Beruflich Dokumente
Kultur Dokumente
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U N ITED STA T ES D ISTR IC T C O U R T
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D ISTR IC T O F N EV A D A
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8
SECU RITIES A N D EX CH A N G E Case N o.2-08CV 00437-LRH -R JJ
9 C OM M ISSION '
Plaintiff, D E FEN D A N T SER G EY
10 u u tu v x x v sEv 's
11 vs. M EM O M N D U M IN
O PPO SITIO N T O PL A IN TIFF
12 CM K M D IA M ON D S,IN C.,etaI., SEC U R ITIES A N D EX CH A N G E
13 D efendants. C O M M ISSIO N 'S M O TIO N FO R
SU M M A R Y JU D G M EN T
14
24 1.IN TR O D UC TIO N
25 PlaintiftltheSecuritiesandExchangeCommission ((iSEC''),movedfor
26 stzmmaryjudgmentagainstDefendantallegingthathewasSçboth ainecessaor
1
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25
26 1 AllExhibitsareappendedto theaccompanyingDeclarationofDefkndantSergey Rumyantsev,unless
otherwisenoted.
2
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3
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l thesubjectsecuritiestookplace(seeExhibit2,ttRumyantsev OTR,''
2 105:23-106:12).
3 l6.D efendant,in a supenisory capacity or otherw ise,never signed off
4 on any tradeticketsevidencing transactionsin thesubjectsecurities
5 (seeExhibit2,tçRumyantsev OTR,''92:5).
6 l7.D efendantrelied on A ntony Santos,a principalofN evW estSecurities
7 Corporation responsible for com pliance,to conductinquiries w ith
8 respecttothesalesofthesubjectsecurities(seeExhibit3,
9 StR um yantsev Testim ony,''20:22-21:3,35:9-35:13,37:20-38:11,40:6-
10 40:10,41:10-41:17,57:17-57:22,60:2-60:8,61:23-62:20,63:3-63:7,
11 64:17-65:22,75:11-76:1,93:8-93:9,108:17-109:24,130:22-132:22,
12 153:6-156:3,163:2-163:15,).
13 l8.lkaym ond D illon,SeniorR etailSupelw isor,directly supervised D aryl
14 Anderson (seeExhibit3,dsRumyantsev Testimony,''160:7-160:l1and
15 170:24-171:4).
16 lg.A ntony Santos supervised D arylA nderson w ith respectto com pliance
17 matters(seeExhibit3,RRumyantsev Testimony,''160:12-160:17 and
18 170:24-171:4).
19 zo.A ntony Santos and his fam ily ow ned and controlled approxim ately
20 the sam e percentage ofN evW estSecurities Corporation as D efendant:
21 approximately ninepercent(seeExhibit3,dtlkumyantsev Testimony,''
22 19:8-19:9 and 19:23-20:l).
23 21vG ingerG utierrez,Jam esK inney,and Part--fim e M anagem ent,lnc.
24 sold a totalofapproxim ately 88.4 billion shares ofunregistered
25 CM KM stock (seePlaintiffsExhibit1at19:21-20:1.
5).
26
4
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1 SecuritiesCorporation(seeExhibit4,çtltumyantsev'sResponseto
2 Firstand SecondRequestforProduction ofDocuments''No.8).
3 PlaintiffarguesthatDefendantderived $34,552,28 in alleged i1l-
4 gotten gainsfrom the salesofthesubjectsecurities(PlaintiffsFacts,
5 No.98).
6 3. N one ofD efendant's securities Iicenses are current,asm ore than
7 two yearslapsed sincethe tiling ofDefendant'sUniform Term ination
8 NoticeforSecuritiesIndustry Registration inOctober2007 (seethe
9 accom panying D eclaration ofD efendantSergey R um yantsev and
10 httn:/+rockercheck.inra.org).PlaintiffarguesthatRumyantsev holds
11 Series4 (registered optionsprincipal),7(generalsecurities
12 representative),24 (securitiesprincipal),27(tinancialandoperations
13 principal),53(municipalsecuritiesprincipal),sstequitiestrader)and
14 63 (state securities)licenses(Plaintiff'sFacts,No.9).
15 4.D efendant denied thathe nevertook steps to investigate w hy Jefferies
16 & Company(idlefferief')stoppedtradingthetlow ofCM KM stock
17 from NevW est(seeExhibit5,dslkumyantsev SecondRFA Response,''
18 No.49).PlaintiffassertsthatDefendantnevertookstepsto
19 investigate w hy Jefferies stopped trading the tlow of CM K M stock
20 from NevW est(Plaintift''sFacts,No.84).
21 5. Jefferiesnever acted as a clearing brokerforN evW estSecurities
22 Corporation;Jefferies w as only a counter-party in securitiestrades
23 (seeExhibit3,d'Rumyantsev Testimony,''45:8-57:9and 97:23-99:24).
24 PlaintiffassertsthatJefferies w asone ofthe tw o prim al'y clearing
25 brokersthrough w hich N evW estintroduced CM K M trades.
26
:
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7
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1 248. The Coul4 m ustassum e the tnlth ofdirectevidence setforth by the opposing
2 party.SeeHanon v.DataproductsCorp.976F.2d497,507(9th Cir.1992).
3 B .Plaintiff s M otion Icnores Facts ThatA re M aterialin Establishina That
4 D efendantW asN either a t'
N ecessarv Participant'nora tsubstantialFactor'in the
5 U nrezistered D istribution ofCM K M Stock
6 In asserting its claim ,Plaintiffinvokes a num berof authorities. ln
7 particular,PlaintiffreferencesSEC v.Phan,500F.3d895(9th Cir.2007).ln
8 Phan,the courtfokm d Phan to be both a ''necessary participant''and a ''substantial
9 factorin''a resaleofsecurities,thussatisfying the ''sold oroffered to sell''elem ent
10 ofSection 5 ofthe SectlritiesA ct. Thespecitk facts,on which thatconclusion was
(
11 based,included such actsby Phan aschoosing a transaction date,directing the
12 seller to sellthe shares,providing a buyer,directing a Iawyer to drafta stock
s
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L0
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8 bv Plaintiff
9 N otwithstanding theDefendant'sassertion thathe did notviolate Section 5
10 ofthe Securities A ct,there rem ain genuine issues ofm aterialfactw ith respectto
11 relief soughtby Plaintiffw ere this Courtto rule in Plaintiff s favor.
12 N one ofD efendant's securities Iicenses are current,asm ore than tw o
13 years lapsed since the filing ofD efendant'sU niform Term ination N otice for
14 SecuritieslndustryRegistration in October2007(Facts,B-3).Thisfactismaterial,
15 because re-qualification requirem ents constitute a barrierto entry into the
1 16 securitiesprofession. A consideration ofsuch barrierto entl'
y ispertinentto the
I
17 discussion ofwhetherthere isreasonable likelihood offuture violationsby
18 Defendantand,hence,whetherapennanentinjunction orapenny stock barisan
19 appropriate sanction.
20 D efendantis gainfully em ployed outside ofthe securities profession and has
21 absolutelyno intention ofeverre-entering thesecuritiesprofession (Facts,A-
22 22).Based on thisfact,itisentirely tmlikely thatDefendantwilleverbein a
23 position to com m itfuture violations.
24 D efendantacted in good faith relying on A ntony Santos and R aym ond
25 D illon as they exercised their supervisory dutiesw ith respectto D arylA nderson
26 (Facts,A-l8andA-19).Defendant,in asupervisorycapacity orotherwise,never
1(
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 12 of 111
1 signed offon any new account applications for accounts,from w hich sales ofthe
2 subjectsecuritiestookplace(FactsA-15).Defendant,in asupeNisory capacityor
3 othem ise,never signed off on any trade tickets evidencing transactions in the
4 subjectsectzrities(Facts,A-16).Thesefactsm ake itamatterofdisputeofexactly
5 w hatalleged actions ofD efendantcould be constrtzed as iGknow ing,''lGrepeated,''
6 and tim ultiple.'' The claim thatD efendant's alleged violationsw ere ûdknow ing,''
7 içrepeatedy''and itm ultiple''is atthe heartofPlaintiff sassertion thatitis entitled to
8 injunctivereliefandimposition ofcivilpenaltiesagainstDefendant.
9 The am ountof disgorgem entsoughtby Plaintiffalso rem ains genuinely in
10 dispute. D isgorgem entisan equitable rem edy thatrequires a violatorto give up
11 w rongfully obtained protitscausally related to the proven w rongdoing.See SEC v.
12 FirstCj/&,Fin.Cory ,890F.
. 2d 1215,1230-32 (D.C.Cir.1989)*
,seealsoHateley v.
13 SEC,8F.3d653,655-56(9th Cir.1993).ltreturnstheviolatortowherehewould
14 have been absentthe violative activity. B ased on this standard and the evidence
l5 presentedby Defendant(Facts,A-11,B-1,andB-2),theam ountofdisgorgem ent
16 soughtappears excessive,unreasonable,and arguably punitive.
17 ln its m otion,PlaintiffarguesthatD efendant's alleged ill-gotten gains
18 derived from hisow nership stake in N evW est Securities C orporation. That
19 argum entrem ains in dispute because D efendantdid not benefitor gain
20 financially in any directorm eaningfulmannerfrom thesaleofthesubject
21 securities(Facts,A-11),asheneverreceived any portionoftheproceedsof
22 salesofthesubjectsecuritiesbased on hisshareofownership ofNevW est
23 SecuritiesCorporation (Facts,B-2).DefendantpreviouslyprovidedtoPlaintiff
24 evidence docum enting al1sources ofhis com pensation from N evW estSectzrities
25 C orporation,none ofw hich w as tied to his share ofow nership ofN evW est
12
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3 e-mail:Forl-lall@ aol.com
4 AttorneyforDefendantBrianflvtprtz/c
5 K athleen Tom asso
9580 Lake Serena D rive
6 B oca R aton, FL 33496
7 Email:t'tomasso@ ncfgcomm .com
8 A nthony Tom asso
9 9580 Lake Serena D rive
B oca Raton,FL 33496
i0 Email:ttomasso@ncfgcomm.com
11 A
nthony Santos
12 6965 N orth D urango D rive,Suite 11lf-381
Las V egas,N V 89149
13 Em ail:A m s.
!
nwst@ gmail.com
I 14
! N evW estSecurities C orporation
' l5 c/o A nthony Santos
j6 6965 N orth D urango D rive,Suite 1115-381
Las V egas,N V 89149
17 Em ail:A m snwst@ gmail.
.
com
18
D ouglas E.Griffith,Esq.
19 K esler & Rust
M clntyre Building,2ndFloor
20 68 S M ain Street
.
16
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1
M ichaelR .B akst
2 PM B 702
3 222 Lakeview A venue,#160
W estPalm B each,FL 33401
4 ichael
m bakst@ ruden.com
.
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7 Se g R um ntsev
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5
U N IT ED ST A TES D ISTR IC T C O U R T
6
D ISTR IC T O F N EV A DA
7
8
SECU R ITIE S A N D EX CH A N G E C ase N o.2-08CV 00437-LRH -R JJ
9 co M M lsslo N '
Plaintiftl DECLARATION OF DEFENDANT
10 SER G EY R U M Y A N T SEV IN
11 vs. SU PPO R T O F M EM O R A N D U M
IN O PPO SITIO N TO PLA IN T IFF
12 CM K M D IA M O N D S,IN C .,etaI., SE C U R IT IE S A N D EX C H A N G E
13 D efendants. C O M M ISSIO N 'S M O TIO N FO R
SU M M A R Y JUD G M EN T
14
l5
16 1, SergeyRumyantsev,declarepursuantto28 U.S.
C.j 1746asfollows:
17 l. Iam one ofthe defendants in this action,appearing pro se. lhave
18 personalknow ledge ofthe follow ing facts and could and w ould testify com petently
19 thereto.
20 2. A ttached as Exhibit l is a true and correctcopy ofD efendantSergey
21 R um yantsev's Response to PlaintiffSecurities and Exchange Com m ission'sFirst
22 Setoflnterrogatories to Sergey Rum yantsev served on D ecem ber 24, 2008.
23 3. A ttached as Exhibit2 is a true and correctcopy ofrelevantpages of
24 the transcriptofinvestigative testim ony ofSergey Rum yantsev taken under oath
I
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 19 of 111
1 organization proceeding based on m any ofthe sam e facts and circum stancesasthis
2 action.
3 4. A ttached asExhibit3 is a true and correctcopy ofrelevantpages of
4 the transcriptofinvestigative testim ony of Sergey R um yantsev taken underoath In
5 theMatterofcM KM Diamondstakenon April13,2006aspartofPlaintiffs
6 investigation preceding this action.
7 5. Attached asExhibit4 is a true and correctcopy ofD efendantSergey
8 Rum yantsev's A nsw erto SEC 'SFirstand Second R equestsfor Production of
9 DocumentsPursuantToRule34served on October12,2008(redactedtoprevent
10 disclosure ofpersonalidentifying infonnation such asD efendant's SocialSecurity
11 Number).
12 6. Contem poraneously w ith the service ofD efendantSergey
13 R um yantsev's A nsw erto SEC 'SFirstand Second R equestsforProduction of
14 Documents(Exhibit4),Defendant,pursuanttohisResponseNo.8,provided
15 Plaintiffw ith a detailed record ofN evW estSecuritiescom m issions,a share of
16 w hich he received in addition to his salary during the period from January 1,2002
17 though October12,2008(thedocumentconsistedof252 pagesand,becauseofits
18 size,isnotattached asanexhibithereto).The detailed record evidencedthat
19 D efendantshared in acomm issionspooltotaling $992,334.24 and earned during
20 the period from January 2,2002 to M ay 30,2007, N one ofthe colnm issions
.
2
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l6
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E X H IB IT 1
8
SECIJR ITIE S Ar EX CH A N G E C ase N o.2-08CV 00437-LR H -R JJ
9 CO M M ISSIO N '
Plaintiff, D X FEN D A N T SER G E Y
10 R tiM v A x T sEv 's R ESPO N SE TO
11 vs. PLX IN TIFF SE CU R IT IE S A N D
E X C H A N G E C O M M ISSIO N 'S
12 CM K M D IA M O N D S,IN C .,etal., FIR ST SET O F
13 D efendants. IN TER R O G A T O R IE S T O
SE R G EY R UM Y A N T SE V
14
15 PR OPO U N D IN G PA R TY -
: PLA IN TIFF U N ITED STA I-ES SEC U RITIES A N D
16 EX CH A N GE CO M M ISSION
17 R ESPO N D IN G PA RTY
: D EFEN D A N T SERG EY RU M Y A N TSEV
18 SET N O
. : ONE
19
20
21
22
23
24
25
26
EXHIBIT 1
I
Rum yantsev Declaration,Page 7
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 25 of 111
23 IN TER R O G A TO R Y N O .1:
24 Statea1lfactsthatsuppol'
tYOUR contention that''gtlhesecuritiesatissue
25 w ere in fact,exemptfrom registration and eligibleforsale underthegiven facts
26
EXHIBIT 1
2
Rum yantsev Declaration,Page 8
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 26 of 111
l and circum stances''on page 14 ofD efendantSergey Rum yantsev'sA nsw er,w hich
2 w as tiled on M ay 9,2008.
3
4 R ESPO N SE TO IN T ER R O G A TO R Y N O .1:
5 B ased on D efendant'sinform ation,belief,and understanding ofthe
6 Interrogatory,D efendantresponds as follow s'
.
7 The securities atissue w ere represented by certificatesw ithouta restrictive
8 legend. A restrictive legend is a statem entplaced upon a stock certiticate stating,
9 am ong otherthings,thatthe stock is notregistered w ith the Com m ission pursuant
10 to Seotion 5 ofthe SecuritiesA ctand thatan ow nership interestin the stock
11 represented by thatcertificate cannotbe sold ortransferred absentregistration or
12 the existence ofa valid exem ption from registration.
13 D efendantEdw ards controlled the accounts atN evW estthrough w hich the
14 securities atissue w ere sold. N evW est's searching inquiry established a beliefthat
15 D efendantEdw ardsw as notthe issuerofthe securitiesatissue. N evW est's
16 searching inquiry furtherestablished a beliefthatD efendantEdw ardsw as notan
17 affiliate ofthe issuer ofthe securities atissue.
22 Upon inquil'y,lStG lobalalso stated thatnone ofthe securities atissue cam e into
23 D efendantEdw ards'controlas a resultot-transfers from aftsliatesofthe issuer. 1St
24 G lobalfurtherindicated thatitissued the certificatesrepresenting the securities at
25 issue on the basisofattorney opinion letters.
26
EXHIBIT 1
3
Rum yantsev Declaration,Page 9
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 27 of 111
12 IN TE R R O G A TO R Y N O .2:
13 State allfactsthatsupportY O U R contention that''D EFEN D A N T
14 R UM Y A N TSEV w asN O T a necessary and substantialfactor in the sale or
15 distributionofthesubjectsecurities''on page 14 ofDefendantSergey
16 Rum yantsev's A nsw er,w hich w as filed on M ay 9,2008.
l7
18 R E SPO N SE TO IN T ER R O G A T O R Y N O .2:
19 B ased on D efendant's inform ation,belief,and understanding ofthe
20 lnterrogatoo,,D efendantresponds as follow s:
21 D efendantplayed neithernecessary nor substantialrole in facilitating the
i 22 saleofthesubjectsecurities.
23 Defendantdid nothaveanyrelationship with the issuerofthesubject
24 securities.
25 D efendantdid notintroduce D efendantEdw ardsto N evW est.
26 Defendantneveraccepteddelivery ofthesubjectsecurities.
EXH IBIT 1
4
Rum yantsev Declaration,Page 10
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 28 of 111
1 Defendantneverpurchased,sold,orothenvisepassed titletothesubject
2 securities.
3 Defendantneverownedthesubjectsecurities.
4 Defendantneversolicitedthesaleorpurchaseofthesubjectsecurities.
5 Defendantneversoughtbuyersofthesubjectsecurities.
6 Defendantneverpromoted salesofthesubjectsecurities.
7 Defendantneveraccepted ordersto sellthe subjectsecurities.
8 D efendantneverserved as a brokerofrecord forthe accountsofD efendant
9 Edwards,throughwhichDefendantEdwardssold thesubjectsecurities.
10 Defendantneverdirectedsalesofthesubjectsecurities.
1l Defendantneversetthetermsandconditionsofsaleofthesubjectsecurities.
12 D efendantdid notbenestorgain tinancially in any director m eaningful
13 mannerfrom thesaleofthesubjectsecurities.
14 Defendantneverpublishedquotationsinthesubjectsecuritiesin any
15 m edium .
16 D efendantneverreceived instructions to transferthe proceeds ofsalesofthe
17 subjectsecurities.
l8 D efendantneverinstructed anyone to transferthe proceedsofsalesofthe
19 subjectsecurities.
20
21 IN T ER R O G A T O R Y N O .3:
22 State a1lfactsthatsupportY O U R contention thatD EFEN D A N T
i 23 RUM YANTSEV ''wasnotan offerorwithrespecttothesubjectsecurities''onpage
i
I 24 15 ofDefendantSergey Rumyantsev'sAnswer, w hich w as filed on M ay 9,2008.
' 25
26
EXHIBIT 1
5
Rum yantsev Declaration,Page 11
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 29 of 111
12 IN TER R O G A T O R Y N O .4: -
i 13 State allfactsthatsupportY O U R contention thatD EFEN D A N T
I
14 RUM YANTSEV ''did notsolicitthesaleorptlrchaseofthesubjectsecurities''on
15 page 15 ofD efendantSergey R um yantsev's A nsw er,w hich w as filed on M ay 9,
l6 2008.
l7
21 Defendantneversoughtbuyersofthesubjectsecurities.
22 Defendantneverpromoted salesofthesubjectsecurities.
23 Defendantneverdirectedsalesofthesubjectsecurities.
24 Defendantneverpublished quotationsin thesubjectsecuritiesinany
25 m edium .
26
EXHIBI
T1
6
Rum yantsev Declaration,Page 12
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 30 of 111
l IN T ER R O G A T O R Y N O .5:
2 State allfacts thatsupportY O U R contention thatD EFEN D A N T
3 RU M Y A N TSEV ''did notpersonally benefitorgain,tinancially,in any
4 meaningfulmannerfrom thesaleofthesubjectsecurities''onpage 15of
5 D efendantSergey Rum yantsev's A nsw er,w hich w as tiled on M ay 9,2008.
6
7 R ESPO N SE TO IN T ER R O G A T O R Y N O .5:
8 BasedonDefendant'sinform ation,belietlandtmderstandingofthe
9 Interrogatory,D efendantresponds as follow s:
10 D efendantpreviously provided Plaintiffw ith detailed inform ation aboutthe
l1 sources ofD efendant's incom e during a11relevanttim es. In particular,such
12 inform ation w asincluded in A nsw er ofSergey Rum yantsev to SEC 'SFirstand
13 Second R equests for Production ofD ocum entsPursuantto R ule 34 dated O ctober
14 12,2008 and in D efendantSergey Rum yantsev's Response to PlaintiffSecurities
15 and Exchange Com m ission's FirstSetofR equests for A dm issionsdated D ecem ber
16 1,2008.
. 17 D uring allrelevanttim es,D efendantw asan em ployee ofN evW est.
18 D efendant'sem ploym entand the term s thereofdid notdepend on the sale ofthe
19 subjectsecurities.
20 D uring allrelevanttim es,D efendantdid notreceive any paym ents or item s
21 ofvalue from otherD efendantsin thisaction otherthan the salary and
22 com m issions from N evW estpaid in the ordinary course ofbusiness unrelated to
23 thesaleofthesubjectsecurities.
24 D uring al1relevanttim es,D efendantdrew a salary from N evW estin the
25 am ountof$36,000 perannum . Theam ountofthatsalary did notdepend on the
26 saleofthesubjectsecurities.
EXHIBIT 1
7
Rum yantsev Declaration,Page 13
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 31 of 111
17 IN T ER R O G A T O R Y N O .6:
18 State a1lfactsthatsupportY O U R contention that''D EFEN D A N T
19 R U M Y A N TSEV w as notan undenvriterw ith respectto the relevantissuerand the
l ,, ,
I
I
20 subjectsecurities onpage 15ofDefendantSergeyRumyantsev sAnswer,which
21 w as tiled on M ay 9,2008.
!
i 22
!
!
i
23 R ESPO N SE T O IN TER R O G A TO R Y N O .6:
E
. 24 Based on D efendant, sinform ation,belief,and understanding ofthe
25 Interrogatory,D efendantresponds as follow s:
26
EXHIBI
T1
8
Rum yantsev Declaration,Page 14
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 32 of 111
13 IN TE R R O G A T O R Y N O .7:
14 Stateal1factsthatsupportYOUR contention that''lnlo sharescam etorest
15 w ith D EFEN D A N T R U M Y A N TSEV or any entity orindividualcontrolled by,or
l6 sharing com m on controlw ith,D EFEN D A N T RU M Y A N TSEV ''on page l5 of
17 D efendantSergey Rum yantsev's A nsw er,w hich w as tiled on M ay 9,2008.
l8
23 controlwithDefendantneverownedasingleshareofthesubjectsecurities.
24 D efendantorany entity or individualcontrolled by,orsharing com m on
25 controlwithDefendantneverheld asingleshareofthesubjectsecuritiesinany
26 accountunderD efendant's control.
EXHIBIT 1
9
Rum yantsev Declaration,Page 15
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 33 of 111
1 IN TER R O G A T O R Y N O .8:
2 State a1lfactsthatsupportY O UR contention that''D EFEN D A N T
3 RUM YANTSEV isentitledtorely on Section 4(4)oftheSecuritiesAct,
4 exem pting brokers'transactionsexecuted upon custom ers'orderson any exchange
5 orin theover-the-countermarket(absentsolicitation)suchthathecould notbe
6 held liable for the violation ofthe registration requirem ents ofSecuritiesA ct
20 Defendantdidnotexecuteorderstosellthesubjectsecurities.
21 Defendantdid notreceiveany com m issionsin connection with the saleof
22 the subjectsecurities.
23 Defendantdid notdirectly orindirectly solicitorarrangeforthe solicitation
24 oforderstobuy in anticipationoforin connectionwith thesaleofthesubject
25 securities.
26
EXHIBIT 1
10
Rum yantsev Declaration,Page 16
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 34 of 111
l D efendantneverm ade any paym ents in connection w ith the sale ofthe
2 subjectsecuritiestoany person.
3 A ta1lrelevanttim es,D efendantw as notaw are ofany circum stances in
4 connection withthesaleofthesubjectsecttritiesthatmadeprovisionsofSection
5 4(4)oftheSecuritiesAct,exempting brokers'transactionsexecutedupon
6 custom ers'orders on any exchange or in the over-the-counter m arket,unavailable
7 to him .
8
9 IN T ER R O G A T O R Y N O .9:
10 State al1factsthatsupportY O U R contention that ''D EFEN D A N T
l1 RU M Y A N TSEV caused to be conducted,a searching inquil'y in cooperation w ith
12 theNationalAssociation ofSecuritiesDealers(NASD now FINRAIwithrespect
13 tothesubjectsecurities,which inquil'y yielded legalopinionsfrom three(3)
14 separatelaw t'irm sastothefree-tradingstatusofthesubjectsecuritiesandsuch
15 otherfactsandcircumstancessupportingthecontentionthatthesubjectsecurities
16 wereindeed free-tradingand thatthesubjecttransactionswereconsistentwith state
17 and federalsecurities law s''on pages 15-16 ofD efendantSergey R um yantsev's
18 A nsw er,w hich w as filed on M ay 9,2008.
19
26
EXHIBIT 1
11
Rum yantsev Declaration,Page 17
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 35 of 111
13 IN TE R R O G A T O R Y N O .10:
14 State allfactsthatsupportYOUR contention that''DEFEN DANT
15 RU M Y A N TSEV relied on the nlles and regulations,advice and guidance as
16 prom ulgated by FIN RA including butnotlim ited to its D istrict2 oftices in Los
17 Angeles,California which abdicated itsduty to itsm embersand itsduty to protect
18 investors and preserve m arketintegrity by failing to establish reasonably sufficient
19 policies and procedures so asto apprise ornotify itsm em bership ofthe vel'y
20 standardts)PLAINTIFF now seeksin imposeonDEFENDANT RUM YANTSEV''
21 on page 16 ofD efendantSergey Rum yantsev'sA nsw er,w hich w as filed on M ay 9,
22 2008.
23
:
i 24 R ESPO N SE T O IN TER R O G A T O R Y N O . 10:
13
Rum yantsev Declaration,Page 19
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 37 of 111
14
Rum yantsev Declaration,Page 20
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 38 of 111
1 Afterinitiallylearningaboutthesubjectsecuritiesand transactions,District
2 2 oftheNASD started monitoringthesubjectsecuritiesandtransactionsas
3 evidenced by num erousverbaland w ritten com m unications between N evW est,
4 DefendantandKeith Llorens(seeAttachments1and2forexamplesofsuch
5 communications).Defendantbelievesthat,subsequenttoAugust2004,theshare
6 oftransactionsinthesubjectsecuritiescomprisednolessthan 60percentofthe
7 totaltransactionsin thesubjectsecuritiesatNevW estby volumeandno lessthan
8 40 percentofthe totalby the dollar am ount.
9 W hile lim ited in itsresourcesand capabilities,D efendantunderstood thatthe
10 N A SD had m uch broaderinvestigative and su> eillance pow ers than D efendant
11 and N evW estthem selves. D efendantalso believed thatthe N A SD shared w ith its
12 m em bers a duty to protectinvestors and preserve m arketintegrity. B ased on that
13 understanding and belief,N evW estand D efendantinquired on m ultiple occasions
14 ifthe N A SD had inform ation or knew ofsom ething thatw ould challenge
15 N evW est's and D efendant'scontention thatN evW est'sand D efendant's activities
16 inconjunctionwiththesubjectsecuritiesandtransactionsdid notconstitutea
17 violation ofapplicable securitiesrules and regulations. The N A SD never
18 specifically responded to such inquiries advising N evW estand D efendantto m ake
19 theirow n detenmination on the m atter.
20
21 IN TER R O G A T O R Y N O .11:
22 State a1lfactsthatsupportY OU R contention that''D EFEN D AN T
23 RU M Y A N TSEV ,beginning in A ugust2004,explicitly shared any and all
24 inform ation relatedtothesubjecttransactionswithFINRA'SDistrict2 Ofticesona
25 daily orweekly basisand explicitly soughtFINRA'Sguidanceastothesubject
26
EXHIBIT 1
15
Rum yantsev Declaration,Page 21
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 39 of 111
4 R ESPO N SE TO IN T ER R O G A T O R Y N O .11:
5 Based on Defendant'sinformation,belietland understanding ofthe
6 lnterrogatory,D efendantresponds as follow s:
7 D efendantincorporatesby reference each and allofhis responses to
8 lnterrogatory N o.10.
24 IN TER R O G A T O R Y N O .12:
25 State allfacts thatsupportY O UR contention thaton ''infonmation and belief,
26 FIN R A ,and particularly certain individuals atD istrict2,oversaw each and eveor
EXHIBIT 1
16
Rum yantsev Declaration,Page 22
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 40 of 111
6 R E SPO N SE TO IN T ER R O G A T O R Y N O .12:
7 B ased on D efendant's infonnation,belief,and understanding ofthe
8 lnterrogatory,D efendantresponds as follow s:
9 D efendantincorporatesby reference each and al1ofhis responses to
10 lnterrogatory N os.10-l1.
11 Subsequentto the A ugust2004 audit,the N A SD and,specifically,K eith
12 Llorens,Senior Com pliance Exam iner w ith D istrict2,engaged in frequentverbal
13 and w ritten com m unicationsw ith N evW estand D efendantaboutthe transactions
14 referencedinthislnterrogatory (seeAttachments1and 2forexamplesofsuch
15 communications).
16 D uring and subsequentto the audit,D efendantand N evW estinquired of
17 K eith Llorens on severaloccasions ifthe N A SD had infonuation orknew of
18 som ething thatw ould challenge N evW est's and D efendant'scontention that
19 NevW est'sandDefendant'sactivitiesin conjunctionwith thetransactions
20 referenced in this Interrogatory did notconstitute a violation ofapplicable
21 secttritiesrules and regulations. K eith Llorens neverspecitically responded to
22 such inquiries advising N evW estand D efendantto m ake theirow n determ ination
23 on the m atter.
24
25
26
EXHIBIT 1
17
Rum yantsev Declaration,Page 23
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 41 of 111
l IN TER RO GA TO RY NO .13:
2 State a1lfactsthatsupportY O U R contention that''D EFEN D A N T
3 RUM YANTSEV relied on policiesand proceduresprom ulgated by DEFENDANT
4 NEV W EST SECURITIES CORPORATION,which policiesand procedures
5 em anated fonn num erouswritten and telephonic com municationswith
6 PLA INTIFF SECURITIES AN D EXCHAN GE COM M ISSION whose staffled
7 D EFEN DANT RUM YANTSEV to believehe could and m ustrely solely on the
8 issuer'stransferagent,attorney opinion letterls),thefirm 'sclearing tirm,and
9 D epositoly TrustCorporation for purposes ofsurm ising the validity ofany given
10 stock certificate and its free-trading status''on page 17 ofD efendantSergey
ll R um yantsev's A nsw er,w hich w as filed on M ay 9,2008.
12
18
Rum yantsev Declaration,Page 24
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 42 of 111
26
EXHIBIT 1
19
Rum yantsev Declaration,Page 25
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 43 of 111
l IN TER R O G A TO R Y N O .14:
2 In Y O U R RFA R esponse N o.14,Y O U deny thatY O U ''nevertook steps to
3 investigate w hy Jolm Edw ards opened brokerage accounts in m ore than 30
4 differentnam es atN evW est.'' ldentify a1lstepsY O U took to investigate w hy John
5 Edw ardsopened brokerage accounts in m ore than 30 differentnam esatN evW est.
6
7 R ESPO N SE T O IN T ER R O G A T O R Y N O .14:
8 B ased on D efendant's infonmation,belief,and understanding ofthe
9 lnterrogatory,D efendantresponds as follow s:
10 D uring al1relevanttim es,D efendantw as Presidentand a registered principal
11 ofN evW est. ln those capacities,D efendantputin place policiesand procedures
12 thatw ere the basis ofN evW est's inquiries into w hy D efendantEdw ardsopened
13 brokerage accounts in m ore than 30 differentnam esatN evW est. A spartofthose
14 inquiries,D efendantSantos,N evW est'sV ice Presidentand G eneralC ounsel
15 during a1lrelevanttim es,interview ed D efendantEdw ards on m ultiple occasions
16 w ith respectto D efendantEdw ards'activities atN evW est,including the num berof
17 accountsD efendantEdw ards controlled. D efendantw aspresentduring atleast
l8 one such interview and discussed al1such interview sw ith D efendantSantos.
19 D efendantSantos also contacted D efendantEdw ards'attorney about
20 D efendantEdw ards'activities atN evW est. D efendantdiscussed w ith D efendant
21 Santosthose com m unications.
20
Rum yantsev Declaration,Page 26
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 44 of 111
8 IN T ER R O G A T O R Y N O .15:
9 ln Y O U R RFA R esponse N o.16,Y O U deny that ''during the period of
10 January 1,2002 through O ctober 31,2005,Y O U did notknow the identity ofany
11 ofthe benetk iariesofthe accotmtsthatJohn Edwardscontrolled atNevW est''
12 ldentify al1benetk iaries ofthe accotm ts thatJohn Edw ards controlled atN evW est
13 thatYOU knew the identity ofduring the period ofJanuary l,2002 through
14 O ctober31,200.
5.
15
16 R ESPO N SE TO IN T ER R O G A TO R Y N O .15:
17 B ased on D efendant's inform ation,belief,and understanding ofthe
18 Interrogatoo,,D efkndantrespondsasfollow s:
19 The accounts thatJohn Edw ards controlled atN evW estincluded,am ong
20 others,the follow ing four:Jolm M ichaelEdw ardsR oth IRA ;D ebra A nn Edw ards
21 Roth IR A ;Eton Properties Corp;and ShareholderRelations U SA ,lnc. The first
22 tw o ofthe four accounts w ere individualretirem entaccounts in the nam es ofJohn
23 M ichaelEdw ards and D ebra A nn Edw ards,respectively. A ssuch,those tw o
! 24 accounts had clearly identitied beneficiaries The rem aining tw o accounts on the
.
21
Rum yantsev Declaration,Page 27
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 45 of 111
1 IN TER R O G A T O R Y N O .16:
2 In Y OU R R FA Response N o.21,Y O U deny that''before February 1,2005,
3 Y O U did notknow thatJohn Edw ards used the sam e address for severalofthe
4 accountsthrough w hich he w as selling CM K M D iam onds stock atN evW est''
5 W hen did Y O U learn thatJohn Edw ards used the sam e address forseveralofthe
6 accountsthrough w hich he w as selling CM K M D iam onds stock atN evW est?
7
8 R E SPO N SE T O IN T ER R O G A T O R Y N O .16;
9 Based on D efendant'sinform ation,belief,and understanding ofthe
10 Interrogatory,D efendantresponds as follow s:
11 D efendantdoes nothave a specific recollection w hen he learned that
12 D efendantEdw ardsused the sam e address for severalofthe accounts through
13 w hich he w as selling CM K M D iam ondsstock atN evW est. H ow ever,D efendant
14 believesthatitw aspriorto February 1,2005.
15
16 IN TER R O G A T O R Y N O .17:
17 ln Y O UR R FA Response N o.2 1,Y O U deny that''before Februaly 1,2005,
18 Y O U did notknow thatJohn Edw ards used the sam e address for severalofthe
19 accountsthrough w hich he w as selling CM K M D iam onds stock atN evW est.''
20 H ow did Y O U learn thatJohn Edw ards used the sam e address for severalofthe
21 accountsthrough w hich he w as selling CM K M D iam onds stock atN evW est?
22
j 23 R E SPO N SE T O IN T ER R O G A T O R Y N O .17:
!
24 Based on D efendant's inform ation,belief,and understanding ofthe
25 lnterrogatoly ,D efendantresponds asfollow s:
26
EXHIBIT 1
22
Rum yantsev Declaration,Page 28
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 46 of 111
7 IN TER R O G A T O R Y N O .18:
8 In Y O U R R FA Response N o.28,Y OU deny that''YO U never took stepsto
9 investigate w hy Jefferies stopped trading CM K M D iam onds stock.'' ldentify all
10 stepsthatY OU took to investigate w hy Jefferiesstopped trading the tlow oforders
ll ofCM K M D iam ond's stock from N evW est.
12
I 26
EXHIBIT 1
23
Rum yantsev Declaration,Page 29
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 47 of 111
l IN TER R O G A TO R Y N O .19:
2 ln Y O U R RFA R esponse N o.31,Y O U deny that''Y O U nevertook any
3 stepsto determ ine whetherJolm Edwardswasreturning the proceedsfrom his
4 salesofCM K M D iam ondsstock to CM KM Diam onds.'' Identify a11stepsthat
5 Y O U took to determ ine w hetherJohn Edw ards w asreturning the proceedsform
6 his sales ofCM K M D iam onds stock to C M K M D iam onds.
7
24
Rum yantsev Declaration,Page 30
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 48 of 111
22 IN T ER R O G A T O R Y N O .20:
23 ln YOUR RFA ResponseN o.36,Y OU deny that''in 2004,John Edw ards's
24 trading ofCM K M D iam onds stock accounted forabout80 percentofN evW est's
25 totaltrading com m issions.'' ln 2004,w hatpercentage ofN evW est'stotaltrading
26 com m issionscam e from John Edwards'strading ofCM KM D iam ond'sstock?
EXHIBIT 1
25
Rum yantsev Declaration,Page 31
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 49 of 111
l R ESPO N SE T O IN T ER R O G A TO R Y N O .20:
2 Based on D efendant's inform ation,belief,and understanding ofthe
3 lnterrogatory,D efendantresponds as follow s:
4 ln 2004,approxim ately sixtp five percentofN evW est's totaltrading
5 com m issions cam e from D efendantEdw ards'strading ofCM K M D iam ond's stock.
6
7 IN TER R O G A TO R Y N O .21:
: ln2003,whatwerethetotalcommissions(in dollars)thatNevW estearned
9 from John Edw ards'strading ofCM K M D iam ond's stock?
10
11 R ESPO N SE T O IN T ER R O G A T O R Y N O .21:
12 B ased on D efendant's inform ation,belief,and understanding ofthe
13 lnterrogatory,D efendantresponds as follow s:
14 The totalcom m issionsthatN evW estealmed from D efendantEdw ards's
15 trading ofCM KM D iam ond'sstock in 2003 were $20,240.
16
r 17 IN TE R R O G A TO R Y N O .22:
18 In2004,whatwerethetotalcommissions(indollars)thatNevW estearned
19 from John Edw ards'strading ofC M K M D iam ond's stock?
20
21 R E SPO N SE TO IN TE R R O G A TO R Y N O .22:
22 B ased on D efendant's inform ation,belief,and understanding ofthe
23 lnterrogatofy,D efendantresponds as follow s:
24 The totalcom m issions thatN evW estearned from D etkndantEdw ards's
25 trading ofCM KM Diam ond'sstock in 2004 were$2,371,289.
26
EXHIBIT 1
26
Rum yantsev Declaration,Page 32
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 50 of 111
1 IN TE R R O G A TO R Y N O .23:
2 In2005,whatwerethetotalcommissions(in dollars)thatNevW estearned
3 from John Edw ards'strading ofCM K M D iam ond's stock?
4
5 R E SPO N SE TO IN TE R RO G A TO R Y N O .23:
6 B ased on D efendant's inform ation,belief,and understanding ofthe
7 Interrogatory,D efendantresponds as follow s:
8 The totalcom m issionsthatN evW estearned from D efendantEdw ards's
9 trading ofCM KM Diam ond'sstock in 2005 were $183,977.
10
ll IN TE R R O G A TO R Y N O .24:
12 In Y O U R RFA R esponse N o.4l,Y O U deny that ''Y OU do notknow from
13 w hom John Edw ards obtained his shares ofCM K M D iam onds stock.'' ldentify
14 ti'om w hom John Edw ards obtained sharesofCM K M D iam onds stock.
15
25
26
EXHIBIT 1
27
i Rum yantsev Declaration,Page 33
i
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 51 of 111
l IN TERR O GA TO RY NO .25:
2 In Y O U R RFA R esponse N o.41,Y O U deny that''Y O U do notknow from
3 w hom John Edw ards obtained his shares ofCM K M D iam onds stock.'' D escribe
4 how Y OU leanled thatJohn Edw ardsobtained sharesofCM KM Diam ondsstock
5 from those w hom Y O U identify in Interrogatory R esponse N o.24.
6
15 IN TER R O G A TO R Y N O .26:
16 In YOUR RFA Response No.43,YOU deny that''YOU nevertook any
17 steps to contirm thatthe people from w hom John Edw ards acquired the CM K M
18 D iam onds stock w ere notaffiliated w ith C M K M D iam onds,otherthan to have
19 A nthony Santoscallthe transfer agent, lstG lobalStock Transfer.'' ldentify a1l
20 stepsthatY O U took to confrm thatthe people from w hom John Edw ards acquired
21 the CM K M D iam onds stock w ere notaffiliated w ith CM K M D iam onds.
22
23 R ESPO N SE T O IN TE R R O G A TO RY N O .26;
24 Based on D efendant'sinform ation,belief,and understanding ofthe
25 lnterrogatory,D et-
endantresponds as follow s:
26
EXHIBIT 1
28
Rum yantsev Declaration,Page 34
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 52 of 111
29
Rum yantsev Declaration,Page 35
ii Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 53 of 111
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EXHIBIT 1
32
Rum yantsev Declaration,Page 38
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 56 of 111
From : ''Llorens,Kei
th'<Kei
th.l-lorens@ nasd.com>
To: <sergey@ nevwest.netp
Sent: Fri
day,December10.2004 9:46 AM
Subject: CMKX
Sergey,
Thank you,
K eith A .Llorens
Senior Com pliance Exam iner
D istrict2 -Los Angeles
N A SD
300 S.G rand A venue,Suite 1600
Los Angeles,CA 90071-3126
tel213.613.2633
fax 213.617.3299
keith.llorens@ naid-sçom
ww w ,nasd.com
j
I
EXHIBIT 1
33
Rum yantsev Declaration,Page 39
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 57 of 111
A TA CH M EN T 2
EXHIBIT 1
34
Rum yantsev Declaration,Page 40
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 58 of 111
From :''
Llorens Keith''KKeith.lwlorensrt-
tnasd.com>
To:''Sergey Rumyantsev'''
ctseruev/ nevwest.net>
Sent:Tuesday,Janum'y04,2005 2:l6PM
Subject:RE:CMK.X
CM KX VOLUM E
1273/2004 1.
471,165,710 400,000,000 27.l9%
12/2/2004 1v413,130,666 l00,000,000 7.08%
K eith A .Llorens
SeniorComplianceExam iner
tel213.613.2633
f-
ax 213.6l7.3299
originalM essage-----
- -- --
From:Sergey'Rumyantsev(lnailto:serge/'anevvvest.net)
Sent:Tuesday,Decem ber14,20042:56 PM
To:LlorensaKeith
Cc:santost
o
a/nevwest.
net
Subject:Re:CMKX
Keith,
35
Rum yantsev Declaration,Page 41
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 59 of 111
DISCLAIM ER
From:''Llorens,Keith''<lkeith.lwlorensr
z nasd.coml>
To:<serzevl nevwest.net>
Sent:Friday,D ecem berl0,2004 9:46 AM
Subject:CMK.X
EXHIBiT 1
36
Rum yantsev Declaration,Page 42
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 60 of 111
Sergey.
Y esterday'stotaltradingvolum eforCM KX w asapproxim ately 40billion
shares.Mr,Jolm Edwardssold over14billionsharesyesterday.Edwards'
activityreqresentedapproximately1/3ofthetotaltradingvolumefor
CM KX .Dld EdwardsgiveNevW estany differentinstructionsyesterday?W as
thereany new s? W hathappenedyesterdaythatwouldcausethisextrem e
increaseinEdwards'sellingactivity?
Thank you,
KeithA .Llorens
SeniorCom plianceExam iner
District2 -LosAngeles
N ASD
300 S.GrandAvenue,Suite 1600
LosAngeles,CA 90071-3126
tel213.613.2633
f-
ax 213.617.3299
keith.llorensa nasd.com
www ,nasd.com
EXHIBI
T1
37
R um yantsev Declaration,Page 43
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 61 of 111
ATA CH M EN T 3
EXHIBIT 1
38
Rum yantsev Declaration,Page 44
95/06/211l 1Case
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Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 71 of 111
4 M Olly M . W hite
5 Leslie A .H akala
Securities and Exchange Com m ission
6 5670 W ilshire Boulevard, l1th Floor
7 LosA ngeles,California 90036-3648
E-mails:whitem@ sec.gov& hakalal@ secxgov
8 Attorneysforthe5'
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lrving M .Einhorn,E sq.
10 Law O ffices ofIlwing M .Einhorn
11 l7l0 10th Street
M arthattan Beach,CA 90266
12 Email:ime@einhornlaw.com
13 AttorneyforDep ndantJohnEdwards
14 M ark S.D zarnoski,Esq.
G ordon & Silver,Ltd.
15 3960 H ow ard H ughes Parkw ay, N inth Floor
16 Las V egas,'
N V 89169
Email:m dzarnoski@ gordonsilver.com
17 AttorneyforHelenBagley and lstGlobalStock Transp rLLC
18
U rban A .C asavant
19 R R 5 Site 16 B ox 29
20 Prince A lbert,Saskatchew an S6V 5R 3
Canada
21 Email:ucasavant@ shaw.ca
22 K athleen Tom asso
2,3 9580 Lake Serena D rive
B oca Raton,FL 33496
24 Email:ttomasso@ ncfgcomm.com
25
26
EXHIBIT 1
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Rum yantsev Declaration,Page 54
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 72 of 111
23
M ichaelR .B akst
24 pxjs .r()2,
a5 222 Lakeview A venue,#160
W estPalm Beach,FL 33401
26 m ichaelbakst@ ruden.
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EXHIBIT 1
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Rum yantsev Declaration,Page 55
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 73 of 111
l
John W esley H all,Jr.
2 1311 S. Broadw ay
3 Little Rock,A rkansas 72202-4843
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A T K IN SO N -BA KE R , IN C .
22 COURT REPORTERS
Telephone : 1-800-288-3376
23 www .depo .com
24 REPORTED BY : ANGELAH HUNTER , CSR NO . 12574
25 FILE NO .: 9FOOACD
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Rum yantsev Declaration,Page 58
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 76 of 111
Page2 Page4
1 BEFORE THE NATIONAL ASSOCIATION 1 IND EX
2 OF SECIJRITIES DEAI.ERS,INC. 2
3 WITNES
EXAMI S: SON
NATI ergeyRumyantsev PAGE
3 -000- 4 ByMr?pebber 6 29 35 6175 91 114 l21
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7 10 STAFF'S
8 NUMBER EXHIBITS PAOE
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9 l EkwumtntdatedJanuary21st.2005onNASD 8
10 12 letterheadtoSergeyRunlyantsev
i3 2 CRD extraction rorMr.Rumyantsev l7
lI 14 3 DxumentdatedAugust26 2004onNevwest 6l
12 InvestigativttestimonyofSERGEY RUM YANTSEV,a SecuriticslettcrheadtoKeitlLl
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l3 witnessherein, taken on behalf.oftheNASD at300 South I5 4 LetterdatedNovember1#2004toMr .
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l4 GrandAvenuel6thFloor,LosAngelesCaliforniaon :6 from shcrwinCook ' 1
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1 A PP E A R A N C ES 1 W ITNESS'S ;
1
2 NUM BER EXHIBITS PAGE .
3 Forthc NASD: 2 .
4 BY :JOHN E.W EBBER,CornplianceExaminer 1 Unidcntifieddocument 227 /
KEITH A.LLORENS,SeniorComplianceOflicer 3 )
5 JILI.I-.JABI.ONOW ,SeniorregionalAttoruey (Exhibitsretained) L
300 South Grand Avenue.Suite I600 4
6 LosAngetes.Calilbrnia 90071 5
213-613-2650 6 QCyES'I'I()NSW ITNESS INSTRUCTED NOTTO ANSW ER
7 (NONE)
8 Forthe W itness; 7
9 l
kIC.DER.M O' I'I'
,W ILL & EM ERY INICORM ATION TO BE SUPPLIED
BY;JAMESL.SANDERS,ATTORNEY AT LAW 8 (NONE)
10 2049 Century Park East.Suite 3400 9
LosAngeles,California 90067 10
ll 310-551-9397 ll
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I LOSANGELES,CALIFORNIA;WEDNESDAY,FEBRUARY26.2005 1 Q. Didyoudiscussanythingelse?
2 -o0e- 2 A No.
3 SERGEYRUMYANTSEV. 3 (Exhibit1markedforidentifcation.)
havingt
irstbeendulysworn,was 4 () staffisgoing tohand you what'sbeen marked as
4 examincdandtestifiedasfOllow5: 5 stafpsExhibit1 one-pagedocumentdatedJanuary21st
5 .
6 2005' on xAs:lletterheadtosergey Rum yantsev.
6 EXAMINAI'ION 7 A. (ReviewingExhjtljtj.
)
7 BYMR.WEBBER: 8 Q. Please1keamom entto review thedocum ent.
8 Q. W careontherecordatapproximately8:35on 9 Do yourecognizethedocum ent?
9 Januazy26th,2005. 10 A. Yes.
10 Svillthen'itaesspleasestateandspellhisfull 1l Q. Andwhatdo yourecognizethedocum enttobe?
ll namefortNerecord.
l2 A. Sergey Rumyantsev.Fifstname-S-e-r-g-e-y,and 12 A. Thatisthelettercontirm ingm yappointment.
13 thelastnarncisTt-u-nx-y-a-n-t-s-e-v. 13 Q. Okay.Asstated inExhibitlsyourtestimony
14 (2. A11right.M ynameisJohn W ebber I,m a 14 hasbeen requested inthismatterpursuanttoNASD
l5 complianceexaminerwithDistrict2. Alsopresentis 15 ProceduralRule 8210. Rule 82l0 requiresany person
l6 KeithLl
otens' ascni
orcompliancccxami
ncr- and l6 subjecttoNAsD'
sjurisdictiontoprovideaIlinformation
I7 JillJablownow afegi onalcounselbothalsowiththcNASD l7 requestedbythestaff.Therefore,please beadvisedthat
18 oi strict2. 18 failureto answ eranyofourquestions failuretoprovide
19 '
rhisisan investigationbyNASD todctcrminc l9 any inform ation requested by thestaffduring this
20 whethertherehavebeenanyviolationsoftheassoci ation'
s 20 interview '
,orfailure to com pletethe interview befbre the '
)
.
2l rul
esorfederalsecuritieslaws. 21 staffdeemsittobecompletecouldbeviewedasactivity 1
22 Mr.Rumyantsev,youareentitledtobe 22 inconsistentwithRule82l0 andNA SD ConductRule2l10. '
23 rcprcscntcdbycounselofyourownchoosing.Willyoube 23 ltcouldbethebasisfortheinitiation ofa 1
1 !
24 sorepresentedtoday? 24 disciplinary proceedingthatcould leadto the imposition
25 A. I'm representedbyJirnSanders. 25 ofsanctionsincluding abar censure suspel lsionand/or
Eyage7 Page9 1
1 M R.SAN DERS'
. That'sm e. 1 Gne. l
2 Q. And doesyourcounselrepresentyou individually 2 M r.Rumyantsev,youweresworn in underoath )
3 oronbehalfofathirdparty? 3 today.Thus,yourfailureto trutbfutly answerquestion #
4 MR.SANDERS:lndividually. 4 couldexposeyoutoprosecutionforperjuozunderboththe f
5 THEWl'I'NESS:lndividually,yes. 5 federalandStateofCaliforniaperjury'statutes.Also 1
6 M R.W EBBER. .M r.Sanders,areyourepresenting 6 NASD ProceduralRule82l0requiresthatyouanswcrallthe l
7 anyoneelsein connectionwith the exam ination in the 7 staff'squestionstruthfully, !
8 m atterofNevW estSectlritiesCorporationAExam ination s Iwanttorelnind youthatgivingfàlsetestim ony 1
1
9 E-02040ll2? 9 heretodaycould resultintheinitiation ofadisciplinary .
'
10 M R.SAN DERS:Right. Atthispoint,I'm l0 actionagainstyotlw hoseend resultcould betheim position t
11 .1
representingN evW estSecurities,thewitness.M r.Santos, ll ofsuch sanctionsasabark- rom thesectkritiesindustry, '
I2 M r. Anderson Mr.I-aub and M r.Dillon. l2 suspension,censureand/orfine.
.
4
I3 BY MR.WEBBER: I3 Doyouunderstandallthat1iavejtlst .
l4 Q M r.Rumyantsev.didyouhave anyprior
.
.
l4 representedtoyou..
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15 conversationsw ithanyoneregarding yourappearancehere 15 A . Y es'Ido. '
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16 today? 16 Q. NASD isconduclingthisinterview aspartofa 4
2
l7 A. Welljustinthegeneralsense Idiscussedthe 17 fact-findingprocesstodeterminewhethertherehavebeen '
18 need toappearanddiscussaIlthelnatterstothe fùllyou 18 anyviolationsoftheassociation'
srules.Atthispoint
19 know whateverlrem em beranddeliverthew holetruth. 19 theN ASD hasnotm adeany determ inationthatanysuch
20 Q. Okay.W hodid youhavethoseconversations 20 violationshaveoccurred.Thisinterview isnonpublicand
2l with? 21 confidential.Itisnotintendedtobeanadversarial t
22 A . Basically wegottogetherwithAntony Santos, 22 proceeding. .
23 thegeneralcounsel.SohesaidsHey,bethereontime, 23 Thestaffcontrolsthcrecord.Andassuch,the j
24 answeralIthequestions betruthfulyouknow everything 24 courtrcportcrwillgoofftherecordonlyatour t
25 you rem em ber. 25 instruction.Shouldanyonewishtogo offtherecord for E
;
.
Page90 Page92
assets. 1 Q. Andwhatarethemanualprocedures?
A. Uh-huh. 2 A. Manualproceduresvely muchfocusonajudgment
Q. W hichwould includethetirm'sbankaccount. 3 calland checksandbalancesthatwehavewiththetinn
4 A. Uh-huh. 4 because--justlikelreview tradingblottersonadaily
5 Q. Thetirm'sclearingdeposit. 5 basis Mr.Dillon reviewsevery singletradeticket
6 A. Uh-buh. 6 virtuallyon adaily basis.So wehavehvo peoplew orking
7 Q. Thefirm's- any ofthc'
lirm'spositionsin 7 independently ofeneanother.
8 theirtradingaccount. 8 Andlhavean extrem elycautioustrader Jim
9 A. Uh-huh. 9 Correia w ho'sthesecondtraderonm y desk. Hew ould
10 Q. Thosedocnments suchasthebankstatements 10 rarely run atradewithoutactuallyshowingmetheticket
l1 theshtementsfrom CCSshowingthose,doesMr.Cowentake 11 justtoverifythat,youknow,Hey,wouldthisbeconstrued
12 thosedocum entsandenterthem intotheNYOB? 12 assom ething thatisofinterest.
13 A. Yes.Allofthosedocum entsarriveatNevW est 13 So Iwouldputm yselfand M r.D illon atthe
14 inhardcopyform .S0wefaxa11ofthem toM r.Cowen,and 14 forefrontofthisfront-lineeffort.And 1havea asl
15 heistheonewhoishandlingthem. 15 m entioned verydiligentstaffontrading desk thathelps
16 Q. Okay. 16 meout,you know,tomakesurethatldon'toverlook
)7 A. Asam atteroffactyoumightrecallthat 17 som ethingthatm ightattractfurtherreview .
18 duringthecourseoftheauditwehadthediscussionabout l8 Q. AretheSARSfilingsreportedtotheboardof
19 valuingpositionsinourtrading account.Thatparticular 19 directors? 1
20 schedulcisvcrymuchm ymaking,becauseyrememberythere 20 A. N o,notreportedtotheboard ofdirectors. 2
2I isadiscrepancy inwhatthevalueaclearingt-11711might 2l Q. W hoaretheyreported to? t
22 assigntoapositionversuswhatIwouldconsidertobea 22 A Essentially top m anagem ent,M r.Santos
23 fairmarketvaluebasedonthebidtcst whichistie 23 M r.Dillon DaveLaub andm yselfaretheonesthatare
24 metiodprescribedbySEC rulestovaluepennystocks.I 24 involvedinthatchain. 1
25 makeallofthosecorfections,andlprovidethatschedule 25 Q. How oftenhastheGrm filedSARSreports?
Page9l Page93
to M r.Cow en. A. W eli thert isno setfrequency. It'snotthat
&1R.LLORENS:Okay. we'reonanykindofschedule.ButIbelievetw' oorthree
reportstiatwe have on file.
FUR'l'l'
iER EXAM INATION Q, W henisthelitsttirneyouaSARSreport,the 1
BY M R.W EBBER: 5 tirm? j
:
!
Q. W hatisyourroleinthefirm'
santi-money 6 A. lwouldn'
twanttobeguessing,btltitwouldbe
laundering supervision? 7 aboutayearto ayearand ahalfago. c
8 A. W ell,IbelieveIansweredthisquestionearlier 8 Q. Didthatinvolveacustomerofthefirm? '
i
9 loday.Onthetradingdesk,l'm justoneofthepeopleon 9 A. Yeah.Asllnentionedearlier thereportsthat E
;
10 the frontlines,essentially being a brokerand being 10 we filed so for,they focusprimarlly on trading acîivity. .
'
11 solnebodywhoseesevety tradethatgoesthroughNevW est.I 11 Thevel 'y firslreportthatwefiledwaspriorto theformal ;
.
Page242
l much moreimportant,but,youknow,lwouldn' tbe
2 dedicating asmuch timeto thetradingdesk.
3 Sotomakemypointshorter lwouldjust--l
4 would liketoputthew ord in forJeffer.yPucket't. lwould
5 liketoperhapsdraw yourattention tothesanction
6 guidelinesthatareapplicable to thosescenmios.A nd
7 thosesanctionguidelinesgiveyou arangeofpotential
8 finesinthatcase. Butthe statem enton the
9 suspension/barsideexplicitly m entionsegregious
10 violations.Iflcould saythat,ifyoutind thatwe
11 violated something.ifyou findthatJeffreyPucketthas
12 violated som ething,lw ouldsuggestthatthatviolation was
13 notegregious.So that'saIllhavetosayonthe record.
14 M R .W EBBER:Okay.Thankyouforyour
15 appearance here.
16 A ndw e'regoing to go offtherecordat
17 approxim ately4207.
18
19 (Proceedingsconcludedat4:07p.m.) ?
20 -000- !
21 4
22
23
24
25
Pagc243 i
$
I REPORTER'SCERTIFICATE j
2 l
$
3 1,A NG ELA H HU NTER.CSR No.12574,Certified
4 ShorthandReporter,certify; !
5 Thattheforegoing proceedingsweretaken beforem e t
6 atthetimeandplacethereinsctfot'
th atwhichtime 1
.
,
7 thewitnesswas12utunderoathbyme,
'
8 Thatthetestlm onyofthew itness'thequestions 6
.
9 propounded,andal1theobjectionsandstatementsmade :
l0 atthetim eoftheexam ination w ere recorded '
11 stenographically bym eand werethereaftertranscribed;
l2 Thattheforegoing isatrueandcorrecttranscript
l3 ol-m yshorthand notesso taken. '
:
14 1ftlnhercertify thatIam nota relative or
l5 employeeofanyattorneyoftheparties nortinancially 1
16 interestedintheaction. j
l7 Ideclareunderpenaltyofperjul'
yunderthelawsof '
1
l8 theStateofCalifornia thatthcfbregoing istrue and 1
l9 correct. .
20 Datedthis7th day of'lanuary,2005. i
2! d
22 )
1
..
)
23 :
ANGELAH HUNTER CSR N o.12574 j
'
,
24
25
EXHIBI
T2 Page 7cf7 62(Pages242to243)
R um yantsev Declaration,Page 64
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 82 of 111
E X H IB IT 3
R um yantsev Declaration,Page 65
'
CM KM D iCase
xvnonds M uld-pagenf
2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10Sergey R=
Page 83 :
- 111
of 1x.v. 4:13/:6
Page 3
1 THEIJM TED STATF-Ssscum' np.sANo EXCHANGECOMMI% ION 1 C O N TEN T S
a 2 m 'Iwsss EXAM m ATION
3 h tlxMatvvof: ) 3 SGgey Rmnyana v 4
4 ) Fi1eNo.tA.o3n2:.A 4 EXIIIBITS
5 cvK.wfD> oNos ) 5 EM IIBITS DESCRIPTION IDENTIH ED
6 wnwass:sermyRwnyaatx.v 6 130 Subp= a '. 4
7 M GBS: l11u*+ 2:4 7 131 M r.Edwartls'Accotmls Sprexqdqhv!
t 43
8 ptxcE: sxnuiti es- Excaaam commission 8 132 11/18/04 Iaeu 61
9 567:wilsbireBoulevard 9 133 CerdficateIkw sitqSproadsheet 78
10 ll* Floor 10 l34 W ireTransfcrsS œt 88
11 LosAnm- ,ce ornia 11 135 222/05Ixttcr ll1
12 12 136 2/22/05lzeH l12
13 DATE: ' Ibnvuy,Aplil13,24106 13 137 IX'U'
gG CM KX Shareholdn Sprradshed 146
14 14 138 6/15/04 W W Confirmadœ 167
15 .
11x above-enutledmzttfcase onforIe np 15 139 6/l7/04 W H Conflrmadon I68
16 pursuanttopouœaat10:120 . 16 140 TotalSalesand W ircsSpreadshœ t 188
17 17 141 A11CM KM TradcsSpreadshœt 191
18 18 142 LargtstlndividuqlCM KX
19 19 lnvestorsSpreadshœt 193
20 20
21 21
22 22
23 23
24 Diveained Reporingserdoes Inc. 24
25 (z02)457-92:0 25
Page 2 Page 4
1 APPM R AN CES: l P R O C E E D IN G S
2 2 (sBC Exhibit130wasmarkv for
3 On W halfoftlle Secuzitiesand Exchange Com m ission: 3 idmtificauon)
4 LESLIE HAKALA,ESQ. 4 MS.HAKALA!Onlhev ordat10:12a.m,on
5 OLIVJA CARNEGIE,ESQ. 5 n ursday,April13tb,2û06.
6 Securides and Exchange Com mission 6 Wbmvulxm,
7 5670 W ilshire Boulevard 7 SERGEY RUMYANTSEV,
8 11th Floor 8 wascalle asawimcssand,lxavingtuzlf-
lrstduly sworn:
9 LosAngeles,California 9 wasexaminclandtostifiedasfollows: 1
10 10 EXAM INATION I
11 On te alfoftlx W itncss: 11 BY M S. HAKALA: i
12 M ARK J.Gltllv lhlsESQ. 12 Q Pioax slaœ aadS-IIyourfullnx-ofnrtbo
13 W oodbury & Kesler 13 = ml.
14 265 East 100 South 14 A Selw y Rumyantsev;ft '
rstnnrnaS-o-r-g-e-y,las!
15 Suite 300 15 nnmeR-u-m-y-a-n-t-sv v.
16 SaltLake City,Utah 16 Q Iaw IaoslioHakala,1am aa offico ortbe
17 17 Comutission forpurpo= ofthisprrmM ing. n is is an
18 l8 invostigationby thoUniv StatesSœ tuiticsandExchav
19 19 fx
.runm lssien in tlm m alu ofCM KM Diamondw M -3028, lo
20 20 M errrnlzm whetller11)= havoh xn violationsofr- oln
21 21 provisionsoftllo fexlerrxlsc uritios laws. Howx . tllo
22 22 facts dovolom d in tlzis inw m igationm igl!tconstilulo
23 23 violationsof otborfal- lor slae civil(yrrrn-m inallaws.
24 24 Priorto11. oe ngoftle rccorlk youw=
25 25 m ovidod w itb a copy oftbo form alarrlnrofinvu tigation in
EXHIBIT3Page1of23 Pago 2 -Page 4
Divorsified Reportins Servicesvlnc. 202-467-9200 R um yantsev Declaration,Page 66
CM KM m Case
- onds M IO -PM
2:08-cv-00437-LRH-RJJ Document W Filed 12/28/10SePage
163 e ey Rnmyant ax 4/13/06
84 of 111
Page 17 Page 19
1 AnotH issw wastk manIn%nw learDc Jeffroy l Securities?
2 Puckotintlm paslhqd anNASD sarmuonatenrdlngtowhich 1r 2 A Antony SR Q)R who ispresently thcexœutivevice
3 wassuppoe topayafinoof$3,
* 0pliortorœssxiasng 3 prGidentswenttoUnivero ofConnecticutyandwewerein
4 witb anNASD mv e .Nov West wlrnwohr 'rt
vlhim,Jeffroy 4 Severalclam in thec nemicspror am . W emetthere@ and
5 Puckotrasanacceuntingclck,m mlie on11= definition 5 hewastheonewho invited:
me to comeoutto1.% Vcgasand
6 tlhatirapersonistznploye inackzicalcapacily,lhaî 6 joinNevW G in 1999. '.
7 dœ sno!rkx R)1llelevelofIZI/ associaulO tIItlr 7 Q W llo owpsio
8 brokœ dœH .SoJeffroy worke forNov Westforacouplo 8 A Nev W esti:acorporatien+1t1:approximntely 80
9 ycarspriortopayngtbatfix n atwastbosecondissue. 9 sbareholdu and1pcrsenallyownaboutninepcrcent.
10 A liird issuewa:tim fact*ataftcrourpx'vioms 10 Q Ninc?
l1 amv
' 'lorof(w auonsTom Cbavtzloh in2002:lowasin 11 A Ninem rcentayeAybutit's80 shareholdG tlx
12 cbarr oftlr oloctronicfilingN sontoNASD Rulo3070 12 way m disburad owncrship.
13 whichisaquarulyxportoawrittoncomplaints.Andsincv 13 Q D= anyox c1x own--wlm arotbeotlmrtop iive
14 Mn Glzaw Ie. R ourrzrm abruptly,lx)novG dolœatodtbat 14 qhnreholœ rs?
15 task,soforsrvcalmontbsjIbçETvoforaboutayearanda 15 A 'flr largcstshareholdw to thelxstofany
16 ihalf,m faikdtoprovidelheseflnngsinah'melynuanner. 16 knowledge igOneCap,which isattllispointthe private
17 W egotcaughtupsincetlxzz,buttbatwastbtthirdbsue. 17 entitycontrollrd by VincentHesser. the Cap isa xa1
18 Andtlv fourtblssuq wHchIbelioveisconrc ted 18 es'tatc company in 1.
- Vegmqengaged in realçs'
tate brokœal ,
19 totbispaxticularinvtsugauon,asanumbcroftzansactions 19 mortgagr brokerage,and realestate developmentinvestment.
20 inswvcralaccmmtstranspe intlr sœtuitiosorcMn f 20 An individualDonald M iner,whoisaretired gcntleman in his
21 Diamondsytlr NASD dœmedllzatwemighthaveikadtofilea 21 latc60s,heperscm lly,w101hisfamily includinghiswire
22 suspiciousactivitymportundertlxrPalziotAcl.Sotbat 22 and Itvliovehisbrother,acoupleofotherKlatives,
23 wastlv fourtbissuotlzattbrywcreinvœtigating. 23 controls,IY lievr,in excer'
sof20percent.Antony Santos
24 Q m 1. :1istllomn'eantstatasoftlv NASD inqmr 'y? 24 andhisfamily control,1believq approximately thesame
25 A It's3nsulmnak.' nry actually novœ previde us 25 percentageasm yrlf,so itw ouldbearound nine,ten
Page l8 Page 20
1 w1111any writtencnmmunicationasq)wba!tiw'irinknded 1 percentaandalsoagentlcman from SaltLakeCity axo ,Lleyd
2 coursc ofaction is. 2 M ccuwen and hiswife--M r.M ccuwcn igalso - Ithink bo's
3 M R.GRIFH N: By ''stalc ako''you mm nyou don't 3 in hisearly 80sattllispoinl. He controls,lwould say
4 know? 4 about5ve h)srvcn prrcenl.
5 THE W ITNESS:Wodon'tlmow what'sgoingonwitlt 5 Q D= John Fadwanlslmvo anyownem hlp ineex qtin 1
6 tb i
at,contm . 6 Nov W ost* rnritira?
7 BY M S.HAKALA : 7 A No.
8 Q t)t1v lhzntlm u timoniesyou'vedosCrile zbave 8 Q W bohadm licymakingauthority atNcvW est
9 you proviH u timoay % faro? 9 A urities?
10 A No. 10 A n e board ofdirœ lorswhich atpmsentlinw
11 Q Havoyou ovor1v 11adofondantîn any lawsuil? 11 includesmysclf,Anlony Santos,DonMinorandDavid Laub.
12 A No. 12 Q Slnce2œ 2 hasanyozm else saton1hoboard ofNOV '
13 Q A= you now orhavoyouovc 1= affiliakxlwith 13 W estSecurkiu ?
14 SaintGoorge M e s,Inc.? 14 A No.
15 A No. 15 Q How ofe t1= tlm btnrdmœt?
16 Q Aa you now orhav:youeve:r1- afllliatod witb l6 A NvvW %tisacloselyixldcompanyandmossoftbo
17 CM KM Diamonds Inc.? 17 dœ isionm akingtakesplace in daily inu action am ongA ntony
18 A No. 18 Santos,myself,and David Laub. M r.M intr dropsin m aye
19 Q AR younow orhavoyouovc h=1afliliatod w1111 19 onceawee.
k lalclymaylv onceeverytweweeks.SoQIOSeare
20 CasavantM ining Kimlv liglltIntornatiomql? 20 no1rormalboard mœ tings,butwe t
ypically keep him
21 A No. 21 inform e .
22 Q Andarcyou now orbavoyouevm'lv nafliliakxl 22 Q W hal--how doyou and Mr.SanlosandM n Laub
23 w 1111U .S.fonldian M inerrnls? 23 divie m sponsibilitiesalNcv W eest?
24 A No. 24 A M r. Sanlos graduatGlfz'
om law school Univc sityof
25 Q How didyou ondupgottinginvolm lw1111NevW esl 25 Connecticutzsoby vi
m m ofhisbackground,lr handlr.sall
EXHIBIT 3Rage2of23 Pgge l7 -Page 20
Diversifiod koportiw sorvic s-lno. 2:2..467-92* Rum yantsev Declaratlon,Page 67
Case
goy Rum yazlta' 2:08-cv-00437-LRH-RJJ
w 4/13/06 M ulDocument
ti-pageœ 163 Filed 12/28/10 Page 85 of
EM KM p i111
xm oztds
Page 21 Page 23
contractualmatters,alloompiiancematters,and typically l A That'sbeforepayinganyexmns> . n at'stbT
z
nostofthenegotiwtionswith calx ntandprospedive 2 grou rovenuœ .
ulitnts. Ihandlethe tinanccs,becauseI'
m thefmancial 3 Q And 2005? '
.
a
r
pcrationsprincipal,and 'ngi ntmdi
ngincl udi
ng 4 A2005,ourt
ecord keeping:complimm supxvision.And lxingthetop 5 14 millios.
otalrtvenueswezvapproximat
.
el
y1.
3, )
lxmutive,the CEO.Iam in r,1)- ofessentiatly setting 6 Q W hy wœ t01a1= e,- :<,muclïlil> iq2G14tlx
Ioals,targe? andfollowingthrougb withNev W estplans. 7 in2* 5?
Mr.Laub isthedirectorofoperationsysohe ' sall 8 A In2004,weu d anlmntq'nlyoarwith a signiscant
vcord keepino mnlntenmm and e- tially qv ation ofthe 9 amonhtofwvqnuccomiagfrom u-adisp andwe(lid, Ile 'ove,
àffice. 10 two se ificantprivatoplaev entswhich lwululin
Q W hatarç Nov W est'ssource,s ofrovo œ ? l1 significantcnmmlssions. So2004badtwoG tranrdlnary
A n eprednminantseku' ce,sofrevcaue forNev W G is 12 circumm tw tkats+ ificantlyimprove tlo !opEx for
lommissionsfrom exœ uting unM licitedorderson dientq' 13 tle fmn.
nstructions. Twoyearsagotlzatsourcewaq80pertzntof 14 Q Ixt'sahmltbox lwocimumstancos. Fiatyou
11etop line;lastyearitwasabout70lxrcentoftiketop 15 saitlthe- wassipuficaxktlvxrllng?
ine. 16 A T&m wassi gnificanttcadinp
Q So 20M and 2005? 17 Q Plow= olabaratmon lat.
A 2005 was70perlxnt;2004,about80N = twms !8 A Mostoftluatwastrallingontbeday sœtwitya:
'nmmissionsfrom tradingbased on unsolicitcd custozner 19 issuc1m .
lrdtrs. Thesecond largestsourceofrevenueiscommissions 20 Q CM KM Diamonds?
zld otherfœsfrom iavestrnm tbnnkingactivities.'Ihat 21 A CMKM INAIIXIlXK wNioh wtso= pointtradu undtrtlv
vould prim arily involve privateplacementstypically tmder 22 symbolCMKM ,cvenm ally CM LX . Corv t And Ibeliç'vethat
tcgulation D exemptions. And thethird sourçe,and I'm 23 rrsulto sommvberemoundtwoto$3million intopline
lasingthison2005 numbers,issalesofpackaged produots; 24 rev ue.
nutualfunds,variableannuities,and similarfinancial 25 Q Aadwbatwv 1% m ivatoplacmnontayou mentionod
Page 22 Page 24
lanning vcbiclts. ) oavlior?
Q In2œ 3.whatwoa Nov W est'stOL'U mvona's? 2 A '1'hopzivateplaccmcntswodid in2004, m
A Idon'lremmnbertlm numbm'
. 3 definitcly didaprivatoplaccmcntforAim siTœlmologios,
Q Doyouknow appreximaely wllatitwaw 2* ,% 4 tbat*sA-i-m's'i. And l'm notcxactly sure itwas2004,but
rrwu, 2* million? 5 Ibesevewe did tlr privatephc- entfor E-Linnic tbat
A W cE,itdefiniœly wasnot200 million. M y 6 year. 'n atmighthavrbecn 2003,though. And we did tbe
Jucaulconjœturewcf
uldbeslwould putitsomowbmr 7 privateplacmnentforOakridgeMicroBnergy. lbonove
ewtrnono milion and two m illion probably closc to one. 8 tbat'stbe name oftlr issuer.
'
Q Andin 2002.wox rnmmlssionstlm primary sourceof 9 Q W a:Jobn Edwardsinvolved inaay way Y IIIanyof
wvomx? 10 tbo privat/ plaoem onts?
A To tlv bestofmy rrcollc tion,tkougbouttbe l1 A IbeliovethatJolm EdwartjsinvestGlin tiloAimsi
istory ofNt'v W < with 11w exception,N haps, oftlx 12 private plagcmenl.
rst.maybesocosdyear,sM ingin20:1 mostofour 13 Q How'm= h dil1loiuvre
st?
rvcnues camefrom commissions. 14 A n atwould lx,a guessIv ause ldonptreancnlmrtie
Q In2003,w:atwereNovW ost'stotalmvwnura? 15 speciscnumber,butsevoral$100,000. Ibelievo in tlla!
A Jjustanswm'
ed tilatqueslion.Ibclieveithvas 16 pxivateplacmnent,m raised aboulfivomillionalltogetbm..
lmcwimm iïltlr neighborboodofoneznillion. 17 Sohozriightbavoaccounulforaboutjustunderaboutseven,
Q 1'zn - .Itbou@ t1askodyou for2* 2. I 18 eightpzrcontoftbctotalthatm raisclintlmtpHvate
Lean:to ask youfor2* 2. 19 placement.
A Yoab,2002,ldon'trememlmr. 20 Q Andlmw muc.
h did Nev W > tge1fortllatprivaR
Q How about2004:? 21 placcmfmt?
A 2004 ourtotalrcvtnutswme closerto Iive 22 A W ecozœ !Gla commissjon often percem so all
illion. 23 togcthertbatwouldbe$500,000 in cash. And tbrrr was
Q Andjuslso I'm cloarai:tbatlmfozrpayiag 24 commissionintlr form ofrestzicu lstock whichisnextto
mraling cxlo sees? 25 impossible to valuoattllatpointip tim c.
gj.Page;# EXHIBI
T3Page3of23 Rum yantsev Declaration Page 68
Diversified RCPOX'
O R Serviccss Inç. 202-467-9200
1
Case
gey R- yantzavy 2:08-cv-00437-LRH-RJJ
4/13/06 M ulDocument
ti-page 163 Filed 12/28/10 Page
C 86 of
Iji111
am onds
Page 29 Page 31
Q IsM r.Anrkx m 'sconerxe stillthe ruqme ox ? 1 A IlxlevethatJolm Edwardsaçcounu lforabout80
A No,itisnot. 2 mrrm tofourtola1tradingcommissionstbatyoar.
QC
AWh
urr
ae
tni
t
s
lyi
tmner
w?
educedpayoukqiFniflcantly on any 3 QHHow
4 gOZ- byz
n
Ju
ocho
lm ftàort
Edwa wo
ds m
'+ illion
..a- plmttoiaDacnrmylmM'
wœ l
ud=ionl
on? ''%)
znsolicite,d trndesin whatwould lx considerr,dpenny stocks. 5 A Considcingtlm payoulstructtm somowe around
rotmlessanequityisliqted onNASDAQ aranexchange,the 6 85to90N centconm inghispayoutstnzhur.
Jayoutson allthox cxamml>ionsare at45perccnt. '
lYe 7 Q How muçlddid NovW estgotfrtwnJohaEawards.
xayouts()nallothertraœ sh'eM ;NASDAQ,Gxedincome 8 e aing?
yroducts,znutualftmds,payoutson thoseprodudsarest111 9 A Considevingthosepercenta- , sonwwberebdween
ligb starting at72 perlrntand prv ssing toyIld ievc,90 10 t= , 15lxrccnqsomy guesstim ateoInv'vwrsv incally
ltthispoint. lI calculae tir numbm;Ibolioveh wasaround$300,000.
Q W hen did thatchange 'xkn place? 12 Q llasN> W esto'vorgnHenany mvonuo- aay-
A n atcbangt took pl= in panuary ofthisyear,is 13 sorry.
vhen wedid -- 14 HasNevW es,ovcrgottonanylhizl g ofvalueFrrun
Q 2006? 15 John Ellwardsotllorthnnr- missionsforsellingMsstœk?
A 2006,mostre= t> otiation. 16 A W ou!tllbatincludogifts?
Q Are tbe,x tbeonly two payoutenmturesthattook 17 Q Yos.
:1= ? W asthcre a m iddleonelvtwccn tlw two? 18 A IbrliovctbataroundChristmastime2004 Jclm
,
A 'fhere wcre may% oneortwo rev odationssbecause 19 Klwardsbroultacoupleofbottlesofcbampagaeto!lm
kqImentioned earlicr,M r.Anderson'scontractisrenewable 20 ofjke,soesscniallyjugtinsiptilican!gif'
ts:notbingof
rveryyear.And forbusinessrexw ms,wealwaysthoughtthat 21 significantvalue .
So thenextm ove wasto Com putcrClearingServices. 21 ftrms,very fww m arketm akersthatIknow ofwould allow X
a
-ompute,rClearing Service,sforrefcrence,on Exhibit13lit 22 clearingtrades.and thatntunlxrhasdropped sincethetime
;identified asCCS. CCS weloomcd us,and whatreally was 23 wewercactually executing alotofthose trades.
reatfrom the btwn
'ning,thcy exhibited clearundcrstanding 24 In 2004lbelievewehad ardationshipwithm aybe
'falltllefœsinvolved in trading largevolumes.And wc 25 two orthreemarkd makcswho would execute X clearing
:53-Page56 EXHIBI3Page10o2 R um vaptsev Declaration, Page 75
Divc sified Reporline S-
em ces.Inc. 202-467-920:
CM KM D isa onf
Case ls
2:08-cv-00437-LRH-RJJ M UIH-PV
Document 163eTM Filed 12/28/10 Page
ey Remyu lzxv. 4/13/06
93 of 111
Page 57 Page 59
1 t:adoswitbNevW œ t.Sotbatflezerrnlnd tlwirdirccuonof 1 lv e iciariesoftboso1= 1 wœ ?
2 ourbtlsinœsinalotoflow price sœ misœ .Com pue 2 A Idonotknow.
3 CH n'ng Strviccsdidbusinosswitbusforaboutaytar 3 Q D9dyouru askMn Edwauly'h-?
4 lvforebdngacqne
' by IYnsonFinancialScvicœ,which Lq 4 A No,Inrvcrdid.
5 ourpresensclœring,so tlm circtunstancœ oftbattransilion 5 Q Didye = inqr
lnmsaayœ atNOV W Y > fiad
6 arreasytodcscribc.M ezgtr,so we'vebœ nce ngwitb 6 oqtw:o1% *''-11c1a* = 7 '.
7 Pœ sonsinc,ethate kplaçe.W estnr'e transfcrring 7 A No,Idkln't.
8 accountqandexecuti
ngtradesw1t11Penson,Ibelit'veoin 8 Q W hyno'?
9 Augustof2005. So it'sa longanswc. 9 A Cunrnoy uodc tlr provigions eftlv PahiotA ct,
10 Q YR = tofane tlzisbcf- butItlidn't 10 tlmreax cvtninnzl% andrtgulati
onstllatapplyto
11 m ally un-----xna D id you - ask anyox atN> W > twhy 11 ctutomc idoatificafonpre urœ .And tlrrg isazule
12 Jolm FA- ?had egtablimhtvl> many diff= taccouna? 12 tbat'sckarly statclt11a1tlm duty ofa brokc doalerin tie
13 A 1n- askc bm IdiscussedtNisissx Wirn 13 caseofalrustaccountexkndstotlv owrlc oftlv agcoun:
14 tlrNASD brougbtuptlr que onofwlutherorno1NovW % t 14 in thiscasesomœ nwwhocontrolsit.Sotlmreislanguagw
15 wouldInVetofzlesuspiciousactivityrvw rtinconjlmcion 15 inblackandwhitotbatintlicau tbatabrokerdealerdœs
16 witb tlr speciik transaction:in CM KM onooftlr factors to 16 notne toknow wlzolbebeneficiariosofa trustaremqlong
17 consideriswle bercertain activitym a1:% sense.Sointlr 17 asm know ourçustomertv coneoh tlm account.' rir
18 gontexld lbisanalysis.NevW >tbadtoaddv stlr issueo 18 persolwho( IIX'nGItim accountwhotzadcs!l= accouh: h's
19 and Antony Santos,who istbevke pmsidtmtand gx al 19 csscnlially tlm basis.
20 counstlofN> W es:lm isllr N sonwboinkrvimvGlMr. 20 Q So did you virw 1atJohnEdwv lmwastle owzerof
21 Bdwardsand M r.Edwards'alkrney on severaloccasionstrying 21 allofo œ e accounts?
22 to identify tlàatbusin% spurpose. So M r.Santosand myself 22 A Ferpurposef oftbectlstonw'ride licaéon rule,
23 would discusstbatissuo. 23 M r.Edwardswastlleownc oftllosmaccounts.
24 Q And whatdid Mn Edware orMsattarzmy say was 24 Q W = you overcariousofwhotbol=e ciario'sof
25 tbo bm ix u pux'
pv ofall'1u'
.
e se aralo acr- nts? 25 tboso trustsw c ?
Page 58 Page60
1 A lbelieve tlxatM r.Edwards'atlorncy did notgo l A Not- notparticularly,no.
2 s- ificallyin* tljatAscussion.'
I'
Y answerwomcdved 2 Q Didanyox ovt:r- th*1youknow efç'vera:k M n
3 from tle attorney wastbatovczytkingwas in com plianco w1,11 3 Hdwanklwho tbo a lloficiariw'sof111
0 trus:sw= ?
4 applicablorules. 'I'
ir answœ wogotfrom M r.Edwardswas 4 A I' m notawam oftbat. I'm aw= oftlzofacttlhat
5 tlmtir wasaçting asattorney-in-fatlforsoveral 5 in ourdisoussionsw1t11M r.Edwardsand in particular
. 6 individuals,and tilosetrusls thatwobad tbo accountsfor, 6 convcsati ons tbatMr.Sanu had w1t1)M r.Edwards,itwas
7 tboy obviously rcpresented intmpsts ofdiffercnt 7 absolutely cloartbatMr.Fwdwardswas concerned witb tl)c
8 bendiciarics.Sodiffm m açgountsworenœessarylo 8 privacy oftlv beneficiaries,ButasIjustindicatcd intlx
9 mainuin oleam raccountingv ords,cloartrrvw rting,And 9 pxviousanswer,ir indicatcd tllatiftlrrcwas a formal
10 so csœ tially O t'smy interpretation oftlr answo'
rwt 10 m jueslforthatinformation,be would provide tbenamea of
11 received from M r.Edwards. 11 tllcbcneticiaries. Soaslong as1r could proteu tlxir
12 Q W llo wœ tbodiffomnti- liciariosoftbo 12 privacy,ir wouldnotput- notbingwouldstophim from
13 (Iifrmvntaccouna? 13 doing tbatifformally tm uesled.
14 A Idonotknow whotlloscbeneficiariesare. 14 Q W hat(1oyou R obycone- ahmt'lœn
-tpzivacr
15 Q M o would Iasktofindom wbotlxseaR? 15 A We1l,essentiey ifyou havoatrustwitba
16 A M r.Edwardsatsomepoint,Ibeliove,indiçae to l6 btnetk iary,hismyunderslndingofwhataclientprivacy
17 usthatifa regulattzrformally m jtlcstcd tbatinf= ation, 17 is. So ifM r.Edwardshasacccs to a beneficiary fora
l8 ht would provide it. 18 tnzst,1bclitvetbattlr berwficiariesbave tlr rightnotto
19 Q Towbam? 19 bcdisclosedtoanybody wheasks.
20 A Tewbcevœ would asktlmt. 20 Q Cauyouhavoatrustwitlmutabenoficiary?
21 Q Didlm ovorIOIIyeutbathohad asserkxlhis5111 21 A Idon'tknow.
22 Amondmwnlprivilegesnotloproviœ iztformationtotlm 22 Q W asilyourlmaet rqnnalngthat'lœ.
- ac-xllyweze
23 goverrnm ontagoncics? 23 lv mticiaries ofalloftbotnlsts?
24 A 1'm notawareofthat. 24 A W G Ibavexvimm lso= oftlletrustpapm vork
25 Q DidanyonoatNovW esto'verask Mn Edwaro whotlm 25 that'sgubmie w1t13nmvacgounts,andaltboughtbat
EXHIBIT3Page 11of23 page 57 - Page 60
Diversificd Repoe 'nR Sarvices.Inc. 202-467-9200 R um vantsev Declaration Paae 76 .
Case
gwy R um yantzav 2:08-cv-00437-LRH-RJJ
p 4/13/06 M ulDocument
ti-pagow 163 Filed 12/28/10 Page 94 Di
CM KM of 111
am onds '
Page 61 Page 63
lapergrork never spœ ificany idrntifiod tlm lvneliciaries, 1 ustbatM r. Bdwards'acuvitks weren'tcrossing any legalor '
)ul1besm?eitstqtGltbatbmwsciariesn istcl. 2 reguhtoty 11 *.
Q 11itpessible.bm lontv iafermatioayoq'w 3 Q Whydidyoupxthatas= xu'
Rfenmtkislotte '')
;aG - =aboutM r.Fz wardsand1% trustqytkas11- am in 4 A Prim arily l= alss/ofM r. Cm k'sreputaûon,and '
.
'
actxm rral''-'ficiariostotlm trastsandte 'm just
. 5 tbis1* resultcdinmyun* standing&om anumbœ of
lccountslàatJobn Fxlwardscontrols? 6 tdopbonic convcsauonstbatM r. Santosand M r.Clmk luad so
MR.GIUFFIN: You'm askinsaboutpossibiliti
>? 7 âtwasjustac'Almination ofsovm'
alvcbalGcbanges.ahnd
M S.HAKALA:I'm askitv ifV *sr. alydotumtlls B tàiswasNov> W 2* 4,approximatolytlu montbsafw tlm
batzulooutthatpossibiEty,oranyevidencetbatntles 9 flrsttimctlr NASD indicae toustbatwenœdtxltopay
mttbatpossibiöty. 10 cklxraœ ntiontoM r.Edwards'acGvity. So a 1- 11u
M R.GRIFFIN:You can answ that 11 tbkqreassuredust1n1itwasnotjustNovW>l11m1looke
THE W ITNF-SS: Ibavonotsœ nanydoctmw tstbat 12 atM r.Fxlwards'acti
vityandconçluded Qlatnotbingapmam i
vouldrtlotiïatout,bm ldon'tknow ifIcanmakotlmt 13 tobewronp SoMn Cook,wiè hisapulation,wastio namo
l
onjecturm 14 tbatgavetlscomfort.
(SEC Bxlu3it132wasmarkH for 15 Q DidNA W eesxpayMr.Cœ ktomviow lohn FxlwarA '
idmnufication.
) 16 luTh'nemactic-?
BY M s.HAKAI.A: 17 A No.
Q l'm yhowie yoxkwhat's*''-matked asExhibit132. 1% Q W lm paidM T.Ctmk fm hiswork?
lxhibit132jsa10* dau N ov= H 18t1,toNovW Y * 19 A Ihavonoinformadonorknowlcdgeoftbat
iborw4xxlCm ks''Ro:lolm M .Edwards.''Doyou= (e zo 20 Q 11saylbormin tlm sœ ondparagraph or% letlerx
lxhibit 1327 21 ''Ihavo roviowed tlm lzatling pzacticcsofM r. Edwards.H W hat
A Yos,Ido. 22 trading practica i:11%1s- ifically mf- ing to?
Q W hatisit? 23 A Ita notmlk'
e.anycondusionsbastdonthis.
A n at'stbeletterfrom Mr.ShmwoodCookwhe,to 24 Q m katwaKyourundozstandingofwhatlIowas
bebo tofmyknowlodgc,reprosenti Mr.Edwardsatthe 25 zrforringt0?
Page 62 Page 64
im e.W e havethedate, Novemlv 18th 2004. 1mentioned l A Myundcstandingisthisxfm edtotransactions
arlic today thatM r.Santosconununicated with M r.Edward 2 oxecuulatortiroughNovWestSecurltiesCorporation.
nd hisattonxy,thatattorney wasM r. Cook.And thisisan 3 Q How did Mn Cœ k roview Mr.Edwarda'trading
xamplrofcorrespondencethatM r.Santosreceived t hisin 4 pzacticosatNo'vW est?
kovmnbcrof2004 and maintnlnazlitwith the recordsthatwe 5 A Idonotknow, butmyeducatedconjectt ur wouldbc
ad.from Mr.Edwards'accotmts. 6 everyaccounthasdctailcdrœordsandt110% rœordsalv
Q ls thisthe only lctkrtkatNev W estreceived 1()m 7 cnmmunicau totl
zcaccountholderbywayoftrado
& .Cook regarding John Edwartks? 8 conrlrmnuonsandslaa ene. Andtotbelxstofmy
A Thisisthe only lctterthatIlçnow of. 9 knowle m ,M r.Edwardsmainuine good rrcordsofcvmyl hing
Q Do you havoany rcason totbink tbcre were any 10 tbattranspirv inaccountsir controne . So itismy
o erletters? 11 Glucated conjœturetbatMr, Edwardsmighthaveprovide .
A ldon'thave any otherreason. 12 conrzrm ationsand stau nentsto Mr.Cook forroviow.
Q W lm isSherw' oed Cook? 13 Q n ismay - nd a- osutivo, and Idon'tm cau it
A Ipersonally do notltzmw M r.Sherweod Cook,butM r. 14 tebo.I'm tryie loundozwtand. W axityeurunH m nding
antosdidrv archandlbelievq$atMr.Cookatsomepoint 15 tbattltislottornometFrnm JohnFxlwards'lawyor,right?
Athcpmstwmsan officerofaregulàtory orgM ization. 1 16 A Yes.
on'trcmembersw cifîcally ifitwasthesta1 securitics 17 Q Inox scntcnc.
eJohnEdwartks'Iawycrsaysthat '
lgulatorin Ncvadaorifitwasafederal,but1believe 18 gsxntially my clicnthmsn'ldox anytNing wlxmg. W le did
1atMr.Cookwasahighlyrankedofficerinasecurities 19 that#voyoucatnrozltbatMx.Edwardsacnmllylladn'Adono
o latorin thestate ofNevada. 20 anytltingwrong?
Q Did Exhibitl32 play any rolein Nev W est's 21 A Ia- dy sutcd0 1aonmsentenccletl
ercomes
ecision regardie Jobn Edwartls? 22 onthebackof, Ibelieve,sevcaltelephonic conversations
A Ican say withconlidcnc,ethatthe letterfrom M r. 23 tbatM r.Sanosbad w111.M r. Coek. Al
ld my backvound dces
'
.ookgavet tsquite abitofconfidencein the factthatwc 24 notallow meo makeany lcgalconclusions,butM r.Santos is
l
eren'tdoing anythingw rong in particular. butitreassured 25 anattoruoyandagencalcounsolforNcv W est. so based on
l
D iversm ed Row TtinR Servicesxlno. 202-467-9200
'
CM KM DiCase 2:08-cv-00437-LRH-RJJ Document
xm onds 163 Filed 12/28/10S PageRuv
M ulti-pageW 95 nyaat
of 111w'v 4/13/06
.
Page 65 eage 67
l Msreproxntauons,hwasmyunderstandingthata1* l A Okay.
2 liketbiswassufficlntgroundsfûratlœstthatsonseef 2 Q Sewocanmqotbatwardwithom le ng cone '
3 comrorttbatIroferzrd te,x ttlm vmy soid tcmzbut- 3 aboxzttllat.W hatwastlm n-* ofMr.Edwe 'xdatianolp
4 Q Hew oftendidM r.Santosand Mn Cm k sw ak? 4 w11: CyW M ark?
5 A Ido notknow,butIIXZ- atlo sttwice. 5 A Idon'tzomcznbœ sN v cally,bm a1:a11)0Ian
5 Q Did Mn Sane x'ptu O youA*ezreacltoflho= 6 Macontirecamoup. '.
7 çonv= atiozuq? 7 Q Ian?
8 A 1cannotsay itwasafterœ choftbosç 8 A Ye ,IanM acentirecamoup intlw cone of
9 conversauons,butbytlm timotbis1* arrie ,1m s 9 M r.-'onoofticcl ti
ti
est ik
atM g.Edwardscontrolle also
10 wellawarroftlr factthattboseconm sationstook placo. 10 badM r.M acentireon itand-
l1 Q W u twu dirprm me,lH ing'hr- çonv= ationW 11 Q YR mex oxm oftlm trtuls'
12 A IwasnotpartofIIXISG Idon'tknow. 12 A Notono oftlm trustq,but- 1don'tzmneznlmr
13 Q W llatdid Mn Sane tollyoulm '.
xlkGlabeutw11 13 sv ifkaHy,bm tlm wasacorpomti
ontbatwolœkcd up
14 M r.o mkde lg111- conv- zvhn 'n&? 14 ontlv NevadaSecrete ofStak site,pnmethlngalongth0x
15 A ' 11e factt1m1M r.Edwardshadanumltrofaçcounts, 15 snes.
16 tmstaccomm .and tlmrmwmrlransaçlionsin1- amounts 16 Q FirslColonyM orchant? .
17 ofCMKM,CMKX shn- . Ibelieve11. fœm wassm cifica:y 17 A FkslColony Mcchantmost111* .AndIdon't
18 on+a1particularissr ,andIbe19ovetbeconversae ns 18 remernbc why tlr theughtisinmy * d,butItllink Mr.
19 involvodadiscttssionofwlehsrtlr shaM wmv ll timakly 19 Macentirewastle principalofCy* M ark.Idon'thm a
20 issue andlœ itim aklyh= trading.So tbatwouldl)omy 20 s- iliczœ ollection,bu1forsomero sontbat'stlv memory
21 conjœture,tbatwastlm natux oftlv discx ion,andtbat 21 tbatcomestomerighînow.
22 wouldl)emyrecollœtionofwhatMr.Santosrrpore tomc. 22 Q WM n didyogdiscovor11-1JohnEdwardslladx e
23 Q Wkatdid - wàalObeantivoly - itsoundslik- 23 priorafliliationwith C''
ylx:rMark?
24 tàoso wom tbo topics tlhqtworodiscusm l. 24 A Iwould eslimate itasbeing sœ ondhaifof2004
25 A Corrœ t 25 se probably towardsthemld oftbe yoarwhcn we sinrteH
Page 66 Page 68
1 Q W lhqtRbstantivelywaseaid a:towhy tbolares l lookingg1o5eratthosotransactions.
2 wc isse and fzroH'
nalngandsofoe ? 2 Q Didyou ovt:rask Jolm Fzlwards- ordid anyonoat
3 A Considering 11m:discussionsoftllisparicular 3 N*v W estrvw'rask Jobn.m lw ards whattbe natm r ofM s
4 subjœ tIœ kplacewilhanumbc ofindividuals,Icannotsay 4 rclationship w1t11CyH M ark kad *'---?
5 tbatwhatl'm goingto say now wasdiscusse betwœnM r.Cook 5 A Iam notawam ofany spccific5r1/ofquel ons
6 and Mr.Santos,buth wasmy belid alalltimo tbata 6 along these lines.
7 substantialnumbœ ofqhn,v'
xlhaîMr.Edwardsdepositedand 7 Q Didanw neo-vc ask JohnF-dwardswhatlli:
8 sold through Ncv W estcanw to him througb private 8 rd alionship witb C-axavantM ining KlmH lightInev nntienal
9 transactions,privatr p'zmbnsesfrom individualsnot 9 or CM KM Diam ondsw as?
10 arjiliatmlw;G tir issuc , And alse M r.Edwardshad somo 10 A Ibelieve tbalon severaloccasionsvm asked M r.
1l early deposhsearly in 2003,somoof1l= sharesin CM KM 11 Fdwardsin tbenegatim wllich mc nswe asked bim to verify
12 Diamonds itismy lvlid tl zasM r.Edwardswas in oneway or l2 to uslbalbeisnotan affiliale ofCM KM Diamondsand no
13 anoe afflliau lwith tlv prcdocessorcompany ofCM KM 13 sharestballm deposite M IIINev W >tcammfrom affiliatea
14 Diam onds,andtlx: rewasacontolpesitientbatwasnolonm 14 ofCM KM Diamonds.
15 zestrictctlunderRule144. Sosomeoftlr sbamstbatMr. 15 Q Whatdoyou moanby ''affiliau ?''
16 Edwardshad wce oldcrslua'
req datingback to the predœ essor 16 A Affiliates,in m y undc slanding,am officœs and
17 issuc .I'm tty'ngtormnember.CylmrM arkwas1lr nameof 17 de tors,andI'm not100N contcerlainbutma bersof
18 11)eissue,1IXE- .Andthemajorityoftbesbarescamein l8 irnmcdiatefamd
'y of(l
ffir,
ersand directors,andcontrol
19 tlv privatctransacuons. 19 shareholdœston pm'
cgntormore. So that'smy tmdrrslnding
20 Q lwanttoprobralittlebiton somooftbothing: 20 ofwhatçonstitutesanaffiliak.
21 youjlm said andtrytogeta1* unH - ding. '
rlm 21 Q AndM r.Edwardxwasaske toconfm
' nt:alnoseof
22 flrstisyou znmzlioned a surcempany CyborM ark. I 22 hisshaa s caum from affiliau ?
23 canxrpu ntloyouthatCylmrM ark was1heprtdocmssernanm 23 A Yes. I
24 IxtroroG sam tMining Kz
'mlmrlightIna ationaltœ kovor. 24 Q W asbeaskcd'ocoxdirm tbath;wasnotan !
25 You're cxm tly zvmvmlxr
rjng tllatnam c. 25 affiliatc? ;
EXHIBIT3Page13of23 page 65 - Page 68
Divmxified RoportinE sow ices.Inc. 202-467-* 00 Rum yantsev D eclaration,Page 78
Case
CM KM D i 2:08-cv-00437-LRH-RJJ Document
am onds 163eTM Filed 12/28/10SePage
M UIW-PV 96un
fggy Rl of 111 4/13/06
y
Page 73 Page75
l A Ibavenorosontodoubtit,and oncoagains1can 1 Q Including alloftlm trustaccountsand sefe ?
2 say lll
atlwaspartofctxnpiEng allthedata tbatweatiœ 2 A Yœ ac= t.
3 thepe arafonoft%isdamment. 3 Q Mr.Edwards- wlo dgdM n Fxlwe qgotalloftlx
4 Q &)John e ositod O rtificau - m) 4 sllares1atlm ' intotbovaxiousaccounte?
5 somobmlywho youkx w lzml1= fœ mally asstviatGlw111,tlm 5 A AsImee nGloarH , we IXIG tbatmostof
6 c- pany (kPO?tGI261billion thx.w- ofs- k D idthi:o'vœ 6 thosepesifonsim acqe' frem '
privateinéviduals.
7 giveyouany= sonA)wonœ rFIXIwastxyie to Iiquidato 7 Q R o?
8 se k fortle com- y? 8 A Ibave no know- geofthat.
9 A H= 'smy lix oftbinking.Unfozluna lyQmreis 9 Q Didw u evorask hlm?
10 nol.
muchby way ofdau onthisdocttmentzExbèit131,but 1Q A Wllal?
ll Mr.Edwardsstare drpositingand melllngslwq- fnCMKM as 1J Q Didyouo'
vc ask hlm?
12 early asM arch ef2003.AndbyJtmeof2004 wlrna1- 12 A Iv onally ncvc aske * . Edwards,bu1basGlon
13 spikein pricchappenc ItI;nIIttmtotalamountofsh= 13 my knowkdm ofMr.Edwards'convcsationswit: Mr.Santos,
14 dvw sie antlsquîdatodwasintlr neigbborhocd of60 14 M n Edwardsindicao tbatlrweuldprovidetbeinfonnaEon
15 billion.Andasyouzmntznber,IjustdiscmrsGlour 15 ifnœeaary.AndIte rvoMr.Santoscontacu lF'
ust
16 convcsation witbW eltqFazgoandsubsmuonldiscussionsw111, 16 GlobalStockTransfc anda* dtlmnztovcrifytiu atallQr
17 tbotransfc agent,in m rly 2004.late2003,w:brlix that 17 transfm'sin tlm namo oftir lrust,tlx position tbaîM r.
18 CM KM had in cxcessof600billion issuesoutsunding. So 18 Edwardscontrollcl,none ofth! m cam efrom affiliaa . 1
19 SeIIi/Kabout60billionovcraIXHIXIofmoa tbanayoar 19 bcErvetlrkassfœ agentissubjœ ttocerl
ainprivacy
20 clid notpru entany spœ ific lm son forconrm to us. 20 provisions, butatleastM r.Sanloswasabloto obuin a 'ne''
21 And this number,263billion sbaro ,m ostoftboso 21 astbeanswerto tbatquestion.
22 dopositsbappencd inlat:2005,early 2006,likelyator 22 Q FH GlobaltoldM r.Santos?
23 around tbotimem'subsequentlo tlr lwmz'tbaîm 23 A Thatnonloftboseposifons - tbatallofthose
24 discmsc Exlll
-bit132,wccks.ifnot,.
montik
qaftc tlr NASD 24 transfm'swerecovc dbyaltorneyopinion I
cttersand tbat
25 st'm rd taking aclose look atM r.Edwards'eansacfons,and 25 none oftbox transferscamefrom affiliaa . n at'smy
Page 74 Page 76
1 ebviouslyinmy tmdcstandigg,yoarsaft
c CyW M ark lxcame I interpree onofwhatFirstGloballoldM r. Santos.
2 CMKM Diamond .So alloftbox factorscombinedusentially 2 Q DoyolihaveaxtynotesorH umontation conf-
uming
3 lGlmc to beliovothatatnopartigularpointin timodid M r. 3 l at?
4 Edwardscontrolmoretban *'nm rcenl. So ovc a pcziod of 4 A Idon't.
5 twoyears,itwagprobably--Idon'twantto sound like1'm 5 Q D= NcvW estllaw aay businem
s:Rlationshipw1111
6 producing animplausibk scenazio,butwccantl zink ofa 6 FH GlobalSe k Trangfo otlv tbantbattl>oy'rwtu
7 tcadcrwbo over11. com seoftwo ycarson 1bomonthly 7 lzansfo-ran tthatyou coalau to clv k on stlxk
8 basis,lot'ssay,buysatbousandsbaresofMicrosoftand 8 = rlilicakl s?
9 stllsatbousand sharescf M icrosoft. 9 A Yoab, tbey'rea localtransferam nt,one ofmany
10 Icanrun thisskaight12 tim esa year,ev opt 10 in LeasVœ as,soit'sjus!- yoab tbcre'snobusinGs
i1 lct'spretend I'
m buying itin oncphce and solling itin 11 relationship.
12 anotber. So ono f-
zrm would sœ owncship of 12,000shnna ,q 12 Q Nootberties? i
13 wllileatnopointintiuw did tlm parlicularindivldual 13 A No. I
14 controlm oretban aiousand shares. So in Mr i
. Ed wards' 14 Q AR you awam ofanyp= onaltiesl- œ nanyox !
15 çaso,œpecially considœipg hisrepresenlations tbatfrom 15 atNev W estand anyox atFirslGlobal?
16 timc to timoixlwould purchâse largepositionsfrom l6 A W dl we know oach ote 's facc .
17 nen-affiliaulindivîduals so ovcr!lx)couzseoflwoyears. 17 Q Butnopersonalbusiness?
18 thatnumberaddsup to263 billion shares. Bu1atno point 18 A No N sonalbusinœs,no N sonaltl> .
19 illtimedidwehaveanytllingneartotenpcrcrntconsidering 19 Q W hala!v tllonaxneseftM lmopleatFizstGlobal?
20 ourunderstanding ofwhatth:numbcrofissued and 20 A W eknow tbeplincipalHokn Baglcy and m v ently
21 outœ nllingsbn,oewasinCM KM . 21 md agentlmnannamd JeffatFirstGlobal. 1don'trmnmnber
22 Q Forcalculatingtbetonm rcontnumbcr,didyou 22 hislastnamo.
23 agpu atoallofM n Fzdwards'accounts? 23 Q M itcbom .
24 A At> cy pointin tim yes,wewould aggrœ ale M r. 24 A JeffM ilchell, çorrect.
25 Edwards'accomm . . 25 Q W âat11% d= Jolm EIIwaTILSIlavotoFirslGlobal?
(
Di EXHIBIT3Page14of23 (p,V e 73 -Pagc 76
vcsifiod ReportinM Scrvices.Inc.202-467-9200 Rum yantsev Declarallon,Page 79
Case
gey Rum yantax 2:08-cv-00437-LRH-RJJ
4/13/ 06 M ulDocument
d-page 163 Filed 12/28/10 Page
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C 97 of
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'attarnoy-in-fact7'? 1 BY M S.HAKAI.A'
A We2,tbat'sau m t1>11. lksGlinmyprx ceat 2 Q And M n Sc geypdo you tm&e nndtbatyou remain
%stonce,so1'm rqo lingitaactlyasIIX'
J.M hfrom 3 undcreatll? Xj
kim, 4 A Yes,Idounderstand. ''
Q + 11a1tlœ a9:moan? 5 Q And can you conlinœ g1v1e your% sttgeimony?
A Idon'tknow.Butonclagain,tbatterm cameupon 6 A Yes,1(;an. '' '
10v= 1(v asionw andnobody atNrvw estovc quesuonu it. 7 Q W lzo isJM Corrcia?
5oIalwayszrlimlonthet'xperGsoofotlmrm oploinvolvM 8 A Jim Correiaisan equity tradcratNev W est.
includingMn sanos.soI(lon'tknow wbattbatm ns. 9 Q W hatdx s11e do forN> W es'ts- ifically?
Q How mnnyt'ustamerrqcanyoabaw ie'
oreyou aœ dto 10 A Hisp!imary duty ispru ssingexecution ofagency
% - r.aa ox havolmr- opo'w vlqtolm rrgisteaxlasas 11 traaex.Heoriginally startedasmya istantonthetrading
i
svestmontadvisorforpxovidie invosa cntadvicoand 12 dcsk,and atthispointin time hehandlesmostofthe agcncy
undung mw w forpooplo? 13 volmneand he helpsme witlloriginalentry inpreparation of
A Idon'lknow. 14 ourtrade blotters.Sohe startsat6in themorninw takes
Q Di;you ow rask Mn Fzwardsif1. wasxcgist- 15 phonecalls,receivestickets.ordersfrom brokcs,
Asaniavostmontadwxr? 16 commm icatesthoseorderseledronically orovc the
x Ne. 17 telephonoto aclearing rlrm tmaing desk orotherm arket
Q Didyou ovv'rwoae if11 0n--*-=lolm regiseenwl 18 makcs,and es= tially completestheordcrs.
u aa inveglznontadviscrl= aux howmqV dling1- 1e.:* 19 Q W ashetl,etradertlmthandled John Edwards'sales
iRmks? 20 of CM KM Diamondsstx k?
A No. 21 A Hchandledthemajodtyefthosetrades.
Q D9dMr.Fzwaukqevm'give any --tbatyou'a aw= 22 Q W lle elsllx dled thorest?
)t anyindicationofwhohepurçbav tlv CMKM Diamends 23 A SinceIlm a1s0 traderonthe desk,occasionally I
a k f'rfwn? 24 mightbe theonewhotake.
sthosetickea.
A Henevergavoany s- ificindication. 25 Q Did John fdwartLqevercommtm icats '
Page 94 Page 96
Q Didhmovergivoany- 1indication? 1 instruclionstoJM Cm eia? i
'
A Hisgenm' alindkation washisrosponsoto our 2 A Iwould say t1a1on extrmnely rare occassons bu1
nquirieswhellrrtbepuzchase camefrem affiliau ,and 1lr 3 tlm w= 6111% whcn M r.Andcson would bc ou1oflown,so 1
mswerwasno. 4 probablywouldsay lc stlzantrntimœ M r.Edwm'
dswouldcaE
Q W hytlidyouask tlkal? 5 into thetadingdcskdiv tlyandcommunicatemosllikely to
. A Bœ aus:aspartofouroperatingproceduro wlm 6 M r.Conda.
ve'rede ngw1f11alargeposition wlm tbcrearoqueslions, 7 Q Andtbat'sloss'hnn tcntimo ovtr% wbole
vmwouldEketogetadditionalinsurancetbatwc'renot 8 m'
HGIthatM n Edwards:ad accoual atNey W es't?
nvolved in an tmregiste distribution. 9 A n at'stbebestofmy rtcollœ tion,bœ ause thoso
Q Didilovrroccurtoyou thatJobn F-dwartkqmil t 10 wcrovmy infzm uentinsunces.
usllv liquidaungsharcsfrom tbocompany and nxrnlngtbo 11 Q otW tllan 1t:$ )einstaaoeg.aveyou aw= ofany
hnxcods around to tbo back tailcom pany? 12 occasien wben M n Corm ia spoko dirrctly w1t11Jobn Fxlwae ?
A Cm sidering allinformation availabletom ,tbat 13 A W itb almostcomplœ tertaînty,thatwould be in my
kcveroccurrcd to us. 14 prucnce in tlx trading room wirn Mr.Edwarllswould com eand
Q Didtbatovm'(xcurlo anyonpatNovW csl? 15 Gsittbeofficesandirwouldsimplypopinandsayhelloto
A Idon'tlmlieve so. 16 M r.Correia and myself.
MS.HAKALA: It'sabout12:30.W ilydon'tm take 17 Q W asanything e ond sx ialgrœ tings?
'
urlungb brcak now? 18 A Noxnotto tbe bestofmy knowltxlge.
MR.GRIFFIN:Grwat. 19 Q On thoseœ casionx?
M S,HAKALA: Offtbezw ord at12:30 p= . 20 A No.
t'
Rœesskaken.
l 21 Q How didNevW Y can'
y outitstrading forJohn
M S.HAKALA: We'reback on tte record at!:47 p.m. 22 Edwartlsin CM KM Diam onds stockssm cilically?
Cotmsel,do you agrcc we had no subsmntivo 23 A Asthe pcriodduzing which sfr.EdwardstradM CM KX
onvcrsationsduring tbobrcak? 24 CM KM spansovœ,Iwould say,m orethanlwo years ifmy
51R.GRIFR N: Yes. 25 mmnory dœ sn'tfailme,m bad tll
rœ differentclearing f'
lrm s
:ju .jug;j)6 EXHIBIT3Page15of23 R Um yarltsev Declaration, Page 80
D ivm 'sified X eportinM Sc vicesplnc. 202-467-9200
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Case
CM KM Di 2:08-cv-00437-LRH-RJJ Document
nm ondg M MIU- 163?w Filed 12/28/10Ser
.PM . Page 98 nya
goy RoTof 111
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1 dmingtbatPY IKIoftime.SotirwayweexecutGltradœ l* ?
2 diff= ldw dingontlr procedu!w inphcealtlm time. 2 A No.lfwc'm narrowingthisdow nlotlr timewlm
3 Soorignallyearly onin2003,Iwould saytlmtmo:toftlr 3 wehad tonm X clenrlngtrades,tbemajeritywcnttkougb
4 mdarssimplywcntlnto tbetradingroutmg
' syse oftlr 4 Jeffreysand EmpireFinancialasdavcrysmallamountthough
5 ckaringrzrm .Iaau in 2003 early2K 4 Idon't ''''''''ber 5 wbat'snow Hudson Sœ urities.Attlx timetlrymight% ve
6 speciscally,butm miglltbavecommtmicae de tly w1t11 6 10 W ern. '
7 otlr markd makcrsbœ a ewirnyouexecuteo (losin a 7 Q Hew waKtlm A ision ma* ofwhatsbalo wo'nl
8 parucularissuerm luœ uy,you * 11notko whicb 1a+ 8 tlœougllJoffx'ys.w:atshn- went Fx pia , aud what
9 whelœalcmarku makcshandlehrgervohxmm soyou IMVOa 9 m1:--'-went Hvdson?
10 tmtlrrclhanx ofa ecutingifyou godl
'recllyloaparticuhr 10 A Thatwasmœ tly base on,numH 011e,willinp l
œs
11 markd makc. 11 ofacompany ta,you know,acce tatIUIIOofa 1- sizo X
12 Andoventually --Ibad tlr prolone discussien 12 clearing.And witbMr.Edwards'kansacuong,m would
13 earliertoday abeut11Y*a
' tionsrtsulting from cle ng fund 13 typically havc avn L'V position t1m1lypically could not
14 dopositsrw uirementgatM SCC.Sincem coulddoonlyX 14 getfillcdina singleday,sowewouldcrwnmunicateto
15 clcazingtzadesin tbcamountconsisa tw1t11M r.Edwards' 15 JeffrcysandEmpim on11, sameday tllatm weuldlmvestock
l6 ordcs,duringmostoftlm 2004tlr majority ofvolumowcnt 16 forsalein sucb andsuch aquantity,andtlziswouldlm our
17 tlzrougb Jeffx'ys & Company in Now York and EmpireFinancfal 17 limiîprice. And dependingon how m ucb œ ch oftlv housrs
18 Group in Rorida bœ ausctbosowczrtboonly two heusosm 18 would bo ableto 511us,tbatwould bctbealtocati
on. And
19 km w tlzatwould accxpth1. ordcsforX cl ez
m 'ng 19 voxy Ettle weatto Hudsen becaurs
e iludxm t!- felt
20 processinp Sotlv choicewasbare G clusivelyon tlr fact 20 comfortablew1Q1lazgesizcsandtbcyevenluallycouldn'tdo
21 thatwocould nottradetbatkindofvolumewithanybody 21 tradesX cloaring.SoGsentiallytheallc ationofsales
22 olse. 22 wa&demanddriven;ifJdfrryscouldSIk say,20million,a
23 Q PloaseYIImomom ahmttlm relationqhlp e twcon 13 hundredmillionon agivcnday,iftllatmetourlimitpricc
24 Nov W estand Joffm'
ys. How did tbatdovolop? 24 pnmmœ rs,weweuld fillthatorder.
25 A n atrelauonship,1beliom (lau backto 2002 at 25 Q W hoatJoffx'
yswasNov W estintoucbwitl,?
Page 98 Page l00
l least. Evcry wholcsalekadinghouse,to tbcbcstofmy l A Chrprimazy conlactisAlfonsotm tini.Ibeliove
2 lmowledgc,alwaystriçsto sr.cure agencybusix ssfrom small 2 howastbeprincipalguy tba!ledtl!etmm from Hamt 'egovc
3 marketmakers,smallbrokerdealerslikgNcv W res 't,and m 3 toMcrillLynck Ncw lersc'y and finallyto leffreys. Bul
4 frcquently getphonrcallsfrom cssentially --Icannotsay 4 tborraremultipk traders.n cy'rcOTC deskaIthink,
5 everym arkd m akc,butIprobably havememoly ofatleast 5 consistqofatlcasttenpeoplq sowecommunicau w11 a
6 20,30 phonecallsfrom differcntmarkctmakcrstryingto 6 numberoftbem.
7 secur/business. Butitmakessenseto directblzsincssonly 7 Q Arc'1<m any jm onalrdalionshipslvtwccn Mn
8 to 1a1> houxslvcausethat'swhereyou do gd quality of 8 LontiniandanyoneatNevW :+ 7
9 cxecudon. 9 A No,nopersonalmlationship.
10 Jeffreys& Company isalargebrokeragehouse,and 10 Q W hoalJeffmyskx-w ldow Nov W ostwmsgelting11m
l) tbeirOTC desk hastremendousamotmtofexperiencc in tbc lI CM KM Dia ondscmrtificatcs?
12 over-the-countrbulletin board and pink sheetstocksbecause 12 A Totbobrstofmyknowkdgc,nobody.
13 Ibelievemostoftheirstaffcameovcrfrom whatuxd to be 13 Q W agJohn Edwanks'namosevm'mantione lo Joffreys? I
14 Hairtog,which wasone ofthe largcstmarketmakers. Before 14 A l'm notawareofanysuchinslance. i
15 tlxy wentoatofbusiness,they becameM errillLynoltaNt'
w 15 Q DidanyonoatJoffrcysovcrask Novw osq oraayox
16 Jersey,andth% finallyVerrillLynchshutth= down,sethc 16 atNov'
Wosthow itcamotollavosomanythn-qofCMKM
17 teazn came overto Jeffreys& Company. 17 Diamondsstek?
!B So Jeffro s& Company tradedlargevoîmnes,l i: A I(lon'llhiak se.
19 believethatoriginally startrd in convcsationslxtwœn 19 Q Isitu111z:1hq1forox brokc doalc tollavos'Ilcha
20 th:irtradersand M r.Correiaashe handlesmostoftlle 20 higllvolumoinaparucularoertificae?
21 agency tradingbusîness,he'stheoncwho'son thephonew 11.
11 21 A ln my experienceit'snotmmsual.
22 otàermarketmakersthemost,And oncc Jcffreysindicated to 22 Q Did Mn IxntiniOVO'Toxpmssasy opinion#o you
23 lzsthatthey do nothave aproblem withX clearing trades,a 23 ahmttle issuorCM KM Diamonds?
24 lotofCM KM tradeswentthrough tht' m. 24 A Canyou lm m orrspecific? W batdoyoumeanby
25 Q Are tlley tbe only N son tbatNev W estdid CM KM 25 '' opinion?''
age o Page 97 -Page jx
DiversifiedReportinltScrvicesolnc-202-467-9200 Rum vantsev Declaratlon.Paae 81
CM KM m Case
m onds M UIH-PK
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l Q W H e alngi-- 'o- did Jobn Edwards#v@ 1 Q W hydidn'tyou z- odak tlm contractatthl
2 xrgarding M saccolma ? 2 lxgilmill
g of2(K)4?
3 A Irm crspœiscallyztredm lany instnzcuonsfmrn 3 A Badbusinasjudgmentymaybe. ' flrrewasnotbingin
4 Mr.Edwx
vds,semyknowhlgeoftlè Lqba* ontrade 4 Mr,Andœson'scontracttbatwouldhavejustificlacbano of
5 tkkotsandtbocrvnrnunicauonfzom M r.M derson.Typicallya 5 tlr payoutstructux in favorot!lr rtrm ,bccatlseatall
6 position intlv accountwouldlx)availableforliquidation 6 h'
mexm consv!
'envlMr.Edwm'dsasagrtatlar& clientbuî
7 subjœttoalimitprix Myundœsandingis,lv would not 7 tbeapvement11m1wasin pl= wastlr ag= mcnttbalm hatl
8 cnmmunicatoittomerbutMr.Andcsonwould relaytotir 8 inplace.
9 lrading desk tbattbisistlr taro pricestbisiswlmre 9 Q And you don'tH ow Eow Mr.Anœ---''cax tohave
10 wo'rctrgngto x11 soace in11* pricoorbottcr, 1() Mn Edwnedmasacuslomor?
11 om tbecourse- 11 A Idon't.
12 Q W erelobn nlward:'* Mnvolitited? 12 Q Did DarylAarkx m know John le alrDaryl
13 A Yœ . 13 Ani
u S'nHZ',IworkiogatNovW ost?
14 Q W batdid DarxlA''*''''ndatooarnhisonomént 14 A 1alreadyanswe tbisque on.Idon'thlow.I
15 = 1cth1e milliondollam thatiheenx''ee *''''John Fzlw m lM' 15 bavenoreasontobdievotbatlr did. '
16 accouals? 16 Q Hm you ovmr:adany roasostolmliovotbatDaryl
17 A W en,iflmay say so,tlzisisnotam atkrof 17 Ate rxonlla:aay mlbennceab> pzoblmns? .
18 m onoy buta znatlerofparticularG ecution. A lotoftraclœ 18 A No.
19 inCMKM Diamondsw edoneinmarkswitbsignificantsp= ds, 19 Q Hax you :adanyztasonlodoubtM n Ane en's
20 and a spread isthediffezrnce bdwccn tlx bid and tlm ask 20 inkgrity?
21 prico. And mostoftbo cœ uGonsfor Mr.Edwardswere at 21 A No.
22 tbetlffm'
,And forerxnrnpleyirastock tradosat6/1001 of 22 Q Haveyoucvc hadaoy reasontolhlnt'llo':
23 a m nny on thcbid and 7/10* ofam nny on tlv offc,tbat 23 (Iishox st?
24 spread isaboul12,13,14 N cent. So tl
x diffcm wolbat 24 A No.
25 tbecustomc gainsby sdBngatlziplozcosixasopposed 25 Q Haveyourvor--whats% sdid you 'nlettofind
Page 106 Page 108
1 to kiple zero scwen ismore Qzan sufficic tto compensate l out:ow mue. h Joha Fzwxva.hadpidfpr* CKR M Diauxmo
2 forany additionalcostoflrading. 2 xloçko atlIeIlad acquie ?
3 So Gvc N centcomm lssion alwaysfactored in tll e 3 A w eneverlook aay se sto es
xabsshsw cifically
4 1- amotmtoftrading,lhis wasmm sual,1- volume 4 wbathepaid.
5 transactîonstbatwcredoncclosc totheoffc. Sotbe 5 Q Ditlyoaevertakeaaystem lorfndoutrmxvally
. 6 çustomc wasrxoivingsignirxantbenelitoft11a%and in 6 what1= paid?
7 everybody'sopinion wbo looke atitzto tbe bestofmy 7 A No.
8 kmowledge,tba!justificdlhefivomrcentcommission. 8 Q Didyouqr
v- axkMn Fxlwavdswhll1zelle midfor !
9 Q M aye 1em --lotmotryto mskyoutlv quostion in 9 theMock?
10 a diff= ntway. h solmtls11W Dal'
ylAndmxon m rsonally 10 A Ne. '
11 didn'tdovcry muç: lm qur
.oalltlm tr'
atloswc unsolicitGl 11 Q D14Mr.FXI- o evcre- muaicatetoyouwlla:be
12 and itwas M n Conv'is whe was achmlly haut lling lho trading 12 - 14 foxtlxrMx k?
l3 and M n F-dwardswas bzinging in alltlm K rtificalos and so 13 A No.
14 forth. HutitsonnamlikoDarylAxldorsopew.''re wollovG a 14 Q Istlmroanywxyfhaîyouknow oftoriadoulbow
15 m illion doBars from Jolm Fxlwards'lxados. 15 mucbMn FXI- A paid roglEes:oe.k7
16 A n atiscorrec and tbat'san tmforhmate 16 A No.
17 consm uenceofthecnmmivsionstrucmre.It'ssometkingtbat 17 Q Haveyouever= aMn Fulwards'taxzvqt% s?
18 IN sonally do nots
.œ llow tlr amountitselfwould be tlm 18 A Ihave nol,butMn santosrepzqsented to= tbat
19 basisalonetoadjusttbal. Sotir arrangGnœt,tbecontract 19 lppresentedhistaxzeturnstohim inanoffix And
20 tbatMr.A nderson bad in placo atlllotimewarrante that 20 accoydingtowlxatIrenxm-r,tljosetaxzemmsmflectefl1he
21 payouttohim .Soifilwore$10, 000$100,000 or$2m illion, 21 proceedsorsalesofCMKX.
22 11* wastlx commission slructum lhatapplied,and - 22 Q DidMn Saatoskeepacopyoftlkox tu wtuas?
23 Q W mv M r.And> on'scontraclsdnM onayoarly 23 A Idou'
tkaow.
24 baqis? 24 Q DidyourvrraxkMy.rianlostosbow yeum rxaally.
25 A Ycq. 25 aoopy oflhox tu zvturns?
EXHIBI
T 3Page17of23 pa e j05 - Page 108
Divc sified Reportixm Scrvicesalnc. 202-467-9200 R um vantsev Declaration. Paae 82
Case
vp4/2:08-cv-00437-LRH-RJJ
gey Rum yanta' 13/06 Document
M ulti-pago 163 Filed 12/28/10 Page
w 100 Di
CM KM ofam
111
onds
'
.
5
6clarifye.Wa
Edwar evcst
baa
rsyt
anm
tbatq
ts
lumpwœ
mx uononfy
di fo
trm 'pa
rentlm
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rici
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adriM
esn
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oi
s
sea
nn
sd
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''Sotbisisapersonalassumption
.
, )
i
7 A Timt,sanassumptiononmypartlv auseasIsaid$ 7 lbattozrm m a1= scnse.Ybuth alsohassupporling--itls !
!
8 1ncverN sonally discm sGlwitb M r.Edwardshisbusi= s 8 notdoclxmentary evidence, butrepresentationsofM r.Edwards i
9 purposœ ,butthatwasmy undc standing ofrepresenl
ations 9 sœmsto suppon tbatassumption. ;
i
10 made. ' 10 Q W bat1G1Mn SaaYstoaskMn Edwae aboyttlkiv?
1i Q Ditlanyox atNovW ostovœ ask Mn Edwardswhy lm 11 A AspartofNov Wrst'scompliancewithntw
12 lmd 40 diffc ntaccountnamta? 12 anti-money laundming zulesundc lhe PattiotAct every time
13 A I'm sorzy.C-an you rcpeattbat? 13 tllcrc is atransaction ora pattern oftransacticmstbal
l4 Q According toIwhlbitl3l ifyou'll14x)kon tbo 14 slandsoutiutbebusiriesspracticeofabrekerdœler,tbat
15 socondpago,Mn Edwardshadaccountsin40 tliffcronlnamos. 15 mim rmuixradditionalscludny.Andbased upontl!e
16 n at'scounting as* u mowY naccountsgw ilclxxlovorfm m 16 conclusionofreview andtbatadditionalscrutiny, tbat
17 W cllstoCCS.tl- werr40diffcrrntaccezm tnxm cs. Did l7 brokœ doalcrbastomaketir callwhetbcrtorrport
18 anyoe atNov W cstovcrask Jolm F-dwanh why lm v epexl 18 particulartransactionorpattcrn oftfansaclionsto tbe
19 accountsin 40 diffcrrntnnmcs? 19 EkpartmrntofTrc sury. So thisiswil atNev W estwasJoing.
20 A 1don'tbeliev: anybcdy evtrasked 11m spœ isc 20 And in tir cotlrseofcomplyingw ith thatparticttlar
21 quœtion. 21 reqnirt
vnentj M r.SantoswasinterviY ne M r.Edwards :nd his
22 Q Did anyox overask- frnm NovW esteVG ask M r. 22 aRornoySlv woodCm k.
23 EIIwW %gonozaHyw:ylm omntxlsomanydifforenlaccountl? 23 Q M atdidyouknow aboutCMKM Diamonds?
24 A I'
m gcing to try and answerthisas spœijkally as 24 A Atwlmtpointia ti
m o?
25 possibye.lntlv coursooftbeconvcrsationsthat1I
XEt'CO 25 Q ln 2X 3alzd 2004.
EXHIBIT3Page19of23 pagC j;p .yage 132
m versifiedReportinM ScrviccssInc-202-467-9200 R um vantsev Declaration Paae 84 .
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ey Rltm of
ya111
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1 ()ranylbing ofthatsort. So -- l M n ffzmk to = bslantiate M svi- :w1t1:11= reasonsho rmvno
2 Q Did youbave any- I'm = y. 2 te tllosoconolw iozw?
3 A T1xrew asa combinationoffac- tbatœ &entially 3 A Bœ ause1tnkstM n Santos. He ismy par- and
4 drtw substantialscrutinytoMr.Edwards'adivity butnrvor 4 gmlrralcounsesandifbertporlsR)metbatinformati
on
5 pase tlm tlzreslxlld Ijustdescribed. 5 providd byMr.CookissufficimA Ileavtîtattbat.
6 Q DidMnff
.re ec givoyouanyagx/monr,o otber 6 Q Now,in'zvenmeftalkinhtotlmlransfœ agont
7 tbantbe1,41- thatI- you m rlicrltxlay? 7 wkatv x llywmqasked oftboh'
A- foragont?
8 A Jnevœ N sonallyspokew1:1Mr.(7 œ k soI'mjust 8 A ldonetknow.
9 judgingontlm basisofrepresene onsxnadetomeby Mr. 9 Q *11a1oxactly didtllotransfcragontcnmmunicae
10 Santes. 10 back te N> W - t;
11 Q n atelsodid Mn Santossay tllatM n fx
.re said 11 A 1don'tknow.
12 lvyondthislm e? 12 Q Solow didyouzr,
ly on tlm trxnsferagv'nt?
13 A My enemoây 1l= bestofmyv onY tion,Mr.Santos 13 A 1reBed onM r.Santoswhocommnnicae w1,11tlr
14 juslbrlfly qummarizcltbatMr.Cxx)kindicaultoMr.Santos 14 lransfœ ae t.
15 that 'ngwasincomplianco11Q1tY applicablerttlo, 15 Q Andwlzatdid Mn Santosxw rtbek loyou?
16 mgulations,and M r.Edwardsbadclearedjt. 16 A Mr.Santosmportodback tonze11m11. askodtlle
17 Q Did M n Sanu overcnmmunicateA)w a tkatM n 17 lransfc < :andIbrliovc1lespokewitbHrlenBagley,be
18 Cœ kbad gex ino aay M >11of1llefactorstllat:ad1m1hlm 18 askulifslrcansaywithce intythatM r.Edwards'
19 to t:atçoncl- ion? 19 certilicau didn'tcomofrom tlr issuororaflisatesoftbo
20 A Ihad no'vœ hard any dotails,so M r.Santosnt'
vc 20 issuc. And tlv answer11m1l1er= ived accordingto wlmtir
21 çemmunicae any deails,and zvitirrlm indicae tbatH . 21 x'pmsonted to mowasabsolutely not,tbey did notcome from
22 Cook did. 22 tlr issuerorafj-
zliatcs.
23 Q Soyourue%zlerrvvnndingi,tba:Mn Cm kx'
vc 23 Q How didHol= Bagloy H ow whatM n SanesInoantby
24 provie any * *11:substaatiatingbise izon? 24 ''afliliate '' '
25 A No.Al1Iknow igtbatM r.Santosdidnotprovidm 25 A Oncearain,Ibeli- thatswitboutknowingwith
Page 154 Page 156
l mowithinformationonewayoranodm l certainty,slrhadjustlikoanytransferagcntwou!dhave,
2 Q Didyou askM n Sanu ? 2 attorncyopinionletlerssubstantiatingtransfm'sofslock.
3 A No. 3 AnllIbelicvetllatwasthebasisofberconclusion.
4 Q W= you conv- ? 4 Q DidMr.- t0$,asfarasyou know,askHelon
5 A No. 5 Bagloyif11- wereallorneylctlorssuppmlingtlm transror 1
6 Q (Xlmr'hnntlm facttbasM r. Cœkhadaprier 6 oftbestœktoJoim F-dwards? !
!
7 apm înlmcu:- m iormnployma tposition tbalyou viowtxlaa 7 A Ido notrem> ber. ;
8 pzrsligiou .wasfhe- anyv son togiw Mr.Cœ k'sviçw any 8 Q W asityourundorstandingtbal#herraworcattonmy !
9 m om weighl111= a guy on tlm st- 7 9 10- supportillg làesm transf= tœ ? i
10 A WG tlm wasanotW tkirigtbalMr.Santos 10 A 1.41m:pu1thisintimemrspœtivc.Itismy '
11 indiqate tome,notjusthispriorposidonw1t17a 1l understandingpresently.ln2004,Idon'tthinklhad any
12 ngtdator,apparently M r.Cook pv ently is employcd witb a l2 knewlGlge oropinien oncway oranotH .
13 prestigiouslaw f'
mn andltllink repu&alionisabigtiling 13 Q % 41what':tlm basisforyouruntlerstanling now?
14 intlr 1* 1com munity. So thatwasthcword tlkatIreceived 14 A Bœ ause Ibcliovcweeve askM thatquee
slion a
15 from M r.Santos. 15 couplemore times since2004.
16 Q Sotbefacttl'allm werkM forage 1aw fvm aod 16 Q Towhom?
l7 uRdtoikave age jobwasonough tomlyonMsviows? 17 A FirstGlobalStock Transferand spœilscally Htltm
18 M R.GRO Fm : Itllink thatznischaracterizeshis 18 Bagley.
19 a timony. HesaidpmstigiousIaw fmn. 19 Q W1* did sbosay?
20 M S.HAK ALA : Okay, Prestigiouslaw r'
zrm .which 20 A Onceagain,Idldn'tspeak to herdiv tly,bu!
21 acmally maybeadiffx tthing. 21 prcenllyIbelio e111 % areattorneyopinionletters
22 '
IH E W ITNESS; Honestly,Ido notknow whatelscto 22 substanliaung transferofcm4ain shmrzsinlo 1l= nazne or
23 lzseas areferenceforalawycr. 23 beneficialom mrship oftrustscontrolled by Jolm Edwards.
24 BY M S.HAKALA: 24 Q I'm IIIK quilosua llow tophrar.ethis. Hastbo
25 Q W lly didn'tyou arkkM n fY
.zmk orMr.Santostoask 25 Johnm lwardsiss- and tbosubsm uentrcgulatory scrutiny
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'-asignificanli- forNo'vW est? My follow-up que on 1 (R= staken.l
is to 1= w hy are you baving M r.SaatosTnoW alltlm çalls 2 M S. ' Okay. Back ontlv rœord at3:32p= .
in-a
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tlm responm buton onel0velithash tz!asiN ificant 5 than tlmt,did we havoany substanïve conversauons?
problc bccaux it'snotgoing away;on tlm otH handp 6 M R.GRIFR N: No. ''
nobodysafu a2Abexemonlbs,almostycars,afe alltlr 7 BY MS.HAKAI.K
talkstlmtwe'vebadwitkNM D inparticuhr.haqm?er 8 Q Mn - whatwonld yol 14
% todarify;
spœ ifiedyputdownonllam rwhatm m iglïthavedonem ' ong. 9 A Iindicae thattheNASD novœ putanyf hingin
Bœ amsototlrbotofourknowkdgesandx 'zrabsolutezy 10 wridng. W ihal1needtosay andmeantto sayistlrynevœ
confidtnttllatm'Gy applicablezuleintlzi:partkularoasw 11 chqrged uswith anytbinginwriting,V austQxrris
andIdon'tt hinkwe'm missinganytbing,bm wedidnet 12 cono pondencelhatindkae A'm qofconc= oftla last
break any rulotbatm know of.A ndm 'm lakenskp:going 13 audit Andvczy early in tlm u timonytoday1outline
wellbom nd cfwbatwould beqxpectclfrom an averagebroker 14 lbosofourm s,so obviously tbarsbased on written
do lerin tbiscoantry,oaco aFainyto tlw botoflmr 15 cormspondencc. So inslead ofnothing in wri*ng Im cntto
knowledge,soitisourbelir,ftbatm havedonewhatm had 16 saytbryhavenotchargtxlusinwriting.
tofloand1- 1m mom. 17 Q Haveyou ser.
na copy oftllotraascriptofytmr
So tba:rrgtllaklry scam iny forushasmostly bœ n 18 u tim ony witb tbeNA SD?
apm zloinourlrallsjllstintbesenseofwhatcould 19 A No.
possiblyhavebeen- likewbatcouklwobavodonowrong? 20 Q Doyourtanomlx)
rytmrtestimonyw1t11tlr NASD?
Bœ ausototbisdaywehavenoovie cetbatM r.Edwards 21 A Thatwasabout15monl sago, bm Imo n,it'sll1e
lkimselfhas denosonwthing wrong.bœ allsewo've sœ n all 22 tzutb,so --
kinclsofactiens,asImenti
onc againstUrban C-asavant, 23 Q l.clme--whatI'm wondering.I'vohad tho
CMKM hadtbeire strationrevoke .So wo'vescenallkinds 24 oppnennity toreviow thattraascript,antl1'm thinking tbat
ofactions taken againsttlr issucr m 'Me nvwc sœn 25 tmlay wo can savo a lolortimo thatifI can assm no that
Page l58 Pagt 160
anyt
hingdon:toM r.Edwardsv onally.Tatlzisdaywchave 1 youransworsto tlzo quostionsposodby tlv N ASD arot:osame
notbad any documcnted evidmwepztw nu ltoany ofus 2 msyou w ould answ ortbose qu tionskxlay, jdon'tnexvlto go
indicatinp juslcbatl
engingtbatopinkm.Evenlookingat 3 througb a1otofthobackground stuffofinform aliom h
LI. transfc she ,bœ ausmIsœ tlzisfor11r fzrsttime 4 tbat--
('m still--ldon'tknow wbo Dalo antlM ax Casavantareobut 5 A n atisa goqxlassumption . Y>.
iustreadingthesenamesdonotyetasccrtaintometlhat 6 Q Okay. Justsa= a1otoftimotnxlgingthrough
L
lry'm in facl.affiliau oftbeissuer. So to tllis day 7 tho tnm o stuffovorand overagaim W ho svm rvisGlDaryl
i
vt'rejusyinO dark andwondœing. 8 Anlkfson?
Q HastboNASD indicated toyouorh)Nov Wosttbat 9 A DarylAndrrson,lmingaretailbrokerduringtlm
il'sconsidezing suie Nov W Y ? 10 thneundtrreview , wassubjectt
osupervk&ion by Ram ond
A 'nry indicae toustlry'm censidcringAnklng ' )1 Dillon supmwisor anduhimately subjcttomy sujm ision
lisciglinary action,butnoverindicatcd th% were suing. I 12 astlv pru identoftir fzrm . ADIIobvieusly tbat's you
lon'ttIIiIICtbal'san optien initially. Arbitration istlr 13 knew,a vertical5ne ofcomm and,butirwc IIICabout
>rocclure llmtwould havcto follow. l4 functionalareas obviously wehad M r. Santoswbo,asa
Q '
l'll
oy'x indicakxltkattilcyintçodlopursœ 15 gencralcounsel,isin charl ofgenrralcomplianceissuesin
Nsciplinazy action? l6 tbalrespect and M r. Andcsonwassubjem lo Nfr.Santos's
A n cy intlicaled they intend to pursuedisciplina!y 17 supn ision. Iam tlr seniortrading supn isor,so in
Iction,buttlry noverputanything in writing aftermontbs 18 cmlain alm s oftrading, 1wottld bavediv tautboHty in
m dmonthsofindicatingtbal.Ticy indicae thatteus 19 supefvisorym atu s.
ïboutl5mopl
lm agooriginazy. 20 Q W lm --llow did NovW Y sqlporvix DarylAntH sonto
M R.GRIFH N:Couldwetakeashon blm k? 21 makoxm otbathowasaccurately convoyingtrading
M S.HAKALA: Oh,sure. 22 instructiens to the trading * k?
M R.ORIFFIN;lftbat'sall:111. 23 A n atwasmyv ponsibility.Andsinccwe'
resucha
M S.HAKALAZ n at's fino. OfftlleTecord at3:25 24 sm allf-
lrm ,tbereisno chain ofdelivm'
y, so tlle only way
).
m. 25 M r.Aadcson communicated trading instructionsto m wasby
)157-Pagel60 EXHIBIT3PKe21of23 Rum yantsev Declaration, Page 86 '
!
D iversified R eportinM Servicem Inc. 202-467-9200 i
C Case
Di 2:08-cv-00437-LRH-RJJ Document
am onds 163 Filed 12/28/10 Se
M uld-pageW Page
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Page 161 ' page 163
1 doli
vmingaF:N e kttm'callingasm cifk irism xtion l (11f1notknow itwasam aildrop. And esxnlially now wedo.
2 1.Now,wenovc sm cificallyverifid thevalidity or 2 Q How doyollhlgw wbatJo% F.rlwe I'hamoaddressis?
3 wM herinstrucuonswerecorrœ tly convom lgoingbackto 3 A Bœ ausewovcrificlitfrom hisdrivc 'slicensc.
4 tllec5< butasM r.Fxlwardswasanactivoclientw1t11a 4 .*rXIIbolkveM r. SantosmiFhthavo'A enadditionalsttps,
5 1- ntunlmroflradlngjandbcwottl d receivlstalem enlsand 5 but--
6 confuznauonsatalltkncs,D'VH l1xzn.andlr wasa 6 Q Doyouknow whœtly- 'n'
aaltionalvtop:= 1
7 faquentvisitortotbeoflicq M r.Fzwardsncveryovm' 7 A No.
8 que onclwhe.hv hisinsmwtionswc relayed inan 8 Q How doyoa t'n- tlm oaa- sonM gdzivo 'slirwe-
9 inaccurat mannc ,Sosinceiv ncvc raisedtbeque on 9 isM shnmnaaa- e?
10 likethat,tlx:
fewasnovc a need frem m yperspectiveto 19 A 1(lon'lknow,andI'm notawareoftlr spœ ific
11 verz'
ry any instrucions sv ifically. 11 stepstbatwemigbtorm igbfnclhavc lnlren lo vtzify tbat.
12 Q Did DarylAnœ---'-mevAlvoanycomlvnsatien 12 n erevionvofMr.Santog inmyundersunding,e k - tlr
13 ot- - fnwn Nev W ostotbrrtbln cnmm lsxion:on hisM aez
q? 13 çonclmqion wasy% , thatwasM r.Fzlwards'hmnead- s and
14 Didllohavoasalaryoranylhing? 14 tbatwmqsufscienttosatisfyourclulomeridentlficadon
15 A No. 15 rm ltilunontq.
16 Q W asllemimbursmlferhiglxm nsos? 16 Q Did mœ tof* .Bdwards'acr.romW ux MsSœ ial
17 A Idon'tboli
evele v'vc wasforanyœ ng. 17 recurily nm zthx'
?
18 Q Ax you awareofanyotH Rlationshiple w= 18 A Idonotknow tlxat.
19 DarylAne onandJoha BdwardsotH tàanactie ashi& 19 Q Didyou= 1W e!any so sto cW k and = what
20 brnkev? 20 K mialSocurity num lmrwas*:jw lontv accounts?
21 A No. 21 A No.
22 Q lfyou11> toExhibil131,whic.
b istboacrnnnt 22 Q Didyou - haveyoq o'vordiscm e w1111anyox whal
23 lisq you'llnolc tàatznany ofJohn Edwards'accmm tsàave 23 SocialSooUlity numlvrwmln=xlos tboaccountq?
24 tbeu mnaddregsal75* W eslLakeM = d Boukvard. 24 A No.
25 A Ycs. 25 Q W oulditmlrpriseyouk>1= AatJohn Fxlware
Page 162 ' Page 164
1 Q Wox youaw= ofthatin2003and2(K)4? 1 uralMs> ialSocurilynxlmbcronmanyoftlmaccounts? l
2 A lbœ ame fam iliarwith an igsuewitb tlkisaddress. 2 A No. Acmally thisis slandard praclic:in many !
3 W@taroundtheIime- 3 caseswithtrusts. IbelirvoI'vestrntbatY fore. ;
4 Mlt,GRIFFm :Answc tbequestiontbatsl
x asked. 4 Q W I- tboenzqrle- ux'sMlown Se ialSKUIY
5 W 1m1wastbequestion? 5 numbm' ?
. 6 THF,W JTNESS: n eanswc isno. 6 A 1belioveIil avw. I'm no1lK percentcA in,but
7 BY M S.HAKALA: 7 itdoesnotstrike moassnm-bing untksmql.
8 Q You Y dyouW ameawareofan issœ w1111œis 8 Q DœwsNovW osthaw an outsidolaw Ftrm thalitu=
9 adG ss. W llatwas tbatissuo? 9 to Gonsuls< t11on zrgulatory issx ?
l0 A ln Februazy 2005 wlx'
n tlm SEC was in olzrofficœ, 10 A From timelo times y> ,m de,soveralFzrms.
ll tllw'
yindicae to ustlmlthataddresswasamaildrop,soa 1i Q M atFzrmsam tllosl?
12 PO Box wimre M r.Edwardswould collœ ta largcvolume ef 12 A M r. Griffin 11= mpresene W oodbury & Kesler,w c
l3 confulnation stalemenlstbat1mtnéonod. So ir wasusing a I3 çonsule witb tbmn inrœeatmontllssrvcaltinv , But1lr
14 mailbox asa location to rœ eive thoso documcnts. 14 lengestrdatiensbip tba!we'vehad iswitila fu'
m McEtrmotq
i5 Q Andwlryisthat.anissuo? 15 W ill& Bmeryin'
W ashingtonDC.Andweknow acoupleof
16 A W e.II our- tbepœ ple who brougbti!to our 16 lawjrcrsin tlr I7C officq Irœ ently nxtsomopeople io tbo
17 attention said tbatit'simportant* velify lmdertbe 17 L .A.office,andasamattœ offact,MclMrmott,W ill& Emcfy
18 cllstomœ identilication $.11% we Qrre'sa physical 18 rtprtsented usduring ouru timony attM NASD lastycar.
19 localion wlm an accountholdcrisdoing business. Butotlr 19 Q 1wantlotreadvcry carrfully bozolecausc
20 v earcb indicatod tbatin acaseofan entity such as 20 obviom ly convmsationsyou've had w1,11yourlawm azr
21 trasts,tir residoncéoftlm trastœ issufficienttox'
rvc 21 privilœ c andIdon'twantlogee1- . Se l tM IA wo all
22 astlv m ainplaccofbusiness,SoforM r.Edwards,atall 22 wanttotzm dveryca fully. I'm surc yov counselfœ ls
23 îimesweknmvwbathishom:addzvsswas,and tlr facttbat1x: 23 tbo mame way.
24 bad a maildrop atfu'
stapprared an issueto an SEE ofi
k er 24 lWR . GRIFIRXN: W o'llld you know ifyou crosstbo
25 whowa:inouroffices butitjust--tousapmaredlikewe 25 lino.
EXHIBIT3Page22Of23 page 161 -Page l64
Divc sified Reportinz Sexviccsplnc. 202-467-9200 R um vantsev Declaration Paae 87 .
'
E X H IB IT 4
7
sEc tnkl-rlEs A N D Ex clovx t)s case N o.2-O8cv O()437-LRH -R JJ
8 CO M M ISSION '
9 Pa
1 intiff, A N SW ER O F SE R G EY ,
R U M Y A N T SEV TO SE C s FIR ST
10 vs. and SECOND REQUESTS FOR
PR O D U C TIO N O F D O C U M EN TS
11 CM K M D IA M O N D S, IN C.,etal., PU R SUA N T T O R U LE 34
12 D efendants.
13
20 i
21
22
23
24
25
26
l s. JeffTurino;
2 t. Edw ards & A ngellLLP;
3 u. D .R ogerG lenn;
4 v. Em erson K och;
5 w . Shaw n H ackm an;
6 x. D avid D esorm eau;
7 y. ChristopherJensen;
8 z. Ed Thom pson'
,
9 aa. V incentLo C astro;
10 bb. D on Y arter;
l1 cc. P.A .H oldings;
12 dd. Part--l-im e M anagem ent,lnc.,
'
13 ee. A ny entity for w hich JeffTurino served or serves as a director,ofticer,
14 ow ner,trustee,orbeneficiary;
15 ff. A ny entity forw hich K athleen Tom asso served orserves as a director,
16 officer,ow ner,trustee,or beneficiary;
17 gg. A ny entity forw hich A nthony Tom asso served orserves as a director,
18 oftscer,ow nertrustee,orbenetqciary;
19 hh. A ny entity forw hich Bruce H arlan served or serves as a director,
20 officer,ow ner,trustee,or beneficiary;
21 ii. A ny entity forw hich U rban Casavantsen'ed orserves as a director,
22 officer,ow ner,trustee,orbeneficiary.
d. A nthony Santos'
,
2 D arylA nderson'
,
3 Ian M clntyre'
,
4 g. Bruce H arlan;
5 h. Todd Sm ith'
,
6 Tim othy C am m ell'
,
7 JeffM itchell;
8 k. V ictorCasavant'
,
9 Jam esK irm ey;
10 m. G ingerG utierrez;
11 n. N evW estSecurities,Inc.;
12 1S'G lobalStock TransferLLC;
13 p. H elen B agley;
14 q. A nthony Tom asso;
15 K athleen Tom asso'
,
16 s. JeffTurino;
17 Edw ards & A ngellLLP;
18 u. D .R ogerG lenn'
,
19 Em erson K och;
20 w. Shaw n H ackm an;
21 D avid D esonmeau;
22 C hristopherJensen'
,
23 z. Ed Thom pson'
,
24 aa. V incentLo Castro'
,
25 bb. D on Y arter;
26 cc. P.A .H oldings;
22 SW O.
RN tounderthepenaltyofperjurythis12thdayofOctober,2008.
23 .
24 c l
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17 Email:mdzarnoski@ gordonsilver.com
l8 AttorneyforHelenBagley and 1stGlobalStock TranqferLLC
19 U rban A .Casavant
R R 5 Site 16 Box 29
20 Prince A lbert, Saskatchew an S6V 5R 3
21 C anada
Email:ucasavant@ shaw.ca
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E X H IB IT 5
14
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5 Defendantobjectstothettdefinitions''inPlaintiff'sSecond SetofRequests
6 forAdm issionsto SergeyRumyantsev(ttplaintiffsRFA's'')totheextentthey
7 purportto im pose obligations on D efendantbeyond the obligations im posed by the
: FederalRulesofCivilProeedure. ln respondlng to PlaintiffsRFA 's, D efendant
9 willrespond in accordance with hisobligationsassetforth in the FederalRulesof
10 CivilProcedure.
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EXHIBIT 5 Page 3 of7 3
Rum yantsev Declaration,Page 115
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 22 of 30
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EX H IB IT 5 Page 5 of7 5
R um yantsev D eclaration,Page 117
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 24 of 30
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E X H IB IT 6
From: ''DavidAlsup''<davi
d@ ccls.com>
To: <sergey@ nevwest.net>
Sent: W ednesdaylFebruary25,2004 2:48 PM
Attach: NevW est.doc
Subject: again,amended.
((S
Stocks thattrade forIess than $0.01 and willrequire CCS to depositw ith NSCC an am ount greater
than $500,000 in aggregate,mustbe doneX-clearing.Thesetrades willbesubjected to aIl
applicable fees,including interestcharges on funds thatare required to be deposited to NSCC for
al1trades.
Initials
((s
k mpllterIlu riglserëicesvlnt.
Page 2
O THER TRANSA CTIO NS'
.
*Bonds $25.perticket
*U.S.Govt/Agencies $50.perticket
*zero Coupon $50.perticket
*syndicate $12.perticket
*MutualFunds/ulT's $25.perticket
wBrokerto BrokertRiskless principaltrades) $10.perticket
*x-clearing Trades $28.perticket
*DTC,NSCC,& NASDAQ fees apply w hereapplicable.
NOTE:Canceland Rebilldue to Correspondenterrorwillbe charged to the Correspondentbased
on the above schedule
O PERATIO NS A CTIVITY:
AccountTransfertoutgoingACATS) $ 50.00 peraccount
Back up W ithholding directcost
Deliveryvs.Payment(NOn-CNS eligible) $ 35.00 plus any directcost
DTC Fee $ 10.00 peroutgoing delivery
lnactivity Fee $ 30.00 sem i-annually (IRA'sExempted)
Option Exercise/Assignment $ 30.00 perexercise/assignm ent
Records Research $ 50.00 perhour (1/2hourmin.)
Safekeeping Charge $ 50.00 peraccount,annually
Tenders,Exchange,Reorg $ 10.00 percustom er,perissue
Transfers/custom ers $ 15.00 Apercedificate
Transfers/courtesy $ 25.00 epercertificate
Transfers/Foreign $ 15.00 eperdelivery w ithin U.S.
$100.00 Aperdelivery outside country
$250.00 perissue directto customer
* PIus any directcosts
PO STA G E
OvernightMail(by Requestj $ 25.00 perenvelope
Postage & Handing $ 3.00 perretailtrade.
Returned Mail $ 1.00 peritem
Initials
((S
ZEE '
7
P--p llr
prlleari. k lvites.1n:.
Page 3
**CUR RENT REG ULATO RY FEES:
NASD TRADING ACTIVITY FEE -EQUITIES:
No Min.Fee $0.0001perShareSellSide Listed and OTC (Share< 100,000)
Max$10.00 $10 perTrade SellSide Listedand OTC (Share>= 100,000)
NASD Fee-Options No Min/Max $0.002perContract
NSCC TRADE RECORDING FEE:
Mjn.$0.009&rade $0.009 perTrade Listed and OTC (Share<= 300)
Max.$0.18/Trade $0.18perTrade Listed and OTC (Share>= 6000)
$0.00003 perShare $0.00003 perShareListed and OTC (300< Share<6000)
NASDAQ MANAGEMENT FEE: $0.029 perExecution
e'rhesecurrentfeesaresubjecttochangewitboutnoticefrom theRegulatorybodies.
R EG ULA TO RY REQ UIREM ENTS'
.
Reg.T Extension $ 10.00 perextension
Rule 144 Filing com pleted by CCS $100.00 plus directcost
Blue SheetRepoding $150.00 perrequestby NASD & S.E.C.
By: By:
N am e: N am e:
(Pri
ntName) (Pri
ntName)
Title: - Title:
D ate D ate
EXHIBIT 6 Page 4 of4 3
R um yantsev Declaration,Page 124