EFTA00731381.pdf

Page I 1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA 2 3 IN RE: CASE NO.09-34791-BKC-RBR 4 ROTHSTEIN ROSENFELDT ADLER, P.A., 5 Debtor. 6 7 MOTION TO CLARIFY FILED BY OTHER PROFESSIONAL 8 ROBERT B. CARNEY (1013) 9 10 October 13, 2010 11 12 13 14 The above-entitled cause came on for 15 hearing before the HONORABLE RAYMOND B. RAY, one 16 of the judges of the UNITED STATES BANKRUPTCY COURT, 17 in and for the SOUTHERN DISTRICT OF FLORIDA at 299 18 East Broward Boulevard, Fort Lauderdale, Broward 19 County, Florida on October 13, 2010, commencing at 20 or about 9:30 a.m., and the following proceedings 21 were had: 22 23 24 25 Reported By: Bonnie Tannenbaum OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731381  Page 2 1 APPEARANCES: 2 ROBERT B. CARNEY, SPECIAL MASTER 3 BERGER SINGERMAN, by 4 CHARLES H. LICHTMAN, ESQUIRE On behalf of Herbert Stettin, Chapter 11 Trustee 5 6 CONRAD & SCHERER, by JAMES D. SILVER, ESQUIRE 7 On behalf of Razorback Funding 8 FARMER, JAFFE, WEISSING, EDWARDS, FISTOS & 9 LEHRMAN, P.L., by GARY M. FARMER, JR., ESQUIRE 10 BRAD EDWARDS, ESQUIRE On behalf of the Former RRA Clients 11 12 FOWLER WHITE BURNETT, P.A., by CHRISTOPHER E. KNIGHT, ESQUIRE 13 JOSEPH L. ACKERMAN, JR., ESQUIRE On behalf of Jeffrey Epstein 14 15 16 17 18 19 20 21 22 23 24 25 OUELLETTE & MAULDIN COURT REPORTERS. INC. (305) 358-8875 EFTA00731382  Page 3 1 THE COURT: All right. Feltman versus 2 Venture is going to take some time, so I'll start 3 with Rothstein Rosenfeldt. 4 MR. LICHTMAN: Good morning, Judge. Chuck 5 Lichtman, Berger Singerman, for the trustee. 6 MR. SILVER: Good morning, Your Honor. 7 Jim Silver of Conrad & Scherer on behalf of Razorback 8 Funding and other victim creditors. 9 MR. KNIGHT: Good morning, Your Honor. 10 Christopher Knight and Joe Ackerman on behalf of 11 Jeffrey Epstein. 12 MR. CARNEY: Good morning, Your Honor. 13 Robert Carney. I'm the special master that's been 14 appointed in this case. 15 MR. FARMER: Good morning, Your Honor. 16 Gary Farmer and Brad Edwards. We are the attorneys 17 for the former RRA clients who have objected to the 18 discovery request. 19 THE COURT: All right. I have showing on 20 my calendar the motion to clarify, Docket Entry 1013, 21 by Mr. Carney, joinder by 1038 and 1039. All right. 22 MR. CARNEY: Yes, Your Honor, if I may be 23 heard? 24 THE COURT: Yes, please. 25 MR. CARNEY: Let me begin to place this in OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731383  Page 4 1 context with just a little background about how we 2 got here. This action is a civil action. It's 3 pending in Circuit Court up in Palm Beach County. 4 Jeffrey Epstein has sued Mr. Rothstein, individually, S and Mr. Edwards, individually, regarding -- the 6 genesis of which was a civil suit that Mr. Edwards 7 had filed against Mr. Epstein, which has since 8 settled. That civil suit was brought by 9 Mr. Edwards to the Rothstein firm. It was the 10 linchpin of the settlements that Mr. Rothstein was 11 attempting to sell as part of his Ponzi Scheme. So 12 that's a little bit of the background. 13 Fowler White, who is representing the 14 plaintiff, Mr. Epstein, in this case, has made a 15 discovery request seeking documents pertinent to 16 those civil lawsuits. 17 The trustee in this case -- because the 18 documents are held by the trustee now, and so 19 Mr. Stettin was concerned that there may be some 20 privilege issues on those documents, and as a result, 21 Mr. Lichtman and the attorneys came forward before 22 this Court and requested that there be a master 23 appointed to help resolve this issue, and ultimately, 24 I became involved in the case. 25 Mr. Farmer is representing the child in OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731384  Page 5 1 this case, who is the one who would be asserting the 2 privilege. Mr. Edwards, as I understand it, is 3 representing himself. Actually, Jack Scarola is his 4 attorney. 5 I've had a chance to review the documents. I've printed them out and reviewed them. Just to 7 place things in its context, the stack of documents 8 are divided into two separate stacks. One relates to 9 e-mails from and to Mr. Edwards, and the second are 10 e-mails from and to Mr. Rothstein dealing with that 11 particular case. 12 Just in terms of sheer volume, we're 13 probably talking 5,000 or more pages. 14 THE COURT: Each or combined? 15 MR. CARNEY: Combined, probably at least 16 5,000 pages. Now, the problem that I'm seeing is 17 this, the order directs that I prepare a privilege 18 log. And the initial difficulty that I am seeing 19 right now, it's implicit in the order for me to 20 prepare the privilege log, is that Mr. Farmer and 21 Mr. Edwards cannot prepare the privilege log. It's 22 implicit in the order, because none of the documents 23 upon which they could prepare the privilege log are 24 given to them, they're given to me, as I have the 25 disk, I have the documents, and they don't. And the OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731385  Page 6 1 order is that they don't get the documents. And so 2 they're left unable to prepare the privilege log. 3 The problem that I'm seeing here is we have 4 the child, for example, that Mr. Farmer is S representing, it's her privilege, and she is denied 6 the opportunity to actually assert the privilege. 7 And I'm seeing legally some appellate issues with 8 that one. Actually, I think we may end up being in a 9 reversible situation in the State Court on that, if 10 it goes before Appellate Court scrutiny. 11 So I'm concerned at this point legally 12 telling Mr. Edwards and telling Mr. Farmer that they 13 can't prepare the privilege log, and they can't see 14 the documents upon which they would be preparing the 15 privilege log, that the privilege is simply being -- 16 the privilege log is being prepared by me. 17 So, I think that's our first legal issue. 18 There's a practical problem to it, and the practical 19 problem is this, I have no idea what Mr. Farmer is 20 going to assert. He may assert the privilege, or he 21 may not, I don't know. I'm not privy to his trial 22 tactics, and I certainly would suspect he's not 23 willing to tell me what his trial tactics are in the 24 case. 25 So I'm left to simply guess whether he is OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731386  Page 7 1 going to assert a privilege, and if so, what 2 privilege he's going to assert. If I'm going to do 3 that, I'm certainly going to err on the side of 4 caution, which means that I'm going to assert a S privilege on virtually everything within those 6 documents. 7 The reason for that is that if I make a 8 mistake, or I overlook something, the obvious effect 9 of it is going to be, if I'm not asserting a 10 privilege on the document, the document's going to be 11 released, and it will be released to the plaintiff. 12 At that point, the cat is out of the bag. 13 Now we have a problem, because they haven't had the 14 opportunity to assert the privilege, the plaintiff 15 now has seen the document, and there we are. So I'm 16 seeing some practical problems with me asserting it. 17 The additional practical problem is that it 18 lands everything in the lap of the Court. My 19 function as a special master should be to relieve the 20 Court from these duties. This is a case that this 21 Court really has no dog in the fight. This is a 22 pluralistic Court action. 23 So my job should be to relieve this Court 24 from the mundane duties of resolving all these 25 issues, but by having me prepare the privilege log, OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731387  Page 8 1 and the order pretty much ends there, it places all 2 of this in the Court's lap to then sort it out. 3 Now, if the order is expanded to say, 4 conduct a hearing on it, I think we have a more S uncomfortable problem, because at that point, then, I 6 will have been somewhat in the shoes of the defense 7 in asserting the privilege, and then turn around and 8 rule on the privilege that I've just asserted, which 9 I think may make the plaintiff's attorneys a little 10 uncomfortable, and perhaps rightfully so. 11 THE COURT: Your recommendation is to have 12 Farmer and Edwards on behalf of their respective 13 parties -- 14 MR. CARNEY: Yes, sir. 15 THE COURT: -- review the documents, 16 indicate whether or not to you there is a privilege 17 to be asserted? 18 MR. CARNEY: I have a disk the trustee 19 has a disk, I've got a disk. What my suggestion is 20 is we simply copy that disk and give it to 21 Mr. Farmer, and give it to Mr. Edwards. There's no 22 issue involved anymore on the integrity of the disk, 23 because I have a copy of it, and the trustee has a 24 copy. 25 So we have, again, no issues on the OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731388  Page 9 1 integrity of the disk, and let them assert their 2 privilege. If they want to assert it, they can 3 assert it. If they don't, it's their choice. We 4 eliminate whatever appellate issues there may be by 5 denying them the right to assert their own 6 privileges. 7 Secondly, I think the order needs to be 8 amended at this point. It takes me out of the 9 equation of asserting the privilege, as I shouldn't 10 be the one asserting it. 11 THE COURT: They assert it, you hear it, 12 and you report back to me. 13 MR. CARNEY: Exactly, as I then make 14 recommendations to you, and once I make the 15 recommendations to you, you can decide at that point 16 whether you want to -- if there's an objection filed 17 to any of the recommendations that I made, you can 18 decide whether you want to entertain the objections, 19 or whether you want to pass the objections -- I 20 haven't researched this issue, but perhaps pass the 21 objections back to Circuit Court in Palm Beach, and 22 let the Circuit Judge up in Palm Beach resolve them. 23 But that's my recommendation that I think 24 will eliminate both legal and practical problems to 25 the order as it's written. OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731389  Page 10 1 THE COURT: All right. Thank you, 2 Mr. Carney. 3 MR. KNIGHT: Your Honor, Christopher Knight 4 on behalf of Jeffrey Epstein. First, I'd like to 5 thank the Court, and thank Special Master Carney for 6 the time that he's put into this matter to date. 7 I understand Judge Carney's concerns, 8 however I want to point out the following to the 9 Court, which I think will be helpful in crafting a 10 solution here. 11 He mentioned the child, who actually was 12 arguably an adult, arguably a late teen that was 13 involved in a case that is now settled, which is the 14 subject matter of obviously the comments that were 15 brought to this Court by Mr. Scherer at the time of 16 the last hearing of, was Mr. Edwards part of the 17 fraud which led to the dollars being put into the 18 Rothstein firm or the Rothstein investments, which is 19 all part of this entire ball of yarn that this Court 20 is having to deal with. 21 We are here because in our case, our 22 plaintiff's case that we're bringing on behalf of 23 Mr. Epstein versus Mr. Edwards, we cannot move 24 forward with our case without the various documents 25 that are in the trustee's hands. And I say that the OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731390  Page I I 1 documents -- we've heard about the disk. That is the 2 disk that Mr. Lichtman has, which now Mr. Carney has. 3 I do not know whether or not that covers the ten 4 boxes which Mr. Scherer came before this Court and 5 said his clients, the ones that were in the room, the 6 ones that arguably would waive the privilege, saw ten 7 boxes of documents. We still don't know if those are 8 there, and so eventually we have to find out where 9 those are so that those can get before Judge Carney. 10 However, the privilege, if there is any 11 privilege, which we will argue before Judge Carney is 12 waived, that would only apply to this LM case. And 13 it should not be broader than that. There should be 14 plenty of documents right now that can be released 15 that will need no privilege log whatsoever by review 16 of Judge Carney. 17 What we do not want is Mr. Farmer and 18 Mr. Edwards becoming the gatekeeper for their own 19 firm, which is exactly why I think in Paragraph 2 of 20 your order, which I believe was Docket Entry 888, 21 that you had said exclusively that Judge Carney would 22 be able to review these documents. 23 I do understand, as I mentioned earlier, 24 Judge Carney's dilemma here in that he certainly 25 cannot sit in the exact same shoes as Edwards to -- OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731391  Page 12 1 or excuse me, as LM to assert a privilege, if one's 2 there, but I bring back to the Court's attention that 3 that case is settled and resolved, and is only a 4 portion of these entire e-mails. 5 Delay is a major problem for my client. 6 There is a pending motion for summary judgment, 7 there's a pending trial date, and the Edwards group 8 has fought any attempt on our end to push those trial 9 dates back while we wait to get these e-mails or 10 other documents, which we believe will show further 11 involvement than just Mr. Rothstein sitting in a room 12 over at his old firm and showing this to investors. 13 We believe that these e-mails will 14 eventually show that other people knew what was going 15 on, and that may or may not have -- play out -- it 16 may or may not be relevant to our case but, 17 certainly, we should have the opportunity to look at 18 those documents. 19 The other issue is, at the Rothstein firm, 20 the e-mails we have learned through the various 21 documents from this Court and various hearings, many 22 of them are tied up in Qtask. We believe that many 23 of the documents we would be seeking eventually would 24 be in Qtask. 25 I bring all of that to your attention, Your OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731392  Page 13 1 Honor, because it goes beyond just the issues that 2 Special Master Carney has brought before you. We 3 understand that Special Master Carney wants to 4 protect himself relative to these issues, and that is S certainly understandable. We believe if there is 6 going to be any viewing by the Farmer or Edwards 7 group, it would be independent to Judge Carney. He 8 should still look at all the documents, but certainly 9 many of the documents would have nothing to do with 10 the underlying LM case, and should be released now. 11 THE COURT: But whoever is going to look at 12 them is going to want Farmer and Edwards to have a 13 privilege log as to what they're claiming privileged. 14 They may only claim 1,000 of the 5,000 documents as 15 privileged. That saves me or Judge Carney from 16 looking at 4,000 documents. 17 MR. KNIGHT: And that's where we understand 18 and agree with Judge Carney. We want Judge Carney to 19 be able to independently look at all of those 20 documents, and not have Farmer and Edwards there with 21 him, be able to independently -- so he can look at 22 them himself so he can decide whether or not this may 23 even come into the purview of privileged, especially 24 when many of these documents were shown to people 25 which would have waived the privilege, and I think OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731393  Page 14 1 those are decisions that only Judge Carney can make 2 once he has the rest of this information in front of 3 him. 4 THE COURT: We're taking an extra step from S the Special Master's recommendation and report. We 6 could have -- I could have Farmer and Edwards, for 7 their respective clients, review the disk, prepare a 8 privilege log, and then either I, through the 9 recommendations of the Special Master, or Judge 10 Carney could then take the log and make a 11 determination as to what is privileged and what is 12 not. 13 MR. KNIGHT: And I believe that is 14 workable, although, as we argued before Judge Carney, 15 he met with each side separately, and then together, 16 we don't know what to argue until we see a privilege 17 log which would have to be constructed by Judge 18 Carney, because it would give you an entire list, as 19 opposed to something that would be limited by what 20 Mr. Farmer and Mr. Edwards, Mr. Edwards being the 21 defendant in this case, would -- 22 THE COURT: Well, no, we would have Special 23 Master Carney's report to me as to what the claim of 24 privilege was, and what documents were subject to 25 that. OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731394  Page IS 1 MR. KNIGHT: And, Your Honor, as long as we 2 had also Judge Carney's list or logs so that we know 3 that all the documents are included, and also know 4 that the ten boxes, once located, need to go before 5 Carney, and anything before Qtask -- 6 THE COURT: Let me ask while we're there, 7 ten boxes, what ten boxes? 8 MR. KNIGHT: At the time of -- 9 THE COURT: No, no, let me ask 10 MR. KNIGHT: I'm sorry, I thought you 11 were -- 12 THE COURT: I'm asking somebody. I'm the 13 only one that doesn't know. 14 MR. FARMER: Thank you, Your Honor. May it 15 please the Court, those ten boxes are litigation 16 files -- 17 COURT REPORTER: Judge, can I ask his name? 18 THE COURT: This is Mr. Farmer. 19 MR. FARMER: I'm Gary Farmer, I'm sorry. 20 These are our litigation files, Your Honor, and the 21 factual scenario is a bit broader than Judge Carney 22 advised the Court. There were nine lawsuits handled 23 by Mr. Edwards against Mr. Epstein that were settled 24 by Mr. Epstein. There is another lawsuit that is 25 pending. Those ten boxes comprise Brad Edwards' work OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)3584875 EFTA00731395  Page 16 1 product in the nine cases that settled, and contain 2 information that is, one, protected by the 3 attorney/client privilege owned by each of those 4 clients; and, two, contains his mental thoughts, S impressions, and strategies for those cases which 6 resulted in those nine settlements. 7 So those privileges live on. And to give a 8 party who is suing Mr. Edwards and his client access 9 to Mr. Edwards' underlying files and related cases 10 would be a clear and blatant breach of the work 11 product privilege. 12 In addition, Your Honor, we have an added 13 twist here in that Mr. Epstein has consistently and 14 adamantly invoked his Fifth Amendment privilege 15 against self incrimination when questioned, both in 16 the underlying cases filed against him by his minor 17 pedifile victims, and the young woman in question, 18 LM, was not an adult, she was 13 years old when 19 Mr. Epstein committed sexual assault on her. He has 20 taken the Fifth Amendment in that case, he's taken 21 the Fifth Amendment in the very case in which he has 22 now issued this subpoena. 23 And so Judge Crow is wrestling with the 24 issue of the sword and the shield doctrine. Does 25 Mr. Epstein get access to any of this information, OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731396  Page 17 1 given the fact that one cannot invoke the Fifth 2 Amendment privilege against self incrimination when 3 one is suing on those very facts? 4 So there is a very twisted and sorted S history here, Your Honor, but the bottom line is -- 6 and, oh, by the way, Mr. Epstein also pled guilty to 7 criminal charges related to the sexual assault. 8 So a convicted criminal who's invoked his 9 Fifth Amendment privilege against self incrimination 10 in this purported lawsuit against my partner, now 11 seeks records which he claims are going to show that 12 these cases are fabricated. If they were fabricated, 13 then he needs to be sanctioned for invoking his Fifth 14 Amendment right against self incrimination because he 15 had no basis to do so. 16 But I think the real truth here, Your 17 Honor, is that nothing was fabricated. One doesn't 18 plead guilty to criminal charges, spend a year 19 incarcerated, be on probation, invoke the Fifth 20 Amendment and settle nine lawsuits, if everything is 21 fabricated. 22 But I bring all of this to the Court's 23 attention, because as Judge Carney indicated in his 24 presentation, I respectfully submit, Your Honor, that 25 we are wasting your time, and you don't really have OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731397  Page 18 1 the full breath of information and facts necessary to 2 ultimately rule on these privileges, because this 3 Fifth Amendment invocation is going to be an issue, 4 these prior convictions are all going to be an issue. S It may be that Judge Crow determines, because 6 Mr. Epstein refuses to answer any questions about his 7 allegations in his complaint, that his case will be 8 dismissed or eliminated via summary judgment. 9 And so as Judge Carney alluded to, Your 10 Honor, I would respectfully submit that we should 11 stop bothering Your Honor, stop wasting trust assets 12 that should go to the ultimate benefit of the 13 creditors once the Court determines how that's going 14 to play out, but stop wasting this Court's time, stop 15 wasting the very limited assets, and allow Judge 16 Crow, who's going to be in the best position from a 17 factual standpoint, to consider the privileges 18 asserted, whether -- despite maybe if a privilege 19 wasn't asserted, whether they get any of this 20 information, given their admission to this conduct 21 via the guilty plea, given the Fifth Amendment, et 22 cetera. 23 But if Your Honor is going to keep the 24 matter here, we certainly agree with Judge Carney in 25 that it's very clear, Your Honor, due process OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731398  Pagc 19 1 requires that the party who possesses the privilege, 2 both the client who possesses the attorney/client 3 privilege and the lawyers who possess the work 4 product privileges, they have a due process right to 5 review the documents and assert the privileges that 6 they feel appropriate. 7 It then falls on some judge somewhere to 8 call balls and strikes on those asserted privileges, 9 but it would be absolute error to not allow the 10 parties who own the privileges from reviewing these 11 documents. And there's no preservation or 12 gatekeeper issue here, because they've been well 13 preserved. They're on the original RRA server, there 14 are copies of disks everywhere, so it's not as though 15 giving a copy of a disk to myself and my partner, 16 Mr. Edwards, would lead to some preservation problem. 17 They've got copies of everything that we would be 18 looking at. 19 THE COURT: Thank you. 20 MR. KNIGHT: Your Honor, briefly, if I can? 21 THE COURT: Go ahead. 22 MR. KNIGHT: I guess we now know where the 23 ten boxes are. If that's true, they should be handed 24 over to the trustee who said they didn't have them 25 before, because obviously they should be before the OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731399  Page 20 1 trustee. I don't know if those ten boxes are going 2 to have anything to do with these nine other 3 lawsuits, but at the time of the last hearing, nobody 4 knew where those ten boxes were. 5 THE COURT: Well, my recollection -- 6 Mr. Lichtman, correct me if I'm wrong, is the trustee 7 turned over the respective lawyer's files to the 8 respective lawyers of the former Rothstein firm. 9 MR. LICHTMAN: Correct. I think the 10 phraseology might be better stated that when the firm 11 dissolved and lawyers that were responsible for cases 12 had files in their custody, in order to properly 13 manage those files, they took the files, and we said, 14 you should have them. 15 MR. FARMER: Actually, Judge Streitfeld, 16 who presided over the initial receivership, issued an 17 order providing for -- 18 THE COURT: That's what I thought. 19 MR. LICHTMAN: Yes. 20 THE COURT: I thought there was an order in 21 place somewhere. 22 MR. LICHTMAN: Yeah. 23 THE COURT: So then you don't have the ten 24 boxes of files? 25 MR. LICHTMAN: I've never seen them. I OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731400  Page 21 1 don't, no. 2 THE COURT: No, they're in the custody of 3 Farmer and Edwards. 4 MR. FARMER: Yes, sir. 5 MR. KNIGHT: Then, Your Honor, we need 6 those to get back to the trustee so they can come 7 under this privilege log. This is not a matter 8 before Judge Crow, it's over here because 9 Mr. Lichtman has custody of these e-mails. These 10 e-mails, no matter what Mr. Farmer wants to throw out 11 about our client, which were allegations which were 12 disputed on many of it, this deals with our ability 13 to get documents -- 14 THE COURT: Well, he didn't take the Fifth 15 Amendment? 16 MR. KNIGHT: He took the Fifth Amendment 17 relative to some of the criminal charges that were 18 brought against him. 19 THE COURT: And he didn't plead guilty? I 20 thought he did. 21 MR. KNIGHT: He pled guilty to a charge. 22 When he threw out the 13-year old girl, I think that 23 is only for fluff in this courtroom. 24 MR. FARMER: No, it's to rebut your 25 assertion that she was an adult. OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731401  Page 22 1 MR. KNIGHT: She's an adult now. I said -- 2 we also argued that she wasn't an adult at that time. 3 He entered into a plea. Clients enter into a plea. 4 It does not take away his rights to come before this 5 Court and understand why his case was promoted at the 6 Rothstein firm to bring other investors in to cause 7 other people to come out of the woodwork to claim 8 they were also victims of his. We need to find out 9 why. That's why Judge Carney has been appointed. 10 Judge Carney has come up with a solution which is 11 workable. All we're asking the Court is to not allow 12 the Farmer firm to become the gatekeeper, allow Judge 13 Carney to continue to be the gatekeeper, and have it 14 limited to the objections which were raised earlier, 15 and the privileges asserted earlier. 16 THE COURT: I will tell you now, I will 17 deal with the disk problem here. The, quote, "ten 18 boxes" in the possession of Mr. Farmer and 19 Mr. Edwards can be dealt with at the State Court 20 level. 21 MR. KNIGHT: Okay. And -- 22 THE COURT: Now, turning to the disk issue, 23 let me hear from Mr. Silver and Mr. Lichtman. 24 MR. LICHTMAN: You go first. 25 MR. SILVER: Your Honor, first of all, we OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731402  Page 23 1 issued a subpoena under Rule 2004 last night to the 2 trustee, service of which was accepted by 3 Mr. Lichtman. So now we're clearly before this 4 Court. We believe it relates to acts, conduct and S property of this estate, these facts. In fact, in 6 Paragraph 90 of our complaint in the State Court 7 action before Judge Streitfeld, we've stated, in 8 terms of some of our clients being lured into the 9 fraud through false facts relating -- or false 10 allegations relating to Jeffrey Epstein, we alleged 11 representatives of D3 were offering -- 12 THE COURT: I haven't read your subpoena, 13 but I take it you're seeking access to the same disk 14 that Messrs. Knight and -- 15 MR. SILVER: That's correct, Your Honor, so 16 I think the whole sword, shield and Fifth Amendment 17 is, at this point, a moot point, because we have a 18 legitimate discovery request under Bankruptcy Rule 19 2004. 20 In terms of the cost and expense to this 21 estate, Your Honor, in the State Court action, we 22 represent over $160,000,000 of the victims. So while 23 we appreciate Mr. Farmer trying to look after our 24 financial interests, we think we can do so ourselves. 25 In addition, in your ruling, you indicated OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731403  Page 24 1 that the costs and expenses of this matter would be 2 paid for by Mr. Epstein, not by the bankruptcy 3 estate, so I think that's a red-herring issue, Judge. 4 Also, I pulled the transcript from the last S hearing, and I believe Your Honor contemplated the 6 very issues raised in the motion for clarification 7 and dealt with them. At Page 35 of the transcript, 8 beginning at Line 24, the Court: "Well, no, if I 9 appoint a special master, you will have an input into 10 that. Special master: "and you'll have an 11 opportunity to be heard before me before I authorize 12 the release of the information, because, ultimately, 13 the order that's going to authorize the release of 14 the information is going to provide protection to the 15 trustee and the estate." 16 Then at Page 36, beginning at Line 24, "The 17 Special Master will meet with both sides, Epstein and 18 Edwards, and then with a trustee, and will prepare a 19 privilege log, the release of which will be noticed 20 for hearing in front of me." 21 Your Honor also indicated that the special 22 master would review the actual documents. So reading 23 the transcript, I believe the procedure Your Honor 24 contemplated was that the Farmer Jaffe firm would 25 have input before any of these documents were OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731404  Pagc 25 1 released, the special master would, in effect, be 2 reviewing them, in camera, as an adjunct of this 3 Court, which is appropriate and a long-standing 4 procedure, and that the Farmer Jaffe firm would have 5 input if they believed that certain of the documents 6 were privileged, to assert that. The special master 7 would then make a recommendation to this Court, and 8 this Court would make the final decision. 9 So I think the due process rights, and the 10 ability of the Farmer Jaffe firm on behalf of their 11 client to make objection on the basis of privilege 12 still exists, and is still protected by this Court. 13 I am concerned, Your Honor, though, with 14 timing. We have a motion for protective order that 15 was filed by the Farmer Jaffe firm, I believe it's 16 set for a week from today, where, if I read it 17 correctly, they're saying essentially every document 18 is privileged. So to have a procedure that first 19 gives it to the Farmer Jaffe firm, only to come back 20 several weeks later saying everything is privileged, 21 we're going to end up at square one again with a 22 special master who is going to need to go through 23 these documents in camera, and make a recommendation 24 to this Court, and all that will have been 25 accomplished is delay, additional delay, and I don't OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)3584875 EFTA00731405  Page 26 1 think that's appropriate, Your Honor. 2 THE COURT: Well, that may or may not be 3 so, because Farmer and Edwards don't want delay, 4 according to them. 5 MR. SILVER: I hope that's correct, Your 6 Honor. 7 THE COURT: Because if they cause the 8 delay, then it becomes their problem. 9 MR. SILVER: Understood, Your Honor. We 10 also will be seeking to subpoena, under Rule 2004, 11 the Farmer Jaffe firm for the 13 -- it's actually 13 12 rather, than 10 boxes, that were used to lure some of 13 our clients into this by coming up with false 14 allegations against Mr. Epstein. 15 THE COURT: But are you going to issue the 16 subpoena in your State Court proceeding, or are you 17 going to attempt to use Rule 2004 in the federal 18 proceeding -- I'm sorry, the federal bankruptcy 19 proceeding, not the federal criminal proceeding, or 20 forfeiture proceeding? 21 MR. SILVER: Your Honor, the latter, Rule 22 2004 under the bankruptcy case, as it relates to 23 acts, conduct, and property of this estate, because 24 it's intertwined with the entire Ponzi Scheme, and we 25 have a right to investigate that as a significant OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731406  Page 27 1 creditor in this estate. 2 Thank you very much, Your Honor. 3 MR. LICHTMAN: Good morning, Judge. 4 THE COURT: It was. 5 MR. LICHTMAN: Maybe we'll go back and have a glass of Alka-Seltzer together. Let me first point 7 out that the scope of the subpoena served upon the 8 trustee goes well beyond e-mails. I'm going to not 9 read to you very much, but as an example, the duces 10 tecum portion of the subpoena, Paragraph 1 alone 11 already starts off with Paragraph 1(b) soliciting or 12 receiving money in return for settlement funds 13 allegedly paid or to be paid by Jeffrey Epstein; 14 (d), communication between third party investors or 15 potential investors and the plaintiffs or their 16 attorneys; Subsection 3, all e-mails, data, 17 correspondence, memo or similar documents between 18 Brad Edwards, Scott Rothstein, William Berger and 19 Russell Adler and/or any attorney or representative 20 of RRA and any investor or third party, and so on. 21 I think you get the point there. 22 We came before you last time because we 23 sort of looked at the situation as not having a need 24 to get into the middle of this fight between Epstein 25 and the Farmer firm in terms of what the exorbitant OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731407  Page 28 1 costs would have been for us to comply with the 2 subpoena in terms of preparing the privilege log. I 3 think the Court will remember, and I think that 4 inherently the order effectively was put in place so 5 that Judge Carney was going to serve as the pro tempt 6 gatekeeper for the trustee. And that's really what 7 his role was. 8 This situation now is complicated a little 9 bit more by the subpoena, the Rule 2004 Subpoena, 10 that we received from Mr. Scherer. I am aware, 11 without waiving work product or a common interest 12 agreement with the committee, that they are looking 13 at some of the things that are actually covered by 14 the subpoena, so it ought not be a surprise that the 15 subpoena by the Scherer firm was issued. And we 16 point out that the initial claims were against Scott 17 Rothstein and Mr. Edwards, as well, which is, I 18 think, really Mr. Knight's point as to that it's not 19 right for the Farmer firm to serve as the gatekeeper 20 under those circumstances. 21 THE COURT: Tell me, does this also this 22 information also roll over into the insurance 23 litigation? 24 MR. LICHTMAN: I don't think so. 25 THE COURT: Well, if -- OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)3584875 EFTA00731408  Page 29 1 MR. LICHTMAN: I haven't seen it come up in 2 that context. 3 THE COURT: I've not seen it come up, but 4 those still are in the early stages wherein there are 5 claims against the malpractice policies, as well as 6 the D&Os. 7 MR. LICHTMAN: I'm not sure I've seen 8 anybody try to put it into that pot yet. 9 THE COURT: All right. All right. 10 MR. LICHTMAN: To be sure, I think that 11 Judge Carney is right, that Mr. Farmer has a 12 privilege, but it's a limited one. I think it 13 pertains as to matters that are particularly unique 14 to him, and Mr. Edwards, and to the LM client. Of 15 course, we also have that same situation, because we 16 were the law firm of record at the time that all this 17 came about. 18 And then there's this issue of the ten 19 boxes of documents that we haven't had. I think that 20 this is a somewhat relevant issue. I don't know how 21 we ferret it out today, to tell you the truth. I 22 honestly -- I'm not trying to cast dispersions on 23 what Mr. Farmer said, but having litigated for many, 24 many years, I find it doubtful that there are ten 25 boxes of work product. I think that there's ten OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731409  Page 30 1 boxes of work that was compiled in the course of 2 litigation, that does not mean it is work product. 3 Work product has a very narrow definition. 4 THE COURT: Yeah, but you don't have S custody of those -- 6 MR. LICHTMAN: I don't. 7 THE COURT: -- so it's not your problem. 8 They can litigate that in State Court. 9 MR. LICHTMAN: Right. So I think that 10 where we come out on this is that -- oh, I need to 11 also own up to something. I don't know if this is 12 the case, or not, but when I heard Judge Carney 13 mention two disks, and everybody is using the word 14 e-mail, it dawned on me for the first time two 15 minutes ago, no more than that, that there was 16 another server at RRA, and I'm not exactly sure how 17 it all worked, but I think that we may have 18 electronic copies of those ten boxes of documents. 19 That is because at some point the Rothstein firm went 20 to a process where every document that came into the 21 office was scanned into a system. In fact, a lot of 22 documents were then destroyed that we found some 23 boxes where they were stored on a daily basis, and 24 then we had learned after the fact many boxes were 25 destroyed. OUELLETTE & MAULDIN COURT REPORTERS, INC. (305) 358-8875 EFTA00731410  Page 31 1 I'll be candid with the Court, I'm not sure 2 that we searched that server and, obviously, I feel 3 compelled as soon as I leave here to pick up the 4 phone and call our ESI people and say, did we look at 5 that server also, were there documents on that case, 6 because then obviously we have a situation with those 7 ten boxes. 8 It could be that my people looked at it and 9 they didn't find anything. It could be that we have 10 a whole mass of documents that are sitting on that 11 server, as well, and I apologize for it not dawning 12 on me until I just heard Judge Carney's remarks 13 solely about e-mails. So I have to look at that 14 issue. 15 I think that the way we come out is that I 16 think your order was basically right the first time 17 around. I so think that Mr. Farmer has a right to 18 look at the documents. I do think that Judge Carney 19 was appointed to protect the estate and the trustee 20 and, frankly, I heard everybody say stuff that I 21 thought was basically right. I thought Mr. Silver 22 was right, too. 23 So I'm glad I get to punt mostly on this 24 one. 25 THE COURT: All right. I'm ready to rule. OUELLETTE & MAULDIN COURT REPORTERS. INC. (305)358-8875 EFTA00731411  Pagc 32 1 MR. FARMER: Judge, one minute, if -- 2 THE COURT: Go ahead. 3