20-10990-mew doc 178 filed 07/13/20 entered 07/13/20 09:34:15 main document pg 1 of 1 · 20 hours...
TRANSCRIPT
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK --------------------------------------------------------------------X In re: THE NORTHWEST COMPANY, LLC, et al.1, Debtors.
: : : : : : : :
Chapter 11 Case No. 20-10990 (MEW) (Jointly Administered)
--------------------------------------------------------------------X
DECLARATION OF URIEL PINELO, ESQ. I, URIEL PINELO, declare under the penalty of perjury as follows:
1. I am an associate with the law firm of Brown Rudnick LLP (“Brown Rudnick”),
counsel to Extreme Horse Limited. I am duly admitted, in good standing and authorized to
practice before this Court. I submit this declaration (the “Pinelo Declaration”) in connection
with the Reply Of Extreme Horse Limited And Ashford Textiles LLC In Support Of Their Motion
To Appoint An Examiner Or A Chapter 11 Trustee.
2. Attached hereto as Exhibit 1 is a true and correct copy of the transcript of the
deposition of Robert Jolson conducted on June 29, 2020.
3. Attached hereto as Exhibit 2 is a true and correct copy of the transcript of the
deposition of Ross Auerbach conducted on July 1, 2020.
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true
and correct to the best of my knowledge, information, and belief.
Dated: July 13, 2020 /s/ Uriel Pinelo Uriel Pinelo
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: The Northwest Company, LLC (8132) and The Northwest.com LLC (1339). The location of the Debtors’ service address is: 49 Bryant Avenue, Roslyn, New York 11576.
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Exhibit 1
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Page 1·1· · · · · ·UNITED STATES BANKRUPTCY COURT
·2· · · · · ·SOUTHERN DISTRICT OF NEW YORK
·3· · · · · · ·Case No. 20-10990 (MEW)
·4· ·--------------------------------------
·5· ·In Re
·6· ·NORTHWEST COMPANY LLC, et al.,
·7· · · · · · · ·Debtors.
·8· ·--------------------------------------
·9
10· · · · · ·REMOTE VIDEOTAPED DEPOSITION OF
11· · · · · · · · · ROBERT JOLSON
12
13· · · · · · · ·Monday, June 29, 2020
14· · · · · · · · · · 10:00 a.m.
15
16
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21
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23· ·Reported by:
24· ·Debra Stevens, CRR/RPR
25· ·Job No. 181219
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Page 2·1· ·REMOTE APPEARANCES:
·2· ·On behalf of Movant and Extreme Horse· · ·Limited:·3· · ·BROWN RUDNICK·4· · · · · ·Times Square Tower· · · · · · ·New York, New York 10036·5· · · BY:· KENNETH AULET, ESQ.
·6
·7
·8· ·On behalf of the Debtors:
·9· ·SILLS CUMMIS & GROSS· · · · · · ·The Legal Center10· · · · · ·One Riverfront Plaza· · · · · · ·Newark, New Jersey 0710211· · · BY:· S. JASON TEELE, ESQ.· · · · · · ·DAVID NEWMAN, ESQ.12
13
14
15· ·On behalf of Ross Auerbach and Northwest· · ·Textile Holdings LLC:16· · ·DUFFY AMEDEO17· · · · · ·275 Seventh Avenue· · · · · · ·New York, New York 1000118· · · BY:· TODD DUFFY, ESQ.
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24· · · · · · · · · · · ·(Continued)
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Page 3·1· ·REMOTE APPEARANCES (Continued):
·2· ·On behalf of Ashford Textile:
·3· ·BUCHALTER LAW FIRM· · · · · · 1000 Wilshire Boulevard·4· · · · · Los Angeles, California 90017· · · · BY: PAUL ARROW, ESQ.·5
·6· · · · · · · - and -·7· · ·KLESTADT WINTERS JURELLER SOUTHARD &·8· ·STEVENS· · · · · · ·200 West 41st Street·9· · · · · ·New York, New York 10036· · · · BY:· TRACY KLESTADT, ESQ.10
11
12
13· ·ALSO PRESENT:
14· · · · · ·JULIE KIMMEL, Videographer
15· · · · · · · · · · · · * * *
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Page 4·1
·2· · · · · E X A M I N A T I O N S
·3· ·WITNESS· · · · · · · · · · · · · · · PAGE
·4· ·ROBERT JOLSON
·5· · ·By Mr. Aulet· · · · · · · · · · · · · 9
·6· · · · · · · · · · E X H I B I T S·7· · ·EXHIBIT· · · DESCRIPTION· · · · · · PAGE·8· · ·Exhibit 1· · Notice of 30(b)(6)· · · · 15·9· · · · · · · · Deposition
10· ·Exhibit 2· · Screenshots of 2017· · · ·45· · · · · · · · · general ledger file11· · · · · · · · entries
12· ·Exhibit 3· · Screenshots of· · · · · · 64· · · · · · · · · general ledger files13· · · · · · · · from 1/1/20 through· · · · · · · · · 2/28/2014· · ·Exhibit 4· · Screenshots from· · · · · 8015· · · · · · · · general ledger files· · · · · · · · · for 202016· · ·Exhibit 5· · Screenshots for· · · · · ·8717· · · · · · · · general ledger· · · · · · · · · entries for October18· · · · · · · · 2017
19· ·Exhibit 6· · Document, "Statement· · · 92· · · · · · · · · of Financial Affairs20· · · · · · · · for Non-Individuals· · · · · · · · · Filing for21· · · · · · · · Bankruptcy" dated· · · · · · · · · 6/1/2022· · ·Exhibit 7· · Bank statement for· · · · 9823· · · · · · · · The Northwest· · · · · · · · · Company, 4/1/2024· · · · · · · · through 4/30/20
25· · · · · · · · · · · · ·(Continued)
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Page 5·1
·2· · · · · · · · E X H I B I T S
·3· ·EXHIBIT· · · · ·DESCRIPTION· · · · ·PAGE
·4· ·Exhibit 8· · · Three payments made· · 107· · · · · · · · · · before bankruptcy·5· · ·Exhibit 9· · · Northwest Company· · · 113·6· · · · · · · · · Platinum card· · · · · · · · · · statement ending·7· · · · · · · · · 6/14/19
·8· ·Exhibit 10· · ·Amex Platinum card· · ·115· · · · · · · · · · statement ending·9· · · · · · · · · 1/16/17
10· ·Exhibit 11· · ·Centurian card· · · · ·121· · · · · · · · · · statement, closing11· · · · · · · · · date 9/19/17
12· ·Exhibit 12· · ·Centurian card· · · · ·127· · · · · · · · · · account statement13· · · · · · · · · for July through· · · · · · · · · · December 201914· · ·Exhibit 13· · ·Northwest general· · · 13015· · · · · · · · · ledger, journal· · · · · · · · · · entry from October16· · · · · · · · · 2018
17· ·Exhibit 14· · ·Northeastern· · · · · ·134· · · · · · · · · · Aviation invoices18· · ·Exhibit 15· · ·Emails, beginning· · · 14519· · · · · · · · · 5/18/20
20· ·Exhibit 15(A)· David Harrison· · · · ·150· · · · · · · · · · invoices21· · ·Exhibit 16· · ·Email from Ross· · · · 15722· · · · · · · · · Auerbach to Jay· · · · · · · · · · Silver and Michael23· · · · · · · · · Goldsmith
24· ·Exhibit 17· · ·Spreadsheet· · · · · · 168
25· · · · · · · · · · · · · ·(Continued)
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Page 6·1
·2· · · · · · · · · E X H I B I T S·3· · ·EXHIBIT· · · · ·DESCRIPTION· · · · ·PAGE·4· · ·Exhibit 18· ·Email from Ron· · · · · ·170·5· · · · · · · · Andreola to Allen Guo
·6· ·Exhibit 19· ·Emails· · · · · · · · · ·173
·7· ·Exhibit 20· ·Screenshot of March· · · 181· · · · · · · · · 2017 ledgers·8· · ·Exhibit 21· ·Email to Peter Wu· · · · 192·9· · ·Exhibit 22· ·PDF titled "PPP Loan"· · 19910· · ·Exhibit 23· ·May 2017 bank· · · · · · 20711· · · · · · · · statement
12· ·Exhibit 24· ·2017 general ledgers· · ·209
13· ·Exhibit 25· ·Shorter version of· · · ·210· · · · · · · · · Exhibit 2414
15· · · ·INFORMATION/PRODUCTION REQUESTS16· · ·DESCRIPTION· · · · · · · · · · · · · PAGE17· · ·Documents reflecting results of· · · · 7918· ·allocation in Mr. Auerbach's· · ·account19
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Page 7·1
·2· · · · ·THE VIDEOGRAPHER:· Good morning.
·3· ·My name is Julie Kimmel.· I am a
·4· ·certified legal videographer in
·5· ·association with TSG Reporting.· As a
·6· ·result of COVID-19 and the following
·7· ·practice of social distancing, I will
·8· ·not be in the same room with the
·9· ·witness.· Instead, I will record this
10· ·videotaped deposition remotely.· The
11· ·reporter, Deb Stevens, will also not
12· ·be in the same room and will swear the
13· ·witness remotely.· Do all parties
14· ·stipulate to the validity of this
15· ·video recording and remote swearing
16· ·and that it will be admissible in the
17· ·courtroom as if it had been taken
18· ·following Rule 30 of the Federal Rules
19· ·of Civil Procedure and the state's
20· ·rules where this case is pending?
21· · · · ·MR. TEELE:· The Debtors do.
22· · · · ·MR. DUFFY:· Northwest Textiles
23· ·do.
24· · · · ·MR. AULET:· Extreme Horse does.
25· · · · ·THE VIDEOGRAPHER:· Thank you.
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Page 8·1
·2· ·This is the start of media labeled
·3· ·number 1 of the video-recorded
·4· ·deposition of Robert Jolson in the
·5· ·matter In Re Northwest Company LLC, et
·6· ·al., Debtors, in the Court of U.S.
·7· ·Bankruptcy for Southern District of
·8· ·New York, No. 20-10990 (MEW).
·9· · · · ·This deposition is being held
10· ·remotely on June 29, 2020, at
11· ·approximately 10:20 a.m.· My name
12· ·again is Julie Kimmel, legal video
13· ·specialist for TSG Reporting
14· ·headquartered at 747 Third Avenue, New
15· ·York New York.· Court reporter is Deb
16· ·Stevens in association with TSG
17· ·Reporting.
18· · · · ·Counsel, please introduce
19· ·yourselves.
20· · · · ·MR. AULET:· This is Ken Aulet,
21· ·of Brown Rudnick, on behalf of the
22· ·Movants and Extreme Horse Limited.
23· · · · ·MR. TEELE:· This is Jason Teele,
24· ·of Sills Cummis & Gross, on behalf of
25· ·the Debtors.
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Page 9·1
·2· · · · · · ·MR. DUFFY:· Todd Duffy, Duffy
·3· · · ·Amedeo LLP, on behalf of Ross Auerbach
·4· · · ·and Northwest Textile Holdings LLC.
·5· · · · · · ·MR. NEWMAN:· David Newman, Sills
·6· · · ·Cummis, on behalf of Debtors.
·7· · · · · · ·Whereupon,
·8· · · · · · · · · ·ROBERT JOLSON,
·9· · · having been first duly sworn/affirmed,
10· · · was examined and testified as follows:
11· ·EXAMINATION BY
12· ·MR. AULET:
13· · · ·Q.· · Good morning, Mr. Jolson.· Can
14· ·you state your name and occupation for the
15· ·record, please?
16· · · ·A.· · Robert Jolson, chief financial
17· ·officer for Northwest Company.
18· · · ·Q.· · As you are aware, we are taking
19· ·this deposition under somewhat unusual
20· ·circumstances.· To the extent you have any
21· ·technical issues such as you can't see us,
22· ·you can't hear me or anything of the sort,
23· ·please let us know as quickly as possible
24· ·and we will try and get that resolved.
25· · · · · · ·Is there anyone in the room with
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Page 10·1· · · · · · · · · ·R. JOLSON
·2· ·you while you are taking this deposition?
·3· · · ·A.· · Yes.
·4· · · ·Q.· · And who is in the room with you?
·5· · · ·A.· · Jason Teele and --
·6· · · · · · ·THE WITNESS:· I don't remember
·7· · · ·your last name.
·8· · · · · · ·MR. DUFFY:· Duffy.
·9· · · · · · ·THE WITNESS:· Duffy.
10· · · ·Q.· · Is Jason Teele representing you
11· ·in this deposition?
12· · · · · · ·MR. TEELE:· That's correct.
13· · · ·A.· · Yes.
14· · · ·Q.· · Have you ever been deposed
15· ·before?
16· · · ·A.· · Yes.
17· · · ·Q.· · So, you may be familiar with
18· ·this, but I will go over some ground
19· ·rules.· As you know, this deposition is
20· ·being transcribed, so even if you know
21· ·where I am going with a question, please
22· ·wait until I finish so that we have a
23· ·clean record.· And I will attempt to do
24· ·the same for you.· Your counsel from time
25· ·to time may have an objection.· If he
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Page 11·1· · · · · · · · · ·R. JOLSON
·2· ·does, please wait for him to finish
·3· ·speaking and then, unless he instructs you
·4· ·not to answer the question, I will expect
·5· ·you to answer the question.
·6· · · · · · ·Are you aware that you are under
·7· ·oath today?
·8· · · ·A.· · Yes.
·9· · · ·Q.· · And is there any reason why you
10· ·cannot testify truthfully and accurately
11· ·today?
12· · · ·A.· · No.
13· · · ·Q.· · You said you have been deposed
14· ·before.· How many times have you been
15· ·deposed?
16· · · · · · ·MR. TEELE:· Objection to the
17· · · ·form of that.· You can answer.
18· · · ·A.· · One time.
19· · · ·Q.· · What was the case in which you
20· ·were deposed?
21· · · ·A.· · It was -- it was the sale of a
22· ·company, so --
23· · · ·Q.· · What company was that?
24· · · ·A.· · It was T, like Tom, Juniors.
25· · · ·Q.· · Did that case have anything to
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Page 12·1· · · · · · · · · ·R. JOLSON
·2· ·do with Northwest?
·3· · · ·A.· · No.
·4· · · ·Q.· · And when I say "Northwest," I am
·5· ·going to be referring to the Debtors in
·6· ·this case.· Will you understand what I
·7· ·mean when I say that?
·8· · · ·A.· · I'd like a clarification on
·9· ·that, please.
10· · · ·Q.· · So, when I say "Northwest," I am
11· ·going to be referring to the entity The
12· ·Northwest Company, LLC, as well as, to the
13· ·extent relevant, its wholly owned
14· ·subsidiary, northwest.com.· Unless I
15· ·otherwise specify, when I say "Northwest,"
16· ·I am not referring to Northwest Textiles,
17· ·one of the owners and members of the
18· ·Debtors.
19· · · · · · ·If I use "Northwest" as I just
20· ·described, will you understand what I
21· ·mean?
22· · · ·A.· · Yes.
23· · · ·Q.· · What is the highest level of
24· ·education you have achieved?
25· · · ·A.· · Master's degree.
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Page 13·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · And what was that master's
·3· ·degree in?
·4· · · ·A.· · Finance.
·5· · · ·Q.· · Where was it awarded?
·6· · · ·A.· · Adelphi University.
·7· · · ·Q.· · Could you describe your job
·8· ·history since receiving that degree?
·9· · · ·A.· · Yes.· I was, at the time, a vice
10· ·president at Bankers Trust in the
11· ·asset-based lending division, specifically
12· ·factoring.
13· · · ·Q.· · And what job did you move to
14· ·after that position?
15· · · ·A.· · I went to something called T
16· ·Juniors.
17· · · ·Q.· · And what was your role at T
18· ·Juniors?
19· · · ·A.· · Chief financial officer.
20· · · ·Q.· · And approximately when did you
21· ·begin that job?
22· · · ·A.· · 1992.
23· · · ·Q.· · What company did you move to
24· ·after you left T Juniors?
25· · · ·A.· · Signature Apparel.
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Page 14·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · And what was your role at
·3· ·Signature Apparel?
·4· · · ·A.· · Chief financial officer.
·5· · · ·Q.· · And when did you join Signature
·6· ·Apparel?
·7· · · ·A.· · 2007.
·8· · · ·Q.· · When did you leave Signature
·9· ·Apparel?
10· · · ·A.· · In the end of 2009.
11· · · ·Q.· · What job did you take after you
12· ·left Signature Apparel?
13· · · ·A.· · Went to work for FAB, Fashion
14· ·Accessory Bazaar.
15· · · ·Q.· · What role did you have at
16· ·Fashion Accessory Bazaar?
17· · · ·A.· · Chief financial officer.
18· · · ·Q.· · When did you leave Fashion
19· ·Accessory Bazaar?
20· · · ·A.· · 2012.
21· · · ·Q.· · What company did you move to
22· ·after FAB in 2012?
23· · · ·A.· · Northwest Company.
24· · · ·Q.· · That is the title you currently
25· ·hold today?
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Page 15·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Yes.
·3· · · ·Q.· · Have you held any other
·4· ·positions at any other companies since
·5· ·joining Northwest?
·6· · · ·A.· · No.
·7· · · ·Q.· · Could you explain your main
·8· ·responsibilities as CFO of Northwest?
·9· · · ·A.· · I am responsible for finance,
10· ·parts of operations.
11· · · ·Q.· · Who do you report to?
12· · · ·A.· · Ross Auerbach.
13· · · · · · ·MR. AULET:· I am going to make a
14· · · ·first stab at submitting an exhibit.
15· · · ·Let's see if this works.
16· · · · · · ·(So marked for identification as
17· · · ·Exhibit 1.)
18· · · ·Q.· · You should be now seeing what I
19· ·have marked as Exhibit 1, which is a
20· ·Notice of 30(b)(6) Deposition.
21· · · · · · ·MR. TEELE:· Ken, one second. I
22· · · ·am trying to show Mr. Jolson the
23· · · ·buttons to make it bigger.
24· · · ·A.· · Okay.
25· · · · · · ·MR. TEELE:· Just a technical
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Page 16·1· · · · · · · · · ·R. JOLSON
·2· · · ·instruction there.
·3· · · · · · ·MR. AULET:· Of course.
·4· · · ·Q.· · I am not sure if my moving to
·5· ·page 5 moved you, but if not, please go to
·6· ·page 5 and look at the topics for
·7· ·examination.
·8· · · ·A.· · I am looking at topics for
·9· ·examination.
10· · · ·Q.· · Have you been designated to
11· ·testify on behalf of the Debtors for any
12· ·of these topics of examination?
13· · · · · · ·MR. TEELE:· I will object and
14· · · ·say, Ken, the Debtor has received two
15· · · ·different deposition notices for
16· · · ·today.· One was directed to the
17· · · ·Debtors and called for Mr. Jolson's
18· · · ·testimony specifically.· Several days
19· · · ·to maybe a week later you served on
20· · · ·the Debtors a 30(b)(6) deposition
21· · · ·notice.· So, Mr. Jolson is here in
22· · · ·response to the initial dep notice
23· · · ·directed to the Debtors but calling
24· · · ·for his deposition specifically, as
25· · · ·well as -- and I will let him answer
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Page 17·1· · · · · · · · · ·R. JOLSON
·2· · · ·your question -- as well as a 30(b)(6)
·3· · · ·witness for today on those topics.
·4· · · · · · ·I will let him answer the
·5· · · ·question but I wanted to clarify there
·6· · · ·are two different dep notices hanging
·7· · · ·out there.
·8· · · ·Q.· · Mr. Jolson, do you remember what
·9· ·the question was?
10· · · ·A.· · No.
11· · · ·Q.· · Have you been designated to
12· ·testify on behalf of the Debtors for any
13· ·of these five topics of examination and,
14· ·if so, could you identify which ones?
15· · · ·A.· · Yes.
16· · · ·Q.· · And which topics?
17· · · ·A.· · Can I just go one by one?
18· · · ·Q.· · You can just identify by number
19· ·rather than read out off the entire topic
20· ·of examination.
21· · · ·A.· · It would be all of them to the
22· ·extent that I know about certain
23· ·information.
24· · · ·Q.· · And what did you do to prepare
25· ·for this deposition today?
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Page 18·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I just spoke to our attorney.
·3· · · ·Q.· · Did you review documents in
·4· ·preparation for your deposition today?
·5· · · ·A.· · No.
·6· · · ·Q.· · Are you aware that the Debtors
·7· ·have produced a number of documents to
·8· ·Extreme Horse, Ashford, as well as to the
·9· ·committee?
10· · · ·A.· · Yes.
11· · · ·Q.· · Were you involved in collecting
12· ·the documents for production?
13· · · ·A.· · Some of them.
14· · · ·Q.· · And which ones were you involved
15· ·in collecting?
16· · · ·A.· · Items relating to the general
17· ·ledger or bank statement.
18· · · ·Q.· · Do you have any role at
19· ·Northwest Textiles, Mr. Jolson?
20· · · ·A.· · No.
21· · · · · · ·MR. AULET:· For the record, I
22· · · ·will note there are a couple of
23· · · ·document requests still outstanding
24· · · ·that we, as of this morning, do not
25· · · ·believe we have received.· There were
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Page 19·1· · · · · · · ·R. JOLSON
·2· ·two general ledger files for 2016 that
·3· ·were actually 2018 general ledger
·4· ·files.· There were the documents
·5· ·related to the Textile's funds.· There
·6· ·was the check register and then there
·7· ·were certain texts from Ross Auerbach
·8· ·that were produced in an unreadable
·9· ·format.· I will note that for the
10· ·record and request that those be
11· ·produced immediately, but we will
12· ·continue with the deposition.
13· · · · ·MR. TEELE:· We responded to
14· ·those requests.· I will follow up
15· ·again following this deposition.
16· · · · ·MR. AULET:· Now we have done a
17· ·good amount of the boilerplate. I
18· ·assume nobody's realtime feed has come
19· ·up again?
20· · · · ·THE VIDEOGRAPHER:· Gentlemen, we
21· ·are having some audio issues on this
22· ·end.· I don't know if you hear it or
23· ·not but there is some feedback.· I am
24· ·almost thinking we should call back in
25· ·to try to get a better and clearer
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Page 20·1· · · · · · · ·R. JOLSON
·2· ·line.
·3· · · · ·MR. TEELE:· Can we resolve the
·4· ·live transcript issue at the same
·5· ·time?
·6· · · · ·MR. AULET:· We can go off the
·7· ·record, but I think that the issue is
·8· ·that we have Mr. Teele and Mr. Jolson
·9· ·dial in from the same room and that's
10· ·likely causing feedback.
11· · · · ·MR. DUFFY:· No, there's only one
12· ·phone dialed in from this room.
13· ·Mr. Teele, Mr. Olsen and Mr. Duffy are
14· ·all in the same room on one line.
15· · · · ·MR. AULET:· Mr. Jolson, I will
16· ·also note we can take breaks every so
17· ·often.· If you need a break, let us
18· ·know.· We can take one at a convenient
19· ·time, but I will just ask that you
20· ·answer any questions pending before we
21· ·take a break.
22· · · · ·THE VIDEOGRAPHER:· Now going off
23· ·the record.· The time is 10:37.
24· · · · ·(Recess taken.)
25· · · · ·THE VIDEOGRAPHER:· The time is
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Page 21·1· · · · · · · · · ·R. JOLSON
·2· · · ·now 10:46 a.m. and we are back on the
·3· · · ·record.
·4· ·BY MR. AULET:
·5· · · ·Q.· · Mr. Jolson, could you describe
·6· ·generally what the business of Northwest
·7· ·is?
·8· · · ·A.· · We are a licensee of Home
·9· ·Textiles.
10· · · ·Q.· · So, does Northwest manufacture
11· ·the textiles itself?
12· · · ·A.· · We import about 90 percent of
13· ·our product.
14· · · ·Q.· · Do you produce the remaining
15· ·10 percent?
16· · · ·A.· · We produce about 6 percent and a
17· ·small amount is manufactured in the United
18· ·States other than our own production.
19· · · ·Q.· · Okay.· For the textiles that are
20· ·imported, are those produced directly by
21· ·Northwest or are they produced by parties
22· ·that Northwest contracts with?
23· · · ·A.· · Outside factories.
24· · · ·Q.· · So, generally speaking, is the
25· ·business of Northwest that you obtain
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Page 22·1· · · · · · · · · ·R. JOLSON
·2· ·these licenses, you have product
·3· ·manufactured using the licenses and then
·4· ·you attempt to sell the products for
·5· ·profit?
·6· · · · · · ·MR. TEELE:· Object to the form
·7· · · ·but Mr. Jolson can answer.
·8· · · ·A.· · Yes.
·9· · · ·Q.· · Is Northwest profitable today?
10· · · · · · ·MR. TEELE:· Object to the form
11· · · ·but you can answer that.
12· · · ·A.· · Can you just clarify that,
13· ·please?
14· · · ·Q.· · In 2019, did Northwest make a
15· ·profit?
16· · · ·A.· · No.
17· · · ·Q.· · What was the last year that
18· ·Northwest made a profit?
19· · · ·A.· · I would have to check. I
20· ·believe, 2017.
21· · · ·Q.· · In your view, what is the main
22· ·factor or factors causing Northwest to be
23· ·uncomfortable?
24· · · · · · ·MR. TEELE:· Object to the form.
25· · · ·A.· · Shortfalls in minimum
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Page 23·1· · · · · · · · · ·R. JOLSON
·2· ·guarantees.
·3· · · ·Q.· · Could you describe what the
·4· ·minimum guarantees you referred to are?
·5· · · ·A.· · Sure.· In a contract, for any
·6· ·given year, we are required to pay a
·7· ·certain amount of royalties whether we hit
·8· ·the sales or not.· So, if we don't hit the
·9· ·sales, we are paying royalties against
10· ·sales that never happened.
11· · · ·Q.· · Understood.· Does Northwest also
12· ·have problems with unsold inventory?
13· · · ·A.· · Yes.
14· · · ·Q.· · And has it had a problem with
15· ·unsold inventory for several years?
16· · · ·A.· · Yes.
17· · · ·Q.· · Approximately how many millions
18· ·of dollars of unsold inventory does
19· ·Northwest have today?
20· · · ·A.· · Of unsold?· I am not sure I
21· ·heard you.· Sorry.
22· · · ·Q.· · Yes, of unsold inventory.
23· · · ·A.· · About 15 million.
24· · · ·Q.· · Are you familiar with the
25· ·general ledgers of Northwest?
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Page 24·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Somewhat.
·3· · · ·Q.· · Do you directly interact with
·4· ·the general ledgers?
·5· · · ·A.· · No.
·6· · · ·Q.· · Are you familiar with the
·7· ·general ledger spreadsheets that were
·8· ·produced in this case?
·9· · · ·A.· · I know they were given to you,
10· ·yes.
11· · · ·Q.· · Have you ever reviewed those
12· ·spreadsheets?
13· · · ·A.· · No.
14· · · ·Q.· · Are you familiar with the
15· ·process that was used to create those
16· ·spreadsheets?
17· · · ·A.· · Yes.
18· · · ·Q.· · How were those spreadsheets
19· ·created?
20· · · ·A.· · They were downloaded from our
21· ·ERP.
22· · · ·Q.· · What is the ERP?
23· · · ·A.· · JD Edwards.
24· · · ·Q.· · Could you describe what the ERP
25· ·is?
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Page 25·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · It's our computer system, JD
·3· ·Edwards, which all transactions flow
·4· ·through.
·5· · · ·Q.· · Okay.· Is that system where all
·6· ·of the transactions the company enters
·7· ·into are entered into -- strike that.
·8· ·That was extremely confusing.
·9· · · · · · ·The ERP system is a computer
10· ·program?
11· · · ·A.· · Yes.
12· · · ·Q.· · And when the company enters any
13· ·sort of financial transaction, the details
14· ·of that transaction are put in the ERP
15· ·system?
16· · · ·A.· · Can you repeat that, please?
17· · · ·Q.· · I will strike that and give you
18· ·a new question.
19· · · · · · ·When the company enters into any
20· ·sort of financial transaction, are the
21· ·details of that transaction put in the ERP
22· ·system?
23· · · ·A.· · To the extent the description is
24· ·necessary, yes.
25· · · ·Q.· · Does the company track -- sorry.
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Page 26·1· · · · · · · · · ·R. JOLSON
·2· ·I am still having a little feedback issue.
·3· · · · · · ·Does the company track the
·4· ·transactions it enters into in any other
·5· ·system, other than the ERP?
·6· · · ·A.· · No.
·7· · · ·Q.· · Who created the spreadsheets
·8· ·that were produced in this case?
·9· · · ·A.· · Which spreadsheets?
10· · · ·Q.· · The spreadsheets reflecting the
11· ·general ledger.
12· · · ·A.· · I am trying to understand.· Who
13· ·created them?
14· · · ·Q.· · So, as I understand it, these
15· ·spreadsheets that were produced are not
16· ·how the transactions are actually
17· ·recorded; instead, the transactions are
18· ·actually recorded in the ERP system and
19· ·these spreadsheets are essentially a log
20· ·of those transactions that were created
21· ·from the ERP system.· Did I describe that
22· ·accurately?
23· · · ·A.· · The information was downloaded
24· ·from the ERP in the form of a CSV file,
25· ·and the CSV file was then given to whoever
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Page 27·1· · · · · · · · · ·R. JOLSON
·2· ·asked for them.
·3· · · ·Q.· · Thank you.· And who downloaded
·4· ·the data from the ERP?
·5· · · ·A.· · My controller.
·6· · · ·Q.· · And who is your controller?
·7· · · ·A.· · Ted Georgis.
·8· · · ·Q.· · Is there any separate system for
·9· ·tracking expenses of the company that are
10· ·entered into on American Express corporate
11· ·credit cards?
12· · · · · · ·MR. TEELE:· Objection.· You can
13· · · ·answer.
14· · · ·A.· · Not that I know of.
15· · · ·Q.· · Could you describe the process
16· ·of determining what expenses on the
17· ·American Express corporate credit cards
18· ·are expenses of the company?
19· · · · · · ·MR. TEELE:· Objection to form.
20· · · ·A.· · Sure.· Ross would download a
21· ·statement and he would give it to somebody
22· ·in our accounting staff for coding into
23· ·the general ledger.
24· · · ·Q.· · In this case, copies of American
25· ·Express statements with handwritten notes
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Page 28·1· · · · · · · · · ·R. JOLSON
·2· ·have been produced that indicate
·3· ·individual expenses being allocated to
·4· ·individual expense categories.· Would
·5· ·those have been created by this person on
·6· ·your accounting staff?
·7· · · ·A.· · Well, anybody who has a
·8· ·corporate card would write on the
·9· ·statement what the expense is for.· And
10· ·then, based on that explanation,
11· ·accounting would code the general ledger.
12· · · ·Q.· · Understood.· And is there any
13· ·sort of review process to determine if a
14· ·claimed expense is a legitimate business
15· ·expense?
16· · · ·A.· · No.
17· · · ·Q.· · Is that the same for all
18· ·employees of the companies, that nobody's
19· ·expenses are reviewed to determine if they
20· ·are legitimate?
21· · · ·A.· · For the most part, people submit
22· ·expense reports and they are just coded.
23· · · ·Q.· · You say "for the most part."
24· ·Are there any exceptions that you can
25· ·recall at this time?
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Page 29·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Well, certain -- if there was an
·3· ·expense that I would see on our financial
·4· ·statements, I would ask a question.· But I
·5· ·don't see the American Express.· They are
·6· ·just coded and I don't see them.
·7· · · ·Q.· · Is there anybody who, as part of
·8· ·their job description, would review
·9· ·claimed expenses or expenses that should
10· ·not be paid by the company?
11· · · ·A.· · Yes.
12· · · ·Q.· · And who is that person?
13· · · ·A.· · Somebody in our accounting staff
14· ·is Ron Andreola.· And if he had a question
15· ·about something, he would ask me.
16· · · ·Q.· · About how often does Ron
17· ·Andreola ask you a question about a
18· ·particular expense?
19· · · ·A.· · It could be a few times a year.
20· ·It depends if he had a question.
21· · · ·Q.· · Other than reviewing those
22· ·handwritten notes on American Express
23· ·statements, is there any way I can
24· ·determine how any particular charge on an
25· ·American Express card was expensed in the
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Page 30·1· · · · · · · · · ·R. JOLSON
·2· ·general ledger?
·3· · · ·A.· · You could match up the details
·4· ·to an American Express bill.
·5· · · ·Q.· · Are you familiar with how the
·6· ·American Express bills are booked into the
·7· ·ledger?
·8· · · ·A.· · Conceptually.
·9· · · ·Q.· · So, in reviewing the general
10· ·ledgers, we have found that typically the
11· ·American Express payments are entered as a
12· ·single block and they may be allocated to
13· ·different areas as a single block but that
14· ·we cannot trace any particular American
15· ·Express expense from a statement to a
16· ·particular account.
17· · · · · · ·Are you aware of any system that
18· ·would allow us to do that?
19· · · ·A.· · That happens when a payment is
20· ·made and we don't have the bill yet so we
21· ·have to record the payment and we don't
22· ·know how to allocate until we get the
23· ·bill.
24· · · ·Q.· · Well, so you are aware that
25· ·Mr. Auerbach would, on occasion, expense
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Page 31·1· · · · · · · · · ·R. JOLSON
·2· ·personal items to his American Express
·3· ·card.· Correct?
·4· · · ·A.· · Yes.
·5· · · ·Q.· · And those items were supposed to
·6· ·be booked in his personal loan account.
·7· ·Correct?
·8· · · ·A.· · Yes.
·9· · · ·Q.· · So, when reviewing the ledger,
10· ·what we would find is that in any
11· ·particular month where something was added
12· ·you would see a block addition to his bill
13· ·that would say something along the lines
14· ·of "March 2018 Amex" for a certain amount,
15· ·say $5,000.· Is there any way that you
16· ·could determine what particular expenses
17· ·were included in that $5,000?
18· · · ·A.· · Yes.· That is the result of --
19· ·to use your example, at that time we did
20· ·not have the American Express bill.· Once
21· ·we get the bill, it would be allocated by
22· ·entry.
23· · · ·Q.· · So we should see individual
24· ·entries from the American Express bill
25· ·allocated specifically to Ross Auerbach's
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Page 32·1· · · · · · · · · ·R. JOLSON
·2· ·personal loan account?
·3· · · ·A.· · I am sorry?· I missed that.
·4· · · ·Q.· · If we reviewed the general
·5· ·ledger and we want to see where a specific
·6· ·expense went, say an $11 iTunes expense,
·7· ·we should find that exact iTunes expense
·8· ·in the general ledger?
·9· · · ·A.· · I wouldn't know how it is
10· ·booked, but you could see it on the
11· ·American Express statement.
12· · · ·Q.· · So, what I am trying to get at
13· ·is, when I see a block of $5,000, which is
14· ·a number I picked out of the air, billed
15· ·to Mr. Auerbach's personal loan account
16· ·for a specific American Express bill, are
17· ·you aware of any Northwest system that
18· ·would tell me exactly which expenses from
19· ·that Amex bill were put into Ross's loan
20· ·account if we do not have that handwritten
21· ·American Express statement allocating
22· ·individual expenses?
23· · · ·A.· · A system?· No.
24· · · ·Q.· · You said that when the American
25· ·Express payments are made before you have
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Page 33·1· · · · · · · · · ·R. JOLSON
·2· ·the details, those are put on the ledger
·3· ·without being broken out.· Are those put
·4· ·in a so-called suspense account?
·5· · · · · · ·MR. TEELE:· Objection to the
·6· · · ·form.· You can answer, though.
·7· · · ·A.· · Yes.
·8· · · ·Q.· · What is a suspense account?
·9· · · ·A.· · It is a holding place until we
10· ·get further information.
11· · · ·Q.· · How often, generally speaking,
12· ·should an expense remain in the suspense
13· ·account?
14· · · ·A.· · It would have to be cleaned up
15· ·in the current year.
16· · · ·Q.· · And you say "it would have to be
17· ·cleaned up in the current year."· Why
18· ·would it have to be cleaned up?
19· · · ·A.· · Because when we do our year-end
20· ·audit, you can't have a suspense account.
21· ·I shouldn't have a suspense account.
22· · · · · · ·MR. AULET:· So Jason's video
23· · · ·just disappeared.· Jason, are you
24· · · ·having issues?
25· · · · · · ·MR. TEELE:· I am here.· I hit a
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Page 34·1· · · · · · · · · ·R. JOLSON
·2· · · ·button by accident.· I should be back.
·3· · · ·Q.· · Are you aware that the company,
·4· ·Northwest, has had millions of dollars in
·5· ·its suspense account for years?
·6· · · · · · ·MR. TEELE:· Objection to form.
·7· · · ·A.· · I am not sure I understand.· At
·8· ·the year end?
·9· · · · · · ·MR. AULET:· I will strike the
10· · · ·question.
11· · · ·Q.· · You say that the suspense
12· ·account needs to be cleaned up at the year
13· ·end.· Does that mean that all of the
14· ·expenses in the suspense account need to
15· ·be properly allocated to whatever other
16· ·category they should be in?
17· · · · · · ·MR. TEELE:· Objection to the
18· · · ·form.· You can answer.
19· · · ·A.· · If we don't have the proper
20· ·information at the end of the year, there
21· ·has been a process that has been here for
22· ·a long time that allocates 40 percent to
23· ·loan account and 60 percent to P&L
24· ·account.
25· · · ·Q.· · Are you sure it is 40 percent to
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Page 35·1· · · · · · · · · ·R. JOLSON
·2· ·the loan account and 60 percent to the P&L
·3· ·account and not vice versa?
·4· · · ·A.· · That's what I think it is.
·5· · · ·Q.· · So when the suspense account --
·6· ·at the end of the year, when the suspense
·7· ·account is allocated to the loan account
·8· ·and to the P&L accounts, is it permanently
·9· ·allocated?
10· · · · · · ·MR. TEELE:· Objection to the
11· · · ·form.
12· · · ·A.· · It is allocated until we get the
13· ·American Express statements.
14· · · ·Q.· · Let me make sure I understand
15· ·your answer that it is allocated "until we
16· ·get the American Express statements."
17· ·Let's assume the suspense account has a
18· ·million dollars at the end of the year,
19· ·for easy math.· I understand that
20· ·40 percent of it will go to, I think you
21· ·said, the loan account and 60 percent will
22· ·go to the P&L account.· Will those amounts
23· ·stay in the loan account and the P&L
24· ·account?
25· · · · · · ·MR. TEELE:· Objection to the
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Page 36·1· · · · · · · · · ·R. JOLSON
·2· · · ·form.
·3· · · ·A.· · They will stay there until we
·4· ·get a statement.
·5· · · ·Q.· · Are you aware that that has
·6· ·never been the case, Mr. Jolson?
·7· · · · · · ·MR. TEELE:· Objection to the
·8· · · ·form.
·9· · · ·Q.· · So, are you aware that -- strike
10· ·that.
11· · · · · · ·Are you aware that Northwest
12· ·makes a practice of allocating the
13· ·suspense account to various accounts on
14· ·December 31st of every year and then
15· ·immediately unallocating it on January 1st
16· ·of the next year?
17· · · · · · ·MR. TEELE:· Objection to form.
18· · · ·A.· · No.· I don't know that.
19· · · ·Q.· · You are not aware of that.
20· ·And --
21· · · ·A.· · I --
22· · · ·Q.· · Are you aware that Northwest has
23· ·that same practice at the end of June and
24· ·beginning of July, that expenses are
25· ·allocated at the end of June and
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Page 37·1· · · · · · · · · ·R. JOLSON
·2· ·immediately reallocated on July 1st?
·3· · · · · · ·MR. TEELE:· Objection to form.
·4· · · ·A.· · Those would be journal entries
·5· ·that I am not aware of.
·6· · · ·Q.· · Now, you said that some amount
·7· ·of the --
·8· · · · · · ·(Reporter interruption.)
·9· · · ·Q.· · Mr. Jolson, are you aware that
10· ·Northwest also makes it a practice of
11· ·allocating amounts in the suspense account
12· ·between -- sorry.· Strike the question.
13· ·You already answered that.
14· · · · · · ·You said some amount of the
15· ·suspense account is allocated to a P&L
16· ·account.· Could you explain what you mean
17· ·by P&L account?
18· · · ·A.· · The amount that doesn't go to
19· ·the loan account is put into one account
20· ·on the P&L called foreign travel, so it is
21· ·all sitting in that account waiting for
22· ·proper allocation.
23· · · ·Q.· · And your understanding was that
24· ·those expenses stayed in the foreign
25· ·travel account.· Correct?
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Page 38·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Until we get a bill.
·3· · · ·Q.· · And it would surprise you to see
·4· ·that they are immediately reversed the
·5· ·next day rather than staying in that
·6· ·account.· Correct?
·7· · · · · · ·MR. TEELE:· Objection to the
·8· · · ·form.
·9· · · ·A.· · Yes.
10· · · ·Q.· · Now, when an expense is put into
11· ·a profit/loss account, does that affect
12· ·the net income that the company reports
13· ·for that year?
14· · · ·A.· · Yes.
15· · · ·Q.· · So, if an amount is put in a
16· ·profit/loss account at the end of the year
17· ·and then reversed back out for, say, the
18· ·next year, is the net income of the
19· ·company understated?
20· · · ·A.· · What period -- I don't
21· ·understand.
22· · · ·Q.· · Well, if you put a million
23· ·dollars into the profit/loss account, that
24· ·reduces your net income by a million
25· ·dollars.· Correct?
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Page 39·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Correct.
·3· · · ·Q.· · What is the effect of
·4· ·immediately reversing that out the next
·5· ·day?
·6· · · ·A.· · It would put it back on the
·7· ·balance sheet to wait until either the
·8· ·bills come in or the next reporting cycle
·9· ·comes in.
10· · · ·Q.· · What is the last year that the
11· ·debtors filed a tax return with the IRS?
12· · · ·A.· · I am not sure.· I don't handle
13· ·the taxes.
14· · · ·Q.· · We requested tax returns and the
15· ·last return that we received was 2017.
16· ·Was that tax return filed?
17· · · ·A.· · Yes.
18· · · ·Q.· · Who would have signed on behalf
19· ·of the company?
20· · · ·A.· · Ross.
21· · · ·Q.· · Not you?
22· · · ·A.· · No.
23· · · ·Q.· · Why wouldn't you have signed the
24· ·tax returns?
25· · · ·A.· · Because I don't.
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Page 40·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Are you aware of any tax returns
·3· ·that were filed for 2018 or 2019?
·4· · · ·A.· · No.
·5· · · ·Q.· · Why wouldn't tax returns have
·6· ·been filed for 2018 or 2019?
·7· · · ·A.· · I don't know why they weren't.
·8· ·An extension was filed.
·9· · · ·Q.· · And what was the reason for
10· ·filing for an extension?
11· · · ·A.· · We weren't ready.· We have a tax
12· ·accountant that didn't do it.· I don't
13· ·know.
14· · · ·Q.· · Well, it's been a year and a
15· ·half since the 2018-fiscal year ended --
16· ·strike that.
17· · · · · · ·When does Northwest's fiscal
18· ·year end?
19· · · ·A.· · December 31st.
20· · · ·Q.· · And so why has Northwest been
21· ·unable to file a tax return for a year and
22· ·a half for the fiscal year 2018?
23· · · · · · ·MR. TEELE:· Objection.· He's
24· · · ·already answered that question that he
25· · · ·didn't know.· You can still answer.
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Page 41·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I don't know.· I would ask our
·3· ·tax accountant.
·4· · · ·Q.· · Does the issue of filing the
·5· ·company's taxes ever come to your
·6· ·attention, as the CFO of the company?
·7· · · ·A.· · No.· I am not involved in any of
·8· ·the tax returns.
·9· · · ·Q.· · Who is the most senior person at
10· ·Northwest who is involved in filing tax
11· ·returns?
12· · · ·A.· · Ross.
13· · · ·Q.· · If I wanted to know why the
14· ·company has been unable to file a tax
15· ·return for 2018 for a year and a half, is
16· ·there anybody other than Ross at the
17· ·company who would be able to answer that
18· ·question?
19· · · ·A.· · No.
20· · · ·Q.· · Who are the company's auditors?
21· · · ·A.· · Mazars U.S.
22· · · ·Q.· · What was the last year that they
23· ·completed an audit for?
24· · · ·A.· · They completed all the work and
25· ·testing for 2018 and issued a draft.
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Page 42·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · You say "they completed all the
·3· ·work and testing for 2018 and issued a
·4· ·draft."· Did they not issue a final audit?
·5· · · ·A.· · They did not.
·6· · · ·Q.· · Why not?
·7· · · · · · ·MR. TEELE:· Objection to the
·8· · · ·form.
·9· · · ·A.· · They went on and CIT didn't need
10· ·it.· So when they didn't need it, they
11· ·didn't issue the final.
12· · · ·Q.· · Did Northwest instruct Mazars
13· ·not to issue a final?
14· · · · · · ·MR. TEELE:· Objection to form.
15· · · ·A.· · No.
16· · · ·Q.· · Did you provide the draft audit
17· ·to CIT?
18· · · ·A.· · Yes.
19· · · ·Q.· · Why was no audit completed for
20· ·2019?
21· · · · · · ·MR. TEELE:· Objection to the
22· · · ·form.
23· · · ·A.· · At the time, there was a
24· ·question about a going-concern comment
25· ·that never got answered, so they never
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Page 43·1· · · · · · · · · ·R. JOLSON
·2· ·issued a final.
·3· · · ·Q.· · And was there a going concern
·4· ·comment in the potential audit for 2019?
·5· · · · · · ·MR. TEELE:· Objection to form.
·6· · · ·A.· · There is no -- there was no
·7· ·audit for 2019.
·8· · · ·Q.· · So when you say the question
·9· ·about a going-concern comment that never
10· ·got answered, where was that going-concern
11· ·comment?
12· · · ·A.· · I don't understand.
13· · · ·Q.· · Previously, you had answered
14· ·that there was a question about a
15· ·going-concern comment that never got
16· ·answered so they never issued a final.
17· ·Was that going-concern comment in the 2018
18· ·audit?
19· · · ·A.· · That was the question, in the
20· ·2018 audit.· That's why it didn't get
21· ·final.
22· · · ·Q.· · Did the 2018 audit have a
23· ·going-concern statement?
24· · · ·A.· · No.· There was opinion --
25· · · ·Q.· · Strike that.· Sorry.
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Page 44·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·So, Mazars did not issue an
·3· ·opinion in the 2018 audit that the company
·4· ·could continue as a going concern?
·5· · · · · · ·MR. TEELE:· Objection to form.
·6· · · ·A.· · I lost track.· Can you repeat
·7· ·the question, please.
·8· · · ·Q.· · Did Mazars -- strike the
·9· ·previous question.
10· · · · · · ·Did Mazars indicate any concern
11· ·about the company's ability to continue as
12· ·a going concern in its 2018 draft audit?
13· · · · · · ·MR. TEELE:· Same objection to
14· · · ·form.
15· · · ·A.· · They just wanted to discuss it,
16· ·about a going-concern comment, and the
17· ·discussions never concluded, so -- and at
18· ·the time CIT didn't ask for a final so
19· ·there was no opinion given.
20· · · ·Q.· · When you say "they just wanted
21· ·to discuss it," by "they" did you mean
22· ·Mazars?
23· · · ·A.· · Yes.
24· · · ·Q.· · Why was the discussion never had
25· ·with Mazars about a going-concern comment?
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Page 45·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · The discussion happened.· We
·3· ·didn't have a resolution.
·4· · · ·Q.· · Was Mazars concerned about the
·5· ·ability of the company to continue as a
·6· ·going concern?
·7· · · · · · ·MR. TEELE:· Objection to form.
·8· · · ·A.· · They asked Ross for a letter
·9· ·that would support that -- that he would
10· ·support the company, and that was it.
11· · · ·Q.· · Did Ross ever supply that
12· ·letter?
13· · · ·A.· · I am not sure.
14· · · ·Q.· · Are you aware of any such letter
15· ·that he ever supplied?
16· · · · · · ·MR. TEELE:· Objection.
17· · · ·A.· · I never saw it.
18· · · · · · ·MR. AULET:· So, I am going to
19· · · ·introduce a new exhibit.· As usual,
20· · · ·please bear with me while I confirm
21· · · ·that this actually works.
22· · · · · · ·(So marked for identification as
23· · · ·Exhibit 2.)
24· · · ·Q.· · What you should be seeing is an
25· ·exhibit that we have created of
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Page 46·1· · · · · · · · · ·R. JOLSON
·2· ·screenshots of a number of entries from
·3· ·the general ledger files from 2017.· In
·4· ·these files, for the record, are hundreds
·5· ·of thousands to over a million lines long
·6· ·so we are not going to attempt to run
·7· ·those through the system, hence the need
·8· ·for these screenshots.
·9· · · · · · ·MR. TEELE:· I just want to
10· · · ·clarify, Mr. Aulet.· You prepared this
11· · · ·exhibit based on the GL's that were
12· · · ·produced by the Debtors.· Right?
13· · · · · · ·MR. AULET:· That's correct.
14· · · ·They are screenshots from those files.
15· · · ·So, we have left the line numbers so
16· · · ·that if you want, you can go look them
17· · · ·up.
18· · · · · · ·MR. TEELE:· Thank you.
19· · · · · · ·MR. AULET:· You will also see we
20· · · ·have left the header that shows --
21· · · · · · ·MR. TEELE:· Sorry, Ted.· I'm
22· · · ·helping Mr. Jolson zoom in on the
23· · · ·document.
24· · · · · · ·MR. AULET:· For the record,
25· · · ·looking at the first page, you can see
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Page 47·1· · · · · · · · · ·R. JOLSON
·2· · · ·the headers that show that this
·3· · · ·particular screenshot is from the
·4· · · ·January 2017 ledger.· What this is
·5· · · ·focusing on is the officer loan entry
·6· · · ·for Ross Auerbach.
·7· · · ·Q.· · Mr. Jolson, please let me know
·8· ·once you are ready to begin discussing
·9· ·this exhibit.
10· · · ·A.· · Okay.· I see one page.
11· · · ·Q.· · On this first page, you can see
12· ·a balance forward that is about
13· ·2.76 million under the officer's loan,
14· ·Ross Auerbach entry.
15· · · ·A.· · Okay.
16· · · ·Q.· · Then there are a number of
17· ·changes to this which appear to be
18· ·allocated to specific American Express
19· ·statements.· Do you see those?
20· · · · · · ·THE VIDEOGRAPHER:· Excuse me. I
21· · · ·need Mr. Jolson back on camera.
22· · · · · · ·THE WITNESS:· Let me see if I
23· · · ·can arrange it so you can see me and I
24· · · ·can look at another computer.· You
25· · · ·will get my profile.· How is that?
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Page 48·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. TEELE:· For the record,
·3· · · ·Mr. Jolson is looking at the exhibit
·4· · · ·on a bigger screen.
·5· · · · · · ·THE VIDEOGRAPHER:· Thank you.
·6· · · ·Q.· · Mr. Jolson, you can see these
·7· ·entries that appear to reference specific
·8· ·American Express statements.· Is that
·9· ·correct?
10· · · ·A.· · I see them.
11· · · ·Q.· · If I wanted to know, for
12· ·example, what was included in the top
13· ·entry, "Jan 16, Amex," you are not aware
14· ·of any system that would let me look up
15· ·what specific expenses are in that?
16· · · · · · ·MR. TEELE:· Objection.· He's
17· · · ·already answered that question.· You
18· · · ·can answer.
19· · · ·A.· · No, I am not.
20· · · ·Q.· · If you go to the next page, this
21· ·shows the employee receivable for an
22· ·employee named Peter Ochs.· Do you know
23· ·who Peter Ochs is?
24· · · ·A.· · Yes.
25· · · ·Q.· · Who is he?
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Page 49·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Peter -- he is in-house
·3· ·salesperson.
·4· · · · · · ·MR. TEELE:· Is the next page of
·5· · · ·the exhibit on the screen?
·6· · · · · · ·MR. AULET:· I have moved to the
·7· · · ·next page.· I am not sure if yours --
·8· · · · · · ·MR. TEELE:· Apologies.· I see it
·9· · · ·now.
10· · · · · · ·(Reporter interruption.)
11· · · · · · ·MR. AULET:· Now give me a second
12· · · ·while I scroll to the correct page.
13· · · ·Q.· · Now could you turn to page 13?
14· · · · · · ·MR. TEELE:· I don't think we can
15· · · ·flip the pages.
16· · · · · · ·MR. AULET:· I have moved to page
17· · · ·13 on my screen.
18· · · ·Q.· · Has it moved for you to an
19· ·officer's loan Ross Auerbach entry but the
20· ·from and through date is 6/1 to 6/30,
21· ·2017?
22· · · ·A.· · Yes.· I see it.
23· · · ·Q.· · What I am interested in is the
24· ·first line, the line that says "Adjusting
25· ·entries June 2017."· It moves about
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Page 50·1· · · · · · · · · ·R. JOLSON
·2· ·900,000 into Ross Auerbach's loan account.
·3· ·Are you aware of what this entry reflects?
·4· · · ·A.· · No.
·5· · · ·Q.· · Now, on the next page there is a
·6· ·similar entry under Peter Ochs's
·7· ·receivable, where it looks like 13,000 is
·8· ·added to his receivable with the same
·9· ·header, "Adjusting entries June 2017."
10· ·Are you aware of why that entry was made?
11· · · ·A.· · No.
12· · · ·Q.· · On the right-hand side is a
13· ·column that says "LT" and then a column
14· ·that says "Batch."· Are you aware of what
15· ·the column that reads "LT" represents?
16· · · ·A.· · No.
17· · · ·Q.· · Are you aware of what the column
18· ·labeled "Batch" represents?
19· · · ·A.· · No.
20· · · ·Q.· · So, I am going to move to the
21· ·next page, which is the suspense account
22· ·for June.· As you will see, the second
23· ·entry here says "Adjusting entries
24· ·June 2017."· You may have to zoom in to
25· ·get the correct number of digits here.· It
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Page 51·1· · · · · · · · · ·R. JOLSON
·2· ·appears to be that about 2.25 million is
·3· ·removed from the suspense account.· Do you
·4· ·see that?
·5· · · ·A.· · Yes.
·6· · · ·Q.· · Do you have any understanding of
·7· ·why that transaction would have been made?
·8· · · ·A.· · No.
·9· · · ·Q.· · Now, I have moved to the next
10· ·page.· This is a continuation of the
11· ·suspense account.· At the bottom I see the
12· ·"Account Total" line has both the same
13· ·debit and credit and now has a zero
14· ·balance.· Do you see that?
15· · · ·A.· · Yes.
16· · · ·Q.· · Does that indicate that all
17· ·expenses have been moved out of the
18· ·suspense account?
19· · · · · · ·MR. TEELE:· Objection to form.
20· · · ·A.· · I don't really know.
21· · · ·Q.· · Well, if the suspense account is
22· ·zero, does it have any expenses left in
23· ·it?
24· · · ·A.· · No.
25· · · ·Q.· · Would this movement of expenses
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Page 52·1· · · · · · · · · ·R. JOLSON
·2· ·out of the suspense account -- let me go
·3· ·back to the previous page.· If you will
·4· ·notice, the "Adjusting entries June 2017"
·5· ·line has a date of 6/30/2017.· Is that
·6· ·consistent with your understanding that
·7· ·entries are moved out of the suspense
·8· ·account and moved into other accounts at
·9· ·the end of a reporting period?
10· · · · · · ·MR. TEELE:· Objection to form.
11· · · ·A.· · Yes.
12· · · ·Q.· · And now I have moved to page 17,
13· ·which contains the foreign travel account.
14· ·Here I see adjusting entries June 2017 of
15· ·about 1.34 million that similarly happened
16· ·on June 30, 2017.· Do you see that entry?
17· · · ·A.· · Yes.
18· · · ·Q.· · And is that consistent with your
19· ·understanding that the expenses that are
20· ·moved out of the suspense account are
21· ·partially moved into the foreign travel
22· ·account?
23· · · ·A.· · Yes.
24· · · ·Q.· · Do you have any understanding
25· ·what June 2017 "permanent JE" means, the
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Page 53·1· · · · · · · · · ·R. JOLSON
·2· ·entry right below?
·3· · · ·A.· · Not specifically.
·4· · · ·Q.· · Do you have a general
·5· ·understanding of what it means?
·6· · · ·A.· · By theory, yes.
·7· · · ·Q.· · And what is that theory?
·8· · · ·A.· · It would mean to me that it is a
·9· ·permanent journal entry.
10· · · ·Q.· · What does a permanent journal
11· ·entry mean?
12· · · ·A.· · It would mean that it's not an
13· ·accrual.· It would just mean that it's a
14· ·journal entry that would affect our
15· ·records.
16· · · ·Q.· · Why would you have a journal
17· ·entry affecting your records that is not
18· ·an accrual?
19· · · · · · ·MR. TEELE:· Objection to form.
20· · · ·A.· · I was just stating a theory
21· ·based on the words I see.
22· · · ·Q.· · Okay.· Let me go to the next
23· ·page.· As you will see, the next page,
24· ·page 18, is the officer's loan Ross
25· ·Auerbach from July 2017.· Now, at the
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Page 54·1· · · · · · · · · ·R. JOLSON
·2· ·bottom, you will see a line that says
·3· ·"Adjusting entries June 2017" with the
·4· ·date of July 1, 2017 and a credit of
·5· ·$903,044.· What is your understanding of
·6· ·what that line means?
·7· · · ·A.· · I have no idea.
·8· · · ·Q.· · We can go back and look, but
·9· ·that $903,044 is an exactly offsetting
10· ·transaction for what was put into Ross's
11· ·loan account on June 30, 2017.· Do you
12· ·have any understanding why two offsetting
13· ·transactions like that would have been put
14· ·into the ledgers?
15· · · ·A.· · No.
16· · · ·Q.· · Now, if you look at the batch
17· ·number, the batch number is 195355, and
18· ·that is the exact same batch number for
19· ·every other entry titled "Adjusting
20· ·entries June 2017" that we have seen.· Do
21· ·you have any understanding of why all
22· ·those entries would have the same batch
23· ·number?
24· · · ·A.· · No.
25· · · ·Q.· · Is it possible to put entries
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Page 55·1· · · · · · · · · ·R. JOLSON
·2· ·into the ledger that will appear on a
·3· ·different date from the date that they
·4· ·were actually entered into the system?
·5· · · · · · ·MR. TEELE:· Objection to the
·6· · · ·form.
·7· · · ·A.· · Can you rephrase that?· I am not
·8· ·sure I understand what you mean.
·9· · · ·Q.· · Can you, for example, if today I
10· ·went to the system, would I be able to
11· ·type in a transaction that had a date of
12· ·yesterday or tomorrow?
13· · · · · · ·MR. TEELE:· Objection to form.
14· · · ·A.· · I am not sure.
15· · · ·Q.· · Would I be able to, in a single
16· ·set of transactions, type in a set of
17· ·entries for June 30, 2017 in that exact
18· ·same set of transactions that I am going
19· ·to submit to the system at once put
20· ·offsetting transactions for July 1, 2017?
21· · · · · · ·MR. TEELE:· Objection.· He
22· · · ·already answered that question.· You
23· · · ·can still answer if you have something
24· · · ·to add.
25· · · ·A.· · I don't know.
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Page 56·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Can you think of any legitimate
·3· ·basis to put entries into the system on
·4· ·June 30, 2017, and cancel them out on
·5· ·July 1, 2017 in this manner?
·6· · · ·A.· · If it --
·7· · · · · · ·MR. TEELE:· Objection to the
·8· · · ·form.
·9· · · ·A.· · If it was an accrual, in
10· ·accounting accruals are reversed the
11· ·following period.
12· · · ·Q.· · Could you explain what you mean
13· ·by "if it was an accrual"?
14· · · ·A.· · In accounting, if you don't have
15· ·an exact amount, an accrual is an
16· ·estimate.· So, you put a placeholder into
17· ·an account.· And since you don't know, the
18· ·next day it gets reversed.
19· · · ·Q.· · And so you earlier stated that
20· ·you were not aware that the split of the
21· ·suspense account into the Ross loan
22· ·account and into the foreign travel
23· ·account was immediately reversed.
24· · · · · · ·MR. TEELE:· Objection to the
25· · · ·characterization.
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Page 57·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · After looking at these general
·3· ·ledger sheets, do you have an
·4· ·understanding now of what happened with
·5· ·that suspense account every six months?
·6· · · · · · ·MR. TEELE:· Same objection.
·7· · · ·A.· · I am just not familiar with
·8· ·this.
·9· · · ·Q.· · Now, what we have been looking
10· ·at is a middle-of-the-year report.· Does
11· ·the company provide any reporting to
12· ·anybody that shows the first six months of
13· ·the year?
14· · · · · · ·MR. TEELE:· Objection to the
15· · · ·form.
16· · · ·A.· · Yes.
17· · · ·Q.· · Who does it provide that
18· ·financial reporting to?
19· · · ·A.· · CIT.
20· · · ·Q.· · Is CIT aware of these offsetting
21· ·entries?
22· · · · · · ·MR. TEELE:· Objection to the
23· · · ·form.
24· · · ·A.· · I don't know.
25· · · ·Q.· · Have you ever brought it to
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Page 58·1· · · · · · · · · ·R. JOLSON
·2· ·CIT's attention that the company has
·3· ·millions of dollars in its suspension
·4· ·account?
·5· · · · · · ·MR. TEELE:· Objection to the
·6· · · ·characterization.
·7· · · ·A.· · No.· They get the statement.
·8· · · ·Q.· · And the statement shows nothing
·9· ·in the suspense account.· Correct?
10· · · ·A.· · I don't know.· I don't have a
11· ·statement in front of me.
12· · · ·Q.· · We have gone to the next page.
13· ·The entry to the Peter Ochs account is
14· ·also reversed out as you can see.· Why are
15· ·expenses being put into Peter Ochs's
16· ·account and then being taken back out?
17· · · · · · ·MR. TEELE:· Objection. I
18· · · ·thought you already asked that
19· · · ·question and he answered it.
20· · · ·Q.· · You can answer if you know.
21· · · ·A.· · I don't know.
22· · · ·Q.· · Why are expenses put into the
23· ·foreign travel account specifically for
24· ·profit/loss, as the, quote/unquote, P&L
25· ·account got put into?
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Page 59·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. TEELE:· Objection to the
·3· · · ·form.
·4· · · ·A.· · When we do not have a statement,
·5· ·the amount of the payment is split
·6· ·40 percent to a loan and 60 percent goes
·7· ·into foreign travel.
·8· · · ·Q.· · So why is the foreign travel
·9· ·account picked for these amounts to be put
10· ·into as opposed to any other profit and
11· ·loss account?
12· · · ·A.· · It's a holding account that was
13· ·titled "foreign travel account" years ago.
14· · · ·Q.· · So it is just a holding account?
15· · · ·A.· · Correct.
16· · · ·Q.· · I have gone to page 29 of this
17· ·exhibit, which is the entry for foreign
18· ·travel for the month of October 2017.· My
19· ·first question -- I apologize that it
20· ·appears that the "Credit" column was a
21· ·little bit narrow when we took the
22· ·screenshot of this so the credit amount
23· ·appears as negative 9E plus 05, which I
24· ·understand is scientific notation.· I will
25· ·represent to you that that amount equals
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Page 60·1· · · · · · · · · ·R. JOLSON
·2· ·around negative $900,000 in the credit
·3· ·line, and that is shown as the balance
·4· ·forward.
·5· · · · · · ·Could you explain to me what a
·6· ·negative amount in the credit column, as
·7· ·the balance forward, means?
·8· · · · · · ·MR. TEELE:· Objection to the
·9· · · ·form.· We are missing numbers.
10· · · ·A.· · I don't know.
11· · · ·Q.· · You see here about $864,000 of
12· ·expenses are shifted into this account in
13· ·October.· Do you see that in, labeled "BK
14· ·2016 year-end journal perm"?
15· · · · · · ·MR. TEELE:· Objection to the
16· · · ·form.
17· · · ·A.· · I don't see that.
18· · · · · · ·MR. TEELE:· To the left.
19· · · ·Q.· · It is line 381158 and the label
20· ·begins "BK" column?
21· · · ·A.· · I see it.
22· · · ·Q.· · Okay.· So what is your
23· ·understanding of moving -- what is your
24· ·understanding of what this entry
25· ·represents?
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Page 61·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I don't know.
·3· · · · · · ·MR. TEELE:· Objection to form.
·4· · · ·Q.· · So, you cannot explain to me
·5· ·what a negative number in the "Credit"
·6· ·column represents as a balance forward.
·7· ·Is that correct?
·8· · · · · · ·MR. TEELE:· Objection to the
·9· · · ·form of the question.· It is a little
10· · · ·argumentative, Mr. Aulet.
11· · · ·Q.· · You can answer the question.
12· · · ·A.· · I don't know what it means on
13· ·this.
14· · · ·Q.· · Okay.· So now as we have seen,
15· ·the transactions that are entered into
16· ·this account at the beginning and the day
17· ·after -- sorry.· The end of a reporting
18· ·period, June 30th, and then the next day
19· ·are reversed out.· This entry, we can't
20· ·find any reversal for.· What would be the
21· ·effect of permanently moving $864,000 to
22· ·this holding account?
23· · · · · · ·MR. TEELE:· Objection to the
24· · · ·form.
25· · · ·A.· · I would need to know the entry.
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Page 62·1· · · · · · · · · ·R. JOLSON
·2· ·Then I could tell you the effect.
·3· · · ·Q.· · What information isn't visible
·4· ·to you that you would need to know?
·5· · · ·A.· · I only see half of a journal
·6· ·entry.· I don't see the other side.
·7· · · ·Q.· · So you would need to know where
·8· ·that $864,000 came from?
·9· · · ·A.· · Or where it went.
10· · · ·Q.· · Now I have moved to page 28,
11· ·which is unfortunately apparently
12· ·suffering from the same issue.· We'll see
13· ·if we can get a revised version of this
14· ·prepared.· But this page, which is the
15· ·suspense account, also has an entry
16· ·labeled "BK 2016 year-end journal perm"
17· ·and there a significant amount in the
18· ·credit is moved out.· I will represent to
19· ·you that that is -- actually, I believe
20· ·that that is around $2 million but I
21· ·believe it may be heavily rounded and I
22· ·think it is more like 1.5.
23· · · · · · ·MR. TEELE:· We object to the
24· · · ·representation in this exhibit.· If
25· · · ·you want to provide an updated one
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Page 63·1· · · · · · · · · ·R. JOLSON
·2· · · ·with the actual number Mr. Jolson can
·3· · · ·look at, that is fine.· Based on this
·4· · · ·exhibit, we have never seen this in
·5· · · ·that line or in that cell.
·6· · · · · · ·MR. AULET:· All right.· We'll
·7· · · ·come back to this particular issue.
·8· · · ·Q.· · Do you know if there were any
·9· ·funds in the suspense account as of the
10· ·date that the Debtors filed for
11· ·bankruptcy?
12· · · ·A.· · I don't know.
13· · · ·Q.· · You are aware that the Debtors
14· ·disclosed to this court that Mr. Auerbach
15· ·owes the company approximately
16· ·$3.4 million.· Is that correct?
17· · · · · · ·MR. TEELE:· Objection to the
18· · · ·form.
19· · · ·A.· · Yes.
20· · · · · · ·MR. AULET:· I appreciate
21· · · ·Mr. Teele's objection.· The question
22· · · ·was confusing.
23· · · ·Q.· · Are you aware that the Debtors
24· ·disclosed to the court that Mr. Auerbach
25· ·owes $3.4 million to the company?
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Page 64·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. TEELE:· Same objection.
·3· · · ·A.· · Yes.
·4· · · ·Q.· · To the best of your knowledge,
·5· ·is that figure correct?
·6· · · · · · ·MR. TEELE:· Objection to the
·7· · · ·form.
·8· · · ·A.· · I don't know.
·9· · · ·Q.· · Who would know?
10· · · ·A.· · I don't know if anybody would
11· ·know.
12· · · · · · ·MR. AULET:· Let me get another
13· · · ·exhibit up for you.
14· · · · · · ·(So marked for identification as
15· · · ·Exhibit 3.)
16· · · ·Q.· · Mr. Jolson, you should now be
17· ·able to see what I have stamped Exhibit 3,
18· ·I believe.
19· · · ·A.· · Okay.
20· · · ·Q.· · This is a set of screenshots
21· ·from the ledger file that encompasses
22· ·January 1st through February 28, 2020.
23· · · · · · ·MR. TEELE:· One second,
24· · · ·Mr. Aulet.· Rob, can you make sure you
25· · · ·stay on camera?
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Page 65·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·THE WITNESS:· Sorry.· You are
·3· · · ·getting my profile.· Is that okay?
·4· · · · · · ·THE VIDEOGRAPHER:· If you can
·5· · · ·tilt your camera down a little?· I can
·6· · · ·barely see you.
·7· · · · · · ·Thank you.
·8· · · ·Q.· · Can you see the exhibit,
·9· ·Mr. Jolson?
10· · · ·A.· · Yes.
11· · · ·Q.· · Now, this is another set of
12· ·screenshots from the ledger files.· This
13· ·one is titled "Ledger ending 2/28/2020."
14· ·This shows three different accounts.· It
15· ·shows the officer's loan for Ross
16· ·Auerbach, it shows the foreign travel
17· ·account and it shows the suspense account.
18· ·I will note that the suspense account
19· ·continues on to page 2, which I have just
20· ·moved you to.
21· · · · · · ·At the end of 2019, do I
22· ·understand your practice would have been
23· ·to take all the funds in the suspense
24· ·account and transfer them to the foreign
25· ·travel and the Ross loan account?
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Page 66·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · The foreign travel is not the
·3· ·same as the Ross loan account.
·4· · · ·Q.· · But the funds from the suspense
·5· ·account, part of them would have been
·6· ·transferred to the Auerbach loan account
·7· ·and part of them would have been
·8· ·transferred to foreign travel.· Is that
·9· ·correct?
10· · · · · · ·MR. TEELE:· Objection to form.
11· · · ·A.· · Yes.
12· · · ·Q.· · Now, if you look at the foreign
13· ·travel account here, you see that about
14· ·$2 million is taken out of the account for
15· ·year 2019 entries.· Do you see that?
16· · · ·A.· · Yes.
17· · · ·Q.· · Now, the results of that appears
18· ·to be from the "Account Total" column,
19· ·that the foreign travel account now has a
20· ·negative balance of about $2 million,
21· ·which is composed of that year 2019 entry
22· ·and a small Amex amount that was billed to
23· ·this account.
24· · · · · · ·Do you see that account total?
25· · · ·A.· · I see it.
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Page 67·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · What does it mean for this
·3· ·foreign travel account to have a negative
·4· ·balance of $2 million?
·5· · · · · · ·MR. TEELE:· Objection to the
·6· · · ·form.
·7· · · ·A.· · Without seeing the other end, I
·8· ·couldn't tell you.
·9· · · ·Q.· · The other end of what?
10· · · ·A.· · There is always two sides to
11· ·every journal entry, so --
12· · · ·Q.· · I am asking about the meaning of
13· ·the account total.· Is that line a journal
14· ·entry?
15· · · · · · ·MR. TEELE:· Objection to the
16· · · ·form.
17· · · ·A.· · Yes.· A journal entry for -- if
18· ·I am reading this right, the journal entry
19· ·equals the account total.
20· · · ·Q.· · So I understand that you need to
21· ·see the other half of the year 2019
22· ·entry's journal entry to know what that
23· ·means.· Is that correct?
24· · · · · · ·MR. TEELE:· Objection to the
25· · · ·form.
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Page 68·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Yes.
·3· · · ·Q.· · But my question is different.
·4· ·The account total for the foreign travel
·5· ·account, which is, as I understand it, a
·6· ·P&L account, is negative $2 million.· What
·7· ·does that mean for the company's balance
·8· ·sheet?
·9· · · · · · ·MR. TEELE:· Objection to the
10· · · ·form.
11· · · ·A.· · This is a P&L account.· So,
12· ·without seeing the offset, I don't know
13· ·what it would mean to the balance sheet
14· ·because it is only half an entry.
15· · · ·Q.· · Are P&L accounts set to zero at
16· ·the beginning of each year?
17· · · · · · ·MR. TEELE:· Objection to the
18· · · ·form.
19· · · ·A.· · Yes.
20· · · ·Q.· · So if an amount is put into this
21· ·foreign travel account on December 31st,
22· ·that is incorporated for the year into the
23· ·profit/loss statement.· Correct?
24· · · · · · ·MR. TEELE:· Objection to the
25· · · ·form of the hypothetical.· You can
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Page 69·1· · · · · · · · · ·R. JOLSON
·2· · · ·answer if you have an answer.
·3· · · ·A.· · Yes, that account would be set
·4· ·to zero.
·5· · · ·Q.· · And it would be set to zero
·6· ·because what was previously in the account
·7· ·was thus incorporated in the year's
·8· ·profits and losses?
·9· · · · · · ·MR. TEELE:· Objection.· You are
10· · · ·asking him hypothetical questions with
11· · · ·half information.· If you have
12· · · ·something specific and particular that
13· · · ·you want to ask him you should do that
14· · · ·rather than leading him down this path
15· · · ·with various hypotheticals with
16· · · ·different variations.
17· · · · · · ·MR. AULET:· I am asking him how
18· · · ·these account statements work, how
19· · · ·these journal entries work.
20· · · · · · ·MR. TEELE:· In the form of a
21· · · ·hypothetical.· He already answered
22· · · ·your specific question where he said
23· · · ·he needed to see the other half of the
24· · · ·entry.· Now you are asking him to make
25· · · ·a guess based on your hypothetical
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Page 70·1· · · · · · · · · ·R. JOLSON
·2· · · ·facts.· If you --
·3· · · · · · ·MR. AULET:· Okay.
·4· · · ·Q.· · Mr. Jolson, as you might expect,
·5· ·the other half of the entry is in the
·6· ·suspense account.· We have amounts that
·7· ·come out of Mr. Auerbach's loan account,
·8· ·and you see that on page 1.· You have
·9· ·amounts that come out of foreign travel,
10· ·and you see that on page 1, and they are
11· ·put that back into the suspense account
12· ·and you see that on page 2 for year 2019
13· ·entries.
14· · · · · · ·Do you see that year 2019
15· ·entries at the end of page 2?
16· · · · · · ·MR. TEELE:· Are you looking at
17· · · ·the top box on page 2 or the bottom
18· · · ·box?
19· · · · · · ·MR. AULET:· The bottom box.
20· · · ·A.· · I see an entry.
21· · · ·Q.· · Now, understanding -- if you
22· ·look closely, the batch number for that
23· ·will also be the same.· But given that
24· ·that is where the offsetting entry is,
25· ·what does it mean if the foreign travel
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Page 71·1· · · · · · · · · ·R. JOLSON
·2· ·account has a negative $2 million account
·3· ·balance?
·4· · · · · · ·MR. TEELE:· Objection.· I don't
·5· · · ·know that it is established that that
·6· · · ·is where the offsetting entry is.
·7· · · ·Q.· · Mr. Jolson, if your counsel
·8· ·makes an objection, unless he instructs
·9· ·you not to answer, you can then answer.
10· · · · · · ·MR. TEELE:· He can answer.
11· · · ·A.· · Sorry.· I hate to do this, but I
12· ·don't remember the question.
13· · · ·Q.· · So, this year 2000 entry is the
14· ·offsetting entry for the moving of funds
15· ·out of Mr. Auerbach's loan account on page
16· ·1 and the moving of funds out of the
17· ·foreign travel account on page 1.
18· · · · · · ·(Reporter interruption.)
19· · · ·Q.· · This year 2019 entry moves money
20· ·out of Ross Auerbach's loan account and
21· ·out of the foreign travel account and puts
22· ·it back into suspense.· This leaves the
23· ·foreign travel account with an account
24· ·total of negative $2 million.· What does
25· ·that negative account total represent?
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Page 72·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. TEELE:· Objection to the
·3· · · ·form.
·4· · · ·A.· · It just -- it represents the
·5· ·negative number in that account.
·6· · · ·Q.· · And what does it mean to have a
·7· ·negative number in an expense account?
·8· · · · · · ·MR. TEELE:· Objection to the
·9· · · ·form.
10· · · ·A.· · It would mean there is a
11· ·reduction of expenses.
12· · · ·Q.· · Does that indicate that
13· ·$2 million of expenses were taken in
14· ·fiscal year 2019?
15· · · · · · ·MR. TEELE:· Objection to the
16· · · ·form.
17· · · ·A.· · Can you just rephrase that
18· ·question, please?
19· · · ·Q.· · Does the negative approximately
20· ·$2 million in the foreign travel account
21· ·indicate that $2 million of expenses were
22· ·charged against the company's net income
23· ·in the fiscal year 2019?
24· · · · · · ·MR. TEELE:· Objection to the
25· · · ·form.
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Page 73·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I am just not familiar with this
·3· ·journal entry.· I am really not familiar
·4· ·with this journal entry.
·5· · · ·Q.· · Who is responsible for putting
·6· ·in journal entries into the system on a
·7· ·regular basis?
·8· · · ·A.· · I have different accountants
·9· ·responsible for different parts of the
10· ·general ledger.
11· · · ·Q.· · Do you know what accountant
12· ·would be responsible for these year-2019
13· ·entries?
14· · · ·A.· · Yes.
15· · · ·Q.· · And who is that?
16· · · ·A.· · Ron Andreola.
17· · · ·Q.· · So, if you look at page 2, the
18· ·account total for the suspense account is
19· ·about $3.4 million.· How would we
20· ·determine what expenses made up that
21· ·$3.4 million?
22· · · · · · ·MR. TEELE:· Objection.· He's
23· · · ·already testified that he doesn't --
24· · · ·isn't familiar with the journal
25· · · ·entries.· You can answer if you happen
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Page 74·1· · · · · · · · · ·R. JOLSON
·2· · · ·to know.
·3· · · ·A.· · In the suspense account?· You
·4· ·would have to look at the American Express
·5· ·bills.
·6· · · ·Q.· · Okay.· So, does the fact that
·7· ·this $3.4 million remains in the suspense
·8· ·account mean that the company currently
·9· ·does not -- or at the time of this general
10· ·ledger did not know how to allocate that
11· ·$3.4 million of expenses?
12· · · · · · ·MR. TEELE:· Objection to the
13· · · ·form.
14· · · ·A.· · Yes.
15· · · ·Q.· · So, if you go to page 4 and look
16· ·at the bottom, the suspense account, you
17· ·will see that this reflects the last
18· ·general ledger file that was produced to
19· ·us that had the dates of from March 1st
20· ·through April 18, 2020.· And this -- let
21· ·me zoom in on mine.· This has an amount in
22· ·suspense account of about 3.78 million.
23· ·Does that similarly represent
24· ·$3.78 million of expenses that the Debtors
25· ·do not or did not know how to allocate on
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Page 75·1· · · · · · · · · ·R. JOLSON
·2· ·that date?
·3· · · · · · ·MR. TEELE:· Objection to the
·4· · · ·form.
·5· · · ·A.· · Yes.
·6· · · ·Q.· · Are you aware of any attempt to
·7· ·review those expenses and properly
·8· ·allocate them?
·9· · · · · · ·MR. TEELE:· Objection.
10· · · ·A.· · There were attempts.
11· · · ·Q.· · You say "there were attempts."
12· ·When were those attempts made?
13· · · ·A.· · I don't know.
14· · · ·Q.· · Were they recently?
15· · · · · · ·MR. TEELE:· Objection.· If you
16· · · ·can put a time frame on there.
17· · · ·Q.· · Were they in the last few
18· ·months?
19· · · ·A.· · Yes.
20· · · ·Q.· · And who was making those
21· ·attempts?
22· · · ·A.· · Ron Andreola.
23· · · ·Q.· · Is he -- are those attempts
24· ·ongoing?
25· · · ·A.· · They would be ongoing until we
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Page 76·1· · · · · · · · · ·R. JOLSON
·2· ·got all the answers.
·3· · · ·Q.· · Is it fair to assume that they
·4· ·are -- that Mr. Andreola is currently
·5· ·working on that?
·6· · · ·A.· · Yes.
·7· · · ·Q.· · And who is he reporting to in
·8· ·doing this review?
·9· · · ·A.· · I am not sure what you mean.
10· · · ·Q.· · If he decides to allocate -- if
11· ·he looks at a hundred thousand dollars of
12· ·expenses and decides to allocate those to
13· ·Ross Auerbach's personal loan account or
14· ·to allocate it to some business account,
15· ·who is going to review his work on that?
16· · · · · · ·MR. TEELE:· Objection to form.
17· · · ·A.· · That would be the controller's
18· ·job.
19· · · ·Q.· · And who is the controller?
20· · · ·A.· · Ted Georgis.
21· · · ·Q.· · Who does Ted Georgis report to?
22· · · ·A.· · To me.
23· · · ·Q.· · And has Ted Georgis or
24· ·Mr. Andreola reported the amount of
25· ·suspense account -- sorry -- the amount of
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Page 77·1· · · · · · · · · ·R. JOLSON
·2· ·expenses in the suspense account that they
·3· ·have been able to allocate?
·4· · · · · · ·MR. TEELE:· Objection to the
·5· · · ·form.
·6· · · ·A.· · Not to me.
·7· · · ·Q.· · Do you know how much of that
·8· ·3.78 million represents expenses that
·9· ·should have been charged to Mr. Auerbach's
10· ·loan account?
11· · · ·A.· · No.
12· · · ·Q.· · Has anyone given you any
13· ·timeline on when this review will be
14· ·completed?
15· · · · · · ·MR. TEELE:· Objection to the
16· · · ·form.
17· · · ·A.· · Yes.
18· · · ·Q.· · What is that timeline?
19· · · ·A.· · My expectation is this week.
20· · · ·Q.· · Have they produced any interim
21· ·reports?
22· · · ·A.· · No.
23· · · ·Q.· · Have they given you any
24· ·indication of the progress they have made?
25· · · ·A.· · No.
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Page 78·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Have they given you any
·3· ·information at all on the results of their
·4· ·work to date?
·5· · · ·A.· · No.
·6· · · ·Q.· · In what form do you expect them
·7· ·to deliver their results?
·8· · · ·A.· · I expect them to tell me that
·9· ·they are done.
10· · · ·Q.· · When you say that you expect
11· ·them to tell you that they are done, are
12· ·they going to tell you what expenses they
13· ·allocated where?
14· · · ·A.· · No.
15· · · ·Q.· · Are they going to simply
16· ·allocate -- strike that.
17· · · · · · ·Do you expect them to put
18· ·entries in the general ledger allocating
19· ·those expenses?
20· · · · · · ·MR. TEELE:· Objection to form.
21· · · ·A.· · Yes.
22· · · ·Q.· · Is anyone going to review the
23· ·work done by the controller?
24· · · · · · ·MR. TEELE:· Objection to the
25· · · ·form.
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Page 79·1· · · · · · · ·R. JOLSON
·2· ·A.· · No.
·3· · · · ·MR. AULET:· We will request
·4· ·production of any documents that
·5· ·reflect the results of that allocation
·6· ·as soon as they are produced.
·7· · · · ·MR. TEELE:· If you want to send
·8· ·us a request, we will review it.
·9· · · · ·MR. AULET:· Since we got started
10· ·a little late, this would now normally
11· ·be a good time for a break.· I was
12· ·thinking we would take a five-minute
13· ·break, go a little longer and then
14· ·maybe take lunch at one.· If people
15· ·prefer, we can do lunch now.
16· · · · ·MR. TEELE:· We are good either
17· ·way.
18· · · · ·MR. AULET:· Why don't we take a
19· ·five-minute break.
20· · · · ·MR. TEELE:· We are going to put
21· ·our phone on mute until we come back.
22· · · · ·THE VIDEOGRAPHER:· Going off the
23· ·record.· The time is 12:13 p.m.
24· · · · ·(Recess.)
25· · · · ·THE VIDEOGRAPHER:· The time is
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Page 80·1· · · · · · · · · ·R. JOLSON
·2· · · ·now 12:30.· This begins media number 2
·3· · · ·and we are back on the record.
·4· ·BY MR. AULET:
·5· · · ·Q.· · Mr. Jolson, are you aware that
·6· ·the general ledger for February 29, 2020
·7· ·was not originally produced to us?
·8· · · · · · ·MR. TEELE:· Objection to the
·9· · · ·form.
10· · · ·A.· · No.
11· · · ·Q.· · Does anyone have the ability to
12· ·alter the balances in, I believe it was,
13· ·the ERT system without putting in an entry
14· ·that will be recorded?
15· · · ·A.· · No.
16· · · ·Q.· · And does the system, to your
17· ·knowledge, record who makes each entry?
18· · · ·A.· · It leaves a footprint of the
19· ·user name.
20· · · · · · ·(So marked for identification as
21· · · ·Exhibit 4.)
22· · · ·Q.· · I am going to show you what we
23· ·are marking Exhibit 4.· This is another
24· ·sheet of screenshots from the general
25· ·ledger files.· These are again the files
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Page 81·1· · · · · · · · · ·R. JOLSON
·2· ·from 2020.
·3· · · · · · ·I want to draw your attention to
·4· ·the bottom of the first image, the
·5· ·Auerbach loan in the ledger ending on
·6· ·February 28, 2020.· If you see in the
·7· ·account total it says a little over
·8· ·$2 million.· Do you see that?
·9· · · ·A.· · Not yet.
10· · · ·Q.· · If you go --
11· · · · · · ·MR. TEELE:· Hold on.· He is
12· · · ·still looking for what you are
13· · · ·pointing to.
14· · · ·A.· · Which box is it?
15· · · ·Q.· · The top box?
16· · · ·A.· · Okay.
17· · · ·Q.· · Do you see the account total
18· ·line?
19· · · ·A.· · Yes.
20· · · ·Q.· · Does that represent that this
21· ·account started out at about 3.4 million,
22· ·around 1.36 million was taken out, leaving
23· ·a balance of about $2 million?
24· · · · · · ·MR. TEELE:· Objection to the
25· · · ·form.
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Page 82·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I see that.
·3· · · ·Q.· · And so, does this mean that in
·4· ·the ledger that the Auerbach loan was
·5· ·about a little over $2 million as of
·6· ·February 28, 2020?
·7· · · ·A.· · Yes.
·8· · · ·Q.· · Now, if you look at the second
·9· ·box, this is the entirety of the general
10· ·ledger that was produced for February 29,
11· ·2020 with respect to the Auerbach loan.
12· ·As you will see, there are no transactions
13· ·listed, but the Auerbach loan has somehow
14· ·become a balance of negative 1.357 and
15· ·change.· 1.357 million and change.
16· · · · · · ·So, my question is, why did the
17· ·account total change so dramatically
18· ·without any new entry into the loan
19· ·account?
20· · · · · · ·MR. TEELE:· Objection, to the
21· · · ·extent he's already testified that he
22· · · ·is not responsible for preparing or
23· · · ·entering items into the journal
24· · · ·ledger.· But he can answer if he has
25· · · ·knowledge.
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Page 83·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I don't know.
·3· · · ·Q.· · Are you aware of anyone who
·4· ·would have access to the system that would
·5· ·enable them to change the balance of
·6· ·Mr. Auerbach's loan without leaving a
·7· ·journal entry?
·8· · · · · · ·MR. TEELE:· Objection to the
·9· · · ·form.
10· · · ·A.· · No.
11· · · ·Q.· · Do you have any explanation for
12· ·what happened to Mr. Auerbach's loan
13· ·account between the 28th and 29th of
14· ·February?
15· · · · · · ·MR. TEELE:· Objection.· You can
16· · · ·answer.
17· · · ·A.· · No.
18· · · ·Q.· · And if you look at the bottom,
19· ·which represents the loan account as of
20· ·the last general ledger file that we
21· ·received, you will see that it still
22· ·reflects a now slightly larger account
23· ·total for Mr. Auerbach of negative
24· ·1.46 million.· And again, can you provide
25· ·any explanation for what happened to
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Page 84·1· · · · · · · · · ·R. JOLSON
·2· ·Mr. Auerbach's loan amounts in the general
·3· ·ledger?
·4· · · · · · ·MR. TEELE:· Same objections as
·5· · · ·before.
·6· · · ·A.· · No.
·7· · · ·Q.· · And if you go to the second
·8· ·page, you will see what appears to be an
·9· ·amount owed by the estate of Shay
10· ·Auerbach.· Do you know who Shay Auerbach
11· ·is?
12· · · ·A.· · Was.
13· · · ·Q.· · Was he Ross Auerbach's father?
14· · · ·A.· · Yes.
15· · · ·Q.· · And you will similarly see that
16· ·the receivable due to the Shay Auerbach --
17· ·the receivable due from the Shay Auerbach
18· ·estate of a little under a quarter of a
19· ·million dollars is present on February 28,
20· ·2020, and disappears on February 29, 2020.
21· · · · · · ·MR. TEELE:· Objection to the
22· · · ·form and characterization.
23· · · ·Q.· · Are you aware of how this could
24· ·have happened?
25· · · ·A.· · No.
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Page 85·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Are you aware of anyone repaying
·3· ·that balance on behalf of the Shay
·4· ·Auerbach estate?
·5· · · ·A.· · No.
·6· · · ·Q.· · And again, do you have any
·7· ·knowledge of how somebody could have
·8· ·erased that receivable without leaving a
·9· ·journal entry?
10· · · · · · ·MR. TEELE:· Objection to the
11· · · ·form and to the characterization of
12· · · ·"erased."
13· · · ·A.· · No.
14· · · ·Q.· · And if you go to page 3, we have
15· ·a section we haven't discussed much
16· ·before, the "Prepaid Other" in the ledger.
17· ·Similarly, you will see a balance of about
18· ·436,000 at the end of February 28th, which
19· ·drops to a balance of about 14,000 with no
20· ·intervening journal entries.· Do you have
21· ·any explanation for what happened here?
22· · · · · · ·MR. TEELE:· Objection.· It
23· · · ·assumes information that hasn't been
24· · · ·introduced.· And to the form.
25· · · ·A.· · I don't know the question.
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Page 86·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Well, here the account total for
·3· ·"Prepaid Other" is about 436,000 on
·4· ·February 28th, but it is 14,000 on
·5· ·February 29th and no journal entries are
·6· ·recorded on the February 29th ledger.· Do
·7· ·you have any explanation as to why that
·8· ·balance dropped?
·9· · · · · · ·MR. TEELE:· Objection to the
10· · · ·form.
11· · · ·A.· · No.
12· · · ·Q.· · Did you direct anyone to reduce
13· ·or eliminate Ross Auerbach's loan or to
14· ·eliminate the amount owed by the estate of
15· ·Shay Auerbach?
16· · · ·A.· · No.
17· · · ·Q.· · Are you aware of anyone giving
18· ·that instruction?
19· · · ·A.· · No.
20· · · · · · ·MR. TEELE:· Objection to the
21· · · ·form.
22· · · · · · ·MR. AULET:· Let me put up --
23· · · ·Exhibit 5 is a revised exhibit that we
24· · · ·created for October 2017, where you
25· · · ·should be able to see all the balances
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Page 87·1· · · · · · · · · ·R. JOLSON
·2· · · ·correctly.
·3· · · · · · ·(So marked for identification as
·4· · · ·Exhibit 5.)
·5· · · ·Q.· · To refresh your recollection,
·6· ·what we were discussing was the line "BK
·7· ·2016 year-end journal perm."· Page 1 shows
·8· ·that entry on Ross Auerbach's loan adding
·9· ·about $629,000 to it.· Page 2 shows
10· ·$80,000 added to the employee receivable
11· ·of Peter Ochs.· Page 3 reflects -- and I
12· ·believe this is what we couldn't see
13· ·before, and you will need to zoom in to
14· ·see this, but 1.57 million being taken out
15· ·of the suspense account.
16· · · · · · ·Then page 4 reflects $864,605.86
17· ·being put into the foreign travel account.
18· ·Once that is applied against the credit in
19· ·that account, leaving that account with a
20· ·balance of negative 31,539.25.
21· · · · · · ·We are unaware of any
22· ·transaction that reverses that amount out
23· ·of the foreign travel account.· Aside from
24· ·looking in all the general ledger files
25· ·that have been produced to us, is there
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Page 88·1· · · · · · · · · ·R. JOLSON
·2· ·any other file that would reflect if this
·3· ·amount was ever taken out of the foreign
·4· ·travel account?
·5· · · · · · ·MR. TEELE:· I will object to
·6· · · ·that question on the grounds that you
·7· · · ·pointed him to multiple pages very
·8· · · ·quickly, referring his attention to
·9· · · ·individual cells of those pages very
10· · · ·quickly and then are asking him a
11· · · ·generic question about this amount.
12· · · ·And objection to form.
13· · · · · · ·MR. AULET:· Let me strike that
14· · · ·question.
15· · · ·Q.· · If you would like to go back and
16· ·look at any of the previous pages, I
17· ·believe that the system requires you to
18· ·look at the page I am currently on -- let
19· ·me know.· But what I am specifically
20· ·interested in is this "BK 2016 year-end
21· ·journal perm" entry into the foreign
22· ·travel account.
23· · · · · · ·Now, I believe you had earlier
24· ·testified that this account is a holding
25· ·account.· Is there any reason that an
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Page 89·1· · · · · · · · · ·R. JOLSON
·2· ·expense would be permanently allocated to
·3· ·it?
·4· · · · · · ·MR. TEELE:· Objection to the
·5· · · ·form.
·6· · · ·A.· · I don't know.
·7· · · ·Q.· · What would be the effect of
·8· ·permanently allocating expenses to this
·9· ·account?
10· · · · · · ·MR. TEELE:· Objection to the
11· · · ·form of the hypothetical.· You can
12· · · ·answer if there is an answer.
13· · · ·A.· · It would show an expense of the
14· ·company.
15· · · ·Q.· · And it is roughly cancelled out
16· ·by the existing credit in the foreign
17· ·travel account.· How would a credit have
18· ·been created in the foreign travel
19· ·account?
20· · · · · · ·MR. TEELE:· Objection to the
21· · · ·form.
22· · · ·A.· · Via a journal entry.
23· · · ·Q.· · What does it mean that an
24· ·expense account like a foreign travel
25· ·account has a credit?
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Page 90·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · It is a negative expense.
·3· · · ·Q.· · If any of these amounts that
·4· ·were permanently allocated to foreign
·5· ·travel were, instead, Ross Auerbach's
·6· ·personal expenses, would that mean that
·7· ·those expenses had been paid by the
·8· ·company?
·9· · · · · · ·MR. TEELE:· Objection to the
10· · · ·form.
11· · · ·A.· · I don't even understand the
12· ·question.
13· · · · · · ·MR. TEELE:· Let me finish my
14· · · ·objection.· Objecting to form and to
15· · · ·the assumption of information that has
16· · · ·not yet been introduced or
17· · · ·established.
18· · · · · · ·MR. AULET:· I will strike the
19· · · ·question.
20· · · ·Q.· · How do I find out exactly what
21· ·expenses this $864,605.86 represents?
22· · · ·A.· · You have to look at the American
23· ·Express bills.
24· · · ·Q.· · If I go back to page 3, you will
25· ·see that a large amount is simply taken
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Page 91·1· · · · · · · · · ·R. JOLSON
·2· ·out of the suspense account in one lump
·3· ·sum on that day with the same journal
·4· ·entry.· How would I determine what
·5· ·expenses were taken out of the suspense
·6· ·account in that journal entry?
·7· · · ·A.· · I am looking for the journal
·8· ·entry.
·9· · · ·Q.· · It is the top one.
10· · · ·A.· · I am sorry, but what are you
11· ·asking?
12· · · ·Q.· · So, on line 345112, about
13· ·1.57 million of expenses comes out of the
14· ·suspense account in a transaction labeled
15· ·"BK 2016 year-end journal perm."· How
16· ·would I determine what expenses those are?
17· · · ·A.· · I don't know.
18· · · ·Q.· · Did you receive $35,000 from the
19· ·Debtors on April 17, 2020?
20· · · ·A.· · Yes.
21· · · ·Q.· · And that was the day before the
22· ·company filed for bankruptcy.· Correct?
23· · · ·A.· · Yes.
24· · · ·Q.· · What was that $35,000 for?
25· · · ·A.· · 25,000 was for me, for a
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Page 92·1· · · · · · · · · ·R. JOLSON
·2· ·retention, and then I gave $10,000 to my
·3· ·controller.
·4· · · ·Q.· · Are you aware that the Debtors
·5· ·filed a statement with the Bankruptcy
·6· ·Court that reflected that payment?
·7· · · ·A.· · I don't know.
·8· · · · · · ·MR. AULET:· I believe we are on
·9· · · ·Exhibit 6.· Is that correct?
10· · · · · · ·(So marked for identification as
11· · · ·Exhibit 6.)
12· · · ·Q.· · Mr. Jolson, I am showing you a
13· ·document called "Statement of Financial
14· ·Affairs for Non-Individuals Filing for
15· ·Bankruptcy" that was filed with the
16· ·Bankruptcy Court as Docket 117 on June 1,
17· ·2020.
18· · · · · · ·MR. TEELE:· Excuse me,
19· · · ·Mr. Aulet.· Is the entire 34-page
20· · · ·document part of this exhibit, or just
21· · · ·this page?· Can you just explain the
22· · · ·exhibit before you move on?
23· · · · · · ·MR. AULET:· It is the entire
24· · · ·submission, all 34 pages is an
25· · · ·exhibit, though I will not be asking
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Page 93·1· · · · · · · · · ·R. JOLSON
·2· · · ·about every page.
·3· · · · · · ·MR. TEELE:· Fine.· Thank you.
·4· · · ·Q.· · Mr. Jolson, have you ever seen
·5· ·this document before?
·6· · · ·A.· · No.
·7· · · ·Q.· · Were you aware that such a
·8· ·document was going to be created?
·9· · · ·A.· · No.
10· · · ·Q.· · And you were not involved at all
11· ·in the preparation of this document?
12· · · ·A.· · No.
13· · · ·Q.· · Apologies.· Let me see how to
14· ·quickly flip pages.
15· · · · · · ·While I get to the appropriate
16· ·page, are you aware that the Debtors
17· ·reported that the payment to you was a
18· ·payment for T&E reimbursement?
19· · · · · · ·MR. TEELE:· Objection to the
20· · · ·form.
21· · · ·A.· · No.
22· · · ·Q.· · Was it a payment for travel and
23· ·expense reimbursement or any other kind of
24· ·reimbursement?
25· · · ·A.· · No.
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Page 94·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · And are you aware that a payment
·3· ·was made to Mr. Auerbach on the same
·4· ·day -- two payments were made to
·5· ·Mr. Auerbach, one for $100,000 and one for
·6· ·$40,000?
·7· · · ·A.· · Yes.
·8· · · ·Q.· · Here we go.· Was the payment to
·9· ·Mr. Auerbach for $40,000 -- sorry.
10· · · · · · ·What was the payment to
11· ·Mr. Auerbach of $40,000 for?
12· · · · · · ·MR. TEELE:· Objection to form.
13· · · ·A.· · I don't know.
14· · · ·Q.· · You don't know?
15· · · ·A.· · No.
16· · · ·Q.· · What was the payment of $100,000
17· ·to Mr. Auerbach for?
18· · · ·A.· · That was for reimbursing him for
19· ·money that he gave to Northwest previously
20· ·to cover some bills.
21· · · ·Q.· · Do you see that on page 27 of
22· ·the exhibit, which is at the top labeled
23· ·page 27 of 34 and at the bottom labeled
24· ·page 2 of 2, there is an entry that says
25· ·"Robert Jolson," reflecting the $35,000
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Page 95·1· · · · · · · · · ·R. JOLSON
·2· ·payment, and it says it was made to you
·3· ·and was for T&E reimbursement?
·4· · · ·A.· · I see it.
·5· · · ·Q.· · Do I understand your previous
·6· ·testimony that this was not a payment for
·7· ·any sort of reimbursement?
·8· · · ·A.· · That's correct.
·9· · · ·Q.· · And instead, 25,000 of it was a
10· ·bonus for you and 10,000 of it was a bonus
11· ·for your controller?
12· · · ·A.· · Correct.
13· · · ·Q.· · Was all 35,000 paid directly to
14· ·you?
15· · · ·A.· · Yes.
16· · · ·Q.· · Were any taxes taken out of that
17· ·payment?
18· · · ·A.· · Not yet.
19· · · ·Q.· · Did the company pay any taxes on
20· ·that amount?
21· · · ·A.· · Not yet.
22· · · ·Q.· · Had the payment been
23· ·characterized as a bonus, would taxes have
24· ·been taken out of that amount before it
25· ·was paid to you?
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Page 96·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Only if it went through our
·3· ·payroll system.
·4· · · ·Q.· · Is there any reason why this
·5· ·would not have gone through your payroll
·6· ·system?
·7· · · ·A.· · No.· It will.· It will go
·8· ·through the payroll system.
·9· · · ·Q.· · Do you ordinarily make payments
10· ·to yourself or to any other member or any
11· ·other employee of the company outside of
12· ·the payroll system?
13· · · · · · ·MR. TEELE:· Objection to the
14· · · ·form.
15· · · ·A.· · No.
16· · · ·Q.· · Have you ever made payments of
17· ·bonuses to yourself or anyone else at the
18· ·company outside of the payroll system?
19· · · ·A.· · Yes.
20· · · ·Q.· · When was that?
21· · · ·A.· · I couldn't -- I don't remember
22· ·specifically.
23· · · ·Q.· · Is it a general practice to make
24· ·bonus payments outside of the payroll
25· ·system?
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Page 97·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · No.
·3· · · · · · ·MR. TEELE:· Objection to the
·4· · · ·form.
·5· · · ·Q.· · And do you have any basis to
·6· ·believe that the $40,000 paid to
·7· ·Mr. Auerbach was actually any sort of
·8· ·reimbursement?
·9· · · · · · ·MR. TEELE:· Objection to form.
10· · · ·You can answer.
11· · · ·Q.· · Could you answer the question,
12· ·please, Mr. Jolson?
13· · · ·A.· · It was -- my belief was a
14· ·reimbursement.
15· · · ·Q.· · I understand the $100,000 you
16· ·are aware was a reimbursement.· Do you
17· ·know if the $40,000 was a reimbursement?
18· · · · · · ·MR. TEELE:· Objection to the
19· · · ·form.· And he's already answered that,
20· · · ·I believe.
21· · · ·Q.· · You can answer, Mr. Jolson.
22· · · · · · ·MR. DUFFY:· Can you repeat the
23· · · ·question, please.
24· · · ·Q.· · Do you know if the $40,000 paid
25· ·to Ross Auerbach on April 17th was a
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Page 98·1· · · · · · · · · ·R. JOLSON
·2· ·reimbursement of any kind?
·3· · · ·A.· · I was told it was.
·4· · · ·Q.· · Who told you that?
·5· · · ·A.· · Ross.
·6· · · ·Q.· · Would it surprise you to know
·7· ·that the bank statements reflect that the
·8· ·payment of both the $35,000 to you and the
·9· ·payment of $40,000 to Ross were labeled
10· ·"Bonus"?
11· · · · · · ·MR. TEELE:· Objection to the
12· · · ·form.
13· · · ·A.· · I wouldn't know the bank
14· ·statements.
15· · · ·Q.· · I will show you the bank
16· ·statements.· Give me one second. I
17· ·apologize.· I am having some technical
18· ·issues here.
19· · · · · · ·(Pause.)
20· · · · · · ·(So marked for identification as
21· · · ·Exhibit 7.)
22· · · ·Q.· · Now, what you should be seeing
23· ·is what is now Exhibit 7, the bank
24· ·statement for The Northwest Company for
25· ·April 1st to April 30, 2020.
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Page 99·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·I am going to go to the page
·3· ·that reflects those bonus payments.· Now
·4· ·we are on page 4.· If you look around the
·5· ·middle of the page you will see two
·6· ·entries for 4/17, one for $40,000 to Ross
·7· ·Auerbach and one to you for $35,000.· Do
·8· ·you see underneath them that it says "Your
·9· ·REF" code?· You see that?
10· · · ·A.· · I do.
11· · · ·Q.· · Who made those payments?
12· · · · · · ·MR. TEELE:· Objection to the
13· · · ·form.
14· · · ·A.· · I don't understand the question.
15· ·Who made -- the company made the payments.
16· · · ·Q.· · Who specifically told the bank
17· ·to transfer $40,000 to Ross and $35,000 to
18· ·you?
19· · · · · · ·MR. TEELE:· Objection to the
20· · · ·form.
21· · · ·A.· · Ross.
22· · · ·Q.· · Would Ross have been the one --
23· ·strike the question.
24· · · · · · ·So, a payment like this, someone
25· ·would have entered it into the bank
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Page 100·1· · · · · · · · · ·R. JOLSON
·2· ·systems to have the payment made.
·3· ·Correct?
·4· · · ·A.· · Yes.
·5· · · ·Q.· · Who would have done that?
·6· · · ·A.· · One of our staff accountants.
·7· · · ·Q.· · And you did not direct them to
·8· ·make that payment to Ross?
·9· · · ·A.· · Yes, I directed them.
10· · · ·Q.· · You did direct them to make that
11· ·payment to Ross?
12· · · ·A.· · Yes.
13· · · ·Q.· · Is that correct?
14· · · ·A.· · Yes.
15· · · ·Q.· · And you also directed them to
16· ·make the $100,000 payment to Ross?
17· · · ·A.· · Yes.
18· · · ·Q.· · And I believe you testified
19· ·earlier that Ross told you that the
20· ·$40,000 was an expense reimbursement.· Is
21· ·that correct?
22· · · ·A.· · Yes.
23· · · ·Q.· · Who else did he tell that to, if
24· ·you know?
25· · · ·A.· · I don't know.
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Page 101·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Would it surprise you to learn
·3· ·that both of these payments to you and to
·4· ·Ross were also booked on the general
·5· ·ledgers as travel and entertainment
·6· ·expenses?
·7· · · · · · ·MR. TEELE:· Objection to form.
·8· · · ·If you have the general ledger and you
·9· · · ·want to ask him about it, show it to
10· · · ·him and ask him a question.
11· · · · · · ·MR. AULET:· The question stands.
12· · · ·Q.· · Would it surprise you to learn
13· ·that both of those payments to Ross were
14· ·booked on the general ledgers as travel
15· ·and entertainment expenses?
16· · · · · · ·MR. TEELE:· Same objection and
17· · · ·we will not accept the representation
18· · · ·that they were reflected that way in
19· · · ·the general ledger.· If you have a
20· · · ·document to show him, show him the
21· · · ·document.
22· · · · · · ·MR. AULET:· Are you directing
23· · · ·him not to answer, Mr. Teele?
24· · · · · · ·MR. TEELE:· I am stating my
25· · · ·objection.
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Page 102·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Please answer, Mr. Jolson.
·3· · · ·A.· · I am not familiar with what
·4· ·would be on the general ledger.
·5· · · ·Q.· · Who would have made the entries
·6· ·in the general ledger that reflect this
·7· ·$40,000 and $35,000 payment?
·8· · · ·A.· · One of the staff accountants.
·9· · · ·Q.· · Do you know which staff
10· ·accountant?
11· · · ·A.· · No.
12· · · ·Q.· · Do you have any idea how it came
13· ·to be that the Bankruptcy Court was told
14· ·that the payment to you and the payment to
15· ·Ross were travel and expense
16· ·reimbursements?
17· · · · · · ·MR. TEELE:· Objection to form.
18· · · ·A.· · No.
19· · · ·Q.· · Who was, if you know, involved
20· ·in creating the schedule, the exhibit that
21· ·we previously looked at?· Let me see if I
22· ·can put that back up.
23· · · · · · ·I am not quite sure how to show
24· ·it to you again so I will save that
25· ·question.
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Page 103·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. AULET:· It is 1 o'clock so
·3· · · ·now is a good time for a lunch break
·4· · · ·if that works for everyone else.
·5· · · · · · ·MR. TEELE:· Okay.· How long did
·6· · · ·you say?
·7· · · · · · ·MR. AULET:· I want to do
·8· · · ·30 minutes since we got started a
·9· · · ·little late.· Why don't we come back
10· · · ·at 1:40 if that works for everyone.
11· · · · · · ·MR. TEELE:· Sure.
12· · · · · · ·THE VIDEOGRAPHER:· The time is
13· · · ·now 1:04, and we are now off the
14· · · ·record.
15· · · · · · ·(Recess.)
16· · · · · · ·THE VIDEOGRAPHER:· The time is
17· · · ·1:47 and we are back on the record.
18· ·BY MR. AULET:
19· · · ·Q.· · Mr. Jolson, I believe you said
20· ·Peter Ochs was a salesman.· Is that
21· ·correct?
22· · · ·A.· · Yes.
23· · · ·Q.· · Does Northwest -- strike that.
24· · · · · · ·How senior an employee is he?
25· · · · · · ·MR. TEELE:· Objection to form.
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Page 104·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · He is a director level.
·3· · · ·Q.· · Does Northwest make it a
·4· ·practice to let their employees, other
·5· ·than Ross Auerbach, run up large
·6· ·receivables to the company?
·7· · · · · · ·MR. TEELE:· Object to the
·8· · · ·question and the characterization of
·9· · · ·"large receivables to the company."
10· · · ·A.· · No.
11· · · ·Q.· · Mr. Ochs has had a large
12· ·receivable at various points in time.· Why
13· ·is that?
14· · · · · · ·MR. TEELE:· Object to the form
15· · · ·and the reference to Mr. Ochs's
16· · · ·receivable as a large receivable
17· · · ·without establishing what it is and
18· · · ·what is large.
19· · · · · · ·You can answer the question.
20· · · ·A.· · What he does, he sells and he
21· ·has a base salary and he gets paid a
22· ·commission.· So, what happens is he uses
23· ·the American Express card as a basis for
24· ·his commission.· So, when we get the bill,
25· ·that whole amount is recorded as a
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Page 105·1· · · · · · · · · ·R. JOLSON
·2· ·receivable until we get his commission
·3· ·statement.· When we get his commission
·4· ·statement, it would go against his payroll
·5· ·and relieve the receivable.
·6· · · ·Q.· · Okay.· Does anyone else have a
·7· ·similar arrangement?
·8· · · ·A.· · Not that I am aware.
·9· · · ·Q.· · So, Northwest has a large number
10· ·of corporate credit cards.· Is that
11· ·correct?
12· · · · · · ·MR. TEELE:· Object to form.· You
13· · · ·keep using the term "large" without
14· · · ·defining what is big, what is small,
15· · · ·what is large or what is not.
16· · · ·Q.· · Northwest has dozens of
17· ·corporate credit cards.· Is that correct?
18· · · ·A.· · Not dozens.
19· · · ·Q.· · More than a dozen?
20· · · ·A.· · It is around a dozen.· One.
21· · · ·Q.· · And are there both American
22· ·Express Platinum cards and American
23· ·Express Centurian cards?
24· · · ·A.· · No.
25· · · ·Q.· · So, the Debtors have produced
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Page 106·1· · · · · · · · · ·R. JOLSON
·2· ·Amex statements for both Platinum cards
·3· ·and Centurian cards.· You are not aware of
·4· ·both of those?
·5· · · ·A.· · Only Ross has a Centurian card.
·6· · · ·Q.· · And is that card his personal
·7· ·card, or is it also a Northwest corporate
·8· ·card?
·9· · · ·A.· · I don't know.· I am not familiar
10· ·with those.
11· · · ·Q.· · Is there a difference between
12· ·what expenses Ross is supposed to charge
13· ·to the different corporate credit cards he
14· ·has been issued?
15· · · · · · ·MR. TEELE:· Object to the form.
16· · · ·A.· · Nothing specified.
17· · · ·Q.· · Okay.· Do you know who Vanessa
18· ·Marinho is?
19· · · ·A.· · Yes.
20· · · ·Q.· · Who is she?
21· · · ·A.· · Somebody that periodically does
22· ·some work for Ross and Northwest.
23· · · · · · ·MR. AULET:· Somebody is not on
24· · · ·mute.· Can you go on mute if you are
25· · · ·not one of the people defending the
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Page 107·1· · · · · · · · · ·R. JOLSON
·2· · · ·deposition?
·3· · · ·Q.· · And you said that Ross is the
·4· ·only one with a Centurian card but we
·5· ·noticed that in 2018 Vanessa Marinho had a
·6· ·Centurian card.· Do you know why she also
·7· ·had a Centurian card?
·8· · · ·A.· · No.
·9· · · ·Q.· · Are you involved at all in
10· ·reviewing the American Express bills?
11· · · ·A.· · No.
12· · · · · · ·(So marked for identification as
13· · · ·Exhibit 8.)
14· · · ·Q.· · Let's pause on that subject and
15· ·go back to the subject of the payments
16· ·that were made the day before the
17· ·bankruptcy.· We have put together this
18· ·exhibit, which I believe is Exhibit 8,
19· ·showing how all three of the payments, the
20· ·two payments to Ross Auerbach for 100,000,
21· ·the $40,000, and the payment to you of
22· ·$35,000 is booked.· And I believe that I
23· ·said that it was booked as a travel or
24· ·entertainment expense.· That was
25· ·incorrect.· It is booked as a "travel or
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Page 108·1· · · · · · · · · ·R. JOLSON
·2· ·other" expense.
·3· · · · · · ·Do you know why who would have
·4· ·booked these expenses?
·5· · · ·A.· · Somebody in the accounting
·6· ·department.· I don't know which one.
·7· · · ·Q.· · And you testified that the
·8· ·$25,000 and the $10,000 that you received
·9· ·that you passed on to the controller were
10· ·a retention bonus?
11· · · ·A.· · Yes.
12· · · ·Q.· · Should a retention bonus have
13· ·been characterized as a "travel or other"
14· ·expense?
15· · · · · · ·MR. TEELE:· Objection to the
16· · · ·form.
17· · · ·A.· · No.
18· · · ·Q.· · In reviewing the American
19· ·Express statements, we saw a number of
20· ·charges for St. Regis Residences for about
21· ·$13,000 every so often.· Do you know what
22· ·the St. Regis Residences are?
23· · · ·A.· · I know what the hotel is. I
24· ·don't know what you are asking.
25· · · ·Q.· · Does Northwest own a condo at
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Page 109·1· · · · · · · · · ·R. JOLSON
·2· ·the hotel?
·3· · · ·A.· · Northwest does not.
·4· · · ·Q.· · Does anybody associated with
·5· ·Northwest own a condo at the hotel?
·6· · · ·A.· · Yes.
·7· · · ·Q.· · Who?
·8· · · ·A.· · Ross.
·9· · · ·Q.· · And does Northwest pay the
10· ·maintenance fees for that condo?
11· · · ·A.· · On occasion.
12· · · ·Q.· · Why does Northwest pay those
13· ·fees?
14· · · ·A.· · On occasion, guests of Northwest
15· ·stay at the St. Regis during market week.
16· · · ·Q.· · And Northwest pays the fees for
17· ·the condo based upon guests of Northwest
18· ·staying at St. Regis.· Is that correct?
19· · · ·A.· · Yes.
20· · · ·Q.· · About how often do guests of
21· ·Northwest stay at that condo?
22· · · ·A.· · I wouldn't know every visit.
23· · · ·Q.· · Who would?
24· · · ·A.· · Ross would know when it's used.
25· · · ·Q.· · Who determines if Northwest is
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Page 110·1· · · · · · · · · ·R. JOLSON
·2· ·getting a good deal by paying these
·3· ·maintenance fees in exchange for allowing
·4· ·guests of Northwest to stay at the condo?
·5· · · · · · ·MR. TEELE:· Objection to the
·6· · · ·form.
·7· · · ·A.· · It's not something that I am
·8· ·aware of that we do.
·9· · · ·Q.· · Who reviews transactions between
10· ·Northwest and Mr. Auerbach for companies
11· ·controlled by Mr. Auerbach?
12· · · ·A.· · Look at it?· I don't know what
13· ·you are asking.
14· · · ·Q.· · Do you?
15· · · ·A.· · Do I what?
16· · · · · · ·MR. TEELE:· He just said he
17· · · ·doesn't understand what you are
18· · · ·asking.
19· · · ·Q.· · Do you review the transactions
20· ·that Northwest enters into between
21· ·Northwest and Mr. Auerbach for companies
22· ·controlled by Mr. Auerbach?
23· · · · · · ·MR. TEELE:· Objection.· Do you
24· · · ·want to define which companies and
25· · · ·which transactions?
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Page 111·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Any companies that you are aware
·3· ·of controlled by Mr. Auerbach.
·4· · · · · · ·MR. TEELE:· Objection.· Which
·5· · · ·companies are you referring to?
·6· · · · · · ·MR. AULET:· I am referring to
·7· · · ·any companies that he is aware of that
·8· · · ·are controlled by Mr. Auerbach.
·9· · · ·A.· · Again, I don't know what you are
10· ·asking.
11· · · ·Q.· · Well, take this transaction
12· ·where Northwest pays the maintenance fee
13· ·for Ross's condo in exchange for allowing
14· ·guests of Northwest to stay at that condo.
15· · · · · · ·MR. TEELE:· Objection.
16· · · ·Q.· · Does anyone review those
17· ·transactions to determine if they are fair
18· ·for Northwest?· I believe your counsel had
19· ·an objection?
20· · · · · · ·MR. TEELE:· Objection.· Which
21· · · ·transaction?· The question is vague as
22· · · ·to what is fair to Northwest.· I think
23· · · ·you should restate that and perhaps
24· · · ·ask him about a specific transaction
25· · · ·with a document.
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Page 112·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Mr. Jolson, are you aware that
·3· ·Northwest enters into a number of
·4· ·transactions with either Mr. Auerbach
·5· ·personally or companies controlled by
·6· ·Mr. Auerbach?
·7· · · ·A.· · I don't know what transactions
·8· ·you are referring to.
·9· · · ·Q.· · Are you aware of any transaction
10· ·that Northwest enters into with
11· ·Mr. Auerbach personally?
12· · · ·A.· · I am aware of a lease for our
13· ·rent in Roslyn.
14· · · ·Q.· · Who reviewed that lease to
15· ·determine if it was at market terms?
16· · · ·A.· · We comped the lease, I think it
17· ·was about two years ago, to current rates
18· ·in the area.
19· · · ·Q.· · Who did that work?
20· · · ·A.· · We spoke to our -- we have
21· ·another accountant, not Mazars but
22· ·somebody who helps with our accounting,
23· ·and myself and Ross.
24· · · ·Q.· · Who made the ultimate decision
25· ·about what a fair market rate would be?
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Page 113·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. TEELE:· Objection to the
·3· · · ·form.
·4· · · ·A.· · Well, the ultimate decision is
·5· ·Ross.
·6· · · ·Q.· · Did you provide any input?
·7· · · ·A.· · Just the comps.
·8· · · ·Q.· · Did anyone ask you to determine
·9· ·if the price that was ultimately reached
10· ·was fair to the company?
11· · · ·A.· · Ken.· Ken Gould.
12· · · ·Q.· · And what was your response?
13· · · ·A.· · My response?
14· · · ·Q.· · Yes.
15· · · ·A.· · To what question?
16· · · ·Q.· · Was the price that was
17· ·ultimately reached fair to the company?
18· · · ·A.· · On the lease, it was.
19· · · · · · ·MR. AULET:· Okay.· I am going to
20· · · ·show you what I have marked Exhibit 9,
21· · · ·which is a Platinum card statement for
22· · · ·Northwest Company for the closing date
23· · · ·of June 14, 2019.· Please turn to page
24· · · ·6.
25· · · · · · ·(So marked for identification as
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Page 114·1· · · · · · · · · ·R. JOLSON
·2· · · ·Exhibit 9.)
·3· · · ·Q.· · In the middle you will see a
·4· ·transaction, St. Regis NY maintenance fee
·5· ·for a little over $13,000 with a star,
·6· ·"Northwest paid maintenance fee, no room
·7· ·fee."
·8· · · · · · ·Have you ever reviewed this
·9· ·arrangement where Northwest pays the
10· ·maintenance fees of this condo in exchange
11· ·for not paying room fees to determine if
12· ·Northwest is getting a good deal?
13· · · ·A.· · No, I have not.
14· · · ·Q.· · Are you aware of anyone at
15· ·Northwest doing that?
16· · · ·A.· · No.
17· · · ·Q.· · Given that it is marked
18· ·"Northwest pays maintenance fee, no room
19· ·fee," would you expect that this is billed
20· ·as an expense of the company?
21· · · ·A.· · Yes.
22· · · · · · ·MR. AULET:· Let me pull up
23· · · ·another exhibit.· This exhibit is a
24· · · ·different business Platinum card Amex
25· · · ·statement with closing date
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Page 115·1· · · · · · · · · ·R. JOLSON
·2· · · ·January 16, 2017.
·3· · · · · · ·(So marked for identification as
·4· · · ·Exhibit 10.)
·5· · · ·Q.· · I am going to turn to -- first,
·6· ·if you go to page 9, at the bottom is
·7· ·labeled -- there is a passenger ticket for
·8· ·Gabrielle Auerbach from Miami to Denver.
·9· ·Who is Gabrielle Auerbach?
10· · · ·A.· · That is Ross's daughter.
11· · · ·Q.· · Is she employed by Northwest?
12· · · ·A.· · When?
13· · · ·Q.· · Was she employed at the time of
14· ·this transaction in January 2017 by
15· ·Northwest?
16· · · ·A.· · No.
17· · · ·Q.· · Would there be any business
18· ·purpose for bringing Ross's daughter on a
19· ·business trip to Denver?
20· · · ·A.· · Not that I know.
21· · · ·Q.· · So there is a notation, 1.1531.
22· ·Do you know what that refers to?
23· · · ·A.· · That is a general ledger code.
24· · · ·Q.· · Do you happen to know what that
25· ·general ledger code refers to?
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Page 116·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · No.
·3· · · ·Q.· · But would you expect, if we
·4· ·looked at the general ledger, this
·5· ·particular transaction had been billed to
·6· ·whatever account is represented by 1.1531?
·7· · · ·A.· · Yes.
·8· · · ·Q.· · If we go to the next page, page
·9· ·10, you will see a $38,000 charge for a
10· ·property in Vail that is labeled "Ashford
11· ·Ross NW trip."· Do you see that entry?
12· · · ·A.· · No.
13· · · · · · ·MR. TEELE:· Mr. Aulet, I think
14· · · ·there is a feature of this web portal
15· · · ·where you can actually point to
16· · · ·things.· If that exists and you know
17· · · ·how to use it, it might be beneficial
18· · · ·to use it just to call Mr. Jolson's
19· · · ·attention to things quicker.
20· · · · · · ·MR. AULET:· I will see if I can
21· · · ·do that but I am afraid I just created
22· · · ·a weird-looking mark on this.
23· · · ·Q.· · This appears to be a trip to
24· ·Vail that is labeled "Ashford Ross
25· ·Northwest trip" for about $38,000.· Do you
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Page 117·1· · · · · · · · · ·R. JOLSON
·2· ·see that?
·3· · · ·A.· · I do.
·4· · · ·Q.· · Would you or anyone else at
·5· ·Northwest have checked who accompanied
·6· ·Ross on that trip?
·7· · · ·A.· · Not me.· I don't see these
·8· ·bills.
·9· · · ·Q.· · If this was a trip with Ashford,
10· ·would it typically be billed as a business
11· ·expense?
12· · · ·A.· · In whole or part.
13· · · ·Q.· · If nobody from Ashford ever
14· ·attended that trip, would it still be a
15· ·business expense?
16· · · · · · ·MR. TEELE:· Objection.
17· · · ·A.· · I don't know how to answer.· It
18· ·says "Ashford."
19· · · ·Q.· · If that was false, should this
20· ·have been billed as a business expense?
21· · · · · · ·MR. TEELE:· Objection.· It is a
22· · · ·pure hypothetical.· You are making him
23· · · ·guess.
24· · · ·Q.· · Are you able to answer the
25· ·question?
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Page 118·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I am not going to guess.
·3· · · ·Q.· · So you are not able to tell me
·4· ·if this trip to Vail did not, in fact,
·5· ·include anyone from Ashford, if it would
·6· ·be something that should be billed as a
·7· ·business expense?
·8· · · · · · ·MR. TEELE:· Objection.
·9· · · ·A.· · I still don't know the question.
10· · · ·Q.· · Let's say that Ross just took a
11· ·trip to Vale with himself and with, as you
12· ·saw, his daughter, and billed it as an
13· ·expense to Northwest by claiming that it
14· ·was a trip that included Ashford.· Would
15· ·that be a legitimate business expense to
16· ·bill Northwest for?
17· · · · · · ·MR. TEELE:· I will object again.
18· · · ·It is a pure hypothetical and you are
19· · · ·asking him to guess and make judgments
20· · · ·based on some incomplete hypothetical
21· · · ·situation that has been presented to
22· · · ·him as a fact witness.
23· · · · · · ·MR. AULET:· Are you directing
24· · · ·him not to answer?
25· · · · · · ·MR. TEELE:· I have stated my
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Page 119·1· · · · · · · · · ·R. JOLSON
·2· · · ·objection.
·3· · · ·Q.· · Mr. Jolson, please answer the
·4· ·question.
·5· · · ·A.· · I don't know how to answer.· We
·6· ·take it at face value.· If it says Ashford
·7· ·was on it, then Ashford was there.
·8· · · ·Q.· · Have you ever personally been
·9· ·made aware that Ross claimed that an
10· ·employee of Ashford was on a trip when he,
11· ·in fact, was not on that trip?
12· · · ·A.· · No.
13· · · ·Q.· · And were you again reminded of
14· ·that fact -- strike that.
15· · · · · · ·Were you reminded in May of this
16· ·year that such a thing had happened, that
17· ·Ross claimed an employee of Ashford was on
18· ·the trip when in fact that employee was
19· ·not on that trip?
20· · · ·A.· · No.
21· · · ·Q.· · Now, if I were to go through
22· ·these Amex statements, as we see here with
23· ·all the notations, I could verify where
24· ·these were billed by, for example, adding
25· ·up anything titled "Auto" and checking if
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Page 120·1· · · · · · · · · ·R. JOLSON
·2· ·an entry to the auto account in that
·3· ·amount was billed.· Correct?
·4· · · · · · ·MR. DUFFY:· Objection.· It's
·5· · · ·hypothetical.
·6· · · ·Q.· · Mr. Jolson, if counsel doesn't
·7· ·direct you not to answer, you can answer
·8· ·after the objection.
·9· · · ·A.· · Sorry.· Can you ask the question
10· ·again, please?
11· · · ·Q.· · For an Amex statement like this
12· ·where I have the handwritten notations
13· ·about what everything was billed to, I
14· ·should be able to, for example, add up all
15· ·the auto charges and compare that to a
16· ·general ledger entry for automobile
17· ·expense.· Correct?
18· · · ·A.· · Correct.
19· · · ·Q.· · Now, if I have an Amex statement
20· ·where there is not a corresponding
21· ·statement indicating exactly which expense
22· ·is billed where, is it correct that I
23· ·can't determine how those Amex statements
24· ·were billed on the general ledger?
25· · · · · · ·MR. TEELE:· Objection to the
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Page 121·1· · · · · · · · · ·R. JOLSON
·2· · · ·form.
·3· · · ·A.· · I lost you.· Sorry.· Can you
·4· ·repeat that?
·5· · · ·Q.· · Strike that.· I think we have
·6· ·asked that previously.· I am going to move
·7· ·on to another exhibit.· I believe this is
·8· ·Exhibit 10.· This is a business Centurian
·9· ·card statement, closing date September 19,
10· ·2017, for Ross Auerbach.
11· · · · · · ·(So marked for identification as
12· · · ·Exhibit 11.)
13· · · ·Q.· · I am going to go to an entry on
14· ·9/17.· Do you see this entry for 9/17 for
15· ·Tom Ford that I have highlighted?
16· · · ·A.· · Yes.
17· · · ·Q.· · And that is $53,000 at Tom Ford
18· ·Beverly Hills that has the handwritten
19· ·notation "business clothes."· Is that
20· ·correct?
21· · · ·A.· · Yes.
22· · · ·Q.· · Then there is the notation "off
23· ·SUP."· Would it be reasonable to assume
24· ·that that is office supplies?
25· · · · · · ·MR. TEELE:· Objection to the
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Page 122·1· · · · · · · · · ·R. JOLSON
·2· · · ·form.
·3· · · ·A.· · I don't know.· I didn't write
·4· ·it.
·5· · · ·Q.· · Would it be -- if these $53,000
·6· ·of business clothes were billed to
·7· ·Northwest as office supplies, would that
·8· ·be an appropriate business expense?
·9· · · · · · ·MR. TEELE:· Objection to form.
10· · · ·A.· · I don't know what the clothes
11· ·were.· I don't know what this entry is.
12· ·It is the first time I am seeing it so I
13· ·don't know anything about it.
14· · · ·Q.· · Should someone have raised
15· ·questions about it who did see it?
16· · · · · · ·MR. TEELE:· Objection to form.
17· · · ·It is hypothetical.
18· · · ·A.· · Yes, I would expect so.
19· · · ·Q.· · We'll stop that one and let me
20· ·go to another exhibit.
21· · · · · · ·Does Northwest do any business
22· ·in Italy?
23· · · ·A.· · Not that I am aware.
24· · · ·Q.· · Are you aware of any business
25· ·purpose that would be served by a trip to
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Page 123·1· · · · · · · · · ·R. JOLSON
·2· ·Italy?
·3· · · · · · ·MR. TEELE:· Objection.· It's
·4· · · ·vague.· I think you need to define
·5· · · ·what you mean by "business purpose."
·6· · · ·I think if you are asking about a
·7· · · ·specific, you should ask him about it.
·8· · · ·Q.· · Would it be -- when I say --
·9· ·strike that.
10· · · · · · ·Are you aware of any purpose
11· ·that would be served by a trip to Italy
12· ·that would justify charging expenses on
13· ·that trip to Italy to the company?
14· · · · · · ·MR. TEELE:· Objection.· It is
15· · · ·purely hypothetical as well.· If there
16· · · ·is a specific expense of a specific
17· · · ·trip, just ask him about it.
18· · · ·Q.· · Can you answer the question,
19· ·Mr. Jolson?
20· · · ·A.· · I don't know what we are talking
21· ·about.
22· · · · · · ·MR. AULET:· Let me go on to a
23· · · ·different exhibit.
24· · · · · · ·The Amex statements for 2018
25· · · ·that were produced to us were produced
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Page 124·1· · · · · · · · · ·R. JOLSON
·2· · · ·in a spreadsheet.· What I am going to
·3· · · ·show to you are three entries from the
·4· · · ·two spreadsheets that were produced to
·5· · · ·us rather than the actual Amex
·6· · · ·statements, which weren't provided to
·7· · · ·us.· But I am interested in these
·8· · · ·three entries.
·9· · · ·Q.· · First, is there any reason that
10· ·student tuition should be charged as a
11· ·business expense of Northwest?
12· · · · · · ·MR. TEELE:· Objection to the
13· · · ·form.
14· · · ·A.· · No.
15· · · ·Q.· · Would this be the type of
16· ·expense that should have gone to Ross's
17· ·loan account?
18· · · ·A.· · Yes.
19· · · ·Q.· · If I can't find any entries
20· ·after that day that would appear to be
21· ·moving these entries into Ross's loan
22· ·account, how would I determine how --
23· ·strike that.
24· · · · · · ·If there are no corresponding
25· ·entries that could include these that were
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Page 125·1· · · · · · · · · ·R. JOLSON
·2· ·made in Ross's loan account, how would I
·3· ·determine where in the general ledger
·4· ·these expenses currently are?
·5· · · ·A.· · You would have to look at the
·6· ·American Express statement to see the
·7· ·journal entry.
·8· · · ·Q.· · And if those American Express
·9· ·statements weren't produced to us with
10· ·handwritten notes, is there any other way
11· ·we could determine where these expenses
12· ·currently sit on the general ledger?
13· · · ·A.· · I would -- we would need the
14· ·American Express statement.
15· · · ·Q.· · And the Grand Hotel Zermatterhof
16· ·-- I have mangled that pronunciation. I
17· ·have looked it up and that is in
18· ·Switzerland.· Are you aware of any event
19· ·that Northwest held in Switzerland in
20· ·December 2018?
21· · · · · · ·MR. TEELE:· Objection to the
22· · · ·representation that this Grand Hotel
23· · · ·is in Switzerland.· There is no
24· · · ·indication or evidence in the record
25· · · ·that suggests that.
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Page 126·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·But you can answer if you know.
·3· · · ·A.· · What was the question?
·4· · · ·Q.· · Are you aware of any events that
·5· ·Northwest held in Switzerland in December
·6· ·of 2018?
·7· · · ·A.· · No.
·8· · · ·Q.· · Is there any other reason
·9· ·besides an event that spending $43,000 at
10· ·a hotel would be an expense of Northwest?
11· · · ·A.· · I don't know.
12· · · ·Q.· · Again, there is no way that I
13· ·can determine where this particular
14· ·expense wound up on the general ledger if
15· ·I don't have those handwritten American
16· ·Express statements?
17· · · ·A.· · I don't know of any other way.
18· · · · · · ·MR. AULET:· What I have marked
19· · · ·as Exhibit 12 is a file that the
20· · · ·Debtors produced to us that appears to
21· · · ·be scanned copies of hard copies of
22· · · ·the account statement for the business
23· · · ·Centurian card for Ross Auerbach for
24· · · ·the months of July through
25· · · ·December 2019.
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Page 127·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·(So marked for identification as
·3· · · ·Exhibit 12.)
·4· · · ·Q.· · First I would like to go to page
·5· ·15.
·6· · · · · · ·Who is Alexander Auerbach?
·7· · · ·A.· · Ross's son.
·8· · · ·Q.· · Is Alexander Auerbach currently
·9· ·employed by Northwest or was he employed
10· ·by Northwest in 2019?
11· · · ·A.· · No.
12· · · ·Q.· · So we would not expect that this
13· ·ticket to what appears to be Athens would
14· ·be an expense of Northwest?
15· · · ·A.· · No.
16· · · ·Q.· · Now, on page 35, the November
17· ·statement, there is a $3,503.17 charge at
18· ·Porsche of Roslyn.· Do you know of any
19· ·reason that this would be a Northwest
20· ·business expense?
21· · · ·A.· · I don't know what that charge
22· ·is.
23· · · ·Q.· · Does Northwest own any Porsches?
24· · · ·A.· · No, Northwest does not own cars.
25· · · ·Q.· · Does Northwest lease any cars
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Page 128·1· · · · · · · · · ·R. JOLSON
·2· ·for the benefit of its employees?
·3· · · ·A.· · Yes.
·4· · · ·Q.· · What cars does Northwest lease?
·5· · · ·A.· · Northwest reimburses --
·6· ·Northwest is not the holder of the lease
·7· ·but it is common for employees to have
·8· ·auto allowances.
·9· · · ·Q.· · How high are those allowances
10· ·typically?
11· · · ·A.· · On a monthly -- they're monthly.
12· · · ·Q.· · Does Mr. Auerbach have a car
13· ·that he leases through this program or
14· ·these auto allowances?
15· · · ·A.· · No.
16· · · ·Q.· · What is the Old Westbury Country
17· ·Club?
18· · · ·A.· · A country club.
19· · · ·Q.· · Is anyone -- is Ross Auerbach a
20· ·member of that country club?
21· · · ·A.· · As far as I know, yes.
22· · · ·Q.· · Are you a member of that country
23· ·club?
24· · · ·A.· · No.
25· · · ·Q.· · So there are a number of charges
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Page 129·1· · · · · · · · · ·R. JOLSON
·2· ·that appear to be recurring charges for
·3· ·about five and $6,000 from the Old
·4· ·Westbury Country Club that are paid by
·5· ·Northwest.· Are you aware of any
·6· ·arrangement where Northwest pays those
·7· ·fees?
·8· · · · · · ·MR. TEELE:· Objection.· Are
·9· · · ·there any specific transactions that
10· · · ·you wanted to point out?
11· · · ·Q.· · Just in general, does Northwest
12· ·pay for Mr. Auerbach's fees for this
13· ·country club?
14· · · ·A.· · Yes.
15· · · ·Q.· · And why is that?
16· · · ·A.· · We use -- we use their facility
17· ·for off-site meetings.· Once a month we
18· ·use their -- we have meeting rooms and we
19· ·have employees, senior management and
20· ·sometimes middle management comes to
21· ·off-site meetings.
22· · · ·Q.· · Are any other events held at the
23· ·Old Westbury Country Club for Northwest?
24· · · ·A.· · Not that I am aware.
25· · · · · · ·MR. AULET:· This will be another
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Page 130·1· · · · · · · · · ·R. JOLSON
·2· · · ·one you will want to be able to zoom
·3· · · ·into.
·4· · · · · · ·(So marked for identification as
·5· · · ·Exhibit 13.)
·6· · · · · · ·MR. AULET:· What I have just
·7· · · ·marked as Exhibit 13, unless I have
·8· · · ·lost track, is a journal entry from
·9· · · ·the Northwest general ledger from
10· · · ·October of 2018.· It is for a
11· · · ·$49,594.41 payment to the Old Westbury
12· · · ·Golf and Country Club.
13· · · ·Q.· · Do you know what that payment is
14· ·for, Mr. Jolson?
15· · · ·A.· · I do.
16· · · ·Q.· · And what was that payment for?
17· · · ·A.· · That payment was for my
18· ·daughter's wedding.
19· · · ·Q.· · And did the company pay for your
20· ·daughter's wedding?
21· · · ·A.· · That was a bonus for me.· In
22· ·lieu of a bonus that is what I received
23· ·that year.
24· · · ·Q.· · Was that reflected on your pay
25· ·stubs as a bonus?
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Page 131·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · It wasn't on my pay stubs but it
·3· ·is going to be on my W-2.· But it wouldn't
·4· ·be on an individual pay stub.
·5· · · ·Q.· · So if we checked your W-2's, we
·6· ·would find that that payment was included
·7· ·in your taxes?
·8· · · ·A.· · Not in that year.
·9· · · ·Q.· · In what year?
10· · · ·A.· · It would be 2019.· I didn't
11· ·report it in 2018.
12· · · ·Q.· · Did the Northwest Company pay
13· ·taxes on that $49,594?
14· · · ·A.· · Not in '18.
15· · · ·Q.· · Did it pay any taxes on that
16· ·amount in 2019?
17· · · ·A.· · We didn't finish filing all our
18· ·tax returns yet.
19· · · ·Q.· · Was that amount of compensation
20· ·reported on any tax forms that Northwest
21· ·filed the IRS for 2018 that reflected
22· ·compensation that it paid you?
23· · · ·A.· · Not in 2018.
24· · · ·Q.· · Was it done in a subsequent
25· ·year?
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Page 132·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · We didn't finish filing all our
·3· ·returns for '19.
·4· · · ·Q.· · I am asking about any tax forms
·5· ·Northwest filed with the IRS that reflect
·6· ·payments it made to its employees for
·7· ·compensation.· Would any of those tax
·8· ·forms include this payment to the Old
·9· ·Westbury Gold and Country Club?
10· · · · · · ·MR. TEELE:· Objection.· Already
11· · · ·asked and answered.· You can answer to
12· · · ·the extent you have any information.
13· · · ·A.· · No.· I have answered it. I
14· ·don't have anything further to add.
15· · · ·Q.· · Was the answer no?
16· · · ·A.· · Not in 2018, no.
17· · · ·Q.· · And Northwest never filed any
18· ·tax forms with the IRS that reflect
19· ·payments to employees at all for the year
20· ·of 2018?· Is that correct?
21· · · ·A.· · I am not familiar with every
22· ·single form that gets filed but we are not
23· ·finished filing for 2019 yet.
24· · · ·Q.· · Did Ross Auerbach make a
25· ·practice of flying on personal jets at any
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Page 133·1· · · · · · · · · ·R. JOLSON
·2· ·point in past five years?
·3· · · · · · ·MR. TEELE:· Objection to the
·4· · · ·form.
·5· · · ·A.· · I don't know what "a practice"
·6· ·means.· There was use of a private jet,
·7· ·but I don't know that there is a practice.
·8· · · ·Q.· · Was that private jet billed to
·9· ·Northwest?
10· · · ·A.· · The ones I know about, yes.
11· · · ·Q.· · Has Northwest stopped using a
12· ·private jet in the past year or so?
13· · · ·A.· · Yes.
14· · · ·Q.· · When was that decision made?
15· · · ·A.· · I can't recall exactly.
16· · · ·Q.· · Did anyone review the use of the
17· ·private jet and determine if it was
18· ·appropriately used for Northwest business
19· ·purposes?
20· · · · · · ·MR. TEELE:· Objection to form
21· · · ·and vagueness.
22· · · ·A.· · There was no -- not a formal
23· ·review.
24· · · · · · ·MR. AULET:· Now would be a good
25· · · ·time for a five-minute break if that
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Page 134·1· · · · · · · · · ·R. JOLSON
·2· · · ·works for everyone.
·3· · · · · · ·THE VIDEOGRAPHER:· The time is
·4· · · ·now 2:34 and we are now off the
·5· · · ·record.
·6· · · · · · ·(Recess.)
·7· · · · · · ·THE VIDEOGRAPHER:· The time is
·8· · · ·now 2:51 and we are back on the
·9· · · ·record.
10· · · · · · ·(So marked for identification as
11· · · ·Exhibit 14.)
12· ·BY MR. AULET:
13· · · ·Q.· · Mr. Jolson, you should have in
14· ·front of you what is Exhibit 14, which is
15· ·a file of Northeastern Aviation invoices
16· ·that were provided by the Debtor, and they
17· ·were provided in the form that I marked as
18· ·the exhibit.
19· · · · · · ·I am going to first go to page
20· ·3.· This is -- have you ever seen these
21· ·invoices before?
22· · · ·A.· · I see invoices.· I can't recall
23· ·if I saw this specific one, but I do see
24· ·them.
25· · · ·Q.· · Have you ever seen Northeastern
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Page 135·1· · · · · · · · · ·R. JOLSON
·2· ·Aviation's invoices like this one?· Maybe
·3· ·not this specific one.
·4· · · ·A.· · Yes.
·5· · · ·Q.· · If I go to page 4, there is an
·6· ·attached voucher journal report that
·7· ·appears to show that this was billed to
·8· ·air, hotels and travel.· Is that correct?
·9· · · ·A.· · Sorry.· I have to turn my
10· ·computer.
11· · · · · · ·I see that.
12· · · ·Q.· · So, these were produced to us in
13· ·invoice and then -- invoice, as in page 3,
14· ·and then these general ledger sheets, as
15· ·in page 4.· Would it be reasonable for us
16· ·to assume that the general ledger sheets
17· ·immediately after the invoice reflect how
18· ·that invoice was booked?
19· · · ·A.· · Yes.
20· · · ·Q.· · And so, take page 5, which, if
21· ·you look up the airport codes under the
22· ·itinerary, from Farmingdale, New York,
23· ·which appears to be where most of these
24· ·flights originate, to Miami, Florida.· How
25· ·would I go about determining what the
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Page 136·1· · · · · · · · · ·R. JOLSON
·2· ·reason for this trip was?
·3· · · ·A.· · I think you'd have to ask Ross.
·4· · · ·Q.· · Would anyone from Northwest have
·5· ·required Ross to explain what the business
·6· ·purpose of this trip was in writing or
·7· ·otherwise?
·8· · · ·A.· · When Ross approves the -- I am
·9· ·looking at this.· Generally speaking, when
10· ·Ross approves an invoice, he generally
11· ·writes what the business purpose was.
12· · · ·Q.· · And so this invoice doesn't have
13· ·a business purpose but it does have the
14· ·notation 600.8440.01.· Would that notation
15· ·indicate that Ross thought it should be
16· ·billed to that general ledger account?
17· · · · · · ·MR. TEELE:· Objection to form.
18· · · ·A.· · That would mean that whoever
19· ·coded it had a belief that it should go to
20· ·a business account.
21· · · ·Q.· · Okay.· But short of asking Ross,
22· ·if a business purpose is not written on
23· ·the invoice, there is no other document I
24· ·can refer to to determine what the
25· ·business purpose of this flight was.· Is
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Page 137·1· · · · · · · · · ·R. JOLSON
·2· ·that correct?
·3· · · ·A.· · Not that I know of.· Right.
·4· · · ·Q.· · So, on page 5 -- sorry.· Page 9.
·5· ·This appears to be -- someone has
·6· ·helpfully written this out.· A trip that
·7· ·includes Miami and CID airport in Iowa.
·8· ·Do you know why anyone would be flying to
·9· ·Iowa on behalf of Northwest?
10· · · · · · ·MR. TEELE:· Objection to the
11· · · ·form and the inference about the
12· · · ·airport codes.
13· · · ·A.· · No.
14· · · · · · ·THE WITNESS:· My battery is
15· · · ·dead.
16· · · · · · ·MR. TEELE:· Can we take a break
17· · · ·so that Mr. Jolson can retrieve his
18· · · ·laptop plug?
19· · · · · · ·MR. AULET:· Can we make it
20· · · ·quick, though?
21· · · · · · ·MR. TEELE:· Two minutes.
22· · · · · · ·THE VIDEOGRAPHER:· Time is now
23· · · ·2:57 and we are now off record.
24· · · · · · ·(Discussion held off the
25· · · ·record.)
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Page 138·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·THE VIDEOGRAPHER:· The time is
·3· · · ·now 3 o'clock and we are back on the
·4· · · ·record.
·5· ·BY MR. AULET:
·6· · · ·Q.· · Mr. Jolson, let's direct your
·7· ·attention to page 16, which is what
·8· ·appears to be a day trip to SLK airport,
·9· ·which appears to be an airport in Saranac
10· ·Lake in Upstate New York.· Do you know of
11· ·any business purpose for a day trip to
12· ·Upstate New York on behalf of Northwest?
13· · · ·A.· · No.
14· · · ·Q.· · Again, the only way I would be
15· ·able to determine what the business
16· ·purpose of these trips was would be to ask
17· ·Ross?
18· · · · · · ·MR. TEELE:· Objection.
19· · · ·Q.· · You can answer.
20· · · ·A.· · Yes.
21· · · ·Q.· · I will also just remind you,
22· ·Mr. Jolson, nodding or shaking your head
23· ·doesn't appear in the transcript.
24· · · ·A.· · I got it.· Sorry about that.
25· · · ·Q.· · Please direct your attention to
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Page 139·1· · · · · · · · · ·R. JOLSON
·2· ·page 35, which is a flight from EGE, which
·3· ·is an airport near Vail, to Denver and
·4· ·back to Vail.· Again, do you know of any
·5· ·business purpose that might be served by a
·6· ·trip like this?
·7· · · ·A.· · No.
·8· · · ·Q.· · Page 35.· Again, we can see from
·9· ·the attached general ledger on page 36
10· ·that this appears to have been billed to
11· ·the company as air, hotel and travel
12· ·expense.
13· · · · · · ·MR. TEELE:· Can you show him the
14· · · ·exhibit?
15· · · ·A.· · Okay.
16· · · ·Q.· · So, this is a trip to a number
17· ·of airports, but the first thing I want to
18· ·ask is, this has a notation that says,
19· ·"Please put Allen's fee 50 percent of
20· ·this."· Do you have understanding of what
21· ·that means?
22· · · · · · ·MR. TEELE:· Objection to form.
23· · · ·A.· · I never saw this comment to give
24· ·to me.· So, I don't remember it, but if it
25· ·said they gave it to me, I would say they
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Page 140·1· · · · · · · · · ·R. JOLSON
·2· ·did.
·3· · · ·Q.· · Okay.· And do you know what was
·4· ·meant by "Please put on Allen's fee
·5· ·50 percent of this"?
·6· · · ·A.· · I don't recall what I would have
·7· ·said at the time, but I know what I -- I
·8· ·don't recall what I would have said at the
·9· ·time.
10· · · ·Q.· · Okay.· Well, it appears from the
11· ·attachment, page 43, that half of this was
12· ·billed to air, hotel, travel and half of
13· ·it was billed to other accounts
14· ·receivable.· Would it make sense that --
15· ·and you can see the parentheses at the end
16· ·of the list of airports, that somebody
17· ·wrote "(Allen)."· Do you see that?
18· · · · · · ·MR. TEELE:· Where are you
19· · · ·looking?
20· · · ·A.· · I see it.
21· · · · · · ·MR. TEELE:· Oh, I see it, Ken.
22· · · ·Q.· · Does this mean that half of this
23· ·flight was billed to Allen Guo and half of
24· ·it was billed to Northwest?
25· · · ·A.· · That is what this journal entry
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Page 141·1· · · · · · · · · ·R. JOLSON
·2· ·means.
·3· · · ·Q.· · Why would half of the flight be
·4· ·a personal expense of Allen but the other
·5· ·half of the flight be an expense of
·6· ·Northwest?
·7· · · ·A.· · Can you go back to the bill?
·8· · · ·Q.· · Sure.
·9· · · ·A.· · Because that is the instructions
10· ·that is given to accounting on the
11· ·invoice.
12· · · ·Q.· · So my question is, if this trip
13· ·is something that Allen should pay for
14· ·personally, why isn't the other half
15· ·something that Ross would pay for
16· ·personally?
17· · · ·A.· · I don't know anything about this
18· ·trip.· I don't know.
19· · · ·Q.· · We have gone to page 49 of the
20· ·exhibit.· This is a flight to Iowa and it
21· ·has the handwritten note "Iowa Daniella
22· ·orientation."· Who is Daniella?
23· · · ·A.· · That is Ross's daughter.
24· · · ·Q.· · Did Daniella attend the
25· ·University of Iowa for a year?
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Page 142·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I believe so.
·3· · · ·Q.· · Was that school year the year
·4· ·beginning in the fall of 2017?
·5· · · ·A.· · I am not sure of the year.
·6· · · ·Q.· · If this was a flight, as it
·7· ·indicates, for an orientation for Ross's
·8· ·daughter at the University of Iowa, would
·9· ·that be a legitimate Northwestern business
10· ·expense?
11· · · · · · ·MR. TEELE:· Objection to the
12· · · ·hypothetical.· You can answer if you
13· · · ·know.· It's hypothetical.
14· · · ·A.· · It should have been booked to
15· ·the loan account.
16· · · ·Q.· · Was Daniella an employee of
17· ·Northwest in 2017?
18· · · ·A.· · No.
19· · · ·Q.· · So, the attached page reflects
20· ·that this was, instead, billed to air,
21· ·hotels and travel.· Is that correct?
22· · · ·A.· · I see that.
23· · · ·Q.· · Why wouldn't someone have asked
24· ·questions about this receipt given that
25· ·somebody handwrote on it that it is for
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Page 143·1· · · · · · · · · ·R. JOLSON
·2· ·Ross's daughter's orientation?
·3· · · ·A.· · They should have.
·4· · · · · · ·MR. DUFFY:· Objection.
·5· · · ·Speculative.
·6· · · ·Q.· · Page 62 is another receipt that
·7· ·includes a flight to Iowa, and this one is
·8· ·in the fall of 2017.· Is there any
·9· ·business reason that this flight might
10· ·have gone to Iowa on behalf of Northwest?
11· · · ·A.· · Not that I know.
12· · · ·Q.· · If the only reason to visit Iowa
13· ·for either Ross to visit his daughter or
14· ·to bring his daughter to University of
15· ·Iowa, would that be a legitimate business
16· ·expense for Ross to charge Northwest for?
17· · · · · · ·MR. DUFFY:· Objection.
18· · · ·Speculative.
19· · · ·A.· · No.
20· · · ·Q.· · And for any of the flights to
21· ·Iowa, is there any way I could determine
22· ·if there was a legitimate business reason
23· ·for a private jet to Iowa besides asking
24· ·Ross Auerbach?
25· · · ·A.· · No.
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Page 144·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Page 76 is a flight between what
·3· ·I looked up and appears to be an airport
·4· ·in Greece to an airport in Italy.· Is
·5· ·there any business reason that a private
·6· ·jet would have been needed to bring Ross
·7· ·Auerbach from Greece to Italy in the
·8· ·summer of 2018?
·9· · · · · · ·MR. TEELE:· Objection.
10· · · ·A.· · I don't know.
11· · · ·Q.· · So, this flight, HDI is an
12· ·airport in Harbor Island, Bahamas.· Again,
13· ·is there any business reason why a private
14· ·jet would have been needed to go to the
15· ·Bahamas?
16· · · · · · ·MR. TEELE:· Objection.· I am
17· · · ·going to note for the record
18· · · ·continuing objection to the
19· · · ·representation of the airport codes,
20· · · ·and I will object to the form of that
21· · · ·question as well.
22· · · ·A.· · I don't know.
23· · · ·Q.· · Is there any way I can determine
24· ·who was on these private jets?
25· · · · · · ·MR. TEELE:· Objection.· Vague.
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Page 145·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I don't know.
·3· · · · · · ·(So marked for identification as
·4· · · ·Exhibit 15.)
·5· · · · · · ·MR. AULET:· Now I am showing you
·6· · · ·an email I have marked Exhibit 15,
·7· · · ·which is a series of emails that
·8· · · ·begins with an email from Ron Andreola
·9· · · ·to Robert Jolson on Monday, May 18,
10· · · ·2020.
11· · · ·Q.· · Mr. Jolson, do you recall we
12· ·asked you a few questions if anyone had
13· ·alerted you that Ross was claiming that
14· ·Allen was on trips where he was not in
15· ·fact on trips?
16· · · ·A.· · Yes.
17· · · ·Q.· · Is this email an email from Ron
18· ·Andreola to you forwarding an email from
19· ·2017 where Allen informed him, cc'ing you,
20· ·that he was not on the trip that Ross had
21· ·represented he was on?
22· · · ·A.· · I am reading it.· First time I
23· ·am seeing it.· Yes.
24· · · ·Q.· · I will just go to page 2 so you
25· ·can read the rest of the email.· Did you
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Page 146·1· · · · · · · · · ·R. JOLSON
·2· ·ever investigate why Ross had claimed that
·3· ·Allen was on this trip as a reason to bill
·4· ·it to debtors?
·5· · · ·A.· · No.· May I ask you to go back,
·6· ·please?
·7· · · · · · ·Okay.
·8· · · ·Q.· · In 2017, did you ever conduct an
·9· ·investigation to determine if there were
10· ·any other charges that Ross had billed to
11· ·the company based on reasons that turned
12· ·out not to be true?
13· · · · · · ·MR. TEELE:· Objection to the
14· · · ·form.
15· · · ·A.· · I don't recall.
16· · · ·Q.· · Why was Mr. Andreola looking
17· ·into this issue in May of this year?
18· · · ·A.· · I don't know.
19· · · ·Q.· · Why did he forward this email to
20· ·you?
21· · · ·A.· · I can't answer that.· I don't
22· ·know why he forwarded it to me.
23· · · ·Q.· · What did you do in response to
24· ·receiving this email?
25· · · ·A.· · I don't recall seeing this
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Page 147·1· · · · · · · · · ·R. JOLSON
·2· ·email.· I get about a thousand a day. I
·3· ·am sure I miss plenty of them.· Ron sits
·4· ·about three feet from me.· Never told me
·5· ·about it, so it is entirely possible I
·6· ·missed it.
·7· · · ·Q.· · What is David Harrison LLC?
·8· · · ·A.· · It's a consulting company.
·9· · · ·Q.· · And what do they consult on?
10· · · ·A.· · They don't consult with me, so I
11· ·don't know what that is.
12· · · ·Q.· · Who do they consult with?
13· · · ·A.· · I don't know.· I can't answer
14· ·that question.
15· · · ·Q.· · Is there a David Harrison?
16· · · ·A.· · I don't know of a David
17· ·Harrison.
18· · · ·Q.· · Who owns David Harrison LLC?
19· · · ·A.· · I don't know the owners of David
20· ·Harrison LLC.
21· · · ·Q.· · Would it surprise you to learn
22· ·that it is Ross Auerbach?
23· · · · · · ·MR. TEELE:· Objection to the
24· · · ·form.
25· · · · · · ·MR. DUFFY:· Objection.
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Page 148·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I don't know.· So, okay.
·3· · · ·Q.· · Who contracted with David
·4· ·Harrison LLC to provide consulting
·5· ·services to Northwest?
·6· · · ·A.· · I don't know.
·7· · · ·Q.· · How long has the consulting
·8· ·arrangement been in place?
·9· · · ·A.· · A few years.
10· · · ·Q.· · Who started -- who first engaged
11· ·David Harrison LLC to provide consulting
12· ·services?
13· · · · · · ·MR. TEELE:· Objection.· It's
14· · · ·already been asked and answered.
15· · · ·A.· · I don't know.
16· · · ·Q.· · How do you know that they
17· ·provide consulting services?
18· · · ·A.· · I only know I get an invoice and
19· ·it's for consulting services.· I don't
20· ·know --
21· · · ·Q.· · So, you have seen the David
22· ·Harrison LLC invoices for consulting?
23· · · ·A.· · Yes.
24· · · ·Q.· · And are each of those invoices
25· ·for $9,700?
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Page 149·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I don't really recall each
·3· ·invoice amount.
·4· · · ·Q.· · So, you simply pay these
·5· ·invoices without knowing what the services
·6· ·provided by David Harrison LLC are?
·7· · · ·A.· · We get a lot of invoices every
·8· ·day.· They go through our payables
·9· ·department.· I don't see every single
10· ·invoice.· So, items get paid.· I don't see
11· ·everything that gets paid.
12· · · ·Q.· · But you see these invoices.
13· ·Correct?
14· · · ·A.· · I saw -- I can't tell you I have
15· ·seen every one.
16· · · ·Q.· · But you earlier testified that
17· ·you had in fact seen David Harrison
18· ·invoices.· Correct?
19· · · ·A.· · Correct.
20· · · ·Q.· · And who directed you to pay
21· ·those invoices?
22· · · ·A.· · Those invoices are approved by
23· ·Ross and they get paid and we account for
24· ·them based on what the invoice says.
25· · · ·Q.· · And so you have never inquired
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Page 150·1· · · · · · · · · ·R. JOLSON
·2· ·into why this entity is providing
·3· ·consulting services?
·4· · · ·A.· · No.
·5· · · ·Q.· · Are you aware that Mr. Auerbach
·6· ·claimed to CBIZ that in fact David
·7· ·Harrison leased premises to the Debtors?
·8· · · · · · ·MR. TEELE:· Objection to the
·9· · · ·form.
10· · · ·A.· · No.
11· · · · · · ·MR. AULET:· I am going to put in
12· · · ·front of you what I have marked
13· · · ·Exhibit 15, which is a file of David
14· · · ·Harrison invoices.
15· · · · · · ·(So marked for identification as
16· · · ·Exhibit 15A.)
17· · · ·Q.· · The first -- this is the file as
18· ·it was produced to us by the Debtors.
19· · · · · · ·MR. TEELE:· Sorry, Mr. Aulet.
20· · · ·Did this come -- is this an excerpt
21· · · ·from the CBIZ report or did this come
22· · · ·from another page in the Debtors'
23· · · ·production.
24· · · · · · ·MR. AULET:· This was a separate
25· · · ·PDF from the Debtors' production.· We
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Page 151·1· · · · · · · · · ·R. JOLSON
·2· · · ·have not modified it aside from my now
·3· · · ·putting this stamp on it.
·4· · · · · · ·MR. TEELE:· If you could, after
·5· · · ·the deposition, indicate where in the
·6· · · ·production you got it from?
·7· · · · · · ·MR. AULET:· It is in the
·8· · · ·June 3rd, either the June 3rd or
·9· · · ·June 8th production and it was
10· · · ·produced as a PDF called simply "David
11· · · ·Harrison invoices.PDF."
12· · · · · · ·MR. TEELE:· Thank you.
13· · · ·Q.· · Mr. Jolson, the first page
14· ·appears to be a list of invoices paid for
15· ·$9,700.· Is that correct?
16· · · ·A.· · That is what it says.
17· · · ·Q.· · And it appears that these
18· ·invoices were issued as recently as
19· ·December 2019?
20· · · ·A.· · Yes.
21· · · ·Q.· · We'll go to page 2, an invoice
22· ·from August 2017.· There is a lot of
23· ·handwriting on this invoice.· First there
24· ·is a handwritten number at the top that
25· ·says "17."· Then to be quite honest, I am
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Page 152·1· · · · · · · · · ·R. JOLSON
·2· ·not sure what the next number is.· Do you
·3· ·know what that number refers to?
·4· · · ·A.· · No.
·5· · · ·Q.· · There is an address, 3 Old Farm,
·6· ·Old Westbury, New York 11568.· Do you know
·7· ·what address that is?
·8· · · ·A.· · No.
·9· · · ·Q.· · Do you know who owns the
10· ·property located there?
11· · · ·A.· · I am not familiar with that
12· ·address.
13· · · ·Q.· · Does the Northwest Company ever
14· ·do business at that address, hold events
15· ·at that address or do anything at that
16· ·address that you are aware of?
17· · · ·A.· · I am not aware of that, no.
18· · · ·Q.· · In the middle bottom there is
19· ·what I have just highlighted.· Do you have
20· ·any idea what this marking is?
21· · · ·A.· · Yes.· That is my initial. I
22· ·can't read the document.
23· · · ·Q.· · So you saw this invoice and
24· ·initialed it?
25· · · ·A.· · Yes.
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Page 153·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Then this code 600.84 -- and
·3· ·then I can't make out the rest, would that
·4· ·be a general ledger code?
·5· · · ·A.· · It would be.
·6· · · ·Q.· · I am going to go to the next
·7· ·page.· Would those be your initials on the
·8· ·bottom right-hand corner again?
·9· · · ·A.· · Yes.
10· · · ·Q.· · There is a different set of
11· ·numbers at the top right.· Do you have any
12· ·idea what numbers those are?
13· · · ·A.· · No.
14· · · ·Q.· · I am going to skip ahead to page
15· ·30.· This is an invoice dated December 1,
16· ·2019.· Whose handwriting is that at the
17· ·bottom middle?
18· · · ·A.· · I don't want to guess.· Which
19· ·one?· Can you put that yellow thing on it?
20· · · ·Q.· · There you are.
21· · · ·A.· · I know that initial.
22· · · ·Q.· · What initials are those?
23· · · ·A.· · That's Christina Dovico.
24· · · ·Q.· · Who is Christina Dovico?
25· · · ·A.· · I apologize.· Is there a way for
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Page 154·1· · · · · · · · · ·R. JOLSON
·2· ·you to make that bigger?· It may be
·3· ·somebody else.
·4· · · ·Q.· · I believe that you can zoom in
·5· ·on this, and my zooming in doesn't help.
·6· ·If it does, I have just zoomed in.· We
·7· ·have two Christina's.
·8· · · · · · ·Okay.· I am sorry.· That is
·9· ·Christy McClure.
10· · · · · · ·Who is Christy McClure?
11· · · ·A.· · She is manager of events.
12· · · ·Q.· · Manager of events?
13· · · ·A.· · Events.· That is her title.
14· · · ·Q.· · Why would the manager of events
15· ·be approving an invoice for consulting?
16· · · ·A.· · I don't know.
17· · · ·Q.· · So when, about -- if we go back
18· ·to page 20, it looks like she is now still
19· ·signing these invoices.· Again, do you
20· ·have any idea why the manager of events
21· ·would be signing these invoices?
22· · · ·A.· · No.
23· · · ·Q.· · And so if we go to the
24· ·April 2018 invoice, it seems you were
25· ·still signing these invoices.· Is that
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Page 155·1· · · · · · · · · ·R. JOLSON
·2· ·correct?
·3· · · ·A.· · That is my initial.
·4· · · ·Q.· · Why would you have stopped
·5· ·signing these invoices?
·6· · · ·A.· · There was a point in time we
·7· ·stopped paying it.
·8· · · ·Q.· · When did you stop paying it?
·9· · · ·A.· · I don't recall the exact date,
10· ·but if you look at the ledger you could
11· ·probably tell.
12· · · ·Q.· · Approximately when do you
13· ·believe that you stopped paying these
14· ·invoices?
15· · · · · · ·MR. DUFFY:· Objection.
16· · · ·Speculative.
17· · · ·A.· · I don't recall when we stopped.
18· ·Months ago.
19· · · ·Q.· · Would it be -- would December of
20· ·2019 be consistent with your recollection?
21· · · · · · ·MR. DUFFY:· Objection.· Asked
22· · · ·and answered.
23· · · ·A.· · I don't recall when we stopped.
24· · · · · · ·MR. TEELE:· Ken, there is a note
25· · · ·from the videographer or court
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Page 156·1· · · · · · · · · ·R. JOLSON
·2· · · ·reporter?
·3· · · · · · ·MR. AULET:· I did not see that
·4· · · ·note.
·5· · · · · · ·MR. TEELE:· Apparently we have
·6· · · ·to switch the media.
·7· · · · · · ·MR. AULET:· Let's go off the
·8· · · ·record for five minutes.
·9· · · · · · ·THE VIDEOGRAPHER:· Thank you,
10· · · ·gentlemen.· The time is now 3:27 and
11· · · ·we are off record.· This ends media
12· · · ·number 2.
13· · · · · · ·(Recess.)
14· · · · · · ·THE VIDEOGRAPHER:· The time is
15· · · ·now 3:36.· This is the start of media
16· · · ·number 3 and we are back on the
17· · · ·record.
18· ·BY MR. AULET:
19· · · ·Q.· · I had one question I neglected
20· ·to ask when we were discussing the
21· ·American Express cards.· Why did Allen Guo
22· ·of Ashford have a Northwest American
23· ·Express card?
24· · · ·A.· · I don't know.
25· · · ·Q.· · Who would I ask to find out?
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Page 157·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Ross.
·3· · · · · · ·MR. AULET:· You should be able
·4· · · ·to see now what I have marked as
·5· · · ·Exhibit 16.
·6· · · · · · ·(So marked for identification as
·7· · · ·Exhibit 16.)
·8· · · ·Q.· · This is an email from Ross
·9· ·Auerbach to Jay Silver and Michael
10· ·Goldsmith.· First, do you know who Jay
11· ·Silver and Michael Goldsmith are?
12· · · ·A.· · Yes.
13· · · ·Q.· · Who are they?
14· · · ·A.· · Jay Silver is a partner at CBIZ
15· ·and Michael Goldsmith is a lawyer at
16· ·Sills.
17· · · ·Q.· · Now, at the bottom of the first
18· ·page, you see a request that says, "Please
19· ·describe in detail the business of each
20· ·entity below, how they are related to
21· ·Northwest, what services they provide and
22· ·an explanation as to the purpose of the
23· ·amounts disbursed to them during 2018."
24· ·Then in blue text which, per Ross's email
25· ·above, is his response, it says, "All
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Page 158·1· · · · · · · · · ·R. JOLSON
·2· ·entities below involve real estate and we
·3· ·can resend leases if needed."
·4· · · · · · ·Then if you go to page 2, you
·5· ·see David Harrison LLC and the notation
·6· ·"Old Farm, NY."· Do you have any
·7· ·understanding of why Mr. Auerbach would
·8· ·represent that David Harrison LLC leases
·9· ·property to Northwest?
10· · · ·A.· · No.
11· · · ·Q.· · Does Northwest have any property
12· ·in Old Farm, New York?
13· · · · · · ·MR. TEELE:· Objection.· It's
14· · · ·asked and answered.· You can answer
15· · · ·again if you know.
16· · · ·A.· · Not that I know, no.
17· · · ·Q.· · Were you aware that David
18· ·Harrison LLC was an entity owned and
19· ·controlled by Ross?
20· · · · · · ·MR. TEELE:· Objection.· It
21· · · ·assumes facts not in evidence.
22· · · ·A.· · I don't know who the owners are
23· ·of David Harrison.
24· · · ·Q.· · We earlier discussed a schedule
25· ·of payments that was with the Bankruptcy
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Page 159·1· · · · · · · · · ·R. JOLSON
·2· ·Court that included your $35,000 bonus.
·3· ·Do I recall correctly that you were not
·4· ·involved in preparing that?
·5· · · ·A.· · What does that mean?
·6· · · ·Q.· · Were you involved --
·7· · · · · · ·MR. TEELE:· Objection.· Sorry.
·8· · · ·I am going to object to the extent you
·9· · · ·are characterizing his prior
10· · · ·testimony.
11· · · ·Q.· · If you had been asked to
12· ·identify payments to or for the benefit of
13· ·an insider in the past year, would you
14· ·have identified payments to David Harrison
15· ·LLC?
16· · · · · · ·MR. DUFFY:· Objection.
17· · · ·Speculative.· Are there any payments
18· · · ·that you know where he did do that or
19· · · ·was asked to do that?
20· · · · · · ·MR. AULET:· I am going to stick
21· · · ·with my question.
22· · · · · · ·MR. DUFFY:· And I will stick
23· · · ·with my objection.· If you can
24· · · ·understand the question and have an
25· · · ·answer, then say I don't understand
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Page 160·1· · · · · · · · · ·R. JOLSON
·2· · · ·the question or whatever the answer
·3· · · ·is.
·4· · · ·A.· · I don't understand the question.
·5· · · ·Q.· · What has your involvement been
·6· ·in preparing financial statements of
·7· ·Northwest to be filed with the Bankruptcy
·8· ·Court?
·9· · · ·A.· · I don't prepare the financial
10· ·statement.
11· · · ·Q.· · Have you been involved in
12· ·preparing them?
13· · · ·A.· · I am not involved in preparing
14· ·financial statements.· It is not the
15· ·role --
16· · · ·Q.· · Have you been involved in
17· ·collecting the data for those statements?
18· · · ·A.· · No.
19· · · ·Q.· · Who has been?
20· · · ·A.· · A consultant here from Clear
21· ·Thinking, and our controller.
22· · · ·Q.· · Who is the controller again?
23· · · ·A.· · Ted Georgis.
24· · · ·Q.· · And Ted Georgis received a
25· ·$10,000 retention bonus.· Is that correct?
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Page 161·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Yes.
·3· · · ·Q.· · When did you transfer that
·4· ·retention bonus to him?
·5· · · ·A.· · I wrote a personal check the
·6· ·same day I received the money.
·7· · · ·Q.· · Has that check been deposited?
·8· · · ·A.· · Yes.
·9· · · ·Q.· · When was it deposited?
10· · · · · · ·MR. DUFFY:· Objection.
11· · · ·A.· · I don't know when it was -- I
12· ·don't recall.
13· · · ·Q.· · Why was that payment first made
14· ·to you and you wrote him a check rather
15· ·than transferring the money to him
16· ·directly?
17· · · ·A.· · He wasn't here on that day.
18· · · ·Q.· · Why did he need to be there on
19· ·that day to receive the payment?
20· · · ·A.· · Because I didn't know how to get
21· ·him money.· I just wrote him a check.
22· · · ·Q.· · So you characterized it as a
23· ·retention bonus.· Are there any written
24· ·terms for the bonus?
25· · · · · · ·MR. TEELE:· Objection to the
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Page 162·1· · · · · · · · · ·R. JOLSON
·2· · · ·form.
·3· · · ·A.· · No.
·4· · · ·Q.· · If he quit tomorrow, is there
·5· ·any document that says he has to return
·6· ·any portion of that $10,000?
·7· · · ·A.· · No.
·8· · · ·Q.· · If you quit tomorrow, is there
·9· ·any document that says that you have to
10· ·return any portion of the $25,000?
11· · · ·A.· · No.
12· · · ·Q.· · Was there a requirement that you
13· ·stay for any length of time to receive
14· ·that bonus?
15· · · ·A.· · No.
16· · · ·Q.· · Who authorized that bonus?
17· · · ·A.· · Ross.
18· · · ·Q.· · And so this controller is now
19· ·the one in charge of collecting the data
20· ·for the filings with the Bankruptcy Court.
21· ·Is that correct?
22· · · ·A.· · Along with Clear Thinking.
23· · · ·Q.· · Is the controller aware that
24· ·Ross personally authorized this bonus?
25· · · ·A.· · Yes.
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Page 163·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Would anyone have made this
·3· ·controller aware of the circumstances of
·4· ·the payments to David Harrison LLC?
·5· · · ·A.· · I don't know.
·6· · · ·Q.· · Are you aware of any documents
·7· ·setting forth the agreement between the
·8· ·Debtors and David Harrison LLC?
·9· · · ·A.· · I am sorry.· Can you repeat
10· ·that, please?
11· · · ·Q.· · Are you aware of any document
12· ·setting forth any agreements between the
13· ·Debtors and David Harrison LLC?
14· · · ·A.· · No.
15· · · ·Q.· · Is there anyone besides Ross
16· ·Auerbach that I could ask to explain to me
17· ·what the consulting services David
18· ·Harrison LLC provides are?
19· · · · · · ·MR. TEELE:· Objection to the
20· · · ·form.
21· · · ·A.· · Not that I am aware of.
22· · · ·Q.· · Has Ross Auerbach ever made any
23· ·payments on his loan from Northwest?
24· · · · · · ·MR. TEELE:· Objection to the
25· · · ·form.
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Page 164·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Yes.
·3· · · ·Q.· · When did -- are you aware of the
·4· ·circumstances of any of those payments?
·5· · · ·A.· · On some.
·6· · · ·Q.· · Are you aware that the general
·7· ·ledgers reflect that Ross Auerbach made a
·8· ·payment of half a million dollars on
·9· ·September 20, 2018?
10· · · ·A.· · I don't recall right now.
11· · · ·Q.· · Would it surprise you to learn
12· ·that there is no deposit from Ross
13· ·Auerbach on that date but there is a
14· ·deposit of half a million dollars on that
15· ·date from David Harrison LLC?
16· · · · · · ·MR. TEELE:· Objection to the
17· · · ·form.
18· · · ·A.· · I am not sure I -- if that is a
19· ·question, I don't understand it.
20· · · ·Q.· · Would it surprise you to learn
21· ·that David Harrison LLC paid half a
22· ·million dollars to Northwest that was
23· ·booked as a repayment of the Ross Auerbach
24· ·loan?
25· · · · · · ·MR. TEELE:· Objection.· Assumes
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Page 165·1· · · · · · · · · ·R. JOLSON
·2· · · ·facts not in evidence and is vague. I
·3· · · ·object to the form as well.
·4· · · ·A.· · I don't even know how to answer
·5· ·that question.
·6· · · ·Q.· · Are payments from Northwest
·7· ·Textile Holdings LLC ever booked as
·8· ·payments by Ross Auerbach?
·9· · · ·A.· · I am not aware of how they
10· ·are -- how they're booked.
11· · · ·Q.· · If a payment came in from
12· ·Northwest Textile Holding LLC, would it be
13· ·appropriate to book that as a payment by
14· ·Ross Auerbach against his loan?
15· · · · · · ·MR. DUFFY:· Objection.
16· · · ·Speculative and already asked and
17· · · ·answered.
18· · · ·A.· · I don't even understand the
19· ·question.
20· · · ·Q.· · Would it be appropriate to book
21· ·a payment made to the Debtors by Northwest
22· ·Textile Holdings LLC as a payment actually
23· ·made by Ross Auerbach against his loan
24· ·account?
25· · · · · · ·MR. DUFFY:· Objection.
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Page 166·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. TEELE:· Objection to the
·3· · · ·hypothetical and to the form.
·4· · · ·A.· · I am trying to understand the
·5· ·question.
·6· · · · · · ·MR. TEELE:· If you don't
·7· · · ·understand, you can ask him to
·8· · · ·clarify.
·9· · · ·A.· · Can you clarify?
10· · · ·Q.· · What part of the question do you
11· ·need clarification on?
12· · · · · · ·MR. TEELE:· Well, why don't you
13· · · ·give a specific example instead of
14· · · ·asking a hypothetical and let him
15· · · ·comment on a specific example that you
16· · · ·give him?
17· · · · · · ·MR. AULET:· Well, I would like
18· · · ·an answer to my question first.
19· · · · · · ·MR. DUFFY:· I think there was an
20· · · ·answer.· He said he doesn't understand
21· · · ·the question.
22· · · ·Q.· · Okay.· So, the payment on the
23· ·eve of bankruptcy of $100,000 to Ross
24· ·Auerbach, you stated that was in payment
25· ·of $100,000 that Ross Auerbach paid the
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Page 167·1· · · · · · · · · ·R. JOLSON
·2· ·Debtors.· Is that correct?
·3· · · · · · ·MR. TEELE:· Objection to the
·4· · · ·characterization of his prior
·5· · · ·testimony.· You can answer, though.
·6· · · ·A.· · Yes.
·7· · · ·Q.· · And if I look at the bank
·8· ·account statements for March of 2020, I
·9· ·see a payment from Northwest Textile
10· ·Holding, not Ross Auerbach.· Should the
11· ·$100,000 be returned to Ross Auerbach
12· ·rather than Northwest Textile Holdings?
13· · · ·A.· · To piece it together, can I see
14· ·both sides so I can answer your question?
15· ·I don't know -- when money comes in, I
16· ·don't see where the money is coming from.
17· · · ·Q.· · While that exhibit is loading
18· ·up, who would be responsible for verifying
19· ·if Ross said he sent $100,000 to Northwest
20· ·and Northwest actually received that
21· ·$100,000?
22· · · ·A.· · One of our staff accountants
23· ·monitors our bank account.
24· · · ·Q.· · And should they have noted if
25· ·the money actually came from a different
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Page 168·1· · · · · · · · · ·R. JOLSON
·2· ·entity?
·3· · · ·A.· · They would know.
·4· · · ·Q.· · So, I apologize.· This is taking
·5· ·long enough to load that perhaps we will
·6· ·come back to it later.
·7· · · · · · ·MR. AULET:· We will mark as
·8· · · ·Exhibit 17.
·9· · · · · · ·(So marked for identification as
10· · · ·Exhibit 17.)
11· · · ·Q.· · This is a spreadsheet we created
12· ·from a number of entries at the end of
13· ·2018 and beginning of 2019.· We previously
14· ·discussed the movement of funds between
15· ·foreign travel, officer's loan and
16· ·suspense, but there is also what I would
17· ·characterize as wash transactions, where
18· ·transactions put on on December 31st and
19· ·taken off on January 1st for exchange rate
20· ·difference and accounts payable in three
21· ·different instances.
22· · · · · · ·What would be the purpose of
23· ·these transactions?
24· · · ·A.· · These are transactions that
25· ·either production or accounting do to
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Page 169·1· · · · · · · · · ·R. JOLSON
·2· ·reflect exchange rates with the factory.
·3· · · ·Q.· · Why do production or accounting
·4· ·do those transactions?
·5· · · ·A.· · Because the foreign currencies
·6· ·differ during the course of the year.· So
·7· ·at the end of the year, we true-up.
·8· · · ·Q.· · You true-up the accounts payable
·9· ·based on fluctuations in the exchange rate
10· ·over that year?· Is that correct?
11· · · ·A.· · Yes.
12· · · ·Q.· · So then why are they immediately
13· ·reversed in January?
14· · · ·A.· · Because they're an accrual,
15· ·as -- what a normal practice be, because
16· ·our books are closed, so we place an
17· ·accrual, we reverse the accrual, do an
18· ·actual spreadsheet and then book it.
19· · · ·Q.· · And when would you do the actual
20· ·spreadsheet and book the actual exchange
21· ·rate differences?
22· · · ·A.· · Well, I can just tell you that
23· ·for 2019 we just did it now.
24· · · ·Q.· · Who would -- these are very
25· ·specific numbers for exchange rate
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Page 170·1· · · · · · · · · ·R. JOLSON
·2· ·differences.· Who came up with those
·3· ·numbers?
·4· · · · · · ·MR. TEELE:· Objection to the
·5· · · ·form.
·6· · · ·A.· · There was a -- it was
·7· ·established by our old chief operating
·8· ·officer.· We followed that form after he
·9· ·left.
10· · · ·Q.· · So there was a form established
11· ·by the old chief operating officer.· What
12· ·do you mean by "form"?
13· · · ·A.· · A methodology.
14· · · ·Q.· · What was that methodology?
15· · · ·A.· · I don't know.· Ask him.
16· · · ·Q.· · Who was this chief operating
17· ·officer?
18· · · ·A.· · It was Mark Friedman.
19· · · ·Q.· · When did Mark Friedman leave
20· ·Northwest?
21· · · ·A.· · A year and a half ago, about.
22· · · · · · ·MR. AULET:· Okay.· I am going to
23· · · ·show you an email that I have marked
24· · · ·Exhibit 18.
25· · · · · · ·(So marked for identification as
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Page 171·1· · · · · · · · · ·R. JOLSON
·2· · · ·Exhibit 18.)
·3· · · ·Q.· · It is an email from Ron Andreola
·4· ·to Allen Guo.· This reflects -- well, I
·5· ·will let you read it.
·6· · · · · · ·Have you seen this email before?
·7· · · ·A.· · I don't recall.
·8· · · · · · ·MR. TEELE:· I will note for the
·9· · · ·record that Mr. Jolson is not copied,
10· · · ·doesn't appear to be copied on this
11· · · ·email.
12· · · ·A.· · I don't know what it is about.
13· · · ·Q.· · Do you see in the middle of the
14· ·page where Mr. Andreola wrote, exclamation
15· ·point, "Group is not real."· I presume
16· ·that he meant first group is not real and
17· ·second group is real.
18· · · · · · ·Do you know what he meant by
19· ·that?
20· · · ·A.· · I have no idea.
21· · · ·Q.· · Are these so called charge-backs
22· ·that are being applied to Ashford
23· ·receivables?
24· · · ·A.· · Sorry?· What was that?
25· · · ·Q.· · Are these charge-backs that are
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Page 172·1· · · · · · · · · ·R. JOLSON
·2· ·being applied to Ashford receivables?
·3· · · ·A.· · There is a debit memo.
·4· · · ·Q.· · Well, what is a debit memo?
·5· · · ·A.· · It explains a debit in an
·6· ·account.
·7· · · ·Q.· · Why would you issue a debit memo
·8· ·or why would you debit an account?
·9· · · ·A.· · You debit an account for various
10· ·reasons.· You debit an account for bad
11· ·quality, for a return, for an incorrect
12· ·invoice, an invoice we never received,
13· ·goods we never received.· Could be a lot
14· ·of reasons.
15· · · ·Q.· · And if a debit memo is not real,
16· ·what effect would that have if it was
17· ·entered anyway?
18· · · · · · ·MR. DUFFY:· Objection.
19· · · · · · ·MR. TEELE:· Objection to form.
20· · · · · · ·MR. DUFFY:· Objection to the
21· · · ·hypothetical.
22· · · ·A.· · I don't even know what that
23· ·means, real and not real.· I don't deal
24· ·with unreal things.
25· · · ·Q.· · Does Mr. Andreola deal with
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Page 173·1· · · · · · · · · ·R. JOLSON
·2· ·unreal things?
·3· · · ·A.· · I have no idea.
·4· · · ·Q.· · Do you ever get involved in
·5· ·directing what debits should or should not
·6· ·be applied?
·7· · · ·A.· · I don't write debit memos.
·8· · · ·Q.· · But do you --
·9· · · · · · ·(Reporter interruption.)
10· · · ·Q.· · Do you ever get involved in
11· ·debit memos?
12· · · ·A.· · I can't remember if I got
13· ·involved in -- the only time I would get
14· ·involved in distribution, if I knew
15· ·something was in error on a bill, I would
16· ·ask somebody to look at it.· But I don't
17· ·instruct anybody.
18· · · · · · ·MR. AULET:· I am going to show
19· · · ·you what I am marking as Exhibit 19.
20· · · · · · ·(So marked for identification as
21· · · ·Exhibit 19.)
22· · · ·Q.· · This is a series of emails that
23· ·involve Allen Guo from Ashford Textiles
24· ·and Ron Andreola.· At the top is an email
25· ·from Ron Andreola to you.· Mr. Andreola
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Page 174·1· · · · · · · · · ·R. JOLSON
·2· ·says, "Per your instructions, I have not
·3· ·reversed this debit."
·4· · · · · · ·Why would you have instructed
·5· ·Mr. Andreola not to reverse that debit?
·6· · · ·A.· · You'd have to tell me what the
·7· ·debit is.
·8· · · ·Q.· · Well, you can read the
·9· ·description at the bottom.· If you need to
10· ·go to the second page, let me know and I
11· ·will move the exhibit.
12· · · ·A.· · Can you go to the second page,
13· ·please?
14· · · · · · ·(Pause.)
15· · · · · · ·Okay.
16· · · ·Q.· · Who is Mark Friedman?
17· · · ·A.· · I mentioned him before.· He was,
18· ·at the time, chief operating officer.
19· · · ·Q.· · And would he have the authority
20· ·to reach agreement with Ashford on the
21· ·amount of any debit that should be
22· ·applied?
23· · · ·A.· · At times.
24· · · ·Q.· · What about in March of 2018?
25· · · ·A.· · I wouldn't know on this specific
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Page 175·1· · · · · · · · · ·R. JOLSON
·2· ·transaction.
·3· · · ·Q.· · Why would you have instructed
·4· ·Mr. Andreola not to reverse the debit even
·5· ·with this email showing that Mr. Friedman
·6· ·had proposed this specific debit
·7· ·reduction?
·8· · · ·A.· · I don't know.· I'd have to ask
·9· ·Ron.· I just don't know and don't
10· ·remember.
11· · · ·Q.· · And if you kept a debit on
12· ·Ashford's account that you had already
13· ·agreed to take off, would that be
14· ·effectively improving your balance sheet?
15· · · · · · ·MR. DUFFY:· Objection to the
16· · · ·form of the question.
17· · · ·A.· · If I didn't take it off.
18· · · ·Q.· · Sorry.· Your answer was
19· ·ambiguous.· It just says "if I didn't take
20· ·it off."· What was your answer to the
21· ·question?
22· · · ·A.· · Well, if we didn't remove it, it
23· ·would improve our balance sheet.
24· · · ·Q.· · And if you had applied non-real
25· ·charge-backs of a little under $2 million
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Page 176·1· · · · · · · · · ·R. JOLSON
·2· ·to Ashford's receivables, would that also
·3· ·improve your balance sheet?
·4· · · · · · ·MR. DUFFY:· Objection to the
·5· · · ·form of the question.
·6· · · ·A.· · Yes.
·7· · · ·Q.· · If you had seen the email
·8· ·characterizing about a little under
·9· ·$2 million of debit memos as,
10· ·quote/unquote, not real, would you have
11· ·taken action about it?
12· · · · · · ·MR. TEELE:· Objection.
13· · · · · · ·MR. DUFFY:· Objection.· Purely
14· · · ·hypothetical.· You may answer.
15· · · ·A.· · Yes.· I would have asked
16· ·questions.
17· · · ·Q.· · Okay.· Are you familiar with the
18· ·various $5 million transactions involving
19· ·Extreme Horse Limited that first happened
20· ·in May 2017?
21· · · ·A.· · I know of one transaction.
22· · · ·Q.· · What is that transaction you
23· ·know of?
24· · · ·A.· · We wired $5 million to Extreme
25· ·Horse for a deposit for goods that we were
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Page 177·1· · · · · · · · · ·R. JOLSON
·2· ·supposed to receive the following year.
·3· · · ·Q.· · Where would I find any record of
·4· ·an agreement when you would receive those
·5· ·goods?
·6· · · ·A.· · If we received the goods you'd
·7· ·see a receiving in the general ledger.
·8· · · ·Q.· · I was asking a slightly
·9· ·different question.· Where would I find
10· ·the agreement to provide that $5 million
11· ·of goods next year, which I assume meant
12· ·2018?
13· · · ·A.· · At the year end, Mazars
14· ·confirmed with Extreme Horse that they had
15· ·5 million on deposit, and the confirmation
16· ·was returned to Mazars and that is why it
17· ·was left on the balance sheet.
18· · · ·Q.· · Did anything in that
19· ·confirmation indicate that the goods would
20· ·be provided in 2018?
21· · · ·A.· · I don't remember the exact
22· ·wording of the confirmation.
23· · · ·Q.· · Are you aware of any demand the
24· ·Debtors made on Extreme Horse to provide
25· ·the $5 million of goods?
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Page 178·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · A demand?
·3· · · ·Q.· · A demand, a request, anything
·4· ·saying "Please provide us $5 million of
·5· ·goods"?
·6· · · ·A.· · I am not sure I understand.
·7· · · ·Q.· · Well, presumably Northwest
·8· ·wouldn't want $5 million of random goods
·9· ·to arrive at its headquarters at a random
10· ·time; it would have a specific type of
11· ·good that it wanted at a specific time.
12· ·Right?
13· · · ·A.· · Yes.· So, I believe we have
14· ·purchase orders outstanding for that.
15· · · ·Q.· · You believe that you issued
16· ·purchase orders to Extreme Horse Limited
17· ·for $5 million of goods?
18· · · ·A.· · I think so, if I remember right.
19· · · ·Q.· · And if we had requested those,
20· ·anything to do with that request for the
21· ·$5 million and you hadn't received any
22· ·such purchase orders, would that impact
23· ·your belief of if such purchase orders
24· ·existed?
25· · · ·A.· · No.· We are expecting the goods.
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Page 179·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · When were those purchase orders
·3· ·issued, to your knowledge?
·4· · · ·A.· · Years ago.· I don't remember the
·5· ·exact date.
·6· · · ·Q.· · At any point this year, did the
·7· ·Debtors demand goods from Extreme Horse?
·8· · · ·A.· · In 2020?· This year?
·9· · · ·Q.· · Yes.
10· · · ·A.· · I don't know.
11· · · ·Q.· · But you are not aware of any
12· ·such request?
13· · · ·A.· · Not this year.
14· · · ·Q.· · Are you aware that the Debtors
15· ·have claimed in a court filing that the
16· ·$5 million was a loan to Extreme Horse?
17· · · · · · ·MR. TEELE:· Objection to the
18· · · ·form.
19· · · ·A.· · I never heard it characterized
20· ·that way.
21· · · ·Q.· · If $5 million had been loaned to
22· ·Extreme Horse, would that have appeared on
23· ·the general ledgers?
24· · · ·A.· · If it was a loan?· It would show
25· ·as a loan.· It would show --
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Page 180·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · And if a -- sorry.
·3· · · · · · ·And if the $5 million had first
·4· ·been a loan and then at a later time been
·5· ·converted into prepayment for inventory,
·6· ·should I first see an entry characterizing
·7· ·a $5 million payment of a loan and then at
·8· ·a later date a new entry recharacterizing
·9· ·that as a payment for prepaid inventory?
10· · · · · · ·MR. TEELE:· Objection to the
11· · · ·hypothetical.· I don't think it is
12· · · ·appropriate to ask him to speculate on
13· · · ·such things.
14· · · · · · ·MR. AULET:· It is not a
15· · · ·hypothetical.· You have alleged that
16· · · ·in the Complaint against Extreme
17· · · ·Horse.· I would like to know what the
18· · · ·general ledger should have said if the
19· · · ·Debtors' allegations are correct.
20· · · · · · ·MR. TEELE:· And that is a
21· · · ·hypothetical.
22· · · ·A.· · What am I being asked?
23· · · ·Q.· · If the Debtors had loaned
24· ·$5 million to Extreme Horse and then at a
25· ·later date agreed that that $5 million
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Page 181·1· · · · · · · · · ·R. JOLSON
·2· ·would be converted, instead, into a
·3· ·prepayment for inventory, should I see two
·4· ·different transactions on the general
·5· ·ledger, first a recording of $5 million
·6· ·payment as a loan and then at a later date
·7· ·a transaction recharacterizing that
·8· ·$5 million payment to something akin to
·9· ·prepaid inventory?
10· · · · · · ·MR. TEELE:· Same objection but
11· · · ·he can answer.
12· · · ·A.· · If we, in accounting, knew it
13· ·was a loan, we would record it as a loan.
14· ·And if we got different instructions after
15· ·that, we would have paid an adjusting
16· ·journal entry.
17· · · · · · ·MR. AULET:· I believe we are on
18· · · ·Exhibit 19.· I am going to mark
19· · · ·something as Exhibit 20.
20· · · · · · ·(So marked for identification as
21· · · ·Exhibit 20.)
22· · · ·Q.· · I apologize for the quality of
23· ·this, but this is a screenshot of the
24· ·March 2017 ledgers, and this is a
25· ·screenshot as the file appears except for
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Page 182·1· · · · · · · · · ·R. JOLSON
·2· ·the fact that a certain box is
·3· ·highlighted.· What I mean by that is, when
·4· ·you open up the file "GL detail May 2017,"
·5· ·it opens immediately to this entry on
·6· ·Extreme Horse Limited, and that entry is
·7· ·in red.· I have never seen in any of the
·8· ·other general ledger entries we received
·9· ·any entries in read.
10· · · · · · ·Do you know who would have
11· ·modified the spreadsheet to highlight the
12· ·Extreme Horse transaction?
13· · · · · · ·MR. TEELE:· Are you representing
14· · · ·that there are no other general entry
15· · · ·ledgers in red in the millions of rows
16· · · ·that were produced?
17· · · · · · ·MR. AULET:· No, but I haven't
18· · · ·seen any other ones.
19· · · · · · ·MR. TEELE:· Then I object to the
20· · · ·form of the question.
21· · · · · · ·MR. AULET:· I am asking if
22· · · ·Mr. Jolson knows if somebody could
23· · · ·have modified this sheet before we
24· · · ·received it.
25· · · ·A.· · A.G. Edwards doesn't know
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Page 183·1· · · · · · · · · ·R. JOLSON
·2· ·colors.· It only prints in black.· How
·3· ·this could change to red, I couldn't begin
·4· ·to tell you.
·5· · · ·Q.· · So this 5 million to Extreme
·6· ·Horse Limited is characterized as prepaid
·7· ·inventory with a date of 5/8/2017.· Do you
·8· ·see that?
·9· · · ·A.· · I do.
10· · · ·Q.· · Does that indicate that this
11· ·payment was booked as a payment for
12· ·prepaid inventory?
13· · · ·A.· · Yes.
14· · · ·Q.· · Do you know what happened to
15· ·that $5 million after it was wired to
16· ·Extreme Horse?
17· · · ·A.· · No.· They still have it.
18· · · ·Q.· · It's your understanding that
19· ·Extreme Horse still has that $5 million?
20· · · ·A.· · Yes.· I wouldn't know what
21· ·they'd do with it.
22· · · ·Q.· · Are you aware that at Ross
23· ·Auerbach's direction it was wired, shortly
24· ·thereafter, to Northwest Textiles
25· ·Holdings?
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Page 184·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. DUFFY:· Objection.
·3· · · ·A.· · I am not familiar and I don't
·4· ·get involved with Northwest Textiles.
·5· · · · · · ·MR. TEELE:· Sorry.· Just for the
·6· · · ·reporter, that was Mr. Duffy who
·7· · · ·stated the last objection.
·8· · · ·Q.· · Were you involved at all with
·9· ·the preparation of the CBIZ report,
10· ·Mr. Jolson?
11· · · ·A.· · I was only involved in supplying
12· ·certain information.
13· · · ·Q.· · What information did you supply?
14· · · ·A.· · Whatever they asked for that was
15· ·available for me to give back.· I never
16· ·saw the -- any of the letters.· I was just
17· ·asked for certain information.
18· · · ·Q.· · Did you ever see a copy of the
19· ·CBIZ report?
20· · · ·A.· · No.
21· · · ·Q.· · And you still have not seen a
22· ·copy of it today?
23· · · ·A.· · I have not seen a copy of this
24· ·report.
25· · · · · · ·MR. AULET:· Okay.· Why don't we
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Page 185·1· · · · · · · · · ·R. JOLSON
·2· · · ·take a short break?
·3· · · · · · ·THE VIDEOGRAPHER:· The time is
·4· · · ·now 4:20.· We are now off the record.
·5· · · · · · ·(Recess.)
·6· · · · · · ·MR. AULET:· We are requesting a
·7· · · ·rough draft and as-quick-as-possible
·8· · · ·final.
·9· · · · · · ·MR. TEELE:· Ditto for Sills.
10· · · · · · ·MR. DUFFY:· Ditto for Duffy
11· · · ·Amedeo.
12· · · · · · ·MR. TEELE:· Ken, I don't know
13· · · ·how much longer you need.· Rob needs a
14· · · ·five-or-ten-minute break to take care
15· · · ·of a business matter.
16· · · · · · ·MR. AULET:· That is fine.
17· · · · · · ·(Recess.)
18· · · · · · ·THE VIDEOGRAPHER:· The time is
19· · · ·now 4:42.· We are back on record.
20· ·BY MR. AULET:
21· · · ·Q.· · Mr. Jolson, who or what is
22· ·Itochu, I-T-O-C-H-U?
23· · · ·A.· · A Japanese trading company.
24· · · ·Q.· · And was Itochu formerly a part
25· ·owner of Northwest?
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Page 186·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Yes.
·3· · · ·Q.· · When did they first acquire
·4· ·their interest in Northwest?
·5· · · ·A.· · I am not sure.· It predates when
·6· ·I started.
·7· · · ·Q.· · How did they cease to have an
·8· ·interest in Northwest?
·9· · · ·A.· · They were bought out.
10· · · ·Q.· · Bought out by whom?
11· · · ·A.· · Northwest Textiles Holding.
12· · · ·Q.· · Were they bought out around
13· ·April 2017?
14· · · ·A.· · I am not sure of the exact date.
15· · · ·Q.· · Sometime in 2017?
16· · · ·A.· · I am sure there is an agreement
17· ·that has the exact date.· I just don't
18· ·have it.
19· · · ·Q.· · Okay.· Were you part of the
20· ·negotiations to buy out Itochu shares in
21· ·the Debtors?
22· · · ·A.· · No.
23· · · ·Q.· · How much did Northwest Textiles
24· ·pay Itochu for its shares of the Debtors,
25· ·if you know?
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Page 187·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · I don't know exactly.
·3· · · ·Q.· · Do you have a ballpark?
·4· · · ·A.· · A ballpark.
·5· · · ·Q.· · And what is that ballpark
·6· ·estimate?
·7· · · ·A.· · I guess it would be about $6 and
·8· ·a half million.
·9· · · ·Q.· · And do you have any
10· ·understanding how that amount was agreed
11· ·to?
12· · · ·A.· · No.
13· · · ·Q.· · Do you know how much Itochu paid
14· ·for its shares of Northwest when it first
15· ·acquired its shares of Northwest?
16· · · ·A.· · No.
17· · · ·Q.· · Around May 2017, when the
18· ·Debtors made a $5 million payment to
19· ·Extreme Horse, could the Debtors have
20· ·declared a $5 million dividend and sent
21· ·the money directly to Northwest Textiles
22· ·Holding?
23· · · · · · ·MR. TEELE:· Objection to form
24· · · ·and calls for speculation.
25· · · ·A.· · Can you just repeat that
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Page 188·1· · · · · · · · · ·R. JOLSON
·2· ·question, please?
·3· · · ·Q.· · Around May 2017, when the
·4· ·Debtors made a $5 million payment to
·5· ·Extreme Horse, could the Debtors have,
·6· ·instead, declared a $5 million dividend
·7· ·and sent that money to Northwest Textiles?
·8· · · ·A.· · No.
·9· · · ·Q.· · Why not?
10· · · ·A.· · As far as I know, the dividend
11· ·that was agreed at the time between Itochu
12· ·and Northwest Textiles was 60 percent of
13· ·our pretax profits.· So a dividend of
14· ·$5 million would have meant -- do the
15· ·math.· It would have meant a substantial
16· ·income declaration.
17· · · ·Q.· · Do you know, in May 2017, if any
18· ·agreements with CIT would have prevented
19· ·the transfer of $5 million directly to
20· ·Northwest Textiles as a dividend?
21· · · ·A.· · I am not aware of any.
22· · · ·Q.· · Is there any reason that you can
23· ·think of why Ross Auerbach would have
24· ·transferred $5 million to Extreme Horse
25· ·with instructions to transfer it to
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Page 189·1· · · · · · · · · ·R. JOLSON
·2· ·Northwest Textiles?
·3· · · · · · ·MR. TEELE:· Objection to form.
·4· · · ·A.· · The instructions were to send
·5· ·$5 million to Extreme Horse for inventory,
·6· ·prepaid inventory.
·7· · · ·Q.· · But my question is, is there any
·8· ·reason that you can think of why Ross
·9· ·Auerbach would have transferred $5 million
10· ·to Extreme Horse with instructions to
11· ·transfer that 5 million to Northwest
12· ·Textiles?
13· · · · · · ·MR. DUFFY:· Objection to the
14· · · ·question.· It is facts not in
15· · · ·evidence, there is no foundation and
16· · · ·it is a hypothetical.
17· · · ·A.· · No idea.· I am not involved with
18· ·Northwest Textiles.
19· · · ·Q.· · If Itochu had previously sold
20· ·its shares to Northwest Textiles such that
21· ·Northwest Textiles was the only owner of
22· ·Northwest at the time in May 2017, is
23· ·there any reason you can think of that
24· ·Northwest would not have been permitted to
25· ·declare a $5 million dividend to Northwest
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Page 190·1· · · · · · · · · ·R. JOLSON
·2· ·Textiles?
·3· · · · · · ·MR. DUFFY:· Objection.
·4· · · ·Speculation, facts not in evidence,
·5· · · ·form of the question.
·6· · · · · · ·If you can answer, you can
·7· · · ·answer.· Do you understand the
·8· · · ·question?
·9· · · · · · ·THE WITNESS:· Not really.
10· · · ·A.· · We have an availability schedule
11· ·with CIT.· We could draw down to the
12· ·extent of our availability.
13· · · ·Q.· · What do you mean by "an
14· ·availability schedule with CIT"?
15· · · ·A.· · In asset-based lending, we can
16· ·borrow 85 percent of our receivables and
17· ·50 percent of our inventory and that is
18· ·what is meant by available funds.
19· · · · · · ·(Reporter interruption.)
20· · · · · · ·THE WITNESS:· 85 percent of our
21· · · ·accounts receivable and 50 percent of
22· · · ·our inventory.
23· · · ·Q.· · And would transferring
24· ·$5 million from Northwest to Northwest
25· ·Textiles as a dividend breach -- cause you
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Page 191·1· · · · · · · · · ·R. JOLSON
·2· ·to breach -- potentially cause you to
·3· ·breach either of those covenants?
·4· · · ·A.· · To my knowledge, we had no
·5· ·covenants.· But again, we couldn't declare
·6· ·a dividend for $5 million because we
·7· ·didn't earn enough money.· So, there would
·8· ·have to have been consent.
·9· · · ·Q.· · Consent of who?
10· · · ·A.· · The shareholders.
11· · · ·Q.· · And if the shareholders
12· ·consented, would there have been any other
13· ·reason you couldn't declare such a
14· ·dividend?
15· · · ·A.· · If the two shareholders
16· ·consented and there was a resolution for
17· ·it and we had the availability at CIT,
18· ·then we could have done it.
19· · · ·Q.· · So it's the availability at CIT
20· ·that I don't quite understand.· What would
21· ·impact if you had the availability at CIT
22· ·to declare such a dividend?
23· · · ·A.· · I don't understand that.· If we
24· ·had the availability means if C -- if we
25· ·had available funds we could draw down.
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Page 192·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Are you familiar with Powder
·3· ·Stuff?
·4· · · ·A.· · Yes.
·5· · · ·Q.· · What is Powder Stuff?
·6· · · ·A.· · It is a children's wear company.
·7· · · · · · ·MR. TEELE:· Just for the court
·8· · · ·reporter, it is Outerstuff, O-U-T-E-R,
·9· · · ·not Powder.
10· · · ·Q.· · Did the Debtors have some form
11· ·of an agreement with Outerstuff to sell
12· ·all or substantially all of their assets
13· ·to Outerstuff in this bankruptcy
14· ·proceeding?
15· · · ·A.· · I don't know.
16· · · ·Q.· · Were you involved in any way
17· ·with the negotiations with Outerstuff?
18· · · ·A.· · No.
19· · · · · · ·MR. AULET:· I believe we are on
20· · · ·Exhibit 21 now.
21· · · · · · ·(So marked for identification as
22· · · ·Exhibit 21.)
23· · · ·Q.· · Who is Peter Wu at Outerstuff?
24· · · ·A.· · I don't know his position but he
25· ·asked me questions.
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Page 193·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. AULET:· For the record,
·3· · · ·Exhibit 21 is an email first from
·4· · · ·Peter Wu to Robert Jolson with his
·5· · · ·cell phone followed by an email from
·6· · · ·Robert Jolson to Peter Wu.
·7· · · ·Q.· · You sent this initial email to
·8· ·Peter Wu saying you had a quick question.
·9· ·What did you want to discuss with Peter
10· ·Wu?
11· · · ·A.· · Well, it had to do with our --
12· ·the way we pay our sales reps.· So,
13· ·Outerstuff has the same type of situation
14· ·we do, so I was just curious about
15· ·something.
16· · · ·Q.· · What specifically were you
17· ·curious about?
18· · · ·A.· · I wanted to know if they pay
19· ·their sales reps when they get paid, or
20· ·when they invoice it.
21· · · ·Q.· · And was this --
22· · · ·A.· · Sorry?
23· · · ·Q.· · I had cut you off.· Did you have
24· ·anything further to add to your answer?
25· · · ·A.· · I had just wanted to know if
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Page 194·1· · · · · · · · · ·R. JOLSON
·2· ·they operate similar to the way we operate
·3· ·in terms of paying commissions.
·4· · · ·Q.· · But you were not involved at all
·5· ·with the negotiations with Outerstuff?
·6· · · ·A.· · No.
·7· · · ·Q.· · Were you generally aware of the
·8· ·status of negotiations?
·9· · · ·A.· · Periodically Ross would tell me
10· ·what's going on.
11· · · ·Q.· · Who was conducting those
12· ·negotiations on behalf of Northwest?
13· · · ·A.· · I am not sure of everybody who
14· ·was involved.
15· · · ·Q.· · Who are the people you know were
16· ·involved?
17· · · ·A.· · I know Ross was involved, I know
18· ·our attorneys were involved at that time.
19· · · ·Q.· · Was anyone else from Northwest
20· ·involved, to your knowledge, besides Ross
21· ·Auerbach?
22· · · ·A.· · Not that I know of.
23· · · ·Q.· · Is there anyone besides Ross
24· ·Auerbach who would be able to answer
25· ·questions -- strike that.
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Page 195·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·Are you aware that Northwest has
·3· ·higher than average travel and
·4· ·entertainment expenses as a percentage of
·5· ·its sales?
·6· · · · · · ·MR. TEELE:· Objection to the
·7· · · ·form and the characterization and also
·8· · · ·the representation of "higher than
·9· · · ·average."· Compared to what?
10· · · ·Q.· · Have any of your consultants
11· ·ever told you that your travel and
12· ·entertainment expenses are higher than
13· ·appropriate?
14· · · ·A.· · Yes.
15· · · ·Q.· · And who told you that?
16· · · ·A.· · Clear Thinking.
17· · · ·Q.· · And when did they tell you that?
18· · · ·A.· · In their initial report.
19· · · ·Q.· · And what was done in response to
20· ·Clear Thinking telling you that?
21· · · ·A.· · We started cutting our expenses
22· ·dramatically.
23· · · ·Q.· · What were the type of expenses
24· ·that got cut?
25· · · ·A.· · Well, first, that we had some
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Page 196·1· · · · · · · · · ·R. JOLSON
·2· ·coding issues.· In travel and
·3· ·entertainment, it is not all travel and
·4· ·entertainment.· We cut out, as you know,
·5· ·Northeast Airlines was cut.· We cut
·6· ·several trade shows.· We cut people's
·7· ·entertainment.
·8· · · ·Q.· · You mentioned you had some
·9· ·coding issues.· What coding issues did you
10· ·have?
11· · · ·A.· · Well, as we started looking at
12· ·things, certain things that were marketing
13· ·expenses were coded to travel and
14· ·entertainment.
15· · · ·Q.· · Was there any specific type of
16· ·expenses that were frequently
17· ·mischaracterized?
18· · · ·A.· · Well, the big one here is the --
19· ·what is called in our general ledger the
20· ·Super Bowl, where it is really the suite
21· ·for the Jets and Giants.· We are required
22· ·by the NFL to spend four -- I am not sure
23· ·if it is four or $500,000 for marketing in
24· ·must-spend, and that is in travel and
25· ·entertainment and should really be in
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Page 197·1· · · · · · · · · ·R. JOLSON
·2· ·marketing.· Things like that.
·3· · · ·Q.· · Just to make sure I understand
·4· ·that, does the NFL require you to spend
·5· ·four to $500,000 as part of your license?
·6· · · ·A.· · Yes.
·7· · · ·Q.· · And that includes things like
·8· ·Super Bowl suites and other spending on
·9· ·NFL products?
10· · · ·A.· · It has to be approved -- any
11· ·spend has to be approved by the NFL.· So,
12· ·they have approved the Jets and Giants
13· ·suite as a must-spend for the NFL.
14· · · ·Q.· · Are the expenses that the NFL
15· ·expects you to incur expenses that would
16· ·be for marketing your licensed products,
17· ·or is it just a general spend of four to
18· ·500,000 on the NFL in certain approved
19· ·ways?
20· · · ·A.· · I am not sure of the exact
21· ·wording in the license.· I just know that
22· ·the NFL has to approve where and how you
23· ·spend the must-spend money.
24· · · ·Q.· · Does Northwest own any season
25· ·tickets for any sports teams?
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Page 198·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Well, for the Jets and the
·3· ·Giants.· It comes with the suite.
·4· · · ·Q.· · What about any other sports
·5· ·teams?
·6· · · ·A.· · For a full season?· No.
·7· · · ·Q.· · Do you have Mets season tickets?
·8· · · ·A.· · We had a Mets suite.· That was
·9· ·for partial.· It wasn't season.· It was --
10· ·if I recall, 20 games.
11· · · ·Q.· · Okay.· Was the Mets suite part
12· ·of any license agreement?
13· · · ·A.· · No.
14· · · · · · ·(Reporter interruption.)
15· · · ·Q.· · Did Northwest hold marketing
16· ·activities in the Mets team?
17· · · ·A.· · I am not sure who went to all
18· ·the games.
19· · · ·Q.· · How would I find out who went to
20· ·the games?
21· · · ·A.· · Christy McClure would handle it.
22· ·She was the events manager I mentioned
23· ·before.
24· · · ·Q.· · How many of those games did you
25· ·attend?
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Page 199·1· · · · · · · · · ·R. JOLSON
·2· · · ·A.· · Five.
·3· · · ·Q.· · Who else was present when you
·4· ·attended?
·5· · · ·A.· · It could have been the NBA.
·6· ·Sometimes I took my son.· The NFL was
·7· ·there.· Mostly the NBA when I was there.
·8· · · ·Q.· · For clarity --
·9· · · ·A.· · NBA, National Basketball League.
10· ·They were then a few people.
11· · · ·Q.· · I assume these were people
12· ·associated with the license department?
13· · · ·A.· · Yes.
14· · · ·Q.· · Are you familiar with what is
15· ·called a PPP loan or the Paycheck
16· ·Protection Program loan?
17· · · ·A.· · Yes.
18· · · ·Q.· · And were you involved in
19· ·obtaining a Paycheck Protection Loan for
20· ·the Debtors?
21· · · ·A.· · Yes.
22· · · ·Q.· · And did you review the loan
23· ·application before it was filed?
24· · · ·A.· · I am sure I did.
25· · · · · · ·(So marked for identification as
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Page 200·1· · · · · · · · · ·R. JOLSON
·2· · · ·Exhibit 22.)
·3· · · ·Q.· · You should have in front of you
·4· ·Exhibit 22, which is a PDF that was
·5· ·produced by the Debtors titled "PPP Loan."
·6· ·It appears to be various documents related
·7· ·to the PPP loan.
·8· · · · · · ·Have you seen this document
·9· ·before?
10· · · ·A.· · Yes.
11· · · ·Q.· · Did the Debtors received these
12· ·funds on April 17th?
13· · · ·A.· · I don't know the exact date it
14· ·hit our bank account, but on that Monday
15· ·it was in our bank account.
16· · · ·Q.· · And what are these funds being
17· ·used for currently?
18· · · ·A.· · Payroll.
19· · · ·Q.· · Have they all been used for
20· ·payroll?
21· · · ·A.· · Payroll and payroll taxes.
22· · · ·Q.· · Was CIT the lender under this
23· ·PPP loan?
24· · · ·A.· · Yes.
25· · · ·Q.· · And was CIT aware of the intent
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Page 201·1· · · · · · · · · ·R. JOLSON
·2· ·to file bankruptcy in the near term?
·3· · · ·A.· · I don't know.
·4· · · ·Q.· · CIT is your DIP lender in this
·5· ·case, isn't it?
·6· · · ·A.· · Right, yes.
·7· · · ·Q.· · Now we turn to page 13, the
·8· ·borrower application form.· You will
·9· ·notice that under "Applicant Ownership" it
10· ·instructs you to list all owners of
11· ·20 percent or more of the applicant?
12· · · ·A.· · Right.
13· · · ·Q.· · Is this a complete list of all
14· ·20 percent or more owners of the equity of
15· ·the applicant?
16· · · ·A.· · I don't know.· I don't know --
17· · · ·Q.· · How much --
18· · · · · · ·Sorry.· I believe I accidentally
19· ·cut you off.
20· · · ·A.· · Because I don't know the exact
21· ·breakdown of the ownership of Northwest.
22· ·It is really Northwest Textiles that owns
23· ·Northwest.
24· · · ·Q.· · So first, it is not accurate
25· ·that Mr. Auerbach in his personal capacity
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Page 202·1· · · · · · · · · ·R. JOLSON
·2· ·owns 80 percent of the Northwest Company
·3· ·LLC.· Correct?
·4· · · ·A.· · Trying to refresh my memory. I
·5· ·did this with CIT.· So, the ownership
·6· ·was --
·7· · · ·Q.· · I will point out, just to not
·8· ·hide the ball, if you look at page 14,
·9· ·Ross Auerbach signed this and initialed
10· ·all the certifications, not you.
11· · · ·A.· · Right.
12· · · ·Q.· · So it is not correct that
13· ·Mr. Auerbach personally, in his individual
14· ·capacity, owns 80 percent of Northwest
15· ·Company LLC.· Correct?
16· · · · · · ·MR. TEELE:· Objection.· Already
17· · · ·asked and answered.
18· · · ·A.· · Yes.· It is Northwest Textiles.
19· · · ·Q.· · And are you aware that Extreme
20· ·Horse Limited also owns 20 percent of the
21· ·equity of Northwest Company LLC?
22· · · ·A.· · Yes.
23· · · ·Q.· · Why wasn't Extreme Horse
24· ·Limited?
25· · · ·A.· · I don't know.
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Page 203·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · Do you know of any reason why
·3· ·Mr. Auerbach would not have listed
·4· ·Northwest Textile Holdings rather than his
·5· ·personal name here?
·6· · · ·A.· · No.
·7· · · ·Q.· · Why did Mr. Auerbach complete
·8· ·and sign this form?
·9· · · · · · ·MR. TEELE:· Objection to the
10· · · ·form.
11· · · ·A.· · That's what CIT advised me.
12· · · ·Q.· · So I understand, why did
13· ·Mr. Auerbach, instead of you, fill out
14· ·this application form?
15· · · · · · ·MR. DUFFY:· For the record, that
16· · · ·was not Mr. Teele that answered the
17· · · ·question.· It was the witness.
18· · · · · · ·MR. TEELE:· I just stated an
19· · · ·objection to the form.
20· · · ·A.· · That is what I was advised by
21· ·CIT.
22· · · ·Q.· · CIT advised you to have
23· ·Mr. Auerbach fill this application out?
24· · · · · · ·MR. DUFFY:· Objection.· Asked
25· · · ·and answered.
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Page 204·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·Answer the question.
·3· · · ·A.· · Yes.· Yes.· CIT advised.
·4· · · ·Q.· · Was Extreme Horse --
·5· · · · · · ·MR. TEELE:· Ken?· Sorry.
·6· · · ·Mr. Jolson needs five minutes.· He has
·7· · · ·to get a wire done today and he just
·8· · · ·has to sit right here and log in and
·9· · · ·type in a code.· Can we just pause for
10· · · ·two minutes and let him do that?
11· · · · · · ·MR. AULET:· Sure.· That is fine.
12· · · · · · ·(Pause.)
13· · · · · · ·MR. AULET:· We should be off the
14· · · ·record.
15· · · · · · ·(Pause.)
16· · · · · · ·THE VIDEOGRAPHER:· The time is
17· · · ·now 5:14 and we are back on the
18· · · ·record.
19· ·BY MR. AULET:
20· · · ·Q.· · Mr. Jolson, you don't have any
21· ·equity in Northwest.· Is that correct?
22· · · ·A.· · That is correct.
23· · · ·Q.· · Is any component of your pay
24· ·directly tied to the profits of Northwest?
25· · · ·A.· · No.
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Page 205·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · And you receive a yearly bonus.
·3· ·Is that correct?
·4· · · ·A.· · Used to, yes.
·5· · · ·Q.· · And how is that bonus
·6· ·determined?
·7· · · ·A.· · We talk to Ross and we agree on
·8· ·a method and a number.
·9· · · ·Q.· · Do you have any investments in
10· ·any enterprises that are owned by Ross
11· ·Auerbach or that Ross Auerbach has any
12· ·involvement in?
13· · · ·A.· · No.
14· · · ·Q.· · Okay.· Are you familiar with
15· ·NYCA China Partners LLC?
16· · · ·A.· · Not really.
17· · · ·Q.· · Do you know of any reason why
18· ·Northwest would be engaging in
19· ·transactions with NYCA China Partners LLC?
20· · · · · · ·MR. TEELE:· Objection.· Which
21· · · ·Northwest entity are you referring to?
22· · · · · · ·MR. AULET:· The Northwest
23· · · ·Company, the debtor entity, not
24· · · ·Northwest Textiles.
25· · · · · · ·MR. TEELE:· Then just objection
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Page 206·1· · · · · · · · · ·R. JOLSON
·2· · · ·to form.
·3· · · ·A.· · I don't know much about
·4· ·whatever, China Partners.· No.
·5· · · ·Q.· · Has Northwest ever rented an
·6· ·office from NYCA China Partners in
·7· ·Florida?
·8· · · ·A.· · No idea.
·9· · · ·Q.· · Who would know that?
10· · · ·A.· · I guess Ross.
11· · · ·Q.· · Does the company engage in any
12· ·business transactions with Northwest
13· ·Textile Holdings?
14· · · ·A.· · I don't understand.· I don't
15· ·know what that means.
16· · · ·Q.· · Do you send money to Northwest
17· ·Textile Holdings for goods or services?
18· · · ·A.· · No.
19· · · ·Q.· · Does Northwest Textile Holdings
20· ·send you money for any goods or services?
21· · · ·A.· · No.
22· · · ·Q.· · Does Northwest Textile Holdings
23· ·provide any foods or services to Northwest
24· ·Company in exchange for other goods or
25· ·services?
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Page 207·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. DUFFY:· Objection to form.
·3· · · ·A.· · Not that I know of.
·4· · · · · · ·MR. AULET:· Let me take a
·5· · · ·five-minute break and we may be done
·6· · · ·on my end.
·7· · · · · · ·THE VIDEOGRAPHER:· It is 5:18
·8· · · ·and we are off record.
·9· · · · · · ·(Recess.)
10· · · · · · ·THE VIDEOGRAPHER:· The time is
11· · · ·now 5:24 and we are now back on
12· · · ·record.
13· · · · · · ·(So marked for identification as
14· · · ·Exhibit 23.)
15· · · · · · ·MR. AULET:· You should have in
16· · · ·front of you Exhibit 23, which is a
17· · · ·May 2017 bank statement.
18· · · ·Q.· · I am going to first direct your
19· ·attention to a deposit on May 26th of
20· ·$1 million from Northwest Textile Holdings
21· ·LLC.· That is on page 3.· Do you see that?
22· · · ·A.· · I do.
23· · · ·Q.· · Do you know what the reason for
24· ·that payment was?
25· · · ·A.· · Not off the top of my head, no.
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Page 208·1· · · · · · · · · ·R. JOLSON
·2· · · ·Q.· · And you see that that money
·3· ·comes from Northwest Textile Holdings LLC?
·4· · · ·A.· · Yes.
·5· · · ·Q.· · Then on page 5, at the bottom,
·6· ·on May 19th, about a week before, do you
·7· ·see this payment of $1 million to Ross?
·8· · · ·A.· · I see it.
·9· · · ·Q.· · Do you have any idea why
10· ·Northwest would be sending a million
11· ·dollars to Ross and being paid a million
12· ·dollars by Northwest Textiles?
13· · · ·A.· · I don't recall.· No, I don't
14· ·know.
15· · · ·Q.· · Would you have been involved in
16· ·approving these transactions?
17· · · ·A.· · I, at the time, would have known
18· ·about it.
19· · · ·Q.· · Would it make sense to you that
20· ·the million dollar payment from Northwest
21· ·Textiles was booked as a payment by Ross
22· ·Auerbach on the general ledgers?
23· · · · · · ·MR. DUFFY:· Objection.
24· · · · · · ·MR. TEELE:· Objection to form.
25· · · · · · ·MR. DUFFY:· Do you have copies
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Page 209·1· · · · · · · · · ·R. JOLSON
·2· · · ·of those transactions on the GL that
·3· · · ·you can show him.
·4· · · · · · ·MR. AULET:· I would like an
·5· · · ·answer to the question first.
·6· · · · · · ·MR. DUFFY:· Then I will keep my
·7· · · ·objection as it is.
·8· · · ·A.· · Can you ask the question again,
·9· ·please?
10· · · ·Q.· · Would it surprise you that the
11· ·payment of a million dollars by Northwest
12· ·Textiles was recorded as a payment by Ross
13· ·Auerbach of a million dollars on
14· ·Northwest's records?
15· · · · · · ·MR. DUFFY:· Objection to form.
16· · · ·A.· · The entries are done by the
17· ·accounting staff.· To them, it is one and
18· ·the same.
19· · · · · · ·MR. AULET:· We may have already
20· · · ·stamped this but I will mark it
21· · · ·Exhibit 24.
22· · · · · · ·(So marked for identification as
23· · · ·Exhibit 24.)
24· · · · · · ·MR. AULET:· This is a set of the
25· · · ·2017 general ledgers, a specific
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Page 210·1· · · · · · · · · ·R. JOLSON
·2· · · ·callout from the 2017 general ledgers.
·3· · · ·My deposition has just disappeared.
·4· · · ·Give me one second to try and reload
·5· · · ·this.
·6· · · · · · ·(Pause.)
·7· · · · · · ·MR. AULET:· I tried to log back
·8· · · ·in and now I am in my own deposition.
·9· · · · · · ·(Discussion held off the
10· · · ·record.)
11· · · · · · ·MR. AULET:· All right.· I'm
12· · · ·back.· The shorter version of this
13· · · ·exhibit has loaded so I will stamp
14· · · ·this Exhibit 25 rather than going back
15· · · ·to the previous exhibit.
16· · · · · · ·(So marked for identification as
17· · · ·Exhibit 25.)
18· · · · · · ·MR. AULET:· While I wait for the
19· · · ·exhibit to continue processing, I
20· · · ·believe you said the accounting staff
21· · · ·considers Ross Auerbach and Northwest
22· · · ·Textiles one and the same.
23· · · ·A.· · I said that, yes.
24· · · ·Q.· · Are there any other entities
25· ·that they know to treat as Ross Auerbach?
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Page 211·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. DUFFY:· Objection to form.
·3· · · · · · ·MR. TEELE:· Objection.
·4· · · ·A.· · No.
·5· · · ·Q.· · Now, I believe you should be
·6· ·able to see this.· Do you see on this
·7· ·excerpt from the May 2017 ledger that
·8· ·there is a debit of a million dollars to
·9· ·Ross Auerbach's loan and repayment of that
10· ·debit on -- the debit is on the 19th and
11· ·the payment is on the 25th?
12· · · ·A.· · Okay.
13· · · ·Q.· · And to your understanding, does
14· ·that reflect that Northwest Company
15· ·considered that $1 million payment by
16· ·Northwest Textiles to be a payment on Ross
17· ·Auerbach's personal loan?
18· · · ·A.· · I don't recall the specifics of
19· ·that particular transaction.
20· · · ·Q.· · Is that transaction recorded as
21· ·a payment of Ross Auerbach's personal loan
22· ·on this exhibit?
23· · · ·A.· · It is an in and an out of a
24· ·million dollars.· Money came in, money
25· ·went out.
20-10990-mew Doc 178-1 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 1 -Robert Jolson deposition transcript dated June 29 2020 Pg 212 of 215
Page 212·1· · · · · · · · · ·R. JOLSON
·2· · · · · · ·MR. AULET:· I have no further
·3· · · ·questions.
·4· · · · · · ·THE VIDEOGRAPHER:· The time is
·5· · · ·now 5:33 and we are now off the
·6· · · ·record.
·7· · · · · · ·[TIME NOTED:· 5:33 p.m.]
·8
·9
10· · · · · ·____________________________
11· · · · · · · · · ·ROBERT JOLSON
12
13
14
15· ·SUBSCRIBED AND SWORN TO
16· ·BEFORE ME THIS______DAY
17· ·OF_______________, 2020.
18
19· ·_______________________
20· · · ·NOTARY PUBLIC
21
22
23
24
25
20-10990-mew Doc 178-1 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 1 -Robert Jolson deposition transcript dated June 29 2020 Pg 213 of 215
Page 213·1
·2· · · · · ·C E R T I F I C A T I O N
·3
·4· · · I, DEBRA STEVENS, a Notary Public for
·5· ·and within the State of New York, do
·6· ·hereby certify:
·7· · · That the witness whose testimony as
·8· ·herein set forth, was duly sworn by me;
·9· ·and that the within transcript is a true
10· ·record of the testimony given by said
11· ·witness.
12· · · I further certify that I am not
13· ·related to any of the parties to this
14· ·action by blood or marriage, and that I am
15· ·in no way interested in the outcome of
16· ·this matter.
17· · · IN WITNESS WHEREOF, I have hereunto
18· ·set my hand this 30th day of June, 2020.
19
20
21· · · · · ·_______________________
22· · · · · ·DEBRA STEVENS, RPR-CRR
23
24· · · · · · · ·*· · ·*· · ·*
25
20-10990-mew Doc 178-1 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 1 -Robert Jolson deposition transcript dated June 29 2020 Pg 214 of 215
Page 214·1· · · · · · · · · · ERRATA SHEET
·2· Case Name:
·3· Deposition Date:
·4· Deponent:
·5· Pg.· No. Now Reads· · ·Should Read· Reason
·6· ___· ___ __________· · __________· ·____________________
·7· ___· ___ __________· · __________· ·____________________
·8· ___· ___ __________· · __________· ·____________________
·9· ___· ___ __________· · __________· ·____________________
10· ___· ___ __________· · __________· ·____________________
11· ___· ___ __________· · __________· ·____________________
12· ___· ___ __________· · __________· ·____________________
13· ___· ___ __________· · __________· ·____________________
14· ___· ___ __________· · __________· ·____________________
15· ___· ___ __________· · __________· ·____________________
16· ___· ___ __________· · __________· ·____________________
17· ___· ___ __________· · __________· ·____________________
18· ___· ___ __________· · __________· ·____________________
19· ___· ___ __________· · __________· ·____________________
20· · · · · · · · · · · · · · · · · · _____________________21· · · · · · · · · · · · · · · · · Signature of Deponent
22· SUBSCRIBED AND SWORN BEFORE ME
23· THIS ____ DAY OF __________, 2020.
24· ____________________
25· (Notary Public)· ·MY COMMISSION EXPIRES:__________
20-10990-mew Doc 178-1 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 1 -Robert Jolson deposition transcript dated June 29 2020 Pg 215 of 215
Exhibit 2
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 1 of 231
Page 1·1· · · · · ·UNITED STATES BANKRUPTCY COURT
·2· · · · · ·SOUTHERN DISTRICT OF NEW YORK
·3· · · · · · ·Case No. 20-10990 (MEW)
·4· ·--------------------------------------
·5· ·In Re
·6· ·NORTHWEST COMPANY LLC, et al.,
·7· · · · · · · ·Debtors.
·8· ·--------------------------------------
·9
10· · · · ·REMOTE VIDEOTAPED DEPOSITION OF
11· · · · · · · · · ROSS AUERBACH
12
13· · · · · · · ·Wednesday, July 1, 2020
14· · · · · · · · · · 10:30 a.m.
15
16
17
18
19
20
21
22
23· ·JOB NO. 181339
24· ·Reported by:
25· ·Debra Stevens, CRR/RPR
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 2 of 231
Page 2·1· ·REMOTE APPEARANCES:
·2· · ·On behalf of Movant and Extreme Horse·3· ·Limited:
·4· ·BROWN RUDNICK· · · · · · ·Times Square Tower·5· · · · · ·New York, New York 10036
·6· · · BY:· KENNETH AULET, ESQ.
·7· · · · · ·SIGMUND WISSNER-GROSS, ESQ.
·8
·9· ·On behalf of the Debtors:
10· ·SILLS CUMMIS & GROSS· · · · · · ·The Legal Center11· · · · · ·One Riverfront Plaza· · · · · · ·Newark, New Jersey 0710212· · · · BY:· S. JASON TEELE, ESQ.13
14· · ·On behalf of Northwest Textile Holdings15· ·LLC and the Witness:
16· ·DUFFY AMEDEO· · · · · · ·275 Seventh Avenue17· · · · · ·New York, New York 10001
18· · · BY:· TODD DUFFY, ESQ.
19
20· ·On behalf of the Witness:
21· ·KESTENBAUM & MARK· · · · · · ·40 Cuttermill Road22· · · · · ·Great Neck, New York 11021
23· · · BY:· RICHARD KESTENBAUM, ESQ.
24
25· · · · · · · · · · · ·(Continued)
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 3 of 231
Page 3·1· ·REMOTE APPEARANCES (Continued):
·2· ·On behalf of Creditors Committee:
·3· ·LOWENSTEIN SANDLER· · · · · · ·1251 Avenue of the Americas·4· · · · · · ·New York, New York 10020·5· · · · BY:· MICHAEL KAPLAN, ESQ.·6· · · · · · ·JESSICA TERRY, ESQ.·7
·8· · ·ALSO PRESENT:·9· · · · · · ·MANNY GARCIA, Videographer10
11· · · · · · · · · · · · * * *
12
13
14
15
16
17
18
19
20
21
22
23
24
25
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 4 of 231
Page 4·1· · · · · E X A M I N A T I O N S
·2· ·Witness· · · · · · · · · · · · · · · Page
·3· ·ROSS AUERBACH· · · ·By Mr. Aulet· · · · · · · · · · · · · 8·4· · · · · · · · E X H I B I T S·5· · ·Exhibit· · ·Description· · · · · · ·Page·6· · ·Exhibit 1· ·Notice of 30(b)(6) to· · · 19·7· · · · · · · ·The Northwest Company· · · · · · · · ·LLC·8· · ·Exhibit 2· ·Statement of Financial· · ·56·9· · · · · · · ·Affairs
10· ·Exhibit 3· ·David Harrison· · · · · · ·62· · · · · · · · ·invoices11· · ·Exhibit 4· ·David Harrison LLC· · · · ·7612· · · · · · · ·exhibit entries since· · · · · · · · ·March 201913· · ·Exhibit 5· ·JPM Bank statement· · · · ·9014· · · · · · · ·from 6/29/19 through· · · · · · · · ·7/31/1915· · ·Exhibit 6· ·American Express· · · · · 10116· · · · · · · ·Business Platinum Card· · · · · · · · ·statement17· · ·Exhibit 7· ·American Express· · · · · 11118· · · · · · · ·Business Centurian· · · · · · · · ·Card statement ending19· · · · · · · ·12/20/17
20· ·Exhibit 8· ·American Express· · · · · 114· · · · · · · · ·entries for 201821· · ·Exhibit 9· ·American Express· · · · · 11422· · · · · · · ·entries for 2018
23· ·Exhibit 10· Northeastern Aviation· · ·122· · · · · · · · ·invoices24· · · · · · · · · · · · (Continued)25
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 5 of 231
Page 5·1· · · · · · · E X H I B I T S
·2· · ·Exhibit· · ·Description· · · · · · ·Page·3· · ·Exhibit 11· Flight emails· · · · · · ·142·4· · ·Exhibit 12· Missing funds entries· · ·150·5· · · · · · · ·from general ledger
·6· ·Exhibit 13· Key EH email chain· · · · 167
·7· ·Exhibit 14· Extreme Horse Limited· · ·184· · · · · · · · ·entry, May 2017·8· · ·Exhibit 15· Extreme Horse· · · · · · ·190·9· · · · · · · ·Adversary Complaint
10· ·Exhibit 16· Chase bank account· · · · 202· · · · · · · · ·statement dated11· · · · · · · ·5/31/17
12· ·Exhibit 17· PPP loan documents· · · · 215
13· ·Exhibit 18· Auerbach support· · · · · 219· · · · · · · · ·letter14· · ·Exhibit 19· American Express· · · · · 22015· · · · · · · ·Centurian statements· · · · · · · · ·from July through16· · · · · · · ·December 2019
17· ·Exhibit 20· American Express· · · · · 225· · · · · · · · ·Business Platinum Card18· · · · · · · ·statement ending· · · · · · · · ·5/16/1919
20
21· · · INFORMATION/PRODUCTION REQUESTS
22· ·Description· · · · · · · · · · · · · Page
23· ·Separate page explaining the· · · · · 124· · ·purpose of private jet travel24
25
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 6 of 231
Page 6·1
·2· · · · ·THE VIDEOGRAPHER:· This is
·3· ·Manual Garcia, I'm a certified legal
·4· ·videographer in association with TSG
·5· ·Reporting, Inc.· Due to the severity
·6· ·of COVID-19 and following the practice
·7· ·of social distancing, I will not be in
·8· ·the same room with the witness but
·9· ·will report the videotape deposition
10· ·remotely.· The reporter, Debra
11· ·Stevens, who also will not be in the
12· ·same room and will swear in the
13· ·witness remotely.
14· · · · ·Do all parties stipulate to the
15· ·validity of the video-reporting and
16· ·remote swearing and that it will be
17· ·admissible in the courtroom as if it
18· ·had been taken following Rule 30 and
19· ·other rules of the Federal Rules of
20· ·Civil Procedure?
21· · · · ·MR. AULET:· On behalf of the
22· ·Movants, yes.
23· · · · ·MR. TEELE:· On behalf of the
24· ·Debtors, yes.
25· · · · ·MR. DUFFY:· On behalf of the
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 7 of 231
Page 7·1
·2· · Witness and Northwest Textiles LLC,
·3· · yes.
·4· · · · · MR. KESTENBAUM:· On behalf of
·5· · Mr. Auerbach, yes.
·6· · · · · MR. KAPLAN:· On behalf of the
·7· · Committee, yes.
·8· · · · · THE VIDEOGRAPHER:· This starts
·9· · media number 1 of the video-recorded
10· · deposition of Ross H. Auerbach in the
11· · matter of In Re Northwest Company LLC,
12· · et al., on July 1, 2020 at
13· · approximately 10:39 a.m.· My name is
14· · Manual Garcia, I'm the certified legal
15· · specialist for TSG Reporting Inc.
16· · Court reporter is Debra Stevens, in
17· · association with TSG Reporting.
18· · · · · Counsels are noted on the
19· · record.
20· · · · · Will the court reporter please
21· · swear in the witness.
22· · · · · Whereupon,
23· · · · · · · ROSS H. AUERBACH,
24· ·having been first duly sworn/affirmed,
25· ·was examined and testified as follows:
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 8 of 231
Page 8·1· · · · · · · · · R. AUERBACH
·2· ·EXAMINATION BY
·3· ·MR. AULET:
·4· · · ·Q.· · Good morning, Mr. Auerbach.
·5· ·Could you state your occupation for the
·6· ·record?
·7· · · ·A.· · I am the CEO of The Northwest
·8· ·Company.
·9· · · ·Q.· · Do you hold any other positions
10· ·with any other companies?
11· · · · · · ·(Reporter interruption.)
12· · · · · · ·MR. AULET:· I will strike the
13· · · ·last question.
14· · · ·Q.· · Mr. Auerbach, have you ever been
15· ·deposed before?
16· · · ·A.· · Yes.
17· · · ·Q.· · How many times have you been
18· ·deposed?
19· · · · · · ·THE VIDEOGRAPHER:· Excuse me. I
20· · · ·think we are getting a feedback from
21· · · ·the attorney.
22· · · · · · ·(Brief interruption.)
23· · · ·Q.· · So, I don't think we got an
24· ·answer on the record.· Mr. Auerbach, how
25· ·many times have you been deposed?
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Page 9·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · Twice.
·3· · · ·Q.· · What were those depositions --
·4· ·what case were those depositions in?
·5· · · ·A.· · One of them was a lawsuit
·6· ·concerning whether commission was due on a
·7· ·transaction that did not occur.· The other
·8· ·was testimony about a client who had bills
·9· ·due that did not pay.
10· · · ·Q.· · Who were the parties in the
11· ·lawsuit that you described as a commission
12· ·due on a transaction that did not occur?
13· · · ·A.· · I don't remember the name of the
14· ·person.· It was -- I don't remember the
15· ·name of the person.· I have -- I don't
16· ·remember the name of the person.· I am
17· ·sorry.
18· · · ·Q.· · And were you personally a
19· ·defendant in that matter?
20· · · ·A.· · It was The Northwest Company. I
21· ·don't believe that I was.
22· · · ·Q.· · And on the second matter that
23· ·you described, who were the parties to
24· ·that litigation?
25· · · ·A.· · I don't remember the name of the
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 10 of 231
Page 10·1· · · · · · · · · R. AUERBACH
·2· ·company, but the person who owned the
·3· ·other company's name was Sue Hale. I
·4· ·don't really have a spelling, but Sue
·5· ·Hale.
·6· · · ·Q.· · Are those the only two times you
·7· ·have been deposed?
·8· · · ·A.· · Yes, it is.
·9· · · ·Q.· · So, as you are aware, this
10· ·deposition is being transcribed.· So that
11· ·we have a clean record, please wait for me
12· ·to finish the question, even if you know
13· ·where I am going with that question. I
14· ·will attempt to do the same for you and
15· ·let you finish the answer so that we don't
16· ·talk over each other.· From time to time
17· ·your attorney may object to a question.
18· ·Please let him finish his objection and
19· ·then, unless he instructs you not to
20· ·answer the question, I will expect you to
21· ·answer the question.
22· · · · · · ·We can take breaks.· Just let us
23· ·know when you need a break and we'll find
24· ·a convenient stopping point.· My only
25· ·request is that you answer any question
20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 11 of 231
Page 11·1· · · · · · · · · R. AUERBACH
·2· ·that is pending when you ask for a break.
·3· · · · · · ·Do you understand?
·4· · · ·A.· · Yes, I do.
·5· · · ·Q.· · Now, when I refer to The
·6· ·Northwest --
·7· · · · · · ·THE VIDEOGRAPHER:· This is the
·8· · · ·videographer.· We are getting
·9· · · ·feedback.
10· · · · · · ·(Interruption.)
11· · · · · · ·(Discussion held off the
12· · · ·record.)
13· · · ·Q.· · When I refer to "The Northwest
14· ·Company," what I mean by that is the --
15· ·when I refer to "Northwest" in this
16· ·deposition, what I mean by that is The
17· ·Northwest --
18· · · · · · ·(Reporter interruption.)
19· · · ·Q.· · For clarity, when I refer to
20· ·"Northwest" during this deposition, I am
21· ·going to mean The Northwest Company and
22· ·its subsidiary northwest.com, but I will
23· ·not, unless I say otherwise, mean
24· ·Northwest Textiles Holding.· Will you
25· ·understand what I mean when I say
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Page 12·1· · · · · · · · · R. AUERBACH
·2· ·"Northwest"?
·3· · · ·A.· · Yes.
·4· · · ·Q.· · How long have you been
·5· ·associated with Northwest?
·6· · · ·A.· · Approximately 1987.
·7· · · ·Q.· · And how did you first come to be
·8· ·associated with Northwest?
·9· · · ·A.· · I joined with my father and he
10· ·started this business that you see today
11· ·along with my brother.
12· · · ·Q.· · And in 1987, when you joined the
13· ·business, did you have an ownership
14· ·interest in Northwest at the time?
15· · · ·A.· · I don't remember the year that I
16· ·had an ownership interest.· I don't
17· ·remember the year.
18· · · ·Q.· · Was it in 1987 or was it at some
19· ·point after that?
20· · · · · · ·MR. TEELE:· Objection.· Asked
21· · · ·and answered.
22· · · ·Q.· · Mr. Auerbach, you can answer the
23· ·question, if you can.
24· · · ·A.· · I don't remember the year that
25· ·the ownership occurred.
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Page 13·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · You say that you joined with
·3· ·your brother and your father.· Was your
·4· ·brother a part owner of Northwest at that
·5· ·time or any time in the future?
·6· · · ·A.· · Glenn is not an owner.· Again, I
·7· ·am not aware of the time or the date on
·8· ·which we set up the ownership of
·9· ·Northwest.
10· · · ·Q.· · Do you know if he was an owner
11· ·at any point in the past?
12· · · ·A.· · I don't know.
13· · · ·Q.· · Do you have positions in any
14· ·other companies other than Northwest?
15· · · ·A.· · I am a managing member of other
16· ·LLC's.
17· · · ·Q.· · Are you a managing member of
18· ·Northwest Textile Holdings?
19· · · ·A.· · Yes.
20· · · ·Q.· · Who owns Northwest Textile
21· ·Holdings?
22· · · ·A.· · Northwest Textile Holdings would
23· ·be myself, Ross, the estate, Shay
24· ·Auerbach, my father.· I believe that that
25· ·is the only owners.
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Page 14·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · Are you a managing member of
·3· ·David Harrison LLC?
·4· · · ·A.· · Yes.
·5· · · ·Q.· · Who owns David Harrison LLC?
·6· · · ·A.· · Northwest Textiles Holdings.
·7· · · ·Q.· · Is Northwest Textiles Holdings
·8· ·the only owner of David Harrison LLC?
·9· · · ·A.· · Yes.
10· · · ·Q.· · What is Accessories By Northwest
11· ·LLC?
12· · · ·A.· · I am repeating.· Accessories
13· ·by -- can you say it again, please?
14· · · ·Q.· · What is Accessories By Northwest
15· ·LLC?
16· · · ·A.· · I do not know.
17· · · ·Q.· · You are not familiar with that
18· ·entity?
19· · · ·A.· · No.
20· · · ·Q.· · What is Pegasus Partners LLC?
21· · · ·A.· · Pegasus Partners LLC is an LLC
22· ·that owns real estate.
23· · · ·Q.· · And who owns Pegasus Partners
24· ·LLC?
25· · · ·A.· · Pegasus Partners LLC is owned by
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Page 15·1· · · · · · · · · R. AUERBACH
·2· ·myself and an irrevocable trust.
·3· · · ·Q.· · What is that irrevocable trust?
·4· · · ·A.· · It is an irrevocable trust from
·5· ·the estate of Shay Auerbach.
·6· · · ·Q.· · Going back to David Harrison
·7· ·LLC, when did Northwest Textile Holdings
·8· ·LLC acquire its ownership interest in
·9· ·David Harrison LLC?
10· · · ·A.· · When it was created.
11· · · ·Q.· · What are the assets of David
12· ·Harrison LLC?
13· · · ·A.· · David Harrison LLC owns real
14· ·estate.· It owned -- it owned a unit in
15· ·Florida and it owns a unit in Old
16· ·Westbury.
17· · · ·Q.· · What unit does it own in
18· ·Florida?
19· · · ·A.· · It no longer owns that.
20· · · ·Q.· · What happened to that unit?
21· · · ·A.· · They were sold.
22· · · ·Q.· · Approximately when was that?
23· · · ·A.· · Approximately a year ago.
24· · · ·Q.· · Does David Harrison LLC conduct
25· ·any business with either the real estate
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Page 16·1· · · · · · · · · R. AUERBACH
·2· ·it currently owns or with the real estate
·3· ·it previously owned?
·4· · · ·A.· · When you say conducts business,
·5· ·could you explain, please?· Thank you.
·6· · · ·Q.· · Does it rent out the properties
·7· ·that it owns?
·8· · · ·A.· · Yes.· At times, yes.
·9· · · ·Q.· · Who does it rent those
10· ·properties to?
11· · · ·A.· · To various individuals.
12· · · ·Q.· · Do you know who any of those
13· ·individuals are?
14· · · ·A.· · Not sitting here at the moment,
15· ·no.
16· · · ·Q.· · When you say "individuals," do
17· ·you mean people rented them in their
18· ·individual capacity rather than some other
19· ·legal entity like an LLC or a business?
20· · · ·A.· · Some were individuals, some
21· ·were, I believe -- I don't know -- I
22· ·believe, business entities.
23· · · ·Q.· · Were any of those business
24· ·entities Northwest?
25· · · ·A.· · Northwest for a period of about
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Page 17·1· · · · · · · · · R. AUERBACH
·2· ·nine months did utilize 3 Old Farm, a
·3· ·rental of 3 Old Farm.
·4· · · ·Q.· · What business did Northwest
·5· ·conduct at 3 Old Farm for those nine
·6· ·months?
·7· · · ·A.· · For those nine months it was
·8· ·business that I would conduct from that
·9· ·property.
10· · · ·Q.· · What nine months were those?
11· · · ·A.· · I can't give you the nine
12· ·months.· Probably about -- I don't have
13· ·the nine months in front of me.
14· · · ·Q.· · Do you know what year those nine
15· ·months were in?
16· · · ·A.· · I will guess.· I believe -- I
17· ·believe in '18, I believe.
18· · · ·Q.· · Okay.· You said that you
19· ·conducted business in the Old Farm unit
20· ·for those nine months.· Is that correct?
21· · · ·A.· · Yes.
22· · · ·Q.· · And what business did you
23· ·conduct?
24· · · ·A.· · Business for Northwest.
25· · · ·Q.· · Did you meet any clients of
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Page 18·1· · · · · · · · · R. AUERBACH
·2· ·Northwest at the Old Farm unit?
·3· · · ·A.· · I did not meet with clients.
·4· · · ·Q.· · Did you meet with any other
·5· ·Northwest employees at the Old Farm unit?
·6· · · ·A.· · I believe from time to time we
·7· ·get papers dropped off from people at
·8· ·Northwest.
·9· · · ·Q.· · Did you conduct any other
10· ·meetings with Northwest employees other
11· ·than having papers dropped off at the Old
12· ·Farm unit?
13· · · ·A.· · No.
14· · · ·Q.· · Does David Harrison LLC have any
15· ·employees?
16· · · ·A.· · No.
17· · · ·Q.· · Does David Harrison LLC conduct
18· ·any business other than renting real
19· ·estate?
20· · · ·A.· · No.
21· · · ·Q.· · Was there a lease agreement
22· ·between Northwest and David Harrison LLC
23· ·for the nine months that you used it?
24· · · ·A.· · Not that I am aware of.
25· · · ·Q.· · During those nine months, did
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Page 19·1· · · · · · · · · R. AUERBACH
·2· ·you live at that unit?
·3· · · ·A.· · During those nine months, no.
·4· · · ·Q.· · Did anyone live at the unit
·5· ·during those nine months?
·6· · · ·A.· · No.
·7· · · ·Q.· · Mr. Auerbach, are you appearing
·8· ·as a 30(b)(6) witness on behalf of
·9· ·Northwest?
10· · · · · · ·MR. TEELE:· Objection to that
11· · · ·question.
12· · · ·A.· · I don't know what that means.
13· · · · · · ·MR. AULET:· I am going to stamp
14· · · ·an exhibit.
15· · · · · · ·(So marked for identification as
16· · · ·Exhibit 1.)
17· · · ·Q.· · Mr. Auerbach, you should be able
18· ·to see what I have stamped Exhibit 1, a
19· ·notice of 30(b)(6) deposition to The
20· ·Northwest Company LLC.· Have you ever seen
21· ·this notice before?
22· · · ·A.· · Can I enlarge it?
23· · · · · · ·Okay.· I am looking at it now.
24· · · ·Q.· · Have you ever seen this notice
25· ·before?
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Page 20·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · Bear with me.· I am just trying
·3· ·to scroll.
·4· · · · · · ·I don't remember.
·5· · · ·Q.· · I am going to go to page 5 of
·6· ·this exhibit, which lists a number of
·7· ·topics.· Are you prepared to testify on
·8· ·behalf of -- strike that.
·9· · · · · · ·Have you been designated to
10· ·testify on behalf of Northwest as to any
11· ·of these topics?
12· · · · · · ·MR. TEELE:· Objection to the
13· · · ·form.
14· · · ·A.· · I am reading the topics right
15· ·now.
16· · · · · · ·(Pause.)
17· · · · · · ·Yes, I am.
18· · · ·Q.· · And which of the five topics
19· ·have you been designated to testify on?
20· · · ·A.· · All of them.
21· · · ·Q.· · Okay.
22· · · · · · ·Going back to Pegasus Partners
23· ·LLC, what properties does Pegasus Partners
24· ·LLC own?
25· · · ·A.· · Pegasus Partners owns two
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Page 21·1· · · · · · · · · R. AUERBACH
·2· ·properties.· It owns -- it owns this
·3· ·building that we are speaking from, 49
·4· ·Bryant Avenue.· And it owns a building
·5· ·within walking distance at 66-68 Skillman
·6· ·Avenue.
·7· · · ·Q.· · And does Northwest rent both of
·8· ·those buildings?
·9· · · ·A.· · Yes.
10· · · ·Q.· · What business does Northwest
11· ·conduct at the 66-68 Skillman Avenue
12· ·building?
13· · · ·A.· · Northwest utilizes 66-68
14· ·Skillman Avenue in Roslyn as an art
15· ·studio.
16· · · ·Q.· · Can you explain what Northwest
17· ·uses an art studio for?
18· · · ·A.· · Yes.
19· · · · · · ·We utilize it, Northwest
20· ·utilizes it in that all of our artists are
21· ·located in one building.· That building,
22· ·we called it art studio because the only
23· ·people in that building are people who
24· ·work in the art department.
25· · · ·Q.· · When you say "art," do you mean
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Page 22·1· · · · · · · · · R. AUERBACH
·2· ·the designs that Northwest uses to print
·3· ·on various textiles?
·4· · · ·A.· · Yes.
·5· · · ·Q.· · What is Shay Auerbach LLC?
·6· · · ·A.· · Shay Auerbach LLC owns a
·7· ·building that was -- that is -- excuse
·8· ·me -- in -- in, you know, Ash, North
·9· ·Carolina, A-S-H.
10· · · ·Q.· · Does Northwest rent that
11· ·building?
12· · · ·A.· · Yes.
13· · · ·Q.· · What does Northwest -- what
14· ·business does Northwest conduct in that
15· ·building?
16· · · ·A.· · That building is used for
17· ·warehousing, fulfillment, it had been used
18· ·in the past for light manufacturing, but
19· ·that particular product Northwest is not
20· ·participating in any longer.
21· · · ·Q.· · Who owns Shay Auerbach LLC?
22· · · ·A.· · It is the estate of Shay
23· ·Auerbach.
24· · · ·Q.· · Are you a manager of Shay
25· ·Auerbach LLC?
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Page 23·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · Yes -- I am sorry.· I believe
·3· ·so.
·4· · · ·Q.· · Was Shay Auerbach your father?
·5· · · ·A.· · Yes.
·6· · · ·Q.· · And he was one of the founders
·7· ·of Northwest?
·8· · · ·A.· · Yes.
·9· · · ·Q.· · Approximately when did he pass
10· ·away?
11· · · ·A.· · Approximately 10 years ago. A
12· ·little bit more than 10 years ago, on
13· ·November 11th.
14· · · ·Q.· · Are you one of the beneficiaries
15· ·of his estate?
16· · · ·A.· · Yes.
17· · · ·Q.· · Is your brother, Glenn Auerbach,
18· ·another beneficiary of the estate?
19· · · ·A.· · Yes.
20· · · ·Q.· · Are any of your other family
21· ·members beneficiaries of the estate?
22· · · ·A.· · No.
23· · · ·Q.· · Who -- strike that.
24· · · ·A.· · Can I have a moment?
25· · · ·Q.· · Sorry.· Were you attempting to
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·2· ·say something?
·3· · · ·A.· · Just one moment.· I have a
·4· ·question for counsel.
·5· · · · · · ·(Discussion held off the
·6· · · ·record.)
·7· · · · · · ·MR. KESTENBAUM:· Could you
·8· · · ·clarify the last question, as to what
·9· · · ·you mean by "family"?
10· · · ·Q.· · Are any of your children,
11· ·spouses or former spouses beneficiaries of
12· ·the Shay Auerbach estate?
13· · · ·A.· · I apologize.· I know you
14· ·repeated the question.· Can you repeat it
15· ·one more time, the second part?
16· · · ·Q.· · Are any of your children,
17· ·spouses or former spouses beneficiaries of
18· ·the Shay Auerbach estate?
19· · · ·A.· · No.
20· · · ·Q.· · Who conducts business on behalf
21· ·of the Shay Auerbach estate?
22· · · ·A.· · Can you define what you mean by
23· ·"business," please?
24· · · ·Q.· · Does the Shay Auerbach estate
25· ·still own any assets?
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·2· · · ·A.· · Yes.· The Shay -- the Shay
·3· ·Auerbach estate is still an open estate.
·4· · · ·Q.· · And for assets that the Shay
·5· ·Auerbach estate owns, such as the assets
·6· ·that do business with Northwest, who makes
·7· ·business decisions on behalf of the Shay
·8· ·Auerbach estate?
·9· · · ·A.· · For business between The
10· ·Northwest Company and the Shay Auerbach
11· ·estate, which -- I am sorry.· You mean who
12· ·makes the decisions for the estate?
13· · · ·Q.· · Yes.
14· · · ·A.· · There is only the lease.· So,
15· ·there are no decisions that are being made
16· ·for the estate with The Northwest Company.
17· · · ·Q.· · Who negotiates the leases on
18· ·behalf of Northwest with any of these
19· ·entities that either you own or the Shay
20· ·Auerbach estate owns?
21· · · ·A.· · The leases for the buildings
22· ·that we have spoken about are old leases.
23· ·They go back many, many years.· And when
24· ·they were initially set up or created, my
25· ·father worked with a real estate person
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Page 26·1· · · · · · · · · R. AUERBACH
·2· ·and comped the real estate in the area.
·3· ·And the leases were set up and they
·4· ·were -- they were -- they were worked on
·5· ·by the -- they were also worked on by the
·6· ·previous CFO of the company
·7· · · · · · (Reporter interruption.)
·8· · · ·A.· · Going forward, they were also
·9· ·worked on by our former CFO.· But the
10· ·leases are extremely old.
11· · · ·Q.· · Who was your former CFO?
12· · · ·A.· · Michael Beezer(phonetic).
13· · · ·Q.· · Have any of the leases been
14· ·renewed in the past five years?
15· · · ·A.· · They have, and they remained as
16· ·they were with whatever -- whatever was in
17· ·the lease.
18· · · ·Q.· · Did the rent under the lease
19· ·increase in any of those amendments or
20· ·renewals?
21· · · ·A.· · The only increases in rent would
22· ·have been the standard escalation as
23· ·detailed in the lease.
24· · · · · · ·May I clarify one thing?
25· · · ·Q.· · Of course.
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·2· · · ·A.· · The lease at 66-68 Skillman for
·3· ·the art department was not an old lease,
·4· ·and that lease -- I don't remember, but it
·5· ·is probably -- I don't remember, but it is
·6· ·not as old as the other two leases, and
·7· ·those were comped by this current -- by
·8· ·myself, by our current CFO and by a local
·9· ·real estate agent.
10· · · ·Q.· · Who made the final decision on
11· ·the rent for that 66-68 Skillman lease?
12· · · ·A.· · We took the comps in the area
13· ·and we used that as the rental amount.· In
14· ·other words, no one person made that
15· ·decision.
16· · · ·Q.· · Who produced the comp figures?
17· · · ·A.· · We did it online and we did it
18· ·by consulting a local property owner and
19· ·real estate -- like a real estate agent.
20· · · ·Q.· · What is The Northwest Company
21· ·Florida LLC?
22· · · ·A.· · I don't know.
23· · · ·Q.· · Are you the manager of that
24· ·entity?
25· · · ·A.· · I don't know.
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Page 28·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · What is The Northwest Company
·3· ·Inc.?
·4· · · ·A.· · I don't know.
·5· · · ·Q.· · What is UMiami Gabrielle, LLC?
·6· · · ·A.· · UMiami LLC is --
·7· · · · · · ·MR. TEELE:· Someone has a
·8· · · ·conversation going on in the
·9· · · ·background.
10· · · ·A.· · UMiami LLC is an LLC -- it is an
11· ·LLC that has an apartment at or near the
12· ·University of Miami.
13· · · ·Q.· · When you say "UMiami LLC," did
14· ·you mean UMiami Gabrielle LLC?
15· · · ·A.· · Yes.· I think that is what it
16· ·says.
17· · · ·Q.· · What is Gabriella Daniella
18· ·Corp.?
19· · · ·A.· · Gabriella Daniella Corp. is a
20· ·Corp. that I set up a long time ago
21· ·because I only had two daughters at the
22· ·time and I thought it would be fun to have
23· ·their names on something.· It doesn't
24· ·actually have a business operation.
25· · · ·Q.· · Does it have any assets?
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Page 29·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · No.
·3· · · ·Q.· · What is Greenville Baker Boys?
·4· · · ·A.· · It is the -- it's the -- the
·5· ·Boys and Girls Club of America, and that
·6· ·is that specific location.· Greenville
·7· ·Baker Boys and Girls Club.
·8· · · ·Q.· · What is 501 NYCA China Partners
·9· ·LLC?
10· · · ·A.· · It is an LLC for the unit in
11· ·Miami, Unit 501.
12· · · ·Q.· · And what is 924 NYCA China
13· ·Partners LLC?
14· · · ·A.· · 924 is the same type of entity,
15· ·but the unit is 924.· It is a different
16· ·unit.
17· · · ·Q.· · And who owns those two entities?
18· · · ·A.· · NYCA China Partners LLC.
19· · · ·Q.· · It wholly owns both of those
20· ·entities?
21· · · · · · ·MR. TEELE:· Object to the form.
22· · · ·A.· · Yes.
23· · · ·Q.· · And what is NYCA China Partners
24· ·LLC?
25· · · ·A.· · It is an LLC that was set up to
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Page 30·1· · · · · · · · · R. AUERBACH
·2· ·buy real estate in Florida.
·3· · · ·Q.· · Who owns NYCA China Partners
·4· ·LLC?
·5· · · ·A.· · Northwest Textile Holdings, and
·6· ·Extreme Horse.
·7· · · ·Q.· · Are there any trusts or
·8· ·irrevocable trusts set up for the benefit
·9· ·of your children?
10· · · ·A.· · Yes.
11· · · ·Q.· · And what are the names of those
12· ·trusts?
13· · · ·A.· · I don't know.
14· · · ·Q.· · Who would know?
15· · · ·A.· · My trust attorney would know.
16· · · ·Q.· · And what assets were owned by
17· ·those trusts?
18· · · ·A.· · I don't know.
19· · · ·Q.· · Do those trusts own an interest
20· ·in Northwest Textile Holdings?
21· · · ·A.· · I don't know.
22· · · ·Q.· · Do they own an interest in David
23· ·Harrison LLC?
24· · · ·A.· · David Harrison LLC is owned by
25· ·Northwest Textile Holdings.· I wouldn't
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Page 31·1· · · · · · · · · R. AUERBACH
·2· ·know the business name.
·3· · · ·Q.· · Are there any -- are there any
·4· ·assets that those trusts hold that you can
·5· ·identify as you sit here today?
·6· · · · · · ·MR. DUFFY:· Objection.· Asked
·7· · · ·and answered.· You can answer.
·8· · · ·A.· · Sorry.· I was looking at the
·9· ·picture.
10· · · ·Q.· · Are there any assets that the
11· ·trust holds that you can identify as you
12· ·sit here today?
13· · · ·A.· · No.
14· · · ·Q.· · Has Northwest Textile Holdings
15· ·ever transferred assets to those trusts
16· ·that you are aware of?
17· · · · · · ·MR. TEELE:· Objection to form.
18· · · ·A.· · Not that I am aware of.
19· · · ·Q.· · How many children do you have?
20· · · ·A.· · Three.
21· · · ·Q.· · What are the names and ages of
22· ·your children?
23· · · · · · ·MR. TEELE:· I will object to
24· · · ·that question and to what I think is
25· · · ·going to be the line of questioning
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Page 32·1· · · · · · · · · R. AUERBACH
·2· · · ·based on your last several questions
·3· · · ·inasmuch as they are not within the
·4· · · ·scope of the topics listed in the
·5· · · ·30(b)(6) notice which you showed the
·6· · · ·witness earlier.
·7· · · · · · ·But you can answer the question.
·8· · · ·A.· · Ages?· Gabriella will be 23 next
·9· ·month -- this month.· Sorry.· Daniella
10· ·just turned 21 last month.· And Alexander
11· ·is 13.
12· · · ·Q.· · Do any of them hold positions
13· ·with Northwest?
14· · · ·A.· · Gabriella Auerbach has a
15· ·position here, yes.
16· · · ·Q.· · And what is that position?
17· · · ·A.· · She is our social media director
18· ·coordinator.· She does all of our social
19· ·media platforms.
20· · · ·Q.· · About how long has she been
21· ·employed in that position?
22· · · ·A.· · She was an intern for a time and
23· ·then she began about a year ago, I
24· ·believe.· About a year ago, after she
25· ·graduated, and that was her major.
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Page 33·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · Have any of your children ever
·3· ·held a Northwest Company credit card?
·4· · · ·A.· · No.
·5· · · ·Q.· · Are you currently married?
·6· · · ·A.· · Yes.
·7· · · ·Q.· · And who is your spouse?
·8· · · ·A.· · Sophia.
·9· · · ·Q.· · Sophia Auerbach?
10· · · ·A.· · Yes.
11· · · ·Q.· · Does she hold any position at
12· ·Northwest?
13· · · ·A.· · No.
14· · · ·Q.· · Does your brother Glenn Auerbach
15· ·hold any positions at Northwest?
16· · · ·A.· · Yes.
17· · · ·Q.· · What position does he hold at
18· ·Northwest?
19· · · ·A.· · He is a vice president at
20· ·Northwest.
21· · · ·Q.· · Are you aware that the Committee
22· ·has requested a number of documents from
23· ·the Debtors?
24· · · · · · ·MR. TEELE:· Objection to the
25· · · ·form.
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Page 34·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · I know that there are document
·3· ·requests.
·4· · · ·Q.· · And were you involved in the
·5· ·collection of documents on behalf of the
·6· ·Debtors?
·7· · · ·A.· · For some of those documents,
·8· ·yes.
·9· · · ·Q.· · And which document collections
10· ·were you involved in?
11· · · ·A.· · I had contacted the financial
12· ·institutions to get copies of bank
13· ·statements, Amex charges, anything that we
14· ·needed documentation on.
15· · · ·Q.· · Are you aware that we have
16· ·requested documents from Northwest Textile
17· ·Holdings?
18· · · ·A.· · Yes, I am.
19· · · ·Q.· · And have you collected the bank
20· ·records of Northwest Textile Holdings?
21· · · ·A.· · I have not collected.· I was
22· ·told that they will be here in electronic
23· ·form today.· And I was told that they
24· ·would be here three days ago, but I
25· ·haven't gotten them yet.
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Page 35·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · Do you have a country club
·3· ·membership?
·4· · · ·A.· · Yes.
·5· · · ·Q.· · What country club is that?
·6· · · ·A.· · Old Westbury Golf and Country
·7· ·Club.
·8· · · ·Q.· · Does that country club charge
·9· ·you membership fees?
10· · · ·A.· · Yes.· They charge dues.
11· · · ·Q.· · And who pays those dues?
12· · · ·A.· · The Northwest Company pays the
13· ·dues.
14· · · ·Q.· · Does The Northwest Company pay
15· ·all of the membership dues?
16· · · · · · ·MR. TEELE:· Objection to the
17· · · ·form.
18· · · ·A.· · I believe.· I don't know.
19· · · ·Q.· · Why does The Northwest Company
20· ·pay your membership dues at the Old
21· ·Westbury Country Club?
22· · · · · · ·MR. TEELE:· Objection to the
23· · · ·form.
24· · · ·A.· · The Old Westbury Country Club
25· ·dues are paid because we need to entertain
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Page 36·1· · · · · · · · · R. AUERBACH
·2· ·business clients.· We also use it for
·3· ·company meetings.· We use it for, you
·4· ·know, off-site meetings within Northwest
·5· ·and -- that is it.· Sorry.
·6· · · ·Q.· · Do you ever use the Old Westbury
·7· ·Country Club personally?
·8· · · ·A.· · Yes.
·9· · · ·Q.· · And when I say "personally," I
10· ·mean for -- not for Northwest business
11· ·purposes.· Do you use it personally in
12· ·that sense?
13· · · · · · ·MR. DUFFY:· Objection to form.
14· · · ·A.· · Yes.
15· · · ·Q.· · And about how often do you use
16· ·the Old Westbury Country Club in a
17· ·personal capacity?
18· · · · · · ·MR. TEELE:· Objection to form.
19· · · ·A.· · On a personal basis, in the last
20· ·number of years, probably a dozen times.
21· · · · · · ·THE WITNESS:· Sorry.· Let me
22· · · ·clarify that last comment that I made.
23· · · ·In the last five years, what I meant
24· · · ·to say was, on a personal basis, maybe
25· · · ·eight to twelve times per year, not
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·2· · · ·twelve times in five years.
·3· · · ·Q.· · Do you have any bank records of
·4· ·Northwest Textile Holdings currently?
·5· · · ·A.· · No.
·6· · · ·Q.· · How often in 2020 were Northwest
·7· ·corporate events held at the country club?
·8· · · ·A.· · In 2020, this year, I don't
·9· ·know.
10· · · ·Q.· · Do you have any sort of
11· ·ballpark?· Was it more than ten?
12· · · ·A.· · No.
13· · · · · · ·MR. TEELE:· Objection.
14· · · ·Q.· · So, my earlier question was a
15· ·compound question.· I am going to reask
16· ·that.· Were more than ten corporate events
17· ·held at the country club in 2020?
18· · · ·A.· · No.
19· · · ·Q.· · How many corporate events were
20· ·held in 2019?
21· · · · · · ·MR. TEELE:· Objection to the
22· · · ·form.· I assume you mean how many
23· · · ·corporate events at the club were held
24· · · ·in 2019?
25· · · · · · ·MR. AULET:· Yes.· I will
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·2· · · ·restate.
·3· · · ·Q.· · How many corporate events were
·4· ·held at the Old Westbury Country Club in
·5· ·2019?
·6· · · ·A.· · I can only -- because I don't
·7· ·know -- I don't know the exact number.
·8· · · ·Q.· · Was it more than 10?
·9· · · ·A.· · Yes.
10· · · ·Q.· · Was it more than 20?
11· · · ·A.· · I don't know.
12· · · ·Q.· · Do you own a property at the St.
13· ·Regis Residences?
14· · · ·A.· · Yes.
15· · · ·Q.· · Does Northwest pay the
16· ·maintenance fees for that residence?
17· · · ·A.· · Yes.
18· · · ·Q.· · And why does Northwest pay the
19· ·maintenance fees for that residence?
20· · · ·A.· · We put people up there for
21· ·different events.· I stay there for
22· ·different events in the city.· I, Ashford
23· ·stays there during market week.· Other
24· ·clients stay there.· And there is no --
25· ·there is no room fees charged when clients
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·2· ·utilize or if I utilize.· There is no room
·3· ·charge.
·4· · · ·Q.· · How many times a year are those
·5· ·rooms used for Northwest purposes?
·6· · · ·A.· · I don't know exactly.
·7· · · ·Q.· · Is it more than 10?
·8· · · ·A.· · Yes.
·9· · · ·Q.· · Is it more than 20?
10· · · ·A.· · Yes.
11· · · ·Q.· · Is it more than 30?
12· · · ·A.· · I don't know.
13· · · ·Q.· · How much would room fees at the
14· ·St. Regis Residences be if Northwest was
15· ·not paying those maintenance fees?
16· · · · · · ·MR. TEELE:· Objection to the
17· · · ·form and to the hypothetical.· You can
18· · · ·answer.
19· · · · · · ·Hold on one second.· The laptop
20· · · ·Ross Auerbach is using went to sleep.
21· · · ·Can we take a two-second break?
22· · · · · · ·MR. AULET:· Sure.· Why don't we
23· · · ·take a short break.
24· · · · · · ·THE VIDEOGRAPHER:· Time is
25· · · ·11:32.· We are off the record.
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·2· · · · · · ·(Recess.)
·3· · · · · · ·THE VIDEOGRAPHER:· Time is
·4· · · ·11:41.· We are back on the record.
·5· ·BY MR. AULET:
·6· · · ·Q.· · Mr. Auerbach, we were just
·7· ·discussing the St. Regis Residences.· Are
·8· ·those residences ever used for
·9· ·non-Northwest purposes?
10· · · ·A.· · Yes.
11· · · ·Q.· · About how often is that?
12· · · · · · ·MR. DUFFY:· Objection to the
13· · · ·form.
14· · · ·A.· · Three to five times a year. I
15· ·don't actually know.
16· · · ·Q.· · What clients have stayed at the
17· ·St. Regis Residences in the past
18· ·12 months?
19· · · ·A.· · In the last 12 months, Ashford
20· ·has stayed there.· I believe 12 months. I
21· ·apologize because I can't -- for market
22· ·week, Allen Guo has stayed there.· I don't
23· ·have a list of other clients that have
24· ·stayed there.
25· · · ·Q.· · How would I determine what
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·2· ·clients had stayed at the Residences at a
·3· ·particular point in time?
·4· · · ·A.· · I don't know.· I -- I don't
·5· ·know.
·6· · · ·Q.· · Who makes the decision if a
·7· ·Northwest client can use the St. Regis
·8· ·residence?
·9· · · ·A.· · That decision would be made, if
10· ·requested to me, I would make it.· If
11· ·requested to someone else, they would make
12· ·that decision.
13· · · ·Q.· · When you say "if requested to
14· ·someone else, they would make that
15· ·decision," who has the authority to let
16· ·someone use the St. Regis residence other
17· ·than you?
18· · · ·A.· · Anyone who -- well, my
19· ·assistant, Robert.· I guess those people.
20· · · ·Q.· · And are any records kept of who
21· ·stays in the St. Regis residence?
22· · · ·A.· · I don't know.
23· · · ·Q.· · Why hasn't Northwest filed a
24· ·2018 tax return?
25· · · · · · ·MR. TEELE:· Objection to the
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·2· · · ·form.
·3· · · ·A.· · Northwest did not complete the
·4· ·2018 tax returns.· Mazars had some
·5· ·adjustment they had to do that they did
·6· ·not finish.· And because of the various
·7· ·issues that were going on, it was delayed.
·8· · · ·Q.· · You say Northwest did not
·9· ·complete the 2018 tax returns.· Did it
10· ·create a draft of the 2018 tax returns?
11· · · ·A.· · No.
12· · · ·Q.· · What were the issues that caused
13· ·Mazars to be unable to finish the 2018 tax
14· ·return?
15· · · ·A.· · Mazars was -- there was more
16· ·than one issue.· Excuse me.· Mazars was
17· ·waiting for a short time on the outcome
18· ·between the negotiations between Ashford
19· ·and Northwest.· They were reconciling
20· ·certain accounts that they needed to make
21· ·adjustments to.
22· · · · · · ·Excuse me.· Sorry.
23· · · · · · ·And they needed a letter from
24· ·myself stating that I would support the
25· ·company and leave my side collateral at
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·2· ·CIT.
·3· · · ·Q.· · You say they were reconciling
·4· ·certain accounts that they needed to make
·5· ·adjustments to.· What accounts?
·6· · · ·A.· · I don't know the account. I
·7· ·don't know the specific account.· When I
·8· ·say accounts --
·9· · · ·Q.· · Do you know --
10· · · ·A.· · What is that?
11· · · ·Q.· · I believe you were in the middle
12· ·of saying a sentence that began with "when
13· ·I say accounts."· Did you have anything
14· ·else to add to your answer?
15· · · ·A.· · No.· I meant to say, when I say
16· ·accounts, I mean in general they were
17· ·accounts.· I don't know what specific
18· ·accounts.
19· · · ·Q.· · What did Mazars describe to you
20· ·generally about what they still needed to
21· ·reconcile?
22· · · ·A.· · They needed a letter.· They
23· ·needed to know the position between
24· ·Ashford and Northwest so they could state
25· ·that opinion.· I believe it's an opinion.
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·2· ·And they were working with our people, as
·3· ·they do every year, just to conclude '18.
·4· · · ·Q.· · What specifically did they say
·5· ·that they needed to make adjustments to or
·6· ·reconcile regarding Northwest's books?
·7· · · ·A.· · They did not, to my knowledge,
·8· ·say specifically what they were -- what
·9· ·they were reconciling.
10· · · ·Q.· · Was Mr. Jolson involved in this
11· ·process at all?
12· · · ·A.· · I don't know.· I don't know.
13· · · ·Q.· · Did Mazars express any concerns
14· ·about the company's accounting?
15· · · ·A.· · No.
16· · · ·Q.· · Did Mazars have any issues with
17· ·being unable to reconcile the company's
18· ·books and records?
19· · · ·A.· · No.· None expressed.
20· · · ·Q.· · Would they have expressed those
21· ·opinions to anyone else?
22· · · ·A.· · I don't know.
23· · · ·Q.· · Would you expect that if they
24· ·had any issues with the company's
25· ·accounting that it would be brought to
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·2· ·your attention?
·3· · · · · · ·MR. DUFFY:· Objection to the
·4· · · ·form.
·5· · · ·A.· · Yes, I do.
·6· · · ·Q.· · Earlier you said that Mazars had
·7· ·certain accounts that they needed to make
·8· ·adjustments to.· What more can you tell me
·9· ·about that statement?
10· · · · · · ·MR. DUFFY:· Objection to the
11· · · ·form of the question.
12· · · ·A.· · I can't.· They had some work to
13· ·complete.· I don't know specifics of the
14· ·work that they were completing.
15· · · ·Q.· · How long did it take for Mazars
16· ·to complete the tax returns for Northwest
17· ·in previous years?
18· · · ·A.· · Again, I don't know.· I can only
19· ·guess, and I don't know.
20· · · ·Q.· · Did it concern you at all that
21· ·Northwest did not file the 2018 tax
22· ·return?
23· · · ·A.· · Yes.· May I have a moment to ask
24· ·a question of my counsel?
25· · · ·Q.· · Yes.
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·2· · · · · · ·(Discussion held off the
·3· · · ·record.)
·4· · · · · · ·THE WITNESS:· We are back. I
·5· · · ·wanted to clarify something.· The
·6· · · ·questions that previously were asked
·7· · · ·about Mazars and the tax returns, when
·8· · · ·I was answering those questions I was
·9· · · ·thinking in my mind you were talking
10· · · ·really about the financial statement.
11· · · ·Mazars did not do our taxes, our tax
12· · · ·returns.
13· · · ·Q.· · Who does do your tax returns?
14· · · ·A.· · Ken Gould.
15· · · ·Q.· · And why did Ken Gould not
16· ·prepare a 2018 tax return?
17· · · ·A.· · He was waiting for the complete
18· ·2018 statement from Mazars.
19· · · ·Q.· · Are there any other reasons that
20· ·he did not prepare a 2018 tax return?
21· · · ·A.· · No.
22· · · ·Q.· · When do you anticipate that the
23· ·2018 tax return will be filed?
24· · · ·A.· · I do not know the date that they
25· ·will file the return.
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·2· · · ·Q.· · Did you receive a $40,000
·3· ·payment from Northwest on April 17, 2020?
·4· · · · · · ·MR. TEELE:· Objection to the
·5· · · ·form.
·6· · · ·A.· · Yes, I did.
·7· · · ·Q.· · What was the basis of that
·8· ·payment?
·9· · · ·A.· · It was a reimbursement for a
10· ·retainer that I paid to retain counsel for
11· ·litigation brought by Ashford in
12· ·California.
13· · · ·Q.· · How would I verify that?
14· · · ·A.· · We can verify that by producing
15· ·the payment that I made to the law firm
16· ·and through the attorneys.
17· · · ·Q.· · Why was it listed as a bonus on
18· ·the bank record?
19· · · ·A.· · I don't know.
20· · · ·Q.· · Who did you instruct to make
21· ·that $40,000 payment to yourself?
22· · · · · · ·MR. TEELE:· Objection to the
23· · · ·form.
24· · · ·A.· · I put it in as a reimbursement,
25· ·and it would have gone to -- it would have
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·2· ·gone to Robert and through our controller.
·3· · · ·Q.· · When you say you put it in as a
·4· ·reimbursement, please describe what you
·5· ·mean.
·6· · · ·A.· · I explained the purpose of the
·7· ·$40,000, what the $40,000 represented.
·8· · · ·Q.· · And who did you explain that to?
·9· · · ·A.· · I explained it to Robert, who
10· ·would explain it to whoever he explained
11· ·it to.
12· · · ·Q.· · And who did you instruct to make
13· ·that payment?
14· · · ·A.· · Robert.
15· · · ·Q.· · Did you talk to anyone but
16· ·Robert about making that $40,000 payment?
17· · · ·A.· · No.
18· · · ·Q.· · Why did you seek reimbursement
19· ·on April 17, 2020, for this $40,000
20· ·payment?
21· · · ·A.· · Because I realized that I was
22· ·never reimbursed for that.
23· · · ·Q.· · Did you make this reimbursement
24· ·request in writing?
25· · · ·A.· · No, I did not.
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·2· · · ·Q.· · Did you provide any
·3· ·documentation to Mr. Jolson that you had
·4· ·made these $40,000 advances?
·5· · · ·A.· · I believe -- I don't remember.
·6· · · ·Q.· · When you made -- so, you say you
·7· ·did not make this reimbursement request in
·8· ·writing.· Did you provide any documents to
·9· ·Mr. Jolson when you made this
10· ·reimbursement request?
11· · · · · · ·MR. DUFFY:· Objection.· Asked
12· · · ·and answered.
13· · · · · · ·MR. TEELE:· And to the
14· · · ·characterization of the testimony.
15· · · ·Q.· · You can answer the question,
16· ·Mr. Auerbach.
17· · · ·A.· · What was the question?· Sorry.
18· · · ·Q.· · Did you provide any documents to
19· ·Mr. Jolson when you made this
20· ·reimbursement request?
21· · · ·A.· · I don't remember.
22· · · ·Q.· · If you did give him any
23· ·documents, would you have handed him
24· ·physical documents?
25· · · · · · ·MR. DUFFY:· Objection to the
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·2· · · ·hypothetical.· It is a lay witness.
·3· · · · · · ·You can answer it, if you
·4· · · ·understand it.
·5· · · ·A.· · Can you just repeat the
·6· ·question, sir?
·7· · · ·Q.· · You say that you can't recall if
·8· ·you gave Mr. Jolson any documents.· Would
·9· ·you have handed him a physical, printed
10· ·out document?
11· · · ·A.· · No, not a printed document.
12· · · ·Q.· · Would you have e-mailed him any
13· ·document?
14· · · ·A.· · No.
15· · · ·Q.· · How would you have given him a
16· ·document if you gave him any documents to
17· ·support this reimbursement request?
18· · · · · · ·MR. TEELE:· Objection to the
19· · · ·form.· The question has been asked and
20· · · ·answered.· Putting hypotheticals in
21· · · ·front of him is not going to get you
22· · · ·anywhere.
23· · · ·Q.· · You can answer the question.
24· · · · · · ·MR. KESTENBAUM:· Do you know
25· · · ·what the question is?
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·2· · · · · · ·THE WITNESS:· Can you repeat the
·3· · · ·question again?
·4· · · ·Q.· · If you had given him any
·5· ·documents to support this reimbursement
·6· ·request, how would you have given him
·7· ·those documents?
·8· · · ·A.· · I don't -- I don't know.
·9· · · ·Q.· · Did you authorize a retention
10· ·bonus for Mr. Jolson on April 17, 2020?
11· · · ·A.· · I did.
12· · · ·Q.· · And how much was that bonus?
13· · · ·A.· · $35,000.
14· · · ·Q.· · Did you authorize the retention
15· ·bonus for anyone else on April 17, 2020?
16· · · ·A.· · No, I did not.
17· · · ·Q.· · What were the terms of the
18· ·retention bonus?
19· · · · · · ·MR. TEELE:· Objection to the
20· · · ·form.
21· · · · · · ·MR. KESTENBAUM:· You can answer.
22· · · ·A.· · Robert had been working around
23· ·the clock with Ashford, with the court,
24· ·with everything that was going on.· And he
25· ·was exhausted, and I believe -- and I
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·2· ·believe that it was the right thing to do.
·3· ·And I need Robert here to go through this
·4· ·process.· And the amount of stress he was
·5· ·under, I was concerned.
·6· · · ·Q.· · Was there any requirement that
·7· ·Mr. Jolson stay employed by the Debtors
·8· ·for any length of time in order to receive
·9· ·that bonus?
10· · · ·A.· · Robert had previously stated to
11· ·me that he was here for the duration.
12· · · ·Q.· · That doesn't answer my question.
13· ·Was there any requirement that Mr. Jolson
14· ·stay employed by the Debtors for any
15· ·length of time in order to receive a
16· ·bonus?
17· · · · · · ·MR. TEELE:· Objection.· Asked
18· · · ·and answered.
19· · · ·A.· · I think I answered the question,
20· ·sir.
21· · · ·Q.· · I didn't get an answer.· Was
22· ·there any requirement that Mr. Jolson stay
23· ·employed by the Debtors for any length of
24· ·time in order to receive that bonus?
25· · · · · · ·MR. DUFFY:· Asked and answered.
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·2· · · ·Objection.
·3· · · · · · ·MR. AULET:· I have asked it
·4· · · ·several times.· I have not gotten an
·5· · · ·answer to my question.· I would like
·6· · · ·an answer to my question.
·7· · · ·Q.· · Was there any length of time
·8· ·that Mr. Jolson had to stay employed by
·9· ·the Debtors in order to receive that
10· ·bonus?
11· · · · · · ·MR. KESTENBAUM:· I think he has
12· · · ·answered the question by stating that
13· · · ·Mr. Jolson was going to stay, as he
14· · · ·said, for the duration.· I think the
15· · · ·exchange is clear.
16· · · ·Q.· · Mr. Auerbach, please answer the
17· ·question.
18· · · ·A.· · I thought I had answered the
19· ·question.· What I had meant was, just as
20· ·was stated.· He said that he would be
21· ·here, stay here through the duration.· He
22· ·was staying on.
23· · · ·Q.· · Had Mr. Jolson quit the next
24· ·day, would there have been any requirement
25· ·that he return that bonus?
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·2· · · · · · ·MR. DUFFY:· Objection to the
·3· · · ·form, and I object as it is a
·4· · · ·hypothetical.
·5· · · · · · ·You can answer if you know.
·6· · · ·A.· · Knowing Robert Jolson's
·7· ·character, if he were to have left he
·8· ·would have returned the bonus.
·9· · · ·Q.· · But was there any requirement
10· ·that he return the bonus?
11· · · ·A.· · No.· There was no requirement
12· ·that he return the bonus.· And as I
13· ·stated --
14· · · ·Q.· · Who was --
15· · · ·A.· · Go ahead.· Sorry.
16· · · ·Q.· · I thought you were done.· Please
17· ·finish the answer.
18· · · ·A.· · It's fine.· That's it.
19· · · ·Q.· · Who is the controller of
20· ·Northwest?
21· · · ·A.· · Ted.
22· · · ·Q.· · Ted who?
23· · · ·A.· · Hmm?
24· · · · · · ·MR. KESTENBAUM:· His last name.
25· · · ·A.· · I know it, I just can't say it.
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Page 55·1· · · · · · · · · R. AUERBACH
·2· ·I am sorry.
·3· · · · · · ·MR. KESTENBAUM:· You don't know
·4· · · ·how to pronounce it?
·5· · · · · · ·THE WITNESS:· "Georgia"
·6· · · ·something.· I never did.· I always
·7· · · ·call him Ted.
·8· · · ·A.· · I can get you the name on a
·9· ·break.· "Georgia" something.
10· · · ·Q.· · The bonus that you authorized
11· ·for Mr. Jolson, that wasn't a
12· ·reimbursement for anything, was it?
13· · · ·A.· · No, it was not.
14· · · ·Q.· · Why was it described as a
15· ·reimbursement in a filing with the
16· ·Bankruptcy Court?
17· · · · · · ·MR. TEELE:· Objection to the
18· · · ·form.· You can answer if you know.
19· · · ·A.· · I don't know why it was. I
20· ·apologize.
21· · · · · · ·(Discussion off the record
22· · · ·conferring with counsel.)
23· · · ·Q.· · Mr. Auerbach, do you review the
24· ·documents that you sign carefully?
25· · · · · · ·MR. TEELE:· Objection to the
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Page 56·1· · · · · · · · · R. AUERBACH
·2· · · ·form.
·3· · · ·A.· · I try to, yes.
·4· · · ·Q.· · Are you aware that you signed a
·5· ·number of documents that were filed with
·6· ·the Bankruptcy Court?
·7· · · ·A.· · Yes.
·8· · · ·Q.· · And for those documents, did you
·9· ·review them carefully before signing them?
10· · · · · · ·MR. TEELE:· Objection to the
11· · · ·form.
12· · · ·A.· · I thought I did.
13· · · · · · ·Can I ask a question?
14· · · · · · ·MR. DUFFY:· Hang on.· He has a
15· · · ·question for counsel.
16· · · · · · ·(Discussion held off the
17· · · ·record.)
18· · · · · · ·THE WITNESS:· I am back.
19· · · · · · ·MR. KESTENBAUM:· Thank you.
20· · · · · · ·(So marked for identification as
21· · · ·Exhibit 2.)
22· · · · · · ·MR. AULET:· I am going to show
23· · · ·you what I have marked Exhibit 2, a
24· · · ·statement of financial affairs for
25· · · ·non-individuals filing for bankruptcy
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Page 57·1· · · · · · · · · R. AUERBACH
·2· · · ·that was filed as Docket 1-117.
·3· · · ·Q.· · Mr. Auerbach, have you seen this
·4· ·document before?
·5· · · · · · ·MR. TEELE:· Mr. Aulet, can you
·6· · · ·make a representation as to whether
·7· · · ·the document -- because we can only
·8· · · ·see the one page -- is the entire
·9· · · ·Docket No. 117, the whole 34 pages?
10· · · · · · ·MR. AULET:· Yes.· This is the
11· · · ·entire 34-page statement of financial
12· · · ·affairs that was filed with the
13· · · ·Bankruptcy Court.
14· · · · · · ·MR. KESTENBAUM:· Is there a
15· · · ·specific thing you want to point him
16· · · ·to?
17· · · · · · ·MR. AULET:· I first want to know
18· · · ·if he has seen this document before.
19· · · · · · ·MR. TEELE:· Mr. Aulet, are you
20· · · ·able to release the document so he can
21· · · ·look through it?· All he can see is
22· · · ·the first page of the 34-page
23· · · ·document.
24· · · · · · ·MR. AULET:· I don't know if I am
25· · · ·able to.· I don't see an option to do
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Page 58·1· · · · · · · · · R. AUERBACH
·2· · · ·that available easily here.· I have
·3· · · ·just ticked Mr. Auerbach's name.
·4· · · ·Check if he can now scroll through it.
·5· · · · · · ·THE WITNESS:· Thank you.
·6· · · ·Q.· · Turn to page 18.· Is that your
·7· ·signature?
·8· · · ·A.· · Give me a moment.· I will move
·9· ·to page 18.· Thank you.
10· · · · · · ·That's my signature.
11· · · ·Q.· · Did you review this document
12· ·carefully before signing it?
13· · · ·A.· · I did review it, yes.
14· · · ·Q.· · And did you review all of the
15· ·text on this page, including the warning
16· ·and the statement that you declare under
17· ·perjury that the foregoing is true and
18· ·correct?
19· · · ·A.· · Yes.
20· · · ·Q.· · And the statement is that you
21· ·have examined the information and the
22· ·statement of financial affairs and any
23· ·attachment, that you have a reasonable
24· ·belief that the information is true and
25· ·correct?
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·2· · · ·A.· · Yes, a reasonable belief that it
·3· ·is correct.
·4· · · ·Q.· · Now, if we turn to page 25, this
·5· ·is an exhibit, part 2, question 4,
·6· ·"Payment or other transfers of property
·7· ·made within one year before filing the
·8· ·case that benefited any insider."
·9· · · · · · ·If we go to page 26, the
10· ·schedule starts.· Did you review this
11· ·schedule carefully before filing it with
12· ·the Bankruptcy Court?
13· · · ·A.· · I did look over this schedule,
14· ·yes.· There -- yes.
15· · · ·Q.· · And did you endeavor to make
16· ·sure that it was complete?
17· · · ·A.· · I did.· And I thought at the
18· ·time it was complete.
19· · · ·Q.· · And did you endeavor to make
20· ·sure that it was accurate?
21· · · ·A.· · Yes.· That was my endeavor.
22· · · ·Q.· · And if we go to page 27 for
23· ·Robert Jolson, you will see that $35,000
24· ·is listed as T&E reimbursement.· Was that
25· ·correct?
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·2· · · ·A.· · No, it is not correct.· And that
·3· ·is something I missed.· The coding is
·4· ·wrong.
·5· · · ·Q.· · And that should have been coded
·6· ·as a bonus.· Is that correct?
·7· · · ·A.· · That is correct.
·8· · · ·Q.· · And this list is not complete,
·9· ·is that correct?· When I say "list," I
10· ·mean the entire schedule of payments.
11· · · ·A.· · I am not aware it is not
12· ·complete.
13· · · ·Q.· · So between pages 26 and 27, is
14· ·this a complete list of payments or
15· ·transfers of property made within one year
16· ·before filing this case that benefited any
17· ·insider?
18· · · ·A.· · I am listening; yes -- sorry.
19· ·You asked me a question?
20· · · · · · ·MR. DUFFY:· Can you repeat the
21· · · ·question, please?
22· · · ·Q.· · Between pages 26 and 27 of this
23· ·exhibit, is this a complete list of
24· ·payments or transfers of property made
25· ·within one year before filing this case
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Page 61·1· · · · · · · · · R. AUERBACH
·2· ·that benefited any insider?
·3· · · ·A.· · To the best of my knowledge, it
·4· ·is.
·5· · · ·Q.· · Were payments made to David
·6· ·Harrison LLC within one year of the filing
·7· ·of the bankruptcy?
·8· · · ·A.· · No.
·9· · · ·Q.· · It is your testimony that no
10· ·payments to David Harrison LLC were made
11· ·within one year of the filing of the
12· ·bankruptcy?
13· · · · · · ·MR. DUFFY:· Objection.· Asked
14· · · ·and answered.· You can answer.
15· · · ·A.· · It is my belief that none were
16· ·made within the last year.
17· · · ·Q.· · Are you aware that Mr. Jolson
18· ·was not aware that David Harrison LLC was
19· ·an entity that you control?
20· · · · · · ·MR. DUFFY:· Objection to form.
21· · · ·A.· · I am so sorry.· I got
22· ·distracted.· Can you repeat the question?
23· · · ·Q.· · Was Mr. Jolson aware that you
24· ·controlled David Harrison LLC?
25· · · · · · ·MR. DUFFY:· Objection.
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·2· · · ·A.· · I don't know.
·3· · · ·Q.· · Did you ever tell him that you
·4· ·controlled David Harrison LLC?
·5· · · ·A.· · I don't remember.
·6· · · ·Q.· · Would you have any reason to
·7· ·doubt that he didn't know who controlled
·8· ·David Harrison LLC?
·9· · · · · · ·MR. DUFFY:· Objection.
10· · · ·A.· · I don't know how to answer that
11· ·question.
12· · · · · · ·(So marked for identification as
13· · · ·Exhibit 3.)
14· · · · · · ·MR. AULET:· Mr. Auerbach, I am
15· · · ·showing you what we have designated as
16· · · ·Exhibit 3.· This is a PDF file called
17· · · ·"David Harrison Invoices" that was
18· · · ·produced to us by the Debtors.
19· · · ·Q.· · Page 1, you will see it is what
20· ·looks like a spreadsheet that lists -- you
21· ·know, I will skip trying to characterize
22· ·it.
23· · · · · · ·If we go to page 2, we see an
24· ·invoice from David Harrison LLC.· Have you
25· ·ever seen this invoice or any invoice like
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Page 63·1· · · · · · · · · R. AUERBACH
·2· ·it?
·3· · · ·A.· · I haven't seen this invoice, no.
·4· · · ·Q.· · Have you ever seen any invoice
·5· ·like this one?
·6· · · ·A.· · No.· It -- no.
·7· · · ·Q.· · Who issued this invoice?
·8· · · · · · ·MR. TEELE:· Objection.
·9· · · ·A.· · I am not sure.
10· · · ·Q.· · Did you prepare this invoice?
11· · · · · · ·MR. DUFFY:· Objection.· Asked
12· · · ·and answered.
13· · · ·Q.· · Was the answer to the question
14· ·that, no, you did not prepare this
15· ·invoice?
16· · · ·A.· · Yes.· I mean, that is correct.
17· · · ·Q.· · Who directed Robert Jolson to
18· ·pay this invoice?
19· · · · · · ·MR. TEELE:· Objection to the
20· · · ·form.
21· · · ·A.· · I don't know for sure who gave
22· ·Robert the -- I don't know.· I don't know
23· ·who gave Robert this invoice.
24· · · ·Q.· · Did you direct Mr. Jolson to pay
25· ·this invoice?
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Page 64·1· · · · · · · · · R. AUERBACH
·2· · · · · · ·MR. DUFFY:· Objection.
·3· · · ·A.· · No.
·4· · · · · · ·MR. DUFFY:· You can answer.
·5· · · ·A.· · No, I did not.
·6· · · ·Q.· · Has David Harrison LLC ever
·7· ·provided consulting services?
·8· · · · · · ·MR. DUFFY:· Objection to the
·9· · · ·form.
10· · · ·A.· · No.· Just the rent that I
11· ·previously mentioned in my testimony.
12· · · ·Q.· · And you previously testified
13· ·that Northwest rented the property for
14· ·about nine months.· Is that correct?
15· · · ·A.· · I believe so.· Nine months,
16· ·approximately.
17· · · ·Q.· · What was the rent for those nine
18· ·months?
19· · · ·A.· · About 9,000.
20· · · ·Q.· · Now, I believe you testified
21· ·earlier that David Harrison LLC has no
22· ·employees.· Is that correct?
23· · · ·A.· · That is correct.
24· · · ·Q.· · And you are the manager of David
25· ·Harrison LLC?
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Page 65·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · Yes.
·3· · · ·Q.· · Who could have created this
·4· ·invoice on behalf of David Harrison LLC
·5· ·besides you?
·6· · · ·A.· · I am not sure.
·7· · · ·Q.· · Do you believe that this invoice
·8· ·is a fraudulent invoice?
·9· · · · · · ·MR. DUFFY:· Objection.
10· · · ·A.· · Fraud is a legal term.
11· · · ·Q.· · Do you believe that somebody
12· ·created this invoice without authorization
13· ·from David Harrison LLC?
14· · · ·A.· · I don't -- I don't know. I
15· ·don't know.
16· · · ·Q.· · Would anyone have been
17· ·authorized to create an invoice like
18· ·this -- strike that.
19· · · · · · ·Who would have been authorized
20· ·to order a creation of an invoice on
21· ·behalf of David Harrison LLC other than
22· ·you?
23· · · ·A.· · The only person that I could
24· ·think of could be my assistant.
25· · · ·Q.· · Did you instruct your assistant
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Page 66·1· · · · · · · · · R. AUERBACH
·2· ·to make this invoice or any invoice like
·3· ·it?
·4· · · ·A.· · No.
·5· · · ·Q.· · Would she have been authorized
·6· ·to create an invoice on behalf of David
·7· ·Harrison LLC without being instructed by
·8· ·you to do so?
·9· · · · · · ·MR. TEELE:· Objection.· You can
10· · · ·answer if you understand.
11· · · · · · ·MR. DUFFY:· You can answer if
12· · · ·you understand the question.
13· · · ·A.· · Can you repeat the question
14· ·please, sir?
15· · · ·Q.· · Would your assistant have been
16· ·authorized by David Harrison LLC to create
17· ·this invoice if you had not instructed him
18· ·or her to do so?
19· · · ·A.· · Should not be.· That should not
20· ·be.
21· · · · · · ·MR. DUFFY:· Hang on.· He has a
22· · · ·question for counsel.· He answered the
23· · · ·question.
24· · · · · · ·(Discussion held off the record;
25· · · ·witness confers with counsel.)
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·2· · · · · · ·MR. DUFFY:· Okay.· We're back.
·3· · · ·Q.· · Did David Harrison LLC get paid
·4· ·the $9,700 shown on this invoice?
·5· · · ·A.· · David Harrison LLC did receive
·6· ·rent, and -- I am going to make it bigger
·7· ·again.· I am sorry.· I cannot see this
·8· ·thing.
·9· · · · · · ·And that amount is what David
10· ·Harrison LLC received as rent.
11· · · ·Q.· · But it was not for consulting
12· ·services?
13· · · · · · ·MR. TEELE:· Objection to form.
14· · · ·A.· · No.· Other than I was working.
15· · · ·Q.· · If you go to page 3, you will
16· ·see another invoice from September 2017.
17· ·Again, this invoice reads "Consulting."
18· ·Is this invoice accurate?
19· · · · · · ·MR. TEELE:· Objection to the
20· · · ·form.
21· · · · · · ·MR. DUFFY:· For the record, this
22· · · ·is October of 2017.· I think, Counsel,
23· · · ·you said September.· If I misheard, I
24· · · ·apologize.
25· · · · · · ·MR. AULET:· It says invoice
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Page 68·1· · · · · · · · · R. AUERBACH
·2· · · ·September 1, 2017.· It has a big stamp
·3· · · ·underneath that that says "Received
·4· · · ·October 17th, 2017."· It actually says
·5· · · ·"for August 2017."
·6· · · · · · ·I will simply say "the invoice"
·7· · · ·on page 3, given the lack of clarity
·8· · · ·on what date this invoice is for.
·9· · · · · · ·MR. DUFFY:· Fair enough.
10· · · ·Q.· · Have you ever seen this invoice
11· ·before?
12· · · ·A.· · No.
13· · · ·Q.· · Do you know whose signature that
14· ·is in the bottom right-hand corner?
15· · · ·A.· · Give me a moment, please.
16· · · · · · ·No, I do not.
17· · · ·Q.· · Mr. Jolson testified that that
18· ·is his signature.· Do you have any reason
19· ·to doubt that?
20· · · ·A.· · If Mr. Jolson said that, then I
21· ·have no reason to doubt that.
22· · · ·Q.· · Why did Mr. Jolson believe that
23· ·David Harrison LLC provided consulting
24· ·services?
25· · · · · · ·MR. TEELE:· Objection.· I don't
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Page 69·1· · · · · · · · · R. AUERBACH
·2· · · ·know how you expect the witness to be
·3· · · ·inside Mr. Jolson's mind.
·4· · · ·Q.· · As the manager of David Harrison
·5· ·LLC and the manager of Northwest Company,
·6· ·what information did you convey to Robert
·7· ·Jolson regarding the relationship between
·8· ·David Harrison LLC and The Northwest
·9· ·Company?
10· · · ·A.· · A discussion that I would be
11· ·utilizing the property to work out of for
12· ·a period of time.· I had some sensitive
13· ·things to work on outside of the office.
14· · · ·Q.· · What were those sensitive
15· ·things?
16· · · ·A.· · The business issues that we were
17· ·going through, both here, in China, in
18· ·Cambodia.· I would work late at night,
19· ·start early in the morning.· Calls would
20· ·have to be in the middle of the night.
21· ·Things like that.
22· · · ·Q.· · So because those issues were
23· ·sensitive, you needed to discuss them at a
24· ·location other than The Northwest Company
25· ·office?
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·2· · · ·A.· · Also because they were very late
·3· ·at night or 2 or 3 o'clock in the morning.
·4· · · ·Q.· · Mr. Jolson testified he was
·5· ·unaware of any business that Northwest had
·6· ·ever conducted at 3 Old Farm.· Do you have
·7· ·any explanation why he was unaware of
·8· ·these discussions that you testified you
·9· ·had with him?
10· · · · · · ·MR. TEELE:· Same objection as
11· · · ·previously, to the extent you are
12· · · ·asking him to comment on testimony
13· · · ·that he didn't hear or thoughts in
14· · · ·Mr. Jolson's mind that he doesn't
15· · · ·know.· I don't think that's an
16· · · ·appropriate question.
17· · · · · · ·If you happen to know, you can
18· · · ·answer the question.
19· · · ·A.· · I don't know.· I assume that his
20· ·definition is his definition.
21· · · ·Q.· · But again, it's your testimony
22· ·under oath that you never told Mr. Jolson
23· ·that David Harrison LLC provided
24· ·consulting services?
25· · · · · · ·MR. TEELE:· Objection to the
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Page 71·1· · · · · · · · · R. AUERBACH
·2· · · ·characterization of his testimony.
·3· · · ·Let him testify for himself.
·4· · · ·A.· · It is not my belief that we
·5· ·discussed consulting.
·6· · · ·Q.· · What is the property at 3 Old
·7· ·Farm Road like?
·8· · · · · · ·MR. TEELE:· Objection to form.
·9· · · · · · ·(Reporter interruption.)
10· · · · · · ·MR. DUFFY:· Objection to form.
11· · · · · · ·MR. AULET:· Will I strike and
12· · · ·reask the question.
13· · · ·Q.· · Is 3 Old Farm Road a residence?
14· · · ·A.· · Yes.
15· · · ·Q.· · In fact, it is a fairly
16· ·expensive house, isn't it?
17· · · · · · ·MR. TEELE:· Objection to the
18· · · ·characterization and assuming
19· · · ·information not in evidence.
20· · · ·Q.· · How much did David Harrison LLC
21· ·pay for 3 Old Farm Road?
22· · · ·A.· · Approximately 4 million.
23· · · ·Q.· · Let's go to page 4.· Again, we
24· ·have another invoice.· This one is dated
25· ·October 1, 2017, instead of September, as
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Page 72·1· · · · · · · · · R. AUERBACH
·2· ·previously noted.· It is also received on
·3· ·October 17, 2020[sic], like the previous
·4· ·statement.
·5· · · · · · ·Did you order this invoice to be
·6· ·created?
·7· · · ·A.· · No.
·8· · · ·Q.· · Do you know who created this
·9· ·invoice?
10· · · ·A.· · No.· No.
11· · · ·Q.· · So, I will let you -- I am going
12· ·to give you control over this rather than
13· ·manually flip through each one, but you
14· ·will see that there is a large number of
15· ·invoices here.· If we scroll through them,
16· ·you will see that they go through every
17· ·month from the first month -- now we are
18· ·in 2018.· If we jump ahead to page 15, we
19· ·are at September 2018.
20· · · · · · ·Now I believe we are
21· ·significantly beyond nine months.· Why
22· ·were these invoices being issued in
23· ·September of 2018?
24· · · ·A.· · I don't know why.· They're not
25· ·paid.· I don't know why.
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Page 73·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · Did I hear you say they are not
·3· ·paid, or did I mishear something?
·4· · · ·A.· · You did, but I shouldn't have
·5· ·said that because I don't actually know
·6· ·the date.· I am trying hard to look at the
·7· ·date, but I don't really know.· I just --
·8· ·I don't know.
·9· · · ·Q.· · Is it your belief that David
10· ·Harrison LLC was only paid for nine months
11· ·of these 9,700 monthly invoices?
12· · · ·A.· · Yes, it is my belief.
13· · · ·Q.· · If we jump ahead to the last
14· ·one, this is December 1, 2019, and it
15· ·bears a note on the bottom "to be entered
16· ·on December 1, 2019."· I believe that
17· ·Mr. Jolson testified that he thought this
18· ·was the signature of something named
19· ·Christine, who was the event manager.
20· · · ·A.· · Yes.
21· · · ·Q.· · First, have you ever seen this
22· ·invoice before?
23· · · ·A.· · No.
24· · · ·Q.· · Do you know whose signature or
25· ·handwriting that is at the bottom?
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Page 74·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · I would assume that he is
·3· ·correct.· It does look like a CM.
·4· · · ·Q.· · And who is CM?
·5· · · ·A.· · Christine McClure.
·6· · · ·Q.· · Is Christine McClure an events
·7· ·manager?
·8· · · ·A.· · She is.
·9· · · ·Q.· · Why would she be involved in
10· ·invoices that were for consulting?
11· · · ·A.· · She also has certain capacities
12· ·that she works with me as an assistant.
13· ·But her main function is to handle and
14· ·coordinate trade shows.
15· · · ·Q.· · You earlier mentioned an
16· ·assistant who might have been authorized
17· ·to create invoices on behalf of David
18· ·Harrison LLC.· Is that Christine McClure?
19· · · ·A.· · Yes.
20· · · ·Q.· · Would she have been the one that
21· ·you were thinking may -- strike all that.
22· · · · · · ·Did you ever instruct her to
23· ·create this invoice?
24· · · ·A.· · No.
25· · · ·Q.· · Was there any reason for The
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Page 75·1· · · · · · · · · R. AUERBACH
·2· ·Northwest Company to pay this invoice?
·3· · · · · · ·MR. TEELE:· Objection to the
·4· · · ·form.
·5· · · ·A.· · Well, 2019, no.· No.
·6· · · ·Q.· · Has David Harrison LLC been
·7· ·receiving monthly payments of 9,700 since
·8· ·2017 from The Northwest Company?
·9· · · ·A.· · As I stated earlier, I believe
10· ·they received nine payments.· And I
11· ·believe that that -- I believe that that
12· ·is the number.· The property was not
13· ·utilized after.
14· · · ·Q.· · Is anyone currently renting the
15· ·property at 3 Old Farm Lane?
16· · · ·A.· · Currently, no.
17· · · ·Q.· · Was anyone renting it in
18· ·December of 2019?
19· · · ·A.· · No.
20· · · ·Q.· · What about at any time in 2019?
21· · · ·A.· · 2019, there was no rentals of
22· ·the unit.
23· · · ·Q.· · Mr. Auerbach, are you familiar
24· ·with the general ledgers of Northwest?
25· · · · · · ·MR. TEELE:· Objection.
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·2· · · ·A.· · No.
·3· · · ·Q.· · Do you know what system holds
·4· ·the general ledgers of Northwest?
·5· · · ·A.· · Can you define the question a
·6· ·little bit more for me?
·7· · · ·Q.· · Have you ever heard of an ERP
·8· ·system?
·9· · · ·A.· · Yes.
10· · · ·Q.· · And what is the ERP system?
11· · · ·A.· · The ERP system is the operating
12· ·system of which this company or other
13· ·companies would operate their business
14· ·platforms.
15· · · ·Q.· · Do you have access to the ERP
16· ·system?
17· · · ·A.· · No, I do not.
18· · · · · · ·(So marked for identification as
19· · · ·Exhibit 4.)
20· · · · · · ·MR. AULET:· I am going to show
21· · · ·you what I have marked as Exhibit 4,
22· · · ·which is a series of screenshots from
23· · · ·individual general ledger files that
24· · · ·were produced to us by the company.
25· · · ·Q.· · If you will take a look, the
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Page 77·1· · · · · · · · · R. AUERBACH
·2· ·first is for March 2019.· Near the bottom
·3· ·it shows a consulting fee for David
·4· ·Harrison LLC.
·5· · · ·A.· · Give me a moment.· I did review
·6· ·the document.· I am just trying to read it
·7· ·where I can answer your question.
·8· · · · · · ·This is from the general ledger,
·9· ·you are stating?
10· · · ·Q.· · Yes.
11· · · ·A.· · Go ahead.· I am sorry.· Could
12· ·you state your question, sir?
13· · · ·Q.· · Do you see the line that reads
14· ·"David Harrison LLC, balance forward
15· ·3/4/2019, 9,700"?
16· · · ·A.· · I see the name David Harrison
17· ·LLC.· I am having a little trouble reading
18· ·the numbers, but I will assume you are
19· ·correct.
20· · · ·Q.· · I believe you can zoom in on the
21· ·exhibit on your screen if you would like
22· ·to zoom in to verify.
23· · · ·A.· · I have been zooming in.· The
24· ·problem is every time I zoom in I lose the
25· ·bottom of the piece of paper.· I use an
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·2· ·Apple and I think I am somewhat challenged
·3· ·on this system.
·4· · · · · · ·Hold on.· Yes, I see 9,700.
·5· · · ·Q.· · Do you have any reason to doubt
·6· ·that payment was made to David Harrison
·7· ·LLC on the dates shown?
·8· · · ·A.· · I don't know.· If you are
·9· ·stating that this shows it was paid?· Is
10· ·that your question?· Does this show
11· ·that -- I don't really understand what
12· ·this shows.
13· · · ·Q.· · Who reviews the books of David
14· ·Harrison LLC?
15· · · ·A.· · Ken Gould.
16· · · ·Q.· · Who would know if it was getting
17· ·paid 9,700 every month?
18· · · ·A.· · Ken Gould and, as stated
19· ·previously, we received rent for
20· ·approximately nine months, and I am aware
21· ·of that.
22· · · ·Q.· · Did Ken Gould create any
23· ·financial statements of David Harrison LLC
24· ·for its activity in 2019?
25· · · ·A.· · I don't believe we published
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·2· ·'19, if that is the right word, but that
·3· ·is his function.
·4· · · ·Q.· · Did he give you any sort of
·5· ·statement that would show if David
·6· ·Harrison LLC had been receiving monthly
·7· ·rent on the 3 Old Farm Road property in
·8· ·2019?
·9· · · · · · ·MR. DUFFY:· Objection to form.
10· · · ·If you understand the question, go
11· · · ·ahead and answer.
12· · · ·A.· · Would you ask the question
13· ·again, sir?
14· · · ·Q.· · Did Ken Gould give you any sort
15· ·of financial statement or any other
16· ·document that would have shown you if
17· ·David Harrison LLC had been receiving rent
18· ·on the 3 Old Farm Road property in 2019?
19· · · ·A.· · In 2019, no.
20· · · ·Q.· · Did David Harrison LLC receive
21· ·any income that you are aware of in 2019?
22· · · ·A.· · Not that I am aware of by year.
23· · · ·Q.· · I am not sure what you mean by
24· ·"not that I am aware of by year."· Could
25· ·you explain that answer a little more?
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·2· · · ·A.· · I stated previously that David
·3· ·Harrison LLC received rent for
·4· ·approximately nine months.· I don't know
·5· ·the period, sitting here, of those
·6· ·payments, so I would be guessing.· I don't
·7· ·know.
·8· · · ·Q.· · But if David Harrison LLC had
·9· ·been receiving payments from 2017 through
10· ·the end of 2019, that is a lot longer than
11· ·nine months, right?
12· · · · · · ·MR. DUFFY:· Objection.
13· · · ·A.· · The duration of time that you
14· ·stated, it would be.· But I have no -- I
15· ·am not aware that David Harrison did at
16· ·all.
17· · · ·Q.· · Do you pay attention to the
18· ·finances of David Harrison LLC?
19· · · · · · ·MR. TEELE:· Objection to the
20· · · ·form.
21· · · ·A.· · I review it at the end of the
22· ·year when Ken produces the statement and
23· ·the taxes.
24· · · ·Q.· · Has he produced those statements
25· ·and taxes for 2019?
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·2· · · ·A.· · No, sir.
·3· · · ·Q.· · Who pays the expenses on the
·4· ·David Harrison property?
·5· · · ·A.· · Northwest Textiles Holdings or
·6· ·David Harrison.· It is one and the same.
·7· · · ·Q.· · Does David Harrison LLC have its
·8· ·own bank account?
·9· · · ·A.· · Yes, it does.
10· · · ·Q.· · Do you receive bank statements
11· ·for that bank account?
12· · · ·A.· · Personally, no, I do not.
13· · · ·Q.· · Who does?
14· · · ·A.· · Ken Gould.
15· · · ·Q.· · Who is authorized to withdraw
16· ·money from the David Harrison LLC bank
17· ·account?
18· · · ·A.· · Myself.
19· · · ·Q.· · Anyone else?
20· · · ·A.· · No.
21· · · ·Q.· · Have you ever withdrawn money
22· ·from the David Harrison LLC bank accounts
23· ·in the past four years?
24· · · ·A.· · I can't say.
25· · · ·Q.· · Have you ever instructed sums of
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Page 82·1· · · · · · · · · R. AUERBACH
·2· ·money to be transferred from the David
·3· ·Harrison LLC bank account to the bank
·4· ·accounts of Northwest?
·5· · · ·A.· · I don't remember.
·6· · · ·Q.· · And so, I have gone to page 10
·7· ·of this exhibit, which shows two payments
·8· ·in December 2019.· Again, it is your
·9· ·testimony that you are unaware of these
10· ·payments to David Harrison LLC?
11· · · · · · ·MR. TEELE:· Objection to the
12· · · ·form.
13· · · ·A.· · I don't believe -- I don't
14· ·believe there were any payments in '19,
15· ·but I don't know.· I don't know.
16· · · ·Q.· · Do you have any explanation for
17· ·why more than two years of invoices were
18· ·created by David Harrison LLC reading
19· ·"Consulting"?
20· · · · · · ·MR. TEELE:· Objection to the
21· · · ·form.
22· · · ·A.· · No, I don't.
23· · · ·Q.· · Does the property at 3 Old Farm
24· ·Lane have a mortgage?
25· · · ·A.· · Yes, it does.
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Page 83·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · And who is responsible for
·3· ·paying that mortgage?
·4· · · ·A.· · I am.
·5· · · ·Q.· · And do you pay that mortgage
·6· ·every month?
·7· · · ·A.· · Yes, I do.
·8· · · ·Q.· · Approximately what are the
·9· ·mortgage payments?
10· · · ·A.· · I don't know.· It is automatic.
11· · · · · · ·MR. AULET:· Now is probably a
12· · · ·good time for a short lunch break if
13· · · ·that works for everyone.
14· · · · · · ·MR. TEELE:· We'll come back at
15· · · ·1:30 or 1:40.
16· · · · · · ·MR. AULET:· Why don't we do
17· · · ·1:30.
18· · · · · · ·THE VIDEOGRAPHER:· 12:48, off
19· · · ·the record.
20· · · · · · ·(Luncheon Recess.)
21· · · · · · ·THE VIDEOGRAPHER:· Time is 1:31.
22· · · ·We are back on the record.
23· · · · · · ·THE WITNESS:· Mr. Aulet?
24· · · ·Q.· · Yes.
25· · · ·A.· · When I was having lunch, I was
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Page 84·1· · · · · · · · · R. AUERBACH
·2· ·sitting in my office and I realized I made
·3· ·a mistake in a comment I made earlier in
·4· ·that I had said that I believed on David
·5· ·Harrison that there were nine payments
·6· ·made.· And what I had meant to say is that
·7· ·there were nine payments that were not
·8· ·made.· So, I misspoke so I wanted to
·9· ·clarify.· I was incorrect in what I said.
10· · · ·Q.· · I am sorry.· I am not sure I
11· ·understand.· You say that there were nine
12· ·payments that were not made.· What do you
13· ·mean by "there were nine payments that
14· ·were not made"?
15· · · ·A.· · That there were nine payments
16· ·that were in the system that -- I am not
17· ·sure why they were in the system but they
18· ·were not paid.· I had made a comment that
19· ·there were nine paid.· I made a mistake.
20· · · ·Q.· · How did you know --
21· · · · · · ·How did you know how many
22· ·invoices were in the system?
23· · · ·A.· · I had asked previously, a while
24· ·ago.· But like I said, I had made a
25· ·mistake.· I flipped the numbers.
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Page 85·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · So, to know how many invoices
·3· ·were not paid, you would have needed to
·4· ·know how many invoices were issued and how
·5· ·many invoices were paid.· Correct?
·6· · · ·A.· · No.· I had just asked -- no. I
·7· ·just asked a while back what was in the
·8· ·system because I didn't understand it.· It
·9· ·came up a long time ago.· Anyway, as I
10· ·said, I made a mistake.
11· · · ·Q.· · Who did you ask --
12· · · · · · ·MR. TEELE:· Let him answer the
13· · · ·question.
14· · · ·A.· · I had asked Ken, Ken Gould, a
15· ·while back.· I was just talking to him
16· ·about different things.· Anyway, as I
17· ·said, I flipped the numbers.· It was my
18· ·mistake and I wanted to correct it.
19· · · ·Q.· · When did you have this
20· ·conversation with Ken Gould?
21· · · ·A.· · A while ago.· I don't know.· And
22· ·I am trying not to guess since when I
23· ·guess I seem to make mistakes.
24· · · ·Q.· · What do you recall about this
25· ·conversation with Ken Gould?
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Page 86·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · I had just asked Ken about the
·3· ·rent received from David Harrison, and Ken
·4· ·had made a comment to me that -- because
·5· ·remember, Ken is with David Harrison and
·6· ·Ken also sees the records here and Ken
·7· ·said to me that he didn't know why there
·8· ·were nine rent payments in the system that
·9· ·were never paid and should not be in the
10· ·system.· And we talked about that.· And
11· ·that was it.· And I said that there were
12· ·nine paid.
13· · · ·Q.· · How long was the Old West -- the
14· ·Old Farm Lane property in use by
15· ·Northwest?
16· · · ·A.· · I believe -- I don't know.
17· · · ·Q.· · Didn't you testify that you were
18· ·the only person who used it on behalf of
19· ·Northwest?
20· · · ·A.· · Yes.
21· · · ·Q.· · How long have you been using it?
22· · · ·A.· · As I said, I was going to say I
23· ·believe -- again, I made a mistake, so I
24· ·don't know the exact length of time. I
25· ·don't know.
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Page 87·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · What refreshed your recollection
·3· ·as to how much David Harrison had earned
·4· ·from Northwest in rent?
·5· · · ·A.· · Earned?· I was just having
·6· ·lunch.· I was thinking about our
·7· ·conversation, you know, from this morning,
·8· ·and I was going through it in my head.
·9· ·That's it.· I got a sandwich, I sat in my
10· ·office.· I was just thinking.
11· · · ·Q.· · Did you ever make an attempt to
12· ·get those nine payments paid?
13· · · ·A.· · No.
14· · · ·Q.· · Why not?
15· · · ·A.· · I wasn't utilizing it.· In other
16· ·words, I don't even know why they are in
17· ·the system.
18· · · ·Q.· · So, when you were alerted that
19· ·these payments existed, and despite the
20· ·fact you weren't using them, why didn't
21· ·you alert Northwest that these payments
22· ·had stopped being made?
23· · · · · · ·MR. DUFFY:· Objection.
24· · · ·Misleading.· Mischaracterizes the
25· · · ·testimony.· If you understand, you can
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Page 88·1· · · · · · · · · R. AUERBACH
·2· · · ·answer.
·3· · · ·A.· · I don't, actually.
·4· · · ·Q.· · Did you ever alert Northwest
·5· ·that it should stop making payments to
·6· ·David Harrison LLC?
·7· · · ·A.· · I have no idea.· I just don't
·8· ·remember.
·9· · · ·Q.· · Was anyone at Northwest besides
10· ·you familiar with your business
11· ·arrangement between Northwest Company and
12· ·David Harrison LLC?
13· · · ·A.· · Can you clarify what that means?
14· ·I am sorry.· When you say any
15· ·relationship?
16· · · ·Q.· · Who knew that you were renting
17· ·this property from David Harrison LLC on
18· ·behalf of Northwest at Northwest?
19· · · ·A.· · My accountant, and I would
20· ·assume the people here who were paying the
21· ·rent.
22· · · ·Q.· · When you say "the people here
23· ·who were paying the rent," who do you
24· ·mean?
25· · · ·A.· · Robert.
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Page 89·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · Robert testified he didn't know
·3· ·that Northwest was leasing property from
·4· ·David Harrison LLC.
·5· · · · · · ·MR. DUFFY:· Objection.
·6· · · ·Mischaracterization.
·7· · · ·Q.· · Why would he have testified that
·8· ·way?
·9· · · · · · ·MR. TEELE:· Objection.· Do you
10· · · ·have the transcript to show him? I
11· · · ·think we should do that.· Otherwise I
12· · · ·don't know and certainly Mr. Auerbach
13· · · ·doesn't know what Mr. Jolson testified
14· · · ·to.
15· · · ·Q.· · Who at Northwest would know if
16· ·you were using or not using the Old Farm
17· ·Road property?
18· · · ·A.· · Myself.
19· · · ·Q.· · And if you didn't tell anyone
20· ·that you were no longer using it the
21· ·payments should be stopped, would anyone
22· ·else know the payments should be stopped?
23· · · · · · ·MR. DUFFY:· Objection to the
24· · · ·form.· If you understand it, you can
25· · · ·answer.
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Page 90·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · I mean, it was a while ago.· The
·3· ·payments were stopped, so clearly the
·4· ·payments stopped.· I must have -- I must
·5· ·have said it but I don't remember when so
·6· ·I don't want to make it up.
·7· · · · · · ·(So marked for identification as
·8· · · ·Exhibit 5.)
·9· · · · · · ·MR. AULET:· So, Mr. Auerbach, I
10· · · ·am going to show you what I have
11· · · ·marked Exhibit 5, which is a bank
12· · · ·statement from June 29, 2019 through
13· · · ·July 31, 2019.
14· · · ·Q.· · I am going to go to page 12 of
15· ·this exhibit.· If you look at the bottom,
16· ·there is a section called "Checks Paid"
17· ·and if you look, the fourth down on the
18· ·leftmost column is check 29080, paid on
19· ·the 11th for $9,700.· Was that check paid
20· ·to David Harrison LLC?
21· · · ·A.· · I have no idea.· I mean, I am
22· ·looking where it says "Checks Paid,"
23· ·and...
24· · · · · · ·I am trying to read it.· I can
25· ·make it larger but things come up and
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Page 91·1· · · · · · · · · R. AUERBACH
·2· ·block it.
·3· · · · · · ·(Pause.)
·4· · · · · · ·I do see it.· I just have no
·5· ·idea what it is -- I have no idea.
·6· · · ·Q.· · Are you aware that we have
·7· ·requested a check register from the
·8· ·Debtors that would enable us to see who
·9· ·checks such as this check were paid to?
10· · · ·A.· · Not specifically.· I don't
11· ·specifically remember that but...
12· · · ·Q.· · Do such check registers exist at
13· ·Northwest?
14· · · ·A.· · When you say a check register,
15· ·you'd have to explain to me what that
16· ·means.
17· · · ·Q.· · I would like a document that
18· ·tells me who check 29080 was made out to.
19· ·Does such a document exist at Northwest?
20· · · ·A.· · I have no idea.
21· · · ·Q.· · Who would?
22· · · ·A.· · I don't know.
23· · · ·Q.· · Now, July 11, 2019 is within a
24· ·year of the Northwest bankruptcy filing.
25· ·Correct?
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Page 92·1· · · · · · · · · R. AUERBACH
·2· · · · · · ·MR. TEELE:· Why don't you just
·3· · · ·make a representation, Mr. Aulet, and
·4· · · ·see if he agrees with it?
·5· · · ·Q.· · If I made the representation
·6· ·that July 11, 2019 is within one year of
·7· ·the filing date of Northwest, would you
·8· ·have any reason to disagree with that
·9· ·representation?
10· · · ·A.· · No.· We filed on April 18th, I
11· ·believe, of 2020.
12· · · ·Q.· · And if this check for $9,700 was
13· ·made out to David Harrison LLC and was
14· ·deposited by David Harrison LLC, should it
15· ·have been disclosed?
16· · · · · · ·MR. DUFFY:· Objection.· It
17· · · ·assumes facts that are not in
18· · · ·evidence.· I also object to the
19· · · ·hypothetical.
20· · · · · · ·You can answer if you
21· · · ·understand.
22· · · ·A.· · I have no idea.
23· · · ·Q.· · When you prepared the schedule
24· ·of all payments that were made on
25· ·behalf -- by the Debtors to entities --
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Page 93·1· · · · · · · · · R. AUERBACH
·2· ·strike that.
·3· · · · · · ·Do you recall the schedule we
·4· ·have looked at of all payments made to or
·5· ·for the benefit of insiders within one
·6· ·year of the petition date?
·7· · · ·A.· · The statement that you showed me
·8· ·earlier, yes.
·9· · · ·Q.· · And you were aware that the
10· ·Debtors had made payments to David
11· ·Harrison LLC in the past.· Correct?
12· · · · · · ·MR. DUFFY:· Objection.· Vague.
13· · · ·What time period are you speaking
14· · · ·about?
15· · · · · · ·MR. AULET:· At any point in the
16· · · ·past.
17· · · · · · ·MR. DUFFY:· If you understand
18· · · ·it, you can answer it.
19· · · ·A.· · I relied upon others when they
20· ·put the schedule together.· It was my
21· ·understanding that no payments were made
22· ·within a year.· That is my understanding.
23· · · ·Q.· · Did you inform those others that
24· ·David Harrison LLC was one of your
25· ·entities?
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Page 94·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · I don't remember having any
·3· ·conversation about David Harrison LLC.
·4· · · ·Q.· · When you reviewed the schedules
·5· ·for accuracy, did you consider if David
·6· ·Harrison LLC was an entity that someone
·7· ·should check that payments had been made
·8· ·to?
·9· · · ·A.· · No.· As I said, I relied upon
10· ·others to give me the schedule.· I did not
11· ·believe that there were any payments
12· ·within that time frame.
13· · · ·Q.· · What others did you rely on?
14· · · ·A.· · The people who prepared the
15· ·schedules.
16· · · ·Q.· · And who were those?
17· · · ·A.· · The Clear Thinking Group. I
18· ·would assume -- the Clear Thinking Group.
19· · · ·Q.· · Did you provide Clear Thinking
20· ·Group with a complete list of entities
21· ·that were associated with you?
22· · · ·A.· · I don't remember if he gave us a
23· ·listing of all entities.· Again, I did not
24· ·believe that there were any payments in
25· ·the time frame.· Didn't even occur to me.
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Page 95·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · You earlier testified that you
·3· ·recalled a conversation with your
·4· ·accountant about nine payments that were
·5· ·made to David Harrison LLC that were not
·6· ·received or not made.· Is that correct?
·7· · · · · · ·MR. DUFFY:
·8· · · ·A.· · Yes.· Not -- not not received,
·9· ·just that there were nine payments that
10· ·appeared on our books that should not be
11· ·booked, that we did not pay nor should we.
12· · · ·Q.· · Appeared on whose books?
13· · · ·A.· · Northwest.
14· · · ·Q.· · And Mr. Gould made you aware
15· ·that there were nine payments from David
16· ·Harrison LLC that appeared on Northwest's
17· ·books "that should not be booked, that we
18· ·did not pay nor should we."· Who did you
19· ·tell those payments should not be made?
20· · · ·A.· · I don't remember.· But as I
21· ·said, no payments that I am aware of were
22· ·made.· So I most likely mentioned it to
23· ·Rob but I don't know.· I just don't
24· ·remember.
25· · · ·Q.· · Mr. Auerbach, do you have
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Page 96·1· · · · · · · · · R. AUERBACH
·2· ·Northwest American Express cards in your
·3· ·name?
·4· · · ·A.· · No.
·5· · · ·Q.· · How many -- sorry.· How many did
·6· ·you have at the beginning of April of
·7· ·2020?
·8· · · · · · ·THE WITNESS:· He asked if I had,
·9· · · ·and I do not have.
10· · · · · · ·MR. DUFFY:· You answered
11· · · ·contemporaneously now?
12· · · · · · ·THE WITNESS:· Yes.
13· · · · · · ·MR. DUFFY:· Objection to the
14· · · ·question.· It assumes facts not in
15· · · ·evidence.
16· · · ·Q.· · In the past, have you had
17· ·American Express cards issued -- strike
18· ·that.
19· · · · · · ·Have you had Northwest Company
20· ·American Express cards issued in your
21· ·name?
22· · · ·A.· · Yes.
23· · · ·Q.· · Did you generally have an
24· ·American Express Platinum Card?
25· · · ·A.· · Yes.
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Page 97·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · Did you generally have an
·3· ·American Express Centurian Card in your
·4· ·name?
·5· · · ·A.· · Yes.
·6· · · ·Q.· · Was there any difference in the
·7· ·expenses that were supposed to be put on
·8· ·the Platinum Card versus the Centurian
·9· ·Card?
10· · · ·A.· · No.· There was no defined
11· ·difference.
12· · · ·Q.· · Who is Vanessa Marinho?
13· · · ·A.· · Vanessa Marinho is a person who
14· ·worked with us from time to time.· She
15· ·attends events, goes to factories, meets
16· ·the suppliers.· Basically, just somebody
17· ·who helps me with different things.
18· · · ·Q.· · Why did she have a Northwest
19· ·Centurian Card?
20· · · ·A.· · She didn't have a Centurian
21· ·Card.· She had a supplemental card on the
22· ·Centurian account, but it's not a
23· ·Centurian Card.
24· · · ·Q.· · Why did she have a supplemental
25· ·card on the account?
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Page 98·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · To cover either expenses, or she
·3· ·didn't have the income to make all the
·4· ·trips.· It would have been much more
·5· ·difficult for me to have to do that
·6· ·through somebody else.· We gave her a
·7· ·card.
·8· · · ·Q.· · Did she perform any -- did you
·9· ·hire her for any personal services
10· ·unrelated to Northwest?
11· · · · · · ·MR. TEELE:· Objection to the
12· · · ·question.· I think it is outside the
13· · · ·scope of anything the deposition is
14· · · ·noticed for.
15· · · · · · ·MR. AULET:· We noticed
16· · · ·Mr. Auerbach in his personal capacity.
17· · · ·Q.· · Vanessa Marinho, did you hire
18· ·her for any personal services unrelated to
19· ·Northwest?
20· · · · · · ·MR. TEELE:· Same objection.· You
21· · · ·can answer.
22· · · ·A.· · Can you define "personal
23· ·services"?
24· · · ·Q.· · Did you hire her to do anything
25· ·that didn't relate to Northwest?
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Page 99·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · She also is a real estate agent
·3· ·and she handles the maintenance of the
·4· ·properties in Miami.
·5· · · ·Q.· · What properties in Miami do you
·6· ·mean?
·7· · · ·A.· · The properties that we discussed
·8· ·earlier that were owned -- the units that
·9· ·are owned in Miami.
10· · · ·Q.· · Do you charge personal expenses
11· ·to your Northwest American Express credit
12· ·card?
13· · · ·A.· · Yes.
14· · · ·Q.· · And have you charged a number of
15· ·personal expenses over a number of years
16· ·to those American Express credit cards?
17· · · · · · ·MR. TEELE:· Objection to the
18· · · ·form.
19· · · ·A.· · There were personal charges.
20· · · ·Q.· · What is the procedure at
21· ·Northwest for determining what charges on
22· ·your American Express cards are your
23· ·personal expenses versus corporate
24· ·expenses?
25· · · · · · ·MR. DUFFY:· Objection to the
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Page 100·1· · · · · · · · · R. AUERBACH
·2· · · ·form.
·3· · · ·A.· · To my knowledge, it goes to
·4· ·accounting.· They are supposed to be
·5· ·booked either to the appropriate business
·6· ·expense, to my W-2 or to my loan account,
·7· ·depending upon the nature of the charge.
·8· · · ·Q.· · You say your W-2.· What tax
·9· ·forms do you receive from Northwest?
10· · · ·A.· · I really don't know what you
11· ·mean.
12· · · ·Q.· · Do you receive a W-2 tax form
13· ·from Northwest?
14· · · ·A.· · Yes.· And it goes to my
15· ·accountant, but yes.
16· · · ·Q.· · Do you receive a K-1 tax form
17· ·from Northwest?
18· · · ·A.· · I don't know.
19· · · ·Q.· · Does your W-2 form that you
20· ·receive accurately reflect all
21· ·compensation that was provided to you by
22· ·Northwest, both cash and non-cash
23· ·compensation?
24· · · ·A.· · To the best of my knowledge, it
25· ·is -- it does.
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Page 101·1· · · · · · · · · R. AUERBACH
·2· · · · · · ·(So marked for identification as
·3· · · ·Exhibit 6.)
·4· · · · · · ·MR. AULET:· I will show you what
·5· · · ·I have marked Exhibit 6, American
·6· · · ·Express Business Platinum Card
·7· · · ·statement.
·8· · · ·Q.· · I am going to scroll through
·9· ·this a little bit.· Let me get to the
10· ·debits.· So, we are on page 6.· This is a
11· ·detail of charges for the Ross H. Auerbach
12· ·card ending 4-25001.· Whose handwriting is
13· ·this?
14· · · ·A.· · It's mine -- well, at least
15· ·parts of it are.· I recognize the word
16· ·"auto," but maybe I can look at it on --
17· ·give me a second.
18· · · · · · ·(Pause.)
19· · · · · · ·That's my -- appears to be my
20· ·handwriting.
21· · · · · · ·MR. KESTENBAUM:· Each entry you
22· · · ·see on the page?
23· · · · · · ·THE WITNESS:· It appears to be.
24· · · ·A.· · Yes, it appears to be my
25· ·handwriting.
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Page 102·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · So, when these account
·3· ·statements are received, are you provided
·4· ·with a copy of them?
·5· · · ·A.· · Yes.· And then -- you mean do I
·6· ·get the statements to make those notes?
·7· · · ·Q.· · Yes.
·8· · · ·A.· · Yes.· Yes.
·9· · · ·Q.· · So, are you responsible for
10· ·indicating which expenses on the card are
11· ·your personal expenses and which expenses
12· ·are expenses of Northwest?
13· · · · · · ·MR. TEELE:· Objection to form.
14· · · ·A.· · When I write my description,
15· ·yes.· He knows whatever I write.
16· · · ·Q.· · Is anyone else responsible for
17· ·verifying if an expense that you allocate
18· ·to a Northwest expense account is in fact
19· ·a Northwest expense?
20· · · ·A.· · There are supposed to be checks
21· ·and balances.· So if something is deemed
22· ·maybe not correct or -- there is supposed
23· ·to be checks and balances.
24· · · ·Q.· · You say "there are supposed to
25· ·be checks and balances."· What checks and
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Page 103·1· · · · · · · · · R. AUERBACH
·2· ·balances are you personally aware of?
·3· · · ·A.· · I am not aware of the checks and
·4· ·balances that are set up but I know that
·5· ·there are checks and balances.· I have
·6· ·been made aware that there are checks and
·7· ·balances.· More than one person looks
·8· ·through these.· I just don't know who that
·9· ·is.
10· · · ·Q.· · Has anyone ever come back to you
11· ·and challenged one of the expenses that
12· ·you allocated to Northwest?
13· · · · · · ·MR. TEELE:· Objection to form.
14· · · ·A.· · Over a period of years there had
15· ·to be -- there were occasions where either
16· ·accounting would come back and ask me if
17· ·something was coded correctly or to
18· ·explain in more detail what something was.
19· ·But, yes, I have been asked before.
20· · · ·Q.· · About how many times can you
21· ·recall?
22· · · ·A.· · I don't know.
23· · · ·Q.· · Are there any specific instances
24· ·that you can recall as you sit here today?
25· · · ·A.· · Specific?· Not as I sit here,
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Page 104·1· · · · · · · · · R. AUERBACH
·2· ·but the answer is yes, I have been asked
·3· ·about items that I have entered.
·4· · · ·Q.· · Have you ever been asked to
·5· ·provide additional documentation to
·6· ·support an expense?
·7· · · ·A.· · Yes.· Especially with some of
·8· ·the things that are gifts to retailers or
·9· ·gifts to licensors.· I was asked for like
10· ·the actual receipt so --
11· · · · · · ·Like if it was a gift for a
12· ·retailer or a gift for a licensor,
13· ·sometimes I am asked for more detail on
14· ·that.
15· · · · · · ·(Reporter interruption.)
16· · · ·Q.· · I have turned to page 9 of this
17· ·exhibit, and I would like to direct your
18· ·attention to the bottom entry, which is a
19· ·ticket from Miami to Denver for Gabrielle
20· ·Auerbach.· That is noted as "Ashford Ross
21· ·trip."· Did you write "Ashford Ross trip"
22· ·there?
23· · · ·A.· · I am looking at the other
24· ·screen.
25· · · · · · ·I did.· That is my handwriting.
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Page 105·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · And when you wrote "Ashford Ross
·3· ·trip," did you intend that this airline
·4· ·ticket be booked to a Northwest expense
·5· ·account?
·6· · · ·A.· · What year is this statement?
·7· ·May I ask?· I can't see it.
·8· · · ·Q.· · You can see the date right next
·9· ·to the ticket of January 2, 2017.
10· · · ·A.· · Oh, okay.· I don't know -- I
11· ·don't know sitting here why I would have
12· ·"Ashford" on there unless there was a
13· ·reason that -- I don't know the answer.
14· ·It could either -- I don't know the
15· ·answer.· It could be a mistake.· It could
16· ·be something that needed to be done in
17· ·Florida.· I don't know.
18· · · ·Q.· · And the passenger is Gabrielle
19· ·Auerbach that is listed there.· Is there
20· ·any reason why a plane ticket for
21· ·Gabriella Auerbach from Miami to Denver
22· ·would be a Northwest expense?
23· · · ·A.· · Not that I am aware of, no.
24· · · ·Q.· · Should that have been billed to
25· ·a Northwest expense account?
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Page 106·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · I am looking here.
·3· · · · · · ·MR. DUFFY:· Objection to the
·4· · · ·question.· It assumes facts that
·5· · · ·aren't in evidence.
·6· · · ·A.· · I just don't remember the trip.
·7· ·I just don't remember.
·8· · · ·Q.· · I have gone to page 10.· You
·9· ·will notice some other entries, in
10· ·particular a $38,000 charge in Vail,
11· ·Colorado, also labeled "Ashford Ross NW
12· ·trip."· What did you mean -- did you write
13· ·"Ashford Ross NW trip" there?
14· · · ·A.· · I did.· I did.· And I said
15· ·earlier, I shouldn't guess at things. I
16· ·believe that that is a trip that
17· ·Ashford -- when I say "Ashford," I use the
18· ·name Ashford and Allen interchangeably.
19· ·We all do here at the company.· We look at
20· ·Ashford as Allen.· Sometimes I write
21· ·Ashford, sometimes I write Allen.· But I
22· ·believe Allen was going to come on this
23· ·trip with his family but did not.· Now
24· ·that I see that charge, I think that that
25· ·was a mistake because he wanted to come on
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Page 107·1· · · · · · · · · R. AUERBACH
·2· ·it but he did not.
·3· · · ·Q.· · Had Allen and his family come on
·4· ·that trip to Vail, would that have been a
·5· ·Northwest business expense or a personal
·6· ·expense?
·7· · · ·A.· · If we were working, most of the
·8· ·trips that we had, no matter where we
·9· ·went, we were always working, Allen and I.
10· ·We used to -- we used to work a lot and
11· ·spend a lot of time together.
12· · · ·Q.· · And if Allen had been on that
13· ·trip and you had been working some amount
14· ·of that time, would the entire expense
15· ·have been properly allocated to Northwest?
16· · · · · · ·MR. DUFFY:· Objection.· I object
17· · · ·to the hypothetical and I object that
18· · · ·he would need to draw a legal
19· · · ·conclusion or an accounting conclusion
20· · · ·or something.· But it is not
21· · · ·appropriate for a lay witness.
22· · · · · · ·If you understand the question,
23· · · ·you can answer.
24· · · ·A.· · No, because I don't know the
25· ·answer.
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Page 108·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · Did you ever provide Northwest
·3· ·with an allocation of expenses for a trip
·4· ·like this trip to Vail that allocated the
·5· ·expense between personal and business
·6· ·expense?
·7· · · · · · ·MR. DUFFY:· Objection to the
·8· · · ·form.
·9· · · ·A.· · And the answer is I don't know.
10· · · ·Q.· · And if Allen was not in fact on
11· ·this trip -- strike that.
12· · · · · · ·Mr. Auerbach, I am going to show
13· ·you what I have marked as Exhibit 6, which
14· ·is an American Express Centurian Card
15· ·statement with the closing date of
16· ·September 19, 2017.
17· · · ·Q.· · I have gone to page 7, and I
18· ·would like to direct your attention to the
19· ·top entry, a Tom Ford charge for
20· ·$53,536.95, with the handwritten notation
21· ·"business clothes" next to the amount.
22· · · · · · ·Is that "business clothes" note
23· ·your handwriting?
24· · · ·A.· · It is.
25· · · ·Q.· · Is that handwriting near it to
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Page 109·1· · · · · · · · · R. AUERBACH
·2· ·the left that appears to say "off sup," is
·3· ·that your handwriting?
·4· · · ·A.· · No, it is not.
·5· · · · · · ·Go ahead.
·6· · · ·Q.· · When you wrote "business
·7· ·clothes" next to this expense, how did you
·8· ·expect the accounting department to
·9· ·allocate this expense?
10· · · ·A.· · I didn't know whether or not it
11· ·would be considered something that was a
12· ·business deduction since it was
13· ·specifically clothes that I wore for work,
14· ·meaning suits that I wore for work, or if
15· ·it was going to be part of W-2 or if it
16· ·was going to go to the loan account. I
17· ·didn't know, so I just wrote down what it
18· ·was, which was clearly what it was, and I
19· ·gave it to -- and I gave it into
20· ·accounting to book correctly.
21· · · ·Q.· · Would it -- complete what you
22· ·were saying.
23· · · ·A.· · Things I didn't know.· Go ahead.
24· · · ·Q.· · Would it surprise you that this
25· ·was booked as office supplies?
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Page 110·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · It would stun me.
·3· · · ·Q.· · Do you shop at Tom Ford often?
·4· · · ·A.· · In breaks of time, yes.· Not
·5· ·every day.· I mean...
·6· · · ·Q.· · I apologize.· I think there is a
·7· ·slight delay in the audio so I keep
·8· ·accidentally talking over you.
·9· · · ·A.· · It's okay.
10· · · ·Q.· · When you shop at Tom Ford, how
11· ·do you typically allocate those expenses
12· ·when you are given one of these printouts
13· ·of an American Express card?
14· · · · · · ·MR. DUFFY:· Objection.· It
15· · · ·assumes that every time he shops at
16· · · ·Tom Ford he charges it on a Northwest
17· · · ·Company credit card.
18· · · · · · ·THE WITNESS:· Correct.· And I
19· · · ·don't.
20· · · ·Q.· · When you shop at Tom Ford on a
21· ·Northwest Company credit card, how do you
22· ·typically allocate that expense?
23· · · · · · ·MR. DUFFY:· Objection.· It
24· · · ·assumes that he's done it other than
25· · · ·this one time.
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Page 111·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · You can answer the question,
·3· ·Mr. Auerbach.
·4· · · ·A.· · Can you state it again?· I am so
·5· ·sorry.
·6· · · ·Q.· · When you shop at Tom Ford on a
·7· ·Northwest Company credit card, how do you
·8· ·typically allocate that expense?
·9· · · ·A.· · If it is business attire, then I
10· ·do as I wrote here.· If it is personal, I
11· ·wouldn't put it in at all and I wouldn't
12· ·shop on this card if it was personal.· So
13· ·that's...
14· · · ·Q.· · When you say that you wouldn't
15· ·put it on this card, you wouldn't shop on
16· ·this card if it was personal, do you mean
17· ·you wouldn't shop on Northwest Company
18· ·cards if it was personal, or you wouldn't
19· ·shop on this particular Centurian Card if
20· ·it was personal?
21· · · ·A.· · Let me say it differently.· If
22· ·it were personal clothing, I would have
23· ·written "personal" and circled it if it
24· ·was purely personal.
25· · · · · · ·(So marked for identification as
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Page 112·1· · · · · · · · · R. AUERBACH
·2· · · ·Exhibit 7.)
·3· · · · · · ·MR. AULET:· Mr. Auerbach, I will
·4· · · ·show you what I have marked Exhibit 7,
·5· · · ·which is a Business Centurian Card
·6· · · ·statement with closing date of
·7· · · ·December 20, 2017.· I will turn to the
·8· · · ·charges of this account.
·9· · · ·Q.· · We are on page 4, and there is a
10· ·number of charges for various active --
11· ·various charges in Milano.· There is a
12· ·great deal of your handwriting here.
13· · · · · · ·First, is this your handwriting?
14· · · ·A.· · I believe, yes.
15· · · ·Q.· · And do you recall this trip to
16· ·Italy?
17· · · ·A.· · No.· Only in that I have been --
18· ·I have been to Italy many more times than
19· ·one.· I would have to go back.· If I have
20· ·notes, I'd have to go back just because it
21· ·is back a long way.· I have been to Italy
22· ·with Ashford, Allen.· I have been to Italy
23· ·without Ashford.· I don't know the answer.
24· ·I just don't know.
25· · · ·Q.· · For the things that are listed
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·2· ·"Ross personal" or "personal Ross," those
·3· ·should have been charged to your loan
·4· ·account.· Correct?
·5· · · ·A.· · That is correct.
·6· · · ·Q.· · Is there any reason they would
·7· ·not have been charged to your loan
·8· ·account?
·9· · · ·A.· · None that I would know of.
10· · · ·Q.· · Do you ever receive statements
11· ·of your loan account?
12· · · ·A.· · No, I do not.
13· · · ·Q.· · Is anything ever created to show
14· ·what specific expenses have been put in
15· ·your loan account in any one month?
16· · · · · · ·MR. TEELE:· Objection to the
17· · · ·form.
18· · · ·A.· · No.· I am not -- I am sorry.
19· ·Can you repeat the question for me?
20· · · ·Q.· · Are you aware of any document
21· ·that is created that would show what
22· ·specific expenses are added to your loan
23· ·account each month?
24· · · ·A.· · I don't receive a document such
25· ·as that.
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·2· · · ·Q.· · Now, if you look on this
·3· ·exhibit, there is an $11,000 charge that
·4· ·is labeled "Roslyn wine" -- it has a
·5· ·handwritten note "Roslyn Wine and Foods"
·6· ·next to it.
·7· · · ·A.· · Give me another moment.
·8· · · · · · ·(Pause.) Yes.· And give me a
·9· ·moment.· ·(Pause.)
10· · · · · · ·Yes.· Go ahead.
11· · · ·Q.· · What was your -- strike that.
12· · · · · · ·How did you intend that this
13· ·expense would be allocated when you wrote
14· ·"Roslyn Wine and Foods"?
15· · · ·A.· · I am looking at the statement
16· ·from 2017.· I believe that to be wine that
17· ·we gave out to clients.
18· · · ·Q.· · How would I verify that?
19· · · ·A.· · I would have to go back and look
20· ·and give you something.
21· · · ·Q.· · If I wanted to verify that, what
22· ·documents would I go and look at?
23· · · ·A.· · I don't know.· I don't know what
24· ·document you could look at.
25· · · · · · ·(So marked for identification as
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·2· · · ·Exhibits 8 and 9.)
·3· · · ·Q.· · I am showing you what I have
·4· ·marked Exhibit 8 -- Exhibit 9.· My
·5· ·apologies.
·6· · · · · · ·I am showing you what I have
·7· ·marked as Exhibit 9.· We did not receive
·8· ·printed copies of an American Express
·9· ·statement for 2018.· Instead, we received
10· ·Excel files.· These are three entries from
11· ·those Excel files.
12· · · ·A.· · Yes.· I am familiar with it.
13· · · · · · ·(Reporter interruption.)
14· · · · · · ·(Pause.)
15· · · ·Q.· · Mr. Auerbach, are the Excel --
16· ·are the American Express statements with
17· ·handwritten notes the only documents --
18· · · · · · ·MR. TEELE:· Sorry for the
19· · · ·interruption.· Mr. Auerbach's laptop
20· · · ·went to sleep again.· We needed a
21· · · ·moment to get it back up.· I don't
22· · · ·think he heard your question.
23· · · · · · ·THE WITNESS:· I am back.· Go
24· · · ·ahead, sir.
25· · · ·Q.· · First, we have just looked at a
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·2· ·number of American Express statements with
·3· ·handwritten notes on them.· If we don't
·4· ·have an American Express statement with
·5· ·handwritten notes indicating how the
·6· ·expenses were allocated, are there any
·7· ·other documents that would show us how
·8· ·those expenses were allocated?
·9· · · ·A.· · There should be.· I will have to
10· ·ask.· I do not know specifically how --
11· ·what document that is.
12· · · ·Q.· · Do you ever provide your
13· ·instructions on how specific entries on
14· ·your American Express statement should be
15· ·allocated other than by handwriting on an
16· ·American Express statement?
17· · · ·A.· · No, I do not.
18· · · ·Q.· · So, the first charge listed here
19· ·is a charge for $43,000 at the Grand Hotel
20· ·Zermatterhof in Zermatt, ZH.· First, what
21· ·is the Grand Hotel Zermatterhof, if I am
22· ·pronouncing that correctly, which I am
23· ·sure I haven't?
24· · · · · · ·MR. TEELE:· I am going to
25· · · ·intercede with an objection here, more
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·2· · · ·so to clarify the record with respect
·3· · · ·to the comment that you made a moment
·4· · · ·ago, Mr. Aulet, which is you stated
·5· · · ·that you have received from the
·6· · · ·Debtors in a production only Excel
·7· · · ·files for the 2018 American Express
·8· · · ·statements.· I just wanted to clarify
·9· · · ·for the record that the 2018 Amex
10· · · ·statements were produced in PDF form
11· · · ·from American Express on June 26,
12· · · ·2020, and it is in the production
13· · · ·folder of the dropbox that you have.
14· · · ·I just wanted to clarify that.
15· · · · · · ·MR. AULET:· Okay, but the
16· · · ·Debtors do not believe -- strike that.
17· · · ·Anyway, I will go back to the
18· · · ·question.
19· · · ·Q.· · What is the Grand Hotel
20· ·Zermatterhof?
21· · · ·A.· · It is a hotel in Zermatt,
22· ·Switzerland.
23· · · ·Q.· · What is this charge for $43,000
24· ·for?
25· · · ·A.· · This is a charge, I had booked a
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·2· ·hotel reservation for a personal trip in
·3· ·the first quarter of 2018, and at the end
·4· ·of 2018, because of the issues with the
·5· ·business, I didn't feel comfortable going
·6· ·and spending money and doing it so I
·7· ·attempted to cancel the trip.· And I
·8· ·worked with American Express to cancel the
·9· ·trip, and the Zermatterhof did not want to
10· ·return the money.· After a lengthy
11· ·discussion, battle, whatever you want to
12· ·say, the Zermatterhof agreed to allow the
13· ·proceeds, the amount to be used in
14· ·2019/'20.· American Express issued a
15· ·credit for this amount in 2019, and then
16· ·later that credit was reversed, later in
17· ·the year of '19.
18· · · · · · ·There was first received a
19· ·credit because we disputed the charge,
20· ·since it was not needed.· And American
21· ·Express -- I remember this one vividly.
22· ·So American Express posted a credit and
23· ·then they later charged the account for an
24· ·amount similar to this amount but a little
25· ·bit different, maybe by two or three -- I
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·2· ·don't remember, but two or $3,000.
·3· · · · · · ·So at the end of 2019 I utilized
·4· ·that credit, and actually Ashford is aware
·5· ·that I did and that I went on this trip.
·6· ·It is a personal trip.· There is no
·7· ·business related to this trip.
·8· · · ·Q.· · So would I find that charge, a
·9· ·similar but slightly reduced charge on a
10· ·subsequent American Express statement?
11· · · ·A.· · Yes.· You will find the credit
12· ·and then -- you will find the credit and
13· ·then an issue of a new charge in '19.
14· · · ·Q.· · And was that new charge booked
15· ·to your loan account?
16· · · ·A.· · On this particular trip, this
17· ·particular trip is supposed to be
18· ·booked -- we haven't finished the audit on
19· ·'19, but this particular trip is supposed
20· ·to go to W-2.· And I have given -- I don't
21· ·have a list.· It is a mental list.· This
22· ·trip is something that I gave to Ken Gould
23· ·to make sure it was included in the W-2
24· ·for 2019 before we file our taxes.
25· · · ·Q.· · When was the last time that you
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·2· ·received a W-2 from Northwest?
·3· · · ·A.· · The only W-2's that I get from
·4· ·Northwest comes through Paycom and they go
·5· ·to Ken Gould.· So it would have been after
·6· ·the year, I think.· Paycom sends them
·7· ·automatically so it goes through Paycom.
·8· · · · · · ·MR. AULET:· I note we had issued
·9· · · ·a document request for those W-2's and
10· · · ·didn't receive them for this
11· · · ·deposition.· Jason, were those
12· · · ·uploaded at any point during this
13· · · ·deposition?
14· · · · · · ·MR. TEELE:· Because we received
15· · · ·the request yesterday afternoon they
16· · · ·have not been uploaded yet, but they
17· · · ·are in process.
18· · · ·Q.· · The second entry on this
19· ·exhibit, the UM student tuition, I assume
20· ·that is University of Miami?
21· · · ·A.· · It is but I am just going to
22· ·look at the other computer.· It is much
23· ·easier for me to see.
24· · · · · · ·Yes.· These two -- both -- they
25· ·are registered to both at the same time.
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·2· ·Both of these should be in the loan
·3· ·account.
·4· · · ·Q.· · Is there any reason why we would
·5· ·not be able to find these being put in the
·6· ·loan account?
·7· · · ·A.· · No reason I am aware.
·8· · · ·Q.· · Do you recall reviewing an
·9· ·American Express statement and indicating
10· ·that these should be put in your loan
11· ·account?
12· · · ·A.· · I don't recall the actual
13· ·statement, but I am completely aware of
14· ·those charges and I would have coded them
15· ·as personal.
16· · · ·Q.· · Is there any reason why we would
17· ·not be able to find entries in your loan
18· ·account that would potentially include
19· ·these, such as an entry in the loan
20· ·account for expenses in January that are
21· ·larger than that?
22· · · ·A.· · I don't understand the last part
23· ·of what you said.· I understood the first
24· ·part.
25· · · ·Q.· · We haven't been able to find any
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·2· ·entries into your loan account that would
·3· ·correspond with these two student tuitions
·4· ·being moved into your loan account.· Do
·5· ·you have any explanation why that would
·6· ·be?
·7· · · ·A.· · No.· No, I do not.
·8· · · · · · ·(So marked for identification as
·9· · · ·Exhibit 10.)
10· · · · · · ·MR. AULET:· Mr. Auerbach,
11· · · ·showing you Exhibit 10, PDF file of
12· · · ·Northeastern Aviation invoices.
13· · · ·Q.· · The first page or two is -- I
14· ·have gone to the third page, a
15· ·Northeastern Aviation Corp. invoice.· What
16· ·is Northeastern Aviation Corp.?
17· · · ·A.· · Northeastern is an aviation
18· ·company that has jet service that would
19· ·arrange jet travel, private jet travel.
20· · · ·Q.· · Did you, in 2016, '17, '18
21· ·frequently fly on Northeastern Aviation
22· ·Corp. private jets?
23· · · ·A.· · I know that I flew on them. I
24· ·wouldn't say frequently, but I would say
25· ·that I flew on them.
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·2· · · ·Q.· · Looking at this invoice on page
·3· ·3, how would I determine what the business
·4· ·purpose of this flight was?
·5· · · ·A.· · Give me a second.
·6· · · · · · ·At the time it should be
·7· ·noted -- I know the Farmingdale code, and
·8· ·I am sure that you checked that I have
·9· ·not -- I don't know CHO right now.
10· · · ·Q.· · So, CHO is Charlottesville,
11· ·Virginia?
12· · · · · · ·MR. TEELE:· Objection.
13· · · ·Q.· · OPF is Miami, Florida, according
14· ·to a look-up that I did.
15· · · · · · ·MR. TEELE:· Objection to the
16· · · ·representation.· If he happens to know
17· · · ·what the airport codes are, let him --
18· · · ·A.· · I would have to find -- there
19· ·should have been an original invoice that
20· ·I marked up that would have said
21· ·specifically what the trip was for.
22· · · · · · ·THE WITNESS:· Is there anything
23· · · ·lower on there?
24· · · ·A.· · Again, I would have to go back
25· ·to notes that I -- I can't answer the
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·2· ·question with what I have in front of me.
·3· · · ·Q.· · Well, aside from looking up the
·4· ·airports that are listed on the itinerary,
·5· ·what other information would exist on this
·6· ·invoice or anywhere else that would allow
·7· ·me to determine what the business purpose
·8· ·of this flight was?
·9· · · · · · ·MR. DUFFY:· Objection.· The
10· · · ·question is vague.· You can answer if
11· · · ·you understand what he is saying.
12· · · ·A.· · I can't answer it.· I would have
13· ·to -- I would have to go back to see what
14· ·occurred on that date, and then I would --
15· ·because I don't see -- there should be
16· ·another page or something that would say
17· ·what the event was or why but I don't see
18· ·it on here.
19· · · ·Q.· · So, would you have typically
20· ·filled out a separate page explaining what
21· ·the purpose of the private jet travel was?
22· · · ·A.· · Sometimes I did.· Sometimes I
23· ·wrote it just on the face of the invoice.
24· ·This doesn't have --
25· · · · · · ·MR. AULET:· I don't believe any
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·2· · · ·separate pages were produced, so to
·3· · · ·the extent that those exist, I call
·4· · · ·for their production.
·5· · · ·Q.· · I will show you page 4, which
·6· ·appears to be how the expense was
·7· ·vouchered as air, hotels, travel.· Were
·8· ·you ever shown these sorts of sheets?
·9· · · ·A.· · No.· I have never seen these
10· ·types of sheets.
11· · · ·Q.· · Is there -- I have gone to page
12· ·5.· Is there any information on this
13· ·invoice that would let me determine what
14· ·the business purpose of this trip was?
15· · · ·A.· · Give me just a moment, please.
16· ·I am sorry.
17· · · · · · ·I don't see anything on this
18· ·one.· And again, I would have to -- I
19· ·would have to check.· I would have to
20· ·check.· There should be -- somewhere there
21· ·should be a Post-it note, something that
22· ·would have gone with it to explain, but I
23· ·don't see it.
24· · · ·Q.· · Again, here is what looks like a
25· ·number of general ledger files.· You have
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·2· ·never seen these before?
·3· · · ·A.· · No.· I have never seen general
·4· ·ledger files at all.
·5· · · ·Q.· · Here is another trip that has
·6· ·some handwriting on it.· Would this
·7· ·handwriting allow me to determine what the
·8· ·business purpose of this trip is?
·9· · · ·A.· · Again, there should be a Post-it
10· ·note or something with it.· Again, I would
11· ·look it up.· It looks like -- well, I
12· ·don't want to guess, but it looks like it
13· ·is a business trip.· I just don't know --
14· ·I don't know where the Post-it notes are.
15· · · ·Q.· · Well, there is the text
16· ·"Miami-Ohio-IN-NY" --
17· · · ·A.· · University of Ohio.
18· · · · · · ·(Reporter interruption.)
19· · · ·Q.· · What business does Northwest do
20· ·in Ohio?
21· · · ·A.· · University of Ohio.· We have an
22· ·exclusive license with University of
23· ·Ohio -- Ohio State.
24· · · ·Q.· · What about IN?· Do you know what
25· ·that means?
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·2· · · ·A.· · Indiana.· I believe it's
·3· ·Indiana.· University of Indiana.
·4· · · ·Q.· · And does Northwest have a
·5· ·business relationship with University of
·6· ·Indiana?
·7· · · ·A.· · Yes.
·8· · · ·Q.· · Does Northwest have any business
·9· ·relationship with the University of Iowa?
10· · · ·A.· · Yes.
11· · · ·Q.· · And for universities that you
12· ·have an exclusive relationship with, how
13· ·often do you go to those universities?
14· · · ·A.· · There is no specific cadence.
15· ·There is no specific -- I don't have a
16· ·specific answer.
17· · · ·Q.· · Do you visit each university at
18· ·least once a year?
19· · · · · · ·MR. DUFFY:· Objection.· Asked
20· · · ·and answered.
21· · · ·A.· · We do our best to do so.· Most
22· ·of these universities -- many of these
23· ·universities are located in remote places.
24· ·We try to link them together to save money
25· ·for the trip.
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·2· · · ·Q.· · Are there universities that you
·3· ·will visit multiple times a year?
·4· · · · · · ·MR. DUFFY:· Objection.· Asked
·5· · · ·and answered.
·6· · · ·A.· · There are, specifically when we
·7· ·are campaigning to get a special license
·8· ·or an exclusive, there are times that we
·9· ·will visit a university more than once a
10· ·year because we are working towards
11· ·something.
12· · · ·Q.· · At any point has the University
13· ·of Iowa been one of those universities
14· ·where you were making an effort to get a
15· ·special license or an exclusive from?
16· · · ·A.· · Yes.· I met with the athletic
17· ·director a couple of times there, and the
18· ·bookstore management there.· We tried to
19· ·get an exclusive, but the university does
20· ·not believe in the theory of exclusivity
21· ·because they think it limits customers'
22· ·ability to choose.· But we created a very
23· ·good relationship and we went from having
24· ·just some throws and blankets in the
25· ·university store to getting -- the
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·2· ·following year, to getting a display set
·3· ·up with our bedding, our throws, our
·4· ·pillows, our automotive, our various
·5· ·products.· So, we did a really good job
·6· ·building the business.· Again, the
·7· ·athletic director did not believe in
·8· ·exclusivity.
·9· · · ·Q.· · About how much revenue did you
10· ·get from the University of Iowa?
11· · · ·A.· · I don't know.
12· · · ·Q.· · Did you make multiple private
13· ·jet flights to the University of Iowa?
14· · · ·A.· · Yes, I did.
15· · · ·Q.· · Did you have any other reason to
16· ·make those flights?
17· · · ·A.· · Yes.· My daughter went there for
18· ·one year.
19· · · ·Q.· · And did you take a private jet
20· ·there to visit your daughter?
21· · · ·A.· · No.· I did -- no.· To visit?
22· ·No.
23· · · · · · ·MR. DUFFY:· Objection to the
24· · · ·form.
25· · · ·Q.· · I have moved to page 49, which
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·2· ·has the handwritten note "Iowa Daniella
·3· ·orientation."
·4· · · ·A.· · Yes.
·5· · · ·Q.· · What is the business purpose of
·6· ·this flight?
·7· · · ·A.· · It had -- the business purpose
·8· ·was I met with the athletic director at
·9· ·the University of Iowa during the period
10· ·in which Daniella went to orientation.
11· · · ·Q.· · So why does it read "Iowa
12· ·Daniella orientation"?
13· · · ·A.· · Because somebody wrote that.
14· ·That is not my handwriting, but I was
15· ·probably asked on this specific one what
16· ·the purpose of the trip was, and I
17· ·probably said that I went down to Iowa for
18· ·Daniella's orientation.· And most likely I
19· ·said, "And I met with the athletic
20· ·director and I met with the bookstore" but
21· ·they didn't write that.· But that is not
22· ·my handwriting.· That would have been
23· ·something verbally that I have said. I
24· ·have never seen that.
25· · · ·Q.· · And so despite the fact that
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·2· ·that reads "Daniella Iowa orientation,"
·3· ·there is a voucher journal report attached
·4· ·to this that shows that it was billed to
·5· ·"air, hotels and travel."· Was this one of
·6· ·the -- why was this billed to air, hotels
·7· ·and travel if it reads "Iowa Daniella
·8· ·orientation"?
·9· · · · · · ·MR. DUFFY:· Objection.· That is
10· · · ·a misrepresentation of the facts that
11· · · ·he just stated.
12· · · ·Q.· · Why did the accounting
13· ·department bill this to air, hotels,
14· ·travel if the receipt says on it "Iowa
15· ·Daniella orientation"?
16· · · · · · ·MR. TEELE:· Objection.· If it is
17· · · ·a question for the accounting
18· · · ·department, I think you should ask
19· · · ·them.
20· · · ·Q.· · You can answer the question,
21· ·Mr. Auerbach.
22· · · ·A.· · I thought I did before.· As I
23· ·stated, it is not my handwriting, so I was
24· ·probably asked and I verbally gave an
25· ·answer and they possibly just wrote down
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Page 132·1· · · · · · · · · R. AUERBACH
·2· ·the first part and not the second part.
·3· ·But I didn't watch anybody write anything.
·4· · · · · · ·In other words, this is probably
·5· ·one that had no comment, they came into my
·6· ·office, they said "Can you tell us what
·7· ·this is" and I told them what it is. I
·8· ·guess they wrote the first part and not
·9· ·the other part.· But it is conjecture
10· ·because I don't know why they wrote one
11· ·part.
12· · · ·Q.· · Did the accounting department
13· ·come back to you on this invoice and ask
14· ·you to justify it?
15· · · ·A.· · No.· Accounting?· No.
16· ·Somebody -- could have been accounting.
17· ·Somebody came to me and asked me what the
18· ·trip was.· I just don't know what
19· ·department it was or who it was.
20· · · ·Q.· · I am going to go to page 16.
21· ·How would I determine what the business
22· ·purpose of this flight was?
23· · · ·A.· · Bear with me again.
24· · · · · · ·Again, I don't see the Post-it
25· ·notes.· This particular trip is not a
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Page 133·1· · · · · · · · · R. AUERBACH
·2· ·business trip so this should have gone --
·3· · · ·Q.· · Where is this a trip to?
·4· · · ·A.· · That is -- what?
·5· · · · · · ·MR. TEELE:· He was answering the
·6· · · ·question when you asked that.
·7· · · ·A.· · To Saranac Lake.
·8· · · ·Q.· · And I think you said -- now I
·9· ·have gone to the next page.· This is
10· ·another voucher journal report.· This
11· ·records this trip as being booked to air,
12· ·hotels, travel.· Do you have any
13· ·explanation why this trip would have been
14· ·booked as a Northwest expense?
15· · · ·A.· · Would you do me a favor?· Would
16· ·you please go back to the invoice?· Could
17· ·you go back one page for me?
18· · · ·Q.· · Sure.
19· · · ·A.· · Thank you.· Just to clarify,
20· ·I -- it's a long time ago, 2016.· I am
21· ·looking at the date and I just noticed
22· ·that that date is Allen Guo's birthday.
23· ·So I don't know if it was a trip that he
24· ·was on or not.· But there is nothing on
25· ·this invoice that would state that.
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Page 134·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · So, you first testified that
·3· ·this was not a business expense?
·4· · · ·A.· · And it may not be.
·5· · · · · · ·MR. DUFFY:· Objection.
·6· · · ·A.· · I just noticed the date, but
·7· ·there is no Post-it note on it and my
·8· ·belief would be that it would be a
·9· ·personal trip.· But when I noticed the
10· ·date, it is just going back to '16, it's
11· ·hard to remember.
12· · · ·Q.· · I have gone to page 22.· This
13· ·appears to be another trip to Saranac Lake
14· ·two days later.
15· · · ·A.· · It would be the return.· It
16· ·costs too much to have it sit there.
17· · · ·Q.· · And so this is also booked to
18· ·air, hotels and travel.
19· · · ·A.· · As I said earlier, I would be --
20· ·go ahead.
21· · · ·Q.· · I apologize.· The delay is
22· ·causing a lot of confusion.· You believed
23· ·that this may have involved Allen Guo on
24· ·this flight?
25· · · ·A.· · No.· I noticed that it was his
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Page 135·1· · · · · · · · · R. AUERBACH
·2· ·birthday, so we used to get together for a
·3· ·lot of -- like his birthday and things.
·4· ·So, I don't remember, but it could very
·5· ·easily be a personal trip.· I would have
·6· ·to check.· I would need a day to check and
·7· ·clarify.· I am not confident to sit here
·8· ·and answer.
·9· · · ·Q.· · And would there be any documents
10· ·other than these Post-it notes that you
11· ·have referenced that I should be able to
12· ·go and find to verify what the business
13· ·purpose of each of these trips was?
14· · · ·A.· · Again, on this very last -- on
15· ·these last two, I would have to go back
16· ·and look.· But I am sure that there is
17· ·something that would show.
18· · · ·Q.· · What is this flight on page 35
19· ·of the exhibit?
20· · · ·A.· · Again, I am going to look at the
21· ·other one.· Give me a second.
22· · · · · · ·This was a trip -- I was in
23· ·Colorado on a personal trip, vacation, and
24· ·they had closed the roads in the Colorado
25· ·pass because of weather and I needed to
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Page 136·1· · · · · · · · · R. AUERBACH
·2· ·get to Denver.· And I booked this through
·3· ·them, through another company, to get to
·4· ·Denver.· There was no way to get from Vail
·5· ·to Denver.
·6· · · ·Q.· · And then on page 36, this is
·7· ·also booked to air, hotels, travel?
·8· · · ·A.· · Again, I have never seen these,
·9· ·these documents that you show.
10· ·Afterwards, I have never seen.
11· · · ·Q.· · I have gone to page 76.· What is
12· ·the business purpose of this trip?
13· · · ·A.· · Bear with me one second.
14· · · · · · ·(Pause.)
15· · · · · · ·This is not a business trip.
16· ·This is a personal trip.· Yes, this is a
17· ·personal trip.· I am looking at how it is
18· ·booked on what you have shown me, which I
19· ·have never seen before.· But that would be
20· ·booked incorrectly.
21· · · ·Q.· · Okay.· There is a number of
22· ·flights down to Miami.· What would the
23· ·business purpose of flights to Miami be?
24· ·I will show you an example on page 102.
25· · · ·A.· · I would have to go through them,
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Page 137·1· · · · · · · · · R. AUERBACH
·2· ·but I would visit University of Miami and
·3· ·sometimes I would visit with Home Shopping
·4· ·in Miami, HSN.· I would have to go back
·5· ·and go through the actual trip.
·6· · · ·Q.· · And is there any document that
·7· ·we should be able to find that would tell
·8· ·us what this trip was for?
·9· · · ·A.· · I would have to go back through
10· ·my notes.· When I say "notes," I would
11· ·have to go back and see what there is.
12· · · ·Q.· · So, I have gone to page 42.
13· ·First, what handwriting on this page is
14· ·yours, if you know, if any?
15· · · · · · ·MR. TEELE:· Objection to the
16· · · ·question, to the form.
17· · · · · · ·MR. AULET:· I will strike it.
18· · · ·Q.· · Is any of this handwriting
19· ·yours?
20· · · ·A.· · Yes.· "Please put on Allen's..."
21· ·sorry.
22· · · ·Q.· · Please identify which
23· ·handwritten notes are yours.
24· · · ·A.· · The one that says "Please put on
25· ·Allen's fee 50 percent of this, give to
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Page 138·1· · · · · · · · · R. AUERBACH
·2· ·Rob J," meaning to make sure it is entered
·3· ·properly in the GL.
·4· · · · · · ·Sorry it's taking me so long. I
·5· ·am reading the invoice.
·6· · · · · · ·MR. KESTENBAUM:· Can we just
·7· · · ·check the airport code on...
·8· · · · · · ·MR. TEELE:· I object to
·9· · · ·co-counsel attempting to research an
10· · · ·answer when making the record.
11· · · · · · ·MR. DUFFY:· If you know it, you
12· · · ·know it.· If you don't, you don't.
13· · · ·A.· · The answer is that I wrote that.
14· ·Again, Allen and/or Ashford is
15· ·interchangeable in the way we see it here.
16· ·So I am assuming part of this -- I have to
17· ·look at the airport codes.· I am assuming
18· ·that part of this -- I am sure that this
19· ·is a trip that I took with Allen Guo or
20· ·Ashford of the part of the trip, it says
21· ·Jacksonville.· The Jacksonville, probably,
22· ·Fanatics.· The international part of it
23· ·would be a trip with Ashford, with Allen
24· ·Guo.
25· · · ·Q.· · When you say or wrote "Please
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Page 139·1· · · · · · · · · R. AUERBACH
·2· ·put Allen's fee 50 percent of this" what
·3· ·did you mean by that?
·4· · · ·A.· · I meant -- when I say "Allen," I
·5· ·mean Ashford.· That we went on a trip, we
·6· ·worked to discuss business.· And this is a
·7· ·trip where half of that trip would be a
·8· ·Northwest expense, half would be an
·9· ·Ashford expense.· Again, Allen, Ashford, I
10· ·use the words interchangeably.
11· · · ·Q.· · So, if we go to the voucher
12· ·journal report, you see half of this is
13· ·allocated to air, hotels, travel and the
14· ·other half to accounts receivable.· Does
15· ·this reflect your instructions that half
16· ·of it be billed to, as you said, Allen or
17· ·Ashford?
18· · · ·A.· · Sitting here, with no
19· ·documentation to look other than this, I
20· ·would say yes, that that would be correct.
21· ·Again, Ashford, Allen is the same thing to
22· ·me.· We call him uncle Allen.· It is a
23· ·very close relationship.
24· · · ·Q.· · So if I represented to you that
25· ·TJIG is in Puerto Rico, would that refresh
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Page 140·1· · · · · · · · · R. AUERBACH
·2· ·your recollection as to the purpose of
·3· ·this trip?
·4· · · · · · ·MR. TEELE:· I will object to
·5· · · ·that because he indicated he didn't
·6· · · ·know what it was based on the airport
·7· · · ·code.
·8· · · ·A.· · Like I said, I would have to
·9· ·look it up.· I really would.
10· · · ·Q.· · And when you say you would look
11· ·it up, where would you look?
12· · · ·A.· · I would go back and see if I
13· ·have anything written down about -- this
14· ·trip goes back to what year?· I can't see
15· ·it on this screen.· Oh, '17.
16· · · ·Q.· · Is there any central location
17· ·that should have the business purpose of
18· ·these trips?
19· · · ·A.· · Central location?· No.· No,
20· ·there is not.
21· · · ·Q.· · What is the business purpose of
22· ·this trip?
23· · · · · · ·MR. TEELE:· Object to the form
24· · · ·of the question.
25· · · · · · ·MR. AULET:· For the record, we
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Page 141·1· · · · · · · · · R. AUERBACH
·2· · · ·are looking at page 105.
·3· · · ·A.· · I see CLT, Charlotte.· I don't
·4· ·know HBI off the top of my head.· I have
·5· ·to look at these airport codes because
·6· ·without the sticky-note that would have
·7· ·been on there, it is really impossible for
·8· ·me to really know.
·9· · · ·Q.· · Would there be any business
10· ·purpose for a trip to the Bahamas?
11· · · · · · ·MR. DUFFY:· Object to the
12· · · ·hypothetical.
13· · · ·A.· · The only business trip I
14· ·remember to the Bahamas was a trip with
15· ·Allen Guo.· But this is a long time ago.
16· ·Again, without going and trying to rebuild
17· ·it in my mind, you know, it could be one
18· ·trip or another trip.· We took so many
19· ·trips together, it is very hard for me to
20· ·do it this way.
21· · · · · · ·MR. AULET:· Uri, are we on
22· · · ·Exhibit 11?
23· · · · · · ·MR. PINELO:· Yes.· Next is 11.
24· · · ·Q.· · Have you ever billed flights to
25· ·Northwest by saying Allen Guo was on the
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Page 142·1· · · · · · · · · R. AUERBACH
·2· ·flight when in fact he is not on the
·3· ·flight?
·4· · · · · · ·MR. DUFFY:· Objection to the
·5· · · ·form.
·6· · · ·A.· · Nothing that I would do -- no, I
·7· ·would not do that intentionally.· That is
·8· ·why I am saying here, it is too confusing
·9· ·without having the time to go back, to
10· ·know which he was on and which he was not
11· ·on.
12· · · ·Q.· · Are you aware of ever having
13· ·done that unintentionally?
14· · · ·A.· · On a flight?
15· · · · · · ·MR. DUFFY:· Objection to the
16· · · ·form.
17· · · ·A.· · I am not aware, no.
18· · · · · · ·(So marked for identification as
19· · · ·Exhibit 11.)
20· · · · · · ·MR. AULET:· I am going to show
21· · · ·you what I have marked Exhibit 11,
22· · · ·which is a series of emails between
23· · · ·Ron Andreola, Robert Guo and Robert
24· · · ·Jolson.
25· · · ·Q.· · I will go back to page 2.· So
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Page 143·1· · · · · · · · · R. AUERBACH
·2· ·that you can read -- actually, I will give
·3· ·you control of this again so you can
·4· ·review the entire email and let me know if
·5· ·you have read it.
·6· · · ·A.· · So, I am reading the first part:
·7· ·I mean, St. Petersburg is HSN.
·8· ·Jacksonville is Fanatic.· Dominican
·9· ·Republic, I really don't remember the
10· ·trip.
11· · · · · · ·Let me scroll down.· I can only
12· ·see -- how do I change the page?
13· · · ·Q.· · I will move it.
14· · · ·A.· · Thank you.
15· · · ·Q.· · As you can see, on October 3,
16· ·2017, Allen is telling Rob Andreola and
17· ·Robert Jolson that he wasn't on a flight
18· ·that you had indicated he was on.· Why is
19· ·that?
20· · · ·A.· · It is possible that I made a
21· ·mistake and that he -- that he, that Allen
22· ·responded because I made a mistake.· That
23· ·is why I said earlier I would need to go
24· ·back and look to make sure that it is
25· ·correct.· But that is what it appears to
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Page 144·1· · · · · · · · · R. AUERBACH
·2· ·say.
·3· · · ·Q.· · So now --
·4· · · ·A.· · Looks like he must have --
·5· · · ·Q.· · I apologize.· Please continue.
·6· · · ·A.· · I was just reading the email.
·7· ·It says, "Allen, FYI Ross will call you."
·8· ·He must have called me.· It is just it is
·9· ·so long ago I don't remember.· I am
10· ·reading.
11· · · ·Q.· · As you will notice, most of
12· ·these emails are from October 2017, but
13· ·the top email is an email on May 18th of
14· ·this year.· Do you know why Ron Andreola
15· ·or Robert Jolson would have been looking
16· ·into this issue in May?
17· · · ·A.· · I have no idea.· Absolutely no
18· ·idea.
19· · · ·Q.· · Has anyone been conducting an
20· ·investigation of the expenses you have
21· ·charged the company to determine if they
22· ·were legitimate?
23· · · ·A.· · No.
24· · · ·Q.· · Has anyone in the past few
25· ·months asked you about any previous
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Page 145·1· · · · · · · · · R. AUERBACH
·2· ·American Express charges to determine if
·3· ·they were personal or business related?
·4· · · ·A.· · No.· I am thinking.· No.
·5· · · ·Q.· · Has anyone from Northwest asked
·6· ·you to review an American Express
·7· ·statement from before the bankruptcy and
·8· ·indicate what the purpose of the expense
·9· ·was?
10· · · · · · ·MR. TEELE:· Objection to the
11· · · ·form.· It is a horribly compound
12· · · ·question.
13· · · ·A.· · I am sure I was asked about
14· ·something, but I don't remember
15· ·specifically anything I was asked.
16· · · ·Q.· · Are you aware that there are
17· ·millions of dollars of expenses booked
18· ·into Northwest's so-called suspense
19· ·account?
20· · · · · · ·MR. DUFFY:· Objection to the
21· · · ·form of the question.· Lack of
22· · · ·foundation, et cetera.
23· · · ·Q.· · You can answer the question.
24· · · · · · ·MR. DUFFY:· Can you?· If you
25· · · ·understand it, sure.
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Page 146·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · I don't really understand the
·3· ·question.
·4· · · · · · ·MR. DUFFY:· If you don't
·5· · · ·understand, don't answer.
·6· · · ·A.· · It was probably an account that
·7· ·you mentioned but I don't know.· I don't
·8· ·have an answer.
·9· · · ·Q.· · Before the bankruptcy, every
10· ·year did -- strike that.
11· · · · · · ·Are you aware of any policy of
12· ·the company on how to split American
13· ·Express charges that the company has not
14· ·previously allocated at the end of the
15· ·fiscal year?
16· · · ·A.· · The company is supposed to
17· ·allocate at the end of the fiscal year.
18· ·It is my understanding that if something
19· ·was not allocated, they had a percentage
20· ·split that they did between the loan
21· ·account and the business expense.· It was
22· ·supposed to be reconciled, you know, at
23· ·the end of the year.
24· · · ·Q.· · Were you involved at all in
25· ·determining the split between the loan
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Page 147·1· · · · · · · · · R. AUERBACH
·2· ·account and the business expense account?
·3· · · ·A.· · No.· Wasn't even aware of it
·4· ·until recently.
·5· · · ·Q.· · Would anyone from Northwest ever
·6· ·come back to you several months later and
·7· ·say, "We don't know how these expenses
·8· ·should have been allocated.· Can you take
·9· ·a look at this, please?"
10· · · · · · ·MR. TEELE:· Objection to the
11· · · ·hypothetical, and it is vague, the
12· · · ·question.
13· · · · · · ·MR. AULET:· I will strike that.
14· · · ·Q.· · How much money do you owe to
15· ·Northwest?
16· · · · · · ·MR. TEELE:· Objection to the
17· · · ·form.
18· · · ·A.· · I don't have an answer for that
19· ·question.
20· · · ·Q.· · Who would?
21· · · ·A.· · Mazars and Ken Gould.
22· · · ·Q.· · And have they provided an answer
23· ·at any point in the past few months?
24· · · · · · ·MR. DUFFY:· Objection.· If he
25· · · ·had an answer he would have given one.
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Page 148·1· · · · · · · · · R. AUERBACH
·2· · · ·Asked and answered.
·3· · · ·Q.· · I would like an answer to the
·4· ·question.
·5· · · ·A.· · Have they given an answer yet?
·6· ·No.· No, they have not given an answer
·7· ·yet.
·8· · · ·Q.· · Are you aware that in 2017 a
·9· ·little over $800,000 of expenses were
10· ·moved out of the suspense account and into
11· ·what Mr. Jolson characterized as a holding
12· ·account?
13· · · · · · ·MR. DUFFY:· Objection.· Assumed
14· · · ·facts not in evidence, no foundation.
15· · · ·A.· · No, I am not aware.
16· · · ·Q.· · Who would have had the authority
17· ·to permanently reclassify expenses from a
18· ·suspense account to another expense
19· ·account?
20· · · ·A.· · You would have to ask Robert
21· ·Jolson that.· I have no access to that.
22· · · ·Q.· · Does the estate of Shay Auerbach
23· ·owe any money to Northwest?
24· · · ·A.· · Not that I am aware of.
25· · · ·Q.· · Did it at any point in the past?
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Page 149·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · The only thing I am aware of is
·3· ·that The Northwest Company owes a large
·4· ·amount of money to the estate of Shay
·5· ·Auerbach.· I don't know how much.· Two
·6· ·hundred, $300,000.
·7· · · ·Q.· · Was that amount ever paid?
·8· · · ·A.· · No, not that I am aware of. I
·9· ·mean, the amount that I am speaking of was
10· ·not paid, to clarify.
11· · · · · · ·MR. AULET:· Do we want to take a
12· · · ·five-minute break?
13· · · · · · ·THE WITNESS:· Sure.
14· · · · · · ·THE VIDEOGRAPHER:· Time is 3:15,
15· · · ·going off the record.
16· · · · · · ·(Recess.)
17· · · · · · ·THE VIDEOGRAPHER:· Time is 3:34
18· · · ·and we are back on the record.
19· ·BY MR. AULET:
20· · · ·Q.· · Mr. Auerbach, I believe that
21· ·before the break you said that Northwest
22· ·owes money to the Shay Auerbach estate.
23· ·Is that correct?
24· · · ·A.· · Yes, I said that.
25· · · ·Q.· · Did you ever tell anyone --
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Page 150·1· · · · · · · · · R. AUERBACH
·2· ·strike that.
·3· · · · · · ·Did anyone ever tell you this
·4· ·year that in fact the Shay Auerbach estate
·5· ·owed money to Northwest?
·6· · · ·A.· · No.
·7· · · ·Q.· · Did you issue any instruction
·8· ·that any receivable owed by Shay
·9· ·Auerbach's estate to Northwest be removed
10· ·from the books?
11· · · ·A.· · No.· I don't even know what that
12· ·means, but no.
13· · · ·Q.· · Did you instruct anyone to alter
14· ·the amount of your loan on the company's
15· ·books and records?
16· · · ·A.· · No.
17· · · · · · ·(So marked for identification as
18· · · ·Exhibit 12.)
19· · · · · · ·MR. AULET:· I am going to show
20· · · ·you what we have marked as Exhibit 12.
21· · · ·Q.· · This is a compilation of certain
22· ·entries from the general ledgers that were
23· ·produced to us this year.· The first page
24· ·is entries that relate to your loan
25· ·account.
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Page 151·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · I can see it on the other
·3· ·screen.
·4· · · ·Q.· · Now, as you will see, this is
·5· ·screenshots from three different ledgers.
·6· ·We received three ledgers from the company
·7· ·for this year.· We received one that
·8· ·covers January through February 28th, we
·9· ·received one that covers February 29th,
10· ·and we received one that begins on
11· ·March 1st.· On the ledger that ends on
12· ·February 28, 2020, the account total for
13· ·your officer's loan account is listed as a
14· ·little bit over $2 million.· Yet, when we
15· ·look at the ledger for February 29th,
16· ·there is no transactions.· Yet, that
17· ·account balance has changed from you owing
18· ·the company about 2 million to the company
19· ·owing you about a little over 1.3 million.
20· · · · · · ·Did you instruct anyone to make
21· ·these changes?
22· · · ·A.· · No, absolutely not.
23· · · ·Q.· · Do you have any idea how these
24· ·changes could have occurred?
25· · · ·A.· · No.
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·2· · · ·Q.· · Similarly, the records that end
·3· ·on February 28th reflect an amount owed by
·4· ·the estate of Shay Auerbach to Northwest,
·5· ·yet that amount is zeroed out beginning on
·6· ·the February 29, 2020 ledger.· Again,
·7· ·there is no transaction recorded.
·8· · · · · · ·Did you instruct anyone to erase
·9· ·that receivable?
10· · · ·A.· · No.
11· · · · · · ·MR. TEELE:· Object to the form.
12· · · ·A.· · No.· I have no idea --
13· · · ·Q.· · Are you aware of anyone who
14· ·instructed any employee of Northwest to
15· ·alter the amount owed by the estate of
16· ·Shay Auerbach?
17· · · ·A.· · Absolutely not.
18· · · ·Q.· · Are you familiar with the
19· ·Complaint that was filed by Northwest
20· ·against Extreme Horse Limited?
21· · · ·A.· · I believe so.· If you can
22· ·specifically tell me?
23· · · ·Q.· · The Complaint that was filed as
24· ·an adversary proceeding in this bankruptcy
25· ·case alleging that Northwest made a loan
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Page 153·1· · · · · · · · · R. AUERBACH
·2· ·to Extreme Horse and/or Extreme Horse
·3· ·agreed to provide $5 million of goods and
·4· ·that Extreme Horse has not honored those
·5· ·alleged commitments.
·6· · · · · · ·Are you aware of that --
·7· · · ·A.· · Yes.
·8· · · ·Q.· · Was there a loan by Northwest to
·9· ·Extreme Horse Limited of $5 million at any
10· ·point?
11· · · ·A.· · Yes.
12· · · ·Q.· · Who arranged that loan?
13· · · ·A.· · When you say arrange, can you,
14· ·please, explain to me what that means?
15· · · ·Q.· · Who negotiated that loan on
16· ·behalf of Northwest?
17· · · ·A.· · I don't know if it was
18· ·negotiated.· I don't know how -- I don't
19· ·know how you mean it could be.· I guess I
20· ·should say I don't really understand the
21· ·question.
22· · · ·Q.· · Who agreed to loan $5 million to
23· ·Extreme Horse Limited on behalf of
24· ·Northwest?
25· · · ·A.· · I guess it was myself and
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Page 154·1· · · · · · · · · R. AUERBACH
·2· ·Robert.· I mean...
·3· · · ·Q.· · So, Robert Jolson was involved
·4· ·in these loan negotiations?
·5· · · ·A.· · I don't believe that there were,
·6· ·quote-unquote, negotiations.
·7· · · ·Q.· · How would you describe how the
·8· ·loan came to occur?
·9· · · ·A.· · I think it was just more of a
10· ·mutual agreement.
11· · · ·Q.· · Between who and who?
12· · · ·A.· · Between Northwest and Extreme
13· ·via Allen.
14· · · ·Q.· · And was that loan -- was that
15· ·mutual agreement documented anywhere?
16· · · ·A.· · When you say "documented," could
17· ·you just elaborate on what you mean by
18· ·"documented"?
19· · · ·Q.· · Is there any document that
20· ·exists that reflects a loan of $5 million.
21· · · ·A.· · If you mean in the traditional
22· ·sense of like a note or something like
23· ·that, not that I am aware of.· We did a
24· ·lot of things very casually between Allen
25· ·and myself.· I sent Ashford six hundred or
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·2· ·$650,000 one day just to help invest in a
·3· ·machine they bought.· I have no note, I
·4· ·have no agreement with Allen on anything;
·5· ·I just sent the money, and they still have
·6· ·the money.· But we were like a family so a
·7· ·lot of what we did was verbal.· Most of
·8· ·everything was verbal.
·9· · · ·Q.· · So, you sent $5 million to
10· ·Extreme Horse Limited with no written
11· ·agreement of any kind regarding the terms
12· ·of that $5 million loan?
13· · · ·A.· · Not a note.
14· · · ·Q.· · Written in an email?
15· · · ·A.· · Excuse me?
16· · · ·Q.· · Were the terms of that agreement
17· ·written in an email?
18· · · ·A.· · There were some emails back and
19· ·forth, yes.· The terms, I am not sure --
20· · · ·Q.· · The emails back and forth, did
21· ·any of them contain discussion of a loan?
22· · · ·A.· · I have to go back and look at
23· ·the emails.· I don't know.· But in the
24· ·context of the relationship that I and we
25· ·here had with Allen -- and again, I say
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Page 156·1· · · · · · · · · R. AUERBACH
·2· ·"Allen" because our relationship really
·3· ·was always with Allen only, although Allen
·4· ·had a partner in Northwest, Ashford was
·5· ·Allen and we all love Allen.
·6· · · · · · ·So, we were very casual with the
·7· ·way that we dealt with Allen and Ashford,
·8· ·and they were casual with the way they
·9· ·dealt with us.· It seems like a difficult
10· ·concept in the scheme of what is going on
11· ·today and in general, but that is how we
12· ·operated for probably a decade and a half
13· ·with Allen.· It was normal for us and me.
14· · · ·Q.· · Are you aware of any emails that
15· ·discuss loaning Extreme Horse Limited
16· ·$5 million?
17· · · ·A.· · I would have to go back and
18· ·look.· The answer is no, I don't know.
19· · · ·Q.· · Are you aware of any text
20· ·messages that would reflect a loan by
21· ·Northwest to Extreme Horse of $5 million?
22· · · ·A.· · Again, I don't know if the word
23· ·"loan" was used.· I don't know.
24· · · ·Q.· · Was any other word that would
25· ·have a similar meaning to the word "loan"
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·2· ·used?
·3· · · ·A.· · I am not an accountant.· It is
·4· ·not my skill set and it is not what I do.
·5· ·Extreme was supposed to give Northwest
·6· ·$5 million of product.· If that would
·7· ·constitute the same meaning as when you
·8· ·say "loan," that I am not aware of. I
·9· ·just don't know when you use that word how
10· ·it is meant.· Again, I am not an
11· ·accountant.
12· · · ·Q.· · When you allege that this loan
13· ·agreement was made, was Extreme Horse
14· ·Limited to repay the $5 million in cash or
15· ·in goods?
16· · · ·A.· · They were going to pay in cash
17· ·and then they -- then it changed to being
18· ·goods.
19· · · ·Q.· · Is there any document anywhere
20· ·of any sort that would reflect an
21· ·agreement by Extreme Horse to repay
22· ·$5 million in cash?
23· · · ·A.· · There are emails that point to
24· ·that.· I don't know the exact wording in
25· ·the emails sitting here but there were
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Page 158·1· · · · · · · · · R. AUERBACH
·2· ·emails that point to that.· But again, it
·3· ·is the way we did business.
·4· · · ·Q.· · At the time of this loan, did
·5· ·Northwest owe Ashford tens of millions of
·6· ·dollars?
·7· · · · · · ·MR. TEELE:· Object to the form.
·8· · · ·A.· · You mean in accounts payable,
·9· ·correct?
10· · · ·Q.· · Yes, in accounts payable.· At
11· ·the time of this alleged loan did
12· ·Northwest owe Ashford tens of millions of
13· ·dollars?
14· · · ·A.· · Yes, we did.
15· · · ·Q.· · And those tens of millions of
16· ·dollars were generally documented,
17· ·correct, in purchase orders and other
18· ·sorts of invoices?
19· · · ·A.· · They were -- they were for goods
20· ·purchased, so we would have to issue a
21· ·purchase order for the factory, along with
22· ·art files, packaging requirements,
23· ·transport information, EDI information, if
24· ·there is an RFID code.· So, on those
25· ·transactions a lot of documentation exists
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·2· ·because you can't manufacture the items
·3· ·and ship it to the retailers without
·4· ·charge-backs unless everything is
·5· ·documented.
·6· · · · · · ·So, the answer is those are
·7· ·invoices so they get a different...
·8· · · ·Q.· · So what kind of transaction
·9· ·involved Ashford supplying millions of
10· ·dollars of goods or cash without extensive
11· ·documentation?
12· · · ·A.· · Well, this was, I believe,
13· ·through Extreme, not Ashford.· And as I --
14· · · ·Q.· · What transaction --
15· · · ·A.· · Sorry.
16· · · · · · ·MR. TEELE:· You have to let the
17· · · ·witness answer.
18· · · ·A.· · As I said, the only example I
19· ·can give you off the top of my head for
20· ·Ashford would be when I sent -- when we
21· ·sent them the 600 -- 620, 630 -- I don't
22· ·remember exactly.· Over $600,000 that we
23· ·sent them, so when they bought their
24· ·Zimmer printer, we -- Allen and I had gone
25· ·to a trade show in Spain.· Give me a
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Page 160·1· · · · · · · · · R. AUERBACH
·2· ·moment.· ITMA, International Textile
·3· ·Machinery Show, and decided this would be
·4· ·a great machine for it to have.· And
·5· ·although they would own it, I sent
·6· ·approximately one-third of the value of
·7· ·the machine to them to show that I was
·8· ·supportive.· And then I had met with his
·9· ·brother and his brother was extremely
10· ·happy that we would show support for them
11· ·by basically investing in the machine that
12· ·was in their factory.
13· · · · · · ·But there is no documentation on
14· ·that.· The only thing I could check is a
15· ·wire.
16· · · ·Q.· · When did that happy?
17· · · ·A.· · I don't know.· I would have to
18· ·go back and check.· I believe sometime in
19· ·the past five years.
20· · · ·Q.· · At the time that happened, did
21· ·Northwest owe Ashford millions of dollars?
22· · · ·A.· · Yes.
23· · · ·Q.· · Tens of millions?
24· · · ·A.· · We always -- we always would owe
25· ·Ashford millions of dollars because we
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Page 161·1· · · · · · · · · R. AUERBACH
·2· ·gave Ashford at one point 85 percent of
·3· ·our volume.· So, therefore, if every
·4· ·invoice was paid on time, it is
·5· ·conceivable that we would always owe
·6· ·Ashford approximately $25 million no
·7· ·matter what happened, on a revolving
·8· ·basis.
·9· · · ·Q.· · You say that it was typical that
10· ·business was done like this, where you
11· ·would send $5 million with no written
12· ·documentation.· What other transactions of
13· ·similar size happened between either
14· ·Northwest and Extreme, Northwest and
15· ·Ashford, or any other party that you
16· ·believe that was represented by Allen Guo?
17· · · ·A.· · As I said to you, the one that
18· ·comes to mind is the machinery loan. I
19· ·understand six hundred or $650,000 is not
20· ·what you specifically said, 5 million. I
21· ·don't have an example of one that is 5
22· ·million.
23· · · · · · ·As I said, I would think if you
24· ·send six hundred or $650,000 with no --
25· ·there is not even an email on it.· Just
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Page 162·1· · · · · · · · · R. AUERBACH
·2· ·got back from a trip and sent the money
·3· ·because I said I would.· And that's it.
·4· · · · · · ·It's a very, very special
·5· ·relationship that we have and it is very,
·6· ·very different from a normally structured
·7· ·business.· As I said, I considered Allen a
·8· ·brother and they were family.· And Allen
·9· ·was very close to my father and Allen and
10· ·I spent 15 years of our lives together.
11· ·So, I know that it is difficult to follow,
12· ·and I may get a little emotional, but that
13· ·is what it was.· We just were one family.
14· ·Now we have a problem.
15· · · ·Q.· · One clarification.· I believe
16· ·you said that you sent 650K and you said
17· ·it was a third of the purchase price.
18· ·Would 650, or 600 to 650K be the amount
19· ·you sent, or was that the total purchase
20· ·price and you sent about a third?
21· · · ·A.· · I sent approximately six hundred
22· ·to $650,000, and that was approximately a
23· ·third of the value of the machine.· So,
24· ·the machine was like a million or a
25· ·million-5, a million-8, a million-9.
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·2· ·Again, it is for a Zimmer jet printer that
·3· ·we used for our production and they have
·4· ·used for their production.· It wasn't
·5· ·exclusive to Northwest.
·6· · · ·Q.· · Did you ever talk to anyone
·7· ·other than Allen Guo on behalf of Extreme
·8· ·Horse Limited?
·9· · · ·A.· · Not --
10· · · · · · ·MR. AULET:· Strike that.
11· · · · · · ·MR. TEELE:· He is answering the
12· · · ·question.
13· · · ·A.· · Not really, no.
14· · · ·Q.· · So, my question was, did you
15· ·ever speak to anyone other than Allen Guo
16· ·who spoke on behalf of Extreme Horse
17· ·Limited?· My initial question was somewhat
18· ·unclear.
19· · · ·A.· · The only conversation -- the
20· ·only contact would be some emails.· No
21· ·actual conversations or meetings.
22· · · ·Q.· · And were those emails with Pan
23· ·Dong Mei?
24· · · ·A.· · Yes.· I don't remember the last
25· ·name, I apologize.· But Pan.
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·2· · · ·Q.· · What happened to the $5 million
·3· ·after you sent it to Extreme Horse
·4· ·Limited?
·5· · · ·A.· · I don't know exactly where they
·6· ·put it.
·7· · · ·Q.· · Is it your testimony that you do
·8· ·not know what happened to the $5 million
·9· ·you sent to Extreme Horse Limited?
10· · · ·A.· · Once they received it?· I don't
11· ·know what they did with it when they
12· ·received it.· I mean, I wouldn't know what
13· ·they did with it when they got it. I
14· ·don't know their bank account.
15· · · ·Q.· · Do you know where the money went
16· ·within the next few weeks?
17· · · ·A.· · Give me one second.
18· · · · · · ·Sorry.· The laptop I am using,
19· ·something happened.· Give me one moment.
20· · · · · · ·(Pause.)
21· · · · · · ·MR. DUFFY:· Give us a two-minute
22· · · ·break and we'll try and sign back on.
23· · · ·He is having a technical glitch.
24· · · · · · ·MR. AULET:· Fine.· Let's take a
25· · · ·two-minute break.
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Page 165·1· · · · · · · · · R. AUERBACH
·2· · · · · · ·THE VIDEOGRAPHER:· It is 3:56.
·3· · · ·We are off the record.
·4· · · · · · ·(Recess.)
·5· · · · · · ·THE VIDEOGRAPHER:· The time is
·6· · · ·3:59.· We are back on the record.
·7· ·BY MR. AULET:
·8· · · ·Q.· · Before the break, we were
·9· ·discussing the $5 million you sent to
10· ·Extreme Horse Limited.· Where did they
11· ·transfer that money to within the next few
12· ·weeks after you sent it to them?
13· · · · · · ·MR. TEELE:· Objection to the
14· · · ·form.
15· · · · · · ·(Pause.)
16· · · ·A.· · Could you explain exactly in
17· ·detail -- I apologize -- what it is you
18· ·are trying to ask?
19· · · ·Q.· · You sent Extreme Horse Limited
20· ·$5 million in May of 2017.· Correct?
21· · · ·A.· · I don't remember the date but we
22· ·sent $5 million.
23· · · ·Q.· · And where did Extreme Horse
24· ·subsequently transfer that $5 million to?
25· · · · · · ·MR. DUFFY:· Objection to the
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Page 166·1· · · · · · · · · R. AUERBACH
·2· · · ·characterization "that $5 million."
·3· · · ·If you understand it, you can answer.
·4· · · ·A.· · It's just that -- it's what he
·5· ·had said.· I apologize.· The "that." I
·6· ·don't understand "that."
·7· · · ·Q.· · Did you receive $5 million at
·8· ·Northwest Textiles Holdings shortly after
·9· ·you sent $5 million from Northwest Company
10· ·to Extreme Horse Limited?
11· · · ·A.· · Yes, for their investment in the
12· ·company.· Yes, that is correct.
13· · · ·Q.· · When did Extreme Horse Limited
14· ·sign any documents relating to any
15· ·investment?
16· · · · · · ·MR. TEELE:· Objection to the
17· · · ·form.
18· · · ·A.· · I don't remember the date, but
19· ·the documents have been produced.· I just
20· ·don't know the date that is on the
21· ·document.
22· · · ·Q.· · When did Extreme Horse Limited
23· ·inform you that they would not be making
24· ·an independent -- strike that.
25· · · · · · ·Did Pan Dong Mei ever tell you
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Page 167·1· · · · · · · · · R. AUERBACH
·2· ·that Extreme Horse Limited would make a
·3· ·$5 million cash investment?
·4· · · ·A.· · At some time in the process, I
·5· ·believe the answer would be yes.
·6· · · ·Q.· · And you previously testified you
·7· ·only e-mailed with her.· Is that correct?
·8· · · ·A.· · That is correct.
·9· · · ·Q.· · And so those emails where she
10· ·agreed to make a $5 million cash
11· ·investment would have been produced to us.
12· ·Is that correct?
13· · · ·A.· · If those were in an email, it
14· ·would be produced.· Anything that we have
15· ·we produced.
16· · · · · · ·(So marked for identification as
17· · · ·Exhibit 13.)
18· · · · · · ·MR. AULET:· I will show you
19· · · ·Exhibit 13.· This is a series of
20· · · ·emails between you and Pan Dong Mei.
21· · · ·I am going to direct your attention to
22· · · ·page 5.
23· · · ·Q.· · First, the date on this is
24· ·2017-6-9.· As you can see, in this email
25· ·Pan informs you that she and Allen "have
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Page 168·1· · · · · · · · · R. AUERBACH
·2· ·discussed about this before.· Due to loan
·3· ·pressure we are not able to do an actual
·4· ·investment for now.· Allen told me that
·5· ·you need help on the documents first but
·6· ·not actual investment needed.· That's why
·7· ·you sent me the 5 million last month and I
·8· ·just sent it back to you right away."
·9· · · · · · ·Does this accurately reflect the
10· ·discussion regarding any potential
11· ·investment by Extreme Horse Limited in
12· ·Northwest?
13· · · ·A.· · Not exactly.· There is emails I
14· ·believe where it said Allen will explain
15· ·to you.· But as I said to you...
16· · · · · · ·No.· As I said, it wouldn't make
17· ·any sense.· She may have phrased it that
18· ·way because of English and translation, I
19· ·really don't know, but it was clear based
20· ·on the documents and it was clear that
21· ·they were going to pay, at that point, in
22· ·merchandise.· And they confirmed that to
23· ·both myself and to Robert, "they" being
24· ·Allen.
25· · · ·Q.· · So you say that at that point
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·2· ·they confirmed they were going to pay in
·3· ·merchandise.
·4· · · ·A.· · I don't know if I said --
·5· · · · · · ·MR. DUFFY:· Objection.
·6· · · ·Mischaracterization.
·7· · · · · · ·MR. AULET:· I hadn't finished my
·8· · · ·question.
·9· · · · · · ·MR. DUFFY:· My apologies.
10· · · ·Q.· · So you said that "it was clear
11· ·based on the documents and it was clear
12· ·that they were going to pay at that point
13· ·in merchandise."· Was it clear that they
14· ·were going to pay in merchandise before
15· ·anyone signed any documents -- sorry.· By
16· ·"anyone," I mean anyone from Extreme
17· ·Horse.
18· · · ·A.· · They were going to pay in cash
19· ·and then it changed.· I don't know the
20· ·date that it changed without going through
21· ·all the emails.· I see the emails you have
22· ·here but I know there is more emails so I
23· ·can't profess to know the date.· I just
24· ·can't.
25· · · ·Q.· · How was it communicated to you
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Page 170·1· · · · · · · · · R. AUERBACH
·2· ·that Extreme Horse would not repay an
·3· ·alleged loan in cash?
·4· · · ·A.· · How was it conveyed to me?· It
·5· ·was conveyed to myself and to Robert
·6· ·Jolson by Allen Guo.
·7· · · ·Q.· · And Robert Jolson was aware that
·8· ·this loan existed?
·9· · · ·A.· · I don't want to speak for
10· ·Robert.· I don't think I should.
11· · · ·Q.· · Was Robert Jolson involved in
12· ·the discussion where Allen informed you
13· ·that Extreme Horse would not repay the
14· ·$5 million loan?
15· · · ·A.· · Robert had independent
16· ·conversations with Allen, as I did with
17· ·Allen myself.· You'd have to ask Robert.
18· · · ·Q.· · Was Robert Jolson involved in
19· ·any of the discussions that you had with
20· ·Allen regarding the $5 million loan?
21· · · ·A.· · At the same time?· You mean
22· ·together?
23· · · ·Q.· · Yes.
24· · · ·A.· · I believe it was independent. I
25· ·believe that Allen spoke to Robert and I
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Page 171·1· · · · · · · · · R. AUERBACH
·2· ·spoke with Allen.· I don't believe we were
·3· ·on a call together.
·4· · · ·Q.· · Northwest sent $5 million to
·5· ·Extreme Horse Limited, and Extreme Horse
·6· ·Limited immediately sent it back to
·7· ·Northwest Holdings -- strike that.
·8· · · · · · ·Northwest sent $5 million to
·9· ·Extreme Horse Limited, and shortly
10· ·thereafter Extreme Horse Limited sent $5
11· ·million to Northwest Holdings.· Correct?
12· · · · · · ·MR. DUFFY:· Object to the
13· · · ·characterization of "shortly
14· · · ·thereafter" as vague.
15· · · ·Q.· · Within a few weeks.
16· · · ·A.· · I believe that that is correct.
17· ·I mean, I know that they sent 5 million.
18· ·I just don't know the dates.
19· · · ·Q.· · And when in that period did
20· ·Extreme Horse inform you that it would not
21· ·repay any alleged loan in cash?
22· · · · · · ·MR. DUFFY:· Objection.· Asked
23· · · ·and answered.
24· · · ·A.· · I don't know the date.
25· · · · · · ·(Audio interruption.)
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Page 172·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · Now, you control Northwest
·3· ·Textiles Holdings.· Correct?
·4· · · · · · ·MR. TEELE:· Objection to form.
·5· · · ·A.· · I am a member, the managing
·6· ·member.
·7· · · ·Q.· · You could have simply returned
·8· ·the $5 million to Northwest Company.
·9· ·Correct?
10· · · · · · ·MR. DUFFY:· Objection.· It is a
11· · · ·hypothetical.· You can answer if you
12· · · ·can understand what he is asking.
13· · · ·A.· · Could you please say it again?
14· ·I heard you but I just didn't understand.
15· · · ·Q.· · You could have returned the $5
16· ·million that was sent to Northwest Textile
17· ·Holdings to Northwest Company; correct?
18· · · ·A.· · I don't -- okay.· I truly don't
19· ·understand the question.
20· · · ·Q.· · It's a very simple question.
21· ·Could you have taken the $5 million that
22· ·was sent to Northwest Textiles Holdings
23· ·and sent it back to Northwest Company?
24· · · · · · ·MR. TEELE:· Objection to form.
25· · · · · · ·MR. DUFFY:· Yes, objection to
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·2· · · ·form.
·3· · · · · · ·MR. TEELE:· You are asking
·4· · · ·questions as though there was no
·5· · · ·transaction between the parties. I
·6· · · ·think we should get to the end of
·7· · · ·this.
·8· · · · · · ·MR. AULET:· I stand by the
·9· · · ·question.
10· · · ·Q.· · Can you answer the question,
11· ·please?
12· · · · · · ·MR. DUFFY:· If you understand
13· · · ·it, you can answer it.· If you do not
14· · · ·understand it, you need to say you
15· · · ·don't understand it.
16· · · ·A.· · You are asking me if I could
17· ·have physically sent $5 million from
18· ·Northwest Textiles Holdings to The
19· ·Northwest Company?· Is that your question?
20· · · ·Q.· · Yes.
21· · · ·A.· · I don't know how to answer the
22· ·question because I don't know why we would
23· ·do that.· I don't understand in this
24· ·context -- this is the first question you
25· ·have asked me, I have no idea how to
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Page 174·1· · · · · · · · · R. AUERBACH
·2· ·answer the question.
·3· · · ·Q.· · It would have been trivial for
·4· ·you to unwind all of the transactions once
·5· ·Extreme Horse Limited said that they could
·6· ·not repay this alleged loan.· Correct?
·7· · · · · · ·MR. DUFFY:· Objection to the
·8· · · ·characterization as "trivial."
·9· · · ·A.· · That is making an assumption
10· ·that I don't feel you can make.
11· · · ·Q.· · And what assumption is that?
12· · · ·A.· · That it was trivial that I could
13· ·transfer $5 million to another company.
14· ·Everything that you said is an assumption.
15· ·I know you asked me, and that is why I
16· ·said I don't understand because I don't
17· ·find it as easy a question as you have.
18· · · · · · ·And they received equity for
19· ·their investment, so if I was to do what
20· ·you suggested, how could I do that?
21· · · ·Q.· · Let's take a look at the exhibit
22· ·in front of you.· They didn't sign their
23· ·documents to get the equity until June.
24· ·Correct?
25· · · ·A.· · Do we have the document, the
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Page 175·1· · · · · · · · · R. AUERBACH
·2· ·actual document?
·3· · · · · · ·MR. DUFFY:· Actually, I object
·4· · · ·to the question.· He has already said
·5· · · ·that he doesn't remember the date that
·6· · · ·the documents were signed.· So,
·7· · · ·answered and asked -- asked and
·8· · · ·answered.· Excuse me.
·9· · · · · · ·MR. AULET:· He has an email
10· · · ·sending the documents to Pan Dong Mei
11· · · ·in front of him.
12· · · · · · ·MR. DUFFY:· That is true, but
13· · · ·you asked him what date the documents
14· · · ·were signed, and he has already said
15· · · ·that he doesn't remember what those
16· · · ·dates are.
17· · · ·Q.· · If the documents had not yet
18· ·been signed, it would have been trivial
19· ·for you to take the $5 million sent to
20· ·Northwest Holdings, return it to
21· ·Northwest, and everything would have been
22· ·unwound.· Correct?
23· · · · · · ·MR. DUFFY:· Objection to the
24· · · ·term "trivial" and to the
25· · · ·mischaracterization.· He's already
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·2· · · ·answered that question.
·3· · · ·Q.· · I would like an answer to the
·4· ·question.
·5· · · ·A.· · Can you repeat the question,
·6· ·sir?
·7· · · ·Q.· · If the documents had not yet
·8· ·been signed, it would have been trivial
·9· ·for you to take the $5 million sent to
10· ·Northwest Holdings and returned it to
11· ·Northwest to unwind the transaction.
12· ·Correct?
13· · · · · · ·MR. DUFFY:· Same objection.
14· · · · · · ·MR. TEELE:· Same objection.
15· · · · · · ·MR. DUFFY:· Also hypothetical.
16· · · ·A.· · I can't answer the question.
17· · · · · · ·MR. TEELE:· You are trying to
18· · · ·get the witness to say something that
19· · · ·he clearly doesn't think is true or is
20· · · ·responsive.· Why don't you save that
21· · · ·for your argument?
22· · · · · · ·MR. AULET:· Mr. Teele, then the
23· · · ·witness can say he doesn't think it is
24· · · ·true.· I do not need an answer from
25· · · ·you.· I need an answer from the
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·2· · · ·witness.
·3· · · · · · ·MR. TEELE:· You have said it
·4· · · ·five times.· You keep pounding on him
·5· · · ·to give you the damn answer that you
·6· · · ·want him to give.
·7· · · ·Q.· · Would it have not been trivial
·8· ·for you to simply return the $5 million
·9· ·from Northwest Holdings to Northwest --
10· · · · · · ·MR. TEELE:· Why don't we take a
11· · · ·break so you can collect your thoughts
12· · · ·and figure out how to ask your
13· · · ·question?
14· · · · · · ·MR. AULET:· Mr. Teele, I intend
15· · · ·to get an answer to the question.
16· · · · · · ·MR. TEELE:· We have been going
17· · · ·since 10:30 this morning.
18· · · · · · ·MR. AULET:· I need you to stop
19· · · ·interfering.· You can make an
20· · · ·objection --
21· · · · · · ·MR. TEELE:· You should ask an
22· · · ·appropriate question.· As long as
23· · · ·you ask inappropriate questions --
24· · · · · · ·MR. AULET:· You can make your
25· · · ·objection for the record and no more.
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·2· · · ·I intend to get an answer to this
·3· · · ·question and I am going to keep asking
·4· · · ·it until I get an answer from the
·5· · · ·witness.
·6· · · · · · ·MR. TEELE:· I will direct the
·7· · · ·witness not to answer.· If you keep
·8· · · ·going down this road with this
·9· · · ·question I am going to direct the
10· · · ·witness not to answer because at this
11· · · ·point you are being abusive toward him
12· · · ·asking him the same question over and
13· · · ·over and now trying to ask the same
14· · · ·question in reverse.· Move on.
15· · · · · · ·MR. WISSNER-GROSS:· Jason, it's
16· · · ·Sig Wissner-Gross.· First, dial it
17· · · ·down.· Ken has been very patient with
18· · · ·the witness, who has been very
19· · · ·evasive.· ·Let Ken ask his questions.
20· · · · · · ·This is Sigmund Wissner-Gross.
21· · · ·I'm Kenneth Aulet's partner.· I've
22· · · ·been on all day.
23· · · ·Q.· · I would like a yes or no answer
24· ·to my question.· Would it have been
25· ·trivial for you to unwind the transaction
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·2· ·by sending the 5 million back from
·3· ·Northwest Holdings to Northwest when no
·4· ·documents had been signed?· Yes or no?
·5· · · · · · ·MR. KESTENBAUM:· Before the
·6· · · ·witness answers, you are asking him
·7· · · ·essentially could he have changed the
·8· · · ·transaction.· I don't know what you
·9· · · ·mean by the word "trivial" and neither
10· · · ·does the witness.· You are asking him
11· · · ·could he have changed the transaction
12· · · ·to a different transaction.
13· · · · · · ·Are you asking did he have the
14· · · ·legal authority to do that?· Are you
15· · · ·asking would he have?· I am not even
16· · · ·sure what your question is.· You keep
17· · · ·repeating the same words and the
18· · · ·witness is having trouble answering it
19· · · ·because you keep using the word
20· · · ·"trivial."· What does that mean?· What
21· · · ·are you trying to ask?· Could he have
22· · · ·physically taken a pen --
23· · · · · · ·MR. AULET:· I will note that you
24· · · ·can make an objection and that the
25· · · ·speaking objections are improper.· But
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·2· · · ·I will ask without the word "trivial."
·3· · · ·Q.· · Could you have sent the money
·4· ·back from Northwest Textiles Holdings to
·5· ·Northwest once you became aware that
·6· ·Extreme Horse Limited would not,
·7· ·quote-unquote, repay the loan in cash
·8· ·before they had signed the document?
·9· · · ·A.· · No.
10· · · ·Q.· · Why not?
11· · · ·A.· · The answer is no.· Also, I do
12· ·not -- I do not have with me any
13· ·documentation on the use of proceeds.· But
14· ·we could not.· The answer is no, we could
15· ·not.· We were involved in a transaction,
16· ·we received the money, we gave the equity
17· ·and that was it.· I just don't understand,
18· ·and I don't think anything is trivial
19· ·about $5 million.
20· · · ·Q.· · You previously testified that
21· ·you sent $5 million from The Northwest
22· ·Company to Extreme Horse Limited with no
23· ·written agreement.· Correct?
24· · · ·A.· · That is correct but I never said
25· ·it was trivial.· I said that is the way we
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Page 181·1· · · · · · · · · R. AUERBACH
·2· ·did business since we were like a family.
·3· ·"Trivial" implies to me that there is no
·4· ·consequences involved.
·5· · · ·Q.· · Please direct your attention to
·6· ·page 3, which is an email from you to Pan
·7· ·Dong Mei where you say, "I know you cannot
·8· ·physically send 5 million now.· We
·9· ·understand.· Please just sign the
10· ·documents so we can transfer the stock for
11· ·dividend payments when they are issued.
12· ·The money will come much later, and we
13· ·spoke of taking that in trade, not cash.
14· ·But again, nothing now.· Maybe end year or
15· ·next year."
16· · · · · · ·Does that refresh your
17· ·recollection that the documents had not
18· ·been signed before you were told that
19· ·Extreme Horse Limited could not make their
20· ·own $5 million cash investment?
21· · · ·A.· · I stated earlier or said earlier
22· ·I don't know the date.· I still don't know
23· ·the date.· I do see the email.· I remember
24· ·this email very well.· The answer is I
25· ·still don't know the date that we signed
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Page 182·1· · · · · · · · · R. AUERBACH
·2· ·the agreement and I have no idea what that
·3· ·date is.
·4· · · · · · ·I still don't see how -- excuse
·5· ·me.
·6· · · · · · ·I don't see how that matters.
·7· · · ·Q.· · Well, this email is on June 9,
·8· ·2017.· Correct?
·9· · · ·A.· · Yes.
10· · · ·Q.· · And you are requesting that Pan
11· ·sign the documents on that date.· Correct?
12· · · ·A.· · That's what it says.
13· · · ·Q.· · And at the time that you are
14· ·requesting that she sign those documents,
15· ·you are stating that you know that she is
16· ·not going to physically send $5 million
17· ·now.· Correct?
18· · · ·A.· · That's what it says but I don't
19· ·know what I said to Allen at the time.
20· ·But go ahead.
21· · · ·Q.· · How was the transfer of $5
22· ·million to Extreme Horse booked on
23· ·Northwest's records?
24· · · ·A.· · That, you would have to ask
25· ·Robert.
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Page 183·1· · · · · · · · · R. AUERBACH
·2· · · ·Q.· · How did you instruct it to be
·3· ·booked?
·4· · · ·A.· · I didn't specifically instruct
·5· ·it to be booked.· In other words, I didn't
·6· ·tell anyone to book anything a certain
·7· ·way.· It was booked in accordance with how
·8· ·it should be booked, but I am not an
·9· ·accountant so I can't speak to that.
10· · · ·Q.· · Was Robert Jolson aware of all
11· ·information that he would need to know how
12· ·the $5 million would be booked?
13· · · · · · ·MR. TEELE:· Objection to the
14· · · ·form.· What do you mean by "all
15· · · ·information"?
16· · · ·Q.· · Was Mr. Jolson aware of what the
17· ·terms of sending the $5 million to Extreme
18· ·Horse Limited were?
19· · · ·A.· · Mr. Jolson had -- excuse me --
20· ·had conversations with Allen, and he got
21· ·back -- I would think that his
22· ·conversations with Allen -- in other
23· ·words, we both had conversations with
24· ·Allen.· But as I stated earlier, I don't
25· ·believe we had them together so I can't
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Page 184·1· · · · · · · · · R. AUERBACH
·2· ·say what Robert said and spoke to Allen
·3· ·and heard.
·4· · · · · · ·(So marked for identification as
·5· · · ·Exhibit 14.)
·6· · · · · · ·MR. AULET:· I am going to show
·7· · · ·you what I have marked as Exhibit 14,
·8· · · ·which shows how the Extreme Horse
·9· · · ·Limited payments were booked on the
10· · · ·books and records.· These are
11· · · ·screenshots from the May 2017 general
12· · · ·ledger.· I would note that we did not
13· · · ·put that red text in, that the
14· · · ·document had all Extreme Horse Limited
15· · · ·lines in red when we received it.
16· · · ·Q.· · As you can see, Mr. Auerbach, a
17· ·transaction for Extreme Horse Limited for
18· ·$5 million on May 8, 2017 is listed under
19· ·prepaid inventory and there is a
20· ·corresponding cash-in-banks entry
21· ·reflecting $5 million out to Extreme Horse
22· ·Limited.
23· · · · · · ·Do you have any explanation for
24· ·why this payment would have been booked as
25· ·prepaid inventory if it was in fact a
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Page 185·1· · · · · · · · · R. AUERBACH
·2· ·loan?
·3· · · · · · ·MR. TEELE:· Objection to form.
·4· · · ·A.· · I don't even really know how to
·5· ·read it, to be frank with you.· I have
·6· ·never seen this before and I don't see if
·7· ·this is from the general ledger, I don't
·8· ·see "general ledger."· I never see the
·9· ·general ledger.
10· · · ·Q.· · Do you have any explanation for,
11· ·putting the document aside, why the
12· ·payment to Extreme Horse Limited would
13· ·have been booked at the time it was made
14· ·as a prepaid inventory payment?
15· · · ·A.· · As I said earlier, I don't.
16· ·This is something that I just don't get
17· ·involved with.· I don't know.
18· · · ·Q.· · But this is something that
19· ·Robert Jolson should be aware of, correct?
20· · · · · · ·MR. TEELE:· Object to the form.
21· · · ·A.· · I would assume, but I don't know
22· ·who made the entry.· I don't know who made
23· ·the entries.· I see what you are giving
24· ·me.· I know nothing else about it.
25· · · ·Q.· · Have you ever made a demand on
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Page 186·1· · · · · · · · · R. AUERBACH
·2· ·Extreme Horse Limited to repay the $5
·3· ·million in cash or in goods?
·4· · · ·A.· · When you say "demand," can you
·5· ·explain what you mean by "demand"?
·6· · · ·Q.· · Have you ever, in sum or
·7· ·substance, said "give us $5 million or
·8· ·give us $5 million worth of goods"?
·9· · · ·A.· · We did ask for the goods at a
10· ·later date, towards the Wilderness
11· ·program, but we did not get the goods.
12· ·And it carried forward for another year.
13· · · ·Q.· · And when did you ask for the
14· ·goods?
15· · · ·A.· · I don't know.
16· · · ·Q.· · And in what form did you ask for
17· ·the goods?· Did you write an email?
18· · · ·A.· · No.· And when I say "we," I mean
19· ·the company.· I don't know who asked.· It
20· ·could be -- it could be Robert, it could
21· ·be myself.· It could be almost anybody.
22· ·Well, Robert, myself, one of us asked or
23· ·both of us asked but I don't remember
24· ·when.· It would have been on a call.· Most
25· ·everything we did with Allen was on a
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Page 187·1· · · · · · · · · R. AUERBACH
·2· ·call.
·3· · · ·Q.· · Do you recall asking Allen to
·4· ·provide the goods on a call?
·5· · · ·A.· · I don't recall any specific
·6· ·call.· I do know that we asked about it.
·7· ·It, again, got carried over to the
·8· ·following year because they were not able
·9· ·to do it that year.
10· · · ·Q.· · But do you specifically recall
11· ·making that request on the phone call?
12· · · ·A.· · I don't remember the phone call.
13· ·I know it was discussed.
14· · · ·Q.· · Do you know by whom it was
15· ·discussed?
16· · · ·A.· · As I said, I know that I spoke
17· ·to Allen about Wilderness, and I believe
18· ·probably Robert did, too, but I can't
19· ·speak for Robert.
20· · · ·Q.· · When you say you spoke to Allen
21· ·about Wilderness, in that phone call did
22· ·you request that he provide the $5 million
23· ·of goods?
24· · · ·A.· · We chatted about this probably
25· ·on more than one occasion, but there was
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Page 188·1· · · · · · · · · R. AUERBACH
·2· ·not one -- I feel as if you are asking if
·3· ·there was one moment in time when we
·4· ·demanded the goods.· The answer is that we
·5· ·spoke about the goods and probably more
·6· ·than once.· Probably much more than once.
·7· · · ·Q.· · Did anyone ever say, "We will
·8· ·not supply the goods"?
·9· · · ·A.· · No, at least not that I am aware
10· ·of.
11· · · ·Q.· · Was any request or demand or
12· ·similar -- sorry.
13· · · · · · ·Was any demand made on Extreme
14· ·Horse in April of this year for either $5
15· ·million cash or $5 million of goods?
16· · · ·A.· · Could you repeat the question,
17· ·specifically the date you referenced?
18· · · ·Q.· · Was any demand made on Extreme
19· ·Horse in April of this year for either $5
20· ·million of cash or $5 million of goods?
21· · · ·A.· · I do not -- I don't have any
22· ·recollection of a date specific of
23· ·anything.· But I -- I don't.· I am not
24· ·sure why April.· I have no idea.
25· · · ·Q.· · At any point since the initial
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Page 189·1· · · · · · · · · R. AUERBACH
·2· ·$5 million was made -- strike that.
·3· · · · · · ·What was the $5 million that was
·4· ·sent to Northwest Textiles used for?
·5· · · ·A.· · It was part of the proceeds to
·6· ·purchase the shares owned by Itochu
·7· ·Corporation from Itochu.
·8· · · ·Q.· · When were the shares purchased
·9· ·from Itochu Corporation?
10· · · ·A.· · I do not know the date.· It
11· ·would be somewhere in the range of this
12· ·transaction, but I do not know the date.
13· · · ·Q.· · Was it before or after the 5
14· ·million was sent?
15· · · · · · ·MR. DUFFY:· Objection.· He said
16· · · ·he didn't know the date.· Asked and
17· · · ·answered.
18· · · ·A.· · I just don't know the specific
19· ·dates.
20· · · ·Q.· · How would I determine if it was
21· ·before or after?
22· · · ·A.· · We --
23· · · · · · ·MR. DUFFY:· Objection to form.
24· · · · · · ·THE WITNESS:· Did you want me to
25· · · ·answer the question?
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Page 190·1· · · · · · · · · R. AUERBACH
·2· · · · · · ·MR. DUFFY:· Answer if you can.
·3· · · ·A.· · We would have to -- we'd have to
·4· ·look at the closing documents and the
·5· ·dates.· I just don't know the dates.
·6· · · ·Q.· · Would the bank account
·7· ·statements of Northwest Textiles reflect
·8· ·when money was paid to Itochu?
·9· · · ·A.· · Yes, they would have to.
10· · · ·Q.· · And you are aware that we have
11· ·not received those bank account statements
12· ·despite requesting them.· Correct?
13· · · ·A.· · You made me aware of that
14· ·earlier today.· As I told you, I will
15· ·follow up because we did request those for
16· ·you.
17· · · · · · ·(So marked for identification as
18· · · ·Exhibit 15.)
19· · · · · · ·MR. AULET:· I am going to show
20· · · ·you what I am marking as Exhibit 15,
21· · · ·which is the Complaint that has been
22· · · ·filed against Extreme Horse Limited.
23· · · ·Q.· · Have you seen this document
24· ·before?
25· · · ·A.· · Without scrolling through it, I
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Page 191·1· · · · · · · · · R. AUERBACH
·2· ·am sure I have.· If we created this
·3· ·document, I am sure I saw it.
·4· · · ·Q.· · I am going to direct your
·5· ·attention to page 3, specifically
·6· ·paragraph 12, which states that, "On the
·7· ·same day, May 7, 2017, Extreme Horse
·8· ·executed a capital contribution redemption
·9· ·agreement and invested 5 million in
10· ·Northwest Textiles LLC."
11· · · · · · ·Is that statement true?
12· · · ·A.· · I don't know the dates.· I just
13· ·don't know the dates sitting here. I
14· ·don't know the date.· I would have to look
15· ·it up.· I assume -- again, I shouldn't
16· ·assume.· I don't know without having it in
17· ·front of me.
18· · · ·Q.· · Is there any document that you
19· ·can think of that would be more accurate
20· ·to determine if paragraph 12 is correct
21· ·than looking at an email returning the
22· ·signature pages to you?
23· · · · · · ·MR. DUFFY:· Objection to form.
24· · · · · · ·If you understand, you can
25· · · ·answer.
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Page 192·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · Can you repeat the question?
·3· ·Thank you.
·4· · · ·Q.· · Is there any document you can
·5· ·think of that would be more accurate in
·6· ·determining if the allegations in
·7· ·paragraph 12 are correct about when these
·8· ·agreements were signed than looking at an
·9· ·email returning the signature pages to
10· ·you?
11· · · ·A.· · I am not really sure how to
12· ·answer the question.· It says a capital
13· ·contribution redemption agreement -- I'm
14· ·reading it -- on May 7th.· Again --
15· · · · · · ·MR. KESTENBAUM:· You don't know
16· · · ·whether that is correct?
17· · · ·A.· · I don't have the agreement in
18· ·front of me.
19· · · ·Q.· · Paragraph 13, "At or shortly
20· ·after the transfer was made, Extreme Horse
21· ·informed Northwest it was unable to repay
22· ·the loan in cash as originally agreed."
23· · · · · · ·First, who communicated this on
24· ·behalf of Extreme Horse?
25· · · ·A.· · Well, again, I don't know
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Page 193·1· · · · · · · · · R. AUERBACH
·2· ·because -- I don't know.· I don't even
·3· ·know that Allen is part of Extreme Horse.
·4· ·I don't know.
·5· · · ·Q.· · Are you aware of any statements
·6· ·being made that Extreme Horse was unable
·7· ·to repay the loan in cash as originally
·8· ·agreed?
·9· · · ·A.· · To the date, or to the
10· ·statement?
11· · · · · · ·MR. KESTENBAUM:· Do you have a
12· · · ·time frame?
13· · · ·Q.· · Do I understand your previous
14· ·testimony that you are unable to recall a
15· ·specific statement by someone that would
16· ·match the allegation in paragraph 13?
17· · · · · · ·MR. KESTENBAUM:· Objection.
18· · · ·Mischaracterizes the testimony.
19· · · ·A.· · I didn't say that.· I just said
20· ·that without having the documents in front
21· ·of me, I can't really answer the question
22· ·because I don't have anything to look at.
23· · · ·Q.· · Well, for paragraph 13, do you
24· ·believe that that statement was in
25· ·writing?
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Page 194·1· · · · · · · · · R. AUERBACH
·2· · · ·A.· · I can't answer the question. I
·3· ·don't know.
·4· · · ·Q.· · Can you think of anyone else who
·5· ·I would be able to ask who might know?
·6· · · ·A.· · Again, I just don't know. I
·7· ·don't know because it has to be dates, and
·8· ·I don't know the dates sitting here.
·9· · · ·Q.· · If you ignore the representation
10· ·about when, in this Complaint, about when
11· ·the statements were made, do you recall
12· ·such statements being made?
13· · · ·A.· · I am just asking a question.
14· ·Are you asking me whether or not Extreme
15· ·Horse said that they were going to supply
16· ·merchandise to Northwest?· Is that the
17· ·question?
18· · · ·Q.· · I understand that your response
19· ·was that you cannot say with a sufficient
20· ·degree of certainty when a statement
21· ·matching the one alleged in paragraph 13
22· ·was made.· Is that correct?
23· · · ·A.· · Can you say it again?· I am
24· ·sorry.
25· · · ·Q.· · Well, there is two reasons -- I
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·2· ·will rephrase.
·3· · · · · · ·There are two reasons you might
·4· ·be unable to say if paragraph 13 is true
·5· ·or not.· Either the statement was or
·6· ·wasn't made, or you don't know when it was
·7· ·made.
·8· · · · · · ·MR. KESTENBAUM:· Objection.
·9· · · ·Q.· · Do you know if a statement as
10· ·alleged in paragraph 13 was made at any
11· ·point in time?
12· · · ·A.· · I know that Extreme Horse was
13· ·going to supply merchandise to Northwest
14· ·at some point in time in lieu of sending
15· ·cash.· I don't know when that was.· That's
16· ·it.· That's all I've got.
17· · · ·Q.· · Okay.· And paragraph 16,
18· ·"Despite due demand by Northwest, Extreme
19· ·Horse has failed and refused to provide
20· ·the goods to repay the transfer."
21· · · · · · ·When did Extreme Horse refuse to
22· ·provide the goods?
23· · · ·A.· · I don't know the date.· I am
24· ·very sorry but I don't know the date.
25· · · ·Q.· · Is it your testimony that
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Page 196·1· · · · · · · · · R. AUERBACH
·2· ·Extreme Horse did refuse to provide the
·3· ·goods at some point in time?
·4· · · ·A.· · Well, we never got them.· We
·5· ·requested it, we never got it.· So, the
·6· ·answer is yes.
·7· · · ·Q.· · Let me try and parse that
·8· ·answer.· You say that you never got them,
·9· ·and you requested it and you never got
10· ·them, so the answer is yes.· But my
11· ·question is, did anyone from Extreme Horse
12· ·say "We will not supply the goods" or
13· ·something to that effect?
14· · · · · · ·MR. DUFFY:· Objection.· Asked
15· · · ·and answered.· You can answer.
16· · · ·A.· · Can you say it one more time,
17· ·please?· Sorry.· Thank you.
18· · · ·Q.· · So I understood your previous
19· ·answer to be, in essence, that you
20· ·requested the goods and you haven't gotten
21· ·them, so Extreme Horse has failed to
22· ·provide the goods.· But what I am focusing
23· ·on is the statement that Extreme Horse has
24· ·refused to provide the goods.· Has anyone
25· ·from Extreme Horse explicitly refused to
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Page 197·1· · · · · · · · · R. AUERBACH
·2· ·provide the goods?
·3· · · · · · ·MR. DUFFY:· Objection.· It
·4· · · ·mischaracterizes what the document
·5· · · ·says.· It doesn't say "explicitly."
·6· · · ·It just says "refused."
·7· · · ·A.· · We didn't get the goods.· We
·8· ·requested the goods.· And the answer is
·9· ·yes, they did not give us the goods.
10· · · ·Q.· · But did Extreme Horse say
11· ·explicitly "We will not provide the
12· ·goods"?
13· · · ·A.· · I don't mean to be argumentative
14· ·to you in any way, but we asked for the
15· ·goods, they didn't show up.· We asked for
16· ·the goods, we never got the goods. I
17· ·know -- I feel like you want me to answer
18· ·the question in the way in which you are
19· ·asking the question and you want me to
20· ·answer it to suit that purpose.· But I am
21· ·giving you an honest answer.· Anything
22· ·else I do, I am making it up.· I am giving
23· ·an honest answer each time.
24· · · ·Q.· · My concern is that I am drawing
25· ·a distinction between simply failing to
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Page 198·1· · · · · · · · · R. AUERBACH
·2· ·provide the goods and refusing to provide
·3· ·the goods.
·4· · · · · · ·MR. DUFFY:· Objection.· This
·5· · · ·witness has stated that he doesn't see
·6· · · ·the distinction.· It is a distinction
·7· · · ·without a difference according to this
·8· · · ·witness.· He's answered the question
·9· · · ·several times that exact same way.
10· · · · · · ·MR. AULET:· There is a
11· · · ·difference between him not seeing a
12· · · ·difference and getting a clear answer
13· · · ·to the question.
14· · · ·Q.· · What I want to know, did anyone
15· ·from Extreme Horse say "We will not
16· ·provide the goods"?
17· · · ·A.· · I don't know if anyone from
18· ·Extreme Horse -- excuse me.
19· · · · · · ·I don't know if anyone from
20· ·Extreme Horse used the verbiage that you
21· ·just used.· I can't remember if they said
22· ·what you said.
23· · · · · · ·MR. TEELE:· Ken, how much longer
24· · · ·do you have?
25· · · · · · ·MR. AULET:· I think we have a
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Page 199·1· · · · · · · · · R. AUERBACH
·2· · · ·little while longer to go.
·3· · · ·Q.· · Paragraph 38 --
·4· · · · · · ·MR. TEELE:· You only have
·5· · · ·another hour remaining in your
·6· · · ·seven hours so you can't have that
·7· · · ·much longer.
·8· · · · · · ·MR. AULET:· I have questions and
·9· · · ·I will use the entire time.· I think I
10· · · ·am done with this exhibit.· We can
11· · · ·take about a five-minute break if now
12· · · ·is good.· I think we have been going
13· · · ·about two hours.
14· · · · · · ·THE WITNESS:· Sounds good to me.
15· · · · · · ·THE VIDEOGRAPHER:· The time is
16· · · ·4:45.· We are going off the record.
17· · · · · · ·(Recess.)
18· · · · · · ·THE VIDEOGRAPHER:· The time is
19· · · ·4:53.· We are back on the record.
20· ·BY MR. AULET:
21· · · ·Q.· · Mr. Auerbach, is there any
22· ·reason you couldn't have simply sent $5
23· ·million from The Northwest Company to
24· ·Northwest Textiles rather than seeking
25· ·this investment from Extreme Horse?
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Page 200·1· · · · · · · · · R. AUERBACH
·2· · · · · · ·MR. DUFFY:· Objection to the
·3· · · ·form.
·4· · · ·A.· · Would you repeat the question,
·5· ·please?
·6· · · ·Q.· · Was the purpose of obtaining an
·7· ·investment from Extreme Horse to raise
·8· ·funds to purchase Itochu's investment in
·9· ·Northwest?
10· · · ·A.· · No.
11· · · · · · ·(Reporter interruption.)
12· · · ·A.· · Say it one more time and I will
13· ·repeat my answer as well.
14· · · ·Q.· · I changed the question.· Was the
15· ·purpose of obtaining an investment from
16· ·Extreme Horse to raise funds to purchase
17· ·Itochu's investment in Northwest?
18· · · ·A.· · No.· That was not the -- I may
19· ·not be answering the question correctly,
20· ·but the funds were used for that purpose,
21· ·yes.· Not exactly -- I don't know why I am
22· ·having trouble with your question but...
23· · · ·Q.· · The funds were used for that
24· ·purpose, but you did not seek the
25· ·investment for that purpose?· Is that
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Page 201·1· · · · · · · · · R. AUERBACH
·2· ·correct?
·3· · · ·A.· · Okay.· Now I understand.· The
·4· ·answer is yes, we did.· We seeked funds
·5· ·for that investment.· I misunderstood what
·6· ·you said.
·7· · · ·Q.· · Is there any reason that you
·8· ·could not have distributed $5 million as a
·9· ·dividend to Northwest Textiles to get the
10· ·money to Northwest Textiles to purchase
11· ·Itochu shares?
12· · · ·A.· · When we did this transaction, we
13· ·did so with counsel and we did so in a
14· ·manner which was set up in that process.
15· ·The answer to your question is I do not
16· ·know.· I can't answer the question. I
17· ·followed the legal advice that I was --
18· · · · · · ·(Reporter interruption.)
19· · · · · · ·I followed the legal advice of
20· ·my attorneys.· I am obviously not a lawyer
21· ·or attorney.
22· · · ·Q.· · What was the source of any
23· ·additional funds used to purchase the
24· ·Itochu shares?
25· · · ·A.· · The additional funds came from
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Page 202·1· · · · · · · · · R. AUERBACH
·2· ·Northwest Textile Holdings.
·3· · · ·Q.· · Where did Northwest Textile
·4· ·Holdings obtain those funds?
·5· · · ·A.· · Those were funds that Northwest
·6· ·Textiles had.
·7· · · ·Q.· · They were existing funds in its
·8· ·bank account?
·9· · · ·A.· · Yes.
10· · · ·Q.· · At that time, did Northwest
11· ·Textiles have sufficient funds in its bank
12· ·account to purchase the Itochu shares
13· ·without receiving the $5 million that we
14· ·have been discussing?
15· · · ·A.· · Sitting here, I don't know. I
16· ·have no idea.
17· · · · · · ·(So marked for identification as
18· · · ·Exhibit 16.)
19· · · · · · ·MR. AULET:· I am going to show
20· · · ·you what I have marked as Exhibit 16,
21· · · ·a Chase bank account statement for
22· · · ·May 2017.
23· · · ·Q.· · I am going to direct your
24· ·attention to page 4.· The second
25· ·transaction listed is a wire of $5 million
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Page 203·1· · · · · · · · · R. AUERBACH
·2· ·to Extreme Horse Limited.· At the bottom
·3· ·of that transaction it says "Your REF,
·4· ·prepaid inventor" and the "Y" is left off.
·5· · · · · · ·Do you have any explanation as
·6· ·to why this wire was labeled "prepaid
·7· ·inventory" if it was, in fact, a loan?
·8· · · ·A.· · No.· No idea.· I don't do these
·9· ·things.
10· · · ·Q.· · On page 5 at the bottom is a
11· ·wire of $5 million to you personally on
12· ·the 19th.· What was the purpose of this
13· ·wire?
14· · · ·A.· · I don't know.· I don't know.
15· ·I'd have to try to look it back up. I
16· ·don't know.
17· · · ·Q.· · What is Outerstuff?
18· · · ·A.· · Outerstuff is a company that
19· ·manufactures outer stuff.· Youth apparel
20· ·for the sports leagues, NFL, NBA, hockey.
21· ·Similar to our business but in youth
22· ·apparel.
23· · · ·Q.· · And at one point in this
24· ·bankruptcy proceeding, did you have a
25· ·non-binding term sheet for the purchase by
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Page 204·1· · · · · · · · · R. AUERBACH
·2· ·Outerstuff of substantially all assets of
·3· ·the Debtors?
·4· · · ·A.· · Yes, we did.
·5· · · ·Q.· · How was that term sheet
·6· ·negotiated?
·7· · · ·A.· · Can you be specific?· I'd be
·8· ·happy to answer.
·9· · · ·Q.· · Who was in charge of negotiating
10· ·that deal on behalf of Northwest?
11· · · ·A.· · The negotiation of that term
12· ·sheet was between the attorneys.
13· · · ·Q.· · Who negotiated the general
14· ·business terms?
15· · · ·A.· · I don't know what the general
16· ·business terms are.· I don't know -- could
17· ·you tell me what they are, and I can
18· ·answer the question, please?
19· · · ·Q.· · For example, the price that
20· ·Outerstuff would pay.· Who negotiated
21· ·that?
22· · · ·A.· · I am not aware of what the
23· ·price -- if there was a price.
24· · · ·Q.· · Did you participate in the
25· ·negotiations?
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·2· · · ·A.· · I participated in phone
·3· ·conversation and I had a meeting.· But the
·4· ·negotiation part, no, the attorney did.
·5· · · ·Q.· · I am just a little bit unclear.
·6· ·I think the transcript says you had a
·7· ·meeting, singular.· One meeting, or were
·8· ·there multiple meetings?
·9· · · ·A.· · I have seen -- excuse me. I
10· ·have seen Outerstuff more than once.
11· ·Probably two or three times.· But I
12· ·have --
13· · · ·Q.· · What was the -- sorry.· Please
14· ·finish your answer.
15· · · ·A.· · It's okay.· They are in our
16· ·industry, so I have known them, as I know
17· ·other people, for many, many years.
18· · · ·Q.· · How would you characterize your
19· ·involvement in the negotiations with
20· ·Outerstuff?
21· · · ·A.· · I would say that I spoke to them
22· ·about the opportunity.· Actually, I spoke
23· ·to them and told them what we were doing
24· ·with Ashford in a conversation.· And it
25· ·went further because Ashford dropped out
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Page 206·1· · · · · · · · · R. AUERBACH
·2· ·of -- they no longer were interested in
·3· ·going forward.
·4· · · ·Q.· · At one point in the negotiations
·5· ·with Outerstuff, did Outerstuff
·6· ·essentially walk away from the
·7· ·negotiations?
·8· · · ·A.· · I think the answer would be that
·9· ·their attorney did walk away, yes, at one
10· ·point.· Or Outerstuff did I guess, you
11· ·could say that.· Yes.
12· · · ·Q.· · And what did they indicate the
13· ·basis of their walking away was?
14· · · ·A.· · They were concerned -- give me a
15· ·moment.· I want to think it through.
16· · · · · · ·(Pause.)
17· · · · · · ·I may leave something out.· I am
18· ·not really sure.· But I think in general
19· ·they were concerned about completing the
20· ·transaction.· They were having problems --
21· ·excuse me.· They were having problems of
22· ·their own.· They had the exclusive for
23· ·youth apparel for the Olympics.· They had
24· ·about twenty or $25 million in inventory
25· ·that they had to sit on for a year.· That
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Page 207·1· · · · · · · · · R. AUERBACH
·2· ·number may be wrong but I am trying to
·3· ·remember.· They had furloughed a lot of
·4· ·their people.· They had no sports team
·5· ·playing, and they basically had enough
·6· ·problems of their own.· And I think it was
·7· ·hard for them to get the attention of
·8· ·their partner to go through with this in
·9· ·the timetable that was required.· And that
10· ·is a summary but that is what I believe it
11· ·to be.
12· · · ·Q.· · Who was the partner you referred
13· ·to?
14· · · · · · ·(Reporter interruption.)
15· · · ·Q.· · You had referred to a partner
16· ·that there was trouble getting the
17· ·attention of.· Who was the partner?
18· · · ·A.· · Blackstone.
19· · · ·Q.· · What caused Outerstuff to come
20· ·back to the negotiating table?
21· · · ·A.· · I think that -- I believe that
22· ·Outerstuff wanted to be a part of this
23· ·when Ashford dropped out of it.· There
24· ·were conversations.· I don't remember
25· ·exactly what we said.· But the issues -- I
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·2· ·don't know if I should say opinions,
·3· ·because it is not a fact.· So, the answer
·4· ·is I don't know.· Anything I say would be
·5· ·an opinion, not a fact.
·6· · · ·Q.· · Were you involved in essentially
·7· ·pitching them to come back to the
·8· ·negotiating table?
·9· · · ·A.· · There were conversations. I
10· ·don't know if I would say I was pitching
11· ·them to come back.· But, yes, I was
12· ·involved in conversations with them.
13· ·Absolutely.
14· · · ·Q.· · And what was the substance of
15· ·those conversations?
16· · · ·A.· · Again, I am summarizing.· The
17· ·proceeding that we were working toward
18· ·with Ashford or down the road, say, with
19· ·Outerstuff or any other interested party
20· ·is one that would have to go through a 363
21· ·sale or a bankruptcy, and they did not
22· ·have a bankruptcy attorney working on the
23· ·term sheet and on the deal.· And the
24· ·attorneys were trying to get them to get
25· ·someone to the table who understood the
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Page 209·1· · · · · · · · · R. AUERBACH
·2· ·process.
·3· · · ·Q.· · Has that non-binding term sheet
·4· ·now expired?
·5· · · ·A.· · Mm-hmm.· Sorry.· Yes.
·6· · · ·Q.· · Did any of your discussions with
·7· ·Outerstuff involve any potential future
·8· ·employment by you at Outerstuff?
·9· · · ·A.· · At Outerstuff?· The conversation
10· ·that we had as far as myself goes, we left
11· ·them open.· We did not discuss anything
12· ·specific about me.
13· · · ·Q.· · Did you discuss anything
14· ·generally about you?
15· · · ·A.· · Just that they don't make
16· ·blankets and we do, and we make home
17· ·products and they don't.· And the fact
18· ·that I would be helpful on that side of
19· ·it, and they would have their side of the
20· ·business.· But we didn't go into any
21· ·detail because it was more important --
22· · · · · · ·(Reporter interruption.)
23· · · · · · ·THE WITNESS:· I said that we
24· · · ·spoke about the different businesses,
25· · · ·the fact that we made Home Textiles
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Page 210·1· · · · · · · · · R. AUERBACH
·2· · · ·and they made apparel.· And the idea
·3· · · ·would have been that if we did get
·4· · · ·together, that I would be able to help
·5· · · ·them on the home side and they would,
·6· · · ·obviously, be able to do their side
·7· · · ·and we would be able to reduce our
·8· · · ·overhead by combining similar
·9· · · ·functions.
10· · · ·Q.· · Are you familiar with the CBIZ
11· ·report?
12· · · ·A.· · I never really saw the report.
13· ·I am familiar with CBIZ.· I am familiar
14· ·with the exercise of CBIZ, yes.
15· · · ·Q.· · You said you have never really
16· ·seen the report.· Did you ever see the
17· ·report?
18· · · ·A.· · Sometime recently we were given
19· ·a copy of the report.· We weren't given a
20· ·copy of the report at the time.· Although
21· ·we retained CBIZ, we only retained CBIZ at
22· ·the request of Ashford.· Although we
23· ·retained CBIZ, they really reported to
24· ·Ashford only, not to Northwest.· All of
25· ·their conversations with were Ashford, not
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·2· ·with Northwest.
·3· · · · · · ·MR. DUFFY:· For the report.
·4· · · ·Q.· · Is it your testimony that the
·5· ·report that CBIZ created was never
·6· ·provided to Northwest?
·7· · · ·A.· · Not at the time that it was
·8· ·created.· It was given to us sometime
·9· ·recently within the last month.· It could
10· ·have been three weeks.· I don't really
11· ·remember.· A month, maybe six weeks.· But
12· ·no, it was not given to us at the time
13· ·of -- at the time it was created, it was
14· ·not given to us.· But it was never
15· ·intended for us.· It was only intended for
16· ·Ashford.
17· · · ·Q.· · And were you involved in the
18· ·providing of information to CBIZ for its
19· ·report?
20· · · ·A.· · Yes.· I had one meeting with Jay
21· ·Silver.
22· · · ·Q.· · And did you respond to their
23· ·request by email?
24· · · ·A.· · I don't remember.· There must be
25· ·emails, but I just -- I am sure there is
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·2· ·an email, yes, to Jay Silver and his
·3· ·associate.
·4· · · ·Q.· · And did you provide an
·5· ·explanation to CBIZ of what the purpose of
·6· ·the transactions between Northwest and
·7· ·David Harrison LLC were?
·8· · · ·A.· · I told them that -- excuse me.
·9· ·I told Jay -- I told Jay that -- you said
10· ·David Harrison?· Sorry.
11· · · ·Q.· · Yes, David Harrison LLC.
12· · · ·A.· · Thank you.
13· · · · · · ·I informed him what David
14· ·Harrison LLC owned and what it related to.
15· · · ·Q.· · Who is Elex Auerbach, E-L-E-X?
16· · · ·A.· · My brother's son, Elex.· It's a
17· ·tough name, I know.
18· · · ·Q.· · Do you recall providing
19· ·information to CBIZ regarding certain
20· ·Christine McClure American Express
21· ·charges?
22· · · ·A.· · I don't know if I provided it or
23· ·if she provided it, but you could ask me a
24· ·question about it.
25· · · ·Q.· · Does Christine McClure ever
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·2· ·charge personal items for you on her
·3· ·corporate American Express card?
·4· · · ·A.· · I don't -- I don't know.· I just
·5· ·don't know the answer.· I mean it's
·6· ·possible, but I don't know, sitting here,
·7· ·if there is personal items on that card.
·8· ·But if there were, she would code them as
·9· ·such.
10· · · ·Q.· · Would she be responsible for
11· ·going through her American Express charges
12· ·and coding them?
13· · · ·A.· · Yes.· Each individual with a
14· ·card goes through their charges
15· ·themselves.
16· · · ·Q.· · What is Charmonix,
17· ·C-H-A-R-M-O-N-I-X?
18· · · · · · ·(Pause.)
19· · · ·A.· · I am going to write it down.
20· ·Can you spell that again?
21· · · · · · ·MR. DUFFY:· C-H-A-R-M-O-N-I-X.
22· · · · · · ·MR. AULET:· I apologize.· My
23· · · ·live reporting thing just crashed but
24· · · ·I will be back on shortly.
25· · · · · · ·THE VIDEOGRAPHER:· Off the
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·2· · · ·record or staying on?
·3· · · · · · ·MR. AULET:· Let's stay on the
·4· · · ·record.
·5· · · · · · ·(Pause.)
·6· · · ·Q.· · I can still hear, if you can
·7· ·answer the question.
·8· · · ·A.· · I am just trying to think about
·9· ·what it is.· I am having a little trouble
10· ·remembering, which is sad.
11· · · · · · ·MR KESTENBAUM:· If you don't
12· · · ·remember, don't guess.
13· · · · · · ·THE WITNESS:· I looked at the
14· · · ·word.· I just don't remember.
15· · · ·Q.· · Does it have anything to do with
16· ·boats?
17· · · · · · ·MR. DUFFY:· Objection.· Asked
18· · · ·and answered.
19· · · ·A.· · I mean, the answer is I just
20· ·don't remember the name.· But if you have
21· ·a question on a boat, I don't mind
22· ·answering a question on a boat.
23· · · · · · ·MR. AULET:· I apologize.· I was
24· · · ·trying to open the wrong link.
25· · · ·Q.· · Are you familiar with a PPP loan
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·2· ·that was filed on behalf of the Debtors?
·3· · · ·A.· · Yes, I am.
·4· · · ·Q.· · Were you involved in preparing
·5· ·that loan?
·6· · · ·A.· · No, I was not.
·7· · · ·Q.· · Did you sign any portions of
·8· ·that loan?
·9· · · ·A.· · I am pretty sure I must have.
10· · · · · · ·MR. KESTENBAUM:· When you say
11· · · ·"that loan," I am assuming you are
12· · · ·referring to an application for a
13· · · ·loan?
14· · · · · · ·MR. AULET:· Yes.· The PPP loan
15· · · ·application.
16· · · ·A.· · I am sure I did.· I think I
17· ·would have to.· But I know what you are
18· ·referring to.
19· · · · · · ·MR. KESTENBAUM:· Let him ask the
20· · · ·questions.· The answers that you know,
21· · · ·you answer.
22· · · · · · ·THE WITNESS:· Okay.
23· · · · · · ·(So marked for identification as
24· · · ·Exhibit 17.)
25· · · · · · ·MR. AULET:· What I have just
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Page 216·1· · · · · · · · · R. AUERBACH
·2· · · ·shown you is what I have marked
·3· · · ·Exhibit 17, a PDF that we received
·4· · · ·from the Debtor that a number of
·5· · · ·documents appear to relate to, the PPP
·6· · · ·loan.
·7· · · ·Q.· · Have you seen this document
·8· ·before?
·9· · · ·A.· · This specific document?· I don't
10· ·know.· But I am very much aware of the PPP
11· ·loan.· I just don't know if this is the
12· ·specific document I saw.· But I am aware.
13· · · ·Q.· · Have you seen this portion of
14· ·the exhibit, page 13?
15· · · ·A.· · Again, I don't know, but I have
16· ·to assume that I did.· Sitting here right
17· ·now I don't remember, but I am sure I did.
18· · · ·Q.· · And if you look near the bottom,
19· ·there is two initials, RA.· Would those be
20· ·your initials?
21· · · ·A.· · Give me a moment to get to that
22· ·spot.· Sorry.
23· · · · · · ·Oh, they are typed.· On what I
24· ·am looking at, they are typed.· Right.· So
25· ·I guess it was done on a computer by
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Page 217·1· · · · · · · · · R. AUERBACH
·2· ·somebody.
·3· · · ·Q.· · And are those your initials?
·4· · · ·A.· · Well, I don't mean to be
·5· ·difficult.· If you mean is it a physical
·6· ·initial, no.· But I mean, they say RA, so
·7· ·someone typed in RA.· I mean, it's got to
·8· ·be me, Ross Auerbach.· Are you asking if I
·9· ·signed it?· Because it is not a signature.
10· · · ·Q.· · We'll go to the signature page.
11· ·Is that your signature?
12· · · ·A.· · Absolutely.· That is my ugly
13· ·signature.
14· · · ·Q.· · And do you recall -- were you
15· ·the person who initialed each of these
16· ·certifications "RA"?
17· · · ·A.· · No.· They did it on the computer
18· ·and I read it.
19· · · ·Q.· · Did you authorize somebody to
20· ·initial it for you?
21· · · ·A.· · Yes.
22· · · ·Q.· · And would you have reviewed this
23· ·document before you signed it?
24· · · ·A.· · I would have.
25· · · ·Q.· · Why isn't Extreme Horse Limited
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Page 218·1· · · · · · · · · R. AUERBACH
·2· ·listed on this document?
·3· · · ·A.· · We were going to list it, and
·4· ·Robert was either told, requested,
·5· ·advised -- I don't know the proper way to
·6· ·say it -- by CIT just to leave it off.· It
·7· ·says "Ross Auerbach 80 percent," and the
·8· ·advice was that that was enough.· But that
·9· ·came from CIT.· That was CIT's advice to
10· ·Robert.· And the only reason I know that
11· ·is because I was standing in Robert's
12· ·office when he was on the phone with Jeff
13· ·Kremburg when Jeff Kremburg was on
14· ·speakerphone and he said he just needs to
15· ·list Ross.· Otherwise, I would not know.
16· · · ·Q.· · And when you filed this loan
17· ·application -- let me go to the second
18· ·page so you can see when it was signed,
19· ·April 6th.· Did you intend to file for
20· ·Chapter 11 at that time?
21· · · ·A.· · I don't know.· In other words, I
22· ·really truly don't know.· It was one of
23· ·the many things -- we were working on so
24· ·many different plans, so many different
25· ·options.· We were trying to do so many
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Page 219·1· · · · · · · · · R. AUERBACH
·2· ·different things that I cannot tell you on
·3· ·that date.· I don't know.
·4· · · ·Q.· · While I wait for this to load,
·5· ·did you, on or around November 21, 2019,
·6· ·sign a letter that stated you had both the
·7· ·wherewithal, commitment of Northwest
·8· ·Company by providing adequate financial
·9· ·assistance to enable the company to
10· ·continue its business operations through
11· ·December 31, 2020?
12· · · · · · ·(So marked for identification as
13· · · ·Exhibit 18.)
14· · · · · · ·MR. AULET:· You should now be
15· · · ·able to see this, which I have marked
16· · · ·Exhibit 18.
17· · · ·A.· · Yes, I can see it.· And that is
18· ·something that I did create and I did
19· ·sign.
20· · · ·Q.· · And this references $5 million
21· ·in an account with the company's financial
22· ·institution, CIT, as collateral for the
23· ·outstanding loan.· Does CIT still hold
24· ·those funds?
25· · · ·A.· · Yes, they do.
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·2· · · ·Q.· · Why does Allen Guo have a
·3· ·Northwest American Express card?
·4· · · ·A.· · Allen needed a way to charge
·5· ·certain items without his family knowing
·6· ·that he was doing so.
·7· · · ·Q.· · And why was that --
·8· · · ·A.· · What?· Sorry.
·9· · · ·Q.· · I apologize.· Due to the delay
10· ·issue, I cut you off while you were still
11· ·finishing your answer.· Did you have
12· ·anything to add?
13· · · ·A.· · No.· I was just saying it was
14· ·something that he needed for his personal
15· ·life.
16· · · · · · ·MR. AULET:· Okay.· Why don't we
17· · · ·take a five-minute break and then we
18· · · ·should be pretty close to done?
19· · · · · · ·THE VIDEOGRAPHER:· Time is 5:25.
20· · · ·We are going off the record.
21· · · · · · ·(Recess.)
22· · · · · · ·THE VIDEOGRAPHER:· The time is
23· · · ·5:35.· We are on the record.
24· · · · · · ·(So marked for identification as
25· · · ·Exhibit 19.)
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Page 221·1· · · · · · · · · R. AUERBACH
·2· · · · · · ·MR. AULET:· I have put in front
·3· · · ·of you what I have marked Exhibit 19.
·4· · · ·This is a set of American Express
·5· · · ·Centurian statements that were
·6· · · ·produced to us in a single PDF that
·7· · · ·covered July through December 2019. I
·8· · · ·am going to direct your attention to
·9· · · ·page 51.
10· · · ·Q.· · First, there is a very large
11· ·charge, Americana Concierge for $33,000.
12· ·What is that charge for?
13· · · ·A.· · Those are for holiday gift cards
14· ·to employees.
15· · · ·Q.· · Who handles giving these out?
16· · · ·A.· · There are two or three people
17· ·who work here who give them out at the
18· ·holiday party.
19· · · ·Q.· · And if you look up near the top,
20· ·there is a charge for $1,386.15 at the
21· ·Bryant & Cooper Steakhouse.· Is this a
22· ·business transaction?
23· · · ·A.· · It's a dinner.· Yes.· I would
24· ·go -- I have to go look and I can probably
25· ·find out -- I mean, I would find out who
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·2· ·we entertained.· But yes, the answer is
·3· ·yes.
·4· · · ·Q.· · Would anyone simply looking at
·5· ·this account statement be able to tell if
·6· ·that was a business express or one of your
·7· ·personal expenses?
·8· · · ·A.· · The answer is that these -- I
·9· ·can't speak.
10· · · · · · ·These are duplicate copies that
11· ·I asked American Express to send so there
12· ·would be no void of anything missing in
13· ·the discovery requests.· So the answer is
14· ·that the actual statements, which if they
15· ·are not -- if they have not been provided,
16· ·they would have the coding on them.· These
17· ·duplicate statements don't have coding on
18· ·them.
19· · · · · · ·We were concerned that there
20· ·would be missing gaps, and I was told it
21· ·was better to give more than to not
22· ·furnish.
23· · · ·Q.· · But my question is about this
24· ·specific duplicate copy with no
25· ·handwritten notes on it.· Would someone,
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Page 223·1· · · · · · · · · R. AUERBACH
·2· ·just with this copy, no handwritten notes,
·3· ·be able to determine which expenses were
·4· ·business expenses?
·5· · · ·A.· · I don't know if I can answer
·6· ·that question.· I mean, when Jay Silver
·7· ·was here, he said that he didn't need
·8· ·anything other than the transactions
·9· ·themselves.· We actually requested them in
10· ·a CSV file and he didn't want the
11· ·statement.· So according to Jay Silver,
12· ·the answer would be yes.· According to
13· ·you, I don't know if you agree.· But that
14· ·is what he called it.
15· · · ·Q.· · Let's use the steakhouse as an
16· ·example.· If we simply hand that
17· ·transaction to an accountant, can they
18· ·determine if it is a business or personal
19· ·expense without additional information?
20· · · · · · ·MR. DUFFY:· Objection.
21· · · ·Objection, hypothetical.· This is a
22· · · ·lay witness and not an accountant.· If
23· · · ·you can answer the question; go to it.
24· · · ·A.· · As I said earlier, the
25· ·original -- when I say "original," this,
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Page 224·1· · · · · · · · · R. AUERBACH
·2· ·as you can see, is a duplicate copy.· The
·3· ·original statements would be coded.· You
·4· ·have duplications.· You have original
·5· ·statements that you have been receiving
·6· ·and duplicate copies.· So, you have more
·7· ·than one of many.
·8· · · · · · ·If you look at the original --
·9· ·if you look at the original of this, you
10· ·would be able to see what the business
11· ·purpose was and the transactions.· You
12· ·should have them in the -- I don't know
13· ·what it is called.· In the data room.
14· · · ·Q.· · Would I need that version of
15· ·this statement with notes about how things
16· ·should be coded in order to properly code
17· ·it?
18· · · ·A.· · You would need to know -- I
19· ·guess you would need -- I mean, I know it
20· ·was a business dinner, but I -- the
21· ·answer, I guess, is whatever you want it
22· ·to be.
23· · · · · · ·MR. DUFFY:· I object to the
24· · · ·question for the same reason I
25· · · ·objected to the question before.· He
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Page 225·1· · · · · · · · · R. AUERBACH
·2· · · ·is not an accountant.
·3· · · · · · ·(So marked for identification as
·4· · · ·Exhibit 20.)
·5· · · · · · ·MR. AULET:· Mr. Auerbach, I am
·6· · · ·putting in front of you what I am
·7· · · ·marking as Exhibit 20, which is a
·8· · · ·Business Platinum Card statement with
·9· · · ·closing date of May 16, 2019.
10· · · ·Q.· · I have gone to page 5.
11· · · · · · ·MR. DUFFY:· For the record, the
12· · · ·exhibit is not up.· I don't see the
13· · · ·exhibit, for the record.
14· · · · · · ·MR. AULET:· Who was speaking?
15· · · · · · ·MR. DUFFY:· This is Todd Duffy.
16· · · · · · ·MR. AULET:· My apologies.
17· · · · · · ·MR. DUFFY:· It is fine. I
18· · · ·wanted to be sure you knew.
19· · · · · · ·MR. AULET:· Can you see it now?
20· · · · · · ·MR. DUFFY:· I can.· Thank you.
21· · · ·Q.· · So now you should be able to see
22· ·the exhibit which I previously identified.
23· ·I will it turn to page 5.· Who is Michael
24· ·Robert Howley, the passenger on the first
25· ·Delta Airlines ticket?
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Page 226·1· · · · · · · · · R. AUERBACH
·2· · · · · · ·MR. DUFFY:· Sorry.· There is
·3· · · ·something here.· Go ahead.
·4· · · ·Q.· · Do you see the two Delta
·5· ·Airlines tickets dated 5/3/19 in the
·6· ·middle of the page?
·7· · · ·A.· · Yes.· I apologize.· Someone is
·8· ·sneezing.
·9· · · · · · ·Michael Howley.· Yes.· He works
10· ·here.· And he -- the answer is he is an
11· ·employee here.· He works here.
12· · · ·Q.· · And the second person, Cassandra
13· ·Marinescu?
14· · · ·A.· · Cassandra works here as well.
15· ·Cassandra works in -- those are trips to
16· ·the factory in Mexico.
17· · · · · · ·MR. AULET:· Last name
18· · · ·M-A-R-I-N-E-S-C-U.
19· · · ·Q.· · Then above those tickets, what
20· ·is Strivectin?
21· · · ·A.· · That is personal.· This
22· ·statement -- I didn't mean to interrupt
23· ·anybody.· This statement is relatively
24· ·recent.· This statement I know.· This is
25· ·just from -- this is very recent.· So,
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Page 227·1· · · · · · · · · R. AUERBACH
·2· ·this statement is coded.· It should be in
·3· ·the data room.· The one you mentioned,
·4· ·S-T-R-I, is personal.· The Delta Airlines
·5· ·is a visit to Providencia.· This statement
·6· ·I recognize for the most part.· Very
·7· ·recent.
·8· · · ·Q.· · You recall coding one of these
·9· ·statements?
10· · · ·A.· · Yes.· This is a duplicate.· But
11· ·yes.
12· · · · · · ·MR. AULET:· I have no further
13· · · ·questions right now.· However, I would
14· · · ·note that I am going to hold the
15· · · ·deposition open due to the lack of the
16· · · ·Northwest Textiles documents.· We
17· · · ·reserve our right to recall
18· · · ·Mr. Auerbach if and when we actually
19· · · ·receive those documents.
20· · · · · · ·MR. DUFFY:· For the record, we
21· · · ·will note there is approximately one
22· · · ·hour left under Federal Rules of Civil
23· · · ·Procedure for questioning.
24· · · · · · ·THE VIDEOGRAPHER:· The time is
25· · · ·5:46, the conclusion of today's
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Page 228·1· · · · · · · · · R. AUERBACH
·2· · · ·deposition on July 1, 2020.
·3· · · · · · ·MR. TEELE:· Debtors would like a
·4· · · ·rough draft tonight and final copy as
·5· · · ·soon as possible, including copies of
·6· · · ·all exhibits.
·7· · · · · · ·MR. DUFFY:· Duffy Amedeo would
·8· · · ·like the same.
·9· · · · · · ·MR. AULET:· Brown Rudnick would
10· · · ·like the same.
11· · · · · · ·MR. KAPLAN:· The same for the
12· · · ·Committee.· Thank you.
13
14· · · · · · ·[TIME NOTED:· 5:47 p.m.]
15
16
17· · · · · ·____________________________
18· · · · · · · · · ·ROSS AUERBACH
19
20· ·SUBSCRIBED AND SWORN TO
21· ·BEFORE ME THIS______DAY
22· ·OF_______________, 2020.
23
24· ·_______________________
25· · · ·NOTARY PUBLIC
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Page 229·1
·2· · · · · ·C E R T I F I C A T I O N
·3
·4· · · I, DEBRA STEVENS, a Notary Public for
·5· ·and within the State of New York, do
·6· ·hereby certify:
·7· · · That the witness whose testimony as
·8· ·herein set forth, was duly sworn by me;
·9· ·and that the within transcript is a true
10· ·record of the testimony given by said
11· ·witness.
12· · · I further certify that I am not
13· ·related to any of the parties to this
14· ·action by blood or marriage, and that I am
15· ·in no way interested in the outcome of
16· ·this matter.
17· · · IN WITNESS WHEREOF, I have hereunto
18· ·set my hand this 2nd day of July, 2020.
19
20
21· · · · · ·_______________________
22· · · · · ·DEBRA STEVENS, RPR-CRR
23
24· · · · · · · ·*· · ·*· · ·*
25
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Page 230·1
·2· · · · · · · WITNESS ERRATA SHEET
·3· · ·CASE NAME: In re Northwest Company LLC·4· ·DATE OF DEPOSITION:· July 1, 2020· · ·WITNESS NAME:· ROSS AUERBACH·5· · ·PAGE/LINE(S)/· · CHANGE· · · · · REASON·6· ·____/_______/_________________/________· · ·____/_______/_________________/________·7· ·____/_______/_________________/________· · ·____/_______/_________________/________·8· ·____/_______/_________________/________· · ·____/_______/_________________/________·9· ·____/_______/_________________/________· · ·____/_______/_________________/________10· ·____/_______/_________________/________· · ·____/_______/_________________/________11· ·____/_______/_________________/________· · ·____/_______/_________________/________12· ·____/_______/_________________/________· · ·____/_______/_________________/________13· ·____/_______/_________________/________· · ·____/_______/_________________/________14· ·____/_______/_________________/________· · ·____/_______/_________________/________15· ·____/_______/_________________/________· · ·____/_______/_________________/________16· ·____/_______/_________________/________· · ·____/_______/_________________/________17· ·____/_______/_________________/________· · ·____/_______/_________________/________18· ·____/_______/_________________/________· · ·____/_______/_________________/________19· ·____/_______/_________________/________
20· · · · · · ·_______________________21· · · · · · · ·ROSS AUERBACH
22· ·SUBSCRIBED AND SWORN TO· · ·BEFORE ME THIS______DAY23· ·OF_______________, 2020.
24· ·_______________________· · · · ·NOTARY PUBLIC25· · ·MY COMMISSION EXPIRES__________________
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