UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK. UNITED STATES SECURITIES & EXCHANGE COMMISSION, : 08cv2457 Plaintiff

Transcription

1 X UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK UNITED STATES SECURITIES & EXCHANGE COMMISSION, : 0cv Plaintiff RALPH CIOFFI, et al. -against- : United States Courthouse Brooklyn, New York October, 00 Defendants : :00 o'clock a.m X APPEARANCES: TRANSCRIPT OF PROCEEDINGS BEFORE THE HONORABLE FREDERIC BLOCK UNITED STATES DISTRICT SENIORJUDGE. 0 For the Plaintiff: For Defendant Cioffi: For Defendant Tannin: SECURITIES and EXCHANGE COMMISSION 00 F Street N.E. Washington, DC 0 BY: JOHN D. WORLAND, ESQ. HUGHES HUBBARD & REED LLP One Battery Park Plaza New York, N.Y. 000 BY: EDWARD J.M. LITTLE, ESQ. MARC ALAN WEINSTEIN, ESQ. BRUNE & RICHARD LLP 0 Broad Street New York, N.Y. 000 BY: SUSAN E. BRUNE, ESQ. NINA M. BEATTIE, ESQ. BHS OCR CM CRR CSR

2 For Intervenors: Court Reporter: BENTON J. CAMPBELL UNITED STATES ATTORNEY FOR THE EASTERN DISTRICT OF NEW YORK BY: PATRICK SINCLAIR SEAN CASEY Burton H. Sulzer Cadman Plaza East Brooklyn, New York () Proceedings recorded by mechanical stenography, transcript produced by computer-aided transcription. (Open court-case called-appearances noted.) THE COURT: Good morning. We have a distinguished array of lawyers here. Who is going to speak first for the United States? We have so many people here. States, your Honor. MR. SINCLAIR: I'll be speaking for the United THE COURT: Mr. Sinclair. All right. Miss Brune for Mr. Tannin. Who is going to be speaking for Mr. Cioffi? MR. WEINSTEIN: I will, your Honor, Marc Weinstein. THE COURT: All right, Mr. Weinstein. Mr. Casey, you're going to stay mute here? MR. CASEY: I may chime in from time to time, your Honor, if the court will permit me. THE COURT: I think that the intervention application is a no-brainer and nobody seriously disputes BHS OCR CM CRR CSR

3 0 0 that, and certainly the government I think has a real stake here so I assume we can go beyond that. Do we agree? The intervention is going to be ordered. MR. WORLAND: Yes, your Honor. THE COURT: I guess whatever we do today will be reduced to some short order so we'll have a paper trial here. On the issue of a stay, of course there are pluses and minus and this's and thats. I invited Judge Pohorelsky to be here, but I didn't think about doing that until the eleventh hour, but I know his office is represented here. I see his courtroom deputy sitting in the back. The reason why, because in the Eastern District our custom is to allow the magistrate judges, as you probably know, to really handle the main discovery and pretrial. The Southern District sometimes is a little different and judges really take over the pretrial discovery. I could do that, but whether I will or not will depend upon how this all plays out. There may be a middle ground. One of the possibilities -- I guess there are three possibilities: Yes, a complete stay; no stay whatsoever and let the magistrate judge sort at all out or, there's a middle ground; I imagine, also that you could explore as well to allow the matter to go

4 0 0 forward and if there are any problems that crop up during the course of discovery, you can always at that time come to me or the magistrate judge and talk about the particular problems at a particular time. So I think those are the three broad areas that we should reflect upon. Given the importance of the case, we're going to give you folks an opportunity to speak about all those things. Let me kick the ball off by asking the government, that wants the stay, now that you have intervention rights, the SEC decided to bring this action at about the same time that the criminal proceeding was initiated. I imagine the SEC could have waited and this all would have been academic. Should that or should not that be a consideration? Why doesn't the SEC just decide to kind of withdraw the case without prejudice and bring it next year. What am I missing here? MR. SINCLAIR: Your Honor, I'm not going to address what the SEC would do or wouldn't do, but what I will point out to the court -- THE COURT: You have a real stake now since you've intervened. Who is going to speak for SEC today? MR. WORLAND: I can do that. THE COURT: Why did you bring did case right away? MR. WORLAND: We brought the case because we were to

5 0 0 bring the case, your Honor, we are ready to proceed if that is your Honor's decision. THE COURT: Well, no, it seems that the timing was uniquely within control of the SEC and the government, and because you chose to do it this way, you now have to deal with these issues that we have to sort out. But it seems like you are really in control of this. There is a body of case law that does suggest, does it not -- and any one of you can answer this -- when the government controls the timing then why shouldn't the court intervene in terms of not allowing the defendants to exercise their rights? MR. SINCLAIR: I think that body of case law, your Honor, is colored by the fact in those cases, the government tried to control the discovery available to the defendants from the SEC. In this case, the government, at the defendants request, sought and received the SEC investigative case file as it relates to this and we have begun making that available to the defendants. As of today, percent of that case file is available for the defendants at a local copy center where they can go forward. THE COURT: All right. What is wrong with allowing them to go forward? If

6 0 0 any problem surfaces during the course of the discovery which would be controlled by the Magistrate Judge, Judge Pohorelsky, you can come back and a talk a to him or to me. What is wrong with that? MR. SINCLAIR: We anticipate -- the defendants have signaled that what they are looking for is a lengthy period of documentary discovery which would likely be focused on third party subpoena requests. The defendant Tinnan argues that he's being made a scapegoat in this case for the global credit crisis ongoing. We can own envision the subpoenas that will go out to the various financial institutions seeking documents to substantiate that request defense. In the first instance, the defense has nothing to do with the government's case, which focuses on very limited lies and misrepresentations told by the defendant. THE COURT: If that is the case, won't that all be flushed out? They may not make these broad requests. I'm going to ask Miss Brune and Mr. Weinstein what they think about this. Look, I guess from a common sense perspective you folks probably would be more than happy to -- I'm not going to tell you how to try your case -- to really let the civil case linger out there forever. I mean, why would you really be so anxious to have discovery in the civil case if not for the criminal case? I

7 0 0 would imagine you would just let sleeping dogs lie, right? MS. BRUNE: I don't think so, your Honor. There are very serious allegations made in the civil case and we're entitled to prepare to defend them. THE COURT: They are the allegations. Are you looking at me in the eyes and telling me if not for the criminal case you would really want to go full vent or full discovery right away with respect to this? You can tell me honestly. MS. BRUNE: I will. I will look you right in the eye and tell you that, your Honor. There is a highly publicized, highly choreographed, very big deal thing here and Mr. Tannin's face has been flashed across every newspaper in America thanks to the government's decision to -- THE COURT: You feel basically that the sooner you get to the bottom of it, it has a lot to do with the reputation of your clients and the stigma that has been associated with them because of the bringing of these two cases? MS. BRUNE: That's right, your Honor. MR. WEINSTEIN: We share that view. This is not the ordinary civil case. These are charges brought by the SEC, an arm of the government. Most of the public doesn't distinguish between an

8 0 0 SEC charge and a criminal charge. Their reputation is at stake. THE COURT: So it's reputational concerns that you have. So what would happen, Mr. Weinstein, if you would make these demands that have a legitimate concern from the government's perspective, that I might agree with, that would disclose information that should be perhaps not disclosed at a particular posture of the discovery process? I imagine there could be situations like that which could possibly impact upon the criminal case or create some vulnerabilities in terms of witnesses, et cetera, etcetera. How, if you were wearing the black robe, which I'm sure you will be some day, how would you manage that? MR. WEINSTEIN: Your Honor, I would follow exactly what in our brief we suggested. And while we share in all the arguments made by Mr. Tannin's counsel, I think we were closer to taking the third approach that your Honor mentioned earlier, which is we're a bit premature here on this motion; maybe there are instances down the road in discovery, and certainly none that are at issue now, where the government might have an argument that they want to protect a witness or two, such as in the Saad case that Judge Rakoff decided, or that the defendants will have the same issue. Our question is, why are we here now? We don't need

9 0 0 to deal with these issues. The government hasn't identified a single issue in discovery where there's really some prejudice to the criminal case. THE COURT: It's sort of a prophylactic effort on their part to sort of not like have to be concerned with having to sort through the discovery demands and come back to court and have to deal with it on a particularized daily base. We don't want to be inundated with that type of application, do we. MR. WEINSTEIN: Well, I don't see any of those applications being appropriate in the document discovery phase and so we're talking about perhaps a very few witnesses who may be deposed or may not be deposed in this case. As far as we know, for example, in the Saad case Judge Rakoff -- THE COURT: We can shut it off. Can you hear me without the mike? MR. WEINSTEIN: Yes. In the Saad case, Judge Rakoff, in addition to staying depositions of the criminal defendants, stayed, I believe, four witnesses that were witnesses for the government, most likely cooperating witnesses. In this case, we don't know of any such cooperating witnesses so there may not even be an issue with respect to a particular government witness where they believe that there

10 0 0 0 will be prejudice in a deposition going forward. That is far down the road, it is very narrow and it's simply not an issue we need to address until it may come to pass. THE COURT: All of you are highly skilled professionals whom I have a great deal of respect for, but isn't there a way to sit down as officers of the court and try to chart initially some sort of course for discovery or some sort of overall plan and see whether you can come to certain agreements? I'm sure there are certain areas which would not trigger the types of concerns that the government has here in the first instance. Isn't that a possibility? MS. BRUNE: Your Honor, it's begun already with the SEC. We have already have agreed -- THE COURT: You have a lot of information. MR. SINCLAIR: What you're suggesting is what would happen in a civil case. As your Honor pointed out, there is a significant difference between a civil case and a criminal case and the defendants here are trying to use the civil discovery mechanisms to gain leverage in the criminal case. There is a reason why -- THE COURT: They may or may not. See, the problem is I'm dealing in a vacuum. I don't have any particular

11 0 0 discovery demands in front of me. So we're talking somewhat conceptually, I guess. MR. SINCLAIR: We are speaking conceptually in terms of the rules, your Honor, that is correct. But there is a reason why the rules are different in a civil and criminal case, and it has to do with the facts that the government's case would be prejudiced by manufactured evidence or perhaps the attempts to influence the testimony. The government will proffer to the court that we're already aware of instances where the defendant here has attempted to influence the statements of potential witnesses in the course of Bear Stearns internal investigation. It's a significant concern that the government has that the defendants will continue that practice in the course of civil discovery. That's something that the government is seeking to avoid here. THE COURT: I understand your concerns. I'm just trying to manage it in a way which will be fair to all sides considering the reasons for and against the stay. You're asking for a blanket stay, which is a little bit troublesome. You say that the body of case law that you cite to me generally supports a blanket stay? MR. SINCLAIR: Certainly the Nicholas case supports the notion of a blanket stay. THE COURT: Most of the cases do not, I don't think,

12 do they? 0 0 MR. SINCLAIR: There are other cases that do grant blanket stays; some are put off until documentary discovery is over. But here in this case, we've already provided all of the document discovery to the defendants. The SEC's investigative case file has been made available to them. If the defendants are concerned about moving expeditiously to clear their names, as we heard here in court today, then we suggest that we move forward towards setting a criminal trial date sooner rather than later. THE COURT: We're going to be doing that. I think we are waiting on the government to find out whether you're superseding, if I remember the last time we sort of talked about it, by the end of December, if I remember. MR. SINCLAIR: We have a status conference in the criminal case on December. THE COURT: Have you made any progress in terms of the superseding? MR. SINCLAIR: Your Honor, we decline to comment on the course of the grand jury investigation. THE COURT: I'm not asking what you're doing. You're going to have to report back to me in December. I thought while you're here, the government have some bearing -- MR. SINCLAIR: We believe by December th we'll be in a position to set a trial date for the early part of 00.

13 0 0 THE COURT: As soon as you make the decision, it's not necessarily the defendants holding up the trial, we're waiting for the government to decide what the indictment is going to be. You can't really fault them. MR. SINCLAIR: Certainly the grand majority of the charges have been set forth in the existing indictment. THE COURT: When we find out in December what the indictment is going to be, we'll be in a better position to fix a trial date. In any event, the trial is going to happen, I guess, within the next several months. As a practical matter, we may be talking with the fall of 00, that seems probably realistic, I guess. MS. BRUNE: I'd like to respond, if I may, to several of the comments made about the case law. I don't want to step in if it's the wrong time. THE COURT: Go ahead. MS. BRUNE: We've heard several times that the SEC's investigative case file has been turned over and we're certainly glad that it was turned over -- I think it was turned over in response to this motion practice, and it was turned over, I think, based on the Nicholas case. There's a significant difference between a regular investigative case file and the case file here. By that what I mean is, in a regular SEC investigation, of course there are

14 0 0 all kinds of depositions that were taken. Here no depositions were taken, and I believe that the SEC lawyers were probably instructed not to take any notes, precisely to frustrate our ability to understand what the witnesses have to say. In the Nicholas case, the judge made plain that, as part arriving at a flexible remedy, the government should work very expeditiously to turn over 00 material and Brady material. I have to say that here, the government is playing it very close to the vest with respect to Brady. My belief that is they have interviewed all of the principal witnesses here already. It's hard for me to imagine that of all the things these people said, not a single one of them said something helpful to Matt Tannin. There is something very odd about that. In the government's brief, they say that they have turned over 0s. That's correct, there have been 0s and notes of reports of our own clients' statements but we don't have access to what the other statements are. The government is reaching out and is trying to subvert the rules of civil discovery and they are simply, I believe, not entitled to walk in and do that. The SEC has chosen to bring its case, which should mean that it's prepared to go forward. They say they are ready to go forward --

15 0 0 THE COURT: Let me ask you this. You'll find out maybe on December th what the real indictment is going to be. Your rights can possibly be enhanced if the criminal trial was moved forward to sometime in the spring maybe, and that way all of this as a practical matter might be academic. Isn't that really an effective way of dealing with your concerns? MS. BRUNE: I don't believe so, your Honor. THE COURT: Having an expeditious trial. MS. BRUNE: I don't believe so, your Honor. MR. SINCLAIR: I agree with -- THE COURT: I don't force people to speak one at a time. I allow a little play in the joints. Some other judges don't do that. MS. BRUNE: Your Honor, it's no remedy at all. We have already worked with the SEC to arrive at a schedule. The schedule provides for document discovery for the first six months after your Honor moves on this application. The SEC's case was, of course, brought the same day as the government's case in June. There has been a lot of delay here. There is no basis for changing how things are done. I think that at the end of the six months of documentary discovery, we then move into depositions -- THE COURT: You're talking about the civil case or

16 0 0 the criminal case? MS. BRUNE: I'm talking about the civil case, your Honor. THE COURT: I just want to know whether or not you might be amenable to trying this case in the springtime. MS. BRUNE: Your Honor, it's awfully difficult to say. We have received millions of pages of documents. We don't even know what the trial indictment looks like and we're working, I can tell you, very hard -- THE COURT: I'm balancing things out in my head as we speak, okay. MS. BRUNE: I don't think it's realistic to try this case next spring. MR. SINCLAIR: If I may respond to some of the points raised by counsel, your Honor? The opening salvo of counsel's argument was that we don't have the 00 material here, and then when we say, let's have a trial earlier and certainly you would get 00 material in advance of a criminal trial, the answer is, we need civil discovery. It doesn't make any sense, your Honor. We think we should proceed quickly toward a criminal trial, as expeditiously as possible. THE COURT: We're not going to let the rights in terms of the criminal trial be affected by the civil concerns.

17 0 0 MR. SINCLAIR: Absolutely not. The government is aware of its obligations under 00. THE COURT: We're dealing really in a very nonconcrete way here. We are talking about generalities. Do we have a particular discovery demand? Is there a particular witness you want to depose? I mean, if we really get you to focus on what you want, I would have a better sense of whether you really are trying to use the civil proceeding as a vehicle for the criminal case, so to speak, and whether there is a legitimate basis, a middle ground -- as Mr. Weinstein is going to talk to me about -- where the government's concerns can be assuaged and you can go forward. Is that realistic? MS. BRUNE: I believe going forward is the right approach. I think as we make our way through the documents we should be able -- THE COURT: If you gave something concrete to me and the magistrate judge then we would have something in front of us to deal with. The government may not have a problem, or if they do have a problem, either myself or the magistrate judge, whoever is going to handle discovery, can deal with it at that time without prejudicing anybody. Mr. Weinstein.

18 0 0 MR. WEINSTEIN: I wanted to give you one specific example, because you've asked for examples. Mr. Sinclair has mentioned a number of times that we're seeking third party discovery, that it is improper in a civil case -- absolutely it's not -- but the SEC charges, I think, unlike the criminal charges, have specific allegations that these defendants misled what they represent to be Bank Number One. There are actual allegations. Everyone knows it's Barclays. My understanding is, and I think it's confirmed now by their schedule of documents that they are turning over from the SEC's file, is that we're not going to get a single page of documents produced by Barclays to the government or to the SEC. Somehow, there are allegations in here that our clients hoodwinked a major financial global institution, yet they don't have a single page to turn over directly from their file. We clearly need third party discovery to meet the allegations that they brought in their complaint that they decided to file the same day the government did. MR. SINCLAIR: Your Honor, I can represent to the court that by the end of this week, the defendants will receive discovery from Barclays, that it's going to be part of Rule discovery in the criminal action. THE COURT: Is there anything wrong with at least

19 0 0 starting discovery process in the civil case by document discovery before we even deal with having to have the depositions of any particular witness? MR. CASEY: Your Honor, it is the document discovery that we're here for. They are not seeking to take depositions for six months for now. It is the third party discovery that they are going to use the civil rules. Your Honor was on to, I believe, the middle grounds part here. Let's wait until December th. We will have a superseder or we will not have a superseder by December th. We can take it up that day or the next day when the SEC is in town, and we can do the stay proceeding at that time because then when we're not dealing in a vacuum. We're going to have a trial date, we're going to have a motions calendar, we're going to have a spring trial date or a fall trial date. THE COURT: What is wrong with my calling Judge Pohorelsky, giving him a transcript of what we're talking about today and letting him do what the magistrate judges normally do, to sit down with you folks -- that's what they are getting paid to do, they have the time to do it while we handle trials. I have a or week trial right now and another one after that, and he might be in a better position to really give you the necessary time to hear you out on a situational

20 0 0 0 basis as things evolve. Is there anything wrong with doing that? MR. SINCLAIR: Respectfully, your Honor, that is exactly what the Nicholas court contemplated. It contemplated a diversion of the parties' time and attention to third party civil discovery, as you're suggesting, even though it would be orderly and simple, and we could go through it, but it would be a diversion of our time from preparation of the criminal case. THE COURT: I don't know how much of a diversion of your time to sit down with the magistrate judge for an hour or two. MR. SINCLAIR: Your Honor, you have been part of civil discovery disputes. We know how much of a diversion of time that can be, especially given the fact that we might be dealing with third party discovery from some of the largest financial institutions undergoing the most major crisis that they have ever faced before, and we are seeking what documents presumably about the types of securities that we are dealing with here, which the government takes the position would be irrelevant in the criminal case. THE COURT: Let me think about it all. My initial reaction -- it may not be any final determination -- is to send this to the magistrate with a transcript of what we spoke about today and to have him rehash this with you in a more

21 0 0 particularized way. This gives us to some overall scope of what we are talking about and sort of the general framework in which we are talking and expressing our concerns which ought to be considered, certainly from both parties' perspectives, but the particularized aspects of this I think possibly should be something that the magistrate judge should be privy to. So I'm going to think before that. For present purposes, is there anything else you wish to say that can impact my decisions here? MS. BRUNE: Your Honor, as you think about the delay argument that the government has made -- and, frankly, it's one that utterly mystifies me, I want to say this to you -- THE COURT: Does it mystify you or utterly mystify you? MS. BRUNE: Utterly mystifies me. The government is enormous. Surely they have the resources to litigate these important cases they brought. We're small but mighty, we're ready, and I'm not going to say to you that the civil case is a basis for delaying the criminal trial, I'm simply not going to do that. THE COURT: In an effort to make some sort of a comedic comment here to sort of break the ice, when you mentioned the word "utterly," I had the interesting experience of sitting on a panel in the Circuit Court when Judge Kazinski

22 0 0 was presiding. You can just picture the situation, it was at the end of a wonderful oral argument by a very capable young attorney, and just to punctuate he was doing very, very well and he wanted to end with a real nail-down of his case and he said, Members of the court, in sum, it just simply is not fair what the government is doing. And Judge Kazinski -- and I don't know whether you know him, he has this Romanian accent, he sounds like Dr. Frankenstein when talks -- he said, Fair? What do you mean by the word fair? I have been wondering my whole life what fair means. I've been thinking about it, I have been going to write books about it, and this poor guy never said another word. So I was sitting here now and I heard the word "utterly" and if I were Judge Kazinski, I would probably say, What do you mean by the word "utterly"? MS. BRUNE: We still pursue fairness your Honor, even though sometimes it's elusive, and I think it's fair to make the SEC litigate the case they have brought and I do think that there is a flexible way to address any concerns on both sides about the specific discovery. THE COURT: We'll think about that. Mr. Weinstein, do you want to add anything to this? MR. WEINSTEIN: No, your Honor. THE COURT: And, Mr. Sinclair, anything else you wish to say?

23 0 0 MR. SINCLAIR: Nothing further, your Honor. THE COURT: Mr. Casey, you're standing there looking very austere. Do you want to say anything? MR. CASEY: No, your Honor. THE COURT: How about the SEC? MR. WORLAND: Your Honor, just that if we go forward with depositions, I can give you the two people at the top of my list. THE COURT: I understand that. Well, of course, you would have the right to depose your clients. How do ou feel about that? MS. BRUNE: I feel that a flexible remedy can be arrived at, your Honor, as is what was done in some of the cases. THE COURT: What is fair for the goose is fair for the gander. MS. BRUNE: There is no asymmetry here at all. The government has been investigating this case for a year. They have had a massive ability to get unilateral access to all of the witnesses. The notion that they are going to say that -- THE COURT: Be specific. You're a very articulate lawyer, but if in fact the SEC serves you with a notice of deposition, which may not happen for awhile, your clients were requested to deposed, what would your position be? MS. BRUNE: Our position would be what it is now,

24 0 0 which is, obviously the criminal case is more for to Matt Tinnan and his family than the SEC case. THE COURT: You really don't want to subject yourself to reciprocal discovery, do you? MS. BRUNE: I disagree heartily, and I know you'll tease me for the adverb. The reason I say that is the government already has a lot. I daresay they have not investigated the significant defenses that we have, and when we get to the SEC case after the acquittal of the defendants here, something we have to get ready for, they will have the benefit of the defendants' testimony. THE COURT: I haven't read your -- you haven't answered, I guess, in this civil complaint? MS. BRUNE: We have not yet. It's coming. THE COURT: It hasn't come out yet. MS. BRUNE: Under the schedule we agreed with, with, with the SEC. THE COURT: Are you going to put defenses in there? MS. BRUNE: We are thinking about what this will look like. THE COURT: That is really all the type of thing that the SEC is entitled to reflect upon in terms of their discovery, reciprocal discovery, don't you think? MS. BRUNE: Sure. THE COURT: Really it reinforces the fact that this

25 0 0 may be a little premature from both points of view, right? MS. BRUNE: I think it's better to get ready. I don't agree with the idea that we have basically done nothing since June. THE COURT: Don't you think that maybe we should wait for the answer, see what the defenses are, and wait until the superseding indictment comes, so we have the full body of information in front of us? MS. BRUNE: No, your Honor. I think we should proceed as one would proceed in any civil case. The answer is due, I think, in the next week or so. It depends on when your Honor rules and sounds as if your Honor is on the verge of doing so. THE COURT: I can stay this thing for whatever, a month or two or three, then we can revisit it then, have a global survey at the present time, and this way we'll have more information. In a month or two, when we get the answer, when we get the final indictment, maybe that is a proper way of proceeding in the first instance, but baby steps. How do you feel about that? MS. BRUNE: It feels like a global stay. It has already been a stop action since it was brought. THE COURT: Have you put in an answer? The issue hasn't been joined. Don't you have discovery after issue is joined?

26 0 0 MS. BRUNE: We can do it in short order. I would suggest that we set up an appointment with the magistrate judge. THE COURT: I'm getting a feel for this and I do appreciate your helping me out. That is the beauty of oral argument, to listen to skilled lawyers talking about the interests, and hopefully the person in the black robe has the wisdom of Solomon, which I doubt. Do you have anything else to say? MS. BRUNE: No, your Honor. MR. LITTLE: Judge, if I could add something. With respect to the trial date, it's absolutely inconceivable that this case could be tried in the spring because I don't want the government's -- THE COURT: I suspect you're right. MR. LITTLE: I just want to make one point to get it in, your Honor, because they have mentioned this several times. They have had a full year with the cooperation of Bear Stearns' lawyers. Bear Stearns waived its privilege and its lawyers brought to them selected documents, keying up the various issues they are investigating. THE COURT: There is a level of cooperation. MR. LITTLE: Exactly. I'm not saying that she shouldn't have done it, they did what they did, but the point

27 0 0 is that we're starting at ground zero with a million documents being dumped on us. They have had a year with the help of inside counsel putting a case together that they have brought and we are just getting now a dump of documents. THE COURT: You know those documents. Basically, they're your documents by and large, I think. MR. LITTLE: No. MR. SINCLAIR: It's not a dump of documents. It's a sets of documents that have been indexed for the defendants, including pointing directly to the type of material that Mr. Little is speaking about, which was subject of negotiation between the defendants and Bear Stearns with respect to the highly privileged documents that the government was in receipt of and now that the defendants have. That's a limited universe of documents that's easily segregable. MR. LITTLE: Let me make the point, your Honor. I don't want to mislead the court. The earliest this trial can go is next September. That is our position. There is to way that we can catch up to where they are by the spring. THE COURT: It's going to probably work out that way, common sense suggests that. We're not going to be certain what the indictment is going to be, we still have all these matters to sort out. Summertime comes along. I don't think we should try this case in the summertime I suspect. I

28 0 0 do have a bunch of tries scheduled. As a practical matter, it will probably be in the fall. MR. SINCLAIR: I wanted to make the request just for clarity that there would be an interim stay of discovery until the court reaches it's decision. THE COURT: Right now, of course. I mean that is understood. MR. SINCLAIR: I appreciate that. THE COURT: Anything else? It was a pleasure having you here. I'll try to respond as quickly as possible. Mr. Casey, anything else? MR. CASEY: No, your Honor. MR. WORLAND: Your Honor, just one slight clarification. We already have a process going on to produce documents. It's not quite finished -- they said percent. It's been kind of a combination civil and criminal. It's alright if the SEC continues to complete that? THE COURT: You have those responsibilities. You will go forward obviously, yes. MR. LITTLE: Your Honor, Jack Worland has been very helpful in one respect. We have agreed, I believe, that rather than duplicate documents that are produced or confuse us as to how many documents are duplicates and how many are different, we're going to work together so that if we get a

29 0 big bunch of documented from the SEC, we'll know whether or not this simply duplicates what the government has already given to us or whether or not there are differences. Jack has agreed to work that out with us and I think that will help a lot in terms of sorting through this. THE COURT: That's good to know. That sort of suggests even more so that the magistrate judge should really be able to focus a little on these things better than perhaps I will be able to. Magistrate Judges cannot try felony cases, as Mr. Casey knows, and that's what we have to do and it just takes up a lot of our time. I have a couple of heavy-duty trials. Mr. Casey, do you have any of them before me? MR. CASEY: I do not, your Honor. THE COURT: So we try to balance it out. We're busier than the Southern District, they have more time to do all this than we do. All right. Nice to say you here. ********* 0

30 0cv [] - : 0 00 [] - : 000 [] - :, : :00 [] - : [] - : [] - : 00 [] - :, :, : 0 [] - : [] - : [] - : 0s [] - : 00 [] - :, :, :, : [] - : [] - : th [] - :, :, :, : - [] - : [] - : 0 [] - : [] - :, : A a.m [] - : ability [] - :, : able [] - :, :, : Absolutely [] - : absolutely [] - :, : academic [] - :, : accent [] - : access [] - :0, : acquittal [] - : action [] - :0, :, : actual [] - : add [] - :, : addition [] - : address [] - :, 0:, : advance [] - : adverb [] - : affected [] - : agree [] - :, :, :, : agreed [] - 0:, :, :, : agreements [] - 0:0 ahead [] - : aided [] - : al [] - : ALAN [] - :0 allegations [] - :, :, :, :, :, : allow [] - :, :, : allowing [] - :, : alright [] - : amenable [] - : America [] - : answer [] - :, :, :, :0, :, : answered [] - : anticipate [] - : anxious [] - : APPEARANCES [] - : appearances [] - :0 application [] - :, :, : applications [] - : appointment [] - : appreciate [] - :, : approach [] - :, : appropriate [] - : areas [] - :, 0: argues [] - : argument [] - :, :, :, :, : arguments [] - : arm [] - : array [] - : arrive [] - : arrived [] - : arriving [] - : articulate [] - : aspects [] - : associated [] - : assuaged [] - : assume [] - : asymmetry [] - : attempted [] - : attempts [] - : attention [] - 0: ATTORNEY [] - : attorney [] - : austere [] - : available [] - :, :, :, : avoid [] - : aware [] - :0, : awfully [] - : awhile [] - : B baby [] - : balance [] - : balancing [] - :0 ball [] - : Bank [] - : Barclays [] - :, :, : base [] - : based [] - : basis [] - :, :, 0:, :0 Battery [] - : Bear [] - :, :0, : bearing [] - : BEATTIE [] - : beauty [] - : BEFORE [] - : begun [] - :, 0: belief [] - :0 benefit [] - : BENTON [] - : better [] - :, :, :, :, : between [] - :, 0:0, :, : beyond [] - : big [] - :, : bit [] - :, : black [] - :, : blanket [] - :0, :, :, : BLOCK [] - : body [] - :, :, :, : books [] - : bottom [] - : Brady [] - :, :0 brainer [] - : break [] - : brief [] - :, : bring [] - :0, :, :, :, : bringing [] - : Broad [] - : broad [] - :, : Brooklyn [] - :, : brought [] - :, :, :, :, :, :, :, :, : BRUNE [] - :, :, :, :0, :, 0:, :, :, :, :0, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :0 Brune [] - :, :

31 bunch [] - :, : Burton [] - : busier [] - : BY [] - :, :0, :, : C Cadman [] - : calendar [] - : called-appearances [] - :0 CAMPBELL [] - : cannot [] - :0 capable [] - : case [] - :0, :, :, :, :, :, :, :, :, :, :, :0, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, 0:, 0:0, 0:, 0:, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :0, :, :, :, :, :, :0, :, :, 0:, 0:, :0, :, :, :, :, :, :, :0, :, :, : cases [] - :, :0, :, :, :, :, :0 CASEY [] - :, :, :, :, :, : Casey [] - :, :, :, :, : catch [] - :0 center [] - : certain [] - 0:, 0:, : certainly [] - :, :, :0, :, : Certainly [] - :, : cetera [] - : changing [] - : charge [] - : charges [] - :, :, :, : chart [] - 0: chime [] - : choreographed [] - : chose [] - : chosen [] - : CIOFFI [] - : Cioffi [] - :, : Circuit [] - : cite [] - : civil [] - :, :, :, :, 0:, 0:0, 0:, :, :, :, :, :, :, :, :, :, :, :, 0:, 0:, :0, :, :0, : clarification [] - : clarity [] - : clear [] - : clearly [] - : clients [] - :, :, :0, : clients' [] - : close [] - :0 closer [] - : colored [] - : combination [] - : comedic [] - : coming [] - : comment [] - :, : comments [] - : COMMISSION [] - :, : common [] - :0, : complaint [] - :, : complete [] - :, : computer [] - : computer-aided [] - : conceptually [] - :, : concern [] - :, : concerned [] - :, : concerns [] - :, 0:, :, :, :, :, :, : concrete [] - :, : conference [] - : confirmed [] - : confuse [] - : consideration [] - : considered [] - : considering [] - : contemplated [] - 0: continue [] - : continues [] - : control [] - :, :, : controlled [] - : controls [] - :0 cooperating [] - :, : cooperation [] - :, : copy [] - : correct [] - :, : counsel [] - :, :, : counsel's [] - : couple [] - : course [] - :, :, :, 0:, :, :, :0, :, :, :, : Court [] - :, : COURT [] - : court [] - :0, :, :, 0: court-case [] - :0 Courthouse [] - : courtroom [] - : create [] - : credit [] - :0 criminal [] - :, :, :, :, :, :, :0, 0:0, 0:, :, :0, :, :, :, :, :, :, :0, :, :, 0:, 0:, :, :, : crisis [] - :0, 0: crop [] - : custom [] - : D daily [] - : daresay [] - : date [] - :0, :, :, :, :, :, : DC [] - : deal [] - :, :, :, :, 0:, :0, :, : dealing [] - 0:, :, :, :, 0:, 0: December [] - :, :, :, :, :, :, :, : decide [] - :, : decided [] - :0, :, :0 decision [] - :, :, :, : decisions [] - :0 decline [] - : defend [] - : Defendant [] - :, : defendant [] - :, :, :0 defendants [] - :, :, :, :0, :, :, :, :0, 0:, :, :, :, :, :, :, :, :0, :, : Defendants [] - : defendants' [] - : defense [] - :, : defenses [] - :, :, : delay [] - :, : delaying [] - :0 demand [] - : demands [] - :, :, : depose [] - :, :0 deposed [] - :, : deposition [] - 0:, : depositions [] - :0, :, :, :, :, : deputy [] - : determination [] - 0: difference [] - 0:0, : differences [] - : different [] - :, :, : difficult [] - : directly [] - :, : disagree [] - : disclose [] - : disclosed [] - : discovery [] - :, :, :, :, :, :, :, :, :, :0, :, :, :, 0:, 0:, :, :, :, :, :, :, :, :0, :, :, :, :, :, :, :, :, :, :, 0:, 0:, 0:, :0, :, :, :, : disputes [] - :, 0: distinguish [] - : distinguished [] - : DISTRICT [] - :, :, :, : District [] - :, :, :

32 diversion [] - 0:, 0:, 0:0, 0: document [] - :, :, :, :, : documentary [] - :, :, : documented [] - : documents [] - :, :, :, :0, :, 0:, :, :, :, :, :, :, :0, :, :, :, :, : dogs [] - : done [] - :, :, :, : doubt [] - : down [] - :0, 0:, 0:, :0, 0:, : Dr [] - : due [] - : dump [] - :, : dumped [] - : duplicate [] - : duplicates [] - :, : during [] - :, : duty [] - : E earliest [] - : early [] - : easily [] - : East [] - : Eastern [] - : EASTERN [] - :, : EDWARD [] - :0 effective [] - : effort [] - :, : either [] - : eleventh [] - : elusive [] - : end [] - :, :, :, :, : enhanced [] - : enormous [] - : entitled [] - :, :, : envision [] - : especially [] - 0: ESQ [] - :, :0, :0, :, : et [] - :, : etcetera [] - : event [] - :0 evidence [] - : evolve [] - 0: Exactly [] - : exactly [] - :, 0: example [] - :, : examples [] - : EXCHANGE [] - :, : exercise [] - : existing [] - : expeditious [] - : expeditiously [] - :, :, : experience [] - : explore [] - : expressing [] - : eye [] - : eyes [] - : F face [] - : faced [] - 0: fact [] - :, 0:, :, : facts [] - : Fair [] - : fair [] - :, :, :, :0, :, : fairness [] - : fall [] - :, :, : family [] - : far [] - :, 0: fault [] - : felony [] - :0 few [] - : file [] - :, :, :, :, :, :, :, :0 final [] - 0:, : financial [] - :, :, 0: finished [] - : first [] - :, :, 0:, :, : fix [] - : flashed [] - : flexible [] - :, :, : flushed [] - : focus [] - :, : focused [] - : focuses [] - : folks [] - :, :, :0 follow [] - : FOR [] - : force [] - : forever [] - : forth [] - : forward [] - :, :, :, 0:, :, :, :, :, :, :, :0 four [] - : framework [] - : Frankenstein [] - : frankly [] - : FREDERIC [] - : front [] - :, :, : frustrate [] - : full [] - :, :, : G gain [] - 0: gander [] - : general [] - : generalities [] - : generally [] - : Given [] - : given [] - 0:, : glad [] - :0 global [] - :0, :, :, : goose [] - : government [] - :, :, :, :0, :, :, :, :, :, :, :, 0:, :, :, :, :, :, :, :, :, :, :, :, :, :0, 0:0, :, :, :, :, :, :, : government's [] - :, :, :, :, :, :0, :, : grand [] - :0, : grant [] - : great [] - 0: ground [] - :, :, :, : grounds [] - : guess [] - :, :, :0, :, :0, :, : guy [] - : H handle [] - :, :, : happy [] - : hard [] - :, : head [] - :0 hear [] - :, : heard [] - :, :, : heartily [] - : heavy [] - : heavy-duty [] - : help [] - :, : helpful [] - :, : helping [] - : highly [] - :, 0:, : holding [] - : honestly [] - : Honor [] - :, :, :, :, :, :, :, :, :, :, :, :, 0:, 0:, :, :, :, :0, :, :, :, :, :, :, :, :, :, 0:, 0:, :, :, :, :, :, :, :, :, :, :0, :, :, :, :, :, : Honor's [] - : HONORABLE [] - : hoodwinked [] - : hopefully [] - : hour [] - :, 0: HUBBARD [] - : HUGHES [] - : ice [] - : idea [] - : I

33 identified [] - : imagine [] - :, :, :, :0, : impact [] - :, :0 importance [] - : important [] - : improper [] - : including [] - : inconceivable [] - : indexed [] - :0 indictment [] - :, :, :, :, :, :, :, : influence [] - :, : information [] - :, 0:, :, : initial [] - 0: initiated [] - : inside [] - : instance [] - :, 0:, : instances [] - :0, :0 institution [] - : institutions [] - :, 0: instructed [] - : interesting [] - : interests [] - : interim [] - : internal [] - : intervene [] - : intervened [] - : Intervenors [] - : intervention [] - :, :, : interviewed [] - : inundated [] - : investigated [] - : investigating [] - :, : investigation [] - :, :0, : investigative [] - :, :, :, : invited [] - :0 irrelevant [] - 0: issue [] - :, :, :, :, :, 0:, :, : issues [] - :, :, : J J.M [] - :0 Jack [] - :, : JOHN [] - : joined [] - :, : joints [] - : Judge [] - :0, :, :, :, :, :, :, :, :, : judge [] - :, :, :, :, :, 0:, :, :, : Judges [] - :0 judges [] - :, :, :, : June [] - :0, : jury [] - :0 K Kazinski [] - :, :, : keying [] - : kick [] - : kind [] - :, : kinds [] - : knows [] - :, : L large [] - : largest [] - 0: last [] - : law [] - :, :, :, : lawyer [] - : lawyers [] - :, :, :, :0, : least [] - : legitimate [] - :, :0 lengthy [] - : letting [] - : level [] - : leverage [] - 0: lie [] - : lies [] - : life [] - :0 likely [] - :, : limited [] - :, : linger [] - : list [] - : listen [] - : litigate [] - :, : LITTLE [] - :0, :, :, :, :, :, : LLP [] - :, : local [] - : look [] - :0, :0 Look [] - :0 looking [] - :, :, : looks [] - : M magistrate [] - :, :, :, :, :, :, 0:, 0:, :, :, : Magistrate [] - :, :0 main [] - : major [] - :, 0: majority [] - : manage [] - :, : manufactured [] - : MARC [] - :0 Marc [] - : massive [] - : material [] - :, :, :, :, : Matt [] - :, : matter [] - :, :, :, : matters [] - : mean [] - :, :, :, :, :, :, : means [] - :0 mechanical [] - : mechanisms [] - 0: meet [] - : Members [] - : mentioned [] - :, :, :, : middle [] - :, :, :, : might [] - :, :, :, :, :, 0: mighty [] - : mike [] - : million [] - : millions [] - : minus [] - : mislead [] - : misled [] - : misrepresentations [] - : Miss [] - :, : missing [] - : month [] - :, : months [] - :, :, :, : morning [] - : Most [] - :, : most [] - :, 0: motion [] - :, : motions [] - : move [] - :, : moved [] - : moves [] - : moving [] - : MR [] - :, :, :, :, :, :, :, :, :, :, :, :0, :, 0:, :, :, :, :, :, :, :, :, :, :, :, :, :, 0:, 0:, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, : MS [] - :, :0, :, 0:, :, :, :, :0, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :0 mute [] - : mystifies [] - :, : mystify [] - : N N.E [] - : N.Y [] - :, : nail [] - : nail-down [] - : names [] - :

34 narrow [] - 0: necessarily [] - : necessary [] - : need [] - :, 0:, :, : negotiation [] - : never [] - : NEW [] - :, : New [] - :, :, :, : newspaper [] - : next [] - :, :, :, :, :, : Nice [] - : Nicholas [] - :, :, :, 0: NINA [] - : no-brainer [] - : nobody [] - : non [] - : none [] - : normally [] - :0 noted [] - :0 notes [] - :, : Nothing [] - : nothing [] - :, : notice [] - : notion [] - :, :0 number [] - : Number [] - : O o'clock [] - : obligations [] - : obviously [] - :, :0 October [] - : odd [] - : OF [] - :, :, : office [] - : officers [] - 0: One [] - :, :, : one [0] - :, :, :, :, :, :, :0, :, :, : ongoing [] - :0 Open [] - :0 opening [] - : opportunity [] - : oral [] - :, : order [] - :, : ordered [] - : orderly [] - 0: ordinary [] - : ou [] - :0 ought [] - : overall [] - 0:, : own [] - :, : P page [] - :, : pages [] - : paid [] - : panel [] - : paper [] - : Park [] - : part [] - :, :, :, :, :, 0: particular [] - :, :, :, :, 0:, :, :, : particularized [] - :, :, : parties' [] - 0:, : party [] - :, :, :, :, 0:, 0: pass [] - 0: PATRICK [] - : people [] - :, :, :, : percent [] - :, : perhaps [] - :, :, :, : period [] - : permit [] - : person [] - : perspective [] - :, : perspectives [] - : phase [] - : picture [] - : plain [] - : Plaintiff [] - :, : plan [] - 0: play [] - : playing [] - : plays [] - :0 Plaza [] - :, : pleasure [] - :0 pluses [] - : Pohorelsky [] - :0, :, : point [] - :, :, :, : pointed [] - 0: pointing [] - : points [] - :, : poor [] - : position [] - :, :, :, 0:0, :, :, : possibilities [] - : possibility [] - 0: possible [] - :, : possibly [] - :, :, : posture [] - : potential [] - : practical [] - :, :, : practice [] - :, : precisely [] - : prejudice [] - :, :, 0: prejudiced [] - : prejudicing [] - : premature [] - :, : preparation [] - 0: prepare [] - : prepared [] - : present [] - :, : presiding [] - : presumably [] - 0: pretrial [] - :, : principal [] - : privilege [] - :0 privileged [] - : privy [] - : problem [] - :, 0:, :, : problems [] - :, : proceed [] - :, :, :0 proceeding [] - :, :, :, : Proceedings [] - : PROCEEDINGS [] - : process [] - :, :, : produce [] - : produced [] - :, :, : professionals [] - 0: proffer [] - : progress [] - : proper [] - : prophylactic [] - : protect [] - : provided [] - : provides [] - : public [] - : publicized [] - : punctuate [] - : purposes [] - : pursue [] - : put [] - :, :, : putting [] - : Q quickly [] - :, : quite [] - : R raised [] - : Rakoff [] - :, :, : RALPH [] - : rather [] - :0, : reaches [] - : reaching [] - : reaction [] - 0: read [] - : ready [] - :, :, :, :0, : real [] - :, :0, :, : realistic [] - :, :, : Really [] - : really [] - :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, : reason [] - :, 0:, :, : reasons [] - : receipt [] - : receive [] - :

35 received [] - :, : reciprocal [] - :, : recorded [] - : reduced [] - : REED [] - : reflect [] - :, : regular [] - :, : rehash [] - 0: reinforces [] - : relates [] - : remedy [] - :, :, : remember [] - :, : report [] - : Reporter [] - : reports [] - : represent [] - :, : represented [] - : reputation [] - :, : reputational [] - : request [] - :, :, : requested [] - : requests [] - :, : resources [] - : respect [] - :, :, 0:, :0, :, :, : Respectfully [] - 0: respond [] - :, :, : response [] - : responsibilities [] - : revisit [] - : RICHARD [] - : rights [] - :, :, :, : road [] - :0, 0: robe [] - :, : Romanian [] - : Rule [] - : rules [] - :, :, :, :, : S Saad [] - :, :, : salvo [] - : scapegoat [] - :0 schedule [] - :, :, :0, : scheduled [] - : scope [] - : SEAN [] - : SEC [] - :, :, :, :, :, :, :, :, :, :, 0:, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :, : SEC's [] - :, :, :, : securities [] - 0: SECURITIES [] - :, : see [] - :, :0, 0:, : See [] - 0: seeking [] - :, :, :, :, 0: segregable [] - : selected [] - : send [] - 0: SENIORJUDGE [] - : sense [] - :0, :, :, : September [] - : serious [] - : seriously [] - : serves [] - : set [] - :, :, : sets [] - :0 setting [] - : several [] - :, :, :, : share [] - :, : short [] - :, : shut [] - : sides [] - :, :0 signaled [] - : significant [] - 0:0, :, :, : simple [] - 0: simply [] - 0:, :, :, :, : SINCLAIR [] - :, :, :, :, :, 0:, :, :, :, :, :, :, :, :, :, :, :, 0:, 0:, :, :, :, : Sinclair [] - :, :, : single [] - :, :, :, : sit [] - 0:, :0, 0: sitting [] - :, :, : situation [] - : situational [] - : situations [] - :0 six [] - :, :, : skilled [] - 0:, : sleeping [] - : slight [] - : small [] - : Solomon [] - : sometime [] - : sometimes [] - :, : somewhat [] - : soon [] - : sooner [] - :, :0 sort [] - :, :, :, :, :, 0:, 0:, :, :, :, :, :, : sorting [] - : sought [] - : sounds [] - :, : Southern [] - :, : speaking [] - :, :, :, : specific [] - :, :, :0, : spring [] - :, :, :, :, :0 springtime [] - : stake [] - :, :0, : standing [] - : starting [] - :, : statements [] - :, :, :0 STATES [] - :, :, :, : States [] - :, :, : status [] - : stay [] - :, :, :, :, :, :0, :, :, :, :, :, : stayed [] - :0 staying [] - :0 stays [] - : Stearns [] - :, :0, : Stearns' [] - :0 stenography [] - : step [] - : steps [] - : stigma [] - : still [] - :, : stop [] - : Street [] - :, : subject [] - :, : subpoena [] - : subpoenas [] - : substantiate [] - : subvert [] - : suggest [] - :, :, : suggested [] - : suggesting [] - 0:, 0: suggests [] - :, : Sulzer [] - : sum [] - : Summertime [] - : summertime [] - : superseder [] - :0 superseding [] - :, :, : supports [] - :, : Surely [] - : surfaces [] - : survey [] - : SUSAN [] - : suspect [] - :, : T talks [] - : Tannin [] - :, :, : Tannin's [] - :, : tease [] - : terms [] - :, :, :, :, :, :, : testimony [] - :, : THE [] - :, : The court [] - :, :, :0, :, :, :, :, :0, :, :, :0, :, :, :, :, :, :, :, 0:, 0:, 0:, 0:, :, :, :, :, :, :, :, :, :, :, :, :, :, :, :0, :, :, :, :, :, :, 0:0, 0:, :, :, :,