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12-2297pr

To be argued by:
D. B. KARRON
Uu|Icd 'IaIco <oa|I o| Jppca|o
FOR THE SECOND CIRCUIT
Docket No. 12-2297



DANIEL B. KARRON,
Petitioner - Appellant,
v.
UNITED STATES OF AMERICA,
Respondent - Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

APPENDIX Volume 8 FOR THE PETITIONER - APPELLANT











D. B. KARRON
pro se
348 East Fulton Street
Long Beach, New York 11561
(516) 515- 1474
drdbkarron@gmail.com
Contents
Table of Contents ............................................................................................. 2
APPENDIX VOLUME COVERS .................................................................. 6
APPENDIX Volume 1 FOR THE PETITIONER APPELLANT ................ 7
APPENDIX Volume 2 FOR THE PETITIONER APPELLANT ................ 9
APPENDIX Volume 3 FOR THE PETITIONER APPELLANT ..............11
APPENDIX Volume 4 FOR THE PETITIONER APPELLANT ..............13
APPENDIX Volume 5 FOR THE PETITIONER APPELLANT ..............15
APPENDIX Volume 6 FOR THE PETITIONER APPELLANT ..............17
APPENDIX Volume 7 FOR THE PETITIONER APPELLANT ..............19
APPENDIX Volume 8 FOR THE PETITIONER APPELLANT ..............21
APPENDIX Volume 9 FOR THE PETITIONER APPELLANT ..............23
APPENDIX Volume 10 FOR THE PETITIONER APPELLANT ............25
APPENDIX Volume 11 FOR THE PETITIONER APPELLANT ............27
APPENDIX TABS ........................................................................................29
Case Docket ..................................................................................................... 1
District Court Amended Opinion and Order ................................................... 2
Docketed Briefs ............................................................................................... 3
Originating 2255 Form Motion ....................................................................... 4
Originating Brief Memorandum of Facts and Law ......................................... 5
Reply Brief Corrected Sur Reply Memo of Facts and Law ............................ 6
Audit and Accounting Forensics (short) .......................................................... 7
GX114 .............................................................................................................. 8
GX114 in Focus ............................................................................................... 9
GX110 Year 1 ................................................................................................10
KARRON PERSONAL ACCOUNTS ..........................................................11
GX112 Year 1 ................................................................................................12
Year 1 SF269A ..............................................................................................13
Year 1 Source of Funds .................................................................................14
Karron Co-Funding Year 1 Schedule .....................................................15
Karron Co-Funding Check 1166 .........................................................16
Karron Co-Funding Check 5339 .........................................................17
Karron Co-Funding Check 5341 .........................................................18
Karron Co-Funding Check 1222 .........................................................19
Karron Co-Funding Check 1228 .........................................................20
Karron Co-Funding Check 1142 .........................................................21
Karron Co-Funding Check 1243 .........................................................22
Karron Co-Funding Check 1152 .........................................................23
Karron Co-Funding Check 1153 .........................................................24
Karron Co-Funding Check 1154 .........................................................25
Karron 75K Payroll Advance and Repayment......................................26
Salary Advance and Repayment Schedule .........................................27
Year 2 Source of Funds .................................................................................28
GX113 Year 2 Source of Funds ....................................................................29
Year 2 Karron Checks Source of Funds ........................................................30
Karron Co-Funding Year 2 Schedule .....................................................31
Karron Check 1142 for $5000 ..............................................................32
Karron Check 1152 for $2,500 .............................................................33
Karron Check 1153 for $2,500 .............................................................34
Karron Check 1154 for $2,500 .............................................................35
Karron Check 1166 for $2,000 .............................................................36
Karron Check 5339 for $2,000 .............................................................37
Karron Check 5341 for $1,000 .............................................................38
Karron check 1222 for $1000. ..............................................................39
Karron check 1228 for $20,000 ............................................................40
Karron Check 1243 for $25,000 ...........................................................41
Program Purchases during Program on Karron Personal ...............42
KARRON PERSONAL MASTERCARD ....................................................43
STATUTES ...................................................................................................44
15 USC 278n(2001) .....................................................................................45
Rules and Regulations ...................................................................................46
15 CFR 24.30 Changes ................................................................................47
15 CFR 14 DoC Uniform Administrative Rules ........................................48
OMB Cost Principles 2001 ............................................................................49
48 CFR Ch. 99 9903.2015 Waiver (2001) ................................................50
Government Exhibits .....................................................................................51
Government Exhibit Contracts ......................................................................52
GX1 Proposal Preparation Kit .......................................................................53
GX2 ATP General Terms and Conditions 2001............................................54
GX3 DoC Financial Assistance Standard Terms and Conditions .................55
GX4 Grants and Agreements Management Division GAMA ......................56
GX12 Co Operative Agreement ....................................................................58
GX13 Special Conditions ..............................................................................59
GX14 Special Conditions ..............................................................................60
POPA Newsletter 1 ........................................................................................61
POPA Newsletter 2 ........................................................................................62
Case Law........................................................................................................63
Institute for Technology Development v. Brown, 63 F.3d 445 (C.A.5
(Miss.), 1995) ...........................................................................................................64
Scholarly Writing ...........................................................................................65
Legal Scholarly Writing ................................................................................66
Say What You Mean J Levine .......................................................................67
Financial Assistance And The Bona Fide Need Rule ...................................68
The Use of Sentencing Findings ............................................................69
THESE PAGES INTENTIONALLY BLANK .............................................70
TRIAL and Sentencing TRASCRIPT (Long) ...............................................77
DUNLEVY FORENSIC RECONSTRUCTION (Long) ..............................77


APPENDIX VOLUME PAGES

Volume V1 KA-1 KA-300
Volume V2 KA-300 KA-599
Volume V3 KA-600 KA-899
Volume V4 KA-900 KA-1199
Volume V5 KA-1200 KA-1499
Volume V6 KA-1500 KA-1799
Volume V7 KA-1800 KA-2199
Volume V8 KA-2200 KA-2499
Volume V9 KA-2500 KA-2799
Volume V10 KA-2800 KA-3099
Volume V11 KA-3100 KA-3332 END
Table 1 Appendix Volume Pages

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1 THE COURT: But t hen you never got a pr oposed budget
2 i ncor por at i ng t hat $80, 000 r equest .
3 THE WI TNESS: The change was mor e t han $80, 000. I t
4 was wel l over 80, 000.
5 THE COURT: You never got a pr oposed budget - -
6 THE WI TNESS: I got a r equest f or a r evi sed budget .
7 So, I don' t l ook at - -
8 THE COURT: Let me ask a quest i on.
9 THE WI TNESS: OK.
10 THE COURT: Di d you ever get a pr oposal i n wr i t i ng i n
11 a r evi sed budget f or an addi t i onal pur chase of equi pment over
12 $80, 000?
13 THE WI TNESS: Yes.
14 THE COURT: You di d. Whi ch budget di d you get t hat
15 i n?
16 THE WI TNESS: The next budget , so i t came i n November ,
17 so i t pr obabl y had t o be t he Oct ober 20 budget i n 2002. That
18 woul d be t he budget , because t hat woul d be t he budget af t er .
19 THE COURT: That ' s Exhi bi t - -
20 MR. RUBI NSTEI N: 31, I bel i eve, your Honor .
21 THE COURT: 35? 45?
22 THE WI TNESS: No, t her e i s anot her one f or Oct ober , so
23 I have t o t el l you whi ch one.
24 MR. RUBI NSTEI N: Ar e you l ooki ng f or t he Oct ober 2002,
25 Ms. Snowden?
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1 THE WI TNESS: Yes.
2 MR. RUBI NSTEI N: That i s Gover nment Exhi bi t 32.
3 THE WI TNESS: 32?
4 THE COURT: Whi ch i t emar e you r ef er r i ng t o t her e?
5 THE WI TNESS: The quest i on was about t he equi pment .
6 And i f you see t he equi pment cat egor y i t ' s l i ke $303, 400, so I
7 woul d l ook i n t he one t hat ' s pr evi ous, t he appr oved one. So,
8 you know t hat t hat cat egor y i t ' s wel l over $80, 000. So, we can
9 l ook i n any appr oved budget .
10 THE COURT: I ' ml ooki ng her e. I ' ml ooki ng at Exhi bi t
11 32.
12 THE WI TNESS: Yes.
13 THE COURT: And t he equi pment number s i n Exhi bi t 32
14 ar e $303, 400 i n year one.
15 THE WI TNESS: Ri ght .
16 THE COURT: I n year one. I n year t wo i t ' s $133, 000.
17 And I ' ml ooki ng back t o Exhi bi t 1, and t he equi pment i s
18 $250, 000, whi ch i s $53, 000 l ess t han t he amount i n Exhi bi t 32,
19 so i n year t wo i t ' s $133, 000, whi ch i s over $120, 000 hi gher
20 t han t he amount i n Exhi bi t 31.
21 THE WI TNESS: Ri ght . So i t ' s over $80, 000. He has t o
22 get appr oval .
23 THE COURT: That ' s f or year t wo.
24 THE WI TNESS: We' r e onl y l ooki ng at year one r i ght
25 now, because - -
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1 THE COURT: I ' ml ooki ng at bot h of t hem, and you' r e
2 not l i st eni ng t o me.
3 THE WI TNESS: OK.
4 THE COURT: Al l r i ght ? I ' ml ooki ng at Exhi bi t 32.
5 THE WI TNESS: I ' ml ooki ng at Exhi bi t 32.
6 THE COURT: That ' s $303, 400.
7 THE WI TNESS: Yes.
8 THE COURT: And Exhi bi t 31 i s $250, 000 i n year one.
9 THE WI TNESS: I f you can bear wi t h me, t hese ar e not
10 i n or der . I need t o get 31 so we can - - her e we go.
11 THE COURT: 250, 000, i s t hat r i ght ?
12 THE WI TNESS: Ri ght , 250, 000.
13 THE COURT: And t hi s budget f or August 1, 2002 i s
14 appr oved, i sn' t t hat r i ght ?
15 THE WI TNESS: No.
16 THE COURT: No? I t wasn' t ?
17 THE WI TNESS: No.
18 THE COURT: Do I have t o go back t o Exhi bi t 30? Whi ch
19 one was appr oved.
20 THE WI TNESS: I t ' s amendment 2 t hat was - -
21 THE COURT: Wher e do I see t hat ?
22 THE WI TNESS: Yeah, amendment 2 was t he l ast appr oved
23 budget .
24 DEPUTY COURT CLERK: I s t hat 22? I s t hat Gover nment
25 Exhi bi t 22?
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1 THE WI TNESS: I t sai d amendment 2 on t he f r ont of i t .
2 THE COURT: I want t o know what one was appr oved.
3 THE WI TNESS: OK. The l ast appr oved budget was
4 amendment 2.
5 THE COURT: The one t hat says submi t t ed - - oh, come
6 on.
7 THE WI TNESS: Ri ght , i t ' s Exhi bi t 22.
8 DEPUTY COURT CLERK: Gover nment 22.
9 THE COURT: Thi s i s J anuar y 17, 2002?
10 THE WI TNESS: Yes.
11 THE COURT: And t hat had a f i gur e or a number of
12 $110, 000.
13 THE WI TNESS: Yes.
14 THE COURT: So, what you ar e sayi ng i s t hat you shoul d
15 l ook at Exhi bi t 22 - -
16 THE WI TNESS: Yes.
17 THE COURT: - - and t hen compar e Exhi bi t 22 wi t h
18 Exhi bi t 33 - - 32.
19 THE WI TNESS: Wel l , August 2002 i s Exhi bi t 31. That
20 woul d be t he f i r st t i me t hat I r ecei ved t he budget t hat I
21 quest i oned.
22 THE COURT: What I want t o know i s what t est you
23 appl i ed on t he r equest f or addi t i onal equi pment . Di d you l ook
24 t o t he pr i or appr oved budget ?
25 THE WI TNESS: Yes.
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1 THE COURT: So, you l ooked at Exhi bi t 22, i s t hat
2 cor r ect ?
3 THE WI TNESS: Yes.
4 THE COURT: And you saw t hat t he amount f or equi pment
5 i n year one was $110, 000.
6 THE WI TNESS: Yes.
7 THE COURT: And t hen when you l ooked at Exhi bi t 32,
8 whi ch cont ai ned t he r equest , you say - -
9 THE WI TNESS: No, f i r st i t ' s goi ng t o be Exhi bi t 31.
10 THE COURT: Exhi bi t 31.
11 THE WI TNESS: Because t hat ' s August 2002. That wi l l
12 be t he next budget .
13 THE COURT: So, t hat ' s t he t i me t hat he made t he
14 r equest f or t he addi t i onal equi pment ?
15 THE WI TNESS: Oh, you know what , you' r e t ot al l y r i ght ,
16 because of t hi s, i t woul d be Oct ober - - you' r e r i ght . 32.
17 Sor r y about t hat , because t hat woul d be i n Oct ober . You' r e
18 cor r ect . Yes.
19 THE COURT: So, when you l ooked at Exhi bi t 32 - - or
20 maybe when you l ooked at Exhi bi t 31 you l ooked at t he
21 di f f er ence bet ween $110, 000 i n Exhi bi t 22 t he appr oved budget
22 and t he ent r i es i n Exhi bi t 32 of $303, 000.
23 THE WI TNESS: Yes.
24 THE COURT: 110 t o 303.
25 THE WI TNESS: Yes.
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1 THE COURT: And t hat was over $80, 000?
2 THE WI TNESS: Yes.
3 THE COURT: OK, al l r i ght . I j ust want ed t o
4 under st and what pr ocess you used i n det er mi ni ng t hat .
5 BY MR. RUBI NSTEI N:
6 Q. Now, as f ar as f r i nge benef i t s, t her e was an appr oved
7 budget , was t her e not , i n November of 2001?
8 A. The or i gi nal appr oved budget was dat ed Sept ember of 2001.
9 That was i ncor por at ed i nt o t he document t hat CASI si gned
10 Oct ober 5, 2001.
11 Q. Wasn' t t her e a r evi si on of - -
12 THE COURT: What exhi bi t ar e we deal i ng wi t h her e?
13 The j ur y has t o f ol l ow t hi s. What exhi bi t i s i t ? They mi ght
14 want t o l ook at t hei r books t o see what you ar e t al ki ng about .
15 MR. RUBI NSTEI N: I ' mt r yi ng.
16 THE COURT: I s t hat t he one exhi bi t 21?
17 THE WI TNESS: No, Exhi bi t 21 i s t he f i r st amendment ,
18 so i t woul d have t o be I guess 20.
19 THE COURT: Was t he f i r st amendment appr oved?
20 THE WI TNESS: The or i gi nal document was appr oved.
21 THE COURT: Was Exhi bi t 21 appr oved i s what I ' maski ng
22 you.
23 THE WI TNESS: Exhi bi t 21 was appr oved.
24 THE COURT: And t he or i gi nal document was Exhi bi t 14?
25 THE WI TNESS: I ' ml ooki ng.
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1 THE COURT: I ' mj ust aski ng. I don' t know.
2 Q. Exhi bi t 21, ma' am, i s t he f i r st r evi sed - -
3 THE COURT: Wel l , l et ' s get an answer f i r st t o what
4 was t he or i gi nal budget .
5 THE WI TNESS: Exhi bi t 14.
6 THE COURT: Al l r i ght , t hat ' s t he or i gi nal budget . Go
7 on f r omt her e, Mr . Rubi nst ei n. I t ur n i t over t o you.
8 Q. OK. Exhi bi t 21 was t he f i r st amended budget , cor r ect ?
9 A. Yes.
10 Q. And i t i s dat ed 10/ 24/ 01, si gned by Dr . Kar r on 11/ 7/ 01,
11 cor r ect ?
12 A. Yes.
13 Q. What wer e t he amendment s t hat wer e made t o t he budget at
14 t hat t i me?
15 A. Ther e was no changes t o t he budget at t hat t i me.
16 Q. That was t he t i me t hat Gur f ei n' s name was changed, cor r ect ?
17 A. Yes.
18 Q. The next one i s 22. I t ' s amendment number 2 dat ed J anuar y
19 4, ' 02.
20 A. That ' s when my f or mer super vi sor si gned i t , yes.
21 Q. And i n t hat amendment t hey' r e aski ng t o r educe sal ar i es
22 f r om375 t o 325, 000, r i ght ?
23 A. Yes.
24 Q. And t hey want t o r educe f r i nge benef i t s f r om127, 500 t o
25 10, 500, r i ght ?
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1 A. 110, 500.
2 Q. And equi pment t hey want t o r educe 10, 000, f r om120 t o
3 110, 000.
4 A. Yes.
5 Q. And t hey want t o i ncr ease subcont r act or s f r om200, 000 t o
6 250, 000.
7 A. Yes.
8 Q. And t he net t ot al i s t hat t he same amount of money i s bei ng
9 spent , cor r ect , t he $800, 000?
10 A. I t st ays wi t hi n t he 800, 000 but i t ' s over 10 per cent change
11 i n t he annual year , so i t ' s over $80, 000 of changes.
12 Q. Whi ch cat egor y was changed by $80, 000?
13 A. I t ' s not per cat egor y, i t ' s per annual budget .
14 Q. When you t al k about t he 10 per cent , you ar e t al ki ng about
15 an i ncr ease, cor r ect ?
16 A. No, t he 10 per cent i s a change wi t hi n t he annual budget of
17 over 10 per cent .
18 Q. I s i t gi vi ng 10 per cent mor e money t han you had bef or e?
19 A. The annual budget r emai ns t he same, but i t ' s when you
20 change cat egor i es. You can make t he changes but i f i t ' s
21 over - - f or exampl e, year one, i f i t was over $80, 000, i f you
22 l ook at t he changes t hat was r equest ed i t was wel l over
23 $80, 000, and t hat ' s why he had t o r equest and get an appr oved
24 r evi sed budget nar r at i ve. The changes have t o be 10 per cent or
25 gr eat er wi t hi n al l cat egor i es.
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1 Q. Changes of mor e money spent i n a par t i cul ar cat egor y.
2 A. No, i t coul d be mor e, i t coul d be t aki ng money away. I t ' s
3 changes i n gener al , changes per i od.
4 Q. Any t i me you i ncr ease a cat egor y, you have t o t ake away
5 f r omanot her cat egor y i n or der t o st ay wi t hi n t he 800, 000,
6 cor r ect ?
7 A. Yes.
8 Q. Now, i n t hat year t hey r educed t he f r i nge benef i t s t o
9 $110, 000, cor r ect ?
10 A. Yes.
11 Q. And di d you have any di scussi ons - - when you had t he
12 ki ck- of f on November 8, 2001, was t her e di scussi ons about
13 f r i nge benef i t s?
14 A. Not speci f i cal l y.
15 Q. And di d you ever have any di scussi on wi t h Dr . Kar r on as t o
16 f r i nge benef i t s t hat you r ecal l ?
17 A. No.
18 Q. Di d you ever have any conver sat i ons wi t h Lee Gur f ei n as t o
19 f r i nge benef i t s?
20 A. No.
21 Q. Di d you ever have any conver sat i on wi t h J oan Hayes as t o
22 f r i nge benef i t s?
23 A. No.
24 THE COURT: You ar e t al ki ng dur i ng t he cour se of
25 t he - -
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1 MR. RUBI NSTEI N: Dur i ng t he cour se of t he gr ant .
2 THE COURT: I s t hi s bef or e or af t er t he ki ck- of f ?
3 Does i t i ncl ude at t he ki ck- of f , any di scussi on of f r i nge
4 benef i t s?
5 THE WI TNESS: No.
6 Q. At any t i me up unt i l you l ast spoke t o anybody f r omCASI ,
7 di d you ever have any di scussi ons about t he f r i nge benef i t s?
8 A. No. Ther e i s r egul at i ons t o r egul at e t hat .
9 Q. So when t hey l ower ed t he f r i nge benef i t s f or 2001 by
10 $17, 000, t hey coul d have i ncr eased t he sal ar y by 17, 000 at t hat
11 t i me, cor r ect ?
12 A. Ther e i s r easons f or why he di d what he di d i n t hi s
13 exhi bi t .
14 THE COURT: But - -
15 Q. I ' mnot t al ki ng about a par t i cul ar exhi bi t , ma' am.
16 A. You' r e r ef er r i ng t o - -
17 THE COURT: We ar e t al ki ng about t he 17, 000.
18 MR. RUBI NSTEI N: Tal ki ng about t he 17, 000.
19 THE WI TNESS: Exhi bi t 22, 17, 000, yeah.
20 Q. Ri ght .
21 A. So, he deduct ed f r i nge benef i t s of 17, 000 because per sonnel
22 was decr eased, so t he f r i nge benef i t s went down.
23 Q. He coul d use t he 17, 000 somepl ace el se, cor r ect ?
24 A. Yes, he can use i t somewher e el se.
25 Q. Now, you t ol d us t hat you had t hese di scussi ons wi t h
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1 Gur f ei n about t he r ent , cor r ect ?
2 A. Yes.
3 Q. And t hat was ear l y on i n t he gr ant ?
4 A. The di scussi on was bef or e t he ki ck- of f pr esent at i on and
5 af t er t he ki ck- of f pr esent at i on, so i n Oct ober and i n November .
6 Q. 2001.
7 A. 2001.
8 Q. And t hen - -
9 THE COURT: You had t hose wi t h Gur f ei n.
10 THE WI TNESS: Wi t h bot h Gur f ei n and Dr . Kar r on.
11 Q. And you t ol d t hem- - and I t hi nk you t est i f i ed t hat t hey
12 doubl e t eamed you.
13 A. Yes.
14 MR. EVERDELL: Obj ect i on.
15 Q. They kept aski ng and cal l i ng about t he same r equest about
16 t he r ent , r i ght ?
17 A. They asked t he same quest i ons and r ecei ved t he same answer .
18 Q. Same answer was?
19 A. Same r esponse f r omme i s no.
20 Q. And t hen when Hayes cal l ed i n t he f al l of 2002 - -
21 THE COURT: I t hi nk i t ' s af t er . Her t est i mony i s t hat
22 i t occur r ed af t er t he end of t he f i scal year .
23 MR. RUBI NSTEI N: Ri ght , whi ch i s t he f al l of 2002,
24 af t er Oct ober 1st .
25 THE COURT: I t mi ght be wi nt er .
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1 Q. Your audi t i s due at t he end of t he year , r i ght ?
2 A. The audi t i s due 90 days af t er t he end of awar d per i od.
3 Q. Ri ght . Af t er t he f i r st year ?
4 A. Of year one, whi ch ended Sept ember 30, 2002.
5 Q. And i s i t f ai r t o say t hat Hayes cal l ed bet ween Sept ember
6 30, 2002 and t he end of t hat year 2002 and asked you about t he
7 deduct i bi l i t y of t he r ent , cor r ect ?
8 A. I t ' s f ai r t o say t hat wi t hi n t hat t i me per i od I was cal l ed
9 by J oan Hayes and she di d ask about t he r ent .
10 Q. And i n your di scussi ons wi t h ei t her Lee Gur f ei n or Dr .
11 Kar r on about t he deduct i bi l i t y of t he r ent di d you suggest t o
12 ei t her of t hemt hat t hey coul d i ncr ease Dr . Kar r on' s sal ar y and
13 he coul d pay t he r ent out of an i ncr ease i n sal ar y?
14 A. No.
15 Q. I mean he coul d do anyt hi ng he want s wi t h hi s $175, 000 t hat
16 he get s pai d i n t he i ni t i al year , cor r ect ?
17 A. I f he get s a paycheck, j ust l i ke me and you when we get our
18 paycheck, you can do what ever you want wi t h i t once you' r e pai d
19 f or ser vi ces r ender ed.
20 Q. And i n f act you appr oved t he second year budget f or CASI ,
21 di d you not ?
22 A. Yes, I t hi nk f unds f or year t wo was appr oved.
23 Q. And di d t her e come a t i me - -
24 THE COURT: When woul d t hat have been?
25 THE WI TNESS: I woul d have t o l ook at t he amendment ,
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1 but we usual l y appr ove t he f unds f or t he f ol l owi ng year mont hs
2 ahead of t i me, but t hey cannot spend t hat amount of money unt i l
3 t hei r second year begi ns. So, f or exampl e, you coul d have
4 appr oved i t i n J une, but t her e woul d be a cl ause t hat says
5 al t hough we' r e obl i gat i ng aut hor i zi ng money J une 1, i t can' t be
6 spent unt i l your next year st ar t s, whi ch woul d have been
7 Oct ober 1. So, i t ' s aut hor i zed ahead of t i me, but i t can' t be
8 spent unt i l t he new year st ar t s.
9 THE COURT: Thank you.
10 Q. Now, di d t her e come a t i me t hat you l ear ned t hat Dr . Kar r on
11 had t aken any l oan f r omt he f unds, t he ATP f unds of $75, 000?
12 A. I hear d - - I wasn' t - -
13 THE COURT: No. Di d you - -
14 THE WI TNESS: Di d I ever hear t hat ?
15 THE COURT: I n your capaci t y.
16 THE WI TNESS: I hear d t hat .
17 Q. And di d you have any conver sat i ons wi t h Dr . Kar r on about
18 t hat $75, 000?
19 A. No.
20 THE COURT: When di d you hear i t ?
21 THE WI TNESS: Fr omJ oan Hayes.
22 THE COURT: What ?
23 THE WI TNESS: Fr omJ ones Hayes t he audi t or .
24 THE COURT: Appr oxi mat el y when di d you hear i t ?
25 THE WI TNESS: So i t woul d be November 2002, wi t hi n
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1 t hat t i me.
2 Q. November what ?
3 A. Dur i ng t he audi t , whi ch woul d be any t i me af t er Sept ember
4 2002, dur i ng t he audi t per i od of t he i ndependent CPA.
5 Q. Di d you ever have a conver sat i on wi t h Dr . Kar r on t el l i ng
6 hi mi t was i nappr opr i at e t o t ake t hat check of $75, 000? Di d
7 you ever t el l hi mt hat ?
8 A. I never t al ked t o Dr . Kar r on about t he check.
9 Q. And di d you ever r equest of Dr . Kar r on t hat he r et ur n t he
10 f unds t o t he pr oj ect ?
11 A. No.
12 Q. Di d you speak t o f eder al agent s i n Gai t her sbur g? That ' s
13 wher e your of f i ce i s, Gai t her sbur g?
14 A. I ' ml ocat ed i n Gai t her sbur g, Mar yl and.
15 Q. Gai t her sbur g. And di d you speak t o agent Rachel , bet t er
16 known as Rachel Gar r i son?
17 A. Rachel .
18 Q. Rachel . Di d you speak t o l et t er ?
19 A. Yes, I have spoken t o her .
20 Q. Di d you speak t o her on Sept ember 8, 2003?
21 A. I spoke t o her dur i ng t hat per i od. I don' t know t he exact
22 dat e, but Sept ember 2003, yes.
23 Q. And when you spoke t o her i n Sept ember of 2003, t hat woul d
24 be pr i or t o t he t i me you spoke t o J oan Hayes about t he $75, 000,
25 cor r ect ?
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1 A. I spoke t o J oan Hayes f i r st .
2 Q. Di dn' t you t el l us - - I ' msor r y, you' r e r i ght . I st and
3 cor r ect ed. Thank you.
4 Di d you t el l agent Gar r i son t hat you t ol d Dr . Kar r on
5 t hat i t was i nappr opr i at e f or hi mt o wr i t e hi msel f a check f or
6 $75, 000 out of pr oj ect f unds t o cover di sal l owed cost s? On
7 Sept ember 8, 2003.
8 A. I don' t r ecal l t hat conver sat i on.
9 Q. Wel l , l et me show you t hi s document .
10 A. Sur e.
11 Q. I t ' s mar ked as Gover nment Exhi bi t 3504- A. I di r ect your
12 at t ent i on t o t he t hi r d par agr aph t her e.
13 DEPUTY COURT CLERK: I t ' s not i n t he book.
14 MR. RUBI NSTEI N: These ar e gover nment document s t hat
15 ar e not i n t he book. Woul d your Honor i nst r uct t he j ur y about
16 3500 mat er i al ?
17 THE COURT: You want an i nst r uct i on?
18 MR. RUBI NSTEI N: About 3500 mat er i al , because t he
19 j ur or s don' t have i t i n t hei r book.
20 THE COURT: 3500 mat er i al i s mat er i al whi ch i n t hi s
21 case t he gover nment t ur ns over t o t he def ense r el at i ng t o al l
22 t he document s t hat mi ght possi bl y be i n some way r el evant t o
23 t he t est i mony of t he wi t ness, and def ense get s a copy of t hat
24 t o ai d t hemi n t hei r exami nat i on of t he wi t nesses. But t hey' r e
25 not admi t t ed i n evi dence, because al t hough t hey may be abl e t o
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1 use t hemf or cr oss- exami nat i on pur poses, t hey may not be
2 admi ssi bl e i n evi dence f or a number of l egal r easons. But t hey
3 ar e - - but t hey - - but i t i s di scover y t hat t he gover nment i s
4 obl i ged t o pr ovi de t o t he def endant s i n al l cr i mi nal cases.
5 ( Cont i nued on next page)
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1 Q. I show you t hat document , I show you t hat document , 3504 - -
2 A. Yes.
3 Q. - - 8.
4 A. Uh- huh.
5 Q. And does t hat r ef r esh your r ecol l ect i on f i r st t hat you had
6 t hi s conver sat i on wi t h - -
7 A. I t - - yes.
8 Q. Par don?
9 THE COURT: Wi t h whom?
10 Q. Wi t h t he agent woul d, was t hen known as Gar r i son, who I
11 under st and she got mar r i ed and she now i s Or t hwei n?
12 A. No.
13 THE COURT: The quest i on i s - -
14 Q. And I di r ect - - I ' msor r y. Al l r i ght . Does t hat r ef r esh
15 your r ecol l ect i on of t hat conver sat i on?
16 A. Yes, i t does.
17 Q. On Sept ember 8t h, 2003, cor r ect ?
18 A. Yes.
19 Q. And di d you t el l t he agent t hat you spoke t o Dr . Kar r on and
20 r equest ed t he r et ur n of f unds, of t he $75, 000?
21 A. I made t he st at ement , yes. Because t hi s wasn' t par t of hi s
22 sal ar y. Thi s was j ust money he t ook out of t he gr ant s as a
23 whol e. Thi s wasn' t a sal ar i ed money. Thi s was gr ant money
24 t hat was t o be used f or t he di r ect pr oj ect cost .
25 Q. You j ust sai d bef or e t hat you never had conver sat i ons wi t h
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1 Dr . Kar r on about t hi s $75, 000, cor r ect ?
2 A. Yes. I sai d I di dn' t r ecal l havi ng a conver sat i on wi t h Dr .
3 Kar r on. Yes.
4 Q. Ar e you awar e t hat t he money was pai d back i n August ?
5 THE COURT: Do you have a r ecol l ect i on now t hat you - -
6 THE WI TNESS: Yeah.
7 THE COURT: Di d you have a conver sat i on wi t h hi m?
8 THE WI TNESS: Now t hat I ' mr eadi ng t hi s, yes.
9 THE COURT: Not - -
10 THE WI TNESS: Yes, I - -
11 THE COURT: You' r e not t o answer t he quest i on based on
12 what ' s i n t he document .
13 THE WI TNESS: Okay.
14 THE COURT: The quest i on i s, do you now r emember t hat
15 i n f act you di d have a conver sat i on wi t h Dr . Kar r on?
16 THE WI TNESS: Yes.
17 THE COURT: Regar dl ess of t he document ?
18 THE WI TNESS: Yes.
19 THE COURT: You do r emember , okay.
20 Q. And - -
21 THE COURT: Do you r emember when t hat conver sat i on
22 was?
23 THE WI TNESS: I woul d - - 2003.
24 THE COURT: Al l r i ght .
25 Q. When i n 2003?
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1 A. I don' t r ecal l .
2 Q. Di d you - - was i t t he ear l y par t of 2003?
3 A. I don' t r ecal l .
4 Q. Was i t bef or e you sent t he l et t er aski ng f or an audi t of
5 CASI t o t he OI G?
6 A. No. I woul d not have known i t bef or e t he audi t .
7 Q. The audi t by OI G?
8 THE COURT: What audi t ar e you r ef er r i ng t o, t he audi t
9 by Mi ss Hayes or t he audi t by OI G?
10 THE WI TNESS: The audi t by Mi ss Hayes.
11 Q. So coul d you est i mat e when you had t hi s al l eged
12 conver sat i on wi t h Dr . Kar r on?
13 A. No.
14 Q. Di d you ask Dr . Kar r on f or r et ur n of t he f unds?
15 A. Yes.
16 Q. And di d Dr . Kar r on r et ur n t he f unds?
17 A. Not t o my knowl edge.
18 Q. Di d you f ol l ow up on get t i ng t hese f unds r et ur ned?
19 A. Dur i ng t hi s t i me Sept ember 8t h of 2003, I had, I had no
20 cont act wi t h Dr . Kar r on.
21 Q. Di d you r epor t t hi s t o your super i or , Ms. Gol dst ei n?
22 A. She was awar e of t hi s, of t he si t uat i on at hand.
23 Q. Di d you r epor t i t t o her , ma' am?
24 A. Yes.
25 Q. I s t her e any wr i t i ng of you r epor t i ng t hi s t o Mi ss
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1 Gol dst ei n?
2 A. No, t her e' s no wr i t i ng. I t ' s ver bal conver sat i on.
3 Q. I s t her e any wr i t i ng t o t he OI G whi ch i ndi cat es t hat Dr .
4 Kar r on t ook $75, 000 as per sonal money?
5 THE COURT: I s t her e any what ?
6 Q. Di d you wr i t e anyt hi ng t o t he OI G?
7 A. I di d not wr i t e anyt hi ng t o t he OI G. I don' t r ecal l
8 wr i t i ng anyt hi ng t o t he OI G.
9 Q. Now, you t el l us t hat - - have you ever been t o CASI ' s
10 headquar t er s at 300 East 33r d St r eet ?
11 A. No.
12 Q. Par don?
13 A. No.
14 Q. So i t ' s f ai r t o say t hat you have no i dea what ki nd of
15 const r uct i on, i f any, was done t her e, cor r ect ?
16 A. Cor r ect .
17 Q. Now, under t he t er ms of t he budget , I di r ect your at t ent i on
18 t o t he exhi bi t 35. And t hi s i s a st andar d f or m, i s i t not , f or
19 each year of t he budget ?
20 MR. EVERDELL: Your Honor , I obj ect . Thi s i s not an
21 appr oved budget , J udge.
22 MR. RUBI NSTEI N: Par don?
23 THE COURT: I t ' s not a budget .
24 MR. RUBI NSTEI N: I t ' s a pr oposed budget .
25 THE COURT: You r ef er r ed t o i t as t he budget .
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1 MR. RUBI NSTEI N: I ' msor r y.
2 Q. Pr oposed budget . I s t hat cor r ect , ma' am?
3 A. Thi s i s a pr oposed budget .
4 Q. And whose f or ms ar e t hese?
5 A. The f or ms t hat ar e at t ached ar e gover nment f or ms.
6 Q. So t hey' r e suppl i ed t o t he gr ant s r eci pi ent , t hese f or ms,
7 r i ght ?
8 A. They' r e par t of your - - t he package, yes. When t he gr ant
9 deci des t hat t hey want t o appl y f or pr oposal , t hey get a
10 pr oposal ki t , and t hese f or ms ar e i ncor por at ed i nt o t hat ki t .
11 Q. And do you want t o t ur n t o par agr aph D wher e i t says,
12 equi pment ; see t hat , ma' am?
13 A. Yes.
14 Q. And r eadi ng f r omt he f i f t h l i ne f r omt he bot t omof t hat
15 par agr aph: ATP f unds may, however , be used f or const r uct i on of
16 exper i ment al r esear ch and devel opment f aci l i t i es t o be l ocat ed
17 wi t h a new or exi st i ng bui l di ng, pr ovi ded t he equi pment or
18 f aci l i t i es ar e essent i al f or car r yi ng out t he pr oj ect . I f such
19 cost s ar e pr oposed, i ncl ude i t bel ow and pr ovi de j ust i f i cat i on.
20 I s t hat cor r ect ?
21 THE COURT: What page ar e you on?
22 MR. RUBI NSTEI N: I t ' s par agr aph D, your Honor , of
23 t hat - - t hese ar e - - I don' t know i f t hey' r e number ed or - -
24 i t ' s par agr aph D at t he t op of t he page. I t says " equi pment " .
25 Q. I s t hat cor r ect , ma' am?
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1 A. I don' t see - - I ' mnot f ol l owi ng wher e t hi s says t hat .
2 Because i f you l ook at t he at t achment , whi ch i s D, t hat ' s al so
3 i ncor por at ed i nt o t hi s.
4 THE COURT: Wai t a mi nut e. Let ' s make sur e you' r e
5 l ooki ng at what he want s you t o be l ooki ng at .
6 THE WI TNESS: Ri ght .
7 Q. See at t he t op of t he page i t says D, i n bol d pr i nt ,
8 equi pment ?
9 A. Yes.
10 Q. Go down f i ve l i nes f r omt he bot t om, wher e t he sent ence
11 st ar t s, ATP f unds may, however , be used?
12 A. Okay, yes, I see t hat .
13 Q. You see t hat ? For const r uct i on of exper i ment al r esear ch
14 and devel opment f aci l i t i es t o be l ocat ed wi t h a new or exi st i ng
15 bui l di ng, pr ovi ded t he equi pment or f aci l i t i es ar e essent i al
16 f or car r yi ng out t he pr oj ect , i f such cost s ar e pr oposed,
17 i ncl ude bel ow pr ovi de j ust i f i cat i on?
18 A. Yes, I see t hat .
19 Q. You see t hat ?
20 A. Yes.
21 Q. I s i t f ai r t o say t hat not al l const r uct i on cost s ar e not
22 al l owabl e under t he gr ant , cor r ect ?
23 A. We don' t - - i f you r ead above t hat , f unds may not be used
24 f or const r uct i on of new bui l di ngs or ext ensi ve r enovat i ons of
25 ext ensi on - - of ext endi ng - - of exi st i ng l abor at or y bui l di ngs.
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1 Q. But t hey may be expended. And i t says may, however ;
2 t hey' r e gi vi ng you an except i on?
3 A. I f cost s ar e pr oposed, i ncl ude and pr ovi de a j ust i f i cat i on.
4 So i f t hey wer e cl osed and t hey wer e appr oved, t hat ' s may - -
5 i t - - t hey may be appr oved, t hey may not be appr oved. But i n
6 t hi s i nst ance, t hey' r e not a par t of t hi s pr oposal .
7 Q. Wel l , t hi s pr oposal her e i s t he wr ong year , okay. That ' s
8 2002, cor r ect ?
9 A. Thi s i s a pr oposed budget - - t hi s r i ght her e i s a f or m.
10 Thi s i s a f or m. Thi s has not hi ng t o do wi t h t he pr oposal .
11 Thi s r i ght her e i s a f or mt hat ' s used no mat t er what year
12 you' r e i n. Thi s i s a t empl at e.
13 Q. But t hat t empl at e - -
14 A. Uh- huh, i s al ways used.
15 Q. - - i s pr ovi ded by t he gover nment ?
16 A. Yes.
17 Q. That happens t o be f or 2002, not 2001, cor r ect ?
18 A. No, no. I t ' s t he same. No. I t ' s t he same t empl at e used
19 f or 2001, 2002, 2003. I t ' s an exi st i ng t empl at e.
20 Q. Ri ght . But i t ' s f i l l ed i n. Ther e ar e l i nes f i l l ed i n?
21 A. I t ' s f i l l ed i n f or t he pr oposed budget of 12/ 24/ 02. I t ' s
22 f i l l ed i n. But t hi s i s t he same t empl at e t hat woul d be f or
23 2000, 2001, 2002, and 2003. I t ' s a t empl at e t hat ' s used as
24 par t of t he pr oposal package, no mat t er what year s i t ' s i n.
25 Q. The t empl at e does not i ncl ude, ma' am- -
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1 A. Excuse me?
2 Q. The number s t hat ar e f i l l ed i n, r i ght , gr ant ee, r i ght ;
3 under neat h you see under D, i t says met hodol ogy? Those number s
4 ar e not par t of a t empl at e, ar e t hey, addi ng up t o $95, 900?
5 That ' s not a t empl at e.
6 THE COURT: Wher e ar e you r eadi ng?
7 MR. RUBI NSTEI N: I ' mon t he same page.
8 THE COURT: Locat e her t he page.
9 MR. RUBI NSTEI N: The same page.
10 A. But when you ask about t hi s, you asked me about t he wor di ng
11 wi t hi n D, equi pment . You di dn' t ask me about t he number s on
12 t her e. You asked me about t he wor di ng and how t hey wer e
13 i nt er pr et ed. And I j ust comment ed on t he wor di ng and t ol d you
14 t hat t hese, t hi s wor di ng i s t empl at ed f or al l year s i n al l t he,
15 i n al l t he awar ds as par t of your ki t .
16 Q. Di d you di scuss t hi s at t he ki ckof f , t hi s par agr aph, at t he
17 ki ckof f on November 8t h, 2001?
18 A. Ther e was no need f or di scussi on. Ther e was no
19 const r uct i on.
20 THE COURT: I ' ml ost her e, Mr . Rubi nst ei n. Exhi bi t D
21 f r om, you' ve been r eadi ng f r om.
22 MR. RUBI NSTEI N: No, no. I t ' s not exhi bi t D, your
23 Honor . I t ' s par agr aph D.
24 THE COURT: Par agr aph D, ent i t l ed equi pment .
25 THE WI TNESS: Yes.
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1 THE COURT: Exhi bi t .
2 MR. RUBI NSTEI N: 35.
3 THE COURT: 35.
4 MR. RUBI NSTEI N: Ri ght .
5 THE COURT: And t hen af t er t he, what seems t o be f or m
6 l anguage i n t he f or m, t her e i s a t ot al under neat h of $231, 714.
7 But up above i t says, see at t ached exhi bi t . And I don' t see
8 t he at t ached exhi bi t . So I can' t det er mi ne and make any
9 det er mi nat i on what i t i s you' r e t al ki ng about .
10 MR. RUBI NSTEI N: J udge, my quest i on onl y r el at ed t o
11 t he f act t hat t he wi t ness i nsi st ed t hat t hi s was al l a
12 t empl at e, and I want t o show i t ' s not j ust a t empl at e, i t ' s
13 i nf or mat i on i n - - i n - - t hat i s i n addi t i on t o t he t empl at e
14 l et t er . That ' s al l t he pur pose of t he quest i on was.
15 THE COURT: I ' mnot sur e you have est abl i shed t hat .
16 So l et me under st and what you' r e sayi ng. I s t her e a di sput e
17 bet ween you and t he wi t ness as t o what appear s i n t he f i r st
18 f ul l par agr aph t her e?
19 MR. RUBI NSTEI N: We agr ee on - -
20 THE COURT: Bef or e we get t o i t emmet hodol ogy
21 comput at i on and cost ?
22 MR. RUBI NSTEI N: We agr ee t hat t he wor ds t hat I spoke
23 ar e i n t he document t hat she has.
24 Q. We' r e i n agr eement , cor r ect , Ms. Snowden?
25 THE COURT: Yes.
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1 Q. I r ead cor r ect l y f r omt hat document ?
2 A. I agr ee t hat you r ead t hemcor r ect l y f r omt he document .
3 Q. Thank you.
4 THE COURT: And t hat t hat par agr aph, as I under st and
5 i t , i s par t of t he gover nment f or mt hat i s submi t t ed - -
6 THE WI TNESS: Yes.
7 THE COURT: - - t o t he gr ant ee t o f i l l out .
8 THE WI TNESS: Yes.
9 THE COURT: So i s t her e any di sput e about t hat , Mr .
10 Rubi nst ei n? I j ust - -
11 MR. RUBI NSTEI N: Not at al l .
12 THE COURT: What ?
13 MR. RUBI NSTEI N: None at al l . I j ust want ed t o
14 show - -
15 THE COURT: I don' t see any di sput e bet ween you and
16 t he wi t ness, so pl ease go ahead.
17 BY MR. RUBI NSTEI N:
18 Q. Now Dr . Kar r on, di d t her e come a t i me he r equest ed t hat - -
19 can I have t hat document , back, ma' am, t hat 3504 t hat I gave
20 you?
21 ( Handi ng)
22 Q. Now, i n t hese di scussi ons t hat you had wi t h Dr . Kar r on
23 about , r ent and ut i l i t i es asi de, di d you say anyt hi ng el se
24 ot her t han no, when he asked you about t he gr ant money cover i ng
25 r ent and ut i l i t i es?
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1 A. I sai d no.
2 Q. Di d you di scuss t hi s wi t h Mi ss Gol dst ei n, t he super vi sor - -
3 A. Yes.
4 Q. - - t he f act t hat Ms. Gol dst ei n advi sed you t hat i f CASI got
5 commer ci al space and i f t hey made a l ease i n t he name of t he
6 gr ant ATP, DMT, t hat t hat woul d be an accept abl e expense?
7 A. No, i t ' s not an accept abl e expense.
8 Q. No, no. Di d you have t hat di scussi on wi t h Ms. Gol dst ei n?
9 Di d you - - di d Ms. Gol dst ei n t el l you t hat ?
10 A. No.
11 Q. Di d you ever t el l Dr . Kar r on t hat , why don' t you i ncr ease
12 your sal ar y and pay i t out of your sal ar y, t hi s r ent f i gur e?
13 A. Never .
14 Q. Di d Dr . Kar r on advi se you at any t i me t hat t he r ent moni es
15 t hat wer e bei ng pai d wer e bei ng pai d f or a t i me per i od bef or e
16 t he ATP gr ant , and i t was back r ent owed?
17 A. No.
18 Q. So i t was your under st andi ng, when you spoke t o Dr . Kar r on,
19 t hat he was t al ki ng about cur r ent r ent whi l e he was r ecei vi ng
20 f unds f r omATP?
21 A. I t was t o my under st andi ng t hat he was aski ng t o pay f or
22 cur r ent , cur r ent - - use cur r ent f unds t o pay f or r ent , and t he
23 cur r ent f unds wer e di r ect cost s. You can not use - - you can' t
24 use ATP money. Once he r ender ed ser vi ces and he had a pay
25 check at t he end of t he day, he coul d do what ever he want ed.
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1 But he coul d not char ge t hi s gr ant f or di r ect as a - - r ent as
2 di r ect cost of t hi s pr oj ect .
3 Q. I s i t a f act t hat , t hat f unds, t hat pr e- gr ant - - i n ot her
4 wor ds, t hi s gr ant st ar t ed Oct ober 1st , 2001?
5 A. Uh- huh.
6 Q. That t her e wer e st ar t up cost s ant i ci pat ed pr i or t o t he t i me
7 t hat t he gr ant was act ual l y f or mal l y appr oved, cor r ect ?
8 A. No.
9 Q. Wel l , i sn' t i t a f act t hat a gr ant ee can pay pr e- gr ant
10 expenses r el at ed t o t he gr ant , but t hat t her e i s no obl i gat i on
11 f or NI ST t o r epay t hose moni es?
12 MR. EVERDELL: Obj ect i on.
13 THE COURT: Obj ect i on sust ai ned t o t he f or mof t he
14 quest i on.
15 Q. I s i t a f act , ma' am, t hat pr e- gr ant expenses, i n ot her
16 wor ds, i n t hi s case expenses i ncur r ed pr i or t o Oct ober 1st ,
17 2001, t hat wer e f or i t ems or mat er i al s r el at ed t o t he ATP
18 gr ant , ar e al l owed t o be char ged t o t he gr ant ?
19 A. No.
20 Q. What i f you buy a pi ece of equi pment on Sept ember 30t h,
21 2001 f or t he gr ant ' s use, i t get s del i ver ed on Oct ober 2, 2001,
22 you pay f or i t on Oct ober 3, 2001, i s t hat expense an al l owabl e
23 expense or non- al l owabl e expense?
24 A. Non- al l owabl e. You don' t even have a gr ant unt i l
25 Oct ober 1, 2001. And accor di ng t o t he f undi ng l i mi t at i on
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1 cl ause t hat ' s i ncor por at ed i nt o t hi s gr ant , f unds can onl y be
2 expended dur i ng a per i od of t i me. And t he per i od of t i me f or
3 t hi s par t i cul ar gr ant was st ar t i ng Oct ober 1, 2001 t hr ough
4 Sept ember 30t h, 2002. So t hat ' s when f unds ar e t o be expended,
5 and t hat i s al l document ed as par t of speci al wor k condi t i ons,
6 whi ch super sede ot her r egul at i ons i ncor por at ed t o t hi s gr ant .
7 Q. Ar e you f ami l i ar wi t h Feder al Regi st er Vol ume 66, November
8 1M?
9 THE COURT: Have you ever hear d of t hat ?
10 THE WI TNESS: I mean, I need a t i t l e. I mean, he
11 coul d at l east gi ve me a t i t l e or a CFR, some ki nd of
12 f eder al - - some gui del i nes.
13 Q. Wel l , di d you send an e- mai l on August 17t h, 2006 about
14 5: 53 p. m. t o Agent Ondr i k and c. c. i t t o Mar i l yn Gol dst ei n?
15 A. Ther e' s a possi bi l i t y. I don' t r ecal l . Thi s i s - -
16 Q. Let me show you what ' s been - -
17 A. Okay.
18 Q. - - mar ked as gover nment exhi bi t 3504/ C.
19 By t he way, your e- mai l addr ess i s Hope. Snowden@NI ST.
20 Gov, cor r ect ?
21 A. Yes, t hat ' s cor r ect .
22 THE COURT: You want t o show - -
23 MR. EVERDELL: She' s r eadi ng.
24 THE COURT: Show - - al l r i ght , good.
25 A. Okay. Okay.
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1 Q. I s t hat your e- mai l , ma' am?
2 A. Thi s i s my e- mai l .
3 Q. And ar e t he wor ds cont ai ned t her ei n, wor ds t hat you sent i n
4 t hat e- mai l ?
5 A. These ar e wor ds t hat I sent i n my e- mai l .
6 Q. May I have t he document , pl ease, ma' am.
7 ( Handi ng)
8 Q. Di d you, i n t hat e- mai l , say cost s - - wr i t e: Cost s
9 i ncur r ed bef or e t he pr oj ect , Feder al Regi st er , J anuar y 2, 2001,
10 Vol ume 66, Vol ume 1M. st at es, pr eawar d act i vi t i es, appl i cant s
11 or i nst i t ut i ons who i ncur any cost pr i or t o an awar d bei ng
12 made, do so sol el y at t hei r own r i sk of not bei ng r ei mbur sed by
13 t he gover nment . Not wi t hst andi ng any ver bal assur ance t hat may
14 have been pr ovi ded, t her e i s no obl i gat i on on t he par t of NI ST
15 t o cover t he pr eawar d cost . Thi s not i ce i s appl i cabl e t o t hi s
16 awar d.
17 Di d you - -
18 THE COURT: Anyt hi ng el se? Ther e does seemt o be
19 anot her - -
20 A. I s t her e a quest i on wi t h t hat ? Because I wr ot e t hat and
21 under t her e, up under neat h t her e i t al so says, we do not pay
22 pr eawar d cost s, whi ch ar e consi der ed sunk cost s.
23 Q. Sunk cost s - -
24 THE COURT: That ' s s- u- n- k cost ?
25 THE WI TNESS: Yes, yes.
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1 Q. And, i n f act , what I j ust r ead says t hat you do, on
2 occasi on, pay pr e- gr ant cost s, cor r ect ?
3 A. I t says t hat we, t he gover nment , has no - - we have no
4 obl i gat i on t o pay. So i t doesn' t say t hat we pay i t . I t says
5 we - -
6 Q. Does i t say you don' t pay i t ?
7 A. I t says we don' t have any obl i gat i on.
8 Q. Does i t say you do not pay i t ; yes or no?
9 A. No. But t he sent ence under t hat says t hat we don' t pay i t ,
10 t he sent ence r i ght under t hat .
11 Q. You know what sunk cost i s, ma' am?
12 A. To - - we i nt er pr et i t as pr e- awar d cost , cost t hat you
13 i ncur r ed bef or e you wer e gi ven a pr oposal . That ' s how - -
14 t hat ' s t he i nt er pr et at i on.
15 Q. That ' s j ust your i nt er pr et at i on?
16 A. That ' s t he ATP i nt er pr et at i on, and i t ' s al so l ocat ed i n a
17 r egul at i on and i t says sunk cost s.
18 Q. And i s i t f act t hat sunk cost s i s cost s t hat you al r eady
19 pai d out of your pocket pr i or t o t he t i me t hat t he gr ant
20 st ar t s, and t hat t her e' s - - i sn' t t hat cor r ect ?
21 A. Sunk cost s i s any cost t hat you i ncur pr i or t o a pr oposal
22 or cont r act or what have you.
23 THE COURT: Pr oposal bei ng appr oved.
24 THE WI TNESS: Ri ght . I t ' s unappr oved cost . Because
25 you r eal l y don' t even know i f you' r e goi ng t o get t he pr oposal ,
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1 so you ar e j ust spendi ng money at your own r i sk i f you' r e ever
2 goi ng t o r ecei ve i t .
3 THE COURT: Go ahead.
4 Q. When was Dr . Kar r on not i f i ed, of f i ci al l y, t hat he r ecei ved
5 t hi s awar d, t hat CASI r ecei ved t hi s awar d?
6 THE COURT: Do you know of your own knowl edge?
7 THE WI TNESS: My own knowl edge i s t hat i t was sent out
8 pr obabl y ar ound ver y t he end of Sept ember . So he shoul d have
9 got t en i t Oct ober 1st , 2001.
10 Q. And when i s a deci si on made by ATP as t o who i s goi ng t o be
11 a r eci pi ent of an awar d?
12 A. Depends on when t he pr oposal s ar e bei ng r ead, and t hen
13 deci si ons ar e made l at er on.
14 But no pr oposer can ever know t hat t hey r ecei ve a
15 gr ant unt i l appr opr i at i ons ar e appr oved. And appr opr i at i ons i s
16 t he money t hat we' r e gi ven f or t he t hese compet i t i ons. So,
17 basi cal l y, you go t hr ough a compet i t i on, you go t hr ough
18 ever yt hi ng, and you get - - you get al l your cl ear ances, and
19 appr opr i at i ons - - Congr ess can st i l l say at t he end of t he day,
20 you' ve done al l t hi s wor k and we don' t have money. So unt i l
21 you r ecei ve t hat paper document i n your hand, t hat ' s t he onl y
22 not i f i cat i on t hat you get knowi ng t hat you r ecei ved t hi s awar d.
23 You get no ot her not i f i cat i on, ' cause we don' t know t i l l t he
24 l ast mi nut e. Ever yt hi ng i s si t t i ng out t her e wai t i ng, and i t ' s
25 si gned. I t cannot be mai l ed unt i l we ar e not i f i ed we can mai l
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1 out t hese document s.
2 Q. Don' t you have a $60 mi l l i on appr opr i at i on i n 19, i n 2001
3 t o gi ve t o peopl e who r ecei ve awar ds?
4 A. I don' t know how much was al l ocat ed i n 2001.
5 Q. Ar e you t el l i ng t hi s j ur y t hat peopl e go t hr ough al l ki nds
6 of submi ssi ons and at t he end of t he day t her e' s no money
7 t her e; i s t hat what you' r e t el l i ng t hi s j ur y?
8 A. No. I ' mt el l i ng t he j ur y t hat we r ecei ve over 300 or mor e
9 pr oposal s, and t hat at t he end of t he day nobody knows. We
10 have t o get not i f i cat i on. The per son who i s goi ng t o r ecei ve
11 t hat awar d does not know unt i l he r ecei ves t he paper document .
12 He doesn' t - - he, she, t he company does not know. Unt i l you
13 r ecei ve somet hi ng i n t he mai l , you' r e one of - - you coul d be
14 one of a mi l l i on appl i cant s. You don' t know unt i l you r ecei ve
15 t hat document i n t he mai l , so you' r e j ust , you' r e unawar e. The
16 money - -
17 Q. What i f I have a f r i end at ATP and I cal l ed my f r i end and I
18 say, di d I get t he awar d?
19 THE COURT: Obj ect i on sust ai ned t o t he f or mof t he
20 quest i on.
21 MR. EVERDELL: Obj ect i on.
22 Q. Do you know whet her or not - -
23 THE COURT: I t ' s a hypot het i cal quest i on. Let ' s - -
24 Q. Do you know whet her or not Dr . Kar r on has a per sonal
25 r el at i onshi p wi t h Mar k St anl ey?
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1 A. Not - -
2 THE COURT: Obj ect i on - - do you know?
3 A. Not t o my knowl edge. I have no i dea.
4 THE COURT: Al l r i ght , okay.
5 Q. You don' t know one way or t he ot her ?
6 A. No.
7 Q. Cor r ect ? Now - -
8 THE COURT: Have you got any ot her quest i ons?
9 MR. RUBI NSTEI N: Yes, your Honor .
10 THE COURT: Have you got much mor e?
11 MR. RUBI NSTEI N: Yes, a di f f er ent t opi c.
12 THE COURT: What ?
13 MR. RUBI NSTEI N: Di f f er ent t opi c.
14 THE COURT: Have you got much mor e?
15 MR. RUBI NSTEI N: I t hi nk I have enough, J udge, t hat i f
16 your Honor want s t o br eak f or l unch now f or ever ybody, I t hi nk
17 i t woul d be appr opr i at e t i me.
18 THE COURT: I t hi nk we bet t er br eak and come back at
19 f i ve mi nut es af t er t wo.
20 ( J ur y exi t s t he cour t r oom)
21 THE COURT: You can st ep down.
22 THE WI TNESS: Thank you.
23 THE COURT: I s t her e anyt hi ng t o t ake up?
24 MR. KWOK: Not f r omt he gover nment at t hi s moment .
25 MR. RUBI NSTEI N: Not f r omt he def ense, your Honor .
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1 THE COURT: How much l onger ar e you goi ng t o be, Mr .
2 Rubi nst ei n?
3 MR. RUBI NSTEI N: I don' t t hi nk I shoul d be mor e t han a
4 hal f - hour , J udge, t ops.
5 THE COURT: Redi r ect ?
6 MR. EVERDELL: Your Honor , I have a f ew t hi ngs t o
7 cover , I t hi nk t o cl ar i f y. Maybe 15 mi nut es. I ' l l t r y t o keep
8 i t as br i ef as possi bl e.
9 THE COURT: Al l r i ght . Wel l , we may have t o r un a
10 l i t t l e l at e t oday.
11 MR. EVERDELL: I ' l l t r y t o be as br i ef as I can.
12 THE COURT: Al l r i ght . Thank you.
13 ( Luncheon r ecess)
14 A F T E R N O O N S E S S I O N
15 2: 05 p. m.
16 THE COURT: Good af t er noon. Okay, i s Rober t her e?
17 Fi ve af t er t wo.
18 MR. RUBI NSTEI N: Your Honor , I have a housekeepi ng
19 mat t er t hat I have t o addr ess t he Cour t on.
20 THE COURT: Yes, si r .
21 MR. RUBI NSTEI N: I aman at t or ney i n a 62 def endant
22 case i n t he East er n Di st r i ct of New Yor k, and a pl ea has been
23 wor ked out wi t h t he gover nment t hat i f 52 of t he 62, I t hi nk
24 t he number i s, def endant s pl ead gui l t y, t hey' r e goi ng t o be
25 af f or ded t hr ee poi nt s r educt i on f or gl obal pl ea.
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1 They have schedul ed my pl ea f or 5: 00 o' cl ock t hi s
2 af t er noon i n t he East er n Di st r i ct . I want t o ask your Honor i f
3 i t ' s possi bl e f or me t o be - - f or us t o br eak at 4: 00 o' cl ock,
4 so t hat I coul d handl e t he pl ea t her e.
5 THE COURT: I don' t see a pr obl em. I mi ght go a
6 coupl e mi nut es af t er , but l et ' s see i f we can get t hese peopl e
7 i n. Who i s i t bef or e?
8 MR. RUBI NSTEI N: I t ' s bef or e Magi st r at e J udge Levy.
9 I t ' s act ual l y, t he case i s bef or e J udge Wei nst ei n, but he has
10 t he pl ea t aken by a magi st r at e j udge.
11 THE COURT: I see.
12 MR. RUBI NSTEI N: Who doesn' t l i ke t o st ay past 5: 00
13 o' cl ock.
14 THE COURT: Doesn' t , t he magi st r at e J udge doesn' t ?
15 MR. RUBI NSTEI N: I hear d what you sai d about t he
16 pr obat i on depar t ment s, J udge. I ' mnot goi ng t o say anyt hi ng
17 about t he magi st r at e j udges.
18 THE COURT: Wel l , wher e i s Rober t ? Not her e. I ' l l go
19 i n and see. I ' l l do i t . I ' l l see i f t hey' r e r eady.
20 THE DEPUTY CLERK: I ' l l check.
21 THE COURT: The j ur y i s comi ng i n.
22 ( J ur y ent er i ng)
23 THE COURT: Pl ease be seat ed. Pl ease pr oceed, Mr .
24 Rubi nst ei n. Oh, t he wi t ness, t he wi t ness.
25 MR. RUBI NSTEI N: I coul d st ar t wi t hout her , J udge.
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1 ( Wi t ness r esumi ng t he wi t ness st and)
2 THE COURT: Mr . Rubi nst ei n.
3 MR. RUBI NSTEI N: Yes.
4 Q. Good af t er noon, Ms. Snowden.
5 A. Good af t er noon.
6 Q. Ear l i er t oday t he gover nment di scussed wi t h you exhi bi t 30
7 whi ch i s a - - whi ch i s t he l et t er f r om- - memor andumf r omyour
8 boss, Mar i l yn Gol dst ei n, dat ed August 16t h, 2003, cor r ect ?
9 A. No. I t ' s a memor andumf or Mar i l yn, not f r omher .
10 Q. Okay. For her ?
11 A. Uh- huh.
12 Q. And, i n f act , t he l et t er pr ovi des t hat t her e ar e f i ve
13 budget r evi si ons?
14 A. I t says t her e' s qui t e a f ew budget r evi si ons.
15 Q. And, i n f act , al l of t hose budget r evi si ons appl y t o t he
16 f i r st year of t he gr ant s, i s t hat cor r ect ?
17 A. No.
18 Q. Does i t say at t he t op l i ne i n f i ve communi cat i ons, copi es
19 at t ached. CASI has r equest ed ATP appr ove t he r evi sed budget
20 l i st i ng act ual cost s f or year one.
21 I sn' t t hat what t hey say, al l t hese r evi si ons r el at e
22 t o t he f i r st year ?
23 A. No. I mean, t he f i r st quest i on you asked me wer e ar e t he
24 r evi si ons i n year one and I t ol d you no.
25 THE COURT: Ar e you aski ng whet her t he memor andumsays
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1 t hat or ar e you aski ng t he wi t ness f or her r ecol l ect i on of t he
2 budget s?
3 Q. You t est i f i ed on di r ect exami nat i on - -
4 THE COURT: I j ust want t o know whi ch you' r e aski ng
5 because i t ' s not cl ear .
6 Q. I ' maski ng - - i sn' t i t a f act , ma' am, t hat t he f i ve
7 r evi si ons submi t t ed on behal f of CASI dat ed August 1st , 2002,
8 Oct ober 20t h, 2002, December 2nd, 2002, December 20t h, 2002,
9 and Febr uar y 25t h, 2003, al l r el at e t o t he f i r st year of t he
10 gr ant s?
11 A. No, t hey don' t . The f i r st year of t he gr ant ended
12 Sept ember 30t h, 2002. These exceed t hat dat e.
13 Q. Ar e you f ami l i ar wi t h t he budget r evi si ons?
14 A. Yes, I am.
15 Q. And ar e you f ami l i ar wi t h t he - - t hat you can r evi se a
16 budget af t er t he f i r st year ?
17 A. Yes, you can r evi se a budget af t er t he f i r st year .
18 Q. So i sn' t i t a f act t hat t hi s memor andumt al ks about
19 r evi si ng t he budget f or t he f i r st year ?
20 A. No. I t says has - - af t er t hese dat es, i t says has
21 i ndi cat ed on t he l ast f our of t he submi ssi ons t hat t he f i r st
22 year ' s cost l i st s ar e act ual .
23 So, basi cal l y, i t ' s st at i ng t hat t hese budget s
24 r epr esent r evi si ons and t her e wer e r evi si ons made t o year one,
25 but year one was over . So t hey shoul d have been act ual
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1 number s. That ' s what t hi s i s sayi ng.
2 Q. I f CASI had submi t t ed one budget r evi si on i nst ead of f i ve
3 wi t h f i ve di f f er ent number s - -
4 THE COURT: No hypot het i cal s, pl ease.
5 MR. RUBI NSTEI N: Okay. You' r e r i ght , J udge.
6 Q. So i t ' s your t est i mony t hat t he f i ve dat es when budget
7 r evi si ons wer e submi t t ed, t hey wer e submi t t ed f or year ot her
8 t han - - endi ng Oct ober - - Sept ember 1st , 2002?
9 MR. EVERDELL: Obj ect i on.
10 THE COURT: I t hi nk her t est i mony speaks f or i t sel f
11 and I ' mgoi ng t o sust ai n t he obj ect i on. Let ' s have anot her
12 quest i on.
13 Q. What year was - - t he r evi sed budget f or Febr uar y 25t h, t hat
14 was submi t t ed Febr uar y 25t h 2003, what year was t hat r evi si on
15 r equest f or ?
16 A. Thi s r evi si on r equest was st i l l unappr oved budget t hat had
17 st ar t ed i n Oct ober 20t h of 2002. But I cont i nuousl y r ecei ve
18 r evi sed budget s wi t hi n shor t per i ods of t i me t hat wer e never
19 ever appr oved. So i t was j ust , he' d send me one and t hen a
20 week or l at er I get anot her one. But t hey al l st ar t ed f r om
21 or i gi nal , t he or i gi nal Oct ober 20t h. So i t was - - one
22 or i gi nat ed, I had quest i ons, t hen he r evi sed t hemand sent me
23 anot her budget . I had ot her quest i ons because t her e was ot her
24 changes, and so i t cont i nued on, unt i l t hi s war d was suspended.
25 Q. The awar d was suspended on J une 27t h, ' 03, cor r ect ?
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1 A. J une - - yes.
2 Q. The quest i on i s, ma' am, t he year t hat t hese r equest s f or
3 budget r evi si ons, what year ar e t hese r equest s f or , t he f i r st
4 year , t he second year , t he t hi r d year of t he gr ant ?
5 THE COURT: Mr - -
6 MR. EVERDELL: Obj ect i on.
7 THE COURT: Mr - - t he budget cover s t hr ee year s. Each
8 budget cover s t hr ee year s.
9 MR. RUBI NSTEI N: The r evi si on - -
10 THE COURT: I t ' s t he gr ant budget cover s t hr ee year s.
11 I f you want t o f r ame your quest i on r i ght , f r ame i t wi t h r espect
12 t o t he f i r st year , and ask her a quest i ons about t he f i r st year
13 and whet her t her e wer e r evi si ons t her e. Ther e ar e r evi si ons i n
14 ot her year s as wel l as t he f i r st year , i n or der t o end up wi t h
15 a t ot al amount of t he gr ant .
16 Q. You can' t move money bet ween year s, can you, i n t he
17 budget s?
18 A. When one - - when one year ends; f or exampl e, i f year one
19 ends or i t ' s get t i ng r eady t o end, you can r equest - - i f al l
20 t he money wasn' t expended wi t hi n t hat year , you can r equest t o
21 car r y over money t o t he second year . So t hat means your year
22 one woul d have al l your act ual s, and t hen you woul d t ake t he
23 money t hat you' r e not goi ng t o use and you can car r y i t over
24 i nt o year t wo.
25 But when - - i f year one had t ot al l y t ot al l y ended, you
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1 can not car r y any of t hat , t hose f unds over , none. So i f you
2 r equest f or r evi si on bef or e t hat year ends, and say I see t hat
3 i t ' s now t he end of my per i od, I ' mnot goi ng t o spend $100, 000,
4 I woul d l i ke t o r evi se and car r y i t over t o year t wo, you' r e
5 al l owed t o do t hat . But once t he year ends, i t ' s ended, you
6 can' t have any r evi si ons once t he dat e has expi r ed.
7 Q. Year one ended Sept ember 30t h, 2002, cor r ect ?
8 A. Yes.
9 Q. Budget was appr oved f or t he year st ar t i ng Oct ober 1st , 2002
10 endi ng Sept ember 30t h, 2003, cor r ect ?
11 A. No. Ther e wasn' t anot her appr oved budget . The l ast
12 appr oved budget , whi ch was amendment t o, was st i l l i n ef f ect .
13 Ther e was no ot her budget s appr oved.
14 What happened - - what you' r e t al ki ng about i s t hat we
15 obl i gat ed money f or t he second year dur i ng t hat f undi ng per i od.
16 Q. Ri ght .
17 A. Under - -
18 Q. You gave t hat money t o CASI f or t he second year , $600, 000
19 and change, cor r ect ?
20 A. We aut hor i zed t hat money st ar t i ng Oct ober 1st , 2002 f or t he
21 pur poses of spendi ng i t accor di ng t o t he r evi sed budget of
22 amendment t wo.
23 Q. Wer e any of t he f i ve r evi si ons r ef er r ed t o i n gover nment
24 exhi bi t 30 r el at ed t o year t wo?
25 MR. EVERDELL: Obj ect i on.
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1 THE COURT: Look t hr ough t hem. Look t hr ough t hemand
2 see i f t her e ar e any r evi si ons t o year t wo. You can compar e i t
3 what , 21 t o - -
4 THE WI TNESS: Yeah, 32 st ar t s year t wo, t hat ' s goi ng
5 t o be wi t hi n t hat per i od, exhi bi t 32.
6 THE COURT: What wer e you compar i ng t o do - - t o
7 det er mi ne t hi s?
8 THE DEPUTY CLERK: I woul d have t o l ook at exhi bi t 32
9 because year t wo st ar t ed and t he or i gi nal budget .
10 THE COURT: Al l r i ght . And what ' s - - or i gi nal budget
11 i s exhi bi t 21; i s t hat t he one you' r e t al ki ng about ?
12 THE WI TNESS: No, t her e' s no budget i n 21, so l et ' s
13 l ook at - -
14 THE COURT: What exhi bi t number i s i t ?
15 THE WI TNESS: I f you l ook at exhi bi t 14.
16 THE COURT: Al l r i ght .
17 THE WI TNESS: That ' s t he or i gi nal budget .
18 THE COURT: Al l r i ght . 14 and 32, i s t hat cor r ect ?
19 THE WI TNESS: Yes, I can, I can do a compar i son t her e.
20 THE COURT: Any changes i n t he second year ?
21 THE WI TNESS: Yes.
22 THE COURT: Tel l us what t hey ar e.
23 THE WI TNESS: The per sonnel - - t her e wer e per sonnel
24 changes f r omt he or i gi nal t o t he, t he r equest ed r evi sed
25 per sonnel changes. The per sonnel went down. Your f r i nge
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1 benef i t s went down i n t he r evi sed, pr oposed r evi sed budget t hat
2 was not appr oved. Tr avel decr eased i n t he pr oposed r evi sed
3 budget t hat was not appr oved. Equi pment i ncr eased i n t he
4 pr oposed r evi sed budget t hat was not appr oved.
5 You have money t hat i s i ncor por at ed f or mat er i al and
6 suppl i es. I n t he or i gi nal budget t her e was zer o f or mat er i al
7 and suppl i es. Then you have your subcont r act or . Your
8 subcont r act or , i t decr eased i n t he r evi sed unappr oved budget .
9 The ot her changed. I t i ncr eased i n t he unappr oved
10 budget . And t hat ' s i t . So t hose changes f or ever y cat egor y,
11 t her e wer e pr oposed changes f or ever y cat egor y.
12 Q. And t hey wer e based upon t he act ual s, cor r ect ?
13 A. They coul dn' t be based on t he act ual s. Because i f you l ook
14 at - - i f you compar e year one t o year one, year one shoul d have
15 been act ual s, not year t wo. Year one and year one, t hey have
16 changes t oo.
17 Q. You r ecei ved t he audi t i n J une of 2003?
18 A. Yes.
19 Q. And do you know when Dr . Kar r on or CASI r ecei ved a copy of
20 t hat audi t f r omJ oan Hayes?
21 A. No.
22 Q. Di d you have a di scussi on, pr i or t o r ecei vi ng t he audi t ,
23 wi t h Dr . Kar r on as t o t he l at eness of t he submi ssi on of t he
24 audi t ?
25 A. Yes, I di d have a di scussi on wi t h hi mabout t he l at eness of
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1 t he submi ssi on of t he audi t .
2 Q. Because t he audi t was due wi t hi n 90 days af t er t he end of
3 t he f i r st year , cor r ect ?
4 A. Yes.
5 Q. That woul d t ake you t i l l t he end, December 31st , 2002,
6 cor r ect ?
7 A. Yes.
8 Q. And t hey had r ecei ved an ext ensi on of t hat , cor r ect ?
9 A. Yes. They asked f or a 60 day ext ensi on.
10 Q. And t hey got 60 day ext ensi on?
11 A. Yes.
12 Q. And you st i l l hadn' t r ecei ved t he budget af t er 60 days,
13 cor r ect ?
14 A. Yes.
15 Q. And because t hat woul d t ake you t i l l t he begi nni ng of
16 Mar ch, r i ght ?
17 A. End of Febr uar y, begi nni ng of Mar ch, yes.
18 Q. And i n f act t hat Dr . Kar r on asked you i f he coul d f i r e
19 Hayes?
20 A. He never asked me coul d he f i r e J oan Hayes.
21 Q. I sn' t t he expense of t he audi t a deduct i bl e expense f r om
22 NI ST?
23 A. When you pr opose your budget , you i ncor por at e - - t her e i s a
24 pr i ce associ at ed wi t h t he audi t under ot her f or year s one and
25 year t hr ee, and t hat ' s i n your or i gi nal pr oposed budget , and
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1 t hat was appr oved.
2 Q. So t hat ' s an aut hor i zed expense - -
3 A. I t ' s aut hor i zed.
4 Q. - - on t he budget , r i ght ?
5 A. Yes, i t i s.
6 Q. And di d you t el l Dr . Kar r on, we pai d f or t he budget f or t he
7 audi t and we want i t ?
8 A. I asked, af t er 60 days - -
9 Q. Di d you t el l Dr . Kar r on - - you hear t he quest i on? Di d you
10 t el l Dr . Kar r on - -
11 A. I ' manswer i ng your quest i on. Af t er 60 days - -
12 THE COURT: Wai t , l et hi mask t he quest i on.
13 THE WI TNESS: Okay, al l r i ght .
14 Q. You pai d f or t he budget f or t he audi t and you want i t ; di d
15 you say t hat , yes or no?
16 A. Yes.
17 Q. And, i n f act , moni es had been spent and gi ve t o J oan Hayes
18 f or t he audi t , cor r ect ?
19 A. I don' t know what was done wi t hi n hi s cor por at i on.
20 Q. Now, and i n f act t he gr ant was suspended because of t he
21 absence of t he cof undi ng por t i on, cor r ect ?
22 A. I t was suspended because of noncompl i ance, whi ch
23 cor r esponded wi t h t he r equi r ed cost shar e t hat was not pai d.
24 Q. Now, di d you have di scussi on wi t h Dr . Kar r on about t he use
25 of equi pment as a por t i on of t he cost shar e cont r i but i on?
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1 A. No.
2 Q. Di d you have di scussi ons wi t h Mar i l yn Gol dst ei n as t o t he
3 cost s shar e cont r i but i on of pr eowned equi pment ?
4 A. No.
5 Q. I show you what ' s been mar ked i n evi dence, I ' msor r y, i s
6 mar ked f or i dent i f i cat i on as Gover nment ' s 3504/ M and ask you i f
7 you r ecogni ze t hi s document , ma' am?
8 A. Yes, I r ecogni ze t hi s document .
9 Q. Can I have i t back, pl ease?
10 A. Sur e.
11 Q. Thank you.
12 And t hi s i s a l et t er t hat ' s wr i t t en t o Dr . Kar r on?
13 A. Yes.
14 Q. On J ul y 25t h, 2003, r i ght ?
15 A. Yes.
16 Q. Fr omyour boss, Mar i l yn Gol dst ei n?
17 A. Fr ommy f or mer super vi sor , yes, i t i s.
18 Q. Now, by t he way, di d you have cont act wi t h Dr . Kar r on af t er
19 t he gr ant was suspended on J une 27t h, 2003?
20 A. I pr obabl y had l i mi t ed cont act wi t h hi maf t er , af t er i t was
21 suspended.
22 Q. Now, gover nment exhi bi t - - had you had cont act wi t h t hi s
23 Bob Benedi ct bef or e t he gr ant was suspended?
24 A. Yes, I t hi nk I di d. I ' m- - I don' t r ecal l .
25 Q. Wel l , i n f act , i n Gover nment ' s 48 i s t he l et t er t hat he
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1 wr ot e on August 13t h, 2003?
2 A. Okay.
3 Q. Cor r ect ?
4 A. Yes.
5 Q. And t her e wer e - - you t est i f i ed as t o r evi si ons i n t he
6 f i nanci al st at us r epor t s; r ecal l t hat ?
7 A. Yes.
8 Q. And t hose r epor t s, you' r e supposed t o submi t a f i nanci al
9 st at us r epor t ever y quar t er , ever y t hr ee mont hs?
10 A. Yes.
11 Q. And, i n f act , CASI had submi t t ed such r epor t s, cor r ect ?
12 A. Yes.
13 Q. And who r ecei ves t hose r epor t s?
14 A. I do.
15 Q. And how much was - - and t hose ar e our exhi bi t s 41, t he
16 or i gi nal r epor t ?
17 THE COURT: St ar t wi t h 40 t o 46, i s t hat cor r ect ?
18 MR. RUBI NSTEI N: Yeah.
19 THE COURT: The r evi si ons ar e 48, 41A, 42A.
20 Q. The f i r st - - i n exhi bi t 40, do you have t hat , ma' am?
21 A. Yes.
22 Q. They show t he - - and we' r e t al ki ng about , I , t he cost shar e
23 out l ay?
24 A. Yes.
25 Q. The f i r st year i t ' s r epor t ed at $12, 320?
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1 A. Fi r st quar t er i s r epor t ed.
2 Q. Fi r st quar t er , r at her ?
3 A. Yes.
4 Q. And t hen t he second l i ne on t hat - - t he t hi r d l i ne on t hat
5 page shows you t ot al so f ar , cor r ect ? That ' s what was t he
6 amount t hat was pai d f or t he year ?
7 A. Woul d you t el l me what number - -
8 Q. Ther e ar e t hr ee col umns.
9 A. Ther e i s t hr ee col umns. I s i t a, b, c?
10 Q. Ri ght . No, t her e' s - - my eyes ar en' t so good. You see i t
11 says, pr evi ous r epor t , t hi s per i od cumul at i ve r epor t ?
12 A. Uh- huh, yes.
13 Q. So t hat because t hi s was t he f i r st r epor t , t he same number
14 $12, 320 i s t hi s r epor t , and t he t ot al amount t hey' r e cl ai mi ng
15 cumul at i ve i s 12 - -
16 A. Yes.
17 Q. - - 320. And you r evi ewed t hat r epor t ?
18 A. Yes.
19 Q. How l ong af t er you r ecei ved i t di d you, woul d you say you
20 r evi ewed i t ? You don' t have t o gi ve me a speci f i c dat e.
21 A. Maybe wi t hi n 30 days.
22 Q. Okay.
23 A. Because t he r epor t i s f or t he quar t er endi ng December 31st ,
24 2001, t he dat e at t he bot t omsays J anuar y 10t h. So you gave
25 t i me t hat i t was mai l ed i n. So we have - - pr obabl y wi t hi n 30
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1 days of when i t came i nt o my of f i ce.
2 Q. Okay. Now, i n gover nment exhi bi t 41, t hat ' s t he or i gi nal
3 f i nanci al st at us r epor t t hat ' s submi t t ed f or t he second
4 quar t er ?
5 A. Yes.
6 Q. And t hat i s on l i ne I , t hey have $9, 582. 58, whi ch was
7 pr evi ousl y r epor t ed, cor r ect ?
8 A. That - - wel l , t hat ' s an i ncor r ect number .
9 Q. I agr ee wi t h you, but t hat ' s what ' s r epor t ed?
10 A. On t hi s r evi sed budget - -
11 Q. Thi s i s not r evi sed. Thi s i s t he or i gi nal .
12 A. 41.
13 Q. The second quar t er ?
14 THE COURT: 41?
15 THE WI TNESS: Ri ght .
16 Q. 41?
17 A. Yes.
18 Q. They say t hat t her e was - -
19 A. Uh- huh.
20 Q. - - 9, 582. 58, r i ght , t hat was r epor t ed what we now know as
21 gover nment exhi bi t 40?
22 A. Yes.
23 Q. When i n f act t her e i t was act ual l y $12, 320 t hat shoul d have
24 been t her e?
25 A. Yes.
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1 Q. And t hen t hey showed an addi t i onal 8, 213. 64, r i ght ?
2 A. For t he cur r ent per i od.
3 Q. The cur r ent per i od. Then t hey t ot al t he 9, 000 and 8, 000
4 and t hey get 17, 796. 22, cor r ect ?
5 A. Yes.
6 Q. And t hat number i s wr ong, r i ght ; cor r ect ?
7 A. I have t o do t he mat h.
8 Q. I mean i f t he 12 - - no. I f i t shoul d have been 12, 000 f or
9 t he - -
10 A. Ul t i mat el y, yes.
11 Q. - - f i r st quar t er , t hen t hat number woul d be wr ong?
12 A. Yes.
13 Q. Okay. Nobody comment ed on t hat t o CASI , cor r ect , t hat
14 t her e was, t hese r epor t s, t hese f i nanci al st at us r epor t s wer e
15 i nconsi st ent and i naccur at e?
16 A. Yes, t her e wer e comment s on i t .
17 Q. Wher e wer e comment s made?
18 A. Excuse me?
19 Q. Wher e wer e comment s made?
20 A. Pr obabl y ver bal . They wer e pr obabl y - - t he - - what I
21 usual l y do i f t her e i s a budget t hat comes i n t hat ' s wr ong,
22 I ' l l j ust gi ve t he company a cal l and say, your number s ar e
23 wr ong, pl ease r evi se and r esend your document .
24 THE COURT: Di d you make t hat cal l ?
25 THE WI TNESS: Yes.
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1 THE COURT: Ar e you sur e you made t hat cal l ?
2 THE WI TNESS: Yes.
3 THE COURT: Your sel f ?
4 THE WI TNESS: Yes.
5 THE COURT: You t ol d t hemt he f i r st quar t er was wr ong?
6 THE WI TNESS: Yes, even - - one - - I t hi nk t he number s
7 ar e - - t he dat es wer e wr ong t oo. Yes, I ' msur e I made t he
8 cal l .
9 Q. Who di d you speak t o?
10 A. Usual l y when I woul d cal l t he doct or - - I pr obabl y - -
11 usual l y I woul d speak t o Lee Gur f ei n.
12 Q. And di d you memor i al i ze t hat i n any way wi t h an e- mai l t hat
13 you had made t hat cal l ?
14 A. No.
15 Q. Di d you put anyt hi ng i n your gover nment f i l e t o i ndi cat e
16 t hat you had made t he cal l because you not i ced t hese number s
17 wer e wr ong?
18 A. The pr act i ce i s t hat I woul d put t hi s document i n t he f i l e,
19 make a not e t o i t , and t hen when a new f or mcame i n, I woul d
20 j ust di scar d t he ol d f or mand put i n t he cor r ect f or m.
21 Q. Wel l , di d a new f or mcome i n?
22 A. Thi s - - a new f or m, a new f or mcame i n.
23 Q. How l ong af t er you cl ai myou made t hi s cal l ?
24 A. Wel l , t hi s one i s a r evi si on. I ' mnot get t i ng t he
25 quest i on.
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1 THE COURT: Nei t her of t hese ar e r evi si ons - -
2 THE WI TNESS: These ar e t he or i gi nal document s, okay.
3 THE COURT: 2000.
4 THE WI TNESS: Ri ght .
5 THE COURT: One i n J anuar y and one i n, appar ent l y,
6 Apr i l 2002.
7 THE WI TNESS: So t her e - - I don' t see a r evi si on her e,
8 t hat i t was ever r evi sed.
9 Q. As a mat t er of f act , t he next quar t er , whi ch i s
10 gover nment ' s exhi bi t 42 - -
11 A. Uh- huh.
12 THE COURT: I t i sn' t a mat t er of bei ng r evi sed. Ms.
13 Snowden, t he f i r st quar t er i s a di f f er ent number - -
14 THE WI TNESS: Ri ght .
15 THE COURT: - - i n t hi s r epor t t han i s t he one i n t he
16 second r epor t .
17 THE WI TNESS: Exact l y.
18 THE COURT: Now, as I under st ood you, you t est i f i ed
19 t hat af t er you r ecei ved t he second r epor t , you cal l ed and t ol d
20 t hemt her e was an er r or i n t he f i r st r epor t , t he f i r st r epor t
21 number and t he second r epor t number f or t he f i r st - -
22 THE WI TNESS: Yes.
23 THE COURT: - - per i od wer e i ncor r ect .
24 THE WI TNESS: Uh- huh.
25 THE COURT: Di d you make t hat cal l ?
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1 THE WI TNESS: I made t hat cal l , and t her e i s an
2 or i gi nal gr ant f i l e her e, I ' msur e t hat t he or i gi nal gr ant f i l e
3 wi l l r ef l ect t hat .
4 Q. Wel l , when you got t he next r epor t , t he t hi r d quar t er , J une
5 30t h, 2002, t hey car r i ed f or war d t he number f r omt he mi st aken
6 second quar t er r epor t ?
7 A. Uh- huh.
8 THE COURT: You' r e aski ng her t o l ook at what ?
9 Q. To l ook at exhi bi t 42, gover nment exhi bi t 42.
10 A. They act ual car r i ed over t o 17, 792. 26.
11 Q. Whi ch was t he mi st aken number f r omt he second r epor t ?
12 A. Yes. And i f you l ook at t he bot t omof t he f or m, t hi s f or m
13 wasn' t even si gned by hi m. I t wasn' t - - i t wasn' t aut hor i zed,
14 i t wasn' t si gned.
15 Q. But i t was submi t t ed, r i ght ?
16 A. I t was - - of cour se, yes, i t was submi t t ed.
17 Q. And t he number s, accor di ng t o you, wer e wr ong because t hey
18 used t he number s f r omt he second quar t er , not f r omt he f i r st
19 quar t er , t he 12, 000 number ?
20 A. Yes.
21 Q. Ri ght ? Di d you make anot her cal l af t er you got t he t hi r d
22 quar t er f i nanci al st at ement ?
23 A. Yes.
24 Q. And who di d you speak t o t hen?
25 A. Pr obabl y Lee Gur f ei n or Dr . Kar r on. I don' t r ecal l who I
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1 t al ked t o.
2 Q. And you say you made a not e, you wr ot e somet hi ng down i n a
3 f i l e about i t ?
4 A. Yes.
5 Q. How many cal l s di d you make?
6 A. Qui t e a f ew.
7 Q. Af t er you got t he second f i nanci al st at ement , I ' msor r y.
8 Af t er you got t he t hi r d f i nanci al st at ement , and you had not
9 r ecei ved a r evi si on of t he second f i nanci al st at ement yet ,
10 cor r ect ?
11 A. Yes.
12 Q. How many cal l s di d you make about t hat ?
13 A. I made cal l s unt i l i t was cor r ect ed, and t hat i s r ef l ect ed
14 i n t he or i gi nal gr ant f i l e.
15 Q. When was i t cor r ect ed?
16 A. I have no i dea, because t he f or ms ar e not i n f r ont of me.
17 Q. Wel l , i n f act , t he f i r st t i me you ever got a r evi sed
18 f i nanci al st at us r epor t i s r ef l ect ed i n t he exhi bi t s A t o 40,
19 41, 42, 43, cor r ect ?
20 A. No, t hat ' s not cor r ect .
21 Q. Ar en' t t hose t he r evi si on r epor t s?
22 A. These ar e, t hese ar e r evi sed r epor t s, but t hese ar e not t he
23 f i r st r evi sed r epor t s.
24 Q. Wher e i s t he f i r st r evi sed r epor t ?
25 A. I n t he or i gi nal gr ant f i l e.
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1 Q. You never t ur ned i t over t o t he Pr osecut or ?
2 A. Yes.
3 Q. So you' r e t el l i ng us t her e ar e addi t i onal r epor t s t han what
4 we have her e as exhi bi t s, wi t hi n exhi bi t 40 t hr ough 43?
5 A. I ' mt el l i ng you t hat t her e ar e cor r espondence, addi t i onal
6 cor r espondence t o t hese exhi bi t s.
7 Q. I sn' t i t a f act , ma' am, t hat t he f i r st r evi sed r epor t s you
8 got f or any quar t er of t he f i r st year of t he gr ant was on
9 August 13t h, 2003?
10 A. No.
11 ( Cont i nued on next page)
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1 BY MR. RUBI NSTEI N:
2 Q. Woul d you t ake a l ook at Exhi bi t 40A, pl ease. Do you see
3 t hat exhi bi t t hat ' s i n evi dence, ma' am?
4 A. Yes.
5 Q. Do you see t hat i s a r evi sed f i nanci al st at us r epor t ?
6 A. Yes.
7 Q. And t hat i s a r epor t f or t he f i r st per i od Oct ober 1, 2001
8 t o December 31, 2001?
9 A. Yes.
10 Q. Si gned by Dr . Kar r on?
11 A. Yes.
12 Q. Dat ed?
13 A. Oh, i t ' s dat ed August 13, 2003.
14 Q. And i n t he next quar t er t ake a l ook at 41A t hat ' s i n
15 evi dence, and t hat ' s f or t he second quar t er endi ng Mar ch 31,
16 2002, cor r ect ?
17 A. Yes.
18 Q. And what dat e? I s t hat dat ed as dat e r epor t submi t t ed?
19 A. August 13, 2002. 2003, sor r y.
20 Q. Same dat e as t he f i r st one, r i ght ?
21 A. Yes.
22 Q. Now l et ' s go t o 42A. I s t her e a 42A?
23 A. Yes.
24 Q. And 42 i s t he one, t he or i gi nal one t hat was submi t t ed. I t
25 was not si gned by Dr . Kar r on. 42A i s si gned by Dr . Kar r on,
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1 cor r ect ?
2 A. Yes.
3 Q. And t hat cover s t he per i od of J une 30, 2002 endi ng, r i ght ?
4 A. Yes.
5 Q. And t hat ' s si gned by Dr . Kar r on?
6 A. Yes.
7 Q. And what dat e was t hat r epor t submi t t ed?
8 A. August 13, 2003.
9 Q. Same dat e, r i ght ?
10 A. Yes.
11 Q. And l et ' s t ake a l ook at 43A, and t hat r el at es t o t he
12 f our t h quar t er Sept ember 30, 2002, si gned by Dr . Kar r on,
13 cor r ect ?
14 A. Yes.
15 Q. And what dat e i s t hat r evi sed?
16 A. August 13, 2003.
17 Q. So, al l f our of t hese r evi sed r epor t s wer e submi t t ed on t he
18 ver y same day, cor r ect ?
19 A. Yes. They wer e si gned on - - yes.
20 Q. As a mat t er of f act , t hat was t he ver y same day t hat Bob
21 Benedi ct wr ot e you a l et t er t hat ' s Exhi bi t 48, t hat he cc' d t o
22 Mar i l yn Gol dst ei n, cor r ect ?
23 THE COURT: Do you have 48?
24 A. Yes, i t ' s t he same dat e.
25 Q. By t he way, di d you ever r evi ew - - wi t hdr awn.
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1 I s a gr ant ee supposed t o have a busi ness manual ?
2 A. Under r egul at i on t he gr ant ee shoul d have t he pr oper wr i t t en
3 management pr ocedur es wi t hi n hi s company.
4 Q. Do you know whet her or not CASI , I nc. had pr oper - - had any
5 sor t of manual or busi ness pr ocedur es?
6 A. Accor di ng t o a document t hat was sent t o us by hi s
7 account i ng f i r mt hat he hi r ed, he di d have a pr oper account i ng
8 syst emwi t hi n hi s cor por at i on.
9 Q. And what about di d he have a manual f or f r i nge benef i t s?
10 A. Not hi ng t hat I r evi ewed. Al l I know i s t hat we r ecei ved a
11 document f r oman i ndependent CPA sayi ng t hat Dr . Kar r on' s
12 company, CASI , had t he pr oper management pr ocedur es t o pr ocess
13 f eder al gover nment f unds.
14 Q. Di d you ever ask Dr . Kar r on or any busi ness admi ni st r at or
15 f or CASI whet her or not t hey had a manual t hat encompassed
16 f r i nge benef i t s?
17 A. No.
18 Q. Now, di d you have cont act wi t h Dr . Kar r on i n J ul y of 2003
19 af t er t he gr ant was suspended?
20 A. Possi bl y.
21 Q. Let me show you what has been mar ked f or i dent i f i cat i on as
22 Def endant ' s D and E.
23 THE COURT: Can I have t he desi gnat i on agai n? B and
24 C?
25 MR. RUBI NSTEI N: D and E.
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1 MR. KWOK: May we appr oach, your Honor ?
2 THE COURT: Have you l ooked at bot h document s?
3 MR. KWOK: Yes.
4 THE COURT: Al l r i ght .
5 ( Cont i nued on next page)
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1 ( At t he si debar )
2 MR. EVERDELL: Your Honor , t hi s e- mai l , she i s not
3 even on t hi s e- mai l , not on ei t her one of t hese e- mai l s. Hope
4 Snowden i s not on ei t her of t hese t wo e- mai l s at al l , so I
5 don' t see how i t ' s possi bl e he coul d i nt r oduce i t t hr ough her .
6 Secondl y, t hi s e- mai l her e and act ual l y t hat e- mai l
7 t her e i s out si de t he i ndi ct ment per i od. Thi s ends J une 2003.
8 These ar e e- mai l s J ul y 24, 2003.
9 MR. RUBI NSTEI N: J udge, we have t he l et t er f r om
10 Ms. Gol dst ei n i n t he 3500 t hat I showed bef or e t hat ' s dat ed
11 J ul y I t hi nk 24t h or 25t h. I ' l l get i t .
12 Thi s i s a l et t er J ul y 25 f r omMs. Gol dst ei n, t hat she
13 has i dent i f i ed t hat she i s awar e of and she has seen. That ' s
14 her boss. These e- mai l s r el at e t o what was goi ng on at t hat
15 t i me.
16 THE COURT: But t hi s doesn' t l ook l i ke t he or i gi nal
17 document .
18 MR. RUBI NSTEI N: No, i t ' s a copy of t he e- mai l .
19 THE COURT: But i t doesn' t l ook l i ke an or i gi nal copy
20 or a phot ost at or anyt hi ng of t hat sor t .
21 MR. RUBI NSTEI N: No, we t ook i t of f what t he
22 gover nment has pr ovi ded - - what we have, sor r y. Thi s i s of f
23 e- mai l s t hat we had on t he comput er t hat we had r et r i eved f r om
24 t he comput er s.
25 THE COURT: But i t doesn' t l ook l i ke a r et r i eved
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1 e- mai l . I t ' s i n di f f er ent pr i nt , et c. I mean i t j ust doesn' t
2 l ook l i ke any - -
3 MR. RUBI NSTEI N: She can say whet her or not t hi s i s - -
4 THE COURT: I f you have t he or i gi nal , why not use t he
5 or i gi nal ?
6 MR. RUBI NSTEI N: I don' t have t he or i gi nal . That ' s
7 why I ' mshowi ng t hi s one.
8 THE COURT: I t hought I saw i t i n t he 3500 mat er i al ,
9 somet hi ng about cheer s.
10 MR. RUBI NSTEI N: I t mi ght be i n t her e, but - - l et me
11 t ake a l ook at t he 3500 mat er i al .
12 THE COURT: What ' s t he mat t er wi t h t he ot her l et t er
13 f r omBenedi ct ?
14 MR. EVERDELL: Wel l , f i r st of al l , i t ' s f r omBob
15 Benedi ct t o Dr . Kar r on, and t hat ' s a hear say pr obl em.
16 Secondl y, t hi s i s out si de t he scope. Thi s i s J ul y 24,
17 2003. The i ndi ct ment onl y al l eges up t o J une 2003. How i s
18 t hi s r el evant ?
19 MR. RUBI NSTEI N: I t ' s r el evant on t he i ssue of i nt ent ,
20 your Honor . I t ' s al so r el evant i n t he - - I saw t hose e- mai l s
21 mysel f , J udge, but I coul dn' t r emember wher e i t was, so I
22 pr i nt ed out new ones. I don' t know what I di d wi t h t he
23 or i gi nal e- mai l s, so I had t hempr i nt ed of f t he comput er t hat
24 i t was saved.
25 MR. KWOK: I f I may, I j ust don' t see how i t goes t o
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1 t he i ssue of i nt ent f or somet hi ng t hat ' s happeni ng af t er t he
2 end of t he i ndi ct ment t hat ' s bei ng char ged.
3 THE COURT: Whi ch one?
4 MR. KWOK: Al l of t hese. I t ' s l i ke i n J ul y of 2003.
5 Thi s i s al so J ul y 2003, and so i s t hi s one.
6 The i ndi ct ment char ges i t ends i n J une 2003. You
7 can' t unr i ng a bel l . I f he had t he i nt ent t o st eal , t he f act
8 t hat he l at er want ed t o cor r ect i t af t er he knows t hat he i s i n
9 t r oubl e does not undo t hat i nt ent .
10 MR. RUBI NSTEI N: Wel l , he doesn' t know; he j ust knows
11 t he gr ant i s suspended.
12 THE COURT: I don' t t hi nk you can get i t i n t hr ough
13 t hi s wi t ness.
14 MR. RUBI NSTEI N: Then I wi l l j ust ask about t hi s
15 r ef er ence over her e i n t he document t hat she has i dent i f i ed
16 wher e t hey t al k about - -
17 MR. KWOK: But i t ' s st i l l not i n evi dence. You can' t
18 r ead i t .
19 MR. RUBI NSTEI N: No, I can ask her . She has
20 i dent i f i ed t hi s.
21 MR. KWOK: We wi l l obj ect i f you ask her .
22 THE COURT: I f you al l t al k at t he same t i me, I can' t
23 concent r at e on what you' r e sayi ng.
24 Wel l , I don' t know t he wi t ness has seen t hi s.
25 MR. RUBI NSTEI N: I di d. I showed i t t o her , and she
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1 has i dent i f i ed t hi s, and she r ecogni zed i t .
2 THE COURT: Any obj ect i on t o 3504- M?
3 MR. EVERDELL: Ar e you t r yi ng t o i nt r oduce i t i nt o
4 evi dence?
5 THE COURT: Yes, he i s.
6 MR. EVERDELL: That ' s not what I under st ood.
7 MR. KWOK: I t hi nk i t ' s f i ne. No obj ect i on t o t hat .
8 THE COURT: Al l r i ght .
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1 ( I n open cour t )
2 MR. RUBI NSTEI N: Your Honor , I woul d at t hi s t i me l i ke
3 t o of f er what has been pr evi ousl y mar ked as Gover nment Exhi bi t
4 3504- M - -
5 THE COURT: For - -
6 MR. RUBI NSTEI N: - - f or i dent i f i cat i on, as Def endant ' s
7 Exhi bi t F i n evi dence.
8 THE COURT: Al l r i ght .
9 MR. EVERDELL: No obj ect i on.
10 THE COURT: I t ' s a l et t er f r omMs. Gol dst ei n?
11 MR. RUBI NSTEI N: That i s cor r ect , your Honor .
12 THE COURT: Dat ed J ul y what ?
13 MR. RUBI NSTEI N: Dat ed J ul y 25, ' 03.
14 THE COURT: That ' s af t er t he gr ant was suspended?
15 MR. RUBI NSTEI N: Ri ght .
16 ( Def endant ' s Exhi bi t F r ecei ved i n evi dence)
17 THE COURT: Do you want t o di spl ay i t t o t he j ur y?
18 MR. RUBI NSTEI N: Yes. I wi l l r ead t he document t o t he
19 j ur y. I t ' s f r omt he Uni t ed St at es Depar t ment of Commer ce,
20 Nat i onal I nst i t ut e of St andar ds and Technol ogy, Gai t her sbur g,
21 Mar yl and, J ul y 25, 2003, Dr . D. B. Kar r on, Comput er Ai ded
22 Sur ger y, I nc. , 300 East 33r d St r eet , Sui t e 4N, New Yor k, New
23 Yor k 10016. Re cooper at i ve agr eement number 70NANB1H3050.
24 " Dear Dr . Kar r on. I n r esponse t o your e- mai l dat ed
25 J ul y 16, 2003, t he money i n your bank account does not
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1 const i t ut e cost shar e. To qual i f y as cost shar e you woul d have
2 t o act ual l y appl y your cont r i but i on t o t he pr oj ect cost . I n
3 or der t o r esol ve amendment 6, noncompl i ance of t he speci al
4 awar d commi ssi on 7, cost shar e, you need t o r ef und t o t he
5 gover nment your appl i cabl e por t i on of t he pr oj ect cost and
6 r esubmi t cor r ect ed 269 r ef l ect i ng t hat cont r i but i on.
7 " I n r ef er ence t o your pr oposed i n ki nd cont r i but i on,
8 you cannot cl ai mt he f ul l cost of pr eowned equi pment .
9 Accor di ng t o t he cost pr i nci pl es, you can onl y cl ai mf ai r use
10 al l owance ( wi t h r ent al s) .
11 " I f you need addi t i onal i nf or mat i on, pl ease cont act
12 Hope Snowden at 301- 975- 602 or vi a e- mai l at
13 Hope. snowden@NI ST. gov. Si ncer el y, Mar i l yn Gol dst ei n, gr ant
14 of f i cer . "
15 Ms. Snowden, af t er J ul y 25, 2003 di d Dr . Kar r on
16 cont act you?
17 A. I don' t r ecal l .
18 Q. Di d you cont act Dr . Kar r on?
19 A. No.
20 MR. RUBI NSTEI N: No f ur t her quest i ons, your Honor .
21 THE COURT: Al l r i ght . Thank you ver y much.
22 Redi r ect ?
23 MR. EVERDELL: Yes, pl ease, your Honor .
24 THE COURT: Let ' s make i t shor t .
25
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1 REDI RECT EXAMI NATI ON
2 BY MR. EVERDELL:
3 Q. Hel l o agai n, Ms. Snowden.
4 A. Hel l o.
5 Q. You wer e asked sever al quest i ons on cr oss- exami nat i on, and
6 I want t o di scuss a f ew of t hem.
7 I f we coul d put up Gover nment Exhi bi t 4, page 7.
8 Do you r ecal l bei ng asked about t hat sl i de?
9 A. Yes.
10 Q. And you r ecal l bei ng asked about bankr upt cy i n t hat sl i de?
11 A. Yes.
12 Q. What ' s t he wor d af t er " bankr upt cy" on t hat sl i de?
13 A. " Pr ot ect i on" .
14 Q. So bankr upt cy pr ot ect i on. What exact l y ar e you r ef er r i ng
15 t o when you have " bankr upt cy pr ot ect i on" on t hat sl i de?
16 A. Bankr upt cy pr ot ect i on i s a r eor gani zat i on. A company
17 r eor gani zes so t hat t hey don' t want t o t ot al l y - - t he company
18 i s not t ot al l y goi ng t o go away, t hey ar e goi ng t o r eor gani ze
19 so t hey can pay t hei r f i nanci al debt .
20 Q. And i s t hat somet hi ng you have t o not i f y t he gr ant
21 speci al i st of ?
22 A. Yes.
23 Q. So, i t ' s not i f you ar e br oke, i s i t ?
24 A. No, i t ' s not i f you ar e br oke; i t ' s when you r eor gani ze
25 f i nanci al l y.
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1 Q. You wer e al so asked some quest i ons about r evi si ng budget s.
2 A. Yes.
3 Q. Ther e ar e a f ew t her e I want t o t ouch on. Fi r st , you sai d
4 t hat I bel i eve you can r evi se your budget at t he end of t he
5 f i r st year , i s t hat r i ght ?
6 A. Yes.
7 Q. But i f your year one has al r eady ended, can you r evi se your
8 year one number s at t hat poi nt ?
9 A. No.
10 Q. So, what can you r evi se at t he end of t he f i r st year of
11 your budget ?
12 A. I f your year one has ended, you can r evi se your out year s,
13 whi ch woul d be year s t wo and t hr ee.
14 Q. And you wer e al so asked I bel i eve about r evi si ng budget s,
15 speci f i cal l y t he t en per cent r ul e whi ch i s on t hat sl i de. I s
16 t hat r i ght ?
17 A. Yes.
18 Q. And you t est i f i ed about what t hat 10 per cent r ul e means,
19 r i ght ?
20 A. Yes.
21 Q. And i s t hat 10 per cent of t he t ot al awar d amount or 10
22 per cent of t he annual budget t hat you' r e al l owi ng?
23 A. I t ' s 10 per cent of t he annual budget .
24 Q. So, i f you ar e al l owed $800, 000 i n t he f i r st year of your
25 gr ant , how much can you move ar ound i n t he f i r st year of your
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1 gr ant wi t hout get t i ng pr i or appr oval ?
2 A. $79, 999. 99, under $80, 000.
3 Q. And can t hose r evi si ons be addi t i ons and subt r act i ons?
4 A. The 80, 000 i ncl udes addi t i ons and subt r act i ons.
5 Q. And does t he t ot al have t o be 80, 000 under t hat exampl e?
6 A. Yes.
7 Q. Now, when you r evi se your budget t hough can you cr eat e
8 br and new cat egor i es wi t hout appr oval ?
9 A. No.
10 Q. You need pr i or appr oval f or t hat ?
11 A. Yes.
12 Q. OK. Do you r ecal l bei ng asked about Bob Benedi ct ?
13 A. Yes.
14 Q. Do you r ecal l who Bob Benedi ct i s?
15 A. Ther e was a l et t er f r omDr . Kar r on sayi ng t hat he was goi ng
16 t o be t he new admi ni st r at or under CASI .
17 Q. And do you r ecal l when t hat l et t er was sent ?
18 A. I t hi nk i t was l i ke Sept ember 2003.
19 Q. Ar e you cer t ai n of t hat ?
20 A. No.
21 Q. Do you need somet hi ng t o r ef r esh your r ecol l ect i on?
22 A. Pl ease.
23 THE COURT: Has Mr . Rubi nst ei n seen t he document t hat
24 you ar e showi ng t he wi t ness?
25 MR. EVERDELL: Sor r y. Mr . Rubi nst ei n, t hi s i s - -
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1 THE COURT: Show hi mwhat you ar e goi ng t o show t he
2 wi t ness.
3 MR. EVERDELL: I t ' s 3504- L.
4 MR. RUBI NSTEI N: I have a copy of i t .
5 THE COURT: OK.
6 A. Oh, i t ' s Febr uar y 25, 2003.
7 Q. So, say agai n t he dat e of when Dr . Kar r on r equest ed Bob
8 Benedi ct be made t he - -
9 A. Febr uar y 25, 2003.
10 Q. Now, I bel i eve you t est i f i ed on di r ect t hat you di dn' t
11 appr ove Mr . Benedi ct , i s t hat r i ght ?
12 A. No, I di d not .
13 Q. And what was t he r eason why he was not appr oved?
14 A. He was not appr oved because t he budget had f l uct uat ed so
15 many t i mes none of t he budget s wer e appr oved.
16 He was i ncor por at ed i nt o t he budget as a pr oposed
17 r evi si on, and si nce t hey wer en' t appr oved, he was never
18 appr oved, so he was never aut hor i zed t o make any deci si ons
19 under t he ATP gr ant .
20 Q. And do you r ecal l when t he l ast pr oposed budget r evi si on
21 was submi t t ed?
22 A. I n 2003. The l ast one I t hi nk was l i ke Febr uar y 2003.
23 Q. I f you r ef er t o Gover nment Exhi bi t 36. Do you have t hat i n
24 f r ont of you?
25 A. Yes.
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1 Q. I s t hat t he l ast pr oposed budget r evi si on?
2 A. To my r ecol l ect i on, t hi s i s t he l ast pr oposed budget .
3 Q. And what ' s t he dat e on t he l ast pr oposed budget r evi si on?
4 A. Febr uar y 25, 2003.
5 Q. I s t hat t he same dat e as t he l et t er r equest i ng Mr . Benedi ct
6 be appoi nt ed as t he admi ni st r at or at CASI ?
7 A. Yes.
8 Q. And was t hi s amendment ever appr oved?
9 A. No, i t never was.
10 Q. Ar e you st i l l abl e t o have di scussi ons wi t h an unappr oved
11 cont act per son l i ke t hat ?
12 A. I f t hey' r e unappr oved I can have di scussi ons wi t h hi m, but
13 not hi ng he says can be val i dat ed because you' r e not an appr oved
14 per sonnel . So, I can t al k t o t hemver bal l y, but unt i l you ar e
15 i ncor por at ed i nt o t he budget , i n t he appr oved budget , i t ' s not
16 aut hent i c, so you can' t make any deci si ons under t he ATP
17 pr oj ect .
18 Q. Now, i n t er ms of hi r i ng deci si ons i n gener al , whi ch I
19 bel i eve you wer e asked about , does t he gr ant s of f i ce, your
20 of f i ce, r evi ew hi r i ng deci si ons of t he compani es t hat r ecei ve
21 ATP gr ant s?
22 A. No, t he compani es, t hey' r e commer ci al compani es, t hey can
23 hi r e and f i r e whoever t hey want , but anybody t hat par t i ci pat es
24 on t he ATP gr ant , we have t o - - t he gr ant of f i cer has t o
25 appr ove. But ot her wi se j ust nor mal busi ness day, t hey can hi r e
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1 and f i r e whoever t hey want ; we have not hi ng t o do wi t h t hat .
2 Q. So, you don' t r evi ew r sums necessar i l y of peopl e t hat ar e
3 hi r ed by compani es?
4 A. No.
5 Q. Al l r i ght . You wer e asked a ser i es of quest i ons about t he
6 budget amendment s and t he $80, 000 10 per cent cap i n t hi s case.
7 Do you r emember t hat ?
8 A. Yes.
9 Q. I j ust want t o go t hr ough t hat ver y qui ckl y i f possi bl e,
10 but I t hi nk we shoul d go t hr ough t hat .
11 I f we coul d have Gover nment ' s 14 on t he scr een.
12 Do you see t hat document ?
13 A. Yes.
14 Q. I bel i eve you t est i f i ed bef or e t hat t hi s was t he l ast
15 appr oved budget , i s t hat r i ght ?
16 A. No, 14, t hi s i s t he or i gi nal budget .
17 Q. Sor r y, you' r e r i ght , t hat ' s t he or i gi nal budget .
18 A. Thi s i s t he or i gi nal budget .
19 Q. OK. And t hen i f you l ook at amendment 2, whi ch i s
20 Gover nment Exhi bi t 22, t he t hi r d page of t hat exhi bi t . We
21 di scussed t hi s on di r ect , i s t hat r i ght ?
22 A. Yes.
23 Q. And t hat i s I bel i eve t he onl y amendment t hat was appr oved
24 t o t he act ual budget number s, i s t hat r i ght ?
25 A. Thi s i s t he onl y appr oved r evi sed budget .
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1 Q. What was t he dat e on t hat budget ?
2 A. Thi s budget was dat ed 12/ 27/ 01.
3 Q. Now, you t est i f i ed on cr oss- exami nat i on and on di r ect about
4 conver sat i ons you had wi t h Dr . Kar r on about equi pment cost s,
5 r i ght , an addi t i onal pi ece of equi pment ?
6 A. About addi ng addi t i onal equi pment t o t he pr ogr am, yes.
7 Q. And I bel i eve t hat you t est i f i ed t hat you needed hi mt o
8 submi t a budget amendment r equest because i t was over $80, 000,
9 i s t hat r i ght ?
10 A. Yes.
11 Q. OK. I j ust want t o compar e - - t hi s i s t he f i nal appr oved
12 budget , i s t hat r i ght , t he l ast appr oved budget amendment ?
13 A. Yes.
14 Q. Then l et ' s compar e t hat t o Gover nment Exhi bi t 32.
15 THE COURT: Wel l , we ar e l ooki ng at Gover nment Exhi bi t
16 22.
17 MR. EVERDELL: Gover nment Exhi bi t 22 i s on t he scr een.
18 I don' t know i f i t ' s possi bl e t o do a si de- by- si de compar i son.
19 Yes? On t he l ef t - hand si de Gover nment Exhi bi t 22.
20 THE COURT: No one can see t hese. No one can see
21 t hem. I ' mcl oser t han t hey ar e, and I can' t see t hem.
22 MR. EVERDELL: Then we wi l l j ust di scuss i t .
23 THE COURT: You have t o go t o t he exhi bi t number s.
24 MR. EVERDELL: Absol ut el y, your Honor .
25 Q. We j ust l ooked at Gover nment Exhi bi t 22, whi ch was
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1 amendment t o t he f i nal r evi sed budget t hat was appr oved, r i ght ?
2 A. Yes.
3 Q. Do you see t he equi pment cost s t her e?
4 A. Yes.
5 Q. For year one.
6 A. Yes.
7 Q. What i s t he number t her e?
8 A. $110, 000.
9 Q. OK. And t hen you' r e now l ooki ng at Gover nment ' s 32, whi ch
10 I bel i eve you wer e l ooki ng at on cr oss- exami nat i on.
11 A. Yes.
12 Q. I s t hi s a pr oposed budget or was t hi s appr oved?
13 A. Pr oposed.
14 Q. So t hi s i s pr oposed. Wi l l you l ook at t he equi pment l i ne
15 t her e.
16 A. Yes.
17 Q. For year one?
18 A. Yes.
19 Q. What ' s t he number t her e?
20 A. $303, 400.
21 Q. And i s t hat mor e t han $80, 000 mor e t han t he l ast appr oved
22 budget f or t hat equi pment l i ne i n year one?
23 A. Yes.
24 THE COURT: I ' msor r y. I ' ve got t he wr ong exhi bi t .
25 J ust a second. Al l r i ght . Go ahead.
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1 Q. So, t hen l ooki ng at 32, whi ch i s a pr oposed budget , I t hi nk
2 you t est i f i ed, r i ght - -
3 A. Yes.
4 Q. - - t he equi pment l i ne t her e says - - and now i t ' s on t he
5 scr een - - $303, 400, r i ght ?
6 A. Yes.
7 Q. Wher eas bef or e you sai d t he l ast appr oved budget t he
8 equi pment l i ne f or year one was $110, 000, i sn' t t hat r i ght ?
9 A. Yes.
10 Q. So, t hat i s an i ncr ease of j ust bel ow $200, 000, i sn' t i t ?
11 A. Yes.
12 Q. Al l r i ght . So, i s t hat mor e t han $80, 000?
13 A. Yes, i t i s.
14 Q. The 10 per cent l i mi t ?
15 A. Yes.
16 Q. And i s t hat why you had di scussi ons wi t h Dr . Kar r on about
17 submi t t i ng a r evi sed budget amendment ?
18 A. Yes.
19 Q. And l et ' s go t o Gover nment Exhi bi t 35, page 7.
20 Do you have t hat i n f r ont of you?
21 A. Yes, I do.
22 Q. Do you r ecal l bei ng asked quest i ons on cr oss- exami nat i on
23 about t hi s equi pment cat egor y?
24 A. Yes.
25 Q. OK. Now, woul d equi pment cost s - - wel l , l et me r ead t he
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1 l ast sent ence, t he l ast t wo sent ences her e. I t says, " ATP
2 f unds may not be used f or const r uct i on of new bui l di ngs or
3 ext ensi ve r enovat i ons of exi st i ng l abor at or y bui l di ngs. ATP
4 f unds may, however , be used f or const r uct i on of exper i ment al
5 r esear ch and devel opment f aci l i t i es t o be l ocat ed wi t hi n a new
6 or exi st i ng bui l di ng pr ovi ded t hat t he equi pment or f aci l i t i es
7 ar e essent i al f or car r yi ng out t hat pr oj ect . I f such cost s ar e
8 pr oposed, i ncl ude bel ow and pr ovi de j ust i f i cat i on. "
9 That ' s what i t says, r i ght ?
10 A. Yes.
11 Q. Now t hat l ast sent ence, ' i f such cost s ar e pr oposed,
12 i ncl ude bel ow and pr ovi de j ust i f i cat i on, " why i s t hat sent ence
13 t her e?
14 A. " I f such cost s ar e pr oposed, i ncl ude bel ow and pr ovi de
15 j ust i f i cat i on, " because i t may - - i t coul d be consi der ed. But
16 t hat ' s a consi der at i on. But t her e was none i ncor por at ed i nt o
17 t hi s pr oposal . Ther e was no cost s.
18 Q. Do const r uct i on cost s, t hi ngs l i ke t hat , have t o be
19 appr oved i n t he budget bef or e you can spend money on t hem?
20 A. Yes.
21 Q. OK.
22 THE COURT: Wel l , what i s t he i t emt hat appear s at t he
23 end of t hat exhi bi t - - or not t he end - - a f ew pages l at er ,
24 t ot al down bel ow i s $231, 719 at t he bot t omof t he page? Now,
25 as I see i t , t her e i s a document at t he end t hat says i t em
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1 met hodol ogy, comput at i on and cost s, t hr ee pages l at er i s i t ,
2 counsel ? And t her e i t says vi deo syst em, wor k st at i on,
3 ser ver s, pr i nt er , f i r e wal l , l ab camer a, scanner s, t ape dr i ve,
4 l i br ar y, swi t ches, ai r condi t i oni ng and sof t war e.
5 Have you got t hat ?
6 THE WI TNESS: Yes.
7 THE COURT: Wel l , t hat t ot al s up t o $231, 719 at t he
8 bot t om?
9 THE WI TNESS: Um- hum.
10 THE COURT: What ' s t he pr obl em?
11 Q. The quest i on i s: Wer e t hese cost s ever appr oved?
12 A. No, t hey wer e never appr oved.
13 Q. And i f you t ake a l ook at Gover nment Exhi bi t 1, page 6.
14 Fi r st , l ooki ng at Gover nment Exhi bi t 1 when you get i t , j ust
15 t el l us what t hat i s.
16 THE COURT: You say t hey wer e never appr oved, but t hat
17 i sn' t qui t e what I was aski ng you. Thi s i s f or equi pment , but
18 t hi s i s not f or - - none of t hose f unds wer e, as I r ead i t , ar e
19 f or const r uct i on of new bui l di ngs or ext ensi ve r enovat i ons,
20 ot her t han possi bl y t he ai r condi t i oni ng and swi t ches. AmI
21 wr ong, counsel ?
22 MR. EVERDELL: Your Honor , t he cat egor y was l i st ed as
23 equi pment i n subcat egor y D, and you ar e r i ght t hat t hat number
24 i s f ul l y el abor at ed, i t emi zed l at er on i n t he exhi bi t , and i t
25 does add up, so t hese ar e t he cost s t hat ar e bei ng cl ai med
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1 under equi pment .
2 THE COURT: I t doesn' t i ncl ude i nst al l at i on.
3 MR. EVERDELL: That ' s cor r ect . I t i ncl udes - - t hi s
4 t al ks about usi ng t hese f unds f or const r uct i on of new bui l di ngs
5 and ext ensi ve r enovat i on of exi st i ng l abor at or i es, and t hat ' s
6 wher e t hese cost s - - accor di ng t o t hat l anguage we r ead out ,
7 t hese cost s ar e cont empl at ed f or t hat pur pose.
8 THE COURT: Wel l , what about const r uct i on on
9 exper i ment al r esear ch and devel opment f aci l i t i es t o be l ocat ed
10 i n exi st i ng bui l di ngs, not new, pr ovi ded t hat t he equi pment and
11 f aci l i t i es ar e essent i al f or car r yi ng out t he pr oj ect ?
12 MR. EVERDELL: Cor r ect . I t hi nk my quest i on was wer e
13 t hese f unds i n f act ever appr oved.
14 THE WI TNESS: No, t hey wer en' t . They wer e r equest ed
15 and pr oposed but never appr oved.
16 Q. And i f you coul d l ook at - -
17 THE COURT: The i ssue i s whet her or not t hey pr oper l y
18 come wi t hi n t hat f r amewor k of Exhi bi t D; i t ' s j ust t hat t hey
19 wer e not appr oved. I s t hat r i ght ?
20 MR. EVERDELL: Cor r ect , your Honor .
21 THE COURT: That ' s what I want t o f i nd out .
22 MR. EVERDELL: Sor r y.
23 THE COURT: Sur e.
24 Q. And what i s Exhi bi t 1 agai n?
25 A. Exhi bi t 1 i s t he Advanced Technol ogy Pr ogr ampr oposal
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1 pr epar at i on ki t .
2 Q. Was t hat gi ven t o t he def endant as par t of hi s pr oposal
3 when he submi t t ed i t f or an ATP gr ant ?
4 A. Yes. I don' t know - - he pr obabl y went t o a pr oposer ' s
5 conf er ence, and anybody t hat want s t o pr opose a gr ant , t hi s i s
6 a package t hat gi ves you an out l i ne, gi ves you di r ect i on and
7 gui dance on how t o compl et e a pr oposal t o submi t t o ATP. So,
8 he pi cked i t up, he got i t f r omsomewher e.
9 Q. OK. And t hen i f we coul d hi ghl i ght 5A, and I wi l l j ust
10 r ead i t . " What t ypes of cost s ar e unal l owabl e. " Ri ght ?
11 And t hen 5A says " Regar dl ess of whet her t hey ar e al l ow
12 under t he f eder al cost pr i nci pl es, t he f ol l owi ng ar e
13 unal l owabl e under ATP: Const r uct i on of new bui l di ngs or
14 ext ensi ve r enovat i on of exi st i ng l abor at or y bui l di ngs.
15 However , const r uct i on of exper i ment al r esear ch and devel opment
16 f aci l i t i es t o be l ocat ed wi t hi n a new or exi st i ng bui l di ng ar e
17 al l owabl e pr ovi ded t hat t he equi pment or f aci l i t i es ar e
18 essent i al f or car r yi ng out t he pr oposed sci ent i f i c and
19 t echni cal pr oj ect and ar e appr oved by t he NI ST gr ant s of f i cer . "
20 I s t hat what t hat says?
21 A. Yes.
22 Q. Ar e you t he NI ST gr ant s of f i cer f or t he ATP gr ant f or CASI ?
23 A. No.
24 Q. I s t hat your super vi sor ?
25 A. That ' s my super vi sor . I ' mt he gr ant speci al i st .
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1 Q. And you wor k i n t he gr ant s of f i ce.
2 A. Yes.
3 THE COURT: Who i s your super vi sor ?
4 THE WI TNESS: For mer l y, when t hi s was goi ng on her
5 name i s Mar i l yn Gol dst ei n. Ri ght now her name i s Mel i nda
6 Tukr am.
7 Q. I s Mar i l yn Gol dst ei n t he act ual gr ant s of f i cer , t he one who
8 woul d si gn of f on t he act ual amendment s t hat wer e appr oved?
9 A. Yes.
10 Q. OK. You wer e al so asked on cr oss- exami nat i on about sunk
11 cost s, cost s i ncur r ed bef or e t he gr ant was act ual l y awar ded.
12 A. Yes.
13 Q. What i s t he r ul e on t hat agai n?
14 A. We don' t pay f or pr eawar d cost s.
15 Q. I f you can go t o Gover nment Exhi bi t 13 and hi ghl i ght
16 f undi ng l i mi t at i ons number 6.
17 Do you know what t hi s document i s, Ms. Snowden?
18 A. Yes.
19 Q. What ' s t hi s?
20 A. These ar e t he speci al awar d condi t i ons t hat ar e at t ached t o
21 t he gr ant .
22 Q. And was t hi s at t ached t o t he CASI ' s ATP gr ant ?
23 A. Yes, i t was.
24 Q. I wi l l j ust r ead t he f undi ng l i mi t at i ons. " The scope of
25 wor k and budget i ncor por at ed i nt o t hi s awar d cover t he t hr ee
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1 year per i od ( r ef er r ed t o as t he pr oj ect per i od) f or a t ot al
2 amount of $2 mi l l i on i n f eder al f unds. However , f eder al
3 f undi ng avai l abl e at t hi s t i me i s l i mi t ed t o $800, 000 f or t he
4 f i r st year per i od f r omOct ober 1, 2001 t hr ough Sept ember 30,
5 2002, r ef er r ed t o as t he budget per i od. "
6 Do you see t hat ?
7 A. Yes.
8 Q. So, what does t hat mean t hat t he $800, 000 ar e avai l abl e f or
9 t hat per i od Oct ober 1, 2003 t hr ough Sept ember 2 - - 30, 2002?
10 A. That ' s t he per i od t hat t hese f unds can be expended so t hey
11 can be spent wi t hi n st ar t i ng Oct ober 1, 2001 t hr ough Sept ember
12 30, 2002.
13 Q. So, i f you want ed t o expend t hese ATP f unds f or a cost t hat
14 occur r ed bef or e t hat per i od, coul d you do i t ?
15 A. No.
16 Q. And was t hi s speci al condi t i ons awar d document gi ven t o t he
17 def endant as par t of hi s gr ant pr oposal when he r ecei ved t he
18 gr ant ?
19 A. Yes.
20 THE COURT: Any f ur t her quest i ons?
21 MR. EVERDELL: Sor r y?
22 THE COURT: Do you have anyt hi ng f ur t her wi t h t hi s
23 wi t ness?
24 MR. EVERDELL: Your Honor , I do have t o cover j ust a
25 f ew mor e t opi cs.
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1 THE COURT: Let ' s move al ong.
2 Q. Al l r i ght . Ms. Snowden you wer e asked a quest i on about t he
3 audi t s on cr oss- exami nat i on. I bel i eve you sai d t hat you t ol d
4 t he def endant t hat you pai d f or t he audi t and you want ed i t .
5 A. Yes.
6 Q. What pr ompt ed you t o say t hat ?
7 A. The audi t was ver y del i nquent and past due. We needed - -
8 t he audi t was due, i t was del i nquent , and t her ef or e I r equest ed
9 a copy of t he audi t .
10 Q. OK.
11 MR. EVERDELL: Al most done, your Honor .
12 Q. You wer e al so quest i oned about t he f i nanci al st at us r epor t s
13 and t he r evi si ons t o t he f i nanci al st at us r epor t s.
14 A. Yes.
15 Q. And I bel i eve you t est i f i ed on cr oss- exami nat i on t hat t her e
16 wer e ot her r evi si ons t hat you had put i n t he gr ant f i l e.
17 A. Yes.
18 Q. And i n f act t he f i r st r evi si ons wer e not on August 13,
19 2003, t her e wer e ot her r evi si ons t hat you r ecal l ed?
20 A. Qui t e a f ew i n t he mi ddl e of t hat dat e.
21 MR. EVERDELL: Your Honor , I haven' t mar ked t hese yet ,
22 but I woul d l i ke t o mar k t hemf or i dent i f i cat i on. I woul d l i ke
23 t o mar k t hese f or i dent i f i cat i on as Gover nment Exhi bi t 2000 and
24 2001.
25 Q. Do you see t hose document s?
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1 A. Yes.
2 Q. Do you r ecogni ze t hose document s?
3 A. Yes.
4 Q. How do you r ecogni ze t hem?
5 A. They wer e sent t o me by Dr . Kar r on.
6 Q. And what ar e t hose document s?
7 A. These ar e f i nanci al st at us r epor t s.
8 MR. EVERDELL: The gover nment moves 2000 and 2001 be
9 admi t t ed i nt o evi dence.
10 THE COURT: May I see t hem? No obj ect i on, Exhi bi t
11 2000 and 2001 ar e admi t t ed i nt o evi dence.
12 MR. EVERDELL: Your Honor , may I publ i sh?
13 THE COURT: Yes, you may.
14 ( Gover nment ' s Exhi bi t s 2000 and 2001 r ecei ved i n
15 evi dence)
16 THE COURT: Bl ow i t up so t hey can r ead i t .
17 Q. Al l r i ght . Ms. Snowden, you t est i f i ed t hat t hi s i s a
18 r evi sed f i nanci al r epor t you r ecei ved f r omDr . Kar r on?
19 A. Yes.
20 Q. And what per i od does t hat r evi sed f i nanci al r epor t supposed
21 t o cover ?
22 A. Oct ober 1, 2001 t hr ough Mar ch 31, 2002.
23 Q. Do you see t he dat e on t he bot t omof t hat r evi si on?
24 A. Yes.
25 Q. What i s t he dat e on t he ver y bot t omof t hat r evi si on?
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1 A. Apr i l 21, 2002.
2 Q. Who si gned t hat ?
3 A. Dr . Kar r on.
4 Q. And do you see t he scr at ch- out s on t ot al out l ays up t op?
5 A. Yes.
6 Q. What ar e t hose?
7 A. Those ar e mat hemat i cal er r or s t hat I not i ced.
8 THE COURT: Ar e t hey.
9 THE WI TNESS: Yes, t hat ' s my handwr i t i ng.
10 Q. And what ar e t hose r evi si ons based on?
11 A. The pr evi ous r epor t t hat was sent . Now because i t says
12 pr evi ousl y r epor t ed, t he number s ar e wr ong, so I have - - I di d
13 t he mat h, scr at ched t hemout and t hen cal l ed Dr . Kar r on f or hi m
14 t o r evi se t hemagai n.
15 Q. And was t hi s r evi sed suppor t submi t t ed by Dr . Kar r on?
16 A. Yes.
17 Q. I show you Gover nment Exhi bi t 2001.
18 MR. RUBI NSTEI N: Can I have 2000, pl ease?
19 Q. Do you see t hat document ?
20 A. Yes.
21 Q. What per i od i s t hi s supposed t o cover ?
22 A. Apr i l 1, 2002 - -
23 MR. RUBI NSTEI N: J udge, I ' mgoi ng t o obj ect and ask
24 f or a si debar . These document s have never been gi ven t o me
25 bef or e.
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1 THE COURT: Wel l , you shoul d have r ai sed t hat bef or e
2 we admi t t ed t hemi n evi dence, Mr . Rubi nst ei n.
3 MR. RUBI NSTEI N: I ' msor r y, J udge. They shoul d have
4 gi ven me a copy, J udge. I amsor r y. I was t r yi ng t o get
5 somet hi ng el se. I t ' s my f aul t .
6 THE COURT: I ' msor r y, but t hi s i s not a pr oper way t o
7 r ai se i t . I wi l l go over and hear you at t he si debar , but i t ' s
8 a l i t t l e l at e.
9 MR. RUBI NSTEI N: You' r e r i ght .
10 ( Cont i nued on next page)
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1 ( At t he si debar )
2 MR. RUBI NSTEI N: I apol ogi ze, J udge, but I di dn' t
3 t hi nk t hat t he gover nment was goi ng t o of f er somet hi ng t hat
4 t hey never t ur ned over , t hat ' s cl ear l y 3500 mat er i al .
5 MR. KWOK: Wel l - -
6 MR. RUBI NSTEI N: And t o i nt r oduce i t i s i nappr opr i at e.
7 OK? And t hey vi ol at ed Rul e 3500, and your Honor shoul d st r i ke
8 t hese document s f r omt he r ecor d.
9 THE COURT: I wi l l t ake i t under advi sement and hear
10 you af t er t he end of t he cour t day.
11 ( Cont i nued on next page)
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1 ( I n open cour t )
2 BY MR. EVERDELL:
3 Q. J ust l ooki ng agai n at Gover nment Exhi bi t 2001.
4 A. Yes.
5 Q. What per i od i s t hat supposed t o cover ?
6 A. That ' s Apr i l 1, 2002 t hr ough J une 30, 2002.
7 Q. I s t hat a r evi sed f i nanci al r epor t ?
8 A. Yes, i t i s.
9 Q. And what ' s t he dat e on t hat r evi sed f i nanci al r epor t ?
10 A. J ul y 2002.
11 Q. Do you know who submi t t ed t hi s t o you? I know t he
12 si gnat ur e i s obscur ed.
13 A. Dr . Kar r on. He was t he onl y aut hor i zed of f i ci al si gner of
14 t hese document s.
15 Q. What i s t hat not e " r evi ew al l 269, 7/ 19/ 02" ?
16 A. Because t her e wer e so many r evi si ons i n bet ween t he
17 or i gi nal and t he f i nal t hat was gi ven t o me - - t he or i gi nal - -
18 t her e was a l ot of r evi si ons i n bet ween, so I woul d cal l hi m
19 al l t he t i me, t hese number s ar e wr ong, you need t o r evi ew,
20 r evi se, cor r ect and r esend.
21 So, I was maki ng not es t o mysel f , and t he not e was
22 check t hemal l , because t her e ar e t oo many f l uct uat i ng number s
23 i n her e; you can' t keep maki ng so many mat hemat i cal mi st akes;
24 t her e i s t oo many mi st akes i n her e.
25 Q. Di d you i n f act have conver sat i ons wi t h Dr . Kar r on about
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1 t hat ?
2 A. Yes.
3 THE COURT: And t hat not e i s 7/ 19/ 02.
4 THE WI TNESS: Yes.
5 MR. EVERDELL: Your Honor , no f ur t her quest i ons f or
6 t hi s wi t ness.
7 MR. RUBI NSTEI N: J ust one, your Honor .
8 RECROSS EXAMI NATI ON
9 BY MR. RUBI NSTEI N:
10 Q. Coul d we have Exhi bi t 10B, t he page t hat st ar t s wi t h D,
11 equi pment .
12 DEPUTY COURT CLERK: What pages?
13 MR. RUBI NSTEI N: I wi l l put i t on t he El mo.
14 DEPUTY COURT CLERK: I s t her e a number on i t ?
15 MR. RUBI NSTEI N: I t ' s 10B.
16 THE COURT: I t ' s about f our pages i nt o 10B.
17 MR. RUBI NSTEI N: Thank you, J udge. Maybe we can put
18 i t on t he El mo.
19 THE COURT: I t ' s been up t her e a f ew t i mes.
20 MR. RUBI NSTEI N: I s t hi s page i n t he bi nder s? OK.
21 Q. Now, t he gover nment showed you on r edi r ect a por t i on f r om
22 an exhi bi t t hat pr ovi ded t hat pr i or appr oval was r equi r ed f or
23 const r uct i on r el at ed t o t he r esear ch and devel opment , cor r ect ?
24 Do you r emember j ust bei ng shown somet hi ng on t he scr een
25 bef or e?
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1 A. Yes.
2 Q. Now, i n 10B, Exhi bi t 10B, i t ' s a f act t hat i t st at es " I f
3 such cost s ar e pr oposed, i ncl ude bel ow and pr ovi de
4 j ust i f i cat i on. " Cor r ect ?
5 A. Yes.
6 Q. Ther e i s not hi ng i n 10B t hat suggest s t hat you need pr i or
7 appr oval , cor r ect ?
8 A. Cor r ect .
9 MR. RUBI NSTEI N: No f ur t her quest i ons, J udge.
10 THE COURT: Do you want t o r eopen?
11 MR. EVERDELL: No.
12 THE COURT: Al l done? You ar e excused.
13 ( Wi t ness excused)
14 THE COURT: Next wi t ness.
15 MR. KWOK: Bef or e I cal l t he next wi t ness, t he
16 gover nment want s t o r ead a pr oposed st i pul at i on i nt o t he r ecor d
17 at t hi s t i me.
18 THE COURT: Al l r i ght . Read i t .
19 Get t he wi t ness r eady. Ti me i s wast i ng.
20 I shoul d have sai d somet hi ng t o t he j ur y.
21 Dur i ng t hat l ast exami nat i on I asked qui t e a f ew
22 quest i ons, and i t ' s not my pur pose t o i nt er f er e wi t h t he
23 exami nat i on goi ng on. I asked t he quest i ons f or cl ar i f i cat i on
24 pur poses when I t hi nk t hat t he t est i mony i sn' t cl ear or and
25 t i mes i n an at t empt t o speed t hi ngs up. You ar e not t o dr aw
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1 any concl usi ons f r omt he f act t hat I asked quest i ons of one
2 wi t ness or anot her . I j ust have ver y much i n mi nd t he t i me
3 pr obl ems i n t he case, and I want t o get t he case over as soon
4 as possi bl e. I t hi nk I ' mhel pi ng, but I may not be hel pi ng,
5 and I t r y t o ant i ci pat e quest i ons I t hi nk t he j ur y mi ght have
6 so t hat t hi ngs ar e cl ear f or t he j ur y. That ' s t he pur pose of
7 t he quest i oni ng, but i t ' s not t hat I ' mt aki ng si des wi t h one
8 si de or t he ot her .
9 MR. RUBI NSTEI N: Your Honor , whi l e t he gover nment
10 r eads t he st i pul at i on, whi ch I have agr eed t o, can I r un out
11 f or a second so we don' t st op anyt hi ng?
12 THE COURT: Yes, you may. Thank you.
13 MR. KWOK: May I pr oceed, your Honor ?
14 THE COURT: Yes.
15 MR. KWOK: I amr eadi ng i nt o t he r ecor d what ' s been
16 mar ked f or i dent i f i cat i on Gover nment Exhi bi t 900, and i t r eads
17 as f ol l ows:
18 Uni t ed St at es of Amer i ca v. Dani el B. Kar r on, t he
19 def endant , S2 07 Cr i m. 541. " I t i s her eby st i pul at ed and
20 agr eed by and among t he Uni t ed St at es of Amer i ca, by Mi chael J .
21 Gar ci a, Uni t ed St at es at t or ney f or t he Sout her n Di st r i ct of New
22 Yor k, St even Kwok and Chr i st i an Ever del l , assi st ant Uni t ed
23 St at es at t or neys, of counsel , and def endant Dani el B. Kar r on by
24 and wi t h t he consent of hi s at t or ney Ronal d Rubi nst ei n, Esq.
25 t hat :
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1 " 1. The document s mar ked f or i dent i f i cat i on as
2 Gover nment Exhi bi t 80 ar e t he r ecor ds of t he bank account s of
3 Dani el B. Kar r on, def endant , at J P Mor gan Chase Bank f r omi n or
4 about Oct ober 2001 t o i n or about August of 2003.
5 " 2. The document s mar ked f or i dent i f i cat i on as
6 Gover nment Exhi bi t 81 ar e t he r ecor ds of t he bank account s of
7 Comput er Ai ded Sur ger y, I nc. ( CASI ) at J P Mor gan Chase Bank
8 f r omi n or about Oct ober 2001 t o i n or about August 2003.
9 " 3. The document s mar ked f or i dent i f i cat i on as
10 Gover nment Exhi bi t 90 ar e t he cr edi t car d st at ement s f or t he
11 Amer i can Expr ess car d bear i ng account number 3783- 490172- 15000
12 f r omi n or about Oct ober 2001 t o i n or about Apr i l 2003.
13 " 4. The document s mar ked f or i dent i f i cat i on as
14 Gover nment Exhi bi t 100 ar e t he r ecor ds of pur chases at Dat a
15 Vi si on by CASI f r omi n or about Oct ober 2001 t o i n or about
16 Oct ober 2003.
17 " 5. The document s mar ked f or i dent i f i cat i on as
18 Gover nment Exhi bi t 101 ar e t he r ecor ds of pur chases at Home
19 Fr ont Har dwar e St or e by CASI f r omi n or about Sept ember 2002 t o
20 i n or about Sept ember 2003.
21 " 6. The document s mar ked f or i dent i f i cat i on as
22 Gover nment Exhi bi t 102 ar e t he r ecor ds of pur chases at Gener al
23 Comput er and Ser vi ce by CASI f r omi n or about Oct ober 2001 t o
24 i n or about May 2003.
25 " 7. Document s mar ked f or i dent i f i cat i on as Gover nment
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1 Exhi bi t 103 ar e t he r ecor ds of pur chases at Si l i con Gr aphi cs,
2 I nc. by CASI f r omi n or about December 2001 t o i n or about
3 J anuar y 2003.
4 " 8. The document s mar ked f or i dent i f i cat i on as
5 Gover nment Exhi bi t 104 ar e t he r ecor ds of pur chases at Si l i con
6 Ci t y, I nc. by CASI i n or about November 2001 t o i n or about May
7 2003.
8 " 9. The document s mar ked f or i dent i f i cat i on as
9 Gover nment Exhi bi t 120A ar e t he r ecor ds of pur chases at Si l i con
10 Ci t y, I nc. by CASI on or about May 10, 2002, Mar ch 27, 2002 and
11 Oct ober 1, 2002, wi t h pr oof of pur chase and payment , and t he
12 r ecor ds of pur chase at Dat a Vi si on by CASI on or about
13 Sept ember 20, 2002.
14 " The r ecor ds mar ked f or i dent i f i cat i on as Gover nment ' s
15 Exhi bi t s 80, 81, 90, 100, 101, 102, 103, 104 and 120A ar e f ul l
16 and compl et e r ecor ds of t he act s, t r ansact i ons and event s
17 descr i bed t her ei n; wer e made and/ or r ecei ved and t her eaf t er
18 mai nt ai ned i n t he r egul ar cour se of busi ness; wer e made at or
19 near t he t i me of t he act s, t r ansact i ons and event s r ecor ded
20 t her ei n; and cont ai n t he i nf or mat i on set f or t h by or obt ai ned
21 f r omper sons wi t h knowl edge of t hose mat t er s.
22 " I t i s f ur t her st i pul at ed and agr eed t hat t he
23 Gover nment ' s Exhi bi t s 80, 81, 90, 100, 101, 102, 103, 104 and
24 120A, and t hi s st i pul at i on, whi ch i s mar ked f or i dent i f i cat i on
25 as Gover nment Exhi bi t 900, may be r ecei ved i n evi dence as
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1 Gover nment Exhi bi t i n t hi s t r i al , and i t i s si gned J une 3,
2 2008, New Yor k, New Yor k, on behal f of t he Uni t ed St at es by
3 St eve Kwok, and on behal f of Dani el B. Kar r on by Ronal d
4 Rubi nst ei n, Esqui r e. "
5 Your Honor , t he gover nment moves f or t he admi ssi on of
6 t hi s st i pul at i on and t he exhi bi t s ment i oned t her ei n.
7 MR. RUBI NSTEI N: No obj ect i on.
8 THE COURT: No obj ect i on? Let me have a copy of t he
9 st i pul at i on, pl ease.
10 Gover nment ' s Exhi bi t s 80, 81, 90 and 100, and Exhi bi t s
11 101, 102, 103, 104 and 104A ar e admi t t ed i n evi dence pur suant
12 t o st i pul at i on t o t he par t i es.
13 DEPUTY COURT CLERK: 104A or 120A?
14 THE COURT: I ' msor r y. 104 and 120A. They ar e
15 admi t t ed i nt o evi dence. Thank you.
16 ( Gover nment ' s Exhi bi t s 80, 81, 90, 100, 101, 102, 103,
17 104, 120A r ecei ved i n evi dence)
18 ( Gover nment ' s Exhi bi t 900 r ecei ved i n evi dence)
19 MR. KWOK: The gover nment cal l s Bel i nda Ri l ey.
20 BELI NDA RI LEY,
21 cal l ed as a wi t ness by t he gover nment ,
22 havi ng been dul y swor n, t est i f i ed as f ol l ows:
23
24 DEPUTY COURT CLERK: Pl ease st at e you name, and spel l
25 you f i r st and l ast name sl owl y f or t he r ecor d, pl ease.
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1
2 THE WI TNESS: My name i s Hazel Ri l ey, H- A- Z- E- L
3 R- I - L- E- Y, but I go by Bel i nda.
4 DI RECT EXAMI NATI ON
5 BY MR. KWOK:
6 Q. Good af t er noon, Ms. Ri l ey.
7 A. Good af t er noon.
8 Q. Wher e do you wor k?
9 A. Depar t ment of Commer ce, Of f i ce of I nspect or Gener al , t he
10 At l ant a r egi on.
11 Q. What ' s your j ob t i t l e?
12 A. Assi st ant r egi onal i nspect or gener al f or audi t s, At l ant a
13 r egi on.
14 Q. I s t hat a super vi sor y posi t i on?
15 A. Yes, i t i s.
16 Q. How l ong have you been a super vi sor ?
17 A. For about t wo year s.
18 Q. What do you do i n your cur r ent j ob?
19 A. I super vi se sever al empl oyees, and I pl an audi t s and ot her
20 dut i es assi gned.
21 Q. What di d you do bef or e you became a super vi sor ?
22 A. I was an audi t or r evi ewi ng gover nment gr ant s or gover nment
23 pr ogr ams.
24 Q. You wer e an audi t or wi t h whi ch depar t ment ?
25 A. The Depar t ment of Commer ce, Of f i ce of I nspect or Gener al ,
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1 si nce J une of ' 97.
2 Q. What wer e your dut i es and r esponsi bi l i t i es when you wer e an
3 audi t or wi t h t he Depar t ment of Commer ce?
4 A. To audi t commer ce pr ogr ams, wor k up commer ce gr ant s, under
5 t he var i ous agenci es.
6 Q. What di d you do bef or e t hen, bef or e you j oi ned t he commer ce
7 depar t ment ?
8 A. I was a r evenue agent wi t h I RS f or about 11 year s.
9 Q. Can you gi ve us a t i me f r ame i f you r emember ?
10 A. I st ar t ed i n Sept ember of ' 86 and l ef t i n J une of ' 97.
11 ( Cont i nued on next page)
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1 Q. And what di d you do as an agent wi t h t he I RS?
2 A. For t he f i r st - - I audi t ed i ndi vi dual t ax r et ur ns,
3 cor por at e t ax r et ur ns, exci se t ax r et ur ns.
4 Q. Ms. Ri l ey, what ' s your educat i onal backgr ound?
5 A. I have a bachel or s of - - I have a B. A. i n account i ng, a
6 B. A. i n account i ng i nf or mat i on syst ems, a Bachel or of Sci ence
7 i n Comput er Sci ence Pr ogr ammi ng Opt i on, and I ama cer t i f i ed
8 CPA.
9 Q. How di d you become a cer t i f i ed CPA, what - -
10 A. Cer t i f i ed Publ i c Account ant .
11 Q. What does CPA st and f or ?
12 A. Cer t i f i ed Publ i c Account ant .
13 Q. How di d you become cer t i f i ed?
14 A. I t ook a CPA examat t he t i me, I t hi nk i t was a
15 t wo- and- a- hal f day t est t hat ' s l i ke 19 hour s, and you al so had
16 t o have f i ve year s f or gover nment t o become a CPA i n
17 account i ng.
18 Q. Mi ss Ri l ey, what , i f any, pr of essi onal r ecogni t i on have you
19 r ecei ved f or your account i ng and audi t i ng wor k?
20 A. I have t wo br onze medal s and a si l ver medal awar ded f r om
21 t he Depar t ment of Commer ce.
22 MR. KWOK: Your Honor , gover nment of f er s Bel i nda Ri l ey
23 as an exper t i n account i ng and audi t i ng pr ocedur es.
24 MR. RUBI NSTEI N: No obj ect i on, your Honor .
25 THE COURT: Al l r i ght . Ms. Ri l ey i s accept ed as an
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1 exper t i n account i ng audi t i ng pr ocedur es - - account i ng and
2 audi t i ng pr ocedur es.
3 BY MR. KWOK:
4 Q. Ms. Ri l ey, what ki nds of gr ant s does your of f i ce audi t ?
5 A. We audi t NI ST ATP gr ant s, whi ch i s Nat i onal I nst i t ut e of
6 St andar ds and Technol ogy Advanced Technol ogy Pr ogr am, audi t s
7 f or r esear ch. We audi t NTI A gr ant s i n t el ecommuni cat i ons. We
8 audi t EDA gr ant s, whi ch i s Economi c Devel opment Admi ni st r at i on,
9 what ever - - we can audi t any gr ant t hat one of our commer ce
10 agenci es gi ve.
11 Q. Do al l gr ant s awar ded by t he Commer ce Depar t ment get
12 audi t ed by t he Of f i ce of t he I nspect or Gener al ?
13 A. No.
14 Q. How does your of f i ce become i nvol ved?
15 A. Our of f i ce becomes i nvol ved by r equest f r omNI ST or i t
16 coul d be f r omt he hot l i ne cal l t hat says t hat t hey suspect an
17 or gani zat i on i s usi ng f r audul ent , doi ng f r audul ent act i vi t y.
18 Or we have a - - we r evi ew al l of t he NI ST ATP r esear ch gr ant
19 awar ds submi t t ed by t he CPA f i r ms, and so i f dur i ng one of our
20 r evi ews someone sees suspi ci ous, we may audi t t hat awar d.
21 Q. How many audi t s have you handl ed si nce you j oi ned t he
22 depar t ment ?
23 A. Pr obabl y about 10 or 15.
24 Q. How many t i mes have you t est i f i ed i n a cr i mi nal t r i al
25 bef or e i n connect i on wi t h your audi t i ng wor k?
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1 A. None.
2 Q. Ms. Ri l ey, di d t her e come a t i me when you became i nvol ved
3 i n audi t i ng an Advanced Technol ogy Pr ogr amgr ant or ATP gr ant
4 awar ded t o a company known as CASI ?
5 A. Yes.
6 Q. Who was t he pr i nci pal i nvest i gat or of t hat gr ant ?
7 A. Dan Kar r on.
8 Q. Do you see Dan Kar r on i n t he cour t r oomher e t oday?
9 A. Yes, he' s over t her e.
10 Q. Coul d you descr i be an ar t i cl e of cl ot hi ng he' s wear i ng?
11 A. He' s got gl asses - - he' s got on gl asses, a pony t ai l and i s
12 t hat a whi t e and gr een t i e?
13 MR. KWOK: Your Honor , may t he r ecor d r ef l ect t hat t he
14 wi t ness has i dent i f i ed t he def endant ?
15 THE COURT: Al l r i ght , t he r ecor d wi l l so r ef l ect .
16 Q. Ms. Ri l ey, how di d you become i nvol ved i n t he CASI audi t ?
17 A. The NI ST gr ant s of f i cer s sent a l et t er t o our - - t he Of f i ce
18 of I nspect or Gener al r equest i ng an audi t , and I was assi gned
19 t he audi t .
20 Q. What di d t hey ask you t o do?
21 A. To det er mi ne t he f i nanci al st at us of t he gr ant pr oj ect .
22 Q. And when was t hi s, appr oxi mat el y?
23 A. We r ecei ved r equest s i n May of 2003, appr oxi mat el y.
24 Q. What di d you do upon r ecei vi ng t hi s r equest ?
25 A. I cal l ed CASI t o schedul e an i ni t i al appoi nt ment f or t he
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1 audi t .
2 Q. Wher e di d you go t o conduct t hi s audi t ?
3 A. To t he CASI of f i ce apar t ment .
4 Q. And wher e i s t hat ?
5 A. I n Manhat t an.
6 Q. You sai d apar t ment . How do you know i t was an apar t ment ?
7 A. Wel l , on some of t he vi si t s, Mr . Kar r on woul d be get t i ng
8 out of bed t o answer t he door because I woul d get t her e ear l y
9 i n t he mor ni ng, 10: 00 o' cl ock, 9, 10: 00 o' cl ock, and he was a
10 l at e ni ght per son.
11 Q. And what was t he obj ect i ve of your vi si t ?
12 A. To det er mi ne t he f i nanci al st at us of t he gr ant cost .
13 Q. How do you get up t o speed on t he company' s f i nanci al
14 si t uat i on?
15 A. Okay. Pr i or - - by r evi ewi ng t he l edger s and i nvoi ces
16 pr ovi ded by CASI t o me. Pr i or t o goi ng t o t he - - pr i or t o
17 comi ng t o Manhat t an, I i nt er vi ewed t he NI ST gr ant s of f i ce
18 peopl e and r evi ewed t hei r gr ant f i l es concer ni ng CASI .
19 Q. As par t of t hat pr epar at i on, di d you t al k t o anyone at
20 CASI ?
21 A. Yes. At CASI I t al ked t o Dan Kar r on, t o J oan Hayes, t he
22 CPA t hat he pr ovi ded t o, Fr ank Spr i ng, a book keeper , t o Bob
23 Benedi ct , t he pr oj ect manager .
24 Q. And i s t hat consi st ent wi t h what you usual l y do?
25 A. Yes.
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1 Q. Your usual pr act i ce?
2 A. Yes.
3 Q. You ment i oned i nvoi ces. Can you t el l us how t hose i nvoi ces
4 r el at ed t o what you do as an audi t or ?
5 A. Wel l , we t r ace - - we' r e pr ovi ded j our nal ent r i es or
6 what ever , we' r e pr ovi ded a l i st of expense, expendi t ur es f or
7 awar d, we t r ace a sampl e of t hem, j ust t he suppor t i ng voi ce or
8 cancel l ed check.
9 Q. And wer e you abl e t o f i nd t hose i nvoi ces at CASI ?
10 A. They pr ovi ded some i nvoi ces. The i nvoi ces at CASI had
11 been - - t he or i gi nal i nvoi ces had been scanned i nt o t he
12 comput er , and t he or i gi nal document s had been dest r oyed. And
13 so f or some of t he i nvoi ces, t her e wer e mul t i pl e copi es and
14 some of t hemwe had a har d t i me f i ndi ng or di dn' t f i nd.
15 Q. Di d t her e come a t i me whi l e you wer e conduct i ng t he audi t
16 t hat you spoke as t o an i ndi vi dual by t he name of J oan Hayes?
17 A. Yes.
18 Q. And what i s your under st andi ng as t o what J oan Hayes was
19 doi ng at CASI ?
20 A. She had done t he f i r st year audi t , t hey' r e r equi r ed t o have
21 an audi t by ATP, and she was - - I guess she was t her e t o hel p
22 me wi t h my audi t or t o pr ovi de i nf or mat i on about t he CASI books
23 and r ecor ds or f or answer i ng quest i ons I mi ght have concer ni ng
24 t he books and r ecor ds.
25 Q. And what di d you do wi t h t he mat er i al s t hat J oan Hayes
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1 pr ovi ded you?
2 A. I used, I used t hemas a sour ce of my audi t .
3 Q. And how l ong wer e you at CASI f or t hi s audi t ?
4 A. I t hi nk I got t her e on Wednesday and I l ef t Thur sday or
5 Fr i day of t he next week.
6 Q. Di d you pr epar e a r epor t af t er t he audi t ?
7 A. Yes. I pr epar ed a memo r epor t , a shor t r epor t .
8 Q. I f you coul d f i nd what ' s been mar ked f or i dent i f i cat i on as
9 gover nment exhi bi t 60 i n t hat pi l e t hat i s i n f r ont of you?
10 A. Oh, okay. 60.
11 THE COURT: What per i od of t i me di d you audi t ?
12 THE WI TNESS: I audi t ed t he t i me 10/ 1 - - Oct ober ,
13 Oct ober 1st , 2001 t hr ough 6/ 30 - - 6/ 27, 2003.
14 Q. Do you have t hat document i n f r ont of you?
15 A. Yes.
16 Q. Gover nment exhi bi t 60 mar ked f or i dent i f i cat i on? Do you
17 r ecogni ze t hat document ?
18 A. Yes.
19 Q. Who pr epar ed t hat document ?
20 A. I di d.
21 Q. And what i s i t ?
22 A. I t i s our memo r epor t t hat was pr epar ed af t er t he J une 2003
23 vi si t s.
24 Q. I s t hat t he vi si t you j ust r ef er r ed t o - -
25 A. Yes.
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1 Q. - - a moment ago?
2 A. Yes.
3 MR. KWOK: Your Honor , t he gover nment of f er s exhi bi t
4 60?
5 MR. RUBI NSTEI N: I ' d l i ke a br i ef voi r di r e, your
6 Honor .
7 THE COURT: Yes, you may.
8 VOI R DI RE:
9 BY MR. RUBI NSTEI N:
10 Q. Good af t er noon, Ms. Ri l ey.
11 A. Good af t er noon.
12 Q. Now, you pr epar ed t hi s r epor t f r omwhat document s?
13 A. Thi s r epor t s wer e pr epar ed, my audi t , as a r esul t of t he
14 document s t hat Dr . Kar r on pr ovi ded dur i ng t hat J une vi si t .
15 Q. Dr . Kar r on or Ms. Hayes?
16 A. Dr . Kar r on, J oan Hayes, Bob Benedi ct , t hey wer e al l t her e.
17 Mi ss Hayes was supposed t o be t he r epr esent at i ve l eadi ng me
18 t hr ough t he books and r ecor ds, and she was r epr esent i ng Dr .
19 Kar r on.
20 Q. Do you have copi es of t hose document s?
21 A. The document s - -
22 Q. That you used t o - -
23 A. Yes.
24 Q. - - cr eat e t hi s r epor t ?
25 A. Yes.
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1 Q. Wher e ar e t hey?
2 A. What - - my audi t r epor t s, my audi t - -
3 Q. Your what ?
4 A. I n my audi t f i l es. I t hi nk t he document t hat my r epor t ,
5 t hat t he r epor t was cr eat ed f r omwas pr ovi ded. I mean, what - -
6 my own - - I have my audi t r epor t t hat I used t o pr epar e t hi s.
7 Q. I n ot her wor ds, do you make a r epor t or cr eat e some
8 wr i t i ngs t o show t hat you used t o put i nt o t hi s r epor t ,
9 Gover nment ' s 60?
10 A. Yes.
11 MR. RUBI NSTEI N: May I appr oach t he gover nment , your
12 Honor .
13 THE COURT: Yes, you may.
14 ( Pause)
15 Q. I s i t cor r ect , ma' am, t hat you used J oan Hayes' wor k paper s
16 t o do your - - t hi s r epor t ?
17 A. I used t he wor k - - t he gener al l edger s, t he cash
18 di sbur sement r egi st er s, t he - - what ever i nf or mat i on, t he books
19 t hat wer e pr epar ed by - - some t hi ngs t hat J oan Hayes pr ovi ded.
20 The books t hat wer e bei ng r epr epar ed by Fr ank Spr i ng. He
21 al so - - I al so t al ked t o hi mwhi l e I was t her e, t o do - - t o
22 come up wi t h t he wor k paper s f r omt hi s r epor t .
23 Q. Di d you cr eat e any wor k paper s, ma' am?
24 A. Yes, I di d.
25 Q. Di d you cr eat e a gener al l edger ?
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1 A. For t hi s r epor t ?
2 Q. Yes.
3 A. No. I mean no.
4 Q. You used J oan Hayes' - -
5 A. I di dn' t use J oan Hayes' audi t f or t hi s as a, my - - t he
6 f i nal number f or t hi s r epor t .
7 Q. You t est i f i ed t hat you used J oan Hayes' i nf or mat i on,
8 cor r ect ?
9 A. I used J oan Hayes' - - I used i t , t he i nf or mat i on t hat J oan
10 Hayes - - t hat CASI under Kar r on had asked J oan Hayes t o pr ovi de
11 t o me f or t hi s audi t .
12 Q. Di d you i ndependent l y check what ever document at i on J oan
13 Hayes pr ovi ded f or you, t o you?
14 A. I di d sel ect a sampl e of t he i nvoi ces t o t r ace t he sampl e
15 of t he l edger ent r i es t o t r ace t o t he i nvoi ces f or t hi s r epor t .
16 Q. I sn' t i t a f act t hat J oan Hayes had no gener al l edger ?
17 Ther e was no gener al l edger f or CASI ; i s t hat a f act ?
18 A. Ther e wer e - - CASI used Qui ck Books, and so what ever t he
19 syst emof qui ck books t her e wer e - - t her e wer e - - t her e wer e
20 t hi ngs f or Qui ck Books.
21 Fr ank Spr i ng, I guess Fr ank Spr i ng was cr eat i ng a new
22 gener al l edger or a new l edger syst emor j our nal ent r y syst em
23 f or CASI at t he t i me I was t her e.
24 When I cal l ed t o schedul e t he i ni t i al appoi nt ment ,
25 CASI coul dn' t meet wi t h me because t hey wer e i n t he pr ocess of
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1 r edoi ng t hei r books and r ecor ds, and so i t del ayed my vi si t f or
2 a coupl e of weeks t o gi ve t hemt i me.
3 When I ar r i ved, t he new books wer en' t compl et ed yet ,
4 so t hey wer e goi ng t o be compl et ed t he next day so I wai t ed
5 t i l l t he next day.
6 The - - I used t he r ecor ds t hat t hey pr ovi ded and,
7 i ncl udi ng J oan Hayes, what J oan Hayes had pr ovi ded t o come up
8 wi t h t he number s f or t hi s. I di d not t ake J oan Hayes' r epor t
9 and copy t he number s t o come up wi t h t hi s.
10 Q. I n f act , you never - - do you have, ei t her f r omyour own
11 wor k, f r omFr ank Spr i ng' s - - he was a book keeper of some sor t ?
12 A. Yes.
13 Q. Or f r omJ oan Hayes, a gener al l edger , ma' am?
14 A. I know I have some summar i es pr ovi ded di f f er ent cat egor i es,
15 and I t hi nk t her e ar e some l edger s t her e. I know I have t o - -
16 Q. Di d you do - -
17 A. Yes.
18 Q. - - a r econci l i at i on? Ther e wer e checki ng account s, wer e
19 t her e not ?
20 A. Yes when I - - f or t he audi t ?
21 Q. Yes. Ther e wer e checki ng account s, CASI had a number of
22 checki ng account s, di d i t not ?
23 A. Yes.
24 Q. Di d you do a bank r econci l i at i on of t he var i ous bank
25 account s of CASI ?
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1 A. For t hi s, f or t hi s audi t ?
2 Q. Ri ght .
3 A. No.
4 MR. RUBI NSTEI N: Your Honor , I obj ect .
5 MR. KWOK: Si debar , your Honor ?
6 THE COURT: Yes.
7 ( Cont i nued on next page)
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1 ( At t he si debar )
2 MR. KWOK: Gr ounds?
3 MR. RUBI NSTEI N: The gr ounds - - t hese ar e some
4 summar y, some document s t hat she doesn' t have, t hat she' s
5 unawar e of , and she came up wi t h t hese number s f r omwher e we
6 wi l l never never know because we don' t have or i gi nal sour ce
7 document s t o l ook at , j udge. She cl ear l y r el i ed upon ot her
8 peopl e' s wor k t o det er mi ne t he cost . I t ' s har d t o bel i eve t hat
9 someone coul d be an audi t or and not r econci l e bank account s
10 t hat pr obabl y had l ess t han 500 checks i n t ot al , f or t he per i od
11 t hat we' r e t al ki ng about .
12 MR. KWOK: Your Honor , we of f er her as an exper t
13 wi t ness under Feder al Rul es of Evi dence 703. Under l yi ng
14 document s t hat an exper t r el y upon does not have t o be
15 admi ssi bl e. That ' s what audi t or s do, t hey don' t necessar i l y
16 have t he under l yi ng document s. They go t o si t es t o l ook at t he
17 company books. They don' t necessar i l y t ake t hose document s
18 back wi t h t hemaf t er t hey' ve compl et ed an audi t . I bel i eve
19 t hat ' s what happened i n t hi s case, t hat she wasn' t - - went t o
20 CASI t o l ook at t he books. She t r i ed t o ver i f y some of i t t o
21 have some conf i dence about t he accur acy of t he number s. She
22 i ssued a r epor t . I t doesn' t mean she t ook away t hose document s
23 and at t ached t hemas some sor t of at t achment t o her r epor t .
24 She went t her e, saw t hi ngs, t al ked t o peopl e make some
25 det er mi nat i ons and i ssue a r epor t . The f act t hat she doesn' t
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1 have t he under l yi ng document s shoul d not be an i ssue, and she' s
2 an exper t . Under Rul e 703 t he under l yi ng document s - -
3 THE COURT: I ' mgoi ng t o al l ow her t o t est i f y because
4 a audi t or does not have t o t ake t he r ecor ds wi t h t hemor copi es
5 of t he r ecor ds. They may have t o t ake copi es of por t i ons t hat
6 t hey r el y on. But f or i l l ust r at i on pur poses, t he audi t or does
7 not have t o - - j ust has t o use gener al accept ed audi t i ng
8 met hods t o ver i f y t he books and account s of t he company.
9 MR. KWOK: I t hi nk t hat ' s exact l y r i ght .
10 THE COURT: I t ' s t he company, i t ' s t he company' s
11 account t hat t he audi t or i s ver i f yi ng.
12 MR. RUBI NSTEI N: Her e he di dn' t have account s, J udge
13 wi t h al l due r espect , so t hat ' s why - -
14 THE COURT: I don' t know. I mean t hat ' s anot her
15 mat t er .
16 MR. KWOK: You can cr oss on i t .
17 MR. RUBI NSTEI N: I don' t want - -
18 THE COURT: They' r e supposed t o have an account ant ,
19 sor r y, as I under st ood i t .
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1 ( I n open cour t )
2 MR. KWOK: Your Honor , gover nment of f er s gover nment
3 exhi bi t 60.
4 THE COURT: Gover nment 60 i s admi t t ed i n evi dence.
5 ( Gover nment ' s Exhi bi t 60 r ecei ved i n evi dence)
6 MR. RUBI NSTEI N: I obj ect t o t he - -
7 THE COURT: I under st and. I haven' t r ead i t , so I
8 don' t know what i t i s. I t may be a val i d obj ect i on af t er I see
9 i t .
10 MR. KWOK: Do you st i l l have t he document i n f r ont of
11 you?
12 THE COURT: Di d you use your or di nar y audi t i ng
13 pr ocedur es i n r evi ewi ng t he books of - -
14 THE WI TNESS: Yes.
15 THE COURT: CASI ?
16 THE WI TNESS: Yes.
17 THE COURT: What ever books you wer e pr esent ed wi t h?
18 THE WI TNESS: Yes, yes.
19 THE COURT: Those i ncl uded t he r epor t of what was her
20 name, Mi ss Hayes?
21 THE WI TNESS: Yes.
22 THE COURT: And al so mat er i al s suppl i ed by t he book
23 keeper ?
24 THE WI TNESS: Yes.
25 THE COURT: Was t her e - - so, and t hey wer e i n l edger
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1 f or mso you coul d check t hem?
2 THE WI TNESS: Thi ngs wer e i n l edger f or ms.
3 THE COURT: I see, al l r i ght .
4 MR. KWOK: Thank you, your Honor .
5 Q. Ms. Ri l ey, what ' s t he dat e of t hi s r epor t ?
6 A. J ul y 2003.
7 Q. Di r ect i ng your at t ent i on t o pages t hr ee and f our , l et ' s put
8 up page - - i f we coul d put t hemsi de by si de.
9 Ms. Ri l ey, what ar e t he f i ndi ngs t hat you r eached i n
10 t hi s audi t r epor t ?
11 A. That , t hat CASI had not met t he mat chi ng cost shar e
12 r equi r ement ; t hat CASI had excess dr awdowns of over $200, 000,
13 and t hat t hey had submi t t ed a - -
14 THE COURT: Sor r y, what was t he f i r st t hi ng you sai d?
15 THE WI TNESS: That t hey had not met t he mat chi ng
16 r equi r ement s of t he NI ST awar d.
17 THE COURT: Second.
18 THE WI TNESS: That t hey had excess dr awdowns of over
19 $200, 000.
20 Q. And t he t hi r d?
21 A. The t hi r d, t hey had f i l ed i naccur at e f i nanci al st at us
22 r epor t wi t h us.
23 Q. Ms. Ri l ey, l et ' s t ake t hi s one at a t i me now. What does i t
24 mean when you sai d t he company had not cont r i but ed mat chi ng
25 f unds?
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1 A. That t hey, t hey had not - - t hey had not cont r i but ed
2 anyt hi ng t o t he, t o t he NI ST awar d.
3 Q. What ar e t hey supposed t o do?
4 A. They wer e supposed t o cont r i but e 4. 57 per cent of t he f unds.
5 MR. RUBI NSTEI N: I ' msor r y, I di dn' t di gi t hear t hat .
6 A. Of t he pr oj ect cost .
7 MR. RUBI NSTEI N: I mi ssed t he per cent age, your Honor .
8 THE WI TNESS: The 4. 57 per cent .
9 Q. And what i n f act happened?
10 A. They hadn' t cont r i but ed anyt hi ng t o t he cost , t he cost
11 shar e t o t he pr oj ect .
12 Q. And, Ms. Ri l ey, how di d you ar r i ve at t hi s concl usi on?
13 A. By r evi ewi ng t he, t he r ecor ds of what , and t r ansact i ons of
14 t he l edger s.
15 Q. The document s pr ovi ded t o you by t he company?
16 A. Ri ght , t he document s pr ovi ded.
17 Q. The second i ssue you ment i oned was t he excessi ve dr awdowns.
18 Can you expl ai n t o us what t hat means?
19 A. They had, t hey had - - t hey had r ecei ved NI ST gr ant f unds
20 t hat had been spent on CASI expenses i nst ead of t he pr oj ect
21 expenses. They - -
22 THE COURT: You dr opped your voi ce, I can' t hear you.
23 You' l l have t o speak up.
24 THE WI TNESS: They had, t hey had - - t hey had dr awn
25 down f unds f r omNI ST t hat wer e spent on CASI busi ness expenses
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1 or not al l owabl e NI ST pr oj ect expenses.
2 Q. I n ot her wor ds, expenses not appr oved?
3 MR. RUBI NSTEI N: Obj ect i on, your Honor , t o - -
4 Q. Can you expl ai n what you mean by t hat ?
5 THE COURT: Your obj ect i on' s sust ai ned, f or mof t he
6 quest i on, Mr . Kwok.
7 MR. KWOK: I apol ogi ze, your Honor .
8 Q. What do you mean by t hat ?
9 A. They had spent - - t he money had been spent on r ent or
10 ut i l i t i es or on t hi ngs t hat wer e not al l owed per t he gr ant
11 budget .
12 Q. And what i s t he appr oxi mat e si ze of t hi s excess dr awdown?
13 A. 205, 000.
14 Q. And agai n how wer e you abl e t o make t hat det er mi nat i on?
15 A. Fr omr evi ewi ng t hei r books, f r omt he l edger s - - f r omt he
16 books t hat wer e pr ovi ded t o us by CASI .
17 Q. Fi nal l y, you ment i oned f i nanci al st at us r epor t s. Fi r st of
18 al l , what ar e f i nanci al st at us r epor t s?
19 A. Gr ant r eci pi ent s ar e r equi r ed t o submi t f i nanci al st at us
20 r epor t s quar t er l y t o i nf or mNI ST how t hey spent t he gr ant
21 moni es t hat t hey dr ew down f or t hat quar t er .
22 Q. And what t ype of i nf or mat i on ar e t hey supposed t o r epor t on
23 t hese f i nanci al st at us r epor t s?
24 A. Fi nanci al st at us r epor t i ncl udes t he amount of mat ched
25 shar e t hey pr ovi de, and t he amount of cost spent wi t h t he NI ST
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1 gr ant pr oj ect .
2 Q. What was your audi t f i ndi ng about CASI ' s f i nanci al st at us
3 r epor t s?
4 A. They r epor t ed t he dr awdown amount s t hey r ecei ved f r omNI ST,
5 not t he expense of what t hey spent dr awdowns on.
6 Q. Can you - -
7 A. Not t he cost . They di dn' t - - t hey di dn' t r epor t how t hey
8 spent t he gr ant moni es.
9 Q. What , i n f act , di d t hey r epor t ?
10 A. They r epor t ed t he dr awdown, t he moni es t hey r ecei ved.
11 Q. Any ot her i ssue wi t h t he f i nanci al st at us r epor t s?
12 A. They r epor t ed a mat ch shar e. They di d not gi ve a mat ch
13 shar e.
14 Q. And how wer e you abl e t o make t hose det er mi nat i ons?
15 A. By r evi ewi ng t he f i nanci al st at us r epor t s.
16 Q. I s t hat what you do as an audi t or ?
17 A. Yes.
18 Q. Ms. Ri l ey, what , i f any, r ecommendat i ons do you make i n
19 your audi t r epor t ?
20 MR. RUBI NSTEI N: I obj ect t o t hat , your Honor .
21 Q. I f you coul d di r ect us t o t he page of t he document ?
22 A. I t ' s on page f i ve.
23 THE COURT: I don' t see t he r el evance of t hat .
24 MR. KWOK: Your Honor , t he audi t r epor t cont ai ns a
25 r ecommendat i on or ser i es of r ecommendat i ons.
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1 THE COURT: The - -
2 MR. RUBI NSTEI N: That ' s what I obj ect ed t o, J udge.
3 THE COURT: That ' s what he obj ect ed t o, t he
4 r ecommendat i on par t .
5 MR. RUBI NSTEI N: 60.
6 MR. KWOK: The r el evance, t he r el evance i s - -
7 THE COURT: I don' t want t o hear your ar gument i n
8 f r ont of t he j ur y.
9 MR. KWOK: Coul d we have a si debar ?
10 THE COURT: I ' l l have i t at t he si debar i f you want t o
11 hal f i t . I t seems t o me i t ' s - -
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1 ( At t he si debar )
2 MR. KWOK: Your Honor , t hi s audi t r epor t i s t he f i r st
3 of I bel i eve t hr ee audi t r epor t s t hat t hi s audi t or pr epar ed.
4 She made a ser i es of r ecommendat i ons i n her f i r st audi t r epor t ,
5 and t hen l at er on she went back t o t he company t o audi t t he
6 books f or a second t i me. And I ' mi nt endi ng t o show t hat t he
7 r ecommendat i ons t hat she made t he f i r st t i me wer e not
8 under t aken even si x mont hs l at er when she went back t o t he
9 company.
10 THE COURT: That has not hi ng t o do wi t h whet her or not
11 t hi s man i mpr oper l y used - -
12 MR. KWOK: I t goes t o hi s i nt ent , i t goes t o hi s
13 i nt ent because t he f i r st r epor t t ol d hi mwhat was wr ong, and
14 when si x mont hs l at er she came back, t he same t hi ng st ays t he
15 same. I t goes t o hi s i nt ent .
16 MR. RUBI NSTEI N: I submi t , your Honor , i t doesn' t go
17 t o hi s i nt ent t hat he - - t he audi t r epor t r ecommendat i on. He
18 hi r ed a separ at e account ant who submi t t ed r esponses t o Ri l ey,
19 t o ar gue t he i ssue of her f i ndi ngs, as t o her number of
20 f i ndi ngs. So I submi t i t doesn' t go t o hi s i nt ent , and t hey
21 know i t . They have t hi s, one of t he exhi bi t s.
22 THE COURT: Why can' t you deal wi t h i t i n ot her ways
23 i nst ead of deal i ng wi t h t he r ecommendat i ons, whi ch i nvol ves
24 suspensi on, whi ch doesn' t seemt o me t o be r el evant t o t he
25 i ssue i n t he i ndi ct ment . Why can' t you r ai se t he i ssue about
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1 whet her t hi s r epor t and i t s r ecommendat i ons wer e, wer e pr ovi ded
2 t o Mr . , Dr . Kar r on, and whet her she had f ur t her di scussi ons
3 wi t h hi m. And t hey had anot her audi t , et cet er a, and you can
4 get i nt o what t he subj ect mat t er i s of t hose i t ems at t hat
5 t i me, not get i nt o t he r ecommendat i on of suspensi on by - -
6 MR. KWOK: The wi t ness i s act ual l y not goi ng t o
7 answer , I don' t bel i eve, t hat I r ecommended t he gr ant s be
8 suspended. She i s goi ng t o say, I t ol d hi mt hat he needs t o
9 amend hi s f i nanci al st at us r epor t and make t he cost - -
10 THE COURT: But you asked f or t he r ecommendat i on. She
11 i sn' t bei ng asked what she t ol d hi m.
12 MR. KWOK: Okay, can I ask t hat ?
13 THE COURT: The f or mof your quest i on.
14 MR. KWOK: Okay. I under st and. Thank you, your
15 Honor .
16 THE COURT: Al l r i ght .
17 MR. RUBI NSTEI N: Your Honor , i t ' s past f our .
18 THE COURT: Yeah, wel l , l et ' s j ust l et hi mget t hi s
19 quest i on i n.
20 MR. RUBI NSTEI N: Sur e.
21 ( Cont i nued on next page)
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2 THE COURT: Ref r ame your quest i on, Mr . Kwok.
3 MR. KWOK: Yes, your Honor .
4 Q. Ms. Ri l ey, what , i f any, act i ons di d you suggest t he
5 company under t ake t o i mpr ove t he negat i ve audi t f i ndi ngs i n
6 t hi s r epor t ?
7 MR. RUBI NSTEI N: Obj ect i on, your Honor .
8 THE COURT: What act i ons? I ' l l al l ow i t .
9 The j ur y i s i nst r uct ed t o di sr egar d anyt hi ng about
10 negat i ve or possi bl y, what have you.
11 What act i ons di d you t ake wi t h r espect t o Dr . Kar r on
12 and CASI af t er you made t hi s r epor t ? Di d you pr ovi de hi mwi t h
13 a copy?
14 THE WI TNESS: Oh, t hi s r epor t ? Yes, we pr ovi ded a
15 copy of t hi s r epor t t o CASI .
16 THE COURT: And what act i on di d you t ake t her eaf t er ?
17 Q. What act i ons di d you ask t hat t he company t ake?
18 A. We asked t hat t hey r ei mbur se NI ST f or t he f unds dr awn down
19 i n excess of t he f eder al amount , and we asked t hat t hey pr ovi de
20 cor r ect ed f i nanci al st at us r epor t s f or t he per i od of 2002 and
21 f or - - and f i nanci al st at us r epor t s f or t he 2003 year .
22 Q. Af t er you i ssued t hi s audi t r epor t , what , i f any, f ur t her
23 i nvol vement di d you have wi t h CASI ?
24 A. We went - - we di d a - - we di d anot her audi t i n December of
25 2003.
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1 Q. Why do you do anot her audi t i n December of 2003?
2 A. Wel l , we had al ways pl anned on i ssui ng - - t hi s i s a shor t
3 r epor t , our r epor t s nor mal l y ar e l onger , and pr ovi de mor e
4 i nf or mat i on i n quest i oned cost s, so we al ways pl anned on
5 i ssui ng anot her r epor t . But CASI had obt ai ned anot her CPA f or
6 t he audi t when we wer e r eady t o go back, and so - - i t cr eat ed
7 new books and r ecor ds, and so we had anot her si t e vi si t .
8 Q. Appr oxi mat el y, how much t i me passed bet ween t hi s second
9 vi si t and t he i ssuance of t hat r epor t ?
10 A. The second - - t he r epor t was i ssued i n J ul y, and t he second
11 vi si t was i n December 2003, so about f i ve mont hs.
12 Q. Now, by t hi s t i me had CASI under t aken any of t he act i ons
13 t hat you suggest ed?
14 A. They had - -
15 MR. RUBI NSTEI N: Obj ect i on, your Honor .
16 THE COURT: I t hi nk t hi s may be a good poi nt t o
17 suspend f or t he day, sor r y. But I ' mawar e of obl i gat i on, ot her
18 obl i gat i ons t hat I have t o car r y out and have t o be car r i ed out
19 by t he at t or neys. So I t hi nk we bet t er suspend t en mi nut es
20 af t er f our . Thank you f or bei ng so pr ompt t hi s mor ni ng. I
21 hope you get of f t o a good st ar t t omor r ow at 9: 30, and we' l l
22 see you.
23 I hope you get cof f ee and cooki es or what ever t hey
24 ser ve you.
25 ( J ur y exi t s t he cour t r oom)
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1 ( I n open cour t ; j ur y not pr esent )
2 THE COURT: Oh, di d you gi ve Ms. - - al l r i ght , you can
3 st ep down.
4 THE WI TNESS: Okay.
5 THE COURT: I s t her e anyt hi ng el se t o t ake up? How
6 l ong wi l l wi t h t hi s wi t ness t ake?
7 MR. KWOK: I bel i eve appr oxi mat el y 45 mi nut es t o an
8 hour .
9 THE COURT: I t ' s awf ul l ong. Go ahead. I ' mj ust
10 t r yi ng t o move t hi s al ong.
11 MR. KWOK: I under st and, but as I t ol d your Honor we
12 bel i eve t hat we may be abl e t o move t hi s case a l i t t l e bi t .
13 Whi l e we' r e her e, shoul d we addr ess t he obj ect i on t hat
14 Mr . Rubi nst ei n j ust made?
15 THE COURT: Yes, you bet t er .
16 MR. KWOK: I t ' s our posi t i on t hat t hat goes t o hi s
17 i nt ent , as Ms. Ri l ey t est i f i es she suggest ed a number of
18 act i ons t hat t he company under t ake, i ncl udi ng payi ng back t he
19 money. And f i ve mont hs l at er she went back t o i ssue t he mor e
20 f ul some r epor t , and at t hat t i me i t was st i l l out st andi ng. So
21 I under st and par t of def ense' s ar gument i s t hey di d ever yt hi ng
22 t hey coul d t o r emedy t he si t uat i on, and t hat ' s si mpl y not t he
23 case. And i t goes t o t he def endant ' s st at e of mi nd. And i f he
24 i nt ends t o ar gue t hat t her e wer e some ot her peopl e i nvol ved who
25 wer e advi si ng t he def endant , he can cr oss on t hat . But t hat
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1 seems t o be a maj or pr i mar y i ssue i n t hi s case and we shoul d be
2 al l owed t o have t he wi t ness t est i f y t o t hat , i n f act .
3 THE COURT: Wel l , t est i f y t o what went on. I f ol l ow
4 your ar gument . But i s t her e any t est i mony about whet her
5 t her e - - f unds wer e avai l abl e f or t he r epayment s t hat t he
6 gover nment want ed?
7 MR. KWOK: Wel l , I bel i eve t her e' s goi ng t o be
8 t est i mony t hat al l - - t he CASI money comes f r omt he NI ST gr ant ,
9 and t he company had pr omi sed t o put some cost shar e wi t hi n, i n
10 t he pr oposal and i t was never pai d.
11 THE COURT: 280, 000 i s a l ot mor e t han t he cost shar e.
12 I t ' s a l i t t l e har d t o pay 280, 000 and meet your cost shar e t oo.
13 They - -
14 MR. KWOK: But t he wi t ness, I bel i eve, i s goi ng t o
15 t est i f y t hat t he company has pai d zer o, t hat - -
16 THE COURT: What ?
17 MR. KWOK: Had not pai d back anyt hi ng, even af t er t he
18 i ssuance of her r epor t , not t he f ul l amount , j ust not hi ng at
19 al l . I bel i eve t hat ' s goi ng t o be t he t est i mony, and I t hi nk
20 t hat goes t o t he i nt ent i onal mi sappl i cat i on of gr ant f unds.
21 THE COURT: They have f unds; t he company have f unds?
22 MR. KWOK: The company does not have i ndependent
23 sour ces of f unds, t hat ' s t he Gover nment ' s posi t i on. However ,
24 t he r eason t hey di dn' t have f unds i s because t hey mi sspent al l
25 t hose f unds t hat t hey had al r eady dr awn down, so i t ' s not - -
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1 THE COURT: How does i t go t o t he i nt ent ?
2 MR. KWOK: Wel l , i t goes t o t he i nt ent because t hey
3 di dn' t even t r y t o put i n t he cost shar e t hat t hey had pr omi sed
4 t he gover nment t hat t hey woul d.
5 THE COURT: They di dn' t have any f unds, how coul d t hey
6 do i t ?
7 MR. KWOK: Wel l , I bel i eve Mr . Kar r on - - Mr .
8 Rubi nst ei n el i ci t ed t est i mony f r omsome wi t nesses t hat at some
9 poi nt i n t i me t he def endant mor t gaged, t ook out a second
10 mor t gage of hi s apar t ment t o r epay $60, 000.
11 THE COURT: I s t he apar t ment owned by CASI ?
12 MR. KWOK: No. I t was owned by Dr . Kar r on per sonal l y.
13 THE COURT: The gr ant was t o CASI , was i t not ?
14 MR. KWOK: I t was. But i f Mr . Rubi nst ei n, as he t r i ed
15 t o el i ci t f r omsome of t hese wi t nesses, t hat at some poi nt i n
16 t i me he, al t hough af t er t he per i od al l eged on t he f ace of t he
17 i ndi ct ment , he t ook out a second mor t gage on hi s home t o t r y t o
18 pay back some of t hat money t hat he mi sappl i ed, t o suggest t hat
19 he t r i ed t o r emedy t he si t uat i on, he put s t hat i ssue squar el y
20 at pl ay and we shoul d be al l owed t o count er t hat suggest i on.
21 THE COURT: Oh, but you' r e maki ng a cl ai mt hat - - I
22 don' t know what you' r e maki ng. I don' t know t he nat ur e of t he
23 f ul l case, but you can' t j ust - - t he gover nment made t he gr ant
24 not t o Dr . Kar r on, but t he gover nment made t he gr ant t o CASI .
25 MR. KWOK: That ' s cor r ect , your Honor . But t he r eason
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1 t he company di d not have f unds was because i t had been al r eady
2 mi sspent al l t hose f unds.
3 THE COURT: That ' s al l r i ght , but t hey over spent .
4 MR. KWOK: I ' msor r y?
5 THE COURT: They di d, t hey over spent .
6 MR. KWOK: I nt ent i onal l y mi sspent . The onl y basi c
7 poi nt I ' mt r yi ng t o el i ci t f r omt hi s wi t ness i s t he def endant
8 knew about t hese pr obl ems. He under t ook some of t he r emedi al
9 act i ons t hat she r ecommended; namel y, t o r evi se t he f i nanci al
10 st at us r epor t t hat we saw t o cor r ect t he cost shar e amount t hat
11 t hey f al sel y r epor t ed t o t he gover nment wher e t hey di dn' t pay
12 anyt hi ng t hey had r epor t ed t hat t hey had pai d t en' s of
13 t housands of dol l ar s, but t hey never pai d t hat money back, and
14 t hat ' s an i nt egr al par t of what went on at t he company, t hat - -
15 THE COURT: They di dn' t have t he f unds t o pay i t back.
16 They spent i t .
17 MR. KWOK: But t hey cont i nued t o dr aw - - act ual l y,
18 t hey - - I , I don' t t hi nk t hat ' s qui t e t r ue, because t he company
19 cont i nued t o dr awdown ATP money.
20 THE COURT: But you have t o convi nce me - - I ' l l have
21 t o hear i t - - you' l l have t o convi nce me pr ompt l y t hat
22 ar gument , but - -
23 MR. KWOK: As I sai d a moment ago, I bel i eve Mr .
24 Rubi nst ei n had suggest ed i n t he past t wo days t hat at some
25 poi nt i n t i me Dr . Kar r on t ook out a second mor t gage on hi s home
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1 t o t r y t o pay back t he money t hat he - -
2 THE COURT: Tel l me wher e, show me i n t he r ecor d. I
3 don' t r ecal l hi msayi ng t hat i n t hi s case on t r i al . I f he - -
4 maybe one of your cohor t s does. I don' t r emember hi msayi ng
5 t hat . I ' mawar e of t he f act t hat t her e was a mor t gage, but - -
6 MR. KWOK: We wi l l go get t he t r anscr i pt .
7 THE COURT: I ' mnot sur e about t hi s whol e t heor y of
8 t hi s evi dence pr ovi ng t he - - bei ng admi ssi bl e. So you bet t er
9 have somet hi ng f or me i n t he mor ni ng.
10 MR. KWOK: We wi l l do t hat . And - -
11 THE COURT: I n wr i t i ng so I can r ead i t , or t oni ght i f
12 you want t o r ead t he cases t hat you' r e r el yi ng on.
13 MR. KWOK: Ver y wel l , your Honor . And i n t he
14 al t er nat i ve, I wi l l go back t o r evi si t t he t est i mony t hat I
15 i nt end t o el i ci t and maybe we can avoi d t he whol e pr obl emby
16 j ust movi ng qui ckl y t hr ough t he audi t r epor t s wi t hout dwel l i ng
17 t oo much on t he r ecommendat i on por t i ons of t he r epor t , because
18 t her e' s ot her ways we can show what we need t o show.
19 THE COURT: I ' mhavi ng t r oubl e wi t h t hi s whol e t heor y
20 t hat t he f ai l ur e t o r epay may be evi dence of hi s i nt ent i n
21 mi sspendi ng t he money.
22 MR. KWOK: Even i f - -
23 THE COURT: I ' mhavi ng t r oubl e wi t h t hat , so you' l l
24 have t o gi ve me cases, maybe Mr . Rubi nst ei n' s of f i ce can t oo,
25 si nce he' s got hi s assi st ant her e t oday.
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1 MR. RUBI NSTEI N: We have anot her quest i on t hat mi ght
2 hel p t hat , J udge, but t hat ' s when we f i ni sh wi t h t hi s f i r st .
3 I t ' s mor e i n t he housekeepi ng nat ur e.
4 MR. KWOK: I wi l l do some r esear ch and t r y t o gi ve
5 your Honor case l aw.
6 But t he onl y ot her poi nt I woul d make on t hi s poi nt i s
7 t hat even i f i t does not go t o hi s i nt ent , i t goes t o t he basi c
8 f act s of what happened t o t he money. She' s goi ng t o - -
9 THE COURT: I t doesn' t go t o basi c. What ever happened
10 t o t he money, happened t o t he money. Ther e may be, t her e may
11 be cl ar i f i cat i on as t o. But t he conver sat i ons wi t h Dr . Kar r on
12 don' t have anyt hi ng t o do wi t h what happened t o t he money, as I
13 under st and i t . I mean, she may have got t en f ur t her , f ur t her
14 mat er i al s f r omt he new audi t or , t he new account ant s or what
15 have you, but I ' mhavi ng t r oubl e wi t h t he, t hi s el ement of t he
16 case.
17 MR. KWOK: We' l l submi t a l et t er t o t he Cour t .
18 THE COURT: I don' t know t he ot her wi t nesses you have.
19 MR. RUBI NSTEI N: Your Honor , i n or der t o f aci l i t at e
20 what your Honor suggest ed of hopef ul l y hel pi ng t he Cour t i n
21 r esol vi ng t he i ssue, t her e i s a car d t hat t he secur i t y t ook
22 t hat per mi t s us t o use t he i nt er net , and we woul d need a - -
23 i t ' s a Spr i nt PCS car d t hat - - i n ot her wor ds, t hey don' t l et
24 you br i ng i n a comput er t hat gi ves you access t o t he i nt er net ,
25 but act ual l y t hat woul d be - -
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1 THE COURT: Why do we need t he i nt er net ?
2 MR. RUBI NSTEI N: We want t o be abl e t o go i nt o West l aw
3 and, you know, do some r esear ch and st uf f .
4 THE COURT: Oh- - don' t - - bet t er not do i t her e,
5 t hat ' s al l .
6 MR. RUBI NSTEI N: Okay, J udge. Thank you.
7 THE COURT: Al l r i ght . Ar e we al l done?
8 MR. KWOK: Yes, t hank you.
9 ( Adj our ned t o J une 5, 2008 at 9: 30 a. m. )
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1 I NDEX OF EXAMI NATI ON
2 Exami nat i on of : Page
3 HOPE SNOWDEN
4 Di r ect By Mr . Ever del l . . . . . . . . . . . 297
5 Cr oss By Mr . Rubi nst ei n . . . . . . . . . . 344
6 Redi r ect By Mr . Ever del l . . . . . . . . . . 435
7 Recr oss By Mr . Rubi nst ei n . . . . . . . . . 456
8 BELI NDA RI LEY
9 Di r ect By Mr . Kwok . . . . . . . . . . . . . 462
10 GOVERNMENT EXHI BI TS
11 Exhi bi t No. Recei ved
12 47 . . . . . . . . . . . . . . . . . . . 325
13 40, 40A, 41, 41A, 42, 42A, 43, 43A, 44, 45 and333
14 48 . . . . . . . . . . . . . . . . . . . 340
15 2000 and 2001 . . . . . . . . . . . . . . 451
16 [ Exhi bi t s] *[ r ecei ved] . . . . . . . . . . . 461
17 900 . . . . . . . . . . . . . . . . . . . 461
18 60 . . . . . . . . . . . . . . . . . . . 477
19 DEFENDANT EXHI BI TS
20 Exhi bi t No. Recei ved
21 F . . . . . . . . . . . . . . . . . . . . 433
22
23
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865ZKAR1
1 UNI TED STATES DI STRI CT COURT
1 SOUTHERN DI STRI CT OF NEWYORK
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3 UNI TED STATES OF AMERI CA, New Yor k, N. Y.
3
4 v. S2 07 CR 541 ( RPP)
4
5 DANI EL B. KARRON,
5
6 Def endant .
6
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
7
8
8 J une 5, 2008
9 9: 20 a. m.
9
10
10 Bef or e:
11
11 HON. ROBERT P. PATTERSON, J R. ,
12
12 Di st r i ct J udge
13
13
14 APPEARANCES
14
KA-2325 KA-2325 KA-2325
15 MI CHAEL J . GARCI A
15 Uni t ed St at es At t or ney f or t he
16 Sout her n Di st r i ct of New Yor k
16 BY: STEVEN KWOK
17 CHRI STI AN EVERDELL
17 Assi st ant Uni t ed St at es At t or neys
18
18 RUBI NSTEI N & COROZZO, LLP
19 At t or neys f or Def endant
19 BY: RONALD RUBI NSTEI N
20
20 Al so Pr esent : Rachel Ondr i k, U. S. Dept . of Commer ce
21 Ki r k Yamat ani , U. S. Dept . of Commer ce
22
23
24
25
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1 ( I n open cour t ; j ur y not pr esent )
2 THE COURT: We have sever al mat t er s t o t ake up.
3 MR. RUBI NSTEI N: Fi r st of al l , I want t o t el l t he
4 Cour t t hat Dr . Kar r on i s her e. I pi cked hi mup and dr ove hi m
5 her e mysel f , as I pr omi sed your Honor I woul d. He' s doi ng
6 somet hi ng - -
7 THE COURT: He' s her e?
8 MR. RUBI NSTEI N: Yes, he i s. I br ought hi mher e.
9 Much t o my chagr i n, I pi cked hi mup and deposi t ed hi m. But
10 he' s maki ng a cal l f or me now, so he' s - - he consent ed t o be
11 excused dur i ng t he l egal , any l egal ar gument s we make her e.
12 THE COURT: You consent t o hi s absence?
13 MR. RUBI NSTEI N: Yes, your Honor .
14 THE COURT: For t hese ar gument s? Al l r i ght , t hank
15 you.
16 Now, we had some i ssues about whet her t he Gover nment ' s
17 Exhi bi t 2, 000, and 2, 001 wer e 3500 mat er i al t hat wer e not
18 pr oduced t o t he def endant .
19 MR. RUBI NSTEI N: Yes, your Honor . And t he r eason f or
20 t hat i s t hat when I was cr oss- exami ni ng - -
21 THE COURT: I t came up i n cr oss as a r esul t of your
22 cr oss- exami nat i on.
23 MR. RUBI NSTEI N: Yes, because I had never been
24 pr ovi ded wi t h t hose document s, so I was t ot al l y unawar e.
25 THE COURT: Why i s i t 3500 mat er i al ?
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1 MR. RUBI NSTEI N: Wel l , j ust as al l t he ot her f i nanci al
2 st at ement r evi si ons was 3500 mat er i al t hat was t ur ned over of
3 t hi s wi t ness.
4 THE COURT: I t ' s not a f i nanci al st at ement , as I r ead
5 i t . But why i s i t 3500 mat er i al ?
6 MR. RUBI NSTEI N: I t ' s t he same as - - i t was a r evi sed
7 f i nanci al st at ement . The wi t ness t est i f i ed t hat she had
8 r ecei ved f i nanci al st at ement - - i n ot her wor ds, I showed t hat
9 t he f i nanci al st at ement s t hat t he gover nment had i n evi dence
10 wer e submi t t ed August 13t h, 2003. The wi t ness sai d t hat she
11 had seen ear l i er ones. We di dn' t have any ear l i er ones. We
12 had t he ones August 13t h, and I - - and she sai d she had t hemi n
13 her f i l e. So obvi ousl y t he gover nment has a whol e f i l e t hat
14 t hey never t ur ned over , never made avai l abl e ei t her on Rul e 16
15 or under 3500 mat er i al as t o t hi s wi t ness, and t hen t hey
16 i nt r oduce i t . And i t ' s my f aul t because I was doi ng somet hi ng
17 el se at t he t i me, and I shoul d' ve known when t hey came up wi t h
18 a number l i ke 2, 000, t hat ' s what got my i nt er est , i t was a new
19 number sequence i n t hi s case and - -
20 THE COURT: Wel l , l et me hear f r omt he gover nment .
21 MR. EVERDELL: Wel l , your Honor , a f ew t hi ngs. I
22 t hi nk your Honor ' s r i ght , I don' t see how t hese ar e her
23 st at ement s. These ar e r evi sed f i nanci al r epor t s t hat somehow
24 she r ecal l s seei ng, so I don' t see how t hese become her pr i or
25 st at ement s.
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1 THE COURT: Wel l , t hey' r e pr oposed - - what wer e t hey
2 exact l y? They' r e pr oposed f i nanci al st at ement r evi si ons, i s
3 t hat what t hey ar e?
4 MR. EVERDELL: These wer e t hese f i nanci al st at us,
5 quar t er l y f i nanci al st at us r epor t s.
6 THE COURT: Fi nanci al , pr oposed f i nanci al st at us
7 r epor t s.
8 MR. EVERDELL: Ri ght .
9 THE COURT: Whi ch wer e not appr oved.
10 MR. EVERDELL: Ther e, as t he wi t ness t est i f i ed, t her e
11 was some di scussi on about pr oposed f i nanci al st at us r epor t s
12 wi t h t he def endant . And she r ecal l s seei ng t hese and havi ng
13 ot her , ot her pr oposed r evi sed f i nanci al st at us r epor t s t hat she
14 saw i n t he gr ant f i l e. So t hese, I don' t t hi nk, ar e her
15 st at ement s. And pl us t he f act t hat I bel i eve t he i ssue i s
16 wai ved as wel l because def ense counsel di dn' t obj ect when I
17 showed i t t o hi mand onl y came up af t er t he f act , so.
18 THE COURT: Wel l , t hese ar e not st at ement s by her or
19 do t hey cont ai n st at ement s by her ? I f t hey' r e wi t ness
20 st at ement s, I have a pr obl em. I r emember t her e was some
21 not at i on on one of t hemas I r ecol l ect .
22 MR. EVERDELL: Ther e was some ar e ar i t hmet i c not at i ons
23 and t her e was a not at i on down at t he bot t omof one of t hem,
24 t hat ' s cor r ect . I ' mnot sur e i f i t came out whose t hose wer e.
25 THE COURT: Her s, I bel i eve - -
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1 MR. EVERDELL: Yeah.
2 THE COURT: - - i s t he t est i mony.
3 MR. EVERDELL: I n addi t i on, your Honor , f or t he 3500
4 mat er i al we wr ot e a l et t er t o def ense counsel sayi ng t hat ,
5 because di scover y was so vol umi nous i n t hi s case, t hat i f we
6 had al r eady pr ovi ded i t i n di scover y, we wer en' t goi ng t o
7 pr ovi de i t agai n at separ at e 3500 mat er i al . We di d pr ovi de a
8 copy of t he gr ant f i l e i n di scover y, and you know, I mean - -
9 THE COURT: You di d pr ovi de t he gr ant f i l e? I t hought
10 t hey wer e i ncl uded.
11 MR. EVERDELL: I t woul d have. Your Honor , I conf ess
12 t hat when we t r i ed t o l ook t hr ough t he di scover y l ast ni ght t o
13 see i f we can see t hese exact document s t hat we showed
14 yest er day, t he di scover y copy, t he Bat es st amped di scover y
15 copy, I conf ess we coul dn' t f i nd t hemi n t he Bat es st amped
16 di scover y copy.
17 The i ssue i s t hat t he gr ant f i l e was copi ed sever al
18 year s ago when t he agent s went t o D. C. t o copy t he gr ant f i l e,
19 t hat was what we pr oduced. And, appar ent l y, t hese wer e not
20 copi ed, f or what ever r eason.
21 The agent s at t he t abl e had her own copy of t he gr ant
22 f i l e t hat she r equest ed some, a l i t t l e bi t l at er , j ust because
23 t he copy por t i on t hat we pr oduced was - - i t wasn' t or gani zed as
24 ef f ect i vel y as she woul d have l i ked i t t o be, so she j ust
25 r equest ed anot her copy of i t . That ' s what we wer e usi ng
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1 yest er day when I was t ol d of t hese document s. So I had assumed
2 t hat because we had pr oduced t he gr ant f i l e, t hat t hose
3 document s wer e al so i ncl uded i n t he gr ant f i l e. Appar ent l y, i n
4 my r evi ew of t he di scover y l ast ni ght , I don' t see t hem.
5 But I r ai se i t t hat , you know, t hi s onl y came up on
6 cr oss- exami nat i on as t he def endant was t r yi ng t o appar ent l y
7 maki ng i t seen l i ke Ms. Snowden wasn' t doi ng her j ob pr oper l y.
8 I hadn' t i nt ended t o br i ng t hese t o t he j ur y' s at t ent i on at
9 al l . And pl us t hi s i s a conver sat i on she had wi t h t he
10 def endant hi msel f , so t hi s i sn' t r eal l y any gr eat sur pr i se on
11 t he par t of t he def endant . She' s t est i f yi ng about di scussi ons
12 she had wi t h hi mabout addi t i onal r evi si ons t o t he f i nanci al
13 st at us r epor t s. So t hi s i sn' t r eal l y a gr eat sur pr i se t o hi m
14 or shoul dn' t have been. So whi l e I admi t I t hi nk because of
15 t he r evi ew of di scover y l ast ni ght I can' t say f or cer t ai n t hat
16 t hese par t i cul ar t wo document s wer e t ur ned over t o t he
17 def endant i n di scover y, I don' t t hi nk t hi s i s any gr eat
18 sur pr i se t o t he def endant . And gi ven t he nat ur e of how t he
19 document s came up and t he f act t hat def ense counsel di dn' t
20 obj ect when we f i r st t r i ed t o i nt r oduce t hem, I don' t t hi nk
21 t hi s i s - - shoul d be an i ssue.
22 THE COURT: He di dn' t obj ect unt i l af t er t hey wer e
23 admi t t ed i n evi dence.
24 MR. EVERDELL: Cor r ect , your Honor .
25 THE COURT: I don' t know what t he l aw i s on t hat ,
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1 under t hose ci r cumst ances.
2 MR. RUBI NSTEI N: Your Honor , I woul d have no pr obl em
3 i f your Honor want ed t o gi ve a l i mi t i ng i nst r uct i on t hat Rul e
4 3500 r equi r es t he gover nment t o t ur n over al l t he mat er i al
5 about - - t hat a par t i cul ar wi t ness who was goi ng t o t est i f y and
6 t hat , you know, and i t wasn' t done as t o Exhi bi t 2, 000 and
7 t hat ' s - -
8 THE COURT: Those document s wer e over l ooked? I s t hat
9 what you want ?
10 MR. EVERDELL: Your Honor , I don' t - - unt i l yest er day
11 when t hi s i ssue came up, I don' t t hi nk we knew t hat t hose
12 document s, t hose not at i ons wer e Hope Snowden' not at i ons. We
13 saw t hemi n t he gr ant f i l e because i t l ooked l i ke t hese wer e
14 r evi si ons and we want ed t o, because t he i ssue came up on
15 cr oss- exami nat i on, i t was cl ear t hat t her e wer e ot her r evi si ons
16 t o t he f i nanci al st at us r epor t s. And so we t hought , okay, t hi s
17 i s a copy of t he gr ant f i l e, we t hought we pr oduced t he gr ant
18 f i l e so we' r e goi ng t o i nt r oduce t hese ' cause we don' t want i t
19 t o l ook as i f Hope Snowden wasn' t doi ng her j ob, whi ch i s
20 cl ear l y what t he - -
21 THE COURT: Tel l i ng t he t r ut h i s - -
22 MR. EVERDELL: Wasn' t t el l i ng t he t r ut h, whi ch i s
23 exact l y what t he def ense counsel was I t hi nk t r yi ng t o do wi t h
24 t hat cr oss- exami nat i on. So i t was done i n good f ai t h. I don' t
25 t hi nk a l i mi t i ng i nst r uct i on t o t hat ef f ect i s appr opr i at e
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1 her e. Pl us t he i ssue of wai ver , I mean t hese wer e t hi ngs t hat
2 we showed t o t he def endant and he di d not obj ect t o i t . He had
3 t he oppor t uni t y t o r evi ew t hembef or e I el i ci t ed t hemf r omt he
4 f r omt he wi t ness, so.
5 MR. RUBI NSTEI N: That ' s not exact l y accur at e, your
6 Honor . They di dn' t gi ve me a copy. They di dn' t hand me a
7 copy.
8 THE COURT: They - -
9 MR. RUBI NSTEI N: They - -
10 THE COURT: They di d show t hemt o you, Mr - -
11 MR. RUBI NSTEI N: No. They of f er ed t o show t hemand I
12 di d not l ook at t hem. I t ' s my f aul t .
13 THE COURT: I saw t hemshow t hemt o you.
14 MR. RUBI NSTEI N: I di dn' t l ook at - -
15 THE COURT: Whet her you exami ned t hemi s anot her
16 i ssue.
17 MR. RUBI NSTEI N: I conceded t hat , J udge.
18 THE COURT: What ?
19 MR. RUBI NSTEI N: I conceded t hat f r omt he out set , f r om
20 yest er day, t oday. I ' mnot suggest i ng t hey di dn' t of f er i t t o
21 show me t hem, okay. And as I sai d, I was l at e i n maki ng t he
22 obj ect i on. You know, j ust as t he def endant ' s not ent i t l ed t o a
23 per f ect t r i al , he' s not ent i t l ed t o a per f ect l awyer .
24 THE COURT: I want t o see t hose document s, but I want
25 t o - - and t hen I want t o consi der what t o do. Because I t hi nk
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1 i t ' s acknowl edged t hat t he t wo document s wer e appar ent l y not at
2 t he di scover y mat er i al s t ur ned over .
3 Now whet her , whet her t he di scover y mat er i al s - - and I
4 t hi nk t he wi t ness t est i f i ed, I may be wr ong, t hat t he
5 handwr i t t en not at i ons on t he document wer e her s. So I suppose
6 t hey coul d be consi der ed pr i or st at ement s of a wi t ness.
7 MR. EVERDELL: Your Honor , I mean t he wr i t t en
8 st at ement s t her e wer e not t he subj ect of t est i mony. The
9 t est i mony was - -
10 THE COURT: That ' s t r ue.
11 MR. EVERDELL: - - was di d she i n f act have di scussi ons
12 wi t h t he def endant about addi t i onal r evi sed f i nanci al st at us
13 r epor t s.
14 THE COURT: They wer en' t t he subj ect of her di r ect
15 t est i mony.
16 MR. EVERDELL: Cor r ect .
17 THE COURT: She was r esponded t o on cr oss- exami nat i on.
18 MR. EVERDELL: Exact l y. I di d not i nt end t o get i nt o
19 t hi s at al l unt i l Mr . Rubi nst ei n was, appar ent l y, t r yi ng t o
20 t est her cr edi bi l i t y and I f el t l i ke t hi s was somet hi ng I
21 needed t o addr ess on r edi r ect .
22 The i ssue r eal l y was di d she have di scussi ons wi t h t he
23 def endant about addi t i onal r evi sed f i nanci al st at us r epor t s,
24 whi ch she t est i f i ed t o bef or e I even i nt r oduced t he document s.
25 She sai d, yes, I had di scussi ons wi t h hi m; yes, t her e wer e
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1 f ur t her r evi si ons. I was si mpl y t r yi ng t o f i nd document ar y
2 evi dence because t he def ense counsel was t r yi ng t o - - was
3 aski ng t he wi t ness, di d you make any not es. She sai d yes. So
4 I l ooked t o see i f we had evi dence of t hi s, and i t appear s
5 t her e was. Now, i t ' s t r ue t hat t hese wer e not - - appar ent l y
6 wer e not t ur ned over i n di scover y, but - -
7 THE COURT: I t hi nk you mi sspoke about any not es. But
8 what he asked her was i f t her e had been any ot her f i nanci al
9 st at us r epor t s i n bet ween t he t wo, t he f i nanci al st at us r epor t
10 of t he f i r st one and t he so- cal l ed r evi sed one of 8/ 13
11 somet hi ng or ot her .
12 MR. EVERDELL: That ' s cor r ect , your Honor .
13 THE COURT: Wel l , I want t o consi der t hi s and see
14 what , i f anyt hi ng, shoul d be done about i t .
15 MR. EVERDELL: And your Honor , addi t i onal l y - -
16 THE COURT: Now l et ' s - - we' ve got a j ur y wai t i ng
17 her e. We got anot her pr obl em.
18 Mr . J ur or number ei ght wi l l not be i n, Mr . Naveen
19 spr ai ned hi s ankl e and has di f f i cul t y wal ki ng and wi l l not be
20 i n t oday, so we' l l have t o r epl ace hi m.
21 Al l r i ght . Now, t her e' s anot her i ssue we have t hat
22 came at t he end of t he day, r i ght ?
23 MR. KWOK: That ' s cor r ect . I wi l l not pr ess t hat l i ne
24 of quest i oni ng, your Honor .
25 THE COURT: Not r ef er t o i t i n summat i on ei t her ; not
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1 make t hat ar gument i n summat i on.
2 MR. KWOK: Cer t ai nl y. But t he onl y ot her t hi ng I want
3 t o f l ag f or t he Cour t , I bel i eve your Honor now has a pr oposed
4 new st i pul at i on whi ch I wi l l r ead i nt o t he r ecor d bef or e we
5 cal l t he wi t ness.
6 THE COURT: Al l r i ght . Ot her wi se ar e we r eady?
7 MR. KWOK: The gover nment i s r eady.
8 MR. RUBI NSTEI N: Def ense i s r eady, your Honor . I f I
9 can j ust r un out and so I don' t have t o r un out l at er .
10 THE COURT: Maybe I shoul d t oo.
11 MR. EVERDELL: Shoul d we get t he wi t ness, your Honor ?
12 THE COURT: You bet t er have t he wi t ness r eady.
13 ( Recess)
14 THE COURT: Pl ease be seat ed.
15 Al l r i ght , we' r e br i ngi ng i n t he j ur y.
16 ( J ur y ent er i ng)
17 THE COURT: Good mor ni ng. Pl ease be seat ed. Good
18 mor ni ng, l adi es and gent l emen.
19 THE J URY: Good mor ni ng.
20 THE COURT: Mr . Mont eagudo r ecei ved a message f r om
21 Mr . Naveen J ohn, j ur or number ei ght . He spr ai ned hi s ankl e
22 yest er day and cannot wal k t hi s mor ni ng, and as a r esul t he wi l l
23 not be i n t oday. And, accor di ngl y, I ' mgoi ng t o ask Ms. Chang,
24 t he f i r st al t er nat e j ur or , t o t ake hi s pl ace as j ur or number
25 ei ght and we' l l pr oceed wi t h t he t r i al , and I guess we' r e st i l l
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1 on t he di r ect exami nat i on wi t h Ms - -
2 MR. KWOK: Ms. Ri l ey, your Honor .
3 THE COURT: I ' msor r y.
4 MR. KWOK: Ms. Ri l ey.
5 THE COURT: Ms. Ri l ey, yes.
6 MR. KWOK: May I pr oceed?
7 THE COURT: Ms. Ri l ey, you' r e r emi nded you' r e st i l l
8 under oat h. The j ur y i s r emi nded t hat on t he succeedi ng day
9 when t he wi t ness t akes t he st and, I ' mobl i ged, as a mat t er of
10 cour t pr ocedur e, t o r emi nd t hemt hey' r e st i l l under oat h.
11 Pl ease.
12 MR. KWOK: Thank you, your Honor .
13 BELI NDA RI LEY,
14 cal l ed as a wi t ness by t he gover nment ,
15 havi ng been pr evi ousl y swor n, t est i f i ed as f ol l ows:
16 DI RECT EXAMI NATI ON
17 BY MR. KWOK:
18 MR. KWOK: Your Honor , bef or e I pr oceed wi t h t he
19 di r ect exami nat i on, I woul d l i ke t o r ead a pr oposed st i pul at i on
20 i nt o t he r ecor d.
21 THE COURT: Al l r i ght , si r .
22 MR. KWOK: Uni t ed St at es of Amer i ca ver sus Dani el B.
23 Kar r on, def endant S2 07 Cr i m. 542. I t i s her eby st i pul at ed and
24 agr eed by and among t he Uni t ed St at es of Amer i ca by Mi chael J .
25 Gar ci a, Uni t ed St at es At t or ney f or t he Sout her n Di st r i ct of New
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1 Yor k, St eve Kwok and Chr i st i an Ever del l , Assi st ant Uni t ed
2 St at es At t or neys of counsel , and def endant Dani el B. Kar r on, by
3 and wi t h t he consent of hi s at t or ney Ronal d Rubi nst ei n,
4 Esqui r e, par agr aph t hr ee of Gover nment exhi bi t 900 i s amended
5 t o r ead as f ol l ows: The document s mar ked as gover nment exhi bi t
6 0 ar e t he cr edi t car d st at ement s f or t he Amer i can Expr ess car ds
7 of Comput er Ai ded sur ger y, I nc. CASI , and Dani el B. Kar r on, t he
8 def endant , f r omi n or about Oct ober 2001 t o i n or about Apr i l
9 of 2003.
10 I t i s f ur t her st i pul at ed and agr eed t hat gover nment
11 exhi bi t 90 and t hi s st i pul at i on mar ked f or i dent i f i cat i on as
12 gover nment exhi bi t 900A, may be r ecei ved i n evi dence as
13 gover nment exhi bi t s at t r i al , and i t i s si gned New Yor k, New
14 Yor k, J une 5t h, 2008 on behal f of t he Uni t ed St at es by St eve
15 Kwok and on behal f of Dani el B. Kar r on, Ronal d B. Rubi nst ei n,
16 Esqui r e.
17 THE COURT: Al l r i ght , Gover nment ' s exhi bi t 90 i s
18 admi t t ed i n evi dence. I t hi nk Gover nment ' s exhi bi t 900 was
19 admi t t ed i n evi dence.
20 THE DEPUTY CLERK: Thi s i s 900A?
21 THE COURT: Excuse me. Gover nment ' s exhi bi t 900A i s
22 admi t t ed i n evi dence.
23 ( Gover nment ' s Exhi bi t 900A r ecei ved i n evi dence)
24 MR. KWOK: Thank you, your Honor .
25 BY MR. KWOK:
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1 Q. Good mor ni ng, Ms. Ri l ey.
2 A. Good mor ni ng.
3 Q. Bef or e we br oke yest er day you ment i oned you went back t o
4 CASI t o do a second audi t ; i s t hat r i ght ?
5 A. Yes.
6 Q. When di d you go back t o t hat , t o do t hat second audi t ?
7 A. I n December of 2003.
8 Q. So how l ong was t hat bet ween your f i r st audi t and t hi s
9 t i me?
10 A. About f i ve mont hs.
11 Q. Wher e di d you go t o conduct t hi s second audi t ?
12 A. To hi s account ant , Mel Spi t z' s of f i ce i n Manhat t an.
13 Q. I n conduct i ng your second audi t , what mat er i al s di d you
14 exami ne?
15 A. I exami ned t he books and r ecor ds pr ovi ded by Mel Spi t z.
16 Q. So ar e t hese mat er i al s t hat you exami ned f or t he second
17 audi t di f f er ent or t he same f r omt he mat er i al s you r el i ed on
18 t he f i r st t i me?
19 A. I t was di f f er ent l edger s. The i nvoi ces or what ever woul d
20 been t he same, but t he l edger s wer e new.
21 Q. Di d t her e come a t i me when you compl et ed t hi s second audi t ?
22 A. Yes.
23 Q. When was t hat , appr oxi mat el y?
24 A. I t hi nk t he r epor t was pr obabl y i ssued i n Febr uar y or
25 Mar ch 2004.
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1 Q. And what per i od di d your second audi t cover ?
2 A. I t cover ed t he per i od 10/ 1, 2001 t hr ough J une 27t h, 2003.
3 THE COURT: What dat e i n 2003?
4 THE WI TNESS: J une 27t h, when t he awar d was suspended.
5 Q. Di d you i ssue a r epor t af t er t he second audi t ?
6 A. Yes.
7 Q. Ms. Ri l ey, i f you coul d t ake a l ook at t he st ack of
8 document s i n f r ont of you. I bel i eve t her e' s one mar ked f or
9 i dent i f i cat i on gover nment exhi bi t 61?
10 A. Yes.
11 THE COURT: 61 f or i dent i f i cat i on?
12 MR. KWOK: That ' s cor r ect , your Honor .
13 THE COURT: I t ' s not admi t t ed i n evi dence yet , l adi es
14 and gent l emen.
15 Q. Do you r ecogni ze t hi s document , Ms. Ri l ey?
16 A. Yes.
17 Q. Who pr epar ed t hat document ?
18 A. I di d.
19 Q. And what i s i t ?
20 A. I t ' s t he dr af t r epor t t hat we i ssued as a r esul t of t he
21 December 2003 r evi ew of CASI ' s r ecor ds.
22 Q. I s t hat t he r epor t you j ust r ef er r ed t o?
23 A. Yes.
24 MR. KWOK: Gover nment of f er s exhi bi t 61.
25 MR. RUBI NSTEI N: Your Honor , except f or concl usi ons, I
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1 have no obj ect i on, your Honor .
2 THE COURT: Exhi bi t 61 i s admi t t ed i n evi dence. I t ' s
3 kept i n t he r egul ar cour se of busi ness by t he agency; i s t hat
4 cor r ect ?
5 THE WI TNESS: I ' msor r y, what ?
6 THE COURT: Thi s r epor t i s kept i n t he r egul ar cour se
7 of busi ness by t he Of f i ce of I nspect or Gener al ?
8 THE WI TNESS: Yes, yes.
9 THE COURT: And i t ' s t he r egul ar cour se of busi ness t o
10 keep t hese, t hi s r epor t - -
11 THE WI TNESS: Yes.
12 THE COURT: - - i n i t s r ecor ds?
13 THE WI TNESS: Yes.
14 THE COURT: Al l r i ght , I ' l l al l ow i t .
15 MR. KWOK: Thank you, your Honor .
16 THE COURT: Exhi bi t 61 i s admi t t ed i n evi dence.
17 ( Gover nment ' s Exhi bi t 61 r ecei ved i n evi dence)
18 Q. Now, Ms. Ri l ey, I di r ect your at t ent i on t o page seven of
19 t hat document . I f you coul d put t hat up on t he scr een.
20 THE COURT: What I have i s page seven - - Mr - - I don' t
21 have a page seven t o t hat document , 61. I have - - I have i n
22 61 - -
23 MR. KWOK: You have t o keep f l i ppi ng t o - - t he i ni t i al
24 pages don' t have number s on i t , and t hen t her e ar e l i t t l e one,
25 l i t t l e t wo, and t hen - -
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1 THE COURT: Those ar e mar ked dr af t .
2 THE WI TNESS: Yes.
3 MR. KWOK: Yes.
4 THE WI TNESS: I t ' s a dr af t r epor t .
5 THE COURT: I t ' s not a f i nal r epor t .
6 THE WI TNESS: Ri ght . The f i nal - -
7 MR. KWOK: I can - - I ' mhappy t o expl ai n t hat at
8 si debar .
9 THE COURT: Not you expl ai n i t , l et t he wi t ness
10 expl ai n i t .
11 MR. KWOK: Okay. I wi l l l ay some f oundat i on, your
12 Honor .
13 THE COURT: She' s t he wi t ness, not you.
14 Q. Ms. Ri l ey, can you expl ai n t he di f f er ence bet ween a dr af t
15 r epor t and a f i nal r epor t ?
16 A. Yes. We i ssue t he dr af t - - we i ssue a dr af t r epor t and
17 gi ve t he gr ant ee an oppor t uni t y t o r espond t o our f i ndi ngs and
18 any er r or s we may have i n our number s, our wor di ngs or any - -
19 and t hen we i ssue a f i nal r epor t and i ncl ude t hei r r esponse t o
20 our dr af t r epor t .
21 Q. Thank you.
22 THE COURT: So you want page seven of t he dr af t r epor t
23 t hat ' s accompanyi ng t he - -
24 MR. KWOK: Yes.
25 THE COURT: - - t hat i s at t ached t o exhi bi t 61?
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1 MR. KWOK: That ' s cor r ect , your Honor , page seven of
2 t he dr af t r epor t , exhi bi t 61, we' r e j ust wai t i ng f or i t t o be
3 up on t he scr een. Can we bl ow t hat up.
4 Q. Ms. Ri l ey, what ar e t he f i ndi ngs t hat you r eached?
5 MR. RUBI NSTEI N: I obj ect t o t hi s. Ther e' s no
6 f oundat i on.
7 THE COURT: Obj ect i on over r ul ed.
8 A. We det er mi ned t hat t he gover nment was - - we f ound t hat t he
9 gover nment - - t he r ef und was due t he f eder al gover nment of
10 $582, 000, appr oxi mat el y.
11 Q. Now, i f we coul d go t wo pages af t er t hat . I t ' s appendi x
12 one, page one of ei ght . What ar e some of t he exampl es of t he
13 f unds t hat you di sal l owed?
14 A. Funds t hat wer e used t o pay f or r ent , i nt er net - -
15 MR. RUBI NSTEI N: I can' t hear t he wi t ness, your Honor .
16 I ' msor r y.
17 THE COURT: I ' msor r y, I ' msor r y?
18 MR. RUBI NSTEI N: I can' t - - I coul dn' t hear t he
19 wi t ness.
20 THE WI TNESS: I ' msor r y.
21 THE COURT: I t hi nk you' r e t oo - - I t hi nk you' r e t oo
22 cl ose - - Rober t i s not her e t o.
23 THE WI TNESS: Oh, i f I si t back, i s t hi s bet t er ?
24 MR. RUBI NSTEI N: Thank you.
25 THE COURT: I t ' s bet t er i f you speak up.
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1 THE WI TNESS: Okay.
2 THE COURT: Al l r i ght .
3 THE WI TNESS: I t sounds l oud t o me. Okay.
4 Moni es t hat wer e spent f or r ent s, i nt er net - -
5 THE COURT: Keep t al ki ng i nt o t he mi ke. As soon as
6 you st ar t t ur ni ng l ooki ng ar ound t o t he Cour t Repor t er your
7 voi ce get s muf f l ed.
8 THE WI TNESS: Okay.
9 A. For r ent , i nt er net , ut i l i t i es, and cer t ai n ot her CASI
10 expendi t ur es.
11 Q. And I di r ect your at t ent i on t o page ei ght now of t he
12 r epor t , t he one page pr evi ous t o t he one we j ust l ooked at .
13 Di r ect i ng your at t ent i on t o t he t hi r d f ul l par agr aph. What
14 f i ndi ng di d you make t her e?
15 A. That on Oct ober 26 CASI r ecei ved gr ant f unds of 100 and - -
16 THE COURT: Oct ober 26 of what year ?
17 THE WI TNESS: Oh, of 2001, CASI r ecei ved gr ant f unds
18 of $150, 000, and t hey i mmedi at el y wr ot e Dr . Kar r on a check f or
19 $75, 000 as an advance on sal ar y and pai d back r ent of $2, 000 a
20 mont h f or t he per i od, J anuar y 2000 t hr ough Sept ember of 2000,
21 whi ch was pr i or t o t he awar d of t he gr ant .
22 Q. And what di d you concl ude about t hese ser i es of
23 t r ansact i ons?
24 MR. RUBI NSTEI N: Obj ect i on, your Honor .
25 THE COURT: I t hi nk you need - -
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1 MR. KWOK: Your Honor - -
2 THE COURT: Obj ect i on - - I t hi nk you need a f oundat i on
3 quest i on, Mr . Ever del l . Fi r st , di d she - - was t hi s based on
4 any - -
5 MR. KWOK: Cer t ai nl y, your Honor .
6 THE COURT: On what di d she base t hi s concl usi on.
7 Q. Ms. Ri l ey, bef or e you conduct ed t hi s audi t , di d you have
8 occasi on t o r evi ew t he t er ms and condi t i ons of t he ATP gr ant ?
9 A. Yes, I di d.
10 Q. And what di d you concl ude about t hese ser i es of
11 t r ansact i ons?
12 A. The r ent woul d be an i ndi r ect cost , whi ch woul d be
13 unal l owabl e on t hat , but t hat was al so pr i or t o t he awar d so i t
14 woul d not be al l owed.
15 THE COURT: Rober t , woul d you f i x t he mi ke so i t ' s i n
16 t he r i ght spot her e. We' r e havi ng t r oubl e hear i ng her voi ce.
17 J ust so she get s up t o i t cl ose and t hen i t ' s al l - -
18 THE WI TNESS: Do I need t o si t back?
19 THE DEPUTY CLERK: She' s al so got - - l ooki ng at
20 document s so i t ' s sor t of har d. She' s up cl oser . I t ' s okay.
21 Keep - -
22 THE WI TNESS: Okay.
23 THE DEPUTY CLERK: Ri ght wher e you ar e. I ' mgoi ng t o
24 move your wat er r i ght her e.
25 THE WI TNESS: Okay.
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1 THE DEPUTY CLERK: You shoul d be okay. I t ' s okay.
2 Q. I ' msor r y, can you cont i nue wi t h t he answer ? The quest i on
3 was, what di d you concl ude about t he ser i es of t r ansact i ons?
4 A. That t he r ent payment s wer e - - woul d have been pr eawar d
5 cost and not al l owabl e, but t hey wer e al so i ndi r ect cost s t hat
6 t hey woul d not have been al l owabl e cost s. And t he advance, we
7 don' t , we don' t - - we consi der ed t hi s l i ke t hat he used i t as a
8 per sonal l oan account . You' r e not - - you don' t , you don' t pay
9 advance sal ar y out of gr ant cost .
10 Q. I f you coul d speak up, Ms. Ri l ey, t hat woul d be ver y
11 hel pf ul .
12 A. Okay.
13 Q. Ms. Ri l ey, do you know whet her t he gr ant - - t he def endant
14 gave a wr i t t en r esponse t o your audi t r epor t ?
15 A. Yes, he di d.
16 Q. And how do you know t hat ?
17 A. Because i t was sent t o me, or t o our of f i ce.
18 Q. And di d you i ssue a f i nal r epor t af t er r evi ewi ng t he
19 def endant ' s r esponse?
20 A. Yes, we di d.
21 Q. I ' mshowi ng you what i s next i n t he pi l e, I bel i eve, mar ked
22 f or i dent i f i cat i on gover nment exhi bi t 62. Do you know what
23 t hat i s?
24 A. Yes.
25 Q. What i s i t ?
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1 A. I t ' s our f i nal r epor t t hat we i ssued.
2 Q. Who pr epar ed t he document ?
3 A. I di d.
4 MR. KWOK: Gover nment of f er s exhi bi t 62.
5 MR. RUBI NSTEI N: Same l i mi t ed obj ect i on, your Honor ,
6 as t o opi ni ons of t hi s wi t ness.
7 THE COURT: Thi s i s kept i n t he r egul ar cour se of
8 busi ness by t he agency.
9 THE WI TNESS: Yes, si r .
10 THE COURT: Al l r i ght . I ' l l al l ow i t , 62 i n evi dence.
11 ( Gover nment ' s Exhi bi t 62 r ecei ved i n evi dence)
12 Q. Ms. Ri l ey, af t er t hi s audi t r epor t , exhi bi t 62, di d you
13 conduct a t hi r d anal ysi s of CASI ' s bank account s?
14 A. Yes, I di d.
15 Q. What di d you do?
16 A. Af t er I was pr ovi ded t he bank account r ecor ds f or t he, f or
17 t he year - and- a- hal f per i od of t he gr ant , and I schedul ed out
18 t hem, t he checks by payee, amount , dat e, and t he el ect r oni c
19 f unds t r ansf er s wer e t aken f r omt he bank st at ement s.
20 Q. What bank ar e we t al ki ng about ?
21 A. Chase.
22 Q. And t hese bank st at ement s bel onged t o what per son or what
23 ent i t y?
24 A. CASI .
25 Q. Di d you al so r evi ew t he bank st at ement s of Dr . Kar r on
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1 per sonal l y?
2 A. Yes, I di d.
3 Q. How about Dr . Kar r on st at ement s?
4 A. Yes, t he Amer i can Expr ess st at ement s f or t he CASI busi ness
5 account and f or one of t he account s f or Donal d Kar r on onl y.
6 Q. Di d you r evi ew any i nvoi ces?
7 A. Yes, t her e wer e some i nvoi ces.
8 Q. Di d CASI have one account or mul t i pl e account s?
9 A. Ther e wer e f our CASI busi ness account s.
10 Q. And how di d you t r eat t hese mul t i pl e account s i n your
11 anal ysi s?
12 A. I n my anal ysi s - -
13 THE COURT: What ki nd account s ar e we t al ki ng about ?
14 THE WI TNESS: Checki ng.
15 THE COURT: Checki ng account s. Ther e wer e f our
16 checki ng account s?
17 THE WI TNESS: Yeah, yeah. Ther e may have been - -
18 yeah, t her e wer e f our checki ng account s, and t hen a per sonal
19 account had a savi ngs account and a per sonal account .
20 Q. And how do you t r eat CASI ' s mul t i pl e busi ness account s?
21 A. I t r eat ed t hemas one bank account .
22 Q. And why di d you do t hat ?
23 A. Because al l - - t he maj or i t y of t he deposi t s wer e f r omt he
24 NI ST ATP gr ant , and t her e was a l ot of t r ansf er s bet ween t he
25 account s.
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1 Q. Now, i n t er ms of t he i nf or mat i on t hat you r el i ed on, how
2 does t hi s anal ysi s di f f er or t he same f r omyour , t he mat er i al s
3 you r el i ed on i n your audi t r epor t s?
4 A. The audi t r epor t I r el i ed on t he what ever books and r ecor ds
5 or l edger s t hat wer e pr ovi ded by CASI . For t he anal ysi s of t he
6 checki ng account , I was r el yi ng j ust on t he checks.
7 Q. Ms. Ri l ey, I ' mshowi ng you - - i n, f r ont of you t he box
8 mar ked al r eady i n evi dence as gover nment exhi bi t 80.
9 THE COURT: I ' mconf used, Mr . Kwok. I f we used t he
10 exhi bi t number s, I ' d be much happi er , but when you f ai l t o use
11 t he exhi bi t number s I t hi nk i t ' s conf usi ng and not cl ear t o t he
12 j ur y what t he wi t ness i s t al ki ng about .
13 MR. KWOK: I wi l l use t he exhi bi t number . I
14 apol ogi ze, your Honor .
15 THE COURT: Al l r i ght .
16 Q. I ' mdi r ect i ng your at t ent i on, Ms. Ri l ey, t o exhi bi t 80,
17 whi ch i s t he box i n f r ont of you, i f you coul d st and up?
18 THE COURT: Exhi bi t 80 i sn' t admi t t ed i n evi dence.
19 MR. KWOK: I t ' s by st i pul at i on, your Honor .
20 THE COURT: Oh, al l r i ght .
21 A. Okay. Yes.
22 THE COURT: And what does exhi bi t 80 consi st of so
23 t hat you don' t - - we know what we' r e t al ki ng about ?
24 THE DEPUTY CLERK: Move t hose f ol der s.
25 BY MR. KWOK:
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1 Q. Ms. Ri l ey, what i s exhi bi t 80?
2 A. 80 - - exhi bi t 80 i s Dr . Kar r on' s per sonal checki ng account s
3 and savi ngs account .
4 Q. How about gover nment exhi bi t 81?
5 A. 81 i s t he busi ness checki ng account s, t he f our busi ness
6 checki ng account s.
7 THE COURT: Four checki ng?
8 THE WI TNESS: Yes, si r . I t ' s t hr ough - - t her e i s a
9 CASI busi ness account , and t hen t her e' s NI ST pr oj ect busi ness
10 account , and t hen t her e' s a CASI cor por at i on - - CASI has
11 changed i t s - - become an LLC Cor por at i on, and t her e' s, so
12 t her e' s al so a NI ST LLC cor por at i on account .
13 Q. So, and what i s gover nment - -
14 A. They wer e j ust changi ng di f f er ent ent i t i es.
15 Q. And what i s gover nment exhi bi t 90, 90?
16 A. 90?
17 Q. I t ' s t o your r i ght ?
18 THE COURT: J ust so I ' mcl ear , i n 81 t her e ar e f our ,
19 t hose f our account s wer e i n 81, amI r i ght , Ms. Ri l ey?
20 THE WI TNESS: I ' msor r y, what ?
21 THE COURT: The f our account s t hat you j ust ment i oned
22 t he CASI busi ness account , t he CASI LLC busi ness account , t he
23 NI ST - -
24 THE WI TNESS: NI ST - -
25 THE COURT: CASI NI ST account s and CASI ' s NI ST LLC
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1 account - -
2 THE WI TNESS: Yes.
3 THE COURT: - - ar e al l par t of exhi bi t 81, i s t hat
4 cor r ect ?
5 THE WI TNESS: Yes, yes.
6 THE COURT: Al l r i ght .
7 THE WI TNESS: Okay.
8 Q. Now t ur ni ng t o exhi bi t 90 al r eady i n evi dence, what i s
9 t hat ?
10 A. Thi s i s t he Amer i can Expr ess st at ement s f or t he CASI
11 account s.
12 THE COURT: I t ' s a what ?
13 THE WI TNESS: Amer i can Expr ess account .
14 THE COURT: I n t he name of ?
15 THE WI TNESS: I t ' s - - t her e ar e var i ous Amer i can
16 Expr ess account s and - -
17 THE COURT: I n whose name?
18 THE WI TNESS: The Comput er Ai ded Sur ger y, and Dr - -
19 t her e' s one i n D. B. Kar r on.
20 THE COURT: Dr . Kar r on?
21 THE WI TNESS: Yes.
22 THE COURT: That ' s t wo.
23 THE WI TNESS: Oh, t hey' r e t he same. They' r e - -
24 t hey' r e var i ous account number s wi t h t he same name.
25 THE COURT: They' r e var i ous - -
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1 THE WI TNESS: Doct or D. B Kar r on Comput er Ai ded
2 Sur ger y, t her e i s an account number t hr ee - -
3 THE COURT: I coul dn' t under st and you.
4 THE WI TNESS: Doct or D. B. Kar r on Comput er Ai ded
5 sur ger y, t her e' s an account number 37834901721500, and al so
6 account 378349017217006.
7 THE COURT: And i n whose name i s t hat ?
8 THE WI TNESS: Doct or D. B. Kar r on, Comput er Ai ded
9 Sur ger y.
10 THE COURT: Any ot her account s i n t he Amer i can
11 Expr ess.
12 THE WI TNESS: Yes.
13 THE COURT: Exhi bi t 90?
14 THE WI TNESS: Al so f or Dr . D. B. Kar r on - -
15 THE COURT: I ' msor r y?
16 THE WI TNESS: Anot her one under t hat same name i s
17 378349017216008.
18 THE COURT: I n t he name of ?
19 THE WI TNESS: Dr . D. B. Kar r on, Comput er Ai ded Sur ger y.
20 THE COURT: Any ot her s?
21 THE WI TNESS: Ther e i s al so under Dr . D. B. Kar r on
22 Comput er Ai ded Sur ger y 378349017218004.
23 THE COURT: Any ot her s?
24 THE WI TNESS: These t wo - -
25 THE COURT: I ' msor r y?
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1 THE WI TNESS: Thi s, t hese - - al so i n t hi s t her e ar e
2 sect i ons t hat ar e f or ot her peopl e l i ke f or Lee Gur f ei n wher e
3 i t ' s not - -
4 THE COURT: Tel l us whi ch ones you r evi ewed.
5 THE WI TNESS: Okay. So t hen al so t her e' s a per sonal
6 Dr . D. B. Kar r on f or 371543567491006, and one f or Dr . D. B.
7 Kar r on 372893053176002.
8 THE COURT: And what about t he ones f or t he ot her
9 peopl e you say ar e par t of 90?
10 THE WI TNESS: They' r e i n - - l et ' s see. They' r e i n
11 par t of t he st at ement .
12 THE COURT: I ' msor r y?
13 THE WI TNESS: They' r e l i ke t he one, l i ke account
14 number Dr . D. B. Kar r on.
15 THE COURT: We can' t r emember t hose number s so you
16 have t o t el l us what you' r e doi ng.
17 THE WI TNESS: Okay. So i ncl uded i n some of t he
18 account s t her e' s a, f or Dr . D. B. Kar r on, Al i ci a Gur f ei n and
19 Char l es Desal a, cr edi t car ds under t he account number or t he
20 mai n account number .
21 THE COURT: You mean wer e separ at e cr edi t car ds i ssued
22 under t he - -
23 THE WI TNESS: Under t he same bi l l i ng account number
24 t hey had - - yeah, t hey had t hr ee - - t hi s one cr edi t car d
25 account number had t hr ee separ at e cr edi t car ds t hat appear ed on
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1 t hat bi l l f or t hat account number , so i t ' s associ at ed wi t h.
2 THE COURT: I see. Who ar e t hey at t r i but ed t o?
3 THE WI TNESS: Al i ci a Ger f ei n and Char l es Desal a.
4 Q. Ms. Ri l ey - -
5 MR. KWOK: Sor r y, your Honor .
6 THE COURT: Anyt hi ng el se?
7 Q. Yes. Ms. Ri l ey, now I ' mshowi ng you gover nment Exhi bi t
8 100. Do you r ecogni ze what t hat i s, al r eady i n evi dence?
9 A. Yes. I t ' s i nvoi ces f r omDat avi si oi n.
10 Q. How about gover nment Exhi bi t 101?
11 THE COURT: What ar e i nvoi ces f r omdat a bases?
12 THE WI TNESS: I nvoi ces f r omDat avi si oi n i s a - -
13 THE COURT: Dat avi si on.
14 THE WI TNESS: I t ' s a comput er company.
15 THE COURT: Al l r i ght . Suppl i er of some sor t ?
16 THE WI TNESS: Yes, equi pment suppl y, equi pment per son.
17 THE COURT: Al l r i ght .
18 Q. Gover nment Exhi bi t 101, do you have t hat document i n f r ont
19 of you?
20 A. Yes.
21 Q. Do you r ecogni ze i t ?
22 A. I t ' s i nvoi ces f r omHomef r ont Har dwar e.
23 Q. Ar e t hose i nvoi ces as wel l ?
24 A. Yes.
25 Q. How about gover nment Exhi bi t 102 al r eady i n evi dence?
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1 A. 102, i nvoi ces f r omGener al Comput er Ser vi ce.
2 Q. Gover nment exhi bi t 103 al r eady i n evi dence?
3 A. I nvoi ces f r omSi l i con Gr aphi cs I ncor por at ed.
4 Q. Gover nment Exhi bi t 104?
5 A. I nvoi ces f r omSi l i con Ci t y.
6 Q. Now, Ms. Ri l ey, bef or e I showed you t hose document s, had
7 you l ooked at t hose document s bef or e?
8 A. Yes.
9 Q. And what di d you do wi t h t hose document s?
10 A. I r evi ewed t he t hi ngs on t he document s and t r aced t hemback
11 t o t he sour ce r ecor ds. I al so i ni t i al ed and dat ed t hat I had
12 seen t hem.
13 Q. Di d you summar i ze t he i nf or mat i on i n t he bank r ecor ds, t he
14 Amer i can Expr ess car d st at ement s and t he i nvoi ces, i n a summar y
15 document ?
16 A. Yes, t hey' r e summar i zed i n my r evi ew of t he checks and bank
17 st at ement s.
18 Q. I ' mshowi ng next what ' s been mar ked f or i dent i f i cat i on as
19 gover nment Exhi bi t 110?
20 A. 110.
21 THE COURT: Okay.
22 Q. Do you r ecogni ze what t hat i s?
23 A. Yes.
24 Q. Who pr epar ed t hat document ?
25 A. I di d.
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1 Q. What i s t he summar y of ?
2 A. I t ' s a summar y of t he bank, anal ysi s of t he bank st at ement s
3 and checks.
4 Q. Of ?
5 A. Of CASI , and t he f our bank account s of CASI .
6 MR. KWOK: Gover nment of f er s gover nment Exhi bi t 110?
7 MR. RUBI NSTEI N: No obj ect i on, your Honor .
8 THE COURT: Let me j ust see. I want t o know exact l y
9 what i t i s. 110 i s t he summar y of whi ch exhi bi t s, t he 70 - -
10 does i t al so i ncl ude cr edi t car ds?
11 THE WI TNESS: Yes, si r , i t does.
12 THE COURT: So i t ' s 70 and 80. And what about - - and
13 81, i s t hat r i ght ?
14 THE WI TNESS: The cr edi t car ds ar e 90, and t he checks
15 wer e 81 - - t he checks wer e 81, r i ght . Checks ar e 81. So i t
16 i ncl udes 90, t he Amer i can, t he Amer i can Expr ess bi l l s and 81,
17 t he checks f r omt he f our bank account s.
18 THE COURT: 90 you mean?
19 THE WI TNESS: Yeah.
20 THE COURT: What ?
21 THE WI TNESS: No.
22 THE COURT: I ncl udes 90?
23 THE WI TNESS: 90 i s, what i s 90? Oh, yes, t he
24 Amer i can Expr ess - - yes, t he Amer i can Expr ess bi l l i s 90, 90
25 and 81.
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1 THE COURT: J ust 90 and 81, not 70, not 80.
2 THE WI TNESS: 70 i s - -
3 Q. I f I can ask t he next quest i on, I t hi nk i t woul d cl ear i t
4 up.
5 Ms. Ri l ey, di d you pr epar e a separ at e summar y f or t he
6 i nf or mat i on cont ai ned i n gover nment exhi bi t 80?
7 A. Yeah, t he separ at e, 80 - -
8 Q. What i s gover nment exhi bi t 80?
9 A. Oh, yes, I di d. Dr . Kar r on' s checks has a separ at e
10 summar y.
11 THE COURT: Al l r i ght . 80 i s a separ at e one. What i s
12 i n t hi s one, 110; what i s i ncl uded i n 110?
13 MR. KWOK: Let me ask t he wi t ness.
14 THE COURT: That ' s what I ' maski ng t he wi t ness.
15 Q. Ms. Ri l ey, does gover nment exhi bi t 110 i ncl ude gover nment
16 exhi bi t 81, gover nment exhi bi t whi ch i s t he CASI bank account
17 st at ement , and gover nment exhi bi t 90, whi ch ar e t he Amer i can
18 Expr ess car d st at ement s?
19 A. Yes.
20 Q. And does what i s mar ked f or i dent i f i cat i on as gover nment
21 exhi bi t 111, i ncl ude a summar y of gover nment exhi bi t 80, whi ch
22 i s t he Chase Bank account st at ement s f or Dr . Kar r on,
23 per sonal l y?
24 A. Yes, pl us i t al so i ncl udes t he per sonal cr edi t car d
25 st at ement s t hat wer e i ncl uded i n 90 Amer i can Expr ess.
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1 MR. KWOK: Gover nment of f er s - -
2 THE COURT: I ' mabsol ut el y conf used as t o what i t
3 cover s. I don' t f ol l ow what she' s cover i ng i n each of t hese
4 exhi bi t s.
5 THE WI TNESS: Okay.
6 THE COURT: She doesn' t seemt o make i t cl ear .
7 THE WI TNESS: Okay.
8 THE COURT: 90 i s i ncl uded i n bot h, appar ent l y.
9 Q. Ms. Ri l ey, why i s gover nment exhi bi t 90 i ncl uded i n bot h
10 summar i es?
11 A. Gover nment exhi bi t 90 has busi ness cr edi t car ds and i t ' s
12 st at ement s, and i t al so has a coupl e of per sonal cr edi t car d
13 st at ement s. So t he busi ness cr edi t car d st at ement s ar e
14 i ncl uded, al ong wi t h exhi bi t 81, t he busi ness checks and
15 anal yzed, and t he per sonal cr edi t car d st at ement s i n 90 ar e
16 i ncl uded wi t h t he per sonal bank account checks f or Dr . Kar r on
17 and i n Exhi bi t 110, 111 - - 111.
18 THE COURT: So i s t he st i pul at i on you' r e maki ng
19 bet ween Exhi bi t 110 and 111 i s t hat one i s f or per sonal r ecor ds
20 of Dr . Kar r on and t he ot her i s f or t he busi ness r ecor ds of - -
21 t hat or busi ness account s of CASI ?
22 THE WI TNESS: Yes, si r ; yes, si r .
23 THE COURT: Whi ch Dr . Kar r on may have had dr awi ng
24 power over as a - -
25 THE WI TNESS: Ri ght .
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1 THE COURT: - - an execut i ve of CASI ?
2 THE WI TNESS: Yes, he di d have dr awi ng power as an
3 execut i ve of CASI .
4 THE COURT: So whi ch i s whi ch, t he per sonal - - Dr .
5 Kar r on, per sonal l y, i s 110?
6 THE WI TNESS: Ri ght .
7 THE COURT: And CASI and Dr . Kar r on busi ness wi se i s
8 111; i s t hat r i ght ?
9 THE WI TNESS: No, Dr . Kar r on per sonal i s 111, because
10 on t he per sonal - -
11 THE COURT: Al l r i ght .
12 Q. Ms. Ri l ey, j ust t o be cl ear , gover nment Exhi bi t 111, i sn' t
13 t hat Dr . Kar r on' s - - summar y of Dr . Kar r on' s per sonal expenses
14 as r ef l ect ed i n t he Amer i can Expr ess car d st at ement s and hi s
15 per sonal Chase Bank st at ement s?
16 A. Yes.
17 Q. And j ust t o be cl ear , i s gover nment Exhi bi t 110 a summar y
18 of t he busi ness expenses as r ef l ect ed i n t he Chase Bank
19 st at ement s and t he bank expenses - - CASI ' s expenses as
20 r ef l ect ed i n t he Amer i can Expr ess cr edi t car d st at ement s.
21 A. Yes.
22 MR. KWOK: Gover nment of f er s 110 and 111.
23 THE COURT: 110 and 111 ar e admi t t ed wi t hout
24 obj ect i on.
25 ( Gover nment ' s Exhi bi t s 110 and 111 r ecei ved i n
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1 evi dence)
2 Q. Now, Ms. Ri l ey - - Ms. Moussa, i f we coul d put up gover nment
3 Exhi bi t 110 on t he scr een, whi ch i s t he summar y f or CASI
4 expenses. I f we coul d zoomi n on t he t op hal f of t he page.
5 Ms. Ri l ey, coul d you t el l us what t he col umn headi ngs
6 of your dat a base i ndi cat e?
7 A. Okay. The f i r st one t he I D i s j ust a number assi gned by
8 t he comput er . The descr i pt i on i s t he payee of t he check. I t
9 was el ect r oni c f unds t r ansf er , t he i nf or mat i on f r omt he bank
10 st at ement concer ni ng t he payee. The dat e i s f r omt he dat e
11 t hat - - t he dat e on t he bank st at ement t hat t he check was
12 cl ear ed. The - - and t he t ot al of t he, of t he check. The check
13 memo ent r i es ar e f r om, ar e f r om- - i f t her e was a check memo on
14 t he account , and f or some of t he account s i f I - - I may have
15 gone back t o one of t he l edger s f r omt he pr evi ous audi t t o get
16 a check, an ent r y t her e. But i t nor mal l y says per l edger i f i t
17 di dn' t come f r omt he check.
18 THE COURT: I ' msor r y, what exhi bi t i s t hat f r om? I ' m
19 a st ep behi nd you al l .
20 MR. KWOK: What i s on t he scr een, your Honor , i s
21 gover nment exhi bi t 110.
22 THE COURT: And t hi s i s not t he f i r st page, i t ' s - - oh
23 i t i s t he f i r st page.
24 THE WI TNESS: I t i s t he f i r st page.
25 THE COURT: But i t ' s cut of f , i s t hat t he pr obl em?
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1 THE DEPUTY CLERK: They bl ew up a sect i on of i t .
2 THE COURT: You can' t - - you' r e not - - you haven' t got
3 t he whol e page on t her e, because i t says bank t r ansf er , r i ght ?
4 MR. KWOK: That ' s cor r ect .
5 THE WI TNESS: Yes.
6 THE COURT: Al l r i ght . Okay.
7 MR. KWOK: Ms. Moussa, i f we coul d put up what i s
8 al r eady i n evi dence, pages f r omgover nment exhi bi t 81, whi ch i s
9 t he CASI bank st at ement s. I f we coul d zoomi n on t he t op
10 check. May I appr oach, your Honor ?
11 THE COURT: Thi s i s par t of what , 80?
12 MR. KWOK: Thi s i s exhi bi t 81. I t ' s not i n t he j ur y
13 bi nder s because i t ' s par t of vol umi nous bank r ecor ds, but i t i s
14 on t he scr een.
15 THE COURT: Al l r i ght .
16 MR. RUBI NSTEI N: Coul d I j ust ask one quest i on, your
17 Honor ?
18 THE COURT: What f or ? You mean voi r di r e of some
19 sor t ?
20 MR. RUBI NSTEI N: Yes.
21 MR. KWOK: I t ' s al r eady i n evi dence.
22 THE COURT: I t ' s a l i t t l e l at e.
23 MR. RUBI NSTEI N: Coul d I ask one quest i on, J udge? I t
24 may hel p l at er on.
25 THE COURT: Maybe I ' l l ask i t . Why don' t you come up.
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1 I hat e t o i nt er r upt .
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1 ( At t he si debar )
2 MR. RUBI NSTEI N: Each one of t hese account s t hat she
3 ment i oned has a di f f er ent col or check. Showi ng i t up her e i s
4 i n bl ack and whi t e. I j ust want t o ask her what col or check i t
5 i s so t he j ur y wi l l know. That way t hey' l l know what account
6 i t comes f r om.
7 THE COURT: Whet her she knows what col or check?
8 MR. RUBI NSTEI N: She has t he or i gi nal .
9 MR. KWOK: We don' t - - your account ant di d - -
10 THE COURT: What ?
11 MR. KWOK: That ' s t he way i t ' s pr ovi ded t o us by t he
12 bank. I t ' s i n evi dence i n bl ack and whi t e.
13 MR. RUBI NSTEI N: Okay, al l r i ght .
14 ( Cont i nued on next page)
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1 BY MR. KWOK:
2 Q. Ms. Ri l ey, do you r ecogni ze t he document s t hat ar e bei ng
3 di spl ayed on t he scr een t her e?
4 A. Yes.
5 Q. What ar e t hey?
6 A. They ar e checks f r omt he Comput er Ai ded Sur ger y checki ng
7 account .
8 Q. Who i s t he payee?
9 A. Dr . D. B. Kar r on.
10 Q. For how much?
11 A. $2, 000.
12 THE COURT: Whi ch check ar e you t al ki ng about ?
13 Q. Can you t el l us t he check number ?
14 A. The t op check, 2977.
15 Q. What does i t say on t he memo l i ne?
16 A. Rent al of f i ce, 300 East 33r d St r eet , Sui t e 4N.
17 Q. How about t he handwr i t t en not at i on?
18 A. J anuar y 2000 r ent .
19 MR. RUBI NSTEI N: Excuse me?
20 THE WI TNESS: J anuar y 2000 r ent .
21 Q. Can you t el l me how t hat i nf or mat i on i s r ef l ect ed on your
22 dat abase, Gover nment Exhi bi t 110.
23 A. Exhi bi t 110, on page 39 of 44. Exhi bi t 110, page 39 of 44.
24 MR. KWOK: I f we coul d zoomi n on t he bot t ompor t i on
25 of t he page.
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1 Q. Coul d you t el l us how t he i nf or mat i on we j ust l ooked at on
2 t he check i s r ef l ect ed her e?
3 A. OK. I t ' s under r ent on of f i ce. Under t he descr i pt i on i t
4 has i n par ens i t ' s got Dr . Kar r on, and t he ot her t hi ng i s hi s
5 bank account number t hat t he check was deposi t ed i nt o, hi s
6 per sonal account . I t showed t hat t her e was a t r ansf er i nt o hi s
7 checki ng account . And t he dat e of t he t r ansact i on was
8 10/ 26/ 2001.
9 Q. I s t hat t he same or di f f er ent f r omt he check we j ust l ooked
10 at ?
11 A. I t ' s t he same.
12 Q. What i s t he check number r ef l ect ed on t he dat abase?
13 A. 2977.
14 Q. I s t hat t he same check number as we j ust l ooked at ?
15 A. Yes. And t he memo i s r ent on of f i ce per gener al l edger ,
16 f r omt he check memo, and i t ' s $2, 000. I t ' s t he amount f or
17 check number 2977.
18 Q. Now, I ' mshowi ng you anot her page f r omGover nment Exhi bi t
19 81 whi ch i s t he CASI bank st at ement . Do you r ecogni ze t hi s
20 check?
21 A. Yes, i t ' s f r omt he CASI / NI ST checki ng account .
22 Q. What i s t he check number t her e?
23 A. 10325.
24 Q. And who i s t he payee?
25 A. D. Fer r and.
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1 Q. And do you see a si gnat ur e t her e?
2 A. Yes, i t ' s Dr . Kar r on.
3 Q. Coul d you expl ai n t o us how t hi s i nf or mat i on i s r ef l ect ed
4 on your dat abase.
5 I f we coul d go back t o t he dat abase, pl ease.
6 THE COURT: What i s t he amount of t he check?
7 Q. What i s t he amount of t he check?
8 A. $100. OK. Thi s i s on - -
9 Q. Coul d you di r ect us t o t he page of t he dat abase wher e t hat
10 check i s r ef l ect ed?
11 A. The check number was 10325 on page 37 of 44 on Exhi bi t 110.
12 MR. KWOK: Can we zoomi n?
13 MR. RUBI NSTEI N: We' r e st i l l on 110, ar e we?
14 THE WI TNESS: Yes, Exhi bi t 110, page 37 of 44.
15 Q. Wher e shoul d we be l ooki ng?
16 A. I n t he mi ddl e of t he page. I f you l ook, t he check number
17 i t ' s 10325, so i f you l ook under t he check number col umn i t ' s
18 down under - - yeah - - you see t he not at i on.
19 THE COURT: I ' msor r y. She shoul d be doi ng t he
20 poi nt i ng out t o what she i s t est i f yi ng. I t shoul dn' t be you,
21 Mr . Kwok. Al l r i ght ?
22 A. OK. The check number of 10325 f or cl eani ng of f i ce char ges
23 f or t he week endi ng 6/ 22/ 02 i n t he amount of $100. 10325 i s
24 t he check number . I t was f or cl eani ng of f i ces. The amount i s
25 $100, and t he pay payee St eve Kor and, t hat ' s shown under t he
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1 descr i pt i on of t he col umn.
2 Q. I f we coul d l ook at t he r est of t he page. Under t he check
3 memo.
4 THE COURT: The r est of t he page of exhi bi t - - you ar e
5 maki ng a r ecor d, Mr . Kwok. The r ecor d has t o be cl ear as t o
6 what exhi bi t s you ar e r ef er r i ng t o at al l t i mes.
7 MR. KWOK: I apol ogi ze.
8 THE COURT: No one can r evi ew t he r ecor d i f you don' t
9 ment i on t he exhi bi t number at al l t i mes.
10 MR. KWOK: I amst i l l l ooki ng at Gover nment Exhi bi t
11 110. I amst i l l l ooki ng at page 37 of 44.
12 Q. Now, di r ect i ng your at t ent i on t o t he t op por t i on of t hat
13 page, what appear s under t he check memo col umn?
14 A. The check memo i s i nf or mat i on t aken f r omt he memo sect i on
15 of t he check.
16 Q. What does i t say on t he check memo?
17 A. Oh, cl eani ng.
18 Q. And what di d you base t hat i nf or mat i on on?
19 A. Some of t he checks wer e based on, i f t hey di dn' t have - - i n
20 or der t o i dent i f y t he check and what t he check was f or , on some
21 of t he checks I l ooked back at t he l edger s t hat I had got t en
22 f r omCASI ' s audi t s pr epar ed by ei t her Mel Spi t z or f or t he
23 check r egi st er s I had got t en f r omt he J une audi t 2003.
24 Q. Ms. Ri l ey, I ' mshowi ng you a check f r omGover nment Exhi bi t
25 81 al r eady i n evi dence, whi ch i s t he bank account st at ement s
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1 f or CASI .
2 Can we put one by one up on t he scr een?
3 What i nf or mat i on i s r ef l ect ed - - what check number i s
4 t hat , f i r st of al l ?
5 A. 10330.
6 Q. And what i nf or mat i on i s next t o t he memo l i ne of t he check?
7 MR. RUBI NSTEI N: Sor r y. I mi ssed t he check number .
8 THE WI TNESS: 10330.
9 Q. And what i nf or mat i on i s r ef l ect ed next t o t he memo l i ne of
10 t he check?
11 A. Cl eani ng of f i ce char ges f or t he week endi ng 6/ 29/ 2002.
12 Q. Look at t he next check, st i l l Gover nment Exhi bi t 81. What
13 i s t he check number on t hat check?
14 A. 10325.
15 Q. What i s t he i nf or mat i on r ef l ect ed next t o t he memo l i ne?
16 A. Cl eani ng of f i ce char ges f or t he week endi ng 6/ 22/ 02.
17 Q. And di r ect i ng your at t ent i on t o t he upper l ef t - hand cor ner
18 of t he check, what does t hat say?
19 A. Comput er Sur ger y, I ncor por at ed, NI ST ATP DMT Pr ogr am.
20 Q. Let t he r ecor d r ef l ect t hese ar e col or ed checks.
21 A. I t hi nk t hey' r e col or ed, ar en' t t hey pi nk?
22 THE COURT: Do you know?
23 THE WI TNESS: Yeah, t hey' r e col or ed.
24 Q. And who i s t he payee on t hat par t i cul ar check?
25 A. The payee i s D. Fer r and.
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1 Q. What ' s t he amount of t he check?
2 A. $100.
3 Q. Let ' s l ook at t he next and f i nal check, st i l l Gover nment
4 Exhi bi t 81, par t of t he bank r epor t s. What i s t he check number
5 on t hi s check?
6 A. 10509.
7 Q. How about t he upper l ef t - hand cor ner of t he check, what
8 does t hat say?
9 A. Comput er Ai ded Sur ger y, I nc. NI ST ATP DMT pr ogr am.
10 Q. And who i s t he payee on t hat check?
11 A. D. Fer r and.
12 Q. For how much?
13 A. $100.
14 Q. And what i s t he i nf or mat i on r ef l ect ed next t o t he memo
15 l i ne?
16 A. Cl eani ng of f i ce char ges f or t he week endi ng 10/ 5/ 2002.
17 Q. What ' s t he si gnat ur e t hat appear s on t hat check?
18 A. D. B. Kar r on.
19 Q. Now, Ms. Ri l ey, a moment ago you ment i oned Amer i can Expr ess
20 car d st at ement s.
21 A. Yes.
22 Q. How i s t he i nf or mat i on on t he Amer i can Expr ess car d
23 st at ement s, whi ch i s Gover nment Exhi bi t 90, r ef l ect ed on your
24 dat abase?
25 A. The t r ansact i on of t he cr edi t car d i s t aken f r omt he cr edi t
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1 car d i nvoi ce, but t he t r ansact i on f or payi ng t he cr edi t car d
2 was pi cked up whenever I anal yzed t he CASI bank st at ement s.
3 THE COURT: What ?
4 THE WI TNESS: The payment of t he cr edi t car d was
5 al r eady i n t he dat abase because I had t hat i nf or mat i on when I
6 r evi ewed t he bank st at ement s, t he bank st at ement s and cancel ed
7 checks. So t he payment was al r eady i n t he dat abase. I j ust
8 added t he t r ansact i ons, t he pur chase t r ansact i ons f r omt he
9 cr edi t car d.
10 THE COURT: You j ust added t he i nf or mat i on about who
11 t he pur chaser was?
12 THE WI TNESS: And t he amount and t he dat e of t he
13 t r ansact i on.
14 THE COURT: I see. So t he t ot al payment f or t he
15 cr edi t car d i s al r eady i n t he dat abase?
16 THE WI TNESS: Yes, si r .
17 THE COURT: So, t hese wer e j ust i ndi vi dual - -
18 THE WI TNESS: Yes.
19 THE COURT: - - t r ansact i ons.
20 THE WI TNESS: Ri ght . And so t hat i t woul dn' t show as
21 a doubl e payment I handl ed t he cr edi t car d, I t ook t he cr edi t
22 car d payment s out of t he deposi t wi t hdr awal sect i on of t he
23 dat abase.
24 MR. KWOK: May I appr oach, your Honor ?
25 Q. Ms. Ri l ey, I j ust handed you pages f r omGover nment Exhi bi t
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1 90, whi ch i s t he Amer i can Expr ess car d st at ement s. I t ' s i n t he
2 j ur y bi nder s. Now, coul d you show us an exampl e of how some of
3 t he i nf or mat i on i n t he document t hat I j ust handed you i s
4 r ef l ect ed on your dat abase, Gover nment Exhi bi t 110.
5 A. OK. I f we go t o - - does ever ybody have 90?
6 Q. What page ar e you l ooki ng at i n your dat abase, Ms. Ri l ey?
7 THE COURT: What page of 110 ar e you l ooki ng at ? I s
8 t hat what you' r e aski ng her ?
9 MR. KWOK: That ' s what I ' maski ng t he wi t ness.
10 Q. What page of Gover nment Exhi bi t 110 ar e you l ooki ng at ?
11 A. Page 24 of 37 of Exhi bi t 110. Act ual l y - -
12 MR. KWOK: Your Honor , may I di r ect t he wi t ness' s
13 at t ent i on t o a par t i cul ar page?
14 THE COURT: Of 110?
15 MR. KWOK: Yes.
16 THE COURT: She sai d 24 of 37.
17 Q. I s t hat t he cor r ect page?
18 A. I don' t t hi nk so.
19 THE COURT: I t depends on what she i s compar i ng i t t o.
20 Q. Let me do i t t hi s way. Ms. Ri l ey can I di r ect your
21 at t ent i on t o page 29 of 44 of your dat abase. Do you have t hat
22 page?
23 A. Page 29 of 44? Yes.
24 Q. OK.
25 THE COURT: Exhi bi t 110.
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1 Q. 29 of 44, Exhi bi t 110, do you have t hat page?
2 A. Oh, you' r e r i ght , OK. I ' msor r y. 29 of 44, yes.
3 Q. OK. Let ' s put your f i nger on t hat page, and l ook back at
4 t he Amer i can Expr ess car d st at ement s t hat I j ust showed you.
5 I f we coul d have t hat up on t he scr een, pl ease.
6 Gover nment Exhi bi t 90.
7 THE COURT: What ar e you aski ng t o have put up on t he
8 scr een.
9 MR. KWOK: Gover nment Exhi bi t 90, t he st at ement f or
10 August 7, 2002.
11 THE COURT: Fi r st page?
12 MR. KWOK: Page 2.
13 Q. Now, l ooki ng at t he scr een, Ms. Ri l ey, and i f you coul d use
14 your poi nt er , what t r ansact i on i s r ef l ect ed f or J ul y 12, 2002?
15 A. I mi spl aced my poi nt er .
16 MR. RUBI NSTEI N: Ar e t her e number s on t he bot t omof
17 t he page t hat I can' t see? OK. I have my r evi sed.
18 Q. OK. Ms. Ri l ey, what t r ansact i on i s r ef l ect ed - - what i s
19 t he f i r st t r ansact i on f or J ul y 12, 2002?
20 A. J ul y 12, 2002, t he Amer i can Expr ess shows a char ge t o Sam' s
21 Noodl e Shop i n t he amount of 29. 10. On page 29 of 44 - -
22 Q. Let ' s go t hr ough t he Amer i can Expr ess car d st at ement s
23 f i r st . Let ' s t ur n t o t he next page of t he Amer i can Expr ess
24 car d st at ement , Gover nment Exhi bi t 90, page 3.
25 A. OK.
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1 Q. What t r ansact i on i s shown f or J ul y 22, 2002?
2 A. J ul y 22, 2002 t her e i s a char ge t o Sam' s Noodl e Shop f or
3 23. 55.
4 Q. And i s t her e a char ge r ef l ect ed on t he same page,
5 Gover nment Exhi bi t 90, page 3 of 7, f or August 7, 2002 t o t he
6 same vendor ?
7 THE COURT: What ' s your quest i on agai n?
8 Q. Di r ect i ng your at t ent i on t o J ul y 30, 2002, Ms. Ri l ey.
9 A. Oh, yes, on J ul y 30 t her e i s Sam' s Noodl e Shop f or t he
10 amount of 19. 45.
11 Q. OK. Now, l et ' s t ur n back t o Gover nment Exhi bi t 110 t hat we
12 j ust l ooked at , page 29 of 44. Can you t el l us how t he
13 i nf or mat i on t hat we j ust l ooked at i s r ef l ect ed on your
14 dat abase?
15 A. I t comes t hr ough t he dat e col umn t o J ul y.
16 MR. RUBI NSTEI N: Your Honor , excuse me. Ar e we on
17 page 24 or 29?
18 THE WI TNESS: 29 of 44.
19 MR. RUBI NSTEI N: Thank you.
20 A. On J ul y 12 t her e i s a t r ansact i on t o Sam' s Noodl e Shop i n
21 t he amount of 29. 10, and on J ul y 22 t her e i s a t r ansact i on t o
22 Sam' s Noodl e Shop of 23. 55, and on J ul y 30, Sam' s Noodl e Shop
23 i n t he amount of 19. 45.
24 THE COURT: So, how was t hi s cr edi t car d pai d f or ?
25 THE WI TNESS: I t ' s pai d f or out of t hi s account .
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1 THE COURT: What account ?
2 THE WI TNESS: Out of one of t he CASI - - at t he CASI
3 account s. Thi s one - -
4 THE COURT: You t ol d us t her e ar e mul t i pl e CASI
5 account s.
6 THE WI TNESS: Ri ght . But i n my dat abase t hey ar e
7 t r eat ed as one account , one bi g account , because t he deposi t s
8 come f r omNI ST, f r omone sour ce.
9 THE COURT: The deposi t s come f r omwher e?
10 THE WI TNESS: Fr omNI ST, t he ATP gr ant awar d. Ther e
11 i s a l ot of i nt er account t r ansf er s, but f or t he most par t t he
12 deposi t s ar e comi ng f r omt he gr ant moni es.
13 MR. KWOK: I f we coul d put back up on t he scr een
14 Gover nment Exhi bi t 90, t he Amer i can Expr ess car d st at ement , t he
15 August 7, 2002 st at ement , page 1. I f we coul d zoomi nt o t he
16 mi ddl e por t i on of t hat page t her e hi ghl i ght ed i n gr ay.
17 Q. What does t hi s st at ement show r egar di ng payment t o t he
18 out st andi ng cr edi t car d bal ance?
19 A. I t shows on J ul y 14, 1, 074. 91 was r ecei ved by Amer i can
20 Expr ess f r omCASI , and on J ul y 29 t hat Amer i can Expr ess
21 r ecei ved a payment of $2, 940. 01 f r omCASI .
22 Q. And wher e di d t he money come f r omt hat pai d of f t hese
23 cr edi t car d bal ances?
24 A. Fr omt he CASI / NI ST bank account s.
25 Q. How do you know t hat ?
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1 A. OK. Those t r ansact i ons ar e r ef l ect ed on page 3 of 44 of
2 Exhi bi t 110.
3 Q. Ar e you t al ki ng about Gover nment Exhi bi t 110, Ms. Ri l ey?
4 A. Yes, Gover nment Exhi bi t 110, page 3 of 44.
5 Q. And wher e ar e you l ooki ng?
6 A. Ki nd of t he mi ddl e of t he page, under t he payment s of t he
7 cr edi t car d.
8 THE COURT: Sor r y. What was t hat page agai n?
9 THE WI TNESS: 3 of 44.
10 Q. Can you poi nt t hemout on t he scr een?
11 A. Yes. I t shows t hat Amer i can Expr ess el ect r oni c r emi t t ance
12 was made f r omt he CASI bank st at ement account on 7/ 15 i n t he
13 amount of $1, 074. 91 t o pay Amer i can Expr ess, and t hat anot her
14 el ect r oni c r emi t t ance was made f r omt he account on J ul y 31,
15 2002 t o pay Amer i can Expr ess i n t he amount of $2, 940. 01.
16 Q. Di d you base t hi s i nf or mat i on on t he Chase cr edi t car d
17 st at ement s of CASI ?
18 A. Thi s i nf or mat i on came f r omt he bank st at ement s and t he
19 payment of t he bank st at ement s.
20 Q. Chase Bank?
21 A. Chase Bank.
22 Q. I amhandi ng you a f ew pages f r omGover nment Exhi bi t 81,
23 t he CASI Chase Bank account st at ement s, whi ch i s al so i n t he
24 j ur y bi nder s. Di r ect i ng your at t ent i on t o t he J une 22 t o J ul y
25 22 st at ement per i od, page 3.
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1 MR. RUBI NSTEI N: Excuse me. What ar e t hose dat es?
2 MR. KWOK: I ' ml ooki ng at Gover nment Exhi bi t 81, t he
3 Chase st at ement s f or CASI , t he per i od f r omJ une 22 t o J ul y 22,
4 page 3 of 4.
5 THE COURT: Let t he wi t ness poi nt t o t he ar ea you ar e
6 r ef er r i ng t o.
7 A. The bank st at ement shows t hat on 7/ 15 t her e was an Amer i can
8 Expr ess el ect r oni c payment i n t he amount of 1, 074. 91 f r omt he
9 Chase bank account .
10 MR. KWOK: And i f you coul d zoomout f or a second.
11 Q. Di r ect i ng your at t ent i on t o t he upper r i ght - hand cor ner ,
12 under t he pr i mar y account number , what i s t he t ext t hat ' s
13 under neat h t hat ?
14 A. I t says Comput er Ai ded Sur ger y, I ncor por at ed, NI ST ATP DMT
15 Pr ogr am.
16 Q. And di r ect i ng your at t ent i on now t o t he same exhi bi t ,
17 Gover nment Exhi bi t 81, but now we ar e l ooki ng at t he next
18 st at ement per i od f r omJ ul y 23 t o August 21, 2002, page 3 of 4.
19 Do you have t hat page, Ms. Ri l ey?
20 A. Sor r y. What page?
21 Q. J ul y 23 t o August 21, 2002, t hat per i od st at ement ?
22 THE COURT: Wher e do I f i nd t he dat e?
23 MR. KWOK: I t ' s on t he upper r i ght - hand cor ner of
24 ever y page.
25 THE COURT: I see. J ul y what ?
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1 MR. KWOK: J ul y 23 t o August 21, 2002, t he st at ement
2 f or t hat account per i od.
3 THE COURT: J ust one second. So t hat ' s si x or ei ght
4 pages i n.
5 MR. KWOK: That ' s page 3 of 4. I t ' s t he page on t he
6 scr een.
7 THE COURT: J ul y 23, page - -
8 MR. KWOK: I t ' s act ual l y page 10 on t he bot t omof t he
9 page.
10 THE COURT: Page 10 at t he bot t omr i ght - hand cor ner ?
11 MR. KWOK: Of t he page, yes.
12 THE COURT: Of t hat st at ement .
13 MR. KWOK: Of t hat st at ement , cor r ect .
14 Q. Do you have t hat page, Ms. Ri l ey?
15 A. Yes.
16 Q. Di r ect i ng your at t ent i on t o t he wi t hdr awal and debi t s
17 por t i on of t hat page, what ar e you poi nt i ng at , Ms. Ri l ey?
18 A. Thi s shows t he payment on 7/ 31, t he el ect r oni c r emi t t ance
19 t o Amer i can Expr ess of $2, 940. 01. That cor r esponds t o t he
20 amount t hat we j ust l ooked at on t he Amer i can Expr ess
21 st at ement .
22 Q. So, i s t hat t he same or di f f er ent number t han t he one we
23 j ust l ooked at i n t he Amer i can Expr ess car d st at ement
24 Gover nment Exhi bi t 90?
25 A. I t ' s t he same number .
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1 THE COURT: Same account number .
2 THE WI TNESS: The payment .
3 THE COURT: Same - -
4 THE WI TNESS: - - payment .
5 Q. When you say same number , what number ar e you r ef er r i ng t o?
6 A. The same payment , t he J ul y 29 on t he Amer i can Expr ess bi l l
7 shows t hat t hey r ecei ved $2, 940. 01 f r omCASI , and t he bank
8 st at ement el ect r oni c r emi t t ance shows t hat t hi s bank account
9 pai d $2, 940. 01 t o Amer i can Expr ess.
10 THE COURT: Al l r i ght .
11 Q. Now, Ms. Ri l ey, ot her t han summar i zi ng i nf or mat i on on your
12 dat abases, what el se di d you do i n your anal ysi s of t he bank
13 r ecor ds?
14 A. Cr eat ed char t s and gr aphs.
15 Q. I amshowi ng you what ' s been mar ked f or i dent i f i cat i on as
16 Gover nment Exhi bi t 112 and 113. They ar e not yet i n evi dence
17 but mar ked f or i dent i f i cat i on. Do you have t hat i n f r ont of
18 you, Ms. Ri l ey?
19 A. Yes, I do.
20 Q. Do you r ecogni ze what t hey ar e?
21 A. Yes.
22 Q. And what ar e t hey?
23 A. They ar e pi e char t s t hat I cr eat ed f r omt he bank st at ement s
24 of CASI .
25 Q. How di d you cr eat e t hese gr aphs?
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1 A. I used t he i nf or mat i on t hat was i n Exhi bi t 110, t he bank
2 r ecor ds, t o cr eat e t hese gr aphs.
3 MR. KWOK: The gover nment of f er s Exhi bi t 112 and 113.
4 THE COURT: No obj ect i on?
5 MR. RUBI NSTEI N: No obj ect i on, your Honor .
6 THE COURT: 112 and 113 ar e admi t t ed i nt o evi dence.
7 ( Gover nment ' s Exhi bi t s 112 and 113 r ecei ved i n
8 evi dence)
9 Q. Now, l et ' s t ake t hemone at a t i me, Ms. Ri l ey. Let ' s go
10 f i r st t o Gover nment Exhi bi t 112. What gr aph i s t hat of ?
11 A. Thi s i s a gr aph of t he deposi t s i nt o t he CASI bank account s
12 f or t he per i od 10/ 1/ 2001 t hr ough 9/ 30/ 2002 whi ch i s t he f i r st
13 year of t he gr ant awar d.
14 Q. And what does t he pur pl e ar ea r epr esent ?
15 A. I t r epr esent s t he deposi t s i nt o t he account f or t he NI ST - -
16 f or t he gr ant money.
17 Q. Was t her e any ot her sour ce of f undi ng t hat ' s not f r omt he
18 ATP gr ant ?
19 A. Ther e wer e a coupl e of mi nor deposi t s, but t hey wer e r eal l y
20 cr edi t , r ef unds t o ot her account s, so t hey wer e used as
21 of f set s, not as deposi t s. They wer e r ef und checks.
22 Q. Now, l et ' s go t hr ough Gover nment Exhi bi t 113. Ms. Ri l ey,
23 what i s t hi s a gr aph of ?
24 A. The CASI busi ness account - - deposi t s i nt o t he CASI
25 busi ness account s f or t he per i od 10/ 1/ 2002 t hr ough 6/ 30/ 2003,
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1 whi ch i s t he ni ne mont hs of t he second year of t he awar d.
2 Q. What does t he pur pl e ar ea of t he gr aph r epr esent ?
3 A. Deposi t s of gr ant moni es r ecei ved by CASI .
4 Q. And how about t hat l i ne t hat ' s br eaki ng up t he ci r cl e?
5 A. Thi s i s mi scel l aneous ot her deposi t s i nt o t he account .
6 Q. Ms. Ri l ey, di d you pr epar e any addi t i onal gr aphs asi de f r om
7 t hese ones t hat we j ust l ooked at ?
8 A. Yes.
9 Q. What di d you pr epar e?
10 THE COURT: What was t he amount of t hose ot her
11 deposi t s i nt o t he account ?
12 THE WI TNESS: The deposi t s f r omNI ST wer e $545, 000,
13 and t he mi scel l aneous deposi t s wer e l i ke 1200, 1500, somet hi ng
14 r eal l y smal l .
15 THE COURT: Sor r y.
16 Q. Ms. Ri l ey, asi de f r omt hese gr aphs, di d you cr eat e any
17 addi t i onal char t s and gr aphs?
18 A. Yes.
19 Q. What di d you pr epar e?
20 A. I anal yzed t he expendi t ur es f r omt he account s.
21 Q. I amshowi ng you what have been mar ked f or i dent i f i cat i on
22 as Gover nment ' s Exhi bi t s 114 and 115. Do you have t hose i n
23 f r ont of you?
24 A. Yes.
25 Q. Do you r ecogni ze what t hey ar e?
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1 A. Yes, t hey ar e t he pi e char t s t hat I cr eat ed f or t he
2 anal ysi s of t he expendi t ur es.
3 Q. And what document s di d you l ook at t o cr eat e t hese gr aphs
4 and char t s?
5 A. Cancel ed checks and Amer i can Expr ess st at ement s wer e t he
6 mai n sour ce document s used t o cr eat e t hese.
7 MR. KWOK: Gover nment of f er s Gover nment ' s Exhi bi t s 114
8 and 115.
9 MR. RUBI NSTEI N: No obj ect i on, your Honor .
10 THE COURT: 114 and 115 ar e admi t t ed i nt o evi dence.
11 ( Gover nment ' s Exhi bi t s 114 and 115 r ecei ved i n
12 evi dence)
13 MR. KWOK: May we publ i sh t hat t o t he j ur y?
14 THE COURT: You say t hese ar e expendi t ur es?
15 THE WI TNESS: Yes, si r . For 114 and 115 I di d
16 anal ysi s and expendi t ur es.
17 THE COURT: Fi r st f or t he year ended Oct ober 10, 2002?
18 THE WI TNESS: OK. And t hat i s because of t he
19 br eakdown f or t he f r i nge benef i t s f or check pai d t o I RS f or
20 wi t hhol di ngs or what ever , t he br eakdown I had f or check and
21 f r i nge benef i t s, I had an anal ysi s f or t he year pr epar ed by one
22 of t he account ant s t hat I coul d r econci l e t he number s - - t he
23 check payment s t hr ough Oct ober 10. So, i t doesn' t - -
24 THE COURT: 114 and 115 ar e admi t t ed i n evi dence.
25 Q. Now, Ms. Ri l ey l ooki ng f i r st at Gover nment Exhi bi t 114,
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1 what i s t he pi e char t at t he upper l ef t - hand cor ner ?
2 A. The upper l ef t - hand cor ner pi e char t i s j ust a br eakdown of
3 t he budget , t he NI ST budget , gr ant budget t o CASI , and i t has
4 t he budget cat egor i es by amount .
5 THE COURT: Whi ch budget ?
6 THE WI TNESS: For t he year one CASI / NI ST ATP budget .
7 THE COURT: Appr oved t he f i r st one or t he subsequent ?
8 THE WI TNESS: Amendment t o appr oved budget .
9 Q. So, st ayi ng wi t h t hat gr aph f or a second, j ust wal k us
10 t hr ough an exampl e, f or exampl e, what subcont r act or shows.
11 A. Subcont r act or shows t hat t he NI ST- appr oved budget had a
12 budget of $250, 000 f or subcont r act or cost s f or year one f or t he
13 NI ST ATP gr ant awar d.
14 Q. How about , f or exampl e, Dr . Kar r on' s sal ar y, accor di ng t o
15 t he appr oved budget ?
16 A. The appr oved budget had al l owed - - Dr . Kar r on' s sal ar y f or
17 t he appr oved budget was $175, 000.
18 MR. KWOK: OK. Now l et ' s zoomback out . Let ' s t ur n
19 t o t he upper r i ght - hand cor ner of t he char t . I f we coul d zoom
20 t hat i n.
21 Q. What i s t hi s char t ?
22 A. Thi s char t shows accor di ng t o t he checks. The checks ar e
23 t he Amer i can Expr ess t r ansact i ons f r omt he CASI busi ness
24 account . Thi s i s a br eakdown by t he budget cat egor i es of how
25 t he checks wer e wr i t t en.
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1 Q. OK. And what i s t he yel l ow ar ea of t hat char t ?
2 A. The yel l ow ar ea f or t he most par t i s what i s l i mi t ed by t he
3 budget cat egor y. I f i t was spent over budget , t hen t her e i s a
4 por t i on t hat ' s r ed and a por t i on t hat ' s yel l ow. I t ' s cost s
5 t hat ar e al l ocabl e t o t hose budget cat egor i es i n t he anal ysi s
6 of checks and Amer i can Expr ess t r ansact i ons. Li ke f or t he - -
7 Q. And what does t he r ed ar ea of t he gr aph r epr esent ?
8 A. The r ed ar ea r epr esent s cost s t hat wer e over budget s, t hat
9 wer e consi der ed i ndi r ect cost s and nonal l owabl e, l i ke dues and
10 subscr i pt i ons, l awyer s, and t he r ent pai d t o Dr . Kar r on, was
11 not al l owabl e per t he budget .
12 MR. KWOK: Let ' s zoomi t back out . Let ' s t ur n t o t he
13 bot t omr i ght - hand cor ner of t he page.
14 Q. What i s t hat t he char t of ?
15 A. Ther e i s a 10 per cent budget cat egor y adj ust ment t hat ' s
16 al l owed by NI ST ATP.
17 Q. What i s a 10 per cent adj ust ment ? Can you expl ai n t hat ?
18 A. 10 per cent of t he budget amount can be r eal l ocat ed f r omsay
19 subcont r act or cost s t o per sonnel expense, i f you have l ess
20 subcont r act or cost s t han you t hought .
21 So, t hi s i s t o show t hat $83, 000 whi ch coul d be
22 r eal l ocat ed bet ween t he budget cat egor y i f t hat ' s t he onl y
23 t hi ng t hat made somet hi ng unal l owabl e, but i t was over budget .
24 Q. Accor di ng t o t hi s char t , what i s t he t ot al of di sal l owabl e
25 amount f or year one of t he gr ant per i od?
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1 A. Thi s one shows $268, 638.
2 Q. Let ' s zoomi t back out , and l et ' s f ocus on t he t abl e f or
3 now. What does t he t abl e show?
4 A. The t abl e shows t he budget cat egor i es compar ed t o t he
5 amount of money spent by CASI , and t he di f f er ence bet ween what
6 CASI spent and what t he budget al l owed t o be spent , and t hen i t
7 shows t he per cent age di f f er ence.
8 Q. Can you wal k us t hr ough an exampl e of t hat .
9 A. Wel l , f or l i ke Dr . Kar r on' s sal ar y t he budget was $175, 000,
10 CASI spent $200, 000 f or year one, a di f f er ence of $25, 488, f or
11 a di f f er ence of 14. 56 per cent over .
12 Q. OK. Let ' s zoomi t back out . Let ' s go back t o t he upper
13 r i ght - hand cor ner por t i on of t he page, t he pi e char t wi t h t he
14 r ed. Does t hi s char t t ake i nt o account t he l ack of any cost
15 shar e t hat you t est i f i ed about yest er day?
16 A. No, i t doesn' t have cost shar e.
17 Q. What woul d t hi s char t have l ooked l i ke i f t hat i nf or mat i on
18 had been r ef l ect ed on t he char t ?
19 A. Some of t he r ed number s mi ght be yel l ow i f some of t he cost
20 shar e had been r ef l ect ed.
21 Q. I ' msor r y. Let me r ephr ase. I f you had i ncl uded i n your
22 char t t he absence of any cost shar e t hat you t est i f i ed about
23 yest er day, what woul d t hi s char t l ook l i ke?
24 A. I f I t ook i nt o consi der at i on t hat t her e was no cost shar e,
25 none of t he cost woul d be al l owabl e, and al l ot her cost s woul d
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1 be r ed.
2 Q. Let ' s go t o Gover nment Exhi bi t 115. What i s t hi s a char t
3 of ?
4 A. Thi s i s a char t of t he same t ype i nf or mat i on f or year t wo
5 of t he awar d, t he ni ne mont hs of year t wo.
6 Q. Let ' s go t o t he f i r st gr aph, t he upper l ef t - hand cor ner .
7 Agai n, what i nf or mat i on i s r ef l ect ed on t hi s char t ?
8 A. Thi s i s t he expendi t ur es by budget cat egor y i n t he NI ST
9 budget awar d.
10 Q. So, usi ng subcont r act or as an exampl e, what i s budget ed f or
11 year t wo?
12 A. $110, 000.
13 Q. Let ' s go t o t he f ul l page, t o t he upper r i ght - hand cor ner .
14 And once agai n, what i s t hi s a char t of f or year t wo?
15 A. Thi s i s t he expendi t ur es f r omt he CASI NI ST account s br oken
16 down by budget cat egor y, f r omt he check account s and t he
17 Amer i can Expr ess account s.
18 Q. What i s r epr esent ed by t he r ed por t i on?
19 A. The r ed por t i on woul d be cost s t hat woul d be over t he
20 budget cat egor y or maybe not al l owabl e because t hey ar e
21 i ndi r ect cost s.
22 Q. What ar e some of t hose exampl es?
23 A. The equi pment cost over budget her e of $90, 169, suppl y
24 cost s over budget of $8, 800.
25 Q. Let ' s zoomi t back out and l ook at t he char t t o t he bot t om
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1 r i ght . What i s t he t ot al di sal l owed expense t hat you f ound f or
2 year t wo?
3 A. Accor di ng t o t hi s anal ysi s, i t woul d be $196, 504.
4 Q. Once agai n, what i s t hat l i t t l e por t i on t hat ' s a l i t t l e of f
5 t o t he si de?
6 A. I t ' s al l owed, t he 10 per cent r ul e t hat you can al l ow,
7 al l owi ng f or 10 per cent adj ust ment t o t he budget cat egor i es,
8 t her e woul d st i l l be - - t her e woul d onl y be 50, 000 of t he
9 196, 000 t hat woul d be OK.
10 THE COURT: So wi t h t he adj ust ment i t woul d be
11 $146, 017.
12 THE WI TNESS: Ri ght .
13 Q. Now, Ms. Ri l ey, l et ' s go t o what ' s been mar ked f or - -
14 act ual l y what i s al r eady i n evi dence as Gover nment Exhi bi t 101.
15 Do you have t hat document i n f r ont of you?
16 A. 101?
17 Q. That ' s cor r ect .
18 MR. KWOK: I t ' s Gover nment Exhi bi t 101, your Honor .
19 Q. Do you have t hat document ?
20 A. Yes.
21 Q. Do you r ecogni ze i t ?
22 A. Yes, i t ' s t he Homef r ont Har dwar e i nvoi ce.
23 Q. And di d you anal yze t hi s document i n t he cour se of your
24 anal ysi s?
25 A. Yes.
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1 Q. Wer e you abl e t o det er mi ne how t he bal ances r ef l ect ed on
2 t hese i nvoi ces wer e pai d f or ?
3 A. Yes. They wer e pai d f or f r omt he CASI / NI ST bank account ,
4 or Amer i can Expr ess or except f or one t r ansact i on f or $301 t hat
5 was pai d f r omDr . Kar r on' s per sonal cr edi t car d account .
6 Q. Asi de f r omt hat , wer e t her e any i nvoi ces pai d f or f r omDr .
7 Kar r on' s per sonal account ?
8 A. Yes, one f or $301.
9 Q. Asi de f r omt hat , i s t her e anyt hi ng el se?
10 A. No, t he r est of t hemwer e pai d f or f r omt he CASI / NI ST
11 account .
12 Q. And how wer e you abl e t o make t hat det er mi nat i on?
13 A. I t r aced t he payment back t o my dat abase of check payment s,
14 back t o t he bank st at ement s, t o t he cancel ed checks, or t o t he
15 Amer i can Expr ess st at ement t hat pai d t hem.
16 MR. KWOK: Your Honor , at t hi s t i me t he gover nment
17 woul d l i ke t o r ead i nt o t he r ecor d anot her st i pul at i on mar ked
18 f or i dent i f i cat i on as Gover nment Exhi bi t 901.
19 THE COURT: Yes.
20 MR. KWOK: Uni t ed St at es of Amer i ca v. Dani el B.
21 Kar r on, def endant , S1 07 Cr i m. 541.
22 " I t i s her eby st i pul at ed and agr eed by and among t he
23 Uni t ed St at es of Amer i ca, by Mi chael J . Gar ci a, t he Uni t ed
24 St at es at t or ney f or t he Sout her n Di st r i ct of New Yor k, St eve
25 Kwok and Chr i st i an Ever del l , assi st ant Uni t ed St at es at t or neys,
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1 of counsel , and def endant Dani el B. Kar r on, by and wi t h t he
2 consent of hi s at t or ney, Ronal d Rubi nst ei n, Esq. t hat :
3 " 1. The document mar ked f or i dent i f i cat i on as
4 Gover nment Exhi bi t 120 i s an i nvent or y of i t ems sei zed on or
5 about J une 26, 2007 f r om300 East 33r d St r eet , Apar t ment 4N,
6 New Yor k, New Yor k, pur suant t o a sei zur e war r ant i ssued by t he
7 Honor abl e Dougl as F. Eat on, Uni t ed St at es magi st r at e j udge of
8 t he Sout her n Di st r i ct of New Yor k.
9 " 2. The i t emmar ked f or i dent i f i cat i on as Gover nment
10 Exhi bi t 112 cor r esponds t o i t em79, GPS syst em, i dent i f i ed i n
11 Gover nment Exhi bi t 120.
12 " 3. The i t emmar ked f or i dent i f i cat i on as Gover nment
13 Exhi bi t 122 cor r esponds t o i t em20, Sony Cyber shot camer a
14 DSC- F707, i dent i f i ed i n Gover nment Exhi bi t 120.
15 " 4. The i t emmar ked f or i dent i f i cat i on as Gover nment
16 Exhi bi t 123 cor r esponds t o i t em23, I nf ocus LCD pr oj ect or wi t h
17 mount , i dent i f i ed i n Gover nment Exhi bi t 120.
18 " 5. The i t emmar ked f or i dent i f i cat i on as Gover nment
19 Exhi bi t 124 cor r esponds t o i t em18, pr oj ect or scr een,
20 i dent i f i ed i n Gover nment Exhi bi t 120.
21 " 6. The i t emmar ked f or i dent i f i cat i on as Gover nment
22 Exhi bi t 125 cor r esponds t o i t em75, shoe r ack, i dent i f i ed i n
23 Gover nment Exhi bi t 120.
24 " 7. The i t emmar ked f or i dent i f i cat i on as Gover nment
25 Exhi bi t 126 cor r esponds t o i t em37, Ki t chen Cl assi cs bl ender by
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1 War i ng, i dent i f i ed i n Gover nment Exhi bi t 120.
2 " 8. The i t emmar ked f or i dent i f i cat i on as Gover nment
3 Exhi bi t 127 cor r esponds t o i t em46, Lar ge STABI LA bubbl e l evel ,
4 i dent i f i ed i n Gover nment Exhi bi t 120.
5 " 9. The i t emmar ked f or i dent i f i cat i on as Gover nment
6 Exhi bi t 128 cor r esponds t o i t em36, Dust Bust er , i dent i f i ed i n
7 Gover nment Exhi bi t 120.
8 " 10. The i t emmar ked f or i dent i f i cat i on as Gover nment
9 Exhi bi t 129 cor r esponds t o i t em82, f ol di ng l adder , i dent i f i ed
10 i n Gover nment Exhi bi t 120.
11 " 11. The i t emmar ked f or i dent i f i cat i on as Gover nment
12 Exhi bi t 130 cor r esponds t o i t em41, Por t er cabl e r echar geabl e
13 t ool set , i dent i f i ed i n Gover nment Exhi bi t 120.
14 " 12. The i t emmar ked f or i dent i f i cat i on as Gover nment
15 Exhi bi t 131 cor r esponds t o i t ems 38 and 39, Por t er cabl e Ti ger
16 Saw qui ckchar ge and t wo bat t er i es and char ger f or i t em38,
17 i dent i f i ed i n Gover nment Exhi bi t 120.
18 " 13. The i t ems mar ked f or i dent i f i cat i on as
19 Gover nment Exhi bi t 132 cor r espond t o i t ems 42 and 74, set of
20 t hr ee r echar geabl e f l ashl i ght s wi t h char ger s, and set of t wo
21 r echar geabl e f l ashl i ght s wi t h char ger s, i dent i f i ed i n
22 Gover nment Exhi bi t 120.
23 " I t i s f ur t her st i pul at ed and agr eed t hat Gover nment
24 Exhi bi t s 120 and 121, 122, 123, 124, 125, 126, 127, 128, 129,
25 130, 131, 132 may be r ecei ved i n evi dence as Gover nment ' s
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1 Exhi bi t s at t r i al . "
2 Si gned and dat ed, si gned on behal f of t he Uni t ed
3 St at es by St eve Kwok, and on behal f of Dani el B. Kar r on by
4 Ronal d Rubi nst ei n, Esqui r e.
5 MR. RUBI NSTEI N: What was t hat exhi bi t , si r ?
6 MR. KWOK: I t ' s mar ked f or i dent i f i cat i on as
7 Gover nment Exhi bi t 901.
8 THE COURT: That ' s t he st i pul at i on number ?
9 MR. KWOK: That ' s cor r ect , your Honor .
10 THE COURT: Wel l , I wi l l have t o have t he st i pul at i on,
11 a copy of t he st i pul at i on, t o r ead of f t he exhi bi t s.
12 Oh, I see i t .
13 Al l r i ght . Exhi bi t s 120, 121, 122, 123, 124, 125,
14 126, 127, 128, 129, 130, 131 and 132 ar e r ecei ved i n evi dence.
15 And Exhi bi t 901 i s r ecei ved i n evi dence.
16 ( Gover nment ' s Exhi bi t s 120, 121, 122, 123, 124 and 125
17 r ecei ved i n evi dence)
18 ( Gover nment ' s Exhi bi t s 126, 127, 128, 129, 130, 131
19 and 132 r ecei ved i n evi dence)
20 ( Gover nment ' s Exhi bi t 901 r ecei ved i n evi dence)
21 MR. KWOK: Your Honor , may we publ i sh t hese i t ems t o
22 t he j ur y?
23 THE COURT: Yes, you may.
24 MR. KWOK: Your Honor , may I go t hr ough t he i t ems one
25 by one, j ust r ead of f t he exhi bi t number ?
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1 THE COURT: Yes, you may.
2 MR. KWOK: Gover nment Exhi bi t 120, Gover nment Exhi bi t
3 122.
4 MR. RUBI NSTEI N: Can I see t hat when you hol d i t up,
5 pl ease, Mr . Kwok?
6 MR. KWOK: Gover nment Exhi bi t 123. Gover nment Exhi bi t
7 124 i s t he scr een on t he f l oor . Gover nment Exhi bi t 125.
8 Gover nment Exhi bi t 126. Gover nment Exhi bi t 127. Gover nment
9 Exhi bi t 128. Gover nment Exhi bi t 129. Gover nment Exhi bi t 130.
10 MR. RUBI NSTEI N: Can I see t hat , pl ease?
11 MR. KWOK: Gover nment Exhi bi t 131 and Gover nment
12 Exhi bi t 132.
13 BY MR. KWOK:
14 Q. Ms. Ri l ey, di d you r evi ew addi t i onal i nvoi ces i n t he cour se
15 of your anal ysi s?
16 A. Yes.
17 Q. I amshowi ng you a document al r eady i n evi dence as
18 Gover nment Exhi bi t 120A. Do you r ecogni ze what ' s al r eady i n
19 evi dence as Gover nment Exhi bi t 120A, Ms. Ri l ey?
20 A. Yes, i t ' s an i nvoi ce f or Si l i con Ci t y.
21 Q. How ar e you abl e t o r ecogni ze i t ?
22 A. The company name i s at t he t op, and I have i ni t i al ed at t he
23 bot t omt hat I have seen i t .
24 Q. Now l et ' s st ar t wi t h t he f i r st page. What i s t he i t em
25 shown on t he f i r st page of t hat i nvoi ce?
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1 A. A t en f oot scr een f or $2, 315. 50.
2 Q. And what i s t he t ot al amount of t hat i nvoi ce?
3 A. $2, 583. 05.
4 Q. And what i s at t he bot t ompor t i on of t hat page?
5 A. At t he bot t om?
6 Q. That ' s cor r ect .
7 A. I t ' s Comput er Ai ded Sur ger y, NI ST ATP DMT Pr ogr amcheck
8 number 10220 pai d i n t he amount of $2, 583. 05.
9 Q. And what i s t he check number agai n f or t hat check?
10 A. 10220.
11 Q. Ms. Ri l ey, I amshowi ng you a page f r omGover nment Exhi bi t
12 81.
13 THE COURT: What account was t hat on?
14 MR. KWOK: Sor r y, your Honor .
15 THE COURT: 10220, what account i s i t dr awn on?
16 THE WI TNESS: I t ' s shown on t he bot t omof t he page of
17 t he i nvoi ce.
18 THE COURT: What account was i t dr awn on?
19 THE WI TNESS: Fr omt he Comput er Ai ded Sur ger y NI ST ATP
20 DMT Pr ogr amaccount .
21 Q. I amshowi ng you a page f r omGover nment Exhi bi t 81. I t ' s
22 al r eady i n evi dence and i s mar ked as page 23 at t he bot t om
23 r i ght - hand cor ner of t he j ur y bi nder s. I f we coul d put t hat up
24 on t he scr een, page 23 of t he Chase st at ement s.
25 THE COURT: I ' msor r y. I l ost t r ack. What ' s t he
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1 exhi bi t number ?
2 MR. KWOK: I t ' s Gover nment Exhi bi t 81, your Honor .
3 THE COURT: Thank you.
4 MR. KWOK: And t he bot t omi s page 23 of t he j ur y
5 bi nder s.
6 Q. Do you have t hat page, Ms. Ri l ey?
7 A. Yes.
8 Q. Can you show us wher e check 10220 appear s on t hat page?
9 A. On t he bank st at ement i t appear s her e dat ed 6/ 07/ 2002 and
10 i t ' s i n t he amount of $2, 583. 05.
11 Q. Now st ayi ng on t he same page, f ocusi ng your at t ent i on t o
12 t he upper r i ght - hand cor ner por t i on of t he page, under neat h
13 pr i mar y account number , what does t hat say?
14 A. Comput er Ai ded Sur ger y I nc. , NI ST ATP DMT pr ogr am.
15 Q. Now l et ' s go back t o Gover nment Exhi bi t 120A, t he second
16 page. What ar e t he i t ems shown on t hat i nvoi ce?
17 A. A pr oj ect or and a l amp.
18 Q. And how much f or ei t her of t hose i t ems?
19 A. For $3, 482. 72.
20 MR. RUBI NSTEI N: I di dn' t hear .
21 A. 3, 482. 72.
22 THE COURT: Whi ch exhi bi t i s on t he boar d?
23 MR. KWOK: Exhi bi t 120A i s on t he boar d, your Honor ,
24 page 2.
25 Q. What i s t he shi ppi ng cost ?
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1 A. $35.
2 Q. And what i s t he amount mi nus t he shi ppi ng cost ?
3 A. The t ot al amount i s $3, 482. 72 wi t hout t he shi ppi ng cost .
4 Q. And l et ' s l ook at t he bot t ompor t i on of t he same page. I
5 amst i l l st ayi ng wi t h Gover nment Exhi bi t 120A, page 2. What i s
6 r ef l ect ed on t he bot t ompor t i on of t hat page?
7 A. OK. The f i r st Comput er Ai ded Sur ger y, I nc. name, check
8 number 10127, of $35 pays t he shi ppi ng, t he $35 shi ppi ng. And
9 t he next check number 10114 f or $3, 482. 72 on 3/ 29/ 2002 pays f or
10 t he pr oj ect or and t he l amp.
11 ( Cont i nued on next page)
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1 Q. And can you r ead of f t he check number s once agai n?
2 A. 10114 and 10127.
3 Q. Now, l et ' s go back t o gover nment exhi bi t 81 now, whi ch i s
4 t he Chase Bank account st at ement s. Di r ect i ng your at t ent i on t o
5 page 19 of t he j ur y bi nder s, do you have t hat check?
6 A. Yes, on t he bank st at ement . On check number 10114 dat ed
7 4/ 11, f or $3, 482. 72.
8 Q. Now about f or check number 10127?
9 A. 10127 i s f or $35, and i t i s al so on 4/ 11.
10 Q. Let ' s zoomout on t hat page. And once agai n di r ect i ng your
11 at t ent i on t o t he upper r i ght - hand cor ner of t he page, what does
12 t hat say?
13 A. I t ' s f or t he checki ng account Comput er Ai ded Sur ger y
14 I ncor por at ed, NI ST ATP DMT pr ogr amaccount .
15 Q. Do you know what NI ST ATP DMT st ands f or ?
16 A. Nat i onal I nst i t ut e of St andar ds and Technol ogy, Advanced
17 Technol ogy Pr ogr am, Di gi t al Mor se Theor y.
18 MR. RUBI NSTEI N: J udge, I can' t hear her .
19 A. I ' msor r y.
20 MR. RUBI NSTEI N: I don' t know i f anybody el se i s
21 havi ng a pr obl em, but she dr ops her voi ce.
22 THE COURT: J ust - -
23 THE WI TNESS: Okay.
24 THE COURT: Don' t be shy, j ust speak up.
25 THE WI TNESS: Nat i onal I nst i t ut e of St andar ds and
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1 Technol ogy, and Advanced Technol ogy Pr ogr am, Di gi t al Mor se
2 Theor y.
3 Q. Thank you, Ms. Ri l ey. I f you coul d keep your voi ce up.
4 Let ' s go back t o t he i nvoi ces, gover nment Exhi bi t
5 120A, page t hr ee. Can we zoomi n on t he t op of t hat page.
6 What i t emi s r ef l ect ed on t hi s i nvoi ce?
7 A. A Gar mi n St r eet Pi l ot , a GPS.
8 Q. How much i s t hat ?
9 A. For $979. 99.
10 Q. How about i ncl udi ng shi ppi ng and t axes?
11 A. $25 shi ppi ng, i t ' s $1, 004. 99.
12 Q. And what appear s on t he bot t omof t hat page? Let ' s zoomi t
13 back out .
14 A. That , t hat i t i t was pai d wi t h - - f r omt he Comput er Ai ded
15 Sur ger y NI ST ATP DMT pr ogr amaccount , check number 10598 f or
16 1, 004. 99 on 11/ 11, 2002.
17 Q. Let ' s go back now t o gover nment exhi bi t 81, whi ch i s agai n
18 t he Chase Bank st at ement s f or t he CASI account , page 25 of t he
19 j ur y bi nder s.
20 THE COURT: I don' t - - page 25 i n t he j ur y bi nder ?
21 MR. KWOK: That ' s cor r ect , your Honor .
22 THE COURT: What ' s t he exhi bi t number ?
23 MR. KWOK: Exhi bi t number 81, your Honor .
24 THE COURT: And what page of 81?
25 MR. KWOK: I t ' s page 25 of t he j ur y bi nder s on t he
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1 bot t omof t he page.
2 THE COURT: Page 25 of t hat exhi bi t ?
3 MR. KWOK: That ' s cor r ect .
4 THE COURT: Al l r i ght .
5 Q. Do you see t hat check on t hi s page, Ms. Ri l ey?
6 A. Yes. Check 10598 f or on 11/ 25 f or $1, 004. 99.
7 Q. Now, l et ' s go back t o t he i nvoi ce gover nment , Exhi bi t 120A,
8 t he l ast page. What i t ems ar e shown on t hi s i nvoi ce,
9 Ms. Ri l ey?
10 A. Okay. Thi s i nvoi ce t o Dat avi si on has a di gi t al camer a wi t h
11 accessor i es.
12 Q. And how much al t oget her f or t hose i t ems?
13 A. $1, 519. 95
14 Q. And whose handwr i t i ng i s t hat on t he bot t omof t he page, i f
15 we coul d show t hat ?
16 A. Okay. I t ' s my handwr i t i ng. I t says HBR. I t ' s sayi ng t hat
17 t he Amer i can Expr ess t r ansact i on was on 9/ 20 of ' 02.
18 Q. And how much i s t hat t r ansact i on?
19 A. Amer i can Expr ess i s goi ng t o be - - $1, 519. 95.
20 Q. Okay. Now di r ect i ng your at t ent i on now t o gover nment
21 exhi bi t 90, 90, l ooki ng at t he st at ement , t he cl osi ng dat e?
22 THE COURT: Hol d on a second.
23 MR. KWOK: Gover nment exhi bi t 90, your Honor ?
24 THE COURT: I have t o swi t ch books her e. Al l r i ght
25 exhi bi t 90. What page?
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1 MR. KWOK: I ' mshowi ng you - - what page i s t hat , ?
2 I t ' s page f i ve of ei ght , exhi bi t 90.
3 THE DEPUTY CLERK: Fi ve of ei ght ?
4 MR. KWOK: Exhi bi t 90. I ' ml ooki ng at t he st at ement
5 wi t h cl osi ng dat e of Oct ober 8t h, 2002, page f i ve of ei ght .
6 THE COURT: Al l r i ght .
7 Q. Okay. Ms. Ri l ey, di r ect i ng your at t ent i on t o Sept ember
8 20t h, 2002.
9 A. Ther e i s an Amer i can expr ess t r ansact i on t o Dat avi si on f or
10 $1, 519. 95.
11 Q. I s t hat t he same amount or di f f er ent f r omt he amount we
12 l ooked at i n gover nment exhi bi t 120A, t he i nvoi ce j ust now?
13 A. I t ' s t he same amount .
14 Q. And st i l l l ooki ng at t hat page, st i l l gover nment exhi bi t
15 90 - -
16 THE COURT: Let me j ust see - - I ' msor r y, I mi ssed her
17 expl anat i on.
18 Q. Ms. Ri l ey, can you - -
19 THE COURT: I have t he wr ong page up now. Let ' s see
20 wher e we ar e. Thi s i s what page? I have f i ve of ei ght . What
21 page shoul d I be on?
22 MR. KWOK: I t ' s page f i ve of ei ght f or t he st at ement
23 wi t h cl osi ng dat e Oct ober 8, 2002.
24 THE COURT: I don' t have t hat . That ' s not - -
25 MR. KWOK: We coul d hand up an ext r a copy.
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1 THE COURT: Ther e i s mor e t han 1 f i ve of ei ght . Al l
2 r i ght , okay. Go ahead.
3 MR. KWOK: Thank you, your Honor .
4 Q. Di r ect i ng your at t ent i on agai n, Ms. Ri l ey, t o Sept ember
5 20t h, 2002, what does t hat show?
6 A. The Amer i can Expr ess shows t he t r ansact i on payment t o
7 Dat avi si on of $1, 519. 95.
8 Q. And how does t hat amount compar e t o t he amount we j ust
9 l ooked at i n gover nment exhi bi t 120A?
10 A. I t ' s t he same amount t hat ' s on t he i nvoi ce t o Dat avi si on.
11 Q. And st i l l st ayi ng wi t h t hat page, gover nment exhi bi t 90,
12 page f i ve of ei ght , what i s t he sect i on headi ng j ust above t hat
13 l i st of t r ansact i ons?
14 A. Oh, Expo t r ansact i ons f or Dr . D. B. Kar r on.
15 MR. KWOK: One moment , your Honor .
16 THE COURT: Thi s i s an Amer i can Expr ess char ge?
17 THE WI TNESS: Yes.
18 THE COURT: We don' t have how i t ' s pai d f or yet , do
19 we?
20 MR. KWOK: I ' msor r y?
21 THE WI TNESS: Thi s i s - -
22 THE COURT: We don' t know how t he cr edi t , t he Amer i can
23 Expr ess car d cr edi t account was pai d f or , do we?
24 MR. KWOK: Okay.
25 Q. Ms. Ri l ey, can you show us how t hat out st andi ng cr edi t car d
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1 bal ance i s pai d f or .
2 A. Okay, l et ' s see. Okay, i t shoul d show up i n t he - - next
3 mont h' s payment s.
4 Q. Can I di r ect your at t ent i on t o gover nment exhi bi t 110, t he
5 dat a base?
6 A. Yes.
7 ( Pause)
8 Q. Di r ect i ng your at t ent i on t o page, gover nment exhi bi t 110,
9 page t hr ee of 37. What i nf or mat i on i s r ef l ect ed f or Oct ober
10 18t h, 2002?
11 A. That an Amer i can expr ess el ect r oni c r emi t t ance $5, 736. 51.
12 THE COURT: Fr omwhat account ?
13 THE WI TNESS: Fr omt he CASI busi ness account , or t he
14 busi ness account s f r omt he CASI bank.
15 THE COURT: CASI busi ness, what account ? You sai d
16 t her e wer e mor e t han one, di dn' t you?
17 THE WI TNESS: Yes. I t ' s f r omt he - - t hi s r epor t
18 doesn' t i dent i f y i t .
19 THE COURT: I ' msor r y?
20 THE WI TNESS: Thi s r epor t doesn' t i dent i f y t he
21 speci f i c account , but i n my - - I have a not e i n my dat a base, I
22 know whi ch one i t ' s f r om. I t ' s f r omt he - - i t ' s f r omone of
23 t he CASI busi ness account s.
24 Q. And how i s t hi s account f unded, Ms. Ri l ey?
25 A. Fr omt he NI ST deposi t s.
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1 Q. Does i t have any sour ce of f undi ng f r omanywher e el se?
2 A. J ust a smal l - - a smal l a mi scel l aneous, smal l amount f r om
3 somewher e el se.
4 MR. KWOK: No f ur t her quest i ons, your Honor .
5 THE COURT: Al l r i ght .
6 MR. RUBI NSTEI N: Good t i me t o t ake a l i t t l e r ecess.
7 THE COURT: Let ' s t ake t he mor ni ng br eak and come
8 back.
9 ( Recess)
10 THE COURT: Al l r i ght , l et ' s br i ng i n t he j ur y. I s
11 Dr . Kar r on her e? You want t o cal l Dr . Kar r on? No one' s goi ng
12 t o go out af t er hi m?
13 MR. RUBI NSTEI N: Aye aye, si r .
14 THE COURT: You got an assi st ant .
15 MR. RUBI NSTEI N: He' s doi ng somet hi ng el se, J udge.
16 THE COURT: He has no aut hor i t y.
17 MR. RUBI NSTEI N: He' s not admi t t ed t o t he Ci r cui t ,
18 J udge.
19 ( J ur y ent er i ng)
20 THE COURT: Al l r i ght , pl ease be seat ed.
21 ( Cont i nued on next page)
22
23
24
25
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1 THE COURT: Mr . Rubi nst ei n, cr oss- exami nat i on.
2 CROSS EXAMI NATI ON
3 BY MR. RUBI NSTEI N:
4 MR. RUBI NSTEI N: Thank you, your Honor .
5 Q. Good mor ni ng, Ms. Ri l ey.
6 A. Good mor ni ng.
7 Q. Now, you ar e wor ki ng f or t he OI G' s of f i ce?
8 A. Yes, si r .
9 Q. And how l ong have you - - ar e you wor ki ng t her e?
10 A. Si nce J une of ' 97.
11 Q. And pr i or t o t hat , you wer e an I nt er nal Revenue Agent ?
12 A. Yes, I RS.
13 Q. I RS?
14 A. Yes.
15 Q. And how l ong wer e you wi t h I RS?
16 A. Fr om' 86 t o ' 97.
17 Q. Now, di d you do f i el d audi t s or - -
18 A. Yes.
19 Q. - - wor k i nsi de?
20 A. Fi el d audi t s.
21 Q. And when di d you meet peopl e f r omt he f eder al gover nment on
22 t hi s case f or t he f i r st t i me, I mean peopl e at t he pr osecut i on
23 t abl e her e, f i r st t i me?
24 THE COURT: Ar e you r ef er r i ng t o - - one per son' s f r om
25 t he agency, Mr - - ar e you r ef er r i ng t o her ?
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1 MR. RUBI NSTEI N: Wel l , l et ' s st ar t wi t h her .
2 Q. Do you know t he l ady seat ed i n t he mi ddl e?
3 A. Yes.
4 Q. And who i s she?
5 A. Rachel Ondr i k.
6 Q. And t he gent l eman at t he end?
7 A. Ki r k Yamat ani .
8 Q. And on t hi s case i n deal i ng wi t h t hi s ATP gr ant t o CASI ,
9 when di d you meet ei t her or bot h of t hemf or t he f i r st t i me?
10 A. I don' t - - I don' t - - I ' mnot sur e.
11 Q. Was i t i n t he year 2003?
12 A. I ' mnot sur e i f i t was 2003, 2004.
13 Q. Was i t i n 2008?
14 THE COURT: She sai d she was not sur e whet her i t was
15 2003 or 2004.
16 Q. Wel l , do you have anyt hi ng t hat coul d r ef r esh your
17 r ecol l ect i on as t o when you met t hese peopl e f or t he f i r st
18 t i me?
19 A. For t hi s case, I don' t know - - I ' mnot sur e - - I ' mnot sur e
20 when t hat woul d be.
21 Q. Al l r i ght . When i s t he - - bef or e you came her e t o
22 t est i f y - - you' r e f r omanot her st at e, cor r ect ?
23 A. Yeah, I ' mf r omAt l ant a, At l ant a r egi on.
24 Q. Okay, f r omt he At l ant a r egi on. When di d you come her e t o
25 t est i f y on t hi s case?
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1 A. For t hi s?
2 Q. Yeah.
3 A. I came - - you mean f or t hi s week f or t he t r i al or - -
4 Q. No. When di d you come f r omAt l ant a, Geor gi a, r i ght ;
5 At l ant a, Geor gi a, r i ght ?
6 A. For t he t r i al , I came Monday.
7 Q. Bef or e you came Monday, wer e you her e i n pr epar at i on f or
8 your t est i mony on t hi s t r i al ?
9 A. Yes.
10 Q. And when di d you come f or t he f i r st t i me f or your
11 pr epar at i on f or t hi s t r i al ?
12 A. That I ' d have t o l ook back. I ' mnot sur e.
13 Q. Wel l , was i t a mont h ago, t wo weeks ago?
14 A. For pr epar at i on f or t he t r i al , i t woul d' ve pr obabl y been
15 maybe t he end of Apr i l .
16 Q. And you st ayed; you di dn' t commut e back and f or t h t o
17 At l ant a, Geor gi a, cor r ect ? Di d you commut e back and f or t h
18 whi l e you wer e pr epar i ng f or t hi s t r i al ?
19 A. Yes.
20 Q. And how l ong di d you st ay when you came somet i me i n Apr i l ?
21 A. For a day.
22 Q. And t hen you woul d go back?
23 A. Yes.
24 Q. And t hen you woul d come back agai n?
25 A. Yes.
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1 Q. For anot her day?
2 A. Yes.
3 Q. About how many t r i ps, day t r i ps di d you make, ma' am?
4 A. I t hi nk maybe t hr ee.
5 Q. And di d you have t el ephone cont act wi t h ei t her t he agent
6 t hat you poi nt ed - - t he agent s you poi nt ed out or anybody i n
7 t he U. S. At t or ney' s Of f i ce?
8 THE COURT: When?
9 Q. Bet ween Apr i l when you st ar t ed comi ng her e?
10 A. Yes.
11 Q. And how of t en woul d you have cont act ?
12 A. Wel l , Ki r k and Rachel wor k i n t he same of f i ce I do.
13 Q. Okay. So you woul d see t hemi n At l ant a?
14 A. I f we al l happened t o be i n t hat day.
15 Q. Wel l , di d you have an i nt er vi ew wi t h t hem, wi t h Ki r k and
16 Rachel on Apr i l 22nd, 2008?
17 A. I coul d have. I ' m- -
18 Q. Wel l , woul d meet wi t h you i n At l ant a, Geor gi a or woul d t hey
19 meet wi t h you her e i n New Yor k?
20 A. For t r i al pr ep?
21 Q. For t r i al pr ep.
22 A. I t woul d - - i t - -
23 THE COURT: What was your answer ?
24 A. For - - how do we def i ne t r i al pr ep? I mean, I can meet at
25 ei t her - - I mean f or t r i al pr ep, I woul d come up and meet wi t h
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1 St eve.
2 Q. Mr . Kwok, t he Assi st ant U. S. At t or ney, cor r ect ?
3 A. Yes.
4 Q. When you met wi t h Rachel di d you - -
5 MR. RUBI NSTEI N: Let me j ust appr oach t he Gover nment
6 f or a moment , your Honor .
7 Q. When di d you meet Mr . Kwok f or t he f i r st t i me?
8 A. I ' mnot sur e.
9 Q. Was i t pr i or t o 2008?
10 A. Pr i or t o 2000 - - I ' mnot sur e when I met hi m.
11 Q. Now, you, as member of t he Of f i ce of t he I nspect or Gener al ,
12 you' r e i n t he ci vi l por t i on of t hat of f i ce, cor r ect ?
13 A. I ' mi n t he audi t por t i on of t hat of f i ce.
14 Q. And i s t hat ci vi l or cr i mi nal end?
15 A. Nei t her . I t ' s - - I do - - I nor mal l y do audi t s.
16 Q. And t he t wo agent s her e ar e?
17 A. I nvest i gat or s.
18 Q. I nvest i gat or s. I n t he cr i mi nal di vi si on?
19 A. Yes - - wel l , what ever , ci vi l or cr i mi nal .
20 THE COURT: I s t her e a cr i mi nal di vi si on and ci vi l
21 di vi si on?
22 THE WI TNESS: No, no. Ther e' s onl y - - t her e' s - - t hey
23 handl e - - I t hi nk - - I under st and t hey handl e bot h.
24 Q. You under st and t hey' r e cal l ed speci al agent s, cor r ect ?
25 A. Yes.
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1 Q. So you under st and t hat t hey have t he power t o ar r est
2 peopl e, cor r ect ?
3 A. Yes.
4 Q. Now, I asked you yest er day on t he voi r di r e i f you had any
5 document s t hat you used i n pr epar i ng your r epor t i n J ul y of
6 2003, t he f i r st r epor t t hat you pr epar ed her e?
7 A. Yes.
8 Q. And di d you have any document s?
9 A. Yes.
10 Q. Di d you r evi ew t hose document s bet ween yest er day and t oday?
11 A. Yes.
12 Q. Do you have t hemwi t h you?
13 A. Um, I - - my comput er . I don' t have a pr i nt ed copy of t hem.
14 Q. Wel l , di d you pr i nt a copy out i n 2003, i n J une or J ul y of ,
15 or August of 2003, whi l e you wer e pr epar i ng your f i r st audi t ?
16 A. I had pr i nt ed copi es of t he document s. Yes, I got pr i nt ed
17 copi es of t he document s somewher e.
18 THE COURT: On t he comput er , t he comput er document s;
19 i s t hat what you' r e sayi ng? Or ar e you t al ki ng about t he
20 document s you - - any document s you i nspect ed at t he of f i ces of
21 CASI ?
22 THE WI TNESS: I ' ve got ei t her - - some of t he document s
23 I have ar e comput er document s and some of t he document s I have
24 have been pr i nt ed.
25 THE COURT: By?
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1 THE WI TNESS: By - - I don' t know i f i t was by me or by
2 CASI , I mean because i t was 2003.
3 THE COURT: Wer e t hey pr i nt ed by comput er - - out of
4 t he comput er ?
5 THE WI TNESS: They wer e pr i nt ed, and I had comput er
6 r ecor ds t hat wer e pr ovi ded by CASI , copi es of some comput er
7 r ecor ds and some of t hemwer e pr i nt ed and some of t hemwer e
8 not .
9 THE COURT: So some of t hemwer e pr i nt ed of f CASI ' s
10 comput er ?
11 THE WI TNESS: Possi bl y some.
12 THE COURT: Some wer e pr i nt ed of f your comput er ?
13 THE WI TNESS: Possi bl y, yes.
14 THE COURT: Wel l , not possi bl y.
15 THE WI TNESS: Yes.
16 THE COURT: Yes or no?
17 THE WI TNESS: Yes, yes. I t coul d be at t he - - i t
18 coul d be ei t her one. I mean - -
19 THE COURT: I ' m- - not possi bl y. Yes or no.
20 THE WI TNESS: Of f t he t op of my head, I don' t r emember
21 whi ch document s wer e pr i nt ed and gi ven t o me or whi ch document s
22 I got back t o At l ant a.
23 THE COURT: They wer e ei t her pr i nt ed - -
24 THE WI TNESS: Yes.
25 THE COURT: - - of f t he CASI ' s comput er - -
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1 THE WI TNESS: Yes.
2 THE COURT: Or of f your s?
3 THE WI TNESS: Or me.
4 THE COURT: Al l r i ght .
5 MR. KWOK: Coul d we have a si debar , your Honor ?
6 THE COURT: No, you can not .
7 BY MR. RUBI NSTEI N:
8 Q. Now, so you di d have what ' s cal l ed t he har d copi es of i t ems
9 t hat wer e on t he comput er , cor r ect ?
10 A. Some of - -
11 THE COURT: She' s answer ed t hat .
12 A. Yes.
13 Q. And wher e ar e t hose har d copi es t hat you obt ai ned i n t he
14 summer of 2003?
15 A. They' r e i n t he audi t f i l e.
16 Q. And wher e i s t he audi t f i l e?
17 A. Her e.
18 Q. Al l r i ght . And have you t ur ned t hat over t o t he
19 Pr osecut or ?
20 A. The audi t f i l e?
21 Q. Ri ght .
22 A. I pr ovi ded copi es of t he document s t hat we had f r omCASI t o
23 hi m.
24 Q. And i t ' s f ai r t o say you di d not have a gener al l edger ,
25 cor r ect ?
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1 A. I had what ever document s t hat CASI - - I guess i t depends
2 how you' r e def i ni ng gener al l edger t her e. The t hi ng t hat
3 t hat - -
4 Q. You' r e sayi ng - -
5 THE COURT: Let t er her f i ni sh her answer .
6 A. The number , t he number s t hat - - t he number t hat you' r e
7 r ef er r i ng t o came f r omt he books and r ecor ds pr ovi ded t o me by
8 CASI ' s r epr esent at i ve Fr ank Spr i ng, J oan Hayes, Bob Benedi ct .
9 Dr . Kar r on was awar e of t he document s t hat t hey pr ovi ded, and
10 t her e' s, t her e' s summar i es by budget cat egor y of expenses.
11 Those number s wer e t aken f r om, f r omt he - - I guess i t woul d be
12 t he l i ke t he pr of i t l oss st at ement .
13 Q. The summar i es?
14 A. Summar i es.
15 Q. Ri ght ?
16 A. Wel l , i t ' s - - t her e' s al so - - because we used di f f er ent
17 r ecor ds f or 2003, t hey may not have been pr i nt ed. They may
18 st i l l be on a di sk somewher e.
19 Q. You' r e a CPA, ar e you not , ma' am?
20 A. Yes.
21 Q. And you know what a gener al l edger i s, do you not ?
22 A. Yes.
23 Q. And t el l t he j ur y what a gener al l edger i s?
24 A. A gener al l edger i s t he l edger of account s and how t he
25 cost s ar e cat egor i zed by t he account i ng syst em.
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1 Q. Does a gener al l edger r ef l ect ever y t r ansact i on made by t he
2 or gani zat i on?
3 A. Yes, i t shoul d.
4 Q. I t shoul d?
5 THE COURT: Shoul d.
6 Q. And i f t her e ar e changes made or adj ust ment s, somet i mes
7 t her e ar e adj ust ment s because - -
8 A. Yes, t her e ar e adj ust ment s.
9 Q. - - somet hi ng i s mi ssed or some i ncome i s mi ssed, cor r ect ?
10 A. Yes.
11 Q. Wher e woul d t hose adj ust ment s be r ef l ect ed?
12 A. They woul d be r ef l ect ed i n t he gener al l edger , but t hey
13 shoul d al so be car r i ed f or war d t o t he pr of i t and l oss
14 st at ement s.
15 Q. Now, you never saw a gener al l edger her e, cor r ect ? What
16 you j ust descr i bed, di d you ever see t hat at any t i me f r omJ une
17 of 2003, t o t oday?
18 A. I ' ve got t en t he, what ever t he Qui ck Book r ecor ds t hat t hey
19 pr ovi ded t o me.
20 Q. You know t hat t hei r r ecor ds t hat t hey pr ovi ded t o you wer e
21 summar i es; you j ust t est i f i ed t o t hat , cor r ect ?
22 THE COURT: Obj ect i on.
23 THE WI TNESS: But i t ' s some of t he - -
24 THE COURT: One quest i on you' r e aski ng. That ' s a
25 doubl e quest i on. Ask your si ngl e quest i on, Mr . Rubi nst ei n, so
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1 i t ' s cl ear what she' s bei ng asked and what she' s answer i ng t o.
2 Q. I s i t a f act t hat what you wer e suppl i ed wer e summar y
3 char t s?
4 A. I was pr ovi ded summar i es, but I al so saw t he suppor t f or
5 t he summar i es.
6 Q. You made copi es of t hose suppor t f or t he summar y?
7 A. I don' t know t he - - I don' t r emember . I t hi nk t hat t her e
8 shoul d be somewher e, but I don' t r emember speci f i cal l y.
9 Q. Do you r ecal l - - you met wi t h a man named Mar k Spi t z,
10 cor r ect - - Mel Spi t z?
11 A. Mel Spi t z, yes.
12 Q. And he was i nt r oduced t o you as t he new audi t or f or CASI
13 LLC?
14 A. Yes.
15 Q. Cor r ect ? And you met hi msomet i me i n December of 2003,
16 r i ght ?
17 A. Yes.
18 THE COURT: I t hought we' r e t al ki ng about J une, J ul y
19 2003, Mr - -
20 MR. RUBI NSTEI N: We wer e.
21 THE COURT: So now we' r e movi ng t o December . Okay. I
22 j ust want - -
23 MR. RUBI NSTEI N: Two year s l at er .
24 THE COURT: Al l r i ght , okay. So she' s or i ent ed al l
25 r i ght .
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1 MR. RUBI NSTEI N: Wel l get her back t o J ul y, J udge.
2 We' l l get her back t o At l ant a t oo.
3 THE COURT: I hope we' r e f i ni shed wi t h J ul y.
4 Q. Di d Mr . Spi t z pr ovi de you wi t h t wo comput er di sks?
5 A. He pr ovi ded me wi t h new books and r ecor ds.
6 Q. Di d he pr ovi de you wi t h - -
7 A. I don' t r emember i f t her e wer e t wo di sks or not .
8 Q. Wel l , di d you l ook at what he had pr ovi ded you wi t h?
9 A. Yes, I di d.
10 Q. Di d t hey - - di d what Mr . Spi t z pr ovi ded you wi t h cont ai n a
11 gener al l edger ?
12 A. He pr ovi ded expenses by budget cat egor y as - - I don' t - - I
13 don' t r emember i f i t was necessar i l y - -
14 THE COURT: Was i t i n t he f or mof a pr oposed gener al
15 l edger or a gener al l edger of any sor t , or i s i t j ust pr oposed,
16 a summar y of - -
17 THE WI TNESS: Yes.
18 THE COURT: - - t he t ot al expense; whi ch was i t ?
19 THE WI TNESS: Yes, he pr ovi ded - - he pr ovi ded us a
20 gener al l edger and he pr ovi ded summar i es of expenses.
21 Q. And di d you ut i l i ze hi s document s, i n any way, i n cr eat i ng
22 t he f i nanci al r ecor ds t hat you r el i ed upon?
23 A. Yes.
24 Q. And we have bef or e us i n evi dence Exhi bi t 110 and 111. Ar e
25 you - - do you r ecal l what t hose ar e, ma' am?
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1 A. 110, okay. Yes.
2 Q. And when di d you cr eat e t hose exhi bi t s 110 and 111 t hat ' s
3 i n t he books t hat we al l have, t he j ur or s and what have you?
4 A. I n 2004 or - - yeah 2004, 2005.
5 Q. I sn' t i t a f act , ma' am, t hat you cr eat ed t hemi n
6 pr epar at i on f or t hi s t r i al ?
7 A. I cr eat ed t hemat t he r equest f r omt he r equest of
8 i nvest i gat i ons.
9 Q. Par don?
10 A. I cr eat ed t hemat t he r equest of i nvest i gat i ons.
11 THE COURT: Who i nvest i gat i on?
12 THE WI TNESS: Fr omRachel or Ki r k pr ovi ded me wi t h t he
13 r ecor ds I had subpoenaed.
14 THE COURT: I ' msor r y?
15 THE WI TNESS: Fr omt he, f r omour i nvest i gat or s t hey
16 had subpoenaed t he checks, cor r obor at ed t hi s f r omt he banks,
17 t he subpoenaed checks.
18 Q. And, i n f act , you di d t hat i n May of 2008, about a week or
19 t wo bef or e - - a week bef or e t he t r i al st ar t ed, r i ght ?
20 A. No. These wer e cr eat ed - - t hi s, t he dat a base was cr eat ed
21 pr i or t o t hat . I was st i l l - - di d some anal ysi s on t he account
22 because i t had been cr eat ed.
23 THE COURT: When was t hi s r ecor d or i gi nal l y cr eat ed
24 t hat you' r e t al ki ng about her e i n t he comput er , 2004, 2003,
25 2005?
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1 THE WI TNESS: I t was cr eat ed - - i t was cr eat ed i n
2 t wo - - I ' mnot - - because - - I ' ve got a coupl e dat a bases. I t
3 was cr eat ed somet i me i n 2004, 2005. I woul d have t o l ook back
4 and see t he exact - - l ook at my t i me, l ook t o see t he exact
5 t i me i t was cr eat ed.
6 THE COURT: That ' s sat i sf act or y. Now go ahead.
7 Q. Now, di d you exami ne t he CASI , pr i or t o t hemr ecei vi ng you
8 or any member , t o your knowl edge, of t he Of f i ce of The
9 I nspect or Gener al - -
10 MR. KWOK: Obj ect i on.
11 Q. - - exami ne CASI pr i or t o t hemr ecei vi ng t he act ual gr ant on
12 Oct ober 1st - -
13 MR. KWOK: Obj ect i on.
14 Q. - - 2001?
15 THE COURT: Obj ect i on t o t he f or mof t he quest i on i s
16 sust ai ned. You' r e not aski ng f or her knowl edge, so - -
17 MR. RUBI NSTEI N: Okay.
18 THE COURT: Pl ease.
19 Q. I s i t a - - does t he - -
20 MR. RUBI NSTEI N: Wel l , she i s an exper t , your Honor .
21 She was qual i f i ed as an exper t .
22 THE COURT: Not an exper t on t hat , not on when ot her
23 peopl e mi ght have done t hi ngs.
24 Q. Di d you exami ne, on behal f of NI ST, CASI pr i or t o t he
25 gr ant i ng, pr i or t o t hemr ecei vi ng t he gr ant ?
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1 THE COURT: Bef or e t hey r ecei ved t he gr ant , di d you
2 exami ne - - have anyt hi ng t o do wi t h CASI ?
3 THE WI TNESS: No, no.
4 THE COURT: Okay.
5 Q. I t ' s a f act t hat under - - you' r e gover ned by Ti t l e 15, CFR
6 14, cor r ect ?
7 A. For t he gr ant , yes.
8 Q. Yes?
9 A. Yes.
10 Q. And as par t of your r esponsi bi l i t y of t he Of f i ce of t he
11 At t or ney Gener al , t he pr i nci pal of f i cer of t he r eci pi ent of t he
12 gr ant i s eval uat ed f or f i nanci al r esponsi bi l i t y, cor r ect ?
13 MR. KWOK: Obj ect i on.
14 THE COURT: By t he At t or ney Gener al ?
15 Q. No, by t he Of f i ce of t he I nspect or Gener al .
16 THE COURT: Do you know?
17 THE WI TNESS: They submi t - - yeah. They - -
18 THE COURT: Do you know?
19 THE WI TNESS: That doesn' t come t o me. That goes t o
20 anot her sect i on of t he or gani zat i on.
21 Q. I sn' t i t a f act t hat t he key of f i ci al s ar e exami ned as t o
22 t hei r f i nanci al r esponsi bi l i t y?
23 THE COURT: Do you know t hat ?
24 THE WI TNESS: They' r e - -
25 THE COURT: Do you have any knowl edge of t hat ?
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1 THE WI TNESS: They do a backgr ound check bef or e t hey
2 gi ve t he awar ds I t hi nk, yeah.
3 THE COURT: You t hi nk?
4 THE WI TNESS: Yeah, t hey have a sect i on f or NI ST
5 gr ant s f i l e, t hey have backgr ound i nf or mat i on, f i nanci al st uf f .
6 THE COURT: You' r e not i nvol ved i n t hat ?
7 THE WI TNESS: I ' mnot i nvol ved i n t hat .
8 THE COURT: Al l r i ght .
9 Q. But you' r e f ami l i ar wi t h t he f act t hat under t hat sect i on,
10 t he quest i on of whet her or not OI G r evi ews t he appl i cant as t o
11 t hei r r esponsi bi l i t y and as t o t hei r honest y and t hei r
12 f i nanci al st abi l i t y - -
13 MR. KWOK: Obj ect i on.
14 Q. - - i s t he of f i ci al s, cor r ect ?
15 MR. KWOK: Obj ect i on.
16 THE COURT: Do you have any knowl edge - - obj ect i on - -
17 I t hi nk t hi s i s not t he r i ght wi t ness f or t hi s, Mr . Rubi nst ei n.
18 MR. RUBI NSTEI N: J udge, t hey want Dr . Kar r on t o know
19 ever y l i ne i n t hi s st at ut e.
20 THE COURT: I don' t want t o have an ar gument i n f r ont
21 of t he j ur y of t hi s sor t . I f you want t o r ai se i t , you can
22 r ai se i t at t he si de bar , but you can pr obabl y get a
23 st i pul at i on.
24 Q. Ar e you f ami l i ar wi t h Chapt er Ei ght of 15 CFR, 14?
25 A. What i s i t t al ki ng about ?
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1 THE COURT: I f you want t o put t he - - i f you want t o
2 put somet hi ng f r omt he Code of Feder al Regul at i ons i n, you can
3 put i t i nt o evi dence. Let ' s not wast e our t i me wi t h t hi s
4 wi t ness on t hi s subj ect .
5 MR. RUBI NSTEI N: I ' d l i ke t o mar k i t t hen f or
6 i dent i f i cat i on at t hi s t i me as def endant ' s AAA.
7 THE COURT: Show i t t o t he gover nment and - -
8 MR. RUBI NSTEI N: Yes.
9 THE COURT: Gi ve i t t o t he Cl er k and I ' l l have i t
10 mar ked.
11 MR. RUBI NSTEI N: I mar ked i t , J udge.
12 THE COURT: What ?
13 MR. RUBI NSTEI N: I mar ked i t .
14 THE COURT: They Code of Feder al Regul at i ons,
15 par agr aph ei ght , 14, i s t hat cor r ect ?
16 MR. RUBI NSTEI N: Your Honor , i t ' s chapt er ei ght .
17 THE COURT: What have you mar ked i t as?
18 MR. RUBI NSTEI N: AAA.
19 THE COURT: Def endant ' s AAA?
20 MR. RUBI NSTEI N: Yes. I t ' s chapt er ei ght , r ef er r i ng
21 t o page f i ve, your Honor .
22 THE COURT: J ust chapt er ei ght , page f i ve?
23 MR. RUBI NSTEI N: And chapt er ni ne.
24 THE COURT: Not par agr aph 14.
25 MR. RUBI NSTEI N: Chapt er ni ne, page seven.
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1 THE COURT: I ' msor r y, I di dn' t hear t hat .
2 MR. RUBI NSTEI N: Chapt er ni ne, page seven.
3 THE COURT: Ei ght code of Feder al r egul at i ons, chapt er
4 ni ne, page seven; i s t hat cor r ect ?
5 MR. RUBI NSTEI N: Your Honor - -
6 THE COURT: We coul d do t hi s out si de t he pr esence of
7 t he j ur y.
8 MR. RUBI NSTEI N: Yes, your Honor .
9 BY MR. RUBI NSTEI N:
10 Q. As par t of your r esponsi bi l i t y as a member of t he Of f i ce of
11 t he I nspect or Gener al , you' r e pr ovi ded wi t h al l of t hese 15 CFR
12 sect i ons, cor r ect ?
13 MR. KWOK: Obj ect i on.
14 THE COURT: Obj ect i on sust ai ned. Now l et ' s get ahead
15 wi t h t hi s. I t doesn' t bear on t hi s wi t ness' t est i mony. Come
16 on.
17 MR. RUBI NSTEI N: J udge, t hey put on t he boar d - -
18 MR. KWOK: Obj ect i on.
19 MR. RUBI NSTEI N: - - 15 CFR.
20 THE COURT: You coul d put up on t he boar d CFR t oo.
21 Al l you got t o do i s move i t i nt o evi dence.
22 MR. RUBI NSTEI N: I t ' s i n evi dence, J udge. Coul d you
23 put Exhi bi t 4 - -
24 THE COURT: What i s i n evi dence?
25 MR. RUBI NSTEI N: Exhi bi t 4, Gover nment ' s exhi bi t 4.
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1 THE COURT: Al l r i ght . I f i t ' s al r eady i n evi dence,
2 t hen why ar e we mar ki ng t hi s ot her t hi ng f or ?
3 MR. RUBI NSTEI N: Because i t ' s onl y r ef er enced i n
4 Exhi bi t 4. Thi s i t page 11, your Honor .
5 THE COURT: Al l r i ght .
6 MR. RUBI NSTEI N: 7 or 11, l et me see.
7 THE COURT: Do you want t o have i t mar ked i n evi dence,
8 of f er i t i n evi dence.
9 MR. RUBI NSTEI N: Par don, J udge?
10 THE COURT: Look, we' r e i nt er r upt i ng t he
11 cr oss- exami nat i on her e. Let ' s get t hi s t hi ng movi ng. We' ve
12 had a hal f - hour of exami nat i on and we haven' t yet got t en t o
13 anyt hi ng about t hi s wi t ness' t est i mony. Let ' s get on.
14 BY MR. RUBI NSTEI N:
15 Q. When wer e you f i r st cont act ed about t he audi t of t he - -
16 r evi ew what was al l owabl e f or CASI Cor por at i on, CASI , I nc. ?
17 A. End of Apr i l - - appr oxi mat el y May of 2003.
18 Q. And who not i f i ed you?
19 A. Our of f i ce got a r equest f r omNI ST gr ant s of f i ce t o do an
20 audi t , t o r evi ew t he f i nanci al st at us of CASI .
21 Q. And di d you - - and di d you speak t o a per son f r omNI ST,
22 per sonal l y?
23 A. I spoke t o Hope and t o B. J . , Hope Snowden, and who i s t he
24 gr ant s of f i cer , and B. J . Li de, who was t he pr ogr amof f i cer .
25 Q. And di d - -
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1 THE WI TNESS: I t hi nk J ane Or t hwei n, who i s al so a
2 pr ogr amof f i cer .
3 THE COURT: I ' msor r y?
4 THE WI TNESS: And t o J ane Or t hwei n, who i s al so a
5 pr ogr amof f i cer .
6 THE COURT: Who? What ' s t he ot her name?
7 THE WI TNESS: B. J . Li de and J ane Or t hwei n, I t hi nk
8 i t ' s O- r - t - h- w- e- i - n.
9 THE COURT: And i s t her e a t hi r d per son?
10 THE WI TNESS: I coul d' ve t al ked t o one of Hope' s
11 super vi sor s, whi ch - -
12 THE COURT: Al l r i ght .
13 THE WI TNESS: Mar i l yn.
14 Q. Di d you have a meet i ng wi t h t hese peopl e i n per son or over
15 t he t el ephone or what ?
16 A. I had a meet i ng wi t h t hemi n per son.
17 Q. Al l t hr ee of t hem?
18 A. Yes.
19 Q. And di d you subsequent l y - - who i s Wi l l i amF. Bedwel l ?
20 A. He was t he r egi onal I nspect or Gener al f or At l ant a at t he
21 t i me.
22 Q. And di d he assi gn you t o i nvest i gat e t he expenses of CASI ?
23 A. He woul d' ve pr ovi ded t he audi t assi gnment when t he audi t
24 st ar t ed i n May of 2003.
25 Q. And when di d t he audi t act ual l y st ar t ?
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1 A. Wel l , when I got t her e when, when our of f i ce deci ded t o
2 per f or mt he audi t , I cal l ed t o r equest a meet i ng wi t h Dr .
3 Kar r on, wi t h CASI r epr esent at i ves, and t hey wer e r edoi ng t he
4 books.
5 THE COURT: What ' s t he dat e? Al l we need i s t he dat e
6 when, t hat ' s al l , t hat ' s al l he asked.
7 THE WI TNESS: I don' t know - - okay. I don' t - - i n May
8 of 2003. I don' t know t he speci f i c dat e.
9 Q. Di d you have t hat - - i s t hat cal l ed an ent r ance conf er ence?
10 A. We had t he ent r ance conf er ence on J une 18t h when I ar r i ved
11 i n New Yor k.
12 Q. And who di d you meet wi t h?
13 A. Dr . Kar r on and Bob Hayes and J oan Benedi ct , and I don' t
14 r emember Fr ank Spr i ng was t her e or not .
15 Q. And t hat was at - - you met wi t h t hemat t he headquar t er s of
16 CASI ?
17 A. Yes.
18 Q. Cor r ect ? And CASI - - what or gani zat i on had r ecei ved t he
19 gr ant f r omNI ST, t he ATP gr ant f r omNI ST?
20 A. I t hi nk i t was Comput er Ai ded Sur ger y, I ncor por at ed.
21 Q. And you ascer t ai ned t hat Dr . Kar r on was t he pr i nci pal
22 of f i cer of t hat cor por at i on?
23 A. Yes.
24 Q. Wer e you awar e, when you began t he audi t , what t he of f i ci al
25 name of CASI was?
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1 A. I t was at one t i me CASI , Comput er Ai ded Sur ger y I nf or mat i cs
2 Cor por at i on, and so t hey pr ef er r ed t o be cal l ed CASI . So
3 t hat ' s nor mal l y t he name t hat I used f or t hem.
4 Q. Wer e t hey i ncor por at ed; was i t t hen as CASI , I nc?
5 A. Oh, I t hi nk i t coul d have been, yes. Maybe.
6 Q. Wel l , ar e you awar e whet her or not at any t i me t hey changed
7 t hei r name f r omCASI , I nc. t o CASI LLC?
8 A. Yes, t hey had changed t hei r name t o CASI LLC.
9 Q. Now, when you went t o t he l ocat i on at 300 East 33r d St r eet ,
10 apar t ment , i t was apar t ment 1N, cor r ect ?
11 A. I t hi nk t hat ' s t he addr ess.
12 Q. And you had made an appoi nt ment bef or e you got t her e?
13 A. Yes.
14 Q. And when you ar r i ved - - appr oxi mat el y, what t i me di d you
15 get t her e?
16 A. I don' t r emember i f t hat was a mor ni ng or eveni ng. I had
17 come over f r om- - I had t aken t he t r ai n f r omD. C, and I don' t
18 r emember i f I went - - i f i t was i n t he mor ni ng appoi nt ment or
19 eveni ng appoi nt ment or af t er noon appoi nt ment .
20 Q. And f or sur e J oan Hayes was t her e, cor r ect ?
21 A. Yes, I t hi nk J oan Hayes was t her e.
22 Q. Bob Benedi ct was t her e?
23 A. Yes.
24 Q. And Dr . Kar r on was t her e?
25 A. Yes.
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1 Q. Now, wer e t her e ot her peopl e pr esent when you ar r i ved
2 t her e?
3 A. Yes. I t hi nk pr obabl y J i mCox was t her e, and maybe Mat
4 Rot hman.
5 Q. And t hey wer e i dent i f i ed t o you as empl oyees of CASI ?
6 A. Yes.
7 Q. They wer e - - you wer e i nf or med t hey wer e wor ki ng on t he ATP
8 pr oj ect ?
9 A. Yes.
10 Q. And when di d you - - had you t al ked t o J oan Hayes pr i or t o
11 your vi si t on J une 18, 2001?
12 A. I don' t r emember speci f i cal l y i f I t al ked t o her . I coul d
13 have and, i n schedul i ng t he appoi nt ment , because t hey wer e
14 t r yi ng t o r edo t he books, and so we had r eschedul ed. So I ' m
15 not sur e who I - - i f I spoke di r ect l y wi t h Dr . Kar r on f or t hat
16 or i f I t al ked t o one of hi s r epr esent at i ves.
17 Q. And how l ong di d t hi s vi si t t ake, t hi s f i r st vi si t ?
18 A. I t st ar t ed I t hi nk pr obabl y on Wednesday of one week and
19 t hr ough Thur sday or Fr i day t he next week.
20 Q. Now t hi s - - what r oomdi d you meet t hese t hr ee peopl e i n,
21 Dr . Kar r on, Bob Benedi ct - -
22 A. At CASI ' s, at t he CASI , Dr . Kar r on' s apar t ment , CASI
23 of f i ce, t hat , t he f i r st meet i ng?
24 Q. Yes.
25 A. Okay. The f i r st meet i ng was t her e at t he busi ness.
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1 Q. At t he busi ness. And i t was i n t he busi ness sect i on of t he
2 apar t ment ?
3 A. I t was i n t he l i vi ng r oom, I guess t he l i vi ng r oomof t he
4 apar t ment , t he busi ness.
5 Q. You say l i vi ng r oom. Was t her e, wer e t her e couches i n
6 t her e?
7 A. No, t her e wer e comput er s i n t her e.
8 Q. Wer e t her e f ur ni t ur e t hat you woul d expect t o f i nd i n what
9 woul d commonl y be cal l ed a l i vi ng r oom?
10 A. No.
11 Q. And, appr oxi mat el y, how many comput er s wer e t her e?
12 A. I t hi nk t her e wer e f our .
13 Q. And how l ar ge wer e t hey?
14 A. They wer e, t hey wer e l ar ge. I mean, t hey - - I know a
15 coupl e of t hemhad t wo moni t or s. I don' t r emember i f al l f our
16 of t hemhad t wo moni t or s.
17 Q. And wer e t her e wor k ar eas f or peopl e t o wor k at t hat had
18 smal l er comput er s?
19 A. Ther e wer e - - t her e wer e - - I , I don' t r emember . Ther e
20 was, t her e wer e - - I don' t r emember t he si ze of al l t he
21 comput er s.
22 Q. But t her e was al so a bedr oomt her e, cor r ect ?
23 A. Yes.
24 Q. And - -
25 MR. KWOK: Obj ect i on, r el evance.
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1 THE COURT: I wi l l al l ow t he quest i on. I ' l l al l ow t he
2 quest i on. I s t her e a bedr oomi n t he apar t ment ?
3 THE WI TNESS: Oh, I ' msor r y. Yes.
4 Q. I ' mgoi ng t o show you what ' s bei ng mar ked as def endant ' s
5 BBB f or i dent i f i cat i on?
6 THE COURT: 3 B' s?
7 MR. RUBI NSTEI N: 3 B' s, yes, your Honor .
8 Q. And ask you i f you r ecogni ze what i s depi ct ed i n t hat
9 document ?
10 MR. KWOK: Your Honor , may we appr oach t o l ook at i t ?
11 THE COURT: Ther e ar e f our - - i t ' s mor e t han one
12 pi ct ur e.
13 MR. RUBI NSTEI N: Yes, your Honor .
14 THE COURT: Si x pi ct ur es.
15 THE WI TNESS: Yeah, i t ' s - - i t ' s t he CASI of f i ce
16 apar t ment s.
17 Q. Thank you.
18 THE COURT: Al l of i t , t he ent i r e apar t ment ?
19 THE WI TNESS: I t ' s t he sect i on t hat was known as t he
20 l i vi ng r oomof t he apar t ment , woul d have been t he l i vi ng r oom
21 sect i on of t he apar t ment .
22 THE COURT: Pi ct ur es of t he par t of t he l i vi ng r oom?
23 THE WI TNESS: Yeah, i t ' s t he - - i t ' s a smal l l i vi ng
24 r oom. I t has comput er desks ar ound i t .
25 THE COURT: Let ' s get on wi t h t hi s, Mr . Rubi nst ei n,
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1 i nst ead of - -
2 MR. RUBI NSTEI N: Yes, J udge.
3 THE COURT: Let ' s move i t on. We' ve got t o get t o t he
4 t est i mony and what she' s t est i f i ed about , now l et ' s move i t
5 al ong.
6 MR. RUBI NSTEI N: We of f er t hi s i n evi dence.
7 THE COURT: We' ve been her e al most 45 mi nut es on t hi s
8 cr oss- exami nat i on.
9 MR. RUBI NSTEI N: The gover nment t ol d me t hey wer e
10 goi ng t o be 45 mi nut es l ong.
11 THE COURT: Let ' s move i t al ong.
12 MR. RUBI NSTEI N: I want t o of f er BBB i n evi dence.
13 MR. KWOK: No obj ect i on.
14 THE COURT: No obj ect i on? BBB i s r ecei ved i n
15 evi dence.
16 ( Def endant ' s Exhi bi t BBB r ecei ved i n evi dence)
17 MR. RUBI NSTEI N: Put t hi s on t he El mo, pl ease.
18 THE COURT: I guess you have t o - - you have t o move i t
19 si deways t oo f or t he j ur y t o get any i dea. That ' s upsi de down.
20 Q. Now, you see t he scr een i n t he bot t omas you f ace t he
21 pi ct ur e on t he bot t omr i ght por t i on; you see what ' s depi ct ed
22 t her e?
23 A. Yes.
24 Q. Par don?
25 A. The scr een, yes.
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1 Q. And di d you see t hat scr een i n t he apar t ment ?
2 A. I don' t r ecal l i f I saw t he scr een or not . They di d a
3 pr esent at i on, but I was t hi nki ng i t was on t he moni t or ,
4 comput er moni t or s, but I don' t r ecal l i f I saw.
5 Q. And di d you see i n t he, i n 120A t hey pr esent ed an exhi bi t
6 t hat sor t of l ooked l i ke t hi s i t emover her e, a l amp wi t h a
7 pr oj ect i on; di d you see t hat ?
8 A. At t he apar t ment ?
9 Q. At t he apar t ment .
10 A. I don' t r ecal l i f I saw t hat at t he apar t ment .
11 THE COURT: Wel l , when you i dent i f i ed t hi s as Dr .
12 Kar r on' s apar t ment , does i t l ook l i ke t he apar t ment at t he t i me
13 t hat you vi ewed i t i n J ul y 2003; i s t hat a f ai r r epr esent at i on
14 of t he apar t ment and equi pment i n i t at t he t i me i n J ul y 2003?
15 THE WI TNESS: I t , i t had a - - i t had - - I don' t
16 r emember t he - - i f I saw t he scr een, but t he ot her st uf f i s
17 pr obabl y so.
18 THE COURT: What ?
19 THE WI TNESS: The ot her , t he r est of i t pr obabl y.
20 THE COURT: Not pr obabl y.
21 THE WI TNESS: Oh, yeah.
22 THE COURT: You know when t hi s pi ct ur e was t aken?
23 THE WI TNESS: No.
24 THE COURT: Al l r i ght . Wel l , does i t - -
25 THE WI TNESS: Yes.
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1 THE COURT: Ther ef or e, t hat ' s why I ' maski ng you t he
2 quest i on.
3 THE WI TNESS: Yes. I t l ooks - - yeah, but I was - -
4 THE COURT: Not t he apar t ment i t sel f , t he equi pment i n
5 i t .
6 THE WI TNESS: Um, yes, t hey had si mi l ar - - t hey woul d
7 have had - - except f or t he - - I don' t know about t he - - I don' t
8 r emember about t he scr een - - but i t had - - di d have comput er s
9 l i ke t hat and t hi ngs under t he deck and al l t he t hi ngs.
10 THE COURT: Al l r i ght .
11 ( Cont i nued on next page)
12
13
14
15
16
17
18
19
20
21
22
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25
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1 BY MR. RUBI NSTEI N:
2 Q. And t her e was shel vi ng ar ound t he r oom?
3 A. Ther e was shel f i ng.
4 Q. And i t wasn' t f or kni ckknacks, r i ght ? I t was f or
5 comput er - r el at ed i t ems, cor r ect ?
6 THE COURT: That cal l s f or a concl usi on. Let ' s go
7 ahead.
8 Q. Wel l , you as t he audi t or , wer e you i nt er est ed i n
9 det er mi ni ng whet her or not gover nment money was spent on
10 comput er - r el at ed i t ems?
11 A. They had a budget f or equi pment .
12 Q. Now, wer e you at t he apar t ment when t he - - t he pr osecut or
13 r ead t o you a whol e l i st of i t ems t hat wer e sei zed. Wer e you
14 pr esent when t he i t ems wer e sei zed?
15 A. No.
16 Q. At t hat meet i ng i n J une of 2001 wi t h J oan Hayes and Bob
17 Benedi ct , who di d you under st and Bob Benedi ct was?
18 A. J une of - -
19 Q. J une of 2003 when you wer e conduct i ng your audi t .
20 A. He was t he pr oj ect manager .
21 Q. And whi l e you wer e i n t he - - whi l e you wer e at CASI , wer e
22 you pr ovi ded wi t h any document at i on?
23 MR. KWOK: Ti me f r ame, your Honor .
24 A. Document at i on f or what ?
25 MR. KWOK: Ti me f r ame.
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1 THE COURT: Ti me f r ame.
2 MR. RUBI NSTEI N: When she was at t he apar t ment .
3 THE COURT: Whi ch ar e you t al ki ng about ? J ul y?
4 MR. RUBI NSTEI N: I sai d J une, J udge.
5 THE COURT: Al l r i ght . I n J une.
6 MR. RUBI NSTEI N: Fi r st I sai d 2001 and t hen I sai d
7 2003.
8 THE COURT: I don' t want t o hear t hat . I want t o hear
9 her gi ve some t est i mony t hat ' s accur at e and st r ai ght .
10 THE WI TNESS: He sai d document s.
11 Q. Any f i nanci al st at ement s?
12 A. I was gi ven what ever t he Qui ck Book r ecor ds wer e t hat t hey
13 pr ovi ded t o me.
14 Q. Who i s t hey?
15 A. Pr obabl y J oan Hayes, Bob Benedi ct , Fr ank Spr i ng, Dr .
16 Kar r on. I don' t know who speci f i cal l y handed me t he
17 i nf or mat i on.
18 Q. Was t he i nf or mat i on r eady f or you, or di d t hey have t o
19 pr i nt i t out f r omone of t he comput er s?
20 A. They wer e st i l l i n t he pr ocess of r edoi ng t he second set of
21 books.
22 THE COURT: Di d t hey hand i t out t o you or not ?
23 THE WI TNESS: They gave me some of i t i n comput er and
24 some of i t i n har d copy.
25 Q. And wer e you shown t he syst emt hat was used by t he
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1 pr i nci pal - - by t he peopl e at CASI t o keep t hei r r ecor ds?
2 A. Yes.
3 Q. And i n f act ever y check was scanned i nt o t hi s syst em,
4 cor r ect ?
5 A. Yes, t hey scanned i n checks and i nvoi ces.
6 Q. And t he checks, i nvoi ces and backup, cor r ect ?
7 A. Yeah, t he i nvoi ces woul d be t he backup. They scanned i nt o
8 t he comput er and dest r oyed t he or i gi nal i nvoi ce.
9 Q. And i n your audi t of r evi ewi ng whenever a check was i ssued
10 and cashed was t her e an i nvoi ce t hat backed up t hat par t i cul ar
11 i t em?
12 A. I don' t r emember speci f i cal l y what i t l ooked l i ke, what
13 t hat r ecor d l ooked l i ke.
14 Q. I ' mnot aski ng you what t he r ecor d l ooked l i ke, ma' am.
15 A. You' r e aski ng me i f t her e was a check backi ng up t he
16 i nvoi ce at t ached t o each i nvoi ce.
17 Q. Ri ght .
18 A. I don' t r emember speci f i cal l y i n t he i nst ance of CASI i f
19 t hey had copi es of checks and copi es of i nvoi ces at t ached t o
20 each ot her . I t ' s possi bl e, but I don' t speci f i cal l y r ecol l ect
21 i f t hey di d or not .
22 Q. Wel l , i f t hey had an expense t hat t hey wr ot e a check f or
23 and t her e was no i nvoi ce as a backup, woul d you make a not e of
24 t hat as an audi t or ?
25 A. Yes.
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1 Q. And i n f act i n t hi s case you made no not es of mi ssi ng
2 i nvoi ces t o mat ch wi t h checks, cor r ect ?
3 A. Ri ght , I don' t t hi nk so, r i ght .
4 Q. Now - -
5 A. For t he sampl e r evi ewed.
6 Q. That was t he f i r st r evi ew, t he sampl e r evi ew, cor r ect ?
7 A. Bot h of t hem- - yes, t hey woul d have sampl e r evi ew.
8 Q. Di d you ask quest i ons of Dr . Kar r on?
9 A. Yes.
10 Q. And di d you ask hi mf or speci f i c i nf or mat i on?
11 A. Yes.
12 Q. And gi ve us an i l l ust r at i on of somet hi ng you asked Dr .
13 Kar r on f or .
14 THE COURT: I f you r emember .
15 A. Wel l , I know I asked hi mwhat t he empl oyees di d. That ki nd
16 of i nf or mat i on? I mean - -
17 Q. Di d he r espond t o you?
18 A. Yes.
19 Q. Di d he r espond t o any quest i on you asked hi m?
20 A. I t hi nk so.
21 Q. Di d he of f er t o l et you use t he - - excuse me one second - -
22 and di d t hey act ual l y show you on a comput er scr een document s
23 t hat had been st or ed i n t he comput er - -
24 A. Yes, yes.
25 Q. - - t o show t he expenses t hat wer e i ncur r ed and t he backup
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1 why i t was l egi t i mat e? Ri ght ?
2 A. They showed, document s - -
3 MR. KWOK: Obj ect i on t o f or m.
4 Q. Wel l , backup t o expl ai n what t he expense was f or .
5 THE COURT: Over r ul ed. Coul d I hear t he quest i on
6 back.
7 ( Recor d r ead)
8 THE COURT: I t doesn' t sound l i ke a compl et e answer .
9 THE WI TNESS: Ther e was an obj ect i on, so I di dn' t know
10 i f you - -
11 A. They showed document s. They showed copi es of i nvoi ces t hat
12 t hey had scanned i nt o t he comput er .
13 Q. Now, you used as a st ar t i ng poi nt - - di d you use as a
14 st ar t i ng poi nt f or your audi t what was t he schedul es of t he
15 most r ecent l y appr oved budget ?
16 A. Yes.
17 THE COURT: What you wer e t ol d was t he most r ecent l y
18 appr oved budget .
19 THE WI TNESS: Yes, what I was t ol d was t he most
20 r ecent l y appr oved budget . I t hi nk i t was amendment 2.
21 Q. And i n f act when you wer e i n t he apar t ment - - wi t hdr awn.
22 You became awar e dur i ng t he cour se of your audi t t hat
23 t her e wer e cer t ai n expenses at t r i but abl e t o wor k t hat had been
24 done i n t he apar t ment , shel vi ng and i nst al l at i on of wi r i ng and
25 t hi ngs of t hat nat ur e, cor r ect ?
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1 A. Yes. Yes.
2 Q. Di d you see when you wer e i n t hat apar t ment anyt hi ng t hat
3 you woul d descr i be as const r uct i on?
4 A. The shel ves and t he desks, t he t abl es.
5 THE COURT: Wer e t hey under const r uct i on?
6 THE WI TNESS: No, t hey wer en' t under const r uct i on at
7 t he t i me.
8 Q. The shel ves and t he desks. And i s i t f ai r t o say t hat you
9 di sal l owed t hat expense?
10 A. Yes.
11 Q. And ar e you f ami l i ar wi t h - - and on what basi s di d you
12 di sal l ow t hat expense?
13 A. I t wasn' t al l owabl e per t he budget .
14 Q. Equi pment was al l owabl e, was i t not ?
15 A. I di dn' t quest i on t he equi pment amount up t o t he budget
16 cat egor y.
17 Q. Wel l , ar e you awar e t hat under t he cat egor y of equi pment
18 you ar e per mi t t ed t o do a cer t ai n amount of what you woul d cal l
19 si t e pr epar at i on?
20 A. They st i l l had mor e cost - - t he equi pment was st i l l over
21 t he budget wi t hout t hat cost , so sayi ng whet her t hat was
22 al l owabl e or not al l owabl e was i r r el evant as t o whet her i t
23 woul d be qual i f i ed as al l owabl e equi pment cost s.
24 Q. The money was spent - - i n ot her wor ds, ar e you sayi ng now
25 t hat what ever changes wer e made, physi cal changes wer e made t o
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1 t he apar t ment , wer e made f or t he benef i t of t he pr ogr amf or
2 car r yi ng out t he pr oj ect ?
3 MR. KWOK: Obj ect i on.
4 THE COURT: I di dn' t hear her say t hat .
5 Q. Wel l , ar e you f ami l i ar wi t h t he f act t hat under equi pment
6 you ar e per mi t t ed - - " ATP f unds may, however , be used f or
7 const r uct i on of exper i ment al r esear ch and devel opment
8 f aci l i t i es t o be l ocat ed wi t hi n a new or exi st i ng bui l di ng,
9 pr ovi ded t he equi pment or f aci l i t i es ar e essent i al f or car r yi ng
10 out t he pr oj ect . I f such cost s ar e pr oposed, i ncl ude bel ow and
11 pr ovi de j ust i f i cat i on. " Ar e you f ami l i ar wi t h t hat ?
12 A. Yes.
13 Q. And sal ar i es, you r evi ewed t he sal ar i es, di d you not ?
14 A. Yes.
15 Q. And what was your - - you di sal l owed sal ar i es, di d you not ,
16 as par t of you comi ng t o t hi s hal f a mi l l i on dol l ar f i gur e,
17 r i ght ?
18 A. Whi ch f i gur e ar e we t al ki ng about now?
19 Q. Sal ar i es.
20 A. Ar e we t al ki ng about t he J ul y r epor t or t he December
21 r epor t ?
22 Q. I n your t est i mony di d you say t hat you di sal l owed - -
23 THE COURT: No, you' ve got t o gi ve her some t i me
24 f r ame, Mr . Rubi nst ei n.
25 Q. Wel l , how about di d t her e come a t i me t hat you i n your
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1 eval uat i on and anal ysi s of CASI , t hat you eval uat ed t he
2 sal ar i es t hat wer e bei ng pai d?
3 A. Yes.
4 Q. And when was t hat ?
5 A. I n t he December 2003 r evi ew.
6 Q. And at t hat t i me di d you make a det er mi nat i on as t o how
7 much sal ar y was appr ovabl e?
8 A. Yes.
9 Q. How much sal ar y was budget ed f or CASI f or t he f i r st year ,
10 Oct ober 1, 2001 t o Sept ember 30, 2002, t he f i r st year of t he
11 gr ant ?
12 A. I woul d have t o l ook back at some document at i on t o know t he
13 speci f i c number .
14 Q. Par don? Do you have anyt hi ng t hat - -
15 A. Dr . Kar r on' s sal ar y was budget ed 175, 000, and t he ot her
16 empl oyees' sal ar i es wer e budget ed at 150, 000.
17 Q. And how much of Dr . Kar r on' s $175, 000 sal ar y di d you al l ow?
18 A. I t hi nk 85 per cent of i t . I s t hat r i ght ?
19 THE COURT: You l ook at t he paper s and t el l us. Don' t
20 say you t hi nk.
21 MR. KWOK: Your Honor , I don' t know whet her
22 Mr . Rubi nst ei n i s aski ng per t he audi t or per t he bank r ecor ds
23 anal ysi s.
24 MR. RUBI NSTEI N: I ' maski ng her audi t , what she
25 al l owed.
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1 THE COURT: Whi ch audi t ?
2 MR. RUBI NSTEI N: I n any audi t .
3 THE COURT: 2004? J ul y 2003? Whi ch audi t ? The f i nal
4 audi t ? The one t hat went up on t he boar d?
5 Q. Wel l , di d your number s change bet ween your f i r st audi t and
6 your second audi t ?
7 A. The f i r st - - t he number s - - t he number on t he f i r st audi t
8 di dn' t get t hat det ai l ed. The shor t r epor t number of t he
9 205, 000 number came f r omt he r evi sed books, how much t hat CASI
10 sai d i t spent f or t he NI ST pr oj ect , excl udi ng t he expenses t hat
11 i t had f or CASI , t he di f f er ence bet ween t hat and t he deposi t s.
12 So, t hat number di dn' t come f r oman anal ysi s of t he speci f i c
13 budget cost cat egor i es. The December r epor t , af t er I met wi t h
14 Mel Spi t z, was an anal ysi s of t he speci f i c budget cat egor i es,
15 si nce Dr . Kar r on t ol d me he had addi t i onal new r ecor ds.
16 Q. Do you want t o l ook at t he appendi x t o your dr af t r epor t
17 t hat ' s i n evi dence, whi ch i s Exhi bi t - -
18 A. Ri ght . And t hat one says - -
19 THE COURT: Wai t . Wai t unt i l he gi ves you t he
20 exhi bi t .
21 THE WI TNESS: I ' msor r y.
22 Q. 61. I ' msor r y. 62. Appendi x 1, page 2 of 8. Does t hat
23 r ef r esh your r ecol l ect i on of how much of Dr . Kar r on' s appr oved
24 sal ar y you di sal l owed t o come t o your f i gur e of over $500, 000?
25 A. I t hi nk 15 per cent .
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1 Q. Par don?
2 A. 15 per cent . The chi ef t echni cal of f i cer , r i ght ?
3 Q. And t hat was based on an hour l y comput at i on?
4 A. That was based on an est i mat e of t i me spent on ot her
5 act i vi t i es ot her t han t he NI ST gr ant .
6 Q. What act i vi t i es was t hat ?
7 A. The busi ness of CASI .
8 Q. I s i t a f act t hat CASI had no ot her busi ness?
9 A. CASI was a busi ness t hough.
10 Q. But t hei r onl y pr oj ect was t he ATP pr oj ect ?
11 A. Ri ght , but t her e woul d st i l l be expenses associ at ed wi t h
12 t he exi st ence of t he busi ness.
13 Q. When t he budget was appr oved, i t was appr oved f or $175, 000,
14 cor r ect , sal ar y?
15 A. Cor r ect .
16 Q. And was t her e any i ndi cat i on of how many hour s Dr . Kar r on
17 woul d spend i n or der t o ear n hi s $175, 000 on t hi s ATP pr oj ect ?
18 A. I don' t r emember i f t hey speci f i cal l y had t i me sheet s or
19 not .
20 Q. Di d you det er mi ne how many hour s a week Dr . Kar r on wor ked
21 on t he ATP gr ant ?
22 A. The sal ar y, t he hour s don' t - - i t doesn' t necessar i l y
23 mat t er t he hour s. I t ' s per cent of t i me wor ked.
24 Q. Wel l , what about Mr . Gur f ei n, was he budget ed f or sal ar y?
25 A. Yes.
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1 Q. How much was he budget ed f or sal ar y?
2 A. I don' t r ecal l . I don' t have a copy of t he budget i n f r ont
3 of me.
4 Q. So you over r ul ed ATP t hat aut hor i zes $175, 000 f or Dr .
5 Kar r on, cor r ect ?
6 MR. KWOK: Obj ect i on.
7 THE COURT: Obj ect i on sust ai ned t o t he f or mof t he
8 quest i on.
9 Q. I n f act , does i t r ef r esh your r ecol l ect i on t hat Mr . Gur f ei n
10 was t o r ecei ve $100, 000 annual sal ar y?
11 THE COURT: Does t hat r ef r esh your r ecol l ect i on?
12 A. I f I coul d see a copy.
13 Q. Why don' t you l ook at t he same page. See i f i t r ef r eshes
14 your r ecol l ect i on. He was t he chi ef oper at i ng of f i cer ,
15 cor r ect ?
16 A. Yes.
17 Q. Di d t hat r ef r esh your r ecol l ect i on of what Mr . Gur f ei n' s
18 sal ar y was?
19 A. You sai d t hat i t was $100, 000 accor di ng t o t he budget .
20 Q. And di d you al l ow $100, 000 i n cost s f or Mr . Gur f ei n?
21 A. J ust because i t ' s al l owabl e i n t he budget cat egor y doesn' t
22 make i t al l owabl e - -
23 THE COURT: The quest i on i s di d you or di dn' t you.
24 THE WI TNESS: I - -
25 THE COURT: Yes or no?
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1 THE WI TNESS: I don' t have t he i nf or mat i on her e t o
2 t el l how much was al l owabl e.
3 THE COURT: What does your r epor t say r i ght on t he
4 f r ont page?
5 THE WI TNESS: I t says how much.
6 THE COURT: Page 2 of 8 on t he appendi x.
7 THE WI TNESS: Ri ght . I t says how much i s quest i oned;
8 i t doesn' t say how much was al l owed.
9 THE COURT: Wel l , when you say i t ' s quest i oned, i sn' t
10 t hat you di sal l ow i t subj ect t o t hei r comi ng back t o you t o
11 show t hat i t was appr opr i at e?
12 THE WI TNESS: J ust because t her e i s a budget cat egor y
13 wi t h an al l owabl e amount , t hat means t hey al l ow up t o t hat
14 amount i f appl i cabl e t o t he NI ST pr oj ect or par t of t he NI ST
15 pr oj ect cost . I t doesn' t mean you ar e ent i t l ed t o t hat amount
16 of money no mat t er what .
17 Q. I t doesn' t mean you ar e not ent i t l ed t o i t ei t her , cor r ect ?
18 A. I f i t ' s al l owabl e i n t he NI ST ATP gr ant cost i t ' s al l owabl e
19 up t o t hat amount . J ust because you have an amount i n a budget
20 f or an expense doesn' t mean you ar e ent i t l ed t o t hat amount i f
21 you di dn' t have al l owabl e cost s f or t hat amount .
22 Q. I f you have a budget f or $100, 000 f or equi pment and you
23 spend $100, 000 on equi pment f or your pr oj ect , i s t hat OK?
24 A. I f i t ' s a NI ST ATP pr oj ect equi pment .
25 Q. Wel l , her e t her e i s onl y one pr oj ect , cor r ect ?
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1 THE COURT: I ' msor r y?
2 Q. I n your audi t di d you f i nd t hat CASI was doi ng any ot her
3 pr oj ect ot her t han t he NI ST ATP pr oj ect ?
4 A. They wer e wor ki ng on t he NI ST ATP pr oj ect . They may - -
5 t hey al so had been t r yi ng t o get ot her awar ds.
6 Q. For t hi s pr oj ect .
7 THE COURT: Obj ect i on. Do you know what t hey wer e
8 f or , ot her awar ds?
9 THE WI TNESS: Onl y t he one t hat kept comi ng up f r om
10 t he St at e of New Yor k t hat di dn' t happen.
11 Q. They want ed t o get f unds f r omt he St at e of New Yor k t o add
12 t o t hi s NI ST ATP pr oj ect , cor r ect ?
13 MR. KWOK: Obj ect i on.
14 THE COURT: Obj ect i on sust ai ned.
15 Q. How much of Mr . Gur f ei n' s $100, 000 sal ar y di d you di sal l ow?
16 A. 25 per cent .
17 Q. So, t hat woul d be $25, 000, cor r ect ?
18 A. Yes.
19 Q. I f he got 100, 000, i t woul d be 25, 000?
20 A. Yes.
21 Q. And on what basi s di d you r educe hi s sal ar y by 25 per cent ?
22 A. Because of t he dut i es t hat he di d.
23 Q. He spent onl y 75 per cent of hi s t i me on NI ST ATP pr oj ect s,
24 i s t hat your t est i mony?
25 A. Wel l , t he t hi ngs t hat Mr . Gur f ei n was doi ng wer e not
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1 necessar i l y t hi ngs f or t he r esear ch, t hey wer e t o cont i nue t he
2 pr oj ect . So, t hey wer en' t necessar i l y al l al l owabl e NI ST
3 pr oj ect expendi t ur es f or gr ant pur poses.
4 Q. Wel l , i sn' t i t a f act t hat Mr . Gur f ei n' s sal ar y was
5 appr oved on t he basi s t hat onl y 75 per cent of hi s t i me woul d be
6 devot ed t o t he NI ST pr oj ect ?
7 A. Ri ght . And so when he car r i ed i t out t hen he woul dn' t have
8 had - -
9 Q. Ar e you awar e of t hat , ma' am?
10 THE COURT: Do you know what t he si t uat i on was i n
11 t er ms of how hi s sal ar y was comput ed - -
12 THE WI TNESS: I have t o see t he budget .
13 THE COURT: - - f or t he budget ?
14 THE WI TNESS: I know i t was a per cent age of what ever
15 hi s sal ar y was was al l owabl e.
16 Q. I amaski ng you, ma' am, whet her or not when you made t he
17 det er mi nat i on and you put i n your r epor t t hat $25, 000 - - t hi s
18 i s r eadi ng f r omappendi x A, page 2 of 8 pages, i t says, $25, 000
19 of t he 71, 550 i s quest i oned f or t he chi ef oper at i ng of f i cer due
20 t o 25 per cent of hi s t i me and sal ar y bei ng al l ocat ed t o
21 non- NI ST act i vi t i es. Cor r ect ?
22 A. That ' s what i t says, yes.
23 Q. So, t hat he i s supposed t o i nvest 75 per cent of hi s t i me t o
24 a NI ST act i vi t y, accor di ng t o your cal cul at i on, r i ght ?
25 A. Yes.
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1 Q. But i sn' t i t a f act t hat t he budget speci f i cal l y appr oved
2 by NI ST ATP pr ovi ded t hat Gur f ei n was onl y t o spend 75 per cent
3 of hi s t i me on t he pr oj ect ?
4 A. So, i t had 75 per cent of hi s sal ar y t i mes t hat came up wi t h
5 a l ower number t han a hundr ed per cent of hi s sal ar y t hat was
6 al l owed f or t he budget .
7 THE COURT: What ar e you sayi ng?
8 THE WI TNESS: Wel l , i f hi s - - I don' t r emember . But
9 i f hi s sal ar y was $100, 000 a year , and NI ST al l owed 75 per cent
10 of t hat as NI ST ATP f or t he budget , t hen 75 t i mes a hundr ed
11 woul d be $75, 000 of hi s sal ar y coul d be r ei mbur sed by t he NI ST
12 pr oj ect cost s, and t he ot her 25, 000 woul d be pai d by CASI .
13 THE COURT: Let me ask you a quest i on. What di d you
14 under st and t he budget $100, 000 t o be payi ng hi m? Di d you
15 expect i t t o be f or 75 per cent of hi s t i me?
16 THE WI TNESS: 75 per cent of t he t i me, t he sal ar i ed
17 amount .
18 THE COURT: That ' s what i t was i n t he budget .
19 THE WI TNESS: That ' s what t he budget woul d al l ow i f he
20 devot ed t hat much t i me t o t he pr oj ect , yes.
21 THE COURT: Now, so i f he spent 75 per cent of hi s t i me
22 on t he budget , why wasn' t he ent i t l ed t o t he f ul l amount of t he
23 $100, 000?
24 THE WI TNESS: No, not wor ki ng on t he budget . But t he
25 NI ST budget mul t i pl i es i t out acr oss t hat says $100, 000, t i mes
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1 75 per cent of hi s t i me, so t hat woul d be $75, 000 t hat NI ST
2 woul d r ei mbur se of t he sal ar y t hat he was pai d. I ' mnot sur e
3 i f hi s sal ar y was $100, 000. What ever hi s sal ar y was, t i mes 75
4 per cent of t he t i me, t hen NI ST woul d pay t hat amount .
5 I s t hat how t hat ' s wr i t t en? I don' t - -
6 THE COURT: I s t hat how what i s wr i t t en?
7 THE WI TNESS: The budget .
8 THE COURT: So, you ar e j ust accept i ng what Mr . - -
9 THE WI TNESS: No, I ' msayi ng how i t ' s wr i t t en.
10 THE COURT: Wel l , you ar e t he one we' r e aski ng how
11 i t ' s wr i t t en, not hi m.
12 THE WI TNESS: OK, I need a copy of t he budget t o see.
13 THE COURT: Wel l , you bet t er exami ne a copy of t he
14 budget bef or e you st ar t answer i ng quest i ons.
15 THE WI TNESS: OK.
16 THE COURT: Thi s i sn' t hypot het i cal st uf f .
17 THE WI TNESS: Ri ght .
18 THE COURT: Do you under st and?
19 THE WI TNESS: Yes.
20 THE COURT: Al l r i ght .
21 MR. RUBI NSTEI N: Why don' t we t ur n t o Gover nment
22 Exhi bi t 10B.
23 THE COURT: Do you have a copy bef or e you?
24 THE WI TNESS: Yes.
25 THE COURT: Al l r i ght .
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1 Q. Have you r evi ewed t hat , ma' am?
2 A. Yes. Wher e i s t he t hi ng t hat - - t hi s i s - - wher e i s t he
3 t hi ng t hat i ncor por at es t hi s par t of t he awar d or of t he
4 budget ? Because f or amendment 2 what i t shoul d say i s i f hi s
5 annual sal ar y i s $100, 000, t hen 75 per cent of t hat woul d be
6 $225, not $300, 000, so t hi s shoul d be mul t i pl yi ng t hi s acr oss.
7 I t hi nk t hese ar e pr epar ed by I t hi nk CASI and submi t t ed.
8 THE COURT: 10B?
9 THE WI TNESS: Yes.
10 THE COURT: I s submi t t ed by t hem?
11 THE WI TNESS: I s submi t t ed by CASI t o NI ST.
12 THE COURT: Wher e i s what t he awar d appr oved, t he
13 budget t hat t he awar d appr oved? Do we have t hat exhi bi t ?
14 MR. KWOK: I t ' s Gover nment Exhi bi t 22, I bel i eve, your
15 Honor .
16 THE COURT: What ?
17 DEPUTY COURT CLERK: Gover nment 22.
18 THE COURT: 22.
19 MR. RUBI NSTEI N: Your Honor , I dr aw. I f you l ook
20 at - -
21 THE COURT: She i s l ooki ng at 22 now. Let ' s st ay wi t h
22 what she i s l ooki ng at and t hen you can ask a quest i on.
23 THE WI TNESS: Ther e shoul d be somet hi ng t hat br eaks
24 down t he expenses by year s.
25 MR. RUBI NSTEI N: Can I ask a quest i on, your Honor ?
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1 THE COURT: She hasn' t answer ed t he quest i on yet .
2 THE WI TNESS: Ther e shoul d be - -
3 THE COURT: Thi s i s t he budget t hat was appr oved.
4 THE WI TNESS: Ther e shoul d be somet hi ng t hat br eaks
5 down f or t he year one t hat l ooks si mi l ar t o t hi s, t hat br eaks
6 down by year one, year t wo, year t hr ee, i nst ead of j ust al l
7 t hr ee t oget her , and i t shoul d - -
8 THE COURT: I don' t f ol l ow what you' r e sayi ng. But
9 now you can see t hat t hey r equest ed f or t he t hr ee year s
10 $1, 330, 000, l ooki ng at 10B - -
11 THE WI TNESS: Yes.
12 THE COURT: - - f or per sonnel .
13 THE WI TNESS: And t hen l ooki ng at page 2 of t hi s
14 exhi bi t , t he t hr ee year t ot al i s $1, 075, 000.
15 THE COURT: So, t her e was some adj ust ment made.
16 THE WI TNESS: Yes, t her e i s some adj ust ment .
17 THE COURT: But you don' t know what adj ust ment was
18 made.
19 THE WI TNESS: Mat hemat i cal l y t hi s shoul d show - - t he
20 annual sal ar y i s $100, 000. I t shoul d be t hr ee t i mes a 100, 000,
21 t i mes 75 per cent , and t hat woul dn' t be $300, 000, so t her e i s a
22 mat hemat i cal t hi ng t her e.
23 Q. Ar e you awar e t hat t he $325, 000 al l ocat i on f or sal ar y and
24 wages was of f an amended budget t hat i ni t i al l y had $375, 000
25 t hat was appr oved?
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1 A. Yes.
2 THE COURT: You ar e?
3 THE WI TNESS: Wel l , I know t hat t hi s budget was
4 adj ust ed, and t hey had moved some money t o consul t i ng t o pay
5 f or Geor ge Wol ber g.
6 THE COURT: What ?
7 THE WI TNESS: They moved some money f r ompayr ol l cost
8 t o consul t i ng cost s or subcont r act i ng cost t o pay f or Wol ber g.
9 THE COURT: I ' mt r yi ng t o have you t el l us what you
10 wer e l ooki ng at - -
11 THE WI TNESS: Oh.
12 THE COURT: - - whi ch al l owed you t o deduct or di sal l ow
13 Mr . El i sha Gol dber g' s sal ar y i n t he amount of $25, 000. That ' s
14 what I ' maski ng you t o show us, what you wer e r el yi ng on t o do
15 t hat . Now, woul d you show i t t o us.
16 THE WI TNESS: OK. The suppor t i ng document t hat shows
17 t he br eakdown of cost s by year , t hat l ooks si mi l ar t o 10B, has
18 si mi l ar per sonnel , f r i nge benef i t s, t r avel , i t br eaks down t he
19 cost as a year one, year t wo, year t hr ee, i nst ead of a t ot al
20 cost . On t hi s i t says l i ke Lee Gur f ei n, $100, 000 annual
21 sal ar y, per cent age of t i me on pr oj ect i s est i mat ed, t he
22 budget ed i s est i mat ed t o be 75 per cent , and so t hat shoul d not
23 be $300, 000, i t shoul d be i t shoul d be 225. Pl us
24 mat hemat i cal l y i t ' s not r i ght .
25 THE COURT: Al l r i ght . Wel l , we have t o t ake - -
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1 THE WI TNESS: But t her e i s some ot her document .
2 THE COURT: You bet t er st udy your document s, and we
3 bet t er t ake a l uncheon br eak. I t ' s t en af t er one, so t he j ur y
4 i s excused unt i l t en af t er t wo. And t he par t i es ar e i nst r uct ed
5 t hey ar e not t o t al k t o t he wi t ness dur i ng t he br eak.
6 ( Luncheon r ecess)
7 ( Cont i nued on next page)
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1 AFTERNOON SESSI ON
2 2: 05 p. m.
3 ( J ur y not pr esent )
4 MR. KWOK: Your Honor , may we j ust r ai se one qui ck
5 i ssue wi t h t he cour t - -
6 THE COURT: Yes.
7 MR. KWOK: - - bef or e we cal l i n t he j ur y? I bel i eve
8 t he wi t ness j ust now was r ef er r i ng t o some wor k paper s or ot her
9 mat er i al s t hat she used t o assi st her i n conduct i ng her audi t .
10 I bel i eve she i s r ef er r i ng t o t hat box of document s t her e whi ch
11 we j ust got on Monday. I t l ooks l i ke mat er i al s t hat she
12 gat her ed t o assi st her i n her wor k. We haven' t l ooked at i t .
13 Def ense hasn' t l ooked at i t . But i f she i s r ef er r i ng t o and i f
14 she want s t o l ook at t hat t o assi st her , I was wonder i ng i f
15 anyone had any obj ect i on t o gi ve t hat t o t he wi t ness.
16 MR. RUBI NSTEI N: J udge, I suggest ed t o Mr . Kwok t hat I
17 woul d have no pr obl emi f she r evi ewed i t and showed us whi ch
18 document she was goi ng t o r el y upon. I don' t want t o have
19 anot her 2000 si t uat i on.
20 THE COURT: Do you want t o r ecal l her and have her
21 come back, have anot her wi t ness? The j ur y i s al r eady i nqui r i ng
22 about wher e we ar e i n t hi s case, how many mor e wi t nesses, how
23 l ong.
24 MR. KWOK: We can t ake t hat out of or der .
25 THE COURT: Wel l , bot h l awyer s have t o agr ee.
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1 MR. KWOK: We have our next wi t ness her e who i s Lee
2 Gur f ei n. We can t ake hi mf i r st , and i n t he meant i me we can
3 have t he pr i or wi t ness r evi ew t he box of document s she was
4 r ef er r i ng t o.
5 MR. RUBI NSTEI N: I t sounds al l r i ght . I amj ust goi ng
6 t o use t he f aci l i t i es f or a second.
7 THE COURT: Let ' s cal l t he j ur y i n.
8 ( Cont i nued on next page)
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1 ( J ur y pr esent )
2 THE COURT: Ladi es and gent l emen, Ms. Ri l ey want s t o
3 r evi ew her per sonal f i l e i n or der t o gi ve you an answer t o t he
4 quest i on t hat was pendi ng, so she i s subj ect t o r ecal l f or t hat
5 quest i on and cont i nued cr oss- exami nat i on. I n or der t o save
6 t i me, we have anot her wi t ness.
7 Wi l l t he cl er k swear i n t he wi t ness, pl ease.
8 ELI SHA GURFEI N,
9 cal l ed as a wi t ness by t he gover nment ,
10 havi ng been dul y swor n, t est i f i ed as f ol l ows:
11 DEPUTY COURT CLERK: St at e your name, spel l your f i r st
12 and your l ast name sl owl y f or t he r ecor d, pl ease.
13 THE WI TNESS: El i sha Gur f ei n, E- L- I - S- H- A. Last name
14 G- U- R- F- E- I - N.
15 THE COURT: Pl ease pr oceed, Mr . Ever del l .
16 DI RECT EXAMI NATI ON
17 BY MR. EVERDELL:
18 Q. Good af t er noon, Mr . Gur f ei n.
19 A. Good af t er noon.
20 Q. Wher e do you wor k?
21 A. I cur r ent l y wor k at New Yor k Uni ver si t y and Wi l l i am
22 Pat t er son Uni ver si t y.
23 Q. What do you do at t hose uni ver si t i es?
24 A. I t each.
25 Q. What do you t each?
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1 A. I t each economi cs and f i nance at Wi l l i amPat t er son, and I
2 t each cour ses on nat ur al r esour ces at New Yor k Uni ver si t y.
3 Q. How l ong have you t aught at t hose uni ver si t i es?
4 A. For a f ew year s.
5 Q. What di d you do bef or e you wer e a t eacher ?
6 A. I had a company of my own i n commodi t y t r adi ng.
7 Q. How l ong di d you do commodi t i es t r adi ng?
8 A. Oh, wi t h my own company about 20 year s and bef or e t hat f or
9 t en.
10 Q. And bef or e you wer e a commodi t i es t r ader , what di d you do?
11 A. I wor ked f or t he def ense i ndust r y. I wor ked f or a company.
12 The name of t he company was Fur k & El mer .
13 Q. What di d you do f or t hat company?
14 A. I was i nvol ved i n get t i ng - - pur sui ng gover nment cont r act s
15 f or t he company.
16 Q. How l ong di d you do t hat f or ?
17 A. Ten year s.
18 Q. What i s your educat i onal backgr ound?
19 A. I have a bachel or ' s degr ee i n mat hemat i cs, and I have an
20 MBA wi t h a speci al t y i n f i nance.
21 Q. And you ment i oned gover nment cont r act s. Coul d you expl ai n
22 t hat a l i t t l e bi t mor e.
23 A. Wel l , I was i nvol ved i n t r yi ng t o obt ai n gover nment
24 cont r act s f or t he company, but most l y t he Def ense Depar t ment
25 and ot her agenci es of t he gover nment .
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1 Q. Mr . Gur f ei n, di d t her e come a t i me when you met a man named
2 Dani el Kar r on?
3 A. Yes.
4 Q. Do you see Mr . Kar r on i n t he cour t r oomt oday?
5 A. Yes.
6 Q. Coul d you pl ease poi nt hi mout and descr i be an ar t i cl e of
7 cl ot hi ng.
8 A. He i s si t t i ng i n t he cour t r oomwi t h a pl ai d shi r t .
9 MR. EVERDELL: Let t he r ecor d i ndi cat e t hat he has
10 i dent i f i ed t he def endant .
11 THE COURT: The r ecor d wi l l so i ndi cat ed.
12 Q. How di d you f i r st meet t he def endant ?
13 A. A mut ual acquai nt ance some t i me back, pr obabl y i n 2000
14 r oughl y, I ' mnot sur e.
15 Q. Was t hat t he f i r st t i me you met hi m?
16 A. Yes.
17 Q. Di d t her e come anot her t i me when you met hi m?
18 A. Yes.
19 Q. When was t hat r oughl y?
20 A. I n t he spr i ng or ear l y summer of 2001.
21 Q. And what was t he r eason f or t hat second meet i ng?
22 A. Dr . Kar r on t ol d me t hat he was goi ng t o pur sue a gr ant f r om
23 t he Depar t ment of Commer ce and t hat he i ndi cat ed t o me t hat
24 because I had backgr ound i n gover nment cont r act s and i n
25 busi ness, he asked me t o hel p hi mwr i t e t hat pr oposal .
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1 Q. And was he appl yi ng f or t he gr ant on behal f of hi msel f or a
2 company?
3 A. On behal f of a company.
4 Q. What company was t hat ?
5 A. CASI .
6 Q. What ' s CASI st and f or ?
7 A. Comput er Ai ded Sur ger y, I nc.
8 Q. And what was t he def endant ' s posi t i on at CASI ?
9 A. I bel i eve he was t he owner and pr esi dent .
10 Q. What gr ant was he appl yi ng f or ?
11 A. He was appl yi ng f or an ATP gr ant wi t h NI ST.
12 Q. Do you r ecal l what NI ST i s?
13 A. The Nat i onal I nst i t ut e of St andar ds and Technol ogy.
14 Q. And what was your under st andi ng of why t he def endant asked
15 you t o hel p wi t h t he gr ant wr i t i ng pr oposal ?
16 A. Because of my f ami l i ar i t y wi t h gover nment cont r act i ng and
17 wi t h wr i t i ng pr oposal s f or gover nment cont r act s.
18 Q. Di d you and t he def endant di scuss whet her you woul d have
19 any cont i nui ng r ol e - - oh, sor r y.
20 Di d you t wo di scuss what your r ol e wi t h t he company
21 woul d be i f you wer e t o r ecei ve a gr ant ?
22 A. Yes.
23 Q. What di d you di scuss?
24 A. I was t o be t he busi ness manager i n t he event of an awar d.
25 Q. And what woul d t he busi ness manager do?
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1 A. Basi cal l y be r esponsi bl e f or al l nont echni cal i ssues.
2 Q. Woul d t hose i ncl ude budget i ng i ssues?
3 A. The pur chasi ng of equi pment , hi r i ng of peopl e, t he
4 budget i ng, var i ous ot her f i nanci al mat t er s.
5 Q. Wer e you goi ng t o have any ot her r ol e wi t h CASI besi des
6 managi ng t he gr ant f unds?
7 A. Yes, I was t o be at t empt i ng t o obt ai n addi t i onal f unds f or
8 CASI t hat woul d be suppl ement al t o t he f unds comi ng f r omNI ST.
9 Q. Addi t i onal f unds?
10 A. Yes.
11 Q. And how much of your t i me was goi ng t o be spent on
12 nonf undr ai si ng?
13 A. Wel l , 75 per cent was t o be f or CASI di r ect l y on t he gr ant ,
14 and 25 per cent was t o be f or ot her f undr ai si ng, at t empt i ng t o
15 get mor e f unds, whi ch was par t of t he gr ant s r equi r ement , by
16 t he way.
17 Q. How l ong di d t he gr ant wr i t i ng pr ocess t ake, t he pr oposal
18 wr i t i ng pr ocess?
19 A. Sever al mont hs. I can' t r emember exact l y, but sever al
20 mont hs.
21 Q. Dur i ng t hat t i me di d you become f ami l i ar wi t h t he f i nanci al
22 t er ms of t he gr ant and what const i t ut ed pr oper and i mpr oper
23 expendi t ur es?
24 A. Yes.
25 Q. How di d you do t hat ?
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1 A. Wel l , t he package t hat we r ecei ved f r omNI ST spel l ed out
2 t he var i ous r equi r ement s and t he qual i f i cat i ons of t he gr ant .
3 Q. Was t hat t he pr oposer ' s package?
4 A. Yes, t he pr oposer ' s package, cor r ect .
5 Q. And di d you r evi ew t hose mat er i al s dur i ng t he t i me of t he
6 gr ant wr i t i ng pr ocess?
7 A. Yes.
8 Q. And what di d t hose mat er i al s say about al l owabl e ver sus
9 unal l owabl e cost s?
10 A. Wel l , i t def i ned what was al l owed and what woul d not be
11 al l owed i n wor ki ng on t he gr ant .
12 Q. What sor t s of t hi ngs wer e t hose?
13 A. Wel l , i t i ndi cat ed t hat al l di r ect cost s woul d be al l owed
14 pr et t y much, but t her e wer e cer t ai n i t ems t hat wer e not t o be
15 al l owed l i ke r ent , ut i l i t i es, account i ng, l egal , ot her s I can' t
16 r emember .
17 Q. Di d you ever di scuss t hese r ul es wi t h Dr . Kar r on whi l e you
18 wer e pr epar i ng t he pr oposal ?
19 A. Yes.
20 Q. How many t i mes woul d you di scuss t hese spendi ng r ul es?
21 A. At var i ous t i mes, numer ous t i mes, but at var i ous t i mes
22 under di f f er ent condi t i ons or what ever par t i cul ar i t emwe wer e
23 di scussi ng.
24 Q. Di d you di scuss any par t i cul ar cost s wi t h t he def endant
25 dur i ng t hat per i od?
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1 A. Yes. We di scussed at t he t i me of t he wr i t i ng t he pr oposal
2 t he wr i t i ng cost s, t he var i ous cost s associ at ed wi t h t hat .
3 Q. Can you be mor e speci f i c?
4 A. Wel l , I mean t her e wer e var i ous cost s t hat we had. I n
5 par t i cul ar , t her e wer e cost s f or t r avel t o Gai t her sbur g wher e
6 NI ST was l ocat ed, t her e wer e some host t r avel cost s, t her e wer e
7 mot el s what ever , f ood, what ever we expended t hat way, whi ch
8 act ual l y at t he t i me I was l ayi ng out t hat money. And Dr .
9 Kar r on and I di scussed t hat .
10 Q. You had some di scussi ons about t hose cost s?
11 A. Yeah.
12 Q. What was t he nat ur e of t hose di scussi ons?
13 A. Dr . Kar r on sai d we wi l l t r y and see i f we can get t hose
14 t hi ngs pai d, and you wi l l get your money back and so f or t h.
15 Q. What i f anyt hi ng di d you say t o hi m?
16 A. I sai d, you know, t hey' r e not al l owabl e, t hose cost s ar e
17 not al l owabl e, so, you know, l et ' s not wor r y about i t . Because
18 t her e wasn' t t hat much money t o begi n wi t h, but
19 not wi t hst andi ng, t hey wer en' t al l owed.
20 Q. Al l r i ght . Mr . Gur f ei n, di d CASI event ual l y r ecei ve an ATP
21 gr ant .
22 A. Yes.
23 Q. And how much money was aut hor i zed?
24 A. My memor y says $2. 1 mi l l i on, but I coul d be of f by a l i t t l e
25 bi t .
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1 Q. And how was t hat money goi ng t o be di sbur sed?
2 A. I n pr ogr ess payment s over a t hr ee- year per i od.
3 Q. Di d you i n f act have any cont i nui ng i nvol vement wi t h CASI
4 af t er t he gr ant was awar ded?
5 A. Yes.
6 Q. What was t hat i nvol vement ?
7 A. I was t aken on as t he busi ness manager .
8 Q. How l ong wer e you t he busi ness manager ?
9 A. For one year .
10 Q. St ar t i ng when and endi ng when?
11 A. St ar t i ng Oct ober 1, 2001, endi ng Sept ember 30, 2002.
12 Q. Wer e you pai d anyt hi ng f or t hi s j ob?
13 A. Yes.
14 Q. How much wer e you pai d?
15 A. I was pai d $100, 000.
16 Q. Mr . Gur f ei n, di d t her e come a t i me when you met wi t h peopl e
17 at NI ST af t er t he gr ant was awar ded t o di scuss t he gr ant ?
18 A. Yes.
19 Q. About when was t hat ?
20 A. Appr oxi mat el y a mont h or so af t er t he awar d.
21 Q. When was t he awar d?
22 A. The awar d was ef f ect i ve Oct ober 1, 2001. We wer e advi sed
23 of i t on Oct ober 4, 2001.
24 THE COURT: For t he $100, 000, was t hat a f ul l - t i me
25 j ob?
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1 THE WI TNESS: The $100, 000 was f or 75 per cent of my
2 t i me.
3 THE COURT: So, you spent 75 per cent on busi nesses
4 ot her t han CASI , i s t hat cor r ect ? I mean 25 per cent - -
5 THE WI TNESS: Yes.
6 THE COURT: - - on busi nesses of your s ot her t han CASI .
7 THE WI TNESS: Yes, si r . But t he 25 per cent was al so
8 on CASI ' s behal f - -
9 THE COURT: Yes.
10 THE WI TNESS: - - i n pur sui ng ot her f unds.
11 THE COURT: I see. Al l r i ght . Sor r y, Mr . Ever del l .
12 MR. EVERDELL: That ' s al l r i ght , your Honor .
13 Q. So, you ment i oned t he meet i ng you had wi t h t he NI ST peopl e
14 af t er t he gr ant was awar ded.
15 A. Sor r y?
16 Q. You ment i oned a meet i ng you had wi t h NI ST peopl e af t er t he
17 gr ant was awar ded.
18 A. Yes.
19 Q. About when di d t hat t ake pl ace agai n?
20 A. About a mont h or so, maybe a l i t t l e mor e t han a mont h af t er
21 t he awar d.
22 Q. Di d t hat meet i ng have a name i n par t i cul ar ?
23 A. That was r ef er r ed t o as a ki ck- of f meet i ng.
24 Q. What was t he ki ck- of f meet i ng?
25 A. Wel l , i t was a meet i ng t o essent i al l y r est at e t he r ul es,
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1 t he gr ound r ul es, what was expect ed of us, what t hat agency was
2 al l about , namel y t he NI ST agency, what t he r epor t i ng of t he
3 f undi ng woul d be, what t he r epor t i ng of pr ogr ess woul d be, what
4 was al l owed, what was not al l owed, under what condi t i ons woul d
5 we have t o appl y f or a change t o t he budget t hat was appr oved.
6 Q. And who at t ended t hi s meet i ng f r omCASI ?
7 A. Dr . Kar r on and I at t ended t hat meet i ng.
8 Q. And who at t ended f r omNI ST?
9 A. Wel l , Hope Snowden, who was t he gr ant admi ni st r at or
10 at t ended, as di d J ayne Or t hwei n and B. J . Li de, and t her e mi ght
11 have been some ot her peopl e. I t hi nk maybe Mar i l yn Gol dst ei n,
12 and I t hi nk even t he di r ect or mi ght have popped i n f or a l i t t l e
13 bi t , Mar k St anl ey. I r emember shaki ng hi s hand. That ' s al l I
14 r emember .
15 Q. Those ot her peopl e t hat you ment i oned - - Hope Snowden,
16 J ayne Or t hwei n, B. J . Li de - - who ar e t hey?
17 A. Hope Snowden was a gr ant admi ni st r at or .
18 Q. Was she on t hi s par t i cul ar gr ant wi t h CASI ?
19 A. Yes, yes. B. J . and J ayne wer e super vi sor y management t ype
20 per sons who wer e mor e i nvol ved i n t he t echni cal aspect s, as
21 wel l as t he busi ness but i n t he over al l aspect s of t he gr ant .
22 Q. And what happened at t he ki ck- of f meet i ng?
23 A. How do you mean?
24 Q. Di d t he peopl e at NI ST have any di scussi ons wi t h you at
25 t hat meet i ng?
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1 A. Yes, t hey t ol d us what t hey expect ed of us.
2 Q. And how di d t hey i mpar t t hat i nf or mat i on t o you?
3 A. Ther e was a pr esent at i on made t o us.
4 Q. I want you t o t ake a l ook at what ' s al r eady i n evi dence as
5 Gover nment Exhi bi t 4, whi ch i n t he f ol der i n f r ont of you, one
6 of t hose t wo f ol der s.
7 A. Yeah.
8 Q. Di spl ay t he f i r st page.
9 A. I see i t .
10 Q. Do you r ecogni ze what t hat i s?
11 A. Yes.
12 Q. What i s t hat ?
13 A. That was par t of t he pr esent at i on made t o us at t he
14 ki ck- of f meet i ng.
15 Q. What di d t hat pr esent at i on i nvol ve?
16 A. That pr esent at i on i nvol ved a st at ement of what t he ATP
17 pr ogr amwas and what our r esponsi bi l i t i es woul d be i n r epor t i ng
18 and so f or t h.
19 Q. What i f anyt hi ng wer e you t ol d about t he r esponsi bi l i t i es
20 concer ni ng t he budget ?
21 A. Wi t h r espect t o t he budget ?
22 Q. Yes.
23 A. Wel l , one of t he t hi ngs we t al ked about was i f we wer e mor e
24 t han a cer t ai n per cent age f r omt he budget ed number s, t hen we
25 had t o appl y f or per mi ssi on t o do t hat .
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1 BY MR. EVERDELL:
2 Q. And how di d t hat per mi ssi on come?
3 A. That woul d be i n wr i t i ng.
4 Q. What , i f anyt hi ng, wer e you t ol d about spendi ng out si de t he
5 budget ?
6 A. That i t coul d be al l owed, but i t woul d have t o be appr oved.
7 Q. What about di r ect ver sus i ndi r ect cost s, wer e you t ol d
8 anyt hi ng about t hat ?
9 A. Ri ght . I mean we wer e abl e pr et t y much t o spend on
10 i ndi r ect - - I ' msor r y - - on di r ect cost s i n a most gener al way,
11 but i ndi r ect cost s wer e gener al l y not al l owed.
12 Q. What wer e t hose t hi ngs cover ed at t hi s meet i ng?
13 A. Wel l , agai n, t he r ent , t he ut i l i t i es, account i ng, l egal ,
14 maybe some ot her i t ems. I can' t r ecal l .
15 Q. Now, ar ound t he t i me when t he gr ant was awar ded and t he
16 ki ckof f meet i ng occur r ed, di d you have any di scussi ons wi t h Dr .
17 Kar r on about any par t i cul ar expendi t ur es?
18 A. Wel l , agai n l eadi ng up t o t he awar d, we had di scussed
19 var i ous of t hose i t ems t hat wer e not al l owed. Agai n, we
20 di scussed t he pr oposal wr i t i ng cost s.
21 Q. What exact l y di d you di scuss about ?
22 A. Wel l , whet her t hey woul d be al l owed and - - you know, i t was
23 I t hought pr et t y cl ear t hat we wer en' t al l owed, but he sai d
24 maybe we' l l get t hemal l owed. But I ' mnot sur e how t hat was
25 goi ng t o happen.
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1 Q. To your knowl edge, wer e any of t hose pr epr oposal cost s ever
2 appr oved by NI ST peopl e?
3 A. Not t o my knowl edge.
4 Q. What ot her speci f i c expendi t ur es di d you di scuss wi t h t he
5 def endant ar ound t hi s t i me when t he gr ant was awar ded?
6 A. Wel l , af t er t he awar d, we di scussed r ent and ut i l i t i es and
7 l egal and account i ng.
8 Q. Let ' s t al k about r ent s and ut i l i t i es f or a moment . What
9 was t he nat ur e of your di scussi ons about r ent and ut i l i t i es?
10 A. Wel l , we had, i n t he pr oposal , and as appr oved i n t he
11 gr ant , we had i ndi cat ed t hat we wer e goi ng t o be i nvol ved wi t h
12 t he Ci t y Uni ver si t y at Fi f t h Avenue and 34t h St r eet wi t h t he
13 gr aduat e cent er t her e, t he comput er sci ence par t of i t , wher e
14 we woul d have a f aci l i t y t her e, and t hat f aci l i t y woul d be a
15 company wi t h some suppor t st af f f r omgr aduat e st udent s or
16 what ever , who wer e i n t he comput er sci ence ar ea.
17 Q. What happened wi t h r espect t o t hat f aci l i t y?
18 A. Wel l , i t was deci ded t hat we woul d not be usi ng t hat
19 f aci l i t y.
20 Q. Why not ?
21 A. I t hi nk Dr . Kar r on had i ndi cat ed t hat t he over head r at es
22 f or t he peopl e t her e was hi gh, and t hat i t was somet hi ng t hat
23 woul d not be desi r abl e.
24 Q. So wher e di d CASI set up i t s busi ness l ocat i on?
25 A. We set up, basi cal l y, i n Dr . Kar r on' s apar t ment .
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1 Q. And what , i f any, di scussi ons di d you have wi t h t he
2 def endant about r ent and ut i l i t i es wi t h r espect t o t he busi ness
3 space of CASI ?
4 A. Wel l , yeah, he f el t t hat - - I mean, he i ndi cat ed t o me t hat
5 t he r ent shoul d be pai d t o hi mby CASI , because t hat ' s wher e we
6 wer e doi ng al l t he wor k, and i t was essent i al l y an of f i ce
7 l abor at or y si t uat i on.
8 Q. Thi s was r ent f r omCASI t o t he def endant ?
9 A. Fr omCASI t o t he def endant , yes.
10 Q. And when t he def endant t ol d you t hi s, what , i f anyt hi ng,
11 was your r eact i on?
12 A. Wel l , i t was cl ear t hat t he r ul es, or t he gui del i nes gi ven
13 t o us by t he peopl e at NI ST sai d no, t hat ' s - - t hat was not
14 al l owed.
15 Q. And what , i f anyt hi ng, di d t he def endant r espond?
16 A. Wel l , he asked me t o see i f we can get i t appr oved. So I
17 wound up cal l i ng Hope Snowden at NI ST and aski ng her i f i t
18 coul d be appr oved.
19 Q. What , i f anyt hi ng, was her r esponse?
20 A. She sai d no.
21 Q. And what di d you do af t er you hear d no f r omHope Snowden?
22 A. I r epor t ed t o Dr . Kar r on. And he sai d, wel l , we t al ked
23 about i t and he sai d, wel l , why don' t you go back and t r y
24 agai n. But under t he i dea t hat t hi s i s a one gr ant company,
25 and so i t ' s cl ear t hat ever yt hi ng we do her e i s f or t hi s gr ant
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1 and t her e wer e no ot her f unds, and so t hat t her e' s no ot her
2 act i vi t y at t he moment . So t hat we coul d si mpl y - - you know,
3 i t woul d be, as he expr essed i t , appr opr i at e f or us t o get pai d
4 r ent f or t hat f aci l i t y.
5 Q. And di d you, i n f act , cal l Hope Snowden agai n?
6 A. Yes, I di d.
7 Q. And di d you ask her t hat quest i on?
8 A. Yes, I di d.
9 Q. That way?
10 A. Wi t h r egar d, wi t h r egar d t o i t bei ng a one gr ant oper at i on,
11 yes.
12 Q. And what was her r esponse?
13 A. She sai d no, we can' t - - we don' t appr ove t hat .
14 Q. And what , i f anyt hi ng, di d you do wi t h t hat r esponse?
15 A. I t ol d i t t o Dr . Kar r on.
16 Q. And what was hi s r esponse?
17 A. I don' t know. I t hi nk he was a l i t t l e none pl used by i t , I
18 don' t know exact l y. For t hat moment we dr opped i t at t he
19 moment at t hat poi nt .
20 Q. About how many t i mes di d you speak t o Hope Snowden about
21 t hi s i ssue of r ent ?
22 A. Wel l , cer t ai nl y t wi ce, maybe mor e, but cer t ai nl y t wi ce.
23 Q. And di d you - - di d Hope Snowden ever t el l you t hat r ent was
24 an al l owabl e expense?
25 A. No.
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1 Q. Di d you have any ot her di scussi ons wi t h Hope Snowden about
2 ot her expense?
3 A. Yes. We di scussed ot her expenses. I t hi nk I pr obabl y
4 di scussed t he pr oposal cost s expense and ut i l i t i es. I t hi nk we
5 di scussed agai n si mi l ar t o t he r ent di scussi on.
6 THE COURT: Di d you ever t al k t o anyone besi des Hope
7 Snowden about t hese t hi s r ent and ut i l i t i es?
8 THE WI TNESS: I t ' s possi bl e. I mi ght ' ve di scussed - -
9 I mi ght have cal l ed her super vi sor , Mar i l yn Gol dst ei n, on a f ew
10 occasi ons.
11 THE COURT: And di d you get a - - what answer di d you
12 get ?
13 THE WI TNESS: Essent i al l y, no.
14 THE COURT: Al l r i ght .
15 Q. And about how of t en di d you cal l Hope Snowden and t hese
16 ot her peopl e you ment i oned?
17 A. Wel l , at t he begi nni ng of t he gr ant per i od t hat I was
18 t her e, I woul d cal l her t wo t i mes a week or so. As t i me went
19 on, I cal l ed her maybe t wo t i mes a mont h.
20 Q. Al l r i ght . Mr . Ger f ei n, do you know, appr oxi mat el y, when
21 CASI r ecei ved i t s f i r st i nst al l ment of ATP gr ant money?
22 A. I ' ve been t r yi ng t o f i gur e t hat out . But I know i t was
23 ver y ear l y. I t was not ver y much af t er t he not i ce of awar d.
24 The not i ce of awar d was Oct ober 4t h. I keep t hi nki ng i t was
25 r i ght af t er t hat , but I ' mnot sur e.
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1 Q. Do you r ecal l how much was t r ansf er r ed i nt o t he CASI bank
2 account ?
3 A. Yes. $150, 000.
4 Q. And wher e di d t hat money go?
5 A. That money went i nt o a CASI gener al account of some ki nd.
6 Q. Di d you - -
7 A. At Chase Bank.
8 Q. I ' msor r y?
9 A. I t was at Chase Bank, I r ecal l t hat .
10 Q. Di d you ever have any di scussi ons wi t h t he def endant about
11 t hat i ni t i al t r ansf er of $150, 000?
12 A. Yes. He, he - - we had appl i ed f or , I bel i eve, or we had t o
13 appl y f or i t , and I t hi nk wi t h happi ness he t ol d me one mor ni ng
14 when I ar r i ved at hi s apar t ment t hat t he money came i n, t he
15 150, 000 came i n. And i n t he same sent ence I r ecal l he sai d,
16 and I ' ve t r ansf er r ed $75, 000 out of t he account .
17 Q. Di d he say why he di d t hat ?
18 A. Yes. He sai d he had some per sonal obl i gat i ons t o hi s
19 f ami l y, money owed t o hi s f ami l y, and he sai d t hat he had
20 cr edi t car d payment s t o make.
21 Q. Wi t h r espect t o hi s obl i gat i ons t o hi s f ami l y t hat you
22 ment i oned, di d you ever have any ot her di scussi ons wi t h hi m
23 about t hat t opi c?
24 A. Wel l , I mean i n t he cour se of wr i t i ng t he pr oposal , he had
25 al l owed t hat he had not had a - - been empl oyed i n any way, nor
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1 had any ot her gr ant money f or somet i me, and so t hat he had t o
2 r esor t t o cr edi t car ds and t o f ami l y hel p.
3 Q. And what i n par t i cul ar di d you - - di d he say what he was
4 spendi ng t he cr edi t car d money on?
5 A. Wel l , my sense was t hat f r omwhat t he di scussi ons wer e was
6 t hat he was spendi ng i t on j ust l i vi ng. He sai d he had t o
7 l i ve, and so he used hi s cr edi t car ds t o l i ve.
8 Q. When you hear d f r omt he def endant t hat he had t r ansf er r ed
9 $75, 000 out of t he $150, 000, what , i f anyt hi ng, di d you say?
10 A. I t ol d hi mhe coul dn' t do t hat .
11 Q. And what was t he def endant ' s r esponse?
12 A. He sai d, I have t o do i t .
13 Q. Di d he expand on t hat ?
14 A. Wel l , he sai d he had no choi ce; he had t o get r i d of t hose
15 debt s he had and he was t aki ng t hose f unds at t he get - -
16 i ni t i al l y, he had t o j ust t ake t hose f unds i mmedi at el y.
17 Q. Di d you have any ot her di scussi ons wi t h t he def endant about
18 wher e t he gr ant money was bei ng deposi t ed?
19 A. Yes.
20 Q. What wer e t hose di scussi ons?
21 A. Wel l , I t ol d hi mt hat we had t o open up a separ at e account
22 f or t he gr ant so t hat we don' t have i t mi xed up wi t h any ot her
23 act i vi t i es of CASI , i f t her e wer e any.
24 Q. And what was t he def endant ' s r esponse t o t hat ?
25 A. Wel l , at f i r st he r ej ect ed t he i dea, I t hi nk sayi ng t hat i t
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1 was - - i t woul d j ust cost t oo much t o open up anot her account .
2 But I di dn' t - - I di dn' t under st and what t hat meant about t he
3 cost woul d be so gr eat . But I t ol d hi mi t was a r equi r ement of
4 t he gr ant t hat we had t o have a separ at e account .
5 Q. And was a separ at e account event ual l y opened?
6 A. Yes.
7 Q. Mr . Ger f ei n, when you accept ed t he j ob at CASI as busi ness
8 manager , what was your under st andi ng about who woul d have t he
9 aut hor i t y t o si gn checks f or t he company?
10 A. Our i ni t i al di scussi ons wer e t hat I was goi ng t o have sol e
11 r esponsi bi l i t y f or si gni ng checks. I t ol d hi mt hat , l ook,
12 t hat ' s okay, but t hi s i s your company and r eal l y t her e shoul d
13 be dual si gnat ur e r equi r ement f or most checks. And we agr eed
14 t hat t her e woul d be dual si gnat ur e r esponsi bi l i t y, but anyt hi ng
15 under $250 coul d be si gned by one per son.
16 Q. I s t hi s i n f act t hat ar r angement you j ust descr i bed, i s
17 t hat i n f act what happened af t er t he gr ant was awar ded?
18 A. No.
19 Q. How di d i t wor k i n pr act i ce af t er t he gr ant was awar ded?
20 A. Wi t hi n one week exact l y on Oct ober 11t h, Dr . Kar r on sent a
21 not e t o Hope Snowden sayi ng t hat , whi l e I had admi ni st r at i ve
22 r esponsi bi l i t y, I had no si gnat ur e or of f i cer r esponsi bi l i t y at
23 CASI .
24 Q. And what di d you under st and t hat t o mean?
25 A. That means t hat I was st r i pped of my abi l i t y t o cont r ol t he
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1 busi ness as I was t ol d I woul d have.
2 Q. Take a l ook at Gover nment ' s exhi bi t 21 i n t he ot her f ol der
3 i n f r ont of you. Coul d we di spl ay t hat on t he scr een, page
4 t hr ee. I t ' s al so i n t he j ur y bi nder s.
5 A. Uh- huh. Yes.
6 Q. You see t hat document ?
7 THE COURT: I t ' s a l i t t l e har d t o see, but can you
8 r ead i t ?
9 THE WI TNESS: Yes.
10 THE COURT: I can' t , I can' t r ead i t .
11 THE WI TNESS: Her e' s my copy.
12 THE DEPUTY CLERK: J udge, he has a copy.
13 THE COURT: Al l r i ght . He was l ooki ng up t her e, so I
14 was - -
15 Q. Act ual l y, he, i f you coul d bl owup exact l y what you bl ew up.
16 Mr . Ger f ei n, do you see t hat document ?
17 A. Yes.
18 Q. What i s t hat document ?
19 A. That document i s t he l et t er t hat Dr . Kar r on sent t o Hope
20 Snowden dat ed Oct ober 11t h, 2001 and i ndi cat i ng t hat I onl y had
21 t he admi ni st r at or r esponsi bi l i t y, but not t he si gnat ur e
22 aut hor i t y. And i t says her e, and i s not aut hor i zed t o si gn f or
23 t he cor por at i on.
24 Q. Wher e do you see t hat ?
25 A. Fr omt he t hi r d - - on t he r i ght si de, t hi r d l i ne f r omt he
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1 bot t om.
2 Q. And you see t he f i nal sent ence whi ch says, t he
3 aut hor i zat i on f or Mr . Ger f ei n t o commi t t he cor por at i on wi l l be
4 made by separ at e l et t er aut hor i zat i on i f t he need ar i ses?
5 A. Cor r ect . I see t hat .
6 Q. Wer e you ever gi ven si gnat or y aut hor i t y f or t he company
7 whi l e you wer e wor ki ng at CASI ?
8 A. No.
9 Q. And what ' s t he dat e on t hi s l et t er ?
10 A. I ' msor r y?
11 Q. What ' s t he dat e on t hi s l et t er ?
12 A. The dat e on t he l et t er above, Oct ober 11t h - - r i ght t her e,
13 yeah.
14 Q. And about how l ong af t er t he gr ant was awar ded was t hat
15 l et t er dat ed?
16 A. I t ' s dat ed - - wel l t he gr ant was - - not i f i cat i on of awar d
17 was Oct ober 4t h, and t hi s l et t er i s dat ed Oct ober 11t h. So
18 i t ' s exact l y one week af t er t he not i ce of awar d.
19 Q. Al l r i ght . Mr . Ger f ei n, di d you have any f ur t her
20 di scussi ons wi t h t he def endant about spendi ng gr ant money af t er
21 t hat l et t er was submi t t ed?
22 A. About spendi ng gr ant money?
23 Q. About par t i cul ar expendi t ur es?
24 A. Sur e, I mean we di scussed var i ous t hi ngs t hat - - I mean Dr .
25 Kar r on ki nd of l i ked equi pment . I mean he - -
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1 Q. Why di d you di scuss t he equi pment di scussi ons you had?
2 A. I n par t i cul ar , we di scussed - - t her e wer e many i t ems of
3 di scussi on, but we di scussed some moni t or s t hat he bought t hat
4 wer e ver y expensi ve. I mean as moni t or s go, I t hi nk t hese
5 wer e, i f I r emember cor r ect l y, a coupl e t housand dol l ar s a
6 pi ece. They wer e l ar ge, at t r act i ve, but I di dn' t t hi nk t hey
7 wer e necessar y, and t hey wer e not par t - -
8 MR. RUBI NSTEI N: Obj ect i on, move t o st r i ke.
9 A. They wer e not par t of t he gr ant .
10 MR. RUBI NSTEI N: I move t o st r i ke what he t hought .
11 THE WI TNESS: I ' msor r y.
12 THE COURT: Obj ect i on sust ai ned, I guess.
13 Q. Ar e you - -
14 THE COURT: As t o what he t hought . You sai d you
15 t hought t hat you t ol d hi mt hey wer e not par t of t he gr ant .
16 THE WI TNESS: Yes, si r .
17 THE COURT: Go ahead, what . Di d you t el l hi manyt hi ng
18 el se?
19 Q. I ' msor r y, Mr . Ger f ei n, you ment i oned moni t or s i n
20 par t i cul ar ?
21 A. Ri ght .
22 Q. I s t her e any ot her pi eces of equi pment ?
23 A. They wer e not par t of t he gr ant . Al so, t he poi nt t hey wer e
24 not par t of appr oved gr ant .
25 Q. Al l r i ght , l et ' s - - what , i f any, di scussi ons di d you have
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1 wi t h def endant about t hese pi eces of equi pment not bei ng par t
2 of t he gr ant ?
3 A. Wel l , t hat , you know, he coul dn' t j ust buy anyt hi ng he
4 want ed; t hat he had t o do t hi ngs t hat wer e par t of t he gr ant .
5 I f he want ed t o get somet hi ng t hat was not par t of t he gr ant ,
6 he woul d have t o appl y f or a wr i t t en appr oval . And hi s
7 r esponse t o me was I ' mt he PI , meani ng I ' mt he pr i nci pal
8 i nvest i gat or , and I can do anyt hi ng I want . I sai d, you can' t
9 do anyt hi ng you want . And t hat went on and on. That , t hat
10 i nt er change t ook pl ace a number of t i mes.
11 Q. Di d you appr ove or di sappr ove your sel f of t hese
12 expendi t ur es?
13 MR. RUBI NSTEI N: Obj ect i on, your Honor .
14 THE COURT: Obj ect i on sust ai ned. As I under st ood i t ,
15 hi s t est i mony i s t hat he di dn' t have appr oval aut hor i t y af t er
16 Oct ober 11t h.
17 MR. EVERDELL: I ' msor r y, your Honor , I j ust meant not
18 wi t h r espect t o your appr oval , si gnat or y aut hor i t y, but di d you
19 t hi nk t hat t hese expendi t ur es - -
20 THE COURT: The quest i on i s whet her t hey came wi t hi n
21 t he gr ant or not , not whet her he per sonal l y appr oved t hi ngs.
22 Thi s i sn' t a t r i al i n connect i on wi t h - -
23 MR. EVERDELL: Cer t ai nl y, your Honor .
24 THE COURT: - - per sonal appr oval s or di sappr oval s.
25 Q. When you sai d t hat t hese wer e not par t of t he gr ant , t hese
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1 expendi t ur es t hat you wer e t al ki ng t o t he def endant about , what
2 di d you mean by t hat ?
3 A. Wel l , we had i ncl uded i n our pr oposal var i ous f i gur es,
4 i ncl udi ng f i gur es f or equi pment , and t he equi pment was
5 del i neat ed, and t he i t ems t hat we j ust t al ked about wer e not
6 i ncl uded. And when t hose i t ems wer e bei ng pur chased t hat wer e
7 not r equi r ed by t he gr ant , or not appr oved by t he gr ant , I
8 shoul d say, t hen t hey r eal l y shoul d not have been bought .
9 Q. Di d you di scuss t hi s wi t h t he def endant ?
10 A. Yes, but - -
11 Q. What was hi s r esponse?
12 A. Wel l , f i r st of al l , i t was al ways af t er t he f act t hat I
13 f ound out t hat t hese t hi ngs wer e bought , because I di dn' t have
14 anyway of st oppi ng i t . And so I ' d come i n t her e one day as an
15 exampl e, and t her e woul d be t hi s movi e si zed t heat er - - t hese
16 t heat er si ze movi e scr een goi ng up, pr oj ect i on scr een pr obabl y
17 as bi g as t hat , maybe bi gger , don' t know. And I sai d t o hi m,
18 what i s t hat al l about ? And he sai d, wel l , we need t hat . And
19 I sai d, f or what ? And I j ust di dn' t under st and why we' d have
20 t o spend anot her f ew t housand dol l ar s when we - -
21 MR. RUBI NSTEI N: Obj ect i on t o what - - hi s f eel i ngs.
22 THE COURT: The j ur y i s i nst r uct ed t o di sr egar d t he
23 l ast t hr ee or f our wor ds. What t he i ssue i s t hat , was t hat
24 amongst t he equi pment t hat was del i neat ed i n t he gr ant ?
25 THE WI TNESS: I t i s not . That equi pment was not
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1 i ncl uded i n t he gr ant .
2 Q. What was t he def endant ' s r esponse when you woul d t al k t o
3 hi mabout t hese non- del i neat ed equi pment pi eces?
4 A. He sai d, we needed i t .
5 Q. Do you know what f unds wer e used t o buy t hese i t ems,
6 equi pment ?
7 A. The onl y f unds we had wer e f unds f r omNI ST, ATP f unds. So
8 t her e wer e no ot her f unds t hat I knew about t hat came i nt o t he
9 company.
10 Q. How do you know t he onl y f unds you had wer e ATP f unds?
11 A. Wel l , because I had been t r yi ng t o get ot her f unds and I
12 had not been successf ul i n doi ng t hat .
13 THE COURT: Di d you r evi ew - - wer e you i n char ge of
14 t he books and r ecor ds?
15 THE WI TNESS: Essent i al l y not . I mean, I shoul d have
16 been, but I had no cont r ol over i t .
17 THE COURT: What about t he bank account ?
18 THE WI TNESS: Same.
19 THE COURT: You di dn' t - -
20 THE WI TNESS: I had no cont r ol over i t .
21 THE COURT: You di dn' t r evi ew t he bank account s?
22 THE WI TNESS: I di d, but I had no cont r ol over i t .
23 Q. Di d you have any di scussi ons wi t h t he def endant on t he
24 subj ect of f r i nge benef i t s f or medi cal expenses?
25 A. Yes.
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1 Q. And what wer e t he nat ur e of t hose di scussi ons?
2 A. The nat ur e of t hose di scussi ons wer e t hat t he, t he f i gur e
3 of 34 per cent of an empl oyee' s gr oss sal ar y was al l owabl e f or
4 medi cal and ot her expenses l i ke t hat , f r i nge benef i t s. And Dr .
5 Kar r on was of t he opi ni on t hat , because he t ol d me so, t hat i f
6 i t was 34 per cent of t he t ot al payr ol l , t hat woul d be okay.
7 Q. What do you mean, i f i t was 34 per cent of t he t ot al ?
8 A. I f we di d not exceed 34 per cent of t he ent i r e payr ol l as
9 opposed t o j ust 34 per cent of each i ndi vi dual , t hat woul d be
10 okay. So t hat i f one per son had, say, 20 per cent and one
11 per son had 50 per cent , t he aver age woul d be l i ke 35 per cent or
12 somet hi ng cl ose t o t hat , so t hat woul d be okay.
13 THE COURT: Di d t he company have a benef i t pl an? Di d
14 t he company have a benef i t pl an?
15 THE WI TNESS: Not t hat I ever saw.
16 THE COURT: And how wer e f r i nge benef i t s admi ni st er ed?
17 THE WI TNESS: They wer e ver y l oosel y ar r anged at t hat
18 t i me.
19 THE COURT: What do you mean by t hat ?
20 THE WI TNESS: Wel l , t her e was, t her e was an assi gnment
21 gi ven t o an at t or ney t o gener at e a benef i t pol i cy, but t hat
22 never happened whi l e I was t her e.
23 THE COURT: But how - - you sai d t hey wer e l oosel y
24 admi ni st er ed. Someone had t o document somet hi ng l i ke t hat .
25 THE WI TNESS: Ri ght .
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1 THE COURT: What woul d happen?
2 THE WI TNESS: Doct or ' s bi l l , i f t he per son woul d have
3 i nsur ance or t he bi l l woul d be submi t t ed, but basi cal l y t he
4 company pai d f or i nsur ance i n my case.
5 THE COURT: Was t her e i nsur ance; t her e was heal t h
6 i nsur ance?
7 THE WI TNESS: Ther e was no - - t o my knowl edge, t her e
8 mi ght have been a pol i cy, but I can' t r ecal l . I do know t hat
9 i n my case i t was handl ed a l i t t l e bi t di f f er ent l y, but st i l l
10 i t was, t her e was no f or mal pol i cy.
11 THE COURT: What di d t hey do, pay t hemas t he bi l l s
12 came i n?
13 THE WI TNESS: I was cover ed by - - I was cover ed by an
14 i nsur ance pol i cy. I t hi nk Dr . Kar r on had one t oo. But I t hi nk
15 t her e wer e ot her bi l l s t hat he mi ght have had, as I r ecal l ,
16 t hat wer e pai d possi bl y di r ect l y. I r eal l y don' t know.
17 THE COURT: So t hat ' s what you mean by " l oosel y"
18 admi ni st er ed.
19 THE WI TNESS: Yes.
20 THE COURT: I see.
21 BY MR. EVERDELL:
22 Q. Mr . Ger f ei n, di d t he def endant have any heal t h expendi t ur es
23 t hat you' r e awar e about dur i ng t hi s per i od you wor ked wi t h
24 CASI ?
25 A. Yes, he had - - I t hi nk he had a l ot of heal t h expendi t ur es.
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1 I n par t i cul ar , I r emember he had dent al expendi t ur es.
2 Q. How do you know he had dent al expendi t ur es?
3 A. Wel l , of t en t i mes he asked me t o pi ck hi mup at t he dent i st
4 on my way i nt o t he of f i ce.
5 Q. And do you know what ki nd of dent al pr ocedur es he was
6 havi ng?
7 A. I n par t i cul ar , he had i ndi cat ed t hat he had a j aw
8 r econst r uct i on act i vi t y goi ng on wi t h t he dent i st .
9 Q. And di d you have any sense about why t he def endant was
10 havi ng hi s j aw - -
11 A. Based on hi s di scussi on wi t h me, and some ot her peopl e who
12 had such pr ocedur e, and t hat t hey wer e get t i ng a sex change
13 oper at i on, i t became cl ear t hat t hat j aw r econst r uct i on was f or
14 a sex change oper at i on.
15 Q. And j ust t o r epeat , di d you see any wr i t t en pl an f or t he
16 empl oyees at CASI f or heal t h benef i t s?
17 THE COURT: Wai t . I don' t under st and. A dent i st
18 can' t - - doesn' t do a sex change oper at i on.
19 THE WI TNESS: Cor r ect ; yes, si r .
20 THE COURT: You pi cked hi mup at t he dent i st .
21 THE WI TNESS: Ri ght , but - -
22 THE COURT: So al l you know i s t hat he had dent al
23 expenses.
24 THE WI TNESS: Ri ght . But based on hi s descr i pt i ons he
25 made of some ot her peopl e who he knew who had a si mi l ar
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1 pr ocedur e, and t hat was as t he cosmet i cs f or i n cont empl at i on
2 of a sex change oper at i on.
3 Q. Al l r i ght . Mr . Ger f ei n, di d you ever see a wr i t t en pl an i n
4 pl ace f or CASI f or heal t h expendi t ur es?
5 A. I di d not .
6 Q. Mr . Ger f ei n, when you had di scussi ons wi t h t he def endant
7 about spendi ng, wher e woul d you have t hose conver sat i ons?
8 A. Wel l , t ypi cal l y we woul d l eave t he of f i ce, whi ch was
9 usual l y ver y noi sy and poor l y vent i l at ed, and we' d go t o a
10 cof f ee shop, one of sever al cof f ee shops acr oss t he st r eet .
11 Q. And when you had meet i ngs wi t h t he def endant , woul d you
12 schedul e meet i ngs or woul d you j ust show up?
13 A. Wel l , bot h. Somet i mes I j ust show up and somet i mes t hey
14 wer e schedul ed.
15 Q. When you di d schedul e meet i ngs, di d t he def endant al ways
16 at t end your schedul ed meet i ngs?
17 A. Ver y of t en not .
18 Q. Can you expand on t hat ?
19 A. Wel l , I woul d t r y t o see hi mon var i ous occasi ons havi ng t o
20 do wi t h budget ar y t hi ngs and ot her mat t er s, and somet i mes I ' d
21 show up at t he appoi nt ed t i me, l et ' s say 11: 00 o' cl ock and he
22 was ei t her sl eepi ng or he' s i n t he gymor what ever , but ver y
23 of t en he was not t her e.
24 Q. You say he was sl eepi ng; how do you know he' s sl eepi ng?
25 THE COURT: I don' t see t he r el evance of whet her he' s
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1 sl eepi ng or not , Mr . Ever del l . You have t o - -
2 Q. As a - -
3 MR. EVERDELL: Your Honor , i f we coul d have a br i ef
4 si debar ?
5 THE COURT: I f you got - - al l r i ght , go ahead t hen.
6 MR. EVERDELL: Al l r i ght .
7 THE COURT: You got a r el evant poi nt , but I j ust
8 want ed t o cal l your at t ent i on t o t he possi bl e l ack of
9 r el evance.
10 Q. How, i f anyt hi ng, di d t hi s, di d t hese - - di d t he
11 def endant ' s wor k habi t s i mpact your wor k?
12 MR. RUBI NSTEI N: Obj ect i on, your Honor .
13 THE WI TNESS: Ver y of t en i t was di f f i cul t t o - -
14 MR. RUBI NSTEI N: I have an obj ect i on.
15 THE COURT: I wi l l al l ow t he quest i on.
16 Q. How, i f any - -
17 A. Wel l , ver y of t en I woul d t r y t o meet wi t h hi mand - - wel l ,
18 one t i me I had an appoi nt ment t o see hi mon a Sunday eveni ng
19 ' cause I coul d get hi s at t ent i on wi t hout i nt er f er ence, and I ' d
20 show up and I wai t f or an hour , and he di dn' t show up.
21 Q. Do you ever have any di scussi ons wi t h Dr . Kar r on about hi s
22 wor k habi t s?
23 A. Yes, I di d. I t ol d hi mt hi s i s not j ust accept abl e. I
24 used t o get f r ust r at ed j ust showi ng up t i me and t i me agai n, and
25 he' d be out doi ng what he was doi ng.
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1 Q. Mr . Ger f ei n do you know someone named Mar gar et Fer r and?
2 A. I know t he name Mar gar et .
3 Q. Who i s Mar gar et ?
4 A. Mar gar et was a cl eani ng l ady.
5 Q. And what di d you - - oh, di d you ever see her i n t he
6 apar t ment , Mar gar et ?
7 A. Sur e.
8 Q. How of t en?
9 A. I woul d guess once a week, but I ' mnot r eal l y sur e.
10 Q. And what was she doi ng when you saw her i n t he apar t ment ?
11 A. She' d be cl eani ng di shes or t oi l et s or , you know, what ever ;
12 dust i ng, what ever a cl eani ng l ady does.
13 Q. Di d you ever see Mar gar et doi ng any of f i ce wor k, asi de f r om
14 cl eani ng, whi l e you wer e t her e?
15 A. Not when I was t her e.
16 MR. EVERDELL: One moment , your Honor .
17 Q. Mr . Ger f ei n, when di d you t er mi nat e your empl oyment at
18 CASI ?
19 A. I t er mi nat ed my empl oyment Sept ember 30t h, 2002.
20 Q. Why di d you l eave af t er onl y one year ?
21 A. Wel l , Dr . Kar r on sai d he coul dn' t af f or d t o pay me t he
22 hundr ed t housand dol l ar s a year . And he asked i f I woul d st ay
23 on at $50, 000 a year . And i t di dn' t t ake much t i me f or me t o
24 know t hat I woul dn' t st ay t her e ei t her way, at 100 or 50,
25 because my ment al heal t h was mor e val uabl e t han bei ng par t of
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1 t hat oper at i on.
2 MR. EVERDELL: Thank you. No f ur t her quest i ons.
3 THE COURT: Mr . Rubi nst ei n.
4 MR. RUBI NSTEI N: Thank you, your Honor .
5 CROSS EXAMI NATI ON
6 BY MR. RUBI NSTEI N:
7 Q. I n f act , Mr . Gur f ei n, you had a cont r act , di d you not ?
8 A. I di d.
9 Q. And your cont r act was f or one year , cor r ect ?
10 A. Cor r ect .
11 Q. And at t he end of t he year wer e you of f er ed a r enewal of
12 t hat cont r act ?
13 A. No.
14 Q. You wer e a member of t he boar d of di r ect or s, wer e you not ?
15 A. For one mont h.
16 Q. And - -
17 A. Appr oxi mat el y.
18 Q. Was t hat t he f i r st mont h?
19 A. That was - - no. I t was somet i me bet ween J ul y and August ,
20 somet hi ng l i ke t hat .
21 Q. J ul y and August of 2002?
22 A. Cor r ect .
23 Q. And wer e you an of f i cer i n t he cor por at i on?
24 A. For about t hat one mont h. I was made an of f i cer of t he
25 cor por at i on wi t hout my bei ng t ol d i n advance, and I r esi gned
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1 t hat wi t hi n a mont h, r oughl y, of t he t i me t hat I had t hat ,
2 whi l e I t hat mai nt ai ned my posi t i on as t he busi ness manager .
3 Q. You r esi gned as member of t he boar d, cor r ect ?
4 A. Yes.
5 Q. Who el se was on t he boar d?
6 A. Dr . Kar r on, I t hi nk t her e was a Mr . Ber nst ei n I bel i eve who
7 was an at t or ney, t her e was Abe Kar r on, who was Dr . Kar r on' s
8 br ot her . Ther e wer e, t her e pr obabl y was one ot her per son, I
9 t hi nk possi bl y Fr eder i ca Mi l l er at t or ney. I ' mnot sur e. She
10 mi ght have been a member of t he boar d as wel l .
11 Q. And t hese - - di d you at t end any boar d meet i ngs?
12 A. That one. Oh, as a di r ect or or as a vi si t or ?
13 Q. At any t i me?
14 A. I t hi nk I at t ended t wo boar d meet i ngs i n t ot al , i f I
15 r emember cor r ect l y.
16 Q. And wher e wer e t he boar d meet i ngs hel d?
17 A. They wer e hel d at t he of f i ce of Mr . Ber nst ei n.
18 Q. And what t i me of day or ni ght ?
19 A. I t hi nk pr obabl y i n t he eveni ng.
20 Q. And you, when you wor ked at CASI , what wer e your wor k
21 hour s?
22 A. The wor k hour s wer e pr et t y var i abl e. They wer e up t o me.
23 And some days I wor ked at CASI ' s of f i ces l i ke t hr ee days a
24 week, maybe f our , maybe t wo, and t he r est of t he t i me I wor ked
25 at home. But r emember I was t her e on 75 per cent of t he t i me.
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1 Q. When you came t o t he of f i ce, how l at e woul d you st ay on a
2 non- boar d member day?
3 A. I t var i ed.
4 Q. Wel l , what was t he l at est t hat you ever st ayed at t he
5 of f i ce when you wer e t he - - you wer e t he chi ef oper at i ng
6 of f i cer ?
7 A. No, I was not .
8 Q. What was your t i t l e?
9 A. Busi ness manager , I t hi nk.
10 Q. How l at e di d you - - what ' s t he l at est you ever wor ked at
11 CASI t he year as t he busi ness manager ?
12 A. Pr obabl y mi dni ght .
13 Q. And how of t en di d you do t hat ?
14 A. I don' t r emember .
15 Q. Mor e t han once?
16 A. Oh, sur e.
17 Q. And you wer e asked t o i nvest money i n CASI , wer e you not ?
18 A. I was.
19 Q. You wer e asked t o i nvest money by Dr . Kar r on' s br ot her , Abe
20 Kar r on, r i ght ?
21 A. I t wasn' t qui t e l i ke you' r e sayi ng.
22 Q. Wel l , wer e you asked t o i nvest $50, 000?
23 A. That ' s cor r ect .
24 Q. And when you wer e asked t o i nvest , when was i t ?
25 THE COURT: Coul d we have a dat e, Mr . Rubi nst ei n?
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1 Q. Was t hat ear l y on - -
2 A. Yes.
3 Q. - - your empl oyment , cor r ect ?
4 A. Cor r ect .
5 Q. I t was pr i or t o t he t i me t hat t he l et t er was gener at ed t o
6 Mar i l yn Gol dst ei n l i mi t i ng your f unct i ons?
7 A. No, i t was af t er t hat .
8 Q. When was i t ?
9 A. I don' t know t he dat e, but i t was af t er t hat .
10 Q. Wer e you a si gnat or y at one t i me on t he checki ng account s?
11 A. Was I a si gnat or y on t he checki ng account ? Di d I si gn
12 paper , document s at Chase t o do t hat at some poi nt ? I t hi nk I
13 di d. Di d I ever si gn a check? No.
14 Q. How wer e t he checks cr eat ed?
15 A. How wer e t hey cr eat ed?
16 Q. Yeah. You got pai d, di dn' t you?
17 A. Yes.
18 Q. Pai d ever y week, cor r ect ?
19 A. No.
20 Q. Got pai d ever y t wo weeks?
21 A. No.
22 Q. How of t en you get pai d?
23 A. Once a mont h.
24 Q. Each mont h?
25 A. Each mont h.
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1 Q. Now, you t ol d us about Dr . Kar r on i n t he f i r st mont h of t he
2 gr ant he t ook $75, 000 f or as a l oan f or hi s per sonal use,
3 cor r ect ?
4 A. Cor r ect .
5 Q. Now, he was ear ni ng $175, 000 f or t he year , cor r ect ?
6 A. Cor r ect .
7 Q. And t hat comes out t o about $14, 000 and change a mont h?
8 A. Cor r ect .
9 Q. Di d you know i f Dr . Kar r on t ook a check, a paycheck i n
10 November of 2001?
11 A. I don' t know.
12 Q. Do you know i f he t ook a paycheck i n December of 2001?
13 A. I don' t know.
14 Q. Do you know i f he got a paycheck i n J anuar y of 2002?
15 A. I don' t r emember t hat .
16 Q. I sn' t i t a f act t hat t he f i r st paycheck t hat Dr . Kar r on got
17 was i n May of 2002?
18 A. I don' t know t hat .
19 Q. Wel l , as t he - -
20 THE COURT: The j ur y i s t o dr aw no i nf er ences.
21 Quest i ons onl y ar e what i s t he evi dence bef or e you. Don' t dr aw
22 any i nf er ences f r omt he quest i on.
23 Q. Now, t her e wer e a number of peopl e who wor ked at CASI on
24 t hi s pr oj ect , wer e t her e not ?
25 A. Sever al , yes.
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1 Q. And what was t he or i gi nal budget f or sal ar i es?
2 A. For what ?
3 Q. For sal ar i es, f or t ot al sal ar i es?
4 A. I don' t r emember . I don' t r ecal l t hat of f hand.
5 Q. Let me show you an exhi bi t t o see i f i t r ef r eshes your
6 r ecol l ect i on?
7 THE COURT: What exhi bi t ?
8 Q. Okay. Af t er t he i ni t i al budget was submi t t ed, was t her e an
9 amendment , a r equest f or an amendment t o t he budget submi t t ed?
10 A. I ' msor r y, coul d you r epeat t hat ?
11 Q. Yeah. Af t er t he i ni t i al budget was submi t t ed, you
12 submi t t ed a budget bef or e you r ecei ved t he f unds, cor r ect ?
13 A. Yes.
14 Q. And t hat was t o get $800, 000 t he f i r st year , cor r ect ?
15 A. Cor r ect .
16 Q. And af t er - -
17 THE COURT: Tot al budget .
18 Q. For t he f i r st year ?
19 A. I bel i eve, I bel i eve 800, 000 sounds about r i ght . I t mi ght
20 have been a l i t t l e bi t mor e.
21 THE COURT: Budget . We' r e not t al ki ng sal ar i es at
22 t hi s poi nt . Budget .
23 MR. RUBI NSTEI N: No, t al ki ng t ot al budget .
24 A. Yes.
25 Q. The f i r st year . And t hen t he t ot al you t ol d us was f or t he
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1 t hr ee year s was about 2. 1 mi l l i on?
2 A. Cor r ect .
3 Q. Now, i n Oct ober di d you f i l e f or a budget amendment , a
4 r evi si on ear l y on?
5 A. Yes.
6 Q. And I t ur n your at t ent i on t o exhi bi t - - do you have t he
7 exhi bi t s i n f r ont of you, si r ? I s t her e a book wi t h exhi bi t s
8 t her e?
9 A. Whi ch exhi bi t ar e you - -
10 Q. I ' mr ef er r i ng t o exhi bi t 22.
11 A. I don' t have such an exhi bi t .
12 MR. EVERDELL: One moment , your Honor .
13 MR. RUBI NSTEI N: I ' l l gi ve hi mmy exhi bi t , your Honor .
14 MR. EVERDELL: Her e.
15 Q. Mr . Ger f ei n - -
16 THE COURT: The wi t ness has been handed exhi bi t 22.
17 Q. Di d you r evi ew t hat , si r ?
18 A. Whi ch pi ece of paper ar e you aski ng me t o l ook at ?
19 Q. The ent i r e exhi bi t .
20 A. Okay. I , I have an i dea what t hi s i s.
21 Q. Di d you have di scussi ons wi t h peopl e, ei t her Hope Snowden
22 or anybody at ATP about a r evi si on i n t he budget ?
23 A. About a pr ovi si on i n t he budget ?
24 Q. No, a r evi si on?
25 A. Oh, yes. The chances ar e I di d, al t hough t hi s was
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1 submi t t ed - - we di d make a submi ssi on.
2 Q. And di d you pr epar e t he submi ssi on?
3 A. I bel i eve I di d. I can' t be 100 per cent sur e. But i f I
4 di d i t , I di d i t wi t h t he Dr . Kar r on. I mean, we cer t ai nl y
5 di scussed i t .
6 Q. Al l r i ght . And by l ooki ng at t hat document , does i t
7 r ef r esh your r ecol l ect i on as t o what t he budget was f or t he
8 f i r st year ?
9 A. Ri ght . I see t hat .
10 Q. And t her e wer e submi t t ed r easons f or t he r equest f or
11 r evi si ons, cor r ect ?
12 A. Yes.
13 Q. As a mat t er of f act , t hi s was t he second r evi si on f or
14 budget ?
15 A. I don' t r ecal l t hat . I , I j ust don' t r ecal l whi ch r evi si on
16 i t was, i f t her e was a f i r st or second.
17 Q. Do you r ecal l submi t t i ng a r evi si on t o change your name
18 f r omLee t o El i sha?
19 A. I f t her e was such changes, I do not r emember i t .
20 Q. Now, t he sal ar y - - di d you under st and, si r , as t he busi ness
21 manager , t hat you di d not need appr oval i f you changed a
22 cat egor y by 10 per cent ?
23 A. Wi t hi n 10 per cent .
24 Q. Of t he gr ant ?
25 A. Yes.
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1 Q. So t hat you coul d add $80, 000 t o a cat egor y as l ong as you
2 t ook 80, 000 away f r omt hat cat egor y, cor r ect ?
3 A. Um, t hat coul d be cor r ect . I can' t be sur e 100 per cent i f
4 t hat ' s cor r ect .
5 Q. Now, you t ol d us t hat you had heal t h i nsur ance. You
6 act ual l y had a cont r act , cor r ect ?
7 A. Yes.
8 Q. And di d t hat pr ovi de f or heal t h benef i t s f or you?
9 A. I t hi nk so, but I can' t r emember exact l y. I don' t have i t
10 i n f r ont of me.
11 Q. Do you r ecal l who t he l awyer was who you ment i oned was
12 cont act ed t o devel op a f r i nge benef i t manual ?
13 A. My best r ecol l ect i on - -
14 THE COURT: Pl an or manual ?
15 Q. Pl an or manual ?
16 A. My best r ecol l ect i on was Fr eder i ca Mi l l er .
17 Q. And do you know i f Fr eder i ca Mi l l er was pai d anyt hi ng t o do
18 t hi s wor k?
19 A. I have no i dea.
20 Q. Now, i n addi t i on t o t he - - your wi f e had separ at e cover age,
21 di d she not ?
22 A. My wi f e had separ at e cover age, yes.
23 Q. And CASI r ei mbur sed you f or your wi f e' s medi cal expense,
24 r i ght ?
25 A. Not our medi cal expense, our i nsur ance.
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1 Q. What ki nd of i nsur ance?
2 A. I t was a gr oup i nsur ance, I t hi nk. I t was our por t i on of
3 t he gr oup i nsur ance.
4 Q. Gr oup i nsur ance cover i ng what ?
5 A. Cover i ng medi cal .
6 Q. And wer e you al so on t he medi cal pl an t hat CASI had f or i t s
7 empl oyees?
8 A. No.
9 THE COURT: Whose gr oup medi cal wer e you t al ki ng
10 about ?
11 THE WI TNESS: My wi f e' s medi cal . My wi f e was par t of
12 a gr oup, and so - -
13 THE COURT: I see. Di f f er ent , separ at e gr oup?
14 THE WI TNESS: Agai n, t her e was no - - I must make a
15 poi nt . Ther e was no pol i cy, and Dr . Kar r on sai d, okay, we' l l
16 j ust pay your medi cal i nsur ance. And t he way i t was set up,
17 t hat my wi f e woul d be cover ed under t hat as wel l .
18 Q. And t her e wer e f r i nge benef i t s pr ovi ded f or i n your budget ,
19 wer e t her e not ?
20 A. Cor r ect .
21 Q. And how much wer e t he f r i nge benef i t s pr ovi ded f or i n t he
22 CASI budget ?
23 A. I woul d have t o l ook t hat up. I don' t know t hat exact l y.
24 The f r i nge benef i t s wer e pr obabl y 34 per cent of t he t ot al
25 payr ol l . The payr ol l - - and t hat f i r st year says her e
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1 $325, 000. So f r i nge benef i t s shoul d have been 34 per cent of
2 what ever t hat number i s, whi ch shoul d be somet hi ng over
3 $100, 000, I t hi nk.
4 Q. And do you see on - - so t hat was - - di d you ar gue wi t h Dr .
5 Kar r on as t o whet her or not you - - your wi f e shoul d be
6 r ei mbur sed f or your medi cal i nsur ance?
7 A. Ar gue? No, t her e was no ar gument . He - - t her e was never
8 an ar gument about t hat .
9 Q. Di d you say t o hi m, I don' t t hi nk t hat ' s an al l owabl e
10 f r i nge benef i t ?
11 A. No.
12 Q. Di d you t hi nk i t was al l owabl e?
13 A. Based on t he, t he l oose pol i cy t hat he had est abl i shed, i t
14 was.
15 Q. What about ATP, di d you t hi nk t hat hi s l oose pol i cy
16 vi ol at ed t he ATP - -
17 A. I ' mnot sur e how. I f i t was f or me, wi t hi n 34 per cent of
18 my, of my gr oss pay, i t was not vi ol at i ng, no.
19 Q. Was i t - - di d you know of any r ul e t hat suggest ed t hat t he
20 f r i nge benef i t amount was r el at ed t o an i ndi vi dual ' s gr oss pay?
21 A. Yes.
22 Q. Wher e, wher e i s i t t hat i t ' s - - wher e i s t he document t hat
23 suggest s t hat f r i nge benef i t s ar e i n di r ect pr opor t i on t o one' s
24 sal ar y?
25 A. As f ar as - - I r emember r eadi ng t hat i n t he document s.
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1 Q. You had t hat di scussi on wi t h Dr . Kar r on, di d you not ?
2 A. Yes. Wel l , we di scussed t he subj ect i n gener al , mor e wi t h
3 r espect t o hi s r equi r ement s f or medi cal t han mi ne. I was way
4 wi t hi n t he 34 per cent .
5 Q. And hi s vi ew was t hat i f you had f r i nge benef i t s f or t he
6 company, what ever was ut i l i zed, as l ong as i t was a f r i nge
7 benef i t , anybody coul d use i t ?
8 A. I don' t under st and your quest i on.
9 Q. Di d you have a di scussi on wi t h Dr . Kar r on as t o t he use of
10 f r i nge benef i t s?
11 A. Yes.
12 Q. And di dn' t he advi se you t hat i t was hi s under st andi ng t hat
13 f r i nge benef i t s - - t hat he coul d ut i l i ze up t o what ever f r i nge
14 benef i t money was not used by ot her empl oyees t hat was
15 avai l abl e f or hi m?
16 A. He sai d t hat .
17 Q. And ar e you awar e - - di d you have anyt hi ng t o do wi t h t he
18 quar t er l y f i nanci al st at ement s?
19 A. Yes.
20 Q. Di d you hel p pr epar e t hem?
21 A. Yes.
22 Q. Wher e di d you get t he number s f r omt o put i nt o t he
23 quar t er l y f i nanci al st at ement s?
24 A. Those number s wer e t he aggr egat e of what was i n t he mont hl y
25 appl i cat i ons f or , f or t he var i ous pr ogr ess payment s. That ' s
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1 wher e t hese number s came f r om.
2 Q. Di d t hey come f r omact ual expenses?
3 A. No, t hey di d not .
4 Q. And who det er mi ned t hat t hat was t he pr oper number s, t hose
5 wer e t he pr oper number s t o use?
6 A. Wel l , t he f i r st t i me we went i n af t er Dr . Kar r on wi t hdr ew
7 t he $75, 000, and we had we had a di scussi on about t hat , about
8 how t hat $75, 000, f or exampl e, coul d be appl i ed t o di r ect - - on
9 t he di r ect char ges f or t he gr ant , whi ch we coul dn' t possi bl y do
10 because i t wasn' t - - I mean t hat money was not spent on t he
11 gr ant . So Dr . Kar r on sai d j ust , okay, make i t t hat i t wor ks;
12 make sur e t hat , you know, you don' t r ai se any r ed f l ags and
13 j ust submi t t he number s t hat wi l l make i t wor k. And t hat ' s
14 what we di d.
15 Q. You ar e awar e, si r , t hat Dr . Kar r on pai d back t hat $75, 000
16 i n t hat f i r st year ; you' r e awar e of t hat ?
17 A. I am. But i t caused us gr eat pai n t o have t hat $75, 000
18 t aken out , so at t he end of ever y mont h we wer e down t o al most
19 zer o on t he bank account .
20 Q. And whenever you got down t o zer o, Dr . Kar r on woul d put hi s
21 own money i nt o t he company, cor r ect ?
22 A. I don' t know t hat .
23 Q. Wel l , how di d you get above zer o?
24 A. We got anot her pr ogr ess payment .
25 Q. Di d you get a per sonal l oan f r omCASI dur i ng t hi s per i od?
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1 A. Di d I get a per sonal l oan?
2 Q. Yes.
3 A. Not t o my knowl edge.
4 Q. Di d you get a per sonal l oan f r omDr . Kar r on dur i ng t hi s
5 per i od?
6 A. I don' t r emember t hat .
7 Q. You al so had a t el ephone i nst al l ed i n your house r el at ed t o
8 CASI busi ness wi t h t he ATP gr ant , di d you not ?
9 A. Cor r ect .
10 Q. And t hat t el ephone was pai d f or by CASI ?
11 A. Cor r ect .
12 Q. And you used t hat phone st r i ct l y f or company busi ness?
13 A. Cor r ect .
14 Q. Di d you have a cr edi t car d t o use f or CASI ?
15 A. I don' t r ecal l i f I had a cr edi t car d. I f I di d, i t was
16 har dl y used. I n f act , I t hi nk I gave i t back t o hi m. I f I had
17 one, I gave i t back t o hi m.
18 Q. At what poi nt ?
19 A. Ri ght away. I mean i t was - - I , I , I can' t r emember t he,
20 any cr edi t car d bei ng of any subst ance.
21 Q. Di d you cal l anybody at ATP t o r epor t t hat Dr . Kar r on had
22 bor r owed $75, 000?
23 A. I di d not .
24 Q. When you say t hat you wer e, t he company was shor t money,
25 t her e was $800, 000 deposi t ed by ear l y Oct ober or by t he mi ddl e
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1 of Oct ober i nt o an account f or you t o dr awdown; i s t hat
2 cor r ect ?
3 A. I ncor r ect .
4 Q. Wher e was t he money t hat was gi ven by ATP, t he $800, 000,
5 how di d t hat - -
6 A. The $800, 000 came i n pi eces. The f i r st pi ece was 150, 000
7 and ever y mont h i n t he f i r st year af t er t hat i t was $60, 000.
8 We had t o appl y f or t hat money each mont h.
9 Q. Ar e you awar e t hat you coul d have appl i ed f or t he f i r st - -
10 i n t he f i r st mont h f or t he whol e $800, 000?
11 A. I was not awar e of t hat .
12 Q. So i f somebody f r omATP had t est i f i ed her e at t he t r i al ,
13 you wer e unawar e of t hat , cor r ect ?
14 A. I ' munawar e of t hat .
15 Q. You wer e pr esent at - - on November 8t h, 2001 at what ' s
16 cal l ed a ki ckof f meet i ng?
17 A. Yes. Yes, I was.
18 Q. And you went over r ul es and r egul at i ons wi t h t he peopl e - -
19 A. Yes.
20 Q. - - at NI ST?
21 A. Cor r ect .
22 Q. And I t hi nk you t ol d us t hat you met Mar k St anl ey t her e?
23 A. I t hi nk I shook hands wi t h hi mat most .
24 Q. And di d Dr . Kar r on know Mar k St anl ey?
25 A. Yes.
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1 Q. And t hey had a cor di al comf or t abl e r el at i onshi p?
2 MR. EVERDELL: Obj ect i on.
3 THE COURT: Do you know? Wer e you pr esent ? Do you
4 r emember any of t hei r meet i ngs bef or e t he gr ant ?
5 THE WI TNESS: No, I was not .
6 Q. Wel l , di d Dr . Kar r on or you di scuss t hese, t hi s agr eement
7 agr eement s you had wi t h hi mas t o whet her or not an expense,
8 was a pr oper NI ST expense, you had a number of t hese di scusses,
9 cor r ect ?
10 A. Yes.
11 Q. And di d he advi se you t hat he woul d get t he appr oval
12 because NI ST l oved hi mand he bought i t ems bef or e he asked or
13 r ecei ved appr oval f r omNI ST?
14 A. I can' t hear what you' r e sayi ng.
15 Q. Di d he t el l you t hat - -
16 THE COURT: You bet t er get back t o t he mi cr ophone, Mr .
17 Rubi nst ei n, because I coul dn' t hear hal f t hat quest i on.
18 MR. RUBI NSTEI N: Sor r y.
19 Q. When you quest i oned t he pr opr i et y of cer t ai n expendi t ur es
20 by Dr . Kar r on, wi t hout pr i or appr oval , and i n f act t hat Dr .
21 Kar r on t ol d you t hat he woul d get appr oval because NI ST l oved
22 hi m?
23 A. Yes, he sai d t hat .
24 Q. Di d you bi l l a, and be r ei mbur sed f or par ki ng whi l e you
25 wer e a CASI empl oyee?
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1 A. Yes.
2 Q. And di d you al so bi l l f or t r avel ?
3 A. For mi l eage you mean?
4 Q. Yes.
5 A. I don' t r ecal l t he mi l eage. I r ecal l I t hi nk par ki ng at
6 t he met er . Possi bl y t ol l s. I don' t r emember t hat . That ' s
7 possi bl e. But I don' t r ecal l mi l eage, al t hough t hat ' s possi bl e
8 t oo.
9 Q. Do you r ecal l r ecei vi ng an e- mai l f r omDr . Kar r on
10 r equest i ng t hat you r epay cer t ai n expenses t hat wer e not
11 appr oved by ATP?
12 A. I don' t r ecal l such an e- mai l .
13 ( Cont i nued on next page)
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