. 83. Accordingly, it is my understanding Hugh Levey was not an ECNS director at any point during Davie Kaplan's respective engagements by ECNS. 84. To the extent Hugh Levey was a director of ECNS (despite ECNS's tax filings), Davie Kaplan had no knowledge of that fact. 85. For these reasons and those set forth in the accompanying Memorandum of Law, I respectfully submit that Davie Kaplan's motion should be granted and that all claims against Davie Kaplan should be dismissed. David Pitcher... Sworn to before me this I~Ytray of November, REBECCA ANN SIGL Notary Public in the State of New York MONROE COUNTY ~ 7\ 7 Commission Expires Sept. 14,..!...CU I { :3 } of 19