EFTA00299085.pdf

Page 1 1 2 JUDICIAL ARBITRATION AND MEDIATION SERVICE 3 NEW YORK, NEW YORK 4 5 FORTRESS VRF I LLC and ) FORTRESS VALUE RECOVERY ) 6 FUND I LLC, ) Claimants, ) 7 ) vs. ) Reference No. 8 ) 1425006537 JEEPERS, INC., ) 9 Respondents. ) ) 10 and ) ) 11 FINANCIAL TRUST COMPANY, ) INC., and JEEPERS, INC., ) 12 Counter-Claimants and ) Third-Party Claimants, ) 13 ) vs. ) 14 ) FORTRESS VALUE RECOVERY ) 15 FUND I LLC, ) Counter-Respondents, ) 16 ) vs. ) 17 ) D.B. ZWIRN PARTNERS, LLC, ) 18 D.B. ZWIRN & CO., L.P., ) DBZ GP, LLC, ZWIRN ) 19 HOLDINGS, LLC, and DANIEL ) ZWIRN, ) 20 Third-Party Respondents. ) ) 21 22 April 20, 2011 23 9:02 a.m. 24 25 Deposition of JEFFREY EPSTEIN. VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400 EFTA00299085  Page 2 1 2 3 4 5 April 20, 2011 6 9:02 a.m. 7 8 Deposition of JEFFREY EPSTEIN, held at 9 the offices of Cooley Godwin Kronish, 1114 10 Avenue of the Americas, New York, New York, 11 before Laurie A. Collins, a Registered 12 Professional Reporter and Notary Public of the 13 State of New York. 14 15 16 17 18 19 20 21 22 23 24 25 VERITEXT REPORTING COMPANY 212-267-6868 www.veritext.com 516-608-2400 EFTA00299086  Page 3 1 2 APPEARANCE S: 3 4 PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 5 Attorneys for Claimants 6 1285 Avenue of the Americas 7 New York, New York 10019-6064 8 BY: ALLAN J. ARFFA, ESQ. 9 HANNAH S. SHOLL, ESQ. 10 11 SUSMAN GODFREY 12 Attorneys for JEEPERS, 13 Financial Trust Company, and Witness 14 560 Lexington Avenue, 15th Floor 15 New York, New York 10022 16 BY: STEPHEN D. SUSMAN, ESQ. 17 18 COOLEY GODWARD KRONISH LLP 19 Attorneys for D.B. Zwirn Partners, LLC, 20 D.B. Zwirn Co. , L.P. , and DBZ GP, LLC 21 1114 Avenue of the Americas 22 New York, New York 10036-7798 23 BY: WILLIAM J. SCHWARTZ, ESQ. 24 WILLIAM O'BRIEN, ESQ. 25 ARASTU K. CHAUDHURY, ESQ. VERITEXT REPORTING COMPANY www.yeritext.com EFTA00299087  Page 4 1 2 APPEARANCES (continued): 3 4 LANKLER SIFFERT & WOHL LLP 5 Attorneys for Daniel Zwirn 6 500 Fifth Avenue, 7 New York, New York 10110-3398 8 BY: JOHN S. SIFFERT, ESQ. 9 DANIEL E. REYNOLDS, ESQ. 10 ANDREW S. LEE, ESQ. 11 12 ALSO PRESENT: 13 RICK NOBLE, ESQ. (Fortress) 14 ADAM DICOLA, Videographer 15 16 17 18 19 20 21 22 23 24 25 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299088  Page 5 1 Proceedings 2 THE VIDEOGRAPHER: Good morning. We 3 are now on the record. My name is Adam DiCola 4 of Veritext New York. The date today is April 5 20th, 2011, and the time is approximately 9:01 09:02:17 6 a.m. 7 This deposition is being held in the 8 office of Cooley Godward Kronish LLP, located 9 at 1114 Avenue of the Americas, New York, New 10 York. The caption of this case is Fortress 09:02:33 11 VRF LLC, et al., versus JEEPERS, Inc., et al., 12 in the Judicial Arbitration and Mediation 13 Service, New York, New York, Reference Number 14 1425006537. The name of the witness is 15 Jeffrey Epstein. 09:02:55 16 At this time will the attorneys please 17 identify themselves and the parties they 18 represent, after which our court reporter, 19 Laurie Collins, will swear in the witness and 20 we can proceed. 09:03:04 21 MR. SCHWARTZ: My name is William 22 Schwartz. I represent D.B. Zwirn Partners, 23 LLC; D.S. Zwirn & Co., L.P.; DBZ GP, LLC; and 24 Zwirn Holdings, LLC. 25 MR. CHAUDHURY: My name is Arastu 09:03:18 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299089  Page 6 1 Proceedings 2 Chaudhury, also from Cooley LLP. I also 3 represent D.B. Zwirn Partners, LLC; 4 D.B. Zwirn & Co., L.P.; DBZ GP, LLC; and Zwirn 5 Holdings, LLC. 09:03:16 6 MR. O'BRIEN: William O'Brien from 7 Cooley for the same parties. 8 MR. SIFFERT: John Siffert, Lankler 9 Siffert & Wohl, for Daniel Zwirn. 10 MR. REYNOLDS: Daniel Reynolds, Lankler 09:03:38 11 Siffert & Wohl, also for Daniel Zwirn. 12 MR. LEE: Andrew Lee, Lankler Siffert & 13 Wohl, also for Daniel Zwirn. 14 MR. ARFFA: I'm Allan Arffa from Paul, 15 Weiss, Rifkind, Wharton & Garrison, LLP. We 09:03:51 16 represent the two claimants, Fortress VRF I 17 LLC and Fortress Value Recovery Fund I LLC. 18 MS. SHOLL: I'm Hannah Sholl, here for 19 the same clients, also from Paul, Weiss, 20 Wharton & Garrison. 09:04:05 21 MR. NOBLE: Rick Noble from Fortress 22 for Fortress Value Recovery Fund. 23 MR. SUSMAN: Steve Susman on behalf of 24 FTC, JEEPERS, and the witness, Mr. Epstein. 25 Before we get going, before we swear 09:04:18 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299090  Page 7 1 Proceedings 2 him in, let's get some agreements on the 3 record; I think it's appropriate. We agree 4 that these depositions each side will get 5 seven hours of questioning time, exclusive of 09:04:29 6 breaks. 7 We have agreed, at least today -- I 8 think we have agreed that the depositions will 9 be taken in the office of the party taking the 10 deposition or at the location. 09:04:40 11 MR. SCHWARTZ: That's where this one 12 is. 13 MR. SUSMAN: Right. I'm just trying to 14 say the rules we set today, since it's the 15 first deposition, will be the rules of the 09:04:49 16 game, as far as I'm concerned. 17 We'll begin these depositions at 9. We 18 can make other agreements. But unless other 19 agreements are made, we start the depositions 20 at 9. When the seven hours are up, the seven 09:04:59 21 hours are up. 22 I thank you for accommodating me for 23 lunch today. We will break at 12:20 and be 24 back at 1:45. We can do -- an hour and a half 25 for lunch. We can do whatever schedule you 09:05:11 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299091  Page 8 1 Proceedings 2 want on that. But I would ask you give us 3 notice if you have any luncheon times so 4 people can make plans, such as we gave you. 5 Mr. Epstein needs to use the facility 09:05:21 6 more regularly than normally. So what I 7 proposed to him is that we are going to take a 8 break every hour on the hour for five minutes 9 for you to do what you need to do. 10 So you know coming to the hour he's 09:05:34 11 going to break and you'll not have any interim 12 breaks where he -- we can do the same thing 13 with your witnesses. I'm not talking about a 14 long break, because if we take long breaks we 15 will be here until 8 o'clock tonight and I 09:05:46 16 don't want to do that. We can take a very 17 short break to use the facility, but on the 18 hour. 19 MR. ARFFA: I hope we can finish it in 20 seven hours. There are multiple parties here 09:05:58 21 who don't have the same interests. Hopefully 22 we can do it all in seven, but I'm going to 23 reserve my right to seek or ask for additional 24 time, if necessary. Hopefully that won't be 25 necessary. 09:06:11 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299092  Page 9 1 Epstein 2 MR. SUSMAN: Just so our position is 3 understood, yes, anyone is free to seek any 4 time, obviously, but you're going to have to 5 get the judge's permission. 09:06:18 6 MR. ARFFA: That's your position. I 7 have a different position. 8 MR. SUSMAN: Exactly. Ready. 9 MR. SCHWARTZ: Good morning, 10 Mr. Epstein. 09:06:28 11 (Discussion off the record.) 12 JEFFREY EPSTEIN , 13 called as a witness, having been duly sworn 14 by the notary public, was examined and 15 testified as follows: 16 EXAMINATION BY 17 BY MR. SCHWARTZ: 18 Q. Good morning, Mr. Epstein. 19 A. Good morning. 20 Q. Now you can say it under oath. 09:06:39 21 I take it you are experienced in 22 investing in hedge funds; is that correct? 23 A. Yes. 24 Q. How long have you been an investor in 25 hedge funds? 09:06:54 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299093  Page 10 1 Epstein 2 A. More than 20 years. 3 Q. And how many hedge funds have you 4 invested in? 5 A. More than ten. 09:06:58 6 Q. And in the context of hedge funds, do 7 you have an understanding of what a lockup is? 8 A. Yes. 9 Q. What is a lockup? 10 A. It's a period of time where your 09:07:12 11 investment is restricted from being redeemed. 12 Q. In other words, you put your money 13 in -- correct? -- and then you can't take it out 14 until the lockup is over? 15 A. If that's what the lockup says. Many 09:07:29 16 lockups have partial withdrawal rights so... 17 Q. Is it fair to say that as an investor, 18 given a choice, you would prefer a shorter lockup 19 to a longer lockup of your funds? 20 A. No. 09:07:54 21 Q. And why would you not -- well, can you 22 explain that? 23 A. Different investments have different 24 periods of time to make investments as well as 25 redeem them. 09:08:09 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299094  Page 11 1 Epstein 2 Q. Is it fair to say that you would prefer 3 to have greater access to your money over time -- 4 strike that. Let me go back. 5 A. Have you asked a question? 09:08:34 6 Q. I'm trying to understand your last 7 answer. 8 A. Sorry. 9 Q. I'm not sure what you mean by why -- 10 why different -- the period of time over which you 09:08:49 11 can make an investment has an effect on your view 12 as to how long a lockup is. Can you explain? 13 MR. SUSMAN: Is that a question? I 14 didn't get question. 15 MR. SCHWARTZ: I asked him whether he 09:09:01 16 can explain his last answer. 17 A. In many instances if you are going to 18 take a large position in a security, you might 19 want to buy it over a longer period of time. So 20 if -- a lockup period sometimes reflects the fact 09:09:15 21 as well that you might have to accumulate a 22 position. 23 Q. And isn't it fair to say that you would 24 like to be able to get quicker access to your 25 money if you decide to change your investment? Is 09:09:30 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299095  Page 12 1 Epstein 2 it fair to say that during a lockup period you 3 cannot take your money out of an investment? 4 A. No. 5 Q. Is it fair to say that during a lockup 09:09:42 6 period -- 7 A. No, it's not fair to say that. 8 Q. Is it fair to say that if a lockup 9 applies to a particular tranche of an investment 10 for a period of time, restricting the amount of 09:09:52 11 time you cannot take it out, during that period of 12 time you cannot take out that tranche; is that 13 fair to say? 14 A. No, it's not. 15 Q. Explain that to me, please. 09:10:00 16 A. Lockups are very specific. So 17 sometimes -- you're using the general category of 18 lockups when in fact lockups, like menus, have 19 many different options. 20 Q. You made investments in the Zwirn fund; 09:10:19 21 is that correct? 22 A. You mean me -- you're referring to FTC? 23 Q. FTC, excuse me. 24 A. Yes. 25 Q. And when you made your initial 09:10:51 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299096  Page 13 1 Epstein 2 investment, what did you understand the lockup to 3 be? 4 A. I'm sorry, you'll have to rephrase the 5 question. This is -- the Zwirn fund, is this the 09:11:01 6 Highbridge/ Zwirn? I made many investments in 7 funds having to do with Dan Zwirn. 8 Q. It's the Highbridge/Zwirn? 9 A. Would you repeat your question? 10 Q. What did you understand lockup to be? 09:11:13 11 A. With Highbridge I? 12 Q. Yes. 13 A. My understanding was a two-year lockup. 14 Q. From when to when? 15 A. From 2002 until 2004. 09:11:31 16 Q. And when you made your second 17 investment in that fund, what did you understand 18 the lockup period to be for that investment? 19 A. I understood I had one capital account, 20 one capital account, and I could make my 09:11:46 21 redemption request any time after the first -- 22 between two thousand -- at the end of 2004 for the 23 2002 investment. 24 Q. And that was with respect to each 25 investment you made in the Highbridge fund, the 09:12:01 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299097  Page 14 1 Epstein 2 Highbridge/Zwirn fund? It was governed by a 3 single lockout -- a single lockup period? 4 A. Correct. 5 Q. Just so I'm clear, it is your testimony 09:12:27 6 that the lockup the period in which you could 7 withdraw your funds was governed by the date on 8 which you made your first investment into the 9 fund? 10 A. Which fund are we talking about? Which 09:12:51 11 investment are we talking about? 12 Q. We're talking about the Highbridge/ 13 Zwirn fund. 14 A. Which time? 15 Q. Well, how many investments did you make 09:13:02 16 in the Highbridge/Zwirn fund? 17 A. If you could refresh my recollection, I 18 would be happy to. 19 Q. Prior to 2005 does it refresh your 20 recollection that you made four investments? 09:13:10 21 A. If you say so. 22 Q. Well, does it refresh your recollection 23 that you made an investment on May 1, 2002; 24 September 1, 2002; December 1, 2002; and June 1, 25 2003? 09:13:28 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299098  Page 15 1 Epstein 2 A. That sounds right. 3 Q. When could you withdraw those 4 investments, each of them? 5 A. After the first 2002 investment, two 09:13:38 6 years after that. 7 Q. Do you recall that -- so after -- let 8 me see if I can be more specific. 9 Is it your testimony that you could 10 obtain a withdrawal of your funds at the 09:13:53 11 quarter -- at the end of the quarter in which you 12 invested two years after you made your original 13 investment; so that if you made a May 1, 2002, 14 investment, those funds could be withdrawn June 15 30, 2003, on proper notice -- 2004 on proper 09:14:13 16 notice? 17 A. That's my understanding. 18 Q. And for the investment you made on 19 September 1, 2002, it is your understanding -- it 20 was your understanding at the time you made that 09:14:28 21 investment that those funds could be withdrawn on 22 June 30, 2004, given proper notice? 23 A. I believe so, yes. 24 Q. And for the investment you made on 25 December 1, 2002, it was your understanding at the 09:14:47 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299099  Page 16 1 Epstein 2 time you made that investment that if you gave 3 proper notice you could withdraw that investment 4 on June 30, 2004? 5 A. That's correct. 09:15:01 6 Q. And for the investment that you made on 7 June 1, 2003, it was your understanding that you 8 could withdraw that investment, if you gave proper 9 notice, on June 30, 2004? 10 A. That's correct. 09:15:14 11 Q. And you understood that to be a rolling 12 lockup so that if you did not withdraw your money 13 on June 30, 2004, the next time you could withdraw 14 your money would be two years after that? 15 A. I don't recall what my understanding 09:15:41 16 was then. Sorry. 17 Q. Is that your understanding now? 18 A. Yes. 19 Q. And was that understanding based on? 20 A. My understanding is I had one capital 09:15:48 21 account with D.B. Zwirn, that I was the original 22 investor -- one of the original investors in 23 D.B. Zwirn, and the transaction that I structured 24 early on is that I could withdraw my money in two 25 years. 09:16:07 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299100  Page 17 1 Epstein 2 Q. And with whom did you structure that 3 transaction? 4 A. Glenn Dubin. 5 Q. I'm sorry? 09:16:16 6 A. Glenn Dubin. 7 Q. So -- 8 A. This was a Highbridge -- you're asking 9 me about Highbridge I; is that correct? 10 Q. Yes. 09:16:24 11 A. Okay. 12 (Pause.) 13 Q. Just so we're clear, your understanding 14 of the lockups came from conversations with Glenn 15 Dubin? 09:17:12 16 A. Yes. 17 Q. At the time you made your initial 18 investment? 19 A. Yes. 20 Q. And at the time you made your 09:17:23 21 subsequent investments, did you have conversations 22 with Glenn Dubin about the lockups for those? And 23 I'm referring only to the investments that I -- 24 the first four investments. 25 A. I don't recall. 09:17:37 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299101  Page 18 1 Epstein 2 Q. What did Mr. Dubin tell you -- well, 3 tell us your conversations with Mr. Dubin 4 concerning the lockups prior to your first 5 investment. How many were there? 09:17:47 6 A. You've asked two questions, I'm sorry. 7 Q. I'm sorry. How many conversations 8 prior to making your first investment did you have 9 with Mr. Dubin about the lockup period prior to 10 making your first investment? 09:18:00 11 A. Probably one 12 Q. And what did you say to him and what 13 did he say to you? 14 A. I would -- I would never lock up my 15 money for more than two years. So if you want me 09:18:10 16 to invest in Highbridge I, it will have to be a 17 two-year lockup, more than a two-year lockup. 18 Q. And what did he say? 19 A. Fine. 20 Q. And did you have a specific 09:18:22 21 conversation with him about subsequent investments 22 at that time that you might make in the fund? 23 A. Can you repeat the question? 24 Q. At the time you had that conversation 25 with him about not wanting to lock up your money 09:18:37 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299102  Page 19 1 Epstein 2 for more than two years, did you have a 3 conversation with him about subsequent investments 4 that you might make in the fund? 5 A. Yes. 09:18:48 6 Q. And what was that conversation? 7 A. That if the performance was attractive 8 I would increase my investments in the fund. 9 Q. And did you discuss what the lockup 10 would be for those increases? 09:19:07 11 A. I don't recall. 12 Q. Did Mr. Zwirn tell you that the lockup 13 for those -- did Mr. Dubin tell you that the 14 lockup for any subsequent investment would be on 15 the same calendar as the lockup for the first 09:19:21 16 investment? 17 A. No. 18 Q. Did anybody tell you that? 19 A. I don't recall. However, my 20 understanding was I was only putting money in for 09:19:43 21 my original investment. I would add to that 22 investment with the same two-year lockup. 23 Q. And with whom did you have that 24 conversation? 25 A. Mr. Dubin. 09:19:51 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299103  Page 20 1 Epstein 2 Q. So you said to Mr. Dubin that if I add 3 money it will be on the same lockup calendar as my 4 original investment? 5 A. Correct. 09:20:02 6 Q. Meaning I can withdraw any subsequent 7 investment at the same time I can withdraw my 8 original investment? 9 A. Correct. 10 Q. And Mr. Dubin confirmed for you that 09:20:14 11 that was indeed the way the fund was going to be 12 operated? 13 A. That was my understanding. 14 Q. Can you tell us when this conversation 15 was with respect to when you made your first 09:20:26 16 investment? 17 A. It would be prior to the May 2002 first 18 investment tranche. 19 Q. Did you have any conversations with 20 Mr. Zwirn about the lockup at that time? 09:20:39 21 A. I never spoke to Dan Zwirn until years 22 later. 23 Q. Is it fair to say that your only 24 understanding of what the lockup period was came 25 from that conversation with Mr. Dubin? 09:20:55 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299104  Page 21 1 Epstein 2 A. No. 3 Q. What else did you rely on? 4 A. I spoke to people in my office, my 5 in-house counsel. 09:21:08 6 Q. About what? 7 A. Everyone knows I am very disciplined 8 about not investing money basically with lockups 9 and especially for more than two years. 10 Q. And why is that? 09:21:20 11 A. Because with an -- with my history of 12 investing in hedge funds, sometimes they go wrong. 13 I believe liquidity, especially when there's a 14 problem, becomes important. Liquidity in hedge 15 funds, especially with hedge funds, is a primary 09:21:37 16 concern of mine. And anything more than a 17 two-year lockup is too risky. 18 Q. Have you ever made a hedge fund 19 investment where you invested multiple tranches 20 where each tranche was governed by a separate 09:21:55 21 lockout -- lockup period? 22 A. I don't recall. 23 Q. Have you made other investments in 24 hedge funds with multiple tranches where each 25 tranche lockup was governed by the lockup period 09:22:16 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299105  Page 22 1 Epstein 2 for the first investment? 3 A. I don't recall. 4 Q. You said you made how many other 5 investments in hedge funds? 09:22:26 6 A. More than ten. 7 Q. And were those single tranches or 8 multiple tranche investments? 9 A. I don't recall with specificity. 10 Q. And you don't recall, with respect to 09:22:35 11 any of those hedge funds, what the lockup terms 12 were with respect to multiple tranches? 13 A. I make my investments based on 14 recommendations and analysis of usually 15 performance. The details of the lockups are 09:22:49 16 usually left to others. My discipline is I don't 17 make investments. In fact, the reason I have a 18 side letter dated January '05 is that later on 19 when I was asked to have a three-year lockup I 20 said absolutely not, I will not invest money, I 09:23:06 21 only will have two-year money. 22 MR. SUSMAN: Mr. Epstein, I instruct 23 you try to be responsive to this lawyer and 24 answer "yes" or "no," if you can, and not give 25 a talk. We'll be here too long. He knows 09:23:19 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299106  Page 23 1 Epstein 2 what questions to ask. 3 THE WITNESS: Okay. 4 Q. So of the approximately ten hedge fund 5 investments you have made, the only one, as you 09:23:26 6 sit here today, that you remember the terms of the 7 lockup for is this one? 8 A. Yes. 9 Q. Is that because you recently reviewed 10 those terms or is that because you have an 09:23:47 11 independent memory of those terms? 12 A. Can you repeat the entire question? 13 Q. Why is it that you remember this one 14 and not others? 15 A. This is the only one I've had a problem 09:23:58 16 with. 17 Q. In November 2004 did you remember the 18 terms of the lockup? 19 A. I don't recall. 20 Q. Did you recall the terms of this lockup 09:24:21 21 only after you began to have a problem with this 22 hedge fund? 23 A. Did I recall? I'm sorry, you'll have 24 to repeat your question. 25 Q. Your testimony is that you remember 09:24:32 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299107  Page 24 1 Epstein 2 this lockup and not others because this is the 3 only one "I've had a problem with." 4 So my question to you is when did you 5 remember the terms of this lockup, when did you 09:24:43 6 first remember the terms of this lockup. 7 A. I was told initially when I signed up 8 in 2002 that I would have a two-year lockup. I 9 remember having an agreement in 2005 that all my 10 money would be subject only to a two-year lockup. 09:25:00 11 Q. Is it possible that you were told in 12 2002 that the lockup period would be two years 13 from the date of each separate tranche? 14 A. You're asking me is it possible? 15 Q. Yes. 09:25:15 16 A. I do not recall that. 17 Q. Are you certain that Mr. Dubin did not 18 tell you that? 19 A. Correct. 20 MR. ARFFA: Mr. Susman, it may be 09:25:27 21 involuntary, but I notice you tend to shake 22 your head up and down. 23 MR. SCHWARTZ: As I have noticed. 24 MR. ARFFA: I would prefer you didn't 25 do that when he asks a question. 09:25:38 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299108  Page 25 1 Epstein 2 THE WITNESS: I was 3 MR. ARFFA: I'm not talking to you, 4 Mr. Epstein. 5 THE WITNESS: I haven't seen anything, 09:25:44 6 I'm sorry. 7 MR. ARFFA: That's your counsel. You 8 can do whatever you like. 9 THE WITNESS: Not a problem. 10 Q. Let me just go back. 09:25:56 11 Are you certain that Mr. Dubin told you 12 that the lockup period for the initial tranche 13 would apply to each additional tranche that you 14 made, in other words, you'd be able to take them 15 all out at the same time? 09:26:29 16 A. Yes. 17 Q. What do you recall prompted your desire 18 to obtain a side letter in 2005? 19 A. My best recollection is that they were 20 asking investors to have their money locked up for 09:27:24 21 three years. They were taking in new money. They 22 asked investors to take their money -- lock it up 23 for three years. I said absolutely not. 24 Q. And with whom did you have that 25 conversation? 09:27:35 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299109  Page 26 1 Epstein 2 A. My best recollection is Glenn Dubin. 3 Q. Do you have that conversation with 4 Mr. Zwirn? 5 A. No, not to the best of my recollection. 09:27:48 6 Q. Did anybody else to your knowledge in 7 your office communicate about that to Mr. Zwirn or 8 anybody else at his fund? 9 A. You'll have to repeat the question. 10 Q. Did anybody else to your knowledge in 09:28:05 11 your office communicate about that desire not to 12 be locked up for three years to Mr. Zwirn or 13 anybody else at his fund? 14 A. I don't recall. 15 Q. What did Mr. Dubin say to you when you 09:28:52 16 expressed that concern to him? 17 A. He told me that they would -- Stan 18 would send me a letter confirming my 19 understanding. 20 Q. Anybody else participate in that 09:29:10 21 conversation? 22 A. I don't recall. 23 Q. By the way, did anybody else 24 participate in the conversation -- initial 25 conversation you had with Mr. Dubin concerning 09:29:20 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299110  Page 27 1 Epstein 2 lockups in 2002? 3 A. No. 4 Q. Was that conversation in person or on 5 the phone? 09:29:27 6 A. On the phone. 7 Q. Was the conversation in 2004 in person 8 or on the phone? 9 A. My best recollection would be on the 10 phone. 09:29:42 11 Q. What happened after that conversation? 12 A. What question is that? 13 Q. With respect to your desire not to have 14 a three-year lockup, what happened after that 15 conversation with Mr. Dubin? 09:29:56 16 A. Which conversation with Mr. Dubin? 17 Q. 2004. 18 A. Are you talking about the end of 2004? 19 Q. Yes. 20 A. We received a letter stating that, yes, 09:30:05 21 my one capital account would be subject to only a 22 two-year lockup, where everybody else's would be 23 three, or at least mine said a two-year lockup. 24 Q. And between the time you spoke to 25 Mr. Dubin and the time you received that letter, 09:30:21 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299111  Page 28 1 Epstein 2 do you recall having any conversations with 3 anybody about that topic? 4 A. Repeat the question? Sorry. 5 Q. Between the time you spoke to Mr. Dubin 09:30:44 6 in late 2004 and the time you received the letter 7 in early 2005, do you recall having any 8 conversations with anybody about that topic? 9 A. Yes. 10 Q. With whom? 09:30:58 11 A. My general counsel. 12 Q. Was anybody else present when you had 13 that conversation with your in-house counsel? 14 A. I don't believe so. 15 Q. I think you also testified that you had 09:31:10 16 conversations back in 2002 with your in-house 17 counsel about lockups; do you recall? Is that 18 correct? 19 A. I've spoken to -- most people who work 20 for me know I don't agree to investments basically 09:31:26 21 more than two years. 22 Q. Do you recall any conversations with 23 your in-house counsel in 2002 about that topic? 24 A. Not specifically. 25 Q. Do you recall any conversations with 09:31:34 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299112  Page 29 1 Epstein 2 anybody other than Mr. Dubin in 2002 about that 3 topic? 4 A. Yes. 5 Q. With whom? 09:31:43 6 A. Many people I have made investments 7 with. When I discuss investments, I say having 8 more than a two-year lockup makes no sense to many 9 people. 10 Q. If you invest money in May -- if you 09:31:56 11 would have invested money in May of 2002 and then 12 you invest additional monies in September 2002, it 13 would also be a two-year lockup if the monies in 14 September 2002 could be obtained in September 15 2006; is that correct -- 2004; is that correct? 09:32:13 16 A. Again? 17 Q. I want to be clear about what a 18 two-year lockup is. You can have a two-year 19 lockup with respect to each tranche where that 20 tranche is locked up for two years. That's a 09:32:29 21 possibility -- correct? -- in a fund? 22 A. Yes. 23 Q. You could also have a two-year lockup 24 where each tranche is governed by the date of the 25 initial lockup for the initial tranche; is that 09:32:42 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299113  Page 30 1 Epstein 2 correct? 3 A. I'm sure it is. 4 Q. I just want to be sure which one you're 5 saying this fund required. 09:32:50 6 A. I've repeatedly told you what my 7 understanding was. 8 Q. And you said that you have 9 conversations with many people about your desire 10 to have two-year lockups. In those 09:33:04 11 conversations -- 12 A. Less than two-year lockups. I have 13 many talks about the dangers of having anything 14 more than a two-year lockup. That's what I said. 15 Q. In those conversations are you talking 09:33:16 16 about two-year lockups generally or are you being 17 specific that each tranche needs to be governed by 18 the two-year lockup on the initial tranche? 19 A. Generally. 20 Q. So the only conversation in which you 09:33:34 21 discussed that each tranche of this of these 22 investments would be governed by the initial 23 two-year lockup was with Mr. Dubin prior to your 24 first investment; is that correct? 25 A. You'll have to repeat the question. 09:33:59 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299114  Page 31 1 Epstein 2 Q. So the only conversation in which you 3 discussed that each tranche of these investments 4 in the Highbridge/Zwirn fund would be governed by 5 the initial two-year lockup date was the 09:34:10 6 conversation with Mr. Dubin prior to your first 7 investment; is that correct? 8 A. Correct. 9 Q. It's your testimony that the purpose of 10 the side letter was to create -- was to assure you 09:34:46 11 a two-year lockup -- is that correct? -- for 12 additional investments? 13 A. It was to confirm my two-year lockup in 14 the face of Dan wanting to raise more money. I 15 was the largest investor. And this was a 09:35:02 16 confirmation that I had one capital account 17 subject to a two-year lockup. 18 Q. And was there any other purpose to the 19 side letter, to your recollection? 20 A. To encourage me to I think contribute 09:35:17 21 the additional money. 22 Q. By giving you the assurance it would be 23 a two-year lockup; correct? 24 A. He reconfirmed my initial -- I always 25 had a two-year lockup. The letter reconfirmed it, 09:35:33 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299115  Page 32 1 Epstein 2 since everyone else was now going to be subject to 3 a three-year lockup. 4 Q. So the way Mr. Zwirn encouraged you to 5 contribute additional money was by making that 09:35:46 6 confirmation; is that correct? 7 A. You'd have to ask Dan Zwirn that. 8 Q. It's your testimony that the purpose of 9 the letter was to encourage you to contribute 10 additional money. How did it do that? 09:35:56 11 A. It reconfirmed my understanding that 12 right from the beginning I only had a two-year 13 lockup on my additional monies, so other people 14 were going to be subject to a three-year lockup. 15 Nothing would change for me. 09:36:06 16 MR. SCHWARTZ: Can I have this marked 17 as I guess Defendants' 1. 18 (Discussion off the record.) 19 MR. SUSMAN: This can be on the record, 20 actually, because there will be an agreement 09:36:55 21 that will follow us. Let's just mark all 22 these exhibits 1, 2, 3, 4, 5, continue the 23 marking. We will try to avoid duplicates. 24 MR. SCHWARTZ: I'm with you. Fine. 25 MR. SUSMAN: And when we go to the 09:37:02 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299116  Page 33 1 Epstein 2 hearing, we don't have to re-mark anything. 3 So this will be Exhibit 1. 4 MR. SCHWARTZ: I'm with you. 5 MR. SUSMAN: I assume everyone else is. 09:37:08 6 (Discussion off the record.) 7 (Exhibit 1, letter, marked for 8 identification.) 9 Q. Before we discuss that, I just want 10 to -- you've been testifying about your 09:37:40 11 conversation with Mr. Dubin and the only 12 conversation from which you had an understanding 13 about the lockups going back to 2002. 14 Did you review the documents with 15 respect to the investment at the time you got 09:37:53 16 them? 17 A. No. 18 Q. So your entire understanding of the 19 lockups is based on the conversation with 20 Mr. Dubin as opposed to conversations with anybody 09:38:02 21 else or documents? 22 A. I believe I said I had conversations 23 with my counsel. 24 Q. I think you testified both ways about 25 that. When was the conversation with your 09:38:15 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299117  Page 34 1 Epstein 2 counsel? 3 A. Prior to -- as I said before, I 4 believe, prior to 2002 I talked to Glenn Dubin and 5 reconfirmed with my counsel that this investment 09:38:29 6 would be subject to a two-year lockup. 7 Q. In reconfirming with your counsel, is 8 that what you asked him: Can you confirm that 9 this is subject to a two-year lockup? 10 A. No. 09:38:43 11 Q. What did you ask him? 12 MR. SUSMAN: That is covered by a 13 privilege, so let's -- 14 MR. SCHWARTZ: I didn't volunteer the 15 conversation with counsel. 09:38:56 16 MR. SUSMAN: Yeah. 17 MR. SCHWARTZ: I think we've waived the 18 privilege. 19 MR. SUSMAN: Do not answer the question 20 about the subjects. It's never a waiver of 09:39:03 21 privilege to say you've talked to your lawyer. 22 And how much you want to bet on that? 23 MR. SCHWARTZ: Excuse me? It never 24 waives a privilege to say exactly what you 25 said to your lawyer? I think that's -- you 09:39:15 VERITEXT REPORTING COMPANY www.veritext.com EFTA00299118  Page 35 1 Epstein 2 and I have a different understanding of the 3 attorney-client privilege. 4 MR. SUSMAN: Okay. 5 MR. SCHWARTZ: Once you testify as to 09:39:19 6 the conversation, you've waived the privilege. 7 MR. SUSMAN: Go ahead. 8 I've instructed him not to answer the 9 substance. 10 MR. SCHWARTZ: I heard your 09:39:30 11 instruction. 12 MR. SUSMAN: Go ahead. 13 MR. SCHWARTZ: I caught the 14 instruction.