UNITED STATES SECURITIES AND EXCHANGE COMMISSION

In the Matter of:           }
                            } Volume II
REED SLATKIN AND ASSOCIATES } File No. LA-1961


WITNESS:  Reed E. Slatkin

PAGES:    156 through 338

PLACE:    Securities and Exchange Commission
          5670 Wilshire Boulevard
          Los Angeles, California

DATE:     Wednesday, February 2, 2000


     The above-entitled matter came on for hearing at 10:0[7?]
a.m., pursuant to notice.

APPEARANCES:

On behalf of the Securities and Exchange Commission:


     ANDREW J. DUNBAR, ESQ.
     MARTIN J. MURPHY, ESQ.
     Securities and Exchange Commission
     Office of Enforcement
     5670 Wilshire Boulevard, 11th Floor
     Los Angeles, California 90036
     (323) 963-3985

On behalf of the Witness:


     GERALD E. BOLTZ, ESQ.
     Bryan Cave, LLP
     120 Broadway, Suite 500
     Santa Monica, California 90401-2305
     (310) 576-2134




                                                                      Page 157

                                    CONTENTS



WITNESSES:                                               EXAMINATION



Reed E. Slatkin                                                   159


EXHIBITS:                DESCRIPTION                  IDENTIFICATION



31                       Copy of check to Rakow,

                         dated 10/11/99                     290

32                       1/22/00 letter from Rakow          29[2]

33                       Gibbs quarterly statement,

                         dated 10/13/99                     29[5]

34                       Schedule 1, Certified Public

                         Accountant and Independent

                         Contractors                        29[9]

35                       Independent contractors

                         agreement for O[w]ens             305

36                       Copies of 5 checks                 30[8]

37                       Copies of 4 checks and 

                         one deposit slip                   311

38                       Account value, 

                         Montgomery Securities              316

39                       Wire transfer, dated 12/24/98      320

40                       Wire transfer, dated 6/29/99       322

41                       Wire transfer, dated [8]/24/99     323

42                       Wire transfer, dated 6/23/99       324



                                                                      Page 158

1                       PROCEEDINGS

2        MR. DUNBAR:  We are on the record at 10:0[7?], on

3   Wednesday, February 2nd, 2000.  I am Andy Dunbar and with me

4   is Martin Murphy.  We are officers of the Commission for

5   purposes of this proceeding.

6        We are today resuming the examination of Mr. Reed

7   Slatkin, which was adjourned on January 21st, 2000.  Mr.

8   Slatkin, are you represented by counsel today?

9        THE WITNESS:  I am.

10       MR. DUNBAR:  Would counsel please identify himself?

11       MR. BOLTZ:  Yes, Gerald E. Boltz with the Bryan

12  Cave law firm, Santa Monica, representing Mr. Slatkin

13  individually.

14       MR. DUNBAR:  Testimony today is pursuant to a

15  Commission subpoena, dated December 13th, 1999, which has

16  been previously marked as Exhibit Number 2.  Mr. Slatkin, do

17  you understand that you remain under oath?

18       THE WITNESS:  I do.

19  Whereupon,

20                    REED E. SLATKIN

21  having previously been duly sworn, was called as a witness

22  herein, and was examined and testified further as follows:

23       MR. DUNBAR:  Let the record reflect that a copy of

24  the Formal Order of Investigation in this matter will be

25  available for examination during the course of the



                                                                      Page 159

1   proceeding.

2        THE WITNESS:  Okay.

3               EXAMINATION

4         BY MR. DUNBAR:

5     Q  First I would like to just do some quick follow-up

6   from last time.  With regards to the bank accounts, I know [you]

7   did not have the account numbers for the two different bank

8   accounts.  And I have them right here, just so if we want to

9   refer to the bank accounts we could refer to them as the last

10  four numbers of the account.  It might make it easier during

11  this examination.

12    A  Okay.

13    Q  I believe last time we were referring to them as

14  your personal account and your friends account.

15    A  Right.

16       MR. BOLTZ:  You are referring to the Union Bank, I

17  think.

18       BY MR. DUNBAR:

19    Q  The two Union Bank accounts -- the Union Bank

20  personal account, account number 0630057574 and the Un[ion]

21  Bank friends account 0630057582.  Does that sound correc[t?]

22    A  Yes.

23    Q  And also last time, with regard to bank accounts,

24  we discussed bank accounts that you currently had open.  [We?]

25  were not able to get to the question of what bank accounts



                                                                      Page 160

1   have you had in the last ten years that have been closed?

2        MR. BOLTZ:  That is your question.

3        THE WITNESS:  Yeah.  I take it that you are asking

4   me which ones I -- which ones have been closed.

5        MR. DUNBAR:  Correct.

6        THE WITNESS:  I'm trying to recall, as we spoke

7   last time, about the fact that some of these banks bought

8   other banks that I've been part of.  And, so, it's sort of a

9   natural flow from bank to bank.  We've been pretty

10  consistently with the banks I gave you.

11       If there were closed accounts I can recall just two

12  scenarios where that would happen.  One is if we were -- the

13  bank we were involved in was bought by another bank, in which

14  case the account would be closed; a new number would be 

15  assigned.  And then, in the Union Bank or in Bank of

16  California, before it merged with Union Bank, we did have a

17  theft of some checks at one point, and we did close those

18  accounts and new numbers were issued.  But I believe the

19  continuity of the relationship was unchanged.  So, outside of

20  that, I don't think -- I don't recall closing -- in the last

21  ten years anyway -- don't recall closing any other accounts.

22       BY MR. DUNBAR:

23    Q  In the accounts where you said the checks were

24  stolen was that the Union Bank accounts?

25    A  This is Bank of California.



                                                                      Page 161

1     Q  And that was recently -- which was then bought by

2   Union Bank?

3     A  Right.

4     Q  So, the two numbers got changed about a year or

5   three years ago maybe?

6     A  Yeah, it could have been longer than that ago.  I

7   mean, I think we could -- if you would like us to go back we

8   could find all of that transitions for you.  It's not hard.

9   We've been pretty stable with that bank pretty much for the

10  whole time.

11    Q  And, also, a lot of times with -- since we have

12  already done testimony once I may summarize what was said

13  last time.  I just want to make clear I am in no way trying

14  to misstate what you said.  If I say anything that you think

15  that does not sound right or is wrong, just please let me

16  know.

17    A  I will.  I'd like to have the transcript sometime

18  too.

19    Q  Yeah, we have not received the transcript.

20    A  Okay.

21       MR. MURPHY:  Did you give us an order for the

22  transcript?

23       MR. DUNBAR:  Yes, he did.

24       MR. BOLTZ:  We did, yeah.  I just want to be sure,

25  I do not remember the last time he mentioned the  



                                                                      Page 162

1   Golden Pacific Bank, Pacific Century or Network Bank but

2   those were all banks that previously had been in Pacific

3   Century.  Or maybe I mentioned it.

4        THE WITNESS:  I think we went over those last time,

5   as they had changed their names.

6        MR. BOLTZ:  Yeah, okay.

7        THE WITNESS:  You know, this was Lincoln something

8   or other.  This one was Golden Pacific.  Again, there's a 

9   continuity there.

10       MR. BOLTZ:  I think they were mentioned last time,

11  but I --

12       THE WITNESS:  Yeah, I think so too.  I don't

13  remember.  There's an example of these banks would get

14  bought, and then they'd change their name so they'd be --

15  change ownership.

16       MR. BOLTZ:  Yeah, that is right, I have notes that

17  -- okay.

18       BY MR. DUNBAR:

19    Q  Last time, also, you mentioned that you did not

20  have any professional licenses.  Have you ever taken a Series

21  2 test --

22    A  No.

23    Q  -- with the NASD?

24    A  Ever?

25    Q  Ever.



                                                                      Page 163

1     A  I did take a -- it might have been a Series 2, it

2   might have been.

3     Q  Do you recall what --

4     A  Well, I don't remember exactly when.

5     Q  Do you remember why?

6     A  Yeah.  I had a relationship with an advisor.  This

7   is 1987.  And I think I took the test for that reason.

8     Q  Have you taken any other NASD tests?

9     A  Un-uh.  (Negative response.)

10    Q  And what was this relationship with this advisor?

11    A  I was hired to help them with their portfolio.

12    Q  Who was that advisor?

13    A  It was called Statistical Sciences.

14    Q  And when did you get hired by them?

15    A  1987, I believe.

16    Q  And how long did you work for them?

17    A  A little over a year.

18    Q  Why did you stop working for them?

19    A  They were in Los Angeles and I was in Santa

20  Barbara.  It was just too hard.

21    Q  And how did you get hired there?

22    A  It was an introduction from a mutual acquaintance,

23  I think.

24    Q  Do you recall who the acquaintance was?

25    A  I think it was Mr. Levine -- knew about them.  I



                                                                      Page 164

1   think I mentioned him last time.

2     Q  Richard?

3     A  Yes.

4     Q  And why did you apply for a job at Statistical

5   Sciences?

6     A  I didn't really apply.  They asked me.

7     Q  And what were your job duties?

8     A  I was involved in portfolio management.

9     Q  For your whole length of employment?

10    A  Yes.

11    Q  And what exactly did that entail?  Like day to day,

12  what was your day to day --

13    A  Well, I just want to ask Gerry just kind of a

14  stupid question.

15       (Witness and counsel confer.)

16       MR. DUNBAR:  We can go off the record.

17       (Whereupon, a brief recess was taken.)

18       MR. DUNBAR:  Back on the record.

19       THE WITNESS:  Just a clarification.  I had done

20  some extensive computer modeling of the stock in the middle

21  '80's.  And they were interested in that particular aspect as

22  it applied.  So, I would use that modeling to recommend

22  potential investments.

24       BY MR. DUNBAR:

25    Q  How did they find out about the computer modeling?



                                                                      Page 165

1     A  I told them.

2     Q  Do they still use your computer modeling?

3     A  I have no idea.

4        MR. BOLTZ:  Are they still in business?

5        THE WITNESS:  I'm not even sure.  I don't know.

6        BY MR. DUNBAR:

7     Q  And when you say you did computer modeling in the

8   mid-'80's was this for yourself?

9     A  Uh-huh.  (Affirmative response.)

10    Q  And what was this type of computer modeling?

11    A  Well, in 1984, I believe, I read a book by a

12  gentleman named Larry Williams.  Do you know him?

13       MR. MURPHY:  I have heard the name.

14       THE WITNESS:  He's a semi-famous commodities

15  mathematician.  And, as you probably know, over the years

16  there's a whole industry built up about guys who think they

17  can use computers to make money in the stock market, right.

18  So, back then there weren't very powerful computers that

19  little guys could -- you know, individual guys could use.

20  But I read a book of his and I thought, gee, it would be

21  interesting to apply this to stocks, some of his theories.

22  So, I found a computer programmer, and I went over the

23  material with him, from the book, and said I wonder if we

24  could create a model that would take these particular price

25  and volume patterns and look for these -- we call them signal



                                                                      Page 166

1   points.  And, so, I had the software written to do that, and

2   I had a little Compaq computer.  It's about the size of this

3   -- maybe bigger, but a little screen.  And we put the Dow

4   Jones stocks in there and we did a computer sort against our

5   signals.

6        And it was -- it took all night long to do three of

7   these for 50 stocks or so, right.  And we'd come in in the

8   morning, all excited, and we'd see a buy signal or a sell

9   signal, you know, on some stock.  And, so, we started to test

10  this and see if -- you know, and it was interesting

11  because it seemed to have some efficacy.

12       So, over the next two or three years I spent a lot

13  of time developing more software that would allow us to have

14  more stocks and more signals.  And I combined some -- what I

15  would call vanilla -- technical analysis tools, like moving

16  averages, end of day highs and lows, relative strength

17  indexes, and put them on this computer.  And at that time --

18  nowadays you can buy this stuff off the shelf for fifty

19  bucks, you know.  In those days it was really unique.  And I

20  felt that it had a great deal of efficacy in showing where

21  there was interest in particular stocks.  And I found it to

22  be a useful tool in making money, okay.

23       It was just a model.  I didn't -- it was raw

24  mathematics.  And during the middle '80's, if you recall --

25  not to get too much into this -- but there was a certain



                                                                      Page 167

1   amount of -- there was a kind of expansion of the amou[nt of]

2   information that was available.  The structures, research 

3   facilities in many of the big firms -- I think Charles Sch[wab]

4   started during this time -- and the market went from a vo[lume?]

5   of something on the order of, you know, 20- to 30- or 40

6   million shares up to 60-, 80-, 90-, 100 million shares.

7   Sometimes you had a 200,000,000-share day.  It was

8   remarkable.

9        This led to an interest in these kind of models.

10  And I think that just having the model and -- it was

11  interesting to these folks.  When they met me they thoug[ht it]

12  was really fascinating.  And it was efficacious.  It wasn'[t -]

13  - I wouldn't have hung my hat on every single line of it, [but?]

14  it was efficacious, and it did give us a pretty good idea o[n?]

15  entry and exit ideas.

16       Nowadays you can look on -- I know you can pro[bably?]

17  look on Motley Fool or Yahoo and just pull up a chart o[n a?]

18  stock.  But back in 1986, you couldn't do that.  You co[uld?]

19  not do that.  And we had that.

20       BY MR. MURPHY:

21    Q  Did the O'Neil firm have stock charts back th[en?]

22    A  That's an interesting question.  I was just about

23  to mention the O'Neil firm.  Do you know him?  He's [an]

24  interesting guy.

25    Q  Just know the paper and his publications, just



                                                                      Page 168

1   vaguely.

2     A  Yeah, he's a real pioneer in this industry.  And we

3   were very fascinated with some of the tools that he had

4   developed on his charting.  And I, to this day, subscribe to

5   his chart books.  I still think he's very good.

6     Q  Were they available back then?

7     A  Uh-huh.  (Affirmative response.)

8     Q  They were?

9     A  Just starting.  Yeah, I think they were just

10  starting.  I was getting his chart books back then, yeah.

11  The difference, of course, is with nowadays I think you can

12  get him online, I'm pretty sure.  I think he's probably had

13  to really switch his business.  But we were doing this every

14  day, and his books, I think, came out weekly and monthly, if

15  I remember correctly.  The blue one was the New York Stock

16  Exchange, the green one was the American Stock Exchange, and

17  then he started adding Nasdaq stocks.  And he would have --

18  show you when the dividends came and stock splits.  And he

19  was very useful in sort of organizing the way we built our

20  charts.  I was going to mention his name.  So, have I given

21  you a thorough answer here?

22       BY MR. DUNBAR:

23    Q  Did you have a name for this program?

24    A  Let's see, we called it the Base Plate.

25    Q  Did you make any other programs?



                                                                      Page 169

1     A  No, this had some evolution, you know, over the

2   years.  It's now quite a bit more complex than it was in

3   1986-87.

4     Q  Do you currently use it?

5     A  I do.

6     Q  And you said you found a programmer.  Who is the

7   programmer?

8     A  His name is Jeff Donovan.  I believe you have his

9   name under one of my independent contractors.

10    Q  Does he still do work for you?

11    A  He still does do -- yes, he maintains the program

12  for me.

13    Q  And I also want to go back to the Mindful Partners

14  account in San Rafael.  When was that account opened?

15    A  Three or four years ago.

16    Q  And what was the purpose of that account?

17    A  I had heard that Mr. Ruddick was a good money

18  manager.

19    Q  I am sorry, who is this?

20    A  Stu Ruddick runs it.  Stuart Ruddick is the

21  gentleman who runs the account.

22    Q  How do you spell his last name?

23    A  I think it's R-u-d-d-i-c-k.  I heard he was a good

24  manager and opened an account with him.

25    Q  And you said about two or three years ago?



                                                                      Page 170

1     A  I think it was in '96 or '97.

2     Q  And does he manage the account?

3     A  Uh-huh.  (Affirmative response.)

4     Q  Do you have any say in the --

5     A  Un-uh.  (Negative response.)

6     Q  How much money do you have in that account?

7     A  I would think -- it's easy to find out, I just

8   have to call my office and ask.  I don't pay too much

9   attention.  I think there's about $1,300,000 in it, something

10  like that.  Easy to get you the statement if you want it.

11    Q  That is okay.  And how did you hear of Stu Ruddick?

12    A  I don't know exactly.  I might have heard of him

13  through one of -- I think he was a friend of one of the

14  people that I met during my experience with EarthLink, I

15  think.  Somebody knew him and recommended him.

16    Q  And back to the Union Bank accounts, one is the --

17  the 7582 account is strictly for your friends' money?

18    A  That's correct.

19    Q  And the money that goes into the account, what type

20  -- what money would go into the account?

21    A  Deposits from my friends and -- I think that's

22  basically -- that's the bulk of it.

23    Q  Would there be any other deposits for any other

24  reasons in that account?

25       MR. BOLTZ:  Probably in the liquidation process



                                                                      Page 171

1   that you are talking about --

2        THE WITNESS:  Oh, yeah, yeah, I'm sorry.

3        MR. BOLTZ:  --there are other deposits from NAA?

4        THE WITNESS:  Yeah, I would put money in -- when

5   liquidations take place money would go into that account to

6   liquidate, definitely.

7        BY MR. DUNBAR:

8     Q  From NAA?

9     A  Yeah.

10    Q  From any other sources?

11    A  That's basically it.  I'm just trying to -- any

12  other sources, you know.  I think from time to time there's

13  been probably a --

14       MR. BOLTZ:  Essentially, that is it, or were there

15  others?

16       THE WITNESS:  Well, I mean, essentially, if I'm

17  making a liquidation and the money has to be there, it gets

18  there.  That's the point.

19       BY MR. DUNBAR:

20    Q  Do you ever put money in that account from friends

21  who you do not invest money for?

22    A  No.

23    Q  And you also mentioned before that if there is a

24  mistake, sometimes money will go back over?

25    A  Right, right.



                                                                      Page 172

1     Q  And with the withdrawals, what have you withdrawn

2   the money out of the 7582 account for?

3     A  For requests of money and for liquidations.

4        MR. BOLTZ:  From the friends?

5        THE WITNESS:  From the friends, yeah.

6        BY MR. DUNBAR:

7     Q  Do you ever refer to your friends as investors?

8     A  Well, I'm not trying to -- I'm happy to use

9   whatever term you think you'd like to use for conversation.

10  I mean, the point here was this account was used to ensure

11  that the records were clear on who was -- you know, that this

12  was not my money.

13    Q  I will use whatever term you want to use.  It is

14  just a matter of --

15    A  I mean, I'm not trying to -- I mean, I used the

16  word friends because that's how I look at it, but if you want

17  to use investors, that's fine.

18    Q  Okay, other than money that has been sent out in

19  liquidation to your friends, what other -- any other

20  withdrawals?  And the mistake.

21    A  That's it, unless you've got a specific question.

22    Q  Okay, now, start from the beginning.  When -- can

23  you just kind of explain, starting from Meyer, when you first

24  met Meyer -- actually, I believe you said in 1983 you wanted

25  to do a career change.  You were currently working full-time



                                                                      Page 173

1   as a volunteer for the Church of Scientology.  You were

2   getting honoraria from some of the people to continue.  And

3   then you said you wanted to make a career change.  And you

4   met -- then that was in '83, I believe you said -- and then

5   in 1986 you met Robert Duggan.

6     A  No, I met him around -- no, I had met him.  If i

7   say '86 that's a mistake.  If I had the transcript here we

8   could check it carefully, but that's not exactly what

9   occurred.

10    Q  Okay, we will start 1983, you said --

11    A  I can reprise this for you, if you like.

12    Q  Yeah, that is fine.

13    A  Okay, very happy to do it.  During my time when I

14  was working as a volunteer and as a counselor, I said that I

15  wanted -- I had two young children and I wanted to enhance my

16  income, and I had met Mr. Duggan, who is also a

17  Scientologist.  I probably met Mr. Duggan in 1979 or '80, or

18  something like that, I think is what I told you.  And then he

19  offered me -- to show me stock market investing.  And I 

20  probably started doing that in earnest with him in '84 -- not

21  '86, '84.  So, if I said '86 it was incorrect.  But he had

22  been showing me things probably even a little earlier than

23  that.  I don't know, I couldn't give you the exact date.  But

24  during that '84 period was the main period.

25    Q  Before you met Mr. Duggan had you invested in the



                                                                      Page 174

1   stock market?

2     A  No.

3     Q  And in 1983 what was your net worth at that time?

4     A  Well, it was probably a negative net worth.  I owed

5   my dad the down payment on my house, and my cars were leased

6   or, you know, on payments.  I probably had a negative net

7   worth at that time.

8     Q  With regards to, like, your bank accounts at that

9   time, how much money did you have in your bank accounts would

10  you estimate?

11    A  20- to $30,000 at the most, something like that --

12  maybe 50-.  That depends.  I still maintained an account with

13  my mother at that time, I believe.  She was helping me out

14  with the rent -- you know, with the house payments.

15    Q  And explain your meeting with Mr. Meyer and when

16  that occurred?

17    A  Mr. Meyer is a Scientologist.  Probably met him in

18  -- well, I knew him already; I've known him for years.  We

19  just -- I mean, I've known him since about 1968 or '69.  He

20  was an old friend of mine.  So, I met him at the Scientology

21  college in England.

22    Q  And describe the interaction with him that occurred with

23  regards to investing his money for him.

24    A  Mr. Duggan had a pretty good reputation as a very

25  successful stock investor, and I was his apprentice at that



                                                                      Page 175

1   time; I was working with him.  And we had had some success --

2   I'm answering the question, I think -- we had some success in

3   some of the high tech companies that had come out that I

4   could probably remember a couple of the names for you.

5     Q  You and he did?

6     A  Mr. Duggan and I did, yeah.  Mr. Duggan, yes.  I

7   did some of the leg work, but I was successful in making some

8   money with him.

9     Q  I am sorry, I do not mean to interrupt you, but

10  when you say "with him" did you have an account with hi[m,?]

11  was this in your own account?

12    A  Yeah, I gave him my meager amount of money.  I

13  actually borrowed some money from my parents to do this.

14    Q  To give to Mr. Duggan?

15    A  Yeah.

16    Q  So, Mr. Duggan invested money for you?

17    A  Yes, he had an account for me, yeah.  It was -- you

18  know, that's right.

19    Q  Okay, I am sorry, go ahead.

20    A  Anyway, so I had a very successful, in my mind, run

21  with him and probably made five times on my money in a ve[ry]

22  short period of time.  I could give you the names of the

23  companies if I -- I remember two of them.

24       MR. BOLTZ:  I think his question, really, is being

25  directing to your establishing a relationship, your



                                                                      Page 176

1   relationship with Meyer.

2        THE WITNESS:  Yeah, I know, but this is -- I'm

3   getting there.  I'm not trying to be too roundabout here, but

4   it's important because my association with Mr. Duggan is how

5   Mr. Meyer, who knew both of us, came to me and said -- I

6   think I explained to him what I was doing, and he said I'd

7   like to -- can you help me?  I'd like to do that.  I'm

8   working as a full-time Scientology counselor, and maybe you

9   can -- maybe I can be part of that.  That was, essentially,

10  the conversation.

11       BY MR. DUNBAR:

12    Q  And when was this interaction?

13    A  Sometime in '85, I think, or late '85.

14    Q  Had you already developed the program at this

15  point?

16    A  Not completely.  It was still under -- it was not

17  really developed; it was developing.

18       MR. BOLTZ:  You may need to explain that the Duggan

19  program was more fundamental research.

20       THE WITNESS:  Oh, it was completely, utterly,

21  utterly, oh, yeah.

22       MR. BOLTZ:  -- as opposed to the technical --

23       THE WITNESS:  My little program -- I'm sorry,

24  thanks, Gerry.  My computer program was my own development

25  that I developed over, you know, between '83 and '88, or




                                                                      Page 177

1   whatever, or '87 when it came to sort of fruition.  I was

2   completely trained by Mr. Duggan in 100 percent fundamental

3   analysis; no technical at all.  In fact, he thought it was

4   hocus pocus, that stuff.

5        BY MR. DUNBAR:

6     Q  And how much money did you make with Mr. Duggan?

7     A  I think I made a couple hundred thousand dollars on

8   my original investment over a year and a half, something like

9   that.

10       BY MR. MURPHY:

11    Q  Was this on using fundamental analysis to pick --

12    A  Only, only, only.

13    Q  -- like Graham, Dodd, or whatever it is called?

14    A  Yeah, exactly.  In fact, I have a copy of that

15  book, as a gift from Mr. Duggan, signed by him on the jacket,

16  you know.  May you always use this book.  And it's pretty --

17  I could show it to you; I got it.

18    Yeah, he -- I don't want to waste your time, but

19  that was all made with visiting companies, talking to the

20  analysts, understanding the industries, doing comparative

21  analysis of companies, P/E ratios, understanding the

22  relationship between the suppliers -- and I remember one of

23  the companies was called Tandon Corporation.  It was out here

24  in the Valley.  They made disk drives for computers.  At that

25  time it was a pretty exciting business.  And we came down to



                                                                      Page 178

1   visit him several times and learned about how those drives

2   were made and what the gross margins were for the business

3   and what the number of units they were selling.  I remember,

4   it's all coming back to me now.  They had a big contract

5   coming with IBM, and would IBM, who was just getting into the

6   PC business, would they really use their drives as opposed to

7   somebody else's.  And this was all very exciting, you know,

8   and it turned out they did, and the stock went from $7 to $30

9   over a very short period of time.

10       And another company we invested in was called Dysan

11  Corporation.  A gentleman who ran that company was a

12  wonderful guy.  I can't think of his name right now.  And

13  they made the five and a quarter inch floppy drives.  And we

14  would go up and visit him, and he had some other -- so, that

15  was most of my work with Mr. Duggan; in fact, all of my work

16  was in fundamentals at the time.

17       BY MR. DUNBAR:

18    Q  So, you met Meyer in '85.  He said he would like to

19  get in on this.  And how much money did he give you?

20    A  I don't recall.

21    Q  Can you give an estimate?

22    A  I can probably give you a range.  It was probably

23  $10,000 maybe.

24    Q  And when he gave you this what exactly did you do

25  with the $10,000 -- like where did you put it?



                                                                      Page 179

1     A  Well, at the time I -- I'm going to guess.  I

2   don't recall exactly.  I just know that it was in a --

3   probably it was put in a brokerage account.

4     Q  Can you recall which one?

5     A  It was probably one I maintained at the time.  I

6   don't know where it was.

7     Q  And did you have any sort of arrangement with Mr.

8   Meyer?  Did you guys discuss how you would invest the money,

9   or where it would be, or --

10    A  Yeah, we invented a word called piggyback.

11    Q  And how did you keep his money separate; or, like

12  how did you know which -- how did you guys work out that?

13    A  Well, when I bought shares of a certain stock I

14  bought shares for him and kept a record of it.

15    Q  Would you tell him?

16    A  Yes, yes.

17    Q  Did he ever receive any statements of any sort?

18    A  I think not at the very beginning, but eventually,

19  yes, yes.

20    Q  So, while Meyer had money invested the first couple

21  of months, years?

22    A  Well, let me see how to answer this.  At a certain

23  point in time, and I don't know the exact date, it became

24  apparent to me that it was very good for me to keep extremely

25  accurate records of what was going on here.  And, therefore,



                                                                      Page 180

1   I made sure that on a monthly -- or it might have been

2   monthly even -- I made sure that he received a letter from me

3   giving him the information about the money that he had given

4   me, and where it was, and how much it had grown, or what it

5   was comprised of.

6     Q  And when you came to this point was Meyer the only

7   one with money invested with you?

8     A  No.

9     Q  When you came to this realization how many others

10  were invested with you?

11    A  I would say there were -- well, a dozen or less.

12  That's a guess.

13    Q  And why did you start to think this?

14    A  Well, when you say why do I think I should keep

15  this special record, the separate record?

16    Q  Yeah, when you said you realized it was important

17  for you to keep the --

18    A  Right.  Well, I mean the obvious answer is that,

19  you know, it's people's money.  You know, they want to know

20  what's going on with their money.  And I wasn't -- didn't

21  consider myself to be a stock broker or a manager 

22  particularly.  This was just helping my friends at the time.

23  But the impact that I seemed to be having on these people was

24  extraordinary to me.  Do you want me to explain that?

25       MR. BOLTZ:  Be sure you answer the question while



                                                                      Page 181

1   you are doing it.  In other words, as to why you decided --

2        THE WITNESS:  Because I wanted to ensure that I

3   distinguished what was theirs and what was happening to it.

4   It just seemed to be appropriate to do that.  I mean,

5   sometimes you ask a question and it's like a long,

6   philosophical answer.  He's going to kill me for doing that,

7   but I'm not trying to do that.  It's not so simple.

8        MR. BOLTZ:  You are not in danger.

9        THE WITNESS:  I mean, look, you asked me how I went

10  about that.  You know, that's kind of a -- that's a big

11  question.

12       MR. DUNBAR:  Correct.

13       THE WITNESS:  I thought it was very important to

14  keep the records separate.  That was the answer.

15       BY MR. DUNBAR:

16    Q  And how did you implement this, then?  When did you

17  -- how did you make the records?

18    A  Well, there were particular purchases and sales

19  made on behalf of this person and I reported those.

20    Q  And how did you report them?

21    A  On a piece of paper.

22    Q  I mean, you can be totally detailed on this one if

23  you want.  It is a matter of -- so, you buy a stock.  And

24  would you decide -- how would you decide out of these twelve

25  people who would it go to?



                                                                      Page 182

1     A  It was a percentage issue for me.

2     Q  Can you explain that, please?

3     A  Well, I had learned that, you know -- I was

4   operating on a sort of a 5 percent of the investable capital

5   for a position.  Not clear?

6     Q  Why don't you explain that for me?

7     A  Well, if you have $1,000 or you have $10,000, in

8   order to keep -- for safety purposes you wouldn't put more

9   than 5 percent of that money in one position.  Is that clear?

10    Q  No, it makes sense.

11    A  Yeah, that was my guideline, I guess.

12    Q  Guideline with their money?

13    A  Yes.  My own money too.

14    Q  So, in any one stock they will not have more than 5

15  percent?

16    A  Well, if they went up in value sometimes they would

17  have more than 5 percent, but my initial idea was to have,

18  you know, 5 percent.

19    Q  But would you buy -- you know, let's say you had [?]

20  would you buy just a big chunk of stock and then allocate [?]

21  to their accounts or how did that work?

22    A  I figured out exactly how many shares it would take

23  to make sure that those ratios were kept in tact.

24    Q  And would you invest your own money too, or wou[ld]

25  you pool their money and invest in the stock?



                                                                      Page 183

1     A  I'm not sure I understand.

2     Q  Well, let me try to be clear on this.  We are

3   talking at the point where you decided it was important to

4   keep records, which do you have an estimate of when tha[t]

5   was?

6     A  Eighty-five.  I mean, pretty much -- it would be

7   prior to '86.  I mean, it was pretty much immediate.  I mean,

8   once you had somebody else's money it was important.

9     Q  And when you decided it was important to keep th[ese?]

10  accurate records is this pretty much the same time you o[pened?]

11  up the 7582 account?

12    A  I'm not really clear.  I was thinking about that,

13  since you asked me that last time, and I wasn't -- I don't

14  remember exactly when I opened that.

15    Q  Well, what about the NAA Financial Account?

16    A  That came a few years later.

17    Q  After the Union Bank account?

18    A  Yes

19    Q  So, before NAA Financial which brokerage house[s were?]

20  you using for your friends' money?

21    A  I believe there were two -- to the best of my

22  recollection, Merrill Lynch and Hambrecht & Quist.

23    Q  Were these your own personal accounts at the tim[e?]

24    A  Yes.

25    Q  And did you have money in these accounts at the



                                                                      Page 184

1   time?

2     A  Yes.

3     Q  Your own personal money in these accounts at the

4   time?

5     A  Yes.

6     Q  And were all the friends' money in just particular

7   one account in Merrill Lynch and one account in Hambrecht &

8   Quist?

9     A  That's all I had, yes.

10    Q  Did you differentiate if one person's money -- like

11  if somebody had asked you, if Meyer had asked you "Where is

12  my money?" would you have been able to say "Merrill Lynch" or

13  "Hambrecht & Quist"?

14    A  Yes.

15    Q  Why did you differentiate between two accounts?

16    A  I don't think I did.  You said "or"; I guess I took

17  that as "and/or".

18    Q  What do you mean by that?

19    A  Well, it was in one of those accounts, or both, at

20  the time, depending on where the stock was being held.

21    Q  An individual person's money?

22    A  Uh-huh.  (Affirmative response.)

23    Q  So, they could have had money in Merrill Lynch and

24  Hambrecht & Quist?

25    A  Yes.  If we bought one stock at Hambrecht & Quist



                                                                      Page 185

1   and bought one at Merrill Lynch, their portion of each one of

2   those stocks would be held at whichever firm had that

3   particular stock.

4     Q  So, at this time when you had twelve or less, when

5   you decided it was important to keep the accurate records --

6   we will go back in a minute -- if you bought a stock would

7   that stock be for everyone at that time?  Let's say you would

8   buy -- you would figure out what would be 5 percent of each

9   person's holdings?

10    A  I cannot say that it was 100 percent every single

11  time.

12       MR. BOLTZ:  100 percent what?

13       THE WITNESS:  I'm sorry.

14       MR. BOLTZ:  I am not sure I understood your

15  question.  

16       THE WITNESS:  I actually do understand the

17  question.  I do understand.

18       MR. BOLTZ:  Well, he is asking you, if you

19  allocated it how did you allocate it?

20       THE WITNESS:  Right, right.

21       MR. BOLTZ:  I think.  I do not mean to misstate

22  your question, but --

23       MR. DUNBAR:  No, no, it is actually better than I

24  said it.

25       THE WITNESS:  And I actually understand exactly



                                                                      Page 186

1   where you're going here too.  So, I'm trying to just be

2   helpful, because we're all going to the same place here, but

3   we'll go the proper way, so no problem.  All right, okay, to

4   answer the last question you asked me, I did not buy every

5   stock that I bought for my friends.  I believe that was the

6   question you asked me.

7        BY MR. DUNBAR:

8     Q  Yes.  How did you decide which stocks were for your

9   friends and which stocks were for you?

10    A  I bought the ones that I knew best for my friends.

11    Q  And how would you record that?

12    A  Record that.  I had a file with each person's name

13  on it and recorded it in their file.

14    Q  Would you notify them when you purchased a stock

15  for them?

16    A  Sometimes.

17    Q  Percentage-wise, would you notify them 50 percent

18  of the time?

19    A  Less than that.

20    Q  30 percent of the time?

21    A  Probably less than that.

22    Q  10 percent of the time?

23    A  Maybe.  I mean, I don't recall exactly.  It wasn't

24  very often.

25    Q  And when I say notify does that mean -- I mean, you



                                                                      Page 187

1   would call them?

2     A  Yeah.  Yes, I would call them.

3     Q  Would you, you know; send them a letter?

4     A  No.

5     Q  Were these people receiving statements as well at

6   this time?

7     A  At some point they started -- I started to make

8   sure that they were, as I said earlier, getting a statement

9   from me.

10    Q  And what did the statement entail?

11    A  Purchases, sales and value.

12    Q  When you say purchases, those are the stocks you

13  purchased for them?

14    A  Right.

15    Q  With the name of the stock?

16    A  Right.

17    Q  And the purchase amount?

18    A  Right.

19    Q  Would you include current holdings; would that

20  entail purchases -- purchases and not sales?  Like you said

21  if there are purchases, like what stocks they purchased that

22  month, let's say.

23    A  Okay.

24    Q  The sales would be all the sales that they did that

25  month?



                                                                      Page 188

1     A  Right.

2     Q  So, they actually saw all the stocks that they held

3   in their account at any one time?

4     A  That's correct.

5     Q  Would you ever notify them when you purchased

6   stocks in the account that were for you?

7     A  No.

8     Q  And at this time you said you had the Merrill Lynch

9   and the Hambrecht & Quist account.  Did you have any other

10  personal brokerage accounts?

11    A  I believe I had one at Pershing as well.  It might

12  have been called Wedbush.  I don't remember which way it was

13  in those days.  They eventually became one, didn't they, or

14  something?  I don't recall.

15    Q  Pershing?

16    A  I don't know.  It might have been Wedbush.  But

17  Pershing was the clearing firm.  I can't recall exactly.

18    Q  But you might have another one?

19    A  Yeah, I'm pretty sure I did.

20    Q  Just background again, we kind of -- we somewhat

21  skipped between Meyer and the twelve.  And at the point when

22  you said it was important to keep accurate records, which was

23  about '85, '86, and Meyer was in '85.  So, within that year

24  you increased the number of friends who were investing money

25  with you; and describe how that occurred.



                                                                      Page 189

1     A  Mr. Meyer -- I'll give you a very simple example.

2   I was having dinner with a friend, a fellow church member.  I

3   was describing what I was doing for myself and how excited I

4   was about it.  And he asked me to help him in a similar way.

5     Q  Who was this?

6     A  I don't know the -- this particular person?

7     Q  Yes.

8     A  His name is Anthony Hitchman.

9     Q  And when you said you described what you were doing

10  for yourself, what do you mean by that?

11    A  I told him I was working with Bob Duggan and that I

12  was enjoying what I was doing, that I was finally getting to

13  be very helpful for making money.

14    Q  Did you mention Meyer?

15    A  Did I mention him?  I might have.  I don't know for

16  sure.

17    Q  So, throughout that year more people found out that

18  you were doing well in the market and wanted a piece of the

19  action?

20    A  That's a fair description.

21    Q  And at this point --

22       BY MR. MURPHY:

23    Q  Could I ask, was that from word of mouth -- you

24  know, your meeting with these people socially -- or was it from

25  the other investors, other friends of yours talking?



                                                                      Page 190

1     A  Thank you.  I mean, that's the question we want to

2   answer here, so let's answer it.  I did not actively promote

3   what I was doing.  You know, I was alive, when people asked me

4   what I was doing with my life.  I was not looking for anybod[y]

5   to do this for.  The people that I did it for seemed

6   appropriate when they asked me because of what they were

7   doing relative to the church.  And they might have talked

8   together, but I didn't make those connections myself.

9        BY MR. DUNBAR:

10    Q  And during this time period -- I am trying to limit

11  it to, you know, when you first met Meyer, and he first g[ave?]

12  you money in '85, to this time when you had probably b[?]

13  twelve or less investors and decided that it was importan[t to]

14  keep statements -- what were the profits like during that

15  time for your friends and for yourself?

16    A  I believe -- I could go back and get it for you,

17  but I believe those first couple of years we were -- I'm

18  talking about Bob Duggan and I now; I'm not talking about

19  anybody else -- we probably had a couple of two or three 100

20  percent years.

21    Q  Which brought you up to a couple hundred thousa[nd]

22  dollars, you said?

23    A  Yeah.  They were pretty amazing.

24    Q  When did you and Bob Duggan sort of split?

25    A  I believe it was in early '86 -- late '85 or early



                                                                      Page 191
1   '86.  But "split" is not really the right word.  I guess I'm

2   not -- I wasn't clear.  I mean, I think I stopped working

3   directly with him at that time.  We still worked on companies

4   together in an informal manner after that for many years.

5     Q  Did he ever compensate you for any work you did [for?]

6   him?

7     A  Yeah.

8     Q  And how much did he compensate you?

9     A  Plane tickets, hotel rooms, rent-a-cars, meals,

10  good advice -- really good advice.  And he was very good at

11  that.

12    Q  Did he give you any monetary compensation?

13    A  No.

14    Q  So, we are at the point now where you are starting

15  to keep records.  You have got about twelve people.  And [you?]

16  think you are sending out, you said, monthly statements [at?]]

17  this point, possibly?

18    A  Yes.

19    Q  And yearly statements?

20    A  I didn't get that.

21    Q  And yearly statements or just monthly statements[?]

22    A  I believe just monthly, and there was a synopsis at

23  the end of the year of tax information relative to purchases

24  and sales -- cost basis and proceeds and dates of purchase

25  and dates of sale.



                                                                      Page 192

1     Q  So at this time, '85, '86, did you have anybody

2   helping you with the administration of these people's money?

3     A  Ms. Rogers was working for me at the time, relative

4   to keeping records of money and doing the reconciliations of

5   the brokerage accounts.  I, personally, was providing the

6   monthly communication.

7     Q  And when did you hire Ms. Rogers?

8     A  1981 or 2.  She was a -- she worked for me for a

9   few hours a day when I was in my -- doing my counseling --

10  answering the phone and keeping track of the people that I

11  was working with; office, general office stuff.

12    Q  And why did you hire her?

13    A  Well, at the time I needed help to keep track of,

14  you know, basic files and --

15    Q  In 1981?

16    A  Yeah, yeah.

17    Q  Did you compensate her?

18    A  Oh, yeah, I did.

19    Q  Now, let me just review.  In '81 you were still

20  receiving honoraria, right?

21    A  Right, right.  And I had her come in a couple hours

22  a week to kind of get things in order, and I'd pay her for

23  that.

24    Q  And what things would she get in order?

25    A  Mail.



                                                                      Page 193

1     Q  Your personal mail?

2     A  No, we had a lot of interaction with the church and

3   there was a lot of communication back and forth.  I think she

4   probably -- I asked her to balance my check book.  And I

5   think she came in a few hours a week.  That's how it started.

6     Q  And then when you started helping with your

7   friends' money when did she get involved with that; at the

8   same time?

9     A  Well, I think that by that point she was -- once I

10  started working with Mr. Duggan, I had asked her to come in

11  and reconcile the brokerage statements and the bank

12  statements for me.

13    Q  And at the time when you started sending our

14  records, '85, '86, how much money did you have under

15  management of your friends' money?

16    A  Well, I'm guessing, but at the end of '86 it was

17  probably 7 or $8 million by then.

18    Q  And how much of that seven or eight million would

19  you say would be -- was profit at the end of '86.

20    A  I would not be able to tell you exactly, but it was

21  a substantial portion of it.

22    Q  Can you recall how much they gave you -- each of

23  them individually gave you -- to invest?  You said Meyer was

24  approximately $10,000?

25    A  Yes, and then he added more to that.  It seemed --



                                                                      Page 194

1   or I can't remember the names of all these people exactly,

2   although I could go back and get them -- but there seemed to

3   be some money, and then some more money would come and some

4   more money would come and some more money would come.  So, I

5   don't know exactly the numbers, but it grew pretty quickly.

6   I do remember that there was one stock that really went up

7   quite a bit that we all owned.  It was very exciting at the

8   time.

9     Q  Do you recall what stock that was?

10    A  It was Apple Computer.

11    Q  So, at the end of '86, '85, when you started to do

12  these records, how much did you have, would you say,

13  personally, in your accounts?

14    A  I believe personally I probably got up to about

15  $1,500,000 of my own capital due to these gains.  Yes, that's

16  the answer to your question.

17    Q  At this time did these people compensate you in any

18  way?

19    A  No.

20    Q  Did they give you any gifts?

21    A  I don't believe so, not those days.

22    Q  So, now let's go from you started doing the records

23  to the switching of accounts.  And that was a year

24  difference?

25    A  I don't remember exactly.  I wish I could give it



                                                                      Page 195

1   to you exactly.  I don't know.  I could be off by months in

2   here too, you know.  That's a long time ago.

3     Q  Yeah, I understand.  But, you know, your best

4   estimate?

5     A  Switch accounts, what do you mean by that?

6     Q  When you went to -- you moved the friends' money to

7   the NAA Financial account?

8     A  Right.  That was in '87, I believe, late '87.

9     Q  And, I'm sorry, just to recall it, and the Union

10  Bank friends account came in '86, or before this?

11    A  I think so.  I mean, I would have to go back and

12  check.  I don't know, I'm sorry.  I don't know exactly when

13  it came into being.  I could find out, I think.

14    Q  So, before the Union Bank account, with the friends

15  account, when they gave you money would it go straight to one

16  of the brokerage houses?

17    A  Or to the bank.

18    Q  Or to your personal account, and then you would

19  send the money out?

20    A  Right.  You see, I have a letter that I was -- I

21  made a decision that I wouldn't take these people's money at

22  all unless I had an agreement with them.  And this agreement

23  was -- I think it's obviously there for the protection.  You

24  know, someone gives you money and you have their money, 

25  there's some record that they gave it to you, you know what I



                                                                      Page 196

1   mean?  But the agreement specifically stated, and it always

2   stated, that the funds could be placed in my name or other

3   names that I would choose.  So, that was the agreement that

4   we had.  I think you've seen a sample of that.  And everybody

5   who gave me money had that agreement signed at the time they

6   gave me the money.

7     Q  I would like to hand you what has been marked as

8   Exhibit Number 5, with your heading letter dating:  "Dear

9   _____, you have asked me to do you a favor and invest some of

10  your money as a friend..."  Is this the letter you were

11  referring to?

12    A  Yes.

13    Q  And did you draft this letter?

14    A  I did not draft this letter.

15    Q  Who drafted this letter?

16    A  I'm trying to remember.  It was drafted by a friend

17  of mine who was an attorney.

18    Q  And what was his name?

19    A  His name was Dan Lang.

20    Q  And when was this letter drafted?

21    A  I think originally in '85.

22    Q  Was Meyer the first one to receive it?

23    A  I think so.

24    Q  And why did you have this letter drafted?

25    A  Well, I think I was advised by him that it was



                                                                      Page 197

1   important to have an agreement in writing about the

2   arrangement that I had with these individuals.

3     Q  Did anybody ever have a problem signing this?

4     A  No.  Maybe you could ask that in a little different

5   way.

6     Q  Actually, yeah, did -- well, did they sign this?

7     A  Yes.  That's the answer.

8     Q  Has this letter changed over time?

9     A  I think that the fourth paragraph may have changed

10  from "calendar quarter"; I think we said "monthly" originally

11  and changed it to "calendar quarter".  I think that was one

12  change.  That's about it.

13    Q  And everyone who invested money with you, did they

14  sign one of these?

15    A  Yes.

16    Q  Did anybody refuse to sign one?

17    A  Well, if they did I wouldn't invest their money.

18    Q  Did anybody refuse to sign one and you --

19    A  I don't recall that.  You have to understand that I

20  was being requested here.  I wasn't soliciting.  Someone

21  would say to me:  Will you do this?  And I'd say, well,

22  depending on who they were relative to their activities in

23  the church, I would say, okay, if that's what we're going to

24  do this is what we -- this is our agreement.

25    Q  When you would give them this agreement, would any



                                                                      Page 198

1   of them ever ask when -- did they ever ask specifics, whe[re]

2   was my money going to be put or what brokerage?

3     A  I'm going to use the bathroom and then answer that

4   question, if it's okay with you.  I've been holding on for

5   dear life, here.

6        MR. DUNBAR:  Off the record.

7        (Whereupon, a brief recess was taken.)

8        MR. DUNBAR:  Back on the record at 11:26.  I

9   believe there was a question pending.

10       MR. BOLTZ:  I am not sure what it was.  Do you

11  remember?

12       THE WITNESS: It was --

13       MR. BOLTZ:  Well, he could read it, I suppose, if

14  you -- we do not have to guess.

15       THE WITNESS:  Yeah, we could play it back because [I]

16  don't remember.

17       MR. BOLTZ:  That is why we have a record.

18       THE WITNESS:  I remember it, that's okay, go ahead.

19       BY MR. DUNBAR:

20    Q  Back to Exhibit Number 5 briefly, did your friends

21  receive these when they added to their account?

22    A  Not as a rule.

23    Q  But sometimes?

24    A  Sometimes.

25    Q  And why is that?



                                                                      Page 199

1     A  I think in the early days I did it just as a matter

2   of course, and then was advised it wasn't necessary.

3     Q  Who were you advised by?

4     A  Mr. Lang.

5     Q  How long did you do that for?  How long did you

6   send subsequent letters?

7     A  I don't know.  I don't know how long.

8        BY MR. MURPHY:

9     Q  Would every investor sign a letter like Exhibit 5,

10  you know, the dates of statements?

11    A  Yes.

12       MR. BOLTZ:  We are going to be producing those,

13  hopefully, by Friday.  There is a lot of copying but we are -

14  -

15       THE WITNESS:  We're going back in the files.  It's

16  going to be a lot of copying going on here.  You'll have

17  them.

18       BY MR. DUNBAR:

19    Q  Okay, I believe we are at 1987 -- I know it is a

20  while back -- 1987, moved to NAA Financial, the accounts wer[e]

21  moved; or you opened the NAA Financial account in '87,

22  approximately.

23    A  Yes.

24    Q  And when you opened that, I believe you said last

25  time that you opened that account for the purposes of keeping



                                                                      Page 200

1   the friends account separate?

2     A  Yes.

3     Q  Now, when you did open that account how did you

4   transfer the money?

5     A  I believe I said in my last testimony by bank wire.

6     Q  From Hambrecht & Quist?

7     A  I think it came from various sources at the time,

8   wherever the money was being held.

9     Q  And what were those various sources?

10    A  It would be the brokerage accounts and bank

11  accounts at the time.

12    Q  When you say bank accounts --

13    A  Oh, bank account.  I mean, I don't remember

14  specifically.

15    Q  And how did you know which was investor money that

16  you transferred over?

17    A  We had a very clear accounting of what belonged to

18  the other people.

19    Q  And these were in the records that you kept?

20    A  Yes.

21    Q  And where did you store these records?

22    A  They were -- we had -- each person had a file, and

23  it was in a file cabinet.

24    Q  At your house?

25    A  In my office.



                                                                      Page 201

1     Q  Kellogg?

2     A  Yeah.

3     Q  And at this time, when the accounts were moved, did

4   you maintain a list of the investors?

5     A  Yes.

6     Q  I am now showing you what has been marked

7   previously as Exhibit Number 4.  And I believe you saw this

8   document last time.

9     A  We did.

10    Q  And, once again, what is this document?

11    A  This is a list of -- I think this is the answers to

12  the questions on the subpoena of current people that have

13  accounts, '87 to -- or '97 to current.

14    Q  And when you just mentioned, you said you

15  maintained a list of your friends who had invested money with

16  you, is this similar to the list that you maintained at that

17  time?

18    A  Yes, yes.  Well, I mean, it wouldn't be in this

19  exact form.  You say similar; what does that mean?

20       MR. BOLTZ:  It would be similar in size.

21       THE WITNESS:  Oh, no, not at all.

22       BY MR. DUNBAR:

23    Q  Well, format, format-wise?

24    A  Yeah, that's what I thought you meant.  Maybe.  I

25  think -- it might have been handwritten.



                                                                      Page 202

1     Q  And throughout the years have you consistently

2   maintained a list of your friends who --

3     A  Yes.

4     Q  For the purposes of keeping -- of knowing who has

5   money invested?

6     A  Yes.

7     Q  Is there any reason you would keep an investor off

8   the list?

9     A  No.

10    Q  Did any of your friends who invested money, would

11  they ever request to see the list?

12    A  No.

13    Q  Did any investor ever ask you if other people were

14  doing this, other than what they knew?  Did they ever ask you

15  how many people were involved?

16    A  Yes.

17    Q  Do you recall who?

18    A  Who asked me that?

19    Q  Yeah.

20    A  I don't recall specifically.

21    Q  But people have asked you that?

22    A  Yes.

23    Q  Ten, over ten?

24    A  I -- rarely, I don't know.

25    Q  And would you tell them?



                                                                      Page 203

1     A  If I was asked, yes.

2     Q  Did anybody ever ask you where their money was

3   held, what accounts?

4     A  Yes.

5     Q  Do you recall who?

6     A  Not exactly.

7     Q  Do you recall the last time you were asked that?

8     A  Certainly in the last few years, for sure.

9     Q  And what do you tell them?

10    A  I told them it was held in accounts -- banks and

11  brokerage houses -- in my name.

12    Q  Did you ever tell them specifics?

13    A  Ever?  I don't recall exactly.

14    Q  Since '87, did you ever tell an investor their

15  money was held in NAA Financial?

16    A  Did you ever tell an investor that their money was

17  held in a Union Bank account?

18    Q  Well, that is where the money was sent, so I assume

19  they would assume that.

20       MR. BOLTZ:  But that is not the question.

21       THE WITNESS:  Yeah, I'm sorry.

22       MR. BOLTZ:  I mean, they may know, because they

23  might have got the check or a deposit --

24       MR. DUNBAR:  Right, did you ever tell them?

25       THE WITNESS:  No, I didn't directly.



                                                                      Page 204

1        MR. BOLTZ:  Listen to the question.

2        THE WITNESS:  Yeah.

3        BY MR. DUNBAR:

4     Q  Who manages each individual friends account?  Do

5   you manage their accounts?  When they send money are you

6   solely in charge of that money?

7     A  I'm clarifying the question.  Do you mean in

8   regards to which stocks go into it?

9     Q  Yes.

10    A  Yes, that's my decision.

11    Q  Anybody else?

12    A  No.

13    Q  Does the friend have any say in what they want you

14  to invest in?

15    A  No.

16    Q  Have you ever had someone call you up and say --

17  request you to invest in a particular stock?

18    A  Yes.

19    Q  How often does that happen?

20    A  Very rarely.

21    Q  Do you recall the last time that happened?

22    A  No.

23    Q  Do you recall who it was?

24    A  Not -- I'm not sure.

25    Q  Do you recall why they did that?



                                                                      Page 205

1     A  Yes.

2     Q  What was the reason?

3     A  I heard -- they said I heard this is a really good

4   stock.  I want you to buy this for me.

5     Q  And did you?

6     A  No.

7     Q  Did you tell them why?

8     A  Yes.

9     Q  And what did you tell them?

10    A  I said that the research that I did on the stocks

11  defined the ones that I would buy, and if I hadn't done the

12  research on the stock I didn't feel comfortable owning it.

13    Q  Going back to Exhibit Number 4, the list -- well,

14  does Ms. Janu invest money with you?

15    A  Ms. Janu has an account.

16    Q  With you?

17    A  Yes.

18    Q  And her name is not on this list.

19    A  Right.

20    Q  What is the reason for that?

21    A  We went over that last time, that we gave you the

22  list of the people who were independent contractors.  I think

23  there's a couple or three that we didn't get onto that list.

24  It's not that they're kept off the list, but they are sort of

25  separate, in a sense, in how they're classified.



                                                                      Page 206

1     Q  So, that would include Ms. Janu and who else?

2     A  Mr. McMullin and his mother.

3     Q  And his mother, oh.

4     A  I think they're on the list, I believe they are,

5   Rubinstein.

6     Q  Joanne Rubinstein?

7     A  Yeah, I think it's on there.  If it's not, you

8   know, it might --

9     Q  She is not, unless I am looking in the wrong pl[ace.]

10    A  All right, well, I'm not sure.  It just may not be

11  on there.

12    Q  And why are they kept off the list?

13    A  I don't think they're kept off the list.  I just

14  think we -- just because they're -- I don't know the answe[r.]

15  I would have to say they should be on it.  I just don't kno[w]

16  why they wouldn't be.  They are on it, but for some reaso[n]

17  when this list was printed they weren't on it.  I don't kno[w]

18  why.

19    Q  Okay.  Would there be any other reason someb[ody]

20  would not be on this list?

21    A  It's possible.  It's a possibility.

22    Q  Do you know for what reason they would --

23    A  I don't -- I just -- I'm saying that because I'm

24  not 100 percent sure, but the fact that there may be anoth[er]

25  reason why somebody is not on the list.  It's possible.



                                                                      Page 207

1        MR. BOLTZ:  But do you know of anybody else that is

2   not on the list?

3        THE WITNESS:  Not off the top of my head, I don't.

4        MR. BOLTZ:  That you -- which is the list of

5   current investors?

6        THE WITNESS:  Right.  They're -- the answer to your

7   question is I don't know why someone else wouldn't be on it,

8   but it's possible.

9        BY MR. DUNBAR:

10    Q  And where is this list maintained?

11    A  Ms. Janu's office.

12    Q  Who maintains it?

13    A  She does.

14    Q  Does she maintain it with your assistance?

15    A  I don't know what you mean.

16    Q  How does she know when to put a name on the list?

17    A  When we had somebody new come in she was informe[d.]

18    Q  By who?

19    A  By me.

20    Q  Would she put a name on the list for any other

21  reason?  Would she get a letter directly to her?

22    A  I don't know what to say.  I mean, I don't know if

23  procedurally, that maybe if I was out of town, or something,

24  and then one of the investor letters came back in; it was

25  sent over to her so she would know that it occurred.  She



                                                                      Page 208

1   certainly had, you know, knowledge at that point.

2        BY MR. MURPHY:

3     Q  Can I ask a question.  The list, Exhibit 4, is a

4   list of all the friends that invested excluding some

5   categories; would that be fair?

6     A  Well, I don't think it excludes any categories.  I

7   just don't know how to answer the question of exactly why

8   those people, Janu and Rubinstein, wasn't on there.

9        MR. BOLTZ:  Who prepared the list?

10       THE WITNESS:  Jean did.

11       MR. BOLTZ:  All right, so maybe she could answer

12  that question.

13       THE WITNESS:  Yeah, maybe she can answer that

14  question for you.

15       MR. BOLTZ:  But, to your knowledge, anyone other

16  than the three people -- the independent contractors,

17  McMullin, Rubinstein, his mother, and Janu -- to your

18  knowledge, is there anyone else --

19       THE WITNESS:  I'm not aware.

20       MR. BOLTZ:  -- that is not on the list?

21       THE WITNESS:  I'm not aware who else might be left

22  off; I don't know.

23       BY MR. MURPHY:

24    Q  I was wondering, is there another category of, you

25  know, people who --



                                                                      Page 209

1     A  Well, what I thought of when you asked the question

2   -- and I would just make it brief -- is if somebody was new

3   the list might be incomplete, because it's missing somebody

4   who is new, okay.

5     Q  Oh, they have not yet got into the process?

6     A  They haven't quite got into the process.  That's

7   what I was thinking when you asked me that originally.  That

8   would be classified as a new person.

9        MR. BOLTZ:  And I think we supplied two lists, one

10  the current, and then didn't we -- there was closed accounts.

11       THE WITNESS:  Right.  We gave you a list of all the

12  closed accounts too.

13       MR. DUNBAR:  A list?

14       THE WITNESS:  Yes, we did.

15       MR. BOLTZ:  Gave you list or did we give the

16  statements?

17       THE WITNESS:  Both.

18       MR. BOLTZ:  I think that is right.

19       THE WITNESS:  If it wasn't a list we simply sent

20  you all the closed account statements.

21       BY MR. DUNBAR:

22    Q  Right.  So, we are now at the point where all the -

23  - where NAA Financial opened; money has gone into NAA

24  Financial, or the stocks and money -- or was it just pure

25  stocks that you got transferred to NAA Financial?



                                                                      Page 210

1     A  And money both.

2     Q  And money both?

3     A  Yeah.

4     Q  And, so, now with NAA Financial, since '87 that's

5   been strictly reserved for friends' monies?

6     A  Yes.

7     Q  Do you have any of your own money in there?

8     A  Within the assets of NAA I have some money too.

9     Q  And how do you -- what money is that?

10    A  It's all in my name there.  So, there is some money

11  there that belongs to me.

12    Q  And how do you know it belongs to you?

13    A  They have a -- well, how do I say this?  It's --

14       MR. BOLTZ:  They keep it segregated?

15       THE WITNESS:  They keep it segregated.  That's the

16  best way to say it.

17       BY MR. DUNBAR:

18    Q  Who keeps it segregated?

19    A  NAA.

20    Q  How do they segregate it; how do they keep it

21  segregated?  Did you receive two statements?

22    A  Well -- I just want to refer with him just for one

23  second on this.

24       MR. DUNBAR:  Okay, off the record.

25       (Whereupon, a brief recess was taken.)



                                                                      Page 211

1        MR. DUNBAR:  Back on the record.

2        THE WITNESS:  They segregate the funds and I get a

3   statement of what's mine from them.

4        BY MR. DUNBAR:

5     Q  Is it a separate statement?

6     A  Yes.

7     Q  Is it a separate statement from what you produced

8   to us?

9     A  Yes.

10    Q  Is it possible for us to receive those documents?

11    A  Yes.

12    Q  And do they actually separate it or is it two

14  separate accounts?

15    A  They separate it by account.

15       MR. BOLTZ:  Well, it is two separate accounts.

16       THE WITNESS:  Two separate accounts, but as far --

17  I don't know how they do it internally.

18       BY MR. DUNBAR:

19    Q  So, within NAA Financial you have two accounts?

20    A  Right.

21    Q  Any more than those two accounts?

22    A  There's two accounts.

23    Q  And one of them is your personal account?

24    A  Uh-huh.  (Affirmative response.)

25    Q  And one of them is your friends account?



                                                                      Page 212

1     A  Yes.

2     Q  And with regards to the two accounts, do you know

3   the account numbers?

4     A  I will get them for you.

5     Q  So, let's discuss your friends account first.  Do

6   you have any money, personal money, in that account?

7     A  No.

8        MR. BOLTZ:  Have you ever?

9        THE WITNESS:  Have I ever?

10       MR. BOLTZ:  Yeah.

11       THE WITNESS:  No.

12       BY MR. DUNBAR:

13    Q  And in your personal account, how long have you had

14  that account?

15    A  Pretty much same time frame, not exactly but --

16    Q  Within the year?

17    A  Within the year, yeah.

18    Q  And how much money do you currently have in that

19  account; or what is the value of that account?

20    A  It's -- exactly I don't know, but it's several

21  hundred million dollars.

22    Q  Several?  Is it --

23    A  Three.

24    Q  Three hundred.  And are those statements sent to

25  your -- sent to you?



                                                                      Page 213

1     A  Yeah.

2     Q  Does anybody else see those statements?

3     A  No.

4     Q  Do you have anybody consolidate those brokerage

5   statements?

6     A  Consolidate those brokerage statements.

7     Q  Well, I believe you mentioned Ms. Rogers sometimes

8   will take a brokerage statement --

9     A  Right.  She does not operate -- she does not do

10  these.

11    Q  So, do you receive two separate statements?

12    A  Right.

13    Q  Do you ever transfer money between these two

14  accounts in the NAA Financial?

15    A  Transfer?

16    Q  Have you ever switched money from one account to

17  the other for any reason?

18    A  Can I check with him just for a second?

19       MR. DUNBAR:  Sure, off the record.

20       (Whereupon, a brief recess was taken.)

21       MR. DUNBAR:  Back on the record.

22       THE WITNESS:  We've used the domestic accounts that

23  we have to accommodate our requests for money in and out from

24  the friends accounts.  And when necessary, if there has been

25  a change from the domestic accounts and there has to be an



                                                                      Page 214

1   adjustment to make that changeover, we'll make that

2   adjustment over there.

3        BY MR. DUNBAR:

4     Q  Would you explain, like, when you would do an

5   adjustment?

6     A  Well, for example, if I sent somebody some money

7   from here, it would go into the Union Bank account, sent to

8   them.  But it came from a domestic account of mine, then I'd

9   make the adjustment over there.

10       MR. BOLTZ:  I think it needs to be clarified a

11  little bit more.  In other words, if there were -- in order

12  to make a -- to accommodate a withdrawal, for example --

13       THE WITNESS:  Right.

14       MR. BOLTZ:  -- additional money were needed from

15  the money that is in the Union Bank account of the friends.

16  You would transfer money from one of your personal brokerage

17  account accounts --

18       THE WITNESS:  Right.

19       MR. DUNBAR:  Domestic.

20       MR. BOLTZ:  Domestic.  And that would be your

21  personal money.  And then, in order to keep the record

22  straight, because that money was going to the friends, you

23  would make an appropriate -- or direct NAA to make an

24  appropriate adjustment, accounting adjustment, from the NAA

25  friends account to your personal account; is that correct?



                                                                      Page 215

1        THE WITNESS:  Right, that's correct.

2        MR. BOLTZ:  And would that be the only occasion

3   that you would --

4        THE WITNESS:  That's the only time.

5        BY MR. DUNBAR:

6     Q  And how often does that occur?  About how many

7   times a yea -- twenty, thirty?

8     A  Oh, I see.  Twice.

9     Q  Twice a year, possibly?

10    A  Yeah, possibly.

11    Q  So, in the friends account at Union Bank money wil[l]

12  be put in also from your personal brokerage account?

13    A  Yes, from time-to-time.

14    Q  Is there any one particular account that we see

15  money coming in?

16    A  You'd see it from various, depending on the

17  situation.  Sometimes not at all, sometimes a bunch.

18    Q  Why would you vary between your different broke[rage]

19  houses; like why would you pick one over the other?

20    A  I don't have a -- I mean, just that's where there's

21  ease of movement, I guess.  Just cash available, or whatever.

22    Q  And do you recall when the last time you did this

23  was?

24    A  The last time I did --

25    Q  The last time you brought money from your broker[age]



                                                                      Page 216

1   account into the friends Union Bank account?

2     A  The day before yesterday.

3     Q  Which was Monday?

4     A  Monday.  We're in a liquidation process right now.

5   We are in a very intense liquidation process.  That's what's

6   going on.

7     Q  So, for example, you brought money from what

8   brokerage house?

9     A  Several different ones over -- on Monday?  It was

10  from our Phillip Louis account.

11    Q  So eventually you will make an adjustment between

12  the Swiss accounts?

13    A  Correct.

14    Q  And how do you keep track of that?

15    A  I have -- I keep a record.  Let's see, Ms. Rogers

16  has the record of the amount of money that came in from the

17  brokerage accounts, and that's how I do it.  I get an

18  analysis of that.

19    Q  Does Ms. Rogers produce that analysis?

20    A  She produces the full activity and then I

21  extrapolate it from that.

22    Q  Do you ever bring brokerage money from your

23  personal domestic accounts into the account for any other

24  reason?

25    A  No.



                                                                      Page 217

1     Q  Do you recall the last time it was when you made an

2   adjustment in the Swiss accounts?

3     A  Last year sometime, I think at the beginning of

4   '99.

5     Q  And why was that?

6     A  We had a lot of withdrawals for taxes at that time

7   -- I guess March, April, somewhere around there.

8     Q  So, you needed to -- let me just get this right.

9   So, you had a lot of withdrawals to the Union account when

10  the friends account got low, so you needed to --

11    A  Well, we needed to be able to give people money

12  when they asked it back.

13    Q  Right, you needed to pay people their money.  So,

14  you brought personal money over and then made the transition

15  in Swiss --

16    A  Right, exactly, precisely.

17    Q  Do you ever make this transfer of money from a

18  domestic brokerage house to your own personal account, would

19  you ever have to liquidate stocks?

20    A  Have to liquidate.  I don't -- no, not really.

21  That's not an issue.

22    Q  I mean, would it always be you would have money in

23  the -- where you could just bring the money out?

24    A  Yeah, there's -- yeah, just bring the money out,

25  yeah.



                                                                      Page 218

1     Q  Would you ever bring money over from the other

2   Union Bank account to cover if it gets low and you need to

3   pay people out?

4     A  Yes, the simple answer.

5     Q  And when was the last time that occurred?

6     A  I believe the process is that the money comes from

7   the domestic brokerage house into the -- my account, and then

8   it transfers over.  That's how we would do it, so we keep the

9   records really straight.

10    Q  Okay, so money does transfer from one account to

11  the other?

12    A  When it's for these kind of purposes.

13    Q  So your domestic brokerage houses, do they ever go

14  straight to the 7582 account?

15    A  I don't believe so.

16    Q  Have they ever gone straight to the 7582 account?

17    A  I don't believe so.

18    Q  So, they go to the 7574 account and that is when it

19  moves over?

20    A  Right.

21    Q  And who makes that transition over?

22    A  Ms. Rogers.

23    Q  Does she call?  Will she call you before that or --

24    A  We discuss it; she calls the bank.

25    Q  Has she ever called on her own that you know of?



                                                                      Page 219

1     A  I'm not sure.

2     Q  Has she ever transferred money from one account to

3   the other without your knowledge?

4     A  No.

5     Q  Would she only do it with your knowledge?

6     A  Yes, she would do it with my knowledge.

7        BY MR. MURPHY:

8     Q  But is she authorized, if the account from which

9   you pay the friends is running low, to take money from the

10  other account to replenish it?

11    A  Not without talking to me.

12    Q  She is supposed to call you first?

13    A  Yes.

14    Q  We have a very direct line on that.

16       BY MR. DUNBAR:

17    Q  When you opened up your personal account in the NAA

18  Financial where did that money come from, or stocks?

19    A  From my accounts here.

20    Q  Do you recall which ones or --

21    A  Similar.  I don't have the exact accounts at the

22  time, but I did have a Hambrecht & Quist account and I did

23  have a Merrill Lynch account, and I think I had a Bear

24  Stearns account also at the time.

25    Q  And when did you open that account, your personal



                                                                      Page 220

1   one?

2        MR. BOLTZ:  Which account are we talking about?

3        MR. DUNBAR:  His personal NAA Financial account.

4        MR. BOLTZ:  Okay, all right, that is -- I wanted to

5   be sure.

6        THE WITNESS:  Yeah.  I felt that it was in my best

7   interest to have that account open.  That's the best way I

8   can say it.

9        MR. BOLTZ:  Well, I think you described last time

10  that you had a lot of confidence in that organization.

11       THE WITNESS:  I mean, I had met Mr. deLamoussaye

12  and I had met Mr. Axiall, and I had watched it for a while

13  and seen the way they reported and the way they -- their

14  executions -- and reliability, and that and that, and I

15  thought it would be a good thing for me to have an account

16  there too.  So, I opened my account as well.  I think I was -

17  - you know, they wanted me to as well.  I mean, it was a

18  sales situation on their part, to some degree.  I was

19  definitely asked.

20       BY MR. DUNBAR:

21    Q  And this was around 1987?

22    A  No, this is later.  This would be -- I would say

23  it's sometime after the first one.  I can't give you the

24  exact dates, but it was after the first -- '88 maybe.

25    Q  And how much money -- what was the value when you



                                                                      Page 221

1   transferred it over?

2     A  It was probably lower eight figures.  That's why

3   I'm thinking it might have been '89 even.  I'm not sure of

4   the exact year.

5     Q  When you say low?

6     A  Twelve, fifteen, somewhere in there?

7     Q  Million?

8     A  Uh-huh.  (Affirmative response.)

9     Q  So, '85, '86, you had about $1.5 million of your own

10  money to '88 to '89 where you had between $12 million and $15

11  million?

12    A  Right, I did.  I actually had more than that.

13    Q  How do you have more than that?  Well, I am sorry,

14  it was transferred over.

15    A  Right.

16    Q  So, just walk me through, you know, stocks,

17  whatever, from '85 to '88.

18    A  Sure.  Essentially, if you guys remember -- I don't

19  know if you remember this or not, but we had an interesting -

20  - I will make this as short as I can, I'm sorry.

21       MR. BOLTZ:  That is all right.  As long as it

22  answers his question.

23       THE WITNESS:  All right.  Well, he asked me how I

24  to that amount of money, I think is the question.

25       MR. BOLTZ:  I know, and I think that is --



                                                                      Page 222

1        THE WITNESS:  So, the market went from -- in 19[8?]

2   to 1987, before the crash, it was up about 80 percent, I

3   believe was the number -- 1,200 to 2,200, am I correct,

4   something like that?  That was a very lucrative time for m[e.]

5   And after that the market, in the early part of -- due to

6   circumstances that I was very fortunate, when the crash

7   occurred I was in a position to make some serious investm[ents]

8   at that time, put a lot of money to work.

9        BY MR. DUNBAR:

10    Q  After the crash?

11    A  Right after -- during and after the crash.

12    Q  Did the crash hurt you?

13    A  I was not hurt by the crash?

14    Q  Why?

15    A  I wasn't there.  I was in Europe.  I was meeting

16  with the people at NAA.  And I was over there on a vacati[on]

17  and a business trip, and took my money out of the market [at?]

18  the end of September, 1987.  And just a complete fluke.

19       BY MR. MURPHY:

20    Q  What kind of stocks were you in that caused the

21  increase in value prior to the crash?

22    A  We were in high tech, mainly high tech stocks.

23    Q  Computer related and --

24    A  Very much so.  Very much involved in computer

25  related stocks at that time, mostly small companies in



                                                                      Page 223

1   southern California.  Some of the names come to mind:  Xebec,

2   you know, Computer Memories.  Maybe you remember some of

3   these names, I don't know.  They were out in the Valley.

4   They're either the ones we have today, that just go up

5   ten, twelve times, you know, very quickly -- over the counter

6   stocks.

7        BY MR. DUNBAR:

8     Q  So, you were away for the crash.  And, then, you

9   said after the crash you had some prospects?

10    A  Yes.  On the day of the crash I purchased stocks

11  like Colgate, bought some blue chips, and bought Microsoft,

12  Apple and some of these other ones that I knew really well.

13  And the next two years were wonderful.  And I held those

14  stocks for a long, long time.  I remember selling Colgate --

15  I'm sorry, never mind.

16    Q  And, so, are these stocks that you bought after the

17  crash attributable to your -- the $1.5 million, to what was

18  it when you transferred the $12,000,000 to $15,000,000?

19    A  What was -- net worth?

20    Q  Yeah.

21    A  It was probably close to $25,000,000.

22    Q  So, is it purely the stocks that brought your

23  wealth up from $1.5 million to $25,000,000?  Was there o[ther?]

24  type of investments, real estate?

25    A  I had --



                                                                      Page 224

1        MR. BOLTZ:  During that period.

2        THE WITNESS:  During that period.  I had two

3   venture investments that were very lucrative for me also.

4        BY MR. DUNBAR:

5     Q  And what were those?

6     A  One was called Computer Motion -- no, Computer

7   Motion Corporation, CMC Corporation, in Santa Barbara.  And

8   I'm trying to think of the other one now.  It's a while back.

9   Anyway, it was in the food business, eventually bought out by

10  Charthouse.  I those two investments worth -- accounted for

11  about a third of that money, maybe up to a third-and-a-half.

12    Q  And how did you get involved in these two -- when

13  you say venture what do you mean by venture?

14    A  Private company.

15    Q  And how did you get involved with these?

16    A  From Mr. Duggan.

17    Q  Did you get involved with any other ventures

18  through Mr. Duggan, even the ones that did not work?

19    A  At that time?

20    Q  At that time.

21    A  It's possible.  I don't recall exactly.

22    Q  But you do recall these two?

23    A  Yeah, I recall these two very well.

24    Q  And how much money did you invest in each of those?

25    A  Let me think.  There were a couple different



                                                                      Page 225

1   rounds.  I don't think I had over $100,000 in each one of

2   them -- maybe a little bit more than that.  I should say I

3   don't know, but I don't know exactly.  That's a better

4   answer.  I really don't know exactly.

5     Q  Can you recall where this money came from?  Was it

6   your personal account?

7     A  Yeah, it was money that was mine.

8     Q  Was it given directly to Computer Motion or the

9   company you previously -- Charthouse?  I mean, was it with

10  Mr. Duggan?  

11    A  I invested as a -- I had my own stock, my own

12  position.

13    Q  Were your friends invested in either of these

14  ventures?

15    A  No.

16    Q  Did you tell your friends that you were investing

17  in either of these ventures?

18    A  I think I did.

19    Q  How did you tell them, or who did you tell?

20    A  I mean, this is sort of an open question.  I don't

21  know how to answer it.

22       MR. BOLTZ:  Well, it is also a little imprecise in

23  whether you are talking about all of them or some of them.

24       MR. DUNBAR:  Well, with regard to Computer Motion?

25       MR. BOLTZ:  I mean all the friends or --



                                                                      Page 226

1        THE WITNESS:  Some, one, five.  I mean, certainly,

2   I think in social situations I certainly talked about it.

3        BY MR. DUNBAR:

4     Q  Did anybody ever ask you to get them involved in

5   some of these ventures?

6     A  In a couple of these ventures a couple of people

7   who knew Mr. Duggan also invested in these deals -- not

8   through me -- who are also some of my friends.

9     Q  And did they hold stock in their own name?

10    A  Yes.

11    Q  Besides yourself, did anybody else invest with Mr.

12  Duggan?

13    A  I think so.

14    Q  Do you recall who?

15    A  I don't, but I think he had some family and some

16  friends that were working with him at the time.

17    Q  Now, going back to the crash -- go ahead.

18       BY MR. MURPHY:

19    Q  Did you purchase private placement stock, privately

20  placed stock, in those two companies; and, then, how did you

21  get out?  Did you get out of those investments?

22    A  Yes.

23    Q  And what was your exit?

24    A  In one case, the Charthouse bought the company.

25    Q  Before it became public?  I think it was --



                                                                      Page 227

1     A  I think it was before it became public, I think.  I

2   don't remember when Charthouse went public, but I think it

3   was -- you probably remember that company.  I like their

4   food.  Anyway, and the other company was purchased by

5   Rockwell.

6     Q  Directly from a private company by Rockwell, was

7   it?

8     A  Right, that's correct.

9     Q  And, then, in each case your $100,000 in the

10  computer company, your $100,000 mushrooms to --

11    A  Well, in the case of the one with Computer Motion

12  we ended up with Rockwell stock, and the Rockwell stock went

13  crazy.

14    Q  Oh, you were paid in stock, and you held the stock?

15    A  Right.

16    Q  And then the stock became valuable?

17    A  Very, very valuable, yeah.

18    Q  And then the other company --

19    A  Well, we had Charthouse stock.  That also became

20  very, very valuable.

21    Q  You held the stock after the acquisition?

22    A  Yes, that was the idea -- obvious reasons; I mean

23  tax events.

24    Q  Capital gains?

25    A  Capital gains.  And there was a pooling, whatever



                                                                      Page 228

1     the -- I don't know what the rules are, but that's what we

2   did.

3     Q  There were tax reasons to do it that way?

4     A  Tax reasons, exactly.

5        BY MR. DUNBAR:

6     Q  Have you sold those stocks now or do you still hold

7   them?

8     A  Oh, they're gone now.

9     Q  And that accounted for a little bit over a third,

10  third-and-a-half, of --

11    A  I'd say at least, yeah.

12    Q  -- that gain during that time period?

13    A  Yeah.  I was very fortunate.

14       BY MR. MURPHY:

15    Q  Was that Mr. Duggan's strategy to purchase private

16  placement interests in companies?

17    A  Yes.  I mean, if you want to ask me for more details

18  I'll give them to you, but the answer to the simple question

19  is yes.

20    Q  I mean, was he purchasing not only listed stocks,

21  but also making investments in non-public companies?

22    A  Can I make a clarifying --

23       MR. BOLTZ:  Yeah, yes.

24       MR. MURPHY:  Just briefly.

25       THE WITNESS:  Very briefly I'll do this, okay.  One



                                                                      Page 229

1   of the companies that was purchased by Charthouse was started

2   by Mr. Duggan.  The food company was actually his company.

3   He was the -- he and his friends started the company, okay.

4   It was a local bakery and had units all over the country by

5   the time Charthouse got it.  I can't remember the name; it's

6   a cute name.  The other company was also -- Mr. Duggan was a

7   founding -- well, he helped to finance the company he got

8   involved in -- the concept was that when you do investments

9   like this, which I don't want to elaborate, you get involved

10  in helping the company.

11       BY MR. MURPHY:

12    Q  Taking a management role as a venture capitalist,

13  kind of?

14    A  Exactly.  That was the idea, which, as you know,

15  later on was very good for me as well.

16    Q  And that was part of what Mr. Duggan taught you on

17  the --

18    A  Taught me how to do it, exactly, yeah.  It was the

19  application of the fundamental analysis to a private venture.

20  There was a leverage point there that was pretty good.

21       BY MR. DUNBAR:

22    Q  And when you said you had all your money out before

23  the crash, is this including investor money?

24    A  Uh-huh.  (Affirmative response.)

25    Q  So, all that money was out too?



                                                                      Page 230

1     A  Yeah, we were not 100 percent out, but we were -- I

2   mean, it was a non-event, remarkably.

3     Q  Do you ever have any friends call you and say, how

4   did our money do, what is going on?

5     A  Oh, man, I'm not going to say any more.  There's

6   some great stories I could tell, but I'm not going to tell

7   them.  You know, I don't want to -- I'm not trying to show

8   off here.  Yes, I got a lot of phone calls.

9        MR. BOLTZ:  Maybe it should be explained, if you do

10  not mind, why didn't you put friends into these two venture

11  capital private placements?

12       THE WITNESS:  Oh.  First of all, except for the

13  people that knew Mr. Duggan and had a chance to talk to him

14  directly, I didn't feel confident to make that decision.

15  That was not my charter.  Number two, I wasn't in a position

16  to make the decision.  They weren't situations that I had the

17  right to ask other investors into.  It wasn't my role.

18       BY MR. DUNBAR:

19    Q  Have you ever put these investors into any other

20  ventures other than stocks?

21    A  No.

22    Q  So, to NAA Financial, in '88, '89, to your personal

23  account at NAA Financial, with the $12,000,000 to $15,000,000

24  transfer, have you ever transferred any other -- other than

25  the transfer over between accounts and the initial transfer



                                                                      Page 231

1   of the $15,000,000 to $17,000,000 at the beginning?

2     A  Would you be more specific on what you're aski[ng?]

3     Q  Well, have you ever deposited money, more m[oney?]

4   into that NAA Financial account?

5     A  Yes.

6     Q  When or how often?

7     A  It's been a long time.  I don't remember the last

8   time, but it's been a long time.

9     Q  Okay, when was the last deposit, other than a

10  transfer or --

11    A  Maybe 1990 or '91, something like that.  I'd hav[e]

12  to look. 

13    Q  Did you ever transfer money from your person[al]

14  account to the friends account in NAA Financial?

15    A  No.

16    Q  Have you ever?

17    A  No.

18       MR. BOLTZ:  Maybe just another clarifying que[stion]

19  if I may, that -- did you ever use the friends' or the

20  investors' money, even temporarily, to invest personall[y,]

21  your personal --

22       THE WITNESS:  No, I had my own funds.  It w[asn't?]

23  necessary, ever.

24       BY MR. DUNBAR:

25    Q  So, this is correct.  In the last ten years you



                                                                      Page 232

1   have not made a deposit to either of the accounts in NAA

2   Financial?

3     A  I have not.

4     Q  All right, for the friends accounts how do you

5   allocate the stocks?  Walk me through that process, now that

6   we are at NAA Financial.

7     A  Okay.  I have -- I know exactly how much money is

8   there and I know exactly what it's invested in.

9     Q  In NAA Financial?

10    A  Yes.  I know -- the allocation process is

11  essentially done, three criteria.  The first one is to use

12  this 5 percent, and it's a maximum.  And sometimes we buy

13  things in pieces.  I don't buy it all in one day.  You know,

14  so it sometimes takes over time, so it might be 1 percent,

15  then two percent, then 4 percent.  Okay, you could see that in

16  the statement.

17    Q  Right.

18    A  And the idea is that I want to buy 5 percent of

19  this particular -- I want each person to have 5 percent of

20  this stock.  And, so, I add up the amount of money that is

21  and how many shares that is and I buy that many shares --

22  that simple.

23       MR. BOLTZ:  When you say "5 percent," you do not

24  mean 5 percent of the stock outstanding, or anything like

25  that.  You mean 5 percent of --



                                                                      Page 233

1        THE WITNESS:  -- positions.  I think it's clear

2   what I'm saying.

3        MR. BOLTZ:  Yeah.  You started to say three

4   criteria.  What are the other two?

5        THE WITNESS:  Oh, I'm sorry.  Did you want me to

6   clarify something on that first?

7        MR. DUNBAR:  Yes, please, sure.  Oh, no, no, go

8   ahead, go ahead with the next two criteria, yes.

9        THE WITNESS:  Okay, the second one is, if someone

10  has just started I make a decision of which stocks -- they

11  may not buy stocks that we already own, because of the change

12  in their value at this time.

13       BY MR. DUNBAR:

14    Q  New person?

15    A  A new person.  So, one of the criteria, when is

16  this a -- it's a category that we talked about, a new person.  If

17  we had a stock that we bought in February, and it had -- and

18  now it was September, and that stock had moved significantly

19  or it was in a position where I didn't feel it was

20  appropriate to allocate, or to buy or purchase anything of

21  that, I didn't do it.  So, they wouldn't own that stock.  And

22  you'll see this when you see the unrealized gains of theirs.

23  They're not all exactly the same by a long shot, okay, for

24  that reason.  Timing is the second criteria.

25       MR. BOLTZ:  That is what you are saying is timing?



                                                                      Page 234

1        THE WITNESS:  Timing, yeah.  I could have just

2   said timing.  It would have been great, huh?  And the third is

3   risk.  And I can elaborate if you want.

4        MR. DUNBAR:  Yes, elaborate.

5        THE WITNESS:  This would come under the heading of

6   how invested we should be at any given time in the cycle,

7   market cycle.

8        BY MR. DUNBAR:

9     Q  And does this apply to everyone?

10    A  Yes.

11    Q  Do you make risk kind of analyses on individual

12  people?  Like, will you not put them in a certain stock for

13  risk reasons, for individual people?

14    A  I'm not sure I understand.

15    Q  You mentioned earlier that sometimes -- I believe

16  you said that there have been accounts where you have not

17  accepted because you did not feel that they could maintain

18  the risk of the market.

19    A  Yes, that's true.

20    Q  Would you ever make an evaluation of a person and

21  decide not to put them -- put them in more conservative

22  stocks?

23    A  No.  We only know the ones we know.  It's just a

24  question of how invested we want to be relative to the

25  situation at the time.



                                                                      Page 235

1        MR. BOLTZ:  In other words, once you decided to

2   take the account of the investor you would treat them

3   uniformly?

4        THE WITNESS:  Uniformly, yes.

5        BY MR. DUNBAR:

6     Q  Have you ever turned down an account, other than

7   for the purposes of since -- have you ever turned down an

8   account?

9     A  Yes.

10    Q  For what reasons?

11    A  Lots of reasons.  I didn't think the person -- it's

12  either an older person or a person with a very small amount of

13  assets, and this was, I thought -- my decision was, for me,

14  was not willing to -- as much as I wanted to help them I

15  wouldn't take -- didn't feel comfortable about it.  I've been

16  approached by people I didn't know; institutions even;

17  individuals that got my name from somebody who heard that I

18  was this or that and this or that.  I wasn't ever looking for

19  anybody except people that were associated with the church,

20  who came to me.  You know, I never was looking for anybody.

21  So I turned down a lot of people.

22    Q  And what was your criteria to take an account?

23    A  Primarily it was someone who was associated with

24  the church, who was working to help the church.

25    Q  And when you say "primarily," you are talking in



                                                                      Page 236

1   the beginning or --

2     A  Always.

3     Q  Or always.

4     A  Yeah.  I mean, as you'll see on this here, a guy

5   has an account for his son.  I mean, it's a relative; you

6   know, I would do that.

7     Q  So, walk me through again, let's say somebody wants

8   to -- you talk to somebody, they say please invest my money

9   for me, and you say fine.  What happens?

10    A  Well, I don't just say fine.

11    Q  Or, I mean -- what happens?  You eventually agreed

12  that you will invest their money for them.  What happens

13  next?

14       BY MR. MURPHY:

15    Q  Well, let's go -- before you mentally agree, is

16  there a step that you have not described?

17    A  Yeah, it's a big step.

18    Q  What is the step?

19    A  I mean, I tell them -- I mean, I want to know who

20  this person is.

21       BY MR. DUNBAR:

22    Q  Okay, so let's start from, let's say somebody

23  approaches, and you have known them from some way or

24  another, and they say, "I'd like to invest my money with

25  you."  And then what happens?



                                                                      Page 237

1     A  I'd say, "Do you know what my purpose here is?  Do

2   you know what I'm doing here?  Do you know what I'm up to?

3   Why I'm doing this?"  And I explain to them.  And I ask them

4   what they're doing in the church -- what are their

5   activities, what is their current contribution?

6     Q  And, so, you have a meeting with each investor?

7     A  Well, I certainly talk to them, yeah.  It's a 

8   meeting, yes.

9     Q  So each one you have spoken with before, they have

10  invested their money?

11    A  Absolutely.

12    Q  And is it a formal conversation that you have?  I

13  mean, do you always say meet me at this time or can it just

14  occur at a social event or --

15    A  I'd say that, you know, mostly we -- I'd want to,

16  you know, get together and talk it over, yeah.

17    Q  And when you talk with them, after -- next step?

18    A  Well, you know, I sort of make my -- decide whether

19  I think this is someone I think is going to make a difference

20  in what we're doing.  And if it is then I'm willing to go

21  forward and, you know, answer their questions.

22    Q  And do they ask questions?

23    A  Yeah, what do you do?  How do you do it?  What do

24  you charge?  You know, what's the arrangement?  Some of your

25  standard investor type questions.



                                                                      Page 238

1     Q  And how do you answer; what do you tell them?

2     A  My purpose is to help the Scientologists who have

3   their attention away from their money and they're helping the

4   church.  And that's the main thing.  And that we have a

5   letter agreement, and that I will be investing the money in

6   stocks I've researched.  And I talk about the -- my own

7   personal goals and why I'm doing this.  Now, they may ask me

8   lots of questions.  I mean, you can imagine, lots and lots of

9   questions.  But those are originated by them.

10    Q  And when they ask you how much do you charge wh[at]

11  do you tell them?

12    A  I say I don't charge anything.  There's no

13  requirement of any kind.

14    Q  Do you tell them anything else?

15    A  About?

16    Q  Like, do you mention that some people give me gifts

17  or --

18    A  No.

19    Q  Do you mention anything about compensation or --

20    A  I mean, if they ask me a direct question about

21  somebody else, you know, I usually say take it up with them.

22    Q  You mean, like if they say they are giving you --

23    A  Well, they may know me.  I'm just thinking of a

24  time, you know, so-and-so sent you a case of wine, or

25  something.  And I said, talk to them.  You know, it's not my



                                                                      Page 239

1   -- there's no requirements at all here.

2     Q  Okay, so you have this meeting; and then what?

3     A  Well, it's kind of odd because I give them the -- I

4   send the letter out to them and say, when you're ready, if

5   you want to do this, send it back signed with a check.

6     Q  You are talking about Exhibit Number --

7     A  Is this 29?

8     Q  -- Number 5.

9        MR. BOLTZ:  Five.

10       BY MR. DUNBAR:

11    Q  Exhibit Number 5.  You say that this is the letter yo[u]

12  send to them?

13    A  Yeah.

14    Q  Do you send a cover letter too?

15    A  No.

16    Q  And where do they send the money to?

17    A  They send it back to our office or they wire it to

18  the bank.  Occasionally, they ask for wire instructions.

19    Q  And you tell them to wire it to the --

20    A  -- friends account.

21    Q  -- the friends account?

22    A  Yes.

23    Q  And, so, they send the money back -- they first

24  invest, they send it to the office address.  Then what

25  happens?



                                                                      Page 240

1     A  Then what happens to what?

2     Q  The money.

3     A  It goes into the friends account.

4     Q  Well, who -- you receive it.  Who deposits it?

5     A  I -- well, I put it in an envelope with a deposit

6   slip and send it down to the bank.

7     Q  And do you make a mark somewhere, do you note it,

8   do you --

9     A  Send a copy to Phyllis so she knows that --

10    Q  Oh, a copy of the check?

11    A  Yeah, oh, yeah.

12    Q  And you send it to Phyllis?

13    A  And I think you've got copies of all those checks,

14  yeah.

15    Q  So, then it goes into the friends account?

16    A  Right.

17    Q  Do you send a copy of the check anywhere else?

18    A  Did I send a copy of the check anywhere else?  I

19  don't think so.

20    Q  Or do you notify anybody else with regards to --

21  that this person is beginning to invest with you?

22    A  I don't at that time notify anybody, at that time,

23  no.

24    Q  Does anybody else notify anybody else?

25    A  At that moment?



                                                                      Page 241

1     Q  Yes.

2     A  I don't think so.

3        MR. BOLTZ:  Well, Ms. Janu, when does she --

4        THE WITNESS:  Well, at the end of the month, I

5   mean, she gets reconciliations from Ms. Rogers, and then she

6   gets the information from her.

7        BY MR. DUNBAR:

8     Q  Okay, so now Ms. Rogers has a copy of the check,

9   which she will check against the bank statement that comes

10  in; is that correct?

11    A  Right.

12    Q  So, we have the new investor's money into the

13  account.  Then what?

14    A  Then I -- there's an allocation step at NAA.  And

15  then I, when I'm doing my general purchases into the account,

16  I make sure and buy stocks for them.

17    Q  And how often do you make purchases or trades?

18    A  I think you have copies of the statements.  You can

19  look at it.  It's very -- it's sporadic.  It's right there,

20  it's all there.

21    Q  But how often do you make trades, would you say?

22    A  I could look at the statements and tell you.  I

23  mean, sometimes you go weeks without doing anything;

24  sometimes you do things right away.  I think -- what, you

25  mean monthly, yearly, weekly?



                                                                      Page 242

1     Q  Monthly?

2     A  Monthly.  I mean, probably -- it really varies.

3   I'm sorry, I can't give you an exact example.

4     Q  And so when this person's money goes into the

5   account, into the friends account, before they actually own

6   any stocks, I mean, do you invest their money right away or

7   does it depend on when you think it is a good time to get

8   into the market, or how does that work?

9     A  Interesting question.  If we're ready to buy the

10  stocks we buy them.  If we're not ready we wait until we're

11  ready.  Simple answer.

12    Q  And when you go to buy a stock you said you figure

13  out what is 5 percent for everybody for their personal

14  accounts.

15    A  Right.

16    Q  Do you look to see who has not been invested yet

17  and say, well, we need to get that person --

18    A  Oh, okay.  Let me clarify your question.

19    Q  Yeah, go ahead.

20    A  I'm trying to make sure I'm answering the right

21  question.

22       MR. BOLTZ:  Yeah, that is fine.

23       THE WITNESS:  I think you're asking what the

24  allocation procedure is, or what the buy and sell decision

25  procedure is, in terms of timing.  Is that what you're asking



                                                                      Page 243

1   me?

2        BY MR. DUNBAR:

3     Q  Well, I am asking both.

4     A  Okay.  Well, I'll just take something that's

5   relatively -- should I just give him an example or just --

6     Q  That would be great, yeah.

7        MR. BOLTZ:  Sure.  He is trying to trace a new

8   account, as to the process when new comes in.

9        MR. DUNBAR:  Right, right, just the whole process

10  of how it gets --

11       THE WITNESS:  Okay, so, we have our portfolio.

12  This is the stocks that we know, or that I know, if you want

13  to put it that way.

14       BY MR. DUNBAR:

15    Q  Right.  And you are talking about a portfolio that

16  has already been -- we are talking NAA Financial, friends

17  account, fully-invested account; is that correct?

18    A  Well, what I would call -- it's not always 100

19  percent invested, but fully-allocated, let's put it that way.

20    Q  Okay.  To your friends?

21    A  Right.  So, I look at the current stocks that we

22  own, and if they seem to meet the criteria for being buyable

23  at that time, then I purchase for them their allocation of

24  that particular stock.  Now, there might be one, two, three,

25  four, five, but there's always research going on for new



                                                                      Page 244

1   ideas.  That's what I do.  And, so, I might wait until we

2   prove out another position.  And, so --

3     Q  And what do you mean, prove out another position?

4     A  Well, fundamental research is a lot of running

5   around and validating the story and making sure that the

6   fundamentals are in place.  And I don't buy the stocks until

7   I feel that the company's prospects and our viewpoint on the

8   company is in a position where I would risk capital to put

9   money in there.

10    Q  So, when you purchase the stock -- I mean, you have

11  a new investor and their money is in the account, waiting to

12  be invested, and let's say no other money has come in.

13    A  That happens a lot, by the way, just like that.

14    Q  Where you just have, like, you will get --

15    A  Yeah.  You know, the last two years, particularly,

16  we have taken virtually no accounts, so it's been, you know,

17  just -- years before that, yeah.

18    Q  And, so -- what I am having a problem with is, you

19  said it is fully-allocated, all the stocks.  So, each friend

20  owns a particular piece of each stock that is in that NAA

21  Financial account?

22    A  It's a purchase for him in that account?

23    Q  Right.  Yeah, I mean, when you purchase a stock it

24  is for a particular person?

25    A  Right, right, exactly.



                                                                      Page 245

1     Q  And so, like if somebody has -- somebody just

2   invested money; they have money in the account.  And you go

3   to purchase the stock at NAA.  Are you purchasing it just for

4   that friend?

5     A  Right.

6     Q  And you are purchasing just is the amount that will

7   -- you know, give or take -- 5 percent, that that would be

8   that person's portfolio?

9     A  Exactly.

10    Q  Do you ever buy stocks that would be allocated to

11  more than one friend?

12    A  Yes.

13    Q  And, okay, here is something else I do not

14  understand.  You said you have not made a deposit in NAA

15  Financial in ten years.  And if those stocks are all

16  allocated to someone, and somebody invests within the last

17  ten years, how does that work?

18    A  Well, the sales are taking place over there also,

19  and there's plenty of capital to be allocated there, as well

20  as -- the capital is there.  So, it's easy to just make that

21  allocation there.

22    Q  But when you have a sale doesn't -- wouldn't that

23  money correspond to whoever owns that piece of the stock at

24  that time?

25    A  It does, yes, exactly.  But the money is not coming



                                                                      Page 246

1   out; it's being reinvested.

2        MR. BOLTZ:  I think what his question is, with a

3   new investor, or investors -- whether it is one or several [at]

4   a time -- let's say another $200,000 comes in, just as an

5   example.  Then where does that money go, or how does it [?]

6   into NAA to be invested in stocks?

7        THE WITNESS:  Yes, it's already in NAA.

8        MR. DUNBAR:  Right.

9        MR. BOLTZ:  Well, if it is new money, how can [it be?]

10  already in NAA?

11       THE WITNESS:  Because it's -- this allocation

12  procedure.

13       MR. BOLTZ:  Well, you have to explain that.

14       THE WITNESS:  I'll explain it.

15       MR. BOLTZ:  If it is new money -- I think that is

16  what you are asking, isn't it?

17       MR. DUNBAR:  Right, yeah.

18       THE WITNESS:  Do you want me to take a break [?]

19  explain it to you, and we'll go through it --

20       MR. BOLTZ:  No, that is not necessary, unless y[ou]

21  want to?

22       THE WITNESS:  Well, I mean, I just want to ma[ke]

23  sure that I'm --

24       MR. BOLTZ:  -- doing it right.

25       THE WITNESS:  -- doing it right, you know.



                                                                      Page 247

1        BY MR. DUNBAR:

2     Q  Why don't you just explain to me how it works?

3     A  Essentially, since I'm -- when the money arrives

4   the money is allocated in NAA to that person.  It's allocated

5   to them; it's theirs, allocated to them.  It's cash in their

6   account.

7     Q  So you are talking about -- I mean, okay, let's

8   start with somebody who already is an investor, and they [?]

9   stocks; you purchased stocks for that person with their

10  money.  I mean, I understand that -- we will go back to t[?]

11  allocation thing.  So, they own 200 shares of Emisphere, [?]

12  shares of another stock.  And, so, in their account, when

13  they would receive their unrealized gains and losses

14  statement they could see what their positions are?

15    A  Correct.

16    Q  In addition, when they receive their realized gain[s]

17  and losses they would see what was bought and sold for [?]

18    A  Right.

19    Q  Now, that money that was bought and sold for th[?]

20  their realized gains, is not sent to them unless they requ[est]

21  it.

22    A  Correct.

23    Q  So, that stays in the account?

24    A  Correct.

25    Q  Now, theoretically, isn't that money theirs?



                                                                      Page 248

1     A  Yes.

2     Q  And so when that money gets reinvested, wouldn't

3   the new stocks purchased with that money be their stocks?

4     A  I see what you're saying now, okay, okay.

5        MR. BOLTZ:  Be sure you understand.  In other

6   words, if --

7        THE WITNESS:  I do understand.

8        MR. BOLTZ:  Let's just, as an example, if there is

9   $120,000,000 in their account at NAA, and that represents the

10  money of, let's say, 200 people; now you get two more people

11  coming along, and they put in $100,000.  This money is still

12  the money of the 200.  And what you still have not explained

13  is how that additional $100,000 gets invested into NAA.  How

14  does the money find its way from Union Bank to NAA?

15       THE WITNES:  That is the allocation process back

16  with my account.

17       MR. BOLTZ:  Well, explain it.

18       THE WITNESS:  In other words, I say we do this

19  adjustment at the end of a period, on how the money needs to

20  be allocated back and forth between the two accounts at NAA.

21       MR. BOLTZ:  All right, so, if it is $100,000, then 

22  $100,000 goes from your personal account at NAA --

23       THE WITNESS:  Right, right, correct.

24       MR. BOLTZ:  -- into the friends account, and then

25  you order it to be invested --



                                                                      Page 249

1        THE WITNESS:  Exactly, exactly.

2        MR. BOLTZ:  -- in either some of the existing

3   stocks, if they are still buyable, or new stocks?

4        THE WITNESS:  Right, yeah, I thought I explained

5   that, yeah.

6        MR. BOLTZ:  Well, you did not.

7        BY MR. MURPHY:

8     Q  No, because we thought -- I thought there was no

9   money going from your personal account into the friends

10  account at NAA.

11    A  Oh, I'm sorry, I misunderstood the question.  I

12  consider it their money at that point.  So, it's their money

13  that's moving over, through my account.  I'm sorry, that was

14  a -- I'm not subsidizing that account.  That's what I thought

15  you meant.  In other words, I'm not keeping my money in their

16  account; I'm only keeping their money in that account.  But

17  if I have to move money over there it goes from my account to

18  that --

19       MR. BOLTZ:  It is an offsetting adjustment.

20       THE WITNESS:  It's an offsetting adjustment.

21       BY MR. MURPHY:

22    Q  So, if somebody gives you $1,000,000 here, into the

23  friends account at Union Bank, you transfer $1,000,000 from

24  your personal account --

25    A  Exactly, yes.



                                                                      Page 250

1     Q  Is that what happens?

2     A  Yeah, that's exactly -- I thought I explained that

3   earlier, that it was offset -- every so often we do an

4   offsetting adjustment as money comes in.

5        BY MR. DUNBAR:

6     Q  So, that is how you maintained those two accounts?

7     A  Right.

8     Q  You never ever sent -- in the last seven years you

9   have never sent money over --

10    A  Right.  We don't do the back and forth, exactly.

11    Q  Okay, so now you have, you know, let's say, the

12  $100,000 in the friends account.  What happens then to that

13  money, since it is already -- $100,000 came in and you made

14  the adjustment.

15       MR. BOLTZ:  So, it is now in the friends account at

16  NAA.

17       THE WITNESS:  Right.

18       BY MR. DUNBAR:

19    Q  Now it is in the friends account at NAA, but it is

20  also in the friends in Union Bank?

21    A  Okay, we need to talk about the accounting here.  I

22  think this is what I needed to go into here, how carefully we

23  do this.

24       MR. BOLTZ:  Yes, I think that is exactly right.

25       THE WITNESS:  I need to explain to you, you're --



                                                                      Page 251

1   and, like I say, you don't have this now, and I'm sorry,

2   because I guess you thought you asked for it.  We didn't

3   withhold it from you, this stuff about the unrealized gain

4   report.  You're going to have this material in a day or two.

5   You know, you take a look at that, you take a look at the

6   realized gain reports, take a look at the quarterly

7   statements.  You know, I have really been meticulous about

8   the way we keep these records, okay.

9        So, we very carefully make sure there's a deposit

10  to that person's account.  When the stocks are bought he's

11  allocated his stocks.  And each person, when he sells his

12  stocks, we then give him a credit in his account for the sale

13  of the stocks.  Every person has their own individual, very

14  carefully kept account.  And, so, for our purposes, the

15  procedure is as if we're just investing for each one of these

16  people separately.  That's how we keep track of it.  This is

17  not some, you know, up in the air, we'll have to see where it

18  lands.  We know exactly how many shares we buy and we

19  allocate it exactly for their account.  In each case they

20  only make those adjustments back and forth based on money

21  that came in or goes out.  But it's done very specifically

22  for the person.  It's not -- in other words, it's as if it

23  was just in their account.  That's the concept.

24       MR. BOLTZ:  All right, and I think you still need

25  to explain that, you know, under this hypothetical situation



                                                                      Page 252

1   that [we are?] using of $100,000, I think, where $100,000 of an

2   investor's money went into the Union Bank friends account.

3        THE WITNESS:  Right.

4        MR. BOLTZ:  And then you moved $100,000 from NAA

5   personal to NAA friends account --

6        THE WITNESS:  Right.

7        MR. BOLTZ:  -- which was then invested.  Well,

8   then, did you also make an offsetting or an entry deleting --

9   what happened to the $100,000 that was in the Union Bank

10  account, the friends?  How was that accounted for?

11       THE WITNESS:  Okay.  Every month people take money

12  out of the accounts.  You've seen that on the statements.

13  Okay, so at the end of the month there's a net number in the

14  Union Bank account of how [much?] was taken in or nets out in

15  that account from people taking money out.  So, that $100,000

16  would be gone, perhaps, by the end of that month or that

17  quarter.

18       BY MR. DUNBAR:

19    Q  Sent to investors?

20    A  Send to another investor, exactly.

21       MR. BOLTZ:  But from an accounting standpoint --

22       THE WITNESS:  From an accounting standpoint we have

23  it separated by person.  But the Union Bank account, there's

24  an accommodation to allow us to make these deposits and

25  withdrawals.



                                                                      Page 253

1        MR. BOLTZ:  So, if you are talking about Mr. Jones

2   who put in $100,000, he would not still be shown to have

3   $100,000 in both place?

4        THE WITNESS:  No, not in Union Bank.  He wouldn't

5   have it in both places.  So, if that's what you're asking me

6   the answer is no; he wouldn't have it in both places.

7        MR. BOLTZ:  But the $100,000 that went into the

8   Union, then after that accounting adjustment was made to show

9   it comes out of the Jones account, it would still be there

10  physically --

11       THE WITNESS:  Physically there.

12       MR. BOLTZ:  -- and used for other withdrawals.

13       THE WITNESS:  Other withdrawals, or whatever,

14  exactly.

15       BY MR. DUNBAR:

16    Q  Let me just clarify this one more time.  You know,

17  the person makes $100,000, it goes into the Union Bank

18  account and you make the adjustment.

19    A  Right.

20    Q  So, theoretically, that $100,000 is now yours?

21    A  Theoretically, it's mine.  But we use that account

22  to keep track of the money we send out and receive from the

23  friends.  So, money does not leave there or go into there, as

24  a rule, except to accommodate those particular transactions.

25    Q  So, how does that $100,000 at this point get to



                                                                      Page 254

1   your account, or does that $100,000 become your money?

2     A  Okay, I'm not sure I understand exactly what you're

3   asking me here.  Just let me try and follow your logic.

4   It's already my money in the sense that it's in that account.

5     Q  Right.  Well, it is in the friends account.

6     A  Right, but it's -- you see, that --

7     Q  Where do you make a notion to that?

8     A  I feel like we're going around in a circle.

9        MR. BOLTZ:  Well, how do you account for --

10       THE WITNESS:  In other words, it's -- from out

11  accounting standpoint, we have the assets and cash and

12  securities in NAA.  The accounts here are used as a facility

13  to accommodate the deposits and withdrawals.  But outside of

14  the bookkeeping on the individual accounts and how we keep

15  track of it, no other adjustment takes place.  That's how we

16  do it.

17       MR. BOLTZ:  So, is there a bookkeeping entry, then,

18  that on the $100,000 that is still in the Union Bank friends

19  account, and now that you have moved the money over from NA[A]

20  personal to NAA friends of that amount, then what is the

21  bookkeeping entry that takes place and who makes it?  In

22  other words, of that $100,000 that is at the Union Bank is

23  there a bookkeeping entry that moves that money to another

24  account?

25       THE WITNESS:  Theoretically, that would happen,



                                                                      Page 255

1   ultimately.  We don't tend to do that.

2        MR. BOLTZ:  You do not physically move it.

3        THE WITNESS:  Don't physically move it.

4        MR. BOLTZ:  I know, you explained that part.  But

5   is there a bookkeeping entry that credits that money to --

6        THE WITNESS:  By definition it is in that account.

7   That account is in my name.  So, if I were to liquidate

8   everybody right now, okay, all the dollars would end up in

9   people's hands and there would be money left over, and what

10  was left over belonged to me.  I mean, I never thought of

11  that.  It doesn't work that way, because it's done on the

12  books.  And so theoretically, you're right, that money would

13  belong to me, except I don't go -- I don't do that on this

14  end.  That's a fact.

15       MR. BOLTZ:  But you have got records that show that

16  the $100,000 that you put from your personal account over in

17  NAA --

18       THE WITNESS:  Absolutely.

19       MR. BOLTZ:  -- that that really is --

20       THE WITNESS:  It's over in the friends account over

21  there.

22       MR. MURPHY:  And you could bring in the bookkeep[ing]

23  records the next -- bring in the set of books and explain it

24  to us, you know, on another day.

25       THE WITNESS:  If you want.



                                                                      Page 256

1        MR. MURPHY:  Yeah.  At some point, you know, you

2   can explain the way --

3        THE WITNESS:  I understand now where you are headed

4   on this and I --

5        BY MR. DUNBAR:

6     Q  Well, you know, if somebody, let's say, made a

7   $50,000,000 deposit and it would go into the friends account,

8   you would move $50,000,000 over from your personal account.

9   So, your personal account up there would be $50,000,000 less.

10    A  Theoretically, you're right.

11    Q  Right?

12    A  Yes.  And it's on the books, it's true, yes.

13    Q  And the $50,000,000 would be in there, that would

14  be sent out investors and everything --

15    A  Yes.  I mean, I guess I could -- you know, that's a

16  good point.  I guess I could go back and make that change

17  every time something like that happened.  I just don't do it.

18  Except we do it in the bookkeeping we have it.  I just don't

19  do it physically.

20    Q  Right.  And when do you do the bookkeeping?

21    A  Quarterly.

22    Q  Quarterly?

23    A  Yeah.  I mean, you can look at the statements; it's

24  all there.

25       MR. BOLTZ:  Is this a good time?



                                                                      Page 257

1        MR. DUNBAR:  This is a good time, break for lunch.

2   Off the record.

3     (Whereupon, at 12:42 p.m., a luncheon recess was taken.)

4              * * * * *

5           AFTERNOON SESSION  

6        MR. DUNBAR:  Back on the record after lunch at 1:56

7   p.m.

8        BY MR. DUNBAR:

9     Q  We left off with the discussion with how the money

10  goes, and just one quick question back on that.  With regards

11  to physical amounts, if an investor -- let's say you get

12  three investors; all send you a check for $100,000, let's

13  say, and it goes into the Union Bank friends account.  Do you

14  then physically transfer $300,000 between the Swiss accounts?

15    A  That transfer is done.

16    Q  So, you would call -- you would pick up the phone?

17    A  You would pick up the phone, yes.

18    Q  And call Switzerland or --

19    A  Yes, or wherever the number I'm supposed to call

20  is.

21    Q  Do they have an office in the United States?

22    A  No.  It's always over there.

23    Q  So, your phone bill is always to Switzerland?

24    A  Right, right.

25    Q  And say you transfer $300,000.



                                                                      Page 258

1     A  Yeah, we would -- it's exactly that.

2     Q  Do you ever take -- either work [it] out where it is

3   a net or does --

4     A  Yes, I think it's sometimes a net.  But it depends

5   on the timing.  You know, it's like trying to be as specific

6   to the day we can, but I can't say we do it every single --

7   the next morning.

8     Q  So, it varies?

9     A  It might vary.  But the person gets credit for it

10  instantly.

11    Q  Does your friends account at Union Bank receive

12  interest?

13    A  Yes.

14    Q  And how does that work?

15    A  Okay, I need you to be more specific on that

16  question.

17    Q  Well, how do you divide the interest up among the

18  friends?

19    A  We have a money market interest rate that we are

20  given -- you know, that we make in the bank.  We use that as

21  our standard for interest.  And from the date of deposit any

22  funds that are not invested that are in the money market, or

23  from a bookkeeping standpoint not in the market, get the

24  money market interest rate.  And you see those reports

25  associated with the tax returns, and you've got them.  That's



                                                                      Page 259

1   where that number comes from.

2     Q  Sent to your friends?  Is that what you are saying,

3   the tax report sent to friends?

4     A  Yes.

5        MR. BOLTZ:  So, regardless of when the accounting

6   adjustments are made with NAA --

7        THE WITNESS:  They get the interest from the date.

8        MR. BOLTZ:  -- they would get the interest from the

9   date of their deposit.

10       THE WITNESS:  Date of the deposit, right.

11       BY MR. DUNBAR:

12    Q  Which is the bank's money market rate?

13    A  Bank's money market rate, correct, which varies, as

14  you know.

15    Q  And what amount of money do they get the rate on --

16  the money that is not invested, like a particular amount of

17  money not invested?

18    A  Uninvested capital by days, by quarter.

19    Q  And the uninvested capital is what is separated --

20    A  It's not in the securities.

21    Q  Right.  In the NAA Financial account in

22  Switzerland?

23    A  Well, it's the accounting, the bookkeeping that

24  belongs to that person.  Whether the funds - whatever the

25  funds happen to be, that's their account -- we keep it



                                                                      Page 260

1   segregated in that sense -- and that they get interest on the

2   money that they've got in the account, as cash.

3     Q  And that is daily?

4     A  It's by month, daily, yes.  And Ms. Janu would have

5   that exactly, but I'm -- that's my understanding.  It's by

6   month, I know that.  But we do it -- if a guy gets funding in

7   on the 15th of the month he'd get the fifteen days.

8     Q  And with regards to dividends?

9     A  Dividends are allocated exactly according to the

10  ones that we receive for the shares that they receive.

11    Q  And with regards to this entire setup and how it

12  works, why do you have a set up like that?  Why don't -- when

13  an investor sends money, why don't you just send it straight

14  to their account in Switzerland?

15    A  Well, I've tried to keep -- my own standpoint of

16  security and confidentiality I've tried to keep the number of

17  transactions to a minimum.

18    Q  And this, you feel, is at least the way that you

19  could keep the transactions to the bare minimum?

20    A  Yeah, I've tried to do that.

21    Q  And why is that?

22    A  That was my decision about this whole concept of

23  confidentiality and security.

24    Q  And you mentioned that you send statements to each

25  friend who has money invested with you.  And what statements



                                                                      Page 261

1   do you send and when?

2     A  We send out a quarterly letter indicating the

3   change in the value of their account.  And it goes out

4   usually after we've finished our accounting after the end of

5   the quarter.

6     Q  And what else do you send?

7     A  We -- you mean, like, at the end of the year?

8     Q  Yeah, at the end of the year.

9     A  We send them their -- the activity that they need

10  to have, as I explained before, their -- I guess it would be

11  the -- what they would use for their taxes, or their tax

12  reports.

13       MR. BOLTZ:  Well, year end they would get a

14  realized gains and loss statement --

15       THE WITNESS:  Yeah.

16       MR. BOLTZ:  -- as well as unrealized?

17       THE WITNESS:  The unrealized is up to them, but

18  it's always available.

19       MR. BOLTZ:  Okay.

20       BY MR. DUNBAR:

21    Q  I am not going to hand you what has been previously

22  marked as Exhibit Number 10, dated October 15th, 1999, with

23  the heading of Charles A. and Sally B. Culloden.  Do you

24  recognize this document?

25    A  I do.



                                                                      Page 262

1     Q  And what is it?

2     A  It is a copy of a statement that was sent to

3   Charlie Culloden last fall.

4     Q  Is this similar in nature to the quarterly

5   statements sent to all investors?

6     A  Yes.

7     Q  The date at the top says October 15th, 1999, at

8   fifteen days after the last statement.  Is that generall[y]

9   when the statements are sent?

10    A  No.  Sometimes it's later or earlier.  It just

11  depends on when we get the work done.

12    Q  In regards to page 2, Bates-stamped RS 00775, [can?]

13  you explain that?

14    A  [I can.]  We keep a copy of all the statements sent

15  to the person on a quarterly basis.  When we were reques[ted]

16  to supply all those statements we found that some of the[m]

17  were not filed properly.  And we felt, in the interest of

18  making sure that we got the information to you, we sent [out?]

19  sort of a -- this is a transaction printout of all the -- in

20  other words, each of the month's net changes are in here;  [?]

21  could be extrapolated from this.  Even though we couldn['t]

22  find the '97, I guess you couldn't find the '97, '98

23  statements.  For some reason they were filed wrong, or

24  whatever, and this was just to supply you with the

25  information that would be on these quarterly statements.



                                                                      Page 263

1     Q  Did you generate this report for every investor[?]

2     A  Yeah.

3     Q  What type of program do you use for this?

4     A  I gave it to you last time.  It's called RB Files.

5     Q  Sorry.

6     A  Yeah.

7     Q  Did you ever send this to an investor?

8     A  Possibly, but I don't think so, not generally.

9     Q  If you look at the last line of RS 00775, just to

10  clarify, it says 11449; what is that?

11    A  Well, it says at the top of the page it's the

12  account number.

13    Q  And when it says negative $3,546, what does t[hat]

14  mean?

15    A  Well, it says profit or loss for August.

16    Q  Is that just for August or for the --

17    A  Well, it says profit or loss for August.  That's

18  what it says.

19    Q  So, each month you have a profit or loss?

20    A  Yeah.

21    Q  And who maintains this file?

22    A  Ms. Janu does.

23    Q  Do you assist her in maintaining this file?

24    A  Do I assist her?  Do you mean do I tell her what

25  numbers to put in there?  Do you mean do I put numbe[rs in?]



                                                                      Page 264

1   myself?  I don't know what you mean by assist her.

2     Q  Yeah, do you put numbers in yourself?

3     A  No, I don't do that.

4     Q  Do you ever tell her what numbers to put in?

5     A  I don't tell her what numbers to put in.  This is

6   based on what's in the account.

7     Q  So, this is sort of raw data for each account?

8     A  Yeah.  I mean, I supplied it to you because we

9   couldn't find the printouts.

10    Q  Do you recall when this person first invested with

11  you?

12    A  No.  It looks like it might be 9/96, doesn't it?

13    Q  Would this report generate when they first

14  invested?

15    A  Yeah.

16    Q  So, this is their -- if you produced this for every

17  investor it would start with their first day?

18    A  Yeah.

19    Q  So, they had money invested, $50,000, 9/1/96?

20    A  That's what it says.

21    Q  And then, I guess, so, for the first quarter it

22  appears their money -- well, explain that, those zeros.

23       MR. BOLTZ:  What is the question now?

24       BY MR. DUNBAR:

25    Q  The question is, it appears they invested $50,000



                                                                      Page 265

1   9/1/96.  And then -- oh, I see, there are seven -- well, is

2   that zeros?  That is previous, before they invested?

3     A  In other words, that -- I'm sorry, the reason

4   there's zeros is because the program -- I guess she must -- I

5   don't know what she did exactly.  It's possible that this

6   money came in at the end of August, I believe.  And by

7   putting August in the program it probably spit it out by

8   quarter.  So, it started with July.  That's what I'm guessing

9   that's why the zeros are there.  Oh, here it says 8/21.  So,

10  what probably occurred is that the --

11    Q  8/21 or 8/31?

12    A  I think it says 8/21.  Am I reading it wrong?

13  Here.

14    Q  Oh, I see, wire in, 8/21/96.

15    A  Yeah.  So, I think maybe the program is built that

16  whatever quarter there is a starting point it gives the whole

17  quarter.

18    Q  Who built this program?

19    A  It's an off-the-shelf program.  We had some

20  modifications done to it, I believe, but it was off the

21  shelf.  So, since it started in the end of August, my

22  assumption is that the adjustment was made -- or the

23  reconciliation was done at the end of September, and that's

24  where that number comes from.

25    Q  And when you say reconciliation what are you



                                                                      Page 266

1   referring to?

2     A  Well, you know, what stocks they own, how much they

3   made, what interest they made.  That's the net change.

4     Q  And if you go back to the first page, who generates

5   these reports, quarterly statements?

6     A  Who generates them?  In other words --

7     Q  Whose computer are they printed off of?

8     A  They're printed off of my computer at the Kellogg

9   office.

10    Q  And does Ms. Janu assist you in generating these

11  reports?

12    A  Yes.

13    Q  And in what way does she assist you?  I mean,

14  describe the process when these are made.

15    A  Yeah, okay.  I'm not sure of all the details.

16  Since we have all the information, has been entered --

17  deposits, withdrawals, gains, losses -- there's a utility in

18  the program that allows certain pieces of the data that's in

19  this raw data to be pulled off of that and put onto this

20  particular page.  It's a software utility.

21    Q  So, it gets down to a command; you, like, press

22  command and this will come out?

23    A  I've never done it myself, but I would assume

24  that's probably true.

25    Q  And who does it?



                                                                      Page 267

1     A  She does it.

2     Q  Ms. Janu?

3     A  Yeah.

4     Q  And, then, how do you assist her?  What do you do

5   in the process when she is -- when she comes to help generate

6   these reports?

7     A  I sign them.

8     Q  Do you do anything else?

9     A  Well, that's basically what I do.  I mean, I'm --

10    Q  So, you said these records are maintained by Ms.

11  Janu?

12    A  Right.

13    Q  And I believe last time you said --

14    A  If I said something that --

15    Q  No, no, no, I am --

16    A  -- just tell me, I'll clear it up.

17    Q  -- just trying to recall.  I think you mentioned

18  that Ms. Janu helps you generate these reports, right; you

19  guys generate them together?  Well, describe the process,

20  like, around, I guess, you know, right before these come out.

21  What happens?  Do you go see Ms. Janu, does she come see you?

22    A  She comes to Santa Barbara.

23    Q  She flies out?

24    A  Yeah.

25    Q  Every quarter?



                                                                      Page 268

1     A  Pretty much.

2     Q  And then what?  Because you said she maintains

3   these records.

4     A  Well, I mean, she gets the reconciliations from Ms.

5   Rogers about deposits and withdrawals.  And then she enters

6   all this, and then we print them.

7     Q  Does she enter all in New Mexico?

8     A  Probably some of the entry is done there -- I

9   think.

10    Q  I mean, does she fly out with a computer?  Does she

11  fly out with all these and you just sign them?  Or how do

13  these --

14    A  Okay, okay.  I just can't tell what the question is

15  sometimes.  You know, I just --

15    Q  That is probably my fault, but go ahead.

16       MR. BOLTZ:  Well, do not be bashful about asking to

17  clarify if you do not understand it, because we want to have

18  this clear.

19       THE WITNESS:  Yeah, I don't have any -- the RB

20  Files program existed on the computer in Santa Barbara.  And

21  through a utility, I believe called PC Anywhere -- I'm just

22  guessing now -- she was able to log in and do the work on it.

23  I think that's how it worked.

24       MR. BOLTZ:  And logged in from Albuquerque -- or

25  Santa Fe?



                                                                      Page 269

1        THE WITNESS:  From Santa Fe, yeah.

2        BY MR. DUNBAR:

3     Q  And where is it connected to?  You said she logs in

4   somewhere.

5     A  Well, if you understand how a modem works --

6     Q  Right.  Well, walk me through it.

7     A  So, say the program is in Santa Barbara.  It's not

8   dissimilar -- I'm trying to describe the technology.  There's

9   a communications program; it's called PC Anywhere.  Are you

10  familiar with this?  And you can call another computer, and

11  then you control the screen and the computer while you've

12  logged into it.

13    Q  So, she has this software -- so, she has the

14  ability to do this.  And what computer does she

15  access when she does this?

16    A  I'm not sure exactly which one it is.

17    Q  Is it one in your office?

18    A  Yeah.

19    Q  Can other people access your computers in your

20  office?

21    A  We have put a fire wall in, you know, for

22  confidentiality.

23    Q  Who is allowed to log in and access these

24  computers?

25    A  This particular computer, I believe it was just



                                                                      Page 270

1   her.

2     Q  And this particular computer had these files on

3   there?

4     A  Yeah.

5     Q  So, just you and Ms. Janu had access to these

6   files?

7     A  I'm not even sure even I have access to them,

8   particularly.  I'm not sure I would be able to sit down and

9   bring them up.  I'm not sure I would even know how to do it.

10    Q  Why do you maintain them at your place?  Why

11  doesn't she just keep them?

12    A  I think that's how it was originally set up.  I

13  don't know.  There's no -- I guess it could be.  I mean, we

14  could change that, but I've got to sign them anyway, so.

15       BY MR. MURPHY:

16    Q  How do you get from the -- if I could look at page

17  RS 775 of Exhibit 10 that is before you, the second page --

18  you know, the statement from Mr. and Mrs. Culloden?

19    A  Culloden.

20    Q  Do you see, it shows that they wired in $50,000 on

21  August 21, 1996?

22    A  Uh-huh.  (Affirmative response.)

23    Q  And then in September they had a profit or loss of

24  $2,535?

25    A  Uh-huh.  (Affirmative response.)



                                                                      Page 271

1     Q  How was that computed -- do you know -- the gene[ral?]

2   process?

3     A  Based on the stocks they bought and interest and

4   dividends that were -- that belonged to that particular

5   account.

6     Q  But how is that -- like, does the big account over

7   in NAA that has most of the stocks, you know, how do yo[u]

8   track that?

9     A  Okay, okay.  You had another statement over there

10  to show the tax statement, for example.  Let's bring that

11  out, just for --

12      BY MR. DUNBAR:

13    Q  The realized gains and losses?

14    A  Yeah, let's just bring that out for a second, okay?

15  This is pretty straightforward.

16    Q  Okay, now handing an Exhibit which has previous[ly]

17  been marked as Exhibit Number 6.  There are two of them

18  there.

19    A  This is a different program -- aha, apparently,

20  right?  Okay.  So, this is the program where the transactions

21  are entered for the individual securities, for the individual

22  accounts.  So, this would be the program that would be

23  accessed to -- for that individual person.  This is the

24  record keeping program.  This is the recording program.

25  That's basically the answer to your question.  So, this



                                                                      Page 272

1   number would be generated from this.

2        BY MR. MURPHY:

3     Q  I see.  So, the first step would be for the program

4   that generates Exhibit 6 would work on the record keeping?

5     A  Right.

6     Q  And who does that?

7     A  Ms. Janu does that.

8     Q  Oh, she does that from -- and how does she do --

9     A  She gets -- I tell her what stocks are bought.  She

10  records them and then they're in -- that's when that account

11  is set up.

12    Q  Oh, so you -- like, for example, on Exhibit 6, the

13  first line is:  Open date, 12/2/96.  Exhibit 6, just for the

14  record, is a statement for Betty Carlton for January 1, '98

15  through December 31st, '98.

16    A  Right.

17    Q  And then it is a summary of the whole series of

18  statements, is it?

19    A  A summary of the securities that were sold during

20  the tax year.  This program also, just to -- again, I'm

21  extrapolating, but when you get the statements that have the

22  unrealized gain reports on them it's the same program that

23  generates those.  And you'll get to see the whole history of

24  each of these accounts.

25    Q  So, if you could take me through that allocation,



                                                                      Page 273

1   you know, from when you buy a -- you do a transaction of

2   buying or selling a stock, and how do you allocate that out

3   to the -- how do you communicate down through your reporting

4   process?

5     A  Well, I know, for example, how many dollars in each

6   account -- I know the size of each account.  And I'm looking,

7   say, for a 5 percent allocation.  I've already this question,

8   didn't I?  I already answered this.

9     Q  Right.  So I am wondering about mechanically what

10  you do.  Now you have decided you are going to buy -- let's

11  say -- make a transaction.

12    A  Yeah.  So, let's take this account.  Take this

13  account right here.  Take Mr. Culloden's account.  Let's just

14  say we have an account here, $113,000, right?  Now, let's

15  just call it $120,000 for the purposes of conversation.  And

16  5 percent of that would be $6,000.

17    Q  Right.

18    A  Okay, so, I would say to Ms. Janu, we're going to

19  allocate $6,000 worth of Tupperware to Mr. Culloden's

20  account, based on my purchase of that particular stock, and

21  on the date --

22       MR. DUNBAR:  I am sorry, did you say "Ms. Janu"?

23       THE WITNESS:  Pardon me?

24       MR. MURPHY:  You tell Ms. Janu to allocate $6,000

25  worth of that stock to that --



                                                                      Page 274

1        THE WITNESS:  Yes.

2        MR. BOLTZ:  He did say that.

3        THE WITNESS:  I did say that, yeah.  And that's how

4   that gets on this page over here, which is -- you haven't

5   seen yet, but you'll see it.

6        BY MR. DUNBAR:

7     Q  Do you tell her this right when the purchase is

8   made or do you wait and do it all at once?

9     A  I do it pretty often.  I mean, usually weekly,

10  sometimes daily.  It depends on the situation.

11    Q  So, when you make a purchase you write it down on

12  your own little note pad?

13    A  Yeah, right.

14    Q  And eventually call Ms. Janu and say --

15    A  -- this is what we're doing.

16    Q  And then she inputs it?

17    A  Correct.

18    Q  How does this information get to this program?

19    A  I believe that it just generates it directly, and

20  then it's just entered over here.

21    Q  It just transfers --

22    A  Well, I think that there might have to be some data

23  entry that has to be put in there, but it comes from this

24  other side.

25       BY MR. MURPHY



                                                                      Page 275

1     Q  So, you are saying the realized gains and losses

2   information is used to generate through a program the

3   statement of account activity?

4     A  Both of them are.

5     Q  Both of them, realized and unrealized, yeah.

6     A  Yeah.

7        BY MR. DUNBAR:

8     Q  And Exhibit 6, this is sent to every investor at

9   the end of the year?

10    A  Correct.

11    Q  And going back to the Culloden account, which is

12  Exhibit Number --

13       MR. BOLTZ:  Exhibit 6, though, includes this --

14       MR. DUNBAR:  Plus Exhibit 10.

15       MR. BOLTZ:  Oh, I am sorry, you are correct.

16       THE WITNESS:  Yeah, I think he made the

17  distinction.

18       MR. BOLTZ:  Yeah, right, okay.

19       BY MR. DUNBAR:

20    Q  Going back to Exhibit 10, at the bottom of the page

21  it says:  "Please note:  The balances contained in this

22  statement are approximate and subject to change, based on our

23  yearly reconciliation."  What does the yearly reconciliation

24  mean?

25    A  Well, in general terms, the information that I



                                                                      Page 276

1   receive from NAA, or from brokerage house, subject to

2   keypunch error, wrong pricing.  You've probably seen this

3   happen.  I mean, we like to check them, make sure it's all

4   right.  So, there could be an error.  And I think it's sort

5   of a standard disclaimer, based on the fact that, you know

6   we check things very thoroughly.  I mean, to have somebody

7   pay taxes on something, we want to make sure it's right.  So,

8   that's what we're doing right now.  We're doing all the 

9   reconciliation for the whole year, for '99.

10    Q  Have you ever had a major difference?

11    A  I've seen some errors, yeah.  Yeah, I've seen

12  somebody get $500,000 when they sent in $5,000; seen that

13  happen.  I think that we got a phone call on that one

14  probably.  Those kind of things, I've seen that occur, where

15  we made a -- or there was a number on one of these, you know,

16  P and L's here that was transferred by human hand and the

17  decimal point was off, or a very typical sort of, you know,

18  keypunch error.

19    Q  How often does that happen?

20    A  Well, we're pretty thorough on the checking.  Ms.

21  Janu will tell you about that.  It's one of my important

22  points.  We're as careful as we can be under the

23  circumstances.  We feel pretty good about it.

24    Q  I am now going to hand you what has been previously

25  marked as Exhibit Number 7.



                                                                      Page 277

1     A  This is -- see, this is where we got that

2   communication.  We sent you the sample, and this is a sample

3   of the unrealized gain and loss report.

4     Q  So, this is sent to the investor as well at the

5   year end?

6     A  It's available.  I would say mostly.  Some people,

7   I can't say it's sent every single year, but it's certainly

8   there -- just to answer your question exactly.

9     Q  And when you say available --

10    A  Well, I guess some of these people are -- I mean,

11  you know, they're working down there in Clearwater and

12  they're -- just send a copy of my tax information to my CPA

13  and don't send me anything, literally.  That's the --

14  totally, it's sent out to a lot of them, but not necessarily

15  all of them.

16    Q  How many people does it get sent out to on a

17  regular basis, without someone asking?

18    A  I don't know the answer.  It's most people.  But,

19  you know, the vast majority.

20    Q  Just go over it again, so this is an account for

21  G. Lynne Hanson, and it appears on 7/30/97 she became

22  involved with Acorn, Inc., at $2.27 per share?

23    A  Right.  There's one above that, too.

24    Q  Right, Advanced Energy, Inc.  So, you took money

25  that was allocated to her and purchased Acorn with it?



                                                                      Page 278

1     A  Correct.

2     Q  And made a note, and then told Jean?

3     A  Yeah.  It could have been part of a larger

4   purchase.

5     Q  Okay, so, for example, on Apple Computer, Inc., [?]

6   quantity is the next line down.  You could have purchas[ed]

7   shares of that and allocated it accordingly -- or a three

8   hundredth, or whatever?

9     A  That was her allocation, it's what's there.

10    Q  So, this 500 shares of Emisphere Technology, she

11  will hold that until it is sold?

12    A  Yes.

13    Q  Just hypothetical, let's say some you bought a big

14  [share] of Emisphere Technology and allocated it to ten

15  different people.  Would you sell all of that Emisphere [or]

16  would you sometimes sell just half of it?  And if you di[d]

17  sell just half of it how would you allocate that?

18    A  With all due respect, I'm not sure that's exactly

19  the question that you want to ask me.  I know where you're

20  headed, but --

21       MR. BOLTZ:  Well, he is entitled to ask the

22  questions he wants.

23       THE WITNESS:  I know.  I'm not trying to be rude

24  here.

25       MR. MURPHY:  Yeah, maybe explain what you are



                                                                      Page 279

1   trying to get and let him explain it.

2        MR. DUNBAR:  I was -- you know, I was just

3   wondering, like, if I could do it best with an example.  I

4   mean, I am really not trying to get anywhere.  I am just

5   wondering --

6        THE WITNESS:  Well, no, I just want to make sure [to?]

7   give a very clear answer and I wasn't clear on what you we[re]

8   saying.

9        BY MR. DUNBAR:

10    Q  To make it very simple, let's say you bought 1,0[00]

11  shares of Emisphere Technology and you split it up -- y[ou ?]

12  1,000 shares and you split it up between two people, 50[0]

13  shares each.  And then you sell 500 shares of it.  You d[on't]

14  sell the whole 1,000 lot; you sell only 500 of it.

15    A  Oh, partial --

16    Q  A partial sale of it.

17    A  Partial sale, right.

18    Q  Now, I mean, I understand you could split it up [and?]

19  each of them would have only 250 then; or would there [be]

20  times when you would leave 500 in one account and th[e other?]

21  account is fully-liquidated of the Emisphere Technolog[y?]

22    A  I understand.  That's what I thought you were

23  asking me, but it wasn't clear.  The rule is that if we do

24  liquidations we do them across the board, same ratios.

25    Q  When you say rule, how often do you follow tha[t?]



                                                                      Page 280

1     A  That's the rule.  I mean, we're selling half, we're

2   selling half.  Everybody sells half.

3        MR. BOLTZ:  Everybody is treated the same?

4        THE WITNESS:  Yeah, absolutely.

5        BY MR. DUNBAR:

6     Q  So you would never hold one person in a position

7   while another person got fully-liquidated out of it?

8     A  Well, it could happen if someone wanted to

9   liquidate their account.

10       MR. BOLTZ:  But aside from that --

11       THE WITNESS:  Aside from that, I mean --

12       BY MR. DUNBAR:

13    Q  And if someone did want to liquidate they would

14  call you and say I want all my money?

15    A  They would write to me.

16    Q  And would you subsequently sell all their shares in

17  the NAA Financial account?

18    A  Yes.

19    Q  Would you ever just take the market value of those

20  shares and send out -- at that time that they want to be

21  liquidated -- and send out that amount of money?

22    A  Are you asking me if you would keep the stocks and

23  just send them cash?

24    Q  Right.

25    A  Is that what you're asking?



                                                                      Page 281

1     Q  Yes, that is what I am asking.

2     A  So you're asking me if I would cross a trade, is

3   what you're asking me, I guess.

4     Q  Well, let's say, you know, you have an investor who

5   owns only 1,000 shares of Emisphere Technology, and they say

6   I want my money.  Would you ever maintain that -- keep that

7   1,000 shares of Emisphere and send them that market value,

8   just like you sold it, and what they would get, but just kept

9   the stock in the account?  Or do you actually call NAA

10  Financial and say, I need to sell --

11    A  I see your point, I see your point.  You're

12  thinking of things that I haven't even thought of.  That's

13  good.  Let's see, so, the question is, have you ever not sold

14  the stock when you were asked to liquidate the account and

15  just kept it in the account.

16    Q  Correct.

17    A  Okay.  I'm trying to think of a situation where

18  that would take place.  I'll have to think about that one.

19       MR. BOLTZ:  Well, normally does that happen?

20       THE WITNESS:  No, absolutely not.  I mean, normally

21  I wouldn't do that.  But when you say "ever", you know, I

22  mean, I'm trying to think of an example when it might not.

23       MR. BOLTZ:  Well, can you ever remember an example

24  when it did happen?

25       THE WITNESS:  I can't remember when -- I mean, I'm



                                                                      Page 282

1   just -- you know, when I get this kind of question I get a

2   little confused, because when someone says "ever" or "any" or

3   "at all", I try and be completely -- you know, but did you 

4   ever?  I would say that normal activity was not -- no,

5   because when someone liquidated we sold.

6        MR. BOLTZ:  And you ca not remember any exceptions

7   to that?

8        THE WITNESS:  I'm trying to but I can't think of

9   one right now.

10       BY MR. MURPHY:

11    Q  What about the crossing trade that you mentioned?

12    A  I thought that's what he's asking me.

13    Q  What did you mean by that?

14    A  Well, actually, that's what I thought he was

15  originally asking me, was would I keep it for somebody else,

16  or something like that.

17    Q  There is one investor buying in and another selling

18  out?

19    A  Yeah, I mean, by default it might happen that way,

20  but on the books it wouldn't happen that way.

21       BY MR. DUNBAR:

22    Q  It would actually be a sale on a repurchase?

23    A  Yes, absolutely, yeah.

24       BY MR. MURPHY:

25    Q  Why do these accounts -- and, like, I notice the



                                                                      Page 283

1   shares are in even numbers on, for example, Exhibit 7, it

2   shows 1,100, 3,000?

3     A  Oh, yeah, we round them up, round up the number of

4   shares.

5     Q  Round up the number?

6     A  Because I don't buy odd lots.  It's just nutty.

7   So, it might not be exactly 5 percent.  It would a round up

8   to the nearest 100.

9     Q  Of shares on that person's account?

10    A  Shares, shares, the shares in the person's account,

11  yes.  Otherwise I'd have 21's and 33's and 59's, and it's

12  unwieldy.

13    Q  But then do you have a balance in the holding

14  account, in the NAA account?  And if you buy, like, 300,000

15  Emisphere and you have 799 investors, maybe it does not

16  divide up.  How does it work out?

17    A  Right.  There's a -- it takes some time to make

18  sure that we get it right, but we do make sure that we round

19  up -- we buy enough shares to round up to hundreds.

20    Q  For each investor?

21    A  For each investor.  And I suppose, you know, I

22  could take you through that whole thing, but it's not --

23    Q  Eventually, we will get into detailed bookkeeping at

24  another day.  We are just trying to get concepts now of how

25  you do things.



                                                                      Page 284

1     A  It's not really that complicated when you think

2   about it.  I would do it just like you would do it probably,

3   just, you know --

4        BY MR. DUNBAR:

5     Q  And on a withdrawal, let's say a -- we will use

6   Exhibit 7 -- let's say Lynne Hanson wanted to withdraw money.

7   How would that work?

8     A  How would that work?

9     Q  I mean, you could start from the beginning if you

10  want.  She would write you a letter?

11    A  Yeah.

12    Q  And it would say, please withdraw $50,000, let's

13  say.  And then what would you do?

14    A  Well, I would look at the account and see what her

15  positions were, and what ratio of cash to stocks were, based

16  on the risk point we talked about earlier, and then make a

17  decision on just sending her the cash that was available at

18  that time or liquidating a particular position, as necessary.

19    Q  So, you would choose which stocks to get her out of

20  to get her the funds she has requested?

21    A  That's correct.

22    Q  And that would either be liquidating an entire

23  position in a stock or just cutting her down some in a stock?

24    A  Correct.

25       MR. BOLTZ:  Or just using the cash balance?



                                                                      Page 285

1        THE WITNESS:  Or just using the cash balance,

2   correct.

3        BY MR. DUNBAR:

4     Q  Now I am going to show you what has been previously

5   marked as Exhibit Number 8, Bates-stamped RS 00037.  Do you

6   recognize this document?

7     A  I do.

8     Q  And what is this?

9     A  This document is called Interest and Dividends.

10  It's sent out to Ms. Carlton here.

11    Q  And how often is this sent out?

12    A  Once a year.

13    Q  It appears she made $3,993, approximately, in

14  interest?

15    A  Correct.

16    Q  And was that calculated by the method you mentioned

17  before?

18    A  It was.

19    Q  As was the dividends?

20    A  Dividends would match exactly what I told you;

21  whatever stocks that she had that received a dividend she got

22  her --

23    Q  -- her share?

24    A  Well, she got whatever allocates to that particular

25  number of shares for that stock.



                                                                      Page 286

1     Q  With regards to the interest and the cash balance,

2   you [said?] it [is?] their cash balance which is no[t] in equities at

3   the time, and you do it monthly on a daily basis.  Is it --

4   does that include interest?

5     A  I'm going to write this down as you say it, so I --

6     Q  Actually, no.  I am actually not going to -- I am

7   going to pass on that.  I will think of that in a minute.

8   So, the interest is on the cash balance of whatever their

9   account says their cash balance is?

10    A  Correct.

11    Q  Do you receive interest on the friends Union Bank

12  account; does that produce interest?

13    A  Yes.

14    Q  Do you receive interest on your personal Union Ban[k]

15  account?

16    A  Yes.

17    Q  Do you receive interest in the NAA Financial

18  accounts?

19    A  Yes.

20    Q  What are the interest rates on the NAA Financial

21  accounts?

22    A  It's a money market rate.  I think it's -- I

23  couldn't give you the exact number, but it's pretty equal to

24  what we get over here, I think within a couple of tenths, I

25  think.



                                                                      Page 287

1     Q  So, with the Union Bank accounts you also get the

2   money market rate?

3     A  Money market rate, that's correct, right.

4        BY MR. MURPHY:

5     Q  In the NAA accounts, when you have capital gains,

6   does the bank withhold taxes on those accounts?

7     A  No.

8     Q  So, the full capital gain is paid to the account,

9   is it, that there are no withholdings or anything?

10    A  I've never seen a withholding in all the years I --

11  I don't recall seeing that.  I think I saw once when there

12  was a -- anyway, nothing to do with that.

13    Q  But with the capital gains there may be -- the

14  companies withhold tax on dividends and stuff, but there i[s]

15  not -- with respect to when you sell a stock, there is no ta[x]

16  withheld on the account level?

17    A  I've never seen a withholding document myself.

18       BY MR. DUNBAR:

19    Q  In your NAA personal account, other than yourself[,]

20  does anybody else have any sort of ownership in that acc[ount?]

21    A  No.

22       BY MR. MURPHY:

23    Q  Do they have any indirect interest in it?  Is there

24  anybody else that has got a claim on that money, the acc[ount?]

25    A  Claim on it.  Like hypothecation, you mean, or



                                                                      Page 288

1   something like that?

2     Q  Well, any kind of claim.  In other words, was t[he]re

3   any other institution or anybody else that has got like an

4   indirect claim on that account?

5     A  I'd like to go with a specific example, but as far

6   as I know, no.  If you have something particular --

7     Q  There is nobody --

8     A  There's no margin or anything like that.

9     Q  Or nobody who says, well, look, you know, I own --

10    A  I hope not.

11       MR. BOLTZ:  Not that you know of.

12       THE WITNESS:  Not that I know of, yeah.

13       MR. BOLTZ:  Your attorney.  No, just kidding.

14       THE WITNESS:  Well, aside from my accomplice here,

15  yes.

16       MR. BOLTZ:  Just kidding.

17       THE WITNESS:  For the record, just kidding.

18       BY MR. DUNBAR:

19    Q  I am now handing you what has been marked as

20  Exhibit Number 24, Bates-stamped RS 07298.  Do you recognize

21  this document?

22    A  I'm confused by this document.

23       MR. BOLTZ:  Well, do you recognize it?

24       THE WITNESS:  I don't recognize it.

25       MR. BOLTZ:  That was his question.



                                                                      Page 288

1        BY MR. DUNBAR:

2     Q  Why are you confused by this document?

3     A  Because I don't -- oh, I see, I didn't sign it.

4   Okay, I'm sorry.  I thought if I signed it, I don't recognize

5   it; that's what I meant.

6     Q  Do you know why Ms. Janu would write this type of

7   letter?

8     A  I don't know.  I could only speculate.

9     Q  Speculate.

10       MR. BOLTZ:  If an investor lost the original or

11  requested it, would that be something she --

12       THE WITNESS:  That's the first thing I thought of.

13  But I also don't know -- I would speculate it has to do with

14  a close out of some kind.  

15       BY MR. DUNBAR:

16    Q  You mean like a liquidation of an account?

17    A  Yeah, liquidation of account.  You can certainly

18  ask her.  I don't -- I am just only speculating.  It was

19  certainly requested for some reason, or it was necessary to

20  send it for some reason.  I don't know.

21    Q  Do you know if these were commonly sent to people?

22    A  I would say no.

23    Q  Normally, they got the interest and dividend

24  statement?

25    A  Yeah.  That's why I'm speculating as to the close



                                                                      Page 290

1   out of some kind.  

2        MR. DUNBAR:  I will now have this marked as Exhibit

3   Number 31.  This is a copy of a check, it appears, from Reed

4   Slatkin to Lillian Rakow.

5             (SEC Exhibit No. 31 was marked for

6             identification.)

7        BY MR. DUNBAR:

8     Q  Do you recognize this document?

9     A  I've never seen it before.  I mean, I could

10  speculate what it is if you want me to.

11    Q  Yeah, speculate what it is.

12    A  This is, like, a check written to -- and Phyllis

13  Rogers signed it.

14    Q  Is Lillian Rakow an investor?

15    A  I believe so, but I'm not, I mean -- okay, I know

16  what's coming now.

17       MR. BOLTZ:  With the list?

18       THE WITNESS:  I guess, does her name not show up on

19  the list?  I'm sorry, it should have.  I guess we should

20  offer to review this because it was done so fast.  I don't

21  know why her name is not on here.  Can we just take a -- I

22  mean, obviously, there's a name here which should be on this

23  list that's not on the list.

24       MR. BOLTZ:  Yes.

25       THE WITNESS:  Okay, apparently, that's the point of



                                                                      Page 291

1   it being here.  I just got a letter from her.  And I sent her

2   the letter of liquidation.

3        MR. BOLTZ:  Well, show him the letter.

4        THE WITNESS:  I'm just trying to think; I don't

5   know why she wouldn't be on here.

6        MR. BOLTZ:  Is her account closed, was that the

7   reason?

8        THE WITNESS:  I don't think so.  I think that

9   somehow or other --

10       BY MR. DUNBAR:

11    Q  Well, how do you know her?

12    A  Well, her -- she's the mother of one of my close

13  friends.  Anyway --

14       MR. BOLTZ:  Do you want me to look for it?  Go

15  ahead, if you can find it.

16       THE WITNESS:  I'll find it.  I guess we should just

17  say that there's some people that are missing here.  We need

18  to make sure we get them all back on the -- all on the list

19       MR. MURPHY:  So, Exhibit 4, then, we would ask you

20  to update it and provide us with an updated list.

21       THE WITNESS:  Yeah, we're happy to do it.  I mean,

22  I'm not trying to hold back here.  This was done very

23  quickly, when you first asked for the information, and I know

24  that, you know -- here's her letter, if I can just find it

25  here, briefly.



                                                                      Page 292

1        MR. MURPHY:  I can just run a copy.

2        MR. DUNBAR:  Yeah, we [can?] not mark the original, so

3   we will have to --

4        THE WITNESS:  Well, I mean, I was just going to

5   read it to you.  "Dear Read, We received your letter and we

6   are very sad that our relationship was coming to an end.  We

7   wanted to thank you from the bottom of our hearts for what

8   you have done to make us financially secure.  It was a

9   pleasure to have been associated with you for the past twelve

10  years.  Good luck and good health to you and your family 

11  forever.  Sincerely, Lillian and Irving Rakow."

12       MR. MURPHY:  Why don't I just make a photocopy and

13  we can mark it.  We will just pause a second.

14       MR. DUNBAR:  We will go off the record.

15       (Whereupon a brief recess was taken.)

16       MR. DUNBAR:  Back on the record at 2:51.  First, we

17  will mark this letter, dated January 22nd, 2000:  "Dear Reed,

18  We received your letter..." -- Exhibit Number 32.

19            (SEC Exhibit No. 32 was marked for

20            identification.)

21       BY MR. MURPHY:

22    Q  Is Exhibit 32 a copy of the letter you just read

23  out from the investor?

24    A  Yes.

25       BY MR. DUNBAR:



                                                                      Page 293

1     Q  Okay, back to Exhibit 31, the check from -- to

2   Lillian Rakow, upon your understanding, if Lillian, if Ms.

3   Rakow --

4     A  Mrs.

5     Q  Mrs. Rakow; wrote to you saying, I would like to

6   withdraw $18,000.  The letter comes to you.  What do you do

7   then?  We have discussed that you go to the account, you will

8   see what -- if there are cash equivalents, or if you want to

9   sell some of her stocks to give her the withdrawal; is that

10  correct?

11    A  Right.

12    Q  And, then, once you decide, then what happens,

13  mechanics?

14    A  Well, we would -- I would order a check to be

15  written to her in the friends account, either immediately or

16  after a liquidation took place.

17    Q  And when you say "order" what does that mean?  You

18  would order it?

19    A  I would tell Ms. Rogers to write her a check.

20    Q  And would this be a check that went out to Ms.

21  Rakow as a result of that?

22    A  Right.

23    Q  And how would you indicate to Ms. Rogers?  Usually

24  you fax her, call her on the phone?

25    A  I think mostly with phone calls.  I mean, we



                                                                      Page 294

1   usually discussed, you know, what needed to be done.

2     Q  So, it appears she has some sort of program where

3   she can print out all these checks.  Do you know what type [of?]

4   program it is?

5     A  No.

6     Q  Do you know how she writes these checks?  I mean

7   do you know what her function is in -- I mean, do you call

8   her, and then what does she do, input the number?

9     A  How she writes the check.  I mean, I --

10    Q  Well, I mean, you said --

11    A  I assume that you could -- I mean, if she was here

12  you could ask her.  I don't know exactly what program she

13  uses.  I think it's a real -- I don't think it's Quicken.

14  It's some program that's -- excuse me, I d[on't] know the

15  answer, sorry.  I'll stop speculating.

16       MR. BOLTZ:  If you do not know --

17       MR. MURPHY:  You do not have to guess.  I mean, if

18  you do not know, you can just say you do not know.  You are

19  not expected to know every answer to every question.

20       MR. BOLTZ:  It is not a test.

21       THE WITNESS:  I'm trying to help out here.

22       BY MR. DUNBAR:

23    Q  Now, going back to your independent contractors

24  that you hired, who would you categorize as an independe[nt]

25  contractor?



                                                                      Page 295

1     A  You mean generally or as individuals?

2     Q  Individuals.

3     A  You're asking me to name people that I consider

4   independent contractors?

5     Q  Yeah, for you.

6     A  At that time period are we talking about?

7     Q  We are talking the last five years.

8     A  Well, where is that list?  Excuse me for asking,

9   but where's the list?  I can have the list in front of me.

10       MR. DUNBAR:

11       (Whereupon, a brief recess was taken.)

12       MR. DUNBAR:  We will go back on the record.  I am

13  actually going to take you -- I am going to take us one step

14  back and do one more quarterly statement.  I would like to

15  have this marked as Exhibit Number 33.  Exhibit 33 appears [to]

16  be a document, dated October 15th, 1999, care of Marla Gibb[s]

17  with an account number 12178, Bates-stamped RS02707 to [RS]

18  02709.

19            (SEC Exhibit No. 33 was marked for

20            identification.)

21       BY MR. DUNBAR:

22    Q  Can you identify this document?

23    A  It's a quarterly statement.

24    Q  Similar to the ones that have been sent out to

25  every investor?



                                                                      Page 296

1     A  Yeah.

2     Q  I would like to draw your attention to RS -- the

3   second page, Bates-stamped RS 02708.  And it says that the

4   ending balance on 6/30/99 was $221,369 and the beginning

5   balance on 7/1/99, on the front page, Bates-stamped RS 02707,

6   is approximately $1.5 million.  I was wondering if you could

7   just explain that?

8     A  I have no idea.  I know this particular person.  I

9   think Ms. Janu could really fill that in for you.  There's

10  documentation for all this, from the person.  I don't know

11  what occurred here.  The addresses, amounts, there may be an

12  error of some kind.  But I'm sure she'd be happy to take -- I

13  have no idea.  I don't know what happened here.

14    Q  Just let me direct your attention to page 1 again,

15  RS 02707.  Wire in, 8/12/99, $548,500.  Does that indicate a

16  -- what does that indicate?

17    A  Money was sent in.

18    Q  Or wired in?

19    A  Wired in.

20    Q  And in the case that money is wired in, how does

21  that work?

22    A  Don't understand what you mean specifically.

23    Q  Like, do they need wire instructions, or do they

24  call you?  Do they write you a letter saying -- I mean, where

25  does the wire come from and where does this wire go?



                                                                      Page 297

1     A  Well, the wire is going to the friends account at

2   Union Bank.

3     Q  So, do they call you and ask for information, wire

4   instructions?

5     A  Yeah.

6     Q  Well, do they call anybody else or would they call

7   you?

8     A  They'd call my office.

9     Q  Would Jean be able to give them wire instructions?

10    A  Don't think she does that.

11    Q  And how often do people wire in money?

12    A  I don't know exactly.

13    Q  What is the common practice?

14       MR. BOLTZ:  You say what is the common practice?

15       MR. DUNBAR:  Yeah, mostly.

16       THE WITNESS:  Mostly we get checks, yeah.

17       BY MR. DUNBAR: 

18    Q  Then the next line says:  "Additional gain,

19  9/30/99."  What does that represent?

20    A  I'd have to speculate, but it looks like it --

21  these statements are unclear to me.  I would like to get an

22  explanation and then come back and give it to you.  I mean,

23  I'll make a note.  I'm happy to do that.  I'm sure there's an

24  explanation.  I don't know if I should ask for a copy of

25  this.  I know what to do.  I'll just --



                                                                      Page 298

1        MR. MURPHY:  We can give you an extra, since it is

2   your record and you need to provide an explanation.  If you

3   and counsel wish to take one of the extra copies --

4        THE WITNESS:  That would be great, if you don't

5   mind.  We'll do that.

6        MR. MURPHY:  Right, because you are going to

7   provide us with an explanation.

8        MR. BOLTZ:  Okay, we can keep that.  That is

9   something you can take.

10       THE WITNESS:  Yeah, okay, good.

11       MR. MURPHY:  Since it is your own record.

12       THE WITNESS:  I will provide you with an

13  explanation for this.

14       MR. DUNBAR:  Do you mind if we mark that as an

15  Exhibit, or do we have to make copies of it or --

16       MR. BOLTZ:  It is Exhibit 33.

17       MR. MURPHY:  No, no, that is fine.  We have Exhibit

18  33.  He is just -- oh, I am sorry.

19       MR. DUNBAR:  No, I am talking about the --

20       MR. MURPHY:  Oh, the list?  Sure, I can run a copy

21  if you want.  Do you want me to?

22       THE WITNESS:  Feel free.  I think you've already

23  got this, but --

24       MR. BOLTZ:  I think you do have it.

25       MR. DUNBAR:  Yeah, but we have not marked it yet.



                                                                      Page 299

1        MR. MURPHY:  Okay, we will just mark it.

2        MR. DUNBAR:  Yeah, it makes it easier.  We will go

3   off the record.

4        (Whereupon, a brief recess was taken.)

5        MR. DUNBAR:  Back on the record.  I am showing you

6   now what is Government Exhibit Number 34, entitled Certified

7   Public Accountant and Independent Contractors.

8             (SEC Exhibit No. 34 was marked for

9             identification.)

10       BY MR. DUNBAR:

11    Q  Do you recognize this document?

12    A  I do.

13    Q  And what is it?

14    A  It's a record or schedule of certified public

15  accountants, independent contractors.

16    Q  So, back to the questions, can you list who you

17  consider an -- in the last five years who has been an

18  independent contractor for you?

19    A  Phyllis Rogers, Jean Janu, Richard McMullin, Joanne

20  Rubinstein, Jeffrey Donovan, Hank Owens, and there are a couple

21  more.

22    Q  Who are the couple more that you can --

23    A  Lawrence Carhartt.

24       MR. BOLTZ:  This is in the last five years.

25       THE WITNESS:  Yeah, I'm just -- Patrick Siefe.



                                                                      Page 300

1   That's S-i-e-f-e.  I guess we could start there.  If I think

2   of somebody else I'll let you know.  I don't think there's

3   anybody else.

4        BY MR. DUNBAR:

5     Q  Starting with Ms. Rogers, you said she was hired in

6   approximately 1981?

7     A  Uh-huh.  (Affirmative response.)

8     Q  And what was the purpose again?

9     A  General administrative assistance.

10    Q  Of your personal finances?

11    A  Well, that was part of it, in terms of balancing a

12  checkbook.  But she also did office filing and stuff like

13  that.

14    Q  Office filing in relation to?

15    A  Well, correspondence I was getting from the church

16  and my church activities at that time.

17    Q  When did she begin start working full-time for you?

18    A  She has never worked full-time for me.

19    Q  Currently, how often does she --

20    A  You'd have to ask her.  I guess if it's during

21  March it might be pretty much full-time -- tax.  Otherwise, I

22  think it's, you know, I'm going to guess ten or fifteen hours

23  a week, maybe a little bit more.  Maybe twenty; it depends on

24  the situation.

25    Q  And with Ms. Janu, when was she brought on?



                                                                      Page 301

1     A  I'm going to guess '91 or '92 -- '90?  Maybe even

2   '89.  I'd just say early '90's.  I could look it up.

3     Q  And why was she brought on?

4     A  I brought her on to ensure that the -- our

5   accounting procedures and record keeping were done at the

6   highest possible standard.

7     Q  And before Ms. Janu who was doing the accounting,

8   the accounting work and the breakdown?

9     A  Ms. Rogers was doing the bank's reconciliations and

10  the brokerage reconciliations, and I was doing the rest.

11    Q  And when you say the rest, taking the stocks that

12  were bought and then putting them into the program?

13    A  I'm not sure exactly when that program started and

14  which program -- whatever program we were using, yes.

15    Q  You were doing the manual?

16    A  I was doing the manual, yes.

17    Q  Was anybody else doing the manual?

18    A  No.

19    Q  And how did you meet Ms. Janu?

20    A  Her sister was the -- went out with one of my best

21  friends there, almost married.  So, that's how I originally

22  kn[o/e?]w her.

23    Q  And resides -- she is in New Mexico; is that right?

24    A  Right.  And we had a mutual acquaintance in New

25  Mexico that I knew her through.



                                                                      Page 302

1     Q  Does Mr. Janu have her own business?

2     A  Yes.

3     Q  What is it called?

4     A  I think it's called "Jean Janu, Inc."

5     Q  And is she an accountant?

6     A  Don't think so.  You mean a certified public

7   accountant?

8     Q  Yeah, certified public accountant.

9     A  Don't think so.

10    Q  What does her business entail, Jean Janu, Inc[.?]

11    A  She's a bookkeeper.

12    Q  Do you know if she does bookkeeping for any[one?]

13  else?

14    A  Yes, I think she does -- although I don't know if

15  she still does; I'm not sure.

16    Q  And with regards to your independent contrac[tors,?]

17  how do you compensate them?

18    A  I -- well, it depends on the person.  In some case[s,?]

19  I'm -- those that are on a regular schedule get a regular

20  check.

21    Q  What do you mean regular schedule; what do[?]

22  mean?

23    A  Well, like, Ms. Rubinstein comes in from 9:00 [to]

24  1:00 and answers my phone.  So, she's on a regular sch[edule.]

25  Someone like Mr. Siefe, who works from time-to-time [?]



                                                                      Page 303

1   computer related issues at the office, would send us for the

2   time -- we would pay him for the time he was there, for the

3   work he had done on computers.

4     Q  And would you write him a check -- or these peop[le,?]

5   any of these people?  Would you wire them money or w[ould you?]

6   send a check to them or --

7     A  We'd send a check to them.

8     Q  And was this on a yearly basis, monthly basis?

9     A  I think that they're paid either once or twice a

10  month.

11    Q  Once or twice a month?

12    A  Yeah, I think so.

13    Q  Why do you do it that way rather than a yearly

14  thing?

15    A  Well, they're making a living, I guess they're

16  going to get paid.

17    Q  Well, I mean, do you base their salary on a yearly

18  basis and then divide it or -- I mean, how do you base w[hat]

19  their salary is going to be?

20    A  Oh, I see, I'm sorry.  Yeah, we have an agreement

21  on what we're going to do for that year.

22       MR. BOLTZ:  I am concerned about your generaliz[ing]

23  when you say that different people are paid in different

24  ways.

25       THE WITNESS:  Okay, maybe I'm not clear.



                                                                      Page 304

1        MR. BOLTZ:  Maybe --

2        THE WITNESS:  What I mean [to] say is that --

3        MR. BOLTZ:  How do you pay Ms. Rogers and how do

4   you pay Ms. Janu?  Is it on an hourly basis?

5        THE WITNESS:  Right, they're all paid the same way.

6   They're all paid by -- no, excuse me.  All right, I

7   understand what you're asking me.  I will clarify.  Mr. Siefe

8   is paid by the hour, I believe, whereas the rest of the

9   people on this list, for example -- and that would have 

10  included Mr. Carhartt -- was on a yearly agreement with me,

11  and they were paid out either monthly or yearly.

12       MR. DUNBAR:  Mr. Boltz, do you wish to ask any

13  clarifying questions?

14       BY MR. DUNBAR:

15    Q  How would you and the independent contractor come

16  to this type of agreement?

17    A  Communicate about the work that was being done --

18  the extent of it, hours involved, responsibilities.

19    Q  And how would you come to a salary?

20    A  It wasn't exactly a salary.

21    Q  Or a number, I am sorry, how would you come to a 

22  figure?

23    A  I would, simplicity say, was one we agreed on.

24    Q  And when you hired these people did -- and this

25  applies to Ms. Rogers, Ms. Janu, Mr. McMullin, Ms. Rubinstein



                                                                      Page 305

1   and Mr. Donovan, Mr. Owens, Mr. Carhartt and Mr. Siefe -- did

2   they sign any sort of contracts when they started working for

3   you?

4     A  I believe that we provided you with the ones that

5   we have.  You have those on file.  If you don't we'll get you

6   another copy of them.

7     Q  Did any of them not sign any?

8     A  I'm not sure.  I believe there may be -- I'm not

9   sure that every single one of the people did sign one.  I

10  could look in the file again.

11       MR. DUNBAR:  I will now have marked as Government

12  Exhibit 35 --

13       MR. BOLTZ:  Just to clarify, Siefe was not on a

14  yearly contract?

15       THE WITNESS:  That is correct; he was not -- isn't.

16       MR. DUNBAR:  I hand you now Exhibit Number 35,

17  which is entitled Independent Contractor Agreement, Bates-

18  stamped RS 07630 to RS 07631.

19            (SEC Exhibit No. 35 was marked for

20            identification.)

21       BY MR. DUNBAR:

22    Q  Do you recognize this document?

23    A  I do.

24    Q  And what is it?

25    A  It's an independent contractor agreement.



                                                                      Page 306

1     Q  For?

2     A  For Mr. Owens, I believe.

3     Q  And what was his duties?

4     A  Mr. Owens is a technical analyst and looks over

5   stocks during the day and evening, and calls me with his

6   recommendations.

7     Q  Do you ever use his recommendations?

8     A  Yeah.

9     Q  And when he calls you with recommendations do you

10  use them for your personal account, investors' accounts or

11  both -- or it depends?

12    A  Well, if they're used they're not used

13  independently.  They're part of a larger -- he's just one

14  input.  So, it would be either.

15    Q  If you look at the front page, I. Services: 

16  "Contractor shall perform the service set forth on Exhibit

17  A."  Was there at one time an Exhibit A to this?

18    A  Don't remember.

19    Q  And when they -- after you sign this where would it

20  be filed?

21    A  I'm not sure.  I'm being specific, I'll answer I

22  don't know for sure.

23    Q  Would you keep them, though?

24    A  Yes.

25    Q  Is Hank Owens still an independent contractor?



                                                                      Page 307

1     A  Yes.

2     Q  How often does he come into the office?

3     A  I don't think he's been in my office once in ten

4   years.

5     Q  So, does he work from home?

6     A  Yeah.

7        BY MR. MURPHY:

8     Q  How do your friends compensate you for all this

9   overhead -- the computers, independent contractors' offices?

10    A  They don't compensate me at all.

11    Q  So, how do you recover the costs?  It is a lot of

12  overhead, isn't it?

13    A  Well, I pay for it myself; I don't ask for

14  anything.

15    Q  So, you take these costs out of your own account?

16    A  Yes.

17       BY MR. DUNBAR:

18    Q  For Ms. Janu, how much do you compensate her for

19  her work?

20    A  How much?  I don't know the current number.  Let's

21  say it's in the -- I think last year it was eighty-seven,

22  ninety.  I'd have to look it up.  I think it was more this

23  last -- I think it's just switched over recently.  I'm not

24  sure.

25    Q  Does Ms. Janu do any work with your personal



                                                                      Page 308

1   accounts?

2     A  No.

3     Q  And which account did you pay these people from?

4     A  My -- the 74 account.

5        MR. BOLTZ:  Which institution?

6        THE WITNESS:  Union Bank.

7        MR. DUNBAR:  Can I please have this marked as

8   Exhibit Number 36?

9             (SEC Exhibit No. 36 was marked for

10            identification.)

11       BY MR. DUNBAR:

12    Q  I am now handing you Exhibit Number 36, which

13  appears to be copies of 5 checks.  Do you recognize these

14  checks?

15    A  I'm having trouble reading this, I'm sorry.  It's

16  pretty tiny.

17       MR. BOLTZ:  It is small.

18       THE WITNESS:  I can't see it.  These appear to be -

19  - all five of them?  I mean, it looks like there are five

20  checks, they're expense checks from 7574, it looks like to

21  me, if I'm reading it right.  I see, like, an American

22  Express check, you know, payment here at the bottom.

23       MR. DUNBAR:  Okay, going to check number 2, paid to

24  Richard D. McMullin, is that representative of a check paid

25  to an independent contractor?



                                                                      Page 309

1        MR. BOLTZ:  You mean for compensation?

2        BY MR. DUNBAR:

3     Q  For compensation, for their independent contractor

4   work?

5     A  It appears to be, yes.

6     Q  And with regards to this check sent out, it appears

7   to be signed by Phyllis Rogers.  How does that work?  Would

8   you dictate to Phyllis which -- how much to send to these

9   people, or does she know, or how did that work?

10    A  Well, I think that I let her know what the

11  agreement was between myself and the person, and that became

12  the process every month.

13    Q  So, she would know and be able to write the check

14  every month?

15    A  That's correct.

16    Q  And this check appears to be for $22,916.67.  Just,

17  you know --

18    A  Well, divide by 12.  Maybe that's what that was.  I

19  mean, it's obviously some percentage of some bigger number.

20  Is that what you're asking me; why is this such an odd

21  amount?

22    Q  Yeah.  Even if you multiply by 12 I believe it

23  comes to an odd amount too.

24    A  Well, maybe it was done by the week and she's

25  divided it by 52.  I wouldn't, not for sure, know.  But



                                                                      Page 310

1   there's an explanation for that.

2     Q  Okay.  And with regards to the Pacific Century

3   Bank, the third check down, what would that be for, if you

4   know?

5     A  I think I had a credit line.  I think we talked of

6   it the other day.  I think that's probably what the -- I'm

7   not sure what date that's written, or how many months it

8   stands for, but that's what it looks like, a loan payment.  I

9   think it says "Loan account" at the bottom there of the 

10  check.

11    Q  You mean loan 5067?

12    A  Yeah, yeah.

13    Q  What is the Joe Sussfolk Agency, check number 4?

14    A  Joe Sussfolk Agency, 7/99?

15    Q  Yes.

16    A  I don't know.  Might be anything.  I have no idea.

17       BY MR. MURPHY:

18    Q  Well, it says, on the deposit here, it is Joe

19  Sussfolk Agency, insurance trust account.  Does that help

20  you?

21    A  Insurance trust.

22    Q  Is he the insurance agent, or something?

23    A  It could be insurance on my house or on -- I have

24  no -- I don't know what it's for, I have no idea.  It's for

25  insurance of some kind.



                                                                      Page 311

1     Q  Do not know?

2     A  Don't know.

3        MR. BOLTZ:  You are speculating.

4        THE WITNESS:  Yeah, I don't know.  Oh, I see,

5   you're looking at the stamp.

6        MR. MURPHY:  Right, under the deposit on the back

7   of the check, which has reproduced what is on the --

8        THE WITNESS:  I have no idea.

9        MR. DUNBAR:  I would like to have this marked.  I

10  am now handing you what has been marked as Exhibit Number [37.]

11  It appears to be a copy of four checks and one deposit slip.

12            (SEC Exhibit No. 37 was marked for

13            identification.)

14       BY MR. DUNBAR:

15    Q  Mr. Slatkin, looking at the first check, once

16  again, is that similar to a check that would be paid to an

17  independent contractor?

18    A  Can I have one second with Gerry?

19       (Witness and counsel confer.)

20       THE WITNESS:  Yes.

21       BY MR. DUNBAR:

22    Q  Was that particular check for independent

23  contractor work?

24    A  Yes.

25    Q  Was Mr. Carhartt paid monthly?



                                                                      Page 312

1     A  I'm trying to -- Mr. Carhartt was paid monthly.

2   This particular check -- do you have a specific question

3   about this particular one?

4     Q  No.

5     A  Okay.  And I don't know exactly why that amount

6   particularly, but, yes, this is -- he was paid as an

7   independent contractor.

8     Q  Was he paid $10,000 monthly?

9     A  No, he was not.

10    Q  How much was he compensated?

11    A  I think it was $3,900 a month, something like

12  this.  This may have been a bonus check for him of some kind.

13    Q  Did you give bonuses to your --

14    A  Yes.

15    Q  Every year?

16    A  Pretty much, yes.

17    Q  With regards to, for instance, the last Exhibit we

18  were looking at, with regards to Mr. McMullin's paycheck, was

19  he paid monthly?

20    A  Yes.

21    Q  Looking at the same Exhibit 37, the fourth item

22  down, which is a check to Union Bank of California, dated

23  7/99, can you recall what that was for?

24    A  No.

25    Q  For that check to be written by Phyllis would you



                                                                      Page 313

1   have told her to write that check?

2     A  The $10,901.54?

3     Q  Yes.

4     A  I don't know who it was to.

5     Q  Union Bank of California.

6     A  Yeah, but I'm not sure why.

7     Q  Would that be a check to your other account or

8   would it be a check to somebody else's account -- or to Union

9   Bank?

10       MR. BOLTZ:  Well, it shows it goes over to the

11  Imperial Bank.

12       THE WITNESS:  Yeah, but they bought them.  I just

13  don't know what the check was for.  I mean, I don't know.  I

14  can try and clarify.  If you want to clarify it I'm happy to

15  go over it with you.  I don't know what it is.

16       BY MR. DUNBAR:

17    Q  Did Ms. Rogers ever do wire transfers out of the

18  Union Bank accounts?

19    A  Yes.

20    Q  Would she ever do a wire transfer without your

21  authorization? 

22    A  No.

23    Q  But she could write checks without your

24  authorization out of this account?

25       MR. BOLTZ:  Which is this account?  Is it the



                                                                      Page 314

1   friends account we are talking about or the personal account?

2        THE WITNESS:  I think it's 75, I'm just confused

3        MR. DUNBAR:  I am sorry, we are talking about the

4   7574 account.

5        MR. BOLTZ:  Okay.

6        BY MR. DUNBAR:

7     Q  Like, for example, the Fire Safe Landscape; would

8   she call you up and say I am writing a check to Fire Safe

9   Landscape?

10    A  When she's paying bills I go over the list of bills

11  and she would pay them.

12    Q  Would the bills sometime be sent to her, straight

13  to her?

14    A  Yes.  Not to her personally, but to my P.O. box

15  down there.

16    Q  And would she pick them up?

17    A  Yeah.

18    Q  And then pay them?

19    A  Yes.

20    Q  Would she contact you before she paid them?

21    A  Yes.

22       MR. BOLTZ:  If they were routine bills like a --

23       THE WITNESS:  Yeah.  I mean, mostly -- and

24  occasionally there would be something exceptional that she

25  wasn't aware of and she'd call me and ask me.



                                                                      Page 315

1        MR. BOLTZ:  But other than that she would just pay

2   it?

3        THE WITNESS:  Yeah.  A lot of that was just routine

4   stuff.  Maybe I should use the bathroom now.

5        MR. DUNBAR:  We will go off the record, please.

6        (Whereupon, a brief recess was taken.)

7        MR. DUNBAR:  Back on the record at 3:40.

8        BY MR. DUNBAR:  

9     Q  Just briefly, on this list of certified public

10  accountant and independent contractors, do any of these

11  independent contractors still work for you?

12    A  Well, I thought I answered that but I'll answer it

13  again.  Mr. McMullin does not work for me.  The other ones

14  do.

15    Q  Including Pat Siefe and Larry Carhartt?

16    A  Oh, I'm sorry --

17       MR. BOLTZ:  They were not on the list.

18       THE WITNESS:  They weren't on this list.

19       BY MR. DUNBAR:

20    Q  I am sorry, does Larry Carhartt still work for you?

21    A  No, he does not.

22    Q  Does Pat Siefe still work for you?

23    A  Yes, he does.

24    Q  For Mr. Carhartt and Mr. McMullin, did they sign

25  any documents to indicate that they were not working for you



                                                                      Page 316

1   any longer, any releases or --

2     A  I'll have to look for that.  I'm not sure.  I don't

3   know.  It's possible.

4        BY MR. MURPHY:

5     Q  All of the other people still work for you?

6     A  Yeah.  I mean, can I make a note to --

7        MR. DUNBAR:  Sure.

8        MR. BOLTZ:  I have made it.

9        MR. DUNBAR:  I would like this document marked as

10  Exhibit Number 38, entitled NationsBanc, Montgomery

12  Securities.

13            (SEC Exhibit No. 38 was marked for

14            identification.)

15       BY MR. DUNBAR:

16    Q  Mr. Slatkin, do you recognize this document?

17    A  Yes.  This is one I provided you the last time I

18  was here, I believe.

19    Q  Well, do you recognize this document?

20    A  Yeah.

21    Q  What is it?

22    A  It is an account value summary of NationsBanc,

23  Montgomery Securities, with a certain account number.

24    Q  Is this your account?

25    A  Yes.



                                                                      Page 317

1     Q  Will you please turn to page 5?  If you look at the

2   bottom, where it says "Contribution and withdrawal activity",

3   there are three funds wired out, one for $2 million, one for

4   $6.1 million, one for $6 million; and then there is a wire in

5   for approximately $14 million.  Can you explain those?

6     A  I'm not exactly positive.

7        MR. BOLTZ:  Okay.  Well, we do not want you to say

8   if you do not know.

9        THE WITNESS:  I think I know but I'm not sure.

10  It's one of those questions where you'd like to just go check

11  your records and come back and tell the answer, you know what

12  I mean?

13       MR. BOLTZ:  Yeah.  You are talking about all --

14  there are four of them.

15       THE WITNESS:  I'm pretty sure I know what this is

16  about.  I just wanted to -- can I just confer with Gerry just

17  for a second?

18       (Witness and counsel confer.)

19       THE WITNESS:  I'm happy to make a note and go back

20  and verify this, but this is my best recollection.  I believe

21  that there was a sale of EarthLink stock in January of '99.

22       MR. DUNBAR:  I am sorry, there was what?

23       THE WITNESS:  A sale of EarthLink stock in January

24  of '99, which is the lower -- the one at the bottom.  And the

25  stock is held at NationsBanc, or Bank of America, in a



                                                                      Page 318

1   different account.  And I believe that they credited this

2   account with that amount of money, and I do believe that the

3   rest of this was all -- I believe it came -- I'm not sure

4   what the AV number of Union Bank is, but I believe most of

5   this came to Union Bank.  I can check where these places are,

6   but this is associated with the sale of the EarthLink stock.

7   That's my -- that could be verified, but I have to check with

8   Phyllis and make sure.  There's a window every quarter you're

9   allowed to sell stock, and I think this is right on the nose

10  for that first quarter, that --

11       MR. MURPHY:  Oh, because you have a certain

12  percentage holder?

13       THE WITNESS:  After the annual -- after the board

14  meeting and --

15       MR. MURPHY:  -- announcements?

16       THE WITNESS:  -- announcements and that kind of

17  thing.  So I'm pretty sure that's what that is.

18       BY MR. DUNBAR:

19    Q  In your personal account at NAA Financial how oft[en]

20  do you trade in that account?

21    A  About the same.

22    Q  And with regards to when you make a purchase for

23  your friends account and when you make a purchase for y[our]

24  personal account, when do you decide what stocks to buy [in?]

25  which account?  I mean, do you invest in the same stocks [?]



                                                                      Page 319

1   each account?

2     A  I think pretty much.

3     Q  And how do you decide when to buy one for your

4   personal account and when to buy them for the --

5     A  I think it's pretty much the same decision.

6     Q  Do you ever decide to buy a stock, buy it in your

7   personal account first and then divide it into the friends

8   account?

9     A  If that's done it was inadvertent.  I don't take a 

10  better price than somebody else earlier.  It could have -- [?]

11  happened, I wouldn't tell you 100 percent it never happened.

12    Q  So, when you decided to buy stock -- and you like

13  it, and you want to invest it in your personal account [?]

14  -- what do you do?  Would you buy it for the friends acc[ount]

15  and then buy it, or do you wait a period, or how does tha[t]

16  work, if you want to be dually invested?

17    A  I think it happens around the same time.  I don't

18  have -- my basic concept is that I wouldn't get a better

19  price for myself than for them.

20       MR. BOLTZ:  In other words, buying or selling from

21  your account and/or the investor's account of a stock?  We

22  all know that buying large amounts of stock can cause a pri[ce]

23  to go up; and selling a large amount can sometimes cause a

24  stock to go down.  So, have you ever consciously bought sto[ck]

25  for you own account first, to get a lower price?



                                                                      Page 320

1        THE WITNESS:  No.

2        MR. BOLTZ:  Or sold it from your account first to

3   get a better price?

4        THE WITNESS:  No.

5        MR. BOLTZ:  You have never done that?

6        THE WITNESS:  I don't do that, no.

7        MR. DUNBAR:  And you do own some -- it appears that

8   you own some pretty big positions in certain stocks.  Are you

9   ever above 5 percent ownership in any stock that you know of?

10       MR. BOLTZ:  Other than EarthLink?

11       MR. DUNBAR:  Other than EarthLink, I am sorry.

12       THE WITNESS:  Not that I know of.  I mean, if it's

13  happened I don't know about it.

14       MR. DUNBAR:  I would like to have this marked as

15  Exhibit Number 39.  It is dated December 24th, 1998.  It is a

16  wire with a wire service department heading, account number

17  0630057 582, which I believe was the friends account; is that

18  correct, 7582?

19       THE WITNESS:  Okay.

20            (SEC Exhibit No. was marked for

21            identification.)

22       BY MR. DUNBAR:

23    Q  Do you recognize this document?

24    A  No.

25    Q  Do you receive the wire transfer receipts?



                                                                      Page 321

1     A  Personally?

2     Q  Yes.

3     A  No.

4     Q  Do they go to Ms. Rogers?

5     A  I think so.

6     Q  Would they go anywhere else?

7     A  Not that I know of.

8     Q  Do you know what CIBC Oppenmeyer Corp. is?

9     A  It's a bank, I think, isn't it?

10       MR. BOLTZ:  Is it a bank or a brokerage firm?

11       THE WITNESS:  I think it's both.

12       BY MR. DUNBAR:

13    Q  Is it your brokerage firm?  It is an incoming wire

14  transfer.

15    A  Right.  I -- my reaction is that I would have to

16  go check and see what this is.

17    Q  Have investors wired money from their brokerage

18  account before to the friends account?

19    A  I don't know the answer to that.  Possibly.

20    Q  Do you recall anybody doing a wire transfer of

21  approximately $6.2 million?

22    A  Is that what this adds up to?

23    Q  Yeah, down at the bottom right.

24    A  I don't know what this is.  I'd like to check and

25  find out, though.  Can I keep a copy of this?



                                                                      Page 322

1        MR. MURPHY:  This is your record.  Yeah, you can --

2   we have got a record from him?

3        MR. DUNBAR:  Yeah.

4        THE WITNESS:  And I assume, like, I see a lot of

5   these coming up here, so you might as well just give me a --

6        MR. DUNBAR:  Yeah, we do not know how many, though,

7   so --

8        THE WITNESS:  I think it's going to be necessary

9   for me to go find out what this is, and I'm happy to do that.

10       MR. DUNBAR:  I would like to have this marked as

11  Exhibit 40.  I am showing you now Exhibit Number 40, wire

12  service department, dated June 29th, 1999.

13            (SEC Exhibit No. 40, was marked for

14            identification.)

15       BY MR. DUNBAR:

16    Q  With regard to the $5,000,000 outgoing wire

17  transfer to Beverly Hills Escrow, in account number 29415,

18  L.L. Dayton.  Can you explain that transaction?

19    A  Yeah, I'd have to check it out for you.

20    Q  Is it that you do not remember or you --

21    A  I'm not sure.  I can know this, I can know.  I

22  just need to go look it up and see what it is.  I mean, if I

23  don't know for sure I shouldn't say I know if I don't.

24       MR. MURPHY:  We will take the marked copy and then

25  you can --



                                                                      Page 323

1        THE WITNESS:  And I'll be happy to look these up

2   for you, my pleasure.

3        BY MR. DUNBAR:

4     Q  Have you ever heard of TNI Ledger?

5     A  TNI Ledger?

6     Q  Or just TNI?

7     A  I don't know.  It doesn't strike a bell, out of

8   context, I don't know.

9        MR. DUNBAR:  Why don't we have this marked Exhibit

10  Number 41, a wire service, dated August 24th, 1999, outgoing

11  to J.P. Morgan Bank, Delaware, beneficiary:  TNI.

12            (SEC Exhibit No. 41 was marked for

13            identification.)

14       THE WITNESS:  Again, I'd be happy to find out what

15  this is about.  Oh, this is the original back to you, Mr.

16  Murphy.  Do we keep the copy?

17       MR. DUNBAR:  It has also been known as TNI Ledger.

18       THE WITNESS:  TNI Ledger?

19       MR. DUNBAR:  Yeah.

20       THE WITNESS:  Well, I guess I can write that in

21  here, I guess, and just find out.

22       BY MR. DUNBAR:

23    Q  Who is Arwen Dayton?

24    A  Arwen Dayton?

25    Q  Yes.



                                                                      Page 324

1     A  She is the wife of a friend of mine.

2     Q  Sky Dayton?

3     A  Uh-huh.

4     Q  Do you know a Sky Dayton?

5     A  Sky Dayton is the founder -- co-founder of

6   EarthLink with me.

7     Q  Does he invest money with you?

8     A  No.

9     Q  Would there be money going to Mr. Dayton from the

10  friends account?

11    A  Well, we have some -- how to describe this.

12       MR. BOLTZ:  Well, answer the question directly --

13  that you know of, whether or not you knew of any money going

14  in.

15       THE WITNESS:  I have to look at the record.

16       BY MR. DUNBAR:

17    Q  Okay.  Well, do you know if -- you can go ahead and

18  try to explain what you are --

19    A  No, I'm not sure where I'm headed here.

20       MR. BOLTZ:  I do not see Dayton on here.

21       THE WITNESS:  It's on there.  It's coming.

22       MR. DUNBAR:  Marked as Exhibit Number 42, dated

23  June 23rd, 1999.  It appears to be 5.4 point four -- this one

24  is an incoming wire transfer from Mr. Dayton.

25            (SEC Exhibit No. 42 was marked for



                                                                      Page 325

1             identification.)

2        THE WITNESS:  Okay, okay.  And then another one

3   that goes right out there, I see.  Okay.  Again, I want to

4   look into this for you and get the details, if that's all

5   right with you.  I'm happy to do it.

6        BY MR. DUNBAR:

7     Q  And who is Kevin O'Donnell?

8     A  He's also a co-founder of EarthLink.

9     Q  And why would there be money coming out of the

10  friends account to Mr. O'Donnell?

11    A  Again, I want to get the detail of that for you,

12  okay.  There's an answer.  I just want to -- when there's

13  specific questions here I want to give you the specific

14  answers.  So, I --

15    Q  Is Mr. Dayton an investor?

16    A  Mr. O'Donnell, you mean?

17    Q  Mr. O'Donnell.

18    A  Mr. O'Donnell and I do a lot of investing together.

19  We're business partners.  And I can give you the detail on

20  that.

21    Q  Who is Sidney Azeez?

22       MR. BOLTZ:  Sorry, I just wanted to confer.

23       MR. DUNBAR:  Sure.

24       (Witness and counsel confer.)

25       THE WITNESS:  Oh, okay.  Yeah, I just wanted -- I



                                                                      Page 326

1   was going to do that, but I thought maybe it would be better

2   if I had the exact detail of what was --

3        MR. BOLTZ:  Yeah, you can not explain the detail,

4   but you can explain the concept overall.

5        THE WITNESS:  Yeah, these individuals that you're

6   mentioning to me are people that I do -- they're business

7   partners of mine.  And we do a lot of mutual investing

8   together.  Sometimes I am the source point of where the money

9   goes out to, sometimes they are.  But when I get the money

10  that comes from anybody that I'm -- for example, if we're

11  investing in a venture deal of some kind -- if I receive any

12  money from anybody I don't put it in my account, I put it in

13  the friends account to make sure that it stays segregated,

14  for bookkeeping purposes.  I know it didn't come to me.  It

15  came as part of their money that we were then sending out to

16  another venture, or whatever we're investing in together.

17  That's the principle.  The individual detail of the stuff I

18  can find you exactly.

19       BY MR. DUNBAR: 

20    Q  So, when you invested in partnerships?

21    A  Partnerships or venture capital deals of some kind.

22    Q  It all comes out of the 7582 account?

23    A  If it's their portion.

24       MR. BOLTZ:  In other words, what you are saying --

25  am I correct, Mr. Slatkin, that if money comes in from a



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1   business partner, which I guess you include in your

2   definition of friends --

3        THE WITNESS:  Yeah.

4        MR. BOLTZ:  -- you always put it into the friends

5   account rather than your personal account, to show that it

6   did not come from you, it came from someone else?

7        THE WITNESS:  It came from someone else, exactly.

8   And then we have a --

9        MR. BOLTZ:  So, if it goes out it goes out from

10  that same person?

11       THE WITNESS:  Yes.  And, like, I know the companies

12  that this money went to.  I'm just going to try and get you

13  the details on that, so I could tell you where it went to, so

14  you could trace it.

15       MR. BOLTZ:  But I think it is important they

16  understand the general concept.

17       THE WITNESS:  Yeah.  And it goes the other way too

18  sometimes, when I give them the money, then they invest it.

19  And I don't know what they -- you know, how that goes.

20       BY MR. DUNBAR:

21    Q  So, sometimes money will come out of the 7582

22  account to invest in your personal -- you and somebody, no[t?]

23  the people involved with the NAA Financial?

24    A  Right.  This is just having to do with --

25       MR. BOLTZ:  But it is not your money, is it?



                                                                      Page 328

1        THE WITNESS:  Isn't my money; it's their money.

2        MR. BOLTZ:  It is their money.

3        THE WITNESS:  It's their money.

4        MR. BOLTZ:  It is the friends' money.

5        THE WITNESS:  My portion would come out of my

6   account.

7        BY MR. DUNBAR:

8     Q  The other Union Bank account, your personal Union

9   Bank account?

10    A  Yeah.  I mean, I can give you lots of examples of

11  this.

12    Q  Well, when you said it goes the other way, you said

13  money comes out of the friends account.

14    A  No, what I meant to say is -- boy, got to be real

15  clear.

16       MR. BOLTZ:  You have to be clear.

17       THE WITNESS:  I know this.  There's a situation

18  where one of my business is investing money for myself and

19  for him -- these names, for example.  I would send him my

20  money.  He --

21       MR. BOLTZ:  Out of?

22       THE WITNESS:  From my personal account.  He makes

23  the investment.  That's what I mean by going the other way.

24  Whenever I receive money that is not my money I put it

25  through this account, so it's clearly demarcated.



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1        MR. BOLTZ:  Is that all account for by Ms.

2   Rogers?

3        THE WITNESS:  Yes.

4        MR. BOLTZ:  That is all kept, the records are kept

5   in the --

6        THE WITNESS:  Keeps the records, yes, she has them

7   all.

8        BY MR. DUNBAR:

9     Q  And let's say, for example, if -- let's say you

10  wired a certain amount of money out to Mr. Dayton.  That

11  would be possibly for -- give me an example.

12    A  Well, he's involved in a venture called E-Companies

13  here, for example, on the west side here.  I don't know if

14  you've read about it.  It's a big --

15       MR. MURPHY:  Today's paper, that thing where, like,

16  Internet incubator or something, is that it?

17       THE WITNESS:  Yeah, exactly.

18       MR. MURPHY:  Yeah, it was in the L.A. Times

19  recently.

20       THE WITNESS:  And I don't want to speculate here,

21  but I know there's one time where money came in from him, and

22  I was going to send to a deal.  We decided not to do it, so I

23  sent the money back to him, and it probably went back in

24  pieces.  So, this is complex, obviously.

25       MR. BOLTZ:  But that money is all kept separate --



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1        THE WITNESS:  It's kept separate.

2        MR. BOLTZ:  -- for bookkeeping from the investors?

3        THE WITNESS:  That's right, yes.  I mean, it's

4   earmarked to them.

5        BY MR. DUNBAR:

6     Q  So, there is some money coming in to the 7582

7   account which does not get adjusted in this, between the two

8   Swiss accounts?

9     A  Right, exactly.

10       MR. MURPHY:  I do not know if it was today's paper.

11  I just read about it somewhere, about E-Company's --.

12       THE WITNESS:  They're the ones who paid $7,500,000

13  for the name business.com.

14       MR. MURPHY:  Is that the one?

15       THE WITNESS:  That's the one.

16       MR. MURPHY:  Are you getting tired, Mr. Slatkin?

17       THE WITNESS:  Yeah, I'm getting pretty beat up

18  here.  I'm just tired.  You know, I got up pretty early here.

19  So, if you want to end off any time I'd be thrilled, but it's

20  your call.

21       MR. BOLTZ:  Go ahead and ask your questions.

22       BY MR. DUNBAR:

23    Q  With regards to those people who you do ventures

24  with you said this could happen.  What other names might we

25  see besides Mr. Dayton and Mr. O'Donnell?



                                                                      Page 331

1     A  Oh, boy.

2     Q  If you could just name a couple?

3     A  Mr. Abbott, maybe; Mr. Azeez, did you mention him

4   already?

5     Q  Yeah, Mr. Azeez.  Greg Abbott?

6     A  Yeah.  I could come up with a nice long list for

7   you.

8        MR. BOLTZ:  Richard Levine?

9        THE WITNESS:  Richard Levine maybe, yeah.

10       MR. MURPHY:  Do you want to provide us with a list

11  separate?

12       THE WITNESS:  I'm not sure, because it's sort of --

13       MR. BOLTZ:  In other words, a list of --

14       MR. MURPHY:  -- venture capital investors that you

15  join in venture capital --

16       THE WITNESS:  I mean, if you want to ask me a

17  specific name, I'm happy to respond to it.  I mean, I'll try

18  and put a list together for you as well, if you like.  I

19  mean, maybe I shouldn't volunteer that, but I'm happy to try.

20       BY MR. DUNBAR:

21    Q  What about somebody like Brinton Young?

22    A  Yes, I'll tell you exactly what that's all about.

23  He's an EarthLink employee.  He's got a brother-in-law that

24  started a company on the east coast, and we've invested in it

25  together, and I was the source of the --



                                                                      Page 332

1     Q  So, when you say you invested in it together, did

2   he give you money?

3     A  Yeah, he's busy working.  He says, you take care of

4   this for me, and I'll, you know --

5     Q  So, he sent you how much money for --

6     A  I have no idea how much it was.

7     Q  But he sent you a certain amount and you put it

8   into this account, this 7582 account?

9     A  Yes.

10    Q  And then --

11    A  Then he would have -- I would keep his -- he would

12  have his own, you know, thing.

13    Q  And then would you transfer money from your

14  personal Union Bank account over and then ship the money out;

15  or do you ship just his money out and then --

16    A  No, no.  There's a subscription agreement for this

17  particular investment.  So, his money would go -- and he'd

18  get his own subscription agreement -- I would send my own

19  money for my subscription agreement.

20       MR. BOLTZ:  From your personal account?

21       THE WITNESS:  From my personal account.

22       BY MR. DUNBAR:  

23    Q  So, it would be two separate wires going out?

24    A  Two separate wires.  That's what I'm trying to

25  explain.



                                                                      Page 333

1        MR. DUNBAR:  We will do one more.  It is getting

2   late.

3        THE WITNESS:  Why don't we just not?

4        MR. DUNBAR:  You want to end it right here?

5        THE WITNESS:  I mean, if it's okay.  I just -- I

6   don't want to be rude, but I just think maybe I'd be more use

7   to you next time if I was a little more wide awake.  It's a

8   twelve-hour day here for me.

9        MR. DUNBAR:  We will go off the record for a quick

10  break.

11       (Whereupon, a brief recess was taken.)

12       MR. DUNBAR:  Back on the record at 4:15.

13       BY MR. MURPHY:

14    Q  Like, managing this amount of money did you ever

15  consider, like, just, you know, registering with the SEC and

16  just formally setting this up as a formal investment

17  business?  I mean, before -- I know now you have decided to

18  close it down, but prior to that, was that --

19    A  You know, it was never intended to be a business.

20  It just -- it was -- I got into this and then I got a big

21  break with this EarthLink thing, and all of a sudden I had a

22  lot of money.  And my venture experience early in the '80's

23  was great for me, and I was making a big difference to all

24  these people.  And I never thought about it.  I think I

25  mentioned the last time I was here, you know, I had -- when I



                                                                      Page 330

1   was inquired about in '97, we sent back some material, I --

2   you know, my wife's been telling me to stop this for years

3   because it's a lot of work.

4     Q  The operation?

5     A  Yeah, it's a big -- I mean, it is.  It's not -- but

6   my commitment to the people has been great.  And since I got

7   involved in EarthLink my life has become much more

8   complicated and I've made a lot of money, and I've made these

9   other people a lot of money.  And to be registered, it's just

10  --  that's the reason I'm -- I don't want it to be -- I don't

11  want to be in the business.  I was motivated to help these

12  other folks, and that was great fun for me.  It gave me a

13  reason to do it.  And without that motivation it's just too

14  unwieldy.  So, the answer to your question is, I really never

15  thought about it because I just didn't think that I wanted it

16  to be a business.  I had plenty of business, you know.  And

17  if I read you more of these letters -- you know, we can do it

18  off the record -- but they're pretty amazing.

19       MR. BOLTZ:  You are welcome to look at them.

20       THE WITNESS:  Yeah, there are some neat ones here.

21  You know, it's hard to describe to you how personal this all

22  is.  You know, this is -- do you recognize this?

23       MR. BOLTZ:  Well, that is not on the record.

24       MR. MURPHY:  It is a postcard of -- what is it?

25       THE WITNESS:  Patrick McGoohan.  It's a TV show



                                                                      Page 335

1   that I really like a lot and this is a friend of mine.  She

2   says to me:  "I just wanted to say a huge thank you for all

3   you've done for me over the past few years.  Of course, I [am]

4   sad that my account is closed, but I totally understand that

5   perhaps there are other priorities in your life now, and

6   that's your decision.  I really do wish you well and hope

7   that we won't lose touch."  You know, closed account, yo[u]

8   know.

9        I mean, there's, you know:  "Can't thank you enoug[h]

10  for your assistance.  Please have all our money sent to

11  this broker at Bear Stearns.  I am moving full speed ahead [to?]

12  retain two new money managers to replace you.  Within a [?]

13  weeks I'll be traveling to meet these managers, and I will

14  have the detailed account listing all capital gains from you

15  to take with me.  Would you please arrange this report?"  I

16  mean, you know, so we're -- this is my own best interest.

17  You know, I'm sorry this came down to what we have to [do?]

18  with all this, but -- you know, I never thought of it becaus[e]

19  I didn't think of it as a business.  That's where -- that's

20  the bottom line on it.  And I hope that answers your

21  question.

22       MR. DUNBAR:  All right, Mr. Slatkin, at this time

23  we are adjourning testimony to a future date, which we wi[ll]

24  determine later.  We will speak with Mr. Boltz, speak with

25  you, and then figure out when it is a good time for you to



                                                                      Page 336

1   come back.  Although testimony is adjourned you do remain

2   under subpoena.  Do you wish to clarify anything or add

3   anything to the statements you have made today?

4        MR. BOLTZ:  I do not think so.  Do you have

5   anything now?

6        THE WITNESS:  No.

7        MR. DUNBAR:  Okay, thank you.  We are off the

8   record at 4:16.

9     (Whereupon, at 4:16 p.m., the examination was concluded.)

10                  * * * * *