smb Doc 435 Filed 03/01/18 Entered 03/01/18 16:39:47 Main Document Pg 1 of 2

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1 smb Doc 435 Filed 03/01/18 Entered 03/01/18 16:39:47 Main Document Pg 1 of 2 BAKER & HOSTETLER LLP 45 Rockefeller Plaza New York, New York Telephone: (212) Facsimile: (212) Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and the Chapter 7 Estate of Bernard L. Madoff UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES INVESTOR PROTECTION CORPORATION, v. Plaintiff-Applicant, BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Adv. Pro. No (SMB) SIPA LIQUIDATION (Substantively Consolidated) Defendant. In re: BERNARD L. MADOFF, Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, Adv. Pro. No (SMB) Plaintiff, v. J. EZRA MERKIN, GABRIEL CAPITAL, L.P., ARIEL FUND LTD., ASCOT PARTNERS, L.P., ASCOT FUND LTD., GABRIEL CAPITAL CORPORATION, Defendants. DECLARATION OF LAN HOANG IN SUPPORT OF TRUSTEE S MEMORANDUM OF LAW IN OPPOSITION TO DEFANDANTS MOTION TO REARGUE THE COURT S JANUARY 22, 2018 ORDER EXCLUDING THE OPINIONS AND TESTIMONY OF JEFFREY M. WEINGARTEN

2 smb Doc 435 Filed 03/01/18 Entered 03/01/18 16:39:47 Main Document Pg 2 of 2 I, Lan Hoang, declare the following: 1. I am a Partner with the law firm of Baker & Hostetler LLP, counsel to Irving H. Picard, as trustee ( Trustee ) for the substantively consolidated liquidation of Bernard L. Madoff Investment Securities LLC ( BLMIS ) under the Securities Investor Protection Act, 15 U.S.C. 78aaa et seq., and the chapter 7 estate of Bernard L. Madoff ( Madoff ). 2. I submit this declaration in support of the Trustee s Memorandum of Law in Opposition to Defendants Motion to Reargue the Court s January 22, 2018 Order Excluding the Opinions and Testimony of Jeffrey M. Weingarten. 3. True and correct copies of the following documents are attached: Exhibit 1: Exhibit 2: Excerpts from the hearing transcript on the Trustee s and Defendants motions in limine, dated August 9, 2017, including the Trustee s Motion to Exclude the Opinions and Testimony of Jeffrey M. Weingarten. Excerpts from the deposition transcript of Jeffrey M. Weingarten dated July 15, I declare under penalty of perjury that the foregoing is true and correct pursuant to 28 U.S.C 1746 (2). Dated: March 1, 2018 New York, New York By: /s/ Lan Hoang 45 Rockefeller Plaza New York, New York Telephone: (212) Facsimile: (212) lhoang@bakerlaw.com

3 Pg 1 of 25 EXHIBIT 1

4 Pg 2 of 25 1 UNITED STATES BANKRUPTCY COURT 2 SOUTHERN DISTRICT OF NEW YORK 3 Case No smb 4 Adv. Case No smb x 6 In the Matter of: 7 8 BERNARD L. MADOFF INVESTMENT SECURITIES LLC, 9 10 Debtor x 12 IRVING H. PICARD, TRUSTEE FOR THE LIQUIDATION OF 13 BERNARD L. MADOFF INVESTMENT SECURITIES LLC, 14 Plaintiff, 15 v. 16 MERKIN ET AL., 17 Defendants x Page 1

5 Pg 3 of 25 1 U.S. Bankruptcy Court 2 One Bowling Green 3 New York, NY August 9, :01 AM B E F O R E : 22 HON STUART M. BERNSTEIN 23 U.S. BANKRUPTCY JUDGE ECRO: JULIO PESEYRA Page 2

6 Pg 4 of 25 1 Hearing re: Trustee's Motion to Exclude the Opinions and 2 Testimony of Jeffrey M. Weingarten 3 4 Hearing re: Defendants' Motion to Exclude the Testimony and 5 Report of Bruce G. Dubinsky 6 7 Hearing re: Defendants* Motion to Exclude the Testimony, 8 Reports, and Declaration of Steve Pomerantz 9 10 Hearing re: Defendants' Motion to Exclude the Expert 11 Testimony of Amy B. Hirsch Hearing re: Defendants' Motion to Exclude the Expert 14 Testimony of Lisa M. Col Transcribed by: Sonya Ledanski Hyde Page 3

7 Pg 5 of 25 1 A P P E A R A N C E S : 2 3 BAKER & HOSTETLER LLP 4 Attorneys for Trustee, Irving H. Picard Esq Rockefeller Plaza 6 New York, NY BY: LAN HOANG 9 DAVID J. SHEEHAN 10 BRIAN W. SONG NORTON ROSE FULBRIGHT US LLP 13 Attorneys for Defendants Ascot Fund, Receiver of Ascot 14 Partners Avenue of the Americas 16 New York, NY BY: JUDITH A. ARCHER Page 4

8 Pg 6 of 25 1 DECHERT LLP 2 Attorneys for Merkin Defendants Avenue of the Americas 4 New York, NY BY: ANDREW J. LEVANDER 7 NEIL A. STEINER 8 9 APPEARING TELEPHONICALLY 10 KEVIN H. BELL 11 SEANNA R. BROWN 12 NATHANIEL S. KELLEY Page 5

9 Pg 7 of 25 1 performing or not performing due -- adequate due diligence 2 or what adequate due diligence is. And I just don t see 3 that as an issue in the case. 4 MR. LEVANDER: So, Your Honor -- 5 THE COURT: And let me explain why. I mean, Mr. 6 Merkin -- the issue in the case is not whether Mr. Merkin 7 adequately performed due diligence or was negligent in 8 performing due diligence or breached a fiduciary duty to 9 someone else in performing due diligence. It s what he 10 knew. If he did nothing, like the good faith purchasers in 11 these cases -- if he did nothing and didn t find out 12 anything, it just seems to me that s the end of the case. 13 MR. LEVANDER: Your Honor, I don t disagree. 14 THE COURT: Well, you put in a due diligence 15 report also. 16 MR. LEVANDER: I did. And I ll explain to you why 17 one could draw a distinction between the two. I could also 18 understand Your Honor saying that under Rule 702 you re not 19 going to find what I m about to say as assisting the Court 20 in making the decision. But the fundamental, basic truth is 21 that Mr. Pomerantz s report is relevant to nothing. Willful 22 blindness is the standard and Your Honor articulated the 23 issue. 24 THE COURT: So, what s Mr. Weingarten s revelvant Page 7

10 Pg 8 of 25 1 MR. LEVANDER: So, I do think -- so, unlike Mr. 2 Pomerantz who kind of dreamt up, you know, after the fact, 3 the tests that he had performed prior to Madoff s fall, Mr. 4 Weingarten does focus on -- based on 40 years of experience 5 including running Goldman Sachs Asset Management and his own 6 hedge fund, and having done due diligence a gazillion times 7 and having due diligence done on him a gazillion times, that 8 what -- he ties his analysis to what actually Mr. Merkin 9 did. And to the extent he says that is consistent with his years of experience and what people did prior to the 11 emergence of the Madoff fraud, that does bear, arguably, on 12 the good faith of Mr. Merkin, which, you know, ties into the 13 willful blindness standard. 14 And so, therefore I could draw that distinction. 15 There s no relevance to the Pomerantz report. I m going to 16 live with, you know, the goose and the gander here, though I 17 do think there is a difference between the goose and the 18 gander. 19 THE COURT: All right. I ll deal with Pomerantz s 20 motion first. 21 MR. LEVANDER: Okay. I m not sure how much more I 22 need to say, but I ll quickly try to -- you know, we had 23 moved to exclude the report and testimony of THE COURT: All right. Going back to Weingarten Page 8

11 Pg 9 of 25 1 MR. LEVANDER: Yeah. 2 THE COURT: -- why do I need Weingarten to tell me 3 what Merkin did? Merkin can testify to what he did, right? 4 MR. LEVANDER: Absolutely. And -- 5 THE COURT: So, what do I -- what does Weingarten 6 do for it? 7 MR. LEVANDER: So, arguably Mr THE COURT: Other than tell me what Merkin knew or 9 didn t know, which I wouldn t let him testify to anyway. 10 MR. LEVANDER: -- no, but what he would testify to 11 and his report identified is, Here s the methodology that 12 in pre-madoff days, people need to focus on the five P s. 13 This is the methodology that people did due diligence. And 14 based on my 40 years of experience and having done this a 15 lot, I ve looked at what Mr. Merkin said he did. I ve 16 looked at what was in Mr. Merkin s due diligence file, and I 17 find that satisfies what would have been normal due 18 diligence standards in that period of time. 19 THE COURT: Yeah. But his report goes well beyond 20 that. He talks about what Merkin knew or didn t know. 21 MR. LEVANDER: Well, he s tying -- what he s 22 trying to do is to tie the five P analysis to what Merkin 23 has testified to. His testimony relies on the accuracy of 24 Mr. Merkin s testimony and if the Court were to do this 25 probably then obviously the opinion becomes less useful. Page 9

12 Pg 10 of 25 1 But to the extent that the Court accepts Mr. Merkin s 2 testimony, accepts the inferences to be drawn from the due 3 diligence file, what Mr. Weingarten does is he adds the 4 gloss that this obviously is the kind of thing that one did 5 in those days on due diligence and therefore it shows that 6 Mr. Merkin was acting in good faith. 7 THE COURT: I think you got more out of his report 8 than I did. 9 MR. LEVANDER: I m sure I THE COURT: I guess we re discussing Mr. 11 Weingarten s report at this point, but MR. LEVANDER: -- okay. I m happy to discuss 13 either, Your Honor. 14 THE COURT: All right. Well, you made the motion 15 for Pomerantz so I ll hear Pomerantz. 16 MR. LEVANDER: Thank you, Your Honor. As much fun 17 as it would be to cross-examine Mr. Pomerantz and his Page notions, I just think it s a waste of the Court s time and 19 it will be days of Court s time by the time we re finished 20 with all the motions you re going to hear today. The only 21 issue here is the issue of willful blindness. As you have 22 held, as Judge Rakoff has repeatedly held in the Madoff case 23 including your summary judgment decision, willful blindness 24 requires proof that Merkin subjectively believed there was a 25 high probability that Madoff was engaged in a Ponzi scheme

13 Pg 11 of 25 1 Your initial instincts are correct. It s 2 irrelevant. And that s what Judge Rakoff held in the Katz 3 case. 4 THE COURT: Okay. Thank you. I ll reserve 5 decision on Pomerantz. Who s next? 6 MR. LEVANDER: You want to hear from Weingarten -- 7 on Weingarten as well? 8 THE COURT: Sure. What do we do on Weingarten? I 9 have many of the same comments. And frankly, I didn t find 10 your six-page report particularly probative. Go ahead. Did 11 I just make your argument? 12 MS. HOANG: Okay. Again, for the court reporter, 13 Lan Hoang, Your Honor. (Indiscernible) requires that each 14 expert that s proffered by a party -- the expert s opinions 15 be grounded in reliable principles and methodology analyses. 16 The Trustee submits that Mr. Weingarten should be excluded 17 because he hasn t done any -- he hasn t espoused any 18 principles, any methodologies, or any analyses in his six- 19 page report or even the -- what s repeated in his five-page 20 rebuttal report. It s the same concepts. And there s the 21 statement by Mr. Levander that yes, Mr. Weingarten has this years of experience and he did all these things. Well, 23 yes, an expert could be qualified based on their experience. 24 But there still needs to be a bridge between that experience 25 and the bare conclusions that are contained in Mr. Page 27

14 Pg 12 of 25 1 Weingarten s expert opinions. And that bridge is whether 2 he s utilized reliable methodologies and analysis. And I 3 submit he has not. 4 And so, what the defendants have argued is to say, 5 Oh, yes, he has a methodology. It s called the five P s. 6 Well, the five P s is not a methodology. The five P s is a 7 framework for doing due diligence. And what it is, is the 8 how of how you organize what you do. The methodology is the 9 actual collection of the data, what you do with that data 10 and what analysis you perform on the data and what that data 11 reveals, the how do I look at it part of due diligence. 12 So, just if you ll indulge me for a second, I 13 don t want to be over-simplistic with a real-world analogy, 14 but I think it s helpful in understanding the difference 15 between the five P s framework and the methodology. When 16 you buy a house, you have a home inspection because you 17 simply just don t rely on what the seller tells you is good 18 and bad about the house. The home inspector comes in and he 19 has a checklist of things he has to look at, the electrical, 20 the plumbing, the roof, the basement. That s the framework. 21 That s what he -- that s what do I look at. Page So, from there, then he goes, for example, takes 23 the electrical. He goes and looks at the electric box and 24 he wants to determine is that electrical box a fire hazard. 25 Are there enough breakers in there for the entire house?

15 Pg 13 of 25 1 And he goes through the whole house and does analysis. What 2 appliances are in the kitchen. What is in the living room. 3 What s in each of the bedrooms? What s being utilized? And 4 then he does an analysis of whether there s enough breakers 5 in that box, and he comes to a conclusion. 6 That s the methodology. That s the analysis. The 7 same goes for the basement. And he ll do the same thing. 8 He looks at the basement because that s in the framework, 9 but he does independent analysis. Does the basement flood? 10 Do I need sump pumps? Do I have enough sump pumps for the 11 amount of water I see in there? And each of those analyses, 12 that s what we re talking about methodology and reliable 13 analysis. 14 So, again, I bring you back to Mr. Weingarten s the opinions set forth in his report and even in his 16 rebuttal report. They re conclusions. The report consists 17 of a summary of conclusions and a conclusion. There s no 18 analysis. 19 So, what are his opinions? He said, It is clear 20 that the made-up philosophy would be to forego potential 21 higher profits in order to avoid a risk of loss. This is 22 at page 3. My apologies, Your Honor. For example, being 23 out of the market around highly volatile periods during 24 which the options would have -- the options expired would be 25 part of that philosophy. Page 29

16 Pg 14 of 25 1 So, let s ask. It s not in there. How did he 2 determine that being out of the market around highly 3 volatile periods during which options expire? At his 4 deposition, Mr. Weingarten admitted that he looked at two, 5 maybe three trades and that they were some time in 2004, 6 maybe 2006, and that he doesn t recall exactly. He may have 7 written it down but he doesn t have the notes. 8 So, he looks at two or three trades over the 18-9 year investment history of the Merkin funds with BLMIS. 10 There were 60,000 trades over that period of time. And so, 11 without identification of those two or three trades, we 12 can t, and the Court can t, assess how reliable his 13 methodology is, how reliable his analysis is, in order to 14 say to accept or reject his conclusion. 15 The same can be said for page 3 and 4 and he s 16 talking about the investment philosophy, the -- that Madoff 17 was utilizing the split-strike conversion strategy but with 18 added benefits. Mr. Merkin understood that Mr. Madoff had, 19 by virtue of his long experience and knowledge and ability 20 to take advantage of both market timing and stock selection 21 to improve returns over that which would have been generated 22 by formulae putting on of the trades. 23 What Mr. Merkin understood is something for Mr. 24 Merkin to testify to. But how did Mr. Merkin determine the 25 rest about market timing and stock selection? We don t Page 30

17 Pg 15 of 25 1 know. He -- there s no methodology. He just says so. So, 2 there s no bridge between what his experience is, because he 3 says, I ve seen it, to what his conclusion is that Madoff 4 was utilizing market timing and stock selection. So, you 5 have to take his word for it. 6 That s ipse dixits. That s not admissible as 7 expert -- as a basis for expert testimony under Another example, page 4 when he s talking about the 9 performance of the typical split-strike strategy. And when 10 the market was down, the fund outperformed the overall 11 market. When the market was up sharply, the fund 12 underperformed. 13 Well, what analysis did he do on BLMIS vis-à-vis 14 the market? What periods of time did he review. What were 15 the returns of BLMIS during those periods? What was the 16 market doing during those periods? Can he tell from the two 17 or three trades that he looked at, sometime in 2004, 18 sometime -- maybe 2006, over the 18-year history of the 19 investment? 20 There s other conclusions that he puts forth Page within his report. Page 5, over the course of my career. 22 He talks about the Sharpe ratio, that the oft-referred to 23 Sharpe ratio was relatively high for Madoff, but I counted 24 many funds with very high Sharpe ratios. Madoff s results 25 were above IRTS but they were certainly achievable. Well,

18 Pg 16 of 25 1 what did you look at? What other funds? What were their 2 Sharpe ratios? What -- 3 THE COURT: Well, you took his deposition. Did 4 you ask him any of these questions? 5 MS. HOANG: That -- I need to know based on what s 6 in his expert opinions. It s not our obligation to expand 7 on it because he didn t put it in there. The same applies 8 for -- let me backtrack and just add there that Mr. Merkin there s no evidence that Mr. Merkin performed an analysis 10 of the Sharpe ratio. So, if you re trying to draw this back 11 to what Mr. Merkin did or didn t do and what he did was 12 proper, he didn t do it. 13 So, then we talk about the plausibility rule. And 14 it says, Well, this was plausible. The returns were 15 plausible. It s the smell test. That s what he -- that s 16 what it is. Well, where -- if it s the smell test, how do 17 you know that his returns were plausible? Did you do 18 performance attribution? Did he look at it and determine 19 whether the performance of the BLMIS returns were consistent 20 with the split-strike strategy, were consistent with the 21 split-strike strategy with market timing, with stock 22 selection? He didn t do it. There s -- it s not in his 23 opinions. It s not -- he looked at two or three trades. 24 That s it. 25 So, we re not challenging Mr. Weingarten s Page 32

19 Pg 17 of 25 1 conclusions because he has his -- he has on this motion to 2 exclude his testimony. We re saying, yeah, those are his 3 conclusions. We re challenging him and moving to exclude 4 him because he hasn t performed -- he hasn t set forth, and 5 I submit he hasn t performed any methodology or any analysis 6 to the Merkin Fund s BLMIS returns, trade conference or 7 statements, whatever information that was available 8 contemporaneously to Mr. Merkin and the defendants 9 throughout their 18-year investment. 10 Had he done that analysis standing here, we 11 wouldn t have made this motion, because then, as Your Honor 12 has said, we would have been left to cross-examine him on 13 the issues of his credibility. But he hasn t met the 14 threshold for the submission of expert testimony. What s so what s left of his opinion if you take out everything 16 that he opines to on the market and what happens in the 17 Merkin and the Madoff investment, take those out. What s he 18 left -- he s left with statements regarding what Mr. Merkin 19 believed and what he felt. And we set that forth in the 20 papers. That s state of mind. That s not for him to 21 expound on. 22 The rest is a factual narrative. He s just Page providing fact. He s not saying -- providing anything other 24 than -- he s not providing first-hand testimony. He s not 25 anxious to be a witness. And to the extent that he refers

20 Pg 18 of 25 1 to the OIG, the particular individual from the SEC or what 2 other saw or what other saw or what other funds did in the 3 industry, that s not relevant as to what Mr. Merkin saw. 4 This is subjective. Your Honor said the first prong is 5 subjective. 6 And I think with the experts, there -- and 7 particularly on the bench trial, the Court seems to be 8 inclined based on the motions in limine we argued last time 9 to just let it in. And I, as the fact-finder, can make 10 those determinations. And we don t dispute. We agree with 11 you that you could. But the parties here have had seven 12 years of discovery. They -- and expert discovery. We ve we re on the 15th, 16th, or 17th case management plan. It s 14 been extended so the parties can complete expert discovery. 15 There have been no complaints that either party could not 16 get -- could not or did not have a fair and ample 17 opportunity to prepare their expert reports or to work with 18 their expert. 19 So, now it s for the Court to determine in advance 20 of trial whether Mr. Weingarten and each of the experts has 21 met the requirements of Rule 702 and Daubert, whether there 22 is a reliable, verifiable methodology and analysis. And 23 regardless of the fact that his is a bench trial, this Court 24 is empowered to act as a gatekeeper. Page I trust -- if you d give me just one more minute,

21 Pg 19 of 25 1 Your Honor, in -- recently in State of New York v. United 2 Parcel Service, Judge Katherine Forrest in a bench trial -- 3 it s at 2016 Westlaw It s a September opinion. Judge Forrest in a bench trial considered the 5 parties respective motions to strike all the experts. The 6 plaintiff s experts were excluded, not only because he 7 lacked qualification but also because he failed to identify 8 a reliable methodology, failed to clarify a time period 9 during -- relevant to his analysis, and failed to identify 10 the data that he analyzed to come to his conclusion. 11 In her opinion in excluding that expert testimony 12 and preventing the other to go forward, the -- Judge Forrest 13 said, The Court s experience as a gatekeeper in this regard 14 does not, however, mean that the fact a matter may be 15 charged to the bench signals a free-for-all use of the 16 expert witnesses. There s an obvious efficiency gains there are obvious efficiency gains in precluding testimony 18 from an individual unqualified to take the stand or one who 19 is providing testimony that is plainly irrelevant or is 20 based -- or, if relevant, is based on unreliable methods. 21 Such testimony is a waste of everyone s time. But the 22 efficiency is not the sole reason for the Court to make a 23 pre-trial decision on Daubert motions. Page Pre-trial rulings can enhance fairness as well as 25 efficiency in forming sensible trial adjustments. Pre-trial

22 Pg 20 of 25 1 (indiscernible) are to assess the risk-reward profile of the 2 case on a real-time basis. If a Court will preclude an 3 expert, it is generally better to sooner than later, simply 4 putting fair warning on the value. 5 And I would submit that, in opposite to Dr. 6 Pomerantz, Mr. Weingarten has not met the requirements of 7 Rule 702 and he should be exclude from trial. 8 THE COURT: Thank you. 9 MR. LEVANDER: What Mr. Weingarten has testified 10 to is that in this period of time, methodology of doing due 11 diligence was the (indiscernible) piece. A THE COURT: Well, that s what the goals or the 13 (indiscernible) that you looked into. But the argument is 14 he didn t say what he did in order to look into it. 15 MR. LEVANDER: No. So, what he did then was and Mr. Pomerantz doesn t disagree that that s the 17 appropriate standard, the five P s, and that he, Mr. 18 Pomerantz, did it that way himself. And what he said, based 19 on his 40 years of experience and hundreds of due diligence 20 examinations, either as the subject of it or doing it, that 21 the things that Mr. Merkin did satisfied the standards that 22 then existed with -- or exceeded those standards with regard 23 to each of the five P s. 24 THE COURT: Is that everything that Merkin did in 25 Mr. Weingarten s report? Page 36

23 Pg 21 of 25 1 MR. LEVANDER: I don t know the answer to that 2 question, Your Honor. I think that Mr. Weingarten 3 definitely knew things that may not be in that report. But 4 he -- 5 THE COURT: But that s the issue that s being 6 raised. 7 MR. LEVANDER: Let me -- 8 THE COURT: That -- you know, that he shouldn t be 9 able to supplement his report by coming to trial and 10 expanding it. 11 MR. LEVANDER: -- no. What -- you know, what she 12 complained about, for example, was he said there were lots 13 of managers who did better than Madoff and that the returns 14 were plausible, and therefore when Mr. Merkin believed that, 15 that s consistent with his 40 years and his knowledge. She 16 deposed him on it. Give me some managers. And he gave 17 names of those managers. 18 That s what they re supposed to do. If they 19 didn t like the report, they shouldn t have taken his Page deposition and waited a year and then said, Oh, gee, we 21 don t know. And if the standard is the one they ve just 22 laid out for you, Mr. Pomerantz testified that he looked at 23 less than 10 of the confirmations out of the thousands of 24 confirmations and he can t remember which ones. So, that s 25 our problem. And then Mr. Pomerantz goes, too. What s good

24 Pg 22 of 25 1 for the goose is good for the gander. 2 But the point here is that what Mr. -- his 3 expertise is, is that it didn t -- you didn t have all these 4 mathematical tests. You actually asked questions consistent 5 with the questionnaire, a document that Mr. Pomerantz relied 6 on that Mr. Weingarten was familiar with, that that has 7 questions. And those questions are tied into the six -- the 8 five P s. And Mr. Merkin assiduously tried to get answers 9 to those five P s. And he did his homework in the way that 10 it was done in those times. 11 Now, you know, the fact that there isn t a -- you 12 know, a mathematical calculation about that but it was, you 13 know, interfaced, but, you know, Mr. Merkin, the testimony 14 will show, brought in lots of sophisticated investors to 15 meet with Madoff and they asked the same kind of questions. 16 They had the same kind of due diligence. And they were 17 sophisticated people, too, people from, you know, the best 18 firms on Wall Street, banks, and you ll hear all about that. 19 It seems to me that Mr. Weingarten s testimony 20 clearly satisfies Rule 26, clearly satisfies 702, and Your 21 Honor has to make a decision as to whether or not you want 22 to hear about all kinds of mathematical charts and the 23 cross-examination on those charts that s not relevant. 24 That s the Pomerantz issue. 25 THE COURT: All right. Thank you. Page 38

25 Pg 23 of 25 1 MS. HOANG: Your Honor, if I can just have a few 2 minutes, very quickly. A lot of what Mr. Levander said is are disputed facts. Those facts will be before Your Honor 4 whether through Mr. Merkin or through other witnesses in 5 this case, and that s for Your Honor to decide. As to what 6 his -- what he said about the deposition, I could -- I did 7 ask him about the managers and he named off a few, but it s 8 not my duty -- job to further expand on what is in his 9 report or what is not in his report, and Your Honor, I 10 direct your attention to those reports and the documents. 11 Consider there is no managers listed. There s nothing in 12 there. It s not my job to do what he -- they should have 13 done consistent with Rule And then, just to address one last point, they 15 keep ask -- saying that, you know, Mr. -- or that the 16 standards at the time didn t require you to do the 17 quantitative analysis that s set forth, the different types 18 of tools that are set forth in Dr. Pomerantz s report. 19 Well, they did. As -- they did because they were available. 20 You see that from the (indiscernible) document in In 1996, 97, there were AIMA standards. And the 22 questions in the AIMA standards don t -- excuse me -- don t 23 specifically lay out all of those tools. But as Dr. 24 Pomerantz responded to during his deposition on a pointed 25 question regarding, well, where is it in the AIMA, he Page 39

26 Pg 24 of 25 1 responded that, Well, it s not identified specifically, but 2 to get to each of those answers to the topics that are 3 raised in there, you have to perform quantitative analysis. 4 It talks about draw-down. You have to perform 5 quantitative analysis based on what you know the returns are 6 on the fund to figure out if -- how much money that the fund 7 was down during particular months. He said -- I mean -- if 8 you -- I m sorry -- that he goes through the AIMA 9 questionnaire and says, Yeah, for each of these you have to 10 perform quantitative analysis. 11 So, I don t think it s correct to keep repeating 12 that, well, the AIMA standards -- in 1997 they didn t 13 require you to do quantitative analysis. You see it in the 14 (indiscernible) document in 1995 that was available and that 15 people were doing it, that Mr. Merkin had it in his 16 possession. 17 THE COURT: I reserve decision on this one. I 18 have a serious question about the relevance of virtually all 19 of this due diligence testimony for the reasons I ve stated, 20 but I ll consider it in connection with both experts. 21 MR. LEVANDER: Can I have a one-sentence THE COURT: One sentence. 23 MR. LEVANDER: -- one sentence. How is it Page possible that he can be qualified as an expert when he says 25 that it s not in the AIMA report and he didn t do it at that

27 Pg 25 of 25 1 C E R T I F I C A T I O N 2 3 I, Sonya Ledanski Hyde, certified that the foregoing 4 transcript is a true and accurate record of the proceedings Sonya Ledanski Hyde Old Country Road 22 Suite Mineola, NY Date: August 11, 2016 Page 81

28 smb Doc Filed 03/01/18 Entered 03/01/18 16:39:47 Exhibit 2 Pg 1 of 10 EXHIBIT 2

29 smb Doc Filed 03/01/18 Entered 03/01/18 16:39:47 Exhibit 2 Pg 2 of 10 Picard v Merkin Jeffrey Weingarten 7/15/2015 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Page x In Re: BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Debtor x IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, Plaintiff, v. J. EZRA MERKIN, GABRIEL CAPITAL, L.P., ARIEL FUND LTD., ASCOT PARTNERS, L.P., GABRIEL CAPITAL CORPORATION, Adv.Pro.No (BRL) Adv.Pro.No (BRL) Defendants x * * * VIDEOTAPED DEPOSITION OF JEFFREY M. WEINGARTEN * * * TRANSCRIPT of testimony as reported by NANCY C. BENDISH, Certified Court Reporter, RMR, CRR and Notary Public of the State of New York, at the offices of Baker Hostetler, 45 Rockefeller Plaza, New York, New York, on Wednesday, July 15, 2015, commencing at 10:10 a.m. BENDISH REPORTING

30 smb Doc Filed 03/01/18 Entered 03/01/18 16:39:47 Exhibit 2 Pg 3 of 10 Picard v Merkin Jeffrey Weingarten 7/15/ A P P E A R A N C E S: 2 BAKER HOSTETLER, LLP 3 45 Rockefeller Plaza New York, New York BY: LAN HOANG, ESQ. GANESH KRISHNA, ESQ. 5 AMANDA E. FEIN, ESQ. For Irving H. Picard, Trustee 6 7 NORTON ROSE FULBRIGHT Fulbright & Jaworski, LLP Fifth Avenue New York, New York BY: JUDITH A. ARCHER, ESQ. JAMI MILLS VIBBERT, ESQ. 10 For Ascot Partners LP 11 DECHERT, LLP Avenue of the Americas New York, New York BY: NEIL A. STEINER, ESQ. DAPHNE T. HA, ESQ. 14 For Gabriel Capital Corp. and J. Ezra Merkin ALSO PRESENT: 17 HANNA MILLER, Norton Rose 18 NIKI IKAHIHIFO-BENDER, Norton Rose KEVIN FRANK, Videographer Page 2 BENDISH REPORTING

31 smb Doc Filed 03/01/18 Entered 03/01/18 16:39:47 Exhibit 2 Pg 4 of 10 Picard v Merkin Jeffrey Weingarten 7/15/ THE WITNESS: I'm sorry, sorry, Page sorry. 3 Q. Did you review more transcripts 4 than that are set forth on the documents 5 considered list in the preparation of your 6 report in this matter? 7 A. Not that I remember, no. 8 Q. Are you aware of the number of 9 depositions that have been taken in this matter? 10 A. No, I am not. 11 Q. Other than the transcripts that 12 are set forth on this list, were other 13 transcripts made available to you? 14 MR. STEINER: Objection to form. 15 A. Was there a supplemental list? 16 When was this list submitted with documents? 17 Q. This was the list that was 18 appended to your expert report dated March 19, A. I don't remember if I read any 21 transcripts subsequent to this. I think I read 22 the transcript of the deposition of 23 Mr. Pomerantz. 24 Q. Okay. But that was subsequent to 25 the issuance of this report; is that correct? BENDISH REPORTING

32 smb Doc Filed 03/01/18 Entered 03/01/18 16:39:47 Exhibit 2 Pg 5 of 10 Picard v Merkin Jeffrey Weingarten 7/15/ Q. Anything else? Page A. No. It's stuff that I would have 3 read in here. 4 Q. I just want to put on the record 5 the representation that the Bates numbers for 6 the Trustee's exhibit for Mr. Merkin's Madoff 7 file do match the Bates numbers that are set 8 forth in your documents considered list, the 9 supplemental list that was provided to us. 10 In the Madoff file can you take a 11 look at, it's a document that's Bates numbered A. Are these in any kind of order? 14 Q. They're in order by Bates number 15 on the bottom right-hand corner. 16 A. Everything I have is MR. STEINER: A What's the number again, 19 please? 20 Q A This is comparing Promeo 22 Manager Series B and the S & P? Is that? 23 Q. Yes. 24 A. Okay. 25 Q. Do you recall reviewing this BENDISH REPORTING

33 smb Doc Filed 03/01/18 Entered 03/01/18 16:39:47 Exhibit 2 Pg 6 of 10 Picard v Merkin Jeffrey Weingarten 7/15/ document in connection with the preparation of Page your report? 3 A. I don't remember it exactly, 4 but... 5 Q. You want to take a few minutes to 6 take a look at it? 7 A. Okay, I'm looking at it now. 8 Q. Does it refresh your recollection 9 that you took a look at it in connection with 10 your report? 11 A. Frankly, it looks like a lot of 12 other things that I would have read in 13 connection. I can't specifically recall this 14 one, but... as you can imagine, I don't know how 15 many pages are in this thing, hundreds, so I 16 can't right now recollect actually looking at 17 this one, but I've certainly seen a number of 18 things that show returns on a portfolio that was 19 either Madoff's or Merkin's or somebody else. 20 Q. Can you take a look at -- I'm just 21 going to give you, it's the second page and the 22 bottom Bates range is , I'm 23 sorry. 24 A. 3215, okay. 25 Q. Do you see the chart at number 1? BENDISH REPORTING

34 smb Doc Filed 03/01/18 Entered 03/01/18 16:39:47 Exhibit 2 Pg 7 of 10 Picard v Merkin Jeffrey Weingarten 7/15/ switched to the Big Eight firms. Page As I said, when it became an 3 attractive enough and large enough business, 4 then some of the Big Eight firms started looking 5 at it and some of the big law firms started 6 looking at it. But at the beginning of the 7 hedge funds there were specialty law firms that 8 just did hedge funds, there were specialty 9 accounting firms that just did hedge funds. 10 Q. Are you aware of the Bayou Ponzi 11 scheme? 12 A. Not very familiar with it, no. 13 I'm aware of just the name but I'm not very 14 familiar with it. 15 Q. Are you aware of when the Bayou 16 Ponzi scheme, the time frame that the -- strike 17 that. 18 Are you aware of when the Bayou 19 fund Ponzi scheme occurred? 20 A. You'd have to refresh my memory. 21 I was not in -- I was not working in the U.S. at 22 the time, so I would have been familiar with it 23 but you'd have to refresh my memory on the date. 24 Q. Okay. I'm going to represent to 25 you that it was exposed in BENDISH REPORTING

35 smb Doc Filed 03/01/18 Entered 03/01/18 16:39:47 Exhibit 2 Pg 8 of 10 Picard v Merkin Jeffrey Weingarten 7/15/ Are you aware that after the Bayou Page fund was exposed as a Ponzi scheme Mr. Merkin 3 sent an out regarding due diligence steps 4 for fund managers? 5 MR. STEINER: Objection to form. 6 A. I'm not familiar with the exact 7 timing as you discussed it, but if I saw the 8 document, it might refresh my memory. 9 Q. If you -- so you're not aware of 10 the particular document itself? 11 A. As I said, I'm not aware of, that 12 there was -- I don't recall that there was a 13 document sent out by Ezra Merkin that was 14 immediately following the identification of a 15 Ponzi scheme. I just haven't connected the two. 16 As I said, the Bayou thing was not 17 something, since I was living abroad at the time 18 and I was running a hedge fund, it was probably 19 something at the time that I was aware of but 20 not something that dramatically changed my life. 21 Q. Okay. If Mr. Merkin had said in 22 that to verify the auditors, had 23 cautioned -- strike that. 24 If Mr. Merkin had said in that 25 to verify the auditors in his advice to BENDISH REPORTING

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37 smb Doc Filed 03/01/18 Entered 03/01/18 16:39:47 Exhibit 2 Pg 10 of 10 Picard v Merkin Jeffrey Weingarten 7/15/ REPORTER'S CERTIFICATION 2 3 I, NANCY C. BENDISH, a Certified 4 Court Reporter and Notary Public of the States 5 of New York and New Jersey, do hereby certify 6 that prior to the commencement of the 7 aforementioned examination JEFFREY M. WEINGARTEN 8 was sworn by me to testify the truth, the whole 9 truth and nothing but the truth. 10 I DO FURTHER CERTIFY that the 11 foregoing is a true and accurate transcript of 12 the testimony as taken stenographically by and 13 before me at the time, place, and on the date 14 hereinbefore set forth. 15 I DO FURTHER CERTIFY that I am 16 neither a relative nor employee nor attorney nor 17 counsel of any party in this action and that I 18 am neither a relative nor employee of such 19 attorney or counsel, and that I am not 20 financially interested in the event nor outcome 21 of this action Notary Public of the State of New York Dated: July 16, 2015 Page 258 BENDISH REPORTING