qsgi response to ibm motion to compel compliance and for sanctions for non compliance

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

Case No. 09:11-cv-80880-KLR

QSGI, Inc., a Delaware Corporation, Plaintiff,

v.

IBM GLOBAL FINANCING, a Division of International Business Machines Corp., and INTERNATIONAL BUSINESS MACHINES CORP., Parent to and/or d/b/a IBM GLOBAL FINANCING,

Defendants.

_________________________________________/

PLAINTIFF’S RESPONSE TO IBM’S MOTION TO COMPEL COMPLIANCE WITH MARCH 16, 2012 AND FOR SANCTIONS FOR NONCOMPLIANCE

Plaintiff, by and through undersigned counsel, hereby files this Response to IBM’s

Motion to Compel Compliance with March 16, 2012 and for Sanctions for Noncompliance

pursuant to Fed. R. Civ. P. 37 and Local Rules 7.1 and 26.1. In support thereof, Plaintiff states

as follows:

1. Dorsey v. Academy Moving & Storage, Inc. 423 F.2d 858, 860 (5th Cir. 1970), a

case emanating from Florida, long ago established standards governing the imposition of

sanctions in circumstances such as the present:

The sanctions available under Rule 37(b) for such conduct are predicated upon the presence of such factors as willful disobedience, gross indifference to the right of the adverse party, deliberate callousness, or gross negligence. The sanctions are not predicated upon a party's failure to satisfy fully the requirements of a production order when the failure ‘was due to inability fostered neither by its own conduct nor by circumstances within its control’. Societe Internationale Pour Participations Industrielles Et

Case 9:11-cv-80880-KLR Document 70 Entered on FLSD Docket 05/07/2012 of 8

2

Commerciales, S.A. v. Rogers, 1958, 357 U.S. 197, 211, 78 S.Ct. 1087, 1095, 2 L.Ed.2d 1255, 1266.

2. As this Court will readily see, IBM’s Motion to Compel, IBM’s Motion to

Expedite briefing and request for a hearing, are unnecessary, wasteful of the parties and Court’s

time and resources, and should be immediately withdrawn because it is without cause, legal basis

and moreover, its attorneys’ “good faith” certification is an sham. (See, D.E. 64, p. 15.)1 2 IBM

knows full well, but fails to mention, that the delayed receipt and production of documents and

evidence responsive to IBM’s discovery was not QSGI’s fault and is excusable. QSGI’s

documents and records have been in the possession and control of non-parties—the Securities

and Exchange Commission (“SEC”) and QSGI’s SEC counsel, McDonald Hopkins LLC.

Despite QSGI’s and IBM’s efforts to obtain QSGI’s documents and records sooner, QSGI and

IBM have been, and continue to be, at the mercy of McDonald Hopkins and the SEC, who only

recently produced and allowed access to the millions upon millions of documents constituting

the universe of QSGI’s existing documents and records.

3. Correspondingly, IBM has not sought to resolve QSGI’s objections to IBM’s

discovery nor its Motion to Compel before or after filing it Motion in accordance with Rule 37,

1 Fed. R. Civ. P. 37(a)(1) requires Defendant, IBM, to “include a certification that the movant has in good faith conferred or attempted to confer with the…party failing to make…discovery in an effort to obtain it without court action.”

2 Local Rule 7.1 entitled, Pre-filing Conference Required of Counsel, requires counsel to,

“confer (orally or in writing), or make reasonable effort confer (orally or in writing), with all parties or non-parties who may be affected by the relief sough tin the motion in a good faith effort to resolve by agreement the issues to be raised in the motion. Counsel conferring with movant’s counsel shall cooperate and act in good faith in attempting to resolve the dispute.”


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Local Rules 7.1 and 26.1, and this Court’s Discovery Handbook. 3 Exacerbating this fatal

procedural defect, IBM’s Motion is also rife with hyperbole and blatant inaccuracies regarding

QSGI’s past conduct; the status and whereabouts of QSGI’s records and documents and their

production; and the reviewability of the documents produced by QSGI in March and April 2012.

Contrary to IBM generous claims, QSGI has never destroyed any document outside of its

document retention policies or normal business practices. See, M. Sherman Depo. Trans. as

Exhibit A. pp. 31-82. As of approximately April 26, 2012, QSGI possesses million upon

millions of documents and records, most of which have been produced or will be produced to

IBM. Only an unknown subset of QSGI’s document and records were destroyed between in

2009, and to that extent, they were destroyed by a document storage facility in Minnesota which

was not properly reimbursed by the Receiver in QSGI’s bankruptcy. Id. at 53-54, 63-66, and 72-

82. This is despite QSGI properly submitting bills for these storage fees. Id.

4. Equally untrue is IBM’s claim that the documents from McDonald Hopkins LLC

are unreadable, unreviewable, and unusable. QSGI’s counsel is able to read, review, search and

use the same documents and records, which have been produced exactly as they were organized,

stored and maintained—readable, reviewable and searchable .pdf and .tiff files with all

accompanying metadata. See, D.E. 64-8. Moreover, any discrepancy between the documents

and records produced and the previously agreed format is purely a consequence of QSGI and

QSGI’s counsel not knowing the format in which McDonald Hopkins created, organized, stored

and maintained QSGI’s documents and records. Id. QSGI’s agreement to produce records in the

format requested (ESI)(D.E. 27, pp. 5-6) by IBM was a gratuitous agreement based upon a

3 IBM’s Motion requesting sanctions for QSGI’s alleged failure to respond to IBM’s first set of interrogatories is premature as there has been no attempt whatsoever to resolve QSGI’s objections to the interrogatories.


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mistake of fact regarding the electronic format of QSGI’s existing documents and records. QSGI

is only required to produce its records in the manner in which they were created, stored and

maintained. It is not obligated to rearrange or reorganize these materials for IBM, let alone

create new documents in an entirely new format. See, Section III.B.(1).b. of the Discovery

Handbook.

5. IBM’s Motion to Compel and corresponding Motion to Expedite where no

emergency or real prejudice exists is part of an emerging discourteousness on the part of IBM. It

unreasonable demands and disrespect for counsels schedule is counterproductive and contrary to

those rules governing discovery practice in the Southern District. Section I.A.(1), (2) and (4) of

the Discovery Practices Handbook South District of Florida entitled, Courtesy and Cooperation

Among Counsel clearly provides that:

(1) Courtesy. Discovery in this District is normally practiced with a spirit of

cooperation and civility…Courtesy suggest that a telephone call is appropriate

before taking action that might be avoided by agreement of counsel.

(2) Scheduling. A lawyer shall normally attempt to accommodate the calendars of

opposing lawyers scheduling discovery.

****

(4) Withdrawal of Motions. If counsel are able to resolve their differences after a

discovery motion or response is filed, the moving party should file a notice of

withdrawal of the motion to avoid unnecessary judicial labor.

6. From the inception of this lawsuit until approximately March 21, 2012, QSGI’s

counsel conversed or corresponded with IBM’s local Florida counsel nearly every day about

every aspect of QSGI’s lawsuit. As envisioned by the above guidelines, counsels’ near daily


5

conversations fostered a spirit of cooperation out of which, among other things, IBM learned the

whereabouts of QSGI’s documents leading to IBM’s February 2012 subpoena and the April

2012 release of all of QSGI’s records and documents from the third parties that possessed and

controlled them—McDonald Hopkins LLC and the SEC. IBM now has access to and has begun

its review of 382 boxes of documents controlled by the SEC; and pending the completion of

copying four (4) million or so documents and 23 privilege logs, recently received and reviewed

by QSGI’s counsel, IBM will possess all documents that were in McDonald Hopkins LLC’s and

the SEC’s possession. 4 These millions upon millions of documents are responsive to IBM’s

First Request for Production and First Set of Interrogatories, constitute the known universe of

existing documents pertaining to QSGI’s bankrupt business, and were arduously compiled,

organized and produced in the manner they were created, kept and maintained at a cost of some

$250,000.00.

7. Despite the proven success of conducting litigation in a cooperative and courteous

manner, IBM has abandoned this track and its local Florida counsel in favor of out-of-state

attorneys, who are more concerned with creating litigation and collateral matters rather than

bringing about their just and efficient end. As of March 21, 2012, IBM’s local counsel has been

non-communicative, despite having access to QSGI’s counsel’s contact information, including

personal cell phone number. And while, IBM and its battalion of out-of-state counselors are

prolific at papering the record, they are very ineffective communicators. In just under nine (9)

months of litigation, not one of IBM’s out-of-state attorneys have thought to engage in an actual

4 QSGI’s counsel received all of these records on approximately April 26, 2012. After an initial review, QSGI’s counsel began copying these documents to an external flash drives on Thursday evening, May 3, 2012. As of Monday, May 7, 2012, these documents were still copying and will be shipped to IBM’s counsel immediately upon completion.


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conversation with any of QSGI’s attorneys to discuss any substantive matters relating to this

case, let alone anything of import.5 Indeed, this dearth of conversation leads QSGI to believe

IBM’s out-of-state attorneys might not possess or know how to use a telephone.

8. IBM’s sea of correspondence, sent upwards of four times a day, is a poor

substitute for live conversation, made all the poorer by IBM’s out-of-state’s counsels’

unreasonable and untenable demands that QSGI respond to the same within 24 hours “or else”.

This pattern of practice accomplishes little other than increase the amount and costs of litigation,

and muddles and distorts the Court’s record. Then again, this may be the entire purpose.

9. IBM knows that all QSGI’s documents and records have been in the possession,

custody, and control of a third parties. IBM has known this since December 2011, and it is the

reason precipitating IBM’s subpoena to McDonald Hopkins LLC—not QSGI’s recalcitrance.

IBM also knows, having been repeatedly advised by QSGI’s counsel and McDonald Hopkins,

that QSGI has had no control whatsoever over the timing of these third parties’ production of

QSGI’s records. Rather than acknowledge these facts, IBM has discourteously taken to

completely misrepresenting QSGI’s conduct to the Court to unfairly seek punishment where no

punishment is due.

WHEREFORE, for the reasons set forth herein, Plaintiff respectfully requests that this

Court enter an Order Denying IBM’s Motion to Compel Compliance with March 16, 2012 and

for Sanctions for Noncompliance.

Respectfully submitted,

5 In seven months, QSGI’s counsel knows of only one telephone message left by out-of-state counsel to QSGI’s counsel. This message was about scheduling a deposition and is unrelated to anything having to do with IBM’s immediate Motion or QSGI’s discovery responses.


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THE FERRARO LAW FIRM, P.A. Attorneys for the Plaintiff 4000 Ponce de Leon Blvd. Suite 700 Miami, FL 33146 Telephone (305) 375-0111 Facsimile (305) 379-6222 Email: [email protected]

By: /s/ Case A. Dam

CASE A. DAM, ESQ. Florida Bar No. 756091


mailto:[email protected]

8

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing was served via CM/ECF on

all counsel of record this 7th day of May 2012.

THE FERRARO LAW FIRM, P.A.

By: /s/ Case A. Dam CASE A. DAM, ESQ. Florida Bar No. 756091


In The Matter Of:

QSGI, INC., et al.

v.

IBM GLOBAL FINANCING, et al.

___________________________________________________

MARC SHERMAN ‐ Vol. 1March 12, 2012

___________________________________________________

Case 9:11-cv-80880-KLR Document 70-1 Entered on FLSD Docket 05/07/2012 Page 1 of 54

MARC SHERMAN - 3/12/2012

1-800-325-3376 www.merrillcorp.com/lawMerrill Corporation - New York

Page 11 UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA2

Case No.: 9:11CV 80880-KLR3

4 QSGI, INC., a Delaware Corporation,

5 Plaintiff,

6 v.

7 IBM GLOBAL FINANCING, a Division ofINTERNATIONAL BUSINESS MACHINES

8 CORPORATION, INTERNATIONAL BUSINESSMACHINES CORPORATION, Parent to

9 and/or d/b/a IBM GLOBAL FINANCING,

10 Defendants.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

11

12 VIDEOTAPED DEPOSITION OF

13 MARC SHERMAN

14 TAKEN ON BEHALF OF THE DEFENDANTS

15

16

17 DATE TAKEN: March 12, 2012

18 TIME: 10:19 a.m. - 3:53 p.m.

19 LOCATION: Hogan Lovell 2525 Ponce De Leon Boulevard

20 Suite 300 Coral Gables, Florida

21 PAGES: 1-206

22

23

24 Reported By:

25 Tamra K. Piderit, FPR, RMR, CRR, CLR




2 (Pages 2 to 5)

Page 21 APPEARANCES OF COUNSEL2

ON BEHALF OF THE PLAINTIFF:3

THE FERRARO LAW FIRM4 BY: Juan P. Bauta II, Esquire

4000 Ponce De Leon Boulevard5 Suite 700

Miami, Florida 331466 305.375.0111

305.379.6222 Fax7 [email protected]

ON BEHALF OF THE DEFENDANTS:10

CRAVATH, SWAINE & MOORE, LLP11 BY: Benjamin H. Diessel, Esquire

Brian M. Jenks, Esquire12 Worldwide Plaza

825 Eighth Avenue13 New York, New York 10019

212.474.100014 212.474.3700 Fax

[email protected] [email protected] -and-17 HOGAN LOVELLS

BY: Laura Besvinick, Esquire18 Mellon Financial Center

1111 Brickell Avenue19 Suite 1900

Miami, Florida 3313120 305.459.6500

305.459.6550 Fax21 [email protected]

ALSO PRESENT:24

Steve Wolfe, Videographer25

Page 31 INDEX OF EXAMINATION2 WITNESS: PAGE3 MARC SHERMAN4 DIRECT EXAMINATION

By Mr. Diessel 656

CROSS EXAMINATION7 By Mr. Bauta 20289

10111213141516171819202122232425

Page 41 E X H I B I T S2 NO. DESCRIPTION PAGE3 Exhibit 1.................................. 7

Amended Notice of Videotaped Deposition of4 QSGI Incorporated5 Exhibit 2.................................. 10

November 5, 2007, letter to Samuel Palmisano6 from Marc Sherman7 Exhibit 3.................................. 91

Form 8-K dated November 14, 20078

Exhibit 4.................................. 1359 Debtors, QSGI, Inc., QSGI-CCSI, and Qualtech

Services Group, Inc.'s Third Amended Disclosure10 Statement in Support of Third Amended Plan of

Reorganization11

Exhibit 5.................................. 13812 Summary of First Interim Application of

Kinetic Advisors, LLC for Compensation and13 Reimbursement of Expenses as Restructuring

Advisor to Debtors14

Exhibit 6.................................. 16115 Subpoena16 Exhibit 7.................................. 166

Plaintiff's Response to Defendants' Motion17 to Compel responses to Defendants Discovery

Requests18

Exhibit 8................................... 19619 Schedule F2021222324 **Original exhibits retained by the court reporter

and attached to the original transcript.**25

Page 5

1 P R O C E E D I N G S2 VIDEOTAPED DEPOSITION OF MARC SHERMAN3 March 12, 20124 Videotaped deposition taken before Tamra K.5 Piderit, Florida Professional Reporter, Registered6 Merit Reporter, Certified Realtime Reporter,7 Certified LiveNote Reporter, and Notary Public in8 and for the State of Florida at Large, in the above9 cause.

10 THE VIDEOGRAPHER: Good morning. I'm the11 video operator, Steve Wolfe, of Merrill Legal12 Solutions. Today's date is March 12, 2012, the13 time is 10:19 a.m.14 We are at the office the Hogan Lovells at15 2525 Ponce De Leon Boulevard in Coral Gables,16 Florida, to take the video deposition of Marc17 Sherman in the matter of QSGI versus IBM.18 Tamra Piderit is our court reporter, also of19 Merrill Legal Solutions. As I said, we are on20 the record.21 Counsel please state your appearance for the22 record.23 MR. BAUTA: Juan Bauta on behalf of the24 plaintiff.25 MR. DIESSEL: Ben Diessel from Cravath,




3 (Pages 6 to 9)

Page 61 Swaine & Moore for IBM.2 MR. JENKS: Brian Jenks from Cravath,3 Swaine & Moore for IBM.4 MS. BESVINICK: Laura Besvinick also for5 IBM.6 THE COURT REPORTER: Do you solemnly swear7 that the testimony you are about to give in the8 matter before you will be the truth, the whole9 truth, and nothing but the truth?

10 THE WITNESS: Yes.11 MARC SHERMAN,12 having been duly sworn, was examined and testified as13 follows:14 DIRECT EXAMINATION15 BY MR. DIESSEL:16 Q. Can you state your name for the record.17 A. Marc Sherman, S-h-e-r-m-a-n.18 Q. What's your present address?19 A. Business or home?20 Q. Home address?21 A. 241 Tradewinds Ddrive, Palm Beach, Florida.22 Q. What's your present business address?23 A. 400 Royal Palm Way, suite 302, Palm Beach24 Florida 33480.25 Q. What's your present position at QSGI?

Page 7

1 A. Chairman and CEO.2 Q. How long have you held that position?3 A. Since the inception of the company.4 Q. When was the inception of the company?5 A. I don't have the exact date. It's public6 record.7 Q. Roughly about what year was it?8 A. Ten, 12 years ago.9 Q. So roughly near 2000, give or take?

10 A. 2000ish, yes.11 Q. So you have been chairman and CEO of QSGI12 since about 2000?13 A. Correct. Once again, it is public record so14 there is no reason to guess.15 Q. I'm going to hand you what I have marked as16 Exhibit 1.17 (Document marked as Exhibit 118 for identification)19 Q. This is the amended notice of videotaped20 deposition for QSGI Incorporated. Is it correct21 that you are here today as a corporate witness for22 QSGI?23 A. Yes.24 Q. And you understand that you have been25 designated to give testimony on behalf of QSGI,

Page 8

1 right?2 A. Yes.3 Q. Have you had an opportunity to review4 Exhibit 1 with counsel?5 A. Briefly, yes.6 Q. What's your understanding as to which topics7 you are designated to testify on?8 A. Well, I understand that you are going to ask9 me questions around the topics of information for

10 the company.11 Q. Is it your understanding that you are12 designated to testify as to the three topics in this13 amended deposition notice?14 A. Yes.15 Q. Are you prepared to provide complete16 testimony as to each topic?17 A. To the best of my knowledge, yes.18 Q. What did you do to prepare for this19 deposition?20 A. I spoke with a few of my internal people in21 my company, discussed this with my attorney, and I22 think that I have enough information to be able to23 give you accurate information.24 Q. Who did you speak with -- when you say at25 the company, you mean at QSGI?

Page 9

1 A. At QSGI.2 Q. How long -- who did you speak with?3 A. My current CFO, I spoke with my VP of IT,4 and I also discussed it with my attorney.5 Q. Other than the current CFO, the current VP6 of IT, and your attorney, did you speak to anybody7 else?8 A. No, I did not.9 Q. When you say you spoke with your attorney

10 you mean Mr. Bauta?11 A. Yes.12 Q. Who is the current CFO?13 A. David Meynarez.14 Q. Who is the current VP of IT?15 A. David Harris.16 Q. How much time did you spend preparing for17 this deposition?18 A. Not much.19 Q. Can you ballpark it?20 A. Maybe 30 to 45 minutes.21 Q. When did you conduct that preparation?22 A. Over the last week. I think Juan sent this23 to me about a week ago. I quickly reviewed it and24 then we had some conversations about it and25 discussed it.




4 (Pages 10 to 13)

Page 10

1 Q. So other than speaking with the current CFO,2 the current VP of IT and speaking with your counsel,3 did you do anything else to prepare for this meeting4 or this deposition?5 A. No. No, I have not.6 Q. So you didn't review any documents to7 prepare for this deposition?8 A. No, I have not.9 (Document marked as Exhibit 2

10 for identification)11 Q. I'm going to hand you what I have marked as12 Exhibit 2.13 MR. BAUTA: Ben, I think you gave me some14 extra ones.15 MR. DIESSEL: Thanks.16 Q. Do you recognize Exhibit 2?17 A. Yes, I do.18 Q. What is it?19 A. It's a letter sent to Sam Palmisano,20 chairman of IBM regarding the issues surrounding21 IBM's policy change that affected our business22 adversely.23 Q. The letter refers to a recent IBM policy24 change, correct?25 A. Yes.

Page 11

1 Q. According to the letter the policy appears2 to have been enforced beginning in July 2007. Do3 you see that?4 A. Correct.5 Q. Is the policy change that's referred to in6 this letter the same policy change that is the7 subject of QSGI's present lawsuit?8 MR. BAUTA: Objection. It's beyond the9 scope of this deposition. If you want to ask

10 him about how many documents were retained you11 can do so, but you are not getting into the12 substance of the documents.13 MR. DIESSEL: I'm not going to get into the14 substance of the claim. I do want to set the15 stage. I'm entitled to an answer to the16 question even if you think it's outside the17 scope. My position would be it's setting the18 stage for talking about the documents, and I19 would like an answer to that question, please.20 MR. BAUTA: I'm going to object to it and it21 is beyond the scope for which this witness was22 brought here today. If you insist, then you can23 go ahead and file the appropriate motion and24 have the court address it then. This is not a25 deposition beyond the scope of the 30(b)(6)

Page 12

1 designation.2 MR. DIESSEL: Is it your position that3 asking whether or not the policy change that was4 referred to in 2007, asking whether that is the5 subject of the lawsuit is outside the scope of6 this 30(b)(6)?7 MR. BAUTA: Absolutely. If you can show me8 where in this 30(b)(6) motion or 30(b)(6)9 notice, if you can tell me where it says that

10 you are going to inquire into the substance of11 documents, I'm happy to let you proceed.12 MR. DIESSEL: Well, I'm going to ask for an13 answer to the question unless you are telling me14 you are going to file a protective order. I15 would like to know what your basis would be for16 the protective order.17 MR. BAUTA: Beyond the scope of this18 witness's knowledge for what he is being put19 forward. You specifically asked for an20 individual who had knowledge of regarding21 recordkeeping, not an individual who is here to22 testify about the substance of documents. That23 was your specific request. We have complied24 with that request. Mr. Sherman is here to speak25 exclusively about the issues regarding the

1 document retention policy and where documents2 were stored by QSGI.3 MR. DIESSEL: Juan, what I'm trying to do4 here is QSGI brought this lawsuit alleging a5 policy change in 2007. I'm trying to set the6 stage for understanding the document retention7 and the document sources in 2007, and I'm8 entitled to that.9 MR. BAUTA: Sure. You can ask him what he

10 was doing -- what the company was doing in 200711 to maintain documents. If that's your question,12 go ahead and ask him the question.13 But the exhibit that you have already marked14 as number 2, you are asking him substantive15 questions about what the basis of the lawsuit16 is. That's nowhere in your 30(b)(6) notice. If17 you show me where it is in the 30(b)(6) notice,18 I'm happy to let him speak about it.19 MR. DIESSEL: Juan, that doesn't matter.20 These depositions aren't limited by the scope21 of 30(b)(6).22 MR. BAUTA: Sure, they are.23 MR. DIESSEL: That's absolutely not true.24 I'm not limited to the questions that appear on25 the face of the 30(b)(6) notice, and you know




5 (Pages 14 to 17)

1 that.2 MR. BAUTA: Absolutely. Absolutely you are.3 He was brought here for the sole purpose of4 answering your questions under the 30(b)(6)5 notice.6 MR. DIESSEL: So are you telling me that you7 are going to file a protective order?8 MR. BAUTA: I will file a protective order,9 absolutely.

10 MR. DIESSEL: I'm going to ask the question,11 and I'm going to ask it one more time --12 MR. BAUTA: Sure.13 MR. DIESSEL: -- and if you instruct not to14 answer, then I'm expecting to see a protective15 order, a motion for protective order.16 MR. BAUTA: Absolutely. Absolutely. Go17 ahead.18 BY MR. DIESSEL:19 Q. So Exhibit 2, Mr. Sherman, do you see that20 the letter refers to a recent IBM policy change?21 A. Yes.22 Q. And is that the IBM policy change that is23 the subject of this lawsuit?24 MR. BAUTA: I'm going to instruct you not to25 answer, Mr. Sherman. We are going to file a

Page 15

1 motion for protective order.2 MR. DIESSEL: I appreciate it if you would3 state the basis for what --4 MR. BAUTA: Beyond the scope of this5 deposition, beyond the scope of what this6 witness is being produced for.7 MR. DIESSEL: Do you have any authority for8 the proposition that asking a question outside9 the scope of a 30(b)(6) notice is grounds for

10 protective order? Not conceding that it's11 outside the scope, but if that's your position I12 would like to know what authority you have that13 I can't ask the question about QSGI's claims for14 in this lawsuit.15 MR. BAUTA: Wait for my motion for16 protective order.17 BY MR. DIESSEL:18 Q. In QSGI's complaint in this matter, you19 understand that QSGI makes an allegation about an20 IBM policy change that was purportedly put in place21 in 2007, correct?22 A. Yes.23 Q. And QSGI's claim, in essence, is that IBM24 started enforcing the policy in 2007?25 MR. BAUTA: Objection.

Page 16

1 THE WITNESS: Am I here to answer2 information about documents or questions about3 the case?4 MR. BAUTA: Absolutely. I'm going to5 instruct you not to answer.6 If you are not going to ask him any7 questions about your 30(b)(6) motion, 30(b)(6)8 notice, then just tell me now and we will walk9 away.

10 MR. DIESSEL: I'm going to be asking lots of11 questions about documents and about retention,12 and I need to start by determining the time13 period. I would like to do that so I can ask my14 questions.15 MR. BAUTA: You have got the time periods16 encompassed within your notice. This witness is17 here to respond to your notice and only your18 notice. If your intention was to go beyond the19 notice, then you should have noticed a different20 deposition for today.21 MR. DIESSEL: Well, the notice covers the22 year 2004 through the present. I'm asking about23 QSGI's claim that it brought in this lawsuit24 about a purported policy change in 2007 to25 understand --

Page 17

1 THE WITNESS: You are asking me deposition.2 MR. BAUTA: Why don't you explain to me3 where in this notice it says that you are going4 to be asking about -- that you want a witness5 with knowledge as to the substance of documents6 regarding the subject matter of this lawsuit.7 MR. DIESSEL: I don't have to do that.8 MR. BAUTA: Okay.9 MR. DIESSEL: It's not my obligation to

10 point out to you where in the notice a basic11 background question about the chronology, where12 that it is in the suit.13 MR. BAUTA: I'm going to make this really14 simple for you, Mr. Diessel. If you have no15 intention of asking questions about document16 retention, then go ahead and state that on the17 record, and we will close the deposition out, we18 will file a protective order, we will get the19 judge to rule on whether he believes that this20 notice properly encompasses the area of inquiry21 that you are seeking to address here.22 MR. DIESSEL: So, again, I will ask the23 question again, and if you want to instruct not24 to answer, I will expect to see a protective25 order from you.




6 (Pages 18 to 21)

Page 18

1 MR. BAUTA: Sure.2 BY MR. DIESSEL:3 Q. According to QSGI's complaint, IBM enacted a4 policy that it started enforcing in 2007, correct?5 MR. BAUTA: Same objection.6 I am going to instruct you not to answer.7 It's beyond the scope of this deposition.8 Q. I would like to focus on the time period9 from during 2007 up until roughly the point in time

10 when QSGI sent the letter that is marked as11 Exhibit 2, which is November 2007. Can we agree to12 focus on that time for right now?13 A. Sure.14 Q. So what was QSGI's business during that time15 period in 2007?16 THE WITNESS: Does that relate to paperwork?17 MR. BAUTA: I'm going to give him a tiny bit18 of room to lay a little bit of groundwork, and19 if he decides he is going to go beyond that,20 then I will instruct you not to answer.21 A. Please repeat the question.22 Q. What was QSGI's business in 2007?23 A. We were in the computer remarketing of24 mainframes, PCs, servers, and laptops, and25 maintenance of like same product. Including data

Page 191 security as well.2 Q. How was that business organized in terms of3 its divisions?4 A. The mainframe business was an operation that5 was run in Minnesota where we did mainframe resale,6 mainframe parts, mainframe maintenance, that was our7 Minnesota operation. Our New Jersey operation was8 our data security, data erasure, remarketing9 business.

10 Q. So would it be accurate to refer to the11 Minnesota operation as the hardware division?12 A. Well, you know, define "hardware."13 Q. Well, I believe in QSGI's public filings it14 refers to hardware division, so I'm just trying to15 map on if that's the hardware division that QSGI16 refer to?17 A. Mainframe hardware, yes. That's where our18 mainframe hardware business was, yes.19 Q. So to the extent that QSGI was reselling IBM20 mainframes, that would have been part of the21 business of the hardware division?22 A. Yes, the Minnesota mainframe hardware23 division, yes.24 Q. So how many offices comprise the hardware25 division?

Page 20

1 A. How many offices? There was one office in2 Minnesota that was the mainframe hardware division,3 and there were some salespeople that worked from4 their homes and other places as well. But the main5 focus would be the Minnesota operation where it was6 our warehouse, our testing facility, our main7 distribution hub for mainframes.8 Q. Where was that Minnesota office?9 A. I think it's on Neil Armstrong Boulevard.

10 I'm not exactly sure of the exact address.11 Q. What city was it in?12 A. I think it was Eagan, Minnesota.13 Q. I think you said there was another warehouse14 or another facility that comprised the hardware15 division?16 A. No, no. Well, as I said, define "hardware."17 PC is considered hardware. So in New Jersey we also18 had hardware, but that was our PC group. So we19 didn't handle mainframes out of that group.20 Mainframes were handled out of Minnesota.21 Q. Any other offices or facilities that22 comprise the hardware division of QSGI?23 A. Not 100 percent sure of your question. I24 mean, my office was in Florida, but I didn't have25 mainframes in my office in Florida, and I also did

Page 211 communicate with my mainframe group. Are you2 talking about the physical location of where the3 equipment would be stored and tested; is that your4 question?5 Q. Let's start with the physical location where6 equipment would be stored and tested?7 A. That was Minnesota.8 Q. But I take it from your answer that there9 were other people that dealt with QSGI's mainframe

10 resale business that weren't necessarily in11 Minnesota?12 A. We had outside sales reps and maintainers13 that would work from their homes or other14 demographic areas throughout the country, so the15 company had somewhat of a nationwide footprint.16 Q. Where was your office during the 2007 time17 period?18 A. My office was in Florida.19 Q. Was that where QSGI's headquarters was at20 that time?21 A. Same location, yes.22 Q. Roughly how many employees did QSGI have in23 2007?24 A. Total amount of employees?25 Q. Yes.




7 (Pages 22 to 25)

Page 221 A. I would say somewhere around 70 or 80.2 Q. Of that 70 or 80 how many were in the3 hardware division?4 A. I can't be 100 percent sure.5 THE WITNESS: Can I speculate on the number?6 MR. BAUTA: No.7 A. You know, if you look through the SEC8 filings, it's all spelled out. These are questions9 that are available, it's of public knowledge, public

10 record, so I don't have it off the top of my head.11 Q. What about roughly the number of people that12 were working on mainframe -- QSGI's mainframe resale13 business?14 A. I think the sales office had somewhere15 around 15 people, 14, 15 people.16 Q. Who were the employees that were involved in17 QSGI's mainframe resale business?18 A. It was Joel Owens, Jamie Owens, those are19 the two. Joel was the main salesman and Jamie was20 the lead tech. And then Joel hired his group of21 sales reps, you know, beneath him, so I don't have22 the names, the exact names of those individuals,23 just the managers.24 Q. Any others other than Joel Owens and Jamie25 Owens?

Page 231 A. There were a lot of others, but I don't have2 those at my fingertips.3 Q. Who were some of the principal individuals4 that worked on the QSGI's mainframe resale business?5 A. As I said, Joel was probably one of the main6 salesmen. Joel had probably ten other reps under7 him that were salesmen, you know, selling products.8 We had our -- we also had, you know, outside -- not9 outside, inside commissioned sales reps as well

10 selling maintenance and mainframes.11 Q. So other than Joel and Jamie Owens, who else12 worked on QSGI's mainframe resale business?13 A. Do you want to keep asking me the same14 question over and over again?15 Q. Yeah, I would like to get some more names.16 A. I don't have the names off the top of my17 head.18 Q. Did you work on QSGI's mainframe resale19 business?20 A. You know, I worked with Joel. Joel would21 discuss the business with me from time to time. He22 would discuss issues, he would talk to me about the23 obstacles that we had regarding, you know, IBM,24 things that they were doing to try to put us out of25 business, those types of things. Is that what you

Page 24

1 are asking about?2 Q. No, I was asking if you also worked on3 QSGI's mainframe resale business?4 A. You know, I wasn't really intimately5 involved with direct sales. That wasn't my job at6 the company.7 Q. Did you have some involvement in QSGI's8 mainframe resale business?9 A. Yeah, I was the CEO of the company, so, of

10 course, I was involved.11 Q. What about Seth Grossman. Can you tell me12 who Seth Grossman is?13 A. Seth was the president of QSGI.14 Q. As president of QSGI, did he have some15 involvement in QSGI's mainframe resale business?16 A. Seth was actually more involved. As the17 president his job was to oversee the activities of18 that company.19 Q. Did he have some oversight over QSGI's20 mainframe resale business?21 A. Yes, he did.22 Q. Who is Edward Cummings?23 A. Ed Cummings was the ex-CFO.24 Q. Is he a cofounder of QSGI?25 A. He was a cofounder of QSGI, yes.

Page 25

1 Q. As CFO did he have some oversight over2 QSGI's mainframe resale business?3 A. Well, oversight as a CFO. He would have had4 financial oversight.5 Q. And other than financial oversight, did he6 have any other involvement at QSGI's mainframe7 resale business?8 A. Not to my knowledge.9 Q. Who is Vivek Agarwal, V-i-v-e-k

10 A-g-a-r-w-a-l.11 A. He was a sale rep for our company.12 Q. Did he have involvement in QSGI's mainframe13 resale business?14 A. No, he did not.15 Q. Who is Craig Heilman?16 A. He was -- what was he? He was the finance17 manager.18 Q. Was he QSGI's controller?19 A. Controller, yes.20 Q. Is it correct that he was controller from21 2006 to 2010?22 A. I think that's accurate.23 Q. So he would have been controller in the 200724 time period?25 A. Yes.




8 (Pages 26 to 29)

Page 26

1 Q. Did he have any responsibility over QSGI's2 mainframe resale business?3 A. Only as far as the finance aspect of it.4 Q. So did he have some financial responsibility5 over QSGI's mainframe resale business?6 MR. BAUTA: I'm going to object. You are7 once again now getting way beyond the scope of8 your notice for today.9 MR. DIESSEL: Actually, I'm not.

10 MR. BAUTA: No?11 MR. DIESSEL: I'm asking who the principals12 and the individuals are so I can ask about their13 documents. Juan, I can't conduct this14 deposition without figuring out where the15 facilities are and who the people are. How am I16 supposed to ask --17 MR. BAUTA: Let me -- maybe the problem is,18 and you will have to excuse me because English19 is not my primary English, so maybe it's that I20 misunderstood the topics of your inquiry to21 include and be limited to the document retention22 policies of QSGI.23 What specific individuals did unless they24 are tied to the document retention policy, I25 just need you to kind of educate me on how

Page 27

1 that's within the topic.2 MR. DIESSEL: I would be happy to.3 MR. BAUTA: Sure.4 MR. DIESSEL: Topic 1 includes QSGI's5 document retention procedures, practices, and6 policies.7 MR. BAUTA: Okay.8 MR. DIESSEL: So asking about an9 individual's document retention procedures and

10 practices is plainly within the scope of11 topic 1.12 MR. BAUTA: Let me stop you right there.13 Why don't you ask that question: What were14 these individuals' document retention policies15 rather than how were these individuals involved16 in the sales of mainframe computers.17 MR. DIESSEL: Juan, I intend to do that.18 But rather than going through every one of19 QSGI's 80 employees, I would like to establish20 which employees I should be asking questions21 about, and I'm entitled to do that.22 MR. BAUTA: You know what? You are not23 entitled to do anything. What you are entitled24 to do is follow the rules, and you are entitled25 to limit yourself to the topics of your notice.

Page 28

1 If you wanted to have the person with the2 most knowledge, QSGI's person with the most3 knowledge regarding every topic under the sun,4 you should have designated those topics. You5 chose not to, so here we are at a deposition6 that's been limited by you through your notice7 for the sole purpose of determining whether or8 not and how documents were retained by QSGI.9 MR. DIESSEL: Well, Juan, this is plainly

10 within the topic. I don't know what else to11 tell you. Retention procedures and practices12 from 2004 to the present.13 MR. BAUTA: Well, I haven't heard you ask14 yet that question.15 MR. DIESSEL: Well, I'm establishing the16 people that I'm going to be asking that question17 about. I think if you can give me leeway to18 conduct this deposition, we are going to get19 there. So I would like to proceed.20 MR. BAUTA: I'm going to give you a little21 more leeway, Mr. Diessel, and then if you decide22 that this is a deposition that perhaps needs to23 be broadened in its scope, then maybe you should24 renotice it for that.25 MR. DIESSEL: It did not need to be

Page 29

1 broadened in scope. And I would appreciate it2 if you would let me proceed, and if there comes3 a point where your instruction is not to answer4 where you start instructing not answer, I expect5 to see a protective order.6 MR. BAUTA: You are going to see a7 protective order, don't worry about that.8 MR. DIESSEL: It's improper under the rules9 for you to limit me in this way, especially when

10 I'm asking questions that are plainly within the11 scope of the deposition notice.12 MR. BAUTA: I'm sure you are going to13 explain that to the Court.14 MR. DIESSEL: Well, you are going to explain15 to the Court in your motion for protective order16 that I expect to see because you have instructed17 twice now the witness not to answer.18 MR. BAUTA: I plan on instructing him more19 if you continue to deviate from your notice.20 MR. DIESSEL: I'm not deviating from the21 notice.22 MR. BAUTA: I guess the Court will determine23 that.24 BY MR. DIESSEL:25 Q. So I believe we were talking about Craig




9 (Pages 30 to 33)

Page 30

1 Heilman a second ago?2 A. You were, yes.3 Q. I think the last question, I'm not sure if I4 got an answer to it, I think my question was whether5 he had financial responsibility -- whether his6 financial responsibility included QSGI's mainframe7 resale business?8 A. He was the controller, so I'm sure when it9 came to collections and things like that, he had

10 responsibility from a financial aspect of the11 business.12 Q. Okay. Having gone through a short list of13 some individuals who had at least some14 responsibility or involvement in QSGI's mainframe15 resale business, did I miss anyone or did someone16 else come to mind that you think that ought to be17 included within this set of individuals that worked18 on QSGI's mainframe business?19 MR. BAUTA: Objection to form.20 A. Not that I know of.21 Q. Did all of QSGI's employees have computers?22 A. Probably not.23 Q. What about the individuals that we have been24 discussing, did they all have computers?25 A. Probably so.

Page 31

1 Q. Would they have had laptops or desktop2 computers?3 A. I don't know.4 Q. Do you have a laptop?5 A. Yeah.6 Q. Did you have a laptop in 2007?7 A. Probably. I'm sure I did. I had many8 laptops and PCs and stuff like that.9 Q. How many laptops did you have in 2007?

10 A. Me personally?11 Q. Yes.12 A. I don't know. In my house I probably had13 three or four. I have kids, I have laptops all the14 time.15 Q. Sure. I will limit it in a way that I think16 will be helpful. How many computers did you have17 that you used to work on QSGI-related work?18 A. I use my main desktop at work, which is my19 main computers that I use. Any time I would travel20 I would use a laptop.21 Q. So it sounds like you had at least one22 desktop computer in 2007 and at least one laptop23 that you used for work-related activities?24 A. Yes.25 Q. In the 2007 time frame, did all of the QSGI

Page 32

1 employees have QSGI e-mail accounts?2 A. I'm sure they did, yeah.3 Q. Where would employees' e-mails to or from4 QSGI employees be stored?5 A. We had a tape retention program, and the New6 Jersey backup tapes were stored in New Jersey in a7 locked cabinet. The Minnesota backup tapes were8 stored in Minnesota in a locked cabinet.9 Q. So setting aside the backup tapes, we can

10 get to those in a second, setting aside the backup11 tapes, did QSGI employee e-mails, were those stored12 on the individual's computer or on a server?13 A. Everything I'm pretty sure, and, you know,14 everything ran through the e-mail server that we15 had.16 Q. So it's your understanding that in 2007 QSGI17 had a central e-mail server?18 A. Yes.19 Q. And would that have included all e-mails20 that QSGI employees sent and received?21 A. Yes.22 Q. Was there a nightly purge process on that23 e-mail server that would automatically delete the24 older mails?25 A. No. We actually had a retention program

Page 331 that would actually -- I think how it worked was2 everything was backed up on an 8-day period and then3 stored, and then I think after 30 days things were4 overwritten and then recopied over. So it was kind5 of a system that the e-mails would continuously6 build and grow.7 Q. When you say it was backed up, are you8 saying that QSGI's e-mail server in 2007 was backed9 up every 8 days?

10 A. I'm pretty sure that was the process. I11 would have to get more information from Dave Harris,12 but that's to the best of my knowledge.13 Q. How would the e-mail server be backed up?14 A. It was automatically done through backup15 tapes on a nightly system however it was scheduled.16 Q. So I think I'm confused. Was there an 8-day17 backup of the severer or a nightly backup of the18 server?19 A. I think every day would back up and then it20 would consolidate.21 Q. What is the media onto which the e-mail22 server would be consolidated?23 A. It was on backup tapes.24 Q. What's the time period during which that25 backup procedure was in place?




10 (Pages 34 to 37)

Page 34

1 A. I'm not exactly sure of the date when we2 started the full procedure. I don't have the exact3 date.4 Q. Do you think it was in place as of 2004?5 A. We did have a backup program in place in6 2004, I'm just not sure of the standard of it.7 Q. And do you think it was in place in 2005?8 A. I know it was in place in 2007.9 Q. Do you have a sense for when in 2007 it was

10 put in place?11 A. I don't exactly know. I would say early12 2007, but I don't have the exact date.13 Q. Did there come a point in time when QSGI14 stopped backing up its e-mail server?15 A. I would say around the bankruptcy when we no16 longer had access to the servers is when the backups17 stopped happening.18 Q. And roughly when was that?19 A. It was in 2009.20 Q. So it's your understanding that from early21 2007 to 2009 QSGI backed up its e-mail server?22 A. Yes. We had a backup, you know, we had to23 keep our financial documents and everything safe, so24 everything was being backed up.25 Q. To what media were QSGI's e-mails backed up?

Page 35

1 A. Once again, I'm pretty sure it was to a2 tape, a tape media.3 Q. Where was that tape media stored?4 A. In New Jersey.5 Q. Anywhere else?6 A. There should have been backup tape media7 also in Minnesota.8 Q. Where in New Jersey?9 A. It was in our QSGI main location, I forget

10 the address. The address is a blank at the moment.11 Q. Was it at an office?12 A. Yeah, in our main New Jersey facility.13 Q. Would that be in Hightown, New Jersey?14 A. It would be Hightstown, yes.15 Q. Hightstown?16 A. Yes, Hightstown.17 Q. You said there was another location where18 QSGI kept tape media in Minnesota?19 A. It was in the Minnesota physical location20 where there was another server.21 Q. Where was that?22 A. You have the address.23 Q. Do you know the city?24 A. I think, like I said, I think it's Eagan.25 You can double check.

Page 36

1 Q. Who was in charge of the -- if I refer to2 this as the media, the e-mail backup procedure, will3 we understand that I'm talking about this procedure4 that you and I have been discussing?5 A. Yes.6 Q. Who was in charge of the e-mail backup7 procedure?8 A. David Harris.9 Q. How did you verify that these e-mails were

10 being backed up from 2007 until bankruptcy?11 A. Well, we had to produce the e-mail documents12 for the informal SEC investigation, so we had all13 the backup files as part of the bankruptcy. We had14 them given back over to us, and they were sent off15 to our attorney and sent off to the SEC. So I know16 there are backup documents that existed. I know17 that they were handled properly.18 Q. Where is that tape archive today, if it19 still exists?20 A. The information was sent off to McDonald21 Hopkins, and it does exist.22 Q. So setting aside the information, the23 physical tape archives themselves, do those still24 exist or no?25 A. I'm not sure in what form they exist, but

Page 37

1 they exist in either a downloadable form or some2 type of form, but the information still exists.3 Q. So I take it you are not sure whether the4 backup archive tapes still exist?5 A. I'm not sure.6 Q. You said a second ago that you think7 McDonald Hopkins has the information?8 A. Yes.9 Q. What did you mean by that?

10 A. I said that they were provided all of the11 backup tapes for the informal SEC investigation, so12 they have the information that the company had13 turned over to them through the course.14 Q. Is it your understanding that McDonald15 Hopkins has every single e-mail that was included in16 on the backup archive?17 A. They have what was provided to them through18 the archives. I never went through all of the19 archives to be able to give you a yes or no whether20 I know for sure 100 percent.21 Q. Do you know if they were provided with the22 entire archive?23 A. They were provided with what was available24 at the time.25 Q. Do you know what was available at the time?




11 (Pages 38 to 41)

Page 381 A. Whatever was on the tapes.2 Q. Do you know what was on the tapes?3 A. Once again I said I don't know what was on4 the tapes. I never reviewed the tapes.5 Q. So you didn't review the tapes and you don't6 know whether QSGI's e-mails from 2007 to 2009 were7 on the tapes?8 MR. BAUTA: Objection. Form.9 A. I can only assume that I know that there

10 were thousands of documents that were provided to11 the SEC, so there must have been a tremendous amount12 of documents left on those tapes.13 Q. So setting aside the amount of information14 on the tapes, you don't know whether all the e-mails15 from 2007 to 2009 were included on those tapes?16 A. I do not know. I think there may have been17 some things that may not be there, it could be18 there, I just don't know. I just don't know the19 answer to the question.20 Q. Is there anyone --21 A. I hope everything is there. For my benefit22 I truly do hope that every single document is on23 those tapes.24 MR. BAUTA: You need to just answer his25 question as succinctly as you can.

Page 39

1 Q. Is there anyone at QSGI that would know2 whether those backup tapes would include all of3 QSGI's e-mails from 2007 to 2009?4 A. I don't know.5 Q. You don't know whether there is anyone that6 we can talk to to get an answer to this question?7 A. I don't know.8 Q. Are you aware of any document that we could9 look at where we could get an answer as to whether

10 these backup tapes included all of QSGI's e-mails11 from 2007 to 2009?12 A. I don't really understand your question.13 Q. Is there any document that I could look at14 that you could refer me to from which I could tell15 whether or not those backup tapes included all of16 QSGI's e-mails from 2007 to 2009?17 A. I don't know what kind of documents it would18 be. I can only assume that all the information19 would be there. The way the system was set up it20 was automatic. I can't -- I mean, you are asking to21 deviate from the system that was set up. So there22 was a system, it was in place, the information23 should have been there.24 Q. But you have not verified that?25 A. We took the information and the documents

Page 401 and we turned them over to the law firm who then2 went through them, made copies, and sent information3 off to the SEC. I can only assume that the4 information was there.5 Q. But you didn't verify that it includes all6 the e-mails from 2007 to 2009?7 A. I did not verify.8 Q. Did anyone verify that the backup tapes9 included all of QSGI's e-mails from 2007 to 2009?

10 A. I do not know.11 Q. Is there anyone that you can think of that12 would know the answer as to whether anyone verified13 that there exists a complete set of QSGI e-mails14 from 2007 to 2009?15 A. I would not know.16 Q. If you wanted to get an answer as to whether17 or not there exists a complete set of QSGI's e-mails18 from 2007 to 2009, who would you talk to?19 MR. BAUTA: Objection. Form.20 A. I don't know.21 Q. Is there any way that you can think of that22 it could be determined whether or not QSGI has23 retained a complete set of its e-mails from 2007 to24 2009?25 MR. BAUTA: Objection to form.

Page 41

1 A. I don't know.2 MR. DIESSEL: Juan, we have a little bit of3 a problem here. This is your designated witness4 on document retention topics, and I can't get5 any answers as to the retention of e-mails from6 the key periods -- from key periods leading up7 to the filing of the suit.8 MR. BAUTA: Poor questions give poor9 answers. How do you expect him to know whether

10 every single e-mail was preserved? He would11 have to first know what every single e-mail was,12 and then he would have to cross check. He has13 told you what the policy and procedure was,14 there you go.15 MR. DIESSEL: No, it's not that simple,16 Juan. The notice asks for every document that's17 been destroyed from 2004 to the present. If18 your witness is unable to answer whether or not19 QSGI retained its entire set of e-mails, then a20 large scope of what this deposition is about is21 completely off the table.22 MR. BAUTA: I don't know what this23 deposition is about anymore, Mr. Diessel,24 because you strayed from your topics. So let me25 just say this: You are assuming that documents




12 (Pages 42 to 45)

Page 42

1 have been destroyed, he has told you they2 haven't been, you have asked him whether he has3 personally verified whether every single4 document that was ever generated in an e-mail5 account exists today. I will look forward to6 asking IBM's corporate person whether he has7 verified whether every single piece of paper8 that anyone at IBM has generated is in existence9 today.

10 MR. DIESSEL: I'm not going to argue with11 you anymore about this.12 MR. BAUTA: Why don't you move forward and13 ask more questions.14 MR. DIESSEL: I will do that. Our position15 is this is plainly within the scope, and we have16 not gotten an answer to the question, so I'm17 going to reserve my rights on continuing this18 deposition.19 MR. BAUTA: You can reserve what you want.20 BY MR. DIESSEL:21 Q. We have been discussing a little bit about22 QSGI's e-mail system. Other than the tape backups,23 is there anywhere else that these e-mails might be24 backed up to?25 A. No.

Page 43

1 Q. If an individual that sent or received an2 e-mail deleted that e-mail from his or her In box,3 what would be the impact of that action during the4 2007 time period?5 MR. BAUTA: Objection to form.6 A. I don't understand the question.7 Q. Yeah. Okay. So if someone deleted an8 e-mail in between backup cycles, would that e-mail9 have been included in the backup?

10 A. I don't know the answer to that question.11 Q. Is there someone that would know the answer12 to that question?13 A. Dave Harris would know the answer to the14 question.15 Q. And how much time did you spend speaking16 with Dave Harris preparing for this deposition?17 A. We spoke briefly. It was more about the way18 the e-mails that we had in the past, how they were19 saved. I didn't really ask about the detail of if20 you delete an e-mail if it still resides.21 Q. What did he tell you about how QSGI's22 e-mails were saved?23 A. Well, that was what I had answered before.24 I said they were archived and they were saved on25 backup tapes. My main concern was why did we do

Page 441 that, and he said we did that for purposes of2 compliance. So as we were implementing our Sarbanes3 procedures that we had a backup procedure and that4 was the reason we would back them up. The other5 reason why is in case we had a failure, we would be6 able to recreate our database and have our7 information in our systems.8 Q. Did you discuss anything else with David9 Harris?

10 A. No.11 Q. Setting aside the e-mail system, did QSGI12 have a system for maintaining electronic documents?13 A. Electronic? Isn't that e-mails?14 Q. Aside from e-mails.15 A. That's not electronic documents.16 Q. So setting aside the e-mail system, did QSGI17 have, for example, a repository where it kept18 electronic documents that employees created?19 A. You mean like pdfs and things like that? I20 think that would be in the e-mail archives.21 Q. Did QSGI have any central servers where it22 included business documents?23 A. We had documents, you know, forms and things24 like that. But, once again, I think that would25 still reside when it was backed up.

Page 45

1 Q. My question is in the 2007 time period, did2 QSGI have central servers where business documents3 were maintained?4 A. No.5 Q. Did QSGI have any electronic media where6 business documents were stored other than in e-mails7 or on an individual's computer?8 A. No.9 Q. Did QSGI have servers in 2007?

10 A. Yes.11 Q. What did it use those servers for?12 A. We used them for our e-mail operations, we13 used it for running our PCs and our computer system.14 Q. Did QSGI use those servers for anything15 else?16 A. Other than selling them?17 Q. Did QSGI use those servers for storing18 documents?19 A. No.20 Q. Did QSGI electronically collect or maintain21 any repository of documents, again, setting aside22 e-mail?23 A. No.24 Q. Did QSGI maintain any server database that25 would include electronic repositories of documents?




13 (Pages 46 to 49)

Page 461 Again, I'm talking about the 2007 time period.2 A. No.3 Q. So I want to just establish some vocabulary4 which we have been using that I would like to refer5 to to make sure things stay clear. I would like to6 refer to as business documents those documents that7 a QSGI employee might make or work on in the course8 of his or her duties at work. Can we have that9 understanding?

10 A. Okay.11 Q. So what are the various sources or12 repositories where the QSGI employee in 2007 could13 store his or her business documents?14 A. I guess they could store them on the server.15 We had shared files, is that the question you are16 asking?17 Q. What is the server that you are referring18 to?19 A. Within our network there was a server that20 was called public files where we would have files21 where we would have blank documents, and they would22 populate a document and send out a PO or what have.23 Q. And you referred to something else. I think24 you said it was a shared folder?25 A. Yeah, like a shared folder.

Page 471 Q. What's a shared folder?2 A. Shared folder would be blank documents where3 people could go and they could pull down a PO form4 and things like that to be able to use for5 populating an order.6 THE WITNESS: Is that all right? I had to7 move off the pole.8 Q. So it's your understanding that QSGI9 employees could keep business documents on a server;

10 is that right?11 A. Yes.12 Q. Was there more than one server where13 documents might be stored or just a single server?14 A. I think it was a single server.15 Q. Where was that server stored?16 A. Out of New Jersey.17 Q. Would that, again, be in Hightstown, New18 Jersey?19 A. Yes.20 Q. Do you know what kind of server that was?21 A. No idea.22 Q. What are the years during which that server23 was used to store QSGI business documents?24 A. It was just -- it was always used for25 storing that type of a shared file.

Page 481 Q. So that would include 2006?2 A. Sure.3 Q. 2007?4 A. I would imagine.5 Q. 2008?6 A. I would imagine.7 Q. Are there any other locations where a QSGI8 employee might store his or her electronic business9 documents?

10 A. No, I think everything would have been11 stored up on the server.12 Q. When you say "everything," what are you13 referring to?14 A. The documents that you are referring to.15 Q. Can you describe some categories of16 documents that would be included on the server?17 A. We had photographs, we would have, you know,18 blank forms, we would have probably our wiring19 information, things that would be regular things20 that you would need to send off to a customer. I21 guess you could refer to them more as customer22 forms.23 Q. How, if at all, was that server backed up?24 A. Excuse me?25 Q. How, if at all, was that server backed up?

Page 49

1 A. I'm not sure that that, you know, how that2 server was backed up. That wasn't like mission3 critical e-mail data and things like that. I'm sure4 it was backed up just for the safety if we lost5 power, but I don't know the answer to the question.6 Q. Did QSGI -- so let me just make sure that we7 have got the story so far. So in terms of8 electronic business documents, is it correct that9 the repositories that you are aware of are e-mail

10 and the central server?11 A. Yes.12 Q. And there are no other electronic13 repositories where QSGI employees could have kept14 electronic documents?15 A. Correct.16 Q. What hard copy repositories sources existed17 in 2007 where QSGI employees could keep18 electronic -- could keep hard copy documents?19 A. Filing cabinets.20 Q. And where were these filing cabinets21 situated?22 A. We had files in New Jersey and we had files23 in Minnesota.24 Q. Did QSGI have files in any other locations25 besides New Jersey and Minnesota?




14 (Pages 50 to 53)

Page 50

1 A. No. All my stuff, you know, as far as like2 my Florida things that I would get there, I would3 make copies of and I would send it off to New Jersey4 and New Jersey would do all the filing up there to5 keep it as a central repository.6 Q. Who else was working in Florida in the 20077 time period?8 A. A handful of sales reps in the office.9 Q. Did you send each and every one of your

10 documents for filing to either the Minnesota or New11 Jersey facility?12 A. If it was pertaining to that operation, I13 would send it off to wherever it needed to go. I14 didn't really house documents in Florida.15 Q. So I take it your answer is that you didn't16 send every single document to be filed in --17 A. No, because --18 Q. Sorry. Logistically I need to finish --19 it's going to mess up the court reporter. I need to20 finish my question before you answer so things stay21 clear on the record.22 I take it you didn't send every single one23 of your documents for filing to the filing facility24 in New Jersey?25 A. If it was redundant it would be shredded or

Page 51

1 thrown in the garbage.2 Q. Did individuals keep hard copy documents in3 their offices?4 A. I'm sure they may have.5 Q. Who was in charge of the process of6 documents being filed in these filing facilities in7 New Jersey and Minnesota?8 A. Well, the process that our CFO set up was9 basically a 7-year retention of hard copy documents.

10 So if was contracts, if it was SEC documents or11 financial documents, they would all be stored for12 7 years in New Jersey. Put up on the racks, and13 just, you know, shrink-wrapped and stored.14 Q. What are the years during which this filing15 procedure was in place?16 A. From the beginning -- you know, from an17 accounting standpoint I think 7 years is the time18 frame, so from day one whatever the, you know, the19 rules are, they were followed.20 Q. So can you give me a year when this21 procedure would have been put in place?22 A. Well, if we started the business in 2000, it23 would have started in 2000.24 Q. Did there come a point in time when files25 stopped being stored at those facilities?

Page 521 A. Well, after we filed bankruptcy the files in2 New Jersey were stored up until a point where that3 building was shut down. And then I was able to get4 access to retain those documents and bring them over5 to our new facility. So I had, I would say, the6 majority of the known documents in the New Jersey7 facility.8 Q. What's QSGI's new facility?9 A. That's where we have a warehouse in New

10 Jersey as well. I can get you the address of that11 one. That's in a different location.12 Q. So is it right that so beginning around 200013 QSGI started storing hard copy documents at a14 facility in New Jersey; is that right?15 A. We would maintain all the documents that16 were generated in the New Jersey facility, in the17 Hightstown facility.18 Q. Then at some point during bankruptcy those19 documents were transferred to another New Jersey20 facility?21 A. Well, actually, I was denied access to the22 building, so through the court I was able to23 convince them that those documents needed to be24 retained. So I was able to get them out of the25 building before they were thrown away and

Page 531 transferred to our other facility.2 Q. What are the years during which -- let me3 back up. What time period were those documents4 transferred to the other New Jersey facility?5 A. Oh, it had to be 2010 time frame.6 THE VIDEOGRAPHER: Excuse me, Counsel. We7 have about 3 minutes left on this tape.8 MR. DIESSEL: I will just ask one or two9 more questions and we will take a break.

10 Q. And what are the years during which the11 Minnesota facility was used for storing hard copy12 files?13 A. Well, that was another -- might as well stop14 there and we can go back.15 Q. Well, I need to get an answer before the16 break. You can give the answer and then we can take17 a break after your question.18 A. You may run out of time.19 Okay. The Minnesota facility was -- the20 original building where we were in Eagan, we had21 closed that lease to move into another smaller22 facility. So the boxes of records that were in the23 Minnesota facility were moved to a storage location,24 and they were stored in a, you know, in a storage25 facility. And the company subsequently filed for




15 (Pages 54 to 57)

Page 541 bankruptcy, and the documents that were in the2 Minnesota warehouse facility eventually ended up3 getting thrown out because the lender -- we would4 put in bills to the lender to be able to pay certain5 bills that had to get paid on a monthly basis. I6 found out later that those billed weren't paid.7 When I went to find out where those documents were,8 those documents were subsequently tossed out. I9 couldn't recover the documents that were left behind

10 in Minnesota.11 MR. DIESSEL: Let's take a break.12 THE VIDEOGRAPHER: Tape number one of Marc13 Sherman's deposition. Off the record at 11:16.14 (Recess taken)15 THE VIDEOGRAPHER: Mark Sherman, tape two,16 on the record at 11:32.17 CONTINUED DIRECT EXAMINATION18 BY MR. DIESSEL:19 Q. We talked before the break about QSGI's tape20 archive of e-mails from 2007 to 2009. Do you recall21 that?22 A. Yes.23 Q. Was that archive overwritten every 30 days?24 A. Was it overwritten every 30 days? Yes, it25 was overwritten, yes.

Page 55

1 Q. So the archive would only go back for a2 30-day period?3 A. No, it was cumulative. So it would add to.4 It didn't go back and take the -- it was cumulative.5 Q. So what was the process that took place6 every 30 days, that additional e-mails were added;7 is that your testimony?8 A. Yes, additional e-mails were added.9 Q. Were any e-mails ever deleted or overwritten

10 from that archive?11 A. Not that I know of.12 Q. We also talked before the break about the13 shared folder on the server that was stored at New14 Jersey. Do you recall that?15 A. Yes.16 Q. Were documents related in QSGI's mainframe17 resale business also stored on that server?18 A. Ask it one more time.19 Q. Were electronic documents relating to QSGI's20 mainframe resale business also stored on that21 server?22 A. There could have been templates for23 maintenance contracts and things like that, but I24 don't think there would have been any imperative25 data that would have been on there other than

Page 56

1 templates and things like that.2 Q. So I'm going to give you an illustration3 just to see how this plays out. Supposing that Joel4 Owens had created a, you know, a memo relating to5 QSGI's mainframe business, he created a memo in6 Microsoft Word. Are you following me so far?7 A. Um-hm.8 Q. If he elected to save that document9 somewhere electronically, is there any repository

10 where he could put that memo?11 A. No.12 Q. So it would either be stored, if at all, in13 hard copy in one of the facilities in New Jersey or14 Minnesota?15 A. Probably not.16 Q. It probably would not be stored there?17 A. No, I don't think memos were stored. I18 don't think a memo was a document that we retained19 for 7 years.20 Q. What are the categories of documents that21 QSGI retained for 7 years?22 A. Primarily financial in nature.23 Q. What kind of financial documents did QSGI24 retain for 7 years?25 A. Things that were used pertaining to our

Page 571 audits, financial records, invoices, things of that2 nature. Purchase orders, contracts.3 Q. Other than financial, certain financial4 information, did QSGI retain any other categories of5 information for 7 years?6 A. Not that I know of.7 Q. Did QSGI retain any documents that would8 show the impact, if any, that the IBM policy would9 have had on QSGI's sales?

10 A. Yes.11 Q. Where would that have been retained?12 A. There is financial documents that show that13 information.14 Q. Other than embedded in financial15 information, would QSGI have retained any documents16 that showed the impact on QSGI's sales of the IBM17 policy?18 MR. BAUTA: Objection. Form.19 A. There are financial documents and SEC20 filings, and I'm sure there are even e-mails that21 were sent regarding the destruction of the business22 based on that policy change.23 Q. Were any of those e-mails included in the24 hard copy documents that were retained for 7 years?25 A. Please repeat the question.




16 (Pages 58 to 61)

Page 58

1 Q. Yeah. Were any of those categories of2 e-mails -- of documents that you just described3 included in the 7-year retention of hard copy4 documents?5 A. They could have been, yes.6 Q. Which documents could have been retained?7 A. Well, it would have been the financial8 documents, copies of the filings, all of the9 recordkeeping regarding the lack of sales or the

10 reduction of sales along the way.11 Q. So other than SEC filings and audit12 information, are there any other categories of13 documents that would have been included in the14 7-year retention of hard copy documents?15 A. I supplied Juan with some other documents.16 I had a PowerPoint presentation which actually17 showed the decline of the business in one of our18 earnings calls. There were also some press releases19 that were conveyed regarding the degradation of the20 business due to the policy change.21 Q. And earnings calls are calls that are made22 following an SEC filing; is that right?23 A. Correct.24 Q. So that's, again, a category of documents25 related to QSGI's filings?

Page 59

1 A. Yes.2 Q. So other than documents relating to filings3 and audits, are there any other categories of4 documents that QSGI retained hard copies of for5 7 years?6 A. That's all that I can think of.7 Q. To QSGI didn't retain information about8 prior sales of zSeries mainframes for 7 years?9 A. Prior sales? I'm trying to think of where

10 those documents would reside. They would be11 probably in contracts. If you go through all the12 financial recordkeeping, you would see -- you could13 extrapolate those numbers and create the documents.14 Q. Were contracts a category of documents that15 were retained in the hard copy documents for16 7 years?17 A. Yes.18 Q. So outside of contracts did QSGI retain in19 hard copy form any documents relating to resales of20 zSeries mainframes?21 A. We did keep sales orders in the Minnesota22 warehouse, which I had explained earlier a lot of23 those documents or all of those documents were24 subsequently destroyed, so we can only go off the25 financial data impact.

Page 601 Q. So I'm trying to get a sense of how a2 document might -- what categories of documents might3 have been included in the Hightstown facility versus4 in the Minnesota facility. Was there any basis on5 which a document was selected for inclusion of one6 versus the other?7 A. Well, one would be the day-to-day8 contract-type documents which would have resided in9 Minnesota. And in New Jersey was the parent and all

10 of the financial gathering and reporting would end11 up in New Jersey. So from a big picture you would12 have all the financial data recorded in New Jersey13 and retained in New Jersey, and Minnesota was a sub,14 so you would have a lot of the contractual paperwork15 and the day-to-day sales and things like that.16 Q. So is it right that the New Jersey facility17 included QSGI's hard copy documents relating to18 filings and audits?19 MR. BAUTA: Objection. Form.20 A. Yes.21 Q. And QSGI's New Jersey facility included --22 A. That was New Jersey.23 Q. Thanks. QSGI's Minnesota facility included24 documents relating to QSGI's day-to-day activities?25 A. Correct.

Page 61

1 Q. Is it the case that QSGI's documents2 relating to its mainframe resale business would have3 been included, if at all, in the hard copy documents4 of Minnesota?5 A. Repeat the question again.6 Q. Yeah. So where would QSGI's hard copy7 documents relating to its mainframe resale business8 have been stored?9 A. Transactional data?

10 Q. Well, for example, you said that sales11 orders relating to the mainframe resale business12 were stored in Minnesota.13 A. Correct. Yes.14 Q. What other categories of documents relating15 to the mainframe resale business were stored in16 Minnesota?17 A. It would be their resale contracts, their18 parts, their orders, just the things that would run19 their day-to-day operation that would either create20 a purchase order or a sales order or invoice was21 stored within their documents.22 Q. So is it the case that documents relating to23 QSGI's sale of the zSeries mainframes would have24 been stored at the facility in Minnesota?25 A. Yes.




17 (Pages 62 to 65)

Page 621 Q. And those documents would not have been2 stored at the New Jersey facility, correct?3 A. The actual sales transaction documents would4 not be stored in New Jersey, but the overall revenue5 and the dollars and cents documents would have been6 stored in New Jersey. The consolidated financials7 would end up in New Jersey.8 Q. Setting aside the consolidated financials,9 information relating to QSGI's resale of used

10 mainframes would have been retained, if at all, in11 the Minnesota facility, correct?12 A. Yes.13 Q. Information relating to QSGI's -- any14 prospective sale of used mainframes would have been15 stored, if at all, in the Minnesota facility?16 A. Correct.17 Q. And information relating to QSGI's inventory18 of used IBM mainframes would have been stored, if at19 all, in QSGI's Minnesota facility, correct?20 A. Correct.21 Q. And information relating to QSGI's22 strategies relating to its used mainframe business23 would have been stored, if at all, in its Minnesota24 facility, correct?25 A. Not correct.

Page 631 Q. Where else would that have been stored?2 A. Those are e-mails. Once again, a lot of the3 strategic business plans and things like that were,4 you know, dynamic e-mails that would go back between5 Joel myself and Seth and Ed, and we would talk about6 the business and the growth, about the overall7 things that you would discuss in trying to grow and8 build a business. So that wasn't necessarily a9 storage item in the file, that was more

10 correspondence between parties.11 Q. And I would like to focus just on -- I would12 like to set aside the e-mails and focus on the13 categories of documents that we have been talking14 about, just the hard copy documents. Can we do15 that?16 A. Sure.17 Q. So documents relating to QSGI's strategy18 concerning its used mainframe business would have19 been stored, if at all, in its Minnesota facility,20 correct?21 MR. BAUTA: Objection. Form.22 A. Primarily, yes.23 Q. When you say "primarily" is there any other24 physical location where those documents could have25 been stored?

Page 641 A. You know, I had a document that was a2 PowerPoint presentation that discussed the mainframe3 business and the growth and the degradation of the4 business. So I had a copy of a PowerPoint that I5 gave to Juan as well.6 So for the most part documentation was7 stored in Minnesota. If it was pertaining to8 financial records, hard copy financial records,9 maybe one or two other documents were copied and I

10 ended up with a copy of it for review or Seth ended11 up with a copy of it for review. That wasn't a12 storage item.13 Q. And the PowerPoint that you are talking14 about, is that an example of an electronic document15 or hard copy document?16 A. It was an electronic document that was17 printed.18 Q. So I would like to focus on QSGI's -- well,19 I think let me stop and pause. I think we were20 speaking before about where, if at all, QSGI would21 have stored hard copy documents relating to its22 business. Do you recall that?23 A. Yes.24 Q. And I believe, and you can correct me or25 give a different answer now if you want to, but my

Page 651 understanding was that QSGI would have kept those2 documents, if at all, in either the New Jersey3 facility or in the Minnesota facility; is that right4 or wrong?5 A. Still correct.6 Q. So QSGI's hard copy documents were retained,7 if at all, at the New Jersey facility or the8 Minnesota facility, right?9 A. Correct.

10 Q. So to the extent that QSGI had retained hard11 copy documents relating to its strategy concerning12 its used mainframe business, those documents would13 have been stored, if at all, in its Minnesota14 facility, right?15 A. Correct.16 Q. And to the extent QSGI had any documents17 relating to planning concerning its used mainframe18 those documents would have been stored in Minnesota,19 correct?20 A. We are talking about hard copy documents?21 Q. Yes.22 A. Yes.23 Q. Any documents that QSGI had relating to24 marketing and promotional materials relating to its25 mainframe business would have been stored, if at




18 (Pages 66 to 69)

Page 66

1 all, in Minnesota, right?2 A. Correct.3 Q. Any documents that would show a lost sale by4 QSGI due to the IBM policy would have been stored,5 if at all, in the Minnesota facility, correct?6 A. I don't know how you document lost sales.7 Explain to me what you mean.8 Q. Did QSGI document any instances of lost9 sales due to the IBM policy in 2007?

10 A. There were e-mails that would go back and11 forth saying we just lost this sale because we12 couldn't upgrade or downgrade the machine. There13 were e-mails.14 Q. Other than e-mails did QSGI document in any15 way any instance of a lost sale due to the IBM16 policy?17 A. Are you asking me on hard copy?18 Q. Yes.19 A. Not that I know of.20 Q. So QSGI would not have retained in hard copy21 any document that would show a lost sale due to the22 IBM policy, right?23 MR. BAUTA: Objection to form.24 A. Correct, it wouldn't be normal practice.25 Q. Well, and not only would it not be normal

Page 67

1 practice, QSGI did not, in fact, retain any hard2 copy documents at all that would show any lost sale3 due to the IBM policy, right?4 MR. BAUTA: Objection to form.5 A. Well, as I said earlier, the retention was6 primarily around purchase orders, sales orders,7 contracts, that type of information. So that8 wouldn't have been one of the things that we would9 have retained.

10 Q. Okay.11 A. Even if we had retained it, it's something12 that we wouldn't.13 MR. DIESSEL: I'm going to object in part as14 nonresponsive.15 Q. It's just a lawyer thing I have to do. I'm16 going to ask my question again and ask that you give17 an answer to the specific question.18 So QSGI did not, in fact, retain any hard19 copy document that would show any instance of a lost20 sale due to IBM's policy, right?21 MR. BAUTA: Objection. Form.22 A. It would be outside the scope of what we23 would retain. In hard copy.24 Q. What was within the scope of what you25 retained in hard copy?

Page 68

1 A. We had e-mails back and forth between the2 parties all the time.3 Q. What was within the scope of what you would4 have retained in hard copy?5 A. Financial records, purchase orders, sales6 orders, orders of parts from IBM, we would call IBM7 to do changes on machines, things like that. Things8 that would create sales orders or purchase orders9 where there is a financial exchange generally.

10 Q. So it was outside the scope of QSGI's hard11 copy retention to retain documents relating to the12 impact of the IBM policy on QSGI's resale of13 mainframes?14 A. You have to start all over again. You lost15 me.16 Q. Yeah. So I think you said a moment ago that17 retention of documents showing a lost sale due to18 IBM's policy was outside of the scope of QSGI's19 retention of hard copy documents, right?20 MR. BAUTA: Objection. Form.21 A. Yes.22 Q. How was it determined what was within or out23 of the scope of retention of hard copy documents?24 A. Financial-type documents. In other words a25 purchase order or sales order, customer order,

Page 691 purchase orders, contracts, things like that would2 have been retained in the files. If you had to3 retain every e-mail, you would fill up the universe4 in hard copy.5 Q. So if IBM wanted to find an example of the6 impact of the IBM policy on QSGI, it would have to7 find that evidence, if at all, in e-mails, right?8 MR. BAUTA: Objection. Form.9 A. Yes, I would presume so.

10 Q. So is there any other document or category11 of documents that you can point me to in which IBM12 can find any evidence of the impact of its policy on13 QSGI's mainframe resale business?14 MR. BAUTA: Objection. Form.15 A. Our financial information, our press16 releases, our conference calls, things along those17 nature.18 Q. And those are all examples of public19 documents, correct?20 A. Yes.21 Q. So outside of public documents is there any22 internal document or category of documents that you23 can point me to that would show any impact on QSGI's24 mainframe resale business by the IBM policy?25 A. There have been documents that I turned over




19 (Pages 70 to 73)

Page 70

1 to my attorney that I think you have that could2 point you in that direction.3 Q. And those are e-mails?4 A. They are from e-mails, yes.5 Q. From what years are those e-mails?6 A. I don't know the exact years.7 Q. Are they from 2007?8 A. They could be e-mails of 7, 8, and 9.9 Q. How many e-mails comprise this group of

10 documents that you are referring to that shows the11 impact on QSGI's mainframe resale business?12 A. I don't know off the top of my head.13 Q. Is it greater than 10?14 A. I would imagine so.15 Q. Is it greater than 20?16 A. I would imagine so.17 Q. Greater than 50?18 A. I don't know.19 Q. So other than these e-mails and setting the20 e-mails aside, is there any other source or category21 of documents -- let me strike that and let me start22 over.23 Setting aside these e-mails and the public24 filings that you were referring to, are there any25 other internal documents that would show any impact

Page 71

1 on QSGI by the IBM policy?2 MR. BAUTA: Objection.3 I'm going to instruct you not to answer.4 We are back to asking him substantive5 questions. You are asking him to make decisions6 and to render his opinion on what documents show7 what, not on the retention of documents. Same8 objection as before.9 Q. Are there any categories of documents other

10 than e-mails and public documents that would show11 any impact on QSGI by the IBM policy?12 MR. BAUTA: Same objection.13 MR. DIESSEL: I'm asking about categories of14 documents, Juan.15 MR. BAUTA: No, no, no. You are asking him16 to render opinions. You are asking him in your17 opinion what documents are there that show this,18 and he is not here for that. You have gone19 beyond. I gave you lots of leeway, and you just20 keep going down that path, so I'm going to have21 to cut it down.22 If you want to ask him where the documents23 are maintained, go for it.24 MR. DIESSEL: So I just want to make clear25 for the record, it's your position that whether

Page 72

1 or not QSGI has and retained documents relating2 to its claim is outside the scope of this3 deposition?4 MR. BAUTA: No. You are asking him to5 identify documents that he believes support the6 position of QSGI in this case. That's beyond7 the scope of this deposition.8 MR. DIESSEL: So if I'm asking about9 categories of documents and sources, you would

10 not object to that question?11 MR. BAUTA: That's correct.12 MR. DIESSEL: Okay.13 MR. BAUTA: Unless you preface those14 categories with if you wanted to prove this,15 where would I find those documents.16 BY MR. DIESSEL:17 Q. So I'm going to ask my question again and18 ask what sources of documents QSGI has other than19 e-mails, if any, that would show an impact on QSGI20 by the IBM policy?21 MR. BAUTA: That's the same question.22 MR. DIESSEL: Sources of documents you are23 objecting to?24 MR. BAUTA: That would show impact. Who is25 determining what impact is? You are asking him

Page 73

1 to do that, and it's beyond the scope of your2 notice. If you want to ask him what sort of3 documents are maintained by QSGI, go for it.4 MR. DIESSEL: I will ask him the questions5 that I decide to ask.6 MR. BAUTA: Okay. Then I will instruct him7 not to answer when you are asking him to make8 opinions as to what documents would show what.9 MR. DIESSEL: Just so the record is clear,

10 you are instructing him not to answer the prior11 question?12 MR. BAUTA: Yes, I'm instructing him not to13 answer the prior question. Stick to your notice14 and you will be okay.15 BY MR. DIESSEL:16 Q. So we were discussing a moment ago17 categories of documents that would have been18 retained in hard copy form, if at all, in QSGI's19 Minnesota filing facility. Do you recall that?20 A. Yes.21 Q. And we were discussing documents relating to22 prior sales of zSeries mainframes. Do you recall23 that?24 A. Yes.25 Q. And you testified that documents were




20 (Pages 74 to 77)

Page 74

1 retained in hard copy format, if at all, in2 Minnesota, right?3 MR. BAUTA: Objection to form.4 A. Yes.5 Q. And you testified that documents relating to6 QSGI's prospective sales of zSeries mainframes would7 have been retained, if at all, in Minnesota?8 MR. BAUTA: Objection to form.9 A. Yes.

10 Q. And you testified that any documents11 relating to QSGI's mainframe inventory would have12 been retained, if at all, in Minnesota, correct?13 MR. BAUTA: Objection to form.14 A. Yes.15 Q. And any documents relating to the valuation16 of QSGI's inventory of used mainframes would have17 been retained, if at all, in Minnesota, correct?18 MR. BAUTA: Objection to form.19 A. Yes. And we are talking about all hard copy20 documents, right?21 Q. That's right.22 A. Yes.23 Q. And all of those documents are now24 destroyed, right?25 A. Correct.

Page 75

1 Q. Did QSGI maintain an inventory of the2 documents that were stored in its Minnesota3 facility?4 A. Not that I know of.5 Q. Did QSGI maintain a list of the documents6 stored at its Minnesota facility?7 A. Not that I know of.8 Q. Did QSGI maintain a list of the categories9 of documents that were stored in its Minnesota

10 facility?11 A. Not that I know of.12 Q. Did QSGI maintain any identifying13 information concerning the content of what was14 stored in its New Jersey facility?15 A. I answered that question prior. I said the16 content of the information was primarily financial17 records and invoices and contracts, purchase orders,18 invoices, and contracts.19 Q. So is it the case that -- to summarize this,20 is it accurate to say that hard copy documents21 relating to the day-to-day business of QSGI's22 mainframe resale business would have been23 maintained -- would have been retained in hard copy24 format, if at all, in Minnesota?25 MR. BAUTA: Objection. Form.

Page 761 A. Yes.2 Q. But any such documents that QSGI retained,3 if it retained them, have been destroyed, right?4 MR. BAUTA: Objection. Form.5 A. The Minnesota documents, yes.6 Q. So prior to the -- and if I refer to those7 as the Minnesota documents, will you understand what8 I'm talking about?9 A. Yes.

10 Q. So prior to the Minnesota documents being11 destroyed, did QSGI make any copy of those12 documents?13 A. No.14 Q. What is the date on which those documents,15 the Minnesota documents were destroyed?16 A. I don't have the date.17 Q. What years of documents were destroyed?18 A. All the documents that we had in Minnesota.19 It had to be years. I don't know exactly the years,20 but it was quite a few.21 Q. It would include documents from 2004 related22 to QSGI's mainframe business, right?23 A. It must have, yes, because there were no24 documents available.25 Q. And documents relating to QSGI's mainframe

Page 771 resale business in 2005 were destroyed, right?2 A. Correct.3 Q. Documents relating to QSGI's mainframe4 resale business in to 2006 were destroyed?5 A. Correct.6 Q. And documents relating to QSGI's mainframe7 resale business in 2007 were destroyed?8 A. Correct.9 Q. And the same documents relating to QSGI's

10 mainframe retail business in 2008 were destroyed?11 A. Correct.12 Q. QSGI didn't make any copies of those13 documents before they were destroyed?14 A. Correct.15 Q. Who destroyed the Minnesota documents?16 A. It was the company where the documents were17 being stored.18 Q. What was the name of that company?19 A. I don't know. It was a storage facility in20 Minnesota.21 Q. Who made the determination to store --22 actually, let me pause. So the storage facility in23 which the Minnesota documents were stored, that was24 not a QSGI-controlled storage facility?25 A. No, it was like a storage locker. We just




21 (Pages 78 to 81)

Page 78

1 put them in there temporarily while we were moving.2 Q. Okay. Something like a self store locker;3 is that right?4 A. Like "Storage Wars," you could have bought5 them.6 Q. When were those documents placed into that7 storage locker?8 A. I don't know the exact date. I don't know9 the exact date. Probably sometime in 2008 or early

10 2009.11 Q. So prior to the Minnesota documents being12 placed in the storage locker, where were they kept?13 A. They were kept in the Eagan facility.14 Q. Who made the determination to move the15 Minnesota documents -- the documents relating to16 QSGI's mainframe resale business into the storage17 locker?18 A. We had a very large facility in Minnesota19 which was only being basically half used, so we20 decided to move into a smaller facility since we21 were no longer trading in mainframes. We moved in22 there temporarily while we could move from one23 building to another.24 Q. Who made the determination that those25 documents should be placed in a storage locker?

Page 79

1 A. I think it was Hanks Laws who was managing2 the business at the time.3 Q. Who is Hank Laws?4 A. Hank Laws works for the company. He is our5 business development manager, VP.6 Q. How did it come to pass that the Minnesota7 documents were destroyed?8 A. It came to pass because they were put in the9 storage facility, the company subsequently filed

10 Chapter 11, every week we would present a listing of11 invoices to our lender, certain bills would get12 paid, certain bills wouldn't. This happened to be a13 bill that didn't get paid, it fell through the14 cracks, and by the time we realized that those15 documents were sitting there and wanted to retrieve16 them, we called the storage facility and they said17 they had already disposed of them. They had given18 us some type of 3-month notice or something, and it19 just fell through the cracks, and they got disposed20 of by the storage facility.21 Q. Who was in charge of paying the bills on the22 storage locker?23 A. I don't know.24 Q. Were you in charge of paying those bill?25 A. No, I was not.

Page 80

1 Q. You were the records custodian in the2 bankruptcy, right?3 A. I'm not sure I was the records custodian in4 the bankruptcy. I tried to assemble the records5 because it was important to me to get as much of the6 records as I could, but nobody authorized the7 company to get those documents. It was a fight to8 get the documents that I got out of the building.9 Q. In fact, you were in charge of QSGI's record

10 retention during bankruptcy, right?11 A. I don't know that to be a fact.12 Q. Who was in charge of QSGI's record retention13 during bankruptcy?14 A. I really don't know the answer to that15 question.16 Q. It's your testimony that you don't know who17 was in charge of retaining QSGI's documents during18 bankruptcy?19 A. It was such a mess between our lender and20 the company, it was really just -- so many things21 were going on at one time, I don't know the answer22 to the question.23 Q. So during bankruptcy there were a lot of24 things going on, right?25 A. Yes.

Page 81

1 Q. So many things that it wasn't clear who was2 even in charge of QSGI's documents?3 A. As far as the document retention goes4 because certain things that were not clear-cut, we5 were bouncing in and out of court, information, like6 the records in New Jersey were left there, we7 couldn't get any funds to transfer those records.8 We tried to move those records to Iron Mountain, the9 lender wouldn't even fund the movement of those

10 records.11 Then at some point I just said I will come12 and get them and take them, there won't be any13 billing, I will just move them out of there because14 I didn't want to lose the records. I felt it was in15 my best interest as the CEO of the company to at16 least gather what records I could to make sure that17 we had them for the future.18 Q. In fact, there was a period of time during19 bankruptcy in which no one at QSGI was in charge of20 records retention.21 A. Are you telling me that?22 Q. Is that true?23 A. I don't know. I said before I'm not sure24 exactly what the policy was for that point in time.25 Q. I think your testimony was that it was such




22 (Pages 82 to 85)

Page 821 a mess that nobody was in charge of the record2 retention at QSGI during bankruptcy; is that right?3 MR. BAUTA: Objection to form.4 A. I'm not sure exactly what the situation was5 for a period of time until we were able to talk to6 our lawyers and say look, we have to get these7 records, they are important to the company, how do8 you want to do it. It was a process to try to get9 funding to be able to pay for the records. Like I

10 said, the lender wasn't willing to pay the bills to11 fund some of these things.12 Once again, I had to figure out which way to13 go. And then eventually I took it upon myself to14 get those New Jersey records out of the one15 warehouse and put them into another warehouse that I16 was in control of, not the lender.17 Q. When did QSGI file for bankruptcy?18 A. I don't know the exact date. 2000 -- I'm19 not going to speculate. It's public record.20 Q. Roughly the middle of 2009, would that be21 consistent with your understanding?22 A. I think it was somewhere around -- yeah,23 July of 2009.24 Q. And QSGI emerged from bankruptcy a couple25 years later, right?

Page 831 A. Yeah, a year ago roughly.2 Q. Who at QSGI was in charge of QSGI's record3 retention when QSGI filed for bankruptcy in 2009?4 A. Well, the record retention -- who was in5 charge of record retention? Our policy for record6 retention was what we said, it was 7 years for7 documents prior to all the things that we have gone8 over. And then it was a little bit, you know, gray9 until we got our arms around the documents again,

10 and then we maintain the same policies now.11 Q. What was the period of time during which12 QSGI's record retention was gray?13 A. Well, when we filed for bankruptcy, we had14 to figure out where the records were, how to get15 them, and how to make sure that we were able to get16 our arms around them. The main reason for us to do17 that was we were behind on SEC filings, and we had18 to have as much of the documents as we could to be19 able to catch up with our SEC filings and take the20 company throughout the bankruptcy and emerge from21 Chapter 11.22 Q. What period of time would that have been23 during which QSGI was in a gray area with respect to24 its records retention?25 A. Probably about 6 or 7 months from the time

Page 84

1 we filed.2 Q. So that would have been from sometime in3 2009 to 2010?4 A. Yes.5 Q. Was it during this gray area in QSGI's6 record retention that the Minnesota documents were7 destroyed?8 A. I don't know the exact date when they were9 destroyed.

10 Q. Is it consistent with your recollection that11 those documents were destroyed during that gray12 area --13 A. It had to be --14 Q. Excuse me, I need to finish.15 -- during QSGI's record retention?16 MR. BAUTA: Objection to form.17 A. There was a period of time where the lender18 was in control of the finances and invoices were19 sent to the lender to be paid, and there is probably20 a 4- or 5-month period where certain bills just did21 not get paid and that was one of them. I didn't22 even know that that bill had never gotten paid or23 what have you.24 Q. I think that's why I'm asking whether or not25 the Minnesota documents were destroyed during the

Page 85

1 gray area of records retention period of QSGI?2 MR. BAUTA: Objection to form.3 A. That would be correct.4 Q. During the gray area of QSGI's record5 retention, is it true that QSGI suspended its record6 retention policies?7 MR. BAUTA: Objection to form.8 A. There was nothing official regarding9 suspending or not suspending the record retention

10 policy. When we were in bankruptcy, I'm not sure11 what the policy is at that time. When we exited12 bankruptcy we are retaining all of the documents.13 Once again, financial documents and purchase orders14 and contracts and all those kind of things from a15 going forward standpoint.16 Q. But in effect during that period QSGI17 wasn't, in fact, retaining its documents, correct?18 A. I think it just -- there were documents that19 were being retained. I'm not sure to what level20 until we instituted once again a new server. There21 were assets that were sold to the company, so our22 servers were gone. And things just changed very23 rapidly until we were able to get the company back24 on its foot again.25 Q. So during this gray area in QSGI's record




23 (Pages 86 to 89)

Page 861 retention period, the Minnesota documents at least2 were destroyed, right?3 MR. BAUTA: Objection to form.4 A. Correct.5 Q. How many documents were destroyed at the6 Minnesota facility?7 A. I have no idea.8 Q. Is it hundreds of boxes?9 A. I have no idea.

10 Q. Is there anyone that would know how many11 documents were destroyed at the New Jersey facility?12 A. New Jersey facility?13 Q. Sorry, the Minnesota facility.14 A. I don't know.15 Q. But I guess aside from the specific16 quantity, all of QSGI's hard copy documents relating17 to the day-to-day activity of its mainframe resale18 business were destroyed during that gray area in19 QSGI's record retention period, right?20 MR. BAUTA: Objection to form.21 A. Well, I said we never preserved the22 day-to-day hard copy documents, so I don't know why23 you keep going back to it.24 Q. Okay. So aside from -- let's just start25 over, then.

Page 87

1 I would like to get a sense of what2 documents were destroyed during that gray area of3 records retention period. One of the things that4 you testified was destroyed during a gray area5 records retention period was the Minnesota hard copy6 documents, correct?7 MR. BAUTA: Objection. Form.8 A. The Minnesota hard copy documents were9 destroyed sometime in 2009 when paying the bill was

10 out of our control.11 Q. And is it also the case that QSGI lost12 servers during that gray area period as well?13 A. There were servers that were sold with some14 of the assets.15 Q. And you are referring to the asset sale to16 SMS?17 A. Yes.18 Q. Outside of the asset sale to SMS, were there19 any servers that QSGI lost during that gray area20 records retention period?21 A. There was another New Jersey server that was22 also sold to another company. It was actually sold23 to Victory Park. The lender credit bid and they24 ended up with the assets as well.25 Q. So other than the sale of certain servers,

Page 88

1 are there any other servers that QSGI lost during2 this gray area of its record retention?3 A. No.4 Q. Are there any other documents that QSGI lost5 during the gray area of its record retention?6 MR. BAUTA: Objection. Form.7 A. I have no idea. The question is so broad I8 don't even know the answer to the question.9 Q. You don't know whether QSGI destroyed any

10 documents during its bankruptcy?11 MR. BAUTA: Objection to form.12 A. We never intentionally destroyed any13 documents.14 Q. Do you know whether QSGI unintentionally15 destroyed any documents during its bankruptcy?16 MR. BAUTA: Objection to form.17 A. We never intentionally destroyed any18 documents.19 Q. So my question was whether QSGI20 unintentionally destroyed documents during21 bankruptcy?22 A. If it was unintentional we wouldn't have23 known.24 MR. BAUTA: Mr. Sherman, no speculating.25 THE WITNESS: Oh, sorry.

Page 891 Q. So one category of documents that was2 destroyed were the Minnesota documents, correct?3 A. Yes.4 Q. Do you know of any other documents that were5 discarded during QSGI's bankruptcy?6 MR. BAUTA: Objection. Form.7 A. No.8 Q. Do you know of any other category of9 documents that were destroyed by QSGI or another

10 entity during QSGI's bankruptcy?11 MR. BAUTA: Objection to form.12 A. No.13 Q. Do you know of any other documents that were14 lost during QSGI's bankruptcy?15 MR. BAUTA: Objection to form.16 A. I don't know.17 Q. You don't know the answer or you don't know18 of any documents that were lost?19 MR. BAUTA: Objection to form.20 A. I don't know what documents were lost.21 Q. So as you sit here right now, you have no22 idea what documents QSGI lost during its bankruptcy?23 MR. BAUTA: Objection. Form.24 A. Are you asking hard copy or electronic?25 Q. Well, electronic.




24 (Pages 90 to 93)

Page 90

1 A. I don't know.2 Q. In fact, you can't be sure in that case that3 electronic documents weren't destroyed during4 bankruptcy?5 MR. BAUTA: Objection. Form.6 A. Correct.7 *Q. In fact, given the present sources of8 documents, it has to be the case that QSGI lost9 electronic documents during bankruptcy, right?

10 MR. BAUTA: Objection to form.11 I'm going to instruct you not to answer.12 It goes beyond the scope of this witness's13 notice.14 MR. DIESSEL: Whether QSGI lost electronic15 documents is outside the scope of a 30(b)(6) on16 document retention, is that your position?17 MR. BAUTA: No, that wasn't your question.18 MR. DIESSEL: Can you read back the19 question, please.20 *(Question read)21 MR. DIESSEL: Can you answer the question,22 please.23 MR. BAUTA: If you can.24 A. Can you ask the question one more time?25 MR. DIESSEL: I'm sorry, what's the basis of

Page 91

1 your objection, Juan?2 MR. BAUTA: I don't understand the question,3 number one. Number two is that I still think4 you are asking for his opinion.5 MR. DIESSEL: Topic 3, "The sources and6 location of QSGI's documents that remain or may7 remain following any instance from 2004 through8 the present in which QSGI's documents were9 destroyed, discarded, or otherwise not

10 preserved."11 MR. BAUTA: So you think that's the basis12 for that question?13 MR. DIESSEL: Right.14 MR. BAUTA: I'm going to go ahead and object15 again.16 MR. DIESSEL: I'm not going to argue with17 you.18 MR. BAUTA: Then don't ask for an opinion,19 ask where are they because that's what your20 number three is asking for. Ask him if he knows21 where the documents are.22 (Document marked as Exhibit 323 for identification)24 Q. I'm going to hand you what I have marked as25 Exhibit 3.

Page 92

1 MR. DIESSEL: Did I give you an extra copy?2 MR. BAUTA: Two.3 MR. DIESSEL: Yeah, can I have one.4 Q. I would like you to turn to about the fourth5 page -- first of all, this document is labeled From6 8-K, November 14, 2007. Do you see that?7 A. Um-hm.8 Q. I would like you to turn to the fourth page9 entitled "QSGI Reports Third Quarter Results." Do

10 you see that page?11 A. Um-hm.12 Q. Do you know what this document is?13 A. It's an 8-K.14 Q. So this is an example of something that QSGI15 filed with the SEC?16 A. Yes.17 Q. And the big paragraph that begins two-thirds18 of the way down the page and it starts with "Marc19 Sherman," do you see that paragraph?20 A. Um-hm.21 Q. And the paragraph says, "Marc Sherman,22 chairman and chief executive officer of QSGI,23 commented, 'The third quarter was characterized by24 strong growth and recurring services with both our25 Data Security and Compliance as well as our Data

Page 93

1 Center Maintenance divisions, which was offset by a2 sharp decline in our Data Center Hardware division3 due to what the company believes to be actionable4 anti-competitive business practice by a leading5 OEM.'"6 Do you see that?7 A. Um-hm.8 Q. Does this refer to the same policy that is9 the subject of QSGI's present lawsuit?

10 A. Yes.11 MR. BAUTA: Objection.12 Do me a favor, he is going to go down this13 road. We are not going to answer any of these14 questions.15 THE WITNESS: Hit me next time.16 Q. So on November 6, 2007, the date of this17 document, QSGI believed it had an actionable claim18 against IBM regarding the IBM policy?19 MR. BAUTA: Objection.20 I'm going to instruct you not to answer.21 It's beyond the scope of this witness's22 notice.23 Q. What is the earliest point in time that QSGI24 believed it had an actionable claim against IBM25 regarding policy?




25 (Pages 94 to 97)

Page 94

1 MR. BAUTA: Same objection.2 I'm going to instruct you not to answer.3 Beyond the scope of this witness's notice.4 Q. What is the date on which QSGI anticipated5 litigation with IBM concerning its present lawsuit?6 MR. BAUTA: Same objection.7 MR. DIESSEL: You are instructing him not to8 answer?9 MR. BAUTA: That's correct.

10 MR. DIESSEL: Okay.11 Q. I would like to focus on the 2007 time12 period again that we were focused on this morning.13 Can we do that?14 A. Sure.15 Q. Did QSGI take any steps in 2007 to preserve16 documents relating to this present lawsuit?17 A. No.18 Q. Did QSGI take any steps at any point in time19 to preserve documents for this lawsuit?20 A. No.21 Q. Did QSGI take any steps to preserve22 documents relating to QSGI's mainframe resale23 business for this lawsuit?24 A. No.25 Q. Did QSGI take any steps to preserve

Page 951 documents that would demonstrate any impact on QSGI2 of the IBM lawsuit -- strike that and ask it again.3 Did QSGI take any steps to preserve for this4 lawsuit documents that would demonstrate an impact5 on QSGI of the IBM policy?6 A. Our filings speak for themselves.7 Q. Okay. And I'm going to ask the question8 again, and I just need your answer to it. Did QSGI9 take any steps at all to preserve for this lawsuit

10 documents that would demonstrate the impact on QSGI11 of the IBM policy?12 A. Can you ask the question one more time?13 Q. Did QSGI take any steps at all to preserve14 for this lawsuit any documents that would15 demonstrate the impact on QSGI of the IBM policy?16 A. I don't understand your question.17 Q. QSGI didn't issue a litigation hold notice18 in 2007, correct?19 A. What does that mean?20 Q. Are you familiar with a litigation hold21 notice?22 A. No.23 Q. Does QSGI issue litigation hold notices when24 it enters litigation?25 A. Not that I know of.

Page 96

1 Q. So, in fact, there is no litigation hold2 notice governing this present lawsuit, correct?3 MR. BAUTA: Objection to form.4 A. Explain to me what a litigation hold notice5 is.6 Q. I think I asked you if you have an7 understanding of what a litigation hold notice is?8 A. I do not.9 Q. You as CEO have no knowledge of a litigation

10 hold being issued in this lawsuit, correct?11 MR. BAUTA: Objection. Form. It's beyond12 the scope of this witness's notice.13 Q. Okay. You can answer.14 THE WITNESS: Answer?15 MR. BAUTA: If you can.16 A. I don't know the answer.17 Q. My question was whether you know. So you18 don't know whether QSGI has issued a litigation hold19 notice for this lawsuit, right?20 MR. BAUTA: Objection to form.21 A. Don't know.22 Q. Who at QSGI, if not you, would know whether23 or not QSGI issued a litigation hold notice?24 A. Probably our attorneys.25 Q. Anyone else?

Page 971 A. Not that I know of.2 Q. When you say "our attorneys," who are you3 referring to?4 A. I would assume it would be Juan.5 Q. Any other attorneys that would know?6 A. Not that I know of.7 Q. You are not aware of QSGI issuing a8 litigation hold notice -- strike that.9 MR. DIESSEL: How are we on time?

10 THE VIDEOGRAPHER: About 7 minutes.11 MR. DIESSEL: Is this a good time for you12 guys to break for lunch?13 MR. BAUTA: Sure. How long do you think you14 are going to go this afternoon?15 MR. DIESSEL: I'm going to take the time16 this afternoon.17 MR. BAUTA: So you are going the 7 hours?18 MR. DIESSEL: I don't know the exact time,19 but I intend to use my time, so we should take a20 break.21 MR. BAUTA: Okay. No problem.22 THE VIDEOGRAPHER: Tape number two. We are23 going off the video record at 12:26.24 (Recess taken)25




26 (Pages 98 to 101)

Page 98

1 AFTERNOON SESSION2 THE VIDEOGRAPHER: Start tape three of Marc3 Sherman's deposition, 1:16, on the record.4 CONTINUED DIRECT EXAMINATION5 BY MR. DIESSEL:6 Q. Does QSGI have a written document retention7 policy?8 A. Not that I know of.9 Q. Has QSGI ever had a written document

10 retention policy?11 A. Not that I know of.12 Q. I want to turn back to our prior focus which13 we have been doing in the morning talking about the14 2007 time period, documents before QSGI's15 bankruptcy. Can you stay with me on that?16 A. Sure.17 Q. During that time period did QSGI maintain a18 customer management database?19 A. We had a customer management database.20 Q. What was the name of that database?21 A. I'm not sure which CRM we used. I'm not22 quite sure.23 Q. What's a CRM?24 A. Customer relationship, customer management.25 Q. Customer relationship management; is that

Page 99

1 right?2 A. Yes.3 Q. What did QSGI store in its CRM?4 A. It was on the server.5 Q. What kind of information was included in the6 CRM?7 A. I don't really know the exact information8 that was stored on the CRM.9 Q. What about roughly what was on the CRM?

10 What was it used for?11 A. It was used for managing customer accounts.12 It would have a client name, generally it would have13 their phone number, their e-mail address, and the14 contact person, and usually what the touch point was15 about the last time they contacted the person.16 Q. Would those clients include clients for17 resale of used mainframes?18 A. It could.19 Q. Did the CRM track sales opportunities?20 A. It could have.21 Q. Are there any other places where sales22 opportunities may have been tracked?23 A. Not that I know of.24 Q. Where is that server today?25 A. Well, one would have been with SMS and one

Page 100

1 was with Victory Park.2 Q. So QSGI maintained two CRM servers during3 the 2007-2008 time period; is that right?4 A. Yes.5 Q. And that CRM database included information6 relating to QSGI's used mainframe customers and7 opportunities?8 A. It would have all the customers.9 Q. It would have all the customers and

10 opportunities, including used mainframe customer11 opportunities?12 A. Yes, I suppose.13 Q. Did QSGI make a copy of that information14 before it provided those servers to SMS and Victory15 Park?16 A. No, it did not.17 Q. Does QSGI have any ability -- strike that18 question.19 Do either Victory Park or SMS have the20 obligation to give that information to QSGI if it21 requests that information?22 A. No, they do not.23 Q. So for purposes of this lawsuit, whatever24 information was on the customer relationship25 management database is gone, correct?

Page 101

1 A. Correct.2 Q. Are there any other databases that QSGI3 maintained on servers that QSGI used to support its4 business functions?5 A. Not that I know of.6 Q. Did QSGI use any databases for purposes of7 financial reporting?8 A. Not that I know of.9 Q. Did QSGI use any databases to support its

10 auditing functions?11 A. Not that I know of.12 Q. Did QSGI have any other -- strike that.13 I think you testified before that QSGI had14 several servers during the 2007-2008 time period,15 correct?16 A. Correct.17 Q. Is that right?18 A. I know we had at least two.19 Q. What were on the at least two servers that20 QSGI had during that time period?21 MR. BAUTA: Objection to form.22 A. The servers were used for our e-mail.23 Q. Anything else?24 A. Also the servers were used to basically25 manage and run the company's operation.




27 (Pages 102 to 105)

Page 102

1 Q. What information was on those servers that2 QSGI used to manage and run its operations?3 A. Didn't we answer these questions already?4 Q. Well, if we did I'm not recalling it, so I'm5 just going to ask -- I'm just going to go through6 this again.7 So what information did QSGI keep on the8 servers that it used to manage and run its business?9 A. E-mails.

10 MR. BAUTA: Objection. Form.11 Q. Anything other than e-mails?12 A. I said we had some, you know, templates on13 there that we would have in our used shared files.14 I do recall you going through these questions15 before.16 Q. The reason I'm asking, Mr. Sherman, is this17 morning we didn't talk about CRM, which I now18 understand was included on the server. So what I'm19 trying to get a sense of is if there are any other20 categories of documents besides e-mails and21 templates that were on the server. So can you help22 me understand that?23 A. I'm not really sure how the CRM that was, I24 guess, residing on the server as well, and the25 employee would bring it up to be able to use it as a

Page 103

1 database.2 Q. So other than CRM and the templates and the3 e-mail, what other information was on these servers?4 A. That's all that I can recall.5 Q. Did you do anything in preparation of this6 deposition to investigate what was on those servers?7 A. No, I did not.8 Q. Where are those servers today?9 A. One is -- one was sold to Victory Park, and

10 the other one was sold to SMS.11 Q. Anything on those servers -- strike that.12 QSGI did not make any backup or copy of13 those servers before providing them to SMS and14 Victory Park, right?15 A. Correct.16 Q. So any e-mails or documents on those servers17 for purposes of this lawsuit are gone, right?18 A. The Court actually requested the documents,19 the backup tapes back from Victory Park, and that's20 how we were able to get back the documents that21 we -- the e-mails and everything that we have.22 Q. Were these archives on these two servers23 that you are describing?24 A. I'm not sure.25 Q. So other than the e-mail archive, which you,

Page 104

1 I guess, aren't sure -- you are not sure that the2 e-mail archive was on these two servers, right?3 A. I'm not sure.4 Q. So for purposes of this lawsuit, whatever5 was on those servers is gone?6 MR. BAUTA: Objection to form.7 A. Yes.8 Q. Is there any correspondence or documentation9 that would show what QSGI kept on the servers?

10 A. Repeat the question.11 Q. Is there any documentation or correspondence12 that would describe what information QSGI kept on13 the servers?14 A. No.15 Q. When you say that the servers included all16 the information that QSGI used to manage and run its17 business, what years did that cover?18 A. Can you be more specific with the question?19 Q. Sure. You testified before that these two20 servers included information and documentation that21 QSGI used to manage and run its business, correct?22 A. Correct.23 Q. Did these servers include information and24 documents that QSGI used to run its business in the25 2007 time frame?

Page 105

1 A. I don't know. Can you start over with the2 question one more time, please?3 Q. Sure. My question is in what --4 THE WITNESS: Let me turn this off.5 Q. Let's come at this another way, Mr. Sherman,6 and you can tell me when you are ready.7 A. One second.8 Q. What years were these two servers in use?9 A. They were in use from the starting of the

10 company and the acquisition of Qualtech to the time11 that they were taken off line and sold with the12 assets of those two respective businesses.13 Q. So that would be roughly the year 2000 to14 the year 2009?15 A. If that's the dates, yes.16 Q. You don't have any reason to think that17 those dates are incorrect, do you?18 MR. BAUTA: Objection. Form.19 A. If you tell me that those are the dates,20 I...21 Q. So regardless of the specific dates, those22 servers were used to house QSGI's documents and23 information that it needed to manage and run its24 business during the point in time that QSGI was25 operating as a business, correct?




28 (Pages 106 to 109)

Page 1061 A. Correct.2 Q. And QSGI provided the servers that contains3 the only copy of that information to Victory Park4 and SMS?5 MR. BAUTA: Objection. Form.6 A. We didn't provide them. They were taken.7 Q. So the only servers that contain that8 information were taken by QSGI and provided to --9 A. No. Start over again.

10 Q. Yeah. Again, just for the benefit of the11 court reporter, we have to try not to get on top of12 each other with the questions and answers.13 I will start from the top and we will go14 through. So those two servers contain all of the15 documents and information that QSGI used to run and16 manage its business during the time period when QSGI17 was in business?18 MR. BAUTA: Objection. Form.19 A. Yes.20 Q. And QSGI -- strike that.21 And those two servers are no longer in the22 possession of QSGI, correct?23 A. Correct.24 Q. QSGI didn't make a copy or backup of any of25 the documents or information on that server,

Page 107

1 correct?2 A. Correct.3 Q. QSGI has no ability to access the documents4 or information that were on those servers, correct?5 A. Correct.6 Q. Just to complete the record, QSGI provided7 one of the servers to SMS pursuant to an asset sale,8 correct?9 A. Correct.

10 Q. What is the reason why the second server was11 provided to Victory Park?12 A. They bought the assets of the New Jersey13 facility, the credit assets, from the data security14 side of the business.15 Q. Did Victory Park acquire any other assets16 from the New Jersey facility other than that server?17 A. They bought all the assets that were part of18 the data security compliance business.19 Q. That would include the books and records,20 correct?21 A. That would include the books and records.22 Q. QSGI didn't make any copies of those books23 and records before it provided them to Victory Park,24 correct?25 A. QSGI did not have access to those records.

Page 108

1 Q. And QSGI never made any copy of those books2 and records before it provided them to Victory Park?3 A. Correct.4 Q. As to SMS, QSGI as part of that asset sale5 provided all the books and records relating to its6 hardware division to SMS, correct?7 A. Correct.8 Q. It provided every document relating to its9 hardware division to SMS, correct?

10 A. I don't know every document. I can't11 speculate.12 Q. Well, at least it provided every book,13 record, and document relating to its hardware14 division to SMS, correct?15 A. All the available documents that came with16 the business in the purchase.17 Q. So all of the available documents -- so in18 2009 QSGI sold the assets comprising its hardware19 division to SMS, right?20 MR. BAUTA: Objection to form.21 A. Correct.22 Q. So all the records, documents, and23 information that QSGI had relating to the hardware24 division in 2009 transferred to SMS, correct?25 MR. BAUTA: Objection to form.

Page 109

1 A. Correct.2 Q. QSGI didn't make any copies of the books,3 records, and documents before it provided them to4 SMS, correct?5 MR. BAUTA: Objection to form.6 A. The only copies that we have are the copies7 that were electronic.8 Q. And you are referring to the e-mails?9 A. E-mails and anything that resided on the

10 copies from the tapes.11 Q. So I appreciate that. My question wasn't12 about the e-mails. My question is about the books,13 records, and information that you provided to SMS14 pursuant to the asset sale. Can we stay on that,15 please?16 A. Sure.17 Q. So did QSGI make any copies of any of the18 books, records, or documents before transferring19 them to SMS?20 MR. BAUTA: Objection to form.21 A. Not that I know of.22 Q. So as far as this lawsuit is concerned, the23 books, records, and documents relating to QSGI's24 hardware division are gone, right?25 MR. BAUTA: Objection to form.




29 (Pages 110 to 113)

Page 1101 A. Correct.2 THE WITNESS: Can I speak to you for a3 second?4 MR. BAUTA: Sure. Do you want to take a5 break?6 THE WITNESS: Yeah.7 MR. BAUTA: Sure.8 THE VIDEOGRAPHER: Off the video record at9 1:32.

10 (Recess taken)11 THE VIDEOGRAPHER: Back on the record at12 1:37.13 CONTINUED DIRECT EXAMINATION14 BY MR. DIESSEL:15 Q. We were talking a second ago about the QSGI16 CRM?17 A. Yeah.18 Q. I'm not sure if we talked about the years19 during which that was in place. Is it the case that20 QSGI used that CRM database during the time in which21 QSGI was in business?22 A. We always had some type of a database for23 managing names. We went from rolodex to database.24 Q. Do you have -- when did QSGI start using the25 database?

Page 111

1 A. I don't know exactly. I wasn't a user of2 it, so I don't know the exact date, but I know we3 had it for our employees.4 Q. Would it have been 2002?5 A. I don't know the answer to that.6 Q. Would it have been before 2005?7 A. I don't know.8 Q. Would it have been before 2007?9 A. I would imagine so.

10 Q. QSGI is currently using it, right?11 A. QSGI currently uses a database, yes.12 Q. Where is the rolodex?13 A. What's the question?14 Q. Where is the rolodex of customer15 information?16 A. Where is the rolodex of customers? I don't17 know.18 Q. So there is two sources of customer19 information that QSGI has had while it's been in20 business, a rolodex and the CRM database, right?21 A. I used that as an example. I said before22 CRM there was such a thing as a rolodex.23 Q. What did QSGI use for its customer24 information before CRM?25 A. I don't know.

Page 112

1 Q. To the best of your knowledge, QSGI has been2 using the CRM --3 A. We have been using.4 Q. Excuse me.5 -- since at least 2007?6 A. We have used some type of a database. I7 don't know what it is, but we have used some type of8 a database.9 Q. Since 2007 at least?

10 A. Yes.11 Q. I guess having, and I appreciate that was12 just an example, but having thought more about the13 rolodex, does it refresh your recollection as to how14 far back QSGI used a CRM database?15 A. No.16 Q. You mentioned earlier in the day a17 PowerPoint presentation. Do you recall that?18 A. Um-hm.19 Q. And you mentioned that it was an electronic20 PowerPoint that you printed out. Do you remember21 that?22 A. Um-hm.23 Q. Where is that PowerPoint stored24 electronically?25 A. No idea.

Page 113

1 Q. Does QSGI use PowerPoints?2 A. Presently?3 Q. Let's start with the 2007-2008 prebankruptcy4 time, did QSGI use PowerPoints then?5 A. Yes.6 Q. What did QSGI use PowerPoints for?7 A. Presentations.8 Q. What kinds of presentations?9 A. Could be customer presentations, could be

10 investor presentations, customer -- I said customer11 presentations. Corporate presentations internally.12 Q. Are these presentations that individual13 employees would prepare using PowerPoint, a version14 of PowerPoint loaded on his or her laptop?15 A. Could be laptop, could be a desktop, I16 presume.17 Q. So in either case these PowerPoints, I take18 it, would have been created on some computer the19 employee was using?20 A. I would assume so.21 Q. And those PowerPoints, I take it, would have22 been stored on whatever computer they were created23 on, correct?24 A. If you say so.25 Q. Well, I'm asking you whether QSGI used




30 (Pages 114 to 117)

Page 114

1 PowerPoints, and your testimony was yes.2 A. Yes.3 Q. And I'm trying to understand where QSGI4 would have kept these PowerPoints that its employees5 were creating?6 A. I would imagine they would have been made7 from the server, you know, from Windows, some8 application, Office, right?9 Q. You are saying PowerPoint is part of

10 Microsoft Office, correct?11 A. Correct.12 Q. When employees create PowerPoints, they13 would store them on their computer, correct?14 MR. BAUTA: Objection to form.15 A. I would assume, yes.16 Q. Does QSGI use Microsoft Excel?17 A. Yes.18 Q. What does it use Excel for?19 A. Spreadsheets.20 Q. What kinds of spreadsheets?21 A. Financial spreadsheets, inventory22 spreadsheets.23 Q. What kinds of inventory spreadsheets would24 QSGI create Excel -- I want to remind you that I25 want to ask you about the 2007-2008 prebankruptcy

Page 1151 period, so I will ask my question again. What kinds2 of inventory spreadsheets did QSGI create during3 that period of time?4 A. I don't know. Create. I don't understand5 the question completely.6 Q. What kinds of inventory spreadsheets did7 QSGI use?8 A. We would get inventories from customers and9 we would dump them into Excel and we would price

10 them based on the inventory on an Excel spreadsheet,11 and then usually bid a deal and send it back to a12 customer in Excel.13 Q. Did QSGI use Excel to track sales14 information?15 A. I don't know the answer to that.16 Q. Did it use Excel to track opportunities?17 A. Opportunities? I don't know what that18 means.19 Q. Did it use Excel to track sales20 opportunities?21 A. Not that I can recall.22 Q. When QSGI employees created Excel23 spreadsheets, I take it those would have been stored24 on their computers?25 A. I would assume so, sure.

Page 116

1 Q. No reason to think that that's not the case,2 right?3 A. I would assume that that would be the case.4 Q. You create PowerPoints, don't you?5 A. Occasionally.6 Q. Where do you store those PowerPoints when7 you create them?8 A. To a document file.9 Q. And where would the document file be stored?

10 A. Usually on some sort of server.11 Q. And you also have PowerPoints on a computer,12 don't you?13 A. Yes, they are on the computer, but I do know14 that -- yes, on the computer.15 Q. Does QSGI use Microsoft Word?16 A. Yes.17 Q. What does it use Microsoft Word for? Again,18 sorry to interrupt your answer. I want to focus on19 the prebankruptcy time.20 A. Um-hm.21 Q. What did QSGI use Microsoft Word for?22 A. Documents.23 Q. When you say for documents, what do you24 mean?25 A. Writing or creating documents.

Page 117

1 Q. What kinds of documents?2 A. Letters.3 Q. What kinds of letters?4 A. Speeches and things like that.5 Q. Speeches delivered to whom?6 A. To -- I did my father's eulogy on a Word7 document.8 Q. What about business-related speeches?9 A. Could be, sure.

10 Q. To whom -- what kinds of letters did QSGI11 create?12 A. Letters are created to customers and13 vendors, I would imagine, from time to time,14 collection letters.15 Q. What's the purpose for which letters were16 sent to customers and vendors?17 A. It could be for a proposal, for a bid.18 Q. Other than speeches and letters, what other19 Word documents did QSGI create?20 A. I don't know.21 MR. BAUTA: Objection. Form.22 A. I don't know.23 Q. You don't know whether QSGI used Microsoft24 Word for anything other than speeches or letters?25 MR. BAUTA: Objection to form. Beyond the




31 (Pages 118 to 121)

Page 118

1 scope of this deposition.2 A. I don't understand the meaning of the3 question. Yes, it was used for writing letters,4 putting letters on paper.5 Q. Okay. I'm just trying to get a general6 sense of the types of documents that QSGI was7 creating in 2007-2008. Okay? So when I'm asking8 what did QSGI use Microsoft Word for, what I'm9 really getting at is what kinds of documents was

10 QSGI preparing. Do you understand that?11 A. Sure.12 Q. So other than speeches and letters, what13 other types of documents did QSGI create using14 Microsoft Word?15 A. Letters, documents.16 Q. What types of documents?17 A. We went through that already.18 Q. I don't think we did. What kind of Word19 documents did QSGI prepare?20 A. I really don't know.21 MR. BAUTA: Objection to form.22 A. I don't know.23 Q. You don't know what kinds of documents QSGI24 created in 2007 and 2008?25 MR. BAUTA: Objection.

Page 119

1 A. There is a broad spectrum of documents.2 Q. What's included in the broad spectrum of3 documents?4 A. Could be a collection letter to a customer5 that owed us money, could be a letter to an6 employee, could be a proposal to a customer.7 MR. BAUTA: Mr. Sherman, you are not here to8 guess, so...9 THE WITNESS: I'm just telling the things

10 that I know.11 Q. What other categories of documents do you12 know about in 2007 and 2008?13 A. I don't know.14 Q. What about strategy documents?15 A. I don't know of any strategy-type documents.16 Q. The documents that QSGI created using17 Microsoft Word in 2007 and 2008 I take it would have18 been stored on a computer, right?19 A. Yes.20 Q. So your testimony is you are not sure that21 QSGI created any strategy documents before22 bankruptcy.23 MR. BAUTA: Objection. Form.24 A. That wasn't a question.25 Q. Did QSGI create any strategy documents

Page 120

1 before bankruptcy?2 A. We always had strategic-type documents about3 the business on e-mails primarily.4 Q. So setting aside the documents which were5 primarily an e-mail, what were the formats of the6 other strategy documents?7 A. It would be, I would say, primarily e-mail.8 Q. Other than e-mail were there any strategy9 documents that QSGI created or prepared?

10 MR. BAUTA: Objection to form.11 A. We had some PowerPoint documents.12 Q. Other than strategy documents other than --13 in Microsoft Word, for example?14 A. No, not that I can recall.15 Q. And those PowerPoint strategy documents, I16 take it, would have been stored on a computer?17 A. Yes.18 Q. What about documents relating to valuation19 of QSGI's mainframe inventory, did QSGI prepare20 those types of documents in 2007 and 2008?21 MR. BAUTA: I'm going to object and instruct22 you not to answer.23 THE WITNESS: Okay.24 MR. BAUTA: Beyond the scope of your notice.25 MR. DIESSEL: I don't agree with that.

Page 121

1 MR. BAUTA: Show me where. Here is your2 notice, here is your three topics.3 MR. DIESSEL: I'm not going to engage with4 you on this because we are wasting time. I'm5 not arguing. I need to state my position on the6 record that I disagree, and I'm going to keep7 asking question.8 MR. BAUTA: Okay.9 MR. DIESSEL: That way every time you

10 instruct not to answer, we don't have to keep11 having this colloquy.12 MR. BAUTA: I'm giving IBM's counsel the13 opportunity to explain to me of the three topics14 that were specifically listed for your 30(b)(6)15 notice which one covers the question that you16 just asked.17 MR. DIESSEL: I will repeat it is plainly in18 the scope, and I'm entitled to ask questions19 whether you think they are inside the notice or20 not.21 MR. BAUTA: Oh, I see. Okay.22 MR. DIESSEL: And you know that. That's23 what the local rules say.24 MR. BAUTA: Okay.25 MR. DIESSEL: It shouldn't be a surprise to




32 (Pages 122 to 125)

Page 122

1 you. I look forward to reading your motion for2 protective order.3 MR. BAUTA: Which of the local rules? Maybe4 I don't know them.5 MR. DIESSEL: It seems you don't know them.6 MR. BAUTA: Apparently not. Do you know7 which one it is?8 BY MR. DIESSEL:9 Q. Did QSGI use Microsoft Word to prepare

10 financial documents?11 A. I don't know.12 Q. Your testimony is you don't know whether13 QSGI used Microsoft Word for financial documents?14 MR. BAUTA: Objection. Beyond the scope of15 this notice, and I'm going to instruct you not16 to answer.17 Q. So Seth Grossman worked at QSGI through18 2009, correct?19 A. Correct.20 Q. And Seth Grossman had a computer, right?21 A. Correct.22 Q. And you would expect Seth Grossman would23 have prepared documents that were stored on his24 computer, correct?25 MR. BAUTA: Objection to form.

Page 123

1 A. What was the question?2 Q. Seth Grossman created documents that were3 stored on his computer, correct?4 A. Correct.5 Q. Did QSGI copy or preserve his documents6 before he left in 2009?7 A. All of his documents resided on the server.8 Q. What server?9 A. The server that was in New Jersey.

10 Q. Which server in New Jersey are you referring11 to?12 A. The server that Victory Park took.13 Q. So to the extent that any of -- let me ask14 two questions. First, did QSGI do anything to15 preserve the documents and information on his16 laptop -- strike that.17 Did QSGI do anything to preserve a copy or18 copy of the documents Seth Grossman had on his19 computer before he left in 2009?20 A. I don't think you understand how the system21 worked. Okay? I would log into my computer, I22 would log into my server. When QSGI was shut out23 and Victory Park took over the assets, the server24 was disconnected. There was no log in, there was25 nothing there, you had no access, so it was gone.

Page 124

1 There was nothing to back up, there was nothing to2 have. It was completely gone. My desktop had no3 information, his desktop had no information. There4 was nothing to recover.5 MR. DIESSEL: I'm going to object as6 nonresponsive.7 Q. You testified earlier that Seth Grossman had8 documents on his computer, correct?9 A. Seth Grossman had --

10 MR. BAUTA: Objection to form.11 A. Seth Grossman had a computer, yes.12 Q. And on the computer he had documents,13 correct?14 MR. BAUTA: Objection to form.15 A. There were documents on his computer.16 Q. There were QSGI documents on his computer,17 correct?18 A. There were QSGI documents on his computer.19 Q. And QSGI didn't do anything to copy or20 preserve the information on his computer before he21 left, correct?22 A. The retention was handled in New Jersey23 through backup tapes.24 Q. So the answer to my question is -- my25 question is did QSGI do anything to copy or preserve

Page 1251 the documents and information on his computer before2 he left?3 A. Yes, they were backed up as normal protocol4 in New Jersey.5 Q. How were they backed up?6 A. Through backup data tapes.7 Q. When were Seth Grossman's documents backed8 up?9 A. I don't know the exact date, but it was our

10 normal process.11 Q. What is the mechanism through which his12 documents would be backed up?13 A. Same process that we had in New Jersey, it14 was automatically backed up through their data15 tapes.16 Q. So the server to which you are referring is17 the server that QSGI provided to Victory Park?18 A. Correct.19 Q. QSGI never retained any of the information20 on that server, correct?21 A. Whatever we have is on the backup tapes.22 Q. And the backup tapes that you are referring23 to are the e-mail backup tapes, right?24 A. Right. There could be some additional25 information on those backup tapes as well, I'm just




33 (Pages 126 to 129)

Page 126

1 not sure.2 Q. So let's start over. So Seth Grossman3 worked at QSGI until 2009, correct?4 MR. BAUTA: Objection. Form.5 A. Yes.6 Q. He created documents and he stored those7 documents on his computer?8 MR. BAUTA: Objection. Form.9 A. I assume so.

10 Q. To the extent that Seth Grossman had QSGI11 documents that he created on his computer, they12 would have either been stored on his computer or on13 the Victory Park -- or on the New Jersey server,14 correct?15 MR. BAUTA: Objection. Form.16 A. Yes.17 Q. QSGI didn't preserve a copy of his computer18 before he left, correct?19 MR. BAUTA: Objection to form.20 A. It was always backed up through the main21 server.22 Q. I appreciate that but I need to get an23 answer to my question, and then we will move on to24 the server.25 So Seth Grossman stored QSGI documents on

Page 127

1 his computer, correct?2 MR. BAUTA: Objection to form.3 A. I think that there is a disconnect here.4 The files that he would save would be saved to the5 server, it wouldn't be saved -- you are asking if6 it's saved to a local computer, is that your7 question? What is your question?8 MR. DIESSEL: I'm going to move to strike as9 nonresponsive.

10 MR. BAUTA: He is asking you for11 clarification of the question, which is12 confusing.13 MR. DIESSEL: I got a speech.14 Q. Where is your laptop right now, Mr. Sherman?15 A. Where is my laptop?16 Q. Where is your laptop?17 A. I have a laptop at my home, I have one in my18 office.19 Q. And the one in your office you use for QSGI20 purposes?21 A. Yes.22 Q. If I were to go in your office and turn on23 your laptop, would I see PowerPoint files on your24 laptop?25 A. No.

Page 1281 Q. Why not?2 A. Because I normally would save them to -- I3 would save them and they would reside on our server.4 Q. Would I find any Microsoft Word files on5 your QSGI computer?6 A. Well, that's a -- maybe I can back up a7 second. If you are in my office and you logged in8 under my user name, you would see Word files and you9 would see everything. You can see everything as if

10 you were working through a central server.11 Q. So is it your understanding that those12 documents exist only on a QSGI server and not on the13 local computer?14 A. That's my knowledge, yes.15 Q. Now, setting aside other QSGI employees and16 just focusing on you, there also are, in fact, QSGI17 documents that you retain locally on your computer,18 correct?19 MR. BAUTA: Objection. Form.20 A. I don't know the answer to that question.21 Q. Who would know the answer to that question?22 A. Dave Harris would know the answer to that23 question.24 Q. Is it your testimony that QSGI did not store25 any local Word, PowerPoint, or Excel files on

Page 129

1 anyone's computer?2 A. That was my experience when the server was3 shut down in New Jersey when I tried to log in the4 next day.5 Q. So Seth Grossman's files your testimony is6 would only have existed on the QSGI server, correct?7 MR. BAUTA: Objection to form.8 A. That's my knowledge from my experience.9 Q. And all the information on that server is

10 gone today?11 MR. BAUTA: Objection. Form.12 A. Unless it was saved and backed up.13 Q. Unless it was in an e-mail?14 MR. BAUTA: Objection. Form.15 A. Unless some of those additional documents16 were saved on the backup tapes.17 Q. And you have absolutely no knowledge that18 any documents were saved on that server?19 A. I don't know which ones were saved.20 Q. You don't know if any were saved?21 A. I don't know which ones -- I know that some22 were saved.23 Q. What was saved?24 A. I know that we have financial documents that25 were saved.




34 (Pages 130 to 133)

Page 130

1 Q. Where are those financial documents today?2 A. The current CFO has those -- has some of the3 old documents. I'm not sure he has all of them, but4 he has enough, because we have had to recreate our5 SEC documents.6 Q. The CFO has these financial documents where?7 A. On his computer.8 Q. He has local copies of financial documents9 on his computer?

10 A. Yes.11 Q. So at least some QSGI employees have local12 documents in their computers?13 A. Some of the old records that we got back we14 were able to make copies of.15 Q. Did any of the QSGI employees in 2007 and16 2008 have local copies of documents in their17 computers?18 A. Repeat that again.19 Q. Did any of the QSGI employees in 2007 and20 2008 have local copies of documents in their21 computers?22 A. I'm not sure. I don't think so but maybe.23 Q. If they did they would be gone, correct?24 A. I don't know that.25 Q. Did QSGI take any effort at all to collect

Page 1311 laptops of former employees when they left?2 A. All the technology was sent back to New3 Jersey, and it was sold with the assets to Victory4 Park.5 Q. So the answer to that question is QSGI has6 no information at all about what was on these former7 employees' computers in 2007 and 2008, correct?8 MR. BAUTA: Objection to form.9 A. Correct.

10 Q. Whatever was there QSGI no longer has?11 MR. BAUTA: Objection to form.12 A. Correct.13 Q. So QSGI doesn't have Seth Grossman's14 documents from 2007 and 2008, correct?15 MR. BAUTA: Objection to form.16 A. Unless they are on the backup tapes.17 Q. The same backup tapes that you have no18 knowledge as to their contents, right?19 MR. BAUTA: Objection. Form.20 A. Yes, correct.21 Q. QSGI has no documents from Edward Cummings22 from his tenure at QSGI, correct?23 A. Correct.24 Q. QSGI has no documents from Robert25 VanHellemont from his tenure at QSGI, correct?

Page 132

1 A. Correct.2 Q. QSGI has no documents from Jeffrey Smith3 from his tenure at QSGI, correct?4 A. Correct.5 Q. QSGI has no documents from R. Keith Elliott6 from his tenure at QSGI, correct?7 A. You are talking about physical hard copy8 paper documents, correct?9 Q. I'm talking about the documents that were on

10 the computer during their time at QSGI?11 A. They could be in the backup tapes.12 Q. Your testimony is you don't know what's on13 the backup tapes?14 A. I said they could be on the backup tapes.15 Q. But you have no idea they are on the backup16 tapes?17 MR. BAUTA: Objection. Form.18 A. They could be on the backup tapes.19 Q. Do you know of any measure that QSGI has20 taken at all to preserve the documents of any of21 these individuals and put them on the backup tapes?22 MR. BAUTA: Objection. Form.23 A. All those documents were sent to the24 attorney, they were reviewed, and they were -- a lot25 of them were sent off to the SEC. I'm sure there is

Page 1331 lots of information and lots of documents, and I do2 know that a lot of those e-mails were compiled and3 sent off to the SEC. I don't know how many, what4 they were, what the correspondence was, but of those5 people's names there was -- if they were mentioned6 in the SEC question, then those documents were7 pulled and sent.8 Q. Okay. I'm not talking about e-mails. Okay?9 So QSGI doesn't have any of R. Keith Elliott's

10 documents from his tenure as QSGI, correct?11 MR. BAUTA: Objection. Form.12 A. I would assume not.13 Q. QSGI doesn't have any documents from Joel14 Owens from his tenure at QSGI, correct?15 MR. BAUTA: Objection. Form.16 A. Hard copy documents I would assume -- let me17 think about this for a second. In the hard copy18 files that we had, there is probably Joel purchase19 and sale agreements and some other documents that20 there should be copies of. I would imagine we do21 have some hard copies. Also some issues, some22 signatures on documents from the board of directors23 we don't have in our possession at the time, but24 those physical copies should be available somewhere.25 Q. QSGI didn't retain any of Joel Owens'




35 (Pages 134 to 137)

Page 1341 electronic documents from the time of his tenure,2 correct?3 MR. BAUTA: Objection to form.4 A. Correct.5 Q. QSGI didn't retain any electronic documents6 from Jamie Owens during the time of his tenure at7 QSGI, correct?8 A. Correct.9 Q. QSGI didn't retain any electronic documents

10 from John Riconda from the time of his tenure at11 QSGI, correct?12 A. Correct.13 Q. And, in fact, QSGI hasn't retained14 electronic documents from any former employee during15 their tenure at QSGI, correct?16 A. Correct.17 THE WITNESS: I have a headache.18 MR. DIESSEL: Do you need a break?19 THE WITNESS: No, I'm fine. Keep on going.20 Q. Is it the case that you were the only QSGI21 employee retained during QSGI's bankruptcy?22 A. I was the only?23 Q. Let me ask the question another way. What24 I'm really getting at is who was employed by QSGI25 during the time of QSGI's bankruptcy?

Page 135

1 A. It was me and then Dave Meynarez came on2 board, and then we actually issued a new slate of3 directors.4 Q. So there was a point in time where the only5 employees of QSGI were you and Dave Meynarez?6 A. It was me for a short period of time.7 Q. So there was a period of time when you were8 the only employee at QSGI?9 A. I was the only employee.

10 Q. What period of time was that?11 A. I don't know.12 Q. I'm going to hand you what I have marked as13 Exhibit 4.14 (Document marked as Exhibit 415 for identification)16 Q. Do you recognize this document? For the17 record it's titled "Debtor QSGI and QSGI-CCSI, Inc.18 and Qualtech Services Group, Inc.'s Third Amended19 Disclosure Statement In Support of Third Amended20 Plan of Reorganization."21 Do you see that, Mr. Sherman, on the front22 page?23 A. Yes.24 Q. And it's dated February 1, 2007, correct?25 A. Yes.

Page 1361 Q. What is this document?2 A. It's our plan of reorganization that was3 sent to the Bankruptcy Court.4 Q. Do you see at the top of the page there is5 some information including a page number?6 A. Yeah.7 Q. Can you turn to page 22 of the document,8 please.9 A. Okay.

10 Q. Do you see a heading titled "Current11 Management"?12 A. Um-hm.13 Q. And it says, "Since the bankruptcy filing,14 Marc Sherman and David J. Meynarez have been running15 the Debtors' reorganization, and facilitating the16 Chapter 11 case in the following ways."17 Do you see that?18 A. Um-hm.19 Q. And then it lists some of the things that20 you and Mr. Meynarez have been doing to run the21 reorganization. Do you see that?22 A. Um-hm.23 Q. And six lines into that paragraph the first24 two words are "document retention." Do you see25 that?

Page 1371 A. Um-hm.2 Q. So you and Mr. Meynarez were running QSGI's3 document retention during this bankruptcy, correct?4 A. To the best that we could.5 Q. You couldn't always do as good of a job as6 you would have hoped, right?7 A. I don't understand your question.8 Q. Yeah, so I asked if you and Mr. Meynarez9 were running QSGI's document retention, and you have

10 testified "the best that we could."11 A. The best that we could.12 Q. You guys did the best job preserving the13 documents that you were able to?14 A. Once we were able to isolate the documents,15 we were able to get our -- we could do what we could16 do with the documents that we had.17 Q. And there were some things that you couldn't18 do?19 A. Correct.20 Q. What are some of the things that you and21 Mr. Meynarez couldn't do?22 A. We couldn't get our hands on all the23 documents because some of the documents were24 destroyed.25 Q. What were the documents that were destroyed?




36 (Pages 138 to 141)

Page 138

1 A. The documents that were in Minnesota.2 Q. What other documents were destroyed?3 A. That's all that I know of. Anything that4 was on the server that we couldn't get our hands on.5 Once again, I don't know exactly what's on the6 backup tapes.7 Q. Who are Kinetic Advisors?8 A. Kinetic Advisors was the company that we9 used to help us through our bankruptcy.

10 Q. You worked with Kinetic Advisors?11 A. Yes, we worked with Kinetic Advisors.12 Q. Did you specifically work with Kinetic13 Advisors?14 A. Yes.15 Q. Who is Rich Cartoon?16 A. Richard Cartoon was one of our advisors on17 the bankruptcy.18 Q. Did Rich Cartoon work for Kinetic Advisors?19 A. Yes, he did.20 (Document marked as Exhibit 521 for identification)22 Q. I would like to hand you what's been marked23 as Exhibit 5. For the record, this document is24 entitled "Summary of First Interim Application of25 Kinetic Advisors, LLC for Compensation and

Page 139

1 Reimbursement of Expenses As Restructuring Advisor2 to Debtors. Do you see that?3 A. Um-hm.4 Q. And it's dated November 2, 2009. Do you see5 that?6 A. Um-hm.7 Q. What is this document?8 A. It's a fee application.9 Q. Is it your understanding that this is a

10 document in which Kinetic Advisors is seeking11 reimbursement for services that it's performed?12 A. Yes.13 Q. I would like you to turn to page 47 using14 the numbers at the top of the page. Keep going.15 A. Um-hm.16 Q. I would like you to go down the left column17 until you see an entry for the date October 2, 2009,18 and let me know when you are there.19 A. Um-hm.20 Q. Do you see an entry that says, "tc M Sherman21 about use of corporate shell"?22 A. Um-hm.23 Q. Would it be consistent with your24 understanding that TC refers to a teleconference?25 A. Yes.

Page 140

1 Q. Does this describe a teleconference that you2 had with Rich Cartoon at Kinetic Advisors?3 A. Um-hm.4 Q. And you see further to the right it says,5 "retention of corporate records." Do you see that?6 A. Um-hm.7 Q. At least according to this document you had8 a teleconference with Rich Cartoon at Kinetic9 Advisors on October 2, 2009, about retention of

10 corporate records?11 A. Exactly.12 Q. Now, is this teleconference concerning13 record retention following QSGI's period of a gray14 area in its record retention?15 A. I don't understand your question.16 Q. I'm trying to understand the chronology of17 events of QSGI's record retention in the bankruptcy.18 Okay? So I would like to get an understanding from19 you as to whether this teleconference concerning20 records retention followed the period, the gray area21 period that you described earlier today?22 A. This conversation was about him speaking23 with Victory Park so we could get the records back24 from them that I wanted to be able to retain. It25 was about if we were to have a successful

Page 1411 resurrection of the public entity, I needed to make2 sure that we had all of the records kept and3 preserved. So he was the go-between between me and4 Victory Park, and that was the reason of our5 corporate records record retention. I needed to get6 those records back. I was trying to get those7 records back.8 MR. DIESSEL: I'm going to object as9 nonresponsive.

10 Q. Do you see an entry -- Mr. Sherman, I11 appreciate that, but I was just asking about the12 date. I was asking about the sequence of dates.13 A. I'm not sure exactly of the sequence of14 dates, but I'm telling you what it was for.15 Q. Thank you. Let's turn to the October 6,16 2009, entry. Do you see that?17 A. Yeah.18 Q. It says, "tc C Heilman about impending19 closure of NJ facility."20 Do you see that?21 A. Um-hm.22 Q. C. Heilman, that's the QSGI controller,23 correct?24 A. Um-hm.25 Q. Do you know what "impending closure of NJ




37 (Pages 142 to 145)

Page 142

1 facility" refers to?2 A. Craig was actually the time after the sale3 of the assets was working for Victory Park, and they4 wanted to shut down the New Jersey facility and get5 rid of the documents. And he was talking about6 document destruction, and I was talking about7 getting the documents out of there before they were8 destroyed. So I was actually successful in getting9 the documents out of that building into another

10 building, because Victory Park didn't want to pay to11 store those documents.12 Q. Is it correct that this is referring to the13 impending closer of the document facility of14 Hightstown, New Jersey?15 A. It wasn't a document facility. It was our16 operating facility where the documents were stored.17 The concern was, as you can see here, it says,18 "query from SEC," I didn't want any of those19 documents destroyed because I needed them for the20 SEC investigation, so I wanted to make sure they21 were preserved.22 Q. So there came a point after this discussion23 of document destruction when the documents were24 moved from the Hightstown, New Jersey, facility to25 another facility, correct?

Page 143

1 A. Yes.2 Q. Another facility in New Jersey, correct?3 A. Correct.4 Q. Was every single document from the New5 Jersey facility moved into the second New Jersey6 facility?7 A. Well, I requested that every document that8 was pertaining to financial records for the company9 were moved to the facility that I was in control of.

10 If you read down J. Page, Phil Landau were the11 attorneys at the time who made sure that I got those12 documents and moved them from one building to13 another.14 Q. So any document not related to financial15 information would have been destroyed pursuant to16 the document destruction being discussed in this17 teleconference, correct?18 A. I don't think -- I'm not sure that that's19 the case. I tried to get every document out of that20 building that was wrapped on a pallet that was21 always put aside under our 7-year retention rules22 because I wanted to get those documents out. So I23 don't know what the destruction aspect is, I have no24 idea. All I know is I got as many documents out of25 that building as I could get.

Page 1441 Q. What happened to the documents that you2 couldn't get?3 A. I don't know about what I don't know.4 Q. Okay. I believe your testimony was that5 financial documents were moved to the second New6 Jersey facility, correct?7 MR. BAUTA: Objection to form.8 A. I said all the documents. It could be9 financial. All the documents that were available to

10 be had were moved.11 Q. Going back to my previous question, is it12 your testimony that every document at the New Jersey13 facility in Hightstown was transferred to the second14 New Jersey facility; is that your testimony?15 MR. BAUTA: Objection to form.16 A. I don't know that to be a fact. I wasn't17 there.18 Q. Who would know that?19 A. I don't know.20 Q. Is there anyone at QSGI that would know21 that?22 A. I don't know. I just don't know who was23 left in that building when things were moving around24 after the assets were sold. Craig Heilman might25 know that.

Page 1451 Q. Who physically went to the building to2 collect the documents from Hightstown, New Jersey?3 A. We sent an independent truck over to pick4 them up.5 Q. Who gave the directions to the independent6 truck to pick up the documents?7 A. I think it was Carl Sarasino.8 Q. What instructions were provided to the truck9 with respect to what documents should be picked up?

10 A. I don't know. You have to ask Carl.11 Q. Who is Carl?12 A. Carl runs our operations.13 Q. Can you spell his last name?14 A. S-a-r-a-s-i-n-o.15 THE VIDEOGRAPHER: Counsel, you have about16 3 minutes left on this tape.17 Q. So you don't know one way or the other18 whether all or only some of the Hightstown documents19 were moved to the second New Jersey facility,20 correct?21 MR. BAUTA: Objection to form.22 A. We were told that all of the documents were23 moved. Now, I can't swear to that because I wasn't24 there, but that's what I was told.25 Q. Who told you that?




38 (Pages 146 to 149)

Page 1461 A. That's what Carl told me, we picked up all2 the documents.3 Q. When did he tell you that?4 A. I don't know. Somewhere between 10/6 and5 whenever they ended up in our building.6 MR. DIESSEL: Why don't we hop off the7 record so we can change the tape.8 THE VIDEOGRAPHER: We will go off the video9 record, tape number three, at 2:19.

10 (Discussion held off the record)11 THE VIDEOGRAPHER: Marc Sherman tape number12 four. On the record at 2:21.13 CONTINUED DIRECT EXAMINATION14 BY MR. DIESSEL:15 Q. I would like you to look at the entry dated16 October 7, 2009. Do you see that?17 A. Yes.18 Q. It states in the last two lines, "e-mails to19 C Heilman about which documents should be retained20 and need to obtain storage and shredding costs."21 Do you see that?22 A. Um-hm.23 Q. And C Heilman is QSGI's controller, correct?24 A. Um-hm.25 Q. So this describes a teleconference in which

Page 1471 QSGI's controller discussed what documents QSGI2 should retain, correct?3 A. Um-hm.4 Q. And other documents that QSGI didn't retain5 that would be shredded, correct?6 MR. BAUTA: Objection. Form.7 A. I guess.8 Q. Do you have any reason to disagree with9 that?

10 A. Well, they would shred duplicates.11 Q. Do you see the word "duplicates" anywhere on12 here?13 A. The process was things that were duplicate14 they would just shred.15 Q. Are you aware of any instances of QSGI16 shredding documents other than duplicates?17 A. No, only duplicates.18 Q. Your testimony under oath is that the only19 documents QSGI shredded were duplicate documents?20 MR. BAUTA: Objection. Form.21 A. Yes.22 Q. Is there any correspondence relating to what23 documents should be shredded that you could direct24 us to?25 MR. BAUTA: Objection. Form.

Page 1481 A. Any correspondence? No.2 Q. Is there any document anywhere that would3 describe what documents QSGI would shred and which4 documents it would not shred?5 A. Well, according to our old CFO, his policy6 was that anything that was duplicate would go in7 another bin and Cintas or whoever would come in on a8 monthly basis and they would shred the nonessential9 documents, and the things that were essential would

10 get filed and put away.11 Q. So nonessential documents could get12 shredded?13 A. Correct.14 Q. And that would include nonessential15 documents irrespective of whether they are16 duplicates or not, right?17 A. Nonessential documents. I would imagine18 just paper. We didn't throw paper in the garbage,19 so as part of our process it would get shredded.20 Q. In this case it's not the CFO but QSGI's21 controller that's making the determination as to22 which documents should be shredded, correct?23 MR. BAUTA: Object to form.24 A. I'm not quite sure -- I'm not sure of your25 question. Rephrase the question, please.

Page 1491 Q. How did QSGI determine which documents were2 nonessential and, therefore, could be shredded?3 A. Duplicates.4 Q. What other basis?5 A. Just general, you know, paper that was not6 essential to financial documents or things that7 needed to be retained under financial reporting8 guidelines.9 Q. The documents other than those that needed

10 to be retained for financial reporting guidelines11 could have been shredded?12 A. I presume so, yes.13 Q. Is that what this entry is referring to on14 October 7, 2009?15 MR. BAUTA: Objection to form.16 A. You are making assumptions. I don't know17 what that entry is relating to.18 Q. I'm asking you as the 30(b)(6) witness19 whether you know the answer to what this is20 referring to?21 MR. BAUTA: Objection to form.22 A. I know it's referring to Craig Heilman23 trying to get the finances to store the documents24 from Victory Park, that's what it was about. He25 couldn't get the finances from Victory Park to store




39 (Pages 150 to 153)

Page 1501 those documents, and that's why I came to get those2 documents out. That's what this whole chain of3 e-mail correspondence is about.4 Q. So this entry refers to e-mails to Heilman5 about which documents should be retained. Do you6 see that?7 A. I don't see anything that says which8 documents should be retained. Where do you see9 that?

10 Q. Let me read it to you. It's the October 7,11 2009, entry.12 A. Okay.13 Q. Second line from the top. "E-mails to14 C Heilman about which documents should be retained15 and need to obtain storage and shredding costs."16 Do you see that?17 A. E-mails to John Page and Phil Landau about18 document storage and need to retain C Heilman to19 prepare MOR's and which documents should be retained20 and need to obtain -- right.21 So this was about Craig didn't want to make22 a decision on what documents should be shredded or23 whether it should be shredded or should be retained.24 And he was trying to make a decision on that asking25 the bankruptcy attorneys what he should do. That's

Page 1511 what this e-mail was about.2 Q. Just to be clear, are Kinetic Advisors3 bankruptcy attorneys?4 A. No, they are advisors.5 Q. Is there something on the face of this entry6 that leads you to conclude that these were e-mails7 with attorneys?8 MR. BAUTA: Objection. Form.9 A. Do you see where it says John Page and Phil

10 Landau? That's the law firm of Shraiberg, Ferrara &11 Landau, bankruptcy counsel.12 Q. I'm talking about the next entry after that13 that says, "e-mails to C Heilman about which14 documents should be retained and need to obtain15 storage and shredding costs."16 A. Isn't that 10/7/2009? Is that what you are17 talking about?18 MR. BAUTA: It's all one entry.19 A. It says, "e-mails to John Page and Phil20 Landau about document storage and need to retain21 C Heilman to prepare MOR's and e-mails to C Heilman22 about which documents should be retained and need to23 obtain storage and shredding costs."24 Q. I would like to focus you on that second set25 of e-mails from Kinetic Advisors to C Heilman.

Page 1521 Okay? Do you see that?2 A. Which one is that?3 Q. The entry that says, "e-mails to C Heilman4 about which documents should be retained and need to5 obtain storage and shredding costs."6 A. Right. Which documents need to be retained.7 Q. So where are those e-mails?8 A. I don't know. Check the e-mail archive9 files.

10 Q. Has QSGI checked its e-mail archive files to11 find this e-mail relating to which documents should12 be retained?13 A. All the documents should be retained. I'm14 telling you as CEO I wanted to make sure that all --15 Craig wasn't the CEO. At that point in time I made16 sure that all those documents were retained.17 Q. So ultimately which documents were18 retained --19 A. All documents that were in the building.20 Q. Excuse me. Ultimately which documents were21 retained and which weren't retained were your22 responsibility?23 A. I have no idea what you just said. Start24 over again.25 Q. Ultimately which documents QSGI retained and

Page 1531 which it didn't retain was your responsibility?2 MR. BAUTA: Objection. Form.3 A. All the documents in the New Jersey4 facility, to the best of my knowledge, were retained5 and nothing was disposed of in that facility.6 Q. So what I want to know is whether you know7 one way or the other whether QSGI retained these8 e-mails between his controller and Kinetic Advisors9 relating to document retention?

10 A. I would assume that those e-mails were on11 the backup tapes, if we were still backing up to the12 tapes on 10/9.13 Q. When did QSGI stop backing up its tapes?14 A. That's a good question. I don't know the15 date.16 Q. Do you have a rough sense of when QSGI17 stopped backing up its e-mails?18 A. I don't know.19 Q. Who would know when QSGI stopped backing up20 its e-mails?21 A. Dave Harris.22 Q. Did you do anything to investigate when QSGI23 would stop backing up its e-mails to prepare for24 this deposition?25 A. No, I did not.




40 (Pages 154 to 157)

Page 154

1 Q. Was it your understanding that that was2 outside the scope of this deposition?3 A. No.4 Q. So it's within the scope as far as you know,5 but you just didn't bother checking to see whether6 QSGI kept backing up e-mails?7 MR. BAUTA: Objection. Form.8 MR. DIESSEL: I will strike my last9 question.

10 Q. Let me ask you this question: Is QSGI11 presently backing up its e-mails?12 A. Yes.13 Q. Was there a point in time when QSGI was not14 backing up its e-mails?15 MR. BAUTA: Objection to form.16 A. I would imagine, yes.17 Q. What was the duration of time during which18 QSGI wasn't backing up its e-mails?19 A. The time that QSGI was no longer active to20 the time it came out of bankruptcy, so I don't know21 the exact timeline.22 Q. There was some period of time that QSGI was23 in bankruptcy when it wasn't backing up its e-mails;24 is that your testimony?25 A. Yes.

Page 155

1 MR. DIESSEL: I'm sorry, do you need a2 break?3 THE WITNESS: No, keep going. It's not4 going to make my head feel any better if I stop.5 Q. So we have been talking about two facilities6 at which QSGI retained its only hard copy documents.7 Do you remember talking about that?8 A. Yes.9 Q. One of the facilities was the Minnesota

10 facility, correct?11 A. Correct.12 Q. And all of those documents have been13 destroyed?14 A. Correct.15 MR. BAUTA: Objection to form.16 Q. And the other facility is the New Jersey17 facility that you and I were just talking about,18 correct?19 MR. BAUTA: Objection to form.20 A. Right.21 Q. But all the documents in that facility have22 been provided to the SEC, correct?23 MR. BAUTA: Objection to form.24 A. Correct.25 Q. So QSGI does not have access to any hard

Page 156

1 copy documents from the point of time which it was2 in business, correct?3 A. Correct.4 Q. What documents did QSGI provide to the5 SEC -- let me strike that last question.6 What documents were in the New Jersey7 facility at the point in time that QSGI provided8 them to the SEC?9 A. Financial documents, contract documents.

10 Q. Any other documents?11 A. That's all that I know of.12 Q. Is it the case that the only documents that13 QSGI had at its Hightstown facility was financial14 documents and contract documents?15 MR. BAUTA: Objection. Form.16 A. The ones that were preserved were the17 financial documents and contract documents. There18 could have been some AR and AP documents, I'm not19 100 percent sure.20 Q. So other than financial documents and21 contract documents which QSGI produced to the SEC,22 its other hard copy documents were destroyed,23 correct?24 A. Nonessential documents I guess would have25 gotten destroyed, yes.

Page 157

1 Q. When you refer to essential documents, are2 you, again, just referring to financial documents3 and contract documents?4 A. Yes.5 Q. So other than the financial documents and6 contract documents that QSGI produced to the SEC,7 all of QSGI's other hard copy documents have been8 destroyed, correct?9 A. Whatever was in the boxes in the New Jersey

10 facility are still somewhere to be had.11 Q. Those are the documents that you are12 referring to that were SEC, correct?13 A. Correct.14 Q. QSGI doesn't have the ability to access15 those documents, correct?16 A. You mean the ones that are at the SEC right17 now?18 Q. Yes.19 A. When they send them back to us. When they20 send them back to us we will have it.21 Q. I'm going to go back to my question. Other22 than the financial documents and the contract23 documents that QSGI produced to the SEC, all of24 QSGI's other hard copy documents have been25 destroyed, correct?




41 (Pages 158 to 161)

Page 158

1 MR. BAUTA: Objection to form.2 A. Correct.3 Q. QSGI does not have the right or the4 authority to access the financial and contract5 documents that it produced to the SEC, correct?6 MR. BAUTA: Objection. Form.7 I'm going to instruct you not to answer. I8 think that calls for a legal opinion at a9 minimum, at a minimum. So if you know the

10 answer, great. If not, I instruct you not to11 answer. Don't guess.12 A. What was the question again?13 Q. Does QSGI have the authority to access the14 financial and contract documents that it produced to15 the SEC?16 A. No.17 Q. So for purposes of this lawsuit, QSGI has no18 hard copy documents at all, correct?19 MR. BAUTA: Objection to form.20 A. Correct.21 Q. What's the status of the SEC investigation?22 MR. BAUTA: I'm going to object and instruct23 you not to answer.24 It's beyond the scope of this witness's25 designation.

Page 159

1 MR. DIESSEL: Well, I recall on your2 response you represented that those documents3 had been produced to the SEC, documents which4 are plainly responsive to our document requests.5 It seems to me we are entitled to know what the6 status of those documents are and what's going7 on with the SEC.8 MR. BAUTA: Why don't you approach the SEC?9 Q. What's the status of the SEC investigation?

10 MR. BAUTA: I'm going to instruct you not to11 answer it.12 MR. DIESSEL: What's the basis of your13 instruction?14 MR. BAUTA: Beyond the scope of this15 particular witness's designation. It may16 involve an ongoing investigation with the17 Securities Exchange Commission, and I'm not his18 counsel for that aspect of it, so I don't19 believe he has authority to talk about it.20 If you question whether the documents are at21 the SEC, I'm sure you can find out.22 MR. DIESSEL: So our position is the SEC has23 the only QSGI hard copy documents in existence.24 MR. BAUTA: Is this a speech or is this a25 question?

Page 1601 MR. DIESSEL: Well, you gave a speech so I2 need to put our position on the record.3 MR. BAUTA: Okay.4 MR. DIESSEL: Our position is from what we5 know, it's clear these are the only hard copy6 documents in existence. QSGI has failed to7 produce them, the basis for not producing them8 is that the SEC has them. QSGI has not provided9 any indication of when or even whether it will

10 be able to produce them.11 Our position is questions going to who or12 what entity controls and possesses these13 documents are plainly within the scope of14 document retention 30(b)(6).15 MR. BAUTA: Well, subpoena the SEC for the16 documents. You are subpoenaing third parties17 for other things, go ahead and subpoena the SEC18 for the documents. Perhaps you will have better19 luck than we did.20 BY MR. DIESSEL:21 Q. Has the SEC provided any indication that22 it's going to return those documents?23 A. The SEC told us 6 months ago that they were24 going to return them to us.25 Q. Has QSGI had any correspondence with the SEC

Page 161

1 concerning those document?2 A. I instructed my attorneys to send a second3 request to them and a third request to send us back4 those documents.5 Q. Has QSGI received any response from the SEC6 about when or even whether it will provide those7 documents back to QSGI?8 A. Their position was that they were sending9 documents back to us 6 months ago.

10 Q. Has the SEC provided any indication of when11 QSGI will receive these documents, if at all?12 A. Six months ago. I don't mean to be smug,13 but they told us they were sending them back14 6 months ago.15 Q. Did QSGI produce documents to the SEC16 pursuant to a subpoena?17 A. There was an informal investigation.18 (Document marked as Exhibit 619 for identification)20 Q. I'm going to hand you what I have marked as21 Exhibit 6. Do you recognize this document?22 A. Yes.23 Q. Is this a subpoena from the SEC to QSGI?24 MR. BAUTA: Objection. Beyond the scope of25 this witness's designation.




42 (Pages 162 to 165)

Page 1621 Don't answer the question. It's a document2 that speaks for itself.3 MR. DIESSEL: You are instructing him not to4 answer whether this is a subpoena?5 MR. BAUTA: You asked him earlier if they6 had been subpoenaed. You have the subpoena and7 now you have shown the subpoena. He is a8 30(b)(6) witness that's appearing here pursuant9 to the topics. Show me where in your three

10 topics there is discussions about subpoenas and11 the underlying bases for those subpoenas.12 MR. DIESSEL: Well, when your client13 produced the only existing copies of his14 documents to the SEC, you don't give me any15 choice but to talk about the SEC subpoena.16 MR. BAUTA: You can easily subpoena the SEC.17 You know how to do that.18 Q. Is this a subpoena from the SEC to QSGI?19 MR. BAUTA: I'm going to instruct you not to20 answer.21 Object. Instruct not to answer. It's22 beyond the scope of this witness. The document23 speaks for itself.24 Q. QSGI produced the 400 boxes of document from25 the New Jersey warehouse to the SEC pursuant to a

Page 163

1 subpoena, correct?2 MR. BAUTA: You can answer that.3 A. Four hundred boxes? Okay. Yes, I guess.4 Q. Do you have a different recollection as to5 the number of boxes QSGI produced?6 A. I didn't know the number of boxes. I knew7 it was a lot of documents.8 Q. Is 400 boxes consistent with your9 understanding of how many boxes there were?

10 A. I was just told it was a lot of boxes.11 Q. What else, if anything, did QSGI produce to12 the SEC pursuant to the subpoena?13 MR. BAUTA: If you know.14 A. E-mails.15 MR. BAUTA: Actually, you know what, I'm16 going to instruct you not to answer.17 We are getting into the SEC investigation18 and what they are asking for, and I'm going to19 tell you that I'm going to object and instruct20 him not to answer. It's an ongoing21 investigation of the Securities and Exchange22 Commission. I'm not his counsel. It's beyond23 the scope of your notice, and had we known that24 you were going to play this issue, then we would25 have had the SEC lawyers who are most intimate

Page 1641 with what the SEC has asked for and whether the2 investigation is going appear here.3 MR. DIESSEL: I'm trying to find the4 documents since apparently the only copies were5 provided to the SEC.6 MR. BAUTA: I'm telling you where they are.7 They are at the SEC. Go get them.8 BY MR. DIESSEL:9 Q. Other than documents from the New Jersey

10 facility, did QSGI produce any other documents to11 the SEC?12 MR. BAUTA: I'm going to instruct you not to13 answer on the same basis as previously.14 MR. DIESSEL: I think this is probably a15 good time for a break if you guys are ready for16 one.17 MR. BAUTA: I'm not.18 THE WITNESS: Let's keep on going.19 MR. BAUTA: Do you need a break?20 MR. DIESSEL: I could use a bio break. Why21 don't we hop of the record.22 THE VIDEOGRAPHER: Off the video record at23 2:43.24 (Recess taken)25 THE VIDEOGRAPHER: Marc Sherman, tape number

Page 165

1 five. On the record, 2:57.2 CONTINUED DIRECT EXAMINATION3 BY MR. DIESSEL:4 Q. Before the break we were talking about5 QSGI's production hard copy documents from its New6 Jersey facility to the SEC. Do you recall that?7 A. Yes.8 Q. Did QSGI ever consider keeping a copy of9 those documents before it produced them to the SEC?

10 A. No.11 Q. Do you have a list of what was sent to the12 SEC so that if and when you get it back you can13 determine if everything was sent back?14 A. I'm not sure if there was a listing by15 categories. I'm not sure. My attorneys did look at16 some of the documents and they did create some17 lists. It was getting so cumbersome I think they18 just decided they were going to send everything to19 them.20 Q. When you say "my attorneys," who21 specifically are you referring to?22 A. My SEC counsel.23 Q. That would be McDonald Hopkins?24 A. Yes.25 Q. This morning we talked a little bit about




43 (Pages 166 to 169)

Page 166

1 QSGI's backup archive. Do you recall that?2 A. Yes.3 Q. That backup archive, was that maintained on4 the server that QSGI provided to Victory Park?5 MR. BAUTA: Objection. Form.6 A. There were backup tapes created through the7 servers, yes.8 Q. Were those backup tapes provided to Victory9 Park?

10 A. We were able to recover the backup tapes.11 Victory Park had the backup tapes, and we got them12 back from them.13 Q. Where are those backup tapes today?14 A. They are with McDonald Hopkins.15 Q. When you refer to backup tapes, are you16 referring to actual tape media, or are you referring17 to something else?18 A. I'm not quite sure what the media was that19 it was stored on, whether it was actually a physical20 tape or the package that was used.21 Q. I'm going to hand you what I have marked as22 Exhibit 7.23 (Document marked as Exhibit 724 for identification)25 MR. DIESSEL: I'm sorry, I keep giving you

Page 167

1 my copies. Let me get one of those back.2 Q. This document is entitled "Plaintiff's3 Response to Defendants' Motion to Compel Responses4 to Defendants Discovery Requests." Do you see that?5 A. Um-hm.6 Q. It's dated March 2, 2012. Do you see that?7 A. Um-hm.8 Q. I would like you to turn to the second page9 of paragraph 4. The sentence states, "Since

10 December 2011, Plaintiff's counsel has learned that11 QSGI's documents were in the possession, custody,12 and control of QSGI's counsel, McDonald Hopkins,13 LLC."14 Do you see that?15 A. Um-hm.16 Q. Is that true?17 MR. BAUTA: Objection.18 A. Um-hm.19 MR. BAUTA: I'm going to instruct you not to20 answer any of these questions, so wait for me.21 THE WITNESS: Thanks.22 Q. Does QSGI have any other documents other23 than those in the possession of McDonald Hopkins?24 MR. BAUTA: You can answer that one.25 A. What was the question again?

Page 168

1 Q. Does QSGI have any documents other than2 those in the possession of McDonald Hopkins?3 A. Well, there are some documents that Juan has4 as well.5 Q. What documents does Juan have?6 A. Juan sent me over --7 MR. BAUTA: Let me tell you don't tell him8 anything, any conversations you and I have had.9 We still have attorney-client here remember.

10 Okay?11 THE WITNESS: Yep.12 Q. To be clear, I obviously don't want those13 answers. That's not what I want to know.14 What documents does Juan have?15 A. Just as part of the discovery there are16 things that he asked me to provide to him that I17 have sent.18 Q. What categories of documents have you sent19 to him?20 MR. BAUTA: Well, I'm going to ask you to21 define for him what "categories" means. Without22 that he is going to become very close to23 disclosing something that he shouldn't, and24 rather than instruct him not to answer it at25 all, I'm going to give you a chance to fix it.

Page 169

1 Q. The documents that you sent to Mr. Bauta, do2 you know how many documents that set comprised?3 A. I don't off the top of my head.4 Q. What sources -- where did you find those5 documents?6 A. I had some PowerPoint presentations sitting7 around my office, I had some documents that were in8 an old credenza that I had sitting from some9 conference calls.

10 Q. Was it greater than a hundred documents?11 A. No.12 Q. So other than these documents -- would it be13 accurate to say that you individually selected these14 and provided them to Mr. Bauta?15 A. I had to look through some things that I had16 hanging around my office, and I found them and I17 sent them off to him.18 Q. So other than these documents that you19 selected and sent to Mr. Bauta, is it true that QSGI20 does not have any documents other than those in the21 possession of McDonald Hopkins?22 MR. BAUTA: Objection to the form.23 A. That would be correct.24 Q. So the next sentence of the response states,25 "McDonald Hopkins, LLC, who is most familiar with




44 (Pages 170 to 173)

Page 170

1 the universe of QSGI documents, informed Plaintiff's2 counsel that the Firm possessed approximately3 400 gigabytes of documents in its database and4 approximately 400 bankers boxes of additional5 documents in a warehouse located in New Jersey."6 Do you see that?7 A. Um-hm.8 Q. Now, the 400 boxes, those are the boxes that9 were produced to the SEC, correct?

10 A. I assume so, yes.11 Q. Do you have an understanding as to what the12 400 gigabytes of documents are?13 A. I have no idea.14 Q. Would it be accurate that these15 400 gigabytes of documents are the only QSGI16 documents that exist presently?17 MR. BAUTA: Objection to form. No18 speculating, please.19 A. Please repeat the question.20 Q. Yeah. Is it true that -- is it the case21 that these 400 gigabytes of documents in the22 database are the only QSGI documents that presently23 exist?24 A. I don't know.25 Q. Do you know of any other documents that

Page 171

1 exist?2 A. I don't know.3 Q. You don't know whether any other documents4 exist other than what's in this database?5 A. I only know that those are the documents6 that I know exist. I don't know if there is any7 other ones that exist.8 Q. When was that database created?9 A. I don't know.

10 Q. Who created it?11 A. McDonald Hopkins apparently, right?12 Q. For what purpose?13 A. I don't know.14 Q. What years of documents does it include?15 A. I don't know.16 Q. Does it include metadata?17 A. Excuse me?18 Q. Does it include metadata?19 A. What is metadata?20 Q. Information about when the document was21 created, who the author was?22 A. I don't know.23 Q. Does it include e-mails?24 A. I don't know.25 Q. Does it include laptop images?

Page 172

1 A. I don't know.2 Q. Does it include server documents?3 A. I don't know.4 Q. Does it include hard copy documents?5 A. I don't know.6 Q. Is there any set of documents that QSGI7 presently has that you can point me to other than8 the database of documents in the possession of9 McDonald Hopkins?

10 A. No.11 Q. So any documents relating to this lawsuit12 would have to be produced, if at all, from the13 database that McDonald Hopkins possesses, correct?14 MR. BAUTA: Are you excluding the SEC15 documents?16 MR. DIESSEL: QSGI, as we know, doesn't have17 the SEC documents. So, yes, I'm excludeing the18 SEC.19 MR. BAUTA: If your question is outside of20 those two sources are there any other documents,21 which is where I think you are going with it,22 but it's a little confusing the way that you are23 saying it.24 MS. BESVINICK: And the documents that25 Mr. Sherman identified in his --

Page 173

1 MR. BAUTA: Right, and the documents that2 have already been produced.3 Q. So can you point me to -- let's set aside4 the SEC documents which QSGI doesn't have and the5 less than hundred documents that you selected. Can6 you point me to any source of documents for this7 lawsuit other than 400 gigabytes that McDonald8 Hopkins possesses?9 MR. BAUTA: I'm going to object to the form

10 of the question, but you can answer if you can.11 A. Other than the information that I sent to12 Juan, that's it.13 Q. You testified this morning that McDonald14 Hopkins created a set of documents from a backup15 archive. Do you recall that?16 A. No, I don't.17 Q. Who, if anyone at QSGI -- strike that.18 Is there anyone at QSGI that knows what19 documents are included in the 400 gigabytes in the20 possession of McDonald Hopkins?21 A. No.22 Q. Where are -- so QSGI -- strike that.23 Is it your understanding that the documents24 in the possession of McDonald Hopkins include only25 e-mails?




45 (Pages 174 to 177)

Page 1741 A. I don't know.2 MR. BAUTA: Objection to form.3 THE WITNESS: Sorry.4 Q. Is it your understanding that the5 400 gigabytes of documents were created from a6 backup archive?7 A. I don't know what the 400 gigabytes of total8 information that McDonald Hopkins has is from.9 Q. From what sources did QSGI produce documents

10 in this lawsuit?11 MR. BAUTA: Object. I'm going to object12 that it calls for legal conclusions, legal13 opinions, and possibly attorney-client issues.14 I'm going to instruct you not to answer.15 THE WITNESS: Okay.16 MR. DIESSEL: What the source of documents17 is calls for a legal conclusion?18 MR. BAUTA: Yeah, that you produced in this19 lawsuit, sure. You are going to tell me that --20 MR. DIESSEL: What's the legal conclusion?21 MR. BAUTA: Deciding whether they are22 responsive to whatever the request for23 production is.24 MR. DIESSEL: What a source is is not a25 legal conclusion, Juan. What source --

Page 175

1 MR. BAUTA: Maybe I didn't understand what2 your source meant.3 Q. What sources has QSGI produced documents4 from?5 A. E-mails.6 Q. Where were these e-mails stored?7 THE WITNESS: I need to talk to you for a8 second.9 Q. You have to answer my question.

10 A. What's the question?11 Q. Where were these e-mails stored?12 A. Where were they stored? I'm not quite sure.13 Q. It's your testimony that you don't know14 where the e-mails that were produced in this15 litigation were stored?16 A. No, that's not the question. Ask me the17 question again, I'm sorry.18 Q. So it's correct that QSGI has produced some19 e-mails in this lawsuit, correct?20 A. Correct.21 Q. Where did QSGI -- what is the source from22 which these e-mails were produced?23 A. From -- the source from where they were24 produced? They are some of my e-mails.25 Q. Were they produced from your laptop?

Page 176

1 A. No.2 Q. Where were they produced from?3 A. From my desktop.4 Q. Your desktop at your office?5 A. From my office.6 Q. What efforts has QSGI undertaken to collect7 documents for this lawsuit?8 A. What was the question?9 Q. What efforts has QSGI taken to collect

10 documents for this lawsuit?11 A. We did our best to be able to collect the12 documents that were available to us.13 Q. Who did QSGI collect documents from?14 A. From myself, from, you know, backup tapes.15 Q. Which backup tapes?16 A. Tapes that are in the possession of McDonald17 Hopkins.18 Q. So McDonald Hopkins possesses QSGI's backup19 tapes?20 A. Yes.21 Q. When you are referring to the backup tapes,22 are you referring to the 400 gigabytes of documents23 in its database?24 A. Yes.25 Q. So the term "backup tapes" as we have been

Page 1771 using it in this deposition today is synonymous with2 the 400 gigabytes of documents in the McDonald3 Hopkins database, correct?4 A. I'm not sure of the answer to that. I think5 that's part and parcel. They have data and there is6 also backup tapes.7 Q. So the 400 gigabytes of documents is the8 data or it's the backup tapes?9 A. I don't know what is which, which is what.

10 How much of what is what.11 Q. Other than e-mails that were produced from12 your desktop, has QSGI collected any other documents13 to produce in this lawsuit?14 A. Yes.15 Q. What documents?16 A. I received a statement of one of our -- from17 one of our suppliers of services that laid out the18 maintenance records and the machines that were being19 monitored from 2004 to 2009.20 Q. What are you referring to?21 A. It was maintenance records that show our22 mainframes that are -- that were under maintenance23 from 2004 to 2009.24 Q. What was the source from which you were able25 to obtain this information?




46 (Pages 178 to 181)

Page 178

1 A. It was a company that actually did our2 monitoring for us.3 Q. What company was that?4 A. I can't think of the name of it at the5 moment.6 Q. So other than obtaining maintenance -- these7 maintenance records from a third party and8 identifying some e-mails from your desktop, has QSGI9 undertaken any efforts to collect documents to

10 produce in this lawsuit?11 A. No.12 Q. So you testified a moment ago that McDonald13 Hopkins has data and it has backup tapes, correct?14 MR. BAUTA: Objection. Form.15 A. Yes.16 Q. I would like to go over how the backup --17 the backup tapes, is that the same as the backup18 archive that we have been talking about?19 A. Yes.20 Q. I would like to go over again how the backup21 archive was created. Okay? So the backup archive22 is something that QSGI created, correct?23 A. Correct.24 Q. How did QSGI -- so if McDonald Hopkins has25 documents at all, it has a subset of the backup

Page 179

1 archive that QSGI created, correct?2 MR. BAUTA: Objection. Form.3 A. Correct.4 Q. So how did QSGI create the backup archive?5 A. It was automatically set up to be backed up6 on a daily basis.7 Q. Are you, again, referring to the server that8 housed QSGI e-mails?9 A. Yes.

10 Q. From the period of time of which QSGI was in11 business?12 A. Yes.13 Q. As far as you know, the only information14 that was backed up into the archive was e-mail,15 correct?16 A. To the best of my knowledge.17 Q. So the information that McDonald Hopkins18 would have relating to this lawsuit, if anything,19 would be a subset of the e-mails that QSGI backed20 up, correct?21 A. Correct.22 Q. What's the size of the backup archive?23 A. Don't know.24 Q. How many e-mails does the backup archive25 contain?

Page 180

1 A. I don't know.2 Q. Did the e-mail archive back up every single3 employee's e-mails?4 A. I would assume so.5 Q. Are there any employee's e-mails that were6 not backed up?7 A. I don't know.8 Q. Did QSGI communicate using Blackberries?9 A. Yes.

10 Q. Were those e-mails included in the backup11 archive?12 A. I would imagine so.13 Q. Were pin messages on the Blackberries14 included in the backup archive?15 A. I don't know how to use the pin.16 Q. Do you know whether pin messages were17 included in the backup archive?18 A. I don't know.19 Q. Do you know whether e-mails from personal20 accounts were included in the backup archive?21 A. I don't know. Everybody had their own22 corporate account.23 Q. Just so we are clear, I want to try and24 summarize, if I can, the state of QSGI's documents25 to see if this is all netted out. All right?

Page 1811 A. Sure.2 Q. As to hard copy documents, QSGI had3 documents that it stored in Minnesota, correct?4 MR. BAUTA: Objection to form.5 A. Yes.6 Q. Those were destroyed?7 MR. BAUTA: Objection to form.8 A. Yes.9 Q. It had documents in New Jersey, correct?

10 MR. BAUTA: Objection to form.11 A. Yes.12 Q. Those were produced to the SEC?13 MR. BAUTA: Objection to form.14 A. Yes.15 Q. Without QSGI making a copy?16 MR. BAUTA: Objection to form.17 A. Correct.18 Q. The only electronic information that remains19 from when QSGI was in business are e-mails that QSGI20 included in its backup archive?21 MR. BAUTA: Objection to form.22 A. Correct.23 Q. And QSGI doesn't possess the backup archive24 anymore, correct?25 MR. BAUTA: Objection to form.




47 (Pages 182 to 185)

Page 182

1 A. It's with its attorney.2 Q. It's with McDonald Hopkins?3 A. Correct.4 Q. So the only information that QSGI has from5 the point in time when it was in business is a6 backup archive containing e-mails, correct?7 MR. BAUTA: Objection to form.8 A. Well, also the documents that the SEC has.9 Nobody said that they were not going to give them

10 back to us, we just don't have them back yet.11 Q. The only documents that QSGI has in its12 control are e-mails that were included in the backup13 archive, correct?14 MR. BAUTA: Objection. Form.15 A. Correct.16 Q. And you are not aware of whether all of the17 e-mails were even backed up in that archive,18 correct?19 MR. BAUTA: Objection to form.20 A. I can't be 100 percent correct -- I cannot21 be 100 percent sure.22 Q. Are there any documents that describe a23 protocol or procedure that would lay out QSGI's24 undertaking to back up its e-mails?25 MR. BAUTA: Objection to form.

Page 183

1 Q. Let me strike that.2 Are there any documents that describe QSGI's3 backup procedure for its e-mails?4 A. You have to check the backups. I hate to5 say it.6 Q. Are you aware as you sit here today of any7 documents or e-mails that describe QSGI's backup8 procedures for its e-mails?9 MR. BAUTA: Objection to form.

10 A. I am not aware.11 Q. Who had access to QSGI's backup archive12 during the period of time in which it was backed up?13 A. Dave Harris.14 Q. Anyone else?15 A. Not that I know of.16 Q. Who had access to QSGI's backup archive17 during QSGI's bankruptcy?18 A. I guess it would have been Craig Heilman who19 was in the building.20 Q. Anyone else?21 A. That's all that I can think of.22 Q. Who was Craig Heilman?23 A. He was the controller.24 Q. What building are you referring to?25 A. In New Jersey.

Page 184

1 Q. The backup tapes are in the New Jersey2 facility, right?3 A. Yes.4 MR. BAUTA: Objection to form.5 Q. Have you checked the backup archive to see6 if all of your e-mails are contained in it?7 MR. BAUTA: Objection to form.8 A. No, I haven't.9 Q. Have you done any investigation to see what

10 e-mails are contained in the backup archive?11 A. Well, I know there is a lot.12 Q. What's your basis for -- strike that.13 QSGI was sued by John Riconda, correct?14 A. Yes.15 Q. And as part of that legal dispute, John16 Riconda subpoenaed documents from QSGI, correct?17 A. I assume so.18 Q. Did QSGI produce documents to John Riconda?19 A. I don't know.20 Q. Did QSGI collect documents to produce to21 John Riconda?22 A. I don't know.23 Q. QSGI was also sued by Victory Park, correct?24 A. Yes.25 Q. And that lawsuit related to QSGI overstating

Page 185

1 the value of its inventory, correct?2 A. I assume so if you are saying.3 Q. Did QSGI collect documents as part of that4 litigation?5 A. Not that I know of.6 Q. After QSGI emerged from bankruptcy, it7 acquired a company called KruseCom, correct?8 A. Correct.9 Q. And KruseCom is a subsidiary that's wholly

10 controlled by QSGI, correct?11 A. Correct.12 Q. What does KruseCom do?13 A. Remarkets computers.14 Q. It included -- strike that.15 QSGI specifically remarkets used mainframes,16 correct?17 A. No.18 Q. Remarketing used mainframes is one of the19 business activities that KruseCom does, correct?20 A. Almost nil.21 Q. There are, in fact, some used mainframe22 transaction that KruseCom has undertaken, correct?23 MR. BAUTA: I'm going to object and instruct24 you not to answer.25 Beyond the scope of the notice.




48 (Pages 186 to 189)

Page 1861 MR. DIESSEL: Well, my position is it's2 within the scope.3 MR. BAUTA: How are you going to tie it in?4 MR. DIESSEL: I'm sorry?5 MR. BAUTA: How are you tying it in?6 MR. DIESSEL: I didn't understand.7 MR. BAUTA: How are you going to tie it in?8 MR. DIESSEL: I'm not going to keep engaging9 in an argument with you. I have already noted

10 your sequence of objections, and by now there11 have been probably 15, and you have a pretty12 long protective order motion to write in the13 next couple of days. So let's try to get14 through the deposition.15 BY MR. DIESSEL:16 Q. What efforts has QSGI taken to collect17 documents from KruseCom to produce in this18 litigation?19 A. I don't understand your question.20 Q. Has QSGI collected any documents from21 KruseCom to produce in this litigation?22 A. I don't think so.23 Q. Has QSGI issued any instruction that24 KruseCom employees should preserve their documents25 for this lawsuit?

Page 1871 A. We have a document retention program at2 QSGI.3 Q. Did QSGI --4 MR. DIESSEL: I'm going to object as5 nonresponsive.6 Q. Did QSGI instruct KruseCom employees to7 preserve documents for this lawsuit?8 MR. BAUTA: Objection. Form.9 A. QSGI, the emerged QSGI preserves all of its

10 documents.11 Q. My question is whether QSGI instructed12 KruseCom employees to preserve their documents for13 this lawsuit?14 A. It's a normal process. There is never an15 instruction made to do something out of character.16 It's the normal process.17 Q. So in this case there wasn't an instruction18 to preserve documents for use, correct?19 MR. BAUTA: Objection. Form.20 Q. Let me strike that and reask it.21 So there wasn't -- QSGI did not instruct any22 KruseCom employees to preserve documents for use in23 this litigation?24 MR. BAUTA: Objection. Form.25 A. QSGI did not instruct QSGI -- KruseCom is

Page 188

1 QSGI, so all the documents are retained going2 forward. So we have a document retention program,3 so nobody would instruct anybody other than the4 normal course of business.5 MR. DIESSEL: I'm going to object and move6 to strike as nonresponsive.7 Q. Has QSGI instructed any of its employees to8 preserve documents for this lawsuit?9 MR. BAUTA: How many times are you going to

10 ask him the same question? He has answered it.11 MR. DIESSEL: I will keep asking until I get12 an answer to the question.13 MR. BAUTA: He has given you an answer to14 the question.15 MR. DIESSEL: He has given me nonresponsive16 answers.17 MR. BAUTA: I see. Objection to form.18 Asked and answered.19 A. I don't understand the question.20 Q. Has QSGI instructed any of its employees to21 preserve documents for this lawsuit?22 MR. BAUTA: Objection to form. Asked and23 answered.24 A. No.25 Q. Did QSGI issue any instruction whatsoever in

Page 1891 2007 to its employees -- strike that.2 In 2007 did QSGI ever instruct its employees3 to preserve documents for this lawsuit?4 A. Not that I know of.5 Q. Has QSGI undertaken any effort to collect6 documents from McDonald Hopkins to produce in this7 lawsuit?8 A. What was that again? I'm sorry.9 Q. Has QSGI undertaken any effort to obtain

10 documents from McDonald Hopkins to produce in this11 lawsuit?12 MR. BAUTA: Objection to form.13 A. We have asked them to produce the documents14 that were requested.15 Q. Other than asking McDonald Hopkins to16 produce the requested documents, has QSGI done17 anything else to obtain the documents from McDonald18 Hopkins?19 MR. BAUTA: You are asking QSGI outside of20 its lawyers? Just asking for clarification.21 MR. DIESSEL: Yeah, I'm asking whether22 QSGI --23 MR. BAUTA: Independent of his lawyers.24 MR. DIESSEL: Correct.25 Q. What has QSGI done to -- strike that.




49 (Pages 190 to 193)

Page 1901 What efforts has QSGI undertaken to obtain2 documents from McDonald Hopkins to produce in this3 lawsuit?4 MR. BAUTA: Independent of what I have done,5 independent of what your lawyers have done.6 A. You mean me asking them to provide the7 documents?8 Q. You or anyone else at QSGI.9 A. I have asked them to be very forthcoming and

10 provide to my attorneys everything they needed under11 your request.12 Q. What's your understanding as to what13 documents QSGI -- McDonald Hopkins will provide to14 QSGI to produce in this lawsuit?15 MR. BAUTA: I'm going to instruct you not to16 answer. It's beyond the scope of your notice17 and deals with attorney-client.18 Q. Are you familiar with the Shraiberg law19 firm?20 A. Yes.21 Q. Were they your counsel in the bankruptcy?22 A. Yes.23 Q. What efforts has QSGI undertaken to obtain24 documents from the Shraiberg law firm to produce in25 this lawsuit?

Page 191

1 MR. BAUTA: Same instruction. If you have2 taken any efforts outside of what your lawyers3 are doing for you, you can answer it. If not,4 no.5 MR. DIESSEL: He can answer if he hasn't6 taken any other efforts, he can say I have taken7 no other efforts. That's the only answer I'm8 looking for.9 Q. I will ask the question again. What efforts

10 has QSGI undertaken to collect documents from the11 Shraiberg law firm to produce in this case?12 A. None. They don't have any documents.13 Q. What efforts has QSGI undertaken to collect14 documents from the Kauffman law firm to produce in15 this case?16 A. They don't have any documents pertaining to17 this case.18 Q. What efforts has QSGI under -- by the way,19 who is the Kauffman law firm?20 A. He was the lawyer who ended up taking us21 through and out of the bankruptcy.22 Q. What's the Fildew Henks law firm?23 A. That's our SEC counsel.24 Q. What efforts has QSGI undertaken to obtain25 documents from Fildew Henks?

Page 192

1 A. He didn't have any documents to pertain to2 this lawsuit.3 Q. Did Fildew Henks retain a copy of the4 documents that QSGI provided to the SEC?5 A. No, they weren't a party to it.6 Q. Who is Morison Cogen?7 A. They are our auditors.8 Q. What efforts has QSGI taken to obtain9 documents from Morison Cogen to produce in this

10 lawsuit?11 A. I don't know if we had a request. I don't12 think they had any documents that would pertain to13 it as well.14 Q. Have you checked?15 A. They weren't our auditor in 2007.16 Q. Who is Rubin Brown?17 A. They were our previous auditor.18 Q. What efforts has QSGI undertaken to obtain19 documents from Rubin Brown to produced in this20 lawsuit?21 A. I'm not quite sure if we had requested any22 information from them or not. I just don't recall.23 Q. So the sum of QSGI's collection efforts as24 you recall it is you identifying a small set of25 e-mails, less than a hundred, correct?

Page 193

1 MR. BAUTA: Object to the form.2 A. Other than what resides on the 400 gigabytes3 of information.4 MR. DIESSEL: Why don't we take a break.5 I'm going to caucus with my colleague here and6 see if we have something else we want to go7 over. If you guys want to take a quick break,8 and we will meet back here in a few minutes.9 THE VIDEOGRAPHER: We are off the record at

10 3:33.11 (Recess taken)12 THE VIDEOGRAPHER: Back on the record at13 3:39.14 CONTINUED DIRECT EXAMINATION15 BY MR. DIESSEL:16 Q. You testified earlier that QSGI's production17 includes -- of documents to date to IBM includes18 less than a hundred documents that you have19 identified. Do you recall that?20 MR. BAUTA: Objection. Form.21 A. I don't know exactly how much it was. You22 threw out numbers, and I said it could be less than23 a hundred, it could be more than a hundred.24 Q. I will represent to you that QSGI has25 produced approximately 800 documents so far in this




50 (Pages 194 to 197)

Page 1941 lawsuit.2 A. Oh.3 Q. What sources other than documents that you4 have identified from your credenza and your computer5 did QSGI produce documents from?6 A. Some of those documents are privileged.7 Q. Can you explain? What do you mean?8 MR. BAUTA: Some of those documents came9 from QSGI's counsel, whether it's former counsel

10 or current counsel, so they are attorney-client.11 You are asking about sources, right?12 Q. Is it your testimony that the documents that13 QSGI produced in this lawsuit to date were supplied14 by counsel for QSGI?15 MR. BAUTA: No, that's not what he is16 saying. What he is saying -- you asked him for17 sources, where they got them from.18 MR. DIESSEL: Juan, I need to get an answer19 from the witness unless you are testifying here.20 MR. BAUTA: This is the problem: The21 problem is you are asking him where documents22 that were produced came from, and the documents23 that were produced came from me. You didn't get24 them from QSGI. So he doesn't know what25 documents I have produced or I haven't produced.

Page 195

1 So we can approach it that way or whichever way2 you want. I'm just telling you -- either that3 or I'm going to instruct him not to answer.4 MR. DIESSEL: Unless you are designating5 yourself, I need to get an answer from him, so I6 need to ask the question.7 BY MR. DIESSEL:8 Q. Do you have an understanding as to the9 sources from which QSGI produced the approximately

10 800 documents that it's produced so far to IBM?11 A. Some I do, yes.12 Q. What are they?13 A. Some are old SEC filings and documents that14 I was able to send Juan that were privileged. Other15 things that we got, I'm not 100 percent sure of the16 documents that you have in your possession right17 now, so unless you want to go through them piece by18 piece --19 Q. What other documents did you gather up?20 A. I don't recall.21 Q. Do you recall whether QSGI produced these22 documents to the SEC or to another party?23 A. I don't recall.24 Q. Do you have any idea where these25 800 documents came from?

Page 1961 A. I don't know which 800 documents you are2 referring to, so I don't know which ones you are3 talking about.4 Q. I'm referring to the only documents that5 QSGI has produced in this lawsuit.6 A. Once again, I don't know what documents you7 have and I don't know -- if you want to go through8 them document by document, we can start doing that9 now.

10 Q. Well, as you sit here now, do you have any11 understanding as to how QSGI collected and produced12 those documents?13 A. They were documents that were through my14 attorney, they are documents that I had, they are15 documents that came from some of the backup.16 Q. And to be clear, those were not documents17 that QSGI looked specifically and collected for this18 litigation, correct?19 A. Correct.20 (Document marked as Exhibit 821 for identification)22 Q. I'm going to hand you what I have marked as23 Exhibit 8. Now, this document is called "Schedule24 F, Creditors Holding Unsecured Nonpriority Claims."25 Do you see that?

Page 197

1 A. Um-hm.2 Q. This is a list of QSGI's creditors in3 bankruptcy, right?4 A. Correct.5 Q. I would like you to turn to page 48.6 A. Okay.7 Q. Third from the top one of QSGI's creditors8 is named Polar Shredding. Do you see that?9 A. Um-hm.

10 Q. They are based in Cinnaminson, New Jersey.11 Do you see that?12 A. Um-hm.13 Q. Is this a company that was retained at14 QSGI's New Jersey facility?15 A. I have no idea.16 Q. Do you know who Polar Shredding is?17 A. I do not.18 Q. Who would know at QSGI who Polar Shredding19 is?20 A. I don't know.21 Q. Does anyone at QSGI?22 A. They are on our creditor's list so somebody23 would know, but I don't know.24 Q. Who would you ask if you needed to know who25 Polar Shredding was?




51 (Pages 198 to 201)

Page 198

1 A. You could ask Craig Heilman.2 Q. Anyone else?3 A. I would say he is probably the right person4 to ask.5 Q. Did you do any investigation to determine6 which shredding and destruction companies QSGI7 retained during bankruptcy to prepare for this8 deposition?9 A. I did not.

10 Q. I would like you to turn to page 64.11 Actually, let's go back to 47 for one second.12 A. Sure.13 Q. I would like to get your understanding as to14 what these entries mean. The Polar Shredding entry15 states an amount of claim for $620.60. Do you see16 that?17 A. What page was it, 47?18 Q. Yeah.19 MR. BAUTA: Forty-eight.20 A. 620.60. I see it.21 Q. Does that reflect that Polar Shredding is22 seeking payment for services that it provided QSGI?23 MR. BAUTA: Objection to form.24 A. I have no idea.25 Q. Let's turn to page 64.

Page 199

1 A. I will get there. Okay.2 Q. I would like you to look at the bottom of3 the page for an entry for United Document4 Destruction. Do you see that?5 A. Um-hm.6 Q. They are a company with an address from7 Reading, Pennsylvania. Do you see that?8 A. Um-hm.9 Q. They have an amount of claim of QSGI of

10 $1640. Do you see that?11 A. Um-hm.12 Q. Who is United Document Destruction?13 A. I have no idea.14 Q. Did QSGI retain United Document Destruction15 to destroy its document?16 A. I have no idea.17 Q. Who at QSGI would know who retained United18 Document Destruction?19 A. You could ask Craig Heilman once again.20 Q. Did you undertake -- did you speak with21 Craig Heilman about whether United Document22 Destruction was retained to destroy QSGI's23 documents?24 A. I did not.25 Q. Craig Heilman is no longer at QSGI, correct?

Page 2001 A. Correct.2 Q. Is there anyone at QSGI who would know about3 the retention of these document destruction and4 shredding firm?5 A. Carl Sarasino would probably know.6 Q. Did you talk to Carl Sarasino about QSGI's7 retention of shredding and destruction firms?8 A. I did not.9 Q. We have talked a little bit today about some

10 of QSGI's document destruction. Do you recall that?11 MR. BAUTA: Objection. Form.12 A. Yes.13 Q. Other than the specific instances of14 document destruction that we have talked about, do15 you recall any other instance from 2004 to the16 present time in which QSGI destroyed documents?17 MR. BAUTA: Objection to form.18 A. I said earlier that documents would be19 shredded that were redundant and not needed outside20 of our document retention, so I'm not quite sure of21 the question.22 Q. So outside of that example, are you aware of23 any other instance in which QSGI documents were24 shredded or destroyed from 2004 to the present time?25 MR. BAUTA: Objection to form.

Page 2011 A. No.2 Q. Are you aware of any other instances from3 2004 to the present time of QSGI losing or giving up4 control of documents other than those that we have5 discussed today?6 MR. BAUTA: Objection to form.7 A. No.8 Q. Do you recall any other instance of QSGI9 giving documents to third parties other than the

10 instances that we have discussed today?11 MR. BAUTA: Objection to form.12 A. No.13 MR. DIESSEL: So I'm going to note for the14 record that there were a number of topics about15 which -- I appreciate your help today,16 Mr. Sherman.17 I have to say for the record there are a18 number of topics about which Mr. Sherman was not19 prepared to provide testimony. He apparently20 prepared for only 30 minutes, and as such he was21 unable to give any answer at all to a large22 number of questions which are reflected in the23 transcript.24 I will also note that the deposition25 proceeding has been in large part obstructed by




52 (Pages 202 to 205)

Page 202

1 counsel's unfounded and improper instructions2 not to answer. As such we reserve our right to3 continue this deposition, reserve our right that4 this time not be counted into our hourly total,5 and I have no further questions.6 MR. BAUTA: Well, obviously I take issue7 with your self-serving statements, and the Court8 will review the transcript and come to whatever9 conclusions that the Court decides. In the

10 future maybe you should broaden your topics a11 little.12 Are you finished?13 MR. DIESSEL: Yes.14 CROSS EXAMINATION15 BY MR. BAUTA:16 Q. Mr. Sherman, I just really have one question17 to just kind of get a better understanding of what18 you know with regard to the documents that comprise19 what we have called the 400 gigabytes. Okay.20 Let me start off by asking have you21 personally reviewed every document that's in the22 400 gigabyte database?23 A. No.24 Q. Do you know what every document in the25 400 gigabyte database has?

Page 2031 A. No.2 Q. Do you know whether they are exclusively3 comprised of e-mails?4 A. I do not know.5 Q. Do you believe that there are documents6 there other than just e-mails?7 A. There could be.8 Q. Okay.9 MR. BAUTA: Thank you, sir. I have no

10 further questions.11 THE VIDEOGRAPHER: Anything else, Counsel?12 MR. DIESSEL: Nope.13 THE VIDEOGRAPHER: We will go off the video14 record. This is Marc Sherman's deposition, tape15 five. Off the record at 3:52.16 MR. BAUTA: We will read.17 THE COURT REPORTER: Did you need a copy of18 the transcript?19 MR. BAUTA: Yes.20 THE VIDEOGRAPHER: Back on the record, 3:53.21 MR. DIESSEL: Juan, my question is whether22 QSGI has an intention to designate any or all of23 this deposition as confidential or if it would24 object to IBM filing all or part of this25 deposition transcript with the Court without

Page 2041 filing it under seal?2 MR. BAUTA: I don't know. I have to take a3 look at it.4 THE VIDEOGRAPHER: Now we are going off the5 record for Marc Sherman's deposition, tape five6 at 3:53.7 (Thereupon, the deposition was concluded8 at 3:53 p.m.)9

10111213141516171819202122232425

Page 2051 ERRATA SHEET2 RE: QSGI, Inc.

v3 IBM Global Financing, et al.

DEPO OF: Marc Sherman4 TAKEN: March 12, 20125 DO NOT WRITE ON THE TRANSCRIPT. ENTER ANY

CHANGES HERE.6 Page Line Correction7 _____ _____ ______________________________8 _____ _____ ______________________________9 _____ _____ ______________________________

10 _____ _____ ______________________________11 _____ _____ ______________________________12 _____ _____ ______________________________13 _____ _____ ______________________________14 _____ _____ ______________________________15 _____ _____ ______________________________16 _____ _____ ______________________________17 _____ _____ ______________________________18 _____ _____ ______________________________19

Please forward the original signed errata sheet to20 this office so that copies may be distributed to all

parties.21

Under penalty of perjury, I declare that I have read22 my deposition and that it is true and correct

subject to any changes in form or substance entered23 here.24

___________ ______________________25 Date Signature




53 (Page 206)

Page 2061 STATE OF FLORIDA )

) SS.2 COUNTY OF MIAMI-DADE )3 I, Tamra K. Piderit, FPR, RMR, CRR, and Notary

for the State of Florida do hereby certify:4

That prior to being examined, the witness named5 in the foregoing deposition was duly sworn to

testify the truth, the whole truth, and nothing but6 the truth;7 That said deposition was taken down by me in

shorthand at the time and place therein named and8 thereafter reduced by me to typewritten form and

that the same is a true, correct, and complete9 transcript of said proceedings.

10 Before completion of the deposition, review ofthe transcript was requested. If requested, any

11 changes made by the deponent (and provided to thereporter) during the period allowed are appended

12 hereto.13 I further certify that I am not interested in

the outcome of the action.14

Witness my hand this 12th day of March 2012.151617 ________________________________

Tamra K. Piderit18 Florida Professional Reporter

Registered Merit Reporter19 Certified Realtime Reporter

Notary Public, State of Florida20 My commission #EE 133698

Expires January 19, 20162122232425
